Amendment No. 15 to Schedule 13D for William Lyon HOmes

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J1xvu9YpGmJIZye5tZGyK//YLH6n1d+gtayY6KkPhPgq5vyXTUClO6lrja/0MHnI N+RrOOspC0ivrwn/r3ydCg== 0001193125-05-003727.txt : 20050110 0001193125-05-003727.hdr.sgml : 20050110 20050110133336 ACCESSION NUMBER: 0001193125-05-003727 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 20050110 DATE AS OF CHANGE: 20050110 GROUP MEMBERS: THE CABLE FAMILY TRUST GROUP MEMBERS: WADE H. CABLE GROUP MEMBERS: WILLIAM HARWELL LYON SEPARATE PROPERTY TRUST FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: LYON WILLIAM CENTRAL INDEX KEY: 0001065244 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: BUSINESS PHONE: 9498333600 MAIL ADDRESS: STREET 1: C/O WILLIAM LYON HOMES INC STREET 2: 4490 VON KARMAN AVE CITY: NEWPORT BEACH STATE: CA ZIP: 92660 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: WILLIAM LYON HOMES CENTRAL INDEX KEY: 0001095996 STANDARD INDUSTRIAL CLASSIFICATION: OPERATIVE BUILDERS [1531] IRS NUMBER: 330864902 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-61509 FILM NUMBER: 05520322 BUSINESS ADDRESS: STREET 1: 4490 VON KARMAN AVENUE CITY: NEWPORT BEACH STATE: CA ZIP: 92660 BUSINESS PHONE: 9498333600 MAIL ADDRESS: STREET 1: 4490 VON KARMAN AVENUE CITY: NEWPORT BEACH STATE: CA ZIP: 92660 FORMER COMPANY: FORMER CONFORMED NAME: PRESLEY COMPANIES/NEW DATE OF NAME CHANGE: 19991115 FORMER COMPANY: FORMER CONFORMED NAME: PRESLEY MERGER SUB INC DATE OF NAME CHANGE: 19990929 SC 13D/A 1 dsc13da.htm AMENDMENT NO. 15 TO SCHEDULE 13D FOR WILLIAM LYON HOMES Amendment No. 15 to Schedule 13D for William Lyon HOmes

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13D

(Rule 13d-101)

INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT

TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO

RULE 13d-2(a)

(Amendment No. 15)¹

WILLIAM LYON HOMES

(Name of Issuer)

COMMON STOCK

(Title of Class of Securities)

552074 10 6

(CUSIP Number)

The William Harwell Lyon Separate

Property Trust

Richard M. Sherman, Jr., Trustee

(c/o) Richard M. Sherman, Jr., Esq.

Irell & Manella LLP

840 Newport Center Drive, #400

Newport Beach, California 92660

(949) 760-0991

William Lyon

The Cable Family Trust, Est. 7-11-88

Wade H. Cable

c/o William Lyon Homes

4490 Von Karman Avenue

Newport Beach, California 92660

(949) 833-3600

Richard M. Sherman, Jr., Esq

Irell & Manella LLP

840 Newport Center Drive, # 400

Newport Beach, California 92660

(949) 760-0991

(Name, Address and Telephone Number of Person Authorized

to Receive Notices and Communications)

January 7, 2005

(Date of Event which Requires Filing of This Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box ¨.

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7(b) for other parties to whom copies are to be sent.

¹	The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).


CUSIP NO. 552074 10 6		13D		Page 2 of 115 Pages


1.	NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) William Lyon
2.	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS) (a) x (b) x
3.	SEC USE ONLY
4.	SOURCE OF FUNDS* BK
5.	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)	¨
6.	CITIZENSHIP OR PLACE OF ORGANIZATION United States of America
7.	NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH SOLE VOTING POWER 4,115,437 Shares
8.	SHARED VOTING POWER 297,705 Shares (1)
9.	SOLE DISPOSITIVE POWER 4,115,437 Shares
10.	SHARED DISPOSITIVE POWER 0 Shares
11.	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4,413,142 Shares (1)
12.	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*	x
13.	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 51.2% as of November 12, 2004
14.	TYPE OF REPORTING PERSON* IN

(1)

Includes 247,705 shares of Common Stock of the Issuer held by the Cable Family Trust Est. 7-11-88, Wade H. Cable and Susan M. Cable, Trustees (“Cable Trust”) and 50,000 shares of Common Stock of the Issuer deemed beneficially owned by Wade H. Cable individually (“Cable”) as a result of Cable’s ownership of 50,000 stock options exercisable by Cable within sixty days of the date of this filing. William Lyon (“Lyon”) has the power to direct the voting of the foregoing shares beneficially owned by the Cable Trust and Cable as a result of and subject to the terms of that certain Voting Agreement, dated as of May 31, 2002, among William Lyon, Wade H. Cable and Susan M. Cable, Trustees of the Cable Trust, and Wade H. Cable, individually (the “Voting Agreement”). By virtue of the Voting Agreement, Lyon, Cable and the Cable Trust may be deemed a “group” under Rule 13d-5(b)(1) of the Securities Exchange Act of 1934, as amended (“Securities Exchange Act”). Does not include 331,437 shares owned of record and beneficially by William Harwell Lyon Separate Property Trust (the “Separate Property Trust”). Lyon and the Separate Property Trust acted together with respect to the acquisition of such shares and the 655,569 shares of Common Stock of the Issuer acquired by Lyon on January 7, 2005 and reported in this Amendment and thus Lyon and the Separate Property Trust may be deemed to be a “group” under Rule 13d-5(b)(1) of the Exchange Act. Neither Lyon nor the Separate Property Trust has any dispositive or voting power with respect to the shares of Common Stock owned by the other and each disclaims any beneficial ownership therein.


CUSIP NO. 552074 10 6		13D		Page 3 of 115 Pages


1.	NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) The Cable Family Trust Est. 7-11-88, Wade H. Cable and Susan M. Cable, Trustees
2.	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS) (a) x (b) ¨
3.	SEC USE ONLY
4.	SOURCE OF FUNDS* Not applicable
5.	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)	¨.
6.	CITIZENSHIP OR PLACE OF ORGANIZATION California
7.	NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH SOLE VOTING POWER 0 Shares
8.	SHARED VOTING POWER 247,705 Shares (1)
9.	SOLE DISPOSITIVE POWER 247,705 Shares
10.	SHARED DISPOSITIVE POWER 0 Shares
11.	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 247,705 Shares
12.	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*	¨.
13.	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 2.9% as of November 12, 2004
14.	TYPE OF REPORTING PERSON* OO

(1)

William Lyon has the power to direct the voting of these shares as a result of and subject to the terms of that certain Voting Agreement, dated as of May 31, 2002, among William Lyon, Wade H. Cable and Susan M. Cable, Trustees of the Cable Family Trust, and Wade H. Cable, individually (the “Voting Agreement”). By virtue of the Voting Agreement, William Lyon, Wade H. Cable and the Cable Trust may be deemed to be a “group” under Rule 13d-5(b)(1) of the Securities Exchange Act. The Cable Family Trust disclaims beneficial ownership of the shares of common stock of the Issuer beneficially owned by William Lyon and Wade H. Cable.


CUSIP NO. 552074 10 6		13D		Page 4 of 115 Pages


1.	NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Wade H. Cable
2.	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS) (a) x (b) ¨
3.	SEC USE ONLY
4.	SOURCE OF FUNDS* Not applicable
5.	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)	¨.
6.	CITIZENSHIP OR PLACE OF ORGANIZATION United States of America
7.	NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH SOLE VOTING POWER 0 Shares
8.	SHARED VOTING POWER 297,705 Shares (1)(2)(3)
9.	SOLE DISPOSITIVE POWER 50,000 Shares (1)
10.	SHARED DISPOSITIVE POWER 297,705 Shares (2)
11.	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 297,705 Shares (1)
12.	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*	¨.
13.	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 3.5% as of November 12, 2004
14.	TYPE OF REPORTING PERSON* IN

(1)	Includes 50,000 shares that could be purchased by Wade H. Cable by exercise of options exercisable on the date of this filing or within 60 days thereafter.

(2)	Includes 247,705 shares held by the Cable Trust of which Wade H. Cable is a co-trustee with Susan M. Cable. Wade H. Cable and Susan M. Cable share voting and dispositive powers with respect to the shares held be the Cable Trust.

(3)

William Lyon has the power to direct the voting of these shares as a result of and subject to the terms of that certain Voting Agreement, dated as of May 31, 2002, among William Lyon, Wade H. Cable and Susan M. Cable, Trustees of the Cable Family Trust, and Wade H. Cable, individually (the “Voting Agreement”). By virtue of the Voting Agreement, William Lyon, Wade H. Cable and the Cable Trust may be deemed to be a “group” under Rule 13d-5(b)(1) of the Securities Exchange Act. Wade H. Cable disclaims beneficial ownership of the shares owned by William Lyon.


CUSIP NO. 552074 10 6		13D		Page 5 of 115 Pages


1.	NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) William Harwell Lyon Separate Property Trust
2.	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS) (a) ¨ (b) x
3.	SEC USE ONLY
4.	SOURCE OF FUNDS* BK
5.	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)	¨.
6.	CITIZENSHIP OR PLACE OF ORGANIZATION California
7.	NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH SOLE VOTING POWER 331,437 Shares
8.	SHARED VOTING POWER 0 Shares
9.	SOLE DISPOSITIVE POWER 331,437 Shares
10.	SHARED DISPOSITIVE POWER 0 Shares
11.	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 331,437 Shares (1)
12.	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*	x.
13.	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 3.8% as of November 12, 2004
14.	TYPE OF REPORTING PERSON* OO

(1)

Does not include 4,413,142 shares owned of record and beneficially by Lyon. Lyon and the Separate Property Trust acted together with respect to the acquisition of the 655,569 shares of common stock of the Issuer acquired by Lyon on January 7, 2005 and the 331,437 shares of Common Stock of the Issuer acquired by the Separate Property Trust on January 7, 2005 and reported in this Amendment and thus Lyon and the Separate Property Trust may be deemed to be a “group” under Rule 13d-5(b)(1) of the Exchange Act. Neither Lyon nor the Separate Property Trust has any dispositive or voting power with respect to the shares of Common Stock owned by the other and each disclaims any beneficial ownership therein.


CUSIP NO. 552074 10 6		13D		Page 6 of 115 Pages

SCHEDULE 13D

This statement, which is being filed by William Lyon, Wade H. Cable, the Cable Family Trust Est. 7-11-88, Wade H. Cable and Susan M. Cable, Trustees, Richard M. Sherman and The William H. Lyon Separate Property Trust (together, the “Reporting Persons”), constitutes Amendment No. 15 to the Schedule 13D originally filed with the Securities and Exchange Commission (the “SEC”), as amended by Amendments No. 1 through 14 previously filed with the SEC (as so amended, the “Schedule 13D”). The Schedule 13D relates to the common stock, par value $.01 per share, of William Lyon Homes, a Delaware corporation (the “Issuer”). The item numbers and responses thereto below are in accordance with the requirements of Schedule 13D. Capitalized terms used herein and not defined shall have the meaning set forth in the Schedule 13D.

ITEM 2.

IDENTITY AND BACKGROUND.

