Document:

Revolving Line of Credit Agreement

 Exhibit 10.1 
 REVOLVING LINE OF CREDIT LOAN AGREEMENT 
 (BORROWING BASE LOAN) 
 By and Between 
 COMERICA BANK 
 75 East Trimble Road 
 MC 4770 
 San Jose, California 95131 
 (“Lender”) 
 And 
 WILLIAM LYON HOMES, INC., 
 a California corporation 
 4490 Von Karman Avenue, Newport Beach, California 92660 
 (“Borrower”) 
 Dated as of March 8, 2006 
 MAXIMUM
REVOLVING LINE OF CREDIT AMOUNT: $50,000,000.00 

 TABLE OF CONTENTS 
  

									
	 	  	 	  	 	  	 	  	Page
	1.	  	DEFINITIONS AND GENERAL PROVISIONS	  	1
		  	1.1	  	DEFINITIONS	  	1
		  	1.2	  	GENERAL PROVISIONS	  	25
			
	2.	  	BORROWING BASE	  	26
		  	2.1	  	LOAN FACILITY	  	26
		  		  	2.1.1	  	COMMITMENT	  	26
		  		  	2.1.2	  	PURPOSE OF THE LOAN	  	26
		  		  	2.1.3	  	PURPOSE OF THE PROJECT LOANS	  	27
		  		  	2.1.4	  	APPROVAL OF QUALIFIED PROJECTS	  	28
		  		  	2.1.5	  	INTEREST PAYMENTS	  	29
		  		  	2.1.6	  	PRINCIPAL PAYMENTS	  	30
		  		  	2.1.7	  	LOAN TERM	  	31
		  		  	2.1.8	  	TERMS OF PROJECT ADVANCES	  	31
		  	2.2	  	AVAILABLE COMMITMENT; BORROWING BASE	  	32
		  		  	2.2.1	  	AVAILABLE COMMITMENT	  	32
		  		  	2.2.2	  	AMOUNT OF BORROWING BASE AND BORROWING AVAILABILITY	  	32
		  		  	2.2.3	  	DETERMINATION OF BORROWING AVAILABILITY	  	32
		  	2.3	  	LETTER OF CREDIT ADVANCES	  	36
		  		  	2.3.1	  	ISSUANCE OF LETTER OF CREDIT	  	36
		  		  	2.3.2	  	ISSUANCE PROCEDURE	  	36
		  		  	2.3.3	  	PURPOSE OF LETTER OF CREDIT; GENERAL LETTER OF CREDIT TERMS AND CONDITIONS.	  	36
		  		  	2.3.4	  	REIMBURSEMENT OF LENDER FOR PAYMENT OF DRAFTS DRAWN OR DRAWN AND ACCEPTED UNDER THE LETTERS OF CREDIT	  	37
		  		  	2.3.5	  	REIMBURSEMENT OBLIGATIONS	  	37
		  		  	2.3.6	  	NATURE OF REIMBURSEMENT OBLIGATIONS	  	37
		  	2.4	  	LOAN ADVANCES; PROJECT MONITORING	  	38
		  		  	2.4.1	  	METHOD FOR ADVANCES	  	38
		  		  	2.4.2	  	USE OF ADVANCES	  	38
		  		  	2.4.3	  	DRAW REQUESTS	  	38
		  		  	2.4.4	  	LIMITATIONS ON BORROWER’S RIGHTS TO ADVANCES	  	39
		  		  	2.4.5	  	EXCESS LOAN BALANCE REPAYMENT	  	39
		  		  	2.4.6	  	APPRAISALS AND EVALUATIONS	  	39
		  		  	2.4.7	  	BORROWER’S ACCOUNTS	  	40
		  		  	2.4.8	  	PROJECT COST SAVINGS AND EXCESS COSTS	  	40
		  	2.5	  	FEES	  	41
		  		  	2.5.1	  	COMMITMENT FEE	  	41
		  		  	2.5.2	  	LETTER OF CREDIT FEE	  	41
		  		  	2.5.3	  	OTHER FEES	  	42

  

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	3.	  	THE COLLATERAL	  	42
		  	3.1	  	SECURITY	  	42
		  	3.2	  	RELEASES OF COLLATERAL	  	42
		  		  	3.2.1	  	GENERAL REQUIREMENTS FOR RELEASES	  	42
		  		  	3.2.2	  	SALES OF LOTS OR HOMES PURSUANT TO A PURCHASE CONTRACT	  	43
		  		  	3.2.3	  	DEDICATIONS	  	44
			
	4.	  	CONDITIONS PRECEDENT	  	44
		  	4.1	  	CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AGREEMENT AND TO THE EFFECTIVENESS OF THE COMMITMENT	  	44
		  		  	4.1.1	  	REPRESENTATIONS AND WARRANTIES ACCURATE	  	44
		  		  	4.1.2	  	DEFAULTS	  	44
		  		  	4.1.3	  	DOCUMENTS	  	44
		  		  	4.1.4	  	PLAT AND/OR SURVEY	  	45
		  		  	4.1.5	  	RESTRICTIVE COVENANTS	  	45
		  		  	4.1.6	  	SOILS TEST	  	45
		  		  	4.1.7	  	ENVIRONMENTAL ASSESSMENT	  	45
		  		  	4.1.8	  	ENVIRONMENTAL INDEMNITY	  	45
		  		  	4.1.9	  	PRELIMINARY TITLE REPORT	  	46
		  		  	4.1.10	  	FLOOD REPORT	  	46
		  		  	4.1.11	  	DEED OF TRUST/TITLE POLICY	  	46
		  		  	4.1.12	  	COMPLETION OF FILINGS AND RECORDINGS	  	46
		  		  	4.1.13	  	PAYMENT OF COSTS, EXPENSES, AND FEES	  	46
		  		  	4.1.14	  	APPRAISAL	  	46
		  		  	4.1.15	  	OTHER ITEMS OR ACTIONS BY BORROWER	  	46
		  	4.2	  	CONDITIONS PRECEDENT TO ADMISSION OF LAND AS ZONED LAND	  	46
		  		  	4.2.1	  	REQUEST	  	47
		  		  	4.2.2	  	DEFAULTS	  	47
		  		  	4.2.3	  	ZONING APPROVALS	  	47
		  		  	4.2.4	  	OTHER	  	47
		  	4.3	  	CONDITIONS PRECEDENT TO ADMISSION OF LAND AS ENTITLED LAND OR HIGH END ENTITLED LAND	  	47
		  		  	4.3.1	  	REQUEST	  	47
		  		  	4.3.2	  	DEFAULTS	  	47
		  		  	4.3.3	  	MAP	  	47
		  		  	4.3.4	  	ZONING APPROVALS	  	48
		  		  	4.3.5	  	OTHER	  	48
		  	4.4	  	CONDITIONS PRECEDENT TO ADMISSION OF LAND AS LOTS UNDER DEVELOPMENT OR HIGH END LOTS UNDER DEVELOPMENT	  	48
		  		  	4.4.1	  	REQUEST	  	48
		  		  	4.4.2	  	DEFAULTS	  	48
		  		  	4.4.3	  	DOCUMENTS AND INFORMATION	  	48
		  		  	4.4.4	  	INSPECTION	  	48

  

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		 		 	4.4.5	  	MAP	  	48
		 		 	4.4.6	  	UTILITIES	  	49
		 		 	4.4.7	  	LOT LIMITATIONS	  	49
		 		 	4.4.8	  	OTHER	  	49
		 	4.5	 	CONDITIONS PRECEDENT TO ADMISSION OF LAND AS PRESOLD HOMES, SPEC HOMES, MODEL HOMES, HIGH END PRESOLD HOMES, HIGH END SPEC HOMES AND/OR HIGH END MODEL HOMES	  	49
		 		 	4.5.1	  	REQUEST	  	49
		 		 	4.5.2	  	DEFAULTS	  	50
		 		 	4.5.3	  	DOCUMENTS AND INFORMATION	  	50
		 		 	4.5.4	  	HOME CONSTRUCTION INFORMATION	  	50
		 		 	4.5.5	  	CONCENTRATION LIMITATIONS	  	52
		 		 	4.5.6	  	OTHER	  	52
		 	4.6	 	ADDITIONAL CONDITIONS PRECEDENT TO ALL ADVANCES	  	52
		 	4.7	 	WAIVER OF CONDITIONS PRECEDENT	  	52
			
	5.	 	BORROWER’S REPRESENTATIONS AND WARRANTIES	  	52
		 	5.1	 	CLOSING REPRESENTATIONS AND WARRANTIES	  	52
		 		 	5.1.1	  	CORPORATE EXISTENCE AND AUTHORIZATION	  	52
		 		 	5.1.2	  	NO APPROVALS, ETC.	  	53
		 		 	5.1.3	  	NO CONFLICTS	  	53
		 		 	5.1.4	  	EXECUTION AND DELIVERY AND BINDING NATURE OF LOAN DOCUMENTS	  	53
		 		 	5.1.5	  	LEGAL PROCEEDINGS; HEARINGS, INQUIRIES AND INVESTIGATIONS	  	53
		 		 	5.1.6	  	NO EVENT OF DEFAULT	  	53
		 		 	5.1.7	  	APPROVALS AND PERMITS; ASSETS AND PROPERTY	  	53
		 		 	5.1.8	  	ERISA	  	54
		 		 	5.1.9	  	COMPLIANCE WITH LAW	  	54
		 		 	5.1.10	  	FULL DISCLOSURE	  	54
		 		 	5.1.11	  	USE OF PROCEEDS; MARGIN STOCK	  	54
		 		 	5.1.12	  	GOVERNMENTAL REGULATION	  	55
		 		 	5.1.13	  	MATERIAL AGREEMENTS; NO MATERIAL DEFAULTS	  	55
		 		 	5.1.14	  	TITLE TO PROPERTY	  	55
		 		 	5.1.15	  	PAYMENT OF TAXES	  	56
		 		 	5.1.16	  	NO CONDEMNATION	  	56
		 		 	5.1.17	  	BORROWING BASE	  	56
		 	5.2	 	REPRESENTATIONS AND WARRANTIES UPON REQUESTS FOR ADVANCES	  	56
		 	5.3	 	REPRESENTATIONS AND WARRANTIES UPON DELIVERY OF FINANCIAL STATEMENTS, DOCUMENTS, AND OTHER INFORMATION	  	56
			
	6.	 	BORROWER AFFIRMATIVE COVENANTS	  	57
		 	6.1	 	CORPORATE EXISTENCE	  	57
		 	6.2	 	BOOKS AND RECORDS; ACCESS BY LENDER	  	57

  

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		 	6.3	 	SPECIAL COVENANTS RELATING TO COLLATERAL	  	57
		 		 	6.3.1	  	DEFENSE OF TITLE	  	57
		 		 	6.3.2	  	FURTHER ASSURANCES	  	58
		 		 	6.3.3	  	PLATS, ANNEXATIONS AND APPROVALS	  	58
		 		 	6.3.4	  	UTILITIES	  	59
		 		 	6.3.5	  	PLANS AND SPECIFICATIONS	  	59
		 		 	6.3.6	  	COMPLIANCE WITH PERMITTED EXCEPTIONS	  	60
		 		 	6.3.7	  	PROJECT DEVELOPMENT	  	60
		 		 	6.3.8	  	TITLE POLICY ENDORSEMENTS	  	61
		 		 	6.3.9	  	IMPROVEMENT DISTRICTS	  	61
		 		 	6.3.10	  	APPRAISALS	  	62
		 	6.4	 	INFORMATION AND STATEMENTS	  	62
		 		 	6.4.1	  	MONTHLY SALES REPORTS	  	62
		 		 	6.4.2	  	QUARTERLY FINANCIAL STATEMENTS	  	62
		 		 	6.4.3	  	ANNUAL FINANCIAL STATEMENTS	  	63
		 		 	6.4.4	  	ANNUAL 24-MONTH PROJECTION	  	63
		 		 	6.4.5	  	COMPLIANCE CERTIFICATES	  	63
		 		 	6.4.6	  	BORROWING BASE CERTIFICATE	  	63
		 		 	6.4.7	  	OTHER ITEMS AND INFORMATION	  	63
		 	6.5	 	LAW; JUDGMENTS; MATERIAL AGREEMENTS; APPROVALS AND PERMITS	  	63
		 	6.6	 	TAXES AND OTHER DEBT	  	64
		 	6.7	 	ASSETS AND PROPERTY	  	65
		 	6.8	 	INSURANCE	  	65
		 		 	6.8.1	  	PROPERTY	  	65
		 		 	6.8.2	  	LIABILITY	  	65
		 		 	6.8.3	  	FLOOD	  	65
		 		 	6.8.4	  	WORKER’S COMPENSATION	  	65
		 		 	6.8.5	  	CONTRACTORS	  	66
		 		 	6.8.6	  	ADDITIONAL INSURANCE	  	66
		 	6.9	 	COMMENCEMENT AND COMPLETION	  	67
		 	6.10	 	RIGHTS OF INSPECTION; AGENCY	  	67
		 		 	6.10.1	  	GENERALLY	  	67
		 		 	6.10.2	  	INSPECTOR(S)	  	67
		 	6.11	 	VERIFICATION OF COSTS	  	67
		 	6.12	 	USE OF PROCEEDS	  	67
		 	6.13	 	COSTS AND EXPENSES OF BORROWER’S PERFORMANCE OF COVENANTS AND SATISFACTION OF CONDITIONS	  	68
		 	6.14	 	NOTIFICATION	  	68
		 	6.15	 	FINANCIAL COVENANTS	  	68
		 		 	6.15.1	  	NO OTHER DEBT	  	68
		 		 	6.15.2	  	NO OTHER LOAN DEFAULTS	  	68
		 	6.16	 	BOOKS AND RECORDS; NAMES; PLACE OF BUSINESS AND CHIEF EXECUTIVE OFFICE	  	69
		 	6.17	 	PROCEEDS OF PURCHASE CONTRACTS	  	69
		 		 	6.17.1	  	NET SALES PROCEEDS	  	69

  

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		 		 	6.17.2	  	PAYMENTS TO LENDER	  	69
			
	7.	 	BORROWER NEGATIVE COVENANTS	  	69
		 	7.1	 	CORPORATE RESTRICTIONS	  	69
		 	7.2	 	NAME, FISCAL YEAR, ACCOUNTING METHOD, AND LINES OF BUSINESS	  	69
		 	7.3	 	CHANGE IN OWNERSHIP	  	69
		 	7.4	 	[INTENTIONALLY DELETED]	  	69
		 	7.5	 	LIENS AND ENCUMBRANCES	  	69
		 	7.6	 	INDEBTEDNESS	  	70
		 	7.7	 	ACQUISITION OF ASSETS	  	70
			
	8.	 	EVENTS OF DEFAULT AND REMEDIES	  	70
		 	8.1	 	EVENTS OF DEFAULT	  	70
		 	8.2	 	RIGHTS AND REMEDIES OF LENDER	  	72
			
	9.	 	BANK’S OBLIGATIONS TO BORROWER ONLY AND DISCLAIMER BY BANK	  	74
			
	10.	 	NO BROKERS	  	74
			
	11.	 	PROVISIONS IN THE NOTE GOVERN THIS AGREEMENT	  	74
			
	12.	 	COUNTERPART EXECUTION	  	75
			
	13.	 	MISCELLANEOUS	  	75
		 	13.1	 	ASSIGNMENT	  	75
		 	13.2	 	NOTICES	  	75
		 	13.3	 	AUTHORITY TO FILE NOTICES	  	76
		 	13.4	 	INCONSISTENCIES WITH THE LOAN DOCUMENTS	  	76
		 	13.5	 	NO WAIVER	  	76
		 	13.6	 	LENDER APPROVAL OF INSTRUMENTS AND PARTIES	  	76
		 	13.7	 	LENDER DETERMINATION OF FACTS	  	76
		 	13.8	 	INCORPORATION OF PREAMBLE: RECITALS AND EXHIBITS	  	76
		 	13.9	 	THIRD-PARTY CONSULTANTS	  	76
		 	13.10	 	PAYMENT OF EXPENSES	  	77
		 	13.11	 	DISCLAIMER BY LENDER	  	77
		 	13.12	 	RELEASE AND INDEMNITY	  	77
		 	13.13	 	TITLES AND HEADINGS	  	78
		 	13.14	 	BROKERS	  	78
		 	13.15	 	CHANGE, DISCHARGE, TERMINATION OR WAIVER	  	78
		 	13.16	 	GOVERNING LAW	  	78
		 	13.17	 	ADVANCES IN EXCESS OF LOAN AMOUNT	  	78
		 	13.18	 	PARTICIPATIONS	  	78
		 	13.19	 	TIME IS OF THE ESSENCE	  	79
		 	13.20	 	ATTORNEYS’ FEES	  	79
		 	13.21	 	SIGNS	  	79

  

 -v- 

							
		 	13.22	  	SUBORDINATION TO CERTAIN EASEMENTS, DEDICATIONS AND RESTRICTIONS	  	80
		 	13.23	  	WAIVER OF JURY TRIAL	  	80
			
	14.	 	EXHIBITS	  	80
			
	15.	 	ADDITIONAL ADVANCES	  	80
			
	16.	 	FINANCING STATEMENTS	  	81

 LIST OF EXHIBITS 
  

					
	 EXHIBIT “A-1”
	 	–	  	Legal Description for (Bella Sera)
	 EXHIBIT “B”
	 	–	  	Form of Borrowing Base Certificate
	 EXHIBIT “C”
	 	–	  	Letter of Credit Request Form
	 EXHIBIT “D”
	 	–	  	Project Loan Request Form
	 EXHIBIT “E”
	 	–	  	Form of Letter of Credit Application
	 EXHIBIT “F”
	 	–	  	Form of Request for Admission of Zoned Land
	 EXHIBIT “G”
	 	–	  	Form of Request for Admission of Entitled Land or High End Entitled Land
	 EXHIBIT “H”
	 	–	  	Form of Request for Admission of Lots Under Development or High End Lots Under Development
	 EXHIBIT “I”
	 	–	  	Form of Request for Admission of Homes
	 EXHIBIT “J”
	 	–	  	List of Material Agreements
	 EXHIBIT “K”
	 	–	  	Required Project Information

  

 -vi- 

 REVOLVING LINE OF CREDIT LOAN AGREEMENT 
 (Borrowing Base) 
 THIS REVOLVING LINE OF CREDIT LOAN AGREEMENT (this
“Agreement”), is entered into as of the date set forth above by and between WILLIAM LYON HOMES, INC., a California corporation (“Borrower”), and COMERICA BANK (“Lender”). 
 RECITALS 
 A. Borrower owns and/or desires to
acquire fee simple title to and develop certain real properties located in the Western United States, including without limitation the States of California, Nevada and/or Arizona (collectively and individually, each and every property which is the
subject of a loan made hereunder shall be referred to as the “Property”). 
 B. The purpose of this Agreement is to set forth the
general terms and conditions of the loans to be made under a revolving line of credit in a total sum not to exceed Fifty Million Dollars ($50,000,000.00) to provide funding for the acquisition and development of residential lots, the construction of
existing and future residential home projects (both single family homes and condominiums), and the issuance of letters of credit for the payment of costs incurred or associated with the Projects. This Agreement shall set forth the basic approval
requirements for the Projects and shall set forth the basic terms and conditions for the Advance of Loan funds for the Projects. 
 AGREEMENT

 NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Borrower and Lender
agree as follows: 
 1. DEFINITIONS AND GENERAL PROVISIONS. 
 1.1 DEFINITIONS. In this Agreement, capitalized terms shall have the following meanings: 
 “A&D Budget” shall mean, for each Qualified Project for which A&D Improvements are to be constructed, the cost breakdown/budget for such A&D Improvements, which budget shall be satisfactory to Lender in all
respects. For purposes of this Agreement, all such budgets shall be referred to individually and collectively in the singular. 
 “A&D Improvements” shall mean, for each and every Qualified Project financed hereunder, (i) those certain offsite improvements on the Property (including without limitation curbs, grading, storm and sanitary
sewers, paving, sidewalks, landscaping, hardscaping, sprinklers, electric lines, gas lines, telephone lines, cable television lines, fiber optic lines, pipelines and other utilities) necessary to make the Property suitable for the construction of
single family residential homes or condominiums thereon, and (ii) any common area improvements to be constructed on the Property. 
  

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 “Advance” means an advance of Loan proceeds by Lender to Borrower
hereunder, including without limitation Project Advances and Letter of Credit Advances. 
 “Affiliate” of any
Person means (i) any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such Person, and (ii) any other Person that beneficially owns at least ten percent (10%) of the
voting common stock or partnership interest or limited liability company interest, as applicable, of such Person. For the purposes of this definition, “control” when used with respect to any Person, means the power to direct the management
and policies of such Person, directly or indirectly, whether through the ownership of voting securities, partnership interests, by contract or otherwise. 
 “Agreement” means this Revolving Line of Credit Loan Agreement, as it may be amended, modified, extended, renewed, restated or supplemented from time to time. 
 “Appraisal” means each appraisal of the Land and the Improvements (a) ordered by Lender, (b) prepared by an
appraiser satisfactory to Lender, (c) in compliance with all federal and state standards for appraisals, (d) reviewed by Lender, and (e) in form and substance satisfactory to Lender based on its standards and practices applied in
reviewing real estate appraisals. 
 “Appraised Value” shall mean, for each Qualified Project to be financed
hereunder, the fair market value of each Lot and/or Home as set forth in the Appraisal. 
 “Approvals and
Permits” means, for each Qualified Project, each and all approvals, authorizations, bonds, consents, certificates, franchises, licenses, permits, registrations, qualifications, and other actions and rights granted by or filings with any
Persons necessary or appropriate for the improvement and development of the Land or for the conduct of the business and operations of Borrower. 
 “Architect” shall mean the architect for each Qualified Project, which architect shall be reviewed and approved by Lender in its sole and absolute discretion. For purposes of this Agreement, all such
architects shall be referred to individually and collectively in the singular. 
 “Architect’s
Agreement” shall mean any agreement between the Architect and Borrower for each Qualified Project to be financed by a Loan to be made hereunder. For purposes of this Agreement, all such agreements shall be referred to individually and
collectively in the singular. 
 “Assignment of Architect’s Plans and Specs” shall mean, for each
Qualified Project financed by a Loan to be made hereunder, that certain Assignment of Plans and Specifications executed by Borrower for the benefit of Lender (including the consent of the applicable Architect to such assignment), pursuant to which
Borrower shall assign to Lender, subject to and in accordance with the provisions thereof, all of Borrower’s right, title and interest in, to and under the Architect’s Agreement and the Plans and Specifications. For purposes of this
Agreement, all such assignments shall be referred to individually and collectively in the singular. 
  

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 “Assignment of Engineer’s Plans and Specs” shall mean, for each
Qualified Project financed by a Loan to be made hereunder, that certain Assignment of Plans and Specifications by Borrower for the benefit of Lender (including the consent of the applicable Engineer to such assignment), pursuant to which Borrower
shall assign to Lender, subject to and in accordance with the provisions thereof, all of Borrower’s right, title and interest in, to and under the Engineering Contract and/or the Plans and Specifications (as applicable). For purposes of this
Agreement, all such assignments shall be referred to individually and collectively in the singular. 
 “Authorization
Form” shall mean that certain Signature Authorization Form and Disbursement Instructions of even date herewith executed by Borrower. 
 “Available Commitment” shall be the lesser of (i) the Commitment Amount, as in effect from time to time, or (ii) the Borrowing Base, subject to the limitations set forth in
Sections 2.1.1 and 2.2.1. 
 “Base Appraised Value” shall mean, with respect to each Home financed
by a Loan to be made hereunder, the lesser of (i) the value of such Home as determined by the Appraisal (as adjusted by Lender in its reasonable discretion) for the model plan type of such Home, which value shall be determined without lot
premiums, options or upgrades (unless included by Lender in its sole and absolute discretion), or (ii) Borrower’s estimated sales price of such Home. 
 “Base Sales Price” shall mean, with respect to any Home, the projected base sales price for that Home as set forth in the
applicable Appraisal. 
 “Borrower’s Funds” shall mean any funds deposited by Borrower from time to time
in the Borrower’s Funds Account. 
 “Borrower’s Funds Account” shall mean that certain
non-interest-bearing deposit account in the name of Borrower, listing Lender as secured party and pledgee of Borrower, which account shall be maintained as an account with Lender. Borrower’s Funds shall be deposited into the Borrower’s
Funds Account pending disbursement in the manner and for the purposes herein described. 
 “Borrowing
Availability” shall mean: 
 (a) An amount equal to the lesser of the Commitment Amount or Reduced Commitment Amount,
as applicable, or the Borrowing Base as calculated each Calendar Month, 
 LESS 
 (b) The sum of the Loan Balance, 
 LESS 
 (c) Any reductions as provided in Section 2.1.3(d), 
 PLUS 
  

 -3- 

 (d) Any sums deposited into the Borrower’s Funds Account. 
 “Borrowing Base” shall be equal to the sum of: 
 (a) The respective Maximum Allowed Advances multiplied by the applicable Draw Percentages for all Zoned Land, Entitled Land, High End
Entitled Land, Lots Under Development, High End Lots Under Development, Spec Homes (including Model Homes), High End Spec Homes (including High End Model Homes), Presold Homes and High End Presold Homes for all Qualified Projects; and 
 (b) Any committed portion of the Letter of Credit Sublimit under this Loan. 
 “Borrowing Base Certificate” means a certificate, in form and substance reasonably satisfactory to Lender, delivered to
Lender by Borrower in accordance with Section 6.4.6 setting forth, among other things, a current and detailed computation of the Borrowing Base and Borrowing Availability with respect to Zoned Land, Entitled Land, High End Entitled Land, Lots
Under Development, High End Lots Under Development, Spec Homes (including Model Homes), High End Spec Homes (including High End Model Homes), Presold Homes and High End Presold Homes, and containing such other information as Lender may reasonably
request. An initial form of the Borrowing Base Certificate is attached hereto as EXHIBIT “B”. 
 “Budget” shall mean each and every A&D Budget and/or Home Construction Budget approved by Lender for each and every Qualified Project to be financed by a Loan to be made hereunder. 
 “Bulk Finished Lot Value” shall mean, for each Qualified Project financed hereunder, the bulk sale value of the Lots
included in such Qualified Project after completion of the A&D Improvements as determined by a qualified appraiser, which appraisal shall be satisfactory to Lender in all respects. 
 “Business Day” means each day of the year other than Saturdays, Sundays, Holidays, and days on which banking institutions
are generally authorized or obligated by law or executive order to close in California. 
 “Business Hour”
means each hour of each Business Day between 9:00 a.m. and 4:00 p.m. (California time). 
 “Calendar
Month” shall mean the twelve (12) calendar months of the year. Any payment that is due or obligation that is required to be performed within a specified number of Calendar Months shall become due on the day in the last of such
specified number of Calendar Months that corresponds numerically to the date on which such payment or obligation was incurred or commenced, provided, however, that with respect to any obligation that is incurred or commences on the 29th, 30th or
31st day of any 

  

 -4- 

 
Calendar Month and if the Calendar Month in which such payment or obligation would otherwise be due does not have a numerically corresponding date, such
payment or obligation shall become due on the first day of the next succeeding Calendar Month. 
 “Calendar
Quarter” shall mean a period of three (3) consecutive Calendar Months, commencing on the Closing Date and continuing through the Loan Term. 
 “Closing Date” shall mean (a) the date upon which the initial Deeds of Trust for the Existing Projects are recorded in the Official Records of each applicable County (“Initial Closing
Date”), and (b) the future date(s) upon which future Deeds of Trust for any Future Projects are recorded in the Official Records of each applicable County (each, a “Subsequent Closing Date”). 
 “Collateral” means all property, interests in property, and rights to property securing any or all Obligations from time
to time. 
 “Commitment” means the agreement by Lender in Section 2.1.1 to make Advances pursuant to the
terms and conditions herein. 
 “Commitment Amount” means (a) during the Initial Line Term, the sum of
Fifty Million Dollars ($50,000,000.00), and (b) during the Reduction Period, beginning upon the last day of the first Calendar Quarter following the Initial Line Maturity Date, and on or prior to the last day of each Calendar Quarter thereafter
during the Reduction Period, the Commitment Amount shall be reduced in the minimum amount of Twelve Million Five Hundred Thousand and No/100 Dollars ($12,500,000.00) (each, “Reduced Commitment Amount”): 
  

				
	 DATE
	  	REDUCED
COMMITMENT
AMOUNT
	 Initial Line Maturity Date
	  	$	50,000,000.00
	 First Calendar Quarter
	  	$	37,500,000.00
	 Second Calendar Quarter
	  	$	25,000,000.00
	 Third Calendar Quarter
	  	$	12,500,000.00
	 Fourth Calendar Quarter
	  	$	0.00

 “Commitment Fee” means that certain facility fee (a) that is
calculated during the Initial Line Term at the rate of thirty-five one hundredths of one percent (0.35%) per annum on the full Commitment Amount, and (b) that is calculated during the Reduction Period at the rate of thirty-five one hundredths
of one percent (0.35%) per annum based on the then-applicable Reduced Commitment Amount, in each case payable pursuant to Section 2.5.1 below. These fees shall be paid in advance on a quarterly basis such that: (i) during the Initial Line
Term, each quarterly fee payment shall be based on 0.0875% of the full Commitment Amount, and (ii) during the Reduction Period, each quarterly fee 

  

 -5- 

 
payment shall be based on 0.0875% of the then-applicable Reduced Commitment Amount. 
 “Concentration Limitation” shall mean each of the concentration limitations, whether geographic or based on product type,
set forth in the definition of “Maximum Aggregate Borrowing Base Concentration(s)”. 
 “Construction
Assignments” shall mean, for each Qualified Project to be entered into the Borrowing Base, the Assignment of Engineer’s Plans and Specs, the Assignment of Architect’s Plans and Specs, and all other assignments and other related
documents encumbering the Collateral, which assignments may be included within a single document to be executed by Borrower in connection with each Qualified Project to be financed hereunder. 
 “County” shall mean each and every county in which a Qualified Project to be financed hereunder is located. 

“Debt” means, as to any Person, without limitation, (i) all obligations of such Person which in accordance with
GAAP would be shown on a balance sheet of such Person as a liability (including without limitation obligations for borrowed money and for the deferred purchase price of property or services and obligations evidenced by bonds, debentures, notes or
similar instruments), (ii) all rental obligations under leases required to be capitalized under GAAP, (iii) the stated amount of all letters of credit issued for the account of such Person or upon which such Person would be obligated to
reimburse the issuer thereof for draws, (iv) liabilities in respect of unfunded vested benefits under plans covered by ERISA, and (v) indebtedness of others secured by any lien upon property owned by such Person whether or not assumed.

 “Dedication” means a transfer by Borrower, or the granting of easements, rights of way, and licenses by
Borrower, to municipalities, utility providers, municipal districts, property owners, and property owners’ associations in connection with the development of a Project, for the purpose of providing streets, common areas, parks, water, waste
water and sewage treatment facilities, hillside and other areas, and similar land and improvements. 
 “Deed of
Trust” shall mean, for each Qualified Project entered into the Borrowing Base, a Construction Deed of Trust, Security Agreement and Fixture Filing (With Assignment of Rents and Leases) executed by Borrower, as trustor, to Title Company, as
trustee, and naming Lender as beneficiary, creating a first lien on the Property, the Improvements, and all other buildings, fixtures and improvements now or hereafter owned or acquired by Borrower and situated thereon, and all rights and easements
appurtenant thereto. Each Deed of Trust shall secure indebtedness in the Commitment Amount. For purposes of this Agreement, all such deeds of trust securing the Loan shall be referred to individually and collectively in the singular as the
“Deed of Trust.” Upon the closing of the Loan on the Initial Closing Date, a separate Deed of Trust shall encumber all of the Property in each of the Existing Projects that will be added to the Loan. Upon the entry of each Qualified
Project into the Borrowing Base, a separate Deed 

  

 -6- 

 
of Trust shall encumber all of the Lots in the applicable Future Project. All Lots in a Qualified Project shall ultimately be subject to a Tentative Map or a
Final Map, and Lender shall have no obligation to make any Advances of Hard Costs for the construction of any Homes in any particular Qualified Project, unless and until Lender receives evidence satisfactory to Lender in its discretion of the
recording of the Final Map for such Qualified Project. 
 “Default Interest Rate” means the default rate
specified in the Note. 
 “Draw Percentage” shall mean the percentage of completion for the applicable
improvements as certified by Borrower in its Borrowing Base Certificate and as verified by the Lender’s monthly inspections. 
 “Draw Request” means a completed, written request for an Advance from Borrower to Lender, which request shall be in form reasonably satisfactory to Lender, and shall be accompanied by such other documents and information as
Lender may require or specify from time to time. 
 “EBITDA” means, with respect to any Person (or any asset
of any Person) for a period, an amount equal to the earnings of such Person before the payment of interest expenses, taxes, depreciation expenses and amortization costs. The EBITDA of a Person shall be adjusted to reflect the Person’s allocable
share of such amounts from any Person (or asset of any Person) the accounts of which are not consolidated with the financial statements of the first Person in accordance with GAAP, but only to the extent that such amounts could have been paid to
such Person. 
 “Engineer” shall mean the engineer for each Qualified Project to be financed hereunder, which
engineer shall be reviewed and approved by Lender in its sole and absolute discretion. For purposes of this Agreement, all such engineers shall be referred to individually and collectively in the singular. 
 “Engineer’s Contract” shall mean any agreement between the Engineer and Borrower for each Qualified Project to be
financed by a Loan to be made hereunder. For purposes of this Agreement, all such agreements shall be referred to individually and collectively in the singular. 
 “Entitled Land” means those portions of the Land for which Borrower has satisfied the conditions set forth in
Section 4.3 and with respect to which Borrower has not yet satisfied the conditions precedent for inclusion in the Borrowing Base as Lots Under Development. 
 “Environmental Indemnity” means, for each Qualified Project, that certain Environmental Indemnity executed by Borrower,
which indemnity shall be in form and content acceptable to Lender in its sole and absolute discretion. 
 “ERISA” means the Employee Retirement Income Security Act of 1974 and the regulations and published interpretations thereunder, as in effect from time to time. 
  

