Document:

Severance Agreement

 Exhibit 10.1 
 EXECUTION COPY 
 SEVERANCE AGREEMENT 
 SEVERANCE AGREEMENT, dated as of September 15, 2008 (the “Agreement”), between Nobel Learning Communities, Inc., a Delaware
corporation, (“Employer”), and Susan W. Race, Senior Vice President - Education (“Executive”). 
 WHEREAS, Executive is a member of Employer’s senior leadership team and is expected to be actively involved in positioning the organization for continued growth and success; 
 WHEREAS, in an effort to acknowledge Executive’s important role in this process and to provide Executive with a degree of income and benefit
protection in the event her employment is terminated as more fully described below; and 
 NOW, THEREFORE, in consideration of the
premises and the mutual covenants and promises contained herein and for other good and valuable consideration, Employer and Executive hereby agree as follows: 
  

	 	1.	Effective Date 

 This Agreement shall become
effective as of the above written date and shall provide for the payment of compensation and benefits in the event Executive’s employment with Employer is terminated under the conditions described in Section 3(a). 
  

	 	2.	Term of Agreement 

 (a) This Agreement shall become
effective as of the above written date. No provision of this Agreement may be modified, waived, or discharged unless the modification, waiver, or discharge is approved by the Board of Directors of Employer (“Board”) and is agreed to
in writing by Executive. 
 (b) Employer may terminate this Agreement and Executive’s employment at any time upon written notice for
“Cause,” which, for purposes of this Agreement, shall mean: 
  

	 	(1)	Executive’s habitual intoxication or drug addiction; 

  

	 	(2)	violation of Employer’s written policies, procedures or codes including, without limitation, those with respect to harassment (sexual or otherwise) and ethics;

  

	 	(3)	refusal or failure by Executive to perform such duties as may reasonably be delegated or assigned to her, consistent with her position, by the Board; 

  

	 	(4)	willful refusal or willful failure by Executive to comply with any requirement of the Securities and Exchange Commission or any securities exchange or self-regulatory organization
then applicable to Employer; 

	 	(5)	willful or wanton misconduct by Executive in connection with the performance of her duties including, without limitation, breach of fiduciary duties; 

  

	 	(6)	the breach by Executive (whether due to inattention, neglect, or knowing conduct) of any of the material provisions of this Agreement (including Sections 4(a), 4(b), or 4(c) of this
Agreement); 

  

	 	(7)	Executive is convicted of, pleads guilty, no contest or nolo contendere to, or admits or confesses to any felony, or any act of fraud, misappropriation, embezzlement or any
misdemeanor involving moral turpitude; 

  

	 	(8)	Executive’s dishonesty detrimental to the best interest of Employer; or 

  

	 	(9)	involvement in any matter which, in the opinion of the Board, is reasonably likely to cause material prejudice or embarrassment to Employer’s business;

 provided, that, in the case of clauses (iii), (v), or (vi), there shall not be Cause unless Employer has first given Executive written
notice specifying in reasonable detail the circumstances which Employer believes gives rise to Cause for termination and Executive has failed to remedy the same to the reasonable satisfaction of the Board within fifteen (15) days after the date
of such notice, or unless the condition or event is not subject to cure, or a substantially similar condition or event has been the subject of a prior notice by Employer within the twelve months preceding such notice. 
 (c) If Employer terminates Executive’s employment for Cause, or if Executive voluntarily terminates her employment other than for Good Reason,
Executive shall not be entitled to any compensation or benefits under this Agreement, but shall be entitled to receive her base salary accrued but not paid through the date of termination and no other monies or benefits except as provided by the
terms of the underlying plan documents or as required by law. 
 (d) For purposes of this Agreement, “Good Reason” means,
within twelve (12) months following a Change in Control, (i) a reduction of Executive’s authority or responsibility, (ii) a reduction in Executive’s rate of pay, or (iii) a change in Executive’s principal work
location to a location that is more than fifty (50) highway miles from Executive’s principal work location immediately before the change and the change increases Executive’s commuting distance in highway mileage. The terms
“highway miles” and “highway mileage” shall have the same meanings as these terms have when used to express the distances between locations by mapmakers such as the Hagstrom Map Company. 
  

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 (e) A reduction in authority or responsibility means (i) the assignment to Executive of any duties
materially inconsistent in any respect with Executive’s position (including status, offices, titles, and reporting requirements), and that detract from or reduce the authority, duties or responsibilities to which Executive was assigned
immediately before change; or (ii) any other action by Employer that results in a diminution in such position, authority, duties, or responsibilities. 
 (f) However, a reduction in authority or responsibility shall not include: 
  

	 	(1)	an isolated, insubstantial and inadvertent action taken in good faith and which is remedied by Employer promptly after receipt of notice thereof given by Executive; or

  

	 	(2)	any temporary reduction in authority or responsibility while Executive is absent from active service on any approved disability or approved leave of absence.

 (g) If Executive determines that Good Reason exists to terminate her employment with Employer, Executive must notify
Employer in writing of the specific event, within sixty days of the occurrence of the event, and the notice shall also include the date on which Executive will terminate employment with Employer, which date shall be no earlier than fifteen days
after the date of the notice. Within seven days of Employer’s receipt of the written notice, Employer shall notify Executive that it agrees or disagrees with Executive’s determination that the event specified in the notice constitutes Good
Reason. If Employer notifies Executive that it agrees with Executive’s determination that the event specified in the notice constitutes Good Reason, Executive will terminate employment with Employer as specified in the notice or as otherwise
agreed. If Employer notifies Executive that it disagrees with Executive’s determination that the event specified in the notice constitutes Good Reason, Executive may terminate her employment on the date specified in the notice (or such later
date as Executive and Employer may mutually agree in writing) or may elect to continue her employment by so notifying Employer in writing. 
  

	 	3.	Salary Continuation and Other Benefits 

  

	 	(a)	In General 

 If, while this Agreement is in effect,
(i) Executive’s employment is involuntarily terminated by Employer without Cause or Executive terminates her employment for Good Reason and Executive satisfies her obligations set forth in Section 4 of this Agreement including, but
not limited to, the execution and delivery of the Waiver and Release described in Section 4(e), she shall be entitled to the payments and benefits described in this Section 3. 
 Notwithstanding the foregoing, if Employer determines that Executive has breached any provision of this Agreement, Executive shall repay the Salary
Continuation Payment and forfeit any future benefits provided under this Agreement, excluding the lesser of (i) twenty percent of her total Salary Continuation Payment or (ii) $5,000. The retained amount shall be deemed to be continuing
consideration for signing and not revoking the applicable Waiver and Release. Termination of Executive’s employment by reason of death or disability shall not constitute involuntary termination by Employer under this Agreement and, in such
event, no payments or benefits shall be provided under this Agreement. 
  

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	 	(b)	Payment of Accrued Obligations 

 Executive shall be
entitled to payment of her then current base salary through the date her employment is terminated (“Termination Date”). Any vacation amount accrued, but not paid, through the Termination Date shall also be paid to Executive in a
single lump sum. Executive shall submit all vouchers for reasonable business expenses prior to her Termination Date or as soon thereafter as is practicable. Executive will no longer be authorized after her Termination Date to incur any expenses,
obligations, or liabilities on behalf of Employer. 
  

