Exhibit 10.1

 

SECOND MODIFICATION AGREEMENT TO BORROWING BASE REVOLVING

LINE OF CREDIT AGREEMENT

 

DATE:    As of July 14, 2005      PARTIES:                Borrower:    WILLIAM
LYON HOMES, INC., a California corporation      Guarantor:    WILLIAM LYON
HOMES, a Delaware corporation      Bank:    JPMORGAN CHASE BANK, N.A. (successor
by merger to Bank One, NA (Main Office Chicago, Illinois)), a national banking
association

 

JPMORGAN CHASE BANK, N.A. (successor by merger to Bank One, NA (Main Office
Chicago, Illinois)), a national banking association (“Bank”), and WILLIAM LYON
HOMES, INC., a California corporation (“Borrower”), hereby enter into this
Second Modification Agreement (the “Modification”) to the Borrowing Base
Revolving Line of Credit Agreement dated as of June 28, 2004, as modified by a
Modification Agreement, dated as of December 7, 2004 (the “Loan Agreement”),
with the consent of guarantor WILLIAM LYON HOMES, a Delaware corporation
(“Guarantor”).

 

RECITALS

 

A. Bank has extended to Borrower credit (“Loan”) up to the original maximum
principal amount of Seventy Million Dollars ($70,000,000) pursuant to the Loan
Agreement, as further evidenced by that certain Promissory Note dated as of June
28, 2004 (the “Original Note”) executed by Borrower and payable to the order of
Bank.

 

B. The Loan is secured by, among other things, (i) the duly recorded
Construction Deed of Trust and Fixture Filing (With Assignment of Rents and
Security Agreement) executed by Borrower as Trustor for the benefit of Bank,
dated as of July 7, 2004, and recorded on July 9, 2004 in the Official Records
of Orange County, California as Instrument No. 2004000623341, (ii) the duly
recorded Construction Deed of Trust and Fixture Filing (With Assignment of Rents
and Security Agreement) executed by Borrower as Trustor for the benefit of Bank,
dated as of August 18, 2004, and recorded on September 28, 2004 in the Official
Records of Orange County, California as Instrument No. 2004000868716, (iii) the
duly recorded Construction Deed of Trust and Fixture Filing (With Assignment of
Rents and Security Agreement) executed by Borrower as Trustor for the benefit of
Bank, dated as of January 18, 2005, and recorded on January 20, 2005 in the
Official Records of Orange County, California as Instrument

 

1

--------------------------------------------------------------------------------

No. 2005000049025, (iv) the duly recorded Deed of Trust, Assignment of Rents,
Security Agreement and Fixture Filing, executed by Borrower as Trustor for the
benefit of Bank, dated as of March 7, 2005, and recorded on March 15, 2005 in
the Official Records of Santa Clara County, California as Document No. 18273941,
and (v) the duly recorded Construction Deed of Trust and Fixture Filing (With
Assignment of Rents and Security Agreement) executed by Borrower as Trustor for
the benefit of Bank, dated as of March 24, 2005, and recorded on April 15, 2005
in the Official Records of Orange County, California as Instrument No.
2005000285427 (the foregoing Deeds of Trust, as amended to dated, shall be
hereinafter referred to, individually, as a “Deed of Trust” and, collectively,
as the “Deeds of Trust”). The Loan is further secured by the personal property
described in certain UCC-1 Financing Statements relating to the property
encumbered by the Deeds of Trust naming Borrower as Debtor and Bank as Secured
Party (as amended to date, the “UCC Financing Statements”). The Deeds of Trust,
the UCC Financing Statements, and such other agreements, documents and
instruments securing the Loan are referred to individually and collectively as
the “Security Documents”).

 

C. Repayment of the Loan and the completion of the improvements have been, and
continue to be, guaranteed by the Repayment Guaranty dated as of June 28, 2004
and executed by Guarantor in favor of Bank (the “Guaranty”). The Guaranty and
any other agreements, documents and instruments guarantying the Loan are
referred to individually and collectively as the “Guaranty Documents”.

 

D. The Loan Agreement, Note, the Security Documents, the Guaranty Documents, any
environmental certification and indemnity agreement, and all other agreements,
documents, and instruments evidencing, securing, or otherwise relating to the
Loan, as may be amended, modified, extended or restated from time to time, are
sometimes referred to individually and collectively as the “Loan Documents”.
Hereinafter, the Loan Documents shall mean such documents as modified in this
Modification.

 

E. The Borrower has requested that the Bank agree to extend the Revolving Credit
Termination Date from June 28, 2006 to June 28, 2007, and to extend the Maturity
Date from June 28, 2007, to June 28, 2008. Based on the representations of
Borrower, Bank is willing to so extend the Revolving Credit Termination Date and
the Maturity Date, subject to the terms and conditions herein.

 

F. Pursuant to Section 2.1(d) of the Loan Agreement, the Borrower has also
requested that the Bank increase the Commitment Amount from Seventy Million
Dollars ($70,000,000) to One Hundred Million Dollars ($100,000,000). The Bank
has agreed to increase the Commitment Amount on certain conditions, including
that all amounts disbursed under the Loan, as increased hereby, be secured by
the Deeds of Trust.

 

G. All capitalized terms used herein and not otherwise defined shall have the
meanings given to such terms in the Loan Agreement.

 

2

--------------------------------------------------------------------------------

AGREEMENT

 

For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Borrower and Bank agree as follows:

 

1. ACCURACY OF RECITALS.

 

Borrower acknowledges the accuracy of the Recitals.

 

2. MODIFICATION OF LOAN DOCUMENTS.

 

2.1 The Revolving Credit Termination Date is hereby extended from June 28, 2006
to June 28, 2007. In no event shall the Bank be required to make Advances of the
Loan to Borrower and to issue Facility LCs for the account of Borrower after the
Revolving Credit Termination Date, as extended hereby.

 

2.2 The Maturity Date is hereby extended from June 28, 2007 to June 28, 2008.
All principal, interest and Other Amounts shall be immediately due and payable
on the Maturity Date, as extended hereby.

 

2.3 The Commitment Amount is hereby increased from $70,000,000 to $100,000,000.
In no event shall the Bank be obligated to make any disbursement of the Loan
which would cause the outstanding principal balance of the Loan to exceed the
Commitment Amount, as increased hereby.

 

2.4 The Borrower’s obligation to repay the Loan, together with interest thereon,
shall be evidenced by that certain Amended and Restated Promissory Note of even
date herewith, executed by the Borrower and made payable to the Bank, in the
maximum principal amount of $100,000,000 (the “Amended and Restated Note”). All
references in the Loan Agreement, the Deeds of Trust and the other Loan
Documents to the term “Note” shall mean and be deemed to refer to the Amended
and Restated Note.

 

2.5 There is hereby added to the Loan Agreement a new Section 2.13, which shall
read in its entirety as follows:

 

2.13 Electronic Notices. Conversion/Continuation Notices and notices of
prepayments under Sections 2.3 and 2.4, may be made by electronic communication
(including email and internet or intranet websites) pursuant to procedures
approved by the Bank. Such approval may be limited to particular notices or
communications. Unless the Bank otherwise prescribes, (i) notices and other
communications sent to an e-mail address shall be deemed received upon the
sender’s receipt of an acknowledgement from the intended recipient (such as by
the “return receipt requested” function, as available, return e-mail or other
written acknowledgement), provided that if such notice or other communication is
not sent during the normal business hours of the recipient, such notice or
communication shall be deemed to have been sent at the opening of business on
the next business day for the recipient, and (ii) notices or communications
posted to an Internet or intranet website shall be deemed received upon the
“receipt” by

 

3

--------------------------------------------------------------------------------

the intended recipient at its e-mail address as described in the foregoing
clause (i) of notification that such notice or communication is available and
identifying the website address therefor. Any party hereto may change its
address or telecopier number or email address for notices and other
communications hereunder by notice to the other parties hereto.

 

2.6 The Deeds of Trust are modified to secure payment and performance of the
Loan as amended to date, in addition to all other “Obligations” of Borrower as
therein defined. The foregoing notwithstanding, certain obligations continue to
be excluded from the Obligations, as provided in the Deeds of Trust.

 

2.7 Each of the Loan Documents is modified to provide that it shall be a default
or an event of default thereunder if Borrower shall fail to comply with any of
the covenants of Borrower herein or if any representation or warranty by
Borrower herein or by any guarantor in any related Consent and Agreement of
Guarantor is materially incomplete, incorrect, or misleading as of the date
hereof.

 

2.8 Each reference in the Loan Documents to any of the Loan Documents shall be a
reference to such document as modified herein.

 

3. RATIFICATION OF LOAN DOCUMENTS AND COLLATERAL.

 

The Loan Documents are ratified and affirmed by Borrower and shall remain in
full force and effect as modified herein. Any property or rights to or interests
in property granted as security in the Loan Documents shall remain as security
for the Loan and the obligations of Borrower in the Loan Documents.

 

4. CONDITIONS PRECEDENT.

 

Before this Agreement becomes effective and any party becomes obligated under
it, all of the following conditions shall have been satisfied at Borrower’s sole
cost and expense in a manner acceptable to Bank in the exercise of Bank’s sole
judgment:

 

4.1 Bank shall have received such assurance as Bank may require that the
validity and priority of the Deeds of Trust have not been and will not be
impaired by this Agreement or the transactions contemplated by it, including the
issuance by the title company of CLTA Endorsement Nos. 108.8 and 110.5 to be
attached to Bank’s title policies insuring the liens of the Deeds of Trust.

