Current report Shea Homes Limited Partnership

8-K - Current report

Published: 2014-02-25 20:01:39
Submitted: 2014-02-26
Period Ending In: 2014-02-20
d682039d8k.htm 8-K


> ENT> 8-K 1 d682039d8k.htm 8-K

8-K

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

Current Report

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 20, 2014 

SHEA HOMES LIMITED PARTNERSHIP

(Exact name of registrant as specified in its charter)

 

    CALIFORNIA    

 

    333-177328    

 

    95-4240219    

(State or other jurisdiction

of incorporation)

 

(Commission File

Number)

 

(IRS Employer

Identification No.)

655 Brea Canyon Road, Walnut, California 91789

(Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number, including area code: (909) 594-9500

Not Applicable

(Former name or former address, if changed since last report):

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


Item 1.01. Entry into a Material Definitive Agreement

On February 20, 2014, Shea Homes Limited Partnership (the “Company”) entered into a $125,000,000 two-year secured revolving credit facility (the “Revolving Credit Facility”) among the Company, the lenders party thereto and U.S. Bank National Association as administrative agent (the “Agent”), which became effective on February 25, 2014. Certain of the Company’s subsidiaries (the “Guarantors”) have guaranteed its obligations under the Revolving Credit Facility.

Pursuant to an Amended and Restated Security Agreement dated as of February 20, 2014, effective as of February 25, 2014, among the Company, the Guarantors and Wells Fargo Bank, National Association as collateral agent, the Company’s obligations under the Revolving Credit Facility are secured by a lien on substantially all of its assets, and the Guarantors’ obligations under the guaranty are secured by a lien on substantially all of their assets. The liens securing the Revolving Credit Facility are pari passu with the liens securing the Company’s 8.625% Senior Secured Notes due 2019 (the “Notes”), but will have the benefit of repayment priority upon enforcement against the collateral.

The Revolving Credit Facility will be used for general corporate purposes of the Company and its subsidiaries. Any loans made under the Revolving Credit Facility (the “Loans”) may accrue interest, at the Company’s option, either at (i) a daily eurocurrency base rate as defined in the Revolving Credit Facility, plus a margin of 2.75% or (ii) a eurocurrency rate as defined in the Revolving Credit Facility, plus a margin of 2.75%. The Company will also pay a fee of 0.50% per annum on the average unused portion of the Revolving Credit Facility.

The Revolving Credit Facility contains certain customary affirmative and negative covenants, including financial covenants. The Company’s ability to draw upon the Revolving Credit Facility is subject to there being no default continuing under the Revolving Credit Facility, as well as customary documentary conditions. If certain defaults occur, including default under certain of the financial covenants, the Revolving Credit Facility will convert into a term loan with an 18-month maturity, with amortization payments equal to 1/18th of the then-outstanding amount of the facility.

As previously disclosed, in order to permit the Company to enter into the Revolving Credit Facility and related documents, in November 2013, the Company completed a solicitation of consents to amend the indenture governing the Notes.

The description of the Revolving Credit Facility and Amended and Restated Security Agreement set forth under this Item 1.01 is qualified in its entirety by references to the complete terms and conditions of the Revolving Credit Facility and Amended and Restated Security Agreement, which are filed as Exhibits 10.1 and 10.2 hereto, respectively, and are incorporated herein by reference.

 

Item 1.02 Termination of a Material Definitive Agreement

The Revolving Credit Facility and related documents replace the Company’s Letter of Credit Facility Agreement dated as of May 10, 2011, among the Company, the subsidiary guarantors party thereto, the participants party thereto and Credit Suisse AG (the “LC Facility”). All commitments under the LC Facility were terminated and all obligations thereunder were repaid effective on February 25, 2014, concurrent with effectiveness of the Revolving Credit Facility.

 

Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant

The information disclosed in Item 1.01 of this Form 8-K is incorporated into this Item 2.03 in its entirety by reference.


Item 9.01. Financial Statements and Exhibits

(d) Exhibits

 

Exhibit Number

  

Description

10.1    Credit Agreement dated as of February 20, 2014, by and among Shea Homes Limited Partnership, the lenders from time to time party thereto, and U.S. Bank National Association as administrative agent.

10.2

   Amended and Restated Security Agreement dated as of February 20, 2014 among the Company, the Guarantors and Wells Fargo Bank, National Association as collateral agent.

 

 


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

SHEA HOMES LIMITED PARTNERSHIP

By:     /s/ Andrew H. Parnes                                        

Name:

 

Andrew H. Parnes

Title:

 

Chief Financial Officer

Date: February 25, 2014


Exhibit Index

 

Exhibit Number

  

Description

10.1    Credit Agreement dated as of February 20, 2014, by and among Shea Homes Limited Partnership, the lenders from time to time party thereto, and U.S. Bank National Association as administrative agent.
10.2    Amended and Restated Security Agreement dated as of February 20, 2014 among the Company, the Guarantors and Wells Fargo Bank, National Association as collateral agent.

 

 

d682039dex101.htm EX-10.1


ENT> EX-10.1 2 d682039dex101.htm EX-10.1

EX-10.1

Exhibit 10.1

 

 

 

 

CREDIT AGREEMENT

Dated as of February 20, 2014

by and among

SHEA HOMES LIMITED PARTNERSHIP,

as Borrower,

The Several Lenders from Time to Time Parties Hereto,

and

U.S. BANK NATIONAL ASSOCIATION,

as Administrative Agent,

with

U.S. BANK NATIONAL ASSOCIATION,

as Lead Arranger and Bookrunner

 

 

 


TABLE OF CONTENTS

 

 
  
 
  
Page
 

ARTICLE I DEFINITIONS

  
  1   

ARTICLE II THE CREDITS

  
  26   

        2.1

  
Commitment
  
  26   

        2.2

  
Required Payments
  
  26   

        2.3

  
Ratable Loans; Types of Advances
  
  26   

        2.4

  
Extension of Facility Termination Date
  
  26   

        2.5

  
Undrawn Fee
  
  27   

        2.6

  
Minimum Amount of Each Advance
  
  27   

        2.7

  
Reductions in Aggregate Commitment; Optional Principal Payments
  
  27   

        2.8

  
Method of Selecting Types and Interest Periods for New Advances
  
  28   

        2.9

  
Conversion and Continuation of Outstanding Advances; Maximum Number of Interest Periods
  
  28   

        2.10

  
Interest Rates
  
  29   

        2.11

  
Rates Applicable After Event of Default
  
  29   

        2.12

  
Method of Payment
  
  30   

        2.13

  
Noteless Agreement; Evidence of Indebtedness
  
  30   

        2.14

  
Telephonic Notices
  
  31   

        2.15

  
Interest Payment Dates; Interest and Fee Basis
  
  31   

        2.16

  
Notification of Advances, Interest Rates, Prepayments and Commitment Reductions
  
  31   

        2.17

  
Lending Installations
  
  31   

        2.18

  
Non-Receipt of Funds by the Administrative Agent
  
  32   

        2.19

  
Facility LCs
  
  32   

        2.20

  
Replacement of Lender
  
  37   

        2.21

  
Limitation of Interest
  
  37   

        2.22

  
Defaulting Lenders
  
  38   

        2.23

  
Increase Option
  
  41   

        2.24

  
Loans and LC Obligations are “Pari Passu” Lien Obligations
  
  42   

        2.25

  
Term Out Provision.
  
  43   

        2.26

  
Swingline Commitment.
  
  44   

        2.27

  
Procedure for Swingline Borrowing; Refunding of Swingline Loans.
  
  44   

ARTICLE III YIELD PROTECTION; TAXES

  
  46   

        3.1

  
Yield Protection
  
  46   

        3.2

  
Changes in Capital Adequacy Regulations
  
  47   

        3.3

  
Availability of Types of Advances; Adequacy of Interest Rate
  
  47   

        3.4

  
Funding Indemnification
  
  47   

        3.5

  
Taxes
  
  48   

        3.6

  
Selection of Lending Installation; Mitigation Obligations; Lender Statements; Survival of Indemnity
  
  51   

 

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ARTICLE IV CONDITIONS PRECEDENT

  

52

        4.1

  
Initial Credit Extension
  

52

        4.2

  
Each Credit Extension
  

54

ARTICLE V REPRESENTATIONS AND WARRANTIES

  

55

        5.1

  
Existence and Standing
  

55

        5.2

  
Authorization and Validity
  

55

        5.3

  
No Conflict; Government Consent
  

55

        5.4

  
Financial Statements and Information
  

55

        5.5

  
Material Adverse Change
  

56

        5.6

  
Taxes
  

56

        5.7

  
Litigation and Contingent Obligations
  

56

        5.8

  
Entities Owned
  

56

        5.9

  
ERISA
  

57

        5.10

  
Accuracy of Information
  

57

        5.11

  
Regulation U
  

57

        5.12

  
Material Agreements
  

57

        5.13

  
Compliance With Laws
  

57

        5.14

  
Title to Properties
  

57

        5.15

  
Plan Assets; Prohibited Transactions
  

58

        5.16

  
Environmental Matters
  

58

        5.17

  
Investment Company Act
  

58

        5.18

  
Insurance
  

58

        5.19

  
Subordinated Debt
  

58

        5.20

  
Solvency
  

58

        5.21

  
No Default
  

59

        5.22

  
Foreign Asset Control Regulations
  

59

        5.23

  
Secured Obligations
  

59

ARTICLE VI COVENANTS

  

59

        6.1

  
Financial Reporting
  

59

        6.2

  
Notice of Material Events
  

61

        6.3

  
Preservation of Existence and Similar Matters
  

61

        6.4

  
Compliance with Applicable Law
  

62

        6.5

  
Maintenance of Property; Completion of Construction
  

62

        6.6

  
Insurance
  

62

        6.7

  
Payment of Taxes and Claims
  

62

        6.8

  
Books and Records; Inspections
  

62

        6.9

  
Use of Proceeds
  

63

        6.10

  
Environmental Matters
  

63

        6.11

  
Further Assurances
  

63

        6.12

  
[Reserved]
  

63

        6.13

  
ERISA Compliance
  

63

        6.14

  
Business Operations; Unrelated Business
  

63

        6.15

  
[Reserved].
  

63

        6.16

  
Restrictions on Other Indebtedness
  

64

        6.17

  
Negative Pledge
  

64

 

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        6.18
  
Prepayment of Indebtedness
  
64
        6.19
  
Limitation on Fundamental Changes
  
65
        6.20
  
Transactions with Affiliates
  
66
        6.21
  
Investments
  
67
        6.22
  
Dividends and Subordinated Debt
  
67
        6.23
  
Financial Covenants
  
68
        6.24
  
Guarantors
  
69
        6.25
  
[Reserved.]
  
69
        6.26
  
Foreign Assets Control Regulations
  
69
        6.27
  
[Reserved.]
  
69
        6.28
  
Loans and LC Obligations Shall At All Times Be and Remain Pari Passu Lien Obligations
  
69
ARTICLE VII DEFAULTS
  
70
ARTICLE VIII ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
  
72
        8.1
  
Acceleration; Remedies
  
72
        8.2
  
Application of Funds
  
74
        8.3
  
Amendments
  
74
        8.4
  
Preservation of Rights
  
75
ARTICLE IX GENERAL PROVISIONS
  
76
        9.1
  
Survival of Representations
  
76
        9.2
  
Governmental Regulation
  
76
        9.3
  
Headings
  
76
        9.4
  
Entire Agreement
  
76
        9.5
  
Several Obligations; Benefits of this Agreement
  
76
        9.6
  
Expenses; Indemnification.
  
77
        9.7
  
[Reserved].
  
78
        9.8
  
Accounting
  
78
        9.9
  
Severability of Provisions
  
78
        9.10
  
Nonliability of Lenders
  
78
        9.11
  
Confidentiality
  
79
        9.12
  
Nonreliance
  
79
        9.13
  
Disclosure
  
79
        9.14
  
USA PATRIOT ACT NOTIFICATION
  
79
        9.15
  
Document Interpretation.
  
80
ARTICLE X THE ADMINISTRATIVE AGENT
  
80
        10.1
  
Appointment; Nature of Relationship
  
80
        10.2
  
Powers
  
81
        10.3
  
General Immunity
  
81
        10.4
  
No Responsibility for Loans, Recitals, etc.
  
81
        10.5
  
Action on Instructions of Lenders
  
81
        10.6
  
Employment of Administrative Agents and Counsel
  
82
        10.7
  
Reliance on Documents; Counsel
  
82
        10.8
  
Administrative Agent’s Reimbursement and Indemnification
  
82

 

-iii-


        10.9
  
Notice of Event of Default
  
83
        10.10
  
Rights as a Lender
  
83
        10.11
  
Lender Credit Decision, Legal Representation
  
83
        10.12
  
Successor Administrative Agent
  
84
        10.13
  
Administrative Agent and Arranger Fees
  
84
        10.14
  
Delegation to Affiliates
  
84
        10.15
  
No Advisory or Fiduciary Responsibility
  
85
ARTICLE XI SETOFF; RATABLE PAYMENTS
  
85
        11.1
  
Setoff
  
85
        11.2
  
Ratable Payments
  
85
ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
  
86
        12.1
  
Successors and Assigns
  
86
        12.2
  
Participations
  
86
        12.3
  
Assignments
  
88
ARTICLE XIII NOTICES
  
90
        13.1
  
Notices; Effectiveness; Electronic Communication
  
90
ARTICLE XIV COUNTERPARTS; INTEGRATION; EFFECTIVENESS; ELECTRONIC EXECUTION
  
91
        14.1
  
Counterparts; Effectiveness
  
91
        14.2
  
Electronic Execution of Assignments
  
91
ARTICLE XV CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL
  
92
        15.1
  
CHOICE OF LAW
  
92
        15.2
  
CONSENT TO JURISDICTION; OTHER MATTERS; WAIVERS
  
92
ARTICLE XVI OPTION TO CONVERT TO UNSECURED FACILITY
  
93

 

-iv-


SCHEDULES

Schedule 1

  

Authorized Officer(s)

Schedule 1(a)

  

Commitments

Schedule 1(b)

  

Guarantors

Schedule 1(c)

  

Project(s)

Schedule 5.8

  

Subsidiaries; Existing Investments

Schedule 6.20

  

Transactions with Affiliates

EXHIBITS

Exhibit A

  

Borrowing Base Certificate

Exhibit B

  

Guaranty

Exhibit C

  

Form of Borrowing Notice

Exhibit D

  

Note

Exhibit E

  

Form of Increasing Lender Supplement

Exhibit F

  

Form of Augmenting Lender Supplement

Exhibit G

  

[Reserved]

Exhibit H

  

List of Closing Documents

Exhibit I

  

Compliance Certificate

Exhibit J

  

Assignment and Assumption Agreement

 

-v-


CREDIT AGREEMENT

CREDIT AGREEMENT (this “Agreement”), dated as of February 20, 2014, among SHEA HOMES LIMITED PARTNERSHIP, a California limited partnership (the “Borrower”), the several banks and other financial institutions or entities from time to time parties to this Agreement (the “Lenders”), and U.S. BANK NATIONAL ASSOCIATION, as administrative agent.

ARTICLE I

DEFINITIONS

As used in this Agreement:

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

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

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

Affected Lender” is defined in Section 2.20.

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

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

Aggregate Commitment” means the aggregate of the Commitments of all the Lenders, as reduced or increased from time to time pursuant to the terms hereof. As of the date of this Agreement, the Aggregate Commitment is $125,000,000.

 

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

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

Applicable L/C Fee Rate” means the Applicable Margin with respect to Letters of Credit.

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

Applicable Margin” means, with respect to Eurocurrency Loans, Daily Eurocurrency Loans and Letters of Credit, two and three-quarters percent (2.75%) per annum.

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

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

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

Augmenting Lender” is defined in Section 2.23.

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

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

Baker JV” means the joint venture conducted by Shea/Baker Ranch Associates LLC, a California limited liability company.

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

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

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

(a)        subject to the limitations set forth below, 80% of the Book Value of Units Under Contract; plus

 

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(b)        subject to the limitations set forth below, 80% of the Book Value of Units Under Construction; plus

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

(d)        subject to the limitations set forth below, 80% of the Book Value of Model Units; plus

(e)        subject to the limitations set forth below, 70% of the Book Value of Finished Lots; plus

(f)        65% of the Book Value of Land Under Development; plus

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

Notwithstanding the foregoing:

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

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

Notwithstanding anything in the definition of Borrowing Base which may be construed to the contrary, in no event may any Unit or Lot or other Property described above be counted more than once (notwithstanding that it may satisfy the criteria of more than one category) in the calculation of the Borrowing Base hereunder. Any land or other Property that does not fit within one of the categories specified above in this definition, shall have a zero percent (0%) advance rate. In no event may any Lot, Unit, Project or other Property be included in the Borrowing Base unless it is one hundred percent (100%) owned by Borrower or a Wholly-Owned Subsidiary of Borrower and is encumbered by a deed of trust or mortgage which constitutes a Pari Passu Lien Credit Document that secures the Loans, LC Obligations and other Obligations (as Pari Passu Lien Obligations) in a first position, subject only to the Permitted Liens, in favor of Administrative Agent and Lenders (as Pari Passu Lien Secured Parties).

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

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

Borrowing Base Debt” means, as of any date, Consolidated Debt minus (a) Subordinated Debt due later than one year following such date minus (b) Non-Recourse Indebtedness of the Loan Parties and their respective Subsidiaries (other than Excluded

 

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Subsidiaries), minus (c) the Indenture Notes Obligations (to the extent included in Consolidated Debt).

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

Borrowing Notice” is defined in Section 2.8.

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

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

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

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

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

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

 

-4-


meeting the qualifications specified in clause (iv) of this definition, and (vi) shares of money market mutual funds substantially all of the assets of which consist of securities described in the foregoing clauses (i) through (v) of this definition.

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

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

Change in Law” is defined in Section 3.1.

Change of Control” means (i) the acquisition by any Person, or two or more Persons acting in concert (other than the Permitted Holders), of beneficial ownership (within the meaning of Rule 13d-3 of the U.S. Securities and Exchange Commission under the Securities Exchange Act of 1934) of 50% or more of the outstanding shares of voting stock of the Borrower; (ii) the merger or consolidation of the Borrower with or into another Person or the merger of another Person with or into Borrower, or the sale of all or substantially all the assets of Borrower to another Person, other than any such sale to one or more Loan Parties, and in the case of any such merger or consolidation, the equity securities of Borrower that are outstanding immediately prior to such transaction and which represent 100% of the aggregate voting power of the voting stock of Borrower are changed into or exchanged for cash, securities or property, unless pursuant to such transaction such securities are changed into or exchanged for, in addition to any other consideration, securities of the surviving corporation, or a parent corporation that owns all of the capital stock of such surviving corporation, that represent immediately after such transaction, at least a majority of the aggregate voting power of the voting stock of the surviving corporation or such parent corporation, as the case may be, or (iii) a “change of control” as defined under any of Borrower’s public note indebtedness or other notes issued by Borrower under an indenture or comparable documents which debt is permitted under this Agreement.

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

Collateral” has the meaning set forth in the Intercreditor Agreement.

Collateral Agent” has the meaning set forth in the Indenture.

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

 

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

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

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

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

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

 

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Ventures and income (loss) from consolidated Financial Services Subsidiaries (except to the extent of cash distributions received from such Joint Ventures or Financial Services Subsidiaries).

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

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

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

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

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

Conversion/Continuation Notice” is defined in Section 2.9.

 

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

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

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

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

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

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

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

Defaulting Lender” means, subject to Section 2.22(b), any Lender that (a) has failed to (i) fund all or any portion of its Loans within two (2) Business Days of the date such Loans were required to be funded hereunder unless such Lender notifies the Administrative Agent and the Borrower in writing that such failure is the result of such Lender’s determination that one or more conditions precedent to funding (each of which conditions precedent, together with any applicable default, shall be specifically identified in such writing) has not been satisfied or waived, or (ii) pay to the Administrative Agent, any LC Issuer, any Swingline Lender or any

 

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

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

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

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

Entitled Land” means Qualified Real Property Inventory (a) that is zoned and otherwise suitable for the development of Units or certain limited commercial development incidental to the development and sale of Lots or Units, (b) which the Borrower (or any Loan Party) intends to develop for the sale of Lots or Units or certain limited commercial development incidental to the development and sale of Lots or Units, and (c) with respect to which approval

 

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and entitlement from required Governmental Authorities of a tentative map, a preliminary development plan and all other plan and related Governmental Approvals required by Applicable Law in accordance with the provisions of all Applicable Law have been obtained (other than approvals which are simply ministerial and non-discretionary in nature or otherwise not material, such as a final map) such that in each instance Borrower or another Loan Party has the vested right to develop the Qualified Real Property Inventory as a residential housing project and construct Units thereon.

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

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

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

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

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

 

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

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

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

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

Event of Default” is defined in Article VII.

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

Excluded Swap Obligation” means, with respect to any Guarantor, any Swap Obligation if, and to the extent that, all or a portion of the Guarantee of such Guarantor of, or the grant by such Guarantor of a security interest to secure, such Swap Obligation (or any Guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Guarantor’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act and the regulations

 

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thereunder at the time the Guarantee of such Guarantor or the grant of such security interest becomes effective with respect to such Swap Obligation. If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such Guarantee or security interest is or becomes illegal.

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

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

Facility LC” is defined in Section 2.19(a)

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

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

Facility Termination Date” means March 1, 2016, subject to possible extension as provided in Section 2.4.

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

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

 

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Fee Letter” means that certain letter agreement regarding the mandate for this Agreement dated February 20, 2014 between the Borrower and the Arrangers and the Administrative Agent.

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

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

Finished Lots” means Entitled Land that has been subdivided into Lots and as to which (a) a final subdivision plat or map has been approved by all applicable Governmental Authorities and recorded in all appropriate records, (b) Borrower (or any Loan Party) has legal and physical access to all Lots sufficient to commence vertical construction of the applicable Units thereon, (c) utilities have been stubbed and utility services are available (subject only to completion of the Units) to each Lot in accordance with the applicable requirements of Governmental Authorities, (d) the building permits for the construction of Units may be promptly pulled and construction commenced by Borrower (or any Loan Party) without satisfaction of any further material conditions, and (e) all offsite construction and all major infrastructure required to be completed by an Applicable Law as a condition of commencing vertical construction on the applicable Lot or Lots have been substantially completed in compliance with Applicable Law. As used in this definition of “Finished Lots,” “substantially completed” shall not include the completion of any punch list work with respect to the foregoing items of work, warranty work required by any Governmental Authority having jurisdiction or the final lift of the street on which such Lots are located.

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

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

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

 

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

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

Guarantorsmeans the collective reference to all Wholly-Owned Subsidiaries of Borrower the assets of which are included in the Borrowing Base or that have otherwise guaranteed the Indenture Notes Obligations. The original Guarantors are indicated on Schedule 1(b) to this Agreement.

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

Hazardous Materials” means all or any of the following: (a) substances that are defined or listed in, or otherwise classified pursuant to, any applicable Environmental Laws as “hazardous substances”, “hazardous materials”, “hazardous wastes”, “toxic substances” or any other formulation intended to define, list or classify substances by reason of deleterious properties such as ignitability, corrosivity, reactivity, carcinogenicity, reproductive toxicity, “TCLP” toxicity, or “EP toxicity”; (b) oil, petroleum or petroleum derived substances, natural gas, natural gas liquids or synthetic gas and drilling fluids, produced waters and other wastes associated with the exploration, development or production of crude oil, natural gas or geothermal resources; (c) any flammable substances or explosives or any radioactive materials; (d) asbestos in any form; and (e) electrical equipment which contains any oil or dielectric fluid containing levels of polychlorinated biphenyls in excess of fifty parts per million.

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

Increasing Lender” is defined in Section 2.23.

Indebtedness” of a Person means, without duplication, such Person’s (i) obligations for borrowed money (including the Obligations hereunder), (ii) obligations representing the deferred purchase price of property (other than (x) accounts payable and other accrued liabilities arising in the ordinary course of such Person’s business and (y) any obligation to pay a contingent purchase price, as long as such obligation remains contingent or exists on the balance sheet of such Person on a non-interest accruing basis and is paid within 45 days of the date such obligation becomes non-contingent or a liability on the balance sheet), (iii) obligations, whether or not assumed, secured by Liens or payable out of the proceeds or production from Property now or hereafter owned or acquired by such Person, (iv) obligations which are evidenced by notes, acceptances, or other instruments, (v) obligations of such Person to purchase securities or other Property arising out of or in connection with the sale of the same or substantially similar securities or

 

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Property, (vi) Capitalized Lease Obligations, (vii) obligations of such Person for the reimbursement of any obligor on any standby and commercial Letters of Credit (other than obligations with respect to Letters of Credit securing obligations (other than obligations described in clauses (i), (ii) or (vi) above) entered into in the ordinary course of business of such Person to the extent such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no later than the 10th Business Day following payment on the Letter of Credit), (viii) Contingent Obligations of such Person in respect of obligations otherwise described in clauses (i)-(vii), (ix) Net Mark-to-Market Exposure under Rate Management Transactions, and (x) any other obligation for borrowed money or other indebtedness which in accordance with GAAP would be shown as a liability on the consolidated balance sheet of such Person. Notwithstanding the foregoing, guarantees constituting Specified Obligations shall not constitute Indebtedness.

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

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

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

Intercreditor Agreement” means the Amended and Restated Intercreditor Agreement dated as of February 20, 2014, among Shea Homes Limited Partnership, Shea Homes Funding Corp., the other Grantors party thereto, Wells Fargo Bank, a National Association, in its capacity as Collateral Agent, Wells Fargo Bank, a National Association, as Authorized Representative for the Indenture Secured Parties solely in its capacity as Trustee under the Indenture, the Administrative Agent, as the Credit Facility Authorized Representative, and each Additional Authorized Representative from time to time a party thereto.

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

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

 

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

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

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

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

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

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

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

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

 

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

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

Letter of Credit” means a letter of credit or similar instrument which is issued upon the application of Borrower or for which the Borrower or any other Loan Party is an account party or for which such Person is in any way liable. Letters of Credit shall be issued only for the account of a Loan Party in compliance with Section 6.9.

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

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

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

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

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

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

Material Contract” means any contract or other arrangement (other than Loan Documents), whether written or oral, to which Borrower or any other Loan Party is a party as to

 

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which the breach, nonperformance, cancellation or failure to renew by any party thereto could have a Material Adverse Effect. This definition of “Material Contract” is not intended to include trade contracts.

Material Indebtedness” means Indebtedness of the Borrower or any Subsidiary in an outstanding principal amount of $10,000,000 or more in the aggregate (or the equivalent thereof in any currency other than Dollars).

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

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

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

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

Money Markets” refers to one or more wholesale funding markets available to Administrative Agent, including negotiable certificates of deposit, commercial paper, Eurodollar deposits, bank notes, federal funds and others.

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

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

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

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

 

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

Non-Recourse Indebtedness” means indebtedness or other obligations secured by a Lien on Property to the extent that the liability for such indebtedness or other obligations is limited to the security of such Property (or to Persons other than a Loan Party) without liability on the part of any Loan Party (other than, in the case of indebtedness or obligations of a Subsidiary, with respect to the Subsidiary that holds title to such property (if such property constitutes all or substantially all the property of such Subsidiary) and a pledge of the equity interests of such Subsidiary or its Subsidiaries) for any deficiency; provided that recourse obligations or liabilities of the Loan Parties solely for indemnities, covenants (including, without limitation, performance, completion or similar guarantees or covenants), or breach of any warranty, representation, covenant or other Contingent Obligation in respect of any indebtedness, including indemnities for and liabilities arising from fraud, misrepresentation, misapplication or non-payment of rents, profits, insurance and condemnation proceeds and other sums actually received by any Loan Party from secured assets to be paid to the Lenders, waste and mechanics’ liens, will in each case not prevent indebtedness from being classified as “Non-Recourse Indebtedness”.

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

Note” is defined in Section 2.13.

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

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

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

Pari Passu Lien Credit Documents” has the meaning set forth in the Intercreditor Agreement.

Pari Passu Lien Obligations” has the meaning set forth in the Intercreditor Agreement.

 

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Pari Passu Lien Secured Parties” has the meaning set forth in the Intercreditor Agreement.

Pari Passu Lien Security Documents” has the meaning set forth in the Intercreditor Agreement.

Participant” is defined in Section 12.2(a).

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

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

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

Performance Letter of Credit” means any standby Letter of Credit issued: (a) on behalf of a Person in favor of a Governmental Authority, including, without limitation, any utility, water, or sewer authority, or other similar entity, for the purpose of assuring such Governmental Authority that such Person or other Loan Party will properly and timely complete work it has agreed to perform for the benefit of such Governmental Authority; (b) in lieu of cash deposits to obtain a license, in place of a utility deposit, or for land option contracts; or (c) in lieu of other contract performance, to secure performance warranties payable upon breach, and to secure the performance of labor and materials, including, without limitation, construction, bid, and performance bonds (and does not include trade Letters of Credit).

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

Permitted Indebtedness” is the indebtedness that is permitted under and described in Section 6.16.

Permitted Liens” is defined in Section 6.17.

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

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

Pro Rata Share” means, with respect to a Lender, a portion equal to a fraction the numerator of which is such Lender’s Commitment and the denominator of which is the Aggregate Commitment, provided, however, if all of the Commitments are terminated pursuant to the terms of this Agreement, then “Pro Rata Share” means the percentage obtained by dividing

 

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(a) such Lender’s Outstanding Credit Exposure at such time by (b) the Aggregate Outstanding Credit Exposure at such time; and provided, further, that when a Defaulting Lender shall exist, “Pro Rata Share” shall mean the percentage of the Aggregate Commitment (disregarding any Defaulting Lender’s Commitment) represented by such Lender’s Commitment.