	 	(c)	Salary Continuation Payment 

 To the extent Executive is
eligible for payments and benefits under this Agreement, Employer shall make a single lump sum payment (“Salary Continuation Payment”) to Executive equal to the then current base salary that Executive would have otherwise received
during the period described below (the “Salary Continuation Period”). If Executive dies after becoming eligible for the Salary Continuation Payment and other benefits under this Agreement, but before the end of the Salary
Continuation Period, the remaining benefits shall be paid to Executive’s lawful spouse, or estate if Executive has no surviving lawful spouse. 
  

	 	(d)	Salary Continuation Period 

 If Executive’s
Termination Date is within twelve months after a Change in Control, the Salary Continuation Period shall be eighteen months. If Executive’s Termination Date is not within twelve months after a Change in Control, the Salary Continuation Period
shall be nine months. For purposes of this Agreement, a “Change in Control” shall be deemed to have taken place if (i) any “person” becomes the “beneficial owner” (as such terms are defined in the Securities
Exchange Act of 1934, as amended from time to time, and the rules and regulations promulgated thereunder) of shares of Employer having 50% or more of the total number of votes that may be cast for the election of Employer’s directors; or
(ii) there occurs a cash or tender offer for Employer shares, merger, or other business combination, or sale of assets or any combination of the foregoing transactions, and as a result of or in connection with any such event persons who were
directors of Employer before the event shall cease to constitute a majority of the Board or of the board of directors of any successor to Employer. 
  

	 	(e)	Annual Bonus Program 

 Executive shall be entitled to a
pro rata portion of her incentive compensation (“Award”) for any “performance period” in progress under any annual bonus program of Employer in which Executive participates. The pro rata portion of Executive’s Award
will be determined based on the assumption that Executive’s individual performance goals were 100% satisfied at the end of the performance period, provided that at the end of the performance period, there is a bonus payable to other eligible
employees, and by then multiplying the amount that would otherwise have been paid to Executive had her employment not so terminated by a fraction. The numerator of the fraction is the number of months from the start of the 

  

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performance period through the end of the month in which Executive’s Termination Date occurs. The denominator of the fraction is the total number of
months in the performance period. Unless Executive’s employment is terminated as a result of a Change of Control, in which event the Award will be paid to Executive in a single lump sum on the Termination Date, the prorated amount shall be paid
in cash at the same time that awards would have been paid for that performance period to other participants in the respective bonus program who have not terminated employment. 
  

	 	(f)	Group Health Benefits 

 Executive shall be entitled to
participate in Employer’s medical, dental, vision, and any other group health benefit programs during the Salary Continuation Period on the same terms as she participated immediately prior to the Termination Date. The last day of the Salary
Continuation Period will constitute the date of Executive’s “termination of employment” and her participation in those programs will terminate in accordance with their respective terms. 
 If during the Salary Continuation Period, Executive becomes re-employed with another employer and she and her dependents are eligible to receive any of
the benefits referenced in the Section 3(f) under another employer’s plans, Employer’s obligations under this Section 3(f) shall be reduced to the extent comparable coverage or benefits are actually received by Executive
following Executive’s termination by Employer, and Executive shall promptly report to Employer any such coverage or benefits actually received by Executive. 
  

	 	(g)	Outplacement Services 

 Executive shall be eligible to
receive, at Employer’s expense, senior executive outplacement services from Employer or from an outplacement agency selected or approved by Employer until a date that is 12 months from the date of termination. 
  

	 	(h)	Other Benefit Plans 

 For purposes of Executive’s
participation in any other employee or executive benefit or perquisite plan or program not specifically addressed in this Section 3, including, but not limited to, the Employer’s defined contribution, nonqualified deferred compensation and
group life insurance plans, the Termination Date will constitute the date of Executive’s “termination of employment” for purposes of those plans and programs. Executive may make no contributions to, and shall accrue no further
benefits under, those plans and programs after the Termination Date unless the plans and programs are required to permit the contributions or accruals under applicable law. Executive shall have no right to make contributions to Employer’s
defined contribution plan from the Severance Payment under this Agreement. Executive shall vest in any defined contribution and deferred compensation plans in accordance with the terms set forth in such plan. 
  

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	 	4.	Executive’s Confidentiality and Other Obligations 

  

	 	(a)	Confidentiality 

 Executive shall not at any time,
divulge, communicate, use to the detriment of Employer or for the benefit of any other person, firm, or entity, or misappropriate in any way, any confidential information or trade secrets relating to Employer or its business including, without
limitation, business strategies, operating plans, acquisition strategies (including the identities of (and any other information concerning) possible acquisition candidates), pro forma financial information, market analyses, acquisition terms and
conditions, personnel information, trade processes, manufacturing methods, know-how, customer lists and relationships, supplier lists, protected health information, or other non-public proprietary and confidential information relating to Employer.

  

	 	(b)	Nonsolicitation 

 During her employment with Employer and
throughout the Salary Continuation Period, in addition to any other nonsolicitation agreements between Employer and Executive, Executive shall not, directly or indirectly, for herself or on behalf of any other person, firm, or entity, employ,
engage, or retain any person who at any time during the 12-month period immediately preceding her Termination Date, was an employee of Employer or contact any supplier, customer, or employee of Employer for the purpose of soliciting or diverting any
such supplier, customer, or employee from Employer, or otherwise interfering with the business relationship of Employer with any of the foregoing individuals or organizations. 
  

	 	(c)	Noncompetition 

 During her employment with Employer and
throughout the Salary Continuation Period, in addition to any other noncompetition agreements between Employer and Executive, Executive shall not, directly or indirectly, engage in, or serve as a principal, partner, joint venturer, member, manager,
trustee, agent, stockholder, director, officer or employee of, or consultant or advisor to, or in any other capacity, or in any manner own, control, manage, operate, or otherwise participate, invest, or have any interest in, or be connected with,
any person, firm, or entity that engages in, directly or indirectly, any activity that is competitive with Employer’s business as then conducted within fifty (50) miles of any then facility of Employer or of any customer of Employer;
provided, however, that notwithstanding the foregoing: (i) Executive may own a de minimis amount of the voting securities of any publicly-traded company and may continue to serve as a director on any boards on which Executive was a director
immediately prior to the Termination Date; and (ii) after the Termination Date Executive may engage, directly or indirectly, in employment, activities or services for or to any public school or public school district and such employment,
activities or services will not constitute a violation of this Section 4(c). 
  

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	 	(d)	Return of Employer Property 

 Executive shall return to
Employer, on or before her Termination Date, all property of Employer including, but not limited to, home office equipment, cell phones, credit cards, computers, computer disks, computer access codes, computer programs, keys, card key passes,
instruction manuals, documents, business plans, files, records, and any copies thereof and other property or materials which she received or prepared or helped to prepare in connection with her employment with Employer, and she hereby assigns to
Employer all right, title, and interest in such property, and any other inventions, discoveries, or works of authorship created by Executive during the course of her employment. 
  

