Document:

Tenth Modification Agreement to Borrowing Base Revolving Line of Credit

 Exhibit 10.4 
 TENTH MODIFICATION AGREEMENT TO BORROWING BASE REVOLVING LINE OF 
 CREDIT AGREEMENT 
  

					
	DATE:	  	December 19, 2008	  	
			
	PARTIES:	  		  	
		  	Borrower:	  	 WILLIAM LYON HOMES, INC., a
 California corporation

			
		  	Guarantor:	  	 WILLIAM LYON HOMES, a
 Delaware
corporation

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

 JPMORGAN CHASE BANK, N.A. (successor by merger to Bank One, NA (Main Office Chicago, Illinois)), a national
banking association (“Bank”), and WILLIAM LYON HOMES, INC., a California corporation (“Borrower”), hereby enter into this Tenth Modification Agreement to Borrowing Base Revolving Line of Credit Agreement (the
“Modification”) to the Borrowing Base Revolving Line of Credit Agreement dated as of June 28, 2004, as modified by a Modification Agreement, dated as of December 7, 2004, by a Second Modification Agreement to Borrowing
Base Revolving Line of Credit Agreement, dated as of July 14, 2005, by a Third Modification Agreement to Borrowing Base Revolving Line of Credit Agreement, dated as of October 23, 2006, by a Fourth Modification Agreement to Borrowing Base
Revolving Line of Credit Agreement, dated as of April 26, 2007, by a Fifth Modification Agreement to Borrowing Base Revolving Line of Credit Agreement, dated as of November 6, 2007, by a Sixth Modification Agreement to Borrowing Base
Revolving Line of Credit Agreement, dated as of February 20, 2008, by a Seventh Modification Agreement to Borrowing Base Revolving Line of Credit Agreement, dated as of March 12, 2008, by an Eighth Modification Agreement to Borrowing Base
Revolving Line of Credit Agreement, dated as of June 5, 2008, and by a Ninth Modification Agreement to Borrowing Base Revolving Line of Credit Agreement, dated as of September 16, 2008 (the “Loan Agreement”), with the
consent of guarantor WILLIAM LYON HOMES, a Delaware corporation (“Guarantor”). 
 RECITALS 
 A. Bank has extended to Borrower credit (“Loan”) up to the maximum principal amount of Seventy Million Dollars ($70,000,000) pursuant to
the Loan Agreement, as presently evidenced by that certain Amended and Restated Promissory Note dated as of July 14, 2005 (the “Note”) executed by Borrower and payable to the order of Bank. 
 B. The Loan is secured by, among other things, certain Construction Deeds of Trust and Fixture Filing (With Assignment of Rents and Security Agreement)
executed by 

 
Borrower as Trustor for the benefit of Bank (such Deeds of Trust, as amended to dated, shall be hereinafter referred to, individually, as a “Deed of
Trust” and, collectively, as the “Deeds of Trust”). The Loan is further secured by the personal property described in certain UCC-1 Financing Statements relating to the property encumbered by the Deeds of Trust naming
Borrower as Debtor and Bank as Secured Party (as amended to date, the “UCC Financing Statements”). The Deeds of Trust, the UCC Financing Statements, and such other agreements, documents and instruments securing the Loan are referred
to individually and collectively as the “Security Documents”). 
 C. Repayment of the Loan and the completion of the
improvements have been, and continue to be, guaranteed by the Repayment Guaranty dated as of June 28, 2004 and executed by Guarantor in favor of Bank (the “Guaranty”). The Guaranty and any other agreements, documents and
instruments guarantying the Loan are referred to individually and collectively as the “Guaranty Documents”. 
 D. The Loan
Agreement, the Note, the Security Documents, the Guaranty Documents, any environmental certification and indemnity agreement, and all other agreements, documents, and instruments evidencing, securing, or otherwise relating to the Loan, as may be
amended, modified, extended or restated from time to time, are sometimes referred to individually and collectively as the “Loan Documents”. Hereinafter, the Loan Documents shall mean such documents as modified in this Modification.

 E. The Borrower and the Bank have agreed to modify the Loan as provided herein. 
 F. All capitalized terms used herein and not otherwise defined shall have the meanings given to such terms in the Loan Agreement. 
 AGREEMENT 
 For good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, Borrower and Bank agree as follows: 
  

	1.	ACCURACY OF RECITALS. 

 Borrower acknowledges the
accuracy of the Recitals. 
  

	2.	MODIFICATION OF LOAN DOCUMENTS. 

 2.1 The Commitment Amount
is hereby reduced from $40,000,000 to $30,000,000. In no event shall the Bank be obligated to make any disbursement of the Loan which would cause the outstanding principal balance of the Loan to exceed the Commitment Amount, as reduced hereby.

 2.2 The Maturity Date is hereby shortened from June 28, 2010 to December 28, 2009. All principal, interest and Other Amounts
shall be immediately due and payable on the Maturity Date, as shortened hereby. 