Profit and Participation Agreement” means an agreement, whether or not secured by a deed of trust, mortgage, or other Lien against a purchased property or asset, with respect to which the purchaser of any property or asset agrees to pay the seller of such property or asset a profit, price, premium participation, or other similar amount in such property or asset.

Project” means a parcel or parcels of real property owned by Borrower or any other Loan Party which is comprised of (or will be comprised of) a discrete single family residential development on which will be developed Lots for the construction of Units to be sold to individual buyers or sales of Lots in bulk to other developers, including, without limitation, the initial Projects described on Schedule 1(c) attached hereto.

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

Purchasers” is defined in Section 12.3(a).

Qualified Real Property Inventory” means, as of any date, Real Property Inventory that is not subject to or encumbered by any deed of trust, mortgage, judgment Lien, or any other Lien (other than the Permitted Liens described in Sections 6.17(b), (g), (h), (i) and (n)) and other Liens which have been bonded around so as to remove such Liens as encumbrances against such Real Property Inventory in a matter satisfactory to Administrative Agent and its legal counsel).

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

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

Real Property Collateral Management Agreement” means the Real Property Collateral Management Agreement, dated as of May 10, 2011, among Wells Fargo Bank, a National Association, as Collateral Agent for the Pari Passu Lien Secured Parties, Shea Homes Limited Partnership, a California limited partnership, and Shea Homes Funding Corp., a

 

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Delaware corporation, as the Issuers, and the other entities described therein from time to time a party thereto.

Real Property Inventory” means, as of any date, land that is owned by any Loan Party, which land is being developed or held for future development or sale of residential housing Projects, together with the right, title and interest of the Loan Party in and to the streets, the land lying in the bed of any streets, roads or avenues, open or proposed, in or of, the air space and development rights pertaining thereto and the right to use such air space and development rights, all rights of way, privileges, liberties, tenements, hereditaments and appurtenances belonging in or in any way appertaining thereto, all fixtures, all easements now or hereafter benefiting such land and all royalties and rights appertaining to the use and enjoyment of such land necessary for the residential development of such land, together with all of the buildings and other improvements now or hereafter erected on such land, and any fixtures appurtenant thereto and all related personal property.

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

Register” is defined in Section 12.3(d).

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

Regulation U” means Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor or other regulation or official interpretation of said Board of Governors relating to the extension of credit by banks for the purpose of purchasing or carrying margin stocks applicable to member banks of the Federal Reserve System.

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

Reports” is defined in Section 9.6.

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

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

 

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

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

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

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

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

Security Agreement” means the Amended and Restated Security Agreement dated as of February 20, 2014, among Shea Homes Limited Partnership, Shea Homes Funding Corp., the Guarantors identified therein, the Administrative Agent, and Wells Fargo Bank, a National Association, as Collateral Agent.

Senior Leverage Ratio” is the ratio, as of any date, of (a) Consolidated Debt (exclusive of Non-Recourse Indebtedness) minus Subordinated Debt, minus the Indenture Note Obligations (to the extent not included in Subordinated Debt), minus Unrestricted Cash above $5,000,000, divided by (b) Consolidated Tangible Net Worth on such date.

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

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

Stated Rate” is defined in Section 2.21.

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

 

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Administrative Agent (but, for the avoidance of doubt, shall not include the Indenture Notes Obligations).

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

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

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

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

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

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

Swingline Loans” has the meaning defined in Section 2.26.

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

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

Tax Distributions” means, so long as the Borrower is treated as a passthrough or disregarded entity for United States Federal income tax purposes, the distributions in respect of

 

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income taxes permitted under Section 2 of the Tax Distribution Agreement as in effect on May 10, 2011.

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

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

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

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

Undrawn Fee” is defined in Section 2.5.

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

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

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

Unrestricted Cash” means Cash Equivalent Investments of the Loan Parties that are free and clear of all Liens (other than Liens securing (1) the Obligations, (2) the Indenture Notes Obligations or (3) customary bankers liens) and not subject to any restrictions on the use thereof to pay Indebtedness and other obligations of the applicable Loan Party.

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

 

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

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

ARTICLE II

THE CREDITS

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

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

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

2.4        Extension of Facility Termination Date. Borrower shall have the option to extend the Facility Termination Date from the original Facility Termination Date (for purposes of this Section, the “Original Facility Termination Date”) to a date that is twelve (12) months following the Original Facility Termination Date (for purposes of this Section, the “Extended Facility Termination Date”), subject to the satisfaction of each of the following conditions precedent:

 

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(a)        Borrower shall provide Administrative Agent with written notice of Borrower’s request to exercise its option to extend the maturity date not more than twelve (12) months but not less than thirty (30) days prior to the Original Facility Termination Date.

(b)        As of the date of Borrower’s delivery of notice of request to exercise its option to extend, and as of the date of the commencement of the extension, no Default or Event of Default shall have occurred and be continuing;

(c)        On the date of Borrower’s request for the extension, Borrower shall pay to Agent, for the benefit of Lenders, and extension fee in an amount equal to one-fifth of one percent (.20%) of the Aggregate Commitment;

(d)        There shall have occurred and be continuing no material adverse change in the financial condition of the Borrower that would affect its ability to perform its obligations under the Loan Documents since the date hereof;

(e)        Without limiting subparagraph (b) above, as of the date of Borrower’s request for each Extension and as of the date of the commencement of the applicable Extension, Borrower shall be in full compliance with Sections 2.2 and 6.23.

If each of the foregoing conditions precedent are satisfied, and the Original Facility Termination Date is extended as provided above to the Extended Facility Termination Date, as used herein and in the other Loan Documents, the term “Facility Termination Date” shall thereafter mean the Extended Facility Termination Date.

2.5        Undrawn Fee. The Borrower agrees to pay to the Administrative Agent for the account of each Lender according to its Pro Rata Share a fee (the “Undrawn Fee”) at a per annum rate equal to one-half percent (0.50%) per annum on the average daily Available Aggregate Commitment (subject to the following sentence) from the date hereof to and including the Facility Termination Date, payable in arrears on the first day of each calendar quarter hereafter and on the Facility Termination Date. The Swingline Exposure shall not be taken into account in calculating the available Aggregate Commitment for the purpose of determining the Undrawn Fee.

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

2.7        Reductions in Aggregate Commitment; Optional Principal Payments. The Borrower may permanently reduce the Aggregate Commitment in whole, or in part ratably among the Lenders in integral multiples of $1,000,000, upon at least five (5) Business Days’ written notice to the Administrative Agent, which notice (1) may be conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by the Borrower (by written notice to the Administrative Agent on or prior to the specified effective date previously provided in the applicable notice) if such condition is not satisfied, and (2) shall specify the amount of any such reduction, provided, however, that the amount of the Aggregate

 

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Commitment may not be reduced below the Aggregate Outstanding Credit Exposure. All accrued Undrawn Fees shall be payable on the effective date of any termination of the obligations of the Lenders to make Credit Extensions hereunder. The Borrower may from time to time pay, without indemnity, penalty or premium, all outstanding Daily Eurocurrency Advances or, in a minimum aggregate amount of $1,000,000, any portion of the outstanding Daily Eurocurrency Advances upon same day notice to the Administrative Agent. The Borrower may from time to time pay, subject to the payment of any funding indemnification amounts required by Section 3.4 but without penalty or premium, all outstanding Eurocurrency Advances, or, in a minimum aggregate amount of $1,000,000, any portion of the outstanding Eurocurrency Advances upon three (3) Business Days’ prior written notice to the Administrative Agent.

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

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

(ii)        the aggregate amount of such Advance,

(iii)        the Type of Advance, and

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

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

2.9        Conversion and Continuation of Outstanding Advances; Maximum Number of Interest Periods. Daily Eurocurrency Advances shall continue as Daily Eurocurrency Advances unless and until such Daily Eurocurrency Advances are converted into Eurocurrency Advances pursuant to this Section 2.9 or are repaid in accordance with Section 2.7. Each Eurocurrency Advance shall continue as a Eurocurrency Advance until the end of the then applicable Interest Period therefor, at which time (as of the last day of such Interest Period) such Eurocurrency Advance shall be automatically converted into a Daily Eurocurrency Advance unless (x) such Eurocurrency Advance is or was repaid in accordance with Section 2.7 or (y) the Borrower shall have given the Administrative Agent a Conversion/Continuation Notice (as defined below) requesting that, at the end of such Interest Period, such Eurocurrency Advance continue as a Eurocurrency Advance for the same or another Interest Period. Subject to the terms of Section 2.6, the Borrower may elect from time to time to convert all or any part of a Daily Eurocurrency Advance into a Eurocurrency Advance. The Borrower shall give the Administrative Agent irrevocable notice (a “Conversion/Continuation Notice”) of each conversion of a Daily

 

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Eurocurrency Advance into a Eurocurrency Advance, or continuation of a Eurocurrency Advance not later than 10:00 a.m. (Pacific time) at least three (3) Business Days prior to the date of the requested conversion or continuation, specifying:

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

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

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

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

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

2.11        Rates Applicable After Event of Default.

(a)        Notwithstanding anything to the contrary contained in Section 2.8, 2.9 or 2.10, during the continuance of a Default or Event of Default the Required Lenders may, at their option, by notice to the Borrower (which notice may be revoked at the option of the Required Lenders notwithstanding any provision of Section 8.3 requiring unanimous consent of the Lenders to changes in interest rates), declare that no Advance may be made as, converted into or continued as a Eurocurrency Advance (provided, however, that the foregoing shall not be deemed to modify the requirement of unanimous approval by all Lenders to waive any payment defaults as specified in Section 8.3(a) hereof). Provided further, however, during the continuance of an Event of Default the Required Lenders may, at their option, by notice to the Borrower (which notice may be revoked at the option of the Required Lenders notwithstanding any provision of Section 8.3 requiring unanimous consent of the Lenders to changes in interest rates), declare that (i) each Eurocurrency Advance shall bear interest for the remainder of the applicable Interest Period at the rate otherwise applicable to such Interest Period plus 2.00% per annum, (ii) each Daily Eurocurrency Advance shall bear interest at a rate per annum equal to the Daily Eurocurrency Rate, in effect from time to time plus 2.00% per annum, and (iii) the LC Fee shall be increased by 2.00% per annum, provided that, during the continuance of an Event of

 

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Default under Section 7.6 or 7.7, the interest rates set forth in clauses (i) and (ii) above and the increase in the LC Fee set forth in clause (iii) above shall be applicable to all Credit Extensions without any election or action on the part of the Administrative Agent or any Lender. After an Event of Default has been cured or waived, the interest rate applicable to advances and the LC Fee shall revert to the rates applicable prior to the occurrence of an Event of Default.

2.12        Method of Payment. Each Advance shall be repaid and each payment of interest thereon shall be paid in Dollars. All payments of the Obligations hereunder shall be made, without setoff, deduction, or counterclaim, in immediately available funds to the Administrative Agent at the Administrative Agent’s address specified pursuant to Article XIII, or at any other Lending Installation of the Administrative Agent specified in writing by the Administrative Agent to the Borrower, by 12:00 noon (Pacific time) on the date when due and shall, (ii) in the case of Reimbursement Obligations for which the LC Issuer has not been fully indemnified by the Lenders, or (iii) as otherwise specifically required hereunder) be applied ratably by the Administrative Agent among the Lenders. Each payment delivered to the Administrative Agent for the account of any Lender shall be delivered promptly by the Administrative Agent to such Lender in the same type of funds that the Administrative Agent received at its address specified pursuant to Article XIII or at any Lending Installation specified in a notice received by the Administrative Agent from such Lender. The Administrative Agent is hereby authorized to charge the account of the Borrower maintained with U.S. Bank for each payment of principal, interest, Reimbursement Obligations and fees as it becomes due hereunder. Each reference to the Administrative Agent in this Section 2.12 shall also be deemed to refer, and shall apply equally, to the LC Issuer, in the case of payments required to be made by the Borrower to the LC Issuer pursuant to Section 2.19(f).

2.13        Noteless Agreement; Evidence of Indebtedness.

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

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

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

 

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

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

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

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

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

 

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Facility LCs will be issued by it and for whose account Loan payments or payments with respect to Facility LCs are to be made.

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

2.19        Facility LCs.

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

 

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

(c)        Notice. Subject to Section 2.19(a), the Borrower shall give the Administrative Agent notice prior to 10:00 a.m. Pacific time at least five (5) Business Days prior to the proposed date of issuance or Modification of each Facility LC, specifying the beneficiary, the LC Issuer, the proposed date of issuance (or Modification) and the expiry date of such Facility LC, and describing the proposed terms of such Facility LC and the nature of the transactions proposed to be supported thereby. Upon receipt of such notice, the Administrative Agent shall promptly notify the LC Issuer and each Lender, of the contents thereof and of the amount of such Lender’s participation in such proposed Facility LC. The issuance or Modification by the LC Issuer of any Facility LC shall, in addition to the conditions precedent set forth in Article IV, be subject to the conditions precedent that such Facility LC shall be satisfactory to the LC Issuer and that the Borrower shall have executed and delivered such application agreement and/or such other instruments and agreements relating to such Facility LC as the LC Issuer shall have reasonably requested (each, a “Facility LC Application”). The LC Issuer shall have no independent duty to ascertain whether the conditions set forth in Article IV have been satisfied; provided, however, that the LC Issuer shall not issue a Facility LC if, on or before the proposed date of issuance, the LC Issuer shall have received notice from the Administrative Agent or the Required Lenders that any such condition has not been satisfied or waived. In the event of any conflict between the terms of this Agreement and the terms of any Facility LC Application, the terms of this Agreement shall control.

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

(e)        Administration; Reimbursement by Lenders. Upon receipt from the beneficiary of any Facility LC of any demand for payment under such Facility LC, the LC Issuer shall notify the Administrative Agent and the Administrative Agent shall promptly notify the Borrower and each other Lender as to the amount to be paid by the LC Issuer as a result of such demand and the proposed payment date (the “LC Payment Date”). The responsibility of the LC Issuer to the Borrower and each Lender shall be only to determine that the documents (including each demand for payment) delivered under each Facility LC in connection with such presentment shall be in conformity in all material respects with such Facility LC. The LC Issuer

 

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

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

(g)        Obligations Absolute. The Borrower’s obligations under this Section 2.19 shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which the Borrower may have or have had against the LC Issuer, any Lender or any beneficiary of a Facility LC. The Borrower further agrees with the LC Issuer and the Lenders that the LC Issuer and the Lenders shall not be responsible for, and

 

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

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

(i)        Indemnification. The Borrower hereby agrees to indemnify and hold harmless each Lender, the LC Issuer and the Administrative Agent, and their respective directors, officers, agents and employees from and against any and all claims and damages, losses, liabilities, costs or expenses (including reasonable counsel fees and disbursements) which such Lender, the LC Issuer or the Administrative Agent may incur (or which may be claimed against such Lender, the LC Issuer or the Administrative Agent by any Person whatsoever) by reason of or in connection with the issuance, execution and delivery or transfer of or payment or failure to pay under any Facility LC or any actual or proposed use of any Facility LC, including, without limitation, any claims, damages, losses, liabilities, costs or expenses (including reasonable counsel fees and disbursements) which the LC Issuer may incur by reason of or in connection with (i) the failure of any other Lender to fulfill or comply with its obligations to the LC Issuer hereunder (but nothing herein contained shall affect any rights the Borrower may have against any Defaulting Lender) or (ii) by reason of or on account of the LC Issuer issuing any Facility LC which specifies that the term “Beneficiary” included therein includes any successor by operation of law of the named Beneficiary, but which Facility LC does not require that any

 

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drawing by any such successor Beneficiary be accompanied by a copy of a legal document, satisfactory to the LC Issuer, evidencing the appointment of such successor Beneficiary; provided that the Borrower shall not be required to indemnify any Lender, the LC Issuer or the Administrative Agent for any claims, damages, losses, liabilities, costs or expenses to the extent, but only to the extent, caused by (x) the willful misconduct or gross negligence of the LC Issuer in determining whether a request presented under any Facility LC complied with the terms of such Facility LC or (y) the LC Issuer’s failure to pay under any Facility LC after the presentation to it of a request strictly complying with the terms and conditions of such Facility LC. Nothing in this Section 2.19(i) is intended to limit the obligations of the Borrower under any other provision of this Agreement.

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

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

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

 

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

2.21        Limitation of Interest. The Borrower, the Administrative Agent and the Lenders intend to strictly comply with all Applicable Laws, including applicable usury laws. Accordingly, the provisions of this Section 2.21 shall govern and control over every other provision of this Agreement or any other Loan Document which conflicts or is inconsistent with this Section 2.21, even if such provision declares that it controls. As used in this Section 2.21, the term “interest” includes the aggregate of all charges, fees, benefits or other compensation which constitute interest under Applicable Law, provided that, to the maximum extent permitted by Applicable Law, (a) any non-principal payment shall be characterized as an expense or as compensation for something other than the use, forbearance or detention of money and not as interest, and (b) all interest at any time contracted for, reserved, charged or received shall be amortized, prorated, allocated and spread, in equal parts during the full term of the Obligations. In no event shall the Borrower or any other Person be obligated to pay, or any Lender have any right or privilege to reserve, receive or retain, (a) any interest in excess of the maximum amount of no usurious interest permitted under the applicable laws (if any) of the United States or of any applicable state, or (b) total interest in excess of the amount which such Lender could lawfully have contracted for, reserved, received, retained or charged had the interest been calculated for the full term of the Obligations at the Highest Lawful Rate. On each day, if any, that the interest rate (the “Stated Rate”) called for under this Agreement or any other Loan Document exceeds

 

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the Highest Lawful Rate, the rate at which interest shall accrue shall automatically be fixed by operation of this sentence at the Highest Lawful Rate for that day, and, to the extent lawful, shall remain fixed at the Highest Lawful Rate for each day thereafter until the total amount of interest accrued equals the total amount of interest which would have accrued if there were no such ceiling rate as is imposed by this sentence. Thereafter, interest shall accrue at the Stated Rate unless and until the Stated Rate again exceeds the Highest Lawful Rate when the provisions of the immediately preceding sentence shall again automatically operate to limit the interest accrual rate. The daily interest rates to be used in calculating interest at the Highest Lawful Rate shall be determined by dividing the applicable Highest Lawful Rate per annum by the number of days in the calendar year for which such calculation is being made. None of the terms and provisions contained in this Agreement or in any other Loan Document which directly or indirectly relate to interest shall ever be construed without reference to this Section 2.21, or be construed to create a contract to pay for the use, forbearance or detention of money at an interest rate in excess of the Highest Lawful Rate. If the term of any Obligation is shortened by reason of acceleration of maturity as a result of any Event of Default or by any other cause, or by reason of any required or permitted prepayment, and if for that (or any other) reason any Lender at any time, including but not limited to, the stated maturity, is owed or receives (and/or has received) interest in excess of interest calculated at the Highest Lawful Rate, then and in any such event all of any such excess interest shall be canceled automatically as of the date of such acceleration, prepayment or other event which produces the excess, and, if such excess interest has been paid to such Lender, it shall be credited pro tanto against the then-outstanding principal balance of the Borrower’s obligations to such Lender, effective as of the date or dates when the event occurs which causes it to be excess interest, until such excess is exhausted or all of such principal has been fully paid and satisfied, whichever occurs first, and any remaining balance of such excess shall be promptly refunded to its payor.

2.22        Defaulting Lenders.

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

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

(ii)        Defaulting Lender Waterfall. Any payment of principal, interest, fees or other amounts received by the Administrative Agent for the account of such Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to Article VII or otherwise) or received by the Administrative Agent from a Defaulting Lender pursuant to Section 11.1 shall be applied at such time or times as may be determined by the Administrative Agent as follows: first, to the payment of any amounts owing by such Defaulting Lender to the Administrative Agent hereunder; second, to the payment on a pro rata basis of any amounts owing by such Defaulting Lender to the LC Issuer or Swingline Lender hereunder; third, to Cash Collateralize the LC Issuer’s Fronting Exposure with respect to such Defaulting Lender in accordance with Section 2.22(d); fourth, as the Borrower may request (so long as no Default or Event of Default exists), to the funding of any Loan in respect of which such Defaulting Lender has failed to fund

 

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

(iii)        Certain Fees.

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

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

(C)        With respect to any Undrawn Fee or LC Fee not required to be paid to any Defaulting Lender pursuant to clause (a) or (b) above, the Borrower shall (x) pay to each Non-Defaulting Lender that portion of any

 

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such fee otherwise payable to such Defaulting Lender with respect to such Defaulting Lender’s participation in LC Obligations or Swingline Loans that has been reallocated to such Non-Defaulting Lender pursuant to clause (iv) below, (y) pay to the LC Issuer and Swingline Lender the amount of any such fee otherwise payable to such Defaulting Lender to the extent allocable to the LC Issuer’s or Swingline Lender’s Fronting Exposure to such Defaulting Lender, and (z) not be required to pay the remaining amount of any such fee.

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

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

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

 

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

(d)        Cash Collateral. At any time that there shall exist a Defaulting Lender, within one (1) Business Day following the written request of the Administrative Agent or the LC Issuer (with a copy to the Administrative Agent) the Borrower shall Cash Collateralize the LC Issuer’s Fronting Exposure with respect to such Defaulting Lender (determined after giving effect to Section 2.22(a)(iv) and any Cash Collateral provided by such Defaulting Lender) in an amount not less than the Minimum Collateral Amount.

(i)        Grant of Security Interest. The Borrower, and to the extent provided by any Defaulting Lender, such Defaulting Lender, hereby grants to the Administrative Agent, for the benefit of the LC Issuer, and agrees to maintain, a first priority security interest in all such Cash Collateral as security for the Defaulting Lender’s obligation to fund participations in respect of LC Obligations, to be applied pursuant to clause (ii) below. If at any time the Administrative Agent determines that Cash Collateral is subject to any right or claim of any Person other than the Administrative Agent and the LC Issuer as herein provided or that the total amount of such Cash Collateral is less than the Minimum Collateral Amount, the Borrower will, promptly upon demand by the Administrative Agent, pay or provide to the Administrative Agent additional Cash Collateral in an amount sufficient to eliminate such deficiency (after giving effect to any Cash Collateral provided by the Defaulting Lender).

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

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

2.23 Increase Option. The Borrower may from time to time, with the prior written approval of the Administrative Agent which approval shall not be unreasonably withheld, elect to increase the Aggregate Commitment, in each case in minimum increments of $10,000,000 or such lower amount as the Borrower and the Administrative Agent agree upon, so long as, after giving effect thereto, the aggregate amount of such increases does not exceed $125,000,000, and the Aggregate Commitment does not exceed $250,000,000. The Borrower may arrange for any

 

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such increase to be provided by one or more Lenders (each Lender so agreeing to an increase in its Commitment, an “Increasing Lender”), or by one or more new banks, financial institutions or other entities (each such new bank, financial institution or other entity, an “Augmenting Lender”), to increase their existing Commitments, or extend Commitments, as the case may be; provided that (i) no Lender shall be required to commit to any such increase, (ii) each Augmenting Lender and each Increasing Lender shall be subject to the reasonable approval of the Borrower, the Administrative Agent and the LC Issuer and (iii) (x) in the case of an Increasing Lender, the Borrower and such Increasing Lender execute an agreement substantially in the form of Exhibit E hereto, and (y) in the case of an Augmenting Lender, the Borrower and such Augmenting Lender execute an agreement substantially in the form of Exhibit F hereto. No consent of any Lender (other than the Lenders participating in the increase) shall be required for any increase in Commitments pursuant to this Section 2.23. Increases and new Commitments created pursuant to this Section 2.23 shall become effective on the date agreed by the Borrower, the Administrative Agent and the relevant Increasing Lenders or Augmenting Lenders, and the Administrative Agent shall notify each Lender thereof. Notwithstanding the foregoing, no increase in the Commitments (or in the Commitment of any Lender) shall become effective under this paragraph unless, (i) on the proposed date of the effectiveness of such increase, (a) the conditions set forth in paragraphs (a) and (b) of Section 4.2 shall be satisfied or waived by the Required Lenders (or, if required under Section 8.3, all Lenders) and the Administrative Agent shall have received a certificate to that effect dated such date and executed by an Authorized Officer of the Borrower and (b) the Borrower shall be in compliance (on a pro forma basis reasonably acceptable to the Administrative Agent) with the covenants contained in Section 6.23 and (ii) the Administrative Agent shall have received documents consistent with those delivered on the date hereof as to the corporate power and authority of the Borrower to borrow hereunder after giving effect to such increase. On the effective date of any increase in the Commitments, (i) each relevant Increasing Lender and Augmenting Lender shall make available to the Administrative Agent such amounts in immediately available funds as the Administrative Agent shall determine, for the benefit of the other Lenders, as being required in order to cause, after giving effect to such increase and the use of such amounts to make payments to such other Lenders, each Lender’s portion of the outstanding Loans of all the Lenders to equal its Pro Rata Share of such outstanding Loans, and (ii) the Borrower shall be deemed to have repaid and reborrowed all outstanding Loans as of the date of any increase in the Commitments (with such reborrowing to consist of the Types of Loans, with related Interest Periods if applicable, specified in a notice delivered by the Borrower, in accordance with the requirements of Section 2.3). The deemed payments made pursuant to clause (ii) of the immediately preceding sentence shall be accompanied by payment of all accrued interest on the amount prepaid and, in respect of each Eurocurrency Loan, shall be subject to indemnification by the Borrower pursuant to the provisions of Section 3.4 if the deemed payment occurs other than on the last day of the related Interest Periods.

2.24        Loans and LC Obligations are “Pari Passu” Lien Obligations. It is the intent and the agreement of the Borrower and the other parties hereto that (a) the Loans, the LC Obligations and the other Obligations owing under or in connection with this Agreement are, and at all times shall remain, Pari Passu Lien Obligations secured by the Pari Passu Lien Security Documents and the Collateral (including without limitation each of the “Properties”, as that term is defined in the Real Property Collateral Management Agreement), in a first lien position, subject only to the Permitted Liens, with a repayment priority ahead of and prior to the Indenture

 

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Note Obligations and other specified Pari Passu Lien Obligations; and (b) that U.S. Bank, as Administrative Agent for the Lenders hereunder, is and shall be deemed at all times to be a Pari Passu Lien Secured Party under the Intercreditor Agreement. Borrower represents and warrants that the foregoing provisions of this Section 2.24 shall be true and correct as of the Effective Date of this Agreement; and that it shall at all times take all such actions as Administrative Agent requests so that the same are and will remain true and correct.

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

 

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2.26        Swingline Commitment.

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

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

2.27        Procedure for Swingline Borrowing; Refunding of Swingline Loans.

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

(b)        The Swingline Lender, at any time and from time to time in its sole and absolute discretion may, on behalf of the Borrower (which hereby irrevocably directs the Swingline Lender to act on its behalf), on one (1) Business Day’s notice given by the Swingline Lender no later than 12:00 Noon, New York City time, request each Lender to make, and each Lender hereby agrees to make, a Loan, in an amount equal to such Lender’s Pro Rata Share of the aggregate amount of the Swingline Loans (the “Refunded Swingline Loans”) outstanding on the date of such notice, to repay the Swingline Lender. Each Lender shall make the amount of such

 

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Loan available to the Administrative Agent in immediately available funds, not later than 10:00 A.M., New York City time, one (1) Business Day after the date of such notice. The proceeds of such Loans shall be immediately made available by the Administrative Agent to the Swingline Lender for application by the Swingline Lender to the repayment of the Refunded Swingline Loans. If the amounts received from the Lenders are not sufficient to repay in full such Refunded Swingline Loans, then the Borrower shall pay such difference to the Administrative Agent within two (2) Business Days of notice from the Administrative Agent, which payments shall be made available by the Administrative Agent to the Swingline Lender to repay the Refunded Swingline Loans.

(c)        If prior to the time a Loan would have otherwise been made pursuant to Section 2.27(b), one of the events described in Section 7.6 shall have occurred and be continuing with respect to the Borrower or if for any other reason, as determined by the Swingline Lender in its sole discretion, Loans may not be made as contemplated by Section 2.27(b), each Lender shall, on the date such Loan was to have been made pursuant to the notice referred to in Section 2.27(b), purchase for cash an undivided participating interest in the then outstanding Swingline Loans by paying to the Swingline Lender an amount (the “Swingline Participation Amount”) equal to (i) such Lender’s Pro Rata Share times (ii) the sum of the aggregate principal amount of Swingline Loans then outstanding that were to have been repaid with such Loans.

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

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

 

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ARTICLE III

YIELD PROTECTION; TAXES

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

(a)        subjects any Lender or any applicable Lending Installation, the LC Issuer, or the Administrative Agent to any Taxes (other than with respect to Indemnified Taxes, Excluded Taxes, and Other Taxes) on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto, or

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

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

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

 

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

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

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

 

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in money markets as of the date of prepayment) as a result of the redeployment of funds from the prepayment. Because of the short-term nature of this facility, Borrower agrees that Interest Differential shall not be discounted to its present value.

3.5        Taxes.

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

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

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

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

 

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Administrative Agent shall be conclusive absent manifest error. Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under any Loan Document or otherwise payable by the Administrative Agent to the Lender from any other source against any amount due to the Administrative Agent under this paragraph (d).