	 	(e)	Waiver and Release 

 Executive shall execute the Waiver
and Release in the form attached hereto as Exhibit A. Executive shall deliver the Waiver and Release to Employer as described therein. No compensation or benefits under this Agreement will be paid to Executive before Employer receives the fully
executed Waiver and Release and the expiration of any revocation period described in the Waiver and Release. 
  

	 	5.	Miscellaneous 

 (a) Entire Agreement; Related
Documents 
 This Agreement (including Exhibit A) constitutes the entire agreement between the parties with respect to severance and other
benefits upon termination of employment. Except as otherwise expressly provided in this Agreement, all prior correspondence and proposals (including summaries of proposed terms) and all prior promises, representations, understandings, arrangements,
and agreements (including an offer letter or employment agreement) relating to these subject matters (including, but not limited to, those made to or with Executive by any other person or entity), whether written or oral, are merged in and
superseded by this Agreement. 
  

	 	(b)	Statements by the Parties 

 Executive will not make any
untruthful and disparaging statements about Employer or any clients, competitors, suppliers, employees, or former employees of Employer to any such person or any other persons (including, but not limited to, the press or other media). Employer
agrees that it will not make any untruthful and disparaging statements about Executive to any person (including, but not limited to, the press or other media). 
  

	 	(c)	Assignment and Successors 

 This Agreement shall be
binding on and inure to the benefit of Employer and its successors and assigns. This Agreement shall also be binding on and inure to the benefit of Executive and her heirs, executors, administrators, and legal representatives. This Agreement shall
not be assignable by any party hereto without the prior written consent of the other parties hereto. Employer may effect such an assignment without prior written approval of Executive to a subsidiary or affiliate of Employer or upon the transfer of
all or substantially all of its business and/or assets (whether by purchase, merger, consolidation or otherwise). 
  

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	 	(d)	Governing Law 

 This Agreement shall be governed by and
construed in accordance with Pennsylvania law, without giving effect to its principles or rules of conflict of laws to the extent those principles or rules would require or permit the application of the laws of another jurisdiction. 
  

	 	(e)	Employment at Will 

 Executive agrees and acknowledges
that her employment with Employer is at all times intended to be employment at will. Nothing in this Agreement is intended to create a contract of employment between Executive and Employer or will prevent Employer from terminating Executive’s
employment for any reason at any time. 
  

	 	(f)	Equitable Relief 

 Executive acknowledges that if she
violates this Agreement, Employer could suffer irreparable injury and, in addition to any other rights and remedies available under this Agreement or otherwise, Employer shall be entitled to an injunction to be issued or specific enforcement to be
required (without the necessity of any bond) restricting Executive from committing or continuing any such violation. Accordingly, notwithstanding Section 5(g) in addition to all other remedies under this Agreement, Employer shall be entitled as
a matter of right to injunctive relief, including specific performance, with respect to any such breach or violation, in any court of competent jurisdiction; provided, however, that nothing herein shall be deemed to constitute consent by Executive
to an ex parte proceeding. The remedies granted to Employer in this Agreement are cumulative and are in addition to remedies otherwise available to Employer at law or in equity. If Employer is obliged to resort to the courts for the enforcement of a
covenant of Executive contained in Sections 4(a) through (d), such covenant shall be extended for a period of time equal to the period of such breach, which extended period will commence on the later to occur of (i) the date on which the
original (unextended) term of such covenant is scheduled to terminate, or (ii) the date of the final court order (without further right of appeal) enforcing such covenant. To the extent that any statutes providing for discovery in any action to
enforce any of the covenants or obligations of this Section 5(f) delay the time in which any party may initially propound, request or serve any discovery, the parties waive such provisions of such statutes. Executive will not seek, and hereby
waives any requirement for, the securing of posting of a bond or proving actual damages in connection with Employer’s seeking or obtaining any injunctive or equitable relief in connection with Executive’s covenants or other obligations
under Section 4. If, despite the foregoing waivers, a court would nonetheless require the posting of a bond, the parties agree that a bond in the amount of $25,000 would be a fair and reasonable amount, particularly in light of the difficulty
in quantifying what the actual loss caused by an injunction would be. Executive consents to in personam jurisdiction and venue in each of the United States District Court for the Eastern District of Pennsylvania and the Court of Common Pleas of
Chester County, Pennsylvania, and waives the right to contest in personam jurisdiction and venue in such courts. 
  

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	 	(g)	Arbitration of Certain Disputes. 

 Any and all
controversies or claims arising out of or relating to this Agreement, or the breach thereof, or any other claim by Executive against Employer arising from the employment of Executive or the termination of Executive’s employment, including
without limitation, claims alleging violation of Title VII of the Civil Rights Act of 1964, 42 U.S.C. Sections 2000e, et seq., the Age Discrimination in Employment Act, 29 U.S.C. Section 621, et seq., the Americans with Disabilities Act, 42
U.S.C. Section 12101 et seq., any statutes of any state, and any contract or any principle of state or federal common law, shall be settled by arbitration administered by the American Arbitration Association under its Employment Dispute
Resolution Rules. Judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. The procedure established by this Section 5(g) shall be the exclusive method for resolution of such disputes. Copies
of the American Arbitration Association Employment Discrimination Resolution Rules are available through Employer’s Human Resources Department and may be obtained upon request. Any request or demand for arbitration of any dispute covered by
this Section 5(g) shall be filed with the American Arbitration Association no later than 300 days after the event which gave rise to the claim. Notwithstanding the foregoing, Employer may seek injunctive relief in any court of law in connection
with an alleged violation of any provision of Section 4, as provided in Section 5(f). 
  

	 	(h)	Enforceability 

 Executive acknowledges that her
obligations under this Agreement and the Waiver and Release are reasonable and necessary for the protection of Employer and are essential inducements to Employer’s entering into this Agreement. Accordingly, Executive shall be bound by this
Agreement and the Waiver and Release to the maximum extent permitted by law. It is the parties’ intent that the foregoing shall be fully enforceable. However, the parties further agree that, if any provisions of this Agreement or the Waiver and
Release shall for any reason be held to be excessively broad as to duration, geographical scope, property, or subject matter, such provision shall be construed by limiting and reducing it so as to be enforceable to the extent permitted by applicable
law. 
  

	 	(i)	Severability 

 If any one or more provisions of this
Agreement shall be or become invalid, illegal, or unenforceable in any respect, the validity, legality, and enforceability of the remaining provisions shall not be affected thereby. 
  

	 	(j)	Taxes 

 Employer may withhold from any payments or
benefits provided under this Agreement all federal, state, or other applicable taxes as may be required by law. 
  

	 	(k)	Amendments 

 No provision of this Agreement may be
modified, waived, or discharged unless such modification, waiver, or discharge is approved by the Board of Directors of Employer and is agreed to in writing by Executive. No waiver by any party hereto at any time of any breach by 

  

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any other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No waiver of any provision of this Agreement shall be implied from any course of dealing between the parties or from any failure by any party to assert
its rights under this Agreement on any occasion or series of occasions. 
  