 2.3 The definition of “Interest Rate” set forth in Section 1.1 of the Loan
Agreement is deleted in its entirety and replaced with the following: 
 “‘Interest Rate’ means the LIBOR Rate or the
Floating Rate, as applicable, provided that the Interest Rate shall never be less than 5.5% per annum.” 
 2.4 The definition of
“Floating Rate” set forth in Section 1.1 of the Loan Agreement is deleted in its entirety and replaced with the following: 
 “‘Floating Rate’ means, for any day, a rate per annum equal to the sum of (a) the Prime Rate for such day, plus (b) the Applicable Margin; provided that the Floating Rate shall
never be less than the Applicable Margin plus the Adjusted One Month LIBOR Rate for a one month Interest Period on such day (or if such day is not a Business Day, the immediately preceding Business Day). Any change in the Floating Rate due to a
change in the Prime Rate or the Adjusted One Month LIBOR Rate shall be effective from and including the effective date of such change in the Prime Rate or the Adjusted One Month LIBOR Rate, respectively.” 
 2.5 The following definition is hereby added to Section 1.1 of the Loan Agreement: 
 “‘Adjusted One Month LIBOR Rate’ means, an interest rate per annum equal to the sum of (i) 2.50% per annum plus
(ii) the LIBOR Base Rate for a one month Interest Period on such day (or if such day is not a Business Day, the immediately preceding Business Day); provided that, for the avoidance of doubt, the LIBOR Base Rate for any day shall be
based on the rate appearing on the Reuters Screen LIBOR01 Page (or on any successor or substitute page) at approximately 11:00 a.m. London time on such day.” 
 2.6 Section 2.3(a) of the Loan Agreement is hereby deleted in its entirety and restated to provide as follows: 
 “(a) Rate of Interest. Each Advance will bear interest from the date of the Advance at a per annum Interest Rate which is either the LIBOR Rate or the Floating Rate, as elected by Borrower in accordance with
Section 2.4, provided that the Interest Rate shall never be less than 5.5% per annum.” 
 2.7 Section 2.11(d) of
the Loan Agreement is hereby deleted in its entirety and restated to provide as follows: 
 “(d) Payments During Term Out. From
and after the Revolving Credit Termination Date, the Borrower shall make the following principal payments: 
 (i) On the last day of the
second Calendar Month after the Revolving Credit Termination Date, on the last day of each fourth Calendar Month after the Revolving Credit Termination Date, and on the Maturity Date, the Borrower will make a principal payment, as necessary to
reduce the Outstanding Loan Borrowings to an amount no greater than the Commitment Amount. For the purposes of this Section 2.11(d), on the last day of the second Calendar Month after the Revolving Credit Termination Date, the Commitment
Amount shall be 

 
reduced to an amount equal to Twenty Million Dollars ($20,000,000), and on the last day of the fourth Calendar Month after the Revolving Credit Termination
Date, the Commitment Amount shall be reduced to an amount equal to Ten Million Dollars ($10,000,000); and 
 (ii) To the extent that the
Outstanding Loan Borrowings exceed the Available Commitment at any time, then within one (1) Business Day the Borrower shall make a principal payment in the amount of the excess.” 
 2.8 Section 7.1 of the Loan Agreement is deleted in its entirety and replaced with the following: 
 “7.1 Minimum Tangible Net Worth Covenant. Guarantor shall maintain a Tangible Net Worth of at least $90,000,000.00.” 
 2.9 Section 7.2 of the Loan Agreement is deleted in its entirety and replaced with the following: 
 “7.2 [Intentionally Omitted.]” 
 2.10 Section 7.3 of the Loan Agreement is deleted in its entirety and replaced with the following: 
 “7.3 Minimum
Available Liquidity Covenant. On the Effective Date and at all times thereafter, Guarantor will have Available Liquidity of no less than $30,000,000.00, of which no less than $10,000,000.00 shall consist of consolidated aggregate unpledged,
unreserved, and unrestricted cash and unpledged, unreserved, and unrestricted Cash Equivalents, and the balance of which may consist of either (a) consolidated aggregate unpledged, unreserved, and unrestricted cash and unpledged, unreserved,
and unrestricted Cash Equivalents, (b) the unadvanced portion of any revolving lines of credit loans available to Guarantor as a borrower with respect to which (i) all conditions precedent to such advance have been satisfied (with the
exception of a request for such advance) and (ii) no default, event of default or unmatured event of default has occurred, or (c) a combination of the Available Liquidity described in clauses (a) and (b) above.” 

2.4 The Pricing Schedule set forth in Exhibit C of the Loan Agreement is deleted in its entirety and replaced with the Pricing Schedule attached
hereto as Appendix I. 
 2.5 Notwithstanding any provision in the Loan Agreement or in any other Loan Document to the contrary, with
respect to the Approved Subdivision commonly known as “The Lofts,” which was approved as an Approved Subdivision pursuant to that certain Project Loan Addendum dated as of June 20, 2007, (i) the Maximum Allowed Advance for the
MFR A&D Lots in such Approved Subdivision included in the Borrowing Base is hereby reduced to $0.00, (ii) the Maximum Allowed Advance for each MFR Spec Unit in such Approved Subdivision included in the Borrowing Base is hereby reduced to
the lesser of (A) 50% of the Appraised Value for that Unit or (B) 50% of the Unit Cost for that Unit, and (iii) the Maximum Allowed Advance for each MFR Model Unit in such Approved Subdivision included in the Borrowing 

 
Base is hereby reduced to the lesser of (A) 50% of the Appraised Value for that Unit or (B) 50% of the Unit Cost for that Unit. 
 2.6 Each reference in the Loan Documents to any of the Loan Documents shall be a reference to such document as modified herein. 
  

