Exhibit 10.1

 

 

 

CREDIT AGREEMENT

Dated as of March 23, 2015

by and among

SHEA HOMES LIMITED PARTNERSHIP,

as Borrower,

The Several Lenders from Time to Time Parties Hereto,

and

U.S. BANK NATIONAL ASSOCIATION,

as Administrative Agent,

with

U.S. BANK NATIONAL ASSOCIATION,

as Lead Arranger and Bookrunner

 

 

 

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TABLE OF CONTENTS

 

         Page  

ARTICLE I

 

DEFINITIONS

     1   

ARTICLE II

 

THE CREDITS

     28   

2.1

  Commitment      28   

2.2

  Required Payments      28   

2.3

  Ratable Loans; Types of Advances      28   

2.4

  This Agreement Supersedes the Prior Credit Agreement      29   

2.5

  Undrawn Fee      29   

2.6

  Minimum Amount of Each Advance      29   

2.7

  Reductions in Aggregate Commitment; Optional Principal Payments      29   

2.8

  Method of Selecting Types and Interest Periods for New Advances      30   

2.9

  Conversion and Continuation of Outstanding Advances; Maximum Number of
Interest Periods      30   

2.10

  Interest Rates      31   

2.11

  Rates Applicable After Event of Default      31   

2.12

  Method of Payment      31   

2.13

  Noteless Agreement; Evidence of Indebtedness      32   

2.14

  Telephonic Notices      32   

2.15

  Interest Payment Dates; Interest and Fee Basis      33   

2.16

  Notification of Advances, Interest Rates, Prepayments and Commitment
Reductions      33   

2.17

  Lending Installations      33   

2.18

  Non-Receipt of Funds by the Administrative Agent      33   

2.19

  Facility LCs      34   

2.20

  Replacement of Lender      38   

2.21

  Limitation of Interest      39   

2.22

  Defaulting Lenders      40   

2.23

  Increase Option      43   

2.24

  [Reserved]      44   

2.25

  Term Out Provision.      44   

2.26

  Swingline Commitment.      45   

2.27

  Procedure for Swingline Borrowing; Refunding of Swingline Loans.      46   

ARTICLE III

 

YIELD PROTECTION; TAXES

     47   

3.1

  Yield Protection      47   

3.2

  Changes in Capital Adequacy Regulations      48   

3.3

  Availability of Types of Advances; Adequacy of Interest Rate      48   

3.4

  Funding Indemnification      49   

3.5

  Taxes      49   

3.6

  Selection of Lending Installation; Mitigation Obligations; Lender Statements;
Survival of Indemnity      53   

 

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ARTICLE IV

CONDITIONS PRECEDENT

  53   

4.1

Initial Credit Extension   53   

4.2

Each Credit Extension   55   

ARTICLE V

REPRESENTATIONS AND WARRANTIES

  56   

5.1

Existence and Standing   56   

5.2

Authorization and Validity   56   

5.3

No Conflict; Government Consent   56   

5.4

Financial Statements and Information   57   

5.5

Material Adverse Change   57   

5.6

Taxes   57   

5.7

Litigation and Contingent Obligations   57   

5.8

Entities Owned   57   

5.9

ERISA   58   

5.10

Accuracy of Information   58   

5.11

Regulation U   58   

5.12

Material Agreements   58   

5.13

Compliance With Laws   58   

5.14

Title to Properties   59   

5.15

Plan Assets; Prohibited Transactions   59   

5.16

Environmental Matters   59   

5.17

Investment Company Act   59   

5.18

Insurance   59   

5.19

Subordinated Debt   59   

5.20

Solvency   59   

5.21

No Default   60   

5.22

Foreign Asset Control Regulations   60   

ARTICLE VI

COVENANTS

  60   

6.1

Financial Reporting   61   

6.2

Notice of Material Events   62   

6.3

Preservation of Existence and Similar Matters   63   

6.4

Compliance with Applicable Law   63   

6.5

Maintenance of Property; Completion of Construction   63   

6.6

Insurance   63   

6.7

Payment of Taxes and Claims   63   

6.8

Books and Records; Inspections   64   

6.9

Use of Proceeds   64   

6.10

Environmental Matters   64   

6.11

Further Assurances   64   

6.12

[Reserved]   64   

6.13

ERISA Compliance   64   

6.14

Business Operations; Unrelated Business   65   

6.15

[Reserved].   65   

6.16

[Reserved].   65   

6.17

Liens   65   

6.18

Prepayment of Indebtedness   68   

 

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6.19

Limitation on Fundamental Changes   68   

6.20

Transactions with Affiliates   69   

6.21

Investments   70   

6.22

Dividends and Subordinated Debt   72   

6.23

Financial Covenants   73   

6.24

Guarantors   74   

6.25

[Reserved.]   74   

6.26

Foreign Assets Control Regulations   74   

ARTICLE VII

DEFAULTS

  74   

ARTICLE VIII

ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES

  77   

8.1

Acceleration; Remedies   77   

8.2

Application of Funds   78   

8.3

Amendments   79   

8.4

Preservation of Rights   80   

ARTICLE IX

GENERAL PROVISIONS   80   

9.1

Survival of Representations   80   

9.2

Governmental Regulation   80   

9.3

Headings   80   

9.4

Entire Agreement   80   

9.5

Several Obligations; Benefits of this Agreement   81   

9.6

Expenses; Indemnification.   81   

9.7

[Reserved].   82   

9.8

Accounting   82   

9.9

Severability of Provisions   83   

9.10

Nonliability of Lenders   83   

9.11

Confidentiality   83   

9.12

Nonreliance   84   

9.13

Disclosure   84   

9.14

USA PATRIOT ACT NOTIFICATION   84   

9.15

Document Interpretation.   84   

ARTICLE X

THE ADMINISTRATIVE AGENT

  85   

10.1

Appointment; Nature of Relationship   85   

10.2

Powers   85   

10.3

General Immunity   85   

10.4

No Responsibility for Loans, Recitals, etc.   86   

10.5

Action on Instructions of Lenders   86   

10.6

Employment of Administrative Agents and Counsel   86   

10.7

Reliance on Documents; Counsel   86   

10.8

Administrative Agent’s Reimbursement and Indemnification   87   

10.9

Notice of Event of Default   87   

10.10

Rights as a Lender   87   

10.11

Lender Credit Decision, Legal Representation   88   

10.12

Successor Administrative Agent   88   

 

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10.13

Administrative Agent and Arranger Fees   89   

10.14

Delegation to Affiliates   89   

10.15

No Advisory or Fiduciary Responsibility   89   

ARTICLE XI

SETOFF; RATABLE PAYMENTS

  90   

11.1

Setoff   90   

11.2

Ratable Payments   90   

ARTICLE XII

BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS

  90   

12.1

Successors and Assigns   90   

12.2

Participations   91   

12.3

Assignments   92   

ARTICLE XIII

NOTICES

  94   

13.1

Notices; Effectiveness; Electronic Communication   94   

ARTICLE XIV

COUNTERPARTS; INTEGRATION; EFFECTIVENESS;

ELECTRONIC EXECUTION

  96   

14.1

Counterparts; Effectiveness   96   

14.2

Electronic Execution of Assignments   96   

ARTICLE XV

CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF

JURY TRIAL

  96   

15.1

CHOICE OF LAW   96   

15.2

CONSENT TO JURISDICTION; OTHER MATTERS; WAIVERS   96   

ARTICLE XVI

NON-RECOURSE

  98   

16.1

Notwithstanding any other term of provision of this Agreement, any other Loan
Document or applicable law:   98   

 

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SCHEDULES

 

Schedule 1 Authorized Officer(s) Schedule 1(a) Commitments Schedule 1(b)
Guarantors Schedule 5.8 Subsidiaries; Existing Investments Schedule 6.17
Existing Liens Schedule 6.20 Transactions with Affiliates

EXHIBITS

 

Exhibit A Borrowing Base Certificate Exhibit B Guaranty Exhibit C Form of
Borrowing Notice Exhibit D Note Exhibit E Form of Increasing Lender Supplement
Exhibit F Form of Augmenting Lender Supplement Exhibit G [Reserved] Exhibit H
List of Closing Documents Exhibit I Compliance Certificate Exhibit J Assignment
and Assumption Agreement

 

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CREDIT AGREEMENT

CREDIT AGREEMENT (this “Agreement”), dated as of March 23, 2015, among SHEA
HOMES LIMITED PARTNERSHIP, a California limited partnership (the “Borrower”),
the several banks and other financial institutions or entities from time to time
parties to this Agreement (the “Lenders”), and U.S. BANK NATIONAL ASSOCIATION,
as administrative agent. This Agreement and the Loan Documents described herein
replace and supersede in their entirety the Prior Credit Agreement (as defined
below) and all “Loan Documents” described therein, as is more fully set forth in
this Agreement.

ARTICLE I

DEFINITIONS

As used in this Agreement:

“Adjusted Leverage Ratio” means the ratio, as of any date, of (a) Consolidated
Debt minus Unrestricted Cash in excess of $5,000,000 divided by (b) Consolidated
Tangible Net Worth on such date.

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

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

“Affected Lender” is defined in Section 2.20.

“Affiliate” of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person, including,
without limitation, such Person’s Subsidiaries.

“Affiliate Obligations” means obligations of Shea Properties, LLC, Shea
Properties II, LLC or any of their respective Subsidiaries (or joint ventures in
which they own an interest) or other Shea-family-owned entities (or joint
ventures in which they own an interest, excluding, however, any of the foregoing
that is a Guarantor), including development loans; provided, however, that
capital calls required to be made by the Borrower or its Subsidiaries to or for
the benefit of a joint venture pro rata on the basis of the Borrower’s or a
Subsidiary’s ownership in such joint venture, which capital calls are not being
made to enable such joint venture to pay amounts owed under any Indebtedness,
shall not be Affiliate Obligations but will be treated as Restricted Payments.

 

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“Aggregate Commitment” means the aggregate of the Commitments of all the
Lenders, as reduced or increased from time to time pursuant to the terms hereof.
As of the date of this Agreement, the Aggregate Commitment is $175,000,000.

“Aggregate Outstanding Credit Exposure” means, at any time, the aggregate of the
Outstanding Credit Exposure of all the Lenders.

“Agreement” means this Credit Agreement, as it may be amended, restated,
supplemented or otherwise modified and in effect from time to time.

“Anti-Corruption Laws” means all laws, rules and regulations of any jurisdiction
applicable to the Borrower or any of its Subsidiaries from time to time
concerning or relating to bribery or corruption.

“Applicable L/C Fee Rate” means the Applicable Margin for Eurocurrency Loans.

“Applicable Law” means all applicable provisions of constitutions, statutes,
rules, regulations, orders and decrees of all Governmental Authorities.

“Applicable Margin” means, with respect to Eurocurrency Loans and Daily
Eurocurrency Loans, the percentage rate per annum which is applicable at such
time with respect to each such Type of Advance, as set forth in the Pricing
Schedule.

“Applicable Undrawn Fee Rate” means, at any time, the percentage rate per annum
at which Undrawn Fees are accruing on the Available Aggregate Commitment at such
time as set forth in the Pricing Schedule.

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

“Arrangers” means, collectively, U.S. Bank and any respective successors, in
their capacities as Lead Arrangers and Joint Book Runners.

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

“Augmenting Lender” is defined in Section 2.23.

“Authorized Officer” means, collectively, each of the authorized officers listed
on Schedule 1 or such additional authorized officers or agents as Borrower shall
designate in writing to Administrative Agent from time to time.

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

“Book Value” means, with respect to any Property at any time, the book value of
such Property as determined in accordance with GAAP at such time.

 

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“Borrower” means Shea Homes Limited Partnership, a California limited
partnership, and its successors and assigns.

“Borrowing Base” means, as of any date, an amount calculated as follows:

(a) 100% of Unrestricted Cash to the extent it exceeds $5,000,000; plus

(b) 100% of the amount of Escrow Proceeds Receivable, plus

(c) subject to the limitations set forth below, 90% of the Book Value of Units
Under Contract; plus

(d) subject to the limitations set forth below, 85% of the Book Value of Units
Under Construction; plus

(e) subject to the limitations set forth below, 80% of the Book Value of
Speculative Units (other than Model Units); plus

(f) subject to the limitations set forth below, 85% of the Book Value of Model
Units; plus

(g) subject to the limitations set forth below, 65% of the Book Value of
Finished Lots; plus

(h) subject to the limitations set forth below, 65% of the Book Value of Land
Under Development; plus

(i) subject to the limitation set forth below, 50% of the Book Value of Entitled
Land that is not included in the Borrowing Base under clauses (a)-(f) above.

Notwithstanding the foregoing:

(i) the Borrowing Base shall not include any amounts under clauses (g), (h) and
(i) to the extent the aggregate of such amounts exceed 55% of the Borrowing
Base.

(ii) the Borrowing Base shall not include any amounts under clause (i) to the
extent that such amount exceeds 20% of the Borrowing Base.

(iii) the advance rate for Speculative Units shall decrease to zero percent (0%)
for any Unit that has been a Speculative Unit for more than eighteen
(18) months.

(iv) the advance rate for Model Units shall decrease to zero percent (0%) for
any Unit that has been a Model Unit for more than eighteen (18) months following
the sale of the last production Unit in the applicable project relating to such
Model Unit.

Notwithstanding anything in the definition of Borrowing Base which may be
construed to the contrary, in no event may any Unit or Lot or other Property
described above be counted more than once (notwithstanding that it may satisfy
the criteria of more than one category) in the calculation of the Borrowing Base
hereunder. Any land or other Property that does not fit within

 

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one of the categories specified above in this definition, shall have a zero
percent (0%) advance rate. In no event may any Lot, Unit, Project or other
Property be included in the Borrowing Base unless it is (x) one hundred percent
(100%) owned by Borrower or a Wholly-Owned Subsidiary of Borrower (except only
as specified immediately below) that is a Guarantor, and (y) is not subject to
any deeds of trust, mortgages, judgment liens or other Liens (other than
Permitted Liens). Other than with respect to Properties owned by the Initial
Non-Wholly-Owned Guarantors, no Property that is owned by a Non-Wholly-Owned
Subsidiary may be included in the Borrowing Base, unless Agent and Lenders so
approve in their sole and absolute discretion and such Non-Wholly-Owned
Subsidiary is managed and controlled by Borrower. The amount of the Borrowing
Base with respect to any Property owned by a Non-Wholly-Owned Subsidiary shall
be adjusted by multiplying (a) the Loan Party Ownership Percentage of such
Non-Wholly-Owned Subsidiary, by (b) the amount of the Borrowing Base for such
Property calculated as set forth above in the definition of Borrowing Base.

“Borrowing Base Availability” means, as of any date, (a) the Borrowing Base
calculated in the most recently delivered Borrowing Base Certificate minus
(b) the Borrowing Base Debt on such date.

“Borrowing Base Certificate” means a certificate signed by an Authorized Officer
of Borrower, substantially in the form of Exhibit A.

“Borrowing Base Debt” means, as of any date, Consolidated Debt minus
(a) Subordinated Debt (to the extent included in Consolidated Debt, and that is
not then in default) due later than one year following such date, minus
(b) Non-Recourse Indebtedness of the Loan Parties and their respective
Subsidiaries (other than Excluded Subsidiaries).

“Borrowing Date” means a date on which an Advance is made or a Facility LC is
issued hereunder.

“Borrowing Notice” is defined in Section 2.8.

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

“Capital Stock” means any and all shares, interests, rights to purchase,
warrants, options, participations or other equivalents of or interests in
(however designated) equity of a Person, including any preferred stock, but
excluding any debt securities convertible into such equity.

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

 

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

“Cash Collateralize” means to deposit in the Facility LC Collateral Account or
to pledge and deposit with or deliver to the Administrative Agent, for the
benefit of one or more of the LC Issuer or Lenders, as collateral for LC
Obligations or obligations of Lenders to fund participations in respect of LC
Obligations, cash or deposit account balances or, if the Administrative Agent
and the LC Issuer shall agree in their sole discretion, other credit support, in
each case pursuant to documentation in form and substance reasonably
satisfactory to the Administrative Agent and the LC Issuer, in an amount equal
to 103% of the outstanding LC Obligations. “Cash Collateral” shall have a
meaning correlative to the foregoing and shall include the proceeds of such cash
collateral and other credit support.

“Cash Equivalent Investments” means (i) obligations of, or fully guaranteed or
insured by, the United States of America or any agency or instrumentality
thereof having maturities of one year or less from the date of acquisition,
(ii) commercial paper rated A-1 or better by S&P or P-1 or better by Moody’s,
(iii) demand deposit accounts maintained in the ordinary course of business, and
(iv) certificates of deposit issued by and time deposits with bankers’
acceptances with maturities not exceeding one year and overnight bank deposits
with, commercial banks (whether domestic or foreign) having capital and surplus
in excess of 500,000,000, (v) repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clauses
(i) and (iv) of this definition entered into with any financial institution
meeting the qualifications specified in clause (iv) of this definition, and
(vi) shares of money market mutual funds substantially all of the assets of
which consist of securities described in the foregoing clauses (i) through
(v) of this definition.

“Cash Management Services” means any banking services that are provided to any
Loan Party or any Subsidiary of a Loan Party by the Administrative Agent or any
of its Affiliates (other than pursuant to this Agreement), the LC Issuer or any
other Lender, including without limitation: (a) credit cards, (b) credit card
processing services, (c) debit cards, (d) purchase cards, (e) stored value
cards, (f) automated clearing house or wire transfer services, or (g) treasury
management, including controlled disbursement, consolidated account, lockbox,
overdraft, return items, sweep and interstate depository network services.

“CCM Proceeding” shall have the meaning assigned to such term in the Tax
Distribution Agreement.

“Change in Law” is defined in Section 3.1.

“Change of Control” means (i) the acquisition by any Person, or two or more
Persons acting in concert (other than the Permitted Holders), of beneficial
ownership (within the meaning of Rule 13d-3 of the U.S. Securities and Exchange
Commission under the Securities Exchange Act of 1934) of 50% or more of the
outstanding shares of voting stock of the Borrower; (ii) the merger or
consolidation of the Borrower with or into another Person or the merger of
another Person with or into Borrower, or the sale of all or substantially all
the assets of Borrower to another Person, other than any such sale to one or
more Loan Parties, and in the case of any such

 

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merger or consolidation, the equity securities of Borrower that are outstanding
immediately prior to such transaction and which represent 100% of the aggregate
voting power of the voting stock of Borrower are changed into or exchanged for
cash, securities or property, unless pursuant to such transaction such
securities are changed into or exchanged for, in addition to any other
consideration, securities of the surviving corporation, or a parent corporation
that owns all of the capital stock of such surviving corporation, that represent
immediately after such transaction, at least a majority of the aggregate voting
power of the voting stock of the surviving corporation or such parent
corporation, as the case may be, or (iii) a “change of control” as defined under
any of Borrower’s public note indebtedness or other notes issued by Borrower
under an indenture or comparable documents which debt is permitted under this
Agreement.

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

“Commitment” means, for each Lender, the obligation of such Lender to make Loans
(and participate in Swingline Loans) to, and participate in Facility LCs issued
upon the application of, the Borrower in an aggregate amount not exceeding the
amount set forth in Schedule 1(a), as it may be modified as a result of any
assignment that has become effective pursuant to Section 12.3(b) or as otherwise
modified from time to time pursuant to the terms hereof.

“Commitment Period” has the meaning set forth in Section 2.1.

“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et
seq.), as amended from time to time, and any successor statute.

“Completed Unit” means a Unit as to which all necessary Governmental Approvals
have been obtained, including a certificate of occupancy.

“Consolidated Debt” at any date, without duplication (a) all funded debt of the
Loan Parties and their respective Subsidiaries determined on a consolidated
basis; plus (b) all funded debt with recourse to any limited or general
partnership in which any Loan Party or any of their respective Subsidiaries is a
general partner; plus (c) the sum of (i) all reimbursement obligations with
respect to amounts drawn and not reimbursed under Financial Letters of Credit
and amounts drawn and not reimbursed under Performance Letters of Credit
(excluding any portion of the actual or potential obligations that are secured
by cash collateral) and (ii) the maximum amount available to be drawn under all
undrawn Financial Letters of Credit, in each case issued for the account of, or
guaranteed by, any Loan Party or any of their respective Subsidiaries (excluding
any portion of the actual or potential obligations that are secured by cash
collateral); plus (d) all Contingent Obligations of any Loan Party or any of
their respective Subsidiaries with respect to funded debt of third parties;
provided, however, except as provided above in this definition with respect to
Financial Letters of Credit, that in the case of any Contingent Obligation, only
amounts due and payable at the time of determination will be included in the
calculation of Consolidated Debt; plus (e) Contingent Obligations that are due
and payable at the time of determination; provided, however, “Consolidated Debt”
excludes (i) obligations of Excluded Subsidiaries unless such obligations are
guaranteed by any Loan Party pursuant to a Contingent

 

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Obligation that has been called, and (ii) obligations of one Loan Party owing to
another Loan Party.

“Consolidated EBITDA” means, for any period, (a) Consolidated Net Income
(excluding net income from Excluded Subsidiaries), plus (b) cash distributions
of income received from Joint Ventures, plus (c) to the extent deducted from
revenues in determining Consolidated Net Income (excluding net income from
Excluded Subsidiaries), without duplication, (i) Consolidated Interest Expense,
(ii) expense for income taxes paid or accrued, (iii) depreciation,
(iv) amortization, (v) non-cash (including impairment) charges,
(vi) extraordinary losses, (vii) loss (gain) on early extinguishment of
indebtedness, (viii) transaction costs and restructuring charges required to be
expensed under FASB ASC 805, (ix) the amount of any net losses from discontinued
operations, including net losses from the sale or disposition of discontinued
operations, (x) any fees, expenses or charges related to any issuance of Capital
Stock, Investment, acquisition, disposition, recapitalization or the incurrence
or repayment of Indebtedness permitted to be incurred hereunder including a
refinancing thereof (whether or not successful) and any amendment or
modification to the terms of any such transactions, including such fees,
expenses or charges related to the Transaction, in each case, deducted in
computing Consolidated Net Income and (xi) unusual or non-recurring costs and
expenses in an amount not to exceed 10% of Consolidated EBITDA in any four
fiscal quarter period, and plus (d) (to the extent not duplicative of any of the
foregoing) cash distributions received from Excluded Subsidiaries minus (e) to
the extent added to revenues in determining Consolidated Net Income, non-cash
gains and extraordinary gains, and minus (f) income (loss) from consolidated
Joint Ventures and income (loss) from consolidated Financial Services
Subsidiaries (except to the extent of cash distributions received from such
Joint Ventures or Financial Services Subsidiaries).

“Consolidated Interest Expense” means, for any period, the consolidated interest
expense and previously capitalized interest and other interest related charges
amortized to cost of sales or other accounts of the Loan Parties and their
Subsidiaries for such period, determined on a consolidated basis in accordance
with GAAP.

“Consolidated Interest Incurred” means, for any period, the aggregate amount
(without duplication and determined in each case in accordance with GAAP) of
interest (excluding interest owing by a Loan Party to another Loan Party)
whether such interest was expensed or capitalized, paid, accrued, or scheduled
to be paid or accrued by any of the Loan Parties and their respective
Subsidiaries, excluding interest obligations of Excluded Subsidiaries unless
such obligation is guaranteed pursuant to a Contingent Obligation that has been
called and is due during such period, including (a) the interest portion of all
deferred payment obligations, and (b) all commissions, discounts, and other fees
and charges (excluding premiums) owed with respect to bankers’ acceptances and
letter of credit financings (including, without limitation, letter of credit
fees) and interest swap and Rate Management Obligations, in each case to the
extent attributable to such period.

“Consolidated Net Income” means, with reference to any period, the net income
(or loss) of the Borrower and its Subsidiaries calculated on a consolidated
basis for such period in accordance with GAAP.

 

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“Consolidated Tangible Net Worth” means, for purposes of calculating the
covenants in Section 6.23, at any time the consolidated stockholders’ equity of
the Borrower and its Subsidiaries calculated on a consolidated basis as of such
time, all as defined according to GAAP less intangible assets, plus up to
$70,000,000 of the funds paid as required by the CCM Proceeding determined in
accordance with GAAP at such time, and adjusted up to account for decreases in
stockholders’ equity that have not been included in the calculation of the
aggregate net income (or loss) solely to the extent such changes are due to
unusual transfers of assets between Borrower and its Affiliates permitted under
this Agreement, excluding contributions or distributions of equity.

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

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

“Credit Extension” means the making of an Advance or the issuance of a Facility
LC hereunder.

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

“Daily Eurocurrency Base Rate” means the greater of (a) zero percent (0%) or
(b) the applicable ICE Benchmark Administration (or successor thereto) rate for
Dollar LIBOR for one month appearing on the applicable Reuters Screen LIBOR01 as
of 11:00 a.m. (London time) on a Business Day, provided that, if the applicable
Reuters Screen LIBOR01 for Dollar LIBOR is not available to the Administrative
Agent for any reason, the applicable Daily Eurocurrency Base Rate for one month
shall instead be the applicable ICE Benchmark Administration (or successor
thereto) rate for deposits in Dollar LIBOR for one month as reported by any
other generally recognized financial information service selected by the
Administrative Agent as of 11:00 a.m. (London time) on a Business Day, provided
further that, if no such ICE Benchmark Administration (or successor thereto)
rate is available to the Administrative Agent, the applicable Daily Eurocurrency
Base Rate for one month shall instead be the rate determined by the
Administrative Agent to be the rate at which U.S. Bank or one of its Affiliate
banks offers to place deposits in Dollars with first-class banks in the
interbank market at approximately 11:00 a.m. (London time) on a Business Day in
the approximate amount of the relevant Loan and having a maturity equal to one
month. For purposes of determining any interest rate hereunder or under any
other Loan Document which is based on the Daily Eurocurrency Base Rate, such
interest rate shall change as and when the Daily Eurocurrency Base Rate shall
change.

 

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

“Daily Eurocurrency Rate” means, with respect to a Loan, the sum of (a) the
quotient of (i) the Daily Eurocurrency Base Rate, reset daily, divided by
(ii) one minus the Reserve Requirement (expressed as a decimal) applicable to a
one-month Interest Period, plus (b) the Applicable Margin.

“Debtor Relief Laws” means the Bankruptcy Code of the United States of America,
and all other liquidation, conservatorship, bankruptcy, assignment for the
benefit of creditors, moratorium, rearrangement, receivership, insolvency,
reorganization, or similar debtor relief Laws of the United States or other
applicable jurisdictions from time to time in effect.

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

“Defaulting Lender” means, subject to Section 2.22(b), any Lender that (a) has
failed to (i) fund all or any portion of its Loans within two (2) Business Days
of the date such Loans were required to be funded hereunder unless such Lender
notifies the Administrative Agent and the Borrower in writing that such failure
is the result of such Lender’s determination that one or more conditions
precedent to funding (each of which conditions precedent, together with any
applicable default, shall be specifically identified in such writing) has not
been satisfied or waived, or (ii) pay to the Administrative Agent, any LC
Issuer, any Swingline Lender or any other Lender any other amount required to be
paid by it hereunder (including in respect of its participation in Facility LCs
or Swingline Loans) within two (2) Business Days of the date when due, (b) has
notified the Borrower, the Administrative Agent, any LC Issuer or any Swingline
Lender in writing that it does not intend to comply with its funding obligations
hereunder, or has made a public statement to that effect (unless such writing or
public statement relates to such Lender’s obligation to fund a Loan hereunder
and states that such position is based on such Lender’s determination that a
condition precedent to funding (which condition precedent, together with any
applicable default, shall be specifically identified in such writing or public
statement) cannot be satisfied), (c) has failed, within three (3) Business Days
after written request by the Administrative Agent or the Borrower, to confirm in
writing to the Administrative Agent and the Borrower that it will comply with
its prospective funding obligations hereunder (provided that such Lender shall
cease to be a Defaulting Lender pursuant to this clause (c) upon receipt of such
written confirmation by the Administrative Agent and the Borrower), or (d) has,
or has a direct or indirect parent company that has, (i) become the subject of a
proceeding under any Debtor Relief Law, or (ii) had appointed for it a receiver,
custodian, conservator, trustee, administrator, assignee for the benefit of
creditors or similar Person charged with reorganization or liquidation of its
business or assets, including the Federal Deposit Insurance Corporation or any
other state or federal regulatory authority acting in such a capacity; provided
that a Lender shall not be a Defaulting Lender solely by virtue of the ownership
or acquisition of any equity interest in that Lender or any direct or indirect
parent company thereof by a governmental authority so long as such ownership
interest does not result in or provide such Lender with immunity from the
jurisdiction of courts within the United States or from the enforcement of
judgments or writs of attachment on its assets or permit such Lender (or such
governmental authority) to reject, repudiate, disavow or disaffirm any contracts
or agreements made with such

 

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Lender. Any determination by the Administrative Agent that a Lender is a
Defaulting Lender under any one or more of clauses (a) through (d) above shall
be conclusive and binding absent manifest error, and such Lender shall be deemed
to be a Defaulting Lender (subject to Section 2.22(b)) upon delivery of written
notice of such determination to the Borrower, the LC Issuer, each Swingline
Lender and each Lender.

“Dollar” and “$” means the lawful currency of the United States of America.

“Effective Date” means the date on which all of the conditions precedent set
forth in Section 4.1 shall have been fulfilled or waived in writing by the
Administrative Agent.

“Eligible Assignee” means any Person except a natural Person, the Borrower, any
of the Borrower’s Affiliates or Subsidiaries or any Defaulting Lender or any of
its Subsidiaries; provided that such Person is in the business of making or
purchasing commercial loans similar to the Loans and has total assets in excess
of $3,000,000,000, calculated in accordance with the accounting principles
prescribed by the regulatory authority applicable to such Person in its
jurisdiction of organization.

“Entitled Land” means Qualified Real Property Inventory (a) that is zoned and
otherwise suitable for the development of Units or certain limited commercial
development incidental to the development and sale of Lots or Units, (b) which
the Borrower (or any Loan Party) intends to develop for the sale of Lots or
Units or certain limited commercial development incidental to the development
and sale of Lots or Units, and (c) with respect to which approval and
entitlement from required Governmental Authorities of a tentative map, a
preliminary development plan and all other plan and related Governmental
Approvals required by Applicable Law in accordance with the provisions of all
Applicable Law have been obtained (other than approvals which are simply
ministerial and non-discretionary in nature or otherwise not material, such as a
final map) such that in each instance Borrower or another Loan Party has the
vested right to develop the Qualified Real Property Inventory as a residential
housing project and construct Units thereon.

“Environmental Laws” means any and all federal, state, local and foreign
statutes, laws, judicial decisions, regulations, ordinances, rules, judgments,
orders, decrees, plans, injunctions, permits, concessions, grants, franchises,
licenses, agreements and other governmental restrictions relating to (i) the
protection of the environment, (ii) personal injury or property damage relating
to the release or discharge of Hazardous Materials, (iii) emissions, discharges
or releases of pollutants, contaminants, hazardous substances or wastes into
surface water, ground water or land, or (iv) the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, hazardous substances or wastes or the clean-up or
other remediation thereof.

“Equity Issuance” means any issuance or sale of Capital Stock by Borrower or any
of its Subsidiaries.

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

 

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“ERISA Affiliate” means any trade or business (whether or not incorporated)
that, together with the Borrower, is treated as a single employer under
Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of
ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.

“ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of
ERISA or the regulations issued thereunder with respect to a Plan (other than an
event for which the 30-day notice period is waived); (b) the failure with
respect to any Plan to satisfy the “minimum funding standard” (as defined in
Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the
filing pursuant to Section 412(c) of the Code or Section 303(c) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by the Borrower or any of its ERISA Affiliates of any
liability under Title IV of ERISA with respect to the termination of any Plan;
(e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan
administrator of any notice relating to an intention to terminate any Plan or
Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the
Borrower or any of its ERISA Affiliates of any liability with respect to the
withdrawal or partial withdrawal of the Borrower or any of its ERISA Affiliates
from any Plan or Multiemployer Plan; or (g) the receipt by the Borrower or any
ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the
Borrower or any ERISA Affiliate of any notice, concerning the imposition upon
the Borrower or any of its ERISA Affiliates of withdrawal liability under
Section 4201 of ERISA or a determination that a Multiemployer Plan is, or is
expected to be, insolvent or in reorganization, within the meaning of Title IV
of ERISA.

“Escrow Proceeds Receivable” shall mean funds due to the Borrower or any
Guarantor held in escrow following the sale and conveyance of title of a Unit to
a buyer.

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

“Eurocurrency Base Rate” means, with respect to a Eurocurrency Advance for the
relevant Interest Period, a per annum rate of interest (rounded upward, if
necessary, to the nearest 1/100th of 1%) equal to the greater of (a) zero
percent (0%), and (b) the rate which appears on the Reuters Screen LIBOR01 (or
as successor or substitute thereto selected by Administrative Agent in its sole
discretion) as of 11:00 a.m., London time, two (2) Business Days prior to the
first day of the applicable Interest Period selected by Borrower, for Dollar
deposits having a term coinciding with the Interest Period selected by Borrower,
the applicable ICE Benchmark Administration rate for deposits in Dollars (Dollar
LIBOR), provided that, (i) if the applicable Reuters Screen is not available to
the Administrative Agent for any reason, the applicable Eurocurrency Base Rate
for the relevant Interest Period shall instead be the applicable ICE Benchmark
Administration rate for deposits in Dollars as reported by any other generally
recognized financial information service selected by the Administrative Agent as
of 11:00 a.m. (London time) two (2) Business Days prior to the first day of such
Interest Period, and having a maturity equal to such Interest Period, provided
that, if no such ICE Benchmark Administration rate is available to the
Administrative Agent, the applicable Eurocurrency Base Rate for the relevant
Interest Period shall instead be the rate determined by the Administrative Agent
to be the rate at which U.S. Bank or one of its Affiliate banks offers to place
deposits in Dollars with first-class banks in the interbank market at
approximately 11:00 a.m. (London time) two (2)

 

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Business Days prior to the first day of such Interest Period, in the approximate
amount of U.S. Bank’s relevant Eurocurrency Loan and having a maturity equal to
such Interest Period.

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

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

“Event of Default” is defined in Article VII.

“Excluded Subsidiaries” means, collectively, (a) each Financial Service
Subsidiary and any other Subsidiary which is not in the homebuilding business,
(b) Joint Ventures, (c) Partners Insurance Company, Inc., a Hawaii corporation,
and its successors and assigns and (d) any Wholly-Owned Subsidiary that is
prohibited from becoming a Guarantor as a result of any requirement of law, rule
or regulation binding on such Subsidiary.

“Excluded Swap Obligation” means, with respect to any Guarantor, any Swap
Obligation if, and to the extent that, all or a portion of the Guarantee of such
Guarantor of, or the grant by such Guarantor of a security interest to secure,
such Swap Obligation (or any Guarantee thereof) is or becomes illegal under the
Commodity Exchange Act or any rule, regulation or order of the Commodity Futures
Trading Commission (or the application or official interpretation of any
thereof) by virtue of such Guarantor’s failure for any reason to constitute an
“eligible contract participant” as defined in the Commodity Exchange Act and the
regulations thereunder at the time the Guarantee of such Guarantor or the grant
of such security interest becomes effective with respect to such Swap
Obligation. If a Swap Obligation arises under a master agreement governing more
than one swap, such exclusion shall apply only to the portion of such Swap
Obligation that is attributable to swaps for which such Guarantee or security
interest is or becomes illegal.

“Excluded Taxes” means, in the case of each Lender or applicable Lending
Installation, the LC Issuer, and the Administrative Agent, (i) Taxes imposed on
its overall net income, franchise Taxes, and branch profits Taxes imposed on it,
by the respective jurisdiction under the laws of which such Lender, the LC
Issuer or the Administrative Agent is incorporated or is organized or in which
its principal executive office is located or, in the case of a Lender, in which
such Lender’s applicable Lending Installation is located, (ii) in the case of a
Non-U.S. Lender, any withholding tax that is imposed on amounts payable to such
Non-U.S. Lender pursuant to the laws in effect at the time such Non-U.S. Lender
becomes a party to this Agreement or designates a new Lending Installation,
except in each case to the extent that, pursuant to Section 3.5(a), amounts with
respect to such Taxes were payable either to such Lender’s assignor immediately
before such Lender became a party hereto or to such Lender immediately before it
changed its Lending Installation, or is attributable to the Non-U.S. Lender’s
failure to comply with Section 3.5(f), and (iii) any U.S. federal withholding
taxes imposed by FATCA.

 

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

“Facility LC” is defined in Section 2.19(a)

“Facility LC Application” is defined in Section 2.19(c).

“Facility LC Collateral Account” is defined in Section 2.19(k).

“Facility Termination Date” means March 23, 2018.

“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this
Agreement (or any amended or successor version that is substantively comparable
and not materially more onerous to comply with), and any current or future
regulations or official interpretations thereof.

“Federal Funds Effective Rate” means, for any day, an interest rate per annum
equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 10:00 a.m. (New
York City time) on such day on such transactions received by the Administrative
Agent from three (3) Federal funds brokers of recognized standing selected by
the Administrative Agent in its sole discretion.

“Fee Letter” means that certain letter agreement regarding the mandate for this
Agreement dated March 23, 2015 between the Borrower and the Arrangers and the
Administrative Agent.

“Financial Letter of Credit” means a standby Letter of Credit that is not a
Performance Letter of Credit, and serves as credit support for the repayment of
financial obligations (and does not include trade Letters of Credit).

“Financial Services Subsidiary” means a Subsidiary engaged exclusively in
mortgage banking (including mortgage origination, loan servicing, mortgage
broker and title and escrow businesses), master servicing and related
activities, including, without limitation, a Subsidiary which facilitates the
financing of mortgage loans and mortgage-backed securities and the
securitization of mortgage-backed bonds and other activities ancillary thereto.

“Finished Lots” means Entitled Land that has been subdivided into Lots and as to
which (a) a final subdivision plat or map has been approved by all applicable
Governmental Authorities and recorded in all appropriate records, (b) Borrower
(or any Loan Party) has legal and physical access to all Lots sufficient to
commence vertical construction of the applicable Units thereon, (c) utilities
have been stubbed and utility services are available (subject only to completion
of the Units) to each Lot in accordance with the applicable requirements of
Governmental Authorities, (d) the building permits for the construction of Units
may be promptly pulled and construction commenced by Borrower (or any Loan
Party) without satisfaction of any further material conditions, and (e) all
offsite construction and all major infrastructure required to be completed

 

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by an Applicable Law as a condition of commencing vertical construction on the
applicable Lot or Lots have been substantially completed in compliance with
Applicable Law. As used in this definition of “Finished Lots,” “substantially
completed” shall not include the completion of any punch list work with respect
to the foregoing items of work, warranty work required by any Governmental
Authority having jurisdiction or the final lift of the street on which such Lots
are located.

“Fronting Exposure” means, at any time there is a Defaulting Lender, (a) with
respect to the LC Issuer, such Defaulting Lender’s ratable share of the LC
Obligations with respect to Facility LCs issued by the LC Issuer other than LC
Obligations as to which such Defaulting Lender’s participation obligation has
been reallocated to other Lenders or Cash Collateralized in accordance with the
terms hereof, and (b) with respect to any Swingline Lender, such Defaulting
Lender’s ratable share of outstanding Swingline Loans made by such Swingline
Lender other than Swingline Loans as to which such Defaulting Lender’s
participation obligation has been reallocated to other Lenders.

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

“GAAP” means generally accepted accounting principles as in effect from time to
time in the United States, applied in a manner consistent with that used in
preparing the financial statements referred to in Section 5.4, subject at all
times to Section 9.8.

“Governmental Approvals” means all authorizations, consents, approvals, licenses
and exemptions of, registrations and filings with, and reports to, all
Governmental Authorities.

“Governmental Authority” means any national, state or local government (whether
domestic or foreign), any political subdivision thereof or any other
governmental, quasi-governmental, judicial, public or statutory instrumentality,
authority, body, agency, bureau or entity (including, without limitation, the
Federal Deposit Insurance Corporation, the Comptroller of the Currency or the
Federal Reserve Board, any central lender or any comparable authority) or any
arbitrator with authority to bind a party at law.

“Guarantors” means the collective reference to all Wholly-Owned Subsidiaries of
Borrower the assets of which are included in the Borrowing Base, the Initial
Non-Wholly Owned Guarantors and all other Subsidiaries of Borrower who are party
to the Guaranty. The original Guarantors are indicated on Schedule 1(b) to this
Agreement.

“Guaranty” means that certain Guaranty Agreement, substantially in the form of
Exhibit B attached hereto to be executed by the Guarantors in favor of the
Lenders, as it may be amended or modified and in effect from time to time.

“Hazardous Materials” means all or any of the following: (a) substances that are
defined or listed in, or otherwise classified pursuant to, any applicable
Environmental Laws as “hazardous substances”, “hazardous materials”, “hazardous
wastes”, “toxic substances” or any other formulation intended to define, list or
classify substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity,

 

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“TCLP” toxicity, or “EP toxicity”; (b) oil, petroleum or petroleum derived
substances, natural gas, natural gas liquids or synthetic gas and drilling
fluids, produced waters and other wastes associated with the exploration,
development or production of crude oil, natural gas or geothermal resources;
(c) any flammable substances or explosives or any radioactive materials;
(d) asbestos in any form; and (e) electrical equipment which contains any oil or
dielectric fluid containing levels of polychlorinated biphenyls in excess of
fifty parts per million.

“Highest Lawful Rate” means, on any day, the maximum non-usurious rate of
interest permitted for that day by applicable federal or state law stated as a
rate per annum.

“Increasing Lender” is defined in Section 2.23.

“Indebtedness” of a Person means, without duplication, such Person’s
(i) obligations for borrowed money (including the Obligations hereunder),
(ii) obligations representing the deferred purchase price of property (other
than (x) accounts payable and other accrued liabilities arising in the ordinary
course of such Person’s business and (y) any obligation to pay a contingent
purchase price, as long as such obligation remains contingent or exists on the
balance sheet of such Person on a non-interest accruing basis and is paid within
45 days of the date such obligation becomes non-contingent or a liability on the
balance sheet), (iii) obligations, whether or not assumed, secured by Liens or
payable out of the proceeds or production from Property now or hereafter owned
or acquired by such Person, (iv) obligations which are evidenced by notes,
acceptances, or other instruments, (v) obligations of such Person to purchase
securities or other Property arising out of or in connection with the sale of
the same or substantially similar securities or Property, (vi) Capitalized Lease
Obligations, (vii) obligations of such Person for the reimbursement of any
obligor on any standby and commercial Letters of Credit (other than obligations
with respect to Letters of Credit securing obligations (other than obligations
described in clauses (i), (ii) or (vi) above) entered into in the ordinary
course of business of such Person to the extent such letters of credit are not
drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no
later than the 10th Business Day following payment on the Letter of Credit),
(viii) Contingent Obligations of such Person in respect of obligations otherwise
described in clauses (i)-(vii), (ix) Net Mark-to-Market Exposure under Rate
Management Transactions, and (x) any other obligation for borrowed money or
other indebtedness which in accordance with GAAP would be shown as a liability
on the consolidated balance sheet of such Person. Notwithstanding the foregoing,
guarantees constituting Specified Obligations shall not constitute Indebtedness.

