Exhibit
10.12


SUBORDINATION AGREEMENT


THIS SUBORDINATION AGREEMENT (this “Agreement”) is
made as of July 13, 2007, by and among CAMOFI Master LDC and CAMHZN Master LDC,
each a Cayman Islands Limited Duration Company (collectively, the “Senior
Lender”), the lenders listed on Schedule A attached hereto (each a “Junior
Lender”, and collectively, the “Junior Lenders”), and SHEA DEVELOPMENT CORP., a
Nevada corporation and each of its subsidiaries (collectively, the “Borrower”).


RECITALS


A.  The Senior Lender has purchased certain
secured notes from the Borrower and pursuant to the terms and provisions of the
Securities Purchase Agreement and related documents, each dated as of July 13,
2007 (as amended, modified or amended and restated from time to time, the “Purchase
Agreement”), by and among the Senior Lender and the Borrower;


B.  The Junior Lenders have loaned certain monies
to the Borrower on terms between the Junior Lenders and the Borrower, each in
the principal amount set forth opposite the Junior Lenders’ name on Schedule A;
and


C.  It is a
condition to the Senior Lender’s obligations to purchase the secured notes from
the Borrower that the Junior Lenders enter into this Agreement;


NOW, THEREFORE, in consideration of the above recitals
and the provisions set forth herein, and other good and valuable
considerations, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows, intending to be legally bound:


AGREEMENT


Section
1.              Definitions.  For purpose of this Agreement, the following
terms used herein shall have the following meanings:


“Collateral”
means any and all property which now constitutes or hereafter will constitute
collateral or other security for payment of the Senior Debt pursuant to the
Senior Loan Documents.


“Default” means a default or event of default under
the Junior Notes, or any of them, or under any other instrument or agreement
evidencing the Junior Debt.


“Junior Debt” means all indebtedness,
obligations, and liabilities of the Borrower or any guarantor to the Junior
Lenders, under any agreement of any kind, including, without limitation, all
principal and interest (including, without limitation, any interest accruing
after the filing of any petition in bankruptcy or the commencement of any
Proceeding, whether or not a claim for post-filing or post-petition interest is
allowed in such Proceeding) and late fees payable thereunder, and any
obligation to redeem, repurchase or otherwise acquire any Junior Securities.











“Junior Loan Documents” means any all documents
evidencing the Junior Debt.


“Junior Securities” means any securities
(including common stock, warrants or other equity securities) other than those
Securities issued to the Senior Lender.


“Person” means any corporation, association,
joint venture, partnership, limited liability company, organization, business,
individual, trust, government or agency or political subdivision thereof, or
any other legal entity.


“Proceeding” means (a) any insolvency,
bankruptcy, receivership, custodianship, liquidation, reorganization,
readjustment, composition, or other similar proceeding relating to Borrower or
any of its respective properties, whether under any bankruptcy, reorganization,
or insolvency laws or any law relating to relief of debtors, readjustment of indebtedness,
reorganization, composition, or extension; (b) any proceeding for the
liquidation, liquidating distribution, dissolution, or other winding up of Borrower,
voluntary or involuntary, whether or not involving insolvency or bankruptcy
proceedings; (c) any assignment for the benefit of creditors of Borrower; or
(d) any other marshalling of the assets of Borrower.


“Remedy” means, with respect to a Default, the
acceleration of any Junior Debt or the exercise of any remedies in respect of
such Default (including, without limitation, the right to sue the Borrower, to
exercise any right of set off, to put or otherwise tender for repurchase any
Junior Securities, and to file or participate in any involuntary bankruptcy
proceeding against the Borrower, and explicitly including the imposition of
default rate interest).


“Senior Debt” means all of the following:  (a) the aggregate principal indebtedness
outstanding from time to time under the Purchase Agreement, (b) all interest
accrued and accruing on such aggregate principal amounts from time to time
(including, without limitation, any interest accruing after the filing of any
petition in bankruptcy or the commencement of any Proceeding, whether or not a
claim for post-filing or post-petition interest is allowed in such Proceeding),
(c) all other costs, fees, and expenses owed from time to time under the Senior
Loan Documents and (d) all other liabilities, indebtedness and obligations of
Borrower to the Senior Lender, whether now existing or hereafter arising, direct
or indirect, contingent or non-contingent, secured or unsecured, due or not due.


“Senior Event of Default” means the occurrence
and continuance of an “Event of Default” under the Senior Loan Documents.


