Document:

Exhibit
4.1

 

MERITAGE HOMES
CORPORATION,

 

THE GUARANTORS

named herein

 

and

 

WELLS FARGO BANK,
National Association, as Trustee

INDENTURE

Dated as of
February 23, 2007

7.731% Senior
Subordinated Notes due 2017

 

 

CROSS-REFERENCE
TABLE

	
  TIA

  	
   

  	
   

  	
  Indenture

  
	
  Section

  	
   

  	
   

  	
  Section

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  310

  	
  (a)(1)

  	
   

  	
  7.10

  
	
   

  	
  (a)(2)

  	
   

  	
  7.10

  
	
   

  	
  (a)(3)

  	
   

  	
  N.A.

  
	
   

  	
  (a)(4)

  	
   

  	
  N.A.

  
	
   

  	
  (a)(5)

  	
   

  	
  N.A.

  
	
   

  	
  (b)

  	
   

  	
  7.08; 7.10; 12.02

  
	
   

  	
  (b)(1)

  	
   

  	
  7.10

  
	
   

  	
  (c)

  	
   

  	
  N.A.

  
	
  311

  	
  (a)

  	
   

  	
  7.11

  
	
   

  	
  (b)

  	
   

  	
  7.11

  
	
   

  	
  (c)

  	
   

  	
  N.A.

  
	
  312

  	
  (a)

  	
   

  	
  2.06

  
	
   

  	
  (b)

  	
   

  	
   12.03

  
	
   

  	
  (c)

  	
   

  	
  12.03

  
	
  313

  	
  (a)

  	
   

  	
  7.06

  
	
   

  	
  (b)(1)

  	
   

  	
  N.A.

  
	
   

  	
  (b)(2)

  	
   

  	
  7.06

  
	
   

  	
  (c)

  	
   

  	
  7.06; 12.02

  
	
   

  	
  (d)

  	
   

  	
  7.06

  
	
  314

  	
  (a)

  	
   

  	
  4.02; 4.04; 12.02

  
	
   

  	
  (b)

  	
   

  	
  N.A.

  
	
   

  	
  (c)(1)

  	
   

  	
  12.04

  
	
   

  	
  (c)(2)

  	
   

  	
  12.04

  
	
   

  	
  (c)(3)

  	
   

  	
  N.A

  
	
   

  	
  (d)

  	
   

  	
  N.A.

  
	
   

  	
  (e)

  	
   

  	
  12.05

  
	
   

  	
  (f)

  	
   

  	
  N.A.

  
	
  315

  	
  (a)

  	
   

  	
  7.01(b)

  
	
   

  	
  (b)

  	
   

  	
  7.05; 12.02

  
	
   

  	
  (c)

  	
   

  	
  7.01(a)

  
	
   

  	
  (d)

  	
   

  	
  7.01(c)

  
	
   

  	
  (e)

  	
   

  	
  6.12

  
	
  316

  	
  (a) (last sentence)

  	
   

  	
  2.10

  
	
   

  	
  (a)(1)(A)

  	
   

  	
  6.05

  
	
   

  	
  (a)(1)(B)

  	
   

  	
  6.04

  
	
   

  	
  (a)(2)

  	
   

  	
  N.A.

  
	
   

  	
  (b)

  	
   

  	
  6.08

  
	
   

  	
  (c)

  	
   

  	
  8.04

  
	
  317

  	
  (a)(1)

  	
   

  	
  6.09

  
	
   

  	
  (a)(2)

  	
   

  	
  6.10

  
	
   

  	
  (b)

  	
   

  	
  2.05; 7.12

  
	
  318

  	
  (a)

  	
   

  	
  12.01

  

 

TABLE OF CONTENTS

	
  

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ARTICLE ONE

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  DEFINITIONS AND
  INCORPORATION BY REFERENCE

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 1.01.

  	
   

  	
  Definitions

  	
   

  	
  1

  
	
  SECTION 1.02.

  	
   

  	
  Other Definitions

  	
   

  	
  34

  
	
  SECTION 1.03.

  	
   

  	
  Incorporation by Reference of Trust Indenture Act

  	
   

  	
  35

  
	
  SECTION 1.04.

  	
   

  	
  Rules of Construction

  	
   

  	
  36

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ARTICLE Two

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  THE NOTES

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 2.01.

  	
   

  	
  Amount of Notes

  	
   

  	
  36

  	 

	
  SECTION 2.02.

  	
   

  	
  Form and Dating

  	
   

  	
  37

  	 

	
  SECTION 2.03.

  	
   

  	
  Execution and Authentication

  	
   

  	
  37

  	 

	
  SECTION 2.04.

  	
   

  	
  Registrar and Paying Agent

  	
   

  	
  38

  	 

	
  SECTION 2.05.

  	
   

  	
  Paying Agent To Hold Money in Trust

  	
   

  	
  38

  	 

	
  SECTION 2.06.

  	
   

  	
  Holder Lists

  	
   

  	
  39

  	 

	
  SECTION 2.07.

  	
   

  	
  Transfer and Exchange

  	
   

  	
  39

  	 

	
  SECTION 2.08.

  	
   

  	
  Replacement Notes

  	
   

  	
  40

  	 

	
  SECTION 2.09.

  	
   

  	
  Outstanding Notes

  	
   

  	
  40

  	 

	
  SECTION 2.10.

  	
   

  	
  Treasury Notes

  	
   

  	
  40

  	 

	
  SECTION 2.11.

  	
   

  	
  Temporary Notes

  	
   

  	
  41

  	 

	
  SECTION 2.12.

  	
   

  	
  Cancellation

  	
   

  	
  41

  	 

	
  SECTION 2.13.

  	
   

  	
  Defaulted Interest

  	
   

  	
  41

  	 

	
  SECTION 2.14.

  	
   

  	
  CUSIP Number

  	
   

  	
  41

  	 

	
  SECTION 2.15.

  	
   

  	
  Deposit of Moneys

  	
   

  	
  42

  	 

	
  SECTION 2.16.

  	
   

  	
  Book-Entry Provisions for Global
  Notes

  	
   

  	
  42

  	 

	
  SECTION 2.17.

  	
   

  	
  Special Transfer Provisions

  	
   

  	
  44

  	 

	
  SECTION 2.18.

  	
   

  	
  Computation of Interest

  	
   

  	
  46

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
  ARTICLE THREE

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
  REDEMPTION

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
  SECTION 3.01.

  	
   

  	
  Election To Redeem; Notices to Trustee

  	
   

  	
  46

  	 

	
  SECTION 3.02.

  	
   

  	
  Selection by Trustee of Notes To Be Redeemed

  	
   

  	
  46

  	 

	
  SECTION 3.03.

  	
   

  	
  Notice of Redemption

  	
   

  	
  47

  	 

	
  SECTION 3.04.

  	
   

  	
  Effect of Notice of Redemption

  	
   

  	
  47

  	 

	
  SECTION 3.05.

  	
   

  	
  Deposit of Redemption Price

  	
   

  	
  48

  	 

								

 

 i
 

 

	
  

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
  SECTION 3.06.

  	
   

  	
  Notes Redeemed in Part

  	
   

  	
  48

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
  ARTICLE FOUR

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
  COVENANTS

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
  SECTION 4.01.

  	
   

  	
  Payment of Notes

  	
   

  	
  48

  	 

	
  SECTION 4.02.

  	
   

  	
  Reports to Holders

  	
   

  	
  49

  	 

	
  SECTION 4.03.

  	
   

  	
  Waiver of Stay, Extension or Usury Laws

  	
   

  	
  49

  	 

	
  SECTION 4.04.

  	
   

  	
  Compliance Certificate

  	
   

  	
  49

  	 

	
  SECTION 4.05.

  	
   

  	
  Taxes

  	
   

  	
  50

  	 

	
  SECTION 4.06.

  	
   

  	
  Limitations on Additional Indebtedness

  	
   

  	
  50

  	 

	
  SECTION 4.07.

  	
   

  	
  Limitations on Layering Indebtedness

  	
   

  	
  52

  	 

	
  SECTION 4.08.

  	
   

  	
  Limitations on Restricted Payments

  	
   

  	
  52

  	 

	
  SECTION 4.09.

  	
   

  	
  Limitations on Asset Sales

  	
   

  	
  54

  	 

	
  SECTION 4.10.

  	
   

  	
  Limitations on Transactions with Affiliates

  	
   

  	
  57

  	 

	
  SECTION 4.11.

  	
   

  	
  Limitations on Liens

  	
   

  	
  58

  	 

	
  SECTION 4.12.

  	
   

  	
  Conduct of Business

  	
   

  	
  58

  	 

	
  SECTION 4.13.

  	
   

  	
  Additional Note Guarantees

  	
   

  	
  58

  	 

	
  SECTION 4.14.

  	
   

  	
  Limitations on Dividends and Other Restrictions
  Affecting Restricted Subsidiaries

  	
   

  	
  59

  	 

	
  SECTION 4.15.

  	
   

  	
  Limitations on Designation of Unrestricted
  Subsidiaries

  	
   

  	
  60

  	 

	
  SECTION 4.16.

  	
   

  	
  [Intentionally Omitted]

  	
   

  	
  61

  	 

	
  SECTION 4.17.

  	
   

  	
  Maintenance of Properties; Insurance; Compliance
  with Law

  	
   

  	
  61

  	 

	
  SECTION 4.18.

  	
   

  	
  Payments for Consent

  	
   

  	
  62

  	 

	
  SECTION 4.19.

  	
   

  	
  Legal Existence

  	
   

  	
  62

  	 

	
  SECTION 4.20.

  	
   

  	
  Change of Control Offer

  	
   

  	
  62

  	 

	
  SECTION 4.21.

  	
   

  	
  Suspension Period

  	
   

  	
  63

  	 

	
  SECTION 4.22.

  	
   

  	
  Treatment of Notes

  	
   

  	
  64

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
  ARTICLE FIVE

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
  SUCCESSOR
  CORPORATION

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
  SECTION 5.01.

  	
   

  	
  Limitations on Mergers, Consolidations, Etc

  	
   

  	
  64

  	 

	
  SECTION 5.02.

  	
   

  	
  Successor Person Substituted

  	
   

  	
  66

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
  ARTICLE SIX

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
  DEFAULTS AND
  REMEDIES

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
  SECTION
  6.01.

  	
   

  	
  Events of Default

  	
   

  	
  67

  
	
  SECTION 6.02.

  	
   

  	
  Acceleration

  	
   

  	
  69

  
									

 

 ii
 

 

	
  

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 6.03.

  	
   

  	
  Other Remedies

  	
   

  	
  69

  
	
  SECTION 6.04.

  	
   

  	
  Waiver of Past Defaults and Events of Default

  	
   

  	
  69

  
	
  SECTION 6.05.

  	
   

  	
  Control by Majority

  	
   

  	
  69

  
	
  SECTION 6.06.

  	
   

  	
  Limitation on Suits

  	
   

  	
  70

  
	
  SECTION 6.07.

  	
   

  	
  No Personal Liability of Directors, Officers,
  Employees and Stockholders

  	
   

  	
  70

  
	
  SECTION 6.08.

  	
   

  	
  Rights of Holders To Receive Payment

  	
   

  	
  70

  
	
  SECTION 6.09.

  	
   

  	
  Collection Suit by Trustee

  	
   

  	
  71

  
	
  SECTION 6.10.

  	
   

  	
  Trustee May File Proofs of Claim

  	
   

  	
  71

  
	
  SECTION 6.11.

  	
   

  	
  Priorities

  	
   

  	
  71

  
	
  SECTION 6.12.

  	
   

  	
  Undertaking for Costs

  	
   

  	
  72

  
	
  SECTION 6.13.

  	
   

  	
  Restoration of Rights and Remedies

  	
   

  	
  72

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ARTICLE SEVEN

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TRUSTEE

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 7.01.

  	
   

  	
  Corporate Trustee Required

  	
   

  	
  72

  
	
  SECTION 7.02.

  	
   

  	
  Certain Duties and Responsibilities

  	
   

  	
  73

  
	
  SECTION 7.03.

  	
   

  	
  Notice of Defaults

  	
   

  	
  74

  
	
  SECTION 7.04.

  	
   

  	
  Certain Rights of Trustee

  	
   

  	
  74

  
	
  SECTION 7.05.

  	
   

  	
  May Hold Notes

  	
   

  	
  76

  
	
  SECTION 7.06.

  	
   

  	
  Compensation; Reimbursement; Indemnity

  	
   

  	
  76

  
	
  SECTION 7.07.

  	
   

  	
  Resignation and Removal; Appointment of Successor

  	
   

  	
  78

  
	
  SECTION 7.08.

  	
   

  	
  Acceptance of Appointment by Successor

  	
   

  	
  78

  
	
  SECTION 7.09.

  	
   

  	
  Merger, Conversion, Consolidation or Succession to
  Business

  	
   

  	
  79

  
	
  SECTION 7.10.

  	
   

  	
  Not Responsible for Recitals or Issuance of Notes

  	
   

  	
  79

  
	
  SECTION 7.11.

  	
   

  	
  Appointment of Authenticating Agent

  	
   

  	
  79

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ARTICLE EIGHT

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  AMENDMENTS,
  SUPPLEMENTS AND WAIVERS

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 8.01.

  	
   

  	
  Without Consent of Holders

  	
   

  	
  81

  
	
  SECTION 8.02.

  	
   

  	
  With Consent of Holders

  	
   

  	
  81

  
	
  SECTION 8.03.

  	
   

  	
  Compliance with Trust Indenture Act

  	
   

  	
  83

  
	
  SECTION 8.04.

  	
   

  	
  Revocation and Effect of Consents

  	
   

  	
  83

  
	
  SECTION 8.05.

  	
   

  	
  Notation on or Exchange of Notes

  	
   

  	
  84

  
	
  SECTION 8.06.

  	
   

  	
  Trustee To Sign Amendments, etc

  	
   

  	
  84

  
							

 

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  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
  ARTICLE NINE

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
  DISCHARGE OF
  INDENTURE; DEFEASANCE

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
  SECTION 9.01.

  	
   

  	
  Discharge of Indenture

  	
   

  	
  84

  	 

	
  SECTION 9.02.

  	
   

  	
  Legal Defeasance

  	
   

  	
  85

  	 

	
  SECTION 9.03.

  	
   

  	
  Covenant Defeasance

  	
   

  	
  86

  	 

	
  SECTION 9.04.

  	
   

  	
  Conditions to Defeasance or Covenant Defeasance

  	
   

  	
  86

  	 

	
  SECTION 9.05.

  	
   

  	
  Deposited Money and U.S. Government Obligations To
  Be Held in Trust; Other Miscellaneous Provisions

  	
   

  	
  87

  	 

	
  SECTION 9.06.

  	
   

  	
  Reinstatement

  	
   

  	
  88

  	 

	
  SECTION 9.07.

  	
   

  	
  Moneys Held by Paying Agent

  	
   

  	
  88

  	 

	
  SECTION 9.08.

  	
   

  	
  Moneys Held by Trustee

  	
   

  	
  88

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
  ARTICLE TEN

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
  GUARANTEE OF
  NOTES

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
  SECTION 10.01.

  	
   

  	
  Guarantee

  	
   

  	
  89

  	 

	
  SECTION 10.02.

  	
   

  	
  Execution and Delivery of Guarantee

  	
   

  	
  90

  	 

	
  SECTION 10.03.

  	
   

  	
  Subordination of Note Guarantees

  	
   

  	
  90

  	 

	
  SECTION 10.04.

  	
   

  	
  Limitation of Guarantee

  	
   

  	
  91

  	 

	
  SECTION 10.05.

  	
   

  	
  Release of Guarantor

  	
   

  	
  91

  	 

	
  SECTION 10.06.

  	
   

  	
  Waiver of Subrogation

  	
   

  	
  91

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
  ARTICLE ELEVEN

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
  SUBORDINATION OF
  NOTES

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
  SECTION 11.01.

  	
   

  	
  Agreement to Subordinate

  	
   

  	
  92

  	 

	
  SECTION 11.02.

  	
   

  	
  Liquidation; Dissolution; Bankruptcy

  	
   

  	
  92

  	 

	
  SECTION 11.03.

  	
   

  	
  Default on Designated Senior Debt

  	
   

  	
  93

  	 

	
  SECTION 11.04.

  	
   

  	
  Acceleration of Securities

  	
   

  	
  94

  	 

	
  SECTION 11.05.

  	
   

  	
  When Distribution Must Be Paid Over

  	
   

  	
  94

  	 

	
  SECTION 11.06.

  	
   

  	
  Notice by the Issuer

  	
   

  	
  95

  	 

	
  SECTION 11.07.

  	
   

  	
  Subrogation

  	
   

  	
  95

  	 

	
  SECTION 11.08.

  	
   

  	
  Relative Rights

  	
   

  	
  95

  	 

	
  SECTION 11.09.

  	
   

  	
  Subordination May Not Be Impaired by the Issuer

  	
   

  	
  95

  	 

	
  SECTION 11.10.

  	
   

  	
  Distribution or Notice to Representative

  	
   

  	
  96

  	 

	
  SECTION 11.11.

  	
   

  	
  Rights of Trustee and Paying Agent

  	
   

  	
  96

  	 

	
  SECTION 11.12.

  	
   

  	
  Authorization to Effect Subordination

  	
   

  	
  96

  	 

							

 

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  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
  ARTICLE TWELVE

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
  MISCELLANEOUS

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
  SECTION 12.01.

  	
   

  	
  Trust Indenture Act Controls

  	
   

  	
  97

  	 

	
  SECTION 12.02.

  	
   

  	
  Notices

  	
   

  	
  97

  	 

	
  SECTION 12.03.

  	
   

  	
  Communications by Holders with Other Holders

  	
   

  	
  98

  	 

	
  SECTION 12.04.

  	
   

  	
  Certificate and Opinion as to Conditions Precedent

  	
   

  	
  98

  	 

	
  SECTION 12.05.

  	
   

  	
  Statements Required in Certificate and Opinion

  	
   

  	
  99

  	 

	
  SECTION 12.06.

  	
   

  	
  Rules by Trustee and Agents

  	
   

  	
  99

  	 

	
  SECTION 12.07.

  	
   

  	
  Business Days; Legal Holidays

  	
   

  	
  99

  	 

	
  SECTION 12.08.

  	
   

  	
  Governing Law

  	
   

  	
  99

  	 

	
  SECTION 12.09.

  	
   

  	
  No Adverse Interpretation of Other Agreements

  	
   

  	
  100

  	 

	
  SECTION 12.10.

  	
   

  	
  No Recourse Against Others

  	
   

  	
  100

  	 

	
  SECTION 12.11.

  	
   

  	
  Successors

  	
   

  	
  100

  	 

	
  SECTION 12.12.

  	
   

  	
  Multiple Counterparts

  	
   

  	
  100

  	 

	
  SECTION 12.13.

  	
   

  	
  Table of Contents, Headings, etc

  	
   

  	
  100

  	 

	
  SECTION 12.14.

  	
   

  	
  Separability

  	
   

  	
  101

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
  EXHIBITS

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
  Exhibit A.

  	
  Form of Note

  	
   

  	
  A-1

  	 

	
  Exhibit B.

  	
  Form of Legend for Rule 144A Notes and Other Notes
  That Are Restricted Notes

  	
   

  	
  B-1

  	 

	
  Exhibit C.

  	
  Form of Legend for Regulation S Note

  	
   

  	
  C-1

  	 

	
  Exhibit D.

  	
  Form of Legend for Global Note

  	
   

  	
  D-1

  	 

	
  Exhibit E.

  	
  Form of Certificate To Be Delivered in Connection
  with Transfers to Non-QIB Accredited Investors

  	
   

  	
  E-1

  	 

	
  Exhibit F.

  	
  Form of Certificate To Be Delivered in Connection
  with Transfers Pursuant to Regulation S

  	
   

  	
  F-1

  	 

	
  Exhibit G.

  	
  Form of Guarantee

  	
   

  	
  G-1

  	 

							

 

 v

INDENTURE, dated as of February 23, 2007, among
MERITAGE HOMES CORPORATION, a Maryland corporation, as issuer (the “Issuer”), the Guarantors (as hereinafter
defined) and WELLS FARGO BANK, NATIONAL ASSOCIATION, as trustee (the “Trustee”).

Each party agrees as follows for the benefit of the
other parties and for the equal and ratable benefit of the Holders.

ARTICLE ONE

DEFINITIONS AND
INCORPORATION BY REFERENCE

SECTION 1.01.                            Definitions.

“Acquired Indebtedness” means (1) with respect
to any Person that becomes a Restricted Subsidiary after the Issue Date,
Indebtedness of such Person and its Subsidiaries existing at the time such
Person becomes a Restricted Subsidiary that was not incurred in connection
with, or in contemplation of, such Person becoming a Restricted Subsidiary and
(2) with respect to the Issuer or any Restricted Subsidiary, any Indebtedness
of a Person (other than the Issuer or a Restricted Subsidiary) existing at the
time such Person is merged with or into the Issuer or a Restricted Subsidiary,
or Indebtedness expressly assumed by the Issuer or any Restricted Subsidiary in
connection with the acquisition of an asset or assets from another Person,
which Indebtedness was not, in any case, incurred by such other Person in
connection with, or in contemplation of, such merger or acquisition.

“Adjusted Net Assets” of a Guarantor at any
date shall mean the lesser of the amount by which (x) the fair value of
the property of such Guarantor exceeds the total amount of liabilities,
including, without limitation, contingent liabilities (after giving effect to
all other fixed and contingent liabilities), but excluding liabilities under
the Guarantee, of such Guarantor at such date and (y) the present fair
salable value of the assets of such Guarantor at such date exceeds the amount
that will be required to pay the probable liability of such Guarantor on its
debts and all other fixed and contingent liabilities (after giving effect to
all other fixed and contingent liabilities and after giving effect to any collection
from any Subsidiary of such Guarantor in respect of the obligations of such
Guarantor under the Guarantee), excluding Indebtedness in respect of the
Guarantee, as they become absolute and matured.

“Affiliate” of any Person means any other
Person which directly or indirectly controls or is controlled by, or is under
direct or indirect common control with, the referent Person.  For purposes of Section 4.10, Affiliates
shall be deemed to include, with respect to any Person, any other Person
(1) which beneficially owns or holds, directly or indirectly, 10% or more
of any class of the Voting Stock of the referent Person, (2) of which 10%
or more of the Voting Stock is beneficially owned or held, directly or indirectly,
by the referent Person or (3) with respect to an individual, any immediate
family member of such Person.  For
purposes of this definition, “control” 

of a Person shall mean
the power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise.

“Agent” means any Registrar, Paying Agent or
agent for service or notices and demands.

“amend” means to amend, supplement, restate,
amend and restate or otherwise modify; and “amendment”
shall have a correlative meaning.

“asset” means any
asset or property.

“Asset Acquisition”
means

(1)           an
Investment by the Issuer or any Restricted Subsidiary of the Issuer in any
other Person if, as a result of such Investment, such Person shall become a Restricted
Subsidiary of the Issuer, or shall be merged with or into the Issuer or any
Restricted Subsidiary of the Issuer, or

(2)           the
acquisition by the Issuer or any Restricted Subsidiary of the Issuer of all or
substantially all of the assets of any other Person or any division or line of
business of any other Person.

“Asset Sale” means any sale, issuance,
conveyance, transfer, lease, assignment or other disposition by the Issuer or
any Restricted Subsidiary to any Person other than the Issuer or any Restricted
Subsidiary (including by means of a Sale and Leaseback Transaction or a merger
or consolidation) (collectively, for purposes of this definition, a “transfer”), in one transaction or a series of
related transactions, of any assets (including Equity Interests) of the Issuer
or any of its Restricted Subsidiaries other than in the ordinary course of
business.  For purposes of this
definition, the term “Asset Sale” shall not include:

(1)           transfers
of cash or Cash Equivalents;

(2)           transfers
of assets (including Equity Interests) that are governed by, and made in
accordance with, Section 5.01;

(3)           Permitted
Investments and Restricted Payments permitted under Section 4.08;

(4)           the
creation or realization of any Permitted Lien;

(5)           transactions
in the ordinary course of business, including, without limitation, sales
(directly or indirectly), dedications and other donations to governmental authorities,
leases and sales and leasebacks of (A) homes, improved land and unimproved land
and (B) real estate (including related amenities and improvements);

 2
 

(6)           dispositions
of mortgage loans and related assets and mortgage-backed securities in the
ordinary course of a mortgage lending business; and

(7)           any
transfer or series of related transfers that, but for this clause, would be
Asset Sales, if after giving effect to such transfers, the aggregate Fair
Market Value of the assets transferred in such transaction or any such series
of related transactions does not exceed $1.0 million.

“Attributable Indebtedness,” when used with
respect to any Sale and Leaseback Transaction, means, as at the time of
determination, the present value (discounted at a rate equivalent to the Issuer’s
then-current weighted average cost of funds for borrowed money as at the time
of determination, compounded on a semi-annual basis) of the total obligations
of the lessee for rental payments during the remaining term of any Capitalized
Lease included in any such Sale and Leaseback Transaction.

“Bankruptcy Event” means the commencement of
any case under the Bankruptcy Code (Title 11 of the United States Code) or the
commencement of any other bankruptcy, reorganization, receivership, or similar
proceeding under any federal, state or foreign law or by or against any Person
for whom the Issuer or a Restricted Subsidiary has executed a Springing Guarantee
for the benefit of such Person; provided, however, that the
filing of an involuntary case against such Person shall only be a Bankruptcy
Event if:  (i) such involuntary case
is filed in whole or in part by the Issuer or a Restricted Subsidiary, any
member in such Person which is an affiliate of the Issuer or a Restricted
Subsidiary, or any other affiliate of the Issuer or a Restricted Subsidiary, or
(ii) the Issuer or a Restricted Subsidiary, any member in such Person
which is an affiliate of the Issuer or a Restricted Subsidiary, or any other
affiliate of the Issuer or a Restricted Subsidiary shall in any way induce or
participate in the filing, whether directly or indirectly, of an involuntary
bankruptcy case against such Person or any other Person, and such involuntary
case or proceeding is not dismissed with prejudice within 120 days of the
filing thereof.

“Bankruptcy Law” means Title 11 of the United
States Code, as amended, or any similar federal or state law for the relief of
debtors.

“Board of Directors” means, with respect to any
Person, the board of directors or comparable governing body of such Person.

“Board Resolution” means a copy of a resolution
certified pursuant to an Officers’ Certificate to have been duly adopted by the
Board of Directors of the Issuer and to be in full force and effect, and
delivered to the Trustee.

“Borrowing Base” means, at any time of
determination, the sum of the following without duplication:

(1)           100%
of all cash and Cash Equivalents held by the Issuer or any Restricted
Subsidiary;

 3
 

(2)           75%
of the book value of Developed Land for which no construction has occurred;

(3)           95%
of the cost of the land and construction costs including capitalized interest
(as reasonably allocated by the Issuer) for all Units for which there is an
executed purchase contract with a buyer not Affiliated with the Issuer, less
any deposits, down payments or earnest money;

(4)           80%
of the cost of the land and construction costs including capitalized interest
(as reasonably allocated by the Issuer) for all Units for which construction
has begun and for which there is not an executed purchase agreement with a
buyer not Affiliated with the Issuer; and

(5)           50%
of the costs of Entitled Land (other than Developed Land) on which improvements
have not commenced, less mortgage Indebtedness (other than under a Credit Facility)
applicable to such land.

“Business Day” means a day other than a
Saturday, Sunday or other day on which banking institutions in New York are
authorized or required by law to close.

“Calculation Agent” means J.P. Morgan
Securities Inc. or its successors.

“Capitalized Lease” means a lease required to
be capitalized for financial reporting purposes in accordance with GAAP.

“Capitalized Lease Obligations” of any Person means
the obligations of such Person to pay rent or other amounts under a Capitalized
Lease, and the amount of such obligation shall be the capitalized amount
thereof determined in accordance with GAAP.

“Cash Equivalents”
means:

(1)           marketable
obligations with a maturity of 360 days or less issued or directly and fully
guaranteed or insured by the United States of America or any agency or instrumentality
thereof;

(2)           demand
and time deposits and certificates of deposit or acceptances with a maturity of
180 days or less of any financial institution that is a member of the Federal
Reserve System having combined capital and surplus and undivided profits of not
less than $500 million and is assigned at least a “B” rating by Thomson
Financial BankWatch;

(3)           commercial
paper maturing no more than 180 days from the date of creation thereof issued
by a corporation that is not the Issuer or an Affiliate of the Issuer, and is
organized under the laws of any state of the United States of America or the
District of Columbia and rated at least A-1 by S&P or at least P-1
by Moody’s;

 4
 

(4)           repurchase
obligations with a term of not more than ten days for underlying securities of
the types described in clause (1) above entered into with any commercial bank
meeting the specifications of clause (2) above; and

(5)           investments
in money market or other mutual funds substantially all of whose assets
comprise securities of the types described in clauses (1) through (4) above.

“Change of Control”
means the occurrence of any of the following events:

(1)           any
“person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the
Exchange Act), other than one or more Permitted Holders, is or becomes the
beneficial owner (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that for purposes of this clause that person or group
shall be deemed to have “beneficial ownership” of all securities that any such
person or group has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of
Voting Stock representing more than 50% of the voting power of the total
outstanding Voting Stock of the Issuer;

(2)           during
any period of two consecutive years, individuals who at the beginning of such
period constituted the Board of Directors of the Issuer (together with any new
directors whose election to such Board of Directors or whose nomination for election
by the stockholders of the Issuer was approved by a vote of the majority of the
directors of the Issuer then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board of Directors of the Issuer;

(3)           
(a) all or substantially all of the assets of the Issuer and the Restricted
Subsidiaries are sold or otherwise transferred to any Person other than a
Wholly-Owned Restricted Subsidiary or one or more Permitted Holders or (b) the
Issuer consolidates or merges with or into another Person other than a
Permitted Holder or any Person other than a Permitted Holder consolidates or
merges with or into the Issuer, in either case under this clause (3), in one
transaction or a series of related transactions in which immediately after the
consummation thereof Persons owning Voting Stock representing in the aggregate
100% of the total voting power of the Voting Stock of the Issuer immediately
prior to such consummation do not own Voting Stock representing a majority of
the total voting power of the Voting Stock of the Issuer or the surviving or
transferee Person; or

(4)           the
Issuer shall adopt a plan of liquidation or dissolution or any such plan shall
be approved by the stockholders of the Issuer.

“Change of Control Triggering Event” means the occurrence
of both a Change of Control and a Rating Decline.

“Consolidated Amortization Expense” for any
period means the amortization expense of the Issuer and the Restricted
Subsidiaries for such period, determined on a consolidated basis in accordance
with GAAP.

 5
 

“Consolidated Cash Flow Available for Fixed Charges”
for any period means, without duplication, the sum of the amounts for such
period of

(1)           Consolidated
Net Income, plus

(2)           in
each case only to the extent (and in the same proportion) deducted in
determining Consolidated Net Income and with respect to the portion of
Consolidated Net Income attributable to any Restricted Subsidiary only if a
corresponding amount would be permitted at the date of determination to be
distributed to the Issuer by such Restricted Subsidiary without prior approval
(that has not been obtained), pursuant to the terms of its charter and all
agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to such Restricted Subsidiary or its stockholders,

(a)           Consolidated
Income Tax Expense,

(b)           Consolidated
Amortization Expense (but only to the extent not included in Consolidated Interest
Expense),

(c)           Consolidated
Depreciation Expense,

(d)           Consolidated
Interest Expense and interest and other charges amortized to cost of home sales
and cost of land sales, and

(e)           all
other non-cash items reducing the Consolidated Net Income (excluding any
non-cash charge that results in an accrual of a reserve for cash charges in any
future period) for such period,

in each case determined
on a consolidated basis in accordance with GAAP, minus

(3)           the
aggregate amount of all non-cash items, determined on a consolidated basis, to
the extent such items increased Consolidated Net Income for such period.

“Consolidated Depreciation Expense” for any
period means the depreciation expense of the Issuer and the Restricted
Subsidiaries for such period, determined on a consolidated basis in accordance
with GAAP.

“Consolidated Fixed Charge Coverage Ratio”
means the ratio of Consolidated Cash Flow Available for Fixed Charges during
the most recent four consecutive full fiscal quarters for which financial
statements are available (the “Four-Quarter Period”) ending on or prior
to the date of the transaction giving rise to the need to calculate the Consolidated
Fixed Charge Coverage Ratio (the “Transaction Date”) to Consolidated
Interest Incurred for the Four-Quarter Period. 
For purposes of this definition, Consolidated Cash Flow Available for
Fixed Charges and Consolidated Interest Incurred shall be calculated after
giving effect on a pro forma basis for the period of such calculation to:

 6
 

(1)           the
incurrence of any Indebtedness or the issuance of any Preferred Stock of the
Issuer or any Restricted Subsidiary (and the application of the proceeds
thereof) and any repayment of other Indebtedness or redemption of other
Preferred Stock (and the application of the proceeds therefrom) (other than the
incurrence or repayment of Indebtedness in the ordinary course of business for
working capital purposes pursuant to any revolving credit arrangement)
occurring during the Four-Quarter Period or at any time subsequent to the last
day of the Four-Quarter Period and on or prior to the Transaction Date, as if
such incurrence, repayment, issuance or redemption, as the case may be (and the
application of the proceeds thereof), occurred on the first day of the
Four-Quarter Period; and

(2)           any
Asset Sale or Asset Acquisition (including, without limitation, any Asset
Acquisition giving rise to the need to make such calculation as a result of the
Issuer or any Restricted Subsidiary (including any Person who becomes a
Restricted Subsidiary as a result of such Asset Acquisition) incurring Acquired
Indebtedness and also including any Consolidated Cash Flow Available for Fixed
Charges (including any pro forma expense and cost reductions calculated on a
basis consistent with Regulation S-X under the Exchange Act) associated
with any such Asset Acquisition) occurring during the Four-Quarter Period or at
any time subsequent to the last day of the Four-Quarter Period and on or prior
to the Transaction Date, as if such Asset Sale or Asset Acquisition or other
disposition (including the incurrence of, or assumption or liability for, any
such Indebtedness or Acquired Indebtedness) occurred on the first day of the
Four-Quarter Period.

If the Issuer or any Restricted Subsidiary directly or
indirectly guarantees Indebtedness of a third Person, the preceding sentence
shall give effect to the incurrence of such guaranteed Indebtedness as if the
Issuer or such Restricted Subsidiary had directly incurred or otherwise assumed
such guaranteed Indebtedness.

In calculating Consolidated Interest Incurred for
purposes of determining the denominator (but not the numerator) of the
Consolidated Fixed Charge Coverage Ratio:

(1)           interest
on outstanding Indebtedness determined on a fluctuating basis as of the
Transaction Date and which will continue to be so determined thereafter shall
be deemed to have accrued at a fixed rate per annum equal to the rate of
interest on this Indebtedness in effect on the Transaction Date;

(2)           if
interest on any Indebtedness actually incurred on the Transaction Date may
optionally be determined at an interest rate based upon a factor of a prime or
similar rate, a eurocurrency interbank offered rate, or other rates, then the
interest rate in effect on the Transaction Date will be deemed to have been in
effect during the Four-Quarter Period; and

(3)           notwithstanding
clause (1) or (2) above, interest on Indebtedness determined on a fluctuating
basis, to the extent such interest is covered by agreements with a term of at
least one year after the Transaction Date relating to Hedging Obligations,
shall

 7
 

be deemed to accrue at
the rate per annum resulting after giving effect to the operation of these agreements.

“Consolidated Income Tax Expense” for any
period means the provision for taxes of the Issuer and the Restricted
Subsidiaries, determined on a consolidated basis in accordance with GAAP.

“Consolidated Indebtedness” means, as of any
date, the total Indebtedness of the Issuer and the Restricted Subsidiaries as
of such date, determined on a consolidated basis.

“Consolidated Interest Expense” for any period
means the sum, without duplication, of the total interest expense (other than
interest and other charges amortized to cost of home sales and cost of land
sales) of the Issuer and the Restricted Subsidiaries for such period, determined
on a consolidated basis in accordance with GAAP and including, without
duplication,

(1)           imputed
interest on Capitalized Lease Obligations and Attributable Indebtedness,

(2)           commissions,
discounts and other fees and charges owed with respect to letters of credit
securing financial obligations, bankers’ acceptance financing and receivables
financings,

(3)           the
net costs associated with Hedging Obligations,

(4)           amortization
of debt issuance costs, debt discount or premium and other financing fees and
expenses,

(5)           the
interest portion of any deferred payment obligations,

(6)           all
other non-cash interest expense,

(7)           the
product of (a) all dividend payments on any series of Disqualified Equity
Interests of the Issuer or any Preferred Stock of any Restricted Subsidiary
(other than any such Disqualified Equity Interests or any Preferred Stock held
by the Issuer or a Wholly-Owned Restricted Subsidiary), multiplied  by (b) a fraction, the numerator of which is one and
the denominator of which is one minus the
then current combined federal, state and local statutory tax rate of the Issuer
and the Restricted Subsidiaries, expressed as a decimal,

(8)           all
interest payable with respect to discontinued operations, and

(9)           all
interest on any Indebtedness of any other Person guaranteed by the Issuer or
any Restricted Subsidiary.