Item 2 of the Schedule 13D is hereby amended and restated to read in its entirety as follows:

This Schedule 13D is being filed by William Lyon (“Lyon”), by the group (the “Group”) consisting of Lyon, The Cable Family Trust Est. 7-11-88, Wade H. Cable and Susan M. Cable, Trustees (the “Cable Trust”), and Wade H. Cable, individually (“Cable”) that may be deemed formed under Rule 13d-5(b)(1) of the Securities Exchange Act by virtue of that certain Voting Agreement, dated as of May 31, 2002, among Lyon, the Cable Trust and Cable (“Voting Agreement”), and by the William Harwell Lyon Separate Property Trust (the “Separate Property Trust”). Lyon, the Cable Trust, Cable and the Separate Property Trust are hereinafter referred to as the “Reporting Persons.” Lyon and the Separate Property Trust acted together with respect to the acquisition on January 7, 2005 of 655,569 shares of Common Stock and 331,437 shares of Common Stock, respectively, and thus Lyon and the Separate Property Trust may be deemed to be a “group” under Rule 13d-5(b)(1) of the Exchange Act. Neither Lyon or the Separate Property Trust has any dispositive or voting power with respect to the shares of Common Stock owned by the other and each disclaims any beneficial ownership therein.

This 13D is being filed jointly by the Reporting Persons pursuant to their agreement to the joint filing of this Schedule 13D attached hereto as Exhibit 7.1.

The business address of Lyon, the Cable Trust, Cable, and Susan M. Cable is c/o William Lyon Homes, 4490 Von Karman Avenue, Newport Beach, California 92660. The business address of the Separate Property Trust and the Separate Property Trustee (as defined below) is c/o Irell & Manella LLP, 840 Newport Center Drive, Suite 400, Newport Beach, California 92660. Lyon serves as a director of the Company and is the Chairman of the Board and Chief Executive Officer of the Company. The Company is primarily engaged in designing, constructing and selling single family homes. Lyon is a United States citizen. The Cable Trust is a revocable trust formed under the laws of California. Wade H. Cable and Susan M. Cable are the sole trustees of the Cable Trust. Wade H. Cable serves as a director of the Company and is the President and Chief Operating Officer of the Company. Susan M. Cable is not employed. Wade H. Cable and Susan M. Cable are United States citizens. Richard M. Sherman, Jr. (the “Separate Property Trustee”) is the sole trustee of the Separate Property Trust. William H. Lyon is the sole beneficiary of the Separate Property Trust. The Separate Property Trust is a revocable trust organized under the laws of California. The Separate Property Trustee is a partner in Irell & Manella LLP, a law firm, and is a United States citizen. The Separate Property Trustee also serves as trustee of the William Harwell Lyon 1987 Trust, which has filed its own Schedule 13D with respect to ownership of 1,749,259 shares of Common Stock. The Separate Property Trustee does not own individually any shares of Common Stock.


CUSIP NO. 552074 10 6		13D		Page 7 of 115 Pages

During the last five years, none of Lyon, the Cable Trust, Cable, Susan M. Cable, the Separate Property Trust and the Separate Property Trustee have been convicted in a United States criminal proceeding (excluding traffic violations or similar misdemeanors) nor have the foregoing persons been party to any civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of which he or it was or is subject to a judgment, decree, or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.

ITEM 3:

SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.

Item 3 of the Schedule 13D is hereby amended to add the following:

On January 7, 2005, Lyon and the Separate Property Trust acquired 655,569 shares and 331,437 shares of Common Stock, respectively, for an aggregate purchase price of $43,890,344.55 and $22,189,707.15, respectively. Lyon and the Separate Property Trust acquired the funds for these acquisitions pursuant to two loans (the “Loans”) from Fremont Investment & Loan, a California industrial bank (“Fremont”). The Loans were made pursuant to the terms of (i) a Loan and Security Agreement (the “$27 Million Loan Agreement”) dated as of January 3, 2005 by and among Lyon, his wife, Willa Dean Lyon (collectively for purposes of the description of the Loan Agreements and the Pledge Agreement (as defined below), “Lyon”), the Separate Property Trust and Fremont and (ii) a Loan and Security Agreement (the “$44 Million Loan Agreement”) dated as of January 3, 2005 by and among Lyon, the Separate Property Trust and Fremont. The Loans are guaranteed by William Harwell Lyon 1976 Trust. Both Loans mature January 1, 2007, and are interest only, with provisions requiring prepayment of principal on receipt by Lyon of the proceeds from the sale of certain assets in which Lyon has an interest. Both Loans bear interest at a variable rate equal to three percent (3%) above the six month LIBOR Rate, adjustable every six months, with a Ceiling Rate of 11.76% and a Floor Rate of 5.25%. The Loan made pursuant to the $44 Million Loan Agreement has a loan fee equal to 1% of the loan amount, payable on funding. Both Loans have an Exit Fee equal to 1% of the loan amount, payable on repayment.

The $27 Million Loan Agreement provides for a loan in the amount of $27,550,000 (the “$27 Million Loan”), of which $1,850,000 has been held back by Fremont to pay interest thereon. The $27 Million Loan is represented by a Secured Promissory Note (the “$27 Million Note”) and is secured by a pledge of 861,623 of the 987,006 shares of Common Stock acquired by William Lyon and the Separate Property Trust as described in Section 5(c) hereof pursuant to the terms of a Pledge Agreement (the “Pledge Agreement”) dated as of January 3, 2005 by and among Lyon, the Separate Property Trust and Fremont. Of the 861,623 shares of Common Stock pledged as security for the $27 Million Note, 572,290 shares were pledged by Lyon and 289,333 shares were pledged by the Separate Property Trust. The $44 Million Loan Agreement provides for a loan in the amount of $44,250,,000 (the “$44 Million Loan”), of which $2,950,000 has been held back by Fremont to pay interest thereon. The $44 Million Loan is represented by a Secured Promissory Note (the “$44 Million Note”) and is secured by real property owned by Lyon.

The foregoing descriptions of the $27 Million Loan Agreement, the $44 Million Loan Agreement, the $27 Million Note, the $44 Million Note and the Pledge Agreement are not, and do not purport to be, complete and each is qualified in its entirety by reference to the $27 Million Loan Agreement, the $44 Million Loan Agreement, the $27 Million Note, the $44 Million Note and the Pledge Agreement, copies of which are filed as Exhibits 7.2, 7.3, 7.4, 7.5 and 7.6, respectively.


CUSIP NO. 552074 10 6		13D		Page 8 of 115 Pages

ITEM 4:

PURPOSE OF TRANSACTION.

Item 4 of the Schedule 13D is hereby amended to add the following:

Lyon acquired the shares of Common Stock he acquired on January 7, 2005 as reported in this Amendment for investment purposes and to provide him with greater voting control with respect to the election of the members of the board of directors of the Issuer and other matters. The Separate Property Trust acquired the shares of Common Stock it acquired on January 7, 2005 as reported in this Amendment for investment purposes.

Although no Reporting Person has any contract or agreement to purchase or sell shares of Common Stock from or to any person, he or it may purchase shares from time to time, and may sell shares from time to time, in open market transactions, privately negotiated transactions or transactions with affiliates of the Company on prices and terms as he or it shall determine. Whether any Reporting Person purchases or sells shares and the exact number of shares purchased or sold will depend upon a variety of factors, including the market price, market conditions, financial condition of the business, business prospects, availability and need for funds, and the evaluation of alternative interests. Each Reporting Person intends to review continuously such factors with respect to his or its ownership of shares of Common Stock.

Lyon and Cable, as holders of Common Stock and not in their capacity as officers or directors of the Company, and the Cable Trust and the Separate Property Trust have no present plan or proposal that relates to or would result in (i) an extraordinary corporate transaction, such as a merger, reorganization, liquidation or sale or transfer of a material amount of assets involving the Company or any of its subsidiaries, (ii) any change in the Company’s present board of directors or management, (iii) any material change in the Company’s present capitalization or dividend policy or any other material change in the Company’s business or corporate structure, (iv) any change in the Company’s charter or by-laws or other actions that may impede the acquisition of control of the Company by any person, (v) any change that would result in the Company’s Common Stock becoming eligible for termination of its registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934, as amended, or to be delisted from the New York Stock Exchange, or (vi) any similar action. Based upon a review of various factors relating to his or its ownership of Common Stock, each Reporting Person may formulate plans or proposals relating to the foregoing matters in the future.

ITEM 5.

INTEREST IN SECURITIES OF THE ISSUER.

Item 5 is hereby amended and restated to read in its entirety as follows:

(a) Number and Percentage of Shares of Common Stock Beneficially Owned.

(1) The Group, consisting of Lyon, the Cable Trust and Cable, is the beneficial owner of 4,413,142 shares of Common Stock, including 50,000 shares acquirable by Cable upon the exercise of options exercisable within sixty days of the date of this filing. The 4,413,142 shares of Common Stock represents approximately 51.2% of the Common Stock outstanding as of November 12, 2004. On November 12, 2004, there were 8,616,236 shares of Common Stock outstanding.

(2) Lyon is the owner of record of 4,115,437 shares of Common Stock. In addition, as a result of and subject to the terms of the Voting Agreement, Lyon may be deemed the beneficial owner of the 247,705 shares of Common Stock beneficially owned by the Cable Trust and the 50,000 shares of Common Stock acquirable by Cable upon the exercise of options exercisable within sixty days of the date of this filing. Accordingly, Lyon may be deemed the beneficial owner


CUSIP NO. 552074 10 6		13D		Page 9 of 115 Pages

of an aggregate of 4,413,142 shares of Common Stock, which represents approximately 51.2% of the Common Stock outstanding as of November 12, 2004. Lyon disclaims beneficial ownership of the shares of Common Stock owned by the Separate Property Trust.

(3) The Cable Trust is the beneficial owner of 247,705 shares of Common Stock, which represents approximately 2.9% of the Common Stock outstanding as of November 12, 2004. The Cable Trust disclaims beneficial ownership of the shares of Common Stock owned by Lyon, Cable or the Separate Property Trust.

(4) Cable is the beneficial owner of 50,000 shares of Common Stock issuable upon the exercise of 50,000 options exercisable by him within sixty days of this filing. In addition, Cable and Susan M. Cable, in their capacity as trustees of the Cable Trust, are the beneficial owners of 247,705 shares of Common Stock held by the Cable Trust. Cable and Susan M. Cable are not the owners of record of any shares of Common Stock. Accordingly, Cable may be deemed to be the beneficial owner of an aggregate of 297,705 shares of Common Stock, which represents approximately 3.5% of the Common Stock outstanding as of November 12, 2004. Susan M. Cable, as co-trustee of the Cable Trust, is the beneficial owner of an aggregate of 247,705 shares of Common Stock, which represents approximately 2.9% of the Common Stock outstanding as of November 12, 2004. Cable and Susan M. Cable disclaim beneficial ownership of the shares of Common Stock owned by Lyon or the Separate Property Trust.

(5) The Separate Property Trust is the beneficial owner of 331,437 shares of Common Stock, which represents approximately 3.8% of the Common Stock outstanding as of November 12, 2004. The Separate Property Trust disclaims beneficial ownership of the shares of Common Stock owned by Lyon, Cable or the Cable Trust.

(b) Voting and Dispositive Power.