“Senior Loan Documents” means the Purchase
Agreement, the Senior Notes, and the other Loan Documents (as defined in the Purchase
Agreement), as they may be amended, modified, extended, or amended and restated
from time to time.


“Senior Notes” means the Notes (as defined in
the Purchase Agreement) and any other promissory note executed and delivered by
the Borrower to the Senior Lender from time to time, as amended, modified,
renewed or extended from time to time.











Section
2.              General.


The
Borrower and the Junior Lenders agree that on the terms and conditions herein
the payment of the Junior Debt by the Borrower is subordinated, to the extent
and in the manner provided in this Agreement, to the prior payment in full of
all the Senior Debt.


Section
3.              Subordination in the
Event of a Proceeding.


Upon
any distribution of assets of the Borrower upon any Proceeding:


(i)            the Senior Lender shall first be
entitled to receive payments in full of the Senior Debt in cash, property or
securities (with any such property or securities being valued based on its fair
market value after deducting liquidation and sale expenses) before any Junior
Lender is entitled to receive any payment on account of the Junior Debt;


(ii)           any payment or distribution of assets
of the Borrower of any kind or character, whether in cash, property, or
securities to which any Junior Lender would be entitled except for the
provisions of this Agreement, shall be paid by the liquidating trustee or agent
or other Person making such a payment or distribution, directly to the Senior
Lender, to the extent necessary to pay 
the Senior Debt in full in cash, property or securities (valued as
provided in subsection (i) above) after giving effect to all concurrent
payments and distributions; and


(iii)          in the event that, notwithstanding the
foregoing, any payment or distribution of assets of the Borrower of any kind or
character, whether in cash, property, or securities, shall be received by the Junior
Lenders on account of the Junior Debt before the Senior Debt is paid in full in
cash, property or securities (valued as provided in subsection (i) above), such
payment or distribution shall be received and held in trust by the Junior
Lenders for the benefit of the Senior Lender, to the extent necessary to pay
the Senior Debt in full in cash, property or securities (valued as provided in
subsection (i) above) after giving effect to all concurrent payments and
distributions.


The Borrower shall give
written notice to the Senior Lender and the Junior Lenders within three days of
receipt of notice of any Proceeding.


Section
4.              Remedy Standstill.


The
Junior Lenders shall not exercise any Remedy in respect of any Default until
the earliest of (i) the date the Senior Debt has been paid in full, (ii) the
date a Proceeding is commenced or (iii) the date the Senior Debt has been accelerated
in writing.


Section
5.              Payments Held in Trust,
Subrogation, Right to Cure and Purchase.


(i)            If any payment or distribution of
assets on account of the Junior Debt shall be made by the Borrower or received
by the Junior Lenders at a time when such payment or distribution was
prohibited by the provisions of this Agreement, then such payment or
distribution shall be received and held in trust by the Junior Lenders for the
benefit of the 











Senior Lender
and shall be paid or delivered by the Junior Lenders to the Senior Lender to
the extent necessary to enable payment in full of the Senior Debt.


(ii)           After the payment in full of all
Senior Debt, the Junior Lenders shall be subrogated to the rights of the
holders of such Senior Debt to receive payments or distributions of assets of
the Borrower applicable to the Senior Debt until all amounts owing on the
Junior Debt shall be paid in full, and for the purpose of such subrogation no
such payments or distributions to the holders of the Senior Debt by or on behalf
of the Borrower, or by or on behalf of the Junior Lenders by virtue of this
Agreement, that otherwise would have been made to the Junior Lenders shall, as
between the Borrower and the Junior Lenders, be deemed to be payment by the
Borrower to or on account of the Senior Debt in respect thereof, it being
understood that the provisions of this Agreement are and are intended solely
for the purpose of defining the relative rights of the Junior Lenders, on the
one hand, and the holders of such Senior Debt, on the other hand.  If any payment or distribution to which the Junior
Lenders would otherwise have been entitled but for the provisions of this
Agreement shall have been applied, pursuant to the provisions of this
Agreement, to the payment of amounts payable under the Senior Debt, then the Junior
Lenders shall be entitled to receive from the holders of the Senior Debt any
payments or distributions received by such holders of the Senior Debt in excess
of the amount sufficient to pay all amounts payable under or in respect of such
Senior Debt in full.