“Consolidated Interest Incurred” for any period
means the sum, without duplication, of (1) Consolidated Interest Expense
and (2) interest capitalized for such period (including

 8
 

interest capitalized with
respect to discontinued operations but not including interest or other charges
amortized to cost of home sales and cost of land sales).

“Consolidated Net Income” for any period means
the net income (or loss) of the Issuer and the Restricted Subsidiaries for such
period determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded from
such net income (to the extent otherwise included therein), without
duplication:

(1)           the
net income (or loss) of any Person (other than a Restricted Subsidiary) in
which any Person other than the Issuer and the Restricted Subsidiaries has an
ownership interest, except to the extent that cash in an amount equal to any
such income has actually been received by the Issuer or any of its Restricted
Subsidiaries during such period;

(2)           except
to the extent includible in the consolidated net income of the Issuer pursuant
to the foregoing clause (1), the net income (or loss) of any Person that
accrued prior to the date that (a) such Person becomes a Restricted Subsidiary
or is merged into or consolidated with the Issuer or any Restricted Subsidiary
or (b) the assets of such Person are acquired by the Issuer or any Restricted
Subsidiary;

(3)           the
net income of any Restricted Subsidiary during such period to the extent that
the declaration or payment of dividends or similar distributions by such Restricted
Subsidiary of that income is not permitted by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Subsidiary during such period;

(4)           for
the purposes of calculating the Restricted Payments Basket only, in the case of
a successor to the Issuer by consolidation, merger or transfer of its assets,
any income (or loss) of the successor prior to such merger, consolidation or transfer
of assets;

(5)           other
than for purposes of calculating the Restricted Payments Basket, any gain (or
loss), together with any related provisions for taxes on any such gain (or the
tax effect of any such loss), realized during such period by the Issuer or any
Restricted Subsidiary upon (a) the acquisition of any securities, or the
extinguishment of any Indebtedness, of the Issuer or any Restricted Subsidiary
or (b) any Asset Sale by the Issuer or any Restricted Subsidiary; and

(6)           other
than for purposes of calculating the Restricted Payments Basket, any
extraordinary gain (or extraordinary loss), together with any related provision
for taxes on any such extraordinary gain (or the tax effect of any such
extraordinary loss), realized by the Issuer or any Restricted Subsidiary during
such period.

In addition, any return of capital with respect to an
Investment that increased the Restricted Payments Basket pursuant to clause
(3)(d) of the first paragraph of Section 4.08 or decreased the amount of
Investments outstanding pursuant to clause (14) of the definition of “Permitted
Investments” shall be excluded from Consolidated Net Income for purposes of
calculating the Restricted Payments Basket.

 9
 

“Consolidated Net Worth” means, with respect to
any Person as of any date, the consolidated stockholders’ equity of such
Person, determined on a consolidated basis in accordance with GAAP, less (without duplication) (1) any
amounts thereof attributable to Disqualified Equity Interests of such Person or
its Subsidiaries or any amount attributable to Unrestricted Subsidiaries and
(2) all write-ups (other than write-ups resulting from foreign currency
translations and write-ups of tangible assets of a going concern business made
within twelve months after the acquisition of such business) subsequent to the
Issue Date in the book value of any asset owned by such Person or a Subsidiary
of such Person.

“Consolidated Tangible Net Worth” means, with
respect to any Person as of any date, the Consolidated Net Worth of such Person
as of such date less (without duplication)
all Intangible Assets of such Person as of such date.

“Corporate Trust Office” means the office of
the Trustee at which at any particular time its corporate trust business shall
be principally administered, which office at the date of execution is located
at Wells Fargo Bank, National Association, 919 North Market Street, Suite 700,
Wilmington, Delaware  19801, Attn:
Corporate Trust Department.

“Credit Facilities” means the Credit Agreement,
dated as of December 12, 2002, as amended, among the Issuer, Guaranty Bank, as
administrative agent and swingline lender, Bank One, NA, as syndication agent,
Fleet National Bank, as documentation agent, and the other lenders party
thereto, including any notes, guarantees, collateral and security documents,
instruments and agreements executed in connection therewith (including Hedging
Obligations related to the Indebtedness incurred thereunder), and in each case
as amended or refinanced from time to time, including any agreement extending
the maturity of, refinancing, replacing or otherwise restructuring (including
increasing the amount of borrowings or other Indebtedness outstanding or
available to be borrowed thereunder) all or any portion of the Indebtedness
under such agreements, and any successor or replacement agreement or agreements
with the same or any other agents, creditor, lender or group of creditors or
lenders.

“Custodian” means any receiver, trustee,
assignee, liquidator or similar official under any Bankruptcy Law.

“Default” means (1) any Event of Default
or (2) any event, act or condition that, after notice or the passage of
time or both, would be an Event of Default.

“Depository” means, with respect to the Notes
issued in the form of one or more Global Notes, The Depository Trust Company or
another Person designated as Depository by the Issuer, which Person must be a
clearing agency registered under the Exchange Act.

“Designated Senior Debt” means (1) Senior Debt
and Guarantor Senior Debt, in each case, under or in respect of the Credit
Facilities, and (2) any other Indebtedness constituting Senior Debt or
Guarantor Senior Debt which, at the time of determination, has an aggregate
principal amount of at least $25 million and is specifically designated in the
instrument evidencing such Senior Debt as “Designated Senior Debt.”

 10
 

“Designation” has
the meaning given to this term in Section 4.15.

“Designation Amount” has the meaning given to
this term in Section 4.15.

“Developed Land” means all Entitled Land of the
Issuer and its Restricted Subsidiaries which is undergoing active development
or is ready for vertical construction.

“Disposition”
means, with respect to any Person, any merger, consolidation or other business
combination involving such Person (whether or not such Person is the Surviving
Person) or the sale, assignment, transfer, lease, conveyance or other
disposition of all or substantially all of such Person’s assets.

“Disqualified Equity Interests” of any Person
means any Equity Interests of such Person that, by their terms, or by the terms
of any related agreement or of any security into which they are convertible,
puttable or exchangeable, are, or upon the happening of any event or the
passage of time would be, required to be redeemed by such Person, whether or not
at the option of the holder thereof, or mature or are mandatorily redeemable,
pursuant to a sinking fund obligation or otherwise, in whole or in part, on or
prior to the date which is 91 days after the final maturity date of the Notes; provided, however,
that any class of Equity Interests of such Person that, by its terms,
authorizes such Person to satisfy in full its obligations with respect to the
payment of dividends or upon maturity, redemption (pursuant to a sinking fund
or otherwise) or repurchase thereof or otherwise by the delivery of Equity Interests
that are not Disqualified Equity Interests, and that are not convertible,
puttable or exchangeable for Disqualified Equity Interests or Indebtedness,
will not be deemed to be Disqualified Equity Interests so long as such Person
satisfies its obligations with respect thereto solely by the delivery of Equity
Interests that are not Disqualified Equity Interests; provided,  further,  however, that any Equity Interests that would
not constitute Disqualified Equity Interests but for provisions thereof giving
holders thereof (or the holders of any security into or for which such Equity
Interests are convertible, exchangeable or exercisable) the right to require
the Issuer to redeem such Equity Interests upon the occurrence of a change in
control occurring prior to the final maturity date of the Notes shall not
constitute Disqualified Equity Interests if the change in control provisions
applicable to such Equity Interests are no more favorable to such holders than
the provisions of Section 4.20 and such Equity Interests specifically
provide that the Issuer will not redeem any such Equity Interests pursuant to
such provisions prior to the Issuer’s purchase of the Notes as required
pursuant to the provisions of Section 4.20.

“Entitled Land” means all land of the Issuer
and its Restricted Subsidiaries (a) on which Units may be constructed or which
may be utilized for commercial, retail or industrial uses, in each case, under
applicable laws and regulations and (b) the intended use by the Issuer for
which is permissible under the applicable regional plan, development agreement
or applicable zoning ordinance.

“Equity Interests” of any Person means
(1) any and all shares or other equity interests (including common stock,
preferred stock, limited liability company interests and partnership interests)
in such Person and (2) all rights to purchase, warrants or options
(whether or not

 11

currently
exercisable), participations or other equivalents of or interests in (however
designated) such shares or other interests in such Person.

“Exchange Act” means the U.S. Securities
Exchange Act of 1934, as amended.

“Fair Market Value” means, with respect to any
asset, the price (after taking into account any liabilities relating to such
assets) that would be negotiated in an arm’s-length transaction for cash
between a willing seller and a willing and able buyer, neither of which is
under any compulsion to complete the transaction, as such price is determined
in good faith by the Board of Directors of the Issuer or a duly authorized
committee thereof, as evidenced by a resolution of such Board or committee.

“Financing Documents” means this Indenture, the
Notes and the Guarantees.

“GAAP” means generally accepted accounting
principles set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as may be approved by a significant
segment of the accounting profession of the United States, as in effect on the
Measurement Date.

“guarantee” means a direct or indirect
guarantee by any Person of any Indebtedness of any other Person and includes
any obligation, direct or indirect, contingent or otherwise, of such
Person:  (1) to purchase or pay (or
advance or supply funds for the purchase or payment of) Indebtedness of such
other Person (whether arising by virtue of partnership arrangements, or by
agreements to keep-well, to purchase assets, goods, securities or services
(unless such purchase arrangements are on arm’s-length terms and are entered
into in the ordinary course of business), to take-or-pay, or to maintain
financial statement conditions or otherwise); or (2) entered into for
purposes of assuring in any other manner the obligee of such Indebtedness of
the payment thereof or to protect such obligee against loss in respect thereof
(in whole or in part).  “Guarantee,”
when used as a verb, and “guaranteed” have correlative meanings.

“Guarantor Senior Debt” means, with respect to
any Guarantor, the principal of, premium, if any, and interest (including any
interest accruing subsequent to the filing of a petition of bankruptcy at the
rate provided for in the documentation with respect thereto, whether or not
such interest is an allowed claim under applicable law) on any Indebtedness of
such Guarantor, whether outstanding on the Issue Date or thereafter created,
incurred or assumed, unless, in the case of any particular Indebtedness, the
instrument creating or evidencing the same or pursuant to which the same is
outstanding expressly provides that such Indebtedness shall not be senior in
right of payment to the Notes.

Without limiting the generality of the foregoing, “Guarantor
Senior Debt” shall also include the principal of, premium, if any, interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law) on, and
all other amounts owing in respect of:

 12
 

(1)           all
monetary obligations of every nature of such Guarantor under, or with respect
to, the Credit Facilities, including, without limitation, obligations to pay
principal and interest, reimbursement obligations under letters of credit,
fees, expenses and indemnities (and guarantees thereof); and

(2)           all
Hedging Obligations in respect of the Credit Facilities;

in each case whether outstanding on the Issue Date or
thereafter incurred.

Notwithstanding the foregoing, “Guarantor Senior Debt”
shall not include:

(1)           any
Indebtedness of such Guarantor to the Issuer or any of its Subsidiaries;

(2)           Indebtedness
to, or guaranteed on behalf of, any director, officer or employee of the Issuer
or any of its other Subsidiaries (including, without limitation, amounts owed
for compensation);

(3)           obligations
to trade creditors and other amounts incurred (but not under the Credit
Facilities) in connection with obtaining goods, materials, services, customer
deposits, reserves and accrued expenses;

(4)           Indebtedness
represented by Disqualified Equity Interests;

(5)           any
liability for taxes owed or owing by such Guarantor;

(6)           that
portion of any Indebtedness incurred in violation of Section 4.06 (but, as to
any such obligation, no such violation shall be deemed to exist for purposes of
this clause (6) if the holder(s) of such obligation or their representative
shall have received an Officers’ Certificate of such Guarantor to the effect
that the incurrence of such Indebtedness does not (or, in the case of revolving
credit indebtedness, that the incurrence of the entire committed amount thereof
at the date on which the initial borrowing thereunder is made would not)
violate such provisions of this Indenture);

(7)           Indebtedness
of the type set forth in clauses (9), (10) and (13) of the second paragraph of
Section 4.06;

(8)           Indebtedness
which, when incurred and without respect to any election under
Section 1111(b) of Title 11, United States Code, is without recourse
to such Guarantor; and

(9)           any
Indebtedness which is, by its express terms, subordinated in right of payment
to any other Indebtedness of such Guarantor.

“Guarantors” means
each Restricted Subsidiary of the Issuer on the Issue Date, and each other
Person that is required to become a Guarantor by the terms of this Indenture
after the Issue Date, in each case, until such Person is released from its Note
Guarantee.

 13
 

“Hedging Obligations” of any Person means the
obligations of such Person pursuant to (1) any interest rate swap
agreement, interest rate collar agreement or other similar agreement or
arrangement designed to protect such Person against fluctuations in interest
rates, (2) agreements or arrangements designed to protect such Person
against fluctuations in foreign currency exchange rates in the conduct of its
operations, or (3) any forward contract, commodity swap agreement, commodity
option agreement or other similar agreement or arrangement designed to protect
such Person against fluctuations in commodity prices, in each case entered into
in the ordinary course of business for bona fide hedging purposes and not for
the purpose of speculation.

“Holder” means any registered holder, from time
to time, of the Notes.

“incur” means, with respect to any Indebtedness
or Obligation, incur, create, issue, assume, guarantee or otherwise become
directly or indirectly liable, contingently or otherwise, with respect to such
Indebtedness or Obligation; provided that
(1) the Indebtedness of a Person existing at the time such Person became a
Restricted Subsidiary or at the time such Person merged with or into the Issuer
or a Restricted Subsidiary shall be deemed to have been incurred at such time
and (2) neither the accrual of interest nor the accretion of original
issue discount shall be deemed to be an incurrence of Indebtedness.

“Indebtedness” of
any Person at any date means, without duplication:

(1)           all
liabilities, contingent or otherwise, of such Person for borrowed money
(whether or not the recourse of the lender is to the whole of the assets of
such Person or only to a portion thereof);

(2)           all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments;

(3)           all
obligations of such Person in respect of letters of credit or other similar
instruments (or reimbursement obligations with respect thereto);

(4)           all
obligations of such Person to pay the deferred and unpaid purchase price of
property or services, except trade payables and accrued expenses incurred by
such Person in the ordinary course of business in connection with obtaining
goods, materials or services;

(5)           the
maximum fixed redemption or repurchase price of all Disqualified Equity
Interests of such Person;

(6)           all
Capitalized Lease Obligations of such Person;

(7)           all
Indebtedness of others secured by a Lien on any asset of such Person, whether
or not such Indebtedness is assumed by such Person;

 14
 

(8)           all
Indebtedness of others guaranteed by such Person to the extent of such
guarantee; provided that
(i) Indebtedness of the Issuer or its Subsidiaries that is guaranteed by
the Issuer or the Issuer’s Subsidiaries shall be counted only once in the calculation
of the amount of Indebtedness of the Issuer and its Subsidiaries on a
consolidated basis and (ii) that a Springing Guarantee shall not be deemed
to be Indebtedness under this clause (8) until the earliest to occur of
(a) the demand by a lender for payment under such Springing Guarantee,
(b) the occurrence or failure to occur of any event, act or circumstance
that, with or without the giving of notice and/or passage of time, entitles a
lender to make a demand for payment thereunder or (c) a Bankruptcy Event;

(9)           all
Attributable Indebtedness;

(10)         to
the extent not otherwise included in this definition, Hedging Obligations of
such Person;

(11)         all
obligations of such Person under conditional sale or other title retention
agreements relating to assets purchased by such Person; and

(12)         the
liquidation value of Preferred Stock of a Subsidiary of such Person issued and
outstanding and held by any Person other than such Person (or one of its
Wholly-Owned Restricted Subsidiaries).

Notwithstanding the foregoing, (a) earn-outs or
similar profit sharing arrangements provided for in acquisition agreements
which are determined on the basis of future operating earnings or other similar
performance criteria (which are not determinable at the time of acquisition) of
the acquired assets or entities and (b) accrued expenses, trade payables,
model home leases (to the extent similar in structure to the model home leases
in existence on the Issue Date), customer deposits or deferred income taxes
arising in the ordinary course of business shall not be considered
Indebtedness.  Any Indebtedness which is
incurred at a discount to the principal amount at maturity thereof shall be
deemed to have been incurred in the amount of the full principal amount at
maturity thereof.  The amount of
Indebtedness of any Person at any date shall be the outstanding balance at such
date of all unconditional obligations as described above, the maximum liability
of such Person for any such contingent obligations at such date and, in the
case of clause (7), the lesser of (a) the Fair Market Value of any asset
subject to a Lien securing the Indebtedness of others on the date that the Lien
attaches and (b) the amount of the Indebtedness secured.  For purposes of clause (5), the “maximum
fixed redemption or repurchase price” of any Disqualified Equity Interests that
do not have a fixed redemption or repurchase price shall be calculated in
accordance with the terms of such Disqualified Equity Interests as if such Disqualified
Equity Interests were redeemed on any date on which an amount of Indebtedness
outstanding shall be required to be determined pursuant to this Indenture.

Notwithstanding the above, this Indenture does not
restrict any Unrestricted Subsidiary from incurring Indebtedness nor will Indebtedness
of any Unrestricted Subsidiaries be included in the Consolidated Fixed Charge
Coverage Ratio or the ratio of Consolidated Indebtedness 

 15
 

to Consolidated Tangible
Net Worth hereunder, as long as the Unrestricted Subsidiary incurring such
Indebtedness remains an Unrestricted Subsidiary.

“Indenture” means this Indenture as amended,
restated or supplemented from time to time.

“Independent Director” means a director of the
Issuer who

(1)           is
independent with respect to the transaction at issue;

(2)           does
not have any material financial interest in the Issuer or any of its Affiliates
(other than as a result of holding securities of the Issuer); and

(3)           has
not and whose Affiliates or affiliated firm has not, at any time during the
twelve months prior to the taking of any action hereunder, directly or
indirectly, received, or entered into any understanding or agreement to
receive, compensation, payment or other benefit, of any type or form, from the
Issuer or any of its Affiliates in excess of $60,000, other than customary
directors’ fees for serving on the Board of Directors of the Issuer or any
Affiliate and reimbursement of out-of-pocket expenses for attendance at the
Issuer’s or Affiliate’s board and board committee meetings.

“Independent Financial Advisor” means an
accounting, appraisal or investment banking firm of nationally recognized
standing that is, in the reasonable judgment of the Issuer’s Board of
Directors, qualified to perform the task for which it has been engaged and disinterested
and independent with respect to the Issuer and its Affiliates; provided, however,
that the prior rendering of service to the Issuer or an Affiliate of the Issuer
shall not, by itself, disqualify the advisor.

“Institutional Accredited Investor” means an
institution that is an “accredited investor” as that term is defined in Rule
501(a)(1), (2), (3) or (7) promulgated under the Securities Act.

“Intangible Assets” means, with respect to any
Person, all unamortized debt discount and expense, unamortized deferred
charges, goodwill, patents, trademarks, service marks, trade names, copyrights,
write-ups of assets over their carrying value (other than write-ups which
occurred prior to the Measurement Date and other than, in connection with the acquisition
of an asset, the write-up of the value of such asset to its Fair Market Value
in accordance with GAAP on the date of acquisition) and all other items which
would be treated as intangibles on the consolidated balance sheet of such
Person prepared in accordance with GAAP.

“interest” means,
with respect to the Notes, interest, if any, on the Notes.

“Interest Payment Dates” means each January 30,
April 30, July 30 and October 30, commencing April 30, 2007.

 16
 

“Investment Grade Rating” means (1) with
respect to S&P, any of the rating categories from and including AAA to and
including BBB- and (2) with respect to Moody’s, any of the rating
categories from and including Aaa to and including Baa3.

“Investments” of
any Person means:

(1)           all
direct or indirect investments by such Person in any other Person in the form
of loans, advances or capital contributions or other credit extensions
constituting Indebtedness of such other Person, and any guarantee of
Indebtedness of any other Person; provided that a Springing Guarantee
shall not be deemed to be a guarantee of Indebtedness under clause (1) of this
definition until the earliest to occur of (a) a demand by a lender for
payment under such Springing Guarantee, (b) the occurrence or failure to occur
of any event, act or circumstance that, with or without the giving of notice
and/or passage of time, entitles a lender to make a demand for payment
thereunder or (c) a Bankruptcy Event;

(2)           all
purchases (or other acquisitions for consideration) by such Person of
Indebtedness, Equity Interests or other securities of any other Person;

(3)           all
other items that would be classified as investments on a balance sheet of such
Person prepared in accordance with GAAP; and

(4)           the
Designation of any Subsidiary as an Unrestricted Subsidiary.

Except as otherwise expressly specified in this
definition, the amount of any Investment (other than an Investment made in
cash) shall be the Fair Market Value thereof on the date such Investment is
made.  The amount of Investment pursuant
to clause (4) shall be the Designation Amount determined in accordance with
Section 4.15.  If the Issuer or any
Subsidiary sells or otherwise disposes of any Equity Interests of any direct or
indirect Subsidiary such that, after giving effect to any such sale or
disposition, such Person is no longer a Subsidiary, the Issuer shall be deemed
to have made an Investment on the date of any such sale or other disposition
equal to the Fair Market Value of the Equity Interests of and all other
Investments in such Subsidiary not sold or disposed of, which amount shall be
determined by the Board of Directors of the Issuer.  Notwithstanding the foregoing, redemptions of
Equity Interests of the Issuer shall be deemed not to be Investments.

“Issue Date” means February 23, 2007.

“Issuer” means the party named as such in the
first paragraph of this Indenture until a successor replaces such party
pursuant to Article Five and thereafter means the successor.

“Issuer Request” means any written request
signed in the name of the Issuer by the Chairman of the Board of Directors, the
Chief Executive Officer, the President, any Vice President, the Chief Financial
Officer or the Treasurer of the Issuer and attested to by the Secretary or any
Assistant Secretary of the Issuer.

 17
 

“Lien” means, with respect to any asset, any
mortgage, deed of trust, lien (statutory or other), pledge, lease, easement,
restriction, covenant, charge, security interest or other encumbrance of any
kind or nature in respect of such asset, whether or not filed, recorded or otherwise
perfected under applicable law, including any conditional sale or other title
retention agreement, and any lease in the nature thereof, any option or other
agreement to sell, and any filing of, or agreement to give, any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction (other than cautionary filings in respect of operating leases).

“Make Whole Amount” means, with respect to any
Note at any Redemption Date, the excess of, if any (A) an amount equal to the
present value of (1) the redemption price of such Note at March 1, 2012 plus
(2) the remaining scheduled interest payments on the Notes to be redeemed
(subject to the right of Holders on the relevant record date to receive
interest due on the relevant Interest Payment Date) to March 1, 2012 (other
than interest accrued to the Redemption Date), computed using a discount rate
equal to the Treasury Rate plus 50 basis points, over (B) the aggregate
principal amount of the Notes to be redeemed. 
The Make Whole Amount shall be calculated by the Calculation Agent.

“Measurement Date” means May 30, 2001.

“Moody’s” means Moody’s Investors Service,
Inc., and its successors.

“Net Available
Proceeds” means, with respect to any Asset Sale, the proceeds thereof in
the form of cash or Cash Equivalents, net of

(1)           brokerage
commissions and other fees and expenses (including fees and expenses of legal
counsel, accountants and investment banks) of such Asset Sale;

(2)           provisions
for taxes payable as a result of such Asset Sale (after taking into account any
available tax credits or deductions and any tax sharing arrangements);

(3)           amounts
required to be paid to any Person (other than the Issuer or any Restricted
Subsidiary) owning a beneficial interest in the assets subject to the Asset
Sale or having a Lien thereon;

(4)           payments
of unassumed liabilities (not constituting Indebtedness) relating to the assets
sold at the time of, or within 30 days after the date of, such Asset Sale; and

(5)           appropriate
amounts to be provided by the Issuer or any Restricted Subsidiary, as the case
may be, as a reserve required in accordance with GAAP against any liabilities
associated with such Asset Sale and retained by the Issuer or any Restricted
Subsidiary, as the case may be, after such Asset Sale, including pensions and
other post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale, all as reflected in an Officers’ Certificate delivered to the
Trustee; provided, however, that any amounts

 18
 

remaining after
adjustments, revaluations or liquidations of such reserves shall constitute Net
Available Proceeds.

“Non-Recourse Indebtedness” with respect to any
Person means Indebtedness of such Person for which (1) the sole legal
recourse for collection of principal and interest on such Indebtedness is
against the specific property identified in the instruments evidencing or
securing such Indebtedness and such property was acquired with the proceeds of
such Indebtedness or such Indebtedness was incurred within 90 days after the
acquisition of such property and (2) no other assets of such Person may be
realized upon in collection of principal or interest on such Indebtedness.

“Non-U.S. Person” means a Person who is not a
U.S. person, as defined in Regulation S.

“Notes” means the 7.731% Senior Subordinated
Notes due 2017 issued by the Issuer, treated as a single class of securities,
as amended from time to time in accordance with the terms hereof, that are
issued pursuant to this Indenture.

“Obligation” means any principal, interest,
penalties, fees, indemnification, reimbursements, costs, expenses, damages and
other liabilities payable under the documentation governing any Indebtedness.

“Offer”
has the meaning set forth in the definition of “Offer to Purchase.”

“Offer
Expiration Date” has the meaning set forth in the definition of “Offer
to Purchase.”

“Offer to Purchase” means a written offer (the “Offer”)
sent by or on behalf of the Issuer by first-class mail, postage prepaid, to
each Holder at its address appearing in the register for the Notes on the date
of the Offer offering to purchase up to the principal amount of Notes specified
in such Offer at the purchase price specified in such Offer (as determined
pursuant to this Indenture).  Unless
otherwise required by applicable law, the Offer shall specify an expiration
date (the “Offer Expiration Date”) of the Offer to Purchase, which shall
be not less than 30 Business Days nor more than 60 days after the date of such
Offer, and a settlement date (the “Purchase Date”) for purchase of Notes
to occur no later than three Business Days after the Offer Expiration
Date.  The Offer shall contain all the
information required by applicable law to be included therein.  The Offer shall also contain information
concerning the business of the Issuer and its Subsidiaries which the Issuer in
good faith believes will enable such Holders to make an informed decision with
respect to the Offer to Purchase.  Such information
shall include, at a minimum, (i) the most recent annual and quarterly financial
statements and “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” contained in the document required to be delivered to
Holders pursuant to Section 4.02 (which requirements may be satisfied by
delivery of such documents together with the Offer), (ii) a description of
material developments in the Issuer’s business subsequent to the date of the
latest of such financial statements referred to in clause (i) (including a
description of the events requiring the Issuer to make

 19
 

the Offer to Purchase),
(iii) if applicable, appropriate pro forma financial information concerning the
Offer to Purchase and the events requiring the Issuer to make the Offer to
Purchase and (iv) any other information required by applicable law to be
included therein.  The Offer shall
contain all instructions and materials necessary to enable such Holders to
tender Notes pursuant to the Offer to Purchase. 
The Offer shall also state:

(1)           the
Section of this Indenture pursuant to which the Offer to Purchase is being
made;

(2)           the
Offer Expiration Date and the Purchase Date;

(3)           the
aggregate principal amount of the outstanding Notes offered to be purchased by
the Issuer pursuant to the Offer to Purchase (including, if less than 100%, the
manner by which such amount has been determined pursuant to the Section of this
Indenture requiring the Offer to Purchase) (the “Purchase Amount”);

(4)           the
purchase price to be paid by the Issuer for each $1,000 aggregate principal
amount of Notes accepted for payment (the “Purchase Price”);

(5)           that
the Holder may tender all or any portion of the Notes registered in the name of
such Holder and that any portion of a Note tendered must be tendered in an integral
multiple of $1,000 principal amount;

(6)           the
place or places where Notes are to be surrendered for tender pursuant to the
Offer to Purchase;

(7)           that
interest on any Note not tendered or tendered but not purchased by the Issuer
pursuant to the Offer to Purchase will continue to accrue;

(8)           that
on the Purchase Date the Purchase Price will become due and payable upon each
Note being accepted for payment pursuant to the Offer to Purchase and that interest
thereon shall cease to accrue on and after the Purchase Date;

(9)           that
each Holder electing to tender all or any portion of a Note pursuant to the
Offer to Purchase will be required to surrender such Note, with the form
entitled “Option of Holder to Elect Purchase” on the reverse of the Note
completed, at the place or places specified in the Offer prior to the close of
business on the Offer Expiration Date (such Note being, if the Issuer so
requires, duly endorsed by, or accompanied by a written instrument of transfer
in form satisfactory to the Issuer duly executed by, the Holder thereof or its
attorney duly authorized in writing);

(10)         that
Holders will be entitled to withdraw all or any portion of Notes tendered if
the Issuer receives, not later than the close of business on the fifth Business
Day preceding the Offer Expiration Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Note the Holder

 20
 

tendered, the certificate
number of the Note the holder tendered and a statement that such Holder is withdrawing
all or a portion of its tender;

(11)         that
(a) if Notes in an aggregate principal amount less than or equal to the Purchase
Amount are duly tendered and not withdrawn pursuant to the Offer to Purchase,
the Issuer shall purchase all such Notes and (b) if Notes in an aggregate principal
amount in excess of the Purchase Amount are tendered and not withdrawn pursuant
to the Offer to Purchase, the Issuer shall purchase Notes having an aggregate
principal amount equal to the Purchase Amount on a pro rata basis (with such adjustments as may be deemed appropriate
so that only Notes in denominations of $1,000 principal amount or integral multiples
thereof shall be purchased); and

(12)         that
in the case of any Holder whose Note is purchased only in part, the Issuer
shall execute and deliver to the Holder of such Note without service charge, a
new Note or Notes, of any authorized denomination as requested by such Holder,
in an aggregate principal amount equal to and in exchange for the unpurchased
portion of the Note so tendered.

An Offer to Purchase shall be governed by and effected
in accordance with the provisions above pertaining to any Offer.

On or before the Purchase Date, the Issuer shall
(i) accept for payment Notes or portions thereof tendered and not
withdrawn pursuant to the Offer, (ii) deposit with the Trustee U.S.
Dollars sufficient to pay the Purchase Price, plus accrued interest, if any, of
all Notes to be purchased and (iii) deliver to the Trustee Notes so
accepted together with an Officers’ Certificate stating the Notes or portions
thereof that are being purchased by the Issuer. 
The Trustee shall promptly mail to the Holders of Notes so accepted
payment in an amount equal to the Purchase Price, plus accrued interest, if
any, thereon.

“Officer” means any of the following of the
Issuer:  the Chairman of the Board of
Directors, the Chief Executive Officer, the Chief Financial Officer, the
President, any Vice President, the Treasurer, the Secretary, the Controller or
the Chief Accounting Officer.

“Officers’ Certificate” means a certificate
signed by two Officers.

“Opinion of Counsel” means a written opinion
reasonably satisfactory in form and substance to the Trustee from legal
counsel, which counsel is reasonably acceptable to the Trustee, stating the
matters required by Section 12.05 and delivered to the Trustee.

“Pari Passu Indebtedness” means any
Indebtedness of the Issuer or any Guarantor that ranks pari passu as to payment
with the Notes or the Note Guarantees, as applicable.

“Permitted Business” means the businesses
engaged in by the Issuer and its Subsidiaries on the Issue Date as described in
the Issuer’s Annual Report on Form 10-K for the year ended December 31, 2005
and Quarterly Report on Form 10-Q for the period ended September 30, 2006 and
businesses that are reasonably related thereto or reasonable extensions thereof

 21
 

(including, without
limitation, land development, home alarm, pest control, title and other
ancillary businesses).

“Permitted Holders” means Steven J. Hilton, his
wife and children, any corporation, limited liability company or partnership in
which he has voting control and is the direct and beneficial owner of a
majority of the Equity Interests, and any trust for the benefit of him, his
wife or children.

“Permitted Investment”
means:

(1)           Investments
by the Issuer or any Restricted Subsidiary in (a) any Restricted
Subsidiary or (b) any Person that is or will become immediately after such
Investment a Restricted Subsidiary or that will merge or consolidate into the
Issuer or a Restricted Subsidiary;

(2)           Investments
in the Issuer by any Restricted Subsidiary;

(3)           loans
and advances to directors, employees and officers of the Issuer and the
Restricted Subsidiaries for bona fide business purposes and to purchase Equity
Interests of the Issuer not in excess of $2.0 million at any one time outstanding;

(4)           Hedging
Obligations incurred pursuant to clause (4) of the second paragraph of
Section 4.06;

(5)           Cash
Equivalents;

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

(7)           Investments
in securities of trade creditors or customers received pursuant to any plan of
reorganization or similar arrangement upon the bankruptcy or insolvency of such
trade creditors or customers;

(8)           Investments
made by the Issuer or any Restricted Subsidiary as a result of consideration
received in connection with an Asset Sale made in compliance with Section 4.09;

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

(10)         Investments
made by the Issuer or a Restricted Subsidiary for consideration consisting only
of Qualified Equity Interests of the Issuer;

 22
 

(11)         stock,
obligations or securities received in settlement of debts created in the
ordinary course of business and owing to the Issuer or any Restricted Subsidiary
or in satisfaction of judgments;

(12)         Investments
in existence on the Issue Date or any Reversion Date;

(13)         Investments
made by the Issuer or any Restricted Subsidiary in joint ventures in a
Permitted Business with unaffiliated third parties in an aggregate amount at
any one time outstanding not to exceed 30% of the Issuer’s Consolidated Tangible
Net Worth at such time (with each Investment being valued as of the date made
and without regard to subsequent changes in value); and

(14)         other
Investments in an aggregate amount not to exceed $25.0 million at any one time
outstanding (with each Investment being valued as of the date made and without
regard to subsequent changes in value).

The amount of Investments outstanding at any time
pursuant to clause (14) above shall be deemed to be reduced:

(a)           upon
the disposition or repayment of or return on any Investment made pursuant to
clause (14) above, by an amount equal to the return of capital with respect to
such Investment to the Issuer or any Restricted Subsidiary (to the extent not
included in the computation of Consolidated Net Income), less the cost of the disposition of such Investment and net of
taxes; and

(b)           upon
a Redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary, by an
amount equal to the lesser of (x) the Fair Market Value of the Issuer’s proportionate
interest in such Subsidiary immediately following such Redesignation, and (y)
the aggregate amount of Investments in such Subsidiary that increased (and did
not previously decrease) the amount of Investments outstanding pursuant to
clause (14) above.

“Permitted Junior
Securities” means:

(1)           Equity
Interests in the Issuer or any Guarantor; or

(2)           debt
securities issued pursuant to a confirmed plan of reorganization that are
subordinated in right of payment to (a) all Senior Debt and Guarantor Senior
Debt and (b) any debt issued in exchange for Senior Debt to substantially the
same extent as, or to a greater extent than, the Notes and the Note guarantees
are subordinated to Senior Debt and Guarantor Senior Debt under this Indenture.

“Permitted Liens”
means the following types of Liens:

(1)          
(a) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics,
suppliers, materialmen, repairmen and other Liens imposed by law incurred in
the ordinary course of business and (b) Liens for taxes, assessments or governmental

 23
 

charges or claims, in
either case, for sums not yet delinquent or being contested in good faith, if
such reserve or other appropriate provision, if any, as shall be required by
GAAP shall have been made in respect thereof;

(2)           Liens
incurred or deposits made in the ordinary course of business in connection with
workers’ compensation, unemployment insurance and other types of social
security, or to secure the performance of tenders, statutory obligations,
surety and appeal bonds, bids, leases, government contracts, performance and
return-of-money bonds and other similar obligations (exclusive of obligations
for the payment of borrowed money);

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

(4)           Liens
securing reimbursement obligations with respect to commercial letters of credit
which encumber documents and other assets relating to such letters of credit
and products and proceeds thereof;

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

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

(7)           leases
or subleases (or any Liens related thereto) granted to others that do not
materially interfere with the ordinary course of business of the Issuer or any
Restricted Subsidiary;

(8)           Liens
arising from filing Uniform Commercial Code financing statements regarding
leases;

(9)           Liens
securing all of the Notes and Liens securing any Note Guarantee;

(10)         Liens
existing on the Issue Date or any Reversion Date securing Indebtedness
outstanding on the Issue Date or any Reversion Date and Liens securing
Refinancing Indebtedness with respect to Indebtedness incurred pursuant to
clause (2) of the second paragraph of Section 4.06;

 24
 

(11)         Liens
in favor of the Issuer or a Guarantor;

(12)         Liens
securing Senior Debt or Guarantor Senior Debt;

(13)         [reserved];

(14)         Liens
securing Non-Recourse Indebtedness of the Issuer or any Restricted Subsidiary
permitted to be incurred under this Indenture; provided
that such Liens apply only to the property financed out of the net proceeds of
such Non-Recourse Indebtedness within 90 days after the incurrence of such
Non-Recourse Indebtedness;

(15)         Liens
securing Purchase Money Indebtedness permitted to be incurred under this
Indenture; provided that such Liens apply
only to the property acquired, constructed or improved with the proceeds of
such Purchase Money Indebtedness within 90 days after the incurrence of such
Purchase Money Indebtedness;

(16)         Liens
securing Acquired Indebtedness permitted to be incurred under this Indenture; provided that the Liens do not extend to
assets not subject to such Lien at the time of acquisition (other than
improvements thereon) and are no more favorable to the lienholders than those
securing such Acquired Indebtedness prior to the incurrence of such Acquired
Indebtedness by the Issuer or a Restricted Subsidiary;

(17)         Liens
on assets of a Person existing at the time such Person is acquired or merged
with or into or consolidated with the Issuer or any such Restricted Subsidiary
(and not created in anticipation or contemplation thereof);

(18)         Liens
to secure Attributable Indebtedness permitted to be incurred under this
Indenture; provided that any such Lien
shall not extend to or cover any assets of the Issuer or any Restricted Subsidiary
other than the assets which are the subject of the Sale and Leaseback
Transaction in which the Attributable Indebtedness is incurred;

(19)         attachment
or judgment Liens not giving rise to a Default and which are being contested in
good faith by appropriate proceedings;

(20)         easements,
rights-of-way, restrictions and other similar charges or encumbrances not
materially interfering with the ordinary course of business of the Issuer and
its Subsidiaries;

(21)         zoning
restrictions, licenses, restrictions on the use of real property or minor
irregularities in title thereto, which do not materially impair the use of such
real property in the ordinary course of business of the Issuer and its
Subsidiaries or the value of such real property for the purpose of such
business;

(22)         any
option, contract or other agreement to sell an asset; provided such sale is not otherwise prohibited under this Indenture;

 25
 

(23)         Liens
securing Hedging Obligations of the Issuer or any Restricted Subsidiary;

(24)         any
interest or title of a lessor under any Capitalized Lease Obligation of the
Issuer or any Restricted Subsidiary; provided that such Liens do not
extend to any property or asset which is not leased property subject to such
Capitalized Lease Obligations;

(25)         Liens
for the benefit of holders of defeased Indebtedness of the Issuer or any
Restricted Subsidiary on funds deposited in trust for the purpose of defeasing
such Indebtedness to the extent such Indebtedness is permitted to be defeased
pursuant to the terms of this Indenture; and

(26)         Liens
on mortgage loans and related assets of mortgage lending Subsidiaries securing
Indebtedness incurred (i) pursuant to or (ii) during a suspension
period that would have been permitted by, clause (14) of the second paragraph
of Section 4.06.