	3.	RATIFICATION OF LOAN DOCUMENTS AND COLLATERAL. 

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

	4.	CONDITIONS PRECEDENT. 

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

4.1 Bank shall have received such assurance as Bank may require that the validity and priority of the Deeds of Trust have not been and will not be
impaired by this Agreement or the transactions contemplated by it, including the issuance by the title company of CLTA Endorsement No. 110.5 to be attached to Bank’s title policies insuring the liens of the Deeds of Trust. 
 4.2 Bank shall have received fully executed and, where appropriate, acknowledged originals of this Modification, the attached consents signed by
Guarantor, certain Modification Agreements (Short Form) dated of even date herewith (the “Short Form Modifications”) relating to each of the Deeds of Trust, and any other documents which Bank may require or request in accordance with this
Agreement or the other Loan Documents. 
 4.3 The Short Form Modifications shall have been recorded in the Official Records of the Counties
in which the Deeds of Trust were originally recorded, in addition to all other documents which Bank may require to be recorded. 
 4.4 Bank
shall have received reimbursement, in immediately available funds, of all costs and expenses incurred by Bank in connection with this Agreement, including charges for title insurance (including endorsements), recording, filing and escrow charges,
fees for appraisal, architectural and engineering review, construction services and environmental services, mortgage taxes, and legal fees and expenses of Bank’s counsel. Such costs and expenses may include the allocated costs for services of
Bank’s in-house staffs, such as legal, appraisal, construction services and environmental services. Borrower acknowledges that any extension and modification fees payable in connection with this transaction do not include the amounts payable by
Borrower under this subsection. 
  

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

 The Loan Documents as modified herein contain the entire understanding and agreement 

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

	6.	BINDING EFFECT. 

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

	7.	CHOICE OF LAW. 

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

	8.	COUNTERPART EXECUTION. 

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

 DATED as of the date first above stated. 
  

							
	BORROWER:	 		 	WILLIAM LYON HOMES, INC.,
		 		 	a California corporation
				
		 		 	By:	 	 /s/ Michael D. Grubbs

		 		 	Name:	 	 Michael D. Grubbs

		 		 	Title:	 	 Senior Vice President

				
		 		 	By:	 	 /s/ Richard S. Robinson

		 		 	Name:	 	 Richard S. Robinson

		 		 	Title:	 	 Senior Vice President

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

		 		 	Name:	 	 Kimberlee Edwards

		 		 	Title:	 	 Senior Vice President

 CONSENT AND AGREEMENT OF GUARANTOR 
 With respect to that certain Tenth Modification Agreement to Borrowing Base Revolving Line of Credit Agreement (hereinafter, the
“Modification”) between WILLIAM LYON HOMES, INC., a California corporation (“Borrower”), and JPMORGAN CHASE BANK, N.A. (successor by merger to Bank One, NA (Main Office Chicago, Illinois)), a national banking
association (“Bank”), to which this Consent is attached, the undersigned (“Guarantor”), hereby (i) ratifies and reaffirms all of its obligations to Bank under the Guaranty, (ii) consents to the execution
and delivery by Borrower of the attached Modification, and (iii) confirms that the Guaranty remains in full force and effect notwithstanding Borrower’s execution of the attached Modification. The undersigned agrees that the execution of
this Consent and Agreement of Guarantor (the “Consent”) is not necessary for the continued validity and enforceability of the Guaranty, but it is executed to induce Bank to enter into the Modification. 
 This Consent may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and
the same document. Signature pages may be detached from the counterparts and attached to a single copy of this Consent to physically form one document. Facsimile transmission of the signed original of this Consent or the retransmission of any signed
facsimile transmission will be deemed the same as delivery of an original. 
 IN WITNESS WHEREOF, Guarantor has executed this Agreement as of
the date set forth on the attached Tenth Modification Agreement. 
  

							
	“Guarantor”	 		 	 WILLIAM LYON HOMES,
 a Delaware
corporation

				
		 		 	By:	 	 /s/ Michael D. Grubbs

		 		 	Name:	 	 Michael D. Grubbs

		 		 	Title:	 	 Senior Vice President

				
		 		 	By:	 	 /s/ Richard S. Robinson

		 		 	Name:	 	 Richard S. Robinson

		 		 	Title:	 	 Senior Vice President

 APPENDIX I 
 PRICING SCHEDULE 
  

													
	 APPLICABLE
 MARGIN
	  	LEVEL I
STATUS	 	 	LEVEL II
STATUS	 	 	LEVEL III
STATUS	 	 	LEVEL IV
STATUS	 
	 LIBOR Rate
	  	4.50	%	 	4.00	%	 	3.50	%	 	3.00	%
	 Floating Rate
	  	2.00	%	 	1.50	%	 	1.00	%	 	0.50	%

 The Applicable Margin shall be determined on a quarterly basis, commencing as of December 1,
2008 and on each March 1, June 1, September 1 and December 1 thereafter, and shall be determined based on the weighted average of the dollar deposits maintained by Borrower in deposit accounts established with Bank
during the preceding three (3) month period, all as determined by Bank. 
 For the purposes of this Schedule, the following terms have
the following meanings, subject to the final paragraph of this Schedule: 
 “Level I Status” exists for each three
(3) month period that the weighted average of the dollar deposits maintained by Borrower in deposit accounts established with Bank during the preceding three (3) month period, as determined by Bank, is less than or equal to $2,499,999.99.