(iii)          The Senior Lender hereby grants the Junior
Lenders the right, but not the obligation, to cure any and all defaults under
the Senior Debt (to the extent any such defaults are curable) within the same
period of time afforded the Borrower for curing such defaults before the same
become Senior Events of Default.  The
Senior Lender shall have no obligation hereunder, however, to provide notice of
any Senior Event of Default to the Junior Lenders, and the lack of any such
notice shall not affect the existence or occurrence of any Event of Default.


Section
6.              No Prejudice or
Impairment.


Nothing
contained in this Agreement, is intended to or shall impair, as between the Borrower
and the Junior Lenders, the obligation of the Borrower, which is absolute and
unconditional, to pay to the Junior Lenders the Junior Debt as and when the
same shall become due and payable in accordance with its terms, or is intended
to or shall affect the relative rights of the Junior Lenders and creditors of
the Borrower (other than the holders of the Senior Debt).


Section
7.              Proofs of Claim.


In
connection with any Proceeding involving any Borrower, the Junior Lenders are
entitled to file proofs of claim in respect of the Junior Debt.  Upon the failure of the Junior Lenders to
take any such action as of the fifteenth Business Day preceding the bar date
for the filing of proofs of claims, the Senior Lender is hereby irrevocably
authorized and empowered, but shall have no obligation to file proofs of claim
with respect to the Junior Debt. 
Notwithstanding the foregoing, the Senior Lender shall not have any
right whatsoever to vote any claim that the Junior Lenders may have in the
Proceeding to accept or reject any plan or 











partial or complete liquidation,
reorganization, arrangement, composition, or extension; provided, that the Junior
Lenders shall not vote with respect to any such plan or take any other action
in any way so as to contest (i) the relative rights and duties of the Senior
Lender under the Senior Loan Documents with respect to any collateral or guaranties
or (ii) the Junior Lenders’ obligations and agreements set forth in this
Agreement.


Section
8.              Benefit of Agreement;
Amendments of Certain Documents; etc.


This
Agreement shall constitute a continuing offer to all Persons who, in reliance
upon such provisions, become a Senior Lender, and such provisions are made for
the benefit of each subsequent Senior Lender and each of them may enforce such
provisions.


The Senior Loan Documents may be amended,
supplemented, waived, altered, modified, or otherwise changed in any manner approved
by the Senior Lender and the Borrower without the consent or approval of the Junior
Lenders.  The Junior Loan Documents may not
be amended, supplemented, waived, altered, modified, or otherwise changed in
any manner without the prior written approval of the Senior Lender.


The Senior Lender shall have no obligation to preserve
rights in the Collateral against any prior parties or to marshal any of the
Collateral for the benefit of any Person. 
No failure to exercise, and no delay in exercising on the part of any
party hereto, any right, power, or privilege under this Agreement shall operate
as a waiver thereof; nor shall any single or partial exercise of any right,
power, or privilege under this Agreement preclude any other or further exercise
thereof or the exercise of any other right, power, or privilege.  The rights and remedies provided in this
Agreement are cumulative and shall not be exclusive of any rights or remedies
provided by law.


Except as expressly set forth herein, there shall be
no third party beneficiaries of this Agreement.


Section
9.              Further Agreements
Concerning the Collateral and Senior Debt.


Each
Junior Lender agrees that (i) it will not at any time contest the
validity, perfection, priority or enforceability of the security interests and
liens granted by the Borrower to the Senior Lender in the Borrower’s assets;
(ii) the Senior Lender may administer the Senior Debt and any of the
Senior Lender’s agreements with the Borrower in any way the Senior Lender deems
appropriate consistent with the terms and provisions of the Senior Loan
Documents, without regard to the Junior Lenders or the Junior Debt;
(iii) the Senior Lender shall have no obligation to preserve rights in the
Collateral against any prior parties or to marshal any of the Collateral for
the benefit of any Person; (iv) nothing in this Agreement shall impair or
adversely affect the manner or timing with which the Senior Lender enforces any
of its security; (vi) nothing in this Agreement shall impair or adversely
affect any right, privilege, power or remedy of the Senior Lender with respect
to the Senior Debt, the Borrower, or any assets of the Borrower, including
without limitation, the Senior Lender’s right to (x) waive or release any
of the Senior Lender’s security or rights, (y) waive or ignore any
defaults by the Borrower; and/or (z) restructure, renew, modify, or
supplement the Senior Debt or any portion thereof or any agreement with the
Borrower relating to the Senior Debt or to increase the outstanding principal
amount of the Senior Debt by extending additional credit to the Borrower; and
(vi) nothing contained herein is 











intended to alter or deprive
the Senior Lender of any of its rights as the senior secured creditor of the
Borrower to collect or otherwise foreclose upon any of the Borrower’s assets.