“Permitted
Unrestricted Subsidiary Debt” means Indebtedness of an Unrestricted Subsidiary:

(1)           as
to which neither the Issuer nor any Restricted Subsidiary (a) provides credit
support of any kind (including any undertaking, agreement or instrument that
would constitute Indebtedness), (b) is directly or indirectly liable as a
guarantor or otherwise, or (c) constitutes the lender;

(2)           no
default with respect to which (including any rights that the holders thereof
may have to take enforcement action against an Unrestricted Subsidiary) would
permit upon notice, lapse of time or both any holder of any other Indebtedness
(other than the Notes) of the Issuer or any Restricted Subsidiary to declare a
default on the other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity; and

(3)           as
to which the lenders have been notified in writing that they will not have any
recourse to the Equity Interests or assets of the Issuer or any Restricted
Subsidiary.

“Person” means any
individual, corporation, partnership, limited liability company, joint venture,
incorporated or unincorporated association, joint-stock company, trust, unincorporated
organization or government or other agency or political subdivision thereof or
other entity of any kind.

“Physical Notes” means certificated Notes in
registered form in substantially the form set forth in Exhibit A.

“Plan of Liquidation” with respect to any
Person, means a plan that provides for, contemplates or the effectuation of
which is preceded or accompanied by (whether or not

 26

substantially
contemporaneously, in phases or otherwise): 
(1) the sale, lease, conveyance or other disposition of all or
substantially all of the assets of such Person otherwise than as an entirety or
substantially as an entirety; and (2) the distribution of all or substantially
all of the proceeds of such sale, lease, conveyance or other disposition of all
or substantially all of the remaining assets of such Person to creditors and
holders of Equity Interests of such Person.

“Preferred Stock” means, with respect to any
Person, any and all preferred or preference stock or other equity interests
(however designated) of such Person whether now outstanding or issued after the
Issue Date.

“principal” means,
with respect to the Notes, the principal of, and premium, if any, on the Notes.

“Private Placement Legend” means the legend
initially set forth on the Rule 144A Notes and Other Notes that are Restricted
Notes in the form set forth in Exhibit B.

“Purchase Amount” has the meaning set forth in
the definition of “Offer to Purchase.”

“Purchase Date” has the meaning set forth in
the definition of “Offer to Purchase.”

“Purchase Money Indebtedness” means
Indebtedness, including Capitalized Lease Obligations, of the Issuer or any
Restricted Subsidiary incurred for the purpose of financing all or any part of
the purchase price of property, plant or equipment used in the business of the
Issuer or any Restricted Subsidiary or the cost of installation, construction
or improvement thereof; provided,  however, that (1) the amount of such
Indebtedness shall not exceed such purchase price or cost, (2) such
Indebtedness shall not be secured by any asset other than the specified asset
being financed or, in the case of real property or fixtures, including
additions and improvements, the real property to which such asset is attached
and (3) such Indebtedness shall be incurred within 90 days after such
acquisition of such asset by the Issuer or such Restricted Subsidiary or such
installation, construction or improvement.

“Purchase Price” has the meaning set forth in
the definition of “Offer to Purchase.”

“Qualified Equity Interests” means Equity
Interests of the Issuer other than Disqualified Equity Interests; provided that such Equity Interests shall not
be deemed Qualified Equity Interests to the extent sold or owed to a Subsidiary
of the Issuer or financed, directly or indirectly, using funds (1) borrowed
from the Issuer or any Subsidiary of the Issuer until and to the extent such
borrowing is repaid or (2) contributed, extended, guaranteed or advanced by the
Issuer or any Subsidiary of the Issuer (including, without limitation, in respect
of any employee stock ownership or benefit plan).

“Qualified Equity Offering” means the issuance
and sale of Qualified Equity Interests of the Issuer to Persons other than any
Permitted Holder or any other Person who is not, prior to such issuance and
sale, an Affiliate of the Issuer.

 27
 

“Qualified Institutional Buyer” or “QIB”
shall have the meaning specified in Rule 144A promulgated under the Securities
Act.

“Rating Agency” means each of (a) S&P
and (b) Moody’s.

“Rating Category”
means:

(1)           with
respect to S&P, any of the following categories:  BB, B, CCC, CC, C and D (or equivalent
successor categories); and

(2)           with
respect to Moody’s, any of the following categories:  Ba, B, Caa, Ca, C and D (or equivalent
successor categories).

In determining whether the rating of the Issuer’s
senior unsecured notes (or if no senior unsecured notes are outstanding, the
Issuer’s corporate credit rating) has decreased by one or more gradations, gradations
within Rating Categories (+ and - for S&P; or 1, 2 and 3 for Moody’s) will
be taken into account (e.g., with respect to S&P a decline in rating from
BB+ to BB, as well as from BB- to B+, will constitute a decrease of one
gradation).

“Rating Date” means the date which is 90 days
prior to the earlier of (1) a Change of Control and (2) public notice
of the occurrence of a Change of Control or of the intention by the Issuer to
effect a Change of Control.

“Rating Decline” means either a ratings
withdrawal by a Rating Agency or the decrease (as compared with the Rating
Date) by one or more gradations within Rating Categories as well as between
Rating Categories of the rating of the Issuer’s senior unsecured notes (or if
no senior unsecured notes are outstanding, the Issuer’s corporate credit
rating) by a Rating Agency, in each case on, or within 120 days after, the
earlier of the date of public notice of the occurrence of a Change of Control
or of the intention by the Issuer to effect a Change of Control (which period
will be extended for so long as the rating of the Issuer’s senior unsecured
notes (or if no senior unsecured notes are outstanding, the Issuer’s corporate
credit rating) is under publicly announced consideration for possible downgrade
by any of the Rating Agencies).

“Receivables”
means an amount owed with respect to completed sales of housing units, lots and
parcels sold to an unaffiliated purchaser.

“redeem” means to
redeem, repurchase, purchase, defease, retire, discharge or otherwise acquire
or retire for value; and “redemption” shall
have a correlative meaning.

“Redemption Date” when used with respect to any
Note to be redeemed means the date fixed for such redemption pursuant to the
terms of the Notes.

“refinance” means
to refinance, repay, prepay, replace, renew or refund.

“Refinancing Indebtedness” means Indebtedness
of the Issuer or a Restricted Subsidiary issued in exchange for, or the
proceeds from the issuance and sale or disbursement of

 28
 

which are used substantially
concurrently to redeem or refinance in whole or in part, or constituting an
amendment of, any Indebtedness of the Issuer or any Restricted Subsidiary (the “Refinanced
Indebtedness”) in a principal amount not in excess of the principal amount
of the Refinanced Indebtedness so repaid or amended (plus the amount of any
premium paid and the amount of reasonable expenses incurred by the Issuer or
any Restricted Subsidiary in connection with such repayment or amendment) (or,
if such Refinancing Indebtedness refinances Indebtedness under a revolving
credit facility or other agreement providing a commitment for subsequent
borrowings, with a maximum commitment not to exceed the maximum commitment
under such revolving credit facility or other agreement); provided that:

(1)           (A)
if the Refinanced Indebtedness was subordinated to the Notes or the Note
Guarantees, as the case may be, then such Refinancing Indebtedness, by its
terms, is expressly subordinate in right of payment to the Notes or the Note
Guarantees, as the case may be, at least to the same extent as the Refinanced
Indebtedness and (B) if the Refinanced Indebtedness was pari passu with
the Notes or the Note Guarantees, as the case may be, then the Refinancing
Indebtedness, by its terms, expressly ranks pari passu with, or is
subordinated in right of payment to, the Notes or the Note Guarantees, as the
case may be;

(2)           the
Refinancing Indebtedness is scheduled to mature either (a) no earlier than the
Refinanced Indebtedness being repaid or amended or (b) after the maturity date
of the Notes;

(3)           the
portion, if any, of the Refinancing Indebtedness that is scheduled to mature on
or prior to the maturity date of the Notes has a Weighted Average Life to Maturity
at the time such Refinancing Indebtedness is incurred that is equal to or
greater than the Weighted Average Life to Maturity of the portion of the
Refinanced Indebtedness being repaid that is scheduled to mature on or prior to
the maturity date of the Notes; and

(4)           the
Refinancing Indebtedness is secured only to the extent, if at all, and by the
assets, that the Refinanced Indebtedness being repaid, extended or amended is secured.

“Regulation S” means Regulation S promulgated
under the Securities Act.

“Representative” means any agent or representative
in respect of any Designated Senior Debt; provided that if, and for so
long as, any Designated Senior Debt lacks such Representative, then the Representative
for such Designated Senior Debt shall at all times constitute the holders of a
majority in outstanding principal amount of such Designated Senior Debt.

“Responsible Officer,”
when used with respect to the Trustee, means an officer or assistant officer
assigned to the corporate trust department of the Trustee (or any successor
group of the Trustee) with direct responsibility for the administration of this
Indenture and also means,

 29
 

with respect to a
particular corporate trust matter, any other officer to whom such matter is
referred because of his knowledge of and familiarity with the particular subject.

“Restricted Note” has the same meaning as “Restricted
Security” set forth in Rule 144(a)(3) promulgated under the Securities Act; provided,
that the Trustee shall be entitled to request and conclusively rely upon an
Opinion of Counsel with respect to whether any Note is a Restricted Note.

“Restricted Payment”
means any of the following:

(1)           the
declaration or payment of any dividend or any other distribution on Equity
Interests of the Issuer or any Restricted Subsidiary or any payment made to the
direct or indirect holders (in their capacities as such) of Equity Interests of
the Issuer or any Restricted Subsidiary, including, without limitation, any
payment in connection with any merger or consolidation involving the Issuer,
but excluding (a) dividends or distributions payable solely in Qualified
Equity Interests and (b) in the case of Restricted Subsidiaries, dividends
or distributions payable to the Issuer or to a Restricted Subsidiary and pro
rata dividends or distributions payable to minority stockholders of any
Restricted Subsidiary;

(2)           the
redemption of any Equity Interests of the Issuer or any Restricted Subsidiary,
including, without limitation, any payment in connection with any merger or consolidation
involving the Issuer, but excluding any such Equity Interests held by the
Issuer or any Restricted Subsidiary;

(3)           any
Investment other than a Permitted Investment; or

(4)           any
redemption prior to the scheduled maturity or prior to any scheduled repayment
of principal or sinking fund payment, as the case may be, in respect of Subordinated
Indebtedness.

“Restricted Payments Basket” has the meaning
given to such term in clause (3) of the first paragraph of Section 4.08.

“Restricted Subsidiary” means any Subsidiary of
the Issuer other than an Unrestricted Subsidiary.

“Reversion Date” has the meaning given to such
term in the definition of “Suspension Period.”

“Rule 144” means Rule 144 promulgated under the
Securities Act.

“Rule 144A” means Rule 144A promulgated under
the Securities Act.

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

 30
 

“Sale and Leaseback Transaction” means, with
respect to any Person, an arrangement with any bank, insurance company or other
lender or investor or to which such lender or investor is a party, providing
for the leasing by such Person of any asset of such Person which has been or is
being sold or transferred by such Person to such lender or investor or to any
Person to whom funds have been or are to be advanced by such lender or investor
on the security of such asset.

“SEC” means the
U.S. Securities and Exchange Commission.

“Secretary’s Certificate” means a certificate
signed by the Secretary of the Issuer.

“Securities Act” means the U.S. Securities Act
of 1933, as amended.

“Senior Debt” means the principal of, premium,
if any, and interest (including any interest accruing subsequent to the filing
of a petition of bankruptcy at the rate provided for in the documentation with
respect thereto, whether or not such interest is an allowed claim under
applicable law) on any Indebtedness of the Issuer, whether outstanding on the
Issue Date or thereafter created, incurred or assumed, unless, in the case of
any particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such Indebtedness
shall not be senior in right of payment to the Notes.

Without limiting the generality of the foregoing, “Senior
Debt” shall include the principal of, premium, if any, interest (including any
interest accruing subsequent to the filing of a petition of bankruptcy at the
rate provided for in the documentation with respect thereto, whether or not
such interest is an allowed claim under applicable law) on, and all other
amounts owing in respect of:

(1)           all
monetary obligations of every nature under, or with respect to, the Credit
Facilities, including, without limitation, obligations to pay principal and
interest, reimbursement obligations under letters of credit, fees, expenses and
indemnities (and guarantees thereof); and

(2)           all
Hedging Obligations in respect of the Credit Facilities;

in each case whether outstanding on the Issue Date or
thereafter incurred.

Notwithstanding the foregoing, “Senior Debt” shall not
include:

(1)           any
Indebtedness of the Issuer to any of its Subsidiaries;

(2)           Indebtedness
to, or guaranteed on behalf of, any director, officer or employee of the Issuer
or any of its Subsidiaries (including, without limitation, amounts owed for
compensation);

(3)           obligations
to trade creditors and other amounts incurred (but not under the Credit
Facilities) in connection with obtaining goods, materials or services;

 31
 

(4)           Indebtedness
represented by Disqualified Equity Interests;

(5)           any
liability for taxes owed or owing by the Issuer;

(6)           that
portion of any Indebtedness incurred in violation of Section 4.06 (but, as to
any such obligation, no such violation shall be deemed to exist for purposes of
this clause (6) if the holder(s) of such obligation or their representative
shall have received an Officers’ Certificate of the Issuer to the effect that
the incurrence of such Indebtedness does not (or, in the case of revolving
credit indebtedness, that the incurrence of the entire committed amount thereof
at the date on which the initial borrowing thereunder is made would not)
violate such provisions of this Indenture);

(7)           Indebtedness
which, when incurred and without respect to any election under
Section 1111(b) of Title 11, United States Code, is without recourse
to the Issuer; and

(8)           any
Indebtedness which is, by its express terms, subordinated in right of payment
to any other Indebtedness of the Issuer.

“Significant Subsidiary” means (1) any
Restricted Subsidiary that would be a “significant subsidiary” as defined in
Regulation S-X promulgated pursuant to the Securities Act as such
Regulation is in effect on the Issue Date and (2) any Restricted Subsidiary
that, when aggregated with all other Restricted Subsidiaries that are not
otherwise Significant Subsidiaries and as to which any event described in
clause (7) or (8) of Section 6.01 has occurred and is continuing, would
constitute a Significant Subsidiary under clause (1) of this definition.

“Springing Guarantee” means a guarantee by a
Person which by its express terms does not become effective until the
occurrence of a Bankruptcy Event.

“Subordinated Indebtedness” means Indebtedness
of the Issuer or any Restricted Subsidiary that is subordinated in right of
payment to the Notes or the Note Guarantees, respectively.

“Subsidiary” means, with respect to any Person:

(1)           any
corporation, limited liability company, association or other business entity of
which more than 50% of the total voting power of the Equity Interests entitled
(without regard to the occurrence of any contingency) to vote in the election
of the Board of Directors thereof are at the time owned or controlled, directly
or indirectly, by such Person or one or more of the other Subsidiaries of that
Person (or a combination thereof); and

(2)           any
partnership (a) the sole general partner or the managing general partner
of which is such Person or a Subsidiary of such Person or (b) the only general
partners of which are such Person or of one or more Subsidiaries of such Person
(or any combination thereof).

 32
 

Unless otherwise specified, “Subsidiary” refers to a
Subsidiary of the Issuer.

“Surviving Person” means, with respect to any
Person involved in or that makes any Disposition, the Person formed by or
surviving such Disposition or the Person to which such Disposition is made.

“Suspension Period”
means the period (a) beginning on the date that:

(1)           the
Notes have Investment Grade Ratings by both Rating Agencies; provided
that, prior to the assignment of the Investment Grade Ratings, the Issuer has advised
the Rating Agencies that the Suspendable Covenants will not apply during the Suspension
Period;

(2)           no
Default has occurred and is continuing; and

(3)           the
Issuer has delivered an Officers’ Certificate to the Trustee certifying that
the conditions set forth in clauses (1) and (2) above are satisfied;

and (b) ending on the date (the “Reversion
Date”) that either Rating Agency ceases to have Investment Grade Ratings on
the Notes.

“Treasury Rate” means, at 5:00 p.m. Eastern
Standard Time two (2) Business Days prior to the Redemption Date, the most
recently published yield to maturity of United States Treasury Securities with
a constant maturity (as compiled and published in the most recent Federal
Reserve Statistical Release H.15(519) or, if such Statistical Release is no
longer published, any publicly available source of similar market data) most
nearly equal to the period from the redemption date to March 1, 2012; provided,
however, that if such period is not equal to the constant maturity of a
United States Treasury Security for which a weekly average yield is given, the
Treasury Rate shall be obtained by linear interpolation (calculated to the
nearest month) from the weekly average yields of United States Treasury
Securities for which such yields are given, except that if the period from the
redemption date to March 1, 2012 is less than one year, the weekly average
yield on actually traded United States Treasury Securities adjusted to a
constant maturity of one year shall be used. The Issuer will (1) calculate the
Treasury Rate on the second Business Day preceding the applicable redemption
date and (2) prior to such redemption date file with the Trustee an Officers’
Certificate setting forth the Make Whole Amount and the Treasury Rate and
showing the calculation of each in reasonable detail; provided, however,
that in the event of the legal or covenant defeasance of this Indenture or the
satisfaction and discharge of this Indenture as provided herein, the Officers’
Certificate shall set forth the Make Whole Amount and the Treasury Rate as
estimated calculated based on the Treasury Rate in effect on the date of such
Officers’ Certificate and on the second Business Day preceding the applicable
redemption date, shall be supplemented with the final calculation thereof as
set forth above.

“Trust Indenture Act” or “TIA” means the
Trust Indenture Act of 1939, as amended.

 33
 

“Trustee” means the party named as such in this
Indenture until a successor replaces it pursuant to this Indenture and
thereafter means the successor.

“Unit” means a
residence, whether single or part of a multifamily building, whether completed
or under construction, held by the Issuer or any Restricted Subsidiary for sale
or rental in the ordinary course of business; provided,
however, that the number of Units that are
rental Units at the time of determination shall not exceed 25% of the total
Units sold or rented by the Issuer and its Restricted Subsidiaries during the
immediately preceding twelve month period.

“Unrestricted Subsidiary” means (1) any
Subsidiary that at the time of determination shall be designated an
Unrestricted Subsidiary by the Board of Directors of the Issuer in accordance
with Section 4.15 and (2) any Subsidiary of an Unrestricted Subsidiary.

“U.S. Government Obligations” means direct
non-callable obligations of, or obligations guaranteed by, the United States of
America for the payment of which guarantee or obligations the full faith and
credit of the United States is pledged.

“Voting Stock” with respect to any Person,
means securities of any class of Equity Interests of such Person entitling the
holders thereof (whether at all times or only so long as no senior class of
stock or other relevant equity interest has voting power by reason of any contingency)
to vote in the election of members of the Board of Directors of such Person.

“Weighted Average Life to Maturity,” when
applied to any Indebtedness at any date, means the number of years obtained by
dividing (1) the sum of the products obtained by multiplying (a) the
amount of each then remaining installment, sinking fund, serial maturity or
other required payment of principal, including payment at final maturity, in
respect thereof by (b) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making of such payment
by (2) the then outstanding principal amount of such Indebtedness.

“Wholly-Owned Restricted Subsidiary” means a
Restricted Subsidiary of which 100% of the Equity Interests (except for
directors’ qualifying shares or certain minority interests owned by other
Persons solely due to local law requirements that there be more than one stockholder,
but which interest is not in excess of what is required for such purpose) are
owned directly by the Issuer or through one or more Wholly-Owned Restricted
Subsidiaries.

SECTION 1.02.                            Other
Definitions.

The definitions of the following terms may be found in
the sections indicated as follows:

	
  Term

  	
   

  	
  Defined in Section

  
	
  “Affiliate
  Transaction”

  	
   

  	
  4.10

  
	
  “Agent Members”

  	
   

  	
  2.16(a)

  
	
  “Change of
  Control Date”

  	
   

  	
  4.20

  
	
  “Change of
  Control Offer”

  	
   

  	
  4.20

  

 

 34
 

 

	
  “Change of Control Payment
  Date”

  	
   

  	
  4.20

  
	
  “Change of
  Control Purchase Price”

  	
   

  	
  4.20

  
	
  “Covenant
  Defeasance”

  	
   

  	
  9.03

  
	
  “Designation”

  	
   

  	
  4.15(a)

  
	
  “Events of
  Default”

  	
   

  	
  6.01

  
	
  “Excess
  Proceeds”

  	
   

  	
  4.09

  
	
  “Global Notes”

  	
   

  	
  2.16(a)

  
	
  “Legal
  Defeasance”

  	
   

  	
  9.02

  
	
  “Legal Holiday”

  	
   

  	
  12.07

  
	
  “Net Proceeds
  Deficiency”

  	
   

  	
  4.09

  
	
  “Net Proceeds
  Offer”

  	
   

  	
  4.09

  
	
  “Other Notes”

  	
   

  	
  2.02

  
	
  “Paying Agent”

  	
   

  	
  2.04

  
	
  “Payment
  Blockage Notice”

  	
   

  	
  11.03(a)

  
	
  “Ratio
  Exception”

  	
   

  	
  4.06

  
	
  “Redesignation”

  	
   

  	
  4.15

  
	
  “Registrar”

  	
   

  	
  2.04

  
	
  “Regulation S
  Global Notes”

  	
   

  	
  2.16(a)

  
	
  “Regulation S
  Notes”

  	
   

  	
  2.02

  
	
  “Restricted
  Global Note”

  	
   

  	
  2.16(a)

  
	
  “Restricted
  Payment”

  	
   

  	
  4.08

  
	
  “Rule 144A
  Notes”

  	
   

  	
  2.02

  

 

SECTION 1.03.                            Incorporation
by Reference of Trust Indenture Act.

Whenever this Indenture refers to a provision of the
TIA, the portion of such provision required to be incorporated herein in order
for this Indenture to be qualified under the TIA is incorporated by reference
in and made a part of this Indenture. 
The following TIA terms used in this Indenture have the following
meanings:

“indenture securities” means the Notes.

“indenture securityholder” means a Holder or
Noteholder.

“indenture to be qualified” means this
Indenture.

“indenture trustee” or “institutional
trustee” means the Trustee.

“obligor on the indenture securities” means the
Issuer, the Guarantors or any other obligor on the Notes.

All other terms used in this Indenture that are
defined by the TIA, defined in the TIA by reference to another statute or
defined by SEC rule have the meanings therein assigned to them.

 35
 

SECTION 1.04.                            Rules
of Construction.

Unless the context otherwise requires:

(1)           a term has the meaning assigned to it
herein, whether defined expressly or by reference;

(2)           “or” is not exclusive;

(3)           words in the singular include the
plural, and in the plural include the singular;

(4)           words used herein implying any gender
shall apply to both genders;

(5)           “herein,” “hereof” and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other Subsection;

(6)           unless otherwise specified herein,
all accounting terms used herein shall be interpreted, all accounting
determinations hereunder shall be made, and all financial statements required to
be delivered hereunder shall be prepared in accordance with GAAP as in effect
from time to time, applied on a basis consistent with the most recent audited
consolidated financial statements of the Issuer;

(7)           “$,” “U.S. Dollars” and “United
States Dollars” each refer to United States dollars, or such other money of the
United States that at the time of payment is legal tender for payment of public
and private debts.

ARTICLE TWO

THE NOTES

SECTION 2.01.                            Amount
of Notes.

The Trustee shall authenticate Notes for original
issue on the Issue Date in the aggregate principal amount not to exceed
$150,000,000 upon a written order of the Issuer in the form of an Officers’
Certificate of the Issuer.  The Officers’
Certificate shall specify the amount of Notes to be authenticated and the date
on which the Notes are to be authenticated.

Upon receipt of a written order of the Issuer in the
form of an Officers’ Certificate, the Trustee shall authenticate Notes in
substitution for Notes originally issued to reflect any name change of the
Issuer.

 36
 

SECTION 2.02.                            Form
and Dating.

The Notes and the Trustee’s certificate of
authentication with respect thereto shall be substantially in the form set
forth in Exhibit A, which is incorporated in and forms a part of this
Indenture.  The Notes may have notations,
legends or endorsements required by law, rule or usage to which the Issuer is
subject.  Without limiting the generality
of the foregoing, Notes offered and sold to Qualified Institutional Buyers in
reliance on Rule 144A (“Rule 144A Notes”) shall bear the legend and
include the form of assignment set forth in Exhibit B, Notes offered and
sold in offshore transactions in reliance on Regulation S (“Regulation S
Notes”) shall bear the legend and include the form of assignment set forth
in Exhibit C, and Notes offered and sold to Institutional
Accredited Investors in transactions exempt from registration under the
Securities Act not made in reliance on Rule 144A or Regulation S (“Other
Notes”) may be represented by a Restricted Global Note or, if such an
investor may not hold an interest in the Restricted Global Note, a Physical
Note, in each case, bearing the Private Placement Legend.  Each Note shall be dated the date of its authentication.

The terms and provisions contained in the Notes shall
constitute, and are expressly made, a part of this Indenture and, to the extent
applicable, the Issuer, the Guarantors and the Trustee, by their execution and
delivery of this Indenture, expressly agree to such terms and provisions and
agree to be bound thereby.

The Notes may be presented for registration of
transfer and exchange at the offices of the Registrar.

SECTION 2.03.                            Execution
and Authentication.

Two Officers shall sign, or one Officer shall sign and
one Officer (each of whom shall, in each case, have been duly authorized by all
requisite corporate actions) shall attest to, the Notes for the Issuer by
manual or facsimile signature.

If an Officer whose signature is on a Note was an
Officer at the time of such execution but no longer holds that office at the
time the Trustee authenticates the Note, the Note shall be valid nevertheless.

No Note shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there appears on
such Note a certificate of authentication substantially in the form provided
for herein executed by the Trustee by manual signature, and such certificate
upon any Note shall be conclusive evidence, and the only evidence, that such
Note has been duly authenticated and delivered hereunder.  Notwithstanding the foregoing, if any Note
shall have been authenticated and delivered hereunder but never issued and sold
by the Issuer, and the Issuer shall deliver such Note to the Trustee for
cancellation as provided in Section 2.12, for all purposes of this
Indenture such Note shall be deemed never to have been authenticated and
delivered hereunder and shall never be entitled to the benefits of this
Indenture.

The Trustee may appoint an authenticating agent
reasonably acceptable to the Issuer to authenticate the Notes.  Unless otherwise provided in the appointment,
an authenticating

 37
 

agent may authenticate
the Notes whenever the Trustee may do so. 
Each reference in this Indenture to authentication by the Trustee
includes authentication by such agent. 
An authenticating agent has the same rights as an Agent to deal with the
Issuer and Affiliates of the Issuer. 
Each Paying Agent is designated as an authenticating agent for purposes
of this Indenture.

The Notes shall be issuable only in registered form
without coupons in denominations of $1,000 and any integral multiple thereof.

SECTION 2.04.                            Registrar
and Paying Agent.

The Issuer shall maintain an office or agency (which
shall be located in the Borough of Manhattan in The City of New York, State of New
York) where Notes may be presented for registration of transfer or for exchange
(the “Registrar”), and an office or agency where Notes may be presented
for payment (the “Paying Agent”) and an office or agency where notices
and demands to or upon the Issuer, if any, in respect of the Notes and this
Indenture may be served.  The Registrar
shall keep a register of the Notes and of their transfer and exchange.  The Issuer may have one or more additional
Paying Agents.  The term “Paying Agent”
includes any additional Paying Agent. 
Neither the Issuer nor any Affiliate thereof may act as Paying Agent.

The Issuer shall enter into an appropriate agency
agreement, which shall incorporate the provisions of the TIA, with any Agent
that is not a party to this Indenture. 
The agreement shall implement the provisions of this Indenture that
relate to such Agent.  The Issuer shall
notify the Trustee of the name and address of any such Agent.  If the Issuer fails to maintain a Registrar
or Paying Agent, or fails to give the foregoing notice, the Trustee shall act
as such and shall be entitled to appropriate compensation in accordance with
Section 7.06.

The Issuer initially appoints the Trustee as
Registrar, Paying Agent and Agent for service of notices and demands in connection
with the Notes and this Indenture.  For
so long as the Trustee remains the Registrar and Paying Agent, the office or
agency of the Registrar and Paying Agent shall be at the Corporate Trust
Office.

SECTION 2.05.                            Paying
Agent To Hold Money in Trust.

Each Paying Agent shall hold in trust for the benefit
of the Holders or the Trustee all money held by the Paying Agent for the
payment of principal of or premium or interest on the Notes (whether such money
has been paid to it by the Issuer or any other obligor on the Notes or the
Guarantors), and the Issuer and the Paying Agent shall notify the Trustee of
any default by the Issuer (or any other obligor on the Notes) in making any
such payment.  Money held in trust by the
Paying Agent need not be segregated except as required by law and in no event
shall the Paying Agent be liable for any interest on any money received by it
hereunder.  The Issuer at any time may
require the Paying Agent to pay all money held by it to the Trustee and account
for any funds disbursed and the Trustee may at any time during the continuance
of any Event of Default specified in Section 6.01 (1) or (2), upon written
request to the Paying Agent, require such Paying Agent to pay forthwith all
money so held by it to the Trustee and to account for any funds

 38
 

disbursed.  Upon making such payment, the Paying Agent
shall have no further liability for the money delivered to the Trustee.

SECTION 2.06.                            Holder
Lists.

The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of the Holders.  If the Trustee
is not the Registrar, the Issuer shall furnish to the Trustee at least five
Business Days before each Interest Payment Date, and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders.

SECTION 2.07.                            Transfer
and Exchange.

Subject to Sections 2.16 and 2.17, when Notes are
presented to the Registrar with a request from the Holder of such Notes to
register a transfer or to exchange them for an equal principal amount of Notes
of other authorized denominations, the Registrar shall register the transfer as
requested.  Every Note presented or
surrendered for registration of transfer or exchange shall be duly endorsed or
be accompanied by a written instrument of transfer in form satisfactory to the
Issuer and the Registrar, duly executed by the Holder thereof or his attorneys
duly authorized in writing.  To permit
registrations of transfers and exchanges, the Issuer shall issue and execute
and the Trustee shall authenticate new Notes (and the Guarantors shall execute
the guarantee thereon) evidencing such transfer or exchange at the Registrar’s
request.  No service charge shall be made
to the Holder for any registration of transfer or exchange.  The Issuer may require from the Holder
payment of a sum sufficient to cover any transfer taxes or other governmental
charge that may be imposed in relation to a transfer or exchange, but this
provision shall not apply to any exchange pursuant to Section 2.11, 3.06,
4.09, 4.20 or 8.05 (in which events the Issuer shall be responsible for the
payment of such taxes).  The Registrar
shall not be required to exchange or register a transfer of any Note for a
period of 15 days immediately preceding the mailing of notice of redemption of
Notes to be redeemed or of any Note selected, called or being called for
redemption except the unredeemed portion of any Note being redeemed in part.

Any Holder of the Global Note shall, by acceptance of
such Global Note, agree that transfers of the beneficial interests in such
Global Note may be effected only through a book entry system maintained by the
Holder of such Global Note (or its agent), and that ownership of a beneficial
interest in the Global Note shall be required to be reflected in a book entry.

Each Holder of a Note agrees to indemnify the Issuer
and the Trustee against any liability that may result from the transfer,
exchange or assignment of such Holder’s Note in violation of any provision of
this Indenture and/or applicable U.S. Federal or state securities law.

Except as expressly provided herein, neither the
Trustee nor the Registrar shall have any duty to monitor the Issuer’s
compliance with or have any responsibility with respect to the Issuer’s
compliance with any U.S. Federal or state securities laws.

 39
 

SECTION 2.08.                            Replacement
Notes.

If a mutilated Note is surrendered to the Registrar or
the Trustee, or if the Holder of a Note claims that the Note has been lost,
destroyed or wrongfully taken, the Issuer shall issue and the Trustee shall
authenticate a replacement Note (and the Guarantors shall execute the guarantee
thereon) if the Holder of such Note furnishes to the Issuer and the Trustee
evidence reasonably acceptable to them of the ownership and the destruction,
loss or theft of such Note and if the requirements of Section 8-405 of the New
York Uniform Commercial Code as in effect on the date of this Indenture are
met.  If required by the Trustee or the
Issuer, an indemnity bond shall be posted, sufficient in the judgment of both
to protect the Issuer, the Guarantors, the Trustee or any Paying Agent from any
loss that any of them may suffer if such Note is replaced.  The Issuer may charge such Holder for the
Issuer’s reasonable out-of-pocket expenses in replacing such Note
and the Trustee may charge the Issuer for the Trustee’s expenses (including,
without limitation, attorneys’ fees and disbursements) in replacing such Note.  Every replacement Note shall constitute a
contractual obligation of the Issuer.

SECTION 2.09.                            Outstanding
Notes.

The Notes outstanding at any time are all Notes that
have been authenticated by the Trustee except for (a) those cancelled by
it, (b) those delivered to it for cancellation, (c) to the extent set
forth in Sections 9.01 and 9.02, on or after the date on which the conditions
set forth in Section 9.01 or 9.02 have been satisfied, those Notes theretofore
authenticated and delivered by the Trustee hereunder and (d) those
described in this Section 2.09 as not outstanding.  Subject to Section 2.10, a Note does not
cease to be outstanding because the Issuer or one of its Affiliates holds the
Note.

If a Note is replaced pursuant to Section 2.08,
it ceases to be outstanding unless the Trustee receives proof satisfactory to
it that the replaced Note is held by a bona fide purchaser in whose hands such
Note is a legal, valid and binding obligation of the Issuer.

If the Paying Agent holds, in its capacity as such, on
any maturity date, money sufficient to pay all accrued interest and principal
with respect to the Notes payable on that date and is not prohibited from
paying such money to the Holders thereof pursuant to the terms of this
Indenture, then on and after that date such Notes cease to be outstanding and interest
on them ceases to accrue.

SECTION 2.10.                            Treasury
Notes.

In determining whether the Holders of the required
principal amount of Notes have concurred in any declaration of acceleration or
notice of default or direction, waiver or consent or any amendment,
modification or other change to this Indenture, Notes owned by the Issuer or
any other obligor on the Notes or any of their respective Affiliates shall be
disregarded as though they were not outstanding, except that for the purposes
of determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent or any amendment, modification or other change to
this Indenture, only Notes as to which a Responsible Officer of

 40
 

the Trustee has received
an Officers’ Certificate stating that such Notes are so owned shall be so
disregarded.  Notes so owned which have
been pledged in good faith shall not be disregarded if the pledgee established
to the satisfaction of the Trustee the pledgee’s right so to act with respect
to the Notes and that the pledgee is not the Issuer, a Guarantor, any other
obligor on the Notes or any of their respective Affiliates.

SECTION 2.11.                            Temporary
Notes.

Until definitive Notes are prepared and ready for
delivery, the Issuer may prepare and the Trustee shall authenticate temporary
Notes.  Temporary Notes shall be substantially
in the form of definitive Notes but may have variations that the Issuer
considers appropriate for temporary Notes. 
Without unreasonable delay, the Issuer shall prepare and the Trustee
shall authenticate definitive Notes in exchange for temporary Notes.  Until such exchange, temporary Notes shall be
entitled to the same rights, benefits and privileges as definitive Notes.

SECTION 2.12.                            Cancellation.