 -7- 

 “Event of Default” shall mean all of the events described in
Section 8.1. 
 “Existing Project” shall mean the initial Qualified Project for which Project Loans will
be made hereunder as of the Initial Closing Date. The Existing Project as of the Initial Closing Date is listed below: 
  

													
	 PROJECT 
NAME
	  	ZONED
LAND	  	ENTITLED
LAND	  	HIGH END
ENTITLED
LAND	  	LOTS 
UNDER
DEVELOP.	  	HIGH END
LOTS UNDER
DEVELOP.	  	HOMES
							
	 Bella Sera
	  	_____	  	________	  	________	  	________	  	_________	  	_____

 “Extension Conditions” shall mean (a) at the time the
applicable notice of extension is given to Lender and at the time of such extension, no Event of Default, and no Unmatured Event of Default shall have occurred and be continuing; and (b) there shall have been no Material Adverse Change in the
financial condition of Borrower or Guarantor since the Initial Closing Date. 
 “Final Map” shall mean the
final tract or plat map for the Property for each Qualified Project to be financed by a Project Loan to be made hereunder, which map shall be in form and content acceptable to Lender in its sole and absolute discretion. 
 “Financing Statement” shall mean, for each Qualified Project to be entered into the Borrowing Base, a UCC-1 financing
statement naming Borrower, as debtor, in favor of Lender, as secured party, perfecting Lender’s security interest in the Collateral described therein now owned or hereafter acquired by Borrower. The Financing Statement shall be in form and
content satisfactory to Lender, and shall be filed in the Office of the California Secretary of State (and in such other offices for recording or filing such statements in such jurisdictions as Lender shall require to perfect Lender’s security
interest or reflect such interest in appropriate public records). For purposes of this Agreement, all such financing statements shall be referred to individually and collectively in the singular. 
 “First Payment Date” shall mean the first day of the first Calendar Month after the Closing Date or, in Lender’s
sole and absolute discretion, the first day of the second Calendar Month after the Closing Date. 
 “Force Majeure
Event” shall mean acts of God or the elements, including fire, flood, windstorm, hailstorm, earthquake and lightning, acts of war, riot or civil insurrection, and moratoriums, unforeseeable governmental acts, strikes, labor disputes, delays
in delivery of materials and disruption of shipping (to the extent such moratoriums, unforeseeable governmental acts, strikes, labor disputes, delays in delivery of materials and disruption of shipping affect not only Borrower but also similarly
situated real estate owners and/or contractors in the vicinity of the Property, or are otherwise not the result of an intentional or grossly negligent act or failure to act by Borrower); provided, however, that inclement weather shall be considered
a Force Majeure Event only to the extent it is significantly more severe than typical for the location and time of year in which such inclement weather occurred, and provided further 

  

 -8- 

 
that unforeseeable governmental acts shall not toll Lender’s right to exclude Property from the Borrowing Base. 
 “Future Project” shall mean each Qualified Project for which a Project Loan will be made hereunder after the Initial
Closing Date. 
 “GAAP” means generally accepted accounting principles consistently applied. 
 “Geographic Concentration Limitation” shall have the meaning given to such term in the definition of Maximum Aggregate
Borrowing Base Concentration(s). 
 “Governmental Authority” means any government, any court, and any agency,
authority, body, bureau, department, or instrumentality of any government. 
 “Guarantor” means William Lyon
Homes, a Delaware corporation. 
 “Guaranty” means that certain Guaranty of even date herewith, executed by
Guarantor for the benefit of Lender, as amended, modified, extended, renewed or supplemented from time to time. 
 “Hard Costs” means, for each Qualified Project to be financed hereunder, the onsite cost of labor and materials directly related to the construction of the Improvements, including the A&D Improvements and each Home as
set forth in the A&D Budget and Home Construction Budget, as applicable, including without limitation construction costs, which costs shall be subject to Lender’s review and approval and shall specifically exclude costs to be funded from
general budget categories for overhead, supervision, general and administrative, and marketing expenses, and shall also not include any costs and expenses related to upgrades, options or decorator items; provided, however, that with respect to any
Model Home, Hard Costs may include such costs and expenses related to upgrades, options or decorator items as are approved by Lender. 
 “High End Entitled Land” shall mean Entitled Land in any Project where the average Base Sales Price of all Homes within such Project exceeds $900,000. 
 “High End Homes” shall mean, collectively, all High End Presold Homes and all High End Spec Homes. 
 “High End Lots Under Development” shall mean each Lot Under Development in any Project where the average Base Sales Price
of all Homes within such Project exceeds $900,000. 
 “High End Lots Under Development Concentration
Limitation” shall have the meaning given to such term in the definition of Maximum Aggregate Borrowing Base Concentration(s). 
 “High End Model Home” shall mean each Model Home in any Project where the average Base Sales Price of all Homes within such Project exceeds $900,000. 
  

 -9- 

 “High End Presold Home” shall mean each Presold Home in any Project
where the average Base Sales Price of all Homes within such Project exceeds $900,000. 
 “High End Spec Home”
shall mean each Spec Home in any Project where the average Base Sales Price of all Homes within such Project exceeds $900,000. 
 “High End Spec Home Concentration Limitation” shall have the meaning given to such term in the definition of Maximum Aggregate Borrowing Base Concentration(s). 
 “Home” or “Unit” shall mean, for each Qualified Project to be financed hereunder, a single family
dwelling unit which shall be a Spec, High End Spec, Presold, High End Presold, Model or High End Model Home to be constructed on the Property of any one (1) of the model, design and type generally described in the Plans and Specifications for
the applicable Project, including any furniture, furnishings, fixtures and equipment to be installed therein as shown on said the and Specifications. A Home may include an attached unit, which shall include any completed Home that is designed
pursuant to the Plans and Specifications to share at least one (1) common wall with another Home. 
 “Home
Advance Maturity Date(s)” shall mean the applicable period of time during which a Home may remain in the Borrowing Base for the purposes of calculating the Borrowing Availability, as follows: 
 (a) With respect to Presold, High End Presold, Spec or High End Spec Homes, twelve (12) Calendar Months after the initial entry of
such Presold, High End Presold, Spec or High End Spec Home into the Borrowing Base; and 
 (b) With respect to Model Homes or
High End Model Homes, thirty (30) Calendar Months after the initial entry of such Model Home or High End Model Home into the Borrowing Base. 
 “Home Construction Budget” shall mean, for each Qualified Project in which Homes are to be constructed that are to be financed hereunder, the detailed line-item cost breakdown and budget approved by
Lender for all Homes to be constructed in such Qualified Project, which budget shall be comprised of the Lot Release Price for the release of the Lot into the Loan for the construction of a Home thereon, and the Hard Costs and Soft Costs for the
Home to be constructed on such Lot, and which budget shall be in conformity with the sources and uses of funds for Homes as approved by Lender in its sole and absolute discretion. For purposes of this Agreement, all such budgets shall be referred to
individually and collectively in the singular. 
 “Improvements” means, for each and every Qualified Project
to be financed hereunder, the improvements to be made on the Land (or applicable portion thereof), which shall include all construction and development of the infrastructure and all other housing improvements made in preparation for the development
and marketing of the Land (or applicable portion thereof). 
  

 -10- 

 “Initial Closing Date” shall mean the date on which the Deeds of Trust
for the Existing Projects are recorded and the Loan is closed. 
 “Initial Line Maturity Date” shall mean
April 3, 2008, subject to annual review and extension by Lender in accordance with subsection 2.1.3(e) hereof. 
 “Initial Line Term” shall mean that certain twenty-four (24) Calendar Months commencing on the Initial Closing Date and ending on the Initial Line Maturity Date, as the Initial Line Maturity Date may be extended by
Lender in accordance with subsection 2.1.3(e) hereof. 
 “Intangible Assets” means all intangible assets of
Borrower under GAAP, including without limitation copyrights, franchises, goodwill, licenses, loan origination fees, non-competition agreements, conveyance/organization/formation costs (to the extent required to be capitalized under GAAP), patents,
service marks, service names, trademarks, trade names, write up in the book value of any asset in excess of the acquisition cost of the asset, any amount (however designated on the balance sheet) representing the excess of the purchase price paid
for assets or stock acquired over the value assigned thereto on the books of Borrower, loans and advances to partners/employees/affiliates of Borrower, unamortized leasehold improvement expenses not recoverable at the end of the lease term, and
unamortized Debt discount and deferred discount. 
 “Interest Incurred” shall mean, for any period, the sum
of all interest incurred by a Person on a consolidated basis during such period, whether capitalized or expensed. 
 “Interest Rate” shall mean the rate of interest set forth in the Note. 
 “Land” or
“Property” means that certain real property more particularly described on EXHIBITS “A-1” and “A-2” attached hereto, and all other real property for each and every real property and all improvements located
or to be constructed thereon located in each and every County for each Qualified Project to be financed by a Loan to be made hereunder. For purposes of this Agreement, all such properties shall be referred to individually and collectively in the
singular. 
 “Letter of Credit” shall mean any letter of credit to be issued by Lender under the Letter of
Credit Sublimit. 
 “Letter of Credit Advance” shall mean each and every Advance of Loan funds to be made by
Lender if there is any draw upon any Letter of Credit issued pursuant to this Agreement. 
 “Letter of Credit
Application” means a Standby Letter of Credit Application and Agreement in the form of EXHIBIT “E” to be completed by Borrower and submitted to Lender in connection with the issuance of each Letter of Credit. 
 “Letter of Credit Fee” means that certain fee due and payable by Borrower on each Letter of Credit issued hereunder,
which fee shall be calculated at the rate of one 

  

 -11- 

 
percent (1.00%) per annum on the face amount of the Letter of Credit and shall be payable as a condition to the issuance of each Letter of Credit and on
each twelve-month anniversary of the issuance date of each Letter of Credit, if the Letter of Credit is to be extended beyond a twelve-month term. 
 “Letter of Credit Request” means each and every request by Borrower for the issuance of a Letter of Credit hereunder, which request shall be in the form attached hereto as EXHIBIT “C”.

 “Letter of Credit Sublimit” shall mean that certain line of credit to be provided under the Loan for the
purposes set forth in Section 2.3 of this Agreement, which line of credit shall not exceed at any time Five Million Dollars ($5,000,000.00) (“LOC Total Commitment Amount”). The Letter of Credit Sublimit shall be a revolving line of
credit. Prior to the Maturity Date, the Letter of Credit Sublimit may be drawn, repaid and drawn again through individual Advances in repetition, subject to the limitations herein, so long as: 
 (1) The sum of (a) the amounts outstanding on the Letter of Credit Sublimit, and (b) the cumulative Letter of Credit Sublimit
amounts that are committed but not yet advanced on the Letter of Credit Sublimit, never exceed the LOC Total Commitment Amount; and 
 (2) The sum of (a) the amounts outstanding on the Loan, and (b) the cumulative Loan amounts that are committed but not yet advanced on the Loan, never exceed the Commitment Amount; and 
 (3) No Event of Default has occurred and is continuing. 
 If the Initial Line Maturity Date is not extended as provided in subsection 2.1.3(e), then the Letter of Credit Sublimit shall be repaid during the Reduction Period as set forth herein. 
 “LOC Maximum Commitment Amount” shall mean the amount committed under each Letter of Credit, which sum shall not exceed
the sum equal to (a) Five Million Dollars ($5,000,000.00), less (b) any committed portion of the Letter of Credit Sublimit that Borrower has requested and Lender has approved in its discretion be available for Advances under the Loan.

 “LOC Total Commitment Amount” shall mean the sum of all amounts committed under any Letters of Credit
issued hereunder plus all Letter of Credit Advances in the aggregate, which sum shall not exceed Five Million Dollars ($5,000,000.00). 
 “Lien Or Encumbrance” and “Liens And Encumbrances” mean, respectively, each and all of the following: (i) any lease or other right to use; (ii) any assignment as security,
conditional sale, grant in trust, lien, mortgage, pledge, security interest, title retention arrangement, other encumbrance (voluntary or involuntary), stop notice, or other interest or right securing the payment of money or the performance of any
other liability or obligation, whether voluntarily or involuntarily created and whether arising by agreement 

  

 -12- 

 
or under any law, ordinance, regulation, or rule (federal, state, or local); and (iii) any option, right of first refusal, or other right to purchase.

 “Liquidity” shall mean the amount of any Person’s unencumbered cash, marketable securities, undrawn
availability under lines of credit and unencumbered cash equivalents, as determined in accordance with GAAP. 
 “Loan” means the revolving line of credit from Lender to Borrower described in this Agreement, which Loan shall include all the aggregate of all Project Loans made and all Letters of Credit issued hereunder. 
 “Loan Allocation” shall mean: 
 (a) With respect to each Lot to be constructed in a Qualified Project, the lesser of: 
 (i) the pro rata sum of the costs to be advanced by Lender as shown in the A&D Budget delivered to Lender with respect to such Lot;
or 
 (ii) the Maximum Allowed Advance for such Lot. 
 (b) With respect to each Home to be constructed in a Qualified Project, the lesser of: 
 (i) the sum of the costs to be advanced by Lender as shown in the Home Construction Budget delivered to Lender with respect to such Home;
or 
 (ii) the Maximum Allowed Advance for such Home. 
 “Loan Balance” means an amount, at any point in time, equal to (a) the sum of all outstanding Advances under the
Loan, after giving effect to any borrowings and prepayments or repayments of Advances occurring prior thereto, PLUS (b) with respect to all outstanding Letters of Credit issued hereunder, the aggregate amount of all such Letters of Credit and
all unreimbursed Letter of Credit Advances. 
 “Loan Documents” means this Agreement, the Note, the Deeds of
Trust, the Environmental Indemnity and other Security Documents, and all other guaranties, agreements, documents, or instruments signed by Borrower and evidencing, guarantying, securing or containing agreements with respect to any and all Advances
made hereunder, as such agreements, documents, and instruments may be amended, modified, extended, renewed, or supplemented from time to time. 
 “Loan Payment Date” means the first day of each Calendar Month after the Closing Date provided, however, that at Lender’s option, the First Payment Date may be the first day of the second
calendar month after the Closing Date. 
 “Loan Term” means the period commencing with the Closing Date and
ending on the Maturity Date. 
  

 -13- 

 “Lot Advance Maturity Date(s)” shall mean the term in which a Lot may
remain in the Borrowing Base for the purposes of calculating the Borrowing Availability: 
 (a) With respect to Zoned Land,
twelve (12) Calendar Months after the initial entry of such Zoned Land into the Borrowing Base; 
 (b) With respect to
Entitled Land, nine (9) Calendar Months after the initial entry of such Entitled Land into the Borrowing Base; 
 (c)
With respect to High End Entitled Land, twelve (12) Calendar Months after the initial entry of such High End Entitled Land into the Borrowing Base; or 
 (d) With respect to Lots Under Development or High End Lots Under Development, thirty (30) Calendar Months after the initial entry of such Lots Under Development or High End Lots Under Development into the
Borrowing Base (less any time that has elapsed from the entry of such Lots into the Borrowing Base as Zoned Land, Entitled Land or High End Entitled Land to the date of entry into the Borrowing Base as Lots Under Development or High End Lots Under
Development) (provided, however, that such period may be extended for up to two additional three-month periods if Borrower is in compliance with the Extension Conditions). 
 “Lots” means, with respect to each Qualified Project to be financed hereunder, one (1) or more than one (1) of
the lots into which the subject Property is to be or has been divided, as set forth on the Final Map for such Qualified Project. 
 “Lots Under Development” means a portion of the Land for which Borrower has satisfied the conditions set forth in Section 4.4. 
 “Material Adverse Change” means any change in the assets, business, financial condition, operations, or results of
operations of Borrower, Guarantor or any Project or any other event or condition that in the reasonable opinion of Lender (i) is reasonably likely to affect in a material adverse respect the likelihood of performance by any Borrower of any of
the obligations in the Loan Documents, (ii) is reasonably likely to affect in a material adverse respect the ability of any Borrower to perform any of the Obligations in any of the Loan Documents, (iii) is reasonably likely to affect in a
material adverse respect the legality, validity, or binding nature of any of the Obligations in the Loan Documents or any lien, security interest, or other encumbrance securing any of the Obligations under the Loan Documents, or (iv) could
affect the priority of any lien or encumbrance securing any of the Obligations in the Loan Documents. 
 “Maturity
Date” means (a) the date which is twelve (12) Calendar Months following the Initial Line Maturity Date, as the Initial Line Maturity Date may be extended pursuant to subsection 2.1.3(e) below, or (b) such earlier date
upon the acceleration of the repayment of the Loan as provided in the Loan Documents after the occurrence of the Event of Default. 
  

 -14- 

 “Maximum Aggregate Borrowing Base Concentration(s)” shall mean each and
every one of the following: 
 (a) With respect to all Qualified Projects included in the Borrowing Base (collectively or
individually “Geographic Concentration Limitation”): 
 (i) The aggregate Maximum Allowed Advance multiplied by the
applicable Draw Percentage for all Zoned Land, Lots and/or Homes for Qualified Projects located in the State of Arizona shall not exceed the lesser of (1) Twelve Million Five Hundred Thousand Dollars ($12,500,000.00), or (2) twenty-five
percent (25%) of the then existing Commitment Amount; and 
 (ii) The aggregate Maximum Allowed Advance multiplied by
the applicable Draw Percentage for all Zoned Land, Lots and/or Homes for Qualified Projects located in the State of Nevada shall not exceed the lesser of (1) Twelve Million Five Hundred Thousand Dollars ($12,500,000.00), or (2) twenty-five
percent (25%) of the then existing Commitment Amount. 
 (b) With respect to all Zoned Land and Lots to be included in
the Borrowing Base, the aggregate Maximum Allowed Advance multiplied by the applicable Draw Percentage for all Zoned Land, Entitled Land, High End Entitled Land, Lots Under Development and High End Lots Under Development for all Qualified Projects
shall not exceed the lesser of (i) Twenty-five Million Dollars ($25,000,000.00), or (ii) fifty percent (50%) of the then existing Commitment Amount (“Land Concentration Limitation”). 
 (c) With respect to all Zoned Land to be included in the Borrowing Base, the aggregate Maximum Allowed Advance multiplied by the
applicable Draw Percentage for all Zoned Land for all Qualified Projects shall not exceed the lesser of (i) Five Million Dollars ($5,000,000.00), or (ii) ten percent (10%) of the then existing Commitment Amount (“Zoned Land
Concentration Limitation”). 
 (d) With respect to all Entitled Land to be included in the Borrowing Base, the aggregate
Maximum Allowed Advance multiplied by the applicable Draw Percentage for all Entitled Land for all Qualified Projects shall not exceed the lesser of (i) Ten Million Dollars ($10,000,000.00), or (ii) twenty percent (20%) of the then
existing Commitment Amount (“Entitled Land Concentration Limitation”). 
 (e) With respect to all High End Entitled
Land to be included in the Borrowing Base, the aggregate Maximum Allowed Advance multiplied by the applicable Draw Percentage for all High End Entitled Land for all Qualified Projects shall not exceed the lesser of (i) Seven Million Five
Hundred Thousand Dollars ($7,500,000.00), or (ii) fifteen percent (15%) of the then existing Commitment Amount (“High End Entitled Land Concentration Limitation”). 
 (f) With respect to all Lots Under Development to be included in the Borrowing Base, the aggregate Maximum Allowed Advance multiplied by
the 

  

 -15- 

 
applicable Draw Percentage for all Lots Under Development for all Qualified Projects shall not exceed the lesser of (i) Twenty-five Million Dollars
($25,000,000.00), or (ii) fifty percent (50%) of the then existing Commitment Amount (“Lots Under Development Concentration Limitation”). 
 (g) With respect to all High End Lots Under Development to be included in the Borrowing Base, the aggregate Maximum Allowed Advance
multiplied by the applicable Draw Percentage for all High End Lots Under Development for all Qualified Projects shall not exceed the lesser of (i) Fifteen Million Dollars ($15,000,000.00), or (ii) thirty percent (30%) of the then
existing Commitment Amount (“High End Lots Under Development Concentration Limitation”). 
 (h) With respect to all
High End Entitled Land and High End Lots Under Development to be included in the Borrowing Base, the aggregate Maximum Allowed Advance multiplied by the applicable Draw Percentage for all High End Entitled Land and High End Lots Under Development
for all Qualified Projects shall not exceed the lesser of (i) Fifteen Million Dollars ($15,000,000.00), or (ii) thirty percent (30%) of the then existing Commitment Amount (“High End Land Concentration Limitation”).

 (i) With respect to all Spec Homes to be included in the Borrowing Base, for each and every Qualified Project financed
hereunder, the total number of Spec Homes shall not exceed the lesser of (i) twenty-five (25) Spec Homes, (ii) five (5) months’ appraised absorption for the applicable Project, or (iii) five (5) months’ actual
absorption for the applicable Project, as determined by Lender from time to time based upon the actual prior six-month Home sales average for the applicable Project (“Spec Home Concentration Limitation”). 
 (j) With respect to all High End Spec Homes to be included in the Borrowing Base, for each and every Qualified Project financed hereunder,
the total number of High End Spec Homes shall not exceed the lesser of (i) fifteen (15) High End Spec Homes, (ii) four (4) months’ appraised absorption for the applicable Project, or (iii) four (4) months’
actual absorption for the applicable Project, as determined by Lender from time to time based upon the actual prior six-month Home sales average for the applicable Project (“High End Spec Home Concentration Limitation”). 
 (k) With respect to all Model Homes or High End Model Homes to be included in the Borrowing Base, for each and every Qualified Project
financed hereunder, the total number of Model Homes or High End Model Homes, as applicable, shall not exceed five (5) (“Model Home Concentration Limitation”). 
 (l) With respect to any one Qualified Project, the aggregate Maximum Allowed Advance multiplied by the applicable Draw Percentage for such
Qualified Project shall not exceed Twenty-five Million Dollars ($25,000,000.00). 
  

 -16- 

 (m) With respect to all attached condominium Homes, the aggregate Maximum Allowed Advance
multiplied by the applicable Draw Percentage for all such attached condominium Homes for all Qualified Projects shall not exceed the lesser of (i) Fifteen Million Dollars ($15,000,000.00), or (ii) thirty percent (30%) of the then
existing Commitment Amount. 
 (n) With respect to all High End Homes to be included in the Borrowing Base, the aggregate
Maximum Allowed Advance multiplied by the applicable Draw Percentage for all such High End Homes shall not exceed the lesser or (i) Twenty Million Dollars ($20,000,000.00), or (ii) forty percent (40%) of the then existing Commitment
Amount. 
 “Maximum Allowed Advance” shall have the following meanings: 
  

	 	•	 	ZONED LAND: The sum of all Advances for Zoned Land shall not exceed the lesser of (i) fifty percent (50%) of Total Project Costs, or (ii) fifty percent (50%) of
the Appraised Value for Zoned Land, subject to Lender’s approval. 

  

	 	•	 	ENTITLED LAND: The sum of all Advances for Entitled Land shall not exceed the lesser of (i) sixty-five percent (65%) of Total Project Costs, or (ii) sixty-five
percent (65%) of the Appraised Value for Entitled Land, subject to Lender’s approval. 

  

	 	•	 	HIGH END ENTITLED LAND: The sum of all Advances for High End Entitled Land shall not exceed the lesser of (i) fifty percent (50%) of Total Project Costs, or
(ii) fifty percent (50%) of the Appraised Value for High End Entitled Land, subject to Lender’s approval. 

  

	 	•	 	LOTS UNDER DEVELOPMENT: The sum of all Advances for Lots Under Development shall not exceed the lesser of (i) eighty percent (80%) of Total Project Costs, or
(ii) seventy-five percent (75%) of the Bulk Finished Lot Value for Lots Under Development, subject to Lender’s approval. 

  

	 	•	 	HIGH END LOTS UNDER DEVELOPMENT: The sum of all Advances for High End Lots Under Development shall not exceed the lesser of (i) seventy-five percent (75%) of Total Project
Costs, or (ii) seventy percent (70%) of the Bulk Finished Lot Value for High End Lots Under Development, subject to Lender’s approval. 

  

	 	•	 	SPEC HOMES: The sum of all Advances for Spec Homes (including Model Homes) shall not exceed the lesser of (i) ninety percent (90%) of Total Project Costs, or
(ii) eighty percent (80%) of the Base Appraised Value for such Homes, subject to Lender’s approval. 

  

	 	•	 	 HIGH END SPEC HOMES: The sum of all Advances for High End Spec Homes (including High End Model Homes) shall not exceed the lesser of 

  

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(i) ninety percent (90%) of Total Project Costs, or (ii) seventy-five percent (75%) of the Base Appraised Value for such Homes, subject
to Lender’s approval. 

  

	 	•	 	PRESOLD HOMES: The sum of all Advances for Presold Homes shall not exceed the lesser of (i) ninety percent (90%) of Total Project Costs, or (ii) eighty percent
(80%) of the Base Appraised Value for such Homes, subject to Lender’s approval. 

  

	 	•	 	HIGH END PRESOLD HOMES: The sum of all Advances for High End Presold Homes shall not exceed the lesser of (i) ninety percent (90%) of Total Project Costs, or
(ii) seventy-five percent (75%) of the Base Appraised Value for such High End Presold Homes, subject to Lender’s approval. 

 “Model Home” shall mean, with respect to each Qualified Project to be financed hereunder, a Home constructed and furnished initially for inspection by prospective purchasers, which Model Home will not
be sold until all of the other Homes of its respective plan type in said Project are sold, and which otherwise shall remain as collateral for the Loan until the Loan is paid in full. If permitted by Lender in its sole discretion for any Project, a
Model Home may be sold and leased back to Borrower pursuant to a lease that is assigned to Lender and that is acceptable in form and content to Lender and, in such event, such Model Home shall remain as a model for said Project to be used for the
marketing of the Project until all Homes in the Project of the same plan type as such Model Home have been sold. 
 “Net Sales Proceeds” means, for any sale of any portion of the Qualified Project, the gross sales price, less to the extent paid by or charged to Borrower: (a) customary tax prorations; (b) customary real estate
brokerage commissions payable to any Person who is neither (i) an Affiliate of Borrower or employed by Borrower, nor (ii) engaged in on-site sales at said Project; and (c) reasonable and customary closing costs, including escrow fees,
title insurance premiums, prorations, and recording costs as reflected on the settlement statement and reasonably approved by Lender. 
 “Net Worth” shall mean the amount by which a Person’s Total Assets exceeds Total Liabilities less, to the extent included in Total Assets, the sum of: 
 (a) the total book value of all assets of a Person and its subsidiaries properly classified as intangible assets under GAAP, including
such items as good will, the purchase price of acquired assets in excess of the fair market value thereof, trademarks, trade names, service marks, brand names, copyrights, patents and licenses, and rights with respect to the foregoing; PLUS

 (b) all amounts representing any write-up in the book value of any assets of a Person and its subsidiaries resulting from a
revaluation thereof subsequent to the Person’s balance sheet date. 
  

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 “Non-Related Party” shall mean a Person that is not an Affiliate of
Borrower, nor an officer of, or parent or subsidiary corporation of a shareholder of Borrower, or any Person otherwise controlled directly or indirectly by Borrower or Borrower’s shareholders, or a parent or subsidiary corporation or
partnership of Borrower or its shareholders. 
 “Note” means that certain Promissory Note of even date
herewith, executed by Borrower and payable to Lender, evidencing Borrower’s indebtedness hereunder, as amended, modified, extended, renewed or supplemented from time to time. 
 “Obligations” means the obligations of Borrower under the Loan Documents. 
 “Organizational Documents” shall include Borrower’s articles of incorporation and by-laws and any amendments
thereto, and any certificates required to be filed by Borrower with any Governmental Authority. 
 “Outstandings” shall mean, as of any time of determination, all Advances that have been made by Lender and have not yet been repaid by Borrower. 
 “Permitted Exceptions” means (i) all items shown in Schedule B Part 1 of the Title Policy; (ii) Liens
and Encumbrances granted to Lender to secure the Obligations; and (iii) all other exceptions approved in writing by Lender. 
 “Permitted Expenses” shall mean all expenses to be paid or reimbursed for the purposes set forth in Section 2.4.2 that are budgeted by Borrower in any and all Budgets for Project Loans and are budgeted in
Borrower’s annual business plan submitted to Lender and that are approved by Lender in its sole and absolute discretion. 
 “Person” means a natural person, a partnership, a joint venture, an unincorporated association, a limited liability company, a corporation, a trust, any other legal entity, or any Governmental Authority. 
 “Plans and Specifications” means, with respect to any Qualified Project financed by a Loan to be made hereunder, the
plans and specifications for the construction of the A&D Improvements and/or the Homes, as applicable, that have been approved by Lender pursuant to this Agreement. 
 “Pledge Agreement” means that certain collateral pledge and assignment of even date herewith by Borrower in favor of
Lender pursuant to which Borrower has assigned to Lender all of the Purchase Contracts, Project Revenues and/or Net Sale Proceeds now or hereafter existing, as such assignment may be amended, modified, extended, renewed or supplemented from time to
time. 
 “Presold Home” shall mean a Home that is subject to: 
 (a) A duly executed Purchase Contract, escrow instructions or deposit receipt without contingencies (other than the sale of an existing
residency contingency), which shall be made available for Lender’s review; 
  

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 (b) A prequalification letter or mortgage commitment from an institutional mortgage
lender or such other information or verification as Lender may require concerning the ability of the prospective buyer to obtain financing or otherwise acquire the Home, which shall be made available for Lender’s review; and 
 (c) A cash earnest money deposit or down payment of at least Five Thousand Dollars ($5,000.00), evidence of which shall be made available
for Lender’s review. 
 “Project” means the Land and the Improvements to be constructed for the
development and marketing of a residential subdivision. Each Project shall be acquired, developed and constructed with the proceeds of a Loan to be made hereunder as approved by Lender. Other than Advances for Zoned Land authorized under this
Agreement, no Advances for any Project shall be approved and made unless and until a Tentative Map or Final Map has been recorded for the subject Property. In any event, no Advance shall be made for any Homes to be constructed in a Project unless
and until a Final Map has been recorded for such Project. For purposes of this Agreement, all Projects shall be referred to individually and collectively in the singular. In the event a Qualified Project is entered into the Borrowing Base as
anything other than Zoned Land prior to the recordation of the Final Map for the applicable Project, Lender shall require, among other things, that an ALTA survey must be delivered to Lender for review and approval and/or the Title Company shall
agree in writing to issue the required Title Policy with all requested survey endorsements. 
 “Project
Advance” means an advance of Loan proceeds by Lender to Borrower hereunder for the payment or reimbursement of any Permitted Expenses for Qualified Projects, which advance shall not be a Letter of Credit Advance. 
 “Project Loan” shall mean, for each Qualified Project to be included in the Borrowing Base, the aggregate of all Loan
Allocations for all Lots and/or Homes to be included in the Borrowing Base for such Qualified Project. For purposes of this Agreement, all Project Loans shall be referred to individually and collectively in the singular. 
 “Project Loan Request” means each and every request by Borrower for the inclusion of a Qualified Project into the
Borrowing Base, which request shall be in the form attached hereto as EXHIBIT “D”. 
 “Project Minimum
Standards” means, with respect to each Qualified Project to be financed hereunder, the requirements of Lender that the total number of Lots and/or Homes in each Qualified Project shall not exceed the lesser of (i) one hundred
seventy-five (175), or (ii) thirty (30) months of projected absorption as set forth in the applicable Appraisal for such Qualified Project. 
  

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 “Project Revenues” means all lease or rent payments, profits, proceeds,
revenues and receipts received by Borrower or on its behalf in connection with or arising out of the Qualified Projects. 
 “Property” or “Land” means that certain real property more particularly described on EXHIBITS “A-1” through “A-3” attached hereto, and all other real property for each and
every real property and all improvements located or to be constructed thereon located in each and every County for each Qualified Project to be financed by a Loan to be made hereunder. For purposes of this Agreement, all such properties shall be
referred to individually and collectively in the singular. 
 “Purchase Contract” means: 
 (a) For the sale of any Lot or Lots, a bona fide written agreement between Borrower and a Non-Related Party (provided that an Affiliate of
Borrower may be a purchaser) for sale in the ordinary course of Borrower’s business, accompanied by a cash earnest money deposit or down payment in an amount that is customary and is not subject to any contingencies (including without
limitation “Free Look” or other similar contingencies related to the sale of other property of the purchaser, but excluding conditions precedent to the closing of any such sale to a Non-Related Party); and/or 
 (b) For the sale of any Home or Homes, a bona fide, arm’s-length written agreement entered into between Borrower and a Non-Related
Party for the sale in the ordinary course of Borrower’s business of any Home for a sales price at least equal to the Maximum Allowed Advance. The Sales Agreement shall be conforming to any and all rules or regulations promulgated by any
federal, state or local governmental entity with jurisdiction over the subject Project. A Sales Agreement shall be considered “Without Contingencies” if the buyer’s obligation to purchase is not contingent upon the sale of the
buyer’s existing residence and provided there are no other contingencies to the buyer’s obligation to purchase the Home other than financing, title and inspection contingencies which are normally included in Sales Agreements for newly
constructed residences in the Project. 
 “Qualified Project” means any Project that satisfies the following
conditions: 
 (a) Lender has received a fully completed Project Loan Request, executed by Borrower; 
 (b) Lender has received a fully executed Deed of Trust for the Property included in the Project, which Deed of Trust shall be recorded in
the County in which such Property is located; 
 (c) Lender has received a fully executed Environmental Indemnity for the
Property included in the Project, and has received fully executed Construction Assignments for the Project; 
  

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 (d) Upon recordation of the Deed of Trust, Lender shall have received a Title Policy
issued by the Title Company; and 
 (e) Lender shall have received, reviewed and approved any and all Project information
required by Lender hereunder. 
 “Raw Land” means (i) portions of the Land with respect to which all
conditions set forth in Section 4.2 for inclusion of such Land in the Borrowing Base as Zoned Land have not been satisfied, and (ii) portions of the Land which are not designated for development but are reserved as open space or as streets
and common areas to be dedicated to homeowners’ associations and other Governmental Authorities. 
 “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) during which all existing Qualified Projects entered into the Borrowing Base
as of the Initial Line Maturity Date shall remain in the Borrowing Base and during which Lender’s obligation to include and enter any new Qualified Projects into the Borrowing Base shall terminate. 
 “Release Price” means, for each Lot and Home to be sold and released hereunder, the greater of (i) one hundred
percent (100%) of the Net Sales Proceeds for such Lot or Home or (ii) the Maximum Allowed Advance for such Lot or Home. 
 “Required Principal Payment” means (a) each Release Price paid to Lender in connection with the sale of a Lot or Home to be applied to the outstanding Loan Balance, and (b) that certain quarterly principal payment
to be made during the Reduction Period in order to reduce the outstanding balance of the Loan to an amount not greater than the then-applicable Reduced Commitment Amount. 
 “Requirements” means any and all obligations, other terms and conditions, requirements, and restrictions in effect now or
in the future by which Borrower or any or all of the Project is bound or which are otherwise applicable to any or all of the Project, construction of any improvements thereon, or occupancy, ownership, or use of the Project (including, without
limitation, such obligations, other terms and conditions, restrictions, and requirements imposed by: (i) any law, ordinance, regulation, or rule (federal, state, or local); (ii) any Approvals and Permits; (iii) any Permitted
Exceptions; (iv) any condition, covenant, restriction, easement, right of way, or reservation applicable to the Land; (v) insurance policies; (vi) any other agreement, document, or instrument to which Borrower is a party or by which
Borrower or any or all of the Project or the business or operations of Borrower is bound; or (vii) any judgment, order, or decree of any arbitrator, other private adjudicator, or Governmental Authority to which Borrower is party or by which
Borrower or any of the Project is bound). 
 “Security Documents” means each Deed of Trust, the Pledge
Agreement, the Construction Assignments, the Financing Statements, and such other assignments and security interests as may be required or granted pursuant to the terms of the Loan Documents. 
  