Section
10.            Instrument Legend.


Any
instrument evidencing any of the Junior Debt (including, without limitation,
the Junior Notes), or any portion thereof, will, on the date hereof, have
affixed to it a document conspicuously indicating that payment thereof is
subordinated to the claims of the Senior Creditor pursuant to the terms of this
Agreement:  “THIS INSTRUMENT IS SUBJECT
TO THE TERMS OF A SUBORDINATION AGREEMENT DATED AS OF JULY 13, 2007 BY AND
BETWEEN THE HOLDER HEREOF AND CAMOFI MASTER LDC AND CAMHZN MASTER LDC.”  Any instruments evidencing any of the Junior
Debt, or any portion thereof, which is hereafter executed by the Borrower,
will, on the date thereof, be inscribed with the aforesaid legend, and copies
of such instrument will be delivered to the Senior Lender on the date of its
execution or within five (5) business days thereafter and the original of such
instrument will be delivered to the Senior Lender upon request therefor to the
Senior Lender after the occurrence of a Senior Event of Default.


Section
11.            Representations and
Warranties.


Each of the parties hereto
hereby represents and warrants that (i) it has full power, authority and legal
right to make and perform this Agreement and (ii) this Agreement is its legal,
valid, and binding obligation, enforceable against it in accordance with its
terms.


Section
12.            Amendment.Neither
this Agreement nor any of the terms hereof may be amended, waived, discharged,
or terminated unless such amendment, waiver, discharge, or termination is in
writing signed by the Senior Lender and the Junior Lenders.


Section
13.            Successors and Assigns.  This Agreement and the terms, covenants, and
conditions hereof shall be binding upon and inure to the benefit of the parties
hereto, and their respective successors and assigns, and neither the Senior
Debt nor the Junior Debt shall be sold, assigned, or transferred unless the
assignee or transferee thereof expressly takes such debt subject to and agrees
to be bound by the terms and conditions of this Agreement.


Section
14.            Governing Law.  This Agreement will be construed in
accordance with and governed by the law of the State of New York, without regard
to the choice of law principles thereof.


Section
15.            Notices. Whenever it is provided
herein that any notice, demand, request, consent, approval, declaration, or
other communication shall or may be given to or served upon any of the parties
by another, or whenever any of the parties desires to give or serve upon
another any such communication with respect to this Agreement, each such
notice, demand, request, consent, approval, declaration, or other communication
shall be in writing and shall be deemed to have been duly given and received,
for purposes hereof, when (i) delivered by hand, (ii) four days after being
deposited in the mail, postage prepaid, and (iii) one Business Day after having
been sent by reputable overnight courier, in each case addressed as set forth
on Annex I hereto or at such address as may be substituted by notice given as
herein provided.  Failure to 











delay in delivering
copies of any communication to the persons designated to receive copies shall
in no way adversely affect the effectiveness of such communication.


Section
16.            Counterparts.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.


Section
17.            Final Agreement.  THIS AGREEMENT REPRESENTS THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO ORAL AGREEMENTS BETWEEN THE
PARTIES.


Section
18.            WAIVER OF JURY TRIAL.  TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, THE SENIOR LENDER, THE JUNIOR LENDERS AND THE BORROWERS HEREBY IRREVOCABLY
AND EXPRESSLY WAIVE ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTION CONTEMPLATED THEREBY OR THE
ACTIONS OF THE SENIOR LENDER OR THE JUNIOR LENDERS IN THE NEGOTIATION,
ADMINISTRATION OR ENFORCEMENT HEREOF.


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IN WITNESS WHEREOF, the
parties hereto have caused this Subordination Agreement to be duly executed by
their proper and duly authorized officers as of the day and year first above
written.


	
   

  	
  SENIOR LENDERS:

  
	
   

  	
   

  
	
   

  	
  CAMOFI MASTER
  LDC

  
	
   

  	
  CAMHZN MASTER
  LDC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  JUNIOR
  LENDERS:

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
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  BORROWER:

  
	
   

  	
   

  
	
   

  	
  SHEA DEVELOPMENT
  CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
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ANNEX I

ADDRESSES FOR NOTICE


Senior
Lender


CAMOFI Master LDC


CAMHZN Master LDC


c/o Centrecourt Asset Management


350 Madison Avenue


New York NY 10017


Attn: Keith D. Wellner,
General Counsel


Junior
Lenders


Borrowers


with a copy to: