10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2009

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from     N/A     to                 

Commission file number 1-10959

STANDARD PACIFIC CORP.

(Exact name of registrant as specified in its charter)

Delaware	33-0475989
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
26 Technology Drive, Irvine, CA	92618-2338
(Address of principal executive offices)	(Zip Code)

(Registrant’s telephone number, including area code) (949) 789-1600

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ¨    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer    ¨	Accelerated filer    x	Non-accelerated filer    ¨	Smaller reporting company    ¨
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x.

Registrant’s shares of common stock outstanding at November 5, 2009: 105,121,130

STANDARD PACIFIC CORP.

FORM 10-Q

INDEX

			Page No.
PART I.	Financial Information
	ITEM 1.	Financial Statements
		Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2009 and 2008	2
		Condensed Consolidated Balance Sheets as of September 30, 2009 and December 31, 2008	3
		Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2009 and 2008	4
		Notes to Unaudited Condensed Consolidated Financial Statements	5
	ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
	ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	56
	ITEM 4.	Controls and Procedures	57
PART II.	Other Information
	ITEM 1.	Legal Proceedings	60
	ITEM 1A.	Risk Factors	60
	ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	60
	ITEM 3.	Defaults Upon Senior Securities	60
	ITEM 4.	Submission of Matters to a Vote of Security Holders	60
	ITEM 5.	Other Information	60
	ITEM 6.	Exhibits	60
SIGNATURES			62

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

STANDARD PACIFIC CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(2008 as Adjusted - see Note 2)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2009			2008			2009			2008
	(Dollars in thousands, except per share amounts)
	(Unaudited)
Homebuilding:
Home sale revenues	$	269,873		$	394,942		$	760,312		$	1,145,608
Land sale revenues		57,538			5,398			66,306			13,609
Total revenues		327,411			400,340			826,618			1,159,217
Cost of home sales		(219,641	)		(548,622	)		(661,211	)		(1,462,654	)
Cost of land sales		(65,147	)		(59,375	)		(75,578	)		(97,704	)
Total cost of sales		(284,788	)		(607,997	)		(736,789	)		(1,560,358	)
Gross margin		42,623			(207,657	)		89,829			(401,141	)
Selling, general and administrative expenses		(43,695	)		(76,894	)		(142,100	)		(235,473	)
Loss from unconsolidated joint ventures		(1,960	)		(91,937	)		(4,449	)		(130,322	)
Interest expense		(12,633	)		(3,938	)		(35,409	)		(3,938	)
Gain (loss) on early extinguishment of debt		(8,824	)		(1,841	)		(3,457	)		(11,339	)
Other income (expense)		(305	)		(7,100	)		(1,309	)		(10,145	)
Homebuilding pretax loss		(24,794	)		(389,367	)		(96,895	)		(792,358	)
Financial Services:
Revenues		3,762			2,492			10,095			10,897
Expenses		(2,753	)		(3,106	)		(9,009	)		(11,063	)
Income from unconsolidated joint ventures		—			284			119			659
Other income		19			17			108			128
Financial services pretax income (loss)		1,028			(313	)		1,313			621
Loss from continuing operations before income taxes		(23,766	)		(389,680	)		(95,582	)		(791,737	)
(Provision) benefit for income taxes		(33	)		19,840			(298	)		(42,030	)
Loss from continuing operations		(23,799	)		(369,840	)		(95,880	)		(833,767	)
Loss from discontinued operations, net of income taxes		(45	)		(69	)		(569	)		(2,005	)
Net loss		(23,844	)		(369,909	)		(96,449	)		(835,772	)
Less: Net loss allocated to preferred shareholders		14,500			165,213			59,022			188,354
Net loss available to common stockholders	$	(9,344	)	$	(204,696	)	$	(37,427	)	$	(647,418	)
Basic Loss Per Share:
Continuing operations	$	(0.10	)	$	(2.54	)	$	(0.40	)	$	(8.59	)
Discontinued operations		—			—			—			(0.02	)
Basic loss per share	$	(0.10	)	$	(2.54	)	$	(0.40	)	$	(8.61	)
Diluted Loss Per Share:
Continuing operations	$	(0.10	)	$	(2.54	)	$	(0.40	)	$	(8.59	)
Discontinued operations		—			—			—			(0.02	)
Diluted loss per share	$	(0.10	)	$	(2.54	)	$	(0.40	)	$	(8.61	)
Weighted Average Common Shares Outstanding:
Basic		95,250,351			80,681,394			93,731,253			75,155,044
Diluted		243,063,137			145,800,364			241,544,039			97,019,962

The accompanying notes are an integral part of these condensed consolidated statements.

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STANDARD PACIFIC CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(2008 as Adjusted - see Note 2)

	September 30, 2009			December 31, 2008
	(Dollars in thousands, except per share amounts)
	(Unaudited)
ASSETS
Homebuilding:
Cash and equivalents	$	523,474		$	622,157
Restricted cash		283,292			4,222
Trade and other receivables		17,677			21,008
Inventories:
Owned		1,074,153			1,262,521
Not owned		33,389			42,742
Investments in unconsolidated joint ventures		38,548			50,468
Deferred income taxes		10,383			14,122
Other assets		21,263			145,567
		2,002,179			2,162,807
Financial Services:
Cash and equivalents		6,524			3,681
Restricted cash		2,295			4,295
Mortgage loans held for sale		42,625			63,960
Mortgage loans held for investment		10,734			11,736
Other assets		4,373			4,792
		66,551			88,464
Assets of discontinued operations		159			1,217
Total Assets	$	2,068,889		$	2,252,488
LIABILITIES AND EQUITY
Homebuilding:
Accounts payable	$	22,928		$	40,225
Accrued liabilities		179,473			216,418
Liabilities from inventories not owned		22,440			24,929
Revolving credit facility		—			47,500
Secured project debt and other notes payable		96,816			111,214
Senior notes payable		1,251,193			1,204,501
Senior subordinated notes payable		103,327			123,222
		1,676,177			1,768,009
Financial Services:
Accounts payable and other liabilities		1,731			3,657
Mortgage credit facilities		38,798			63,655
		40,529			67,312
Liabilities of discontinued operations		854			1,331
Total Liabilities		1,717,560			1,836,652
Equity:
Stockholders’ Equity:
Preferred stock, $0.01 par value; 10,000,000 shares authorized; 450,829 issued and outstanding at September 30, 2009 and December 31, 2008		5			5
Common stock, $0.01 par value; 600,000,000 shares authorized; 105,119,880 and 100,624,350 shares issued and outstanding at September 30, 2009 and December 31, 2008, respectively		1,051			1,006
Additional paid-in capital		1,028,624			996,492
Accumulated deficit		(663,291	)		(566,842	)
Accumulated other comprehensive loss, net of tax		(16,798	)		(22,720	)
Total Stockholders’ Equity		349,591			407,941
Noncontrolling Interests		1,738			7,895
Total Equity		351,329			415,836
Total Liabilities and Equity	$	2,068,889		$	2,252,488

The accompanying notes are an integral part of these condensed consolidated balance sheets.

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STANDARD PACIFIC CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(2008 as Adjusted - see Note 2)

	Nine Months Ended September 30,
	2009			2008
	(Dollars in thousands)
	(Unaudited)
Cash Flows From Operating Activities:
Income (loss) from continuing operations	$	(95,880	)	$	(833,767	)
Income (loss) from discontinued operations, net of income taxes		(569	)		(2,005	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
(Income) loss from unconsolidated joint ventures		4,330			129,663
Cash distributions of income from unconsolidated joint ventures		326			771
Depreciation and amortization		2,722			5,300
(Gain) loss on disposal of property and equipment		1,339			901
(Gain) loss on early extinguishment of debt		3,457			11,339
Amortization of stock-based compensation		7,259			10,332
Deferred income taxes		(37,358	)		(211,893	)
Inventory impairment charges and deposit write-offs		51,748			583,279
Deferred tax asset valuation allowance		37,358			348,705
Changes in cash and equivalents due to:
Trade and other receivables		3,464			(5,415	)
Mortgage loans held for sale		23,016			94,357
Inventories - owned		241,525			(27,489	)
Inventories - not owned		(1,462	)		(6,128	)
Other assets		116,678			168,412
Accounts payable		(17,589	)		(32,661	)
Accrued liabilities		(30,199	)		(35,738	)
Net cash provided by (used in) operating activities		310,165			197,963
Cash Flows From Investing Activities:
Investments in unconsolidated homebuilding joint ventures		(23,502	)		(77,702	)
Distributions from unconsolidated homebuilding joint ventures		4,429			96,845
Other investing activities		(1,796	)		(2,723	)
Net cash provided by (used in) investing activities		(20,869	)		16,420
Cash Flows From Financing Activities:
Change in restricted cash		(277,070	)		(8,517	)
Net proceeds from (payments on) revolving credit facility		(47,500	)		(37,500	)
Principal payments on secured project debt and other notes payable		(88,092	)		(12,146	)
Principal payments on senior notes payable		(205,597	)		(58,875	)
Net proceeds from the issuance of senior notes payable		257,592			—
Net proceeds from (payments on) mortgage credit facilities		(24,857	)		(99,062	)
Repurchases of common stock		—			(726	)
Net proceeds from the issuance of preferred stock		—			404,593
Net proceeds from the issuance of common stock		—			78,930
Proceeds from the exercise of stock options		388			—
Net cash provided by (used in) financing activities		(385,136	)		266,697
Net increase (decrease) in cash and equivalents		(95,840	)		481,080
Cash and equivalents at beginning of period		625,845			231,561
Cash and equivalents at end of period (including discontinued operations)	$	530,005		$	712,641
Cash and equivalents at end of period	$	530,005		$	712,641
Homebuilding restricted cash at end of period		283,292			4,222
Financial services restricted cash at end of period		2,295			4,295
Cash and equivalents and restricted cash at end of period	$	815,592		$	721,158

The accompanying notes are an integral part of these condensed consolidated statements.

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STANDARD PACIFIC CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2009

1. Basis of Presentation

The condensed consolidated financial statements included herein have been prepared by Standard Pacific Corp., without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for Form 10-Q. Certain information normally included in the annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) has been omitted pursuant to applicable rules and regulations. In the opinion of management, the unaudited condensed consolidated financial statements included herein reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly our financial position as of September 30, 2009 and the results of operations and cash flows for the periods presented.

Certain items in the prior period condensed consolidated financial statements have been reclassified to conform with the current period presentation.

The condensed consolidated financial statements included herein should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2008. Unless the context otherwise requires, the terms “we,” “us,” “our” and “the Company” refer to Standard Pacific Corp. and its subsidiaries. The results of operations for interim periods are not necessarily indicative of results to be expected for the full year.

On July 1, 2009, we adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”). The ASC does not alter current U.S. GAAP, but rather integrated existing accounting standards with other authoritative guidance. The ASC provides a single source of authoritative U.S. GAAP for nongovernmental entities and supersedes all other previously issued non-SEC accounting and reporting guidance. The adoption of the ASC did not have any effect on our results of operations or financial position. All prior references to U.S. GAAP have been revised to conform to the ASC.

2. Recent Accounting Pronouncements

On January 1, 2009, we adopted certain provisions of ASC Topic 805, Business Combinations (“ASC 805”). These provisions expand the application of ASC 805 to all transactions and other events in which one entity obtains control over one or more other businesses. ASC 805 broadens the fair value measurement and recognition of assets acquired, liabilities assumed, and interests transferred as a result of business combinations. It also requires that the acquisition method of accounting be used for all business combinations and for an acquirer to be identified for each business combination. It also establishes principles and requirements for how the acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. The adoption of these provisions also requires additional disclosures to improve the statement users’ abilities to evaluate the nature and financial effects of business combinations. Adoption is prospective, and early adoption was not permitted. These new provisions are effective for us for any business combination entered into subsequent to January 1, 2009. The adoption of these new provisions on January 1, 2009 did not have a material impact on our condensed consolidated financial statements.

On January 1, 2009, we adopted certain provisions of ASC Topic 810, Consolidation (“ASC 810”), which require that a noncontrolling interest in a subsidiary be reported as equity and the amount of consolidated net income specifically attributable to the noncontrolling interest be reported separately in the consolidated income statement and consolidated statement of equity. It also calls for consistency in the manner of reporting changes in the parent’s ownership interest and requires fair value measurement of any noncontrolling equity investment retained in a deconsolidation. Upon adoption on January 1, 2009, minority interests were reclassified to noncontrolling interests as a separate component in equity for all periods presented. The adoption of these provisions did not impact earnings per share attributable to our common stockholders.

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In March 2008, the FASB updated certain provisions of ASC Topic 815, Derivatives and Hedging (“ASC 815”). Under these new provisions, entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under ASC 815, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. We adopted the provisions of ASC 815 on January 1, 2009 and have included the required disclosures in Note 17.

In May 2008, the FASB updated certain provisions of ASC Topic 470, Debt (“ASC 470”). These new provisions require bifurcation of a component of convertible debt instruments, classification of that component in stockholder’s equity, and then accretion of the resulting discount on the debt to result in interest expense equal to the issuer’s nonconvertible debt borrowing rate. These new provisions of ASC 470 are effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Retroactive application to all periods presented is required. As a result, we have retroactively applied the standard to our financial statements for all periods presented. We adopted these new provisions of ASC 470 as of January 1, 2009 and the adoption impacted the historical accounting for our 6% Senior Subordinated Convertible Notes due 2012 (the “Convertible Notes”) resulting in an increase to additional paid-in capital of $31.7 million with an offset to accumulated deficit of $3.6 million, inventories owned of $2.6 million and senior subordinated notes payable of $25.5 million as of January 1, 2009. During the three months ended September 30, 2009, we repurchased at a discount $32.8 million principal amount of the Convertible Notes in exchange for an aggregate of 7.6 million shares of our common stock. In connection with the exchange, we derecognized $9.3 million of unamortized discount of the Convertible Notes. The remaining balance of the Convertible Notes will be accreted to its redemption value, approximately $45.6 million, over the remaining term of these notes. The unamortized discount of the Convertible Notes, which was included in additional paid-in capital, was $12.6 million and $25.5 million at September 30, 2009 and December 31, 2008, respectively. In addition, approximately $1.1 million of interest was capitalized to inventories for the three months ended September 30, 2009 and 2008, respectively. Interest capitalized to inventories owned is included in cost of sales as related units are sold (please see Note 9 “Capitalization of Interest”).

On January 1, 2009, we adopted certain provisions of ASC Topic 260, Earnings per Share (“ASC 260”), which provide that unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and require that they be included in the computation of earnings per share. These new provisions of ASC 260 are effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years, and require retrospective application. During the three and nine months ended September 30, 2009, we had no unvested share-based payment awards outstanding. In addition, during the three and nine months ended September 30, 2008, the holders of any unvested share-based payment awards were not required to participate in losses of the Company. The adoption of these new provisions of ASC 260 on January 1, 2009 did not have an impact on our results of operations, financial position or earnings per share.

In April 2009, the FASB updated certain provisions of ASC Topic 825, Financial Instruments (“ASC 825”) and ASC Topic 270, Interim Reporting (“ASC 270”). These new provisions require that the fair value disclosures required for all financial instruments within the scope of ASC 825 be included in interim financial statements. ASC 825 also requires entities to disclose the method and significant assumptions used to estimate the fair value of financial instruments on an interim and annual basis and to highlight any changes from prior periods. These new provisions of ASC 825 are effective for interim periods ending after June 15, 2009. The adoption of ASC 825 did not have a material impact on our consolidated financial statements (please see Note 19 “Disclosures about Fair Value”).

In May 2009, the FASB issued ASC Topic 855, Subsequent Events (“ASC 855”), which provides guidance to establish general standards of accounting for and disclosures of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. ASC 855 sets forth (i) the period after the balance sheet date during which management of a reporting entity should

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evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, (ii) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and (iii) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. ASC 855 is effective for interim periods ending after June 15, 2009. Pursuant to ASC 855 we have evaluated subsequent events through the date that the condensed consolidated financial statements were issued for the quarterly period ended September 30, 2009.

In June 2009, the FASB updated ASC Topic 810, Consolidation (“ASC 810”) to among other things, (i) define the primary beneficiary of a variable interest entity (“VIE”) as the enterprise that has both (a) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and (b) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE, (ii) require ongoing reassessments of whether an enterprise is the primary beneficiary of a VIE, and (iii) add an additional reconsideration event for determining whether an entity is a VIE when any changes in facts and circumstances occur such that the holders of the equity investment at risk, as a group, lose the power from voting rights or similar rights to direct the activities of the entity that most significantly impact the entity’s economic performance. ASC 810 is effective for our fiscal year beginning January 1, 2010. We are currently evaluating the effect the adoption of ASC 810 will have on our financial condition and results of operations.

In July 2009, the FASB updated certain provisions of ASC 470, which provide guidance to share lending arrangements executed in connection with a convertible debt offering or other financing and require that share lending arrangements be measured at fair value, recognized as a debt issuance cost with an offset to stockholders’ equity, and then amortized as interest expense over the life of the financing arrangement. These new provisions of ASC 470 are effective for interim or annual periods beginning on or after June 15, 2009 for share lending arrangements entered in during fiscal year 2009. For all arrangements that existed prior to fiscal year 2009, retrospective application is required beginning January 1, 2010. We are currently in the process of determining the impact of adopting these new provisions of ASC 470 on our financial condition and results of operations.

3. Segment Reporting

We operate two principal businesses: homebuilding and financial services.

Our homebuilding operations construct and sell single-family attached and detached homes. In accordance with the aggregation criteria defined in ASC Topic 280, Segment Reporting, our homebuilding operating segments have been grouped into three reportable segments: California; Southwest, consisting of our operating divisions in Arizona, Texas, Colorado and Nevada; and Southeast, consisting of our operating divisions in Florida and the Carolinas. In particular, we have determined that the homebuilding operating divisions within their respective reportable segments have similar economic characteristics, including similar historical and expected future long-term gross margin percentages. In addition, the operating divisions also share all other relevant aggregation characteristics, such as similar product types, production processes and methods of distribution.

Our mortgage financing operations provide mortgage financing to our homebuyers in substantially all of the markets in which we operate. Our title service operation provides title examinations for our homebuyers in Texas. Our mortgage financing and title services operations are included in our financial services reportable segment, which is separately reported in our condensed consolidated financial statements under “Financial Services.”

Corporate is a non-operating segment that develops and implements strategic initiatives and supports our operating divisions by centralizing key administrative functions such as finance and treasury, information technology, risk management and litigation, and human resources. Corporate also provides the necessary administrative functions to support us as a publicly traded company. A substantial portion of the expenses incurred by Corporate are allocated to the homebuilding operating divisions based on their respective percentage of revenues.

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Segment financial information relating to the Company’s homebuilding operations was as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2009			2008			2009			2008
	(Dollars in thousands)
Homebuilding revenues:
California	$	199,390		$	209,813		$	452,515		$	583,304
Southwest		49,882			108,268			180,925			333,759
Southeast		78,139			82,259			193,178			242,154
Total homebuilding revenues	$	327,411		$	400,340		$	826,618		$	1,159,217
Homebuilding pretax income (loss):
California	$	(2,405	)	$	(227,082	)	$	(20,916	)	$	(490,377	)
Southwest		(3,966	)		(109,663	)		(26,393	)		(173,062	)
Southeast		(7,004	)		(45,533	)		(26,807	)		(98,270	)
Corporate		(11,419	)		(7,089	)		(22,779	)		(30,649	)
Total homebuilding pretax income (loss)	$	(24,794	)	$	(389,367	)	$	(96,895	)	$	(792,358	)
Homebuilding income (loss) from unconsolidated joint ventures:
California	$	(639	)	$	(46,492	)	$	5,103		$	(81,871	)
Southwest		(1,365	)		(45,445	)		(9,596	)		(46,125	)
Southeast		44			—			44			(2,326	)
Total homebuilding income (loss) from unconsolidated joint ventures	$	(1,960	)	$	(91,937	)	$	(4,449	)	$	(130,322	)
Restructuring charges:
California	$	(115	)	$	(2,193	)	$	(2,247	)	$	(3,333	)
Southwest		(13	)		(470	)		(1,678	)		(853	)
Southeast		(772	)		(307	)		(4,537	)		(577	)
Corporate		(653	)		(1,211	)		(12,073	)		(2,673	)
Total restructuring charges	$	(1,553	)	$	(4,181	)	$	(20,535	)	$	(7,436	)

Homebuilding pretax income (loss) includes the following inventory and joint venture impairment charges and land deposit write-offs recorded in the following segments:

	Three Months Ended September 30, 2009
	California		Southwest		Southeast		Total
	(Dollars in thousands)
Deposit write-offs	$	—	$	80	$	70	$	150
Inventory impairments		5,984		—		1,680		7,664
Total impairments and write-offs	$	5,984	$	80	$	1,750	$	7,814
	Three Months Ended September 30, 2008
	California		Southwest		Southeast		Total
	(Dollars in thousands)
Deposit write-offs	$	6,675	$	2,214	$	—	$	8,889
Inventory impairments		163,580		61,627		42,009		267,216
Joint venture impairments		46,431		45,818		—		92,249
Total impairments and write-offs	$	216,686	$	109,659	$	42,009	$	368,354

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	Nine Months Ended September 30, 2009
	California		Southwest		Southeast		Total
	(Dollars in thousands)
Deposit write-offs	$	—	$	1,013	$	1,192	$	2,205
Inventory impairments		33,817		6,987		8,739		49,543
Joint venture impairments		—		8,141		—		8,141
Total impairments and write-offs	$	33,817	$	16,141	$	9,931	$	59,889
	Nine Months Ended September 30, 2008
	California		Southwest		Southeast		Total
	(Dollars in thousands)
Deposit write-offs	$	9,020	$	5,113	$	2,966	$	17,099
Inventory impairments		361,776		120,172		84,232		566,180
Joint venture impairments		79,833		45,818		954		126,605
Total impairments and write-offs	$	450,629	$	171,103	$	88,152	$	709,884

Segment financial information relating to the Company’s homebuilding assets and investments in unconsolidated joint ventures was as follows:

	September 30, 2009		December 31, 2008
	(Dollars in thousands)
Homebuilding assets:
California	$	751,006	$	810,619
Southwest		232,480		299,039
Southeast		202,440		275,893
Corporate		816,253		777,256
Total homebuilding assets	$	2,002,179	$	2,162,807
Homebuilding investments in unconsolidated joint ventures:
California	$	34,843	$	39,879
Southwest		2,862		10,073
Southeast		843		516
Total homebuilding investments in unconsolidated joint ventures	$	38,548	$	50,468

4. Earnings (Loss) Per Share

We compute earnings (loss) per share in accordance with ASC Topic 260, Earnings per Share (“ASC 260”), which requires the presentation of both basic and diluted earnings (loss) per share for financial statement purposes. Basic earnings (loss) per share is computed by dividing income or loss available to common stockholders by the weighted average number of shares of common stock outstanding. Our Series B junior participating convertible preferred stock (“Series B Preferred Stock”), which is convertible into shares of our common stock at the holder’s option (subject to a limitation based upon voting interest), is classified as a convertible participating security in accordance with ASC 260, which requires that both net income and loss per share for each class of stock (common stock and participating preferred stock) be calculated for basic earnings per share purposes based on the contractual rights and obligations of this participating security. Net loss allocated to the holders of our Series B Preferred Stock is calculated based on the preferred shareholders’ proportionate share of weighted average shares of common stock outstanding on an if-converted basis.

For purposes of determining diluted earnings per share, basic earnings per share is further adjusted to include the effect of the potential dilutive shares outstanding, including convertible participating securities using the if-converted method. Warrants to purchase shares of convertible participating securities, stock options, nonvested performance share awards, nonvested restricted stock and deferred stock units are included in the computation of diluted earnings per share using the treasury stock method. For the three and nine months ended September 30, 2009 and 2008, all dilutive securities were excluded from the calculation as they were anti-dilutive as a result of the net loss for these respective periods. Shares outstanding under the share lending facility are not treated as outstanding for earnings per share purposes because the share borrower must return to us all borrowed shares (or identical shares) on or about October 1, 2012, or earlier in certain circumstances. The table set forth below reconciles the components of the basic loss per share calculation to diluted loss per share.

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	Three Months Ended September 30,
	2009							2008
	Net Loss			Shares	EPS			Net Loss			Shares	EPS
	(Dollars in thousands, except per share amounts)
Basic loss per share from continuing operations	$	(9,325	)	95,250,351	$	(0.10	)	$	(204,657	)	80,681,394	$	(2.54	)
Loss allocated to preferred shareholders		(14,474	)	147,812,786					(165,183	)	65,118,970
Diluted loss per share from continuing operations	$	(23,799	)	243,063,137	$	(0.10	)	$	(369,840	)	145,800,364	$	(2.54	)
Basic loss per share from discontinued operations	$	(19	)	95,250,351	$	(0.00	)	$	(39	)	80,681,394	$	(0.00	)
Loss allocated to preferred shareholders		(26	)	147,812,786					(30	)	65,118,970
Diluted loss per share from discontinued operations	$	(45	)	243,063,137	$	(0.00	)	$	(69	)	145,800,364	$	(0.00	)
Basic loss per share	$	(9,344	)	95,250,351	$	(0.10	)	$	(204,696	)	80,681,394	$	(2.54	)
Diluted loss per share	$	(23,844	)	243,063,137	$	(0.10	)	$	(369,909	)	145,800,364	$	(2.54	)
	Nine Months Ended September 30,
	2009							2008
	Net Loss			Shares	EPS			Net Loss			Shares	EPS
	(Dollars in thousands, except per share amounts)
Basic loss per share from continuing operations	$	(37,205	)	93,731,253	$	(0.40	)	$	(645,865	)	75,155,044	$	(8.59	)
Loss allocated to preferred shareholders		(58,675	)	147,812,786					(187,902	)	21,864,918
Diluted loss per share from continuing operations	$	(95,880	)	241,544,039	$	(0.40	)	$	(833,767	)	97,019,962	$	(8.59	)
Basic loss per share from discontinued operations	$	(222	)	93,731,253	$	(0.00	)	$	(1,553	)	75,155,044	$	(0.02	)
Loss allocated to preferred shareholders		(347	)	147,812,786					(452	)	21,864,918
Diluted loss per share from discontinued operations	$	(569	)	241,544,039	$	(0.00	)	$	(2,005	)	97,019,962	$	(0.02	)
Basic loss per share	$	(37,427	)	93,731,253	$	(0.40	)	$	(647,418	)	75,155,044	$	(8.61	)
Diluted loss per share	$	(96,449	)	241,544,039	$	(0.40	)	$	(835,772	)	97,019,962	$	(8.61	)

5. Comprehensive Loss

The components of comprehensive loss were as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2009			2008			2009			2008
	(Dollars in thousands)
Net loss	$	(23,844	)	$	(369,909	)	$	(96,449	)	$	(835,772	)
Unrealized gain (loss) on interest rate swaps, net of related income tax effects		486			(341	)		5,922			2,015
Comprehensive loss	$	(23,358	)	$	(370,250	)	$	(90,527	)	$	(833,757	)

6. Stock-Based Compensation

We account for share-based awards in accordance with ASC Topic 718, Compensation-Stock Compensation (“ASC 718”), which requires the fair value of stock-based compensation awards to be amortized as an expense over the vesting period and any dividend equivalents earned to be treated as dividends for financial reporting purposes. Stock-based compensation awards are valued at the fair value on the date of grant and amortized as an expense over the vesting period.

During the nine months ended September 30, 2009, we granted 12,814,000 stock options to our officers and key employees and issued 322,722 shares of unrestricted stock to our independent directors (excluding directors appointed by MP CA Homes LLC (“MatlinPatterson”), who did not receive any stock awards).

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Total compensation expense recognized related to stock-based compensation was as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2009		2008		2009		2008
	(Dollars in thousands)
Stock options	$	1,526	$	3,307	$	6,809	$	5,852
Performance share awards		—		1,581		—		3,296
Restricted and unrestricted stock grants		125		286		450		1,184
Total	$	1,651	$	5,174	$	7,259	$	10,332

As of September 30, 2009, total unrecognized compensation expense related to stock-based compensation was $14.9 million, with a weighted average period over which the unrecognized compensation expense will be recorded of approximately 3.3 years.

7. Restricted Cash

At September 30, 2009, restricted cash included $262.6 million of cash held in an escrow account related to our offering of $280 million of Senior Notes due 2016, which were issued at a discount of 91.997%. The $257.6 million net proceeds from our offering, plus an additional $5.0 million contributed by us, were required to be used to retire existing debt upon certain conditions being met. On October 9, 2009, all conditions were satisfied, and the $262.6 million was released from the escrow account (please see Note 15 “Senior and Senior Subordinated Notes Payable”).

At September 30, 2009, restricted cash also included $23.0 million of cash held in cash collateral accounts related to certain letters of credit that have been issued and a portion related to our financial services subsidiary mortgage credit facilities ($20.7 million of homebuilding restricted cash and $2.3 million of financial services restricted cash).

8. Inventories

a. Inventories Owned

Inventories from continuing operations consisted of the following at:

	September 30, 2009
	California		Southwest		Southeast		Total
	(Dollars in thousands)
Land and land under development	$	359,261	$	122,366	$	106,848	$	588,475
Homes completed and under construction		246,270		57,068		69,106		372,444
Model homes		80,350		14,079		18,805		113,234
Total inventories owned	$	685,881	$	193,513	$	194,759	$	1,074,153
	December 31, 2008
	California		Southwest		Southeast		Total
	(Dollars in thousands)
Land and land under development	$	356,854	$	135,661	$	136,581	$	629,096
Homes completed and under construction		310,603		96,697		94,180		501,480
Model homes		79,384		23,864		28,697		131,945
Total inventories owned	$	746,841	$	256,222	$	259,458	$	1,262,521

In accordance with ASC Topic 360, Property, Plant, and Equipment (“ASC 360”), we record impairment losses on inventories when events and circumstances indicate that they may be impaired, and the undiscounted cash flows estimated to be generated by those assets are less than their carrying amounts. Inventories that are determined to be impaired are written down to their estimated fair value. We calculate

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the fair value of a project under a land residual value analysis and in certain cases in conjunction with a discounted cash flow analysis. The operating margins (defined as gross margin less direct selling and marketing costs) used to calculate land residual values and related fair values for the majority of our projects during the nine months ended September 30, 2009 and 2008, were generally in the 8% to 12% range and discount rates were generally in the 15% to 25% range. The following table summarizes inventory impairments recorded during the three and nine months ended September 30, 2009 and 2008:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2009		2008		2009		2008
	(Dollars in thousands)
Inventory impairments related to:
Land under development and homes completed and under construction	$	—	$	209,228	$	39,461	$	477,274
Land held for sale or sold		7,664		57,988		10,082		88,906
Total inventory impairments	$	7,664	$	267,216	$	49,543	$	566,180
Remaining carrying value of inventory impaired at period end	$	—	$	423,602	$	92,358	$	714,756
Number of projects impaired during the period		2		75		25		129
Total number of projects included in inventories-owned and reviewed for impairment during the period		231		286

The inventory impairments related to land under development and homes completed and under construction were included in cost of home sales and the impairments related to land held for sale or sold were included in cost of land sales in the accompanying condensed consolidated statements of operations (please see Note 3 for a breakout of impairment charges by segment). The impairment charges recorded during the periods noted above resulted primarily from lower home prices, which were driven by increased incentives and price reductions required to address weak demand and economic conditions, including record foreclosures, high unemployment, low consumer confidence and tighter mortgage credit standards. In addition, the $7.7 million of inventory impairments for the three months ended September 30, 2009 related to the sale of a completed podium building in Southern California and a land sale in Florida.

b. Inventories Not Owned

Inventories not owned consisted of the following at:

	September 30, 2009		December 31, 2008
	(Dollars in thousands)
Land purchase and lot option deposits	$	9,204	$	9,910
Variable interest entities, net of deposits		1,745		7,903
Other lot option contracts, net of deposits		22,440		24,929
Total inventories not owned	$	33,389	$	42,742

Under ASC 810, a non-refundable deposit paid to an entity is deemed to be a variable interest that will absorb some or all of the entity’s expected losses if they occur. Therefore, whenever we enter into a land option or purchase contract with an entity and make a non-refundable deposit, a VIE may have been created. If a VIE exists and we have a variable interest in that entity, ASC 810 requires us to calculate expected losses and residual returns for the VIE based on the probability of estimated future cash flows as described in ASC 810. If we are deemed to be the primary beneficiary of a VIE based on such calculations, we are required to consolidate the VIE on our balance sheet.

At September 30, 2009 and December 31, 2008, we consolidated one and two VIEs, respectively, as a result of our options to purchase land or lots from the selling entities. We made cash deposits or issued letters of credit to these VIEs totaling approximately $0.4 million and $1.5 million as of September 30, 2009 and December 31, 2008, respectively, of which the cash deposits are included in land purchase and lot option deposits in the table above. Our option deposits generally represent our maximum exposure to the

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land seller if we elect not to purchase the optioned property. In some instances, we may also expend funds for due diligence, development and construction activities with respect to optioned land prior to takedown, which we would have to write off should we not exercise the option. We consolidated these VIEs because we were considered the primary beneficiary in accordance with ASC 810. As a result, included in our consolidated balance sheets at September 30, 2009 and December 31, 2008 were inventories not owned related to these VIEs of approximately $2.1 million and $8.9 million (which includes $0.4 million and $1.0 million in deposits, exclusive of outstanding letters of credit) and noncontrolling interests of approximately $1.7 million and $7.9 million, respectively. These amounts were recorded based on each VIE’s estimated fair value upon consolidation. Creditors of these VIEs, if any, have no recourse against us.

Other lot option contracts noted in the table above represent specific performance obligations to purchase lots that we have with various land sellers. In certain instances, the land option contract contains a binding obligation requiring us to complete the lot purchases. In other instances, the land option contract does not obligate us to complete the lot purchases but, due to the magnitude of our capitalized preacquisition costs, development and construction expenditures, we are considered economically compelled to complete the lot purchases.

9. Capitalization of Interest

We follow the practice of capitalizing interest to inventories owned during the period of development and to investments in unconsolidated homebuilding and land development joint ventures in accordance with ASC Topic 835, Interest (“ASC 835”). Homebuilding interest capitalized as a cost of inventories owned is included in cost of sales as related units are sold. Interest capitalized to investments in unconsolidated homebuilding and land development joint ventures is included as reduction of income from unconsolidated joint ventures when the related homes or lots are sold to third parties. Interest capitalized to investments in unconsolidated land development joint ventures is transferred to inventories owned if the underlying lots are purchased by us. To the extent our debt exceeds our qualified inventory as defined in ASC 835, we expense a portion of the interest incurred by us. Qualified inventory represents projects that are actively selling or under development. For the three months ended September 30, 2009 and 2008, we expensed $12.6 million and $3.9 million, respectively, and for the nine months ended September 30, 2009 and 2008, we expensed $35.4 million and $3.9 million, respectively, of interest costs related primarily to the portion of real estate inventories held for development that were deemed unqualified assets in accordance with ASC 835.

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The following is a summary of homebuilding interest capitalized to inventories owned and investments in unconsolidated joint ventures, amortized to cost of sales and income (loss) from unconsolidated joint ventures and expensed as interest expense (including discontinued operations), for the three and nine months ended September 30, 2009 and 2008:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2009			2008			2009			2008
	(Dollars in thousands)
Total interest incurred	$	26,218		$	34,428		$	81,411		$	109,933
Less: Interest capitalized to inventories owned		(12,836	)		(28,890	)		(43,437	)		(96,643	)
Less: Interest capitalized to investments in unconsolidated joint ventures		(749	)		(1,600	)		(2,565	)		(9,352	)
Interest expense	$	12,633		$	3,938		$	35,409		$	3,938
Interest previously capitalized to inventories owned, included in cost of sales	$	23,048		$	21,929		$	59,581		$	55,977
Interest previously capitalized to investments in unconsolidated joint ventures, included in income (loss) from unconsolidated joint ventures	$	136		$	572		$	5,612		$	3,494
Interest capitalized in ending inventories owned (1)	$	154,753		$	174,742		$	154,753		$	174,742
Interest capitalized as a percentage of inventories owned		14.4	%		10.7	%		14.4	%		10.7	%
Interest capitalized in ending investments in unconsolidated joint ventures (1)	$	1,455		$	10,378		$	1,455		$	10,378
Interest capitalized as a percentage of joint ventures		3.8	%		17.4	%		3.8	%		17.4	%

(1) During the three months ended September 30, 2009 and 2008, in connection with lot purchases from our unconsolidated joint ventures and joint venture purchases and unwinds $0.8 million and $0.1 million, respectively, of capitalized interest was transferred from investments in unconsolidated joint ventures to inventories owned.