 “Level II Status” exists for each three (3) month period that the weighted average of the dollar deposits maintained
by Borrower in deposit accounts established with Bank during the preceding three (3) month period, as determined by Bank, is greater than $2,499,999.99 but less than or equal to $4,999,999.99. 
 “Level III Status” exists for each three (3) month period that the weighted average of the dollar deposits maintained by Borrower
in deposit accounts established with Bank during the preceding three (3) month period, as determined by Bank, is greater than $4,999,999.99 but less than or equal to $9,999,999.99. 
 “Level IV Status” exists for each three (3) month period that the weighted average of the dollar deposits maintained by Borrower in
deposit accounts established with Bank during the preceding three (3) month period, as determined by Bank, is greater than $10,000,000.00. 
 “Status” means either Level I Status, Level II Status, Level III Status, or Level IV Status. 
  

 APPENDIX IThird Amendment Agreement Dated as of December 22, 2008

 Exhibit 10.5 
 THIRD AMENDMENT AGREEMENT 
 This Third Amendment Agreement (this “Third Amendment
Agreement”) is entered into as of December 22, 2008, by and between WILLIAM LYON HOMES, INC., a California corporation (“Borrower”), and COMERICA BANK (“Lender”). This
Third Amendment Agreement is made with reference to the following facts: 
 RECITALS 
 A. Lender has made a revolving line of credit available to Borrower in the initial maximum outstanding principal amount of $50,000,000 (the
“Loan”), pursuant to the terms of that certain Revolving Line of Credit Loan Agreement (Borrowing Base Loan) dated as of March 8, 2006 (as amended by the First Amendment Agreement and Second Amendment Agreement described
below and by this Third Amendment Agreement, the “Loan Agreement”). Capitalized terms used in this Third Amendment Agreement and not defined shall have the meanings assigned to such terms in the Loan Agreement. 
 B. Pursuant to that certain Amendment Agreement dated as of February 28, 2008, by and between Borrower and Lender (the “First Amendment
Agreement”), among other things (i) the maximum Commitment Amount was reduced to $35,000,000, (ii) certain adjustments were made to the Borrowing Base, and (iii) the Initial Line Maturity Date was extended by twelve
(12) months to and until April 3, 2009. 
 C. The Loan Agreement was further modified pursuant to that certain Second Amendment
Agreement dated as of September 2, 2008, by and between Borrower and Lender (the “Second Amendment Agreement”) to make certain additional changes to the Borrowing Base. 
 D. Subject to the terms and conditions contained in this Third Amendment Agreement, Borrower and Lender have agreed to further modify the Loan Agreement
and other Loan Documents as set forth herein. 
 E. As used in this Third Amendment Agreement, the term “Loan
Documents” means the Loan Agreement, the Note, the Deeds of Trust, the other Security Documents, the Environmental Indemnity, the Guaranty, and the other “Loan Documents” described in the Loan Agreement. This Third Amendment
Agreement and the “Short Forms” and “Amended and Restated Note” described below shall also constitute Loan Documents. 
 AGREEMENT 
 NOW, THEREFORE, with reference to the foregoing Recitals and information, and in consideration of the
mutual covenants and agreements contained in this Third Amendment Agreement, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Borrower and Lender agree as follows: 
  

 -1- 

 1. Recitals; Representations and Warranties. The above statement of facts set forth in the
Recitals is true and correct, and the Recitals are hereby incorporated herein as an agreement of Borrower and Lender. Borrower hereby represents and warrants to Lender that (a) no Event of Default or Unmatured Event of Default has occurred or
exists, and (b) all representations and warranties of Borrower contained in the Loan Agreement or in any of the other Loan Documents (as the Loan Agreement and such other Loan Documents are amended hereby) are true and correct as of the date
hereof. 
 2. Amendments to Loan Agreement. Borrower and Lender hereby amend the Loan Agreement as follows: 
 2.1 The definition of “Commitment Amount” set forth in Section 1.1 of the Loan Agreement is hereby deleted in its entirety and replaced
with the following: 
 “‘Commitment Amount’ means (a) through March 30, 2009, the sum of Thirty Million
Dollars ($30,000,000.00), (b) from March 31, 2009, through June 29, 2009, the sum of Twenty-Six Million Dollars ($26,000,000.00), (c) from June 30, 2009 through September 29, 2009, the sum of Twenty-Two Million Dollars
($22,000,000.00), (d) from September 30, 2009 through December 30, 2009, the sum of Eighteen Million Dollars ($18,000,000.00), and (e) from and after December 31, 2009, the sum of Fourteen Million Dollars
($14,000,000.00).” 
 2.2 The definition of “Commitment Fee” set forth in Section 1.1 of the Loan Agreement is hereby
deleted in its entirety and replaced with the following: 
 “‘Commitment Fee’ means that certain quarterly facility fee
payable in advance pursuant to Section 2.5.1, below in an amount equal to 0.0875% of the then applicable Commitment Amount.” 
 2.3
The definition of “Draw Request” set forth in Section 1.1 of the Loan Agreement is hereby deleted in its entirety and replaced with the following: 
 “‘Draw Request’ means a completed, written request for an Advance from Borrower to Lender, which request shall be substantially in the form attached as Exhibit A to the Note, and
shall be accompanied by such other documents and information as Lender may require or specify from time to time.” 
 2.4 The subheading
entitled “LOTS UNDER DEVELOPMENT” within the definition of “Maximum Allowed Advance” set forth in Section 1.1 of the Loan Agreement is hereby deleted in its entirety and replaced with the following new subheading:

  

	 	“–	 LOTS UNDER DEVELOPMENT: The sum of all Advances for Lots Under Development shall not exceed (a) for all Qualified Projects other than the Qualified Projects
commonly known as ‘Gallery Walk’ and ‘Plaza Walk’ in Elk Grove, California, and ‘Promenade North’ in San Diego, California, the lesser of (i) eighty percent (80%) of Total Project Costs, or
(ii) sixty-five percent (65%) of the Bulk Finished Lot Value for Lots Under Development, subject to Lender’s approval, (b) for the Qualified Projects commonly known as ‘Gallery Walk’ and ‘Plaza Walk’ in Elk

  

 -2- 

	 	 
Grove, California, $0, and (c) for the Qualified Project commonly known as ‘Promenade North’ in San Diego, California, the lesser of
(i) eighty percent (80%) of Total Project Costs, or (ii) (A) through June 29, 2009, forty percent (40%) of the Bulk Finished Lot Value for Lots Under Development, subject to Lender’s approval, (B) from
June 30, 2009 through December 30, 2009, twenty percent (20%) of the Bulk Finished Lot Value for Lots Under Development, subject to Lender’s approval, and (C) from and after December 31, 2009, $0.”

 2.5 The definition of “Reduction Period” set forth in Section 1.1 of the Loan Agreement is hereby deleted
in its entirety and replaced with the following: 
 “‘Reduction Period’ shall mean, as set forth in Section 2.1.7
below, that twelve (12) month period (commencing immediately following the Initial Line Maturity Date).” 
 2.6 The last sentence
of Section 2.1.2(b) of the Loan Agreement is hereby deleted in its entirety and replaced with the following: 
 “No new Qualified
Project will be approved for inclusion in the Borrowing Base after December 1, 2008.” 
 2.7 Section 2.5.1 of the Loan
Agreement is hereby deleted in its entirety and replaced with the following: 
 “2.5.1 COMMITMENT FEE. On the first day of each calendar
quarter (commencing January 1, 2009), Borrower shall pay to lender a Commitment Fee equal to 0.0875% of the then applicable Commitment Amount.” 
 2.8 Section 6.15 of the Loan Agreement is hereby deleted in its entirety and replaced with the following: 
 “6.15 FINANCIAL COVENANTS. Financial covenants described in this Section 6.15, together with all other financial covenants and restrictions set forth in this Agreement, shall be monitored quarterly by Lender upon receipt of the
financial statements to be provided hereunder. 
  

					
	 COVENANT PARTY
	  	 COVENANT TYPE
	  	 COVENANT REQUIREMENT

	Guarantor	  	Minimum Tangible Net Worth	  	Not less than $90,000,000
			
	Guarantor	  	Minimum Liquidity	  	Not less than $30,000,000, at least $10,000,000 of which must be cash on hand”

 Upon the satisfaction of all of the conditions precedent set forth in Section 7, below, the effective date of
the replacement of Section 6.15 of the Loan Agreement shall be deemed to be December 1, 2008. 
  