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

(f)        (i)        Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Loan Document shall deliver to the Borrower and the Administrative Agent, at the time or times reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation reasonably requested by the Borrower or the Administrative Agent as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if reasonably requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Section 3.5(f)(ii)(A), (ii)(B) and (ii)(D) below) shall not be required if in the Lender’s reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.

(ii)        Without limiting the generality of the foregoing,

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

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

 

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

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

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

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

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

(D)        if a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower and the Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Administrative Agent such documentation prescribed by applicable law

 

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(including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower and the Administrative Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this clause (D), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.

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

(g)        If any party determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section 3.5 (including by the payment of additional amounts pursuant to this Section 3.5), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest paid by the relevant governmental authority with respect to such refund). Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid over pursuant to this paragraph (g) (plus any penalties, interest or other charges imposed by the relevant governmental authority) in the event that such indemnified party is required to repay such refund to such governmental authority. Notwithstanding anything to the contrary in this paragraph (g), in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this paragraph (g) the payment of which would place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the indemnification payments or additional amounts giving rise to such refund had never been paid. This paragraph shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.

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

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

3.6        Selection of Lending Installation; Mitigation Obligations; Lender Statements; Survival of Indemnity. To the extent reasonably possible, each Lender shall designate an alternate Lending Installation with respect to its Eurocurrency Loans or Daily Eurocurrency Loans to reduce any liability of the Borrower to such Lender under Sections 3.1, 3.2 and 3.5 or to avoid the unavailability of Eurocurrency Loans or Daily Eurocurrency Loans under Section 3.3,

 

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

ARTICLE IV

CONDITIONS PRECEDENT

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

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

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

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

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

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

 

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

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

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

(i)        There shall not have occurred a Material Adverse Effect since December 31, 2013.

(j)        The Administrative Agent shall have received all governmental, equity holder and third party consents and approvals necessary in connection with the contemplated financing and all applicable waiting periods shall have expired without any action being taken by any authority that would be reasonably likely to restrain, prevent or impose any material adverse conditions on the Loan Parties, taken as a whole, and no law or regulation shall be applicable which in the reasonable judgment of the Administrative Agent could have such effect.

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

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

(m)        [Reserved.]

(n)        All of the representations, agreements and covenants set forth in Section 2.24 and Section 6.28 shall be current, true and correct, and not in default.

(o)        Borrower (and any Guarantors and other parties deemed necessary by Administrative Agent), shall execute such amendments and modifications to the Indenture, the Intercreditor Agreement, the Real Property Collateral Management Agreement, the Security Agreement, the Pari Passu Lien Security Documents, and any other documents and agreements (in recordable form, where required by Administrative Agent) as Administrative Agent shall require in connection with the closing of this credit facility, including without limitation any and

 

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all amendments and modifications as Administrative Agent or its counsel deem necessary or appropriate to ensure that the Administrative Agent and Lenders shall constitute, from and following the Effective Date hereof, Pari Passu Lien Secured Parties, that the Obligations hereunder shall constitute Pari Passu Lien Obligations, and that the Obligations hereunder shall (as Pari Passu Lien Obligations) be secured and have priority in the same manner as the LC Facility Obligations (as that term is defined in the original Intercreditor Agreement as it existed prior to the amendments thereto made in connection with this Agreement) had under the original Intercreditor Agreement, including, without limitation, that all Obligations hereunder shall (in the same manner as the prior LC Facility Obligations) have payment priority above and ahead of the Indenture Notes Obligations (and any other Specified Pari Passu Lien Obligations (as defined in the Intercreditor Agreement).

(p)        Borrower (and any other parties deemed necessary and appropriate by Administrative Agent) shall execute such amendments and modifications to the mortgages, deeds of trust and other Pari Passu Lien Security Documents as Administrative Agent shall require to carry out the intent of this Agreement, and to ensure that the requirements of subsection (o) above and the requirements of Section 2.24 and Section 6.28 hereof shall be satisfied.

(q)        [Reserved.]

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

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

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

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

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

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

 

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ARTICLE V

REPRESENTATIONS AND WARRANTIES

The Borrower represents and warrants to the Lenders that:

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

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

5.3        No Conflict; Government Consent. Neither the execution and delivery by any Loan Party of the Loan Documents to which it is a party, nor the consummation of the transactions therein contemplated, nor compliance with the provisions thereof will violate (i) any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on any Loan Party except where such violation could not reasonably be expected to have a Material Adverse Effect, (ii) any Loan Party’s articles or certificate of incorporation, partnership agreement, certificate of partnership, articles or certificate of organization, by-laws, or operating or other management agreement, as the case may be, or (iii) the provisions of any indenture, instrument or agreement to which any Loan Party is a party or is subject, or by which it, or its Property, is bound, or conflict with or constitute a default thereunder, or result in, or require, the creation or imposition of any Lien in, of or on the Property of any Loan Party pursuant to the terms of any such indenture, instrument or agreement, except where such violation or conflict could not reasonably be expected to have a Material Adverse Effect. No order, consent, adjudication, approval, license, authorization, or validation of, or filing, recording or registration with, or exemption by, or other action in respect of any governmental or public body or authority, or any subdivision thereof, which has not been obtained by any Loan Party is required to be obtained by such Loan Party in connection with the execution and delivery of the Loan Documents, the borrowings under this Agreement, the payment and performance by the Borrower of the Obligations or the legality, validity, binding effect or enforceability of any of the Loan Documents.

5.4        Financial Statements and Information. The financial statements of Borrower and its Subsidiaries for the fiscal year ended December 31, 2012 and the fiscal quarter ended September 30, 2013 heretofore delivered to the Lenders, fairly present in all material respects the consolidated financial condition and operations of Borrower and its Subsidiaries at such date and

 

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the consolidated results of their operations for the periods described therein, subject in the case of financial statements for the period ended September 30, 2013 to normal year-end adjustments and the absence of footnotes. The information contained in such financial statements regarding the Borrower and its Subsidiaries and their respective operations and assets is true and accurate in all material respects.

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

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

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

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

 

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

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

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

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

5.13        Compliance With Laws. Each Loan Party is in compliance with all applicable statutes, rules, regulations, orders and restrictions of any domestic or foreign government or any instrumentality or agency thereof having jurisdiction over the conduct of their respective businesses or the ownership of their respective Property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

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

 

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

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

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

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

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

5.20        Solvency.

(i)        Immediately after the consummation of the transactions to occur on the date hereof and immediately following the making of each Credit Extension, if any, made on the date hereof and after giving effect to the application of the proceeds of such Credit Extensions, (a) the fair value of the assets of the Borrower and its Subsidiaries on a consolidated basis, at a fair valuation, will exceed the debts and liabilities, subordinated, contingent or otherwise, of the Borrower and its Subsidiaries on a consolidated basis; (b) the present fair saleable value of the Property of the Borrower and its Subsidiaries on a consolidated basis will be greater than the amount that will be required to pay the probable liability of the Borrower and its Subsidiaries on a consolidated basis on their debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (c) the Borrower and its Subsidiaries on a consolidated basis will be able to pay their debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (d) the Borrower and its Subsidiaries on a consolidated basis will not have

 

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unreasonably small capital with which to conduct the businesses in which they are engaged as such businesses are now conducted and are proposed to be conducted after the date hereof.

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

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

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

5.23        Secured Obligations. As of the Effective Date of this Agreement, Borrower is, and at all times hereafter shall be, in full compliance with all of the agreements and covenants set forth in Sections 2.24 and 6.28, and all representations and warranties set forth in Sections 2.24 and 6.28, are, and all times hereafter shall be, true and correct in all respects.

ARTICLE VI

COVENANTS

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

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

(a)        Within 120 days after the close of each of its fiscal years, an unqualified (except for qualifications relating (1) to changes in accounting principles or practices reflecting changes in GAAP, (2) for any period within twelve months of the Facility Termination Date, the impending maturity of the Obligations) audit report, with no going concern modifier, certified by (1) nationally recognized independent certified accountants or (2) independent certified public accountants acceptable to the Lenders, prepared in accordance with GAAP on a consolidated basis for the Loan Parties and their respective Subsidiaries, including balance sheets as of the end of such period, related profit and loss and reconciliation of surplus statements, and a statement of cash flows, accompanied by, if prepared and delivered, any management letter prepared by said accountants.

 

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

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

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

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

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

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

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

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

Any financial statement or report required to be furnished pursuant to Section 6.1(a), Section 6.1(b) or Section 6.1(f) shall be deemed to have been furnished on the date on which the Lenders receive notice that the Borrower has filed such financial statement with the U.S. Securities and Exchange Commission and is available on the EDGAR website on the Internet at sec.report or any successor government website that is freely and readily available to the

 

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Administrative Agent and the Lenders without charge. Notwithstanding the foregoing, the Borrower shall deliver paper copies of any such financial statement to the Administrative Agent if the Administrative Agent requests the Borrower to furnish such paper copies until written notice to cease delivering such paper copies is given by the Administrative Agent.

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

(a)        any Default or Event of Default;

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

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

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

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

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

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

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

 

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Subsidiaries taken as a whole; and provided further, however, that this Section 6.3 not prohibit any transaction otherwise permitted by Section 6.19.

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

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

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

6.7        Payment of Taxes and Claims. Borrower shall, and shall cause each of its Subsidiaries to, pay and discharge prior to delinquency (a) all material taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or upon any properties belonging to it, and (b) all material lawful claims of materialmen, mechanics, carriers, warehousemen and landlords for labor, materials, supplies and rentals which, if unpaid, might become a Lien on any properties of such Person; provided, however, that this Section shall not require the payment or discharge of any such tax, assessment, charge, levy or claim (i) which is being contested in good faith by appropriate proceedings which operate to suspend the collection thereof, (ii) for which adequate reserves have been established on the books of such Person in accordance with GAAP or federal income tax accounting principles consistently applied or which has been fully bonded in accordance with Applicable Law, and (iii) failure to pay or discharge the same will not have a Material Adverse Effect.

6.8        Books and Records; Inspections. Borrower will, and will cause each Loan Party to, keep proper books of record and account in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities. Borrower will, and will cause each Loan Party to, permit representatives of the Administrative Agent to (at the expense of the Administrative Agent, unless an Event of Default has occurred and is continuing) visit and inspect any of their respective properties, to examine and make abstracts from any of their respective books and records and to discuss their respective affairs, finances and accounts with their respective officers, employees and independent public accountants, all at such reasonable

 

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times during business hours and as often as may be reasonably requested and, so long as no Event of Default exists, with reasonable prior notice.

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

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

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

6.12        [Reserved].

6.13        ERISA Compliance. Borrower shall, and shall cause each ERISA Affiliate to at all times comply with the provisions of ERISA with respect to any retirement or other employee benefit plan to which it is a party as employer, except as would not reasonably be expected to have a Material Adverse Effect. If Borrower or any Loan Party or any ERISA Affiliate forms any employee benefit plan subject to ERISA, Borrower shall promptly disclose same to Administrative Agent and shall promptly thereafter execute an amendment to this Agreement to add appropriate representations, covenants and defaults with respect to such ERISA plan and compliance.

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

6.15        [Reserved].

 

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6.16        Restrictions on Other Indebtedness. No Loan Party shall create, incur, assume, guarantee or be or remain liable, contingently or otherwise, with respect to any Indebtedness other than:

(a)        The Loans and the Reimbursement Obligations.

(b)        “Permitted Indebtedness”, as that term is defined in the Indenture, and “Coverage Indebtedness,” as that term is defined in Section 4.06 of the Indenture (collectively, the “Indenture Permitted Indebtedness”), in the form delivered to Administrative Agent and as such Indenture is in effect as of the date of this Agreement, subject to the following additional restrictions and limitations:

(i)        In no event may the outstanding principal amount of all Pari Passu Lien Obligations exceed $750,000,000, except for (1) the principal amount of the Obligations owing to Agent and Lenders under this Agreement, and (2) the indebtedness described in and incurred pursuant to clauses (1), (5), (7) and (9) of the definition of Indenture Permitted Indebtedness; and

(ii)        In no event shall any Additional Notes (as defined in the Indenture) or other Additional Pari Passu Lien Obligations (as defined in the Indenture) be issued, created or otherwise permitted or tolerated, so long as any Obligations remain owing, outstanding or unperformed hereunder without the prior written consent of Administrative Agent and Required Lenders.

6.17        Negative Pledge. Borrower shall not and shall not permit any Loan Party to create, assume or suffer to exist any Lien on any Property or any other assets of Borrower or a Loan Party, now owned or hereafter acquired, except (collectively, “Permitted Liens”):

(a)        Liens securing Obligations owing to Agent and Lenders under this Agreement; and;

(b)        “Permitted Liens”, as that term is defined in the Indenture (the “Indenture Permitted Liens”) in the form delivered to Administrative Agent and as such Indenture is in effect as of the date of this Agreement, subject to the following additional restrictions and limitations:

(i)        The Liens described in clause (13) of the definition of Indenture Permitted Liens shall not be permitted liens under this Agreement, and

(ii)        Notwithstanding anything contained in this Agreement or the Indenture which may be construed to the contrary, no Liens shall be prior or superior to the Liens securing the Obligations owing to Agent and Lenders under this Agreement, other than the “Permitted Priority Liens”, as that term is defined in the Indenture.

6.18        Prepayment of Indebtedness. If a Default or Event of Default has occurred and is continuing, Borrower shall not voluntarily prepay, or permit any other Loan Party voluntarily to prepay, the principal amount, in whole or in part, of any Indebtedness other than (a) Indebtedness owed to each Lender hereunder or under some other agreement between Borrower and such

 

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Lender, (b) in pro rata amounts with payment of the Loans, Indebtedness which ranks pari passu with the Indebtedness incurred under this Agreement which is or becomes due and owing whether by reason of acceleration or otherwise and (c) Indebtedness which is exchanged for, or converted into, Capital Stock (or securities to acquire Capital Stock) of any Loan Party.

6.19        Limitation on Fundamental Changes.

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

(i)         sell, assign, lease or otherwise dispose of (whether in one transaction in a series of transactions) all or substantially all of the assets (whether now owned or hereafter acquired) of the Loan Parties (taken as a whole on a consolidated basis) except (A) for the sale of inventory in the ordinary course of business, and (B) bulk sales of Properties held in a geographic region, provided that the fair value of such bulk sales do not exceed in any twelve (12) consecutive months 20% of Consolidated Tangible Net Worth;

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

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

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

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

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

 

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equity interest holders), the board of directors or other governing body of such person approves such acquisition and (iii) the Investment complies with the limitations in Section 6.21.

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

6.20        Transactions with Affiliates. Except as described on Schedule 6.20 attached hereto, Borrower shall not, and shall not permit any other Loan Party to, permit to exist or enter into, any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate of Borrower or any other Loan Party, or with any director, officer or employee of Borrower or any other Loan Party, except transactions in the ordinary course of and pursuant to the reasonable requirements of the business of Borrower or any other Loan Party and upon fair and reasonable terms that, on an overall basis, are no less favorable to Borrower or such other Loan Party than would be obtained in a comparable arm’s length transaction with a Person that is not an Affiliate. Notwithstanding the foregoing, the following are permitted:

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

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

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

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

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

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

 

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

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

6.21        Investments. Borrower will not, nor will Borrower permit any other Loan Party to, make or suffer to exist any Investments (including without limitation, loans and advances to, and other Investments in, Subsidiaries), or commitments therefor, or to create any Subsidiary or to become or remain a partner in any partnership or Joint Venture, except for “Permitted Investments,” as that term is defined in the Indenture, in the form delivered to Administrative Agent and as such Indenture is in effect as of the date of this Agreement.

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

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

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

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

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

(e)         Any Loan Party may, at any time, (i) declare or pay dividends on Capital Stock in the form of Capital Stock (or warrants or rights to acquire Capital Stock) of such Loan Party or through an accretion to the liquidation preference of such Capital Stock, (ii) purchase, redeem, retire or otherwise acquire Capital Stock or Subordinated Debt solely in consideration of Capital Stock (or warrants or rights to acquire Capital Stock) of such Loan Party, (iii) exchange

 

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Capital Stock or Subordinated Debt solely for Capital Stock (or warrants or rights to acquire Capital Stock) of such Loan Party or (iv) convert Capital Stock or Subordinated Debt solely into Capital Stock (or warrants or rights to acquire Capital Stock) of such Loan Party, in each case without transfer to the holders of Capital Stock or Subordinated Debt of any cash or other property of such Loan Party or any of its Subsidiaries in respect thereof.

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

(g)         The Borrower may make Tax Distributions.

6.23        Financial Covenants.

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

(b)         Adjusted Leverage Ratio. The Borrower will not permit the Adjusted Leverage Ratio, determined as of the end of each of its fiscal quarters, to be greater than (i) 2.5 to 1.0, prior to and including December 31, 2014, and (ii) 2.0 to 1.0 at any time after December 31, 2014.

(c)         Permitted Maximum Senior Leverage Ratio. Borrower will not permit the Senior Leverage Ratio, determined as of the end of each of its fiscal quarters, to be greater than 0.75 to 1.0.

(d)         Minimum Consolidated Tangible Net Worth. As at the end of each fiscal quarter, the Consolidated Tangible Net Worth shall not be less than the sum of (a) 75% of Consolidated Net Worth as of the most recently ended fiscal quarter prior to the Effective Date plus (b) 50% of the cumulative Net Cash Proceeds of any Equity Issuances received by Borrower during each completed fiscal quarter after the Effective Date, plus (c) 50% of an amount equal to (i) the cumulative Consolidated Net Income (without deductions for losses sustained during any fiscal quarter) for each completed fiscal quarter following the Effective Date, commencing with the quarter ended March 31, 2014, minus (ii) income taxes on such income at a presumed combined Federal and State rate of fifty percent (50%).

(e)         Ratio of Land Assets to Consolidated Tangible Net Worth. As at the end of each fiscal quarter, Borrower shall not permit the ratio of (a) the Book Value of Land Assets to (b) Consolidated Tangible Net Worth to exceed 2.0 to 1.0.

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

 

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

6.25         [Reserved.]

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

6.27         [Reserved.]

6.28        Loans and LC Obligations Shall At All Times Be and Remain Pari Passu Lien Obligations. Borrower shall, at all times prior to the repayment in full of the Loans and the LC Obligations and the payment and performance of all other Obligations of Borrower under the Loan Documents, execute all documents and take all other actions that Administrative Agent reasonably deems necessary or appropriate, to cause the Loans and the LC Obligations, and any and all other Obligations of Borrower under the Loan Documents, to at all times be and remain Pari Passu Lien Obligations secured by the Pari Passu Lien Security Documents and the Collateral (including without limitation the “Properties”, as that term is defined in the Real Property Collateral Management Agreement), in a first lien position, subject only to the Permitted Liens; with a repayment priority (in connection with any action to enforce rights or exercise remedies with respect to any of the Collateral, or the occurrence of any Event of Default, or any other distribution in accordance with Section 2.01(b) of the Intercreditor Agreement) ahead of and prior to the Indenture Notes Obligations and all other Specified Pari Passu Lien Obligations (as defined in the Intercreditor Agreement); which payment priority shall be as more fully set forth in Section 2.01(b) of the Intercreditor Agreement, as amended or amended and restated substantially concurrently herewith.

 

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ARTICLE VII

DEFAULTS

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

7.1         Any representation or warranty made or deemed made by or on behalf of the Borrower or any of the other Loan Parties to the Lenders or the Administrative Agent under or in connection with this Agreement, any Credit Extension, or any certificate or information delivered in connection with this Agreement or any other Loan Document shall be materially false on the date as of which made or confirmed.

7.2         Nonpayment of (i) principal of any Loan when due, (ii) any Reimbursement Obligation within three (3) Business Days after the same becomes due, or (iii) interest upon any Loan or of any Undrawn Fee, LC Fee or other obligations under any of the Loan Documents within five (5) days after the same becomes due.

7.3         The breach by the Borrower of any of the terms or provisions of Section 6.2(a), 6.9, 6.16, 6.17, 6.19, 6.20, 6.21, 6.22, or 6.23(f). By way of clarification, any failure to maintain or observe the financial covenants set forth in Section 6.23(a), (b), (c), (d) or (e) shall put the Term Out Provision under Section 2.25 hereof into effect, and Borrower must then comply with all the covenants and requirements set forth therein, including without limitation the principal amortization of the Aggregate Outstanding Credit Exposure in eighteen (18) equal monthly principal payments over the following eighteen (18) month period; provided, however, that a failure to comply with such subsections (a), (b), (c), (d) or (e) of Section 6.23 shall not result in an Event of Default or otherwise result in an acceleration of the Loans or the LC Obligations, unless or until any other requirements of Section 2.25 hereof have not been met or satisfied by Borrower in response to such defaults (provided, however, that the foregoing shall not be construed to limit Administrative Agent’s and Lenders’ rights to accelerate the Obligations and exercise all remedies hereunder upon the occurrence of any other Events of Default under this Article VII). Any default by Borrower or failure to observe or comply with the financial covenants set forth in Section 6.23(f) shall constitute an immediate Event of Default under this Agreement.

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

7.5         Failure of the Borrower or any other Loan Party to pay when due any Material Indebtedness (other than any purchase money Non-Recourse Indebtedness); or the default by the

 

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

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

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

7.8         [Reserved.]

7.9         Any of the other Loan Parties shall fail within thirty (30) days to pay, bond or otherwise discharge one or more (i) judgments or orders for the payment of money in excess of $10,000,000 (or the equivalent thereof in currencies other than U.S. Dollars), in the aggregate, exclusive of amounts covered by insurance, or (ii) nonmonetary judgments or orders which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, which judgment(s), in any such case, is/are not stayed on appeal or otherwise being appropriately contested in good faith.

7.10         (a) With respect to a Plan, the Borrower or an ERISA Affiliate is subject to a lien in excess of $10,000,000 pursuant to Section 430(k) of the Code or Section 302(c) of ERISA or Title IV of ERISA, or (b) an ERISA Event shall have occurred that, in the opinion of the

 

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Required Lenders, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect.

7.11         [Reserved.]

7.12         Any Change of Control shall occur.

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

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

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

7.16         Any “Event of Default” (as defined therein) occurs under the Indenture, the Intercreditor Agreement, the Security Agreement, any Pari Passu Lien Credit Documents or any Pari Passu Lien Security Documents that is not cured within any applicable cure or grace period specified in such applicable document or agreement (and, if no such grace or cure period is specified, is not cured within the sooner to occur of (a) the cure period specified in Section 7.4 above, or (b) the date that the Collateral Agent commences enforcement actions or begins to exercise remedies under any of the Security Documents, as that term is defined in the Indenture).

ARTICLE VIII

ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES

8.1        Acceleration; Remedies.

(a)         If any Event of Default described in Section 7.6 or 7.7 occurs with respect to the Borrower, the obligations of the Lenders to make Loans hereunder and the obligation and power of the LC Issuer to issue Facility LCs shall automatically terminate and the Obligations shall immediately become due and payable without any election or action on the part of the Administrative Agent, the LC Issuer or any Lender and the Borrower will be and become thereby unconditionally obligated, without any further notice, act or demand, to pay to the

 

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

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

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

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

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

 

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

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

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

(b)         Second, to payment of fees, indemnities and other amounts (other than principal, interest, LC Fees and Undrawn Fees) payable to the Lenders (including the Swingline Lender) and the LC Issuer (including fees, charges and disbursements of counsel to the respective Lenders and the LC Issuer as required by Section 9.6 and amounts payable under Article III);

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

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

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

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

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

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

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

 

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thereon or Reimbursement Obligations related thereto or increase the amount of the Commitment of such Lender hereunder.

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

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

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

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

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

(g)         modify the Intercreditor Agreement in any way that alters payment priorities (including without limitation those set forth in Section 2.01 of the Intercreditor Agreement) without the unanimous written consent of all Lenders.

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

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

 

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ARTICLE IX

GENERAL PROVISIONS

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

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

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

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

9.5         Several Obligations; Benefits of this Agreement. The respective obligations of the Lenders hereunder are several and not joint and no Lender shall be the partner or agent of any other (except to the extent to which the Administrative Agent is authorized to act as such). The failure of any Lender to perform any of its obligations hereunder shall not relieve any other Lender from any of its obligations hereunder. This Agreement shall not be construed so as to confer any right or benefit upon any Person other than the parties to this Agreement and their respective successors and assigns, provided, however, that the parties hereto expressly agree that

 

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the Arrangers shall enjoy the benefits of the provisions of Sections 9.6, 9.10 and 10.11 to the extent specifically set forth therein and shall have the right to enforce such provisions on its own behalf and in its own name to the same extent as if it were a party to this Agreement.

9.6        Expenses; Indemnification.

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

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

 

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such party of its express contractual obligations under the Loan Documents, including, without limitation, reasonable attorneys’ fees and settlement costs. The obligations of the Borrower under this Section 9.6 shall survive the termination of this Agreement.

9.7        [Reserved].

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

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

9.10        Nonliability of Lenders. The relationship between the Borrower on the one hand and the Lenders, the LC Issuer and the Administrative Agent on the other hand shall be solely that of borrower and lender. Neither the Administrative Agent, any Arranger, the LC Issuer nor any Lender shall have any fiduciary responsibilities to the Borrower. Neither the Administrative Agent, any Arranger, the LC Issuer nor any Lender undertakes any responsibility to the Borrower to review or inform the Borrower of any matter in connection with any phase of the Borrower’s business or operations. The Borrower agrees that neither the Administrative Agent, any Arranger, the LC Issuer nor any Lender shall have liability to the Borrower (whether sounding in tort, contract or otherwise) for losses suffered by the Borrower in connection with, arising out of, or in any way related to, the transactions contemplated and the relationship

 

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established by the Loan Documents, or any act, omission or event occurring in connection therewith, unless it is determined in a final non-appealable judgment by a court of competent jurisdiction that such losses resulted from the gross negligence or willful misconduct of the party from which recovery is sought. Neither the Administrative Agent, any Arranger, the LC Issuer nor any Lender shall have any liability with respect to, and the Borrower hereby waives, releases and agrees not to sue for, any special, indirect, consequential or punitive damages suffered by the Borrower and its Subsidiaries in connection with, arising out of, or in any way related to the Loan Documents or the transactions contemplated thereby. It is agreed that each Arranger shall, in its capacity as such, have no duties or responsibilities under the Agreement or any other Loan Document. Each Lender acknowledges that it has not relied and will not rely on the Arrangers in deciding to enter into the Agreement or any other Loan Document or in taking or not taking any action.

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

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

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

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

Each Lender that is subject to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”) hereby notifies the Borrower and each other Loan Party that pursuant to the requirements of the Act, it is required to obtain, verify and

 

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record information that identifies such Loan Party, which information includes the name and address of such Loan Party and other information that will allow such Lender to identify such Loan Party in accordance with the Act.

9.15        Document Interpretation.

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

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

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

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

ARTICLE X

THE ADMINISTRATIVE AGENT

10.1        Appointment; Nature of Relationship. U.S. Bank National Association is hereby appointed by each of the Lenders as its contractual representative (herein referred to as the “Administrative Agent”) hereunder and under each other Loan Document, and each of the Lenders irrevocably authorizes the Administrative Agent to act as the contractual representative of such Lender with the rights and duties expressly set forth herein and in the other Loan Documents. The Administrative Agent agrees to act as such contractual representative upon the express conditions contained in this Article X. Notwithstanding the use of the defined term “Administrative Agent,” it is expressly understood and agreed that the Administrative Agent shall not have any fiduciary responsibilities to any Lender by reason of this Agreement or any other Loan Document and that the Administrative Agent is merely acting as the contractual representative of the Lenders with only those duties as are expressly set forth in this Agreement

 

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and the other Loan Documents. In its capacity as the Lenders’ contractual representative, the Administrative Agent (i) does not hereby assume any fiduciary duties to any of the Lenders, (ii) is a “representative” of the Lenders within the meaning of the term “secured party” as defined in the New York Uniform Commercial Code and (iii) is acting as an independent contractor, the rights and duties of which are limited to those expressly set forth in this Agreement and the other Loan Documents. Each of the Lenders hereby agrees to assert no claim against the Administrative Agent on any agency theory or any other theory of liability for breach of fiduciary duty, all of which claims each Lender hereby waives.

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

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

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

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

 

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its satisfaction by the Lenders pro rata against any and all liability, cost and expense that it may incur by reason of taking or continuing to take any such action.

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

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

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

 

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in accordance with the provisions thereof. The obligations of the Lenders under this Section 10.8 shall survive payment of the Obligations and termination of this Agreement.

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

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

10.11        Lender Credit Decision, Legal Representation.

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

(b)        Each Lender further acknowledges that it has had the opportunity to be represented by legal counsel in connection with its execution of this Agreement and the other Loan Documents, that it has made its own evaluation of all applicable laws and regulations

 

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relating to the transactions contemplated hereby, and that the counsel to the Administrative Agent represents only the Administrative Agent and not the Lenders in connection with this Agreement and the transactions contemplated hereby.