	 	(l)	Notices 

 Any notice or other communication required or
permitted to be delivered under this Agreement shall be (i) in writing, (ii) delivered personally, by courier service or by certified or registered mail, first-class postage prepaid and return receipt requested, (iii) deemed to have
been received on the date of delivery or on the third business day after mailing, and (iv) addressed as follows (or to such other address as the party entitled to notice shall hereafter designate in accordance with the terms of this Section):

 If to Employer, at: 
 Nobel
Learning Communities, Inc. 
 1615 West Chester Pike, Suite 200 
 West Chester, PA 19382-6223 
 Attention: CEO

 If to Executive, at: 
 1201
Karen Lane 
 Radnor, PA 19087 
  

	 	(m)	Counterparts 

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

	 	(n)	Headings 

 The section and other headings in this
Agreement are for the convenience of the parties only and are not intended to be a part of, or to affect the meaning or interpretation of, this Agreement. 
 [remainder of page intentionally left blank; signatures on following page] 
  

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 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the day and year first
above written. 
  

			
	NOBEL LEARNING COMMUNITIES, INC.
		
	By:	 	 /s/ George Bernstein

	Name:	 	George Bernstein
	Title:	 	President and CEO
	
	EXECUTIVE
	
	 /s/ Susan W. Race

	Susan W. Race

  

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 EXECUTION COPY 
 EXHIBIT A 
 WAIVER AND RELEASE 
 I am terminating my employment with Nobel Learning Communities, Inc., or one of its subsidiaries or affiliates, (collectively, “Employer”).
Employer and I have entered into a Severance Agreement, dated as of September 15, 2008 (the “Severance Agreement”), to which this Waiver and Release is attached as an exhibit. My Severance Agreement provides for, among other things,
certain additional compensation, benefits, and rights in connection with the termination of my employment. In consideration for the receipt of the compensation and additional benefits, I acknowledge and agree to the following: 
 1. I have been told by Employer and I understand that all benefits set forth in my Severance Agreement from Employer are conditioned upon my signing and
not revoking this Waiver and Release (the “Release”) on or after my Termination Date (as that term is defined in the Severance Agreement), and returning it to Employer at Nobel Learning Communities, Inc., 1615 West Chester Pike,
Suite 200, West Chester, PA 19382-6223, Attention: CEO. I have been told by Employer and I understand that I must sign and return this Release on or after my Termination Date so that it is received at the above address by the close of business on
the later of (a) the thirtieth day (or if that thirtieth day is not a business day, the first business day next following such thirtieth day) after my Termination Date, or (b) the forty-fifth day (or if that forty-fifth day is not a
business day, the first business day next following such forty-fifth day) after I have been given this Release to review (the “Release Due Date”). If I do not sign this Release or if I sign this Release, but it is not received by
Employer until after the close of business on the Release Due Date, I shall not be considered to have satisfied the conditions under my Severance Agreement for receipt of benefits or payments. 
 2. I realize that there are various state, local, and federal laws that prohibit, among other things, employment discrimination on the basis of age, sex,
race, color, gender, creed, religion, sexual preference/orientation, marital status, national origin, mental or physical disability, veteran status, and that these laws are enforced through the Equal Employment Opportunity Commission
(“EEOC”), Department of Labor (“DOL”) and State or Local Human Rights agencies. Such laws include, without limitation, Title VII of the Civil Rights Act of 1964 (“Title VII”); the Age Discrimination
in Employment Act of 1964 (“ADEA”); the Americans with Disabilities Act of 1990 (“ADA”); the Employee Retirement Income Security Act of 1974 (“ERISA”); 42 U.S.C. Section 1981; the Equal Pay
Act; as each may have been amended; and other state and local human or civil rights laws as well as other statutes which regulate employment; and the common law of contracts and torts. I hereby waive and release any right I may have under these or
any other laws with respect to my employment and termination of employment at Employer and acknowledge that Employer has not (a) discriminated against me, (b) breached any contract with me, (c) committed any civil wrong (tort) against
me, or (d) otherwise acted unlawfully toward me. 
 I also hereby waive any right to become, and promise not to consent to become, a
member of any class in a case in which claims are asserted against any Releasee (as defined in Paragraph 3 below) that are related in any way to my employment or the termination of my employment with Employer, and that involve events which have
occurred as of the date of 

 
this Release (defined to mean the date on which Executive signs this Release). If, without my prior knowledge and consent, I am made a member of a class in
any proceeding, I shall opt out of the class at the first opportunity afforded to me after learning of my inclusion. In this regard, I agree that I will execute, without objection or delay, an “opt-out” form presented to me either by the
court in which such proceeding is pending or by counsel for any Releasee who is made a defendant in any such proceeding. 
 3. On behalf of
myself, my heirs, executors, administrators, successors and assigns, I hereby unconditionally release and discharge Employer, the various Employer benefit committees, plans, trusts and trustees, and their successors, assigns, affiliates,
shareholders, directors, officers, representatives, agents and employees (collectively “Releasees” and individually “Releasee”) from any and all claims, (including claims for attorneys’ fees and costs),
charges, actions and causes of action, demands, damages, and liabilities of any kind or character, in law or equity, suspected or unsuspected, past or present, that I ever had, may now have, or may later assert against any Releasee, arising out of
or related to my employment or termination of employment with Employer. To the fullest extent permitted by law, this Release includes, but is not limited to: (a) claims arising under the ADEA, Title VII, the ADA, the Equal Pay Act, the Older
Workers Benefit Protection Act, the Worker Adjustment and Retraining Notification Act, ERISA, 42 U.S.C. Section 1981, and any other federal, state, or local law prohibiting age, sex, race, color, gender, creed, religion, sexual
preference/orientation, marital status, national origin, mental or physical disability, veteran status, or any other form of unlawful discrimination or claim with respect to or arising out of my employment with or termination from Employer;
(b) claims (whether based on common law or otherwise) arising out of or related to any contract or employment agreement (whether express or implied); (c) claims under any federal, state or local constitutions, statutes, rules or
regulations; (d) claims (whether based on common law or otherwise) arising out of any kind of tortious conduct (whether intentional or otherwise) including, but not limited to, wrongful termination, defamation, violation of public policy; and
(e) claims included in, related to, or which could have been included in any presently pending federal, state or local lawsuit filed by me or on my behalf against any Releasee, which I agree to immediately dismiss with prejudice. This Release
is intended to include in its effect, without limitation, claims and causes of action of which I am not aware or that I do not suspect to exist in my favor at the time of executing this Release and this Release contemplates extinguishment of all
such claims and causes of action. 
 4. I covenant and agree not to bring any action, suit or administrative proceeding contesting the
validity of this Release or attempting to negate, modify or reform it, nor to sue any Releasee for any reason arising out of my employment or termination thereof, other than a claim contesting the validity of this Release under applicable provisions
of ADEA. If I breach either Paragraph 3 or 4 of this Release, I shall: (a) to the extent not prohibited by law, promptly return to Employer all consideration received hereunder, and (b) pay any Releasee all of their actual attorneys’
fees and costs incurred in each such action, suit, or other proceeding, including any and all appeals or petitions therefrom, regardless of the outcome. I agree to pay such expenses within thirty days of written demand. This Paragraph 4 is not
intended to limit me from instituting legal action according to the terms of my Severance Agreement for the sole purpose of a claim for benefits to which I am entitled under my Severance Agreement. 
  