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 “Soft Costs” means, for each Qualified Project to be financed hereunder,
the fees and costs that are not directly related to the onsite construction of the A&D Improvements or Homes for such Project, as applicable, which fees and costs shall include any Loan fees, plus any other costs, fees or expenses approved by
Lender, including without limitation interest, inspection fees, escrow and title fees, processing and closing fees, wiring fees, legal fees, appraisals and all closing costs, insurance costs, and costs of direct project supervision, and also
including without duplication costs to be funded from general budget categories for overhead, supervision, general and administrative, and marketing expenses, provided that the foregoing in the aggregate shall not exceed the amount of the Soft Costs
set forth in the A&D Budget or Home Construction Budget, as applicable. 
 “Spec Home” means any Home
(including without limitation a Model Home) in a Qualified Project that is not a Presold Home. 
 “Spec Home
Concentration Limitation” shall have the meaning given to such term in the definition of Maximum Aggregate Borrowing Base Concentration(s). 
 “Subsequent Closing Date” shall mean the date on which each Deed of Trust for a Future Project is recorded and a Qualified Project is entered into the Borrowing Base. 
 “Subordination Agreement” shall mean a subordination agreement executed by Borrower, Lender and a Subordinate Rights
Holder, in the form approved by Lender, subordinating such rights, title, interest and charges relating to or arising in favor of the Subordinate Rights Holder under such Subordinate Rights as Lender deems necessary to the rights, title, interest,
lien or charge in favor of Lender under the Loan Documents. 
 “Subordinate Rights” shall mean any
(i) subordinate debt for a Project or (ii) any third party retained interest or rights in any Property held by a Person other than Borrower, including without limitation any rights secured by a Lien or Encumbrance, any right of first
refusal, right of reversion, right to receive marketing fees, indemnity payments or to share profits with Borrower from the sale of Lots, Homes or Units, or any rights to enforce any construction or improvement requirements upon Borrower and/or the
Property as set forth in any declaration or other agreement, all of which shall be subject to approval of Lender in its sole and absolute discretion. 
 “Subordinate Rights Holder” shall mean any (a) seller of any Property to Borrower or (b) other Person holding any Subordinate Rights. 
 “Taking” means the taking of any or all of any Project, any interest therein, or any right thereto for public or quasi
public use by the power of eminent domain, by condemnation (including, without limitation inverse condemnation), or any event in lieu thereof and any damage to any Project as the result of any taking of any other part of the Project or any property
in the vicinity of the Project. 
 “Tangible Net Worth” shall mean a Person’s Net Worth less Intangible
Assets. 
  

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 “Tentative Map” shall mean the tentative tract map for the Property for
each Qualified Project to be financed by a Loan to be made hereunder, which map shall be in form and content acceptable to Lender in its discretion and shall not be subject to any conditions that, in Lender’s reasonable judgment, cannot be
reasonably satisfied by Borrower. 
 “Title Company” means Fidelity National Title Insurance Company.

 “Title Policy” means the title insurance policies to be provided by Borrower under Section 4.1.11.

 “Total Assets” shall mean all assets of a Person determined in accordance with GAAP. All real estate
assets held for development or sale shall be valued on an undepreciated cost basis. The assets of a Person on the financial statements of a Person shall be adjusted to reflect such Person’s allocable share of such asset, for the relevant period
or as of the date of determination, taking into account (a) the relative proportion of each such item derived from assets directly owned by such Person, and (b) such Person’s respective ownership interest in its subsidiaries.

 “Total Liabilities” shall be defined in accordance with GAAP and shall include all payable and accruals
(including contingent liabilities and excluding minority interest, FIN 46 debt and existing mortgage warehousing debt). 
 “Total Liabilities-to-Tangible Net Worth Ratio” means, with respect to each Person, the ratio of such Person’s (a) Total Liabilities to (b) Tangible Net Worth. 
 “Total Project Costs” shall mean: 
 (a) For all Land (including without limitation Entitled Land) to be acquired, the sum of all acquisition and other land costs; 

(b) For all A&D Improvements to be financed hereunder, the sum of the land costs and the total Hard Costs and Soft Costs for the
A&D Improvements pursuant to the applicable A&D Budgets; and 
 (c) For all Homes to be financed hereunder, the sum of
the Hard Costs and Soft Costs for the Homes pursuant to the applicable Home Construction Budgets. 
 “Unmatured Event
Of Default” means any condition or event that with notice, passage of time, or both would, if not cured within the time periods (if any) permitted pursuant to the Loan Documents, be an Event of Default. 
 “Zoned Land” means those portions of the Land for which Borrower has satisfied the conditions set forth in
Section 4.2 and with respect to which Borrower has not yet satisfied the conditions set forth in Section 4.3 for inclusion in the Borrowing Base as Entitled Land or High End Entitled Land. 
  

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 1.2 GENERAL PROVISIONS. 
 (a) SINGULAR AND PLURAL TERMS. Any defined term used in the plural in any Loan Document shall refer to all members of the relevant class
and any defined term used in the singular shall refer to any number of the members of the relevant class. 
 (b) ACCOUNTING
PRINCIPLES. Any accounting term used and not specifically defined in any Loan Document shall be construed in conformity with, and all financial data required to be submitted under any Loan Document shall be prepared in conformity with, generally
accepted accounting principles applied on a consistent basis. 
 (c) EXHIBITS INCORPORATED. All exhibits to this Agreement, as
now existing and as the same may from time to time be supplemented, modified or amended, are incorporated herein by this reference. 
 (d) REFERENCES. Any reference to any Loan Document or other document shall include such document both as originally executed and as it may from time to time be supplemented, modified or amended. References herein to Articles, Sections and
Exhibits shall be construed as references to this Agreement unless a different document is named. References to subparagraphs shall be construed as references to the same section in which the reference appears unless a different section is named.

 (e) OTHER TERMS. The term “document” is used in its broadest sense and encompasses agreements, certificates,
opinions, consents, instruments and other written material of every kind. The terms “including” and “include” mean “including (include) without limitation.” The term “or” is not exclusive. The requirement that
any party “deliver” any item to another party shall be construed to require that the first party “deliver or cause to be delivered” such item to the second party. The term “any,” as a modifier to any noun, shall be
construed to mean “any or all” preceding the same noun in the plural. The term “agreement” includes both written and oral agreements. The terms “law” and “laws,” unless otherwise modified, mean, collectively,
all federal, state and local laws, rules, regulations, codes and administrative and judicial precedents. The terms “herein,” “hereunder” and other similar compounds of the word “here” refer to the entire document in
which the term appears and not to any particular provision or section of the document. The use of the pronoun “its” shall be deemed to also refer to “his,” “hers,” “its,” or “theirs.” This
Section 1.2 shall apply to all of the Loan Documents. 
 (f) HEADINGS. Section and section headings are included in the
Loan Documents for convenience of reference only and are not part of the Loan Documents for any other purpose. 
 (g) OTHER
DOCUMENTS. In the event of any conflict between the provisions of this Agreement and those of any other Loan Document, this Agreement shall prevail. 
 (h) INTENTION. The provisions of this Article 1 shall not apply in any instance where a different meaning, construction or reference is clearly intended. 
  

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 (i) RECITALS. Borrower has applied to Lender for the Loan for the purpose of developing
the Qualified Projects. Lender is willing to make the Loan to Borrower on the terms and subject to the conditions contained in this Agreement and the other Loan Documents. 
 2. BORROWING BASE. 
 2.1 LOAN FACILITY. 
 2.1.1 COMMITMENT. 
 (a) AMOUNT OF COMMITMENT. Subject to the terms and conditions of this Agreement, Lender agrees to make Advances and/or issue Letters of Credit from time to time until the Maturity Date up to the maximum amount of the Borrowing Availability,
provided that the aggregate amount of all Advances and Letters of Credit outstanding shall not exceed the least of (i) the Commitment Amount, or (ii) the Borrowing Availability at such time, or (iii) the Maximum Allowed Advances for
all Homes and Lots entered into the Borrowing Base PLUS the LOC Total Commitment Amount. 
 (b) USE OF LOAN PROCEEDS. Proceeds
of Advances may be used only for the purpose of paying and/or reimbursing Permitted Expenses as described in Section 2.4.2 below. 
 (c) REVOLVING LINE OF CREDIT. Advances shall be on a revolving basis. Advances repaid may be re-borrowed subject to the terms and the conditions herein. Although the outstanding principal of the Note may be zero from
time to time, the Loan Documents shall remain in full force and effect until the Commitment terminates and all other Obligations are paid and performed in full. 
 (d) SUSPENSION OR TERMINATION OF COMMITMENT. Upon the occurrence of an Unmatured Event of Default or an Event of Default and so long as
such Unmatured Event of Default or Event of Default continues, Lender in its sole and absolute discretion, and without notice, may suspend the commitment to make Advances. In addition, upon the occurrence of an Event of Default, Lender in its sole
and absolute discretion, and without notice, may terminate the commitment to make Advances. The obligation of Borrower to repay Advances shall be evidenced by the Note. 
 2.1.2 PURPOSE OF THE LOAN. 
 (a) The purpose of this Agreement is to set forth the general terms and conditions for the entry of Qualified Projects into a borrowing base revolving line of credit loan in the total sum of Fifty Million and No/100
Dollars ($50,000,000.00), which line of credit is being extended to provide funding for the acquisition, development and construction of current and future residential home projects by Borrower. This Agreement (i) shall set forth the basic
approval requirements for the Projects, (ii) shall set forth the basic terms and conditions for Advances of Loan funds for the Projects, and (iii) establishes a revolving line of credit under which Advances may be made, repaid and made
again, subject to the aggregate loan limits and time limits set forth herein. 
  

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 (b) The Loan is being made for the purpose of (i) providing financing for Existing
Projects, and (ii) providing financing for Future Projects, and (iii) providing a Letter of Credit facility for the issuance of Letters of Credit for future residential projects to be owned and developed by Borrower. Each new Qualified
Project submitted for inclusion in the Borrowing Base shall be presented to Lender for approval in compliance with the requirements of Section 2.1.4 below. No new Qualified Project will be approved for inclusion in the Borrowing Base after the
Initial Line Maturity Date. 
 (c) For each Qualified Project which is approved for financing hereunder, (i) a separate
Deed of Trust shall be executed to encumber such Qualified Project, which Deed of Trust shall secure indebtedness in the Commitment Amount, and (ii) if applicable, a Subordination Agreement shall be executed to subordinate any Subordinate
Rights to the lien of the Deed of Trust for such Qualified Project (in an amount equal to the Loan Allocation for such Qualified Project). 
 2.1.3 PURPOSE OF THE PROJECT LOANS. Each Advance made for the Qualified Projects included within the Borrowing Base from time to time shall be for the purpose of paying for or reimbursing Borrower for certain costs
and expenses incurred in connection with the acquisition of Land and the construction of A&D Improvements and/or Homes thereon and for other costs and expenses incidental to the Qualified Projects, as more particularly provided in this
Agreement. This Loan shall constitute a revolving line of credit, and all Qualified Projects included in the Borrowing Base shall satisfy the Project Minimum Standards. 
 (a) REVOLVING LINE OF CREDIT. During the Loan Term, Advances for Qualified Projects may be drawn, repaid and drawn again through
individual Advances in repetition, subject to the limitations herein, so long as (i) any Advance requested hereunder shall not exceed the Borrowing Availability as of the date the Advance is requested, and (ii) no Event of Default has
occurred and is continuing. 
 (b) CONTINUATION OF REVOLVING LINE AFTER INITIAL LINE MATURITY DATE. After the Initial Line
Maturity Date (as the same may be extended pursuant to subsection 2.1.3(e), below), no new Project will be approved to be a Qualified Project for entry into the Borrowing Base, but Advances for all Qualified Projects included in the Borrowing Base
as of the Initial Line Maturity Date may continue to be drawn to complete all Improvements remaining to be constructed as part of Qualified Projects, subject to the limitations herein. 
 (c) EVIDENCE OF LOAN ADVANCES. Outstandings under the Loan shall be evidenced by the Note and shall be secured by the Deed of Trust. Loan
Advances for each Qualified Project shall be charged and funded under the Note. In the event of any inconsistency between the Note and this Agreement, the provisions of this Agreement shall prevail. 
 (d) REDUCTION OF BORROWING AVAILABILITY FOR NON-COMPLIANCE WITH MAXIMUM AGGREGATE BORROWING BASE CONCENTRATIONS. Notwithstanding any other
provision of this Agreement to the contrary, in the event that the aggregate Loan Allocations for the Lots and Homes 

  

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included in the Qualified Projects exceeds any Maximum Aggregate Borrowing Base Concentration, then the Borrowing Availability shall be reduced in the amount
by which such Loan Allocations exceed any Maximum Aggregate Borrowing Base Concentration. 
 (e) ANNUAL REVIEW OF INITIAL LINE
MATURITY DATE. Lender will review the Loan annually to determine whether the then existing Initial Line Maturity Date should be extended for an additional twelve (12) Calendar Months. If Lender, in its sole and absolute discretion, decides to
extend the Initial Line Maturity Date, then Lender shall so notify Borrower in writing at least five (5) Business Days prior to the then existing Initial Line Maturity Date. In connection with any such extension, Borrower shall execute such
documents, and cause to be issued to the Title Policy such title insurance endorsements, as Lender may reasonably request, all at Borrower’s sole cost and expense. 
 2.1.4 APPROVAL OF QUALIFIED PROJECTS. Subject to the terms and conditions of this Agreement, Lender agrees to include Qualified Projects
into the Borrowing Base, as Projects are approved by Lender in its sole and absolute discretion during the Loan Term. Each Qualified Project shall be in compliance with the Project Minimum Standards. Among other things, Lender shall require the
following: 
 (a) TRACT MAP(S). For all Projects other than Zoned Land, Borrower has provided Lender with an approved
Tentative Map or recorded Final Map for the Project to be financed. Provided, however, that notwithstanding any provision of this Agreement to the contrary, Lender may agree to enter a Qualified Project into the Borrowing Base prior to the
recordation of the Final Map, but Lender shall have no obligation to Advance any Loan funds for any Hard Costs for any Home Improvements to be constructed as part of any Qualified Project unless and until the Final Map for such Qualified Project is
recorded in the Official Records of the County in which such Project is located. In the event a Qualified Project is entered into the Borrowing Base prior to the recordation of the Final Map for such Qualified Project, Lender shall require, among
other things, that an ALTA survey be delivered to Lender for its review and approval and/or the Title Company shall agree in writing to issue the required Title Policy with all requested survey endorsements. 
 (b) PROJECT LOAN INFORMATION. Borrower shall have submitted for Lender’s review and approval in its sole and absolute discretion:

 (i) A fully-completed and executed Project Loan Request; and 
 (ii) To the extent such information is available for the A&D Improvements and/or Home Improvements to be constructed as part of the
Qualified Project as of the date of entry into the Borrowing Base — 
 (A) Copies of the Plans and Specifications,
Architect’s Agreement, Engineer’s Contract, and all other agreements, entitlements, CC&Rs, preliminary title report, permits, licenses and approvals concerning the Project being submitted for approval; 
  

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 (B) All cost breakdowns for the Improvements to be constructed as part of the Qualified
Project as of the date of entry into the Borrowing Base; 
 (C) Project sources and uses of funds, Project economics and
feasibility, market data and other similar information concerning the Qualified Project as reasonably requested by Lender; 
 (iii) Any and all of the applicable information concerning the Project set forth in EXHIBIT “D” and EXHIBIT “K” attached hereto; and 
 (iv) All other information reasonably requested by Lender. Each Project Loan Request submitted for approval by Borrower shall comply with
all approval requirements set forth herein. 
 (c) ADDITIONAL PROJECT REQUIREMENTS. Lender shall have no obligation to enter
any Qualified Project into the Borrowing Base if (i) there is a continuing Unmatured Event of Default or Event of Default, (ii) if Lender determines that the Total Project Costs for such Qualified Project, when added to the Total Project
Costs of all other Qualified Projects then in the Borrowing Base, would exceed One Hundred Million Dollars ($100,000,000.00), (iii) if the entry of the Qualified Project into the Borrowing Base would violate any of the Maximum Aggregate
Borrowing Base Concentration limitations, and/or (iv) if any attached condominium Home in such Project has a Base Sales Price greater than $600,000 or any detached single-family Home in such Project has a Base Sales Price grater than
$1,500,000. In the event Borrower seeks approval of the entry of a Qualified Project into the Borrowing Base under terms and conditions different from those approval terms set forth herein, then Lender shall review and approve or disapprove of such
Qualified Project pursuant to Lender’s underwriting guidelines in effect at the time of such application for approval. 
 2.1.5 INTEREST PAYMENTS. Interest on the unpaid outstanding principal amount of the Loan shall accrue at the Interest Rate(s) specified in the Note. 
 (a) PAYMENT. Interest at the Interest Rate shall accrue on the outstanding and unpaid balance, if any, of the Advances made hereunder,
commencing on the date of each Advance under the Loan, until repaid. Interest accruing under the Note shall be due and payable on each Loan Payment Date, commencing on the First Payment Date, until repayment in full, together with all other sums
owed to Lender pursuant to any Loan Document. 
 (b) RATE AFTER DEFAULT. Upon and after the occurrence of an Event of Default
hereunder or under any of the Loan Documents, at the option of Lender, the outstanding principal balance of the Loan shall bear interest, payable on demand, at a rate per annum equal to the Default Interest Rate. The application of the Default
Interest Rate shall not be interpreted or deemed to extend any cure period set forth in this Agreement or otherwise to limit any of Lender’s remedies under this Agreement or any of the other Loan Documents. 
  

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 (c) COMPUTATION OF INTEREST. Interest shall be calculated on a 360-day year for all
Advances, but, in any case, shall be computed for the actual number of days in the period for which interest is charged, which period shall consist of 365 days on an annual basis. If any payment of interest under the Note would otherwise be due on a
day which is not a Business Day, the payment instead shall be due on the next succeeding Business Day and such extension of time shall be included in computing the interest due regarding such payment. 
 (d) NO DEDUCTIONS. All payments of principal or interest under the Note shall be made without deduction of any present and future taxes,
levies, deductions, charges or withholding, which amounts shall be paid by Borrower. Borrower will pay the amounts necessary such that the gross amount of the principal and interest received by Lender is not less than that required by the Note.

 (e) ORDER OF APPLICATION. Any payments received by Lender will be applied as set forth herein and in the Note. 

(f) INTEREST RESERVE; OTHER AMOUNTS. Borrower hereby authorizes Lender to Advance proceeds of the Loan to pay interest accrued on the
Loan and other expenses set forth in the A&D Budget and the applicable Home Construction Budgets, notwithstanding that Borrower may not have requested an Advance of such amount. The authorization hereby granted shall be irrevocable and at
Lender’s discretion, and no further direction or authorization from Borrower shall be necessary for Lender to make such Advances. Nothing contained herein shall be deemed to obligate Lender to make such Advances to pay interest beyond the
portions of any Project Loan specifically allocated to the payment of interest under an approved Budget. 
 (g) FULL RECOURSE;
PAYMENTS. The Loan shall be full recourse against Borrower. All amounts payable by Borrower on or with respect to the Loan, or pursuant to the terms of any other Loan Documents, shall be paid in lawful money of the United States of America to Lender
at 75 East Trimble Road, MC 4770, San Jose, California 95131, in same day funds, not later than 11:00 a.m. (California time) on the date due. 
 2.1.6 PRINCIPAL PAYMENTS. 
 (a) SALE AND RELEASE OF LOTS AND HOMES. Immediately upon the sale and closing of Lots and Homes, Borrower shall pay to Lender any and all Release Prices payable under Section 3.2.2(e) below, which shall be
applied to repay sums due and owing under the Note. 
 (b) REQUIRED PRINCIPAL PAYMENTS DURING THE REDUCTION PERIOD. During the
Reduction Period, commencing with the first Loan Payment Date occurring on or after the end of the first Calendar Quarter following the Initial Line Maturity Date and continuing at the end of each Calendar Quarter thereafter, Borrower shall make any
Required Principal Payment necessary to reduce the 

  

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outstanding Loan Balance to a sum not in excess of the then-applicable Reduced Commitment Amount. 
 (c) VOLUNTARY LOAN PREPAYMENT. Except as otherwise provided in the Note, Borrower shall have the right to prepay the Loan, in whole or in
part, at any time, without premium or penalty, provided that Borrower must pay, together with any prepayment, all accrued but unpaid interest upon the principal so prepaid. Prior to the Initial Line Maturity Date, no prepayment of the Loan shall
reduce the Commitment Amount, unless Borrower relinquishes in writing its right to obtain an Advance of all or any of the amount so prepaid. During the Reduction Period, principal payment(s) may be required as provided herein to reduce the Loan
Balance to the applicable Reduced Commitment Amount. 
 (d) PAYMENTS OF PRINCIPAL AND INTEREST TO BALANCE THE LOAN. Principal
and interest shall be payable in accordance with the terms of the Note; provided, however, that in addition to payments required pursuant to the terms of the Note, if for any reason at any time the outstanding principal amount of Advances under the
Loan exceeds the Available Commitment, Borrower shall make a payment to Lender in an amount equal to such excess principal amount within the earlier of (a) five (5) Business Days after notice from Lender, (b) five (5) days after
delivery of a Borrowing Base Certificate and/or other financial reports of Borrower reflecting that such a payment is due, and (c) five (5) days after Lender notifies Borrower (which notice may be oral, to be followed promptly by written
notice setting forth Lender’s calculations) of Lender’s determination of the Borrowing Base and Borrowing Availability pursuant to Section 2.2.3. Any funds paid hereunder shall be applied by Lender to the outstanding principal balance
of the Loan. 
 2.1.7 LOAN TERM. 
 (a) Upon the Initial Line Maturity Date, Lender and Borrower shall initiate a twelve (12) month period (“Reduction Period”) to reduce the Commitment Amount under the terms and conditions set forth
herein. 
 (b) During the Reduction Period, (i) no new Qualified Projects shall be entered into the Borrowing Base, and
(ii) Advances under existing Project Loans shall continue to be made for the construction of Improvements for the subject Projects, subject to the limitations set forth herein. 
 2.1.8 TERMS OF PROJECT ADVANCES. 
 (a) Lots entered into the Borrowing Base shall be removed from the Borrowing Base on the applicable Lot Advance Maturity Date. 
 (b) Homes entered into the Borrowing Base shall be removed from the Borrowing Base on the applicable Home Advance Maturity Date.

  

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 2.2 AVAILABLE COMMITMENT; BORROWING BASE. 
 2.2.1 AVAILABLE COMMITMENT. The Available Commitment shall be determined in accordance with this Section 2.2 and shall be the lesser
of (i) the applicable Commitment Amount or Reduced Commitment Amount, as in effect from time to time, or (ii) the Borrowing Base. 
 (a) The Available Commitment for all Qualified Projects shall be the difference between the amount set forth in 2.2.1 above LESS the amounts of all Letters of Credit issued under Section 2.3 below. 
 (b) The Available Commitment for all Letters of Credit to be issued hereunder shall be no greater than the LOC Total Commitment Amount of
Five Million Dollars ($5,000,000.00). 
 2.2.2 AMOUNT OF BORROWING BASE AND BORROWING AVAILABILITY. Subject to the provisions
of Section 2.2.3 below, the Borrowing Base and Borrowing Availability shall be determined by Lender based on each Borrowing Base Certificate delivered pursuant to Section 6.4.6. 
 2.2.3 DETERMINATION OF BORROWING AVAILABILITY. 
 (a) GENERAL DETERMINATION. The Borrowing Availability shall be determined by Lender based upon: 
 (i) Each Borrowing Base Certificate most recently submitted by Borrower from time to time (adjusted as determined by Lender from time to
time to reflect portions of the Project sold, property released from the Deed of Trust, and other adjustments and limitations pursuant to this Agreement); 
 (ii) Lender’s inspections made pursuant to Sections 4.4.4 and 6.10 (as such inspections may result in any adjustment to reflect any variance between (A) the Borrowing Base Certificate and
(B) the result of such inspections or other information available to Lender); and 
 (iii) Such other information as
Lender may reasonably require in order to verify such amounts. 
 Each Borrowing Base Certificate shall accurately reflect the valuation of
the Property included in the Borrowing Base as of the last day of the Calendar Month immediately preceding the Calendar Month in which such certificate is due, shall accurately recite the amounts of the Letters of Credit issued to date, and shall
accurately calculate the Borrowing Availability as of the date of the certificate. Without limiting the foregoing, each Borrowing Base Certificate shall exclude the Loan Allocations for any and all Lots and Homes that have been released from the
Deed of Trust, and each Borrowing Base Certificate shall reflect any reductions in the Loan Balance. 
  

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 (b) RIGHT TO EXCLUDE/ADJUST. Lender, in its discretion, may exclude Lots or Homes from
the Borrowing Base, adjust the Appraised Value of Lots or Homes, and/or adjust the applicable classification of property included in the Borrowing Base if: 
 (i) A portion of the Project is subject to unrepaired material damage or destruction; 
 (ii) Lender determines that a Purchase Contract with respect to Lots or Homes is in default or has been terminated or canceled or that
the purchaser is not financially able to complete the purchase under the subject Purchase Contract; 
 (iii) Lender
determines, based on the information provided by Borrower pursuant to Section 6.4, that reclassification of property included in the Borrowing Base is appropriate due to delays in development, changes in the Plans and Specifications, loss or
change of zoning or other Approvals and Permits, Borrower’s failure to satisfy applicable conditions for inclusion in the designated classification, or the occurrence of a Material Adverse Change; 
 (iv) Lender determines that Spec Homes or High End Spec Homes are to be removed from the Borrowing Base under Section 2.2.3(d) in
order to remargin the Loan (provided, however, that Lender shall only be permitted to make such determination in the event that Borrower has failed to comply with the provisions of Section 2.2.3(d)(i) to remargin the Loan); 
 (v) Lender determines that any particular Home in the Borrowing Base has remained unsold for a period of six (6) months following
completion of construction of such Home; or 
 (vi) Lender determines that the actual absorption of Lots or Homes in any
Qualified Project is lower than the projected absorption specified in the applicable Appraisal. 
 Lender shall notify Borrower of any exclusion or
adjustment in the Borrowing Base in writing with the Lender’s calculations. The exclusion of any Property from the Borrowing Base shall not require Lender to release such property from the Deed of Trust, and Lender shall be obligated to release
Collateral only upon the satisfaction of the following conditions unless otherwise allowed by Lender in its sole and absolute discretion: 
 (i) Unless otherwise approved by Lender in its absolute and sole discretion, at the time of such release no Event of Default or Unmatured Event of Default shall have occurred and be continuing. 
 (ii) After giving effect to the release, the outstanding principal amount of Advances under the Loan shall not exceed the Available
Commitment, provided that Borrower may make a payment to Lender in an amount equal to such excess principal amount to satisfy this condition. 
  

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 (iii) Such release shall be in connection with Lots (not Homes) and must be in groups of
at least twenty (20) Lots in a single Project. 
 (iv) Unless the portion of the Land to be released is an entire parcel
with respect to which Lender has previously approved the parcel map or plat or is a lot or lots within a subdivision with respect to which Lender has previously approved a final map or plat, Borrower or Title Company shall have delivered to Lender
(i) a legal description of the portion of the Land to be released, (ii) a map or plat of the portion of the Land to be released, and (iii) copies of all easements for ingress, egress or otherwise to be granted or retained in
connection with such release. 
 (v) Unless the portion of the Land to be released is an entire parcel with respect to which
Lender has previously approved the parcel map or plat or is a lot or lots within a subdivision with respect to which Lender has previously approved a final map or plat, prior to such release, (i) Lender shall have approved such release, which
approval will not be unreasonably withheld, (ii) the remaining unreleased portion of the Land will, after giving effect to such release, have adequate access, in the reasonable opinion of Lender, and (iii) the value of the unreleased
portion of the Land will, after giving effect to such release, not otherwise be materially impaired in the reasonable opinion of Lender. 
 (vi) Borrower shall provide Lender with such endorsements to the Title Policy as Lender may reasonably request in connection with each release. 
 (vii) Borrower shall pay all of Lender’s reasonable costs and expenses, including, without limitation, reasonable attorneys’
fees, arising in connection with each release. 
 (viii) Each release shall be made by Lender by delivery of the release
documents to a title company or other escrow agent satisfactory to Lender upon such conditions as shall assure Lender that all conditions precedent to such release have been satisfied and that the applicable transaction will be completed.

 (c) SPECIFIC LIMITATIONS. Lender has no commitment to Advance Loan funds for any Project that would: 
 (i) Violate any applicable Project Minimum Standards; 
 (ii) Violate any applicable Maximum Aggregate Borrowing Base Concentration(s), including without limitation (1) any of the
Geographic Concentration Limitations for Projects in Arizona and Nevada, (2) any of the Concentration Limitations for Zoned Land or Lots as set forth in the definition of Maximum Aggregate Borrowing Base Concentration(s), and/or (3) any of
the Concentration Limitations for Homes as set forth in the definition of Maximum Aggregate Borrowing Base Concentration(s); 
  

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 (iii) Violate the Loan Allocations applicable to any Zoned Land, Lots or Homes to be
financed hereunder; 
 (iv) Violate the Borrowing Availability; and/or 
 (v) Cause more than fifty percent (50%) of Outstandings to be used for Spec Homes and/or High End Spec Homes (with the exception of
the first phase of such Spec Homes or High End Spec Homes within a given Qualified Project). 
 (d) LOAN REMARGINING DUE TO
CONVERSION OF HOMES. 
 (i) In the event any Home ceases to constitute a Presold Home for any reason, then such Home shall
automatically become a Spec Home for purposes of the limitation upon the number of Spec Homes set forth herein and for purposes of calculating the Maximum Allowed Advance and/or the Home Maturity Date for such Home. After the conversion of any
Presold Home to a Spec Home, (A) if the Spec Home limitations set forth in Section 4.5 below have been violated, then Lender shall have no obligation to make any Advances for any new Spec Homes to be included in the Borrowing Base and
Borrower shall remove Spec Homes from the Borrowing Base so as to be in compliance with such Spec Home limitations, and (B) if the aggregate sum of the Advances for the Spec Homes in the Borrowing Base exceeds the Maximum Allowed Advances for
such Spec Homes, then the Borrowing Availability shall be reduced by such excess amount or, if the Borrowing Availability has a negative balance, Borrower shall make any payment required under Section 2.4.5 below. 
 (ii) In the event a Spec Home or Model Home satisfies the requirements to become a Presold Home, then such Home shall automatically
become a Presold Home for purposes of the limitation upon the number of Spec Homes set forth herein and for purposes of calculating the Maximum Allowed Advance and/or the Home Maturity Date for such Home. 
 (iii) The provisions of subsections (i) and (ii) above also apply with respect to High End Presold Homes, High End Spec Homes
and High End Model Homes. 
 (e) FAILURE TO DELIVER BORROWING BASE CERTIFICATE. If Borrower fails to deliver a Borrowing Base
Certificate as and when required, then in addition to Lender’s other rights and remedies, Lender may determine the amount of the Borrowing Base based upon information available to Lender and such determination by Lender shall be final and
conclusive, absent manifest error. 
 (f) LAND INCLUDED IN BORROWING BASE ONLY IF LENDER TO PROVIDE CONSTRUCTION FINANCING. No
Land (whether Zoned Land, Entitled Land, High End Entitled Land, Lots Under Development or High End Lots Under Development) shall be included in the Borrowing Base unless Lender is anticipated to provide the construction financing for such Land.

  

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 2.3 LETTER OF CREDIT ADVANCES. Borrower shall be entitled to receive Letter of Credit Advances upon
Borrower’s compliance with the terms, conditions and procedures set forth in this Section 2.3. 
 2.3.1 ISSUANCE OF
LETTER OF CREDIT. Subject to the terms and conditions of this Agreement and the Letter of Credit Request, and subject to the policies, procedures, and requirements of Lender in effect from time to time for the issuance of any letter of credit
(including without limitation payment of Letter of Credit Fees), Lender agrees to issue on or before the Maturity Date a Letter of Credit upon request by and for the account of the Borrower, provided that Borrower has delivered to Lender:

 (a) A completed and executed Letter of Credit Request, 
 (b) A completed and executed Letter of Credit Application, and 
 (c) Payment of the required Letter of Credit Fee; 
 and provided further that (i) the Letter of Credit shall not be required to be issued for a term of more than twelve (12) Calendar Months (but in no event later than the applicable Maturity Date plus the Reduction Period),
(ii) the Letter of Credit shall not be required to be issued for an amount in excess of the LOC Maximum Commitment Amount, (iii) the amount of the Letter of Credit, together with any and all existing Letters of Credit previously issued
hereunder, shall not in the aggregate exceed the LOC Total Commitment Amount, and (iv) in any event, the date that is the last date for payment of a draft drawn or drawn and accepted under the Letter of Credit shall be before the applicable
Maturity Date. 
 2.3.2 ISSUANCE PROCEDURE. To obtain a Letter of Credit, Borrower shall complete and execute a Letter of
Credit Request and a Letter of Credit Application and submit them to the letter of credit department of Lender. Upon receipt of a completed and executed Letter of Credit Request and a Letter of Credit Application, Lender will process the application
in accordance with the policies, procedures, and requirements of Lender then in effect (including without limitation the policies, procedures and requirements applicable to the form of the Letter of Credit). If the application meets the requirements
of Lender and is within the policies of Lender then in effect, Lender will issue the requested Letter of Credit. 
 2.3.3
PURPOSE OF LETTER OF CREDIT; GENERAL LETTER OF CREDIT TERMS AND CONDITIONS. 
 2.3.3.1 The Letter of Credit shall be issued to
provide a good faith deposit in connection with any Project, support for unfunded Project costs or any other purpose approved by Lender in connection with the acquisition and/or development and marketing of a Project. Upon occurrence of an Event of
Default and so long such Event of Default continues, Lender, in its sole and absolute discretion and without notice, may refuse to renew or extend the commitment to issue the Letter of Credit, and shall exercise any and all remedies provided for in
the Loan Documents. 
 2.3.3.2 The Letter of Credit shall be drawn under the conditions as set forth in the body of the Letter
of Credit. 
  

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 2.3.4 REIMBURSEMENT OF LENDER FOR PAYMENT OF DRAFTS DRAWN OR DRAWN AND ACCEPTED UNDER THE
LETTERS OF CREDIT. The obligation of Borrower to reimburse Lender for payment by Lender of Letter of Credit Advances under the Letter of Credit shall be as provided in the Letter of Credit Request, in the Letter of Credit Application and in this
Agreement. Lender will notify Borrower of payment by Lender of a Letter of Credit Advance under the Letter of Credit and of the respective Reimbursement Obligations and will give Borrower two (2) Business Days notice that the Reimbursement
Obligations pursuant to the Letter of Credit Request and the Letter of Credit Application shall be due on or before the applicable Maturity Date. Borrower shall also pay to Lender interest at the Interest Rate on the Reimbursement Obligations from
and including the date Lender pays the Letter of Credit Advance at the Interest Rate until the Reimbursement Obligations and such interest are paid in full; provided, however, that if Borrower fails to pay the Reimbursement Obligations and accrued
interest thereon within five (5) days after notification by Lender to Borrower of payment of the Letter of Credit Advance, interest thereafter will accrue at the Default Interest Rate. Such interest shall be computed on the basis of a 360-day
year and accrue on a daily basis for the actual number of days elapsed. A Letter of Credit Advance shall be made to re-pay Lender for any funds disbursed in connection with a draft drawn under any Letter of Credit, at which time such Letter of
Credit Advance shall be used to calculate the Borrowing Availability or, if such Letter of Credit Advance results in the Borrowing Availability having a negative balance, then Borrower shall make any payment required under Section 2.4.5 below.