“Indemnified Taxes” means Taxes imposed on or with respect to any payment made
by or on account of any obligation of any Loan Party under any Loan Document,
other than Excluded Taxes and Other Taxes.

“Indenture” means the Indenture dated as of May 10, 2011 among Shea Homes
Limited Partnership and Shea Homes Funding Corp., as Issuers, Wells Fargo Bank,
a National Association, as Trustee, and the Guarantors named therein, as it may
be amended, restated, supplemented or otherwise modified from time to time.

“Indenture Notes Obligations” means the “Notes Obligations,” as defined in the
Indenture.

 

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“Initial Non-Wholly-Owned Guarantors” means Shea Homes Arizona Limited
Partnership and Shea Riverpark Developers, LLC.

“Interest Coverage Ratio” means, as of any date, for the applicable period, the
ratio of (a) Consolidated EBITDA to (b) Consolidated Interest Incurred.

“Interest Period” means, with respect to a Eurocurrency Advance, a period of one
(1), two (2), three (3) or six (6) months commencing on a Business Day selected
by the Borrower pursuant to this Agreement. Such Interest Period shall end on
the day which corresponds numerically to such date one (1), two (2), three
(3) or six (6) months thereafter, provided, however, that if there is no such
numerically corresponding day in such next, second, third or sixth succeeding
month, such Interest Period shall end on the last Business Day of such next,
third or sixth succeeding month. If an Interest Period would otherwise end on a
day which is not a Business Day, such Interest Period shall end on the next
succeeding Business Day, provided, however, that if said next succeeding
Business Day falls in a new calendar month, such Interest Period shall end on
the immediately preceding Business Day. No Interest Period may end after the
Facility Termination Date.

“Investment” means (a) the purchase or other acquisition of capital stock or
other securities of another Person, (b) a loan, advance, extension or credit (by
way of guaranty or otherwise) or capital contribution to another Person or
(c) the purchase or other acquisition of assets of another Person that
constitute a business unit. For purposes hereof, the Book Value of any
Investment shall be calculated in accordance with GAAP.

“Joint Venture” means a corporation, partnership, limited liability company,
joint venture or similar legal entity (a) formed by the Borrower or any other
Loan Party to engage in the business of homebuilding or a related business, and
(b) in which a Person other than the Borrower or another Loan Party has an
ownership interest, whether or not Borrower is required to consolidate such
entity in its financial statements in accordance with GAAP.

“Land Assets” means the value, as determined on a consolidated basis in
accordance with GAAP, of all real estate assets owned by Borrower and/or any of
its Subsidiaries which constitute raw land or are in the nature of Entitled
Land, Land Under Development and/or Finished Lots on which no vertical
improvements are located and no construction of any such vertical improvements
has commenced.

“Land Under Development” means Entitled Land where (a) a tentative subdivision
plat or map has been approved by all applicable Governmental Authorities to the
extent necessary to permit the development of such Entitled Land, (b) all
governmental permits, consents and other Governmental Approvals have been
obtained to permit the commencement and grading of such Entitled Land as
necessary to improve such Entitled Land to a Finished Lot, (c) all fees required
in connection with such licenses, permits, Governmental Approvals and grading
have been paid, (d) no material impediments exist to the issuance of all further
permits, licenses or Governmental Approvals necessary or appropriate in
connection with the development of utilities, infrastructure and other physical
site improvements on such Lots, and (e) physical site improvement has commenced.

 

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“LC Fee” is defined in Section 2.19(d).

“LC Issuer” means U.S. Bank (or any subsidiary or affiliate of U.S. Bank
designated by U.S. Bank) in its capacity as issuer of Facility LCs hereunder,
and any other Lender approved by Administrative Agent (such consent not to be
unreasonably withheld) and Borrower that has agreed in its sole discretion to
act as an LC Issuer hereunder, or any of their respective subsidiaries or
affiliates, in each case in its capacity as an issuer of Facility LC’s
hereunder. Each reference herein to the “LC Issuer” shall be deemed to be a
reference to the relevant LC Issuer.

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

“LC Payment Date” is defined in Section 2.19(e).

“Lenders” means the lending institutions listed on the signature pages of this
Agreement and any Augmenting Lender and their respective successors and assigns
(and includes, as the context requires, the Swingline Lender).

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

“Letter of Credit” means a letter of credit or similar instrument which is
issued upon the application of Borrower or for which the Borrower or any other
Loan Party is an account party or for which such Person is in any way liable.
Letters of Credit shall be issued only for the account of a Loan Party in
compliance with Section 2.19.

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

“Loan” means, with respect to a Lender, such Lender’s loan made pursuant to its
commitment to lend set forth in Section 2.1 (or any conversion or continuation
thereof), or, with respect to Swingline Lender, any Swingline Loan made by
Swingline Lender.

“Loan Documents” means this Agreement, the Fee Letter, the Facility LC
Applications, the Guaranty, any Note or Notes executed by the Borrower in
connection with this Agreement and payable to a Lender, and any other document
or agreement, now or in the future, executed by the Borrower for the benefit of
the Administrative Agent or any Lender in connection with this Agreement.

 

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“Loan Party” or “Loan Parties” means, individually or collectively, the Borrower
and the Guarantors.

“Loan Party Ownership Percentage” means the percentage of ownership of Borrower
and any Wholly-Owned Subsidiary of Borrower in a Non-Wholly-Owned Subsidiary.

“Lot” or “Lots” means an individual residential lot designated on the final
subdivision plat, map or filing (or in the case of Land Under Development, an
individual lot designated on an approved tentative tract map, preliminary plat
map, preliminary subdivision plat or similar plat or map).

“Marketable Securities” means (a) equity securities that are listed on the New
York Stock Exchange, the American Stock Exchange or The Nasdaq Stock Market and
(b) debt securities that are rated by a nationally recognized rating agency,
listed on the New York Stock Exchange or covered by at least two reputable
market makers.

“Material Adverse Effect” means a material adverse effect on (i) the business,
Property, liabilities (actual and contingent), operations, financial condition
or results of operations of the Loan Parties taken as a whole, (ii) the ability
of the Loan Parties to perform their payment obligations under the Loan
Documents, or (iii) the validity or enforceability of any of the Loan Documents
or the rights or remedies of the Administrative Agent, the LC Issuer or the
Lenders under the Loan Documents.

“Material Contract” means any contract or other arrangement (other than Loan
Documents), whether written or oral, to which Borrower or any other Loan Party
is a party as to which the breach, nonperformance, cancellation or failure to
renew by any party thereto could have a Material Adverse Effect. This definition
of “Material Contract” is not intended to include trade contracts.

“Material Indebtedness” means Indebtedness of the Borrower or any Subsidiary in
an outstanding principal amount of $25,000,000 or more in the aggregate (or the
equivalent thereof in any currency other than Dollars).

“Material Indebtedness Agreement” means any agreement under which any Material
Indebtedness was created or is governed or which provides for the incurrence of
Indebtedness in an amount which would constitute Material Indebtedness (whether
or not an amount of Indebtedness constituting Material Indebtedness is
outstanding thereunder).

“Minimum Collateral Amount” means, with respect to a Defaulting Lender, at any
time, (i) with respect to Cash Collateral consisting of cash or deposit account
balances, an amount equal to 100% of the Fronting Exposure of the LC Issuer with
respect to such Defaulting Lender for all Facility LCs issued and outstanding at
such time and (ii) otherwise, an amount determined by the Administrative Agent
and the LC Issuer, but not to exceed 103% of such Fronting Exposure.

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

 

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“Modify” and “Modification” are defined in Section 2.19(a).

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

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

“Net Cash Proceeds” means, in connection with any Equity Issuance, the cash
proceeds received from such issuance, net of attorneys’ fees, investment banking
fees, accountants’ fees, underwriting discounts and commissions and other
customary fees and expenses actually incurred in connection therewith.

“Net Mark-to-Market Exposure” of a Person means, as of any date of
determination, the excess (if any) of all unrealized losses over all unrealized
profits of such Person arising from Rate Management Transactions. “Unrealized
losses” means the fair market value of the cost to such Person of replacing such
Rate Management Transaction as of the date of determination (assuming the Rate
Management Transaction were to be terminated as of that date), and “unrealized
profits” means the fair market value of the gain to such Person of replacing
such Rate Management Transaction as of the date of determination (assuming such
Rate Management Transaction were to be terminated as of that date).

“New Indenture” means, collectively, (i) the Indenture dated as of March 23,
2015 among Shea Homes Limited Partnership and Shea Homes Funding Corp., as
Issuers, Wells Fargo Bank, National Association, as Trustee, and the Guarantors
named therein, with respect to the 5.875% Senior Notes due 2023, and (ii) the
Indenture dated as of March 23, 2015 among Shea Homes Limited Partnership and
Shea Homes Funding Corp., as Issuers, Wells Fargo Bank, National Association, as
Trustee, and the Guarantors named therein, with respect to the 6.125% Senior
Notes due 2025, in each case, as it may be amended, restated, supplemented or
otherwise modified from time to time.

“New Indenture Notes Obligations” means the “Notes Obligations” as defined in
the New Indenture.

“Non-Defaulting Lender” means, at any time, each Lender that is not a Defaulting
Lender at such time.

“Non-Recourse Indebtedness” means indebtedness or other obligations secured by a
Lien on Property to the extent that the liability for such indebtedness or other
obligations is limited to the security of such Property (or to Persons other
than a Loan Party) without liability on the part of any Loan Party (other than,
in the case of indebtedness or obligations of a Subsidiary, with respect to the
Subsidiary that holds title to such property (if such property constitutes all
or substantially all the property of such Subsidiary) and a pledge of the equity
interests of such Subsidiary or its Subsidiaries) for any deficiency; provided
that recourse obligations or liabilities of the Loan Parties solely for
indemnities, covenants (including, without limitation, performance, completion
or similar guarantees or covenants), or breach of any warranty, representation,
covenant or other Contingent Obligation in respect of any indebtedness,
including indemnities for and liabilities arising from fraud, misrepresentation,
misapplication or

 

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non-payment of rents, profits, insurance and condemnation proceeds and other
sums actually received by any Loan Party from secured assets to be paid to the
Lenders, waste and mechanics’ liens, will in each case not prevent indebtedness
from being classified as “Non-Recourse Indebtedness”.

“Non-U.S. Lender” means a Lender that is not a United States person as defined
in Section 7701(a)(30) of the Code.

“Non-Wholly-Owned Subsidiary” means a Subsidiary that is not a Wholly-Owned
Subsidiary.

“Note” is defined in Section 2.13.

“Obligations” means all unpaid principal of and accrued and unpaid interest on
the Loans, all LC Obligations, all obligations in connection with Cash
Management Services, all Rate Management Obligations, all accrued and unpaid
fees and all expenses, reimbursements, indemnities and other obligations of the
Borrower to the Lenders or to any Lender, the Administrative Agent, the LC
Issuer or any indemnified party arising under the Loan Documents; provided that
for purposes of determining any guaranteed Obligations of any Guarantor pursuant
to the Guaranty Agreement, the definition of “Obligations” shall not create any
guarantee by any Guarantor of (or grant of security interest by any Guarantor to
support, if applicable) any Excluded Swap Obligations.

“Other Taxes” means all present or future stamp, court or documentary,
intangible, recording, filing or similar Taxes that arise from any payment made
under, from the execution, delivery, performance, enforcement or registration
of, from the receipt or perfection of a security interest under, or otherwise
with respect to, any Loan Document.

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

“Participant” is defined in Section 12.2(a).

“Participant Register” is defined in Section 12.2(c).

“Payment Date” means the first day of each month occurring after the Effective
Date.

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

“Performance Letter of Credit” means any standby Letter of Credit issued: (a) on
behalf of a Person in favor of a Governmental Authority, including, without
limitation, any utility, water, or sewer authority, or other similar entity, for
the purpose of assuring such Governmental Authority that such Person or other
Loan Party will properly and timely complete work it has agreed to perform for
the benefit of such Governmental Authority; (b) in lieu of cash deposits to
obtain a license, in place of a utility deposit, or for land option contracts;
or (c) in lieu of other contract performance, to secure performance warranties
payable upon breach, and to

 

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secure the performance of labor and materials, including, without limitation,
construction, bid, and performance bonds (and does not include trade Letters of
Credit).

“Permitted Holders” means, collectively, John F. Shea, Peter O. Shea, Peter O.
Shea, Jr., Mary Shea, John Morrissey and their respective family trusts,
spouses, sons and daughters and lineal descendants, siblings and other familial
relatives of any of them, including any corporation, limited liability companies
or other entities more than 50% of the issued and outstanding equity interests
of which are held, directly or indirectly, by any of the foregoing persons.

“Permitted Liens” means, as to the Borrower or any Guarantor, any of the
following:

(i) Liens for taxes, assessments or governmental charges or levies on the
Borrower’s or such Guarantor’s Property if the same (A) shall not at the time be
delinquent or thereafter can be paid without penalty, or (B) are not being
foreclosed (or any such proceedings have been stayed), are being contested in
good faith and by appropriate proceedings, the encumbered Property is not (in
Administrative Agent’s reasonable determination) in danger of being lost or
forfeited by reason thereof, and for which adequate reserves shall have been
established on the Borrower’s or such Guarantor’s books in accordance with GAAP.

(ii) Liens imposed by law, such as carriers’, warehousemen’s, mechanics’ and
materialmen’s Liens and other similar Liens arising in the ordinary course of
business with respect to amounts that either (A) are not yet delinquent, or
(B) are delinquent but are not being foreclosed (or any such proceedings have
been stayed), are being contested in a timely manner in good faith by
appropriate proceedings and the encumbered Property is not (in Administrative
Agent’s reasonable determination) in danger of being lost or forfeited by reason
thereof, and for which adequate reserves shall have been established on the
Borrower’s or Guarantor’s books in accordance with GAAP.

(iii) Utility easements, rights of way, zoning restrictions, licenses,
covenants, conditions, restrictions, reservations, and such other burdens,
encumbrances (but not for borrowed money) or charges against real property, or
other minor irregularities of title which are not unusual with respect to
properties of a similar character and which do not in any material way interfere
with the use or value thereof or the sale thereof in the ordinary course of
business of the Borrower or such Guarantor.

(iv) Easements, dedications, assessment district or similar Liens in connection
with municipal or special district financing, agreements with adjoining
landowners or state or local government authorities and other similar
encumbrances or charges, in each case reasonably necessary or appropriate for
the development of real property of the Borrower or such Guarantor, and which
are granted in the ordinary course of the business of the Borrower or such
Guarantor, and which in the aggregate do not materially burden or impair the
fair market value, sale or use of such real property (or the project to which it
is related) for the purposes for which it is or may reasonably be expected to be
held.

 

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(v) Any option or right of first refusal to purchase real property granted to
the master developer or the seller of real property that arises as a result of
the non-use or non-development of such real property by the Borrower or such
Guarantor.

(vi) Any arrangement (commonly referred to in the real estate industry (and
defined herein) as “PAPAs”) in conjunction with any agreement or contract for
the purchase of real property, which provides for future payments due to the
sellers of such real property after a specified period of time following such
acquisition or at the time of the sale of Finished Lots or Units, and which
payments may be contingent on the sale price of such Finished Lots or Units,
which arrangement may include (1) adjustments to the land purchase price,
(2) community marketing fees and community enhancement fees, (3) reimburseable
costs paid by the developer, (4) participations in the appreciation or profit,
and (5) fixed minimum amounts in respect of such arrangements and true-up
payments, in each case under (1) through (5) paid from amounts in excess of Book
Value or to pay lot premiums in excess of Book Value, in each case derived from
the sale of Finished Lots or Units, and granted in the ordinary course of
business.

(vii) Easements, exceptions, reservations, or other agreements for the purpose
of facilitating the joint or common use of property affecting real property
which in the aggregate do not materially burden or impair the fair market value
or use of such property for the purposes for which it is or may reasonably be
expected to be held.

(viii) Rights reserved to or vested in any Governmental Authority to control or
regulate the use of any real property.

(ix) Liens for homeowner and property owner association developments and
assessments if (A) the obligations secured by such Liens are not delinquent or
thereafter can be paid without penalty, or (B) such Liens are not being
foreclosed (or any such proceedings have been stayed), are being contested in
good faith and by appropriate proceedings, the Property encumbered thereby is
not (in Administrative Agent’s reasonable determination) in danger of being lost
or forfeited by reason thereof, and adequate reserves therefor shall have been
established on the Borrower’s or such Guarantor’s books in accordance with GAAP.

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

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

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

“Prior Credit Agreement” means that certain Credit Agreement dated as of
February 20, 2014, by and among Shea Homes Limited Partnership, as Borrower, and
U.S. Bank National Association, as Administrative Agent, and the other Lenders
party thereto.

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

 

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Aggregate Commitment, provided, however, if all of the Commitments are
terminated pursuant to the terms of this Agreement, then “Pro Rata Share” means
the percentage obtained by dividing (a) such Lender’s Outstanding Credit
Exposure at such time by (b) the Aggregate Outstanding Credit Exposure at such
time; and provided, further, that when a Defaulting Lender shall exist, “Pro
Rata Share” shall mean the percentage of the Aggregate Commitment (disregarding
any Defaulting Lender’s Commitment) represented by such Lender’s Commitment.

“Project” means a parcel or parcels of real property owned by Borrower or any
other Loan Party which is comprised of (or will be comprised of) a discrete
single family residential development on which will be developed Lots for the
construction of Units to be sold to individual buyers or sales of Lots in bulk
to other developers.

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

“Public Indebtedness” means Indebtedness evidenced by notes, debentures, or
other similar instruments issued after the date of this Agreement pursuant to
either (i) a registered public offering or (ii) a private placement of such
instruments in accordance with an exemption from registration under the
Securities Act of 1933 and/or the Securities Exchange Act of 1934 or similar
law.

“Purchasers” is defined in Section 12.3(a).

“Qualified Real Property Inventory” means, as of any date, Real Property
Inventory that is not subject to or encumbered by any deed of trust, mortgage,
judgment Lien, or any other Lien (other than Permitted Liens and other Liens
which have been bonded around so as to remove such Liens as encumbrances against
such Real Property Inventory in a matter satisfactory to Administrative Agent
and its legal counsel).

“Rate Management Obligations” of a Person means any and all obligations of such
Person, whether absolute or contingent and howsoever and whomsoever created,
arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (i) any and all Rate
Management Transactions, and (ii) any and all cancellations, buy backs,
reversals, terminations or assignments of any Rate Management Transactions.

“Rate Management Transaction” means any transaction (including an agreement with
respect thereto) now existing or hereafter entered by any Loan Party or any
Subsidiary of a Loan Party which is a rate swap, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
forward transaction, currency swap transaction, cross-currency rate swap
transaction, currency option or any other similar transaction (including any
option with respect to any of these transactions) or any combination thereof,
whether linked to one or more interest rates, foreign currencies, commodity
prices, equity prices or other financial measures.

“Real Property Inventory” means, as of any date, land that is owned by any Loan
Party, which land is being developed or held for future development or sale of
residential housing

 

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Projects, together with the right, title and interest of the Loan Party in and
to the streets, the land lying in the bed of any streets, roads or avenues, open
or proposed, in or of, the air space and development rights pertaining thereto
and the right to use such air space and development rights, all rights of way,
privileges, liberties, tenements, hereditaments and appurtenances belonging in
or in any way appertaining thereto, all fixtures, all easements now or hereafter
benefiting such land and all royalties and rights appertaining to the use and
enjoyment of such land necessary for the residential development of such land,
together with all of the buildings and other improvements now or hereafter
erected on such land, and any fixtures appurtenant thereto and all related
personal property.

“Refinancing Indebtedness” means Indebtedness that refunds, refinances or
extends any Indebtedness (or that refunds, refinances or extends any refund,
refinancing or extension of such Indebtedness) (such Indebtedness, the
“Refinanced Indebtedness”), but only to the extent that:

 

  (i) the Refinancing Indebtedness is subordinated to or pari passu with the
Obligations (or a Guarantor’s obligations under its Guaranty, as applicable) to
the same extent as the Indebtedness being refunded, refinanced or extended,

 

  (ii) the Refinancing Indebtedness is scheduled to mature no earlier than the
then current maturity date of such Indebtedness,

 

  (iii) such Refinancing Indebtedness is in an aggregate principal amount (or,
if incurred with original issue discount, an aggregate issue price) that is
equal to or less than the sum of the aggregate amount then outstanding plus all
amounts committed but undisbursed under the Indebtedness being refunded,
refinanced or extended, plus all fees (including, any premiums, if any), costs
and expenses incurred in connection with the incurrence of such Refinancing
Indebtedness,

 

  (iv) One or more Loan Parties (or successor(s) thereto) were liable for the
Indebtedness being refunded, refinanced or extended when such Indebtedness was
initially incurred, and

 

  (v) to the extent that the Refinanced Indebtedness is repaid in connection
with the Refinancing Indebtedness, such Refinancing Indebtedness is incurred
within 120 days after such repayment.

“Refunded Swingline Loans”: as defined in Section 2.27(b).

“Register” is defined in Section 12.3(d).

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

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

 

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purpose of purchasing or carrying margin stocks applicable to member banks of
the Federal Reserve System.

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

“Reports” is defined in Section 9.6.

“Required Lenders” means Lenders in the aggregate having greater than 50% of the
Aggregate Commitment or, if the Aggregate Commitment has been terminated,
Lenders in the aggregate holding greater than 50% of the Aggregate Outstanding
Credit Exposure. The Commitments and Outstanding Credit Exposure of any
Defaulting Lender shall be disregarded in determining Required Lenders at any
time. If there are then more than two (2) Lenders hereunder, “Required Lenders”
shall be a minimum of two (2) Lenders.

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

“Risk-Based Capital Guidelines” means (i) the risk-based capital guidelines in
effect in the United States on the date of this Agreement, including transition
rules, and (ii) the corresponding capital regulations promulgated by regulatory
authorities outside the United States, including transition rules, and, in each
case, any amendments to such regulations.

“S&P” means Standard & Poor’s Ratings Services, a Standard & Poor’s Financial
Services LLC business.

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

“SEC” means the Securities and Exchange Commission, any successor thereto and
any analogous Governmental Authority.

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

“Specified Obligations” means (1) interest-coverage, re-margin and completion
guarantees with respect to any joint venture in which Borrower or any Subsidiary
has a direct or an indirect equity interest, (2) customary “bad-boy” guarantees,
(3) guarantees of Affiliate Obligations existing on the Effective Date (and any
extension, modification or replacement of such Affiliate Obligation provided
that such extension, modification or replacement does not increase the
obligations of the Borrower or any Subsidiary with respect to such Affiliate
Obligations) and (4) tax payments (including interest and penalties) or tax
distributions, as applicable, attributable to any U.S. Federal income tax
proceeding (whether or not still contested or subject to appeal) regarding the
completed contract method (as defined in U.S. Treasury Regulation
Section 1.460-4(d)) of accounting for periods prior to 2011 (other than any
increase in taxes payable for periods after 2010 as a result of such
proceeding).

 

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“Speculative Unit” means any Completed Unit that is not a Unit Under Contract.
Speculative Units shall not include Model Units.

“Stated Rate” is defined in Section 2.21.

“Subordinated Debt” means any Indebtedness of any Loan Party which is
contractually subordinated in right of payment to the Obligations at all times
(including in respect of any amendment or modification thereto) pursuant to
terms reasonably satisfactory to the Administrative Agent.

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

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

“Swap Obligation” means, with respect to any Guarantor, any obligation to pay or
perform under any agreement, contract or transaction that constitutes a “swap”
within the meaning of section 1a(47) of the Commodity Exchange Act.

“Swingline Commitment” means the obligation of the Swingline Lender to make
Swingline Loans pursuant to Section 2.26 in an aggregate principal amount at any
one time outstanding not to exceed $25,000,000.

“Swingline Exposure” means at any time, the aggregate principal amount of all
Swingline Loans outstanding at such time. The Swingline Exposure of any Lender
in respect of any Swingline Loan shall be its Pro Rata Share of the principal
amount of such Swingline Loan.

“Swingline Lender” U.S. Bank, in its capacity as the lender of Swingline Loans.

“Swingline Loans” has the meaning defined in Section 2.26.

“Swingline Participation Amount” has the meaning defined in Section 2.27(c).

 

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“Tax Distribution Agreement” means the Tax Distribution Agreement dated as of
May 10, 2011 among the Borrower, the direct and indirect holders of ownership
interests in the Borrower, and each of the Persons party to the Sixth Amended
and Restated Agreement of Limited Partnership of Shea Homes Limited Partnership,
dated as of April 1, 2005 (as amended, restated, supplemented or otherwise
modified from time to time).

“Tax Distributions” means, so long as the Borrower is treated as a passthrough
or disregarded entity for United States Federal income tax purposes, the
distributions in respect of income taxes permitted under Section 2 of the Tax
Distribution Agreement as in effect on May 10, 2011.

“Taxes” means any and all present or future taxes, duties, levies, imposts,
deductions, fees, assessments, charges or withholdings, and any and all
liabilities with respect to the foregoing, including interest, additions to tax
and penalties applicable thereto.

“Term Out Period” shall have the meaning set forth in Section 2.25.

“Transferee” has the meaning set forth in Section 12.3(e).

“Type” means, with respect to any Advance, its nature as a Daily Eurocurrency
Advance or a Eurocurrency Advance and with respect to any Loan, its nature as a
Daily Eurocurrency Loan or a Eurocurrency Loan.

“Undrawn Fee” is defined in Section 2.5.

“Unit” means Qualified Real Property Inventory on Entitled Land that is, or is
planned to be, comprised of a single family residential housing unit offered for
sale.

“Units Under Construction” means Units for which building permits have been
issued where on-site construction has commenced on a Finished Lot as evidenced
by the trenching of foundations for such Units.

“Unit Under Contract” means a Completed Unit or a Unit Under Construction for
which building permits have been issued as to which a Loan Party owning such
Unit has entered into a bona fide contract of sale (a) in a form customarily
employed by Borrower or such Loan Party, (b) for delivery not more than
twenty-four (24) months after the date of such contract, (c) with a Person who
is not a Subsidiary or Affiliate, (d) under which no Defaults then exist, (e) in
the case of (i) any Unit the purchase of which is to be financed in whole or in
part by a loan insured by the Federal Housing Administration or guaranteed by
the Veterans Administration, to Borrower’s or applicable Guarantor’s knowledge,
the applicable buyer shall have made, or will be required to make, the minimum
down payment required (if any) under the rules of the relevant agency, and
(ii) in all other cases, providing for a minimum down payment of $1,000, (f) not
subject to contingencies other than timely completion of the Unit, obtaining
financing for the purchase and contingency related to the sale of the buyer’s
existing residence, (g) and providing for a sale in compliance with all
Applicable Law and applicable restriction or requirements.

 

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“Unrestricted Cash” means Cash Equivalent Investments of the Loan Parties that
are free and clear of all Liens (other than Liens securing (1) the Obligations,
or (2) customary bankers liens) and not subject to any restrictions on the use
thereof to pay Indebtedness and other obligations of the applicable Loan Party.

“U.S. Bank” means U.S. Bank National Association, a national banking
association, in its individual capacity, and its successors.

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

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

ARTICLE II

THE CREDITS

2.1 Commitment. From and including the date of this Agreement and prior to the
Facility Termination Date, each Lender severally agrees, on the terms and
conditions set forth in this Agreement, to make Loans to the Borrower in Dollars
and participate in Swingline Loans and Facility LCs issued upon the request of
the Borrower, provided that, after giving effect to the making of each such Loan
and Swingline Loan, and the issuance of each such Facility LC, the amount of
such Lender’s Outstanding Credit Exposure shall not exceed the lesser of (a) its
Commitment or (b) its Pro Rata Share of the Borrowing Base Availability at such
time. Subject to the terms of this Agreement, the Borrower may borrow, repay and
reborrow at any time prior to the earlier of the Facility Termination Date or
the commencement of the Term Out Period (the period commencing on the Effective
Date and ending on such date, the “Commitment Period”). The Commitments to
extend credit hereunder shall expire at the end of the Commitment Period. The LC
Issuer will issue Facility LCs hereunder on the terms and conditions set forth
in Section 2.19.

2.2 Required Payments. If at any time the amount of the Aggregate Outstanding
Credit Exposure exceeds the lesser of (i) the Aggregate Commitment or (ii) the
Borrowing Base Availability, the Borrower shall within 5 Business Days of such
occurrence make a payment on the Obligations sufficient to eliminate such
excess. The Aggregate Outstanding Credit Exposure and all other unpaid
Obligations shall be paid in full by the Borrower on the Facility Termination
Date.

2.3 Ratable Loans; Types of Advances. Each Advance hereunder shall consist of
Loans made from the several Lenders ratably according to their Pro Rata Shares.
Each Advance shall be a Eurocurrency Advance except as provided in Sections 2.6,
2.8 and 2.9.

 

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2.4 This Agreement Supersedes the Prior Credit Agreement. This Agreement and the
Loan Documents pertaining hereto and described herein replace and supersede in
their entirety the Prior Credit Agreement and all “Loan Documents” described in
the Prior Credit Agreement, effective as of the Effective Date specified herein.
From and after the Effective Date hereunder, all indebtedness and obligations
owing under and evidenced by the Prior Credit Agreement and the “Loan Documents”
described therein shall be deemed to be owing under, evidenced by and governed
by this Agreement and the Loan Documents described herein (provided, however,
that the foregoing shall not be deemed to relieve or absolve the Borrower or any
Guarantors under the Prior Credit Agreement from and for any continuing
indemnity obligations or similar obligations which by their terms survive the
termination of the Prior Credit Agreement or the repayment of the monetary
obligations owing thereunder).

2.5 Undrawn Fee. The Borrower agrees to pay to the Administrative Agent for the
account of each Lender according to its Pro Rata Share a fee (the “Undrawn Fee”)
at a per annum rate equal to the Applicable Undrawn Fee Rate per annum on the
average daily Available Aggregate Commitment (subject to the following sentence)
from the date hereof to and including the Facility Termination Date, payable in
arrears on the first day of each calendar quarter hereafter and on the Facility
Termination Date. The Swingline Exposure shall not be taken into account in
calculating the available Aggregate Commitment for the purpose of determining
the Undrawn Fee.

2.6 Minimum Amount of Each Advance. Each Eurocurrency Advance and Daily
Eurocurrency Advance shall be in the minimum amount of $500,000 and incremental
amounts in integral multiples of $500,000, provided, however, that any Daily
Eurocurrency Advance may be in the amount of the Available Aggregate Commitment
or, if less, the unused portion of the Borrowing Base Availability at such time.

2.7 Reductions in Aggregate Commitment; Optional Principal Payments. The
Borrower may permanently reduce the Aggregate Commitment in whole, or in part
ratably among the Lenders in integral multiples of $1,000,000, upon at least
five (5) Business Days’ written notice to the Administrative Agent, which notice
(1) may be conditioned upon the effectiveness of other credit facilities, in
which case such notice may be revoked by the Borrower (by written notice to the
Administrative Agent on or prior to the specified effective date previously
provided in the applicable notice) if such condition is not satisfied, and
(2) shall specify the amount of any such reduction, provided, however, that the
amount of the Aggregate Commitment may not be reduced below the Aggregate
Outstanding Credit Exposure. All accrued Undrawn Fees shall be payable on the
effective date of any termination of the obligations of the Lenders to make
Credit Extensions hereunder. The Borrower may from time to time pay, without
indemnity, penalty or premium, all outstanding Daily Eurocurrency Advances or,
in a minimum aggregate amount of $1,000,000, any portion of the outstanding
Daily Eurocurrency Advances upon same day notice to the Administrative Agent.
The Borrower may from time to time pay, subject to the payment of any funding
indemnification amounts required by Section 3.4 but without penalty or premium,
all outstanding Eurocurrency Advances, or, in a minimum aggregate amount of
$1,000,000, any portion of the outstanding Eurocurrency Advances upon three
(3) Business Days’ prior written notice to the Administrative Agent.

 

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2.8 Method of Selecting Types and Interest Periods for New Advances. The
Borrower shall give the Administrative Agent irrevocable notice in the form of
Exhibit C (a “Borrowing Notice”) not later than 10:00 a.m. (Pacific time) three
(3) Business Days before the Borrowing Date for each Advance, specifying:

(i) the Borrowing Date, which shall be a Business Day, of such Advance,

(ii) the aggregate amount of such Advance,

(iii) the Type of Advance, and

(iv) in the case of each Eurocurrency Advance, the Interest Period applicable
thereto and, if no Interest Period is selected, such Advance shall be a Daily
Eurocurrency Advance.

Not later than 12:00 noon (Pacific time) on each Borrowing Date, each Lender
shall make available its Loan or Loans in funds immediately available to the
Administrative Agent at its address specified pursuant to Article XIII. The
Administrative Agent will make the funds so received from the Lenders available
to the Borrower at the Administrative Agent’s aforesaid address.

2.9 Conversion and Continuation of Outstanding Advances; Maximum Number of
Interest Periods. Daily Eurocurrency Advances shall continue as Daily
Eurocurrency Advances unless and until such Daily Eurocurrency Advances are
converted into Eurocurrency Advances pursuant to this Section 2.9 or are repaid
in accordance with Section 2.7. Each Eurocurrency Advance shall continue as a
Eurocurrency Advance until the end of the then applicable Interest Period
therefor, at which time (as of the last day of such Interest Period) such
Eurocurrency Advance shall be automatically converted into a Daily Eurocurrency
Advance unless (x) such Eurocurrency Advance is or was repaid in accordance with
Section 2.7 or (y) the Borrower shall have given the Administrative Agent a
Conversion/Continuation Notice (as defined below) requesting that, at the end of
such Interest Period, such Eurocurrency Advance continue as a Eurocurrency
Advance for the same or another Interest Period. Subject to the terms of
Section 2.6, the Borrower may elect from time to time to convert all or any part
of a Daily Eurocurrency Advance into a Eurocurrency Advance. The Borrower shall
give the Administrative Agent irrevocable notice (a “Conversion/Continuation
Notice”) of each conversion of a Daily Eurocurrency Advance into a Eurocurrency
Advance, or continuation of a Eurocurrency Advance not later than 10:00 a.m.
(Pacific time) at least three (3) Business Days prior to the date of the
requested conversion or continuation, specifying:

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

(ii) the Type of the Advance which is to be converted or continued, and

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

 

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After giving effect to all Advances, all conversions of Advances from one Type
to another and all continuations of Advances of the same Type, there shall be no
more than five (5) Interest Periods in effect hereunder.

2.10 Interest Rates. Each Eurocurrency Advance shall bear interest on the
outstanding principal amount thereof from and including the first day of the
Interest Period applicable thereto to but not including the last day of such
Interest Period at the interest rate determined by the Administrative Agent as
applicable to such Eurocurrency Advance based upon the Borrower’s selections
under Sections 2.8 and 2.9. Each Daily Eurocurrency Advance shall bear interest
on the outstanding principal amount thereof for each day from and including the
date such Advance is made or converted in accordance with Section 2.9, but
excluding the date it becomes or is converted to a Eurocurrency Advance, at a
rate per annum equal to the Daily Eurocurrency Rate for such day. Changes in the
rate of interest on that portion of any Advance maintained as a Daily
Eurocurrency Advance will take effect simultaneously with each change in the
Daily Eurocurrency Base Rate, as applicable.

2.11 Rates Applicable After Event of Default.

(a) Notwithstanding anything to the contrary contained in Section 2.8, 2.9 or
2.10, during the continuance of a Default or Event of Default the Required
Lenders may, at their option, by notice to the Borrower (which notice may be
revoked at the option of the Required Lenders notwithstanding any provision of
Section 8.3 requiring unanimous consent of the Lenders to changes in interest
rates), declare that no Advance may be made as, converted into or continued as a
Eurocurrency Advance (provided, however, that the foregoing shall not be deemed
to modify the requirement of unanimous approval by all Lenders to waive any
payment defaults as specified in Section 8.3(a) hereof). Provided further,
however, during the continuance of an Event of Default the Required Lenders may,
at their option, by notice to the Borrower (which notice may be revoked at the
option of the Required Lenders notwithstanding any provision of Section 8.3
requiring unanimous consent of the Lenders to changes in interest rates),
declare that (i) each Eurocurrency Advance shall bear interest for the remainder
of the applicable Interest Period at the rate otherwise applicable to such
Interest Period plus 2.00% per annum, (ii) each Daily Eurocurrency Advance shall
bear interest at a rate per annum equal to the Daily Eurocurrency Rate, in
effect from time to time plus 2.00% per annum, and (iii) the LC Fee shall be
increased by 2.00% per annum, provided that, during the continuance of an Event
of Default under Section 7.6 or 7.7, the interest rates set forth in clauses
(i) and (ii) above and the increase in the LC Fee set forth in clause
(iii) above shall be applicable to all Credit Extensions without any election or
action on the part of the Administrative Agent or any Lender. After an Event of
Default has been cured or waived, the interest rate applicable to advances and
the LC Fee shall revert to the rates applicable prior to the occurrence of an
Event of Default.

2.12 Method of Payment. Each Advance shall be repaid and each payment of
interest thereon shall be paid in Dollars. All payments of the Obligations
hereunder shall be made, without setoff, deduction, or counterclaim, in
immediately available funds to the Administrative Agent at the Administrative
Agent’s address specified pursuant to Article XIII, or at any other Lending
Installation of the Administrative Agent specified in writing by the
Administrative Agent to the Borrower, by 12:00 noon (Pacific time) on the date
when due and shall (except (i) in the case of Reimbursement Obligations for
which the LC Issuer has not been fully

 

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indemnified by the Lenders, or (ii) as otherwise specifically required
hereunder) be applied ratably by the Administrative Agent among the Lenders.
Each payment delivered to the Administrative Agent for the account of any Lender
shall be delivered promptly by the Administrative Agent to such Lender in the
same type of funds that the Administrative Agent received at its address
specified pursuant to Article XIII or at any Lending Installation specified in a
notice received by the Administrative Agent from such Lender. The Administrative
Agent is hereby authorized to charge the account of the Borrower maintained with
U.S. Bank for each payment of principal, interest, Reimbursement Obligations and
fees as it becomes due hereunder. Each reference to the Administrative Agent in
this Section 2.12 shall also be deemed to refer, and shall apply equally, to the
LC Issuer, in the case of payments required to be made by the Borrower to the LC
Issuer pursuant to Section 2.19(f).

2.13 Noteless Agreement; Evidence of Indebtedness.

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

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

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

(d) Any Lender may request that its Loans be evidenced by a promissory note,
representing its Loans substantially in the form of Exhibit D (each a “Note”).
In such event, the Borrower shall prepare, execute and deliver to such Lender
such Note payable to the order of such Lender in a form supplied by the
Administrative Agent.

2.14 Telephonic Notices. The Borrower hereby authorizes the Lenders and the
Administrative Agent to extend, convert or continue Advances, effect selections
of Types of Advances and to transfer funds based on telephonic notices made by
any person or persons the Administrative Agent or any Lender in good faith
believes to be acting on behalf of the Borrower, it being understood that the
foregoing authorization is specifically intended to allow Borrowing Notices and
Conversion/Continuation Notices to be given telephonically. The Borrower agrees
to deliver promptly to the Administrative Agent a written confirmation (which
may include e-mail) of each telephonic notice authenticated by an Authorized
Officer. If the written confirmation differs in any material respect from the
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Agent and the Lenders, the records of the Administrative Agent and the Lenders
shall govern absent manifest error. The parties agree to prepare appropriate
documentation to correct any such error within ten (10) days after discovery by
any party to this Agreement.

2.15 Interest Payment Dates; Interest and Fee Basis. Interest accrued on each
Advance shall be payable on each Payment Date, commencing with the first such
Payment Date to occur after the date hereof and on any date on which such
Advance is prepaid, whether by acceleration or otherwise, and at maturity.
Interest on all Advances and fees shall be calculated for actual days elapsed on
the basis of a 360-day year. Interest shall be payable for the day an Advance is
made but not for the day of any payment on the amount paid if payment is
received prior to 12:00 noon (Pacific time) at the place of payment. If any
payment of principal of or interest on an Advance shall become due on a day
which is not a Business Day, such payment shall be made on the next succeeding
Business Day.

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

2.17 Lending Installations. Each Lender may book its Advances and its
participation in any LC Obligations and the LC Issuer may book the Facility LCs
at any Lending Installation selected by such Lender or the LC Issuer, as the
case may be, and may change its Lending Installation from time to time. All
terms of this Agreement shall apply to any such Lending Installation and the
Loans, Facility LCs, participations in LC Obligations and any Notes issued
hereunder shall be deemed held by each Lender or the LC Issuer, as the case may
be, for the benefit of any such Lending Installation. Each Lender and the LC
Issuer may, by written notice to the Administrative Agent and the Borrower in
accordance with Article XIII, designate replacement or additional Lending
Installations through which Loans will be made by it or Facility LCs will be
issued by it and for whose account Loan payments or payments with respect to
Facility LCs are to be made.

2.18 Non-Receipt of Funds by the Administrative Agent. Unless the Borrower or a
Lender, as the case may be, notifies the Administrative Agent prior to the date
on which it is scheduled to make payment to the Administrative Agent of (i) in
the case of a Lender, the proceeds of a Loan or (ii) in the case of the
Borrower, a payment of principal, interest or fees to the Administrative Agent
for the account of the Lenders, that it does not intend to make such payment,
the Administrative Agent may assume that such payment has been made. The
Administrative Agent may, but shall not be obligated to, make the amount of such
payment available to the intended recipient in reliance upon such assumption. If
such Lender or the Borrower, as the case may be, has not in fact made such
payment to the Administrative Agent, the recipient of such payment shall, on
demand by the Administrative Agent, repay to the Administrative Agent the amount
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each day during the period commencing on the date such amount was so made
available by the Administrative Agent until the date the Administrative Agent
recovers such amount at a rate per annum equal to (x) in the case of payment by
a Lender, the greater of the Federal Funds Effective Rate and a rate determined
by the Administrative Agent in accordance with banking industry rules on
interbank compensation or (y) in the case of payment by the Borrower, the
interest rate applicable to the relevant Loan.