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 I understand that this Release has neither the purpose nor intent of interfering with my protected right
to file a charge with or participate in an investigation or proceeding pursuant to the statutes administered and enforced by the EEOC, specifically: the ADEA, the Equal Pay Act, Title VII of the Civil Rights Act of 1964 and the ADA. 
 I understand that I will not breach this Release if I file a charge with or participate in an investigation or proceeding pursuant to the statutes
administered and enforced by the EEOC. However, by signing this Release, I understand that I waive any right I may have to recover money or other relief in any lawsuit or proceeding brought by me or by an agency or third party, including the EEOC,
on my behalf. 
 5. I understand that this in no way affects any benefits to which I would be entitled in the absence of my Severance
Agreement under any benefit plan in which I participated during my employment, but specifically excluding any other Employer plan providing for severance or other termination-related benefits. 
 6. I have no knowledge of any wrongdoing involving improper or false claims against a federal or state governmental agency, other than as I have
disclosed to the Employer Compliance Officer. 
 7. I affirm my obligations under Section 4 of the Severance Agreement. 
 8. This Release shall be governed by and construed in accordance with Pennsylvania law, without giving effect to its principles or rules of conflict of
laws to the extent those principles or rules would require or permit the application of the laws of another jurisdiction. 
 9. If any one or
more of the provisions contained in the Release shall for any reason be held to be unenforceable in any respect under the law of any state or of the United States of America, such unenforceability shall not affect any other provisions of this
Release, but, with respect only to that jurisdiction holding the provision to be unenforceable, this Release shall then be construed as if such unenforceable provision or provisions had never been contained herein. 
 10. I understand that I have the right to consult with an attorney before signing the Release and that Employer has advised me to do so. I may revoke the
Release within seven calendar days after signing it. Revocation must be made by delivery of written notice of revocation to Employer at the address set forth in paragraph 1 of this Release. Upon any proper revocation of this Release, my right to
payments and benefits under the Severance Agreement shall terminate and the Severance Agreement will be rendered void and without effect. 
 11. Nothing in the Severance Agreement or this Release shall be construed as an admission of any improper action or conduct by Employer or any of its affiliates, subsidiaries, joint venturers, or directors, officers, employees, agents,
representatives or assigns of any violation or noncompliance with any obligation, legal or otherwise. 
 12. The Severance Agreement and this
Release contain the entire agreement between Employer and me and fully supersedes any and all prior agreements or understandings 

  

 14 

 
pertaining to the subject matter hereof (including any employment agreements, other severance or separation agreements, arrangements, and offer letters) and
all such prior agreements are null and void in their entirety and of no force and effect. By signing this Release I am not relying on any representation, promise, or statement, either oral or written, not contained in this Release or the Severance
Agreement. 
 BY SIGNING THIS WAIVER AND RELEASE, I STATE THAT: I HAVE READ IT; I UNDERSTAND IT AND KNOW THAT I AM GIVING UP IMPORTANT RIGHTS; I AGREE
WITH EVERYTHING IN IT; EMPLOYER HAS ADVISED ME TO CONSULT AN ATTORNEY BEFORE SIGNING IT; AND I HAVE SIGNED IT KNOWINGLY AND VOLUNTARILY. 
  

					
	  
	 		  	  

	Date	 		  	Signature: Susan W. Race

  

 15Sixth Amendment to Amended and Restated Revolving Line of Credit Loan Agreement

 Exhibit 10.1 
 

 
 SIXTH AMENDMENT TO AMENDED AND 
 RESTATED REVOLVING LINE OF CREDIT LOAN AGREEMENT 
 THIS SIXTH AMENDMENT TO
AMENDED AND RESTATED REVOLVING LINE OF CREDIT LOAN AGREEMENT (“Agreement”), dated as of September 17, 2008, by and between WILLIAM LYON HOMES, INC., a California corporation (“Borrower”), and CALIFORNIA
BANK & TRUST, a California banking corporation (“Lender”), with reference to the following facts: 
 RECITALS 
 A. Borrower originally agreed to borrow a sum not to exceed Thirty-Five Million Dollars
($35,000,000.00) (as the same has been and may be further amended from time to time, “Loan”) from Lender for the purpose of providing Borrower with funding for the acquisition and development of residential lots, the construction of
existing and future residential home projects, and the issuance of letters of credit for the payment of costs incurred or associated with said projects. The terms and conditions of the Loan are more particularly set forth in that certain Amended and
Restated Revolving Line of Credit Loan Agreement (Borrowing Base Loan) dated as of September 16, 2004, by and between Borrower and Lender (as the same has been and may be further amended from time to time, “Loan Agreement”).
All capitalized terms not specifically defined herein shall have the meanings given to such terms in the Loan Agreement. 
 B. The
Loan is evidenced by that certain Seventh Amended and Restated Construction Loan Promissory Note (Construction Revolving Line of Credit) dated as of May 20, 2008, given by Borrower to Lender (as the same has been and may be further amended from
time to time, “Current Note”). 
 C. The Loan is secured by, among other things, the “Deed of Trust”
(as defined in the Loan Agreement). 
 D. This Agreement, the Current Note and the other documents evidencing or relating to the Loan
collectively shall be referred to as the “Loan Documents.” 
 E. Borrower has requested that Lender modify the Loan
by, among other things, decreasing (i) the maximum amount of the Loan, (ii) the maximum “Commitment Amount” (as defined in the Loan Agreement), and (iii) the face amount of the Current Note, from Thirty-Five Million
Dollars ($35,000,000.00) to Thirty Million Dollars ($30,000,000.00) (“New Commitment Amount”). 
 F. Lender is
willing to consent to the modifications to the Loan Documents set forth herein, subject to the conditions set forth below. The date on which all conditions in this Agreement have been satisfied shall be referred to as the “Modification
Closing Date.” 