The Issuer at any time may deliver Notes to the
Trustee for cancellation.  The Registrar
and the Paying Agent shall forward to the Trustee any Notes surrendered to them
for registration of transfer, exchange or payment.  The Trustee shall cancel all Notes
surrendered for registration of transfer, exchange, payment, replacement or
cancellation and shall (subject to the record-retention requirements of the
Exchange Act) destroy cancelled Notes. 
The Issuer may not reissue or resell, or issue new Notes to replace,
Notes that the Issuer has redeemed or paid, or that have been delivered to the
Trustee for cancellation.

SECTION 2.13.                            Defaulted
Interest.

If the Issuer defaults on a payment of interest on the
Notes, it shall pay the defaulted interest, plus (to the extent permitted by
law) any interest payable on the defaulted interest, in accordance with the
terms hereof, to the Persons who are Holders on a subsequent special record
date, which date shall be at least five Business Days prior to the payment
date.  The Issuer shall fix such special
record date and payment date in a manner satisfactory to the Trustee.  At least 10 days before such special record
date, the Issuer shall mail to each Holder a notice that states the special
record date, the payment date and the amount of defaulted interest, and
interest payable on defaulted interest, if any, to be paid.  The Issuer may make payment of any defaulted
interest in any other lawful manner not inconsistent with the requirements (if
applicable) of any securities exchange on which the Notes may be listed and,
upon such notice as may be required by such exchange, if, after written notice
given by the Issuer to the Trustee of the proposed payment pursuant to this
sentence, such manner of payment shall be deemed practicable by the Trustee.

SECTION 2.14.                            CUSIP
Number.

The Issuer in issuing the Notes may use a “CUSIP”
number, and if so, such CUSIP number shall be included in notices of redemption
or exchange as a convenience to Holders; provided, that any such notice
may state that no representation is made as to the

 41

correctness or accuracy
of the CUSIP number printed in the notice or on the Notes, and that reliance
may be placed only on the other identification numbers printed on the
Notes.  The Issuer shall promptly notify
the Trustee of any such CUSIP number used by the Issuer in connection with the
issuance of the Notes and of any change in the CUSIP number.

SECTION 2.15.                            Deposit
of Moneys.

Prior to 10:00 a.m., New York City time, on each
Interest Payment Date and maturity date, the Issuer shall have deposited with the
Paying Agent in immediately available funds money sufficient to make cash
payments, if any, due on such Interest Payment Date or maturity date, as the
case may be, in a timely manner which permits the Trustee to remit payment to
the Holders on such Interest Payment Date or maturity date, as the case may
be.  The principal and interest on Global
Notes shall be payable to the Depository or its nominee, as the case may be, as
the sole registered owner and the sole holder of the Global Notes represented
thereby.  The principal and interest on
Physical Notes shall be payable, either in person or by mail, at the office of
the Paying Agent.

SECTION 2.16.                            Book-Entry
Provisions for Global Notes.

(a)           Rule
144A Notes initially shall be represented by one or more notes in registered,
global form without interest coupons (collectively, the “Restricted Global
Note”).  Regulation S Notes initially
shall be represented by one or more notes in registered, global form without
interest coupons (collectively, the “Regulation S Global Note,” and,
together with the Restricted Global Note and any other global notes
representing Notes, the “Global Notes”). 
The Global Notes shall bear legends as set forth in Exhibit D.  The Global Notes initially shall (i) be
registered in the name of the Depository or the nominee of such Depository, in
each case for credit to an account of an Agent Member (or, in the case of the
Regulation S Global Notes, of Euroclear System and Cedel Bank, S.A.), (ii) be
delivered to the Trustee as custodian for such Depository and (iii) bear
legends as set forth in Exhibit B with respect to Restricted Global
Notes and Exhibit C with respect to Regulation S Global Notes.

Members of, or direct or indirect participants in, the
Depository (“Agent Members”) shall have no rights under this Indenture
with respect to any Global Note held on their behalf by the Depository, or the
Trustee as its custodian, or under the Global Notes, and the Depository may be
treated by the Issuer, the Trustee and any agent of the Issuer or the Trustee
as the absolute owner of the Global Note for all purposes whatsoever.  Notwithstanding the foregoing, nothing herein
shall prevent the Issuer, the Trustee or any agent of the Issuer or the Trustee
from giving effect to any written certification, proxy or other authorization
furnished by the Depository or impair, as between the Depository and its Agent
Members, the operation of customary practices governing the exercise of the
rights of a Holder of any Note.

(b)           Transfers
of Global Notes shall be limited to transfer in whole, but not in part, to the
Depository, its successors or their respective nominees.  Interests of beneficial owners in the Global
Notes may be transferred or exchanged for Physical Notes in accordance with the
rules and procedures of the Depository and the provisions of Section 2.17.  In addition, a

 42
 

Global Note shall be
exchangeable for Physical Notes if (i) the Depository (x) notifies the Issuer
that it is unwilling or unable to continue as depository for such Global Note
and the Issuer thereupon fails to appoint a successor depository or (y) has
ceased to be a clearing agency registered under the Exchange Act or (ii) there
shall have occurred and be continuing an Event of Default with respect to the
Notes.  In all cases, Physical Notes
delivered in exchange for any Global Note or beneficial interests therein shall
be registered in the names, and issued in any approved denominations, requested
by or on behalf of the Depository (in accordance with its customary procedures).

(c)           In
connection with any transfer or exchange of a portion of the beneficial
interest in any Global Note to beneficial owners pursuant to paragraph (b), the
Registrar shall (if one or more Physical Notes are to be issued) reflect on its
books and records the date and a decrease in the principal amount of the Global
Note in an amount equal to the principal amount of the beneficial interest in
the Global Note to be transferred, and the Issuer shall execute, and the
Trustee shall upon receipt of a written order from the Issuer authenticate and
make available for delivery, one or more Physical Notes of like tenor and
amount.

(d)           In
connection with the transfer of Global Notes as an entirety to beneficial
owners pursuant to paragraph (b), the Global Notes shall be deemed to be
surrendered to the Trustee for cancellation, and the Issuer shall execute, and
the Trustee shall authenticate and deliver, to each beneficial owner identified
by the Depository in writing in exchange for its beneficial interest in the
Global Notes, an equal aggregate principal amount of Physical Notes of authorized
denominations.

(e)           Any
Physical Note constituting a Restricted Note delivered in exchange for an
interest in a Global Note pursuant to paragraph (b), (c) or (d) shall, except
as otherwise provided by paragraphs (a)(i)(x) and (c) of Section 2.17, bear the
Private Placement Legend or, in the case of the Regulation S Global Note, the
legend set forth in Exhibit C, in each case, unless the Issuer
determines otherwise in compliance with applicable law.

(f)            On
or prior to the 40th day after the later of the commencement of the offering of
the Notes represented by the Regulation S Global Note and the issue date of
such Notes (such period through and including such 40th day, the “Restricted
Period”), a beneficial interest in a Regulation S Global Note may be
transferred to a Person who takes delivery in the form of an interest in the
corresponding Restricted Global Note only upon receipt by the Trustee of a
written certification from the transferor to the effect that such transfer is
being made (i)(a) to a Person whom the transferor reasonably believes is a Qualified
Institutional Buyer in a transaction meeting the requirements of Rule 144A or
(b) pursuant to another exemption from the registration requirements under the
Securities Act which is accompanied by an Opinion of Counsel regarding the
availability of such exemption and (ii) in accordance with all applicable
securities laws of any state of the United States or any other jurisdiction.

(g)           Beneficial
interests in the Restricted Global Note may be transferred to a Person who
takes delivery in the form of an interest in the Regulation S Global Note,
whether before or after the expiration of the Restricted Period, only if the
transferor first delivers to the

 43
 

Trustee a written
certificate to the effect that such transfer is being made in accordance with
Rule 903 or 904 of Regulation S or Rule 144 (if available).

(h)           Any
beneficial interest in one of the Global Notes that is transferred to a Person
who takes delivery in the form of an interest in another Global Note shall,
upon transfer, cease to be an interest in such Global Note and become an
interest in such other Global Note and, accordingly, shall thereafter be
subject to all transfer restrictions and other procedures applicable to
beneficial interests in such other Global Note for as long as it remains such
an interest.

(i)            The
Holder of any Global Note may grant proxies and otherwise authorize any Person,
including Agent Members and Persons that may hold interests through Agent Members,
to take any action which a Holder is entitled to take under this Indenture or
the Notes.

SECTION 2.17.                            Special
Transfer Provisions.

(a)           Transfers
to Non-QIB Institutional Accredited Investors and Non-U.S. Persons.  The following provisions shall apply with
respect to the registration of any proposed transfer of a Note constituting a
Restricted Note to any Institutional Accredited Investor which is not a QIB or
to any Non-U.S. Person:

(i)            the Registrar shall register the
transfer of any Note constituting a Restricted Note, whether or not such Note
bears the Private Placement Legend, if (x) the requested transfer is after
February 23, 2009 or such other date as such Note shall be freely transferable
under Rule 144 as certified in an Officers’ Certificate or (y) (1) in
the case of a transfer to an Institutional Accredited Investor which is not a
QIB (excluding Non-U.S. Persons), the proposed transferee has delivered to the
Registrar a certificate substantially in the form of Exhibit E hereto or
(2) in the case of a transfer to a Non-U.S. Person (including a QIB), the
proposed transferor has delivered to the Registrar a certificate substantially
in the form of Exhibit F hereto; provided that in the case of any
transfer of a Note bearing the Private Placement Legend for a Note not bearing
the Private Placement Legend, the Registrar has received an Officers’
Certificate authorizing such transfer; and

(ii)           if the proposed transferor is an
Agent Member holding a beneficial interest in a Global Note, upon receipt by
the Registrar of (x) the certificate, if any, required by paragraph (i) above
and (y) instructions given in accordance with the Depository’s and the Registrar’s
procedures,

whereupon (a) the Registrar shall reflect on its books
and records the date and (if the transfer does not involve a transfer of
outstanding Physical Notes) a decrease in the principal amount of a Global Note
in an amount equal to the principal amount of the beneficial interest in a
Global Note to be transferred, and (b) the Registrar shall reflect on its
books and records the date and an increase in the principal amount of a Global
Note in an amount equal to the principal amount of the beneficial interest in
the Global Note transferred or the Issuer shall execute and the Trustee

 44
 

shall authenticate and make available for delivery one
or more Physical Notes of like tenor and amount.

(b)           Transfers
to QIBs.  The following provisions
shall apply with respect to the registration or any proposed registration of
transfer of a Note constituting a Restricted Note to a QIB (excluding transfers
to Non-U.S. Persons):

(i)            the Registrar shall register the
transfer if such transfer is being made by a proposed transferor who has
checked the box provided for on such Holder’s Note stating, or has otherwise
advised the Issuer and the Registrar in writing, that the sale has been made in
compliance with the provisions of Rule 144A to a transferee who has signed the
certification provided for on such Holder’s Note stating, or has otherwise
advised the Issuer and the Registrar in writing, that it is purchasing the Note
for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a QIB within the
meaning of Rule 144A, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding the Issuer as it has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware that the
transferor is relying upon its foregoing representations in order to claim the
exemption from registration provided by Rule 144A; and

(ii)           if the proposed transferee is an
Agent Member, and the Notes to be transferred consist of Physical Notes which
after transfer are to be evidenced by an interest in the Global Note, upon
receipt by the Registrar of instructions given in accordance with the
Depository’s and the Registrar’s procedures, the Registrar shall reflect on its
books and records the date and an increase in the principal amount of the
Global Note in an amount equal to the principal amount of the Physical Notes to
be transferred, and the Trustee shall cancel the Physical Notes so transferred.

(c)           Private
Placement Legend.  Upon the
registration of transfer, exchange or replacement of Notes not bearing the
Private Placement Legend, the Registrar shall deliver Notes that do not bear
the Private Placement Legend.  Upon the
registration of transfer, exchange or replacement of Notes bearing the Private
Placement Legend, the Registrar shall deliver only Notes that bear the Private
Placement Legend unless (i) it has received the Officers’ Certificate
required by paragraph (a)(i)(y) of this Section 2.17, (ii) there is delivered
to the Registrar an Opinion of Counsel reasonably satisfactory to the Issuer
and the Trustee to the effect that neither such legend nor the related
restrictions on transfer are required in order to maintain compliance with the
provisions of the Securities Act or (iii) such Note has been sold pursuant to
an effective registration statement under the Securities Act and the Registrar
has received an Officers’ Certificate from the Issuer to such effect.

(d)           General.  By its acceptance of any Note bearing the
Private Placement Legend, each Holder of such Note acknowledges the
restrictions on transfer of such Note set forth in this Indenture and in the
Private Placement Legend and agrees that it will transfer such Note only as
provided in this Indenture.

 45
 

The Registrar shall retain for a period of two years
copies of all letters, notices and other written communications received
pursuant to Section 2.16 or this Section 2.17. 
The Issuer shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time upon
the giving of reasonable notice to the Registrar.

SECTION 2.18.                            Computation
of Interest.

Interest on the Notes shall be computed on the basis
of a 360-day year of twelve 30-day months.

ARTICLE THREE

REDEMPTION

SECTION 3.01.                            Election
To Redeem; Notices to Trustee.

If the Issuer elects to redeem Notes pursuant to
paragraph 6 of the Notes, at least 45 days prior to the Redemption Date (unless
a shorter notice shall be agreed to in writing by the Trustee) but not more
than 65 days before the Redemption Date, the Issuer shall notify the Trustee in
writing of the Redemption Date, the principal amount of Notes to be redeemed
and the redemption price, and deliver to the Trustee an Officers’ Certificate
stating that such redemption will comply with the conditions contained in
paragraph 6 of the Notes.  Notice given
to the Trustee pursuant to this Section 3.01 may not be revoked after the time
that notice is given to Holders pursuant to Section 3.03.

SECTION 3.02.                            Selection
by Trustee of Notes To Be Redeemed.

In the event that less than all of the Notes are to be
redeemed pursuant to a redemption made pursuant to paragraph 6 of the
Notes, selection of the Notes for redemption shall be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which the Notes are listed or, if the Notes are not then listed on a
national security exchange, on a pro  rata basis, by lot or by
such method as the Trustee shall deem fair and appropriate; provided, however,
that no Notes of a principal amount of $1,000 or less shall be redeemed in
part.  If a partial redemption is made
pursuant to the second paragraph of paragraph 6 of the Notes, selection of the
Notes or portions thereof for redemption shall be made by the Trustee only on a
pro  rata basis or on as nearly a pro  rata basis as
is practicable (subject to the procedures of the Depository), unless that
method is otherwise prohibited.  The
Trustee shall promptly notify the Issuer of the Notes selected for redemption
and, in the case of any Notes selected for partial redemption, the principal
amount thereof to be redeemed.  The
Trustee may select for redemption portions of the principal of the Notes that
have denominations larger than $1,000. 
For all purposes of this Indenture unless the context otherwise
requires, provisions of this Indenture that apply to Notes called for
redemption also apply to portions of Notes called for redemption.  The Issuer may acquire Notes by means other
than redemption, whether pursuant to

 46
 

an Issuer tender offer,
open market purchase or otherwise provided
such acquisition does not otherwise violate the other terms of this Indenture.

SECTION 3.03.                            Notice
of Redemption.

At least 30 days, and no more than 60 days, before a
Redemption Date, the Issuer shall mail, or cause to be mailed, a notice of
redemption by first-class mail to each Holder of Notes to be redeemed at his or
her last address as the same appears on the registry books maintained by the
Registrar pursuant to Section 2.04.

The notice shall identify the Notes to be redeemed
(including the CUSIP numbers thereof) and shall state:

(1)           the Redemption Date;

(2)           the redemption price and the amount
of premium and accrued interest to be paid;

(3)           if any Note is being redeemed in
part, the portion of the principal amount of such Note to be redeemed and that,
after the Redemption Date and upon surrender of such Note, a new Note or Notes
in principal amount equal to the unredeemed portion will be issued;

(4)           the name and address of the Paying
Agent;

(5)           that Notes called for redemption must
be surrendered to the Paying Agent to collect the redemption price;

(6)           that unless the Issuer defaults in
making the redemption payment, interest on Notes called for redemption ceases
to accrue on and after the Redemption Date;

(7)           the provision of paragraph 6 of the
Notes, as the case may be, pursuant to which the Notes called for redemption
are being redeemed; and

(8)           the aggregate principal amount of
Notes that are being redeemed.

At the Issuer’s written request made at least five
Business Days prior to the date on which notice is to be given, the Trustee
shall give the notice of redemption in the Issuer’s name and at the Issuer’s
sole expense.

SECTION 3.04.                            Effect
of Notice of Redemption.

Once the notice of redemption described in Section
3.03 is mailed, Notes called for redemption become due and payable on the
Redemption Date and at the redemption price, including any premium, plus
interest accrued to the Redemption Date. 
Upon surrender to the Paying Agent, such Notes shall be paid at the
redemption price, including any premium, plus

 47
 

interest accrued to the
Redemption Date, provided that if the Redemption Date is after a regular
record date and on or prior to the Interest Payment Date, the accrued interest
shall be payable to the Holder of the redeemed Notes registered on the relevant
record date, and provided, further, that if a Redemption Date is
a Legal Holiday, payment shall be made on the next succeeding Business Day and
no interest shall accrue for the period from such Redemption Date to such succeeding
Business Day.

SECTION 3.05.                            Deposit
of Redemption Price.

On or prior to 10:00 A.M., New York City time, on
each Redemption Date, the Issuer shall deposit with the Paying Agent in
immediately available funds money sufficient to pay the redemption price of,
including premium, if any, and accrued interest on all Notes to be redeemed on
that date other than Notes or portions thereof called for redemption on that
date which have been delivered by the Issuer to the Trustee for cancellation.

On and after any Redemption Date, if money sufficient
to pay the redemption price of, including premium, if any, and accrued interest
on Notes called for redemption shall have been made available in accordance
with the preceding paragraph, the Notes called for redemption will cease to
accrue interest and the only right of the Holders of such Notes will be to
receive payment of the redemption price of and, subject to the first proviso in
Section 3.04, accrued and unpaid interest on such Notes to the Redemption
Date.  If any Note surrendered for
redemption shall not be so paid, interest will be paid, from the Redemption
Date until such redemption payment is made, on the unpaid principal of the Note
and any interest not paid on such unpaid principal, in each case, at the rate
and in the manner provided in the Notes.

SECTION 3.06.                            Notes
Redeemed in Part.

Upon surrender of a Note that is redeemed in part, the
Trustee shall authenticate for the Holder thereof a new Note equal in principal
amount to the unredeemed portion of the Note surrendered.

ARTICLE FOUR

COVENANTS

SECTION 4.01.                            Payment
of Notes.

The Issuer shall pay the principal of and interest on
the Notes on the dates and in the manner provided in the Notes and this
Indenture.  An installment of principal
or interest shall be considered paid on the date it is due if the Trustee or
Paying Agent holds on that date money designated for and sufficient to pay such
installment.

 48
 

The Issuer shall pay interest on overdue principal
(including post-petition interest in a proceeding under any Bankruptcy Law),
and overdue interest, to the extent lawful, at the rate specified in the Notes.

SECTION 4.02.                            Reports
to Holders.

Whether or not required by the SEC, so long as any
Notes are outstanding, the Issuer shall furnish to the Holders of Notes, within
the time periods specified in the SEC’s rules and regulations (including any
grace periods or extensions permitted by the SEC):

(1)           all quarterly and annual financial
information that would be required to be contained in a filing with the SEC on
Forms 10-Q and 10-K if the Issuer were required to file these
Forms, including a “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” and, with respect to the annual information only, a
report on the annual financial statements by the Issuer’s independent
registered public accounting firm; and

(2)           all current reports that would be
required to be filed with the SEC on Form 8-K if the Issuer were required
to file these reports.

In addition, whether or not required by the SEC, the
Issuer shall file a copy of all of the information and reports referred to in
clauses (1) and (2) above with the SEC for public availability within the time
periods specified in the SEC’s rules and regulations (unless the SEC will not
accept the filing) and make the information available to securities analysts
and prospective investors upon request. 
For so long as any Notes remain outstanding, the Issuer shall furnish to
the Holders and to securities analysts and prospective investors, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.

SECTION 4.03.                            Waiver
of Stay, Extension or Usury Laws.

Each of the Issuer and the Guarantors covenants (to
the extent that it may lawfully do so) that it shall not at any time insist
upon, or plead (as a defense or otherwise) or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law or any usury law or
other law which would prohibit or forgive any of the Issuer and the Guarantors
from paying all or any portion of the principal of, premium, if any, and/or
interest on the Notes as contemplated herein, wherever enacted, now or at any time
hereafter in force, or which may affect the covenants or the performance of
this Indenture; and (to the extent that they may lawfully do so) each of the
Issuer and the Guarantors hereby expressly waives all benefit or advantage of
any such law, and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and
permit the execution of every such power as though no such law had been
enacted.

SECTION 4.04.                            Compliance
Certificate.

(a)           The
Issuer shall deliver to the Trustee, within 90 days after the end of each
fiscal year, an Officers’ Certificate stating that a review of the activities
of the Issuer and its 

 49
 

Subsidiaries during such
fiscal year has been made under the supervision of the signing Officers with a
view to determining whether the Issuer and the Guarantors have kept, observed,
performed and fulfilled their obligations under this Indenture, and further
stating, as to each such Officer signing such certificate, that to the best of
his or her knowledge, the Issuer and the Guarantors have kept, observed,
performed and fulfilled each and every covenant contained in this Indenture and
are not in default in the performance or observance of any of the terms,
provisions and conditions hereof (or, if a Default shall have occurred,
describing all such Defaults of which he or she may have knowledge and what
action they are taking or propose to take with respect thereto) and that to the
best of his or her knowledge no event has occurred and remains in existence by
reason of which payments on account of the principal of or interest, if any, on
the Notes is prohibited or if such event has occurred, a description of the
event and what action the Issuer and the Guarantors is taking or propose to
take with respect thereto.

(b)           The
Issuer and the Guarantors shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default,
an Officers’ Certificate specifying such Default and what action the Issuer and
the Guarantors are taking or propose to take with respect thereto.

(c)           The
Issuer’s fiscal year currently ends on December 31.  The Issuer will provide written notice to the
Trustee of any change in its fiscal year.

SECTION 4.05.                                                         Taxes.

The Issuer and the Guarantors shall, and shall cause
each of their Subsidiaries to, pay prior to delinquency all material taxes,
assessments, and governmental levies except as contested in good faith and by
appropriate proceedings.

SECTION 4.06.                            Limitations
on Additional Indebtedness.

The Issuer shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, incur any Indebtedness; provided that the Issuer or any Restricted
Subsidiary may incur additional Indebtedness (including Acquired Indebtedness)
if no Default shall have occurred and be continuing at the time of or as a
consequence of the incurrence of the Indebtedness and if, after giving effect
thereto, either (a) the Consolidated Fixed Charge Coverage Ratio would be
at least 2.00 to 1.00 or (b) the ratio of Consolidated Indebtedness to
Consolidated Tangible Net Worth would be less than 3.00 to 1.00 (either (a) or
(b), the “Ratio Exception”).

Notwithstanding the
above, so long as no Default shall have occurred and be continuing at the time
of or as a consequence of the incurrence of the following Indebtedness, each of
the following shall be permitted (the “Permitted Indebtedness”):

(1)           Indebtedness
of the Issuer and any Restricted Subsidiary under the Credit Facilities in an
aggregate amount at any time outstanding (whether incurred under the Ratio
Exception or as Permitted Indebtedness) not to exceed the greater of
(x) $600.0 million and (y) the amount of the Borrowing Base as of the
date of such incurrence;

 50
 

(2)           the
Notes and the Note Guarantees issued on the Issue Date;

(3)           Indebtedness
of the Issuer and the Restricted Subsidiaries to the extent outstanding on the
Issue Date (other than Indebtedness referred to in clauses (1) and
(2) above, and after giving effect to the intended use of proceeds of the
Notes);

(4)           Indebtedness
of the Issuer and the Restricted Subsidiaries under Hedging Obligations; provided that (a) such Hedging
Obligations relate to payment obligations on Indebtedness otherwise permitted
to be incurred by this Section 4.06, and (b) the notional principal
amount of such Hedging Obligations at the time incurred does not exceed the
principal amount of the Indebtedness to which such Hedging Obligations relate;

(5)           Indebtedness
of the Issuer owed to a Restricted Subsidiary and Indebtedness of any
Restricted Subsidiary owed to the Issuer or any other Restricted Subsidiary; provided, however,
that (a) any Indebtedness of the Issuer owed to a Restricted Subsidiary is
unsecured and subordinated, pursuant to a written agreement, to the Issuer’s
obligation, under this Indenture and the Notes and (b) upon any such
Restricted Subsidiary ceasing to be a Restricted Subsidiary or such Indebtedness
being owed to any Person other than the Issuer or a Restricted Subsidiary, the
Issuer or such Restricted Subsidiary, as applicable, shall be deemed to have
incurred Indebtedness not permitted by this clause (5);

(6)           Indebtedness
in respect of bid, performance or surety bonds issued for the account of the
Issuer or any Restricted Subsidiary in the ordinary course of business, including
guarantees or obligations of the Issuer or any Restricted Subsidiary with
respect to letters of credit supporting such bid, performance or surety
obligations (in each case other than for an obligation for money borrowed);

(7)           Purchase
Money Indebtedness incurred by the Issuer or any Restricted Subsidiary;

(8)           Non-Recourse
Indebtedness of the Issuer or any Restricted Subsidiary incurred for the
acquisition, development and/or improvement of real property and secured by
Liens only on such real property;

(9)           Indebtedness
arising from the honoring by a bank or other financial institution of a check,
draft or similar instrument inadvertently (except in the case of daylight
overdrafts) drawn against insufficient funds in the ordinary course of business;
provided, however,
that such Indebtedness is extinguished within five Business Days of incurrence;

(10)         Indebtedness
arising in connection with endorsement of instruments for deposit in the
ordinary course of business;

(11)         Refinancing
Indebtedness with respect to Indebtedness incurred pursuant to the Ratio
Exception or clause (2) or (3) above;

 51
 

(12)         Indebtedness
of the Issuer or any Restricted Subsidiary in an aggregate amount not to exceed
$25.0 million at any time outstanding;

(13)         obligations
for, pledge of assets in respect of, and guarantees of, bond financings of
political subdivisions or enterprises thereof in the ordinary course of business;
and

(14)         Indebtedness
of mortgage lending Subsidiaries under warehouse lines of credit, repurchase
agreements and Indebtedness secured by mortgage loans and related assets of
mortgage lending Subsidiaries in the ordinary course of a mortgage lending
business.

For purposes of
determining compliance with this Section 4.06, in the event that an item
of Indebtedness meets the criteria of more than one of the categories of
Permitted Indebtedness described in clauses (1) through (14) above or is
entitled to be incurred pursuant to the Ratio Exception, the Issuer shall, in
its sole discretion, classify such item of Indebtedness and may divide and
classify such Indebtedness in more than one of the types of Indebtedness described,
except that Indebtedness outstanding under the Credit Facilities on the Issue
Date shall be deemed to have been incurred under clause (1) above.

SECTION 4.07.                            Limitations
on Layering Indebtedness

(a)           The Issuer shall not, and shall not
permit any Guarantor to, directly or indirectly, incur or suffer to exist any
Indebtedness that is or purports to be by its terms (or by the terms of any
agreement governing such Indebtedness) senior in right of payment to the Notes
or the Note Guarantee of such Guarantor and subordinated in right of payment to
any other Indebtedness of the Issuer or of such Guarantor, as the case may be.

(b)           For purposes of the foregoing, no
Indebtedness shall be deemed to be subordinated in right of payment to any
other Indebtedness of the Issuer or any Guarantor solely by virtue of being unsecured
or secured by a junior priority lien or by virtue of the fact that the holders
of such Indebtedness have entered into intercreditor agreements or other
arrangements giving one or more of such holders priority over the other holders
in the collateral held by them.

SECTION 4.08.                            Limitations
on Restricted Payments.

The Issuer shall not, and
shall not permit any Restricted Subsidiary to, directly or indirectly, make any
Restricted Payment if at the time of such Restricted Payment:

(1)           a
Default shall have occurred and be continuing or shall occur as a consequence thereof;

(2)           the
Issuer cannot incur $1.00 of additional Indebtedness pursuant to the Ratio
Exception; or

 52
 

(3)           the
amount of such Restricted Payment, when added to the aggregate amount of all
other Restricted Payments made after the Measurement Date (other than
Restricted Payments made pursuant to clause (2), (3) or (5) of the next
paragraph), exceeds the sum (the “Restricted Payments Basket”) of
(without duplication):

(a)           50%
of Consolidated Net Income for the period (taken as one accounting period)
commencing on the first day of the first full fiscal quarter commencing after
the Measurement Date to and including the last day of the fiscal quarter ended
immediately prior to the date of such calculation for which consolidated
financial statements are available (or, if such Consolidated Net Income shall
be a deficit, minus 100% of such aggregate deficit), plus

(b)           100%
of the aggregate net cash proceeds or the Fair Market Value of any assets to be
used in a Permitted Business (other than securities) received by the Issuer
either (x) as contributions to the common equity of the Issuer after the
Measurement Date or (y) from the issuance and sale of Qualified Equity
Interests after the Measurement Date, other than to the extent any such
proceeds are used to redeem Notes in accordance with Section 6(b) of the
Notes, plus

(c)           the
aggregate amount by which Indebtedness of the Issuer or any Restricted
Subsidiary is reduced on the Issuer’s balance sheet upon the conversion or
exchange (other than by a Subsidiary of the Issuer) subsequent to the Measurement
Date into Qualified Equity Interests (less the amount of any cash, or the fair
value of assets, distributed by the Issuer or any Restricted Subsidiary upon
such conversion or exchange), plus

(d)           in
the case of the disposition or repayment of or return on any Investment that
was treated as a Restricted Payment made after the Measurement Date, an amount
(to the extent not included in the computation of Consolidated Net Income)
equal to the lesser of (i) the return of capital with respect to such Investment
and (ii) the amount of such Investment that was treated as a Restricted
Payment, in either case, less the cost of the disposition of such Investment
and net of taxes, plus

(e)           upon
a Redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary, the
lesser of (i) the Fair Market Value of the Issuer’s proportionate interest
in such Subsidiary immediately following such Redesignation, and (ii) the
aggregate amount of the Issuer’s Investments in such Subsidiary to the extent
such Investments reduced the amount available for subsequent Restricted
Payments under this clause (3) and were not previously repaid or otherwise
reduced, plus

(f)            $25.0
million.

 53
 

The foregoing provisions
will not prohibit:

(1)           the payment by the Issuer or any
Restricted Subsidiary of any dividend within 60 days after the date of
declaration thereof, if on the date of declaration the payment would have
complied with the provisions of this Indenture;

(2)           so long as no Default shall have
occurred and be continuing at the time of or as a consequence of such
redemption, the redemption of any Equity Interests of the Issuer or any
Restricted Subsidiary in exchange for, or out of the proceeds of the substantially
concurrent issuance and sale of, Qualified Equity Interests;

(3)           so long as no Default shall have
occurred and be continuing at the time of or as a consequence of such
redemption, the redemption of Subordinated Indebtedness of the Issuer or any
Restricted Subsidiary (a) in exchange for, or out of the proceeds of the
substantially concurrent issuance and sale of, Qualified Equity Interests or
(b) in exchange for, or out of the proceeds of the substantially concurrent
incurrence of, Refinancing Indebtedness permitted to be incurred under
Section 4.06 and the other terms of this Indenture;

(4)           so long as no Default shall have
occurred and be continuing at the time of or as a consequence of such
redemption, the redemption of Equity Interests of the Issuer held by officers,
directors or employees or former officers, directors or employees (or their
transferees, estates or beneficiaries under their estates), upon their death,
disability, retirement, severance or termination of employment or service; provided that the aggregate cash consideration
paid for all such redemptions shall not exceed $2.0 million during any calendar
year (with unused amounts in any calendar year being carried over to succeeding
calendar years subject to a maximum of $4.0 million in any calendar year); or

(5)           repurchases of Equity Interests
deemed to occur upon the exercise of stock options if the Equity Interests
represent a portion of the exercise price thereof;

provided
that no issuance and sale of Qualified Equity Interests pursuant to clause (2)
or (3) above shall increase the Restricted Payments Basket, except to the
extent the proceeds thereof exceed the amounts used to effect the transactions
described therein.

SECTION 4.09.                                                         Limitations
on Asset Sales.

The Issuer shall not, and
shall not permit any Restricted Subsidiary to, directly or indirectly,
consummate any Asset Sale unless:

(1)           the Issuer or such Restricted Subsidiary receives
consideration at the time of such Asset Sale at least equal to the Fair Market
Value of the assets included in such Asset Sale; and

(2)           at
least 75% of the total consideration received in such Asset Sale or series of related
Asset Sales consists of cash or Cash Equivalents.

 54
 

For purposes of clause
(2), the following shall be deemed to be cash:

(a)           the amount (without duplication) of
any Indebtedness (other than Subordinated Indebtedness) of the Issuer or such
Restricted Subsidiary that is expressly assumed by the transferee in such Asset
Sale and with respect to which the Issuer or such Restricted Subsidiary, as the
case may be, is unconditionally released by the holder of such Indebtedness,

(b)           the amount of any obligations
received from such transferee that are within 30 days converted by the Issuer
or such Restricted Subsidiary to cash (to the extent of the cash actually so
received), and

(c)           the Fair Market Value of any assets
(other than securities, unless such securities represent Equity Interests in an
entity engaged solely in a Permitted Business, such entity becomes a Restricted
Subsidiary and the Issuer or a Restricted Subsidiary acquires voting and
management control of such entity) received by the Issuer or any Restricted
Subsidiary to be used by it in the Permitted Business.

If at any time any
non-cash consideration received by the Issuer or any Restricted Subsidiary of
the Issuer, as the case may be, in connection with any Asset Sale is repaid or
converted into or sold or otherwise disposed of for cash (other than interest received
with respect to any such non-cash consideration), then the date of such
repayment, conversion or disposition shall be deemed to constitute the date of
an Asset Sale hereunder and the Net Available Proceeds thereof shall be applied
in accordance with this Section 4.09.

If the Issuer or any
Restricted Subsidiary engages in an Asset Sale, the Issuer or such Restricted
Subsidiary shall, no later than one year following the consummation thereof, apply
all or any of the Net Available Proceeds therefrom to:

(1)           repay
any Senior Debt or Guarantor Senior Debt;

(2)           repay
any Indebtedness which was secured by the assets sold in such Asset Sale;
and/or

(3)           invest
all or any part of the Net Available Proceeds thereof in the purchase of assets
(other than securities, unless such securities represent Equity Interests in an
entity engaged solely in a Permitted Business, such entity becomes a Restricted
Subsidiary and the Issuer or a Restricted Subsidiary acquires voting and
management control of such entity) to be used by the Issuer or any Restricted
Subsidiary in the Permitted Business.

The amount of Net
Available Proceeds not applied or invested as provided in this paragraph will
constitute “Excess Proceeds.”

When the aggregate amount
of Excess Proceeds equals or exceeds $25.0 million, the Issuer shall be
required to make an Offer to Purchase from all Holders and, if applicable, redeem
(or make an offer to do so) any Pari Passu Indebtedness of the Issuer the
provisions of

 55
 

which require the Issuer
to redeem such Indebtedness with the proceeds from any Asset Sales (or offer to
do so), in an aggregate principal amount of Notes and such Pari Passu
Indebtedness equal to the amount of such Excess Proceeds as follows:

(1)           the Issuer shall (a) make an Offer to
Purchase (a “Net Proceeds Offer”) to all Holders, and (b) redeem (or
make an offer to do so) any such other Pari Passu Indebtedness, pro rata in
proportion to the respective principal amounts of the Notes and such other
Indebtedness required to be redeemed, the maximum principal amount of Notes and
Pari Passu Indebtedness that may be redeemed out of the amount (the “Payment
Amount”) of such Excess Proceeds;

(2)           the offer price for the Notes shall
be payable in cash in an amount equal to 100% of the principal amount of the
Notes tendered pursuant to a Net Proceeds Offer, plus accrued and unpaid
interest thereon, if any, to the date such Net Proceeds Offer is consummated
(the “Offered Price”), and the redemption price for such Pari Passu
Indebtedness (the “Pari Passu Indebtedness Price”) shall be as set forth
in the related documentation governing such Indebtedness;

(3)           if the aggregate Offered Price of
Notes validly tendered and not withdrawn by Holders thereof exceeds the pro rata portion of the Payment Amount
allocable to the Notes, Notes to be purchased shall be selected on a pro rata basis; and

(4)           upon completion of such Net Proceeds Offer
in accordance with the foregoing provisions, the amount of Excess Proceeds with
respect to which such Net Proceeds Offer was made shall be deemed to be zero.

To the extent that the
sum of the aggregate Offered Price of Notes tendered pursuant to a Net Proceeds
Offer and the aggregate Pari Passu Indebtedness Price paid to the holders of
such Pari Passu Indebtedness is less than the Payment Amount relating thereto
(such shortfall constituting a “Net Proceeds Deficiency”), the Issuer
may use the Net Proceeds Deficiency, or a portion thereof, for general
corporate purposes, subject to the provisions of this Indenture.

