Comstock Holding Companies, Inc.
Annual Report 2009

Download report
Bookmark report

More annual reports from Comstock Holding Companies, Inc.:

2023 Report
2022 Report
2021 Report
2020 Report
2019 Report

Peers and competitors of Comstock Holding Companies, Inc.:

Frontline
Irongate Group
Land Securities Group
BlackWall Property Trust
Annaly Capital Management

Plain-text annual report

Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 Form 10-KANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2009Commission file number 1-32375 Comstock Homebuilding Companies, Inc.(Exact Name of Registrant as Specified in Its Charter) Delaware 20-1164345(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)11465 Sunset Hills Road4th FloorReston, Virginia 20190(703) 883-1700(Address, including zip code, and telephone number, including area code, of principal executive offices)Securities registered pursuant to Section 12(b) of the Act:NoneSecurities registered pursuant to Section 12(g) of the Act:Class A common stock, par value $.01 per share(Title of Class)Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No þIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No þIndicate 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 1934during 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 filingrequirements for the past 90 days. Yes þ No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data Filerequired 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 shorterperiod that the registrant was required to submit and post such files. ¨ Yes ¨ NoIndicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, tothe best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment tothis Form 10-K. ¨Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “acceleratedfiler and large accelerated filer” in Rule 12b-2 of the Exchange Act. (check one)Large Accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company þIndicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of The Act). Yes ¨ No þThe aggregate market value of voting and non-voting common equity held by nonaffiliates of the registrant (11,741,553 shares) based on the lastreported sale price of the registrant’s common equity on the NASDAQ Global Market on June 30, 2009, which was the last business day of the registrant’smost recently completed second fiscal quarter, was $2,348,311. For purposes of this computation, all officers, directors, and 10% beneficial owners of theregistrant are deemed to be affiliates. Such determination should not be deemed to be an admission that such officers, directors, or 10% beneficial owners are,in fact, affiliates of the registrant.As of March 31, 2010, there were outstanding 15,875,100 shares of the registrant’s Class A common stock, par value $.01 per share, and 2,733,500shares of the registrant’s Class B common stock, par value $.01 per share.DOCUMENTS INCORPORATED BY REFERENCEPortions of the registrant’s definitive Proxy Statement for the 2010 Annual Meeting of Stockholders are incorporated by reference into Part III of thisForm 10-K. Table of ContentsCOMSTOCK HOMEBUILDING COMPANIES, INC.ANNUAL REPORT ON FORM 10-KFor the Fiscal Year Ended December 31, 2009TABLE OF CONTENTS Page PART I Item 1. Business 1Item 1A. Risk Factors 10Item 1B. Unresolved Staff Comments 21Item 2. Properties 21Item 3. Legal Proceedings 22Item 4. Reserved 22 PART II Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities 23Item 6. Selected Financial Data 24Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 26Item 7A. Quantitative and Qualitative Disclosures About Market Risk 44Item 8. Financial Statements and Supplementary Data 44Item 9. Changes In and Disagreements With Accountants and Financial Disclosure 44Item 9A. Controls and Procedures 45Item 9B. Other Information 45 PART III Item 10. Directors and Executive Officers of the Registrant 46Item 11. Executive Compensation 46Item 12. Security Ownership of Certain Beneficial Owners and Management 46Item 13. Certain Relationships and Related Transactions 46Item 14. Principal Accountant Fees and Services 46 PART IV Item 15. Exhibits and Financial Statement Schedules 47Signatures Index to Consolidated Financial Statements F-1 i Table of ContentsPART I Item 1.BusinessOverviewComstock is a multi-faceted real estate development company engaged in the development of for-sale residential and mixed use products. Oursubstantial experience in building a diverse range of products including single-family homes, townhouses, mid-rise condominiums, high-rise multi-familycondominiums and mixed-use (residential and commercial) developments has positioned Comstock as a prominent real estate developer and home builder inthe Washington, D.C. market place. References in this Form 10-K to “Comstock,” “Company”, “we,” “our” and “us” refer to Comstock HomebuildingCompanies, Inc. together in each case with our subsidiaries and any predecessor entities unless the context suggests otherwise.Our business was founded in 1985 as a residential land developer and home builder focused on the Northern Virginia suburbs of the Washington, D.Carea. In the 1990’s we expanded our business to include home building operations in Maryland and North Carolina and a title insurance agency in Virginia.Prior to our December 2004 initial public offering, we operated our business through multiple holding companies each focused on a distinct geographic areaor business operation. In connection with our initial public offering, these primary holding companies were consolidated and merged into ComstockHomebuilding Companies, Inc., which was incorporated in Delaware in May 2004. Subsequent to our initial public offering we conduct our operationsthrough wholly owned subsidiaries. Comstock Homes is the brand name of our for sale home building operations. Comstock Communities is the brand namewe use for our residential rental property operations. Since our founding in 1985, and as of December 31, 2009, we have built and delivered more than 5,200homes generating total revenue in excess of $1.3 billion.Our core market of Washington, D.C. has experienced significant job and population growth over the past two decades, creating demand for a widerange of housing products. Our expertise in developing traditional and non-traditional housing products enables us to focus on a wide range of opportunitieswithin our core market. We have built homes in suburban communities, where we focus on low density products such as single family detached homes, and inurban areas, where we focus on high density multi-family and mixed use products. We develop properties with the intent that they be sold either as fee-simpleproperties or condominiums to individual unit buyers or as investment properties sold to private or institutional investors. Currently we operate only in theWashington, D.C. market where we target first-time, early move-up, and secondary move-up buyers. We focus on products that we are able to offer for sale inthe middle price points within the markets where we operate, avoiding the very low-end and high-end products. We believe our middle market strategypositions our products such that they are affordable to a significant segment of potential home buyers in our market. In 2007, 2008, and 2009 the averageprice of the homes we delivered was $263,000, $300,000, and $289,000, respectively.We seek to minimize risk associated with fluctuating market conditions by primarily building pre-sold units and limiting the number of spec units heldin inventory. In each new community that we develop we build model homes to demonstrate our products and to house our on-site sales operations. We limitthe building of spec units to locations where there is a demonstrated demand for immediate delivery homes or where the majority of the units within a multi-family building (such as townhouses or condominiums) have been pre-sold. We believe that by limiting the number of spec units held in inventory we reduceour exposure to cyclical fluctuations in market values and minimize costs associated with holding inventory, such as debt service. We believe that ourstrategy of limiting spec inventory and converting our standing condominium inventory to rental properties contributed to our ability to manage the currentdownturn in the housing market.In certain communities we continue to offer units for sale and for rent. In the difficult market conditions that have persisted over the past few years thisstrategy has dramatically enhanced our ability to maintain adequate operating cashflow. It has also contributed to our ability to negotiate amicablearrangements with all of our lenders regarding necessary modifications to our borrowing facilities as we worked to align our portfolio with market realities.Additionally, by operating key properties as rental communities during the housing downturn, we have been able to position valuable assets for sale inimproving market conditions.In 2005 we began executing expansion plans with the goal of establishing operations in key markets throughout the Southeast where job growth andpopulation growth created increased demand for new housing. During 2006, we expanded our Raleigh, North Carolina operation and we entered theCharlotte, North Carolina, Myrtle Beach, South Carolina, and Atlanta, Georgia markets, increasing revenues to approximately $266.2 million in 2007.However, during 2007 it became clear that the unprecedented span of growth in the housing sector was ending. Changing economic conditions werenegatively affecting demand for new housing. Drawing on the experience we gained in previous downturns, we curtailed our expansion plans and adopted adefensive strategy to ensure our ability to survive the housing downturn, should it prove to be protracted, which it has. We quickly sold certain assets wherewe believed market values would continue to erode and we began working with our lenders to renegotiate the terms of our project related and corporateborrowings, which peaked at approximately $340.0 million as of September 30, 2006. Throughout 2007 and 2008, market conditions continued todeteriorate which made it necessary to significantly scale back operations while continuing efforts to renegotiate terms of our debt while seeking to retaincertain properties in our portfolio.With market conditions remaining difficult as 2009 began and liquidity becoming an increasing concern, we established our Strategic RealignmentPlan. This Plan was designed to eliminate debt, further reduce expenses, enhance our balance sheet, conserve cash, and protect our key Washington, D.C.market assets. By the end of 2009 we successfully renegotiated all secured debt obligations and reduced total debt to approximately $67.6 million as ofDecember 31, 2009. As detailed in the Subsequent Events section of this Form 10-K, the final steps of our Strategic Realignment Plan were completed inearly 2010, reducing our total debt by another $4.5 million. By executing this plan we eliminated or reduced corporate and project related debt while alsodisposing of assets where market values had deteriorated and retained key assets in the Washington, D.C. market where values had begun to stabilize.In keeping with our defensive strategy we did not purchase any land in 2008 or 2009 and we completed our exit from the Charlotte, North Carolina,Myrtle Beach, South Carolina, and Atlanta, Georgia markets and suspended our operations in the Raleigh, North Carolina market. We also eliminated all specinventory (other than those units held as rental properties) and we disposed of properties where we believed market conditions did not warrant protecting theasset. We reduced total debt to approximately $67.6 million (see details at Note 8 to the accompanying consolidated financial statements), we significantlyreduced general and administrative expenses (from $37.5 million in 2006 to $8.1 million in 2009), we enhanced operating cashflow, and we protected keyproperties in the Washington, D.C. area around which we will seek to rebuild our business. As a result of our effort to realign our business with marketconditions our unit deliveries declined in 2009 to 74 (down from the peak of 914 in 2006), generating total revenues of $25.0 million (down from the peak of$266.2 million in 2007).We believe that our significant experience over the past 25 years, combined with our ability to navigate through two major housing downturns (early1990’s and late 2000’s) have provided us the experience necessary to capitalize on attractive opportunities in our core market of Washington, D.C. and to rebuild shareholder value. We are confident that our focus on the Washington, D.C. market, which has historically been characterized by economicconditions less volatile than many other major homebuilding markets, will provide opportunity to generate attractive returns on investment while alsoproviding opportunity for growth. Further, as detailed in the Subsequent Events section of this Form 10-K, we believe the recent court decision resulting inour favor regarding litigation we brought against the general contractor on our Eclipse high-rise condominium project in Arlington, Virginia will ultimatelyenhance liquidity and reduce indebtedness, once any appeal of the award by the defendant concludes. 1 Table of ContentsThe homebuilding industry continues to experience demand levels well below the record levels experienced in 2005. Although market conditionsshowed signs of improvement in 2009, as compared to 2008, demand continues to be well below the robust levels experienced earlier in this decade. Theeconomic recession and the well documented turmoil in the financial markets continue to create challenging market conditions for most industries. Amongthe challenges facing the home building industry is availability of capital, availability of mortgage financing, increased levels of existing home inventoryfueled by foreclosures, and reduced demand for new homes. Nonetheless, we believe that having achieved the major objectives of our Strategic RealignmentPlan that Comstock is now well positioned to get back to work seeking to capitalize on opportunities that we believe are emerging in the stabilizingWashington, D.C. market. Comstock’s ability to navigate the turmoil has been a result of the commitment to success and dedication of every member of theComstock team, as well as the strong relationships we have built over the years with our lenders, suppliers, subcontractors, and customers.For additional information and analysis of recent trends in our operations and financial condition, see “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations” in this Form 10-K. We file annual, quarterly and current reports, proxy statements and other information withthe Securities and Exchange Commission (the “SEC”). These filings are available to the public over the Internet at the SEC’s website at http://www.sec.govor on our web site at www.comstockhomebuilding.com. The Investors Relations page on our website contains links to the reports we file with the SEC whichyou may access and download free of charge. Our website also includes a corporate governance section which contains our Corporate GovernanceGuidelines, Code of Conduct, Audit and Compensation Committee Charters, Code of Ethics and Whistleblower Policy. In addition, you may request a copyof the foregoing filings (excluding exhibits), charters, guidelines and codes, and any waivers or amendments to such codes which are applicable to ourexecutive officers, at no cost by writing to us at our principal executive office address. Our principal executive office address is; 11465 Sunset Hills Road, 4thfloor, Reston, Virginia 20190, and our telephone number is; (703) 883-1700.Liquidity and Access to CapitalThe duration and the depth of the current downturn in real estate markets and the general weakness in the economy have significantly impacted thebalance sheets and the overall financial health of many banks and other financial institutions that have been the primary sources of capital for home builders.Banks that have been active in real estate lending have been forced to substantially tighten their lending requirements or withdraw from real estate lendingaltogether. This has created a liquidity crisis for real estate developers and home builders that rely on banks for project financing and has contributed to theerosion of real estate values and increasing default rates in real estate loan portfolios of banks. Federal banking regulators have required banks to devalueloan portfolio assets and many banks have struggled to meet federal capital reserve requirements. This in turn has created a severe liquidity crisis in thebanking and real estate industries. The resulting liquidity crisis is creating a vicious cycle of bank asset devaluation and capital requirement failures amongbanks. The burden created by these circumstances is leading to the seizure by the F.D.I.C. of many banks. Some of these financial institutions are burdenedwith significant troubled real estate loan portfolios and real estate owned as a result of foreclosures. In past real estate market downturns these circumstanceshave been followed by a period of time where experienced investors and developers are able to acquire land and other assets from troubled financialinstitutions or from the F.D.I.C on attractive terms.This series of events, which last occurred in the United States in the early 1990’s, is creating a challenging environment for financing real estate.However it is also creating opportunities to acquire properties at significant discounts to the market values experienced before the market downturn.Additionally, many costs associated with construction have been reduced as a result of waning demand for such products and services over the past few years.The combination of lower land costs and lower production costs leads to the ability to offer homes at prices that are well below the prices experienced at thepeak of market demand. This allows home builders that are positioned to capitalize on this trend to be competitive in the market. Liquidity and access tocapital are key factors in being able to capitalize on such opportunities. If we are unable to rely on our existing lender relationships or identify new capitalsources we will have difficulty capitalizing on new attractive opportunities and margin growth will be difficult to achieve.Our liquidity remains below desired levels and we continue to have limited access to new capital. However, the steps we have taken over the past twoyears to stabilize our business and reverse the trend of negative cashflow experienced in previous periods. We also believe that we are now positioned topotentially build upon the trend of restored profitability that began with the results we reported for the third and fourth quarters of 2009. We believe that asmarket conditions improve our ability to generate positive results will be enhanced which will in turn improve our access to capital. Further, as detailed inthe Subsequent Events section of this Form 10-K, we believe the recent court decision in our favor regarding litigation we brought against the generalcontractor on our Eclipse high-rise condominium project in Arlington, Virginia, will improve our liquidity and reduce our indebtedness to KeyBank, onceany appeal of the award by the defendant concludes.Our Business StrategyOur general business strategy is to focus on for-sale residential real estate development opportunities in the Mid-Atlantic United States that afford usthe ability to produce products at price points where we believe there is significant long-term demand for new housing. To control risk we generally pursuefinished building lots under option contracts. Option contracts afford us the opportunity to minimize land inventory while controlling a supply of buildinglots to meet current and future requirements. Option contract transactions also tend to require less capital and therefore the return on investment may beenhanced. Further, traditional capital sources, such as banks which we rely upon for project financing, view option contract transaction as less risky andtherefore tend to be more willing to provide capital for option lot acquisitions at reasonable rates.Although we have always pursued finished lot option transactions, the scale and financial strength of some of our competitors provides them with adistinct advantage with respect to their ability to acquire building lots on an option contract basis. In order to provide an adequate supply of finished lotsthat can be acquired on an option basis we seek to work with multiple land developers with respect to the land they control rather than relying on a singlesource. In addition, we also have land development capabilities. This enables us to acquire parcels of land that we then develop into finished building lots,sometimes selling a portion of the finished lots to other home builders. We believe that our land development capabilities provide several additionalbenefits, such as the ability to thoroughly analyze acquisition opportunities to identify risks associated with entitlements and/or site conditions, acquireproperties in attractive locations that are not generally available as finished lots on an option basis, develop a wide array of housing products to capitalize ondemand trends in the Washington, D.C. market and to acquire distressed assets (including partially developed properties) from financial institutions where webelieve we can generate attractive returns on invested capital.We seek to reduce risk through diversification of product offerings with a focus on select markets that have a demonstrated history of demand for newhousing products. Recognizing the housing industry is cyclical in nature and that current challenging market conditions, although improving, will take timeto fully stabilize, we believe that our focus on our core market of Washington, D.C. will provide significant opportunity for growth without the riskassociated with maintaining operations in, or expanding operations to, multiple distant markets. We are proceeding with extreme caution as we begin to seekto capitalize on emerging opportunities. With regards to new acquisitions, we are currently focused primarily on distressed assets held by financialinstitutions. We believe that, although larger home builders that have significantly greater capital resources do present competition for land acquisitions, our ability to navigate the significant turmoil in the housing sector over the past few years, while maintaining ongoing operations and reaching amicablearrangements with our lenders, will position us well to work with lenders currently burdened with distressed assets. 2 Table of ContentsA summary of the key elements of our operating strategy, as adapted to current market realities follows:Maintain a focus on our core market-Washington, D.C. From 2005 through 2008 increases in unemployment rates, foreclosure rates, and re-sale marketinventory had a negative effect on demand for new housing products in all markets. Although the presence of the federal government and the impact thatfederal spending has on the local economy has historically provided a level of protection to the Washington, D.C. area economy, the depth and duration ofthe economic recession and the resulting downturn in housing was felt throughout the region. However, recent demand trends in the Washington, D.C. areaare indicative of a stabilizing environment. Accordingly, we have eliminated or suspended operations in all markets except the Washington, D.C. market andwe will draw on our 25 year history in the Washington, D.C. market to capitalize on emerging attractive opportunities for long term growth in our coremarket. We are confident that our focus on the Washington, D.C. market, which has historically been characterized by economic conditions less volatile thanmany other major homebuilding markets, will provide opportunity to generate attractive returns on investment while also providing opportunity for growth.Maintain our “Middle Market” approach. Historically we have focused on middle market products designed to be affordable to a broad segment of thehome buying population. We believe that by focusing on products that are affordable to the largest segment of the prospective home buying population wereduce risk to cyclical market value fluctuations. As stabilizing market conditions warrant new development undertakings, we will continue our focus onprojects with middle market orientation.Continue to maximize the value of our current portfolio. As market conditions resulted in decreased demand for new homes we protected our key assetsin the Washington, D.C. market. Where we had standing condominium inventory, we converted remaining units in the projects to rental properties. Thisstrategy provided cashflow that enabled us to neutralize the impact of debt service requirements and to improve overall liquidity. Additionally, based on ourexperience with prior market cycles in the Washington, D.C. region, we believed that this approach would make it possible to reposition these key propertiesfor sale at a time when market pressure on values began to ease. As traffic and interest in these properties began increasing in the second half of 2009, webegan releasing portions of this inventory from our rental programs for sale. We will continue to manage these assets with a view towards maximizing values,enhancing cashflow and rebuilding value.Regularly assess valuations of portfolio assets. The historic nature of the economic recession of the past few years has been well documented. Theimpact on the value of residential real estate has been dramatic. As a result we recorded significant impairments during 2006 through 2009. We continuouslyre-evaluate the real estate assets we own with the goal of reporting them at estimated fair value on our financial statements if impairment has occurred. Webelieve our depth of experience enables us to quickly identify and address changing market conditions and provides us opportunity to protect and enhancethe value of the real estate assets we own and develop.Protect liquidity and maximize capital availability. We remain highly focused on preserving liquidity and available capital. We believe that by takingsteps to enhance liquidity we will be better positioned to take advantage of attractive opportunities as the market stabilizes and demand for new housingrecovers. Recent trends in the Washington, D.C. area are indicative of improving market conditions.Focus on opportunities for attractive returns on invested capital. By focusing on acquiring finished building lots and distressed assets held byfinancial institutions, we believe that we will be able to enhance the return on invested capital. Option contracts generally tend to require less capital andtherefore the return on investment may be enhanced. Further, traditional capital sources, such as banks which we rely upon for project financing, view optioncontract transactions and the acquisition of distressed assets that are generally available at discounted prices, as less risky and therefore tend to be morewilling to provide capital for such acquisitions at reasonable rates. We will seek to rebuild our pipeline of available building lots through a cautious andmeasured approach focused on the Washington, D.C. market.Maintain rational overhead expenses. A key element of the defensive posture we adopted to enhance our ability to survive the current downturn wasthe significant reduction of operating expenses. We sought to retain only key people capable of contributing to our effort to restore our Company toprofitability and we cut other operating expenses across the board. By doing so we significantly reduced general and administrative expenses, from $37.5million in 2006 to $8.1 million in 2009 and enhanced operating cashflow. We will continue our effort to keep overhead expenses commensurate with ourcurrent level of business as we seek to rebuild margins and enhance shareholder value.Capitalize on undervalued assets. The depth and duration of the cyclical downturn in housing has created an environment where many assets,borrowers and lenders are financially distressed. We will seek to capitalize on market opportunities to acquire assets at reduced costs where we believeimproving market conditions provide opportunity for attractive returns. We believe that we are well positioned to identify such acquisition opportunities as aresult of our strong relationships within the real estate and financial industries in our core market of Washington, D.C.Create opportunities in areas overlooked by our competitors. Through our wide ranging development capabilities and expertise we will seek tocapitalize on opportunities that our competitors may overlook. As current homebuilding industry and general economic conditions stabilize and improve, webelieve there will be attractive market opportunities for well-designed, quality homes and condominiums in suburban areas as well as urban locations in closeproximity to transportation facilities.Build upon our vendor, customer and lender relationships. The turmoil that has engulfed the homebuilding industry over the past few years has had aprofound negative impact on almost every home builder. As a result, many vendors, tradesmen and lenders have suffered significant losses. In manycircumstances the effort to communicate with those impacted by the financial distress suffered by home builders has been lacking and relationships havesuffered along with balance sheets. Throughout the market downturn we have worked diligently to communicate with those that we do business with andsought to reach amicable solutions. A key element of our Strategic Realignment Plan was developing amicable solutions with strategic creditors andaddressing any customer concerns as well. We believe that our efforts in this regard will result in our Company having strengthened the critical relationshipsthat we rely upon as we seek to rebuild our business and enhance shareholder value.Our OperationsOur operations have been scaled back to align general and administrative expenses with market realities. In keeping with the defensive strategyadopted to enhance our ability to survive a prolonged downturn in housing demand we eliminated several operating divisions and refocused operations onthe Washington, D.C. market where we believe our 25 years of market experience provides us the best opportunity to rebuild our business and enhanceshareholder value. Our Washington area divisional operation currently shares office space with our corporate headquarters in Reston, Virginia where itreceives support services such as marketing, accounting, legal, information technology, human resources, sales training, purchasing and land underwritingand financing. Although we have dramatically reduced the size of our staff we believe that we have maintained the critical capabilities we need to capitalizeon emerging opportunities. We believe that we are properly staffed for the current market conditions and have the ability to manage growth as market conditions warrant.Land Identification and AcquisitionWe have operated in our core market of Washington, D.C. since 1985 and as a result have developed a deep knowledge base of the market. Over thepast 25 years we have developed a wide variety of products, including most housing products, from low density single family detached products to highdensity multi-family attached and hi-rise products. We prefer to gain diversity and growth through multiple product offerings within the expandingWashington, D.C. market rather than seeking to expand into multiple distant markets. We believe this strategy minimizes the risks associated with enteringnew markets such as operating in distant locations with non-executive managers and relying on demand in second or third tier markets. Our core market ofWashington, D.C. has experienced significant job and population growth over the past two decades, creating demand for a wide range of housing products.Our extensive experience developing a diverse range of housing products enables us to focus on a wide range of opportunities within our core market. 3 Table of ContentsThe real estate development and home building industries are highly competitive. In addition to competing for home purchasers, home builderscompete for construction financing, raw materials, skilled labor and prime development sites, especially those where developed building lots are availableunder option lot contracts from land developers. We compete with other local, regional and national home builders in all of these areas. Some of ourcompetitors have significantly greater financial resources than we do, giving them a distinct advantage when we compete with them for prime building sites.Some of the national builders against which we compete for land acquisitions include Pulte Homes, DR Horton, Toll Brothers, Ryland Homes, NVR,Hovnanian and Lennar.We believe that controlling a land inventory through option contracts as opposed to holding large inventories of raw land reduces risks associated withcyclical market fluctuations. This is because a typical option lot contract allows the home builder to acquire building lots on a “just in time basis” as it pre-sells homes and prepares for construction. Additionally, such contracts usually limit the home builder’s financial commitment to the project by providing afixed price for each building lot and by limiting liability to the land seller to the amount of the contract deposit. We seek to manage our future growth inaccordance with our business plan and long term objectives by focusing first on acquiring finished lots under option contracts whenever possible. In the pastwe have acquired land for our home building operations both as finished building lots and as raw land that we developed while over weighting option lotsand avoiding raw land holdings if possible. Through the acquisition of Parker Chandler Homes (Atlanta) and Capitol Homes (Raleigh) in 2006 our inventoryof raw land expanded significantly. Due to the focus that these acquired companies had on developing raw land, the amount of raw land in our inventoryoutweighed our option lot inventory. Although our goal was to transform the operations of the acquired companies into option lot buyers, market conditionsdeteriorated sooner than we anticipated. As market conditions deteriorated, we methodically sold or negotiated friendly foreclosure agreements to dispose ofexcess land holdings and the associated debt.We continue to own a small amount of raw land in the Washington, D.C. market. The objectives achieved under our Strategic Realignment Plan hasresulted in the disposal of all raw land and other inventory (and the associated debt) in the Atlanta and Raleigh markets and positioned us to begin arefocused approach of acquiring attractive building lots in our core market of Washington, D.C. Additionally, at December 31, 2009 the remaining raw landin our inventory is under contract to be sold. We expect the sale to be consummated in the first quarter of 2010.Our asset management and land acquisition process is overseen by our executive management team. Executive management meets regularly toevaluate market opportunities, prospective land acquisitions, project financing options, new product development and other operational issues. During muchof 2009, a major focus of the management team was evaluating each and every portfolio asset and determining the best strategy for dealing with each asset inkeeping with the objectives of our Strategic Realignment Plan. A methodical approach was undertaken to ensure that the strategy implemented with respectto each portfolio asset was one that we believed would produce the best short term and long term results for the Company. Executive management also meetsregularly to evaluate performance of portfolio assets and to determine strategy adjustments that may be warranted to contain or reduce risks associated withevolving market conditions, new competition, fluctuations in costs of production and other factors that may affect the results of each project and to reviewoptions for enhancing the return on capital invested in such assets. In 2010, a major focus of the management team will be identifying attractiveopportunities in our core market of Washington, D.C., developing effective acquisition strategies and identifying new sources of capital. As detailed in theSubsequent Events footnote to our Consolidated Financial Statements contained in this Form 10-K, we believe the recent court decision in our favorregarding litigation we brought against the general contractor on our Eclipse high-rise condominium project in Arlington, Virginia, may ultimately enhanceour liquidity and capital resources, once any appeal process initiated by the defendant is concluded. Given the uncertainty as to (i) whether and when wewould receive payment from the contractor and (ii) the amount of the payment, it may be necessary to pursue additional sources of capital prior to ourpotential receipt of any payment from the general contractor.Our acquisition underwriting and due diligence process includes a thorough examination of a variety of factors that can impact the success of adevelopment project. The factors we routinely examine include but are not limited to the following: environmental conditions, soil conditions, utilityavailability, projected construction costs, labor and material availability, zoning restrictions, impact fee assessment, land title conditions and other factors.Additionally, we conduct a competitive marketing analysis to assess competitive projects in the area that may impact our ability to attract purchasers andgenerate sales. Our market studies include, but are not limited to, researching factors such as: existing and upcoming competitive projects, features andpricing offered by the competition, land costs of competitive projects, population and employment trends, impact of school districts, access to regionaltransportation facilities, availability of local and regional amenities, impact of commuter route options and pending transportation improvements, andassessment of other factors. We develop prospective buyer profiles and forecast sales for each project. On a regular basis we assess performance of each projectand make adjustments to our marketing strategy as needed to promote adequate sales.Land Entitlement and DevelopmentWhether purchasing finished building lots or land for development we can rely on our extensive knowledge and experience in all aspects of siteselection, land planning, entitlement and land development processes. We have significant experience in dealing with local governmental and regulatoryauthorities that govern the site development, entitlement and home building processes. Obtaining entitlements and development permits often requiressignificant negotiations with local governmental authorities, and various other parties, including local homeowner associations, environmental protectiongroups and federal governmental agencies. Our extensive experience and knowledge allow us to effectively negotiate with all concerned parties in an attemptto ensure the necessary permits can be obtained before acquisition of a particular building site.Our experience and in-house capabilities also enable us to quickly assess the estimated costs associated with development of a particular property, andthe potential development challenges. As a result, we can control the details of development, from the design of each community entryway to the placementof streets, utilities and amenities, in order to efficiently design a development that we believe will maximize the potential return on our investment in theproperty. Even when we are purchasing finished lots from a land developer, these in-house capabilities enable us to work with the land seller to ensure thatthe development is designed in a manner that is in keeping with our marketing objectives for the project and decisions made by the developer regarding landdevelopment issues do not negatively impact the costs we will incur when constructing homes on the property. Further, we believe that these capabilitiesposition us well to work with financial institutions seeking to sell distressed land assets on which they have foreclosed. In certain circumstances we provideour services for a fee to property owners seeking to develop or sell their property, such as financial institutions or investors.Sales and MarketingWe seek diversification and growth through multiple product offerings rather than seeking growth through expansion into multiple distant markets.We believe this strategy minimizes the risks associated with entering new markets such as operating in distant locations with non-executive managers andrelying on demand in second or third tier markets. Our core market of Washington, D.C. has experienced significant job and population growth over the pasttwo decades, creating demand for a wide range of housing products. Our significant experience in developing a diverse range of housing products enables usto focus on a wide range of opportunities within our core market. We have built homes in suburban communities, where we focus on low density products such as single family detached homes, and in urban areas, where we focus on high density multi-family and mixed use products. We develop properties withthe intent that they be sold either as fee-simple properties or condominiums to individual unit buyers or as investment properties sold to private orinstitutional investors. We focus on geographic areas where we believe there will be continuing demand for new housing and the potential for attractivereturns.Currently we operate only in the Washington, D.C. market where we target first-time, early move-up, and secondary move-up buyers. We focus onproducts that we are able to offer for sale in the middle price points within the markets where we operate, avoiding the very low-end and high-end products.We believe our middle market strategy positions our products such that they are affordable to a significant segment of potential home buyers in our market.We continually reevaluate and improve upon our existing product designs and develop new product offerings to keep up with changing consumer demandsand emerging market trends. 4 Table of ContentsComstock Homes is the brand name of our for sale home building operations. Comstock Communities is the brand name we use for our residentialrental property operations. The single-family detached home products that we may offer at any particular time in the Washington, D.C. area range in size fromapproximately 1,400 square feet to over 6,000 square feet and are usually priced from the high $100,000’s to the $500,000’s. The townhouse products thatwe may offer at any particular time in the Washington, D.C. area range in size from approximately 1,200 square feet to over 4,500 square feet and aretypically priced from the mid $100,000’s to the $400,000’s depending on the location. Our condominiums range in size from approximately 400 square feetto over 2,400 square feet and are generally priced from the mid $100,000’s to over $900,000. Our average new order price over all products was $291,000,$285,000 and $239,000 for the years ended December 31, 2009, 2008 and 2007, respectively.In certain communities we offer units for sale and for rent. Our rental units range in size from approximately 400 square feet to over 1,500 square feetand are priced from under $1,000 per month to over $2,500 per month. Our average rental revenue over all unit types was approximately $1,500 per monthfor the year ended December 31, 2009. In the difficult market conditions that have persisted over the past few years our rental property strategy hasdramatically enhanced our ability to maintain adequate operating cashflow to service the debt associated with these projects and contributed to our ability tonegotiate amicable arrangements with all of our lenders regarding the necessary modifications to our borrowing facilities as we worked to align our portfoliowith market realities. Additionally, by operating key properties as rental communities during the housing downturn we have been able to position valuableassets for sale in improving market conditions.We utilize a consistent marketing approach for all Comstock products. We believe that our marketing efforts have contributed to our reputation as adeveloper of quality communities and housing products. We place strict controls on our brands. Our corporate marketing directors work with our project salesand rental managers to develop marketing and sales strategies for specific projects. Our corporate marketing directors then work with in-house marketing andtechnology specialists to develop advertising and public relations programs for each project.The specific sales and rental objectives, overall strategies, home pricing, and marketing budget decisions are developed by senior management withinput from division managers and marketing directors. We typically build, decorate, furnish and landscape model homes for each product line and maintainonsite sales offices, which are generally open seven days a week. We believe model homes play a critical role in our marketing efforts. During 2009 wecontinued to lower marketing costs through the increased utilization of internet based marketing platforms in lieu of print advertisements. We believe thatthe home buying population will continue to increase its reliance on information available on the internet to help guide their home buying decision.Accordingly, our marketing efforts will continue to seek to leverage this trend in an effort to lower per sale marketing costs while maximizing potential sales.We primarily compensate our sales staff with success based pay. Each sales manager is paid a modest base salary as well as a market rate salescommission. A portion of the sales commission is paid at the time that each purchaser is approved for a mortgage and all contingencies are removed from thepurchase contract. The balance of the sales commission is paid after delivery of the unit to the purchaser. We employ our sales personnel on a long-term basis,rather than a project-by-project basis, which we believe results in a more committed and motivated sales force with better product knowledge. We believe thiscontinuity has a positive impact on sales.All personnel engaged in the sale of Comstock homes receive extensive training in the sales process from our executive and marketing managers. Westrive to provide a high level of customer service during the sales process. Through multi-lingual home buying seminars, relationships with preferredmortgage lenders and utilization of a series of proprietary custom marketing programs, we are able to educate our prospective purchasers, prepare our firsttime home buyer customers for home ownership and help our home buyers obtain a mortgage tailored to their specific needs.Our unique NextHome programs are designed to assist our customers in many aspects of purchasing a Comstock home and to enhance our ability toattract purchasers to our communities in a competitive landscape. These programs include: • DownRight™ – Designed to help identify ways to meet the down payment requirements of a new home purchase;• Tailor Made™ – Designed to provide unique financing products based on agreements with major lenders that tailor a monthly paymentin order to make home ownership affordable in any interest rate climate;• Get It Sold™ – Designed to help our customers sell their current home quickly and efficiently in order to facilitate their purchase of anew Comstock home;• All@Home™ – Designed to enable our customers to design technology solutions for their new Comstock home to meet theirindividual specifications;• Built Right ™ – Our quality assurance program incorporating multiple quality assurance inspections throughout the constructionprocess; and• Home Style ™ – Our program of optional upgrades providing hundreds of options to choose from to customize a new Comstock hometo suit the specific desires of our customers.ProductionWe seek to minimize risk associated with fluctuating market conditions by primarily building pre-sold units and limiting the number of spec units heldin inventory. We limit the building of spec units to locations where there is a demonstrated demand for immediate delivery homes, or where the majority ofthe units within a multi-family building (such as townhouses or condominiums) have been pre-sold. We believe that by limiting the number of spec unitsheld in inventory we reduce our exposure to cyclical fluctuations in market values and minimize costs associated with holding inventory, such as debtservice. We believe that our strategy of limiting spec inventory has contributed to our ability to manage the downturn in the housing market over the pastcouple years.Our homes are typically sold before construction through sales contracts that are accompanied by a cash deposit. Production typically does notcommence until the Purchaser has obtained approval of their mortgage application. Accordingly, we assist the purchaser in all aspects of selecting a mortgageprogram that is right for them. Through arrangements with preferred lenders we are able to closely monitor the loan application process. Cancellation rates aresubject to a variety of factors beyond our control such as job market conditions, consumer confidence, adverse economic conditions, mortgage interest rateincreases, and other factors that impact demand for consumer products. During 2006 through 2008 our cancellation rate increased as economic conditionscaused a significant reduction in demand for new homes. However, as market conditions began to stabilize in 2009 our cancellation rate decreased.We typically act as the general contractor in the construction of our wood frame single-family homes, townhouses and mid-rise condominiumbuildings. On projects where we offer these product lines our employees provide on-site management of land development and construction activities,quality control, permit inspections, and purchaser move-in coordination. Contract management, material purchasing and other supply side managementprocesses are centralized and conducted through our corporate offices. Substantially all construction work on these types of projects is done bytm subcontractors that contract directly with our home building subsidiaries and with whom we typically have an established relationship. 5 Table of ContentsOn our high-rise and mixed-use projects where we typically build concrete structures, we engage a general contractor for the site preparation andconstruction management. This is important on projects that require long construction cycles because it provides us the ability to require a bonded and fixedprice or a gross maximum price contract with the selected general contractor. In these instances, the majority of subcontractors that perform the on-siteconstruction work are typically contracted directly by the general contractor that we select. On projects where we offer these product lines our employeesprovide construction management services, construction quality supervision and purchaser move-in coordination. In all instances, we follow generallyaccepted management procedures and construction techniques which are consistent with local market practices and applicable building codes.We compensate our production staff with market based pay, including performance based pay. Each production manager is paid a base salary as well asa market rate production bonus based on meeting budgets and delivery deadlines and achieving a high level of customer satisfaction. The bonus portion ofcompensation is paid after delivery of the unit to the purchaser. We employ our production personnel on a long-term basis, rather than a project-by-projectbasis, which we believe results in a more committed and motivated production team with better product knowledge. We believe this continuity has a positiveimpact on quality and customer satisfaction.Our CommunitiesAt December 31, 2009 we held for development the following properties in the below states and counties (some of which will be transferred to theapplicable lender during 2010 in keeping with the agreements reached with our lenders under our Strategic Realignment Plan): State CountyMaryland FrederickVirginia Arlington, Fairfax, Loudoun, 6 Table of ContentsThe following lot table summarizes certain information for our current and planned communities at December 31, 2009: As of December 31, 2009Project State ProductType(2) EstimatedUnits atCompletion UnitsSettled Backlog(3) Foreclosedlots LotsOwnedUnsold LotsunderOptionAgreementUnsold Average NewOrderRevenue toDateStatus: Active (1) Allen Creek (6) GA SF 26 23 — 3 — — $204,987Arcanum (6) GA SF 34 24 — 10 — — $376,173Falling Water (6) GA SF 22 18 — 4 — — $422,513Glenn Ivey (6) GA SF 65 18 — 47 — — $227,039James Road GA SF 49 9 — 39 1 — $339,847Post Road (6) GA SF 60 — — 60 — — n/aWyngate (6) GA SF 28 3 — 25 — — $416,990Sub-Total / Weighted Average (4) 284 95 — 188 1 — $313,099Emerald Farm MD SF 84 78 — 6 — $452,347Sub-Total / Weighted Average (4) 84 78 — 6 — $452,347Allyn’s Landing (5) NC TH 109 83 — 26 — $234,820Brookfield Station (5) NC SF 62 15 — 31 16 — $222,757Haddon Hall (5) NC Condo 90 30 — 60 — $158,399Holland Road (5) NC SF 81 18 1 62 — $440,239Providence-SF (5) NC SF 35 25 — 10 — $189,791Riverbrooke (5) NC SF 66 47 — 19 — $166,608Wakefield Plantation (5) NC TH 77 49 — 28 — $483,042Wheatleigh Preserve (5) NC SF 28 18 — 10 — $279,204Sub-Total / Weighted Average (4) 548 285 1 31 231 — $269,993Commons on Potomac Sq VA Condo 191 88 — 103 — $231,891Commons on Williams Sq (5) VA Condo 180 150 — 30 — $333,049Penderbrook VA Condo 424 327 — 97 — $253,047River Club II VA Condo 112 9 — 103 — — $257,464The Eclipse on Center Park VA Condo 465 391 3 71 — $404,875Sub-Total / Weighted Average (4) 1,372 965 3 103 301 — $325,360Total Active 2,288 1,423 4 322 539 — 320,388Status: Development (1) Shiloh Road (6) GA SF 60 — — 60 — — n/aTribble Lakes (5) GA SF 167 — — 167 — n/aSub-Total / Weighted Average (4) 227 — — 60 167 — n/aMassey Preserve (5) NC SF 187 — — — 187 — n/aSub-Total / Weighted Average (4) 187 — — — 187 — n/aStation View VA TH 47 — — — 47 — n/aSub-Total / Weighted Average (4) 47 — — — 47 — n/aTotal Development 461 — — 60 401 — n/aTotal Active & Development 2,749 1,423 4 382 940 — $320,388 (1)“Active” communities are open for sales. “Development” communities are in the development process and have not yet opened for sales. (2)“SF” means single family home, “TH” means townhouse and “Condo” means condominium. (3)“Backlog” means we have an executed order with a buyer but the settlement has not yet taken place. (4)“Weighted Average” means the weighted average new order sale price. (5)Remaining lots subject to foreclosure agreement with Wachovia executed in third quarter 2009. (6)Control of lots transferred to the U.S. Bankruptcy Court upon filing of Chapter 7 petition in fourth quarter 2009. 7 Table of ContentsGreater Washington DC Area DevelopmentsNorthern Virginia MarketThe Commons on Potomac Square is a four building, 191-unit, mid-rise condominium complex in Loudoun County, Virginia. The project ispositioned well for first-time homeowners in a market where the cost of single-family homes and townhouses are prohibitive for many first time home buyers.Sales began in late 2004 and settlements began in early 2006. In keeping with our Strategic Realignment Plan, when market conditions deteriorated wesuspended construction activities at the project and focused on selling the then remaining inventory of spec units. Having sold all remaining inventory in2009 we determined the best course of action for this asset was to hold the remaining building lots for future development. At December 31, 2009 there are103 remaining finished building lots at this project. All permits are issued allowing construction to commence as soon as market conditions warrant andconstruction financing is available. In September 2009 we entered into a loan modification agreement with the project lender which provides us a loanextension through January 2011.The Eclipse on Center Park is a 465-unit, high-rise condominium complex in Arlington, Virginia. The project is just minutes from downtownWashington D.C., the Pentagon and Reagan National Airport. The project is an upscale, urban-style, mixed-use complex with residential condominiumsabove an 83,000 square foot retail center, which includes a Harris Teeter grocery store and other convenience-oriented retailers. Condominium sales began inthe second quarter of 2004 and settlements began in November 2006. In furtherance of our Strategic Realignment Plan, when market conditions deterioratedwe temporarily suspended sales at the project and converted the majority of the remaining inventory to rental units. In October 2009 we entered into a loanmodification agreement with the project lender which provides us with a portion of the cashflow generated from rental and sales operations at the project. Asmarket conditions stabilized and began to improve in the later part of 2009, we re-focused on generating sales at the project. At December 31, 2009, 74 unitsremain in our inventory. Approximately 47 of these units were occupied by rental tenants, generating monthly gross rental revenue of approximately$100,000.Penderbrook Square is a 424-unit rental apartment complex in the Fair Oaks area of Fairfax County, Virginia that we purchased as a condominiumconversion project. We acquired the property in 2005 and made significant improvements to common areas, building exteriors, and heating and air-conditioning systems within units and have completed the conversion and sale of a majority of the units to condominiums. Sales and settlements began in2005. In furtherance of our Strategic Realignment Plan when market conditions deteriorated, we suspended sales at the project and continued operation of theremaining inventory as rental units. In September 2009 we entered into a loan modification agreement with the project lender which provides us with aportion of the cashflow generated from rental and sales operations at Penderbrook. As market conditions stabilized and began to improve in the later part of2009 we re-opened for sales at Penderbrook. At December 31, 2009, 97 units remain in our inventory. Approximately 83 of these units were occupied byrental tenants, generating monthly gross rental revenue of approximately $99,000.Station View is a 47-unit townhouse development in Loudoun County, Virginia. In furtherance of our Strategic Realignment Plan it was determinedthat the best return on our investment in this property would be derived through the sale of the land to another home builder. We have entered into a contractto sell this project in its entirety. Settlement is expected to occur in the first quarter of 2010.MarylandEmerald Farm is an 84-unit development of single-family homes in Frederick, Maryland conveniently located near major transportation routes. Awater moratorium imposed by the local jurisdiction has prevented the timely completion of the project. We believe the moratorium no longer applies to thelots we continue to own in this community. It is our intention to pursue construction financing for homes on the 6 remaining finished building lots in thenear future and as market conditions warrant commence marketing and construction. If we are unable to secure construction financing, we may considerselling the finished lots in a bulk sale.Greater Raleigh MarketRaleigh, North CarolinaIn furtherance of our Strategic Realignment Plan we suspended operations in the Raleigh, North Carolina market. Based on the amicable arrangementswe reached with the lenders involved in our Raleigh projects we sold most home inventory and entered foreclosure agreements which allowed us to bereleased from financial obligations associated with the applicable project loans and required the lender(s) to foreclose on the remaining land inventory. Asindicated by footnote (5) in the lot table above, all of our projects in Raleigh, North Carolina are scheduled for foreclosure by Wachovia Bank in the nearfuture.Greater Atlanta MarketAtlanta, GeorgiaThe market for new homes in the Atlanta, Georgia market continues to be significantly distressed. In furtherance of our Strategic Realignment Plan wehave wound down all operations in the Atlanta, Georgia market. Based on the amicable arrangements we reached with the lenders involved in our Atlantaprojects we sold most home inventory and entered foreclosure agreements which allowed us to be released from financial obligations associated with theapplicable project loans and required the lender(s) to foreclose on the remaining land inventory. As indicated by footnote (6) in the lot table above: OnNovember 12, 2009, Buckhead Overlook, LLC, Post Preserve, LLC and Parker Chandler Homes, LLC (collectively, “Parker Chandler Homes”), filedbankruptcy petitions (the “Petitions”) in the United States Bankruptcy Court, Northern District of Georgia. Parker Chandler Homes were all subsidiaries ofComstock Homebuilding Companies, Inc. (the “Company”) and Parker Chandler Homes, LLC was formerly known as Comstock Homes of Atlanta, LLC. TheChapter 7 petitions were filed in furtherance of the Company’s Strategic Realignment Plan that includes the liquidation of remaining Parker Chandler Homesassets and the winding down of all operations in the Atlanta market.WarrantyWe provide our single-family and townhouse home buyers with a one-year limited warranty covering workmanship and materials. The limited warrantyis transferable to subsequent buyers not under direct contract with us and requires that all home buyers agree to the definitions and procedures set forth in thewarranty. Typically, we provide our condominium home buyers a two-year warranty. In addition, we provide a five-year structural warranty on our homes andcondominiums pursuant to applicable statutory requirements. From time to time, we assess the appropriateness of our warranty reserves and adjust accruals asnecessary. When deemed appropriate by us, we will accrue additional warranty reserves. We require our general contractors and sub-contractors to warrant thework they perform and they are contractually obligated to correct defects in their work that arise during the applicable warranty period. We seek to minimize our risk associated with warranty repairs through our quality assurance program and by selecting contractors with good reputations, sufficient resources andadequate insurance. It is typical that there is a gap in the warranty coverage provided by contractors and by home builders, which is self-insured by the homebuilder. It has been our experience that the warranty claims which we self insure have not been significant in nature.CompetitionThe real estate development and home building industries are highly competitive. We compete with small private builders and large regional ornational builders. In addition to competing for home buyers, home builders compete for construction financing, raw materials and skilled labor. Additionally,under normal market conditions competition exists within the industry for prime development sites, especially those where developed building lots areavailable under option lot contracts. We compete with other local, regional and national home builders in all of these areas. Many of our competitors havesignificantly greater financial, marketing, sales and other resources than we have. Some of the national builders against which we compete include PulteHomes, DR Horton, Toll Brothers, Ryland Homes, NVR, Hovnanian and Lennar.However, competition among home builders is often specific to product types being offered in a particular area. Often we do not find ourselvescompeting with the large national builders in the urban communities where we develop high-rise and mixed use products. This is primarily because mostnational builders tend to focus on a narrower range of products than what we offer. We believe this provides us a distinct advantage in terms of attractingpotential home buyers in certain areas. We believe the factors that home buyers consider in deciding whether to purchase from us include the product type,location, value quality, and reputation of the home builder. We believe that our projects and product offerings compare favorably on these factors and wecontinually strive to maintain our reputation of building quality products. 8 Table of ContentsAdditionally, we compete with the resale market of existing homes including foreclosures and short-sales. The dramatic increase of inventory ofexisting homes available for sale beginning in 2006 created significant competition among builders and home sellers for a shrinking number of prospectivehome buyers. This led to downward pressure on home prices in many areas. The nature of the real estate markets in general and the impact the economicrecession has had on the housing market makes it is impossible to predict future pricing trends. Accordingly, we will proceed with caution as we seek torebuild our company in the Washington, D.C. market.RegulationHome builders are subject to various local, state and federal statutes, ordinances, rules and regulations concerning zoning, building design,construction and similar matters, including local regulation, which imposes restrictive zoning and density requirements in order to limit the number of homesthat can ultimately be built within the boundaries of a particular project. We and our competitors may also be subject to periodic delays or may be precludedentirely from developing in certain communities due to building moratoriums or “slow-growth” or “no-growth” initiatives that could be implemented in thefuture in the states in which we operate. Local and state governments also have broad discretion regarding the imposition of development fees for projects intheir jurisdiction.We and our competitors are also subject to a variety of local, state and federal statutes, ordinances, rules and regulations concerning protection of theenvironment. Some of the laws to which we and our properties are subject may impose requirements concerning development in waters of the United States,including wetlands, the closure of water supply wells, management of asbestos-containing materials, exposure to radon and similar issues. The particularenvironmental laws that apply to any given community vary based on several factors including but not limited to the environmental conditions related to aparticular property and the present and former uses of the property. These environmental laws may result in delays, may cause us and our competitors to incursubstantial compliance related costs, and may prohibit or severely restrict development in certain environmentally sensitive areas. To date, environmentallaws have not had a material adverse impact on our operations.TechnologyWe are committed to the use of Internet-based technology for managing our business, communicating with our customers, and marketing our projects.For customer relationship management, we use Builder’s Co-Pilot™, a management information system that was custom developed in accordance with ourneeds and requirements. This system allows for online and collaborative efforts between our sales and marketing functions and integrates our sales,production and divisional office operations in tracking the progress of construction on each of our projects. We believe that real-time access to ourconstruction progress information and our sales and marketing data and documents through our systems increases the effectiveness of our sales and marketingefforts as well as management’s ability to monitor our business.We utilize our technology infrastructure to facilitate marketing of our projects as well. Through our web site, www.comstockhomebuilding.com, ourcustomers and prospects receive automatic electronic communications from us on a regular basis. Our corporate marketing directors work with in-housemarketing and technology specialists to develop advertising and public relations programs for each project that leverage our technology capabilities. During2009 we continued to lower marketing costs through the increased utilization of internet based marketing platforms in lieu of print advertisements. Webelieve that the home buying population will continue to increase its reliance on information available on the internet to help guide their home buyingdecision. Accordingly, our marketing efforts will continue to seek to leverage this trend in an effort to lower per sale marketing costs while maximizingpotential sales.For accounting and purchasing management purposes we use the JD Edwards Enterprise One software system. This software system is well regarded inour industry and is highly scalable. We believe that since transitioning to this software program in early 2007 we have been better able to manage andmonitor costs.EmployeesAt December 31, 2009, we had 31 full-time and part-time employees. Our employees are not represented by any collective bargaining agreement andwe have never experienced a work stoppage. We believe we have good relations with our employees.Executive OfficersOur executive officers and other management employees and their respective ages and positions as of December 31, 2009 are as follows: Name Age Current PositionChristopher Clemente* 49 Chairman and Chief Executive OfficerGregory V. Benson* 55 President, Chief Operating OfficerJeffrey R. Dauer* 47 Chief Financial OfficerJubal R. Thompson* 40 General Counsel and Secretary *Section 16 officers. 9 Table of ContentsExecutive Officers and Key EmployeesChristopher Clemente founded Comstock in 1985 and has been director since May 2004. Since 1992, Mr. Clemente has served as our Chairman andChief Executive Officer. Mr. Clemente has over 25 years of experience in all aspects of real estate development and home building, and more than 30 years ofexperience as an entrepreneur.Gregory V. Benson joined us in 1991 as President and Chief Operating Officer and has been director since May 2004. Mr. Benson is also a member ofour board of directors. Mr. Benson has over 30 years of home building experience including over 13 years at national home builders, including NVHomes,Ryan Homes and Centex Homes.Jeffrey R. Dauer has served as our Chief Financial Officer since May 2009, after serving as our Chief Accounting Officer since June 2007. Mr. Dauerwas Director of Financial Reporting from March 2007 to June 2007. From October 2004 to March 2007, Mr. Dauer was retained to lead the Sarbanes-OxleySection 404 implementation and assist in the Company’s JD Edwards ERP system conversion.Jubal R. Thompson has served as our General Counsel since October 1998 and our Secretary since December 2004. From April 2002 to April 2003,Mr. Thompson also served as our Vice President — Finance. From 1995 to 1998, Mr. Thompson was associated with Robert Weed & Associates, a law firm.Other InformationWe file annual, quarterly, and current reports, proxy statements, and other documents with the Securities and Exchange Commission (“SEC”) under theSecurities Exchange Act of 1934 (the “Exchange Act”). The public may read and copy any materials that we file with the SEC at the SEC’s Public ReferenceRoom at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at1-800-SEC-0330. Also, the SEC maintains an Internet website that contains reports, proxy and information statements, and other information regardingissuers, including us, that file electronically with the SEC. The public can obtain any documents that we file with the SEC at http://www.sec.gov.We also make available, free of charge, at our Internet website located at www.comstockhomebuilding.com, our annual reports on Form 10-K, our proxystatements, our quarterly reports on Form 10-Q, and our current reports on Form 8-K as well as Form 3, Form 4, and Form 5 Reports for our directors, officersand principal stockholders, together with amendments to those reports filed or furnished pursuant to Section 13(a), 15(d), or 16 under the Exchange Act.These reports are available as soon as reasonably practicable after their electronic filing with the Securities and Exchange Commission.CAUTIONARY NOTES REGARDING FORWARD-LOOKING STATEMENTSSome of the statements contained in this report include forward-looking statements. These forward-looking statements can be identified by the use ofwords such as “anticipate,” “believe,” “estimate,” “may,” “intend,” “expect,” “will,” “should,” “seeks” or other similar expressions. Forward-lookingstatements are based largely on our expectations and involve inherent risks and uncertainties including certain risks described in this report. Whenconsidering those forward-looking statements, you should keep in mind the risks, uncertainties and other cautionary statements made in this report. Youshould not place undue reliance on any forward-looking statement, which speaks only as of the date made. Some factors which may affect the accuracy of theforward-looking statements apply generally to the real estate industry, while other factors apply directly to us. Any number of important factors which couldcause actual results to differ materially from those in the forward-looking statements include, without limitation: general economic and market conditions,including interest rate levels; our ability to service our debt; inherent risks in investment in real estate; our ability to compete in the markets in which weoperate; regulatory actions; fluctuations in operating results; our anticipated growth strategies; shortages and increased costs of labor or building materials;the availability and cost of land in desirable areas; natural disasters; our ability to raise debt and equity capital and grow our operations on a profitable basisand our continuing relationships with affiliates.Many of these factors are beyond our control. For a discussion of factors that could cause actual results to differ, please see the discussion in this reportunder the heading “Risk Factors” in Item 1A. Item 1A.Risk FactorsRisks Relating to Our BusinessFailure to meet the minimum unit settlement requirements in our modified credit facilities would adversely affect our liquidity.In 2009 we negotiated modifications to the loans of two of our largest lenders. These modifications allow us increased cashflow from the settlementproceeds of each unit at the respective project provided that we settle on a prescribed minimum number of units each quarter. If we are unable to achieve therequired number of settlements, the lenders have the rights to reduce the amount of cashflow to us from settlement proceeds. If that happened, it couldseverely compromise our liquidity and could jeopardize our ability to satisfy our capital and cash flow requirements in which case our ability to continueoperating would be seriously compromised.Our operations require significant capital, which may not continue to be available.The real estate development industry is capital intensive and requires significant expenditures for operations, land purchases, land development andconstruction as well as potential acquisitions of other homebuilders. In order to maintain our operations, we will need to obtain additional financing. Thesefunds can be generated through public or private debt or 10 Table of Contentsequity financings, operating cash flow, additional bank borrowings or from strategic alliances or joint ventures. In light of the current economic climate wemay not be successful in obtaining additional funds in a timely manner, on favorable terms or at all. Moreover, certain of our bank financing agreementscontain provisions that limit the type and amount of debt we may incur in the future without our lenders’ consent. In addition, the availability of borrowedfunds, especially for land acquisition and construction financing, has been greatly reduced, and lenders may require us to invest increased amounts of equityin a project in connection with both new loans and the extension of existing loans. If we do not have access to additional capital, we may be required todelay, scale back or abandon some or all of our operating strategies or reduce capital expenditures and the size of our operations. As a result, such an inabilityto access additional capital would likely cause us to experience a material adverse affect on our business, results of operations and financial condition.Our continuing operations and future growth depends on the availability of construction, acquisition and development loans.To finance projects, we have historically utilized construction, acquisition and development loans. These credit facilities tend to be project-orientedand generally have variable rates and require significant management time to administer them. If financial institutions decide to discontinue providing thesefacilities to us we would lose our primary source of financing our operations or the cost of retaining or replacing these credit facilities could increasedramatically. Further, this type of financing is typically characterized by short-term loans which are subject to call. If our primary source of financingbecomes unavailable or accelerated repayment is demanded, we may not be able to meet our obligations and our ability to continue operating would beseriously compromised. This may force us into bankruptcy or liquidation.We engage in construction and real estate activities which are speculative and involve a high degree of risk.The home building industry is speculative and demand for new homes is significantly affected by changes in economic and other conditions, such as: • employment levels; • availability of home buyer mortgage financing; • interest rates; and • consumer confidence.These factors can negatively affect the demand for and pricing of our homes and our margin on sale. We are also subject to a number of risks, many ofwhich are beyond our control, including: • delays in construction schedules; • cost overruns; • changes in governmental regulations (such as slow- or no-growth initiatives); • increases in real estate taxes and other local government fees; • labor strikes; • transportation costs for delivery of materials; and • increases and/or shortages in raw materials and labor costs.Our ability to sell homes and, accordingly, our results of operations, will be affected by the availability of mortgage financing to potential home buyers.Most home buyers finance their purchase of a new home through third-party mortgage financing. As a result, residential real estate demand is adverselyaffected by: • increases in interest rates and/or related fees; • increases in real estate transaction closing costs; • decreases in the availability of consumer mortgage financing; • increasing housing costs; • unemployment; and • changes in federally sponsored financing programs; • increases in foreclosure inventory and reduction in market comparables resulting from foreclosures and short sales. 