 2.3.5 REIMBURSEMENT OBLIGATIONS. Borrower’s obligations under Section 2.3.4, under the Letter of Credit
Application and under the Letter of Credit Request to reimburse Lender with respect to a drawing under a Letter of Credit (such obligations are collectively referred to as the “Reimbursement Obligations”) are absolute and unconditional
under any and all circumstances and irrespective of any setoff, counterclaim, or defense to payment which Borrower may have or have had against Lender or any beneficiary of the Letter of Credit, including any defense based upon the occurrence of any
Event of Default, any draft, demand, certificate or other document presented under a Letter of Credit proving to be forged, fraudulent, invalid or insufficient, the failure of any payment by Lender to conform to the terms of such Letter of Credit
Advance (if, in Lender’s good faith opinion, such payment is determined to be appropriate) or any nonapplication or misapplication of the Letter of Credit or the proceeds of such payment, or the legality, validity, form, regularity or
enforceability of the Letter of Credit; provided, however, that nothing herein will adversely affect the right of Borrower to commence a proceeding against Lender for any wrongful payment under the Letter of Credit made by Lender as the result of
acts or omissions constituting gross negligence or willful misconduct on the part of Lender. 
 2.3.6 NATURE OF REIMBURSEMENT
OBLIGATIONS. Borrower assumes all risks of the acts, omissions, or misuse of any Letter of Credit by any Person to whom a Letter of Credit is issued. Lender (except to the extent of its own gross negligence or willful misconduct) will not be
responsible for: (a) the form, validity, sufficiency, accuracy, genuineness or legal effect of the Letter of Credit or any document submitted by any party in connection with the issuance of any Letter of Credit, even if such document should in
fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (b) the form, validity, sufficiency, accuracy, genuineness or legal effect of any instrument transferring or assigning or purporting to transfer or
assign any Letter of Credit or the rights or benefits thereunder or 

  

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proceeds thereof in whole or in part, which may prove to be invalid or ineffective for any reason; (c) failure of any Person to comply fully with the
conditions required in order to demand payment under the Letter of Credit; (d) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise; or (e) any loss or delay
in the transmission or otherwise of any document or draft required by or from any Person in order to make payment under the Letter of Credit. None of the foregoing will affect, impair or prevent the vesting of any of the rights or powers granted to
Lender. In furtherance and extension and not in limitation or derogation of any of the foregoing, any act taken or omitted to be taken by Lender in good faith will be binding on Borrower and will not put Lender under any resulting liability to
Borrower. 
 2.4 LOAN ADVANCES; PROJECT MONITORING. 
 2.4.1 METHOD FOR ADVANCES. Advances in a sum not in excess at any time of the Borrowing Availability shall be made by Lender to Borrower
for the payment or reimbursement of Permitted Expenses at the written request within twenty-four (24) hours following Lender’s receipt of a completed Draw Request and all accompanying documentation required by Lender from Borrower (which
may be delivered by telecopy or facsimile) by the Person or Persons designated from time to time on Lender’s form of Authorization Form; provided, however, that Lender shall have acknowledged receipt of any changes in the Person or Persons
designated by Borrower, and such Person or Persons shall have executed a new Authorization Form. Such Person or Persons are hereby authorized by Borrower to request Advances and to direct the transfer of the proceeds of Advances to Borrower until
written notice of the revocation of such authority is received from Borrower by Lender and Lender has had a reasonable time to act upon such notice. Lender shall have no duty to monitor for Borrower or any other Person or to report to Borrower or
such other Person the use of proceeds of Advances. 
 2.4.2 USE OF ADVANCES. All Advances shall be used to pay or reimburse
the Permitted Expenses incurred by Borrower in connection with the acquisition, development, marketing and operation of the Project. 
 2.4.3 DRAW REQUESTS. Concurrently with a Draw Request for any Advance of Loan proceeds (other than Advances that, pursuant to this Agreement, may be made without a Draw Request), Borrower shall furnish to Lender a Draw Request, signed
Borrowing Base Certificate and a certificate evidencing completion of a satisfactory monthly Lender inspection, together with such other forms and schedules of values as may from time to time be approved or required by Lender, duly signed and sworn
to by Borrower, with all blanks appropriately filled in. 
 (a) RIGHT OF INSPECTION. Throughout the course of construction of
any Improvements under each Qualified Project on at least a quarterly basis during the Loan Term, Lender shall have the right to employ, at Borrower’s sole cost and expense, an inspector or inspectors who shall review as agent for Lender all
construction activities undertaken in regard to the Project. If required by Lender in its discretion, a certificate or indication from such inspector or inspectors that construction substantially complies with the Plans and Specifications shall be a
further condition precedent to Lender’s approval of 

  

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a Project, or any Lots or Homes included within a Project, for inclusion within the calculation of the Borrowing Base and the Borrowing Availability.

 (b) METHOD OF ADVANCES. The proceeds of each Advance under this Agreement shall be evidenced by the Note and shall be
secured by the Deed of Trust, and all such proceeds shall be disbursed to Borrower as directed by Borrower. 
 2.4.4
LIMITATIONS ON BORROWER’S RIGHTS TO ADVANCES. Borrower shall be entitled to Advances of Loan proceeds only in accordance with the terms and conditions of this Agreement (unless waived or modified by Lender); and, in addition, Borrower certifies
in connection with any Advances requested hereunder that: 
 (a) The representations and warranties of Borrower contained in
all of the Loan Documents shall be correct in all respects on and as of the date of the Advance as though made on and as of that date, and no Event of Default shall have occurred and be continuing as of the date of the Advance; 
 (b) The requested Loan proceeds shall be applied by Borrower only to defray costs actually incurred by Borrower in connection with the
payment or reimbursement of Permitted Expenses; and 
 (c) Notwithstanding any limitations on Advances set forth in this
Agreement or otherwise, Borrower shall pay all costs and expenses arising in connection with each Qualified Project. 
 2.4.5
EXCESS LOAN BALANCE REPAYMENT. In the event the Borrowing Availability has a negative balance, there shall be due and payable from Borrower to Lender, and Borrower shall repay to Lender an amount equal to the negative balance within the earlier of
(a) five (5) Business Days after notice from Lender, or (b) five (5) days after delivery of a Borrowing Base Certificate and/or other financial reports of Borrower reflecting that such a payment is due. 
 2.4.6 APPRAISALS AND EVALUATIONS. If reasonably required by Lender, or if required by law, Lender shall have the right to order
Appraisals, appraisal reviews and/or evaluations of the Land and/or Improvements for any Qualified Project included in the Borrowing Base, from an appraiser selected by Lender, which Appraisal(s) shall comply with all federal and state standards for
appraisals and otherwise shall be satisfactory to Lender in all respects. Notwithstanding the foregoing, Lender shall not order appraisals of any Project more than one (1) time per year unless (i) Lender believes that a Material Adverse
Change has occurred with respect to the Project or any portion thereof, or (ii) Borrower requests in writing that Lender order an appraisal of the Project, or (iii) Lender is required to reappraise the Project in connection with regulatory
requirements. Borrower agrees to pay the cost and expense for all appraisals, appraisal reviews and/or evaluations thereof ordered by Lender pursuant to this Section. 
  

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 2.4.7 BORROWER’S ACCOUNTS. Borrower has established and shall maintain during the
term of this Loan the Borrower’s Funds Account in connection with the acquisition, development, marketing and operation of the Projects: 
 (a) BORROWER’S FUNDS ACCOUNT. The Borrower’s Funds Account and all funds deposited and held therein shall be pledged as security for the Loan as provided herein. Only Lender shall have the authority to sign
documents and checks in connection with the transfer of funds into and out of the Borrower’s Funds Account. Borrower irrevocably waives and relinquishes the right to transfer funds into or out of the Borrower’s Funds Account, and shall
have no right to exercise dominion or control over the Borrower’s Funds Account or the proceeds thereof. 
 (b) USE OF
BORROWER’S FUNDS ACCOUNT. Borrower shall pay or be reimbursed only Permitted Expenses with the funds deposited into the Borrower’s Funds Account. Advances shall be made directly to Borrower or, at Lender’s sole discretion, may be made
into the Borrower’s Funds Account and then transferred by Lender to Borrower. Borrower shall deposit or cause to be deposited into the Borrower’s Funds Account each day all funds to be provided by Borrower to Lender during the Loan Term,
to the extent such funds are not paid directly to Lender pursuant to this Agreement. Funds deposited and held in the Borrower’s Funds Account shall be applied by Lender to the payment of the Obligations as provided herein. In the event at any
time during the Loan Term the outstanding principal Loan balance has been paid in full, and excess funds remain in the Borrower’s Funds Account, such excess funds shall be returned to Borrower. Notwithstanding the existence of any funds in the
Borrower’s Funds Account or the availability or the non-availability of Loan funds under the Commitment, Borrower shall remain obligated to satisfy all Obligations. 
 2.4.8 PROJECT COST SAVINGS AND EXCESS COSTS. Each Draw Request submitted by Borrower shall be deemed a certification by Borrower of the
following matters: 
 2.4.8.1 EXCESS PROJECT COSTS. In the event the actual cost (“Actual Line Item Cost”) of any
matter covered by any given line item in any Budget exceeds the amount allocated to such line item in such Budget (“Approved Line Item Cost”), Borrower either has (a) paid or incurred the amount of the Actual Line Item Cost in excess
of the Approved Line Item Cost (“Excess Cost”), or (b) the financial ability to pay such Excess Costs with its own funds, including without limitation the transfer of a portion of any Contingency line item amount provided for in the
Budget and/or any “Cost Savings” (as defined in Section 2.4.8.3 below) to such line item in an amount equal to such Excess Cost. 
 2.4.8.2 OFFSITE MATERIALS. In connection with any Project materials that are stored or housed at a location other than the Property for the applicable Project (“Offsite Materials”): 
 (a) Borrower has paid for the Offsite Materials or will cause payment to be made promptly upon receipt of the next Advance; 

(b) if the Offsite Materials are stored at the facilities of the supplier of the Offsite Materials (“Offsite Supplier”), the
Offsite Materials have been segregated from other materials in the Offsite Supplier’s storage facility and have been marked with the name of Borrower. If reasonably requested by Lender, Borrower shall 

  

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provide Lender with a written statement from the Offsite Supplier, which statement shall include the Offsite Supplier’s acknowledgment of (i) the
right of Lender to enter the Offsite Supplier’s storage facility at reasonable times for the purpose of inspecting or removing the Offsite Materials and (ii) Lender’s security interest in the Offsite Materials. If the Offsite
Materials are stored in a place other than the facilities of the Offsite Supplier, if reasonably requested by Lender, Borrower shall provide Lender with a written statement from the bailee or other custodian acknowledging (i) the right of
Lender to enter the site where the Offsite Materials are stored at reasonable times for the purpose of inspecting or removing the Offsite Materials, and (ii) Lender’s security interest in the Offsite Materials; 
 (c) Borrower has obtained certificates of insurance showing the Offsite Materials to be insured as required by this Agreement and showing
Lender as loss payee; and 
 (d) Borrower has paid all personal property taxes applicable to the Offsite Materials. Lender
shall have the right to inspect and approve the Offsite Materials. 
 2.4.8.3 COST SAVINGS. For purposes of
Section 2.4.8.1 above, “Cost Savings” shall mean any remaining undisbursed amounts shown in any Budget as allocated to any line item, or any funds allocated to such line item that exceed the amount of the subcontract for such line
item either (a) upon completion of and disbursement for all matters covered by said line item in such Budget, or (b) upon the execution by Borrower and an approved subcontractor of a subcontract for the performance of work or furnishing of
materials for such line item in an amount that is less than the Approved Line Item Cost for the item. 
 2.5 FEES. As additional
consideration for the Commitment, Borrower agrees to pay to Lender the following fees, which shall be earned by Lender on the date due under the Loan Documents and shall be non-refundable to Borrower: 
 2.5.1 COMMITMENT FEE. During the Initial Line Term, a Commitment Fee equal to thirty-five one hundredths of one percent (0.35%) per annum
on the full Commitment Amount shall be payable, and during the Reduction Period, a Commitment Fee equal to thirty-five one hundredths of one percent (0.35%) per annum on the then-applicable Reduced Commitment Amount shall be payable. An amount equal
to one-fourth of the annual Commitment Fee shall be payable in advance on the Closing Date and on each subsequent three-month anniversary thereof. 
 2.5.2 LETTER OF CREDIT FEE. A Letter of Credit Fee shall be due and payable by Borrower in connection with the issuance of each Letter of Credit hereunder, which fee shall be calculated at the rate of one percent
(1.00%) per annum on the face amount of the Letter of Credit. The Letter of Credit Fee shall be payable as a condition to the issuance of each Letter of Credit and on each twelve-month anniversary of the issuance date of said Letter of Credit,
if said Letter of Credit is to be extended beyond a twelve-month term. 
  

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 2.5.3 OTHER FEES. Costs, expenses, and reasonable fees for Lender’s counsel as
provided in the Loan Documents, payable on or before the date hereof, together with all title insurance premiums, appraisal costs, documentation fees, environmental study costs and other costs and expenses to which Lender is entitled to
reimbursement pursuant to the Loan Documents. 
 3. THE COLLATERAL. 
 3.1 SECURITY. Payment of the Note, all indebtedness and liabilities of Borrower to Lender, and performance of all Obligations, due or to become due, under this Agreement and the other Loan Documents, shall be secured
by the following (collectively “Security Documents”): 
 (a) Deeds of Trust; 
 (b) Pledge Agreement; 
 (c) Construction Assignments; 
 (d) Financing Statements; and 
 (e) Such other assignments and security interests as may be required or granted pursuant to the terms of the Loan Documents, including,
without limitation, assignments of construction contracts, assignments of plans and specifications, assignments of permits, licenses and approvals, assignments of declarant’s rights under covenants, conditions and restrictions, assignments of
purchase and sale agreements, and any assignments concerning any environmental indemnities in favor of Borrower. 
 3.2 RELEASES OF
COLLATERAL. In addition to releases in connection with boundary line adjustments and the granting of easements and licenses as more particularly described in Section 6.3.3(c), Lender agrees to release portions of the Project from the lien of
any Deed of Trust in connection with sales of portions of the Project secured by such Deed of Trust pursuant to a Purchase Contract for cash, upon the satisfaction of the following conditions prior to the release: 
 3.2.1 GENERAL REQUIREMENTS FOR RELEASES. In connection with any release: 
 (a) Unless otherwise approved by Lender in its absolute and sole discretion, at the time of such release no Event of Default shall have
occurred and be continuing. 
 (b) Such release shall be in connection with a sale of a Lot or Home in the Project (or in the
case of a Dedication, a transfer or donation of a portion of the Project) to a Non-Related Party. 
 (c) Unless the portion of
the Land to be released is an entire parcel with respect to which Lender has previously approved the parcel map or plat or is a lot or lots within a subdivision with respect to which Lender has previously approved a final 

  

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map or plat, Borrower or Title Company shall have delivered to Lender (i) a legal description of the portion of the Land to be released, (ii) a map
or plat of the portion of the Land to be released, and (iii) copies of all easements for ingress, egress or otherwise to be granted or retained in connection with such release. 
 (d) Unless the portion of the Land to be released is an entire parcel with respect to which Lender has previously approved the parcel map
or plat or is a lot or lots within a subdivision with respect to which Lender has previously approved a final map or plat, prior to such release, (i) Lender shall have approved such release, which approval will not be unreasonably withheld,
(ii) the remaining unreleased portion of the Land will, after giving effect to such release, have adequate access, in the reasonable opinion of Lender, and (iii) the value of the unreleased portion of the Land will, after giving effect to
such release, not otherwise be materially impaired in the reasonable opinion of Lender. 
 (e) Borrower shall provide Lender
with such endorsements to the Title Policy as Lender may reasonably request in connection with each release. 
 (f) Borrower
shall pay all of Lender’s reasonable costs and expenses, including, without limitation, reasonable attorneys’ fees, arising in connection with each release. 
 (g) Each release shall be made by Lender by delivery of the release documents to a title company or other escrow agent satisfactory to
Lender upon such conditions as shall assure Lender that all conditions precedent to such release have been satisfied and that the applicable transaction will be completed. 
 3.2.2 SALES OF LOTS OR HOMES PURSUANT TO A PURCHASE CONTRACT. In connection with sales pursuant to a Purchase Contract for cash:

 (a) Borrower shall satisfy each of the conditions set forth in Section 3.2.1. 
 (b) If requested by Lender, Borrower shall deliver to Lender a true and correct copy of any Purchase Contract, which shall (i) be
substantially on Borrower’s standard forms as previously submitted to and approved by Lender or (ii) otherwise be in form and content reasonably satisfactory to Lender. 
 (c) Borrower shall not have made any material changes in the Purchase Contract delivered to Lender pursuant to this Section 3.2.2,
unless such changes have been approved by Lender. 
 (d) The sale shall be made in the ordinary course of the development and
marketing of the Project, and shall be accompanied by such development covenants, conditions and restrictions, deeds of trust, and other documents, consistent with Borrower’s past practices, as shall be necessary to assure that development of
the Project occurs in accordance with Borrower’s development plans and existing Approvals and Permits. 
  

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 (e) Borrower shall have paid the applicable Release Price and all other fees and costs in
connection with the release, which Release Price shall be applied to repay sums due and owing under the Note and any other Obligations in such order as Lender may determine in its sole and absolute discretion. 
 3.2.3 DEDICATIONS. In connection with any Dedication: 
 (a) Borrower shall satisfy each of the conditions set forth in Section 3.2.1. 
 (b) At least ten (10) days prior to a release, Borrower shall have delivered to Lender all the terms, conditions and details of such
release, including, without limitation, the purpose of such release, evidence of the conformity of such release to the overall development plan for the Project and all Approvals and Permits required in connection therewith, all of which shall be in
form and content reasonably satisfactory to Lender. 
 4. CONDITIONS PRECEDENT. 
 4.1 CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AGREEMENT AND TO THE EFFECTIVENESS OF THE COMMITMENT. This Agreement and the Commitment shall become
effective only upon satisfaction by Borrower of the following conditions precedent on or before the date hereof at the sole cost and expense of Borrower: 
 4.1.1 REPRESENTATIONS AND WARRANTIES ACCURATE. The representations and warranties by Borrower in the Loan Documents are correct on and as of the date of the recordation of the Deeds of Trust for the Existing Projects
to be included in the Borrowing Base in all material respects. 
 4.1.2 DEFAULTS. No Event of Default or Unmatured Event of
Default shall have occurred and be continuing. 
 4.1.3 DOCUMENTS. Lender shall have received the following agreements,
documents, and instruments, each duly executed by the parties thereto: 
 (a) LOAN DOCUMENTS. The Loan Documents, which shall
include all agreements, documents and instruments specified by Lender (including without limitation an Environmental Indemnity). 
 (b) CORPORATION. Certified copies of (i) resolutions of Borrower’s board of directors authorizing Borrower to execute, deliver, and perform the Loan Documents and to grant to Lender the Liens and Encumbrances on the Collateral in
the Loan Documents and certifying the names and signatures of the officer(s) of Borrower authorized to execute the Loan Documents and, in the case of Borrower, to request Advances on behalf of Borrower, (ii) the certificate of incorporation and
bylaws of Borrower and all amendments thereto, and (iii) a certificate of good standing as a corporation from the jurisdiction of formation or organization and for each jurisdiction in 

  

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which the nature of Borrower’s business and operations require qualification as a foreign corporation. 
 (c) INSURANCE POLICIES. A certificate of insurance for all insurance required under the Loan Documents, and certificates of insurance with
respect to professional liability coverage to the extent maintained by engineers, architects, and environmental contractors. 
 (d) OPINION LETTER. A favorable opinion from a law firm representing Borrower covering such matters as Lender may require. 
 (e) FINANCIAL STATEMENTS. Borrower’s and Guarantor’s most recent financial statements (which statements may be prepared on a consolidated basis) reviewed by independent, certified public accountants acceptable to Lender, including
without limitation a balance sheet, cash flow statement, reconciliation of net worth, and profit and loss statement for Borrower. 
 4.1.4 PLAT AND/OR SURVEY. Borrower shall have delivered to Lender, and Lender shall have approved, all surveys, maps and plats in existence with respect to the Existing Projects and individual parcels thereof. Each such map, plat or survey
must contain a legal description of the subject Existing Project (or applicable portion thereof), must describe and show all boundaries of and lot lines within said Existing Project (or applicable portion thereof) and all streets and other
dedications and contain such other information and certifications as Lender may request. 
 4.1.5 RESTRICTIVE COVENANTS.
Borrower shall have provided Lender with, and Lender shall have approved, all covenants, conditions, restrictions, easements and other rights that exist or are contemplated with respect to the Existing Projects. 
 4.1.6 SOILS TEST. Borrower shall have provided to Lender, and Lender shall have approved, soils/hydrology test reports of the Existing
Projects prepared by licensed engineers satisfactory to Lender showing the location of, and containing boring logs from, all borings, together with recommendations for the design of foundations. 
 4.1.7 ENVIRONMENTAL ASSESSMENT. Borrower shall have delivered to Lender and Lender shall have approved a report of environmental
assessments of the Existing Projects, by environmental engineers acceptable to Lender containing such information, results, and certifications as Lender may require. If Lender determines, in its sole discretion, based on such reports or other
information available to Lender that any further review should be obtained, Borrower shall also provide such follow up testing, reports, and other actions as may be required by Lender. The contents of the environmental assessment report and any
follow up must be satisfactory to Lender. If such reports are addressed to Borrower, Borrower shall cause a reliance letter, in form and substance satisfactory to Lender, to be provided to Lender. 
 4.1.8 ENVIRONMENTAL INDEMNITY. Borrower shall have delivered to Lender, Lender’s form of Environmental Indemnity for each Existing
Project, fully completed and duly executed by Borrower. 
  

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 4.1.9 PRELIMINARY TITLE REPORT. Borrower shall have provided Lender and Lender shall have
approved, a preliminary title report for each Existing Project, prepared by the Title Company, together with a legible copy of each “SCHEDULE B” item. 
 4.1.10 FLOOD REPORT. Borrower shall have provided to Lender evidence satisfactory to Lender as to whether (a) each Existing Project,
or any portion thereof, is located in an area designated by the Department of Housing and Urban Development as having special flood or mudslide hazards, and (b) the community in which such Existing Project is located is participating in the
National Flood Insurance Program. 
 4.1.11 DEED OF TRUST/TITLE POLICY. For each Existing Project, Borrower shall have
provided to Lender (a) the Deed of Trust, subject only to Permitted Exceptions, duly executed by Borrower, acknowledged, delivered and recorded; and (b) American Land Title Association loan policies of title insurance (1990 form with the
creditors’ rights exception and arbitration provisions deleted and with a revolving credit endorsement and such other endorsements as Lender may require) for each Deed of Trust (collectively “Title Policy”). The Title Policy shall
provide coverage (including without limitations mechanics’ lien coverage) satisfactory to Lender and insure the Deed of Trust as a first lien on the Project, subject only to Permitted Exceptions. 
 4.1.12 COMPLETION OF FILINGS AND RECORDINGS. For each Existing Project, Lender shall have received evidence of the completion of all
recordings and filings to establish or maintain the perfection and priority of the Liens and Encumbrances on the Collateral granted in the Loan Documents and required by Lender to be in effect prior to the effectiveness of this Agreement and the
Commitment. 
 4.1.13 PAYMENT OF COSTS, EXPENSES, AND FEES. For each Existing Project, all costs, expenses, and fees to be
paid by Borrower under the Loan Documents on or before the effectiveness of this Agreement, the effectiveness of the Commitment, or the making of Advances shall have been paid in full (or shall be paid in full concurrently with the making of the
initial Project Advance), including without limitation applicable fees set forth herein. 
 4.1.14 APPRAISAL. For each
Existing Project, Lender shall have received and approved an Appraisal for the subject Land; provided, however, that in the event prior to the Initial Closing Date Lender has not received Appraisals for all parcels of the Land for the Existing
Parcels, then Lender shall have no obligation to make any Advance against any parcels unless and until Lender shall have received and approved Appraisals for those parcels against which Advances are requested. 
 4.1.15 OTHER ITEMS OR ACTIONS BY BORROWER. Lender shall have received such other agreements, documents, and instruments, and Borrower
shall have performed such other actions as Lender may reasonably require. 
 4.2 CONDITIONS PRECEDENT TO ADMISSION OF LAND AS ZONED LAND.
Borrower may, from time to time, request Lender to include a portion of the Land as Zoned Land for purposes of the Borrowing Base. In connection with each such request, the following conditions precedent shall have been satisfied at the sole cost
and expense of Borrower. Upon 

  

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the satisfaction of such conditions precedent, as determined by Lender, such portions of the Land shall be included in the Borrowing Base as Zoned Land:

 4.2.1 REQUEST. Borrower shall have submitted to Lender a request in the form of EXHIBIT “F” to include in
the Borrowing Base as Zoned Land those portions of the Land for which Lender has received Appraisals. Such request and all other documents and instruments described in this Section 4.2 shall be submitted with the Borrowing Base Certificate in
which Borrower intends to include such portion of the Land in the Borrowing Base as Zoned Land. Each such request shall be deemed a renewal of all representations and warranties of Borrower set forth in the Loan Documents. 
 4.2.2 DEFAULTS. No Event of Default or Unmatured Event of Default shall have occurred and be continuing on and as of the date that each
portion of the Land is included as Zoned Land. 
 4.2.3 ZONING APPROVALS. Borrower shall have provided to Lender and Lender
shall have approved evidence of appropriate vested zoning for the contemplated development of the Zoned Land as residential property. 
 4.2.4 OTHER. Borrower shall have provided such other documents and information reasonably requested by Lender. 
 4.3 CONDITIONS PRECEDENT TO ADMISSION OF LAND AS ENTITLED LAND OR HIGH END ENTITLED LAND. Borrower may, from time to time, request Lender to include a portion of the Land as Entitled Land or High End Entitled Land for purposes of the
Borrowing Base. In connection with each such request, the following conditions precedent shall have been satisfied at the sole cost and expense of Borrower. Upon the satisfaction of such conditions precedent, as determined by Lender, such portions
of the Land shall be included in the Borrowing Base as Entitled Land or High End Entitled Land, as applicable: 
 4.3.1
REQUEST. Borrower shall have submitted to Lender a request in the form of EXHIBIT “G” to include in the Borrowing Base as Entitled Land or High End Entitled Land those portions of the Land for which Lender has received Appraisals.
Such request and all other documents and instruments described in this Section 4.3 shall be submitted with the Borrowing Base Certificate in which Borrower intends to include such portion of the Land in the Borrowing Base as Entitled Land or
High End Entitled Land. Each such request shall indicate whether such portion of the Land should be considered Entitled Land or High End Entitled Land and shall be deemed a renewal of all representations and warranties of Borrower set forth in the
Loan Documents. 
 4.3.2 DEFAULTS. No Event of Default or Unmatured Event of Default shall have occurred and be continuing on
and as of the date that each portion of the Land is included as Entitled Land or High End Entitled Land. 
 4.3.3 MAP.
Borrower shall have delivered to Lender and Lender shall have approved a Final Map or Tentative Map, as applicable, of the Entitled Land or High End Entitled Land pursuant to the applicable subdivision map requirements. Each such map must contain a
legal description of the Entitled Land or High End Entitled Land, must describe and show all 

  

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boundaries of and lot lines within such Entitled Land or High End Entitled Land and all streets and other dedications, and must contain such other
information and certifications as Lender may request. 
 4.3.4 ZONING APPROVALS. Borrower shall have provided to Lender and
Lender shall have approved evidence of appropriate vested zoning for the contemplated development of the Entitled Land or High End Entitled Land, as applicable, for residential purposes. 
 4.3.5 OTHER. Borrower shall have provided such other documents and information reasonably requested by Lender. 
 4.4 CONDITIONS PRECEDENT TO ADMISSION OF LAND AS LOTS UNDER DEVELOPMENT OR HIGH END LOTS UNDER DEVELOPMENT. Borrower may, from time to time, request
Lender to include a portion of the Land as Lots Under Development or High End Lots Under Development for purposes of the Borrowing Base. In connection with each such request, the following conditions precedent shall have been satisfied at the sole
cost and expense of Borrower. Upon the satisfaction of such conditions precedent, as determined by Lender, such Land shall be included in the Borrowing Base as Lots Under Development or High End Lots Under Development, as applicable: 
 4.4.1 REQUEST. Borrower shall have submitted to Lender a request in the form of EXHIBIT “H” to include portion of the Land
in the Borrowing Base as Lots Under Development or High End Lots Under Development. Such request and all other documents and instruments described in this Section 4.4 shall be submitted with the Borrowing Base Certificate in which Borrower
intends to include such portion of the Land in the Borrowing Base as Lots Under Development or High End Lots Under Development. Each such request shall indicate whether such Land is to be included in the Borrowing Base as Lots Under Development or
as High End Lots Under Development and shall be deemed a renewal of all representations and warranties of Borrower set forth in the Loan Documents. 
 4.4.2 DEFAULTS. No Event of Default or Unmatured Event of Default shall have occurred and be continuing on and as of the date that each portion of the Land is included as Lots Under Development or High End Lots Under
Development. 
 4.4.3 DOCUMENTS AND INFORMATION. Borrower shall have provided to Lender, and Lender shall have approved, all
documents and information required pursuant to Section 4.3 with respect to the applicable portion of the Land. 
 4.4.4
INSPECTION. Development of the applicable portion of the Land shall have commenced. Development will be deemed to have commenced when (i) construction of one or more of the following scopes of work has begun on the applicable portion of the
Land -grading, paving, water, sewer or concrete, and (ii) Borrower has expended material amounts for Hard Costs with respect to such work. 
 4.4.5 MAP. Borrower shall have delivered to Lender and Lender shall have approved a Final Map or Tentative Map, as applicable, together with evidence reasonably satisfactory to Lender that any such Tentative Map has
not expired and is not due to expire 

  

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during the development of such portion of the Land. Each such map must contain a legal description of the Land, must describe and show all boundaries of and
lot lines within such Land and all streets and other dedications, and must contain such other information and certifications as Lender may request. 
 4.4.6 UTILITIES. If requested by Lender, Borrower shall have delivered to Lender, evidence, which may be in the form of “will serve” letters from local utility companies or local authorities, that:
(a) telephone service, electric power, storm sewer, sanitary sewer (if applicable) and water facilities will be available to the Lots Under Development or High End Lots Under Development, as applicable; (b) such utilities will be adequate
to serve the Lots Under Development or High End Lots Under Development, as applicable; and (c) upon completion of the Improvements, no conditions will exist to affect Borrower’s right to connect into and have adequate use of such utilities
except for the payment of a normal connection charges or tap charges and except for the payment of subsequent charges for such services to the utility supplier. 
 4.4.7 LOT LIMITATIONS. The total number of Lots Under Development or High End Lots Under Development, as applicable, to be included in the
Borrowing Base as of the date of any request made hereunder shall not be in excess of the applicable Lot Concentration Limitation. 
 4.4.8 OTHER. Borrower shall have provided such other documents and information reasonably requested by Lender. 
 4.5 CONDITIONS
PRECEDENT TO ADMISSION OF LAND AS PRESOLD HOMES, SPEC HOMES, MODEL HOMES, HIGH END PRESOLD HOMES, HIGH END SPEC HOMES AND/OR HIGH END MODEL HOMES. Borrower may, from time to time, request Lender to include a portion of the Land as Presold, Spec
and/or Model Homes (or as High End Presold, High End Spec and/or High End Model Homes) for purposes of the Borrowing Base. In connection with each such request, the following conditions precedent shall have been satisfied at the sole cost and
expense of Borrower. Upon the satisfaction of such conditions precedent, as determined by Lender, such Land shall be included in the Borrowing Base as Presold, Spec and/or Model Homes (or as High End Presold, High End Spec and/or High End Model
Homes), as applicable: 
 4.5.1 REQUEST. Borrower shall have submitted to Lender a request in the form of
EXHIBIT “I” that a portion of the Land be included in the Borrowing Base as Presold, Spec and/or Model Homes (or as High End Presold, High End Spec and/or High End Model Homes). Such request and all other documents and instruments
described in this Section 4.5 shall be submitted with the Borrowing Base Certificate in which Borrower intends to include such portion of the Land in the Borrowing Base as Presold, Spec and/or Model Homes (or as High End Presold, High End Spec
and/or High End Model Homes). Each such request shall indicate whether such portion of the Land is to be included in the Borrowing Base as Presold, Spec and/or Model Homes or as High End Presold, High End Spec and/or High End Model Homes and shall
be deemed a renewal of all representations and warranties of Borrower set forth in the Loan Documents. 
  