In the event of the
transfer of substantially all (but not all) of the assets of the Issuer and the
Restricted Subsidiaries as an entirety to a Person in a transaction covered by
and effected in accordance with Section 5.01 the successor corporation
shall be deemed to have sold for cash at Fair Market Value the assets of the
Issuer and the Restricted Subsidiaries not so transferred for purposes of this
covenant, and shall comply with the provisions of this covenant with respect to
such deemed sale as if it were an Asset Sale (with such Fair Market Value being
deemed to be Net Available Proceeds for such purpose).

The Issuer shall comply
with applicable tender offer rules, including the requirements of Rule 14e-1
under the Exchange Act and any other applicable laws and regulations in
connection with the purchase of Notes pursuant to a Net Proceeds Offer.  To the extent that the provisions of any securities
laws or regulations conflict with this Section 4.09, the Issuer shall

 56

comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under this Section 4.09 by virtue of this compliance.

SECTION 4.10.                            Limitations
on Transactions with Affiliates.

The Issuer shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, in one transaction or a
series of related transactions, sell, lease, transfer or otherwise dispose of
any of its assets to, or purchase any assets from, or enter into any contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate involving aggregate consideration in excess of $60,000 (an “Affiliate
Transaction”), unless:

(1)                                  such
Affiliate Transaction is on terms that are no less favorable to the Issuer or
the relevant Restricted Subsidiary than those that may have been obtained in a
comparable transaction at such time on an arm’s-length basis by the Issuer or
that Restricted Subsidiary from a Person that is not an Affiliate of the Issuer
or that Restricted Subsidiary; and

(2)                                  the
Issuer delivers to the Trustee:

(a)                                  with
respect to any Affiliate Transaction involving aggregate value of $5.0 million
or more, an Officers’ Certificate certifying that such Affiliate Transaction
complies with clause (1) above;

(b)                                 with
respect to any Affiliate Transaction involving aggregate value in excess of
$10.0 million, an Officers’ Certificate certifying that such Affiliate
Transaction complies with clause (1) above and a Secretary’s Certificate
which sets forth and authenticates a resolution that has been adopted by the
Independent Directors approving such Affiliate Transaction; and

(c)                                  with
respect to any Affiliate Transaction involving aggregate value of $25.0 million
or more, the certificates described in the preceding clause (b) and (x) a
written opinion as to the fairness of such Affiliate Transaction to the Issuer
or such Restricted Subsidiary from a financial point of view or (y) a
written appraisal supporting the value of such Affiliate Transaction, in either
case, issued by an Independent Financial Advisor.

The foregoing
restrictions shall not apply to:

(1)                                  transactions
exclusively between or among (a) the Issuer and one or more Restricted
Subsidiaries or (b) Restricted Subsidiaries; provided, in each case, that no Affiliate of the Issuer (other than
another Restricted Subsidiary) owns Equity Interests of any such Restricted
Subsidiary;

(2)                                  reasonable
director, officer, employee and consultant compensation (including bonuses) and
other benefits (including retirement, health, stock and other benefit plans)
and indemnification arrangements;

 57
 

(3)                                  loans
and advances permitted by clause (3) of the definition of “Permitted Investments”;

(4)                                  any
agreement as in effect as of the Issue Date or any extension, amendment or
modification thereto (so long as any such extension, amendment or modification
satisfies the requirements set forth in clause (1) of the first paragraph of
this Section 4.10) or any transaction contemplated thereby;

(5)                                  Restricted
Payments of the type described in clause (1), (2) or (4) of the definition of “Restricted
Payment” and which are made in accordance with Section 4.08; or

(6)                                  sales
of Qualified Equity Interests for cash by the Issuer to an Affiliate.

SECTION 4.11.                            Limitations
on Liens.

The Issuer shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, create, incur, assume or
permit or suffer to exist any Lien of any nature whatsoever against (other than
Permitted Liens) any assets of the Issuer or any Restricted Subsidiary (including
Equity Interests of a Restricted Subsidiary), whether owned at the Issue Date
or thereafter acquired, or any proceeds therefrom, or assign or otherwise
convey any right to receive income or profits therefrom, which Lien secures
Indebtedness or trade payables, unless contemporaneously therewith:

(1)                                  in
the case of any Lien securing an obligation that ranks pari passu with the Notes or a Note Guarantee, effective provision
is made to secure the Notes or such Note Guarantee, as the case may be, at
least equally and ratably with or prior to such obligation with a Lien on the
same collateral; and

(2)                                  in
the case of any Lien securing an obligation that is subordinated in right of
payment to the Notes or a Note Guarantee, effective provision is made to secure
the Notes or such Note Guarantee, as the case may be, with a Lien on the same
collateral that is prior to the Lien securing such subordinated obligation,

in each case, for so long as such obligation is
secured by such Lien.

SECTION 4.12.                            Conduct
of Business.

The Issuer will not, and will not permit any
Restricted Subsidiary to, engage in any business other than the Permitted
Business.

SECTION 4.13.                            Additional
Note Guarantees.

If, after the Issue Date, (a) the Issuer or any
Restricted Subsidiary shall acquire or create another Subsidiary (other than
(i) a Subsidiary that has been designated an Unrestricted Subsidiary or
(ii) during a Suspension Period, a Subsidiary exclusively engaged in
mortgage

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origination, title or
insurance businesses) or (b) any Unrestricted Subsidiary is redesignated a Restricted
Subsidiary, then, in each such case, the Issuer shall cause such Restricted
Subsidiary to:

(1)                                  execute
and deliver to the Trustee (a) a supplemental indenture in form and substance
satisfactory to the Trustee pursuant to which such Restricted Subsidiary shall
unconditionally guarantee all of the Issuer’s obligations under the Notes and
this Indenture and (b) a notation of guarantee in respect of its Note Guarantee;
and

(2)                                  deliver
to the Trustee one or more Opinions of Counsel that such supplemental indenture
(a) has been duly authorized, executed and delivered by such Restricted
Subsidiary and (b) constitutes a valid and legally binding obligation of such
Restricted Subsidiary in accordance with its terms.

SECTION 4.14.                            Limitations
on Dividends and Other Restrictions Affecting Restricted Subsidiaries.

The Issuer shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, create or otherwise cause or
permit to exist or become effective any consensual encumbrance or consensual
restriction on the ability of any Restricted Subsidiary to:

(a)                                  pay dividends or make
any other distributions on or in respect of its Equity Interests;

(b)                                 make loans or advances
or pay any Indebtedness or other obligation owed to the Issuer or any other
Restricted Subsidiary; or

(c)                                  transfer any of its
assets to the Issuer or any other Restricted Subsidiary;

except for:

(1)                                  encumbrances
or restrictions existing under or by reason of applicable law;

(2)                                  encumbrances
or restrictions existing under this Indenture, the Notes and the Note
Guarantees;

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

(4)                                  encumbrances
or restrictions existing under agreements existing on the date hereof
(including, without limitation, the Credit Facilities) as in effect on the date
hereof or on any Reversion Date as in effect on that date;

(5)                                  restrictions
on the transfer of assets subject to any Lien permitted under this Indenture
imposed by the holder of such Lien;

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

(7)                                  any
instrument governing Acquired Indebtedness, which encumbrance or restriction is
not applicable to any Person, or the assets of any Person, other than the Person
or the assets so acquired;

(8)                                  encumbrances
or restrictions arising in connection with Refinancing Indebtedness; provided, however,
that any such encumbrances and restrictions are not materially more restrictive
with respect to any Restricted Subsidiary than those in effect on the Issue
Date with respect to that Restricted Subsidiary pursuant to the agreements creating
or evidencing the Indebtedness being refinanced;

(9)                                  customary
provisions in leases, partnership agreements, limited liability company
organizational governance documents, joint venture agreements and other similar
agreements entered into in the ordinary course of business that restrict the
transfer of leasehold interests or ownership interests in such partnership,
limited liability company, joint venture or similar Person;

(10)                            Purchase
Money Indebtedness incurred in compliance with Section 4.06 that impose
restrictions of the nature described in clause (c) above on the assets acquired;
and

(11)                            any
encumbrances or restrictions imposed by any amendments or refinancings of the
contracts, instruments or obligations referred to in clauses (1) through (10)
above; provided that such amendments or
refinancings are, in the good faith judgment of the Issuer’s Board of
Directors, no more materially restrictive with respect to such encumbrances and
restrictions than those prior to such amendment or refinancing.

SECTION 4.15.                            Limitations
on Designation of Unrestricted Subsidiaries.

The Issuer may designate any Subsidiary of the Issuer
as an “Unrestricted Subsidiary” under this Indenture (a “Designation”) only if:

(1)                                  no
Default shall have occurred and be continuing at the time of or after giving
effect to such Designation; and

(2)                                  the
Issuer would be permitted to make, at the time of such Designation, (a) a
Permitted Investment or (b) an Investment pursuant to the first paragraph of Section 4.08,
in either case, in an amount (the “Designation Amount”) equal to the
Fair Market Value of the Issuer’s proportionate interest in such Subsidiary on
such date.

No Subsidiary shall be
designated as an “Unrestricted Subsidiary” unless such Subsidiary:

(1)                                  has
no Indebtedness other than Permitted Unrestricted Subsidiary Debt;

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(2)                                  is
not party to any agreement, contract, arrangement or understanding with the
Issuer or any Restricted Subsidiary unless the terms of the agreement,
contract, arrangement or understanding are no less favorable to the Issuer or
the Restricted Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of the Issuer or such Restricted Subsidiary;

(3)                                  is
a Person with respect to which neither the Issuer nor any Restricted Subsidiary
has any direct or indirect obligation (a) to subscribe for additional Equity Interests
or (b) to maintain or preserve the Person’s financial condition or to cause the
Person to achieve any specified levels of operating results; and

(4)                                  has
not guaranteed or otherwise directly or indirectly provided credit support for
any Indebtedness of the Issuer or any Restricted Subsidiary, except for any guarantee
given solely to support the pledge by the Issuer or any Restricted Subsidiary
of the Equity Interests of such Unrestricted Subsidiary, which guarantee is not
recourse to the Issuer or any Restricted Subsidiary, and except to the extent
the amount thereof constitutes a Restricted Payment permitted pursuant to Section 4.08.

If, at any time, any Unrestricted Subsidiary fails to
meet the preceding requirements as an Unrestricted Subsidiary, it shall
thereafter cease to be an Unrestricted Subsidiary for purposes of this
Indenture and any Indebtedness of the Subsidiary and any Liens on assets of
such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary as of
the date and, if the Indebtedness is not permitted to be incurred under
Section 4.06 or the Lien is not permitted under Section 4.11, the
Issuer shall be in default of the applicable covenant.

The Issuer may redesignate an Unrestricted Subsidiary
as a Restricted Subsidiary (a “Redesignation”)
only if:

(1)                                  no
Default shall have occurred and be continuing at the time of and after giving
effect to such Redesignation; and

(2)                                  all
Liens, Indebtedness and Investments of such Unrestricted Subsidiary outstanding
immediately following such Redesignation would, if incurred or made at such
time, have been permitted to be incurred or made for all purposes of this
Indenture.

All Designations and Redesignations must be evidenced
by resolutions of the Board of Directors of the Issuer, delivered to the
Trustee certifying compliance with the foregoing provisions.

SECTION 4.16.                            [Intentionally
Omitted]

SECTION 4.17.                            Maintenance
of Properties; Insurance; Compliance with Law.

(a)                                  The Issuer shall, and
shall cause each of its Restricted Subsidiaries to, at all times cause all
properties used or useful in the conduct of their business to be maintained and
kept in good condition, repair and working order (reasonable wear and tear
excepted) and 

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supplied with all
necessary equipment, and shall cause to be made all necessary repairs,
renewals, replacements, necessary betterments and necessary improvements
thereto.

(b)                                 The Issuer shall
maintain, and shall cause to be maintained for each of its Restricted
Subsidiaries, insurance covering such risks as are usually and customarily insured
against by corporations similarly situated in the markets where the Issuer and
the Restricted Subsidiaries conduct homebuilding operations, in such amounts as
shall be customary for corporations similarly situated and with such
deductibles and by such methods as shall be customary and reasonably consistent
with past practice.

(c)                                  The Issuer shall, and
shall cause each of its Subsidiaries to, comply with all statutes, laws,
ordinances or government rules and regulations to which they are subject,
non-compliance with which would materially adversely affect the business,
earnings, properties, assets or financial condition of the Issuer and their
Subsidiaries taken as a whole.

SECTION 4.18.                            Payments
for Consent.

The Issuer shall not, and shall not cause or permit
any of its Subsidiaries to, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder of
any Notes for or as an inducement to any consent, waiver or amendment of any of
the terms or provisions of this Indenture or the Notes unless such
consideration is offered to be paid or agreed to be paid to all Holders which
so consent, waive or agree to amend in the time frame set forth in solicitation
documents relating to such consent, waiver or agreement.

SECTION 4.19.                            Legal
Existence.

Subject to Article Five, the Issuer shall do or cause
to be done all things necessary to preserve and keep in full force and effect
its legal existence, and the corporate, partnership or other existence of each
Restricted Subsidiary, in accordance with the respective organizational
documents (as the same may be amended from time to time) of each Restricted Subsidiary
and the rights (charter and statutory), licenses and franchises of the Issuer
and its Restricted Subsidiaries; provided that the Issuer shall not be
required to preserve any such right, license or franchise, or the corporate,
partnership or other existence of any of its Restricted Subsidiaries if the
Board of Directors of the Issuer shall determine that the preservation thereof
is no longer desirable in the conduct of the business of the Issuer and its
Restricted Subsidiaries, taken as a whole, and that the loss thereof is not adverse
in any material respect to the Holders.

SECTION 4.20.                            Change
of Control Offer.

Upon the occurrence of a Change of Control Triggering
Event, the Issuer shall be obligated to make an Offer to Purchase (the “Change
of Control Offer”), and shall purchase, on a Business Day (the “Change
of Control Payment Date”) not more than 60 nor less than 30 days following
the occurrence of the Change of Control, all of the then outstanding Notes at a
purchase price (the “Change of Control Purchase Price”) equal to 101% of
the principal amount thereof, plus accrued and unpaid interest, if any, thereon
to the Change of Control Payment Date.

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The Change of Control
Offer shall remain open for at least thirty (30) Business Days and until the close
of business on the Change of Control Payment Date.  Issuer also agrees that if it intends or
expects a Change of Control Triggering Event to occur, Issuer will initiate a
review process with a Ratings Agency within ten (10) Business Days of the
occurrence of such intention or expectation.

Within 30 days following the date upon which a Change
of Control Triggering Event occurs (the “Change of Control Date”), the
Issuer shall send, by first class mail, a notice to each Holder, with a copy to
the Trustee, which notice shall govern the terms of the Change of Control
Offer.  The notice to the Holders shall
contain all instructions and materials necessary to enable such Holders to
tender Notes pursuant to the Change of Control Offer.

Any amounts remaining after the purchase of Notes
pursuant to a Change of Control Offer shall be returned by the Trustee to the
Issuer.

The Issuer’s obligation to make a Change of Control
Offer will be satisfied if a third party makes the Change of Control Offer in
the manner and at the times and otherwise in compliance with the requirements
applicable to a Change of Control Offer made by the Issuer and purchases all
Notes properly tendered and not withdrawn under the Change of Control Offer.

The Issuer shall comply with applicable tender rules,
including the requirements of Rule 14e-1 under the Exchange Act and any
other applicable laws and regulations in connection with the purchase of Notes
pursuant to a Change of Control Offer. 
To the extent the provisions of any securities laws or regulations
conflict with the provisions under this Section 4.20, the Issuer shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section 4.20 by virtue
thereof.

SECTION 4.21.                            Suspension
Period.

During a Suspension Period, the provisions of the
Indenture described under Sections 4.06, 4.08, 4.09, 4.10, 4.12, 4.14, and 4.15
(collectively, the “Suspendable Covenants”) will not apply.  All other covenants and provisions of this
Indenture will apply at all times so long as any Notes remain outstanding.

On the Reversion Date, all Indebtedness incurred
during the Suspension Period will be classified to have been incurred pursuant
to the Ratio Exception or one of the clauses set forth in the definition of
Permitted Indebtedness (to the extent such Indebtedness would be permitted to
be incurred thereunder as of the Reversion Date and after giving effect to
Indebtedness incurred prior to the Suspension Period and outstanding on the Reversion
Date).  To the extent any Indebtedness
would not so be permitted to be incurred pursuant to the Ratio Exception or any
of the clauses set forth in the definition of Permitted Indebtedness, such
Indebtedness will be deemed to have been outstanding on the Issue Date, so that
it is classified as Permitted Indebtedness under clause (3) of the second
paragraph of Section 4.06 and permitted to be refinanced under clause (11) of
the second paragraph of Section 4.06.

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For purposes of calculating the amount available to be
made as Restricted Payments under clause (3) of the first paragraph of Section
4.08, calculations under that clause will be made with reference to the
Measurement Date as set forth in that clause. 
Accordingly, Restricted Payments made during the Suspension Period will
reduce the amount available to be made as Restricted Payments under clause (3)
and the items specified in subclauses (a) through (e) of clause (3) that occur
during the Suspension Period will increase the amount available to be made as
Restricted Payments under clause (3). 
Any Restricted Payments made during the Suspension Period that are of
the type described in clause (4) under the second paragraph of Section 4.08
shall reduce the amounts permitted to be incurred under such clause (4) on the
Reversion Date.

For purposes of Section 4.09, on the Reversion Date,
the Net Proceeds Offer Amount will be reset to zero.

SECTION 4.22.                            Treatment
of Notes.

The Issuer will treat the Notes as indebtedness, and
the amounts, other than payments of principal, payable in respect of the
principal amount of such Notes as interest, for all U.S. federal income tax
purposes.  All payments in respect of the
Notes will be made free and clear of U.S. withholding tax to any beneficial
owner thereof that has provided an Internal Revenue Service Form W-9 or W-8BEN
(or any substitute or successor form) establishing its U.S. or non-U.S. status
for U.S. federal income tax purposes, or any other applicable form establishing
a complete exemption from U.S. withholding tax.

ARTICLE FIVE

SUCCESSOR CORPORATION

SECTION 5.01.                            Limitations
on Mergers, Consolidations, Etc.

The Issuer shall not, directly or indirectly, in a
single transaction or a series of related transactions, (a) consolidate or
merge with or into (other than a merger that satisfies the requirements of
clause (1) below with a Wholly-Owned Restricted Subsidiary solely for the purpose
of changing the Issuer’s jurisdiction of incorporation to another State of the
United States), or sell, lease, transfer, convey or otherwise dispose of or
assign all or substantially all of the assets of the Issuer or the Issuer and
the Restricted Subsidiaries (taken as a whole) or (b) adopt a Plan of
Liquidation unless, in either case:

(1)                                  either:

(a)                                  the
Issuer will be the surviving or continuing Person; or

 64
 

(b)                                 the
Person formed by or surviving such consolidation or merger or to which such
sale, lease, conveyance or other disposition shall be made (or, in the case of
a Plan of Liquidation, any Person to which assets are transferred) (collectively,
the “Successor”) is a corporation or
limited liability company organized and existing under the laws of any State of
the United States of America or the District of Columbia, and the Successor
expressly assumes, by supplemental indenture in form and substance satisfactory
to the Trustee, all of the obligations of the Issuer under the Notes and this
Indenture; provided that at any time the Successor is a limited
liability company, there shall be a co-issuer of the Notes that is a corporation;

(2)                                  immediately
after giving effect to such transaction and the assumption of the obligations
as set forth in clause (1)(b) above and the incurrence of any Indebtedness
to be incurred in connection therewith, no Default shall have occurred and be continuing;
and

(3)                                  if
such transaction or series of related transactions occurs other than during a
Suspension Period, immediately after and giving effect to such transaction and
the assumption of the obligations set forth in clause (1)(b) above and the
incurrence of any Indebtedness to be incurred in connection therewith, and the
use of any net proceeds therefrom on a pro forma basis, (a) the
Consolidated Net Worth of the Issuer or the Successor, as the case may be,
would be at least equal to the Consolidated Net Worth of the Issuer immediately
prior to such transaction and (b) the Issuer or the Successor, as the case
may be, could incur $1.00 of additional Indebtedness pursuant to the Ratio Exception.

For purposes of this Section 5.01, any
Indebtedness of the Successor which was not Indebtedness of the Issuer
immediately prior to the transaction shall be deemed to have been incurred in
connection with such transaction.

Except as provided under Section 10.05 no
Guarantor may consolidate with or merge with or into (whether or not such
Guarantor is the surviving Person) another Person, whether or not affiliated
with such Guarantor, unless:

(1)                                  either:

(a)                                  such
Guarantor will be the surviving or continuing Person; or

(b)                                 the
Person formed by or surviving any such consolidation or merger assumes, by
supplemental indenture in form and substance satisfactory to the Trustee, all
of the obligations of such Guarantor under the Note Guarantee of such Guarantor
and this Indenture; and

(2)                                  immediately
after giving effect to such transaction, no Default shall have occurred and be
continuing.

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For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the assets of one or more
Restricted Subsidiaries, the Equity Interests of which constitute all or
substantially all of the assets of the Issuer, will be deemed to be the
transfer of all or substantially all of the assets of the Issuer.

Upon any consolidation, combination or merger of the
Issuer or a Guarantor, or any transfer of all or substantially all of the
assets of the Issuer in accordance with the foregoing, in which the Issuer or
such Guarantor is not the continuing obligor under the Notes or its Note
Guarantee, the surviving entity formed by such consolidation or into which the
Issuer or such Guarantor is merged or to which the conveyance, lease or
transfer is made will succeed to, and be substituted for, and may exercise
every right and power of, the Issuer or such Guarantor under this Indenture,
the Notes and the Note Guarantees with the same effect as if such surviving
entity had been named therein as the Issuer or such Guarantor and, except in
the case of a conveyance, transfer or lease, the Issuer or such Guarantor, as
the case may be, will be released from the obligation to pay the principal of
and interest on the Notes or in respect of its Note Guarantee, as the case may
be, and all of the Issuer’s or such Guarantor’s other obligations and covenants
under the Notes, this Indenture and its Note Guarantee, if applicable.

Notwithstanding the foregoing, any Restricted
Subsidiary may merge into the Issuer or another Restricted Subsidiary.

SECTION 5.02.                            Successor
Person Substituted.

Upon any consolidation or merger, or any transfer of
all or substantially all of the assets of the Issuer or any Restricted
Subsidiary in accordance with Section 5.01, the successor corporation formed by
such consolidation or into which the Issuer is merged or to which such transfer
is made shall succeed to, and be substituted for, and may exercise every right
and power of, the Issuer or such Restricted Subsidiary under this Indenture
with the same effect as if such successor corporation had been named as the
Issuer or such Restricted Subsidiary herein, and thereafter the predecessor
corporation shall be relieved of all obligations and covenants under this
Indenture and the Notes.

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ARTICLE SIX

DEFAULTS AND REMEDIES

SECTION 6.01.                            Events
of Default.

Each of the following is
an “Event of Default”:

(1)                                  failure
by the Issuer to pay interest on any of the Notes when it becomes due and
payable and the continuance of any such failure for 30 days (whether or not
such payment is prohibited by Article Eleven of this Indenture);

(2)                                  failure
by the Issuer to pay the principal on any of the Notes when it becomes due and
payable, whether at stated maturity, upon redemption, upon purchase, upon
acceleration or otherwise (whether or not such payment is prohibited by Article
Eleven of this Indenture);

(3)                                  failure
by the Issuer to comply with Section 5.01 or, except in a Suspension
Period, in respect of its obligations to make a Change of Control Offer;

(4)                                  failure
by the Issuer to comply with any other agreement or covenant in this Indenture
and continuance of this failure for 30 days after notice of the failure has
been given to the Issuer by the Trustee or by the Holders of at least 25% of
the aggregate principal amount of the Notes then outstanding;

(5)                                  default
under any mortgage, indenture or other instrument or agreement under which
there may be issued or by which there may be secured or evidenced Indebtedness
of the Issuer or any Restricted Subsidiary, whether such Indebtedness now
exists or is incurred after the Issue Date, which default:

(a)                                  is
caused by a failure to pay when due principal on such Indebtedness within the
applicable express grace period,

(b)                                 results
in the acceleration of such Indebtedness prior to its express final maturity or

(c)                                  results
in the commencement of judicial proceedings to foreclose upon, or to exercise
remedies under applicable law or applicable security documents to take
ownership of, the assets securing such Indebtedness, and

in each case, the
principal amount of such Indebtedness, together with any other Indebtedness
with respect to which an event described in clause (a), (b) or (c) has occurred
and is continuing, aggregates $10.0 million or more;

 67
 

(6)                                  one
or more judgments or orders that exceed $10.0 million in the aggregate (net of
amounts covered by insurance or bonded) for the payment of money have been
entered by a court or courts of competent jurisdiction against the Issuer or
any Restricted Subsidiary and such judgment or judgments have not been
satisfied, stayed, annulled or rescinded within 60 days of being entered;

(7)                                  the
Issuer or any Significant Subsidiary pursuant to or within the meaning of any
Bankruptcy Law:

(a)                                  commences
a voluntary case,

(b)                                 consents
to the entry of an order for relief against it in an involuntary case,

(c)                                  consents
to the appointment of a Custodian of it or for all or substantially all of its
assets, or

(d)                                 makes
a general assignment for the benefit of its creditors;

(8)                                  a
court of competent jurisdiction enters an order or decree under any Bankruptcy
Law that:

(a)                                  is
for relief against the Issuer or any Significant Subsidiary as debtor in an
involuntary case,

(b)                                 appoints
a Custodian of the Issuer or any Significant Subsidiary or a Custodian for all
or substantially all of the assets of the Issuer or any Significant Subsidiary,
or

(c)                                  orders
the liquidation of the Issuer or any Significant Subsidiary,

and the order or decree
remains unstayed and in effect for 60 days; or

(9)                                  any
Note Guarantee of any Significant Subsidiary ceases to be in full force and
effect (other than in accordance with the terms of such Note Guarantee and this
Indenture) or is declared null and void and unenforceable or found to be invalid
or any Guarantor denies its liability under its Note Guarantee (other than by
reason of release of a Guarantor from its Note Guarantee in accordance with the
terms of this Indenture and the Note Guarantee).

Subject to Sections 7.01 and 7.02, the Trustee shall
not be charged with knowledge of any Default, Event of Default, Change of
Control or Asset Sale unless written notice thereof shall have been given to a
Responsible Officer at the Corporate Trust Office of the Trustee by the Issuer
or any other Person.

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SECTION 6.02.                            Acceleration.

If an Event of Default (other than an Event of Default
specified in clause (7) or (8) of Section 6.01 with respect to the
Issuer), shall have occurred and be continuing, the Trustee, by written notice
to the Issuer, or the Holders of at least 25% in aggregate principal amount of
the Notes then outstanding by written notice to the Issuer and the Trustee, may
declare all amounts owing under the Notes to be due and payable immediately.  Upon such declaration of acceleration, the
aggregate principal of and accrued and unpaid interest on the outstanding Notes
shall immediately become due and payable; provided,
however, that after such acceleration, but
before a judgment or decree based on acceleration, the Holders of a majority in
aggregate principal amount of such outstanding Notes may rescind and annul such
acceleration if all Events of Default, other than the nonpayment of accelerated
principal and interest, have been cured or waived as provided in this
Indenture.  If an Event of Default
specified in clause (7) or (8) of Section 6.01 with respect to the
Issuer occurs, all outstanding Notes shall become due and payable without any
further action or notice.

SECTION 6.03.                            Other
Remedies.

If an Event of Default occurs and is continuing, the
Trustee may pursue any available remedy by proceeding at law or in equity to
collect the payment of principal of, or premium, if any, and interest on the
Notes or to enforce the performance of any provision of the Notes or this
Indenture and may take any necessary action requested of it as Trustee to
settle, compromise, adjust or otherwise conclude any proceedings to which it is
a party.

The Trustee may maintain a proceeding even if it does
not possess any of the Notes or does not produce any of them in the
proceeding.  A delay or omission by the
Trustee or any Holder in exercising any right or remedy accruing upon an Event
of Default shall not impair the right or remedy or constitute a waiver of or
acquiescence in the Event of Default.  No
remedy is exclusive of any other remedy. 
All available remedies are cumulative. 
Any costs associated with actions taken by the Trustee under this Section 6.03
shall be reimbursed to the Trustee by the Issuer.

SECTION 6.04.                            Waiver
of Past Defaults and Events of Default.

Subject to Sections 6.02, 6.08 and 8.02, the Holders
of a majority in aggregate principal amount of the Notes then outstanding have the
right to waive any existing Default or compliance with any provision of this
Indenture or the Notes.  Upon any such
waiver, such Default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Default
or impair any right consequent thereto.

SECTION 6.05.                            Control
by Majority.

The Holders of a majority in aggregate principal
amount of the Notes then outstanding may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee by this Inden-

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ture.  The Trustee, however, may refuse to follow
any direction that conflicts with law or this Indenture or that the Trustee
determines may be unduly prejudicial to the rights of another Holder not taking
part in such direction, and the Trustee shall have the right to decline to
follow any such direction if the Trustee, being advised by counsel, determines
that the action so directed may not lawfully be taken or if the Trustee in good
faith shall, by a Responsible Officer, determine that the proceedings so
directed may involve it in personal liability; provided that the Trustee
may take any other action deemed proper by the Trustee which is not
inconsistent with such direction.

SECTION 6.06.                            Limitation
on Suits.

No Holder will have any right to institute any
proceeding with respect to this Indenture or for any remedy thereunder, unless the
Trustee:

(1)                                  has
failed to act for a period of 60 days after receiving written notice of a
continuing Event of Default by such Holder and a request to act by Holders of
at least 25% in aggregate principal amount of Notes outstanding;

(2)                                  has
been offered indemnity satisfactory to it in its reasonable judgment; and

(3)                                  has
not received from the Holders of a majority in aggregate principal amount of
the outstanding Notes a direction inconsistent with such request.

However, such limitations do not apply to a suit
instituted by a Holder of any Note for enforcement of payment of the principal
of or interest on such Note on or after the due date therefor (after giving
effect to the grace period specified in clause (1) of Section 6.01).

SECTION 6.07.                            No
Personal Liability of Directors, Officers, Employees and Stockholders.

No director, officer, employee, incorporator or
stockholder of the Issuer will have any liability for any obligations of the
Issuer under the Notes or this Indenture or of any Guarantor under its Note
Guarantee or this Indenture or for any claim based on, in respect of, or by reason
of, such obligations or their creation. 
Each Holder by accepting a Note waives and releases all such
liability.  The waiver and release are
part of the consideration for issuance of the Notes and the Note Guarantees.

SECTION 6.08.                            Rights
of Holders To Receive Payment.

Notwithstanding any other provision of this Indenture,
the right of any Holder of a Note to receive payment of principal of, or
premium, if any, and interest of the Note on or after the respective due dates
expressed in the Note, or to bring suit for the enforcement of any such payment
on or after such respective dates, is absolute and unconditional and shall not
be impaired or affected without the consent of the Holder.

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SECTION 6.09.                            Collection
Suit by Trustee.

If an Event of Default in payment of principal,
premium or interest specified in Section 6.01(1) or (2) occurs and is
continuing, the Trustee may recover judgment in its own name and as trustee of
an express trust against the Issuer or any Guarantor (or any other obligor on
the Notes) for the whole amount of unpaid principal and accrued interest
remaining unpaid, together with interest on overdue principal and, to the
extent that payment of such interest is lawful, interest on overdue
installments of interest, in each case at the rate set forth in the Notes, and
such further amounts as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.

SECTION 6.10.                            Trustee
May File Proofs of Claim.

The Trustee may file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the
claims of the Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel,
and any other amounts due the Trustee under Section 7.06) and the Holders
allowed in any judicial proceedings relative to the Issuer or any Guarantor (or
any other obligor upon the Notes), its creditors or its property and shall be
entitled and empowered to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute the same after
deduction of its charges and expenses to the extent that any such charges and expenses
are not paid out of the estate in any such proceedings and any custodian in any
such judicial proceeding is hereby authorized by each Holder to make such payments
to the Trustee, and in the event that the Trustee shall consent to the making
of such payments directly to the Holders, to pay to the Trustee any amount due
to it for the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel, and any other amounts due the Trustee
under Section 7.06.

Nothing herein contained shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan or reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceedings.

SECTION 6.11.                            Priorities.

If the Trustee collects any money pursuant to this
Article Six, it shall pay out the money in the following order:

FIRST:  to the
Trustee for amounts due under Section 7.06;

SECOND:  to
Holders for amounts due and unpaid on the Notes for principal, premium, if any,
and interest as to each, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes; and

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THIRD:  to the
Issuer or, to the extent the Trustee collects any amount from any Guarantor, to
such Guarantor.

The Trustee may fix a record date and payment date for
any payment to Holders pursuant to this Section 6.11.

SECTION 6.12.                            Undertaking
for Costs.

In any suit for the enforcement of any right or remedy
under this Indenture or in any suit against the Trustee for any action taken or
omitted by it as Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys’ fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant.  This Section 6.12 does not
apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.08 or
a suit by Holders of more than 10% in principal amount of the Notes then
outstanding.

SECTION 6.13.                            Restoration
of Rights and Remedies.

If the Trustee or any Holder has instituted any
proceeding to enforce any right or remedy under this Indenture and such
proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Trustee or to such Holder, then and in every case,
subject to any determination in such proceeding, the Issuer, the Guarantors,
the Trustee and the Holders shall be restored severally and respectively to
their former positions hereunder and thereafter all rights and remedies of the
Trustee and the Holders shall continue as though no such proceeding had been
instituted.

ARTICLE SEVEN

TRUSTEE

SECTION 7.01.                            Corporate
Trustee Required.

There shall at all times
be a Trustee hereunder with respect to the Notes.  The Trustee shall be a corporation or
national banking organization organized and doing business under the laws of
the United States or of any state thereof, authorized to exercise corporate
trust powers, having, or having a parent that has, a combined capital and
surplus of at least $100,000,000, subject to supervision or examination by
federal or state authority and having an office within the United States.  If such entity publishes reports of condition
at least annually, pursuant to law or to the requirements of such supervising
or examining authority, then, for the purposes of this Section 7.01, the
combined capital and surplus of such entity shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so published.  If at any time the Trustee shall cease to be
eligible in accordance with the provisions of

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this Section 7.01, it
shall resign immediately in the manner and with the effect hereinafter specified
in this Article Seven.

SECTION 7.02.                            Certain
Duties and Responsibilities.

(1)                                  Except
during the continuance of an Event of Default:

(a)                                  the
Trustee undertakes to perform such duties and only such duties as are
specifically set forth in this Indenture, and no implied covenants or obligations
shall be read into this Indenture against the Trustee; and

(b)                                 in
the absence of bad faith on its part, the Trustee may conclusively rely, as to
the truth of the statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the Trustee and conforming
to the requirements of this Indenture; provided, that
in the case of any such certificates or opinions that by any provision hereof
are specifically required to be furnished to the Trustee, the Trustee shall be
under a duty to examine the same to determine whether or not they substantially
conform on their face to the requirements of this Indenture.

(2)                                  If
an Event of Default known to the Trustee has occurred and is continuing, the
Trustee shall, prior to the receipt of directions, if any, from the Holders of
at least a majority in aggregate principal amount of the outstanding Notes,
exercise such of the rights and powers vested in it by this Indenture, and use
the same degree of care and skill in its exercise, as a prudent person would
exercise or use under the circumstances in the conduct of such person’s own
affairs.

(3)                                  Notwithstanding
the foregoing, no provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.  Whether or
not therein expressly so provided, every provision of this Indenture relating
to the conduct or affecting the liability of or affording protection to the
Trustee shall be subject to the provisions of this Section 7.02.  To the extent that, at law or in equity, the
Trustee has duties and liabilities relating to the Holders, the Trustee shall
not be liable to any Holder for the Trustee’s good faith reliance on the
provisions of this Indenture.  The
provisions of this Indenture, to the extent that they restrict the duties and liabilities
of the Trustee otherwise existing at law or in equity, are agreed by the
Issuer, the Guarantors and the Holders to replace such other duties and
liabilities of the Trustee.

(4)                                  No
provisions of this Indenture shall be construed to relieve the Trustee from
liability with respect to matters that are within the authority of the Trustee
under this Indenture for its own negligent action, negligent failure to act or
willful misconduct, except that:

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(a)                                  the
Trustee shall not be liable for any error or judgment made in good faith by an
authorized officer of the Trustee, unless it shall be proved that the Trustee
was negligent in ascertaining the pertinent facts;

(b)                                 the
Trustee shall not be liable with respect to any action taken or omitted to be
taken by it in good faith in accordance with the direction of the Holders of at
least a majority in aggregate principal amount of the outstanding Notes
relating to the time, method and place of conducting any proceeding for any
remedy available to the Trustee under this Indenture; and

(c)                                  the
Trustee shall be under no liability for interest on any money received by it
hereunder except as otherwise agreed in writing with the Issuer and money held
by the Trustee in trust hereunder need not be segregated from other funds
except to the extent required by law.

SECTION 7.03.                            Notice
of Defaults.