11 Table of ContentsIncreases in interest rates and decreases in the availability of consumer mortgage financing have depressed the market for new homes because of theincreased monthly mortgage costs and the unavailability of financing to potential home buyers. For instance, recent initiatives to tighten underwritingstandards have made mortgage financing more difficult to obtain for some of our entry-level home buyers, which has led to decreased demand from thesebuyers. Even if potential home buyers do not experience difficulty securing mortgage financing for their purchase of a new home, increases in interest ratesand decreased mortgage availability could make it harder for them to sell their existing homes. This could continue to adversely affect our operating resultsand financial condition.Fluctuations in market conditions may affect our ability to sell our land and home inventories at expected prices, if at all, which could adversely affect ourrevenues, earnings and cash flows.We are subject to the potential for significant fluctuations in the market value of our land and home inventories. We must constantly locate and acquirenew tracts of undeveloped and developed land if we are to support growth in our home building operations. There is a lag between the time we acquirecontrol of undeveloped land or developed home sites and the time that we can bring the communities built on that land to market and deliver our homes.This lag time varies from site to site as it is impossible to predict with any certainty the length of time it will take to obtain governmental approvals andbuilding permits. The risk of owning undeveloped land, developed land and homes can be substantial. The market value of undeveloped land, buildable lotsand housing inventories can fluctuate significantly as a result of changing economic and market conditions. Inventory carrying costs can be significant andcan result in losses in a poorly performing development or market. Material write-downs of the estimated value of our land and home inventories could occurif market conditions deteriorate or if we purchase land or build home inventories at higher prices during stronger economic periods and the value of thoseland or home inventories subsequently declines during weaker economic periods. We could also be forced to sell homes, land or lots for prices that generatelower profit than we anticipate, or at a loss, and may not be able to dispose of an investment in a timely manner when we find dispositions advantageous ornecessary. Furthermore, a continued decline in the market value of our land or home inventories may give rise to additional impairments of our inventory andwrite-offs of contract deposits and feasibility cost, which may result in a breach of financial covenants contained in one or more of our credit facilities, whichcould cause a default under those credit facilities. Defaults in these credit facilities are often times the responsibility of the Company as the Company is theguarantor of most of its subsidiary’s debts.Deteriorating market conditions, turmoil in the credit markets and increased price competition continued to negatively impact the Company in 2009resulting in reduced sales prices, increased customer concessions, reduced gross margins and extended estimates for project completion dates. As a result, theCompany evaluated all of its projects to determine if recorded carrying amounts were recoverable. This evaluation resulted in an aggregate 2009 impairmentcharge of $22.9 million, with $15.3 million in the Washington D.C. region, $1.2 million in the Atlanta, Georgia region and $6.4 million in the Raleigh, N.C.region. Impairment charges are recorded as a reduction in our capitalized land and/or house costs. The impairment charge was calculated using a discountedcash flow analysis model, which is dependent upon several subjective 12 Table of Contentsfactors, including the selection of an appropriate discount rate, estimated average sales prices and estimated sales rates. In performing its impairmentmodeling the Company must select what it believes is an appropriate discount rate based on current market cost of capital and returns expectations. TheCompany has used its best judgment in determining an appropriate discount rate based on anecdotal information it has received from marketing its deals forsale in recent months. The Company has elected to use a rate of 17% in its discounted cash flow model. While the selection of a 17% discount rate wassubjective in nature, the Company believes it is an appropriate rate in the current market. The estimates used by the Company are based on the bestinformation available at the time the estimates are made. If market conditions continue to deteriorate additional adverse changes to these estimates in futureperiods could result in further material impairment amounts to be recorded.The Company’s ability to use its NOLs and, in certain circumstances, future built-in losses and depreciation deductions can be negatively affected if thereis an “ownership change” as defined under Section 382 of the Internal Revenue Code.In general, an ownership change occurs whenever there is a shift in ownership by more than 50 percentage points by one or more 5% shareholders overa specified time period (generally three years). Given Section 382’s broad definition, an ownership change could be the unintended consequence of otherwisenormal market trading in the Company’s stock that is outside of the Company’s control.The Company currently has approximately $70.0 million in Federal and State NOLs with a potential value of up to $27.0 million in tax savings. Ifunused, these NOLs will begin expiring in 2028. Under Internal Revenue Code Section 382 rules, if a change of ownership is triggered, the Company’s NOLasset and possibly certain other deferred tax assets may be impaired. We estimate that as of December 31, 2009, the cumulative shift in the Company’s stockwas at approximately 28% compared with the 50% level that would trigger an inability to utilize some of our NOL asset.Home prices and sales activities in the Washington, D.C. geographic market have a large impact on our results of operations because we conductsubstantially all of our business in this market.Home prices and sales activities in the Washington, D.C. geographic market have a large impact on our results of operations because we conductsubstantially all of our business in this market. Although demand in this area historically has been strong, the current slowdown in residential real estatedemand and reduced availability of consumer mortgage financing have reduced the likelihood of consumers seeking to purchase new homes which has hadand will likely continue to have a negative impact on the pace at which we receive orders for our new homes. As a result of the foregoing and generaleconomic conditions, potential customers may be less willing or able to buy our homes, or we may take longer or incur more costs to build them. We may notbe able to recapture increased costs by raising prices in many cases because of market conditions or because we fix our prices in advance of delivery bysigning home sales contracts. We may be unable to change the mix of our homes or our offerings or the affordability of our homes to maintain our margins orsatisfactorily address changing market conditions in other ways. This has and could continue to adversely affect our results of operations and cash flows.Because our business depends on the acquisition of new land, the potential limitations on the supply of land could reduce our revenues or negativelyimpact our results of operations and financial condition.Even in the current depressed housing market, we experience competition for available land and developed home sites in the Washington, D.C. market.We have experienced competition for home sites from other, better capitalized, home builders. Our ability to continue our home building activities over thelong term depends upon our ability to locate and acquire suitable parcels of land or developed home sites to support our home building operations. Ifcompetition for land increases, the cost of acquiring it may rise, and the availability of suitable parcels at acceptable prices may decline. Any need forincreased pricing could increase the rate at which consumer demand for our homes declines and, consequently, reduce the number of homes we sell and leadto a decrease in our revenues, earnings and cash flows.Our business is subject to governmental regulations that may delay, increase the cost of, prohibit or severely restrict our development and home buildingprojects and reduce our revenues and cash flows.We are subject to extensive and complex laws and regulations that affect the land development and home building process, including laws andregulations related to zoning, permitted land uses, levels of density (number of dwelling units per acre), building design, access to water and other utilities,water and waste disposal and use of open spaces. In addition, we and our subcontractors are subject to laws and regulations relating to worker health andsafety. We also are subject to a variety of local, state and federal laws and regulations concerning the protection of health and the environment. In some of ourmarkets, we are required to pay environmental impact fees, use energy saving construction materials and give commitments to provide certain infrastructuresuch as roads and sewage systems. We must also obtain permits and approvals from local authorities to complete 13 Table of Contentsresidential development or home construction. The laws and regulations under which we and our subcontractors operate, and our and their obligations tocomply with them, may result in delays in construction and development, cause us to incur substantial compliance and other increased costs, and prohibit orseverely restrict development and home building activity in certain areas in which we operate. If we are unable to continue to develop communities and buildand deliver homes as a result of these restrictions or if our compliance costs increase substantially, our revenues, earnings and cash flows may be reduced.Cities and counties in which we operate have adopted, or may adopt, slow or no-growth initiatives that would reduce our ability to build and sell homes inthese areas and could adversely affect our revenues, earnings and cash flows.From time to time, certain cities and counties in which we operate have approved, and others in which we operate may approve, various “slow-growth”or “no-growth” initiatives and other similar ballot measures. Such initiatives restrict development within localities by, for example, limiting the number ofbuilding permits available in a given year. Approval of slow- or no-growth measures could reduce our ability to acquire land, obtain building permits andbuild and sell homes in the affected markets and could create additional costs and administration requirements, which in turn could have an adverse effect onour revenues, earnings and cash flows.Increased regulation in the housing industry increases the time required to obtain the necessary approvals to begin construction and has prolonged thetime between the initial acquisition of land or land options and the commencement and completion of construction. These delays increase our costs, decreaseour profitability and increase the risks associated with the land inventories we maintain.Municipalities may restrict or place moratoriums on the availability of utilities, such as water and sewer taps. If municipalities in which we operate takeactions like these, it could have an adverse effect on our business by causing delays, increasing our costs or limiting our ability to build in thosemunicipalities. This, in turn, could reduce the number of homes we sell and decrease our revenues, earnings and cash flows.The competitive conditions in the home building industry could increase our costs, reduce our revenues and earnings and otherwise adversely affect ourresults of operations and cash flows.The home building industry is highly competitive and fragmented. We compete with a number of national, regional and local builders for customers,undeveloped land and home sites, raw materials and labor. For example, in the Washington, D.C. market, we compete against multiple publicly-tradednational home builders, and many privately-owned regional and local home builders. We do not compete against all of the builders in all of our producttypes or submarkets, as some builders focus on particular types of projects within those markets, such as large estate homes, that are not in competition withour projects.We compete primarily on the basis of price, location, design, quality, service and reputation. Some of our competitors have greater financial resources,more established market positions and better opportunities for land and home site acquisitions than we do and have greater amounts of unrestricted cashresources on hand, lower costs of capital, labor and material than us. The competitive conditions in the home building industry could, among other things: • make it difficult for us to acquire suitable land or home sites in desirable locations at acceptable prices and terms, which could adversely affectour ability to build homes; • require us to increase selling commissions and other incentives, which could reduce our profit margins; 14 Table of Contents • result in delays in construction if we experience delays in procuring materials or hiring trades people or laborers; • result in lower sales volume and revenues; and • increase our costs and reduce our earningsWe also compete with sales of existing homes and condominiums, foreclosure sales of existing homes and condominiums and available rental housing.A continued oversupply of competitively priced resale, foreclosure or rental homes in our markets could adversely affect our ability to sell homes profitably.Our business is concentrated in a single geographic area which increases our exposure to localized risks.We currently develop and sell homes principally in the Washington, D.C. market. Our limited geographic diversity means that adverse generaleconomic, weather or other conditions in this market could adversely affect our results of operations and cash flows or our ability to grow our business.We are dependent on the services of certain key employees and the loss of their services could harm our business.Our success largely depends on the continuing services of certain key employees, including Christopher Clemente, our Chairman and Chief ExecutiveOfficer; Gregory Benson, our Chief Operating Officer; Jubal Thompson, our General Counsel and Secretary; and Jeffrey Dauer, our Chief Financial Officer.Our continued success also depends on our ability to attract and retain qualified personnel. We believe that Messrs. Clemente, Benson, Thompson and Dauereach possess valuable industry knowledge, experience and leadership abilities that would be difficult in the short term to replicate. The loss of these or otherkey employees could harm our operations, business plans and cash flows.A significant portion of our business plan involves and may continue to involve mixed-use developments and high-rise projects with which we have lessexperience.We are actively involved in the construction and development of mixed-use and high-rise residential projects. Our experience is largely based onsmaller wood-framed structures that are less complex than high-rise construction or the development of mixed-use projects. A mixed-use project is one thatintegrates residential and non-residential uses in the same structure or in close proximity to each other, on the same land. As we continue to expand into thesenew product types, we expect to encounter operating, marketing, customer service, warranty and management challenges with which we have less familiarity.We have expanded our management team to include individuals with significant experience in this type of real estate development but have been forced tofurlough some of them as we’ve downsized our operation. If we are unable to successfully manage the challenges of this portion of our business, we may incuradditional costs and our results of operations and cash flows could be adversely affected.If we experience shortages of labor or supplies or other circumstances beyond our control, there could be delays or increased costs in developing ourprojects, which would adversely affect our operating results and cash flows.We and the home building industry, from time to time, may be affected by circumstances beyond our control, including: • work stoppages, labor disputes and shortages of qualified trades people, such as carpenters, roofers, electricians and plumbers; 15 Table of Contents • lack of availability of adequate utility infrastructure and services; • transportation cost increases; • our need to rely on local subcontractors who may not be adequately capitalized or insured; and • shortages or fluctuations in prices of building materials.These difficulties have caused and likely will cause unexpected construction delays and short-term increases in construction costs. In an attempt toprotect the margins on our projects, we often purchase certain building materials with commitments that lock in the prices of these materials for 90 to 120days or more. However, once the supply of building materials subject to these commitments is exhausted, we are again subject to market fluctuations andshortages. We may not be able to recover unexpected increases in construction or materials costs by raising our home prices because, typically, the price ofeach home is established at the time a customer executes a home sale contract. Furthermore, sustained increases in construction costs may, over time, erodeour profit margins and may adversely affect our results of operations and cash flows.We depend on the availability and skill of subcontractors and their willingness to work with us.Substantially all of our construction work is done by subcontractors with us acting as the general contractor or by subcontractors working for a generalcontractor we select for a particular project. Accordingly, the timing and quality of our construction depends on the availability and skill of thosesubcontractors. We do not have long-term contractual commitments with subcontractors or suppliers. Although we believe that our relationships with oursuppliers and subcontractors are good, we cannot assure that skilled subcontractors will continue to be available at reasonable rates and in the areas in whichwe conduct our operations. The inability to contract with skilled subcontractors or general contractors at reasonable costs on a timely basis could limit ourability to build and deliver homes and could erode our profit margins and adversely affect our results of operations and cash flows. Recent cash flow andcredit facility limitations have forced us to negotiate settlements with our vendors at less than the entire amounts owed. This may result in vendor hesitationto work with us on future projects.Product liability litigation and claims that arise in the ordinary course of business may be costly or negatively impact sales, which could adversely affectour results of operations and cash flows.Our home building business is subject to construction defect and product liability claims arising in the ordinary course of business. These claims arecommon in the home building industry and can be costly. Among the claims for which developers and builders have financial exposure are property damage,environmental claims and bodily injury claims. Damages awarded under these suits may include the costs of remediation, loss of property and health-relatedbodily injury. In response to increased litigation, insurance underwriters have attempted to limit their risk by excluding coverage for certain claimsassociated with environmental conditions, pollution and product and workmanship defects. As a developer and a home builder, we may be at risk of loss formold-related property, bodily injury and other claims in amounts that exceed available limits on our comprehensive general liability policies. In addition,the costs of insuring against construction defect and product liability claims are high and the amount of coverage offered by insurance companies is limited.Uninsured product liability and similar claims, claims in excess of the limits under our insurance policies and the costs of obtaining insurance to cover suchclaims could have a material adverse effect on our revenues, earnings and cash flows.Increased insurance risk could negatively affect our business, results of operations and cash flows.Insurance and surety companies have reassessed many aspects of their business and, as a result, may take actions that could negatively affect ourbusiness. These actions could include increasing insurance premiums, 16 Table of Contentsrequiring higher self-insured retentions and deductibles, requiring additional collateral on surety bonds, reducing limits, restricting coverages, imposingexclusions, and refusing to underwrite certain risks and classes of business. Any of these actions may adversely affect our ability to obtain appropriateinsurance coverage at reasonable costs, which could have a material adverse effect on our business. Additionally, coverage for certain types of claims, such asclaims relating to mold, is generally unavailable. Further, we rely on surety bonds, typically provided by insurance companies, as a means of limiting theamount of capital utilized in connection with the public improvement sureties that we are required to post with governmental authorities in connection withland development and construction activities. The cost of obtaining these surety bonds is, from time to time, unpredictable and on occasion these suretybonds are unavailable. These factors can delay commencement of development projects and adversely affect revenue, earnings and cash flows.We are subject to warranty claims arising in the ordinary course of business that could be costly.We provide service warranties on our homes for a period of one year or more post closing and a structural warranty for five years post closing. We self-insure all of our warranties and reserve an amount we believe will be sufficient to satisfy any warranty claims on homes we sell. We also attempt to pass muchof the risk associated with potential defects in materials and workmanship on to the subcontractors performing the work and the suppliers and manufacturersof the materials. In such cases, we still may incur unanticipated costs if a subcontractor, supplier or manufacturer fails to honor its obligations regarding thework or materials it supplies to our projects. If the amount of actual claims materially exceeds our aggregate warranty reserves and/or the amounts we canrecover from our subcontractors and suppliers, our operating results and cash flows would be adversely affected.Our business, results of operations and financial condition may be adversely affected by adverse weather conditions or natural disasters.Adverse weather conditions, such as extended periods of rain, snow or cold temperatures, and natural disasters, such as hurricanes, tornadoes, floodsand fires, can delay completion and sale of homes, damage partially complete or other unsold homes in our inventory and/or decrease the demand for homesor increase the cost of building homes. To the extent that natural disasters or adverse weather events occur, our business and results may be adverselyaffected. To the extent our insurance is not adequate to cover business interruption losses or repair costs resulting from these events, our results of operationsand financial conditions may be adversely affected.We are subject to certain environmental laws and the cost of compliance could adversely affect our business, results of operations and cash flows.As a current or previous owner or operator of real property, we may be liable under federal, state, and local environmental laws, ordinances andregulations for the costs of removal or remediation of hazardous or toxic substances on, under or in the properties or in the proximity of the properties wedevelop. These laws often impose liability whether or not we knew of, or were responsible for, the presence of such hazardous or toxic substances. The cost ofinvestigating, remediating or removing such hazardous or toxic substances may be substantial. The presence of any such substance, or the failure promptly toremediate any such substance, may adversely affect our ability to sell the property, to use the property for our intended purpose, or to borrow funds using theproperty as collateral. In addition, the construction process involves the use of hazardous and toxic materials. We could be held liable under environmentallaws for the costs of removal or remediation of such materials. In addition, our existing credit facilities also restrict our access to the loan proceeds if theproperties that are used to collateralize the loans are contaminated by hazardous substances and require us to indemnify the bank against losses resultingfrom such occurrence for significant periods of time, even after the loan is fully repaid. 17 Table of ContentsOur Eclipse project is part of a larger development located at Potomac Yard in Northern Virginia. Potomac Yard was formerly part of a railroadswitching yard contaminated by rail-related activities. Remediation of the property was conducted under supervision of the U.S. Environmental ProtectionAgency, or EPA, in coordination with state and local authorities. In 1998, federal, state and local government agencies authorized redevelopment of theproperty. Our plans for development of our portion of the project are consistent with those authorizations. Although concentrations of contaminants remainon the property under the EPA-approved remediation work plan, the EPA has determined that they do not present an unacceptable risk to human health or theenvironment. However, it is possible that we could incur some costs to defend against any claims that might be brought in the future relating to any suchcontaminants.If we are not able to develop our communities successfully, results of operations and financial condition could be diminished.Before a community generates any revenues, material expenditures are required to acquire land, to obtain development approvals and to constructsignificant portions of project infrastructure, amenities, model homes and sales facilities. It can take a year or more for a community development to achievecumulative positive cash flow. Our inability to develop and market our communities successfully and to generate positive cash flows from these operations ina timely manner would have a material adverse effect on our ability to service our debt and to meet our working capital requirements.Our operating results may vary.We expect to experience variability in our revenues and net income. Factors expected to contribute to this variability include, among other things: • the uncertain timing of real estate closings; • our ability to continue to acquire additional land or options thereon on acceptable terms and the timing of all necessary regulatory approvalsrequired for development; • the condition of the real estate market and the general economy in the markets in which we operate; • the cyclical nature of the home building industry; • the changing regulatory environment concerning real estate development and home building; • changes in prevailing interests rates and the availability of mortgage financing; and • costs of material and labor and delays in construction schedules.The volume of sales contracts and closings typically varies from month to month and from quarter to quarter depending on several factors, includingthe stages of development of our projects, weather and other factors beyond our control. In the early stages of a project’s development, we incur significantstart-up costs associated with, among other things, project design, land acquisition and development, construction and marketing expenses. Since revenuesfrom sales of properties are generally recognized only upon the transfer of title at the closing of a sale, no revenue is recognized during the early stages of aproject unless land parcels or residential home sites are sold to other developers. Periodic sales of properties may be insufficient to fund operating expenses.Further, if sales and other revenues are not adequate to cover operating expenses, we will be required to seek sources of additional operating funds.Accordingly, our financial results will vary from community to community and from time to time. 18 Table of ContentsActs of war or terrorism may seriously harm our business.Acts of war, any outbreak or escalation of hostilities between the United States and any foreign power or acts of terrorism, may cause disruption to theU.S. economy, or the local economies of the markets in which we operate, cause shortages of building materials, increase costs associated with obtainingbuilding materials, result in building code changes that could increase costs of construction, affect job growth and consumer confidence, or cause economicchanges that we cannot anticipate, all of which could reduce demand for our homes and adversely impact our revenues, earnings and cash flows.We do not own the Comstock brand or trademark, but use the brand and trademark pursuant to the terms of a perpetual license granted by ChristopherClemente, our Chief Executive Officer and Chairman of the Board.Our Chief Executive Officer and Chairman of the Board, Christopher Clemente, has licensed the “Comstock” brand and trademark to us in perpetuityand free of charge. We do not own the brand or the trademark and may be unable to protect it against infringement from third parties. However, Mr. Clementeretains the right to continue using the “Comstock” brand and trademark individually and through affiliates, including real estate development projects in ourcurrent or future markets. We will be unable to control the quality of projects undertaken by Mr. Clemente or others using the “Comstock” brand andtrademark and therefore will be unable to prevent any damage to its goodwill that may occur. We will further be unable to preclude Mr. Clemente fromlicensing or transferring the ownership of the “Comstock” trademark to third parties, some of whom may compete against us. Consequently, we are at risk thatour brand could be damaged which could have a material adverse effect on our business, operations and cash flows.Risks Related to our Common Stock and the Securities MarketsVolatility of our stock price could adversely affect stockholders.The market price of our Class A common stock could fluctuate significantly as a result of: • quarterly variations in our operating results; • general conditions in the home building industry; • interest rate changes; • changes in the market’s expectations about our operating results; • our operating results failing to meet the expectation of securities analysts or investors in a particular period; • changes in financial estimates and recommendations by securities analysts concerning our Company of the home building industry in general; • operating and stock price performance of other companies that investors deem comparable to us; • news reports relating to trends in our markets; • changes in laws and regulations affecting our business; • material announcements by us or our competitors. 19 Table of Contents • material announcements by our construction lenders or the manufacturers and suppliers we use; • sales of substantial amounts of Class A common stock by our directors, executive officers or significant stockholders or the perception that suchsales could occur; and • general economic and political conditions such as recessions and acts of war or terrorism.Investors may not be able to resell their shares of our Class A common stock following periods of volatility because of the market’s adverse reaction tothat volatility. Our Class A common stock may not trade at the same levels as the stock of other homebuilders, and the market in general may not sustain itscurrent prices.Investors in our Class A common stock may experience dilution with the future exercise of stock options and warrants, the grant of restricted stock andissuance of stock in connection with our acquisitions of other homebuilders.From time to time, we have issued and we will continue to issue stock options or restricted stock grants to employees and non-employee directorspursuant to our equity incentive plan. We expect that these options or restricted stock grants will generally vest commencing one year from the date of grantand continue vesting over a four-year period. Investors may experience dilution as the options vest and are exercised by their holders and the restrictionslapse on the restricted stock grants. In addition, we may issue stock in connection with acquisitions of other homebuilders, or warrants in connection with thesettlement of obligations and or indebtedness with vendors and suppliers, which may result in investors experiencing dilution.Substantial sales of our Class A common stock, or the perception that such sales might occur, could depress the market price of our Class A common stock.A substantial amount of the shares of our Class A common stock are eligible for immediate resale in the public market. Any sales of substantialamounts of our Class A common stock in the public market, or the perception that such sales might occur, could depress the market price of our Class Acommon stock.Possibility of Delisting of our Common Stock from NASDAQ Global Marketplace.On November 16, 2009, the Company received notice that NASDAQ had granted the Company’s request to transfer the listing of its common stockfrom the NASDAQ Global Market to the NASDAQ Capital Market. On November 13, 2009, the Company received notice from NASDAQ that it does notsatisfy the $1.00 minimum bid price requirement for continued listing on NASDAQ. The Company has until May 11, 2010 to regain compliance with the$1.00 minimum bid price requirement. Regaining compliance would require a closing bid price of $1.00 or more for a minimum of ten consecutive tradingdays on or before May 11, 2010. If that does not occur, we would request a hearing before a NASDAQ panel to request an additional 180 days to regaincompliance. There is no assurance that a NASDAQ panel would grant the Company any additional time after May 11, 2010 to regain compliance. If aNASDAQ panel did grant the Company additional time, there are no assurances that the Company would regain compliance. The Company is currently incompliance with the $5.0 million minimum market value of publicly held shares and the $2.5 million minimum shareholder equity continued listingrequirements of the NASDAQ Capital Market.The holders of our Class B common stocks exert control over us and thus limit the ability of other stockholders to influence corporate matters.Messrs. Clemente and Benson own 100% of our outstanding Class B common stock, which, together with their shares of Class A common stock,represent approximately 78.1% of the combined voting power of all classes of our voting stock. As a result, Messrs. Clemente and Benson, acting together,have control over us, the election of our board of directors and our management and policies. Messrs. Clemente and Benson, acting together, also havecontrol over all matters requiring stockholder approval, including the amendment of certain provisions of our certificate of incorporation and bylaws, theapproval of any equity-based employee compensation plans and the approval of fundamental corporate transactions, including mergers. In light of thiscontrol, other companies could be discouraged from initiating a potential merger, takeover or any other transaction resulting in a change of control. Such atransaction potentially could be beneficial to our business or to our stockholders. This may in turn reduce the price that investors are willing to pay in thefuture for shares of our Class A common stock.The limited voting rights of our Class A common stock could impact its attractiveness to investors and its liquidity and, as a result, its market value.The holders of our Class A and Class B common stock generally have identical rights, except that holders of our Class A common stock are entitled toone vote per share and holders of our Class B common stock are entitled to 15 votes per share on all matters to be voted on by stockholders. The difference inthe voting rights of the Class A and Class B common stock could diminish the value of the Class A common stock to the extent that investors or anypotential future purchasers of our Class A common stock ascribe value to the superior voting rights of the Class B common stock. 20 Table of ContentsIt may be difficult for a third party to acquire us, which could inhibit stockholders from realizing a premium on their stock price.We are subject to the Delaware anti-takeover laws regulating corporate takeovers. These anti-takeover laws prevent Delaware corporations fromengaging in business combinations with any stockholder, including all affiliates and employees of the stockholder, who owns 15% or more of thecorporation’s outstanding voting stock, for three years following the date that the stockholder acquired 15% or more of the corporation’s voting stock unlessspecified conditions are met.Our amended and restated certificate of incorporation and bylaws contain provisions that have the effect of delaying, deferring or preventing a changein control of us that stockholders may consider favorable or beneficial. These provisions could discourage proxy contests and make it more difficult forstockholders to elect directors and take other corporate actions. These provisions could also limit the price that investors might be willing to pay in the futurefor shares of our common stock. These provisions include: • a staggered board of directors, so that it would take three successive annual meetings to replace all directors; • a prohibition of stockholder action by written consent; and • advance notice requirements for the submission by stockholders of nominations for election to the board of directors and for proposing mattersthat can be acted upon by stockholders at a meeting.Our issuance of shares of preferred stock could delay or prevent a change of control of us.Our Board of Directors has the authority to cause us to issue, without any further vote or action by the stockholders, up to 20,000,000 shares ofpreferred stock, par value $.01 per share, in one or more series, to designate the number of shares constituting any series, and to fix the rights, preferences,privileges and restrictions thereof, including dividend rights, voting rights, rights and terms of redemption, redemption price or prices and liquidationpreferences of such series. The issuance of shares of preferred stock may have the effect of delaying, deferring or preventing a change in control of us withoutfurther action by the stockholders, even where stockholders are offered a premium for their shares. The issuance of shares of preferred stock with voting andconversion rights may adversely affect the voting power of the holders of Class A common stock, including the loss of voting control. We have no presentplans to issue any shares of preferred stock. Item 1B.Unresolved Staff CommentsNone. Item 2.PropertiesOur principal administrative, sales and marketing facilities are located at our headquarters in Reston, Virginia. At December 31, 2009 we leasedapproximately 9,100 square feet of office space in the Reston facility from Comstock Asset Management, L.C., an affiliate wholly-owned by ChristopherClemente. Pursuant to this three-year headquarters lease which we entered into on December 31, 2009, we will pay annual rent of approximately $223,000,subject to a 4% annual increase through the lease termination. 21 Table of ContentsWe have exited all office space in Raleigh, North Carolina and in 2009 reached a lease termination agreement with the landlord. We have no furtherobligation related to the Raleigh office lease. Item 3.Legal ProceedingsOn or about June 10, 2009 a judgment of $1.5 million was entered against Parker Chandler Homes, LLC (formerly known as Comstock Homes ofAtlanta, LLC), a subsidiary of the Company, as a result of an uncontested breach of contract claim related to a discontinued development project in theAtlanta area. A liability for this judgment was recorded as of June 30, 2009. On November 12, 2009, Parker Chandler Homes, LLC, filed a Chapter 7bankruptcy petition in the United States Bankruptcy Court, Northern District of Georgia, effectively eliminating any ongoing liability associated with thejudgment.On July 29, 2008 Balfour Beatty Construction, LLC, successor in interest to Centex Construction (“Balfour”), the general contractor for a subsidiary ofthe Company, filed liens totaling approximately $552,000 at The Eclipse on Center Park Condominium project (“Project”) in connection with its claim foramounts allegedly owed under the Project contract documents. In September 2008 the Company’s subsidiary filed suit against Balfour to invalidate the liensand for its actual and liquidated damages in the approximate amount of $17.1 million due to construction delays and additional costs incurred by theCompany’s subsidiary with respect to the Project. In October 2008 Balfour filed counterclaims in the approximate amount of $2.8 million. Subsequent to anexpedited hearing filed by the Company’s subsidiary to determine the validity of the liens that was ultimately heard in February 2009, we received an orderof the court in April 2009 invalidating the liens. The trial began on September 8, 2009 and closed on September 16, 2009. On February 23, 2010, theCompany’s subsidiary received a judgment against Balfour in an amount of $11.7 million plus attorney’s fees to be determined at a later date. On March 3,2010, the Company’s subsidiary received notice of Balfour’s intention to appeal the judgment and post a supersedeas bond in the amount of $12.5 million. Ifthe judgment amount is upheld on appeal, a significant portion is required to be applied towards principal curtailment under the Company’s loan agreementwith KeyBank.On December 30, 2009, Lawyers Title Insurance Corporation filed an indemnification claim against a Company subsidiary in an amount of $126,seeking reimbursement of fees and costs allegedly incurred as a result of mechanic’s liens improperly filed by Balfour Beatty at The Eclipse on Center ParkCondominium project. The Company subsidiary disputes the allegations and intends to vigorously defend the claim.Other than the foregoing, we are not subject to any material legal proceedings. From time to time, however, we are named as a defendant in legalactions arising from our normal business activities. Although we cannot accurately predict the amount of our liability, if any, that could arise with respect tolegal actions pending against us, we do not expect that any such liability will have a material adverse effect on our financial position, operating results orcash flows. We believe that we have obtained adequate insurance coverage, rights to indemnification, or where appropriate, have established reserves inconnection with these legal proceedings. Item 4.Reserved 22 Table of ContentsPART II Item 5.Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesMarket for Common StockOur Class A common stock has been traded on the NASDAQ Global Market under the symbol “CHCI” since our initial public offering on December 14,2004. The following table sets forth the high and low sale prices of our Class A common stock, as reported on NASDAQ, for the periods indicated: High LowFiscal Year Ended 2007 Fourth quarter $2.00 $0.50Fiscal Year Ended 2008 First quarter $1.37 $0.50Second quarter $0.83 $0.31Third quarter $1.05 $0.06Fourth quarter $0.80 $0.16Fiscal Year Ended 2009 First quarter $.34 $.12Second quarter $.38 $.11Third quarter $1.34 $.18Fourth quarter $1.19 $.49On March 31, 2010, there were approximately 27 record holders and as of our last proxy record date at November 13, 2009, there were approximately3,763 beneficial owners of our Class A common stock. On March 31, 2010 there were two holders of our Class B common stock.DividendsWe have never paid any cash dividends on our common stock. From time to time, our board of directors evaluates the desirability of paying cashdividends. The future payment and amount of cash dividends will depend upon our financial condition and results of operations, applicable loan covenantsand other factors deemed relevant by our board of directors.Issuer Purchases of Equity SecuritiesOur board of directors has previously authorized the repurchase of up to 1.0 million shares of our Class A common stock in one or more open market orprivately negotiated transactions.During the twelve months ended December 31, 2009, we did not repurchase any of our outstanding Class A common stock. We have no immediateplans to resume stock repurchases under this authorization. 23 Table of Contents Item 6.Selected Financial DataThe following table contains selected consolidated financial information and is supplemented by the more detailed financial statements and notesthereto included elsewhere in this report. We derived the selected historical financial data shown below for 2009, 2008, 2007, 2006 and 2005 from ouraudited financial statements. You should read the following financial information in conjunction with “Management’s Discussion and Analysis of FinancialCondition and Results of Operations,” “Business” and our consolidated financial statements and the related notes, included elsewhere in this report. 24 Table of ContentsFIVE YEAR COMPARISON OF SELECTED FINANCIAL DATADollars in thousands (except per share data) Year ended December 31, 2009 2008 2007 2006 2005Revenues $25,066 $46,662 $266,159 $245,881 $224,305Expenses cost of sales 21,729 39,274 245,309 216,657 156,490Impairments and write-offs (1) 22,938 18,022 78,264 57,426 1,216Selling, general and administrative 8,073 16,400 34,671 37,500 24,190Interest, real estate taxes and indirect costs related to inactive projects 4,138 5,685 — — — Operating (loss) income (31,812) (32,719) (92,085) (65,702) 42,409Gain on troubled debt restructuring 3,403 12,851 — — — Gain on deconsolidation of subsidiaries 1,965 — — — — Other income (expense), net (1,237) 2,850 1,886 1,487 1,450(Loss) income before noncontrolling interest and equity in earnings of real estatepartnerships (27,681) (17,018) (90,199) (64,215) 43,859Noncontrolling interest — (8) (137) 15 30(Loss) income before equity in (loss) earnings of real estate partnerships (27,681) (17,010) (90,062) (64,230) 43,829Equity in (loss) earnings of real estate partnerships — — — (135) 99Total pre-tax (loss) income (27,681) (17,010) (90,062) (64,365) 43,928Income tax (benefit) provision (929) 48 (2,552) (24,520) 16,366Net (loss) income $(26,752) $(17,058) $(87,510) $(39,845) $27,562Basic (loss) earnings per share $(1.51) $(0.98) $(5.42) $(2.63) $2.14Basic weighted average shares outstanding (2) 17,670 17,462 16,140 15,148 12,870Dilutive (loss) earnings per share $(1.51) $(0.98) $(5.42) $(2.63) $2.12Dilutive weighted average shares outstanding (2) 17,670 17,462 16,140 15,148 13,022 December 31,Balance Sheet Data 2009 2008 2007 2006 2005Cash and cash equivalents $1,085 $5,977 $6,822 $21,263 $42,167Real estate held for development and sale (1)(2) 70,890 129,542 203,860 405,144 263,802Total assets 77,331 160,859 258,976 517,429 431,319Notes payable 67,619 102,879 171,214 295,403 143,657Total liabilities 73,198 130,111 212,226 393,173 285,843Noncontrolling interest — 223 231 371 400 (1)During the years ended December 31, 2009, 2008, 2007 and 2006, the Company recorded gains from troubled debt restructuring, impairment chargesand write-offs of option deposits and related feasibility costs. The inclusion of these items makes year to year comparisons difficult and should beconsidered when evaluating results of operations in relation to earlier years. (2)During 2006 the Company acquired Parker Chandler Homes, Inc. in Atlanta, GA and Capitol Homes, Inc. in Raleigh, NC. 25 Table of Contents Item 7.Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe following discussion and analysis of our financial condition and results of operations should be read in conjunction with “Selected Financial andOther Data” and our consolidated and combined financial statements and related notes appearing elsewhere in this report. This discussion and analysiscontains forward-looking statements that involve risks and uncertainties. Please see “Cautionary Notes Regarding Forward-looking Statements” for moreinformation. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors including, butnot limited to, those discussed below and elsewhere in this report, particularly under the headings “Risk Factors” and “Cautionary Notes Regarding Forward-looking Statements.”OverviewComstock is a multi-faceted real estate development company engaged in the development of for-sale residential and mixed use products. Oursubstantial experience in building a diverse range of products including single-family homes, townhouses, mid-rise condominiums, high-rise multi-familycondominiums and mixed-use (residential and commercial) developments has positioned Comstock as a prominent real estate developer and home builder inthe Washington, D.C. market place. References in this Form 10-K to “Comstock,” “Company”, “we,” “our” and “us” refer to Comstock HomebuildingCompanies, Inc. together in each case with our subsidiaries and any predecessor entities unless the context suggests otherwise.Our business was founded in 1985 as a residential land developer and home builder focused on the Northern Virginia suburbs of the Washington, D.Carea. In the 1990’s we expanded our business to include home building operations in Maryland and North Carolina and a title insurance agency in Virginia.Prior to our initial public offering in December 2004, we operated our business through multiple holding companies each focused on a distinct geographicarea or business operation. In connection with our initial public offering, these primary holding companies were consolidated and merged into ComstockHomebuilding Companies, Inc., which was incorporated in Delaware in May 2004. Subsequent to our initial public offering, we conduct our operationsthrough wholly owned subsidiaries. Comstock Homes is the brand name of our for sale home building operations. Comstock Communities is the brand namewe use for our residential rental property operations. Since our founding in 1985, and as of December 31, 2009, we have built and delivered more than 5,200homes generating total revenue in excess of $1.3 billion.Our core market of Washington, D.C. has experienced significant job and population growth over the past two decades, creating demand for a widerange of housing products. Our expertise in developing traditional and non-traditional housing products enables us to focus on a wide range of opportunitieswithin our core market. We have built homes in suburban communities, where we focus on low density products such as single family detached homes, and inurban areas, where we focus on high density multi-family and mixed use products. We develop properties with the intent that they be sold either as fee-simpleproperties or condominiums to individual unit buyers or as investment properties sold to private or institutional investors. Currently we operate only in theWashington, D.C. market where we target first-time, early move-up, and secondary move-up buyers. We focus on products that we are able to offer for sale inthe middle price points within the markets where we operate, avoiding the very low-end and high-end products. We believe our middle market strategypositions our products such that they are affordable to a significant segment of potential home buyers in our market. In 2007, 2008, and 2009 the averageprice of the homes we delivered was $263,000, $300,000, and $289,000, respectively.We seek to minimize risk associated with fluctuating market conditions by primarily building pre-sold units and limiting the number of spec units heldin inventory. In each new community that we develop we build model homes to demonstrate our products and to house our on-site sales operations. We limitthe building of spec units to locations where there is a demonstrated demand for immediate delivery homes or where the majority of the units within a multi-family building (such as townhouses or condominiums) have been pre-sold. We believe that by limiting the number of spec units held in inventory we reduceour exposure to cyclical fluctuations in market values and minimize costs associated with holding inventory, such as debt service. We believe that ourstrategy of limiting spec inventory and converting our standing condominium inventory to rental properties contributed to our ability to manage the currentdownturn in the housing market.In certain communities we continue to offer units for sale and for rent. In the difficult market conditions that have persisted over the past few years, thisstrategy has dramatically enhanced our ability to maintain adequate operating cashflow. It has also contributed to our ability to negotiate amicablearrangements with all of our lenders regarding necessary modifications to our borrowing facilities as we worked to align our portfolio with market realities.Additionally, by operating key properties as rental communities during the housing downturn, we have been able to position valuable assets for sale inimproving market conditions.In 2005 we began executing expansion plans with the goal of establishing operations in key markets throughout the Southeast where job growth andpopulation growth created increased demand for new housing. During 2006, we expanded our Raleigh, North Carolina operation and we entered theCharlotte, North Carolina, Myrtle Beach, South Carolina, and Atlanta, Georgia markets, increasing revenues to approximately $266.2 million in 2007.However, during 2007 it became clear that the unprecedented span of growth in the housing sector was ending. Changing economic conditions werenegatively affecting demand for new housing. Drawing on the experience we gained in previous downturns, we curtailed our expansion plans and adopted adefensive strategy to ensure our ability to survive the housing downturn, should it prove to be protracted, which it has. We quickly sold certain assets wherewe believed market values would continue to erode, and we began working with our lenders to renegotiate the terms of our project related and corporateborrowings, which peaked at approximately $340.0 million as of September 30, 2006. Throughout 2007 and 2008, market conditions continued todeteriorate which made it necessary to significantly scale back operations while continuing efforts to renegotiate terms of our debt while seeking to retaincertain properties in our portfolio.With market conditions remaining difficult as 2009 began and liquidity becoming an increasing concern, we established our Strategic RealignmentPlan. This Plan was designed to eliminate debt, further reduce expenses, enhance our balance sheet, conserve cash, and protect our key Washington, D.C.market assets. By the end of 2009 we successfully renegotiated all secured debt obligations and reduced total debt to $67.6 million as of December 31, 2009.As detailed in the Subsequent Events subsection of Item 7 of this Form 10-K, the final steps of our Strategic Realignment Plan were completed in early 2010,reducing our total debt by another $4.5 million. By executing this plan we eliminated or reduced corporate and project related debts while also disposing ofassets where market values had deteriorated and retained key assets in the Washington, D.C. market where values had begun to stabilize.In keeping with our defensive strategy we did not purchase any land in 2008 or 2009, and we completed our exit from the Charlotte, North Carolina,Myrtle Beach, South Carolina, and Atlanta, Georgia markets and suspended our operations in the Raleigh, North Carolina market. We also eliminated all specinventory (other than those units held as rental properties), and we disposed of properties where we believed market conditions did not warrant protecting theasset. We reduced total debt to approximately $67.6 million (see details at Note 8 to the accompanying consolidated financial statements), we significantlyreduced general and administrative expenses (from $37.5 million in 2006 to $8.1 million in 2009), enhanced operating cashflow, and protected key properties in the Washington, D.C. area around which we will seek to rebuild our business. As a result of our effort to realign our business with marketconditions our unit deliveries declined in 2009 to 74 (down from the peak of 914 in 2006), generating total revenues of $21.4 million (down from the peak of$266.2 million in 2007).We believe that our significant experience over the past 25 years, combined with our ability to navigate through two major housing downturns (early1990’s and late 2000’s) have provided us the experience necessary to capitalize on attractive opportunities in our core market of Washington, D.C. and torebuild shareholder value. We are confident that our focus on the Washington, D.C. market, which has historically been characterized by economicconditions less volatile than many other major homebuilding markets, will provide opportunity to generate attractive returns on investment while alsoproviding opportunity for growth. 26 Table of ContentsFurther, as detailed in the Subsequent Events subsection of Item 7 of this Form 10-K, we believe the recent court decision resulting in our favor regardinglitigation we brought against the general contractor on our Eclipse high-rise condominium project in Arlington, Virginia will ultimately enhance liquidityand reduce indebtedness to KeyBank, once any appeal of the award by the defendant concludes.The homebuilding industry continues to experience demand levels well below the record levels experienced in 2005. Although market conditionsshowed signs of improvement in 2009, as compared to 2008, demand continues to be well below the robust levels experienced earlier in this decade. Theeconomic recession and the well documented turmoil in the financial markets continue to create challenging market conditions for most industries. Amongthe challenges facing the home building industry is availability of capital, availability of mortgage financing, increased levels of existing home inventoryfueled by foreclosures, and reduced demand for new homes. Nonetheless, we believe that having achieved the major objectives of our Strategic RealignmentPlan that Comstock is now well positioned to get back to work seeking to capitalize on opportunities that we believe are emerging in the stabilizingWashington, D.C. market. Comstock’s ability to navigate the turmoil has been a result of the commitment to success and dedication of every member of theComstock team, as well as the strong relationships we have built over the years with our lenders, suppliers, subcontractors, and customers.In today’s real estate market our general operating business strategy has the following key elements: • protect liquidity and maximize capital availability; • maximize the realized value of our real estate owned; • restructure our debt obligations; • rationalize overhead expenses; • scale operations back to the Washington, D.C. market; • focus on our current land inventory in the Washington, D.C. market; • focus on a broad segment of the home buying market, aka the “middle market”; • seek opportunities to rebuild our business; and • aggressively prosecute existing litigation to recover costs and damages caused by others.Net of the pending Wachovia foreclosure (see details at Note 4 to the consolidated financial statements), we either owned or controlled approximately322 building lots at December 31, 2009. The following tables summarize certain information related to new orders, settlements, and backlog for the twelvemonth periods ended December 31, 2009, 2008, and 2007: Twelve months ended December 31, 2009(dollars in 000s except units) WashingtonMetro Area NorthCarolina Georgia TotalGross new orders 73 16 — 89Cancellations 7 13 1 21Net new orders 66 3 (1) 68Gross new order revenue $23,150 $2,713 $— $25,863Cancellation revenue $2,128 $2,859 $386 $5,373Net new order revenue $21,022 $(146) $(386) $20,490Average gross new order price $317 $170 $— $291Settlements 66 8 — 74Settlement revenue — homebuilding $20,226 $1,175 $— $21,401Average settlement price $306 $147 $— $289Backlog units (1) 3 1 — 4Backlog revenue (1) $1,519 $431 $— $1,950Average backlog price (1) $506 $431 $— $488 27 Table of Contents Twelve months ended December 31, 2008(dollars in 000s except units) WashingtonMetro Area NorthCarolina Georgia TotalGross new orders 69 54 17 140Cancellations 17 23 13 53Net new orders 52 31 4 87Gross new order revenue $23,052 $11,532 $5,260 $39,844Cancellation revenue $4,701 $6,879 $4,023 $15,603Net new order revenue $18,351 $4,653 $1,237 $24,241Average gross new order price $334 $214 $309 $285Settlements 62 63 22 147Settlement revenue — homebuilding $21,367 $15,633 $7,097 $44,097Average settlement price $345 $248 $323 $300Backlog units (1) 3 7 1 11Backlog revenue (1) $739 $1,977 $386 $3,102Average backlog price (1) $246 $282 $386 $282 Twelve months ended December 31, 2007(dollars in 000s except units) WashingtonMetro Area NorthCarolina Georgia TotalGross new orders 559 152 116 827Cancellations 162 28 24 214Net new orders 397 124 92 613Gross new order revenue $123,909 $38,017 $35,936 $197,862Cancellation revenue $69,974 $8,476 $7,594 $86,044Net new order revenue $53,935 $29,541 $28,342 $111,818Average gross new order price $222 $250 $310 $239Settlements 669 131 86 886Settlement revenue — homebuilding $174,584 $31,644 $26,577 $232,805Average settlement price $261 $242 $309 $263Backlog units (1) 13 39 18 70Backlog revenue (1) $4,112 $12,684 $6,051 $22,847Average backlog price (1) $316 $325 $336 $326 (1)Backlog data as of 12/31 for each year.Recent accounting pronouncementsEffective January 1, 2009, the Company adopted SFAS No. 157, “Fair Value Measurements” (codified in “ASC 820”), for its non-financial assets andliabilities and for its financial assets and liabilities measured at fair value on a non-recurring basis. ASC 820 provides a framework for measuring fair value ingenerally accepted accounting principles, expands disclosures about fair value measurements, and establishes a fair value hierarchy that requires an entity tomaximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The adoption of ASC 820 for the Company’snon-financial assets and liabilities did not have a material impact on the Company’s consolidated financial statements, though it may in the future. In April2009, the FASB issued FSP FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have SignificantlyDecreased and Identifying Transactions That Are Not Orderly,” FSP No. FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-TemporaryImpairments,” and FSP FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments” (all codified in ASC 820). The Companyadopted the FSPs as of January 2009, which did not have a material impact on the Company’s consolidated financial statements.In December 2007, the FASB also issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements” (codified in “ASC 810”).ASC 810 requires all entities to report noncontrolling (i.e. minority) interests in subsidiaries as equity in the consolidated financial statements and to accountfor transactions between an entity and noncontrolling owners as equity transactions if the parent retains its controlling financial interest in the subsidiary.ASC 810 also requires expanded disclosure that distinguishes between the interests of the controlling owners and the interests of the noncontrolling ownersof a subsidiary. ASC 810 was effective for the Company beginning on January 1, 2009. The adoption of ASC 810-10 did not have a material impact on theCompany’s consolidated financial statements.In May 2009, the FASB issued SFAS No. 165, “Subsequent Events,” (codified in “ASC 855”). ASC 855 establishes general standards of accounting forand disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. ASC 855 was effectivefor the Company for the period ending June 30, 2009. The adoption did not have a material impact on the Company’s consolidated financial statements.In June 2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial Assets an amendment of FASB Statement No. 140,” (codified in“ASC 860”). ASC 860 requires enhanced disclosures regarding transfers of financial assets and continuing exposure to the related risks. ASC 860 alsoeliminates the concept of a qualifying special-purpose entity and changes the requirements for derecognizing financial assets. ASC 860 will be effective forthe Company’s fiscal year beginning January 1, 2010. The adoption of ASC 860 is not expected to have a material impact on the Company’s consolidatedfinancial statements.In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R),” (codified in “ASC 810”). ASC 810 amends existingconsolidation guidance for variable interest entities, requires ongoing reassessment to determine whether a variable interest entity must be consolidated, andrequires additional disclosures regarding involvement with variable interest entities and any significant changes in risk exposure due to that involvement.ASC 810 will be effective for the Company’s fiscal year beginning January 1, 2010. The Company is currently evaluating the effects of ASC 810 on itsconsolidated financial statements.In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted AccountingPrinciples,” (codified in “ASC 105”), which created a single source of authoritative nongovernmental U.S. GAAP. The Codification was effective for theCompany’s interim and annual periods ending after September 15, 2009. Upon adoption, all existing non-SEC accounting and reporting standards weresuperseded. All other non-SEC accounting literature not included in the Codification are considered non-authoritative. The required disclosures have beenTM incorporated into and did not have a material impact on the Company’s consolidated financial statements. 28 Table of ContentsIn August 2009, the FASB issued Accounting Standards Update No. 2009-05, “Measuring Liabilities at Fair Value” (“ASU 2009-05”), amending ASC820 to provide additional guidance to clarify the measurement of liabilities at fair value. ASU 2009-05 was effective for the Company’s quarter endedDecember 31, 2009 and did not have a material impact on the Company’s consolidated financial statements.In January 2010, the FASB issued Accounting Standards Update No. 2010-06, “Improving Disclosures about Fair Value Measurements” (“ASU 2010-06”), amending ASC 820 to increase disclosure requirements regarding recurring and nonrecurring fair value measurements. ASU 2010-06 will be effectivefor the Company’s fiscal year beginning January 1, 2010, except for the disclosures about activity in Level 3 fair value measurements which will be effectivefor the Company’s fiscal year beginning January 1, 2011. ASC 820 is not expected to have a material impact on the Company’s consolidated financialstatements. 29 Table of ContentsCritical Accounting Policies and EstimatesOur consolidated financial statements are prepared in accordance with generally accepted accounting principles, which require us to make certainestimates and judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financialstatements, and the reported amounts of revenues and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates, including thoserelated to the consolidation of variable interest entities, revenue recognition, impairment of real estate held for development and sale, warranty reserve andour environmental liability exposure. We base our estimates on historical experience and on various other assumptions that we believe to be reasonableunder the circumstances. Actual results may differ materially from these estimates.A summary of significant accounting policies is provided in Note 2 to our audited consolidated financial statements. The following section is asummary of certain aspects of those accounting policies that require our most difficult, subjective or complex judgments and estimates.Consolidation of Variable Interest EntitiesASC 810-10 requires the primary beneficiary of a variable interest entity to consolidate that entity. A variable interest entity is created when (i) theequity investment at risk is not sufficient to permit the entity from financing its activities without additional subordinated financial support from otherparties or (ii) equity holders either (a) lack direct or indirect ability to make decisions about the entity, (b) are not obligated to absorb expected losses of theentity or (c) do not have the right to receive expected residual returns of the entity if they occur. The primary beneficiary of a variable interest entity is theparty that absorbs a majority of the variable interest entity’s expected losses, receives a majority of the entity’s expected residual returns, or both, as a resultof ownership, contractual or other financial interests in the entity. Expected losses are the expected negative variability of an entity’s net assets exclusive ofits variable interests, and expected residual returns are the expected positive variability in the fair value of an entity’s assets, exclusive of variable interests.Prior to the issuance of the principals related to variable interest accounting, an enterprise generally consolidated an entity when the enterprise had acontrolling financial interest in the entity through ownership of a majority voting interest.In December 2003, the FASB issued a revision to the variable interest accounting guidance which we adopted. Based on the revisions, we haveconcluded that whenever we option land or lots from an entity and pay a significant nonrefundable deposit, a variable interest entity is created. This isbecause we have been deemed to have provided subordinated financial support, which refers to variable interests that will absorb some or all of an entity’sexpected theoretical losses if they occur. Therefore, for each variable interest entity created, we compute the expected losses and residual returns based on theprobability of future cash flows to determine if we are deemed to be the primary beneficiary of the variable interest entity.The methodology used to evaluate our primary beneficiary status requires substantial management judgment and estimation. These judgments andestimates involve assigning probabilities to various estimated cash flow possibilities relative to the selling entity’s expected profits and losses and the cashflows associated with changes in the fair value of the land under contract. Because we do not have any ownership interests in the entities with which wecontract to buy land (such as LLCs), we may not have the ability to compel these entities to provide financial or other data to assist us in the performance ofthe primary beneficiary evaluation. This lack of direct information from the contracting entities may result in our evaluation being conducted solely based onthe aforementioned management judgments and estimates. Further, where we deem ourselves to be the primary beneficiary of such an entity and that entityrefuses to provide financial statements, we utilize estimation techniques to perform the consolidation. While management believes that our estimationtechniques provide a reasonable basis for determining the financial condition of an entity that refuses to provide financial statements, the actual financialcondition of the entity could differ from that reported. In addition, although management believes that our accounting policy is designed to properly assessour primary beneficiary status relative to our involvement with the entities from which we acquire land, changes to the probabilities and the cash flowpossibilities used in our evaluation could produce different conclusions regarding our primary beneficiary status.Revenue RecognitionWe primarily derive our earned revenues from the sale of residential property. We recognize residential revenue and all related costs and expenseswhen full payment has been received, title and possession of the property has been conveyed and risks and rewards of ownership transfer to the buyer andother sale and profit recognition criteria are satisfied. Management estimates of future costs to be incurred after the completion of each sale are included incost of sales. A change in circumstances that causes these estimates of future costs to increase or revenues to decrease could significantly affect the profitrecognized on these sales.Impairment of Real Estate Held for Development and SaleReal estate held for development and sale includes land, land development costs, interest and other construction costs and is stated at cost or, whencircumstances or events indicate that the real estate held for development or sale is impaired, at estimated fair value. Circumstances or events we considerimportant which could trigger an impairment review include the following: • significant negative industry or economic trends; • a significant underperformance relative to historical or projected future operating results; • a significant change in the manner in which an asset is used; and • an accumulation of costs significantly in excess of the amount originally expected to construct an asset. 