 TERMS AND CONDITIONS 
 NOW, THEREFORE, in consideration of the foregoing premises and other valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows: 
 1. Recitals. The preamble, recitals and any exhibits hereto are
hereby incorporated into this Agreement. 
 2. Loan Extension. Borrower has requested that Lender modify the Loan by extending
the “Initial Line Term” to September 21, 2009, and extending the “Maturity Date” to September 21, 2010. As a result of the extension of the term of the Loan described above, the following definitions in
the Loan Agreement shall be revised as follows: 
 “Initial Line Maturity Date” shall mean
September 21, 2009. 
 “Initial Line Term” shall mean that period continuing from the date hereof and
ending on the Initial Line Maturity Date of September 21, 2009. 
 “Maturity Date” means
September 21, 2010, subject to the Loan reduction requirements set forth in Section 2.1.7 of the Loan Agreement, 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. 
 “Reduction Period” shall mean, as set forth in Section 2.1.7 of
the Loan Agreement, that period commencing on September 21, 2009 (at the conclusion of the Initial Line Term) and continuing to September 21, 2010 (at the Maturity Date), during which period (a) all existing Qualified Projects entered
into the Borrowing Base as of the Initial Line Maturity Date shall remain in the Borrowing Base, but during which Lender’s obligation to include any new Qualified Projects into the Borrowing Base shall terminate, and (b) the
“Commitment Amount” shall be reduced on a quarterly basis to the applicable “Reduced Commitment Amount” (both as defined in the Loan Agreement). 
 3. Decrease in the Loan Amount. 
 3.1 Decrease in the Maximum Commitment Amount. From and after the Modification Closing Date, the maximum amount of the Loan and the maximum Commitment Amount are hereby decreased from the current amount of Thirty-Five Million
Dollars ($35,000,000.00) to the New Commitment Amount of Thirty Million Dollars ($30,000,000.00). All references in the Loan Documents to the maximum amount of the Loan and maximum Commitment Amount shall be revised to refer to the New Commitment
Amount set forth herein. 
 3.2 Amendment to Definition of Commitment Amount. The definition of “Commitment
Amount” set forth in the Loan Agreement shall be replaced with the following: 
 “Commitment
Amount” means (a) during the Initial Line Term, the sum of Thirty Million Dollars ($30,000,000.00), 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 Seven Million Five Hundred Thousand Dollars ($7,500,000.00) (each,
“Reduced Commitment Amount”): 
  

 2 

			
	Date	  	Reduced Commitment Amount
	 Initial Line Maturity
Date (9/21/09)
	  	$30,000,000.00
	 First Calendar Quarter
(12/21/09)
	  	$22,500,000.00
	 Second Calendar Quarter
(03/21/10)
	  	$15,000,000.00
	 Third Calendar Quarter
(06/21/10)
	  	$7,500,000.00
	 Fourth Calendar Quarter
(09/21/10)
	  	$0.00

 3.3 Decrease in the Amount of the Current Note. As a result of the decrease in the
amount of the Loan and the maximum Commitment Amount, the face amount of the Current Note shall be decreased from the current amount of Thirty-Five Million Dollars ($35,000,000.00) to the New Commitment Amount of Thirty Million Dollars
($30,000,000.00) (“New Note Amount”). All references in the Loan Documents to the face amount of the Current Note shall be revised to refer to the New Note Amount set forth herein. 
 3.4 Amendment and Restatement of the Current Note. Borrower shall execute and deliver to Lender an Eighth Amended and Restated Promissory
Note of even date herewith (the Current Note, as amended by said document, shall hereafter be referred to as the “Note”) evidencing the decrease in the amount of the Loan and the maximum Commitment Amount as described herein.

 3.4.1 In addition to the change in the maturity of the Loan, the new Note also shall be amended to provide that the
term “Applicable Rate Spread” (as used in the Note) shall mean two hundred seventy-five (275) basis points. 
 3.4.2 All references in the Loan Documents to the Current Note shall be revised to refer to the Note, as amended and restated. 
 4. New Definitions in Loan Agreement. 
 4.1 Home Advance Maturity Date(s). The definition of
“Home Advance Maturity Date(s)” in Section 1.1 of the Loan Agreement shall be replaced with the following: 
 “Home Advance Maturity Date(s)” shall mean the term in which a Home may remain in the Borrowing Base for the purposes of calculating the Borrowing Availability: 
 (a) With respect to Presold or Spec Homes, twelve (12) Calendar Months after the initial entry of such Presold or Spec Home
into the Borrowing Base; 
 (b) With respect to Model Homes, twenty-four (24) Calendar Months after the initial
entry of such Model Home into the Borrowing Base (provided, however, that said maturity date may be extended for a six-month period and/or any additional period of time Lender approves, in its sole discretion, but in no event beyond the Maturity
Date, as long as Borrower is in compliance with the Extension Conditions). 
 4.2 Letter of Credit Definitions. The definitions
of Letter of Credit Line, LOC Maximum Commitment Amount, and LOC Total Commitment Amount in Section 1.1 of the Loan Agreement shall be replaced with the following: 
  

 3 

 “Letter of Credit Line” 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 the sum of Three Million Six Hundred Thousand Dollars ($3,600,000.00) (“LOC Total Commitment
Amount”). The Letter of Credit Line shall be a revolving line of credit. Prior to the Maturity Date, the Letter of Credit Line 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 Line, and (b) the
cumulative Letter of Credit Line amounts that are committed but not yet advanced on the Letter of Credit Line, 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. 
 Upon the Maturity Date, if the Loan is not renewed as provided herein, the Letter of Credit Line 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) Three Million Six Hundred Thousand Dollars ($3,600,000.00), less (b) any committed portion of the Letter of Credit Line that Borrower has
requested and Lender has approved in its discretion be available for disbursement 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 Three Million Six Hundred Thousand Dollars
($3,600,000.00). 
 4.3 Maximum Aggregate Loan Allocation(s). The definition of Maximum Aggregate Loan Allocation(s) in
Section 1.1 of the Loan Agreement shall be replaced with the following: 
 “Maximum Aggregate Loan
Allocation(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”): 
 (1) The aggregate Loan Allocations for all Lots and/or Homes for Qualified Projects (whether Advances have been made and/or have been committed but have not yet advanced) located in the State of Arizona shall not exceed the sum of
Nine Million Dollars ($9,000,000.00); and/or 
 (2) The aggregate Loan Allocations for all Lots and/or Homes for
Qualified Projects (whether Advances have been made and/or have been committed but have not yet advanced) located in the State of Nevada shall not exceed the sum of Nine Million Dollars ($9,000,000.00). 
  

 4 

 (b) With respect to all Lots to be included in the Borrowing Base, the aggregate
Loan Allocations for all Entitled Land, Lots Under Development and Developed Lots for all Qualified Projects (whether Advances have been made and/or have been committed but have not yet advanced) shall not exceed the sum of Seven Million Five
Hundred Thousand Dollars ($7,500,000.00) (“Lot Concentration Limitation”). 
 (c) With respect to all
Spec Homes to be included in the Borrowing Base (“Spec Home Concentration Limitation”): 
 (1) For
all Projects financed hereunder, the aggregate Loan Allocations for all Spec Homes for all Projects (whether Advances have been made and/or have been committed but have not yet advanced) shall not exceed the sum of Seven Million Two Hundred Thousand
Dollars ($7,200,000.00); and/or 
 (2) For each and every Project financed hereunder, the total number of Spec Homes
shall not exceed the greater of (A) eight (8), (B) four (4) months’ appraised absorption for the Project, or (C) four (4) months’ actual absorption for the subject Project, as determined by Lender from time to time
based upon the actual prior six-month Home sales average for said Project. 
 4.4 Maximum Allowed Advances. The definition of
“Maximum Allowed Advance” in Section 1.1 of the Loan Agreement shall be replaced with the following: 
 “Maximum Allowed Advance” shall have the following meanings: 
  

	 	•	 	 Entitled Land: The sum of all Advances and Reserved Allocations committed but not disbursed for said Lots shall not exceed the lesser of (i) fifty
percent (50%) of Total Project Costs, (ii) fifty percent (50%) of the Appraised Value for said Land, as determined by Lender from time to time based on its receipt of Appraisals, or (iii) fifty percent (50%) of the sales
price (net of concessions) set forth in the Purchase Contract, subject to Lender’s approval. 