Within ninety (90) days
after the occurrence of any Default actually known to the Trustee, the Trustee
shall give the Holders notice of such Default unless such Default shall have
been cured or waived; provided, that
except in the case of a Default in the payment of the principal of or any
premium or interest on any Notes, the Trustee shall be fully protected in
withholding the notice if and so long as the board of directors, the executive
committee or a trust committee of directors and/or Responsible Officers of the
Trustee in good faith determines that withholding the notice is in the interest
of Holders of Notes; and provided, further,
that in the case of any Default of the character specified in Section 6.01(4),
no such notice to Holders shall be given until at least thirty (30) days after
the occurrence thereof.

SECTION 7.04.                            Certain
Rights of Trustee.

Subject to the provisions
of Section 7.02:

(1)               the Trustee may
conclusively rely and shall be fully protected in acting or refraining from
acting in good faith and in accordance with the terms hereof upon any
resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note or other paper or
document believed by it to be genuine and to have been signed or presented by
the proper party or parties;

(2)               if (i) in
performing its duties under this Indenture the Trustee is required to decide
between alternative courses of action, (ii) in construing any of the provisions
of this Indenture the Trustee finds ambiguous or inconsistent with any other
provisions contained herein or (iii) the Trustee is unsure of the application
of any provision of this Indenture, then, except as to any matter as to which
the Holders are entitled to decide under the terms of this Indenture, the
Trustee shall deliver a notice to the Issuer requesting the Issuer’s written
instruction as to the course of action to be taken and the Trustee shall take
such action, or refrain from taking such action, as the Trustee shall be
instructed in writing to take, or to refrain from taking, by the Issuer;
provided, that if the Trustee does not receive such instructions from the
Issuer within ten Business Days after it has delivered

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such notice or
such reasonably shorter period of time set forth in such notice the Trustee
may, but shall be under no duty to, take such action, or refrain from taking
such action, as the Trustee shall deem advisable and in the best interests of
the Holders, in which event the Trustee shall have no liability except for its
own negligence, bad faith or willful misconduct;

(3)                                  any
request or direction of the Issuer shall be sufficiently evidenced by a Issuer
Request and any resolution of the Board of Directors may be sufficiently evidenced
by a Board Resolution;

(4)                                  the
Trustee may consult with counsel (which counsel may be counsel to the Trustee,
the Issuer or any of its Affiliates, and may include any of its employees) and
the advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;

(5)                                  the
Trustee shall be under no obligation to exercise any of the rights or powers
vested in it by this Indenture at the request or direction of any of the
Holders pursuant to this Indenture, unless such Holders shall have offered to
the Trustee security or indemnity reasonably satisfactory to it against the
costs, expenses (including reasonable attorneys’ fees and expenses) and
liabilities that might be incurred by it in compliance with such request or
direction, including reasonable advances for such costs, expenses and
liabilities as may be requested by the Trustee;

(6)                                  the
Trustee shall not be bound to make any investigation into the facts or matters
stated in any resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, indenture, note or other
paper or document, but the Trustee in its discretion may make such inquiry or
investigation into such facts or matters as it may see fit, and, if the Trustee
shall determine to make such inquiry or investigation, it shall be entitled to
examine the books, records and premises of the Issuer, personally or by agent
or attorney;

(7)                                  the
Trustee may execute any of the trusts or powers hereunder or perform any duties
hereunder either directly or by or through agents, attorneys, custodians or
nominees and the Trustee shall not be responsible for any misconduct or
negligence on the part of any such agent, attorney, custodian or nominee
appointed with due care by it hereunder;

(8)                                  whenever
in the administration of this Indenture the Trustee shall deem it desirable to
receive instructions with respect to enforcing any remedy or right or taking
any other action with respect to enforcing any remedy or right hereunder, the
Trustee (i) may request instructions from the Holders (which instructions may
only be given by the Holders of the same aggregate principal amount of
outstanding Notes as would be entitled to direct the Trustee under this
Indenture in respect of such remedy, right or action), (ii) may refrain from
enforcing such remedy or right or taking such action until such 

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instructions are received and (iii) shall be protected in acting in
accordance with such instructions;

(9)                                  except
as otherwise expressly provided by this Indenture, the Trustee shall not be
under any obligation to take any action that is discretionary under the
provisions of this Indenture;

(10)                            without
prejudice to any other rights available to the Trustee under applicable law,
when the Trustee incurs expenses or renders services in connection with any
bankruptcy, insolvency or other proceeding referred to in clauses (7) or (8) of
the definition of Event of Default, such expenses (including legal fees and
expenses of its agents and counsel) and the compensation for such services are
intended to constitute expenses of administration under any bankruptcy laws or
law relating to creditors rights generally;

(11)                            whenever
in the administration of this Indenture the Trustee shall deem it desirable
that a matter be proved or established prior to taking, suffering or omitting
any action hereunder, the Trustee (unless other evidence be herein specifically
prescribed) may, in the absence of bad faith on its part, conclusively rely
upon an Officers’ Certificate addressing such matter, which, upon receipt of
such request, shall be promptly delivered by the Issuer;

(12)                            the
Trustee shall not be charged with knowledge of any Event of Default unless
either (i) a Responsible Officer of the Trustee shall have actual knowledge or
(ii) the Trustee shall have received written notice thereof from the Issuer or
a Holder; and

(13)                            in the
event that the Trustee is also acting as an Agent, hereunder, the rights and
protections afforded to the Trustee pursuant to this Article Seven shall also
be afforded such Agent.

SECTION 7.05.                            May
Hold Notes.

The Trustee or any
Agent of the Issuer, in its individual or any other capacity, may become the
owner or pledgee of Notes and may otherwise deal with the Issuer (with the same
rights it would have if it were not Trustee or Agent).

SECTION 7.06.                            Compensation;
Reimbursement; Indemnity.

(1)               Each of the Issuer and the Guarantors
agrees:

(a)                                  to pay to the Trustee
from time to time reasonable compensation for all services rendered by it
hereunder in such amounts as the Issuer, the Guarantors and the Trustee shall
agree from time to time (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust);

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(b)                                 to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision of
this Indenture (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense, disbursement
or advance as may be attributable to its negligence, bad faith or willful
misconduct; and

(c)                                  to the fullest extent
permitted by applicable law, to indemnify the Trustee and its Affiliates, and
their officers, directors, shareholders, agents, representatives and employees
for, and to hold them harmless against, any loss, damage, liability, tax (other
than income, franchise or other taxes imposed on amounts paid pursuant to (a)
or (b) hereof), penalty, expense or claim of any kind or nature whatsoever
incurred without negligence, bad faith or willful misconduct on its part
arising out of or in connection with the acceptance or administration of this
trust or the performance of the Trustee’s duties hereunder, including the reasonable
costs and expenses of defending itself against any claim or liability in connection
with the exercise or performance of any of its powers or duties hereunder.

(2)                                  To secure the Issuer’s
payment obligations in this Section 7.06, each of the Issuer and the Guarantors
hereby grants and pledges to the Trustee and the Trustee shall have a lien
prior to the Notes on all money or property held or collected by the Trustee,
other than money or property held in trust to pay principal and interest on
particular Notes.  Such lien shall
survive the satisfaction and discharge of this Indenture or the resignation or
removal of the Trustee.

(3)                                  The obligations of
the Issuer and the Guarantors under this Section 7.06 shall survive the
satisfaction and discharge of this Indenture and the earlier resignation or removal
of the Trustee.

(4)                                  In no event shall the
Trustee be liable for any indirect, special, punitive or consequential loss or
damage of any kind whatsoever, including, but not limited to, lost profits,
even if the Trustee has been advised of the likelihood of such loss or damage
and regardless of the form of action.

(5)                                  In no event shall the
Trustee be liable for any failure or delay in the performance of its
obligations hereunder because of circumstances beyond its control, including,
but not limited to, acts of God, flood, war (whether declared or undeclared),
terrorism, fire, riot, embargo, government action, including any laws,
ordinances, regulations, governmental action or the like which delay, restrict
or prohibit the providing of the services contemplated by this Indenture.

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SECTION 7.07.                            Resignation
and Removal; Appointment of Successor.

(1)                                  No resignation or
removal of the Trustee and no appointment of a successor Trustee pursuant to
this Article Seven shall become effective until the acceptance of appointment
by the successor Trustee under Section 7.08.

(2)                                  The Trustee may
resign at any time by giving written notice thereof to the Issuer.

(3)                                  Unless an Event of
Default shall have occurred and be continuing, the Trustee may be removed at
any time by the Issuer by a Board Resolution. 
If an Event of Default shall have occurred and be continuing, the
Trustee may be removed by Act of the Holders of a majority in aggregate
principal amount of the outstanding Notes, delivered to the Trustee and to the
Issuer.

(4)                                  If the Trustee shall
resign, be removed or become incapable of acting, or if a vacancy shall occur
in the office of Trustee for any reason, at a time when no Event of Default
shall have occurred and be continuing, the Issuer, by a Board Resolution, shall
promptly appoint a successor Trustee, and such successor Trustee and the
retiring Trustee shall comply with the applicable requirements of Section
7.08.  If the Trustee shall resign, be
removed or become incapable of acting, or if a vacancy shall occur in the
office of Trustee for any reason, at a time when an Event of Default shall have
occurred and be continuing, the Holders, by Act of the Holders of a majority in
aggregate principal amount of the outstanding Notes, shall promptly appoint a
successor Trustee, and such successor Trustee and the retiring Trustee shall
comply with the applicable requirements of Section 7.08.  If no successor Trustee shall have been so
appointed by the Issuer or the Holders and accepted appointment within sixty
(60) days after the giving of a notice of resignation by the Trustee or the
removal of the Trustee in the manner required by Section 7.08, any Holder who
has been a bona fide Holder of a Note for at least six months may, on behalf of
such Holder and all others similarly situated, and any resigning Trustee may,
at the expense of the Issuer, petition any court of competent jurisdiction for
the appointment of a successor Trustee.

(5)                                  If the Trustee is
removed by the Issuer pursuant to a Board Resolution as contemplated by Section
7.07(3) or the Trustee shall have resigned, the Issuer shall give notice to all
Holders in the manner provided in this Indenture of each resignation and each
removal of the Trustee and each appointment of a successor Trustee.  Each notice shall include the name of the
successor Trustee and the address of its Corporate Trust Office.

SECTION 7.08.                            Acceptance
of Appointment by Successor.

(1)                                  In case of the
appointment hereunder of a successor Trustee, each successor Trustee so
appointed shall execute, acknowledge and deliver to the Issuer and to the
retiring Trustee an instrument accepting such appointment, and thereupon the
resignation

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or removal of the retiring Trustee shall
become effective and such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Trustee; but, on the request of the Issuer or the successor
Trustee, such retiring Trustee shall, upon payment of its charges, execute and
deliver an instrument transferring to such successor Trustee all the rights,
powers and trusts of the retiring Trustee and shall duly assign, transfer and
deliver to such successor Trustee all property and money held by such retiring
Trustee hereunder.

(2)                                  Upon request of any
such successor Trustee, the Issuer shall execute any and all instruments for
more fully and certainly vesting in and confirming to such successor Trustee
all rights, powers and trusts referred to in paragraph (a) of this Section 7.8.

(3)                                  No successor Trustee
shall accept its appointment unless at the time of such acceptance such
successor Trustee shall be qualified and eligible under this Article Seven.

SECTION 7.09.                            Merger,
Conversion, Consolidation or Succession to Business.

Any
Person into which the Trustee may be merged or converted or with which it may
be consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any Person succeeding
to all or substantially all of the corporate trust business of the Trustee,
shall be the successor of the Trustee hereunder, without the execution or
filing of any paper or any further act on the part of any of the parties
hereto, provided, that such Person shall be otherwise qualified and eligible
under this Article Seven.  In case any
Notes shall have been authenticated, but not delivered, by the Trustee then in
office, any successor by merger, conversion or consolidation or as otherwise
provided above in this Section 7.09 to such authenticating Trustee may adopt
such authentication and deliver the Notes so authenticated, and in case any
Notes shall not have been authenticated, any successor to the Trustee may
authenticate such Notes either in the name of any predecessor Trustee or in the
name of such successor Trustee, and in all cases the certificate of
authentication shall have the full force which it is provided anywhere in the
Notes or in this Indenture that the certificate of the Trustee shall have.

SECTION 7.10.                            Not
Responsible for Recitals or Issuance of Notes.

The
recitals contained herein and in the Notes, except the Trustee’s certificates
of authentication, shall be taken as the statements of the Issuer, and neither
the Trustee nor any Agent assumes any responsibility for their
correctness.  The Trustee makes no
representations as to the validity or sufficiency of this Indenture or of the
Notes.  Neither the Trustee nor any Agent
shall be accountable for the use or application by the Issuer of the Notes or
the proceeds thereof.

SECTION 7.11.                                                         Appointment
of Authenticating Agent.

(1)               The Trustee may appoint an Agent or
Agents with respect to the Notes, which shall be authorized to act on behalf of
the Trustee to authenticate Notes issued upon original issue and upon exchange,
registration of transfer or partial redemption thereof or pursuant to Article
Three, and Notes so authenticated shall be entitled to the benefits of this
Indenture and shall be valid and obligatory for all purposes as if authenticated

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by the Trustee hereunder.  Wherever reference is made in this Indenture
to the authentication and delivery of Notes by the Trustee or the Trustee’s
certificate of authentication, such reference shall be deemed to include
authentication and delivery on behalf of the Trustee by an Agent.  Each Agent shall be acceptable to the Issuer
and shall at all times be a corporation organized and doing business under the
laws of the United States of America, or of any State or Territory thereof or
the District of Columbia, authorized under such laws to act as Agent, having a
combined capital and surplus of not less than $50,000,000 and subject to
supervision or examination by federal or state authority.  If such Agent publishes reports of condition
at least annually pursuant to law or to the requirements of said supervising or
examining authority, then for the purposes of this Section 7.11 the combined
capital and surplus of such Agent shall be deemed to be its combined capital
and surplus as set forth in its most recent report of condition so
published.  If at any time an Agent shall
cease to be eligible in accordance with the provisions of this Section 7.11,
such Agent shall resign immediately in the manner and with the effect specified
in this Section 7.11.

(2)                                  Any Person into which
an Agent may be merged or converted or with which it may be consolidated, or
any Person resulting from any merger, conversion or consolidation to which such
Agent shall be a party, or any Person succeeding to all or substantially all of
the corporate trust business of an Agent shall be the successor Agent
hereunder, provided such Person shall be otherwise eligible under this Section
7.11, without the execution or filing of any paper or any further act on the
part of the Trustee or the Agent.

(3)                                  An Agent may resign
at any time by giving written notice thereof to the Trustee and to the
Issuer.  The Trustee may at any time
terminate the agency of an Agent by giving written notice thereof to such Agent
and to the Issuer.  Upon receiving such a
notice of resignation or upon such a termination, or in case at any time such
Agent shall cease to be eligible in accordance with the provisions of this
Section 7.11, the Trustee may appoint a successor Agent eligible under the
provisions of this Section 7.11, which shall be acceptable to the Issuer, and
shall give notice of such appointment to all Holders.  Any successor Agent upon acceptance of its appointment
hereunder shall become vested with all the rights, powers and duties of its
predecessor hereunder, with like effect as if originally named as an Agent.

(4)                                  Each of the Issuer
and the Guarantors agrees to pay to each Agent from time to time reasonable
compensation for its services under this Section 7.11 in such amounts as the
Issuer, the Guarantors and the Agent shall agree from time to time.

(5)                                  If an appointment of
an Agent is made pursuant to this Section 7.11, the Notes may have endorsed
thereon, in addition to the Trustee’s certificate of authentication, an
alternative certificate of authentication in the following form:

This
is one of the Notes referred to in the within mentioned Indenture.

Dated:

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  WELLS FARGO BANK, N.A.,

  
	
   

  	
  not in its
  individual capacity, but solely as Trustee

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Authenticating
  Agent

  

 

ARTICLE EIGHT

AMENDMENTS,
SUPPLEMENTS AND WAIVERS

SECTION 8.01.                            Without
Consent of Holders.

The Issuer and the
Trustee may amend, waive or supplement this Indenture, the Note Guarantees or
the Notes without consent of any Holder:

(1)                                  to provide for the
assumption of the Issuer’s obligations to the Holders pursuant to Section 5.01;

(2)                                  to provide for
uncertificated Notes in addition to or in place of certificated Notes;

(3)                                  to cure any ambiguity,
defect or inconsistency;

(4)                                  to
release any Guarantor from any of its obligations under its Notes guarantee or
this Indenture (to the extent permitted by this Indenture);

(5)                                  to maintain the
qualification of this Indenture under the TIA; or

(6)                                  to make any other
change that does not materially adversely affect the rights of any Holder hereunder.

The Trustee is hereby
authorized to join with the Issuer and the Guarantors in the execution of any
supplemental indenture authorized or permitted by the terms of this Indenture
and to make any further appropriate agreements and stipulations which may be
therein contained, but the Trustee shall not be obligated to enter into any
such supplemental indenture which adversely affects its own rights, duties or
immunities under this Indenture.

SECTION 8.02.                            With
Consent of Holders.

This Indenture or the
Notes may be amended with the consent (which may include consents obtained in
connection with a tender offer or exchange offer for Notes) of the Holders of
at least a majority in aggregate principal amount of the Notes then outstanding,
and any existing Default under, or compliance with any provision of, this Indenture
may be waived (other than any continuing Default in the payment of the
principal or interest on the Notes) with

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the consent (which may
include consents obtained in connection with a tender offer or exchange offer
for Notes) of the Holders of a majority in aggregate principal amount of the
Notes then outstanding; provided that:

(a)                                  no
such amendment may, without the consent of the Holders of two-thirds in
aggregate principal amount of Notes then outstanding, amend the obligation of
the Issuer under Section 4.20 or the related definitions that could
adversely affect the rights of any Holder; and

(b)                                 without
the consent of each Holder affected, the Issuer and the Trustee may not:

(1)                                  change
the maturity of any Note;

(2)                                  reduce
the amount, extend the due date, reduce the rate of interest or otherwise
affect the terms of any scheduled payment of interest on or principal of the
Notes;

(3)                                  reduce
any premium payable upon optional redemption of the Notes, change the date on
which any Notes are subject to redemption or otherwise alter the provisions
with respect to the redemption of the Notes;

(4)                                  make
any Note payable in money or currency other than that stated in the Notes;

(5)                                  change
the place where any Note or interest thereon is payable;

(6)                                  modify
or change any provision of this Indenture or the related definitions affecting
the subordination of the Notes or any Note Guarantee in a manner that adversely
affects the Holders;

(7)                                  reduce
the percentage of Holders necessary to consent to an amendment or waiver to
this Indenture or the Notes;

(8)                                  impair
the rights of Holders to receive payments of principal of or interest on the
Notes;

(9)                                  release
any Guarantor from any of its obligations under its Note Guarantee or this
Indenture, except as permitted by this Indenture; or

(10)                            make
any change in this Section 8.02.

No amendment of, or
supplement or waiver to, this Indenture shall adversely affect the rights of
any holder of Senior Debt or Guarantor Senior Debt under the subordination
provisions of Article Eleven of this Indenture, without the consent of such
holder or, in accordance with the terms of such Senior Debt or Guarantor Senior
Debt, the consent of the agent or

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representative of such
holder or the requisite holders of such Senior Debt or Guarantor Senior Debt.

After an amendment,
supplement or waiver under this Section 8.02 becomes effective, the Issuer
shall mail to the Holders a notice briefly describing the amendment, supplement
or waiver.

Upon the written request
of the Issuer, accompanied by a Board Resolution authorizing the execution of
any such supplemental indenture, and upon the receipt by the Trustee of
evidence reasonably satisfactory to the Trustee of the consent of the Holders
as aforesaid and upon receipt by the Trustee of the documents described in
Section 8.06, the Trustee shall join with the Issuer and the Guarantors in the
execution of such supplemental indenture unless such supplemental indenture
affects the Trustee’s own rights, duties or immunities under this Indenture, in
which case the Trustee may, but shall not be obligated to, enter into such
supplemental indenture.

It shall not be necessary
for the consent of the Holders under this Section to approve the particular
form of any proposed amendment, supplement or waiver, but it shall be sufficient
if such consent approves the substance thereof.

SECTION 8.03.                            Compliance
with Trust Indenture Act.

Every amendment or
supplement to this Indenture or the Notes shall comply with the TIA as then in
effect.

SECTION 8.04.                            Revocation
and Effect of Consents.

Until an amendment,
supplement, waiver or other action becomes effective, a consent to it by a
Holder of a Note is a continuing consent conclusive and binding upon such
Holder and every subsequent Holder of the same Note or portion thereof, and of
any Note issued upon the transfer thereof or in exchange therefor or in place
thereof, even if notation of the consent is not made on any such Note.  Any such Holder or subsequent Holder,
however, may revoke the consent as to his Note or portion of a Note, if the
Trustee receives the written notice of revocation before the date the
amendment, supplement, waiver or other action becomes effective.

The Issuer may, but shall
not be obligated to, fix a record date for the purpose of determining the
Holders entitled to consent to any amendment, supplement, or waiver.  If a record date is fixed, then,
notwithstanding the preceding paragraph, those Persons who were Holders at such
record date (or their duly designated proxies), and only such Persons, shall be
entitled to consent to such amendment, supplement, or waiver or to revoke any
consent previously given, whether or not such Persons continue to be Holders
after such record date.  No such consent
shall be valid or effective for more than 90 days after such record date unless
the consent of the requisite number of Holders has been obtained.

After an amendment,
supplement, waiver or other action becomes effective, it shall bind every
Holder, unless it makes a change described in any of clauses (1) through (9) of

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Section 8.02(b).  In that case the amendment, supplement,
waiver or other action shall bind each Holder of a Note who has consented to it
and every subsequent Holder of a Note or portion of a Note that evidences the same
debt as the consenting Holder’s Note.

SECTION 8.05.                            Notation
on or Exchange of Notes.

If an amendment,
supplement, or waiver changes the terms of a Note, the Trustee (in accordance
with the specific written direction of the Issuer) shall request the Holder of
the Note (in accordance with the specific written direction of the Issuer) to deliver
it to the Trustee.  In such case, the
Trustee shall place an appropriate notation on the Note about the changed terms
and return it to the Holder. 
Alternatively, if the Issuer or the Trustee so determines, the Issuer in
exchange for the Note shall issue, the Guarantors shall endorse, and the
Trustee shall authenticate a new Note that reflects the changed terms.  Failure to make the appropriate notation or issue
a new Note shall not affect the validity and effect of such amendment,
supplement or waiver.

SECTION 8.06.                            Trustee
To Sign Amendments, etc.

The Trustee shall sign
any amendment, supplement or waiver authorized pursuant to this
Article Eight if the amendment, supplement or waiver does not adversely
affect the rights, duties, liabilities or immunities of the Trustee.  If it does, the Trustee may, but need not,
sign it.  In signing or refusing to sign
such amendment, supplement or waiver the Trustee shall be entitled to receive
and, subject to Section 7.02, shall be fully protected in relying upon an
Officers’ Certificate and an Opinion of Counsel stating, in addition to the
matters required by Section 12.04, that such amendment, supplement or waiver is
authorized or permitted by this Indenture and is a legal, valid and binding
obligation of the Issuer and Guarantors, enforceable against the Issuer and
Guarantors in accordance with its terms (subject to customary exceptions).

ARTICLE NINE

DISCHARGE OF INDENTURE; DEFEASANCE

SECTION 9.01.                            Discharge
of Indenture.

The Issuer may terminate
its obligations and the obligations of the Guarantors under the Notes, the
Guarantees and this Indenture, except the obligations referred to in the last
paragraph of this Section 9.01, if

(1)                                  all the Notes that
have been authenticated and delivered (except lost, stolen or destroyed Notes
which have been replaced or paid and Notes for whose payment money has been
deposited in trust or segregated and held in trust by the Issuer and thereafter
repaid to the Issuer or discharged from this trust) have been delivered to the
Trustee for cancellation, or

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(2)                                  (a)  all Notes not delivered to the Trustee for
cancellation otherwise have become due and payable or have been called for
redemption pursuant to paragraph 6 of the Notes, and the Issuer has
irrevocably deposited or caused to be deposited with the Trustee trust funds in
trust in an amount of money sufficient to pay and discharge the entire
Indebtedness (including all principal and accrued interest) on the Notes not
theretofore delivered to the Trustee for cancellation,

(b)                                 the
Issuer has paid all sums payable by it under this Indenture,

(c)                                  the
Issuer has delivered irrevocable instructions to the Trustee to apply the
deposited money toward the payment of the Notes at maturity or on the date of
redemption, as the case may be, and

(d)                                 the
Trustee, for the benefit of the Holders, has a valid, perfected, exclusive
security interest in this trust.

In addition, the Issuer
must deliver an Officers’ Certificate and an Opinion of Counsel (as to legal
matters) stating that all conditions precedent to satisfaction and discharge
have been complied with.

After such delivery, the
Trustee shall acknowledge in writing the discharge of the Issuer’s and the
Guarantors’ obligations under the Notes, the Guarantees and this Indenture except
for those surviving obligations specified below.

Notwithstanding the
satisfaction and discharge of this Indenture, the obligations of the Issuer in
Sections 7.06, 9.05 and 9.06 shall survive.

SECTION 9.02.                            Legal
Defeasance.

The Issuer may at its
option, by Board Resolution of the Board of Directors of the Issuer, be
discharged from its obligations with respect to the Notes and the Guarantors discharged
from their obligations under the Guarantees on the date the conditions set
forth in Section 9.04 are satisfied (hereinafter, “Legal Defeasance”).  For this purpose, such Legal Defeasance means
that the Issuer shall be deemed to have paid and discharged the entire
indebtedness represented by the Notes and to have satisfied all its other obligations
under such Notes and this Indenture insofar as such Notes are concerned (and
the Trustee, at the expense of the Issuer, shall, subject to Section 9.06,
execute instruments in form and substance reasonably satisfactory to the
Trustee and Issuer acknowledging the same), except for the following which
shall survive until otherwise terminated or discharged hereunder:  (A) the rights of Holders of outstanding
Notes to receive solely from the trust funds described in Section 9.04 and as
more fully set forth in such Section, payments in respect of the principal of,
premium, if any, and interest on such Notes when such payments are due,
(B) the Issuer’s obligations with respect to such Notes under
Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 2.11 and 4.19, (C) the
rights, powers, trusts, duties, and immunities of the Trustee hereunder
(including claims of, or payments to, the Trustee under or pursuant to Section
7.06) and (D) this Article Nine. 
Subject to compliance with this Article 

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Nine, the Issuer may
exercise its option under this Section 9.02 with respect to the Notes
notwithstanding the prior exercise of its option under Section 9.03 with
respect to the Notes.

SECTION 9.03.                            Covenant
Defeasance.

At the option of the Issuer,
pursuant to a Board Resolution of the Board of Directors of the Issuer,
(x) the Issuer and the Guarantors shall be released from their respective
obligations under Sections 4.02 (except for obligations mandated by the
TIA), 4.05 through 4.17, inclusive, and 4.20 and 4.21 and clause (3) of the
first paragraph of Section 5.01 and (y) Section 6.01 (5) and (6)
shall no longer apply with respect to the outstanding Notes on and after the
date the conditions set forth in Section 9.04 are satisfied (hereinafter, “Covenant
Defeasance”).  For this purpose, such
Covenant Defeasance means that the Issuer and the Guarantors may omit to comply
with and shall have no liability in respect of any term, condition or
limitation set forth in any such specified Section or portion thereof, whether
directly or indirectly by reason of any reference elsewhere herein to any such
specified Section or portion thereof or by reason of any reference in any such
specified Section or portion thereof to any other provision herein or in any
other document, but the remainder of this Indenture and the Notes shall be
unaffected thereby.

SECTION 9.04.                            Conditions
to Defeasance or Covenant Defeasance.

The following shall be
the conditions to application of Section 9.02 or Section 9.03 to the outstanding
Notes:

(1)                                  the Issuer must
irrevocably deposit with the Trustee, in trust, for the benefit of the Holders,
U.S. legal tender, U.S. Government Obligations or a combination thereof, in
such amounts as will be sufficient (without reinvestment) in the opinion of a
nationally recognized firm of independent public accountants selected by the
Issuer, to pay the principal of and interest on the Notes on the stated date
for payment or on the redemption date of the principal or installment of
principal of or interest on the Notes, and the Trustee must have a valid,
perfected, exclusive security interest in such trust,

(2)                                  in the case of Legal
Defeasance, the Issuer shall have delivered to the Trustee an Opinion of
Counsel in the United States reasonably acceptable to the Trustee confirming
that:

(a)                                  the Issuer has
received from, or there has been published by the Internal Revenue Service, a
ruling, or

(b)                                 since the date hereof,
there has been a change in the applicable U.S. federal income tax law,

in either case to
the effect that, and based thereon this Opinion of Counsel shall confirm that,
the Holders will not recognize income, gain or loss for U.S. federal income tax
purposes as a result of the Legal Defeasance and will be subject to U.S.
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Legal Defeasance had not occurred,

 86

(3)                                  in
the case of Covenant Defeasance, the Issuer shall have delivered to the Trustee
an Opinion of Counsel in the United States reasonably acceptable to the Trustee
confirming that the Holders will not recognize income, gain or loss for U.S.
federal income tax purposes as a result of such Covenant Defeasance and will be
subject to U.S. federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if the Covenant Defeasance had
not occurred,

(4)                                  no
Default shall have occurred and be continuing on the date of such deposit
(other than a Default resulting from the borrowing of funds to be applied to
such deposit and the grant of any Lien securing such borrowing),

(5)                                  the
Legal Defeasance or Covenant Defeasance shall not result in a breach or
violation of, or constitute a Default under this Indenture or any other
material agreement or instrument to which the Issuer or any of its Subsidiaries
is a party or by which the Issuer or any of its Subsidiaries is bound,

(6)                                  the
Issuer shall have delivered to the Trustee an Officers’ Certificate stating
that the deposit was not made by it with the intent of preferring the Holders
over any other of its creditors or with the intent of defeating, hindering,
delaying or defrauding any other of its creditors or others, and

(7)                                  the
Issuer shall have delivered to the Trustee an Officers’ Certificate and an
Opinion of Counsel, each stating that the conditions provided for in, in the
case of the Officers’ Certificate, clauses (1) through (6) and, in the case of
the Opinion of Counsel, clauses (1) (with respect to the validity and
perfection of the security interest), (2) and/or (3) and (5) of this paragraph
have been complied with.

If the funds deposited with the Trustee to effect
Covenant Defeasance are insufficient to pay the principal of and interest on
the Notes when due, then the Issuer’s obligations and the obligations of
Guarantors under this Indenture will be revived and no such defeasance will be
deemed to have occurred.

	
  SECTION
  9.05.

  	
  Deposited Money and U.S. Government Obligations To
  Be Held in Trust; Other Miscellaneous Provisions.

  

 

All money and U.S. Government Obligations (including
the proceeds thereof) deposited with the Trustee pursuant to Section 9.04 in
respect of the outstanding Notes shall be held in trust and applied by the
Trustee, in accordance with the provisions of such Notes and this Indenture, to
the payment, either directly or through any Paying Agent, to the Holders of
such Notes, of all sums due and to become due thereon in respect of principal,
premium, if any, and accrued interest, but such money need not be segregated
from other funds except to the extent required by law.

The Issuer and the Guarantors shall (on a joint and
several basis) pay and indemnify the Trustee against any tax, fee or other
charge imposed on or assessed against the U.S. Government Obligations deposited
pursuant to Section 9.04 or the principal, premium, if any,

 87
 

and interest received in
respect thereof other than any such tax, fee or other charge which by law is
for the account of the Holders of the outstanding Notes.

Anything in this Article Nine to the contrary
notwithstanding, the Trustee shall deliver or pay to the Issuer from time to
time any money or U.S. Government Obligations held by it as provided in Section
9.04 which, in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof delivered to
the Trustee, are in excess of the amount thereof which would then be required
to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.

SECTION 9.06.                            Reinstatement.

If the Trustee or Paying Agent is unable to apply any
money or U.S. Government Obligations in accordance with Section 9.01, 9.02 or
9.03 by reason of any legal proceeding or by reason of any order or judgment of
any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, the Issuer’s and each Guarantor’s obligations
under this Indenture, the Notes and the Guarantees shall be revived and
reinstated as though no deposit had occurred pursuant to this Article Nine
until such time as the Trustee or Paying Agent is permitted to apply all such
money or U.S. Government Obligations in accordance with Section 9.01; provided
that if the Issuer or the Guarantors have made any payment of principal of,
premium, if any, or accrued interest on any Notes because of the reinstatement
of their obligations, the Issuer or the Guarantors, as the case may be, shall
be subrogated to the rights of the Holders of such Notes to receive such
payment from the money or U.S. Government Obligations held by the Trustee or
Paying Agent.

SECTION 9.07.                            Moneys
Held by Paying Agent.

In connection with the satisfaction and discharge of
this Indenture, all moneys then held by any Paying Agent under the provisions
of this Indenture shall, upon written demand of the Issuer, be paid to the
Trustee, or if sufficient moneys have been deposited pursuant to Section 9.04,
to the Issuer (or, if such moneys had been deposited by the Guarantors, to such
Guarantors), and thereupon such Paying Agent shall be released from all further
liability with respect to such moneys.

SECTION 9.08.                            Moneys
Held by Trustee.

Subject to applicable law, any moneys deposited with
the Trustee or any Paying Agent or then held by the Issuer or the Guarantors in
trust for the payment of the principal of, or premium, if any, or interest on
any Note that are not applied but remain unclaimed by the Holder of such Note
for two years after the date upon which the principal of, or premium, if any,
or interest on such Note shall have respectively become due and payable shall
be repaid to the Issuer (or, if appropriate, the Guarantors), or if such moneys
are then held by the Issuer or the Guarantors in trust, such moneys shall be
released from such trust; and the Holder of such Note entitled to receive such
payment shall thereafter, as an unsecured general creditor, look only to the
Issuer and the Guarantors for the payment thereof, and all liability of the
Trustee or such Paying Agent

 88
 

with respect to such
trust money shall thereupon cease; provided, that the Trustee or any
such Paying Agent, before being required to make any such repayment, may, at
the expense of the Issuer and the Guarantors, either mail to each Holder
affected, at the address shown in the register of the Notes maintained by the
Registrar pursuant to Section 2.03, or cause to be published once a week
for two successive weeks, in a newspaper published in the English language,
customarily published each Business Day and of general circulation in the City
of New York, New York, a notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the
date of such mailing or publication, any unclaimed balance of such moneys then
remaining will be repaid to the Issuer. 
After payment to the Issuer or the Guarantors or the release of any
money held in trust by the Issuer or any Guarantors, as the case may be,
Holders entitled to the money must look only to the Issuer and the Guarantors
for payment as general creditors unless applicable abandoned property law
designates another Person.

ARTICLE TEN

GUARANTEE OF NOTES

SECTION 10.01.                      Guarantee.

Subject to the provisions of this Article Ten,
each Guarantor, by execution of this Indenture, jointly and severally,
unconditionally guarantees to each Holder (i) the due and punctual payment
of the principal of and interest on each Note, when and as the same shall become
due and payable, whether at maturity, by acceleration or otherwise, the due and
punctual payment of interest on the overdue principal of and interest on the
Notes, to the extent lawful, and the due and punctual payment of all other
Obligations and due and punctual performance of all obligations of the Issuer
to the Holders or the Trustee all in accordance with the terms of such Note and
this Indenture, and (ii) in the case of any extension of time of payment
or renewal of any Notes or any of such other Obligations, that the same will be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, at stated maturity, by acceleration or otherwise.  Each Guarantor, by execution of this
Indenture, agrees that its obligations hereunder shall be absolute and
unconditional, irrespective of, and shall be unaffected by, any invalidity,
irregularity or unenforceability of any such Note or this Indenture, any
failure to enforce the provisions of any such Note or this Indenture, any
waiver, modification or indulgence granted to the Issuer with respect thereto
by the Holder of such Note, or any other circumstances which may otherwise
constitute a legal or equitable discharge of a surety or such Guarantor.

Each Guarantor hereby waives diligence, presentment,
demand for payment, filing of claims with a court in the event of merger or
bankruptcy of the Issuer, any right to require a proceeding first against the
Issuer, protest or notice with respect to any such Note or the Indebtedness
evidenced thereby and all demands whatsoever, and covenants that this Guarantee
will not be discharged as to any such Note except by payment in full of the principal
thereof and

 89
 

interest thereon.  Each Guarantor hereby agrees that, as between
such Guarantor, on the one hand, and the Holders and the Trustee, on the other
hand, (i) the maturity of the Obligations guaranteed hereby may be
accelerated as provided in Article Six for the purposes of this Guarantee,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the Obligations guaranteed hereby, and (ii) in the
event of any declaration of acceleration of such Obligations as provided in
Article Six, such Obligations (whether or not due and payable) shall forthwith
become due and payable by each Guarantor for the purpose of this Guarantee.

SECTION 10.02.                      Execution
and Delivery of Guarantee.

To further evidence the Guarantee set forth in Section
10.01, each Guarantor hereby agrees that a notation of such Guarantee,
substantially in the form included in Exhibit G hereto, shall be
endorsed on each Note authenticated and delivered by the Trustee and such
Guarantee shall be executed by either manual or facsimile signature of an
Officer or an Officer of a general partner, as the case may be, of each
Guarantor.  The validity and
enforceability of any Guarantee shall not be affected by the fact that it is
not affixed to any particular Note.