30 Table of ContentsReal estate is stated at the lower of cost or estimated fair value using the methodology described as follows. A write-down to estimated fair value isrecorded when we determine that the net book value exceeds the estimated undiscounted future cash flows. These evaluations are made on a property-by-property basis. When we determine that the net book value of an asset may not be recoverable based upon the estimated undiscounted cash flow, animpairment write-down is recorded. The evaluation of future cash flows and fair value of individual properties requires significant judgment and assumptions,including estimates regarding expected sales prices, development absorption and remaining development costs. Significant adverse changes in circumstancesaffecting these judgments and assumptions in future periods could cause a significant impairment adjustment to be recorded. As discussed in Note 4 to theaccompanying financial statements, we recorded impairment charges of zero in the first quarter of 2009, $22.9 million in the second quarter of 2009 and zeroin the third and fourth quarters of 2009.Warranty ReserveWarranty reserves for houses sold are established to cover potential costs for materials and labor with regard to warranty-type claims expected to ariseduring the one-year warranty period provided by us or within the five-year statutorily mandated structural warranty period. Since we generally subcontractour home building work, subcontractors are required to provide us with an indemnity and a certificate of insurance prior to receiving payments for their work.Claims relating to workmanship and materials are generally the primary responsibility of the subcontractors and product manufacturers. The warranty reserveis established at the time of closing, and is calculated based upon historical warranty cost experience and current business factors. Variables used in thecalculation of the reserve, as well as the adequacy of the reserve based on the number of homes still under warranty, are reviewed on a periodic basis.Although management considers the warranty reserve to be adequate, there can be no assurance that this reserve will prove to be adequate over time to coverlosses due to increased costs for material and labor, the inability or refusal of manufacturers or subcontractors to financially participate in corrective action,unanticipated adverse legal settlements, or other unanticipated changes to the assumptions used to estimate the warranty reserve.Environmental Liability ExposureDevelopment and sale of real property creates a potential for environmental liability on our part as owner and developer, for our own acts as well as theacts of prior owners of the subject property or owners or past owners of adjacent parcels. If hazardous substances are discovered on or emanating from any ofour properties, we and prior owners may be held liable for costs and liabilities relating to those hazardous substances. We generally undertake environmentalstudies in connection with our property acquisitions, when warranted. If we incur environmental remediation costs in connection with properties wepreviously sold, including clean up costs, consulting fees for environmental studies and investigations, monitoring costs, and legal costs relating to clean up,litigation defense and the pursuit of responsible third parties, they are expensed. We capitalize costs relating to land under development and undevelopedland as part of development costs. Costs incurred for properties to be sold are deferred and charged to cost of sales when the properties are sold. Should apreviously undetected, substantial environmental hazard be found on our properties, significant liquidity could be consumed by the resulting clean uprequirements and a material expense may be recorded. Further, governmental regulation on environmental matters affecting residential development couldimpose substantial additional expense on us, which could adversely affect our results of operations or the value of properties owned under contract, orpurchased by us. For additional information regarding risks associated with environmental hazards and environmental regulation, see “Business — RiskFactors — We are Subject to Certain Environmental Laws and the Cost of Compliance Could Adversely Affect our Business.”Results of OperationsYear ended December 31, 2009 compared to year ended December 31, 2008Orders, backlog and cancellationsGross new order revenue for the year ended December 31, 2009 decreased $13.9 million, or 34.9%, to $25.9 million on 89 homes as compared to $39.8million on 140 homes for the year ended December 31, 2008. Net new order revenue for the year ended December 31, 2009 decreased $3.7 million, or 15.3%,to $20.5 million on 68 homes as compared to $24.2 million on 87 homes for the year ended December 31, 2008. The average gross new order revenue perunit for the year ended December 31, 2009 increased by $6,000 to $291,000 as compared to $285,000 for the year ended December 31, 2008. This increase isdue to the sale of 49 units in Raleigh, N.C. during 2008 at an average gross new order revenue per unit of $214,000 which pulled down the average for thatperiod. Our backlog at December 31, 2009 decreased $1.1 million, or 35.5%, to $2.0 million on 4 homes as compared to our backlog at December 31, 2008 of$3.1 million on 11 homes.As a result of winding down our divisions in the Atlanta, GA and Raleigh, N.C. markets we are left with two projects at December 31, 2009 where wehave units available for sale and settlement, Penderbrook and Eclipse at Potomac Yard. Our remaining three projects, net of projects scheduled forforeclosure, are land positions in varying states of readiness. Therefore, we were only able to generate orders and backlog at two projects for much of 2009.The decrease in gross new orders, net new orders and backlog at these two projects is attributable to current market conditions in the homebuilding industrywhich are characterized by a general excess supply of homes available for sale, reduced buyer confidence and elevated levels of unemployment.Revenue – homebuildingThe number of homes delivered for the year ended December 31, 2009 decreased by 49.7%, or 73 homes, to 74 as compared to 147 homes for the yearended December 31, 2008. The decrease in units settled was the result of zero settlements in our Atlanta division in 2009 versus 22 in 2008; 8 settlements inour Raleigh division in 2009 versus 63 in 2008. These decreases were offset by an increase of 23 settlements at our Penderbrook project where we settled 26units in 2009 versus 3 in 2008. Average revenue per home delivered decreased by $11,000 to $289,000 for the year ended December 31, 2009 as compared to$300,000 for the year ended December 31, 2008. This is due to a decrease in the average price per home settled at all of our projects in 2009 compared to2008. For example, in 2009 we settled 27 units at our Eclipse project at an average revenue per settlement of $443,000. In 2008 there were also 27settlements at the Eclipse but at an average revenue per settlement of $486,000.Homebuilding revenues decreased by $22.7 million, or 51.5%, to $21.4 million for the year ended December 31, 2009 as compared to $44.1 million forthe year ended December 31, 2008. This reduction in revenue from homebuilding is primarily attributable to a lower volume of units settled in 2009 versus2008. As a result of our exit from the Atlanta, GA market, we settled 22 units in the Atlanta division in 2008 versus zero settlements in 2009. As we winddown our operation in Raleigh, N.C., the volume decreased from 63 settlements in 2008 to 8 settlements in 2009. In our Washington, D.C. market, we settled62 units in 2008 versus 66 units in 2009.Revenue – otherOther revenue for the year ended December 31, 2009 increased by $1.1 million, or 42.3% to $3.7 million, as compared to $2.6 million for the year ended December 31, 2008. Other revenue includes $2.7 million and $2.5 million of revenue generated by our rental communities during the twelve monthsended December 31, 2009 and the twelve months ended December 31, 2008, respectively. Other revenue for the twelve months ended December 30, 2009also includes $721,000 from the July 2009 sale of 33 single-family lots at our Providence project in Raleigh, N.C. We consider revenue to be fromhomebuilding when there is a structure built or being built on the lot when delivered. Sales of lots occur, and are included in other revenues, when we sell rawland or finished home sites in advance of any home construction. 31 Table of ContentsCost of sales – homebuildingCost of sales homebuilding for the year ended December 31, 2009 decreased $19.6 million, or 50.0%, to $19.6 million, or 91.6% of homebuildingrevenue, as compared to $39.2 million, or 88.9% of revenue, for the year ended December 31, 2008. The increase in cost of sales as a percentage ofhomebuilding revenue for the year ended December 31, 2009 is the result of lower average revenue per settlement and increased sales concessions such as thepayment of certain buyer closing costs at settlement that do not affect the revenue per sale but do increase the cost of a settled home.Cost of sales – otherCost of sales – other is principally comprised of operating expenses incurred in generating rental revenue at our rental communities but for the twelvemonths ended December 31, 2009 it also included $708,000 from the July 30, 2009 sale of 33 single-family lots at our Providence project in Raleigh, N.C.Impairments and write-offsReal estate held for development and sale includes land, land development costs, interest and other construction costs. Land held for development isstated at cost, or when circumstances or events indicate that the land is impaired, at estimated fair value. Real estate held for sale is carried at the lower of costor market less selling costs. Land, land development and indirect land development costs are accumulated by specific project and allocated to various lots orhousing units within that project using specific identification and allocation based upon the relative sales value, unit or area methods. Direct constructioncosts are assigned to housing units based on specific identification. Construction costs primarily include direct construction costs and capitalized fieldoverhead. Other costs are comprised of prepaid local government fees and capitalized interest and real estate taxes. Selling costs are expensed as incurred.Estimated fair value is based on comparable sales of real estate in the normal course of business under existing and anticipated market conditions. Theevaluation takes into consideration the current status of the property, various restrictions, carrying costs, costs of disposition and any other circumstances,which may affect fair value including management’s plans for the property. Due to the large acreage of certain land holdings, disposition in the normal courseof business is expected to extend over a number of years. A write-down to estimated fair value is recorded when the net carrying value of the property exceedsits estimated undiscounted future cash flows. These evaluations are made on a property-by-property basis as seen fit by management whenever events orchanges in circumstances indicate that the net book value may not be recoverable.During the third quarter of 2009, the Company executed a foreclosure agreement with Wachovia Bank that will result in cancellation of indebtedness(see Note 8) in exchange for the Company’s agreement to cooperate in the bank’s foreclosure process on assets that secure the debt. Wachovia Bank had notforeclosed on the real estate assets as of December 31, 2009. The following summary of the carrying value of real estate held for development and sale reflectsthe Wachovia assets scheduled for foreclosure, net of the Wachovia projects that were deconsolidated due to loss of financial control in the fourth quarter of2009 (See Note 20). Number ofprojects December 31,2009$000s Real estate held for development and sale 16 $70,890 Real estate projects awaiting foreclosure related to the Wachovia foreclosure agreement: (11) (15,407)Real estate held for development and sale, net of assets awaiting foreclosure 5 $55,483 Deteriorating market conditions, turmoil in the credit markets and increased price competition have continued to negatively impact the Companyduring 2009 resulting in reduced sales prices, increased customer concessions, reduced gross margins and extended estimates for project completion dates.The Company evaluates its projects on a quarterly basis to determine if recorded carrying amounts are recoverable. For the three months ended December 31,2009, the Company evaluated all 16 of its projects for impairment and the evaluation resulted in no impairment charges. Impairment charges of $3.4 millionwere recorded for the three months ended December 31, 2008. As a result of this analysis, the Company believes that book value approximates fair value forall of its projects except for one project where the fair value exceeds the carrying value of $34.5 million.For projects where the Company expects to continue sales, these impairment evaluations are based on discounted cash flow models. Discounted cashflow models are dependent upon several subjective factors, primarily estimated average sales prices, estimated sales pace, and the selection of an appropriatediscount rate. While current market conditions make the selection of a timeframe for sales in a community challenging, the Company has generally assumedsales prices equal to or less than current prices and the remaining lives of the communities were estimated to be one to two years. These assumptions are ofteninterrelated as price reductions can generally be assumed to increase the sales pace. In addition, the Company must select what it believes is an appropriatediscount rate based on current market cost of capital and returns expectations. The Company has used its best judgment in determining an appropriatediscount rate based on anecdotal information it has received from marketing its deals for sale in recent months. The Company has elected to use a rate of 17%in its discounted cash flow model, which is consistent with the discount rate used in prior periods as the Company’s cost of capital has not changedsignificantly. While the selection of a 17% discount rate was subjective in nature, the Company believes it is an appropriate rate in the current market. Theestimates of sales prices, sales pace, and discount rates used by the Company are based on the best information available at the time the estimates were made.In recent months, market conditions affecting the Company’s Washington, D.C. area projects have improved, however, if market conditions deteriorate again,additional adverse changes to these estimates in future periods could result in further material impairment amounts to be recorded.For projects where the Company expects to sell the remaining lots in bulk or convey the remaining lots to a lender where the loans have matured, thefair value is determined based on offers received from third parties, comparable sales transactions, and/or cash flow valuation techniques.If the project meets the GAAP accounting criteria of held for sale, the project is valued at the lower of cost or fair value less estimated selling costs. AtDecember 31, 2009, the Company had one project with a carrying value of $34.5 million that met these criteria.At May 31, 2009 Mathis Partners, LLC, a wholly owned subsidiary of the Company had approximately $5.1 million of principal, accrued interest andfees outstanding to Cornerstone Bank (“Cornerstone”) relating to the Company’s Gates at Luberon project (“Gates”). In June 2009, Cornerstone foreclosed onGates lots carried in real estate held for development and sale with an estimated fair value of $3.3 million. Upon this foreclosure the Company had beenrelieved of a portion of the outstanding debt balance and recorded this as an extinguishment of debt paid for by the foreclosed lots, in accordance with ASC405.20.40-1. As a result, $1.8 million of Cornerstone debt remained at June 30, 2009 as the Company reduced its assets for the lots that were legallytransferred to Cornerstone and recorded a corresponding reduction in the related debt as a result of the transfer of assets in partial satisfaction of the debt. OnSeptember 22, 2009, the Company 32 Table of Contentsentered into a settlement agreement and mutual release with Cornerstone relating to litigation between the Company and Cornerstone. In connection with thesettlement, Cornerstone released the Company, and its subsidiary Mathis Partners, LLC, from their respective obligations and guarantees relating to $5.1million of debt. As a result of completing the negotiations in September, the Company wrote off the remaining carrying value of the Gates inventory onwhich Cornerstone foreclosed and reduced the recorded value of the debt to the final settlement amount. See Note 12 for the calculation of gain on troubleddebt restructuring related to the Cornerstone settlement agreement.If market conditions continue to deteriorate, additional adverse changes to these estimates in future periods could result in further material impairmentamounts to be recorded. The following table summarizes impairment charges and write-offs for the twelve months ended by metropolitan area ($000): Twelve Months Ended December 31, 2009 2008 2007Washington DC Metropolitan Area $15,351 $6,141 $35,005Raleigh, North Carolina 1,218 499 10,190Atlanta, Georgia 6,369 11,382 33,069 $22,938 $18,022 $78,264As of December 31, 2009, the Company has only an immaterial amount of real estate in Atlanta, GA. The remaining real estate in Raleigh, N.C. isscheduled for foreclosure by Wachovia Bank in 2010. 33 Table of ContentsSelling, general and administrative expensesSelling, general and administrative costs for the year ended December 31, 2009 decreased $7.0 million, or 46.4%, to $8.1 million, as compared to $15.1million for the year ended December 31, 2008. The reduction is attributable to decreased salary, bonus and other personnel related expenses in conjunctionwith a continuing effort to make strategic reductions in personnel and related costs. We had 31 employees at December 31, 2009 versus 67 at December 31,2008. Cost reduction initiatives have also resulted in decreases in office rent, legal, accounting and consulting expenses.Interest, real estate taxes and indirect costs related to inactive projectsInterest and real estate taxes incurred relating to the development of lots and parcels are capitalized to real estate held for development and sale duringthe active development period, which generally commences when borrowings are used to acquire real estate assets and ends when the properties aresubstantially complete or the property becomes inactive which means that development and construction activities have been suspended indefinitely.Interest is capitalized based on the interest rate applicable to specific borrowings or the weighted average of the rates applicable to other borrowings duringthe period. Interest and real estate taxes capitalized to real estate held for development and sale are expensed as a component of cost of sales as related unitsare sold.When a project becomes inactive, its interest, real estate taxes and indirect production overhead costs are no longer capitalized but rather expensed inthe period in which they are incurred. During the twelve months ended December 31, 2009, all of the Company’s projects were determined to be inactive foraccounting purposes. Following is a breakdown of the interest, real estate taxes and indirect costs related to inactive projects reported on the statement ofoperations related to the inactivation of certain real estate projects held for development and sale ($000s): Years ended December 31, 2009 2008 2007Total interest incurred and expensed for inactive projects $2,626 $3,993 $— Total real estate taxes incurred and expensed for inactive projects 845 1,022 — Total production overhead incurred and expensed for inactive projects 667 670 — $4,138 $5,685 — Year ended December 31, 2008 compared to year ended December 31, 2007Orders, backlog and cancellationsGross new order revenue for the year ended December 31, 2008 decreased $158.0 million, or 79.9%, to $39.8 million on 140 homes as compared to$197.9 million on 827 homes for the year ended December 31, 2007. Net new orders for the year ended December 31, 2008 decreased $87.6 million, or78.3%, to $24.2 million on 87 homes as compared to $111.8 million on 613 homes for the year ended December 31, 2007. The 526 unit decrease in net neworders was experienced across all of our markets and projects and is attributable to the real estate industry downturn and the contraction of the nationaleconomy. General erosion of consumer confidence and increasing unemployment along with increasing difficulty in obtaining mortgage financing reduceddemand in 2008. The reduction in 2008 was most dramatically impacted, however, by the 2007 bulk sale of the Bellemeade project. The balance of thereduction was contributed to reduced new orders and increased cancellations. 34 Table of ContentsThe average gross new order revenue per unit for the year ended December 31, 2008 increased by $46,000 to $285,000 as compared to $239,000 forthe year ended December 31, 2007. The increase in average sales price per new order is attributable to an increase in average new order revenue at our Eclipseproject in 2008. Despite receiving 44 fewer gross new orders at the Eclipse in 2008 versus 2007, the average gross new order price increased to $488,000 in2008 from $416,000 in 2007. An additional cause of the increase in 2008 was that average gross new order was depressed by the effect of the discounted bulksales of condominium conversion units at Bellemeade. Our backlog at December 31, 2008 decreased $19.7 million, in 2007 or 86.4%, to $3.1 million on 11homes as compared to our backlog at December 31, 2007 of $22.8 million on 70 homes. The decrease in backlog is consistent with real estate industryslowdown, the global credit crisis and national economic recession currently taking place.Our cancellation rate for the year ended December 31, 2008 was 37.9% on 140 gross new orders compared to a cancellation rate of 25.9% on 827 grossnew orders for the comparable period in 2007. In the Washington, DC market we experienced 17 cancellations on 69 gross new orders, or 24.6%. In theRaleigh market our cancellation rate was 42.6%, or 23 cancellations on 54 gross new orders, and in the Atlanta market our cancellation rate was 76.5%, or 13cancellations on 17 gross new orders. We believe that the high rate of cancellations in our Atlanta and Raleigh markets was due in part to the first-time buyerorientation of our products, our inability to initiate construction due to lack of available construction financing and a slowing of the resale market for ourmove-up buyers.RevenuesThe number of homes delivered for the year ended December 31, 2008 decreased by 83.4%, or 739 homes, to 147 as compared to 886 homes for theyear ended December 31, 2007. Average revenue per home delivered increased by $37,000 to $300,000 for the year ended December 31, 2008 as comparedto $263,000 for the year ended December 31, 2007. The decrease in units settled was the result of 203 settlements at the Eclipse valued at $86.8 million in2007 versus 27 settlements valued at $13.1 million in 2008, and the 2007 bulk sale of our 316-unit Bellemeade condominium conversion project.Homebuilding revenues decreased by $188.7 million, or 81.1%, to $44.1 million for the year ended December 31, 2008 as compared to $232.8 millionfor the year ended December 31, 2007. The decrease in homebuilding revenue is primarily attributable to weaker market conditions, reduced availability ormortgage financing in the second half of the year and reduced pricing of our homes in an effort to sell speculative inventory.Other RevenuesOther revenue for the year ended December 31, 2008 decreased by $30.8 million, or 92.2% to $2.6 million, as compared to $33.4 million for the yearended December 31, 2007. Other revenue from lot sales for the year ended December 31, 2008 was $0.02 million, as compared to $31.8 million for the yearended December 31, 2007. For the twelve months ended December 31, 2007 other revenue included finished lot sales at our Massey Preserve project ($7.2million), raw lot sales at our Blake Culpepper project ($3.6 million), raw lot sale of our East Capital Street project ($6.0 million) and the sale of our PotomacYard Retail complex ($14.5 million). We consider revenue to be from homebuilding when there is a structure built or being built on the lot when delivered.Sales of lots occur, and are included in other revenues, when we sell raw land or finished home sites in advance of any home construction. Other revenueincludes $2.5 million and $0.8 million of revenue generated by our rental communities during the twelve months ended December 31, 2008 and the twelvemonths ended December 31, 2007, respectively. Other revenue for the year ended December 31, 2008 and 2007 includes $0.07 million and $0.4 millionrespectively of revenue associated with the Company’s Settlement Title Services division. 35 Table of ContentsCost of sales and cost of sales otherCost of sales for the year ended December 31, 2008 decreased $171.9 million, or 81.4%, to $39.2 million, or 88.9% of homebuilding revenue, ascompared to $211.1 million, or 90.7% of revenue, for the year ended December 31, 2007. The 1.8 point decrease in cost of sales as a percentage ofhomebuilding revenue for the year ended December 31, 2008 is attributable primarily to prior period impairment charges and reclassification of direct costsfor inactive projects. Impairment charges result in increased margins because they reduce inventory costs remaining to be released and charged to cost ofsales when future units are settled. Projects are classified as inactive when they are either substantially complete or construction activities have beenindefinitely suspended. When a project becomes inactive for accounting purposes, interest, real estate tax and overhead costs are no longer capitalized intoinventory but are expensed in the period incurred. This in turn increases future margin in the same way as impairments.Cost of sales other for the year ended December 31, 2008 was $1.3 million, as compared to $34.8 million for the year ended December 31, 2007. Costof sales other for the year ended December 2008 and 2007 includes expenses associated with lot and bulk project sales made to third parties, rentalcommunity operations and expenses associated with the management of the Company’s Settlement Title Services division. The reduction in cost of salesother is the result of lower land sale revenue in 2008 as compared to 2007.Impairments and write-offsFor the twelve months ended December 31, 2008 we recorded impairment and write-off charges of $18.0 million including an impairment charge of$3.4 million at our Tribble Road project in Atlanta, $7.9 million over fourteen other projects in our Atlanta division, $6.2 million over two projects in ourWashington, D.C. division and $0.5 million over two projects in our Raleigh, N.C. division. For the twelve months ended December 31, 2007 we recorded$78.4 million of impairments and write-offs, with approximately $35.0 million, $10.2 million and $33.1 million in the Washington metro area, NorthCarolina and Georgia, respectively.Selling, general and administrative expensesSelling, general and administrative costs for the year ended December 31, 2008 decreased $19.1 million, or 55.8%, to $15.1 million, as compared to$34.2 million for the year ended December 31, 2007. Selling, general and administrative expenses represented 32.3% of total revenue for the year endedDecember 31, 2008, as compared to 12.8% for the year ended December 31, 2007.The bulk of the decrease in selling, general and administrative costs was the result of staffing reductions and decreases in related compensation costreductions of $7.0 million. Non-compensation related selling expenses decreased by $3.2 million to $1.6 million for the year ended December 31, 2008 ascompared to $4.8 million for the year ended December 31, 2007. General and administrative costs for the year ended December 31, 2007 included a one-timecharge of $3.9 million relating to non-cash stock compensation in December 2007 resulting from the acceleration of certain unvested stock grants. Rentexpense incurred for office and model home leases decreased by $1.2 million to $1.0 million in the year ended December 31, 2008 from $2.2 million in theyear ended December 31, 2007. Consulting fees decreased by $1.3 million and accounting related fees decreased by $0.8 million from 2007 to 2008.Interest, real estate taxes and indirect costs related to inactive projectsDue to the severity of the real estate market downturn, various projects were classified as inactive during 2008. A project becomes inactive foraccounting purposes when either the project is substantially complete or construction or development efforts are suspended indefinitely. When a projectbecomes inactive, its interest, real estate taxes and indirect production overhead costs are no longer capitalized but rather expensed in the period in whichthey are incurred. For the twelve months ended December 31, 2008 the Company recorded $5.7 million of expense relating to inactive projects including$4.0 million of interest, $1.0 million of real estate taxes and $0.7 million of production overhead costs. For the twelve months ended December 31, 2007 noprojects had been classified as inactive and therefore all interest, real estate tax and production overhead costs were capitalized as incurred.Year ended December 31, 2007 compared to year ended December 31, 2006Orders, backlog and cancellationsGross new order revenue for the year ended December 31, 2007 decreased $50.0 million, or 20.2%, to $197.9 million on 827 homes as compared to$247.9 million on 965 homes for the year ended December 31, 2006. Net new orders for the year ended December 31, 2007 decreased $82.9 million, or42.6%, to $111.8 million on 613 homes as compared to $194.7 million on 794 homes for the year ended December 31, 2006. The 181 unit decrease in netnew orders was primarily attributable to increased cancellations of 214 units for the twelve months ended December 31, 2007 as compared to 171 units forthe twelve months ended December 31, 2006, and decreases in sales at our Eclipse project which was substantially pre-sold in 2005 and 2006. In addition,the Company’s 2006 acquisitions of Parker Chandler Homes Inc., and Capitol Homes Inc., in the Georgia and North Carolina markets, contributedapproximately 122 and 91 new order units, respectively in 2006. Our customers experienced increasing difficulty in 2007 obtaining mortgage financing, afactor which also contributed to reduced new orders and increased cancellations.The average gross new order revenue per unit for the year ended December 31, 2007 decreased by $18,000 to $239,000 as compared to $257,000 forthe year ended December 31, 2006. The decrease in average sales price per new order is attributable to lower priced product offerings in our North Carolinaand Georgia markets, increased sales of lower priced condominiums, discounted bulk sales of condominium conversion units at Bellemeade, and pricedecreases throughout our markets in response to slower demand as compared to 2006. This decrease was offset by higher per unit new orders at theCompany’s Eclipse on Center Park at Potomac Yard project as a result of more sales in the East Tower. Our backlog at December 31, 2007 decreased $118.4million, or 83.8%, to $22.8 million on 70 homes as compared to our backlog at December 31, 2006 of $141.3 million on 345 homes. The decrease in backlogis primarily the result of 203 deliveries valued at $86.8 million at the Eclipse during the twelve months ended December 31, 2007.Our average cancellation rate for the year ended December 31, 2007 was approximately 25.9% on 827 gross new orders compared to cancellation rateof 17.7% on 965 gross new orders for the comparable period in 2006. Cancellations were most prevalent in the greater Washington, DC market where weexperienced 162 cancellations on 559 gross new orders or 29.0%. At the Eclipse project we experienced 123 cancellations on 72 new orders although most ofthe cancellations were related to contracts entered into prior to 2007. In the Raleigh market our cancellation rate was 18.4%, or 28 cancellations on 152 grossnew orders, and in the Atlanta market our cancellation rate was 20.7%, or 24 cancellations on 116 gross new orders. We believe that the high rate ofcancellations in our Atlanta and Raleigh markets was due in part to the first-time buyer orientation of our products as well as a slowing of the resale marketfor our move-up buyers. 36 Table of ContentsRevenuesThe number of homes delivered for the year ended December 31, 2007 decreased by 3.1%, or 28 homes, to 886 as compared to 914 homes for the yearended December 31, 2006. Average revenue per home delivered was unchanged at $263,000 for the year ended December 31, 2007 as compared to $263,000for the year ended December 31, 2006. The decrease in units settled was the result of higher cancellations and reduced new orders which were offset by 203settlements at the Eclipse valued at $86.8 million and the bulk sale of our Bellemeade condominium conversion project.Homebuilding revenues decreased by $7.3 million, or 3.0%, to $232.8 million for the year ended December 31, 2007 as compared to $240.1 million forthe year ended December 31, 2006. The decrease in homebuilding revenue is primarily attributable to weaker market conditions, reduced availability ormortgage financing in the second half of the year and reduced pricing of our homes in an effort to sell speculative inventory.Other RevenuesOther revenue for the year ended December 31, 2007 increased by $27.6 million, or 475.9% to $33.4 million, as compared to $5.8 million for the yearended December 31, 2006. Other revenue for the year ended December 31, 2007 and 2006 includes lot sales made to third parties, revenue associated with theCompany’s Settlement Title Services division, management fees received from Comstock Asset Management Inc. and revenue received from a marketingservices alliance. The increase is attributable to increased lot sales and bulk project sales during 2007 as compared to 2006. The Company considers a sale tobe from homebuilding when there is a structure built on the lot when it is sold. Sales of lots occur, and are included in other revenues, when the Companysells raw or finished home sites in advance of any substantial home construction. Projects where other revenue was generated include: Massey Preservefinished lot sales ($7.2 million), Blake Culpepper raw lot sales ($3.6 million), East Capital Street raw lot sales ($6.0 million) and the Potomac Yard Retailcomplex sale ($14.5 million).Cost of sales and cost of sales otherCost of sales for the year ended December 31, 2007 decreased $0.3 million, or 0.1%, to $211.1 million, or 90.7% of homebuilding revenue, ascompared to $211.4 million, or 88.1% of revenue, for the year ended December 31, 2006. The 2.6 percentage point increase in cost of sales as a percentage ofhomebuilding revenue for the year ended December 31, 2007 is attributable to several factors. Due to weakening market conditions, we extended the salescycle of many of our projects, which in turn increased direct costs per unit by increasing the amount of real estate tax, interest and overhead capitalized to theproject. In many cases, since we relieve our capitalized costs pro-rata to the individual lots, fewer remaining lots must absorb the increased costs. As a result,per unit costs go up. In addition, we have experienced pricing concessions and increases in seller closing cost contributions. This percentage point increasein cost of sales was partially offset by the classification of a portion of the cost of sales as impairments and write-offs during the first three quarters of 2007.Cost of sales other for the year ended December 31, 2007 increased by $29.0 million, or 557.7% to $34.2 million, as compared to $5.2 million for the yearended December 31, 2006. Cost of sales other for the year ended December 2007 and 2006 includes expenses associated with lot and bulk project sales madeto third parties and expenses associated with the management of the Company’s Settlement Title Services division. Cost of sales other as a percentage ofother revenue was 102.7% and 90.7% for the year ended December 31, 2007 and 2006 respectively. The 12.0 percentage point increase in cost of sales otheras a percentage of other revenue is due to the Company selling lots at book value to exit underperforming projects as compared to sales of lots for a gain in2006. This percentage point increase in cost of sales other was partially offset by the classification of a portion of the cost of sales other as impairments andwrite-offs during the first three quarters of 2007.Impairments and write-offsAs discussed in Note 5 in the accompanying notes to the consolidated financial statements, the Company, for the year ended December 31, 2007 and2006, recorded impairment charges of $68.8 and $51.2 million, respectively. For the year ended December 31, 2007 the Company wrote-off $9.5 millionrelated to deposits on forfeited option contacts, value assigned to forfeited option contracts and related feasibility costs as compared to $6.2 million for theyear ended December 31 2006. Impairments and write-offs were recorded in all of our geographic regions. The majority of the Company’s impairments, $61.4million, were recorded at September 30, 2007 based on the continuing need for price concession the weakening of pricing power and increasing inventorycosts resulting from the capitalization of interest, overheads and real estate taxes. At December 31, 2007, the Company had approximately $0.2 millionrelated to non-refundable option deposits to purchase real estate.Selling, general and administrative expensesSelling, general and administrative costs for the year ended December 31, 2007 decreased $2.8 million or 7.5% to $34.7 million, as compared to $37.5million for the year ended December 31, 2006. Selling, general and administrative expenses represented 13.0% of total revenue for the year endedDecember 31, 2007, as compared to 15.3% for the year ended December 31, 2006.This decrease in selling, general and administrative costs was principally the result of staffing reductions and related compensation costs of $4.4million. Selling expenses represented $11.5 million of total selling, general and administrative costs for the year ended December 31, 2007 as compared to$12.7 million for the year ended December 31, 2006. Reductions in recurring general and administrative costs were offset by the recognition of a one-timecharge of $3.9 million non-cash stock compensation in December 2007 resulting from the acceleration of certain unvested stock grants. General andadministrative expenses also included other non-cash charges including depreciation and amortization of $0.9 million.Income taxesIncome tax benefit for the year ended December 31, 2007 was $2.6 million compared to $24.5 million for the year ended December 31, 2006. Ourcombined effective tax rate including both current and deferred provisions for the year ended December 31, 2007 was 2.8% as compared to 38.1% for the yearended December 31, 2006. The decrease is primarily a result of our establishment of a full $29.2 million valuation allowance against our net deferred taxassets based on the uncertainty regarding the future realization through future taxable income or carryback opportunities. If in the future the Companybelieves that it is more likely than not that these deferred tax benefits will be realized, the valuation allowance will be reversed. 37 Table of ContentsLiquidity and Capital ResourcesWe require capital to operate, to post deposits on new deals, to purchase and develop land, to construct homes, to fund related carrying costs andoverhead and to fund various advertising and marketing programs to generate sales. These expenditures include payroll, community engineering,entitlement, architecture, advertising, utilities and interest as well as the construction costs of our homes and rent, insurance amenities. Our sources of capitalinclude, and will continue to include, funds derived from various secured and unsecured borrowings, cash flow from operations, which includes the sale anddelivery of constructed homes and finished and raw building lots, and the sale of equity and debt securities.In production home building, it is common for builders such as ourselves to employ revolving credit facilities under which the maximum fundingavailable under the facility exceeds the maximum outstanding balance allowed at any given time. This revolving debt will typically provide for funding ofan amount up to a pre- determined percentage of the cost of each asset funded. The balance of the funding for that asset is provided by us as equity. Theefficiency of revolving debt in production home building allows us to operate with less overall debt capital availability than would be required if we builteach project with long-term amortizing debt.In an effort to stabilize the Company, management has spent much of 2009 focused on negotiating with lenders to eliminate and restructure debt whichhas temporarily limited our ability to pursue new business opportunities. Early in 2009, management formulated a Strategic Realignment Plan (the “Plan”)which identified real estate projects to be retained by the Company. The Company then worked to restructure the debt related to those core projects. Therestructuring was completed in 2009 and has resulted in improved operating cash flow as the lenders have agreed to provide the Company with increasedcash from proceeds as units are settled. This improved cash flow from settlements is contingent upon the Company settling a minimum of 10 units per quarterat Penderbrook and 9 units per quarter at Eclipse, on a cumulative basis. If the Company fails to maintain the minimum settlement requirements, while thatwould not be deemed an event of loan default, it would give the lenders the right to apply substantially all of the unit settlement proceeds to principalreduction. At December 31, 2009, the Company was in compliance with the minimum settlement requirements.The Plan also identified real estate projects which it deemed to be non-essential to future growth. The strategic approach to debt secured by non-essential real estate projects was to pursue foreclosure agreements with the related lenders with the goal of transferring the real estate to the lender in return fora release from the related debt obligation. As detailed herein, the Company has made significant progress in that regard. As of December 31, 2009 theCompany had successfully negotiated settlements with all of its secured lenders regarding the loans guaranteed by the Company and had reduced theoutstanding balance of debt from $102.8 million at December 31, 2008 to $51.7 million ($67.6 million of total debt less $15.9 million of Wachovia debt forwhich extinguishment will occur once real estate assets are foreclosed in 2010) at December 31, 2009. In most cases the Company has been released from theobligations under the loan in return for its agreement to cooperate in the bank’s foreclosure on the real estate assets securing the loan. In a limited number ofcases, the Company provided the lenders with non-interest bearing deficiency notes with three year maturities in an amount equal to a fraction of the originaldebt. The balance of the deficiency notes at December 31, 2009 was $1.1 million. Due to the time required to complete the requisite foreclosures on certainreal estate assets, the foreclosure actions were not all complete at December 31, 2009 and will occur in future periods.Following is a summary of liquidity events that have already occurred or are anticipated in 2010: • As a result of the restructuring effort, the only debt service required in 2010 will be covered by, assuming we are able to maintain sales quotas,settlements of units or land parcels. • Due to a tax law change resulting from the passage of the Unemployment Insurance Extension Act of 2009, the Company received a tax refund of$861,000 in February 2010. • On July 29, 2008 Balfour Beatty Construction, LLC, successor in interest to Centex Construction (“Balfour”), the general contractor for asubsidiary of the Company, filed liens totaling approximately $552,000 at The Eclipse on Center Park Condominium project (“Project”) inconnection with its claim for amounts allegedly owed under the Project contract documents. In September 2008 the Company’s subsidiary filedsuit against Balfour to invalidate the liens and for its actual and liquidated damages in the approximate amount of $17.1 million due toconstruction delays and additional costs incurred by the Company’s subsidiary with respect to the Project. In October 2008 Balfour filedcounterclaims in the approximate amount of $2.8 million. Subsequent to an expedited hearing filed by the Company’s subsidiary to determinethe validity of the liens that was ultimately heard in February 2009, we received an order of the court in April 2009 invalidating the liens. Thetrial began on September 8, 2009 and closed on September 16, 2009. On February 23, 2010, the Company’s subsidiary received a judgmentagainst Balfour in an amount of $11.7 million plus attorney’s fees to be determined at a later date. On March 3, 2010, the Company’s subsidiaryreceived notice of Balfour’s intention to appeal the judgment and post a supersedeas bond in the amount of $12.5 million. If the judgmentamount is upheld on appeal, a significant portion is required to be applied toward principal curtailment under the Company’s loan agreementwith KeyBank.Based on the debt restructuring effort completed to date, we are anticipating that the combination of additional cash from settlement proceeds, the cashgenerated by our rental operations, the cash generated by sales of land parcels and the cash received from the tax refund will be sufficient to sustain ouroperations through 2010. However, this outcome is primarily dependent upon our ability to meet the minimum settlement requirements specified by ourlenders. If we are unable to meet these quotas, substantially all of the proceeds from any settlements will be retained by the lenders. We were in compliancewith these settlement requirements at March 31, 2010. At December 31, 2009, we had $1.1 million in unrestricted cash and $3.2 million in restricted cash.Included in our restricted cash balance, to which we have no access currently, is a $3.0 million deposit with an insurance provider as security for futureclaims. Our access to external working capital is very limited and we have few other sources of cash as commercial banks and other unregulated lenders haveexperienced a liquidity crisis which has made funding for real estate investment extremely difficult to secure. This tightening of the credit markets presentssubstantial risk to our ability to secure financing for our operations, including any future construction and land development efforts.If we are unable to maintain compliance with the cumulative minimum settlement requirements for an extended period of time, it would be necessary toseek waivers or additional loan modifications from the project lenders. If we were unable to secure such waivers or modifications, this would substantiallyreduce the amount of cash generated through unit settlements and make it necessary for us to attempt to generate alternative sources of revenue to meet ouroperating cashflow requirements. To do so, we may have to seek to leverage the judgment award which we obtained against Balfour Beatty, sell ourremaining parcels of land, seek to raise additional capital or seek to obtain additional financing to meet our operating cashflow requirements. If, in theabsence of cashflow being generated from unit settlements, we were unable to generate additional capital through any of these alternative sources, we coulddeplete our cash reserves and be forced to seek protections afforded under the bankruptcy code. There can be no assurance that in the event we were forced toseek bankruptcy protection that we would be able to reorganize, and in such event we could be forced to liquidate our assets. 38 Table of ContentsCredit FacilitiesThe Company has outstanding borrowings with various financial institutions and other lenders that have been used to finance the acquisition,development and construction of real estate property.As of December 31, 2009, maturities and/or curtailment obligations of all of our borrowings are as follows ($000s): Year ending December 31, Debt to be extinguished when foreclosure process is complete (1) $15,895Past due(2) 2632010 15,2232011 18,5772012 1,1012013 12,7432014 and thereafter 3,817Total $67,619 (1) Debt related to Wachovia foreclosure agreement executed during the third quarter of 2009. This debt will be extinguished afterthe bank forecloses on the real estate assets that secure the debt, which is pending but had not occurred at December 31, 2009.There will be no further cash outlay on this debt by the Company. (2) Lender is BB&T.The majority of the Company’s debt is variable rate, based on LIBOR or the prime rate plus a specified number of basis points, typically ranging from220 to 600 basis points over the LIBOR rate and from 25 to 200 basis points over the prime rate. As a result, we are exposed to market risk in the event ofinterest rate increases. At December 31, 2009, the one-month LIBOR and prime rates of interest were 0.23% and 3.25%, respectively, and the interest rates ineffect under the existing secured revolving development and construction credit facilities ranged from 3.50% to 15.19 %. During 2009 these rates have beenrelatively stable. Based on current operations, as of December 31, 2009, an increase/decrease in interest rates of 100 basis points on our variable rate debtwould result in a corresponding increase/decrease in interest actually incurred by us of approximately $0.5 million in a fiscal year. Since all projects arecurrently inactive by accounting standards, any change in interest would be expensed in the period incurred.In the past the Company has generally financed its development and construction activities on a single or multiple project basis so it is not uncommonfor each project or collection of projects the Company develops and builds to have a separate credit facility. Accordingly, the Company typically has hadnumerous credit facilities and lenders. As described below in more detail, the Company made significant progress during 2009 in its efforts to restructure oramend its loan facilities to improve its liquidity outlook for 2010. 39 Table of ContentsAs described in more detail below, at December 31, 2009 our outstanding debt by lender was as follows ($000s): Bank Balance as of 12/31/09 RecourseKeyBank $22,269 SecuredWachovia (1) 15,895 SecuredWachovia 205 UnsecuredGuggenheim Capital Partners 10,492 SecuredM&T Bank - Cascades 1,016 SecuredM&T Bank 495 SecuredCornerstone (Haven Trust) 400 UnsecuredBank of America 3,716 UnsecuredFifth Third 25 UnsecuredBranch Banking & Trust 263 SecuredSeller - Emerald Farm 100 Secured 54,876 Due to affiliates - Stonehenge Funding 12,743 UnsecuredTotal $67,619 (1) Debt related to Wachovia foreclosure agreement executed during the third quarter of 2009. This debt will be extinguished after the banksforeclose on the real estate assets that secure the debt, which had not occurred at December 31, 2009. There will be no further cash outlayon this debt by the Company.At December 31, 2009 the Company had $22.3 million outstanding to KeyBank under a credit facility secured by the Company’s Eclipse and StationView projects. Under the terms of the note there is an interest reserve which represents the amount by which we can avoid cash payments of future monthlyinterest obligations by adding them to the principal balance. At December 31, 2009 the available balance in the interest reserve was approximately $1.6million. While there are no financial covenants associated with the loan, there are a series of curtailment requirements commencing March 31, 2009. OnOctober 30, 2009 the Company executed a loan modification with KeyBank with respect to $22.8 million of principal outstanding under the Company’ssecured Potomac Yard and 40 Table of ContentsStation View project loan (the “Loan”). The key terms of the loan modification adjust the interest rate to the higher of LIBOR plus 5.0% or the prime rate plus2.0% subject to a LIBOR floor of 2.0%. In exchange, KeyBank has agreed to increase the cash flow available to the Company from settlements at thePotomac Yard project by providing the Company with accelerated releases equal to fifteen percent of the net sales price. However, these accelerated releasesare subject to meeting a cumulative minimum sales requirement of nine (9) units per quarter (the “Modification Covenants”). Failure to meet theModification Covenants will not result in an event of default but may result in a reversion of the unit release provisions whereby KeyBank will retain theentire net sales price of sold units. The Modification also adjusted the release provisions for the Station View project allowing for additional monies from thenet sales price of the bulk sale of the Station View project, under contract on a contingent basis, to be made available to the Company for the repayment ofcertain indebtedness. The Modification also provided that any unsecured deficiency notes issued by the Company in satisfaction of foreclosure deficienciesfrom other lenders are fully subordinate to the Loan.On August 17, 2009 the Company entered into a foreclosure agreement (“Agreement”) with Wachovia Bank with respect to approximately $17.8million of secured debt, accrued interest and fees. Under the terms of the Agreement, the Company has agreed to cooperate with Wachovia with respect to itsforeclosure on certain of the Company’s real estate assets. In return, Wachovia agreed to release the Company from their obligations and guarantees relatingto the $17.8 million of indebtedness contemporaneous with the execution by the Company of a non-interest bearing, unsecured deficiency note payable toWachovia in the amount of approximately $1.8 million. The deficiency note was reduced by the principal payments related to certain homes sold by theCompany prior to September 30, 2009. As of December 31, 2009 the deficiency note balance was $205 and the debt from which the Company will bereleased upon foreclosure of the assets was $15.9 million. The related assets are stated at the lower of cost or fair value.The assets scheduled for foreclosure by Wachovia include: Massey Preserve, raw land located in Raleigh, North Carolina; Haddon Hall, finished padsfor a condominium project in Raleigh, North Carolina; Holland Farm, a single-family project in Raleigh, North Carolina; Wakefield Plantation, a single-family project in Raleigh, North Carolina; Riverbrooke, a single-family project in Raleigh, North Carolina; Wheatleigh Preserve, a single-family project inRaleigh, North Carolina; Brookfield Station, a single-family project in Raleigh, North Carolina; Providence, a single-family project in Raleigh, NorthCarolina; Allyn’s Landing, a townhome development project in Raleigh, North Carolina; Allen Creek, a single-family project in Atlanta, Georgia; ArcanumEstates, a single-family project in Atlanta, Georgia; Falling Water, a single-family project in Atlanta, Georgia; James Road, a single-family developmentproject in Atlanta, Georgia; Tribble Lakes, a development project in Atlanta, Georgia; and Summerland, finished pads for a condominium project inWoodbridge, Virginia. None of these assets had been foreclosed upon at December 31, 2009. Due to the large volume of assets upon which Wachovia willforeclose, it is likely that the foreclosure process will extend well into 2010.At December 31, 2009 the Company had approximately $10.5 million outstanding to Guggenheim Corporate Funding (“Guggenheim”) relating to theCompany’s Penderbrook Condominium project. On August 20, 2008 Guggenheim issued a notice of default to the Company regarding a purported default.The Company subsequently entered into a loan modification and forbearance agreement whereby Guggenheim agreed to forgo any remedies it may have hadwith respect to the alleged default. On September 16, 2009 the Company entered into a third amendment to the loan agreement with Guggenheim in whichGuggenheim agreed to continue to forebear from exercising its rights related to the defaults and make certain other modifications to the loan agreement.Other than a minimum number of sales per month and sales per quarter requirement, the Guggenheim loan agreement and the three loan amendments containno significant financial covenants. The key financial terms of the third amendment increase the cash flow available to the Company through reducedprincipal payments to Guggenheim as units are settled. Specifically, the third amendment will provide the Company with cash equal to 25% of the net salesprice provided the Company meets the cumulative minimum sales requirements of three (3) units per month and ten (10) units per quarter. However, if theCompany is unable to meet the minimum sales requirements, it will not constitute an event of default but may result in a reversion to the unit releaseprovisions to ten percent (10%) of the net sales price of sold units in accordance with the loan agreement and first two amendments. The Company has metthe minimum sales requirement as of December 31, 2009 and based on the pace of Q1 2010 sales, settlements and backlog believes it will meet the minimumsales requirement as of March 31, 2010.As of December 31, 2009, $12.7 million was outstanding to JP Morgan Ventures (“JPMV”), which includes its principal amount of $9.0 million plusthe total estimated future interest payments of $3.7 million. On May 4, 2006 the Company closed on a $30.0 million junior subordinated note offering. Theterm of the note was thirty years and it could be retired after five years with no penalty. The rate was fixed at 9.72% the first five years and LIBOR plus 420basis points the remaining twenty-five years. In March 2007 the Company retired the junior subordinated note without penalty and entered into a new 10-year, $30.0 million senior unsecured note with the same lender at the same interest rate. During the third quarter of 2007, the lender’s rights were assumed byJPMV. On March 14, 2008, the Company executed an option to restructure the $30.0 million unsecured note. In connection therewith, the Company made a$6.0 million principal payment to JPMV and executed an amended and restated indenture with a new principal balance of $9.0 million, loosened financialcovenants (summarized below) and a revised term of 5 years. The Company also issued JPMV a seven-year warrant to purchase 1.5 million shares of Class Acommon stock at $0.70 per share. In exchange JPMV agreed to cancel $15.0 million of the outstanding principal balance. This transaction was accounted foras a troubled debt restructuring and the amended and restated indenture was recorded at $13.4 million on March 31, 2008 which includes its principalamount of $9.0 million plus the total estimated future interest payments of $4.4 million. At March 31, 2009 the Company elected not to make a scheduledinterest payment in the amount of $0.2 million. On April 27, 2009, the Company received a notice of payment default from the lender. The notice of paymentdefault indicated that the failure of the Company to make its quarterly interest payment within 30 days of March 30, 2009 would constitute an Event ofDefault under the Indenture. The Company has not cured the default. The Company did not make scheduled interest payments at June 30, 2009,September 30, 2009 or December 31, 2009.On December 23, 2009, Stonehenge Funding, LC (“Stonehenge”), an entity wholly-owned by Christopher Clemente, the Chairman and ChiefExecutive Officer of the Company, completed the purchase of the senior unsecured note from JPMV in the current outstanding amount of approximately $9.0million, plus accrued and unpaid interest. The purchase of the JPMV note also resulted in the transfer to Stonehenge of the warrant previously issued to JPMVfor the purchase of 1.5 million shares of the Company’s Class A Common Stock. In connection with Stonehenge’s purchase of the JP Morgan debt fromJPMV, Stonehenge and the Company entered into two separate subordination and standstill agreements for the benefit of the Company and its securedlenders, KeyBank and Guggenheim. The subordination agreements allow for Stonehenge and the Company to negotiate permanent modifications to theterms of the JP Morgan Debt and provide KeyBank and Guggenheim with assurances that the Company will not make any cash interest or principal paymentsto Stonehenge prior to the full repayment of loans to them in connection with the Company’s Eclipse and Penderbrook projects. See a related subsequentevent disclosure at Note 18.At December 31, 2009 the Company had $1.0 million outstanding to M&T Bank. On September 28, 2009 the Company entered into a series ofagreements with M&T with respect to the $7.6 million of outstanding debt plus accrued interest and late fees. As a result of the agreements, the Belmont Bayloan, with a principal balance of $6.1 million plus $0.5 million of accrued interest and fees, was released in its entirety and the Cascades Loan, with aprincipal balance of $1.0 million, was be extended through January 31, 2011. Under the terms of the agreements, M&T Bank agreed to release the Companyfrom its obligations and guarantees relating to the Belmont Loan and the Company agreed to cooperate with M&T Bank with respect to its foreclosure on the remaining portion of the Belmont Bay Project which includes 19 partially completed condominium units and 84 condominium building lots. M&T Bank’sforeclosure on these assets was completed in December 2009. The Company also entered into a non-interest bearing subordinated promissory note inconnection with the Belmont Loan in the amount of $0.5 million with a three-year maturity secured by the Cascades Project. Under the terms of theagreements, M&T Bank agreed to extend the maturity date of the Cascades Loan by forbearing on enforcing its rights with respect to collection of the debtuntil January 31, 2011. The Company also agreed to commence current payment of interest due M&T Bank related to the current principal balance of theCascades Loan. The Cascades Project contains a total of 191 condominium units with the first phase of the Cascades Project (88 units) being completed bythe Company in 2007. See Note 17 for details related to troubled debt restructuring and the M&T foreclosure agreement.At December 31, 2009 the Company had $0.4 million outstanding to Cornerstone Bank (“Cornerstone”) relating to the Company’s Gates at Luberonproject. The original $5.1 million in loans matured in November 2007. Haven Trust Bank, the originating lender, and its participating lenders were unwillingto grant an extension on terms the Company felt were reasonable so the loans remained unpaid and unmodified. Haven Trust Bank initiated foreclosureproceedings and the Company protected the equity in the project by seeking bankruptcy protection for the entity that owned Gates at Luberon. TheCompany elected not to 41 Table of Contentssubmit a plan of reorganization to the court by September 30, 2008 which resulted in Haven Trust filing a motion to lift the court imposed stay of foreclosure.In December 2008 Haven Trust Bank was closed by the FDIC and its loan portfolio was taken over by the FDIC. Litigation with respect to Haven Trust’sguarantee action against Comstock was stayed with the court while the FDIC determines its intended course of action. Cornerstone, one of the banks to whichHaven Trust participated the loan assumed control of the loan and reinstated the guarantee and foreclosure actions. Cornerstone’s foreclosure on the Gates ofLuberon project real estate was completed by September 30, 2009. On September 21, 2009 the Company entered into a settlement agreement and mutualrelease with Cornerstone relating to the aforementioned litigation. In connection with the settlement, Cornerstone released the Company, and its subsidiaryMathis Partners, LLC, from their respective obligations and guarantees relating to $5.1 million of debt owed by the Company to Cornerstone in exchange fora non-interest bearing unsecured subordinate note in the amount of $0.4 million with a three year term. The parties dismissed all pending litigation againsteach other. See Note 17 for details related to troubled debt restructuring and the Cornerstone settlement and mutual release.At December 31, 2009, the Company had $3.8 million outstanding to Bank of America in a 10-year unsecured note. Bank of America and Comstockmodified the terms of the Company’s existing unsecured note by extending the term to ten (10) years, establishing an interest accrual for the first two yearsand a six year curtailment schedule starting in year four of the loan’s term. See the subsequent event disclosure related to Bank of America below.Cash FlowNet cash provided by operating activities was $11.9 million for the year ended December 31, 2009, $12.9 million for the year ended December 31,2008 and $116.5 million for the year ended December 31, 2007. In 2009 and 2007, the primary source of cash provided by operating activities was the sale ofreal estate assets. In 2008, our primary source of cash from operating activities was $13.0 million in federal and state income tax refunds.Net cash used in financing activities was $16.8 million for the year ended December 31, 2009, $13.7 million for the year ended December 31, 2008 and$130.8 million for the year ended December 31, 2007. Repayments of indebtedness were the primary use of cash from financing activities in all three years.For the year ended December 31, 2008, a primary source of cash was the refinance of our Eclipse at Potomac Yard project and the primary use was the payoffof our Corus Bank loan and a $6.0 million principal payment to JP Morgan Ventures.Subsequent EventsOn February 15, 2010 the Company entered into a Modification Agreement to modify the terms of the Company’s senior unsecured note withStonehenge Funding, LC (“Stonehenge”), an entity wholly-owned by Christopher Clemente, the Chairman and Chief Executive Officer of the Company. OnDecember 23, 2009 Stonehenge acquired the senior unsecured note from JP Morgan Ventures (“JPMV”) which had a $9,000,000 principal balance asdescribed in the Amended and Restated Indenture between the Company and JPMV dated March 14, 2008 (the “JP Morgan Debt”). The purchase of the JPMorgan Debt also resulted in the transfer to Stonehenge of a warrant previously issued to JPMV for the purchase of 1,500,000 shares of the Company’sClass A Common Stock with a strike price of $0.70 per share (“JP Morgan Warrant”). Gregory Benson, the Company’s Chief Operating Officer and a memberof the Company’s Board of Directors, subsequently purchased a participation interest in the JP Morgan Debt and the JP Morgan Warrant from the SubordinateLender.Under the terms of the Modification Agreement, Stonehenge has agreed to forgive $4,500,000 of the principal balance due from the Company underthe JP Morgan Debt; reducing the principal balance by 50% to $4,500,000. Stonehenge also agreed to forgive an additional amount due from the Companyof approximately $875,000 representing all past due interest, late fees and penalties accruing through December 31, 2009 (“Interest and Loan Fees”) underthe JP Morgan Debt. Stonehenge further agreed to reduce the interest rate, effective January 1, 2010, by fifty percent (50%) to 300 basis points above the oneyear LIBOR on a floating basis. In addition, to ensure the Company’s ability to comply with certain restrictions placed upon the Company by KeyBank andGuggenheim Corporate Funding (collectively “Secured Lenders”) in connection with previously announced loan modifications enhancing cashflow to theCompany, Stonehenge agreed to allow all future interest payments due from the Company under the JP Morgan Debt to accrue until at least 90 days after theSecured Lenders have been fully repaid. In connection therewith, Stonehenge may, on a quarterly basis, elect to accept stock of the Company (or warrants forthe purchase thereof) with a cumulative value equal to the value of the scheduled interest payment in lieu of accruing a future quarterly interest payment.Further, the Modification Agreement provides for the elimination or forbearance upon the enforcement of all financial covenants contained in the JPMorgan Debt and all previously reported covenant violations by the Company. The maturity date of the JP Morgan Debt remains unchanged at March 14,2013, provided however, the Modification Agreement provides the Company with two optional extension periods of six months each to further assist theCompany with its compliance with the restrictions of the Secured Lenders.On February 25, 2010 the Company entered into a Seventh Loan Modification Agreement with Bank of America (“BOA”) regarding the modificationof the terms of one certain unsecured loan with an approximate principal balance of $3,700,000 (“Line of Credit”). In connection therewith the Companyagreed to pay an extension fee of $100,000 and BOA agreed to delay for one year, until January 2011, the commencement of repayments of all previouslyunpaid interest accruing since the date of the Company’s previously reported modification of the Line of Credit in November 2008. The maturity dateremains unchanged at December 28, 2018.On March 17, 2010 the Company completed the sale of land at its Station View project located in Loudoun County, Virginia for $2.8 million. 42 Table of ContentsContractual Obligations and Commercial CommitmentsIn addition to the above financing arrangements, we have commitments under certain contractual arrangements to make future payments for goods andservices. These commitments secure the future rights to various assets and services to be used in the normal course of operations. For example, we arecontractually committed to make certain minimum lease payments for the use of property under operating lease agreements. In accordance with currentaccounting rules, the future rights and obligations pertaining to such firm commitments are not reflected as assets or liabilities on the consolidated balancesheet. The following table summarizes our contractual and other obligations at December 31, 2009, and the effect such obligations are expected to have onliquidity and cash flow in future periods: Payments due by period Total Less than1 Year 1-3 Years 3-5 Years More than5 Years (In thousands)Notes payable(1), (2) $51,726 $15,488 $32,421 $3,816 $— Operating leases 698 224 474 — — Total $52,424 $15,712 $32,895 $3,816 $— (1)Notes payable includes estimated interest payments based on interest rates in effect at December 31, 2009. Notes payable does not include any penaltyor default interest. (2)Notes payable excludes $15,895 of Wachovia debt which will be extinguished upon foreclosure of related real estate assets in 2010.Notes payable have an undefined repayment due date and are typically due and payable as homes are settled. We are not an obligor under, or guarantorof, any indebtedness of any party other than for obligations entered into by certain wholly owned subsidiaries of the Company. We have no off-balancesheet arrangements except for the operating leases described above. 