10. Investments in Unconsolidated Land Development and Homebuilding Joint Ventures

The table set forth below summarizes the combined balance sheets for our unconsolidated land development and homebuilding joint ventures that we accounted for under the equity method:

	September 30, 2009		December 31, 2008
	(Dollars in thousands)
Assets:
Cash	$	18,830	$	48,566
Inventories		363,657		814,511
Other assets		6,093		33,782
Total assets	$	388,580	$	896,859
Liabilities and Equity:
Accounts payable and accrued liabilities	$	91,754	$	102,218
Construction loans and trust deed notes payable		270,561		421,848
Equity		26,265		372,793
Total liabilities and equity	$	388,580	$	896,859

Our share of equity in the unconsolidated joint ventures included in the table above was approximately $13.8 million and $106.9 million at September 30, 2009 and December 31, 2008, respectively. Our net investment in such joint ventures reflected in the accompanying condensed consolidated balance sheets totaled approximately $38.5 million and $50.5 million as of September 30, 2009 and December 31, 2008, respectively. In some cases our net investment in these unconsolidated joint ventures is not equal to our proportionate share of equity reflected in the table above because of differences between asset impairments recorded against our joint venture investments and impairments recorded by the applicable joint venture. Our net investment also included approximately $1.5 million and $6.0 million of homebuilding interest capitalized to investments in unconsolidated joint ventures as of September 30, 2009 and December 31, 2008, respectively.

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The $24.7 million difference between our share of equity in our unconsolidated joint ventures reflected in the table above and our net investment reflected in the accompanying condensed balance sheets as of September 30, 2009, relates primarily to our investment in our North Las Vegas joint venture. This joint venture has non-recourse debt and we have no further obligation to fund such joint venture or record losses in excess of the total amount invested. As a result of the inventory impairment recorded by this joint venture during the nine months ended September 30, 2009, we impaired the remaining portion of our investment in such joint venture to $0. However, our share of equity in this joint venture included in the table above was further reduced to a negative balance, as a result of the inventory impairment recorded by this joint venture, which was allocated to the members based on their ownership interests.

The table set forth below summarizes the combined statements of operations for our unconsolidated land development and homebuilding joint ventures that we accounted for under the equity method:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2009			2008			2009			2008
	(Dollars in thousands)
Revenues	$	8,224		$	36,102		$	48,217		$	116,535
Cost of sales and expenses		(12,851	)		(100,476	)		(345,364	)		(232,610	)
Net loss	$	(4,627	)	$	(64,374	)	$	(297,147	)	$	(116,075	)

Cost of sales of unconsolidated joint ventures included in the table above for the nine months ended September 30, 2009 included an inventory impairment of $304.7 million recorded by our North Las Vegas joint venture. For the three and nine months ended September 30, 2008, cost of sales of unconsolidated joint ventures included $69.0 million and $117.4 million, respectively, of impairments recorded by our unconsolidated joint ventures.

Loss from unconsolidated joint ventures in the accompanying condensed consolidated statements of operations reflects our proportionate share of the income (loss) of these unconsolidated land development and homebuilding joint ventures plus any additional impairments recorded against our investments in joint ventures which we do not deem recoverable. Our ownership interests in the joint ventures vary but are generally less than or equal to 50%. The table set forth below summarizes the impairments we recorded against our investment in unconsolidated joint ventures during the three and nine months ended September 30, 2009 and 2008:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2009		2008		2009		2008
	(Dollars in thousands)
Joint venture impairments related to:
Homebuilding joint ventures	$	—	$	19,295	$	—	$	48,321
Land development joint ventures		—		72,954		8,141		78,284
Total joint venture impairments	$	—	$	92,249	$	8,141	$	126,605
Number of projects impaired during the period		—		6		1		18
Total number of projects included in unconsolidated joint ventures and reviewed for impairment during the period (1)		9		18

(1) Certain unconsolidated joint ventures have multiple real estate projects.

The charges noted in the table above were included in loss from unconsolidated joint ventures in the accompanying condensed consolidated statements of operations.

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For certain joint ventures for which we are the managing member, we receive management fees, which represent overhead and other reimbursements for costs associated with managing the related real estate projects. During the three months ended September 30, 2009 and 2008, we recognized $515,000 of management fees and $338,000 of net management fee expense, respectively, and during the nine months ended September 30, 2009 and 2008 we recognized management fees of approximately $1.3 million and $0.8 million, respectively. Management fees were recorded as a reduction of our general and administrative and construction overhead costs. As of September 30, 2009 and 2008, we had approximately $1.0 million and $0.5 million, respectively, in management fees receivable from various joint ventures, which were included in trade and other receivables in the accompanying condensed consolidated balance sheets.

During the nine months ended September 30, 2009, we purchased and unwound three Southern California joint ventures. In connection with these transactions, we assumed $77.3 million of joint venture indebtedness. We accounted for these purchases in accordance with ASC 805.

11. Homebuilding Other Assets

Homebuilding other assets consisted of the following at:

	September 30, 2009		December 31, 2008
	(Dollars in thousands)
Income tax receivables	$	—	$	115,650
Property and equipment, net		6,511		8,939
Deferred debt issuance costs		5,534		12,175
Prepaid insurance		2,265		4,575
Other assets		6,953		4,228
Total homebuilding other assets	$	21,263	$	145,567

12. Warranty Costs

Estimated future direct warranty costs are accrued and charged to cost of sales in the period when the related homebuilding revenues are recognized. Amounts accrued are based upon historical experience rates. Indirect warranty overhead salaries and related costs are charged to cost of sales in the period incurred. We assess the adequacy of our warranty accrual on a quarterly basis and adjust the amounts recorded if necessary. Our warranty accrual is included in accrued liabilities in the accompanying condensed consolidated balance sheets. Changes in our warranty accrual from continuing operations are detailed in the table set forth below:

	Nine Months Ended September 30,
	2009			2008
	(Dollars in thousands)
Warranty accrual, beginning of the period	$	19,998		$	30,790
Warranty costs accrued and other adjustments during the period		5,176			6,757
Warranty costs paid during the period		(3,255	)		(5,984	)
Warranty accrual, end of the period	$	21,919		$	31,563

13. Revolving Credit Facility and Term Loans

As of September 30, 2009, we had a revolving credit facility (“Revolver”) with approximately $20.4 million in letters of credit outstanding and $29.6 million of remaining letter of credit commitment and a $225 million term loan (“Term Loan B” and, collectively with the Revolver, the “Credit Facilities”). During the quarter we repaid in full and terminated our Term Loan A and amended the Credit Facilities. Pursuant to the amendment, among other things, the Company reduced the total commitment under the Revolver from $361.4 million to $50 million, with future extensions of credit under the Revolver limited to the issuance of letters of credit, and agreed to cash collateralize all current and future letters of credit. In addition, the covenants contained in the Credit Facilities were modified to, among other things, eliminate most negative covenants (including those limiting liens, incurrence and prepayment of indebtedness,

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payment of dividends, disposition of properties, investments, and transactions with affiliates). The liquidity test requiring the Company to maintain either a minimum ratio of cash flow from operations to consolidated home building interest incurred or a minimum interest reserve was also eliminated and replaced with a financial covenant requiring the Company to either (i) maintain either a minimum ratio of cash flow from operations to consolidated homebuilding interest incurred, a minimum ratio of home building EBITDA to consolidated home building interest incurred or a maximum ratio of combined net home building debt to consolidated tangible net worth or (ii) pay a fee equal to 50 basis points per quarter on the outstanding principal amount of the Term Loan B and prepay, on a quarterly basis, an aggregate principal amount of $7.5 million of the Term Loan B.

14. Secured Project Debt and Other Notes Payable

At September 30, 2009, we had approximately $88.8 million outstanding in secured project debt that was assumed in connection with the unwinding of four joint ventures. As of the date hereof, the current maturity dates of these loans range from February 2010 to March 2011.

At September 30, 2009, we had approximately $8.0 million outstanding in other notes payable. Our other notes payable consist of purchase money mortgage financing and community development district and similar assessment district bond financings used to finance land development and infrastructure costs for which we are responsible.

15. Senior and Senior Subordinated Notes Payable

Senior notes payable consisted of the following at:

	September 30, 2009		December 31, 2008
	(Dollars in thousands)
5 1/8% Senior Notes due April 2009	$	—	$	124,550
6 1/2% Senior Notes due August 2010		148,468		173,000
6 7/8% Senior Notes due May 2011		170,597		175,000
7 3/4% Senior Notes due March 2013, net		124,537		124,451
6 1/4% Senior Notes due April 2014		150,000		150,000
7% Senior Notes due August 2015		175,000		175,000
10 3/4% Senior Notes due September 2016, net		257,591		—
Term Loan A due December 2009		—		57,500
Term Loan B due May 2013		225,000		225,000
	$	1,251,193	$	1,204,501

Senior subordinated notes payable consisted of the following at:

	September 30, 2009		December 31, 2008
	(Dollars in thousands)
6% Convertible Senior Subordinated Notes due October 2012, net	$	33,019	$	52,963
9 1/4% Senior Subordinated Notes due April 2012, net		70,308		70,259
	$	103,327	$	123,222

The senior notes payable and our 9 ¹/4% Senior Subordinated Notes contain covenants which, among other things, impose certain limitations on our ability to (1) incur additional indebtedness, (2) create liens, (3) make restricted payments (including payments of dividends, other distributions, share repurchases, and investments in unrestricted subsidiaries and unconsolidated joint ventures) and (4) sell assets. Under the limitation on restricted payments, we are also prohibited from making restricted payments (which include investments in and advances to our joint ventures and other unrestricted subsidiaries), if we do not satisfy either a leverage condition or interest coverage condition. Our ability to make restricted payments is also subject to a basket limitation. When we were in compliance with the limitation on restricted payments, we

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directly made restricted payments to our joint ventures and other restricted subsidiaries. Since September 30, 2008, we have made restricted payments (including investments in joint ventures) from funds held in our unrestricted subsidiaries which are not subject to this prohibition. As of September 30, 2009, we had approximately $387.3 million of cash (excluding $285.6 million in restricted cash) in our unrestricted subsidiaries available to fund joint venture capital requirements and to take other actions that would otherwise constitute prohibited restricted payments.

On April 1, 2009, the remaining balance of $124.6 million of our 5 ¹/8% Senior Notes due 2009 was repaid in full in connection with the maturity of these notes. In addition, during the nine months ended September 30, 2009, we repurchased at a discount $24.5 million of our 6 ¹/2% Senior Notes due 2010 and $4.4 million of our 6 ⁷/8% Senior Notes due 2011 and as a result recognized a $5.4 million gain which was included in gain (loss) on early extinguishment of debt in the accompanying condensed consolidated financial statements. During the three months ended September 30, 2009, we entered into three privately negotiated transactions pursuant to which we repurchased at a discount $32.8 million principal amount of our 6% Senior Subordinated Convertible Notes due 2012 in exchange for an aggregate of 7.6 million shares of our common stock, and as a result recognized a $1.5 million loss which was included in gain (loss) on early extinguishment of debt in the accompanying condensed consolidated financial statements. The loss includes the write-off of $0.7 million of deferred debt costs and $0.8 million related to the derecognition of the convertible debt discount that was previously included in stockholders’ equity in accordance with ASC 470.

On September 17, 2009, we issued $280 million of 10 ³/4% senior notes due September 15, 2016 (the “2016 Notes”). The 2016 Notes rank equally with our existing senior and senior subordinated notes outstanding. These notes were issued at a discount of 91.997% and have been reflected net of the unamortized discount in the accompanying consolidated balance sheets. The $257.6 million net proceeds from the offering were required to be used to retire existing debt upon certain conditions being met and were held in escrow as of September 30, 2009. On October 9, 2009, all conditions were satisfied and the proceeds from the offering were released from escrow and used to repurchase through a tender offer approximately $133.4 million, $122.0 million and $3.4 million in principal amount of senior notes due 2010, 2011 and 2013, respectively.

16. Series B Preferred Stock

On June 27, 2008, we issued 381,250 shares of a new series of senior convertible preferred stock (“Senior Preferred Stock”) to MatlinPatterson for $381.3 million in cash. The Senior Preferred Stock was not convertible into our common stock, however, upon obtaining stockholder approval on August 18, 2008, the shares of Senior Preferred Stock automatically converted on a 1 for 1 basis into shares of Series B Preferred Stock, which are initially convertible into 125 million shares of our common stock. In addition, in September 2008, MatlinPatterson purchased 69,579 shares of Series B Preferred Stock (equivalent to 22.8 million shares of common stock) in connection with a common stock rights offering.

The number of shares of common stock into which our Series B Preferred Stock is convertible is determined by dividing $1,000 by the applicable conversion price (currently, $3.05, subject to customary anti-dilution adjustments) plus cash in lieu of fractional shares. The Series B Preferred Stock will be convertible at the holder’s option into shares of our common stock provided that no holder, with its affiliates, may beneficially own total voting power of our voting stock in excess of 49%. The Series B Preferred Stock also mandatorily converts into our common stock upon its sale, transfer or other disposition by MatlinPatterson or its affiliates to an unaffiliated third party. The Series B Preferred Stock votes together with our common stock on all matters upon which holders of our common stock are entitled to vote. Each share of Series B Preferred Stock is entitled to such number of votes as the number of shares of our common stock into which such share of Series B Preferred Stock is convertible, provided that the aggregate votes attributable to such shares with respect to any holder of Series B Preferred Stock (including its affiliates), taking into consideration any other voting securities of the Company held by such stockholder, cannot exceed more than 49% of the total voting power of the voting stock of the Company. Shares of Series B Preferred Stock are entitled to receive only those dividends declared and paid on the common

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stock. As of September 30, 2009, the outstanding shares of Series B Preferred Stock owned by MatlinPatterson represented approximately 58% (or 69%, assuming MatlinPatterson had exercised their warrant to purchase 272,670 shares of Series B Preferred Stock for cash on such date) of the total number of shares of our common stock outstanding on an as-converted basis.

17. Derivative Instruments and Hedging Activities

We account for derivatives and certain hedging activities in accordance with ASC Topic 815, Derivatives and Hedging (“ASC 815”). ASC 815 establishes the accounting and reporting standards requiring that every derivative instrument, including certain derivative instruments embedded in other contracts, be recorded as either assets or liabilities in the consolidated balance sheets and to measure these instruments at fair market value. Gains or losses resulting from changes in the fair market value of derivatives are recognized in the consolidated statement of operations or recorded in other comprehensive income (loss), net of tax, and recognized in the consolidated statement of operations when the hedged item affects earnings, depending on the purpose of the derivatives and whether the derivatives qualify for hedge accounting treatment.

Our policy is to designate at a derivative’s inception the specific assets, liabilities or future commitments being hedged and monitor the derivative to determine if the derivative remains an effective hedge. The effectiveness of a derivative as a hedge is based on a high correlation between changes in the derivative’s value and changes in the value of the underlying hedged item. We recognize gains or losses for amounts received or paid when the underlying transaction settles. We do not enter into or hold derivatives for trading or speculative purposes.

The primary risks associated with derivative instruments are market and credit risk. Market risk is defined as the potential for loss in value of the derivative instruments due to adverse changes in market prices (interest rates). Utilizing derivative instruments allows us to effectively manage the risk of increasing interest rates with respect to the potential effects these fluctuations could have on future earnings and cash flows. Credit risk is the risk that one of the parties to a derivative contract fails to perform or meet their financial obligation. We do not obtain collateral associated with derivative instruments, but monitor the credit standing of our counterparties, primarily global institutional banks, on a regular basis. Should a counterparty fail to perform, we would incur a financial loss to the extent that the associated derivative contract was in an asset position. At September 30, 2009, we do not anticipate non-performance by counterparties to our outstanding derivative contracts and in addition, such contracts were not in an asset position.

In May 2006, we entered into one interest rate swap agreement related to our Term Loan A with a notional amount of $100 million and two interest rate swap agreements related to our Term Loan B with an aggregate notional amount of $250 million that effectively fixed our 3-month LIBOR rates for our term loans through their original maturity dates of May 2011 and May 2013, respectively. The swap agreements have been designated as cash flow hedges and, accordingly, are reflected at their fair market value in accrued liabilities in our consolidated balance sheets. To the extent the swaps are deemed effective and qualify for hedge accounting treatment, the related gain or loss is deferred, net of tax, in stockholders’ equity as accumulated other comprehensive income or loss. During 2007, we repaid $25 million of our Term Loan B which resulted in a portion of the interest rate swap being ineffective, and as a result, we recorded a $0.4 million and $0.2 million loss on early extinguishment of debt related to the Term Loan B during the three and nine months ended September 30, 2008, respectively.

In June 2008, we repaid $35 million of our Term Loan A in connection with an amendment to our Term Loan A agreement which also required amortization payments of $2.5 million per quarter resulting in the related interest rate swap being ineffective, and as a result, we recorded a $1.5 million and $3.1 million loss on early extinguishment of debt during the three and nine months ended September 30, 2008, respectively. On September 8, 2008, we reduced $35 million and $25 million notional amounts of the Term Loan A and Term Loan B interest rate swaps for payments of approximately $2.5 million and $1.9 million, respectively. The reduction in the notional amount of our Term Loan B swap agreement resulted in the

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interest rate swap being highly effective and, accordingly, prospective gains or losses are recorded, net of tax, in stockholders’ equity as accumulated other comprehensive income or loss. In December 2008, we incurred ACI Debt as defined under our Term Loan A agreement which required us to increase the quarterly amortization payment from $2.5 million per quarter to $5 million per quarter. As a result of this accelerated debt amortization schedule, the Term Loan A swap was deemed ineffective as of December 31, 2008 and we recorded a $0.1 million loss on early extinguishment of debt during the three and nine months ended September 30, 2009, respectively. Additionally, in connection with the full repayment and termination of our Term Loan A during the 2009 third quarter, we made a $3.7 million payment to terminate our Term Loan A swap agreement and recorded a $2.2 million loss on early extinguishment of debt, which had been previously included in other comprehensive income or loss.

The estimated fair value of the swaps at September 30, 2009 and December 31, 2008 represented liabilities of $27.2 million and $38.0 million, respectively, which were included in accrued liabilities in the accompanying condensed consolidated financial statements. For the three months ended September 30, 2009 and 2008, we recorded after-tax other comprehensive income of $0.5 million and other comprehensive loss of $0.3 million, respectively, and for the nine months ended September 30, 2009 and 2008, we recorded after-tax other comprehensive income of $5.9 million and $2.0 million, respectively, related to the swap agreements.

18. Mortgage Credit Facilities

At September 30, 2009, we had approximately $38.8 million outstanding under our mortgage financing subsidiary’s mortgage credit facilities. These mortgage credit facilities consist of a $30 million repurchase facility, of which $15 million is uncommitted (meaning that the lender has discretion to refuse to fund requests even if the mortgage loans comply with the requirements of the facility), and $15 million is committed (meaning that the lender has no discretion to refuse to fund requests if the mortgage loans comply with the requirements of the facility, though the lender has substantial discretion to modify from time to time what those requirements are, even if any such modification adversely affects our mortgage financing subsidiary’s ability to use the repurchase facility), and a $45 million early purchase facility. The lender has the right to terminate the committed portion of the repurchase facility on not less than 90 days notice. These mortgage credit facilities are scheduled to mature in April 2010 and require Standard Pacific Mortgage to maintain cash collateral accounts aggregating $2.3 million. These facilities also contain certain financial covenants which require Standard Pacific Mortgage to, among other things, maintain a minimum level of tangible net worth, not exceed a debt to tangible net worth ratio, maintain a minimum liquidity of $5 million, and satisfy certain pretax income (loss) requirements. As of September 30, 2009, Standard Pacific Mortgage was in compliance with the financial and other covenants contained in these facilities.

19. Disclosures about Fair Value

The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate:

Cash and Equivalents—The carrying amount is a reasonable estimate of fair value as these assets primarily consist of short-term investments and demand deposits.

Mortgage Loans Held for Investment—Fair value of these loans is based on the estimated market value of the underlying collateral based on market data and other factors for similar type properties as further adjusted to reflect their estimated net realizable value of carrying the loans through disposition.

Revolving Credit Facility—The fair value of this credit facility was based on quoted market prices at the end of the period.

Mortgage Credit Facilities—The carrying amounts of these credit obligations approximate market value because of the frequency of repricing the borrowings.

Secured Project Debt and Other Notes Payable—These notes are for purchase money deeds of trust on land acquired and certain other real estate inventory construction, including secured bank acquisition, development and construction loans and community development district bonds. The notes were discounted at an interest rate that is commensurate with market rates of similar secured real estate financing.

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Senior and Senior Subordinated Notes Payable—The public senior and senior subordinated notes are publicly traded over the counter and their fair values were based upon the values of their last trade at the end of the period. The Term Loan A and Term Loan B notes were based on quoted market prices at the end of the period.

Forward Sale Commitments of Mortgage-Backed Securities—These instruments consist of the forward sale of publicly traded mortgage-backed securities. Fair values of these instruments are based on quoted market prices for similar instruments.

Commitments to Originate Mortgage Loans—These instruments consist of extending interest rate locks to loan applicants. Fair values of these instruments are based on market rates of similar interest rate locks.

	September 30, 2009				December 31, 2008
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(Dollars in thousands)
Financial assets:
Homebuilding:
Cash and equivalents	$	806,766	$	806,766	$	626,379	$	626,379
Financial services:
Cash and equivalents	$	8,819	$	8,819	$	7,976	$	7,976
Mortgage loans held for investment	$	10,734	$	10,734	$	11,736	$	11,736
Financial liabilities:
Homebuilding:
Revolving credit facility	$	—	$	—	$	47,500	$	35,625
Secured project debt and other notes payable	$	96,816	$	96,816	$	111,214	$	111,214
Senior notes payable, net	$	1,251,193	$	1,179,552	$	1,204,501	$	769,298
Senior subordinated notes payable, net	$	103,327	$	104,169	$	123,222	$	68,625
Financial services:
Mortgage credit facilities	$	38,798	$	38,798	$	63,655	$	63,655
Off-balance sheet financial instruments:
Forward sale commitments of mortgage-backed securities	$	9,284	$	9,162	$	15,000	$	14,762
Commitments to originate mortgage loans	$	76,684	$	77,837	$	12,032	$	12,272

Effective January 1, 2008, we implemented the requirements of ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), for our financial assets and liabilities. Effective January 1, 2009, we adopted ASC 820 for qualifying non-financial assets and liabilities. ASC 820 establishes a framework for measuring fair value, expands disclosures regarding fair value measurements and defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Further, ASC 820 requires us to maximize the use of observable market inputs, minimize the use of unobservable market inputs and disclose in the form of an outlined hierarchy the details of such fair value measurements. ASC 820 specifies a hierarchy of valuation techniques based on whether the inputs to a fair value measurement are considered to be observable or unobservable in a marketplace. The three levels of the hierarchy are as follows:

• Level 1 – quoted prices for identical assets or liabilities in active markets;

• Level 2 – quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and

• Level 3 – valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

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The following assets and liabilities have been measured at fair value in accordance with ASC 820 as of or for the nine months ended September 30, 2009:

			Fair Value Measurements at Reporting Date Using
Description	As of or for the Nine Months Ended September 30, 2009		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in thousands)
Assets:
Inventories owned	$	91,138	$	—	$	—	$	91,138
Mortgage loans held for sale	$	42,625	$	—	$	42,625	$	—
Liabilities:
Interest rate swaps	$	27,182	$	—	$	27,182	$	—

Inventories Owned—Represents the aggregate fair values for projects that were impaired during the nine months ended September 30, 2009, as of the date that the fair value measurements were made. The carrying value for these projects may have subsequently increased or decreased due to activities that have occurred since the measurement date. In accordance with ASC 360, during the nine months ended September 30, 2009, inventories owned with a carrying amount of $140.6 million were determined to be impaired and were written down to their estimated fair value of $91.1 million, resulting in an impairment charge of $49.5 million. These impairment charges were included in cost of sales in the accompanying condensed statements of operations.

Mortgage Loans Held for Sale—These consist of first mortgages on single-family residences which are eligible for sale to Fannie Mae, Freddie Mac, Ginnie Mae, FHA or VA. Fair values of these loans are based on quoted market prices for similar loans.

Interest Rate Swaps—The fair value of interest rate swap agreements is the estimated amount that we would receive or pay to terminate the swap agreements at the reporting date, based on quoted mid-market prices or pricing models using current mid-market rates.

We adopted the provisions of ASC Topic 825, Financial Instruments (“ASC 825”), on a prospective basis for mortgage loans held for sale, effective November 1, 2008. In accordance with the provisions of ASC 825 mortgage loans held for sale originated on or subsequent to November 1, 2008 are measured at fair value. The adoption of ASC 825 for mortgage loans held for sale improves consistency of mortgage loan valuation between the date the borrower locks the interest rate on the pending loan and the date of the mortgage loan sale. Prior to the adoption of ASC 825, mortgage loans held for sale were reported at the lower of cost or market on an aggregate basis.

20. Commitments and Contingencies

a. Land Purchase and Option Agreements

We are subject to customary obligations associated with entering into contracts for the purchase of land and improved homesites. These purchase contracts typically require a cash deposit or delivery of a letter of credit, and the purchase of properties under these contracts is generally contingent upon satisfaction of certain requirements by the sellers, including obtaining applicable property and development entitlements. We also utilize option contracts with land sellers and third-party financial entities as a method of acquiring land in staged takedowns, to help us manage the financial and market risk associated with land holdings, and to reduce the use of funds from our corporate financing sources. Option contracts generally require a non-refundable deposit for the right to acquire lots over a specified period of time at predetermined prices. We generally have the right at our discretion to terminate our obligations under both purchase contracts and option contracts by forfeiting our cash deposit or by repaying amounts drawn under our letter of credit with no further financial responsibility to the land seller, although in certain instances, the land seller has the right to compel us to purchase a specified number of lots at predetermined prices. Also, in a few instances where we have entered into option contracts with third party financial entities, we have generally entered into construction agreements that do not terminate if we elect not to exercise our

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option. In these instances, we are generally obligated to complete land development improvements on the optioned property at a predetermined cost (paid by the option provider) and are responsible for all cost overruns. At September 30, 2009, we had two option contracts outstanding with third party financial entities with approximately $2.9 million of remaining land development improvement costs, all of which will be funded by the option provider. In some instances, we may also expend funds for due diligence, development and construction activities with respect to our land purchase and option contracts prior to purchase, which we would have to write off should we not purchase the land. At September 30, 2009, we had non-refundable cash deposits and letters of credit outstanding of approximately $9.4 million and capitalized preacquisition and other development and construction costs of approximately $3.8 million relating to land purchase and option contracts having a total remaining purchase price of approximately $83.1 million. Approximately $24.2 million of the remaining purchase price is included in inventories not owned in the accompanying condensed consolidated balance sheets.

Our utilization of option contracts is dependent on, among other things, the availability of land sellers willing to enter into option takedown arrangements, the availability of capital to financial intermediaries, general housing market conditions, and geographic preferences. Options may be more difficult to procure from land sellers in strong housing markets and are more prevalent in certain geographic regions.

For the three months ended September 30, 2009 and 2008, we incurred pretax charges (net of recoveries) of $0.2 million and $8.9 million, respectively, related to the write-offs of option deposits and capitalized preacquisition costs for abandoned projects. For the nine months ended September 30, 2009 and 2008, we incurred pretax charges (net of recoveries) of approximately $2.2 million and $17.1 million, respectively, related to the write-offs of option deposits and capitalized preacquisition costs for abandoned projects. These charges were included in other income (expense) in the accompanying condensed consolidated statements of operations. We continue to evaluate the terms of open land option and purchase contracts in light of slower housing market conditions and may write-off additional option deposits and capitalized preacquisition costs in the future, particularly in those instances where land sellers or third party financial entities are unwilling to renegotiate significant contract terms.

b. Land Development and Homebuilding Joint Ventures

Historically, we have entered into land development and homebuilding joint ventures from time to time as a means of:

• accessing lot positions

• establishing strategic alliances

• leveraging our capital base

• expanding our market opportunities

• managing the financial and market risk associated with land holdings

These joint ventures typically obtain secured acquisition, development and construction financing, which is intended to reduce the use of funds from corporate financing sources. Over the last several years both the number of joint ventures in which we participate and the dollar value of loans outstanding with respect to these joint ventures have been significantly reduced. At September 30, 2009, our joint ventures had borrowings outstanding that totaled approximately $270.6 million (of which $225.4 million was nonrecourse indebtedness) compared to $421.8 million in joint venture indebtedness as of December 31, 2008.

Despite the reduced size of our joint venture portfolio, we may be required in the future to, expend corporate funds for anticipated and unanticipated obligations associated with these joint ventures. Potential future obligations may include payments associated with:

• joint venture loans (including to replace expiring loans, to satisfy loan remargin and land development and construction completion obligations, and to satisfy environmental indemnity obligations)

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• joint venture development and construction costs and cost overruns (including the funding of the joint venture partner’s share when the partner is unable or unwilling to make the required contribution)

• indemnity obligations to joint venture surety providers

• land takedown obligations

• joint venture unwinds (including the satisfaction of joint venture indebtedness either through repayment or the assumption of such indebtedness, payments required to be made to our partners in connection with the unwind, and the remaining cost to complete former joint venture projects)

During the nine months ended September 30, 2009, we paid $23.0 million to satisfy joint venture obligations (including the repayment of project specific debt in connection with joint venture unwinds) and assumed $77.3 million of project specific debt. As of September 30, 2009, we held membership interests in 20 homebuilding and land development joint ventures (including discontinued operations), of which eight were active and 12 were inactive or winding down. As of such date, three joint ventures had an aggregate of $45.2 million in recourse project specific financing and one had $225.4 million of nonrecourse project specific financing. In addition, as of such date, we had an obligation to purchase lots related to one joint venture totaling approximately $21.1 million and had approximately $31.7 million of surety bonds outstanding subject to indemnity arrangements by us and our partners and had an estimated $11.7 million remaining in cost to complete.

c. Surety Bonds

We cause surety bonds to be issued in the normal course of business to ensure completion of the infrastructure of our projects. At September 30, 2009, we had approximately $233.5 million in surety bonds outstanding from continuing operations (exclusive of surety bonds related to our joint ventures) with respect to which we had an estimated $76.0 million remaining in cost to complete.

d. Mortgage Loans and Commitments

We commit to making mortgage loans to our homebuyers through our mortgage financing subsidiary, Standard Pacific Mortgage, Inc. Mortgage loans in process for which interest rates were committed to borrowers totaled approximately $76.7 million at September 30, 2009 and carried a weighted average interest rate of approximately 5.1%. Interest rate risks related to these obligations are generally mitigated through the preselling of loans to investors or through interest rate hedging. As of September 30, 2009, Standard Pacific Mortgage had approximately $1.7 million of closed mortgage loans held for sale that were originated on a non-presold basis, all of which were hedged by forward sale commitments of mortgage-backed securities. In addition, as of September 30, 2009, Standard Pacific Mortgage held approximately $117.7 million in closed mortgage loans held for sale and mortgage loans in process which were presold to investors subject to completion of the investors’ administrative review of the applicable loan documents.

Standard Pacific Mortgage sells substantially all of the loans it originates in the secondary mortgage market, with servicing rights released on a non-recourse basis. This sale is subject to Standard Pacific Mortgage’s obligation to repay its gain on sale if the loan is prepaid by the borrower within a certain time period following such sale, or to repurchase the loan if, among other things, the borrower defaults on the loan within a specified period following the sale, the purchaser’s underwriting guidelines are not met, or there is fraud in connection with the loan.

e. Restructuring Costs

Our operations have been impacted by the weak housing demand in substantially all of our markets. As a result, during 2008 we initiated a restructuring plan designed to reduce ongoing overhead costs and improve operating efficiencies through the consolidation of selected divisional offices, the disposal of related property and equipment, and a reduction in our workforce. Our restructuring activities are substantially complete as of September 30, 2009. However, until market conditions stabilize, we may incur additional restructuring charges for employee severance, lease termination and other exit costs.

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Below is a summary of restructuring charges incurred during the three and nine months ended September 30, 2009 and 2008, and the cumulative amount incurred from January 1, 2008 through September 30, 2009:

	Three Months Ended September 30,				Nine Months Ended September 30,				Incurred
	2009		2008		2009		2008		to Date
	(Dollars in thousands)
Employee severance costs	$	617	$	2,367	$	14,089	$	5,403	$	28,155
Lease termination and other exit costs		966		976		5,276		1,195		13,213
Property and equipment disposals		—		838		1,370		838		3,660
	$	1,583	$	4,181	$	20,735	$	7,436	$	45,028

During the three months ended September 30, 2009 and 2008, employee severance costs of $0.5 million and $2.0 million, respectively, were included in selling, general and administrative expenses and $0.1 and $0.4 million, respectively, were included in cost of sales, while lease termination and other exit costs were included in selling, general and administrative expenses and property and equipment disposals were included in other income (expense) in the accompanying condensed consolidated statements of operations. During the nine months ended September 30, 2009 and 2008, employee severance costs of $12.9 million and $4.2 million, respectively, were included in selling, general and administrative expenses and $1.0 million and $1.2 million, respectively, were included in cost of sales, while lease termination and other exit costs were included in selling, general and administrative expenses and property and equipment disposals were included in other income (expense) in the accompanying condensed consolidated statements of operations.

Our restructuring accrual is included in accrued liabilities in the accompanying condensed consolidated balance sheets. Changes in our restructuring accrual from continuing operations are detailed in the table set forth below:

	Nine Months Ended September 30, 2009
	Employee Severance Costs			Lease Termination and Other Costs			Property and Equipment Disposals			Total
	(Dollars in thousands)
Restructuring accrual, beginning of the period	$	4,917		$	6,045		$	—		$	10,962
Restructuring costs accrued and other adjustments during the period		14,089			5,276			1,370			20,735
Restructuring costs paid during the period		(15,815	)		(4,507	)		—			(20,322	)
Non-cash settlements		—			—			(1,370	)		(1,370	)
Restructuring accrual, end of the period	$	3,191		$	6,814		$	—		$	10,005
	Nine Months Ended September 30, 2008
	Employee Severance Costs			Lease Termination and Other Costs			Property and Equipment Disposals			Total
	(Dollars in thousands)
Restructuring accrual, beginning of the period	$	—		$	1,164		$	—		$	1,164
Restructuring costs accrued and other adjustments during the period		5,403			1,195			838			7,436
Restructuring costs paid during the period		(5,266	)		(783	)		—			(6,049	)
Non-cash settlements		—			—			(838	)		(838	)
Restructuring accrual, end of the period	$	137		$	1,576		$	—		$	1,713

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21. Income Taxes

We account for income taxes in accordance with ASC Topic 740, Income Taxes (“ASC 740”). This statement requires an asset and a liability approach for measuring deferred taxes based on temporary differences between the financial statement and tax bases of assets and liabilities existing at each balance sheet date using enacted tax rates for years in which taxes are expected to be paid or recovered.

We evaluate our deferred tax assets on a quarterly basis to determine whether a valuation allowance is required. In accordance with ASC 740, we assess whether a valuation allowance should be established based on our determination of whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets depends primarily on: (i) our ability to carry back net operating losses to tax years where we have previously paid income taxes based on applicable federal law; and (ii) our ability to generate future taxable income during the periods in which the related temporary differences become deductible. The assessment of a valuation allowance includes giving appropriate consideration to all positive and negative evidence related to the realization of the deferred tax asset. This assessment considers, among other things, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carryforward periods, our experience with operating loss and tax credit carryforwards not expiring unused, and tax planning alternatives. Significant judgment is required in determining the future tax consequences of events that have been recognized in our consolidated financial statements and/or tax returns. Differences between anticipated and actual outcomes of these future tax consequences could have a material impact on our consolidated financial position or results of operations.