(1) Lyon has sole voting and dispositive power with respect to the 4,115,437 shares of Common Stock owned of record and beneficially by him, subject to any applicable California community property laws. In accordance with the Voting Agreement, Lyon may direct the voting of the 247,705 shares of Common Stock beneficially owned by the Cable Trust and the 50,000 shares of Common Stock Cable acquirable by Cable upon the exercise of 50,000 options exercisable within sixty days of the date of this filing. Accordingly, Lyon shares voting power with the Cable Trust and Cable with respect to 297,705 shares of Common Stock.

(2) The Cable Trust shares voting power with Lyon with respect to the 247,705 shares of Common Stock owned by it as a result of and subject to the terms of the Voting Agreement. The Cable Trust has sole dispositive power with respect to the 247,705 shares of Common Stock owned by it.

(3) Cable and Susan M. Cable are the sole trustees of the Cable Trust and, accordingly, share voting and dispositive power with each other with respect to the 247,705 shares owned by the Cable Trust. If Cable exercised the 50,000 options exercisable by him within sixty days of this filing, Cable would share voting power with Lyon as a result of the Voting Agreement and Cable would have sole dispositive power with respect to the 50,000 shares acquirable upon such exercise, subject to any applicable California community property laws.

(4) The Separate Property Trust has sole voting and dispositive power with respect to the 331,437 shares of Common Stock owned by it.


CUSIP NO. 552074 10 6		13D		Page 10 of 115 Pages

(c) The Reporting Persons have not effected any transactions in the Common Stock in the last 60 days, except that on January 7, 2005, (i) Lyon purchased an aggregate of 655,569 shares of Common Stock in a private transaction pursuant to a Stock Purchase Agreement (the “Lyon Purchase Agreement”) dated as of January 7, 2005 among Lyon and the sellers named therein (consisting of certain investment funds managed by Bricoleur Capital Management, LLC) for a price per share of $66.95 and (ii) the Separate Property Trust purchased 331,437 shares of Common Stock in a private transaction pursuant to a Stock Purchase Agreement (the “Separate Property Trust Purchase Agreement”) dated as of January 7, 2005 among the Separate Property Trust and the sellers named therein (consisting of certain investment funds managed by Bricoleur Capital Management, LLC) for a price per share of $66.95.

(d) Each Reporting Person does not know of any other person who has the right to receive, or the power to direct the receipt of, dividends from, or the proceeds from the sale of, the Common Stock beneficially owned by such Reporting Person, except, for Reporting Persons who are individuals, as may be required under California community property laws.

(e) Not applicable.

ITEM 6.

CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER.

Item 6 of the Schedule 13D is hereby amended to add the following:

On January 7, 2005, Lyon purchased an aggregate of 655,569 shares of Common Stock from certain investment funds managed by Bricoleur Capital Management, LLC pursuant to the Lyon Purchase Agreement for a purchase price of $66.95 per share. The aggregate purchase price for the shares of Common Stock purchased by Lyon was $43,890,344.55.

On January 7, 2005, the Separate Property Trust purchased an aggregate of 331,437 shares of Common Stock from certain investment funds managed by Bricoleur Capital Management, LLC pursuant to the Separate Property Trust Purchase Agreement for a purchase price of $66.95 per share. The aggregate purchase price for the shares of Common Stock purchased by the Separate Property Trust was $22,189,707.15.

As described in Item 3, certain of the shares of Common Stock acquired by Lyon and the Separate Property Trust have been pledged to secure the $27 Million Loan pursuant to the terms of the Pledge Agreement.

The beneficiary of the Separate Property Trust is the son of Lyon.

The foregoing descriptions of the Lyon Purchase Agreement, the Separate Property Trust Purchase Agreement and the Pledge Agreement are not, and do not purport to be, complete and each is qualified in its entirety by reference to the Lyon Purchase Agreement, the Separate Property Trust Purchase Agreement and the Pledge Agreement, copies of which are filed as Exhibit 7.7, Exhibit 7.8 and Exhibit 7.6, respectively.


CUSIP NO. 552074 10 6		13D		Page 11 of 115 Pages

ITEM 7.

MATERIAL TO BE FILED AS EXHIBITS.

Item 7 of the Schedule 13D is hereby amended to add the following exhibits:



Exhibit 7.1		Joint Filing Agreement, dated as of January 9, 2005, among William Lyon, The Cable Family Trust Est. 7-11-88, Wade H. Cable and Susan M. Cable, Trustees, Wade H. Cable, and William Harwell Lyon Separate Property Trust, Richard M. Sherman, Jr., Trustee.

Exhibit 7.2		Loan and Security Agreement dated as of January 3, 2005 among William Lyon, Willa Dean Lyon, William Harwell Lyon Separate Property Trust and Fremont Investment and Loan.

Exhibit 7.3		Loan and Security Agreement dated as of January 3, 2005 among William Lyon, Willa Dean Lyon, William Harwell Lyon Separate Property Trust and Fremont Investment and Loan.

Exhibit 7.4		Secured Promissory Note dated January 3, 2005 by William Lyon, Willa Dean Lyon and William Harwell Lyon Separate Property Trust in favor of Fremont Investment and Loan.

Exhibit 7.5		Secured Promissory Note dated January 3, 2005 by William Lyon, Willa Dean Lyon and William Harwell Lyon Separate Property Trust in favor of Fremont Investment and Loan.

Exhibit 7.6		Pledge Agreement dated as of January 3, 2005 by and among William Lyon, Willa Dean Lyon, William H. Lyon Separate Property Trust and Fremont Investment and Loan.

Exhibit 7.7		Stock Purchase Agreement dated as of January 7, 2005 among General William Lyon and the sellers named therein (consisting of certain investment funds managed by Bricoleur Capital Management, LLC).

Exhibit 7.8		Stock Purchase Agreement dated as of January 7, 2005 among William Harwell Lyon Separate Property Trust and the sellers named therein (consisting of certain investment funds managed by Bricoleur Capital Management, LLC).


CUSIP NO. 552074 10 6		13D		Page 12 of 115 Pages

SIGNATURE

After reasonable inquiry and to the best of their knowledge and belief, the undersigned certify that the information set forth in this statement is true, complete and correct.



Dated: January 10, 2005	/s/ WILLIAM LYON
	WILLIAM LYON

	THE CABLE FAMILY TRUST, EST. 7-11-88

	By:	/s/ WADE H. CABLE
		Wade H. Cable, Trustee

	By:	/s/ SUSAN M. CABLE
		Susan M. Cable, Trustee

	/s/ WADE H. CABLE
	WADE H. CABLE

	THE WILLIAM HARWELL LYON SEPARATE PROPERTY FAMILY TRUST

	By:	/s/ RICHARD M. SHERMAN, JR.
		Richard M. Sherman, Jr., Trustee


CUSIP NO. 552074 10 6		13D		Page 13 of 115 Pages

EXHIBIT INDEX



Exhibit 7.1		Joint Filing Agreement, dated as of January 9, 2005, among William Lyon, The Cable Family Trust Est. 7-11-88, Wade H. Cable and Susan M. Cable, Trustees, Wade H. Cable, and William Harwell Lyon Separate Property Trust, Richard M. Sherman, Jr., Trustee.

Exhibit 7.2		Loan and Security Agreement dated as of January 3, 2005 among William Lyon, Willa Dean Lyon, William Harwell Lyon Separate Property Trust and Fremont Investment and Loan.

Exhibit 7.3		Loan and Security Agreement dated as of January 3, 2005 among William Lyon, Willa Dean Lyon, William Harwell Lyon Separate Property Trust and Fremont Investment and Loan.

Exhibit 7.4		Secured Promissory Note dated January 3, 2005 by William Lyon, Willa Dean Lyon and William Harwell Lyon Separate Property Trust in favor of Fremont Investment and Loan.

Exhibit 7.5		Secured Promissory Note dated January 3, 2005 by William Lyon, Willa Dean Lyon and William Harwell Lyon Separate Property Trust in favor of Fremont Investment and Loan.

Exhibit 7.6		Pledge Agreement dated as of January 3, 2005 by and among William Lyon, Willa Dean Lyon, William H. Lyon Separate Property Trust and Fremont Investment and Loan.

Exhibit 7.7		Stock Purchase Agreement dated as of January 7, 2005 among General William Lyon and the sellers named therein (consisting of certain investment funds managed by Bricoleur Capital Management, LLC).

Exhibit 7.8		Stock Purchase Agreement dated as of January 7, 2005 among William Harwell Lyon Separate Property Trust and the sellers named therein (consisting of certain investment funds managed by Bricoleur Capital Management, LLC).

EX-7.1 2 dex71.htm JOINT FILING AGREEMENT DATED AS OF JANUARY 9, 2005 Joint Filing Agreement dated as of January 9, 2005

Exhibit 7.1

AGREEMENT REGARDING JOINT FILING OF STATEMENT ON SCHEDULE 13D

In accordance with Rule 13d-1(k) under the Securities Exchange Act of 1934, as amended, each of the persons named below agrees to the joint filing on behalf of each of them of a Statement on Schedule 13D (including amendments thereto) with respect to the Common Stock, par value $.01 per share, of William Lyon Homes, a Delaware corporation, and further agrees that this Joint Filing Agreement be included as an exhibit to such filings provided that, as contemplated by Section 13d-1(k)(1)(ii), no person shall be responsible for the completeness or accuracy of the information concerning the other persons making the filing, unless such person knows or has reason to believe that such information is inaccurate.



Dated: January 9, 2005	/s/ WILLIAM LYON
	WILLIAM LYON

	THE CABLE FAMILY TRUST, EST. 7-11-88

	By:	/s/ WADE H. CABLE
		Wade H. Cable, Trustee

	By:	/s/ SUSAN M. CABLE
		Susan M. Cable, Trustee

	/s/ WADE H. CABLE
	WADE H. CABLE

	THE WILLIAM HARWELL LYON SEPARATE PROPERTY FAMILY TRUST

	By:	/s/ RICHARD M. SHERMAN, JR.
		Richard M. Sherman, Jr., Trustee

EX-7.2 3 dex72.htm LOAN AND SECURITY AGREEMENT DATED AS OF JANUARY 3, 2005 Loan and Security Agreement dated as of January 3, 2005

Exhibit 7.2

Loan No. 950114782

LOAN AND SECURITY AGREEMENT

THIS LOAN AND SECURITY AGREEMENT (this “Agreement”), dated as of January 3, 2005, is made by and between FREMONT INVESTMENT & LOAN, a California industrial bank (“Lender”), and WILLIAM LYON, an individual, WILLA DEAN LYON, an Individual and WILLIAM HARWELL LYON SEPARATE PROPERTY TRUST (the “Trust”) (jointly and severally, “Borrower”).

R E C I T A L S

A. Borrower has advised Lender that it intends to purchase 987,006 shares of the common stock of William Lyon Homes (“Homes”) and in connection therewith has requested that Lender finance such purchase.

B. Borrower desires to borrow from Lender, and Lender is willing to loan to Borrower, a loan (the “Loan”) in the maximum principal amount of the Loan Amount (as hereinafter defined), for the purposes and upon the terms set forth herein.