43 Table of ContentsSeasonality and WeatherOur business is affected by seasonality with respect to orders and deliveries. In the market in which we operate, the primary selling season is fromJanuary through May as well as September and October. Orders in other months typically are lower. In addition, the markets in which we operate are four-season markets that experience significant periods of rain and snow. Construction cycles and efforts are often adversely affected by severe weather.InflationInflation can have a significant impact on our business performance and the home building industry in general. Rising costs of land, transportationcosts, utility costs, materials, labor, overhead, administrative costs and interest rates on floating credit facilities can adversely affect our business performance.In addition, rising costs of certain items, such as lumber, can adversely affect the expected profitability of our backlog. Generally, we have been able torecover any increases in costs through increased selling prices. However, there is no assurance we will be able to increase selling prices in the future to coverthe effects of inflation and other cost increases. Item 7A.Quantitative and Qualitative Disclosures about Market RiskMarket risk represents the risk of loss that may impact our financial position, results of operations or cash flows, due to adverse changes in financialand commodity market prices and interest rates. We are exposed to market risk in the area of interest rate changes. A majority of our debt is variable rate basedon LIBOR and prime rate, and, therefore, affected by changes in market interest rates. Based on current operations, as of December 31, 2009, anincrease/decrease in interest rates of 100 basis points on our variable rate debt would have resulted in a corresponding increase/decrease in interest actuallyincurred by us of approximately $0.5 million in a fiscal year, which would be expensed as incurred if the project is inactive. As a result, the effect on netincome could be immediate if the variable rate debt was related to projects classified for accounting purposes as inactive. Changes in the prices ofcommodities that are a significant component of home construction costs, particularly lumber, may result in unexpected short-term increases in constructioncosts. Because the sales price of our homes is fixed at the time a buyer enters into a contract to acquire a home and we generally contract to sell our homesbefore construction begins, any increase in costs in excess of those anticipated at the time of each sale may result in lower consolidated operating income forthe homes in our backlog. We attempt to mitigate the market risks of the price fluctuation of commodities by entering into fixed price option contracts withour subcontractors and material suppliers for a specified period of time, generally commensurate with the building cycle. These contracts afford us the optionto purchase materials at fixed prices but do not obligate us to any specified level of purchasing. Item 8.Financial Statements and Supplementary DataReference is made to the financial statements, the notes thereto, and the report thereon, commencing on page F-1 of this report, which financialstatements, notes, and report are incorporated herein by reference. Item 9.Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNot applicable. 44 Table of ContentsItem 9A.Controls and ProceduresEvaluation of Disclosure Controls and ProceduresWe have evaluated, with the participation of our Chief Executive Officer and our Chief Financial Officer, the effectiveness of our disclosure controlsand procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of December 31, 2009. Based on this evaluation, our Chief ExecutiveOfficer and Chief Financial Officer have each concluded that our disclosure controls and procedures as of December 31, 2009 are functioning effectively toprovide reasonable assurance that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded,processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to ourmanagement, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timelydecisions regarding required disclosure.Limitations on the Effectiveness of ControlsWe do not expect that our disclosure controls and internal controls will prevent all error and all fraud. A control system, no matter how well conceivedand operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control systemmust reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of its inherentlimitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to futureperiods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies orprocedures may deteriorate.The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurancethat any design will succeed in achieving its stated goals under all potential future conditions; over time, a control may become inadequate because ofchanges in conditions or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effectivecontrol system, misstatements due to error or fraud may occur and may not be detected.Management’s Report on Internal Control Over Financial ReportingManagement is responsible for establishing and maintaining adequate internal control over our financial reporting.Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2009, based on criteria set forth in theframework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Thisevaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness ofcontrols and a conclusion on this evaluation. Our management determined that, as of December 31, 2009, our internal control over financial reporting iseffective.This annual report on Form 10-K does not include an attestation report of the Company’s independent registered public accounting firm regardinginternal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accountingfirm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annualreport.No change has occurred in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during theyear ended December 31, 2009, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Item 9B.Other InformationNot applicable. 45 Table of ContentsPART III Item 10.Directors and Executive Officers of the RegistrantThe information required by this Item relating to our directors is incorporated herein by reference to the definitive Proxy Statement to be filed pursuantto Regulation 14A of the Exchange Act for our 2010 Annual Meeting of Stockholders. The information required by this Item relating to our executiveofficers is included in Item 1, “Business — Executive Officers” of this report. Item 11.Executive CompensationThe information required by this Item is incorporated herein by reference to the definitive Proxy Statement to be filed pursuant to Regulation 14A ofthe Exchange Act for our 2010 Annual Meeting of Stockholders. Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersThe information required by this Item is incorporated herein by reference to the definitive Proxy Statement to be filed pursuant to Regulation 14A ofthe Exchange Act for our 2010 Annual Meeting of Stockholders. Item 13.Certain Relationships and Related TransactionsThe information required by this Item is incorporated herein by reference to the definitive Proxy Statement to be filed pursuant to Regulation 14A ofthe Exchange Act for our 2010 Annual Meeting of Stockholders. Item 14.Principal Accountant Fees and ServicesThe information required by this Item is incorporated herein by reference to the definitive Proxy Statement to be filed pursuant to Regulation 14A ofthe Exchange Act for our 2010 Annual Meeting of Stockholders. 46 Table of ContentsPART IV Item 15.Exhibit and Financial Statement Schedules(a) Financial Statements(1) Financial Statements are listed in the Index to Financial Statements on page F-1 of this report.(2) Schedules have been omitted because they are not applicable or because the information required to be set forth therein is included in theconsolidated and combined financial statements or notes thereto.(b) Exhibits ExhibitNumber Exhibit 3.1(2) Amended and Restated Certificate of Incorporation 3.2(2) Amended and Restated Bylaws 4.1(1) Specimen Stock Certificate10.1(1) Lease Agreement, dated as of January 31, 2004, with Comstock Partners, L.C.10.2(1) Agreement of Sublease, dated as of October 1, 2004, with Comstock Asset Management, L.C.10.3(1) Loan Agreement, dated December 17, 1997, as amended, with Bank of America, N.A.10.4(1) Disbursement and Construction Loan Agreement and Disbursement and Development Loan Agreement, each dated October 10, 2002 and asamended, with Branch Banking and Trust Company of Virginia.10.5(1) Disbursement and Construction Loan Agreement and Acquisition, Disbursement and Development Loan agreement, each dated July 25,2003, with Branch Banking and Trust Company of Virginia.10.6(2) Loan Agreement, dated January 25, 2005, with Corus Bank, N.A.10.7(2) Completion Guaranty, dated January 25, 2005 in favor of Corus Bank, N.A.10.8(2) Carve-Out Guaranty, dated January 25, 2005, in favor of Corus Bank, N.A.10.9(1) Form of Indemnification Agreement10.10(1) Form of Promissory Note to be issued to each of Christopher Clemente, Gregory Benson, James Keena and Lawrence Golub by each ofComstock Holding Company, Inc., Comstock Homes, Inc., Sunset Investment Corp., Inc. and Comstock Service Corp., Inc.10.11(1) Form of Tax Indemnification Agreement to be entered into by each of Christopher Clemente, Gregory Benson, James Keena and LawrenceGolub with each of Comstock Holding Company, Inc., Comstock Homes, Inc., Sunset Investment Corp., Inc. and Comstock Service Corp.,Inc.10.12(1) 2004 Long-Term Incentive Compensation Plan10.13(1) Form Of Stock Option Agreement under the 2004 Long-Term Incentive Compensation Plan10.14(2) Form Of Restricted Stock Grant Agreement under the 2004 Long-Term Incentive Compensation Plan10.15(1) Employee Stock Purchase Plan10.16(1) Purchase and Sale Agreement, dated as of April 25, 2003, as amended, with Crescent Potomac Yard Development, LLC10.17(2) Purchase and Sale Agreement, dated as of November 9, 2004, as amended, with Fair Oaks Penderbrook Apartments L.L.C.10.18(2) Real Estate Purchase Contract, dated as of February 4, 2005, with Westwick Apartments LLC10.19(2) Services Agreement, dated March 4, 2005, with Comstock Asset Management, L.C.10.20(1) Employment Agreement with Christopher Clemente10.21(1) Employment Agreement with Gregory Benson 47 Table of ContentsExhibitNumber Exhibit10.22(1) Employment Agreement with Bruce Labovitz10.23(1) Confidentiality and Non-Competition Agreement with Christopher Clemente10.24(1) Confidentiality and Non-Competition Agreement with Gregory Benson10.25(1) Confidentiality and Non-Competition Agreement with Bruce Labovitz10.26(2) Description of Arrangements with William Bensten10.27(2) Description of Arrangements with David Howell10.28(1) Trademark License Agreement10.29(2) Purchase Agreement, dated as of November 12, 2004 with Comstock Asset Management, L.C.10.30(3) Agreement of Purchase and Sale, dated June 23, 2005, by and between Comstock Carter Lake, L.C. and E.R. Carter, L.L.C.10.31(3) Agreement of Purchase and Sale, dated September 28, 2005, by and between Comstock Bellemeade, L.C. and Bellemeade Farms Investors,LLC et. al.10.32(3) Loan Agreement, dated September 28, 2005, by and between Comstock Bellemeade, L.C. and Bank of America, N.A.10.33(3) Guaranty Agreement, dated September 28, 2005, by the Registrant in favor of Bank of America, N.A.10.34(4) Life Insurance Reimbursement Agreement with William P. Bensten10.35(4) Life Insurance Reimbursement Agreement with Bruce Labovitz10.36(4) Description of Reimbursement and Indemnification Arrangement with Christopher Clemente and Gregory Benson10.37(3) Agreement of Purchase and Sale, dated June 23, 2005, by and between Comstock Carter Lake, L.C. and E.R. Carter, L.L.C.10.38(5) Stock Purchase Agreement with Parker-Chandler Homes, Inc. and the Selling Stockholders identified therein, dated as of January 19, 200610.39(5) Loan Agreement, dated January 31, 2006, by and between Comstock Carter Lake, L.C. and Bank of America, N.A.10.40(5) Guaranty Agreement, dated January 31, 2006, by the Registrant in favor of Bank of America, N.A.10.41(6) Form of purchase agreement, dated as of May 5, 2006, as amended as of May 9, 2006, by and between the Company and the purchasersidentified therein10.42(6) Form of warrant.10.43(7) Note Purchase Agreement with Kodiak Warehouse LLC, dated as of May 4, 200610.44(7) Junior Subordinated Indenture with Wells Fargo Bank, N.A., dated as of May 4, 200610.45(7) Credit Agreement with Wachovia Bank, N.A., dated as of May 26, 2006 48 Table of ContentsExhibitNumber Exhibit10.46(7) Stock Purchase Agreement with Capitol Homes, Inc. and the Selling Shareholders identified therein, dated as of May 1, 200610.47(8) Letter, dated October 18, 2007, from Friedlander, Misler, Sloan, Kletzkin & Ochsman, PLLC to the Registrant and Comstock Bellemeade,L.C.10.48(8) Purchase and Sale Agreement by and between Comstock Countryside L.C. and Merion-Loudon, LC, dated as of December 21, 200610.49(8) Marketing and Sale Agreement by and between Comstock Countryside LC and Merion-Loudon, L.C., dated as of December 21, 200610.50(8) Consulting Agreement with The Merion Group, LC, dated as of December 21, 200610.51(8) Loan Modification Agreement, dated as of December 2006, by and among the Registrant, Highland Avenue Properties, LLC and Bank ofAmerica, N.A.10.52(8) Amended and Restated Guaranty Agreement, dated December 2006, by the Registrant in favor of Bank of America, N.A.10.53(8) Loan Modification Agreement, dated as of December 2006, by and among the Registrant, Comstock Homes of Atlanta, LLC, ComstockHomes of Myrtle Beach, LLC and Bank of America, N.A.10.54(8) Amended and Restated Guaranty Agreement, dated December 2006, by the Registrant in favor of Bank of America, N.A.10.55(8) First Loan Modification Agreement, dated as of December 2006, by and among the Registrant, Comstock Bellemeade, L.C., Bank ofAmerica, N.A. and Lenka E. Lundsten10.56(8) Second Loan Modification Agreement, dated as of December 22, 2006, by and between the Registrant and Bank of America, N.A.10.57(9) Loan and Security Agreement, dated as of February 2008, by and between the Registrant and Stonehenge Funding, LC.10.58(9) Guaranty Agreement, dated as of February 2008, by Comstock Potomac Yard, L.C. in favor of Stonehenge Funding, LC.10.59(9) Supplement to Indenture, dated as of January 7, 2008, by and between the Registrant and Wells Fargo Bank, N.A.10.60(9) Amended and Restated Indenture, dated as of March 14, 2008, by and between the Registrant and Wells Fargo Bank, N.A.10.61(9) Loan Agreement, dated as of March 14, 2008, by and among Comstock Station View, L.C., Comstock Potomac Yard, L.C., and KeyBankNational Association.10.62(9) Unconditional Guaranty of Payment and Performance, dated as of March 2008, by the Registrant in favor of KeyBank NationalAssociation.10.63(10) Forbearance and Conditional Release Agreement, dated as of November 25, 2008, by and among Highland Avenue Properties, LLC,Comstock Homes of Atlanta, LLC, the Registrant and Bank of American, N.A.10.64(10) Sixth Loan Modification Agreement, dated as of November 26, 2008, by and among the Registrant and Bank of America, N.A. 49 Table of ContentsExhibitNumber Exhibit10.65(10) Amended and Restated Promissory Note (Tribble Road Loan), dated as of December 10, 2008, by the Registrant in favor of WachoviaBank, National Association.10.66(10) Loan Modification and Forbearance Agreement, dated as of December 10, 2008, by and among the Registrant, various wholly ownedsubsidiaries as guarantors and Wachovia Bank, National Association.10.67(10) Amended and Restated Promissory Note (Revolving Line of Credit), dated as of December 10, 2008, by the Registrant in favor ofWachovia Bank, National Association.10.68(10) Amended and Restated Promissory Note (Term Loan), dated as of December 10, 2008, by the Registrant in favor of Wachovia Bank,National Association.10.69(11) Settlement Agreement, dated July 8, 2009, by and among Comstock Belmont Bay 89, L.C., the Registrant and Belmont Bay, L.C., et.al.10.70(11) Consensual Foreclosure and Settlement Agreement, dated August 17, 2009, by and among the Registrant, et.al. and Wachovia Bank,National Association10.71(11) Third Amendment of Loan Agreement, dated September 16, 2009, by and among Comstock Penderbrook, L.C., the Registrant andGuggenheim Corporate Funding, LLC10.72(11) Settlement Agreement and Mutual Release, dated September 21, 2009, by and among Registrant, Mathis Partners, LLC and CornerstoneBank10.73(11) Forbearance Agreement, dated September 28, 2009, by and among Comstock Cascades, L.C., the Registrant and Manufacturers andTraders Trust Company10.74(11) Forbearance and Conditional Release Agreement, dated September 28, 2009, by and among Comstock Belmont Bay 89, L.C., theRegistrant and Manufacturers and Traders Trust Company10.75(11) First Amendment to Loan Agreement, dated October 30, 2009, by and among Comstock Station View, L.C., Comstock Potomac Yard, L.C.,the Registrant and Key Bank National Association10.76(11) Forbearance and Conditional Release Agreement, dated November 10, 2009, by and among Comstock Homes of Raleigh, L.L.C., theRegistrant and Fifth Third Bank, N.A.10.77* Forbearance Agreement and Second Amendment to Loan Agreement, dated January 27, 2009, by and among Comstock Penderbrook, L.C.,the Registrant and Guggenheim Corporate Funding, LLC10.78* Fourth Amendment to Sublease Agreement and Services Agreement, dated February 26, 2009, with Comstock Asset Management10.79* Mutual Release and Settlement Agreement, dated June 8, 2009, by and between Comstock Homes of Raleigh, LLC, ProvidenceDevelopment of Raleigh, LLC and Manning Fulton & Skinner10.80* Subordinated Deficiency Note, dated as of September 21, 2009, by the Registrant in favor of Cornerstone Bank., successor-in-interest toHaventrust Bank.10.81* Amended and Restated Subordinated Deficiency Note, dated as of November 5, 2009, by the Registrant in favor of Wachovia Bank,National Association.10.82* Bankruptcy filing for Buckhead Overlook, LLC, filed November 2009 in the U.S. Bankruptcy Court, Northern District of Georgia, AtlantaDivision10.83* Bankruptcy filing for Post Preserve, LLC filed November 2009 in the U.S. Bankruptcy Court, Northern District of Georgia, AtlantaDivision 50 Table of ContentsExhibitNumber Exhibit10.84* Bankruptcy filing for Parker Chandler Homes, LLC f/k/a Comstock Homes of Atlanta, LLC filed November 2009 in the U.S. BankruptcyCourt, Northern District of Georgia, Atlanta Division10.85* Lease Agreement, dated on or about December 31, 2009, with Comstock Asset Management, L.C. by Comstock Property Management, L.C.,a subsidiary of Registrant10.86* License Agreement, effective January 1, 2010, with I-Connect10.87* Letter of Intent, effective February 12, 2010, by and between Registrant and Stonehenge Funding, L.C. and Subordination and StandstillAgreements between Registrant and Guggenheim Corporate Funding, LLC and between Registrant and Key Bank, National Association10.88* Seventh Loan Modification Agreement, dated as of February 25, 2010, by and among the Registrant and Bank of America, N.A.10.89* Memorandum Opinion, filed February 23, 2010, by the US District Court in favor of Comstock Potomac Yard, L.C., a subsidiary ofRegistrant, against Balfour Beatty Construction, LLC10.90* Purchase Agreement, dated October 30, 2009, by and between Comstock Station View, L.C. and M/I Homes of DC, LLC14.1(2) Code of Ethics21.1* List of subsidiaries23.1* Consent of PricewaterhouseCoopers LLP24.1* Power of Attorney (see signature page to this Annual Report on Form 10-K.)31.1* Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act of 200231.2* Certification of Chief Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act of 200232.1* Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002 *Filed herewith. (1)Incorporated by reference to an exhibit to the Registrant’s Registration Statement on Form S-1, as amended, initially filed with the Commission onAugust 13, 2004 (No. 333-118193). (2)Incorporated by reference to an exhibit to the Registrant’s Annual Report on Form 10-K filed with the Commission on March 31, 2005. (3)Incorporated by reference to an exhibit to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 14, 2005. (4)Incorporated by reference to an exhibit to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on August 9, 2005. (5)Incorporated by reference to an exhibit to the Registrant’s Annual Report on Form 10-K filed with the Commission on March 16, 2006. (6)Incorporated by reference to an exhibit to the Current Report on Form 8-K of the Registrant filed with the Commission on May 10, 2005. (7)Incorporated by reference to an exhibit to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on August 9, 2006. (8)Incorporated by reference to an exhibit to the Registrant’s Annual Report on Form 10-K filed with the Commission on March 16, 2007. (9)Incorporated by reference to an exhibit to the Registrant’s Annual Report on Form 10-K filed with the Commission on March 24, 2008. (10)Incorporated by reference to an exhibit to the Registrant’s Annual Report on Form 10-K filed with the Commission on March 31, 2009. (11)Incorporated by reference to an exhibit to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 13, 2009. 51 Table of ContentsINDEX TO CONSOLIDATED FINANCIAL STATEMENTS PageCOMSTOCK HOMEBUILDING COMPANIES, INC. AND SUBSIDIARIES Report of Independent Registered Public Accounting Firm F-2Consolidated Balance Sheets at December 31, 2009 and 2008 F-3Consolidated Statements of Operations for the Years Ended December 31, 2009, 2008 and 2007 F-4Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31, 2009, 2008 and 2007 F-5Consolidated Statements of Cash Flows for the Years Ended December 31, 2009, 2008 and 2007 F-6Notes to Consolidated Financial Statements F-7 F-1 Table of ContentsReport of Independent Registered Public Accounting FirmTo the Board of Directors and Shareholders of Comstock Homebuilding Companies, Inc.:In our opinion, the consolidated financial statements listed on page F-1 present fairly, in all material respects, the financial position of ComstockHomebuilding Companies, Inc. and subsidiaries (the “Company”) at December 31, 2009 and 2008, and the results of its operations and its cash flows for eachof the three years in the period ended December 31, 2009 in conformity with accounting principles generally accepted in the United States of America. Thesefinancial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based onour audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (UnitedStates). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing theaccounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that ouraudits provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLPMcLean, VirginiaMarch 31, 2010 F-2 Table of ContentsCOMSTOCK HOMEBUILDING COMPANIES, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(Amounts in thousands, except per share data) December 31,2009 December 31,2008 ASSETS Cash and cash equivalents $1,085 $5,977 Restricted cash 3,249 3,859 Real estate held for development and sale 70,890 129,542 Inventory not owned - variable interest entities — 19,250 Property, plant and equipment, net 144 829 Other assets 1,963 1,402 TOTAL ASSETS $77,331 $160,859 LIABILITIES AND SHAREHOLDERS’ EQUITY Accounts payable and accrued liabilities $5,579 $8,232 Obligations related to inventory not owned — 19,050 Notes payable - secured by real estate 50,530 84,563 Notes payable - due to affiliates, unsecured 12,743 — Notes payable - unsecured 4,346 18,266 TOTAL LIABILITIES 73,198 130,111 Commitments and contingencies (Note 13) SHAREHOLDERS’ EQUITY Class A common stock, $0.01 par value, 77,266,500 shares authorized, 15,608,438 and 15,608,438 issued andoutstanding, respectively 156 156 Class B common stock, $0.01 par value, 2,733,500 shares authorized, 2,733,500 issued and outstanding 27 27 Additional paid-in capital 157,418 157,058 Treasury stock, at cost (391,400 Class A common stock) (2,439) (2,439) Accumulated deficit (151,029) (124,277) TOTAL COMSTOCK HOMEBUILDING COMPANIES, INC SHAREHOLDERS’ EQUITY 4,133 30,525 Noncontrolling interest — 223 TOTAL EQUITY 4,133 30,748 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $77,331 $160,859 The accompanying notes are an integral part of these consolidated financial statements. F-3 Table of ContentsCOMSTOCK HOMEBUILDING COMPANIES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS(Amounts in thousands, except per share data) Twelve Months Ended December 31, 2009 2008 2007 Revenues Revenue - homebuilding $21,401 $44,097 $232,805 Revenue - other 3,665 2,565 33,354 Total revenue 25,066 46,662 266,159 Expenses Cost of sales - homebuilding 19,635 39,246 211,068 Cost of sales - other 2,094 1,340 34,330 Impairments and write-offs 22,938 18,022 78,264 Selling, general and administrative 8,073 15,088 34,582 Interest, real estate taxes and indirect costs related to inactive projects 4,138 5,685 — Operating loss (31,812) (32,719) (92,085) Gain on troubled debt restructuring (3,403) (12,851) — Gain on deconsolidation of subsidiaries (1,965) — — Other loss (income), net 1,237 (2,850) (1,886) Total pre tax loss (27,681) (17,018) (90,199) Income taxes (benefit) expense (929) 48 (2,552) Net loss (26,752) (17,066) (87,647) Net loss attributable to noncontrolling interest — (8) (137) Net loss attributable to Comstock Homebuilding Companies, Inc. $(26,752) $(17,058) $(87,510) Basic loss per share $(1.51) $(0.98) $(5.42) Basic weighted average shares outstanding 17,670 17,462 16,140 Diluted loss per share $(1.51) $(0.98) $(5.42) Diluted weighted average shares outstanding 17,670 17,462 16,140 The accompanying notes are an integral part of these consolidated financial statements. F-4 Table of ContentsCOMSTOCK HOMEBUILDING COMPANIES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES INSHAREHOLDERS’ EQUITY(Amounts in thousands, except per share data) Class A Class B Additionalpaid-incapital Treasurystock Noncontrollinginterest Retainedearnings(deficit) Total Shares Amount Shares Amount Balance at December 31, 2006 14,129 141 2,733 27 147,528 (2,439) 371 (21,372) 124,256 Stock compensation and issuances 971 10 — — 8,415 — — — 8,425 Issuance of common stock under employee stockpurchase plans 21 — 55 — 55 FIN 48 cumulative effect of adoption 1,663 1,663 Distributions (3) (3) Net loss (137) (87,510) (87,647) Balance at December 31, 2007 15,121 151 2,733 27 155,998 (2,439) 231 (107,219) 46,749 Stock compensation and issuances 472 5 329 334 Issuance of common stock under employee stockpurchase plans 16 — 8 8 Treasury stock purchases — Warrants 723 723 Net loss (8) (17,058) (17,066) Balance at December 31, 2008 15,609 $156 2,733 $27 $157,058 $(2,439) 223 $(124,277) 30,748 Stock compensation and issuances 76 76 Warrants 163 (82) 81 Gain on noncontrolling interest settlement 121 (121) — Note payable to noncontrolling interest holder (20) (20) Net loss — (26,752) (26,752) Balance at December 31, 2009 15,609 $156 2,733 $27 $157,418 $(2,439) $— $(151,029) $4,133 The accompanying notes are an integral part of these consolidated financial statements. F-5 Table of ContentsCONSOLIDATED STATEMENTS OF CASH FLOWS(Amounts in thousands, except per share data) Twelve Months Ended December 31, 2009 2008 2007 Cash flows from operating activities: Net loss $(26,752) $(17,058) $(87,510) Adjustment to reconcile net loss to net cash provided by operating activities Amortization and depreciation 685 710 852 Impairments and write-offs 22,938 18,022 78,264 Loss on disposal of assets — 2 461 Noncontrolling interest — (8) (137) Gain on troubled debt restructuring (3,403) (12,851) — Gain on trade payable settlements (333) — — Gain on deconsolidation of subsidiary (1,965) — — Board of directors compensation — 148 198 Amortization of stock compensation 158 186 6,141 Deferred income tax — — 10,657 Changes in operating assets and liabilities: Restricted cash 610 1,126 7,341 Receivables — 370 4,185 Due from related parties — 92 3,467 Real estate held for development and sale 18,276 14,280 133,542 Other assets (561) 19,964 (8,192) Accounts payable and accrued liabilities 2,278 (12,084) (31,629) Due to related parties — (1,140) Net cash provided by operating activities 11,931 12,899 116,501 Cash flows from investing activities: Purchase of property, plant and equipment — — (129) Net cash used in financing activities — — (129) Cash flows from financing activities: Proceeds from notes payable 874 49,391 84,570 Payments on senior unsecured debt — (6,000) — Proceeds from senior unsecured debt — — 30,000 Payments on junior subordinated debt — — (30,000) Payments on notes payable (17,697) (57,144) (215,434) Distributions paid to minority shareholders — — (3) Proceeds from shares issued under employee stock purchase plan — 9 55 Net cash used in financing activities (16,823) (13,744) (130,812) Net decrease in cash and cash equivalents (4,892) (845) (14,441) Cash and cash equivalents, beginning of year 5,977 6,822 21,263 Cash and cash equivalents, end of year $1,085 $5,977 $6,822 Supplemental cash flow information: Interest paid (net of interest capitalized) $— $— $— Income taxes paid $— $— $27 Supplemental disclosure for non-cash activity: Interest incurred but not paid in cash $1,619 $290 $6,674 Warrants issued in connection with troubled debt restructuring $— $723 $— Reduction in real estate held for development and sale in connection with troubled debt restructuring $10,884 $42,307 $— Reduction in notes payable in connection with troubled debt restructuring $13,926 $45,117 $— Reduction in accrued liabilities in connection with troubled debt restructuring $610 $1,646 $— Reduction in inventory and related debt – variable interest entity $19,050 $— $ Reduction in real estate held for development and sale in connection with deconsolidation of subsidiaries $6,554 $— $— Reduction in notes payable in connection with deconsolidation of subsidiaries $6,080 $— $ Reduction in accrued liabilities in connection with deconsolidation of subsidiaries $2,438 $— $— The accompanying notes are an integral part of these consolidated financial statements. F-6 Table of ContentsCOMSTOCK HOMEBUILDING COMPANIES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands, except per share data) 1.ORGANIZATIONComstock Companies, Inc. (the “Company”) was incorporated on May 24, 2004 as a Delaware corporation. On June 30, 2004, the Company changedits name to Comstock Homebuilding Companies, Inc. On December 17, 2004, the Company completed an initial public offering (“IPO”) of its Class Acommon stock.The Company’s Class A common stock is traded on the NASDAQ Capital market (“NASDAQ”) under the symbol “CHCI” and has no public tradinghistory prior to December 17, 2004. On November 16, 2009, the Company received notice that NASDAQ had granted the Company’s request to transfer thelisting of its common stock from the NASDAQ Global Market to the NASDAQ Capital Market. On November 13, 2009, the Company received notice fromNASDAQ that it does not satisfy the $1.00 minimum bid price requirement for continued listing on NASDAQ. The Company has until May 11, 2010 toregain compliance with the $1.00 minimum bid price requirement. Regaining compliance would require a closing bid price of $1.00 or more for a minimumof ten consecutive trading days on or before May 11, 2010. If that does not occur, we would request a hearing before a NASDAQ panel to request anadditional 180 days to regain compliance. There is no assurance that a NASDAQ panel would grant the Company any additional time after May 11, 2010 toregain compliance. If a NASDAQ panel did grant the Company additional time, there are no assurances that the Company would regain compliance. TheCompany is currently in compliance with the $5.0 million minimum market value of publicly held shares and the $2.5 million minimum shareholder equitycontinued listing requirements of the NASDAQ Capital Market.The homebuilding industry is cyclical and significantly affected by changes in national and local economic, business and other conditions. Over thepast five years, the Company has developed, built and marketed single-family homes, townhouses and condominiums in the Washington D.C., Raleigh, N.C.and Atlanta, GA metropolitan markets. During 2006, new home sales in these markets began to slow and that trend significantly worsened in 2008 and 2009.In response to these conditions, the Company significantly reduced selling, general and administrative expenses in order to align its cost structure with thelevel of sales activity, ceased land acquisition, land development and construction activities (except where required for near term sales) and offered for salevarious developed lots and land parcels that the Company believed were not needed based on current absorption rates. Due primarily to foreclosureagreements entered into in 2009, the Company no longer controls any significant real estate positions in Raleigh, North Carolina. On November 13, 2009,three of the Company’s Atlanta, GA subsidiaries filed petitions to liquidate under chapter 7 of the U.S. bankruptcy code. On or about January 21, 2010, theUnited States Bankruptcy Court, Northern District of Georgia entered an order approving the trustee’s report of no distribution, discharged the trustee andclosed the estate for all three subsidiary filings. As a result, the Company no longer controls any significant real estate positions in Atlanta, GA. Certainforeclosure agreements will result in the foreclosures on the related assets not being completed until 2010. The Company also provides certain managementand administrative support services to certain related parties.Liquidity DevelopmentsIn an effort to stabilize the Company, management has spent much of 2009 focused on negotiating with lenders to eliminate and restructure debt whichhas temporarily limited our ability to pursue new business opportunities. Early in 2009, management formulated a Strategic Realignment Plan (the “Plan”)which identified real estate projects to be retained by the Company. The Company then worked to restructure the debt related to those core projects. Therestructuring was completed in 2009 and has resulted in improved operating cash flow as the lenders have agreed to provide the Company with increasedcash from proceeds as units are settled. This improved cash flow from settlements is contingent upon the Company settling a minimum of 10 units per quarterat Penderbrook and 9 units per quarter at Eclipse, on a cumulative basis. If the Company fails to maintain the minimum settlement requirements, while thatwould not be deemed an event of loan default, it would give the lenders the right to apply substantially all of the unit settlement proceeds to principalreduction. At December 31, 2009, the Company was in compliance with the minimum settlement requirements.The Plan also identified real estate projects which it deemed to be non-essential to future growth. The strategic approach to debt secured by non-essential real estate projects was to pursue foreclosure agreements with the related lenders with the goal of transferring the real estate to the lender in return fora release from the related debt obligation. As detailed herein, the Company has made significant progress in that regard. As of December 31, 2009 theCompany had successfully negotiated settlements with all of its secured lenders regarding the loans guaranteed by the Company and had reduced theoutstanding balance of debt from $102.8 million at December 31, 2008 to $51.7 million ($67.6 million of total debt less $15.9 million of Wachovia debt forwhich extinguishment will occur once real estate assets are foreclosed in 2010) at December 31, 2009. In most cases the Company has been released from theobligations under the loan in return for its agreement to cooperate in the bank’s foreclosure on the real estate assets securing the loan. In a limited number ofcases, the Company provided the lenders with non-interest bearing deficiency notes with three year maturities in an amount equal to a fraction of the originaldebt. The balance of the deficiency notes at December 31, 2009 was $1.1 million. Due to the time required to complete the requisite foreclosures on certainreal estate assets, the foreclosure actions were not all complete at December 31, 2009 and will occur in future periods. F-7 Table of ContentsFollowing is a summary of liquidity events that have already occurred or are anticipated in 2010: • As a result of the restructuring effort, the only debt service required in 2010 will be covered by, assuming we are able to maintain sales quotas,settlements of units or land parcels. • Due to a tax law change resulting from the passage of the Unemployment Insurance Extension Act of 2009, the Company received a tax refund of$861 in February 2010. • On July 29, 2008 Balfour Beatty Construction, LLC, successor in interest to Centex Construction (“Balfour”), the general contractor for asubsidiary of the Company, filed liens totaling approximately $552,000 at The Eclipse on Center Park Condominium project (“Project”) inconnection with its claim for amounts allegedly owed under the Project contract documents. In September 2008 the Company’s subsidiary filedsuit against Balfour to invalidate the liens and for its actual and liquidated damages in the approximate amount of $17.1 million due toconstruction delays and additional costs incurred by the Company’s subsidiary with respect to the Project. In October 2008 Balfour filedcounterclaims in the approximate amount of $2.8 million. Subsequent to an expedited hearing filed by the Company’s subsidiary to determinethe validity of the liens that was ultimately heard in February 2009, we received an order of the court in April 2009 invalidating the liens. Thetrial began on September 8, 2009 and closed on September 16, 2009. On February 23, 2010, the Company’s subsidiary received a judgmentagainst Balfour in an amount of $11.7 million plus attorney’s fees to be determined at a later date. On March 3, 2010, the Company’s subsidiaryreceived notice of Balfour’s intention to appeal the judgment and post a supersedeas bond in the amount of $12.5 million. If the judgmentamount is upheld on appeal, a significant portion is required to be applied toward principal curtailment under the Company’s loan agreementwith KeyBank.Based on the debt restructuring effort completed to date, we are anticipating that the combination of additional cash from settlement proceeds, the cashgenerated by our rental operations, the cash generated by sales of land parcels and the cash received from the tax refund will be sufficient to sustain ouroperations through 2010. However, this outcome is primarily dependent upon our ability to meet the minimum settlement requirements specified by ourlenders. If we are unable to meet these quotas, substantially all of the proceeds from any settlements will be retained by the lenders. We were in compliancewith these settlement requirements at March 31, 2010. At December 31, 2009, we had $1.1 million in unrestricted cash and $3.2 million in restricted cash.Included in our restricted cash balance, to which we have no access currently, is a $3.0 million deposit with an insurance provider as security for futureclaims. Our access to external working capital is very limited and we have few other sources of cash as commercial banks and other unregulated lenders haveexperienced a liquidity crisis which has made funding for real estate investment extremely difficult to secure. This tightening of the credit markets presentssubstantial risk to our ability to secure financing for our operations, including any future construction and land development efforts.If we are unable to maintain compliance with the cumulative minimum settlement requirements for an extended period of time, it would be necessary toseek waivers or additional loan modifications from the project lenders. If we were unable to secure such waivers or modifications, this would substantiallyreduce the amount of cash generated through unit settlements and make it necessary for us to attempt to generate alternative sources of revenue to meet ouroperating cashflow requirements. To do so, we may have to seek to leverage the judgment award which we obtained against Balfour Beatty, sell ourremaining parcels of land, seek to raise additional capital or seek to obtain additional financing to meet our operating cashflow requirements. If, in theabsence of cashflow being generated from unit settlements, we were unable to generate additional capital through any of these alternative sources, we coulddeplete our cash reserves and may be forced to seek protections afforded under the bankruptcy code. There can be no assurance that in the event we wereforced to seek bankruptcy protection that we would be able to reorganize, and in such event we could be forced to liquidate our assets. 2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESA summary of the significant accounting policies and practices used in the preparation of the consolidated financial statements is as follows:Basis of presentationThe accompanying consolidated financial statements include the accounts of Comstock Homebuilding Companies, Inc (the Company), a Delawarecorporation, and its majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. Investments in 50% or lessowned partnerships and affiliates are accounted for using the equity method unless it is determined that the Company has effective control of the entity, inwhich case the entity would be consolidated.Cash and cash equivalents and restricted cashCash and cash equivalents are comprised of cash and short-term investments with maturities when purchased of three months or less. At times, theCompany may have deposits with institutions in excess of federally insured limits. Banking institutions with which the Company does business areconsidered credit worthy; therefore, credit risk associated with cash and cash equivalents is considered low. At December 31, 2009 and 2008, the Companyhad restricted cash of $3.2 million and $3.8 million, respectively, which includes a $3.0 million deposit with an insurance provider as security for futureclaims. F-8 Table of ContentsReal estate held for development and saleReal estate held for development and sale includes land, land development costs, interest and other construction costs. Land held for development isstated at cost, or when circumstances or events indicate that the land is impaired, at estimated fair value. Real estate held for sale is carried at the lower of costor fair value less costs to sell. Land, land development and indirect land development costs are accumulated by specific project and allocated to various lotsor housing units within that project using specific identification and allocation based upon the relative sales value, unit or area methods. Direct constructioncosts are assigned to housing units based on specific identification. Construction costs primarily include direct construction costs and capitalized fieldoverhead. Other costs are comprised of prepaid local government fees and capitalized interest and real estate taxes. Selling costs are expensed as incurred.Estimated fair value is based on comparable sales of real estate in the normal course of business under existing and anticipated market conditions. Theevaluation takes into consideration the current status of the property, various restrictions, carrying costs, costs of disposition and any other circumstances,which may affect fair value including management’s plans for the property. Due to the large acreage of certain land holdings, disposition in the normal courseof business can extend over a number of years. A write-down to estimated fair value is recorded when the net carrying value of the property exceeds itsestimated undiscounted future cash flows. These evaluations are made on a property-by-property basis as seen fit by management whenever events or changesin circumstances indicate that the net carrying value may not be recoverable.Capitalized interest and real estate taxesInterest and real estate taxes incurred relating to the development of lots and parcels are capitalized to real estate held for development and sale duringthe active development period, which generally commences when borrowings are used to acquire real estate assets and ends when the properties aresubstantially complete or the property becomes inactive. A project becomes inactive when development and construction activities have been suspendedindefinitely. Interest is capitalized based on the interest rate applicable to specific borrowings or the weighted average of the rates applicable to otherborrowings during the period. Interest and real estate taxes capitalized to real estate held for development and sale are expensed as a component of cost ofsales as related units are sold. The following table is a summary of interest incurred and capitalized and interest expensed for units settled: Years ended December 31, 2009 2008 2007Total interest incurred and capitalized $12 $4,742 $23,214Interest expensed as a component of cost of sales $2,955 $3,722 $24,605During 2009 all of the Company’s projects were determined to be inactive for accounting purposes as they were either substantially complete ormanagement elected to suspend construction activities indefinitely. When a project becomes inactive, its interest, real estate taxes and indirect productionoverhead costs are no longer capitalized but rather expensed in the period in which they are incurred. Following is a breakdown of the interest, real estatetaxes and indirect costs related to inactive projects reported in real estate held for development and sale: Years ended December 31, 2009 2008 2007Total interest incurred and expensed for inactive projects $2,626 $3,993 $— Total real estate taxes incurred and expensed for inactive projects 845 1,022 — Total production overhead incurred and expensed for inactive projects 667 670 — $4,138 $5,685 — F-9 Table of ContentsProperty, plant and equipmentProperty, plant and equipment are carried at cost less accumulated depreciation and are depreciated on the straight-line method over their estimateduseful lives as follows: Furniture and fixtures 7 yearsOffice equipment 5 yearsComputer equipment and capitalized software 3 yearsLeasehold improvements Life of related leaseWhen assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from their separate accounts and any gain or losson sale is reflected in operations. Expenditures for maintenance and repairs are charged to expense as incurred.Warranty reserveWarranty reserves for houses settled are established to cover potential costs for materials and labor with regard to warranty-type claims expected toarise during the one-year warranty period provided by the Company or within the five-year statutorily mandated structural warranty period. Since theCompany subcontracts its homebuilding work, subcontractors are required to provide the Company with an indemnity and a certificate of insurance prior toreceiving payments for their work. Claims relating to workmanship and materials are generally the primary responsibility of the subcontractors and productmanufacturers. The warranty reserve is established at the time of closing, and is calculated based upon historical warranty cost experience and currentbusiness factors. Variables used in the calculation of the reserve, as well as the adequacy of the reserve based on the number of homes still under warranty, arereviewed on a periodic basis. Warranty claims are directly charged to the reserve as they arise. The following table is a summary of warranty reserve activitywhich is included in accounts payable and accrued liabilities: Years ended December 31, 2009 2008 2007 Balance at beginning period $1,031 $1,537 $1,669 Additions 116 432 1,010 Releases and/or charges incurred (454) (938) (1,142) Balance at end of period $693 $1,031 $1,537 F-10 Table of ContentsRevenue recognitionThe Company recognizes revenues and related profits or losses from the sale of residential properties, including multiple units to the same buyer,finished lots and land sales when closing has occurred, full payment has been received, title and possession of the property transfer to the buyer and theCompany has no significant continuing involvement in the property. Other revenues include revenue from land sales, rental revenue from leased apartmentsand revenue earned from management and administrative support services provided to related parties that is recognized as the services are provided.Advertising costsThe total amount of advertising costs charged to selling, general and administrative expense was $47, $878 and $3,350 for the years endedDecember 31, 2009, 2008 and 2007, respectively.Stock compensationAs discussed in Note 12, the Company sponsors stock option plans and restricted stock award plans. Prior to December 14, 2004, the Company did notsponsor any such plans. Effective January 1, 2004, the Company prospectively adopted Statement of Financial Accounting Standards (“SFAS”) No. 123R(revised 2004), Share-Based Payment (Accounting Standards Codification (“ASC”) 718). ASC 718 requires all share-based payments to employees,including grants of employee stock options, to be recognized in the financial statements over the vesting period based on their fair values at the date of grant.As a result of the inactive status of all of the Company’s projects during 2009 all of the cost associated with stock-based compensation was charged toselling, general and administrative expense. The total stock-based compensation for 2009 was $77 which related to grants made prior to 2009. There were nogrants in 2009.Income taxesAs discussed in Note, 1, we adopted the provisions of ASC 740-10-26-6 Income Tax Recognition as of January 1, 2007. As a result of this adoption, theCompany recorded a benefit to the opening accumulated deficit in the amount of $1,663. The Company recognizes interest accrued related to unrecognizedtax benefits in interest expense. Penalties, if incurred, would be recognized as a component of general and administrative expense. At December 31, 2008, theCompany had gross unrecognized tax benefits of $77, which was fully reserved. The reserve was limited to interest on the net timing difference. During 2009the Company received approval for an accounting method change from the Internal Revenue Service that effectively allows the Company to recognize thepreviously unrecognized tax benefit. As a result, the Company reversed the $77 reserve in 2009. As of December 31, 2009, the Company had nounrecognized tax benefit and the Company does not expect this to change significantly over the next 12 months. F-11 Table of ContentsLoss per shareThe following weighted average shares and share equivalents are used to calculate basic and diluted EPS for the years ended December 31, 2009, 2008and 2007: Years Ended December 31, 2009 2008 2007 Basic loss per share Net loss $(26,752) $(17,058) $(87,510) Basic weighted-average shares outstanding 17,670 17,462 16,140 Per share amounts $(1.51) $(0.98) $(5.42) Dilutive loss per share Net loss $(26,752) $(17,058) $(87,510) Basic weighted-average shares outstanding 17,670 17,462 16,140 Stock options and restricted stock grants — — — Dilutive weighted-average shares outstanding 17,670 17,462 16,140 Per share amounts $(1.51) $(0.98) $(5.42) There were no restricted stock grants outstanding at December 31, 2009. As a result of net losses for the years ended December 31, 2009, 2008 and2007, options and warrants were excluded from the computation of dilutive earnings per share because their inclusion would have been anti-dilutive.Comprehensive incomeFor the years ended December 31, 2009, 2008 and 2007, comprehensive income equaled net income; therefore, a separate statement of comprehensiveincome is not included in the accompanying consolidated financial statements.Segment reportingASC 280-10 Segment Reporting establishes standards for the manner in which companies report information about operating segments. The Companydetermined it provides one single type of business activity, homebuilding, which operates in multiple geographic or economic environments. The Companyhad, in years prior to 2009, determined that its homebuilding operations primarily involved three reportable geographic segments: Washington D.C.metropolitan area, Raleigh, North Carolina and Atlanta, Georgia. Based on the Company’s withdrawal from the Atlanta market, which was effectivelycompleted in the fourth quarter of 2009, the Company elected to consolidate the Raleigh and Atlanta segments into the Southeast region segment, effectiveJanuary 1, 2009. As such, 2008 and 2007 have been restated for presentation purposes only. As the Company completes it exit from the Raleigh, NorthCarolina market, effective in the first quarter of 2010, the Company’s operations will be concentrated in the Washington D.C. metropolitan area. Theaggregation criteria are based on the similar economic characteristics of the projects located in each of these regions. The table below summarizes revenueand income (loss) before income taxes for each of the Company’s geographic segments (amounts in thousands): F-12 Table of ContentsThe table below summarizes revenue and operating (loss) income for each of the Company’s geographic segments: Years Ended December 31, 2009 2008 2007 Revenues: Washington, D.C. metropolitan area $23,170 $23,929 $200,622 Southeast region 1,896 22,733 65,537 Total $25,066 $46,662 $266,159 Operating loss Washington, D.C. metropolitan area $(17,497) $(10,060) $(25,890) Southeast region (8,575) (14,037) (47,828) Segment operating loss (26,072) (24,097) (73,718) Corporate expenses unallocated (5,740) (8,622) (18,367) Total operating loss (31,812) (32,719) (92,085) Gain on debt restructuring (3,403) (12,851 ) — Gain on deconsolidation of subsidiaries (1,965) — — Other loss (income) 1,237 (2,850) (1,886) Loss before income taxes $(27,681) $(17,018) $(90,199) The following table summarizes impairment and write-offs by segment. These expense amounts are included in the segment operating income (loss) asreflected in the table above. Years Ended December 31, 2009 2008 2007Washington, D.C. metropolitan area $15,351 $6,141 $35,005Southeast region 7,587 11,881 43,259 $22,938 $18,022 $78,264The table below summarizes total assets for each of the Company’s segments at December 31, 2009 2008Washington, D.C. metropolitan area $56,732 $116,483Southeast region 15,060 34,924Corporate 5,539 9,452Total assets $77,331 $160,859 F-13 Table of ContentsUse of estimatesThe preparation of the financial statements, in conformity with accounting principles generally accepted in the United States of America, requiresmanagement to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results coulddiffer from those estimates. Material estimates are utilized in the valuation of real estate held for development and sale, valuation of deferred tax assets,capitalization of costs, consolidation of variable interest entities and warranty reserves.Recent accounting pronouncementsEffective January 1, 2009, the Company adopted SFAS No. 157, “Fair Value Measurements” (codified in “ASC 820”), for its non-financial assets andliabilities and for its financial assets and liabilities measured at fair value on a non-recurring basis. ASC 820 provides a framework for measuring fair value ingenerally accepted accounting principles, expands disclosures about fair value measurements, and establishes a fair value hierarchy that requires an entity tomaximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The adoption of ASC 820 for the Company’snon-financial assets and liabilities did not have a material impact on the Company’s consolidated financial statements, though it may in the future. In April2009, the FASB issued FSP FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have SignificantlyDecreased and Identifying Transactions That Are Not Orderly,” FSP No. FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-TemporaryImpairments,” and FSP FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments” (all codified in ASC 820). The Companyadopted the FSPs as of January 2009, which did not have a material impact on the Company’s consolidated financial statements.In December 2007, the FASB also issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements” (codified in “ASC 810”).ASC 810 requires all entities to report noncontrolling (i.e. minority) interests in subsidiaries as equity in the consolidated financial statements and to accountfor transactions between an entity and noncontrolling owners as equity transactions if the parent retains its controlling financial interest in the subsidiary.ASC 810 also requires expanded disclosure that distinguishes between the interests of the controlling owners and the interests of the noncontrolling ownersof a subsidiary. ASC 810 was effective for the Company beginning on January 1, 2009. The adoption of ASC 810-10 did not have a material impact on theCompany’s consolidated financial statements.In May 2009, the FASB issued SFAS No. 165, “Subsequent Events,” (codified in “ASC 855”). ASC 855 establishes general standards of accounting forand disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. ASC 855 was effectivefor the Company for the period ending June 30, 2009. The adoption did not have a material impact on the Company’s consolidated financial statements.In June 2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial Assets an amendment of FASB Statement No. 140,” (codified in“ASC 860”). ASC 860 requires enhanced disclosures regarding transfers of financial assets and continuing exposure to the related risks. ASC 860 alsoeliminates the concept of a qualifying special-purpose entity and changes the requirements for derecognizing financial assets. ASC 860 will be effective forthe Company’s fiscal year beginning January 1, 2010. The adoption of ASC 860 is not expected to have a material impact on the Company’s consolidatedfinancial statements.In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R),” (codified in “ASC 810”). ASC 810 amends existingconsolidation guidance for variable interest entities, requires ongoing reassessment to determine whether a variable interest entity must be consolidated, andrequires additional disclosures regarding involvement with variable interest entities and any significant changes in risk exposure due to that involvement.ASC 810 will be effective for the Company’s fiscal year beginning January 1, 2010. The Company is currently evaluating the effects of ASC 810 on itsconsolidated financial statements.In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted AccountingPrinciples,” (codified in “ASC 105”), which created a single source of authoritative nongovernmental U.S. GAAP. The Codification was effective for theCompany’s interim and annual periods ending after September 15, 2009. Upon adoption, all existing non-SEC accounting and reporting standards weresuperseded. All other non-SEC accounting literature not included in the Codification are considered non-authoritative. The required disclosures have beenincorporated into and did not have a material impact on the Company’s consolidated financial statements.In August 2009, the FASB issued Accounting Standards Update No. 2009-05, “Measuring Liabilities at Fair Value” (“ASU 2009-05”), amending ASC820 to provide additional guidance to clarify the measurement of liabilities at fair value. ASU 2009-05 was effective for the Company’s quarter endedDecember 31, 2009 and did not have a material impact on the Company’s consolidated financial statements.In January 2010, the FASB issued Accounting Standards Update No. 2010-06, “Improving Disclosures about Fair Value Measurements” (“ASU 2010-06”), amending ASC 820 to increase disclosure requirements regarding recurring and nonrecurring fair value measurements. ASU 2010-06 will be effectivefor the Company’s fiscal year beginning January 1, 2010, except for the disclosures about activity in Level 3 fair value measurements which will be effectivefor the Company’s fiscal year beginning January 1, 2011. ASC 820 is not expected to have a material impact on the Company’s consolidated financialstatements. 3.CONSOLIDATION OF VARIABLE INTEREST ENTITIESThe Company typically acquires land for development at market prices from various entities under fixed price purchase agreements. The purchaseagreements require deposits that may be forfeited if the Company fails to perform under the agreements. The deposits required under the purchase agreementsare in the form of cash or letters of credit in varying amounts. The Company may, at its option, choose for any reason and at any time not to perform underthese purchase agreements by delivering notice of its intent not to acquire the land under contract. The Company’s sole legal obligation and economic lossfor failure to perform under these purchase agreements is typically limited to the amount of the deposit pursuant to the liquidated damages provisioncontained within the purchase agreement. As a result, none of the creditors of any of the entities with which the Company enters into forward fixed pricepurchase agreements have recourse to the general credit of the Company.The Company also does not share in an allocation of either the profit earned or loss incurred by any of these entities with which the Company has fixedprice purchase agreements. The Company has concluded that whenever it options land or lots from an entity and pays a significant non-refundable deposit asdescribed above, a variable interest entity is created under the provisions of ASC 810-10 Consolidation. This is because the Company has been deemed tohave provided subordinated financial support, which creates a variable interest which limits the equity holder’s returns and may absorb some or all of anentity’s expected theoretical losses if they occur. The Company, therefore, examines the entities with which it has fixed price purchase agreements forpossible consolidation by the Company under the provision of ASC 810-10. This requires the Company to compute expected losses and expected residualreturns based on the probability of future cash flows which requires substantial management judgments and estimates. In addition, because the CompanyTM does not have any contractual or ownership interests in the entities with which it contracts to buy the land, the Company does not have the ability to compelthese development entities to provide financial or other data to assist the Company in the performance of the primary beneficiary evaluation.On July 7, 2009 the Company reached a settlement agreement with Belmont Bay, LC in a dispute related to the fixed price purchase agreementregarding Phase II of Beacon Park. Under the terms of the settlement agreement, the Company forfeited its $200 deposit and was released from debt owed toBelmont Bay, LC of approximately $1,797. As a result of this settlement agreement, the Company is no longer the primary beneficiary and hasdeconsolidated the entity from its consolidated balance sheet at June 30, 2009. The effect of the deconsolidation was the removal of $19,250 in “Inventorynot owned-variable interest entities” with a corresponding reduction of $19,050 (net of land deposits paid of $200) to “Obligations related to inventory notowned.” Creditors, if any, of this deconsolidated variable interest entity have no recourse against the Company relating to this purchase contract. F-14 Table of Contents 4.REAL ESTATE HELD FOR DEVELOPMENT AND SALEReal estate held for development and sale includes land, land development costs, interest and other construction costs. Land held for development isstated at cost, or when circumstances or events indicate that the land is impaired, at estimated fair value. Real estate held for sale is carried at the lower of costor fair value less costs to sell. Land, land development and indirect land development costs are accumulated by specific project and allocated to various lotsor housing units within that project using specific identification and allocation based upon the relative sales value, unit or area methods. Direct constructioncosts are assigned to housing units based on specific identification. Construction costs primarily include direct construction costs and capitalized fieldoverhead. Other costs are comprised of prepaid local government fees and capitalized interest and real estate taxes. Selling costs are expensed as incurred.Estimated fair value is based on comparable sales of real estate in the normal course of business under existing and anticipated market conditions. Theevaluation takes into consideration the current status of the property, various restrictions, carrying costs, costs of disposition and any other circumstances,which may affect fair value including management’s plans for the property. In the normal course of business, dispositions of large land holdings can extendover a number of years. A write-down to estimated fair value is recorded when the net carrying value of the property exceeds its estimated undiscountedfuture cash flows. These evaluations are made on a property-by-property basis as seen fit by management whenever events or changes in circumstancesindicate that the net book value may not be recoverable.During the third quarter of 2009, the Company executed a foreclosure agreement with Wachovia Bank that will result in cancellation of indebtedness(see Note 8) in exchange for the Company’s agreement to cooperate in the bank’s foreclosure process on assets that secure the debt. Wachovia Bank had notforeclosed on the real estate assets as of December 31, 2009. The following summary of the carrying value of real estate held for development and sale reflectsthe Wachovia assets scheduled for foreclosure, net of the Wachovia projects that were deconsolidated due to loss of financial control in the fourth quarter of2009 (See Note 20). Number ofprojects December 31,2009 Real estate held for development and sale 16 $70,890 Real estate projects awaiting foreclosure related to the Wachovia foreclosure agreement: (11) (15,407)Real estate held for development and sale, net of assets awaiting foreclosure 5 $55,483 Deteriorating market conditions, turmoil in the credit markets and increased price competition have continued to negatively impact the Companyduring 2009 resulting in reduced sales prices, increased customer concessions, reduced gross margins and extended estimates for project completion dates.The Company evaluates its projects on a quarterly basis to determine if recorded carrying amounts are recoverable. For the three months ended December 31,2009, the Company evaluated all 16 of its projects for impairment and the evaluation resulted in no impairment charges. Impairment charges of $3,443 wererecorded for the three months ended December 31, 2008. As a result of this analysis, the Company believes that book value approximates fair value for all ofits projects except for one project where the fair value exceeds the carrying value of $34,478.For projects where the Company expects to continue sales, these impairment evaluations are based on discounted cash flow models. Discounted cashflow models are dependent upon several subjective factors, primarily estimated average sales prices, estimated sales pace, and the selection of an appropriatediscount rate. While current market conditions make the selection of a timeframe for sales in a community challenging, the Company has generally assumedsales prices equal to or less than current prices and the remaining lives of the communities were estimated to be one to two years. These assumptions are ofteninterrelated as price reductions can generally be assumed to increase the sales pace. In addition, the Company must select what it believes is an appropriatediscount rate based on current market cost of capital and returns expectations. The Company has used its best judgment in determining an appropriatediscount rate based on anecdotal information it has received from marketing its deals for sale in recent months. The Company has elected to use a rate of 17%in its discounted cash flow model, which is consistent with the discount rate used in prior periods as the Company’s cost of capital has not changedsignificantly. While the selection of a 17% discount rate was subjective in nature, the Company believes it is an appropriate rate in the current market. Theestimates of sales prices, sales pace, and discount rates used by the Company are based on the best information available at the time the estimates were made.In recent months, market conditions affecting the Company’s Washington, D.C. area projects have improved, however, if market conditions deteriorate again,additional adverse changes to these estimates in future periods could result in further material impairment amounts to be recorded.For projects where the Company expects to sell the remaining lots in bulk or convey the remaining lots to a lender where the loans have matured, thefair value is determined based on offers received from third parties, comparable sales transactions, and/or cash flow valuation techniques.If the project meets the GAAP accounting criteria of held for sale, the project is valued at the lower of cost or fair value less estimated selling costs. AtDecember 31, 2009, the Company had three projects with a carrying value of $39,526 that met these criteria. If the project sales are expected to extend over aperiod of time, the Company calculates fair value utilizing a discounted cash flow model as discussed above, although the Company would select a lowerdiscount rate to reflect a reduced construction risk. No writedowns to fair value were recorded using this method during the years ended December 31, 2009or 2008.At May 31, 2009 Mathis Partners, LLC, a wholly owned subsidiary of the Company had approximately $5.1 million of principal, accrued interest andfees outstanding to Cornerstone Bank (“Cornerstone”) relating to the Company’s Gates at Luberon project (“Gates”). In June 2009, Cornerstone foreclosed onGates lots carried in real estate held for development and sale with an estimated fair value of $3.3 million. Upon this foreclosure the Company had beenrelieved of a portion of the outstanding debt balance and recorded this as an extinguishment of debt paid for by the foreclosed lots, in accordance with ASC405.20.40-1. As a result, $1.8 million of Cornerstone debt remained at June 30, 2009 as the Company reduced its assets for the lots that were legallytransferred to Cornerstone and recorded a corresponding reduction in the related debt as a result of the transfer of assets in partial satisfaction of the debt. OnSeptember 22, 2009, the Company entered into a settlement agreement and mutual release with Cornerstone relating to litigation between the Company andCornerstone. In connection with the settlement, Cornerstone released the Company, and its subsidiary Mathis Partners, LLC, from their respective obligationsand guarantees relating to $5.1 million of debt. As a result of completing the negotiations in September, the Company wrote off the remaining carrying valueof the Gates inventory on which Cornerstone foreclosed and reduced the recorded value of the debt to the final settlement amount. See Note 17 for thecalculation of gain on troubled debt restructuring related to the Cornerstone settlement agreement. F-15 Table of ContentsThe following table summarizes impairment charges and write-offs for the twelve months ended December 31, 2009, 2008 and 2007: Twelve Months EndedDecember 31, 2009 2008 2007Impairments $22,938 $18,011 $68,788Write-offs — 11 9,476 $22,938 $18,022 $78,264After impairments and write-offs, real estate held for development and sale consists of the following: December 31, 2009 2008Land and land development costs $28,173 $51,421Cost of construction (including capitalized interest and real estate taxes) 42,717 78,121 $70,890 $129,542 5.PROPERTY, PLANT AND EQUIPMENT, NETProperty, plant and equipment consist of the following: December 31, 2009 2008 Computer equipment and capitalized software $1,981 $2,145 Furniture and fixtures 272 317 Office equipment 114 309 Leasehold improvements 70 79 2,437 2,850 Less: accumulated depreciation (2,293) (2,021) $144 $829 Depreciation and amortization expense, included in “selling, general, and administrative” in the consolidated financial statements of operations,amounted to $685, $710 and $852 for the years ended December 31, 2009, 2008 and 2007, respectively. F-16 Table of Contents 6.OTHER ASSETSOther assets consist of the following: December 31, 2009 2008Income tax refund receivable (1) $862 $— Restricted escrow deposits 308 492Miscellaneous prepaid and other 793 910 $1,963 $1,402 (1)Income tax refund receivable was collected in full in February 2010. 7.ACCOUNTS PAYABLE AND ACCRUED LIABILITIESAccounts payable and accrued liabilities consist of the following: December 31, 2009 2008Trade payables $4,176 $6,126Warranty 693 1,031Customer deposits 82 316Other 628 759 $5,579 $8,232 8.CREDIT FACILITIESThe Company has outstanding borrowings with various financial institutions and other lenders that have been used to finance the acquisition,development and construction of real estate property.As of December 31, 2009, maturities and/or curtailment obligations of all of our borrowings are as follows: Year ending December 31, Debt to be extinguished when foreclosure process is complete (1) $15,895Past due(2) 2632010 15,2232011 18,5772012 1,1012013 12,7432014 and thereafter 3,817Total $67,619 (1)Debt related to Wachovia foreclosure agreement executed during the third quarter of 2009. This debt will be extinguished after the bank forecloses onthe real estate assets that secure the debt, which is pending but had not occurred at December 31, 2009. There will be no further cash outlay on this debtby the Company.