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 4.5.2 DEFAULTS. No Event of Default or Unmatured Event of Default shall have occurred and
be continuing on and as of the date that each portion of the Land is included as Presold, Spec and/or Model Homes (or as High End Presold, High End Spec and/or High End Model Homes). 
 4.5.3 DOCUMENTS AND INFORMATION. Borrower shall have provided to Lender, and Lender shall have approved, all documents and Information
required pursuant to Sections 4.2, 4.3 and 4.4, with respect to the applicable portion of the Land. 
 4.5.4 HOME
CONSTRUCTION INFORMATION. Borrower shall not be entitled to include any portion of the Land in a Borrowing Base Certificate as Presold, Spec and/or Model Homes (or as High End Presold, High End Spec and/or High End Model Homes) unless and until each
of the following conditions precedent have been satisfied (or waived or modified by Lender in its discretion): 
 (a) Borrower
shall have submitted to Lender, and Lender shall have approved, Plans and Specifications for each type of Home for each Project, which Plans and Specifications shall be (i) prepared by Architect and/or Engineer acceptable to Lender, and
(ii) otherwise satisfactory to Lender; 
 (b) Borrower shall have certified to Lender that such portion of the Land may
be entered into the Borrowing Base as a Home; 
 (c) At Borrower’s sole cost and expense, Lender shall have obtained
Appraisals with respect to each type of Home, which Appraisals shall be (i) prepared by an appraiser acceptable to Lender, and (ii) otherwise satisfactory to Lender. Each Appraisal for each Home in a Project shall be updated or evaluated
once annually at Lender’s discretion (or more frequently if required by regulatory guidelines), at the sole cost and expense of Borrower, and all FNMA appraisals or other Appraisals for the Homes accepted by Lender that do not have a specific
expiration date shall be updated once annually at Lender’s request; provided, however, that Lender may require that any such appraisal be updated more frequently than annually if (i) Lender believes that a material adverse change has
occurred with respect to the Project or any portion thereof, or (ii) Borrower requests in writing that Lender order an appraisal of the Project, or (iii) Lender is required to reappraise the Project in connection with regulatory
requirements. Based on such revised appraisals and/or evaluations and any other information provided to Lender, Lender shall be entitled to revise the Home Construction Budget and Maximum Allowed Advances applicable to any Home in such Project;

 (d) Borrower shall have submitted to Lender all other information requested by Lender to formulate a Home Construction
Budget for each type of Home (which may include without limitation construction contracts and other verifications of costs), and Lender shall have formulated such Home Construction Budget; 
 (e) If requested by Lender, Borrower shall have submitted or made available to Lender evidence of (i) building permits for the
construction of the Homes, (ii) all necessary permits, licenses and approvals for the construction of the Homes, 

  

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including without limitation the requisite consumer disclosure reports, public offering statements, exemptions and approvals required in connection with the
sale of the Homes, and (iii) architectural control committee homeowners’ association and other approvals required under any applicable CC&Rs; 
 (f) Prior to entering into any Purchase Contracts for the sale of any Homes, Borrower shall have delivered to Lender the requisite consumer disclosure reports, public offering statements, exemptions and approvals
prior to the sale of any Homes, in form and substance satisfactory to Lender; 
 (g) For all Presold Homes and all High End
Presold Homes, Lender shall have received evidence in the form of Borrower’s most recent project reports (or such other form as reasonably requested by Lender) of the following: 
 (i) A duly executed Purchase Contract, escrow instructions or deposit receipt without contingencies (other than the sale of an existing
residency contingency), which shall be made available for Lender’s review; 
 (ii) A prequalification letter or mortgage
commitment from an institutional mortgage lender or such other information or verification as Lender may require concerning the ability of the prospective buyer to obtain financing or otherwise acquire the Home, which shall be made available for
Lender’s review; and 
 (iii) A cash earnest money deposit or down payment of at least Five Thousand Dollars
($5,000.00), evidence of which shall be made available for Lender’s review. 
 (h) For all Spec Homes (including any
Model Homes), Borrower shall not be entitled to include in the Borrowing Base at any one time any Spec Homes in violation of the Spec Home Concentration Limitation, which shall mean for each and every Project financed hereunder, more Spec Homes than
the lesser of (i) five (5) months’ appraised absorption for the Project, (ii) five (5) months’ actual absorption for the Project, as determined by Lender from time to time based upon the actual prior six-month Spec Home
sales average for the Project, or (iii) twenty-five (25) Spec Homes. 
 (i) For all High End Spec Homes (including
any High End Model Homes), Borrower shall not be entitled to include in the Borrowing Base at any one time any High End Spec Homes in violation of the High End Spec Home Concentration Limitation, which shall mean for each and every Project financed
hereunder, more High End Spec Homes than the lesser of (i) four (4) months’ appraised absorption for the Project, (ii) four (4) months’ actual absorption for the Project, as determined by Lender from time to time based
upon the actual prior six-month High End Spec Home sales average for the Project, or (iii) fifteen (15) High End Spec Homes. 
 (j) For all Model Homes and High End Model Homes, the Lots to be used for the construction of any Homes, the Homes and any parking areas used for model complex parking shall remain as Collateral for the Loan and shall
not be eligible for 

  

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release from the applicable Deed of Trust until all production Homes of each Model Home’s or High End Model Home’s respective plan type have been
sold for each applicable Project; provided, however, that Lender in its sole discretion may permit Borrower to sell a Model Home or a High End Model Home, as long as (1) such Home is leased back to Borrower under terms and conditions acceptable
to Lender, and (2) the lease of such Home is assigned or otherwise encumbered as collateral for the applicable Loan, and (3) the lease and the assignment or encumbrance shall be in full force and effect until all production Units of that
Model Home’s or High End Model Home’s respective plan type have been sold for the applicable Project. 
 4.5.5
CONCENTRATION LIMITATIONS. The total number of Spec Homes, Model Homes, High End Spec Homes or High End Model Homes, as applicable, to be included in the Borrowing Base as of the date of any request made hereunder shall not be in excess of the
applicable Concentration Limitation. 
 4.5.6 OTHER. Borrower shall have provided such other documents and information
reasonably requested by Lender. 
 4.6 ADDITIONAL CONDITIONS PRECEDENT TO ALL ADVANCES. Lender shall be obligated to make an Advance only if
Borrower shall have delivered to Lender a Draw Request for such Advance. Borrower may not submit more than six (6) Draw Requests per Calendar Month. Lender shall not be required to make the requested Advance before twenty-four (24) hours
after receipt of the Draw Request. Notwithstanding the foregoing, Lender may make Advances, without further authorization or Draw Requests from Borrower, to pay interest prior to delinquency to the extent of the Available Commitment; provided,
however, that from and after the occurrence and during the continuation of an Unmatured Event of Default or an Event of Default, such Advances to pay interest may be made in the sole and absolute discretion of Lender. 
 4.7 WAIVER OF CONDITIONS PRECEDENT. Borrower hereby authorizes Lender, and Lender reserves the right in its sole and absolute discretion, to verify any
documents and information submitted to Lender in connection with this Agreement. Lender may elect, in its sole and absolute discretion, to waive any of the foregoing conditions precedent. Any such waiver shall be limited to the conditions precedent
therein and the requirements therein. Delay or failure by Lender to insist on satisfaction of any condition precedent shall not be a waiver of such condition precedent or any other condition precedent. The making of an Advance by Lender shall not be
deemed a waiver by Lender of the occurrence of an Event of Default or an Unmatured Event of Default. 
 5. BORROWER’S REPRESENTATIONS AND WARRANTIES.

 5.1 CLOSING REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender as of the date of this Agreement: 
 5.1.1 CORPORATE EXISTENCE AND AUTHORIZATION. Borrower is a corporation, validly existing under the laws of California and has the
requisite power and authority to execute, deliver, and perform the Loan Documents. The execution, delivery, and 

  

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performance by Borrower of the Loan Documents have been duly authorized by all requisite corporate action by or on behalf of Borrower and will not conflict
with, or result in a violation of or a default under, the Organizational Documents of Borrower. 
 5.1.2 NO APPROVALS, ETC. No
approval, authorization, bond, consent, certificate, franchise, license, permit, registration, qualification, or other action or grant by or filing with any Person is required in connection with the execution, delivery, or performance by Borrower of
the Loan Documents. 
 5.1.3 NO CONFLICTS. The execution, delivery, and performance by Borrower of the Loan Documents will not
conflict with, or result in a violation of or a default under: (i) any applicable law, ordinance, regulation, or rule (federal, state, or local); (ii) any judgment, order, or decree of any arbitrator, other private adjudicator, or
Governmental Authority to which Borrower is a party or by which Borrower or any of the assets or property of Borrower is bound; (iii) any of the Approvals and Permits; and/or (iv) any agreement, document, or instrument to which Borrower is
a party or by which Borrower or any of the assets or property of Borrower is bound. 
 5.1.4 EXECUTION AND DELIVERY AND
BINDING NATURE OF LOAN DOCUMENTS. The Loan Documents have been duly executed and delivered by or on behalf of Borrower. The Loan Documents are legal, valid and binding obligations of Borrower, enforceable in all material respects in accordance with
their terms against Borrower, except as such enforceability may be limited by bankruptcy, insolvency, moratorium, reorganization or similar laws and by equitable principles of general application. 
 5.1.5 LEGAL PROCEEDINGS; HEARINGS, INQUIRIES AND INVESTIGATIONS. Except as previously disclosed to and approved by Lender, (i) no
legal proceeding is pending or, to the best knowledge of Borrower, threatened before any arbitrator, other private adjudicator or Governmental Authority to which Borrower is a party or by which Borrower or any assets or property of Borrower may be
bound or affected that if resolved adversely to Borrower could result in a Material Adverse Change, and (ii) no hearing, inquiry, or investigation relating to Borrower or any assets or property of Borrower is pending or, to the best knowledge
of Borrower, threatened by any Governmental Authority that if resolved adversely to Borrower could result in a Material Adverse Change. 
 5.1.6 NO EVENT OF DEFAULT. No Event of Default or Unmatured Event of Default has occurred and is continuing. 
 5.1.7 APPROVALS AND PERMITS; ASSETS AND PROPERTY. Except as disclosed to Lender in writing prior to the date hereof, to the best knowledge of Borrower, (i) Borrower has all Approvals and Permits necessary for the
development currently taking place at each Qualified Project, and (ii) there are no facts or circumstances known to Borrower that would materially impair the ability of Borrower to obtain Approvals and Permits necessary for the future
development of each Qualified Project or to otherwise continue the contemplated development of each Qualified Project. In the event that the foregoing representation and warranty shall cease to be true in all material respects with respect to a
Qualified Project or portion thereof, such Qualified Project (or portion thereof, as the case may be) shall cease to be 

  

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part of the Borrowing Base until such time as such representation and warranty become true in all material respects. 
 5.1.8 ERISA. Borrower is in compliance with ERISA. No Reportable Event or Prohibited Transaction (as defined in ERISA) or termination of
any plan has occurred and no notice of termination has been filed with respect to any plan established or maintained by Borrower and subject to ERISA. Borrower has not incurred any material funding deficiency within the meaning of ERISA or any
material liability to the Pension Benefit Guaranty Corporation in connection with any such plan established or maintained by Borrower. 
 5.1.9 COMPLIANCE WITH LAW. Borrower has not received any notice of any material violations of any applicable laws, rules or regulations of any Governmental Authority with respect to any Qualified Project or the
development of any Qualified Project and Borrower is not aware of any facts or circumstances which would constitute or cause any such violation. If the foregoing representation and warranty shall cease to be true with respect to any Qualified
Project (or portion thereof), such Qualified Project (or such portion thereof, as the case may be) shall cease to be a part of the Borrowing Base until such time as such violation or facts or circumstances no longer exist. 
 5.1.10 FULL DISCLOSURE. All information in the loan application, financial statement, certificate or other document and all information
prepared and delivered by Borrower to Lender in obtaining the Commitment is correct and complete in all material respects, and there are no omissions therefrom that result in such information being incomplete, incorrect or misleading in any material
adverse respect as of the date thereof. To the best knowledge of Borrower, all information in any loan application, financial statement, certificate or other document prepared and delivered to Lender on behalf of Borrower by Persons other than
Borrower or its Affiliates and all other information prepared and delivered to Lender on behalf of Borrower or by Persons other than Borrower or its Affiliates in obtaining the Commitment, is correct and complete in all material respects, and there
are no omissions therefrom that result in any such information being incomplete, incorrect or misleading in any material adverse respect as of the date thereof. There has been no Material Adverse Change as to Borrower, Guarantor or any Project since
the date of such information. All financial statements that have been delivered to Lender by Borrower and Guarantor were prepared in accordance with GAAP and accurately represent the financial conditions and results of operation of the subjects
thereof as of the dates thereof and for the periods covered thereby. 
 5.1.11 USE OF PROCEEDS; MARGIN STOCK. The proceeds of
the Advances will be used by Borrower solely for the purposes specified in this Agreement. None of such proceeds will be used for the purpose of purchasing or carrying any “margin stock” as defined in Regulation U or G of the Board of
Governors of the Federal Reserve System (12 C. F. R. Part 221 and 207), or for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry a margin stock or for any other purpose which
might make this transaction a “purpose credit” within the meaning of such Regulation U or G. Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock. Neither Borrower nor any
Person acting on behalf of Borrower has taken or will take any action which might cause any Loan Document to violate Regulation U or G or any other regulations of the Board of Governors of the Federal Reserve System or to violate 

  

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Section 7 of the Securities Exchange Act of 1934, or any rule or regulation promulgated thereunder, in each case as now in effect or as the same may
hereafter be in effect. Borrower and Borrower’s subsidiaries own no “margin stock”. 
 5.1.12 GOVERNMENTAL
REGULATION. Borrower is not subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Investment Company Act of 1940, the Interstate Commerce Act (as any of the preceding have been amended), or any other
law which regulates the incurring by Borrower of indebtedness, including but not limited to laws relating to common or contract carriers or the sale of electricity, gas, steam, water or other public utility services. 
 5.1.13 MATERIAL AGREEMENTS; NO MATERIAL DEFAULTS. Attached hereto as EXHIBIT ”J” is a true and correct listing of all
material contracts, leases, permits, development agreements, covenants, restrictions, option agreements, purchase and sale agreements, instruments and other agreements requested by Lender for review relating to each of the Existing Projects to be
included as Qualified Projects under the Borrower Base as of the Initial Closing Date (collectively “Material Agreements — Existing Projects”). In connection with Borrower seeking approval for a Qualified Project under
Section 2.4 above, Borrower shall provide Lender with a true and correct listing of the same types of documents and/or materials for each new Qualified Project as described in the preceding sentence (collectively “Material Agreements
— Future Projects”) (the Material Agreements — Existing Projects and the Material Agreements — Future Projects shall be collectively referred to herein as the “Material Agreements”). Borrower shall execute an assignment
or assignments in favor of Lender of all of Borrower’s rights, title and interests in and to any and all Material Agreements as required by Lender in its discretion. No event has occurred which, immediately or upon the expiration of applicable
cure or grace periods, would constitute a default which in Lender’s reasonable opinion would result in a Material Adverse Change in Borrower, Guarantor or any Project with respect to (i) the terms of any instrument evidencing or relating
to any debt of Borrower, (ii) any contract, lease, permit, development agreement, covenant, restriction, option agreement, purchase and sale agreement, instruments and other agreements, (iii) any statute, ordinance, law, judgment, order,
writ, injunction, decree, rule or regulation of any Governmental Authority or any determination or award of any arbitrator to which Borrower or any Project may be bound, or (iv) any other instrument, agreement or document by which Borrower, any
Project or any of Borrower’s properties is bound. If the foregoing representation and warranty shall cease to be true with respect to a Qualified Project or a portion thereof, such Qualified Project (or such portion thereof, as the case may be)
shall cease to be part of the Borrowing Base until such time as such representation and warranty is once again true. 
 5.1.14
TITLE TO PROPERTY. Borrower has good, sufficient and legal title to all properties and assets reflected in its most recent balance sheet delivered to Lender, except for assets disposed of in the ordinary course of business since the date of such
balance sheet. The Property is free and clear of Liens and Encumbrances, except for Permitted Exceptions. Borrower is the sole owner of, and has good and marketable title to, the fee interest in each Qualified Project and all other real property
described in the Deed of Trust encumbering the property included in each Qualified Project, free from any Liens and Encumbrances, excepting only Permitted Exceptions. If the foregoing representation and warranty shall cease to be true in any
material respect with respect to a Qualified Project or a portion thereof, such Qualified 

  

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Project (or such portion thereof, as the case may be) shall cease to be part of the Borrowing Base until such time as such representation and warranty is
once again true in all material respects. 
 5.1.15 PAYMENT OF TAXES. All tax returns and reports of Borrower required to be
filed by Borrower have been timely filed, and all taxes, assessments, fees and other governmental charges upon Borrower and upon its properties, assets, income and franchises which are due and payable have been paid prior to delinquency. Borrower
knows of no proposed tax assessment against Borrower or any Qualified Project that would be material to the condition (financial or otherwise) of Borrower, Guarantor or such Qualified Project, and Borrower has not contracted with any Governmental
Authority in connection with any such taxes. If the foregoing representation and warranty shall cease to be true with respect to a Qualified Project or a portion thereof, such Qualified Project (or such portion thereof, as the case may be) shall
cease to be part of the Borrowing Base until such time as such representation and warranty is once again true. 
 5.1.16 NO
CONDEMNATION. No condemnation proceeding or moratorium is pending, or to the best of Borrower’s knowledge, threatened against any Qualified Project or any portion thereof which would impair the use, occupancy or full operation of such Qualified
Project in any manner whatsoever. If the foregoing representation and warranty shall cease to be true with respect to a Qualified Project or a portion thereof, such Qualified Project (or such portion thereof, as the case may be) shall cease to be
part of the Borrowing Base until such time as such representation and warranty is once again true in all material respects. 
 5.1.17 BORROWING BASE. The classification of each item of property included in the Borrowing Base is true and correct. No Borrowing Base value shall be attributed to Raw Land. 
 5.2 REPRESENTATIONS AND WARRANTIES UPON REQUESTS FOR ADVANCES. Each Draw Request shall be a representation and warranty by Borrower to Lender that the
representations and warranties in this Section 5 are correct and complete in all material respects as of the date of the requested Advance, except as otherwise disclosed by Borrower to Lender in writing prior to the date of such Draw Request.

 5.3 REPRESENTATIONS AND WARRANTIES UPON DELIVERY OF FINANCIAL STATEMENTS, DOCUMENTS, AND OTHER INFORMATION. Each delivery by Borrower or
Guarantor to Lender of financial statements, other documents or information after the date of this Agreement (including, without limitation, documents and information delivered in obtaining an Advance) shall be a representation and warranty that
such financial statements, other documents and information are correct and complete (in accordance with GAAP) in all material respects, that there are no material omissions therefrom that would result in such financial statements, other documents or
information being materially incomplete, incorrect or misleading in any material respect as of the date thereof, and that such financial statements accurately present the financial condition and results of operations of Borrower as at the dates
thereof in all material respects and for the periods covered thereby. 
  

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 6. BORROWER AFFIRMATIVE COVENANTS. Until the Commitment terminates in full and the Obligations are paid and performed in
full, Borrower agrees that, unless Lender otherwise agrees in writing in Lender’s sole and absolute discretion: 
 6.1 CORPORATE
EXISTENCE. Borrower shall continue to be a corporation, validly existing under the laws of the State of California. 
 6.2 BOOKS AND RECORDS;
ACCESS BY LENDER. Borrower and Guarantor shall maintain a standard, modern system of accounting (including without limitation a single, complete and accurate set of books and records of its assets, business, financial condition, operations,
property, prospects and results of operations) in accordance with GAAP. Borrower shall also maintain complete and accurate records regarding the acquisition, development and construction of the Project, including, without limitation, all
construction contracts, architectural contracts, engineering contracts, field and inspection reports, applications for payment, estimates and analyses regarding construction costs, names and addresses of all contractors and subcontractors performing
work or providing materials or supplies with respect to the development and construction of the Project, invoices and bills of sale for all costs and expenses incurred by contractors and subcontractors in connection with the development and
construction of the Project, payment, performance and other surety bonds (if applicable), releases and waivers of lien for all such work performed and materials supplied, evidence of completion of all inspections required by any Governmental
Authority, certificates of substantial completion, notices of completion, surveys, Approvals and Permits, Purchase Contracts, escrow instructions, records regarding all sales of all or portions of the Project, and all other documents and instruments
relating to the acquisition, development, construction and/or sale of the Project or portions thereof. During Business Hours, Borrower and Guarantor shall give representatives of Lender access to all assets, property, books, records and documents of
Borrower and will permit such representatives to inspect such assets and property and to audit, copy, examine, and make excerpts from such books, records and documents. Upon request by Lender, Borrower and Guarantor shall also provide Lender with
copies of the reports, documents, agreements and other instruments described in this Section 6.2. 
 6.3 SPECIAL COVENANTS RELATING TO
COLLATERAL. 
 6.3.1 DEFENSE OF TITLE. Borrower shall defend the Collateral, the title and interest therein of Borrower
represented and warranted in the Deed of Trust and the legality, validity, binding nature and enforceability of each Lien and Encumbrance contained in the Deed of Trust and the first priority of the Deed of Trust against all matters, including,
without limitation: (a) any attachment, levy, or other seizure by legal process or otherwise of any or all Collateral; (b) except for Permitted Exceptions, any Lien or Encumbrance or claim thereof on any or all Collateral; (c) any
attempt to foreclose, conduct a trustee’s sale, or otherwise realize upon any or all Collateral under any Lien or Encumbrance, regardless of whether a Permitted Exception and regardless of whether junior or senior to the Deed of Trust; and
(d) any claim questioning the legality, validity, binding nature, enforceability or priority of the Deed of Trust. Borrower shall notify Lender promptly in writing of any of the foregoing and will provide such information with respect thereto
as Lender may from time to time request. During the period of time that Borrower is not able to comply with the covenants set forth herein for a Qualified Project or portion thereof for a period of thirty (30) days following written notice from
Lender (provided that if Borrower cannot reasonably cure such non-compliance within such thirty (30) day period, such thirty (30) day period shall be extended for a reasonable period not in excess of ninety (90) days from the date of
Lender’s notice to cure such non-compliance provided that Borrower shall have commenced such cure within such thirty (30) day period and shall diligently 

  

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thereafter proceed to effect such cure), then such Qualified Project (or portion thereof, as the case may be) shall cease to be a part of the Borrowing Base
until Borrower shall so comply. 
 6.3.2 FURTHER ASSURANCES. Borrower shall promptly execute, acknowledge and deliver such
additional agreements, documents and instruments and do or cause to be done such other acts as Lender may reasonably request from time to time to better assure, preserve, protect and perfect the interest of Lender in the Collateral and the rights
and remedies of Lender under the Loan Documents. Without limiting the foregoing, to the extent that Lender determines from time to time that additional deeds of trust, amendments to deeds of trust, financing statements, subordinations and other
documents are required in order to perfect all Liens and Encumbrances in favor of Lender, and cause all Collateral encumbered by any of the deeds of trust to be subject only to Permitted Exceptions, Borrower shall execute and deliver such documents,
instruments and other agreements as Lender may reasonably request. 
 6.3.3 PLATS, ANNEXATIONS AND APPROVALS. For each
Qualified Project to be included in the Borrowing Base: 
 (a) Each plat or map (whether tentative or final) with respect to
any portion of any Qualified Project shall comply with all Requirements and shall be satisfactory in form and substance to Lender. Prior to evaluation by Lender of the plat or map for approval, Borrower shall deliver to Lender such certifications,
maps, surveys and other documents and information as Lender requires. Prior to the recordation of any plat or map by Borrower, Borrower shall deliver to Lender such title insurance endorsements insuring the continued priority of the Deed of Trust
after recording of the plat or map as Lender may require. Borrower agrees to take such steps as Lender may require in (i) either re-recording the Deed of Trust or amending the Deed of Trust to reflect the new plat legal description, and
(ii) obtaining an endorsement to the Title Policy to amend the legal description therein. 
 (b) Based on the applicable
stage of development, Borrower shall obtain and, upon request, provide Lender with, evidence of: (i) appropriate zoning for the use and occupancy of each Qualified Project; (ii) all necessary Approvals and Permits of Governmental
Authorities and other third parties necessary to permit the development and sale of each Qualified Project, including without limitation all applicable public reports, architectural committee approvals, public offering statements, exemptions and
other approvals required pursuant to any applicable restrictive covenants; (iii) all Approvals and Permits necessary to commence, carry out and complete construction; and (iv) evidence of payment of all fees and other required amounts for
such Approvals and Permits. 
 (c) At Lender’s request, Borrower shall provide Lender with true and correct copies of all
documents and instruments relating to proposed easements, boundary line adjustments, covenants, conditions and restrictions and other similar matters affecting title to each Qualified Project in connection with the development thereof, together with
all surveys, plats, contracts and other information requested by Lender in connection therewith. Such easements, boundary line adjustments, covenants, conditions and restrictions and other matters shall not be entered into by Borrower unless
consented 

  

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to in writing by Lender, which consent shall not be unreasonably withheld by Lender so long as they are entered into in the ordinary course of developing
each Qualified Project. If such consent is granted by Lender, Lender will also enter into such subordinations and releases as may be appropriate in connection with such easements, boundary line adjustments and covenants, conditions and restrictions,
provided that such subordinations are in form reasonably satisfactory to Lender and, in connection with any such releases, Borrower has satisfied the conditions precedent set forth in Section 3.2.1 above. 
 In the event that Borrower is not able to comply with the covenants set forth herein for a Qualified Project or portion thereof for a period of thirty (30) days
following written notice from Lender (provided that if Borrower cannot reasonably cure such non-compliance within such thirty (30) day period, such thirty (30) day period shall be extended for a reasonable period not in excess of
ninety (90) days from the date of Lender’s notice to cure such non-compliance provided that Borrower shall have commenced such cure within such thirty (30) day period and shall diligently thereafter proceed to effect such cure), then
such Qualified Project (or portion thereof, as the case may be) shall cease to be a part of the Borrowing Base until Borrower shall so comply. 
 6.3.4 UTILITIES. Except for Zoned Land, Entitled Land and High End Entitled Land, Borrower shall provide or cause to be provided all telephone service, electric power, storm sewer, sanitary sewer and water facilities
for each Qualified Project, and such utilities will be adequate to serve such Project. No condition will exist to affect Borrower’s right to connect into and have adequate use of such utilities, except for the payment of normal connection
charges or tap charges and except for the payment of subsequent charges for such services to the utility supplier. In the event that Borrower is not able to comply with the covenants set forth herein for a Qualified Project or portion thereof for a
period of thirty (30) days following written notice from Lender (provided that if Borrower cannot reasonably cure such non-compliance within such thirty (30) day period, such thirty (30) day period shall be extended for a reasonable
period not in excess of ninety (90) days from the date of Lender’s notice to cure such non-compliance provided that Borrower shall have commenced such cure within such thirty (30) day period and shall diligently thereafter proceed to
effect such cure), then such Qualified Project (or portion thereof, as the case may be) shall cease to be a part of the Borrowing Base until Borrower shall so comply. 
 6.3.5 PLANS AND SPECIFICATIONS. Borrower shall be the sole owner of all Plans and Specifications for the Improvements for each Qualified
Project or, to the extent that Borrower is not the sole owner of such Plans and Specifications, Borrower shall have the unconditional right to use such Plans and Specifications in connection with the construction of the Improvements for such
Qualified Project. Lender will not be restricted in any way in use of such Plans and Specifications from and after an Event of Default in connection with the construction of the Improvements and the exercise of Lender’s other rights and
remedies, and Borrower shall obtain all consents and authorizations necessary for the use of such Plans and Specifications to Lender. In the event that Borrower is not able to comply with the covenants set forth herein for a Qualified Project or
portion thereof for a period of thirty (30) days following written notice from Lender (provided that if Borrower cannot reasonably cure such non-compliance within such thirty (30) day period, such thirty (30) day period shall be
extended for a reasonable period not in excess of ninety (90) days from the date of Lender’s notice to cure such 

  

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non-compliance provided that Borrower shall have commenced such cure within such thirty (30) day period and shall diligently thereafter proceed to
effect such cure), then such Qualified Project (or portion thereof, as the case may be) shall cease to be a part of the Borrowing Base until Borrower shall so comply. 
 6.3.6 COMPLIANCE WITH PERMITTED EXCEPTIONS. Borrower shall keep and maintain in full force and effect all restrictive covenants,
development agreements, easements and other agreements with Governmental Authorities and other Persons that are necessary or desirable for the use, occupancy and sale of each Qualified Project. Borrower shall not default in any material respect
under any such covenants, development agreements, easements and other agreements and will diligently enforce its rights thereunder. In the event that Borrower is not able to comply with the covenants set forth herein for a Qualified Project or
portion thereof for a period of thirty (30) days following written notice from Lender (provided that if Borrower cannot reasonably cure such non-compliance within such thirty (30) day period, such thirty (30) day period shall be
extended for a reasonable period not in excess of ninety (90) days from the date of Lender’s notice to cure such non-compliance provided that Borrower shall have commenced such cure within such thirty (30) day period and shall
diligently thereafter proceed to effect such cure), then such Qualified Project (or portion thereof, as the case may be) shall cease to be a part of the Borrowing Base until Borrower shall so comply. 
 6.3.7 PROJECT DEVELOPMENT. For each Qualified Project: 
 (a) Borrower shall at all times maintain and operate the Project and use its best efforts to market each Qualified Project. Regardless of
whether Advances are available, Borrower shall pay all costs and expenses arising in connection with the management, operation, development and sale of each Qualified Project. The Improvements for each Qualified Project shall be constructed and
developed in substantial conformity with the Plans and Specifications therefor, and in strict conformity with all applicable laws, rules and regulations of all Governmental Authorities with jurisdiction over such Qualified Project and shall be
contained wholly within the lot lines of the Land included within the Qualified Project and will not encroach on any other real estate, easements, building lines or setback requirements. Within fifteen (15) days after Borrower receives notice
or knowledge thereof, Borrower shall proceed with diligence to correct any material departure from applicable plans and specifications and any departure from applicable laws, rules and regulations of any Governmental Authority with jurisdiction over
such Qualified Project. The making of Advances shall not constitute a waiver of Lender’s right to require compliance with this covenant with respect to any such defect or departure from plans and specifications or applicable laws, rules and
regulations. 
 (b) With respect to those portions of each Qualified Project which are to be “open space” or
otherwise constitute streets and other common areas to be dedicated and transferred to homeowners’ associations or other Governmental Authorities with jurisdiction over such Qualified Project and are not otherwise included within the portions
of the Land to be developed by Borrower, Borrower shall take such actions as may be necessary to cause such dedications to be made promptly and in accordance with applicable covenants, conditions and restrictions and laws, rules and regulations.
Lender 

  

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may, at its sole option, notify Borrower that such transfers and dedications are required by Lender, in which case Borrower shall cause such transfers and
dedications to occur within thirty (30) days. 
 In the event that Borrower is not able to comply with the covenants set forth herein for a Qualified
Project or portion thereof for a period of thirty (30) days following written notice from Lender (provided that if Borrower cannot reasonably cure such non-compliance within such thirty (30) day period, such thirty (30) day period
shall be extended for a reasonable period not in excess of ninety (90) days from the date of Lender’s notice to cure such non-compliance provided that Borrower shall have commenced such cure within such thirty (30) day period and
shall diligently thereafter proceed to effect such cure), then such Qualified Project (or portion thereof, as the case may be) shall cease to be a part of the Borrowing Base until Borrower shall so comply. 
 6.3.8 TITLE POLICY ENDORSEMENTS. If required by Lender from time to time in connection with the approvals to be granted by Lender pursuant
to the Loan Documents, Borrower shall provide such continuation endorsements, date down endorsements, survey endorsements and other endorsements to each Title Policy for each Qualified Project, in form and substance satisfactory to Lender, as Lender
determines necessary to insure the priority of each Deed of Trust as a valid first lien on the applicable Collateral, subject only to Permitted Exceptions. Borrower agrees to furnish to the Title Company, at Borrower’s sole cost and expense,
such surveys and other documents and information as Lender or the Title Company may require for the Title Company to issue such endorsements. In the event that Borrower is not able to comply with the covenants set forth herein for a Qualified
Project or portion thereof for a period of thirty (30) days following written notice from Lender (provided that if Borrower cannot reasonably cure such non-compliance within such thirty (30) day period, such thirty (30) day period
shall be extended for a reasonable period not in excess of ninety (90) days from the date of Lender’s notice to cure such non-compliance provided that Borrower shall have commenced such cure within such thirty (30) day period and
shall diligently thereafter proceed to effect such cure), then such Qualified Project (or portion thereof, as the case may be) shall cease to be a part of the Borrowing Base until Borrower shall so comply. 
 6.3.9 IMPROVEMENT DISTRICTS. For any Qualified Project, without obtaining the prior written consent of Lender, Borrower shall not consent
to, or vote in favor of, the inclusion of all or any part of the Collateral in any improvement district, any “Mello Roos” district (for Qualified Projects in California), special assessment district or similar district. Borrower shall give
immediate notice to Lender of any notification or advice that Borrower may receive from any municipality or other third party of any intent or proposal to include all or any part of the Collateral in an improvement, assessment or other district.
Upon prior written notice to Borrower, Lender shall have the right to file a written objection to the inclusion of all or any part of the Collateral in an improvement, assessment or other district, either in its own name or in the name of Borrower,
and to appear at, and participate in, any hearing with respect to the formation of any such district. In the event that Borrower is not able to comply with the covenants set forth herein for a Qualified Project or portion thereof for a period of
thirty (30) days following written notice from Lender (provided that if Borrower cannot reasonably cure such non-compliance within such thirty (30) day period, such thirty (30) day period shall be extended for a reasonable period not
in excess of ninety (90) days from the date of Lender’s 

  

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notice to cure such non-compliance provided that Borrower shall have commenced such cure within such thirty (30) day period and shall diligently
thereafter proceed to effect such cure), then such Qualified Project (or portion thereof, as the case may be) shall cease to be a part of the Borrowing Base until Borrower shall so comply. 
 6.3.10 APPRAISALS. Lender shall have the right to order Appraisals of each Qualified Project and all other Collateral from time to time in
Lender’s discretion. Each Appraisal is subject to review and approval by Lender. With respect to each Appraisal that Lender orders, whether as a result of applicable laws, rules and regulations of any Governmental Authority or as a result of
Lender’s general policies and procedures applicable to loans secured by real estate or for any other reason, Borrower agrees upon demand by Lender to pay to Lender the cost and expense incurred by Lender for such Appraisals and a fee prescribed
by Lender for review of each Appraisal by Lender. 
 6.4 INFORMATION AND STATEMENTS. Borrower shall furnish or cause to be furnished to
Lender in connection with each and every Loan made hereunder: 
  

			
	 REPORTING PARTY
	  	 REQUIRED STATEMENT

		
	 1. Guarantor
	  	Annual Financial Statement (audited by an independent certified public accountant and certified by the party submitting the statement) within 120 days of Guarantor’s fiscal
year-end
		
	 2. Guarantor
	  	Quarterly Financial Statement (certified by the party submitting the statement) within 45 days of Guarantor’s fiscal quarter-end
		
	 3. Guarantor
	  	Annual 24-Month Cash Flow Projection within 120 days of Guarantor’s fiscal year-end
		
	 4. Borrower
	  	Monthly Sales Reports within 15 days of each Calendar Month-end

 6.4.1 MONTHLY SALES REPORTS. As soon as available and in any event within the time
period set forth in the chart above, Borrower shall deliver to Lender a report of all Home and Lots sales and closings during the previous Calendar Month and on a cumulative basis since inception for each Project financed hereunder, which report
shall be prepared and delivered by Borrower, shall be in form and substance satisfactory to Lender, shall be certified as true and correct on behalf of Borrower by the chief financial officer of Borrower and, upon request of Lender, shall be
supported by settlement statements relating to each Lot or Home sale. 
 6.4.2 QUARTERLY FINANCIAL STATEMENTS. As soon as
available and in any event within the time period set forth in the chart above, copies of the balance sheet of Guarantor and 10-Q statement (as included in the consolidated financial statements of Guarantor) as of the end of such quarter (including
full detail of all assets and Borrowing Base availability computations), statements of income and retained earnings and a statement of cash flow of Guarantor for such month, prepared in accordance with GAAP, and signed and certified as true and
correct on behalf of Guarantor by the chief financial officer of Guarantor. 
  