2.19 Facility LCs.

(a) Issuance. The LC Issuer hereby agrees, on the terms and conditions set forth
in this Agreement, to issue Performance Letters of Credit and Financial Letters
of Credit denominated in Dollars (each, a “Facility LC”) and to renew, extend,
increase, decrease or otherwise modify each Facility LC (“Modify,” and each such
action a “Modification”), from time to time from and including the date of this
Agreement and prior to the Facility Termination Date upon the request of the
Borrower; provided that immediately after each such Facility LC is issued or
Modified, (i) the aggregate amount of the outstanding LC Obligations shall not
exceed 50% of the Aggregate Commitment at such time and (ii) the Aggregate
Outstanding Credit Exposure shall not exceed the lesser of the Aggregate
Commitment and the Borrowing Base Availability at such time. No Facility LC
shall have an expiry date later than the earlier to occur of (x) the fifth
Business Day prior to the Facility Termination Date and (y) one (1) year after
its issuance; provided, however, that the expiry date of a Facility LC may be up
to one (1) year later than the fifth Business Day prior to the Facility
Termination Date if the Borrower has posted on or before the thirtieth
(30th) day prior to the Facility Termination Date cash collateral in the
Facility LC Collateral Account on terms satisfactory to the Administrative Agent
in an amount equal to 100% of the LC Obligations with respect to such Facility
LC. Additionally, if the Term Out Period commences as set forth in Section 2.25
below, Borrower shall promptly post cash collateral in the Facility LC
Collateral Account on terms satisfactory to the Administrative Agent in an
amount equal to 100% of the LC Obligations with respect to any Facility LC or LC
Obligations that remain outstanding as of the date that the Term Out Period
commences. Borrower may request of each LC Issuer that the LC Issuer issue
“Evergreen” letters of credit as the Facility LCs which automatically renew
unless the LC Issuer provides notice to the Borrower that such LC Issuer is not
renewing such Facility LC; and it shall be at the sole discretion of each LC
Issuer as to whether or not it will issue “Evergreen” letters of credit.

(b) Participations. Upon the issuance or Modification by the LC Issuer of a
Facility LC in accordance with this Section 2.19, the LC Issuer shall be deemed,
without further action by any party hereto, to have unconditionally and
irrevocably sold to each Lender, and each Lender shall be deemed, without
further action by any party hereto, to have unconditionally and irrevocably
purchased from the LC Issuer, a participation in such Facility LC (and each
Modification thereof) and the related LC Obligations in proportion to its Pro
Rata Share.

(c) Notice. Subject to Section 2.19(a), the Borrower shall give the
Administrative Agent notice prior to 10:00 a.m. Pacific time at least five
(5) Business Days prior to the proposed date of issuance or Modification of each
Facility LC, specifying the beneficiary, the LC Issuer, the proposed date of
issuance (or Modification) and the expiry date of such Facility LC, and
describing the proposed terms of such Facility LC and the nature of the
transactions proposed to be supported thereby. Upon receipt of such notice, the
Administrative

 

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Agent shall promptly notify the LC Issuer and each Lender, of the contents
thereof and of the amount of such Lender’s participation in such proposed
Facility LC. The issuance or Modification by the LC Issuer of any Facility LC
shall, in addition to the conditions precedent set forth in Article IV, be
subject to the conditions precedent that such Facility LC shall be satisfactory
to the LC Issuer and that the Borrower shall have executed and delivered such
application agreement and/or such other instruments and agreements relating to
such Facility LC as the LC Issuer shall have reasonably requested (each, a
“Facility LC Application”). The LC Issuer shall have no independent duty to
ascertain whether the conditions set forth in Article IV have been satisfied;
provided, however, that the LC Issuer shall not issue a Facility LC if, on or
before the proposed date of issuance, the LC Issuer shall have received notice
from the Administrative Agent or the Required Lenders that any such condition
has not been satisfied or waived. In the event of any conflict between the terms
of this Agreement and the terms of any Facility LC Application, the terms of
this Agreement shall control.

(d) LC Fees. The Borrower shall pay to the Administrative Agent, for the account
of the Lenders ratably in accordance with their respective Pro Rata Shares, with
respect to each Facility LC, a letter of credit fee at a per annum rate equal to
the Applicable Margin for Eurocurrency Loans in effect from time to time on the
average daily undrawn stated amount under such Facility LC, such fee to be
payable in arrears on the third day of each calendar quarter (but, for the
avoidance of doubt, each such payment shall be calculated as of the first day of
each calendar quarter) (the “LC Fee”). The Borrower shall also pay to the LC
Issuer for its own account (x) a fronting fee in an amount equal to 0.125% per
annum of the average daily undrawn stated amount under such Facility LC, such
fee to be payable in arrears on the third day of each calendar quarter (but, for
the avoidance of doubt, each such payment shall be calculated as of the first
day of each calendar quarter), and (y) on demand, all amendment, drawing and
other fees regularly charged by the LC Issuer to its letter of credit customers
and all out-of-pocket expenses incurred by the LC Issuer in connection with the
issuance, Modification, administration or payment of any Facility LC.

(e) Administration; Reimbursement by Lenders. Upon receipt from the beneficiary
of any Facility LC of any demand for payment under such Facility LC, the LC
Issuer shall notify the Administrative Agent and the Administrative Agent shall
promptly notify the Borrower and each other Lender as to the amount to be paid
by the LC Issuer as a result of such demand and the proposed payment date (the
“LC Payment Date”). The responsibility of the LC Issuer to the Borrower and each
Lender shall be only to determine that the documents (including each demand for
payment) delivered under each Facility LC in connection with such presentment
shall be in conformity in all material respects with such Facility LC. The LC
Issuer shall endeavor to exercise the same care in the issuance and
administration of the Facility LCs as it does with respect to letters of credit
in which no participations are granted, it being understood that in the absence
of any gross negligence or willful misconduct by the LC Issuer, each Lender
shall be unconditionally and irrevocably liable without regard to the occurrence
of any Event of Default or any condition precedent whatsoever, to reimburse the
LC Issuer on demand for (i) such Lender’s Pro Rata Share of the amount of each
payment made by the LC Issuer under each Facility LC to the extent such amount
is not reimbursed by the Borrower pursuant to Section 2.19(f) below and there
are not funds available in the Facility LC Collateral Account to cover the same,
plus (ii) interest on the foregoing amount to be reimbursed by such Lender, for
each day from the date of the LC Issuer’s demand for such reimbursement (or, if
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made after 11:00 a.m. (Pacific time) on such date, from the next succeeding
Business Day) to the date on which such Lender pays the amount to be reimbursed
by it, at a rate of interest per annum equal to the Federal Funds Effective Rate
for the first three (3) days and, thereafter, at a rate determined by the
Administrative Agent in accordance with banking industry rules on interbank
compensation.

(f) Reimbursement by Borrower. The Borrower shall be irrevocably and
unconditionally obligated to reimburse the LC Issuer on or before the applicable
LC Payment Date (provided that the Borrower has received notice from the
Administrative Agent of such LC Payment Date not later than 11:00 am Pacific
time on the LC Payment Date, otherwise such amount shall be due on the Business
Day immediately following the date on which the Borrower receives such notice)
for any amounts to be paid by the LC Issuer upon any drawing under any Facility
LC, without presentment, demand, protest or other formalities of any kind;
provided that neither the Borrower nor any Lender shall hereby be precluded from
asserting any claim for direct (but not consequential) damages suffered by the
Borrower or such Lender to the extent, but only to the extent, caused by (i) the
willful misconduct or gross negligence of the LC Issuer in determining whether a
request presented under any Facility LC issued by it complied with the terms of
such Facility LC or (ii) the LC Issuer’s failure to pay under any Facility LC
issued by it after the presentation to it of a request strictly complying with
the terms and conditions of such Facility LC. All such amounts paid by the LC
Issuer and remaining unpaid by the Borrower shall bear interest, payable on
demand, for each day until paid at a rate per annum equal to the rate applicable
to Daily Eurocurrency Advances for such day if such day falls on or before the
applicable LC Payment Date. The LC Issuer will pay to each Lender ratably in
accordance with its Pro Rata Share all amounts received by it from the Borrower
for application in payment, in whole or in part, of the Reimbursement Obligation
in respect of any Facility LC issued by the LC Issuer, but only to the extent
such Lender has made payment to the LC Issuer in respect of such Facility LC
pursuant to Section 2.19(e). Subject to the terms and conditions of this
Agreement (including without limitation the submission of a Borrowing Notice in
compliance with Section 2.8 and the satisfaction of the applicable conditions
precedent set forth in Article IV), the Borrower may request an Advance
hereunder for the purpose of satisfying any Reimbursement Obligation.

(g) Obligations Absolute. The Borrower’s obligations under this Section 2.19
shall be absolute and unconditional under any and all circumstances and
irrespective of any setoff, counterclaim or defense to payment which the
Borrower may have or have had against the LC Issuer, any Lender or any
beneficiary of a Facility LC. The Borrower further agrees with the LC Issuer and
the Lenders that the LC Issuer and the Lenders shall not be responsible for, and
the Borrower’s Reimbursement Obligation in respect of any Facility LC shall not
be affected by, among other things, the validity or genuineness of documents or
of any endorsements thereon, even if such documents should in fact prove to be
in any or all respects invalid, fraudulent or forged, or any dispute between or
among the Borrower, any of its Affiliates, the beneficiary of any Facility LC or
any financing institution or other party to whom any Facility LC may be
transferred or any claims or defenses whatsoever of the Borrower or of any of
its Affiliates against the beneficiary of any Facility LC or any such
transferee. The LC Issuer shall not be liable for any error, omission,
interruption or delay in transmission, dispatch or delivery of any message or
advice, however transmitted, in connection with any Facility LC. The Borrower
agrees that any action taken or omitted by the LC Issuer or any Lender under or
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with each Facility LC and the related drafts and documents, if done without
gross negligence or willful misconduct, shall be binding upon the Borrower and
shall not put the LC Issuer or any Lender under any liability to the Borrower.
Nothing in this Section 2.19(g) is intended to limit the right of the Borrower
to make a claim against the LC Issuer for damages as contemplated by the proviso
to the first sentence of Section 2.19(f).

(h) Actions of LC Issuer. The LC Issuer shall be entitled to rely, and shall be
fully protected in relying, upon any Facility LC, draft, writing, resolution,
notice, consent, certificate, affidavit, letter, cablegram, telegram, facsimile,
telex, teletype or electronic mail message, statement, order or other document
believed by it to be genuine and correct and to have been signed, sent or made
by the proper Person or Persons, and upon advice and statements of legal
counsel, independent accountants and other experts selected by the LC Issuer.
The LC Issuer shall be fully justified in failing or refusing to take any action
under this Agreement unless it shall first have received such advice or
concurrence of the Required Lenders as it reasonably deems appropriate or it
shall first be indemnified to its reasonable satisfaction by the Lenders against
any and all liability and expense which may be incurred by it by reason of
taking or continuing to take any such action. Notwithstanding any other
provision of this Section 2.19, the LC Issuer shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement in
accordance with a request of the Required Lenders, and such request and any
action taken or failure to act pursuant thereto shall be binding upon the
Lenders and any future holders of a participation in any Facility LC.

(i) Indemnification. The Borrower hereby agrees to indemnify and hold harmless
each Lender, the LC Issuer and the Administrative Agent, and their respective
directors, officers, agents and employees from and against any and all claims
and damages, losses, liabilities, costs or expenses (including reasonable
counsel fees and disbursements) which such Lender, the LC Issuer or the
Administrative Agent may incur (or which may be claimed against such Lender, the
LC Issuer or the Administrative Agent by any Person whatsoever) by reason of or
in connection with the issuance, execution and delivery or transfer of or
payment or failure to pay under any Facility LC or any actual or proposed use of
any Facility LC, including, without limitation, any claims, damages, losses,
liabilities, costs or expenses (including reasonable counsel fees and
disbursements) which the LC Issuer may incur by reason of or in connection with
(i) the failure of any other Lender to fulfill or comply with its obligations to
the LC Issuer hereunder (but nothing herein contained shall affect any rights
the Borrower may have against any Defaulting Lender) or (ii) by reason of or on
account of the LC Issuer issuing any Facility LC which specifies that the term
“Beneficiary” included therein includes any successor by operation of law of the
named Beneficiary, but which Facility LC does not require that any drawing by
any such successor Beneficiary be accompanied by a copy of a legal document,
satisfactory to the LC Issuer, evidencing the appointment of such successor
Beneficiary; provided that the Borrower shall not be required to indemnify any
Lender, the LC Issuer or the Administrative Agent for any claims, damages,
losses, liabilities, costs or expenses to the extent, but only to the extent,
caused by (x) the willful misconduct or gross negligence of the LC Issuer in
determining whether a request presented under any Facility LC complied with the
terms of such Facility LC or (y) the LC Issuer’s failure to pay under any
Facility LC after the presentation to it of a request strictly complying with
the terms and conditions of such Facility LC. Nothing in this Section 2.19(i) is
intended to limit the obligations of the Borrower under any other provision of
this Agreement.

 

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(j) Lenders’ Indemnification. Each Lender shall, ratably in accordance with its
Pro Rata Share, indemnify the LC Issuer, its affiliates and their respective
directors, officers, agents and employees (to the extent not reimbursed by the
Borrower) against any cost, expense (including reasonable counsel fees and
disbursements), claim, demand, action, loss or liability (except such as result
from such indemnitees’ gross negligence or willful misconduct or the LC Issuer’s
failure to pay under any Facility LC after the presentation to it of a request
strictly complying with the terms and conditions of the Facility LC) that such
indemnitees may suffer or incur in connection with this Section 2.19 or any
action taken or omitted by such indemnitees hereunder.

(k) Facility LC Collateral Account. If Administrative Agent determines that any
event that would require Borrower to Cash Collateralize the LC Obligations is
reasonably likely to occur, including without limitation, the existence of a
Defaulting Lender or the continuation of any LC Obligation beyond the Facility
Termination Date, Borrower shall, promptly upon the request of the
Administrative Agent or the Required Lenders and until the final expiration date
of any Facility LC and thereafter as long as any amount is payable to the LC
Issuer or the Lenders in respect of any Facility LC, maintain a special
collateral account pursuant to arrangements satisfactory to the Administrative
Agent (the “Facility LC Collateral Account”), in the name of the Borrower but
under the sole dominion and control of the Administrative Agent, for the benefit
of the Lenders and in which the Borrower shall have no interest other than as
set forth in Section 8.1. The Borrower hereby pledges, assigns and grants to the
Administrative Agent, on behalf of and for the ratable benefit of the Lenders
and the LC Issuer, a security interest in all of the Borrower’s right, title and
interest in and to all funds which may from time to time be on deposit in the
Facility LC Collateral Account to secure the prompt and complete payment and
performance of the Obligations. The Administrative Agent will invest any funds
on deposit from time to time in the Facility LC Collateral Account in
certificates of deposit of U.S. Bank having a maturity not exceeding thirty
(30) days. Nothing in this Section 2.19(k) shall either obligate the
Administrative Agent to require the Borrower to deposit any funds in the
Facility LC Collateral Account or limit the right of the Administrative Agent to
release any funds held in the Facility LC Collateral Account in each case other
than as required by Section 8.1.

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

2.20 Replacement of Lender. If the Borrower is required pursuant to Section 3.1,
3.2 or 3.5 to make any additional payment to any Lender or if any Lender’s
obligation to make or continue Eurocurrency Advances shall be suspended pursuant
to Section 3.3 or if any Lender defaults in its obligation to make a Loan,
reimburse the LC Issuer pursuant to Section 2.19(e) or declines to approve an
amendment or waiver that is approved by the Required Lenders or otherwise
becomes a Defaulting Lender (any Lender so affected an “Affected Lender”), the
Borrower may elect, if such amounts continue to be charged or such suspension is
still effective or such default continues to exist, to replace such Affected
Lender as a Lender party to this Agreement, provided that no Default or Event of
Default shall have occurred and be continuing at the time of such replacement,
and provided further that, concurrently with such replacement, (i) another bank
or other entity which is reasonably satisfactory to the Borrower and the
Administrative Agent shall agree, as of such date, to purchase for cash the
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Obligations due to the Affected Lender pursuant to an assignment substantially
in the form of Exhibit J and to become a Lender for all purposes under this
Agreement and to assume all obligations of the Affected Lender to be terminated
as of such date and to comply with the requirements of Section 12.3 applicable
to assignments, and (ii) the Borrower shall pay to such Affected Lender in same
day funds on the day of such replacement (a) all interest, fees and other
amounts then accrued but unpaid to such Affected Lender by the Borrower
hereunder to and including the date of termination, including without limitation
payments due to such Affected Lender under Sections 3.1, 3.2 and 3.5, plus any
assignment fees specified in Section 12.3(c), and (b) an amount, if any, equal
to the payment which would have been due to such Lender on the day of such
replacement under Section 3.4 had the Loans of such Affected Lender been prepaid
on such date rather than sold to the replacement Lender. If the Borrower is
entitled to elect the replacement of an Affected Lender with another Lender as a
party to this Agreement because the Affected Lender has failed or refused to
consent to an amendment or waiver that is required to be approved by the
Required Lenders or all Lenders, the replacement Lender must have so consented
to the amendment or waiver that the Affected Lender failed or refused to
approve.

2.21 Limitation of Interest. The Borrower, the Administrative Agent and the
Lenders intend to strictly comply with all Applicable Laws, including applicable
usury laws. Accordingly, the provisions of this Section 2.21 shall govern and
control over every other provision of this Agreement or any other Loan Document
which conflicts or is inconsistent with this Section 2.21, even if such
provision declares that it controls. As used in this Section 2.21, the term
“interest” includes the aggregate of all charges, fees, benefits or other
compensation which constitute interest under Applicable Law, provided that, to
the maximum extent permitted by Applicable Law, (a) any non-principal payment
shall be characterized as an expense or as compensation for something other than
the use, forbearance or detention of money and not as interest, and (b) all
interest at any time contracted for, reserved, charged or received shall be
amortized, prorated, allocated and spread, in equal parts during the full term
of the Obligations. In no event shall the Borrower or any other Person be
obligated to pay, or any Lender have any right or privilege to reserve, receive
or retain, (a) any interest in excess of the maximum amount of no usurious
interest permitted under the applicable laws (if any) of the United States or of
any applicable state, or (b) total interest in excess of the amount which such
Lender could lawfully have contracted for, reserved, received, retained or
charged had the interest been calculated for the full term of the Obligations at
the Highest Lawful Rate. On each day, if any, that the interest rate (the
“Stated Rate”) called for under this Agreement or any other Loan Document
exceeds the Highest Lawful Rate, the rate at which interest shall accrue shall
automatically be fixed by operation of this sentence at the Highest Lawful Rate
for that day, and, to the extent lawful, shall remain fixed at the Highest
Lawful Rate for each day thereafter until the total amount of interest accrued
equals the total amount of interest which would have accrued if there were no
such ceiling rate as is imposed by this sentence. Thereafter, interest shall
accrue at the Stated Rate unless and until the Stated Rate again exceeds the
Highest Lawful Rate when the provisions of the immediately preceding sentence
shall again automatically operate to limit the interest accrual rate. The daily
interest rates to be used in calculating interest at the Highest Lawful Rate
shall be determined by dividing the applicable Highest Lawful Rate per annum by
the number of days in the calendar year for which such calculation is being
made. None of the terms and provisions contained in this Agreement or in any
other Loan Document which directly or indirectly relate to interest shall ever
be construed without reference to this Section 2.21, or be construed to create a

 

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contract to pay for the use, forbearance or detention of money at an interest
rate in excess of the Highest Lawful Rate. If the term of any Obligation is
shortened by reason of acceleration of maturity as a result of any Event of
Default or by any other cause, or by reason of any required or permitted
prepayment, and if for that (or any other) reason any Lender at any time,
including but not limited to, the stated maturity, is owed or receives (and/or
has received) interest in excess of interest calculated at the Highest Lawful
Rate, then and in any such event all of any such excess interest shall be
canceled automatically as of the date of such acceleration, prepayment or other
event which produces the excess, and, if such excess interest has been paid to
such Lender, it shall be credited pro tanto against the then-outstanding
principal balance of the Borrower’s obligations to such Lender, effective as of
the date or dates when the event occurs which causes it to be excess interest,
until such excess is exhausted or all of such principal has been fully paid and
satisfied, whichever occurs first, and any remaining balance of such excess
shall be promptly refunded to its payor.

2.22 Defaulting Lenders.

(a) Defaulting Lender Adjustments. Notwithstanding anything to the contrary
contained in this Agreement, if any Lender becomes a Defaulting Lender, then,
until such time as such Lender is no longer a Defaulting Lender, to the extent
permitted by applicable law:

(i) Waivers and Amendments. Such Defaulting Lender’s right to approve or
disapprove any amendment, waiver or consent with respect to this Agreement shall
be restricted as set forth in the definition of Required Lenders.

(ii) Defaulting Lender Waterfall. Any payment of principal, interest, fees or
other amounts received by the Administrative Agent for the account of such
Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to
Article VII or otherwise) or received by the Administrative Agent from a
Defaulting Lender pursuant to Section 11.1 shall be applied at such time or
times as may be determined by the Administrative Agent as follows: first, to the
payment of any amounts owing by such Defaulting Lender to the Administrative
Agent hereunder; second, to the payment on a pro rata basis of any amounts owing
by such Defaulting Lender to the LC Issuer or Swingline Lender hereunder; third,
to Cash Collateralize the LC Issuer’s Fronting Exposure with respect to such
Defaulting Lender in accordance with Section 2.22(d); fourth, as the Borrower
may request (so long as no Default or Event of Default exists), to the funding
of any Loan in respect of which such Defaulting Lender has failed to fund its
portion thereof as required by this Agreement, as determined by the
Administrative Agent; fifth, if so determined by the Administrative Agent and
the Borrower, to be held in a deposit account (including the Facility LC
Collateral Account) and released pro rata in order to (x) satisfy such
Defaulting Lender’s potential future funding obligations with respect to Loans
under this Agreement and (y) Cash Collateralize the LC Issuer’s future Fronting
Exposure with respect to such Defaulting Lender with respect to future Facility
LCs issued under this Agreement, in accordance with Section 2.22(d); sixth, to
the payment of any amounts owing to the Lenders, the LC Issuer or Swingline
Lender as a result of any judgment of a court of competent jurisdiction obtained
by any Lender, the LC Issuer or Swingline Lender against such Defaulting Lender
as a result of such Defaulting Lender’s breach of its obligations under this
Agreement; seventh, so long as no Default or Event of Default exists, to the
payment of any amounts owing to the Borrower as a result of any judgment of a
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Borrower against such Defaulting Lender as a result of such Defaulting Lender’s
breach of its obligations under this Agreement; eighth, if so determined by the
Administrative Agent, distributed to the Lenders other than the Defaulting
Lender until the ratio of the Outstanding Credit Exposure of such Lenders to the
Aggregate Outstanding Credit Exposure equals such ratio immediately prior to the
Defaulting Lender’s failure to fund any portion of any Loans or participations
in Facility LCs; and ninth, to such Defaulting Lender or as otherwise directed
by a court of competent jurisdiction; provided that if (x) such payment is a
payment of the principal amount of any Loans or Facility LC issuances in respect
of which such Defaulting Lender has not fully funded its appropriate share, and
(y) such Loans were made or the related Facility LCs were issued at a time when
the conditions set forth in Section 4.2 were satisfied or waived, such payment
shall be applied solely to pay the Credit Extensions of all Non-Defaulting
Lenders on a pro rata basis prior to being applied to the payment of any Credit
Extensions of such Defaulting Lender until such time as all Loans and funded and
unfunded participations in LC Obligations and Swingline Loans are held by the
Lenders pro rata in accordance with the Commitments without giving effect to
Section 2.22(a)(iv). Any payments, prepayments or other amounts paid or payable
to a Defaulting Lender that are applied (or held) to pay amounts owed by a
Defaulting Lender or to post Cash Collateral pursuant to this
Section 2.22(a)(ii) shall be deemed paid to and redirected by such Defaulting
Lender, and each Lender irrevocably consents hereto.

(iii) Certain Fees.

(A) No Defaulting Lender shall be entitled to receive any Undrawn Fee for any
period during which that Lender is a Defaulting Lender (and the Borrower shall
not be required to pay any such fee that otherwise would have been required to
have been paid to that Defaulting Lender).

(B) Each Defaulting Lender shall be entitled to receive LC Fees for any period
during which that Lender is a Defaulting Lender only to the extent allocable to
its ratable share of the stated amount of Facility LCs for which it has provided
Cash Collateral pursuant to Section 2.22(d).

(C) With respect to any Undrawn Fee or LC Fee not required to be paid to any
Defaulting Lender pursuant to clause (a) or (b) above, the Borrower shall
(x) pay to each Non-Defaulting Lender that portion of any such fee otherwise
payable to such Defaulting Lender with respect to such Defaulting Lender’s
participation in LC Obligations or Swingline Loans that has been reallocated to
such Non-Defaulting Lender pursuant to clause (iv) below, (y) pay to the LC
Issuer and Swingline Lender the amount of any such fee otherwise payable to such
Defaulting Lender to the extent allocable to the LC Issuer’s or Swingline
Lender’s Fronting Exposure to such Defaulting Lender, and (z) not be required to
pay the remaining amount of any such fee.

(iv) Reallocation of Participations to Reduce Fronting Exposure. All or any part
of such Defaulting Lender’s participation in LC Obligations and Swingline Loans
shall be reallocated among the Non-Defaulting Lenders in accordance with their
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Shares (calculated without regard to such Defaulting Lender’s Commitment) but
only to the extent that (x) the conditions set forth in Section 4.2 are
satisfied at the time of such reallocation (and, unless the Borrower shall have
otherwise notified the Administrative Agent at such time, the Borrower shall be
deemed to have represented and warranted that such conditions are satisfied at
such time), and (y) such reallocation does not cause the aggregate Outstanding
Credit Exposure of any Non-Defaulting Lender to exceed such Non-Defaulting
Lender’s Commitment. No reallocation hereunder shall constitute a waiver or
release of any claim of any party hereunder against a Defaulting Lender arising
from that Lender having become a Defaulting Lender, including any claim of a
Non-Defaulting Lender as a result of such Non-Defaulting Lender’s increased
exposure following such reallocation.

(v) Cash Collateral, Repayment of Swingline Loans. If the reallocation described
in clause (iv) above cannot, or can only partially, be effected, the Borrower
shall, without prejudice to any right or remedy available to it hereunder or
under law, (x) first, prepay Swingline Loans in an amount equal to the Swingline
Lenders Fronting Exposure, and (y) second, Cash Collateralize the LC Issuer’s
Fronting Exposure in accordance with the procedures set forth in
Section 2.22(d).

(b) Defaulting Lender Cure. If the Borrower, the Administrative Agent, each LC
Issuer and Swingline Lender agree in writing that a Lender is no longer a
Defaulting Lender, the Administrative Agent will so notify the parties hereto,
whereupon as of the effective date specified in such notice and subject to any
conditions set forth therein (which may include arrangements with respect to any
Cash Collateral), that Lender will, to the extent applicable, purchase at par
that portion of outstanding Loans of the other Lenders or take such other
actions as the Administrative Agent may determine to be necessary to cause the
Loans and funded and unfunded participations in Facility LCs and Swingline Loans
to be held pro rata by the Lenders in accordance with the Commitments (without
giving effect to Section 2.22(a)(iv)), whereupon such Lender will cease to be a
Defaulting Lender; provided that no adjustments will be made retroactively with
respect to fees accrued or payments made by or on behalf of the Borrower while
that Lender was a Defaulting Lender; and provided, further, that except to the
extent otherwise expressly agreed by the affected parties, no change hereunder
from Defaulting Lender to Lender will constitute a waiver or release of any
claim of any party hereunder arising from that Lender’s having been a Defaulting
Lender.

(c) New Swingline Loans and Facility LCs. So long as any Lender is a Defaulting
Lender, (i) Swingline Lender shall not be required to fund any Swingline Loans
unless it is satisfied that it will have no Fronting Exposure after giving
effect to such Swingline Loan, and (ii) LC Issuer shall not be required to
issue, extend, renew or increase any Facility LC unless it is satisfied that it
will have no Fronting Exposure after giving effect thereto.

(d) Cash Collateral. At any time that there shall exist a Defaulting Lender,
within one (1) Business Day following the written request of the Administrative
Agent or the LC Issuer (with a copy to the Administrative Agent) the Borrower
shall Cash Collateralize the LC Issuer’s Fronting Exposure with respect to such
Defaulting Lender (determined after giving effect to Section 2.22(a)(iv) and any
Cash Collateral provided by such Defaulting Lender) in an amount not less than
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(i) Grant of Security Interest. The Borrower, and to the extent provided by any
Defaulting Lender, such Defaulting Lender, hereby grants to the Administrative
Agent, for the benefit of the LC Issuer, and agrees to maintain, a first
priority security interest in all such Cash Collateral as security for the
Defaulting Lender’s obligation to fund participations in respect of LC
Obligations, to be applied pursuant to clause (ii) below. If at any time the
Administrative Agent determines that Cash Collateral is subject to any right or
claim of any Person other than the Administrative Agent and the LC Issuer as
herein provided or that the total amount of such Cash Collateral is less than
the Minimum Collateral Amount, the Borrower will, promptly upon demand by the
Administrative Agent, pay or provide to the Administrative Agent additional Cash
Collateral in an amount sufficient to eliminate such deficiency (after giving
effect to any Cash Collateral provided by the Defaulting Lender).

(ii) Application. Notwithstanding anything to the contrary contained in this
Agreement, Cash Collateral provided under this Section 2.22 in respect of
Facility LCs shall be applied to the satisfaction of the Defaulting Lender’s
obligation to fund participations in respect of LC Obligations (including, as to
Cash Collateral provided by a Defaulting Lender, any interest accrued on such
obligation) for which the Cash Collateral was so provided, prior to any other
application of such property as may otherwise be provided for herein.

(iii) Termination of Requirement. Cash Collateral (or the appropriate portion
thereof) provided to reduce the LC Issuer’s Fronting Exposure shall no longer be
required to be held as Cash Collateral pursuant to this
Section 2.22(d) following (i) the elimination of the applicable Fronting
Exposure (including by the termination of Defaulting Lender status of the
applicable Lender), or (ii) the determination by the Administrative Agent and
the LC Issuer that there exists excess Cash Collateral; provided that, subject
to this Section 2.22 the Person providing Cash Collateral and the LC Issuer may
agree that Cash Collateral shall be held to support future anticipated Fronting
Exposure or other obligations.

2.23 Increase Option. The Borrower may from time to time, with the prior written
approval of the Administrative Agent which approval shall not be unreasonably
withheld, elect to increase the Aggregate Commitment, in each case in minimum
increments of $10,000,000 or such lower amount as the Borrower and the
Administrative Agent agree upon, so long as, after giving effect thereto, the
aggregate amount of such increases does not exceed $125,000,000, and the
Aggregate Commitment does not exceed $300,000,000. The Borrower may arrange for
any such increase to be provided by one or more Lenders (each Lender so agreeing
to an increase in its Commitment, an “Increasing Lender”), or by one or more new
banks, financial institutions or other entities (each such new bank, financial
institution or other entity, an “Augmenting Lender”), to increase their existing
Commitments, or extend Commitments, as the case may be; provided that (i) no
Lender shall be required to commit to any such increase, (ii) each Augmenting
Lender and each Increasing Lender shall be subject to the reasonable approval of
the Borrower, the Administrative Agent and the LC Issuer and (iii) (x) in the
case of an Increasing Lender, the Borrower and such Increasing Lender execute an
agreement substantially in the form of Exhibit E hereto, and (y) in the case of
an Augmenting Lender, the Borrower and such Augmenting Lender execute an
agreement substantially in the form of Exhibit F hereto. No consent of any
Lender (other than the Lenders participating in the increase) shall be required
for any increase in Commitments pursuant to this Section 2.23. Increases and new
Commitments created pursuant to this Section 2.23 shall become effective on the
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the Administrative Agent and the relevant Increasing Lenders or Augmenting
Lenders, and the Administrative Agent shall notify each Lender thereof.
Notwithstanding the foregoing, no increase in the Commitments (or in the
Commitment of any Lender) shall become effective under this paragraph unless,
(i) on the proposed date of the effectiveness of such increase, (a) the
conditions set forth in paragraphs (a) and (b) of Section 4.2 shall be satisfied
or waived by the Required Lenders (or, if required under Section 8.3, all
Lenders) and the Administrative Agent shall have received a certificate to that
effect dated such date and executed by an Authorized Officer of the Borrower and
(b) the Borrower shall be in compliance (on a pro forma basis reasonably
acceptable to the Administrative Agent) with the covenants contained in
Section 6.23 and (ii) the Administrative Agent shall have received documents
consistent with those delivered on the date hereof as to the corporate power and
authority of the Borrower to borrow hereunder after giving effect to such
increase. On the effective date of any increase in the Commitments, (i) each
relevant Increasing Lender and Augmenting Lender shall make available to the
Administrative Agent such amounts in immediately available funds as the
Administrative Agent shall determine, for the benefit of the other Lenders, as
being required in order to cause, after giving effect to such increase and the
use of such amounts to make payments to such other Lenders, each Lender’s
portion of the outstanding Loans of all the Lenders to equal its Pro Rata Share
of such outstanding Loans, and (ii) the Borrower shall be deemed to have repaid
and reborrowed all outstanding Loans as of the date of any increase in the
Commitments (with such reborrowing to consist of the Types of Loans, with
related Interest Periods if applicable, specified in a notice delivered by the
Borrower, in accordance with the requirements of Section 2.3). The deemed
payments made pursuant to clause (ii) of the immediately preceding sentence
shall be accompanied by payment of all accrued interest on the amount prepaid
and, in respect of each Eurocurrency Loan, shall be subject to indemnification
by the Borrower pursuant to the provisions of Section 3.4 if the deemed payment
occurs other than on the last day of the related Interest Periods.

2.24 [Reserved]

2.25 Term Out Provision. In the event that Borrower fails to meet or satisfy, or
there is otherwise a default under, any of the financial covenants set forth in
Sections 6.23(a), (b), (d), or (e), and such breach is not cured to the
reasonable satisfaction of Administrative Agent by Borrower within 30 days after
the earlier of (a) Borrower becoming aware of such breach, or (b) Administrative
Agent notifying Borrower of such breach (the “Cure Period”), the credit facility
available to Borrower under this Agreement will convert at the end of such Cure
Period to an 18 month term loan (the period between the end of the 30 day Cure
Period specified above and 18 months following the end of such Cure Period being
referred to herein as the “Term Out Period”). Upon the commencement of the Term
Out Period, Borrower shall no longer have any right to request or receive Loans
hereunder or the issuance of Letters of Credit hereunder, and shall otherwise
have no rights to any credit accommodations or other rights to obtain any
further loans, money, letters of credit, or other credit accommodations of any
nature whatsoever, under this Agreement. Commencing with the first day of the
first month following the commencement of the Term Out Period, and continuing on
the first day of each month thereafter, Borrower shall pay to Bank an amount
equal to 1/18th of the Aggregate Outstanding Credit Exposure as of the
commencement of the Term Out Period. All such payments shall be applied first to
the outstanding principal amount of all Loans owing hereunder and then to all
due and owing LC Obligations. To the extent that any of the LC Obligations
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Facility LCs then outstanding, any payments to be made under this Section 2.25
remaining after the outstanding principal amount of all Loans and then due and
payable LC Obligations have been paid in full, shall be remitted to the Facility
LC Collateral Account with Administrative Agent, to serve as security for the
payment of all future amounts drawn under all Facility LC’s and other LC
Obligations as the same become due and payable, and shall also serve as security
for all other Obligations owing hereunder (and Borrower hereby grants to
Administrative Agent and Lenders, a security interest in all of the Borrower’s
right, title and interest in and to the Facility LC Collateral Account and all
funds and sums which may from time to time be on deposit therein). For purposes
of clarification, if it occurs prior to the Facility Termination Date, at the
end of the Term Out Period, this facility shall be terminated. For purposes of
further clarification, notwithstanding that the Facility Termination Date has
occurred, if the Term Out Period has commenced prior to the Facility Termination
Date, then (notwithstanding the occurrence of the Facility Termination Date)
Borrower shall have the option to continue to make the principal amortization
payments, and interest payments and other sums owing under the Loan Documents,
in accordance with the foregoing provisions of this Section 2.25 during the
remainder of the Term Out Period (so that, so long as no other Event of Default
has occurred other than the failure to satisfy the financial covenants described
above in this Section 2.25, and so long as interest and other amounts owing
under the Loan Documents continue to be paid, Borrower need not pay the full
principal amount of the Loan outstanding on the Facility Termination Date, but
rather may continue to pay the principal amortization payment equal to 1/18th of
the Aggregate Outstanding Credit Exposure as of the commencement of the Term Out
Period each month for the remainder of the period of the Term Out Period).
Notwithstanding the foregoing or anything else contained herein which may be
construed to the contrary, in no event shall the Term Out Period exceed the
maturity date of the New Indenture Notes Obligations or any Refinancing
Indebtedness with respect thereto, at which time all Obligations owing hereunder
and under the other Loan Documents, not otherwise paid when due, shall be
immediately due and payable in full.

2.26 Swingline Commitment.

(a) Subject to the terms and conditions hereof, the Swingline Lender agrees to
make a portion of the credit otherwise available to the Borrower under the
Commitments from time to time prior to the Facility Termination Date by making
swing line loans (“Swingline Loans”) to the Borrower; provided that (i) the
aggregate principal amount of Swingline Loans outstanding at any time shall not
exceed the Swingline Commitment then in effect (notwithstanding that the
Swingline Loans outstanding at any time, when aggregated with the Swingline
Lender’s other outstanding Loans, may exceed the Swingline Commitment then in
effect), (ii) the Borrower shall not request and the Swingline Lender shall not
make, any Swingline Loan if, after giving effect to the making of such Swingline
Loan, the amount of the Available Aggregate Commitment would be less than zero,
and (iii) Borrower shall not request, and the Swingline Lender shall not make,
any Swingline Loan if, after giving effect to the making of such Swingline Loan,
the Borrowing Base Availability would be less than zero. During the Commitment
Period, the Borrower may use the Swingline Commitment by borrowing, repaying and
reborrowing, all in accordance with the terms and conditions hereof. Swingline
Loans shall be Daily Eurocurrency Loans only.

 

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(b) The Borrower shall repay to the Swingline Lender the then unpaid principal
amount of each Swingline Loan on the earliest of the end of the Commitment
Period, the tenth (10th) Business Day after such Swingline Loan is made, or the
date that the next Loan is borrowed.

2.27 Procedure for Swingline Borrowing; Refunding of Swingline Loans.

(a) Whenever the Borrower desires that the Swingline Lender make Swingline Loans
it shall give the Swingline Lender irrevocable telephonic notice confirmed
promptly in writing (which telephonic notice must be received by the Swingline
Lender not later than 2:00 P.M., New York City time, on the proposed Borrowing
Date), specifying (i) the amount to be borrowed and (ii) the requested Borrowing
Date (which shall be a Business Day during the Commitment Period). Each
borrowing under the Swingline Commitment shall be in an amount equal to $500,000
or a whole multiple of $100,000 in excess thereof. Not later than 3:00 P.M., New
York City time, on the Borrowing Date specified in a notice in respect of
Swingline Loans, the Swingline Lender shall make available to the Administrative
Agent at the Funding Office an amount in immediately available funds equal to
the amount of the Swingline Loan to be made by the Swingline Lender. The
Administrative Agent shall make the proceeds of such Swingline Loan available to
the Borrower on such Borrowing Date by depositing such proceeds in the account
of the Borrower with the Administrative Agent or as otherwise directed by the
Borrower on such Borrowing Date in immediately available funds.

(b) The Swingline Lender, at any time and from time to time in its sole and
absolute discretion may, on behalf of the Borrower (which hereby irrevocably
directs the Swingline Lender to act on its behalf), on one (1) Business Day’s
notice given by the Swingline Lender no later than 12:00 Noon, New York City
time, request each Lender to make, and each Lender hereby agrees to make, a
Loan, in an amount equal to such Lender’s Pro Rata Share of the aggregate amount
of the Swingline Loans (the “Refunded Swingline Loans”) outstanding on the date
of such notice, to repay the Swingline Lender. Each Lender shall make the amount
of such Loan available to the Administrative Agent in immediately available
funds, not later than 10:00 A.M., New York City time, one (1) Business Day after
the date of such notice. The proceeds of such Loans shall be immediately made
available by the Administrative Agent to the Swingline Lender for application by
the Swingline Lender to the repayment of the Refunded Swingline Loans. If the
amounts received from the Lenders are not sufficient to repay in full such
Refunded Swingline Loans, then the Borrower shall pay such difference to the
Administrative Agent within two (2) Business Days of notice from the
Administrative Agent, which payments shall be made available by the
Administrative Agent to the Swingline Lender to repay the Refunded Swingline
Loans.

(c) If prior to the time a Loan would have otherwise been made pursuant to
Section 2.27(b), one of the events described in Section 7.6 shall have occurred
and be continuing with respect to the Borrower or if for any other reason, as
determined by the Swingline Lender in its sole discretion, Loans may not be made
as contemplated by Section 2.27(b), each Lender shall, on the date such Loan was
to have been made pursuant to the notice referred to in Section 2.27(b),
purchase for cash an undivided participating interest in the then outstanding
Swingline Loans by paying to the Swingline Lender an amount (the “Swingline
Participation

 

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Amount”) equal to (i) such Lender’s Pro Rata Share times (ii) the sum of the
aggregate principal amount of Swingline Loans then outstanding that were to have
been repaid with such Loans.

(d) Whenever, at any time after the Swingline Lender has received from any
Lender such Lender’s Swingline Participation Amount, the Swingline Lender
receives any payment on account of the Swingline Loans, the Swingline Lender
will distribute to such Lender its Swingline Participation Amount (appropriately
adjusted, in the case of interest payments, to reflect the period of time during
which such Lender’s participating interest was outstanding and funded and, in
the case of principal and interest payments, to reflect such Lender’s pro rata
portion of such payment if such payment is not sufficient to pay the principal
of and interest on all Swingline Loans then due); provided, however, that in the
event that such payment received by the Swingline Lender is required to be
returned, such Lender will return to the Swingline Lender any portion thereof
previously distributed to it by the Swingline Lender.

(e) Each Lender’s obligation to make the Loans referred to in Section 2.27(b)
and to purchase participating interests pursuant to Section 2.27(c) shall be
absolute and unconditional and shall not be affected by any circumstance,
including (i) any setoff, counterclaim, recoupment, defense or other right that
such Lender or the Borrower may have against the Swingline Lender, the Borrower
or any other Person for any reason whatsoever, (ii) the occurrence or
continuance of a Default or an Event of Default or the failure to satisfy any of
the other conditions specified in Section 4.2, (iii) any adverse change in the
condition (financial or otherwise) of the Borrower, (iv) any breach of this
Agreement or any other Loan Document by the Borrower, any other Loan Party or
any other Lender or (v) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing.