(2)Lender is BB&T.The majority of the Company’s debt is variable rate, based on LIBOR or the prime rate plus a specified number of basis points, typically ranging from220 to 600 basis points over the LIBOR rate and from 25 to 200 basis points over the prime rate. As a result, we are exposed to market risk in the event ofinterest rate increases. At December 31, 2009, the one-month LIBOR and prime rates of interest were 0.23% and 3.25%, respectively, and the interest rates ineffect under the existing secured revolving development and construction credit facilities ranged from 3.50% to 15.19 %. During 2009 these rates have beenrelatively stable. Based on current operations, as of December 31, 2009, an increase/decrease in interest rates of 100 basis points on our variable rate debtwould result in a corresponding increase/decrease in interest actually incurred by us of approximately $0.5 million in a fiscal year. Since all projects arecurrently inactive by accounting standards, any change in interest would be expensed in the period incurred.In the past the Company has generally financed its development and construction activities on a single or multiple project basis so it is not uncommonfor each project or collection of projects the Company develops and builds to have a separate credit facility. Accordingly, the Company typically has hadnumerous credit facilities and lenders. As described below in more detail, the Company made significant progress during 2009 in its efforts to restructure oramend its loan facilities to improve its liquidity outlook for 2010. F-17 Table of ContentsAs described in more detail below, at December 31, 2009 our outstanding debt by lender was as follows (dollars in 000s): Bank Balance as of12/31/09 RecourseKeyBank $22,269 SecuredWachovia (1) 15,895 SecuredWachovia 205 UnsecuredGuggenheim Capital Partners 10,492 SecuredM&T Bank – Cascades 1,016 SecuredM&T Bank 495 SecuredCornerstone (Haven Trust) 400 UnsecuredBank of America 3,716 UnsecuredFifth Third 25 UnsecuredBranch Banking & Trust 263 SecuredSeller – Emerald Farm 100 Secured 54,876 Due to affiliates – Stonehenge Funding 12,743 UnsecuredTotal $67,619 (1)Debt related to Wachovia foreclosure agreement executed during the third quarter of 2009. This debt will be extinguished after the banks foreclose onthe real estate assets that secure the debt, which had not occurred at December 31, 2009. There will be no further cash outlay on this debt by theCompany.At December 31, 2009 the Company had $22.3 million outstanding to KeyBank under a credit facility secured by the Company’s Eclipse and StationView projects. Under the terms of the note there is an interest reserve which represents the amount by which we can avoid cash payments of future monthlyinterest obligations by adding them to the principal balance. At December 31, 2009 the available balance in the interest reserve was approximately $1.6million. While there are no financial covenants associated with the loan, there are a series of curtailment requirements commencing March 31, 2009. OnOctober 30, 2009 the Company executed a loan modification with KeyBank with respect to $22.8 million of principal outstanding under the Company’ssecured Potomac Yard and Station View project loan (the “Loan”). The key terms of the loan modification adjust the interest rate to the higher of LIBOR plus5.0% or the prime rate plus 2.0% subject to a LIBOR floor of 2.0%. In exchange, KeyBank has agreed to increase the cash flow available to the Companyfrom settlements at the Potomac Yard project by providing the Company with accelerated releases equal to fifteen percent of the net sales price. However,these accelerated releases are subject to meeting a cumulative minimum sales requirement of nine (9) units per quarter (the “Modification Covenants”).Failure to meet the Modification Covenants will not result in an event of default but may result in a reversion of the unit release provisions wherebyKeyBank will retain the entire net sales price of sold units. The Modification also adjusted the release provisions for the Station View project allowing foradditional monies from the net sales price of the bulk sale of the Station View project, under contract on a contingent basis, to be made available to theCompany for the repayment of certain indebtedness. The Modification also provided that any unsecured deficiency notes issued by the Company insatisfaction of foreclosure deficiencies from other lenders are fully subordinate to the Loan.On August 17, 2009 the Company entered into a foreclosure agreement (“Agreement”) with Wachovia Bank with respect to approximately $17.8million of secured debt, accrued interest and fees. Under the terms of the Agreement, the Company has agreed to cooperate with Wachovia with respect to itsforeclosure on certain of the Company’s real estate assets. In return, Wachovia agreed to release the Company from their obligations and guarantees relatingto the $17.8 million of indebtedness contemporaneous with the execution by the Company of a non-interest bearing, unsecured deficiency note payable toWachovia in the amount of approximately $1.8 million. The deficiency note was reduced by the principal payments related to certain homes sold by theCompany prior to September 30, 2009. As of December 31, 2009 the deficiency note balance was $205 and the debt from which the Company will bereleased upon foreclosure of the assets was $15.9 million. The related assets are stated at the lower of cost or fair value. F-18 Table of ContentsThe assets scheduled for foreclosure by Wachovia include: Massey Preserve, raw land located in Raleigh, North Carolina; Haddon Hall, finished padsfor a condominium project in Raleigh, North Carolina; Holland Farm, a single-family project in Raleigh, North Carolina; Wakefield Plantation, a single-family project in Raleigh, North Carolina; Riverbrooke, a single-family project in Raleigh, North Carolina; Wheatleigh Preserve, a single-family project inRaleigh, North Carolina; Brookfield Station, a single-family project in Raleigh, North Carolina; Providence, a single-family project in Raleigh, NorthCarolina; Allyn’s Landing, a townhome development project in Raleigh, North Carolina; Allen Creek, a single-family project in Atlanta, Georgia; ArcanumEstates, a single-family project in Atlanta, Georgia; Falling Water, a single-family project in Atlanta, Georgia; James Road, a single-family developmentproject in Atlanta, Georgia; Tribble Lakes, a development project in Atlanta, Georgia; and Summerland, finished pads for a condominium project inWoodbridge, Virginia. None of these assets had been foreclosed upon at December 31, 2009. Due to the large volume of assets upon which Wachovia willforeclose, it is likely that the foreclosure process will extend well into 2010.At December 31, 2009 the Company had approximately $10.5 million outstanding to Guggenheim Corporate Funding (“Guggenheim”) relating to theCompany’s Penderbrook Condominium project. On August 20, 2008 Guggenheim issued a notice of default to the Company regarding a purported default.The Company subsequently entered into a loan modification and forbearance agreement whereby Guggenheim agreed to forgo any remedies it may have hadwith respect to the alleged default. On September 16, 2009 the Company entered into a third amendment to the loan agreement with Guggenheim in whichGuggenheim agreed to continue to forebear from exercising its rights related to the defaults and make certain other modifications to the loan agreement.Other than a minimum number of sales per month and sales per quarter requirement, the Guggenheim loan agreement and the three loan amendments containno significant financial covenants. The key financial terms of the third amendment increase the cash flow available to the Company through reducedprincipal payments to Guggenheim as units are settled. Specifically, the third amendment will provide the Company with cash equal to 25% of the net salesprice provided the Company meets the cumulative minimum sales requirements of three (3) units per month and ten (10) units per quarter. However, if theCompany is unable to meet the minimum sales requirements, it will not constitute an event of default but may result in a reversion to the unit releaseprovisions to ten percent (10%) of the net sales price of sold units in accordance with the loan agreement and first two amendments. The Company has metthe minimum sales requirement as of December 31, 2009 and based on the pace of Q1 2010 sales, settlements and backlog believes it will meet the minimumsales requirement as of March 31, 2010.As of December 31, 2009, $12.7 million was outstanding to JP Morgan Ventures (“JPMV”), which includes its principal amount of $9.0 million plusthe total estimated future interest payments of $3.7 million. On May 4, 2006 the Company closed on a $30.0 million junior subordinated note offering. Theterm of the F-19 Table of Contentsnote was thirty years and it could be retired after five years with no penalty. The rate was fixed at 9.72% the first five years and LIBOR plus 420 basis pointsthe remaining twenty-five years. In March 2007 the Company retired the junior subordinated note without penalty and entered into a new 10-year, $30.0million senior unsecured note with the same lender at the same interest rate. During the third quarter of 2007, the lender’s rights were assumed by JPMV. OnMarch 14, 2008, the Company executed an option to restructure the $30.0 million unsecured note. In connection therewith, the Company made a $6.0million principal payment to JPMV and executed an amended and restated indenture with a new principal balance of $9.0 million, loosened financialcovenants and a revised term of 5 years. The Company also issued JPMV a seven-year warrant to purchase 1.5 million shares of Class A common stock at$0.70 per share. In exchange JPMV agreed to cancel $15.0 million of the outstanding principal balance. This transaction was accounted for as a troubled debtrestructuring and the amended and restated indenture was recorded at $13.4 million on March 31, 2008 which includes its principal amount of $9.0 millionplus the total estimated future interest payments of $4.4 million. At March 31, 2009 the Company elected not to make a scheduled interest payment in theamount of $0.2 million. On April 27, 2009, the Company received a notice of payment default from the lender. The notice of payment default indicated thatthe failure of the Company to make its quarterly interest payment within 30 days of March 30, 2009 would constitute an Event of Default under theIndenture. The Company has not cured the default. The Company did not make scheduled interest payments at June 30, 2009, September 30, 2009 orDecember 31, 2009.On December 23, 2009, Stonehenge Funding, LC (“Stonehenge”), an entity wholly-owned by Christopher Clemente, the Chairman and ChiefExecutive Officer of the Company, completed the purchase of the senior unsecured note from JPMV in the current outstanding amount of approximately $9.0million, plus accrued and unpaid interest. The purchase of the JPMV note also resulted in the transfer to Stonehenge of the warrant previously issued to JPMVfor the purchase of 1.5 million shares of the Company’s Class A Common Stock. In connection with Stonehenge’s purchase of the JP Morgan debt fromJPMV, Stonehenge and the Company entered into two separate subordination and standstill agreements for the benefit of the Company and its securedlenders, KeyBank and Guggenheim. The subordination agreements allow for Stonehenge and the Company to negotiate permanent modifications to theterms of the JP Morgan Debt and provide KeyBank and Guggenheim with assurances that the Company will not make any cash payments to the Stonehengeprior to the full repayment of loans to them in connection with the Company’s Eclipse and Penderbrook projects. See a related subsequent event disclosure atNote 18.At December 31, 2009 the Company had $1.0 million outstanding to M&T Bank. On September 28, 2009 the Company entered into a series ofagreements with M&T with respect to the $7.6 million of outstanding debt plus accrued interest and late fees. As a result of the agreements, the Belmont Bayloan, with a principal balance of $6.1 million plus $0.5 million of accrued interest and fees, was released in its entirety and the Cascades Loan, with aprincipal balance of $1.0 million, was be extended through January 31, 2011. Under the terms of the agreements, M&T Bank agreed to release the Companyfrom its obligations and guarantees relating to the Belmont Loan and the Company agreed to cooperate with M&T Bank with respect to its foreclosure on theremaining portion of the Belmont Bay Project which includes 19 partially completed condominium units and 84 condominium building lots. M&T Bank’sforeclosure on these assets was completed in December 2009. The Company also entered into a non-interest bearing subordinated promissory note inconnection with the Belmont Loan in the amount of $0.5 million with a three-year maturity secured by the Cascades Project. Under the terms of theagreements, M&T Bank agreed to extend the maturity date of the Cascades Loan by forbearing on enforcing its rights with respect to collection of the debtuntil January 31, 2011. The Company also agreed to commence current payment of interest due M&T Bank related to the current principal balance of theCascades Loan. The Cascades Project contains a total of 191 condominium units with the first phase of the Cascades Project (88 units) being completed bythe Company in 2007. See Note 17 for details related to troubled debt restructuring and the M&T foreclosure agreement.At December 31, 2009 the Company had $0.4 million outstanding to Cornerstone Bank (“Cornerstone”) relating to the Company’s Gates at Luberonproject. The original $5.1 million in loans matured in November 2007. Haven Trust Bank, the originating lender, and its participating lenders were unwillingto grant an extension on terms the Company felt were reasonable so the loans remained unpaid and unmodified. Haven Trust Bank initiated foreclosureproceedings and the Company protected the equity in the project by seeking bankruptcy protection for the entity that owned Gates at Luberon. TheCompany elected not to submit a plan of reorganization to the court by September 30, 2008 which resulted in Haven Trust filing a motion to lift the courtimposed stay of foreclosure. In December 2008 Haven Trust Bank was closed by the FDIC and its loan portfolio was taken over by the FDIC. Litigation withrespect to Haven Trust’s guarantee action against Comstock was stayed with the court while the FDIC determines its intended course of action. Cornerstone,one of the banks to which Haven Trust participated the loan assumed control of the loan and reinstated the guarantee and foreclosure actions. Cornerstone’sforeclosure on the Gates of Luberon project real estate was completed by September 30, 2009. On September 21, 2009 the Company entered into a settlementagreement and mutual release with Cornerstone relating to the aforementioned litigation. In connection with the settlement, Cornerstone released theCompany, and its subsidiary Mathis Partners, LLC, from their respective obligations and guarantees relating to $5.1 million of debt owed by the Company toCornerstone in exchange for a non-interest bearing unsecured subordinate note in the amount of $0.4 million with a three year term. The parties have agreedto dismiss all pending litigation against each other. See Note 17 for details related to troubled debt restructuring and the Cornerstone settlement and mutualrelease.At December 31, 2009, the Company had $3.8 million outstanding to Bank of America in a 10-year unsecured note. Bank of America and Comstockmodified the terms of the Company’s existing unsecured note by extending the term to ten (10) years, establishing an interest accrual for the first two yearsand a six year curtailment schedule starting in year four of the loan’s term. See the subsequent event disclosure related to Bank of America at Note 18. 9.COMMON STOCKAs discussed in Note 1, the Company immediately prior to the IPO, had 4,333 and 2,734 shares Class A and B common stock outstanding. Class A andB common stock shares bear the same economic rights. However for voting purposes, Class A stock holders are entitled to one vote for each share held whileClass B stock holders are entitled to fifteen votes for each share held. As a result of the IPO, the Company sold 3,960 Class A shares of common stock. TheCompany also sold an additional 594 shares of Class A common stock pursuant to the underwriters’ exercise of their over-allotment option. On June 22, 2005the Company completed a follow-on offering in which 2,360 shares of Class A common stock were sold to the public.On May 12, 2006, the Company completed a private placement (the “PIPE”) to institutional and other accredited investors of 2,121 shares of Class Acommon stock and warrants exercisable into 636 shares of Class A common stock. The Company sold the securities for $9.43 per share for total proceeds ofapproximately $20,000 and net proceeds of approximately $18,700. The per share price of $9.43 represented a premium of approximately 14.6% to theclosing price of the Company’s common stock on the date the purchase was completed. The net proceeds were used for general corporate purposes. Thewarrants issued in connection with the PIPE were five-year warrants exercisable at any time after November 10, 2006 with an exercise price of $11.32 pershare. The fair value of the warrants issued under the PIPE have been reported as equity instruments because the liquidated damages, which are capped at10%, reasonably represent the difference between the value of a registered share and an unregistered share of the Company’s common stock.In February 2006 the Company’s Board of Directors authorized the Company to purchase up to 1,000 shares of the Company’s Class A common stock in the open market or in privately negotiated transactions. The authorization did not include a specified time period in which the shares repurchase wouldremain in effect. During the twelve months ended December 31, 2006, the Company repurchased an aggregate of 391shares of Class A common stock for atotal of $2,439 or $6.23 per share. There were no shares repurchased for the twelve months ended December 31, 2009, 2008 or 2007 and the Company has noimmediate plans to repurchase any additional shares under the existing authorization. 10.RELATED PARTY TRANSACTIONSThe Company entered into a lease agreement for its corporate headquarters at 11465 Sunset Hills Road, Reston, Virginia with Comstock AssetManagement, L.C., and (CAM) an entity wholly owned by Christopher Clemente. In October 2007, the lease agreement was amended decreasing the totalsquare footage from 24.1 to 17.1 and extending the term to four years through September 2011. For the twelve months ended December 31, 2009 and 2008,total payments made under this lease agreement were $437 and $565, respectively. During the second quarter of 2009, the Company began deferring aportion of its monthly rent payment to CAM as well as deferring a portion of the base salary payments to executive officers Chris Clemente and Greg Benson.As a result of its liquidity constraints, the Company expects to further reduce its office lease obligation to CAM. F-20 Table of ContentsOn or about January 15, 2010, Comstock Property Management, L.C. (“CPM”), a subsidiary of Comstock Homebuilding Companies, Inc. (the“Company”), has agreed to enter into a new three year lease with CAM, for the use of approximately 8.2 square feet of office space at the Company’s existingheadquarters (the “Lease”). Pursuant to the terms of a separate early termination of Lease by and between CAM and the Company (the “Lease Termination”),the Company has agreed to surrender approximately 15.7 square feet of space to CAM in exchange for (i) CPM’s agreement to enter into the Lease for thereduced space and at a reduced rate; and (ii) the issuance of a warrant to purchase up to 55 shares of the Company’s Class A common stock at a strike priceequal to the average of the closing stock price for the twenty days immediately preceding the effective date of the Lease Termination in exchange for theforgiveness of approximately $110 in delinquent rent.The Company is party to agreements with I-Connect, L.C. (I-Connect), a company in which Investors Management, LLC, an entity wholly owned byGregory Benson, holds a 25% interest, for information technology and website consulting services and the right to use certain customized enterprise softwaredeveloped with input from the Company. The intellectual property rights associated with the software solution developed by I-Connect, along with anyimprovements made thereto by the Company, remain the property of I-Connect. For the twelve months ended December 31, 2009, 2008 and 2007, totalpayments made under this agreement were $86, $253 and $509, respectively. Although I-Connect has no obligation to do so, it has allowed us to accrueportions of our payment obligations from time to time and has reduced the amount due from us under the agreements.Effective January 1, 2010, the Company entered into a new software license agreement with I-Connect for the use of I-Connect’s proprietary Builder’sCo-Pilot software (the “Agreement”). Pursuant to the terms of the Agreement, I-Connect has agreed to forgive approximately $12 in delinquent payments inexchange for a warrant to purchase up to 6 shares of the Company’s Class A common stock at a strike price equal to the average of the closing stock price forthe twenty days immediately preceding the effective date of the Agreement and the Company will agree to make reduced monthly payments of $6 for the useof the software for a term of 24 months.See the subsequent event disclosure with related party Stonehenge Funding LC at Note 18. 11.EMPLOYEE BENEFIT PLANSThe Company maintains a defined contribution retirement savings plan pursuant to Section 401(k) of the Internal Revenue Code (the “Code”). Eligibleparticipants may contribute a portion of their compensation to their respective retirement accounts in an amount not to exceed the maximum allowed underthe Code. In January 2006, the Company began matching employee contributions. The total amount matched for the twelve months 2009, 2008 and 2007,was $17, $64 and $121, respectively. The Company also maintained an Employee Stock Purchase Plan in which eligible employees had the opportunity topurchase common stock of the Company at a discounted price of 85% of the fair market value of the stock on the designated dates of purchase. Under theterms of the plan, the total fair market value of the common stock that an eligible employee could purchase each year was limited to the lesser of 15% of theemployee’s annual compensation or $15. The Employee Stock Purchase Plan was discontinued in 2008. While it was active, employees of the Companypurchased zero, 15,762 and 20,763 shares of Class A common stock, for the twelve months ending December 31, 2009, 2008 and 2007, respectively. F-21 Table of Contents12.RESTRICTED STOCK, STOCK OPTIONS AND OTHER STOCK PLANSEffective January 1, 2004, the Company adopted the fair value recognition provisions required in accounting for share based payments. Prior toDecember 14, 2004, the Company did not sponsor any stock based plans.On December 14, 2004 the Company adopted the 2004 Long-Term Compensation Plan (“The Plan”). The plan provides for the issuance of stockoptions, stock appreciation rights, or SARs, restricted stock, deferred stock, dividend equivalents, bonus stock and awards in lieu of cash compensation, otherstock-based awards and performance awards. Any shares issued under the Plan vest typically over service periods that range from one to five years. Stockoptions issued under the plan expire 10 years from the date they are granted.The Plan provided for an initial authorization of 1,550 shares of Class A common stock for issuance thereunder, plus an additional annualauthorization effective January 1, 2006 equal to the lesser of (i) 3% of the Class A common stock outstanding on the date of determination, (ii) 500 shares or(iii) such lesser amount as may be determined by the Company’s Board of Directors. In September 2007 shareholders approved an amendment to The Planincreasing the number of shares reserved and available for grant from 1,550 to 2,550 and an automatic annual increase provision that increases the number ofPlan shares reserved and available for grant by the lesser of the number of shares outstanding or 750 shares.In December 2007, the Company’s Board of Directors authorized the accelerated vesting of substantially all outstanding unvested restricted stockawards held by employees representing approximately 845 shares. As a result of the acceleration, the Company recognized approximately $4,200 ofcompensation expense during the 4th quarter of 2007, thereby eliminating the need to recognize these expenses in future periods.In December 2007, the Company’s Board of Directors authorized the cancellation of all outstanding vested and unvested stock options representingapproximately 200 shares. In connection therewith, the Company recognized approximately $176 of compensation expense associated with the subjectoptions during the 4th quarter of 2007, thereby eliminating the need to recognize these expenses in future periods.In December 2007, the Company’s Board of Directors authorized the granting of 647 shares in new stock option awards to certain Companyemployees, with a $1.00 per share exercise price. The new stock options were issued to employees at all levels of the company (excluding the CEO) with the$1.00 exercise price set above the then current market price in an effort to further align the interests of the workforce as a whole with the interests ofshareholders. The new stock options will vest over a four year period. The Company will recognize compensation expense of approximately $24 related toremaining options during 2010-2011.The following equity awards were outstanding at December 31, 2009 2008 2007Stock options 248 568 647Restricted stock grants — 397 1,966Total outstanding equity awards 248 965 843 F-22 Table of ContentsOn December 31, 2009 the following amounts were available for issuance under the plan: Shares available for issuance at December 31, 2008 911Restricted stock grants and options issued — Restricted stock grants and options forfeited or cancelled 320Shares issued under employee stock purchase plan — Shares available for issuance at December 31, 2009 1,231The fair value of each option award is calculated on the date of grant using the Black-Scholes option pricing model and certain subjectiveassumptions. Because the Company does not have sufficient trading history, expected volatilities are based on historical volatilities of comparablecompanies within our industry. We estimate forfeitures using a weighted average historical forfeiture rate. Our estimates of forfeitures will be adjusted overthe requisite service period based on the extent to which actual forfeitures differ, or are expected to differ, from their estimate. The risk-free rate for the periodsis based on the U.S. Treasury rates in effect at the time of grant. The expected term of options is based on the simplified method which assumes that the optionwill be exercised midway between the vesting date and the contractual term of the option. The Company is able to use the simplified method as the optionsqualify as “plain vanilla” options as defined by ASC 718 - Stock Compensation. We issued no options in 2009. The following table summarizes theassumptions used to calculate the fair value of options during 2008 and 2007. 2008 2007 Weighted average fair value of options granted $0.33 $0.33 Dividend yields N/A N/A Expected volatility 58.3%-60.1% 58.3%-60.1% Weighted average expected volatility 59.31% 59.45% Risk free interest rates 3.56%-3.87% 3.56%-3.87% Weighted average expected term (in years) 6.25 6.26 The following table summarizes information about stock option activity: Shares WeightedaverageexercisepriceOutstanding at December 31, 2007 647 $1.00Granted 1 1.00Exercised — — Forfeited or expired (80) 1.00Outstanding at December 31, 2008 568 1.00Granted — — Exercised — — Forfeited or expired (320) 1.00Outstanding at December 31, 2009 248 1.00Exercisable at December 31, 2009 124 $1.00 F-23 Table of ContentsA summary of the Company’s restricted share activity is presented below: Shares Weightedaverage fairvalue at dateof grant Restricted shares outstanding at December 31, 2006 587 $6.95 Granted 1,023 4.25 Vested (463) (5.94) Accelerated (845) (7.24) Forfeited (106) 5.41 Restricted shares outstanding at December 31, 2007 196 $3.43 Granted 397 0.49 Vested (196) (3.43) Forfeited — — Restricted shares outstanding at December 31, 2008 397 $0.49 Granted — — Vested (397) (0.49) Forfeited — — Restricted shares outstanding at December 31, 2009 — $— As of December 31, 2009, there was zero unrecognized compensation cost related to non-vested restricted stock issuances granted under the Plan. Totalcompensation expense for share based payment arrangements for the year ended December 31, 2009 and 2008 was $77 and $280 respectively, of which $0and $0 was capitalized to real estate held for development and sale. The total deferred tax (liability) benefit related to stock compensation as of December 31,2009 and 2008 amounted to $(35) and $(82) respectively. The Company intends to issue new shares of its common stock upon vesting of restricted stockgrants or the exercise of stock options. 13.COMMITMENTS AND CONTINGENCIESLitigationOn or about June 10, 2009 a judgment of $1,502 was entered against Parker Chandler Homes, LLC (formerly known as Comstock Homes of Atlanta,LLC), a subsidiary of the Company, as a result of an uncontested breach of contract claim related to a discontinued development project in the Atlanta area. Aliability for this judgment was recorded as of June 30, 2009. On November 12, 2009, Parker Chandler Homes, LLC, filed a Chapter 7 bankruptcy petition inthe United States Bankruptcy Court, Northern District of Georgia, effectively eliminating any ongoing liability associated with the judgment. See details atNote 20.On July 29, 2008 Balfour Beatty Construction, LLC, successor in interest to Centex Construction (“Balfour”), the general contractor for a subsidiary ofthe Company, filed liens totaling approximately $552 at The Eclipse on Center Park Condominium project (“Project”) in connection with its claim foramounts allegedly owed under the Project contract documents. In September 2008 the Company’s subsidiary filed suit against Balfour to invalidate the liensand for its actual and liquidated damages in the approximate amount of $17,100 due to construction delays and additional costs incurred by the Company’ssubsidiary with respect to the Project. In October 2008 Balfour filed counterclaims in the approximate amount of $2,800. Subsequent to an expedited hearingfiled by the Company’s subsidiary to determine the validity of the liens that was ultimately heard in February 2009, we received an order of the court in April2009 invalidating the liens. The trial began on September 8, 2009 and closed on September 16, 2009. On February 23, 2010, the Company’s subsidiaryreceived a judgment against Balfour in an amount of $11,700 plus attorney’s fees to be determined at a later date. On March 3, 2010, the Company’ssubsidiary received notice of Balfour’s intention to appeal the judgment and post a supersedeas bond in the amount of $12,500. If the judgment amount isupheld on appeal, a significant portion is required to be applied toward principal curtailment under the Company’s loan agreement with KeyBank.On December 30, 2009, Lawyers Title Insurance Corporation filed an indemnification claim against a Company subsidiary in an amount of $126,seeking reimbursement of fees and costs allegedly incurred as a result of mechanic’s liens improperly filed by Balfour Beatty at The Eclipse on Center ParkCondominium project. The Company subsidiary disputes the allegations and intends to vigorously defend the claim.Other than the foregoing, we are not subject to any material legal proceedings. From time to time, however, we are named as a defendant in legalactions arising from our normal business activities. Although we cannot accurately predict the amount of our liability, if any, that could arise with respect tolegal actions pending against us, we do not expect that any such liability will have a material adverse effect on our financial position, operating results orcash flows. We believe that we have obtained adequate insurance coverage, rights to indemnification, or where appropriate, have established reserves inconnection with these legal proceedings. F-24 Table of ContentsLetters of credit and performance bondsThe Company has commitments as a result of contracts entered into with certain third parties, primarily local governmental authorities, to meet certainperformance criteria as outlined in such contracts. The Company is required to issue letters of credit and performance bonds to these third parties as a way ofensuring that such commitments entered into are met by the Company. The letters of credit and performance bonds issued in favor of the Company and/or itssubsidiaries mature on a revolving basis, and if called into default, would be deemed material if assessed against the Company and/or its subsidiaries for thefull amounts claimed. Although in some circumstances we have negotiated with our lenders in connection with foreclosure agreements for the lender toassume certain liabilities with respect to the letters of credit and performance bonds, we cannot accurately predict the amount of any liability that could beimposed upon the Company with respect to maturing or defaulted letters of credit or performance bonds and it is anticipated that any such liability wouldlikely have a material adverse effect on our financial position, operating results or cash flows. At December 30, 2009 the Company has issued $976 in lettersof credit and $4,355 in performance and payment bonds to these third parties. No amounts have been drawn against these letters of credit and performancebonds.Operating leasesThe Company leases office space and model homes under non-cancelable operating leases. Future minimum annual lease payments under these leasesat December 31, 2009: Year Ended: Amount2010 $2242011 2322012 242Thereafter — Total $698 F-25 Table of ContentsOffice and model home operating lease rental expense aggregated $649, $1,011 and $2,151 respectively, for years ended December 31, 2009, 2008 and2007. 14.FAIR VALUE OF FINANCIAL INSTRUMENTSThere are three measurement input levels for determining fair value: Level 1, Level 2, and Level 3. Fair values determined by Level 1 inputs utilizequoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Fair values determined by Level 2 inputs utilizeinputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quotedprices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest ratesand yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, and include situationswhere there is little, if any, market activity for the asset or liability. An asset’s or liability’s level within the fair value hierarchy is based on the lowest level ofinput that is significant to the fair value measurement.The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, accounts receivable, accounts payable and accruedliabilities are reasonable estimates of their fair values based on their short maturities. The carrying amount of floating rate debt approximates fair value.The fair value of fixed rate debt is based on observable market rates (level 2 inputs). The following table summarizes the fair value of fixed rate debtand the corresponding carrying value of fixed rate debt as of: December 31,2009 December 31,2008Carrying amount $9,000 $10,797Fair value $2,000 $10,542Fair value estimates are made at a specific point in time, based on relevant market information about the financial instruments. These estimates aresubjective in nature and involve uncertainties and matters of significant judgment and therefore, cannot be determined with precision. Changes inassumptions could significantly affect the estimates.The Company may also value its real estate held for development and sale at fair value on a nonrecurring basis if it is determined that an impairmenthas occurred. Such fair value measurements use significant unobservable inputs and are classified as level 3. See Note 2 for a further discussion of thevaluation techniques and the inputs used. 15.INCOME TAXESIncome taxes are accounted for under the asset and liability method in accordance with ASC 740, “Accounting for Income Taxes,” (“ASC 740”).Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts ofexisting assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply totaxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on the deferred tax assets and liabilities ofa change in tax rates is recognized in income in the period that includes the enactment date.For the twelve months ended December 31, 2009, the Company generated a tax loss of approximately $32.6 million for federal and state tax purposes.Therefore, an effective tax rate of zero was assumed in calculating the current income tax expense at December 31, 2009.Income tax provision consists of the following as of December 31 : 2009 2008 2007 Current: Federal $— $— $(11,251) State (67) 48 (1,958) (67) 48 (13,209) Deferred: Federal (9,097) (5,855) (17,890) State (1,691) (1,089) (3,391) (10,788) (6,944) (21,281) Other Valuation allowance 9,926 6,944 29,209 State franchise tax refund — — — Tax shortfall related to the vesting of equity awards — — 2,729 Total income tax expense (benefit) $(929) $48 $(2,552) F-26st Table of ContentsDeferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. Components of the Company’s deferred tax assets and liabilities at December 31 are as follows: 2009 2008 Deferred tax assets: Inventory $16,926 $19,047 Warranty 270 308 Investment in Affiliates 38 38 Net operating loss and tax credit carryforwards 27,314 15,483 Cancellation of debt gain 2,387 2,505 Accrued expenses (84) (176) Stock based compensation (36) (82) 46,815 37,123 Less — valuation allowance (46,033) (36,107) Net deferred tax assets 782 1,016 Deferred tax liabilities: Depreciation and amortization (782) (1,016) Net deferred tax liabilities (1,016) Net deferred tax assets (liabilities) $— $— As of December 31, 2007, the Company recorded valuation allowances for certain tax attributes and other deferred tax assets. At December 31, 2009,significant uncertainty exists regarding the future realization of these deferred tax assets through future taxable income or carry back opportunities. If in thefuture the Company believes that it is more likely than not that these deferred tax benefits will be realized, the valuation allowances will be reversed.The Company’s ability to use its NOLs and, in certain circumstances, future built-in losses and depreciation deductions can be negatively affected ifthere is an “ownership change” as defined under Section 382 of the Internal Revenue Code. In general, an ownership change occurs whenever there is a shiftin ownership by more than 50 percentage points by one or more 5% shareholders over a specified time period (generally three years). Given Section 382’sbroad definition, an ownership change could be the unintended consequence of otherwise normal market trading in the Company’s stock that is outside ofthe Company’s control.The Company currently has approximately $70,000 in Federal and State NOLs with a potential value of up to $27,000 in tax savings. If unused, theseNOLs will begin expiring in 2028. Under Internal Revenue Code Section 382 rules, if a change of ownership is triggered, the Company’s NOL asset andpossibly certain other deferred tax assets may be impaired. We estimate that as of December 31, 2009, the cumulative shift in the Company’s stock was at anapproximately 28% level compared with the 50% level that would trigger impairment of our NOL asset. However, if an ownership change were to occur dueto the Company’s valuation allowance on its net deferred tax assets, a Section 382 limitation is not expected to materially impact the Company’s financialposition or results of operations as of December 31, 2009. Additionally, if an ownership change were to occur, the application of Section 382 may require theCompany to reduce its gross deferred tax assets related to its NOLs and possibly other deferred tax asset balances.As discussed in Note, 1, we adopted the provisions of ASC 740 as of January 1, 2007. As a result of this adoption, the Company recorded a benefit tothe opening accumulated deficit in the amount of $1,663. The Company recognizes interest accrued related to unrecognized tax benefits in interest expense.Penalties, if incurred, would be recognized as a component of general and administrative expense. At December 31, 2008, the Company had grossunrecognized tax benefits of $77, which was fully reserved. The reserve was limited to interest on the net timing difference. During 2009 the Companyreceived approval for an accounting method change from the Internal Revenue Service that effectively allows the Company to recognize the previouslyunrecognized tax benefit. As a result, the Company reversed the $77 reserve in 2009. As of December 31, 2009, the Company had no unrecognized taxbenefit and the Company does not expect this to change significantly over the next 12 months.We file U.S. and state income tax returns in jurisdictions with varying statutes of limitations. The 2007 through 2009 tax years generally remainsubject to examination by federal and most state tax authorities.A reconciliation of the statutory rate and the effective tax rate follows: 2009 2008 2007 Federal statutory rate 35.00% 35.00% 35.00% State income taxes — net of federal benefit 3.97% 3.97% 3.97% Permanent differences 0.0% 1.85% 0.09% Change in effective tax rate 0.0% 0.0% (0.02)% Tax reserve 0.0% 0.0% (0.75)% Tax shortfall related to the vesting of certain equity awards 0.0% 0.0% (3.03)% Change in valuation allowance (35.86)% (40.82)% (32.43% Tax benefit 3.11% 0.00% 2.83% F-27 Table of Contents16.QUARTERLY RESULTS (unaudited)Quarterly results for the years ended December 31, 2009 and 2008 follow (in thousands, except per share amounts): Three months ended March 31,2009 June 30,2009 September30, 2009 December31, 2009 Revenues $5,523 2,965 12,624 $3,954 Operating loss (2,997) (26,191) (658) (1,967) Pretax income (loss) (2,644) (27,743) 2,279 425 Net income (loss) (2,645) (27,743) 2,279 1,356 Basic earnings (loss) per share (0.15) (1.58) 0.13 0.08 Diluted earnings (loss) per share (0.15) (1.58) 0.12 0.07 Three months ended March 31,2008 June 30,2008 September30, 2008 December31, 2008 Revenues $16,376 $12,003 $13,073 $5,209 Operating loss (2,970) (17,032) (4,663) (8,055) Pretax loss 6,542 (16,618) (2,197) (4,738) Net loss 6,542 (16,618) (2,202) (4,781) Basic loss per share 0.40 (1.00) (0.13) (0.27) Diluted loss per share 0.39 (1.00) (0.13) (0.27) Quarterly and year-to-date computations of per share amounts are made independently. Therefore, the sum of per share amounts for the quarters maynot agree with per share amounts for the year due to rounding. F-28 Table of Contents17.TROUBLED DEBT RESTRUCTURINGOn July 8, 2009 the Company executed a settlement agreement with an unsecured lender with respect to approximately $1,664 of unsecured debt plusinterest due. Under the terms of the settlement agreement, the Company agreed to forfeit their $200 land option deposit and the unsecured lender agreed torelease the Company from liability under the $1,664 unsecured note and interest accrued. This transaction was accounted for as a full settlement of debtpursuant to ASC 470-60. On both a basic and diluted income per share basis the $1,597 gain was $0.09 per share for the twelve months ended December 31,2009. The gain resulting from the foreclosure agreement was calculated as follows: Carrying amount of debt settled in full $1,664Cancellation of accrued interest 133Total consideration 1,797Forfeited deposit 200Gain on troubled debt restructuring $1,597On September 21, 2009 the Company entered into a settlement agreement and mutual release with Cornerstone Bank (“Cornerstone”) with respect toapproximately $5.1 million debt secured by its Gates of Luberon project in Atlanta, Georgia. Under the terms of the agreement, Cornerstone released theCompany, and its subsidiary Mathis Partners, LLC, from their respective obligations and guarantees relating to $5.1 million of debt owed by the Company toCornerstone in exchange for a non-interest bearing unsecured subordinate note in the amount of $0.4 million with a three year term. The parties have agreedto dismiss all pending litigation against each other. This transaction was accounted for as a transfer of assets in full settlement of debt pursuant to ASC 470-60. On both a basic and diluted income per share basis the $1,206 gain was $0.07 per share for the twelve months ended December 31, 2009. The gainresulting from the foreclosure agreement was calculated as follows: Carrying amount of debt and accrued interest settled in full $5,105 Fair value of foreclosed real estate assets held for development and sale (3,449)Unsecured deficiency note (400)Cash payment (50)Gain on troubled debt restructuring $1,206 On September 28, 2009 the Company entered into a series of agreements with M&T Bank under which the bank agreed to release the Company from itsobligations and guarantees relating to its Belmont loan and the Company agreed to cooperate with M&T Bank with respect to its foreclosure on theremaining portion of the Belmont Bay project. The project included 19 partially completed condominium units and 84 condominium building lots. M&TBank’s foreclosure on these assets was completed in December 2009. The Company also entered into a non-interest bearing subordinated promissory note inconnection with the Belmont loan in the amount of $496 with a three-year maturity secured by the Cascades Project. This transaction was accounted for as atroubled debt restructuring modification of terms pursuant to ASC 470. On both a basic and diluted income per share basis the $408 gain was $0.02 per sharefor the twelve months ended December 31, 2009. The gain resulting from the foreclosure agreement was calculated as follows: Transaction costs paid in cash $— Subordinated promissory note 496Fair value of foreclosed real estate assets held for development and sale 6,294Total consideration paid 6,790Less: carrying amount of debt released by lender 6,617Less: carrying amount of accrued interest and property taxes released 581Gain on troubled debt restructuring $408On November 11, 2009 the Company entered into an agreement with Fifth Third Bank in which the bank agreed to release the Company and itsaffiliates from its obligations and guarantees relating to a $1.3 million project loan and eliminate past due interest and other charges associated with thesubject debt. The Company agreed to cooperate with Fifth Third with respect to a foreclosure on a portion of the Brookfield project. In connection with theagreement with Fifth Third the Company agreed to provide Fifth Third an unsecured, non-interest bearing three year promissory note in the original principalamount of approximately $25 provided that Fifth Third completes the foreclosure proceeding no later then February 28, 2010, unless extended pursuant tothe terms of the agreement. Fifth Third’s foreclosure on the real estate assets was completed in December 2009. This transaction was accounted for as atroubled debt restructuring full settlement of terms pursuant to ASC 470. On both a basic and diluted income per share basis the $192 gain was $0.01 pershare for the twelve months ended December 31, 2009. The gain resulting from the foreclosure agreement was calculated as follows: Transaction costs paid in cash $— Unsecured promissory note 25Fair value of foreclosed real estate assets held for development and sale 1,141Total consideration paid 1,166Less: carrying amount of debt released by lender 1,328Less: carrying amount of accrued interest and property taxes released 30Gain on troubled debt restructuring $192 F-29 Table of Contents18.SUBSEQUENT EVENTSOn February 15, 2010 the Company entered into a Modification Agreement to modify the terms of the Company’s senior unsecured note withStonehenge Funding, LC (“Stonehenge”), an entity wholly-owned by Christopher Clemente, the Chairman and Chief Executive Officer of the Company. OnDecember 23, 2009 Stonehenge acquired the senior unsecured note from JP Morgan Ventures (“JPMV”) which had a $9,000,000 principal balance asdescribed in the Amended and Restated Indenture between the Company and JPMV dated March 14, 2008 (the “JP Morgan Debt”). The purchase of the JPMorgan Debt also resulted in the transfer to Stonehenge of a warrant previously issued to JPMV for the purchase of 1,500,000 shares of the Company’sClass A Common Stock with a strike price of $0.70 per share (“JP Morgan Warrant”). Gregory Benson, the Company’s Chief Operating Officer and a memberof the Company’s Board of Directors, subsequently purchased a participation interest in the JP Morgan Debt and the JP Morgan Warrant from the SubordinateLender.Under the terms of the Modification Agreement, Stonehenge has agreed to forgive $4,500,000 of the principal balance due from the Company underthe JP Morgan Debt; reducing the principal balance by 50% to $4,500,000. Stonehenge also agreed to forgive an additional amount due from the Companyof approximately $875,000 representing all past due interest, late fees and penalties accruing through December 31, 2009 (“Interest and Loan Fees”) underthe JP Morgan Debt. Stonehenge further agreed to reduce the interest rate, effective January 1, 2010, by fifty percent (50%) to 300 basis points above the oneyear LIBOR on a floating basis. In addition, to ensure the Company’s ability to comply with certain restrictions placed upon the Company by KeyBank andGuggenheim Corporate Funding (collectively “Secured Lenders”) in connection with previously announced loan modifications enhancing cashflow to theCompany, Stonehenge agreed to allow all future interest payments due from the Company under the JP Morgan Debt to accrue until at least 90 days after theSecured Lenders have been fully repaid. In connection therewith, Stonehenge may, on a quarterly basis, elect to accept stock of the Company (or warrants forthe purchase thereof) with a cumulative value equal to the value of the scheduled interest payment in lieu of accruing a future quarterly interest payment.Further, the Modification Agreement provides for the elimination or forbearance upon the enforcement of all financial covenants contained in the JPMorgan Debt and all previously reported covenant violations by the Company. The maturity date of the JP Morgan Debt remains unchanged at March 14,2013, provided however, the Modification Agreement provides the Company with two optional extension periods of six months each to further assist theCompany with its compliance with the restrictions of the Secured Lenders.On February 25, 2010 the Company entered into a Seventh Loan Modification Agreement with Bank of America (“BOA”) regarding the modificationof the terms of one certain unsecured loan with an approximate principal balance of $3,700,000 (“Line of Credit”). In connection therewith the Companyagreed to pay an extension fee of $100,000 and BOA agreed to delay for one year, until January 2011, the commencement of repayments of all previouslyunpaid interest accruing since the date of the Company’s previously reported modification of the Line of Credit in November 2008. The maturity dateremains unchanged at December 28, 2018.On March 17, 2010 the Company completed the sale of land at its Station View project located in Loudoun County, Virginia for $2.8 million. 19.CHANGE IN ACCOUNTING ESTIMATESThe preparation of the financial statements, in conformity with accounting principles generally accepted in the United States of America, requiresmanagement to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results coulddiffer from those estimates. Material estimates are utilized in the valuation of real estate held for development and sale, valuation of deferred tax assets,contingent liabilities, capitalization of costs, consolidation of variable interest entities, warranty reserves and incentive compensation accruals.During the twelve months ended December 31, 2008, the Company recognized a reduction in selling, general and administrative expense ofapproximately $1,417 related to the amount accrued at December 31, 2007 for 2007 employee incentive compensation payments. This transaction was achange in estimate due to the fact that after the completion and filing of the Company’s form 10-K for the year ended December 31, 2007, the Company’sCEO, with the approval of the Compensation Committee of the Board of Directors, determined to forgo paying 2007 performance based bonuses. Instead, theCompany elected to pay bonuses to retain key employees through 2008 and executives through 2009. The new facts and circumstances that came to lightsubsequent to the filing of form 10-K led management to conclude that this was a change in an accounting estimate. Accordingly, management hasaccounted for the change in estimate in 2008 in accordance with ASC 250, Accounting Changes and Error Corrections. 20.DECONSOLIDATION OF SUBSIDIARIESOn November 12, 2009, Buckhead Overlook, LLC, Post Preserve, LLC and Parker Chandler Homes, LLC (collectively, “Parker Chandler Homes”), filedbankruptcy petitions (the “Petitions”) in the United States Bankruptcy Court, Northern District of Georgia. Parker Chandler Homes were all subsidiaries ofComstock Homebuilding Companies, Inc. (the “Company”) and Parker Chandler Homes, LLC was formerly known as Comstock Homes of Atlanta, LLC. Onor about January 21, 2010, the United States Bankruptcy Court, Northern District of Georgia entered an order approving the trustee’s report of no distribution,discharged the trustee and closed the estate for all three subsidiary filings. The Chapter 7 petitions were filed in furtherance of the Company’s StrategicRealignment Plan that includes the liquidation of Parker Chandler Homes and the winding down of all operations in the Atlanta market.Prior to the bankruptcy filing, the Parker Chandler Homes subsidiaries were consolidated in the financial statements of Comstock. After filing theChapter 7 petitions with the bankruptcy court, Comstock no longer had the controlling financial interest as the subsidiaries became subject to the control ofthe bankruptcy court. As a result, the Company is required under ASC 810-10-55-4A to deconsolidate the subsidiaries as of the date of the bankruptcy filing.At the date of the bankruptcy filing, the Company accounted for the deconsolidation of the subsidiaries as a gain in net income, calculated in accordancewith ASC 810-10-40-5 as follows: Fair value of consideration received $— Fair value of any retained noncontrolling investment in former subsidiaries — Carrying amount of any noncontrolling interest in the former subsidiaries — Total consideration received — Carrying amount of former subsidiaries net liabilities 1,965Gain on deconsolidation of subsidiaries $1,965 F-30 Table of ContentsSIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized. COMSTOCK HOMEBUILDING COMPANIES, INC.Date: March 31, 2010 By: /s/ CHRISTOPHER CLEMENTE Christopher Clemente Chairman and Chief Executive OfficerPursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the date indicated. Signature Capacity Date/s/ CHRISTOPHER CLEMENTE Chairman of the Board of Directors March 31, 2010Christopher Clemente and Chief Executive Officer (Principal Executive Officer) * Chief Operating Officer March 31, 2010Gregory V. Benson /s/ JEFFREY R. DAUER Chief Financial Officer(Principal Financial Officer) March 31, 2010Jeffrey R. Dauer * Director March 31, 2010A. Clayton Perfall * Director March 31, 2010David M. Guernsey * Director March 31, 2010James A. MacCutcheon * Director March 31, 2010Norman D. Chirite * Director March 31, 2010Robert P. Pincus * Director March 31, 2010 Socrates Verses By: /S/ JEFFREY R. DAUER March 31, 2010 Jeffrey R. Dauer Attorney-in-Fact Exhibit 10.77FORBEARANCE AGREEMENT ANDSECOND AMENDMENT OF LOAN AGREEMENTTHIS FORBEARANCE AGREEMENT AND SECOND AMENDMENT OF LOAN AGREEMENT (the “Forbearance Agreement”), is made as of the 27day of January, 2009 (“Forbearance Effective Date”) by and among COMSTOCK PENDERBROOK, L.C., a Virginia limited liability company (“Borrower”)and COMSTOCK HOMEBUILDING COMPANIES, INC., a Delaware corporation (“Comstock” or “Guarantor”) (Borrower and Comstock are referred toherein collectively as “Obligors”), and GUGGENHEIM CORPORATE FUNDING, LLC, having an address at 135 East 57 Street, New York, New York,10022 (“Administrative Agent”), for the benefit of the several banks and other financial institutions or entities from time-to-time parties to the LoanAgreement, defined below (the “Lenders” and together with the Administrative Agent, the “Beneficiary”).RECITALSWHEREAS, Borrower, Guarantor, the Administrative Agent and the Lenders entered into a Loan Agreement dated February 22, 2007 as amended bythat certain First Amendment of Loan Documents dated April 10, 2007 (collectively the “Loan Agreement”), pursuant to which the Lenders agreed to and didmake loans to the Borrower in the aggregate principal amount of $28,000,000.00 (the “Loans”) for the purposes stated in the Loan Agreement. The Loans arenow secured by, among other things, (1) an Amended and Restated Deed of Trust With Absolute Assignment Of Leases And Rents, Security Agreement andFixture Filing executed by Borrower, as Grantor, in favor of the Administrative Agent and Lenders, as Beneficiaries (the “Deed of Trust”); (2) anEnvironmental Indemnity Agreement executed by Borrower and Guarantor (the “Environmental Indemnity Agreement”); (3) the Limited Guaranty executedby the Guarantor (the “Guaranty”); (4) the Completion Guaranty executed by the Guarantor (the “Completion Guaranty”); (5) the Pledge Agreement executedby the Guarantor (the “Pledge”); and (6) the Collateral Assignment of Developer’s Rights executed by the Borrower (the “Collateral Assignment”), eachdated February 22, 2007 unless otherwise indicated (collectively the “Loan Documents”); andWHEREAS, a number of defaults have occurred under the Loan Documents including the failure by Borrower to make payment in full of amounts dueand owing under the Loan Documents, and Borrower has requested that the Administrative Agent forebear from collection of the Loans, and make certainmodifications to the terms and provisions of the Loans and the Loan Agreement; andWHEREAS, the Administrative Agent and the Lenders are willing to forebear from exercising their rights and remedies under the Loan Agreement withrespect to the Existing Defaults (defined below), and to make certain modifications to the terms and provisions of the Loans and the Loan Agreement inaccordance with the provisions of this Forbearance Agreement. 1thth NOW, THEREFORE, for and in consideration of the sum of Ten and 00/100 Dollars ($10.00) cash in hand paid, and other good and valuableconsideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto stipulate and agree as follows:1. Recitals. All of the foregoing recitals are hereby incorporated into this Forbearance Agreement. Capitalized terms that are not otherwise defined inthis Forbearance Agreement shall have the same meanings herein as ascribed to such terms in the Loan Agreement.2. Acknowledgment of Loan Balances and Default.a) Borrower and Guarantor each acknowledge that they are in default under the Loan Documents, such Events of Default being specified in the lettersto Borrower and Guarantor attached hereto as Exhibit A (“Existing Defaults”) and the Administrative Agent and the Lenders have the right to exercise allremedies set out in the Loan Documents and available at law and in equity, including but not limited to foreclosing on the Units and the Property. Borrowerand Guarantor hereby represent, warrant, agree and acknowledge that the outstanding balances on the Loans as of January 27, 2009 are as follows: Tranche A Term Loan: Principal $0.00Interest 0.00Total $0.00Tranche B Term Loan: Principal $13,593,605.00Interest 424,915.32Quarterly Admin. Fee 10,000.00Total $14,028,520.32b) Borrower and Guarantor each hereby reaffirm to the Administrative Agent and the Lenders (i) the validity and enforceability of the Loan Agreementand the other Loan Documents as modified herein; (ii) that the signature of Borrower and Guarantor upon the Loan Agreement and the Loan Documents wereauthorized and are genuine; and (iii) neither the Borrower nor the Guarantor has any knowledge of any offsets or defenses to the enforceability of the LoanAgreement and the other Loan Documents. 2 c) The parties hereto acknowledge that the interest and the Quarterly Admin. Fee due and owing through January 27, 2009 on the Tranche B TermLoan are to be added to the principal balance due on the Tranche B Term Loan resulting in a principal balance due on the Tranche B Term Loan of$14,028,520.32.3. Payment of Past Due Amounts.Simultaneously with the execution of this Forbearance Agreement by Borrower and Guarantor, Borrower agrees to pay, and shall pay, the followingamounts: a)All real estate taxes presently due and owing relating to the Property and Units, including all past due taxes, penalties and interest, in the amountof $324,643.21; and b)All condominium association assessments due and owing for the Units through January 31, 2009, in the amount of $479,572.81; and c)To the Administrative Agent the following amounts: (i)$15,000.00 to reimburse the Administrative Agent for expenses incurred in connection with the review and audit of books and records ofthe Borrower by Alvarez and Marsal; and (ii)$45,000.00 to reimburse the Administrative Agent for attorney’s fees and costs incurred in connection with the Loans, the defaults by theBorrower and Guarantor, the Lawsuit (as defined in Section 9 of this Forbearance Agreement) and the negotiation, preparation andimplementation of this Forbearance AgreementBorrower shall provide the Administrative Agent with proof of payment of the amounts required to be paid pursuant to Sections 3(a) and 3(b) above nolater than the Forbearance Effective Date.4. Borrower’s Calculation of NOI, Interest Reserve Account, and Proof of Insurance.a) On or before the Forbearance Effective Date, Borrower shall deliver to the Administrative Agent (i) Borrower’s calculation of NOI, as required bySection 5.1 of the Loan Agreement, for the months of October, November and December, 2008, (ii) Borrower’s balance sheet for December, 2008 (in a formreasonably acceptable to Administrative Agent) (“Borrower’s December Balance Sheet”), and (iii) a rent roll for the Property for January, 2009 (in a formreasonably acceptable to Administrative Agent). From and after the Forbearance Effective Date, Borrower shall strictly comply with the requirements ofSection 5.1 of the Loan Agreement, as modified herein. 3 b) Borrower and Administrative Agent hereby acknowledge that at Closing, Borrower deposited into the Interest Reserve Account established pursuantto Section 5.1 of the Loan Agreement the amount of Two Million Five Hundred Thousand Dollars and No Cents ($2,500,000.00). Borrower and Guarantoracknowledge that the Administrative Agent had the right to and did set-off against the Interest Reserve Account and applied the funds in the Interest ReserveAccount against interest and principal amounts owed on the Loans and that as of the Forbearance Effective Date there are no funds on deposit in the InterestReserve Account.c) Simultaneously with the execution of the Forbearance Agreement, Borrower shall pay to Administrative Agent the positive difference, if any,between (i) the net cash reflected on Borrower’s December Balance Sheet, and (ii) the sum of (A) $25,000, plus (B) the amount used to pay the items set forthin Section 3 of this Forbearance Agreement, plus (C) a $75,000 partial reimbursement to Guarantor of expenses paid by Guarantor on behalf of the Borrowerin accordance with the Loan Documents. Any amount paid to Administrative Agent pursuant to this Section 4(c) shall be applied to the outstanding principalbalance of the Tranche B Term Loans.d) On or before the Forbearance Effective Date, Borrower shall deliver to Administrative Agent proof of Insurance in compliance with Section 6.8 of theLoan Agreement.5. Modification of Loan Agreement.Provided that Borrower timely satisfies all of the terms, conditions and requirements set forth above in this Forbearance Agreement, the LoanAgreement from and after the Forbearance Effective Date is hereby modified as follows: a)Section 6.8.1(c) of the Loan Agreement is amended to reduce all insurance limits and sublimits to Two Million Dollars ($2,000,000) in theannual aggregate and One Million Dollars ($1,000,000) per occurrence. b)Section 7.4 of the Loan Agreement is amended to read as follows:Sale Activity. Borrower shall use all commercially reasonable efforts to market and sell all Units in the Project for a Unit selling price sufficientto satisfy the requirements of Section 6.7(i) and Section 7.7(b). Borrower shall provide Administrative Agent by the tenth (10) day of eachmonth with a Sales Report certified by the Borrower for the preceding month. Within ten (10) days after written request from AdministrativeAgent, Borrower shall also provide Administrative Agent with any information reasonably requested by Administrative Agent or Lendersregarding sales activity at the Project. 4th c)Section 7.5 of the Loan Agreement and Exhibit E of the Loan Agreement are deleted. d)Section 7.1(c) of the Loan Agreement is deleted. e)Section 6.7(i) of the Loan Agreement entitled “Unit Selling Price” is amended to read as follows:Unit Selling Price. From and after the Forbearance Effective Date, Units shall be sold for no less than a minimum unit selling price set by theBorrower necessary to satisfy the payment requirements to the Administrative Agent set forth in Section 7.7(b), unless otherwise approved by theAdministrative Agent, in writing. f)Section 7.1(f) of the Loan Agreement is deleted. g)The first sentence of Section 7.7(a) of the Loan Agreement is amended to read as follows:Condominium Closings. No less than three (3) Business Days prior to the closing of each Residential Unit or Parking Unit pursuant to anApproved Condominium Contract, Borrower shall deliver notice to Administrative Agent (a “Closing Notice”) which Closing Notice shall:(i) specifically identify the Residential Unit(s) and Parking Units to be conveyed; (ii) state the purchase price to be paid therefore, specificallyidentifying the portion thereof applicable to the Residential Unit, Upgrades, if any, and the Parking Units, if any; and (iii) be accompanied bythe form of the partial release to be executed by the Administrative Agent on behalf of the Lenders in order to release its security interest underthe Deed of Trust in the applicable Residential Unit and/or Parking Units to be sold and containing a description of the applicable ResidentialUnit and/or Parking Units to be released, which partial release shall be prepared by Borrower at Borrower’s sole cost and expense (“UnitReleases”). h)Section 7.7(b) of the Loan Agreement is amended to read as follows:Release of Units. Upon receipt of a Closing Notice and satisfaction of all conditions precedent set forth in Section 7.7(a) and this Section 7.7(b),and upon the confirmation of the closing of a Residential Unit and/or Parking Units pursuant to an Approved Condominium Contract (suchconfirmation to be satisfied through the delivery of a fully executed HUD-1 from the settlement agent coordinating the closing, and writtenconfirmation from the settlement agent coordinating the closing of such agent’s receipt of immediately available funds sufficient to fully fundthe closing in 5 accordance with the fully executed HUD-1 for the closing), Administrative Agent shall authorize in writing recordation of the deed transferringtitle to the Unit pursuant to the Approved Condominium Contract and agrees to release the applicable Residential Unit, Parking Units and itsappurtenant undivided interest in the common elements from the lien of the Deed of Trust and the other Loan Documents upon receipt of theUnit Release Payment for each Unit so sold. As used herein, “Unit Release Payment” means 90% of the Net Sales Price for such Residential Unitand its Parking Units, but in no event not less than $135,000, other than with the prior written consent of the Administrative Agent. Borrowershall cause the Title Insurer, as escrowee, to pay the proceeds of sale in an amount of not less than the Unit Release Payment directly toAdministrative Agent by wire-transfer of immediately available funds. The proceeds of sale shall be applied to the outstanding principal balanceof the Tranche B Term Loans. i)Exhibit F of the Loan Agreement is replaced with Exhibit F attached to this Forbearance Agreement. j)Section 6.7(j) of the Loan Agreement is amended to read as follows:Number of Units Sold. (i) From and after the Forbearance Effective Date and continuing through December, 2010, prior to the end of eachcalendar quarter that all or any part of the Loans are outstanding, Borrower, on an ongoing cumulative basis, shall have closed on the MinimumUnit Settlements as set forth below:Q1 2009: 0Q2 2009: 0Q3 2009: 1Q4 2009: 6Q1 2010: 8Q2 2010: 10Q3 2010: 16Q4 2010: 24Borrower’s failure to close on the required Minimum Unit Settlements by the end of any of the above referenced calendar quarters shall be anEvent of Default under this Agreement unless, (a) within twenty-five (25) days of the end of such calendar quarter, the Borrower providesAdministrative Agent with written notice that it will either: (i) affect a Unit Deficiency Reduction Payment as defined in Section 6.7(j)(ii) below,or (ii) affect a 6 Deed-in-Lieu Cure as defined in Section 6.7(j)(iii) below, and in such notice specify which option has been chosen by Borrower, and (b) if suchnotice is timely delivered, the Borrower delivers the Unit Deficiency Reduction Payment or the Cure Deed (together with all applicablerecording costs for the Cure Deed and all affidavits and documents reasonably required for the Administrative Agent to obtain owner’s titleinsurance for the conveyed Units), as the case may be, to Administrative Agent within thirty (30) days of the end of such calendar quarter.(ii) A “Unit Deficiency Reduction Payment” occurs when the Borrower makes a release payment to the Administrative Agent for the number ofResidential Units representing the difference between the Minimum Unit Settlements required for such calendar quarter under Section 6.7(j)(i)herein and the actual cumulative number of Residential Units closed by the end of such calendar quarter. The Residential Units shall be releasedunder this provision in accordance with the order and priority set forth in Section 6.7(j)(iii) until sufficient Residential Units have been releasedto satisfy the Event of Default. Each Unit Deficiency Reduction Payment will be an amount equal to the then Average Debt Per Unit multipliedby the following in accordance with the applicable Residential Unit type: Unit Type MultiplePenderbrook 1.40xMcLean 1.30xFairfax 1.20xClifton 1.10xUpon receipt of the Unit Deficiency Reduction Payment, Administrative Agent will release such Residential Units from the lien of the Deed ofTrust. Residential Units released through a Unit Deficiency Reduction Payment shall be deemed closed Units for the purpose of: (i) satisfying theMinimum Unit Settlement requirements set forth in Section 6.7(j)(i); (ii) extending the Maturity Date in accordance with Section 2.2(f)(ii); and(iii) calculating and re-computing PIK Interest in accordance with Section 2.6(g).(iii) A “Deed-in-Lieu Cure” occurs when the Borrower delivers to the Administrative Agent a deed in the form attached hereto as Exhibit F(“Cure Deed”) for a total number of Residential Units (and their corresponding Parking Units and appurtenant undivided interest in the commonelements) representing the difference between the Minimum Unit Settlements required for such calendar quarter under Section 6.7(j)(i) 7 herein and the actual cumulative Residential Units closed by the end of such calendar quarter. The Residential Units shall be conveyed “as-is”and alternating between unrenovated and renovated Residential Units in the following order: (A) unrenovated, vacant and not leased,(B) renovated, vacant and not leased, and once all Residential Units falling into categories (A) and (B) have been conveyed, then(C) unrenovated, leased, and (D) renovated, leased; all in accordance with the following sentence. Residential Units shall be conveyed on arotating basis in the following order, subject to the renovation status and availability of each Residential Unit as provided in this Section 6.7(j)(iii) above: (w) Penderbrook, (x) McLean, (y) Fairfax, and (z) Clifton. For each Residential Unit conveyed pursuant to this Section 6.7(j)(iii), theLoan balance will be reduced by an amount equal to the then Average Debt Per Unit conveyed, multiplied by the following in accordance withthe applicable Residential Unit type: Unit Type MultiplePenderbrook 1.22xMcLean 1.05xFairfax 0.94xClifton 0.78x(iv) Residential Units conveyed to Lender by Cure Deed pursuant to Section 6.7(j)(iii) shall not be considered closed Units for purposes of(a) satisfying the requirements for extending the Maturity Date in accordance with Section 2.2(f)(ii); and (b) calculating and re-computing PIKInterest in accordance with Section 2.6(g).(v) In no event shall the Borrower convey to Administrative Agent pursuant to the provisions of Section 6.7(j)(iii) more than that number ofResidential Units required to satisfy the Event of Default. k)Section 2.6(b) of the Loan Agreement is amended to read as follows:Interest (“Interest”) shall accrue and be payable in cash on the outstanding principal balance of each of the Tranche B Term Loans at the rate (the“Tranche B Term Loan Interest Rate”) from time to time which is equal to the Index Rate (as defined in Section 2.6(c)) then in effect plus 200basis points. 8 l)The following is added to Section 2.6 of the Loan Agreement:(g) (i) Commencing on the Forbearance Effective Date, additional paid in kind interest (“PIK Interest”) shall accrue on a monthly basis on theLoans. The PIK Interest rate charged shall depend upon the cumulative number of Residential Units closed as of the last day of the previouscalendar quarter according to the following schedules:Schedule A: For Calendar Year 2009: CumulativeResidential UnitsClosed PIK Interest Rate(basis points perannum)0-9 120010 70011 65012 60013 55014 50015 45016 40017 35018 30019 25020 or more 200Schedule B: For Calendar Year 2010: CumulativeResidential UnitsClosed PIK Interest Rate(basis points perannum)0-15 120016 70017 65018 60019 55020 50021 45022 40023 35024 30025 25026 or more 200 9 Schedule C: For the Calendar Year 2011:From January 1, 2011 through the Maturity Date the PIK Interest Rate (basis points per annum) shall be determined based on the rate ineffect on Schedule B herein as of December 31, 2010.Notwithstanding the above schedules to the contrary, PIK Interest commencing on the Forbearance Effective Date through March 31, 2009 andPIK Interest commencing on January 1, 2010 through March 31, 2010 shall accrue at the rate of 1200 basis points per annum (12.0%), subject toadjustment as provided in Section 2.6(g)(ii). Otherwise, PIK Interest shall accrue at the rates set forth in the above schedules based on thecumulative number of Residential Units closed as of the last day of the previous calendar quarter. PIK Interest shall accrue and be added to theprincipal amounts owing on the Loans at the end of each month.(ii) On each of December 31, 2009 and December 31, 2010, PIK Interest charged for the preceding twelve (12) month period shall be recomputedbased upon the rates shown on the schedules in Section 2.6(g)(i) corresponding to the cumulative Residential Units closed during the precedingtwelve (12) month period, and the principal balance due on the Loans shall be adjusted to take into account this recomputation. By way ofexample, the PIK Interest rate for Q1 2009 is 1200. If there are five (5) Residential Units closed during Q1 2009, based upon the number of Unitsclosed, PIK Interest for Q2 2009 will accrue at a rate of 1200 basis points. If there are then eight (8) additional Residential Units closed during Q22009, based upon the cumulative number of Residential Units closed for Q1 2009 and Q2 2009 (which is 13), PIK Interest for Q3 2009 willaccrue at a rate of 550 basis points. If two (2) additional Residential Units closed during Q3 2009, based upon the cumulative number ofResidential Units closed for Q1 2009, Q2 2009 and Q3 2009 (which is 15), PIK Interest for Q4 2009 will accrue at a rate of 450 basis points. Iftwo (2) additional Residential Units closed during Q4 2009, based upon the cumulative number of Residential Units closed for the calendar year2009 (which is 17), PIK Interest for the entire calendar year 2009 is recomputed based upon a rate of 350 basis points, and the amount of PIKInterest for the calendar year 2009 added to the principal balance of the Loans would be adjusted accordingly. The PIK Interest for Q1 2010would then begin to accrue at a rate of 1200 basis points. 