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 6.4.3 ANNUAL FINANCIAL STATEMENTS. As soon as available and in any event within the time
period set forth in the chart above, annual consolidated, unqualified financial statements of Guarantor (as included in the consolidated financial statements of Guarantor), including copies of the balance sheet of Guarantor, 10-K statement as of the
end of such fiscal year, all in reasonable detail and prepared in accordance with GAAP, audited by independent certified public accountants satisfactory to Lender and accompanied by an unqualified opinion of such auditors. Such audit shall also
cover and include the information contained in the Borrowing Base Certificates delivered pursuant to Section 6.4.6. In the event that the annual financial statements provided to Lender hereunder are not accompanied by an unqualified opinion of
such auditors, then Guarantor shall provide such management letters as required by Lender in its discretion. 
 6.4.4 ANNUAL
24-MONTH PROJECTION. As soon as available and in any event within the time period set forth in the chart above, Guarantor shall provide Lender with a projection for the next twenty-four (24) Calendar Months of cash flow and Project Revenues for
Guarantor and all Projects financed hereunder. 
 6.4.5 COMPLIANCE CERTIFICATES. Together with each of the financial
statements required pursuant to Sections 6.4.1-6.4.4, a statement in form and substance satisfactory to Lender, certified by the chief financial officer of Borrower that Borrower is in compliance with all covenants, terms, and conditions
applicable to Borrower under or pursuant to the Loan Documents and any other Debt owing by Borrower to any Person, and disclosing any noncompliance therewith and describing the status of Borrower’s actions to correct such noncompliance, if
applicable. 
 6.4.6 BORROWING BASE CERTIFICATE. 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. 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. 
 6.4.7 OTHER ITEMS AND INFORMATION. Such other information concerning Borrower, Guarantor, the
Project and the assets, business, financial condition, operations, property, prospects and results of operations of Borrower and Guarantor, as well as the financial statements and other information for prospective purchasers of any portion of the
Land, as Lender reasonably requests from time to time. In this regard, promptly upon request of Lender, Borrower shall deliver to Lender counterparts and/or conditional assignments as security of any and all construction contracts, receipted
invoices, bills of sale, statements, conveyances and other agreements, documents, and instruments of any nature relating to the Project or under which Borrower claims title to any materials or supplies used or to be used in the Project. Also, in
this regard, promptly upon request of Lender, Borrower shall deliver to Lender a complete list of all contractors, subcontractors, material suppliers, other vendors, artisans and laborers performing work or services or providing materials or
supplies for the Project. 
 6.5 LAW; JUDGMENTS; MATERIAL AGREEMENTS; APPROVALS AND PERMITS. Borrower shall comply with all laws, ordinances,
regulations and rules (federal, 

  

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state, and local) and all judgments, orders and decrees of any arbitrator, other private adjudicator or Governmental Authority relating to Borrower, the
Project or the other assets, business, operations or property of Borrower. Borrower shall comply with all material agreements, documents and instruments to which Borrower is a party or by which Borrower, the Project or any of the other assets or
property of Borrower are bound or affected. Borrower shall not cancel or terminate any such agreements, documents or instruments if to do so could result in a Material Adverse Change. Borrower shall comply with all Requirements (including, without
limitation, as applicable, requirements of the Federal Housing Administration and the Veterans Administration) and all conditions and requirements of all Approvals and Permits. Borrower shall obtain and maintain in effect from time to time all
Approvals and Permits required for the development and marketing of the Project and the business activities and operations then being conducted by Borrower. Borrower shall immediately provide Lender with written notice and explanation of any
litigation involving Borrower that, in Lender’s reasonable judgment if determined adversely to Borrower, would constitute a Material Adverse Change in Borrower, Guarantor or any Project. In the event of any dispute that, in the good faith
opinion of Lender, could result in a Material Adverse Change or the fulfillment of any condition precedent or covenant herein, Lender may agree to make Advances for the account of Borrower without prejudice to Borrower’s rights, if any, to
recover such funds from the party to whom paid. Such agreement or agreements may take any form that Lender in its reasonable discretion deems proper, including, without limitation, agreements to indemnify a title insurer against possible assertion
of lien claims and agreements to pay disputed amounts to contractors in the event Borrower is unable or unwilling to pay the same. All sums paid or agreed to be paid pursuant to such agreement shall be for the account of Borrower and shall be
charged as an Advance. 
 6.6 TAXES AND OTHER DEBT. Borrower shall pay and discharge (a) before delinquency all taxes, assessments, and
governmental charges or levies imposed upon it, upon its income or profits, or upon any property belonging to it, (b) when due all lawful claims (including, without limitation, claims for labor, materials, and supplies), which, if unpaid, might
become a Lien or Encumbrance upon any of its assets or property, and (c) all its other Debt, when due; provided, however, Borrower may in good faith contest any such claim by appropriate administrative or judicial proceedings so long as:

 (a) Borrower has, in Lender’s judgment, a reasonable basis for such contest; 
 (b) Borrower pays, prior to the date any interest or penalties will attach thereto, that portion of any such claim that Borrower does not
contest; 
 (c) Borrower’s contest will not result in or pose any risk of the seizure, sale or imposition of a lien upon
any Property or any Project or any portion thereof; 
 (d) Borrower delivers to Lender such bond or other security as Lender
may require in connection with such contest; 
 (e) Borrower at all times prosecutes such contest with due diligence; and

  

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 (f) Borrower pays, prior to the date any interest or penalties will attach thereto, the
amount of the disputed claim that is determined to be due and owing by Borrower. 
 6.7 ASSETS AND PROPERTY. Borrower shall maintain, keep,
and preserve all of its assets and property (tangible and intangible) necessary or useful in the proper conduct of its business and operations in good working order and condition, ordinary wear and tear excepted. Borrower shall promptly obtain and
maintain, from time to time at its own expense, all Approvals and Permits as may be required to enable it to comply with its obligations hereunder and under the other Loan Documents. 
 6.8 INSURANCE. Borrower shall obtain and maintain the following insurance and pay all premiums related thereto as and when they become due in connection
with each and every Project financed hereunder: 
 6.8.1 PROPERTY. Insurance of all Collateral against damage or loss by fire,
lightning, and other perils, on an all risks basis, such coverage to be in an amount not less than the full insurable value of such Collateral on a replacement cost basis. Such policy will be written on an all risks basis, with no coinsurance
requirement, and will contain a provision granting the insured permission to complete and/or occupy the Project. 
 6.8.2
LIABILITY. Commercial general liability insurance protecting Borrower and Lender against loss or losses from liability imposed by law or assumed in any agreement, document, or instrument and arising from bodily injury, death, or property damage with
a limit of liability of not less than Two Million Dollars ($2,000,000.00) per occurrence and Ten Million Dollars ($10,000,000.00) general aggregate. Also, “umbrella” excess liability insurance in an amount not less than Ten Million Dollars
($10,000,000.00) or such greater amount as Lender may reasonably require. Such policies must be written on an occurrence basis so as to provide blanket contractual liability, broad form property damage coverage, and coverage for products and
completed operations. If required by Lender, Borrower shall also obtain and maintain business motor vehicle liability insurance protecting Borrower and Lender against loss or losses from liability relating to motor vehicles owned, non-owned, or
hired and used by Borrower or its agents and employees, with a limit of liability of not less than One Million Dollars ($1,000,000.00) (combined single limit for personal injury (including bodily injury and death) and property damage). 

6.8.3 FLOOD. A policy or policies of flood insurance in the maximum amount of flood insurance available with respect to the Project
under the Flood Disaster Protection Act of 1973, as amended. This requirement will be waived with respect to portions of the Project upon presentation of evidence satisfactory to Lender that no such portion of the Project in question is or will be
located within an area identified by the U.S. Department of Housing and Urban Development as having special flood hazards. 
 6.8.4 WORKER’S COMPENSATION. Worker’s compensation insurance, disability benefits insurance and such other forms of insurance as are required by law covering loss resulting from injury, sickness, disability or death of employees
of Borrower. 
  

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 6.8.5 CONTRACTORS. During the construction of the Improvements, any and all contractors
and subcontractors will be required to carry liability insurance of the type and providing the minimum limits set forth below: 
 (a) WORKER’S COMPENSATION. Worker’s compensation insurance, disability benefits insurance and each other form of insurance which such contractor is required by law to provide, covering loss resulting from injury, sickness,
disability or death of employees of the contractor who are located on or assigned to the construction of the Improvements. 
 (b) LIABILITY. Comprehensive general liability insurance coverage for: 
 Property and Operations 
 Products and Completed Operations 
 Contractual Liability 
 Personal Injury Liability 
 Broad Form Property Damage 
 (including completed operations) 
 Explosion Hazard 
 Collapse Hazard

 Underground Property Damage Hazard 
 Such policy will have a limit of liability of not less than One Million Dollars ($1,000,000.00) (combined single limit for personal injury, including bodily injury or death, and property damage). 
 6.8.6 ADDITIONAL INSURANCE. Such other policies of insurance as may be specified in Lender’s insurance letter and as Lender may
reasonably request in writing. All policies for required insurance will be in form and substance satisfactory to Lender in its absolute and sole discretion. All required insurance will be procured and maintained in financially sound and generally
recognized responsible insurance companies selected by Borrower and approved by Lender. Deductibles under insurance policies required pursuant to this Section 6.8 will not exceed the amounts approved from time to time by Lender. Such companies
must be authorized to write such insurance in the states in which the Collateral is located. Each company will have a rating acceptable to Lender in Lender’s sole and absolute discretion. All property policies evidencing required insurance will
name Lender as first mortgagee and loss payee. All liability policies evidencing required insurance will name Lender as additional insured. The policies will not be cancelable as to the interests of Lender due to the acts of Borrower. The policies
will provide for at least thirty (30) days prior written notice of the cancellation or modification thereof to be given to Lender. A certified copy of each insurance policy or, if acceptable to Lender in its sole and absolute discretion,
certificates of insurance evidencing that such insurance is in full force and effect, will be delivered to Lender, together with proof of the payment of the premiums thereof. Prior to the expiration of each such policy, Borrower shall furnish Lender
evidence that such policy has been renewed or replaced in the form of the original or a certified copy of the renewal or replacement policy or, if acceptable to Lender in its sole and absolute discretion, a certificate reciting that there is in full
force and 

  

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effect, with a term covering at least the next succeeding calendar year, insurance of the types and in the amounts required in this Section 6.8.

 6.9 COMMENCEMENT AND COMPLETION. Borrower shall cause construction of the Improvements to be prosecuted and completed in good faith, with
due diligence and without delay, subject to any Force Majeure Events; provided, however, that in all events all Improvements shall be constructed and completed prior to the applicable Lot Advance Maturity Date or applicable Home Advance Maturity
Date for the subject Lot or Home for which said Improvements are being constructed. Upon demand by Lender, Borrower shall correct any defect in the Improvements or any material departure from any applicable Requirements or, to the extent not
previously approved in writing by Lender, the applicable plans and specifications. Borrower understands and agrees that the inspection of the Improvements on behalf of Lender, the review by Lender or others acting on behalf of Lender of Draw
Requests and related documents and information, the making of Advances by Lender and any other actions by Lender will be for the sole benefit of Lender and will not be a waiver of the right to require compliance with this Section 6.9. In the
event that construction of any Improvements for any Qualified Project is abandoned or halted prior to completion for any period of fifteen (15) consecutive days for any cause not a Force Majeure Event (or for any period up to, in the aggregate,
ninety (90) consecutive days as a result of one or more Force Majeure Events) or otherwise beyond the reasonable control of Borrower or any contractor or subcontractor, or not completed by the applicable Maturity Date, then such Qualified
Project shall cease to be part of the Borrowing Base until a cure thereof shall have occurred. 
 6.10 RIGHTS OF INSPECTION; AGENCY.

 6.10.1 GENERALLY. Lender and its respective agents, employees and representatives will have the right, at the sole cost and
expense of Borrower, at any time and from time to time to enter upon the Collateral in order to inspect the Collateral and all aspects thereof, including, without limitation, in order to determine if Collateral is property classified for Borrowing
Base purposes. All inspections by Lender are for the sole purpose of protecting the security of Lender and are not to be construed as a representation by Lender that there has been compliance with applicable plans and specifications, the applicable
Requirements, or that the Project is free of defects in materials or workmanship. Borrower may make or cause to be made such other independent inspections as Borrower may desire for its own protection. Based on such inspections, Lender may adjust
the Borrowing Base and other calculations pursuant to this Agreement. 
 6.10.2 INSPECTOR(S). Without limiting the rights of
Lender pursuant to Section 6.10, Lender may employ outside inspectors to perform some or all of the inspections described in Section 6.10 and may also elect to have Lender’s own employees perform some or all of such inspection duties
and review the reports of outside inspectors. 
 6.11 VERIFICATION OF COSTS. Lender will have the right at any time and from time to time to
review and verify all Hard Costs and Soft Costs incurred by Borrower. 
 6.12 USE OF PROCEEDS. Borrower shall use proceeds of Advances only
for the purposes described herein. 
  

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 6.13 COSTS AND EXPENSES OF BORROWER’S PERFORMANCE OF COVENANTS AND SATISFACTION OF CONDITIONS.
Borrower shall perform all of its obligations and satisfy all conditions under the Loan Documents at its sole cost and expense. 
 6.14
NOTIFICATION. Borrower shall promptly disclose to Lender the occurrence of: (a) any default by Borrower under or pursuant to the terms and conditions of any material Debt owed by Borrower to any Person, whether now existing or hereafter
arising; (b) the occurrence of any event or other circumstance of which Borrower has knowledge and that with the giving of notice or the passage of time would constitute a default referred to in clause (a) above; (c) any Material
Adverse Change; (d) any change in the Requirements of any Governmental Authority that would materially and adversely affect Borrower’s ability to develop any Project; (e) any action or proceeding which is instituted by or against
Borrower or any Project in any Federal or state court or before any Governmental Authority, federal, state or local, foreign or domestic, or any such actions or proceedings are threatened against Borrower or any Project which, in any such case, if
adversely determined, would cause a Material Adverse Change; and (f) the occurrence of any Event of Default or Unmatured Event of Default. 
 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
	  	Maximum Total Liabilities-to-Tangible Net Worth Ratio	  	Not in excess of 3.25:1.0
			
	 Guarantor
	  	Minimum Tangible Net Worth	  	Not less than the sum of (a) $200,000,000, plus (b) 50% of quarterly net income after June 30, 2004
			
	 Guarantor
	  	Minimum Liquidity	  	Not less than $10,000,000

 6.15.1 NO OTHER DEBT. There shall be no third party Debt on the Property or any
Project, other than trade debt. Lender shall have the right, but not the obligation, to declare a default under the Loan if there are any material uncured monetary or non-monetary defaults on any and all trade debt obligations (including without
limitation any other loans by Lender) of Borrower, which in Lender’s reasonable judgment will materially impair the ability of Borrower to perform under the terms of this Agreement, the Note or the Security Documents. 
 6.15.2 NO OTHER LOAN DEFAULTS. Borrower shall not be in default under any “Other Loan.” For purposes of this
Section 6.15.2, an “Other Loan” shall mean any loan by Lender, or any affiliate or subsidiary of Lender, that is made to Borrower or that is guaranteed by Borrower. It is the expressed intent of Borrower to cross-default this Loan
with any Other Loan, such that (a) any Event of Default under this Loan shall constitute a default under each and every Other Loan, and (b) any default under each and every Other Loan shall constitute an Event of Default under this Loan.

  

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 6.16 BOOKS AND RECORDS; NAMES; PLACE OF BUSINESS AND CHIEF EXECUTIVE OFFICE. Borrower shall give Lender
thirty (30) days prior written notice of any change in the location of its books and records or its sole place of business or chief executive office. 
 6.17 PROCEEDS OF PURCHASE CONTRACTS. 
 6.17.1 NET SALES PROCEEDS. All payments of Net Sales
Proceeds under Purchase Contracts shall be paid directly to Lender to be applied by Lender to the payment of the Obligations in such order as Lender may determine in its sole and absolute discretion. 
 6.17.2 PAYMENTS TO LENDER. If Borrower collects or receives any amounts payable to Lender pursuant to this Section 6.17, Borrower
shall forthwith, upon receipt, transmit and deliver to Lender in the form received all cash, checks, drafts, chattel paper, and other instruments or writings for the payment of money (endorsed, where required, so that such items may be collected by
Lender). Any such proceeds which may be so received by Borrower will not be commingled with any other of Borrower’s funds or property, but will be held separate and apart from Borrower’s own funds or property and upon express trust for
Lender until delivery is made to Lender. 
 7. BORROWER NEGATIVE COVENANTS. Until the Commitment terminates in full and the Obligations are paid and
performed in full, Borrower agrees that, unless Lender otherwise agrees in writing in Lender’s absolute and sole discretion: 
 7.1
CORPORATE RESTRICTIONS. Borrower will not issue any capital stock in Borrower or grant any option, right of first refusal, warrant or other right to purchase any capital stock in Borrower. Borrower will not be dissolved or liquidated. Borrower will
not amend, modify, restate, supplement or terminate any of its Organizational Documents. Borrower will not consolidate or merge with any corporation, any other limited partnership, any limited liability company, or any other Person. 
 7.2 NAME, FISCAL YEAR, ACCOUNTING METHOD, AND LINES OF BUSINESS. Borrower will not change its name, fiscal year or method of accounting. Borrower will
not directly engage in any business other than the lines of business in which Borrower is engaged on the date of this Agreement, discontinue any existing lines of business that are material to the business or operations of Borrower or substantially
alter its method of doing business. 
 7.3 CHANGE IN OWNERSHIP. Borrower will not suffer to occur or exist, whether occurring voluntarily or
involuntarily, any change in, or Lien or Encumbrance with respect to, the legal or beneficial ownership of any capital stock in Borrower. 
 7.4 [INTENTIONALLY DELETED] 
 7.5 LIENS AND ENCUMBRANCES. Except for (i) Permitted Exceptions, (ii) Liens and
Encumbrances securing the Loan, and (iii) involuntary Liens and Encumbrances being contested in good faith and through appropriate proceedings and otherwise in accordance with 

  

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the applicable conditions of the Loan Documents, Borrower shall not grant or suffer to exist any Lien or Encumbrance upon any Property. 
 7.6 INDEBTEDNESS. Borrower shall not assume, create, incur or permit to exist any Debt for any Property, except (i) the Obligations, and
(ii) trade obligations and normal accruals in the ordinary course of business not yet due and payable. Borrower shall not assume, create, incur or permit to exist any contingent liabilities for any Property, including, without limitation,
contingent reimbursement obligations under any letters of credit (other than the Letters of Credit); provided, however, that Borrower may incur and permit to exist contingent liabilities resulting from the issuance of payment and performance bonds
related to construction of the Improvements. 
 7.7 ACQUISITION OF ASSETS. Borrower shall not acquire by purchase, lease or otherwise all or
substantially all the assets of any other Person, if to do so would materially adversely affect its business or operations. 
 8. EVENTS OF DEFAULT AND
REMEDIES. 
 8.1 EVENTS OF DEFAULT. The occurrence of any one (1) or more of the following shall constitute an Event of Default under
this Agreement: 
 8.1.1 Failure by Borrower to pay any monetary amount when due under any Loan Document and the expiration of
ten (10) days after written notice of such failure by Lender to Borrower. 
 8.1.2 Failure by Borrower to perform any
Obligation not involving the payment of money, or to comply with any other term or condition applicable to Borrower under any Loan Document, and the expiration of thirty (30) days after written notice of such failure by Lender to Borrower,
provided that if Borrower cannot reasonably cure such failure within such thirty (30) day period, such thirty (30) day period shall be extended for a reasonable period not in excess of ninety (90) days from the date of Lender’s
notice to cure such failure provided that Borrower shall have commenced such cure within such thirty (30) day period and shall diligently thereafter proceed to effect such cure. 
 8.1.3 Any representation or warranty by Borrower in any Loan Document is materially false, incorrect or misleading as of the date made.

 8.1.4 Borrower (i) is unable or admits in writing its inability to pay its monetary obligations as they become due,
(ii) makes a general assignment for the benefit of creditors, or (iii) applies for, consents to or acquiesces in the appointment of a trustee, receiver or other custodian for itself or its property or any part thereof, or in the absence of
such application, consent or acquiescence, a trustee, receiver or other custodian is appointed for Borrower or the property of Borrower or any part thereof and such appointment is not discharged within sixty (60) days. 
 8.1.5 Commencement of any case under the Bankruptcy Code, Title 11 of the United States Code or commencement of any other bankruptcy
arrangement, reorganization, 

  

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receivership, custodianship or similar proceeding under any federal, state or foreign law by or against Borrower, and such case in not discharged within
sixty (60) days of filing. 
 8.1.6 Borrower fails to pay when due (after the expiration of any applicable notice and
cure period) any monetary obligation (other than the Loan), whether such obligation be direct or contingent, to any Person that, in Lender’s reasonable judgment if determined adversely to Borrower, would constitute a Material Adverse Change in
Borrower, Guarantor or any Project, provided that Borrower may in good faith contest any such monetary obligation by appropriate administrative or judicial proceedings as long as (i) the contesting party has, in Lender’s judgment, a
reasonable basis for such contest, (ii) the contesting party pays when due any portion of such monetary obligation that such party does not contest, (iii) the contesting party’s contest will not result in or pose any risk of the
seizure, sale or imposition of a lien upon the Property or the Project or any portion thereof, or the contesting party has posted appropriate lien release bonds as permitted by applicable law in order to cause any such lien to be released from the
Property or the Project, (iv) the contesting party delivers to Lender such bond or other security as Lender may require in connection with such contest, (v) the contesting party at all times prosecutes such contest with due diligence, and
(vi) the contesting party pays, promptly following a determination of the amount of such monetary obligation due and owing by Borrower. In the event that the contesting party does not make, promptly following a determination of the amount of
such monetary obligation due and owing by the contesting party, any payment required to be made pursuant to clause (vi) of the preceding sentence, an Event of Default shall have occurred and Lender may draw or realize upon any bond or other
security delivered to Lender in connection with the contest by Borrower, in order to make such payments. 
 8.1.7 Any
litigation or proceeding that, in Lender’s reasonable judgment if determined adversely to Borrower, would constitute a Material Adverse Change to Borrower, Guarantor or any Project, is commenced before any Governmental Authority against or
affecting Borrower, or the property of Borrower or any part thereof, and such litigation or proceeding is not defended diligently and in good faith by Borrower or is not discharged within sixty (60) days of filing. 
 8.1.8 A final judgment or decree for monetary damages or a monetary fine or penalty (not subject to appeal or as to which the time for
appeal has expired) is entered against Borrower by any Governmental Authority, which together with the aggregate amount of all other such judgments, decrees, fines and penalties against Borrower that remain unpaid or that have not been discharged or
stayed, would in Lender’s reasonable judgment constitute a Material Adverse Change in Borrower, Guarantor or any Project, and such judgment, decree, fine or penalty is not paid, discharged or stayed within thirty (30) days after the entry
thereof. 
 8.1.9 Commencement of any action or proceeding which seeks as one of its remedies the dissolution of Borrower, and
such action is not discharged within sixty (60) days of filing. 
 8.1.10 All or any part of the property of Borrower or
Guarantor, which would in Lender’s reasonable judgment constitute a Material Adverse Change in Borrower, Guarantor or any Project, is attached, levied upon or otherwise seized by legal process, and such attachment, levy or seizure is not
quashed, stayed or released within ninety (90) days of the date thereof. 
  

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 8.1.11 The occurrence of any prohibited transfer under any Deed of Trust, unless prior to
such transfer the holder of the Note has delivered to Borrower the written consent of such holder to such transfer. 
 8.1.12
The occurrence of any Event of Default, as such term is defined in any other Loan Document. 
 8.1.13 If Borrower, at any
time, ceases to manage the Projects financed hereunder. 
 8.1.14 Any Governmental Authority with jurisdiction over the
Property or any Project orders or requires that construction of any Improvements be stopped, in whole or in part, or any required approval, license or permit is withdrawn or suspended, and the order, requirement, withdrawal or suspension remains in
effect for a period of thirty (30) days, then the Qualified Project or Property to which the order, requirement, withdrawal or suspension relates shall not be a part of the Borrowing Base until such order, requirement, withdrawal or suspension
is no longer in effect. 
 8.1.15 Failure to deposit with Lender in cash or cash equivalents, as required herein, the amount
necessary to put the Loan “In Balance” (as required pursuant to Sections 2.1.6(d), 2.2.3(d), 2.3.4 and 2.4.5 above) within ten (10) days after Lender’s notice to Borrower that the Loan is not “In Balance,” or
any other failure to deposit the amount(s) necessary and required herein within ten (10) days after the date such amounts are required to be deposited. 
 Notwithstanding anything to the contrary in the foregoing, if a particular Event of Default arises solely as a result of a single Project, Borrower may cure such Event of Default by notifying Lender in writing, within the applicable time
period set forth above for curing such Event of Default, that Borrower has elected to remove that particular Project from the Borrowing Base; provided that if removal of such Project from the Borrowing Base causes the Loan to not be “In
Balance,” Borrower must also deposit the amount(s) necessary to bring the Loan “In Balance” within the applicable cure period. Even if Borrower so elects to remove a Project from the Borrowing Base, the release of such Project from
the lien of the Deed of Trust shall not occur unless all conditions for releasing property from the Deed of Trust set forth in Section 2.2.3(b) have been satisfied. 
 8.2 RIGHTS AND REMEDIES OF LENDER. 
 8.2.1 Notwithstanding any provision to the contrary
herein or any of the other Loan Documents, during the continuance of any Event of Default under this Agreement, or during the continuance of an Event of Default under any of the other Loan Documents: (i) Lender’s obligation to make further
Advances shall abate; and (ii) if the Event of Default shall not be cured within the applicable notice and cure periods, then Lender shall, at its option, have the remedies provided in the Loan Document breached by Borrower, including, without
limitation, the option to declare all outstanding indebtedness to be immediately due and payable without presentment, demand, protest or notice of any kind, and the following remedies: Lender’s obligation to make further Advances to Borrower
shall terminate; Lender may, at its 

  

 -72- 

 
option, apply any of Borrower’s funds in its possession to the outstanding indebtedness under the Note whether or not such indebtedness is then due;
Lender may exercise all rights and remedies available to it under any or all of the Loan Documents; and Lender shall have the right to cause an independent contractor selected by Lender to enter into possession of the Property and to perform any and
all work and labor necessary for the completion of the Project substantially in accordance with the Plans and Specifications and to perform Borrower’s obligations under this Agreement. All sums expended by Lender for such purposes shall be
deemed to have been Advanced to and borrowed by Borrower and shall be secured by the Deed of Trust on the Property. 
 (a)
Subject to the provisions of Sections 8.2.1(b) and 8.2.1(c) below, Lender and Borrower acknowledge and agree that in each instance in which a Project ceases to be a Qualified Project so as to be included in the Borrowing Base, either due to
(i) the failure of or non-compliance with any representations and warranties under Sections 5.1.7, 5.1.9, 5.1.13-5.1.16, or (ii) the failure of or non-compliance with any affirmative covenants under Sections 6.3.1, 6.3.3-6.3.9,
6.9 or (iii) the failure to cure a default under Section 8.1.14, then such removal of the Project from the Borrowing Base shall not in and of itself constitute an Event of Default under this Agreement. 
 (b) Notwithstanding any other provision of this Agreement to the contrary, if any adjustment in the Borrowing Base shall arise from a
Project ceasing to be a Qualified Project for the purpose of inclusion in the Borrowing Base and Borrower shall fail or refuse to timely make any principal payment required as a result of such adjustment, then such failure and/or refusal to timely
make such payment shall constitute an Event of Default under this Agreement. 
 (c) Notwithstanding any other provision of
this Agreement to the contrary, any failure or non-compliance by Borrower with any representation, warranty, covenant (including without limitation the financial covenants set forth in Section 6.15 above), duty, obligation, promise or agreement
set forth herein shall constitute an Event of Default under this Agreement unless such failure or non-compliance is (i) cured as provided herein, (ii) expressly waived in writing by Lender, or (iii) subject to the express provisions
of Section 8.2.1(a) above. 
 8.2.2 Borrower hereby constitutes and appoints Lender, or an independent contractor
selected by Lender, as its true and lawful attorney-in-fact with full power of substitution, for the purposes of completion of each and every Project and performance of Borrower’s obligations under this Agreement in the name of Borrower, and
hereby empowers such attorney-in-fact to do any or all of the following upon the occurrence of an Event of Default (it being understood and agreed that this power of attorney shall be deemed to be a power coupled with an interest which cannot be
revoked until repayment of the Loan): 
 (a) To use any of the funds of Borrower, including any balance of the Loan, as
applicable, and any funds which may be held by Lender for Borrower, for the purpose of effecting completion of the Improvements in the manner called for by the Plans and Specifications; 
  

 -73- 

 (b) To make such additions, changes and corrections in the Plans and Specifications as
shall be necessary or desirable to complete the Improvements in substantially the manner contemplated by the Plans and Specifications; 
 (c) To employ any contractors, subcontractors, agents, architects and inspectors required to complete the Improvements; 
 (d) To employ attorneys to defend against attempts to interfere with the exercise of power granted hereby; 
 (e) To pay, settle or compromise all existing bills and claims which are or may be liens against the Property, the Improvements or the Project or may be necessary or desirable for the completion of the Improvements or
clearance of objections to or encumbrances on title; 
 (f) To execute all applications and certificates in the name of
Borrower which may be required by any other construction contract; 
 (g) To prosecute and defend all actions or proceedings
in connection with the Project, and to take such action, require such performance and do any and every other act as is deemed necessary with respect to the completion of the Improvements which Borrower might do on its own behalf; and 
 (h) To let new or additional contracts (to the extent not prohibited by existing contracts) to employ watchmen and erect security fences
to protect the Project from injury, and to take such action and require such performance as Lender deems necessary under any of the bonds or insurance policies to be furnished hereunder, to make settlements and compromises with the sureties or
insurers thereunder, and in connection therewith to execute instruments of release and satisfaction. 
 9. BANK’S OBLIGATIONS TO BORROWER ONLY AND
DISCLAIMER BY BANK. No Person, other than Borrower and Lender, shall have any rights hereunder or be a third-party beneficiary hereof. Lender is not a joint venturer or a partner with Borrower. Prior to an Event of Default and thereafter until
Lender elects in writing to assume specific obligations of Borrower, Lender shall not be obligated to any Person providing labor, materials or other services for the Project and payment of funds from Advances directly to any such Persons shall not
give or be a recognition of any third-party beneficiary status. 
 10. NO BROKERS. Except as disclosed by Borrower to Lender in writing prior to the date of
this Agreement, Borrower and Lender represent and warrant to the other that it knows of no broker’s or finder’s fee due in respect of the transaction described in this Agreement and that it has not used the services of a broker or a finder
in connection with this transaction. 
 11. PROVISIONS IN THE NOTE GOVERN THIS AGREEMENT. This Agreement is subject to certain terms and provisions in the
Note, to which reference is made for a statement of such terms and provisions. 
  

 -74- 

 12. 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. 
 13. MISCELLANEOUS. 
 13.1 ASSIGNMENT. 
 Borrower shall not assign this Agreement or any interest it may have in the monies due hereunder, without the prior written consent of Lender, which
consent may be granted or withheld in Lender’s sole and absolute discretion. Notwithstanding the foregoing, in the event of any such assignment, Lender may nevertheless at its option continue to make Advances under this Agreement to Borrower or
to those who succeed to Borrower’s title, and all sums shall be deemed to be Advances under this Agreement, and not to be modifications hereof, and shall be secured by the Deed of Trust. 
 13.2 NOTICES. All notices, requests, demands and consents to be made hereunder to the parties hereto shall be in writing and shall be delivered by hand
or sent by registered mail or certified mail, postage prepaid, return receipt requested, through the United States Postal Service to the addresses shown below or such other address which the parties may provide to one another in accordance herewith.
Such notices, requests, demands and consents, if sent by mail, shall be deemed given two (2) Business Days after deposit in the United States mail, and if delivered by hand, shall be deemed given when delivered. 
  

			
	If to Borrower:	  	 WILLIAM LYON HOMES, INC.
 4490 Von Karman Avenue (P.O.
Box 7520)
 Newport Beach, California 92658-7520
 Attention:
Richard Robinson and Michael Grubbs

		
	With a copy to:	  	 IRELL & MANELLA LLP
 840 Newport Center Drive,
Suite 400
 Newport Beach, California 92660-6324
 Attention: John
Nakashima, Esq.

		
	If to Lender:	  	 COMERICA BANK
 75 East Trimble Road
 MC 4770
 San Jose, California 95131
 Attention: Ms. Lorri Field

		
	With a copy to:	  	 COMERICA BANK
 611 Anton Boulevard, Fourth
Floor
 Mail Code 4410
 Costa Mesa, California 92626
 Attention: Mr. David Plattner

  

 -75- 

			
	And a copy to:	  	 SHEPPARD, MULLIN, RICHTER & HAMPTON LLP
 650 Town Center Drive, 4th Floor
 Costa Mesa, California 92626-1993
 Attention: Brent R. Liljestrom, Esquire

 13.3 AUTHORITY TO FILE NOTICES. Upon the occurrence of any Event of Default, Borrower irrevocably
appoints Lender as its attorney-in-fact, with full power of substitution, to file or record, at Borrower’s cost and expense and in Borrower’s name, any notices of completion, notices of cessation of labor or any other notices that Lender
considers necessary or desirable to protect its security. 
 13.4 INCONSISTENCIES WITH THE LOAN DOCUMENTS. In the event of any
inconsistencies between the terms of this Agreement and the terms of any of the other Loan Documents, the terms of this Agreement shall govern and prevail. 
 13.5 NO WAIVER. No Advance shall constitute a waiver of any conditions to Lender’s obligation to make further Advances nor, in the event Borrower is unable to satisfy any such conditions, shall any such waiver
have the effect of precluding Lender from thereafter declaring such inability to constitute an Event of Default under this Agreement. 
 13.6
LENDER APPROVAL OF INSTRUMENTS AND PARTIES. All proceedings taken in accordance with transactions provided for herein, and all surveys, appraisals and documents required or contemplated by this Agreement and the Persons responsible for the execution
and preparation thereof, shall be satisfactory to and subject to approval by Lender. Lender’s counsel shall be provided with copies of all documents which they may reasonably request in connection with the Agreement. 
 13.7 LENDER DETERMINATION OF FACTS. Lender shall at all times be free to establish independently, to its satisfaction, the existence or nonexistence of
any fact or facts, the existence or nonexistence of which is a condition of this Agreement. 
 13.8 INCORPORATION OF PREAMBLE: RECITALS AND
EXHIBITS. The preamble, recitals and exhibits hereto are hereby incorporated into this Agreement. 
 13.9 THIRD-PARTY CONSULTANTS. Lender may
hire such third-party consultants as it deems necessary, the costs of which shall be paid by Borrower, to provide the following services: (a) review final Plans and Specifications and final construction cost breakdown and the construction
schedule; (b) conduct compliance inspections with respect to the progress of construction of the Project and approve each element of a Draw Request relating to construction costs, and (c) perform such other services as may, from time to
time, be required by Lender. This obligation on the part of Borrower shall survive the closing of the Loan and the repayment thereof. Borrower hereby authorizes Lender, in its discretion, to pay such expenses, charges, costs and fees at any time by
an Advance, and to the extent the applicable Loan Budget category is insufficient, such expenses, charges, costs and fees shall be paid by Borrower from its own funds. 
  