Each of the Guarantors hereby agrees that its
Guarantee set forth in Section 10.01 shall remain in full force and effect
notwithstanding any failure to endorse on each Note a notation of such
Guarantee.

If an officer of a Guarantor whose signature is on
this Indenture or a Guarantee no longer holds that office at the time the
Trustee authenticates the Note on which such Guarantee is endorsed or at any
time thereafter, such Guarantor’s Guarantee of such Note shall be valid nevertheless.

The delivery of any Note by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of any
Guarantee set forth in this Indenture on behalf of the Guarantor.

SECTION 10.03.                      Subordination
of Note Guarantees.

The obligations of each Guarantor under its Note
Guarantee pursuant to this Article Ten shall be junior and subordinated to the
prior payment in full of the Guarantor Senior Debt of such Guarantor in cash
(including the termination or cash collateralization of all outstanding letters
of credit and bank product obligations pursuant to the terms, if any, of the
documents evidencing such Senior Debt) on the same basis as the Notes are
junior and subordinated to Senior Debt of the Issuer.  For the purposes of the foregoing sentence,
the Trustee and the Holders shall have the right to receive and/or retain
payments by any of the Guarantors only at such times as they may receive and/or
retain payments in respect of the Notes pursuant to this Indenture, including
Article Eleven.

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SECTION 10.04.                      Limitation
of Guarantee.

The obligations of each Guarantor are limited to the
maximum amount as will, after giving effect to all other contingent and fixed
liabilities of such Guarantor and after giving effect to any collections from
or payments made by or on behalf of any other Guarantor in respect of the
obligations of such other Guarantor under its Guarantee or pursuant to its
contribution obligations under this Indenture, result in the obligations of
such Guarantor under its Guarantee not constituting a fraudulent conveyance or
fraudulent transfer under federal or state law. 
Each Guarantor that makes a payment or distribution under a Guarantee
shall be entitled to a contribution from each other Guarantor in a pro  rata
amount based on the Adjusted Net Assets of each Guarantor.

SECTION 10.05.                      Release
of Guarantor.

A Guarantor shall be
released from all of its obligations under its Guarantee if:

(i)                                     all
of the assets of such Guarantor have been sold or otherwise disposed of in a
transaction in compliance with the terms of this Indenture (including Sections
4.09, 4.20 and 5.01);

(ii)                                  all
of the Equity Interests held by the Issuer and the Restricted Subsidiaries of
such Guarantor have been sold or otherwise disposed of in a transaction in
compliance with the terms of this Indenture (including Sections 4.20 and 5.01);

(iii)                               the
Guarantor is designated an Unrestricted Subsidiary in compliance with the terms
of this Indenture (including Section 4.15);

and in each such case, the Issuer has delivered to the
Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that
all conditions precedent herein provided for relating to such transactions have
been complied with and that such release is authorized and permitted hereunder.

The Trustee shall execute any documents reasonably
requested by the Issuer or a Guarantor in order to evidence the release of such
Guarantor from its obligations under its Guarantee endorsed on the Notes and
under this Article Ten.

SECTION 10.06.                      Waiver
of Subrogation.

Each Guarantor hereby irrevocably waives any claim or
other rights which it may now or hereafter acquire against the Issuer that
arise from the existence, payment, performance or enforcement of such Guarantor’s
obligations under its Guarantee and this Indenture, including, without
limitation, any right of subrogation, reimbursement, exoneration, indemnification,
and any right to participate in any claim or remedy of any Holder of Notes
against the Issuer, whether or not such claim, remedy or right arises in
equity, or under contract, statute or common law, including, without
limitation, the right to take or receive from the Issuer, directly or indirectly,
in cash or other property or by setoff or in any other manner, payment or Note
on account of such

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claim or other
rights.  If any amount shall be paid to
any Guarantor in violation of the preceding sentence and the Notes shall not
have been paid in full, such amount shall have been deemed to have been paid to
such Guarantor for the benefit of, and held in trust for the benefit of, the
Holders, and shall forthwith be paid to the Trustee for the benefit of such
Holders to be credited and applied upon the Notes, whether matured or
unmatured, in accordance with the terms of this Indenture.  Each Guarantor acknowledges that it will
receive direct and indirect benefits from the financing arrangements
contemplated by this Indenture and that the waiver set forth in this Section 10.06
is knowingly made in contemplation of such benefits.

ARTICLE ELEVEN

SUBORDINATION OF NOTES

SECTION 11.01.                      Agreement
to Subordinate.

The Issuer agrees, and each Holder by accepting a Note
agrees, that the Obligations evidenced by the Notes are subordinated in right
of payment, to the extent and in the manner provided in this Article Eleven, to
the prior payment in full in cash of all Senior Debt (including the termination
or cash collateralization of all outstanding letters of credit and bank product
obligations pursuant to the terms, if any, of the documents evidencing such
Senior Debt) (whether outstanding on the date hereof or hereafter created,
incurred, assumed or guaranteed), and that the subordination is for the benefit
of and enforceable by the holders of Senior Debt, including Senior Debt
incurred after the date of this Indenture.

SECTION 11.02.                      Liquidation;
Dissolution; Bankruptcy.

(a)                                  The holders of Senior
Debt shall be entitled to receive payment in full in cash of all Obligations
outstanding in respect of Senior Debt (including the termination or cash
collateralization of all outstanding letters of credit and bank product
obligations pursuant to the terms, if any, of the documents evidencing such
Senior Debt) before the Holders of Notes will be entitled to receive any
payment or distribution of any kind or character with respect to any Obligations
on or relating to the Notes (other than (A) in Permitted Junior Securities or
(B) payments or other distributions made from any defeasance trust created
pursuant to Section 9.01 or Section 9.04, in each case in accordance with the
terms of this Indenture, including, without limitation, this Article Eleven) in
the event of any distribution to creditors of the Issuer:

(1)                                  in
a total or partial liquidation, dissolution or winding up of the Issuer;

(2)                                  in
a bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Issuer or its assets;

(3)                                  in
an assignment for the benefit of creditors; or

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(4)                                  in
any marshalling of the Issuer’s assets and liabilities; and

(b)                                 If a payment or
distribution is made to the Holders of the Notes that, due to the subordination
provisions with respect to the Notes and the Note Guarantees, should not have
been made to them, such holders are required to hold it in trust for the
Holders of the Senior Debt and pay the payment or distribution over to the
holders of the Senior Debt, as their interests may appear.

A distribution may consist of cash, securities or
other property, by setoff or otherwise.

SECTION 11.03.                      Default
on Designated Senior Debt.

(a)                                  The Issuer may not
make any payment or distribution of any kind or character to the Trustee or any
Holder with respect to any Obligations on or relating to the Notes and may not
acquire from the Trustee or any Holder any Notes for cash or property (other
than (A) Permitted Junior Securities and (B) payments and other distributions
made from any defeasance trust created pursuant to Section 9.01 or Section
9.04, in each case in accordance with the terms of this Indenture including,
without limitation, this Article Eleven) until all principal and other
Obligations with respect to the Senior Debt have been paid in full if:

(1)                                  a
default (whether at stated maturity, upon acceleration or otherwise) in the payment
of any principal or other Obligations with respect to Senior Debt occurs and is
continuing; or

(2)                                  any
other default, other than a payment default, on any Designated Senior Debt
occurs and is continuing that then permits holders of such Designated Senior
Debt to accelerate its maturity and the Trustee receives a notice of the
default (a “Payment Blockage Notice”) from the Representative of such
Designated Senior Debt.  If the Trustee
receives any such Payment Blockage Notice, no subsequent Payment Blockage Notice
shall be effective for purposes of this Section unless and until at least 360
days shall have elapsed since the receipt of the immediately prior Payment
Blockage Notice.  No nonpayment default
that existed or was continuing on the date of delivery of any Payment Blockage
Notice to the Trustee shall be, or be made, the basis for a subsequent Payment
Blockage Notice unless such default shall have been cured or waived for a
period of not less than 90 consecutive days. 
Any subsequent action or any breach of any financial covenants for a
period ending after the date of delivery of the initial Payment Blockage Notice
that in either case would give rise to a default pursuant to any provisions under
which a default previously existed or was continuing will constitute a new
default for purposes of this clause (2).

(b)                                 The Issuer may and
shall resume payments on and distributions in respect of the Notes and may
acquire them upon the earlier of:

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(1)                                  in
the case of a payment default (whether at stated maturity, upon acceleration or
otherwise), the date upon which all payment defaults are cured or waived in
accordance with the terms of the applicable Senior Debt, and

(2)                                  in
the case of a default referred to in clause (2) of Section 11.03(a), the
earliest of (1) the date on which all such nonpayment defaults are cured or
waived (as evidenced by written notice to the Trustee from the Representative
for such Designated Senior Debt), (2) 179 days after the date on which the
applicable Payment Blockage Notice is received or (3) the date on which the
Trustee receives notice from the Representative for such Designated Senior Debt
rescinding the Payment Blockage Notice, unless, in the case of clause (1), (2)
or (3), the maturity of any Designated Senior Debt has been accelerated.

In the event that the Designated Senior Debt is
accelerated because of a default other than a payment default thereunder in
accordance with the terms of such Designated Senior Debt, and such acceleration
has not been rescinded, then the failure to make the payment required arising
from such acceleration shall constitute a payment default.

SECTION 11.04.                      Acceleration
of Securities.

If payment of the Notes is accelerated because of an
Event of Default, the Issuer shall promptly notify the Representative of the
Designated Senior Debt of such acceleration.

SECTION 11.05.                      When
Distribution Must Be Paid Over.

In the event that the Trustee or any Holder receives
any payment of any Obligations with respect to the Notes (other than Permitted
Junior Securities or payments and other distributions made from the defeasance
trust described under Article Nine) when the payment is prohibited by Section
11.03, such payment shall be held by the Trustee or such Holder, in trust for
the benefit of, and shall be paid forthwith over and delivered, upon written
request, to, the holders of Senior Debt as their interests may appear or their
Representative under this Indenture or other agreement (if any) pursuant to
which Senior Debt may have been issued, as their respective interests may
appear, for application to the payment of all Obligations with respect to
Senior Debt remaining unpaid to the extent necessary to pay such Obligations in
full in accordance with their terms, after giving effect to any concurrent
payment or distribution to or for the holders of Senior Debt.

With respect to the holders of Senior Debt, the
Trustee undertakes to perform only such obligations on the part of the Trustee
as are specifically set forth in this Article Eleven, and no implied covenants
or obligations with respect to the holders of Senior Debt shall be read into
this Indenture against the Trustee.  The
Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior
Debt, and shall not be liable to any such holders if the Trustee shall pay over
or distribute to or on behalf of Holders or the Issuer or any other Person
money or assets to which any holders of Senior Debt shall be entitled by virtue
of this Article Eleven, except if such payment is made as a result of the
willful misconduct or gross negligence of the Trustee.

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SECTION 11.06.                      Notice
by the Issuer.

The Issuer shall promptly notify the Trustee and the
Paying Agent of any facts known to the Issuer that would cause a payment of any
Obligations with respect to the Notes to violate this Article Eleven, but
failure to give such notice shall not affect the subordination of the Notes to
the Senior Debt as provided in this Article Eleven.

SECTION 11.07.                      Subrogation.

After all Senior Debt is paid in full and until the
Notes are paid in full, Holders of Notes shall be subrogated (equally and
ratably with all other Indebtedness pari passu with the Notes) to the
rights of holders of Senior Debt to receive distributions applicable to Senior
Debt to the extent that distributions otherwise payable to the Holders of Notes
have been applied to the payment of Senior Debt.  A distribution made under this Article Eleven
to holders of Senior Debt that otherwise would have been made to Holders of
Notes is not, as between the Issuer and Holders, a payment by the Issuer on the
Notes.

SECTION 11.08.                      Relative
Rights.

This Article Eleven defines the relative rights of
Holders of Notes and holders of Senior Debt. 
Nothing in this Indenture shall:

(a)                                  impair, as between
the Issuer and Holders of Notes, the obligation of the Issuer, which is
absolute and unconditional, to pay principal of and interest on the Notes in
accordance with their terms;

(b)                                 affect the relative
rights of Holders of Notes and creditors of the Issuer other than their rights
in relation to holders of Senior Debt;

(c)                                  prevent the Trustee
or any Holder of Notes from exercising its available remedies upon a Default or
Event of Default, subject to the rights of holders and owners of Senior Debt to
receive distributions and payments otherwise payable to Holders of Notes; or

(d)                                 subordinate in favor
of holders of Senior Debt or otherwise impair the rights of the Trustee under
Section 7.06 hereof.

If the Issuer fails because of this Article Eleven to
pay principal of or interest on a Note on the due date, the failure is still a
Default or Event of Default.

SECTION 11.09.                      Subordination
May Not Be Impaired by the Issuer.

No right of any holder of Senior Debt to enforce the
subordination of the Indebtedness evidenced by the Notes shall be impaired by
any act or failure to act by the Issuer or any Holder or by the failure of the
Issuer or any Holder to comply with this Indenture.

 95
 

SECTION 11.10.                      Distribution
or Notice to Representative.

Whenever a distribution is to be made or a notice
given to holders of Senior Debt, the distribution may be made and the notice
given to their Representative.

Upon any payment or distribution of assets of the
Issuer referred to in this Article Eleven, the Trustee and the Holders of Notes
shall be entitled to rely upon any order or decree made by any court of
competent jurisdiction or upon any certificate of such Representative or of the
liquidating trustee or agent or other Person making any distribution to the
Trustee or to the Holders of Notes for the purpose of ascertaining the Persons
entitled to participate in such distribution, the holders of the Senior Debt
and other Indebtedness of the Issuer, the amount thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article Eleven.

SECTION 11.11.                      Rights
of Trustee and Paying Agent.

Notwithstanding the provisions of this Article Eleven
or any other provision of this Indenture, the Trustee shall not be charged with
knowledge of the existence of any facts that would prohibit the making of any
payment or distribution by the Trustee, and the Trustee and the Paying Agent
may continue to make payments on the Notes, unless the Trustee shall have received
at its Corporate Trust Office at least five Business Days prior to the date of
such payment written notice of facts that would cause the payment of any
Obligations with respect to the Notes to violate this Article Eleven.  Only the Issuer or a Representative may give
the notice.  Nothing in this Article
Eleven shall impair the claims of, or payments to, the Trustee under or
pursuant to Section 7.06 hereof.

The Trustee in its individual or any other capacity
may hold Senior Debt with the same rights it would have if it were not
Trustee.  Any Agent may do the same with
like rights.

The Trustee shall not be deemed to owe any fiduciary
duty to the holders of Senior Debt and shall not be liable to any such holders
if the Trustee shall in good faith mistakenly pay over or distribute to Holders
of Notes or to the Issuer or to any other person cash, property or securities
to which any holders of Senior Debt shall be entitled by virtue of this Article
Eleven or otherwise.  With respect to the
holders of Senior Debt, the Trustee undertakes to perform or to observe only
such of its covenants or obligations as are specifically set forth in this
Indenture and no implied covenants or obligations with respect to holders of Senior
Debt shall be read into this Indenture against the Trustee.

SECTION 11.12.                                        Authorization
to Effect Subordination.

Each Holder of Notes, by the Holder’s acceptance
thereof, authorizes and directs the Trustee on such Holder’s behalf to take
such action as may be necessary or appropriate to effectuate the subordination
as provided in this Article Eleven, and appoints the Trustee to act as such
Holder’s attorney-in-fact for any and all such purposes.  If the Trustee does not file a proper proof
of claim or proof of debt in the form required in any proceeding referred to in
Section 6.10

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at least 30 days before
the expiration of the time to file such claim, the Representatives are hereby
authorized to file an appropriate claim for and on behalf of the Holders of the
Notes.

ARTICLE
TWELVE

MISCELLANEOUS

SECTION 12.01.                      Trust
Indenture Act Controls.

If any provision of this Indenture limits, qualifies
or conflicts with another provision which is required to be included in this
Indenture by the TIA, the required provision shall control.  If any provision of this Indenture modifies
any TIA provision that may be so modified, such TIA provision shall be deemed
to apply to this Indenture as so modified. 
If any provision of this Indenture excludes any TIA provision that may
be so excluded, such TIA provision shall be excluded from this Indenture.

The provisions of TIA §§ 310 through 317 that
impose duties on any Person (including the provisions automatically deemed
included unless expressly excluded by this Indenture) are a part of and govern
this Indenture, whether or not physically contained herein.

SECTION 12.02.                      Notices.

Except for notice or communications to Holders, any
notice or communication shall be given in writing and delivered in person, sent
by facsimile, delivered by commercial courier service or mailed by first-class
mail, postage prepaid, addressed as follows:

If to the Issuer or any Guarantor:

MERITAGE HOMES CORPORATION

17851 North 85th Street

Suite 300

Scottsdale, AZ  85255

Attention: 
Chief Financial Officer

Fax Number:  (480) 998-9178

with, in the case of any notice furnished pursuant to
Article Six, a copy to:

SNELL & WILMER L.L.P.

One Arizona Center

400 E. Van Buren St.

Phoenix, AZ  85004

 97
 

Attention: 
Steven D. Pidgeon, Esq.

Fax Number:  (602) 382-6070

If to the Trustee:

WELLS FARGO BANK, NATIONAL ASSOCIATION

919 North Market Street

Suite 700

Wilmington, Delaware  19801

Attention: 
Corporate Trust Department

Fax Number:  (302) 575-2006

Such notices or communications shall be effective when
received and shall be sufficiently given if so given within the time prescribed
in this Indenture.

The Issuer, the Guarantors or the Trustee by written
notice to the others may designate additional or different addresses for
subsequent notices or communications.

Any notice or communication mailed to a Holder shall
be mailed to him by first-class mail, postage prepaid, at his address shown on
the register kept by the Registrar.

Failure to mail a notice or communication to a Holder
or any defect in it shall not affect its sufficiency with respect to other Holders.  If a notice or communication to a Holder is
mailed in the manner provided above, it shall be deemed duly given, whether or
not the addressee receives it.

In case by reason of the suspension of regular mail
service, or by reason of any other cause, it shall be impossible to mail any
notice as required by this Indenture, then such method of notification as shall
be made with the approval of the Trustee shall constitute a sufficient mailing
of such notice.

SECTION 12.03.                      Communications
by Holders with Other Holders.

Holders may communicate pursuant to TIA § 312(b)
with other Holders with respect to their rights under this Indenture or the
Notes.  The Issuer, the Guarantors, the
Trustee, the Registrar and anyone else shall have the protection of TIA
§ 312(c).

SECTION 12.04.                      Certificate
and Opinion as to Conditions Precedent.

Upon any request or application by the Issuer or any
Guarantor to the Trustee to take any action under this Indenture, the Issuer or
such Guarantor shall furnish to the Trustee:

(1)                                  an
Officers’ Certificate (which shall include the statements set forth in Section
12.05) stating that, in the opinion of the signers, all conditions precedent,
if any,

 98
 

provided for
in this Indenture relating to the proposed action have been complied with; and

(2)                                  an
Opinion of Counsel (which shall include the statements set forth in Section
12.05) stating that, in the opinion of such counsel, all such conditions
precedent have been complied with.

SECTION 12.05.                      Statements
Required in Certificate and Opinion.

Each certificate and opinion with respect to
compliance by or on behalf of the Issuer or any Guarantor with a condition or
covenant provided for in this Indenture shall include:

(1)                                  a
statement that the Person making such certificate or opinion has read such
covenant or condition;

(2)                                  a
brief statement as to the nature and scope of the examination or investigation
upon which the statements or opinions contained in such certificate or opinion
are based;

(3)                                  a
statement that, in the opinion of such Person, it or he has made such examination
or investigation as is necessary to enable it or him to express an informed opinion
as to whether or not such covenant or condition has been complied with; and

(4)                                  a
statement as to whether or not, in the opinion of such Person, such covenant or
condition has been complied with.

SECTION 12.06.                      Rules
by Trustee and Agents.

The Trustee may make reasonable rules for action by or
meetings of Holders.  The Registrar and
Paying Agent may make reasonable rules for their functions.

SECTION 12.07.                      Business
Days; Legal Holidays.

A “Business Day” is a day that is not a Legal
Holiday.  A “Legal Holiday” is a
Saturday, a Sunday or other day on which (i) commercial banks in the City
of New York are authorized or required by law to close or (ii) the New
York Stock Exchange is not open for trading. 
If a payment date is a Legal Holiday at a place of payment, payment may
be made at that place on the next succeeding day that is not a Legal Holiday, and
no interest shall accrue for the intervening period.

SECTION 12.08.                      Governing
Law.

This Indenture and the Notes shall be governed by
and construed in accordance with the laws of the State of New York, as applied
to contracts made and performed within the State of New York.

 99
 

SECTION 12.09.                      No
Adverse Interpretation of Other Agreements.

This Indenture may not be used to interpret another
indenture, loan, security or debt agreement of the Issuer or any Subsidiary
thereof.  No such indenture, loan, security
or debt agreement may be used to interpret this Indenture.

SECTION 12.10.                      No
Recourse Against Others.

No recourse for the payment of the principal of or
premium, if any, or interest, on any of the Notes, or for any claim based
thereon or otherwise in respect thereof, and no recourse under or upon any
obligation, covenant or agreement of the Issuer or any Guarantor in this Indenture
or in any supplemental indenture, or in any of the Notes, or because of the
creation of any Indebtedness represented thereby, shall be had against any
stockholder, officer, director or employee, as such, past, present or future,
of the Issuer or of any successor corporation or against the property or assets
of any such stockholder, officer, employee or director, either directly or
through the Issuer or any Guarantor, or any successor corporation thereof,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise; it being expressly
understood that this Indenture and the Notes are solely obligations of the Issuer
and the Guarantors, and that no such personal liability whatever shall attach
to, or is or shall be incurred by, any stockholder, officer, employee or
director of the Issuer or any Guarantor, or any successor corporation thereof,
because of the creation of the indebtedness hereby authorized, or under or by
reason of the obligations, covenants or agreements contained in this Indenture
or the Notes or implied therefrom, and that any and all such personal liability
of, and any and all claims against every stockholder, officer, employee and
director, are hereby expressly waived and released as a condition of, and as a
consideration for, the execution of this Indenture and the issuance of the
Notes.  It is understood that this limitation
on recourse is made expressly for the benefit of any such shareholder,
employee, officer or director and may be enforced by any of them.

SECTION 12.11.                      Successors.

All agreements of the Issuer and the Guarantors in
this Indenture and the Notes shall bind their respective successors.  All agreements of the Trustee, any additional
trustee and any Paying Agents in this Indenture shall bind its successor.

SECTION 12.12.                      Multiple
Counterparts.

The parties may sign multiple counterparts of this
Indenture.  Each signed counterpart shall
be deemed an original, but all of them together represent one and the same agreement.

SECTION 12.13.                      Table
of Contents, Headings, etc.

The table of contents, cross-reference sheet and
headings of the Articles and Sections of this Indenture have been inserted for
convenience of reference only, are not to be considered a part hereof, and
shall in no way modify or restrict any of the terms or provisions hereof.

 100
 

SECTION 12.14.                      Separability.

Each provision of this Indenture shall be considered
separable and if for any reason any provision which is not essential to the
effectuation of the basic purpose of this Indenture or the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.

 101

IN WITNESS WHEREOF, the parties have caused this
Indenture to be duly executed all as of the date and year first written above.

 

	
  

  	
  MERITAGE HOMES CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry W. Seay

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Larry W. Seay

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President and

  
	
   

  	
   

  	
   

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  MERITAGE HOMES OF ARIZONA, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry W. Seay

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Larry W. Seay

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  MERITAGE HOMES CONSTRUCTION, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry W. Seay

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Larry W. Seay

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President

  
					

 

 S-1
 

 

	
  

  	
  MERITAGE PASEO CROSSING, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Meritage Homes of Arizona, Inc., its Sole 

  
	
   

  	
   

  	
  Member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry W. Seay

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Larry W. Seay

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MERITAGE PASEO CONSTRUCTION, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Meritage Homes Construction, Inc., its Sole

  
	
   

  	
   

  	
  Member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry W. Seay

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Larry W. Seay

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  MERITAGE HOMES OF CALIFORNIA, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry W. Seay

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Larry W. Seay

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President

  
					

 

 S-2
 

 

	
  

  	
  MERITAGE HOMES OF TEXAS GP, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry W. Seay

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Larry W. Seay

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  MERITAGE HOMES
  OF TEXAS LP HOLDING,

  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry W. Seay

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Larry W. Seay

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  MERITAGE HOMES OF TEXAS L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Meritage Homes of Texas GP, Inc.,

  
	
   

  	
   

  	
  its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry W. Seay

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Larry W. Seay

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President

  
					

 

 S-3
 

 

	
  

  	
  MERITAGE HOMES
  OPERATING COMPANY,

  L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Meritage Holdings, L.L.C., its General

  
	
   

  	
   

  	
  Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Meritage Homes of Texas, L.P.,

  
	
   

  	
   

  	
  its Sole Member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Meritage Homes of Texas GP, Inc.,

  
	
   

  	
   

  	
  its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry W. Seay

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Larry W. Seay

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President

  
					

 

 S-4
 

 

	
  

  	
  MERITAGE HOLDINGS, L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Meritage Homes of Texas L.P., its Sole

  
	
   

  	
   

  	
  Member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Meritage Homes of Texas GP, Inc.,

  
	
   

  	
   

  	
  its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry W. Seay

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Larry W. Seay

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  MERITAGE HOMES
  OF TEXAS JOINT

  VENTURE HOLDING COMPANY, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Meritage Homes of Texas L.P., its Sole

  
	
   

  	
   

  	
  Member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Meritage Homes of Texas GP, Inc.,

  
	
   

  	
   

  	
  its General Partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry W. Seay

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Larry W. Seay

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President

  
					

 

 S-5
 

 

	
  

  	
  MTH-CAVALIER, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Meritage Homes Construction, Inc., its Sole

  
	
   

  	
   

  	
  Member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry W. Seay

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Larry W. Seay

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President

  
						

 

 S-6
 

 

	
  

  	
  MTH GOLF, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Meritage Homes Construction, Inc., its Sole

  
	
   

  	
   

  	
  Member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry W. Seay

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Larry W. Seay

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  CALIFORNIA URBAN BUILDERS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry W. Seay

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Larry W. Seay

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  MERITAGE HOMES OF NEVADA, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry W. Seay

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Larry W. Seay

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  MERITAGE HOMES OF COLORADO, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry W. Seay

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Larry W. Seay

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President

  
					

 

 S-7
 

 

	
  

  	
  MERITAGE HOMES OF FLORIDA, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry W. Seay

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Larry W. Seay

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President

  
					

 

 S-8
 

 

	
  

  	
  CALIFORNIA URBAN HOMES, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Meritage Homes of California, Inc., its Sole

  
	
   

  	
   

  	
  Member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry W. Seay

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Larry W. Seay

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  GREATER HOMES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry W. Seay

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Larry W. Seay

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President

  
					

 

 S-9
 

 

	
  

  	
  WELLS FARGO
  BANK, NATIONAL

  ASSOCIATION, as Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Tracy M. McLamb

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Tracy M. McLamb

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
					

 

 S-10

EXHIBIT A

	
  

  	
  CUSIP 59001AAAL6

  

 

MERITAGE HOMES
CORPORATION

	
  No. 1

  	
  $150,000,0000

  

 

7.731% SENIOR
SUBORDINATED NOTE DUE 2017

MERITAGE HOMES CORPORATION, a Maryland corporation
(the “Company”), for value received, promises to pay to CEDE & CO. or
registered assigns the principal sum of $150,000,000 dollars on April 30,
2017.

Interest Payment Dates: January 30, April
30, July 30 and October 30.

Record Dates: January 15, April 15, July 15 and
October 15.

Reference is made to the further provisions of this
Note contained herein, which will for all purposes have the same effect as if
set forth at this place.

 A-1
 

IN WITNESS WHEREOF, the Company has caused this Note
to be signed manually or by facsimile by its duly authorized officers.

 

	
  

  	
  MERITAGE HOMES CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Larry W. Seay

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President and Chief

  
	
   

  	
   

  	
   

  	
  Financial Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
  C. Timothy White

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President, General

  
	
   

  	
   

  	
   

  	
  Counsel and Secretary

  

 

Dated: February     , 2007

 A-2
 

Certificate of Authentication

This is one of the 7.731% Senior Subordinated Notes
due 2017 referred to in the within-mentioned Indenture.

 

	
  

  	
  WELLS FARGO
  BANK, NATIONAL

  ASSOCIATION, as Trustee

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  

 

 

Dated: February     , 2007

 A-3
 

[FORM OF REVERSE
OF NOTE]

MERITAGE HOMES
CORPORATION

7.731% SENIOR
SUBORDINATED NOTE DUE 2017

1.                                       Interest.
MERITAGE HOMES CORPORATION, a Maryland corporation (the “Company”), promises to
pay, until the principal hereof is paid or made available for payment, interest
on the principal amount set forth on the face hereof at a rate of 7.731% per annum.
Interest hereon will accrue from and including the most recent date to which interest
has been paid or, if no interest has been paid, from and including
February    , 2007 to but excluding the date on which
interest is paid. Interest shall be payable in arrears on each January 30,
April 30, July 30 and October 30 commencing on April 30, 2007. Interest
will be computed on the basis of a 360-day year of twelve 30-day months. The
Company shall pay interest on overdue principal and on overdue interest (to the
full extent permitted by law) at a rate of 7.731% per annum.

2.                                       Method
of Payment. The Company will pay interest hereon (except defaulted
interest) to the Persons who are registered Holders at the close of business on
January 15, April 15, July 15 and October 15 next preceding
the interest payment date (whether or not a Business Day). Holders must
surrender Notes to a Paying Agent to collect principal payments. The Company
will pay principal and interest in money of the United States of America that
at the time of payment is legal tender for payment of public and private debts.
Interest may be paid by check mailed to the Holder entitled thereto at the
address indicated on the register maintained by the Registrar for the Notes.

3.                                       Paying
Agent and Registrar. Initially, Wells Fargo Bank, National Association (the
“Trustee”) will act as a Paying Agent and Registrar. The Company may change any
Paying Agent or Registrar without notice. Neither the Company nor any of its
Affiliates may act as Paying Agent or Registrar.

4.                                       Indenture.
The Company issued the Notes under an Indenture dated as of February
   , 2007 (the “Indenture”) among the Company, the Guarantors
(as defined in the Indenture) and the Trustee. This is one of an issue of Notes
of the Company issued, or to be issued, under the Indenture. The terms of the
Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code §§
77aaa-77bbbb), as amended from time to time. The Notes are subject to all such
terms, and Holders are referred to the Indenture and such Act for a statement
of them. Capitalized and certain other terms used herein and not otherwise
defined have the meanings set forth in the Indenture.

5.                                       Subordination.
The payment of the Notes will, to the extent set forth in the Indenture, be
subordinated in right of payment to the prior payment in full in cash of all Senior
Debt.

 A-4
 

6.                                       Optional
Redemption.

(a)                                  The
Notes will be redeemable, at the Company’s option, in whole or in part, on and
after March 1, 2012 at the redemption prices (expressed as a percentage of
principal amount) set forth below, plus accrued and unpaid interest on such
Notes, if any, to the applicable Redemption Date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date), if redeemed during the 12-month period beginning
on March 1, of each of the years indicated below:

	
  Year

  	
   

  	
  Notes

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2012

  	
   

  	
  103.900

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  2013

  	
   

  	
  102.900

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  2014

  	
   

  	
  101.900

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  2015

  	
   

  	
  101.000

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  2016

  	
   

  	
  100.000

  	
  %

  

 

(b)                                 At
any time prior to March 1, 2010, the Company may on any one or more occasions
redeem up to 35% of the principal amount of the Notes with the net cash
proceeds of one or more Qualified Equity Offerings at a redemption price of
107.731% of the principal amount thereof, plus accrued and unpaid interest, if
any, to the Redemption Date (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date); provided that (a) at least 65% of the aggregate principal amount
of the Notes remains outstanding after such redemption; and (b) the redemption
occurs within 90 days of the date of the closing of such Qualified Equity Offering.

(c)                                  Notwithstanding
the foregoing, prior to March 1, 2012, the Company may redeem all, or from time
to time, a part of the Notes at a Redemption Price equal to 100.000% of the
aggregate principal amount plus the Make Whole Amount and accrued and unpaid
interest, if any, to the Redemption Date (subject to the right of Holders of record
on the relevant record date to receive interest due on the relevant interest
payment date).

(d)                                 In
the event of a redemption of fewer than all of the Notes, the Trustee shall
select the Notes to be redeemed in compliance with the requirements of the
principal national securities exchange, if any, while such Notes are listed, or
if such Notes are not then listed on a national securities exchange, on a pro
rata basis, by lot or in such other manner as the Trustee shall deem
fair and equitable. The Notes will be redeemable in whole or in part upon not
less than 30 nor more than 60 days’ prior written notice, mailed by first class
mail to a Holder’s last address as it shall appear on the register maintained
by the Registrar of the Notes. On and after any redemption date, interest will
cease to accrue on the Notes or portions thereof called for redemption unless
the Company shall fail to redeem any such Note.

7.                                       Notice
of Redemption. Notice of redemption will be mailed at least 30 days but not
more than 60 days before the Redemption Date to each Holder of Notes to be 

 A-5
 

redeemed at his
registered address. On and after the Redemption Date, unless the Company defaults
in making the redemption payment, interest ceases to accrue on Notes or portions
thereof called for redemption.

8.                                       Offers
To Purchase. The Indenture provides that upon the occurrence of a Change of
Control or an Asset Sale and subject to further limitations contained therein,
the Company shall make an offer to purchase outstanding Notes in accordance
with the procedures set forth in the Indenture.

9.                                       [Intentionally
omitted.]

10.                                 Denominations,
Transfer, Exchange. The Notes are in registered form without coupons in
denominations of $1,000 and integral multiples of $1,000. A Holder may transfer
or exchange Notes in accordance with the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements and transfer
documents and to pay to it any taxes and fees required by law or permitted by
the Indenture. The Registrar need not register the transfer of or exchange any
Notes or portion of a Note selected for redemption, or register the transfer of
or exchange any Notes for a period of 15 days before a mailing of notice of
redemption.

11.                                 Persons
Deemed Owners. The registered Holder of this Note may be treated as the
owner of this Note for all purposes.

12.                                 Unclaimed
Money. If money for the payment of principal or interest remains unclaimed
for two years, the Trustee will pay the money back to the Company at its written
request. After that, Holders entitled to the money must look to the Company for
payment as general creditors unless an “abandoned property” law designates
another Person.

13.                                 Amendment,
Supplement, Waiver, Etc. The Company, the Guarantors and the Trustee (if a
party thereto) may, without the consent of the Holders of any outstanding
Notes, amend, waive or supplement the Indenture or the Notes for certain specified
purposes, including, among other things, curing ambiguities, defects or
inconsistencies, maintaining the qualification of the Indenture under the Trust
Indenture Act of 1939, as amended, and making any change that does not
materially and adversely affect the rights of any Holder. Other amendments and
modifications of the Indenture or the Notes may be made by the Company, the
Guarantors and the Trustee with the consent of the Holders of not less than a
majority of the aggregate principal amount of the outstanding Notes, subject to
certain exceptions requiring the consent of the Holders of the particular Notes
to be affected.

14.                                 Successor
Corporation. When a successor corporation assumes all the obligations of
its predecessor under the Notes and the Indenture and the transaction complies
with the terms of Article Five of the Indenture, the predecessor corporation
will, except as provided in Article Five, be released from those obligations.

15.                                 Defaults
and Remedies. Events of Default are set forth in the Indenture. Subject to
certain limitations in the Indenture, if an Event of Default (other than an
Event of Default specified in Section 6.01(7) or (8) with respect to the Company)
occurs and is continuing,

 A-6
 

the Trustee or the
Holders of not less than 25% in aggregate principal amount of the outstanding
Notes may, by written notice to the Trustee and the Company, and the Trustee
upon the request of the Holders of not less than 25% in aggregate principal
amount of the outstanding Notes shall, declare all principal of and accrued
interest on all Notes to be immediately due and payable and such amounts shall
become immediately due and payable. If an Event of Default specified in Section
6.01(7) or (8) occurs with respect to the Company, the principal amount of and
interest on, all Notes shall ipso  facto become and be immediately
due and payable without any declaration or other act on the part of the Trustee
or any Holder. Holders may not enforce the Indenture or the Notes except as provided
in the Indenture. The Trustee may require indemnity satisfactory to it before
it enforces the Indenture or the Notes. Subject to certain limitations, Holders
of a majority in principal amount of the then outstanding Notes may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders notice of any continuing default (except a default in payment of
principal, premium, if any, or interest on the Notes or a default in the
observance or performance of any of the obligations of the Company under Article
Five of the Indenture) if it determines that withholding notice is in their
best interests.

16.                                 Trustee
Dealings with Company. The Trustee, in its individual or any other
capacity, may make loans to, accept deposits from, and perform services for the
Company or its Affiliates, and may otherwise deal with the Company or its
Affiliates, as if it were not Trustee.