10 (iii) If the Loans are refinanced or paid in full prior to the Maturity Date, PIK Interest charged for the calendar year in which the Loans arerefinanced or paid in full (“Payoff Year”) shall be at a rate of 200 basis points, retroactive to January 1 of the Payoff Year. m)Section 2.6(e) of the Loan Agreement is amended to read as follows:Interest accruing through and including the last day of each calendar month (exclusive of PIK Interest) shall be payable in arrears on eachInterest Payment Date, provided that interest accruing pursuant to Section 2.6(d) shall be payable from time-to-time on demand. n)Section 5.1 of the Loan Agreement is amended to read as follows:On the fifteenth day of each calendar month, beginning February 15, 2009, Borrower shall submit to Administrative Agent Borrower’scalculation of NOI for the preceding month, a balance sheet for Borrower in form acceptable to Administrative Agent for the preceding month,and a rent roll for the Project in form acceptable to Administrative Agent for the current month. Borrower shall have the right to retain NOI not toexceed $100,000 in each calendar year. All NOI in excess of $100,000 in each calendar year shall be paid to the Administrative Agent on eachInterest Payment Date and applied to the outstanding principal balance of the Tranche B Term Loans. o)The following shall be added to Section 2.2 of the Loan Agreement:(f) (i) For purposes of this Agreement, the term “Maturity Date” shall mean March 6, 2011 (“Modified Maturity Date”), subject to the provisionsof Section 2.2(f)(ii). 11 (ii) The Borrower shall be entitled to extend the Modified Maturity Date (such date being an “Extended Maturity Date”) or the current ExtendedMaturity Date based on the cumulative number of Residential Units closed between the Forbearance Effective Date and the date which isfourteen (14) calendar days prior to the Modified Maturity Date or then current Extended Maturity Date (“Sales Period”) as follows: Number of ResidentialUnits Closed ExtendedMaturity Date45 July 6, 201151 September 6, 201157 November 6, 201163 January 6, 201269 or more March 6, 2012(iii) If the Modified Maturity Date is extended, the “Maturity Date” shall mean the then current Extended Maturity Date.(iv) In the event Borrower has not closed on the number of Residential Units required in Section 2.2(f)(ii) during the Sales Period to qualify foran Extended Maturity Date, Borrower (or Borrower’s affiliate acting for the Borrower) shall have the option of extending the Modified MaturityDate or the then current Extended Maturity Date by making a release payment for the number of Residential Units representing the differencebetween the number of Residential Units required to be closed under Section 2.2.(f)(ii) to qualify for an Extended Maturity Date and the actualnumber of Residential Units closed during the Sales Period (“Borrower Release Payment Option”). Residential Units shall be released under thisprovision in accordance with the order and priority set forth in Section 7.6(j)(iii) until sufficient Residential Units have been released to meet therequired number of Residential Units closed to qualify for an Extended Maturity Date. Each Residential Unit release payment will be an amountequal to then outstanding Average Debt Per Unit multiplied by the following in accordance with the applicable Residential Unit type: Unit Type MultiplePenderbrook 1.40xMcLean 1.30xFairfax 1.20xClifton 1.10xBorrower shall provide Administrative Agent with written notice no later than fourteen (14) calendar days prior to the Modified Maturity Date orthen current Extended Maturity Date that it will be exercising the Borrower Release Payment Option. If Borrower timely exercises the BorrowerRelease Payment Option, payment for the Residential Units (calculated in accordance with this Section 2.2(f)(iv)) (“Borrower Release Payment”)shall be delivered to Administrative Agent no later than the Modified Maturity Date or the then current Extended Maturity Date. Upon receipt ofthe Borrower Release Payment, Administrative Agent will release such Residential Units from the lien of the Deed of Trust. Residential Unitsreleased pursuant to a Borrower Release Payment Option will be counted toward the calculation of the number of Residential Units required tobe closed under Section 2.2(f)(ii) with respect to qualifying for additional Extended Maturity Dates. 12 (v) If Borrower shall not have closed on the number of Residential Units required in Section 2.2(f)(ii) to qualify for an extension of the ModifiedMaturity Date or the then current Extended Maturity Date during the Sales Period, and (A) does not exercise the Borrower Release PaymentOption set forth in Section 2.2(f)(iv), or (B) does not refinance or pay the Loans in full by the Modified Maturity Date or the then currentExtended Maturity Date, such shall be an Event of Default and Administrative Agent and the Lenders may exercise any or all of the remedies setforth in Article X of the Agreement. If Borrower does not refinance or pay the Loans in full by any final Extended Maturity Date, such shall be anEvent of Default and Administrative Agent and Lenders may exercise any or all of the remedies set forth in Article X of the Agreement. p)Section 5.2 of the Loan Agreement is amended to read as follows:Deposits for Real Estate Taxes, HOA Fees and Insurance Premiums. (a) At the election of Administrative Agent, Administrative Agent shallestablish a Tax, HOA and Insurance Reserve Account with a bank or financial institution selected by Administrative Agent, and Borrower shallon the Interest Payment Date deposit with Administrative Agent an amount equal to (i) one-twelfth (1/12) of 100% of the annual Real EstateTaxes next to become due upon the Property for the payment of Real Estate Taxes when due, (b) one-twelfth (1/12) of 100% of the HOA Feesnext to become due upon the Property for the payment of HOA Fees when due, and (c) one-twelfth (1/12) of the Insurance Premiums thatAdministrative Agent estimates will be payable during the next ensuing twelve (12) months for the renewal of the coverage afforded by theInsurance Policies upon the expiration thereof or such higher amount necessary to accumulate with Administrative Agent sufficient funds to payall such Insurance Premiums at least thirty (30) days prior to the expiration of the Insurance Policies, which payments shall be deposited byAdministrative Agent into the Tax, HOA and Insurance Reserve Account; provided that in the case of the first such deposit there shall bedeposited by Borrower, in addition, an amount which, when added to the aggregate amount of monthly sums next payable under thisSection 5.2, will result in a sufficient reserve to pay the Real Estate Taxes, HOA Fees and Insurance Premiums next becoming due one monthprior to the date when such Real Estate Taxes, HOA Fees and Insurance Premiums are, in fact, due and payable. If Administrative Agentdetermines at any time that the monthly payments are not adequate to fund the next installment of Real Estate 13 Taxes, HOA Fees and Insurance Premiums due, Borrower shall make an additional deposit in an amount equal to the expected deficiency. Theamount of the deposits described in this Section 5.2(a) (herein generally called “Tax, HOA and Insurance Reserve Funds”) shall be based uponAdministrative Agent’s reasonable estimate as to the amount of Real Estate Taxes, HOA Fees and Insurance Premiums next to be payable. Failureof Borrower to make the monthly deposits required by this Section 5.2 shall constitute an Event of Default.(b) It shall be the responsibility of Borrower to furnish Administrative Agent with the bills for the Real Estate Taxes, HOA Fees and InsurancePremiums not later than the date that is thirty (30) days (or such later date if Borrower does not receive the bills from the billing party by suchdate) prior to the date on which the same are due and payable without penalty or premium of any kind. If the total Tax, HOA and InsuranceReserve Funds on hand shall not be sufficient to pay all of the Real Estate Taxes, HOA Fees and Insurance Premiums when the same shallbecome due, then Borrower shall deliver to Administrative Agent at the time of the submission of the bills to Administrative Agent as describedabove an amount equal to the deficiency. If the total of such Tax, HOA and Insurance Reserve Funds exceeds the amount required to pay theReal Estate Taxes, HOA Fees and Insurance Premiums, such excess shall be credited against subsequent payments to be made for such deposits.(c) Provided Administrative Agent has required Borrower to deposit funds into the Tax, HOA and Interest Reserve Account for the payment ofReal Estate Taxes, HOA Fees and Insurance Premiums, and provided Borrower complies with the provisions of Sections 5.2(a) and (b),Administrative Agent shall timely submit payment to the proper entities for the amount of Real Estate Taxes, HOA Fees or Insurance Premiumsfor which such funds were escrowed. If Borrower has complied with the provisions of Sections 5.2(a) and (b) and Administrative Agent fails totimely pay the Real Estate Taxes, HOA Fees or Insurance Premiums, Administrative Agent shall be solely responsible for payment of allapplicable late fees and costs associated with the late payment of the Real Estate Taxes, HOA Fees and Insurance Premiums. If Borrower fails tocomply with the provisions of Sections 5.2(a) and (b), Administrative Agent shall have no obligation to submit payment for the Real EstateTaxes, HOA Fees and Insurance Premiums to the proper entities.(d) Administrative Agent hereby elects, and Borrower and Guarantor hereby acknowledge such election, to establish as of the ForbearanceEffective Date the Tax, HOA and Insurance Reserve Account pursuant to Section 5.2(a) and Borrower shall make payments into the Tax, HOAand 14 Insurance Reserve Account only for Real Estate Taxes and HOA Fees in accordance with Section 5.2(a) beginning on February 15, 2009.Administrative Agent further agrees it shall not elect to collect Insurance Premiums so long as it is provided with a current certificate ofinsurance evidencing the coverage set forth in Section 6.8.1. q)All references in Section 5.3 to the “Tax and Insurance Reserve Account” shall be replaced with “Tax, HOA and Interest Reserve Account”. r)Section 9.1(f) of the Loan Agreement is amended to read as follows:Bankruptcy, Insolvency, etc. Borrower shall: (i) become insolvent or generally fail to pay, or admit in writing its inability or unwillingness topay, debts as they become due; (ii) apply for, consent to, or acquiesce in, the appointment of a trustee, receiver, sequestrator or other custodianfor itself or a substantial part of its property, or make a general assignment for the benefit of creditors; (iii) in the absence of such application,consent or acquiesce, permit or suffer to exist the appointment of a trustee, receiver, sequestrator or other custodian for itself or for a substantialpart of its property, and such trustee, receiver, sequestrator or other custodian shall not be discharged within 60 days, provided thatAdministrative Agent is hereby expressly authorized to appear in any court conducting any relevant proceeding during such 60-day period topreserve, protect and defend its rights and the rights of Lenders under the Loan Documents; (iv) permit or suffer to exist the commencement ofany bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcy or insolvency law, or any dissolution,winding up or liquidation proceeding, in respect of any of Borrower, and, if any such case or proceeding is not commenced by Borrower, suchcase or proceeding shall be consented to or acquiesced in by Borrower, or shall result in the entry of an order for relief or shall remain for 60 daysundismissed, provided that Administrative Agent is hereby expressly authorized to appear in any court conducting any such case or proceedingduring such 60-day period to preserve, protect and defend its rights and the rights of the Lenders under the Loan Documents; or (v) take anycorporate, partnership, trust or other similar action authorizing or in furtherance of any of the foregoing; 15 s)Section 9.1(g) of the Loan Agreement is amended to read as follows:Attachment. There is an attachment, execution or other judicial seizure of any portion of Borrower’s assets or any assets of Guarantor pledgedpursuant to the Pledge Agreement, and such seizure is not discharged within thirty (30) days of such attachment, execution or other judicialseizure, as the case may be; t)Section 9.1(o) of the Loan Agreement is deleted. u)Section 9.1(p) of the Loan Agreement is amended to read as follows:Judgments. Any judgment or judicial decree (collectively “Adverse Judgment”) for the payment of money in excess of $75,000.00 not otherwisecovered by insurance (with deductibles not to exceed $75,000) shall be rendered against Borrower unless such Adverse Judgment is bonded offof the Property within thirty (30) days of such Adverse Judgment becoming final. v)The last paragraph of Section 9.1 of the Loan Agreement is amended to read as follows:provided, however, (i) an item of Default listed in Section 9.1(a) shall not be deemed an Event of Default (except as provided below) until suchdefault continues for five (5) days after Borrower or Guarantor, as applicable, has been provided with notice of such default (“Default Notice”) byAdministrative Agent and/or Lenders in accordance with Section 12.2 below; (ii) any item of Default listed in Sections 9.1(b), (h), (j), (l), (n) and(q) shall not be deemed an Event of Default (except as provided below) until such default continues for thirty (30) days after Borrower orGuarantor, as applicable, has been provided a Default Notice by Administrative Agent and/or Lenders in accordance with Section 12.2 below;and (iii) any item of Default listed in Sections 9.1(e), (g), (i), (k), (m), (p) and (r) shall not be deemed an Event of Default (except as providedbelow) until such default continues for thirty (30) days after Borrower or Guarantor, as applicable, has been provided a Default Notice byAdministrative Agent and/or Lenders in accordance with Section 12.2 below. If two (2) Default Notices have been given by AdministrativeAgent and/or Lenders in the twelve (12) month period after the Forbearance Effective Date preceding an item of Default listed in Sections 9.1(a)-(e) and (g)-(r), then there shall be no notice or cure period applicable to such item of Default. w)Exhibit H attached to this Forbearance Agreement is added to the Loan Agreement as Exhibit H. 16 x)The following is added to Article X of the Loan Agreement: 10.6Deed in Lieu of Foreclosure. (i) On the Forbearance Effective Date, Borrower shall execute and deliver to the Administrative Agent adeed in the form attached hereto as Exhibit H (“Deed in Lieu of Foreclosure”). Upon an Event of Default and acceleration of the Loanspursuant to Section 10.1, Administrative Agent and Lenders may, and Borrower hereby authorizes Administrative Agent and Lenders to,attach to the Deed in Lieu of Foreclosure the legal description(s) for all Residential Units and their corresponding Parking Units andappurtenant common elements comprising the Project against which the Deed of Trust is a lien, date the Deed in Lieu of Foreclosureeffective the date of default and make any other additions to the Deed in Lieu of Foreclosure necessary to comply with recordingrequirements then in effect in the County of Fairfax, Virginia, and record the Deed in Lieu of Foreclosure. If requested by theAdministrative Agent, Borrower shall promptly (a) re-execute the Deed in Lieu of Foreclosure and immediately deliver it toAdministrative Agent; and/or (b) any affidavits and documents reasonably required for the Administrative Agent to obtain owner’s titleinsurance for the conveyed Units, and immediately deliver such affidavits and documents to the Administrative Agent. ProvidedBorrower has not (x) applied for, consented to, or acquiesced in, the appointment of a trustee, receiver, sequestrator or other custodian foritself or a substantial part of its property, or made a general assignment for the benefit of creditors, (y) filed for, permitted or suffered toexist the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcy orinsolvency law, or any dissolution, winding up or liquidation proceeding, or (z) consented to or acquiesced in any such involuntary caseor proceeding, or provided that if any involuntary case or proceeding described in Section 10.6(i)(y) is filed, it is dismissed within sixty(60) days of filing, the recordation of the Deed in Lieu of Foreclosure shall be deemed full satisfaction and payment of the Loans andGuarantor shall be deemed automatically released from the Guaranty.(ii) In the event the Administrative Agent exercises the remedy set forth in Section 10.6(i) and the Borrower becomes a debtor in anybankruptcy commenced under Title 11 of the U. S. Code prior to the recording of the Deed in Lieu of Foreclosure, the Borrower, asdebtor, shall promptly file a motion in the bankruptcy proceeding to approve the transfer of the Units pursuant to Section 10.6(i) (or suchhigher offer received for the Units), or consent to a motion filed by the Administrative Agent or the Lenders to approve such transfer. 17 (iii) The Administrative Agent may refuse to exercise the remedy set forth in Section 10.6(i) only in the event the Borrower is unable todeliver clear title to the Units to be transferred by the Deed in Lieu of Foreclosure, as determined by the Administrative Agent in itsreasonable discretion. In such an event, the Administrative Agent may promptly proceed to initiate foreclosure of the Units and Propertypursuant to the Deed of Trust, or exercise any other remedies available to Administrative Agent and Lenders under the Loan Documentsor at law or in equity. Borrower and Guarantor acknowledge and agree that pursuant to the terms of the Loan Documents, theAdministrative Agent has the right to foreclose on the Units and Property and under applicable law, the Administrative Agent and theLenders have the right to bid on the Units and Property at the foreclosure sale and purchase the Units and Property at the foreclosure sale.Borrower and Guarantor agree fully to cooperate with the Administrative Agent and the substitute trustee in foreclosing on the Units andProperty, including without limitation by: (1) providing and/or making available to the Administrative Agent all appropriate data,records and documents in the possession, custody or control of the Borrower and Guarantor, pertaining to the Units and Property; and(2) responding promptly to all reasonable inquiries and requests from the Administrative Agent.(iv) Borrower and Guarantor hereby grant authority to the Administrative Agent, its agents, employees, officers, attorneys, consultantsand affiliates to disseminate, discuss and/or communicate with and contact any and all prospective purchasers at the foreclosure sale andto engage in such discussions, communications and other dialogues with such prospective purchasers as the Administrative Agent in itssole discretion deems appropriate. In connection with such discussions, communications and dialogues, the Administrative Agent isauthorized, without limitation: (1) to disclose to prospective purchasers any and all information that the Administrative Agent in its solejudgment and discretion deems appropriate regarding the Loans including, but not limited to, any and all information regarding theexisting balance of each Loan, the interest rate of each Loan, and other related information concerning the Loans; (2) to disclose toprospective purchasers any and all information relating to the Units and the Property; and (3) to take such other actions as theAdministrative Agent may deem necessary or desirable to facilitate the sale of the Units and Property including, without limitation,contacting real estate brokers and prospective purchasers, preparing and disseminating advertising materials relating to the Units andProperty, operating statements and financial information, and entering upon the Property for any purpose reasonably related to sale,including, without limitation, showing the Property to prospective purchasers or interested parties. 18 (v) Borrower and Guarantor covenant and agree not to oppose any foreclosure of the Units and Property, covenant and agree not tointerpose any defenses to the Administrative Agent’s efforts to foreclose pursuant to this Article X and applicable law, and waive anydefenses to foreclosure that they have or may have pursuant to applicable law and/or the Loan documents. Provided Borrower andGuarantor comply with the above provisions of this Section 10.6(v), and provided Borrower has not (x) applied for, consented to, oracquiesced in, the appointment of a trustee, receiver, sequestrator or other custodian for itself or a substantial part of its property, or madea general assignment for the benefit of creditors, (y) filed for, permitted or suffered to exist the commencement of any bankruptcy,reorganization, debt arrangement or other case or proceeding under any bankruptcy or insolvency law, or any dissolution, winding up orliquidation proceeding, or (z) consented to or acquiesced in any such involuntary case or proceeding, or provided that if any involuntarycase or proceeding described in Section 10.6(v)(y) is filed, it is dismissed within sixty (60) days of filing, the foreclosure of the Units andthe Property shall be deemed full satisfaction and payment of the Loans and Guarantor shall be deemed automatically released from theGuaranty. y)The first sentence of Section 12.6(c) of the Loan Agreement is amended to read as follows:Any Lender (an “Assignor”) may, in accordance with applicable Law and upon written notice to the Administrative Agent, at any time and fromtime-to-time assign to any Eligible Assignee or, with the consent of the Administrative Agent (which, in each case, shall not be unreasonablywithheld or delayed), to an additional bank, financial institution or other entity (each, an “Assignee”) all or any part of its rights and obligationsunder this Agreement pursuant to an Assignment and Acceptance, in form acceptable to Assignor and Assignee (an “Assignment andAcceptance”), executed by such Assignee and such Assignor (and, where the consent of the Administrative Agent is required pursuant to theforegoing provisions, by the Administrative Agent) and delivered to the Administrative Agent for its acceptance and recording in the Register;provided that no such assignment to an Assignee (other than any Lender or any Affiliate, Related Fund or Control Investment Affiliate thereof)shall be in an aggregate principal amount of less than $1,000,000 (other than in the case of an assignment of all of a Lender’s interests under thisAgreement), unless otherwise agreed by the Administrative Agent. In the event an assignment results in a party other than the AdministrativeAgent administering the Loan, the Administrative Agent shall provide notice of the Assignment and Acceptance, along with proper contactinformation, to the Borrower and Guarantor within three (3) business days of the Assignment and Acceptance. 19 z)Section 3.4 of the Loan Agreement is amended to read as follows:Pending Litigation. Except as disclosed on Exhibit C attached to this Agreement, no actions, suits, or proceedings (including condemnation oreminent domain proceedings) are pending or, to Borrower’s or Guarantor’s knowledge, threatened against or affecting Borrower, the Property, theMembership Interests, or any other assets subject to the Loan Documents. None of the items (if any) listed on Exhibit C will have a MaterialAdverse Effect. aa)Exhibit C of the Loan Agreement is replaced with Exhibit C attached to this Forbearance Agreement. bb)Section 3.5 of the Loan Agreement is amended to read as follows:No Violation. There exists no violation, or default with respect to any of the Basic Agreements or of any mortgage, deed of trust, indenture or anyother material contract, agreement or instrument applicable to Borrower, Guarantor, the Property, or the Membership Interests, or by which any ofthe foregoing is bound. The execution, delivery and performance of the Loan Documents will not result in any such violation, conflict or default,or result in the creation of any Lien on any of the assets of Borrower or Guarantor, other than the Permitted Exceptions and Liens in favor ofLenders. cc)Section 3.8 of the Loan Agreement is amended to read as follows:Truth of Financial Statements; Financial Condition Warranty. Any Financial Statements delivered to Administrative Agent and/or Lenders byBorrower or Guarantor prior to or after the date of this Agreement: (a) are materially true, correct and complete and (b) fairly present in a mannerinternally consistent and consistent with prior statements submitted to Administrative Agent and/or Lenders the respective financial conditionsof the subjects thereof and for the periods referenced therein. Borrower further warrants that except as disclosed to Administrative Agent inwriting, Borrower is not currently a party to any material pending litigation or administrative proceedings, or subject to any judicial or non-judicial orders or consent agreements, except as set forth on Exhibit C. All financial statements, including the related schedules and notesthereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved. 20 dd)The Table of Exhibits to the Loan Agreement is amended to read as follows:Appendix A – Definitions and InterpretationExhibit A – The PropertyExhibit B – The NoteExhibit C – Pending LitigationExhibit D – Ownership ChartExhibit E – Intentionally DeletedExhibit F – Cure DeedExhibit G – Form of Condominium ContractExhibit H – Deed in Lieu of Foreclosure ee)The following definitions in Appendix A of the Loan Agreement shall be amended to read as follows:“Maturity Date” shall have the meaning set forth in Section 2.2(f).“Minimum Unit Settlements” means with respect to each calendar quarter during which the Loans are outstanding, the minimum cumulativenumber of Residential Units closed by the end of each calendar quarter as set forth in Section 6.7(j).“Loan Documents” means this Agreement, any Note, the Deed of Trust, the Environmental Indemnity Agreement, the Limited Guaranty, theCompletion Guaranty, the Pledge Agreement, the Collateral Assignment of Developer’s Rights, the UCC Financing Statements, any forbearanceagreement entered into by Borrower, Guarantor and Administrative Agent relating to the Loans, and any other document evidencing, pertainingto or securing the Loans which Administrative Agent or Lenders may require to be executed and delivered by Borrower, Guarantor or anyAffiliate thereof from time to time, as each of the same shall be amended, restated, modified, replaced or supplemented from time to time. 21 “Material Adverse Effect” means an event occurring subsequent to the Closing Date which has the effect of impairing the validity of the securityinterest in the Property.“Net Sales Price” means with respect to the sale of any Unit (A) the Base Purchase Price for such Unit plus Upgrades and any costs associatedwith the purchase of a Parking Unit, less (B) customary closing costs both paid by Borrower and paid by the Borrower on behalf of the Unitbuyer, reasonable warranty reserves (not to exceed $750.00), brokerage commissions (including a 1.5% internal sales commissions paid toBorrower’s sales agent), expenses and prorations paid by Borrower as shown on the RESPA statement for such sale and approved byAdministrative Agent, and the costs to convert the Unit.“NOI” means, for any applicable period, Gross Operating Income minus Interest to be paid pursuant to the Agreement, all amounts to be paidpursuant to Section 5.2, and Operating Expenses.“Tax and Insurance Reserve Account” shall be renamed “Tax, HOA and Insurance Reserve Account” and shall mean an account for the paymentof Real Estate Taxes, HOA Fees and Insurance Premiums to be established and applied as set forth in Section 5.2.“Tax and Insurance Reserve Fund” shall be renamed “Tax, HOA and Insurance Reserve Fund” and shall have the meaning ascribed thereto inSection 5.2(a). ff)The following definitions shall be added to Appendix A of the Loan Agreement:“Average Debt Per Unit” shall mean the then current balance due under the Loans including all accrued PIK Interest divided by the total numberof Residential Units then subject to the lien of the Deed of Trust.“closed” or “settled” shall mean with respect to a Unit, that settlement has occurred, title to the Unit has been transferred and funds disbursed bythe settlement agent in accordance with the applicable fully executed HUD-1.“Forbearance Effective Date” shall mean January 27, 2009.“HOA Fees” means all fees, dues and annual assessments, regular or special, which are levied, assessed, made, imposed or charged on or againstthe Property by the condominium association for the Project. 22 6. Modification of Guarantys.Provided the Borrower timely satisfies all of the terms, conditions and requirements set forth in Sections 1-4 of this Forbearance Agreement, theGuaranty from and after the Forbearance Effective Date is hereby modified as follows:a) Section 2(b)(i) of the Guaranty is amended to read as follows:if Borrower files a voluntary bankruptcy petition under any section or chapter of the Bankruptcy Code or any similar law or regulation or is aparty to a collusive involuntary bankruptcy petition or any receivership proceedings in which Borrower is the debtor, or the making of anassignment for the benefit of its creditors by Borrower, or the filing of a case or proceeding by Borrower for its dissolution or liquidation;b) Provided the Borrower timely satisfies all of the terms, conditions and requirements set forth in Sections 1-4 of this Forbearance Agreement,the Completion Guaranty from and after the Forbearance Effective Date is of no further force and effect.7. Additional Guarantor Obligations. Guarantor hereby absolutely, irrevocably, and unconditionally guarantees, as a principal obligor and not as asurety, to the Administrative Agent and the Lenders (i) the payment of all costs incurred in connection with all construction and improvements undertaken byBorrower at the Property, and (ii) to keep the Property free and clear of all claims for mechanic’s and materialmen’s liens.8. Forbearance.Conditioned upon Borrower’s full, faithful and timely performance under this Forbearance Agreement and the Loan Documents, the AdministrativeAgent and Lenders hereby agree that so long as the Borrower and Guarantor comply with the terms of this Forbearance Agreement and the Loan Documents,for the period commencing on the Forbearance Effective Date and continuing until the Maturity Date under the Loan Agreement (the “Forbearance Period”),and except as provided below, Lender will not, solely with respect to the Existing Defaults: a)Institute foreclosure proceedings against any property pledged as security for the Loans; or b)Pursue or institute any other remedies, legal and/or equitable, against the Borrower or the Guarantor in connection with the Loans.On or after the Maturity Date (without further notice to the Borrower or the Guarantor) or upon the occurrence of any Event of Default under thisForbearance Agreement, or any of the Loan Documents (whichever occurs first), the Forbearance Period will terminate, and the Administrative Agent, in itssole discretion, may declare any or all of the Loans to be in default, institute foreclosure proceedings against any encumbered property and/or pursue itsremedies legal and equitable, against the Borrower and Guarantor. 23 9. Dismissal of Litigation/Cancellation of Foreclosure Sale. On the Forbearance Effective Date, Borrower and Guarantor shall endorse an order in theform attached hereto as Exhibit B (“Order”) dismissing with prejudice that certain action filed by Borrower and Guarantor against Administrative Agent inthe Circuit Court of Fairfax County, Virginia (“Court”), Case No. 200816874 (“Lawsuit”) and immediately submit the Order to the Court for entry and takeall such further action as may be required for the dismissal of the Lawsuit with prejudice. On the Forbearance Effective Date, Administrative Agent andLenders shall cancel the foreclosure sale originally noticed for January 22, 2009 and thereafter continued for a period of thirty days, and provide Borrowerand Guarantor with such evidence of the cancellation as their attorneys shall reasonably request.[Remainder of page intentionally left blank. Document continues on the following page]10. Discounted Payoff. Borrower may, at Borrower’s sole option, pay off the Loans through a cash payment (“Discounted Payoff”), which Lenders andAdministrative Agent hereby acknowledge and deem acceptable, as set forth below: Number ofDays from the ForbearanceEffective Date in which toMake the DiscountedPayoff Amount ofDiscounted Payoff0-60 $11,700.00061-90 12,200,00091-120 12,500,000In the event that Borrower makes the required Discounted Payoff in a timely manner, all rights and interests of the Lenders and Administrative Agent inthe Residential Units and to the Property shall cease, and all rights and obligations of the Borrower, Guarantor, Lenders, and Administrative Agent under thisForbearance Agreement and under the Loan Documents shall be released and deemed satisfied. In such event, Administrative Agent and Lenders shallexecute a deed of release for recordation prepared by Borrower and to be recorded by Borrower, at Borrower’s sole cost and expense, in form reasonablyacceptable to Administrative Agent. 24 11. No Waiver by Lender.Borrower and Guarantor each represent, warrant and agree that:a) Administrative Agent and Lenders have not waived and, by entering into this Forbearance Agreement, do not waive any existing default or anydefault which may occur subsequent to execution of this Forbearance Agreement; andb) Administrative Agent and Lenders have not waived and, by entering into this Forbearance Agreement, do not waive any of their respective remediesagainst the Borrower or the Guarantor.12. General Release of Claims.a) For any time in the past up to and including the Forbearance Effective Date hereof, Borrower and Guarantor each represent and warrant that they,individually and/or collectively, have no claims, defenses, actions or causes of action or set offs of any kind or nature which they, individually and/orcollectively can assert against the Administrative Agent or any Lender in connection with the Loans, this Forbearance Agreement, the Loan Agreement orany other Loan Document .b) IN THE EVENT BORROWER OR THE GUARANTOR, INDIVIDUALLY AND/OR COLLECTIVELY HAVE ANY CLAIMS, DEFENSES, ACTIONSOR CAUSES OF ACTION OR SET OFFS OF ANY KIND OR NATURE, KNOWN OR UNKNOWN, FOR ANY TIME IN THE PAST UP TO AND INCLUDINGTHE FORBEARANCE EFFECTIVE DATE HEREOF, WHICH THEY INDIVIDUALLY AND/OR COLLECTIVELY NOW OR HEREAFTER MAY ASSERTAGAINST THE ADMINISTRATIVE AGENT OR ANY LENDER, IN CONNECTION WITH THE LOAN AGREEMENT, DEED OF TRUST OR ANY OTHERLOAN DOCUMENT AND/OR THE ENFORCEMENT BY THE ADMINISTRATIVE AGENT OR ANY LENDER OF THIS FORBEARANCE AGREEMENT,THE LOAN AGREEMENT, DEED OF TRUST OR ANY OTHER LOAN DOCUMENT, THEN BY EXECUTING THIS FORBEARANCE AGREEMENT, THEYFOREVER WAIVE AND RELINQUISH THEM.13. Default.The following shall constitute Events of Default:a) Failure by Borrower to make any payments on the Loans in accordance with the terms of this Forbearance Agreement and the Loan Documents; 25 b) Failure by Borrower or Guarantor to perform any term, covenant or agreement in this Forbearance Agreement that continues uncured for three(3) business days after Borrower or Guarantor, as applicable, has been provided notice by Administrative Agent and/or Lenders in accordance with Section 25hereof.;c) Failure by Borrower or Guarantor to perform any term, covenant or agreement in the Loan Documents that constitutes an Event of Defaultthereunder;d) Failure by any Borrower or Guarantor to perform any term, covenant or agreement contained in any of the Loan Documents that constitutes an Eventof Default thereunder not modified by this Forbearance Agreement.If an Event of Default shall occur, the Administrative Agent may declare the Loans to be in default and declare the entire amount then outstanding,including all interest, late charges and all other amounts owing, to be immediately due and payable without regard to any previously agreed maturity date orthe Forbearance Period. Upon the occurrence of an Event of Default, and at any time thereafter, the Administrative Agent and the Lenders shall have the rightto institute foreclosure proceedings under the Deed of Trust and to sell and dispose of any collateral given to secure the Loans, upon such terms and in suchmanner as the Administrative Agent or the Lenders deems advisable, consistent with the Loan Documents. Such action by the Administrative Agent or theLenders shall not be exclusive of any other remedy available to them.14. Conflict Between Documents.In the event that there is any conflict between the terms and provisions of the Loan Documents and any one or more of the terms and conditions of thisForbearance Agreement or of any documents executed pursuant hereto, the terms and conditions of this Forbearance Agreement and the documents executedpursuant hereto shall supersede and control the terms of the Loan Document in conflict herewith.15. Time is of the Essence.Time is of the essence as to all of the obligations of the parties under this Forbearance Agreement and the Loan Documents.16. Applicable Law.This Forbearance Agreement shall be construed, performed and enforced in accordance with the laws of the Commonwealth of Virginia. 26 17. Further Assurances.The parties hereto agree to execute, acknowledge and deliver such other documents and to provide such other information as may be reasonablynecessary and/or required in order to fully consummate the transactions which are the subject hereof. The Borrower and Guarantor agree to promptly executeand deliver any documents the Administrative Agent or the Lenders may reasonably believe to be necessary or required to fully perfect Lender’s interests inany and all collateral provided for in any of the Loan Documents.18. Binding Effect.This Forbearance Agreement and the respective covenants, provisions, terms, conditions and agreements herein contained together with the LoanDocuments, shall inure to the benefit of, and be binding upon, the parties hereto and their respective legal successors and assigns.19. Entire Agreement.This Forbearance Agreement and the documents to be executed pursuant hereto and the Loan Documents constitute the entire agreement between theparties hereto with regard to the subject matter addressed herein. Borrower and Guarantor acknowledge and agree that all prior discussions, negotiations andcorrespondence between the parties relating to the subject matter hereof are hereby merged into this Forbearance Agreement and that there are no other oral,written or other agreements of any nature whatsoever between the parties with respect to the subject matter hereof other than those documents specificallyreferred to in this Forbearance Agreement, the Exhibits hereto and in the Loan Documents.20. Modifications and Waiver.No modification or waiver of any of the provisions of this Forbearance Agreement or the Loan Documents, and no consent by any party to anydeparture therefrom shall be effective unless such modification or waiver shall be in writing and signed by a duly authorized representative of all parties, andthe same shall then be effective only for the period and on the conditions and for the specific instance and purposes specified in such writing. No waiver ofany breach or default shall be deemed to be a waiver of any breach or default thereafter occurring. No omission or delay by any party in exercising any rightor power hereunder or under any Loan Document shall impair such right or power or be construed to be a waiver of any default or any acquiescence therein.21. Severability.Should any one or more of the provisions contained in this Forbearance Agreement or the Loan Documents be declared invalid, illegal orunenforceable in any respect, the validity, legality and enforceability of any of the remaining provisions contained therein shall not in any way be affected orimpaired thereby. 27 22. Successors and Assigns.This Forbearance Agreement and the respective covenants, provisions, terms, conditions and agreements herein contained shall inure to the benefit of,and be binding upon, the parties hereto and their respective heirs, legal representatives, successors and assigns. Whenever in this Forbearance Agreement oneof the parties hereto is named or referred to, the heirs, legal representatives, successors and assigns of such parties shall be included, and all covenants andconditions contained in this Forbearance Agreement by or on behalf of a party shall bind and inure to the benefit of their respective heirs, legalrepresentatives, successors and assigns, whether so expressed or not. This paragraph shall in no manner be construed to confer upon Borrower or Guarantorany right to assign any of their rights and obligations hereunder.23. Number and Gender.Words which import one gender shall be applied to any gender where appropriate or whenever the context of this Forbearance Agreement requires,words of the singular number shall include the plural and vice versa.24. Counterparts.This Forbearance Agreement may be executed in one or more counterparts, and all such executed counterparts shall contain one agreement, binding onall the parties hereto, notwithstanding that all the parties are not signators to the original or the same counterpart.25. Notices.All notices, requests, demands or other communications provided for herein shall be made pursuant to the Loan Documents.26. Agreement to Lifting of Automatic Stay.Borrower and Guarantor agree that in the event Borrower shall (a) file with any bankruptcy court of competent jurisdiction or be the subject of anypetition under Title 11 of the U.S. Code, as amended; (b) be the subject of any order for relief issued under Title 11 of the U.S. Code, as amended; (c) file or bethe subject of any petition seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any present orfuture federal or state act or law relating to bankruptcy, insolvency or other relief for debtors; (d) have sought or consented to or acquiesced in theappointment of any trustee, receiver, conservator, or liquidator; (e) be the subject of any order, judgment or decree entered by any court of competentjurisdiction approving a petition filed against such party for any 28 reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any present or future federal or state act or lawrelating to bankruptcy, insolvency, or relief for debtors, Lender immediately shall be entitled to relief from any automatic stay imposed by Section 362 ofTitle 11 of the U.S. Code, as amended, or otherwise, on or against the exercise of the rights and remedies available to it under the Loan Documents andBorrower and Guarantor each waive any right to object and agree not to object to any motion by the Administrative Agent and/or the Lenders for relief fromthe automatic stay. It is understood and agreed by the Borrower and Guarantor that this provision was a negotiated and bargained for condition of theAdministrative Agent and the Lenders and that they would not have agreed to the terms of this Forbearance Agreement if this provision had not beenincluded.27. WAIVER OF JURY TRIAL/SUBMISSION TO JURISDICTION.a) TO THE MAXIMUM EXTENT PERMITTED BY LAW, BORROWER, GUARANTOR, THE ADMINISTRATIVE AGENT AND LENDERS HEREBYKNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASEDHEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS FORBEARANCE AGREEMENT, ANY OTHER LOAN DOCUMENT, OR ANYCOURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTION OF ANY PARTY OR ANY EXERCISEBY ANY PARTY OF THEIR RESPECTIVE RIGHTS UNDER THE LOAN DOCUMENTS OR IN ANY WAY RELATING TO THE LOANS OR THE PROJECT(INCLUDING, WITHOUT LIMITATION, ANY CLAIM OR DEFENSE ASSERTING THAT THIS FORBEARANCE AGREEMENT WAS FRAUDULENTLYINDUCED OR IS OTHERWISE VOID OR VOIDABLE). THIS WAIVER IS A MATERIAL INDUCEMENT FOR THE ADMINISTRATIVE AGENT AND THELENDERS TO ENTER INTO THIS FORBEARANCE AGREEMENT.b) IN ADDITION TO ANY OTHER PROPER JURISDICTION AND VENUE PROVIDED FOR IN THE LOAN DOCUMENTS, BORROWER ANDGUARANTOR, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPONTHE ADVICE OF COMPETENT COUNSEL, CONSENT TO AND SUBMIT TO PERSONAL JURISDICTION AND VENUE OF ANY LITIGATIONCONCERNING OR RELATING TO THIS FORBEARANCE AGREEMENT IN THE CIRCUIT COURT OF FAIRFAX COUNTY AND/OR THE UNITEDSTATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA, AND BORROWER AND GUARANTOR AGREE THAT SUCH JURISDICTIONAND VENUE ARE PROPER.28. Power and Authority.Each of the parties to this Forbearance Agreement warrants that it has full power and authority to enter into, execute, deliver and perform thisForbearance Agreement, and that no consent, license, approval, authorization, registration or declaration with any court, governmental authority or any otherperson or entity is required in connection with the execution, delivery, performance, validity and enforceability of this Forbearance Agreement or thedocuments to be executed in connection herewith. 29 29. Representation by Counsel.BORROWER AND GUARANTOR EACH ACKNOWLEDGE AND AGREE THAT THEY HAVE HAD THE OPPORTUNITY TO BE REPRESENTEDBY COUNSEL OF THEIR CHOICE AND HAVE BEEN ADVISED TO SEEK INDEPENDENT LEGAL COUNSEL, THEY HAVE REVIEWED THISFORBEARANCE AGREEMENT AND HAVE BEEN FULLY ADVISED OF ITS CONTENTS AND THE MEANING THEREOF. BORROWER ANDGUARANTOR FURTHER REPRESENT THAT THEY ARE SIGNING THIS FORBEARANCE AGREEMENT VOLUNTARILY AND WITH FULLUNDERSTAND OF ITS CONTENTS AND MEANING.[SIGNATURES BEGIN ON THE FOLLOWING PAGE] 30 WITNESS the following signatures and seals as of the date first above written. BORROWER: COMSTOCK PENDERBROOK, L.C.,a Virginia limited liability companyBy: Comstock Homebuilding Companies, Inc.,a Delaware corporation,Its Manager By: (SEAL) Name: Title: STATE OF ____________CITY/COUNTY OF ____________________, to-wit:I, _______________________, a Notary Public in and for the City/County and Sate aforesaid, do hereby certify that ______________,______________ of Comstock Homebuilding Companies, Inc., the Manager of Comstock Penderbrook, L.C., whose name as such is signed to the foregoinginstrument bearing date on the 27 day of January, 2009, has acknowledged the same before me in my City/County and State aforesaid.GIVEN under my hand and seal this _____________ day of January, 2009. Notary PublicMy Commission Expires: __________________________Notary No. ____________________[signatures continue on the following page] 31th GUARANTOR: COMSTOCK HOMEBUILDING COMPANIES, INC.a Delaware corporationBy: (SEAL)Name: Title: STATE OF ____________CITY/COUNTY OF ____________________, to-wit:I, _________________, a Notary Public in and for the City/County and Sate aforesaid, do hereby certify that ______________, ______________ ofComstock Homebuilding Companies, Inc., whose name as such is signed to the foregoing instrument bearing date on the 27 day of January, 2009, hasacknowledged the same before me in my City/County and State aforesaid.GIVEN under my hand and seal this _________________ day of January, 2009. Notary PublicMy Commission Expires: ______________________Notary No. ________________[signatures continue on the following page] 32th ADMINISTRATIVE AGENT: GUGGENHEIM CORPORATE FUNDING, LLC,as Administrative AgentBy: (SEAL)Name: Title: STATE OF ____________CITY/COUNTY OF ________________, to-wit:I, _______________________, a Notary Public in and for the City/County and Sate aforesaid, do hereby certify that ______________,______________ of Guggenheim Corporate Funding, LLC, whose name as such is signed to the foregoing instrument bearing date on the 27 day ofJanuary, 2009, has acknowledged the same before me in my City/County and State aforesaid.GIVEN under my hand and seal this _______________ day of January, 2009. Notary PublicMy Commission Expires: ________________________Notary No. _______________________[signatures continue on the following page] 33th LENDER:ORPHEUS FUNDING LLCBy: Guggenheim Investment Management, LLC,its Manager By: (SEAL) Name: Title: STATE OF ____________CITY/COUNTY OF _______________________, to-wit:I, _________________________, a Notary Public in and for the City/County and Sate aforesaid, do hereby certify that ______________,______________ of Guggenheim Investment Management, LLC., the Manager of Orpheus Funding LLC, whose name as such is signed to the foregoinginstrument bearing date on the 27 day of January, 2009, has acknowledged the same before me in my City/County and State aforesaid.GIVEN under my hand and seal this ______________ day of January, 2009. Notary PublicMy Commission Expires: _____________________Notary No. __________________ 34th EXHIBIT ASee attached four (4) letters from LeClairRyan to Comstock Penderbrook, L.C. dated August 20, 2008, October 1, 2008, October 15, 2008 and November 19,2008. 35 EXHIBIT BV I R G I N I A:IN THE CIRCUIT COURT OF FAIRFAX COUNTY COMSTOCK PENDERBROOK, L.C., ) ET. AL. ) Plaintiffs, ) ) v. ) Case No. 2008-16874 ) GUGGENHEIM CORPORATE FUNDING, ) LLC ) Defendant. ) FINAL ORDER OF DISMISSALTHIS CAUSE came before this Court upon the joint representations of counsel for Plaintiffs Comstock Penderbrook, L.C. and Comstock HomebuildingCompanies, Inc. (“Plaintiffs”) and counsel for Defendant Guggenheim Corporate Funding, LLC, (“Defendant”) that the matters at issue between them asexpressed in Plaintiff’s Complaint filed in this case have been compromised, agreed and settled.UPON CONSIDERATION WHEREOF, it appearing to the Court that the claims set forth in Plaintiff’s Complaint filed herein against Defendant havebeen settled, compromised and agreed, and that Plaintiffs’ Complaint should be dismissed with prejudice, all as evidenced by the signatures below, it isthereforeORDERED, that Plaintiff’s Complaint be and is hereby DISMISSED WITH PREJUDICE.THIS CAUSE IS ENDED.Entered this ____ day of January, 2009. 36 Circuit Court Judge WE ASK FOR THIS: Rodney H. Glover (VSB# 17780)Brian Walsh (VSB # 73508)WILEY REIN LLP1776 K Street, N.W.Washington, D.C. 20006(202) 719-7381/7469(202) 719-7049 (facsimile)Counsel for Plaintiffs, Comstock Penderbrook, L.C.And Comstock Homebuilding Companies, Inc. R. Scott Caulkins (VSB #23584)LeCLAIR RYAN, A Professional Corporation225 Reinekers Lane, Suite 700Alexandria, Virginia 22314703-684-8007703-684-8075 (facsimile) Ray W. King (VSB#22253)LeCLAIR RYAN, A Professional Corporation999 Waterside Drive, Suite 2525Norfolk, Virginia 23510757-441-8929757-624-3773 (facsimile)Counsel for Defendant, Guggenheim Corporate Funding, LLC 37 EXHIBIT CPending or Potential Litigation as of the Forbearance Effective DateNetwork Multifamily Security Corporation. v. Comstock Penderbrook, L.C. (“Comstock”)Jurisdiction: General District Court of Fairfax County, Virginia served on or about January 15, 2009Amount in Controversy: $66,659.04Plaintiff, a company previously providing security monitoring service for the Penderbrook Condominium owned by Comstock, has filed a claim for breach ofcontract for failure to pay for security monitoring services. The vendor was replaced by a competing vendor due to inadequate performance. Comstockintends to defend this claim. 38 EXHIBIT F Prepared By: Consideration: _____________________[insert firm name and address] Tax ID/GPIN: ______________________SPECIAL WARRANTY DEEDTHIS SPECIAL WARRANTY DEED is made as of this ____ day of ___________ 200_, by and between COMSTOCK PENDERBROOK, L.C., aVirginia limited liability company (“Grantor”), and GUGGENHEIM CORPORATE FUNDING, LLC, as Administrative Agent (“Grantee”), having amailing address of 135 East 57 Street, New York, New York, 10022.W I T N E S S E T H:That for and in consideration of the sum of Ten Dollars ($10.00), cash in hand paid, and other good and valuable consideration, the receipt of which ishereby acknowledged, the Grantor does hereby grant and convey, with SPECIAL WARRANTY OF TITLE unto Grantee the property located in the County ofFairfax, Virginia as described on Exhibit A attached hereto and made a part hereof (the “Property”).This conveyance is made subject to all easements, conditions and restrictions of record insofar as they may lawfully affect the Property. 39th WITNESS the following signature and seal. GRANTOR:COMSTOCK PENDERBROOK, L.C.,a Virginia limited liability companyBy: Comstock Homebuilding Companies, Inc.,a Delaware corporation,its Manager By: (SEAL) Name: Title: COMMONWEALTH OF VIRGINIACITY/COUNTY OF ______________, to-wit:The foregoing instrument was acknowledged before me this ______ day of _________, 20___, by ________________________, in his capacity as____________________ of Comstock Homebuilding Companies, Inc., a Delaware corporation, the manager of Comstock Penderbrook, L.C., a Virginialimited liability company, on behalf of said limited liability company. _____________ is personally known to me or has produced his driver’s license asidentification. Notary PublicMy Commission Expires: ____________________Notary Registration No.: _____________________ 40 [affix seal]EXHIBIT ALEGAL DESCRIPTION(Blanks to be completed upon determination of Units to be conveyed)Units ___________, and Limited Common Element Parking Spaces ___________, Phase ______, [if there are Units in more than one Phase, repeat theprevious line], all a part of PENDERBROOK SQUARE, A CONDOMINIUM, as shown on the plat attached to the Declaration recorded in Deed Book 17380at page 948, as amended by Amendment to Condominium Instruments recorded in Deed Book 17380 at page 1989, corrected in Corrective Amendment toCondominium Instruments recorded in Deed Book 17401 at page 1895 and further corrected in Deed Book 17450 at page 1600, all among the land recordsof Fairfax County, Virginia.TOGETHER WITH an undivided percentage interest appurtenant to the Unit in all Common Elements of said Project, as described in said Declaration andsubsequent amendments.TOGETHER WITH the right of ingress and egress from said property and right to use, for all proper purposes in common with Declarant, its successors andassigns, and all other occupants from time to time, any and all portions of the Condominium designated by statute and the Declaration as General CommonElements.SUBJECT TO the reservations, restrictions on use and all covenants and obligations set forth in said Declaration recorded in Deed Book 17380 at page 948,among the said land records, and set forth in the By-Laws of the Unit Owners Association attached thereto, as it may be amended from time to time; all ofwhich restrictions, conditions, assessments and all other covenants are incorporated herein by reference, and which shall be binding on each grantee and theirsuccessors, heirs and assigns. 41 EXHIBIT HPrepared by and after Consideration: [insert amount]recording return to:[insert firm name and address]Tax Parcel Id. Nos: [insert numbers]THIS DEED, made and entered into effective this _______ day of _____________, 20__, by and between COMSTOCK PENDERBROOK, L.C., aVirginia limited liability company, GRANTOR, and GUGGENHEIM CORPORATE FUNDING, LLC, as Administrative Agent, GRANTEE, whose mailingaddress is 135 East 57 Street, New York, New York, 10022.W I T N E S S E T H :WHEREAS, the title to the real property described on Exhibit “A” attached hereto (“the Property”) is vested in fee simple in the Grantor; andWHEREAS, the Property is subject to a lien of that certain Amended and Restated Deed of Trust With Absolute Assignment of Leases and Rents,Security Agreement and Fixture Filing recorded in the Clerk’s Office of the Circuit Court of the County of Fairfax, Virginia, in Deed Book 19143, at Page257 (“Deed of Trust”); andWHEREAS, the loan agreement (“Loan Agreement”) evidencing the obligations secured by said Deed of Trust is owned and held by the Grantee, asAdministrative Agent; andWHEREAS, the Grantor, being unable to pay the obligations set forth in the Loan Agreement, has requested the Grantee accept this Deed insatisfaction of said obligations and the underlying Deed of Trust, and the Grantee, as evidenced by its signing this Deed, has acceded to said request.NOW, THEREFORE, in consideration of the premises and the sum of Ten Dollars ($10.00) cash in hand paid, and other good and valuableconsideration the receipt of which is hereby acknowledged, and except as set forth below, the Grantor grants and conveys with SPECIAL WARRANTY OFTITLE unto the Grantee the Property. 42th This Deed is given as an absolute conveyance of legal and beneficial title to the Property to the Grantee and of all redemption rights which the Grantormay have therein, and not as a deed of trust or security interest of any kind, the Grantor having sold the Property to the Grantee for a fair and adequateconsideration, such consideration being full satisfaction of the obligations set forth in the Loan Agreement, the Grantor’s obligations under the Deed of Trust,and the release of certain parties heretofore guaranteeing the Grantor’s obligations under the Loan Agreement and Deed of Trust.In executing this Deed, the Grantor is not acting under any misapprehension as to the effect thereof, any duress, any undue influence, or anymisrepresentation by the Grantee or its representatives, agents or attorneys; and the Grantee acknowledges that this Deed is not given as a preference overother creditors of the Grantor, but rather in lieu of foreclosure of the Deed of Trust.This conveyance is made subject to the conditions, restrictions, easements and reservations of record, if any, affecting the Property and constitutingconstructive notice.[Remainder of page intentionally left blank. Signature pages follow.] 43 [Signature page to Deed from Comstock Penderbrook, L.C. toGuggenheim Corporate Funding, LLC, as Administrative Agent]WITNESS the following signatures and seals: GRANTOR: COMSTOCK PENDERBROOK, L.C.,a Virginia limited liability companyBy: Comstock Homebuilding Companies, Inc., a Delawarecorporation,its Manager By: (SEAL) Name: Title: COMMONWEALTH OF VIRGINIACITY/COUNTY OF ______________, to-wit:The foregoing instrument was acknowledged before me this ______ day of _________, 20___, by ___________________, in his capacity as____________________ of Comstock Homebuilding Companies, Inc., a Delaware corporation, the manager of Comstock Penderbrook, L.C., a Virginialimited liability company, on behalf of said limited liability company. _____________ is personally known to me or has produced his driver’s license asidentification. Notary PublicMy Commission Expires: ____________________Notary Registration No.: _____________________[affix seal][Signatures continue on the following page.] 44 [Signature page to Deed from Comstock Penderbrook, L.C. toGuggenheim Corporate Funding, LLC, as Administrative Agent] ACCEDED TO BY: GUGGENHEIM CORPORATE FUNDING, LLCBy: (SEAL) Name: Title: STATE OF NEW YORKCITY/COUNTY OF ______________, to-wit:The foregoing instrument was acknowledged before me this _____ day of ________________, 20__ by ___________________ in his capacity as__________________________ of Guggenheim Corporate Funding, LLC, on behalf of said limited liability company. ________________________ ispersonally known to me or has produced his driver’s license as identification. Notary PublicMy Commission Expires: ______________________[affix seal] 45 EXHIBIT “A”LEGAL DESCRIPTION(Blanks to be completed upon determination of Units to be conveyed)Units ___________, and Limited Common Element Parking Spaces ___________, Phase ______, [if there are Units in more than one Phase, repeat theprevious line], all a part of PENDERBROOK SQUARE, A CONDOMINIUM, as shown on the plat attached to the Declaration recorded in Deed Book 17380at page 948, as amended by Amendment to Condominium Instruments recorded in Deed Book 17380 at page 1989, corrected in Corrective Amendment toCondominium Instruments recorded in Deed Book 17401 at page 1895 and further corrected in Deed Book 17450 at page 1600, all among the land recordsof Fairfax County, Virginia.TOGETHER WITH an undivided percentage interest appurtenant to the Unit in all Common Elements of said Project, as described in said Declaration andsubsequent amendments.TOGETHER WITH the right of ingress and egress from said property and right to use, for all proper purposes in common with Declarant, its successors andassigns, and all other occupants from time to time, any and all portions of the Condominium designated by statute and the Declaration as General CommonElements.SUBJECT TO the reservations, restrictions on use and all covenants and obligations set forth in said Declaration recorded in Deed Book 17380 at page 948,among the said land records, and set forth in the By-Laws of the Unit Owners Association attached thereto, as it may be amended from time to time; all ofwhich restrictions, conditions, assessments and all other covenants are incorporated herein by reference, and which shall be binding on each grantee and theirsuccessors, heirs and assigns. 46 Exhibit 10.78FOURTH AMENDMENT TO SUBLEASE AGREEMENTTHIS FOURTH AMENDMENT TO SUBLEASE AGREEMENT (this “Fourth Amendment”) is made and entered into this day of February, 2009,by and between COMSTOCK ASSET MANAGEMENT, L.C., a Virginia limited liability company (hereinafter referred to as “Sublandlord”); andCOMSTOCK HOMES OF WASHINGTON, L.C., a Virginia limited liability company (hereinafter referred to as “Subtenant”).WHEREAS, Sublandlord and Subtenant are parties to an Agreement of Sublease dated October 1, 2004 (the “Original Sublease”), as amended by acertain First Amendment to Sublease Agreement dated August 1, 2005, and further amended by a certain Second Amendment to Sublease Agreement datedApril 12, 2007, and further amended by a certain Third Amendment to Sublease Agreement dated October 31, 2007, for the sublease of certain SubleasePremises as defined in the Original Sublease, as amended. The Original Sublease as amended is hereby referred to as the “Sublease.”WHEREAS, Subtenant has requested to surrender certain space and to modify certain other terms of the Sublease.WHEREAS, the Sublandlord has agreed to Subtenant’s request, subject to the terms and conditions contained herein.WHEREAS, the parties desire otherwise to further amend certain terms and conditions of the Sublease, and have agreed to the terms contained herein.NOW, THEREFORE, for and in consideration of the mutual promises of the parties herein contained, the premises and other good and valuableconsideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree to amend the Sublease as follows:1. Vacated Premises. No later than February 20, 2009, Subtenant shall promptly vacate and surrender that portion of the Sublease Premises located onthe 6 floor of the Building and consisting of 1,377 rentable square feet of office space, previously identified as in the Third Amendment as the AdditionalPremises (herein, the “Vacated Premises”) in accordance with the requirements set forth in Section 9.D of the Original Sublease. The date of such surrendershall be confirmed in writing by the Sublandlord (“Surrender Date”). As of the Surrender Date, (i) Subtenant shall be relieved of all obligations and liabilitiesfor the Vacated Premises, including payment of Basic Rent and all expense pass throughs, except that Subtenant shall pay (a) the Base Rent for March 2009,and (b) a termination fee of Fifty Thousand Dollars ($50,000) (“Termination Fee”), which shall be payable in monthly installments of Five Thousand Dollars($5,000) each due as and when payments of Base Rent are due under the Sublease, for the next ten (10) calendar months (“Termination Fee Installment”)beginning March 1, 2009 (i.e., through December 2009); (ii) the “Sublease Premises” shall thereafter be defined as the 15,714 rentable square feet of officespace located on the 5 floor of the Building; and (iii) Subtenant shall be responsible for Seventeen and 61/100ths percent (17.61%) (15,714 rentable squarefeet of the Sublease Premises divided by 89,221 rentable square feet in the Building) of any operating expense pass-throughs for the Building, subject to andin accordance with Section 7 of the Original Sublease and Section 3(b) of the Prime Lease.2. Rent. As of April 1, 2009, the rent calculation tables contained in the Existing Sublease shall be deleted in their entirety and in lieu thereof thefollowing shall be inserted: Total Basic Rent Under Comstock Sublease - 15,714 RSFMonthly Rent Annual Rent Rent/SF Starts Ends$41,812.34 $501,748.02 $31.93 4/1/09 9/30/09$43,069.46 $516,833.46 $32.89 10/1/09 9/30/10$44,365.86 $532,390.32 $33.88 10/1/10 9/30/11 CAM - 4 Am to CHW Sublease 1 of 12 ththth Provided, however, that if Subtenant has not timely vacated and surrendered the Vacated Premises in accordance with Section 1 above, then this rentcalculation table will not be effective until the first day of the calendar month next following vacation and surrender of the Vacated Premises.3. Parking. As of April 1, 2009, “Exhibit D” to the Existing Sublease shall be deleted in its entirety and replaced with Exhibit D attached hereto andincorporated herein, showing the number of parking spaces and the location of reserved parking spaces, if any, available for Subtenant’s use under the currentparking program for the Building.4. Services Agreement. Subtenant and Sublandlord are concurrently entering into a certain “Services Agreement” attached hereto and incorporatedherein as Exhibit A whereby Subtenant will provide, or cause to be provided, to Sublandlord certain development, property management and other servicesin accordance with the terms and conditions set forth therein and Sublandlord will pay to Subtenant a “Management Fee” (as defined therein). TheManagement Fee due by Sublandlord under the Services Agreement to Subtenant is intended to and shall offset the monthly Termination Fee Installment;provided, that if the Services Agreement is terminated before the entire Termination Fee is paid, then Subtenant shall pay the remaining balance of theTermination Fee in accordance with Section 1 above. The parties agree that execution of the Services Agreement is a material inducement for entering intothis Fourth Amendment.5. Ratification. The Sublease is otherwise ratified and reaffirmed in all respects, and all terms and conditions thereof unless otherwise modified by thisFourth Amendment are in full force and effect. If there are any conflicts between the terms of the Sublease and this Fourth Amendment, then this FourthAmendment shall control.[Remainder of this page intentionally blank.] CAM - 4 Am to CHW Sublease 2 of 12 th 6. Miscellaneous. Unless otherwise stated herein, all terms defined in the Existing Sublease shall have the same meaning when used in this FourthAmendment. This Fourth Amendment may be executed in counterparts all of which when taken together shall constitute one instrument binding upon allparties thereto.WITNESS the following signatures and seals: SUBLANDLORD: COMSTOCK ASSET MANAGEMENT, L.C.a Virginia limited liability company By: (SEAL)WITNESS Christopher D. ClementeManaging Member , 2009DATE SUBTENANT: COMSTOCK HOMES OF WASHINGTON, L.C. By: Comstock Homebuilding Companies, Inc. By: (SEAL)WITNESS Bruce LabovitzChief Financial Officer , 2009DATE CAM - 4 Am to CHW Sublease 3 of 12 th 11465 SH I, LC as Landlord under the Prime Lease, hereby consents to the foregoing Fourth Amendment to Sublease Agreement between ComstockAsset Management, L.C. and Comstock Homes of Washington, L.C. and the terms and conditions hereunder. Landlord’s consent herein shall not modify oraffect the Prime Lease or relieve Sublandlord from any liability hereunder. LANDLORD:11465 SH I, LC By: (SEAL)WITNESS Christopher D. ClementeManaging Member , 2009DATEAttachmentsExhibit A Services AgreementExhibit C Office Furniture and/or EquipmentExhibit D Number and Location of Parking Spaces CAM - 4 Am to CHW Sublease 4 of 12 th EXHIBIT ASERVICES AGREEMENT[attached] CAM - 4 Am to CHW Sublease 5 of 12 th SERVICES AGREEMENTTHIS SERVICES AGREEMENT (the “Agreement”) is made as of the day of February, 2009 (“Effective Date”), by and between COMSTOCKHOMES OF WASHINGTON, L.C., a Virginia limited liability company (“Comstock”), and COMSTOCK ASSET MANAGEMENT, L.C., a Virginia limitedliability company (“CAM”).W I T N E S S E T H :WHEREAS, Comstock and CAM are parties to an Agreement of Sublease dated October 1, 2004 (the “Original Sublease”), as amended by a certainFirst Amendment to Sublease Agreement dated August 1, 2005, and further amended by a certain Second Amendment to Sublease Agreement datedApril 12, 2007, and further amended by a certain Third Amendment to Sublease Agreement dated October 31, 2007, for the sublease of certain SubleasePremises as defined in the Original Sublease, as amended. The Original Sublease as amended is hereby referred to as the “Sublease”;WHEREAS, in accordance with a certain Fourth Amendment to Sublease Agreement (“Fourth Amendment”), executed simultaneously herewith,Comstock has agreed to pay a “Termination Fee” in monthly installments, known as the “Termination Fee Installments”, as those terms are defined in theFourth Amendment, over ten (10) calendar months to CAM for surrender of certain property under the Sublease;WHEREAS, as a material inducement to enter into the Fourth Amendment, Comstock and CAM agreed to enter into a services agreement as set forthherein;WHEREAS, CAM is agent for, or has contracted to provide development and property management services to, the owner(s) of certain real properties inthe Washington, DC metropolitan area (each, a “Property”);WHEREAS, Comstock is experienced in providing development and property management services, as well as IT and similar office support services;WHEREAS, CAM desires to hire Comstock to perform such services on its behalf, subject to the terms and conditions contained herein; andWHEREAS, Comstock desires to perform such services for CAM, subject to the terms and conditions of this Agreement. CAM - 4 Am to CHW Sublease 6 of 12 th NOW, THEREFORE, for and in consideration of the premises and mutual covenants and agreement of the parties contained herein, and of other goodand valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound, do hereby agreeas follows:ARTICLE IScope of the Work1.01 Acting as a consultant for CAM and at its written request, Comstock will undertake and perform for CAM, subject to staffing and workload availability,any or all the following responsibilities set forth in this Section 1.01 which CAM in its discretion may delegate or assign to Comstock by written request withrespect to any Property (or with respect to CAM’s offices), as applicable (the ”Work”):A. Plan/Product Design and Management. In conjunction with land planners, architects and engineers, Comstock shall review and comment upon any and alldesign drawings, product specifications and shop drawings submitted by such professionals and by other contractors for a Property or portions thereof.B. Governmental Approvals. Based on conceptual plans approved by CAM, Comstock shall coordinate and submit engineering plans for a Property orportions thereof, monitor the approval processes with the applicable governmental authority in order to seek final approvals for lot or unit yield and F.A.R.densities, provide for vested rights regarding the intended uses of a Property and prepare and submit bonding applications required as a prerequisite todevelopment of a Property.C. Solicit and Evaluate Development Bids. Comstock shall solicit and evaluate bids for the development and/or improvement of a Property or portionsthereof (including without limitation tenant improvements of individual suites therein), as applicable, from qualified contractors and make recommendationsto CAM regarding the selection of the contractors.D. Development and Improvement of a Property. Comstock agrees to perform and complete all functions attendant to the management of the following itemsfor a Property: (i) installation of all road infrastructure over time required to service the Property; (ii) installation of all utilities over time reasonablynecessary to commence construction of improvements on the Property; (iii) installation of all tenant improvements within individual suites or elsewherewithin the Property, as directed by CAM.E. Legal, Accounting Marketing Services. If expressly directed by CAM, Comstock, on behalf of CAM, shall assist in the performance of requisite legal,accounting and/or marketing services required as a result of the prosecution of the Work unless such legal work would constitute a conflict of interest foreither party. If a conflict of interest exists, such conflict of interest may be waived upon request by either party and receipt by both parties of a written waiverof such conflict.F. IT Services & Support. Comstock shall provide CAM’s voice and data technology services and such other similar office services and support as may bereasonably requested by CAM.Notwithstanding the foregoing or any other mutually-agreed upon description of the Work, it is expressly agreed by the parties hereto that (x) Comstock shallnot be responsible for any out-of-pocket or third party costs associated with the Work being performed, (y) Comstock is not guaranteeing the Work and is notguaranteeing that the Work will be prosecuted within any particular timelines that may be established as part of the Work, and (z) CAM shall have approvalauthority over all Work prior to submission to a third party or governmental agency.ARTICLE IIExclusions from Scope of the Work2.01 The scope of the Work listed in Article I is not an exhaustive list, but the Work shall in no event include the following items:A. Procurement of leasing agreements related to the retail or commercial space for any Property or the administration of any such agreements;B. Management duties associated with a master or neighborhood property owners associations for any Property; or CAM - 4 Am to CHW Sublease 7 of 12 th C. Management duties associated with completed commercial or investment properties within any Property (which shall not include duties relating to the fitout of tenant spaces within a Property, which is expressly contemplated herein).ARTICLE IIITerm3.01. Term. This Agreement shall remain in effect for ten (10) full calendar months from the Effective Date of this Agreement (i.e., through December 31,2009) (“Initial Term”), unless terminated earlier as provided herein. If this Agreement is not terminated prior to the expiration of the Initial Term, thisAgreement shall automatically renew on a month-to-month basis until terminated as provided herein.ARTICLE IVCompensation4.01 Management Fee. In consideration for the performance of the Work under this Agreement, CAM agrees to pay to Comstock, or any designated affiliate,and Comstock agrees to accept from CAM, the amount of Five Thousand Dollars ($5,000) per month as a management fee (the “Management Fee”). TheManagement Fee shall be due and payable by the fifth day of each month during the Initial Term, beginning on March 1, 2009, and shall continue on amonthly basis thereafter until termination of the Agreement in accordance with the terms hereof. If Comstock believes that it will perform work exceeding theManagement Fee in any one-month period, Comstock shall so advise CAM and CAM shall either (y) authorize in writing Comstock to perform Work inexcess of the Management Fee, or (z) notify Comstock to cease any further Work for that month. Notwithstanding any provision hereof the contrary, in noevent shall Comstock perform any Work in excess of the Management Fee that is not authorized by CAM. Work exceeding the Management Fee in any onemonth period, as authorized by CAM, shall be performed on an hourly basis of 125% of the hourly salary of such employee(s) utilized to perform the Work(“Hourly Fee”). Hourly Fees shall be paid to Comstock by CAM in the same manner as Vendor fees (pursuant to Section 4.04 below) or, upon writtenagreement of the parties, shall be set off against the Termination Fee. Hourly Fees shall also be due in the event a new employee(s) is hired for the prosecutionof the Work hereunder.4.02 Responsibility of Employees. Comstock shall be responsible for all staffing decisions and the payment of the salaries of its officers and employeesperforming the Work, subject to Paragraph 4.01 herein. In its sole discretion, Comstock may increase or maintain its staff to service CAM. In the case whereCAM desires a particular employee of Comstock to perform Work for CAM’s benefit, CAM may make a written request to Gregory Benson, President ofComstock, for assignment of such employee to perform Work for CAM; however, such request may be accepted or rejected by Comstock in its sole discretion.4.03 Setoff of Management Fee. As provided in Paragraph 4.01 herein, the Management Fee shall be payable on a monthly basis; provided, however, thatCAM shall be entitled to set off against each monthly payment of the Management Fee coming due a corresponding amount of the Termination Fee untilsuch Termination Fee is fully applied to payment of the Management Fee due hereunder. If either party terminates this Agreement prior to the expiration ofthe Initial Term, all Management Fees and Hourly Fees due to Comstock shall be applied to the Termination Fee, whether paid or unpaid.4.04 Third Party Vendors and Reimbursements.A. Certain services related to a Property may be provided by third party vendors (“Vendors”) under the management of Comstock. Comstock shall obtainprior written approval from CAM before engaging Vendors to perform services totaling over Five Hundred Dollars ($500). Vendor fees shall be billed to CAM - 4 Am to CHW Sublease 8 of 12 th and payable by CAM, and in no event shall the Vendor fees be deducted from the Management Fee. The Vendors shall include, but are not limited to, landplanners, civil engineers, architects, consultants, contractors and sub-contractors.B. CAM shall be responsible for the reimbursement of all of Comstock’s out-of-pocket expenses actually incurred and submitted to CAM in the prosecutionof the Work, including without limitation, fees of Vendors in cases where Comstock pays a Vendor and seeks reimbursement from CAM, payment of whichshall occur within fifteen (15) days from the end of the month in which an expense report is received by CAM, accompanied by copies of paid invoices andsuch other documentation as CAM may reasonably request.ARTICLE VTermination5.01. Either CAM or Comstock may terminate this Agreement, with or without cause, upon ten (10) days written notice to the other party during the InitialTerm or any time thereafter (“Termination Notice”). CAM shall be responsible for payment of the Management Fee (subject to setoff pursuant toSection 4.03) and Vendor fees for Work performed through the date of termination of this Agreement. If Comstock terminates this Agreement prior to theexpiration of the Initial Term, Comstock shall pay to CAM the remaining Termination Fee Installments as provided in the Fourth Amendment. Until theeffective date of termination set forth in a Termination Notice, Comstock shall continue to perform the Work under this Agreement. Upon termination, neitherparty shall have any liability to each other related to the Work or any provisions of this Agreement.ARTICLE VIAssignment and Sub-Contracting6.01 Comstock may assign or transfer this Agreement to a parent or affiliated entity provided all rights and obligations are transferred therewith andnotwithstanding CAM’s acceptance of performance hereunder by such assignee or transferee, such assignment or transfer will not relieve Comstock of itsprimary liability hereunder.ARTICLE VIIIndependent Contractor Status7.01 The parties to this Agreement agree that the relationship of Comstock to CAM is that of independent contractor. Except as otherwise stated in thisAgreement, no agency is created by this Agreement, and the employees and agents of Comstock are not to be considered as employees or agents of CAM, andshall not enter into any vendor agreements without the prior consent of CAM.ARTICLE VIIICompliance with Non-Discrimination Laws; Employment8.01 Comstock shall comply with all federal, State and County laws, codes, ordinances and regulations requiring non-discrimination in employment and inthe provision of services.8.02 Without the prior written consent of Comstock, CAM shall not offer employment to any employee of Comstock prior to Comstock’s termination of theemployment of such person. CAM - 4 Am to CHW Sublease 9 of 12 th ARTICLE IXEntire Agreement9.01 Except as otherwise stated in this Agreement, this Agreement constitutes the entire agreement of the parties with respect to the matters dealt with herein.ARTICLE XIndemnification10.01 Comstock shall hold CAM harmless from, and indemnify CAM against loss, personal injury or death resulting from the gross negligence or willful actof any employee or agent or Contractor of Comstock, but not from the gross negligence or willful act of any employee, agent or Contractor of CAM. CAMshall hold Comstock harmless from, and indemnify Comstock against, any claims made by third parties under any agreements with CAM. The protectionsagreed to under this section shall include, without limitation, all costs of litigation, including court costs, arbitration and mediation costs and attorneys’ fees.ARTICLE XINotices11.01 All notices, demands and requests which may be given or which are required to be given by either party to the other must be in writing. Notices,demands or requests shall be deemed to have been properly given for all purposes if (i) delivered against a written receipt of delivery, (ii) mailed by express,registered or certified mail of the United States Postal Service, return receipt requested, postage prepaid, or (iii) delivered to a nationally recognized overnightcourier service for next business day delivery to the receiving party’s address as set forth above or (iv) delivered via telecopier or facsimile transmission to thefacsimile number listed below, with an original counterpart of such communication sent concurrently as specified in subsection (ii) or (iii) above and withwritten confirmation of receipt of transmission provided. Each such notice, demand or request shall be deemed to have been received upon the earlier of theactual receipt or refusal by the addressee or three (3) business days after deposit thereof at any main or branch United States post office if sent in accordancewith subsection (ii) above, and the next business day after deposit thereof with the courier if sent pursuant to subsection (iii) above. Notices shall be sent tothe following addresses: To CAM: c/o Comstock Partners11465 Sunset Hills RoadSuite 620Reston, Virginia 20190Attention: Beau SchweikertTo Comstock: c/o Comstock Homebuilding Companies, Inc.11465 Sunset Hills Road, Suite 500Reston, Virginia 20190Attention: Gregory BensonNotwithstanding the foregoing, written requests with respect to requests for performance of and/or staffing of the Work contemplated hereunder, includingwithout limitation in Sections 1.01 and 4.02, may be made by email to Gregory Benson.