 -76- 

 13.10 PAYMENT OF EXPENSES. Borrower shall pay all taxes and assessments and all expenses, charges, costs
and fees provided for in this Agreement or relating to the Loan or construction of the Improvements, including, without limitation, any fees incurred for recording or filing any of the Loan Documents, title insurance premiums and charges, tax
service contract fees, fees of any consultants, Lender’s processing and closing fees, reasonable fees and expenses of Lender’s counsel, printing, photostatting and duplicating expenses, air freight charges, escrow fees, costs of surveys,
premiums of hazard insurance policies and surety bonds and fees for any appraisal, appraisal review, market or feasibility study required by Lender. Borrower hereby authorizes Lender to make Advances to pay such expenses, charges, costs and fees
notwithstanding that Borrower may not have requested an Advance of such amount, provided that Borrower acknowledges that Lender has no obligation to disburse amounts listed under “Borrower’s Equity” on the A&D Budget or the Home
Construction Budget. Such Advances shall be added to the outstanding principal balance of the Note. The authorization hereby granted shall be irrevocable, and no further direction or authorization from Borrower shall be necessary for Lender to make
such Advances. However, the provision of this Section 13.10 shall not prevent Borrower from paying such expenses, charges, costs and fees from its own funds. All such expenses, charges, costs and fees shall be Borrower’s obligation
regardless of whether or not Borrower has requested and met the conditions for an Advance. The obligations on the part of Borrower under this Section 13.10 shall survive the closing of the Loan and the repayment thereof. 
 13.11 DISCLAIMER BY LENDER. Lender shall not be liable to any contractor, subcontractor, supplier, laborer, architect, engineer or any other party for
services performed or materials supplied in connection with the Project. Lender shall not be liable for any debts or claims accruing in favor of any such parties against Borrower or others or against the Property or the Project. Borrower is not and
shall not be an agent of Lender for any purpose. Lender is not a joint venture partner with Borrower in any manner whatsoever. Prior to default by Borrower under this Agreement and the exercise of remedies granted herein, Lender shall not be deemed
to be in privity of contract with any contractor or provider of services to the Project, nor shall any payment of funds directly to a contractor, subcontractor or provider of services be deemed to create any third party beneficiary status or
recognition of same by Lender. Approvals granted by Lender for any matters covered under this Agreement shall be narrowly construed to cover only the parties and facts identified in any written approval or, if not in writing, such approvals shall be
solely for the benefit of Borrower. 
 13.12 RELEASE AND INDEMNITY. Borrower agrees to release and indemnify, defend and hold Lender harmless
from and against all liabilities, claims, actions, damages, costs and expenses (including all reasonable legal fees and expenses of Lender’s counsel) arising out of or resulting from construction of the Improvements, including any defective
workmanship or materials; any failure to satisfy any of the Requirements; Lender’s performance of any act permitted under the Loan Documents (excluding Lender’s willful misconduct); breach of any representation or warranty made or given by
Borrower to Lender; breach of any obligation of Borrower contained in any of the Loan Documents; or any claim or cause of action of any kind by any party that Lender is liable for any act or omission committed or made by Borrower or any other Person
in connection with the ownership, sale, operation or development of the Property or any Project or the construction of any Improvements, whether on account of any theory of derivative liability, comparative negligence or otherwise. Upon demand by
Lender, Borrower 

  

 -77- 

 
shall defend any action or proceeding brought against Lender arising out of or alleging any claim or cause of action covered by this indemnity, all at
Borrower’s own cost and by counsel to be approved by Lender in the exercise of its reasonable judgment. In the alternative, Lender may elect to conduct its own defense at the expense of Borrower. The provisions of this Section 13.12 shall
survive the repayment of the Loan. Notwithstanding the foregoing, Borrower shall not be obligated to release and indemnify, defend and hold Lender harmless from and against any liabilities, claims, actions, damages, costs and expenses arising out of
or resulting from any construction activities that take place after Lender has acquired the applicable Property or Project by foreclosure or acceptance of a deed in lieu thereof. 
 13.13 TITLES AND HEADINGS. The titles and headings of sections of this Agreement are intended for convenience only and shall not in any way affect the
meaning or construction of any provision of this Agreement. 
 13.14 BROKERS. Borrower and Lender represent to each other that neither of
them knows of any brokerage commissions or finders’ fee due or claimed with respect to the transaction contemplated hereby. Borrower and Lender shall indemnify and hold harmless the other party from and against any and all loss, damage,
liability and expense, including costs and reasonable attorneys’ fees, which such other party may incur or sustain by reason of or in connection with any misrepresentation by the indemnifying party with respect to the foregoing. 
 13.15 CHANGE, DISCHARGE, TERMINATION OR WAIVER. No provision of this Agreement may be changed, discharged, terminated or waived except in writing signed
by the party against whom enforcement of the change, discharge, termination or waiver is sought. No failure on the part of Lender to exercise and no delay by Lender in exercising any right or remedy under the Loan Documents or under the law shall
operate as a waiver thereof. 
 13.16 GOVERNING LAW. This Agreement (and any and all disputes between the parties arising directly or
indirectly from the transaction or from the lending relationship contemplated hereunder) shall be governed by and construed in accordance with the laws of the State of California. 
 13.17 ADVANCES IN EXCESS OF LOAN AMOUNT. In the event the total Advances by Lender exceed the amount of the Loan, the total of all Advances shall be
secured by the Deed of Trust. All other sums expended by Lender pursuant to this Agreement or any other Loan Documents shall be deemed to have been paid to Borrower and shall be secured by, among other things, the Deed of Trust. 
 13.18 PARTICIPATIONS. Subject to the limitations set forth herein, Lender may at any time sell, assign, grant participations in, or otherwise transfer to
any other Person (each a “Participant”) all or part of the indebtedness of Borrower outstanding under this Agreement or the Note. However, so long as no Event of Default or Unmatured Event of Default has occurred and is continuing, Lender
must obtain Borrower’s prior consent (which consent will not be unreasonably withheld) to such proposed transfer. Borrower hereby acknowledges and agrees that any such transfer will give rise to each Participant becoming a co-lender and an
equitable owner of an undivided fractional interest in the Loan and the Loan Documents, with Comerica Bank (“Comerica”), acting as the sole administrative agent for all Participants as co-lenders; 

  

 -78- 

 
provided, however, that after any such disposition, as between Borrower and Lender under the Loan Documents, Comerica has the sole authority to bind the
co-lenders under the Loan Documents, and Borrower shall have the right and the duty to continue to deal solely with Comerica concerning any part of the Loan in the same manner as if Comerica were the sole owner thereof and as if no sale of any
participation interest had occurred. Subject to the foregoing, Borrower agrees and consents to Comerica’s sale or transfer, whether now or later, of one (1) or more participation interests in the Loan to one (1) or more Participants,
whether related or unrelated to Lender, with all references in the Loan Documents to Lender (together with all participants, successors and assigns) to include all such Participants as co-lenders hereunder. Lender may provide, without any limitation
whatsoever, to any one (1) or more Participants, or potential Participant, any information or knowledge Lender may have about Borrower or about any other matter relating to the Loan, and Borrower waives any rights to privacy it may have with
respect to such matters as may be disclosed to said Participants or potential Participants. Borrower additionally waives any and all notices of sale of participation interests, as well as all notices of any repurchase of a participation interest.
Borrower also agrees that any Participant will be considered as the absolute owner of such participation interest in the Loan and will have all the rights granted under the intercreditor agreement and/or other agreements between Lender and
Participant governing the sale of such participation interest. Subject to the foregoing, Borrower further waives all rights of offset or counterclaim (excluding any rights or counterclaims arising from the gross negligence or willful misconduct of
or breach of this Agreement by Comerica) that it may have now or later against Lender or against any Participant and unconditionally agrees that either Lender or such Participant, as provided in the applicable intercreditor agreement, may enforce
Borrower’s obligations under the Loan irrespective of the failure or insolvency of any holder of any interest in the Loan. In no event shall any sale, assignment or participation in the Loan result in any delay or change in the requirements for
Advances to Borrower or alter any of Borrower’s or Lender’s obligations under this Agreement or the other Loan Documents. 
 13.19
TIME IS OF THE ESSENCE. Time is of the essence of this Agreement. 
 13.20 ATTORNEYS’ FEES. Borrower shall promptly pay to Lender from
Borrower’s own funds or from the proceeds of the Loan, upon demand, with interest thereon from the date of demand at the Default Interest Rate, reasonable attorneys’ fees, expert witness fees and all costs and other expenses paid or
reasonably incurred by Lender in enforcing or exercising its rights or remedies created by, connected with or provided for in this Agreement or any of the other Loan Documents, and payment thereof shall be secured by the Deed of Trust. If at any
time Borrower fails, refuses or neglects to do any of the things herein provided to be done by Borrower, Lender shall have the right, but not the obligation, to do the same but at the expense and for the account of Borrower. The amount of any moneys
so expended or obligations so incurred by Lender, together with interest thereon at the Default Interest Rate, shall be repaid to Lender forthwith upon written demand therefor and payment thereof shall be secured by the Deed of Trust. 
 13.21 SIGNS. Throughout the term of the Loan, Lender shall have the right to erect one or more signs on the Project indicating its provision of financing
for the Project, and Lender shall also have the right to publicize its financing of the Project as Lender may deem appropriate. 
  

 -79- 

 13.22 SUBORDINATION TO CERTAIN EASEMENTS, DEDICATIONS AND RESTRICTIONS. Lender agrees to subordinate the
lien and charge of the Deed of Trust to any easements for any public utility purposes, drainage purposes or roadway purposes, or to any roadway park or common area dedication, as specifically approved by Lender and as required by the applicable
governmental authorities as a condition to its approval of the Final Map. In addition, Lender agrees to subordinate the lien and charge of the Deed of Trust to any CC&Rs which Borrower determines to be necessary or desirable in connection with
the Project and which CC&Rs are approved by Lender. In addition, Lender shall cause the lien of the Deed of Trust to be partially reconveyed for any portion of the Property approved by Lender which is required to be dedicated for roadway, park
and common area purposes. Lender agrees, without receipt of further consideration but at the sole cost and expense of Borrower, to execute and acknowledge any and all documents which are reasonably acceptable to Lender and which are reasonably
necessary for the processing and recording of any Final Map or are reasonably necessary to effectuate the purposes of this Section 13.21. 
 13.23 WAIVER OF JURY TRIAL. LENDER AND BORROWER EACH ACKNOWLEDGE AND AGREE THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT OR OUT OF THE LENDING RELATIONSHIP ESTABLISHED HEREBY WOULD BE BASED UPON DIFFICULT AND COMPLEX ISSUES, AND
THEREFORE, BORROWER AND LENDER EACH HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING (INCLUDING ACTIONS SOUNDING IN TORT) TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT RELATING HERETO OR ARISING
FROM THE TRANSACTION CONTEMPLATED HEREUNDER OR THE LENDING RELATIONSHIP ESTABLISHED HEREBY AND AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE AND NOT BY A JURY. 
 14. EXHIBITS. The following Exhibits are attached to this Agreement and incorporated herein by this reference: 
  

			
	EXHIBIT “A-1”	  	Legal Description (Bella Sera)
	EXHIBIT “B”	  	Form of Borrowing Base Certificate
	EXHIBIT “C”	  	Letter of Credit Request Form
	EXHIBIT “D”	  	Project Loan Request Form
	EXHIBIT “E”	  	Form of Letter of Credit Application
	EXHIBIT “F”	  	Form of Request for Admission of Zoned Land
	EXHIBIT “G”	  	Form of Request for Admission of Entitled Land or High End Entitled Land
	EXHIBIT “H”	  	Form of Request for Admission of Lots Under Development or High End Lots Under Development
	EXHIBIT “I”	  	Form of Request for Admission of Homes
	EXHIBIT “J”	  	List of Material Agreements
	EXHIBIT “K”	  	Required Project Information

 15. ADDITIONAL ADVANCES. Borrower agrees that any and all amounts advanced by Lender to protect the Collateral or
for any other purpose under the Loan Documents shall be 

  

 -80- 

 
considered Advances pursuant to this Agreement, and Borrower acknowledges that such Advances may be made by Lender in its sole and absolute discretion and
without any request or authorization of Borrower. Any such advances shall be immediately due and payable and shall bear interest at the Default Interest Rate until paid. Borrower acknowledges and agrees that such Advances may exceed the amount of
Advances otherwise available, and Borrower nonetheless agrees to pay such Advances as provided herein and agrees that such Advances shall be secured by all Collateral. 
 16. FINANCING STATEMENTS. Borrower hereby authorizes Lender to file such financing statements with the appropriate Governmental Authority which Lender determines is necessary to perfect its security interest in all
personal property Collateral. 
 DATED as of the date first above stated. 
  

			
	 LENDER:

	
	 COMERICA BANK

		
	 By:
	 	 /s/ David Plattner

		 	 David Plattner,
 Vice President – Western Market

 [Signatures continued on next page.] 
  

 -81- 

					
	 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

  

 -82- 

 EXHIBIT “A-1” 
 LEGAL DESCRIPTION 
 (Bella Sera) 
 That certain real property in the County of Nye, State of Nevada, more particularly described as follows: 
 Lots 18 through
23, 27 through 30 and 50 through 52 in Block 1; Lots 53 through 55, 57, 59 through 61 and 73 through 82 in Block 2; Lots 83, 84 and 88 in Block 3; Lots CE1 through CE13 and Parcels 2-1 and 2-2 of Merger Resubdivision Final Map For Mountain Falls
– Planning Area 3, Phase 1 as shown by map thereof recorded July 15, 2005 as File No. 630053, in the Office of the County Recorder of Nye County, Nevada. 
 TOGETHER WITH a non-exclusive easement of ingress and egress over and across the entry area and private streets therein, and a non-exclusive easement of use and enjoyment of the other Common Elements thereof (subject
to and as set forth in the Master Declaration of Covenants, Conditions and Restrictions and Reservation of Easements for Mountain Falls, recorded June 2, 2005 as File No. 626080, in the Office of the County Recorder of Nye County, Nevada).

 Assessor’s parcel No: 46-421-18 through 23, 27 through 41; 46-422-01 through 03, 05, 07 through 20; 46-571-01, 05 through 08, 28, 29, 30; 46-572-04.

  

 A-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 / (Deficieicy):
	  	$	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. 
 7. Attached hereto are the following request(s) for entry into the Borrowing Base of new [__] Zoned
Land, [__] Entitled Land, [__] High End Entitled Land, [__] Lots Under Development, [__] High End Lots Under Development, [__] Model Homes, [__] High End Model Homes, [__] Spec Homes, [__] High End Spec Homes,
[__] Presold Homes and/or [__] High End Presold Homes. 
 The undersigned hereby certifies to Lender that the foregoing information on this
Borrowing Base Certificate as of the Calendar Month ending                         , 200__, 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
                        , 2006 (“Loan Agreement”) by and between COMERICA BANK (“Lender”) and WILLIAM
LYON HOMES, INC., a California corporation (“Borrower”). 
  

					
	 WILLIAM LYON HOMES, INC., a California
 corporation

		
	 By:
	 	  
		 	 Name:
	 	  
		 	 Title:
	 	  

  

 B-2 

 EXHIBIT “C” 
 LETTER OF CREDIT REQUEST FORM 
 COMERICA BANK 
 75 East Trimble Road 
 MC 4770 
 San Jose, California 95131 
 Attn: Ms. Lorri Field 
 Ladies and Gentlemen: 
 Reference is hereby made to 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”). All capitalized terms used herein and not otherwise defined shall have the meanings
given to such terms in the Loan Agreement. 
 Pursuant to Section 2.3 of the Loan Agreement, Borrower hereby certifies as follows:

 1. LETTER OF CREDIT. The undersigned Borrower hereby requests a Letter of Credit to be issued under Section 2.3 of the Loan
Agreement: 
  

				
	 Principal Amount:
	  	$	___________________
	 Beneficiary:
	  	 	____________________
	 Issuance Date:
	  	 	____________________

 2. USE OF LETTER OF CREDIT. Such Letter of Credit shall be used for the following purposes
permitted by the Loan Agreement: 
 [Describe] 
 3. NO DEFAULT. Borrower certifies that Borrower is and will be in compliance with all covenants under the Loan Agreement after giving effect to the issuance of the Letter of Credit requested hereby. 
 4. REPRESENTATIONS TRUE. Each of the representations and warranties made by or on behalf of any of Borrower contained in the Loan Agreement, in the other
Loan Documents or in any document or instrument delivered pursuant to or in connection with the Loan Agreement was true and correct in all material respects as of the date as of which it was made and shall also be true and correct in all material
respects at and as of the issuance date for the Letter of Credit requested hereby, with the same effect as if made at and as of such issuance date (except to the extent of changes resulting from transactions contemplated or permitted by the Loan
Agreement and the other Loan Documents, changes occurring in the ordinary course of 

  

 C-1 

 
business that singly or in the aggregate are not materially adverse, changes previously disclosed in writing to and approved by Lender in writing and except
to the extent that such representations and warranties relate expressly to an earlier date) and no Event of Default or Unmatured Event of Default has occurred and is continuing. 
 5. OTHER CONDITIONS. All other conditions to the issuance of the Letter of Credit requested hereby set forth in Section 2.3 of the Loan Agreement
have been satisfied. 
 6. ISSUANCE DATE. Except to the extent, if any, specified by notice actually received by Lender prior to the issuance
date specified above, the foregoing representations and warranties shall be deemed to have been made by Borrower on and as of such issuance date. 
 7. DEFINITIONS. Terms defined in the Loan Agreement are used herein with the meanings so defined. 
 IN WITNESS WHEREOF, we have
executed this Letter of Credit Request as of this              day of
                        , 200__. 
  

					
	 WILLIAM LYON HOMES, INC., a California
 corporation

		
	 By:
	 	  
		 	 Name:
	 	  
		 	 Title:
	 	  
		
	 By:
	 	  
		 	 Name:
	 	  
		 	 Title:
	 	  

  

 C-2 

 EXHIBIT “D” 
 PROJECT LOAN REQUEST FORM 
 COMERICA BANK 
 75 East Trimble Road 
 MC 4770 
 San Jose, California 95131 
 Attn: Ms. Lorri Field 
 Ladies and Gentlemen: 
 Reference is hereby made to 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”). All capitalized terms used herein and not otherwise defined shall have the meanings
given to such terms in the Loan Agreement. 
 Pursuant to Section 2.1.4 of the Loan Agreement, Borrower hereby certifies as follows:

 1. LOAN. The undersigned Borrowers hereby request entry of a Qualified Project into the Borrowing Base under Section 2.1.4 of the
Loan Agreement: 
 Name of Project:
                                        
                         
 Entry of Project into the Borrowing Base:
                                        
                                        
                     
 Description of initial Lot Inventory as of date of entry into the Borrowing Base:
                                        
                             
 Description of initial Home Inventory as of date of entry into the Borrowing Base:
                                    : 
 2. DUE DILIGENCE COMPLETED: (YES/NO) 
  

	 	 ̈	Soils and Engineering Report 

  

	 	 ̈	Approved Phase I Report 

  

	 	 ̈	Approved Phase II Report (if required) 

  

	 	 ̈	Remediation completed by licensed environmental engineer 

  

	 	 ̈	Tentative Map [__] or Final Map (recorded) [__] 

  

	 	 ̈	If Tentative Map, outstanding conditions to Final Map:
                                        
                                        .

  

 D-1 

	 	 ̈	Title Insurance 

  

	 	 ̈	Owner’s Policy 

  

	 	 ̈	Title Policy in favor of Lender to be issued by Title Company 

  

	 	 ̈	No liens or encumbrances in violation of the Loan Agreement 

  

	 	 ̈	Plans and Specifications 

  

	 	 ̈	Compliance with Maximum Aggregate Borrowing Base Concentration limitations 

  

	 	 ̈	Attach list of “Material Agreements” for Project (which list shall include those agreements listed in Exhibit “J” to the Loan Agreement for the Existing
Project included in the Borrowing Base as of the Initial Closing Date). 

 3. USE OF PROCEEDS. Such Project Loan shall be used
for the following purposes permitted by the Loan Agreement: 
 [Attach A&D Budget and/or Home Construction Budget, as applicable]

 4. LOAN DOCUMENTS. Borrower has executed and delivered to Lender the following Loan Documents for the Qualified Project: 
  

	 	 ̈	Deed of Trust; 

  

	 	 ̈	Financing Statement; 

  

	 	 ̈	Construction Assignments (as applicable); 

  

	 	 ̈	Assignment of Permits; 

  

	 	 ̈	Assignment of Architect’s Agreement (if applicable); 

  

	 	 ̈	Assignment of Engineering Contract (if applicable); 

  

	 	 ̈	Environmental Indemnity. 

 5. NO DEFAULT. The Borrower
certifies that it is and will be in compliance with all covenants under the Loan Agreement after inclusion of the Qualified Project into the Borrowing Base as requested hereby. No condemnation proceedings are pending or, to Borrowers’
knowledge, threatened against any Project, and there have been no changes in title as reflected in the Title Policy since the date of the Title Policy, except as may have been previously disclosed in writing to and approved in writing by Lender.

 6. REPRESENTATIONS TRUE. Each of the representations and warranties made by or on behalf of Borrower contained in the Loan Agreement, in
the other Loan Documents or in any document or instrument delivered pursuant to or in connection with the Loan Agreement was true and correct in all material respects as of the date as of which it was made and shall also be true and correct in all
material respects at and as of the initial entry date for the Qualified 

  

 D-2 

 
Project described herein, with the same effect as if made at and as of such date (except to the extent of changes resulting from transactions contemplated or
permitted by the Loan Agreement and the other Loan Documents, changes occurring in the ordinary course of business that singly or in the aggregate are not materially adverse, changes previously disclosed in writing to and approved in writing by
Lender, except to the extent that such representations and warranties relate expressly to an earlier date) and no Event of Default or Unmatured Event of Default has occurred and is continuing. 
 7. OTHER CONDITIONS. All other conditions to the entry of the Qualified Project into the Borrowing Base requested hereby set forth in Section 2.1.4
of the Loan Agreement have been satisfied, including without limitation that Borrower has provided any Project information set forth in EXHIBIT “K” to the Loan Agreement required by Lender prior to or concurrent with the submission of
this request. 
 8. DEFINITIONS. Terms defined in the Loan Agreement are used herein with the meanings so defined. 
 IN WITNESS WHEREOF, we have executed this Project Loan Request as of this             
day of                     , 200  . 
  

					
	 WILLIAM LYON HOMES, INC., a California
 corporation

		
	 By:
	 	  
		 	 Name:
	 	  
		 	 Title:
	 	  
		
	 By:
	 	  
		 	 Name:
	 	  
		 	 Title:
	 	  

  

 D-3 

 EXHIBIT “E” 
 FORM OF LETTER OF CREDIT APPLICATION 
 (Attach) 
  

 E-1 

 EXHIBIT “F” 
 REQUEST FOR INCLUSION OF LAND 
 IN BORROWING BASE AS ZONED LAND 
 [INSERT DATE] 
 Comerica Bank 
 75 East Trimble Road 
 MC 4770 
 San Jose, California 95131 
 Attn: Ms. Lorri Field 
 Gentlemen: 
 Reference is hereby made to 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”). All capitalized
terms used herein and not otherwise defined shall have the meanings given to such terms in the Loan Agreement. 
 Pursuant to
Section 4.2 of the Loan Agreement, Borrower hereby requests that the portion of the Land more particularly described on SCHEDULE “1” attached hereto be included in the Borrowing Base as Zoned Land. Borrower represents and
warrants that Borrower has provided all information and documents and satisfied all conditions precedent with respect to the inclusion of such portion of the Land in the Borrowing Base as Zoned Land. Borrower further represents and warrants that
(i) no Event of Default or Unmatured Event of Default has occurred and is continuing and (ii) except as otherwise disclosed to Lender in writing and approved in writing by Lender, all representations and warranties set forth in the Loan
Documents are true and correct as of the date hereof. 
  

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

  

 F-1 

 EXHIBIT “G” 
 REQUEST FOR INCLUSION OF LAND 
 IN BORROWING BASE AS ENTITLED LAND OR HIGH END ENTITLED LAND 
 [INSERT DATE] 
 Comerica Bank 
 75 East Trimble Road 
 MC 4770 
 San Jose, California 95131 
 Attn: Ms. Lorri Field 
 Gentlemen: 
 Reference is hereby made to 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”). All capitalized
terms used herein and not otherwise defined shall have the meanings given to such terms in the Loan Agreement. 
 Pursuant to
Section 4.3 of the Loan Agreement, Borrower hereby requests that the portion of the Land more particularly described on SCHEDULE “1” attached hereto be included in the Borrowing Base as Entitled Land or High End Entitled Land.
Borrower represents and warrants that Borrower has provided all information and documents and satisfied all conditions precedent with respect to the inclusion of such portion of the Land in the Borrowing Base as Entitled Land or High End Entitled
Land, as applicable. Borrower further represents and warrants that (i) no Event of Default or Unmatured Event of Default has occurred and is continuing and (ii) except as otherwise disclosed to Lender in writing and approved in writing by
Lender, all representations and warranties set forth in the Loan Documents are true and correct as of the date hereof. 
 Check only one of
the following: 
  

	 	 ̈	Include as Entitled Land 

  

	 	 ̈	Include as High End Entitled Land 

  

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

  

 G-1 

 EXHIBIT “H” 
 REQUEST FOR INCLUSION OF LAND 
 IN BORROWING BASE AS LOTS UNDER DEVELOPMENT 
 OR HIGH END LOTS UNDER DEVELOPMENT 
 [INSERT DATE] 

COMERICA BANK 
 75 East Trimble Road 
 MC 4770 
 San Jose, California 95131 
 Attn: Ms. Lorri Field 
 Gentlemen: 
 Reference is hereby made to 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”). All capitalized terms used herein and not otherwise defined shall have the meanings given to such terms in the Loan Agreement.

 Pursuant to Section 4.4 of the Loan Agreement, Borrower hereby requests that the portion of the Land more particularly described on
SCHEDULE “1” attached hereto be included in the Borrowing Base as Lots Under Development or High End Lots Under Development. Borrower represents and warrants that Borrower has provided all information and documents and satisfied all
conditions precedent with respect to the inclusion of such portion of the Land in the Borrowing Base as Lots Under Development or High End Lots Under Development, as applicable. Borrower further represents and warrants that (i) no Event of
Default has occurred and is continuing and (ii) except as otherwise disclosed to Lender in writing and approved in writing by Lender, all representations and warranties set forth in the Loan Documents are true and correct as of the date hereof.

 Check only one of the following: 
  

	 	 ̈	Include as Lots Under Development 

  

	 	 ̈	Include as High End Lots Under Development 

  

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

  

 H-1 

 EXHIBIT “I” 
 REQUEST FOR INCLUSION OF LAND IN BORROWING 
 BASE AS PRESOLD HOMES, SPEC HOMES, MODEL HOMES, 
 HIGH END PRESOLD HOMES, HIGH END SPEC HOMES 
 OR
HIGH END MODEL HOMES 
 [INSERT DATE] 
 COMERICA BANK

 75 East Trimble Road 
 MC 4770 
 San Jose, California 95131 
 Attn: Ms. Lorri Field 
 Gentlemen: 
 Reference is hereby made to 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”). All capitalized
terms used herein and not otherwise defined shall have the meanings given to such terms in the Loan Agreement. 
 Pursuant to
Section 4.5 of the Loan Agreement, Borrower hereby requests that the portion of the Land more particularly described on SCHEDULE “1” attached hereto be included in the Borrowing Base as Presold Homes, Spec Homes, Model Homes,
High End Presold Homes, High End Spec Homes, or High End Model Homes, as shown. Borrower represents and warrants that Borrower has provided all information and documents and satisfied all conditions precedent with respect to the inclusion of such
portion of the Land in the Borrowing Base as Presold Homes, Spec Homes, Model Homes, High End Presold Homes, High End Spec Homes, or High End Model Homes, as applicable. Borrower further represents and warrants that (i) no Event of Default has
occurred and is continuing and (ii) except as otherwise disclosed to Lender in writing and approved in writing by Lender, all representations and warranties set forth in the Loan Documents are true and correct as of the date hereof. 

Check only one of the following: 
  

							
	 ̈	  	Include as Presold Homes	  	 ̈	  	Include as High End Presold Homes
				
	 ̈	  	Include as Spec Homes	  	 ̈	  	Include as High End Spec Homes
				
	 ̈	  	Include as Model Homes	  	 ̈	  	Include as High End Model Homes

  

 I-1 

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

  

 I-2 

 EXHIBIT “J” 
 LIST OF MATERIAL AGREEMENTS 
 Agreements of Sale and Escrow Instructions 
 Declarations of Development CC&Rs 
 Payment and Performance Agreements

 Option Agreements and Escrow Instructions 
 Other Agreements

  

 J-1 

 EXHIBIT “K” 
 REQUIRED PROJECT INFORMATION 
 Borrower shall not be entitled to any Advances for any Qualified Project hereunder unless and
until each of the following conditions precedent have been satisfied to the extent such information is available for the A&D Improvements and/or Home Improvements to be constructed as part of the Qualified Project: 
 (a) FINAL PLANS. Borrower shall have submitted to Lender, and Lender shall have reviewed and approved, Plans and Specifications for the applicable
Project, which Plans and Specifications shall (i) be prepared by Architect and/or Engineer, and (ii) be otherwise satisfactory to Lender. 
 (b) APPRAISALS. At Borrower’s sole cost and expense, Lender shall have obtained an Appraisal with respect to the Property and each type of Improvements for the applicable Project, which Appraisal shall be (i) prepared by an
appraiser acceptable to Lender, and (ii) otherwise satisfactory to Lender. 
 (c) INDEPENDENT COST ANALYSIS. If required by Lender, at
Borrower’s sole cost and expense, Lender shall have obtained a report in form and content acceptable to Lender in its discretion from an independent cost engineer validating the cost adequacy of the applicable Project. 
 (d) ADDITIONAL ASSIGNMENTS. Borrower shall have executed and delivered to Lender the Deed of Trust, Financing Statement and Construction Assignments
securing the Collateral to be included in the subject Project, and Architect and/or Engineer for the applicable Project shall have consented to such assignments. 
 (e) ENVIRONMENTAL REPORTS. Borrower shall have submitted to Lender for each Project an environmental, toxics and/or soils report(s) satisfactory to Lender, including drainage, boring (if applicable) and compacting
data, together with such hydrology and other engineering reports that Lender may reasonably require, all of which shall be by engineers acceptable to Lender and shall indicate that the condition of the Property is suitable for construction of the
A&D Improvements and Homes thereon (without extraordinary land preparation) and for the operation and maintenance of the Project. Any recommendations in the approved soils, hydrology and other engineering reports must be complied with and
incorporated into the Plans and Specifications. Each environmental assessment (Phase I assessment) of the Property and adjacent property shall be dated no earlier than one hundred eighty (180) days prior to the date hereof, and Borrower shall
deliver to Lender any sampling and analysis (Phase II assessment) or special limited assessment that Lender may require after review of the Phase I assessment, together with any other environmental investigations and reports that Lender may
reasonably require, all of which shall be by a Lender-approved environmental consulting firm, and none of which shall reveal any existing or potential environmental condition adversely affecting the use or value of the Property. 
  

 K-1 

 (f) BUILDING PERMITS, LICENSES, ETC. If required by Lender, Borrower shall have submitted to Lender
evidence for the applicable Project of (i) building permits for the construction of the Homes (ii) all necessary permits, licenses and approvals (including without limitation any required consumer disclosure reports, public offering
statements, exemptions and approvals prior to the sale of any Homes) in connection with the sale of said Homes, and/or (iii) Architectural Control Committee and other approvals, if any, required under any CC&Rs affecting the Property.

 (g) TRUTH-IN-LENDING DISCLOSURES. Prior to entering into any Purchase Contract for the sale of any Home for the applicable Project,
Borrower shall have delivered to the purchaser all truth-in-lending and other required consumer disclosures, in compliance with law and in form and substance satisfactory to Lender. 
 (h) APPROVED BUDGETS. The final approved Budget for the applicable Project itemizing the Hard Costs and Soft Costs, including direct and indirect costs,
certified to be correct to the best knowledge and belief of Borrower for each type of Improvement to be constructed as part of the Project. Such Budget shall be subject to formal review and approval by Lender at Lender’s sole and absolute
discretion, and if Lender determines that the Loan funds allocated for Hard Costs are inadequate to pay for all Hard Costs, then Lender may require Borrower to deposit cash into an account pledged as additional collateral for the Loan the amount of
the shortfall. In no event shall the costs of the Project as set forth in any A&D Budget or any Home Construction Budget violate the applicable Maximum Allowed Advance(s). 
 (i) MISCELLANEOUS CONDITIONS. The following additional conditions must be satisfied prior to the Closing Date for each Loan made hereunder: 

(1) FINANCIAL STATEMENTS. Financial statements for Borrower in conformity with the requirements of the Loan Agreement covering the
two-year period immediately preceding the Closing Date and showing a financial condition satisfactory to Lender in its sole discretion; 
 (2) SURVEY. If required by Lender, particularly if a Qualified Project is to be entered into the Borrowing Base prior to the recording of a Final Map for such Qualified Project, a current survey of the Property by a
licensed surveyor acceptable to Lender describing the boundaries of said property and showing all means of ingress and egress, rights-of-way, easements (each of which shall be identified by docket and page or recording number where recorded) and all
other customary and relevant information pursuant to ALTA standards and any Title Company requirements. All surveys shall be certified to Lender and the Title Company issuing the Title Policy required by the Loan Agreement; 
 (3) TITLE INSURANCE. The Title Insurance Policy, with such endorsements as Lender may require, issued by the Title Company satisfactory to
Lender in the amount of the Loan (with direct access reinsurance in amounts and by companies and in form acceptable to Lender as Lender may require) insuring the lien of the Deed of Trust to be a first and prior lien upon the Property, as security
for all Advances pursuant to the terms of this Agreement, subject only to such exceptions as Lender may expressly 

  

 K-2 

 
approve in writing, and insuring against any lien claims that could arise out of the construction of the Homes on the Property. During the course of
construction of the Homes, Borrower shall provide Lender with such title insurance endorsements as Lender may require, including CLTA Form 122 Endorsements (or equivalent endorsements acceptable to Lender) for each Advance, and any other
endorsements Lender may require to insure that the Homes shall have been constructed within the boundaries of the Property and in accordance with all applicable laws, covenants, restrictions and/or CC&Rs. Upon completion of the Homes, Borrower
shall deliver to Lender such further endorsements to the title insurance policy as Lender may require; 
 (4) ZONING. Evidence
that the Property is properly zoned for the construction of the A&D Improvements and/or Homes to be constructed as part of the applicable Project; 
 (5) CONSTRUCTION MATERIALS. Copies of all agreements between Borrower and any architects, engineers, consultants, managers or supervisors, and, if required by Lender, copies of construction subcontracts related to the
construction, maintenance, repair, leasing, management and operation of the Project, together with written agreements by such Persons that they will perform for Lender the services contracted to Borrower, notwithstanding the occurrence of any Event
of Default and any trustee’s sale or foreclosure of the Deed of Trust (provided that such Persons continue to receive payments under their respective contracts), and the consent of such Persons to the collateral assignment by Borrower to Lender
of their respective contracts; 
 (6) CC&RS. Copies of any CC&Rs and related documents pertaining to the Property and
the Project; 
 (7) TAXES. Evidence that all taxes and assessments levied against or affecting the Property have been paid
current, together with a tax service contract for the Project in form and content acceptable to Lender in its sole discretion; 
 (8) ORGANIZATIONAL DOCUMENTS. Copies of Borrower’s Organizational Documents, together with proper authorizations and certificates and such other documents as Lender may require, relating to the existence and good standing of such
Persons and the authority of any officer, partner or member, as applicable, executing documents on behalf of such Persons; 
 (9) EQUITY. Evidence satisfactory to Lender that Borrower has equity in the Project in an amount sufficient to satisfy the applicable Maximum Allowed Advances for the Project; 
 (10) OTHER INSURANCE. In addition to evidence of all insurance coverages as set forth in Section 6.8 of the Loan Agreement, evidence
of such other insurance as Lender may reasonably require herein, including without limitation (i) earthquake insurance, (ii) insurance covering vandalism and malicious mischief, and sprinkler leakage, and (iii) errors and omissions
insurance for the contractors, architects, engineers, 

  

 K-3 

 
environmental engineers and the provider of the soils report with limits of liability in amounts reasonably acceptable to Lender; 
 (11) FLOOD. Evidence whether the Property, or any part thereof, lies within a “special flood hazard area” as designated on maps
prepared by the U.S. Department of Housing and Urban Development pursuant to the Flood Disaster Protection Act of 1973, as amended, and, if so designated, a National Flood Insurance Association standard flood insurance policy, plus insurance from a
private insurance carrier if required by Lender, for the duration of the Loan in the amount of the full insurable value of the completed Improvements, naming Lender as an additional loss payee; 
 (12) UTILITIES. Evidence that all utilities and services to the Property and Improvements, including without limitation water, sewer, gas,
electric and telephone, are available, or will be available as required, and will be provided in amounts that are sufficient to service the Improvements for their intended use; 
 (13) INGRESS/EGRESS. Evidence that there exists adequate legal ingress and egress to the Project; 
 (14) JOB SCHEDULE. A job progress schedule showing the planned timing, progress of construction and completion date for the Improvements
of the Project; 
 (15) OFF-SITE IMPROVEMENTS. Evidence that each type of off-site improvement for the Property that has been
completed shall have been certified and/or accepted by any municipality, utility, county or other governmental entity whose certification or acceptance thereof is required; 
 (16) LIST OF CONTRACTORS. If required by Lender, a list of all subcontractors, suppliers and materialmen employed or retained, or to be
employed or retained, in connection with the construction of the Improvements. Such list shall show the name, address and telephone number of each such Person, a general statement of the nature of the work to be done, the labor and materials to be
supplied, the names of materialmen (if known) and the approximate dollar value of such labor or work with respect to the labor and materials to be supplied; 
 (17) LEGAL OPINION. If required by Lender, a legal opinion in form and content acceptable to Lender addressing such issues as required by
Lender; and 
 (18) OTHER INFORMATION. Such other information and documents that Lender may reasonably require. 
  

