10.750% SENIOR NOTES DUE 2016 INDENTURE

Exhibit 4.1

 

 

10.750% SENIOR NOTES DUE 2016

INDENTURE

by and between

STANDARD PACIFIC ESCROW LLC

and

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.,

as Trustee

 

Dated as of September 17, 2009

TABLE OF CONTENTS

 

TABLE OF CONTENTS (continued)

 

 

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TABLE OF CONTENTS (continued)

 

 

iii

TABLE OF CONTENTS (continued)

 

 

iv

CROSS-REFERENCE TABLE

This Cross-Reference Table is not a part of this Indenture.

 

N.A. means Not Applicable.

 

v

INDENTURE dated as of September 17, 2009, by and between STANDARD PACIFIC ESCROW LLC, a Delaware corporation (the “Company” ) and THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., a national banking association, as trustee (the “ Trustee ”).

Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders (as defined) of the 10.750% Senior Notes due 2016 of the Company (the “ Initial Notes ”) to be issued, from time to time, in one or more series as in this Indenture provided and, if and when issued pursuant to a registered or private exchange for the Initial Notes, the Company’s 10.750% Senior Notes due 2016 (the “ Exchange Notes ” and, together with the Initial Notes, the “ Notes ”)

ARTICLE ONE

DEFINITIONS AND INCORPORATION BY REFERENCE

Section 1.01. Definitions.

“ Additional Assets ” means (i) any property or assets (other than Indebtedness and Capital Stock) in a Related Business; or (ii) the Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the acquisition of such Capital Stock by the Company or another Restricted Subsidiary; provided , however , that any such Restricted Subsidiary is primarily engaged in a Related Business.

“ Additional Notes ” means any newly issued Notes, issued after the Original Issue Date from time to time in accordance with the terms of Section 2.01(b)(i) hereof.

“ Affiliate ” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, “control” when used with respect to any specified Person means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“ Agent ” means any Registrar, Paying Agent or co-Registrar or agent for service of notices and demands.

“ Asset Disposition ” means any sale, lease, transfer or other disposition (or series of related sales, leases, transfers or dispositions) by the Company or any Restricted Subsidiary, including any disposition by means of a merger, consolidation or similar transaction (each referred to for the purposes of this definition as a “disposition”), of (i) any shares of Capital Stock of a Restricted Subsidiary (other than directors’ qualifying shares and, to the extent required by local ownership laws in foreign countries, shares owned by foreign shareholders); (ii) all or substantially all the assets of any division, business segment or comparable line of business of the Company or any Restricted Subsidiary; or (iii) any other assets of the Company or any Restricted Subsidiary having a fair market value (as determined in good faith by the Board of Directors) in excess of $1,000,000 disposed of in a single transaction or

 

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series of related transactions outside of the ordinary course of business of the Company or such Restricted Subsidiary (other than, in the case of (i), (ii) and (iii) above, (A) a disposition by a Restricted Subsidiary to the Company or by the Company or a Restricted Subsidiary to a Wholly-Owned Subsidiary) and (B) a merger, consolidation or transfer of all or substantially of the Company’s assets to which Section 5.01 applies.

“ Assumption ” means the consummation of the transactions whereby Standard Pacific will assume all of the obligations of the Company under the Notes and this Indenture and the Guarantors will guarantee the Notes and this Indenture pursuant to the SP Assumption Supplemental Indenture and other agreements and the Trustee will become a party to the Intercreditor Agreement.

“ Average Life ” means, as of the date of determination, with respect to any Indebtedness, the quotient obtained by dividing (i) the sum of the products of the numbers of years from the date of determination to the dates of each successive scheduled principal payment (assuming the exercise by the obligor of such Indebtedness of all unconditional (other than as to the giving of notice) extension options of each such scheduled payment date) of such Indebtedness multiplied by the amount of such principal payment by (ii) the sum of all such principal payments.

“ Bank Credit Facility ” means the Revolving Credit Facility, the Term Loan Facilities, any other bank credit agreement or credit facility entered into in the future by the Company or any Restricted Subsidiary and any other agreement (including all related ancillary agreements) pursuant to which any of the Indebtedness, Obligations, commitments, costs, expenses, fees, reimbursements and other indemnities payable or owing under the Revolving Credit Facility, any Term Loan Facility or any other bank credit agreement or credit facility (or under any subsequent Bank Credit Facility) may be Refinanced, restructured, renewed, extended, refunded, replaced or increased, as any such Revolving Credit Facility, Term Loan Facility, bank credit agreement, credit facility or other agreement may from time to time at the option of the parties thereto be amended, renewed, supplemented or otherwise modified.

“ Bankruptcy Law ” means title 11 of the United States Code, as amended, or any similar federal or state law for the relief of debtors.

“ Board of Directors ” means the Board of Directors of the Company or any authorized committee thereof.

“ Board Resolution ” means a copy of a resolution certified by the secretary or an assistant secretary of any Person to have been duly adopted by the Board of Directors of such Person, which is in full force and effect on the date of such certification, and delivered to the Trustee.

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

“ Capitalized Lease Obligations ” means any obligations under a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP.

 

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“ Cash Equivalents ” means “Temporary Cash Investments”, as defined in the Credit Agreement.

“ Change of Control ” means the occurrence of any of the following events:

(i) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that for purposes of this clause such person or group shall be deemed to have “beneficial ownership” of all shares that any such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50% of the total voting power of the Voting Stock of the Company;

(ii) the merger or consolidation of the Company with or into another Person or the merger of another Person with or into the Company, or the sale of all or substantially all the assets of the Company to another Person, other than any such sale to one or more Restricted Subsidiaries, and in the case of any such merger or consolidation, the securities of the Company that are outstanding immediately prior to such transaction and which represent 100% of the aggregate voting power of the Voting Stock of the Company 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” occurs under any of the Other Public Notes or any other notes issued by the Company under an indenture or comparable documents to indentures used in jurisdictions outside of the United States.

“ Collateral ” means the property of the Company and the Pledgor Subsidiaries which is at any time subject to the Pledge Agreement

“ Collateral Agent ” means Bank of America, N.A., in its capacity as Collateral Agent under the Pledge Agreement and the Intercreditor Agreement, and its successors, assigns and replacements in such capacity.

“ Collateral Documents ” means, collectively, the Pledge Agreement, the Intercreditor Agreement and any agreements, documents, or instruments (including UCC financing statements) required to be executed pursuant to the foregoing and relating to the Collateral referred to therein, in each case as amended or modified from time to time.

“ Collateral Release ” means a release of Collateral following a Collateral Release Date.

“ Collateral Release Date ” means any date on which all Liens on the Collateral are released in accordance with the terms of the Indenture or the Collateral Documents.

“ Company ” means the party named as such in this Indenture until a successor replaces it pursuant to this Indenture and thereafter means the successor.

 

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“ Comparable Treasury Issue ” means the United States Treasury security selected by the Quotation Agent as having a maturity comparable to the Remaining Life that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity with the Remaining Life.

“ Comparable Treasury Price ” means, with respect to any redemption date, the average of the Reference Treasury Dealer Quotations for such redemption date.

“ Consolidated Coverage Ratio ” with respect to the Company as of any date of determination means the ratio of the Company’s EBITDA to its Consolidated Interest Incurred for the four fiscal quarters ending immediately prior to the date of determination. If the Indebtedness which is being Incurred is Incurred in connection with an acquisition by the Company or a Restricted Subsidiary, the Consolidated Coverage Ratio shall be determined after giving effect to both the Consolidated Interest Incurred related to the Incurrence of such Indebtedness and the EBITDA as if the acquisition had occurred at the beginning of the four fiscal quarter period (x) of the Person becoming a Restricted Subsidiary, or (y) in the case of an acquisition of assets that constitute substantially all of an operating unit or business, relating to the assets being acquired by the Company or a Restricted Subsidiary.

“ Consolidated Interest Expense ” of the Company means, for any period, the aggregate amount of interest which, in accordance with GAAP, would be included on an income statement for the Company and its Restricted Subsidiaries on a consolidated basis, whether expensed directly, or included as a component of cost of goods sold, or allocated to joint ventures or otherwise (including, but not limited to, imputed interest included on Capitalized Lease Obligations, all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers’ acceptance financing, the net costs associated with Hedging Obligations, amortization of other financing fees and expenses, the interest portion of any deferred payment obligation, amortization of discount or premium, if any, and all other non-cash interest expense), excluding interest expense related to mortgage banking operations, plus the product of (i) cash dividends paid on any Preferred Stock of the Company, times (ii) a fraction, the numerator of which is one and the denominator of which is one minus the then current effective aggregate federal, state and local tax rate of the Company, expressed as a decimal.

“ Consolidated Interest Incurred ” of the Company means, for any period, Consolidated Interest Expense, plus or minus without duplication, the difference between capitalized interest for such period and the interest component of cost of goods sold for such period.

“ Consolidated Net Income ” for any period, means the aggregate of the Net Income of the Company and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that (i) the Net Income of any Person in which the Company or any Restricted Subsidiary has a joint interest with a third party (other than an Unrestricted Subsidiary) shall be included only to the extent of the lesser of: (A) the amount of dividends or distributions actually paid to the Company or a Restricted Subsidiary; or (B) the Company’s direct or indirect proportionate interest in the Net Income of such Person; provided that, so long as the Company or a Restricted Subsidiary has an unqualified legal right to require the payment of a dividend or distribution, Net Income shall be determined solely pursuant to this clause (B); (ii) the Net Income of any Unrestricted Subsidiary shall be included only to the extent of the amount of dividends or distributions (the fair value of which, if other than in cash, to be

 

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determined by the Board of Directors, in good faith) by such Subsidiary to the Company or to any of its consolidated Restricted Subsidiaries; and (iii) the Net Income of any Unrestricted Subsidiary, any Homebuilding Joint Venture or any other Person in which the Company, or any Restricted Subsidiary has a joint interest with a third party that is not existing on June 30, 2009 shall be included only to the extent that the aggregate amount of dividends or distributions (the fair value of which, if other than cash, to be determined by the Board of Directors, in good faith) by such Subsidiary or Homebuilding Joint Venture, to the Company or to any of its consolidated Restricted Subsidiaries exceeds the aggregate amount of unpaid loans or advances and unreturned capital contributions made by the Company or any Restricted Subsidiary in or to such Subsidiary or Homebuilding Joint Venture.

“ Consolidated Net Worth ” of the Company means consolidated stockholders’ equity of the Company less any increase in stockholders’ equity of each of the Unrestricted Subsidiaries subsequent to June 30, 2009 attributable to the Company or any of its Restricted Subsidiaries, as determined in accordance with GAAP.

“ Consolidated Tangible Net Worth ” with respect to the Company means the consolidated stockholders’ equity of the Company, as determined in accordance with GAAP, less: (i) that portion of any increase in each of the Unrestricted Subsidiaries’ stockholders’ equity subsequent to June 30, 2009 attributable to the Company or any of its Restricted Subsidiaries, as determined in accordance with GAAP; and (ii) the Intangible Assets of the Company and the Restricted Subsidiaries.

“ Corporate Trust Office of the Trustee ” means the office of the Trustee at which at any particular time its corporate trust business in Chicago, Illinois shall be principally administered, which office as of the date of this instrument is located at the address of the Trustee specified in Section 12.01 hereof or such other address as to which the Trustee gives notice to the Company, except that with respect to presentation of Notes for payment or for registration of transfer or exchange, such term shall mean the office or agency of the Trustee at which at any particular time its corporate agency business shall be conducted, which office at the date of this instrument is located at 101 Barclay Street, New York, New York 10286; Attention: Corporate Trust Division - Corporate Finance Unit, or, in the case of any of such offices or agency, such other address as the Trustee may designate from time to time by notice to the Company.

“ Credit Agreement ” means that certain Revolving Credit Agreement, dated as of August 31, 2005 among Standard Pacific, the several financial institutions from time to time party thereto and Bank of America, N.A., as administrative agent, as amended, supplemented and otherwise modified from time to time.

“ Custodian ” means any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law.

“ Default ” means any event, act or condition that is, or after notice or the passage of time or both would be, an Event of Default.

 

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“ Disqualified Stock ” means, with respect to any Person, any Capital Stock which by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) or upon the happening of any event: (i) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise; (ii) is convertible or exchangeable, at the option of the holder thereof, for Indebtedness or Disqualified Stock; or (iii) is redeemable at the option of the holder thereof, in whole or in part, in each case on or prior to the Stated Maturity of the Notes; provided , however , that Disqualified Stock shall not include Capital Stock which is redeemable solely pursuant to a change in control provision that does not (A) cause such Capital Stock to become redeemable in circumstances which would not constitute a Change of Control and (B) require the Company to pay the redemption price therefor prior to the repurchase date specified under Section 3.08 hereof.

“ EBITDA ” of the Company for any period means the sum of Consolidated Net Income plus Consolidated Interest Expense plus, without duplication, the following to the extent deducted in calculating such Consolidated Net Income: (i) income tax expense; (ii) depreciation expense; (iii) amortization expense; and (iv) all other non-cash items reducing Consolidated Net Income (other than items that will require cash payments in the future and for which an accrual or reserve is, or is required by GAAP, made), less all non-cash items increasing Consolidated Net Income, in each case for such period. Notwithstanding the foregoing, the provision for taxes based on the income or profits of, and the depreciation and amortization of, a Subsidiary of the Company shall be added to Consolidated Net Income to compute EBITDA only to the extent (and in the same proportion) that the net income of such Subsidiary was included in calculating Consolidated Net Income.

“ Escrow Account ” means a segregated account, under the sole control of the Trustee that includes only cash, the proceeds thereof and interest earned thereon, free from all Liens (other than those Liens in favor of the Trustee permitted under the Escrow Agreement).

“ Escrow Agreement ” means the Escrow Agreement dated as of the date hereof, among The Bank of New York Mellon Trust Company, N.A. (acting in its capacities as the escrow agent thereunder and as Trustee) and the Company, relating to the Escrow Account.

“ Escrow Redemption Date ” means October 16, 2009 (or such earlier date as Standard Pacific determines in its sole discretion that the conditions precedent to the release of funds held in the Escrow Account cannot be satisfied).

“ Escrow Redemption Price ” means an amount of cash equal to 101% of the initial offering price of the Notes (after giving effect to original issue discount), plus accrued and unpaid interest to, but excluding, the Escrow Redemption Date.

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

“ GAAP ” means generally accepted accounting principles set forth in the accounting standards codification of the Financial Accounting Standards Board or in such other statements by such or any other entity as may be approved by a significant segment of the accounting profession of the United States, as in effect on the date of this Indenture.

 

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“ Guarantee ” means any guarantee by a Guarantor of the Notes that may be issued under this Indenture, executed pursuant to the terms of this Indenture, as amended or supplemented from time to time.

“ Guarantors ” means all of the Subsidiaries of Standard Pacific that execute a Guarantee of the Notes on the Refinancing Completion Date and any Restricted Subsidiary that subsequently executes a Guarantee of the Notes pursuant to the terms of this Indenture, until such time as any such Subsidiary is released from its Guarantee pursuant to the terms of this Indenture.

“ Hedging Obligations ” of any Person means the net obligations of such Person pursuant to any Interest Rate Agreement or any foreign exchange contract, currency swap agreement or other similar agreement to which such Person is a party or a beneficiary.

“ Holder ” means the person in whose name a Note is registered on the Registrar’s books.

“ Homebuilding Joint Venture ” means: (i) any Unrestricted Subsidiary; and (ii) any Person in which the Company or any of its Subsidiaries has an ownership interest but less than an 80% ownership interest that, in each case, was formed for and is engaged in homebuilding operations.

“ Incur ” means issue, assume, guarantee, incur or otherwise become liable for; provided , however , that any Indebtedness or Capital Stock of a Person existing at the time such Person becomes a Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred by such Subsidiary at the time it becomes a Subsidiary; provided further , however , that in the case of a discount security, neither the accrual of interest nor the accretion of original issue discount shall be considered an Incurrence of Indebtedness. The term “ Incurrence ” when used as a noun shall have a correlative meaning.

“ Indebtedness ” means on any date of determination (without duplication):

(i) the principal of and premium (if any) in respect of:

 

(a)

indebtedness of such Person for money borrowed; and

 

(b)

indebtedness for borrowed money evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable;

(ii) all Capitalized Lease Obligations of such Person;

(iii) all obligations of such Person issued or assumed as the deferred purchase price of property or services, all conditional sale obligations of such Person and all obligations of such Person under any title retention agreement (but in each case excluding (A) accounts payable and accrued expenses arising in the ordinary course of business and which are not more than 90 days past due and not in dispute and (B) any obligation to pay a contingent purchase price as long as such obligation remains contingent) which would appear as a liability on a balance sheet of a Person prepared on a consolidated basis in accordance with GAAP,

 

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which purchase price or obligation is due more than six months after the date of placing such property in service or taking delivery and title thereto or the completion of such services ( provided that, in the case of obligations of an acquired Person assumed in connection with an acquisition of such Person, such obligations would constitute Indebtedness of such Person);

(iv) all obligations of such Person for the reimbursement of any obligor on any letter of credit, banker’s acceptance or similar credit transaction (other than obligations with respect to letters of credit securing obligations (other than obligations described in (i) through (iii) 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 tenth Business Day following receipt by such Person of a demand for reimbursement following payment on the letter of credit);

(v) the amount of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock or, with respect to any Subsidiary of such person, any Preferred Stock (but excluding, in each case, any accrued dividends);

(vi) all obligations of the type referred to in clauses (i) through (v) of other Persons and all dividends of other Persons for the payment of which, in either case, such Person is responsible or liable, directly or indirectly, as obligor, guarantor or otherwise, including by means of any guarantee;

(vii) all obligations of the type referred to in clauses (i) through (vi) of other Persons secured by any Lien on any property or asset of such Person (whether or not such obligation is assumed by such Person), the amount of such obligation being deemed to be the lesser of the value of such property or assets or the amount of the obligation so secured; and

(viii) to the extent not otherwise included in this definition, Hedging Obligations of such Person.

The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency, other than a contingency solely within the control of such Person, giving rise to the obligations, of any contingent obligations as described above at such date; provided , however , that (i) in the case of any loan to value maintenance agreement (or similar agreement) by which the Company or any Restricted Subsidiary agrees to maintain for a joint venture a minimum ratio of Indebtedness outstanding to value of collateral property, only amounts owing by the Company or the Restricted Subsidiary (or which would be owing upon demand of the lender) at such date under such agreements will be included in Indebtedness and (ii) the amount outstanding at any time of any Indebtedness issued with original issue discount shall be deemed to be the face amount of such Indebtedness less the remaining unamortized portion of the original issue discount of such Indebtedness at such time as determined in conformity with GAAP.

 

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For purposes of calculating the Indebtedness of the Company under this Indenture, such calculation shall include the Indebtedness listed in clauses (i) through (viii) of the definition of “Indebtedness”, minus cash and temporary cash investments of the Company and its Restricted Subsidiaries not subject to any Lien, encumbrance, or restriction in excess of $5,000,000.

“ Indenture ” means this Indenture as amended, modified or supplemented from time to time.

“ Intangible Assets ” means the amount (to the extent reflected in determining consolidated stockholders’ equity) of: (A) all write-ups (other than write-ups of tangible assets of a going concern business made within twelve months after the acquisition of such business) in the book value of any asset owned by the Company or any Restricted Subsidiary; and (B) all goodwill, trade names, trademarks, patents and other like intangibles.

“ Intercreditor Agreement ” means the Collateral Agent and Intercreditor Agreement dated as of May 3, 2006 among the Collateral Agent, the Trustee, Standard Pacific, the Pledgor Subsidiaries and the Creditor Representatives referred to therein, as amended, supplemented and otherwise modified from time to time.

“ Interest Payment Date ” means the Stated Maturity of an installment of interest on the Notes.

“ Interest Rate Agreement ” means any interest rate swap agreement, interest rate cap agreement or other financial agreement or arrangement designed to protect the Company or any Restricted Subsidiary against fluctuations in interest rates.

“ Investment ” in any Person means any direct or indirect advance, loan (other than advances to customers in the ordinary course of business that are recorded as accounts receivable on the balance sheet of such Person) or other extensions of credit (including by way of guarantee or similar arrangement) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, Indebtedness or other similar instruments issued by such Person.

“ Investment Grade ” means, with respect to a debt rating of the Notes, a rating of Baa3 or higher by Moody’s together with a rating of BBB- or higher by S&P or, in the event S&P or Moody’s or both shall cease rating the Notes (for reasons outside the control of the Company) and the Company shall select any other Rating Agency, the equivalent of such ratings by such other Rating Agency.

“ Lien ” means, with respect to any Property, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such Property. For purposes of this definition, a Person shall be deemed to own, subject to a Lien, any Property which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such Property.

“ Maturity ” means the date on which the principal of the Notes becomes due and payable, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise.

 

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“ Moody’s ” means Moody’s Investors Service, Inc. or any successor to its debt rating business.

“ Mortgage ” means a first priority mortgage or first priority deed of trust on improved real property.

“ Net Income ” of any Person means the net income (loss) of such Person, determined in accordance with GAAP; excluding, however, from the determination of Net Income (i) all gains (to the extent that they exceed all losses) realized upon the sale or other disposition (including, dispositions pursuant to sale leaseback transactions) of any real property or equipment of such Person, which is not sold or otherwise disposed of in the ordinary course of business, or of any Capital Stock of such Person or its Subsidiaries owned by such Person, (ii) all non-cash compensation expenses, and (iii) all non-cash charges relating to the revaluation of earnouts or similar obligations.

“ Net Proceeds ” means with respect to any sale, assignment, exchange, lease, transfer or other disposition of assets, the consideration received by the Company (or a Restricted Subsidiary, as the case may be) for such disposition after (i) provision for all income and other taxes resulting from such asset disposition, (ii) payment of all brokerage commissions, underwriting, legal, accounting, appraisal and other fees and expenses related to such asset sale and (iii) deduction of appropriate amounts to be provided by the Company or a Restricted Subsidiary as a reserve, in accordance with GAAP, against any liabilities associated with the assets sold or disposed of in such asset disposition and retained by the Company or a Restricted Subsidiary after such asset sale, including, pension and other post-employment benefit liabilities and against any indemnification obligations associated with the assets sold or disposed of in such asset sale.

“ 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 the property without liability on the part of the Company or any Subsidiary (other than the Subsidiary which holds title to such property) for any deficiency.

“ Notes ” has the meaning assigned to it in the preamble to this Indenture. Except as expressly provided herein, the Initial Notes and any Additional Notes shall be treated as a single class for all purposes under this Indenture, and unless the context otherwise requires, all references to Notes shall include the Initial Notes and any Additional Notes.

“ Obligations ” means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness.

“ Officer ” means the Chairman of the Board, the President, any Vice President, the Treasurer, the Controller or the Secretary of the Company.

“ Officers ’ Certificate ” means a certificate signed by two Officers or by an Officer and an Assistant Treasurer or an Assistant Secretary of the Company.

 

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“ Opinion of Counsel ” means a written opinion from legal counsel. The counsel may be an employee of or counsel to the Company or the Trustee.

“ Original Issue Date ” means the date of the original issue of any of the Notes pursuant to this Indenture.

“ Other Public Notes ” means the Company’s 7% Senior Notes due 2015, the Company’s 6  ¹ / 4 % Senior Notes due 2014, the Company’s 7  ³ / 4 % Senior Notes due 2013, the Company’s 9  ¹ / 4 % Senior Subordinated Notes due 2012, the Company’s 6% Convertible Senior Subordinated Notes due 2012, the Company’s 6  ⁷ / 8 % Senior Notes due 2011, and the Company’s 6  ¹ / 2 % Senior Notes due 2010.

“ Person ” means an individual, corporation, partnership, joint venture, association, joint-stock company, limited liability company, limited liability partnership, trust, unincorporated organization, or government or any agency or political subdivision thereof.

“ Pledge Agreement ” means the Pledge Agreement dated as of May 3, 2006 among Standard Pacific, the Subsidiaries of Standard Pacific party thereto and the Collateral Agent granting a lien to the Collateral Agent for the benefit of the holders of the Qualified Obligations, in each case as at any time amended, modified, supplemented, renewed or extended.

“ Pledgor Subsidiaries ” has the meaning given in the Pledge Agreement.

“ Preferred Stock ”, as applied to the Capital Stock of any corporation, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such corporation, over shares of Capital Stock of any other class of such corporation.

“ principal ” of a debt security means the principal of the security plus, when appropriate, the premium, if any, on the security.

“ Property ” of any Person means all types of real, personal, tangible, intangible or mixed property owned by such Person, whether or not included in the most recent consolidated balance sheet of such Person and its Subsidiaries under GAAP.

“ Qualified Obligations ” has the meaning given in the Pledge Agreement and, from and after the Refinancing Completion Date, includes the Obligations under the Notes and this Indenture.

“ Quotation Agent ” means the Reference Treasury Dealer appointed by the Company.

“ Rating Agency ” means a statistical rating agency or agencies, as the case may be, nationally recognized in the United States and selected by the Company (as certified by a resolution of the Board of Directors) which shall be substituted for S&P or Moody’s, or both, as the case may be.

 

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“ Redemption Price ” when used with respect to any Note to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture.

“ Reference Treasury Dealer ” means Citigroup Global Markets Inc and its successors; provided , however , that if the foregoing ceases to be a primary U.S. Government securities dealer in New York City, a “primary treasury dealer,” the Company will substitute therefor another primary treasury dealer.

“ Reference Treasury Dealer Quotations ” means, with respect to each Reference Treasury Dealer and any redemption date, the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third business day preceding such redemption date.

“ Refinance ” means, in respect of Indebtedness, to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue other Indebtedness in exchange or replacement for, such Indebtedness. “ Refinancing ” shall have a correlative meaning.

“ Refinancing Completion Date ” means the date on which the funds held in the Escrow Account are released upon satisfaction of all conditions precedent to such release, as set forth in the Escrow Agreement.

“ Regular Record Date ” for the interest payable on any Interest Payment Date on March 15 on the Notes means March 1 and for the interest payable on any Interest Payment Date on September 15 on the Notes means September 1(in each case whether or not a Business Day).

“ Related Business ” means, for the purposes of the definition of “Additional Assets,” any business related, ancillary or complementary (as defined in good faith by the Board of Directors) to the business of the Company and the Restricted Subsidiaries on the Original Issue Date.

“ Restricted Investment ” means any loan, advance, capital contribution or transfer (including by way of guaranty or other similar arrangement) in or to any Unrestricted Subsidiary, Homebuilding Joint Venture or any Person in which the Company, directly or indirectly, has an ownership interest but less than an 80% ownership interest; provided , however , that loans, advances, capital contributions or transfers (including by way of guaranty or other similar arrangement) to a Homebuilding Joint Venture shall be counted as a Restricted Investment only to the extent that the aggregate at any one time outstanding of all such amounts expended (or with respect to guaranties or similar arrangements the amounts then guaranteed) exceed, subsequent to June 30, 2009, 30% of Consolidated Tangible Net Worth in the aggregate for all Homebuilding Joint Ventures. In the case of any loan to value maintenance agreement (or similar agreement) by which the Company or any Restricted Subsidiary agrees to maintain for a joint venture a minimum ratio of indebtedness outstanding to value of collateral property, only amounts owing by the Company or the Restricted Subsidiary (or which would be owing upon demand of the lender) under such agreements will be counted as a Restricted Investment. Restricted Investment shall include the fair market value of the net assets of any Restricted Subsidiary that at any time is designated an Unrestricted Subsidiary. Any property transferred to an Unrestricted Subsidiary, and the net assets of a Restricted Subsidiary that is designated an Unrestricted Subsidiary, shall be valued at fair market value at the time of such transfer, in each case as determined by the Board of Directors in good faith.

 

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“ Restricted Subsidiary ” means any 80% or more owned Subsidiary that has not been designated an Unrestricted Subsidiary.

“ Revolving Credit Facility ” means the Credit Agreement and the other Loan Documents (as defined in the Credit Agreement) or other analogous documents entered into in connection with any refinancing, restructuring, renewal, extension, refunding, replacement or increase thereof, as any of the foregoing has been or may from time to time be amended, renewed, supplemented or otherwise modified at the option of the parties thereto (in whole or in part, and without limitation as to amount, terms, conditions, covenants and other provisions) and to add any Subsidiary as additional direct obligors thereunder.

“ S&P ” means Standard & Poor’s Ratings Services, a division of McGraw Hill, Inc., a New York corporation or any successor to its debt rating business.

“ SEC ” means the Securities and Exchange Commission or any successor agency performing the duties now assigned to it under the TIA.

“ SP Assumption Supplemental Indenture ” means a supplemental indenture, substantially in the form as set forth in Exhibit D hereto to be entered into on the Refinancing Completion Date, among Standard Pacific, the Guarantors and the Trustee.

“ Standard Pacific ” mean Standard Pacific Corp., a Delaware corporation.

“ Stated Maturity ” means the date specified in the Notes as the fixed date on which an amount equal to the principal of or interest on the Notes is due and payable.

“ Subordinated Notes ” means the Company’s 9  ¹ / 4 % Senior Subordinated Notes due 2012 and the 6% Convertible Senior Subordinated Notes due 2012.

“ Subsidiary ” means a corporation, a majority of the capital stock with voting power to elect directors of which is directly or indirectly owned by the Company and its Subsidiaries, or any person in which the Company and its Subsidiaries have at least a majority interest.

“ Term Loan A Facility ” means that certain Term Loan A Credit Agreement (the “ Term Loan A Credit Agreement ”), dated as of May 5, 2006 among the Company, the several financial institutions from time to time party thereto and Bank of America, N.A., as administrative agent, and the other Loan Documents (as defined in the Term Loan A Credit Agreement) or other analogous documents entered into in connection with any Refinancing, restructuring, renewal, extension, refunding, replacement or increase thereof, as any of the foregoing has been or may from time to time be amended, renewed, supplemented or otherwise modified at the option of the parties thereto (in whole or in part, and without limitation as to amount, terms, conditions, covenants and other provisions) and to add any Subsidiary as additional direct obligors thereunder.

 

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“ Term Loan B Facility ” means that certain Term Loan B Credit Agreement (the “ Term Loan B Credit Agreement ”), dated as of May 5, 2006 among the Company, the several financial institutions from time to time party thereto and Bank of America, N.A., as administrative agent, and the other Loan Documents (as defined in the Term Loan B Credit Agreement) or other analogous documents entered into in connection with any Refinancing, restructuring, renewal, extension, refunding, replacement or increase thereof, as any of the foregoing has been or may from time to time be amended, renewed, supplemented or otherwise modified at the option of the parties thereto (in whole or in part, and without limitation as to amount, terms, conditions, covenants and other provisions) and to add any Subsidiary as additional direct obligors thereunder.

“ Term Loan Facilities ” means, collectively, the Term Loan A Facility and the Term Loan B Facility.

“ TIA ” means the Trust Indenture Act of 1939, as in effect from time to time.

“ Treasury Rate ” means, with respect to any redemption date, (1) the yield, under the heading which represents the average for the immediately preceding week, appearing in the most recently published statistical release designated “H.15(519)” or any successor publication that is published weekly by the Board of Governors of the Federal Reserve System and that establishes yields on actively traded United States Treasury securities adjusted to constant maturity under the caption “Treasury Constant Maturities,” for the maturity corresponding to the Comparable Treasury Issue (if no maturity is within three months before or after the stated maturity, yields for the two published maturities most closely corresponding to the Comparable Treasury Issue shall be determined, and the Treasury Rate shall be interpolated or extrapolated from such yields on a straight-line basis, rounding to the nearest month) or (2) if such release (or any successor release) is not published during the week preceding the calculation date or does not contain such yields, the rate per annum equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue, calculated using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date. The Treasury Rate shall be calculated on the third business day preceding the redemption date.

“ Trigger Event ” has the meaning given in the Intercreditor Agreement.

“ Trustee ” means the party named as such in this Indenture until a successor replaces it pursuant to this Indenture and thereafter means the successor serving hereunder.

“ Trust Officer ” means, with respect to the Trustee, any officer assigned to the Corporate Trust Administration—Corporate Finance Unit (or any successor division or unit) of the Trustee located at the Corporate Trust Office of the Trustee, who shall have direct responsibility for the administration of this Indenture, and for the purposes of Section 7.01(c)(ii) and the second sentence of Section 7.05 shall also include any other officer of the Trustee to whom any corporate trust matter is referred because of such officer’s knowledge of and familiarity with the particular subject.

 

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“ U.S. government obligations ” means securities which are (i) direct obligations of the United States for the payment of which its full faith and credit is pledged or (ii) obligations of a person controlled or supervised by and acting as an agency or instrumentality of the United States the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depositary receipt issued by a bank or trust company as custodian with respect to any such U.S. government obligations or a specific payment of interest on or principal of any such U.S. government obligation held by such custodian for the account of the holder of a depositary receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depositary receipt from any amount received by the custodian in respect of the U.S. government obligation or the specific payment of interest on or principal of the U.S. government obligation evidenced by such depositary receipt.

“ United States ” means the United States of America.

“ Unrestricted Subsidiary ” means: (i) any Subsidiary in which the Company, directly or indirectly, has less than an 80% ownership interest; (ii) any 80% or more owned Subsidiary which in accordance with Section 4.12 hereof has been designated in a resolution adopted by the Board of Directors as an Unrestricted Subsidiary, in each case unless and until such Subsidiary shall, in accordance with Section 4.12 hereof, be designated by a resolution of the Board of Directors as a Restricted Subsidiary; and (iii) any 80% or more owned Subsidiary a majority of the Voting Stock of which shall at the time be owned directly or indirectly by one or more Unrestricted Subsidiaries. As of the date hereof, Standard Pacific Mortgage, Inc. and its Subsidiaries and Standard Pacific Investment Corp. and its Subsidiaries are Unrestricted Subsidiaries.

“ Voting Stock ” means, with respect to any Person, securities of any class of Capital Stock of such Person entitling the holders thereof (whether at all times or only so long as no senior class of stock has voting power by reason of any contingency) to vote in the election of members of the board of directors of such Person.

“ Warehouse Facility ” means any bank credit agreement, repurchase agreement or other credit facility entered into to finance the making of Mortgage loans originated by the Company or any of its Subsidiaries.

“ Wholly-Owned Subsidiary ” means a Subsidiary, all of the Capital Stock (whether or not voting, but exclusive of directors’ qualifying shares) of which is owned by the Company or a Wholly-Owned Subsidiary.

Section 1.02. Other Definitions.

 

 

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Section 1.03. Incorporation by Reference of Trust Indenture Act.

This Indenture is subject to the mandatory provisions of the TIA, which are incorporated by reference in and made a part of this Indenture. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings:

“ Commission ” means the SEC.

“ indenture securities ” means the Notes.

“ indenture security holder ” means a Holder.

 

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“ indenture to be qualified ” means this Indenture.

“ indenture trustee ” or “ institutional trustee ” means the Trustee.

“ obligor ” on the indenture securities means the Company or any other obligor on the Notes.

All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings so assigned to them by such definitions.

Section 1.04. Rules of Construction.

Unless the context otherwise requires:

(a) a term has the meaning assigned to it;

(b) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;

(c) “or” is not exclusive;

(d) “including” means including without limitation;

(e) words in the singular include the plural, and in the plural include the singular;

(f) the principal amount of any noninterest bearing or other discount security at any date shall be the principal amount thereof that would be shown on a balance sheet of the issuer dated such date prepared in accordance with GAAP; and

(g) provisions apply to successive events and transactions.

ARTICLE TWO

THE NOTES

Section 2.01. Amount of Notes.

(a) The aggregate principal amount of Notes, which may be authenticated and delivered under this Indenture on the Original Issue Date is $280,000,000. All Notes shall be identical in all respects other than issue prices and issuance dates. The Notes may be issued in one or more series; provided , however , that any Notes issued with original issue discount (“ OID ”) for Federal income tax purposes shall not be issued as part of the same series as any Notes that are issued with a different amount of OID or are not issued with OID. All Notes of any one series shall be substantially identical except as to denomination.

(b) (i)  Issuance of Additional Notes . Subject to Section 4.06, the Company shall be entitled to issue Additional Notes under this Indenture which shall have substantially identical terms as the Notes, other than with respect to the date of issuance, issue price, and amount of interest payable on the first payment date applicable thereto. The Initial Notes and any Additional Notes shall be treated as

 

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a single class for all purposes under this Indenture but may or may not be fungible for federal income tax purposes and may have a different “CUSIP”, “ISIN” or “Common Code” number from the Initial Notes.

(c) With respect to any Additional Notes, the Company shall set forth in an Officers’ Certificate, a copy of which shall be delivered to the Trustee, the following information:

 

(i)

the aggregate principal amount of Notes outstanding immediately prior to the issuance of such Additional Notes;

 

(ii)

the aggregate principal amount of such Additional Notes to be authenticated and delivered pursuant to this Indenture;

 

(iii)

the issue price and the issue date of such Additional Notes and the amount of interest payable on the first payment date applicable thereto; and

 

(iv)

the “CUSIP”, “ISIN” or “Common Code” number, as applicable, of such Additional Notes.

If any of the terms of any series are established by action taken pursuant to a resolution of the Board of Directors, a copy of an appropriate record of such action shall be certified by the Secretary or any Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Officers’ Certificate or the indenture supplemental hereto setting forth the terms of the series.

Section 2.02. Form and Dating.

Provisions relating to the Initial Notes and the Exchange Notes are set forth in Appendix A, which is hereby incorporated in and expressly made part of this Indenture. The Initial Notes and the Trustee’s certificate of authentication and any Additional Notes and the Trustee’s certificate of authentication shall be substantially in the form of Exhibit A to Appendix A which is hereby incorporated in and expressly made a part of this Indenture. The Exchange and the Trustee’s certificate of authentication shall each be substantially in the form of Exhibit B, which is hereby incorporated in and expressly made a part of this Indenture. The Notes may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Company is subject, if any, or usage; provided that any such notation, legend or endorsement is in a form reasonably acceptable to the Company. Each Note shall be dated the date of its authentication.

Section 2.03. Execution and Authentication.

Two Officers shall sign the Notes for the Company by manual or facsimile signature.

If an Officer whose signature is on a Note no longer holds that office at the time the Trustee authenticates the Note, the Note shall nevertheless be valid.

 

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A Note shall not be valid until the Trustee manually signs the certificate of authentication on the Note. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture.

The Trustee shall authenticate and make available for delivery upon a written order of the Company signed by one Officer (a) Initial Notes for original issue on the date hereof in an aggregate principal amount of $280,000,000, (b) subject to the terms of this Indenture, including Section 4.06, Additional Notes in an aggregate principal amount to be determined at the time of issuance and specified therein and (c) the Exchange Notes for issue in a Registered Exchange Offer pursuant to the Registration Agreement for a like principal amount of Initial Notes exchanged pursuant thereto or otherwise pursuant to an effective registration statement under the Securities Act. Such order shall specify the amount of Notes to be authenticated, the date on which the original issue of Notes is to be authenticated and whether the Notes are to be Initial Notes or Exchange Notes.

The Trustee may appoint an authenticating agent reasonably acceptable to the Company to authenticate the Notes. Any such appointment shall be evidenced by an instrument signed by the Trustee, a copy of which shall be furnished to the Company. Unless limited by the terms of such appointment, an authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as any Registrar, Paying Agent or agent for service of notice and demands.

Section 2.04. Registrar and Paying Agent.

The Company shall maintain an office or agency where Notes may be presented for registration of transfer or for exchange (the “ Registrar ”) and an office or agency where Notes may be presented for payment (the “ Paying Agent ”) and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may have one or more co-registrars and one or more additional paying agents. The term “Registrar” includes any co-registrar. The term “Paying Agent” includes any additional paying agent.

The Company shall enter into an appropriate agency agreement with any Registrar or Paying Agent not a party to this Indenture, which shall incorporate the terms of the TIA. The agreement shall implement the provisions of this Indenture that relate to such agent. The Company shall notify the Trustee of the name and address of any such agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor in accordance with Section 7.07. The Company or any of its domestically incorporated Wholly-Owned Restricted Subsidiaries may act as Paying Agent, Registrar or transfer agent.

The Company initially appoints the Trustee as Registrar and Paying Agent in connection with the Notes.

The Company may remove any Registrar or Paying Agent upon written notice to such Registrar or Paying Agent and to the Trustee; provided , however , that no such removal shall become effective until (i) acceptance of an appointment by a successor as

 

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evidenced by an appropriate agreement entered into by the Company and such successor Registrar or Paying Agent, as the case may be, and delivered to the Trustee or (ii) notification to the Trustee that the Trustee shall serve as Registrar or Paying Agent until the appointment of a successor in accordance with clause (i) above. The Registrar or Paying Agent may resign at any time upon written notice to the Company and the Trustee.

Section 2.05. Paying Agent to Hold Money in Trust.

Each Paying Agent shall hold in trust for the benefit of Holders and the Trustee all money held by the Paying Agent for the payment of principal, interest or premium on the Notes, and shall notify the Trustee of any default by the Company in making any such payment. If the Company or a Wholly-Owned Restricted Subsidiary acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon doing so the Paying Agent (if other than the Company or any of its Wholly-Owned Restricted Subsidiaries) shall have no further liability for the money.

Section 2.06. Holder Lists.

The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders. If the Trustee or the Paying Agent is not the Registrar, the Company shall furnish to the Trustee and each Paying Agent at least seven Business Days before each Interest Payment Date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee or the Paying Agent may reasonably require of the names and addresses of Holders.

Section 2.07. Replacement Notes.

If the Holder of a Note claims that the Note has been lost, destroyed, mutilated or wrongfully taken, the Company shall issue and, upon written request of any Officer of the Company, the Trustee shall authenticate a replacement Note; provided, in the case of a lost, destroyed or wrongfully taken Note, that the requirements of Section 8-405 of the New York Uniform Commercial Code are met. If any such lost, destroyed, mutilated or wrongfully taken Note shall have matured or shall be about to mature, the Company may, instead of issuing a substitute Note therefor, pay such Note without requiring (except in the case of a mutilated Note) the surrender thereof. An indemnity bond must be sufficient in the judgment of the Company and the Trustee to protect the Company, the Trustee or any Agent from any loss which any of them may suffer if a Note is replaced, including the acquisition of such Note by a bona fide purchaser. The Company or the Trustee may charge for its expenses in replacing a Note.

Every replacement Note is an additional obligation of the Company and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder.

 

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Section 2.08. Outstanding Notes.

Notes outstanding at any time are all Notes authenticated by the Trustee except for those canceled by it and those described in this Section as not outstanding. A Note does not cease to be outstanding because the Company or one of its Affiliates holds the Note. If a Note is replaced pursuant to Section 2.07, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser. If the Paying Agent segregates and holds in trust, in accordance with this Indenture, on a redemption date or Maturity date money sufficient to pay all principal and interest payable on that date with respect to Notes, then on and after that date such Notes cease to be outstanding and interest on them ceases to accrue.

Subject to the foregoing provisions of this Section, each Note delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Note shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Note.

Section 2.09. Temporary Notes.

Until Definitive Notes are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of Definitive Notes but may have variations that the Company considers appropriate for temporary Notes. Without unreasonable delay, the Company shall prepare and, upon surrender for cancellation of the temporary Note, the Company shall execute and the Trustee shall authenticate Definitive Notes in exchange for temporary Notes. Until so exchanged, the temporary Notes shall in all respects be entitled to the same benefits under this Indenture as Definitive Notes authenticated and delivered hereunder.

Section 2.10. Cancellation.

The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange, redemption or payment. The Trustee and no one else shall cancel and dispose of in accordance with its standard procedures, or retain in accordance with its standard retention policy, all Notes surrendered for registration or transfer, exchange, redemption, payment or cancellation.

Section 2.11. Defaulted Interest.

If the Company defaults in a payment of interest on the Notes, it shall pay the defaulted interest plus any interest payable on the defaulted interest to the persons who are Holders on a subsequent special record date. The Company shall fix such special record date and an Interest Payment Date which shall be reasonably satisfactory to the Trustee. At least 15 days before such special record date, the Company shall mail to each Holder a notice that states the record date, the payment date and the amount of defaulted interest to be paid. On or before the date such notice is mailed, the Company shall deposit with the Paying Agent money sufficient to pay the amount of defaulted interest to be so paid. The Company may pay defaulted interest in any other lawful manner if, after notice given by the Company to the Trustee of the proposed payment, such manner of payment shall be deemed practicable by the Trustee.

 

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Section 2.12. Treasury Notes.

In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver, consent or notice, Notes owned by the Company or any of its Affiliates shall be considered as though they are not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes which the Trustee actually knows are so owned shall be so considered.

Section 2.13. CUSIP, ISIN or Common Code Numbers.

The Company in issuing the Notes may use “CUSIP,” “ISIN” or “Common Code” numbers (if then generally in use) and, if so, the Trustee shall use such numbers in notices of redemption or repurchase as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness or accuracy of such numbers either as printed on the Notes or as contained in any notice of a redemption or repurchase and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption or repurchase shall not be affected by any defect in or omission of such numbers. The Company shall promptly notify the Trustee of any change in “CUSIP,” “ISIN” or “Common Code” numbers.

Section 2.14. Deposit of Moneys.

Prior to 11:00 a.m. New York City time on each Interest Payment Date and Maturity date with respect to each Note, the Company shall have deposited with the Paying Agent in immediately available funds money sufficient to make cash payments due on such Interest Payment Date or Maturity date, as the case may be, in a timely manner which permits the Paying Agent to remit payment to the Holders on such Interest Payment Date or Maturity date, as the case may be.

ARTICLE THREE

REDEMPTION AND PREPAYMENT

Section 3.01. Optional Redemption.

(a) The Company may, at its option, redeem the Notes, in whole or in part, at any time or from time to time on or after the Refinancing Completion Date and prior to the Maturity Date, at a Redemption Price equal to the greater of: (i) 100% of the aggregate principal amount of Notes to be redeemed; or (ii) the sum, as determined by the Quotation Agent, of 100% of the present values of the principal amount of the Notes to be redeemed and the remaining scheduled payments of interest thereon from the redemption date to the Maturity Date of the Notes to be redeemed (exclusive of interest accrued to the redemption date), discounted from their respective scheduled payment dates to the redemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate, plus 75 basis points, plus, in either case, accrued and unpaid interest, if any, on the principal amount being redeemed to the redemption date.

 

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(b) In the case of any optional redemption of the Notes, interest installments whose Stated Maturity is on or prior to the redemption date will be payable to the Holders of such Notes at the close of business on the relevant Regular Record Date. Notes (or portions thereof) for whose redemption provision is made in accordance with this Indenture shall cease to bear interest from and after the redemption date.

Section 3.02. Notices to Trustee.

If the Company elects to redeem Notes pursuant to Section 3.01 hereof, it shall notify the Trustee in writing of the redemption date, the principal amount of Notes to be redeemed, the redemption price and the applicable CUSIP, ISIN or Common Code numbers.

The Company shall give each notice provided for in this Section 3.02 at least 5 days before the notice of any such redemption is to be mailed to Holders (unless a shorter notice shall be satisfactory to the Trustee). Such notice shall be accompanied by an Officers’ Certificate and an Opinion of Counsel from the Company to the effect that such redemption will comply with the conditions herein.

Section 3.03. Selection of Notes to be Redeemed.

If fewer than all of the Notes are to be redeemed, the Trustee shall select the Notes to be redeemed on a pro rata basis, by lot or by such other method as the Trustee in its sole discretion shall deem to be fair and appropriate. The Trustee shall make the selection from Notes outstanding not previously called for redemption and shall promptly notify the Company of the serial numbers or other identifying attributes of the Notes so selected. Notes and portions of them it selects shall be in amounts equal to the minimum denomination of $2,000 or multiples in excess thereof of $1,000. Provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. The Trustee shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Notes selected for partial redemption, the aggregate principal amount thereof to be redeemed.

Section 3.04. Notice of Redemption.

At least 30 days but not more than 60 days before a redemption date, the Company will mail or caused to be mailed, a notice of redemption by first-class mail, postage prepaid, to each Holder of Notes to be redeemed at its registered address, except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with a defeasance of the Notes or a satisfaction and discharge of this Indenture pursuant to Article Eight hereof.

The notice shall identify the Notes to be redeemed and shall state:

(a) the redemption date;

(b) the redemption price (or formula for calculating the same);

(c) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the redemption date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion of the original Note representing the same indebtedness to the extent not redeemed will be issued in the name of the Holder of the Notes upon cancellation of the original Note;

 

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(d) the name and address of the Paying Agent;

(e) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price; and

(f) that, unless the Company defaults in making such redemption payment, interest on Notes called for redemption ceases to accrue on and after the redemption date, subject to the satisfaction of any condition to such redemption;

(g) no representation is made as to the correctness or accuracy of the CUSIP, ISIN or Common Code number, if any, listed in such notice or printed on the Notes; and

(h) if notice of redemption of Notes to be redeemed has been given by the Company and funds sufficient to pay the redemption price (including any accrued and unpaid interest) of all Notes to be redeemed on the redemption date are irrevocably available for the redemption of the Notes called for redemption on the redemption date, that the Notes called for redemption shall cease to bear interest on and after such redemption date and that the only remaining right of the Holders will be to receive payment of the redemption price.

At the Company’s request, the Trustee shall give the notice of redemption in the Company’s name and at its expense; provided , however , that the Company shall deliver to the Trustee at least 15 days prior to the date on which notice of redemption is to be mailed or such shorter period as may be satisfactory to the Trustee, an Officers’ Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph.

Section 3.05. Effect of Notice of Redemption.

Once notice of redemption is mailed in accordance with Section 3.04 hereof, Notes called for redemption become irrevocably due and payable on the redemption date and at the redemption price as set forth in the notice of redemption, subject to the satisfaction of any conditions to such redemption. A notice of redemption may be conditional in that the Company may, notwithstanding the giving of the notice of redemption, condition the redemption of the Notes specified in the notice of redemption upon the completion of other transactions, such as refinancings. Upon surrender to the Paying Agent, such Notes shall be paid at the redemption price, plus accrued interest to the redemption date.

Section 3.06. Deposit of Redemption Price.

On or before 11:00 a.m. New York time, on any redemption date, the Company shall deposit with the Paying Agent immediately available funds sufficient to pay the redemption price of and accrued interest on all Notes to be redeemed on that date.

 

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Section 3.07. Notes Redeemed in Part.

Upon surrender of a Note that is redeemed in part, the Company shall execute and the Trustee shall authenticate for each Holder a new Note equal in principal amount to the unredeemed portion of the Note surrendered.

Section 3.08. Change of Control.

Upon the occurrence of a Change of Control, each Holder shall have the right to require that the Company repurchase all or a portion of such Holder’s Notes at a purchase price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of repurchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant Interest Payment Date), in accordance with the provisions of the next paragraph.

Within 30 days following any Change of Control, the Company shall mail a notice to each Holder with a copy to the Trustee stating:

(a) that a Change of Control has occurred and that such Holder has the right to require the Company to purchase such Holder’s Notes at a purchase price in cash equal to 101% of the principal amount outstanding at the repurchase date plus accrued and unpaid interest, if any, to the date of repurchase (subject to the right of Holders of record on the relevant record date to receive interest on the relevant Interest Payment Date) (the “ Repurchase Price ”);

(b) the circumstances and relevant facts and relevant financial information regarding such Change of Control;

(c) the repurchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed) (the “ Repurchase Date ”);

(d) that any Note not tendered or accepted for payment will continue to accrue interest;

(e) that any Note accepted for payment shall cease to accrue interest after the Repurchase Date;

(f) that Holders electing to have a Note purchased will be required to surrender the Note, with the form entitled “Option of Holder to Elect Purchase” on the reverse side of the Note completed, to the Paying Agent at the address specified in the Notice at least five days before the Repurchase Date;

(g) that Holders will be entitled to withdraw their election if the Paying Agent receives, no later than three days prior to the Repurchase Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have the Note purchased; and

 

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(h) that Holders whose Notes were purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered.

On the Repurchase Date, the Company shall (i) accept for payment Notes or portions thereof properly tendered, (ii) deposit with the Paying Agent money sufficient to pay the purchase price of all Notes or portions thereof so accepted and (iii) deliver to the Trustee Notes so accepted together with an Officers’ Certificate stating the Notes or portions thereof accepted for payment by the Company. The Paying Agent shall promptly mail or deliver to Holders of Notes so accepted, payment in an amount equal to the Repurchase Price, and the Trustee shall promptly authenticate and mail or deliver to such Holders a new Note equal in principal amount of any unpurchased portion of the Note surrendered. The Company will publicly announce the results on or as soon after as practical the Repurchase Date. For purposes of this Section 3.08, the Trustee shall act as the Paying Agent.

Section 3.09. Special Mandatory Redemption.

(a) Terms used in this Section 3.09 and not otherwise defined in this Indenture have the meanings set forth in the Escrow Agreement.

(b) In accordance with the terms and conditions of the Escrow Agreement, (i) if the conditions to the release of the Escrow Funds are not satisfied on or prior to October 16, 2009, the Company shall redeem all and not less than all of the Notes at the Escrow Redemption Price on October 16, 2009, with notice of such redemption to be provided on such date; and (ii) the Company may, on or prior to October 16, 2009, if the Company determines in its sole discretion that the Release Documents cannot be provided on or prior to October 16, 2009, redeem all and not less than all of Notes at the Escrow Redemption Price no later than one Business Day prior to the Optional Special Redemption Date. In each case, the redemption hereunder shall be made pursuant to the Escrow Agreement.

(c) Upon receipt of a written notice from the Trustee pursuant to clause 4(b) of the Escrow Agreement, the Company shall deliver a notice of redemption to each Holder pursuant to the terms set forth in the Escrow Agreement.

(d) For Global Notes which are held on behalf of DTC, Euroclear or Clearstream, notices may be given of the relevant notices to DTC, Euroclear or Clearstream for communication to entitled accountholders in substitution for the aforesaid mailing.

(e) The notice shall identify the Notes to be redeemed and corresponding CUSIP, ISIN or Common Code numbers, as applicable and shall state:

 

(i)

the applicable clause in the Escrow Agreement pursuant to which the Company is permitted or required to release the Escrow Funds to the Paying Agent; and

 

(ii)

the redemption date and the redemption price;

 

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(iii)

that no representation is made as to the correctness or accuracy of the CUSIP, ISIN or Common Code number, if any, listed in such notice or printed on the Notes.

(f) Failure to redeem the Notes when required pursuant to this Section will constitute an Event of Default with respect to the Notes.

ARTICLE FOUR

COVENANTS

Section 4.01. Payment of Notes.

The Company shall pay the principal of and interest on the Notes on the dates and in the manner provided therein and in this Indenture. An installment of principal or interest shall be considered paid on the date it is due if the Paying Agent holds on that date money designated for and sufficient to pay the installments.

Section 4.02. Maintenance of Office or Agency.

The Company shall maintain an office or agency (which may be an office of the Trustee or an Affiliate of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to and upon the Company in respect of the Notes and this Indenture may be served. The Company shall give prior written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the address of the Trustee.

Section 4.03. Compliance Certificate.

The Company shall deliver to the Trustee within 120 days after the end of each fiscal year of the Company an Officers’ Certificate stating whether or not the signers know of any Default by the Company in performing any of its obligations under this Indenture. If they do know of such a Default, the certificate shall describe the Default.

Section 4.04. Maintenance of Corporate Existence.

The Company will cause to be done all things necessary to preserve and keep in full force and effect the corporate existence of the Company; provided , however , that nothing in this Section 4.04 shall prevent a consolidation or merger of the Company not prohibited by the provisions of Article Five.

Section 4.05. Compliance with Securities Laws.

The Company shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Notes pursuant to Section 3.08 or 4.09 hereof. To the extent that the provisions of any securities laws or regulations conflict with said provisions hereunder, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under said provisions hereunder by virtue thereof.

 

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Section 4.06. Limitation on Additional Indebtedness.

(a) The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, Incur any Indebtedness unless, after giving effect thereto, either:

 

(i)

(i) the ratio of Indebtedness of the Company and the Restricted Subsidiaries (excluding, for purposes of this calculation only, purchase money mortgages that are Non-Recourse Indebtedness), to Consolidated Tangible Net Worth of the Company is less than 2.25 to 1; or

 

(ii)

the Consolidated Coverage Ratio exceeds 2.0 to 1.

(b) Notwithstanding the foregoing, the Company and its Restricted Subsidiaries may Incur:

 

(i)

Indebtedness under one or more Bank Credit Facilities in an amount not in excess of $1,100 million outstanding in the aggregate at any one time;

 

(ii)

purchase money mortgages that are Non-Recourse Indebtedness;

 

(iii)

Indebtedness Incurred under a Warehouse Facility; provided that the amount of such Indebtedness (excluding funding drafts issued thereunder ) outstanding at any time pursuant to this clause (iii) may not exceed 98% of the value of the Mortgages pledged to secure Indebtedness thereunder;

 

(iv)

Indebtedness Incurred solely for the purpose of refinancing or repaying any existing Indebtedness so long as:

 

(A)

the principal amount of such new Indebtedness does not exceed the principal amount of the existing Indebtedness refinanced or repaid (plus the premiums or other payments required to be paid in connection with such refinancing or repayment and the expenses incurred in connection therewith);

 

(B)

the maturity of such new Indebtedness is not earlier than that of the existing Indebtedness to be refinanced or repaid;

 

(C)

such new Indebtedness, determined as of the date of Incurrence, has an Average Life at least equal to the remaining Average Life of the Indebtedness to be refinanced or repaid;

 

(D)

the new Indebtedness ranks equally with or is junior to the Indebtedness being refinanced or repaid; and

 

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(E)

the existing and new Indebtedness are obligations of the same entity;

 

(v)

(A) Indebtedness of the Company owed to a Guarantor and Indebtedness of any Guarantor owed to the Company or any other Guarantor; and (B) Indebtedness of any Restricted Subsidiary to the Company; provided that in the case of clause (A), upon any Guarantor ceasing to be a Guarantor or such Indebtedness being owed to any Person other than the Company or a Guarantor, the Company or such Restricted Subsidiary, as applicable, shall be deemed to have Incurred Indebtedness not permitted by this clause (v).

 

(vi)

the Notes (other than Additional Notes) and the related guarantees.

(c) For purposes of determining compliance with this Section 4.06, in the event that an item of proposed Indebtedness meets the criteria of more than one of the categories of Indebtedness permitted in clauses (i) through (vi) of Section 4.06(b), or is entitled to be incurred pursuant to Section 4.06(a), the Company will be permitted to classify (or later classify or reclassify in whole or in part in its sole discretion) such item of Indebtedness in any manner that complies with this covenant.

Section 4.07. Limitations on Liens.

The Company will not, and will not permit any Restricted Subsidiary to, issue, assume, guarantee or suffer to exist any Indebtedness secured by any Lien upon any property of the Company or any Restricted Subsidiary, or on any shares of stock of any Restricted Subsidiary, without in any such case effectively providing that the Notes (together with, if the Company shall so determine, any other Indebtedness of the Company or such Restricted Subsidiary ranking pari passu with or subordinate to the Notes) shall be secured equally and ratably with (or in the case of such subordinate Indebtedness, senior to) such Indebtedness, except that the foregoing restrictions shall not apply to:

(a) Liens existing on the Original Issue Date;

(b) pledges, guarantees and deposits under workers’ compensation laws, unemployment insurance laws or similar legislation, good faith deposits under bids, tenders or contracts, deposits to secure public or statutory obligations or appeal or similar bonds, and Liens created by special assessment districts used to finance infrastructure improvements;

(c) Liens existing on property or assets of any entity on the date on which it becomes a Restricted Subsidiary, which secured Indebtedness is not Incurred in contemplation of such entity becoming a Restricted Subsidiary;

(d) Liens on or leases of model home units;

(e) Capitalized Lease Obligations entered into in the ordinary course of business in amounts not in excess of $25,000,000 outstanding in the aggregate at any one time;

 

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(f) the replacement of any of the items set forth in clauses (a) through (e) above; provided that: (A) the principal amount of the Indebtedness secured by Liens shall not be increased; (B) such Indebtedness, determined as of the date of Incurrence, has an Average Life at least equal to the remaining Average Life of the Indebtedness to be refinanced; (C) the maturity of such Indebtedness is not earlier than that of the Indebtedness to be refinanced; and (D) the Liens shall be limited to the property or part thereof which secured the Lien so replaced or property substituted therefor as a result of the destruction, condemnation or damage of such property;

(g) Liens on property acquired, constructed or improved by the Company or any Restricted Subsidiary, which Liens are either existing at the time of such acquisition or at the time of completion of construction or improvement or created within 120 days after such acquisition, completion or improvement, to secure Indebtedness Incurred or assumed to finance all or part of such property, including any increase in the principal amount of such Indebtedness and any extension of the repayment schedule and maturity of such Indebtedness Incurred or entered into in the ordinary course of business;

(h) Liens or priorities incurred in the ordinary course of business, such as laborers’, employees’, carriers’, mechanics’, vendors’ and landlords’ Liens or priorities;

(i) Liens for taxes that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted and customary survey and title exceptions;

(j) Liens arising out of judgments or awards against the Company or any Restricted Subsidiary with respect to which the Company or such Restricted Subsidiary is in good faith prosecuting an appeal or proceeding for review and with respect to which it has secured a stay of execution pending such appeal or proceeding for review;

(k) Liens on property owned by any Homebuilding Joint Venture;

(l) Liens securing a Warehouse Facility; provided that such Liens shall not extend to any assets other than the mortgages, promissory notes and other collateral that secures mortgage loans made by the Company or any of its Restricted Subsidiaries;

(m) Liens securing the Notes and, if any Restricted Subsidiary guarantees payment of the Notes, Liens securing any such guarantee;

(n) Liens securing surety bonds entered into in the ordinary course of business; and

(o) Liens which would otherwise be subject to the foregoing restrictions which, when the Indebtedness relating to those Liens is added to all other then outstanding Indebtedness of the Company and the Restricted Subsidiaries secured by Liens and not listed in clauses (a) through (n) above, do not secure Indebtedness in excess of $100,000,000.

 

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Section 4.08. Limitation on Restricted Payments.

The Company will not, nor will it permit any Restricted Subsidiary to, directly or indirectly,

(a) declare or pay any dividend on, or make any distribution in respect of, or purchase, redeem or otherwise acquire or retire for value, any Capital Stock of the Company other than through the issuance solely of the Company’s own Capital Stock (other than Disqualified Stock), or rights thereto;

(b) make any principal payment on, or redeem, repurchase, defease or otherwise acquire or retire for value prior to scheduled principal payments or maturity, Indebtedness of the Company or any Restricted Subsidiary which is expressly subordinated in right of payment to the Notes (other than any repayment, redemption, repurchase, defeasance or other retirement that is made substantially concurrent with the receipt of proceeds from the Incurrence of Indebtedness that by its terms is both subordinated in right of payment to the Notes and matures, by sinking fund or otherwise, after the earlier of (A) the Stated Maturity of the Notes, and (B) the maturity date of the Subordinated Indebtedness being repaid, redeemed, repurchased, defeased or otherwise retired); or

(c) make any Restricted Investment

(such payments or any other actions described in (a), (b) and (c) being referred to herein collectively as, “ Restricted Payments ”) unless:

 

(i)

at the time of, and after giving effect to, the proposed Restricted Payment, no Event of Default (and no event that, after notice or lapse of time, or both, would become an Event of Default) shall have occurred and be continuing;

 

(ii)

the Company is able to Incur an additional $1.00 of Indebtedness pursuant to Section 4.06(a) hereof; and

 

(iii)

at the time of, and after giving effect thereto, the sum of the aggregate amount expended (or with respect to guaranties or similar arrangements the amount then guaranteed) for all such Restricted Payments (the amount expended for such purposes, if other than in cash, to be determined by the Board of Directors, whose determination shall be conclusive and evidenced by a resolution of such Board of Directors filed with the Trustee) subsequent to the Original Issue Date shall not exceed the sum of:

 

(I)

50% of the aggregate Consolidated Net Income (or, in case such aggregate Consolidated Net Income shall be a deficit, minus 100% of such deficit) of the Company accrued on a cumulative basis subsequent to June 30, 2009; plus

 

(II)

the aggregate net proceeds, including the fair market value of property other than cash (as determined by the Board of Directors, whose determination shall be conclusive and evidenced by a resolution of such Board of

 

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Directors filed with the Trustee), received by the Company from the issuance or sale, after the Original Issue Date, of Capital Stock (other than Disqualified Stock) of the Company, including Capital Stock (other than Disqualified Stock) of the Company issued subsequent to the Original Issue Date upon the conversion of Indebtedness of the Company initially issued for cash; plus

 

(III)

100% of dividends or distributions (the fair value of which, if other than cash, to be determined by the Board of Directors, in good faith) paid to the Company (or any Restricted Subsidiary) by an Unrestricted Subsidiary, Homebuilding Joint Venture or any other Person in which the Company (or any Restricted Subsidiary), directly or indirectly, has an ownership interest but less than an 80% ownership interest to the extent that such dividends or distributions do not exceed the amount of loans, advances or capital contributions made to any such entity or Person subsequent to the Original Issue Date and included in the calculation of Restricted Payments; plus

 

(IV)

$40,000,000;

provided , however , that the foregoing shall not prevent

 

(aa)

the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration the making of such payment would have complied with the provisions of this limitation on dividends; provided , however , that such dividend shall be included in future calculations of Restricted Payments,

 

(bb)

the retirement of any shares of the Company’s Capital Stock by exchange for, or out of proceeds of the substantially concurrent sale of other shares of its Capital Stock (other than Disqualified Stock); provided , however , that the aggregate net proceeds from such sale shall be excluded from the calculation of the amounts under subclause (II) above, or

 

(cc)

the redemption, repayment, repurchase, defeasance or other retirement of Indebtedness with proceeds received from the substantially concurrent sale of shares of the Company’s Capital Stock (other than Disqualified Stock); provided, however , that the aggregate net proceeds from such sale shall be excluded from the calculation of the amounts under subclause (II) above.

Section 4.09. Limitation on Asset Sales.

The Company will not, and will not permit any Restricted Subsidiary to, make an Asset Disposition, other than for fair market value and in the ordinary course of business, with an aggregate net book value as of the end of the immediately preceding fiscal quarter greater than 10% of the Company’s total consolidated assets as of that date, unless:

 

(a)

the consideration received by the Company (or a Restricted Subsidiary, as the case may be) for such disposition consists of at least 70% cash; provided , however , that the amount of any liabilities assumed by the transferee and any notes or other Obligations received by the Company or a Restricted Subsidiary which are immediately converted into cash shall be deemed to be cash; and

 

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(b)

the Company shall, within 390 days after the date of such sale or sales, apply the Net Proceeds from such sale or sales in excess of an amount equal to 10% of the Company’s total consolidated assets to:

 

(i)

a purchase of or an Investment in Additional Assets (other than cash or Cash Equivalents);

 

(ii)

repayments, redemptions or repurchases of Indebtedness of the Company which ranks pari passu with the Notes; and/or

 

(iii)

make an offer to acquire all or part of the Notes (or Indebtedness of the Company which is pari passu with the Notes) at a purchase price equal to the principal amount thereof plus accrued and unpaid interest thereon to the purchase date.

In the event the Company shall be required to offer to repurchase Notes pursuant to the provisions of this Section 4.09, the Company shall deliver to the Trustee an Officers’ Certificate specifying the Asset Sale Offer Amount (as defined below) and the proposed date of purchase of the Notes by the Company (the “ Asset Sale Purchase Date ”). Not less than 30 days nor more than 60 days prior to the Asset Sale Purchase Date, the Company shall mail or cause the Trustee to mail (in the Company’s name and at its expense) an offer to repurchase (the “ Asset Sale Offer ”) to each Holder of Notes. The repurchase price shall be 100% of the principal amount of the Notes plus accrued interest to the redemption date and upon surrender to the Trustee or the Paying Agent, the Holders of such Notes shall be paid the repurchase price. The Asset Sale Offer is to be and shall be mailed by the Company or the Trustee to the Holders of the Notes at their last registered address. The Asset Sale Offer shall remain open from the time of mailing until 5 days before the Asset Sale Purchase Date The Notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Asset Sale Offer. The Notice, which shall govern the terms of the Asset Sale Offer, shall state:

(a) that the Asset Sale Offer is being made pursuant to this Section 4.09;

(b) the amount of Notes offered to be repurchased (the “ Asset Sale Offer Amount ”), the purchase price and the Asset Sale Purchase Date;

(c) that any Note not tendered or accepted for payment will continue to accrue interest;

 

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(d) that any Note accepted for payment pursuant to the Asset Sale Offer shall cease to accrue interest after the Asset Sale Purchase Date;

(e) that Holders electing to have a Note purchased pursuant to an Asset Sale Offer will be required to surrender the Note, with the form entitled “Option of Holder to Elect Purchase” on the reverse side of the Note completed, to the Paying Agent at the address specified in the Notice at least five days before the Asset Sale Purchase Date;

(f) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than three days prior to the Asset Sale Purchase Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have the Note purchased;

(g) that if both Notes and Indebtedness of the Company which is pari passu with the Notes in a principal amount in excess of the Asset Sale Offer Amount are tendered pursuant to the Asset Sale Offer, the Company shall purchase Notes and Indebtedness of the Company which ranks pari passu with the Notes on a pro rata basis based upon the purchase price or by lot or in such other manner as the Trustee shall deem fair and appropriate; and

(h) that Holders whose Notes were purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered.

On the Asset Sale Purchase Date, the Company shall (i) accept for payment Notes or portions thereof properly tendered pursuant to the Asset Sale Offer (on a pro rata basis, by lot or in such other manner specified by the Trustee if required pursuant to paragraph (g) above), (ii) deposit with the Paying Agent money sufficient to pay the purchase price of all Notes or portions thereof so accepted and (iii) deliver to the Trustee Notes so accepted together with an Officers’ Certificate stating the Notes or portions thereof accepted for payment by the Company. The Paying Agent shall promptly mail or deliver to Holders of Notes so accepted, payment in an amount equal to the purchase price, and the Trustee shall promptly authenticate and mail or deliver to such Holders a new Note equal in principal amount of any unpurchased portion of the Note surrendered. Any Notes not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company will publicly announce the results of the Asset Sale Offer on or as soon after as practical the Asset Sale Purchase Date. For avoidance of doubt, any amount of Net Proceeds remaining after the Asset Sale Purchase Date shall be returned by the Paying Agent to the Company and may be used by the Company for any purpose not inconsistent with this Indenture. For purposes of this Section 4.09, the Trustee shall act as the Paying Agent.

Section 4.10. Transactions with Affiliates.

(a) The Company shall not, and shall not permit any Restricted Subsidiary to, enter into or permit to exist any transaction or series of related transactions (including the purchase, sale, lease or exchange of any property, employee compensation arrangements or the rendering of any service) with any Affiliate of the Company (an “ Affiliate Transaction ”) unless the terms thereof: (i) are no less favorable to the Company or such Restricted Subsidiary than those that could be obtained at the time of such transaction in

 

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arm’s-length dealings with a Person who is not such an Affiliate; and (ii) if such Affiliate Transaction (or series of related Affiliate Transactions) involve aggregate payments in an amount in excess of $10 million in any one year, (A) are set forth in writing; and (B) have been approved by a majority of the disinterested members of the Board of Directors.

(b) The provisions of the foregoing paragraph shall not prohibit:

 

(i)

any Restricted Payment permitted to be paid pursuant to Section 4.08 hereof;

 

(ii)

any issuance of securities, or other payments, awards or grants in cash, securities or otherwise, pursuant to, or the funding of, employment arrangements, stock options and stock ownership plans in the ordinary course of business and approved by the Board of Directors or a committee thereof;

 

(iii)

the grant of stock options or similar rights to employees and directors of the Company in the ordinary course of business and pursuant to plans approved by the Board of Directors or a committee thereof;

 

(iv)

loans or advances to employees in the ordinary course of business of the Company or its Restricted Subsidiaries;

 

(v)

fees, compensation or employee benefit arrangements paid to and indemnity provided for the benefit of directors, officers or employees of the Company or any Subsidiary in the ordinary course of business; or

 

(vi)

any Affiliate Transaction between the Company and a Restricted Subsidiary or between Restricted Subsidiaries.

Section 4.11. Limitation on Payment Restrictions Affecting Restricted Subsidiaries.

The Company will not, and will not permit any Restricted Subsidiary to, create or otherwise cause or permit to exist or become effective, any consensual encumbrance or consensual restriction on the ability of any Restricted Subsidiary:

(a) to pay dividends or make any other distributions on its Capital Stock to the Company or a Restricted Subsidiary or pay any Indebtedness owed to the Company;

(b) to make any loans or advances to the Company; or

(c) transfer any of its property or assets to the Company; except for:

 

(i)

any encumbrance or restriction pursuant to an agreement in effect at or entered into on the Original Issue Date;

 

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(ii)

any encumbrance or restriction with respect to a Restricted Subsidiary pursuant to an agreement relating to any Indebtedness Incurred by such Restricted Subsidiary which was entered into on or prior to the date on which such Restricted Subsidiary was acquired by the Company (other than as consideration in, or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was acquired by the Company) and outstanding on such date;

 

(iii)

any encumbrance or restriction pursuant to an agreement effecting a Refinancing of Indebtedness Incurred pursuant to an agreement referred to in clause (i) or (ii) of this covenant (or effecting a Refinancing of such Refinancing Indebtedness pursuant to this clause (iii)) or contained in any amendment to an agreement referred to in clause (i) or (ii) of this covenant or this clause (iii); provided , however , that the encumbrances and restrictions with respect to such Restricted Subsidiary contained in any such refinancing agreement or amendment are no more restrictive in any material respect than the encumbrances and restrictions with respect to such Restricted Subsidiary contained in such agreements;

 

(iv)

any such encumbrance or restriction consisting of customary contractual non-assignment provisions to the extent such provisions restrict the transfer of rights, duties or obligations under such contract;

 

(v)

in the case of clause (c) above, restrictions contained in security agreements or mortgages securing Indebtedness or other obligations of a Restricted Subsidiary to the extent such restrictions restrict the transfer of the property subject to such security agreements or mortgages;

 

(vi)

any restriction with respect to a Restricted Subsidiary imposed pursuant to an agreement entered into for the sale or disposition of all or substantially all the Capital Stock or assets of such Restricted Subsidiary pending the closing of such sale or disposition; and

 

(vii)

any restriction imposed by applicable law.

Section 4.12. Restricted and Unrestricted Subsidiaries.

The Company will not permit any Restricted Subsidiary to be designated as an Unrestricted Subsidiary unless the Company and its Restricted Subsidiaries would thereafter be permitted to (i) Incur at least $1.00 of Indebtedness under Section 4.06(a) hereof and (ii) make a Restricted Payment of at least $1.00 under Section 4.08 hereof (without giving effect to the proviso thereto).

The Company will not permit any Unrestricted Subsidiary to be designated as a Restricted Subsidiary unless such Subsidiary has outstanding no Indebtedness except such Indebtedness as the Company could permit it to become liable for immediately after becoming a Restricted Subsidiary under Section 4.06 hereof.

 

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Promptly after the adoption of any Board Resolution designating a Restricted Subsidiary as an Unrestricted Subsidiary or an Unrestricted Subsidiary as a Restricted Subsidiary, a copy thereof shall be filed with the Trustee, together with an Officers’ Certificate stating that the provisions of this Section 4.12 have been complied with in connection with such designation.

The Company will not permit Standard Pacific of Texas, Inc., Standard Pacific of Arizona, Inc., Standard Pacific of Colorado, Inc., Standard Pacific of Las Vegas, Inc., Standard Pacific of Central Florida, a general partnership, Standard Pacific of the Carolinas, LLC, or Standard Pacific of Tampa, a general partnership to be designated as an Unrestricted Subsidiary or permit the assets of the Company or any Subsidiary employed in the homebuilding operations to be transferred to an Unrestricted Subsidiary, except in amounts permitted under Section 4.08 hereof.

Section 4.13. Reports to Holders of the Notes.

So long as the Company is subject to the periodic reporting requirements of the Exchange Act, it shall continue to furnish the information required thereby to the SEC. Even if the Company is entitled under the Exchange Act not to furnish such information to the SEC or to the holders of the Notes, it will nonetheless continue to furnish information under Section 13 or 15(d) of the Exchange Act to the SEC and the Trustee as if it were subject to such periodic reporting requirements.

While the Notes remain outstanding and are “restricted securities” within the meaning of Rule 144(a)(3) under the Securities Act, the Company will, during any period in which it is not subject to and in compliance with Section 13 or 15(d) of the Exchange Act, furnish to Holders of the Notes and prospective purchasers of the Notes designated by such Holders, upon the request of such Holders or such prospective purchasers, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.

Section 4.14. Future Subsidiary Guarantees.

The Company shall not permit any of its Restricted Subsidiaries, directly or indirectly, to guarantee, assume or in any manner become liable with respect to any of the Other Public Notes or other notes issued by the Company under an indenture or comparable documents to indentures used in jurisdictions outside of the United States (other than guarantees in existence on the Original Issue Date) unless such Restricted Subsidiary simultaneously executes and delivers a supplemental indenture to this Indenture providing for the guarantee of the Notes on the same terms as the guarantee of such Other Public Notes or other notes issued under an indenture or comparable documents used in jurisdictions outside of the United States (except that the guarantee of the Subordinated Notes (and other notes that are subordinated to any notes issued under an indenture or comparable documents used in jurisdictions outside of the United States) shall be subordinated to the guarantee of the Notes to the same extent as the Subordinated Notes are subordinated to the Notes).

 

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Section 4.15. Limitation of Applicability of Certain Covenants if Notes Rated Investment Grade.

(a) The obligations of the Company and its Restricted Subsidiaries to comply with the provisions of Sections 4.06, 4.08, 4.09, 4.10, 4.11, 4.12, and 4.14 and paragraph (d) of Section 5.01 hereof will terminate (such terminated covenants, the “ Extinguished Covenants ”) and cease to have any further effect from and after each date when the Notes issued under this Indenture are rated Investment Grade; provided that if the Notes subsequently cease to be rated Investment Grade, then, from and after each such time as the Notes cease to be rated Investment Grade until such time as the Notes are again rated Investment Grade, the obligations of the Company and its Restricted Subsidiaries to comply with the Extinguished Covenants shall be reinstated.

(b) In the event of any reinstatement of the obligation to comply with the Extinguished Covenants, no action taken or omitted to be taken by the Company or any of its Subsidiaries prior to such reinstatement shall give rise to a Default or Event of Default under this Indenture upon reinstatement; provided that with respect to Restricted Payments made after any such reinstatement, the amount of Restricted Payments made after the Original Issue Date will be calculated as though Section 4.08 hereof had been in effect during the entire period after such date.

Section 4.16. Escrow Account Deposits.

Upon the consummation of the sale of the Initial Notes, the Company shall (i) cause the Initial Purchasers to deposit $257,591,600.00, representing the gross proceeds of the Notes into the Escrow Account with the Escrow Agent (the “ Gross Proceeds Deposit ”) and (ii) deposit or cause an affiliate to deposit $5,000,638.22 in to the Escrow account, representing an amount equal to the sum of (x) 1% of the Gross Proceeds Deposit and (y) interest that would accrue on the Notes from the date hereof to, but excluding October 16, 2009.

Section 4.17. Activities of the Company Prior to the Assumption.

Notwithstanding anything in this Indenture to the contrary, prior to the Assumption, the Company shall not engage in any business activity or undertake any other activity, except (a) any activity relating to the offering, sale or issuance of the Notes issued on the Original Issue Date and the incurrence of Indebtedness represented by the Notes, (b) issuing membership interests to, and receiving capital contributions from, Standard Pacific or its Subsidiaries, (c) performing its obligations in respect of the Notes under this Indenture and the Escrow Agreement, (d) consummating the Assumption or redeeming the Notes on the Escrow Redemption Date, as applicable and (e) conducting such other activities as are necessary or appropriate to carry out the activities described above. Prior to the Assumption, the Company will not issue any Indebtedness other than the Notes, own, hold or otherwise have any interest in any assets other than the Escrow Account and cash or Cash Equivalents.

Section 4.18. SP Assumption Supplemental Indenture.

Immediately prior to the release of Escrow Funds (as defined in the Escrow Agreement) pursuant to Section 4(a) of the Escrow Agreement, Standard Pacific and the Guarantors shall execute the SP Assumption Supplemental Indenture. Following the

 

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Refinancing Completion Date, all of the covenants set forth in Article Four (except Sections 4.16 and 4.17) will be deemed to have been applicable to Standard Pacific and its Restricted Subsidiaries beginning as of the Original Issue Date and, to the extent that Standard Pacific and its Restricted Subsidiaries took any action or inaction after the Original Issue Date and prior to the Refinancing Completion Date prohibited by this Indenture, Standard Pacific will be in Default hereunder as of the Refinancing Completion Date and the terms and provisions of Article Six of this Indenture shall apply.

ARTICLE FIVE

SUCCESSOR CORPORATION

Section 5.01. When Company May Merge, etc.

The Company shall not