[Remainder of this page intentionally blank.] CAM - 4 Am to CHW Sublease 10 of 12 th ARTICLE XIILaw and Jurisdiction12.01 This Agreement shall be construed by the laws of the Commonwealth of Virginia. Jurisdiction shall be proper in the Circuit Court of Fairfax County,Virginia, and the parties consent to such jurisdiction and venue.IN WITNESS WHEREOF, CAM and Comstock have executed this Agreement as of the Effective Date. CAM: COMSTOCK:COMSTOCK ASSET MANAGEMENT, L.C., a Virginia limited liabilitycompany COMSTOCK HOMES OF WASHINGTON, L.C., a Virginia limited liabilitycompanyBy: By: COMSTOCK HOMEBUILDING COMPANIES,INC., a Delaware corporation Beau Schweikert, Senior VP & CFO By: Gregory Benson, President CAM - 4 Am to CHW Sublease 11 of 12 th EXHIBIT DNumber and Location of Parking Spaces Category/Type of Space Number of SpacesReserved and Assigned to Tenant: 10Reserved for Tenants Only, but Unassigned: 19Unreserved and Unassigned: 15Total Spaces: 44Reserved Spaces: To be assignedby LandlordLandlord reserves the right to reconfigure the parking for the Property by establishing or relocating reserved parking spaces, subject to and in accordancewith the Lease. CAM - 4 Am to CHW Sublease 12 of 12 th Exhibit 10.79NORTH CAROLINAMUTUAL RELEASE AND SETTLEMENT AGREEMENTWAKE COUNTYThis MUTUAL RELEASE AND SETTLEMENT AGREEMENT (“Agreement”) is made by and between COMSTOCK HOMES OF RALEIGH, LLC, aNorth Carolina limited liability company (“Plaintiff”), PROVIDENCE DEVELOPMENT OF RALEIGH, LLC, a North limited liability company(“Defendant”) and MANNING FULTON & SKINNER, PA, a North Carolina professional association (“Escrow Agent”). The parties to this Agreement otherthan Escrow Agent may be collectively referred to herein as “the parties.”WHEREAS, the parties executed an Agreement for the purchase and Sale of Subdivision Lots and Option Agreement dated December 16, 2005, asamended (“Contract”), for the sale and purchase of approximately 80 townhome lots and 148 single family lots in the subdivision known as Providence (the“Development”);WHEREAS, Providence of Raleigh Subdivision is a planned community of more than 20 residential lots created within this State on or after January 1,1999, and is therefore a “planned community” as that term is defined in Chapter 47F of the North Carolina General Statutes, commonly known as the “NorthCarolina Planned Community Act” (hereinafter, the “Planned Community Act” or the “Act”);WHEREAS, Defendant is the Declarant under that certain Declaration of Covenants, Conditions and Restrictions for Providence of RaleighSubdivision recorded in Book 12053, page 2419, Wake County Registry, as supplemented by that certain Annexation Declaration recorded in Book 12451,page 2197, re-recorded in Book 12623, page 2662, both of the Wake County Registry (the “Subdivision Declaration”) and that certain Declaration ofCovenants, Conditions and Restrictions for Providence Subdivision, Phase 2 Townhouses recorded in Book 12451, page 2202, Wake County Registry (the“Townhouse Declaration”);WHEREAS, a dispute has arisen between the parties pertaining to the Contract and other action taken by the parties as described in Civil Action No. 07CVS 15940 filed in Wake County, North Carolina Superior Court (the “Lawsuit”) and in the related Civil Action No. 08 SP 6183 filed in Wake County,North Carolina Superior Court (the “TOA Foreclosure Action”);WHEREAS, the Initial Escrow Deposit posted by Plaintiff under the Contract has been released by the Escrow Agent to Defendant;WHEREAS, Section 47F-2-117(a) of the Act provides that the Subdivision Declaration and the Townhouse Declaration may be amended by affirmativevote or written agreement signed by lot owners of lots to which at least sixty-seven percent (67%) of the votes in each respective association are allocated, orany larger majority the declaration for such association specifies;WHEREAS, Article IX, Section 4 of the Subdivision Declaration and Article IX, Section 4 of the Townhouse Declaration provide respectively that eachsuch declaration may be amended during the first twenty-year period by an instrument signed by not less than seventy-five percent (75%) of the lot ownerssubject to such declaration; WHEREAS, at this time, Plaintiff is the owner of fifty-two (52) lots and Defendant is the owner of thirty-one (31) lots, and together the parties are theowners of eighty-three (83) of the one hundred and seven (107) lots subject to the Subdivision Declaration, and Plaintiff is the owner of eighteen (18) of theeighteen (18) townhouse lots subject to the Townhouse Declaration;WHEREAS, the parties to this Agreement wish to revise and amend the Subdivision Declaration and/or the Townhouse Declaration (and, to the extentnecessary to accomplish the same results, the Bylaws for each association), in the following respects: (1) to allow vinyl siding to be used within theDevelopment ; (2) to change the side yard setbacks as provided in the Subdivision Declaration to conform with those provided in the Raleigh City Code;(3) to remove the blanket prohibition of wooden fences, to increase the maximum height limitation for fences to six feet (6.0’), and to allow the ArchitecturalReview Board the discretion to approve all proposed fences on a case-by-case basis; and (4) to allow the regular association dues payable by the Declarantunder the Declarations to accrue and become payable by Declarant at the time of closing on the sale of any lot to a builder and to allow the regularassociation dues payable by any builder to accrue and become payable by any builder at the time of closing of a completed dwelling to the owner-occupant;and (5) to clarify that the Declarant has the right to make amendments to the Subdivision Declaration and the Townhouse Declaration, in its sole discretion,without the approval of the lot owners, in the course of exercising the Declarant’s “development rights” as provided in the Subdivision Declaration and theTownhouse Declaration and the Act;WHEREAS, the parties to this Agreement desire to settle all controversies between them;NOW, THEREFORE, in consideration of the mutual covenants set forth below and other good and valuable consideration, the parties hereto representand agree:1. Nature of Agreement. This Agreement is a mutual release and settlement agreement that completely resolves the Lawsuit, the TOA ForeclosureAction, and any other disputes between and among Plaintiff and Defendant.2. Exchanges of Consideration. In consideration for the releases and other obligations contained in this Agreement, the sufficiency of which is herebyacknowledged:(a) Plaintiff waives all claims for reimbursement of costs incurred incidental to construction of an amenity package consisting of an entrancemonument and associated landscaping and irrigation at the entrance to the Development;(b) Defendant, as Declarant under the recorded Subdivision Declaration and Townhouse Declaration applicable to single-family lots andtownhouse lots for the Development (together, the “Covenants”), shall continue to be responsible to fund any shortfall on the operations of the HOA orTOA; - 2 - (c) Upon execution of this Agreement, Escrow Agent shall close a transaction and three escrow accounts established on behalf of the parties, asfurther described below, with the following material terms and on the following conditions (“the Closing”):(1) The Defendant shall: (i) pay all fines, penalties, costs, liens, claims and other remedies arising from or relating to the TOA ForeclosureAction and any and all alleged violations of the Covenants by Plaintiff, whether known or unknown, occurring prior to the date of thisAgreement in consideration for Plaintiff’s waiver of any claims, whether known or unknown, arising from Defendant and any affiliates’ allegedacts and omissions as Declarant or other role as controlling party of the TOA; (ii) provide Plaintiff with the current budget, income statementsand balance sheets for the HOA at Closing; (iii) release all claims of lien against any property to be conveyed by Plaintiff pursuant to thisAgreement in a form acceptable for filing; (iv) irrevocably approve Plaintiff’s current house plans in existing and future homes in theDevelopment as requested and shown in the letters attached hereto as Exhibit E; and (v) deposit $19,450.00 in escrow with the Escrow Agentrepresenting the difference in values of the lots being conveyed by each party (“Reconciliation Payment”), which is further described below,provided, however, that all closing costs incurred by Plaintiff in connection with the closing contemplated herein shall be paid out of theescrowed Reconciliation Payment. It is further provided that any portion of the escrowed Reconciliation Payment that remains after payment ofPlaintiff’s closing costs shall remain in escrow until such time as Plaintiff is able to convey to Defendant, or Defendant’s assign(s), Single FamilyLots 2 and 3. At such time as Plaintiff conveys Single Family Lots 2 and 3 to Defendant, or Defendant’s assign(s), the balance of the escrowedReconciliation Payment shall be paid by Escrow Agent to Plaintiff. However, in the event Plaintiff has not conveyed Single Family Lots 2 and 3to Defendant, or Defendant’s assign(s), for any reason, within six (6) months of the full execution of this Agreement, the balance of the escrowedReconciliation Payment shall be released by Escrow Agent back to Defendant;(2) The parties acknowledge and agree that Plaintiff shall no longer be obligated to pay assessments for its townhome pads as stipulated inthe Covenants and are hereby deemed satisfied and released. Plaintiff and Defendant agree to sign and record an amendment to the Covenants inthe form attached hereto as Exhibit B, revising and amending the Covenants as set forth therein and hereinabove;(3) Defendant shall upon execution of this Agreement convey to Plaintiff, through means of special warranty deeds, the form of which isattached hereto as Exhibit C, Single Family Lots 49, 71, 64, 65, 66, 67, 81, 82, 83 and 84 within the Development (the “Defendant’s ConveyedProperties”), which are more particularly identified on Exhibit A hereto. The special warranty deeds shall be held in escrow by Escrow Agentpending completion of all conditions precedent to the Closing as described in this Paragraph 2(c) (“the Comstock Escrow Deposit”). In addition,at such time as Plaintiff conveys Single Family Lots 2 and 3 to Defendant, or Defendant’s assign, Defendant shall convey to Plaintiff, throughmeans of special warranty deeds, Single Family Lots 50 and 51; - 3 - (4) Defendant shall, upon execution of this Agreement, deposit $16,757.34 in escrow with the Escrow Agent representing Plaintiff’saccrued, but currently unpaid, TOA and HOA dues in the amounts of $15,340.74 and $1,416.60, respectively, as required under the Covenants.Defendant shall instruct the Escrow Agent to disburse $15,340.74 to the TOA and $1,416.60 to the HOA at the Closing described herein.(5) Plaintiff shall upon execution of this Agreement, convey to Defendant, through means of special warranty deeds, the form of which isattached hereto as Exhibit D, the 18 townhouse pads known as Townhome Lots 161, 162, 163, 164, 165, 166, 167, 168, 169, 170, 171, 172, 173,174, 175, 176, 177 and 178 which Plaintiff owns and are part of the Development (the “Plaintiff’s Conveyed Properties”), which are moreparticularly identified on Exhibit A hereto. The special warranty deeds shall be held in escrow by Escrow Agent pending completion of allconditions precedent to the Closing as described in this Paragraph 2(c) (“the PDR Escrow Deposit”). In addition, at such time as Plaintiff is ableto obtain a release of all liens on Single Family Lots 2 and 3 from its lender, Plaintiff shall convey Single Family Lots 2 and 3 to Defendant, atwhich time the provisions of paragraph 2(c)(1) concerning the Reconciliation Payment shall control. In the event Plaintiff has not conveyedSingle Family Lots 2 and 3 to Defendant, or Defendant’s assign(s), for any reason, within six (6) months of the full execution of this Agreement,the balance of the escrowed Reconciliation Payment shall be released by Escrow Agent back to Defendant and the parties shall have no furtherliability to each other;(6) The Escrow Agent shall receive releases from the parties suitable for the recordation of all encumbrances, including lien releases andreleases of deeds of trust in favor of Wachovia, SunTrust or any other lender on Plaintiff’s Conveyed Properties or Defendant’s ConveyedProperties;(7) The parties shall, upon execution of this Agreement, execute a written termination of any remaining option or obligation to purchase orobligation to sell lots under the Contract, provided, however, the parties expressly acknowledge that Plaintiff will continue to attempt to obtaina release of liens from its lender on Single Family Lots 2 and 3 for purposes of conveying said lots to Defendant, or Defendant’s assign, inexchange for Single Family Lots 50 and 51 (as well as receipt of the balance of the escrowed Reconciliation Payment);(8) Each party shall bear its transfer costs incidental to this transaction and shall be responsible for depositing with the Escrow Agent sumsdeemed sufficient by the Escrow Agent in its reasonable discretion to cover all of the party’s closing costs;(9) The parties shall file dismissals with prejudice of all claims in the Lawsuit and the TOA Foreclosure Action and cancel the Notice of LisPendens related to the Lawsuit upon full execution of this Agreement; - 4 - (10) The releases contemplated by this Agreement shall be effective upon full execution of this Agreement;(11) The parties agree and specifically direct the Escrow Agent to withhold from recordation of any deeds and making any disbursementsof funds or otherwise closing the contemplated transaction until such time that all deliverables, including, but not limited to, deeds, releases, andcovenant modifications, are in the Escrow Agent’s possession; and(12) Notwithstanding the foregoing, in the event that any third party, including any creditors, lenders or obligees of Plaintiff or Defendant,takes title to or exercises its right to foreclose on any land owned by Plaintiff or Defendant in the Providence Subdivision that is to be conveyedto Plaintiff or Defendant under the terms of this Agreement, each party shall forfeit all rights to the other’s deposits with the Escrow Agent underthe Agreement, and each party’s Escrow Deposit shall revert back and be delivered to the party that tendered the Escrow Deposit under thisAgreement;(13) The parties understand that agree that timely completion of the Closing is of the essence. The parties acknowledge that each otherwill incur substantial damages if the Closing does not occur as provided herein, and that such damages are not readily ascertainable. If any partyto this Agreement fails to provide Escrow Agent with any of the necessary documents, monies or information within thirty (30) days as requiredby Paragraph 2(c) herein, the non-breaching party shall be entitled to liquidated damages of $25,000, and the parties agree that such amount issufficient for damages that would occur, as well as any additional remedies being sought by the parties in the Lawsuit. Upon any such failuredescribed herein, Escrow Agent shall disburse and deliver the HOA Escrow Deposit, Comstock Escrow Deposit, and PDR Escrow Deposit back tothe party that tendered such escrow deposit under this Agreement;(14) The parties shall execute and deliver to Escrow Agent a settlement statement acknowledging the Closing and the actions to occurtherein contemporaneous with the execution of this Agreement;(15) Except as otherwise stated herein, the parties shall bear their own costs and expenses incidental to the matters addressed by thisAgreement; and(16) The parties shall cooperate with each other on development requirements, provided such assistance shall be at no cost to the other. Byway of example and not limitation, the parties expect to cooperate in accommodating the reasonable requests of the other concerning easements,utilities, and construction items.(d) Upon Escrow Agent’s receipt of the items required in Paragraph 2(c) herein, including all documents, as necessary, executed and inrecordable form, Escrow Agent is authorized and directed to effectuate the Closing contemplated herein.(e) Upon Closing, the parties hereby agree to terminate and cancel the Contract, and the parties shall not have any further options, obligations, orrights under the Contract, other than as set forth in this Agreement. - 5 - 3. Releases by Plaintiff. Plaintiff, for itself, its successors and assigns, hereby releases Defendant from any and all claims, causes of action, actions, suits,debts, dues, demands, bonds, costs, attorney fees or interests recoverable, and any and all damages recoverable which Plaintiff or any of its officers or agentshave, or may have either at law or equity, by reason of, arising out of, or relating to the Lawsuit, the TOA Foreclosure Action and the disputes underlying thesame, including but not limited to, any and all claims which were or could have been raised in the Lawsuit (“Plaintiff’s Released Claims”). Plaintiff foreverdischarges Defendant and their successors, assigns, affiliates, agents, employees, managers, members, officers, board members, shareholders, representatives,insurers and legal representatives, from Plaintiff’s Released Claims. Plaintiff covenants and agrees that no assignment, transfer or conveyance in any mannerof all or part of any legal right relating to Plaintiff’s Released Claims has been made. This release is binding upon Plaintiff and its successors and assigns, andshall inure to the benefit of Defendant and its successors, assigns, affiliates, agents, employees and legal representatives.Notwithstanding the foregoing, Plaintiff does not release Defendant from its obligations under this Agreement. All other obligations under the Contractare waived and released.4. Releases by Defendant. Defendant, for themselves, their successors and assigns, hereby release Plaintiff from any and all claims, causes of action,actions, suits, debts, dues, demands, bonds, costs, attorney fees or interests recoverable, and any and all damages recoverable which Defendant or any of itsofficers or agents have, or may have either at law or equity, by reason of, arising out of, or relating to the Lawsuit and the disputes underlying the same,including but not limited to, any and all claims which were or could have been raised in the Lawsuit (“Defendant’s Released Claims”). Defendant foreverdischarges Plaintiff and its predecessors in interest, successors, assigns, affiliates, agents, employees, managers, members, representatives, insurers and legalrepresentatives, from Defendant’s Released Claims. Defendant covenants and agrees that no assignment, transfer or conveyance in any manner of all or part ofany legal right relating to Defendant’s Released Claims has been made. This release is binding upon Defendant and its successors and assigns, and shall inureto the benefit of Plaintiff and its successors, assigns, affiliates, agents, employees and legal representatives.Notwithstanding the foregoing, Defendant does not release Plaintiff from its obligations under this Agreement. All other obligations under the Contractare waived and released.5. Representations. The parties hereby represent and agree as follows:(a) All real estate taxes have been or will be paid on or before the date of conveyance of the lots described in Paragraph 2(c) herein. - 6 - (b) Subject to the release of the liens described in Paragraph 2(c) herein, the parties represent that the lots being conveyed pursuant to Paragraphs2(c) shall be conveyed free and clear of any liens, claims, notices, actions or causes of action, whether known or threatened. If any lien, claim, notice,action, or cause of action exists pertaining to any of the lots being conveyed pursuant to Paragraphs 2(c), the party transferring such lot shall beresponsible for payment or satisfaction of such claim.6. Duties Are Administrative. The duties of the Escrow Agent hereunder shall be entirely administrative and not discretionary. The Escrow Agent shallhave no duties other than as set forth herein. The Escrow Agent shall have no liability or responsibility hereunder for any act or omission to act except for itsown gross negligence or bad faith.7. Waiver; Indemnification. The parties agree to and hereby do waive any suit, claim, demand, or cause of action of any kind which either may have ormay assert against the Escrow Agent arising out of or relating to Escrow Agent’s performance hereunder, unless such suit, claim, demand, or cause of action isbased entirely upon Escrow Agent’s gross negligence or bad faith. The parties do hereby agree to indemnify and hold Escrow Agent harmless from andagainst any and all liabilities, actions, claims, demands, damages, and expenses of every type and kind, including reasonable attorneys’ fees, asserted againstor incurred by Escrow Agent as a result of or in connection with its serving as the Escrow Agent hereunder, excepting only such claims and expenses as mayresult from Escrow Agent’s gross negligence or bad faith.8. Dispute and Representation. If Escrow Agent shall be unable to determine at any time to whom the Comstock Escrow Deposit, the HOA EscrowDeposit or the PDR Escrow Deposit (collectively, the “Escrow Deposits”) should be delivered or if a dispute should develop between the parties concerningthe disposition of the their Escrow Deposits, then in any such event, Escrow Agent shall deliver the aforementioned Escrow Deposits in accordance with thejoint (or consistent) written instructions of the parties. In the event that such joint (or consistent) written instructions shall not be received by Escrow Agentwithin ten (10) days after Escrow Agent has served written requests for such joint (or consistent) written instructions upon the parties, Escrow Agent shallhave the right to deliver all of the Escrow Deposits to a title insurance company of Escrow Agent’s choice; and, thereafter, Escrow Agent shall be dischargedof any further or continuing obligations in connection with this Agreement.If costs and expenses (including attorneys’ fees) are incurred by Escrow Agent because of litigation or any dispute between the parties arising out of theholding of the Escrow Deposits, the non-prevailing party shall reimburse Escrow Agent for such reasonable costs and expenses incurred. The parties herebyagree and acknowledge that Escrow Agent assumes no liability in connection with the holding or investment of the Escrow Deposits pursuant hereto, exceptfor the negligence or willful misconduct of Escrow Agent and its employees and agents. Escrow Agent shall not be responsible for the validity, correctness orgenuineness of any document or notice referred to herein; and, in the event of any dispute under this Agreement relating to the delivery of the EscrowDeposits, Escrow Agent may seek advice from its own counsel and shall be fully protected in any action taken in good faith in accordance with the opinionof Escrow Agent’s counsel. - 7 - 9. Joinder of Escrow Agent. Escrow Agent enters into this Agreement for the purpose of acknowledging its agreement to serve as the Escrow Agenthereunder. The parties agree that Escrow Agent may resign as Escrow Agent hereunder and may designate as a successor escrow agent having the same dutiesand responsibilities as the Escrow Agent any of the following title insurance companies or the North Carolina agencies thereof: First American TitleInsurance Company, Chicago Title Insurance Company or Investors Title Insurance Company.10. Right to Review; Intent to Release. The parties acknowledge that: (a) they have been advised to consult an attorney prior to signing thisAgreement; (b) they have read carefully and had sufficient time to consider this Agreement and to consult with their attorney concerning its contents andeffect; (c) they understand the terms of this Agreement; (d) they knowingly and voluntarily waived the rights identified herein; and (e) they have determinedthat entering into this Agreement is in their best interest.11. No Admissions. The settlement contemplated by this Agreement is in compromise of disputed claims, and the compromises are not to be construedas admissions of liability on the part of any party. The parties deny liability and intend merely to avoid litigation and buy their peace.12. Enforceability; Authority of Parties and Signators. The parties hereby represent and warrant to each other that they have the power and authority toexecute and deliver this Agreement and that they have obtained all necessary authorizations to enter into this Agreement, that the execution of thisAgreement does not violate any agreement to which it is a party and that this Agreement constitutes a legal, valid and binding obligation enforceable uponthe parties in accordance with its terms, regardless of the adequacy of consideration. By his or her signature, each signator executing this Agreement onbehalf of an entity covenants and warrants to the other parties that he has the authority to do so as a binding and legally enforceable act of such entity.13. Entire Agreement; No Oral Modifications. This Agreement is not based upon any factual, legal, or other representation or promise made by or onbehalf of either of the parties not contained in this Agreement. The parties acknowledge and agree that if the facts or law with respect to which this Agreementas executed are, or may be found hereafter to be, other than or different from the facts or law in that connection now believed by either of the parties to betrue, the parties expressly accept and assume the risk of such possible difference and agree that all provisions of this Agreement shall be and remain effectivenotwithstanding any such difference. This Agreement contains the entire understanding between the parties regarding the subject matter hereof andsupersedes any prior understanding or agreement between the parties respecting such subject matter. There are no representations, warranties, arrangements,understandings, or agreements, oral or written, relating to the subject matter of this Agreement, except as fully expressed herein. The terms of this Agreementare contractual and not a mere recital. This Agreement may not be altered, amended, modified or rescinded in any way except by written instrument dulyexecuted by the parties. - 8 - 14. Legal Representation. The parties acknowledge, represent and agree, each with the other, that (i) each has consulted with an attorney of their choiceregarding this Agreement prior to the execution hereof, or had the opportunity to consult with an attorney; (ii) each attorney or party has been afforded a fullopportunity to read, review and consider this Agreement; (iii) each attorney or party has had the opportunity to and has negotiated the terms of thisAgreement; and (iv) neither Plaintiff nor Defendant shall be deemed the drafter hereof.15. Governing Law. All questions concerning this Agreement and performance hereunder shall be governed by and resolved in accordance with thelaws of the State of North Carolina.16. Execution Under Seal. This Agreement has been executed under seal in express contemplation of the parties’ continuing duties to perform and tobe bound as contemplated by its terms for a period in excess of three years.17. Counterparts. This Agreement may be executed in facsimile or PDF counterparts at different times and locations, each of which shall be deemed anoriginal and all of which shall constitute the same instrument.[THIS SPACE INTENTIONALLY LEFT BLANK – SIGNATURES APPEAR ON NEXT PAGE] - 9 - Agreed, effective the __ day of June, 2009. COMSTOCK HOMES OF RALEIGH, LLC,a North Carolina limited liability company (“SEAL”)By: COMSTOCK HOMEBUILDING COMPANIES, INC.,Its ManagerBy: Title: Date: PROVIDENCE DEVELOPMENT OF RALEIGH, LLC,a North Carolina limited liability company (“SEAL”)By: Title: Date: ESCROW AGENT:By: Title: Date: [NOTARY ACKNOWLEDGEMENTS ATTACHED] - 10 - STATE OF NORTH CAROLINACOUNTY OF WAKEI, a Notary Public of the County and State aforesaid, certify that _______________________, an authorized representative of PROVIDENCEDEVELOPMENT OF RALEIGH, LLC, a North Carolina limited liability company, personally appeared before me this day and, having provided satisfactoryevidence of his identity in the form of a state issued driver’s license, signed the foregoing instrument under seal for the purpose stated therein on behalf of thecorporation, under authority duly given, on this the day of June, 2009.(SEAL) _____________________, Notary Public My commission expires: _________STATE OF ________________________COUNTY OF _______________I, a Notary Public of the County and State aforesaid, certify that _______________________, an authorized representative of COMSTOCK HOMESOF RALEIGH, LLC, a North Carolina limited liability company, personally appeared before me this day and, having provided satisfactory evidence of hisidentity in the form of a state issued driver’s license, signed the foregoing instrument under seal for the purpose stated therein on behalf of the corporation,under authority duly given, on this the day of June, 2009.(SEAL) _____________________, Notary Public My commission expires: _________ - 11 - STATE OF NORTH CAROLINACOUNTY OF WAKEI, a Notary Public of the County and State aforesaid, certify that _______________________, an authorized representative of MANNING, FULTON &SKINNER, PA, a North Carolina professional association, personally appeared before me this day and, having provided satisfactory evidence of his identityin the form of a state issued driver’s license, signed the foregoing instrument under seal for the purpose stated therein on behalf of the corporation, underauthority duly given, on this the __ day of June , 2009.(SEAL) _____________________, Notary Public My commission expires: _________ - 12 - EXHIBIT ADESCRIPTION OF LOTSLots Conveyed by Defendant:Single Family Lots: Being Lots 49, 71, 64, 65, 66, 67, 81, 82, 83 and 84, Providence of Raleigh Subdivision, Phase 2, as shown on plat of survey entitled“SUBDIVISION PLAT OF PROVIDENCE – PHASE 2” prepared by Elingburg Land Surveying Co., P.A. and recorded in Book of Maps 2007, pages 657 and658, Wake County Registry.Together with all rights, privileges, and easements appurtenant to the above-described property as set forth in that certain Declaration of Covenants,Conditions and Restrictions for Providence of Raleigh Subdivision recorded in Book 12053, page 2419, Wake County Registry, as supplemented by thatcertain Annexation Declaration recorded in Book 12451, page 2197, re-recorded in Book 12623, page 2662, both of the Wake County Registry.Lots Conveyed by Plaintiff:Townhouse Lots: Being all of Townhouse Lots 161-178, inclusive, Providence of Raleigh Subdivision, Phase 2, as shown on plat of survey entitled“SUBDIVISION PLAT OF PROVIDENCE – PHASE 2” prepared by Elingburg Land Surveying Co., P.A. and recorded in Book of Maps 2007, pages 657 and658, Wake County Registry.Together with all rights, privileges, and easements appurtenant to the above-described property as set forth in (i) that certain Declaration of Covenants,Conditions and Restrictions for Providence of Raleigh Subdivision recorded in Book 12053, page 2419, Wake County Registry, as supplemented by thatcertain Annexation Declaration recorded in Book 12451, page 2197, re-recorded in Book 12623, page 2662, both of the Wake County Registry, and (ii) thatcertain Declaration of Covenants, Conditions and Restrictions for Providence Subdivision, Phase 2 Townhouses recorded in Book 12451, page 2202, WakeCounty Registry. - 13 - EXHIBIT BCovenant Modification - 14 - EXHIBIT CFORM OF SPECIAL WARRANTY DEED FOR DEFENDANT’S CONVEYANCE - 15 - EXHIBIT DFORM OF SPECIAL WARRANTY DEED FOR PLAINTIFF’S CONVEYANCE - 16 - EXHIBIT EHOUSE PLAN SUBMISSION AND APPROVAL - 17 - Exhibit 10.80SUBORDINATED DEFICIENCY NOTE $400,000.00 September ___, 2009FOR VALUE RECEIVED, the undersigned, COMSTOCK HOMEBUILDING COMPANIES, INC., a Delaware corporation (the “Borrower”), promisesto pay to the order of CORNERSTONE BANK (“Noteholder” or “Lender”), the sum of Four Hundred Thousand Dollars and No/cents ($400,000.00) (the“Subordinated Deficiency Note”), or so much thereof as shall remain unpaid; this Note being non-interest bearing. This Subordinated Deficiency Note isbeing issued pursuant to and shall be administered in accordance with that certain Settlement Agreement of even date herewith (the “Agreement”). Borrowerhereby agrees to pay Noteholder in full on the Maturity Date (as defined herein). As consideration for the entry into this Subordinated Deficiency Note andpayment by Borrower hereunder, Noteholder has executed the release contained in the Agreement.1. Maturity. The unpaid principal amount of this Subordinated Deficiency Note shall mature and become due and payable in full on the date that isthree (3) years from the date hereof (the “Maturity Date”).2. Notices. Any notice, request, or demand to be given to the Borrower under this Subordinated Deficiency Note shall be in writing and shall bedeemed to have been given if delivered to the Borrower at 11465 Sunset Hills Road, Suite 500, Reston, Virginia 20190, Attention: Mr. ChristopherClemente, with a copy to Mr. Jubal R. Thompson either (i) on the date of delivery of the notice to the Borrower by hand, or (ii) the next business dayfollowing the day on which the same shall have been placed in the hands of a nationally recognized courier service for overnight delivery to the Borrower,with all charges prepaid and tracking information retained, addressed to the Borrower at the address provided herein.3. Purpose of Loan. The Borrower hereby represents and warrants that the loan evidenced hereby was made and transacted solely for the purpose ofcarrying on a business.4. Prepayment. Subject to Paragraph 7 below, this Subordinated Deficiency Note may be prepaid, in whole or in part, at any time without penalty orpremium.5. Choice of Law. The validity and construction of this Subordinated Deficiency Note and all matters pertaining thereto are to be determined accordingto the laws of the State of Georgia.6. Enforceability. In the event any provision of this Subordinated Deficiency Note (or any part of any provision) is held by a court of competentjurisdiction to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision (orremaining part of the affected provision) of this Subordinated Deficiency Note; but this Subordinated Deficiency Note shall be construed as if such invalid,illegal or unenforceable provision (or part thereof) had not been contained in this Subordinated Deficiency Note, but only to the extent it is invalid, illegal orunenforceable. This Subordinated Deficiency Note may not be changed orally, but only by an agreement in writing signed by the parties against whomenforcement of any waiver, change, modification or discharge is sought. 7. Subordination. By acceptance of this Subordinated Deficiency Note, Holder of the Subordinated Indebtedness (as defined below) agrees to each ofthe following provisions:(a) As used in this Paragraph 7, the following terms have the following respective meanings:“Agents” means the Guggenheim Agent and the KeyBank Agent.“Bankruptcy Code” means 11 U.S.C. §101 et seq., as from time to time hereafter amended, and any successor or similar statute.“Collateral” means the Guggenheim Collateral and the KeyBank Collateral.“Enforcement Action” means the commencement of any litigation or proceeding at law or in equity, the commencement of any foreclosureproceeding, the exercise of any statutory or non-judicial power of sale, the taking of a deed or assignment in lieu of foreclosure, seeking to obtain ajudgment, seeking the appointment of or the obtaining of a receiver or the taking of any other enforcement action against, or the taking of possessionor control of, or the exercise of any rights or remedies with respect to, any Obligor or the Collateral, any other property or assets of any Obligor or anyportion thereof.“Guggenheim Agent” means Guggenheim Corporate Funding, LLC, in its capacity as the administrative agent under the Guggenheim SeniorLoan Documents, or any successor administrative agent under the Guggenheim Senior Loan Documents.“Guggenheim Collateral” means all of the real, personal and other property owned by the Guggenheim Obligors now or hereafter encumbered byor securing the Guggenheim Senior Note, the Guggenheim Senior Loan Agreement, the Guggenheim Senior Security Documents, or the GuggenheimSenior Guaranty, or any documents now or hereafter entered into or delivered in connection with any of them, and all of each Guggenheim Obligor’sright, title and interest in and to such property, whether existing or future, and all security interests, security titles, liens, claims, pledges, encumbrances,conveyances, endorsements and guaranties of whatever nature now or hereafter securing any Guggenheim Obligor’s obligations under the GuggenheimSenior Loan Documents or any part thereof, and all products and proceeds of the foregoing. The Guggenheim Collateral shall not include the pledgesby Borrower to KeyBank Agent of its equity interests in Potomac and Station View pursuant the KeyBank Senior Assignment of Interests.“Guggenheim Obligors” means Comstock Penderbrook, L.C. and Borrower.“Guggenheim Senior Debt” means (i) principal of, premium, if any, and interest on, the Guggenheim Senior Note or pursuant to the GuggenheimSenior Loan Agreement (whether payable under the Guggenheim Senior Note, the Guggenheim Senior Loan Agreement, the Guggenheim SeniorGuaranty, or any other Guggenheim Senior Loan Document), (ii) prepayment fees, yield maintenance charges, breakage costs, late charges, default interest, agent’s fees, costs of collection, protective advances,advances to cure defaults, and indemnities, and (iii) any other amount or obligations (including any fee or expense) due or payable with respect to theGuggenheim Senior Loan or any of the Guggenheim Senior Loan Documents (including interest and any other of the foregoing amounts accruing afterthe commencement of any Insolvency Proceeding, and any other interest that would have accrued but for the commencement of such InsolvencyProceeding, whether or not any such interest is allowed as an enforceable claim in such Insolvency Proceeding and regardless of the value of theGuggenheim Collateral at the time of such accrual), whether outstanding on the date of this Subordinated Deficiency Note or hereafter incurred,whether as a secured claim, undersecured claim, unsecured claim, deficiency claim or otherwise, and all renewals, modifications, amendments,supplements, consolidations, restatements, extensions, refinances, and refundings of any thereof; provided, however, that notwithstanding anythingherein to the contrary, “Guggenheim Senior Debt” shall not include (a) any funds loaned or advanced by the Guggenheim Senior Lenders for anypurpose unrelated to the Fair Lakes (Penderbrook) Condominium conversion project in Fairfax County, VA, or (b) any of items described in (i), (ii),(iii) of this definition that are related to any of the purposes set forth in (a).“Guggenheim Senior Guaranty” means that certain Carve-Out Guaranty dated as of February 27, 2007 executed by Borrower in favor of theGuggenheim Agent for the benefit of the Guggenheim Senior Lenders, as the same may be from time to time amended, extended, supplemented,consolidated, renewed, restated or otherwise modified.“Guggenheim Senior Lenders” means financial institutions or designated entities from time to time as defined in the Guggenheim Senior LoanAgreement.“Guggenheim Senior Loan” means the up to Twenty Eight Million Dollars and No/Cents ($28,000,000) credit facility provided pursuant to theGuggenheim Senior Loan Agreement, as the same may be amended, modified, increased, consolidated, restated, or replaced.“Guggenheim Senior Loan Agreement” means that certain Loan Agreement dated as of February 22, 2007 executed by Comstock Penderbrook,L.C. and Guggenheim Corporate Funding, LLC, individually and as Administrative Agent for the Guggenheim Senior Lenders, and certain otherparties now or hereafter a party thereto, as modified by that certain First Amendment to Loan Agreement dated April 10, 2007, and as further modifiedby Forbearance Agreement and Second Amendment to Loan Agreement dated January 27, 2009, and as further modified by Third Amendment to LoanAgreement dated on or near the date hereof, and as the same may be further amended, modified, increased, consolidated, restated or replaced.“Guggenheim Senior Loan Documents” means the Guggenheim Senior Security Documents, the Guggenheim Senior Note, the GuggenheimSenior Loan Agreement, the Guggenheim Senior Guaranty, and any other documents, agreements or instruments now or hereafter executed anddelivered by or on behalf of any Guggenheim Obligor or any other person or entity in connection with the Guggenheim Senior Loan, and anydocuments, agreements or instruments hereafter executed and delivered by or on behalf of any Guggenheim Obligor or any other person or entity inconnection with any refinancing of the Guggenheim Senior Loan, as any of the same may be from time to time amended, extended, supplemented,consolidated, renewed, restated, or otherwise modified. “Guggenheim Senior Note” means that certain Promissory Note dated February 22, 2007 executed by Comstock Penderbrook, L.C. in favor ofthe Guggenheim Corporate Funding, LLC, as originally executed, or if varied, extended, supplemented, consolidated, amended, replaced, renewed,modified, or restated from time to time as so varied, extended, supplemented, consolidated, amended, replaced, renewed, modified, or restated.“Guggenheim Senior Security Documents” means the “Security Documents” as defined in the Guggenheim Senior Loan Agreement, and eachother Guggenheim Senior Loan Document securing any or all of the Guggenheim Senior Loan, together with any and all acknowledgments, powers,certificates, UCC financing statements, or other documents or instruments executed and delivered in connection therewith.“Insolvency Proceeding” means any proceeding, whether voluntary or involuntary, under the Bankruptcy Code, or any other bankruptcy,insolvency, liquidation, reorganization, composition, extension, arrangement, adjustment or other similar proceeding concerning any Obligor, anyaction for the winding-up or dissolution of any Obligor, any proceeding (judicial or otherwise) concerning the application of the assets of any Obligorfor the benefit of its creditors, the appointment of or any proceeding seeking the appointment of a trustee, receiver or other similar custodian for all orany substantial part of the assets of any Obligor, a general assignment for the benefit of creditors or any proceeding or action seeking the marshaling ofthe assets and liabilities of any Obligor, or any other action concerning the adjustment of the debts of any Obligor or the cessation of business by anyObligor, in each case under any applicable domestic or foreign federal or state law. For the purposes hereof, an “Insolvency Proceeding” shall alsoinclude the taking, seeking or approving of any action in any proceeding described in the foregoing sentence by, against or concerning any otherperson or entity that could adversely affect any Obligor, any other obligor with respect to the Subordinated Indebtedness, the Collateral, the SeniorLoan Documents, the Agents, the Senior Lenders or any Judicial Proceeding under the Senior Security Documents or any other Senior Loan Document.“Judicial Proceeding” means one or more proceedings by one or more holders of Senior Debt before a state or federal court (having jurisdictionwith respect thereto) to collect the Senior Debt following an acceleration of the maturity thereof as a result of a default.“KeyBank Agent” means KeyBank National Association, in its capacity as the agent under the KeyBank Senior Loan Documents, or anysuccessor agent under the KeyBank Senior Loan Documents.“KeyBank Cash Collateral Agreement” means that certain Cash Collateral Agreement dated on or near the date herewith executed by Borrowerin favor of the KeyBank Agent for the benefit of the KeyBank Senior Lenders, and as may be further amended, modified, increased, consolidated,restated or replaced.“KeyBank Collateral” means all of the real, personal and other property owned by the KeyBank Obligors now or hereafter encumbered by orsecuring the KeyBank Senior Note, the KeyBank Senior Loan Agreement, the KeyBank Senior Security Documents, the KeyBank Cash CollateralAgreement, the pledges by Borrower to KeyBank Agent of its equity interests in Potomac and Station View pursuant the KeyBank Senior Assignment of Interests, or the KeyBank Senior Guaranty, or anydocuments now or hereafter entered into or delivered in connection with any of them, and all of each KeyBank Obligor’s right, title and interest in andto such property, whether existing or future, and all security interests, security titles, liens, claims, pledges, encumbrances, conveyances, endorsementsand guaranties of whatever nature now or hereafter securing any KeyBank Obligor’s obligations under the KeyBank Senior Loan Documents or anypart thereof, and all products and proceeds of the foregoing.“KeyBank Obligors” means Comstock Station View, L.C., a Virginia limited liability company, Comstock Potomac Yard, L.C., a Virginialimited liability company, and Borrower.“KeyBank Senior Assignment of Interests” means that certain Assignment of Interests dated March 14, 2008 executed by Borrower in favor ofKeyBank Agent for the benefit of the KeyBank Senior Lenders, as the same may be from time to time amended, extended, supplemented, consolidated,renewed, restated or otherwise modified.“KeyBank Senior Debt” means the (i) principal of, premium, if any, and interest on, the KeyBank Senior Note or pursuant to the KeyBank SeniorLoan Agreement (whether payable under the KeyBank Senior Note, the KeyBank Senior Loan Agreement, the KeyBank Senior Guaranty, or any otherKeyBank Senior Loan Document), (ii) prepayment fees, yield maintenance charges, breakage costs, late charges, default interest, agent’s fees, costs ofcollection, protective advances, advances to cure defaults, and indemnities, and (iii) any other amount or obligations (including any fee or expense)due or payable with respect to the KeyBank Senior Loan or any of the KeyBank Senior Loan Documents (including interest and any other of theforegoing amounts accruing after the commencement of any Insolvency Proceeding, and any other interest that would have accrued but for thecommencement of such Insolvency Proceeding, whether or not any such interest is allowed as an enforceable claim in such Insolvency Proceeding andregardless of the value of the KeyBank Collateral at the time of such accrual), whether outstanding on the date of this Subordinated Deficiency Note orhereafter incurred, whether as a secured claim, undersecured claim, unsecured claim, deficiency claim or otherwise, and all renewals, modifications,amendments, supplements, consolidations, restatements, extensions, refinances, and refundings of any thereof; provided, however, thatnotwithstanding anything herein to the contrary, “KeyBank Senior Debt” shall not include (a) any funds loaned or advanced by the KeyBank SeniorLenders after the date of this Subordinated Deficiency Note for any purpose unrelated to the Eclipse on Center Park Condominium high rise project inArlington County, VA, referred to as the Potomac Project in the Key Bank Senior Loan Agreement, and the townhouse development project known asStation View in Loudoun County, Virginia referred to as the Station View Project in the Key Bank Senior Loan Agreement, or (b) any of the itemsdescribed in (i), (ii), (iii) of this definition that are related to any of the purposes set forth in (a); provided, further, however, that Lender acknowledgesthat all amounts currently outstanding under the KeyBank Senior Loan Documents shall be deemed KeyBank Senior Debt.“KeyBank Senior Guaranty” means that certain Unconditional Guaranty of Payment and Performance dated as of March 14, 2008 executed byBorrower in favor of the KeyBank Agent for the benefit of the KeyBank Senior Lenders, as the same may be from time to time amended, extended,supplemented, consolidated, renewed, restated or otherwise modified. “KeyBank Senior Lenders” means “Lenders” as defined in the KeyBank Senior Loan Agreement.“KeyBank Senior Loan” means the up to $40,391,200.00 credit facility provided pursuant to the KeyBank Senior Loan Agreement, as the samemay be amended, modified, increased, consolidated, restated, or replaced.“KeyBank Senior Loan Agreement” means that certain Loan Agreement dated as of March 14, 2008 executed by Comstock Station View, L.C., aVirginia limited liability company, and Comstock Potomac Yard, L.C., a Virginia limited liability company, and KeyBank National Association,individually and as Agent for the KeyBank Senior Lenders, and certain other parties now or hereafter a party thereto, as modified by that certain FirstAmendment to Loan Agreement dated on or near the date hereof, and as the same may be further amended, modified, increased, consolidated, restatedor replaced.“KeyBank Senior Loan Documents” means the KeyBank Senior Security Documents, the KeyBank Senior Note, the KeyBank Senior LoanAgreement, the KeyBank Senior Guaranty, the KeyBank Senior Assignment of Interests and any other documents, agreements or instruments now orhereafter executed and delivered by or on behalf of any KeyBank Obligor or any other person or entity in connection with the KeyBank Senior Loan,and any documents, agreements or instruments hereafter executed and delivered by or on behalf of any KeyBank Obligor or any other person or entityin connection with any refinancing of the KeyBank Senior Loan, as any of the same may be from time to time amended, extended, supplemented,consolidated, renewed, restated, or otherwise modified.“KeyBank Senior Note” means that certain Amended and Restated Note dated March 14, 2008 executed by Comstock Station View, L.C., aVirginia limited liability company, and Comstock Potomac Yard, L.C., a Virginia limited liability company in favor of KeyBank National Association,as originally executed, or if varied, extended, supplemented, consolidated, amended, replaced, renewed, modified, or restated from time to time as sovaried, extended, supplemented, consolidated, amended, replaced, renewed, modified, or restated.“KeyBank Senior Security Documents” means the “Security Documents” as defined in the KeyBank Senior Loan Agreement, the KeyBank CashCollateral Agreement, and each other KeyBank Senior Loan Document securing any or all of the KeyBank Senior Loan, together with any and allacknowledgments, powers, certificates, UCC financing statements, or other documents or instruments executed and delivered in connection therewith.“Obligors” means the Guggenheim Obligors and the KeyBank Obligors.“Potomac” means Comstock Potomac Yard, L.C., a Virginia limited liability company.“Senior Debt” means the Guggenheim Senior Debt and the KeyBank Senior Debt. “Senior Lender Sharing Ratio” means as of the date of determination thereof, with respect to the Guggenheim Senior Debt, the outstandingprincipal amount due on the Guggenheim Senior Guaranty divided by the total outstanding principal balance of the KeyBank Senior Debt plus theoutstanding principal amount due on the Guggenheim Senior Guaranty, and means, with respect to the KeyBank Senior Debt, the outstandingprincipal balance of the KeyBank Senior Debt divided by the total outstanding principal balance of the KeyBank Senior Debt plus the outstandingprincipal amount due on the Guggenheim Senior Guaranty.“Senior Lenders” means the KeyBank Senior Lenders and the Guggenheim Senior Lenders.“Senior Loan Documents” means the Guggenheim Senior Loan Documents and the KeyBank Senior Loan Documents.“Senior Security Documents” means the Guggenheim Senior Security Documents and the KeyBank Senior Security Documents.“Station View” means Comstock Station View, L.C., a Virginia limited liability company.“Subordinated Indebtedness” means the principal amount of the indebtedness evidenced by this Subordinated Deficiency Note, together withinterest, breakage or other amount, if any, due thereon or payable with respect thereto, whether the same is payable by Borrower or any other Obligor.“Subsidiary” means any corporation, association, partnership, trust, or other business entity of which the designated parent shall at any time owndirectly or indirectly through a Subsidiary or Subsidiaries at least a majority (by number of votes or controlling interests) of the outstanding VotingInterests.“Voting Interests” means stock or similar ownership interests, of any class or classes (however designated), the holders of which are at the timeentitled, as such holders, (a) to vote for the election of a majority of the directors (or persons performing similar functions) of the corporation,association, partnership, trust or other business entity involved, or (b) to control, manage, or conduct the business of the corporation, partnership,association, trust or other business entity involved.(b) Upon any distribution of the assets of Borrower in any Insolvency Proceeding relating to Borrower, or to its respective creditors as such, thenand in any such event:(i) the holders of the Senior Debt shall be entitled to receive payment in full of all amounts due or to become due on or in respect of all SeniorDebt, before any payment, whether in cash, property, or securities is made on account of or applied to the Subordinated Indebtedness; and(ii) any payment, whether in cash, property or securities, to which the holders of the Subordinated Indebtedness would be entitled except for theprovisions of this Paragraph 7, shall be paid or delivered, to the extent permitted by law, by any debtor, custodian, liquidating trustee, agent, or other person making such payment, directly to the holders of the Senior Debt, or their representative or representatives, inamounts computed in accordance with each applicable Senior Lender Sharing Ratio, for application to the payment thereof, to the extent necessary topay all such Senior Debt in full, after giving effect to any concurrent payment or distribution, or provision therefor, to the holders of such Senior Debt.(c) By acceptance of this Subordinated Deficiency Note, each holder of the Subordinated Indebtedness hereby expressly waives any rights torequire or request that the Agents, or either of them, or the Senior Lenders marshal the Collateral in favor of the holder of the SubordinatedIndebtedness or to equitably subordinate the rights, liens or security interests of the Agents, or either of them, or the Senior Lenders, or any of them,under the Senior Loan Documents, whether pursuant to the Bankruptcy Code or otherwise. The Agents, or either of them, and the Senior Lenders, orany of them, shall have the right at any and all times to determine the order in which, or whether, (i) recourse is sought against any Obligor or any otherobligor with respect to the Senior Debt, or (ii) any or all of the Collateral shall be enforced. Each holder of the Subordinated Indebtedness herebywaives any and all rights to require that the Agents, or either of them, and/or the Senior Lenders, or any of them, pursue or exhaust any rights orremedies with respect to any Obligor or any other party prior to exercising their rights and remedies with respect to the Collateral or any other propertyor assets of the Obligors. The Agents, or either of them, and the Senior Lenders, or any of them, may forbear collection, grant indulgences, release,compromise or settle the Senior Debt, or sell, take, exchange, surrender or release collateral or security therefor, consent to or waive any breach of, orany act, omission or default under, any of the Senior Loan Documents, apply any sums received by or realized upon by the Agents, or either of them,and the Senior Lenders, or any of them, against liabilities of the Obligors to the Agents, or either of them, and the Senior Lenders, or any of them, insuch order as the Agents, or either of them, and the Senior Lenders, or any of them, shall determine in their sole discretion, and otherwise deal with anyand all parties and the Collateral or other property or assets of the Obligors as they deem appropriate. The Agents and the Senior Lenders shall have noliability to the holder of the Subordinated Indebtedness for, and each holder of the Subordinated Indebtedness hereby waives any claim, right, action orcause of action which it may now or hereafter have against the Agents, or either of them, and the Senior Lenders, or any of them, arising out of, anywaiver, consent, release, indulgence, extension, delay or other action or omission, any release of any Obligor, release of any of the Collateral, thefailure to realize upon any Collateral or other property or assets of any Obligor, or the failure to exercise any rights or remedies of the Agents, or eitherof them, and the Senior Lenders, or any of them, under the Senior Loan Documents.(d) Each holder of the Subordinated Indebtedness hereby expressly consents to and authorizes, at the option of each Agent, the amendment,extension, restatement, consolidation, increase, renewal, refinance or other modification, in whole or in part, of all or any of the Senior LoanDocuments, including, without limitation, increasing or decreasing the stated principal amount of either Senior Loan, extending or shortening the termof either Senior Loan, increasing or decreasing the interest rate payable as provided in any of the Senior Loan Documents or altering any other paymentterms under any of the Senior Loan Documents. (e) By acceptance of this Subordinated Deficiency Note, each holder of the Subordinated Indebtedness acknowledges that no Agent and noSenior Lender has made nor do any of them now make any representations or warranties, express or implied, nor do they assume any liability to anyholder of the Subordinated Indebtedness, with respect to the creditworthiness or financial condition of any Obligor or any other person. Each holder ofthe Subordinated Indebtedness acknowledges that it has, independently and without reliance upon the Agents, or either of them, or the Senior Lenders,or any of them, and based upon such information and documents as it has deemed appropriate, made its own credit analysis and decision to accept thisSubordinated Deficiency Note and the Subordinated Indebtedness. Each holder of the Subordinated Indebtedness will, independently and withoutreliance upon the Agents, or either of them, or the Senior Lenders, or any of them, based upon such information and documents as it deems appropriateat the time, continue to make its own credit analysis and decisions in taking or not taking action under this Subordinated Deficiency Note. No Agentand no Senior Lender shall have any duty or responsibility, either initially or on a continuing basis, to provide any holder of the SubordinatedIndebtedness with any credit or other information with respect to any Obligor, whether coming into its possession before the making of any SeniorLoan or at any time or times thereafter. Each holder of the Subordinated Indebtedness agrees that no Agent an no Senior Lender owes any fiduciaryduty to the holder of the Subordinated Indebtedness in connection with the administration of any Senior Loan or any Senior Loan Document and theholder of the Subordinated Indebtedness agrees not to assert any such claim.(f) The provisions of this Paragraph 7 shall be applicable both before and after the commencement, whether voluntary or involuntary, of anyInsolvency Proceeding by or against any Obligor and all references herein to any Obligor shall be deemed to apply to any such Obligor as a debtor-in-possession and to any trustee in bankruptcy for the estate of any such Obligor. Furthermore, this Paragraph 7 and the subordinations contained hereinshall apply notwithstanding the fact that all or any part of the Senior Debt or any claim for or with respect to all of any part of the Senior Debt issubordinated, avoided or disallowed, in whole or in part, in any Insolvency Proceeding or other applicable federal, state or foreign law. Withoutlimiting the foregoing, by acceptance of this Subordinated Deficiency Note, each holder of the Subordinated Indebtedness expressly covenants andagrees that this Subordinated Deficiency Note is enforceable under applicable bankruptcy law and should be enforced under Section 510(a) of theBankruptcy Code. Until such time as the Senior Debt has been indefeasibly paid in full in cash and Senior Lenders have no further obligation to makeany advances which would constitute Senior Debt, the holders of the Subordinated Indebtedness shall not, and shall not solicit any person or entity to:(i) seek, commence, file, institute, consent to or acquiesce in any Involuntary Proceeding with respect to any Obligor or the Collateral; (ii) seek toconsolidate any Obligor with any other person or entity in any Insolvency Proceeding; or (iii) take any action in furtherance of any of the foregoing.(g) Each holder of the Subordinated Indebtedness hereby agrees that it shall not challenge the validity or amount of any claim submitted in suchInsolvency Proceeding by the Agents, or either of them, or the Senior Lenders, or any of them, or any valuations of the Collateral submitted by theAgents, or either of them, or the Senior Lenders, or any of them, in such Insolvency Proceeding or take any other action in such Insolvency Proceeding,which is adverse to their enforcement of any claim or receipt of adequate protection (as that term is defined in the Bankruptcy Code). (h) To the extent any transfer, payment or distribution of assets with respect to all or any portion of the Senior Debt (whether in cash, property orsecurities and whether by or on behalf of any Obligor as proceeds of security or enforcement of any right of setoff or otherwise) is declared to befraudulent or preferential, set aside or required to be paid to any Obligor, the estate in bankruptcy thereof, any third party, or a trustee, receiver or othersimilar party under any bankruptcy, insolvency, receivership or similar law, then if such payment is recovered by, or paid over to, any Obligor, theestate in bankruptcy thereof, any third party, or such trustee, receiver or other similar party, the Senior Debt or part thereof originally intended to besatisfied shall be deemed to be reinstated and outstanding as if such payment or distribution had not occurred, and this Paragraph 7 and the agreementsand subordination contained herein shall be reinstated with respect to any such transfer, payment or distribution. No Agent shall be required to contestany such declaration or obligation to return such payment or distribution.(i) Each holder of the Subordinated Indebtedness intentionally and unconditionally waives and relinquishes any right to challenge the validity,enforceability and binding effect of any of the Senior Security Documents or the other Senior Loan Documents, and any lien, encumbrance, claim orsecurity interest now or hereafter created thereunder, or the attachment, perfection or priority thereof, regardless of the order of recording or filing ofany thereof, or compliance by the Agents, or either of them, or the Senior Lenders, or any of them, with the terms of any of the Senior SecurityDocuments or any of the other Senior Loan Documents, by reason of any matter, cause or thing now or hereafter occurring, nor shall the holder of theSubordinated Indebtedness raise any such matter, cause or thing as a defense to the enforcement thereof.(j) Each holder of the Subordinate Debt agrees that it will not in any manner challenge, oppose, object to, interfere with or delay (i) the validityor enforceability of this Subordinated Deficiency Note, including without limitation, any provisions regarding the relative priority of the rights andduties of the Agents, or either of them, and Senior Lenders, or any of them, and the holder of the Subordinated Indebtedness, or (ii) any Agent’s or anySenior Lender’s security interest in, liens on and rights as to the Obligors, and any Collateral or any other property or assets of any Obligor, or anyEnforcement Actions of the Agents, or either of them, or the Senior Lenders, or any of them, (including, without limitation, any efforts by the Agents, oreither of them, to obtain relief from the automatic stay under Section 362 of the Bankruptcy Code).IN WITNESS WHEREOF, the Borrower has executed and sealed, or caused to be executed and sealed, this Note on the date first above written. BORROWER: Comstock Homebuilding Companies, Inc. By: (SEAL) Name: Christopher ClementeTitle: CEO Exhibit 10.81AMENDED AND RESTATED SUBORDINATED DEFICIENCY NOTE $205,488.23 November 5, 2009FOR VALUE RECEIVED, the undersigned, COMSTOCK HOMEBUILDING COMPANIES, INC., a Delaware corporation (the “Borrower”), promisesto pay to the order of WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association (the “Noteholder” or “Wachovia”), the sum of TwoHundred and Five Thousand, Four Hundred Eighty-Eight and 23/100 Dollars ($205,488.23) (the “Subordinated Deficiency Note”), or so much thereof asshall remain unpaid; this Note being non-interest bearing provided that Borrower is not in default of its obligations hereunder. This Subordinated DeficiencyNote is issued pursuant to that certain Consensual Foreclosure and Settlement Agreement dated August 17, 2009 (the “Agreement”), and shall restate in fulland supersede that certain Subordinated Deficiency Note dated August 17, 2009 in the original principal amount of $1,805,243.00. Borrower hereby agreesto pay Noteholder in full on the Maturity Date (as defined herein). As consideration for the entry into this Subordinated Deficiency Note and payment byBorrower hereunder, Noteholder has executed the release contained in the Agreement.1. Maturity. The unpaid principal amount of this Subordinated Deficiency Note shall mature and become due and payable in full on August 17, 2012(the “Maturity Date”).2. Default. In addition to all other rights contained in this Subordinated Deficiency Note, the Borrower hereby expressly agrees that if there is a defaultin the payment of any amount due under this Subordinated Deficiency Note and if such default shall continue uncorrected for a period of fifteen (15) daysafter notice of such default is given by the Noteholder to the Borrower (a “Default”), then in such event this Subordinated Deficiency Note shall bear interestat the rate of three percent (3%) per annum (the “Default Rate”) from and after the Maturity Date.3. Notices. Any notice, request, or demand to be given to the Borrower under this Subordinated Deficiency Note shall be in writing and shall bedeemed to have been given if delivered to the Borrower at 11465 Sunset Hills Road, Suite 500, Reston, Virginia 20190, Attention: Mr. ChristopherClemente, copy to Mr. Jubal Thompson by e-mail to jthompson@comstockhomebuilding.com, either (i) on the date of delivery of the notice to the Borrowerby hand, or (ii) the next business day following the day on which the same shall have been placed in the hands of a nationally recognized courier service forovernight delivery to the Borrower, with all charges prepaid and tracking information retained, addressed to the Borrower at the address provided herein.4. Purpose of Loan. The Borrower hereby represents and warrants that the loan evidenced hereby was made and transacted solely for the purpose ofcarrying on a business.5. Prepayment. Subject to Paragraph 8 below, this Subordinated Deficiency Note may be prepaid, in whole or in part, at any time without penalty orpremium. 