ARTICLE III

YIELD PROTECTION; TAXES

3.1 Yield Protection. If, after the date of this Agreement, there occurs any
adoption of or change in any law, governmental or quasi-governmental rule,
regulation, policy, guideline, interpretation, or directive (whether or not
having the force of law) or in the interpretation, promulgation, implementation
or administration thereof by any governmental or quasi-governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, including, notwithstanding the foregoing, all requests,
rules, guidelines or directives (x) in connection with the Dodd-Frank Wall
Street Reform and Consumer Protection Act or (y) promulgated by the Bank for
International Settlements, the Basel Committee on Banking Regulations and
Supervisory Practices (or any successor or similar authority) or the United
States financial regulatory authorities, in each case of clauses (x) and (y),
regardless of the date enacted, adopted, issued, promulgated or implemented, or
compliance by any Lender or applicable Lending Installation or the LC Issuer
with any request or directive (whether or not having the force of law) of any
such authority, central bank or comparable agency (any of the foregoing, a
“Change in Law”) which:

(a) subjects any Lender or any applicable Lending Installation, the LC Issuer,
or the Administrative Agent to any Taxes (other than with respect to Indemnified
Taxes,

 

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Excluded Taxes, and Other Taxes) on its loans, loan principal, letters of
credit, commitments, or other obligations, or its deposits, reserves, other
liabilities or capital attributable thereto, or

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

(c) imposes any other condition (other than Taxes) the result of which is to
increase the cost to any Lender or any applicable Lending Installation or the LC
Issuer of making, funding or maintaining its Eurocurrency Loans or Daily
Eurocurrency Loans, or of issuing or participating in Facility LCs, or reduces
any amount receivable by any Lender or any applicable Lending Installation or
the LC Issuer in connection with its Eurocurrency Loans, Daily Eurocurrency
Loans, Facility LCs or participations therein, or requires any Lender or any
applicable Lending Installation or the LC Issuer to make any payment calculated
by reference to the amount of Eurocurrency Loans, Daily Eurocurrency Loans,
Facility LCs or participations therein held or interest or LC Fees received by
it, by an amount deemed material by such Lender or the LC Issuer as the case may
be,

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

3.2 Changes in Capital Adequacy Regulations. If a Lender or the LC Issuer
determines the amount of capital or liquidity required or expected to be
maintained by such Lender or the LC Issuer, any Lending Installation of such
Lender or the LC Issuer, or any corporation or holding company controlling such
Lender or the LC Issuer is increased as a result of (i) a Change in Law or
(ii) any change after the date of this Agreement in the Risk-Based Capital
Guidelines, then, within fifteen (15) days of demand by such Lender or the LC
Issuer, the Borrower shall pay such Lender or the LC Issuer the amount necessary
to compensate for any shortfall in the rate of return on the portion of such
increased capital which such Lender or the LC Issuer determines is attributable
to this Agreement, its Outstanding Credit Exposure or its Commitment to make
Loans and issue or participate in Facility LCs, as the case may be, hereunder
(after taking into account such Lender’s or the LC Issuer’s policies as to
capital adequacy or liquidity), in each case that is attributable to such Change
in Law or change in the Risk-Based Capital Guidelines, as applicable.

3.3 Availability of Types of Advances; Adequacy of Interest Rate. If (a) the
Administrative Agent or the Required Lenders determine that deposits of a type
and maturity appropriate to match fund Eurocurrency Advances or Daily
Eurocurrency Loans are not available to such Lenders in the relevant market or
(b) the Administrative Agent, in consultation with the Lenders, determines that
the interest rate applicable to Eurocurrency Advances or Daily Eurocurrency
Advances is not ascertainable or does not adequately and fairly reflect the cost
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making or maintaining Eurocurrency Advances or Daily Eurocurrency Advances or
(c) it becomes unlawful for the Lenders to maintain any Loan based on the
Eurocurrency Rate and/or Daily Eurocurrency Rate, then the Administrative Agent
shall suspend the availability of Eurocurrency Advances and Daily Eurocurrency
Advances and require any affected Eurocurrency Advances or Daily Eurocurrency
Advances to be repaid or converted to Advances accruing interest at a rate per
annum determined based upon an alternate index selected by Administrative Agent,
in its reasonable discretion after consultation with (but not approval of)
Borrower, reasonably comparable to that of a one-month Interest Period, intended
to generate a return substantially the same as that generated by the
Eurocurrency Rate at such time with a one-month Interest Period, and all
references in the Loan Documents to the Daily Eurocurrency or Eurocurrency Rate
shall be deemed to be references to such alternate index while such rate is in
effect, such repayment or conversion subject to the payment of any funding
indemnification amounts required by Section 3.4.

3.4 Funding Indemnification. If (a) any payment of a Eurocurrency Advance occurs
on a date which is not the last day of the applicable Interest Period, whether
because of acceleration, prepayment or otherwise, (b) a Eurocurrency Advance is
not made on the date specified by the Borrower for any reason other than default
by the Lenders, (c) a Eurocurrency Loan is converted other than on the last day
of the Interest Period applicable thereto, (d) the Borrower fails to borrow,
convert, continue or prepay any Eurocurrency Loan on the date specified in any
notice delivered pursuant hereto, or (e) any Eurocurrency Loan is assigned other
than on the last day of the Interest Period applicable thereto as a result of a
request by the Borrower pursuant to Section 2.20, the Borrower will indemnify
each Lender for such Lender’s costs, expenses and Interest Differential (as
determined by such Lender) incurred as a result of such prepayment. The term
“Interest Differential” shall mean that sum equal to the greater of zero or the
financial loss incurred by the Lender resulting from prepayment, calculated as
the difference between the amount of interest such Lender would have earned
(from the investments in money markets as of the Borrowing Date of such Loan)
had prepayment not occurred and the interest such Lender will actually earn
(from like investments in money markets as of the date of prepayment) as a
result of the redeployment of funds from the prepayment. Because of the
short-term nature of this facility, Borrower agrees that Interest Differential
shall not be discounted to its present value.

3.5 Taxes.

(a) Any and all payments by or on account of any obligation of any Loan Party
under any Loan Document shall be made without deduction or withholding for any
Taxes, except as required by applicable law. If any applicable law requires the
deduction or withholding of any Tax from any such payment, then the applicable
Loan Party shall be entitled to make such deduction or withholding and shall
timely pay the full amount deducted or withheld to the relevant Governmental
Authority in accordance with applicable law and, if such Tax is an Indemnified
Tax or Other Tax, then the sum payable by the applicable Loan Party shall be
increased as necessary so that after such deduction or withholding has been made
(including such deductions and withholdings applicable to additional sums
payable under this Section 3.5) the applicable Lender, the LC Issuer or the
Administrative Agent receives an amount equal to the sum it would have received
had no such deduction or withholding been made.

 

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(b) The Loan Parties shall timely pay to the relevant Governmental Authority in
accordance with applicable law or at the option of the Administrative Agent
timely reimburse it for the payment of, any Other Taxes.

(c) The Loan Parties shall indemnify any Lender, the LC Issuer or the
Administrative Agent, within fifteen (15) days after demand therefor, for the
full amount of any Indemnified Taxes and Other Taxes (including Indemnified
Taxes and Other Taxes imposed or asserted on or attributable to amounts payable
under this Section 3.5) payable or paid by such Lender, the LC Issuer or the
Administrative Agent or required to be withheld or deducted from a payment to
such Lender, the LC Issuer or the Administrative Agent and any reasonable
expenses arising therefrom or with respect thereto, whether or not such
Indemnified Taxes and Other Taxes were correctly or legally imposed or asserted
by the relevant governmental authority. A certificate as to the amount of such
payment or liability delivered to the Borrower by a Lender or LC Issuer (with a
copy to the Administrative Agent), or by the Administrative Agent on its own
behalf or on behalf of a Lender or LC Issuer, shall be conclusive absent
manifest error.

(d) Each Lender shall severally indemnify the Administrative Agent, within
fifteen (15) days after demand therefor, for (i) any Indemnified Taxes and Other
Taxes attributable to such Lender (but only to the extent that any Loan Party
has not already indemnified the Administrative Agent for such Indemnified Taxes
and Other Taxes and without limiting the obligation of the Loan Parties to do
so), (ii) any Taxes attributable to such Lender’s failure to comply with the
provisions of Section 12.2(c) relating to the maintenance of a Participant
Register, and (iii) any Excluded Taxes attributable to such Lender, in each
case, that are payable or paid by the Administrative Agent in connection with
any Loan Document, and any reasonable expenses arising therefrom or with respect
thereto, whether or not such Taxes were correctly or legally imposed or asserted
by the relevant governmental authority. A certificate as to the amount of such
payment or liability delivered to any Lender by the Administrative Agent shall
be conclusive absent manifest error. Each Lender hereby authorizes the
Administrative Agent to set off and apply any and all amounts at any time owing
to such Lender under any Loan Document or otherwise payable by the
Administrative Agent to the Lender from any other source against any amount due
to the Administrative Agent under this paragraph (d).

(e) As soon as practicable after any payment of Taxes by any Loan Party to a
Governmental Authority pursuant to this Section 3.5, such Loan Party shall
deliver to the Administrative Agent the original or a certified copy of a
receipt issued by such governmental authority evidencing such payment, a copy of
the return reporting such payment or other evidence of such payment reasonably
satisfactory to the Administrative Agent.

(f) (i) Any Lender that is entitled to an exemption from or reduction of
withholding Tax with respect to payments made under any Loan Document shall
deliver to the Borrower and the Administrative Agent, at the time or times
reasonably requested by the Borrower or the Administrative Agent, such properly
completed and executed documentation reasonably requested by the Borrower or the
Administrative Agent as will permit such payments to be made without withholding
or at a reduced rate of withholding. In addition, any Lender, if reasonably
requested by the Borrower or the Administrative Agent, shall deliver such other
documentation prescribed by applicable law or reasonably requested by the
Borrower or the

 

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Administrative Agent as will enable the Borrower or the Administrative Agent to
determine whether or not such Lender is subject to backup withholding or
information reporting requirements. Notwithstanding anything to the contrary in
the preceding two sentences, the completion, execution and submission of such
documentation (other than such documentation set forth in Section 3.5(f)(ii)(A),
(ii)(B) and (ii)(D) below) shall not be required if in the Lender’s reasonable
judgment such completion, execution or submission would subject such Lender to
any material unreimbursed cost or expense or would materially prejudice the
legal or commercial position of such Lender.

(ii) Without limiting the generality of the foregoing,

(A) any Lender that is a United States Person for U.S. federal income Tax
purposes shall deliver to the Borrower and the Administrative Agent on or prior
to the date on which such Lender becomes a Lender under this Agreement (and from
time to time thereafter upon the reasonable request of the Borrower or the
Administrative Agent), executed originals of IRS Form W-9 certifying that such
Lender is exempt from U.S. federal backup withholding Tax;

(B) any Non-U.S. Lender shall, to the extent it is legally entitled to do so,
deliver to the Borrower and the Administrative Agent (in such number of copies
as shall be requested by the recipient) on or prior to the date on which such
Non-U.S. Lender becomes a Lender under this Agreement (and from time to time
thereafter upon the reasonable request of the Borrower or the Administrative
Agent), whichever of the following is applicable:

(i) in the case of a Non-U.S. Lender claiming the benefits of an income Tax
treaty to which the United States is a party (x) with respect to payments of
interest under any Loan Document, executed originals of IRS Form W-8BEN
establishing an exemption from, or reduction of, U.S. federal withholding Tax
pursuant to the “interest” article of such Tax treaty and (y) with respect to
any other applicable payments under any Loan Document, IRS Form W-8BEN
establishing an exemption from, or reduction of, U.S. federal withholding Tax
pursuant to the “business profits” or “other income” article of such Tax treaty;

(ii) executed originals of IRS Form W-8ECI;

(iii) in the case of a Non-U.S. Lender claiming the benefits of the exemption
for portfolio interest under Section 881(c) of the Code, (x) a certificate to
the effect that such Non-U.S. Lender is not a “bank” within the meaning of
Section 881(c)(3)(a) of the Code, a “10 percent shareholder” of the Borrower
within the meaning of Section 881(c)(3)(b) of the Code, or a “controlled foreign
corporation” described in Section 881(c)(3)(c) of the Code and (y) executed
originals of IRS Form W-8BEN; or

 

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(iv) to the extent a Non-U.S. Lender is not the beneficial owner, executed
originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN,
IRS Form W-8IMY or IRS Form W-9, and/or other certification documents from each
beneficial owner, as applicable.

(C) any Non-U.S. Lender shall, to the extent it is legally entitled to do so,
deliver to the Borrower and the Administrative Agent (in such number of copies
as shall be requested by the recipient) on or prior to the date on which such
Non-U.S. Lender becomes a Lender under this Agreement (and from time to time
thereafter upon the reasonable request of the Borrower or the Administrative
Agent), executed originals of any other form prescribed by applicable law as a
basis for claiming exemption from or a reduction in U.S. federal withholding
Tax, duly completed, together with such supplementary documentation as may be
prescribed by applicable law to permit the Borrower or the Administrative Agent
to determine the withholding or deduction required to be made; and

(D) if a payment made to a Lender under any Loan Document would be subject to
U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to
comply with the applicable reporting requirements of FATCA (including those
contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender
shall deliver to the Borrower and the Administrative Agent at the time or times
prescribed by law and at such time or times reasonably requested by the Borrower
or the Administrative Agent such documentation prescribed by applicable law
(including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such
additional documentation reasonably requested by the Borrower or the
Administrative Agent as may be necessary for the Borrower and the Administrative
Agent to comply with their obligations under FATCA and to determine that such
Lender has complied with such Lender’s obligations under FATCA or to determine
the amount to deduct and withhold from such payment. Solely for purposes of this
clause (D), “FATCA” shall include any amendments made to FATCA after the date of
this Agreement.

(iii) Each Lender agrees that if any form or certification it previously
delivered expires or becomes obsolete or inaccurate in any respect, it shall
update such form or certification or promptly notify the Borrower and the
Administrative Agent in writing of its legal inability to do so.

(g) If any party determines, in its sole discretion exercised in good faith,
that it has received a refund of any Taxes as to which it has been indemnified
pursuant to this Section 3.5 (including by the payment of additional amounts
pursuant to this Section 3.5), it shall pay to the indemnifying party an amount
equal to such refund (but only to the extent of indemnity payments made under
this Section with respect to the Taxes giving rise to such refund), net of all
out-of-pocket expenses (including Taxes) of such indemnified party and without
interest (other

 

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than any interest paid by the relevant governmental authority with respect to
such refund). Such indemnifying party, upon the request of such indemnified
party, shall repay to such indemnified party the amount paid over pursuant to
this paragraph (g) (plus any penalties, interest or other charges imposed by the
relevant governmental authority) in the event that such indemnified party is
required to repay such refund to such governmental authority. Notwithstanding
anything to the contrary in this paragraph (g), in no event will the indemnified
party be required to pay any amount to an indemnifying party pursuant to this
paragraph (g) the payment of which would place the indemnified party in a less
favorable net after-Tax position than the indemnified party would have been in
if the indemnification payments or additional amounts giving rise to such refund
had never been paid. This paragraph shall not be construed to require any
indemnified party to make available its Tax returns (or any other information
relating to its Taxes that it deems confidential) to the indemnifying party or
any other Person.

(h) Each party’s obligations under this Section 3.5 shall survive the
resignation or replacement of the Administrative Agent or any assignment of
rights by, or the replacement of, a Lender, the termination of the Commitments
and the repayment, satisfaction or discharge of all obligations under any Loan
Document.

(i) For purposes of Section 3.5(d) and (f), the term “Lender” includes the LC
Issuer.

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

ARTICLE IV

CONDITIONS PRECEDENT

4.1 Initial Credit Extension. The Lenders shall not be required to make the
initial Credit Extension hereunder unless each of the following conditions is
satisfied:

 

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(a) The Administrative Agent shall have received executed counterparts of each
of this Agreement and the Guaranty.

(b) The Administrative Agent shall have received a certificate, signed by the
chief financial officer of the Borrower, stating that on the date of the initial
Credit Extension (1) no Default or Event of Default has occurred and is
continuing and (2) the representations and warranties contained in Article V are
(x) with respect to any representations or warranties that contain a materiality
qualifier, true and correct in all respects and (y) with respect to any
representations or warranties that do not contain a materiality qualifier, true
and correct in all material respects as of such date, except to the extent any
such representation or warranty is stated to relate solely to an earlier date,
in which case such representation or warranty shall have been true and correct
on and as of such earlier date.

(c) The Administrative Agent shall have received a written opinion of the
Borrower’s counsel in form and substance reasonably acceptable to the
Administrative Agent.

(d) The Administrative Agent shall have received any Notes requested by a Lender
pursuant to Section 2.13 payable to the order of each such requesting Lender.

(e) The Administrative Agent shall have received such documents and certificates
relating to the organization, existence and good standing of the Borrower and
each initial Guarantor, the authorization of the transactions contemplated
hereby and any other legal matters relating to the Borrower and such Guarantors,
the Loan Documents or the transactions contemplated hereby, all in form and
substance satisfactory to the Administrative Agent and its counsel and as
further described in the list of closing documents attached as Exhibit H.

(f) If the initial Credit Extension will be the issuance of a Facility LC, the
Administrative Agent shall have received a properly completed Facility LC
Application.

(g) The Administrative Agent shall have received evidence satisfactory to it
that any credit facility currently in effect for the Borrower or any Guarantor
(other than the New Indenture Notes Obligations) shall have been terminated and
cancelled or arrangement made for the substantially concurrent discharge thereof
and all indebtedness thereunder shall have been fully repaid or arrangement made
for the substantially concurrent discharge thereof (except to the extent being
so repaid with the initial Loans) and any and all liens thereunder shall have
been terminated and released.

(h) The Administrative Agent and Arrangers shall have received all fees and
other amounts due and payable on or prior to the date hereof, including fees
payable under the Fee Letter and, to the extent invoiced, reimbursement or
payment of all out-of-pocket expenses required to be reimbursed or paid by the
Borrower hereunder.

(i) There shall not have occurred a Material Adverse Effect since December 31,
2014.

(j) The Administrative Agent shall have received all governmental, equity holder
and third party consents and approvals necessary in connection with the
contemplated financing and all applicable waiting periods shall have expired
without any action being taken by

 

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any authority that would be reasonably likely to restrain, prevent or impose any
material adverse conditions on the Loan Parties, taken as a whole, and no law or
regulation shall be applicable which in the reasonable judgment of the
Administrative Agent could have such effect.

(k) No action, suit, investigation or proceeding is pending or, to the knowledge
of the Borrower, threatened in any court or before any arbitrator or
governmental authority that would reasonably be expected to result in a Material
Adverse Effect.

(l) The Administrative Agent shall have received: (i) pro forma financial
statements giving effect to the initial Credit Extensions contemplated hereby,
which demonstrate, in the Administrative Agent’s reasonable judgment, together
with all other information then available to the Administrative Agent, that the
Borrower can repay its debts and satisfy its other obligations as and when they
become due, and can comply with the financial covenants set forth in
Section 6.23 throughout the term of this Agreement and (ii) such information as
the Administrative Agent may reasonably request to confirm the tax, legal, and
business assumptions made in such pro forma financial statements.

(m) The Administrative Agent shall have received evidence satisfactory to
Administrative Agent that all of the existing Indenture Note Obligations and any
and all other Specified Pari Passu Lien Obligations (as defined in the Prior
Credit Agreement or the “Intercreditor Agreement” described therein) shall have
been repaid or that arrangements have been made for such obligations to be
discharged pursuant to the terms thereof (other than contingent indemnification
obligations for which no claim has been made), and all liens and security
interests in any Collateral (as defined in the Prior Credit Agreement or the
“Intercreditor Agreement” described therein) or any other property or assets
pertaining thereto shall have been cancelled and released.

(n) The net proceeds of the New Indenture and the New Indenture Notes
Obligations shall be used in whole or in part to repay and satisfy the existing
Indenture Notes Obligations.

(o) The Administrative Agent shall have successfully syndicated $100,000,000 of
the total Aggregate Commitment hereunder to Lenders other than U.S. Bank, so
that the total Aggregate Commitment of U.S. Bank under this Credit Agreement
does not exceed $75,000,000; and such other Lenders shall be a party to this
Agreement, and shall have executed such documents and agreements to evidence and
confirm the foregoing as the Administrative Agent in its reasonable discretion
shall require.

(p) Borrower, Guarantors and any other parties reasonably deemed necessary or
appropriate by Administrative Agent shall have executed any and all other
documents and agreements, in form and substance satisfactory to Administrative
Agent, which Administrative Agent deems necessary or appropriate to carry out
the intent and agreement of the parties hereto.

4.2 Each Credit Extension. The Lenders shall not be required to make any Credit
Extension unless on the applicable Borrowing Date:

(a) There exists no Default or Event of Default, nor would a Default or Event of
Default result from such Credit Extension.

 

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(b) The representations and warranties contained in Article V are (x) with
respect to any representations or warranties that contain a materiality
qualifier, true and correct in all respects and (y) with respect to any
representations or warranties that do not contain a materiality qualifier, true
and correct in all material respects as of such Borrowing Date except to the
extent any such representation or warranty is stated to relate solely to an
earlier date, in which case such representation or warranty shall have been true
and correct on and as of such earlier date.

(c) After giving effect to the requested Credit Extension, the Aggregate
Outstanding Credit Exposure does not exceed the lesser of (i) the Borrowing Base
Availability at such time, or (ii) the Aggregate Commitment at such time.

Each Borrowing Notice or request for issuance of a Facility LC with respect to
each such Credit Extension shall constitute a representation and warranty by the
Borrower that the conditions contained in Sections 4.2(a) and (b) have been
satisfied.

ARTICLE V

REPRESENTATIONS AND WARRANTIES

The Borrower represents and warrants to the Lenders that:

5.1 Existence and Standing. Each of the Loan Parties is a corporation,
partnership or limited liability company duly and properly incorporated or
formed, as the case may be, validly existing and (to the extent such concept
applies to such entity) in good standing under the laws of its jurisdiction of
incorporation or organization and has all requisite authority to conduct its
business in each jurisdiction in which its business is conducted.

5.2 Authorization and Validity. Each Loan Party has the power and authority and
legal right to execute and deliver the Loan Documents to which it is a party and
to perform its obligations thereunder. The execution and delivery by each Loan
Party of the Loan Documents to which it is a party and the performance of its
obligations thereunder have been duly authorized by proper corporate, limited
partnership and limited liability company proceedings, as the case may be, and
the Loan Documents to which each Loan Party is a party constitute legal, valid
and binding obligations of such Loan Party enforceable against such Loan Party
in accordance with their terms, except as enforceability may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement of creditors’
rights generally.

5.3 No Conflict; Government Consent. Neither the execution and delivery by any
Loan Party of the Loan Documents to which it is a party, nor the consummation of
the transactions therein contemplated, nor compliance with the provisions
thereof will violate (i) any law, rule, regulation, order, writ, judgment,
injunction, decree or award binding on any Loan Party except where such
violation could not reasonably be expected to have a Material Adverse Effect,
(ii) any Loan Party’s articles or certificate of incorporation, partnership
agreement, certificate of partnership, articles or certificate of organization,
by-laws, or operating or other management agreement, as the case may be, or
(iii) the provisions of any indenture, instrument or agreement to which any Loan
Party is a party or is subject, or by which it, or its Property, is

 

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bound, or conflict with or constitute a default thereunder, or result in, or
require, the creation or imposition of any Lien in, of or on the Property of any
Loan Party pursuant to the terms of any such indenture, instrument or agreement,
except where such violation or conflict could not reasonably be expected to have
a Material Adverse Effect. No order, consent, adjudication, approval, license,
authorization, or validation of, or filing, recording or registration with, or
exemption by, or other action in respect of any governmental or public body or
authority, or any subdivision thereof, which has not been obtained by any Loan
Party is required to be obtained by such Loan Party in connection with the
execution and delivery of the Loan Documents, the borrowings under this
Agreement, the payment and performance by the Borrower of the Obligations or the
legality, validity, binding effect or enforceability of any of the Loan
Documents.

5.4 Financial Statements and Information. The financial statements of Borrower
and its Subsidiaries for the fiscal year ended December 31, 2014 heretofore
delivered to the Lenders, fairly present in all material respects the
consolidated financial condition and operations of Borrower and its Subsidiaries
at such date and the consolidated results of their operations for the periods
described therein. The information contained in such financial statements
regarding the Borrower and its Subsidiaries and their respective operations and
assets is true and accurate in all material respects.

5.5 Material Adverse Change. Since the date of the most recent audited financial
statements delivered to the Administrative Agent there has been no change in the
business, Property, prospects, financial condition or results of operations of
the Loan Parties which could reasonably be expected to have a Material Adverse
Effect.

5.6 Taxes. The Borrower and each of its Subsidiaries have filed all United
States federal and state income Tax returns and all other material Tax returns
which are required to be filed by them and have paid prior to delinquency
thereof all United States federal and state income Taxes and all other material
Taxes due from the Borrower and each of its Subsidiaries, including, without
limitation, pursuant to any assessment received by the Borrower and each of its
Subsidiaries, except such Taxes, if any, (i) as are being contested in good
faith and as to which adequate reserves have been provided in accordance with
GAAP and as to which no Lien exists, or (ii) the CCM Proceeding, or (iii) which
would not have a Material Adverse Effect. No Tax liens have been filed and no
claims are being asserted with respect to any such Taxes. The charges, accruals
and reserves on the books of the Borrower and each of its Subsidiaries in
respect of any Taxes or other governmental charges are adequate.

5.7 Litigation and Contingent Obligations. There is no litigation, arbitration,
governmental investigation, proceeding or inquiry pending or, to the knowledge
of any of their executive officers, threatened against or affecting the Borrower
or any of its Subsidiaries which could reasonably be expected to have a Material
Adverse Effect (other than the CCM Proceeding) or which seeks to prevent, enjoin
or delay the making of any Credit Extensions.

5.8 Entities Owned. Schedule 5.8 sets forth, as of the Effective Date, the names
and jurisdictions of incorporation or formation of all Subsidiaries and Joint
Ventures in which Borrower has a direct ownership interest (but excluding
publicly-traded Persons in which Borrower holds less than a five percent
(5%) ownership interest). Except as described in

 

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Schedule 5.8, as of the Effective Date, excluding publicly-traded Persons in
which Borrower holds less than a five percent (5%) ownership interest, Borrower
does not own any Capital Stock or ownership interest in any Person other than
its Subsidiaries and Joint Ventures. All outstanding shares of Capital Stock or
ownership interests, as the case may be, of each Subsidiary (other than an
Excluded Subsidiary) and Joint Venture that are owned by Borrower or any other
Loan Party are (i) owned of record and beneficially by Borrower and/or by one
(1) or more Loan Parties, free and clear of all Liens, claims, encumbrances, and
rights of others (other than Permitted Liens), and (ii) (to the knowledge of the
Borrower in the case of any such Person that is not a Subsidiary of the
Borrower) duly authorized, validly issued, fully paid, nonassessable (except for
capital calls or contribution requirements in connection with ownership
interests in limited liability companies, limited partnerships and Joint
Ventures), and issued in compliance with all applicable state and federal
securities and other laws, except where the failure to comply could not
reasonably be expected to have a Material Adverse Effect.

5.9 ERISA. With respect to each Plan, the Borrower and all ERISA Affiliates have
paid all required minimum contributions and installments on or before the due
dates provided under Section 430(j) of the Code and could not reasonably be
subject to a lien under Section 430(k) of the Code or Title IV of ERISA. Neither
the Borrower nor any ERISA Affiliate has filed, pursuant to Section 412(c) of
the Code or Section 302(c) of ERISA, an application for a waiver of the minimum
funding standard. No ERISA Event has occurred or is reasonably expected to occur
that, when taken together with all other such ERISA Events for which liability
is reasonably expected to occur, could reasonably be expected to result in a
Material Adverse Effect.

5.10 Accuracy of Information. No information, exhibit, financial statements or
report furnished by any Loan Party or any of their respective Subsidiaries to
the Administrative Agent or to any Lender in connection with the negotiation of,
or compliance with, the Loan Documents (as modified or supplemented by other
information so furnished), taken as a whole, as of the date so furnished or
delivered, contained any material misstatement of fact or omitted to state a
material fact or any fact necessary to make the statements contained therein not
misleading.; provided that (1) with respect to projected financial information,
the Borrower represents only that such information was prepared in good faith
based upon assumptions believed to be reasonable at the time and (2) with
respect to the financial statements, the Borrower makes only the representations
set forth in Section 5.4.

5.11 Regulation U. Margin stock (as defined in Regulation U) constitutes less
than 25% of the value of those assets of the Borrower and its Subsidiaries which
are subject to any limitation on sale, pledge, or other restriction hereunder.

5.12 Material Agreements. No Loan Party nor any Subsidiary of the Borrower is in
default in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in (i) any agreement to which it is a party,
which default could reasonably be expected to have a Material Adverse Effect or
(ii) any agreement or instrument evidencing or governing Material Indebtedness.

5.13 Compliance With Laws. Each Loan Party is in compliance with all applicable
statutes, rules, regulations, orders and restrictions of any domestic or foreign
government or any

 

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instrumentality or agency thereof having jurisdiction over the conduct of their
respective businesses or the ownership of their respective Property, except
where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.

5.14 Title to Properties. Each of the Loan Parties has good and marketable fee
title to the Real Property Inventory owned by it, and except as could not
reasonably be expected to result in a Material Adverse Effect, to all the other
assets owned by it and reflected on the balance sheet and related notes and
schedules most recently delivered by the Borrower to the Lenders (the “Recent
Balance Sheet”), except for those properties and assets which have been disposed
of since the date of the Recent Balance Sheet or which no longer are used or
useful in the conduct of its business or which are classified as real estate not
owned under GAAP. All such Real Property Inventory and other assets owned by the
Loan Parties are free and clear of all Liens except Permitted Liens.

5.15 Plan Assets; Prohibited Transactions. The Borrower is not an entity deemed
to hold “plan assets” within the meaning of 29 C.F.R. § 2510.3-101 of an
employee benefit plan (as defined in Section 3(3) of ERISA) which is subject to
Title I of ERISA or any plan (within the meaning of Section 4975 of the Code),
and neither the execution of this Agreement nor the making of Credit Extensions
hereunder gives rise to a prohibited transaction within the meaning of
Section 406 of ERISA or Section 4975 of the Code.

5.16 Environmental Matters. Based on its commercially reasonable due diligence,
the Borrower has concluded its Property and operations and those of its
Subsidiaries are in material compliance with applicable Environmental Laws and
that none of Borrower or any of its Subsidiaries is subject to any liability
under Environmental Laws that individually or in the aggregate could reasonably
be expected to have a Material Adverse Effect. None of the Loan Parties has
received any notice to the effect that its Property and/or operations are not in
material compliance with any of the requirements of applicable Environmental
Laws or are the subject of any federal or state investigation evaluating whether
any remedial action is needed to respond to a release of any Hazardous Material,
which non-compliance or remedial action could reasonably be expected to have a
Material Adverse Effect.

5.17 Investment Company Act. Neither the Borrower nor any Subsidiary is an
“investment company” or a company “controlled” by an “investment company”,
within the meaning of the Investment Company Act of 1940, as amended.

5.18 Insurance. The Borrower maintains, and has caused each Subsidiary to
maintain, with financially sound and reputable insurance companies insurance on
all their Property, liability insurance and environmental insurance in such
amounts, subject to such deductibles and self-insurance retentions and covering
such properties and risks as is consistent with sound business practice.

5.19 Subordinated Debt. The Obligations constitute senior indebtedness which is
entitled to the benefits of the subordination provisions of all outstanding
Subordinated Debt.

5.20 Solvency.

 

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(i) Immediately after the consummation of the transactions to occur on the date
hereof (inclusive of the New Indenture Notes Obligations) and immediately
following the making of each Credit Extension, if any, made on the date hereof
and after giving effect to the application of the proceeds of such Credit
Extensions, (a) the fair value of the assets of the Borrower and its
Subsidiaries on a consolidated basis, at a fair valuation, will exceed the debts
and liabilities, subordinated, contingent or otherwise, of the Borrower and its
Subsidiaries on a consolidated basis; (b) the present fair saleable value of the
Property of the Borrower and its Subsidiaries on a consolidated basis will be
greater than the amount that will be required to pay the probable liability of
the Borrower and its Subsidiaries on a consolidated basis on their debts and
other liabilities, subordinated, contingent or otherwise, as such debts and
other liabilities become absolute and matured; (c) the Borrower and its
Subsidiaries on a consolidated basis will be able to pay their debts and
liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured; and (d) the Borrower and its
Subsidiaries on a consolidated basis will not have unreasonably small capital
with which to conduct the businesses in which they are engaged as such
businesses are now conducted and are proposed to be conducted after the date
hereof.

(ii) The Borrower does not intend to, or to permit any of its Subsidiaries to,
and does not believe that it or any of its Subsidiaries will, incur debts beyond
its ability to pay such debts as they mature, taking into account the timing of
and amounts of cash to be received by it or any such Subsidiary and the timing
of the amounts of cash to be payable on or in respect of its Indebtedness or the
Indebtedness of any such Subsidiary.

5.21 No Default. No Default or Event of Default has occurred and is continuing.

5.22 Foreign Asset Control Regulations. Neither the execution and delivery of
the Loan Documents by Borrower or any Loan Party nor the use of the proceeds of
any Loan or any extension of credit, will violate the Trading with the Enemy
Act, as amended, or any of the foreign assets control regulations of the United
States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or the
Anti-Terrorism Order or any enabling legislation or executive order relating to
any of the same. Without limiting the generality of the foregoing, none of the
Borrower, any Loan Party nor any of their respective subsidiaries (a) are or
will become a blocked person described in Section 2 of the Anti-Terrorism Order
or (b) engage or will engage in any dealings or transactions or be otherwise
associated with any such blocked person.

5.23 Anti-Corruption Laws. The Borrower, its subsidiaries and their respective
officers and employees and, to the knowledge of Borrower, its directors and
agents, are in compliance with Anti-Corruption Laws in all material respects. No
Advance or Letter of Credit, use of proceeds or other transaction contemplated
by this Agreement will violate any Anti-Corruption Law.

ARTICLE VI

COVENANTS

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

 

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6.1 Financial Reporting. The Borrower will maintain, for itself and each
Subsidiary, a system of accounting established and administered in accordance
with GAAP, and furnish to the Administrative Agent:

(a) Within 90 days after the close of each of its fiscal years, an unqualified
(except for qualifications relating (1) to changes in accounting principles or
practices reflecting changes in GAAP, (2) for any period within twelve months of
the Facility Termination Date, the impending maturity of the Obligations) audit
report, with no going concern modifier, certified by (1) nationally recognized
independent certified accountants or (2) independent certified public
accountants acceptable to the Lenders, prepared in accordance with GAAP on a
consolidated basis for the Loan Parties and their respective Subsidiaries,
including balance sheets as of the end of such period, related profit and loss
and reconciliation of surplus statements, and a statement of cash flows,
accompanied by, if prepared and delivered, any management letter prepared by
said accountants.

(b) Within forty-five (45) days after the close of the first three (3) quarterly
periods of each of its fiscal years, for the Loan Parties and their respective
Subsidiaries, consolidated unaudited balance sheets as at the close of each such
period and consolidated profit and loss statements (including sufficient detail
for independent calculation of the financial covenants set forth in
Section 6.23) and a statement of cash flows for the period from the beginning of
such fiscal year to the end of such quarter, all certified by its chief
financial officer as being prepared in accordance with GAAP, subject to normal
year-end adjustments and the absence of footnotes.

(c) Within forty-five (45) days after the end of each calendar quarter, Borrower
shall provide Administrative Agent with a Borrowing Base Certificate (and
Administrative Agent will promptly forward to each Lender) showing Borrower’s
calculations of the components of the Borrowing Base and such data supporting
such calculations as the Administrative Agent may reasonably require, which
Borrowing Base Certificate shall be subject to the Administrative Agent’s
reasonable approval and adjustment.

(d) As soon as available, but in any event within 30 days after the beginning of
each fiscal year of the Borrower, a copy of the plan and forecast (including a
projected consolidated balance sheet, income statement and cash flow statement)
of the Borrower for such fiscal year.

(e) Together with the financial statements required under Sections 6.1(a) and
(b), a compliance certificate in substantially the form of Exhibit I signed by
its chief financial officer showing the calculations necessary to determine
compliance with Section 6.23 of this Agreement and stating that no Default or
Event of Default exists, or if any Default or Event of Default exists, stating
the nature and status thereof.

(f) Promptly upon the filing thereof, copies of all registration statements and
annual, quarterly, monthly or other regular reports which the Borrower or any of
its Subsidiaries files with the SEC.

 

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(g) within 20 days after each month-end, a monthly sales report for all
Properties and Projects owned by Borrower.

(h) Such other information (including non-financial information and
environmental reports, if available) as the Administrative Agent may from time
to time reasonably request.

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

Any financial statement or report required to be furnished pursuant to
Section 6.1(a), Section 6.1(b) or Section 6.1(f) shall be deemed to have been
furnished on the date on which the Lenders receive notice that the Borrower has
posted such financial statement on a website that is freely and readily
available to the Administrative Agent and the Lenders without charge.
Notwithstanding the foregoing, the Borrower shall deliver paper copies of any
such financial statement to the Administrative Agent if the Administrative Agent
requests the Borrower to furnish such paper copies until written notice to cease
delivering such paper copies is given by the Administrative Agent.

6.2 Notice of Material Events. The Borrower will give notice in writing to the
Administrative Agent, promptly and in any event within 10 days after an officer
of the Borrower obtains knowledge thereof, of the occurrence of any of the
following:

(a) any Default or Event of Default;

(b) the filing or commencement of any action, suit or proceeding by or before
any arbitrator or governmental authority (including pursuant to any applicable
Environmental Laws) against or affecting any Loan Party or any Affiliate thereof
that would reasonably be expected to result in a Material Adverse Effect;

(c) with respect to a Plan, (i) any failure to pay all required minimum
contributions and installments on or before the due dates provided under
Section 430(j) of the Code or (ii) the filing pursuant to Section 412(c) of the
Code or Section 302(c) of ERISA, of an application for a waiver of the minimum
funding standard;

(d) the occurrence of any ERISA Event that, alone or together with any other
ERISA Events that have occurred, would reasonably be expected to result in a
Material Adverse Effect;

(e) as soon as possible and in any event within 10 days after receipt thereof by
any of the Loan Parties or any of their Subsidiaries, a copy of (i) any notice
or claim to the effect that any of the Loan Parties or of their Subsidiaries is
or may be liable to any Person as a result of the release by any of the Loan
Parties, any of their Subsidiaries, or any other Person of any Hazardous
Material into the environment, and (ii) any notice alleging any violation of any
Environmental Law or any federal, state or local health or safety law or
regulation by any of the

 

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Loan Parties or any of their Subsidiaries, which, in either case, could
reasonably be expected to have a Material Adverse Effect; and

(f) any other development, financial or otherwise, which would reasonably be
expected to have a Material Adverse Effect.

Each notice delivered under this Section shall be accompanied by a statement of
an Authorized Officer of Borrower setting forth the details of the event or
development requiring such notice and any action taken or proposed to be taken
with respect thereto.

6.3 Preservation of Existence and Similar Matters. Borrower shall, and shall
cause each other Loan Party to, preserve and maintain its respective existence,
and to keep in full force and effect the rights, franchises, licenses and
privileges that are material to the conduct of the business of the Borrower and
its Subsidiaries, taken as a whole; provided, that the Borrower shall not be
required to preserve any such right, franchise, license or privilege, if the
maintenance or preservation thereof is no longer desirable in the conduct of the
business of the Borrower and its Subsidiaries taken as a whole; and provided
further, however, that this Section 6.3 not prohibit any transaction otherwise
permitted by Section 6.19.

6.4 Compliance with Applicable Law. Borrower shall, and shall cause each other
Loan Party to, comply with all Applicable Law, including the obtaining of all
Governmental Approvals, the failure with which to comply could be expected to
have a Material Adverse Effect.

6.5 Maintenance of Property; Completion of Construction. In addition to the
requirements of any of the other Loan Documents, Borrower shall, and shall cause
each other Loan Party to, (a) protect and preserve all of its Properties
(including, but not limited to, all intellectual Property) necessary to the
conduct of its respective business, and maintain in good repair, working order
and condition all tangible properties necessary to the conduct of its respective
business, ordinary wear and tear excepted, except as would not reasonably be
expected to have a Material Adverse Effect, and (b) from time to time make or
cause to be made all needed and appropriate repairs, renewals, replacements and
additions to such properties necessary to the conduct of its respective
business.

6.6 Insurance. The Borrower will, and will cause each other Loan Party to,
maintain with financially sound and reputable insurance companies insurance on
all their Property, liability insurance and environmental insurance in such
amounts, subject to such deductibles and self-insurance retentions and covering
such properties and risks as is consistent with sound business practice, and the
Borrower will furnish to the Administrative Agent upon request full information
as to the insurance carried.

6.7 Payment of Taxes and Claims. Borrower shall, and shall cause each of its
Subsidiaries to, pay and discharge prior to delinquency (a) all material taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits or upon any properties belonging to it, and (b) all material
lawful claims of materialmen, mechanics, carriers, warehousemen and landlords
for labor, materials, supplies and rentals which, if unpaid, might become a Lien
on any properties of such Person; provided, however, that this Section shall not

 

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require the payment or discharge of any such tax, assessment, charge, levy or
claim (i) which is being contested in good faith by appropriate proceedings
which operate to suspend the collection thereof, (ii) for which adequate
reserves have been established on the books of such Person in accordance with
GAAP or federal income tax accounting principles consistently applied or which
has been fully bonded in accordance with Applicable Law, and (iii) failure to
pay or discharge the same will not have a Material Adverse Effect.

6.8 Books and Records; Inspections. Borrower will, and will cause each Loan
Party to, keep proper books of record and account in which full, true and
correct entries shall be made of all dealings and transactions in relation to
its business and activities. Borrower will, and will cause each Loan Party to,
permit representatives of the Administrative Agent, at the expense of the
Administrative Agent, unless an Event of Default has occurred and is continuing
(and during the existence of any Event of Default, each of the Lenders), to
visit and inspect any of their respective properties, to examine and make
abstracts from any of their respective books and records and to discuss their
respective affairs, finances and accounts with their respective officers,
employees and independent public accountants, all at such reasonable times
during business hours and as often as may be reasonably requested and, so long
as no Event of Default exists, with reasonable prior notice.

6.9 Use of Proceeds. Borrower will use the proceeds of the Loans and the
Facility LCs solely for general corporate purposes not otherwise prohibited
hereunder. The Borrower will not, nor will it permit any Subsidiary to, use any
of the proceeds of the Advances in violation of any domestic sanctions.

6.10 Environmental Matters. Borrower shall comply and shall cause each other
Loan Party to comply with all Environmental Laws, except as would not reasonably
be expected to have a Material Adverse Effect. Borrower shall promptly take all
actions necessary to prevent the imposition of any Liens on any of the Qualified
Real Property Inventory included in the Borrowing Base arising out of or related
to any Environmental Laws. Notwithstanding the foregoing, Borrower may contest
the existence of any such Lien in good faith by appropriate proceedings which
operate to suspend the collection thereof and for which adequate reserves have
been established on the books of such Person in accordance with GAAP or federal
income tax accounting principles consistently applied.

6.11 Further Assurances. At Borrower’s cost and expense and upon request of the
Administrative Agent, Borrower shall, and shall cause each other Loan Party to,
duly execute and deliver or cause to be duly executed and delivered, to the
Administrative Agent such further instruments, documents and certificates, and
do and cause to be done such further acts that may be necessary or advisable in
the reasonable opinion of the Administrative Agent to carry out more effectively
the provisions and purposes of this Agreement and the other Loan Documents.