 -3- 

 2.9 Section 6.4.6 of the Loan Agreement is hereby deleted in its entirety and replaced with the
following: 
 “6.4.6 BORROWING BASE CERTIFICATE. (i) By the fifteenth (15th) day of each Calendar Month, a
current Borrowing Base Certificate reflecting the Property included in the Borrowing Base as of the last day of the immediately preceding Calendar Month, and (ii) by the last day of each Calendar Month, a current Borrowing Base Certificate
reflecting the Property included in the Borrowing Base as of the fifteenth (15th) day of such Calendar Month. In addition, by the forty-fifth (45th) day of the end of each Calendar Quarter, together with such certificate, a detailed
computation of the financial covenant requirements set forth in Section 6.15 below.” 
 2.10 Exhibit “B” to the Loan
Agreement is hereby deleted in its entirety and replaced with Exhibit “B” attached hereto. 
 3. Amended and Restated Note.
The Note is being amended, restated and replaced in its entirety by that certain Amended and Restated Note Secured by Deed of Trust of even date herewith, executed by Borrower and payable to Lender, in the face principal amount of $30,000,000.00
(the “Amended and Restated Note”). 
 4. Lender’s Waiver of Set-off Rights. Notwithstanding any provision
of any Loan Document or applicable law to the contrary, in no event shall Lender, whether with or without demand or notice to Borrower, exercise any right to set-off and apply deposits (whether certificates of deposit, demand, general, savings,
special, time, or other, and whether provisional or final) held by Lender for Borrower or any other liabilities or other obligations of Lender to Borrower against or to the Obligations. By its signature below, Lender hereby waives any right it may
have to set-off and apply such deposits or other liabilities against or to the Obligations. 
 5. Security Documents. Each Deed of
Trust, and all other Security Documents, shall secure, in addition to all other indebtedness and obligations secured thereby, the payment and performance of all present and future indebtedness and obligations of Borrower under (a) this Third
Amendment Agreement, (b) the Amended and Restated Note, (c) any and all amendments, modifications, renewals and/or extensions of the Loan Agreement, regardless of whether any such amendment, modification, renewal or extension is evidenced
by a new or additional instrument, document or agreement, and (d) all other Loan Documents (other than the Guaranty and the Environmental Indemnity, the obligations under which continue to remain unsecured by each Deed of Trust), as amended by
this Third Amendment Agreement and by the Short Forms. 
 6. Definitions. Except as provided in this Third Amendment Agreement, all
references in the Loan Agreement and in the other Loan Documents (a) to the Deeds of Trust shall mean the Deeds of Trust, as amended by this Third Amendment Agreement, (b) to the Loan shall mean the Loan, as the maximum principal amount
thereof has been reduced pursuant to this Third Amendment Agreement, (c) to the Loan Agreement shall mean the Loan Agreement as amended by this Third Amendment Agreement, (d) to the Note shall mean the Amended and 

  

 -4- 

 
Restated Note, (e) to the Loan Documents shall mean the Loan Documents as such term is defined in this Third Amendment Agreement, and (f) to any
particular Loan Document shall mean such Loan Document as modified by this Third Amendment Agreement or any document executed pursuant hereto. 
 7. Conditions Precedent. Lender’s obligation to modify the terms of the Loan Agreement and the other Loan Documents as set forth herein is subject to the satisfaction of all of the following conditions precedent (any of which
may be waived by Lender in its sole discretion): 
 7.1 Lender shall have received a fully executed original of this Third Amendment Agreement
(including an original of the executed Guarantor’s Consent attached hereto). 
 7.2 Lender have received an original of each Third
Amendment Agreement (Short Form), of even date herewith (collectively, the “Short Forms”), fully executed and acknowledged by Borrower and consented to by all applicable Subordinate Rights Holders. 
 7.3 The Short Forms shall have been recorded in the official records of the counties in which each Project is located in accordance with Lender’s
instructions to the Title Company, in addition to all other documents which Lender may reasonably request to be recorded. 
 7.4 Lender shall
have received such endorsements to each existing Title Policy (or commitments by the Title Company to issue the same in form acceptable to Lender) as Lender shall reasonably request to insure the validity and continuing first position liens of the
Deeds of Trust, as amended hereby, including without limitation a CLTA 110.5 endorsement (or its local equivalent). 
 7.5 Lender shall have
received current good standing certificates of Borrower issued by the California Secretary of State and the Secretary of State of each other state in which a Qualified Project included in the Borrowing Base is located. 
 7.6 No change shall have occurred in the financial condition of Borrower, Guarantor or any Project, which would have, in Lender’s sole judgment, a
material adverse effect on such Project or on Borrower’s or Guarantor’s ability to repay the Loan or otherwise perform their respective obligations under the Loan Documents as of the date hereof. 
 7.7 No condemnation or adverse zoning or usage change proceeding shall have occurred or shall have been threatened against any Project; no Project shall
have suffered any significant damage by fire or other casualty which has not been repaired; no law, regulation, ordinance, moratorium, injunctive proceeding, restriction, litigation, action, citation or similar proceeding or matter shall have been
enacted, adopted, or threatened by any governmental authority, which would have, in Lender’s judgment, a material adverse effect on Borrower or any Project as of the date hereof. 
 7.8 The representations and warranties contained in the Loan Agreement and in all other Loan Documents shall remain true and correct as of the date
hereof. 
  