10.12        Successor Administrative Agent. The Administrative Agent may resign at any time by giving written notice thereof to the Lenders and the Borrower, such resignation to be effective upon the appointment of a successor Administrative Agent or, if no successor Administrative Agent has been appointed, forty-five (45) days after the retiring Administrative Agent gives notice of its intention to resign. Upon any such resignation, the Required Lenders shall have the right to appoint, on behalf of the Borrower and the Lenders, a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed by the Required Lenders within thirty (30) days after the resigning Administrative Agent’s giving notice of its intention to resign, then the resigning Administrative Agent may appoint, on behalf of the Borrower and the Lenders, a successor Administrative Agent. Notwithstanding the previous sentence, the Administrative Agent may at any time without the consent of the Borrower or any Lender, appoint any of its Affiliates which is a commercial bank as a successor Administrative Agent hereunder. If the Administrative Agent has resigned and no successor Administrative Agent has been appointed, the Lenders may perform all the duties of the Administrative Agent hereunder and the Borrower shall make all payments in respect of the Obligations to the applicable Lender and for all other purposes shall deal directly with the Lenders. No successor Administrative Agent shall be deemed to be appointed hereunder until such successor Administrative Agent has accepted the appointment. Any such successor Administrative Agent shall be a commercial bank having capital and retained earnings of at least $100,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the resigning Administrative Agent. Upon the effectiveness of the resignation of the Administrative Agent, the resigning Administrative Agent shall be discharged from its duties and obligations hereunder and under the Loan Documents. After the effectiveness of the resignation of an Administrative Agent, the provisions of this Article X shall continue in effect for the benefit of such Administrative Agent in respect of any actions taken or omitted to be taken by it while it was acting as the Administrative Agent hereunder and under the other Loan Documents. In the event that there is a successor to the Administrative Agent by merger, or the Administrative Agent assigns its duties and obligations to an Affiliate pursuant to this Section 10.12.

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

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

 

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

ARTICLE XI

SETOFF; RATABLE PAYMENTS

11.1        Setoff. The Borrower hereby grants each Lender a security interest, to secure the Obligations owing to such Lender, in all deposits, credits and deposit accounts (including all account balances, whether provisional or final and whether or not collected or available) of the Borrower with such Lender or any Affiliate of such Lender (the “Deposits”). In addition to, and without limitation of, any rights of the Lenders under applicable law, if any Event of Default occurs and is continuing, Borrower authorizes each Lender to offset and apply all such Deposits as set forth in Section 2.01(b) of the Intercreditor Agreement; provided, that in the event that any Defaulting Lender shall exercise such right of setoff, (x) all amounts so set off shall be paid over immediately to the Administrative Agent for further application in accordance with the provisions of Section 2.22 and, pending such payment, shall be segregated by such Defaulting Lender from its other funds and deemed held in trust for the benefit of the Administrative Agent, the LC Issuer, and the Lenders, and (y) the Defaulting Lender shall provide promptly to the Administrative Agent a statement describing in reasonable detail the Obligations owing to such Defaulting Lender as to which it exercised such right of setoff. Notwithstanding the foregoing, no Lender shall exercise any such right of set off without the prior written consent of all Lenders and Administrative Agent.

11.2        Ratable Payments. If any Lender, whether by setoff or otherwise, has payment made to it upon its Outstanding Credit Exposure (other than payments received pursuant to Section 3.1, 3.2, 3.4 or 3.5) in a greater proportion than that received by any other Lender, such Lender agrees, promptly upon demand, to purchase a portion of the Aggregate Outstanding Credit Exposure held by the other Lenders so that after such purchase each Lender will hold its

 

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Pro Rata Share of the Aggregate Outstanding Credit Exposure. If any Lender, whether in connection with setoff or amounts which might be subject to setoff or otherwise, receives collateral or other protection for its Obligations or such amounts which may be subject to setoff, such Lender agrees, promptly upon demand, to take such action necessary such that all Lenders share in the benefits of such collateral or other protection ratably in proportion to their respective Pro Rata Shares of the Aggregate Outstanding Credit Exposure. In case any such payment is disturbed by legal process, or otherwise, appropriate further adjustments shall be made.

ARTICLE XII

BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS

12.1        Successors and Assigns. The terms and provisions of the Loan Documents shall be binding upon and inure to the benefit of the Borrower and the Lenders and their respective successors and assigns permitted hereby, except that (i) the Borrower shall not have the right to assign its rights or obligations under the Loan Documents without the prior written consent of each Lender, (ii) any assignment by any Lender must be made in compliance with Section 12.3, and (iii) any transfer by participation must be made in compliance with Section 12.2. Any attempted assignment or transfer by any party not made in compliance with this Section 12.1 shall be null and void, unless such attempted assignment or transfer is treated as a participation in accordance with the terms of this Agreement. The parties to this Agreement acknowledge that clause (ii) of this Section 12.1 relates only to absolute assignments and this Section 12.1 does not prohibit assignments creating security interests, including, without limitation, (x) any pledge or assignment by any Lender of all or any portion of its rights under this Agreement and any Note to a Federal Reserve Bank or (y) in the case of a Lender which is a Fund, any pledge or assignment of all or any portion of its rights under this Agreement and any Note to its trustee in support of its obligations to its trustee; provided, however, that no such pledge or assignment creating a security interest shall release the transferor Lender from its obligations hereunder unless and until the parties thereto have complied with the provisions of Section 12.3. The Administrative Agent may treat the Person which made any Loan or which holds any Note as the owner thereof for all purposes hereof unless and until such Person complies with Section 12.3; provided, however, that the Administrative Agent may in its discretion (but shall not be required to) follow instructions from the Person which made any Loan or which holds any Note to direct payments relating to such Loan or Note to another Person. Any assignee of the rights to any Loan or any Note agrees by acceptance of such assignment to be bound by all the terms and provisions of the Loan Documents. Any request, authority or consent of any Person, who at the time of making such request or giving such authority or consent is the owner of the rights to any Loan (whether or not a Note has been issued in evidence thereof), shall be conclusive and binding on any subsequent holder or assignee of the rights to such Loan.

12.2        Participations.

(a)        Permitted Participants; Effect. So long as Borrower consents in writing (which consent shall not be necessary at any time that an Event of Default has occurred and is continuing, and may not at any time be unreasonably withheld or delayed by Borrower), any Lender may at any time sell to one or more banks or other entities (“Participants”) participating interests in any Outstanding Credit Exposure owing to such Lender, any Note held by such

 

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Lender, any Commitment of such Lender or any other interest of such Lender under the Loan Documents. In the event of any such sale by a Lender of participating interests to a Participant, such Lender’s obligations under the Loan Documents shall remain unchanged, such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, such Lender shall remain the owner of its Outstanding Credit Exposure and the holder of any Note issued to it in evidence thereof for all purposes under the Loan Documents, all amounts payable by the Borrower under this Agreement shall be determined as if such Lender had not sold such participating interests, and the Borrower and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under the Loan Documents.

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

(c)        Benefit of Certain Provisions. The Borrower agrees that each Participant shall be deemed to have the right of setoff provided in Section 11.1 in respect of its participating interest in amounts owing under the Loan Documents to the same extent as if the amount of its participating interest were owing directly to it as a Lender under the Loan Documents, provided that each Lender shall retain the right of setoff provided in Section 11.1 with respect to the amount of participating interests sold to each Participant. The Lenders agree to share with each Participant, and each Participant, by exercising the right of setoff provided in Section 11.1, agrees to share with each Lender, any amount received pursuant to the exercise of its right of setoff, such amounts to be shared in accordance with Section 11.2 as if each Participant were a Lender. The Borrower further agrees that each Participant shall be entitled to the benefits of Sections 3.1, 3.2, 3.4, 3.5, 9.6 and 9.10 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 12.3, provided that (i) a Participant shall not be entitled to receive any greater payment under Section 3.1 or 3.2 than the Lender who sold the participating interest to such Participant would have received had it retained such interest for its own account, unless the sale of such interest to such Participant is made with the prior written consent of the Borrower, and (ii) a Participant shall not be entitled to receive any greater payment under Section 3.5 than the Lender who sold the participating interest to such Participant would have received had it retained such interest for its own account (a) except to the extent such entitlement to receive a greater payment results from a change in treaty, law or regulation (or any change in the interpretation or administration thereof by any governmental authority) that occurs after the Participant acquired the applicable participation and (B), in the case of any Participant that would be a Non-U.S. Lender if it were a Lender, such Participant agrees to comply with the provisions of Section 3.5 to the same extent as if it were a Lender (it being understood that the documentation required under Section 3.5(f) shall be delivered to the participating Lender). Each Lender that sells a participation shall, acting solely for this purpose as an agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in any Outstanding Credit Exposure, any Note, any Commitment or any other obligations under the Loan Documents (the

 

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Participant Register”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any Outstanding Credit Exposure, any Note, any Commitment or any other obligations under the Loan Documents) to any Person except to the extent that such disclosure is necessary to establish that such Outstanding Credit Exposure, any Note, any Commitment or any other obligations under the Loan Documents is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.

12.3        Assignments.

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

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

(c)        Effect; Effective Date. Upon (i) delivery to the Administrative Agent of an assignment, together with any consents required by Sections 12.3(a) and 12.3(b), and (ii) payment of a $3,500 fee to the Administrative Agent for processing such assignment (unless such fee is waived by the Administrative Agent), such assignment shall become effective on the effective date specified in such assignment. The assignment shall contain a representation by the Purchaser to the effect that none of the consideration used to make the purchase of the Commitment and Outstanding Credit Exposure under the applicable assignment agreement constitutes “plan assets” as defined under ERISA and that the rights and interests of the

 

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Purchaser in and under the Loan Documents will not be “plan assets” under ERISA. On and after the effective date of such assignment, such Purchaser shall for all purposes be a Lender party to this Agreement and any other Loan Document executed by or on behalf of the Lenders and shall have all the rights and obligations of a Lender under the Loan Documents, to the same extent as if it were an original party thereto, and the transferor Lender shall be released with respect to the Commitment and Outstanding Credit Exposure assigned to such Purchaser without any further consent or action by the Borrower, the Lenders or the Administrative Agent. In the case of an assignment covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a Lender hereunder but shall continue to be entitled to the benefits of, and subject to, those provisions of this Agreement and the other Loan Documents which survive payment of the Obligations and termination of the applicable agreement. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 12.3 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 12.2. Upon the consummation of any assignment to a Purchaser pursuant to this Section 12.3(c), the transferor Lender, the Administrative Agent and the Borrower shall, if the transferor Lender or the Purchaser desires that its Loans be evidenced by Notes, make appropriate arrangements so that new Notes or, as appropriate, replacement Notes are issued to such transferor Lender and new Notes or, as appropriate, replacement Notes, are issued to such Purchaser, in each case in principal amounts reflecting their respective Commitments, as adjusted pursuant to such assignment.

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

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

 

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ARTICLE XIII

NOTICES

13.1        Notices; Effectiveness; Electronic Communication.

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

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

(ii)        if to the Administrative Agent, to it at c/o Soua R. Yang, Senior Agency Specialist, U.S. Bank Agency Services, 800 Nicollet Mall, 3rd Floor, Minneapolis, MN 55402-7020, Telephone: 602-303-3247, Facsimile: (612) 303-3851, e-mail: soua.yang1@usbank.com and c/o Young Hahn, Agency Specialist, U.S. Bank Agency Services, 1420 Fifth Avenue, 9th Floor, Seattle, WA 98101, Telephone: (206) 344-5055, Facsimile: (203) 587-7022, e-mail: elaine.hahn@usbank.com and c/o Susanie Samson, Loan Administration, 4100 Newport Place, Suite 900, Newport Beach, CA 92680, Telephone: (949) 863-2376, Facsimile: (949) 252-1759, e-mail: susanie.samson@usbank.com;

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

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

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

(b)        Electronic Communications. Notices and other communications to the Lenders and the LC Issuer hereunder may be delivered or furnished by electronic communication (including e-mail and internet or intranet websites) pursuant to procedures

 

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approved by the Administrative Agent or as otherwise determined by the Administrative Agent, provided that the foregoing shall not apply to notices to any Lender or the LC Issuer pursuant to Article II if such Lender or the LC Issuer, as applicable, has notified the Administrative Agent that it is incapable of receiving notices under such Article by electronic communication. The Administrative Agent or the Borrower may, in its respective discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it or as it otherwise determines, provided that such determination or approval may be limited to particular notices or communications.

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

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

ARTICLE XIV

COUNTERPARTS; INTEGRATION; EFFECTIVENESS;

ELECTRONIC EXECUTION

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

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

 

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National Commerce Act, or any other state laws based on the Uniform Electronic Transactions Act.

ARTICLE XV

CHOICE OF LAW; CONSENT TO JURISDICTION;

WAIVER OF JURY TRIAL

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

15.2        CONSENT TO JURISDICTION; OTHER MATTERS; WAIVERS.

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

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

 

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SUMMONS AND COMPLAINT, OR OTHER PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO BORROWER AT ITS ADDRESS FOR NOTICES PROVIDED FOR HEREIN.

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

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

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

(f)        THE FOREGOING WAIVERS HAVE BEEN MADE WITH THE ADVICE OF COUNSEL AND WITH A FULL UNDERSTANDING OF THE LEGAL CONSEQUENCES THEREOF, AND SHALL SURVIVE THE PAYMENT OF THE LOAN AND ALL OTHER AMOUNTS PAYABLE HEREUNDER OR UNDER THE OTHER LOAN DOCUMENTS AND THE TERMINATION OF THIS AGREEMENT.

ARTICLE XVI

OPTION TO CONVERT TO UNSECURED FACILITY

Borrower shall have the option to convert this credit facility from a secured facility to an unsecured facility, provided that all of the following conditions precedent are satisfied in full:

(a)        Each and all of the Lenders and the Administrative Agent have given their approval (which may be given or withheld in their sole and absolute discretion) in writing thereto;

(b)        All of the Indenture Note Obligations and any and all other Specified Pari Passu Lien Obligations (as defined in the Intercreditor Agreement) shall have been repaid in full (other than contingent indemnification obligations for which no claim has been made), and the Indenture, Intercreditor Agreement, Real Property Collateral Management Agreement, the Security Agreement, the Pari Passu Lien Security Documents, and all other documents and agreements pertaining to the foregoing shall have been terminated, cancelled, and of no further force or effect, and no party thereunder shall owe any further obligations with respect thereto,

 

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and all liens and security interests in any Collateral or any other property or assets pertaining thereto shall have been cancelled and released;

(c)        No Default or Event of Default exists hereunder, or would exist under the Loan Documents for the new unsecured facility after converting the credit facility hereunder from a secured facility to an unsecured facility and the amendment or re-documentation of all of the Loan Documents (as specified in subparagraph (e) below);

(d)        All financial covenants and all other covenants and agreements specified herein shall remain satisfied and in full force and effect (including, without limitation, the requirements of Section 2.1 and Section 2.2 hereof), taking into consideration the conversion of the facility from a secured to an unsecured facility; and

(e)        Borrower, Guarantors and such other parties as Administrative Agent and Lenders in their sole discretion shall require, shall execute such amendments and modifications to the existing Loan Documents, and such new loan documents and agreements, as Administrative Agent and each of the Lenders shall in their sole and absolute discretion require, containing such amendment and modification of terms and provisions as such Administrative Agent and Lenders shall in their sole and absolute discretion require.

Borrower understands and agrees that the foregoing terms under this Article XVI are not exclusive or exhaustive of any criteria and requirements that Administrative Agent or any Lender may require to agree to a conversion of the secured credit facility hereunder to an unsecured credit facility.

[Signature Pages Follow]

 

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

 

SHEA HOMES LIMITED PARTNERSHIP,

a California limited partnership

By:

  

/s/ Andy Parnes

Name: Andy Parnes

Title: Chief Financial Officer

By:

  

/s/ Robert R. O’Dell

Name: Robert R. O’Dell

Title: Treasurer

 

S-1


U.S. BANK NATIONAL ASSOCIATION,

as a Lender, as LC Issuer and as Administrative Agent

By:

  

/s/ Adrian Montero

Name:

  

Adrian Montero

Title:

  

Senior Vice President

WELLS FARGO BANK, NA, as a Lender

By:

  

/s/ Susan A. Klein

Name:

  

Susan A. Klein

Title:

  

Senior Vice President

CREDIT SUISSE AG, CAYMAN ISLANDS
BRANCH, as a Lender

By:

  

/s/ Judith Smith

Name:

  

Judith Smith

Title:

  

Authorized Signatory

By:

  

/s/ Ryan Long

Name:

  

Ryan Long

Title:

  

Authorized Signatory

 

S-2


SCHEDULE 1

Authorized Officer(s)

For Borrowing Base Certificates and other documents:

Andy Parnes, Chief Financial Officer

James G. Shontere, Secretary

Robert R. O’Dell, Treasurer

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

Andy Parnes, Chief Financial Officer

James G. Shontere, Secretary

Robert R. O’Dell, Treasurer

Heather Tang, Senior Treasury Analyst

Yves Hebert, Cash Manager

 

SCH. 1-1


SCHEDULE 1(a)

Commitments

 

Lender:

  
Commitment:
  
    Percentage:

U.S. BANK NATIONAL ASSOCIATION

  
$50,000,000
  
    40.000000000000%

WELLS FARGO BANK, NA

  
$40,000,000
  
    32.000000000000%

CREDIT SUISSE AG, Cayman Islands Branch

  
$35,000,000
  
    28.000000000000%

TOTAL COMMITMENTS

  
$125,000,000
  
    100%
 
  
 
  
 

 

SCH. 1(a)-1


SCHEDULE 1(b)

Guarantors

Shea Homes Funding Corp., a Delaware corporation

Highlands Ranch Development Corporation,

a Colorado corporationMonty Green Holdings, LLC, a Delaware limited liability company

Mountainbrook Village Company, an Arizona corporation

Sand Creek Cattle Company, a Colorado corporation

Serenade at Natomas, LLC, a California limited liability company

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

SH Jubilee, LLC, a Delaware limited liability company

SH Jubilee Management, LLC, a Delaware limited liability company

SHAA Development, LLC, a Delaware limited liability company

SHALC GC, Inc., a Delaware corporation

Shea Brea Development, LLC, a Delaware limited liability company

Shea Capital II, LLC, a Delaware limited liability company

Shea Communities Marketing Company, a Delaware corporation

Shea Financial Services, Inc., a California corporation

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

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

Shea Homes Houston LLC, a Delaware corporation Shea Homes, Inc., a Delaware corporation

Shea Homes Southwest, Inc., an Arizona corporation

Shea Homes Vantis, LLC, a California limited liability company

Shea Insurance Services, Inc., a California corporation

Shea La Quinta LLC, a California limited liability company

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

Shea Proctor Valley, LLC, a California limited liability company

Shea Properties of Colorado, Inc., a Colorado corporation

Shea Tonner Hills, LLC, a Delaware limited liability company

Shea Victoria Gardens, LLC, a Florida limited liability company

SHI JV Holdings, LLC, a Delaware limited liability company

SHLP JV Holdings, LLC, a Delaware limited liability company

Tower 104 Gathering, LLC, a Colorado limited liability company

Tower 104 Oil, LLC, a Colorado limited liability company

Trilogy Antioch, LLC, a California limited liability company

UDC Advisory Services, Inc., an Illinois corporation

UDC Homes Construction, Inc., an Arizona corporation

Vistancia Construction, LLC, a Delaware limited liability company

Vistancia Marketing, LLC, a Delaware limited liability comp

 

SCH. 1(b)-1


Schedule 1(c)

Projects

 

Project Name
 
Master Plan
 
Owner
 
County
 
State

Central Coast

 
Trilogy Central Coast
 
SHLP
 
San Luis Obispo
 
California

Trilogy Glen Ivy

 
Trilogy Glen Ivy
 
SHI
 
Riverside
 
California

Trilogy at Redmond Ridge

 
Trilogy at Redmond Ridge
 
SHI
 
King
 
Washington

SHI - Vistancia Lots

 
Vistancia
 
SHI
 
Maricopa
 
Arizona

Vistancia Construction Company

 
Vistancia
 
Vistancia Construction LLC
 
Maricopa
 
Arizona

Tehaleh

 
Tehaleh
 
Shea Homes Inc.
 
Pierce
 
Washington

Shenandoah

 
Shenandoah
 
SHLP
 
Frederick County
 
Virginia

Mountain Shadows II

 
Arroyo Mountain Estates
 
SHLP
 
Maricopa
 
Arizona

Entrada 3

 
Vistancia
 
Vistancia Construction LLC
 
Maricopa
 
Arizona

Kensington

 
Watson Estates
 
SHLP
 
Maricopa
 
Arizona

Vista Montana

 
None
 
SHI
 
Maricopa
 
Arizona

Blackstone

 
Vistancia
 
SHI
 
Maricopa
 
Arizona

The Estates at Litchfield Park

 
Litchfield Park
 
SHLP
 
Maricopa
 
Arizona

Johnson Ranch

 
Johnson Ranch
 
SHI
 
Pinal
 
Arizona

Silver Canyon Ranch

 
Silver Canyon Ranch
 
SHI
 
Maricopa
 
Arizona

Bridges 3-5

 
Bridges
 
SHI
 
Maricopa
 
Arizona

Bridges 1-5

 
Bridges
 
SHI
 
Maricopa
 
Arizona

Marbella Vineyards - Phase 2A

 
Marbella Vineyards
 
SHI
 
Maricopa
 
Arizona

Marbella Vineyards - Phase 2B

 
Marbella Vineyards
 
SHI
 
Maricopa
 
Arizona

Caballos Del Rio

 
 
SHLP
 
Maricopa
 
Arizona

Verrado

 
Verrado
 
SHLP
 
Maricopa
 
Arizona

Greer Ranch

 
 
SHLP
 
Maricopa
 
Arizona

Backcountry Future 118S 7010’s

 
Highlands Ranch
 
SHLP
 
Douglas
 
Colorado

Eaton Parcel and 393 acresPrimesite acq.

 
Reunion
 
SHLP
 
Adams
 
Colorado

Denver Tech Center

 
Denver Tech Center
 
SHLP
 
Denver
 
Colorado

Plum Creek

 
Plum Creek
 
Sand Creek Cattle Company
 
Douglas
 
Colorado

CHATFIELD GREEN - Trailmark

 
Chatfield Green
 
SHLP
 
Jefferson
 
Colorado

One Cherry Lane

 
 
SHLP
 
Arapahoe County
 
Colorado

Meridian Village South

 
 
SHLP
 
Douglas
 
Colorado

Day Break

 
Day Break
 
SHLP
 
Weld
 
Colorado

Capistrano

 
Capistrano
 
SHLP
 
Sacramento
 
California

Front Porch

 
Liberty
 
SHLP
 
Solano
 
California

Portico

 
Montage
 
Shea Homes Inc.
 
Alameda
 
California

Antigua

 
Mountain House
 
SHLP
 
San Joaquin
 
California

Antigua/Campania

 
Mountain House
 
SHLP
 
San Joaquin
 
California

Questa

 
Mountain House
 
SHLP
 
San Joaquin
 
California

 

SCH. 1(c)-1


The Cove at Summer Lake

 
Summer Lake
 
SHLP
 
Contra Costa
 
California

Natomas

 
Natomas
 
SHI
 
Sacramento
 
California

Landsdowne

 
Bay Meadows
 
SHI
 
San Mateo
 
California

Sorrento

 
Sorrento
 
SHI
 
Alameda
 
California

Tralee Village

 
Tralee Village
 
SHI
 
Alameda
 
California

Jade @ Blackstone

 
Blackstone
 
Shea Tonner Hills LLC
 
Orange
 
California

Canterbury Lane

 
Centerbury Lane
 
SHLP
 
Ventura
 
California

Parkside Estates

 
Parkside Estates
 
SHLP
 
Orange
 
California

Latitudes South @ Vantis

 
Vantis
 
SHI
 
Orange
 
California

RMVP3 / Sendero

 
 
SHI
 
Orange
 
California

RMVAQ4 / Gavalon

 
 
SHI
 
Orange
 
California

Parsons Place

 
Rosedale
 
SHLP
 
Los Angeles
 
California

Sage Wood / Pavilion Park

 
Great Park
 
SHLP
 
Orange
 
California

Stonegate / Sausalito

 
Stonegate
 
SHLP
 
Orange
 
California

Cabanas, The

 
Coral Cove
 
SHLP
 
San Diego
 
California

Tapestry

 
Lomas Verdes
 
SHLP
 
San Diego
 
California

socialGarden

 
Civita
 
SHLP
 
San Diego
 
California

Iris

 
Iris/Vulcan
 
SHLP
 
San Diego
 
California

Ventana @ Bella Lago

 
Bella Lago
 
SHLP
 
San Diego
 
California

Poinsettia Place

 
Poinsettia Place
 
SHI
 
San Diego
 
California

Vulcan

 
 
SHI
 
San Diego
 
California

Balhmann

 
 
SHI
 
San Diego
 
California

Civita - lots 4&5

 
Civita
 
SHLP
 
San Diego
 
California

Eaton Beach Estates

 
Nantucket
 
SHLP
 
San Diego
 
California

Lorna Ave

 
 
SHLP
 
San Diego
 
California

 

SCH. 1(c)-2


SCHEDULE 5.8

Subsidiaries; Existing Investments

Direct Subsidiaries and Joint Ventures of Shea Homes Limited Partnership

 

Name
 
 
 
 
 

4S Area 37 LLC

 
 

Armstrong Ranch LLC

 
 

Benicia CS Developers, LLC

 
 

Benicia CS Lenders, LLC

 
 

Coast Cable Partners

 
 

Highlands Ranch Development Corporation

 
 

Laing Forster Ranch II, LLC

 
 

Marina Community Partners, LLC

 
 

MSSH Malibu Terrace Residential, LLC

 
 

Novato Community Partners, LLC

 
 

Polo Estates Ventures, LLC

 
 

RRWS Holding Company

 
 

Sand Creek Cattle Company

 
 

Seville Golf and Country Club, LLC

 
 

SFHB I, LLC

 
 

Shea Mountain House, LLC

 
 

Shea Arvada Ridge, LLC

 
 

Shea Brea Development, LLC

 
 

Shea Capital II, LLC

 
 

Shea Homes, Inc.

 
 

Shea Laguna Hills LLC

 
 

Shea Long Beach LLC

 
 

Shea Otay Village 11, LLC

 
 

Shea Proctor Valley, LLC

 
 

Shea Properties of Colorado, Inc.

 
 

Shea Riverpark Developers, LLC

 
 

Shea Tonner Hills, LLC

 
 

SHLP JV Holdings, LLC

 
 

SHPA2 Development, LLC

 
 

Tower 104 Gathering, LLC

 
 

Tower 104 Oil, LLC

 
 

 

SCH. 5.8-1


Tustin Legacy Community Partners, LLC

 
 

Vistancia, LLC

 
 

West Landmark Ventures, LLC

 
 

 

SCH. 5.8-2


SCHEDULE 6.20

Transactions with Affiliates

None.

 

SCH. 6.20-1


EXHIBIT A

FORM OF BORROWING BASE CERTIFICATE

[Date]

U.S. Bank National Association, Administrative Agent

  

 

  

 

Ladies/Gentlemen:

This Borrowing Base Certificate is delivered to you pursuant to Section 6.1(c) of the Credit Agreement, dated as of                 , 2014 (as amended, supplemented, restated or otherwise modified from time to time, the “Credit Agreement”; unless otherwise defined herein, terms defined therein being used herein as therein defined), among Shea Homes Limited Partnership, a California limited partnership (the “Borrower”), the lenders or other financial institutions that are parties as lenders (collectively, the “Lenders”), and U.S. Bank National Association, as administrative agent for the Lenders (the “Administrative Agent”).

 

1.

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

 

2.

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

[Signature page follows.]

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

 

[Borrower]

By:

  

 

Name:

  

 

Title:

  

 

 

EXH. A-1


Attachment I to Exhibit A

 

EXH. A-2


EXHIBIT B

GUARANTY

 

EXH. B-1


EXHIBIT C

FORM OF BORROWING NOTICE

TO:        U.S. Bank National Association, as administrative agent (the “Administrative Agent”) under that certain Credit Agreement (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), dated as of [                                ], 2014 among Shea Homes Limited Partnership (the “Borrower”), the financial institutions party thereto, as lenders (the “Lenders”), and the Administrative Agent.

Capitalized terms used herein shall have the meanings ascribed to such terms in the Credit Agreement.

The undersigned Borrower hereby gives to the Administrative Agent a request for borrowing pursuant to Section 2.8 of the Credit Agreement, and the Borrower hereby requests to borrow on [                    ], 20[        ] (the “Borrowing Date”) from the Lenders, on a pro rata basis, an aggregate principal Dollar Amount of $[                    ] in Loans as:

 

  1.

a Daily Eurocurrency Advance

 

  2.

a Eurocurrency Advance with the following characteristics:

 

      

Interest Period of [            ] month(s)

The undersigned hereby certifies to the Administrative Agent and the Lenders that (i) all of the representations and warranties of the Borrower set forth in the Credit Agreement (a) that contain a materiality qualifier are true and correct in all respects and (b) that do not contain a materiality qualifier are true and correct in all material respects (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date) on and as of the date of the Advance requested herein; (ii) at the time of and immediately after giving effect to such Advance, no Default shall have occurred and be continuing; and (iii) all other relevant conditions set forth in Section 4.2 of the Credit Agreement have been satisfied.

******

IN WITNESS WHEREOF, the undersigned has caused this Borrowing Notice to be executed by its authorized officer as of the date set forth below.

Dated:                     , 20    

 

 

By:

  

 

Name:

  

 

Title:

  

 

 

EXH. C-1


EXHIBIT D

NOTE

[Date]

Shea Homes Limited Partnership, a California limited partnership (the “Borrower”), promises to pay to the order of [                                                             ] (the “Lender”) the aggregate unpaid principal amount of all Loans made by the Lender to the Borrower pursuant to Article II of the Agreement (as hereinafter defined), in immediately available funds at the applicable office of U.S. Bank National Association, as Administrative Agent, together with interest on the unpaid principal amount hereof at the rates and on the dates set forth in the Agreement. The Borrower shall pay the principal of and accrued and unpaid interest on the Loans in full on the Facility Termination Date.

The Lender shall, and is hereby authorized to, record on the schedule attached hereto, or to otherwise record in accordance with its usual practice, the date and amount of each Loan and the date and amount of each principal payment hereunder.

This Note is one of the Notes issued pursuant to, and is entitled to the benefits of, the Credit Agreement dated as of [                        ], 2014 (which, as it may be amended or modified and in effect from time to time, is herein called the “Agreement”), among the Borrower, the lenders party thereto, including the Lender, the LC Issuer and U.S. Bank National Association, as Administrative Agent, to which Agreement reference is hereby made for a statement of the terms and conditions governing this Note, including the terms and conditions under which this Note may be prepaid or its maturity date accelerated. This Note is guaranteed pursuant to the Guaranty, all as more specifically described in the Agreement, and reference is made thereto for a statement of the terms and provisions thereof. Capitalized terms used herein and not otherwise defined herein are used with the meanings attributed to them in the Agreement.

In the event of default hereunder, the undersigned agree to pay all costs and expenses of collection, including reasonable attorneys’ fees. The undersigned waive demand, presentment, notice of nonpayment, protest, notice of protest and notice of dishonor.

THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS NOTE SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS OF THE UNITED STATES APPLICABLE TO NATIONAL BANKS.

 

SHEA HOMES LIMITED PARTNERSHIP,

A California limited partnership

By:

  

 

Name:

  

 

Title:

  

 

 

EXH. D-1


SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL

TO

NOTE OF [                                ],

DATED [                    ], 20[    ]

 

Date
  
Principal
Amount of
Loan
  
Maturity
of Interest
Period
  
Principal
Amount
Paid
  
Unpaid
Balance

 

EXH. D-2


EXHIBIT E

FORM OF INCREASING LENDER SUPPLEMENT

INCREASING LENDER SUPPLEMENT, dated [                    ], 20[    ] (this “Supplement”), by and among each of the signatories hereto, to the Credit Agreement, dated as of [                    ] (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Shea Homes Limited Partnership (the “Borrower”), the Lenders party thereto and U.S. Bank National Association, as administrative agent (in such capacity, the “Administrative Agent”).

W I T N E S S E T H

WHEREAS, pursuant to Section 2.23 of the Credit Agreement, the Borrower has the right, subject to the terms and conditions thereof, to effectuate from time to time an increase in the Aggregate Commitment under the Credit Agreement by requesting one or more Lenders to increase the amount of its Commitment;

WHEREAS, the Borrower has given notice to the Administrative Agent of its intention to increase the Aggregate Commitment pursuant to such Section 2.23 of the Credit Agreement; and

WHEREAS, pursuant to Section 2.23 of the Credit Agreement, the undersigned Increasing Lender now desires to increase the amount of its Commitment under the Credit Agreement by executing and delivering to the Borrower and the Administrative Agent this Supplement;

NOW, THEREFORE, each of the parties hereto hereby agrees as follows:

1.        The undersigned Increasing Lender agrees, subject to the terms and conditions of the Credit Agreement, that on the date of this Supplement it shall have its Commitment increased by $[            ], thereby making the aggregate amount of its total Commitments equal to $[            ].

2.        The Borrower hereby represents and warrants that no Default or Event of Default has occurred and is continuing on and as of the date hereof.

3.        Terms defined in the Credit Agreement shall have their defined meanings when used herein.

4.        This Supplement shall be governed by, and construed in accordance with, the laws of the State of New York.

5.        This Supplement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same document.

 

EXH. E-1


IN WITNESS WHEREOF, each of the undersigned has caused this Supplement to be executed and delivered by a duly authorized officer on the date first above written.

 

[INSERT NAME OF INCREASING LENDER]

By:

  

 

Name:

  

 

Title:

  

 

Accepted and agreed to as of the date first written above:

 

[                                                       ]

By:

  

 

Name:

  

 

Title:

  

 

Acknowledged as of the date first written above:

U.S. BANK NATIONAL ASSOCIATION

as Administrative Agent

 

By:

  

 

Name:

  

 

Title:

  

 

 

EXH. E-2


EXHIBIT F

FORM OF AUGMENTING LENDER SUPPLEMENT

AUGMENTING LENDER SUPPLEMENT, dated [                    ], 20[__] (this “Supplement”), to the Credit Agreement, dated as of [                    ] (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Shea Homes Limited Partnership (the “Borrower”), the Lenders party thereto and U.S. Bank National Association, as administrative agent (in such capacity, the “Administrative Agent”).

W I T N E S S E T H

WHEREAS, the Credit Agreement provides in Section 2.23 thereof that any bank, financial institution or other entity may extend Commitments under the Credit Agreement subject to the approval of the Borrower and the Administrative Agent, by executing and delivering to the Borrower and the Administrative Agent a supplement to the Credit Agreement in substantially the form of this Supplement; and

WHEREAS, the undersigned Augmenting Lender was not an original party to the Credit Agreement but now desires to become a party thereto;

NOW, THEREFORE, each of the parties hereto hereby agrees as follows:

1.        The undersigned Augmenting Lender agrees to be bound by the provisions of the Credit Agreement and agrees that it shall, on the date of this Supplement, become a Lender for all purposes of the Credit Agreement to the same extent as if originally a party thereto, with a Commitment with respect to Loans of $[                ].

2.        The undersigned Augmenting Lender (a) represents and warrants that it is legally authorized to enter into this Supplement; (b) confirms that it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 6.1 thereof, as applicable, and has reviewed such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Supplement; (c) agrees that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement or any other instrument or document furnished pursuant hereto or thereto; (d) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Credit Agreement or any other instrument or document furnished pursuant hereto or thereto as are delegated to the Administrative Agent by the terms thereof, together with such powers as are incidental thereto; and (e) agrees that it will be bound by the provisions of the Credit Agreement and will perform in accordance with its terms all the obligations which by the terms of the Credit Agreement are required to be performed by it as a Lender.

 

EXH. F-1


3.        The undersigned’s address for notices for the purposes of the Credit Agreement is as follows:

[                             ]

4.        The Borrower hereby represents and warrants that no Default or Event of Default has occurred and is continuing on and as of the date hereof.

5.        Terms defined in the Credit Agreement shall have their defined meanings when used herein.

6.        This Supplement shall be governed by, and construed in accordance with, the laws of the State of New York.

7.        This Supplement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same document.

[remainder of this page intentionally left blank]

 

EXH. F-2


IN WITNESS WHEREOF, each of the undersigned has caused this Supplement to be executed and delivered by a duly authorized officer on the date first above written.

 

[INSERT NAME OF AUGMENTING LENDER]

By:

  

 

Name:

  

Title:

  

Accepted and agreed to as of the date first written above:

 

[                                                                      ]

By:

  

 

Name:

  

 

Title:

  

 

Acknowledged as of the date first written above:

U.S. BANK NATIONAL ASSOCIATION

as Administrative Agent

 

By:

  

 

Name:

  

 

Title:

  

 

 

EXH. F-3


EXHIBIT G

[RESERVED]

 

EXH. G-1


EXHIBIT H

LIST OF CLOSING DOCUMENTS

Attached

 

EXH. H-1


EXHIBIT H

LIST OF CLOSING DOCUMENTS

Shea Homes Limited Partnership, LLC, a California limited partnership

February 20, 2014

LIST OF CLOSING DOCUMENTS

 

  1.

Credit Agreement

 

  2.

Amended and Restated Intercreditor Agreement

 

  3.

Note – U.S. Bank

 

  4.

Note – Wells Fargo

 

  5.

Note – Credit Suisse

 

  6.

Guaranty

 

  7.

Amended and Restated Real Property Collateral Management Agreement

 

  8.

Amended and Restated Security Agreement

 

  9.

Amended and Restated Copyright Security Agreement

 

  10.

Amended and Restated Trademark Security Agreement

 

  11.

Modifications to Deeds of Trust/Mortgages

 

  1.

AA003 - Central Coast

 

  2.

AA003.01 - Central Coast

 

  3.

AA004 - - Trilogy Glen Ivy

 

  4.

AA006 - Trilogy at Redmond Ridge

 

  5.

AA008 - SHI Vistancia Lots

 

  6.

AA009 - Vistancia Construction Company

 

  7.

AA010 - Tehaleh

 

  8.

AZ001 - Mountain Shadows II

 

EXH. H-2


  9.

AZ001.02 - Mountain Shadows II

 

  10.

AZ009 - Entrada 3

 

  11.

AZ010 - Kensington

 

  12.

AZ013 - Vista Montana

 

  13.

AZ014 - Blackstone

 

  14.

AZ016 - The Estates at Litchfield Park

 

  15.

AZ016.01 - The Estates at Litchfield Park

 

  16.

AZ018 - Johnson Ranch

 

  17.

AZ019 - Silver Canyon Ranch

 

  18.

AZ019.01 - Silver Canyon Ranch

 

  19.

AZ020 - Bridges 3-5

 

  20.

A20.01 - Bridges 1-5

 

  21.

AZ021 - Marbella Vineyards - Phase 2A

 

  22.

AZ021.01 – Marbella Vineyards - Phase 2B

 

  23.

AZ022 - Caballos Del Rio

 

  24.

AZ023 - Verrado

 

  25.

AZ024 - Greer Ranch

 

  26.

CO001 - Backcountry Future 118S 7010’s

 

  27.

CO001.01 - Backcountry Future 118S 7010’s

 

  28.

CO002 - Eaton Parcel and 393 acres Primesite acq.

 

  29.

CO003 - Denver Tech Center

 

  30.

CO004 - Plum Creek

 

  31.

CO006 - Chatfield Green - Trailmark

 

  32.

CO007 - One Cherry Lane

 

  33.

CO008 - Meridian Village South

 

EXH. H-3


  34.

CO010 - Day Break

 

  35.

NC003 - Capistrano

 

  36.

NC004 - Front Porch

 

  37.

NC006 - Portico

 

  38.

NC007 - Antigua

 

  39.

NC007.01 - Antigua/Campania

 

  40.

NC007.02 - Questa

 

  41.

NC007.03 – Questa

 

  42.

NC009 - The Cove at Summer Lake

 

  43.

NC011 - Natomas

 

  44.

NC012 - Landsdowne

 

  45.

NC012.01 - Landsdowne

 

  46.

NC013 - Sorrento

 

  47.

NC014 - Tralee Village

 

  48.

SC003 - Jade @ Blackstone

 

  49.

SC004 - Canterbury Lane

 

  50.

SC008 - Parkside Estates

 

  51.

SC010 - Latitudes South @ Vantis

 

  52.

SC011 - RMVP3 / Sendero

 

  53.

SC012 - RMVAQ4 / Gavalon

 

  54.

SC012.01 - RMVAQ4/Gavalon

 

  55.

SC012.02 - RMVAQ4/Gavalon

 

  56.

SC012.03 - RMVAQ4/Gavalon

 

  57.

SC013 - Parsons Place

 

  58.

SC014 - Sage Wood / Pavilion Park

 

EXH. H-4


  59.

SC015 - Stonegate / Sausalito

 

  60.

SD002 - Cabanas, The

 

  61.

SD004 - Tapestry

 

  62.

SD007 - Social Garden

 

  63.

SD008 - Iris

 

  64.

SD009 - Ventana @ Bella Lago

 

  65.

SD011 - Poinsettia Place

 

  66.

SD012 - Vulcan

 

  67.

SD013 - Balhmann

 

  68.

SD014 - Civita - lots 4&5

 

  69.

SD015 - Eaton Beach Estates

 

  70.

SD016 - Lorna Ave

12.        All documents evidencing the formation, organization, valid existence, good standing, and due authorization of and for Borrower and each Guarantor and the authorization for the execution, delivery, and performance of the Loan Documents and the transactions contemplated therein by Borrower and each Guarantor.

 

EXH. H-5


EXHIBIT I

FORM OF COMPLIANCE CERTIFICATE

This Compliance Certificate is delivered to you by the Borrower pursuant to Section 6.1(e) of the Credit Agreement, dated as of                 , 2014 (as amended, supplemented, restated or otherwise modified from time to time, the “Credit Agreement”; unless otherwise defined herein, terms defined therein being used herein as therein defined), among Shea Homes Limited Partnership (the “Borrower”), the lenders or other financial institutions that are parties as lenders (collectively, the “Lenders”), and U.S. Bank National Association, as administrative agent for the Lenders (the “Administrative Agent”). This Compliance Certificate relates to the accounting period ending [                    ]. I, the undersigned, on behalf of the Borrower, do certify on behalf of the Borrower that:

1.        I am the chief financial officer of the Borrower.

2.        I have reviewed and am familiar with the contents of this Compliance Certificate.

3.        I, on behalf of the Borrower, have read the Credit Agreement and have made or caused to be made under my supervision, a review in reasonable detail of the transactions and condition of the Loan Parties and their Subsidiaries during the accounting period covered by the financial statements attached hereto as Schedule I (the “Financial Statements”). Such review did not disclose, and I have no knowledge of the existence, as of the date of this Compliance Certificate, of any condition or event which constitutes a Default or Event of Default (except as set forth on Schedule III).

4.        Attached hereto as Schedule II are the computations showing compliance with the covenants set forth in Section 6.23 of the Credit Agreement as of the end of the accounting period set forth above.

[Signature page follows.]

 

EXH. I-1


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

 

SHEA HOMES LIMITED PARTNERSHIP, a

California limited partnership

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

EXH. I-2


Schedule I

to Exhibit I

Financial Statements

[See Attached]

 

EXH. I-3


Schedule II

to Exhibit I

Compliance Certificate Calculations

($ in 000’s)

For the [Quarter] [Year] ended                      (the “Reporting Date”)

 

I.

  
  

Section 6.23(a) - Interest Coverage Ratio

  
  

A.

  

Consolidated EBITDA for the period of four fiscal quarters ending on the Reporting Date:

  
  

1.

  

Consolidated Net Income (excluding net income from Excluded Subsidiaries):

  

$                    

  
  

2.

  

Cash distributions of income from Joint Ventures:

  

$                    

  
  

3.

  

Consolidated Interest Expense:

  

$                    

  
  

4.

  

Expense for income taxes paid or accrued:

  

$                    

  
  

5.

  

Depreciation:

  

$                    

  
  

6.

  

Amortization:

  

$                    

  
  

7.

  

Non-cash (including impairment) charges:

  

$                    

  
  

8.

  

Extraordinary losses:

  

$                    

  
  

9.

  

Loss (gain) on early extinguishment of indebtedness:

  

$                    

  
  

10.

  

Transaction costs and restructuring charges required to be expensed under FASB ASC 805:

  

$                    

  
  

11.

  

The amount of any net losses from discontinued operations, including net losses from the sale or disposition of discontinued operations:

  

$                    

  
  

12.

  

Any fees, expenses or charges related to any issuance or Capital Stock, Investment, acquisition, disposition, recapitalization or the incurrence or repayment of Indebtedness permitted to be incurred hereunder including a refinancing thereof (whether or not successful) and any amendment or modification to the terms of any such transactions, including such fees, expenses or charges related to the Transaction, in each case, deducted in computing Consolidated Net Income:

  

$                    

 

EXH. I-4


  
  

13.

  

Unusual or non-recurring costs and expenses in an amount not to exceed 10% of Consolidated EBITDA in any four fiscal quarter period:

  

$                    

  
  

14.

  

To the extent not duplicative of any of the foregoing, cash distributions received from Excluded Subsidiaries:

  

$                    

  
  

15.

  

Non cash gains and extraordinary gains:

  

$                    

  
  

16.

  

Income (loss) from Joint Ventures and from Financial Services

Subsidiaries:

  

$                    

  
  

17.

  

Consolidated EBITDA (Lines I.A.1 + 2 + 3+ 4 + 5 + 6 + 7 + 8 + 9 + 10 + 11 + 12 + 13 + 14 – 15 – 16):

  

$                    

  

B.

  

Consolidated Interest Incurred:            $                    

  

C.

  

Interest Coverage Ratio (Lines I.A.12. to I.B.):                    

  

D.

  

Minimum Interest Coverage Ratio required (1.5 to 1.0)

II.

  
  

Section 6.23(b) - Maximum Adjusted Leverage Ratio

  
  

A.

  

Consolidated Debt:

  
  

1.

  

all funded debt of the Loan Parties and their Subsidiaries:

  

$                    

  
  

2.

  

funded debt of partnerships that are Subsidiaries with recourse to any Loan Party or their Subsidiaries:

  

$                    

  
  

3.

  

the sum of (i) all reimbursement obligations with respect to amounts drawn and not reimbursed under Financial Letters of Credit and amounts drawn and not reimbursed under Performance Letters of Credit (excluding any portion of the actual or potential obligations that are secured by cash collateral) and (ii) the maximum amount available to be drawn under all undrawn Financial Letters of Credit, in each case issued for the account of, or guaranteed by, any Loan Party or any of their respective Subsidiaries (excluding any portion of the actual or potential obligations that are secured by cash collateral)

  

$                    

  
  

4.

  

all Contingent Obligations of the Loan Parties or their Subsidiaries of funded debt of third parties:

  

$                    

  
  

5.

  

Obligations due and payable:

  

$                    

 

EXH. I-5


  
  

6.

  

All Contingent Obligations due and payable

  

$                    

  
  

7.

  

Total Consolidated Debt (Lines II.A.1. + 2. + 3. + 4. + 5.):

  

$                    

  

B.

  

Unrestricted Cash (to the extent it exceeds $5,000,000):

  
  

1.

  

Unrestricted Cash:

  

$                    

  
  

2.

  

Unrestricted Cash for use in Adjusted Leverage Ratio (Lines II.B.1 - $5,000,000):

  

$                    

  

C.

  

Consolidated Tangible Net Worth:

  
  

1.

  

consolidated stockholders equity:

  

$                    

  
  

2.

  

intangible assets:

  

$                    

  
  

3.

  

up to $70,000,000 of the funds paid as required by the CCM Proceeding

  

$                    

  
  

4.

  

Adjustment (up or down as applicable) to account for changes in stockholders’ equity that do not flow to Borrower’s income statement solely to the extent such changes are due to unusual transfers of assets between Borrower and its Affiliates permitted under the Credit Agreement, excluding contributions or distributions of equity, as approved by Administrative Agent

  

$                    

  
  

5.

  

Consolidated Tangible Net Worth (Lines II.C.1 - II.C.2 + II.C.3 + II.C.4):

  

$                    

  

D.

  

Adjusted Leverage Ratio (Lines II.A.6 - II.B.2) divided by (II.C.5):                         %

  

E.

  

Maximum Adjusted Leverage Ratio:                         %

  

(Must be (i) 2.5 to 1.0 prior to and including December 31, 2014, and (ii) 2.0 to 1.0 at any time after December 31, 2014)

III.

  
  
Section 6.23(c) – Permitted Maximum Senior Leverage Ratio
  
  

A.

  

Consolidated Debt (from Line II.A.6.):

  

$                    

  

B.

  

Indenture Note Obligations

  

$                    

  

C.

  

Unrestricted Cash Above $5,000,000 (from Line II.B.2.):

  

$                    

  

D.

  

Consolidated Tangible Net Worth (from Line II.C.5.):

  

$                    

 

EXH. I-6


  

E.

  

Senior Leverage Ratio (Lines III.A.- III.B. - III.C.) divided

by (Line III.D.):

  

            to
1.0

  

(Must be greater than 0.75 to 1.0).

IV.
  
  
Section 6.23(d) - Minimum Consolidated Net Worth Test
  
  

A.

  

Consolidated Tangible Net Worth (from Line II.C.5):

  

$                    

  

B.

  

75% of Consolidated Tangible Net Worth as of the most recently ended fiscal quarter prior to Effective Date:

  

$                    

  
  

1.

  

50% of the cumulative Net Cash Proceeds of any Equity Issuances received by Borrower from and after [                    ];

  

$                    

  
  

2.

  

50% of an amount equal to (i) the cumulative Consolidated Net Income (without deductions for losses sustained during any fiscal quarter) of the Loan Parties and their Subsidiaries from and after [                    ] minus (ii) income taxes on such income at a presumed combined Federal and State rate of fifty percent (50%):

  

$                    

  
  

3.

  

Required Minimum Consolidated Tangible Net Worth (Lines IV.B + IV.B.1. + IV.B.2.)

  

$                    

  

C.

  

Test: Line IV.A.

³
IV.B.3.:

  

                     

V.

  
  
Section 6.23(e) - Maximum Ratio of Land Assets to Consolidated Tangible Net Worth
  
  

A.

  

Land Assets

  

$                    

  

B.

  

Consolidated Tangible Net Worth (from Line II.C.3)

  

$                    

  

C.

  

Actual Ratio of Line V.A to Line V.B:

  
                     
  

D.

  

Maximum Ratio of Land Assets to Consolidated Tangible Net Worth

  

2.0 to 1.0

VI.
  
  
Minimum Liquidity
  
  

A.

  

Unrestricted Cash:

  

$                    

  

(Must be greater than or equal to $5,000,000)

  

 

EXH. I-7


Schedule III

to Exhibit I

Defaults and Events of Default

 

EXH. I-8


EXHIBIT J

ASSIGNMENT AND ASSUMPTION AGREEMENT

This Assignment and Assumption (the “Assignment and Assumption”) is dated as of the Effective Date set forth below and is entered into by and between [Insert name of Assignor] (the “Assignor”) and [Insert name of Assignee] (the “Assignee”). Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (as amended, the “Credit Agreement”), receipt of a copy of which is hereby acknowledged by the Assignee. The Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full.

For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below, the interest in and to all of the Assignor’s rights and obligations in its capacity as a Lender under the Credit Agreement and any other documents or instruments delivered pursuant thereto that represents the amount and percentage interest identified below of all of the Assignor’s outstanding rights and obligations under the respective facilities identified below (including without limitation any letters of credit, guaranties and swing line loans included in such facilities and, to the extent permitted to be assigned under applicable law, all claims (including without limitation contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity), suits, causes of action and any other right of the Assignor against any Person whether known or unknown arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby) (the “Assigned Interest”). Such sale and assignment is without recourse to the Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by the Assignor.

 

1.

  

Assignor:

  

                                                                                                                                                           

2.

  

Assignee:

  
                                                                                        [and is an Affiliate/ Approved Fund of [identify Lender]1

3.

  

Borrower(s):

  

                                                                                                                                                           

4.

  

Administrative Agent:

  

[                                                                          ], as the agent under the Credit Agreement.

5.

  

Credit Agreement:

  
The [amount] Credit Agreement dated as of [                        ], 20[        ] among Shea Homes Limited Partnership, the Lenders party thereto, U.S. Bank National Association, as Administrative Agent, and the other agents party thereto.

 

 

1 Select as applicable.

 

EXH. J-1


6.

Assigned Interest:

 

Aggregate

Amount of

Commitment/

Loans for all

Lenders2

  

Amount of Commitment/

Loans Assigned3

  

Percentage

Assigned of Commitment/

Loans4

  
Commitment of
Assignor

Following
Assignment

  
Commitment of
Assignee

Following
Assignment

$[                    ]

  

$[                    ]

  

[                    %]

  

$[                    ]

  

$[                    ]

 

7.

Trade Date:         [                                    ]5

Effective Date: [                                ], 20[      ] [TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER BY THE ADMINISTRATIVE AGENT.]

The terms set forth in this Assignment and Assumption are hereby agreed to:

 

ASSIGNOR

[NAME OF ASSIGNOR]

By:

 

 

 

Title:

ASSIGNEE

[NAME OF ASSIGNEE]

By:

 

 

 

Title:

[Consented to and]6     Accepted:

 

2 

Amount to be adjusted by the counterparties to take into account any payments or prepayments made between the Trade Date and the Effective Date.

 

3 

Amount to be adjusted by the counterparties to take into account any payments or prepayments made between the Trade Date and the Effective Date.

 

4 

Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans of all Lenders thereunder.

 

5 

Insert if satisfaction of minimum amounts is to be determined as of the Trade Date.

 

6 

To be added only if the consent of the Administrative Agent is required by the terms of the Credit Agreement.

 

EXH. J-2


U.S. BANK NATIONAL ASSOCIATION

as Administrative Agent

By:

  

 

Name:

  

 

Title:

  

 

[Consented to:]7

[NAME OF RELEVANT PARTY]

By:

  

 

Name:

  

 

Title:

  

 

 

7 

To be added only if the consent of the Borrower and/or other parties (e.g. L/C Issuer) is required by the terms of the Credit Agreement.

 

EXH.J-3


ANNEX 1

TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION

1.        Representations and Warranties.

1.1        Assignor. The Assignor represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby. Neither the Assignor nor any of its officers, directors, employees, agents or attorneys shall be responsible for (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency, perfection, priority, collectability, or value of the Loan Documents or any collateral thereunder, (iii) the financial condition of the Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Loan Document, (iv) the performance or observance by the Borrower, any of its Subsidiaries or Affiliates or any other Person of any of their respective obligations under any Loan Documents, (v) inspecting any of the property, books or records of the Borrower, or any guarantor, or (vi) any mistake, error of judgment, or action taken or omitted to be taken in connection with the Loans or the Loan Documents.

1.2        Assignee. The Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, (iii) agrees that its payment instructions and notice instructions are as set forth in Schedule 1 to this Assignment and Assumption, (iv) confirms that none of the funds, monies, assets or other consideration being used to make the purchase and assumption hereunder are “plan assets” as defined under ERISA and that its rights, benefits and interests in and under the Loan Documents will not be “plan assets” under ERISA, (v) agrees to indemnify and hold the Assignor harmless against all losses, costs and expenses (including, without limitation, reasonable attorneys’ fees) and liabilities incurred by the Assignor in connection with or arising in any manner from the Assignee’s non-performance of the obligations assumed under this Assignment and Assumption, (vi) it has received a copy of the Credit Agreement, together with copies of financial statements and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest on the basis of which it has made such analysis and decision independently and without reliance on the Administrative Agent or any other Lender, and (vii) attached as Schedule 1 to this Assignment and Assumption is any documentation required to be delivered by the Assignee with respect to its tax status pursuant to the terms of the Credit Agreement, duly completed and executed by the Assignee and (b) agrees that (i) it will, independently and without reliance on the Administrative Agent, the Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with

 

EXH. J-4


their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.

2.         Payments. The Assignee shall pay the Assignor, on the Effective Date, the amount agreed to by the Assignor and the Assignee. From and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, Reimbursement Obligations, fees and other amounts) to the Assignor for amounts which have accrued to but excluding the Effective Date and to the Assignee for amounts which have accrued from and after the Effective Date.

3.         General Provisions. This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Assumption may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Assumption by telecopy shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by, and construed in accordance with, the law of the State of New York.

 

EXH. J-5

d682039dex102.htm EX-10.2


ENT> EX-10.2 3 d682039dex102.htm EX-10.2

EX-10.2

Exhibit 10.2

 

 

 

AMENDED AND RESTATED

SECURITY AGREEMENT

dated as of

February 20, 2014

by and among

SHEA HOMES LIMITED PARTNERSHIP,

SHEA HOMES FUNDING CORP.,

THE GRANTORS IDENTIFIED HEREIN,

U.S. BANK NATIONAL ASSOCIATION,

as Administrative Agent

and

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Collateral Agent

Reference is made to the Intercreditor Agreement (as defined in this Agreement). Notwithstanding any other provision contained herein, this Agreement, the Liens created hereby and the rights, remedies, duties and obligations provided for herein are subject in all respects to the terms of the Intercreditor Agreement. In the event of any conflict or inconsistency between the provisions of this Agreement and the terms of the Intercreditor Agreement, the terms of the Intercreditor Agreement shall control.

 

 

 


TABLE OF CONTENTS

 

 
  
 
  
Page

ARTICLE I DEFINITIONS

  
2

        SECTION 1.01.

  

Defined Terms

  
2

        SECTION 1.02.

  

Other Defined Terms

  
2

ARTICLE II RESERVED.

  
8

ARTICLE III PLEDGE OF SECURITIES

  
8

        SECTION 3.01.

  

Pledge

  
8

        SECTION 3.02.

  

Delivery of the Pledged Collateral

  
10

        SECTION 3.03.

  

Representations, Warranties and Covenants

  
10

        SECTION 3.04.

  

Certification of Limited Liability Company and Limited Partnership Interests

  
11

        SECTION 3.05.

  

Registration in Nominee Name; Denominations

  
12

        SECTION 3.06.

  

Voting Rights; Dividends and Interest

  
12

ARTICLE IV SECURITY INTERESTS IN PERSONAL PROPERTY

  
14

        SECTION 4.01.

  

Security Interest

  
14

        SECTION 4.02.

  

Representations and Warranties

  
17

        SECTION 4.03.

  

Covenants

  
18

        SECTION 4.04.

  

Other Actions

  
22

        SECTION 4.05.

  

Covenants Regarding Patent, Trademark and Copyright Collateral

  
24

ARTICLE V REMEDIES

  
26

        SECTION 5.01.

  

Remedies Upon Default

  
26

        SECTION 5.02.

  

Application of Proceeds

  
27

        SECTION 5.03.

  

Grant of License to Use Intellectual Property

  
28

        SECTION 5.04.

  

Securities Act

  
29

ARTICLE VI INDEMNITY, SUBROGATION AND SUBORDINATION

  
29

        SECTION 6.01.

  

Indemnity and Subrogation

  
29

        SECTION 6.02.

  

Contribution and Subrogation

  
30

        SECTION 6.03.

  

Subordination

  
30

ARTICLE VII MISCELLANEOUS

  
30

        SECTION 7.01.

  

Notices

  
30

        SECTION 7.02.

  

Waivers; Amendment

  
31

        SECTION 7.03.

  

Collateral Agent’s Fees and Expenses; Indemnification

  
31

        SECTION 7.04.

  

Successors and Assigns

  
32

        SECTION 7.05.

  

Survival of Agreement

  
32

        SECTION 7.06.

  

Counterparts; Effectiveness; Several Agreement

  
32

        SECTION 7.07.

  

Severability

  
32

        SECTION 7.08.

  

Reserved

  
33

        SECTION 7.09.

  

Governing Law; Jurisdiction; Consent to Service of Process

  
33

 

-i-


        SECTION 7.10.

  

WAIVER OF JURY TRIAL

  
33

        SECTION 7.11.

  

Headings

  
34

        SECTION 7.12.

  

Security Interest Absolute

  
34

        SECTION 7.13.

  

Termination or Release

  
34

        SECTION 7.14.

  

Additional Guarantors

  
35

        SECTION 7.15.

  

Collateral Agent Appointed Attorney-in-Fact

  
35

        SECTION 7.16.

  

Intercreditor Agreement Govern

  
36

        SECTION 7.17.

  

Joint Obligor/Suretyship Provisions

  
36

 

-ii-


Schedules

Schedule I

  

    Guarantors

Schedule II

  

    Pledged Equity Interests; Pledged Debt Securities

Schedule III

  

    Intellectual Property

Schedule IV

  

    Commercial Tort Claims

Exhibits

Exhibit A

  

    Form of Supplement To Security Agreement

Exhibit B

  

    Form of Perfection Certificate

 

-iii-


AMENDED AND RESTATED

SECURITY AGREEMENT

This Amended and Restated Security Agreement dated as of February 20, 2014 (this “Agreement”), is made by and among Shea Homes Limited Partnership, a California limited partnership (the “Company”), Shea Homes Funding Corp., a Delaware corporation (the “Corporate Issuer” and, together with the Company, the “Issuers”), the other Grantors (as defined below) from time to time a party hereto, U.S. Bank National Association, a national banking association, as “Administrative Agent” under the Revolving Facility Agreement described below (“Administrative Agent”) and Wells Fargo Bank, National Association, as “Collateral Agent” under the Intercreditor Agreement described below (“Collateral Agent”).

RECITALS

A.        Reference is made to: (i) the Indenture dated as of May 10, 2011 (as amended, supplemented or otherwise modified from time to time, the “Indenture”), by and among the Company, the Corporate Issuer, the Guarantors from time to time a party thereto and Wells Fargo Bank, National Association, as Trustee (the “Trustee”); (ii) the Credit Agreement dated as of February 20, 2014 (as amended, supplemented or otherwise modified from time to time, the “Revolving Facility Agreement”) by and among the Company, Administrative Agent and the “Lenders” from time to time a party thereto (“Revolving Facility Lenders”); (iii) the Guaranty dated as of February 20, 2014 (as amended, supplemented or otherwise modified from time to time, the “Revolving Facility Guaranty”) made by the Guarantors from time to time a party thereto in favor of Administrative Agent and the Revolving Facility Lenders; and (iv) the Amended and Restated Intercreditor Agreement dated as of February 20, 2014 (as amended, supplemented or otherwise modified from time to time, the “Intercreditor Agreement”), by and among the Administrative Agent, the Collateral Agent, the Company, the Corporate Issuer, the Trustee and the other parties from time to time a party thereto.

B.        This Agreement amends and restates in its entirety that certain Security Agreement dated as of May 10, 2011 (the “Prior Security Agreement”) by and among the Company, the Corporate Issuer and the other “Grantors” a party thereto, Credit Suisse AG, as the “Administrative Agent” thereunder, and Collateral Agent.

C. As an inducement (among other things) to (i) the Holders to continue to hold Notes from the Issuers previously purchased pursuant to the Indenture, (ii) the Revolving Facility Lenders to extend credit to the Issuers pursuant to the Revolving Facility Agreement, and (iii) the Collateral Agent, the Trustee and Administrative Agent to enter into the amended and restated Intercreditor Agreement, the Issuers and the other Grantors designated herein have agreed to enter into this Agreement to grant the Collateral Agent (for the benefit of the Secured Parties) a lien on the Collateral (as defined below).

Accordingly, the parties hereto agree as follows:

 

-1-


ARTICLE I

DEFINITIONS

SECTION 1.01.        Defined Terms.

(a)        Each capitalized term used but not defined herein shall have the meaning specified in the Intercreditor Agreement and, if not defined therein, then in the Indenture or the Revolving Facility Agreement, as applicable, as in effect on the date hereof. Terms defined herein by reference to the Intercreditor Agreement, the Indenture or the Revolving Facility Agreement have the meanings set forth in such documents, as in effect on the date hereof. Terms used (but not defined) in this Agreement that are defined in the New York UCC shall have the meanings specified in the New York UCC (including those capitalized terms describing types of Article 9 Collateral used in Section 4.01(a) and other provisions herein). The term “instrument” shall have the meaning specified in Article 9 of the New York UCC.

(b)        The rules of construction specified in Section 1.02 of the Indenture and in the Revolving Facility Agreement also apply to this Agreement.

SECTION 1.02.        Other Defined Terms. As used in this Agreement, the following terms have the meanings specified below:

Account Debtor” means any Person who is or who may become obligated to any Grantor under, with respect to or on account of an Account.

Administrative Agent” has the meaning assigned to such term in the introductory paragraph to this Agreement.

Agreement” has the meaning assigned to such term in the introductory paragraph to this Agreement.

Applicable Authorized Representative” shall have the meaning assigned to such term in the Intercreditor Agreement.

Article 9 Collateral” has the meaning assigned to such term in Section 4.01.

Business Day” shall mean any day other than a Saturday, Sunday or day on which banks in New York City are authorized or required to close by law.

Claiming Party” has the meaning assigned to such term in Section 6.02.

Collateral” means Article 9 Collateral and Pledged Collateral and, where the context requires, any assets of any Credit Party upon which a Lien is granted pursuant to any other Security Document to secure any Obligations.

Collateral Accounts” shall mean the Controlled Deposit Accounts and the Controlled Securities Accounts.

 

-2-


Collateral Agent” shall mean Wells Fargo Bank, National Association, in its capacity as collateral agent as appointed hereunder and under the Intercreditor Agreement, and its successors and permitted assigns in such capacity.

Commercial Tort Action” shall mean any action, other than an action primarily seeking declaratory or injunctive relief with respect to claims asserted or expected to be asserted by Persons other than the Grantors, that is commenced by a Grantor in which such Grantor seeks damages arising out of commercial torts committed against it that would reasonably be expected to result in a damage award to it exceeding $500,000.

Company” has the meaning assigned to such term in the introductory paragraph to this Agreement.

Contributing Party” has the meaning assigned to such term in Section 6.02.

Control” has the following meanings:

(a)        when used with respect to any Security or Security Entitlement, the meaning specified in New York UCC Section 8-106; and

(b)        when used with respect to any Deposit Account, that the Collateral Agent shall have met one of the requirements for control specified in New York UCC Section 9-104.

Controlled Deposit Account” means a Deposit Account of a Grantor (i) that is subject to a Deposit Account Control Agreement or (ii) as to which the Collateral Agent is the Depositary Bank’s “customer” (as defined in New York UCC Section 4-104) or the bank which is the Collateral Agent is also the Depositary Bank.

Controlled Securities Account” means a Securities Account of a Grantor that is maintained in the name of such Grantor at an office of a Securities Intermediary located in the United States and, together with all Financial Assets credited thereto and all related Security Entitlements, is subject to a Securities Account Control Agreement among such Grantor, the Collateral Agent and such securities intermediary.

Copyright License” means any written agreement, now or hereafter in effect, granting to any third party any right now or hereafter under any Copyright now or hereafter owned by any Grantor or that such Grantor otherwise has the right to license, or granting any right to any Grantor under any Copyright now or hereafter owned by any third party, or that a third party now or hereafter otherwise has the right to license and all rights of such Grantor under any such agreement.

Copyrights” means, with respect to any Person, all the following now owned or hereafter acquired by such Person: (a) all copyright rights in any work subject to the copyright laws of the United States or any other country, whether as author, assignee, transferee or otherwise, and (b) all registrations and applications for registration of any such copyright in the United States or any other country, including registrations, recordings, supplemental registrations and pending applications for registration in the United States Copyright Office (or any similar

 

-3-


office in any other country), including, in the case of clauses (a) and (b), those listed on Schedule III.

Corporate Issuer” has the meaning assigned to such term in the introductory paragraph to this Agreement.

Credit Party” means, the Company, the Corporate Issuer and the Guarantors.

Deposit Account Control Agreement” means, with respect to any Deposit Account of any Grantor, an agreement in form and substance reasonably satisfactory to the Administrative Agent and the Applicable Authorized Representative and such Grantor among such Grantor, the Collateral Agent and the relevant Depositary Bank establishing the Collateral Agent’s Control with respect to such Deposit Account.

Depositary Bank” shall mean a bank at which a Controlled Deposit Account is maintained.

Event of Default” shall mean an “Event of Default” as defined in the Intercreditor Agreement which is continuing.

Excluded Accounts” has the meaning assigned to such term in Section 4.01(a).

Excluded Stock Collateral” has the meaning assigned to such term in Section 3.01(b).

Excluded Property” has the meaning assigned to such term in Section 4.01(a).

Federal Securities Laws” has the meaning assigned to such term in Section 5.04.

General Intangibles” shall mean “General Intangibles” as defined in the New York UCC and shall include Intellectual Property.

Governmental Authority” means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national body exercising such powers or functions, such as the European Union or the European Central Bank).

Grantors” means the Company, the Corporate Issuer and the Guarantors.

Guarantors” means the Persons set forth on Schedule I hereto and each other Person that becomes a Guarantor pursuant to the Indenture or the Revolving Facility Agreement after the Issue Date.

Indenture” has the meaning assigned to such term in Recital A to this Agreement.

 

-4-


Intellectual Property” means all intellectual and similar property of every kind and nature now owned or hereafter acquired by any Grantor, including inventions, designs, Patents, Copyrights, Licenses, Trademarks, trade secrets, domain names, confidential or proprietary technical and business information,

know-how,
show-how
or other data or information, software and databases and all embodiments or fixations thereof and related documentation, registrations and franchises, and all additions, improvements and accessions to, and books and records describing or used in connection with, any of the foregoing.

Intercompany Note” has the meaning assigned to such term in Section 3.02(b).

Intercreditor Agreement” has the meaning assigned to such term in Recital A to this Agreement.

Issue Date” has the meaning assigned to such term in the Indenture.

Issuers” has the meaning assigned to such term in the introductory paragraph to this Agreement.

Letter of Credit” shall mean a “Letter of Credit” issued under, and as defined in, the Revolving Facility Agreement.

License” means any Patent License, Trademark License, Copyright License or other license or sublicense agreement to which any Grantor is a party, including those listed on Schedule III.

New York UCC” means the Uniform Commercial Code as from time to time in effect in the State of New York.

Note Documents” means (a) the Notes, the Indenture, this Agreement, the Security Documents (as defined in the Indenture), the Intercreditor Agreement, the Real Property Collateral Management Agreement and (b) any other related document or instrument executed and delivered pursuant to any Note Document described in clause (a) evidencing or governing any Notes Obligations thereunder.

Notes Obligations” means (a) the due and punctual payment by the Issuers of (i) the principal of and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Notes, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise and (ii) all other monetary obligations of either Issuer to any of the Secured Parties under the Indenture and each of the other Note Documents, including obligations to pay fees, expense reimbursement obligations and indemnification obligations, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), (b) the due and punctual performance of all other obligations of the Issuers to any of the Secured Parties under or pursuant to the Indenture and each of the other Note Documents, and (c) the due and punctual payment and performance of all the obligations of each other Grantor to any of the Secured Parties under or pursuant to this Agreement and each of the other

 

-5-


Note Documents (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding).

Obligations” means, collectively, the Revolving Facility Obligations and the Notes Obligations.

Parallel Obligations” means the independent obligations of any of the Credit Parties arising pursuant to the Intercreditor Agreement to pay to the Collateral Agent sums equal to the sums owed by such Credit Party to the Secured Parties (or any of them) under the Note Documents or the Revolving Facility Documents.

Patent License” means any written agreement, now or hereafter in effect, granting to any third party any right to make, use or sell any invention on which a Patent, now or hereafter owned by any Grantor or that any Grantor now or hereafter otherwise has the right to license, is in existence, or granting to any Grantor any right to make, use or sell any invention on which a patent, now or hereafter owned by any third party, is in existence, and all rights of any Grantor under any such agreement.

Patents” means, with respect to any Person, all the following now owned or hereafter acquired by such Person: (a) all letters patent of the United States or the equivalent thereof in any other country, all registrations and recordings thereof, and all applications for letters patent of the United States or the equivalent thereof in any other country, including registrations, recordings and pending applications in the United States Patent and Trademark Office or any similar offices in any other country, including those listed on Schedule III, and (b) all reissues, continuations, divisions, continuations-in-part, renewals or extensions thereof, and the inventions disclosed or claimed therein, including the right to make, use and/or sell the inventions disclosed or claimed therein.

Perfection Certificate” means a certificate substantially in the form of Exhibit B, completed and supplemented with the schedules and attachments contemplated thereby, and duly executed by the chief financial officer and the chief legal officer of the Issuers.

Pledged Collateral” has the meaning assigned to such term in Section 3.01(a).

Pledged Debt Securities” has the meaning assigned to such term in Section 3.01(a).

Pledged Equity Interests” has the meaning assigned to such term in Section 3.01(a).

Pledged Securities” means any promissory notes, stock certificates, unit certificates, or other securities now or hereafter included in the Pledged Collateral, including all certificates, instruments or other documents representing or evidencing any Pledged Collateral.

Real Property Collateral Management Agreement” means the Amended and Restated Real Property Collateral Management Agreement dated as of February 20, 2014, by and among the Issuers and the Collateral Agent.

 

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Revolving Facility Agreement” has the meaning assigned to such term in Recital A to this Agreement.

Revolving Facility Documents” means (a) the Revolving Facility Agreement, the Notes (as such term is defined in the Revolving Facility Agreement), the Revolving Facility Guaranty, this Agreement, the Pari Passu Lien Security Documents (as defined in the Revolving Facility Agreement), the Intercreditor Agreement, the Real Property Collateral Management Agreement and any other document designated by the Administrative Agent as a Revolving Facility Document, and (b) any other related document or instrument executed and delivered pursuant to any Revolving Facility Document described in clause (a) evidencing, governing, guaranteeing or securing any Revolving Facility Obligations thereunder.

Revolving Facility Guaranty” has the meaning assigned to such term in Recital A to this Agreement.

Revolving Facility Lenders”: has the meaning assigned to such term in Recital A to this Agreement.

Revolving Facility Obligations” means (a) the due and punctual payment or repayment of all principal, interest, reimbursements, indemnification obligations, fees, cash collateral obligations and other monetary obligations of any type or nature that are now owing or that hereafter become owing by any or all Credit Parties to Administrative Agent or any or all of the Revolving Facility Lenders or any other Secured Party pursuant to the Revolving Facility Agreement, the Revolving Facility Guaranty or the other Revolving Facility Documents and (b) the due and punctual payment and performance of all other covenants, representations, warranties and obligations of any type or nature that now or hereafter become owing or required to be performed by any or all Credit Parties to Administrative Agent or any or all of the Revolving Facility Lenders or any other Secured Party under the Revolving Facility Documents; and, for the avoidance of doubt (with respect to clause (a) and clause (b) above), (i) including all “Obligations,” all “Loans” and all “LC Obligations” (as such terms are defined in the Revolving Facility Agreement), (ii) including all interest, other amounts and obligations accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding, and (iii) whether primary, secondary, direct, contingent, fixed or otherwise.

Secured Parties” means (a) the Holders, (b) the Revolving Facility Lenders, (c) the Administrative Agent, (d) the LC Issuer (as defined in the Revolving Facility Agreement), (e) the Collateral Agent, (f) the Trustee, (g) the beneficiaries of each indemnification obligation undertaken by any Grantor under any Note Document or Revolving Facility Document and (h) the successors and assigns of each of the foregoing.

Securities Account Control Agreement” means, when used with respect to a Securities Account of a Grantor, an agreement in form and substance reasonably satisfactory to the Administrative Agent and the Applicable Authorized Representative and such Grantor among the relevant securities intermediary, such Grantor and the Collateral Agent establishing the Collateral Agent’s Control with respect to such Securities Account.

 

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Security Documents” shall mean this Agreement, the Real Property Collateral Management Agreement and each of the security agreements, mortgages and other security instruments or documents executed and delivered pursuant to this Agreement or the Note Documents or the Revolving Facility Documents or otherwise executed and delivered to secure the Obligations.

Security Interest” has the meaning assigned to such term in Section 4.01(a).

Trademark License” means any written agreement, now or hereafter in effect, granting to any third party any right to use any Trademark now or hereafter owned by any Grantor or that any Grantor otherwise has the right to license, or granting to any Grantor any right to use any Trademark now or hereafter owned by any third party or that a third party now or hereafter otherwise has the right to license, and all rights of any Grantor under any such agreement.

Trademarks” means, with respect to any Person, all the following now owned or hereafter acquired by such Person: (a) all trademarks, service marks, trade names, corporate names, company names, business names, fictitious business names, trade styles, trade dress, logos, other source or business identifiers, designs and general intangibles of like nature, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all registration and recording applications filed in connection therewith, including registrations and registration applications in the United States Patent and Trademark Office or any similar offices in any State of the United States or any other country or any political subdivision thereof, and all extensions or renewals thereof, including those listed on Schedule III, (b) all goodwill associated therewith or symbolized thereby, and (c) all other assets, rights and interests that uniquely reflect or embody such goodwill.

ARTICLE II

RESERVED.

ARTICLE III

PLEDGE OF SECURITIES

SECTION 3.01.        Pledge.

(a)        As security for the payment or performance, as the case may be, in full of the Obligations, each Grantor hereby assigns and pledges to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, and hereby grants to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, a security interest in, all such Grantor’s right, title and interest in, to and under: (i)(x) the shares of capital stock and other Equity Interests owned by it including those listed on Schedule II, (y) any other Equity Interests obtained in the future by such Grantor and (z) the certificates representing all such Equity Interests (collectively, the “Pledged Equity Interests”); (ii)(x) the debt securities owned by it, including those listed opposite the name of such Grantor on Schedule II, (y) any debt securities in the future issued to such Grantor and (z) the promissory notes and any other instruments

 

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evidencing all such debt securities (the “Pledged Debt Securities”); (iii) all other property that may be delivered to and held by the Collateral Agent pursuant to the terms of this Section 3.01(a); (iv) subject to Section 3.06, all payments of principal or interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of, in exchange for or upon the conversion of, and all other Proceeds received in respect of, the securities referred to in clauses (i) and (ii) above; (v) subject to Section 3.06, all rights and privileges of such Grantor with respect to the securities and other property referred to in clauses (i), (ii), (iii) and (iv) above; and (vi) all Proceeds of any of the foregoing (the items referred to in clauses (i) through (vi) above being collectively referred to as the “Pledged Collateral”)

(b)        Notwithstanding the foregoing, the capital stock and securities of any Guarantor will constitute Pledged Collateral (or Article 9 Collateral, as the case may be) with respect to the Notes only to the extent that the securing of the Notes Obligations with such capital stock and securities would not require such Guarantor to file separate financial statements with the SEC under Rule 3-16 of Regulation S-X under the Securities Act. Subject to 3.01(d), in the event that Rule 3-16 of Regulation S-X under the Securities Act requires or is amended, modified or interpreted by the SEC to require (or is replaced with another rule or regulation that would require) the filing with the SEC of separate financial statements of any Guarantor due to the fact that such Guarantor’s capital stock and securities secure the Notes Obligations, then the capital stock and securities of such Guarantor shall automatically be deemed not to be part of the Pledged Collateral and, to the extent previously delivered to the Collateral Agent, the certificates evidencing all such capital stock and securities shall be returned to such Guarantor (but only to the extent necessary for such Guarantor to not be subject to such requirement to provide separate financial statements) and such excluded portion of the capital stock and securities is referred to as the “Excluded Stock Collateral”. In such event, the Security Documents may be amended, modified or supplemented, without the consent of any Secured Party, to the extent necessary to release the security interests on the Excluded Stock Collateral. In the event that Rule 3-16 of Regulation S-X under the Securities Act is amended, modified or interpreted by the SEC to permit (or is replaced with another rule or regulation that would permit) any Guarantor’s Excluded Stock Collateral to secure the Notes Obligations in excess of the amount then pledged without the filing with the SEC of separate financial statements of such Guarantor, then the capital stock and securities of such Guarantor shall automatically be deemed to be a part of the Pledged Collateral (but only to the extent possible without such Guarantor becoming subject to any such filing requirement). In such event, the Security Documents may be amended or modified, without the consent of any Secured Party, to the extent necessary to subject to the Liens under the Security Documents such additional capital stock and securities.

(c)        In addition, Pledged Collateral shall not include (and no security interest shall be granted in) (1) the Equity Interests in Partners Insurance Company, a Hawaii corporation and (2) any right, title or interest in or under any capital stock or other Equity Interests in any Persons that are bona fide joint ventures with third parties to the extent, but only to the extent, that such a grant is expressly prohibited by the organizational documents governing such Person.

(d)        Notwithstanding the foregoing, unless and until the Discharge of Revolving Facility Obligations has occurred, any Pledged Collateral (or Article 9 Collateral, as the case may be) that would otherwise become Excluded Stock Collateral pursuant to

 

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Section 3.01(b) shall remain Pledged Collateral (or Article 9 Collateral, as the case may be) granted hereunder to secure the Revolving Facility Obligations.

SECTION 3.02.        Delivery of the Pledged Collateral.

(a)        Each Grantor agrees promptly to deliver or cause to be delivered to the Collateral Agent any and all Pledged Securities.

(b)        Each Grantor will (i) cause any Indebtedness that is owing to any Credit Party by another Credit Party to be evidenced by an intercompany note (the “Intercompany Note”) and (ii) in respect of any Indebtedness for borrowed money owed to such Grantor by any Person that is evidenced by a promissory note, pledge and deliver such promissory note to the Collateral Agent pursuant to the terms hereof.

(c)        Upon delivery to the Collateral Agent, (i) any certificated Pledged Securities shall be accompanied by stock powers duly executed in blank or other instruments of transfer satisfactory to the Collateral Agent and by such other instruments and documents as the Collateral Agent may reasonably request and (ii) all other property comprising part of the Pledged Collateral shall be accompanied by proper instruments of assignment duly executed by the applicable Grantor and such other instruments or documents as the Collateral Agent may reasonably request. Each delivery of Pledged Securities shall be accompanied by a schedule describing the securities, which schedule shall be attached hereto as Schedule II and made a part hereof, provided that failure to attach any such schedule hereto shall not affect the validity of such pledge of such Pledged Securities. Each schedule so delivered shall supplement any prior schedules so delivered.

SECTION 3.03.        Representations, Warranties and Covenants. The Grantors jointly and severally represent, warrant and covenant to and with the Collateral Agent, for the benefit of the Secured Parties, that:

(a)        Schedule II correctly sets forth, as of the date hereof, the percentage of the issued and outstanding units of each class of the Equity Interests of the issuer thereof represented by the Pledged Equity Interests and includes all Equity Interests, debt securities and promissory notes required to be pledged hereunder on the date hereof;

(b)        the Pledged Equity Interests and Pledged Debt Securities have been duly and validly authorized and issued by the issuers thereof and (i) in the case of Pledged Equity Interests, are fully paid and nonassessable (except for such assessments and capital contributions as are required in connection with the organizational documents of any Person that is not a wholly owned Subsidiary and whose Equity Interests constitute Pledged Equity Interests) and (ii) in the case of Pledged Debt Securities, are legal, valid and binding obligations of the issuers thereof; provided that, with respect to bona fide joint ventures with third parties, the representations made in this paragraph (b) must only be true and correct to the extent the Grantors have knowledge thereof;

(c)        except for the security interests granted hereunder, each of the Grantors (i) is and will continue to be the direct owner, beneficially and of record, of the Pledged Securities indicated on Schedule II as owned by such Grantor except to the extent such Grantor

 

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ceases to own such Pledged Securities as a result of disposition or other transfer made in compliance with the Indenture and the Revolving Facility Agreement, (ii) holds the same free and clear of all Liens, other than Liens created by this Agreement, Permitted Liens and transfers made in compliance with the Indenture and the Revolving Facility Agreement, (iii) will make no assignment, pledge, hypothecation or transfer of, or create or permit to exist any security interest in or other Lien on, the Pledged Collateral, other than Liens created by this Agreement, Permitted Liens and transfers made in compliance with the Indenture and the Revolving Facility Agreement and (iv) will defend its title or interest thereto or therein against any and all Liens (other than the Liens created by this Agreement and Permitted Liens), however arising, of all Persons whomsoever;

(d)        except for restrictions and limitations imposed by the Note Documents and the Revolving Facility Documents or securities laws generally, the Pledged Collateral is and will continue to be freely transferable and assignable, and none of the Pledged Collateral is or will be subject to any option, right of first refusal, shareholders agreement, charter, by-law or other organizational document provisions or contractual restriction of any nature that might reasonably be expected to prohibit, impair, delay or otherwise affect the pledge of such Pledged Collateral hereunder, the sale or disposition thereof pursuant hereto or the exercise by the Collateral Agent of rights and remedies hereunder;

(e)        each of the Grantors has the power and authority to pledge the Pledged Collateral pledged by it hereunder in the manner hereby done or contemplated;

(f)        no consent or approval of any Governmental Authority, any securities exchange or any other Person was or is necessary to the validity of the pledge effected hereby (other than such as have been obtained and are in full force and effect);

(g)        by virtue of the execution and delivery by the Grantors of this Agreement, when any Pledged Securities are delivered to the Collateral Agent in accordance with this Agreement, the Collateral Agent will obtain a legal, valid and perfected lien upon and security interest in such Pledged Securities as security for the payment and performance of the Obligations, prior to all other liens and security interests created and perfected by a method other than by control under Article 9 of the New York UCC; and

(h)        the pledge effected hereby is effective to vest in the Collateral Agent, for the benefit of the Secured Parties, the rights of the Collateral Agent in the Pledged Collateral as set forth herein.

SECTION 3.04.        Certification of Limited Liability Company and Limited Partnership Interests. Each Grantor agrees that interests in any wholly owned limited liability company or limited partnership owned by such Grantor and pledged hereunder shall be represented by a certificate, shall be a “security” within the meaning of Article 8 of the New York UCC and shall be governed by Article 8 of the New York UCC. Each Grantor acknowledges and agrees that (i) to the extent each interest in any non-wholly owned limited liability company or limited partnership controlled now or in the future by such Grantor and pledged hereunder is a “security” within the meaning of Article 8 of the New York UCC and is governed by Article 8 of the New York UCC, such interest shall be certificated and (ii) each such

 

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interest shall at all times hereafter continue to be such a security and represented by such certificate. Each Grantor further acknowledges and agrees that with respect to any interest in any non-wholly owned limited liability company or limited partnership controlled now or in the future by such Grantor and pledged hereunder that is not a “security” within the meaning of Article 8 of the New York UCC, such Grantor shall at no time elect to treat any such interest as a “security” within the meaning of Article 8 of the New York UCC, nor shall such interest be represented by a certificate, unless such Grantor provides prior written notification to the Collateral Agent of such election and such interest is thereafter represented by a certificate that is promptly delivered to the Collateral Agent pursuant to the terms hereof.

SECTION 3.05.        Registration in Nominee Name; Denominations. The Collateral Agent, on behalf of the Secured Parties, shall have the right (in its sole and absolute discretion) to hold the Pledged Securities (i) in its own name as pledgee, (ii) the name of its nominee (as pledgee or as sub-agent) or (iii) the name of the applicable Grantor, endorsed or assigned in blank or in favor of the Collateral Agent; provided that, in the case of clause (ii), an Event of Default has occurred and is continuing. Each Grantor will promptly give to the Collateral Agent copies of any notices or other communications received by it with respect to Pledged Securities registered in the name of such Grantor. The Collateral Agent shall at all times have the right to exchange the certificates representing Pledged Securities for certificates of smaller or larger denominations for any purpose consistent with this Agreement.

SECTION 3.06.        Voting Rights; Dividends and Interest.

(a)        Unless and until an Event of Default shall have occurred and be continuing and the Collateral Agent shall have notified the Grantors that their rights under this Section 3.06 are being suspended:

(i)        each Grantor shall be entitled to exercise any and all voting and/or other consensual rights and powers inuring to an owner of Pledged Collateral or any part thereof for any purpose consistent with the terms of this Agreement, the Note Documents and the Revolving Facility Documents, provided that such rights and powers shall not be exercised in any manner that could materially and adversely affect the rights inuring to a holder of any Pledged Collateral or the rights and remedies of any of the Collateral Agent or the other Secured Parties under this Agreement or the Note Documents and the Revolving Facility Documents or the ability of the Secured Parties to exercise the same;

(ii)        the Collateral Agent shall execute and deliver to each Grantor, or cause to be executed and delivered to such Grantor, all such proxies, powers of attorney and other instruments as such Grantor may reasonably request for the purpose of enabling such Grantor to exercise the voting and/or consensual rights and powers it is entitled to exercise pursuant to subparagraph (i) above;

(iii)        Each Grantor shall be entitled to receive and retain any and all dividends, interest, principal and other distributions paid on or distributed in respect of the Pledged Collateral to the extent and only to the extent that such dividends, interest, principal and other distributions are permitted by, and

 

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otherwise paid or distributed in accordance with, the terms and conditions of the Note Documents and the Revolving Facility Documents and applicable laws, provided that any noncash dividends, interest, principal or other distributions that would constitute Pledged Equity Interests or Pledged Debt Securities, whether resulting from a subdivision, combination or reclassification of the outstanding Equity Interests of the issuer of any Pledged Securities or received in exchange for Pledged Securities or any part thereof, or in redemption thereof, or as a result of any merger, consolidation, acquisition or other exchange of assets to which such issuer may be a party or otherwise, shall be and become part of the Pledged Collateral and, if received by any Grantor, shall not be commingled by such Grantor with any of its other funds or property but shall be held separate and apart therefrom, shall be held in trust for the benefit of the Collateral Agent and shall be forthwith delivered to the Collateral Agent in the same form as so received (with any necessary endorsement).

(b)        Upon the occurrence and during the continuance of an Event of Default, after the Collateral Agent shall have notified the Grantors of the suspension of their rights under paragraph (a)(iii) of this Section 3.06, then all rights of any Grantor to dividends, interest, principal or other distributions that such Grantor is authorized to receive pursuant to paragraph (a)(iii) of this Section 3.06 shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall have the sole and exclusive right and authority to receive and retain such dividends, interest, principal or other distributions. All dividends, interest, principal or other distributions received by any Grantor contrary to the provisions of this Section 3.06 shall be held in trust for the benefit of the Collateral Agent, shall be segregated from other property or funds of such Grantor and shall be forthwith delivered to the Collateral Agent upon demand in the same form as so received (with any necessary endorsement). Any and all money and other property paid over to or received by the Collateral Agent pursuant to the provisions of this paragraph (b) shall be retained by the Collateral Agent in an account to be established by the Collateral Agent upon receipt of such money or other property and shall be applied in accordance with the provisions of Section 5.02. After all Events of Default have been cured or waived and the Issuers have delivered to the Collateral Agent a certificate to that effect, the Collateral Agent shall promptly repay to each Grantor (without interest) all dividends, interest, principal or other distributions that such Grantor would otherwise be permitted to retain pursuant to the terms of paragraph (a)(iii) of this Section 3.06 and that remain in such account.

(c)        Upon the occurrence and during the continuance of an Event of Default, after the Collateral Agent shall have notified the Grantors of the suspension of their rights under paragraph (a)(i) of this Section 3.06, then all rights of any Grantor to exercise the voting and consensual rights and powers it is entitled to exercise pursuant to paragraph (a)(i) of this Section 3.06, and the obligations of the Collateral Agent under paragraph (a)(ii) of this Section 3.06, shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall have the sole and exclusive right and authority to exercise such voting and consensual rights and powers, provided that, unless otherwise directed by requisite party pursuant to the Intercreditor Agreement, the Collateral Agent shall have the right from time to time following and during the continuance of an Event of Default to permit the Grantors to exercise such rights.

 

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(d)        Any notice given by the Collateral Agent to the Grantors suspending their rights under paragraph (a) of this Section 3.06 (i) may be given by telephone if promptly confirmed in writing, (ii) may be given to one or more of the Grantors at the same or different times and (iii) may suspend the rights of the Grantors under paragraph (a)(i) or paragraph (a)(iii) in part without suspending all such rights (as specified by the Collateral Agent in its sole and absolute discretion) and without waiving or otherwise affecting the Collateral Agent’s right to give additional notices from time to time suspending other rights so long as an Event of Default has occurred and is continuing.

ARTICLE IV

SECURITY INTERESTS IN PERSONAL PROPERTY

SECTION 4.01.        Security Interest.

(a)        As security for the payment or performance, as the case may be, in full of the Obligations, each Grantor hereby grants to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, a security interest (the “Security Interest”) in, all right, title and interest in and to any and all the following assets and properties now owned or at any time hereafter acquired by such Grantor or in which such Grantor now has or at any time in the future may acquire any right, title or interest (collectively, the “Article 9 Collateral”) (terms used below and in other provisions of this Agreement to describe types of Article 9 Collateral, which terms are not otherwise defined herein, shall having the meanings specified in the New York UCC):

(i)        all Accounts;

(ii)        all Chattel Paper;

(iii)        all cash and Deposit Accounts;

(iv)        all Documents;

(v)        all Equipment;

(vi)        all General Intangibles;

(vii)        all Instruments;

(viii)        all Inventory;

(ix)        all Investment Property;

(x)        Letter-of-Credit rights;

(xi)        Commercial Tort Claims (as described in the Perfection Certificate or a document provided pursuant to Section 4.04(f));

 

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(xii)        all books and records pertaining to the Article 9 Collateral; and

(xiii)        to the extent not otherwise included, all Proceeds and products of any and all the foregoing and all collateral security and guarantees given by any Person with respect to any of the foregoing;

provided, however, that the Article 9 Collateral shall not include the following (collectively, the “Excluded Property”):

(A)        personal property where the cost of obtaining a security interest or perfection thereof exceeds its benefits (as reasonably determined by the Company’s Governing Body in a resolution delivered to the Collateral Agent);

(B)        assets, with respect to which any applicable law or the terms of any applicable contract prohibits the creation or perfection of security interests therein or that otherwise results in a default, waiver or termination of rights or privileges arising under such law or contract (other than to the extent that any such law or contract term would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the New York UCC or any other applicable law or principles of equity); provided, however, that such security interest shall attach immediately at such time as the condition causing such prohibition shall be remedied and, to the extent severable, shall attach immediately to any portion of any such contract that does not result in any such prohibition, including any Proceeds of any such contract;

(C)        all Trademarks and other Intellectual Property bearing the name “Shea” or a variant thereof; provided that (x) the Collateral Agent, the Administrative Agent and the Applicable Authorized Representative (for the benefit of the Secured Parties) shall have a non-exclusive License to use such Intellectual Property in connection with the exercise of remedies upon a Default or Event of Default and (y) the Grantors hereby grant to the Collateral Agent, the Administrative Agent and the Applicable Authorized Representative (for the benefit of the Secured Parties) such a License for such use in any such event;

(D)        any trademark applications filed in the United States Patent and Trademark Office on the basis of such Grantor’s “intent-to-use” such trademark to the extent that granting a Security Interest in such trademark application prior to such filing would adversely affect the enforceability or validity or result in the voiding of such trademark application, unless and until acceptable evidence of use of the trademark has been filed with and accepted by the United States Patent and Trademark Office pursuant to Section 1(c) or Section 1(d) of the Lanham Act (15 U.S.C. 1051, et seq.), whereupon such trademark application will, without any further action taken on the part of such Grantor or the Collateral Agent, be deemed to constitute Collateral;

(E)        cash collateral supporting (i) deductible, retention and other obligations to insurance carriers, (ii) reimbursement claims in respect of letters of

 

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credit and surety providers, (iii) contingent claims arising in respect of community facility district, metro-district, mello-roos, subdivision improvement and similar obligations arising in the ordinary course of business of a homebuilder and (iv) cash management services;

(F)        equity interests in joint ventures with respect to which the agreements governing such joint ventures prohibit the creation or perfection of security interests in such equity interests;

(G)        any leasehold interests in real property;

(H)        any real property in a community under development with a dollar amount of investment as of the most recent quarter end (as determined in accordance with GAAP) of less than $2,000,000 or with less than 10 lots remaining unsold;

(I)        vehicles covered by a certificate of title; and

(J)        (i) any Deposit Account or Securities Account that is established solely for the purpose of funding payroll, benefits, trust or other compensation benefits to employees and (ii) any other Deposit Account and Securities Account the aggregate balance in which does not exceed $2,000,000 for all such excluded accounts at any one time outstanding (the accounts described in clauses (i) and (ii), collectively the “Excluded Accounts”).

(b)        Each Grantor hereby irrevocably authorizes the Collateral Agent at any time and from time to time to file in any relevant jurisdiction any financing statements (including fixture filings) with respect to the Article 9 Collateral or any part thereof and amendments thereto that (i) indicate the Collateral as all assets of such Grantor or words of similar effect as being of an equal or lesser scope or with greater detail, and (ii) contain the information required by Article 9 of the Uniform Commercial Code of each applicable jurisdiction for the filing of any financing statement or amendment, including (A) whether such Grantor is an organization, the type of organization and any organizational identification number issued to such Grantor and (B) in the case of a financing statement filed as a fixture filing or covering Article 9 Collateral constituting minerals or the like to be extracted or timber to be cut, a sufficient description of the real property to which such Article 9 Collateral relates. Each Grantor agrees to promptly provide such information to the Collateral Agent.

Each Grantor also ratifies its authorization for the Collateral Agent to file in any relevant jurisdiction any financing statements or amendments thereto if filed prior to the date hereof.

The Collateral Agent is further authorized to file with the United States Patent and Trademark Office or United States Copyright Office (or any successor office or any similar office in any other country) such documents as may be necessary or advisable for the purpose of perfecting, confirming, continuing, enforcing or protecting the Security Interest granted by each Grantor, without the signature of any Grantor, and naming any Grantor or the Grantors as debtors and the Collateral Agent as secured party.

 

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(c)        The Security Interest and the security interest granted pursuant to Article III are granted as security only and shall not subject the Collateral Agent or any other Secured Party to, or in any way alter or modify, any obligation or liability of any Grantor with respect to or arising out of the Collateral.

SECTION 4.02.        Representations and Warranties. The Grantors jointly and severally represent and warrant to the Collateral Agent and the Secured Parties that:

(a)        Each Grantor has good and valid rights in and title to the Article 9 Collateral with respect to which it has purported to grant a Security Interest hereunder and has full power and authority to grant to the Collateral Agent the Security Interest in such Article 9 Collateral pursuant hereto and to execute, deliver and perform its obligations in accordance with the terms of this Agreement, without the consent or approval of any other Person other than any consent or approval that has been obtained.

(b)        (i) The Perfection Certificate has been duly prepared, completed and executed and the information set forth therein, including the exact legal name of each Grantor, is correct and complete as of the Issue Date; (ii) the Uniform Commercial Code financing statements (including fixture filings, as applicable) or other appropriate filings, recordings or registrations prepared by the Collateral Agent based upon the information provided to the Collateral Agent in the Perfection Certificate for filing in each governmental, municipal or other office specified in Schedule 6 to the Perfection Certificate (or specified by notice from the Issuers to the Collateral Agent after the Issue Date in the case of filings, recordings or registrations required by Section 4.22 of the Indenture and Section 6.11 (or other applicable provisions) of the Revolving Facility Agreement), are all the filings, recordings and registrations (other than filings required to be made in the United States Patent and Trademark Office and the United States Copyright Office in order to perfect the Security Interest in Article 9 Collateral consisting of United States Patents, Trademarks and Copyrights) that are necessary to publish notice of and protect the validity of and to establish a legal, valid and perfected security interest in favor of the Collateral Agent (for the benefit of the Secured Parties) in respect of all Article 9 Collateral in which the Security Interest may be perfected by filing, recording or registration in the United States (or any political subdivision thereof) and its territories and possessions, and no further or subsequent filing, refiling, recording, rerecording, registration or reregistration is necessary in any such jurisdiction, except as provided under applicable law with respect to the filing of amended financing statements or continuation statements; (iii) each Grantor represents and warrants that a fully executed agreement in the form hereof (or a fully executed short form agreement (A) in the case of Trademarks and Copyrights, in form and substance substantially similar to the short form agreements delivered on the Issue Date or (B) in the case of Patents, in form and substance reasonably satisfactory to the Collateral Agent), and containing a description of all Article 9 Collateral consisting of Intellectual Property shall have been received and recorded within three months after the execution of this Agreement with respect to United States Patents and United States registered Trademarks (and Trademarks for which United States registration applications are pending) and within one month after the execution of this Agreement with respect to United States registered Copyrights has been delivered to the Collateral Agent for recording by the United States Patent and Trademark Office and the United States Copyright Office pursuant to 35 U.S.C. § 261, 15 U.S.C. § 1060 or 17 U.S.C. § 205 and the regulations thereunder, as applicable, and otherwise as may be required pursuant to the laws

 

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of any other necessary jurisdiction, to protect the validity of and to establish a legal, valid and perfected security interest in favor of the Collateral Agent (for the benefit of the Secured Parties) in respect of all Article 9 Collateral consisting of Patents, Trademarks and Copyrights in which a security interest may be perfected by filing, recording or registration in the United States (or any political subdivision thereof) and its territories and possessions, and no further or subsequent filing, refiling, recording, rerecording, registration or reregistration is necessary (other than such actions as are necessary to perfect the Security Interest with respect to any Article 9 Collateral consisting of Patents, Trademarks and Copyrights (or registration or application for registration thereof) acquired or developed after the date hereof).

(c)        The Security Interest constitutes (i) a legal and valid security interest in all the Article 9 Collateral securing the payment and performance of the Obligations, (ii) subject to the filings described in Section 4.02(b), a perfected first-priority security interest in all Article 9 Collateral (subject only to Permitted Liens) in which a security interest may be perfected by filing, recording or registering a financing statement or analogous document in the United States (or any political subdivision thereof) and its territories and possessions pursuant to the Uniform Commercial Code or other applicable law in such jurisdictions and (iii) a first-priority security interest that shall be perfected in all Article 9 Collateral (subject only to Permitted Liens) in which a security interest may be perfected upon the receipt and recording of this Agreement or the Short Form Agreement with the United States Patent and Trademark Office and the United States Copyright Office, as applicable, within the

three-month
period (commencing as of the date hereof) pursuant to 35 U.S.C. § 261 or 15 U.S.C. § 1060 or the one month period (commencing as of the date hereof) pursuant to 17 U.S.C. § 205 and otherwise as may be required pursuant to the laws of any other necessary jurisdiction. The Security Interest is and shall be prior to any other Lien on any of the Article 9 Collateral, other than Permitted Liens that have priority as a matter of law and Permitted Liens expressly permitted to be prior to the Security Interest pursuant to the Indenture, the Revolving Facility Agreement and the other Security Documents.

(d)        The Article 9 Collateral is owned by the Grantors free and clear of any Lien, except for Permitted Liens. None of the Grantors has filed or consented to the filing of (i) any financing statement or analogous document under the Uniform Commercial Code or any other applicable laws covering any Article 9 Collateral, (ii) any assignment in which any Grantor assigns any Collateral or any security agreement or similar instrument covering any Article 9 Collateral with the United States Patent and Trademark Office or the United States Copyright Office or (iii) any assignment in which any Grantor assigns any Article 9 Collateral or any security agreement or similar instrument covering any Article 9 Collateral with any foreign governmental, municipal or other office, which financing statement or analogous document, assignment, security agreement or similar instrument is still in effect, except, in each case, for Permitted Liens.

SECTION 4.03.        Covenants.

(a)        Each Grantor agrees promptly to notify the Collateral Agent in writing of any change in (i) corporate name, (ii) the location of its chief executive office, its principal place of business or its principal accounting office, (iii) its identity or type of organization or corporate structure, (iv) its Federal Taxpayer Identification Number or organizational identification number or (v) its jurisdiction of organization. Each Grantor agrees to promptly provide the

 

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Collateral Agent with certified organizational documents reflecting any of the changes described in the first sentence of this paragraph. Each Grantor agrees not to effect or permit any change referred to in the preceding sentence unless all filings have been made (or provisions reasonably satisfactory to the Administrative Agent or Applicable Authorized Representative to make such filings prior to the lapse of the perfected security interest granted herein shall have been made) under the Uniform Commercial Code or otherwise that are required in order for the Collateral Agent to continue at all times following such change to have a valid, legal and perfected security interest, having the priority required by this Agreement, in all the Article 9 Collateral. Each Grantor agrees promptly to notify the Collateral Agent if (i) any material portion of the Article 9 Collateral owned or held by such Grantor is damaged, destroyed, or subject to condemnation and (ii) such Article 9 Collateral is material to the business of the Company and the Subsidiary Guarantors as a whole.

(b)        Each year, at the time of delivery of annual financial statements with respect to the preceding fiscal year pursuant to Section 4.19(a) of the Indenture and Section 6.1 of the Revolving Facility Agreement, the Issuers shall deliver to the Collateral Agent a certificate executed by the chief financial officer and the chief legal officer of the Issuers (i) setting forth the information required pursuant to the Perfection Certificate or confirming that there has been no change in such information since the date of such certificate or the date of the most recent certificate delivered pursuant to this Section 4.03(b) and (ii) certifying that all Uniform Commercial Code financing statements (including fixture filings, as applicable) or other appropriate filings recordings or registrations, including all refilings, rerecordings and registrations, containing a description of the Collateral have been filed of record in each governmental, municipal or other appropriate office in each jurisdiction identified pursuant to clause (a) of this Section 4.03 to the extent necessary to protect and perfect the Security Interest for a period of not less than 18 months after the date of such certificate (except as noted therein with respect to any continuation statements to be filed within such period). Each certificate delivered pursuant to this Section 4.03(b) shall identify in the format of Schedule III all registered Intellectual Property and applications for registration (other than any Intellectual Property that is Excluded Property) of any Grantor in existence on the date thereof and not then listed on such Schedules or previously so identified to the Collateral Agent.

(c)        Each Grantor shall, at its own expense, take any and all actions necessary to defend title to the Article 9 Collateral against all Persons and to defend the Security Interest of the Collateral Agent in the Article 9 Collateral and the priority thereof against any Lien not permitted pursuant to Section 4.08 of the Indenture and Section 6.17 of the Revolving Facility Agreement.

(d)        Each Grantor agrees, at its own expense, to execute, acknowledge, deliver and cause to be duly filed all such further instruments and documents and take all such actions as the Collateral Agent may from time to time reasonably request to better assure, preserve, protect and perfect the Security Interest and the rights and remedies created hereby, including the payment of any fees and taxes required in connection with the execution and delivery of this Agreement, the granting of the Security Interest and the filing of any financing statements (including fixture filings) or other documents in connection herewith or therewith. If any amount payable under or in connection with any of the Article 9 Collateral shall be or become evidenced by any promissory note or other instrument, such note or instrument shall be promptly

 

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pledged and delivered to the Collateral Agent, duly endorsed in a manner satisfactory to the Collateral Agent.

Without limiting the generality of the foregoing, each Grantor hereby authorizes the Collateral Agent, with prompt notice thereof to the Grantors, to supplement this Agreement by supplementing Schedule III or adding additional schedules hereto to identify specifically any asset or item that may constitute Copyrights, exclusive Licenses, Patents or Trademarks, provided that any Grantor shall have the right, exercisable within 10 days after it has been notified by the Collateral Agent of the specific identification of such Collateral, to advise the Collateral Agent in writing of any inaccuracy of the representations and warranties made by such Grantor hereunder with respect to such Collateral. Each Grantor agrees that it will use commercially reasonable efforts to take such action as shall be necessary in order that all representations and warranties hereunder shall be true and correct with respect to such Collateral within 30 days after the date it has been notified by the Collateral Agent of the specific identification of such Collateral.

(e)        Upon the occurrence of an Event of Default, the Collateral Agent and such Persons as the Collateral Agent may reasonably designate shall have the right, at the Grantors’ own cost and expense, to inspect the Article 9 Collateral, all records related thereto (and to make extracts and copies from such records) and the premises upon which any of the Article 9 Collateral is located, to discuss the Grantors’ affairs with the officers of the Grantors and their independent accountants and to verify under reasonable procedures the validity, amount, quality, quantity, value, condition and status of, or any other matter relating to, the Article 9 Collateral, including, in the case of Accounts or Article 9 Collateral in the possession of any third party, by contacting Account Debtors or the third party possessing such Article 9 Collateral for the purpose of making such a verification; provided that, in the event such Event of Default has been cured in accordance with the Revolving Facility Agreement or the Indenture, as applicable, (i) the Company shall notify the Collateral Agent of the date of such cure and (ii) the Collateral Agent may only exercise the rights provided in this paragraph (e) for a period of 90 days following such cure. The Collateral Agent shall have the absolute right to share any information it gains from such inspection or verification with any Secured Party.

(f)        At its option following the occurrence and during the continuance of an Event of Default, the Collateral Agent may discharge past due taxes, assessments, charges, fees, Liens, security interests or other encumbrances at any time levied or placed on the Article 9 Collateral and not permitted pursuant to Section 4.08 of the Indenture and Section 6.17 of the Revolving Facility Agreement, and may pay for the maintenance and preservation of the Article 9 Collateral to the extent any Grantor fails to do so as required by the Indenture, the Revolving Facility Agreement or this Agreement, and each Grantor jointly and severally agrees to reimburse the Collateral Agent on demand for any payment made or any expense incurred by the Collateral Agent pursuant to the foregoing authorization, provided that nothing in this paragraph shall be interpreted as excusing any Grantor from the performance of, or imposing any obligation on the Collateral Agent or any Secured Party to cure or perform, any covenants or other promises of any Grantor with respect to taxes, assessments, charges, fees, Liens, security interests or other encumbrances and maintenance as set forth herein, in the Note Documents or in the Revolving Facility Documents.

 

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(g)        If at any time any Grantor shall take a security interest in any property of an Account Debtor or any other Person to secure payment and performance of an Account, such Grantor shall promptly assign such security interest to the Collateral Agent. Such assignment need not be documented or filed of public record unless necessary to continue the perfected status of the security interest against creditors of and transferees from the Account Debtor or other Person granting the security interest.

(h)        Each Grantor shall remain liable to observe and perform all the conditions and obligations to be observed and performed by it under each contract, agreement or instrument relating to the Article 9 Collateral, all in accordance with the terms and conditions thereof, and each Grantor jointly and severally agrees to indemnify and hold harmless the Collateral Agent and the Secured Parties from and against any and all liability for such performance.

(i)        None of the Grantors shall make or permit to be made an assignment, pledge or hypothecation of the Article 9 Collateral or shall grant any other Lien in respect of the Article 9 Collateral, except as permitted by the Indenture and the Revolving Facility Agreement. None of the Grantors shall make or permit to be made any transfer of the Article 9 Collateral and each Grantor shall remain at all times in possession of the Article 9 Collateral owned by it, except that unless and until the Collateral Agent shall notify the Grantors that an Event of Default shall have occurred and be continuing and that during the continuance thereof the Grantors shall not sell, convey, lease, assign, transfer or otherwise dispose of any Article 9 Collateral (which notice may be given by telephone if promptly confirmed in writing), the Grantors may use and dispose of the Article 9 Collateral in any lawful manner not inconsistent with the provisions of this Agreement, the Note Documents or the Revolving Facility Documents.

(j)        Upon the occurrence and continuance of an Event of Default, none of the Grantors will, without the Collateral Agent’s prior written consent, grant any extension of the time of payment of any Accounts included in the Article 9 Collateral, compromise, compound or settle the same for less than the full amount thereof, release, wholly or partly, any Person liable for the payment thereof or allow any credit or discount whatsoever thereon, other than extensions, compromises, settlements, releases, credits or discounts granted or made in the ordinary course of business and consistent with its current practices and in accordance with such prudent and standard practice used in industries that are the same as or similar to those in which such Grantor is engaged.

(k)        The Grantors, at their own expense, shall maintain or cause to be maintained insurance covering physical loss or damage to the Inventory and Equipment. Each Grantor irrevocably makes, constitutes and appoints the Collateral Agent (and all officers, employees or agents designated by the Collateral Agent) as such Grantor’s true and lawful agent (and

attorney-in-fact)
for the purpose, during the continuance of an Event of Default, of making, settling and adjusting claims in respect of Article 9 Collateral under policies of insurance, endorsing the name of such Grantor on any check, draft, instrument or other item of payment for the proceeds of such policies of insurance and for making all determinations and decisions with respect thereto. In the event that any Grantor at any time or times shall fail to obtain or maintain any of the policies of insurance required hereby or to pay any premium in whole or part relating thereto, the Collateral Agent may, without waiving or releasing any obligation or liability of the

 

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Grantors hereunder or any Event of Default, in its sole discretion, obtain and maintain such policies of insurance and pay such premium and take any other actions with respect thereto as the Collateral Agent deems advisable. All sums disbursed by the Collateral Agent in connection with this paragraph, including reasonable attorneys’ fees, court costs, expenses and other charges relating thereto, shall be payable, upon demand, by the Grantors to the Collateral Agent and shall be additional Obligations secured hereby.

(l)        Each Grantor shall maintain, in a manner consistent with the practices of similarly situated companies engaged in the same or similar line of business, records of its Chattel Paper and its books, records and documents evidencing or pertaining thereto.

(m)        As promptly as practicable, and in any event within 30 days, after the Issue Date, the Company and each other Credit Party will deliver all Securities Account Control Agreements that would otherwise have been required to be delivered on the Issue Date.

SECTION 4.04.        Other Actions. In order to further insure the attachment, perfection and priority of, and the ability of the Collateral Agent to enforce, the Security Interest, each Grantor agrees, in each case at such Grantor’s own expense, to take the following actions with respect to the following Article 9 Collateral:

(a)        Instruments and Tangible Chattel Paper. If any Grantor shall at any time hold or acquire any Instruments or Tangible Chattel Paper, such Grantor shall promptly endorse, assign and deliver the same to the Collateral Agent, accompanied by such instruments of transfer or assignment duly executed in blank as the Collateral Agent may from time to time reasonably request.

(b)        Deposit Accounts. For each Deposit Account that any Grantor at any time opens or maintains, such Grantor shall, either (i) cause the depositary bank to agree to comply with instructions from the Collateral Agent to such depositary bank directing the disposition of funds from time to time credited to such deposit account, without further consent of such Grantor or any other Person, pursuant to an agreement reasonably satisfactory to the Collateral Agent, or (ii) arrange for the Collateral Agent to become the customer of the depositary bank with respect to such Deposit Account, with the Grantor being permitted, only with the consent of the Collateral Agent, to exercise rights to withdraw funds from such deposit account. The Collateral Agent agrees with each Grantor that the Collateral Agent shall not give any such instructions or withhold any withdrawal rights from any Grantor unless an Event of Default has occurred and is continuing or, after giving effect to any withdrawal would occur. The provisions of this paragraph shall not apply to (A) any Deposit Account for which any Grantor, the depositary bank and the Collateral Agent have entered into a cash collateral agreement specially negotiated among such Grantor, the depositary bank and the Collateral Agent for the specific purpose set forth therein, (B) Deposit Accounts for which the Collateral Agent is the depositary, (C) segregated Deposit Accounts holding exclusively cash collateral constituting Excluded Property and (D) Excluded Accounts.

(c)        Investment Property. Except to the extent otherwise provided in Article III, if any Grantor shall at any time hold or acquire any certificated securities, such Grantor shall promptly endorse, assign and deliver the same to the Collateral Agent,

 

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accompanied by such instruments of transfer or assignment duly executed in blank as the Collateral Agent may from time to time specify. If any securities now or hereafter acquired by any Grantor are uncertificated and are issued to such Grantor or its nominee directly by the issuer thereof, such Grantor shall promptly notify the Collateral Agent thereof and, pursuant to an agreement in form and substance reasonably satisfactory to the Collateral Agent, either (i) cause the issuer to agree to comply with instructions from the Collateral Agent as to such securities, without further consent of any Grantor or such nominee, or (ii) arrange for the Collateral Agent to become the registered owner of the securities. If any securities, whether certificated or uncertificated, or other investment property now or hereafter acquired by any Grantor are held by such Grantor or its nominee through a securities intermediary or commodity intermediary in a Securities Account that is not an Excluded Account, such Grantor shall immediately notify the Collateral Agent thereof and, pursuant to an agreement in form and substance reasonably satisfactory to the Collateral Agent, either (i) cause such securities intermediary or commodity intermediary, as the case may be, to agree to comply with entitlement orders or other instructions from the Collateral Agent to such securities intermediary as to such security entitlements or to apply any value distributed on account of any commodity contract as directed by the Collateral Agent to such commodity intermediary, as the case may be, in each case without further consent of any Grantor, such nominee, or any other Person, or (ii) in the case of Financial Assets or other Investment Property held through a securities intermediary, arrange for the Collateral Agent to become the entitlement holder with respect to such Investment Property, with the Grantor being permitted, only with the consent of the Collateral Agent, to exercise rights to withdraw or otherwise deal with such Investment Property. The Collateral Agent agrees with each of the Grantors that the Collateral Agent shall not give any such entitlement orders or instructions or directions to any such issuer, securities intermediary or commodity intermediary, and shall not withhold its consent to the exercise of any withdrawal or dealing rights by any Grantor, unless an Event of Default has occurred and is continuing, or, after giving effect to any such investment and withdrawal rights, would occur. The provisions of this paragraph shall not apply to any Financial Assets credited to a securities account for which the Collateral Agent is the securities intermediary.