6.12 [Reserved].

6.13 ERISA Compliance. Borrower shall, and shall cause each ERISA Affiliate to
at all times comply with the provisions of ERISA with respect to any retirement
or other employee benefit plan to which it is a party as employer, except as
would not reasonably be expected to have a Material Adverse Effect. If Borrower
or any Loan Party or any ERISA Affiliate forms

 

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any employee benefit plan subject to ERISA, Borrower shall promptly disclose
same to Administrative Agent and shall promptly thereafter execute an amendment
to this Agreement to add appropriate representations, covenants and defaults
with respect to such ERISA plan and compliance.

6.14 Business Operations; Unrelated Business. Borrower and its Subsidiaries
shall (i) engage solely in the business of homebuilding, housing construction,
land acquisition, land (including masterplan) development, land dispositions,
and related real estate activities, including the provision of mortgage
financing or title insurance, and businesses that are reasonably related or
incidental thereto or are reasonable extensions thereof, and (ii) not change the
fundamental nature of such businesses. Borrower and its Subsidiaries shall
further operate their respective businesses in compliance with the terms and
conditions of this Agreement and the Loan Documents.

6.15 [Reserved].

6.16 [Reserved].

6.17 Liens. Neither the Borrower nor any Guarantor will create, incur, or suffer
to exist any Lien in, of or on the Property of the Borrower or any Guarantor,
except:

(i) Permitted Liens.

(ii) Liens for taxes, assessments or governmental charges or levies which solely
encumber property abandoned or in the process of being abandoned and with
respect to which there is no recourse to the Borrower or any Guarantor or any
Subsidiary.

(iii) Purchase-money Liens on any Property hereafter acquired or the assumption
of any Lien on Property existing at the time of such acquisition (and not
created in contemplation of such acquisition), or a Lien incurred in connection
with any conditional sale or other title retention or a Capitalized Lease;
provided that:

(A) The Lien on any such Property attaches to such asset concurrently or within
ninety (90) days after the acquisition thereof;

(B) Each Lien shall attach only to the Property so acquired, any accessions or
improvements thereto, and any other Property acquired from a common seller.

(iv) Liens existing on the date hereof (and not otherwise permitted under this
Section 6.17) and described in Schedule 6.17 hereto and Liens securing
Refinancing Indebtedness with respect thereto, but only to the extent such Liens
encumber the same collateral in whole or in part as the previous Liens securing
the Indebtedness being refunded, refinanced or extended.

(v) Liens securing obligations for borrowed money in an amount not in excess of
$50,000,000 in the aggregate.

 

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(vi) Judgments and similar Liens arising in connection with court proceedings;
provided the execution or enforcement thereof is stayed and the claim is being
contested in good faith, with adequate reserves therefor being maintained by the
Borrower or such Guarantor in accordance with GAAP.

(vii) Liens securing Non-Recourse Indebtedness of the Borrower or any Guarantor.

(viii) Liens existing with respect to Indebtedness of a Person acquired in an
Investment permitted by this Agreement.

(ix) Liens arising out of pledges or deposits under worker’s compensation laws,
unemployment insurance, old age pensions, or other social security or retirement
benefits, or similar legislation.

(x) Liens incurred or deposits made to secure the performance of (or in lieu of)
tenders, bids, leases, statutory obligations, surety and appeal bonds, progress
payments, government contracts, utility services and other obligations of like
nature in each case incurred in the ordinary course of business.

(xi) Leases or subleases granted to others not materially interfering with the
ordinary course of business of the Borrower or any Guarantor.

(xii) Any interest in or title of a lessor to property subject to any
Capitalized Lease Obligations.

(xiii) Liens on cash pledged to secure deductibles, retentions and other
obligations to insurance providers in the ordinary course of business.

(xiv) Any option, contract, right of first refusal or other agreement to sell or
purchase an asset or participate in the income or revenue derived therefrom,
together with any Liens granted to secure the obligations incurred in respect of
any of the foregoing.

(xv) Any legal right of, or right granted in good faith to, a lender or lenders
to which the Borrower or a Guarantor may be indebted to offset against, or
appropriate and apply to the payment of, such Indebtedness any and all balances,
credits, deposits, accounts, or monies of the Borrower or a Guarantor with or
held by such lender or lenders.

(xvi) Any pledge or deposit of cash or property by the Borrower or any Guarantor
in conjunction with obtaining surety, performance, completion or payment bonds
and Letters of Credit or other similar instruments or providing earnest money
obligations, escrows or similar undertakings or indemnifications required in the
ordinary course of business of a homebuilder.

(xvii) Liens incurred in the ordinary course of business as security for the
Borrower’s or any Guarantor’s obligations with respect to indemnification in
favor of title insurance providers.

 

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(xviii) Letters of Credit, bonds or other assets pledged to secure insurance in
the ordinary course of business.

(xix) Liens on assets securing warehouse lines of credit and repurchase
agreements and other credit facilities to finance the operations of the
Borrower’s mortgage lending Subsidiaries, insurance subsidiaries and/or
financial asset management Subsidiaries and Liens related to issuances of CMOs
and mortgage-related securities, so long as such assets are owned by such
mortgage lending Subsidiaries and financial asset Subsidiaries.

(xx) Liens incurred in the ordinary course of business to secure (i) profit and
price participation arrangements and (ii) fees, taxes and carry costs on, in
respect of or owing to governmental issuers (including enterprises thereof) of
community facility district, mello-roos, metro-district or similar bonding
obligations.

(xxi) Pledges, deposits and other Liens existing under, or required to be made
in connection with, (i) earnest money obligations, escrows or similar purpose
undertakings or indemnifications in connection with any purchase and sale
agreement of real property, (ii) development agreements or other contracts
entered into with governmental authorities (or an entity sponsored by a
governmental authority), in connection with the entitlement of real property or
(iii) agreements for the funding of infrastructure, including in respect of the
issuance of community facility district bonds, metro district bonds, mello-roos
bonds and subdivision improvement bonds, and similar bonding requirements
arising in the ordinary course of business of a homebuilder.

(xxii) Licenses of intellectual property granted in the ordinary course of
business and not interfering in any material respect with the ordinary conduct
of business of the Borrower and its Subsidiaries.

(xxiii) Liens, encumbrances or other restrictions contained in any joint venture
agreement entered into by the Borrower or a Guarantor with respect to the equity
interests issued by the relevant joint venture or the assets of such joint
venture.

(xxiv) Customary Liens in favor of a trustee on cash, Cash Equivalent
Investments and Marketable Securities supporting the repayment of the Senior
Notes and/or other Public Indebtedness in any case arising in connection with
the defeasance, discharge or redemption of such Indebtedness.

(xxv) Customary Liens in favor of a trustee on all money or personal property
held or collected by the trustee pursuant to the indenture governing the New
Indenture Notes Obligations and any indenture governing any other Public
Indebtedness, to the extent such Liens secure only customary compensation and
reimbursement obligations of such trustee.

(xxvi) Assignments of insurance or condemnation proceeds provided to landlords
(or their mortgagees) pursuant to the terms of any lease and Liens and rights
reserved in any lease for rent or for compliance with the terms of such lease.

 

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(xxvii) Liens consisting of pledges or deposits of property to secure
performance in connection with operating leases made in the ordinary course of
business to which the Borrower or a Guarantor is a party as lessee.

(xxviii) Liens on real property, and additions, accessions, improvements and
replacements and customary deposits in connection therewith and proceeds and
products therefrom, that (A) is not related to Units and does not constitute
Land Under Development, Finished Lots or Entitled Land, and (B) is owned by the
Borrower or a Guarantor, which Liens secure Indebtedness of the Borrower or such
Guarantor, provided (x) each such Lien attaches only to such real property and
(y) the obligation secured by such Lien is limited to such Indebtedness.

(xxix) Liens arising by operation of law in favor of issuers of letters of
credit in the documents presented under a letter of credit.

(xxx) Liens of a lessor, sublessor or licensor arising under any lease, sublease
or license entered into by the Borrower or any Subsidiary in the ordinary course
of business and not interfering in any material respect with the ordinary
conduct of business of the Borrower or any Subsidiary, and covering only the
Property or assets so leased, subleased or licensed, including rights of tenants
under leases or subleases and rental agreements covering real property entered
into in the ordinary course of business of the Person owning such real property.

(xxxi) Liens on property or assets of the Borrower or any Subsidiary securing
Indebtedness of the Borrower or any Subsidiary owing to the Borrower or one or
more Subsidiaries not to exceed $20,000,000 in the aggregate.

(xxxii) Liens on specific items of personal property 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.

6.18 Prepayment of Indebtedness. If a Default or Event of Default has occurred
and is continuing, Borrower shall not voluntarily prepay, or permit any other
Loan Party voluntarily to prepay, the principal amount, in whole or in part, of
any Indebtedness other than (a) Indebtedness owed to each Lender hereunder or
under some other agreement between Borrower and such Lender, (b) in pro rata
amounts with payment of the Loans, Indebtedness which ranks pari passu with the
Indebtedness incurred under this Agreement which is or becomes due and owing
whether by reason of acceleration or otherwise and (c) Indebtedness which is
exchanged for, or converted into, Capital Stock (or securities to acquire
Capital Stock) of any Loan Party.

6.19 Limitation on Fundamental Changes.

(a) Borrower shall not, nor shall any Loan Party be permitted to, do any of the
following:

(i) sell, assign, lease or otherwise dispose of (whether in one transaction in a
series of transactions) all or substantially all of the assets (whether now
owned or

 

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hereafter acquired) of the Loan Parties (taken as a whole on a consolidated
basis) except (A) for the sale of inventory in the ordinary course of business,
and (B) bulk sales of Properties held in a geographic region, provided that the
fair value of such bulk sales do not exceed in any twelve (12) consecutive
months 20% of Consolidated Tangible Net Worth;

(ii) merge into or consolidate with any other Person or permit any other Person
to merge into or consolidate with it;

(iii) dissolve, liquidate or wind up its business by operation of law or
otherwise; or

(iv) distribute to the stockholders of such Loan Party any Capital Stock of any
Subsidiary that is a Loan Party;

provided, however, that any Loan Party (other than the Borrower) may merge into
or consolidate with or may dissolve and liquidate into, or may sell, assign,
lease or otherwise dispose of all or substantially all of the assets to, another
Loan Party, and any Person that is not a Loan Party may merge into or
consolidate with or may dissolve and liquidate into, or may sell, assign, lease
or otherwise dispose of all or substantially all of the assets to, another
Subsidiary that is not a Loan Party, and any Loan Party may distribute to
another Loan Party the Capital Stock of any other Loan Parties, if (and only if)
(1) in the case of a merger or consolidation involving a Loan Party other than
the Borrower, the surviving Person is, or upon such merger or consolidation
becomes, a Loan Party, (2) in the case of merger or consolidation involving the
Borrower, the Borrower is the surviving Person, (3) the character of the
business of the Borrower and the Subsidiaries on a consolidated basis will not
be materially changed by such occurrence, and (4) such occurrence shall not
constitute or give rise to (a) an Event of Default or (b) Default (beyond all
applicable grace and cure periods) in respect of any of the covenants contained
in any agreement to which the Borrower or any such Subsidiary is a party or by
which its property may be bound if such Default would have a Material Adverse
Effect.

(b) Borrower shall not, nor shall it permit any Loan Party to, acquire all or
substantially all of the Capital Stock of another Person unless (i) the primary
business of such person is engaging in homebuilding, housing construction, land
acquisition, land (including masterplan) development, land dispositions, and
related real estate activities, including the provision of mortgage financing or
title insurance, and businesses that are reasonably related or incidental
thereto or are reasonable extensions thereof, (ii) the majority of shareholders
(or other equity interest holders), the board of directors or other governing
body of such person approves such acquisition and (iii) the Investment complies
with the limitations in Section 6.21.

Nothing contained in this Section 6.19, however, shall restrict (1) any sale of
assets among the Loan Parties and their Subsidiaries which is in the ordinary
course of business or is otherwise in compliance with all other provisions of
this Agreement or (2) the organization by any Loan Party of one or more Persons
in the ordinary conduct of its business.

6.20 Transactions with Affiliates. Except as described on Schedule 6.20 attached
hereto, Borrower shall not, and shall not permit any other Loan Party to, permit
to exist or enter into, any transaction (including the purchase, sale, lease or
exchange of any property or the

 

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rendering of any service) with any Affiliate of Borrower or any other Loan
Party, or with any director, officer or employee of Borrower or any other Loan
Party, except transactions in the ordinary course of and pursuant to the
reasonable requirements of the business of Borrower or any other Loan Party and
upon fair and reasonable terms that, on an overall basis, are no less favorable
to Borrower or such other Loan Party than would be obtained in a comparable
arm’s length transaction with a Person that is not an Affiliate. Notwithstanding
the foregoing, the following are permitted:

(i) any contract, agreement or understanding with, or for the benefit of, or
plan for the benefit of, employees of the Borrower or its Subsidiaries generally
(in their capacities as such) that has been approved by the general partner of
the Borrower,

(ii) Equity interests issuances to directors, officers and employees of the
Borrower or its Subsidiaries pursuant to plans approved by the holders of equity
interests of the Company;

(iii) any Investment permitted under Section 6.21 (other than Investments
described in clause (j) thereof) or dividend or distribution permitted under
Section 6.22,

(iv) any transaction between or among the Borrower and one or more Loan Parties
or between or among Loan Parties (provided, however, no such transaction shall
involve any other Affiliate (other than a Subsidiary to the extent the
applicable amount constitutes a payment permitted under Section 6.21 or 6.22)),

(v) any transaction between one or more Loan Parties and one or more non-Loan
Parties where all of the payments to, or other benefits conferred upon, such
non-Loan Parties are substantially contemporaneously dividended, or otherwise
distributed or transferred without charge, to the Borrower or a Loan Party,

(vi) any transactions consummated in accordance with written agreements existing
on the Effective Date with Affiliates, or entities in which an Affiliate owns an
interest, including amendments thereto that are no more favorable to the
Affiliate in any material respect than the terms existing on the Effective Date,

(vii) the payment of reasonable and customary fees to, and indemnity provided on
behalf of, officers, directors, employees or consultants of the Borrower or such
Loan Party, and

(viii) any transaction with an Affiliate that is a Joint Venture in which the
Borrower or any Loan Party has a direct or indirect equity interest so long as
the other Joint Venture partners not constituting Affiliates of the Borrower or
any Loan Party, as the case may be, approve the subject transaction.

6.21 Investments. Borrower will not, nor will Borrower permit any other Loan
Party to, make or suffer to exist any Investments (including without limitation,
loans and advances to, and other Investments in, Subsidiaries), or commitments
therefor, or to create any Subsidiary or to become or remain a partner in any
partnership or Joint Venture, except:

 

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(a) Cash Equivalent Investments.

(b) Existing Investments in Subsidiaries and Joint Ventures, and other
Investments in existence on the date hereof and described in Schedule 5.8.

(c) Any loan or advance to an executive officer, director or employee of the
Borrower or any Subsidiary made in the ordinary course of business or in
accordance with past practice; provided, however, that any such loan or advance
exceeding $1 million shall have been approved by the board of directors or other
governing body of the Borrower or a committee thereof consisting of
disinterested members; and provided further that all such loans and advances may
not exceed $10,000,000 in aggregate outstanding at any one time.

(d) Investments by a Loan Party or Wholly-Owned Subsidiary in another Loan Party
or Wholly-Owned Subsidiary.

(e) Investments constituting Rate Management Transactions.

(f) receivables owing to any Loan Party if created or acquired in the ordinary
course of business;

(g) prepaid expenses, negotiable instruments held for collection and insurance,
lease, utility, workers’ compensation, performance and other similar deposits in
the ordinary course of business;

(h) Investments made by any Loan Party for consideration consisting only of
Capital Stock;

(i) guarantees of performance obligations in the ordinary course of business;

(j) Investments permitted by Section 6.19(b) provided that the Person acquired
becomes a Guarantor;

(k) Investments in mortgages, receivables, other securities or ownership
interests, loans or advances made in connection with a strategy to acquire land
or other homebuilding assets through foreclosure or other exercise of remedies;

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

(m) Investments or securities received in settlement of debts, including as a
result of foreclosure, perfection or enforcement of any Lien or any judgment or
settlement in exchange for or satisfaction of such debts, owing to Borrower or
any Guarantor in the ordinary course of business;

(n) Investments, other than those permitted by subsections (a) through
(m) above, in Persons that are in the business of homebuilding, land acquisition
or land development businesses and businesses that are reasonably related
thereto or reasonable extensions thereof not

 

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to exceed in the aggregate amount outstanding at any time 35% of Consolidated
Tangible Net Worth;

(o) any receivables, loans or other consideration received in connection with
any asset sale otherwise permitted hereunder;

(p) obligations (but not payments thereon) with respect to homeowners
association obligations, community facility district bonds, metro district
bonds, mello-roos bonds and subdivision improvement bonds and similar bonding
requirements arising in the ordinary course of business of a homebuilder;

(q) guarantee, reimbursement or indemnification obligations (other than for the
payment of borrowed money) entered into in the ordinary course of business and
incurred for the benefit of any adjoining landowner, seller of real property or
municipal government authority (or enterprises thereof) in connection with the
acquisition, entitlement and development of real property;

(r) current Investments acquired in the ordinary course of business for cash
management purposes;

(s) guarantees of any Indebtedness permitted to be incurred hereunder;

(t) guarantees (but not payments thereon) with respect to Specified Obligations;
and

(u) other Investments in the aggregate amount not to exceed $20,000,000 at any
time outstanding.

6.22 Dividends and Subordinated Debt. No Loan Party shall declare or pay any
dividend on, or purchase, redeem, retire, or otherwise acquire for value any of
its Capital Stock now or hereafter outstanding, return any capital to its
stockholders or make any distribution of assets to its stockholders, whether in
cash, property, or obligations, or pay, repurchase, or redeem all or any part of
any Subordinated Debt, transfer any property in payment of or as security for
the payment of all or any part of any Subordinated Debt, or establish any
sinking fund, reserve, or like set aside of funds or other property for the
redemption, retirement, or repayment of all or any part of any Subordinated
Debt, except:

(a) Subject to the subordination terms applicable to such Subordinated Debt, so
long as no Default or Event of Default exists, a Loan Party may make regularly
scheduled and mandatory payments in respect of any Subordinated Debt as and when
due by the terms thereof; provided, further, that a Loan Party may prepay or
repurchase Subordinated Debt at any time from the proceeds of indebtedness
issued by such Loan Party following the Effective Date so long as (i) the
maturity date of all such indebtedness is at least six (6) months beyond the
Facility Termination Date, and (ii) no Default exists both before and after
giving effect thereto;

(b) So long as no Default or Event of Default exists both immediately before and
after giving effect to such dividend, Borrower may declare and pay dividends;

 

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(c) So long as no Default or Event of Default exists both before and after
giving effect to such repurchase, Borrower may from time to time repurchase
shares of its Capital Stock;

(d) Any Loan Party may pay dividends or make distributions to the Borrower or to
a Loan Party which is a Subsidiary of the Borrower; and

(e) Any Loan Party may, at any time, (i) declare or pay dividends on Capital
Stock in the form of Capital Stock (or warrants or rights to acquire Capital
Stock) of such Loan Party or through an accretion to the liquidation preference
of such Capital Stock, (ii) purchase, redeem, retire or otherwise acquire
Capital Stock or Subordinated Debt solely in consideration of Capital Stock (or
warrants or rights to acquire Capital Stock) of such Loan Party, (iii) exchange
Capital Stock or Subordinated Debt solely for Capital Stock (or warrants or
rights to acquire Capital Stock) of such Loan Party or (iv) convert Capital
Stock or Subordinated Debt solely into Capital Stock (or warrants or rights to
acquire Capital Stock) of such Loan Party, in each case without transfer to the
holders of Capital Stock or Subordinated Debt of any cash or other property of
such Loan Party or any of its Subsidiaries in respect thereof.

(f) Any Loan Party may pay any dividend or redeem any Capital Stock or
Subordinated Debt within 60 days after the date of declaration thereof or call
for redemption if, at such date of declaration or call for redemption, such
payment or redemption was permitted by the above provisions of this Section 6.22
as of the date of declaration or call for redemption (and the payment itself
will be deemed to have been paid on such date of declaration or call for
redemption); and

(g) The Borrower may make Tax Distributions.

6.23 Financial Covenants.

(a) Interest Coverage Ratio. The Borrower will not permit the ratio, determined
as of the end of each of its fiscal quarters for the then most-recently ended
four (4) fiscal quarters, of (i) Consolidated EBITDA to (ii) Consolidated
Interest Incurred to be less than 1.5 to 1.0.

(b) Adjusted Leverage Ratio. The Borrower will not permit the Adjusted Leverage
Ratio, determined as of the end of each of its fiscal quarters, to be greater
than (i) 2.0 to 1.0, prior to and including March 31, 2017, and (ii) 1.85 to 1.0
at any time after March 31, 2017.

(c) [Reserved].

(d) Minimum Consolidated Tangible Net Worth. As at the end of each fiscal
quarter, the Consolidated Tangible Net Worth shall not be less than the sum of
(a) $400,000,000 plus (b) 50% of the cumulative Net Cash Proceeds of any Equity
Issuances received by Borrower during each completed fiscal quarter after the
Effective Date, plus (c) 50% of an amount equal to (i) the cumulative
Consolidated Net Income (without deductions for losses sustained during any
fiscal quarter) for each completed fiscal quarter following the Effective Date,
commencing with the quarter ended June 30, 2015, minus (ii) income taxes on such
income at a presumed combined Federal and State rate of fifty percent (50%).

 

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(e) Ratio of Land Assets to Consolidated Tangible Net Worth. As at the end of
each fiscal quarter, Borrower shall not permit the ratio of (a) the Book Value
of Land Assets to (b) Consolidated Tangible Net Worth to exceed 1.75 to 1.0.

(f) Minimum Liquidity. The Borrower will not permit its Unrestricted Cash,
determined as of the end of each of its fiscal quarters, to be less than
$5,000,000.

6.24 Guarantors. Shea Homes Funding Corp. and the other direct and indirect
Subsidiaries of Borrower listed on Schedule 1(b) under the heading “Guarantors”
shall execute and deliver the Guaranty on the Effective Date. Borrower shall
cause each (a) Wholly-Owned Subsidiary of Borrower formed or acquired after the
Effective Date, the assets of which are included in the Borrowing Base, (b) the
Initial Non-Wholly-Owned Guarantors, (c) other Subsidiaries that have guaranteed
the New Indenture Notes Obligations (other than an Excluded Subsidiary), and
(d) Non-Wholly-Owned Subsidiaries whose assets are to be included in the
Borrowing Base, to become a party to the Guaranty and execute and deliver such
other documentation required by Administrative Agent, all in form and substance
reasonably acceptable to Administrative Agent within thirty (30) days after the
date on which such Subsidiary is formed or acquired; provided that if any
Subsidiary that has become a party to the Guaranty (i) is sold or otherwise
disposed of in a transaction permitted by this Agreement to a Person other than
Borrower or one of the other Loan Parties, (ii) ceases, at any time, to qualify
as a Subsidiary (other than an Excluded Subsidiary) or (iii) is designated an
Excluded Subsidiary in accordance with the terms of this Agreement, then, upon
the request of Borrower, Administrative Agent shall, so long as no Default or
Event of Default exists or would result therefrom, release such Subsidiary from
the Guaranty pursuant to a release in form and substance reasonably acceptable
to Administrative Agent and Borrower.

6.25 [Reserved.]

6.26 Foreign Assets Control Regulations. The Loan Parties shall not use or
permit the use of the proceeds of any Loan or any extension of credit in any
manner that will violate the Trading with the Enemy Act, as amended, or any of
the foreign assets control regulations of the United States Treasury Department
(31 CFR, Subtitle B, Chapter V, as amended) or the Anti-Terrorism Order or any
enabling legislation or executive order relating to any of the same. Without
limiting the foregoing, neither the Borrowers nor any Loan Party will permit
itself nor any of its Subsidiaries to (a) become a blocked person described in
Section 1 of the Anti-Terrorism Order or (b) engage in any dealings or
transactions or be otherwise associated with any Person who is a blocked person.

ARTICLE VII

DEFAULTS

The occurrence of any one or more of the following events shall constitute an
Event of Default (each, an “Event of Default”):

7.1 Any representation or warranty made or deemed made by or on behalf of the
Borrower or any of the other Loan Parties to the Lenders or the Administrative
Agent under or in

 

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connection with this Agreement, any Credit Extension, or any certificate or
information delivered in connection with this Agreement or any other Loan
Document shall be materially false on the date as of which made or confirmed.

7.2 Nonpayment of (i) principal of any Loan when due (including, without
limitation, under Section 2.2 hereof), (ii) any Reimbursement Obligation within
three (3) Business Days after the same becomes due, or (iii) interest upon any
Loan or of any Undrawn Fee, LC Fee or other obligations under any of the Loan
Documents within five (5) days after the same becomes due.

7.3 The breach by the Borrower of any of the terms or provisions of
Section 6.2(a), 6.9, 6.17, 6.19, 6.20, 6.21, 6.22, or 6.23(f). By way of
clarification, any failure to maintain or observe the financial covenants set
forth in Section 6.23(a), (b), (d) or (e) shall put the Term Out Provision under
Section 2.25 hereof into effect, and Borrower must then comply with all the
covenants and requirements set forth therein, including without limitation the
principal amortization of the Aggregate Outstanding Credit Exposure in eighteen
(18) equal monthly principal payments over the following eighteen (18) month
period; provided, however, that a failure to comply with such subsections (a),
(b), (c), (d) or (e) of Section 6.23 shall not result in an Event of Default or
otherwise result in an acceleration of the Loans or the LC Obligations, unless
or until any other requirements of Section 2.25 hereof have not been met or
satisfied by Borrower in response to such defaults (provided, however, that the
foregoing shall not be construed to limit Administrative Agent’s and Lenders’
rights to accelerate the Obligations and exercise all remedies hereunder upon
the occurrence of any other Events of Default under this Article VII). Any
default by Borrower or failure to observe or comply with the financial covenants
set forth in Section 6.23(f) shall constitute an immediate Event of Default
under this Agreement.

7.4 The breach or failure by the Borrower or any other Loan Party (other than a
breach or failure which constitutes an Event of Default under another Section of
this Article VII) of any of the terms or provisions of this Agreement or any
other Loan Document which is not remedied within thirty (30) days after the
Borrower becomes aware of any such breach; provided that (i) if such breach or
failure cannot, by its nature, be cured within such thirty (30) day period,
(ii) Borrower commences efforts to cure such breach or failure within the
initial thirty (30) day period and is diligently pursuing such cure, and
(iii) the continuation of such breach or failure does not otherwise have a
Material Adverse Effect, Borrower shall have up to an additional sixty (60) days
in which to cure such failure.

7.5 Failure of the Borrower or any other Loan Party to pay when due any Material
Indebtedness (other than any purchase money Non-Recourse Indebtedness); or the
default by the Borrower or any other Loan Party in the performance (beyond the
applicable grace period with respect thereto, if any) of any term, provision or
condition contained in any Material Indebtedness Agreement (other than any
agreement with respect to purchase money Non-Recourse Indebtedness), or any
other event shall occur or condition exist, the effect of which default, event
or condition is to cause, or to permit the holder(s) of such Material
Indebtedness or the lender(s) under such Material Indebtedness Agreement to
cause, such Material Indebtedness to become due prior to its stated maturity or
any commitment to lend under such Material Indebtedness Agreement to be
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Indebtedness (other than any purchase money Non-Recourse Indebtedness) of the
Borrower or any other Loan Party shall be declared to be due and payable or
required to be prepaid or repurchased (other than by a regularly scheduled
payment) prior to the stated maturity thereof; or the Borrower or any other Loan
Party shall not pay, or admit in writing its inability to pay, its debts
generally as they become due.

7.6 Any Loan Party shall (i) have an order for relief entered with respect to it
under any Debtor Relief Laws as now or hereafter in effect, (ii) make an
assignment for the benefit of creditors, (iii) apply for, seek, consent to, or
acquiesce in, the appointment of a receiver, custodian, trustee, examiner,
liquidator or similar official for it or any Substantial Portion of its
Property, (iv) institute any proceeding seeking an order for relief under any
Debtor Relief Laws as now or hereafter in effect or seeking to adjudicate it a
bankrupt or insolvent, or seeking dissolution, winding up, liquidation,
reorganization, arrangement, adjustment or composition of it or its debts under
any law relating to bankruptcy, insolvency or reorganization or relief of
debtors or fail to file an answer or other pleading denying the material
allegations of any such proceeding filed against it, (v) take any corporate,
partnership or limited liability company action to authorize or effect any of
the foregoing actions set forth in this Section 7.6 or (vi) fail to contest in
good faith any appointment or proceeding described in Section 7.7.

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

7.8 [Reserved.]

7.9 Any of the other Loan Parties shall fail within thirty (30) days to pay,
bond or otherwise discharge one or more (i) judgments or orders for the payment
of money in excess of $25,000,000 (or the equivalent thereof in currencies other
than U.S. Dollars), in the aggregate, exclusive of amounts covered by insurance,
or (ii) nonmonetary judgments or orders which, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect, which
judgment(s), in any such case, is/are not stayed on appeal or otherwise being
appropriately contested in good faith.

7.10 (a) With respect to a Plan, the Borrower or an ERISA Affiliate is subject
to a lien in excess of $10,000,000 pursuant to Section 430(k) of the Code or
Section 302(c) of ERISA or Title IV of ERISA, or (b) an ERISA Event shall have
occurred that, in the opinion of the Required Lenders, when taken together with
all other ERISA Events that have occurred, could reasonably be expected to
result in a Material Adverse Effect.

7.11 [Reserved.]

7.12 Any Change of Control shall occur.

7.13 The occurrence of any “default” or “Event of Default”, as defined in any
Loan Document (other than this Agreement) or the breach of any of the terms or
provisions of any

 

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Loan Document (other than this Agreement), which default or breach continues
beyond any applicable period of grace therein provided (provided, however, that
should there not be any cure or grace period specified with respect to any
“default” or “event of default” under any Loan Document that is not one of the
Events of Default otherwise specified in this Article VII, Borrower shall have
the cure period specified in Section 7.4 above with respect to such breach or
default).

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

7.15 Any Borrowing Base Certificate proves to have been incorrect in any
material respect when delivered to Administrative Agent; provided that, it shall
not be an Event of Default under this Section 7.15 if (i) such incorrect
Borrowing Base Certificate has been corrected by the delivery of a subsequent
Borrowing Base Certificate within 10 days after the Borrower obtains knowledge
of such inaccuracy, and (ii) the corrected Borrowing Base Certificate
demonstrate that Borrower is in compliance with Section 2.2.

ARTICLE VIII

ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES

8.1 Acceleration; Remedies.

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

 

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

(c) The Administrative Agent may at any time or from time to time after funds
are deposited in the Facility LC Collateral Account, apply such funds to the
payment of the Obligations and any other amounts as shall from time to time have
become due and payable by the Borrower to the Lenders or the LC Issuer under the
Loan Documents, as provided in Section 8.2.

(d) At any time while any Event of Default is continuing (or if there is, or if
the withdrawal would result in, a Collateral Shortfall Amount), neither the
Borrower nor any Person claiming on behalf of or through the Borrower shall have
any right to withdraw any of the funds held in the Facility LC Collateral
Account. After all of the Obligations have been indefeasibly paid in full and
the Aggregate Commitment has been terminated, and there are no undrawn amounts
under any Facility LCs, any funds remaining in the Facility LC Collateral
Account shall be returned by the Administrative Agent to the Borrower or paid to
whomever may be legally entitled thereto at such time.

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

(f) Upon the occurrence and during the continuation of any Event of Default, the
Administrative Agent may and at the direction of the Required Lenders shall,
subject to the direction of the Required Lenders, exercise all rights and
remedies under the Loan Documents and enforce all other rights and remedies
under applicable law.

8.2 Application of Funds. After the exercise of remedies provided for in
Section 8.1 (or after the Obligations have automatically become immediately due
and payable as set forth in the first sentence of Section 8.1(a)), any amounts
received by the Administrative Agent on account of the Obligations shall be
applied by the Administrative Agent in the following order:

(a) First, to payment of fees, indemnities, expenses and other amounts
(including fees, charges and disbursements of counsel to the Administrative
Agent and amounts payable under Article III) payable to the Administrative Agent
in its capacity as such;

(b) Second, to payment of fees, indemnities and other amounts (other than
principal, interest, LC Fees and Undrawn Fees) payable to the Lenders (including
the Swingline

 

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Lender) and the LC Issuer (including fees, charges and disbursements of counsel
to the respective Lenders and the LC Issuer as required by Section 9.6 and
amounts payable under Article III);

(c) Third, to payment of accrued and unpaid LC Fees, Undrawn Fees and interest
on the Loans and Reimbursement Obligations, ratably among the Lenders and the LC
Issuer in proportion to the respective amounts described in this
Section 8.2(c) payable to them;

(d) Fourth, to payment of all Swingline Loans;

(e) Fifth, to payment of all Obligations ratably among the Lenders;

(f) Sixth, to the Administrative Agent for deposit to the Facility LC Collateral
Account in an amount equal to the Collateral Shortfall Amount (as defined in
Section 8.1(a)), if any; and

(g) Last, the balance, if any, to the Borrower or as otherwise required by
Applicable Law.

8.3 Amendments. Subject to the provisions of this Section 8.3, the Required
Lenders (or the Administrative Agent with the consent in writing of the Required
Lenders) and the Borrower may enter into agreements supplemental hereto for the
purpose of adding or modifying any provisions to the Loan Documents or changing
in any manner the rights of the Lenders or the Borrower hereunder or waiving any
Default or Event of Default hereunder; provided, however, that no such
supplemental agreement shall:

(a) without the written consent of each Lender directly affected thereby, extend
the final maturity of any Loan, or extend the expiry date of any Facility LC to
a date after the Facility Termination Date or postpone any regularly scheduled
payment of principal of any Loan or forgive all or any portion of the principal
amount thereof or any Reimbursement Obligation related thereto, or reduce the
rate or extend the time of payment of interest or fees thereon or Reimbursement
Obligations related thereto or increase the amount of the Commitment of such
Lender hereunder.

(b) without the consent of all of the Lenders, change the percentage specified
in the definition of Required Lenders.

(c) without the consent of all of the Lenders, amend this Section 8.3.

(d) without the consent of all of the Lenders, modify the Guaranty, release any
material Guarantor of the Obligations or add any additional borrower.

(e) reduced the amount of any fees payable to any Lender without that Lender’s
prior written consent.

(f) modify the definition of Pro Rata Share without the unanimous written
consent of each Lender.

 

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No amendment of any provision of this Agreement relating to the Administrative
Agent shall be effective without the written consent of the Administrative
Agent, and no amendment of any provision relating to the LC Issuer shall be
effective without the written consent of the LC Issuer. The Administrative Agent
may waive payment of the fee required under Section 12.3(b) without obtaining
the consent of any other party to this Agreement. Notwithstanding anything to
the contrary herein, the Administrative Agent may, with the consent of the
Borrower only, amend, modify or supplement this Agreement or any of the other
Loan Documents to cure any ambiguity, omission, mistake, defect or inconsistency
of a technical or immaterial nature, as determined in good faith by the
Administrative Agent.

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

ARTICLE IX

GENERAL PROVISIONS

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

9.2 Governmental Regulation. Anything contained in this Agreement to the
contrary notwithstanding, neither the LC Issuer nor any Lender shall be
obligated to extend credit to the Borrower in violation of any limitation or
prohibition provided by any applicable statute or regulation.

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

9.4 Entire Agreement. The Loan Documents embody the entire agreement and
understanding among the Borrower, the Administrative Agent, the LC Issuer and
the Lenders and supersede all prior agreements and understandings among the
Borrower, the Administrative Agent, the LC Issuer and the Lenders relating to
the subject matter thereof other than those contained in the Fee Letter which
shall survive and remain in full force and effect during the term of this
Agreement. If there is any conflict between the terms, conditions and provisions
of this Agreement and those of any other agreement or instrument executed by
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any of the other Loan Documents, the terms, conditions and provisions of this
Agreement shall prevail. By executing this Agreement Borrower expressly
represents and warrants that it did not rely on any representation, assurance or
agreement, oral or written, not expressly set forth in this Agreement or any of
the other Loan Documents in reaching its decision to enter into this Agreement
or any of the other Loan Documents and that no promises or other representations
have been made to Borrower which conflict with the written terms of the Loan
Documents. Borrower represents to Lender that (i) it has read and understands
the terms and conditions contained in this Agreement and the other Loan
Documents executed in connection with this Agreement, (ii) its legal counsel has
carefully reviewed all of the Loan Documents and it has received legal advice
from counsel of its choice regarding the meaning and legal significance of this
Agreement and all other Loan Documents, (iii) it is satisfied with its legal
counsel and the advice received from it, and (iv) it has relied only on its
review of the Loan Documents and its own legal counsel’s advice and
representations (and it has not relied on any advice or representations from
Lender, or any of Lender’s officers, employees, agents or attorneys). The Loan
Documents may not be modified, amended or terminated as provided in Section 8.3.

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

9.6 Expenses; Indemnification.

(a) The Borrower shall reimburse the Administrative Agent and the Arrangers upon
demand for all reasonable and documented out-of-pocket expenses paid or incurred
by the Administrative Agent or any Arranger, including, without limitation,
filing and recording costs and fees, costs of any environmental review, and
consultants’ fees, travel expenses and reasonable fees, charges and
disbursements of outside counsel to the Administrative Agent and any Arranger
incurred from time to time, in connection with the due diligence, preparation,
administration, negotiation, execution, delivery, syndication, distribution
(including, without limitation, via DebtX and any other internet service
selected by the Administrative Agent), review, amendment, modification, and
administration of the Loan Documents. The Borrower also agrees to reimburse the
Administrative Agent, the Arrangers, the LC Issuer and the Lenders for any
costs, internal charges and out-of-pocket expenses, including, without
limitation, filing and recording costs and fees, costs of any environmental
review, and consultants’ fees, travel expenses and reasonable fees, charges and
disbursements of outside counsel to the Administrative Agent, the Arrangers, the
LC Issuer and the Lenders incurred by the Administrative Agent, the Arrangers,
the LC Issuer or any Lender in connection with the collection and enforcement of
the Loan Documents. Expenses being reimbursed by the Borrower under this Section
include, without limitation, costs and expenses incurred in connection with the
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that from time to time U.S. Bank may prepare and may distribute to the Lenders
(but shall have no obligation or duty to prepare or to distribute to the
Lenders) certain audit reports (the “Reports”) pertaining to the Borrower’s
assets for internal use by U.S. Bank from information furnished to it by or on
behalf of the Borrower, after U.S. Bank has exercised its rights of inspection
pursuant to this Agreement.

(b) The Borrower hereby further agrees to indemnify and hold harmless the
Administrative Agent, each Arranger, the LC Issuer, each Lender, their
respective Affiliates, and each of their directors, officers and employees,
agents, attorneys and advisors against all losses, claims, damages, penalties,
judgments, liabilities and expenses (including, without limitation, all expenses
of litigation or preparation therefor (including reasonable fees, charges and
disbursements of outside counsel) whether or not the Administrative Agent, the
Arrangers, the LC Issuer, any Lender or any Affiliate is a party thereto) which
any of them may pay or incur arising out of or relating to this Agreement, the
other Loan Documents, the transactions contemplated hereby, any actual or
alleged presence or release of Hazardous Materials on or from any Property owned
or operated by Borrower or any of the Loan Parties, any environmental liability
related in any way to Borrower or any of the Loan Parties, or any actual or
prospective claim, litigation, investigation or proceeding relating to any of
the foregoing, whether based on contract, tort or any other theory, whether
brought by a third party or by Borrower or any of the Loan Parties, or the
direct or indirect application or proposed application of the proceeds of any
Credit Extension hereunder except to the extent that they are determined in a
final non-appealable judgment by a court of competent jurisdiction to have
resulted from (i) the gross negligence or willful misconduct of the party
seeking indemnification or (ii) a material breach by such party of its express
contractual obligations under the Loan Documents, including, without limitation,
reasonable attorneys’ fees and settlement costs. The obligations of the Borrower
under this Section 9.6 shall survive the termination of this Agreement.

9.7 [Reserved].

9.8 Accounting. Except as provided to the contrary herein, all accounting terms
used herein shall be interpreted and all accounting determinations hereunder
shall be made in accordance with GAAP in a manner consistent with that used in
preparing the financial statements referred to in Section 5.4; provided, however
that, notwithstanding any other provision contained herein, all terms of an
accounting or financial nature used herein shall be construed, and all
computations of amounts and ratios referred to herein shall be made without
giving effect to (i) any election under Accounting Standards Codification
Section 825-10-25 (or any other Accounting Standards Codification or Financial
Accounting Standard having a similar result or effect) to value any Indebtedness
or other liabilities of the Borrower or any of its Subsidiaries at “fair value”,
as defined therein, or (ii) any treatment of Indebtedness in respect of
convertible debt instruments under Financial Accounting Standards Codification
Subtopic 470-20 (or any other Accounting Standards Codification or Financial
Accounting Standard having a similar result or effect) to value any such
Indebtedness in a reduced or bifurcated manner as described therein, and such
Indebtedness shall at all times be valued at the full stated principal amount
thereof. If at any time any change in GAAP would affect the computation of any
financial ratio or requirement set forth in any Loan Document, and the Borrower,
the Administrative Agent or the Required Lenders shall so request, the
Administrative Agent, the Lenders and the Borrower shall negotiate in good faith
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preserve the original intent thereof in light of such change in GAAP (subject to
the approval of the Required Lenders), provided that, until so amended, such
ratio or requirement shall continue to be computed in accordance with GAAP prior
to such change therein and the Borrower shall provide to the Administrative
Agent and the Lenders reconciliation statements showing the difference in such
calculation, together with the delivery of quarterly and annual financial
statements required hereunder.

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

9.10 Nonliability of Lenders. The relationship between the Borrower on the one
hand and the Lenders, the LC Issuer and the Administrative Agent on the other
hand shall be solely that of borrower and lender. Neither the Administrative
Agent, any Arranger, the LC Issuer nor any Lender shall have any fiduciary
responsibilities to the Borrower. Neither the Administrative Agent, any
Arranger, the LC Issuer nor any Lender undertakes any responsibility to the
Borrower to review or inform the Borrower of any matter in connection with any
phase of the Borrower’s business or operations. The Borrower agrees that neither
the Administrative Agent, any Arranger, the LC Issuer nor any Lender shall have
liability to the Borrower (whether sounding in tort, contract or otherwise) for
losses suffered by the Borrower in connection with, arising out of, or in any
way related to, the transactions contemplated and the relationship established
by the Loan Documents, or any act, omission or event occurring in connection
therewith, unless it is determined in a final non-appealable judgment by a court
of competent jurisdiction that such losses resulted from the gross negligence or
willful misconduct of the party from which recovery is sought. Neither the
Administrative Agent, any Arranger, the LC Issuer nor any Lender shall have any
liability with respect to, and the Borrower hereby waives, releases and agrees
not to sue for, any special, indirect, consequential or punitive damages
suffered by the Borrower and its Subsidiaries in connection with, arising out
of, or in any way related to the Loan Documents or the transactions contemplated
thereby. It is agreed that each Arranger shall, in its capacity as such, have no
duties or responsibilities under the Agreement or any other Loan Document. Each
Lender acknowledges that it has not relied and will not rely on the Arrangers in
deciding to enter into the Agreement or any other Loan Document or in taking or
not taking any action.