 K-4Amendment Number 2

 Exhibit 4.1 
 EXECUTION VERSION 
 AMENDMENT NO. 2 
 TO THE 
 POOLING AND SERVICING AGREEMENT 
 Amendment No. 2, dated as of March 27, 2006 (the “Amendment”), to the Pooling and Servicing Agreement (the
“Agreement”) dated as of December 1, 2005, by and among NovaStar Mortgage Funding Corporation (the “Company”), NovaStar Mortgage, Inc., as seller and servicer (the “Seller” or
“Servicer”), U.S. Bank, National Association as successor to Wachovia Bank, National Association, as custodian (the “Custodian”), JPMorgan Chase Bank, National Association, as trustee (the
“Trustee”) and J.P. Morgan Trust Company, National Association, as co-trustee (the “Co-Trustee”). Capitalized terms used and not defined herein shall have the meaning set forth in the Agreement and Appendix A
thereto. 
 WHEREAS, the parties hereto have entered into the Agreement; 
 WHEREAS, the parties hereto now wish to amend certain provisions in the Agreement pursuant to Section 12.01 of the Agreement; and 
 WHEREAS, Section 12.01 of the Agreement provides that the Trustee shall not consent to this Amendment unless it shall have first received an Opinion
of Counsel, to the effect that (a) this Amendment (i) will not result in the imposition of a tax on any REMIC created under the Agreement constituting part of the Trust Fund pursuant to the REMIC Provisions or (ii) cause any REMIC
created under the Agreement constituting part of the Trust to fail to qualify as a REMIC at any time that any Certificates are outstanding and (b) any applicable requirements and conditions set forth in the Agreement with respect to the
adoption of amendments thereto have been complied with. 
 NOW, THEREFORE, in consideration of the promises and mutual agreements contained
herein, the parties hereto agree to amend the Agreement pursuant to Section 12.01 thereof, and restate certain provisions thereof, as follows: 
 1. The Amendment. 
 (a) Section 4.04(c)(iv) is hereby amended and restated as follows: 
 (iv) fourth, to the Holders of the Class CT Certificates the excess, if any, of (a) the sum of (x) amounts, if any, received by the
Supplemental Interest Trust with respect to such Distribution Date under all Swap Agreements and all Cap Agreements and (y) the Class I Monthly Interest Distributable Amount over (b) the sum of the amounts described in clauses (i),
(ii) and (iii) above other than Non-Derivative Supplemental Interest Payments described in clause (ii); and 

 (v) fifth, to the Holders of the Class CR Certificates, any remaining amounts. 
 (b) The first paragraph of Section 5.01 is hereby amended to replace the words “the Class C Certificates” with the words “the Class
CT Certificates, the Class CR Certificates” in each place that “the Class C Certificates” appears. 
 (c) The first two
paragraphs of Section 5.02(d) are hereby amended to replace the words “the Class C Certificates” with the words “Class CT Certificates, Class CR Certificates,” in each place that “Class C Certificates” appears.

 (d) Section 8.14(b) is hereby amended to add exhibits “A-27 and A-28” after “A-26,” such that paragraph
(b) reads as follows: 
 (b) to authenticate and deliver the Certificates of each Class substantially in the forms prescribed by Exhibits
A-1, A-2, A-3, A-4, A-5, A-7, A-8, A-9, A-10, A-11, A-12, A-13, A-14, A-15, A-16, A-17, A-18, A-19, A-20, A-21, A-22, A-23, A-24, A-25, A-26, A-27 and A-28 in accordance with the terms of this Agreement; 
 (e) The first sentence of Section 10.01(l) is hereby amended to replace the words “the Class C Certificates” with the words “the
Class CT Certificates and the Class CR Certificates” in the place that “the Class C Certificates” appears. The second sentence of Section 10.01(l) is hereby amended to replace the words “an interest rate cap contract written
by the Class C Certificateholders” with the words “interest rate cap contracts written by the Class CT Certificateholders and the Class CR Certificateholders” in the place that “the Class C Certificateholders” appears. The
fourth sentence of Section 10.01(l) is hereby amended to replace the words “the Class C Certificateholders” with the words “the Class CR Certificateholders” in the place that “the Class C Certificateholders”
appears. 
 (f) The exhibit list to the Agreement is hereby amended to delete the words “Exhibit A-21 - Form of Class C
Certificate” and replace them with the words “Exhibit A-21 - [Reserved]” and add the words “Exhibit A-27 - Form of Class CT Certificates” and “Exhibit A-28 - Form of Class CR Certificates” after the words
“Exhibit A-26 - Form of Class M-12 DSI Certificate.” The exhibits to the Agreement are hereby amended to delete Exhibit A-21 and replace it with the word “Reserved” and add “Exhibit A-27 - Form of Class CT Certificates”
and “Exhibit A-28 - Form of Class CR Certificates” in the forms attached hereto as exhibit A-27 and exhibit A-28. 
 (g) The
definition of “Certificate Principal Balance” in Appendix A to the Agreement is hereby amended to replace the words “the Class C Certificates” with the words “the Class CT Certificates, the Class CR Certificates” in
each place that “the Class C Certificates” appears. 
 (h) The definition of “Definitive Certificates” in Appendix A to
the Agreement is hereby amended to replace the words “Class C” with the words “Class CR, Class CT.” 
  

 2 

 (i) The definition of “Indenture” in Appendix A to the Agreement is hereby amended to replace
the words “Class C Certificates” with the words “Class CT Certificates and the Class CR Certificates.” 
 (j) The
definition of “Initial Certificate Principal Balance” in Appendix A to the Agreement is hereby amended to replace the words “Class C Certificate” with the words “Class CT Certificate, Class CR Certificate.” 

(k) The last sentence of the definition of “Percentage Interest” in Appendix A to the Agreement is hereby amended to replace the words
“Class C Certificate” with the words “Class CT Certificate, Class CR Certificate.” 
 (l) The definition of “Regular
Certificate” in Appendix A to the Agreement is hereby amended to delete the word “or” after “Class I Certificates” and replace it with a comma and add the words “Class CT Certificates or Class CR Certificates”
after the words “Class I Certificates” and delete the words “Class C Certificates.” 
 (m) The last sentence in the
definition of “Voting Rights” in Appendix A to the Agreement is hereby amended to add the words “and the Class CT Certificates” after the words “Class M-12 DSI Certificates.” 
 (n) Appendix A to the Agreement is hereby amended to delete the definition of “Class C Certificate.” 
 (o) Appendix A to the Agreement is hereby amended to add the following definitions: 
 “Class CT Certificate”: Any one of the Class CT Certificates executed, authenticated and delivered pursuant to Section 5.01,
substantially in the form annexed hereto as Exhibit A-27, representing the right to distributions as set forth herein and therein. 
 “Class CR Certificate”: Any one of the Class CR Certificates executed, authenticated and delivered pursuant to Section 5.01, substantially in the form annexed hereto as Exhibit A-28, representing the right to
distributions as set forth herein and therein. 
 (p) The Agreement, Appendix A to the Agreement and Exhibit J to the Agreement are hereby
amended to replace the words “Class C Certificates” with the words “Class CR Certificates” in each place that they appear except for as described in paragraphs (a) through (o) above and replace the words “Class C
Holder” with the words “Class CR Holder.” 
 2. Condition to effectiveness. As a condition to the effectiveness of this
Amendment, an Opinion of Counsel satisfying the requirements of Section 12.01 of the Agreement has been received by the Parties hereto. 
  

 3 

 3. Effect of Amendment. This Amendment to the Agreement shall be effective and the Agreement shall
be deemed to be modified and amended in accordance herewith on the Distribution Date on the date on which the Trustee receives an executed copy of this Amendment, provided, however, that the Certificates and ancillary documentation may be modified
and the exchange of the Class C Certificates for the Class CR Certificates and the Class CT Certificates pursuant to Section 5.02 of the Agreement may be finalized after the date first set forth above. This Amendment, once effective, shall be
effective as of the date first set forth above. The respective rights, limitations, obligations, duties, liabilities and immunities of the Company, the Seller, the Servicer, the Custodian and the Trustee shall hereafter be determined, exercised and
enforced subject in all respects to such modifications and amendments, and all the terms and conditions of this Amendment shall be and be deemed to be part of the terms and conditions of the Agreement for any and all purposes. The Agreement, as
amended hereby, is hereby ratified and confirmed in all respects. 
 4. The Agreement in Full Force and Effect as Amended. Except as
specifically amended hereby, all the terms and conditions of the Agreement shall remain in full force and effect and, except as expressly provided herein, the effectiveness of this Amendment shall not operate as, or constitute a waiver or
modification of, any right, power or remedy of any party to the Agreement. All references to the Agreement in any other document or instrument shall be deemed to mean the Agreement as amended by this Amendment. 
 6. Counterparts. This Amendment may be executed by the Parties in several counterparts, each of which shall be deemed to be an original and all
of which shall constitute together but one and the same agreement. This Amendment shall become effective when counterparts hereof executed on behalf of such Party shall have been received. 
 7. Governing Law. This Amendment shall be construed in accordance with and governed by the laws of the State of New York applicable to agreements
made and to be performed therein. 
  

 4 

 IN WITNESS WHEREOF, the Seller, the Servicer, the Company, the Trustee, the Co-Trustee and the Custodian,
have caused this Amendment to be duly executed by their officers thereunto duly authorized, all as of the day and year first above written. 
  

			
	 NOVASTAR MORTGAGE FUNDING CORPORATION,
 as
Company

		
	By:	 	 /s/ Matt Kaltenrieder

	Name:	 	Matt Kaltenrieder
	Title:	 	Vice President
	
	 NOVASTAR MORTGAGE, INC.,
 as Servicer and as
Seller

		
	By:	 	 /s/ Matt Kaltenrieder

	Name:	 	Matt Kaltenrieder
	Title:	 	Vice President
	
	U.S. BANK, NATIONAL ASSOCIATION, as successor to Wachovia Bank, National Association, as Custodian
		
	By:	 	 /s/ Ronald L. Fisher

	Name: Title:	 	 Ronald L. Fisher
 Authorized Signer

	
	 JPMORGAN CHASE BANK, NATIONAL ASSOCIATION
 as
Trustee

		
	By:	 	 /s/ Andrew M. Cooper

	Name: Title:	 	 Andrew M. Cooper
 Assistant Vice
President

	
	 J.P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION,
 as Co-Trustee

		
	By:	 	 /s/ Mark W. McDermott

	Name: Title:	 	 Mark W. McDermott
 Vice President

 [Signature Page for Amendment No. 2 to the Pooling and Servicing Agreement] 

 Exhibit A-27 
 Form of Class CT Certificate 
 NOVASTAR MORTGAGE SUPPLEMENTAL INTEREST TRUST, SERIES 2005-4

 HOME EQUITY LOAN ASSET-BACKED CERTIFICATE 
 CLASS CT CERTIFICATES 
 Comprised of a Certificate Representing 
 Certain Interests Relating to a Pool of 
 Mortgage Loans 
 The Mortgage Loans are Serviced by 
 NOVASTAR MORTGAGE, INC., as Servicer 
 (This certificate does not represent an interest in, or an obligation
of, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar Capital, Inc. or any of their subsidiaries and affiliates. This certificate is
comprised of a Certificate representing a fractional ownership interest in distributions in certain Accounts created pursuant to the Pooling and Servicing Agreement and certain other rights relating thereto and is payable only from amounts received
by the Trustee with respect to the Supplemental Interest Trust.) 
 THIS CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR THE DISPOSITION OF THIS CERTIFICATE WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION WHICH DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN
ACCORDANCE WITH THE PROVISIONS OF THE POOLING AND SERVICING AGREEMENT. 
 NO TRANSFER OF THIS CERTIFICATE OR ANY INTEREST HEREIN MAY BE MADE
TO (I) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”)) THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN (AS DEFINED IN SECTION
4975(E)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”)) THAT IS SUBJECT TO SECTION 4975 OF THE CODE OR (III) ANY PERSON ACTING, DIRECTLY OR INDIRECTLY, ON BEHALF OF ANY PLAN DESCRIBED IN (I) OR (II) OR
ACQUIRING THIS CERTIFICATE OR ANY INTEREST HEREIN WITH THE ASSETS OF ANY SUCH PLAN. 
  

					
	No.: CT	  	Date: March 27, 2006	  	CUSIP: 66987X JB 2
			
	Percentage Interest: 100%	  	 Registered Owner: Newport
 Funding Corp.
	  	 Final Scheduled Distribution
 Date: January 25,
2036

 The registered owner named above is the registered owner of a fractional interest in that portion of the
Supplemental Interest Trust that holds the Class I Certificates and any amounts received under the Swap Agreements or the Cap Agreements pursuant to that certain Pooling and Servicing Agreement dated as of December 1, 2005 (the “Pooling
and Servicing Agreement”) by and among NovaStar Mortgage Funding Corporation as the company (the “Company”), the Trustee, J.P. Morgan Trust Company, National Association, as co-trustee (the “Co-Trustee”), Wachovia Bank,
National Association, as the custodian (the “Custodian”), and NovaStar Mortgage, Inc. as servicer (the “Servicer”) and as seller (the “Seller”). 
 Each owner of record of a Class CT Certificate will be entitled to certain distributions, as described under Article IV of the Pooling and Servicing
Agreement. 
 In order to receive the final distribution hereon, the owner hereof is required to present this Certificate to the Trustee. The
Pooling and Servicing Agreement provides that, in any event, upon the making of the final distribution due on this Certificate, this Certificate shall be deemed cancelled for all purposes under the Pooling and Servicing Agreement. 
 SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS OWNERSHIP OF THE CLASS I CERTIFICATES, THE SWAP AGREEMENTS AND THE CAP AGREEMENTS.

 DISTRIBUTIONS ON THIS CERTIFICATE WILL BE MADE TO THE OWNER HEREOF FOLLOWING THE PRIOR FUNDING OF AMOUNTS OWED TO CERTAIN SWAP
COUNTERPARTIES, AND FOLLOWING THE FUNDING OF SUPPLEMENTAL INTEREST PAYMENTS TO CERTAIN OTHER CLASSES OF CERTIFICATES. 
 THIS CERTIFICATE IS
A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES). 
 NEITHER THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY. 
 This Certificate is one of a Class of duly-authorized Certificates designated as NovaStar
Home Equity Loan Asset-Backed Certificates, Series 2005-4, Class CT Certificates (the “Class CT Certificates”) and issued under and subject to the terms, provisions and conditions of the Pooling and Servicing Agreement, to which the owner
of this Certificate, by virtue of acceptance hereof assents, and is bound. Also issued under the Pooling and Servicing Agreement are the Class A-1A Certificates, Class A-2A Certificates, Class A-2B Certificates, Class A-2C
Certificates, Class A-2D Certificates, Class M-1 Certificates, Class M-2 Certificates, Class M-3 Certificates, Class M-4 Certificates, Class M-5 Certificates, Class M-6 Certificates, Class M-7 Certificates, Class M-8 Certificates, Class M-9
Certificates, Class M-10 Certificates, Class M-11 

  

 A-27-2 

 
Certificates, Class M-12 Certificates, Class M-9 DSI Certificates, Class M-10 DSI Certificates, Class M-11 DSI Certificates, Class M-12 DSI Certificates,
Class I-1 Certificates, Class I-2 Certificates, Class I-3 Certificates, Class CR Certificates and Class R Certificates, and all such Certificates are collectively referred to as the “Certificates”. 
 Terms capitalized herein and not otherwise defined herein shall have the respective meanings set forth in the Pooling and Servicing Agreement.

 On the 25th day of each month, or, if such day is not a Business Day, then the next succeeding Business Day (each such day being a
“Distribution Date”) commencing April 25, 2006, the owners of the Class CT Certificates as of the close of business on the business day immediately preceding such Distribution Date (the “Record Date”) will be entitled to
receive payments as described in Article IV of the Pooling and Servicing Agreement. Distributions will be made in immediately available funds to such owners, by wire transfer or by check mailed to the address of the person entitled thereto as it
appears on the Certificate Register. 
 The Trustee is required to duly and punctually pay distributions with respect to this Certificate in
accordance with the terms hereof and the Pooling and Servicing Agreement. Amounts properly withheld under the Code or applicable to any owner shall be considered as having been paid by the Trustee to such owner for all purposes of the Pooling and
Servicing Agreement. 
 The Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and Servicing Agreement. The Pooling and
Servicing Agreement permits the Servicer to enter into Sub-Servicing Agreements with certain institutions eligible for appointment as Sub-Servicers for the servicing and administration of certain Mortgage Loans. No appointment of any Sub-Servicer
shall release the Servicer from any of its obligations under the Pooling and Servicing Agreement. 
 This Certificate does not represent a
deposit or other obligation of, or an interest in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc., NovaStar Financial Inc., or any of their
subsidiaries and affiliates and are not insured or guaranteed by the Federal Deposit Insurance Corporation, the Government National Mortgage Association, or any other governmental agency. This Certificate is limited in right of payment to certain
collections and recoveries relating to the Mortgage Loans and amounts on deposit in the Accounts (except as otherwise provided in the Pooling and Servicing Agreement) all as more specifically set forth hereinabove and in the Pooling and Servicing
Agreement. 
 No owner shall have any right to institute any proceeding, judicial or otherwise, with respect to the Pooling and Servicing
Agreement for the appointment of a receiver or trustee, or for any other remedy under the Pooling and Servicing Agreement except in compliance with the terms thereof. 
 Notwithstanding any other provisions in the Pooling and Servicing Agreement, the owner of any Certificate shall have the right which is absolute and unconditional to receive distributions to the extent provided in the
Pooling and Servicing Agreement with respect to such Certificate or to institute suit for the enforcement of any such distribution, and such right shall not be impaired without the consent of such owner. 
  

 A-27-3 

 The Pooling and Servicing Agreement will terminate upon notice to the Trustee upon the earliest of
(i) the Distribution Date on which the Certificate Principal Balances of the Regular Certificates have been reduced to zero, (ii) the final payment or other liquidation of the last Mortgage Loan in the Trust, (iii) the optional
purchase by the Servicer of the Mortgage Loans as described below, (iv) the Distribution Date in January 2036 and (v) at any time when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II, REMIC III and REMIC IV is effected
pursuant to the Pooling and Servicing Agreement. In addition, under certain circumstances relating to the qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC III or REMIC IV as a REMIC under the Code, the Mortgage Loans may
be sold, thereby affecting the early retirement of the Certificates. Notwithstanding the foregoing, in no event shall the Trust hereby continue beyond the expiration of 21 years from the death of the last survivor of the descendants of Joseph P.
Kennedy, the late ambassador of the United States to the Court of St. James, living on the date of the Pooling and Servicing Agreement. 
 The Servicer may, at its option, terminate the Pooling and Servicing Agreement on any date on which the aggregate of the Principal Balances of the Mortgage Loans on such date is equal to or less than 10% of the Maximum Collateral Amount, by
purchasing, on the next succeeding Distribution Date, all of the outstanding Mortgage Loans and REO Properties at a price equal to the greater of the Principal Balance of the Mortgage Loans and REO Properties or the market value of the Mortgage
Loans and REO Properties, in each case plus accrued and unpaid interest thereon at the weighted average of the Mortgage Rates through the end of the Due Period preceding the final Distribution Date plus unreimbursed Servicing Advances, Advances, any
unpaid Servicing Fees allocable to such Mortgage Loans and REO Properties and any accrued and unpaid Available Funds Cap Shortfall Amount and Available Funds Cap Carryforward Amount (without duplication of amounts already paid) and any unpaid amount
due the Trustee, the Swap Counterparties, the Cap Counterparties and the Custodian under the Pooling and Servicing Agreement. 
 The Trustee
shall give written notice of termination of the Pooling and Servicing Agreement to each owner in the manner set forth therein. 
 As provided
in the Pooling and Servicing Agreement and subject to certain limitations therein set forth and referred to on the face hereof, the transfer of this Certificate is registerable in the Certificate Register upon surrender of this Certificate for
registration of transfer at the office designated as the location of the Certificate Register, and thereupon one or more new certificates of like class, tenor and Percentage Interest will be issued to the designated transferee or transferees.

 The Trustee is required to furnish certain information on each Distribution Date to the owner of this Certificate, as more fully described
in the Pooling and Servicing Agreement. 
 As provided in the Pooling and Servicing Agreement and subject to certain limitations therein set
forth, Class CT Certificates are exchangeable for new Class CT Certificates of authorized denominations evidencing the same aggregate principal amount. 
 The Trustee and any agent thereof may treat the person in whose name this Certificate is registered as the owner hereof for all purposes, and none of the Trustee or any such agent shall be affected by notice to the
contrary. 
  

 A-27-4 

 IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed on behalf of the Trust.

  

							
		 		  	JPMORGAN CHASE BANK, NATIONAL
ASSOCIATION,
not in its individual capacity, but
solely
in its capacity as Trustee
				
		 		  	By:	  	  

		 		  	Name:	  	
		 		  	Title:	  	
			
	Trustee Authentication	  		  	
			
	 JPMORGAN CHASE BANK, NATIONAL
 ASSOCIATION,
 not in its individual capacity, but solely
 in its capacity as Trustee
	  		  	
				
	By:	 	  
	  		  	
	Name:	 		  		  	
	Title:	 		  		  	

  

 A-27-5 

 Exhibit A-28 
 Form of Class CR Certificate 
 NOVASTAR MORTGAGE SUPPLEMENTAL INTEREST TRUST, SERIES 2005-4

 HOME EQUITY LOAN ASSET-BACKED CERTIFICATE 
 CLASS CR CERTIFICATES 
 Comprised of a Certificate Representing 
 Certain Interests Relating to a Pool of 
 Mortgage Loans 
 The Mortgage Loans are Serviced by 
 NOVASTAR MORTGAGE, INC., as Servicer 
 (This certificate does not represent an interest in, or an obligation
of, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar Capital, Inc. or any of their subsidiaries and affiliates. This certificate is
comprised of a Certificate representing a fractional ownership interest in distributions in certain Accounts created pursuant to the Pooling and Servicing Agreement and certain other rights relating thereto and is payable only from amounts received
by the Trustee relating to the Mortgage Loans and other assets held in the Trust Fund.) 
 THIS CERTIFICATE HAS NOT BEEN REGISTERED OR
QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR THE DISPOSITION OF THIS CERTIFICATE WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION WHICH DOES NOT REQUIRE SUCH REGISTRATION OR
QUALIFICATION AND IN ACCORDANCE WITH THE PROVISIONS OF THE POOLING AND SERVICING AGREEMENT. 
 NO TRANSFER OF THIS CERTIFICATE OR ANY
INTEREST HEREIN MAY BE MADE TO (I) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”)) THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A
PLAN (AS DEFINED IN SECTION 4975(E)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”)) THAT IS SUBJECT TO SECTION 4975 OF THE CODE OR (III) ANY PERSON ACTING, DIRECTLY OR INDIRECTLY, ON BEHALF OF ANY PLAN DESCRIBED
IN (I) OR (II) OR ACQUIRING THIS CERTIFICATE OR ANY INTEREST HEREIN WITH THE ASSETS OF ANY SUCH PLAN. 
  

					
	No.: CR	 	Date: March 27, 2006	 	CUSIP: 66987X JC 0
			
	Percentage Interest: 100%	 	 Registered Owner: Newport
 Funding
Corp.
	 	 Final Scheduled Distribution
 Date: January 25,
2036

 The registered owner named above is the registered owner of a fractional interest in (i) each
Mortgage Loan identified on the Mortgage Loan Schedule attached as Exhibit B to that certain Pooling and Servicing Agreement dated as of December 1, 2005 (the “Pooling and Servicing Agreement”) by and among NovaStar Mortgage Funding
Corporation as the company (the “Company”), the Trustee, J.P. Morgan Trust Company, National Association, as co-trustee (the “Co-Trustee”), Wachovia Bank, National Association, as the custodian (the “Custodian”), and
NovaStar Mortgage, Inc. as servicer (the “Servicer”) and as seller (the “Seller”), including the related Cut-off Date Principal Balance, all interest accruing thereon on and after the Cut-off Date and all collections in respect
of interest and principal due after the Cut-off Date; (ii) property which secured each such Mortgage Loan and which has been acquired by foreclosure or deed in lieu of foreclosure; (iii) the Company’s interest in any insurance
policies in respect of the Mortgage Loans; (iv) all proceeds of any of the foregoing; (v) the rights of the Company under the Purchase Agreement and (vi) all other assets included or to be included in the Trust Fund. Such assignment
includes all interest and principal due to the Company or the Servicer after the Cut-off Date with respect to the Mortgage Loans. 
 Each
owner of record of a Class CR Certificate will be entitled to certain distributions, as described under Article IV of the Pooling and Servicing Agreement. 
 In order to receive the final distribution hereon, the owner hereof is required to present this Certificate to the Trustee. The Pooling and Servicing Agreement provides that, in any event, upon the making of the final
distribution due on this Certificate, this Certificate shall be deemed cancelled for all purposes under the Pooling and Servicing Agreement. 
 SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS OWNERSHIP OF THE CLASS C-1 MASTER REMIC REGULAR INTEREST, THE CLASS C-2 MASTER REMIC REGULAR INTEREST AND THE CLASS C-3 MASTER REMIC REGULAR INTEREST, WHICH EACH REPRESENT
A “REGULAR INTEREST” IN A “REAL ESTATE MORTGAGE INVESTMENT CONDUIT” (“REMIC”) ISSUED ON THE CLOSING DATE AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED (THE “CODE”), ASSUMING COMPLIANCE WITH THE REMIC PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE CODE. 
 DISTRIBUTIONS ON
THIS CERTIFICATE WILL BE MADE TO THE OWNER HEREOF FOLLOWING THE PRIOR FUNDING OF AMOUNTS OWED TO CERTAIN SWAP COUNTERPARTIES, AND FOLLOWING THE FUNDING OF SUPPLEMENTAL INTEREST PAYMENTS TO CERTAIN OTHER CLASSES OF CERTIFICATES. 
 THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS
REPRESENTED HEREBY (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES). 
  

 A-28-2 

 NEITHER THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY. 
 This Certificate is one of a Class
of duly-authorized Certificates designated as NovaStar Home Equity Loan Asset-Backed Certificates, Series 2005-4, Class CR Certificates (the “Class CR Certificates”) and issued under and subject to the terms, provisions and conditions of
the Pooling and Servicing Agreement, to which the owner of this Certificate, by virtue of acceptance hereof assents, and is bound. Also issued under the Pooling and Servicing Agreement are the Class A-1A Certificates, Class A-2A
Certificates, Class A-2B Certificates, Class A-2C Certificates, Class A-2D Certificates, Class M-1 Certificates, Class M-2 Certificates, Class M-3 Certificates, Class M-4 Certificates, Class M-5 Certificates, Class M-6 Certificates,
Class M-7 Certificates, Class M-8 Certificates, Class M-9 Certificates, Class M-10 Certificates, Class M-11 Certificates, Class M-12 Certificates, Class M-9 DSI Certificates, Class M-10 DSI Certificates, Class M-11 DSI Certificates, Class M-12 DSI
Certificates, Class I-1 Certificates, Class I-2 Certificates, Class I-3 Certificates, Class CT Certificates and Class R Certificates, and all such Certificates are collectively referred to as the “Certificates”. 
 Terms capitalized herein and not otherwise defined herein shall have the respective meanings set forth in the Pooling and Servicing Agreement.

 On the 25th day of each month, or, if such day is not a Business Day, then the next succeeding Business Day (each such day being a
“Distribution Date”) commencing April 25, 2006, the owners of the Class CR Certificates as of the close of business on the business day immediately preceding such Distribution Date (the “Record Date”) will be entitled to
receive payments as described in Article IV of the Pooling and Servicing Agreement. Distributions will be made in immediately available funds to such owners, by wire transfer or by check mailed to the address of the person entitled thereto as it
appears on the Certificate Register. 
 The Trustee is required to duly and punctually pay distributions with respect to this Certificate in
accordance with the terms hereof and the Pooling and Servicing Agreement. Amounts properly withheld under the Code or applicable to any owner shall be considered as having been paid by the Trustee to such owner for all purposes of the Pooling and
Servicing Agreement. 
 The Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and Servicing Agreement. The Pooling and
Servicing Agreement permits the Servicer to enter into Sub-Servicing Agreements with certain institutions eligible for appointment as Sub-Servicers for the servicing and administration of certain Mortgage Loans. No appointment of any Sub-Servicer
shall release the Servicer from any of its obligations under the Pooling and Servicing Agreement. 
 This Certificate does not represent a
deposit or other obligation of, or an interest in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc., NovaStar Financial Inc., or any of their
subsidiaries and affiliates and are not insured or guaranteed by the Federal Deposit Insurance Corporation, the Government National 

  

 A-28-3 

 
Mortgage Association, or any other governmental agency. This Certificate is limited in right of payment to certain collections and recoveries relating to the
Mortgage Loans and amounts on deposit in the Accounts (except as otherwise provided in the Pooling and Servicing Agreement) all as more specifically set forth hereinabove and in the Pooling and Servicing Agreement. 
 No owner shall have any right to institute any proceeding, judicial or otherwise, with respect to the Pooling and Servicing Agreement for the appointment
of a receiver or trustee, or for any other remedy under the Pooling and Servicing Agreement except in compliance with the terms thereof. 
 Notwithstanding any other provisions in the Pooling and Servicing Agreement, the owner of any Certificate shall have the right which is absolute and unconditional to receive distributions to the extent provided in the Pooling and Servicing
Agreement with respect to such Certificate or to institute suit for the enforcement of any such distribution, and such right shall not be impaired without the consent of such owner. 
 The Pooling and Servicing Agreement will terminate upon notice to the Trustee upon the earliest of (i) the Distribution Date on which the
Certificate Principal Balances of the Regular Certificates have been reduced to zero, (ii) the final payment or other liquidation of the last Mortgage Loan in the Trust, (iii) the optional purchase by the Servicer of the Mortgage Loans as
described below, (iv) the Distribution Date in January 2036 and (v) at any time when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II, REMIC III and REMIC IV is effected pursuant to the Pooling and Servicing Agreement. In
addition, under certain circumstances relating to the qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC III or REMIC IV as a REMIC under the Code, the Mortgage Loans may be sold, thereby affecting the early retirement of
the Certificates. Notwithstanding the foregoing, in no event shall the Trust hereby continue beyond the expiration of 21 years from the death of the last survivor of the descendants of Joseph P. Kennedy, the late ambassador of the United States to
the Court of St. James, living on the date of the Pooling and Servicing Agreement. 
 The Servicer may, at its option, terminate the Pooling
and Servicing Agreement on any date on which the aggregate of the Principal Balances of the Mortgage Loans on such date is equal to or less than 10% of the Maximum Collateral Amount, by purchasing, on the next succeeding Distribution Date, all of
the outstanding Mortgage Loans and REO Properties at a price equal to the greater of the Principal Balance of the Mortgage Loans and REO Properties or the market value of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid
interest thereon at the weighted average of the Mortgage Rates through the end of the Due Period preceding the final Distribution Date plus unreimbursed Servicing Advances, Advances, any unpaid Servicing Fees allocable to such Mortgage Loans and REO
Properties and any accrued and unpaid Available Funds Cap Shortfall Amount and Available Funds Cap Carryforward Amount (without duplication of amounts already paid) and any unpaid amount due the Trustee, the Swap Counterparties, the Cap
Counterparties and the Custodian under the Pooling and Servicing Agreement. 
 The Trustee shall give written notice of termination of the
Pooling and Servicing Agreement to each owner in the manner set forth therein. 
  

 A-28-4 

 As provided in the Pooling and Servicing Agreement and subject to certain limitations therein set forth
and referred to on the face hereof, the transfer of this Certificate is registerable in the Certificate Register upon surrender of this Certificate for registration of transfer at the office designated as the location of the Certificate Register,
and thereupon one or more new certificates of like class, tenor and Percentage Interest will be issued to the designated transferee or transferees. 
 The Trustee is required to furnish certain information on each Distribution Date to the owner of this Certificate, as more fully described in the Pooling and Servicing Agreement. 
 As provided in the Pooling and Servicing Agreement and subject to certain limitations therein set forth, Class CR Certificates are exchangeable for new
Class CR Certificates of authorized denominations evidencing the same aggregate principal amount. 
 The Trustee and any agent thereof may
treat the person in whose name this Certificate is registered as the owner hereof for all purposes, and none of the Trustee or any such agent shall be affected by notice to the contrary. 
  

 A-28-5 

 IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed on behalf of the Trust.

  

			
	 JPMORGAN CHASE BANK, NATIONAL
 ASSOCIATION,
 not in its individual capacity, but solely
 in its capacity as Trustee

		
	By:	 	  

	Name:	 	
	Title:	 	

  

			
	Trustee Authentication
	
	 JPMORGAN CHASE BANK, NATIONAL
 ASSOCIATION,
 not in its individual capacity, but solely
 in its capacity as Trustee

		
	By:	 	  

	Name:	 	
	Title:	 	

  

 A-28-6

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