17.                                 Discharge.
The Company’s obligations pursuant to the Indenture will be discharged, except
for obligations pursuant to certain sections thereof, subject to the terms of
the Indenture, upon the payment of all the Notes or upon the irrevocable
deposit with the Trustee of United States dollars or U.S. Government
Obligations sufficient to pay when due principal of and interest on the Notes
to maturity or redemption, as the case may be.

18.                                 Guarantees.
The Note will be entitled to the benefits of certain Guarantees made for the
benefit of the Holders. Reference is hereby made to the Indenture for a
statement of the respective rights, limitations of rights, duties and
obligations thereunder of the Guarantors, the Trustee and the Holders.

19.                                 Authentication.
This Note shall not be valid until the Trustee signs the certificate of
authentication on the other side of this Note.

20.                                 Governing
Law. This Note shall be governed by and construed in accordance with the
laws of the State of New York, as applied to contracts made and performed
within the State of New York. The Trustee, the Company, the Guarantor and the
Holders agree to submit to the jurisdiction of the courts of the State of New
York in any action or proceeding arising out of or relating to the Indenture or
the Notes.

21.                                 Abbreviations.
Customary abbreviations may be used in the name of a Holder or an assignee,
such as: TEN COM (= tenants in common), TENANT (= tenants by the entireties),
JT TEN (= joint tenants with right of survivorship and not as tenants in common),
CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).

 A-7
 

The Company will furnish
to any Holder upon written request and without charge a copy of the Indenture. Requests
may be made to:

MERITAGE HOMES CORPORATION

17851 North 85th Street

Suite 300

Scottsdale, AZ 85255

Attention: Chief Financial Officer

 A-8
 

ASSIGNMENT

I or we assign and
transfer this Note to:

(Insert assignee’s social security or tax I.D. number)

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

(Print or type name, address and zip code of assignee)

and irrevocably
appoint:

                                                                                                                                                                                                                                                                                                                                                                                                                  

Agent to transfer
this Note on the books of the Company. The Agent may substitute another to act
for him.

	
  Date:

  	
   

  	
  Your Signature:  

  	
   

  
	
   

  	
  (Sign exactly as your name

  
	
   

  	
  appears on the other side of

  
	
   

  	
  this Note)

  
	
   

  	
   

  
	
   

  	
   

  
	
  Signature Guarantee:  

  	
   

  	
   

  
						

 

SIGNATURE
GUARANTEE

Signatures must be guaranteed by an “eligible
guarantor institution” meeting the requirements of the Registrar, which
requirements include membership or participation in the Security Transfer Agent
Medallion Program (“STAMP”) or such other “signature guarantee program” as may
be determined by the Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.

 A-9
 

OPTION OF
HOLDER TO ELECT PURCHASE

If you want to elect to
have all or any part of this Note purchased by the Company pursuant to Section
4.09 or Section 4.20 of the Indenture, check the appropriate box:

	
  o     Section 4.09

  	
   

  	
  o     Section
  4.20

  	
   

  

 

If you want to have only
part of the Note purchased by the Company pursuant to Section 4.09 or
Section 4.20 of the Indenture, state the amount you elect to have purchased:

	
  $

  	
   

  	
   

  	
   

  
	
     (multiple of $1,000)

  

 

	
  Date:

  	
   

  	
   

  	
   

  

 

	
  Your Signature:  

  	
   

  
	
   

  	
  (Sign exactly as your name appears on the face of
  this

  
	
   

  	
  Note)

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
			

Signature
Guaranteed

SIGNATURE
GUARANTEE

Signatures must be guaranteed by an “eligible
guarantor institution” meeting the requirements of the Registrar, which requirements
include membership or participation in the Security Transfer Agent Medallion
Program (“STAMP”) or such other “signature guarantee program” as may be
determined by the Registrar in addition to, or in substitution for, STAMP, all
in accordance with the Securities Exchange Act of 1934, as amended.

 A-10

EXHIBIT B

[FORM OF
LEGEND FOR 144A NOTES AND OTHER NOTES

THAT ARE RESTRICTED NOTES]

[The Note (or its predecessor) evidenced hereby was
originally issued in a transaction exempt from registration under
Section 5 of the United States Securities Act of 1933, and the Note evidenced
hereby may not be offered, sold or otherwise transferred in the absence of such
registration or an applicable exemption therefrom.  Each purchaser of the Note evidenced hereby
is hereby notified that the seller may be relying on the exemption from the
provisions of Section 5 of the Securities Act provided by Rule 144A
thereunder or another exemption under the Securities Act.  The holder of the Note evidenced hereby
agrees for the benefit of Meritage Homes Corporation that (a) such Note
may be resold, pledged or otherwise transferred only (1)(a) to a person who the
seller reasonably believes is a qualified institutional buyer (as defined in
Rule 144A under the Securities Act), purchasing for its own account in a
transaction meeting the requirements of Rule 144A under the Securities
Act, (b) in a transaction meeting the requirements of Rule 144 of the
Securities Act, (c) outside the United States to a foreign person in a
transaction meeting the requirements of Rule 904 of Regulation S under
the Securities Act, (d) to an “accredited investor” within the meaning of
Rule 501(a)(1), (2), (3) or (7) under the Securities Act (an “Institutional
Accredited Investor”) that is purchasing at least $100,000 of Notes for its own
account or for the account of an institutional accredited investor (and based
upon an opinion of counsel if Meritage Homes Corporation so requests) or
(e) in accordance with another exemption from the registration
requirements of the Securities Act provided that in the case of a transfer
under clause (e) such transfer is subject to the receipt by the Trustee (and
Meritage Homes Corporation, if it so requests) of a certification of the
Transferor and an opinion of counsel to the effect that such transfer is in
compliance with the Securities Act, (2) to Meritage Homes Corporation or
any of its subsidiaries or (3) under an effective registration statement
under the Securities Act and, in each case, in accordance with any applicable
securities laws of any state of the United States or any other applicable
jurisdiction and the indenture governing the Notes and (b) the holder
will, and each subsequent holder is required to, notify any purchaser from it
of the Note evidenced hereby of the resale restrictions set forth in (a)
above.  If any resale or other transfer
of any Note is proposed to be made under clause (a)(1)(d) above while
these transfer restrictions are in force then the transferor shall deliver a
letter from the transferee to Meritage Homes Corporation and the Trustee which
shall provide, among other things, that the transferee is an institutional
accredited investor and that it is acquiring the Securities for investment purposes
and not for distribution in violation of the Securities Act.](a)

(a)           (4)(2) Legend?

 B-1
 

[FORM OF ASSIGNMENT
FOR 144A NOTES AND OTHER NOTES

THAT ARE  RESTRICTED NOTES]

I or we assign and
transfer this Note to:

(Insert assignee’s social security or tax I.D. number)

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

(Print or type name, address and zip code of assignee)

and irrevocably
appoint:

                                                                                                                                                                                                                                                                                                                                                                                                                  

Agent to transfer
this Note on the books of the Company. 
The Agent may substitute another to act for him.

[Check One]

o  (a)                                                                                                                this
Note is being transferred in compliance with the exemption from registration
under the Securities Act provided by Rule 144A thereunder.

or

o  (b)                                                                                                               this
Note is being transferred other than in accordance with (a) above and documents
are being furnished which comply with the conditions of transfer set forth in
this Note and the Indenture.

If none of the foregoing
boxes is checked, the Trustee or Registrar shall not be obligated to register
this Note in the name of any person other than the Holder hereof unless and
until the conditions to any such transfer of registration set forth herein and
in Sections 2.16 and 2.17 of the Indenture shall have been satisfied.

	
  Date:

  	
   

  	
  Your Signature:  

  	
   

  
	
   

  	
  (Sign exactly as your name appears on the

  face of this Note)

  
	
   

  	
   

  
	
  Signature
  Guarantee:

  	
   

  
					

 

SIGNATURE
GUARANTEE

Signatures must be guaranteed by an “eligible
guarantor institution” meeting the requirements of the Registrar, which
requirements include membership or participation in the Security Transfer Agent
Medallion Program (“STAMP”) or such other “signature guarantee program” as may
be determined by the Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.

 B-2
 

TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED

The undersigned
represents and warrants that it is purchasing this Note for its own account or
an account with respect to which it exercises sole investment discretion and
that it and any such account is a “qualified institutional buyer” within the
meaning of Rule 144A under the Securities Act and is aware that the sale to it
is being made in reliance on Rule 144A and acknowledges that it has received
such information regarding the Company as the undersigned has requested
pursuant to Rule 144A or has determined not to request such information and
that it is aware that the transferor is relying upon the undersigned’s
foregoing representations in order to claim the exemption from registration provided
by Rule 144A.

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  NOTICE:  To
  be executed by an executive officer

  

 

 B-3

EXHIBIT C

[FORM OF
LEGEND FOR REGULATION S NOTE]

This Note has not been registered under the U.S.
Securities Act of 1933, as amended (the “Act”), and, unless so registered, may
not be offered or sold within the United States or to, or for the account or benefit
of, U.S. Persons unless registered under the Act or except pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the
Act.

 C-1
 

[FORM OF
ASSIGNMENT FOR REGULATION S NOTE]

I or we assign and
transfer this Note to:

(Insert assignee’s social security or tax I.D. number)

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

(Print or type name, address and zip code of assignee)

and irrevocably
appoint:

                                                                                                                                                                                                                                                                                                                                                                                                                  

Agent to transfer
this Note on the books of the Company. 
The Agent may substitute another to act for him.

[Check One]

o  (a)                                                                                                                this
Note is being transferred in compliance with the exemption from registration
under the Securities Act provided by Rule 144A thereunder.

or

o  (b)                                                                                                               this
Note is being transferred other than in accordance with (a) above and documents
are being furnished which comply with the conditions of transfer set forth in
this Note and the Indenture.

If none of the
foregoing boxes is checked, the Trustee or Registrar shall not be obligated to
register this Note in the name of any person other than the Holder hereof
unless and until the conditions to any such transfer of registration set forth
herein and in Sections 2.16 and 2.17 of the Indenture shall have been
satisfied.

	
  Date:

  	
   

  	
  Your Signature:  

  	
   

  
	
   

  	
  (Sign exactly as
  your name appears on the

  face of this Note)

  
	
   

  	
   

  
	
  Signature
  Guarantee:

  	
   

  
					

 

SIGNATURE
GUARANTEE

Signatures must be guaranteed by an “eligible
guarantor institution” meeting the requirements of the Registrar, which
requirements include membership or participation in the Security Transfer Agent
Medallion Program (“STAMP”) or such other “signature guarantee program” as may
be

 C-2
 

determined by the Registrar in addition to, or in substitution for,
STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

 C-3
 

TO BE COMPLETED BY
PURCHASER IF (a) ABOVE IS CHECKED

The undersigned represents and warrants that it is
purchasing this Note for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a “qualified
institutional buyer” within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges
that it has received such information regarding the Company as the undersigned
has requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon the undersigned’s
foregoing representations in order to claim the exemption from registration provided
by Rule 144A.

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  NOTICE: To be
  executed by an executive officer

  

 

 C-4

EXHIBIT D

[FORM OF
LEGEND FOR GLOBAL NOTE]

Any Global Note authenticated and delivered hereunder
shall bear a legend (which would be in addition to any other legends required
in the case of a Restricted Note) in substantially the following form:

This Note is a Global Note within the meaning of the
indenture hereinafter referred to and is registered in the name of the
Depository Trust Company, a New York corporation (“DTC”), or a nominee
of DTC.  This Note is not exchangeable
for Notes registered in the name of a person other than DTC or its nominee
except in the limited circumstances described in the indenture, and no transfer
of this Note (other than a transfer of this Note as a whole by DTC to a nominee
of DTC or by a nominee of DTC to DTC or another nominee of DTC) may be registered
except in the limited circumstances described in the Indenture.

Unless this Note is presented by an authorized
representative of DTC to the issuer or its agent for registration of transfer,
exchange, or payment, and any Note issued is registered in the name of CEDE
& CO. or in such other name as it requested by an authorized representative
of DTC (and any payment is made to CEDE & CO. or such other entity as is
requested by an authorized representative of DTC), any transfer, pledge or
other use hereof for value or otherwise by or to any Person is wrongful
inasmuch as the registered owner hereof, CEDE & CO., has an interest
herein.

 D-1

EXHIBIT E

Form of Certificate To Be

Delivered in Connection
with

Transfers to
Non-QIB Accredited Investors

Wells Fargo Bank,
National Association

919 North Market
Street

Suite 700

Wilmington, Delaware 
19801

Attention:  Corporate Trust Department

Ladies and Gentlemen:

In connection with our proposed purchase of 7.731%
Senior Subordinated Notes due 2017 (the “Notes”) of Meritage Homes Corporation,
a Maryland Corporation (the “Company”), we confirm that:

1.                                       We
understand that any subsequent transfer of the Notes is subject to certain
restrictions and conditions set forth in the Indenture dated as of February    ,
2007 relating to the Notes and we agree to be bound by, and not to resell,
pledge or otherwise transfer the Notes except in compliance with, such restrictions
and conditions and the Securities Act of 1933, as amended (the “Securities Act”).

2.                                       We
understand that the Notes have not been registered under the Securities Act or
any other applicable securities laws, have not been and will not be qualified for
sale under the securities laws of any non-U.S. jurisdiction and that the Notes
may not be offered, sold, pledged or otherwise transferred except as permitted
in the following sentence.  We agree, on
our own behalf and on behalf of any accounts for which we are acting as
hereinafter stated, that if we should sell any Notes, we will do so only (i) to
the Company or any subsidiary thereof, (ii) in accordance with Rule 144A under
the Securities Act to a “qualified institutional buyer” (as defined in Rule 144A),
(iii) to an institutional “accredited investor” (as defined below) that,
prior to such transfer, furnishes (or has furnished on its behalf by a U.S.
broker-dealer) to you a signed letter containing certain representations and
agreements relating to the restrictions on transfer of the Notes,
(iv) outside the United States to persons other than U.S. persons in
offshore transactions meeting the requirements of Rule 904 of Regulation S
under the Securities Act, (v) pursuant to the exemption form registration
provided by Rule 144 under the Securities Act (if applicable) or
(vi) pursuant to an effective registration statement, and we further agree
to provide to any person purchasing any of the Notes from us a notice advising
such purchaser that resales of the Notes are restricted as stated herein.

3.                                       We
understand that, on any proposed resale of any Notes, we will be required to
furnish to you and the Company such certifications, legal opinions and other 

 E-1
 

information as you and
the Company may reasonably require to confirm that the proposed sale complies
with the foregoing restrictions.  We
further understand that the Notes purchased by us will bear a legend to the
foregoing effect.

4.                                       We
are an institutional “accredited investor” (as defined in Rule 501(a)(1), (2),
(3) or (7) under the Securities Act) and have such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of our investment in the Notes, and we and any accounts for which we are
acting each are able to bear the economic risk of our or their investment, as
the case may be.

5.                                       We
are acquiring the Notes purchased by us for our account or for one or more
accounts (each of which is an institutional “accredited investor”) as to each
of which we exercise sole investment discretion.

6.                                       We
are not acquiring the Notes with a view toward the distribution thereof in a
transaction that would violate the Securities Act or the securities laws of any
state of the United States or any other applicable jurisdiction.

You are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.

	
  

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  [Name of
  Transferee]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
   

  
					

 

 E-2

EXHIBIT F

Form of Certificate To Be
Delivered

in Connection with
Transfers

Pursuant to
Regulation S

Wells Fargo Bank,
National Association

919 North Market
Street

Suite 700

Wilmington, Delaware 
19801

Attention:  Corporate Trust Department

	
  

  	
  Re:

  	
  Meritage Homes Corporation, a Maryland corporation
  (the “Company”)

  
	
   

  	
   

  	
  7.731% Senior Subordinated Notes due 2017 (the
  “Notes”)

  

 

Dear Sirs:

In connection with our proposed sale of $
                        
aggregate principal amount of the Notes, we confirm that such sale has been
effected pursuant to and in accordance with Regulation S under the U.S.
Securities Act of 1933, as amended (the “Securities Act”), and, accordingly, we
represent that:

(1)                                  the
offer of the Notes was not made to a U.S. person or to a person in the United
States;

(2)                                  either
(a) at the time the buy offer was originated, the transferee was outside the
United States or we and any person acting on our behalf reasonably believed
that the transferee was outside the United States, or (b) the transaction was
executed in, on or through the facilities of a designated off-shore securities
market and neither we nor any person acting on our behalf knows that the
transaction has been pre-arranged with a buyer in the United States;

(3)                                  no
directed selling efforts have been made in the United States in contravention
of the requirements of Rule 904(a) of Regulation S;

(4)                                  the
transaction is not part of a plan or scheme to evade the registration requirements
of the Securities Act; and

(5)                                  we
have advised the transferee of the transfer restrictions applicable to the
Notes.

You are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. 
Terms used in this certificate have the meanings set forth in Regulation
S.

 F-1
 

 

 

 

	
  

  	
  Very truly
  yours,

  
	
   

  	
   

  
	
  

  	
  [Name of
  Transferee]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  

 

 F-2

EXHIBIT G

NOTATION OF
GUARANTEE

Each of the undersigned (the “Guarantors”) hereby
jointly and severally unconditionally guarantees, to the extent set forth in
the Indenture dated as of February     , 2007 by and among
Meritage Homes Corporation, as issuer, the Guarantors, as guarantors, and Wells
Fargo Bank, National Association, as Trustee (as amended, restated or
supplemented from time to time, the “Indenture”), and subject to the provisions
of the Indenture, (a) the due and punctual payment of the principal of,
and premium, if any, and interest on the Notes, when and as the same shall
become due and payable, whether at maturity, by acceleration or otherwise, the
due and punctual payment of interest on overdue principal of, and premium and,
to the extent permitted by law, interest, and the due and punctual performance
of all other obligations of the Company to the Holders or the Trustee, all in
accordance with the terms set forth in Article Ten of the Indenture, and
(b) in case of any extension of time of payment or renewal of any Notes or
any of such other obligations, that the same will be promptly paid in full when
due or performed in accordance with the terms of the extension or renewal,
whether at stated maturity, by acceleration or otherwise.

The obligations of the Guarantors to the Holders and
to the Trustee pursuant to this Guarantee and the Indenture are expressly set
forth in Article Ten of the Indenture, and reference is hereby made to the
Indenture for the precise terms and limitations of this Guarantee.  Each Holder of the Note to which this
Guarantee is endorsed, by accepting such Note, agrees to and shall be bound by
such provisions.

[Signatures on
Following Pages]

 G-1
 

IN WITNESS WHEREOF, each
of the Guarantors has caused this Guarantee to be signed by a duly authorized
officer.

	
  

  	
  [GUARANTORS]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 G-2Exhibit
10(a)

December 4, 2006

PACCAR Inc

Amended and Restated Supplemental
Retirement Plan

(Effective
as of January 1, 2005)

SECTION 1. ESTABLISHMENT AND
PURPOSE OF THE SUPPLEMENTAL PLAN

PACCAR Inc, a
Delaware corporation (the “Company”), established the PACCAR Inc Supplemental
Retirement Plan (the “Supplemental Plan”) effective as of January 1, 1975.  The sole purpose of the Supplemental Plan is
to supplement the benefits of certain employees under the PACCAR Inc Retirement
Plan, as amended from time to time (the “Retirement Plan”).  The Supplemental Plan has been amended from
time to time, and was last amended on December 19, 2005.

The Company hereby
again amends and restates the Supplemental Plan effective as of January 1,
2005.  The Supplemental Plan, as amended
and restated, is intended to satisfy the requirements of, and shall be
implemented and administered in a manner consistent with, Section 409A of the
Internal Revenue Code of 1986, as amended (the “Code”) and the Treasury
regulations promulgated thereunder.  Benefits
that commenced to be paid under the Supplemental Plan before January 1, 2005
shall be governed by the terms and conditions of the Supplemental Plan, as in
effect on December 31, 2004.

SECTION 2. PARTICIPATION

A Member who is an Employee
(as both terms are defined in the Retirement Plan) shall become a “Participant”
in the Supplemental Plan on the first day of the calendar year immediately
following the calendar year in which the earliest of (a), (b) or (c) below,
occurs:

(a)           The date the Employee elects to
participate in the PACCAR Inc Deferred Incentive Compensation Plan, Section 6
of the Administrative Guidelines of the PACCAR Inc Long Term Incentive Plan or
the PACCAR Inc Deferred Compensation Plan, as they may be amended from time to
time (collectively, the “Nonqualified Plans”);

(b)           The date the Employee’s monthly
pension (determined in accordance with the Retirement Plan) would, but for the
limitation of Section 415 of the Code and the maximum benefit limitations
of the Retirement Plan, exceed the amount of the monthly pension actually
payable to such Employee under the Retirement Plan after the application of such
limitation.

(c)           The date the Employee’s monthly
pension (determined in accordance with the Retirement Plan) would, but for the
limitation of Section 401(a)(17) of the Code, exceed the amount of the monthly
pension actually payable to such Employee under the Retirement Plan after the
application of such limitation.

Notwithstanding the foregoing, Participants shall be limited to, and
may be more restrictive than, the group of employees who are members of a
select group of management or highly-compensated employees (within the meaning
of Sections 201, 301, and 401 of the Employee Retirement Income Security Act of
1974, as amended (“ERISA”).

SECTION 3. SUPPLEMENTAL BENEFITS

A Participant’s
Supplemental Benefit shall be the amount (if any) by which the Total Pension
Benefit exceeds the Participant’s Retirement Plan Benefit.  The Total Pension Benefit and the Retirement
Plan Benefit shall be calculated as of the “Supplemental Benefit Commencement
Date.”

(a)           For purposes of calculating a
Participant’s Supplemental Benefit, “Total Pension Benefit” shall equal the
monthly pension which would be payable to such Participant under Article 5
of the Retirement Plan (i) if the maximum benefit limitations of
Section 415 of the Code and of the Retirement Plan did not apply, (ii) if
the includable compensation limitations of Section 401(a)(17) of the Code did
not apply, and (iii) if the definition of “Salary” in the Retirement Plan
included any amount of base salary that is deferred or any amount of incentive
compensation that is deferred under the Company’s Nonqualified Plans.  For purposes of this paragraph, amounts
deferred under the Company’s Nonqualified Plans shall be deemed to be included
in “Salary” for the calendar year in which such amounts are earned.

(b)           For purposes of calculating the
Supplemental Benefit, as discussed above, “Retirement Plan Benefit” shall equal
the Participant’s monthly pension payable under the Retirement Plan.

SECTION 4. SUPPLEMENTAL BENEFIT
PAYMENTS

(a)           Supplemental Benefit Commencement
Date.  A Participant’s “Supplemental
Benefit Commencement Date” shall be the first day of the first month
immediately following the latest of:

(1)           The date of the Participant’s
Termination of Employment;

(2)           The date the Participant attains age
65 or the Participant attains age 55 with 15 years of service (whichever is
earlier); or

(3)           The date that is 12 months after the
Participant’s Payment Election Date.

For purposes of the Supplemental Plan, “Termination of Employment”
shall mean a “separation from service” as defined in Section 409A of the Code
and the Treasury regulations promulgated thereunder.  For purposes of paragraph (3) above, “Payment
Election Date” shall mean either: (i) 
January 31, 2006 for each Employee who is a Participant on such date or
(ii) for other Participants, the date on which the Participant elects a form of
payment for the Supplemental Benefit, provided that such date is not later than
30 days from the date such Employee first became a Participant.

(b)           Supplemental Payment Form.  The Supplemental Benefit shall be payable
either in a single cash lump sum or in an annuity (paid monthly).

 2
 

(1)           Each Participant shall elect the form
in which the Supplemental Benefit (if any) shall be paid within 30 days after
first becoming a Participant. 
Notwithstanding the foregoing, each Employee who was a Participant on
January 1, 2006 and whose Supplemental Benefit (if any) has not been paid (or
commenced to be paid) as of January 1, 2006, shall elect the form in which such
Supplemental Benefit shall be paid no later than January 31, 2006.  If a Participant fails to specify the form in
which the Supplemental Benefit (if any) shall be paid, then such Participant’s
Supplemental Benefit shall be paid as an annuity; provided, however, that the
Participant shall have the right to specify the type of actuarially equivalent
annuity from those available under the Retirement Plan at any time up to the
Supplemental Benefit Commencement Date. 
In the event a Participant fails to specify the type of annuity prior to
the Supplemental Benefit Commencement Date, the Supplemental Benefit shall be
paid as a single life annuity, if the Participant is not married on such Date,
and as a 50% joint and survivor annuity, if Participant is married on such
Date.

(2)           A Participant may change the form in
which the Supplemental Benefit (if any) shall be paid; provided, however that
if such change is made more than 30 days after the Employee first became a
Participant, then the change will not be effective for 12 months and the
Supplemental Benefit Commencement Date shall be delayed at least five (5) years
from when payment otherwise would have been made or commenced.  In this regard, if a Participant first elects
the form in which the Supplemental Benefit shall be paid more than 30 days
after such Employee first became a Participant (or after January 31, 2006 for
Employees who were Participants on January 1, 2006), then such initial election
shall be deemed a change to a prior election and shall be subject to the same
conditions.  Notwithstanding the
foregoing, a change in the form of annuity shall not be deemed a change in the
form in which such Supplemental Benefit shall be paid, provided that the
annuities are actuarially equivalent under Section 409A of the Code (and the
Treasury regulations promulgated thereunder), and that the change in the form
of annuity is made prior to the Supplemental Benefit Commencement Date.

(3)           The amount of a Participant’s
Supplemental Benefit (if any) shall be adjusted to reflect the form in which
such Supplemental Benefit is paid.  If
paid as an annuity, such adjustment shall be made in accordance with Section
6.1 of the Retirement Plan by applying the actuarial factors and assumptions used
for annuity conversions as described in the definition of “Actuarial Equivalent”
in the Retirement Plan.  If paid in a
single cash lump sum, such adjustment shall be made by applying the actuarial
factors and assumptions used for lump sum distributions as described in the
definition of “Actuarial Equivalent” in the Retirement Plan.

(c)           2005 Termination of Employment.  Notwithstanding this Section, if the date of
a Participant’s Termination of Employment is during the 2005 calendar year,
then the benefit accrued under the Supplemental Plan (if any) after December
31, 2004 shall be paid to Participant in a single cash lump sum on or before
December 31, 2005 and the portion attributable to service prior to January 1,
2005 shall be paid in accordance to the terms and conditions of the
Supplemental Plan, as in effect on December 31, 2004.

 3
 

(d)           Specified Employee.  Notwithstanding anything to the contrary, if
a Participant’s Supplemental Benefit becomes payable on account of the
Participant’s Termination of Employment (other than on account of the
Participant’s death) and such Participant is a Specified Employee, then such
Participant’s Supplemental Benefit shall be paid at least six (6) months after
the Participant’s Termination of Employment. 
For purposes of this paragraph, “Specified Employee” shall mean a
Participant who is a “specified employee” as such term is defined in Section
409A of the Code and the Treasury regulations promulgated thereunder.

(e)           Death Benefits.  Upon the death of a Participant prior to the
Supplemental Benefit Commencement Date, the Participant’s surviving spouse (if
any) shall be eligible to receive a Survivor Pension.  The “Survivor Pension” shall be the amount
(if any) by which the Total Survivor Pension Benefit exceeds the surviving
spouse’s Retirement Plan Benefit.  The
Total Survivor Pension Benefit and the Retirement Plan Benefit shall be
calculated as of the date of the Participant’s death.

(1)           For purposes of calculating the
Survivor Pension, “Total Survivor Pension Benefit” shall equal the monthly
pension payment which would be payable under Article 7 of the Retirement Plan
(i) if the maximum benefit limitations of Section 415 of the Code and of
the Retirement Plan did not apply, (ii) if the includable compensation
limitations of Section 401(a)(17) of the Code did not apply, and (iii) if the
definition of “Salary” in the Retirement Plan included any amounts of base
salary or incentive compensation deferred under the Company’s Nonqualified
Plans.  For purposes of this paragraph,
amounts deferred under the Company’s Nonqualified Plans shall be deemed to be
included in “Salary” for the calendar year in which such amounts are earned.

(2)           For purposes of calculating the Survivor
Pension, as described above, the surviving spouse’s “Retirement Plan Benefit” shall
be the actual monthly pension payable under Article 7 of the Retirement
Plan.

(3)           The Survivor Pension shall be paid on
the Participant’s Supplemental Benefit Commencement Date and in the form in
which the Participant’s Supplemental Benefit would have been paid.

(f)            Small Plan Benefits.  Notwithstanding the Participant’s form of
payment election under this Section 4, if the lump-sum value of the Participant’s
Supplemental Benefit is $50,000 (or less) as of the Supplemental Benefit
Commencement Date, then such Participant’s Supplemental Benefit shall be paid
in a single cash lump sum.  In addition,
if the lump-sum value of a surviving spouse’s Survivor Pension is $50,000 (or
less), then such Survivor Pension shall be paid in a single cash lump sum.  For the purpose of determining the
Supplemental Benefit under this section, the Company shall use the actuarial factors
and assumptions described in the definition of “Actuarial Equivalent” in the
Retirement Plan.

SECTION 5. FUNDING

The Supplemental
Plan shall be unfunded, and Supplemental Benefits shall be paid only from the
general assets of the Company.

 4
 

SECTION 6. ADMINISTRATION

The Supplemental
Plan shall be administered by the Company. The Company shall make such rules,
interpretations and computations as it may deem appropriate; and any decision
with respect to the Supplemental Plan, including (without limitation) any
determination of eligibility to participate in the Supplemental Plan and any
calculation of Supplemental Benefits shall be within the discretion of the
Company.  To the extent not preempted by ERISA,
the Supplemental Plan shall be construed according to the laws of the State of
Washington.

SECTION 7.  CLAIMS PROCEDURE

(a)  Benefits Claim.  Claims for benefits and inquiries concerning
the Supplemental Plan (or concerning present or future rights to benefits under
the Supplemental Plan) shall be submitted to the Company in writing.  A claim for benefits shall be submitted on
the prescribed form and shall be signed by the Participant (or, the
beneficiary, if applicable).

(b)  Benefit Claim Denial.  In the event that a claim for benefits is
denied in whole or in part, the Company shall notify the claimant in writing of
the denial and of the right to a review of the denial.  The written notice shall set forth, in a
manner calculated to be understood by the applicant, specific reasons for the
denial, specific references to the provisions of the Supplemental Plan on which
the denial is based, a description of any information or material necessary for
the claimant to perfect the claim, an explanation of why the material is
necessary, and an explanation of the review procedure under the Supplemental
Plan.  The written notice shall be given
to the claimant within a reasonable period of time (not more than 90 days)
after the Company received the claim, unless special circumstances require
further time for processing and the claimant is advised of the extension.  In no event shall the notice be given more
than 180 days after the Company received the claim.

(c)  Review.  A claimant whose claim for benefits was
denied in whole or in part, or the claimant’s duly authorized representative,
may appeal the denial by submitting to the Company a request for a review of
the claim within 90 days after receiving written notice of the denial from the
Company.  The Company shall give the
claimant or his or her representative an opportunity to review pertinent
materials, other than legally-privileged documents, in preparing the request
for a review.  The request for a review
shall be in writing and addressed to the Company.  The request for a review shall set forth all
of the grounds on which it is based, all facts in support of the request, and
any other matters that the claimant (or representative) deems pertinent.  The Company may require the claimant to
submit such additional facts, documents or other material as it may deem
necessary or appropriate in making its review.

(d)  Review Decision.  The Company shall act on each request for an
appeal within 60 days after receipt, unless special circumstances require
further time for processing and the applicant is advised of the extension.  In no event shall the decision on review be
rendered more than 120 days after the Company received the request for a
review.  The Company shall give prompt
written notice of its decision to the claimant. 
In the event that the Company confirms the denial of the claim for
benefits in whole or in part, the notice shall set forth, in a manner

 5
 

calculated to be
understood by the claimant, the specific reasons for the decision and specific
references to the provisions of the Supplemental Plan on which the decision is
based.

(e)  Rules and Interpretations.  The Company shall adopt such rules,
procedures and interpretations of the Supplemental Plan as it deems necessary
or appropriate in carrying out its responsibilities under this Section 7.

(f)  Exhaustion of Remedies.  No legal action for benefits under the Supplemental
Plan shall be brought unless and until the claimant (i) has submitted a written
claim for benefits in accordance with this Section 7, (ii) has been notified by
the Company that the claim is denied, (iii) has filed a written request for a
review of the claim in accordance with this Section 7, and (iv) has been
notified in writing that the Company has affirmed the denial of the claim;
provided, however, that legal action may be brought after the Company has
failed to take any action on the claim within the time prescribed by this
Section 7.

SECTION 8. AMENDMENT AND
TERMINATION

The Company
expects to continue the Supplemental Plan indefinitely.  Future conditions, however, cannot be
foreseen, and the Company shall have the authority to amend or to terminate the
Supplemental Plan at any time; provided, however, that any such termination
shall be subject to the requirements of Section 409A of the Code and the
Treasury regulations promulgated thereunder. 
In the event of an amendment or termination of the Supplemental Plan, a
Participant’s Supplemental Benefit shall not be less than the Supplemental
Benefits to which the Participant would be entitled if the Participant’s
employment had terminated immediately prior to such amendment or termination of
the Supplemental Plan.

SECTION 9. CHANGE OF CONTROL

(a)           Vesting.  Notwithstanding any other provision of the
Supplemental Plan to the contrary, in the event of a Change of Control, each
Participant shall immediately be fully vested in the benefits under the Supplemental
Plan which have accrued through the date of the Change of Control.

(b)           Change of Control.  For purposes of the Supplemental Plan, “Change
of Control” shall mean “Change in Control” as such term is defined in Section
16.4 of the PACCAR Inc Long Term Incentive Plan, as approved by the
stockholders of the Company on April 25, 2006.

(c)           Termination.  Notwithstanding any provision to the
contrary, the Company may terminate the Supplemental Plan in its entirety
within the 30 days preceding or the 12 months following a “change in control
event” (as such term is defined in the Treasury regulations promulgated
pursuant to Section 409A of the Code); provided, that all substantially similar
arrangements also are terminated and that the Participants (or beneficiary, if
applicable) receive the benefit under the Supplemental Plan (if any) within 12
months of the date the Supplemental Plan is terminated.  The Company shall determine, in its sole
discretion, whether to terminate the Supplemental Plan pursuant to this Section
9 and to pay all Supplemental Benefits (or the

 6
 

remaining amount of Supplemental Benefits that are in
pay status) in single cash lump sums.  For
purposes of calculating the present value of the Supplemental Benefit to be
paid upon such a termination of the Supplemental Plan, the date the Plan is
terminated shall be the Supplemental Benefit Commencement Date for all
Participants whose Supplemental Benefit is not then in pay status, the interest
rate shall be 0% and the assumed mortality table shall be the “Applicable
Mortality Table” described in the definition of “Actuarial Equivalent” in the
Retirement Plan.

SECTION 10. EMPLOYMENT RIGHTS

Nothing in the
Supplemental Plan shall be deemed to give any person any right to remain in the
employ of the Company or affect any right of the Company to terminate a person’s
employment with or without cause.

SECTION 11. FORFEITURE OF SUPPLEMENTAL
BENEFITS

(a)                                  Forfeiture.  Benefits payable under the Supplemental Plan
to a Participant will be forfeited if service with the Company is terminated
for Cause.  Benefits shall also be
forfeited if, after Termination of Employment for reasons other Cause, a
Participant fails or refuses to provide advice and counsel to the Company when
reasonably requested to do so.  The good
faith determination of the Board of the existence of facts justifying
forfeiture is considered conclusive under the Supplemental Plan.

(b)                                 Cause.  For purposes of the Supplemental Plan, “Cause”
is defined to include any of the following conduct:

(1)                                  an
act of embezzlement, fraud or theft;

(2)                                  deliberate
disregard of the rules of the Company or a subsidiary,

(3)                                  unauthorized
disclosure of any of the secrets or confidential information of the Company or
a subsidiary;

(4)                                  any
conduct which constitutes unfair competition with the Company or a subsidiary;

(5)                                  inducing
any customers of the Company to breach any contracts with the Company or a
subsidiary.

SECTION 12. NO ALIENATION

Benefits payable
under the Supplemental Plan shall not be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, charge,
garnishment, execution or levy of any kind, either voluntary or involuntary,
prior to actually being received by the person entitled to the benefit under
the terms of the Supplemental Plan; and any attempt to anticipate, alienate,
sell, transfer, assign, pledge, encumber, charge or otherwise dispose of any
right to a benefit payable hereunder shall be void with the exception of
payroll taxes paid on the

 7
 

participant’s behalf. The
prohibition on assignment or alienation shall apply to any judgment, decree or
order (including approval of a property settlement) which relates to the
provisions of child support, alimony or property rights to a present or former
spouse, child or other dependent of a Participant pursuant to a state domestic
relations or community property law.  The
Company shall not in any manner be liable for, or subject to, the debts,
contracts, liabilities, engagements or torts of any person entitled to a benefit
hereunder.

SECTION 13. EXECUTION

PACCAR Inc, by its
Chairman of the Board and Chief Executive Officer, has executed this Supplemental
Plan document on December 7, 2006.

	
   

  	
  PACCAR Inc

  
	
   

  	
   

  
	
   

  	
  /s/ Mark C.
  Pigott

  
	
   

  	
  Mark C. Pigott

  

 

 8

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