9.11 Confidentiality. The Administrative Agent and each Lender agrees to hold
any confidential information which it may receive from the Borrower in
connection with this Agreement in confidence, except for disclosure (i) to its
Affiliates and to the Administrative Agent and any other Lender and their
respective Affiliates, (ii) to legal counsel, accountants, and other
professional advisors to the Administrative Agent or such Lender or to a
Transferee or potential Transferee provided such parties agree to be bound by
this Section 9.11 or comparable confidentiality provisions, (iii) to regulatory
officials, (iv) to any Person as requested pursuant to or as required by law,
regulation, or legal process, (v) to any Person in connection with any legal
proceeding to which it is a party, (vi) to its direct or indirect contractual
counterparties in swap agreements or to legal counsel, accountants and other
professional advisors to such counterparties provided such parties agree to be
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confidentiality provisions, and (vii) to rating agencies if requested or
required by such agencies in connection with a rating relating to the Advances
hereunder. Without limiting Section 9.4, the Borrower agrees that the terms of
this Section 9.11 shall set forth the entire agreement between the Borrower and
the Administrative Agent and each Lender with respect to any confidential
information previously or hereafter received by the Administrative Agent or such
Lender in connection with this Agreement, and this Section 9.11 shall supersede
any and all prior confidentiality agreements entered into by the Administrative
Agent or any Lender with respect to such confidential information.

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

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

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

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

9.15 Document Interpretation.

(a) Unless otherwise specified therein, all terms defined in this Agreement
shall have the defined meanings when used in the other Loan Documents or any
certificate or other document made or delivered pursuant hereto or thereto.

(b) As used herein and in the other Loan Documents, and any certificate or other
document made or delivered pursuant hereto or thereto, (i) accounting terms
relating to any Loan Party not defined in Section 1.1 and accounting terms
partly defined in Section 1.1, to the extent not defined, shall have the
respective meanings given to them under GAAP, (ii) the words “include”,
“includes” and “including” shall be deemed to be followed by the phrase “without
limitation”, (iii) the word “incur” shall be construed to mean incur, create,
issue, assume, become liable in respect of or suffer to exist (and the words
“incurred” and “incurrence” shall have correlative meanings), (iv) the words
“asset” and “property” shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, Capital Stock, securities, accounts, leasehold interests and
contract rights, and (v) references to agreements or other Obligations shall,
unless otherwise specified, be deemed to refer to such agreements or Obligations
as amended, supplemented, restated or otherwise modified from time to time.

 

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(c) The words “hereof”, “herein” and “hereunder” and words of similar import,
when used in this Agreement, shall refer to this Agreement as a whole and not to
any particular provision of this Agreement, and Section, Schedule and Exhibit
references are to this Agreement unless otherwise specified.

(d) The meanings given to terms defined herein shall be equally applicable to
both the singular and plural forms of such terms.

ARTICLE X

THE ADMINISTRATIVE AGENT

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

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

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

 

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10.4 No Responsibility for Loans, Recitals, etc.. Neither the Administrative
Agent nor any of its directors, officers, agents or employees shall be
responsible for or have any duty to ascertain, inquire into, or verify (a) any
statement, warranty or representation made in connection with any Loan Document
or any borrowing hereunder; (b) the performance or observance of any of the
covenants or agreements of any obligor under any Loan Document, including,
without limitation, any agreement by an obligor to furnish information directly
to each Lender; (c) the satisfaction of any condition specified in Article IV,
except receipt of items required to be delivered solely to the Administrative
Agent; (d) the existence or possible existence of any Default or Event of
Default; (e) the validity, enforceability, effectiveness, sufficiency or
genuineness of any Loan Document or any other instrument or writing furnished in
connection therewith; (f) the value, sufficiency, creation, perfection or
priority of any Lien in any collateral security, if any; or (g) the financial
condition of the Borrower or any guarantor of any of the Obligations or of any
of the Borrower’s or any such guarantor’s respective Subsidiaries.

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

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

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

 

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10.8 Administrative Agent’s Reimbursement and Indemnification. The Lenders agree
to reimburse and indemnify the Administrative Agent ratably in proportion to
their respective Commitments (or, if the Commitments have been terminated, in
proportion to their Commitments immediately prior to such termination) (i) for
any amounts not reimbursed by the Borrower for which the Administrative Agent is
entitled to reimbursement by the Borrower under the Loan Documents, (ii) for any
other expenses incurred by the Administrative Agent on behalf of the Lenders, in
connection with the preparation, execution, delivery, administration and
enforcement of the Loan Documents (including, without limitation, for any
expenses incurred by the Administrative Agent in connection with any dispute
between the Administrative Agent and any Lender or between two or more of the
Lenders) and (iii) for any liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind and
nature whatsoever which may be imposed on, incurred by or asserted against the
Administrative Agent in any way relating to or arising out of the Loan Documents
or any other document delivered in connection therewith or the transactions
contemplated thereby (including, without limitation, for any such amounts
incurred by or asserted against the Administrative Agent in connection with any
dispute between the Administrative Agent and any Lender or between two or more
of the Lenders), or the enforcement of any of the terms of the Loan Documents or
of any such other documents, provided that (i) no Lender shall be liable for any
of the foregoing to the extent any of the foregoing is found in a final
non-appealable judgment by a court of competent jurisdiction to have resulted
from the gross negligence or willful misconduct of the Administrative Agent and
(ii) any indemnification required pursuant to Section 3.5(d) shall,
notwithstanding the provisions of this Section 10.8, be paid by the relevant
Lender in accordance with the provisions thereof. The obligations of the Lenders
under this Section 10.8 shall survive payment of the Obligations and termination
of this Agreement.

10.9 Notice of Event of Default. The Administrative Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Administrative Agent has received written notice from a
Lender or the Borrower referring to this Agreement describing such Default or
Event of Default and stating that such notice is a “notice of default”. In the
event that the Administrative Agent receives such a notice, the Administrative
Agent shall give prompt notice thereof to the Lenders; provided that, except as
expressly set forth in the Loan Documents, the Administrative Agent shall not
have any duty to disclose, and shall not be liable for the failure to disclose,
any information relating to the Borrower or any of its Subsidiaries that is
communicated to or obtained by the bank serving as Administrative Agent or any
of its Affiliates in any capacity.

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

 

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10.11 Lender Credit Decision, Legal Representation.

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

(b) Each Lender further acknowledges that it has had the opportunity to be
represented by legal counsel in connection with its execution of this Agreement
and the other Loan Documents, that it has made its own evaluation of all
applicable laws and regulations relating to the transactions contemplated
hereby, and that the counsel to the Administrative Agent represents only the
Administrative Agent and not the Lenders in connection with this Agreement and
the transactions contemplated hereby.

10.12 Successor Administrative Agent. The Administrative Agent may resign at any
time by giving written notice thereof to the Lenders and the Borrower, such
resignation to be effective upon the appointment of a successor Administrative
Agent or, if no successor Administrative Agent has been appointed, forty-five
(45) days after the retiring Administrative Agent gives notice of its intention
to resign. Upon any such resignation, the Required Lenders shall have the right
to appoint, on behalf of the Borrower and the Lenders, a successor
Administrative Agent. If no successor Administrative Agent shall have been so
appointed by the Required Lenders within thirty (30) days after the resigning
Administrative Agent’s giving notice of its intention to resign, then the
resigning Administrative Agent may appoint, on behalf of the Borrower and the
Lenders, a successor Administrative Agent. Notwithstanding the previous
sentence, the Administrative Agent may at any time without the consent of the
Borrower or any Lender, appoint any of its Affiliates which is a commercial bank
as a successor Administrative Agent hereunder. If the Administrative Agent has
resigned and no successor Administrative Agent has been appointed, the Lenders
may perform all the duties of the Administrative Agent hereunder and the
Borrower shall make all payments in respect of the Obligations to the applicable
Lender and for all other purposes shall deal directly with the Lenders. No
successor Administrative Agent shall be deemed to be appointed hereunder until
such successor Administrative Agent has accepted the appointment. Any such
successor Administrative Agent shall be a commercial bank having capital and
retained earnings of at least $100,000,000. Upon the acceptance of any
appointment as Administrative Agent hereunder by a successor Administrative
Agent, such successor Administrative Agent shall thereupon succeed to and

 

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become vested with all the rights, powers, privileges and duties of the
resigning Administrative Agent. Upon the effectiveness of the resignation of the
Administrative Agent, the resigning Administrative Agent shall be discharged
from its duties and obligations hereunder and under the Loan Documents. After
the effectiveness of the resignation of an Administrative Agent, the provisions
of this Article X shall continue in effect for the benefit of such
Administrative Agent in respect of any actions taken or omitted to be taken by
it while it was acting as the Administrative Agent hereunder and under the other
Loan Documents. In the event that there is a successor to the Administrative
Agent by merger, or the Administrative Agent assigns its duties and obligations
to an Affiliate pursuant to this Section 10.12.

10.13 Administrative Agent and Arranger Fees. The Borrower agrees to pay to the
Administrative Agent and the Arrangers, for their respective accounts, the fees
agreed to by the Borrower, the Administrative Agent and the Arrangers pursuant
to the Fee Letter, or as otherwise agreed from time to time.

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

10.15 No Advisory or Fiduciary Responsibility. In connection with all aspects of
each transaction contemplated hereby (including in connection with any
amendment, waiver or other modification hereof or of any other Loan Document),
the Borrower acknowledges and agrees that: (i) (a) the arranging and other
services regarding this Agreement provided by the Lenders are arm’s-length
commercial transactions between the Borrower and its Affiliates, on the one
hand, and the Lenders, on the other hand, (b) the Borrower has consulted its own
legal, accounting, regulatory and tax advisors to the extent it has deemed
appropriate, and (c) the Borrower is capable of evaluating, and understands and
accepts, the terms, risks and conditions of the transactions contemplated hereby
and by the other Loan Documents; (ii) (a) each of the Lenders is and has been
acting solely as a principal and, except as expressly agreed in writing by the
relevant parties, has not been, is not, and will not be acting as an advisor,
agent or fiduciary for the Borrower or any of its Affiliates, or any other
Person and (b) no Lender has any obligation to the Borrower or any of its
Affiliates with respect to the transactions contemplated hereby except those
obligations expressly set forth herein and in the other Loan Documents; and
(iii) each of the Lenders and their respective Affiliates may be engaged in a
broad range of transactions that involve interests that differ from those of the
Borrower and its Affiliates, and no Lender has any obligation to disclose any of
such interests to the Borrower or its Affiliates. To the fullest extent
permitted by law, the Borrower hereby waives and releases any claims that it may
have against each of the Lenders with respect to any breach or alleged breach of
agency or fiduciary duty in connection with any aspect of any transaction
contemplated hereby.

 

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ARTICLE XI

SETOFF; RATABLE PAYMENTS

11.1 Setoff. The Borrower hereby grants each Lender a security interest, to
secure the Obligations owing to such Lender, in all deposits, credits and
deposit accounts (including all account balances, whether provisional or final
and whether or not collected or available) of the Borrower with such Lender or
any Affiliate of such Lender (the “Deposits”). In addition to, and without
limitation of, any rights of the Lenders under applicable law, if any Event of
Default occurs and is continuing, Borrower authorizes each Lender to offset and
apply all such Deposits toward the payment of the Obligations owing to such
Lender, whether or not the Obligations, or any part thereof, shall then be due
and regardless of the existence or adequacy of any collateral, guaranty or other
security, right or remedy available to such Lender or the Lenders; provided,
that in the event that any Defaulting Lender shall exercise such right of
setoff, (x) all amounts so set off shall be paid over immediately to the
Administrative Agent for further application in accordance with the provisions
of Section 2.22 and, pending such payment, shall be segregated by such
Defaulting Lender from its other funds and deemed held in trust for the benefit
of the Administrative Agent, the LC Issuer, and the Lenders, and (y) the
Defaulting Lender shall provide promptly to the Administrative Agent a statement
describing in reasonable detail the Obligations owing to such Defaulting Lender
as to which it exercised such right of setoff. Notwithstanding the foregoing, no
Lender shall exercise any such right of set off without the prior written
consent of all Lenders and Administrative Agent.

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

ARTICLE XII

BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS

12.1 Successors and Assigns. The terms and provisions of the Loan Documents
shall be binding upon and inure to the benefit of the Borrower and the Lenders
and their respective successors and assigns permitted hereby, except that
(i) the Borrower shall not have the right to assign its rights or obligations
under the Loan Documents without the prior written consent of each Lender,
(ii) any assignment by any Lender must be made in compliance with Section 12.3,
and (iii) any transfer by participation must be made in compliance with
Section 12.2. Any attempted assignment or transfer by any party not made in
compliance with this Section 12.1

 

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shall be null and void, unless such attempted assignment or transfer is treated
as a participation in accordance with the terms of this Agreement. The parties
to this Agreement acknowledge that clause (ii) of this Section 12.1 relates only
to absolute assignments and this Section 12.1 does not prohibit assignments
creating security interests, including, without limitation, (x) any pledge or
assignment by any Lender of all or any portion of its rights under this
Agreement and any Note to a Federal Reserve Bank or (y) in the case of a Lender
which is a Fund, any pledge or assignment of all or any portion of its rights
under this Agreement and any Note to its trustee in support of its obligations
to its trustee; provided, however, that no such pledge or assignment creating a
security interest shall release the transferor Lender from its obligations
hereunder unless and until the parties thereto have complied with the provisions
of Section 12.3. The Administrative Agent may treat the Person which made any
Loan or which holds any Note as the owner thereof for all purposes hereof unless
and until such Person complies with Section 12.3; provided, however, that the
Administrative Agent may in its discretion (but shall not be required to) follow
instructions from the Person which made any Loan or which holds any Note to
direct payments relating to such Loan or Note to another Person. Any assignee of
the rights to any Loan or any Note agrees by acceptance of such assignment to be
bound by all the terms and provisions of the Loan Documents. Any request,
authority or consent of any Person, who at the time of making such request or
giving such authority or consent is the owner of the rights to any Loan (whether
or not a Note has been issued in evidence thereof), shall be conclusive and
binding on any subsequent holder or assignee of the rights to such Loan.

12.2 Participations.

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

(b) Voting Rights. Each Lender shall retain the sole right to approve, without
the consent of any Participant, any amendment, modification or waiver of any
provision of the Loan Documents provided that each such Lender may agree in its
participation agreement with its Participant that such Lender will not vote to
approve any amendment, modification or waiver with respect to any Outstanding
Credit Exposure or Commitment in which such Participant has an interest which
would require consent of all of the Lenders pursuant to the terms of Section 8.3
or of any other Loan Document.

 

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(c) Benefit of Certain Provisions. The Borrower agrees that each Participant
shall be deemed to have the right of setoff provided in Section 11.1 in respect
of its participating interest in amounts owing under the Loan Documents to the
same extent as if the amount of its participating interest were owing directly
to it as a Lender under the Loan Documents, provided that each Lender shall
retain the right of setoff provided in Section 11.1 with respect to the amount
of participating interests sold to each Participant. The Lenders agree to share
with each Participant, and each Participant, by exercising the right of setoff
provided in Section 11.1, agrees to share with each Lender, any amount received
pursuant to the exercise of its right of setoff, such amounts to be shared in
accordance with Section 11.2 as if each Participant were a Lender. The Borrower
further agrees that each Participant shall be entitled to the benefits of
Sections 3.1, 3.2, 3.4, 3.5, 9.6 and 9.10 to the same extent as if it were a
Lender and had acquired its interest by assignment pursuant to Section 12.3,
provided that (i) a Participant shall not be entitled to receive any greater
payment under Section 3.1 or 3.2 than the Lender who sold the participating
interest to such Participant would have received had it retained such interest
for its own account, unless the sale of such interest to such Participant is
made with the prior written consent of the Borrower, and (ii) a Participant
shall not be entitled to receive any greater payment under Section 3.5 than the
Lender who sold the participating interest to such Participant would have
received had it retained such interest for its own account (a) except to the
extent such entitlement to receive a greater payment results from a change in
treaty, law or regulation (or any change in the interpretation or administration
thereof by any governmental authority) that occurs after the Participant
acquired the applicable participation and (B), in the case of any Participant
that would be a Non-U.S. Lender if it were a Lender, such Participant agrees to
comply with the provisions of Section 3.5 to the same extent as if it were a
Lender (it being understood that the documentation required under
Section 3.5(f) shall be delivered to the participating Lender). Each Lender that
sells a participation shall, acting solely for this purpose as an agent of the
Borrower, maintain a register on which it enters the name and address of each
Participant and the principal amounts (and stated interest) of each
Participant’s interest in any Outstanding Credit Exposure, any Note, any
Commitment or any other obligations under the Loan Documents (the “Participant
Register”); provided that no Lender shall have any obligation to disclose all or
any portion of the Participant Register (including the identity of any
Participant or any information relating to a Participant’s interest in any
Outstanding Credit Exposure, any Note, any Commitment or any other obligations
under the Loan Documents) to any Person except to the extent that such
disclosure is necessary to establish that such Outstanding Credit Exposure, any
Note, any Commitment or any other obligations under the Loan Documents is in
registered form under Section 5f.103-1(c) of the United States Treasury
Regulations. The entries in the Participant Register shall be conclusive absent
manifest error, and such Lender shall treat each Person whose name is recorded
in the Participant Register as the owner of such participation for all purposes
of this Agreement notwithstanding any notice to the contrary. For the avoidance
of doubt, the Administrative Agent (in its capacity as Administrative Agent)
shall have no responsibility for maintaining a Participant Register.

12.3 Assignments.

(a) Permitted Assignments. Subject to clause (b) below, any Lender may at any
time assign to one or more Eligible Assignees (“Purchasers”) all or any part of
its rights and obligations under the Loan Documents. Such assignment shall be
substantially in the form of Exhibit J or in such other form reasonably
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agreed to by the parties thereto. Each such assignment with respect to a
Purchaser which is not a Lender or an Affiliate of a Lender or an Approved Fund
shall either be in an amount equal to the entire applicable Commitment and
Outstanding Credit Exposure of the assigning Lender or (unless each of the
Borrower and the Administrative Agent otherwise consents) be in an aggregate
amount not less than $5,000,000. The amount of the assignment shall be based on
the Commitment or Outstanding Credit Exposure (if the Commitment has been
terminated) subject to the assignment, determined as of the date of such
assignment or as of the “Trade Date,” if the “Trade Date” is specified in the
assignment.

(b) Consents. The consent of the Borrower shall be required prior to an
assignment becoming effective, unless the Purchaser is a Lender, an Affiliate of
a Lender or an Approved Fund, provided that the consent of the Borrower shall
not be required if an Event of Default has occurred and is continuing and such
consent may not at any time be unreasonably withheld or delayed by Borrower. The
consent of the Administrative Agent shall be required prior to an assignment
becoming effective, unless the Purchaser is a Lender, an Affiliate of a Lender
or an Approved Fund. The consent of the LC Issuer shall be required prior to an
assignment of a Commitment becoming effective, unless the Purchaser is a Lender,
an Affiliate of a Lender or an Approved Fund. Any consent required under this
Section 12.3(b) shall not be unreasonably withheld or delayed.

(c) Effect; Effective Date. Upon (i) delivery to the Administrative Agent of an
assignment, together with any consents required by Sections 12.3(a) and 12.3(b),
and (ii) payment of a $3,500 fee to the Administrative Agent for processing such
assignment (unless such fee is waived by the Administrative Agent), such
assignment shall become effective on the effective date specified in such
assignment. The assignment shall contain a representation by the Purchaser to
the effect that none of the consideration used to make the purchase of the
Commitment and Outstanding Credit Exposure under the applicable assignment
agreement constitutes “plan assets” as defined under ERISA and that the rights
and interests of the Purchaser in and under the Loan Documents will not be “plan
assets” under ERISA. On and after the effective date of such assignment, such
Purchaser shall for all purposes be a Lender party to this Agreement and any
other Loan Document executed by or on behalf of the Lenders and shall have all
the rights and obligations of a Lender under the Loan Documents, to the same
extent as if it were an original party thereto, and the transferor Lender shall
be released with respect to the Commitment and Outstanding Credit Exposure
assigned to such Purchaser without any further consent or action by the
Borrower, the Lenders or the Administrative Agent. In the case of an assignment
covering all of the assigning Lender’s rights and obligations under this
Agreement, such Lender shall cease to be a Lender hereunder but shall continue
to be entitled to the benefits of, and subject to, those provisions of this
Agreement and the other Loan Documents which survive payment of the Obligations
and termination of the applicable agreement. Any assignment or transfer by a
Lender of rights or obligations under this Agreement that does not comply with
this Section 12.3 shall be treated for purposes of this Agreement as a sale by
such Lender of a participation in such rights and obligations in accordance with
Section 12.2. Upon the consummation of any assignment to a Purchaser pursuant to
this Section 12.3(c), the transferor Lender, the Administrative Agent and the
Borrower shall, if the transferor Lender or the Purchaser desires that its Loans
be evidenced by Notes, make appropriate arrangements so that new Notes or, as
appropriate, replacement Notes are issued to such transferor Lender and new
Notes or, as appropriate, replacement Notes, are issued to such Purchaser, in
each case in

 

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principal amounts reflecting their respective Commitments, as adjusted pursuant
to such assignment.

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

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

ARTICLE XIII

NOTICES

13.1 Notices; Effectiveness; Electronic Communication.

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

(i) if to the Borrower, to it at 655 Brea Canyon Road, Walnut, California 91788,
Attention: Chief Financial Officer, Facsimile: 909-543-1874; with a copy (which
shall not constitute notice) to: Gibson, Dunn & Crutcher LLP, Attention:
Cromwell Montgomery, 2029 Century Park East, Los Angeles, CA 90067-3026,
Facsimile: 310.552.7063; and with a copy (which shall not constitute notice) to:
655 Brea Canyon Road, Walnut, California 91788, Attention: Robert O’Dell,
Treasurer, Telephone: 602-303-3247, Facsimile: (612) 303-3851, e-mail:
robert.odell@jfshea.com;

(ii) if to the Administrative Agent, to it at c/o Soua R. Yang, Senior Agency
Specialist, U.S. Bank Agency Services, 800 Nicollet Mall, 3rd Floor,
Minneapolis, MN 55402-7020, Telephone: 602-303-3247, Facsimile: (612) 303-3851,
e-mail: soua.yang1@usbank.com and c/o Young Hahn, Agency Specialist, U.S. Bank
Agency Services,

 

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1420 Fifth Avenue, 9th Floor, Seattle, WA 98101, Telephone: (206) 344-5055,
Facsimile: (203) 587-7022, e-mail: elaine.hahn@usbank.com and c/o Susanie
Samson, Loan Administration, 4100 Newport Place, Suite 900, Newport Beach, CA
92680, Telephone: (949) 863-2376, Facsimile: (949) 252-1759, e-mail:
susanie.samson@usbank.com;

(iii) if to the LC Issuer, to it at c/o Susanie Samson, Loan Administration,
4100 Newport Place, Suite 900, Newport Beach, CA 92680, Telephone:
(949) 863-2376, Facsimile: (949) 252-1759, e-mail: susanie.samson@usbank.com and
c/o International Banking Documentary Services, 555 SW Oak Street, Suite 400-P,
Portland, OR 97204, Facsimile: (503) 464- 4125, e-mail:
portlandlcdept@usbank.com;

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

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

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

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

(c) Change of Address, Etc. Any party hereto may change its address or facsimile
number for notices and other communications hereunder by notice to the other
parties hereto given in the manner set forth in this Section 13.1.

 

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ARTICLE XIV

COUNTERPARTS; INTEGRATION; EFFECTIVENESS;

ELECTRONIC EXECUTION

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

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

ARTICLE XV

CHOICE OF LAW; CONSENT TO JURISDICTION;

WAIVER OF JURY TRIAL

15.1 CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A CONTRARY
EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS (WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS) OF THE STATE
OF NEW YORK, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.

15.2 CONSENT TO JURISDICTION; OTHER MATTERS; WAIVERS.

(a) EACH PARTY HERETO ACKNOWLEDGES THAT ANY DISPUTE OR CONTROVERSY BETWEEN OR
AMONG BORROWER, THE ADMINISTRATIVE AGENT OR ANY OF THE LENDERS WOULD BE BASED ON
DIFFICULT AND COMPLEX ISSUES OF LAW AND FACT AND WOULD RESULT IN DELAY AND
EXPENSE TO THE PARTIES. ACCORDINGLY, TO THE EXTENT PERMITTED BY APPLICABLE LAW,
EACH OF THE LENDERS, THE ADMINISTRATIVE AGENT AND BORROWER HEREBY WAIVES ITS
RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING OF ANY KIND OR NATURE

 

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IN ANY COURT OR TRIBUNAL IN WHICH AN ACTION MAY BE COMMENCED BY OR AGAINST ANY
PARTY HERETO ARISING OUT OF THIS AGREEMENT, THE NOTES, OR ANY OTHER LOAN
DOCUMENT OR IN CONNECTION WITH ANY COLLATERAL OR ANY LIEN OR BY REASON OF ANY
OTHER SUIT, CAUSE OF ACTION OR DISPUTE WHATSOEVER BETWEEN OR AMONG ANY BORROWER,
THE ADMINISTRATIVE AGENT OR ANY OF THE LENDERS OF ANY KIND OR NATURE.

(b) EACH OF THE BORROWER, THE ADMINISTRATIVE AGENT AND EACH LENDER HEREBY AGREES
THAT ANY FEDERAL DISTRICT COURT LOCATED IN NEW YORK, NEW YORK, OR, AT THE OPTION
OF THE ADMINISTRATIVE AGENT, ANY STATE COURT LOCATED IN NEW YORK, NEW YORK,
SHALL HAVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN OR
AMONG ANY BORROWER, THE ADMINISTRATIVE AGENT OR ANY OF THE LENDERS, PERTAINING
DIRECTLY OR INDIRECTLY TO THIS AGREEMENT, THE LOAN, THE NOTES OR ANY OTHER LOAN
DOCUMENT OR TO ANY MATTER ARISING HEREFROM OR THEREFROM. BORROWER AND EACH OF
THE LENDERS EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN
ANY ACTION OR PROCEEDING COMMENCED IN SUCH COURTS. BORROWER HEREBY WAIVES
PERSONAL SERVICE OF THE SUMMONS AND COMPLAINT, OR OTHER PROCESS OR PAPERS ISSUED
THEREIN, AND AGREES THAT SERVICE OF SUCH SUMMONS AND COMPLAINT, OR OTHER PROCESS
OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO BORROWER AT
ITS ADDRESS FOR NOTICES PROVIDED FOR HEREIN.

(c) EACH PARTY FURTHER WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO
THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION
OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT FORUM AND EACH AGREES NOT TO PLEAD
OR CLAIM THE SAME.

(d) THE CHOICE OF FORUM SET FORTH IN THIS SECTION SHALL NOT BE DEEMED TO
PRECLUDE THE BRINGING OF ANY ACTION BY THE ADMINISTRATIVE AGENT OR ANY LENDER OR
THE ENFORCEMENT BY THE ADMINISTRATIVE AGENT OR ANY LENDER OF ANY JUDGMENT
OBTAINED IN SUCH FORUM IN ANY OTHER APPROPRIATE JURISDICTION.

(e) BORROWER AGREES THAT ALL OF ITS PAYMENT OBLIGATIONS HEREUNDER SHALL BE
ABSOLUTE AND UNCONDITIONAL, AND FOR THE PURPOSES OF MAKING PAYMENTS HEREUNDER,
SUCH BORROWER HEREBY WAIVES ANY RIGHT TO ASSERT ANY SETOFF, COUNTERCLAIM OR
CROSS-CLAIM.

(f) THE FOREGOING WAIVERS HAVE BEEN MADE WITH THE ADVICE OF COUNSEL AND WITH A
FULL UNDERSTANDING OF THE LEGAL CONSEQUENCES THEREOF, AND SHALL SURVIVE THE
PAYMENT OF THE

 

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LOAN AND ALL OTHER AMOUNTS PAYABLE HEREUNDER OR UNDER THE OTHER LOAN DOCUMENTS
AND THE TERMINATION OF THIS AGREEMENT.

ARTICLE XVI

NON-RECOURSE

16.1 Notwithstanding any other term of provision of this Agreement, any other
Loan Document or applicable law:

(a) The Administrative Agent, LC Issuer and each Lender and other holder of an
Obligation (for themselves individually and their respective successors and
assigns) (collectively, the “Lender Parties”) each hereby agrees that (1) it
shall not be entitled to assert any claim or enforce any liability against and,
subject to the proviso set forth at the end of this paragraph, will waive any
and all rights, obligations, claims, causes of action and demand against any
general and limited partner(s) of the Borrower, any direct or indirect general
or limited partner of such general or limited partner(s), and any direct or
indirect partners (general or limited), shareholders, members, managers,
officers, directors, trustees, affiliates, parents, employees, or agents of the
foregoing entities and of any Guarantor or any Subsidiary with respect to which
Rate Management Obligations or obligations with respect to Cash Management
services exist (each such Person being referred to herein as a “Non-Recourse
Party”), or against the assets of any such Persons, on account of, or arising
from, any Obligation, and (2) it shall not look to any Non-Recourse Party for
the enforcement of any Obligation, Rate Management Obligations or obligations
with respect to Cash Management services; provided, however, Lender Parties may
look to, pursue, assert a claim against and/or otherwise enforce liability
against any Non-Recourse Party to recover any payments received by, or other
property or assets in the possession of, such person resulting from the payment
of a dividend, the making of a distribution, or other similar action by any
Non-Recourse Party in violation of the terms of the Loan Documents or due to any
fraud or willful misconduct of such Non-Recourse Party.

(b) Nothing contained in the Article XVI shall be construed to limit or restrict
the Obligations of any Loan Party under the Loan Documents or any applicable
Subsidiary with respect to any applicable Rate Management Obligations or
obligations with respect to Cash Management services, and in connection
therewith the Borrower acknowledges that the payment and performance of the
Obligations shall be fully recourse to each Loan Party and its respective
assets, and the assets of any applicable Subsidiary with respect to any
applicable Rate Management Obligations or obligations with respect to Cash
Management services.

[Signature Pages Follow]

 

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

 

SHEA HOMES LIMITED PARTNERSHIP,

a California limited partnership

By:

/s/ Andrew Parnes

Name: Andrew Parnes Title: Chief Financial Officer By:

/s/ Robert R. O’Dell

Name: Robert R. O’Dell Title: Treasurer

 

S-1

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

U.S. BANK NATIONAL ASSOCIATION,

as a Lender, as LC Issuer and as Administrative Agent

By:

/s/ Adrian B. Montero

Name:

Adrian B. Montero

Title:

Senior Vice President

WELLS FARGO BANK, N.A., as a Lender By:

/s/ Elena Bennett

Name:

Elena Bennett

Title:

Senior Vice President

JP MORGAN, as a Lender By:

/s/ Nadeige Dang

Name:

Nadeige Dang

Title:

Vice President

 

S-2

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

PRICING SCHEDULE

The Applicable Margin and Applicable Undrawn Fee Rate shall be determined in
accordance with the following table based on the Borrower’s Adjusted Leverage
Ratio as reflected in the then most recent Financials:

 

Adjusted Leverage Ratio

   Applicable Margin
for Eurocurrency
Loans     Applicable Margin
for Daily
Eurocurrency Loans     Applicable
Undrawn Fee Rate  

> 1.50x

     2.50 %      2.50 %      .45 % 

< 1.50x but > 1.00x

     2.25 %      2.25 %      .40 % 

< 1.00x but > 0.75x

     2.00 %      2.00 %      .35 % 

< 0.75x

     1.75 %      1.75 %      .30 % 

Adjustments, if any, to the Applicable Margin or Applicable Undrawn Fee Rate, to
the extent determined on the basis of the Adjusted Leverage Ratio, shall be
effective from and after the first day of the first fiscal month immediately
following the date on which the delivery of the Financials is required until the
first day of the first fiscal month immediately following the next such date on
which delivery of such Financials of the Borrower is so required. If the
Borrower fails to deliver the Financials to the Administrative Agent at the time
required pursuant to Section 6.1, then the Applicable Margin and Applicable L/C
Fee Rate shall be the highest Applicable Margin and Applicable L/C Fee Rate set
forth in the foregoing table until five (5) days after such Financials are so
delivered.

“Financials” means the annual or quarterly financial statements of the Borrower
delivered pursuant to Section 6.1(a) or (b).

 

Pricing Schedule

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

SCHEDULE 1

Authorized Officer(s)

For Borrowing Base Certificates and other documents:

Andrew Parnes, Chief Financial Officer

James G. Shontere, Secretary

Robert R. O’Dell, Treasurer

For Borrowing Notices, Conversion/Continuation Notices and any other notices
pursuant to Section 2.14:

Andrew Parnes, Chief Financial Officer

James G. Shontere, Secretary

Robert R. O’Dell, Treasurer

Heather Tang, Senior Treasury Analyst

Yves Hebert, Cash Manager

 

SCH. 1-1

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

SCHEDULE 1(a)

Commitments

 

Lender:

   Commitment:      Percentage:  

U.S. BANK NATIONAL ASSOCIATION

   $ 75,000,000         42.857142857 % 

WELLS FARGO BANK

   $ 40,000,000         22.857142857 % 

JP MORGAN

   $ 60,000,000         34.285714285 % 

TOTAL COMMITMENTS

   $ 175,000,000         100 % 

 

SCH. 1(a)-1

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

SCHEDULE 1(b)

Guarantors

Shea Homes Funding Corp., a Delaware corporation

Highlands Ranch Development Corporation, a Colorado corporation

Monty Green Holdings, LLC, a Delaware limited liability company

Mountainbrook Village Company, an Arizona corporation

Serenade at Natomas, LLC, a California limited liability company

Seven Summits Lodge, LLC, a Delaware limited liability company

Seville Golf and Country Club, LLC, an Arizona limited liability company

SH AA Development, LLC, a Delaware limited liability company

SH AA Tehaleh, LLC, a Delaware limited liability company

SH Jubilee, LLC, a Delaware limited liability company

SH Jubilee Management, LLC, a Delaware limited liability company

SH Lake Norman Associates, LLC, a Delaware limited liability company

SH Lake Norman Manager, LLC, a Delaware limited liability company

SH Tegavah Associates, LLC, a Delaware limited liability company

SH Tegavah Manager, LLC, a Delaware limited liability company

SH Vistancia West Associates, LLC, a Delaware limited liability company

SH Vistancia West Manager, LLC, a Delaware limited liability company

SH WR Marketing, LLC, a Delaware limited liability company

SHALC GC, Inc., a Delaware corporation

Shea Arizona Limited Partnership, an Arizona limited partnership

Shea Capital II, LLC, a Delaware limited liability company

Shea Communities Marketing Company, a Delaware corporation

Shea Financial Services, Inc., a California corporation

Shea Homes Active Adult, LLC, a Delaware limited liability company

Shea Homes at Montage, LLC, a California limited liability company

Shea Homes Houston, LLC, a Delaware limited liability company

Shea Homes, Inc., a Delaware corporation

Shea Homes Southwest, Inc., an Arizona corporation

Shea Homes Vantis, LLC, a California limited liability company

Shea Insurance Services, Inc., a California corporation

Shea La Quinta LLC, a California limited liability company

Shea Otay Village 11, LLC, a California limited liability company

Shea Proctor Valley, LLC, a California limited liability company

Shea Properties of Colorado, Inc., a Colorado corporation

Shea Riverpark Developers, LLC, a Delaware limited liability company

Shea Tonner Hills, LLC, a Delaware limited liability company

Shea Victoria Gardens, LLC, a Florida limited liability company

SHI JV Holdings, LLC, a Delaware limited liability company

SHLP JV Holdings, LLC, a Delaware limited liability company

SHPA2 Development, LLC, a Delaware limited liability company

Tower 104 Gathering, LLC, a Colorado limited liability company

Tower 104 Oil, LLC, a Colorado limited liability company

Trilogy Antioch, LLC, a California limited liability company

 

SCH. 1(b)-1

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

UDC Advisory Services, Inc., an Illinois corporation

UDC Homes Construction, Inc., an Arizona corporation

Vistancia, LLC, a Delaware limited liability company

Vistancia Construction, LLC, a Delaware limited liability company

Vistancia Marketing, LLC, a Delaware limited liability company

 

SCH. 1(b)-2

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

SCHEDULE 5.8

Subsidiaries; Existing Investments

 

Direct Subsidiaries and Joint Ventures of Shea Homes Limited Partnership

      

Name

   Equity
Percent  

4S Area 37 LLC

     24.79   

Armstrong Ranch LLC

     19.84   

Benicia CS Developers, LLC

     50   

Bridgeway Lakes Lot Development LLC

     50   

Highlands Ranch Development Corporation

     100   

Laing Forster Ranch II, LLC

     35   

Marina Community Partners, LLC

     33.333333   

MSSH Malibu Terrace Residential, LLC

     50   

Novato Community Partners, LLC

     50   

Polo Estates Ventures, LLC

     50   

RRWS Holding Company

     50   

Seville Golf and Country Club, LLC

     100   

SFHB I, LLC

     74   

Shea Arvada Ridge, LLC

     50   

Shea Baker Ranch, LLC

     .0006   

Shea Capital II, LLC

     96.5   

Shea Homes, Inc.

     100   

Shea Homes Arizona Limited Partnership

     85   

Shea Homes Funding Corp

     100   

Shea Laguna Hills LLC

     50   

Shea Long Beach LLC

     50   

Shea Otay Village 11, LLC

     100   

Shea Proctor Valley, LLC

     100   

Shea Properties of Colorado, Inc.

     100   

Shea Riverpark Developers, LLC

     71   

Shea Tonner Hills, LLC

     100   

SHLP JV Holdings, LLC

     100   

SHPA2 Development, LLC

     100   

Tower 104 Gathering, LLC

     100   

Tower 104 Oil, LLC

     100   

Tustin Legacy Community Partners, LLC

     25   

Vistancia, LLC

     16.667   

 

SCH. 5.8-1

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

Other Investments:

Investments of Shea Homes, Inc. contained in account [redacted] at J.P. Morgan
as of the Effective Date.

 

SCH. 5.8-2

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

SCHEDULE 6.17

Existing Liens

 

DEBTOR

  

JURISDICTION

SEARCHED

  

SECURED PARTY

  

FILE NO./
FILE DATE

  

COLLATERAL

DESCRIPTION

Shea Homes, Inc.

   DE SOS    Deere Credit, Inc.   

20791776
03/08/02

 

Continuation
14525955
11/28/11

   Equipment

Shea Homes, Inc.

   DE SOS    General Electric Capital Corporation   

50946757
3/28/05

 

Continuation
93584833
11/07/09

   Equipment

Shea Homes, Inc.

   DE SOS    Agricredit Acceptance, LLC   

74044037
12/01/09

 

Continuation
2354424
08/10/12

   Equipment

Vistancia, LLC

   DE SOS    U.S. Bancorp Equipment Finance, Inc.   

42351148
8/19/04

 

Continuation
91322327
4/27/09

   Equipment

Seville Golf and Country Club, LLC

   AZ SOS    Textron Financial Corporation   

2007-146-8583-1
3/2/07

 

Continuation
2/9/12

   Equipment

Seville Golf and Country Club, LLC

   AZ SOS    General Electric Capital Corporation    2010-161-5981-3
5/13/10    Equipment

 

SCH. 6.17-1

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

SCHEDULE 6.20

Transactions with Affiliates

None.

 

SCH. 6.20-1

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

EXHIBIT A

FORM OF BORROWING BASE CERTIFICATE

[Date]

U.S. Bank National Association, Administrative Agent

                    

                    

Ladies/Gentlemen:

This Borrowing Base Certificate is delivered to you pursuant to Section 6.1(c)
of the Credit Agreement, dated as of             , 2015 (as amended,
supplemented, restated or otherwise modified from time to time, the “Credit
Agreement”; unless otherwise defined herein, terms defined therein being used
herein as therein defined), among Shea Homes Limited Partnership, a California
limited partnership (the “Borrower”), the lenders or other financial
institutions that are parties as lenders (collectively, the “Lenders”), and U.S.
Bank National Association, as administrative agent for the Lenders (the
“Administrative Agent”).

 

1. [Name of officer signing on behalf of the Borrower] is a duly elected,
qualified and acting Authorized Officer of the Borrower; and

 

2. The Borrowing Base Availability as of                      (the “Report
Date”) and the components thereof are calculated and set forth on the
spreadsheet attached hereto as Attachment 1.

[Signature page follows.]

IN WITNESS WHEREOF, the undersigned has executed this Borrowing Base Certificate
this      day of         , 20    .

 

[Borrower] By:

 

Name:

 

Title:

 

 

EXH. A-1

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

Attachment 1 to Exhibit A

 

EXH. A-2

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

EXHIBIT B

GUARANTY

THIS GUARANTY (this “Guaranty”), dated as of March 23, 2015, is made by each of
the parties who have initially executed this Guaranty AND EACH OTHER PERSON WHO
SHALL BECOME A PARTY HERETO BY EXECUTION OF A GUARANTY JOINDER AGREEMENT AS
PROVIDED HEREIN (each a “Guarantor” and collectively the “Guarantors”) in favor
of U.S. Bank National Association, in its capacity as administrative agent (the
“Administrative Agent”) for each of the lenders from time to time party to the
Credit Agreement (defined below). All capitalized terms used but not otherwise
defined herein shall have the meanings ascribed to such terms in the Credit
Agreement.

RECITALS

A. Pursuant to the terms of that certain Credit Agreement dated as of March 23,
2015, by and among Shea Homes Limited Partnership, a California limited
partnership (the “Borrower”), the Administrative Agent and the Lenders (as
amended, restated, supplemented or otherwise modified form time to time, the
“Credit Agreement”), the Lenders have agreed to make available to the Borrower a
revolving credit facility subject to the terms, conditions and limitations
contained therein for the purposes specified in the Credit Agreement, which
purposes include, among others, investing in and advancing funds to certain of
the Guarantors.

B. Each Guarantor is an Affiliate of the Borrower and will benefit directly by
the credit facility provided under the Credit Agreement.

C. The Lenders are willing to make the credit facility under the Credit
Agreement available on the condition, among other things, that each Guarantor
execute and deliver this Guaranty.