  

	 	•	 	 Lots Under Development: The sum of all Advances and Reserved Allocations committed but not disbursed for said Lots shall not exceed the lesser of
(i) seventy percent (70%) of Total Project Costs, (ii) seventy percent (70%) of the Bulk Finished Lot Value for said Lots, or (iii) seventy percent (70%) of the sales price (net of concessions) set forth in the Purchase
Contract, subject to Lender’s approval. 

  

	 	•	 	 Developed Lots: The sum of all Advances and Reserved Allocations committed but not disbursed for said Lots shall not exceed the lesser of (i) seventy
percent (70%) of Total Project Costs, (ii) seventy percent (70%) of the Bulk Finished Lot Value for said Lots, or (iii) seventy percent (70%) of the sales price (net of concessions) set forth in the Purchase Contract,
subject to Lender’s approval. 

  

	 	•	 	 Spec Homes: The sum of all Advances and Reserved Allocations committed but not disbursed for said Homes shall not exceed the lesser of (i) eighty-five
percent (85%) of Total Project Costs, (ii) seventy-five percent (75%) of the Base Appraisal for said Homes, or (iii) seventy-five percent (75%) of the sales price (net of concessions) set forth in the Purchase Contract,
subject to Lender’s approval. 

  

 5 

	 	•	 	 Presold Homes: The sum of all Advances and Reserved Allocations committed but not disbursed for said Homes shall not exceed the lesser of
(i) ninety percent (90%) of Total Project Costs, (ii) eighty percent (80%) of the Base Appraisal for said Homes, or (iii) eighty percent (80%) of the sales price (net of concessions) set forth in the Purchase Contract,
subject to Lender’s approval. 

 5. Modification of the Spec Home Limitation Requirements. 

5.1 From and after the date hereof, the “Spec Home” (as defined in the Loan Agreement) limitation set forth in
Section 4.5.4(h) of the Loan Agreement shall be deleted in its entirety and replaced with the following: 
 “(h)
For all Spec Homes (including any Model Homes), Borrower shall not be entitled to include in the Borrowing Base at any one time in violation of the Spec Home Concentration Limitation, which shall mean: 
 (i) For all Projects financed hereunder, the aggregate Loan Allocations for all Spec Homes for all Projects (whether Advances have
been made and/or have been committed but have not yet advanced) shall not exceed the sum of Seven Million Two Hundred Thousand Dollars ($7,200,000.00); and/or 
 (ii) For each and every Project financed hereunder, for more Spec Homes than the greater of (A) eight (8), (B) four
(4) months’ appraised absorption for the Project, or (C) four (4) months’ actual absorption for the subject Project, as determined by Lender from time to time based upon the actual prior six-month Home sales average for said
Project.” 
 6. Modification of Terms of Project Advances. Section 2.1.8 of the Loan Agreement shall be replaced with
the following: 
 “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;
provided, however, that the Lot Advance Maturity Date for Lots Under Development in a Project may be extended for a six-month period if over fifty percent (50%) of the total Lots Under Development under the subject Qualified Project have become
Developed Lots prior to said maturity date and if Borrower has satisfied the Extension Conditions. 
 (b) Homes
entered into the Borrowing Base shall be removed from the Borrowing Base on the applicable Home Advance Maturity Date; provided, however, that the Home Advance Maturity Date for Model Homes in a Project may be extended for a six-month period and/or
any additional period of time Lender approves, in its sole discretion, but in no event beyond the Maturity Date, as long as Borrower has satisfied the Extension Conditions.” 
 7. Modification of Financial Covenants. The financial covenants set forth in Section 6.15 of the Loan Agreement shall be replaced with
the following: 
 “6.15. Financial Covenants. Financial covenants described in this Section 6.15,
together with all other financial covenants and restrictions set forth in this Agreement shall be monitored quarterly by Lender upon receipt of the financial statements to be provided hereunder. 
  

 6 

					
	Covenant Party	 	Covenant Type	 	Covenant Requirement
	Borrower and its subsidiaries	 	Maximum Total Liabilities-to-Tangible Net Worth Ratio (with the Total Liabilities to be exclusive of consolidated liabilities of variable interest
entities)	 	Not in excess of 5.0:1.0
	Borrower	 	Minimum Tangible Net Worth	 	Not less than $175,000,000.00
	Borrower	 	Minimum Liquidity	 	Not less than $20,000,000.00 (At least $10,000,000 cash on hand and the remaining $10,000,000 may
consist of either cash and/or availabilities under the lines of credit)

 7.1 Deferred Compliance with Maximum Total Liabilities-to-Tangible Net Worth Ratio.
Notwithstanding any other provision of the Loan Documents to the contrary, Borrower shall not be required to comply with the Maximum Total Liabilities-to-Tangible Net Worth Ratio until on and after January 1, 2009, and continuing thereafter
during the remaining term of the Loan. 
 8. Loan and Letter of Credit Fees. During the extended term of the Loan,
Borrower will continue to be required to pay to Lender the following fees: 
 8.1 Borrower shall pay to Lender during the remaining
term of the Loan a “Commitment Fee” on a periodic basis to be calculated as follows: 
 “Commitment
Fee” means that certain facility fee (a) that is calculated, during the Initial Line Term, at the rate of 0.35% per annum on the full Commitment Amount, and (b) that is calculated, during the Reduction Period, at the rate of
0.35% per annum based on the then-applicable Reduced Commitment Amount, and all said fees shall be payable pursuant to Section 2.5.1 below. Said 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 payment shall be based on 0.0875% of the then-applicable Reduced Commitment Amount. 

8.2 Upon the issuance of each “Letter of Credit” (as defined in the Loan Agreement) during the remaining term of the Loan,
Borrower shall pay to Lender a “Letter of Credit Fee” to be calculated as follows: 
 “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 percent (1.00%) per annum on the face amount of the Letter of Credit, and said
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. 
 9. Current Qualified Projects. As of the Modification Closing Date, the following “Qualified Projects” remain within the
“Borrowing Base” (both as defined in the Loan Agreement): 
  

 7 

							
	 Project Name
	 	City/State	 	Lots	 	Units
	 Harveston (Savannah)

	 	Temecula, CA	 	0	 	26
	 Chapman Heights
(Braeburn)
	 	Yucaipa, CA	 	0	 	6
	 Astoria
	 	Tustin, CA	 	0	 	1
	 Parkside
	 	Eastvale, CA	 	0	 	35
	 Amador
	 	Rancho Cucamonga, CA	 	27	 	42
	 The Court (360 @ South
Bay)
	 	Hawthorne, CA	 	26	 	30
	 Vintage @
Arboreta
	 	Glendora, CA	 	0	 	21
	 Total
	 	 	 	53	 	161