 

4.2 Bank shall have received fully executed and, where appropriate, acknowledged
originals of this Modification, the attached consents signed by Guarantor, the
Amended and Restated Promissory Note, certain Amendments to Deed of Trust dated
of even date herewith (the “Amendments to Deed of Trust”) and any other
documents which Bank may require or request in accordance with this Agreement or
the other Loan Documents.

 

4

--------------------------------------------------------------------------------

4.3 The Amendments to Deed of Trust shall have been recorded in the Official
Records of the Counties in which the Deeds of Trust were originally recorded, in
addition to all other documents which Bank may require to be recorded.

 

4.4 Bank shall have received payment of the facility fee pursuant to Section
2.8(a) of the Loan Agreement hereof with respect to the increase in the
Commitment Amount in immediately available funds.

 

4.5 Bank shall have received reimbursement, in immediately available funds, of
all costs and expenses incurred by Bank in connection with this Agreement,
including charges for title insurance (including endorsements), recording,
filing and escrow charges, fees for appraisal, architectural and engineering
review, construction services and environmental services, mortgage taxes, and
legal fees and expenses of Bank’s counsel. Such costs and expenses may include
the allocated costs for services of Bank’s in-house staffs, such as legal,
appraisal, construction services and environmental services. Borrower
acknowledges that any extension and modification fees payable in connection with
this transaction do not include the amounts payable by Borrower under this
subsection.

 

5. ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION, OR WAIVER.

 

The Loan Documents as modified herein contain the entire understanding and
agreement of Borrower and Bank in respect of the Loan and supersede all prior
representations, warranties, agreements, arrangements, and understandings. No
provision of the Loan Documents as modified herein may be changed, discharged,
supplemented, terminated, or waived except in a writing signed by Bank and
Borrower.

 

6. BINDING EFFECT.

 

The Loan Documents as modified herein shall be binding upon, and inure to the
benefit of, Borrower and Bank and their respective successors and assigns.

 

7. CHOICE OF LAW.

 

This Agreement shall be governed by and construed in accordance with the laws of
the State of California, without giving effect to conflicts of law principles.

 

8. COUNTERPART EXECUTION.

 

This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original and all of which together shall constitute one and the
same document. Signature pages may be detached from the counterparts and
attached to a single copy of this Agreement to physically form one document.

 

[Signatures on following page]

 

5

--------------------------------------------------------------------------------

DATED as of the date first above stated.

 

BORROWER:

      WILLIAM LYON HOMES, INC.,
a California corporation             By:   

/s/ Richard S. Robinson

           

Name: 

 

Richard S. Robinson

           

Title: 

 

Senior Vice President

            By:   

/s/ Michael D. Grubbs

           

Name: 

 

Michael D. Grubbs

           

Title: 

 

Senior Vice President

BANK:

      JPMORGAN CHASE BANK, N.A.
(successor by merger to Bank One, NA (Main Office Chicago, Illinois)), a
national banking association             By:   

/s/ Kimberlee E. Edwards

           

Name: 

 

Kimberlee E. Edwards

           

Title: 

 

First Vice President

 

6

--------------------------------------------------------------------------------

CONSENT AND AGREEMENT OF GUARANTOR

 

With respect to that certain Second Modification Agreement to the Borrowing Base
Revolving Line of Credit Agreement (hereinafter, the “Modification”) between
WILLIAM LYON HOMES, INC., a California corporation (“Borrower”), and JPMORGAN
CHASE BANK, N.A. (successor by merger to Bank One, NA (Main Office Chicago,
Illinois)), a national banking association (“Bank”), to which this Consent is
attached, the undersigned (“Guarantor”), hereby (i) ratifies and reaffirms all
of its obligations to Bank under the Guaranty, (ii) consents to the execution
and delivery by Borrower of the attached Modification, and (iii) confirms that
the Guaranty remains in full force and effect notwithstanding Borrower’s
execution of the attached Modification. The undersigned agrees that the
execution of this Consent and Reaffirmation of Guarantor (the “Consent”) is not
necessary for the continued validity and enforceability of the Guaranty, but it
is executed to induce Bank to enter into the Modification Agreement.

 

This Consent may be executed in one or more counterparts, each of which shall be
deemed an original and all of which together shall constitute one and the same
document. Signature pages may be detached from the counterparts and attached to
a single copy of this Consent to physically form one document. Facsimile
transmission of the signed original of this Consent or the retransmission of any
signed facsimile transmission will be deemed the same as delivery of an
original.

 

IN WITNESS WHEREOF, Guarantor has executed this Agreement as of the date set
forth on the attached Second Modification Agreement.

 

“Guarantor”       WILLIAM LYON HOMES,
a Delaware corporation             By:  

/s/ Richard S. Robinson

           

Name: 

 

Richard S. Robinson

           

Title:

 

Senior Vice President

            By:  

/s/ Michael D. Grubbs

           

Name: 

 

Michael D. Grubbs

           

Title:

 

Senior Vice President

 

7