AGREEMENT

NOW, THEREFORE, to induce Lenders to enter into the Credit Agreement and to make
the Credit Extensions described therein and in consideration thereof, each
Guarantor agrees as follows:

1. Guaranty.

(a) The Guarantors unconditionally guarantee, jointly and severally, the full
and prompt payment and performance, when due, whether upon demand, maturity, by
required prepayment, acceleration or otherwise, and at all times thereafter, of
all of the Obligations (for the avoidance of doubt, all references to the
“Obligations” in this Guaranty shall not include Excluded Swap Obligations, as
more particularly described in the definition of “Obligations” in the Credit
Agreement) which may now be or may hereafter become due and owing, including,
without limitation, interest accruing following the filing of a bankruptcy
petition by or against any Loan Party at the

 

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applicable rate set forth in the Credit Agreement whether or not such interest
is allowed as a claim in such bankruptcy. Each of the Guarantors hereby agrees
that this Guaranty is an absolute guarantee of payment and performance and is
not a guaranty of collection.

(b) Notwithstanding anything contained herein to the contrary, the Guarantors’
liability with respect to the payment of the Obligations shall include all fees,
costs and expenses (including, without limitation, all court costs and
reasonable attorneys’ fees and costs and expenses) paid or incurred by the
Administrative Agent, the LC Issuer or any Lender (individually a “Guaranteed
Party” or collectively the “Guaranteed Parties”) in: (i) endeavoring to collect
all or any part of the Obligations from, or in prosecuting any action against,
the Guarantors; (ii) taking any action with respect to any security or
collateral securing the obligations of the Guarantors under this Guaranty; and
(iii) preserving, protecting or defending the enforceability of this Guaranty or
its rights hereunder (all such costs and expenses are referred to hereinafter
collectively as the “Expenses”).

2. Payment of Obligations. At any time, and from time to time, the Guarantors
shall pay to the Administrative Agent for the benefit of the Lenders, on written
demand and in immediately available funds, all Obligations then due and
outstanding, together with all Expenses.

3. Obligations Unconditional.

(a) Each of the Guarantors hereby agrees that its obligations under this
Guaranty shall be unconditional, irrespective of:

(1) the validity or enforceability, avoidance or subordination of any of the
Obligations;

(2) the absence of any attempt by, or on behalf of, any Guaranteed Party to
collect, or take any other action to enforce, all or any part of the Obligations
from the Borrower, any other Guarantor or any other Person;

(3) the election of any remedy by, or on behalf of, any Guaranteed Party with
respect to all or any part of the Obligations;

(4) the waiver, consent, extension, forbearance or granting of any indulgence
by, or on behalf of, any Guaranteed Party or any Affiliate thereof with respect
to any provision of the Loan Documents;

(5) the failure of any Guaranteed Party to take any steps to perfect and
maintain its security interest in, or to preserve its respective right to, any
collateral for all or any part of the Obligations;

(6) the election by, or on behalf of, any Guaranteed Party, in any proceeding
instituted under the United States Bankruptcy Code (the “Bankruptcy Code”) of
the application of Section 1111 (b)(2) of the Bankruptcy Code;

 

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(7) any borrowing or grant of a security interest by the Borrower, as
debtor-in-possession, under Section 364 of the Bankruptcy Code, or the
disallowance under Section 502 of the Bankruptcy Code of all or any portion of
the claims of any Guaranteed Party for repayment of all or any part of the
Obligations or any Expenses relating thereto; or

(8) any other circumstances other than payment in full which might otherwise
constitute a legal or equitable discharge or defense of the Borrower or any one
or more of the Guarantors.

(b) The Guarantors hereby (i) waive (except to the extent, if any, that such a
waiver is prohibited by applicable law) any requirement of diligence,
presentment, demand of payment, filing of claims with a court in the event of
receivership or bankruptcy of the Borrower or any other Loan Party, protest or
notice with respect to all or any part of the Obligations, the benefit of any
statutes of limitation, and all demands whatsoever (and the Guarantors shall not
require that the same be made on Borrower or any other Guarantor as a condition
precedent to any Guarantor’s obligations hereunder), and (ii) covenant that this
Guaranty will not be discharged, except by full and complete payment of the
Obligations (other than any (1) contingent indemnification obligation (subject
to Section 4 below) for which no claim has been made, (2) Letters of Credit
which have been Cash Collateralized and (3) obligations with respect to Cash
Management Services and Rate Management Obligations as to which arrangements
satisfactory to the applicable cash management bank or counterparty have been
made).

4. Payment; Reinstatement; Debtor Relief.

(a) Administrative Agent may proceed directly and at once, without further
notice, against any one or more of the Guarantors to obtain performance of and
to collect and recover the full amount, or any portion, of the Obligations then
due without first proceeding against any other Loan Party, any other Person or
any security or collateral for all or any part thereof. Payments and credits, if
any, from the Guarantors, the Borrower or any other Person on account of the
Obligations, shall be applied to the Obligations as determined by the
Administrative Agent, but subject to the terms of the Credit Agreement, and none
of the Guarantors, Borrower or any other Person shall have any further liability
with respect to any such payments and credits if such payments and credits have
been made as provided herein; provided, however, that if such payments or
credits, or any part thereof, are subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required to be repaid to the
Guarantors, Borrower or any other Person, or their respective estates, trustees,
receivers or any other party under any bankruptcy law, state or federal law,
common law or equitable cause, then, to the extent of such payment or repayment,
the Obligations or any part thereof which has been paid, reduced or satisfied by
such amount shall be reinstated and shall continue in full force and effect as
of the time immediately preceding the time such initial payment, credit,
reduction or satisfaction occurred. Notwithstanding Section 8(f) hereof or any
other provision of this Guaranty which may be construed to the contrary, the
repayment of the Loan and other Obligations owing under the Credit Agreement
shall not limit, terminate or otherwise diminish Guarantors’ obligations or
liability under this Guaranty for the

 

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payment of any indemnification obligations of Borrower under Section 9.6 of the
Credit Agreement or under any other provisions of the Credit Agreement which, by
their terms, survive the repayment of the Loan and other Obligations owing under
the Credit Agreement.

(b) So long as any of the Obligations (other than any (1) contingent
indemnification obligation for which no claim has been made, (2) Letters of
Credit which have been Cash Collateralized and (3) obligations with respect to
Cash Management Services and Rate Management Obligations as to which
arrangements satisfactory to the applicable cash management bank or counterparty
have been made) are owing to the Guaranteed Parties, Guarantors shall not,
without the prior written consent of the Guaranteed Parties, commence or join
with any other party in commencing any bankruptcy, reorganization or insolvency
proceedings of or against Borrower. The obligations of each Guarantor under this
Guaranty shall not be altered, limited or affected by any case, voluntary or
involuntary, involving the bankruptcy, insolvency, receivership, reorganization,
liquidation or arrangement of Borrower or by any defense which Borrower may have
by reason of the order, decree or decision of any court or administrative body
resulting from any such case. Guaranteed Parties shall have the sole right to
accept or reject any plan on behalf of Guarantors proposed in such case and to
take any other action which Guarantors would be entitled to take, including,
without limitation, the decision to file or not file a claim. Guarantors
acknowledge and agree that any interest on the Obligations which accrues after
the commencement of any such proceeding, (or, if interest on any portion of the
Obligations ceases to accrue by operation of law by reason of the commencement
of said proceeding, such interest as would have accrued on any such portion of
the Obligations if said proceedings had not been commenced) will be included in
the Obligations because it is the intention of the parties that the Obligations
should be determined without regard to any rule or law or order which may
relieve Borrower of any portion of such Obligations. Guarantor hereby permits
and consents to any trustee in bankruptcy, receiver, debtor in possession,
assignee for the benefit of creditors or similar Person to pay Guaranteed
Parties, or allow the claim of Guaranteed Parties in respect of, any such
interest accruing after the date on which such proceeding is commenced. If all
or any portion of the Obligations are paid or performed by Borrower, the
obligations of Guarantors hereunder shall continue and remain in full force and
effect in the event that all or any part of such payment(s) or performance(s) is
avoided or recovered directly or indirectly from Guaranteed Parties as a
preference, fraudulent transfer or otherwise in such case irrespective of
payment in full of all obligations under the Loan Documents.

5. Inability to Collect. Each of the Guarantors agrees that, notwithstanding
anything set forth in this Guaranty to the contrary, if for whatever reason, any
Guaranteed Party is prevented by applicable law or the terms of any
subordination agreement from exercising any of its rights to receive payment
from the Borrower of all or any part of the Obligations, to collect interest on
all or any part of the Obligations or to enforce or exercise any other right or
remedy with respect to all or any part of the Obligations, or is prevented from
taking any action to realize on all or any part of any collateral securing the
Obligations or the liabilities of any Loan Party, the Guarantors agree, jointly
and severally, to pay to the Administrative Agent for the benefit of the Lenders
and the other Guaranteed Parties, on demand therefor and in immediately
available

 

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funds, the amount that would otherwise have been due and payable had such rights
and remedies been permitted to be exercised by the applicable Guaranteed Party.

6. The Guaranteed Parties’ Actions.

(a) The Lenders, either themselves or through the Administrative Agent, are
hereby authorized, without notice or demand and without affecting the liability
of any of the Guarantors hereunder, from time to time: (i) to renew, extend,
accelerate or otherwise change the time for payment of, or other terms relating
to, all or any part of the Obligations or to otherwise modify, amend or change
the terms of the Loan Documents including, without limitation, increasing the
amount of available credit or extending additional credit thereunder (including,
without limitation, the increase in the Aggregate Commitment as provided in
Section 2.23 of the Credit Agreement); (ii) to accept partial payments on all or
any part of the Obligations; (iii) to take and hold security or collateral for
the payment of all or any part of the Obligations, this Guaranty, or any other
guaranties of all or any part of the Obligations or other liabilities of the
Borrower; (iv) to exchange, enforce, waive and release any such security or
collateral; (v) release any other Guarantor; and (vi) to settle, release,
compromise, collect or otherwise liquidate all or any part of the Obligations
and exchange, enforce, release or waive any security or collateral for all or
any part of the Obligations, and any of the foregoing may be done in any manner,
without affecting or impairing all or any part of the obligations of any of the
Guarantors hereunder.

(b) Subject to the provisions of the Loan Documents, at any time after all or
any part of the Obligations have become due and payable, until all of such
Obligations have been paid in full (other than any (1) contingent
indemnification obligation for which no claim has been made, (2) Letters of
Credit which have been Cash Collateralized and (3) obligations with respect to
Cash Management Services and Rate Management Obligations as to which
arrangements satisfactory to the applicable cash management bank or counterparty
have been made), any Guaranteed Party may, in its sole discretion, without
notice to the Guarantors and regardless of the acceptance of any security or
collateral for the payment hereof, appropriate and apply toward the payment of
all or any part of such Obligations: (i) any indebtedness due or to become due
from such Guaranteed Party or any of its Affiliates to any of the Guarantors;
and (ii) any monies, credits or other property belonging to any of the
Guarantors, at any time held by or coming into the possession of such Guaranteed
Party, such Guaranteed Party’s Affiliates or any of their respective custodians
or nominees.

(c) Each of the Guarantors hereby assumes responsibility for keeping informed of
the financial condition of the Borrower and each other Loan Party, and of all
other circumstances bearing upon the risk of nonpayment of the Obligations, or
any part thereof, or the value or condition of any collateral, if any, for the
Obligations, that diligent inquiry would reveal, and the Guarantors hereby agree
that no Guaranteed Party shall have any duty to advise the Guarantors of
information known to it regarding such condition or any such circumstances. Each
of the Guarantors hereby acknowledges that they have been furnished copies of
the Loan Documents, and have had the opportunity to review any documents
relating thereto or financial information relevant thereto and

 

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understands the terms and conditions in this Guaranty and such Loan Documents.
Each of the Guarantors further acknowledges and agrees that in the event any
Guaranteed Party, in its sole discretion, undertakes at any time or from time to
time to provide any such information to the Guarantors, then the party providing
such information shall be under no obligation: (i) to undertake any
investigation not a part of its regular business routine; (ii) to disclose any
information which, pursuant to accepted or reasonable banking or commercial
finance practices, such party wishes to maintain confidential; or (iii) to make
any other or future disclosures of such information or any other information to
the Guarantors.

(d) Each of the Guarantors consents and agrees that each Guaranteed Party, or
any Person acting for or on behalf of such Guaranteed Party, shall not be under
any obligation to marshal any assets in favor of the Guarantors or against or in
payment of all or any part of the Obligations.

7. Credit Agreement. Until all of the Obligations have been fully paid (other
than any (1) contingent indemnification obligation for which no claim has been
made, (2) Letters of Credit which have been Cash Collateralized and
(3) obligations with respect to Cash Management Services and Rate Management
Obligations as to which arrangements satisfactory to the applicable cash
management bank or counterparty have been made) and the Commitments shall have
terminated, each Guarantor hereby makes all representations and warranties and
agrees to comply with all covenants set forth in the Credit Agreement to the
extent applicable to it, mutatis mutandis.

8. Delay of Subrogation, Subordination; Waivers and Other Matters.

(a) Until the Obligations shall have been paid in full (other than any
(1) contingent indemnification obligation for which no claim has been made,
(2) Letters of Credit which have been Cash Collateralized and (3) obligations
with respect to Cash Management Services and Rate Management Obligations as to
which arrangements satisfactory to the applicable cash management bank or
counterparty have been made), the Guarantors shall have no right of subrogation
or contribution on account of payments made by any Guarantor under this Guaranty
and each of the Guarantors hereby agrees to postpone any right to enforce any
remedy which any Guaranteed Party now has or may hereafter have against the
Borrower or any other Guarantor, and each of the Guarantors hereby agrees to
postpone any benefit of, and any right to participate in, any security or
collateral given to the Guaranteed Parties to secure payment of the Obligations
or any other liability of the Borrower to the Guaranteed Parties.

(b) The Guarantors further agree that, subject to the terms and conditions of
the Credit Agreement, any and all claims of the Guarantors against the Borrower
or any other Guarantor or against any of their respective properties, whether
arising by reason of any payment by any of the Guarantors pursuant to the
provisions hereof, or otherwise, and all indebtedness of the Borrower, to the
Guarantors or any of them, shall be subordinate and subject in right of payment
to the prior payment, in full, of all the Obligations and Expenses (other than
any (1) contingent indemnification obligation for which no claim has been made,
(2) Letters of Credit which have been Cash

 

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Collateralized and (3) obligations with respect to Cash Management Services and
Rate Management Obligations as to which arrangements satisfactory to the
applicable cash management bank or counterparty have been made). The Guarantors
also waive all setoffs and counterclaims and all presentments, demands for
performance, notices of nonperformance, protests, notices of protest, notices of
dishonor, and notices of acceptance of this Guaranty by any Person who is at any
time an obligee with respect to any of the Obligations. The Guarantors further
waive all notices of the existence, creation or incurring of new or additional
indebtedness, arising either from additional loans extended to the Borrower or
otherwise, and also waives all notices that the principal amount, or any portion
thereof, and/or any interest with respect to any of the Obligations is due,
notices of any and all proceedings to collect from the Borrower, any endorser,
any other Guarantor, or any other Person of all or any part of the Obligations,
and, to the extent permitted by law, notices of exchange, sale, surrender or
other handling of any security or collateral given to any Guaranteed Party to
secure payment of all or any part of the Obligations.

(c) Each of the Guarantors, to the fullest extent permitted by law, waives any
defense arising by reason of: (i) any disability or other defense of the
Borrower or any other Person, including but not limited to the insolvency or
bankruptcy of the Borrower or any other Person, or any stay in connection with
any such bankruptcy proceedings; (ii) the cessation from any cause whatsoever,
other than payment in full or other satisfaction, of the Obligations; (iii) the
application by the Borrower of the proceeds of any Obligation secured hereby for
purposes other than the purposes represented by the Borrower to the Guaranteed
Parties or intended or understood by the Guaranteed Parties or the Guarantors;
or (iv) any act or omission by any Guaranteed Party which directly or indirectly
results in or aids the discharge or release of the Borrower, any other Person,
any Obligation, or any collateral, by operation of law or otherwise. Each of the
Guarantors, to the fullest extent permitted by law, waives all rights which it
may have under: (i) any law which may limit the amount of a deficiency judgment
based on any Obligation, (ii) any bar to deficiency judgments, (iii) any
requirement of law that any Guaranteed Party exhaust any security for the
Obligations before proceeding against the Guarantors, (iv) any law which may
prohibit any Guaranteed Party from enforcing its rights and remedies against the
Borrower by both a private sale and an action in court, (v) any law which
requires that a court action to enforce any Guaranteed Party’s rights be an
action to foreclose any security instrument securing the Obligations, (vi) any
defense based on any lack of authority of the officers, directors, partners,
managers, members, or agents acting or purporting to act on behalf of Borrower
or any Affiliate of Borrower, or any defect in the formation of Borrower or any
Affiliate of Borrower, (vii) any defense based on any statute or rule of law
which provides that the obligation of a surety must be neither larger in amount
nor in any other respects more burdensome than that of a principal, (viii) any
defense based upon Administrative Agent’s or any Lender’s election, in any
proceeding instituted under the Federal Bankruptcy Code, or the application of
Section 1111(b)(2) of the Federal Bankruptcy Code or any successor statute,
(ix) any defense based upon any borrowing or any grant of a security interest
under Section 364 of the Federal Bankruptcy Code, or (x) the benefit of any
statute of limitations affecting the liability of any Guarantor hereunder or the
enforcement hereof.

 

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(d) Each of the Guarantors warrants and agrees that each of the waivers set
forth above are made with its full knowledge of their significance and
consequences, with the understanding that events giving rise to any defense
waived may diminish, destroy or otherwise adversely affect rights which the
Guarantors otherwise may have against the Borrower, any Guaranteed Party or
others, or against collateral, and that under the circumstances existing in
connection herewith, the waivers are reasonable and not contrary to public
policy or law. If any of the waivers are determined to be contrary to any
applicable law or public policy, such waivers shall be effective to the maximum
extent permitted by law.

(e) No delay on the part of the Administrative Agent in the exercise of any
right or remedy arising under this Guaranty, or any of the Loan Documents, or
otherwise with respect to all or any part of the Obligations, any collateral
securing the Obligations or any other guaranty of or security for all or any
part of the Obligations shall operate as a waiver thereof, and no single or
partial exercise by the Administrative Agent of any such right or remedy shall
preclude any further exercise thereof. No modification or waiver of any of the
provisions of this Guaranty shall be binding upon the Administrative Agent
except as expressly set forth in a writing duly executed and delivered by the
Administrative Agent. Failure by any Guaranteed Party at any time or times
hereafter to require strict performance by the Borrower, the Guarantors or any
other Person of any of the provisions, warranties, terms and conditions
contained in the Loan Documents shall not waive, affect or diminish any right of
the Administrative Agent at any time or times hereafter to demand strict
performance thereof, and such right shall not be deemed to have been modified or
waived by any act or knowledge of the Administrative Agent, unless such waiver
is contained in an instrument in writing, and directed and delivered to the
Guarantors, specifying such waiver signed by the Administrative Agent. No waiver
by any Guaranteed Party of any default under any of the Loan Documents shall
operate as a waiver of any other default or the same default on a future
occasion. Any final determination by a court of competent jurisdiction of the
amount of the Obligations shall be conclusive and binding on the Guarantors
irrespective of whether any of the Guarantors was party to the suit or action in
which such determination was made. Without in any way limiting the generality of
the foregoing, in the event that any Guaranteed Party is awarded a judgment in
any suit brought to enforce and Guarantor’s covenant to perform a portion of the
Obligation, such judgment will in no way be deemed to release such Guarantor
from its covenant to perform any portion of the Obligation which is not the
subject of such suit.

(f) This Guaranty shall continue in full force and effect until the Obligations
(other than any (1) contingent indemnification obligation for which no claim has
been made, subject to Section 4(a) hereof, (2) Letters of Credit which have been
Cash Collateralized and (3) obligations with respect to Cash Management Services
and Rate Management Obligations as to which arrangements satisfactory to the
applicable cash management bank or counterparty have been made) shall have been
fully and indefeasibly paid and no Guaranteed Party shall have further
obligation to make additional financial accommodations available to the Borrower
under the Loan Documents.

 

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9. In furtherance of the foregoing:

(a) Each Guarantor further waives, without limitation, any and all rights or
defenses such Guarantor may have by reason of protection afforded to the
principal with respect to any of the Obligations or to any other guarantor of
any of the Obligations with respect to such guarantor’s obligations under its
guaranty, in either case, pursuant to any applicable anti-deficiency or other
laws limiting or discharging the principal’s indebtedness or such other
guarantor’s obligations; and

(b) Each Guarantor waives all rights and defenses arising out of an election of
remedies by Guaranteed Parties, even though that election of remedies (such as
non-judicial foreclosure with respect to any security for Borrower’s
obligations) has destroyed Guarantors’ rights of subrogation and reimbursement
against Borrower by the operation of applicable law or otherwise, and even
though that election of remedies by Guaranteed Party has destroyed Guarantors’
rights of contribution against another guarantor of any of the Obligations.

(c) Subject to Section 8, each Guarantor waives all rights and defenses that it
may have because the Obligations at any time may be secured by real property.
This means, among other things:

(1) That Guaranteed Parties may collect or receive performance from any
Guarantor without first foreclosing on any real or personal property collateral
pledged by Borrower or any other Party; and

(2) If any Guaranteed Party forecloses on any real property collateral pledged
by Borrower, any Guarantor or any other Party,

(A) the amount of the Obligations may be reduced only by the price for which
that collateral is sold at the foreclosure sale, even if the collateral is worth
more than the sale price; and

(B) the Guaranteed Parties may collect or receive performance from any Guarantor
even if Guaranteed Parties, by foreclosing on the real property collateral, have
destroyed any right such Guarantor may have to collect from Borrower.

The foregoing is an unconditional and irrevocable waiver of any rights and
defenses Guarantor may have because the Obligations may at any time be secured
by real property.

(d) Each Guarantor hereby waives any right it might otherwise have under
applicable law or otherwise to have Borrower designate the portion of any such
obligation to be satisfied in the event that Borrower provides partial
satisfaction of such obligation. Guarantors acknowledges and agrees that
Borrower may already have agreed with Guaranteed Parties, or may hereafter
agree, that in any such event the designation of the portion of the obligation
to be satisfied shall, to the extent not expressly made by the terms of the Loan
Documents, be made by Guaranteed Parties rather than by Borrower.

 

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No other provision of this Guaranty shall be construed as limiting the
generality of any of the covenants and waivers set forth in this paragraph 9.

10. CHOICE OF LAW; JURISDICTION AND SERVICE OF PROCESS; WAIVER OF JURY TRIAL.

(a) THIS GUARANTY SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS
(WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS) OF THE STATE OF NEW YORK,
BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.

(b) EACH PARTY HERETO ACKNOWLEDGES THAT ANY DISPUTE OR CONTROVERSY BETWEEN OR
AMONG ANY GUARANTOR, THE ADMINISTRATIVE AGENT OR ANY OF THE LENDERS WOULD BE
BASED ON DIFFICULT AND COMPLEX ISSUES OF LAW AND FACT AND WOULD RESULT IN DELAY
AND EXPENSE TO THE PARTIES. ACCORDINGLY, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, EACH OF THE GUARANTORS AND THE ADMINISTRATIVE AGENT HEREBY WAIVES ITS RIGHT
TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING OF ANY KIND OR NATURE IN ANY
COURT OR TRIBUNAL IN WHICH AN ACTION MAY BE COMMENCED BY OR AGAINST ANY PARTY
HERETO ARISING OUT OF THIS GUARANTY, OR ANY OTHER LOAN DOCUMENT OR IN CONNECTION
WITH ANY COLLATERAL OR ANY LIEN OR BY REASON OF ANY OTHER SUIT, CAUSE OF ACTION
OR DISPUTE WHATSOEVER BETWEEN OR AMONG THE ADMINISTRATIVE AGENT OR ANY OF THE
GUARANTORS OF ANY KIND OR NATURE.

(c) THE ADMINISTRATIVE AGENT AND EACH GUARANTOR HEREBY AGREES THAT ANY FEDERAL
DISTRICT COURT LOCATED IN NEW YORK, NEW YORK OR, AT THE OPTION OF THE
ADMINISTRATIVE AGENT, ANY STATE COURT LOCATED IN NEW YORK, NEW YORK SHALL HAVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN OR AMONG THE
ADMINISTRATIVE AGENT OR ANY OF THE GUARANTORS, PERTAINING DIRECTLY OR INDIRECTLY
TO THIS GUARANTY, OR ANY OTHER LOAN DOCUMENT OR TO ANY MATTER ARISING HEREFROM
OR THEREFROM. EACH OF THE GUARANTORS EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE
TO SUCH JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED IN SUCH COURTS. EACH
GUARANTOR HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS AND COMPLAINT, OR OTHER
PROCESS OR PAPERS ISSUED THEREIN, AND AGREES THAT SERVICE OF SUCH SUMMONS AND
COMPLAINT, OR OTHER PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED
MAIL ADDRESSED TO SUCH GUARANTOR AT ITS ADDRESS FOR NOTICES PROVIDED FOR HEREIN.

(d) EACH PARTY FURTHER WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO
THE VENUE OF ANY SUCH ACTION

 

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OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN
AN INCONVENIENT FORUM AND EACH AGREES NOT TO PLEAD OR CLAIM THE SAME.

(e) THE CHOICE OF FORUM SET FORTH IN THIS PARAGRAPH 10 SHALL NOT BE DEEMED TO
PRECLUDE THE BRINGING OF ANY ACTION BY THE ADMINISTRATIVE AGENT OR ANY LENDER OR
THE ENFORCEMENT BY THE ADMINISTRATIVE AGENT OR ANY LENDER OF ANY JUDGMENT
OBTAINED IN SUCH FORUM IN ANY OTHER APPROPRIATE JURISDICTION.

(f) EACH GUARANTOR AGREES THAT ALL OF ITS PAYMENT OBLIGATIONS HEREUNDER SHALL BE
ABSOLUTE AND UNCONDITIONAL, AND FOR THE PURPOSES OF MAKING PAYMENTS HEREUNDER,
SUCH GUARANTOR HEREBY WAIVES ANY RIGHT TO ASSERT ANY SETOFF, COUNTERCLAIM OR
CROSS-CLAIM.

(g) THE FOREGOING WAIVERS HAVE BEEN MADE WITH THE ADVICE OF COUNSEL AND WITH A
FULL UNDERSTANDING OF THE LEGAL CONSEQUENCES THEREOF, AND SHALL SURVIVE THE
PAYMENT OF THE OBLIGATIONS AND ALL OTHER AMOUNTS PAYABLE HEREUNDER AND THE
TERMINATION OF THIS GUARANTY.

11. Severability. Wherever possible, each provision of this Guaranty shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Guaranty shall be prohibited by or invalid under
such law, such provision shall be ineffective to the extent of such prohibition
or invalidity without invalidating the remainder of such provision or the
remaining provisions of this Guaranty.

12. Notices. Any notice required or desired to be served, given or delivered
under this Guaranty shall be in writing, and shall be delivered by hand or
overnight courier service, mailed by certified or registered mail or sent by
facsimile, all of which shall be properly addressed to the party to be notified
and sent to the applicable address for such party set forth on Schedule 1
attached hereto (or to such other address as the parties shall, from time to
time, designate in writing). Notices sent by hand or overnight courier service,
or mailed by certified or registered mail, shall be deemed to have been given
when received; notices sent by facsimile shall be deemed to have been given when
sent (except that, if not given during normal business hours for the recipient,
shall be deemed to have been given at the opening of business on the next
Business Day for the recipient). If any Guarantor refuses any delivery, a notice
so refused shall be deemed delivered.

13. Obligations of Others; Reference to the Guarantors. Each of the Guarantor’s
obligations under this Guaranty will also be binding on such Guarantor’s
successors, assigns and legal representatives. Each Guarantor’s successors and
assigns shall include, without limitation, a receiver, successor trustee or
debtor in possession for such Guarantor. This Guaranty shall be joint and
several as among all of the Guarantors and the obligations under this Guaranty
shall not be modified, delayed or impaired as to any one or more of the
Guarantors by the modification, extension or release of any obligations
hereunder of any of the Guarantors.

 

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14. Limitation on Guaranteed Obligations; Contribution.

(a) Notwithstanding anything to the contrary contained in this Guaranty, it is
the intention of each of the Guarantors and the Administrative Agent that each
of the Guarantor’s obligations hereunder, as of any date, shall be in (but not
in excess of) such maximum amount not subject (but for the provisions of this
paragraph) to avoidance under any Debtor Relief Laws. The limitation of this
paragraph (as to each of the Guarantors, its “Limitation”) shall apply to each
of the Guarantors, only to the extent its obligations would otherwise be subject
to avoidance under any Debtor Relief Laws if such Guarantor is not deemed to
have received valuable consideration, fair value or reasonably equivalent value
for its obligations hereunder, in which case, such Guarantor’s obligations
hereunder shall be reduced to that amount (“Maximum Liability”) which, after
giving effect thereto, would not render such Guarantor insolvent, or leave such
Guarantor with an unreasonably small capital to conduct its business, or cause
such Guarantor to have incurred debts (or intended to have incurred debts)
beyond its ability to pay such debts as they mature, at the time such
obligations are deemed to have been incurred. As used herein, the terms
“insolvent” and “unreasonably small capital” shall be determined in accordance
with the U.S. Bankruptcy Code. The rights of each of the Guarantors to any right
of contribution or subrogation against any and all other Loan Parties shall be
taken into account in making any determination described in the foregoing
sentence. This paragraph with respect to the Limitation of each of the
Guarantors is intended solely to preserve the rights of the Guaranteed Parties
hereunder to the maximum extent not subject to avoidance under any Debtor Relief
Laws, and neither the Guarantors nor any other Person shall have any right or
claim under this paragraph with respect to the Limitation, except to the extent
necessary so that the obligations of the Guarantors or any of them hereunder
shall not be rendered voidable under any Debtor Relief Laws.

(b) If any Guarantor makes a payment in respect of the Obligations that is
greater than its Pro Rata Percentage (hereinafter defined) of the Obligations so
paid, calculated as of the date such payment is made, the Guarantor making such
payment shall have the right to receive from each of the other Guarantors, and
the other Guarantors jointly and severally agree to pay to such Guarantor, when
permitted by subparagraph (a) above, an amount such that the net payments made
by the Guarantors in respect of the Obligations shall be shared among the
Guarantors pro rata in proportion to their respective Pro Rata Percentage of the
Obligations so paid by the Guarantors. The Guarantors hereby jointly and
severally indemnify each of the other Guarantors and jointly and severally agree
to hold each of them harmless from and against any and all amounts which any
such Guarantor shall ever be required to pay in respect of the Obligations in
excess of such Guarantor’s respective Pro Rata Percentage of the Obligations so
paid. As used herein, the term “Pro Rata Percentage” shall mean, for each
Guarantor, the percentage derived by dividing (1) the amount by which the
present fair saleable value of such Guarantor’s assets on the date hereof (or,
if later, the date on which such Guarantor becomes a party hereto) exceeds its
liabilities (without giving effect to the Guaranty) (such excess for each
Guarantor, its “Net Worth”) by (2) the Net Worth of all of the Guarantors as of
such date.

 

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(c) To the extent any dispute exists at any time between or among any Guarantor
and any other guarantor of the Obligations as to such Guarantors’ or any other
guarantor’s right to contribution or otherwise, Guarantor agrees to indemnify,
defend and hold Guaranteed Parties harmless from and against any loss, damage,
claim, demand, cost or any other liability (including, without limitation,
reasonable attorneys’ fees and costs) Guaranteed Parties may suffer as a result
of such dispute.

15. Counterparts. This Guaranty may be executed in any number of counterparts,
all of which taken together shall constitute one agreement, and any of the
parties hereto may execute this Guaranty by signing any such counterpart. This
Guaranty shall be effective as against each of the Guarantors when it has been
executed by such Guarantor. A facsimile or pdf copy of a signature of any of the
Guarantors to this Guaranty shall have the same force and effect as an original
manual signature.

16. Effect of Waivers; Entirety of Agreement. Each waiver of any rights of the
Guarantors contained herein is given by each Guarantor knowingly and
intentionally and unless otherwise expressly otherwise provided herein, each
such waiver is given for all times and forever. This Guaranty sets forth the
entire agreement of the Guarantors and Guaranteed Parties with respect to the
matters described herein and supersedes all prior written or oral understandings
and agreements with respect thereto. No modification or waiver of any provision
of this Guaranty shall be effective unless set forth in writing and signed by
the Guarantors and Administrative Agent. If there is any conflict between the
terms, conditions and provisions of this Guaranty and those of any other
agreement or instrument executed by Guarantors, including any of the other Loan
Documents, the terms, conditions and provisions of this Guaranty shall prevail.
Each Guarantor, by executing this Guaranty or a Guaranty Joinder Agreement
pursuant to paragraph 17, expressly represents and warrants that it did not rely
on any representation, assurance or agreement, oral or written, not expressly
set forth in this Guaranty in reaching its decisions to enter into this Guaranty
and that no promises or other representations have been made to such Guarantor
which conflict with the written terms of this Guaranty. Each Guarantor
represents to the Guaranteed Parties that (i) it has read and understands the
terms and conditions contained in this Guaranty and the other Loan Documents
executed in connection with this Guaranty, (ii) its legal counsel has carefully
reviewed all of the Loan Documents (including, without limitation, this
Guaranty) and it has received legal advice from counsel of its choice regarding
the meaning and legal significance of this Guaranty and all other Loan
Documents, (iii) it is satisfied with its legal counsel and the advice received
from it, and (iv) it has relied only on its review of this Guaranty and the
other Loan Documents and its own legal counsel’s advice and representations (and
it has not relied on any advice or representations from Administrative Agent and
Lender, or any of their respective officers, employees, agents or attorneys).
This Guaranty may not be modified, amended or terminated except by a written
agreement signed by Guarantors and Administrative Agent. No course of prior
dealing among the parties, no usage of trade, and no parol or extrinsic evidence
of any nature may be used to supplement, modify or vary any of the terms hereof.
There are no conditions to the full effectiveness of this Guaranty.

17. Guaranty Joinder Agreement. Each Wholly Owned Subsidiary which is required
to become a Guarantor hereunder in accordance with Section 6.24 of the Credit
Agreement (and any other Person who is a Guarantor pursuant to Section 6.24 of
the Credit Agreement) shall execute and deliver to the Administrative Agent a
“Guaranty Joinder Agreement” substantially in

 

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the form attached as Exhibit A hereto (a “Guaranty Joinder Agreement”) and shall
thereupon irrevocably, absolutely and unconditionally become a party hereto and
obligated hereunder as a Guarantor, and all references herein and in the other
Loan Documents to the Guarantors or to the parties to this Guaranty shall be
deemed to include such Person as a Guarantor hereunder.

18. Eligible Contract Participant Provisions.

(a) As used in this paragraph 18: (i) the terms “Commodities Exchange Act” and
“Swap Obligation” have the meanings given to such terms in the Loan Agreement;
(ii) a “Swap” means any agreement, contract or transaction that constitutes a
“swap” within the meaning of Section 1a(47) of the Commodity Exchange Act, as
further defined under CFTC regulations, including any adopted jointly with the
Securities and Exchange Commission; (iii) a “Non-Lender Swap Counterparty”
means, with respect to any Swap with an LC Issuer, any person or entity (other
than the LC Issuer) that is or becomes a party to such Swap; and (iv) “Qualified
ECP Guarantor” means, in respect of any Swap Obligation, each Guarantor that has
total assets exceeding $10,000,000 at the time the relevant guaranty (including,
without limitation, this Guaranty) or grant of the relevant security interest
becomes effective with respect to such Swap Obligation, or such other person as
constitutes an “eligible contract participant” under the Commodity Exchange Act
or any regulations promulgated thereunder and can cause another person to
qualify as an “eligible contract participant” at such time by entering into a
keepwell agreement under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

(b) Each Guarantor hereby represents that as of the date hereof, and shall be
deemed to represent on any and each day that Borrower enters into a Swap, that
it is an “eligible contract participant” as defined in the Commodities Exchange
Act. Each Qualified ECP Guarantor hereby jointly and severally absolutely,
unconditionally and irrevocably undertakes to provide such funds or other
support as may be needed from time to time by each other Guarantor to honor all
of its obligations under this Guaranty in respect of all Swap Obligations
(provided, however, that each Qualified ECP Guarantor shall only be liable under
this paragraph 18 for the maximum amount of such liability that can be hereby
incurred without rendering its obligations under this paragraph 18, or otherwise
under this Guaranty, voidable under applicable law relating to fraudulent
conveyance or fraudulent transfer, and not for any greater amount). The
obligations of each Qualified ECP Guarantor under this paragraph 18 shall remain
in full force and effect until all Obligations guaranteed by this Guaranty have
been paid in full. Each Qualified ECP Guarantor intends that this paragraph 18
constitute, and this paragraph 18 shall be deemed to constitute, a “keepwell,
support, or other agreement” for the benefit of each other Guarantor for all
purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.
Notwithstanding anything to the contrary set forth in this Guaranty, the
obligations of each Guarantor under this paragraph 18 shall constitute
guaranteed Obligations under this Guaranty.

EACH GUARANTOR ACKNOWLEDGES THAT GUARANTOR HAS BEEN AFFORDED THE OPPORTUNITY TO
READ THIS DOCUMENT CAREFULLY AND TO REVIEW IT WITH AN ATTORNEY OF GUARANTORS’
CHOICE BEFORE SIGNING IT.

 

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EACH GUARANTOR ACKNOWLEDGES HAVING READ AND UNDERSTOOD THE MEANING AND EFFECT OF
THIS DOCUMENT BEFORE SIGNING IT.

[Signatures on the following page]

 

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IN WITNESS WHEREOF, this Guaranty has been duly executed as of the day and year
first set forth above.

 

GUARANTORS:

SHEA HOMES LIMITED PARTNERSHIP,

a California limited partnership

By: 

 

Name: Andrew Parnes Title: Chief Financial Officer By:

 

Name: Robert R. O’Dell Title: Treasurer

SHEA HOMES FUNDING CORP.,

a Delaware corporation

By:

 

Name: Andrew Parnes Title: Vice President By:

 

Name: Robert R. O’Dell Title: Treasurer

 

SIGNATURES TO GUARANTY S-1

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

HIGHLANDS RANCH DEVELOPMENT CORPORATION,

a Colorado corporation

By: 

 

Name: James G. Shontere Title: Secretary By:

 

Name: Robert R. O’Dell Title: Treasurer

MONTY GREEN HOLDINGS, LLC,

a Delaware limited liability company

By: Shea Homes, Inc., a Delaware corporation Its Sole Member By:

 

Name: Andrew Parnes Title: Vice President By:

 

Name: Robert R. O’Dell Title: Treasurer

MOUNTAINBROOK VILLAGE COMPANY,

an Arizona corporation

By:

 

Name: Andrew Parnes Title: Vice President By:

 

Name: Robert R. O’Dell Title: Treasurer

 

SIGNATURES TO GUARANTY S-2

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

SERENADE AT NATOMAS, LLC, a California limited liability company By:  Shea
Homes, Inc., a Delaware corporation, Its sole Member By: 

 

Name: Andrew Parnes Title: Vice President By:

 

Name: Robert R. O’Dell Title: Treasurer

SHEA HOMES ARIZONA LIMITED PARTNERSHIP

an Arizona limited partnership

By:

Shea Homes Limited Partnership,

a California limited partnership, Its General Partner By: J.F. Shea, G.P., a
Delaware general partnership, Its sole General Partner By: JFS Management, L.P.,
a Delaware limited partnership, Its sole General Partner By:  J.F. Shea
Construction Management, Inc., a California corporation, Its sole General
Partner By: 

 

Name: James G. Shontere Title: Secretary By:

 

Name: Robert R. O’Dell Title: Treasurer

 

SIGNATURES TO GUARANTY S-3

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

SEVILLE GOLF AND COUNTRY CLUB, LLC, an Arizona limited liability company By: 
Shea Homes Limited Partnership, a California limited partnership, Its Sole
Member and Manager By:  J.F. Shea, G.P., a Delaware limited partnership, Its
sole General Partner By:  JFS Management, L.P., a Delaware limited partnership,
Its sole General Partner By:  J.F. Shea Construction Management, Inc., a
California corporation, Its sole General Partner By: 

 

Name: Andrew Parnes Title: Vice President By:

 

Name: Robert R. O’Dell Title: Treasurer

 

SIGNATURES TO GUARANTY S-4

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

SHEA RIVERPARK DEVELOPERS, LLC, a Delaware limited liability company By:  Shea
Homes Limited Partnership, a California limited partnership, Its Managing Member
By:  J.F. Shea, G.P., a Delaware general partnership, Its sole General Partner
By:  JFS Management, L.P., a Delaware limited partnership, Its sole General
Partner By:  J.F. Shea Construction Management, Inc., a California corporation,
Its sole General Partner By: 

 

Name: James G. Shontere Title: Secretary By:

 

Name: Robert R. O’Dell Title: Treasurer

 

SIGNATURES TO GUARANTY S-5

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

SHEA CAPITAL II, LLC, a Delaware limited liability company By:  Shea Homes
Limited Partnership, a California limited partnership, Its Manager By: J.F.
Shea, G.P.., a Delaware limited partnership, Its sole General Partner By:  JFS
Management, L.P., a Delaware limited partnership, Its sole General Partner By: 
J.F. Shea Construction Management, Inc., a California corporation, Its sole
General Partner By: 

 

Name: Andrew Parnes Title: Vice President By: 

 

Name: Robert R. O’Dell Title: Treasurer

SHEA COMMUNITIES MARKETING COMPANY,

a Delaware corporation

By:

 

Name: Andrew Parnes Title: Vice President By:

 

Name: Robert R. O’Dell Title: Treasurer

 

SIGNATURES TO GUARANTY S-6

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

SHEA FINANCIAL SERVICES, INC., a California corporation By: 

 

Name: James G. Shontere Title: Secretary By:

 

Name: Robert R. O’Dell Title: Treasurer

SHEA HOMES, INC.,

a Delaware corporation

By:

 

Name: Andrew Parnes Title: Vice President By:

 

Name: Robert R. O’Dell Title: Treasurer

SHEA HOMES AT MONTAGE, LLC,

a California limited liability company

By:

 

Name: Andrew Parnes Title: Vice President By:

 

Name: Robert R. O’Dell Title: Treasurer

 

SIGNATURES TO GUARANTY S-7

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

SHEA HOMES SOUTHWEST, INC., an Arizona corporation By: 

 

Name: Andrew Parnes Title: Vice President By:

 

Name: Robert R. O’Dell Title: Treasurer

SHEA HOMES VANTIS, LLC,

a California limited liability company

By: Shea Homes, Inc., a Delaware corporation, Its sole Member By:

 

Name: Andrew Parnes Title: Vice President By:

 

Name: Robert R. O’Dell Title: Treasurer

SHEA INSURANCE SERVICES, INC.,

a California corporation

By:

 

Name: James G. Shontere Title: Secretary By:

 

Name: Robert R. O’Dell Title: Treasurer

 

SIGNATURES TO GUARANTY S-8

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

SHEA LA QUINTA LLC, a California limited liability company By:  Shea Homes,
Inc., a Delaware corporation, Its sole Member By: 

 

Name: Andrew Parnes Title: Vice President By:

 

Name: Robert R. O’Dell Title: Treasurer

SHEA OTAY VILLAGE 11, LLC,

a California limited liability company

By: Shea Homes Limited Partnership, a California limited partnership, Its Sole
Member By: J.F. Shea, G.P.., a Delaware limited partnership, Its sole General
Partner By: JFS Management, L.P., a Delaware limited partnership, Its sole
General Partner By:  J.F. Shea Construction Management, Inc., a California
corporation, Its sole General Partner By: 

 

Name: Andrew Parnes Title: Vice President By:

 

Name: Robert R. O’Dell Title: Treasurer

 

SIGNATURES TO GUARANTY S-9

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

SHEA PROCTOR VALLEY, LLC, a California limited liability company By:  Shea Homes
Limited Partnership, a California limited partnership, Its Sole Member By: J.F.
Shea, G.P.., a Delaware limited partnership, Its sole General Partner By:  JFS
Management, L.P., a Delaware limited partnership, Its sole General Partner By: 
J.F. Shea Construction Management, Inc., a California corporation, Its sole
General Partner By: 

 

Name: Andrew Parnes Title: Vice President By:

 

Name:  Robert R. O’Dell Title: Treasurer

SHEA PROPERTIES OF COLORADO, INC.,

a Colorado corporation

By:

 

Name: James G. Shontere Title: Secretary By:

 

Name: Robert R. O’Dell Title: Treasurer

 

SIGNATURES TO GUARANTY S-10

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

SHEA TONNER HILLS, LLC, a Delaware limited liability company By:  Shea Homes
Limited Partnership, a California limited partnership, Its sole Member and
Manager By: J.F. Shea, G.P.., a Delaware limited partnership, Its sole General
Partner By:  JFS Management, L.P., a Delaware limited partnership, Its sole
General Partner By:  J.F. Shea Construction Management, Inc., a California
corporation, Its sole General Partner By: 

 

Name:  Andrew Parnes Title: Vice President By:

 

Name: Robert R. O’Dell Title: Treasurer

SHEA VICTORIA GARDENS, LLC,

a Florida limited liability company

By:

 

Name:  Andrew Parnes Title: Vice President By:

 

Name: Robert R. O’Dell Title: Treasurer

 

SIGNATURES TO GUARANTY S-11

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

SH JUBILEE, LLC, a Delaware limited liability company By:

 

Name: Andrew Parnes Title: Vice President By:

 

Name: Robert R. O’Dell Title: Treasurer

SH JUBILEE MANAGEMENT, LLC,

a Delaware limited liability company

By:

 

Name: Andrew Parnes Title: Vice President By:

 

Name: Robert R. O’Dell Title: Treasurer

SHI JV HOLDINGS, LLC,

a Delaware limited liability company

By:

 

Name: Andrew Parnes Title: Vice President By:

 

Name: Robert R. O’Dell Title: Treasurer

SHLP JV HOLDINGS, LLC,

a Delaware limited liability company

By:

 

Name: Andrew Parnes Title: Vice President By:

 

Name: Robert R. O’Dell Title: Treasurer

 

SIGNATURES TO GUARANTY S-12

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

TOWER 104 GATHERING, LLC, a Colorado limited liability company By:  Shea Homes
Limited Partnership, a California limited partnership, Its Sole Member and
Manager By:  J.F. Shea, G.P.., a Delaware limited partnership, Its sole General
Partner By:  JFS Management, L.P., a Delaware limited partnership, Its sole
General Partner By:  J.F. Shea Construction Management, Inc., a California
corporation, Its sole General Partner By: 

 

Name:  Andrew Parnes Title: Vice President By:

 

Name: Robert R. O’Dell Title: Treasurer

 

SIGNATURES TO GUARANTY S-13

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

TOWER 104 OIL, LLC, a Colorado limited liability company By:  Shea Homes Limited
Partnership, a California limited partnership, Its Sole Member and Manager By: 
J.F. Shea, G.P.., a Delaware limited partnership, Its sole General Partner By: 
JFS Management, L.P., a Delaware limited partnership, Its sole General Partner
By:  J.F. Shea Construction Management, Inc., a California corporation, Its sole
General Partner By: 

 

Name:  Andrew Parnes Title: Vice President By:

 

Name: Robert R. O’Dell Title: Treasurer

 

SIGNATURES TO GUARANTY S-14

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

TRILOGY ANTIOCH, LLC, a California limited liability company By: SHEA CAPITAL
II, LLC, a Delaware limited liability company, Its sole Member By:  Shea Homes
Limited Partnership, a California limited partnership, Its Manager By:  J.F.
Shea, G.P.., a Delaware limited partnership, Its sole General Partner By:  JFS
Management, L.P., a Delaware limited partnership, Its sole General Partner By: 
J.F. Shea Construction Management, Inc., a California corporation, Its sole
General Partner By: 

 

Name:  Andrew Parnes Title: Vice President By:

 

Name: Robert R. O’Dell Title: Treasurer

UDC ADVISORY SERVICES, INC.,

an Illinois corporation

By: 

 

Name:  Andrew Parnes Title: Vice President By:

 

Name: Robert R. O’Dell Title: Treasurer

 

SIGNATURES TO GUARANTY S-15

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

UDC HOMES CONSTRUCTION, INC., an Arizona corporation By:

 

Name: Andrew Parnes Title: Vice President By:

 

Name: Robert R. O’Dell Title: Treasurer

VISTANCIA CONSTRUCTION, LLC,

a Delaware limited liability company

By: Shea Homes Southwest, Inc., an Arizona corporation, Its Manager By:

 

Name: Andrew Parnes Title: Vice President By:

 

Name: Robert R. O’Dell Title: Treasurer

VISTANCIA MARKETING, LLC,

a Delaware limited liability company

By: Shea Homes Southwest, Inc., an Arizona corporation, Its Manager By:

 

Name: Andrew Parnes Title: Vice President By:

 

Name: Robert R. O’Dell Title: Treasurer

 

SIGNATURES TO GUARANTY S-16

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

SHEA HOMES HOUSTON, LLC, a Delaware limited liability company By: Shea Homes,
Inc., a Delaware corporation Its Sole Member By:

 

Name: Andrew Parnes Title: Vice President By:

 

Name: Robert R. O’Dell Title: Treasurer

SHEA HOMES ACTIVE ADULT, LLC,

a Delaware limited liability company

By: Shea Homes, Inc., a Delaware corporation Its Sole Member By:

 

Name: Andrew Parnes Title: Vice President By:

 

Name: Robert R. O’Dell Title: Treasurer

SH AA DEVELOPMENT, LLC,

a Delaware limited liability company

By: Shea Homes, Inc., a Delaware corporation Its Sole Member By:

 

Name: Andrew Parnes Title: Vice President By:

 

Name: Robert R. O’Dell Title: Treasurer

 

SIGNATURES TO GUARANTY S-17

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

SHALC GC, INC., a Delaware corporation By:

 

Name: Andrew Parnes Title: Executive Vice President By:

 

Name: Robert R. O’Dell Title: Treasurer

 

SIGNATURES TO GUARANTY S-18

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

SHEA RIVERPARK DEVELOPERS, LLC, a Delaware limited liability company By:  Shea
Homes Limited Partnership, a California limited partnership, Its Managing Member
By:  J.F. Shea, G.P., a Delaware general partnership, Its sole General Partner
By:  JFS Management, L.P., a Delaware limited partnership, Its sole General
Partner By:  J.F. Shea Construction Management, Inc., a California corporation,
Its sole General Partner By: 

 

Name:  James G. Shontere Title: Secretary By:

 

Name: Robert R. O’Dell Title: Treasurer

 

SIGNATURES TO GUARANTY S-19

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

SHEA HOMES ARIZONA LIMITED PARTNERSHIP an Arizona limited partnership By:  Shea
Homes Limited Partnership, a California limited partnership, Its General Partner
By:  J.F. Shea, G.P., a Delaware general partnership, Its sole General Partner
By:  JFS Management, L.P., a Delaware limited partnership, Its sole General
Partner By:  J.F. Shea Construction Management, Inc., a California corporation,
Its sole General Partner By: 

 

Name:  James G. Shontere Title: Secretary By:

 

Name: Robert R. O’Dell Title: Treasurer

 

SIGNATURES TO GUARANTY S-20

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

SHPA2 Development, LLC, a Delaware limited liability company By:  Shea Homes
Limited Partnership, a California limited partnership, Its Manager/ sole Member
By:  J.F. Shea, G.P., a Delaware general partnership, Its sole General Partner
By:  JFS Management, L.P., a Delaware limited partnership, Its sole General
Partner By:  J.F. Shea Construction Management, Inc., a California corporation,
Its sole General Partner By:

 

Name:  James G. Shontere Title: Secretary By:

 

Name: Robert R. O’Dell Title: Treasurer

 

SIGNATURES TO GUARANTY S-21

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

VISTANCIA, LLC, a Delaware limited liability company By:  Shea Homes Southwest,
LLC a Arizona corporation Its: Member By: 

 

Name: James G. Shontere Title: Secretary By:

 

Name: Robert R. O’Dell Title: Treasurer

SEVEN SUMMITS LODGE, LLC,

a Delaware limited liability company

By: Shea Homes Active Adult, LLC, a Delaware limited liability company Its: sole
Member By: Shea Homes, Inc. a Delaware corporation Its: sole Member By:

 

Name: James G. Shontere Title: Secretary By:

 

Name: Robert R. O’Dell Title: Treasurer

SH AA TEHALEH, LLC,

a Delaware limited liability company

By:

 

Name: James G. Shontere Title: Secretary By:

 

Name: Robert R. O’Dell Title: Treasurer

 

SIGNATURES TO GUARANTY S-22

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

SH LAKE NORMAN ASSOCIATES, LLC, a Delaware limited liability company By:  Shea
Homes, Inc., a Delaware corporation, Its sole Member By: 

 

Name: James G. Shontere Title: Secretary By:

 

Name: Robert R. O’Dell Title: Treasurer

SH LAKE NORMAN MANAGER, LLC,

a Delaware limited liability company

By: SH Lake Norman Associates, LLC a Delaware limited liability company Its:
sole Member By: Shea Homes, Inc. a Delaware corporation Its: sole Member By:

 

Name: James G. Shontere Title: Secretary By:

 

Name: Robert R. O’Dell Title: Treasurer

 

SIGNATURES TO GUARANTY S-23

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

SH TEGAVAH ASSOCIATES, LLC, a Delaware limited liability company By:  Shea
Homes, Inc., a Delaware corporation, Its sole Member By: 

 

Name:  James G. Shontere Title: Secretary By:

 

Name: Robert R. O’Dell Title: Treasurer

SH TEGAVAH MANAGER, LLC,

a Delaware limited liability company

By: SH Tegavah Associates, LLC a Delaware limited liability company Its: sole
Member By: Shea Homes, Inc. a Delaware corporation Its: sole Member By:

 

Name:  James G. Shontere Title: Secretary By:

 

Name: Robert R. O’Dell Title: Treasurer

 

SIGNATURES TO GUARANTY S-24

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

SH VISTANCIA WEST ASSOCIATES, LLC, a Delaware limited liability company By: 
Shea Homes, Inc., a Delaware corporation, Its sole Member By: 

 

Name: James G. Shontere Title: Secretary By:

 

Name: Robert R. O’Dell Title: Treasurer

SH VISTANCIA WEST MANAGER, LLC,

a Delaware limited liability company

By: SH Vistancia Associates, LLC a Delaware limited liability company Its: sole
Member By: Shea Homes, Inc. a Delaware corporation Its: sole Member By:

 

Name: James G. Shontere Title: Secretary By:

 

Name: Robert R. O’Dell Title: Treasurer

 

SIGNATURES TO GUARANTY S-25

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

SH WR MARKETING, LLC, a Delaware limited liability company By:  Shea Homes,
Inc., a Delaware corporation, Its sole Member By: 

 

Name: James G. Shontere Title: Secretary By:

 

Name: Robert R. O’Dell Title: Treasurer

 

SIGNATURES TO GUARANTY S-26

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

Schedule 1

Addresses for Notices

If to any Guarantor:

Shea Homes Limited Partnership

655 Brea Canyon Road

Walnut, California 91789

Attn: Chief Financial Officer and General Counsel

Facsimile Number: (909) 869-0849

Telephone Number: (909) 594-9500

If to Administrative Agent:

U.S. Bank National Association

c/o Soua R. Yang, Senior Agency Specialist, U.S. Bank Agency Services

800 Nicollet Mall, 3rd Floor

Minneapolis, MN 55402-7020

Telephone: 602-303-3247

Facsimile: (612) 303-3851

With a copy to:

c/o Young Hahn, Agency Specialist, U.S. Bank Agency Services

1420 Fifth Avenue, 9th Floor, Seattle, WA 98101

Telephone: (206) 344-5055

Facsimile: (203) 587-7022

With a copy to:

c/o Susanie Samson, Loan Administration

4100 Newport Place, Suite 900

Newport Beach, CA 92680

Telephone: (949) 863-2376

Facsimile: (949) 252-1759

 

SCHEDULE 1

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EXHIBIT A

GUARANTY JOINDER AGREEMENT

THIS GUARANTY JOINDER AGREEMENT (this “Guaranty Joinder Agreement”), dated as of
            , 20     is made by                     , a              (the
“Joining Guarantor”), and delivered to U.S. Bank National Association in its
capacity as Administrative Agent for the Lenders under that certain Credit
Agreement (as from time to time amended, revised, modified, supplemented or
amended and restated, the “Credit Agreement”), dated as of             , 2015 by
and among Shea Homes Limited Partnership, a California limited partnership (the
“Borrower”), the Lenders from time to time party thereto and the Administrative
Agent. All capitalized terms not otherwise defined herein shall have the
meanings given to such terms in the Credit Agreement.

A. Reference is hereby made to that certain Guaranty dated as of             
    , 2015 made by the Guarantors named therein (including any additional
Guarantors that execute a Guaranty Joinder Agreement) in favor of the
Administrative Agent for the benefit of the Lenders and the LC Issuer (the
“Guaranty”).

B. The Joining Guarantor will materially benefit directly and indirectly from
the credit facility made available and to be made available to the Borrower by
the Lenders under the Credit Agreement and desires to become a Guarantor under
the Guaranty.

NOW, THEREFORE, the Joining Guarantor hereby agrees as follows:

1. Joinder. The Joining Guarantor hereby irrevocably, absolutely and
unconditionally agrees to become a party to the Guaranty as a Guarantor and be
bound by all the terms, conditions, obligations, liabilities and undertakings of
each Guarantor or to which each Guarantor is subject thereunder, including,
without limitation, the guaranty pursuant to paragraph 1 of the Guaranty of the
payment and performance in full of the Obligations and Expenses, all with the
same force and effect as if the Joining Guarantor were a signatory to the
Guaranty.

2. Affirmations. The Joining Guarantor hereby acknowledges and affirms as of the
date hereof with respect to itself, its properties and its affairs each of the
waivers, representations, warranties, acknowledgements and certifications
applicable to any Guarantor contained in the Guaranty.

3. Severability. The provisions of this Guaranty Joinder Agreement are
independent of and separable from each other. If any provision hereof shall for
any reason be held invalid or unenforceable, such invalidity or unenforceability
shall not affect the validity or enforceability of any other provision hereof,
but this Guaranty Joinder Agreement shall be construed as if such invalid or
unenforceable provision had never been contained herein.

 

EXHIBIT A -1-

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4. Counterparts. This Guaranty Joinder Agreement may be executed in any number
of counterparts, each of which when so executed and delivered shall be deemed an
original, and it shall not be necessary in making proof of this Guaranty Joinder
Agreement to produce or account for more than one such counterpart executed by
the Joining Guarantor. A facsimile or email copy of a signature of a Guarantor
to this Guaranty Joinder Agreement shall have the same force and effect as an
original manual signature.

5. Delivery. The Joining Guarantor hereby irrevocably waives notice of
acceptance of this Guaranty Joinder Agreement and acknowledges that the
Obligations are and shall be deemed to be incurred, and Credit Extensions under
the Loan Documents made and maintained, in reliance on this Guaranty Joinder
Agreement and the Guarantor’s joinder as a party to the Guaranty as herein
provided.

6. Governing Law; Venue; Waiver of Jury Trial; Judicial Reference. The
provisions of paragraphs 8, 9 and 10 of the Guaranty are hereby incorporated by
reference as if fully set forth herein.

IN WITNESS WHEREOF, the Joining Guarantor has duly executed and delivered this
Guaranty Joinder Agreement as of the day and year first written above.

 

JOINING GUARANTOR:

 

, a

 

By:

 

Name:

 

Title:

 

 

EXHIBIT A

-2-

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EXHIBIT C

FORM OF BORROWING NOTICE

TO: U.S. Bank National Association, as administrative agent (the “Administrative
Agent”) under that certain Credit Agreement (as amended, restated, supplemented
or otherwise modified from time to time, the “Credit Agreement”), dated as of
[            ], 2015 among Shea Homes Limited Partnership (the “Borrower”), the
financial institutions party thereto, as lenders (the “Lenders”), and the
Administrative Agent.

Capitalized terms used herein shall have the meanings ascribed to such terms in
the Credit Agreement.

The undersigned Borrower hereby gives to the Administrative Agent a request for
borrowing pursuant to Section 2.8 of the Credit Agreement, and the Borrower
hereby requests to borrow on [            ], 20[    ] (the “Borrowing Date”)
from the Lenders, on a pro rata basis, an aggregate principal Dollar Amount of
$[            ] in Loans as:

 

  1. a Daily Eurocurrency Advance

 

  2. a Eurocurrency Advance with the following characteristics:

Interest Period of [                    ] month(s)

The undersigned hereby certifies to the Administrative Agent and the Lenders
that (i) all of the representations and warranties of the Borrower set forth in
the Credit Agreement (a) that contain a materiality qualifier are true and
correct in all respects and (b) that do not contain a materiality qualifier are
true and correct in all material respects (or, if any such representation or
warranty is expressly stated to have been made as of a specific date, as of such
specific date) on and as of the date of the Advance requested herein; (ii) at
the time of and immediately after giving effect to such Advance, no Default
shall have occurred and be continuing; and (iii) all other relevant conditions
set forth in Section 4.2 of the Credit Agreement have been satisfied.

******

IN WITNESS WHEREOF, the undersigned has caused this Borrowing Notice to be
executed by its authorized officer as of the date set forth below.

Dated:             , 20    

 

 

By:

 

Name:

 

Title:

 

 

EXH. C-1

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EXHIBIT D

NOTE

[Date]

Shea Homes Limited Partnership, a California limited partnership (the
“Borrower”), promises to pay to the order of
[                                    ] (the “Lender”) the aggregate unpaid
principal amount of all Loans made by the Lender to the Borrower pursuant to
Article II of the Agreement (as hereinafter defined), in immediately available
funds at the applicable office of U.S. Bank National Association, as
Administrative Agent, together with interest on the unpaid principal amount
hereof at the rates and on the dates set forth in the Agreement. The Borrower
shall pay the principal of and accrued and unpaid interest on the Loans in full
on the Facility Termination Date.

The Lender shall, and is hereby authorized to, record on the schedule attached
hereto, or to otherwise record in accordance with its usual practice, the date
and amount of each Loan and the date and amount of each principal payment
hereunder.

This Note is one of the Notes issued pursuant to, and is entitled to the
benefits of, the Credit Agreement dated as of [            ], 2015 (which, as it
may be amended or modified and in effect from time to time, is herein called the
“Agreement”), among the Borrower, the lenders party thereto, including the
Lender, the LC Issuer and U.S. Bank National Association, as Administrative
Agent, to which Agreement reference is hereby made for a statement of the terms
and conditions governing this Note, including the terms and conditions under
which this Note may be prepaid or its maturity date accelerated. This Note is
guaranteed pursuant to the Guaranty, all as more specifically described in the
Agreement, and reference is made thereto for a statement of the terms and
provisions thereof. Capitalized terms used herein and not otherwise defined
herein are used with the meanings attributed to them in the Agreement.

In the event of default hereunder, the undersigned agree to pay all costs and
expenses of collection, including reasonable attorneys’ fees. The undersigned
waive demand, presentment, notice of nonpayment, protest, notice of protest and
notice of dishonor.

THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS NOTE SHALL BE GOVERNED BY
THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT
OF LAWS PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS OF THE UNITED
STATES APPLICABLE TO NATIONAL BANKS.

 

SHEA HOMES LIMITED PARTNERSHIP, A California limited partnership By:

 

Name:

 

Title:

 

 

EXH. D-1

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SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL

TO

NOTE OF [                    ],

DATED [            ], 20[    ]

 

Date

   Principal
Amount of
Loan    Maturity
of Interest
Period    Principal
Amount
Paid    Unpaid
Balance                                    

 

EXH. D-2

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EXHIBIT E

FORM OF INCREASING LENDER SUPPLEMENT

INCREASING LENDER SUPPLEMENT, dated [            ], 20[    ] (this
“Supplement”), by and among each of the signatories hereto, to the Credit
Agreement, dated as of [            ] (as amended, restated, supplemented or
otherwise modified from time to time, the “Credit Agreement”), among Shea Homes
Limited Partnership (the “Borrower”), the Lenders party thereto and U.S. Bank
National Association, as administrative agent (in such capacity, the
“Administrative Agent”).

W I T N E S S E T H

WHEREAS, pursuant to Section 2.23 of the Credit Agreement, the Borrower has the
right, subject to the terms and conditions thereof, to effectuate from time to
time an increase in the Aggregate Commitment under the Credit Agreement by
requesting one or more Lenders to increase the amount of its Commitment;

WHEREAS, the Borrower has given notice to the Administrative Agent of its
intention to increase the Aggregate Commitment pursuant to such Section 2.23 of
the Credit Agreement; and

WHEREAS, pursuant to Section 2.23 of the Credit Agreement, the undersigned
Increasing Lender now desires to increase the amount of its Commitment under the
Credit Agreement by executing and delivering to the Borrower and the
Administrative Agent this Supplement;

NOW, THEREFORE, each of the parties hereto hereby agrees as follows:

1. The undersigned Increasing Lender agrees, subject to the terms and conditions
of the Credit Agreement, that on the date of this Supplement it shall have its
Commitment increased by $[        ], thereby making the aggregate amount of its
total Commitments equal to $[        ].

2. The Borrower hereby represents and warrants that no Default or Event of
Default has occurred and is continuing on and as of the date hereof.

3. Terms defined in the Credit Agreement shall have their defined meanings when
used herein.

4. This Supplement shall be governed by, and construed in accordance with, the
laws of the State of New York.

5. This Supplement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same document.

 

EXH. E-1

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IN WITNESS WHEREOF, each of the undersigned has caused this Supplement to be
executed and delivered by a duly authorized officer on the date first above
written.

 

[INSERT NAME OF INCREASING LENDER] By:

 

Name:

 

Title:

 

Accepted and agreed to as of the date first written above:

 

[                                         ] By:

 

Name:

 

Title:

 

Acknowledged as of the date first written above:

 

U.S. BANK NATIONAL ASSOCIATION

as Administrative Agent

By:

 

Name:

 

Title:

 

 

EXH. E-2

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EXHIBIT F

FORM OF AUGMENTING LENDER SUPPLEMENT

AUGMENTING LENDER SUPPLEMENT, dated [            ], 20[    ] (this
“Supplement”), to the Credit Agreement, dated as of [                    ] (as
amended, restated, supplemented or otherwise modified from time to time, the
“Credit Agreement”), among Shea Homes Limited Partnership (the “Borrower”), the
Lenders party thereto and U.S. Bank National Association, as administrative
agent (in such capacity, the “Administrative Agent”).

W I T N E S S E T H

WHEREAS, the Credit Agreement provides in Section 2.23 thereof that any bank,
financial institution or other entity may extend Commitments under the Credit
Agreement subject to the approval of the Borrower and the Administrative Agent,
by executing and delivering to the Borrower and the Administrative Agent a
supplement to the Credit Agreement in substantially the form of this Supplement;
and

WHEREAS, the undersigned Augmenting Lender was not an original party to the
Credit Agreement but now desires to become a party thereto;

NOW, THEREFORE, each of the parties hereto hereby agrees as follows:

1. The undersigned Augmenting Lender agrees to be bound by the provisions of the
Credit Agreement and agrees that it shall, on the date of this Supplement,
become a Lender for all purposes of the Credit Agreement to the same extent as
if originally a party thereto, with a Commitment with respect to Loans of
$[        ].

2. The undersigned Augmenting Lender (a) represents and warrants that it is
legally authorized to enter into this Supplement; (b) confirms that it has
received a copy of the Credit Agreement, together with copies of the most recent
financial statements delivered pursuant to Section 6.1 thereof, as applicable,
and has reviewed such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Supplement; (c) agrees that it will, independently and without reliance upon the
Administrative Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Credit Agreement or
any other instrument or document furnished pursuant hereto or thereto;
(d) appoints and authorizes the Administrative Agent to take such action as
agent on its behalf and to exercise such powers and discretion under the Credit
Agreement or any other instrument or document furnished pursuant hereto or
thereto as are delegated to the Administrative Agent by the terms thereof,
together with such powers as are incidental thereto; and (e) agrees that it will
be bound by the provisions of the Credit Agreement and will perform in
accordance with its terms all the obligations which by the terms of the Credit
Agreement are required to be performed by it as a Lender.

 

EXH. F-1

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3. The undersigned’s address for notices for the purposes of the Credit
Agreement is as follows:

[                    ]

4. The Borrower hereby represents and warrants that no Default or Event of
Default has occurred and is continuing on and as of the date hereof.

5. Terms defined in the Credit Agreement shall have their defined meanings when
used herein.

6. This Supplement shall be governed by, and construed in accordance with, the
laws of the State of New York.

7. This Supplement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same document.

[remainder of this page intentionally left blank]

 

EXH. F-2

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IN WITNESS WHEREOF, each of the undersigned has caused this Supplement to be
executed and delivered by a duly authorized officer on the date first above
written.

 

[INSERT NAME OF AUGMENTING LENDER]

By:

 

 

Name:

 

Title:

 

Accepted and agreed to as of the date first written above:

 

[                                         ] By:  

 

Name:  

 

Title:  

 

Acknowledged as of the date first written above:

 

U.S. BANK NATIONAL ASSOCIATION as Administrative Agent By:  

 

Name:  

 

Title:  

 

 

EXH. F-3

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EXHIBIT G

[RESERVED]

 

EXH. G-1

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EXHIBIT H

LIST OF CLOSING DOCUMENTS

Attached

 

EXH. H-1

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

EXHIBIT H

LIST OF CLOSING DOCUMENTS

Shea Homes Limited Partnership, LLC, a California limited partnership

February 20, 2015

LIST OF CLOSING DOCUMENTS

1. Credit Agreement

2. Note – U.S. Bank

3. Note – Wells Fargo Bank

4. Note – JP Morgan

5. Guaranty

6. All documents evidencing the formation, organization, valid existence, good
standing, and due authorization of and for Borrower and each Guarantor and the
authorization for the execution, delivery, and performance of the Loan Documents
and the transactions contemplated therein by Borrower and each Guarantor.

7. Opinions of Borrower’s and Guarantors’ Counsel

 

EXH. H-2

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EXHIBIT I

FORM OF COMPLIANCE CERTIFICATE

This Compliance Certificate is delivered to you by the Borrower pursuant to
Section 6.1(e) of the Credit Agreement, dated as of             , 2015 (as
amended, supplemented, restated or otherwise modified from time to time, the
“Credit Agreement”; unless otherwise defined herein, terms defined therein being
used herein as therein defined), among Shea Homes Limited Partnership (the
“Borrower”), the lenders or other financial institutions that are parties as
lenders (collectively, the “Lenders”), and U.S. Bank National Association, as
administrative agent for the Lenders (the “Administrative Agent”). This
Compliance Certificate relates to the accounting period ending
[                    ]. I, the undersigned, on behalf of the Borrower, do
certify on behalf of the Borrower that:

1. I am the chief financial officer of the Borrower.

2. I have reviewed and am familiar with the contents of this Compliance
Certificate.

3. I, on behalf of the Borrower, have read the Credit Agreement and have made or
caused to be made under my supervision, a review in reasonable detail of the
transactions and condition of the Loan Parties and their Subsidiaries during the
accounting period covered by the financial statements attached hereto as
Schedule I (the “Financial Statements”). Such review did not disclose, and I
have no knowledge of the existence, as of the date of this Compliance
Certificate, of any condition or event which constitutes a Default or Event of
Default (except as set forth on Schedule III).

4. Attached hereto as Schedule II are the computations showing compliance with
the covenants set forth in Section 6.23 of the Credit Agreement as of the end of
the accounting period set forth above.

[Signature page follows.]

 

EXH. I-1

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IN WITNESS WHEREOF, the undersigned has executed this Compliance Certificate
this    day of         , 20    .

 

SHEA HOMES LIMITED PARTNERSHIP, a California limited partnership By:

 

Name:

 

Title:

 

 

EXH. I-2

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

Schedule I

to Exhibit I

Financial Statements

[See Attached]

 

EXH. I-3

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

Schedule II

to Exhibit I

Compliance Certificate Calculations

($ in 000’s)

For the [Quarter] [Year] ended                      (the “Reporting Date”)

 

I. Section 6.23(a) - Interest Coverage Ratio

 

A.

  Consolidated EBITDA for the period of four fiscal quarters ending on the
Reporting Date: 1. Consolidated Net Income (excluding net income from Excluded
Subsidiaries): $                 2. Cash distributions of income from Joint
Ventures: $                 3. Consolidated Interest Expense: $                
4. Expense for income taxes paid or accrued: $                 5. Depreciation:
$                 6. Amortization: $                 7. Non-cash (including
impairment) charges: $                 8. Extraordinary losses: $             
   9. Loss (gain) on early extinguishment of indebtedness: $                 10.
Transaction costs and restructuring charges required to be expensed under FASB
ASC 805: $                 11. The amount of any net losses from discontinued
operations, including net losses from the sale or disposition of discontinued
operations: $                 12. Any fees, expenses or charges related to any
issuance or Capital Stock, Investment, acquisition, disposition,
recapitalization or the incurrence or repayment of Indebtedness permitted to be
incurred hereunder including a refinancing thereof (whether or not successful)
and any amendment or modification to the terms of any such transactions,
including such fees, expenses or charges related to the Transaction, in each
case, deducted in computing Consolidated Net Income: $                

 

EXH. I-4

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

13. Unusual or non-recurring costs and expenses in an amount not to exceed 10%
of Consolidated EBITDA in any four fiscal quarter period: $                 14.
To the extent not duplicative of any of the foregoing, cash distributions
received from Excluded Subsidiaries: $                 15. Non cash gains and
extraordinary gains: $                 16. Income (loss) from Joint Ventures and
from Financial Services Subsidiaries: $                 17. Consolidated EBITDA
(Lines I.A.1 + 2 + 3+ 4 + 5 + 6 + 7 + 8 + 9 + 10 + 11 + 12 + 13 + 14 – 15 – 16):
$                

B.

Consolidated Interest Incurred: $            

C.

Interest Coverage Ratio (Lines I.A.12. to I.B.):             

D.

Minimum Interest Coverage Ratio required (1.5 to 1.0)

 

II. Section 6.23(b) - Maximum Adjusted Leverage Ratio

 

A.   Consolidated Debt:   1.    all funded debt of the Loan Parties and their
Subsidiaries: $                   2.    funded debt of partnerships that are
Subsidiaries with recourse to any Loan Party or their Subsidiaries: $
                  3.    the sum of (i) all reimbursement obligations with
respect to amounts drawn and not reimbursed under Financial Letters of Credit
and amounts drawn and not reimbursed under Performance Letters of Credit
(excluding any portion of the actual or potential obligations that are secured
by cash collateral) and (ii) the maximum amount available to be drawn under all
undrawn Financial Letters of Credit, in each case issued for the account of, or
guaranteed by, any Loan Party or any of their respective Subsidiaries (excluding
any portion of the actual or potential obligations that are secured by cash
collateral) $                   4.    all Contingent Obligations of the Loan
Parties or their Subsidiaries of funded debt of third parties: $                
  5.    Obligations due and payable: $                

 

EXH. I-5

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  6.    All Contingent Obligations due and payable $                   7.   
Total Consolidated Debt (Lines II.A.1. + 2. + 3. + 4. + 5.): $                  
B.      Unrestricted Cash (to the extent it exceeds $5,000,000):   1.   
Unrestricted Cash: $                   2.    Unrestricted Cash for use in
Adjusted Leverage Ratio (Lines II.B.1 - $5,000,000): $                   C.     
Consolidated Tangible Net Worth:   1.    consolidated stockholders equity: $
                  2.    intangible assets: $                   3.    up to
$70,000,000 of the funds paid as required by the CCM Proceeding $             
     4.    Adjustment (up or down as applicable) to account for changes in
stockholders’ equity that do not flow to Borrower’s income statement solely to
the extent such changes are due to unusual transfers of assets between Borrower
and its Affiliates permitted under the Credit Agreement, excluding contributions
or distributions of equity, as approved by Administrative Agent $             
     5.    Consolidated Tangible Net Worth (Lines II.C.1 - II.C.2 + II.C.3 +
II.C.4): $                   D.      Adjusted Leverage Ratio   (Lines II.A.6 -
II.B.2) divided by (II.C.5):     %   E.      Maximum Adjusted Leverage Ratio:
    %

(Must be (i) 2.0 to 1.0 prior to and including March 31, 2017, and (ii) 1.85 to
1.0 at any time after March 31, 2017)

 

III. Section 6.23(d) - Minimum Consolidated Net Worth Test

 

A. Consolidated Tangible Net Worth (from Line II.C.5): $                 B.
$400,000,000; 1.

50% of the cumulative Net Cash Proceeds of any Equity Issuances received by
Borrower from and

after [            ];

$                

 

EXH. I-6

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2. 50% of an amount equal to (i) the cumulative Consolidated Net Income (without
deductions for losses sustained during any fiscal quarter) of the Loan Parties
and their Subsidiaries from and after [            ] minus (ii) income taxes on
such income at a presumed combined Federal and State rate of fifty percent
(50%): $                 3. Required Minimum Consolidated Tangible Net Worth
(Lines IV.B + IV.B.1. + IV.B.2.) $                

C.

Test: Line IV.A. ³ IV.B.3.:

 

IV. Section 6.23(e) - Maximum Ratio of Land Assets to Consolidated Tangible Net
Worth

 

A.

Land Assets $                

B.

Consolidated Tangible Net Worth (from Line II.C.5) $                

C.

Actual Ratio of Line IV.A to Line IV.B:

D. Maximum Ratio of Land Assets to Consolidated Tangible Net Worth 1.75 to 1.0

 

V. Minimum Liquidity

 

A.

Unrestricted Cash: $                

(Must be greater than or equal to $5,000,000)

 

EXH. I-7

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

Schedule III

to Exhibit I

Defaults and Events of Default

 

EXH. I-8

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EXHIBIT J

ASSIGNMENT AND ASSUMPTION AGREEMENT

This Assignment and Assumption (the “Assignment and Assumption”) is dated as of
the Effective Date set forth below and is entered into by and between [Insert
name of Assignor] (the “Assignor”) and [Insert name of Assignee] (the
“Assignee”). Capitalized terms used but not defined herein shall have the
meanings given to them in the Credit Agreement identified below (as amended, the
“Credit Agreement”), receipt of a copy of which is hereby acknowledged by the
Assignee. The Terms and Conditions set forth in Annex 1 attached hereto are
hereby agreed to and incorporated herein by reference and made a part of this
Assignment and Assumption as if set forth herein in full.

For an agreed consideration, the Assignor hereby irrevocably sells and assigns
to the Assignee, and the Assignee hereby irrevocably purchases and assumes from
the Assignor, subject to and in accordance with the Terms and Conditions and the
Credit Agreement, as of the Effective Date inserted by the Administrative Agent
as contemplated below, the interest in and to all of the Assignor’s rights and
obligations in its capacity as a Lender under the Credit Agreement and any other
documents or instruments delivered pursuant thereto that represents the amount
and percentage interest identified below of all of the Assignor’s outstanding
rights and obligations under the respective facilities identified below
(including without limitation any letters of credit, guaranties and swing line
loans included in such facilities and, to the extent permitted to be assigned
under applicable law, all claims (including without limitation contract claims,
tort claims, malpractice claims, statutory claims and all other claims at law or
in equity), suits, causes of action and any other right of the Assignor against
any Person whether known or unknown arising under or in connection with the
Credit Agreement, any other documents or instruments delivered pursuant thereto
or the loan transactions governed thereby) (the “Assigned Interest”). Such sale
and assignment is without recourse to the Assignor and, except as expressly
provided in this Assignment and Assumption, without representation or warranty
by the Assignor.

 

1. Assignor:                                           2. Assignee:
                                          [and is an Affiliate/ Approved Fund of
[identify Lender]1] 3. Borrower(s):                                           4.
Administrative
Agent:
[                                         ], as the agent under the Credit
Agreement. 5. Credit
Agreement: The [amount] Credit Agreement dated as of [                    ],
20[    ] among Shea Homes Limited Partnership, the Lenders party thereto, U.S.
Bank National Association, as Administrative Agent, and the other agents party
thereto.

 

 

1  Select as applicable.

 

EXH. J-1

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6.      Assigned Interest:

 

Aggregate Amount of
Commitment/

Loans for all Lenders2

 

Amount of Commitment/

Loans Assigned3

 

Percentage Assigned of
Commitment/

Loans4

  Commitment of Assignor
Following Assignment   Commitment of Assignee
Following Assignment

$[        ]

  $[        ]   [    %]   $[        ]   $[        ]

 

7.      Trade Date: [            ]5

Effective Date: [            ], 20[    ] [TO BE INSERTED BY ADMINISTRATIVE AGENT
AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER BY THE
ADMINISTRATIVE AGENT.]

The terms set forth in this Assignment and Assumption are hereby agreed to:

 

ASSIGNOR

[NAME OF ASSIGNOR]

By:  

 

Title:  

ASSIGNEE

[NAME OF ASSIGNEE]

By:  

 

Title:  

[Consented to and]6 Accepted:

 

 

2  Amount to be adjusted by the counterparties to take into account any payments
or prepayments made between the Trade Date and the Effective Date.

3  Amount to be adjusted by the counterparties to take into account any payments
or prepayments made between the Trade Date and the Effective Date.

4  Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans of
all Lenders thereunder.

5  Insert if satisfaction of minimum amounts is to be determined as of the Trade
Date.

6  To be added only if the consent of the Administrative Agent is required by
the terms of the Credit Agreement.

 

EXH. J-2

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

U.S. BANK NATIONAL ASSOCIATION as Administrative Agent By:

 

Name:

 

Title:

 

[Consented to:]7

 

[NAME OF RELEVANT PARTY] By:

 

Name:

 

Title:

 

 

 

7 To be added only if the consent of the Borrower and/or other parties (e.g. L/C
Issuer) is required by the terms of the Credit Agreement.

 

EXH. J-3

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ANNEX 1

TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION

1. Representations and Warranties.

1.1 Assignor. The Assignor represents and warrants that (i) it is the legal and
beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free
and clear of any lien, encumbrance or other adverse claim and (iii) it has full
power and authority, and has taken all action necessary, to execute and deliver
this Assignment and Assumption and to consummate the transactions contemplated
hereby. Neither the Assignor nor any of its officers, directors, employees,
agents or attorneys shall be responsible for (i) any statements, warranties or
representations made in or in connection with the Credit Agreement or any other
Loan Document, (ii) the execution, legality, validity, enforceability,
genuineness, sufficiency, perfection, priority, collectability, or value of the
Loan Documents or any collateral thereunder, (iii) the financial condition of
the Borrower, any of its Subsidiaries or Affiliates or any other Person
obligated in respect of any Loan Document, (iv) the performance or observance by
the Borrower, any of its Subsidiaries or Affiliates or any other Person of any
of their respective obligations under any Loan Documents, (v) inspecting any of
the property, books or records of the Borrower, or any guarantor, or (vi) any
mistake, error of judgment, or action taken or omitted to be taken in connection
with the Loans or the Loan Documents.

1.2 Assignee. The Assignee (a) represents and warrants that (i) it has full
power and authority, and has taken all action necessary, to execute and deliver
this Assignment and Assumption and to consummate the transactions contemplated
hereby and to become a Lender under the Credit Agreement, (ii) from and after
the Effective Date, it shall be bound by the provisions of the Credit Agreement
as a Lender thereunder and, to the extent of the Assigned Interest, shall have
the obligations of a Lender thereunder, (iii) agrees that its payment
instructions and notice instructions are as set forth in Schedule 1 to this
Assignment and Assumption, (iv) confirms that none of the funds, monies, assets
or other consideration being used to make the purchase and assumption hereunder
are “plan assets” as defined under ERISA and that its rights, benefits and
interests in and under the Loan Documents will not be “plan assets” under ERISA,
(v) agrees to indemnify and hold the Assignor harmless against all losses, costs
and expenses (including, without limitation, reasonable attorneys’ fees) and
liabilities incurred by the Assignor in connection with or arising in any manner
from the Assignee’s non-performance of the obligations assumed under this
Assignment and Assumption, (vi) it has received a copy of the Credit Agreement,
together with copies of financial statements and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment and Assumption and to purchase the
Assigned Interest on the basis of which it has made such analysis and decision
independently and without reliance on the Administrative Agent or any other
Lender, and (vii) attached as Schedule 1 to this Assignment and Assumption is
any documentation required to be delivered by the Assignee with respect to its
tax status pursuant to the terms of the Credit Agreement, duly completed and
executed by the Assignee and (b) agrees that (i) it will, independently and
without reliance on the Administrative Agent, the Assignor or any other Lender,
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Loan Documents, and (ii) it will perform in accordance with

 

EXH. J-4

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their terms all of the obligations which by the terms of the Loan Documents are
required to be performed by it as a Lender.

2. Payments. The Assignee shall pay the Assignor, on the Effective Date, the
amount agreed to by the Assignor and the Assignee. From and after the Effective
Date, the Administrative Agent shall make all payments in respect of the
Assigned Interest (including payments of principal, interest, Reimbursement
Obligations, fees and other amounts) to the Assignor for amounts which have
accrued to but excluding the Effective Date and to the Assignee for amounts
which have accrued from and after the Effective Date.

3. General Provisions. This Assignment and Assumption shall be binding upon, and
inure to the benefit of, the parties hereto and their respective successors and
assigns. This Assignment and Assumption may be executed in any number of
counterparts, which together shall constitute one instrument. Delivery of an
executed counterpart of a signature page of this Assignment and Assumption by
telecopy shall be effective as delivery of a manually executed counterpart of
this Assignment and Assumption. This Assignment and Assumption shall be governed
by, and construed in accordance with, the law of the State of New York.

 

EXH. J-5