 10. Reserved. 
 11. Amendment to Definition of Maximum Allowed Advance for The Court Project. 
 11.1 Solely with regard to the “Qualified Project” (as defined in the Loan Agreement) known as “The Court” or “360
@ South Bay” (“The Court Project”), the Maximum Allowed Advances shall be reduced in two and one-half percent (2.5%) increments, with full removal of The Court Project from the Borrowing Base on or before June 30,
2009. Accordingly, the sum of all Advances and Reserved Allocations committed, but not disbursed, for the Developed Lots and Spec Homes, respectively, shall not exceed the amounts set forth in, and shall be subject to, the following schedule:

  

					
	Date	 	LTV for Developed Lots	 	LTV for Spec Homes
	 Upon Lender’s
receipt of updated Appraisal
	 	70.0%	 	75.0%
	 9/30/08
	 	67.5%	 	72.5%
	 12/31/08
	 	65.0%	 	70.0%
	 3/31/09
	 	62.5%	 	67.5%
	 6/30/09
	 	0%	 	0%

 The definition of Maximum Allowed Advance with regard to any other “Project” (as
defined in the Loan Agreement) or Qualified Project, other than The Court Project, shall not be modified or changed in any way, except as set forth in Section 4.4 above. 
 12. Amendment to Deed of Trust. Each Deed of Trust shall be amended to secure the obligations under the Note and the other Loan Documents,
as amended herein. 
 13. Conditions Precedent. In no event shall Lender have any obligation to close this transaction unless
and until all of the following conditions are satisfied: 
 13.1 No Defaults. There shall be no: (a) uncured, material
default hereunder or under the Loan Documents; (b) continuing representation, covenant or warranty hereunder or under the Loan Documents that is false or misleading in any manner; and (c) event currently existing which, with the passage of
time, will result in a material default or the falsity of any continuing representation, covenant or warranty hereunder or under the Loan Documents. 
  

 8 

 13.2 No Financial Change. There has been no material adverse change in Borrower’s
financial condition since the closing of the Loan. 
 13.3 Payment of Lender’s Costs. Borrower shall pay all of
Lender’s costs and expenses incurred in connection with the documentation and closing of the modifications to the Loan Documents described herein, including without limitation all attorneys’ fees and other closing fees and costs.

 13.4 Additional Documents. Lender shall have received all additional documents executed by Borrower, as required by Lender
in connection with this Agreement. 
 14. Representations and Warranties. Borrower hereby represents and warrants to Lender as
follows: 
 14.1 No Default. No default or event of default under any of the Loan Documents has occurred that remains uncured,
and no event has occurred which, with the giving of notice or the passage of time, or both, would constitute a default or an event of default under any of the Loan Documents. 
 14.2 Representations and Warranties. As of the date hereof, all of the warranties and representations contained in all of the Loan
Documents remain true, correct, complete and accurate. 
 14.3 No Claims or Defenses. As of the date hereof, neither Borrower
nor its managing member has any claims against Lender nor defenses to the enforcement of any of the Loan Documents in accordance with their respective terms, as amended by this Agreement. 
 14.4 Financial Covenants. Borrower acknowledges and agrees that the financial covenants contained in the Loan Documents are in full force
and effect and shall be monitored by Lender based on the financial reports to be provided under the Loan Agreement. 
 14.5
Satisfaction of Conditions. All of the conditions precedent set forth above have been fully satisfied. 
 15. Further
Assurances. Borrower agrees to perform such other and further acts, and to execute such additional documents, agreements, notices or financing statements, as Lender deems necessary or desirable from time to time to create, preserve,
continue, perfect, validate or carry out any of Lender’s rights under this Agreement and the other Loan Documents. 
 16.
Integration. All rights, remedies, powers and interest provided for Lender herein are in addition to the rights, remedies, powers and interests provided for Lender in the Loan Documents, the terms and provisions of which are incorporated
herein by this reference and made a part hereof. If and to the extent any term or provision hereof is inconsistent with any term or provision of the Loan Documents, the term or provision of this Agreement shall prevail. 
 17. Entire Agreement; Amendments. This Agreement and the other Loan Documents contain the entire agreement between Borrower and Lender with
respect to the Loan Documents, and all prior negotiations, commitments, understandings and agreements are superseded by this Agreement and the Loan Documents. No amendment, modification, supplement, extension, termination or waiver of any provision
of this Agreement, any Loan Document, or any other agreement executed in connection with any of the foregoing shall be effective unless in writing and signed by Lender and Borrower, and then only in the specific instance and for the specific purpose
given. 
  

 9 

 18. Governing Law. The Loan Documents shall be governed by, and construed and enforced in
accordance with, the internal laws of the State of California, without regard to its conflict of laws principles. 
 19. Section
Headings. The section headings of this Agreement are included for convenience only, and shall not affect the construction or interpretation of any provision of this Agreement. 
 20. Attorneys’ Fees. If any action or other proceeding is brought to interpret or enforce any provision of this Agreement, the
prevailing party shall be entitled to recover attorneys’ fees and expenses. 
 21. Binding Effect. This Agreement and the
other Loan Documents shall be binding upon, and shall inure to the benefit of, Borrower and Lender and their respective successors and assigns, or heirs and personal representatives, as applicable, subject to any provision of the Loan Documents
restricting transfers of the Property. 
 22. Severability of Provisions. No provision of this Agreement or any other Loan
Document that is held to be inoperative, unenforceable and invalid shall affect the remaining provisions, and this and all provisions of this Agreement and the Loan Documents are hereby declared to be severable. 
 23. Miscellaneous. No reference to this Agreement is necessary in any instrument or document at any time referring to the Loan Documents. A
reference to the Loan Documents shall be deemed a reference to such document as modified hereby. 
 24. No Commitment. The
furnishing of this Agreement and other modification documents shall in no way be construed as a commitment by Lender to modify, amend, extend or otherwise alter the Loan Documents. Lender shall be under no obligation to close the transaction
evidenced by this Agreement unless this Agreement and all related documents are returned to Lender fully executed by Borrower, and unless this Agreement is actually executed by Lender and delivered to Borrower. 
 25. No Other Amendments. Except as expressly amended herein, the Loan Agreement, and all of the other Loan Documents remain unmodified and
in full force and effect. 
 26. Counterparts. This Agreement may be executed in any number of counterparts and by different
parties hereto on separate counterparts, each of which, when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument. 
 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 
  

 10 

 IN WITNESS WHEREOF, this Agreement has been executed by Borrower and Lender as of the date first above
written. 
 BORROWER: 
 WILLIAM LYON HOMES, INC., a California corporation 
 By: /s/ Richard S. Robinson                               
                                  
 Name: Richard S. Robinson 
 Title: Senior Vice President 
 By: /s/ Michael D. Grubbs                                
                                     
 Name: Michael D. Grubbs 
 Title: Senior Vice President 
 LENDER: 
 CALIFORNIA BANK & TRUST, a California banking corporation 
 By: /s/ James A. Lehmkuhl                                
                                     
 Name: James A. Lehmkuhl                                 
                                    
 Its: Vice President                                  
                                         
      
  

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