(d)        Electronic Chattel Paper and Transferable Records. If any Grantor at any time holds or acquires an interest in any Electronic Chattel Paper or any “transferable record,” as that term is defined in Section 201 of the Federal Electronic Signatures in Global and National Commerce Act, or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction, such Grantor shall promptly notify the Collateral Agent thereof and shall take such action necessary to vest in the Collateral Agent control under New York UCC

Section 9-105
of such Electronic Chattel Paper or control under Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or, as the case may be, Section 16 of the Uniform Electronic Transactions Act, as so in effect in such jurisdiction, of such transferable record. The Collateral Agent agrees with such Grantor that the Collateral Agent will arrange, pursuant to procedures reasonably satisfactory to the Collateral Agent and so long as such procedures will not result in the Collateral Agent’s loss of control, for the Grantor to make alterations to the Electronic Chattel Paper or transferable record permitted under UCC Section 9-105 or, as the case may be, Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or Section 16 of the Uniform Electronic Transactions Act for a party in control to allow without loss of control, unless an Event of Default has occurred and is

 

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continuing or would occur after taking into account any action by such Grantor with respect to such Electronic Chattel Paper or transferable record.

(e)        Letter-of-Credit Rights. If any Grantor is at any time a beneficiary under a letter of credit now or hereafter issued in favor of such Grantor, such Grantor shall promptly notify the Collateral Agent thereof and such Grantor shall, pursuant to an agreement in form and substance reasonably satisfactory to the Collateral Agent, either (i) arrange for the issuer and any confirmer of such letter of credit to consent to an assignment to the Collateral Agent of the proceeds of any drawing under the letter of credit or (ii) arrange for the Collateral Agent to become the transferee beneficiary of the letter of credit, with the Collateral Agent agreeing, in each case, that the proceeds of any drawing under the letter of credit are to be paid to the applicable Grantor unless an Event of Default has occurred or is continuing.

(f)        Commercial Tort Claims. If any Grantor shall at any time undertake a Commercial Tort Action, the Grantor shall promptly notify the Collateral Agent thereof in a writing signed by such Grantor, including a summary description of such claim, and grant to the Collateral Agent in such writing a first-priority security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance as necessary to perfect the security interest in such Commercial Tort Action.

SECTION 4.05.        Covenants Regarding Patent, Trademark and Copyright Collateral.

(a)        Each Grantor agrees that it will not do any act or omit do to any act (and will exercise commercially reasonable efforts to prevent its licensees from doing any act omitting to do any act) whereby any Patent material to the conduct of the businesses of a Grantor may become invalidated or dedicated to the public, and agrees that it shall continue to mark any products covered by a Patent that is material to the conduct of such Grantor’s business with the relevant patent number as necessary and sufficient to establish and preserve its maximum rights under applicable patent laws.

(b)        Each Grantor (either itself or through its licensees or its sublicensees) will, for each Trademark material to the conduct of such Grantor’s business, (i) maintain such Trademark in full force free from any claim of abandonment or invalidity for

non-use,
(ii) maintain the quality of products and services offered under such Trademark, (iii) display such Trademark with notice of Federal or foreign registration to the extent necessary and sufficient to establish and preserve its maximum rights under applicable law and (iv) not knowingly use or knowingly permit the use of such Trademark in violation of any third party rights.

(c)        Each Grantor (either itself or through its licensees or sublicensees) will, for each work covered by a Copyright material to the conduct of such Grantor’s business, continue to publish, reproduce, display, adopt and distribute the work with appropriate copyright notice as necessary and sufficient to establish and preserve its maximum rights under applicable copyright laws.

 

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(d)        Each Grantor shall notify the Collateral Agent promptly if it knows or has reason to know that any Patent, Trademark or Copyright that is material to the conduct of a Grantor’s business may become abandoned, lost or dedicated to the public, or of any materially adverse determination or development (including the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office, United States Copyright Office or any court or similar office of any country) regarding such Grantor’s ownership of any Patent, Trademark or Copyright material to the conduct of its business, its right to register the same, or its right to keep and maintain the same.

(e)        Contemporaneously with the delivery of quarterly financial statements to the Trustee pursuant to Section 4.19(a) of the Indenture and to the Administrative Agent pursuant to Section 6.1 of the Revolving Facility Agreement, each Grantor shall (i) notify the Collateral Agent of any application for any Patent, Trademark or Copyright (or for the registration of any Trademark or Copyright) with the United States Patent and Trademark Office, United States Copyright Office or any office or agency in any political subdivision of the United States or in any other country or any political subdivision thereof since the last such notification (or, in the case of the first quarter following the Issue Date, since the Issue Date), (ii) execute and deliver any and all agreements, instruments, documents and papers necessary to evidence the Collateral Agent’s first-priority security interest in such Patent, Trademark or Copyright and (iii) each Grantor hereby appoints the Collateral Agent as its

attorney-in-fact
to execute and file such writings for the foregoing purposes, all acts of such attorney being hereby ratified and confirmed; such power, being coupled with an interest, is irrevocable.

(f)        Each Grantor will take all necessary steps that are consistent with the practice in any proceeding before the United States Patent and Trademark Office, United States Copyright Office or any office or agency in any political subdivision of the United States or in any other country or any political subdivision thereof, to maintain and pursue each material application relating to the Patents, Trademarks and/or Copyrights (and to obtain the relevant grant or registration) and to maintain each issued Patent and each registration of the Trademarks and Copyrights that is material to the conduct of any Grantor’s business, including timely filings of applications for renewal, affidavits of use, affidavits of incontestability and payment of maintenance fees, and, if consistent with good business judgment, to initiate opposition, interference and cancelation proceedings against third parties.

(g)        In the event that any Grantor has reason to believe that any Article 9 Collateral consisting of a Patent, Trademark or Copyright material to the conduct of any Grantor’s business has been or is about to be infringed, misappropriated or diluted by a third party, such Grantor promptly shall notify the Collateral Agent and shall, if consistent with good business judgment, promptly sue for infringement, misappropriation or dilution and to recover any and all damages for such infringement, misappropriation or dilution, and take such other actions as are appropriate under the circumstances to protect such Article 9 Collateral.

(h)        Upon and during the continuance of an Event of Default, each Grantor shall use commercially reasonable efforts to obtain all requisite consents or approvals by the licensor of each Copyright License, Patent License or Trademark License under which such Grantor is a licensee to effect the assignment of all such Grantor’s right, title and interest thereunder to the Collateral Agent or its designee.

 

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ARTICLE V

REMEDIES

SECTION 5.01.        Remedies Upon Default. Upon the occurrence and during the continuance of an Event of Default, each Grantor agrees to deliver each item of tangible Collateral to the Collateral Agent on demand, and it is agreed that the Collateral Agent shall, upon the occurrence and during the continuance of an Event of Default, have the right to take any of or all the following actions at the same or different times: (a) with respect to any Article 9 Collateral consisting of Intellectual Property, on demand, to cause the Security Interest to become an assignment, transfer and conveyance of any of or all such Article 9 Collateral by the applicable Grantors to the Collateral Agent, or to license or sublicense, whether general, special or otherwise, and whether on an exclusive or nonexclusive basis, any such Article 9 Collateral throughout the world on such terms and conditions and in such manner as the Collateral Agent shall determine (other than in violation of any

then-existing
licensing arrangements to the extent that waivers cannot be obtained), and (b) with or without legal process and with or without prior notice or demand for performance, to take possession of the Article 9 Collateral and without liability for trespass to enter any premises where the Article 9 Collateral may be located for the purpose of taking possession of or removing the Article 9 Collateral and, generally, to exercise any and all rights afforded to a secured party under the Uniform Commercial Code or other applicable law. Without limiting the generality of the foregoing, each Grantor agrees that the Collateral Agent shall have the right, subject to the mandatory requirements of applicable law, to sell or otherwise dispose of all or any part of the Collateral at a public or private sale or at any broker’s board or on any securities exchange, for cash, upon credit or for future delivery as the Collateral Agent shall deem appropriate. The Collateral Agent shall be authorized at any such sale of securities (if it deems it advisable to do so) to restrict the prospective bidders or purchasers to Persons who will represent and agree that they are purchasing the Collateral for their own account for investment and not with a view to the distribution or sale thereof, and upon consummation of any such sale the Collateral Agent shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Collateral so sold. Each such purchaser at any sale of Collateral shall hold the property sold absolutely free from any claim or right on the part of any Grantor, and each Grantor hereby waives (to the extent permitted by law) all rights of redemption, stay and appraisal that such Grantor now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted.

The Collateral Agent shall give the applicable Grantors 10 days’ written notice (which each Grantor agrees is reasonable notice within the meaning of

Section 9-611
of the New York UCC or its equivalent in other jurisdictions) of the Collateral Agent’s intention to make any sale of Collateral. Such notice, in the case of a public sale, shall state the time and place for such sale and, in the case of a sale at a broker’s board or on a securities exchange, shall state the board or exchange at which such sale is to be made and the day on which the Collateral or portion thereof, will first be offered for sale at such board or exchange. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Collateral Agent may fix and state in the notice (if any) of such sale. At any such sale, the Collateral, or portion thereof, to be sold may be sold in one lot as an entirety or in separate parcels, as the Collateral Agent may (in its sole and absolute discretion) determine. The Collateral Agent shall not be obligated to make any sale of any Collateral if it shall determine not

 

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to do so, regardless of the fact that notice of sale of such Collateral shall have been given. The Collateral Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. In case any sale of all or any part of the Collateral is made on credit or for future delivery, the Collateral so sold may be retained by the Collateral Agent until the sale price is paid by the purchaser or purchasers thereof, but the Collateral Agent shall not incur any liability in case any such purchaser or purchasers shall fail to take up and pay for the Collateral so sold and, in case of any such failure, such Collateral may be sold again upon like notice. At any public (or, to the extent permitted by law, private) sale made pursuant to this Agreement, any Secured Party may bid for or purchase, free (to the extent permitted by law) from any right of redemption, stay, valuation or appraisal on the part of any Grantor (all said rights being also hereby waived and released to the extent permitted by law), the Collateral or any part thereof offered for sale and may make payment on account thereof by using any claim then due and payable to such Secured Party from any Grantor as a credit against the purchase price, and such Secured Party may, upon compliance with the terms of sale, hold, retain and dispose of such property without further accountability to any Grantor therefor. For purposes hereof, a written agreement to purchase the Collateral or any portion thereof shall be treated as a sale thereof; the Collateral Agent shall be free (if such agreement cannot be reasonably rescinded) to consummate such sale pursuant to such agreement and no Grantor shall be entitled to the return of the Collateral or any portion thereof subject thereto, notwithstanding the fact that after the Collateral Agent shall have entered into such an agreement all Events of Default shall have been remedied and the Obligations paid in full. As an alternative to exercising the power of sale herein conferred upon it, the Collateral Agent may proceed by a suit or suits at law or in equity to foreclose this Agreement and to sell the Collateral or any portion thereof pursuant to a judgment or decree of a court or courts having competent jurisdiction or pursuant to a proceeding by a

court-appointed
receiver. Any sale pursuant to the provisions of this Section 5.01 shall be deemed to conform to the commercially reasonable standards as provided in
Section 9-610(b)
of the New York UCC or its equivalent in other jurisdictions.

SECTION 5.02.        Application of Proceeds. The Collateral Agent shall apply the proceeds of any collection or sale of Collateral in accordance with the terms specified in Section 2.01 of the Intercreditor Agreement. In the event no Intercreditor Agreement is in effect at any time, the Collateral Agent shall apply the proceeds of any collection or sale of Collateral, including any Collateral consisting of cash, as follows:

FIRST, to the payment of all agent’s fees and collateral management fees of the Collateral Agent and all fees, costs and expenses incurred by the Collateral Agent in connection with such collection or sale or otherwise in connection with this Agreement, any other Note Document, any other Revolving Facility Document or any of the Obligations, including all court costs and the fees and expenses of its agents and legal counsel, all amounts payable in respect of Indemnified Liabilities (as defined in the Real Property Collateral Management Agreement) to the extent such Indemnified Liabilities are matured, payable and owing to the Collateral Agent and its related Indemnified Parties (as defined in the Real Property Collateral Management Agreement), the repayment of all advances made by the Collateral Agent hereunder, under any other Note Document or under any other Revolving Facility Document on behalf of any Grantor and

 

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any other costs or expenses incurred in connection with the exercise of any right or remedy hereunder, under any other Note Document or under any other Revolving Facility Document;

SECOND, to the payment in full of the Revolving Facility Obligations (the amounts so applied to be distributed among the Secured Parties pro rata in accordance with the amounts of the Revolving Facility Obligations owed to them on the date of any such distribution);

THIRD, to the payment in full of the Notes Obligations (the amounts so applied to be distributed among the Secured Parties pro rata in accordance with the amounts of the Notes Obligations owed to them on the date of any such distribution); and

FOURTH, to the Grantors, their successors or assigns, or as a court of competent jurisdiction may otherwise direct.

The Collateral Agent is hereby authorized to establish and maintain as a blocked account under the sole dominion and control of the Collateral Agent, a restricted deposit account designated as “Shea Homes Collateral Account” into which the Collateral Agent may deposit proceeds of Collateral. All amounts at any time held in the Collateral Account shall be beneficially owned by Grantors but shall be held in the name of the Collateral Agent hereunder, as collateral security for the Obligations upon the terms and conditions set forth herein. Grantors shall have no right to withdraw, transfer or, except as expressly set forth herein or in the Intercreditor Agreement, otherwise receive any funds deposited into the Collateral Account. Cash held by the Collateral Agent in the Collateral Account shall not be invested by the Collateral Agent but instead shall be maintained as a cash deposit in the Collateral Account pending application thereof as elsewhere provided in this Agreement or in the Intercreditor Agreement. Subject to the Collateral Agent’s rights hereunder, any interest, if any, earned on deposits of cash in the Collateral Account shall be deposited directly in, and held in, the Collateral Account.

The Collateral Agent is hereby authorized to establish and maintain accounts at such banking institutions necessary or appropriate to receive and distribute proceeds in accordance with this Section 5.02, the Security Documents, the Revolving Facility Documents and the Notes Documents.

SECTION 5.03.        Grant of License to Use Intellectual Property. For the purpose of enabling the Collateral Agent to exercise rights and remedies under this Agreement at such time as the Collateral Agent shall be lawfully entitled to exercise such rights and remedies, each Grantor hereby grants to the Collateral Agent an irrevocable, nonexclusive license (exercisable without payment of royalty or other compensation to the Grantors) to use, license or sublicense any of the Article 9 Collateral consisting of Intellectual Property now owned or hereafter acquired by such Grantor, and wherever the same may be located, and including in such license reasonable access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the compilation or printout thereof. The use of such license by the Collateral Agent may be exercised, at the option of the Collateral Agent, upon the occurrence and during the continuation of an Event of Default, provided that any license, sublicense or other transaction entered into by the Collateral Agent in accordance

 

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herewith shall be binding upon the Grantors notwithstanding any subsequent cure of an Event of Default.

SECTION 5.04.    Securities Act. In view of the position of the Grantors in relation to the Pledged Collateral, or because of other current or future circumstances, a question may arise under the Securities Act of 1933, as now or hereafter in effect, or any similar statute hereafter enacted analogous in purpose or effect (such Act and any such similar statute as from time to time in effect being called the “Federal Securities Laws”) with respect to any disposition of the Pledged Collateral permitted hereunder. Each Grantor understands that compliance with the Federal Securities Laws might very strictly limit the course of conduct of the Collateral Agent if the Collateral Agent were to attempt to dispose of all or any part of the Pledged Collateral, and might also limit the extent to which or the manner in which any subsequent transferee of any Pledged Collateral could dispose of the same. Similarly, there may be other legal restrictions or limitations affecting the Collateral Agent in any attempt to dispose of all or part of the Pledged Collateral under applicable Blue Sky or other state securities laws or similar laws analogous in purpose or effect. Each Grantor recognizes that in light of such restrictions and limitations the Collateral Agent may, with respect to any sale of the Pledged Collateral, limit the purchasers to those who will agree, among other things, to acquire such Pledged Collateral for their own account, for investment, and not with a view to the distribution or resale thereof. Each Grantor acknowledges and agrees that in light of such restrictions and limitations, the Collateral Agent, in its sole and absolute discretion, (a) may proceed to make such a sale whether or not a registration statement for the purpose of registering such Pledged Collateral or part thereof shall have been filed under the Federal Securities Laws and (b) may approach and negotiate with a single potential purchaser to effect such sale. Each Grantor acknowledges and agrees that any such sale might result in prices and other terms less favorable to the seller than if such sale were a public sale without such restrictions. In the event of any such sale, the Collateral Agent shall incur no responsibility or liability for selling all or any part of the Pledged Collateral at a price that the Collateral Agent, in its sole and absolute discretion, may in good faith deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might have been realized if the sale were deferred until after registration as aforesaid or if more than a single purchaser were approached. The provisions of this Section 5.04 will apply notwithstanding the existence of a public or private market upon which the quotations or sales prices may exceed substantially the price at which the Collateral Agent sells.

ARTICLE VI

INDEMNITY, SUBROGATION AND SUBORDINATION

SECTION 6.01.        Indemnity and Subrogation. In addition to all such rights of indemnity and subrogation as the Guarantors may have under applicable law (but subject to Section 6.03), the Issuers agree that (a) in the event a payment in respect of any obligation shall be made by any Guarantor under the Indenture or the Revolving Facility Agreement, the Issuers shall indemnify such Guarantor for the full amount of such payment and such Guarantor shall be subrogated to the rights of the Person to whom such payment shall have been made to the extent of such payment and (b) in the event any assets of any Guarantor shall be sold pursuant to this Agreement or any other Security Document to satisfy in whole or in part any Obligation owed to

 

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any Secured Party, the Issuers shall indemnify such Guarantor in an amount equal to the greater of the book value or the fair market value of the assets so sold.

SECTION 6.02.        Contribution and Subrogation. Each Guarantor (a “Contributing Party”) agrees (subject to Section 6.03) that, in the event a payment shall be made by any other Guarantor hereunder in respect of any Obligation or assets of any other Guarantor shall be sold pursuant to any Security Document to satisfy any Obligation owed to any Secured Party and such other Guarantor (the “Claiming Party”) shall not have been fully indemnified by the Issuers as provided in Section 6.01, the Contributing Party shall indemnify the Claiming Party in an amount equal to the amount of such payment or the greater of the book value or the fair market value of such assets, as the case may be, in each case multiplied by a fraction of which the numerator shall be the net worth of the Contributing Party on the date hereof and the denominator shall be the aggregate net worth of all the Guarantors on the date hereof (or, in the case of any Guarantor becoming a party hereto pursuant to Section 7.14, the date of the supplement hereto executed and delivered by such Guarantor). Any Contributing Party making any payment to a Claiming Party pursuant to this Section 6.02 shall (subject to Section 6.03) be subrogated to the rights of such Claiming Party under Section 6.01 to the extent of such payment.

SECTION 6.03.        Subordination.

(a)        Notwithstanding any provision of this Agreement to the contrary, all rights of the Guarantors under Sections 6.01 and 6.02 and all other rights of the Guarantors of indemnity, contribution or subrogation under applicable law or otherwise shall be fully subordinated to the payment in full in cash of the Obligations. No failure on the part of the Issuers or any Guarantor to make the payments required by Sections 6.01 and 6.02 (or any other payments required under applicable law or otherwise) shall in any respect limit the obligations and liabilities of any Guarantor with respect to its obligations hereunder, and each Guarantor shall remain liable for the full amount of the obligations of such Guarantor hereunder.

(b)        Each Guarantor hereby agrees that all Indebtedness and other monetary obligations owed by it to, or to it by, any other Guarantor, either of the Issuers or any other Subsidiary shall be fully subordinated to the payment in full in cash of the Obligations.

ARTICLE VII

MISCELLANEOUS

SECTION 7.01.        Notices. All communications and notices hereunder shall (except as otherwise expressly permitted herein) be in writing and given as provided in Section 13.03 of the Indenture and Section 13.1 of the Revolving Facility Agreement, as applicable. All communications and notices hereunder to any Guarantor shall be given to it in care of the Issuers as provided in Section 13.1 of the Revolving Facility Agreement or, if the Revolving Facility is no longer in effect, as provided in Section 13.03 of the Indenture. As expressly agreed to in writing by any party hereto from time to time, notices and other communications to such party may also be delivered by email to the email address of a representative of such party provided by such party from time to time.

 

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SECTION 7.02.        Waivers; Amendment. (a) No failure or delay by the Collateral Agent or Holder in exercising any right or power hereunder or under any other Note Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Collateral Agent, the Holders and the Revolving Facility Lenders hereunder, under the other Note Documents and under the other Revolving Facility Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by any Grantor therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section 7.02, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on any Grantor in any case shall entitle any Grantor to any other or further notice or demand in similar or other circumstances.

(b)        Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Collateral Agent and the Grantor or Grantors with respect to which such waiver, amendment or modification is to apply, subject to any consent required in accordance with Sections 9.01 and 9.02 of the Indenture and Section 8.4 (or other applicable provisions) of the Revolving Facility Agreement.

SECTION 7.03.        Collateral Agent’s Fees and Expenses; Indemnification.

(a)        The parties hereto agree that the Collateral Agent shall be entitled to reimbursement of its fees, expenses and other amounts owed to it under this Agreement, Sections 7 and 8 of the Real Property Collateral Management Agreement and Section 2.01(b) of the Intercreditor Agreement.

(b)        Without limitation of its indemnification obligations under the other Note Documents and the other Revolving Facility Documents, each Grantor jointly and severally agrees to indemnify the Secured Parties against, and hold each Secured Party harmless from, any and all losses, claims, damages, liabilities and related expenses, including the fees, charges and disbursements of any counsel for any Secured Party, incurred by or asserted against any Secured Party by any third party or by any Grantor arising out of, in connection with, or as a result of, the execution, delivery or performance of this Agreement or any claim, litigation, investigation or proceeding relating to any of the foregoing agreement or instrument contemplated hereby, or to the Collateral, whether or not any Secured Party is a party thereto, provided that such indemnity shall not, as to any Secured Party, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final judgment to have resulted from the gross negligence or willful misconduct of such Secured Party.

(c)        Any such amounts payable as provided hereunder shall be additional Obligations secured hereby and by the other Security Documents. The provisions of this Section 7.03 shall remain operative and in full force and effect regardless of the termination of this Agreement or any other Note Document, the consummation of the transactions contemplated hereby, the repayment of any of the Obligations, the invalidity or unenforceability of any term or

 

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provision of this Agreement or any other Note Document or any investigation made by or on behalf of the Collateral Agent or any other Secured Party. All amounts due under this Section 7.03 shall be payable on written demand therefor.

SECTION 7.04.        Successors and Assigns. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the permitted successors and assigns of such party; and all covenants, promises and agreements by or on behalf of any Grantor or the Collateral Agent that are contained in this Agreement shall bind and inure to the benefit of their respective successors and assigns.

SECTION 7.05.        Survival of Agreement. All covenants, agreements, representations and warranties made by the Grantors in the Note Documents, the Revolving Facility Documents and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement, any other Note Document or any other Revolving Facility Document shall be considered to have been relied upon by the Holders’ and Revolving Facility Lenders and shall survive the execution and delivery of the Note Documents, the Revolving Facility Documents and the issuance of the Notes and Letters of Credit, regardless of any investigation made by any Holder of Participant or on their behalf and notwithstanding that the Collateral Agent or any Holder may have had notice or knowledge of any Default or incorrect representation or warranty at the time any Notes are issued under the Indenture or any Letters of Credit are issued under the Revolving Facility Agreement, and shall continue in full force and effect as long as any Obligation is outstanding and unpaid. This Agreement shall survive and continue in full force and effect in any Insolvency or Liquidation Proceeding.

SECTION 7.06.        Counterparts; Effectiveness; Several Agreement. This Agreement may be executed in counterparts, each of which shall constitute an original but all of which when taken together shall constitute a single contract. Delivery of an executed signature page to this Agreement by facsimile transmission shall be effective as delivery of a manually signed counterpart of this Agreement. This Agreement shall become effective as to any Grantor when a counterpart hereof executed on behalf of such Grantor shall have been delivered to the Collateral Agent and a counterpart hereof shall have been executed on behalf of the Collateral Agent, and thereafter shall be binding upon such Grantor and the Collateral Agent and their respective permitted successors and assigns, and shall inure to the benefit of such Grantor, the Collateral Agent and the other Secured Parties and their respective successors and assigns, except that no Grantor shall have the right to assign or transfer its rights or obligations hereunder or any interest herein or in the Collateral (and any such assignment or transfer shall be void) except as expressly contemplated by this Agreement, the Indenture or the Revolving Facility Agreement. This Agreement shall be construed as a separate agreement with respect to each Grantor and may be amended, modified, supplemented, waived or released with respect to any Grantor without the approval of any other Grantor and without affecting the obligations of any other Grantor hereunder.

SECTION 7.07.        Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction. The

 

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parties shall endeavor in

good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

SECTION 7.08.        Reserved.

SECTION 7.09.        Governing Law; Jurisdiction; Consent to Service of Process. (a) This Agreement shall be construed in accordance with and governed by the law of the State of New York.

(b)        Each of the Grantors hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, any other Note Document, any other Revolving Facility Document or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the Grantors hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement, any other Note Document or any other Revolving Facility Document shall affect any right that the Collateral Agent or any Holder or Participant may otherwise have to bring any action or proceeding relating to this Agreement, any other Note Document or any other Revolving Facility Document against any Grantor or their respective properties in the courts of any jurisdiction.

(c)        Each of the Grantors hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement, any other Note Document or any other Revolving Facility Document in any court referred to in paragraph (b) of this Section 7.09. Each of the Grantors hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

(d)        Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 7.01. Nothing in this Agreement, any other Note Document or any other Revolving Facility Document will affect the right of any party to this Agreement to serve process in any other manner permitted by law.

SECTION 7.10.        WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER NOTE DOCUMENT, ANY OTHER REVOLVING FACILITY DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS

 

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REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.10.

SECTION 7.11.        Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.

SECTION 7.12.        Security Interest Absolute. All rights of the Collateral Agent hereunder, the Security Interest, the grant of a security interest in the Pledged Collateral and all obligations of each Grantor hereunder shall be absolute and unconditional irrespective of (a) any lack of validity or enforceability of the Indenture, any other Note Document, the Revolving Facility Agreement, any other Revolving Facility Document, any agreement with respect to any of the Obligations, or any other agreement or instrument relating to any of the foregoing, (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Indenture, any other Note Document, the Revolving Facility Agreement, any other Revolving Facility Document or any other agreement or instrument, (c) any exchange, release or non-perfection of any Lien on other collateral, or any release or amendment or waiver of or consent under or departure from any guarantee, securing or guaranteeing all or any of the Obligations or (d) any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Grantor in respect of the Obligations or this Agreement.

SECTION 7.13.        Termination or Release.

(a)        This Agreement, the Security Interest and all other security interests granted hereby shall terminate when (i) all the Obligations have been paid in full or (ii) upon discharge of the Indenture or defeasance of the Notes as set forth in Article VIII of the Indenture and the Revolving Facility Obligations have been paid in full in cash or immediately available funds and the Revolving Facility Lenders have no further commitment to extend credit under the Revolving Facility Agreement and the LC Obligations has been reduced to zero (or cash-collateralized or supported by back-to-back letters of credit in form and substance and from an issuing bank reasonably satisfactory to the LC Issuer and the Administrative Agent) and each LC Issuer has no further obligations to issue Letters of Credit under the Revolving Facility Agreement.

(b)        A Guarantor shall automatically be released from its obligations hereunder and the Security Interest in the Collateral of such Guarantor shall be automatically released when such Guarantor’s Guarantee is released in accordance with the terms of the Indenture and the Revolving Facility Agreement, which terms shall include, if applicable, the obtaining of the consent of the requisite Secured Parties as provided for in the Indenture and the Revolving Facility agreement.

(c)        In connection with any disposition of Collateral to any Person other than the Company, the Corporate Issuer or any of the Subsidiaries (but excluding any transaction

 

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subject to Section 4.10 of the Indenture and Section 6.24 of the Revolving Facility Agreement where the recipient is required to become the obligor on the Notes or a Guarantee) that is permitted by the Indenture and the Revolving Facility Agreement, the security interest in such Collateral shall be automatically released.

(d)        With the consent of the requisite Secured Parties in accordance with Section 9.02 of the Indenture and Section 8.3 of the Revolving Facility Agreement including consents obtained in connection with a tender offer or exchange offer for, or purchase of, Notes, the Security Interest in any Collateral, the release of which is the subject of such consents, shall be automatically released.

(e)        In connection with any termination or release pursuant to paragraph (a), (b), (c) or (d) of this Section 7.13, the Collateral Agent shall execute and deliver to any Grantor, at such Grantor’s expense, all documents that such Grantor shall reasonably request to evidence such termination or release. Any execution and delivery of documents pursuant to this Section 7.13 shall be without recourse to or warranty by the Collateral Agent.

SECTION 7.14.        Additional Guarantors. Pursuant to Section 4.22 of the Indenture and Section 6.24 of the Revolving Facility Agreement, each Person that becomes a Guarantor under the Indenture or Revolving Facility Agreement after the Issue Date is required to enter into this Agreement (and other applicable Security Documents) as a Grantor upon becoming such a Guarantor. Upon execution and delivery by the Collateral Agent and such an additional Guarantor of an instrument in the form of Exhibit A hereto, such Guarantor shall become a Grantor under this Agreement (and the other Security Documents specified therein) with the same force and effect as if originally named as a Grantor herein (and in such other Security Documents). The execution and delivery of any such instrument shall not require the consent of any other Grantor hereunder (or under any other Security Document). The rights and obligations of each Grantor hereunder (and under all other Security Documents) shall remain in full force and effect notwithstanding the addition of any new Grantor as a party to thi