During the nine months ended September 30, 2009 and 2008, we recorded noncash deferred tax valuation allowances of $37.4 million and $348.7 million, respectively, in accordance with ASC 740. As of September 30, 2009, our total deferred tax asset valuation allowance was $691.5 million. To the extent that we generate taxable income in the future to utilize the tax benefits of the related deferred tax assets, subject to certain potential limitations, we will be able to reduce our effective tax rate by reducing the valuation allowance.

We believe that an ownership change under Internal Revenue Code Section 382 (“Section 382”) occurred during the 2008 second quarter as a result of closing the first phase of the investment by MatlinPatterson in our preferred stock. Accordingly, we may be limited on the use of certain tax attributes that relate to tax periods prior to the ownership change. These potential carryback limitations did not have an impact on our ability to carry back our 2008 net operating loss to 2006 for refund purposes. However, the Section 382 ownership change will have the impact of placing an annual limitation on our ability to carry forward certain tax attributes in future periods. Our Section 382 NOL carryforward limitation is currently estimated to be approximately $15 million per year for a period of 20 years for assets with certain tax attributes that are sold within five years of the ownership change. Assets with certain tax attributes sold five years after the ownership change are not subject to the Section 382 limitation.

ASC 740 defines the methodology for recognizing the benefits of tax return positions as well as guidance regarding the measurement of the resulting tax benefits. ASC 740 requires an enterprise to recognize the financial statement effects of a tax position when it is more likely than not (defined as a likelihood of more than 50%), based on the technical merits, that the position will be sustained upon examination. In addition, ASC 740 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The evaluation of whether a tax position meets the more-likely-than-not recognition threshold requires a substantial degree of judgment by management based on the individual facts and circumstances. Actual results could differ from estimates.

As of September 30, 2009, we remained subject to examination by various tax jurisdictions for the tax years ended December 31, 2003 through 2008. There were no significant changes in the accrued liability related to uncertain tax positions during the three months ended September 30, 2009, nor do we anticipate significant changes during the next 12-month period.

-26-

22. Discontinued Operations

During the fourth quarter of 2007, we sold substantially all of the assets of our Tucson and San Antonio homebuilding divisions. The results of operations of our Tucson and San Antonio divisions have been classified as discontinued operations in accordance with ASC Topic 360, Property, Plant, and Equipment. In addition, assets and liabilities related to these discontinued operations are presented separately in the accompanying condensed consolidated balance sheets.

The following amounts related to the Tucson and San Antonio homebuilding divisions were derived from historical financial information and have been segregated from continuing operations and reported as discontinued operations:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2009			2008			2009			2008
	(Dollars in thousands)
Home sale revenues	$	130		$	2,468		$	802		$	25,698
Land sale revenues		—			—			—			694
Total revenues		130			2,468			802			26,392
Cost of home sales		(128	)		(1,843	)		(923	)		(21,354	)
Cost of land sales		—			—			—			(751	)
Total cost of sales		(128	)		(1,843	)		(923	)		(22,105	)
Gross margin		2			625			(121	)		4,287
Selling, general and administrative expenses		250			(954	)		(411	)		(7,634	)
Other income (expense)		(330	)		214			(335	)		195
Pretax loss		(78	)		(115	)		(867	)		(3,152	)
Benefit for income taxes		33			46			298			1,147
Net loss from discontinued operations	$	(45	)	$	(69	)	$	(569	)	$	(2,005	)

We did not record any impairments related to our discontinued operations during the three or nine months ended September 30, 2009 and 2008.

The following is a summary of the assets and liabilities of the Tucson and San Antonio divisions discontinued operations. The amounts presented below were derived from historical financial information and adjusted to exclude intercompany receivables between the divisions and the Company:

	September 30, 2009		December 31, 2008
	(Dollars in thousands)
Assets
Cash and equivalents	$	7	$	7
Trade and other receivables		27		160
Inventories-owned		5		930
Other assets		120		120
Total Assets	$	159	$	1,217
Liabilities
Accounts payable		28		320
Accrued liabilities		826		1,011
Total Liabilities	$	854	$	1,331

-27-

23. Supplemental Disclosures to Condensed Consolidated Statements of Cash Flows

The following are supplemental disclosures to the condensed consolidated statements of cash flows:

	Nine Months Ended September 30,
	2009		2008
	(Dollars in thousands)
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest	$	81,062	$	100,813
Income taxes	$	386	$	343
Supplemental Disclosures of Noncash Activities:
Increase in inventory in connection with purchase or consolidation of joint ventures	$	85,573	$	51,731
Increase in secured project debt in connection with purchase or consolidation of joint ventures	$	77,272	$	47,663
Senior subordinated notes exchanged for the issuance of common stock	$	32,837	$	—
Senior and senior subordinated notes exchanged for the issuance of warrant	$	—	$	128,496
Changes in inventories not owned	$	8,646	$	21,592
Changes in liabilities from inventories not owned	$	2,489	$	5,300
Changes in noncontrolling interests	$	6,157	$	16,292

24. Subsequent Event

On November 6, 2009, new federal legislation was enacted that permits a taxpayer to carryback, at the taxpayer’s election, net operating losses generated in either the 2008 or 2009 taxable year for a period of up to five years preceding the loss. If net operating losses are carried back to the fifth taxable year preceding the loss, the amount carried back is limited to 50 percent of taxable income for such taxable year. Based on the Company’s preliminary analysis, we believe that electing to carryback net operating losses from the 2009 tax year to the 2004 tax year (the fifth tax year preceding the loss year) will maximize the Company’s potential benefit from this change in the law. Applying the new legislation, the Company believes it will be entitled to seek a cash refund of up to approximately $80 million of the taxes it paid for tax year 2004.

-28-

25. Supplemental Guarantor Information

Certain of our 100% owned direct and indirect subsidiaries guarantee our outstanding senior and senior subordinated notes payable. The guarantees are full and unconditional and joint and several. Presented below are the condensed consolidated financial statements for our guarantor subsidiaries and non-guarantor subsidiaries. All prior year periods presented have been retroactively adjusted in accordance with ASC 470.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

	Three Months Ended September 30, 2009
	Standard Pacific Corp.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments		Consolidated Standard Pacific Corp.
	(Dollars in thousands)
Homebuilding:
Revenues	$	99,262		$	140,824		$	87,325		$	—	$	327,411
Cost of sales		(77,633	)		(125,084	)		(82,071	)		—		(284,788	)
Gross margin		21,629			15,740			5,254			—		42,623
Selling, general and administrative expenses		(21,913	)		(19,310	)		(2,472	)		—		(43,695	)
Income (loss) from unconsolidated joint ventures		(338	)		41			(1,663	)		—		(1,960	)
Equity income (loss) of subsidiaries		(5,806	)		—			—			5,806		—
Interest expense		(5,596	)		(5,299	)		(1,738	)		—		(12,633	)
Gain (loss) on early extinguishment of debt		(8,824	)		—			—			—		(8,824	)
Other income (expense)		(578	)		(936	)		1,209			—		(305	)
Homebuilding pretax income (loss)		(21,426	)		(9,764	)		590			5,806		(24,794	)
Financial Services:
Financial services pretax income (loss)		(19	)		19			1,028			—		1,028
Income (loss) from continuing operations before income taxes		(21,445	)		(9,745	)		1,618			5,806		(23,766	)
(Provision) benefit for income taxes		(2,399	)		2,593			(227	)		—		(33	)
Income (loss) from continuing operations		(23,844	)		(7,152	)		1,391			5,806		(23,799	)
Loss from discontinued operations, net of income taxes		—			(45	)		—			—		(45	)
Net income (loss)	$	(23,844	)	$	(7,197	)	$	1,391		$	5,806	$	(23,844	)
	Three Months Ended September 30, 2008
	Standard Pacific Corp.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments		Consolidated Standard Pacific Corp.
	(Dollars in thousands)
Homebuilding:
Revenues	$	183,717		$	216,579		$	44		$	—	$	400,340
Cost of sales		(295,733	)		(287,835	)		(24,429	)		—		(607,997	)
Gross margin		(112,016	)		(71,256	)		(24,385	)		—		(207,657	)
Selling, general and administrative expenses		(44,409	)		(32,468	)		(17	)		—		(76,894	)
Loss from unconsolidated joint ventures		(37,654	)		(44,705	)		(9,578	)		—		(91,937	)
Equity income (loss) of subsidiaries		(129,067	)		—			—			129,067		—
Interest expense		(1,465	)		(2,365	)		(108	)		—		(3,938	)
Gain (loss) on early extinguishment of debt		(1,841	)		—			—			—		(1,841	)
Other income (expense)		(5,643	)		(1,911	)		454			—		(7,100	)
Homebuilding pretax income (loss)		(332,095	)		(152,705	)		(33,634	)		129,067		(389,367	)
Financial Services:
Financial services pretax income (loss)		(15	)		300			(598	)		—		(313	)
Income (loss) from continuing operations before income taxes		(332,110	)		(152,405	)		(34,232	)		129,067		(389,680	)
(Provision) benefit for income taxes		(37,799	)		54,082			3,557			—		19,840
Income (loss) from continuing operations		(369,909	)		(98,323	)		(30,675	)		129,067		(369,840	)
Loss from discontinued operations, net of income taxes		—			(69	)		—			—		(69	)
Net income (loss)	$	(369,909	)	$	(98,392	)	$	(30,675	)	$	129,067	$	(369,909	)

-29-

25. Supplemental Guarantor Information (continued)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

	Nine Months Ended September 30, 2009
	Standard Pacific Corp.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments		Consolidated Standard Pacific Corp.
	(Dollars in thousands)
Homebuilding:
Revenues	$	299,052		$	418,605		$	108,961		$	—	$	826,618
Cost of sales		(263,978	)		(375,503	)		(97,308	)		—		(736,789	)
Gross margin		35,074			43,102			11,653			—		89,829
Selling, general and administrative expenses		(78,811	)		(59,467	)		(3,822	)		—		(142,100	)
Income (loss) from unconsolidated joint ventures		5,228			(7,651	)		(2,026	)		—		(4,449	)
Equity income (loss) of subsidiaries		(25,934	)		—			—			25,934		—
Interest expense		(15,233	)		(15,493	)		(4,683	)		—		(35,409	)
Gain (loss) on early extinguishment of debt		(3,457	)		—			—			—		(3,457	)
Other income (expense)		(1,011	)		(2,959	)		2,661			—		(1,309	)
Homebuilding pretax income (loss)		(84,144	)		(42,468	)		3,783			25,934		(96,895	)
Financial Services:
Financial services pretax income (loss)		(108	)		227			1,194			—		1,313
Income (loss) from continuing operations before income taxes		(84,252	)		(42,241	)		4,977			25,934		(95,582	)
(Provision) benefit for income taxes		(12,197	)		12,535			(636	)		—		(298	)
Income (loss) from continuing operations		(96,449	)		(29,706	)		4,341			25,934		(95,880	)
Loss from discontinued operations, net of income taxes		—			(569	)		—			—		(569	)
Net income (loss)	$	(96,449	)	$	(30,275	)	$	4,341		$	25,934	$	(96,449	)
	Nine Months Ended September 30, 2008
	Standard Pacific Corp.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments		Consolidated Standard Pacific Corp.
	(Dollars in thousands)
Homebuilding:
Revenues	$	531,353		$	613,797		$	14,067		$	—	$	1,159,217
Cost of sales		(778,558	)		(744,008	)		(37,792	)		—		(1,560,358	)
Gross margin		(247,205	)		(130,211	)		(23,725	)		—		(401,141	)
Selling, general and administrative expenses		(133,490	)		(101,149	)		(834	)		—		(235,473	)
Loss from unconsolidated joint ventures		(72,101	)		(48,614	)		(9,607	)		—		(130,322	)
Equity income (loss) of subsidiaries		(222,679	)		—			—			222,679		—
Interest expense		(1,465	)		(2,365	)		(108	)		—		(3,938	)
Gain (loss) on early extinguishment of debt		(11,339	)		—			—			—		(11,339	)
Other income (expense)		(5,724	)		(5,149	)		728			—		(10,145	)
Homebuilding pretax income (loss)		(694,003	)		(287,488	)		(33,546	)		222,679		(792,358	)
Financial Services:
Financial services pretax income (loss)		(168	)		787			2			—		621
Income (loss) from continuing operations before income taxes		(694,171	)		(286,701	)		(33,544	)		222,679		(791,737	)
(Provision) benefit for income taxes		(141,601	)		96,059			3,512			—		(42,030	)
Income (loss) from continuing operations		(835,772	)		(190,642	)		(30,032	)		222,679		(833,767	)
Loss from discontinued operations, net of income taxes		—			(2,005	)		—			—		(2,005	)
Net income (loss)	$	(835,772	)	$	(192,647	)	$	(30,032	)	$	222,679	$	(835,772	)

-30-

25. Supplemental Guarantor Information (continued)

CONDENSED CONSOLIDATING BALANCE SHEET

	September 30, 2009
	Standard Pacific Corp.		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Consolidating Adjustments			Consolidated Standard Pacific Corp.
	(Dollars in thousands)
ASSETS
Homebuilding:
Cash and equivalents	$	130,113	$	439	$	392,922	$	—		$	523,474
Restricted cash		—		—		283,292		—			283,292
Trade and other receivables		247,678		3,257		104,979		(338,237	)		17,677
Inventories:
Owned		357,116		585,616		131,421		—			1,074,153
Not owned		2,530		30,809		50		—			33,389
Investments in unconsolidated joint ventures		10,924		2,524		25,100		—			38,548
Investments in subsidiaries		897,538		—		—		(897,538	)		—
Deferred income taxes		10,235		—		—		148			10,383
Other assets		12,906		8,315		118		(76	)		21,263
		1,669,040		630,960		937,882		(1,235,703	)		2,002,179
Financial Services:
Cash and equivalents		—		—		6,524		—			6,524
Restricted cash		—		—		2,295		—			2,295
Mortgage loans held for sale		—		—		42,625		—			42,625
Mortgage loans held for investment		—		—		10,734		—			10,734
Other assets		—		—		6,076		(1,703	)		4,373
		—		—		68,254		(1,703	)		66,551
Assets of discontinued operations		—		159		—		—			159
Total Assets	$	1,669,040	$	631,119	$	1,006,136	$	(1,237,406	)	$	2,068,889
LIABILITIES AND EQUITY
Homebuilding:
Accounts payable	$	7,946	$	13,221	$	1,803	$	(42	)	$	22,928
Accrued liabilities		147,410		268,649		11,297		(247,883	)		179,473
Liabilities from inventories not owned		—		22,440		—		—			22,440
Revolving credit facility		—		—		—		—			—
Secured project debt and other notes payable		67,165		26,511		88,625		(85,485	)		96,816
Senior notes payable		993,601		—		257,592		—			1,251,193
Senior subordinated notes payable		103,327		—		—		—			103,327
		1,319,449		330,821		359,317		(333,410	)		1,676,177
Financial Services:
Accounts payable and other liabilities		—		—		4,153		(2,422	)		1,731
Mortgage credit facilities		—		—		42,834		(4,036	)		38,798
		—		—		46,987		(6,458	)		40,529
Liabilities of discontinued operations		—		854		—		—			854
Total Liabilities		1,319,449		331,675		406,304		(339,868	)		1,717,560
Equity:
Total Stockholders’ Equity		349,591		297,706		599,832		(897,538	)		349,591
Noncontrolling Interests		—		1,738		—		—			1,738
Total Equity		349,591		299,444		599,832		(897,538	)		351,329
Total Liabilities and Equity	$	1,669,040	$	631,119	$	1,006,136	$	(1,237,406	)	$	2,068,889

-31-

25. Supplemental Guarantor Information (continued)

CONDENSED CONSOLIDATING BALANCE SHEET

	December 31, 2008
	Standard Pacific Corp.		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Consolidating Adjustments			Consolidated Standard Pacific Corp.
	(Dollars in thousands)
ASSETS
Homebuilding:
Cash and equivalents	$	111,702	$	433	$	510,022	$	—		$	622,157
Restricted cash		4,222		—		—		—			4,222
Trade and other receivables		340,471		5,095		17,055		(341,613	)		21,008
Inventories:
Owned		397,059		725,679		139,783		—			1,262,521
Not owned		5,455		37,287		—		—			42,742
Investments in unconsolidated joint ventures		24,895		19,830		5,743		—			50,468
Investments in subsidiaries		964,757		—		—		(964,757	)		—
Deferred income taxes		13,975		—		—		147			14,122
Other assets		140,174		5,849		3		(459	)		145,567
		2,002,710		794,173		672,606		(1,306,682	)		2,162,807
Financial Services:
Cash and equivalents		—		—		3,681		—			3,681
Restricted cash		—		—		4,295		—			4,295
Mortgage loans held for sale		—		—		63,960		—			63,960
Mortgage loans held for investment		—		—		11,736		—			11,736
Other assets		—		—		4,939		(147	)		4,792
		—		—		88,611		(147	)		88,464
Assets of discontinued operations		—		1,217		—		—			1,217
Total Assets	$	2,002,710	$	795,390	$	761,217	$	(1,306,829	)	$	2,252,488
LIABILITIES AND EQUITY
Homebuilding:
Accounts payable	$	20,318	$	17,556	$	2,351	$	—		$	40,225
Accrued liabilities		187,927		368,983		1,121		(341,613	)		216,418
Liabilities from inventories not owned		1,873		23,056		—		—			24,929
Revolving credit facility		47,500		—		—		—			47,500
Secured project debt and other notes payable		9,428		38,214		63,572		—			111,214
Senior notes payable		1,204,501		—		—		—			1,204,501
Senior subordinated notes payable		123,222		—		—		—			123,222
		1,594,769		447,809		67,044		(341,613	)		1,768,009
Financial Services:
Accounts payable and other liabilities		—		—		4,116		(459	)		3,657
Mortgage credit facilities		—		—		63,655		—			63,655
		—		—		67,771		(459	)		67,312
Liabilities of discontinued operations		—		1,331		—		—			1,331
Total Liabilities		1,594,769		449,140		134,815		(342,072	)		1,836,652
Equity:
Total Stockholders’ Equity		407,941		338,355		626,402		(964,757	)		407,941
Noncontrolling Interests		—		7,895		—		—			7,895
Total Equity		407,941		346,250		626,402		(964,757	)		415,836
Total Liabilities and Equity	$	2,002,710	$	795,390	$	761,217	$	(1,306,829	)	$	2,252,488

-32-

25. Supplemental Guarantor Information (continued)

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

	Nine Months Ended September 30, 2009
	Standard Pacific Corp.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated Standard Pacific Corp.
	(Dollars in thousands)
Cash Flows From Operating Activities:
Net cash provided by (used in) operating activities	$	164,084		$	23,489		$	33,071		$	89,521		$	310,165
Cash Flows From Investing Activities:
Investments in unconsolidated homebuilding joint ventures		(532	)		(721	)		(22,249	)		—			(23,502	)
Mortgage loans held for investment		—			—			(679	)		—			(679	)
Distributions from unconsolidated homebuilding joint ventures		3,479			1			949			—			4,429
Other investing activities		(888	)		(229	)		—			—			(1,117	)
Net cash provided by (used in) investing activities		2,059			(949	)		(21,979	)		—			(20,869	)
Cash Flows From Financing Activities:
Change in restricted cash		4,222			—			(281,292	)		—			(277,070	)
Net proceeds from (payments on) revolving credit facility		(47,500	)		—			—			—			(47,500	)
Principal payments on secured project debt and other notes payable		59,470			(12,160	)		(49,917	)		(85,485	)		(88,092	)
Principal payments on senior notes payable		(205,597	)		—			—			—			(205,597	)
Net proceeds from the issuance of senior notes payable		—			—			257,592			—			257,592
Net proceeds from (payments on) mortgage credit facilities		—			—			(20,821	)		(4,036	)		(24,857	)
(Contributions to) distributions from Corporate and subsidiaries		41,285			(10,374	)		(30,911	)		—			—
Proceeds from the exercise of stock options		388			—			—			—			388
Net cash provided by (used in) financing activities		(147,732	)		(22,534	)		(125,349	)		(89,521	)		(385,136	)
Net decrease in cash and equivalents		18,411			6			(114,257	)		—			(95,840	)
Cash and equivalents at beginning of period		111,702			440			513,703			—			625,845
Cash and equivalents at end of period	$	130,113		$	446		$	399,446		$	—		$	530,005
	Nine Months Ended September 30, 2008
	Standard Pacific Corp.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated Standard Pacific Corp.
	(Dollars in thousands)
Cash Flows From Operating Activities:
Net cash provided by (used in) operating activities	$	82,511		$	30,295		$	85,494		$	(337	)	$	197,963
Cash Flows From Investing Activities:
Investments in unconsolidated homebuilding joint ventures		(8,035	)		(63,203	)		(6,464	)		—			(77,702	)
Distributions from unconsolidated homebuilding joint ventures		53,920			42,925			—			—			96,845
Other investing activities		(1,265	)		(50	)		(1,408	)		—			(2,723	)
Net cash provided by (used in) investing activities		44,620			(20,328	)		(7,872	)		—			16,420
Cash Flows From Financing Activities:
Change in restricted cash		(4,222	)		—			(4,295	)		—			(8,517	)
Net proceeds from (payments on) revolving credit facility		(37,500	)		—			—			—			(37,500	)
Principal payment on secured project debt and other notes payable		(2,000	)		(10,146	)		—			—			(12,146	)
Principal payments on senior notes payable		(58,875	)		—			—			—			(58,875	)
Net proceeds from (payments on) mortgage credit facilities		—			—			(99,399	)		337			(99,062	)
Repurchase of common stock		(726	)		—			—			—			(726	)
Distributions from (contributions to) corporate and subsidiaries		(550,158	)		—			550,158			—			—
Net proceeds from the issuance of preferred stock		404,593			—			—			—			404,593
Net proceeds from the issuance of common stock		78,930			—			—			—			78,930
Net cash provided by (used in) financing activities		(169,958	)		(10,146	)		446,464			337			266,697
Net increase in cash and equivalents		(42,827	)		(179	)		524,086			—			481,080
Cash and equivalents at beginning of period		218,129			763			12,669			—			231,561
Cash and equivalents at end of period	$	175,302		$	584		$	536,755		$	—		$	712,641

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Critical Accounting Policies

The preparation of our condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of our assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates and judgments, including those that impact our most critical accounting policies. We base our estimates and judgments on historical experience and various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. We believe that the accounting policies related to the following accounts or activities are those that are most critical to the portrayal of our financial condition and results of operations and require the more significant judgments and estimates:

• Segment reporting;

• Inventories and impairments;

• Homebuilding revenue and cost of sales;

• Variable interest entities;

• Limited partnerships and limited liability companies;

• Unconsolidated homebuilding and land development joint ventures;

• Business combinations and goodwill;

• Warranty accruals;

• Insurance and litigation accruals; and

• Income taxes.

For a more detailed description of these critical accounting policies, refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2008.

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Results of Operations

Selected Financial Information

(Unaudited)

(2008 as Adjusted)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2009			2008			2009			2008
	(Dollars in thousands, except per share amounts)
Homebuilding:
Home sale revenues	$	269,873		$	394,942		$	760,312		$	1,145,608
Land sale revenues		57,538			5,398			66,306			13,609
Total revenues		327,411			400,340			826,618			1,159,217
Cost of home sales		(219,641	)		(548,622	)		(661,211	)		(1,462,654	)
Cost of land sales		(65,147	)		(59,375	)		(75,578	)		(97,704	)
Total cost of sales		(284,788	)		(607,997	)		(736,789	)		(1,560,358	)
Gross margin		42,623			(207,657	)		89,829			(401,141	)
Gross margin percentage		13.0%			(51.9%	)		10.9%			(34.6%	)
Selling, general and administrative expenses		(43,695	)		(76,894	)		(142,100	)		(235,473	)
Loss from unconsolidated joint ventures		(1,960	)		(91,937	)		(4,449	)		(130,322	)
Interest expense		(12,633	)		(3,938	)		(35,409	)		(3,938	)
Gain (loss) on early extinguishment of debt		(8,824	)		(1,841	)		(3,457	)		(11,339	)
Other income (expense)		(305	)		(7,100	)		(1,309	)		(10,145	)
Homebuilding pretax loss		(24,794	)		(389,367	)		(96,895	)		(792,358	)
Financial Services:
Revenues		3,762			2,492			10,095			10,897
Expenses		(2,753	)		(3,106	)		(9,009	)		(11,063	)
Income from unconsolidated joint ventures		—			284			119			659
Other income		19			17			108			128
Financial services pretax income (loss)		1,028			(313	)		1,313			621
Loss from continuing operations before income taxes		(23,766	)		(389,680	)		(95,582	)		(791,737	)
(Provision) benefit for income taxes		(33	)		19,840			(298	)		(42,030	)
Loss from continuing operations		(23,799	)		(369,840	)		(95,880	)		(833,767	)
Loss from discontinued operations, net of income taxes		(45	)		(69	)		(569	)		(2,005	)
Net loss		(23,844	)		(369,909	)		(96,449	)		(835,772	)
Less: Net loss allocated to preferred shareholders		14,500			165,213			59,022			188,354
Net loss available to common stockholders	$	(9,344	)	$	(204,696	)	$	(37,427	)	$	(647,418	)
Basic Loss Per Share:
Continuing operations	$	(0.10	)	$	(2.54	)	$	(0.40	)	$	(8.59	)
Discontinued operations		—			—			—			(0.02	)
Basic loss per share	$	(0.10	)	$	(2.54	)	$	(0.40	)	$	(8.61	)
Diluted Loss Per Share:
Continuing operations	$	(0.10	)	$	(2.54	)	$	(0.40	)	$	(8.59	)
Discontinued operations		—			—			—			(0.02	)
Diluted loss per share	$	(0.10	)	$	(2.54	)	$	(0.40	)	$	(8.61	)
Weighted Average Common Shares Outstanding:
Basic		95,250,351			80,681,394			93,731,253			75,155,044
Diluted		243,063,137			145,800,364			241,544,039			97,019,962
Net cash provided by (used in) operating activities	$	112,572		$	31,933		$	310,165		$	197,963
Net cash provided by (used in) investing activities	$	(9,241	)	$	(11,111	)	$	(20,869	)	$	16,420
Net cash provided by (used in) financing activities	$	(147,732	)	$	116,719		$	(385,136	)	$	266,697

(1) Adjusted Homebuilding EBITDA means net income (loss) (plus cash distributions of income from unconsolidated joint ventures) before (a) income taxes, (b) homebuilding interest expense, (c) expensing of previously capitalized interest included in cost of sales, (d) impairment charges, (e) gain (loss) on early extinguishment of debt, (f) homebuilding depreciation and amortization, (g) amortization of stock-based compensation, (h) income (loss) from unconsolidated joint ventures and (i) income (loss) from financial services subsidiary. Other companies may calculate Adjusted Homebuilding EBITDA (or similarly titled measures) differently. We believe Adjusted Homebuilding EBITDA information is useful to investors as one measure of our ability to service debt and obtain financing. However, it should be noted that Adjusted Homebuilding EBITDA is not a U.S. generally accepted accounting principles (“GAAP”) financial measure. Due to the significance of the GAAP components excluded, Adjusted Homebuilding EBITDA should not be considered in isolation or as an alternative to cash flows from operations or any other liquidity performance measure prescribed by GAAP.

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(1) continued

The table set forth below reconciles net cash provided by (used in) operating activities, calculated and presented in accordance with GAAP, to Adjusted Homebuilding EBITDA:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2009			2008			2009			2008
	(Dollars in thousands)
Net cash provided by operating activities	$	112,572		$	31,933		$	310,165		$	197,963
Add:
Provision (benefit) for income taxes		—			(19,886	)		—			40,883
Deferred tax valuation allowance		(9,278	)		(134,088	)		(37,358	)		(348,705	)
Homebuilding interest amortized to cost of sales and interest expense		35,681			25,867			94,989			59,915
Less:
Income (loss) from financial services subsidiary		1,009			(614	)		1,086			(166	)
Depreciation and amortization from financial services subsidiary		169			188			515			598
Loss on disposal of property and equipment		1			901			1,339			901
Net changes in operating assets and liabilities:
Trade and other receivables		(2,191	)		1,442			(3,464	)		5,415
Mortgage loans held for sale		(16,071	)		14,446			(23,016	)		(94,357	)
Inventories-owned		(103,969	)		(58,537	)		(241,525	)		27,489
Inventories-not owned		324			6,154			1,462			6,128
Deferred income taxes		9,278			124,936			37,358			211,893
Other assets		1,997			18,669			(116,678	)		(168,412	)
Accounts payable		(540	)		1,264			17,589			32,661
Accrued liabilities		5,125			1,401			30,199			35,738
Adjusted Homebuilding EBITDA	$	31,749		$	13,126		$	66,781		$	5,278

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Three and Nine Month Periods Ended September 30, 2009 Compared to Three and Nine Month Periods Ended September 30, 2008

Overview

Our operations continue to be impacted by weak housing demand in substantially all of our markets driven by a housing supply/demand imbalance (including as a result of record foreclosures), declining home prices, low consumer confidence and high unemployment. Despite these factors, our net loss for the three and nine months ended September 30, 2009 decreased considerably from the year earlier periods. In addition, we were successful in generating positive cash flows from operating activities during these periods. These results reflect our efforts to (1) adjust our overhead structure to better align our operations with the decline in demand for new homes; (2) reduce our supply of completed and unsold homes; and (3) reduce our construction costs. While our absolute net new orders were lower than the year earlier periods and are still weak relative to normal market conditions, our orders on a same store basis increased compared to 2008 levels for both the three and nine month periods.

We generated a net loss of $23.8 million, or $0.10 per diluted share, during the 2009 third quarter, compared to a net loss of $369.9 million, or $2.54 per diluted share, in the third quarter of 2008. Our results for the three months ended September 30, 2009 and 2008 included pretax impairment charges totaling $7.8 million and $368.4 million, respectively. For the nine months ended September 30, 2009, we generated a net loss of $96.4 million, or $0.40 per diluted share, compared to a net loss of $835.8 million, or $8.61 per diluted share, for the year earlier period. Our results for the nine months ended September 30, 2009 and 2008 included pretax impairment charges totaling $59.9 million and $709.9 million, respectively.

We generated cash flows from operations of $310.2 million during the nine months ended September 30, 2009, driven primarily by a $241.5 million decrease in inventories (largely due to a 72% reduction in the number of completed and unsold homes and the bulk sale of a podium building) and the receipt of our $114.5 million 2008 federal income tax refund. These cash flows were offset in part by other changes in working capital. During the nine months ended September 30, 2009, we reduced our consolidated homebuilding debt by approximately $35.1 million after the assumption of $77.3 million of secured project debt in connection with three joint venture unwinds and the issuance of $280 million ($257.6 million net of original issue discount) of 10 ³/4% senior notes due 2016 (the “2016 Notes”). The proceeds from the issuance of the 2016 Notes and cash on hand were used to repay $258.8 million of earlier maturity senior notes in October 2009. Taking into account the impact of this repayment, we have reduced our consolidated homebuilding debt by approximately $293.9 million since December 31, 2008.

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Homebuilding

	Three Months Ended September 30,						Nine Months Ended September 30,
	2009			2008			2009			2008
	(Dollars in thousands)
Homebuilding revenues:
California	$	199,390		$	209,813		$	452,515		$	583,304
Southwest (1)		49,882			108,268			180,925			333,759
Southeast		78,139			82,259			193,178			242,154
Total homebuilding revenues	$	327,411		$	400,340		$	826,618		$	1,159,217
Homebuilding pretax loss:
California	$	(2,405	)	$	(227,082	)	$	(20,916	)	$	(490,377	)
Southwest (1)		(3,966	)		(109,663	)		(26,393	)		(173,062	)
Southeast		(7,004	)		(45,533	)		(26,807	)		(98,270	)
Corporate		(11,419	)		(7,089	)		(22,779	)		(30,649	)
Total homebuilding pretax loss	$	(24,794	)	$	(389,367	)	$	(96,895	)	$	(792,358	)
Homebuilding pretax impairment charges:
California	$	5,984		$	216,686		$	33,817		$	450,629
Southwest (1)		80			109,659			16,141			171,103
Southeast		1,750			42,009			9,931			88,152
Total homebuilding pretax impairment charges	$	7,814		$	368,354		$	59,889		$	709,884
Homebuilding pretax impairment charges by type:
Deposit write-offs	$	150		$	8,889		$	2,205		$	17,099
Inventory impairments		7,664			267,216			49,543			566,180
Joint venture impairments		—			92,249			8,141			126,605
Total homebuilding pretax impairment charges	$	7,814		$	368,354		$	59,889		$	709,884

	September 30, 2009		December 31, 2008
	(Dollars in thousands)
Total Assets:
California	$	751,006	$	810,619
Southwest (1)		232,480		299,039
Southeast		202,440		275,893
Corporate		816,253		777,256
Total homebuilding		2,002,179		2,162,807
Financial services		66,551		88,464
Discontinued operations		159		1,217
Total Assets	$	2,068,889	$	2,252,488

(1) Excludes our Tucson and San Antonio divisions, which are classified as discontinued operations.

We generated a homebuilding pretax loss for the 2009 third quarter of $24.8 million compared to a pretax loss of $389.4 million in the year earlier period. Our homebuilding pretax loss for the 2009 third quarter included $7.8 million of asset impairment charges, which are detailed in the table above, and $10.1 million of debt extinguishment and other restructuring charges. The decrease in pretax loss was primarily the result of a $360.5 million decrease in impairment charges and a $33.2 million decrease in our SG&A expenses (which included approximately $1.5 million in restructuring charges related to severance and facilities reductions). These decreases were partially offset by a $9.3 million reduction in gross margin (exclusive of impairments), an $8.7 million increase in non-capitalized interest expense and a $7.0 million increase in loss on early extinguishment of debt. The inventory impairment charges were included in cost of sales and the deposit write-offs were included in other income (expense).

For the nine months ended September 30, 2009, homebuilding pretax loss decreased 88% to a $96.9 million pretax loss compared to a pretax loss of $792.4 million in the year earlier period. The decrease in pretax loss was primarily the result of a $650.0 million decrease in impairment charges, a $93.4 million decrease in our SG&A expenses (which included approximately $18.1 million in restructuring charges related to severance and facilities reductions) and a $7.9 million decrease in loss on early extinguishment of debt. These decreases were partially offset by a $25.7 million reduction in gross margin (exclusive of impairments) and a $31.5 million increase in non-capitalized interest expense.

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Homebuilding revenues for the 2009 third quarter decreased 18% from the year earlier period as a result of a 25% decrease in new home deliveries and an 9% decrease in our consolidated average home price to $302,000. These decreases were partially offset by a $52.1 million year-over-year increase in land sale revenues, representing the sale of a podium building in Southern California and a land sale in Florida during the 2009 third quarter. Homebuilding revenues for the nine months ended September 30, 2009 decreased 29%, driven primarily by a 27% decrease in new home deliveries and a 9% decrease in our consolidated average home price to $301,000. These decreases were offset in part by a $52.7 million increase in revenues from land sales.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2009	2008	% Change		2009	2008	% Change
New homes delivered:
California	347	435	(20%	)	948	1,208	(22%	)
Arizona	75	132	(43%	)	209	436	(52%	)
Texas (1)	82	165	(50%	)	328	520	(37%	)
Colorado	37	62	(40%	)	113	180	(37%	)
Nevada	5	22	(77%	)	13	55	(76%	)
Total Southwest	199	381	(48%	)	663	1,191	(44%	)
Florida	235	220	7%		603	646	(7%	)
Carolinas	112	152	(26%	)	308	416	(26%	)
Total Southeast	347	372	(7%	)	911	1,062	(14%	)
Consolidated total	893	1,188	(25%	)	2,522	3,461	(27%	)
Unconsolidated joint ventures (2)	15	66	(77%	)	92	222	(59%	)
Discontinued operations (including joint ventures) (2)	1	14	(93%	)	4	147	(97%	)
Total (including joint ventures) (2)	909	1,268	(28%	)	2,618	3,830	(32%	)

(1) Texas excludes our San Antonio division, which is classified as a discontinued operation.

(2) Numbers presented regarding unconsolidated joint ventures reflect total deliveries of such joint ventures. Our ownership interests in these joint ventures vary but are generally less than or equal to 50%.

New home deliveries (exclusive of joint ventures and discontinued operations) decreased 25% during the 2009 third quarter as compared to the prior year period. The decline in deliveries reflected a 35% decrease in our beginning backlog level as compared to the prior year period and a 28% decrease in the number of average active selling communities. These decreases were partially offset by the increased number of speculative homes that we sold and delivered during the 2009 third quarter.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2009		2008		% Change		2009		2008		% Change
Average selling prices of homes delivered:
California $		442,000	$	482,000	(8%	)	$	429,000	$	479,000	(10%	)
Arizona		202,000		215,000	(6%	)		210,000		233,000	(10%	)
Texas (1)		269,000		291,000	(8%	)		279,000		279,000	—
Colorado		312,000		358,000	(13%	)		305,000		358,000	(15%	)
Nevada		226,000		278,000	(19%	)		226,000		289,000	(22%	)
Total Southwest		251,000		275,000	(9%	)		261,000		275,000	(5%	)
Florida		181,000		206,000	(12%	)		189,000		211,000	(10%	)
Carolinas		216,000		233,000	(7%	)		218,000		249,000	(12%	)
Total Southeast		192,000		217,000	(12%	)		199,000		226,000	(12%	)
Consolidated (excluding joint ventures)		302,000		332,000	(9%	)		301,000		331,000	(9%	)
Unconsolidated joint ventures (2)		548,000		578,000	(5%	)		524,000		507,000	3%
Total (including joint ventures) (2)	$	306,000	$	345,000	(11%	)	$	309,000	$	342,000	(10%	)
Discontinued operations (including joint ventures) (2)	$	130,000	$	176,000	(26%	)	$	201,000	$	175,000	15%

(1) Texas excludes our San Antonio division, which is classified as a discontinued operation.

(2) Numbers presented regarding unconsolidated joint ventures reflect total average selling prices of such joint ventures. Our ownership interests in these joint ventures vary but are generally less than or equal to 50%.

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During the 2009 third quarter, our consolidated average home price (excluding joint ventures and discontinued operations) decreased 9% to $302,000 versus $332,000 for the year earlier period. The decline in our consolidated average home price was due primarily to the higher level of incentives and price reductions required to sell homes as compared to the year earlier period and, to a lesser degree, geographic delivery mix changes.

Our average home price in California (exclusive of joint ventures) decreased 8% to $442,000 in the 2009 third quarter from $482,000 in the year earlier period due to downward pricing pressure from weaker demand and a product mix shift, including an increase in 2009 third quarter deliveries from our lower priced podium projects in Southern California.

During the 2009 third quarter, our average home price in Arizona decreased 6% year-over-year to $202,000 largely reflective of price declines due to the extremely competitive new and existing home market in Phoenix, and to a lesser degree, due to a product mix shift. In Texas, our average home price for the 2009 third quarter decreased 8% as compared to the year earlier period reflecting a product mix shift to more affordable homes within the Austin market. The Las Vegas, Nevada market continues to be one of the weakest housing markets in the country and has been adversely impacted by record high foreclosure activity. Our average price in Colorado for the 2009 third quarter decreased 13% year-over-year largely due to a shift in product mix to more affordable attached homes.

In Florida, our average sales price decreased 12% to $181,000 in the 2009 third quarter compared to the year earlier period, primarily due to downward pricing pressure experienced across all of our Florida markets. In the Carolinas, our average home price decreased 7% in the 2009 third quarter as compared to the year earlier period which reflected downward pricing pressure combined with a change in product mix towards more affordable attached townhome deliveries in the Raleigh market during the 2009 third quarter as compared to the year earlier period.

Gross Margin

Our 2009 third quarter homebuilding gross margin percentage (including land sales) was 13.0% compared to a negative 51.9% in the prior year period. The 2009 third quarter gross margin reflected $7.7 million of pretax inventory impairment charges related to the sale of a completed podium building in Southern California and a land sale in Florida. Inventory impairments for the 2008 third quarter totaled $267.2 million. The operating margins (defined as gross margin less direct selling and marketing costs) used to calculate land residual values and related fair values for the majority of our projects during the three and nine months ended September 30, 2009 and 2008, were generally in the 8% to 12% range and discount rates were generally in the 15% to 25% range. Excluding inventory impairment charges and land sales, our 2009 third quarter gross margin percentage from home sales would have been 18.6% versus 14.1% in the prior year period (please see the table set forth below reconciling this non-GAAP measure to our gross margin from home sales). The 450 basis point increase in the year-over-year adjusted gross margin percentage was driven primarily by higher margins in California and lower direct construction costs as a result of value engineering and the rebidding of contracts. Until market conditions stabilize, we may continue to incur additional inventory impairment charges.

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The table set forth below reconciles our homebuilding gross margin and gross margin percentage for the three and nine months ended September 30, 2009 and 2008 to gross margin and gross margin percentage from home sales, excluding housing inventory impairment charges:

	Three Months Ended September 30,									Nine Months Ended September 30,
	2009			Gross Margin %	2008			Gross Margin %		2009			Gross Margin %	2008			Gross Margin %
	(Dollars in thousands)
Homebuilding gross margin	$	42,623		13.0%	$	(207,657	)	(51.9%	)	$	89,829		10.9%	$	(401,141	)	(34.6%	)
Less: Land sale revenues		(57,538	)			(5,398	)				(66,306	)			(13,609	)
Add: Cost of land sales		65,147				59,375					75,578				97,704
Gross margin from home sales		50,232		18.6%		(153,680	)	(38.9%	)		99,101		13.0%		(317,046	)	(27.7%	)
Add: Housing inventory impairment charges		—				209,228					39,461				477,274
Gross margin from home sales, as adjusted	$	50,232		18.6%	$	55,548		14.1%		$	138,562		18.2%	$	160,228		14.0%

We believe that the measures described above, which exclude the effect of housing inventory impairment charges, are useful to investors as they provide investors with a perspective on the underlying operating performance of the business by isolating the impact of charges related to housing inventory impairments. However, it should be noted that such measures are not GAAP financial measures. Due to the significance of the GAAP components excluded, such measures should not be considered in isolation or as an alternative to operating performance measures prescribed by GAAP.

Restructuring Activities

Our operations have been impacted by the weak housing demand in substantially all of our markets. As a result, during 2008 we initiated a restructuring plan designed to reduce ongoing overhead costs and improve operating efficiencies through the consolidation of selected divisional offices, the disposal of related property and equipment, and a reduction in our workforce. During the three and nine months ended September 30, 2009, we incurred $1.5 million and $20.5 million, respectively, in restructuring charges. We believe that these restructuring activities were substantially complete as of September 30, 2009. However, until market conditions stabilize, we may incur additional restructuring charges for employee severance, lease termination and other exit costs. We estimate that employee severance and lease terminations during 2008 and the nine months ended September 30, 2009 will result in gross annual savings of approximately $70 million, primarily related to SG&A expenses.

SG&A Expenses

Our 2009 third quarter SG&A expenses (including Corporate G&A) decreased $33.2 million, or 43%, from the year earlier period resulting in an SG&A rate of 13.3% versus 19.2% in the prior year period. Excluding land sale revenues and restructuring charges, our 2009 third quarter SG&A rate was 15.6% versus 18.7% for the 2008 third quarter, despite a 32% decrease in home sale revenues (please see the table set forth below reconciling this non-GAAP measure to our SG&A expenses). The 310 basis point decrease in the year-over-year as adjusted SG&A rate was primarily due to our general focus on reducing our SG&A expenses and was driven primarily by reductions in personnel costs, stock based compensation, and advertising and marketing expenses.

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The table set forth below reconciles our SG&A expense and SG&A rate for the three and nine months ended September 30, 2009 and 2008 to our SG&A expense and SG&A rate, excluding land sale revenues and restructuring charges:

	Three Months Ended September 30,										Nine Months Ended September 30,
	2009			SG&A % (excl. land sales)		2008			SG&A % (excl. land sales)		2009			SG&A % (excl. land sales)		2008			SG&A % (excl. land sales)
	(Dollars in thousands)
Selling, general and administrative expenses	$	43,695		16.2%		$	76,894		19.5%		$	142,100		18.7%		$	235,473		20.6%
Less: Restructuring charges		(1,495	)	(0.6%	)		(2,977	)	(0.8%	)		(18,145	)	(2.4%	)		(5,416	)	(0.5%	)
Selling, general and administrative expenses, excluding restructuring charges	$	42,200		15.6%		$	73,917		18.7%		$	123,955		16.3%		$	230,057		20.1%

We believe that the measures described above, which exclude the effect of restructuring charges, are useful to investors as they provide investors with a perspective on the underlying operating performance of the business by isolating the impact of charges related to restructuring. However, it should be noted that such measures are not GAAP financial measures. Due to the significance of the GAAP components excluded, such measures should not be considered in isolation or as an alternative to operating performance measures prescribed by GAAP.

Unconsolidated Joint Ventures

We recognized a $2.0 million loss from unconsolidated joint ventures during the 2009 third quarter compared to a loss of $91.9 million in the year earlier period. The loss in the 2009 third quarter primarily represented our share of loss related to our North Las Vegas joint venture. The loss in the 2008 third quarter reflected a $92.2 million pretax charge related primarily to our share of joint venture impairments related to three projects located in Southern California and our North Las Vegas joint venture.

During the nine months ended September 30, 2009, we recognized a $4.4 million loss from unconsolidated joint ventures, which included an $8.2 million pretax impairment charge related to our investment in our North Las Vegas joint venture, which was partially offset by approximately $5.2 million of income from land deposits forfeited at one of our Southern California land development joint ventures. During the nine months ended September 30, 2008, we recognized a loss from unconsolidated joint ventures of $130.3 million, which included $126.6 million of joint venture impairments related to 18 projects.

Interest Expense

For the three and nine months ended September 30, 2009, we expensed $12.6 million and $35.4 million, respectively, of interest costs related to the portion of real estate inventories which we were not actively preparing for their intended use, and as a result were deemed unqualified assets in accordance with ASC Topic 835, Interest. For the three months ended September 30, 2008, we expensed $3.9 million of interest. All interest costs incurred during the six months ended June 30, 2008 were capitalized to inventories. To the extent our debt exceeds our qualified inventory in the future, we will expense a portion of the interest related to such debt.

Gain (Loss) on Early Extinguishment of Debt

During the three and nine months ended September 30, 2009, we recognized a loss on early extinguishment of debt of $8.8 million and $3.5 million, respectively. During the 2009 third quarter, we amended our revolving credit facility and Term Loan A facility and recorded a $7.3 million loss on early extinguishment of debt, which represented the write-off of unamortized deferred debt issuance costs and the unwind of the ineffective portion of the Term Loan A interest rate swap. In addition, during the 2009 third quarter we recorded a $1.5 million loss, including the write-off of unamortized debt issuance costs, related to the exchange of $32.8 million of our 2012 senior subordinated convertible notes for 7.6 million shares of our common stock. Gain (loss) on early extinguishment of debt for the nine months ended September 30, 2009 also included a $5.4 million gain related to the early redemption of $24.5 million of our 2010 senior notes and $4.4 million of our 2011 senior notes.

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During the three and nine months ended September 30, 2008, we recognized loss on early extinguishment of debt of $1.8 million and $11.3 million, respectively. The 2008 third quarter gain (loss) on early extinguishment of debt represented the expense associated with the ineffectiveness of our Term Loan A and Term Loan B interest rate swaps as a result of the early pay down of a portion of our Term Loan A and Term Loan B facilities. Gain (loss) on early extinguishment of debt for the nine months ended September 30, 2008 included $3.3 million of expense related to the ineffectiveness of the Term Loan A and Term Loan B interest rate swaps and a $9.1 million charge related to the exchange of $128.5 million of senior and senior subordinated notes for a warrant that was issued to MatlinPatterson to purchase shares of preferred stock, partially offset by $1.1 million gain related to the early extinguishment of $22.5 million of our 2008 senior notes during the 2008 first quarter.

Other Income (Expense)

Other income (expense) for the three and nine months ended September 30, 2009 included $0.2 million and $2.2 million, respectively, of write-offs of lot option deposits and preacquisition costs for abandoned projects, which was partially offset by $0.4 million and $2.1 million, respectively, of interest income. The nine months ended September 30, 2009 also included $1.4 million of fixed asset write-offs related to restructuring activities. While the level of lot option deposits still outstanding as of September 30, 2009 has dropped significantly from prior years, we continue to evaluate the terms of open land option and purchase contracts in light of slower housing market conditions and may write-off additional option deposits and capitalized preacquisition costs in the future, particularly in those instances where land sellers or third party financial entities are unwilling to renegotiate significant contract terms.

Other income (expense) for the three and nine months ended September 30, 2008 included pretax charges of $8.9 million and $17.1 million, respectively, related to the write-off of option deposits and preacquisition costs, offset by $2.2 million and $3.9 million, respectively, of interest income. The nine months ended September 30, 2008 also included $3.3 million of deposit forfeiture income.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2009	2008	% Change		% Change Same Store		2009	2008	% Change		% Change Same Store
Net new orders (1):
California	377	340	11%		36%		1,139	1,266	(10%	)	14%
Arizona	79	100	(21%	)	47%		235	382	(38%	)	9%
Texas (2)	96	117	(18%	)	25%		335	438	(24%	)	21%
Colorado	34	54	(37%	)	(16%	)	95	160	(41%	)	(21%	)
Nevada	2	15	(87%	)	(87%	)	10	40	(75%	)	(63%	)
Total Southwest	211	286	(26%	)	13%		675	1,020	(34%	)	5%
Florida	189	168	13%		81%		617	687	(10%	)	25%
Carolinas	116	127	(9%	)	15%		365	434	(16%	)	5%
Total Southeast	305	295	3%		50%		982	1,121	(12%	)	17%
Consolidated total	893	921	(3%	)	35%		2,796	3,407	(18%	)	13%
Unconsolidated joint ventures (3)	28	49	(43%	)	26%		167	171	(2%	)	46%
Discontinued operations	1	8	(88%	)	—		3	103	(97%	)	—
Total (including joint ventures)	922	978	(6%	)	34%		2,966	3,681	(19%	)	13%

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	Three Months Ended September 30,				Nine Months Ended September 30,
	2009	2008	% Change		2009	2008	% Change
Average number of selling communities during the year:
California	49	60	(18%	)	52	66	(21%	)
Arizona	7	13	(46%	)	9	16	(44%	)
Texas (2)	19	29	(34%	)	19	30	(37%	)
Colorado	6	8	(25%	)	6	8	(25%	)
Nevada	2	2	—		2	3	(33%	)
Total Southwest	34	52	(35%	)	36	57	(37%	)
Florida	28	45	(38%	)	33	46	(28%	)
Carolinas	23	29	(21%	)	24	30	(20%	)
Total Southeast	51	74	(31%	)	57	76	(25%	)
Consolidated total	134	186	(28%	)	145	199	(27%	)
Unconsolidated joint ventures (3)	5	11	(55%	)	8	12	(33%	)
Discontinued operations	—	—	—		—	3	(100%	)
Total (including joint ventures)	139	197	(29%	)	153	214	(29%	)

(1) Net new orders are new orders for the purchase of homes during the period, less cancellations during such period of existing contracts for the purchase of homes.

(2) Texas excludes our San Antonio division, which is classified as a discontinued operation.

(3) Numbers presented regarding unconsolidated joint ventures reflect total net new orders and total average selling communities of such joint ventures. Our ownership interests in these joint ventures vary but are generally less than or equal to 50%.

Net new orders (excluding joint ventures and discontinued operations) for the 2009 third quarter decreased 3% to 893 new homes. Our consolidated cancellation rate for the three months ended September 30, 2009 was 15%, down from 16% for the 2009 second quarter and 26% for the 2008 third quarter. Our monthly sales absorption rate for the 2009 third quarter was 2.2 per community, up from the prior year third quarter of 1.7 per community, and down from the 2.7 per community for the 2009 second quarter. The improvement in our sales absorption rate for the 2009 third quarter as compared to the 2008 third quarter was due to sales increases in most of our markets on a per community basis, with absorption rates relatively better in California, Arizona and Florida. Sales absorption rates still remain low relative to historical rates and reflect the challenging housing market, including an elevated supply of homes available for sale, rising foreclosure properties and weak general economic conditions, including low consumer confidence and high unemployment. These conditions have been magnified by the tightening of available mortgage credit for homebuyers. These and other conditions have resulted in a declining home price environment which has contributed to an erosion of homebuyer confidence, a decrease in the pool of qualified buyers and a resulting decrease in our new home sales volume. Net new orders and sales absorption rates during October 2009 have slowed from the levels achieved during the 2009 third quarter.

Net new orders in California (excluding joint ventures) for the 2009 third quarter increased 11% from the 2008 third quarter despite an 18% decrease in average community count.

Net new orders in Arizona were down 21% for the 2009 third quarter on a 46% lower average community count. The level of foreclosures remains high in the Phoenix market and will continue to provide additional supply. Order activity in Texas for the 2009 third quarter was down 18% on an absolute basis, but up on a per community basis. In Colorado, net new orders for the three months ended September 30, 2009 were down on a lower community count. Our order activity in Nevada during the 2009 third quarter was negligible due primarily to the limited supply of new homes we have available for sale in this market (8 homes available for sale at September 30, 2009) coupled with weak market conditions in Las Vegas, which has been particularly impacted by an oversupply of homes and foreclosures.

Net new orders in Florida increased 13% in the 2009 third quarter. Despite the improvement in orders, all of our Florida markets continued to experience weak demand due primarily to a high level of available homes on the market. Net new orders in the Carolinas during the 2009 third quarter were down 9% on a lower community count as a result of continued slowing in housing demand in these markets.

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	At September 30,
	2009			2008			% Change
	Homes	Dollar Value		Homes	Dollar Value		Homes		Dollar Value
Backlog ($ in thousands):
California	424	$	190,185	384	$	177,890	10%		7%
Arizona	102		21,815	140		30,413	(27%	)	(28%	)
Texas (1)	137		42,849	219		64,950	(37%	)	(34%	)
Colorado	60		18,022	103		31,609	(42%	)	(43%	)
Nevada	1		213	14		3,408	(93%	)	(94%	)
Total Southwest	300		82,899	476		130,380	(37%	)	(36%	)
Florida	161		31,457	261		57,880	(38%	)	(46%	)
Carolinas	110		25,120	127		29,507	(13%	)	(15%	)
Total Southeast	271		56,577	388		87,387	(30%	)	(35%	)
Consolidated total	995		329,661	1,248		395,657	(20%	)	(17%	)
Unconsolidated joint ventures (2)	22		10,722	49		35,443	(55%	)	(70%	)
Total (including joint ventures)	1,017	$	340,383	1,297	$	431,100	(22%	)	(21%	)

(1) Texas excludes our San Antonio division, which is classified as a discontinued operation.

(2) Numbers presented regarding unconsolidated joint ventures reflect total backlog of such joint ventures. Our ownership interests in these joint ventures vary but are generally less than or equal to 50%.

The dollar value of our backlog (excluding joint ventures and discontinued operations) as of September 30, 2009 decreased 17% from the year earlier period to approximately $329.7 million, but was up 7% as compared to the 2009 second quarter. The decrease in backlog from the 2008 third quarter reflects a 28% decrease in the average number of active selling communities from the prior year period combined with a shorter average escrow period from sales contract date to delivery date. All orders are subject to potential cancellation by the customer.

	At September 30,
	2009	2008	% Change
Building sites owned or controlled:
California	7,740	9,749	(21%	)
Arizona	1,925	2,407	(20%	)
Texas	1,676	2,045	(18%	)
Colorado	261	423	(38%	)
Nevada	1,906	2,335	(18%	)
Total Southwest	5,768	7,210	(20%	)
Florida	4,856	7,696	(37%	)
Carolinas	1,656	2,436	(32%	)
Illinois	—	60	(100%	)
Total Southeast	6,512	10,192	(36%	)
Total (including joint ventures)	20,020	27,151	(26%	)
Building sites owned	15,516	19,763	(21%	)
Building sites optioned or subject to contract	2,543	3,401	(25%	)
Joint venture lots (1)	1,961	3,987	(51%	)
Total (including joint ventures)	20,020	27,151	(26%	)

(1) Joint venture lots represent our expected share of land development joint venture lots and all of the lots of our homebuilding joint ventures.

Total building sites owned and controlled as of September 30, 2009 decreased 26% from the year earlier period, which reflects our efforts to generate cash, reduce our real estate inventories, and to better align our land supply with the current level of new housing demand.

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	At September 30,
	2009	2008	% Change
Homes under construction (including specs):
Consolidated (excluding podium projects)	1,106	2,009	(45%	)
Podium projects	—	134	(100%	)
Total consolidated	1,106	2,143	(48%	)
Joint ventures	32	327	(90%	)
Total continuing operations	1,138	2,470	(54%	)
Discontinued operations	—	—	—
Total	1,138	2,470	(54%	)
Spec homes under construction:
Consolidated (excluding podium projects)	475	1,014	(53%	)
Podium projects	—	134	(100%	)
Total consolidated	475	1,148	(59%	)
Joint ventures	15	286	(95%	)
Total continuing operations	490	1,434	(66%	)
Discontinued operations	—	—	—
Total	490	1,434	(66%	)
Completed and unsold homes:
Consolidated (excluding podium projects)	163	374	(56%	)
Podium projects	193	—	—
Total consolidated	356	374	(5%	)
Joint ventures	2	17	(88%	)
Total continuing operations (1)	358	391	(8%	)
Discontinued operations	—	2	(100%	)
Total	358	393	(9%	)

(1) Excludes our San Antonio division, which is classified as a discontinued operation.

We continue to remain focused on managing the number of completed and unsold homes and homes under construction we have in inventory to better match new construction starts with lower sales volume. As of September 30, 2009, the number of homes under construction from continuing operations (exclusive of joint ventures) decreased 48% from the year earlier period, and 17% since December 31, 2008. Total completed and unsold homes from continuing operations (excluding joint ventures) as of September 30, 2009 decreased 5% compared to September 30, 2008 and 40% since December 31, 2008. Excluding 193 units from three Southern California podium projects, the number of completed and unsold homes as of September 30, 2009 decreased 72% since December 31, 2008, and 56% compared to September 30, 2008, reflecting our focus on managing our speculative inventory levels.

Financial Services

In the 2009 third quarter, our financial services subsidiary generated pretax income of approximately $1.0 million compared to a pretax loss of $0.6 million in the year earlier period. The increase in pretax income was driven primarily by higher margins on loan sales, partially offset by a $0.7 million increase in loan loss reserves. Additionally, operating expenses were down $0.4 million due to a decrease in fixed overhead expenses, offset in part by higher commission expenses due to a 51% increase in revenues.

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The following table sets forth information regarding loan originations and related credit statistics for our mortgage banking operations (exclusive of our mortgage financing joint ventures):

	Three Months Ended September 30,
	2009	2008
Mortgage Loan Origination Product Mix:
Conforming loans	38%	38%
Government loans	61%	51%
Jumbo loans	1%	10%
Other loans	0%	1%
	100%	100%
Loan Type:
Fixed	96%	94%
ARM	4%	6%
ARM loans ³ 5 year initial adjustment period	100%	100%
Interest only (ARM’s)	31%	54%
Credit Quality:
FICO score ³ 700	97%	95%
FICO score between 699 - 620	3%	5%
FICO score < 620 (sub-prime loans)	0%	0%
Avg. FICO score	736	729
Other Data:
Avg. combined LTV ratio	88%	87%
Full documentation loans	100%	97%
Non-Full documentation loans	0%	3%
Loan Capture Rates	80%	83%

Income Taxes

During the three months ended September 30, 2009 and 2008, we recorded noncash valuation allowances of $9.3 million and $134.1 million, respectively, in accordance with ASC Topic 740, Income Taxes (“ASC 740”). As of September 30, 2009, our total deferred tax asset valuation allowance was $691.5 million. To the extent that we generate eligible taxable income in the future, allowing us to utilize the tax benefits of the related deferred tax assets, we will be able to reduce our effective tax rate, subject to certain limitations, by reducing the valuation allowance and sheltering a portion of taxable income.

We believe that an ownership change under Internal Revenue Code Section 382 (“Section 382”) occurred during the 2008 second quarter as a result of closing the first phase of the investment by MP CA Homes LLC (“MatlinPatterson”) in our preferred stock. Accordingly, we may be limited on the use of certain tax attributes that relate to tax periods prior to the ownership change. The Section 382 ownership change will have the impact of placing an annual limitation on our ability to carry forward certain tax attributes in future periods.

Discontinued Operations

During the fourth quarter of 2007, we sold substantially all of our Tucson and San Antonio assets. The results of operations of our Tucson and San Antonio divisions have been classified as discontinued operations in accordance with ASC Topic 360, Property, Plant, and Equipment.

Net loss from discontinued operations for the three months ended September 30, 2009 and 2008 was approximately $45,000 and $69,000, respectively. Net loss from discontinued operations for the nine months ended September 30, 2009 and 2008 was $569,000 and $2.0 million, respectively.

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Liquidity and Capital Resources

Our principal uses of cash over the last several years have been for:

• land acquisitions

• operating expenses

• joint ventures (including capital contributions, remargin payments, and purchases of assets and partner interests)

• construction and development expenditures

• principal and interest payments on debt (including market repurchases)

• market expansion (including acquisitions)

• share repurchases

• dividends to our stockholders

Cash requirements over the last several years have been met by:

• internally generated funds

• bank revolving credit facility

• land option contracts

• land seller notes

• sales of our equity through public and private offerings

• proceeds received upon the exercise of employee stock options

• public and private note offerings (including convertible notes)

• bank term loans

• joint venture financings

• assessment district bond financings

• issuance of common stock as acquisition consideration

• mortgage credit facilities

• tax refunds

For the nine months ended September 30, 2009, we generated approximately $310.2 million in cash flows from operating activities driven primarily from a $241.5 million decrease in our inventories (largely due to a reduction in the number of completed and unsold homes and the sale of a podium building in Southern California) and the receipt of a $114.5 million tax refund related to our 2008 federal tax return. These cash flows were partially offset by other changes in working capital. Cash flows used in financing activities reflected the repayment of $341.2 million of homebuilding debt and $24.9 million in mortgage credit facility debt, offset by the issuance of $280.0 million ($257.6 million net of original issue discount) of new senior notes due 2016 in which the net proceeds from the issuance were held in an escrow account as of September 30, 2009. The impact of these cash flow activities resulted in a $180.4 million net increase in our homebuilding cash balance for the nine months ended September 30, 2009 to $806.8 million (including $283.3 million in restricted cash).

Revolving Credit Facility and Term Loans. As of September 30, 2009, we had a revolving credit facility (“Revolver”) with approximately $20.4 million in letters of credit outstanding and $29.6 million of remaining letter of credit commitment and a $225 million term loan (“Term Loan B” and, collectively with the Revolver, the “Credit Facilities”). During the quarter we repaid in full and terminated our Term Loan A and amended the Credit Facilities. Pursuant to the amendment, among other things, the Company reduced the total commitment under the Revolver from $361.4 million to $50 million, with future extensions of credit under the Revolver limited to the issuance of letters of credit, and agreed to cash collateralize all current and future letters of credit. In addition, the covenants contained in the Credit Facilities were modified to, among other things, eliminate most negative covenants (including those limiting liens, incurrence and prepayment of indebtedness, payment of dividends, disposition of properties, investments, and transactions with affiliates). The liquidity test requiring the Company to maintain either a minimum ratio of cash flow from operations to consolidated home building interest incurred or a minimum interest reserve was also eliminated and replaced with a financial covenant requiring the Company to either (i) maintain either a minimum ratio of cash flow from operations to consolidated homebuilding interest incurred, a minimum ratio of home building EBITDA to consolidated home building interest incurred or a maximum ratio of combined net home building debt to consolidated tangible net worth or (ii) pay a fee equal to 50 basis points per quarter on the outstanding principal amount of the Term Loan B and prepay, on a quarterly basis, an aggregate principal amount of $7.5 million of the Term Loan B. As of September 30, 2009, we were in compliance with the cash flow coverage and leverage financial covenants contained in the Credit Facilities. Our covenant compliance for the Credit Facilities at September 30, 2009 is set forth in the table below:

Covenant Requirements	Actual at September 30, 2009	Covenant Requirements at September 30, 2009
Cash Flow Coverage Ratio:
Cash Flow from Operations to Consolidated Homebuilding Interest Incurred	4.08	³	1.00
Interest Coverage Ratio:
Adjusted Homebuilding EBITDA to Consolidated Homebuilding Interest Incurred	0.93	³	1.00
Total Leverage Ratio:
Net Homebuilding Debt to Adjusted Consolidated Tangible Net Worth Ratio	1.99	£	3.00

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Letter of Credit Facilities. During October and November 2009, we entered into three separate letter of credit facilities with three lenders. The facilities have an aggregate commitment of $60 million, and as of the date hereof, had a total of $6.2 million in letters of credit outstanding.

Senior and Senior Subordinated Notes. As of September 30, 2009, we had $1,129.5 million of senior and senior subordinated notes outstanding (the “Notes”). The Notes contain certain restrictive covenants, including a limitation on additional indebtedness and a limitation on restricted payments. Under the limitation on additional indebtedness, we are permitted to incur specified categories of indebtedness but are prohibited, aside from those exceptions, from incurring further indebtedness if we do not satisfy either a leverage condition or an interest coverage condition. As of September 30, 2009, we were unable to satisfy either condition. As a result, our ability to incur further indebtedness is limited. Exceptions to this limitation include new borrowings of up to $550 million under bank credit facilities, non-recourse purchase money indebtedness (subject to available borrowing sources) and indebtedness incurred for the purpose of refinancing or repaying existing indebtedness.

Under the limitation on restricted payments, we are also prohibited from making restricted payments (which include investments in and advances to our joint ventures and other unrestricted subsidiaries), if we do not satisfy either the leverage condition or interest coverage condition. As of September 30, 2009, we were unable to satisfy either condition. Our ability to make restricted payments is also subject to a basket limitation. Our unrestricted subsidiaries are not subject to this prohibition. As of September 30, 2009, we had approximately $387.3 million of cash in our unrestricted subsidiaries available to fund our joint venture capital requirements and to take actions that would otherwise constitute prohibited restricted payments.

The leverage and interest coverage conditions contained in our 6 ¹/4% Senior Notes due 2014 (our most restrictive series of Notes based on the leverage condition as of September 30, 2009) are set forth in the table below:

Covenant and Other Requirements	Actual at September 30, 2009	Covenant Requirements at September 30, 2009
Total Leverage Ratio:
Indebtedness to Consolidated Tangible Net Worth Ratio	3.90	£	2.25	(1)
Interest Coverage Ratio:
EBITDA to Consolidated Interest Incurred	0.93	³	2.00

(1) The leverage ratio under the indenture governing our 9 ¹ /4% Senior Subordinated Notes due 2012 is £ 2.50.

Senior Subordinated Convertible Notes. As of September 30, 2009, we had $45.6 million of Senior Subordinated Convertible Notes due 2012 outstanding (the “Convertible Notes”). In connection with the adoption of certain provisions of ASC Topic 470, Debt (“ASC 470”), we reclassified a portion of our Convertible Notes to stockholders equity and the remaining principal amount will be accreted to its redemption value of $45.6 million over the remaining term of these notes. ASC 470 also requires the restatement of the principal amount for any prior periods in which the Convertible Notes are outstanding.

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Transactions Impacting Senior and Senior Subordinated Notes. On September 17, 2009, a Standard Pacific Corp. subsidiary issued $280 million of 10 ³/4% senior notes due September 15, 2016 (the “2016 Notes”). We assumed our subsidiary’s obligations under the 2016 Notes on October 9, 2009. The 2016 Notes rank equally with the other Notes. We used the net proceeds from the issuance of the 2016 Notes (approximately $250.6 million) and cash on hand to repurchase $133.4 million, $122.0 million, and $3.4 million principal amount of our Notes due 2010, 2011 and 2013, respectively.

During the three months ended September 30, 2009, we entered into three privately negotiated transactions pursuant to which we repurchased at a discount $32.8 million principal amount of our Convertible Notes in exchange for an aggregate of 7.6 million shares of our common stock. The Convertible Notes were exchanged at a discount to their par value at an effective common stock issuance price of $4.30 per share.

In the future, we may, from time to time, undertake negotiated or open market purchases of, or tender offers for, our Notes and Convertible Notes prior to maturity when they can be purchased at discounts to their par value at prices that we believe are attractive. We may also, from time to time, engage in exchange transactions (including debt for equity and debt for debt transactions) for all or part of our Notes and Convertible Notes. Such transactions, if any, will depend on market conditions, our liquidity requirements, contractual restrictions and other factors.

Joint Ventures Loans. As described more particularly under the heading “Off-Balance Sheet Arrangements” beginning on page 52, in connection with our land development and homebuilding joint ventures we have typically obtained secured acquisition, development and construction financing intended to reduce the use of funds from corporate financing sources. Over the last several years both the number of joint ventures in which we participate and the dollar value of loans outstanding with respect to these joint ventures have been significantly reduced. As of September 30, 2009, we held interests in 8 active joint ventures which had a total of approximately $45.2 million of recourse debt (three joint ventures) and $225.4 million of non-recourse debt (one joint venture) outstanding.

Despite the reduced size of our joint venture portfolio, we have, and likely will be required in the future to, expend corporate resources for anticipated and unanticipated obligations associated with these joint ventures. During the nine months ended September 30, 2009, we paid $23.0 million to satisfy joint venture obligations (including the repayment of project specific debt in connection with joint venture unwinds) and assumed $77.3 million of project specific debt.

Secured Project Debt and Other Notes Payable. At September 30, 2009, we had approximately $88.8 million outstanding in secured project debt that was assumed in connection with the unwinding of four joint ventures. As of the date hereof, the current maturity dates of these loans range from February 2010 to March 2011.

At September 30, 2009, we had approximately $8.0 million outstanding in other notes payable. Our other notes payable consist of purchase money mortgage financing and community development district and similar assessment district bond financings used to finance land development and infrastructure costs for which we are responsible.

Mortgage Credit Facilities. At September 30, 2009, we had approximately $38.8 million outstanding under our mortgage financing subsidiary’s mortgage credit facilities. These mortgage credit facilities consist of a $30 million repurchase facility, of which $15 million is uncommitted (meaning that the lender has discretion to refuse to fund requests even if the mortgage loans comply with the requirements of the facility), and $15 million is committed (meaning that the lender has no discretion to refuse to fund requests if the mortgage loans comply with the requirements of the facility, though the lender has substantial discretion to modify from time to time what those requirements are, even if any such modification adversely affects our mortgage financing subsidiary’s ability to use the repurchase facility), and a $45 million early purchase facility. The lender has the right to terminate the committed portion of the repurchase facility on not less than 90 days notice. These mortgage credit facilities are scheduled to mature in April 2010 and require Standard Pacific Mortgage to maintain cash collateral accounts aggregating $2.3 million. These facilities also contain certain financial covenants which require Standard Pacific Mortgage to, among other things, maintain a minimum level of tangible net worth,

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not to exceed a debt to tangible net worth ratio, maintain a minimum liquidity of $5 million, and satisfy certain pretax income (loss) requirements. As of September 30, 2009, Standard Pacific Mortgage was in compliance with the financial and other covenants contained in these facilities.

Surety Bonds. Surety bonds serve as a source of liquidity for the Company because they are used in lieu of cash deposits and letters of credit that would otherwise be required by governmental entities and other third parties to ensure our completion of the infrastructure of our projects. At September 30, 2009, we had approximately $233.5 million in surety bonds outstanding from continuing operations (exclusive of surety bonds related to our joint ventures), with respect to which we had an estimated $76.0 million remaining in cost to complete.

Tax Refunds. During the 2009 first quarter, we collected a tax refund of $114.5 million related to our 2008 federal net operating loss (“NOL”) carrybacks. We believe that an ownership change under Section 382 occurred during the 2008 second quarter as a result of closing the first phase of the MatlinPatterson transaction. Accordingly, we may be limited in the use of certain tax attributes that relate to tax periods prior to the ownership change. These potential carryback limitations did not have an impact on our ability to carry back our 2008 net operating loss to 2006 for refund purposes, however, the Section 382 ownership change will have the impact of placing an annual limitation on our ability to carry forward certain tax attributes in future periods.

On November 6, 2009, new federal legislation was enacted that permits a taxpayer to carryback, at the taxpayer’s election, net operating losses generated in either the 2008 or 2009 taxable year for a period of up to five years preceding the loss. If net operating losses are carried back to the fifth taxable year preceding the loss, the amount carried back is limited to 50 percent of taxable income for such taxable year. Based on the Company’s preliminary analysis, we believe that electing to carryback net operating losses from the 2009 tax year to the 2004 tax year (the fifth tax year preceding the loss year) will maximize the Company’s potential benefit from this change in the law. Applying the new legislation, the Company believes it will be entitled to seek a cash refund of up to approximately $80 million of the taxes it paid for tax year 2004.

Availability of Additional Liquidity. The availability of additional capital, whether from private capital sources (including banks) or the public capital markets, fluctuates as market conditions change. There may be times when the private capital markets and the public debt or equity markets lack sufficient liquidity or when our securities cannot be sold at attractive prices, in which case we would not be able to access capital from these sources. Based on current market conditions and our financial condition (including our inability to satisfy the conditions contained in our public note indentures that are required to be satisfied to permit us to incur additional indebtedness, except through certain exceptions, including the refinance exception), our ability to effectively access these liquidity sources for new borrowing is significantly limited. In addition, a further weakening of our financial condition or strength, including in particular a material increase in our leverage or a further decrease in our profitability or cash flows, could adversely affect our ability to obtain necessary funds, result in a credit rating downgrade or change in outlook, or otherwise increase our cost of borrowing. During the 2009 first quarter, the three credit rating agencies downgraded our corporate and debt ratings and/or changed their outlook to negative due to deterioration in our financial condition, coupled with the wide-spread decline in the general homebuilding market. During the 2009 third quarter, one of the credit rating agencies upgraded our rating and changed their outlook from negative to developing.

Dividends. We paid no dividends to our stockholders during the nine months ended September 30, 2009. Subject to limited exceptions, we are prohibited by the terms of our public note indentures from paying dividends (other than dividends paid in the form of capital stock or through an accretion to the liquidation preference of any capital stock).

Stock Repurchases. We did not repurchase capital stock during the nine months ended September 30, 2009. Subject to limited exceptions, we are prohibited by the terms of our public note indentures from repurchasing capital stock for cash.

Leverage. Our homebuilding leverage ratio was 80.6% at September 30, 2009 and our adjusted net homebuilding debt to adjusted total book capitalization was 65.0%. This adjusted ratio reflects the offset of homebuilding cash in excess of $5 million and excludes $38.8 million of indebtedness of our financial services subsidiary. We believe that this adjusted ratio is useful to investors as an additional measure of our ability to service debt. Our leverage level has been negatively impacted over the last several years due to the reduction in our equity base as a result of the significant level of impairments and operating losses incurred by us as well as by the debt we have had to assume in connection with joint venture unwinds. The impact of these impairments on our leverage has been offset in part by the $662 million in equity we raised in 2008 and the $32.8 million in debt for equity exchanges completed during the quarter ended September 30, 2009. Excluding the impact and timing of recording impairments, historically, our leverage increases during the first three quarters of the year and tapers off at year end.

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Off-Balance Sheet Arrangements

Land Purchase and Option Agreements

We are subject to customary obligations associated with entering into contracts for the purchase of land and improved homesites. These purchase contracts typically require a cash deposit or delivery of a letter of credit, and the purchase of properties under these contracts is generally contingent upon satisfaction of certain requirements by the sellers, including obtaining applicable property and development entitlements. We also utilize option contracts with land sellers and third-party financial entities as a method of acquiring land in staged takedowns, to help us manage the financial and market risk associated with land holdings, and to reduce the use of funds from our corporate financing sources. Option contracts generally require a non-refundable deposit for the right to acquire lots over a specified period of time at predetermined prices. We generally have the right at our discretion to terminate our obligations under both purchase contracts and option contracts by forfeiting our cash deposit or by repaying amounts drawn under our letter of credit with no further financial responsibility to the land seller, although in certain instances, the land seller has the right to compel us to purchase a specified number of lots at predetermined prices. Also, in a few instances where we have entered into option contracts with third party financial entities, we have generally entered into construction agreements that do not terminate if we elect not to exercise our option. In these instances, we are generally obligated to complete land development improvements on the optioned property at a predetermined cost (paid by the option provider) and are responsible for all cost overruns. At September 30, 2009, we had two option contracts outstanding with third party financial entities with approximately $2.9 million of remaining land development improvement costs, all of which will be funded by the option provider. In some instances, we may also expend funds for due diligence, development and construction activities with respect to our land purchase and option contracts prior to purchase, which we would have to write off should we not purchase the land. At September 30, 2009, we had non-refundable cash deposits and letters of credit outstanding of approximately $9.4 million and capitalized preacquisition and other development and construction costs of approximately $3.8 million relating to land purchase and option contracts having a total remaining purchase price of approximately $83.1 million. Approximately $24.2 million of the remaining purchase price is included in inventories not owned in the accompanying condensed consolidated balance sheets.

Our utilization of option contracts is dependent on, among other things, the availability of land sellers willing to enter into option takedown arrangements, the availability of capital to financial intermediaries, general housing market conditions, and geographic preferences. Options may be more difficult to procure from land sellers in strong housing markets and are more prevalent in certain geographic regions.

Land Development and Homebuilding Joint Ventures

Historically, we have entered into land development and homebuilding joint ventures from time to time as a means of:

• accessing lot positions

• establishing strategic alliances

• leveraging our capital base

• expanding our market opportunities

• managing the financial and market risk associated with land holdings

These joint ventures typically obtain secured acquisition, development and construction financing, which is intended to reduce the use of funds from corporate financing sources. Over the last several years both the number of joint ventures in which we participate and the dollar value of loans outstanding with respect to these joint ventures have been significantly reduced. At September 30, 2009, our joint ventures had borrowings outstanding that totaled approximately $270.6 million (of which $225.4 million was nonrecourse indebtedness) compared to $421.8 million in joint venture indebtedness as of December 31, 2008.

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Despite the reduced size of our joint venture portfolio, we may be required in the future to expend corporate funds for anticipated and unanticipated obligations associated with these joint ventures. Potential future obligations may include payments associated with:

• joint venture loans (including to replace expiring loans, to satisfy loan remargin and land development and construction completion obligations, and to satisfy environmental indemnity obligations)

• joint venture development and construction costs and cost overruns (including the funding of the joint venture partner’s share when the partner is unable or unwilling to make the required contribution)

• indemnity obligations to joint venture surety providers

• land takedown obligations

• joint venture unwinds (including the satisfaction of joint venture indebtedness either through repayment or the assumption of such indebtedness, payments required to be made to our partners in connection with the unwind, and the remaining cost to complete former joint venture projects)

During the nine months ended September 30, 2009, we paid $23.0 million to satisfy joint venture obligations (including the repayment of project specific debt in connection with joint venture unwinds) and assumed $77.3 million of project specific debt. As of September 30, 2009, we held membership interests in 20 homebuilding and land development joint ventures (including discontinued operations), of which eight were active and 12 were inactive or winding down. As of such date, three joint ventures had an aggregate of $45.2 million in recourse project specific financing and one had $225.4 million of nonrecourse project specific financing. In addition, as of September 30, 2009, we had an obligation to purchase lots related to our joint venture in Las Vegas totaling approximately $21.1 million and had approximately $31.7 million of surety bonds outstanding subject to indemnity arrangements by us and our partners and had an estimated $11.7 million remaining in cost to complete.

The following lists a number of recent developments regarding our joint ventures.

• Renegotiation/Loan Extension & Loan-to-Value Maintenance Related Payments. During the nine months ended September 30, 2009, we extended the loan maturity date for one of our Southern California joint ventures and made $14.7 million in remargin payments related to two Southern California joint ventures. During October 2009, we extended the loan maturity date of one of our Northern California joint ventures. As of the date hereof, the current maturity dates of our joint venture loans range from June 2010 to January 2011.

• Purchases and Consolidation. During the nine months ended September 30, 2009, we purchased and unwound three Southern California joint ventures. In connection with these transactions, we made aggregate payments of approximately $1.1 million, assumed $77.3 million of joint venture indebtedness (of which $23.0 million was paid off at a discount during the 2009 third quarter), assumed 120 completed podium units, 57 finished lots, 16 completed or partially completed homes, and six model homes. As of September 30, 2009, we had sold and delivered 90 of the assumed podium units and one of the completed homes.

• Joint Ventures Exited. During the nine months ended September 30, 2009, we exited our Chicago joint venture for a $7.3 million cash payment and eliminated $19.8 million of joint venture recourse debt. In addition, our Tucson, Arizona joint venture (discontinued operations) forfeited the joint venture’s remaining real estate to the lender in exchange for the elimination of approximately $23.8 million of joint venture nonrecourse debt.

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• North Las Vegas Joint Venture. In May 2009, our joint venture in Las Vegas filed for reorganization under Chapter 11 of the Bankruptcy Code. During the nine months ended September 30, 2009, we recorded an $8.2 million joint venture impairment charge related to the write off of our remaining investment in this joint venture. As of September 30, 2009, this joint venture had $225.4 million of non-recourse debt. In addition, as of September 30, 2009 we were obligated to purchase $21 million of lots from this joint venture. A plan of reorganization was submitted for the joint venture that was accepted by over 90% of the lenders. The bankruptcy court confirmed the plan on October 15, 2009 and the order confirming the plan has been lodged with the bankruptcy court. Assuming that there are no changes as a result of any appeal of the order confirming the plan, the reorganization will result in a $48 million reduction of the debt balance to $177 million and a $10 million reduction of our transaction costs and funding obligations to $11 million (including $6 million related to the purchase of approximately 59 acres of residential land).

Recent Accounting Pronouncements

On January 1, 2009, we adopted certain provisions of ASC Topic 805, Business Combinations (“ASC 805”). These provisions expand the application of ASC 805 to all transactions and other events in which one entity obtains control over one or more other businesses. ASC 805 broadens the fair value measurement and recognition of assets acquired, liabilities assumed, and interests transferred as a result of business combinations. It also requires that the acquisition method of accounting be used for all business combinations and for an acquirer to be identified for each business combination. It also establishes principles and requirements for how the acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. The adoption of these provisions also requires additional disclosures to improve the statement users’ abilities to evaluate the nature and financial effects of business combinations. Adoption is prospective, and early adoption was not permitted. These new provisions are effective for us for any business combination entered into subsequent to January 1, 2009. The adoption of these new provisions on January 1, 2009 did not have a material impact on our condensed consolidated financial statements.

On January 1, 2009, we adopted certain provisions of ASC Topic 810, Consolidation (“ASC 810”), which require that a noncontrolling interest in a subsidiary be reported as equity and the amount of consolidated net income specifically attributable to the noncontrolling interest be reported separately in the consolidated income statement and consolidated statement of equity. It also calls for consistency in the manner of reporting changes in the parent’s ownership interest and requires fair value measurement of any noncontrolling equity investment retained in a deconsolidation. Upon adoption on January 1, 2009, minority interests were reclassified to noncontrolling interests as a separate component in equity for all periods presented. The adoption of these provisions did not impact earnings per share attributable to our common stockholders.

In March 2008, the FASB updated certain provisions of ASC Topic 815, Derivatives and Hedging (“ASC 815”). Under these new provisions, entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under ASC 815, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. We adopted the provisions of ASC 815 on January 1, 2009 and have included the required disclosures in the notes to our condensed consolidated financial statements.

In May 2008, the FASB updated certain provisions of ASC Topic 470, Debt (“ASC 470”). These new provisions require bifurcation of a component of convertible debt instruments, classification of that component in stockholder’s equity, and then accretion of the resulting discount on the debt to result in interest expense equal to the issuer’s nonconvertible debt borrowing rate. These new provisions of ASC 470 are effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Retroactive application to all periods presented is required. As a result, we have retroactively applied the standard to our financial statements for all periods presented. We adopted these new provisions of ASC 470 as of January 1, 2009 and the adoption impacted the historical accounting

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for our 6% Senior Subordinated Convertible Notes due 2012 (the “Convertible Notes”) resulting in an increase to additional paid-in capital of $31.7 million with an offset to accumulated deficit of $3.6 million, inventories owned of $2.6 million and senior subordinated notes payable of $25.5 million as of January 1, 2009. During the three months ended September 30, 2009, we repurchased at a discount $32.8 million principal amount of the Convertible Notes in exchange for an aggregate of 7.6 million shares of our common stock. In connection with the exchange, we derecognized $9.3 million of unamortized discount of the Convertible Notes. The remaining balance of the Convertible Notes will be accreted to its redemption value, approximately $45.6 million, over the remaining term of these notes. The unamortized discount of the Convertible Notes, which was included in additional paid-in capital, was $12.6 million and $25.5 million at September 30, 2009 and December 31, 2008, respectively. In addition, approximately $1.1 million of interest was capitalized to inventories for the three months ended September 30, 2009 and 2008, respectively. Interest capitalized to inventories owned is included in cost of sales as related units are sold (please see Note 9 “Capitalization of Interest”).

On January 1, 2009, we adopted certain provisions of ASC Topic 260, Earnings per Share (“ASC 260”), which provide that unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and require that they be included in the computation of earnings per share. These new provisions of ASC 260 are effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years, and require retrospective application. During the three and nine months ended September 30, 2009, we had no unvested share-based payment awards outstanding. In addition, during the three and nine months ended September 30, 2008, the holders of any unvested share-based payment awards were not required to participate in losses of the Company. The adoption of these new provisions of ASC 260 on January 1, 2009 did not have an impact on our results of operations, financial position or earnings per share.

In April 2009, the FASB updated certain provisions of ASC Topic 825, Financial Instruments (“ASC 825”) and ASC Topic 270, Interim Reporting (“ASC 270”). These new provisions require that the fair value disclosures required for all financial instruments within the scope of ASC 825 be included in interim financial statements. ASC 825 also requires entities to disclose the method and significant assumptions used to estimate the fair value of financial instruments on an interim and annual basis and to highlight any changes from prior periods. These new provisions of ASC 825 are effective for interim periods ending after June 15, 2009. The adoption of ASC 825 did not have a material impact on our consolidated financial statements (please see Note 19 “Disclosures about Fair Value”).

In May 2009, the FASB issued ASC Topic 855, Subsequent Events (“ASC 855”), which provides guidance to establish general standards of accounting for and disclosures of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. ASC 855 sets forth (i) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, (ii) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and (iii) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. ASC 855 is effective for interim periods ending after June 15, 2009. Pursuant to ASC 855 we have evaluated subsequent events through the date that the condensed consolidated financial statements were issued for the quarterly period ended September 30, 2009.

In June 2009, the FASB updated ASC Topic 810, Consolidation (“ASC 810”) to among other things, (i) define the primary beneficiary of a variable interest entity (“VIE”) as the enterprise that has both (a) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and (b) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE, (ii) require ongoing reassessments of whether an enterprise is the primary beneficiary of a VIE, and (iii) add an additional reconsideration event for determining whether an entity is a VIE when any changes in facts and circumstances occur such that the holders of the equity investment at risk, as a group, lose the power from voting rights or similar rights to direct the activities of the entity that most significantly impact the entity’s economic performance. ASC 810 is effective for our fiscal year beginning January 1, 2010. We are currently evaluating the effect the adoption of ASC 810 will have on our financial condition and results of operations.

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In July 2009, the FASB updated certain provisions of ASC 470, which provide guidance to share lending arrangements executed in connection with a convertible debt offering or other financing and require that share lending arrangements be measured at fair value, recognized as a debt issuance cost with an offset to stockholders’ equity, and then amortized as interest expense over the life of the financing arrangement. These new provisions of ASC 470 are effective for interim or annual periods beginning on or after June 15, 2009 for share lending arrangements entered in during fiscal year 2009. For all arrangements that existed prior to fiscal year 2009, retrospective application is required beginning January 1, 2010. We are currently in the process of determining the impact of adopting these new provisions of ASC 470 on our financial condition and results of operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risks related to fluctuations in interest rates on our rate-locked loan commitments, mortgage loans held for sale and outstanding variable rate debt. Other than interest rate swaps used to manage our exposure to changes in interest rates on our variable rate-based term loans and forward sale commitments of mortgage-backed securities entered into by our financial services subsidiary for the purpose of hedging interest rate risk as described below, we did not utilize swaps, forward or option contracts on interest rates, foreign currencies or commodities, or other types of derivative financial instruments as of or during the three months ended September 30, 2009. We do not enter into or hold derivatives for trading or speculative purposes. You should be aware that many of the statements contained in this section are forward looking and should be read in conjunction with our disclosures under the heading “Forward-Looking Statements.”

We have interest rate swap agreements that effectively fixed our 3-month LIBOR rates for our Term Loan B through its scheduled maturity date. The swap agreements have been designated as cash flow hedges and as of September 30, 2009, the estimated fair value of the swap represented a liability of $27.2 million and was included in accrued liabilities in our condensed consolidated balance sheets.

As part of our ongoing operations, we provide mortgage loans to our homebuyers through our mortgage financing subsidiary, Standard Pacific Mortgage. For a portion of its loan originations, Standard Pacific Mortgage manages the interest rate risk associated with making loan commitments and holding loans for sale by preselling loans. Preselling loans consists of obtaining commitments (subject to certain conditions) from third party investors to purchase the mortgage loans while concurrently extending interest rate locks to loan applicants. Before completing the sale to these investors, Standard Pacific Mortgage finances these loans under its mortgage credit facilities for a short period of time (typically for 15 to 30 days), while the investors complete their administrative review of the applicable loan documents. Due to the frequency of these loan sales and the commitments from investors, we have decided not to hedge the interest rate risk associated with these presold loans. However, these commitments may not fully protect Standard Pacific Mortgage from losses relating to changes in interest rates or loan programs or purchaser non-performance, particularly during periods of significant market turmoil. As of September 30, 2009, Standard Pacific Mortgage had approximately $117.7 million in closed mortgage loans held for sale and mortgage loans in process that were presold to investors subject to completion of the investors’ administrative review of the applicable loan documents.

Standard Pacific Mortgage also originates a small portion of its mortgage loans on a non-presold basis. The loans originated on a non-presold basis are substantially “conforming” or “government” loans, which are loans eligible for sale to, or guaranteed by, a government sponsored enterprise (such as Fannie Mae, Freddie Mac, Ginnie Mae, the Federal Housing Administration or the Veterans Administration). When originating on a non-presold basis, Standard Pacific Mortgage locks interest rates with its customers and funds loans prior to obtaining purchase commitments from investors, thereby creating interest rate risk. To hedge this interest rate risk, Standard Pacific Mortgage enters into forward sale commitments of

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mortgage-backed securities. Loans originated in this manner are typically held by Standard Pacific Mortgage and financed under its mortgage credit facilities for 15 to 45 days before the loans are sold to investors. Standard Pacific Mortgage utilizes the services of an advisory firm to assist with the execution of its hedging strategy for loans originated on a non-presold basis. While this hedging strategy is designed to assist Standard Pacific Mortgage in mitigating risk associated with originating loans on a non-presold basis, these instruments involve elements of market risk that could result in losses on loans originated in this manner. In addition, volatility in mortgage interest rates can also increase the costs associated with this hedging program and therefore, adversely impact margins on loan sales. As of September 30, 2009, Standard Pacific Mortgage had approximately $1.7 million of closed mortgage loans held for sale that were originated on a non-presold basis, all of which were hedged by forward sale commitments of mortgage-backed securities prior to entering into sale transactions with third party investors. In order to reduce interest rate risk related to this hedging strategy, beginning in July 2009, all new loan originations are presold to investors.

ITEM 4. CONTROLS AND PROCEDURES

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as such term is defined in Exchange Act Rules 13a-15(e) and 15d-15(e), including controls and procedures to timely alert management to material information relating to Standard Pacific Corp. and subsidiaries required to be included in our periodic SEC filings. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during our most recently completed fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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FORWARD-LOOKING STATEMENTS

This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In addition, other statements we may make from time to time, such as press releases, oral statements made by Company officials and other reports we file with the Securities and Exchange Commission, may also contain such forward-looking statements. These statements, which represent our expectations or beliefs regarding future events, may include, but are not limited to, statements regarding:

• the alignment of our overhead structure with current delivery levels and our speculative starts with sales;

• our belief that our restructuring activities are substantially complete and the amount of savings that will result from such restructuring;

• our efforts to generate cash, reduce real estate inventories and to better align our land supply with the current levels of new housing demand;

• the potential need for, and magnitude of, unanticipated joint venture expenditures requiring the use of Corporate funds;

• our ability to obtain reimbursement from our partners for their share of joint venture remargin obligations;

• the potential for additional impairments and further deposit and capitalized preacquisition cost write-offs;

• our ability to renegotiate, restructure or extend joint venture loans on acceptable terms;

• a slowdown in demand and a decline in new home orders;

• housing market conditions in the geographic markets in which we operate;

• sales orders, sales cancellation rates, our backlog of homes, the estimated sales value of our backlog and our expectations as to the delivery of our backlog;

• the likelihood that we will be required to complete lot takedowns on uneconomic terms;

• the future availability of lot option structures;

• our ability to obtain surety bonds, the need to provide security to obtain surety bonds, and the impact on our liquidity;

• the sufficiency of our capital resources and ability to access additional capital, including the sufficiency of unrestricted funds available to satisfy joint venture obligations and make other restricted payments;

• continuation of our historical leverage trends;

• our exposure to loss with respect to land under purchase contract and optioned property;

• the extent of our liability for VIE obligations and the estimates we utilize in making VIE determinations;

• expected performance by derivative counterparties;

• estimated remaining cost to complete the infrastructure of our projects;

• future warranty costs;

• litigation related costs;

• our ability to comply with the covenants contained in our debt instruments;

• the estimated fair value of our swap agreements;

• the market risk associated with loans originated by Standard Pacific Mortgage, Inc.;

• the effectiveness and adequacy of our disclosure and internal controls;

• our accounting treatment of stock-based compensation and the potential value of and expense related to stock option grants;

• our ability to purchase our notes prior to maturity at discounts to par and to engage in debt exchange transactions;

• our ability to seek and obtain a federal tax refund as a result of new federal legislation;

• our ability to realize the value of our deferred tax assets; and

• the impact of recent accounting pronouncements.

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Forward-looking statements are based on our current expectations or beliefs regarding future events or circumstances, and you should not place undue reliance on these statements. Such statements involve known and unknown risks, uncertainties, assumptions and other factors—many of which are out of our control and difficult to forecast—that may cause actual results to differ materially from those that may be described or implied. Such factors include, but are not limited to, the following:

• local and general economic and market conditions, including consumer confidence, employment rates, interest rates, housing affordability, the cost and availability of mortgage financing, and stock market, home and land valuations;

• the supply and pricing of homes available for sale in the new and resale markets;

• the impact on economic conditions of terrorist attacks or the outbreak or escalation of armed conflict;

• the cost and availability of suitable undeveloped land, building materials and labor;

• the cost and availability of construction financing and corporate debt and equity capital;

• our significant amount of debt and the impact of restrictive covenants in our debt instruments and our ability to comply with these covenants;

• potential adverse market and lender reaction to our financial condition and results of operations;

• a negative change in our credit rating or outlook;

• the demand for single-family homes;

• cancellations of purchase contracts by homebuyers;

• the cyclical and competitive nature of our business;

• governmental regulation, including the impact of “slow growth,” “no growth,” or similar initiatives;

• delays in the land entitlement and other approval processes, development, construction, or the opening of new home communities;

• adverse weather conditions and natural disasters;

• environmental matters;

• risks relating to our mortgage financing operations, including hedging activities;

• future business decisions and our ability to successfully implement our operational, growth and other strategies;

• risks relating to our unconsolidated joint ventures, including restricted payment, entitlement, development, contribution, completion, financing (including remargining), investment, partner dispute and consolidation risk;

• risks relating to acquisitions;

• litigation and warranty claims; and

• other risks discussed in this report and our other filings with the Securities and Exchange Commission, including in our most recent Annual Report on Form 10-K and subsequent Form 10-Q’s.

Except as required by law, we assume no, and hereby disclaim any, obligation to update any of the foregoing or any other forward-looking statements. We nonetheless reserve the right to make such updates from time to time by press release, periodic report or other method of public disclosure without the need for specific reference to this report. No such update shall be deemed to indicate that other statements not addressed by such update remain correct or create an obligation to provide any other updates.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Chinese Drywall

Like many other homebuilders, we have learned that some of our subcontractors installed drywall manufactured in China in Company constructed homes. Reports have indicated that certain Chinese drywall, thought to be delivered to the United States primarily during 2005 and 2006, may emit various sulfur-based gases that, among other things, have the potential to corrode non-ferrous metals (copper, silver, etc.). We are conducting an internal review in an attempt to determine how many of the homes that we constructed may be impacted. To date, it appears that a subset of homes with drywall dates from February 2006 through February 2007 in five of our Florida communities contain some high-sulfur Chinese drywall. We have not completed our internal review and therefore have not reached a conclusion as to the scope of the problem. We have, however, notified homeowners of the results of our inspections of their homes. So far, two homeowners with Chinese drywall have filed suit. Approximately 45 others have provided formal statutory notices demanding a repair. We have initiated test repairs overseen by our experts in these communities, and are monitoring the results to ensure they are effective. We plan to continue gathering information and are working with our experts to understand the problem and to respond to complaints as they arise.

ITEM 1A. RISK FACTORS

There has been no material change in our risk factors as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2008. For a detailed description of risk factors, refer to Item 1A, “Risk Factors”, of our Annual Report on Form 10-K for the year ended December 31, 2008.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the three months ended September 30, 2009, we issued 7,640,463 shares of common stock in transactions exempt from registration under Section 3(a)(9) of the Securities Act at an average share price of $4.30 to retire $32.8 million of our 6% senior subordinated convertible notes due 2012.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

ITEM 6. EXHIBITS

*3.1	Amended and Restated Bylaws of the Registrant incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 28, 2009.
*4.1	Indenture, dated as of September 17, 2009, between Standard Pacific Escrow LLC and The Bank of New York Mellon Trust Company, N.A., incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 17, 2009.

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*4.2	First Supplemental Indenture, dated as of October 8, 2009, between the Registrant, Standard Pacific Escrow LLC and The Bank of New York Mellon Trust Company, N.A., incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on October 9, 2009.
*4.3	Thirteenth Supplemental Indenture, dated as of October 8, 2009, between the Registrant and The Bank of New York Mellon Trust Company, N.A., incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on October 9, 2009.
*4.4	Registration Rights Agreement, dated as of October 8, 2009, among the Registrant, the subsidiary guarantors party thereto and the initial purchasers, incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on October 9, 2009.
*10.1	Eighth Amendment to Revolving Credit Agreement and Seventh Amendment to Term Loan A Credit Agreement, effective as of August 12, 2009, by and among the Registrant, Bank of America, N.A., as administrative agent, and the Lenders signatory thereto, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on August 13, 2009.
*10.2	Notice of Revolver and Term A Amendment, dated August 12, 2009, incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on August 13, 2009.
*10.3	Third Amendment of Term B Credit Agreement, effective as of September 3, 2009, by and among the Registrant and Bank of America, N.A., as Administrative Agent for the Term B Lenders, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 3, 2009.
*10.4	Instrument of Joinder (Additional Creditor Representative), dated as of October 8, 2009, between The Bank of New York Mellon Trust Company, N.A. and Bank of America, N.A., incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on October 9, 2009.
10.5	Pledge Agreement, dated as of May 5, 2006, between Standard Pacific Corp., certain of Standard Pacific Corp.’s subsidiaries and Bank of America, N.A., as Collateral Agent, as amended through November 1, 2009.
10.6	Collateral Agent and Intercreditor Agreement dated as of May 5, 2006, between Standard Pacific Corp., certain of Standard Pacific Corp.’s subsidiaries, Bank of America, N.A., as Collateral Agent, and the various creditors party thereto, as amended through November 1, 2009.
31.1	Certification of the CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(*) Previously filed.

(+) Management contract, compensation plan or arrangement.

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SIGNATURES

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

	STANDARD PACIFIC CORP.
		(Registrant)
Dated: November 6, 2009	By:	/s/ KENNETH L. CAMPBELL
		Kenneth L. Campbell
		Chief Executive Officer and President
		(Principal Executive Officer)
Dated: November 6, 2009	By:	/s/ JOHN M. STEPHENS
		John M. Stephens
		Senior Vice President and
		Chief Financial Officer
		(Principal Financial Officer)

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EX-10.5

Exhibit 10.5

PLEDGE AGREEMENT

THIS PLEDGE AGREEMENT (this “Agreement”) is dated as of May 5, 2006, and entered into by and between STANDARD PACIFIC CORP., a Delaware corporation (the “Company”); and those subsidiaries of the Company listed on the signature pages hereof or which may hereafter become a party hereto pursuant to Section 16 (each of which is a “Pledgor Subsidiary;” and the Company and each Pledgor Subsidiary are each a “Pledgor” and collectively, “Pledgor”), and BANK OF AMERICA, N.A., a national banking association, as collateral agent for and representative of (in such capacity herein called “Collateral Agent” ) the Creditors defined below.

RECITALS

1. Reference is hereby made to (a) that certain Revolving Credit Agreement dated as of August 31, 2005, among Company, the Lenders defined therein, and Bank of America, N.A., as Administrative Agent, as amended on May 5, 2006, and as at any time amended, modified, supplemented, renewed or extended, and all restatements thereof and any agreement that refinances the indebtedness thereunder (the “Revolving Credit Agreement”), (b) that certain Term Loan A Credit Agreement dated as of May 5, 2006, among Company, the Lenders defined therein, and Bank of America, N.A., as Administrative Agent, as at any time amended, modified, supplemented, renewed or extended, and all restatements thereof and any agreement that refinances the indebtedness thereunder (the “Term Loan A Credit Agreement”), and (c) that certain Term Loan B Credit Agreement dated as of May 5, 2006, among Company, the Lenders referred to therein, and Bank of America, N.A., as Administrative Agent, as at any time amended, modified, supplemented, renewed or extended, and all restatements thereof and any agreement that refinances the indebtedness thereunder (the “Term Loan B Credit Agreement”), and (d) that certain Indenture dated as of April 1, 1999, between the Company and J.P. Morgan Trust Company, National Association, as Trustee (and, in connection with the Eleventh Supplemental Indenture referenced below, the Pledgor Subsidiaries and certain other Subsidiaries of the Company, as guarantors), as supplemented by that certain First Supplemental Indenture dated as of April 13, 1999, Second Supplemental Indenture dated as of September 5, 2000, Third Supplemental Indenture dated as of December 28, 2001, Fourth Supplemental Indenture dated as of March 4, 2003, Fifth Supplemental Indenture dated as of May 12, 2003, Sixth Supplemental Indenture dated as of September 23, 2003, Seventh and Eighth Supplemental Indentures, each dated as of March 11, 2004, Ninth and Tenth Supplemental Indentures, each dated as of August 1, 2005, and Eleventh Supplemental Indenture dated as of February 22, 2006, as at any time amended, modified, supplemented, renewed or extended (collectively, the “Indenture”).

2. Capitalized terms used herein shall, unless otherwise indicated, have the respective meanings set forth in the Term Loan B Credit Agreement as in effect on the date hereof.

3. Each Pledgor is the legal and beneficial owner of (a) the shares of stock (the “Pledged Shares”) described as owned by such Pledgor in Part A of Schedule 1 attached hereto and issued by the corporations named therein, and (b) the partnership interests in limited

partnerships or general partnerships, as the case may be, and membership interests in limited liability companies, if any, described as owned by such Pledgor in Part B of Schedule 1 attached hereto (collectively, the “Pledged Interests”).

4. The Credit Documents require that each Pledgor shall grant to Collateral Agent, for the equal and ratable benefit of the Creditors holding Qualified Obligations, the Liens contemplated by this Agreement.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each Pledgor hereby agrees with Collateral Agent, for the equal and ratable benefit of the Creditors holding Qualified Obligations, as follows:

1. Definitions. As used herein, the following terms have the following meanings:

“Additional Covered Obligations” shall have the meaning set forth in the Collateral Agency Agreement as in effect on the date hereof.

“Certificate Delivery Date” means the date of delivery of each certificate delivered under Section 8.1(d) of the Term Loan B Credit Agreement.

“Collateral Agency Agreement” means that certain Collateral Agent and Intercreditor Agreement dated the date hereof, by and among Bank of America, N.A., as Collateral Agent, Bank of America, N.A., as Administrative Agent under the Revolving Credit Agreement, the Term Loan A Credit Agreement and the Term Loan B Credit Agreement, J. P. Morgan Trust Company, National Association, as Trustee under the Indenture, the Company, and each Pledgor Subsidiary, as amended, modified, supplemented, renewed or extended.

“Credit Documents” means, in respect of each Creditor Group, the instruments, documents and agreements evidencing the obligations and indebtedness of the Company and the Pledgor Subsidiaries owed to such Creditor Group under the respective “Loan Documents” (as defined in the Revolving Credit Agreement, the Term Loan A Credit Agreement or the Term Loan B Credit Agreement) or under the Indenture and the respective series of Notes, in each case together with any respective guarantees thereof, or evidencing Additional Covered Obligations, and in any event includes the Existing Credit Documents.

“Creditor” means each person which is the holder of any indebtedness or other obligation represented by Credit Documents representing Obligations, including (a) Bank of America, N.A., as Administrative Agent under the Revolving Credit Agreement, together with the “Lenders ,” “Issuing Banks ,” and “Swing Line Lender” referenced in such agreement or from time to time party thereto, and those persons entitled to indemnification of any character under such agreement, (b) Bank of America, N.A., as Administrative Agent under the Term Loan A Credit Agreement, together with the “Lenders” referenced in such agreement or from time to time party thereto, and those persons entitled to indemnification of any character under such agreement, (c) Bank of America, N.A., as Administrative Agent under the Term Loan B Credit Agreement, together with the “Lenders” referenced in such agreement or from time to time party thereto, and those persons entitled to indemnification of any character under such agreement, (d) J.P. Morgan Trust Company, National Association, as Trustee under the Indenture in respect of each series of Notes referred to in the definition of “Creditor Groups” and the holders of such Notes, and (e) any Creditor Representative in respect of any Additional Covered Obligations and the holders of such obligations, in each case including their respective successors, assigns and replacements.

“Creditor Group” means any of each of the following groups:

(a) the Administrative Agent, the Lenders, the Issuing Banks and the Swing Line Lender under and as defined in the Revolving Credit Agreement;

(b) the Administrative Agent and the Lenders under and as defined in the Term Loan A Credit Agreement;

(c) the Administrative Agent and the Lenders under and as defined in the Term Loan B Credit Agreement;

(d) the Trustee for and the holders of the Company’s 7% Senior Notes Due 2015;

(e) the Trustee for and the holders of the Company’s 6  ¹/4% Senior Notes Due 2014;

(f) the Trustee for and the holders of the Company’s 7  ³/4% Senior Notes due 2013;

(g) the Trustee for and the holders of the Company’s 6  ⁷/8% Senior Notes due 2011;

(h) the Trustee for and the holders of the Company’s 6  ¹/2% Senior Notes due 2010;

(i) the Trustee for and the holders of the Company’s 5  ¹/8% Senior Notes due 2009;

(j) the Trustee for and the holders of the Company’s 6  ¹/2% Senior Notes due 2008; and

(k) the Creditor Representative for and the holders of each other class of senior indebtedness of the Company which is hereafter registered as Additional Covered Obligations pursuant to the Collateral Agency Agreement; in each case together with any trustee, administrative agent or other creditor representative thereof, and any issuing banks, swap counterparties, indemnitees, or other persons entitled to the benefit of the Collateral.

“Creditor Representative” means (a) the Administrative Agent under and as defined in the Revolving Credit Agreement, (b) the Administrative Agent under and as defined in the Term Loan A Credit Agreement, (c) the Administrative Agent under and as defined in the Term Loan B Credit Agreement, (d) the Trustee under the Indenture, and (e) the administrative agent, trustee or other representative of any Additional Covered Obligations.

“Event of Default” means the occurrence of any Event of Default or defined event of default under any Credit Document.

“Existing Credit Documents” means (a) the Revolving Credit Agreement and the “Loan Documents” (as such term is defined in the Revolving Credit Agreement), (b) the Term Loan A Credit Agreement and the “Loan Documents” (as such term is defined in the Term Loan A Credit Agreement), (c) the Term Loan B Credit Agreement and the “Loan Documents” (as such term is defined in the Term Loan B Credit Agreement), (d) the Indenture and the Existing Notes of the Company, and (e) all guarantees of such obligations issued by the Company or any of its Subsidiaries in respect of the foregoing, including the Existing Guarantees.

“Existing Guarantees” means guaranties or guarantees of the Obligations entered into by certain Subsidiaries of the Company dated as of a date on or prior to this Agreement, including the following guaranties or guarantees by the subsidiaries of the Company named therein, in each case as at any time amended, modified, supplemented, renewed or extended:

(a) Continuing Guaranty dated as of August 31, 2005 (as supplemented as of the date hereof) with respect to the Revolving Credit Agreement;

(b) Continuing Guaranty of even date herewith with respect to the Term Loan A Credit Agreement;

(c) Continuing Guaranty of even date herewith with respect to the Term Loan B Credit Agreement; and

(d) the guarantee obligations contained in the Eleventh Supplemental Indenture dated as of February 22, 2006 included in the Indenture with respect to the Existing Notes.

“Existing Notes” means each series of Notes referred to in clauses (d) through (j) of the definition of “Creditor Groups.”

“Hedge Obligations” means all obligations and indebtedness of the Company or any of its Subsidiaries under any Swap Contract (as defined in the Revolving Credit Agreement as in effect on the date hereof) entered into with any Person who is entitled to the benefits of this Agreement and the Collateral Agency Agreement pursuant to Section 4 of the Collateral Agency Agreement.

“Indenture” has the meaning set forth in the Recitals hereto.

“Lien” means any lien or security interest.

“New Guarantee” means a guaranty of any Obligations hereafter executed by any Subsidiary of the Company, in each case as at any time amended, modified, supplemented, renewed or extended.

“Notes” means the Existing Notes and, from and after the inclusion of any other series of notes registered as Additional Covered Obligations pursuant to the Collateral Agency Agreement, each such other series of notes.

“Obligations” means, collectively, all obligations and indebtedness of the Company or any of the Pledgor Subsidiaries which are owed to any Creditor under the Credit Documents.

“Pledgee Subsidiary” means each direct or indirect Subsidiary of the Company that (a) holds title to Real Estate Inventory constituting ten percent (10%) or more of the GAAP Value of all Real Estate Inventory owned by all Subsidiaries of the Company (other than (i) Excluded Subsidiaries and (ii) any Subsidiary that is a direct or indirect Subsidiary of another Subsidiary if all the shares of stock, other securities, partnership interests or membership interests, as applicable, of such other Subsidiary are pledged hereunder) or (b) is required to meet the Requisite Collateral Coverage; provided however, for purposes of determining if any Person is required to be a Pledgee Subsidiary, such Person will be deemed to own all of the Real Estate Inventory of its direct and indirect Subsidiaries (other than Excluded Subsidiaries).

“Qualified Obligations” means:

(a) in the case of each Creditor Group holding Term Credit Obligations, all principal Obligations owed to such Creditor Group which are outstanding immediately prior to the delivery of a Trigger Notice, together with interest, fees, premiums, indemnification claims, and reasonable costs and expenses allocable to such principal, whether arising before or after a Trigger Event;

(b) in the case of each Creditor Group holding Revolving Credit Obligations, all principal Obligations owed to such Creditor Group which are outstanding immediately prior to the delivery of a Trigger Notice (including, without duplication, the amount of any letters of credit and related reimbursement obligations or other liquidated or contingent obligations issued under the related Credit Documents) (to the extent entitled to the benefit of the relevant Credit Documents) together with interest, fees, premiums, indemnification claims and reasonable costs and expenses allocable to such principal, whether arising before or after a Trigger Event; and

(c) in the case of each Creditor Group holding Hedge Obligations, the net close-out amount and unpaid amounts owed to such Creditor Group immediately prior to the delivery of a Trigger Notice (as if such Hedge Obligations were then terminated), as calculated by Collateral Agent, together with any interest, fees, premiums, indemnification claims and reasonable costs and expenses allocable to such close-out amount (or unpaid amount) included in the Hedge Obligations, whether arising before or after a Trigger Event.

“Requisite Collateral Coverage” means Pledgee Subsidiaries owning, on an aggregate basis as of any date of determination, no less than sixty-five percent (65%) of the GAAP Value of all Real Estate Inventory owned by all Subsidiaries of the Company.

“Revolving Credit Agreement” has the meaning set forth in the Recitals hereto.

“Revolving Credit Obligations” means all obligations and indebtedness of the Company or any of its Subsidiaries under (a) the Revolving Credit Agreement and the Loan Documents described therein, and (b) any other Credit Documents hereafter entitled to the benefits of this Agreement and the Collateral Agency Agreement pursuant to Section 4 of the Collateral Agency Agreement under (and to the extent) which revolving credit facilities are provided to the Company or any of its Subsidiaries.

“Term Loan A Credit Agreement” has the meaning set forth in the Recitals hereto.

“Term Loan B Credit Agreement” has the meaning set forth in the Recitals hereto.

“Term Credit Obligations” means all obligations and indebtedness of the Company and its Subsidiaries, the holders of which are entitled to the benefits of this Agreement and the Collateral Agency Agreement pursuant to Section 4 of the Collateral Agency Agreement and which are not Revolving Credit Obligations or Hedge Obligations.

“Trigger Event” means any of the following:

(a) the occurrence of any default under any Credit Document consisting of a bankruptcy, insolvency or similar event with respect to the Company or any Subsidiary having assets in excess of $100,000,000, provided that in the case of the commencement of any involuntary bankruptcy with respect to the Company or any such Subsidiary, no Trigger Event shall be deemed to have occurred unless and until the shortest period of grace, applicable to an involuntary bankruptcy default and provided for in the then applicable Credit Documents, has expired; or

(b) the actual acceleration of any Obligations in a principal amount in excess of $100,000,000 by the holder or holders thereof or their representatives.

“Trigger Notice” means a written notice from any Creditor to the Collateral Agent that a Trigger Event has occurred.

“Trustee” means J.P. Morgan Trust Company, National Association, in its capacity as trustee under the Indenture and its successors, assigns and replacements in such capacity.

2. Pledge of Security. Each Pledgor hereby pledges and assigns to Collateral Agent, for the equal and ratable benefit of the Creditors, and hereby grants to Collateral Agent, for the equal and ratable benefit of the Creditors, a Lien in, all of such Pledgor’s right, title, and interest in and to the following (the “Collateral”):

(a) the Pledged Shares and the certificates representing the Pledged Shares and any interest or securities entitlement of such Pledgor in the entries on the books of any financial or securities intermediary pertaining to the Pledged Shares;

(b) the Pledged Interests, including without limitation all of such Pledgor’s right, title, and interest as a partner in the issuer of such Pledged Interests (if it is a partnership) or as a member of the issuer of such Pledged Interests (if it is a limited liability company), whether such right, title, and interest arises under any partnership agreement or limited liability company agreement (any such agreement being a “Formation Agreement”) or otherwise;

(c) all additional shares of, and all securities convertible into and warrants, options, and other rights to purchase or otherwise acquire, stock of any issuer of the Pledged Shares from time to time acquired by such Pledgor in any manner (which shares shall be deemed to be part of the Pledged Shares), the certificates or other instruments representing such additional shares, securities, warrants, options, or other rights and any interest of such Pledgor in the entries on the books of any financial intermediary pertaining to such additional shares;

(d) all dividends, cash, warrants, rights, instruments, and other property or proceeds from time to time received or otherwise distributed in respect of or in exchange for any or all of the Collateral referenced in clauses (a), (b), and (c) above;

(e) all of such Pledgor’s right, title and interest in and to all stock or other ownership record books relating to any of the Collateral; and

(f) to the extent not covered by clauses (a) through (e) above, all proceeds of any or all of the foregoing Collateral. For purposes of this Agreement, the term “proceeds” includes whatever is receivable or received when Collateral or proceeds are sold, exchanged, collected, or otherwise disposed of, whether such disposition is voluntary or involuntary, and includes, without limitation, proceeds of any indemnity or guaranty payable to such Pledgor or Collateral Agent from time to time with respect to any of the Collateral.

3. Security for Obligations. This Agreement secures, and the Collateral is collateral security for, the prompt payment or performance in full when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand, or otherwise (including the payment of amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. §362(a)), of all of the Obligations and all renewals or extensions thereof, whether for principal, interest (including without limitation interest that, but for the filing of a petition in bankruptcy with respect to any Pledgor, would accrue on such obligations), fees, expenses, indemnities, or otherwise, whether voluntary or involuntary, direct or indirect, absolute or contingent, liquidated or unliquidated, whether or not jointly owed with others, and whether or not from time to time decreased or extinguished and later increased, created, or incurred (but in each case (for purposes of determinations on and after the occurrence of a Trigger Event) subject to the limitations on the principal amount of Obligations set forth in the definition of “Qualified Obligations”), and all or any portion of such obligations or liabilities that are paid, to the extent all or any part of such payment is avoided or recovered directly or indirectly from Collateral Agent or any Creditor as a preference, fraudulent transfer, or otherwise (all such obligations and liabilities being the “Underlying Debt”), and all payment obligations of the Company or any other Pledgor now or hereafter existing under Section 13 of this Agreement (all such obligations of Pledgors, together with the Underlying Debt, being the “Secured Obligations”).

4. Delivery of Collateral. All certificates or instruments representing or evidencing the Collateral shall be delivered to and held by or on behalf of Collateral Agent pursuant hereto and shall be in suitable form for transfer by delivery or, as applicable, shall be accompanied by the applicable Pledgor’s endorsement, where necessary, or duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to Collateral Agent. Collateral Agent shall have the right, at any time in its discretion and without notice to any Pledgor, to transfer to or to register in the name of Collateral Agent or any of its nominees any or all of the Collateral, subject only to the revocable rights specified in Section 7(a). In addition, Collateral Agent shall have the right at any time to exchange certificates or instruments representing or evidencing Collateral for certificates or instruments of smaller or larger denominations.

5. Representations and Warranties. Each Pledgor represents and warrants, as of the date hereof, that:

(a) Due Authorization, etc. of Collateral. All of the Pledged Shares and Pledged Interests have been duly authorized and validly issued and are fully paid and nonassessable.

(b) Description of Collateral. The Pledged Shares and Pledged Interests (i) constitute all of the issued and outstanding shares of stock of each of the Pledgee Subsidiaries, (ii) there are no outstanding warrants, options or other rights to purchase, or other agreements outstanding with respect to, or property that is now or hereafter convertible into, or that requires the issuance or sale of, any Pledged Shares, and (iii) together with the Pledged Interests are sufficient to satisfy the Requisite Collateral Coverage.

(c) Ownership of Collateral. Each Pledgor is the legal, record, and beneficial owner of the Collateral listed next to its name on Schedule 1, free and clear of any Lien except for the Lien created by this Agreement.

(d) Governmental Authorizations. No authorization, approval, or other action by, and no notice to or filing with, any Governmental Authority is required for either (i) the pledge by any Pledgor of the Collateral pursuant to this Agreement and the grant by any Pledgor of the Lien granted hereby, (ii) the execution, delivery, or performance of this Agreement by any Pledgor, or (iii) the exercise by Collateral Agent of the voting or other rights, or the remedies in respect of the Collateral, provided for in this Agreement (except as may be required in connection with a disposition of Collateral by laws affecting the offering and sale of securities generally).

(e) Perfection. The pledge of the Collateral pursuant to this Agreement creates a valid and perfected first priority Lien in the Collateral, securing the payment of the Secured Obligations.

(f) Margin Regulations. The pledge of the Collateral pursuant to this Agreement does not violate Regulation T, U, or X of the Board of Governors of the Federal Reserve System.

6. Assurances and Covenants of each Pledgor.

(a) Transfers and Other Liens. No Pledgor shall:

(i) sell, assign (by operation of law or otherwise), pledge, or hypothecate or otherwise dispose of, or grant any option with respect to, any of the Collateral except for the Lien created under this Agreement; provided that each Pledgor may sell or dispose of any Collateral so long as, (A) both before and after giving effect to such sale or disposition, (x) no Default or Event of Default exists and (y) Pledgors have satisfied the Requisite Collateral Coverage or (B) such sale or disposition is authorized pursuant to Section 7(b) of the Collateral Agency Agreement, and in either case upon such permitted sale or disposition any assets so sold or disposed as permitted by this Section 6(a) shall be released from the Lien of this Agreement as provided in Section 17; or

(ii) create or suffer to exist any Lien upon or with respect to any of the Collateral, except for the Lien created under this Agreement.

(b) Additional Collateral – Existing Pledgee Subsidiaries. Each Pledgor shall (i) cause each issuer of Pledged Shares or Pledged Interests not to issue any stock or other securities in addition to or in substitution for the Pledged Shares or Pledged Interests issued by such issuer, except to such Pledgor and (ii) pledge hereunder pursuant to Section 6(d), promptly upon its acquisition (directly or indirectly) thereof, any and all additional shares of stock or other securities or interests of each issuer of Pledged Shares or Pledged Interests.

(c) Additional Collateral – New Pledgee Subsidiaries. The Company shall pledge, or cause a Pledgor Subsidiary to pledge, the shares of stock, other securities partnership interests or membership interests, as the case may be, of any additional Subsidiary that is described as the issuer of Pledged Shares or Pledged Interests in a Pledge and Security Amendment executed and delivered from time to time by the Company or such Pledgor Subsidiary, in order to maintain, at each Certificate Delivery Date (and determined as of the end of the latest fiscal quarter preceding such Certificate Delivery Date), the Requisite Collateral Coverage.

(d) Pledge Amendments. Each Pledgor shall, upon obtaining any additional shares of stock or other securities or interests required to be pledged hereunder as provided in Section 6(b), promptly (and in any event on or before five (5) Business Days after obtaining such securities) deliver to Collateral Agent a Pledge and Security Amendment, duly executed by such Pledgor, in substantially the form of Exhibit A attached hereto (a “Pledge and Security Amendment”), in respect of the additional Pledged Shares or Pledged Interests to be pledged pursuant to this Agreement. Each Pledgor shall, upon pledging any additional shares of stock, other securities partnership interests or membership interests, as the case may be, of any additional Subsidiary pursuant to Section 6(b), deliver to the Collateral Agent a Pledge and Security Amendment, duly executed by such Pledgor, in respect of the additional Pledged Shares or Pledged Interests to be pledged pursuant to this Agreement. Each Pledgor hereby authorizes Collateral Agent to attach each Pledge and Security Amendment to this Agreement and agrees that all Pledged Shares listed on any Pledge and Security Amendment delivered to Collateral Agent shall for all purposes hereunder be considered Collateral; provided that the failure of any Pledgor to execute a Pledge and Security Amendment with respect to any additional Pledged Shares pledged pursuant to this Agreement shall not impair the Lien of Collateral Agent therein or otherwise adversely affect the rights and remedies of Collateral Agent hereunder with respect thereto.

(e) Taxes and Assessments. Each Pledgor shall pay promptly when due all taxes, assessments and governmental charges or levies imposed upon, and all claims against, the Collateral, except to the extent the validity thereof is being contested in good faith and by appropriate proceedings and in which reserves or other appropriate provisions, if any, as shall be required in conformity with GAAP, have been made or provided therefor; provided that each Pledgor shall in any event pay such taxes, assessments, charges, levies, or claims not later than five (5) days prior to the date of any proposed sale under any judgement, writ, or warrant of attachment entered or filed against such Pledgor or any of the Collateral as a result of the failure to make such payment.

(f) Further Assurances Perfection. Each Pledgor shall from time to time, at the expense of Pledgors, promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, or that Collateral Agent may reasonably request, in order to perfect and protect any Lien granted or purported to be granted hereby or to enable Collateral Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the foregoing, each Pledgor will:

(i) authenticate and file, or authorize Collateral Agent to file, such financing or continuation statements, or amendments thereto, and such other instruments or notices, as may be necessary or desirable, or as Collateral Agent may reasonably request, in order to perfect and preserve the Liens granted or purported to be granted hereby

(ii) provide the Collateral Agent, on a timely basis, with any documents as may be required under the Trust Indenture Act of 1939, as amended;

(iii) at Collateral Agent’s request, appear in and defend any action or proceeding that may affect any Pledgor’s title to or Collateral Agent’s Lien in all or any part of the Collateral; and

(iv) take any and all action that may be necessary or appropriate to cause any partnership or limited liability company to which any Pledgor is a partner or member, respectively, and which constitute Pledged Interests, to register the Lien of Collateral Agent in the Pledged Interests, including, without limitation, to deliver to such partnership or limited liability company, as the case may be, instructions to register pledge substantially in the form of Exhibit B attached hereto and, to this end, cause such partnership or limited liability company to register the Lien granted hereby upon the books of such partnership or limited liability company, as the case may be, in accordance with Article 8 of the Uniform Commercial Code, as adopted in the State of California (the “Code”).

(g) Authorization to File Financing Statements.

(i) Each Pledgor hereby authorizes Collateral Agent to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral, in such filing offices as Collateral Agent shall deem appropriate, and each Pledgor shall authenticate and deliver to Collateral Agent such financing or continuation statements, and amendments thereto, promptly upon the request of Collateral Agent and, shall pay Collateral Agent’s reasonable costs and expenses incurred in connection therewith.

(ii) Each Pledgor hereby further authorizes Collateral Agent to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral without the signature of such Pledgor, and each Pledgor agrees that a carbon, photographic, or other reproduction of this Agreement or of a financing statement authenticated by such Pledgor shall be sufficient as a financing statement and may be filed as a financing statement in any and all jurisdictions.

(h) Formation Agreements. Each Pledgor shall, at its expense, maintain each applicable Formation Agreement in full force and effect, without any cancellation, termination, amendment, supplement, or other modification of such Formation Agreement, except as explicitly required by its terms (as in effect on the date hereof), except for amendments, supplements or other modifications that do not adversely affect the interests of the Creditors in any material respect and except for Formation Agreements in respect of Pledged Interests of partnerships or limited liability companies that have been released from this Agreement under Section 17.

7. Voting Rights; Dividends; Etc.

(a) So long as no Trigger Event shall have occurred and be continuing:

(i) each Pledgor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Collateral or any part thereof for any purpose not inconsistent with the terms of this Agreement or the Credit Documents;

(ii) each Pledgor shall be entitled to receive and retain, and to utilize free and clear of the Lien of this Agreement, any and all dividends, cash, warrants, rights, instruments, and other property or proceeds from time to time received or otherwise distributed in respect of or in exchange for any Collateral; provided, however, that any and all such dividends, distributions, property or proceeds paid or payable on the Collateral in the form of additional securities of a Pledgee Subsidiary shall be, and shall forthwith be delivered to Collateral Agent to

hold as Collateral and shall, if received by any Pledgor, be received in trust for the benefit of Collateral Agent, be segregated from the other property or funds of such Pledgor and be forthwith delivered to Collateral Agent as Collateral in the same form as so received (with all necessary endorsements); and

(iii) Collateral Agent shall promptly execute and deliver (or cause to be executed and delivered) to Pledgors all such proxies, dividend payment orders, and other instruments as any Pledgor may from time to time reasonably request for the purpose of enabling such Pledgor to exercise the voting and other consensual rights which it is entitled to exercise pursuant to paragraph (i) above and to receive the dividend payments which it is authorized to receive and retain pursuant to paragraph (ii) above.

(b) Upon the occurrence and during the continuation of a Trigger Event:

(i) upon written notice from Collateral Agent to Pledgors, all rights of any Pledgor to exercise the voting and other consensual rights which it would otherwise be entitled to exercise pursuant to Section 7(a)(i) shall cease, and all such rights shall thereupon become vested in Collateral Agent who shall thereupon have the sole right to exercise such voting and other consensual rights;

(ii) all rights of any Pledgor to receive the dividends, cash, warrants, rights, instruments, and other property or proceeds in respect of or in exchange for any Collateral which it would otherwise be authorized to receive and retain pursuant to Section 7(a)(ii) shall cease, and all such rights shall thereupon become vested in Collateral Agent who shall thereupon have the sole right to receive and hold as Collateral such dividend payments; and

(iii) all dividends, cash, warrants, rights, instruments, and other property or proceeds in respect of or in exchange for any Collateral which are received by any Pledgor contrary to the provisions of paragraph (ii) of this Section 7(b) shall be received in trust for the benefit of Collateral Agent, shall be segregated from other funds of such Pledgor and shall forthwith be paid over to Collateral Agent as Collateral in the same form as so received (with any necessary endorsements).

(c) In order to permit Collateral Agent to exercise the voting and other consensual rights which it may be entitled to exercise pursuant to Section 7(b)(i) and to receive all dividends and other distributions which it may be entitled to receive under Section 7(a)(ii) or Section 7(b)(ii), (i) each Pledgor shall promptly execute and deliver (or cause to be executed and delivered) to Collateral Agent all such proxies, dividend payment orders, and other instruments as Collateral Agent may from time to time reasonably request, and (ii) without limiting the effect of the immediately preceding clause (i), each Pledgor hereby grants to Collateral Agent an irrevocable proxy to vote the Pledged Shares and to exercise all other rights, powers, privileges, and remedies to which a holder of the Pledged Shares would be entitled (including, without limitation, giving or withholding written consents of shareholders, calling special meetings of shareholders, and voting at such meetings), which proxy shall be effective, automatically and without the necessity of any action (including any transfer of any Pledged Shares on the record books of the issuer thereof) by any other Person (including the issuer of the Pledged Shares or any officer or agent thereof), upon the occurrence of a Trigger Event and which proxy shall only terminate upon the payment in full of the Secured Obligations or waiver or cure of such Trigger Event.

(d) Notwithstanding any of the foregoing, each Pledgor agrees that this Agreement shall not in any way be deemed to obligate Collateral Agent or any Creditor to assume any of such Pledgor’s obligations, duties, expenses, or liabilities arising out of this Agreement (including, without limitation, such Pledgor’s obligations as the holder of the Pledged Shares and as holder of the Pledged Interests) or under any and all other agreements now existing or hereafter drafted or executed (collectively, the “Pledgor Obligations”) unless Collateral Agent otherwise expressly agrees to assume any or all of said Pledgor Obligations in writing. Without limiting the generality of the foregoing, neither the grant of the Lien in the Collateral in favor of Collateral Agent as provided herein nor the exercise by Collateral Agent of any of its rights hereunder nor any action by Collateral Agent in connection with a foreclosure on the Collateral shall be deemed to constitute Collateral Agent as a partner of any partnership or a member of any limited liability company; provided, however, that in the event Collateral Agent elects to become a substituted partner of any partnership or a member of any limited liability company in place of Pledgor while a Trigger Event has occurred and is continuing, Collateral Agent shall be entitled to and shall become such a substitute partner or member.

8. Collateral Agent Appointed Attorney-in-Fact. Each Pledgor hereby irrevocably appoints Collateral Agent as such Pledgor’s attorney-in-fact, with full authority in the place and stead of such Pledgor and in the name of such Pledgor, Collateral Agent or otherwise, from time to time in Collateral Agent’s discretion:

(a) to file one or more financing or continuation statements, or amendments thereto, relative to all or any part of the Collateral without the signature of Pledgor;

(b) subsequent to a Trigger Event, to ask, demand, collect, sue for, recover, compound, receive, and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral;

(c) subsequent to a Trigger Event, to receive, endorse, and collect any instruments made payable to any Pledgor representing any dividend payment or other distribution in respect of the Collateral or any part thereof and to give full discharge for the same; and

(d) subsequent to a Trigger Event, to file any claims or take any action or institute any proceedings that Collateral Agent may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of Collateral Agent with respect to any of the Collateral.

9. Collateral Agent May Perform. If any Pledgor fails to perform any agreement contained herein, then Collateral Agent may itself perform, or cause performance of, such agreement, and the expenses of Collateral Agent incurred in connection therewith shall be payable by such Pledgor under Section 13(b).

10. Standard of Care. The powers conferred on Collateral Agent hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. Except for the exercise of reasonable care in the custody of any Collateral in its possession or under its control and the accounting for moneys actually received by it hereunder, Collateral Agent shall have no duty as to any Collateral, it being understood that Collateral Agent shall have no responsibility for (a) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders, or other matters relating to any Collateral, whether

or not Collateral Agent has or is deemed to have knowledge of such matters, (b) taking any necessary steps (other than steps taken in accordance with the standard of care set forth above to maintain possession or control of the Collateral) to preserve rights against any parties with respect to any Collateral, (c) taking any necessary steps to collect or realize upon the Secured Obligations or any guarantee therefor, or any part thereof, or any of the Collateral, or (d) initiating any action to protect the Collateral against the possibility of a decline in market value. Collateral Agent shall be deemed to have exercised reasonable care in the custody and preservation of Collateral in its possession or control if such Collateral is accorded treatment substantially equal to that which Collateral Agent accords its own property consisting of negotiable securities.

11. Remedies.

(a) If any Trigger Event shall have occurred and be continuing, then Collateral Agent may exercise in respect of the Collateral, and in accordance with the terms and conditions of the Collateral Agency Agreement, in addition to all other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a Collateral Agent on default under the Code (whether or not the Code applies to the affected Collateral), and Collateral Agent may also in its sole discretion, without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any exchange or broker’s board or at any of Collateral Agent’s offices or elsewhere, for cash, on credit, or for future delivery, at such time or times and at such price or prices and upon such other terms as Collateral Agent may deem commercially reasonable, irrespective of the impact of any such sales on the market price of the Collateral. Collateral Agent or any Creditor may be the purchaser of any or all of the Collateral at any such sale and Collateral Agent, as agent for and representative of Creditors, shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such public sale, to use and apply any of the Secured Obligations as a credit on account of the purchase price for any Collateral payable by Collateral Agent at such sale. Each purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of any Pledgor, and each Pledgor hereby waives (to the extent permitted by applicable law) all rights of redemption, stay, and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. Each Pledgor agrees that, to the extent notice of sale shall be required by law, at least ten (10) days’ prior notice to the applicable Pledgor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. Collateral Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. Collateral Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. Each Pledgor hereby waives any claims against Collateral Agent arising by reason of the fact that the price at which any Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale, even if Collateral Agent accepts the first offer received and does not offer such Collateral to more than one offeree; provided however, that Pledgors do not waive the requirements of Section 9-610 of the Code with respect to any sale or other disposition of the Collateral that is conducted under such Section.

(b) Each Pledgor recognizes that, by reason of certain prohibitions contained in the Securities Act of 1933, as from time to time amended (the “Securities Act”), and applicable state securities laws, Collateral Agent may be compelled, with respect to any sale of all or any part of the Collateral conducted without prior registration or qualification of such Collateral under the Securities Act and/or such state securities laws, to limit purchasers to those who will agree, among other things, to acquire the Collateral for their own account, for investment and not with a view to the distribution or resale thereof. Each Pledgor acknowledges that any such private sales may be at prices and on terms less favorable than those obtainable through a public sale without such restrictions (including, without limitation, a public offering made pursuant to a registration statement under the Securities Act) and, notwithstanding such circumstances, each Pledgor agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner and that Collateral Agent shall have no obligation to engage in public sales and no obligation to delay the sale of any Collateral for the period of time necessary to permit the issuer thereof to register it for a form of public sale requiring registration under the Securities Act or under applicable state securities laws, even if such issuer would, or should, agree to so register it.

(c) If Collateral Agent determines to exercise its right to sell any or all of the Collateral, then upon Collateral Agent’s written request, each Pledgor shall and shall cause each issuer of any Pledged Shares to be sold hereunder from time to time to furnish to Collateral Agent all such information as Collateral Agent may request in order to determine the number of shares and other instruments included in the Collateral which may be sold by Collateral Agent in exempt transactions under the Securities Act and the rules and regulations of the Securities and Exchange Commission thereunder, as the same are from time to time in effect.

12. Application of Proceeds. All proceeds received by Collateral Agent in respect of any sale of, collection from, or other realization upon all or any part of the Collateral shall be held and applied in accordance with the Collateral Agency Agreement.

13. Indemnity and Expenses.

(a) Each Pledgor agrees to indemnify Collateral Agent and each Creditor from and against any and all claims, losses, and liabilities in any way relating to, growing out of, or resulting from this Agreement and the transactions contemplated hereby (including, without limitation, enforcement of this Agreement), except to the extent such claims, losses, or liabilities result from Collateral Agent’s or such Creditor’s gross negligence or willful misconduct as finally determined by a court of competent jurisdiction.

(b) Pledgors shall pay to Collateral Agent upon demand the amount of any and all costs and expenses, including the reasonable fees and expenses of its counsel and of any experts and agents, that Collateral Agent may incur in connection with (i) the administration of this Agreement, (ii) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Collateral, (iii) the exercise or enforcement of any of the rights of Collateral Agent hereunder, or (iv) the failure by any Pledgor to perform or observe any of the provisions hereof.

14. Continuing Security Interest; Transfer of Loans. This Agreement shall create a continuing Lien in the Collateral and shall (a) remain in full force and effect until the payment in full of all Term Loans (as defined in the Term Loan B Credit Agreement) and payment of all

other Obligations under and as defined in the Term B Credit Agreement then due and payable, (b) be binding upon each Pledgor, its successors and assigns, and (c) inure, together with the rights and remedies of Collateral Agent hereunder, to the benefit of Collateral Agent and its successors, transferees, and assigns. Without limiting the generality of the foregoing clause (c), but subject to the relevant provisions of the Credit Documents, any Creditor may assign or otherwise transfer any Secured Obligations held by it to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Creditor herein or otherwise. Upon (i) the indefeasible payment in full of all Term Loans (as defined in the Term Loan B Credit Agreement) and (ii) payment of all other Obligations under and as defined in the Term Loan B Credit Agreement then due and payable, the Lien granted hereby shall terminate and all rights to the Collateral shall revert to Pledgors (provided that, if an Event of Default then exists, such termination and reversion shall not occur until such time as no Event of Default is continuing). In addition, the Lien granted hereby shall terminate and all rights to the Collateral shall revert to Pledgors under the circumstances provided in Section 7(b) of the Collateral Agency Agreement (if a release of all Collateral is authorized thereunder) or Section 13 of the Collateral Agency Agreement. Upon any such termination Collateral Agent will, at Pledgors’ expense, execute and deliver to Pledgors such documents as Pledgors shall reasonably request to evidence such termination and Pledgors shall be entitled to the return, upon their request and at their expense, against receipt and without recourse to Collateral Agent, of such Collateral as shall not have been sold or otherwise applied pursuant to the terms hereof.

15. Collateral Agent as Collateral Agent. Collateral Agent has been appointed to act as Collateral Agent hereunder by Creditors, subject to the terms and conditions of the Collateral Agency Agreement. Collateral Agent shall be obligated, and shall have the right hereunder, to make demands, to give notices, to exercise or refrain from exercising any rights, and to take or refrain from taking any action (including, without limitation, the release or substitution of Collateral), solely in accordance with this Agreement and the Collateral Agency Agreement.

16. Additional Pledgor Subsidiaries. The Company and the Pledgor Subsidiaries hereby agree that they shall, concurrently with the pledge of Pledged Shares or Pledged Interests by any Subsidiary not theretofore a Pledgor Subsidiary (an “Additional Pledgor Subsidiary”), cause such Additional Pledgor Subsidiary to enter into a joinder hereto, substantially in the form of Exhibit C, together with a Pledge Amendment in the form of Exhibit A, listing the Collateral to be pledged by such Additional Pledgor Subsidiary. Such Additional Pledgor Subsidiary hereby authorizes Collateral Agent to attach each Pledge and Security Amendment to this Agreement and agrees that all Pledged Shares or Pledged Interests listed on any Pledge and Security Amendment delivered to Collateral Agent shall, for all purposes hereunder, be considered Collateral. Such Additional Pledgor Subsidiary shall comply with the provisions of Section 4 with respect to delivery of the Pledged Shares.

17. Release of Collateral. Collateral shall be released from the Lien of this Agreement upon any of the following events: (i) any sale or disposition of such Collateral as permitted by Section 6(a), such release to be confirmed by delivery to the Collateral Agent of a certificate of an officer of the Company stating that such Collateral is being sold or disposed of as permitted by Section 6(a); (ii) delivery to the Collateral Agent of a certificate of an officer of the Company requesting the release of the shares of stock, other securities, partnership interests

or membership interests, as the case may be, issued by a Subsidiary identified in such certificate and stating that, on the date of certificate, (A) such Subsidiary owns less than 10% of the Real Estate Inventory owned by the Company’s Subsidiaries (or such Subsidiary is a direct or indirect Subsidiary of another Subsidiary and all the shares of stock, other securities, partnership interests or membership interests, as applicable, of such other Subsidiary are pledged hereunder) and (B) the Pledgee Subsidiaries (not including such Subsidiary) collectively own at least 65% of the Real Estate Inventory owned by the Company’s Subsidiaries (for purposes of the foregoing clauses (A) and (B), in determining the amount of Real Estate Inventory owned by any Subsidiary, such Subsidiary will be deemed to own all of the Real Estate Inventory owned by its direct and indirect Subsidiaries), (iii) upon termination of Liens pursuant to Section 14, (iv) as provided in Section 7(b) of the Collateral Agency Agreement, or (v) as provided in Section 7(a)(ii) of this Agreement. Upon any release of Collateral pursuant to the terms of this Section 17, (i) the Collateral Agent shall thereupon return to the respective Pledgor or to its order any and all certificates and other instruments evidencing or relating to such released Collateral and (ii) the Collateral Agent will, at Pledgors’ expense, file, or will authorize the respective Pledgor to file, an amendment to any financing statement releasing such Collateral.

18. Amendments; Etc. No amendment, modification, termination, or waiver of any provision of this Agreement, and no consent to any departure by Pledgor from the terms and conditions hereof, shall in any event be effective unless the same shall be in writing and signed by Collateral Agent and, in the case of any such amendment or modification, by Pledgors. Any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given.

19. Notices. Any notice or other communication herein required or permitted to be given shall be in writing and (a) if to the Pledgors, shall be to the Company in accordance with the provisions of Section 11.11 of the Term Loan B Credit Agreement; or (b) if to Collateral Agent or Creditors in accordance with the provisions of Section 14 of the Collateral Agency Agreement.

20. Failure or Indulgence Not Waiver; Remedies Cumulative. No failure or delay on the part of Collateral Agent in the exercise of any power, right, or privilege hereunder shall impair such power, right, or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right, or privilege preclude any other or further exercise thereof or of any other power, right, or privilege. All rights and remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available.

21. Severability. In case any provision in or obligation under this Agreement shall be invalid, illegal, or unenforceable in any jurisdiction, the validity, legality, and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.

22. Headings. Section and subsection headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect.

23. Governing Law; Terms. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT THE CODE PROVIDES THAT THE VALIDITY OR PERFECTION OF THE LIENS AND SECURITY INTERESTS HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF CALIFORNIA. Unless otherwise defined herein, terms used in Articles 8 and 9 of the Code are used herein as therein defined.

24. Consent to Jurisdiction and Service of Process. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST PLEDGOR ARISING OUT OF OR RELATING TO THIS AGREEMENT MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT EACH PLEDGOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT. Each Pledgor hereby agrees that service of all process in any such proceeding in any such court may be made by registered or certified mail, return receipt requested, to such Pledgor at its address provided on the signature page hereof, such service being hereby acknowledged by such Pledgor to be sufficient for personal jurisdiction in any action against such Pledgor in any such court and to be otherwise effective and binding service in every respect. Nothing herein shall affect the right to serve process in any other manner permitted by law or shall limit the right of Collateral Agent to bring proceedings against any Pledgor in the courts of any other jurisdiction.

25. Waiver of Jury Trial. EACH PLEDGOR AND COLLATERAL AGENT HEREBY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including without limitation contract claims, tort claims, breach of duty claims, and all other common law and statutory claims. Each Pledgor and Collateral Agent each acknowledge that this waiver is a material inducement for each Pledgor and Collateral Agent to enter into a business relationship, that each Pledgor and Collateral Agent have already relied on this waiver in entering into this Agreement and that each will continue to rely on this waiver in their related future dealings. Each Pledgor and Collateral Agent further warrant and represent that each has reviewed this waiver with its legal counsel, and that each knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS RENEWALS, SUPPLEMENTS, OR MODIFICATIONS TO THIS AGREEMENT. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court.

26. Counterparts. This Agreement may be executed in one or more counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document.

27. Limitation. It is the intention of each Pledgor Subsidiary, Collateral Agent, and each Creditor that the amount of the Secured Obligations shall be in, but not in excess of, the maximum amount permitted by fraudulent conveyance, fraudulent transfer, or similar Laws applicable to each Pledgor Subsidiary. Accordingly, notwithstanding anything to the contrary contained in this Agreement or any other agreement or instrument executed in connection with the payment of any of the Secured Obligations, the amount of the Secured Obligations shall be limited to that amount which after giving effect thereto would not (a) render any Pledgor Subsidiary insolvent, (b) result in the fair saleable value of the assets of any Pledgor Subsidiary being less than the amount required to pay its debts and other liabilities (including contingent liabilities) as they mature, or (c) leave any Pledgor Subsidiary with unreasonably small capital to carry out its business as now conducted and as proposed to be conducted, including its capital needs, as such concepts described in (a), (b), and (c) herein are determined under applicable Laws, if the obligations of such Pledgor Subsidiary hereunder would otherwise be set aside, terminated, annulled, or avoided for such reason by a court of competent jurisdiction in a proceeding actually pending before such court.

[Remainder of Page Intentionally Left Blank;

Signature Pages to Follow]

IN WITNESS WHEREOF, each Pledgor and Collateral Agent have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above.

COMPANY:

STANDARD PACIFIC CORP., a Delaware corporation

By:	/s/ Andrew H. Parnes
	Andrew H. Parnes
	Executive Vice President-Finance and Chief Financial Officer
By:	/s/ John M. Stephens
	John M. Stephens
	Vice President and Corporate Controller

Address for Notices:

Standard Pacific Corp.

15326 Alton Parkway

Irvine, California 92618-2338

Attn: Mr. Andrew H. Parnes

Telephone: (949) 789-1616

Telecopier: (949) 789-1609

Signature Page to Pledge Agreement

PLEDGOR SUBSIDIARIES:

SP TEXAS INVESTMENTS, INC., a Delaware corporation

STANDARD PACIFIC OF TEXAS GP, INC., a Delaware corporation

By:	/s/ John M. Stephens
	Assistant Treasurer of each of the foregoing Pledgor Subsidiaries

Address for each of the foregoing Pledgor Subsidiaries:

15326 Alton Parkway

Irvine, California 92618

Attn: Clay A. Halvorsen, General Counsel

John Babel, Assistant General Counsel

Telephone: (949) 789-1618

Telecopier: (949) 789-1609

Signature Page to Pledge Agreement

COLLATERAL AGENT:

BANK OF AMERICA, N.A., a national banking association

By:	/s/ Eyal Namordi
Name:	Eyal Namordi
Title:	Vice President

Notice Address:

Bank of America, N.A.

Agency Management

100 North Tryon Street, 14th Floor

NC1-007-14-24

Charlotte, NC 28255

Attention: Cindy K. Fisher

Telephone: (704) 387-5452

Telecopy: (704) 409-0180

Signature Page to Pledge Agreement

SCHEDULE 1

PART A

Pledgor	Stock Issuer	Class of Stock	Stock Certificate	Par Value		Number of Shares
Standard Pacific Corp.	Standard Pacific of Arizona, Inc.	common	1	$	0.01	100
Standard Pacific Corp	Standard Pacific of Las Vegas, Inc.	common	1	$	0.01	100
Standard Pacific Corp	Standard Pacific of South Florida GP, Inc.	common	1	$	0.01	100
Standard Pacific Corp	Westfield Homes USA, Inc.	common	1	$	0.01	100

PART B

Limited Partnerships

Pledgor	Limited Partnership	Percentage Interest*
Standard Pacific of Texas GP, Inc.	Standard Pacific of Texas, L.P.	0.5	%
SP Texas Investments, Inc.	Standard Pacific of Texas, L.P.	99.5	%

* 100% of the partnership interests of Standard Pacific of Texas, L.P. is being pledged, of which 0.5% is held by Standard Pacific of Texas GP, Inc. as the General Partner and 99.5% is held by SP Texas Investments, Inc. as the Limited Partner.

Limited Liability Companies

January 5, 2009

PLEDGE AMENDMENT

(to Pledge Agreement dated May 5, 2006)

This Pledge Amendment, dated January 5, 2009, is delivered pursuant to Section 6(d) of the Pledge Agreement referred to below. The undersigned hereby agrees that this Pledge Amendment may be attached to the Pledge Agreement dated as of May 5, 2006, between the undersigned, each other Pledgor party thereto, and Bank of America, N.A., as Collateral Agent (the “Pledge Agreement;” capitalized terms defined therein being used herein as therein defined), and that the Pledged Shares and Pledged Interests listed on this Pledge Amendment shall be deemed to be part of the Pledged Shares and Pledged Interests and shall become part of the Collateral and shall secure all Secured Obligations.

Attached hereto is an updated version of Schedule 1 to the Pledge Agreement reflecting all of the interests that have been pledged through the date hereof.

PLEDGOR:
Standard Pacific of Orange County, Inc.
By:	/s/ John M. Stephens
Name:	John M. Stephens
Title:	Principal Financial & Accounting Officer

PART A

Pledgor	Stock Issuer	Class of     Stock	Stock     Certificate     Nos.	Par Value		Number of Shares
Standard Pacific of Orange County, Inc.	Standard Pacific of Walnut Hills, Inc.	Common	1	$	0.01	100

PART B

Limited Liability Companies

Pledgor	Limited Liability Company	Percent Interest
Standard Pacific Corp.	Standard Pacific of Tonner Hills, LLC	100	%

SCHEDULE 1

(Last Updated on January 5, 2008)

PART A

Pledgor	Stock Issuer	Class of     Stock	Stock     Certificate     Nos.	Par     Value		Number of Shares
Standard Pacific Corp.	Standard Pacific of Arizona, Inc.	common	1	$	0.01	100	*
Standard Pacific Corp	Standard Pacific of Las Vegas, Inc.	common	1	$	0.01	100	*
Standard Pacific Corp	Standard Pacific of South Florida GP, Inc.	common	1	$	0.01	100	*
Standard Pacific Corp	Westfield Homes USA, Inc.	common	1	$	0.01	100	*
Standard Pacific Corp.	Standard Pacific of Texas, Inc.	common	1	$	0.01	100	**
Standard Pacific of Orange County, Inc.	Standard Pacific of Walnut Hills, Inc.	common	1	$	0.01	100

* Previously pledged on May 5, 2006

** Previously pledged on June 30, 2007

PART B

Limited Liability Companies

Pledgor	Limited Liability Company	Percent Interest
Standard Pacific Corp.	Standard Pacific of Tonner Hills, LLC	100	%

COUNTERPART TO PLEDGE AGREEMENT

In witness whereof, the undersigned Additional Pledgor Subsidiary has caused this Pledge Agreement to be executed and delivered by its officer thereunto duly authorized as of January 5, 2009, and has delivered herewith, all items required by Section 16 of this Pledge Agreement.

STANDARD PACIFIC OF ORANGE COUNTY, INC.
By:	/s/ John M. Stephens
	Name:	John M. Stephens
	Title:	Principal Financial & Accounting Officer

Address for Notice:

26 Technology Drive

Irvine, California 92618-2338

Attn: John M. Stephens, SVP and CFO

August 21, 2009

PLEDGE AMENDMENT

(to Pledge Agreement dated May 5, 2006)

This Pledge Amendment, dated August 21, 2009, is delivered pursuant to Section 6(d) of the Pledge Agreement referred to below. The undersigned hereby agrees that this Pledge Amendment may be attached to the Pledge Agreement dated as of May 5, 2006, between the undersigned, each other Pledgor party thereto, and Bank of America, N.A., as Collateral Agent (the “Pledge Agreement;” capitalized terms defined therein being used herein as therein defined), and that the Pledged Shares and Pledged Interests listed on this Pledge Amendment shall be deemed to be part of the Pledged Shares and Pledged Interests and shall become part of the Collateral and shall secure all Secured Obligations.

Attached hereto is an updated version of Schedule 1 to the Pledge Agreement reflecting all of the interests that have been pledged through the date hereof.

PLEDGOR: Standard Pacific of Orange County, Inc. Standard Pacific Investment Corp.
By:	/s/ John M. Stephens
	Name:	John M. Stephens
	Title:	Principal Financial & Accounting Officer

PART B

Limited Liability Companies

Pledgor	Limited Liability Company	Percent Interest
Standard Pacific of Orange County, Inc./Standard Pacific Investment Corp.	Talega Associates, LLC	100	%

SCHEDULE 1

(Last Updated on August 21, 2009)

PART A

Pledgor	Stock Issuer	Class of     Stock	Stock     Certificate     Nos.	Par     Value		Number of Shares
Standard Pacific Corp.	Standard Pacific of Arizona, Inc.	common	1	$	0.01	100	*
Standard Pacific Corp	Standard Pacific of Las Vegas, Inc.	common	1	$	0.01	100	*
Standard Pacific Corp	Standard Pacific of South Florida GP, Inc.	common	1	$	0.01	100	*
Standard Pacific Corp	Westfield Homes USA, Inc.	common	1	$	0.01	100	*
Standard Pacific Corp.	Standard Pacific of Texas, Inc.	common	1	$	0.01	100	**
Standard Pacific of Orange County, Inc.	Standard Pacific of Walnut Hills, Inc.	common	1	$	0.01	100	***

* Previously pledged on May 5, 2006

** Previously pledged on June 30, 2007

*** Previously pledged on January 5, 2009

PART B

Limited Liability Companies

Pledgor	Limited Liability Company	Percent Interest
Standard Pacific Corp.	Standard Pacific of Tonner Hills, LLC	100	%***
Standard Pacific of Orange County, Inc./Standard Pacific Investment Corp.	Talega Associates, LLC	100	%

*** Previously pledged on January 5, 2009

COUNTERPART TO PLEDGE AGREEMENT

In witness whereof, the undersigned Additional Pledgor Subsidiary has caused this Pledge Agreement to be executed and delivered by its officer thereunto duly authorized as of August 21, 2009, and has delivered herewith, all items required by Section 16 of this Pledge Agreement.

STANDARD PACIFIC INVESTMENT CORP.
By:	/s/ John M. Stephens
	Name:	John M. Stephens
	Title:	Principal Financial & Accounting Officer & Treasurer

Address for Notice:

26 Technology Drive

Irvine, California 92618-2338

Attn: John M. Stephens, SVP and CFO

EX-10.6

Exhibit 10.6

COLLATERAL AGENT AND INTERCREDITOR AGREEMENT

This Collateral Agent and Intercreditor Agreement (this “Agreement”) dated as of May 5, 2006, is entered into by and among BANK OF AMERICA, N. A. , as Collateral Agent hereunder (the “Collateral Agent”); STANDARD PACIFIC CORP. , a Delaware corporation (the “Company”); and those subsidiaries of the Company listed on the signature pages hereof or which may hereafter become a party hereto pursuant to Section 12 (each of which is a “Pledgor Subsidiary” as defined below); and each of the following persons (each, in the capacities described below (together with the representatives of any future Additional Covered Obligations), a “Creditor Representative”):

(A) Bank of America, N.A., in its capacity as Administrative Agent under the Revolving Credit Agreement, Term Loan A Credit Agreement and Term Loan B Credit Agreement referred to below; and

(B) J.P. Morgan Trust Company, National Association (as successor in interest to Bank One Trust Company, N.A. and The First National Bank of Chicago), in its capacity as trustee under the Indenture referred to below, pursuant to which the Company’s 7% Senior Notes Due 2015, 6- ¹/4% Senior Notes Due 2014, 7- ³/4% Senior Notes due 2013, 6- ⁷/8% Senior Notes due 2011, 6- ¹/2% Senior Notes due 2010, 5- ¹/8% Senior Notes due 2009 and 6- ¹/2% Senior Notes due 2008 (collectively the “Existing Notes”) each were issued.

The parties hereto hereby agree with reference to the following facts:

RECITALS

A. Pursuant to the Credit Documents described herein, the Company and certain of its Pledgor Subsidiaries and other Subsidiaries have incurred indebtedness for borrowed money, or have guaranteed such indebtedness incurred by the Company.

B. The Term Loan B Credit Agreement referred to below requires that the Company and the Pledgor Subsidiaries grant liens in the stock (or other equity interests) of certain Subsidiaries of the Company to secure the obligations of the Company and the respective Pledgor Subsidiaries under the Term Loan B Credit Agreement.

C. The Revolving Credit Agreement, the Term Loan A Credit Agreement and the Indenture permit the liens securing Term Loan B Credit Agreement but only if such liens secure the obligations under the Revolving Credit Agreement, the Term Loan A Credit Agreement and the Indenture on an equal and ratable basis.

D. Substantially concurrently herewith, the Company and the Pledgor Subsidiaries shall enter into the Pledge Agreement to grant the liens in the Collateral to the Collateral Agent for the mutual benefit of the Creditors.

E. The Company and the Creditor Representatives party hereto as of the date hereof desire to provide that the liens granted under the Pledge Agreement and contemplated hereby shall, to the extent of the Qualified Obligations, be equal, ratable and pari passu and to make provision for future Qualified Obligations incurred by the Company to have the benefit of such liens on the same equal, ratable and pari passu basis.

F. The Company and its Pledgor Subsidiaries may hereafter become entitled to the release of the Collateral subject to this Agreement, and further provision is made herein for the effectuation of such a release.

NOW, THEREFORE, the parties hereto hereby agree as follows:

1. Definitions. As used herein, the following terms have the meanings set forth after each:

“Additional Covered Obligations” has the meaning set forth in Section 4 of this Agreement.

“Administrative Agent” means Bank of America, N.A., in its capacity as Administrative Agent and its successors, assigns and replacements in such capacity, under the Revolving Credit Agreement, the Term Loan A Credit Agreement and the Term Loan B Credit Agreement, respectively.

“Bankruptcy Proceeding” means any bankruptcy or insolvency case or proceeding arising out of an occurrence described in clause (a) of the definition of Trigger Event.

“Cash Equivalent Investments” means (a) direct obligations of the United States Government or any agencies thereof and obligations guaranteed by the United States Government, in each case having remaining terms to maturity of not more than 30 days; and (b) certificates of deposit, time deposits and acceptances, having remaining terms to maturity of not more than 60 days issued by United States banks which have a combined capital and surplus of at least $1,000,000,000 and having an “A” rating or better assigned thereto by Standard & Poor’s Ratings Group, a Division of The McGraw Hill Companies, Inc. or Moody’s Investors Service, Inc.

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

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

“Covered Obligations” means any Obligations (including Obligations owed to the Creditors under the Existing Credit Documents and Additional Covered Obligations) that would be Qualified Obligations from and after delivery of a Trigger Notice.

“Credit Documents” means, in respect of each Creditor Group, the instruments, documents and agreements evidencing the obligations and indebtedness of the Company

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and the Pledgor Subsidiaries owed to such Creditor Group under the respective “Loan Documents” (as defined in the Revolving Credit Agreement, the Term Loan A Credit Agreement or the Term Loan B Credit Agreement) or under the Indenture and the respective series of Notes, in each case together with any respective guarantees thereof, or evidencing Additional Covered Obligations, and in any event includes the Existing Credit Documents.

“Creditor” means each Person which is the holder of, or Creditor Representative with respect to, any indebtedness or other obligation represented by Credit Documents representing Obligations, including (a) Bank of America, N.A., as Administrative Agent under the Revolving Credit Agreement, together with the “Lenders,” “Issuing Banks,” and “Swing Line Lender” referenced in such credit agreement or from time to time party thereto, and those Persons entitled to indemnification of any character under such credit agreement, (b) Bank of America, N.A., as Administrative Agent under the Term Loan A Credit Agreement, together with the “Lenders” referenced in such loan agreement or from time to time party thereto, and those Persons entitled to indemnification of any character under such credit agreement, (c) Bank of America, N.A., as Administrative Agent under the Term Loan B Credit Agreement, together with the “Lenders” referenced in such credit agreement or from time to time party thereto, and those Persons entitled to indemnification of any character under such credit agreement, (d) J.P. Morgan Trust Company, National Association, as Trustee under the Indenture in respect of each series of Notes referred to in the definition of “Creditor Groups” and the holders of such Notes, and (e) any Creditor Representative in respect of any Additional Covered Obligations and the holders of such obligations, in each case including their respective successors, assigns and replacements.

“Creditor Group” means any of each of the following groups:

(a) the Administrative Agent, the Lenders, the Issuing Banks and the Swing Line Lender under the Revolving Credit Agreement;

(b) the Administrative Agent and the Lenders under the Term Loan A Credit Agreement;

(c) the Administrative Agent and the Lenders under the Term Loan B Credit Agreement;

(d) the Trustee for and the holders of the Company’s 7% Senior Notes Due 2015;

(e) the Trustee for and the holders of the Company’s 6- ¹/4% Senior Notes Due 2014;

(f) the Trustee for and the holders of the Company’s 7- ³/4% Senior Notes Due 2013;

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(g) the Trustee for and the holders of the Company’s 6- ⁷/8% Senior Notes due 2011;

(h) the Trustee for and the holders of the Company’s 6- ¹/2 Senior Notes due 2010;

(i) the Trustee for and the holders of the Company’s , 5- ¹/8% Senior Notes due 2009;

(j) the Trustee for and the holders of the Company’s 6- ¹/2% Senior Notes due 2008; and

(k) the Creditor Representative for and the holders of each other class of senior indebtedness of the Company which is hereafter registered as Additional Covered Obligations pursuant to Section 4 hereof; in each case together with any trustee, administrative agent or other creditor representative thereof, and any issuing banks, swap counterparties, indemnitees, or other Persons entitled to the benefit of the Collateral described in the relevant Credit Documents.

“Enforcement Order” has the meaning set forth in Section 8(a) of this Agreement.

“Event of Default” means the occurrence of any Event of Default or defined event of default under any Credit Document.

“Existing Credit Documents” means (a) the Revolving Credit Agreement and the “Loan Documents” (as such term is defined in the Revolving Credit Agreement), (b) the Term Loan A Credit Agreement and the “Loan Documents” (as such term is defined in the Term Loan A Credit Agreement), (c) the Term Loan B Credit Agreement and the “Loan Documents” (as such term is defined in the Term Loan B Credit Agreement), (d) the Indenture and the Existing Notes of the Company, and (e) all guarantees of such obligations issued by the Company or any of its Subsidiaries in respect of the foregoing, including the Existing Guarantees.

“Existing Guarantees” means guaranties or guarantees of the Obligations entered into by certain subsidiaries of the Company dated as of a date on or prior to this Agreement, including the following guaranties or guarantees by the subsidiaries of the Company named therein, in each case as at any time amended, modified, supplemented, renewed or extended:

(a) Continuing Guaranty dated as of August 31, 2005 (as supplemented as of the date hereof) with respect to the Revolving Credit Agreement;

(b) Continuing Guaranty of even date herewith with respect to the Term Loan A Credit Agreement;

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(c) Continuing Guaranty of even date herewith with respect to the Term Loan B Credit Agreement; and

(d) the guarantee obligations contained in the Eleventh Supplemental Indenture dated as of February 22, 2006 included in the Indenture with respect to the Existing Notes.

“Hedge Obligations” means all obligations and indebtedness of the Company or any of its Subsidiaries under any Swap Contract (as defined in the Revolving Credit Agreement as in effect on the date hereof) entered into with any Person who is entitled to the benefits of this Agreement pursuant to Section 4.

“Indenture” means that certain Indenture dated as of April 1, 1999, as supplemented by that certain First Supplemental Indenture dated as of April 13, 1999, Second Supplemental Indenture dated as of September 5, 2000, Third Supplemental Indenture dated as of December 28, 2001, Fourth Supplemental Indenture dated as of March 4, 2003, Fifth Supplemental Indenture dated as of May 12, 2003, Sixth Supplemental Indenture dated as of September 23, 2003, Seventh and Eighth Supplemental Indentures, each dated as of March 11, 2004, Ninth and Tenth Supplemental Indentures, each dated as of August 1, 2005 and Eleventh Supplemental Indenture dated as of February 22, 2006, as at any time amended, modified, supplemented, renewed or extended.

“Majority Representatives” means, as of each date of determination, those Creditor Representatives representing (a) prior to any Trigger Event, Creditors holding a majority of the principal amount of the Covered Obligations (including for this purpose the amount of any unfunded credit commitments (including undrawn letters of credit) which are Covered Obligations and, with respect to any Hedge Obligations, the net close-out amount and unpaid amounts owed to the respective Creditors, calculated by the Collateral Agent as of the date of determination), and (b) following any Trigger Event and subject to Section 8(a), Creditors holding a majority of the principal amount of the outstanding Qualified Obligations (including without duplication the amount of any letters of credit and related reimbursement obligations or other liquidated or contingent obligations issued or arising under the related Credit Documents and, with respect to any Hedge Obligations, the close-out amount (and, if applicable, any unpaid amount) calculated by the Collateral Agent as of the date of determination).

“New Guarantee” means a guaranty of any Obligations hereafter executed by any Subsidiary of the Company, in each case as at any time amended, modified, supplemented, renewed or extended.

“Obligations” means, collectively, all obligations and indebtedness of the Company or any of the Pledgor Subsidiaries which are owed to any Creditors under the Credit Documents.

“Pledge Agreement” means a Pledge Agreement of even date herewith among the Company, the Pledgor Subsidiaries and the Collateral Agent, granting a lien to the Collateral Agent for the benefit of the holders of the Obligations, in each case as at any time amended, modified, supplemented, renewed or extended.

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“Pledgee Subsidiary” has the meaning set forth in the Pledge Agreement.

“Qualified Obligations” means:

(a) in the case of each Creditor Group holding Term Credit Obligations, all principal Obligations owed to such Creditor Group which are outstanding immediately prior to the delivery of a Trigger Notice, together with interest, fees, premiums, indemnification claims, and reasonable costs and expenses allocable to such principal, whether arising before or after a Trigger Event;

(b) in the case of each Creditor Group holding Revolving Credit Obligations, all principal Obligations owed to such Creditor Group which are outstanding immediately prior to the delivery of a Trigger Notice (including without duplication the amount of any letters of credit and related reimbursement obligations or other liquidated or contingent obligations issued or arising under the related Credit Documents (to the extent entitled to the benefit of the relevant Credit Documents)) together with interest, fees, premiums, indemnification claims and reasonable costs and expenses allocable to such principal, whether arising before or after a Trigger Event; and

(c) in the case of each Creditor Group holding Hedge Obligations, the net close-out amount and unpaid amounts owed to such Creditor Group immediately prior to the delivery of a Trigger Notice (as if such Hedge Obligations were then terminated), as calculated by the Collateral Agent, together with any interest, fees, premiums, indemnification claims and reasonable costs and expenses allocable to such close-out amount (or unpaid amount) included in the Hedge Obligations, whether arising before or after a Trigger Event.

“Qualified Obligations” shall exclude claims of a Creditor Group that have been finally determined to be invalid and unenforceable by a court, or arbitral body, of competent jurisdiction, but shall include claims that are reinstated, for example in the event that a payment received by Creditor Group prior to the delivery of the Trigger Notice is later held to be voidable as a preferential transfer under applicable bankruptcy law, with the effect that the Credit Obligations of such Creditor Group are correspondingly reinstated.

“Register” means a register, in the form of Exhibit A hereto, maintained by the Collateral Agent in which the Collateral Agent shall enter the name, address, telephone number, facsimile number, and representative capacity, if any of each Creditor Representative together with the original principal amount of the secured Obligations owed to the related Creditor Group and, in the case of Revolving Credit Obligations, the commitment amount under the related Credit Documents.

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“Revolving Credit Agreement” means the Revolving Credit Agreement dated as of August 31, 2005 among the Company, as Borrower, the Lenders referred to therein, and Bank of America, N.A., as Administrative Agent, as amended on May 5, 2006 and as at any time amended, modified, supplemented, renewed or extended, and all restatements thereof and any agreement that refinances the indebtedness thereunder.

“Revolving Credit Obligations” means all obligations and indebtedness of the Company or any of its Subsidiaries under (a) the Revolving Credit Agreement and the Loan Documents described therein, and (b) any other Credit Documents hereafter entitled to the benefits of this Agreement pursuant to Section 4 under (and to the extent) which revolving credit facilities are provided to the Company or any of its Subsidiaries.

“Term Credit Obligations” means all obligations and indebtedness of the Company and its Subsidiaries, the holders of which are entitled to the benefits of this Agreement pursuant to Section 4 and which are not Revolving Credit Obligations or Hedge Obligations.

“Term Loan A Credit Agreement” means the Term Loan A Credit Agreement dated as of May 5, 2006 among the Company, as Borrower, the Lenders referred to therein, and Bank of America, N.A., as Administrative Agent, as at any time amended, modified, supplemented, renewed or extended, and all restatements thereof and any agreement that refinances the indebtedness thereunder.

“Term Loan B Credit Agreement” means the Term Loan B Credit Agreement dated as of May 5, 2006 among the Company, as Borrower, the Lenders referred to therein, and Bank of America, N.A., as Administrative Agent, as at any time amended, modified, supplemented, renewed or extended, and all restatements thereof and any agreement that refinances the indebtedness thereunder.

“Trigger Event” means any of the following:

(a) the occurrence of any default under any Credit Document consisting of a bankruptcy, insolvency or similar event with respect to the Company or any Subsidiary having assets in excess of $100,000,000, provided that in the case of the commencement of any involuntary bankruptcy with respect to the Company or any such Subsidiary, no Trigger Event shall be deemed to have occurred unless and until the shortest period of grace, applicable to an involuntary bankruptcy default and provided for in the then applicable Credit Documents, has expired; or

(b) the actual acceleration of any Obligations in a principal amount in excess of $100,000,000 by the holder or holders thereof or their representatives.

“Trigger Notice” means a written notice from any Creditor Representative to the Collateral Agent that a Trigger Event has occurred.

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“Trustee” means J.P. Morgan Trust Company, National Association, in its capacity as trustee under the Indenture and its successors, assigns and replacements in such capacity. Unless otherwise indicated, capitalized terms used but not defined in this Agreement shall have the meanings given to them in the Revolving Credit Agreement, as in effect on the date of this Agreement. As used herein, “liens” includes any liens or security interests.

2. Granting of the Liens. Concurrently with the execution and delivery of this Agreement, the Company and each Pledgor Subsidiary shall execute and deliver to the Collateral Agent the Pledge Agreement, in form and substance acceptable to the Creditor Representatives. The Collateral Agent is hereby authorized and directed to execute the Pledge Agreement, each instrument, document and agreement contemplated thereby to which the Collateral Agent is a named party, and each other instrument, document or agreement with is incidental or reasonably related thereto. Upon execution and delivery of the Pledge Agreement, the Company and the Pledgor Subsidiaries shall deliver to the Collateral Agent the certificates or instruments representing all of the issued and outstanding capital stock or other equity securities or partnership interests of each Pledgee Subsidiary.

3. Liens Equal, Ratable and Pari Passu.

(a) Subject to Section 4 hereof, the Creditor Representatives hereby agree on behalf of their respective Creditor Groups that the liens granted to and held by the Collateral Agent, to the extent such liens secure Obligations, shall be for the equal, ratable and pari passu benefit of the Creditor Groups to the extent of their respective Covered Obligations (and, from and after delivery of a Trigger Notice, Qualified Obligations).

(b) In the event of any Enforcement Order or the payment of proceeds pursuant to Section 7(b)(ii), each Creditor Group shall be entitled to equal priority in distribution through its Creditor Representative, ratably based upon the proportion that the Covered Obligations (and, from and after delivery of a Trigger Notice, Qualified Obligations) owed to each of the respective Creditor Groups bears to the aggregate amount of the Covered Obligations (and, from and after delivery of a Trigger Notice, Qualified Obligations). In the event that Additional Covered Obligations become entitled to the benefits hereof in the manner contemplated by Section 4, the related Creditors shall be entitled to equal priority, and ratable and pari passu distributions, as if the Creditor Representatives of such Creditors had been original parties to this Agreement; provided, however, that Creditors holding Additional Covered Obligations shall not be entitled to receive any proceeds of Collateral that were properly distributed to other Creditors, pursuant to this Agreement, prior to such Additional Covered Obligations becoming “Additional Covered Obligations” in accordance with the terms of this Agreement

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(c) The relative priority of such liens shall apply irrespective of the time, order or manner of attachment or perfection of such liens and shall not be affected by any bankruptcy, insolvency or similar event with respect to the Company or any Subsidiary.

(d) Because a credit bid by one or more Creditor Representatives or Creditors at a foreclosure sale with respect to any portion of the Collateral might be used to evade or otherwise circumvent the requirements of equal, ratable and pari passu distributions contemplated by this Agreement, the parties hereto agree that no sale of any portion of the Collateral shall be subject to credit bidding unless all Creditor Representatives consent in writing, such consent not to be unreasonably withheld. Each of the parties from time to time hereto agrees that this is a commercially reasonable restriction on sales of the Collateral.

(e) For purposes of determining the amounts to be distributed pursuant to Section 3 and Section 8(c), the Collateral Agent shall be entitled to establish a “record date,” as the effective date of the calculations upon which distributions are based, not more than ninety (90) days prior to the anticipated date of distribution hereunder. Upon request of the Collateral Agent, the Creditor Representatives shall immediately furnish to the Collateral Agent all information regarding the Obligations of the Creditors represented by such Creditor Representatives, respectively, as Collateral Agent shall reasonably request.

4. Designation of Additional Covered Obligations. The aggregate principal amount of indebtedness which may become Covered Obligations (and which may become, from and after delivery of a Trigger Notice, Qualified Obligations) is unlimited, but indebtedness shall become Covered Obligations (and thereafter Qualified Obligations) only upon its becoming subject to the terms and conditions set forth in this Section 4. The Company may from time to time by resolution of its board of directors (or any duly authorized committee thereof) designate any senior indebtedness of Company or other senior obligations of Company as Covered Obligations hereunder (“Additional Covered Obligations”). In order to designate any such senior indebtedness or other obligations as Additional Covered Obligations, the Company shall deliver to the Collateral Agent:

(a) a certified copy of a resolution of its board of directors (or any duly authorized committee thereof) designating the additional indebtedness as Additional Covered Obligations;

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(b) a certificate of the chief financial officer, controller or treasurer of the Company (i) stating that, as of the date of such certificate, immediately after giving effect to the incurrence of the proposed Additional Covered Obligations, no Trigger Event has occurred in respect of any then Covered Obligation and that the incurrence by the Company and its Subsidiaries of such Additional Covered Obligations does not result in a default under the Credit Documents evidencing all outstanding Covered Obligations and (ii) setting forth sufficient details regarding the proposed Additional Covered Obligations to allow the Collateral Agent to record such Additional Covered Obligations in the Register, including the nature of the Additional Covered Obligations and the name, address and contact information of the Creditor Representative with respect to such Additional Covered Obligations; and

(c) a joinder hereto, substantially in the form of Exhibit B hereto, executed by any Creditor Representative representing the interests of the proposed Additional Covered Obligations, or by the holders of such Additional Covered Obligations and acknowledged by the Collateral Agent.

Upon the receipt by the Collateral Agent of a certificate from the Company’s chief financial officer, controller or treasurer stating that the foregoing conditions precedent have been satisfied (the “Obligations Certificate”), and unless the Collateral Agent has then received written notice from the Company, any Subsidiary, or any Creditor Representative that a Trigger Event has occurred, the Collateral Agent shall promptly record the particulars of the proposed Additional Covered Obligations in the Register (upon which recordation they shall constitute Covered Obligations), and shall promptly inform in writing each of the Company and the Creditor Representatives of such recordation. The Company may, from time to time, examine the Register during normal business hours of the Collateral Agent upon reasonable prior notice.

Each of the Obligations, Creditor Representatives and like information specifically described in the Recitals hereto or elsewhere in this Agreement as of the date hereof shall be deemed to be Covered Obligations and set forth in the Register. The Collateral Agent shall also note in the Register changes, additions or deletions to any of the information relating to the Covered Obligations (or from and after delivery of a Trigger Notice Qualified Obligations) promptly upon the Collateral Agent’s receiving written notice thereof from the related Creditor Representative. The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Collateral Agent and each Creditor may conclusively presume that each Person whose name is recorded in the Register is qualified as the Creditor Representative hereunder for the related Covered Obligations (or Qualified Obligations) for all purposes under this Agreement. The Register shall be kept as part of the Collateral Agent’s official records and shall be available for inspection at the Collateral Agent’s office upon request by any Creditor Representative during the normal business hours and with reasonable prior notice. The Collateral Agent may conclusively rely upon the accuracy of the information certified to it by each Creditor Representative and shall have no duty whatsoever to independently confirm its accuracy.

5. Sharing of Proceeds; Turnover. Each of the Creditor Representatives agrees on behalf of its Creditor Group that in the event that such Creditor Group receives, from any realization upon the liens granted under the Pledge Agreement, a greater amount than the amount to which that

10

Creditor Group is entitled pursuant to Sections 3, 7(b) or 8(c), as applicable, they shall turn over to the Collateral Agent, for distribution thereto in accordance with Sections 3, 7(b) or 8(c), as applicable, such excess amount.

6. Amendments to Credit Documents. Each of the Creditor Groups shall be entitled to enter into any amendment, modification, supplement or extension of the Credit Documents to which they are a party with the Company and its Subsidiaries without affecting the relative priority of their interests in the Collateral held by the Collateral Agent. Without limiting the generality of the foregoing sentence, each of the Obligations now existing or hereafter arising under the Existing Credit Documents, including Obligations arising as a result of any amendment, modification, supplement or extension, shall constitute Covered Obligations without the necessity of any further action, notwithstanding any such amendment, modification, supplement or extension. For avoidance of doubt, any Obligations arising out of any increases in the Total Aggregate Commitment under the Revolving Credit Agreement (whether arising under Section 3.10 of the Revolving Credit Agreement or otherwise) shall constitute Covered Obligations without the necessity of any further action in respect of this Agreement.

7. Releases under and Amendments to Collateral Documents.

(a) The Company and the Pledgor Subsidiaries shall be entitled to releases of the Collateral as provided in the Pledge Agreement, without any further requirements for notice to or consent from the Creditor Representatives or other action under this Agreement.

(b) In addition to releases pursuant to Section 7(a), promptly following a written request of the Company, the Collateral Agent shall release from the lien of the Pledge Agreement any Collateral described in such request, provided that, as of the date of such request, the Collateral Agent has received a certificate from the Company that the following conditions have been fulfilled (and the facts certified in such certificate are true and correct):

(i) the release of such Collateral has been authorized by the Creditor Representative in respect of the Term Loan B Credit Agreement; and

(ii) either (A) no proceeds from any sale or disposition of such Collateral are being applied (through the procedure provided in Section 3) to repay any Covered Obligations as a condition to such release or (B) if any such proceeds are applied to repay any Covered Obligations as a condition to such release, such proceeds are being applied to repay the Covered Obligations (or in the case of letters of credit, contingent Hedge Obligations and other contingent obligations included in the Covered Obligations, held to secure repayment of such Obligations in a manner consistent with Section 8(e)) ratably based upon the proportion that the Covered Obligations owed to each of the respective Creditor Groups bears to the aggregate amount of the Covered Obligations.

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(c) The Company and the Pledgor Subsidiaries shall be entitled to request that the Collateral Agent enter into amendments to the Pledge Agreement with the consent of the Majority Representatives, other than with respect to releases of Collateral (which are governed by Sections 7(a), 7(b) and 13 of this Agreement). Any request made by the Company and the Pledgor Subsidiaries pursuant to this subsection shall be made to the Collateral Agent in writing, with copies to each of the Creditor Representatives, and the Company shall provide the Collateral Agent with proof of notice to the Creditor Representatives. If the Collateral Agent receives written consent from the Majority Representatives, the Collateral Agent shall execute the proposed documents (with any minor amendments or revisions required thereto).

(d) In addition, without any requirement for notice to or consent from the Creditor Representatives, the Collateral Agent may execute amendments to the Pledge Agreement to include among the obligations secured by the Collateral any Additional Covered Obligations designated under Section 4 (together with any other minor amendments relating to the addition of such obligations that are deemed necessary or desirable by the Collateral Agent). If in connection with the designation of Additional Covered Obligations under Section 4, the Company and the Pledgor Subsidiaries are prepared to execute and deliver any amendments (other than those described in the immediately preceding sentence) proposed by the Creditor Representative with respect to such Additional Covered Obligations, the Collateral Agent will execute and deliver such amendments, if, ten business days following the circulation of a draft thereof to all of the Creditor Representatives (or a shorter time not less than three business days which is specified by the Collateral Agent to accommodate any exigent circumstances identified by the Company), no written objection to such amendments by the Majority Representatives has been received by the Collateral Agent or, in the event of any such objection, the Collateral Agent will execute and deliver such amendments (with any minor amendments or revisions required thereto) as are in accordance with the written directions of the Majority Representatives and satisfactory to the Collateral Agent, the Company and the Pledgor Subsidiaries.

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8. Enforcement of the Liens.

(a) Upon the occurrence of a Trigger Event, the Creditor Representative of any Creditor Group which asserts the Trigger Event may unilaterally direct the Collateral Agent in writing to proceed to enforce the liens granted in its favor in accordance with this Section (such a written direction is referred to as an “Enforcement Order”), without the requirement of the consent or approval of any other Creditor or Creditor Representative. Upon its receipt of any such Enforcement Order, the Collateral Agent shall promptly and in any event within ten business days notify each other Creditor Representative thereof, and the Creditor Representatives shall form a committee of the Creditor Representatives (the “Enforcement Committee”) to determine the order and manner in which the remedies of the Collateral Agent shall be exercised. The Majority Representatives shall notify the Collateral Agent in writing of the formation of the Enforcement Committee; which notice may designate a Creditor Representative as the chair of the Enforcement Committee. Any such chair of the Enforcement Committee shall act or refrain from acting as directed by the Majority Representatives, however the Collateral Agent shall be entitled to follow the written directions of the chair of the Enforcement Committee until notified in writing by the Majority Representatives to the contrary and, in the absence of written direction from the Enforcement Committee (or any such chair) the Collateral Agent shall take no action except as permitted by Section 10(h). Each Creditor Representative shall be entitled to cast votes equal to the aggregate amount of the Qualified Obligations owed to its Creditor Group (including, in the case of letters of credit, contingent Hedge Obligations and other contingent obligations included in the Covered Obligations, the amount of such contingent obligations as determined by the Collateral Agent). For purposes of this Section 8, if a Creditor Representative is unable or unwilling to participate actively in the selection of an Enforcement Committee, then such Creditor Representative, and the Qualified Obligations represented by such Creditor Representative, shall be excluded in the determination of the “Majority Representatives.”

(b) No Creditor or Creditor Representative shall have any right to institute any action or proceeding or to exercise any other remedy provided by the Pledge Agreement or by law or equity for the purpose of realizing upon the liens in the Collateral unless (i) an Enforcement Order shall have been tendered to the Collateral Agent and the Collateral Agent shall have failed to act within 30 days thereafter (excluding any days during which the Collateral Agent shall be prohibited from acting by injunction, automatic stay, or similar legal restriction); or (ii) all Creditor Representatives consent thereto in writing (such consent not to be unreasonably withheld). In such case, but not otherwise, any Creditor Representative acting on behalf of itself and the other Creditor Representatives shall be entitled to initiate actions or proceedings in any court of competent jurisdiction such as the Collateral Agent may have taken under this Agreement.

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(c) Except as otherwise provided herein or by applicable law, the money received from the enforcement of any lien under the Pledge Agreement shall be applied by the Collateral Agent (or, if applicable under Section 8(b), a Creditor Representative initiating an action or proceeding) as follows:

First, to the Collateral Agent in such capacity only (and not as a Creditor Representative) in an amount equal to its costs, fees, expenses, including fees and expenses of its attorneys, agents and advisors and indemnity claims arising under this Agreement or other applicable agreements;

Second, to each Creditor or Creditor Representative which has advanced funds to the Collateral Agent in accordance with Sections 10(a), 10(b) or 10(d)(ii) hereof, ratably in accordance with the amounts so advanced;

Third, to the payment (through the Creditor Representatives) of the Qualified Obligations, ratably in accordance with Section 3, or, in the case of Qualified Obligations that are not then due and payable, to be held as Collateral in accordance with Section 8(e) hereof;

Fourth, ratably to the Collateral Agent in such capacity only (and not as a Creditor Representative) in an amount equal to its costs, fees, expenses, to the extent not reimbursed pursuant to clause First above, including fees and expenses of its attorneys, agents and advisors and indemnities in connection with its actions hereunder and under the Pledge Agreement and any unpaid amounts owed to the Collateral Agent pursuant to Section 10; and

Finally, as required by law, to the Persons or Persons legally entitled thereto.

(d) The following provisions shall apply during any Bankruptcy Proceeding of the Company or any Pledgor Subsidiary

(i) The Collateral Agent shall represent all Creditors in connection with all matters directly relating solely to the Collateral, including, without limitation, use, sale or lease of Collateral, use of cash collateral, relief from the automatic stay and adequate protection. The Collateral Agent shall act on the instructions of the Majority Representatives.

(ii) Each Creditor shall be free to act independently on any issue not directly relating solely to the Collateral. Each Creditor shall give prior notice to the Collateral Agent of any action hereunder to the extent that such notice is possible. If such prior notice is not given, such Creditor shall give prompt notice following any action taken hereunder.

(iii) Any proceeds of the Collateral received by any Creditor as a result of, or during, any Bankruptcy Proceeding will be delivered promptly to the Collateral Agent for distribution in accordance with Section 8(c).

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(e) Any amount available for distribution pursuant to the Third clause of Section 8(c) with respect to any Qualified Obligation not then due and payable (including any principal amounts not then accelerated or otherwise due and payable, the outstanding amount of any undrawn letters of credit, Hedge Obligations not then due and payable and other contingent obligations included in the Qualified Obligations and not then due and payable (collectively, the “Future Qualified Obligations”)) shall be held by the Collateral Agent and deposited in an account (the “Cash Collateral Account”) to be held as collateral for the Qualified Obligations and disposed of as provided herein. On each date on which a Future Qualified Obligation becomes due and payable, the Collateral Agent shall distribute from the Cash Collateral Account to the respective Creditor Representative for application to the payment of such Qualified Obligations due to the respective Creditors, an amount equal to the product of (1) the amount then on deposit in the Cash Collateral Account, and (2) a fraction, the numerator of which is the amount of such Future Qualified Obligation that has become due and payable and the denominator of which is the outstanding amount of all Future Qualified Obligations immediately prior to the time such Future Qualified Obligation became due and payable. On each date on which a reduction in the outstanding amount of Future Qualified Obligations occurs other than as a result of a repayment (whether as a result of the expiration of a letter of credit without a drawing, a decrease in the calculation of the amount payable in respect of a Hedge Obligation or otherwise), the Collateral Agent shall distribute from the Cash Collateral Account an amount equal to the product of (1) the amount then on deposit in the Cash Collateral Account, and (2) a fraction, the numerator of which is the amount of such reduction in the outstanding amount of Future Qualified Obligations and the denominator of which is the outstanding amount of all Future Qualified Obligations immediately prior to such reduction, which amount shall be distributed as provided in the Third clause of Section 8(c). At such time as the outstanding amount of all Future Qualified Obligations is reduced to zero, any amount remaining in the Cash Collateral Account, after the distribution therefrom as provided above, shall be distributed as provided in Section 8(c). For purposes of determining “Majority Representatives”, and the amount of Covered Obligations and Qualified Obligations in Section 3, Covered Obligations and Qualified Obligations of a Creditor shall be deemed not to include an amount of such Covered Obligations and Qualified Obligations equal to the amount held in the Cash Collateral Account allocable to such Creditor’s Future Qualified Obligations.

(f) Any and all funds held by the Collateral Agent in its capacity as Collateral Agent, whether pursuant to any provision of any of the Pledge Agreement or otherwise, shall to the extent feasible within a reasonable time be invested by the Collateral Agent in Cash Equivalent Investments. Any interest earned on such funds shall be disbursed to the Creditors or held as Collateral in accordance with Section 8(c), as applicable. The Collateral Agent may hold any such funds in a common interest bearing account. To the extent that the interest rate payable with respect to any such account varies over time, the Collateral Agent may use an average interest rate in making the interest allocations among the respective Creditors. The Collateral Agent shall have no duty to place funds held pursuant to this Section 8(f) in investments which provide a maximum return; provided, however, that the Collateral Agent shall to the extent feasible invest funds in Cash Equivalent Investments with reasonable promptness. In the absence of gross negligence or willful misconduct (and except as to deposits maintained with the Collateral Agent), the Collateral Agent shall not be responsible for any loss of any funds invested in Cash Equivalent Investments in accordance with this Section 8(f).

9. Marshaling of Assets; Election of Remedies; Amendments.

(a) Each of the parties hereto waives any right it may now or hereafter have to require any other party to marshal assets, to exercise rights or remedies in a particular manner, or to forbear exercising such rights and remedies in any particular manner or order.

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(b) Each of the parties hereto will be free to exercise in such manner and order as it elects in its discretion, fail to exercise, waive, suspend, terminate or suffer expiration of, any of its rights and remedies with respect to the Obligations owed to its Creditor Group. Each of the parties hereto will have the unfettered right, at any time or from time to time, in compliance with their Credit Documents, to release, subordinate or otherwise diminish any lien on any Collateral not required to be released hereunder, without affecting the liens of the other parties in such Collateral or the rights of the releasing or subordinating party hereunder with respect to other Collateral.

(c) This Agreement may not be amended, modified or supplemented without the prior written consent of all the parties hereto at the time of such proposed amendment, modification or supplement.

10. Concerning the Collateral Agent.

(a) The Collateral Agent’s Costs and Expenses. The Company will pay or reimburse the Collateral Agent upon its request for all reasonable out-of-pocket costs, expenses, disbursements and advances incurred or made by the Collateral Agent (including the reasonable compensation and the disbursements of its counsel and all other professional advisors to the Collateral Agent) in connection with:

(i) the execution and administration of this Agreement and the Pledge Agreement;

(ii) the discharge of all or any portion of the liens subject to this Agreement;

(iii) the administration or execution, prior to receipt of an Enforcement Order by the Collateral Agent, of its duties hereunder or the liens contemplated hereby; and

(iv) the administration or execution, after receipt of an Enforcement Order by the Collateral Agent, of all duties of the Collateral Agent hereunder until finally and fully performed; except any such expense, disbursement or advance which results from its gross negligence or bad faith or in connection with proceedings in respect of which a final judicial determination is made that the Collateral Agent was not entitled to enter into such proceedings. In the event that the Company fails to pay any amount due under this clause (a), the Collateral Agent shall give notice to each of the Creditor Representatives of the Company’s failure to pay such amount due, in which case each Creditor Representative shall pay the proportional share of its Creditor Group (based on the amount of the Covered Obligations (or Qualified Obligations) of its Creditor Group to the total amount of Covered Obligations (or Qualified Obligations)) of such amount and shall be subrogated to the right of the Collateral Agent to obtain such payment from the Company.

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(b) Indemnification of the Collateral Agent. The Company hereby indemnifies the Collateral Agent (in its capacity as Collateral Agent and in its individual or corporate capacity) and each of its officers, directors, attorneys in fact and agents for, and holds it harmless against, any cost, claim, damages, loss or liability or expense (including reasonable attorneys’ fees and expenses) incurred by it in connection with, or related to or arising from: (i) the execution, acceptance and administration of this Agreement and the performance of its duties hereunder or in connection with the Pledge Agreement or any Enforcement Order; (ii) the execution of the Pledge Agreement, or the granting of any lien or security interest on any Collateral for the benefit of the Collateral Agent; or (iii) any action taken or not taken by Collateral Agent upon the request or instruction of the Company, the Majority Representatives, the chair of the Enforcement Committee, or any Creditor including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder, except for any loss, liability or expense incurred by reason of the Collateral Agent’s gross negligence or willful misconduct. If the Collateral Agent incurs expenses in connection with the occurrence of a bankruptcy or the appointment of a receiver relating to the Company or any of the Pledgor Subsidiaries, the expenses and compensation for those services are intended to constitute expenses of administration under any bankruptcy or receivership law. In the event that the Company fails to pay any amount due under this clause (b), the Collateral Agent shall give notice to each of the Creditor Representatives of the Company’s failure to pay such amount due, in which case each Creditor Representative shall pay the proportional share of its Creditor Group (based on the amount of the Covered Obligations (or Qualified Obligations) of its Creditor Group to the total amount of Covered Obligations (or Qualified Obligations)) of such amount and shall be subrogated to the right of the Collateral Agent to obtain such payment from the Company. The obligations of the Company under this clause (b) shall survive any satisfaction and discharge or termination of this Agreement.

(c) Amount of Covered Obligations or Qualified Obligations Outstanding. The Company shall promptly provide the Collateral Agent with such information in writing relating to the amount of the outstanding Obligations and any related commitments from time to time as the Collateral Agent may reasonably request for the purpose of enabling the Collateral Agent to fulfill its obligations hereunder. If the Company shall fail to provide the Collateral Agent with the required information within the required period, the Collateral Agent shall be entitled to conclusively rely on a written statement signed by the related Creditor Representative.

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(d) Conditions Precedent to Collateral Agent’s Obligation to Act.

(i) Unless and until it shall have been required so to do under the terms hereof, the Collateral Agent shall not be bound to give any notice or do or take any act, action or proceeding by virtue of the powers conferred on it hereby; nor shall the Collateral Agent be required to take notice of any Trigger Event or Enforcement Order, other than in payment of any moneys required by any provision hereof to be paid to it, unless and until the Collateral Agent receives notice in writing of such Trigger Event or Enforcement Order and prior to receipt of such written notice the Collateral Agent may assume that no Trigger Event or Enforcement Order has occurred.

(ii) The obligation of the Collateral Agent to commence, continue, cease or refrain from any act, action or proceeding for the purpose of enforcing or ceasing to enforce any rights of the Collateral Agent or the Creditors hereunder shall be conditional upon the Creditors (other than Creditors who act solely as a Creditor Representative) furnishing, when required by notice in writing by the Collateral Agent to the Creditor Representative of such Creditors, sufficient funds to commence or continue such act, action or proceeding and an indemnity reasonably satisfactory to the Collateral Agent to protect and hold harmless the Collateral Agent against the costs, charges, expenses and liabilities to be incurred thereby and any loss and damage it may suffer by reason thereof except for costs, charges and liabilities incurred by reason of the Collateral Agent’s gross negligence or willful misconduct. Each Creditor providing such indemnity shall be entitled to reimbursement of any and all amounts provided by such Creditor under such indemnity in accordance with Section 8(c).

(iii) None of the provisions contained in this Agreement shall require the Collateral Agent to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties or in the exercise of any of its rights or powers.

(e) Collateral Agent’s Reliance. The Collateral Agent may conclusively rely and shall be protected in acting upon any such documents deposited with it in purported compliance with any such provision or for any other purpose hereof, but may require further evidence before acting or relying thereon. The Collateral Agent may rely conclusively and shall be protected in acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, letter, telegram, cablegram or other paper or document believed by it to be genuine and to have been signed, sent or presented by or on behalf of the proper party or parties. However, the Collateral Agent may require reasonable evidence of the due execution thereof before acting or relying thereon.

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(f) Experts and Advisers. The Collateral Agent may at the expense of the Company appoint such agents and employ or retain such counsel, accountants, appraisers or other experts or advisers as it may reasonably require for the purpose of discharging its duties hereunder and shall not be responsible for any misconduct (other than through its own gross negligence or willful misconduct) on the part of any of them. The Collateral Agent may pay reasonable remuneration for all services performed for it in the discharge of its duties as Collateral Agent hereunder. The Collateral Agent may act (but shall not be bound to act) and shall be protected in acting in good faith on the opinion or advice of or information obtained from any counsel, accountant, appraiser or other expert or adviser, whether retained or employed by the Company, any Subsidiary or by the Collateral Agent, in relation to any matter related to or arising in the administration of this Agreement.

(g) Cash, Documents, Etc. Paid or Delivered to the Collateral Agent. Any cash, securities, documents of title or other instruments, and other assets that may from time to time be paid or delivered to the Collateral Agent by the Company or any Pledgor Subsidiary to be held for the benefit of all Creditors in accordance with the provisions hereunder shall be so held by the Collateral Agent as agent for the benefit of the Creditors in accordance with this Agreement.

(h) Action by Collateral Agent to Protect Security. After the occurrence of a Trigger Event and prior to the first meeting of the Enforcement Committee, the Collateral Agent shall have power (but not any duty) to institute and to maintain such actions and proceedings solely as directed in writing by a Creditor Representative, as deemed necessary or expedient by such Creditor Representative, and solely to the extent indemnified by such Creditor Representative to its satisfaction and upon advice of counsel, upon which it may conclusively rely, to prevent any impairment of the liens of the Pledge Agreement or to preserve or protect its interests and the security and interests of the Creditors in respect of the Collateral or in respect of the income, earnings, rents, issues and profits therefrom.

(i) Collateral Agent Not Required to Give Security. The Collateral Agent shall not be required to give any bond or security in respect of the execution of its duties as Collateral Agent under this Agreement.

(j) Condition of the Collateral. Neither the Collateral Agent nor any Creditor shall be liable for (i) any failure or defect of title to the Collateral, (ii) any failure to perfect the lien of the Pledge Agreement, (iii) any decline in the value of Collateral or (iv) any statements of fact in the recitals in this Agreement or in the Pledge Agreement.

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(k) Liens and Sufficiency of Pledge Agreement. The Collateral Agent shall have no duty to maintain any financing statements or maintain perfected liens granted to it hereunder. The Collateral Agent is not responsible for the sufficiency, validity or enforceability of the Pledge Agreement or any other documents related thereto.

(l) Replacement of Collateral Agent. The Collateral Agent may resign and be discharged from the performance of all further duties hereunder by giving to the Company and the Creditor Representatives sixty days’ notice in writing or such shorter notice as the Company and the Majority Representatives may approve, provided that such resigning Collateral Agent receives payment in full of all amounts due and owing to it hereunder prior to or upon its removal taking effect; and provided, further, that such successor Collateral Agent shall be a bank or trust company having a combined and capital surplus of at least $1 billion, subject to supervision or examination by federal or state lending authority, and authorized under the laws of the jurisdiction of its incorporation or organization to assume the functions of the Collateral Agent. The Majority Representatives may at any time remove the Collateral Agent for cause and appoint a new Collateral Agent. “Cause” shall include the failure of the Collateral Agent to take any action that the Collateral Agent is required to take hereunder after request therefor by Majority Representatives, or the Collateral Agent has taken any action hereunder that the Collateral Agent is not authorized to take hereunder and that violates the terms hereof. If no Event of Default has then occurred and is continuing and if the Collateral Agent is not a Creditor Representative, the Company may, with the written concurrence of the Majority Representatives, remove the Collateral Agent and appoint a new Collateral Agent with the consent of the Majority Representatives (which shall not be unreasonably withheld or delayed). In the event of the Collateral Agent resigning or being removed as aforesaid, the Majority Representatives shall forthwith appoint a new Collateral Agent. On any new appointment the new Collateral Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named herein as Collateral Agent, without any further assurance, conveyance, act or deed; but the Company and the Pledgor Subsidiaries shall immediately execute, at the expense of the Company, all such conveyances or other instruments as may be necessary or advisable for the purpose of transferring the Pledge Agreement to the new Collateral Agent and assuring the continued perfection and priority of the liens thereunder.

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(m) No Trust or Fiduciary Relationship. The Collateral Agent shall not be deemed to be in a relation of trust or confidence with any Creditor Representative or Creditor by reason of this Agreement, and shall not owe any fiduciary, trust or other special duties to any Creditor or Creditor Representative by reason of this Agreement. To the extent the Collateral Agent is requested to exercise any discretion or to make any determination with respect to any provision of the Pledge Agreement or with respect to any of the Collateral, including the sufficiency, adequacy or acceptability of any document or any other item furnished to the Collateral Agent, or compliance by the Company or any Pledgor Subsidiary with any of the provisions of the Pledge Agreement, the Collateral Agent shall notify the Creditor Representatives in writing, together with a copy of the document, item or request, as applicable.

The parties hereto acknowledge that Collateral Agent’s duties do not include any discretionary authority, determination, control or responsibility with respect to the Pledge Agreement or any Collateral, notwithstanding any rights or discretion that may be granted to the Collateral Agent in the Pledge Agreement. The Collateral Agent shall have no obligation, duty or responsibility to exercise any such discretion except as directed in writing by the Majority Representatives or the chair of the Enforcement Committee and solely to the extent the Collateral Agent is indemnified to its satisfaction. The provisions of this Agreement, including, without limitation those provisions relating to the rights, duties, powers, privileges, protections and indemnification of the Collateral Agent shall apply with respect to any actions taken or not taken by the Collateral Agent under the Pledge Agreement.

The Collateral Agent shall be responsible only for the performance of such duties as are expressly set forth herein. The Collateral Agent shall not be responsible for any action taken or not taken by it under this Agreement or with respect to any Pledge Agreement at the request or direction of the Majority Representatives, the chair of the Enforcement Committee or any Creditor.

11. Further Assurances, etc. Each party hereto shall execute and deliver such other documents and instruments, in form and substance reasonably satisfactory to the other parties hereto, and shall take such other action, in each case as any other party hereto may reasonably have requested (at the cost and expense of the Company) to effectuate and carry out the provisions of this Agreement, including by recording or filing this Agreement or such other documents or instruments in such places as the requesting party may reasonably request.

12. Additional Pledgor Subsidiaries. The Company and the Subsidiary Pledgors hereby agree that they shall, concurrently with the formation or acquisition of any new Subsidiary required to pledge any equity interests under the Pledge Agreement (an “Additional Subsidiary Pledgor”), cause that Additional Subsidiary Pledgor to enter into a joinder hereto, substantially in the form of Exhibit B hereto, concurrently with the execution and delivery of the Pledge Agreement which is then required to be delivered by that Additional Subsidiary Pledgor pursuant to the Pledge Agreement or any then applicable Credit Documents. To the extent that the equity securities or instruments owned by that Additional Subsidiary Pledgor, or owned by any other Subsidiary Pledgor not theretofore pledged under the Pledge Agreement, are then required under the Pledge Agreement to be delivered in pledge to secure any Obligations, the same shall be delivered to and held by Collateral Agent in accordance with the terms hereof.

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13. Full Release of Liens and Termination of the Agreement. In addition to releases provided under Section 7:

(a) In the event that the Company and the Pledgor Subsidiaries are entitled to the release of the Collateral under the applicable Credit Documents, (i) upon request of the Company, each Creditor Representative shall promptly confirm in writing to the Collateral Agent its authority to provide evidence of such release to the Company and the Pledgor Subsidiaries and (ii) the Collateral Agent shall execute appropriate documentation of the same and of the termination of this Agreement provided or caused to be provided to it by the Company subject to the payment by the Company of its remaining costs and expenses.

(b) Promptly following a written request of the Company, the Collateral Agent shall terminate the Pledge Agreement and release and reconvey the security interest created thereby (and this Agreement shall thereupon terminate), provided that, as of the date of such request, the Collateral Agent has received a certificate from the Company that the following conditions have been fulfilled (and the facts certified in such certificate are true and correct):

(i) all Obligations under the Term Loan B Credit Agreement have been repaid; and

(ii) no Event of Default under any Credit Document has occurred and is continuing.

14. Notices. All notices, requests, demands, directions and other communications provided for hereunder must be in writing and must be mailed (by registered or certified mail), telecopied, dispatched by commercial courier or delivered to the appropriate party at the address set forth on the signature pages of this Agreement or to such other address as may be designated by a party in a written notice sent to all other parties in accordance with this Section.

15. Integration. This Agreement, including exhibits hereto, sets forth the entire understanding of the parties with respect to the within matters and may not be modified or amended except upon a writing signed by all parties. In the event of any conflict or inconsistency between this Agreement and the Pledge Agreement, the provisions of this Agreement shall govern

16. Counterparts. This Agreement may be executed in one or more counterparts, each one of which when so executed shall be deemed to be an original, and all of which taken together shall constitute one and the same agreement.

17. No Third Parties Benefited. Except for the Creditors (including each future Creditor in respect of Additional Covered Obligations), no Persons not a party to this Agreement are intended to be third party beneficiaries hereunder or to have any right, benefit, priority, or interest under, or because of the existence of, or to have any right to enforce, this Agreement.

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18. Construction. “Includes” and “including” are not limiting. “Or” is not exclusive. “All” includes “any” and “any” includes “all”.

19. Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with, the internal laws of the State of California, without reference to the choice of law or conflicts of law provisions thereof.

[Remainder of this page intentionally left blank]

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IN WITNESS WHEREOF, the parties hereto have executed this Collateral Agent and Intercreditor Agreement as of the date first written above by their duly authorized representatives.

BANK OF AMERICA, N.A., as Collateral Agent
By:	/s/ Eyal Namordi
	Eyal Namordi, Vice President

Address for notices:
Bank of America, N.A.
100 North Tryon Street, 14th Floor
NC1-007-14-24
Charlotte, NC 28255
Attention: Cindy K. Fisher
Telephone:	(704) 387-5452
Telecopier:	(704) 409-0180

[Collateral Agent and Intercreditor Agreement - Signature Page]

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BANK OF AMERICA, N.A., as Administrative Agent under the Revolving Credit Agreement, the Term Loan A Credit Agreement and the Term Loan B Credit Agreement
By:	/s/ Eyal Namordi
	Eyal Namordi, Vice President

Address for notices:
Bank of America, N.A.
100 North Tryon Street, 14th Floor
NC1-007-14-24
Charlotte, NC 28255
Attention: Cindy K. Fisher
Telephone:	(704) 387-5452
Telecopier:	(704) 409-0180

[Collateral Agent and Intercreditor Agreement - Signature Page]

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J.P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION, in its capacity as trustee for the holders of the Company’s 7% Senior Notes Due 2015, 6- 1/4% Notes Due 2014, 6- 7/8% Senior Notes due 2011, 6- 1/2% Senior Notes due 2010, 5- 1/8% Senior Notes due 2009 and 6- 1/2% Senior Notes due 2008
By:	/s/ Sharon McGrath
Name:	Sharon McGrath
Title:	Vice President

Address for notices:
J.P. Morgan Trust Company, National Association 227 West Monroe Street, Suite 2600 Chicago, IL 60606
Attn:	Worldwide Securities Services
Telephone:	(800) 275-2048
Telecopier:	(312) 267-5214

[Collateral Agent and Intercreditor Agreement - Signature Page]

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By executing this Agreement in the space provided below, the undersigned consent and agree to the terms of this Agreement, agree not to take any action in contravention of this Agreement, and to pay the reasonable costs and expenses incurred by the Collateral Agent and each Creditor Representative in connection with the preparation, execution, delivery, administration and enforcement of this Agreement and the instruments, documents and agreements referred to herein. The undersigned also agree that the execution of this Agreement is in furtherance of the transactions contemplated by the Credit Documents, and that, as a consequence, the parties are entitled to all of the various indemnifications provided to them by the Credit Documents with respect to actions and omissions under this Agreement. The undersigned agree that, as between the undersigned and the Trustee, the Trustee shall be entitled to all the immunities, powers, privileges and protections of the Trustee set forth in the Indenture in the execution, delivery and performance of this Agreement, which are herein incorporated by reference as if set forth herein in their entirety.

STANDARD PACIFIC CORP., a Delaware corporation

SP TEXAS INVESTMENTS, INC., a Delaware corporation

STANDARD PACIFIC OF TEXAS GP, INC., a Delaware corporation

By:	/s/ Andrew H. Parnes
	Andrew H. Parnes, Executive Vice President and Chief Financial Officer of Standard Pacific Corp., Vice President and Treasurer of SP Texas Investments, Inc. and Treasurer of Standard Pacific of Texas GP, Inc.

Address for each of the foregoing:
15326 Alton Parkway Irvine, California 92618
Attn:	Clay A. Halvorsen, General Counsel
Telephone:	(949) 789-1618
Telephone:	(949) 789-1609

[Collateral Agent and Intercreditor Agreement - Signature Page]

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EXHIBIT A

TO

COLLATERAL AGENT AND INTERCREDITOR AGREEMENT

REGISTER

QUALIFIED OBLIGATIONS	CREDITOR REPRESENTATIVE
Obligations outstanding from time to time under the Revolving Credit Agreement (Commitment $1,100,000,000) Obligations outstanding from time to time under Term Loan A Credit Agreement (outstanding principal amount $100,000,000) Obligations outstanding from time to time under Term Loan B Credit Agreement (outstanding principal amount $250,000,000)	BANK OF AMERICA, N.A., as Administrative Agent under the Revolving Credit Agreement, the Term Loan A Credit Agreement and the Term Loan B Credit Agreement Address: Bank of America, N.A. Agency Management Services Attn: Telecopier: (    )         -         Telephone: (    )         -

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$175,000,000 7% Senior Notes Due 2015, issued pursuant to an Indenture dated as of April 1, 1999, including all supplemental indentures thereto.   $150,000,000 6- ¹/4% Notes Due 2014, issued pursuant to an Indenture dated as of April 1, 1999, including all supplemental indentures thereto.   $125,000,000 7- ³/4% Notes Due 2013, issued pursuant to an Indenture dated as of April 1, 1999, including all supplemental indentures thereto.   $175,000,000 6- ⁷/8% Senior Notes due 2011, issued pursuant to an Indenture dated as of April 1, 1999, including all supplemental indentures thereto.   $175,000,000 6- ¹/2% Senior Notes due 2010, issued pursuant to an Indenture dated as of April 1, 1999, including all supplemental indentures thereto.   $150,000,000 5- ¹/8% Senior Notes due 2009 issued pursuant to an Indenture dated as of April 1, 1999, including all supplemental indentures thereto.   $150,000,000 6- ¹/2% Senior Notes due 2008 issued pursuant to an Indenture dated as of April 1, 1999, including all supplemental indentures thereto.   J.P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION, in its capacity as trustee for the holders of the Company’s 7% Senior Notes Due 2015, 6- ¹/4% Notes Due 2014, 6- ⁷/8% Senior Notes due 2011, 6- ¹/2% Senior Notes due 2010, 5- ¹/8% Senior Notes due 2009 and 6- ¹/2% Senior Notes due 2008   Address:   J.P. Morgan Trust Company, National Association 227 West Monroe Street, Suite 2600 Chicago, IL 60606   Attn: Worldwide Securities Services Telecopier: (    )         -         Telephone: (    )         -        

29

INSTRUMENT OF JOINDER (ADDITIONAL SUBSIDIARY PLEDGOR)

THIS INSTRUMENT OF JOINDER (“Joinder”) is executed as of January 5, 2009 by Standard Pacific of Orange County, Inc., a Delaware corporation (“Joining Party”), and delivered to BANK OF AMERICA, N.A., as Collateral Agent, pursuant to the Collateral Agent and Intercreditor Agreement dated as of May 5, 2006 among the Collateral Agent, Standard Pacific Corp., a Delaware corporation, those Pledgor Subsidiaries of the Company which are a party thereto and the Creditor Representatives which are a party thereto (the “Agreement”). Terms used but not defined in this Joinder shall have the meanings defined for those terms in the Agreement.

RECITALS

A. In connection with the Agreement, the Company and the Pledgor Subsidiaries granted liens in the stock (or other equity interests) of certain Subsidiaries of the Company to the Collateral Agent for the mutual benefit of the Creditors in order to secure the respective obligations of the Company and the Pledgor Subsidiaries under the Credit Documents.

B. Joining Party is the owner of a Pledgee Subsidiary of the Company and in connection herewith is granting liens in the stock (or other equity interests) of such Pledgee Subsidiary, and as such is required pursuant to Section 12 of the Agreement to enter into a joinder to the Agreement.

C. Joining Party expects to realize direct and indirect benefits as a result of the availability to the Company of the indebtedness under the Credit Documents.

NOW, THEREFORE, Joining Party agrees as follows

AGREEMENT

1. Joining Party acknowledges that it has become a Pledgor Subsidiary under and pursuant to Section 12 of the Agreement. Joining Party agrees that, upon its execution hereof, Joining Party will be bound by all terms conditions, and duties applicable to a Pledgor Subsidiary under the Agreement.

2. The effective date of this Joinder is January 5, 2009.

[Signature Page Follows]

30

“Joining Party”
Standard Pacific of Orange County, Inc. a Delaware corporation
By:	/s/ John M. Stephens
	Name:	John M. Stephens
	Title:	Principal Financial & Accounting Officer
Address:
26 Technology Drive Irvine, California 92618-2338 Attn: John M. Stephens, SVP and CFO Telephone: (949) 789-1600 Facsimile: (949) 789-1608

ACKNOWLEDGED:

BANK OF AMERICA, N.A.

as Collateral Agent

By:

Name:

Title:

INSTRUMENT OF JOINDER (ADDITIONAL SUBSIDIARY PLEDGOR)

THIS INSTRUMENT OF JOINDER (“Joinder”) is executed as of August 21, 2009 by Standard Pacific Investment Corp., a Delaware corporation (“Joining Party”), and delivered to BANK OF AMERICA, N.A., as Collateral Agent, pursuant to the Collateral Agent and Intercreditor Agreement dated as of May 5, 2006 among the Collateral Agent, Standard Pacific Corp., a Delaware corporation, those Pledgor Subsidiaries of the Company which are a party thereto and the Creditor Representatives which are a party thereto (the “Agreement”). Terms used but not defined in this Joinder shall have the meanings defined for those terms in the Agreement.

RECITALS

A. In connection with the Agreement, the Company and the Pledgor Subsidiaries granted liens in the stock (or other equity interests) of certain Subsidiaries of the Company to the Collateral Agent for the mutual benefit of the Creditors in order to secure the respective obligations of the Company and the Pledgor Subsidiaries under the Credit Documents.

B. Joining Party is the owner of a Pledgee Subsidiary of the Company and in connection herewith is granting liens in the stock (or other equity interests) of such Pledgee Subsidiary, and as such is required pursuant to Section 12 of the Agreement to enter into a joinder to the Agreement.

C. Joining Party expects to realize direct and indirect benefits as a result of the availability to the Company of the indebtedness under the Credit Documents.

NOW, THEREFORE, Joining Party agrees as follows

AGREEMENT

1. Joining Party acknowledges that it has become a Pledgor Subsidiary under and pursuant to Section 12 of the Agreement. Joining Party agrees that, upon its execution hereof, Joining Party will be bound by all terms conditions, and duties applicable to a Pledgor Subsidiary under the Agreement.

2. The effective date of this Joinder is August 21, 2009.

[Signature Page Follows]

“Joining Party”
Standard Pacific Investment Corp. a Delaware corporation
By:	/s/ John M. Stephens
	Name:	John M. Stephens
	Title:	Principal Financial & Accounting Officer & Treasurer
Address:
26 Technology Drive Irvine, California 92618-2338 Attn: John M. Stephens, SVP and CFO Telephone: (949) 789-1600 Facsimile: (949) 789-1608

ACKNOWLEDGED:

BANK OF AMERICA, N.A.

as Collateral Agent

By:

Name:

Title:

33

EX-31.1

Exhibit 31.1

Certifications:

I, Kenneth L. Campbell, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Standard Pacific Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 6, 2009

/s/ KENNETH L. CAMPBELL

Kenneth L. Campbell

Chief Executive Officer and President

EX-31.2

Exhibit 31.2

I, John M. Stephens, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Standard Pacific Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 6, 2009

/s/ JOHN M. STEPHENS

John M. Stephens

Senior Vice President and

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Each of the undersigned hereby certifies, in his capacity as an officer of Standard Pacific Corp., a Delaware corporation (the “Company”), for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

• the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2009, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and

• the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 6, 2009

/s/ Kenneth L. Campbell

Kenneth L. Campbell

Chief Executive Officer and President

/s/ John M. Stephens

John M. Stephens

Senior Vice President and

Chief Financial Officer