 -5- 

 7.9 No Event of Default or Unmatured Event of Default shall have occurred and be continuing. 

7.10 Borrower shall have reimbursed Lender for all costs and expenses incurred by Lender in connection with the transaction contemplated by this Third
Amendment Agreement, including title insurance costs, recording fees, and attorneys’ fees and costs. 
 8. Non-Impairment. Except
as expressly provided herein, nothing in this Third Amendment Agreement shall alter or affect any provision, condition or covenant contained in the Loan Agreement or the other Loan Documents or affect or impair any rights, powers or remedies
thereunder, and the parties hereto intend that the provisions of the Loan Agreement and the other Loan Documents shall continue in full force and effect except as expressly modified hereby. 
 9. Miscellaneous. This Third Amendment Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of
California applicable to contracts made and performed in such state, without regard to the principles thereof regarding conflict of laws, and any applicable laws of the United States of America. The headings used in this Third Amendment Agreement
are for convenience only and shall be disregarded in interpreting the substantive provisions of this Third Amendment Agreement. If any provision of this Third Amendment Agreement shall be determined by a court of competent jurisdiction to be
invalid, illegal or unenforceable, that portion shall be deemed severed herefrom and the remaining parts shall remain in full force as though the invalid, illegal or unenforceable provision had never been a part hereof. As used in this Third
Amendment Agreement, the term “include(s)” shall mean “include(s), without limitation,” and the term “including” shall mean “including, but not limited to.” 
 10. Integration; Interpretation. The Loan Documents, including this Third Amendment Agreement, contain or expressly incorporate by reference the
entire agreement of the parties with respect to the matters contemplated therein, and supersede all prior negotiations. No reference to this Third Amendment Agreement is necessary in any instrument or document at any time referring to a Loan
Document. Any reference to a Loan Document (including in any other Loan Document) shall be deemed a reference to such document as amended hereby. 
 11. Counterparts. This Third Amendment Agreement may by executed in any number of counterparts, all of which shall be considered one in the same instrument. The original, executed signature pages of exact copies of this Third
Amendment Agreement may be attached to one of such copies to form one document. 
  

 -6- 

 IN WITNESS WHEREOF, Borrower and Lender have executed this Third Amendment Agreement as of the day and
year first set forth above. 
  

			
	BORROWER:
	
	WILLIAM LYON HOMES, INC., a California corporation
		
	By:	 	 /s/ Michael D. Grubbs

	Name:	 	 Michael D. Grubbs

	Title:	 	 Senior Vice President

		
	By:	 	 /s/ Richard S. Robinson

	Name:	 	 Richard S. Robinson

	Title:	 	 Senior Vice President

  

			
	LENDER:
	
	COMERICA BANK
		
	By:	 	 /s/ David Plattner

	Name:	 	 David Plattner

	Its:	 	 VP – Western Market

  

 S-1 

 EXHIBIT “B” 
 BORROWING BASE CERTIFICATE FORMAT 
 Submission
Date:                     
  

															
	 Category:
	  	 Project Name
	  	Appraised Value
(Already Factored)	  	Budgeted Costs
(Already Factored)	  	Availability Amount
(Lesser of Value or Cost)	  	Available Per
Completion
	 Entitled Land
	  		  			  			  			  		
		  	 Project 1
	  	$	0	  	$	0	  	$	0	  		
		  	 Project 2
	  	$	0	  	$	0	  	$	0	  		
		  	 Project 3
	  	$	0	  	$	0	  	$	0	  		
		  	 Project 4
	  	$	0	  	$	0	  	$	0	  		
		  	 Project 5
	  	$	0	  	$	0	  	$	0	  		
		  	 Project 6
	  	$	0	  	$	0	  	$	0	  		
		  		  	 	 	  	 	 	  	 	 	  		
		  	 SUB-TOTAL
	  	$	0	  	$	0	  	$	0	  		
	 Lots Under Development
	  		  			  			  			  		
		  	 Project 1
	  	$	0	  	$	0	  	$	0	  		
		  	 Project 2
	  	$	0	  	$	0	  	$	0	  		
		  	 Project 3
	  	$	0	  	$	0	  	$	0	  		
		  	 Project 4
	  	$	0	  	$	0	  	$	0	  		
		  	 Project 5
	  	$	0	  	$	0	  	$	0	  		
		  	 Project 6
	  	$	0	  	$	0	  	$	0	  		
		  		  	 	 	  	 	 	  	 	 	  		
		  	 SUB-TOTAL
	  	$	0	  	$	0	  	$	0	  		
	 Developed Lots
	  		  			  			  			  		
		  	 Project 1
	  	$	0	  	$	0	  	$	0	  		
		  	 Project 2
	  	$	0	  	$	0	  	$	0	  		
		  	 Project 3
	  	$	0	  	$	0	  	$	0	  		
		  	 Project 4
	  	$	0	  	$	0	  	$	0	  		
		  	 Project 5
	  	$	0	  	$	0	  	$	0	  		
		  	 Project 6
	  	$	0	  	$	0	  	$	0	  		
		  		  	 	 	  	 	 	  	 	 	  		
		  	 SUB-TOTAL
	  	$	0	  	$	0	  	$	0	  		
	 X. Total Lot Inventory
	  		  			  			  	$	0	  	$	0
						
	 I. Spec Homes
	  		  			  			  			  		
		  	 Project 1
	  	$	0	  	$	0	  	$	0	  		
		  	 Project 2
	  	$	0	  	$	0	  	$	0	  		
		  	 Project 3
	  	$	0	  	$	0	  	$	0	  		
		  	 Project 4
	  	$	0	  	$	0	  	$	0	  		
		  	 Project 5
	  	$	0	  	$	0	  	$	0	  		
		  	 Project 6
	  	$	0	  	$	0	  	$	0	  		
		  		  	 	 	  	 	 	  	 	 	  		
		  	 SUB-TOTAL
	  	$	0	  	$	0	  	$	0	  		
	 II. Model Homes
	  		  			  			  			  		
		  	 Project 1
	  	$	0	  	$	0	  	$	0	  		
		  	 Project 2
	  	$	0	  	$	0	  	$	0	  		
		  	 Project 3
	  	$	0	  	$	0	  	$	0	  		
		  	 Project 4
	  	$	0	  	$	0	  	$	0	  		
		  	 Project 5
	  	$	0	  	$	0	  	$	0	  		
		  	 Project 6
	  	$	0	  	$	0	  	$	0	  		
		  		  	 	 	  	 	 	  	 	 	  		