NOW THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE 1

DEFINITIONS

When used herein, the following initially-capitalized terms shall have the following meanings:

“Affiliate” means, with respect to any Person, any other Person which controls, is controlled by, or is under common control with the Person in question. For the purposes of the foregoing definition, “controls” (and the correlative terms “controlled by” and “under common control with”) means possession by the applicable Person of the power to direct or cause the direction of the management and policies thereof, whether through the ownership of voting securities, by contract, or otherwise, including, without limitation, the power to elect or appoint a majority of the directors of a corporation or the trustees of a trust.

“Agreement” means this Loan and Security Agreement, together with all supplements, amendments, modifications, extensions, renewals and replacements hereto.

“Apartment Affiliates” means any entity in which a Borrower has an interest that has a direct or indirect interest in an Apartment Entity.

“Apartment Entities” means each of Skyline Hills, Provence and Country Club Villas, and their respective successors and assigns.

“Application Information” means all financial information and statements and other information submitted to Lender in connection with the Loan, including, without limitation, the information set forth on the Borrower Questionnaire delivered to Lender.

“Attorneys’ Fees,” “Attorneys’ Fees and Costs,” “attorneys’ fees” and “attorneys’ fees and costs” mean the reasonable fees and expenses of counsel to the applicable parties to the Loan Documents, which may include printing, photostating, duplicating, facsimilating, messengering, filing and

other expenses, air freight charges, and fees billed for law clerks, paralegals, librarians and others not admitted to the bar but performing services under the supervision of an attorney. The terms “attorneys’ fees” or “attorneys’ fees and costs” shall also include, without limitation, all such reasonable fees and expenses incurred with respect to appeals, arbitrations, bankruptcy proceedings (including, without limitation, any adversary proceeding, contested motion or motion) and any post-judgment proceedings to collect any judgment, and whether or not any action or proceeding is brought with respect to the matter for which such fees and expenses were incurred. The recovery of post-judgment fees, costs and expenses under this Agreement or any of the other Loan Documents is separate and several and shall survive the merger of the applicable Loan Documents into any judgment.

“Bankruptcy Code” means Title 11 of the U.S. Code, as applicable, or any similar federal or state laws for the relief of debtors, each as hereafter amended.

“Borrower Affiliates” means each of the Principal Parties, Homes and Skyline Hills, Provence and Country Club Villas, and each of the Apartment Affiliates.

“Business Day” means any day other than a Saturday, a Sunday, a legal holiday under the laws of the State of California, or a day on which commercial banks in the State of California are authorized or required by law or other governmental action to be closed.

“Canyons Apartments” means the real property and improvements commonly known as The Canyons.

“Closing Date” means the date of the satisfaction of the conditions precedent set forth in Article 3 and the closing of the Loan, but in no event later than the Termination Date.

“Collateral” means the collateral now or hereafter pledged to Lender under the Security Instrument or any other Loan Document as security for any of the Loan Obligations, including, without limitation, the Pledged Shares.

“Contractual Obligation” as applied to any Person means any provision of any instrument, document or security issued by that Person or of any indenture, mortgage, deed of trust, contract, undertaking, agreement or other instrument to which that Person is a party or by which any of its properties is bound or to which it or any of its properties is subject.

“Country Club Villas Apartments” means the real property and improvements commonly known as the Country Club Villas.

“Country Club Villas” means DMT/Lyon Country Club Villas, LLC, a California limited liability company.

“Default Interest Rate” is defined in the Note.

“Event of Default” means any of the events specified in Section 7.1.

“Financial Reporting Method” means either generally accepted accounting principles (GAAP) consistently applied or a cash method of accounting (using fair market value for real estate).

“Financial Statement Delivery Date” means with respect to the financial statements and information required by Section 6.4(A), ninety (90) days after the end of each calendar year, and at such other times within thirty (30) days after written request by Lender.

“Formation Documents” means as to any trust, its trust agreement and a certification of the current trustees thereof, each of the foregoing together with all supplements, amendments and modifications thereto.

“Formation Documents Certificates” means such certificates in connection with the Formation Documents of the Signature Parties as may be required by Lender from Borrower and the other Signature Parties.

“Further Assurances Clauses” means the provisions of the Loan Documents requiring Borrower or Guarantors to deliver additional documents or instruments to Lender upon Lender’s written request, including, without limitation, Sections 4.3 and 6.6 of this Agreement and Sections 11 and 12 of the Guaranty.

“Governing State” means California.

“Governmental Agency” means any federal, state, municipal or other governmental or quasi-governmental court, agency, authority or district.

“Guarantor” means William Harwell Lyon 1976 Trust.

“Guaranty” means that certain Guaranty of even date herewith executed by Guarantor in favor of Lender, together with all supplements, amendments, modifications, extensions, renewals and replacements thereto.

“Holdback for Interest Reserve” is defined in the Note.

“Homes” means William Lyon Homes.

“Indebtedness” means, with respect to any Person, (a) all indebtedness of such Person for borrowed money; (b) all obligations issued, undertaken or assumed by such Person as the deferred purchase price of property or services; (c) all non-contingent reimbursement or payment obligations; (d) all obligations of such Person evidenced by notes, bonds, debentures or similar instruments; (e) all indebtedness of such Person created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property); (f) all obligations of such Person with respect to capital leases; (g) all indebtedness referred to in clauses (a) through (f), inclusive, above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness; and (h) all guaranty obligations of such Person in respect of indebtedness or obligations of others of the kinds referred to in clauses (a) through (g), inclusive, above.

“Indemnitees” means, collectively and individually, Lender, its Affiliates and its and their respective directors, officers, agents, attorneys, employees, successors and assigns.

“Insolvency Laws” means the Bankruptcy Code and any and all present and future federal, state and local laws, ordinances, regulations, rules and any other requirements of any Governmental Agency relating to the bankruptcy, insolvency, appointment of a receiver, reorganization, arrangement, readjustment of debt, dissolution or liquidation of, for or relating to, any Person, each as hereafter amended from time to time and the present and future rules, regulations and guidance documents promulgated under any of the foregoing.

“Information Delivery Date” is defined in Section 6.4.

“Lien” means any mortgage, pledge, security interest, encumbrance, lien, charge or claim of any kind, including, without limitation, any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any lease in the nature thereof, and/or the filing of or agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction, in each case, with respect to the Collateral or any portion thereof or interest therein.

“Lien Enforcement Action” means (a) any action in which Lender exercises any rights or remedies against Borrower (and/or any Guarantor) pursuant to the Loan Documents or under applicable law or at equity against or with respect to the Collateral; Lender’s exercise of a power of sale contained in any Loan Document; commencement and prosecution of a foreclosure, sale, or similar proceeding or other judicial process; prosecution of any and all rights available to Lender relating to Borrower or the Collateral in any bankruptcy, insolvency or similar proceeding (including Lender’s rights under the Bankruptcy Code to file a claim for the full amount of all Loan Obligations, to require that all collateral held by Lender continue to secure all Loan Obligations, and to elect treatment under 11 U.S.C. Section 1111(b)(2)); consummation of a U.C.C. sale; and (b) any other action or proceeding relating to the Collateral (including, without limitation, an action for specific performance as to Borrower’s express nonmonetary obligations under the Loan Documents), or relating to any other collateral held by Lender for the Loan.

“Loan Amount” means an amount of up to Twenty-Seven Million Five Hundred Fifty Thousand Dollars ($27,550,000).

“Loan Documents” means the documents described in Section 3.1 and all other documents now or hereafter securing, or executed in connection with, the Loan, together with all supplements, amendments, modifications, extensions, renewals and replacements thereto.

“Loan Fee” means a fee in the amount of one percent (1%) of the Loan Amount.

“Loan Obligations” means all obligations of Borrower with respect to : (a) payment of principal, interest, and any other sums payable under the Loan Documents; (b) performance of all nonmonetary obligations of Borrower under the Loan Documents; (c) payment of damages for breach of any representation, warranty, or covenant in any Loan Document; (d) any obligation to indemnify any party under any Loan Document; and (e) payment of any monetary judgment obtained by Lender under the Loan Documents or in connection with the Loan.

“Loan Year” means the twelve (12) month period commencing on the Closing Date, if the Closing Date occurs on the first day of a calendar month, or on the first day of the calendar month following the Closing Date if the Closing Date does not occur on the first day of a calendar month, and each twelve (12) months thereafter. If the Closing Date does not occur on the first day of a calendar month, the first Loan Year shall in addition include any period from the Closing Date to the first day of the calendar month following the Closing Date.

“Losses” means any and all liabilities, claims and actual, out-pocket losses, damages, costs, and expenses (including, without limitation, reasonable attorneys’ fees and expenses) incurred, paid or suffered by Lender or any Affiliate, subsidiary or nominee of Lender: (a) as a direct result of the specified matter; (b) to cure or remedy such matter; and/or (c) in enforcing Lender’s claims against any Person with respect to such matter.

“Maturity Date” is defined in the Note.

“Monthly Installment” is defined in the Note.

“Nonforeign Status Statutes” means Section 1445 of the Internal Revenue Code of 1986, as amended, Sections 18662, 18668 and 18669 of the California Revenue and Taxation Code, as amended, and the regulations promulgated thereunder, and any successor Laws.

“Note” means that certain Secured Promissory Note of even date herewith in the principal amount of Twenty-Seven Million Five Hundred Fifty Thousand Dollars ($27,550,000), executed by Borrower as maker, in favor of Lender, as payee, together with all supplements, amendments, modifications, extensions, renewals and replacements thereto.

“Person” means and includes natural persons, corporations, limited liability companies, limited liability partnerships, limited partnerships, general partnerships, joint stock companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts, real estate investment trusts or other organizations, whether or not legal entities, and governments, agencies and countries and political subdivisions thereof.

“Pledged Shares” means the 861,623 shares of common stock of Homes owned by the Borrower and pledged to the Lender, together with all dividends and distributions thereon and all new, substituted and additional securities at any time issued in respect thereto, and all proceeds of the foregoing.

“Potential Default” means a monetary default, or material nonmonetary default, in either case which, with the giving of notice or the passage of time, or both, would constitute an Event of Default under any of the Loan Documents.

“Principal Parties” means, individually and collectively, Borrower and Guarantor.

“Provence” means Provence Apartments, LLC, a Delaware limited liability company.

“Provence Apartments” means the real property and improvements commonly known as Provence.

“Real Property Loan Agreement” means that certain Loan and Security Agreement of even date herewith, executed by Borrower and Lender in connection with a loan being made by Lender to Borrower in the principal amount of Forty-Four Million Two Hundred Fifty Thousand Dollars ($44,250,000), which loan is secured by, among other things, certain real property.

“Secured Obligations” is defined in the Security Instrument.

“Security Instrument” means that certain Pledge Agreement of even date herewith executed by Borrower, in favor of Lender, together with all supplements, amendments, modifications, extensions, renewals and replacements thereto.

“Signature Parties” means, individually and collectively, Borrower, Guarantor and each trustee executing the Loan Documents on behalf of Borrower or any Guarantor.

“Skyline Hills” means Skyline Hills Associates, a California general partnership.

“Tax Identification Number” means each Borrower’s employer identification number or social security number, which in the case of William Lyon is ###-##-####, in the case of Willa Dean Lyon is ###-##-####, and in the case of the Trust is ###-##-####.

“Termination Date” means January 28, 2005.

“Terrorism Laws” means Executive Order 13224 issued by the President of the United States of America, the Terrorism Sanctions Regulations (Title 31 Part 595 of the U.S. Code of Federal

Regulations), the Terrorism List Governments Sanctions Regulations (Title 31 Part 596 of the U.S. Code of Federal Regulations), and the Foreign Terrorist Organizations Sanctions Regulations (Title 31 Part 597 of the U.S. Code of Federal Regulations), and all other present and future federal, state and local laws, ordinances, regulations, policies and any other requirements of any Governmental Agency (including, without limitation, the United States Department of the Treasury Office of Foreign Assets Control) addressing, relating to, or attempting to eliminate, terrorist acts and acts of war, each as hereafter supplemented, amended or modified from time to time, and the present and future rules, regulations and guidance documents promulgated under any of the foregoing, or under similar laws, ordinances, regulations, policies or requirements of other States or localities.

ARTICLE 2

LOAN TERMS

2.1 Loan and Disbursements of Loan Proceeds.

Subject to the terms and conditions of this Agreement, and in reliance upon the representations and warranties of Borrower set forth in the Loan Documents, Lender agrees to make to Borrower, and Borrower agrees to accept from Lender, the Loan. The Loan proceeds shall be disbursed by Lender as provided in the Note.

2.2 Evidence of Indebtedness and Maturity.

Borrower shall execute and deliver to Lender, on or before the Closing Date, the Note evidencing the Loan. Borrower agrees to repay the indebtedness evidenced by the Note in accordance with the terms thereof and the terms hereof. The outstanding principal balance of the Loan, together with accrued and unpaid interest thereon and all other amounts payable by Borrower under the Loan Documents shall be due and payable on the Maturity Date provided in the Note, as the same may be accelerated as provided in the Note or the other Loan Documents.

2.3 Interest Rate.

The Loan shall bear interest at the rate per annum specified in the Note.

2.4 Loan Fee and Payment of Closing Expenses.

Whether or not the Loan closes, Borrower shall promptly pay all expenses in connection with the making and closing of the Loan, including, without limitation, all charges for recording and filing fees, inspection fees, travel expenses of Lender’s personnel related to the making of the Loan, documentary stamp taxes and recording taxes and fees, if any, note intangible taxes, if any, costs of tax lien searches, the reasonable fees and costs charged by Lender’s counsel and all of Lender’s out-of-pocket expenses in connection with the Loan payable to Lender. Borrower acknowledges and agrees that the Loan Fee has been fully earned by Lender, and the unpaid portion of the Loan Fee is due and payable, upon the Closing of the Loan, and the Loan Fee is nonrefundable. Borrower hereby authorizes Lender to disburse proceeds of the Loan to Lender or to any other party to pay the Loan Fee, interest for any partial calendar month in which the Closing Date occurs, and the fees and expenses described in this Section 2.4, notwithstanding that Borrower may not have requested a disbursement of such amounts. Borrower covenants to pay all amounts required to be paid by Borrower under this Section 2.4 within ten (10) days after written demand by Lender, if and to the extent not disbursed by Lender from proceeds of the Loan. Borrower’s payment of the Loan Fee is in addition to Borrower’s obligation to pay (a) the expenses and any and all other sums described in this Section 2.4, and (b) all other sums required to be paid by Borrower in any of the Loan Documents.

ARTICLE 3

CONDITIONS TO LOAN CLOSING

3.1 Conditions Precedent to Closing of the Loan.

As a condition precedent to Lender’s obligation to close the Loan and disburse any Loan proceeds, on or before the Closing Date Borrower must satisfy and fulfill each of the following conditions precedent to closing, to the satisfaction of Lender in its good faith sole discretion:

A. Loan Documents. Borrower shall deliver to Lender the following documents, each duly executed and acknowledged by a notary public where necessary, and in form and substance satisfactory to Lender in its good faith sole discretion:

(i) This Agreement;

(ii) The Note;

(iii) The Security Instrument, together with the stock certificate(s) evidencing the Pledged Shares and stock powers executed in blank by Borrower;

(iv) The Guaranty;

(v) UCC-1 Financing Statements relating to the Collateral for the Governing State;

(vi) A duly executed Federal Reserve Form G-3;

(vii) The acknowledgment from Homes pursuant to the Security Instrument; and

(viii) The Formation Documents Certificates.

B. Truth of Representations and Warranties. The representations and warranties contained herein and in the other Loan Documents shall be true, correct and complete in all material respects on the Closing Date.

C. No Default. As of the Closing Date, no event or condition shall have occurred or shall exist that constitutes, and there shall be no event or condition that would result from the funding of the Loan that would constitute, an Event of Default under any of the Loan Documents or a Potential Default under any of the Loan Documents.

3.2 Termination of Agreement.

Lender’s obligation to make the Loan and perform any of its other obligations under the Loan Documents shall terminate unless all of the conditions precedent set forth in Section 3.1 have been satisfied, and the Closing Date has occurred, on or before the Termination Date.

ARTICLE 4

SECURITY AGREEMENT

4.1 Grant of Security Interest.

whether now owned or hereafter acquired, and in all proceeds thereof (and proceeds of proceeds) in whatever form. This Agreement shall constitute a security agreement pursuant to the Governing State Uniform Commercial Code with respect to the Pledged Shares and proceeds thereof, with Borrower the “Debtor” and Lender the “Secured Party” as such terms are used therein. Borrower agrees that Lender may, in such manner, on such terms and at such times as may be elected by Lender, and without demand or notice to, or the consent or signature of, Borrower, file and/or record such UCC financing statements, and/or amendments to or continuations of any financing statements to evidence, perfect and/or continue the perfection of, any security interests created or to be created pursuant to this Agreement or any of the other Loan Documents, in any or all of the Collateral.

4.2 Representations, Agreements and Covenants Regarding Pledged Shares.

As an inducement to Lender to execute this Agreement and make the Loan, Borrower represents and warrants to Lender, and covenants and agrees, as follows:

A. Except for the security interest in favor of Lender, Borrower is, and as to any of the Pledged Shares acquired after the date hereof shall be, the sole owner of the Pledged Shares, free from any adverse Lien of any kind whatsoever. Borrower shall promptly notify Lender of, and will defend the Pledged Shares against, all claims and demands of all persons at any time claiming any interest therein.

B. Borrower shall not, without the prior written consent of Lender, sell, offer to sell or otherwise transfer, exchange, hypothecate or dispose of the Pledged Shares or any interest therein. If the Pledged Shares or any part thereof is sold, transferred, exchanged, or otherwise disposed of (either with or without the written consent of Lender), the security interest of Lender shall extend to the proceeds of such sale, transfer, exchange or other disposition and any such proceeds shall be promptly applied to the repayment of the Note.

C. The Pledged Shares shall be delivered to Lender on the Closing Date and kept by Lender.

D. Borrower shall immediately notify Lender in writing of any change in its state of incorporation or organization or in its place of business or residence, any change in Borrower’s name or organizational number or the adoption or change of any trade name or fictitious business name used by Borrower.

4.3 Further Security Agreements.

Borrower agrees to take such actions and, within ten (10) days after Lender’s written request, to execute, deliver and file and/or record such documents, agreements and financing statements, as may be reasonably necessary to evidence the security interest set forth in Section 4.1, to establish the priority thereof, to carry out the intent and purpose of this Article 4 and/or reflect any change in Borrower’s state of organization, name, organizational number, place of business or place of residence.

ARTICLE 5

BORROWER’S REPRESENTATIONS AND WARRANTIES

As an inducement to Lender to execute this Agreement and make the Loan, Borrower represents and warrants to Lender the truth and accuracy of the matters set forth in this Article 5.

5.1 Organization, Power, Good Standing, and Business.

conducted, to enter into each Loan Document and to carry out the transactions contemplated hereby and thereby. The Trust has delivered to Lender true and correct copies of portions of its Formation Documents and such portions of the Formation Documents have not been amended or modified except pursuant to agreements delivered to Lender prior to the date hereof.

B. Each Signature Party other than Borrower is duly formed and validly existing under the Laws of the State of its formation. Each such Signature Party has the full power and authority to own and operate its properties, to carry on its business as now conducted, to act as a trustee of Borrower or Guarantor, as applicable, to enter into each Loan Document as a trustee of Borrower or a Guarantor, as applicable, to enter into the Guaranty on its own behalf, if applicable, and to carry out the transactions contemplated in the Loan Documents. Borrower has delivered to Lender true, correct and complete copies of the Formation Documents for each such Signature Party and such Formation Documents have not been amended or modified except pursuant to agreements delivered to Lender prior to the date hereof.

5.2 Authorization of Borrowing, etc.

A. Authorization of Borrowing. The execution, delivery and performance of the Loan Documents, and the issuance, delivery and payment of the Note, have been duly authorized by all necessary action of each Signature Party.

B. No Conflict. The execution, delivery and performance by each Signature Party of each applicable Loan Document does not and will not (i) violate any Law applicable to any such Signature Party, the Formation Documents of any such Signature Party, or any order, judgment or decree of any court or other Governmental Agency binding on any such Signature Party; (ii) conflict with, result in a breach of, or constitute (with the giving of notice or the passage of time or both), a default under any Contractual Obligation of any such Signature Party; (iii) result in or require the creation or imposition of any Lien of any nature on Borrower’s properties or assets other than the Liens in favor of Lender under the Loan Documents; or (iv) require any approval or consent of any Person under any Contractual Obligation of any Signature Party.

C. Governmental Consents. The execution, delivery and performance by each Signature Party of each applicable Loan Document does not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any Governmental Agency or other Person.

5.3 Actions.

There is no action, suit, proceeding or arbitration, before or by any Governmental Agency or other Person, pending or, to Borrower’s best knowledge, threatened in writing against or affecting Borrower, any of the Principal Parties or any properties or rights of Borrower or any of the Principal Parties, which might materially and adversely affect Lender’s rights or remedies under the Loan Documents, the business, assets, operations or financial condition of any such party or its ability to perform its obligations under the Loan Documents. There are no outstanding judgments against Borrower or any Collateral which exceed One Million Dollars ($1,000,000) in the aggregate and are not covered by insurance. There are no outstanding judgments against any of the Principal Parties or any of their assets which would have a material adverse effect on Lender’s rights or remedies under the Loan Documents or the Environmental Indemnity or the ability of such party to perform its obligations under the Loan Documents or the Environmental Indemnity.

5.4 Financial Position.

A. Financial Information. The Application Information and all financial statements and financial data delivered to Lender in connection with the Loan and/or relating to Borrower and the Borrower Affiliates are true, correct and complete in all material respects and accurately present the financial position of such parties as of the date thereof. No material adverse change has occurred in the financial position disclosed by the Application Information or in any other financial statements or financial data delivered to Lender or in Borrower’s or any Borrower Affiliate’s assets, liabilities, financial position or business.

B. Bankruptcy and Insolvency. Neither Borrower nor any of the Borrower Affiliates has filed or been the subject of any bankruptcy, insolvency, reorganization, dissolution or similar proceeding or any proceeding for the appointment of a receiver or trustee for all or any substantial part of their respective property. Neither Borrower nor any of the Borrower Affiliates has admitted in writing its inability to pay its debts when due, made an assignment for the benefit of creditors or taken other similar action.

C. Other Borrowing. Except for the Loan, no borrowings have been made by Borrower which are secured by the Pledged Shares or which might give rise to any Lien on the Pledged Shares.

5.5 Liens.

Borrower is the sole owner of the Pledged Shares and any other Collateral free from any adverse Liens, except for Liens in favor of Lender.

5.6 No Defaults.

No Event of Default has occurred under this Agreement or any of the other Loan Documents, and no Potential Default exists under this Agreement or any of the other Loan Documents. No default by Borrower exists under any Contractual Obligation which would have a material adverse effect on Borrower’s ability to repay the Loan or to perform its obligations under any of the Loan Documents.

5.7 Disclosure.

No representation or warranty of Borrower contained in this Agreement, any Loan Document, or any Application Information contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein not misleading.

5.8 Violations of Governmental Prohibitions.

Neither the making of the Loan, nor the receipt of Loan proceeds by Borrower, violates any Law applicable to Borrower, including, without limitation, any of the Terrorism Laws or Regulation U of the Board of Governors of the Federal Reserve. Neither the making of the Loan, nor the receipt of Loan proceeds by Borrower or any Principal Party, violates any of the Terrorism Laws applicable to any of the Principal Parties. To Borrower’s best knowledge, no holder of any direct or indirect equitable, legal or beneficial interest in Borrower or any Principal Party is the subject of any of the Terrorism Laws. No portion of the Loan proceeds will be used, disbursed or distributed by Borrower for any purpose, or to any Person, directly or indirectly, in violation of any Law including, without limitation, any of the Terrorism Laws or Regulation U of the Board of Governors of the Federal Reserve.

5.9 Apartment Entities.

An Apartment Affiliate holds a material ownership interest in each of the Apartment Entities. Skyline Hills owns the Canyons Apartments. Provence owns the Provence Apartments. Country Club Villas owns the Country Club Villas Apartments.

5.10 Use of Loan Proceeds.

The Loan proceeds shall not be used or bought for personal, family or household purposes.

ARTICLE 6

BORROWER’S COVENANTS

Borrower covenants and agrees that, until the Loan and all other amounts owing to Lender under the Loan Documents have been paid in full and all Secured Obligations have been satisfied, Borrower shall perform all of the covenants in this Article 6.

6.1 No Liens.

Borrower shall not permit any Lien to be created or filed against the Collateral. Borrower shall be the sole owner of the Collateral, free from any adverse Liens, except for Liens in favor of Lender. Borrower shall not assign, sell, pledge, encumber or otherwise hypothecate all or any portion of the Collateral.

6.2 Compliance with Laws.

Borrower will comply with all Laws applicable to Borrower, and the Collateral.

6.3 Notice of Proceeding.

Borrower will promptly notify Lender of any notice of violation, action, suit, proceeding or arbitration (including, without limitation, any foreclosure proceeding, any voluntary or involuntary bankruptcy proceeding or any proceeding for the appointment of a receiver), commenced or threatened in writing against Borrower, any of the Collateral or any portion thereof or interest therein. Borrower shall deliver to Lender copies of all notices and other information in connection with any such action, suit, proceeding or arbitration promptly upon receipt or transmittal thereof.

6.4 Financial and Other Information.

Borrower shall furnish or cause to be furnished to Lender such financial information concerning Borrower, the Borrower Affiliates (other than Homes), Canyons Apartments, Country Club Villas Apartments, Provence Apartments and the Collateral as Lender may reasonably request from time to time, all of which shall be prepared in accordance with the Financial Reporting Method. Without limiting the generality of the foregoing, Borrower shall furnish to Lender, without prior request or demand:

A. Trust/Natural Person Financial Statements. If Borrower and/or any Principal Party is a natural person or trust, Borrower shall provide Lender with (i) annual financial statements, in form reasonably acceptable to Lender, for each such party on or before each Financial Statement Delivery Date, and (ii) copies of the tax returns for each such party, together with all supporting schedules, within thirty (30) days after the filing thereof. Such financial statements and tax returns shall be prepared in accordance with the Financial Reporting Method and certified as true, correct and complete by Borrower or such Principal Party. Within thirty (30) days after the end of each Loan Year, Borrower shall provide Lender with a written certification, in form reasonably satisfactory to Lender, that there has been no material adverse change in the financial condition of Borrower and each such Principal Party from the financial statements for such party most recently delivered to Lender (or, if there has been a material adverse change, explaining such material adverse change in reasonable detail).

B. Borrower Affiliates. The Borrower Affiliates (other than Homes and the Persons described in Section 6.4(A) above) shall provide Lender with (i) annual financial statements, prepared in accordance with a Financial Reporting Method, for each such party on or before each Financial Statement Delivery Date, and (ii) promptly upon delivery or receipt by any of the Apartment Affiliates, copies of all correspondence and other information related to the sale or potential sale of Canyons Apartments, Provence Apartments, or Country Club Villas Apartments.

C. Failure to Deliver Financial Statements. Without limiting any of Lender’s rights or remedies in the event of any failure by Borrower to comply with the provisions of this Section 6.4, if Borrower fails to deliver to Lender any of the financial statements or other information required herein on or before the applicable date required in this Section 6.4 (the “Information Delivery Date”), and if Borrower continues to fail to deliver any such financial statements or other information within fifteen (15) days after written notice from Lender given on or after the Information Delivery Date, then, commencing on the first day after the Information Delivery Date, the Variable Interest Rate (as defined in the Note) shall be increased by one-half percent (.50%) until such time as Borrower has delivered all of the financial statements or other information required to be delivered by Borrower pursuant to, and in the form required by, this Section 6.4. The Monthly Installments shall be adjusted effective with the Monthly Installment due immediately following the Information Delivery Date to reflect such increase. Once Borrower has delivered all of the financial statements and other information required to be delivered by Borrower pursuant to, and in the form required by, this Section 6.4, the Variable Interest Rate and the Monthly Installments shall be readjusted effective with the Monthly Installment due immediately thereafter.

D. Notice of Outstanding Shares. As soon as practicable after receipt by Borrower of notice of any publicly announced change in the aggregate number of outstanding shares of Homes, written notice to Lender of such change.

6.5 Other Contractual Obligations.

Borrower shall perform all of its obligations under any Contractual Obligation if the failure to perform any such obligation would have a material adverse effect on Borrower’s ability to repay the Loan or to perform any of its obligations under any of the Loan Documents.

6.6 Further Assurances.

Borrower shall execute and deliver, and shall cause Guarantor to execute and deliver, from time to time, within ten (10) days after written any request by Lender, any and all instruments, agreements and documents, and shall take such other action, as may be reasonably necessary or desirable in the opinion of Lender to maintain, perfect or insure Lender’s security provided for herein and in the other Loan Documents, including, without limitation, the execution of such amendments to the Security Instrument and the other Loan Documents, all as Lender shall reasonably require, and shall pay all reasonable fees and expenses (including, without limitation, reasonable attorney’s fees and costs) related thereto.

6.7 Entity Requirements.

The Trust and the Borrower Affiliates (other than Homes) shall maintain and preserve their existence and all rights and franchises material to their respective businesses and shall be, at all times, validly existing and in good standing in the state of their formation. Borrower shall not at any time be a foreign trust or foreign estate, as those terms are defined in the Nonforeign Status Statutes. Neither Borrower nor any of the Principal Parties shall amend or modify any of their respective Formation Documents without Lender’s prior written consent. Promptly after Lender’s written request from time to time, but not more frequently than once in any calendar year, Borrower shall deliver to Lender evidence reasonably satisfactory to Lender that Borrower and the Borrower Affiliates (other than Homes) are in compliance with the provisions of this Section 6.7.

6.8 Compliance with Governmental Prohibitions.

No portion of the Loan proceeds will be used, disbursed or distributed by Borrower or any Principal Party for any purpose, or to any Person, in violation of any Law including, without limitation, any of the Terrorism Laws or Regulation U of the Board of Governors of the Federal Reserve. Borrower shall provide Lender with immediate written notice (a) of any failure of any of the representations and warranties set forth in Section 5.8 of this Agreement or in Section 4(M) of the Guaranty to be true, correct and complete in all respects at any time, or (b) if Borrower obtains knowledge that Borrower, any of the Principal Parties, or any holder at any time of any direct or indirect equitable, legal or beneficial interest in Borrower or any of the Principal Parties is the subject of any of the Terrorism Laws. Borrower shall immediately and diligently take, or cause to be immediately and diligently taken, all necessary action to comply with all Terrorism Laws and to cause the representations and warranties set forth in Section 5.8 of this Agreement and in Section 4(M) of the Guaranty to be true, correct and complete in all respects.

6.9 Apartment Entities.

Borrower shall pay to Lender an amount equal to the amount that any Borrower actually receives as a result of a sale of any of the Canyons Apartments, Provence Apartments or Country Club Villas Apartments within three (3) Business Days after any Borrower receives such amounts; provided, however, that Borrower’s obligations under the foregoing clause shall not occur until the Secured Obligations (as defined in the Real Property Loan Agreement) have been satisfied in full.

ARTICLE 7

EVENTS OF DEFAULT; REMEDIES

7.1 Events of Default.

A. Events of Default on Notice to Borrower. The occurrence of any of the following events shall constitute an Event of Default under this Agreement and the other Loan Documents upon written notice by Lender to Borrower given at any time on or after the occurrence of any such event; provided that upon such notice from Lender, such Event of Default shall be deemed to have occurred as of the occurrence of such event, irrespective of the date of such notice; and provided further that Lender’s giving of or failure to give such notice shall not affect, in any manner whatsoever, the imposition of any late charge or interest at the Default Interest Rate pursuant to the provisions of the Note or the other Loan Documents:

(i) Failure to Make Payments When Due. Borrower’s or any Guarantor’s failure to pay any principal, interest or other monies due under this Agreement or any of the other Loan Documents within fifteen (15) days after such amount is due.

(ii) Breach of Certain Covenants. Borrower’s or any Guarantor’s failure to perform or comply with any term, obligation or condition contained in this Agreement or any of the other Loan Documents, other than those terms, obligations and conditions otherwise referred to in this Section 7.1(A), within thirty (30) days after the delivery of written notice from Lender of such failure.

(iii) Breach of Warranty. Any representation, warranty, certification or other statement made by Borrower or any of the Borrower Affiliates herein or in any Application Information, or in any other Loan Document or in any statement or certificate at any time given by Borrower or any of the Borrower Affiliates to Lender in writing in connection with the Loan shall be materially false or misleading.

(iv) Lien Priority. Lender fails to have a legal, valid, binding and enforceable first priority Lien on the Collateral or any portion thereof.

(v) Other Liens. Without limiting the provisions of Section 6.1 of this Agreement, Borrower defaults under any Lien (other than the Liens created by the Loan Documents) affecting the Collateral or foreclosure or other proceedings are commenced to enforce any Lien (other than the Liens created by the Loan Documents) affecting the Collateral.

(vi) Material Adverse Change. A material adverse change occurs in Borrower’s or any Principal Party’s assets, liabilities, financial position or business that could have a material adverse effect on Lender’s rights or remedies under the Loan Documents or the Environmental Indemnity or the ability of such party to perform its obligations under the Loan Documents or the Environmental Indemnity.

(vii) Material Litigation. The commencement or filing of any action, suit, proceeding or arbitration against or involving Borrower or any of the Principal Parties which, if determined adversely to Borrower or such Principal Party, would not be covered in whole or in part by insurance and that could have a material adverse effect on that could have a material adverse effect on Lender’s rights or remedies under the Loan Documents or the Environmental Indemnity or the ability of such party to perform its obligations under the Loan Documents or the Environmental Indemnity.

(viii) Governmental Prohibitions. Borrower’s or any Guarantor’s failure to perform or comply with any of the terms, obligations or provisions of Section 6.8 of this Agreement or Section 4(M) of the Guaranty.

(ix) Other Loan Documents. The occurrence of an Event of Default under any of the other Loan Documents (as “Event of Default” is defined therein).

(x) Disbursement Conditions. Borrower fails to satisfy any material condition for the receipt of the disbursement of the Holdback for Interest Reserve, or to resolve the situation to Lender’s satisfaction, for a period in excess of ninety (90) days after written notice from Lender.

(xi) Holdback Balancing. Borrower fails to bring the Holdback for Interest Reserve “in balance” as required by the terms of Exhibit A to the Note within twenty-one (21) days after written notice from Lender.

B. Automatic Events of Default. The occurrence of any of the following events shall constitute an Event of Default under this Agreement and the other Loan Documents automatically and with no notice from Lender required:

(i) Involuntary Bankruptcy; Appointment of Receiver, etc.

(a) A court having proper jurisdiction shall enter a decree or order for relief with respect to Borrower or any of the Principal Parties in an involuntary case under any of the Insolvency Laws, which decree or order is not stayed within seven (7) days after entry and dismissed within ninety (90) days after the entry of such order; or any other similar relief shall be granted under any applicable Insolvency Law; or

Principal Parties, for all or a substantial part of their respective property; or the issuance of a warrant of attachment, execution or similar process against any substantial part of the respective property of Borrower or any of the Principal Parties, and the continuance of any such event in this clause (b) for ninety (90) days unless dismissed or discharged.

(ii) Voluntary Bankruptcy; Appointment of Receiver, etc.

(a) Borrower or any of the Principal Parties shall have an order for relief entered with respect to them or commence a voluntary case under any of the Insolvency Laws, or shall consent to the entry of an order for relief in an involuntary case, or to the conversion of an involuntary case to a voluntary case, under any Insolvency Law, or shall consent to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of their respective property; the making by Borrower or any of the Principal Parties of any assignment for the benefit of creditors; or

(b) The inability or failure of Borrower to pay its debts as such debts become due, the inability or failure of any of the Principal Parties (other than Homes) to pay any of its debts in excess of One Hundred Thousand Dollars ($100,000) as such debts become due, or the admission by Borrower or any of the Principal Parties in writing of its inability to pay its respective debts as such debts become due.

7.2 General Remedies.

Notwithstanding anything to the contrary contained herein or in any of the other Loan Documents, from and after the occurrence of any Event of Default, (a) the unpaid principal amount of the Loan, all accrued and unpaid interest and all other Secured Obligations shall become immediately due and payable, without presentment, demand, protest, notice of intent to accelerate, notice of acceleration, notice or other requirements of any kind, all of which are hereby expressly waived by Borrower, (b) Lender shall have the rights and remedies of a secured party under the Governing State Uniform Commercial Code, and under any other applicable law, (c) Lender may pursue all of its rights and remedies hereunder, under the other Loan Documents, at law, in equity or otherwise, and (d) Lender shall have no further obligation to disburse Loan proceeds to Borrower. Further, from and after the occurrence of any Event of Default all outstanding indebtedness and all other amounts owing to Lender under the Loan Documents shall bear interest at the Default Interest Rate.

7.3 Specific Performance.

From and after the occurrence of an Event of Default, Lender may commence and maintain an action in any court of competent jurisdiction for specific performance of any of the covenants and agreements contained herein or in any of the other Loan Documents, may obtain the aid and direction of the court in the performance of any of the covenants and agreements contained herein or therein, and may obtain orders or decrees directing the same and, in the case of any sale under the Security Instrument, directing, confirming or approving Lender’s actions or, if applicable, the trustee’s actions.

7.4 Deliver of Certificates.

No later than January 28, 2005, Borrower shall deliver to Lender certificates for the Pledged Shares, in form and substance reasonably satisfactory to Lender.

ARTICLE 8

MISCELLANEOUS PROVISIONS

8.1 Assignments and Participations in Loan and Note.

Lender shall not, without the prior written consent of Borrower, which shall not unreasonably be withheld, conditioned or delayed, assign its rights and delegate its obligations under this Agreement or any of the other Loan Documents and/or the Environmental Indemnity or assign, or sell the Loan until the earliest to occur (i) an Event of Default has occurred under Section 7.1(A)(i) or 7.1(A)(v) hereof, (ii) Lender is required to do so by applicable Laws or any Governmental Agency; or (iii) January 1, 2006; provided, however, that the foregoing shall not limit Lender’s rights to sell participations in the Loan, the Loan Documents and/or the Environmental Indemnity. To the extent of any permitted assignment, Lender shall be relieved of its obligations with respect to the Loan and the assignee shall have the same rights, benefits and obligations as it would if it were Lender hereunder and a holder of the Note. Lender may furnish any information (including, without limitation, financial information) concerning the Collateral, Borrower, the Principal Parties and any of their assets to Governmental Agencies, and to its accountants and lawyers for legitimate business purposes.

8.2 Expenses.

Borrower agrees to pay, within ten (10) days after written demand by Lender, all reasonable costs and expenses (including, without limitation, reasonable attorneys’ fees and costs, fees of any consultants, and fees for any audits, appraisal, inspections or other review required by Lender) incurred by Lender in connection with the Loan or the Loan Documents, the enforcement of any of the Secured Obligations, the enforcement of any of Lender’s rights and remedies under the Loan Documents, the collection of any payments owing to Lender hereunder or under any of the other Loan Documents, whether or not such enforcement and collection includes the filing of a lawsuit, or the retaking, holding, preparing for sale or selling the Collateral or any portion thereof or any interest therein. Such costs and expenses shall include, without limitation, Lender’s reasonable attorneys’ fees and costs, including without limitation reasonable attorneys’ fees and costs incurred by Lender in connection with any insolvency, bankruptcy, reorganization, arrangement or other similar proceedings involving Borrower or any of the Principal Parties which in any way affect the exercise by Lender of its rights and remedies hereunder, under any of the other Loan Documents at law or in equity.

8.3 Joint and Several Obligations.

The liability of Borrower under this Agreement and under each of the other Loan Documents shall be joint and several. If applicable, any married person signing the Loan Documents as Borrower or, if applicable, its general partner, agrees that recourse may be had against community assets and against his or her separate property for the satisfaction of all obligations under the Loan Documents.

8.4 Indemnity.

8.5 Waiver of Offset.

All sums payable by Borrower pursuant to any of the Loan Documents shall be paid without notice, demand, counterclaim, setoff, deduction or defense and without abatement, suspension,

deferment, diminution or reduction, and the obligations and liabilities of Borrower under the Loan Documents shall in no way be released, discharged or otherwise affected (except as expressly provided in the Loan Documents) by reason of: (a) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating to Lender, or any action taken with respect to any of the Loan Documents by any trustee or receiver of Lender, or by any court, in any such proceeding; (b) any claim which Borrower has or might have against Lender; (c) any default or failure on the part of Lender to perform or comply with any of the terms hereof or of any other agreement with Borrower or any of the Principal Parties; or (d) any other occurrence whatsoever, whether similar or dissimilar to the foregoing; whether or not Borrower shall have notice or knowledge of any of the foregoing. Except as expressly provided herein, Borrower waives all rights now or hereafter conferred by statute or otherwise to any abatement, suspension, deferment, diminution or reduction of any of the Secured Obligations.

8.6 Approvals, Amendments and Waivers.

All approvals and consents required or allowed to be given by Lender under this Agreement and the other Loan Documents must be in writing to be effective. This Agreement and the other Loan Documents may only be modified in writing signed by all of the parties hereto or thereto or their respective successors and assigns. No waiver of any provision of this Agreement or of any of the other Loan Documents, or consent to any departure by Borrower therefrom, shall in any event be effective without the written agreement of Lender. Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. Except as expressly required by the terms of the Loan Documents, no notice to or demand on Borrower or any of the Principal Parties in any case shall entitle Borrower or any of the Principal Parties to any other or further notice or demand in similar or other circumstances.

8.7 WAIVER OF JURY TRIAL.

BORROWER AND LENDER EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY CONTROVERSY OR CLAIM, WHETHER ARISING IN TORT OR CONTRACT OR BY STATUTE OR LAW, BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONJUNCTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS (INCLUDING, WITHOUT LIMITATION, THE VALIDITY, INTERPRETATION, COLLECTION OR ENFORCEMENT HEREOF OR THEREOF), OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY IN CONNECTION HEREWITH OR THEREWITH. EACH PARTY ACKNOWLEDGES AND AGREES THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY PERSON TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. THIS PROVISION IS A MATERIAL INDUCEMENT FOR BORROWER’S AND LENDER’S ENTERING INTO THE LOAN DOCUMENTS AND THE PARTIES WOULD NOT HAVE ENTERED INTO THE LOAN DOCUMENTS WITHOUT THIS WAIVER. LENDER AND BORROWER ARE EACH HEREBY AUTHORIZED TO FILE A COPY OF THIS SECTION 8.7 IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER OF JURY TRIAL.

8.8 Submission of Loan Documents.

The submission of this Agreement, any of the other Loan Documents to Borrower, Guarantor or any of the other Signature Parties or their agents or attorneys for review or signature does not constitute a commitment by Lender to make the Loan to Borrower, and the Loan Documents shall have no binding force or effect unless and until they are executed and delivered by each Signature Party and Lender and all of the conditions set forth in Section 3.1 have been satisfied.

8.9 Notices.

Any notice, or other document or demand, required or permitted under this Agreement or any of the other Loan Documents shall be in writing addressed to the appropriate address set forth below and

shall be deemed delivered upon the earliest of (a) actual receipt, (b) the next Business Day after the date when sent by recognized overnight courier for next Business Day delivery, or (c) the second Business Day after the date when sent by certified mail, postage prepaid. Any party may, from time to time, change the address at which such written notice or other documents or demands are to be sent, by giving the other party written notice of such change in the manner hereinabove provided.


To Borrower:		William H. Lyon
		Willa Dean Lyon
		c/o William Lyon Homes, Inc.
		4490 Von Karman Avenue
		Newport Beach, California 92660

with a copy to:		Irell & Manella LLP
		840 Newport Center Drive, Suite 400
		Newport Beach, California 92660
		Attention: Richard M. Sherman, Jr., Esq.

		William Harwell Lyon Separate Property Trust
		c/o Irell & Manella LLP
		840 Newport Center Drive, Suite 400
		Newport Beach, California 92660
		Attention: Richard M. Sherman, Jr., Esq

To Lender:		Fremont Investment & Loan
		2727 E. Imperial Highway
		Brea, California 92821-6713
		Attention: Commercial Real Estate Asset Management
		Loan No. 950114782

with a copy to:		Fremont Investment & Loan
		2425 Olympic Boulevard
		Third Floor
		Santa Monica, California 90404
		Attention: Alec G. Nedelman
		Loan No. 950114782

8.10 Survival of Warranties and Certain Agreements.

All agreements, indemnities, representations and warranties made herein and in the other Loan Documents shall survive the execution and delivery of this Agreement, the making of the Loan hereunder and the execution and delivery of the Note. All representations and warranties made in this Agreement or in any of the other Loan Documents shall further survive any and all investigations and inquiries made by Lender. Notwithstanding anything in this Agreement or the other Loan Documents or implied by law to the contrary, any indemnities made by Borrower in the Loan Documents shall survive the payment of the Loan, the satisfaction of the Secured Obligations, and/or the termination of this Agreement or the other Loan Documents.

8.11 Failure or Indulgence Not Waiver; Remedies Cumulative.

this Agreement and the other Loan Documents are separate, distinct and cumulative to, and not exclusive of, any rights or remedies otherwise available at law or in equity. No act of Lender under any of the Loan Documents shall be construed as an election to proceed under any one provision to the exclusion of any other provision, notwithstanding anything in the Loan Documents to the contrary. Borrower expressly waives all right to the benefit of any statute of limitations and any moratorium, reinstatement, marshaling, forbearance, extension, redemption, valuation, or appraisement now or hereafter provided by federal or state law, as a defense to any demand against Borrower to the fullest extent permitted by law.

8.12 Survival of Obligations Upon Termination of Agreement.

No termination or cancellation (regardless of cause or procedure) of this Agreement or any of the other Loan Documents shall in any way affect or impair the powers, obligations, duties, rights, and liabilities of Borrower or Lender relating to (a) any transaction or event occurring prior to such termination or cancellation, or (b) any of the undertakings, agreements, covenants, indemnities, warranties and representations of Borrower or Lender contained in this Agreement or any of the other Loan Documents.

8.13 Disbursements in Excess of Loan Amount.

In the event the total disbursements by Lender exceed the amount of the Loan set forth herein, the total of all disbursements shall, to the extent permitted by the laws of the Governing State, constitute part of the Secured Obligations and be secured by the Security Instrument and other Loan Documents. All other sums expended by Lender pursuant to this Agreement or any of the other Loan Documents shall be deemed to have been disbursed to Borrower and shall be secured by the Loan Documents.

8.14 Severability.

If any term of this Agreement or any of the other Loan Documents or the application thereof to any Person or circumstances, shall, to any extent, be invalid or unenforceable, the remainder of this Agreement or other Loan Document or the application of such term to Persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each term of this Agreement or other Loan Document shall be valid and enforceable to the fullest extent.

8.15 Rules of Construction.

Where the identity of the parties to this Agreement or any of the other Loan Documents or the circumstances make it appropriate, the masculine gender includes the feminine and/or neuter, and the singular number includes the plural. Article and Section headings in this Agreement and the other Loan Documents are included for convenience of reference only and shall not constitute a part of this Agreement or such other Loan Documents for any other purpose or be given any substantive effect. The recitals to this Agreement and to each of the other Loan Documents are incorporated herein and therein and made a part hereof and thereof. All exhibits to each of the Loan Documents shall constitute a part of the applicable Loan Documents. Borrower and Lender have each had an opportunity to review and negotiate the terms of this Agreement and the other Loan Documents; accordingly, the rule requiring that language be construed against drafting party shall not be applicable to this Agreement or the other Loan Documents.

8.16 Applicable Law.

This Agreement and the other Loan Documents shall be governed by, and construed and enforced in accordance with, the laws of the Governing State.

8.17 Successors and Assigns.

any of the other Loan Documents may not be assigned, including, without limitation, assigned for security purposes, and any purported assignment shall be null and void ab initio. As used herein, and in the other Loan Documents, “Lender” (or similar references to the lender) shall include all holders of the Note, including, without limitation, pledgees of the Note, whether or not named herein or therein. In exercising any rights hereunder or under any of the other Loan Documents or taking any actions provided for herein or therein, Lender may act through its employees, agents or independent contractors authorized by Lender.

8.18 Intentionally Omitted.

8.19 Disclaimer by Lender.

Borrower is not and shall not be an agent of Lender for any purpose. Lender is not a joint venture partner with Borrower or Guarantor.

8.20 Counterparts.

This Agreement and the other Loan Documents may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which counterparts taken together shall constitute but one and the same instrument. Signature and, if applicable, acknowledgment pages, may be detached from the counterparts and attached to a single copy of the applicable document to physically form one document, which may be recorded if applicable.

8.21 Entire Agreement.

The Loan Documents set forth the entire understanding between Borrower and Lender relative to the Loan and the same supersede all prior agreements and understandings relating to the subject matter hereof or thereof.

8.22 Time is of the Essence.

Time is strictly of the essence of this Agreement and the other Loan Documents.

8.23 No Third Party Beneficiaries.

This Agreement and the other Loan Documents are made and entered into for the sole protection and benefit of the parties hereto and thereto, and, except as provided in Section 8.17 of this Agreement, no other person or entity shall be a direct or indirect beneficiary of, or shall have any direct or indirect cause of action or claim as a beneficiary in connection with, this Agreement or any of the other Loan Documents.

8.24 Consent to Jurisdiction.

Borrower and Lender each hereby consent to the jurisdiction of any state or federal court located within the Governing State in any suit, action or proceeding based hereon or arising out of, under or in connection with this Agreement or any of the other Loan Documents (and further agree not to assert or claim that such venue is inconvenient or otherwise inappropriate or unsuitable), and waive personal service of any and all process upon them and consent that all service of process be made by certified mail to the applicable address set forth herein.

8.25 Brokerage Commission.

whom it, or any of its Affiliates, agents, employees or representatives have had or have allegedly had any dealings in connection with the making of the Loan.

8.26 Waiver of Rights and Defenses.

To the extent (and only to the extent) that Borrower may be considered guarantors or sureties for one another because of the nature of their ownership interests in the Pledged Shares, and/or due to the joint and several nature of their obligations under the Note and the other Loan Documents, each Borrower (other than the Trust) acknowledges that it has executed and delivered the Security Instrument, and each Borrower acknowledges that it has executed and delivered, to the extent applicable, the other Loan Documents, or assumed the obligations under the Security Instrument and to the extent applicable, the other Loan Documents, as applicable, with the intent of subjecting its respective interests in the Pledged Shares to the lien of the Security Instrument and to the extent applicable, the other Loan Documents, as security for the Note in order to induce Lender to make the Loan, and each Borrower hereby agrees, to the fullest extent permitted by law, not to assert to take advantage of:

(a) Any right to require Lender to proceed against any other Borrower, as co-makers of the Note, or any other person or to proceed against or exhaust any other security held by Lender (and not secured by the Security Instrument) at anytime or to pursue any other remedy in Lender’s power before exercising any right or remedy under the Security Instrument or any other Loan Documents.

(b) Any defense that may arise by reason of:

(i) The release, suspension, discharge or impairment of any of Lender’s rights against any other Borrower or any other party against whom Lender might assert a claim, whether such release, suspension, discharge or impairment is explicit, tacit or inadvertent; or

(ii) Lender’s failure to pursue any other remedies available to Lender that would reduce the burden of the indebtedness secured hereby on each Borrower’s interests in the Pledged Shares; or

(iii) Any extension of the time for the payment or performance of any of any other Borrower’s obligations under the Note, the Security Instrument or any of the other Loan Documents; or

(iv) The incapacity or lack of authority of any other Borrower or any person or persons; or

(v) The failure of Lender to file or enforce a claim against the estate (in either administration, bankruptcy or any other proceedings) of any other Borrower or any other person or persons.

(i) Notice of the evidence, creation or incurring of any new or additional indebtedness or obligation (provided that such indebtedness or obligation is not secured by the Security Instrument); or

(ii) Notice of any action or non-action on the part of any other Borrower or Lender in connection with any obligation or evidence of indebtedness held by Lender as collateral; or

(iii) Notice of payment or non-payment by any other Borrower of the indebtedness secured by the Security Instrument.

waives all rights and defenses to enforcement of all or any part of the indebtedness secured by the Security Instrument which defenses are based on an election of remedies by Lender, even though the election of remedies, such as nonjudicial foreclosure with respect to the Security Instrument, may destroy each Borrower’s rights of subrogation and reimbursement against the others by operation of Law. Each Borrower makes this waiver with full knowledge that if Lender (i) waives a deficiency judgment in a judicial foreclosure, or (ii) exercises the power of sale under this Security Instrument, any action by any Borrower against the others to obtain reimbursement of any amount paid by such Borrower hereunder could be barred, and Borrower is waiving this defense which such Borrower would have against Lender.

(e) Any rights arising because of any Borrower’s payment or satisfaction of the indebtedness secured by the Security Instrument (i) against any other Borrower, by way of subrogation to the rights of Lender or otherwise, or (ii) against any other guarantor or any other party obligated to pay any of the indebtedness secured hereby, by way of contribution or reimbursement or otherwise.

(f) Any duty on the part of Lender to disclose to any Borrower any default by any other Borrower under the Note or any other Loan Document.

(g) Any duty on the part of Lender to disclose to any Borrower any facts Lender may now know or may hereafter know about any other Borrower or any successors in interest (if any) regardless of whether Lender (i) has reason to believe that any such facts materially increase the risk beyond the risk which such Borrower intends to assume by executing the Loan Documents, (ii) has reason to believe that these facts are unknown to such Borrower, or (iii) has a reasonable opportunity to communicate such facts to such Borrower, it being understood and agreed that each Borrower is fully responsible for being and keeping informed of the financial condition of any other Borrower or any successor in interest of any other Borrower and of all circumstances bearing on the risk of non-payment of any indebtedness of any other Borrower to Lender that is secured hereby.

(h) Any right to object to the release of any portions of the Pledged Shares from the lien of the Security Instrument notwithstanding the fact that such releases may be made without Lender having received any or adequate consideration therefor.

Each Borrower further agrees that with respect to any obligation secured by the Security Instrument Lender may, in such manner and upon such terms and at such times as Lender deems best and without demand or notice to or consent of such Borrower (i) release any party now or hereafter liable for the performance of any such obligation, (ii) extend the time for the performance of any such obligation, (iii) accept additional security therefor, and (iv) alter, substitute or release any property securing such performance.

Before executing the Loan Documents, each Borrower has made such independent legal and factual inquiries and investigations as such Borrower deemed necessary or desirable with respect to the ability of any other Borrower to honor all of such other Borrower’s covenants and agreements with Lender, and each Borrower has relied solely on said independent inquiries and investigations preparatory to entering into the Loan Documents.

IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by Borrower and Lender.


BORROWER:
/s/ WILLIAM LYON WILLIAM LYON, an individual
/s/ WILLA DEAN LYON WILLA DEAN LYON, an individual
WILLIAM HARWELL LYON SEPARATE PROPERTY TRUST

By:		/s/ RICHARD M. SHERMAN, JR.
Its:		Richard M. Sherman, Jr., as Trustee

LENDER:

FREMONT INVESTMENT & LOAN,
a California industrial bank

By:		/s/ [Illegible]
Its:		Vice President

E-1

EX-7.3 4 dex73.htm LOAN AND SECURITY AGREEMENT DATED AS OF JANUARY 3, 2005 Loan and Security Agreement dated as of January 3, 2005

Exhibit 7.3

Loan No. 950114733

LOAN AND SECURITY AGREEMENT

R E C I T A L S

A. William Lyon and Willa Dean Lyon are the owners of that certain real property described on Exhibit A attached hereto, together with the Improvements (as hereinafter defined) thereon (the “Property”).