		  	 SUB-TOTAL
	  	$	0	  	$	0	  	$	0	  		
	 III. Presold Homes
	  		  			  			  			  		
		  	 Project 1
	  	$	0	  	$	0	  	$	0	  		
		  	 Project 2
	  	$	0	  	$	0	  	$	0	  		
		  	 Project 3
	  	$	0	  	$	0	  	$	0	  		
		  	 Project 4
	  	$	0	  	$	0	  	$	0	  		
		  	 Project 5
	  	$	0	  	$	0	  	$	0	  		
		  	 Project 6
	  	$	0	  	$	0	  	$	0	  		
		  		  	 	 	  	 	 	  	 	 	  		
		  	 SUB-TOTAL
	  	$	0	  	$	0	  	$	0	  		
	 Y. Total Home Inventory
	  			  			  	$	0	  	$	0
					
	 A. Total Borrowing Base (X+Y)
	  	$	0.00	  			  			  		
	 B. Less Outstanding Advances
	  	$	0.00	  			  			  		
	 C. Less Outstanding Letters of Credit
	  	$	0.00	  			  	$	0.00	  		
	 D. Less Adjustments under Section 2.1.3(d)
	  	$	0.00	  			  			  		
	 E. Plus funds deposited into Borrower's Funds account
	  	$	0.00	  			  			  		
						
		  	 Availability / (Deficiency):
	  	$	0.00	  			  			  		

  

 B-1 

 CERTIFICATION OF BORROWER 
 Borrower hereby certifies as follows with respect to the information contained in this Borrowing Base Certificate: 
 1. All Lot and Home inventory is located in Qualified Projects. 
 2. All Lot and Home inventory is owned by Borrower free of any
liens or encumbrances, other than liens and encumbrances in favor of Lender as security for the Loan, or outstanding liens that have been bonded over, or outstanding liens that are subject to signed released delivered to Borrower. 
 3. Borrower has received lien waivers for all major scopes of construction work in process with respect to the subject Property. 
 4. As to any Lots Under Development, construction of the A&D Improvements has begun or is scheduled to begin within ninety (90) days of
inclusion in the Borrowing Base as Lots Under Development. 
 5. As to any Homes, construction of the Home Improvements has begun or is
scheduled to begin within ninety (90) days of inclusion in the Borrowing Base as Homes. 
 6. As to any Presold Homes and High End
Presold Homes, such Homes were in compliance with all requirements for Presold Homes or High End Presold Homes, as applicable, as of the date of inclusion in the Borrowing Base as Presold Homes or High End Presold Homes, as applicable, and remain in
compliance as of the date hereof. 
 The undersigned hereby certifies to Lender that the foregoing information on this Borrowing Base Certificate as of
(check one) (i)  ̈ the Calendar Month ending                     , 20    ,
or (ii)  ̈                      15, 20    , is true and correct and was
provided from financial information prepared according to GAAP. All capitalized terms not defined herein shall have the meanings given to such terms in that certain Revolving Line of Credit Loan Agreement dated as of March 8, 2006 (“Loan
Agreement”) by and between COMERICA BANK (“Lender”) and WILLIAM LYON HOMES, INC., a California corporation (“Borrower”), as the same has been modified or amended to date. 
  

			
	WILLIAM LYON HOMES, INC., a California corporation
		
	By:	 	 /s/ Michael D. Grubbs

	Name:	 	 Michael D. Grubbs

	Title:	 	 Senior Vice President

		
	By:	 	 /s/ Richard S. Robinson

	Name:	 	 Richard S. Robinson

	Title:	 	 Senior Vice President

  

 B-2 

 GUARANTOR’S CONSENT 
 WILLIAM LYON HOMES, a Delaware corporation (“Guarantor”), hereby consents to the terms, conditions and provisions of the
foregoing Third Amendment Agreement (“Third Amendment Agreement”) and the transactions contemplated by the Third Amendment Agreement. Guarantor hereby reaffirms the full force and effectiveness of its Guaranty dated as of
March 8, 2006 (the “Guaranty”), in light of the Third Amendment Agreement, including without limitation all waivers, authorizations and agreements set forth therein. Guarantor hereby confirms and agrees that all
references in the Guaranty to the Loan Agreement and other Loan Documents shall hereafter be deemed references to the Loan Agreement and other Loan Documents as amended by the Third Amendment Agreement. In addition, Guarantor acknowledges that its
obligations under the Guaranty are separate and distinct from those of Borrower on the Loan. 
 Dated as of December 22, 2008 
  

			
	GUARANTOR:
	
	WILLIAM LYON HOMES, a Delaware corporation
		
	By:	 	 /s/ Michael D. Grubbs

	Name:	 	 Michael D. Grubbs

	Title:	 	 Senior Vice President

		
	By:	 	 /s/ Richard S. Robinson

	Name:	 	 Richard S. Robinson

	Title:	 	 Senior Vice President

  

 CONSENT

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