6. Choice of Law. The validity and construction of this Subordinated Deficiency Note and all matters pertaining thereto are to be determined accordingto the laws of the State of North Carolina.7. Enforceability. In the event any provision of this Subordinated Deficiency Note (or any part of any provision) is held by a court of competentjurisdiction to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision (orremaining part of the affected provision) of this Subordinated Deficiency Note; but this Subordinated Deficiency Note shall be construed as if such invalid,illegal or unenforceable provision (or part thereof) had not been contained in this Subordinated Deficiency Note, but only to the extent it is invalid, illegal orunenforceable. This Subordinated Deficiency Note may not be changed orally, but only by an agreement in writing signed by the parties against whomenforcement of any waiver, change, modification or discharge is sought.8. Subordination. By acceptance of this Subordinated Deficiency Note, each holder of the Subordinated Indebtedness (as defined below) agrees to eachof the following provisions:(a) As used in this Paragraph 8, the following terms have the following respective meanings:“Agents” means the Guggenheim Agent and the KeyBank Agent.“Bankruptcy Code” means 11 U.S.C. §101 et seq., as from time to time hereafter amended, and any successor or similar statute.“Collateral” means the Guggenheim Collateral and the KeyBank Collateral.“Enforcement Action” means the commencement of any litigation or proceeding at law or in equity, the commencement of any foreclosureproceeding, the exercise of any statutory or non-judicial power of sale, the taking of a deed or assignment in lieu of foreclosure, seeking toobtain a judgment, seeking the appointment of or the obtaining of a receiver or the taking of any other enforcement action against, or the takingof possession or control of, or the exercise of any rights or remedies with respect to, any Obligor or the Collateral, any other property or assets ofany Obligor or any portion thereof.“Guggenheim Agent” means Guggenheim Corporate Funding, LLC, in its capacity as the administrative agent under the GuggenheimSenior Loan Documents, or any successor administrative agent under the Guggenheim Senior Loan Documents.“Guggenheim Collateral” means all of the real, personal and other property owned by the Guggenheim Obligors now or hereafterencumbered by or securing the Guggenheim Senior Note, the Guggenheim Senior Loan Agreement, the Guggenheim Senior Security Documents,or the Guggenheim Senior Guaranty, or any documents now or hereafter entered into or delivered in connection with any of them, and all of eachGuggenheim Obligor’s right, title and interest in and to such property, whether existing or future, and all security interests, security titles, liens,claims, pledges, encumbrances, conveyances, endorsements and guaranties of whatever nature now or hereafter securing any GuggenheimObligor’s obligations under the Guggenheim Senior Loan Documents or any part thereof, and all products and proceeds of the foregoing. TheGuggenheim Collateral shall not include the pledges by Borrower to KeyBank Agent of its equity interests in Potomac and Station Viewpursuant the KeyBank Senior Assignment of Interests. 2 “Guggenheim Obligors” means Comstock Penderbrook, L.C. and Borrower.“Guggenheim Senior Debt” means (i) principal of, premium, if any, and interest on, the Guggenheim Senior Note or pursuant to theGuggenheim Senior Loan Agreement (whether payable under the Guggenheim Senior Note, the Guggenheim Senior Loan Agreement, theGuggenheim Senior Guaranty, or any other Guggenheim Senior Loan Document), (ii) prepayment fees, yield maintenance charges, breakagecosts, late charges, default interest, agent’s fees, costs of collection, protective advances, advances to cure defaults, and indemnities, and (iii) anyother amount or obligations (including any fee or expense) due or payable with respect to the Guggenheim Senior Loan or any of theGuggenheim Senior Loan Documents (including interest and any other of the foregoing amounts accruing after the commencement of anyInsolvency Proceeding, and any other interest that would have accrued but for the commencement of such Insolvency Proceeding, whether or notany such interest is allowed as an enforceable claim in such Insolvency Proceeding and regardless of the value of the Guggenheim Collateral atthe time of such accrual), whether outstanding on the date of this Subordinated Deficiency Note or hereafter incurred, whether as a secured claim,undersecured claim, unsecured claim, deficiency claim or otherwise, and all renewals, modifications, amendments, supplements, consolidations,restatements, extensions, refinances, and refundings of any thereof; provided, however, that notwithstanding anything herein to the contrary,“Guggenheim Senior Debt” shall not include (a) any funds loaned or advanced by the Guggenheim Senior Lenders for any purpose unrelated tothe Fair Lakes (Penderbrook) Condominium conversion project in Fairfax County, VA, or (b) any of items described in (i), (ii), (iii) of thisdefinition that are related to any of the purposes set forth in (a).“Guggenheim Senior Guaranty” means that certain Carve-Out Guaranty dated as of February 27, 2007 executed by Borrower in favor ofthe Guggenheim Agent for the benefit of the Guggenheim Senior Lenders, as the same may be from time to time amended, extended,supplemented, consolidated, renewed, restated or otherwise modified.“Guggenheim Senior Lenders” means financial institutions or designated entities from time to time as defined in the Guggenheim SeniorLoan Agreement.“Guggenheim Senior Loan” means the up to Twenty Eight Million Dollars and No/Cents ($28,000,000) credit facility provided pursuantto the Guggenheim Senior Loan Agreement, as the same may be amended, modified, increased, consolidated, restated, or replaced.“Guggenheim Senior Loan Agreement” means that certain Loan Agreement dated as of February 22, 2007 executed by ComstockPenderbrook, L.C. and Guggenheim Corporate Funding, LLC, individually and as Administrative Agent for the Guggenheim Senior Lenders,and certain other parties now or hereafter a party thereto, as modified by that certain First Amendment to Loan Agreement dated April 10, 2007,and as further modified by Forbearance Agreement and Second Amendment to Loan Agreement dated January 27, 2009, and as further modifiedby Third Amendment to Loan Agreement dated on or near the date hereof, and as the same may be further amended, modified, increased,consolidated, restated or replaced. 3 “Guggenheim Senior Loan Documents” means the Guggenheim Senior Security Documents, the Guggenheim Senior Note, theGuggenheim Senior Loan Agreement, the Guggenheim Senior Guaranty, and any other documents, agreements or instruments now or hereafterexecuted and delivered by or on behalf of any Guggenheim Obligor or any other person or entity in connection with the Guggenheim SeniorLoan, and any documents, agreements or instruments hereafter executed and delivered by or on behalf of any Guggenheim Obligor or any otherperson or entity in connection with any refinancing of the Guggenheim Senior Loan, as any of the same may be from time to time amended,extended, supplemented, consolidated, renewed, restated, or otherwise modified.“Guggenheim Senior Note” means that certain Promissory Note dated February 22, 2007 executed by Comstock Penderbrook, L.C. infavor of the Guggenheim Corporate Funding, LLC, as originally executed, or if varied, extended, supplemented, consolidated, amended,replaced, renewed, modified, or restated from time to time as so varied, extended, supplemented, consolidated, amended, replaced, renewed,modified, or restated.“Guggenheim Senior Security Documents” means the “Security Documents” as defined in the Guggenheim Senior Loan Agreement, andeach other Guggenheim Senior Loan Document securing any or all of the Guggenheim Senior Loan, together with any and all acknowledgments,powers, certificates, UCC financing statements, or other documents or instruments executed and delivered in connection therewith.“Insolvency Proceeding” means any proceeding, whether voluntary or involuntary, under the Bankruptcy Code, or any other bankruptcy,insolvency, liquidation, reorganization, composition, extension, arrangement, adjustment or other similar proceeding concerning any Obligor,any action for the winding-up or dissolution of any Obligor, any proceeding (judicial or otherwise) concerning the application of the assets ofany Obligor for the benefit of its creditors, the appointment of or any proceeding seeking the appointment of a trustee, receiver or other similarcustodian for all or any substantial part of the assets of any Obligor, a general assignment for the benefit of creditors or any proceeding or actionseeking the marshaling of the assets and liabilities of any Obligor, or any other action concerning the adjustment of the debts of any Obligor orthe cessation of business by any Obligor, in each case under any applicable domestic or foreign federal or state law. For the purposes hereof, an“Insolvency Proceeding” shall also include the taking, seeking or approving of any action in any proceeding described in the foregoingsentence by, against or concerning any other person or entity that could adversely affect any Obligor, any other obligor with respect to theSubordinated Indebtedness, the Collateral, the Senior Loan Documents, the Agents, the Senior Lenders or any Judicial Proceeding under theSenior Security Documents or any other Senior Loan Document.“Judicial Proceeding” means one or more proceedings by one or more holders of Senior Debt before a state or federal court (havingjurisdiction with respect thereto) to collect the Senior Debt following an acceleration of the maturity thereof as a result of a default.“KeyBank Agent” means KeyBank National Association, in its capacity as the agent under the KeyBank Senior Loan Documents, or anysuccessor agent under the KeyBank Senior Loan Documents. 4 “KeyBank Cash Collateral Agreement” means that certain Cash Collateral Agreement dated on or near the date herewith executed byBorrower in favor of the KeyBank Agent for the benefit of the KeyBank Senior Lenders, and as may be further amended, modified, increased,consolidated, restated or replaced.“KevBank Collateral” means all of the real, personal and other property owned by the KeyBank Obligors now or hereafter encumbered byor securing the KeyBank Senior Note, the KeyBank Senior Loan Agreement, the KeyBank Senior Security Documents, the KeyBank CashCollateral Agreement, the pledges by Borrower to KeyBank Agent of its equity interests in Potomac and Station View pursuant the KeyBankSenior Assignment of Interests, or the KeyBank Senior Guaranty, or any documents now or hereafter entered into or delivered in connection withany of them, and all of each KeyBank Obligor’s right, title and interest in and to such property, whether existing or future, and all securityinterests, security titles, liens, claims, pledges, encumbrances, conveyances, endorsements and guaranties of whatever nature now or hereaftersecuring any KeyBank Obligor’s obligations under the KeyBank Senior Loan Documents or any part thereof, and all products and proceeds ofthe foregoing.“KevBank Obligors” means Comstock Station View, L.C., a Virginia limited liability company, Comstock Potomac Yard, L.C., a Virginialimited liability company, and Borrower.“KevBank Senior Assignment of Interests” means that certain Assignment of Interests dated March 14, 2008 executed by Borrower infavor of KeyBank Agent for the benefit of the KeyBank Senior Lenders, as the same may be from time to time amended, extended, supplemented,consolidated, renewed, restated or otherwise modified.“KevBank Senior Debt” means the (i) principal of, premium, if any, and interest on, the KeyBank Senior Note or pursuant to the KeyBankSenior Loan Agreement (whether payable under the KeyBank Senior Note, the KeyBank Senior Loan Agreement, the KeyBank Senior Guaranty,or any other KeyBank Senior Loan Document), (ii) prepayment fees, yield maintenance charges, breakage costs, late charges, default interest,agent’s fees, costs of collection, protective advances, advances to cure defaults, and indemnities, and (iii) any other amount or obligations(including any fee or expense) due or payable with respect to the KeyBank Senior Loan or any of the KeyBank Senior Loan Documents(including interest and any other of the foregoing amounts accruing after the commencement of any Insolvency Proceeding, and any otherinterest that would have accrued but for the commencement of such Insolvency Proceeding, whether or not any such interest is allowed as anenforceable claim in such Insolvency Proceeding and regardless of the value of the KeyBank Collateral at the time of such accrual), whetheroutstanding on the date of this Subordinated Deficiency Note or hereafter incurred, whether as a secured claim, undersecured claim, unsecuredclaim, deficiency claim or otherwise, and all renewals, modifications, amendments, supplements, consolidations, restatements, extensions,refinances, and refundings of any thereof; provided, however, that notwithstanding anything herein to the contrary, “KeyBank Senior Debt”shall not include (a) any funds loaned or advanced by the KeyBank Senior Lenders after the date of this Subordinated Deficiency Note for anypurpose unrelated to the Eclipse on Center Park Condominium high rise project in Arlington County, VA, referred to as the Potomac Project inthe Key Bank Senior Loan Agreement, and the townhouse development project known as Station View in Loudoun 5 County, Virginia referred to as the Station View Project in the Key Bank Senior Loan Agreement, or (b) any of the items described in (i), (ii),(iii) of this definition that are related to any of the purposes set forth in (a); provided, further, however, that Wachovia acknowledges that allamounts currently outstanding under the KeyBank Senior Loan Documents shall be deemed KeyBank Senior Debt.“KevBank Senior Guaranty” means that certain Unconditional Guaranty of Payment and Performance dated as of March 14, 2008executed by Borrower in favor of the KeyBank Agent for the benefit of the KeyBank Senior Lenders, as the same may be from time to timeamended, extended, supplemented, consolidated, renewed, restated or otherwise modified.“KevBank Senior Lenders” means “Lenders” as defined in the KeyBank Senior Loan Agreement.“KevBank Senior Loan” means the up to $40,391,200.00 credit facility provided pursuant to the KeyBank Senior Loan Agreement, as thesame may be amended, modified, increased, consolidated, restated, or replaced.“KevBank Senior Loan Agreement” means that certain Loan Agreement dated as of March 14, 2008 executed by Comstock Station View,L.C., a Virginia limited liability company, and Comstock Potomac Yard, L.C., a Virginia limited liability company, and KeyBank NationalAssociation, individually and as Agent for the KeyBank Senior Lenders, and certain other parties now or hereafter a party thereto, as modified bythat certain First Amendment to Loan Agreement dated on or near the date hereof, and as the same may be further amended, modified, increased,consolidated, restated or replaced.“KevBank Senior Loan Documents” means the KeyBank Senior Security Documents, the KeyBank Senior Note, the KeyBank Senior LoanAgreement, the KeyBank Senior Guaranty, the KeyBank Senior Assignment of Interests and any other documents, agreements or instrumentsnow or hereafter executed and delivered by or on behalf of any KeyBank Obligor or any other person or entity in connection with the KeyBankSenior Loan, and any documents, agreements or instruments hereafter executed and delivered by or on behalf of any KeyBank Obligor or anyother person or entity in connection with any refinancing of the KeyBank Senior Loan, as any of the same may be from time to time amended,extended, supplemented, consolidated, renewed, restated, or otherwise modified.“KeyBank Senior Note” means that certain Amended and Restated Note dated March 14, 2008 executed by Comstock Station View, L.C.,a Virginia limited liability company, and Comstock Potomac Yard, L.C., a Virginia limited liability company in favor of KeyBank NationalAssociation, as originally executed, or if varied, extended, supplemented, consolidated, amended, replaced, renewed, modified, or restated fromtime to time as so varied, extended, supplemented, consolidated, amended, replaced, renewed, modified, or restated.“KevBank Senior Security Documents” means the “Security Documents” as defined in the KeyBank Senior Loan Agreement, the KeyBankCash Collateral Agreement, and each other KeyBank Senior Loan Document securing any or all of the KeyBank Senior Loan, together with anyand all acknowledgments, powers, certificates, UCC financing statements, or other documents or instruments executed and delivered inconnection therewith.“Obligors” means the Guggenheim Obligors and the KeyBank Obligors. 6 “Potomac” means Comstock Potomac Yard, L.C., a Virginia limited liability company.“Senior Debt” means the Guggenheim Senior Debt and the KeyBank Senior Debt.“Senior Lender Sharing Ratio” means as of the date of determination thereof, with respect to the Guggenheim Senior Debt, the outstandingprincipal amount due on the Guggenheim Senior Guaranty divided by the total outstanding principal balance of the KeyBank Senior Debt plusthe outstanding principal amount due on the Guggenheim Senior Guaranty, and means, with respect to the KeyBank Senior Debt, theoutstanding principal balance of the KeyBank Senior Debt divided by the total outstanding principal balance of the KeyBank Senior Debt plusthe outstanding principal amount due on the Guggenheim Senior Guaranty.“Senior Lenders” means the KeyBank Senior Lenders and the Guggenheim Senior Lenders.“Senior Loan Documents” means the Guggenheim Senior Loan Documents and the KeyBank Senior Loan Documents.“Senior Security Documents” means the Guggenheim Senior Security Documents and the KeyBank Senior Security Documents.“Station View” means Comstock Station View, L.C., a Virginia limited liability company.“Subordinated Indebtedness” means the principal amount of the indebtedness evidenced by this Subordinated Deficiency Note, togetherwith interest, breakage or other amount, if any, due thereon or payable with respect thereto, whether the same is payable by Borrower or any otherObligor.“Subsidiary” means any corporation, association, partnership, trust, or other business entity of which the designated parent shall at anytime own directly or indirectly through a Subsidiary or Subsidiaries at least a majority (by number of votes or controlling interests) of theoutstanding Voting Interests.“Voting Interests” means stock or similar ownership interests, of any class or classes (however designated), the holders of which are at thetime entitled, as such holders, (a) to vote for the election of a majority of the directors (or persons performing similar functions) of thecorporation, association, partnership, trust or other business entity involved, or (b) to control, manage, or conduct the business of thecorporation, partnership, association, trust or other business entity involved.“Wachovia Collateral” means all of the real, personal, and other property now or hereafter encumbered by or securing any obligation ofBorrower or any of its affiliates to Wachovia (including, without limitation, that certain Revolving Promissory Note dated May 26, 2006 in theoriginal principal amount of $40,000,000.00, as renewed, extended, and/or modified, and all guaranties thereof), all of Borrower’s and itsaffiliates’ right, title and interest in and to such property, and all products and proceeds of the foregoing; provided, however, thatnotwithstanding anything herein to the contrary, “Wachovia Collateral” shall not include the KeyBank Collateral or the Guggenheim Collateral. 7 (b) Borrower for itself and its successors and assigns, and for its Subsidiaries and the successors and assigns of such Subsidiaries, covenants andagrees, and each holder of the Subordinated Indebtedness, by its acceptance of this Subordinated Deficiency Note, shall be deemed to have agreed,notwithstanding anything to the contrary in this Subordinated Deficiency Note, that the payment of the Subordinated Indebtedness shall besubordinated and junior in right and time of payment and all other respects, to the prior indefeasible payment in full, in cash, of all Senior Debt, andthat each holder of Senior Debt, whether now outstanding or hereafter created, incurred, assumed or guaranteed, shall be deemed to have acquiredSenior Debt in reliance upon the provisions contained in this Paragraph 8.(c) Upon any distribution of the assets of Borrower in any Insolvency Proceeding relating to Borrower, or to its respective creditors as such, thenand in any such event:(i) the holders of the Senior Debt shall be entitled to receive payment in full of all amounts due or to become due on or in respect of allSenior Debt, before any payment, whether in cash, property, or securities is made on account of or applied to the Subordinated Indebtedness; and(ii) any payment, whether in cash, property or securities, to which the holders of the Subordinated Indebtedness would be entitled exceptfor the provisions of this Paragraph 8, shall be paid or delivered, to the extent permitted by law, by any debtor, custodian, liquidating trustee,agent, or other person making such payment, directly to the holders of the Senior Debt, or their representative or representatives, in amountscomputed in accordance with each applicable Senior Lender Sharing Ratio, for application to the payment thereof, to the extent necessary to payall such Senior Debt in full, after giving effect to any concurrent payment or distribution, or provision therefor, to the holders of such SeniorDebt.(d) Borrower will not, and will not permit any of its Subsidiaries to, directly or indirectly, make or agree to make, and neither the holder nor anyassignee or successor holder of any Subordinated Indebtedness or agent for any of them will accept or receive any payment or distribution in cash,property or securities by set-off or otherwise, direct or indirect, or by repurchase, redemption or retirement, of or on account of all or any portion of anySubordinated Indebtedness until such time as the Senior Debt shall have been indefeasibly paid in full in cash, and Senior Lenders have no furtherobligation to make advances which would constitute Senior Debt.(e) If any payment or distribution of any kind or character, whether in cash, property or securities shall be received by any holder of any of theSubordinated Indebtedness or any agent for such persons in contravention of this Paragraph 8, such payment or distribution shall, to the extentpermitted by law, be held in trust for the benefit of, and shall be paid over or delivered and transferred to, the holders of the Senior Debt, or theirrepresentative or representatives, for application to the payment thereof in accordance with each applicable Senior Lender Sharing Ratio, to the extentnecessary to pay all such Senior Debt in full, after giving effect to any concurrent payment or distribution, or provision therefor, to the holders of suchSenior Debt. 8 (f) By acceptance of this Subordinated Deficiency Note, each holder of the Subordinated Indebtedness hereby absolutely and irrevocably waives,to the fullest extent permitted by law, any rights it may have, by contract, at law or in equity, to be subrogated to the Agents’ and the Senior Lenders’rights against the Obligors under the Senior Loan Documents or to the Agents’ liens and security interests on any of the Collateral.(g) The Agents and the Senior Lenders shall be third party beneficiaries of the subordination provisions in this Paragraph 8; provided, however,nothing in this Subordinated Deficiency Note shall obligate the KeyBank Senior Lenders to share the KeyBank Collateral with the Guggenheim SeniorLenders, or for the Guggenheim Senior Lenders to share the Guggenheim Collateral with the KeyBank Senior Lenders. The provisions of this Paragraph8 are solely for the purpose of defining the relative rights of the holders of Senior Debt on the one hand and the holders of Subordinated Indebtednesson the other hand, and (i) subject to the rights, if any, under this Paragraph 8 of the holders of Senior Debt, nothing in this Paragraph 8 shall (1) impairas between Borrower and the holder of any Subordinated Indebtedness the obligation of Borrower, which is unconditional and absolute, to pay theSubordinated Indebtedness to the holder thereof in accordance with the terms thereof, (2) subject to Paragraphs 8(h) and 8(i) prevent the holder of anySubordinated Indebtedness from exercising all remedies otherwise available to such holder, or (3) affect the relative rights of the holders of theSubordinated Indebtedness and creditors of Borrower other than the holders of the Senior Debt, and (ii) no person or entity is entitled to any third partybeneficiary rights or other similar rights on account of or under this Paragraph 8 other than the holders of the Senior Debt. The failure to make anypayment due in respect of the Subordinated Indebtedness or to comply with any of the terms and conditions of this Subordinated Deficiency Note byreason of any provision of this Paragraph 8 shall not be construed as preventing the occurrence of any default under this Subordinated Deficiency Note.(h) Until such time as the KeyBank Senior Debt shall have been indefeasibly paid in full in cash, and the KeyBank Senior Lenders have nofurther obligation to make advances under the KeyBank Senior Loan Documents which would constitute KeyBank Senior Debt, by acceptance of thisSubordinated Deficiency Note, each holder of the Subordinated Indebtedness agrees that it shall not take any of the following actions with respect tothe Subordinated Indebtedness until ninety-one (91) days following the indefeasible payment in full of the KeyBank Senior Debt in cash without theprior written consent of the KeyBank Agent:(i) Accelerate all or any portion of the amounts due under this Subordinated Deficiency Note or exercise any of its remedies (including,without limitation, any Enforcement Action) under this Subordinated Deficiency Note or at law or in equity;(ii) Commence, directly or indirectly, any legal or other proceedings against any KeyBank Obligor, or commence any Enforcement Actionagainst any KeyBank Obligor or the KeyBank Collateral; 9 (iii) Consent to or enter into any amendment or modification of this Subordinated Deficiency Note, other than a reduction in the principalbalance of the Subordinated Deficiency Note; or(iv) Commence, directly or indirectly, or consent to any Insolvency Proceeding by or against any KeyBank Obligor.The holder of the Subordinated Indebtedness shall have no right, lien or claim in and to the KeyBank Collateral and the proceeds thereof (including, withoutlimitation, any rights with respect to insurance proceeds or condemnation awards), or any other property or assets of any KeyBank Obligor until such time asthe periods described in Paragraph 8(h) hereof shall have lapsed.(i) Until such time as the Guggenheim Senior Debt shall have been indefeasibly paid in full in cash, and the Guggenheim Senior Lenders have nofurther obligation to make advances under the Guggenheim Senior Loan Documents which would constitute Guggenheim Senior Debt, by acceptanceof this Subordinated Deficiency Note, each holder of the Subordinated Indebtedness agrees that it shall not take any of the following actions withrespect to the Subordinated Indebtedness until ninety-one (91) days following the indefeasible payment in full of the Guggenheim Senior Debt in cashwithout the prior written consent of the Guggenheim Agent:(i) Accelerate all or any portion of the amounts due under this Subordinated Deficiency Note or exercise any of its remedies (including,without limitation, any Enforcement Action) under this Subordinated Deficiency Note or at law or in equity;(ii) Commence, directly or indirectly, any legal or other proceedings against any Guggenheim Obligor, or commence any EnforcementAction against any Guggenheim Obligor or the Guggenheim Collateral;(iii) Consent to or enter into any amendment or modification of this Subordinated Deficiency Note, other than a reduction in the principalbalance of the Subordinated Deficiency Note; or(iv) Commence, directly or indirectly, or consent to any Insolvency Proceeding by or against any Guggenheim Obligor.The holder of the Subordinated Indebtedness shall have no right, lien or claim in and to the Guggenheim Collateral and the proceeds thereof (including,without limitation, any rights with respect to insurance proceeds or condemnation awards), or any other property or assets of any Guggenheim Obligor untilsuch time as the periods described in Paragraph 8(i) hereof shall have lapsed.(j) By acceptance of this Subordinated Deficiency Note, each holder of the Subordinated Indebtedness hereby expressly waives any rights torequire or request that the Agents, or either of them, or the Senior Lenders marshal the Collateral in favor of the holder of the SubordinatedIndebtedness or to equitably subordinate the rights, liens or security interests of 10 the Agents, or either of them, or the Senior Lenders, or any of them, under the Senior Loan Documents, whether pursuant to the Bankruptcy Code orotherwise. The Agents, or either of them, and the Senior Lenders, or any of them, shall have the right at any and all times to determine the order inwhich, or whether, (i) recourse is sought against any Obligor or any other obligor with respect to the Senior Debt, or (ii) any or all of the Collateral shallbe enforced. Each holder of the Subordinated Indebtedness hereby waives any and all rights to require that the Agents, or either of them, and/or theSenior Lenders, or any of them, pursue or exhaust any rights or remedies with respect to any Obligor or any other party prior to exercising their rightsand remedies with respect to the Collateral or any other property or assets of the Obligors. The Agents, or either of them, and the Senior Lenders, or anyof them, may forbear collection, grant indulgences, release, compromise or settle the Senior Debt, or sell, take, exchange, surrender or release collateralor security therefor, consent to or waive any breach of, or any act, omission or default under, any of the Senior Loan Documents, apply any sumsreceived by or realized upon by the Agents, or either of them, and the Senior Lenders, or any of them, against liabilities of the Obligors to the Agents,or either of them, and the Senior Lenders, or any of them, in such order as the Agents, or either of them, and the Senior Lenders, or any of them, shalldetermine in their sole discretion, and otherwise deal with any and all parties and the Collateral or other property or assets of the Obligors (with theexception of the Wachovia Collateral) as they deem appropriate. The Agents and the Senior Lenders shall have no liability to the holder of theSubordinated Indebtedness for, and each holder of the Subordinated Indebtedness hereby waives any claim, right, action or cause of action which itmay now or hereafter have against the Agents, or either of them, and the Senior Lenders, or any of them, arising out of, any waiver, consent, release,indulgence, extension, delay or other action or omission, any release of any Obligor, release of any of the Collateral, the failure to realize upon anyCollateral or other property or assets of any Obligor, or the failure to exercise any rights or remedies of the Agents, or either of them, and the SeniorLenders, or any of them, under the Senior Loan Documents.(k) Each holder of the Subordinated Indebtedness hereby expressly consents to and authorizes, at the option of each Agent, the amendment,extension, restatement, consolidation, increase, renewal, refinance or other modification, in whole or in part, of all or any of the Senior LoanDocuments, including, without limitation, increasing or decreasing the stated principal amount of either Senior Loan, extending or shortening the termof either Senior Loan, increasing or decreasing the interest rate payable as provided in any of the Senior Loan Documents or altering any other paymentterms under any of the Senior Loan Documents.(l) By acceptance of this Subordinated Deficiency Note, each holder of the Subordinated Indebtedness acknowledges that no Agent and noSenior Lender has made nor do any of them now make any representations or warranties, express or implied, nor do they assume any liability to anyholder of the Subordinated Indebtedness, with respect to the creditworthiness or financial condition of any Obligor or any other person. Each holder ofthe Subordinated Indebtedness acknowledges that it has, independently and without reliance upon the Agents, or either of them, or the Senior Lenders,or any of them, and based upon such information and documents as it has deemed appropriate, made its own credit analysis and decision to accept thisSubordinated Deficiency Note and the Subordinated Indebtedness. Each holder of the Subordinated Indebtedness will, independently and withoutreliance upon the Agents, or either of them, or the Senior Lenders, or any of them, based upon such information and documents as it deems appropriateat the time, continue to make its own credit analysis and decisions in taking or 11 not taking action under this Subordinated Deficiency Note. No Agent and no Senior Lender shall have any duty or responsibility, either initially or ona continuing basis, to provide any holder of the Subordinated Indebtedness with any credit or other information with respect to any Obligor, whethercoming into its possession before the making of any Senior Loan or at any time or times thereafter. Each holder of the Subordinated Indebtednessagrees that no Agent an no Senior Lender owes any fiduciary duty to the holder of the Subordinated Indebtedness in connection with theadministration of any Senior Loan or any Senior Loan Document and the holder of the Subordinated Indebtedness agrees not to assert any such claim.(m) The provisions of this Paragraph 8 shall be applicable both before and after the commencement, whether voluntary or involuntary, of anyInsolvency Proceeding by or against any Obligor and all references herein to any Obligor shall be deemed to apply to any such Obligor as a debtor-in-possession and to any trustee in bankruptcy for the estate of any such Obligor. Furthermore, this Paragraph 8 and the subordinations contained hereinshall apply notwithstanding the fact that all or any part of the Senior Debt or any claim for or with respect to all of any part of the Senior Debt issubordinated, avoided or disallowed, in whole or in part, in any Insolvency Proceeding or other applicable federal, state or foreign law. Withoutlimiting the foregoing, by acceptance of this Subordinated Deficiency Note, each holder of the Subordinated Indebtedness expressly covenants andagrees that this Subordinated Deficiency Note is enforceable under applicable bankruptcy law and should be enforced under Section 510(a) of theBankruptcy Code. Until such time as the Senior Debt has been indefeasibly paid in full in cash and Senior Lenders have no further obligation to makeany advances which would constitute Senior Debt, the holders of the Subordinated Indebtedness shall not, and shall not solicit any person or entity to:(i) seek, commence, file, institute, consent to or acquiesce in any Involuntary Proceeding with respect to any Obligor or the Collateral; (ii) seek toconsolidate any Obligor with any other person or entity in any Insolvency Proceeding; or (iii) take any action in furtherance of any of the foregoing.(n) Each holder of the Subordinated Indebtedness hereby agrees that it shall not challenge the validity or amount of any claim submitted in suchInsolvency Proceeding by the Agents, or either of them, or the Senior Lenders, or any of them, or any valuations of the Collateral submitted by theAgents, or either of them, or the Senior Lenders, or any of them, in such Insolvency Proceeding or take any other action in such Insolvency Proceeding,which is adverse to their enforcement of any claim or receipt of adequate protection (as that term is defined in the Bankruptcy Code).(o) To the extent any transfer, payment or distribution of assets with respect to all or any portion of the Senior Debt (whether in cash, property orsecurities and whether by or on behalf of any Obligor as proceeds of security or enforcement of any right of setoff or otherwise) is declared to befraudulent or preferential, set aside or required to be paid to any Obligor, the estate in bankruptcy thereof, any third party, or a trustee, receiver or othersimilar party under any bankruptcy, insolvency, receivership or similar law, then if such payment is recovered by, or paid over to, any Obligor, theestate in bankruptcy thereof, any third party, or such trustee, receiver or other similar party, the Senior Debt or part thereof originally intended to besatisfied shall be deemed to be reinstated and outstanding as if such payment or distribution had not occurred, and this Paragraph 8 and the agreementsand subordination contained herein shall be reinstated with respect to any such transfer, payment or distribution. No Agent shall be required to contestany such declaration or obligation to return such payment or distribution. 12 (p) Each holder of the Subordinated Indebtedness intentionally and unconditionally waives and relinquishes any right to challenge the validity,enforceability and binding effect of any of the Senior Security Documents or the other Senior Loan Documents, and any lien, encumbrance, claim orsecurity interest now or hereafter created thereunder, or the attachment, perfection or priority thereof, regardless of the order of recording or filing ofany thereof, or compliance by the Agents, or either of them, or the Senior Lenders, or any of them, with the terms of any of the Senior SecurityDocuments or any of the other Senior Loan Documents, by reason of any matter, cause or thing now or hereafter occurring, nor shall the holder of theSubordinated Indebtedness raise any such matter, cause or thing as a defense to the enforcement thereof.(q) Each holder of the Subordinated Indebtedness agrees that it will not in any manner challenge, oppose, object to, interfere with or delay (i) thevalidity or enforceability of this Subordinated Deficiency Note, including without limitation, any provisions regarding the relative priority of therights and duties of the Agents, or either of them, and Senior Lenders, or any of them, and the holder of the Subordinated Indebtedness, or (ii) anyAgent’s or any Senior Lender’s security interest in, liens on and rights as to the Obligors, and any Collateral or any other property or assets of anyObligor (with the exception of the Wachovia Collateral), or any Enforcement Actions of the Agents, or either of them, or the Senior Lenders, or any ofthem, (including, without limitation, any efforts by the Agents, or either of them, to obtain relief from the automatic stay under Section 362 of theBankruptcy Code).IN WITNESS WHEREOF, the Borrower has executed and sealed, or caused to be executed and sealed, this Note on the date first above written. BORROWER: Comstock Homebuilding Companies, Inc.By: (SEAL) Name: Christopher Clemente Title: CEO 13 Exhibit 10.82UNITED STATES BANKRUPTCY COURTNORTHERN DISTRICT OF GEORGIAATLANTA DIVISION In re: : Case No. 09-90332-MHM : BUCKHEAD OVERLOOK, LLC, : Chapter 7 : Debtor. : : DEBTOR’S STATEMENT OF FINANCIAL AFFAIRS AND SCHEDULESBuckhead Overlook, LLC, “Debtor” herein, hereby files its mends its STATEMENT OF FINANCIAL AFFAIRS AND SCHEDULES. Prepared and submitted by:PAUL REECE MARR, P.C.Debtor’s counselBy: /s/ Paul Reece Marr Paul Reece Marr GA Bar #471230Suite 960300 Galleria Parkway, N.W.Atlanta, GA 30339770/984-2255 –1– B7 (Official Form 7) (12/07)United States Bankruptcy CourtNorthern District of Georgia, Atlanta Division In re Buckhead Overlook, LLC Case No. 09-90332-MHM Debtor(s) Chapter 7STATEMENT OF FINANCIAL AFFAIRSThis statement is to be completed by every debtor. Spouses filing a joint petition may file a single statement on which the information for both spousesis combined. If the case is filed under chapter 12 or chapter 13, a married debtor must furnish information for both spouses whether or not a joint petition isfiled, unless the spouses are separated and a joint petition is not filed. An individual debtor engaged in business as a sole proprietor, partner, family farmer, orself-employed professional, should provide the information requested on this statement concerning all such activities as well as the individual’s personalaffairs. To indicate payments, transfers and the like to minor children, state the child’s initials and the name and address of the child’s parent or guardian,such as “A.B., a minor child, by John Doe, guardian.” Do not disclose the child’s name. See, 11 U.S.C. § 112; Fed. R. Bankr. P. 1007(m).Questions 1 - 18 are to be completed by all debtors. Debtors that are or have been in business, as defined below, also must complete Questions 19 - 25.If the answer to an applicable question is “None,” mark the box labeled “None.” If additional space is needed for the answer to any question, use andattach a separate sheet properly identified with the case name, case number (if known), and the number of the question.DEFINITIONS“In business” A debtor is “in business” for the purpose of this form if the debtor is a corporation or partnership. An individual debtor is “in business”for the purpose of this form if the debtor is or has been, within six years immediately preceding the filing of this bankruptcy case, any of the following: anofficer, director, managing executive, or owner of 5 percent or more of the voting or equity securities of a corporation; a partner, other than a limited partner,of a partnership; a sole proprietor or self-employed full-time or part-time. An individual debtor also may be “in business for the purpose of this form if thedebtor engages in a trade, business, or other activity, other than as an employee, to supplement income from the debtor’s primary employment.“Insider” The term “insider” includes but is not limited to: relatives of the debtor; general partners of the debtor and their relatives; corporations ofwhich the debtor is an officer, director, or person in control; officers, directors, and any owner of 5 percent or more of the voting or equity securities of acorporate debtor and their relatives; affiliates of the debtor and insiders of such affiliates; any managing agent of the debtor. 11 U.S.C. § 101. 1. Income from employment or operation of businessNone n State the gross amount of income the debtor has received from employment, trade, or profession, or from operation of the debtor’s businessincluding part-time activities either as an employee or in independent trade or business, from the beginning of this calendar war to the datethis case was commenced. State also the gross amounts received during the two years immediately preceding this calendar year (A debtorthat maintains, or has maintained, financial records on the basis of a fiscal rather than a calendar year may report fiscal year income. Identifythe beginning and ending dates of the debtor’s fiscal year.) If a joint petition is filed, state income for each spouse separately. (Marrieddebtors filing under chapter 12 or chapter 13 must state income of both spouses whether or not a joint petition is filed, unless the spousesare separated and a joint petition is not filed.) AMOUNT SOURCE 2. Income other than from employment or operation of businessNone n State the amount of income received by the debtor other than from employment, trade, profession, or operation of the debtor’s businessduring the two years immediately preceding the commencement of this case. Give particulars. If a joint petition is filed, state income foreach spouse separately. (Married debtors filing under chapter 12 or chapter 13 must state income for each spouse whether or not a jointpetition is filed, unless the spouses are separated and a joint petition is not filed.) AMOUNT SOURCE Software Copyright (c) 1996-2009 Best Case Solutions, Inc. - Evanston, IL - (800) 492-8037 Best Case Bankruptcy 3. Payments to creditorsNone n Complete a. or b., as appropriate, and c. a. Individual or joint debtor(s) with primarily consumer debts. List all payments on loans, installment purchases of goods or services, andother debts to any creditor made within 90 days immediately preceding the commencement of this case unless the aggregate value of allproperty that constitutes or is affected by such transfer is less than $600. Indicate with an (*) any payments that were made to a creditor onaccount of a domestic support obligation or as part of an alternative repayment schedule under a plan by an approved nonprofit budgetingand creditor counseling agency. (Married debtors filing under chapter 12 or chapter 13 must include payments by either or both spouseswhether or not a joint petition is filed, unless the spouses are separated and a joint petition is not filed.)NAME AND ADDRESSOF CREDITOR DATES OFPAYMENTS AMOUNT PAID AMOUNT STILLOWING None n b. Debtor whose debts are not primarily consumer debts: List each payment or other transfer to any creditor made within 90 days immediatelypreceding the commencement of the case unless the aggregate value of all property that constitutes or is affected by such transfer is less than$5,475. If the debtor is an individual, indicate with an asterisk (*) any payments that were made to a creditor on account of a domestic supportobligation or as part of an alternative repayment schedule under a plan by an approved nonprofit budgeting and creditor counseling agency.(Married debtors filing under chapter 12 or chapter 13 must include payments by either or both spouses whether or not a joint petition is filed,unless the spouses are separated and a joint petition is not filed.) NAME AND ADDRESSOF CREDITOR DATES OFPAYMENTS/TRANSFERS AMOUNTPAID ORVALUE OFTRANSFERS AMOUNT STILLOWING None n c. All debtors: List all payments made within one year immediately preceding the commencement of this case to or for the benefit of creditorswho are or were insiders. (Married debtors filing under chapter 12 or chapter 13 must include payments by either or both spouses whether ornot a joint petition is filed, unless the spouses are separated and a joint petition is not filed.) NAME AND ADDRESS OF CREDITOR ANDRELATIONSHIP TO DEBTOR DATE OF PAYMENT AMOUNT PAID AMOUNT STILLOWING 4. Suits and administrative proceedings, executions, garnishments and attachmentsNone n a. List all suits and administrative proceedings to which the debtor is or was a party within one year immediately preceding the filing of thisbankruptcy case. (Married debtors filing under chapter 12 or chapter 13 must include information concerning either or both spouses whetheror not a joint petition is filed, unless the spouses are separated and a joint petition is not filed.) CAPTION OF SUITAND CASE NUMBER NATURE OF PROCEEDING COURT OR AGENCYAND LOCATION STATUS ORDISPOSITION None n b. Describe all property that has been attached, garnished or seized under any legal or equitable process within one year immediatelypreceding the commencement of this case. (Married debtors filing under chapter 12 or chapter 13 must include information concerningproperty of either or both spouses whether or not a joint petition is filed, unless the spouses are separated and a joint petition is not filed.) NAME AND ADDRESS OF PERSON FOR WHOSEBENEFIT PROPERTY WAS SEIZED DATE OF SEIZURE DESCRIPTION AND VALUE OFPROPERTY 5. Repossessions, foreclosures and returnsNone n List all property that has been repossessed by a creditor, sold at a foreclosure sale, transferred through a deed in lieu of foreclosure or returnedto the seller, within one year immediately preceding the commencement of this case. (Married debtors filing under chapter 12 or chapter 13must include information concerning property of either or both spouses whether or not a joint petition is filed, unless the spouses areseparated and a joint petition is not filed.) NAME AND ADDRESS OFCREDITOR OR SELLER DATE OF REPOSSESSION,FORECLOSURE SALE,TRANSFER OR RETURN DESCRIPTION AND VALUE OFPROPERTY 2 Software Copyright (c) 1996-2009 Best Case Solutions, Inc. - Evanston, IL - (800) 492-8037 Best Case Bankruptcy 6. Assignments and receivershipsNone n a. Describe any assignment of property for the benefit of creditors made within 120 days immediately preceding the commencement of thiscase. (Married debtors filing under chapter 12 or chapter 13 must include any assignment by either or both spouses whether or not a jointpetition is filed, unless the spouses are separated and a joint petition is not filed.) NAME AND ADDRESS OF ASSIGNEE DATE OFASSIGNMENT TERMS OF ASSIGNMENT OR SETTLEMENT None n b. List all property which has been in the hands of a custodian, receiver, or court-appointed official within one year immediately precedingthe commencement of this case. (Married debtors filing under chapter 12 or chapter 13 must include information concerning property ofeither or both spouses whether or not a joint petition is filed, unless the spouses are separated and a joint petition is not NAME AND ADDRESSOF CUSTODIAN NAME AND LOCATIONOF COURTCASE TITLE & NUMBER DATE OFORDER DESCRIPTION AND VALUE OFPROPERTY 7. GiftsNone n List all gifts or charitable contributions made within one year immediately preceding the commencement of this case except ordinary andusual gifts to family members aggregating less than $200 in value per individual family member and charitable contributions aggregatingless than $100 per recipient. (Married debtors filing under chapter 12 or chapter 13 must include gifts or contributions by either or bothspouses whether or not a joint petition is filed, unless the spouses are separated and a joint petition is not filed.) NAME AND ADDRESS OFPERSON OR ORGANIZATION RELATIONSHIP TODEBTOR, IF ANY DATE OF GIFT DESCRIPTION ANDVALUE OF GIFT 8. LossesNone n List all losses from fire, theft, other casualty or gambling within one year immediately preceding the commencement of this case or sincethe commencement of this case. (Married debtors filing under chapter 12 or chapter 13 must include losses by either or both spouseswhether or not a joint petition is filed, unless the spouses are separated and a joint petition is not filed.) DESCRIPTION AND VALUEOF PROPERTY DESCRIPTION OF CIRCUMSTANCES AND, IFLOSS WAS COVERED IN WHOLE OR IN PARTBY INSURANCE, GIVE PARTICULARS DATE OF LOSS 9. Payments related to debt counseling or bankruptcyNone ¨ List all payments made or property transferred by or on behalf of the debtor to any persons, including attorneys, for consultation concerningdebt consolidation, relief under the bankruptcy law or preparation of the petition in bankruptcy within one year immediately preceding thecommencement of this case. NAME AND ADDRESSOF PAYEE DATE OF PAYMENT,NAME OF PAYOR IF OTHERTHAN DEBTOR AMOUNT OF MONEYOR DESCRIPTION AND VALUEOF PROPERTYPaul Reece Marr, P.C.Suite 960300 Galleria ParkwayAtlanta, GA 30339 11/09/2009 Comstock Homesof Atlanta, LLC $3,000.00 attorney fee + $299.00filing fee 10. Other transfersNone n a. List all other property, other than property transferred in the ordinary course of the business or financial affairs of the debtor, transferredeither absolutely or as security within two years immediately preceding the commencement of this case. (Married debtors filing underchapter 12 or chapter 13 must include transfers by either or both spouses whether or not a joint petition is filed, unless the spouses areseparated and a joint petition is not filed.) NAME AND ADDRESS OF TRANSFEREE,RELATIONSHIP TO DEBTOR DATE DESCRIBE PROPERTY TRANSFERREDAND VALUE RECEIVED 3 Software Copyright (c) 1996-2009 Best Case Solutions, Inc. - Evanston, IL - (800) 492-8037 Best Case Bankruptcy None n b. List all property transferred by the debtor within ten years immediately preceding the commencement of this case to a self-settled trust orsimilar device of which the debtor is a beneficiary. NAME OF TRUST OR OTHERDEVICE DATE(S) OFTRANSFER(S) AMOUNT OF MONEY OR DESCRIPTION ANDVALUE OF PROPERTY OR DEBTOR’S INTERESTIN PROPERTY 11. Closed financial accountsNone n List all financial accounts and instruments held in the name of the debtor or for the benefit of the debtor which were closed, sold, orotherwise transferred within one year immediately preceding the commencement of this case. Include checking, savings, or other financialaccounts, certificates of deposit, or other instruments; shares and share accounts held in banks, credit unions, pension funds, cooperatives,associations, brokerage houses and other financial institutions. (Married debtors filing under chapter 12 or chapter 13 must includeinformation concerning accounts or instruments held by or for either or both spouses whether or not a joint petition is filed, unless thespouses are separated and a joint petition is not filed.) NAME AND ADDRESS OF INSTITUTION TYPE OF ACCOUNT, LAST FOURDIGITS OF ACCOUNT NUMBER,AND AMOUNT OF FINAL BALANCE AMOUNT AND DATE OF SALEOR CLOSING 12. Safe deposit boxesNone n List each safe deposit or other box or depository in which the debtor has or had securities, cash, or other valuables within one yearimmediately preceding the commencement of this case. (Married debtors filing under chapter 12 or chapter 13 must include boxes ordepositories of either or both spouses whether or not a joint petition is filed, unless the spouses are separated and a joint petition is notfiled.) NAME AND ADDRESS OF BANKOR OTHER DEPOSITORY NAMES AND ADDRESSESOF THOSE WITH ACCESSTO BOX OR DEPOSITORY DESCRIPTIONOF CONTENTS DATE OF TRANSFER ORSURRENDER, IF ANY 13. SetoffsNone n List all setoffs made by any creditor, including a bank, against a debt or deposit of the debtor within 90 days preceding the commencement ofthis case. (Married debtors filing under chapter 12 or chapter 13 must include information concerning either or both spouses whether or not ajoint petition is filed, unless the spouses are separated and a joint petition is not filed.) NAME AND ADDRESS OF CREDITOR DATE OF SETOFF AMOUNT OF SETOFF 14. Property held for another personNone n List all property owned by another person that the debtor holds or controls. NAME AND ADDRESS OF OWNER DESCRIPTION AND VALUE OF PROPERTY LOCATION OF PROPERTY 15. Prior address of debtorNone ¨¨ If the debtor has moved within three years immediately preceding the commencement of this case, list all premises which the debtoroccupied during that period and vacated prior to the commencement of this case. If a joint petition is filed, report also any separate addressof either spouse. ADDRESS NAME USED DATES OF OCCUPANCY5400 Laurel Springs Pkwy, Suite 201, Suwanee, GA30024 Buckhead Overlook, LLC 01/01/2006 - 09/30/2008405 Wakefiled Bluff Court, Alpharetta, GA 30004 Buckhead Overlook, LLC 10/01/2008 - 04/15/2009 4 Software Copyright (c) 1996-2009 Best Case Solutions, Inc. - Evanston, IL - (800) 492-8037 Best Case Bankruptcy 16. Spouses and Former SpousesNone n If the debtor resides or resided in a community property state, commonwealth, or territory (including Alaska, Arizona, California, Idaho,Louisiana, Nevada, New Mexico, Puerto Rico, Texas, Washington, or Wisconsin) within eight years immediately preceding thecommencement of the case, identify the name of the debtor’s spouse and of any former spouse who resides or resided with the debtor in thecommunity property state.NAME 17. Environmental Information. For the purpose of this question, the following definitions apply: “Environmental Law” means any federal, state, or local statute or regulation regulating pollution, contamination, releases of hazardous ortoxic substances, wastes or material into the air, land, soil, surface water, groundwater, or other medium, including, but not limited to,statutes or regulations regulating the cleanup of these substances, wastes, or material. “Site” means any location, facility, or property as defined under any Environmental Law, whether or not presently or formerly ownedor operated by the debtor, including, but not limited to, disposal sites. “Hazardous Material” means anything defined as a hazardous waste, hazardous substance, toxic substance, hazardous material,pollutant, or contaminant or similar term under an Environmental LawNone n a. List the name and address of every site for which the debtor has received notice in writing by a governmental unit that it may be liable orpotentially liable under or in violation of an Environmental Law. Indicate the governmental unit, the date of the notice, and, if known, theEnvironmental Law: SITE NAME AND ADDRESS NAME AND ADDRESS OFGOVERNMENTAL UNIT DATE OFNOTICE ENVIRONMENTALLAW None n b. List the name and address of every site for which the debtor provided notice to a governmental unit of a release of Hazardous Material.Indicate the governmental unit to which the notice was sent and the date of the notice. SITE NAME AND ADDRESS NAME AND ADDRESS OFGOVERNMENTAL UNIT DATE OFNOTICE ENVIRONMENTALLAW None n c. List all judicial or administrative proceedings, including settlements or orders, under any Environmental Law with respect to which thedebtor is or was a party. Indicate the name and address of the governmental unit that is or was a party to the proceeding, and the docketnumber. NAME AND ADDRESS OFGOVERNMENTAL UNIT DOCKET NUMBER STATUS OR DISPOSITION 18. Nature, location and name of businessNone n a. If the debtor is an individual, list the names, addresses, taxpayer identification numbers, nature of the businesses, and beginning andending dates of all businesses in which the debtor was an officer, director, partner, or managing executive of a corporation, partner in apartnership, sole proprietor, or was self-employed in a trade, profession, or other activity either full- or part-time within six yearsimmediately preceding the commencement of this case, or in which the debtor owned 5 percent or more of the voting or equity securitieswithin six years immediately preceding the commencement of this case. If the debtor is a partnership, list the names, addresses, taxpayer identification numbers, nature of the businesses, and beginning and endingdates of all businesses in which the debtor was a partner or owned 5 percent or more of the voting or equity securities, within six yearsimmediately preceding the commencement of this case. If the debtor is a corporation, list the names, addresses, taxpayer identification numbers, nature of the businesses, and beginning andending dates of all businesses in which the debtor was a partner or owned 5 percent or more of the voting or equity securities within sixyears immediately preceding the commencement of this case. 5 Software Copyright (c) 1996-2009 Best Case Solutions, Inc. - Evanston, IL - (800) 492-8037 Best Case Bankruptcy NAME LAST FOUR DIGITS OFSOCIAL-SECURITY OROTHER INDIVIDUALTAXPAYER-I.D. NO.(ITIN)/COMPLETE EIN ADDRESS NATURE OF BUSINESS BEGINNING ANDENDING DATES None n b. Identify any business listed in response to subdivision a., above, that is “single asset real estate” as defined in 11 U.S.C. §101. NAME ADDRESSThe following questions are to be completed by every debtor that is a corporation or partnership and by any individual debtor who is or has been,within six years immediately preceding the commencement of this case, any of the following: an officer, director, managing executive, or owner of more than5 percent of the voting or equity securities of a corporation; a partner, other than a limited partner, of a partnership, a sole proprietor or self-employed in atrade, profession, or other activity, either full- or part-time.(An individual or joint debtor should complete this portion of the statement only if the debtor is or has been in business, as defined above, within sixyears immediately preceding the commencement of this case. A debtor who has not been in business within those six years should go directly to the signaturepage.) 19. Books, records and financial statementsNone ¨ a. List all bookkeepers and accountants who within two years immediately preceding the filing of this bankruptcy case kept or supervisedthe keeping of books of account and records of the debtor. NAME AND ADDRESS DATES SERVICES RENDEREDJeff Dauer11465 Sunset Hills Rd.5th FloorReston, VA 20190 None ¨ b. List all firms or individuals who within the two years immediately preceding the filing of this bankruptcy case have audited the books ofaccount and records, or prepared a financial statement of the debtor. NAME ADDRESS DATES SERVICES RENDEREDPriceWaterhouse Coopers, LLC Attn: Chris Dietrick1800 Tysons Blvd.Mc Lean, VA 22102 None ¨ c. List all firms or individuals who at the time of the commencement of this case were in possession of the books of account and records ofthe debtor. If any of the books of account and records are not available, explain. NAME ADDRESSJeff Dauer 11465 Sunset Hills Rd.5th FloorReston, VA 20190 None n d. List all financial institutions, creditors and other parties, including mercantile and trade agencies, to whom a financial statement wasissued by the debtor within two years immediately preceding the commencement of this case. NAME AND ADDRESS DATE ISSUED 20. InventoriesNone n a. List the dates of the last two inventories taken of your property, the name of the person who supervised the taking of each inventory, andthe dollar amount and basis of each inventory. DATE OF INVENTORY INVENTORY SUPERVISOR DOLLAR AMOUNT OF INVENTORY(Specify cost, market or other basis) 6 Software Copyright (c) 1996-2009 Best Case Solutions, Inc. - Evanston, IL - (800) 492-8037 Best Case Bankruptcy None n b. List the name and address of the person having possession of the records of each of the two inventories reported in a., above. DATE OF INVENTORY NAME AND ADDRESSES OF CUSTODIAN OF INVENTORYRECORDS 21. Current Partners, Officers, Directors and ShareholdersNone n a. If the debtor is a partnership, list the nature and percentage of partnership interest of each member of the partnership. NAME AND ADDRESS NATURE OF INTEREST PERCENTAGE OF INTEREST None ¨ b. If the debtor is a corporation, list all officers and directors of the corporation, and each stockholder who directly or indirectly owns,controls, or holds 5 percent or more of the voting or equity securities of the corporation. NAME AND ADDRESS TITLE NATURE AND PERCENTAGEOF STOCK OWNERSHIPComstock Homebuilding Companies, Inc. 11465Sunset Hills RoadSuite 500Reston, VA 20190 manager sole member 22. Former partners, officers, directors and shareholdersNone nn a. If the debtor is a partnership, list each member who withdrew from the partnership within one year immediately preceding thecommencement of this case. NAME ADDRESS DATE OF WITHDRAWAL None n b. If the debtor is a corporation, list all officers, or directors whose relationship with the corporation terminated within one year immediatelypreceding the commencement of this case. NAME AND ADDRESS TITLE DATE OF TERMINATION 23. Withdrawals from a partnership or distributions by a corporationNone nn If the debtor is a partnership or corporation, list all withdrawals or distributions credited or given to an insider, including compensation inany form, bonuses, loans, stock redemptions, options exercised and any other perquisite during one year immediately preceding thecommencement of this case. NAME & ADDRESSOF RECIPIENT,RELATIONSHIP TO DEBTOR DATE AND PURPOSEOF WITHDRAWAL AMOUNT OF MONEYOR DESCRIPTION ANDVALUE OF PROPERTY 24. Tax Consolidation Group.None n If the debtor is a corporation, list the name and federal taxpayer identification number of the parent corporation of any consolidated groupfor tax purposes of which the debtor has been a member at any time within six years immediately preceding the commencement of the case. NAME OF PARENT CORPORATION TAXPAYER IDENTIFICATION NUMBER (EIN) 25. Pension Funds.None nn If the debtor is not an individual, list the name and federal taxpayer identification number of any pension fund to which the debtor, as anemployer, has been responsible for contributing at any time within six years immediately preceding the commencement of the case. NAME OF PENSION FUND TAXPAYER IDENTIFICATION NUMBER (EIN) 7 Software Copyright (c) 1996-2009 Best Case Solutions, Inc. - Evanston, IL - (800) 492-8037 Best Case Bankruptcy DECLARATION UNDER PENALTY OF PERJURY ON BEHALF OF CORPORATION OR PARTNERSHIPI declare under penalty of perjury that I have read the answers contained in the foregoing statement of financial affairs and any attachments thereto and thatthey are true and correct to the best of my knowledge, information and belief. Date November 25, 2009 Signature /s/ Christopher Clemente Christopher ClementeC.E.O. of Comstock Homebuilding Companies, Inc., itsManager[An individual signing on behalf of a partnership or corporation must indicate position or relationship to debtor.]Penalty for making a false statement: Fine of up to $500,000 or imprisonment for up to 5 years, or both. 18 U.S.C. §§ 152 and 3571 8 Software Copyright (c) 1996-2009 Best Case Solutions, Inc. - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6A (Official Form 6A) (12/07) In re Buckhead Overlook, LLC, Case No. 09-90332-MHM Debtor SCHEDULE A - REAL PROPERTYExcept as directed below, list all real property in which the debtor has any legal, equitable, or future interest, including all property owned as acotenant, community property, or in which the debtor has a life estate. Include any property in which the debtor holds rights and powers exercisable for thedebtor’s own benefit. If the debtor is married, state whether husband, wife, both, or the marital community own the property by placing an “H,” “W,” “J,” or“C” in the column labeled “Husband, Wife, Joint, or Community.” If the debtor holds no interest in real property, write “None” under “Description andLocation of Property.”Do not include interests in executory contracts and unexpired leases on this schedule. List them in Schedule G - Executory Contracts andUnexpired Leases.If an entity claims to have a lien or hold a secured interest in any property, state the amount of the secured claim. See Schedule D. If no entity claims tohold a secured interest in the property, write “None” in the column labeled “Amount of Secured Claim.” If the debtor is an individual or if a joint petition isfiled, state the amount of any exemption claimed in the property only in Schedule C - Property Claimed as Exempt. Description and Location of Property Nature of Debtor’sInterest in Property Husband,Wife,Joint, orCommunity Current Value ofDebtor’s Interest inProperty, withoutDeducting any SecuredClaim or Exemption Amount ofSecured Claim approx. 20.58 acres, Altpharetta, Forsyth County, GA 30005(book value = $2,353,751.00; tax assessed value =$1,852,200.00) Fee simple — 2,353,751.00 2,390,169.96 Sub-Total > 2,353,751.00 (Total of this page) Total > 2,353,751.00 0 continuation sheets attached to the Schedule of Real Property (Report also on Summary of Schedules) Copyright (c) 1996-2009 - Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6B (Official Form 6B) (12/07) In re Buckhead Overlook, LLC, Case No. 09-90332-MHM Debtor SCHEDULE B - PERSONAL PROPERTYExcept as directed below, list all personal property of the debtor of whatever kind. If the debtor has no property in one or more of the categories, placean “x” in the appropriate position in the column labeled “None.” If additional space is needed in any category, attach a separate sheet properly identifiedwith the case name, case number, and the number of the category. If the debtor is married, state whether husband, wife, both, or the marital community ownthe property by placing an “H,” “W,” “J,” or “C” in the column labeled “Husband, Wife, Joint, or Community.” If the debtor is an individual or a jointpetition is filed, state the amount of any exemptions claimed only in Schedule C - Property Claimed as Exempt.Do not list interests in executory contracts and unexpired leases on this schedule. List them in Schedule G - Executory Contracts and UnexpiredLeases.If the property is being held for the debtor by someone else, state that person’s name and address under “Description and Location of Property.” If theproperty is being held for a minor child, simply state the child’s initials and the name and address of the child’s parent or guardian, such as “A.B., a minorchild, by John Doe, guardian.” Do not disclose the child’s name. See, 11 U.S.C. § 112 and Fed. R. Bankr. P. 1007(m). Type of Property NONE Description and Location of Property Husband,Wife,Joint, orCommunity Current Value ofDebtor’s Interest in Property,without Deducting anySecured Claim or Exemption1. Cash on hand X 2. Checking, savings or other financialaccounts, certificates of deposit, or sharesin banks, savings and loan, thrift, buildingand loan, and homestead associations, orcredit unions, brokerage houses, orcooperatives. X 3. Security deposits with public utilities,telephone companies, landlords, andothers. X 4. Household goods and furnishings,including audio, video, and computerequipment. X 5. Books, pictures and other art objects,antiques, stamp, coin, record, tape,compact disc, and other collections orcollectibles. X 6. Wearing apparel. X 7. Furs and jewelry. X 8. Firearms and sports, photographic, andother hobby equipment. X 9. Interests in insurance policies. Nameinsurance company of each policy anditemize surrender or refund value of each. X 10. Annuities. Itemize and name each issuer. X Sub-Total > 0.00 (Total of this page) 2 continuation sheets attached to the Schedule of Personal Property Copyright (c) 1996-2009 - Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6B (Official Form 6B) (12/07) - Cont. In re Buckhead Overlook, LLC, Case No. 09-90332-MHM Debtor SCHEDULE B - PERSONAL PROPERTY(Continuation Sheet) Type of Property NONE Description and Location of Property Husband,Wife,Joint, orCommunity Current Value ofDebtor’s Interest in Property,without Deducting anySecured Claim or Exemption11. Interests in an education IRA as defined in26 U.S.C. § 530(b)(l) or under a qualifiedState tuition plan as defined in 26 U.S.C. §529(b)(l). Give particulars. (File separatelythe record(s) of any such interest(s). 11U.S.C. §521 (c).) X 12. Interests in IRA, ERISA, Keogh, or otherpension or profit sharing plans. Giveparticulars. X 13. Stock and interests in incorporated andunincorporated businesses. Itemize. X 14. Interests in partnerships or joint ventures.Itemize. X 15. Government and corporate bonds andother negotiable and nonnegotiableinstruments. X 16. Accounts receivable. X 17. Alimony, maintenance, support, andproperty settlements to which the debtor isor may be entitled. Give particulars. X 18. Other liquidated debts owed to debtorincluding tax refunds. Give particulars. X 19. Equitable or future interests, life estates,and rights or powers exercisable for thebenefit of the debtor other than thoselisted in Schedule A - Real Property. X 20. Contingent and noncontingent interests inestate of a decedent, death benefit plan,life insurance policy, or trust. X 21. Other contingent and unliquidated claimsof every nature, including tax refunds,counterclaims of the debtor, and rights tosetoff claims. Give estimated value ofeach. X Sub-Total> 0.00 (Total of this page) Sheet 1 of 2 continuation sheets attached to the Schedule of Personal Property Copyright (c) 1996-2009 - Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6B (Official Form 6B) (12/07) - Cont. In re Buckhead Overlook, LLC, Case No. 09-90332-MHM Debtor SCHEDULE B - PERSONAL PROPERTY(Continuation Sheet) Type of Property NONE Description and Location of Property Husband,Wife,Joint, orCommunity Current Value ofDebtor’s Interest in Property,without Deducting anySecured Claim or Exemption22. Patents, copyrights, and other intellectualproperty. Give particulars. X 23. Licenses, franchises, and other generalintangibles. Give particulars. X 24. Customer lists or other compilationscontaining personally identifiableinformation (as defined in 11 U.S.C. §101(41 A)) provided to the debtor byindividuals in connection with obtaininga product or service from the debtorprimarily for personal, family, orhousehold purposes. X 25. Automobiles, trucks, trailers, and othervehicles and accessories. X 26. Boats, motors, and accessories. X 27. Aircraft and accessories. X 28. Office equipment, furnishings, andsupplies. X 29. Machinery, fixtures, equipment, andsupplies used in business. X 30. Inventory. X 31. Animals. X 32. Crops - growing or harvested. Giveparticulars. X 33. Farming equipment and implements. X 34. Farm supplies, chemicals, and feed. X 35. Other personal property of any kind notalready listed. Itemize. X Sub-Total > 0.00 (Total of this page) Total > 0.00 Sheet 2 of 2 continuation sheets attached to the Schedule of Personal Property(Report on Summmary of Schedule) Copyright (c) 1996-2009 - Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6D (Official Form 6D) (12/07) In re Buckhead Overlook, LLC, Case No. 09-90332-MHM Debtor SCHEDULE D - CREDITORS HOLDING SECURED CLAIMSState the name, mailing address, including zip code, and last four digits of any account number of all entities holding claims secured by property of thedebtor as of the date of filing of the petition. The complete account number of any account the debtor has with the creditor is useful to the trustee and thecreditor and may be provided if the debtor chooses to do so. List creditors holding all types of secured interests such as judgment liens, garnishments,statutory liens, mortgages, deeds of trust, and other security interests.List creditors in alphabetical order to the extent practicable. If a minor child is a creditor, the child’s initials and the name and address of the child’sparent or guardian, such as “A.B., a minor child, by John Doe, guardian.” Do not disclose the child’s name. See, 11 U.S.C. §112 and Fed. R. Bankr. P.1007(m). If all secured creditors will not fit on this page, use the continuation sheet provided.If any entity other than a spouse in a joint case may be jointly liable on a claim, place an “X” in the column labeled “Codebtor”, include the entity onthe appropriate schedule of creditors, and complete Schedule H - Codebtors. If a joint petition is filed, state whether the husband, wife, both of them, or themarital community may be liable on each claim by placing an “H”, “W”, “J”, or “C” in the column labeled “Husband, Wife, Joint, or Community”.If the claim is contingent, place an “X” in the column labeled “Contingent”. If the claim is unliquidated, place an “X” in the column labeled“Unliquidated”. If the claim is disputed, place an “X” in the column labeled “Disputed”. (You may need to place an “X” in more than one of these threecolumns.)Total the columns labeled “Amount of Claim Without Deducting Value of Collateral” and “Unsecured Portion, if Any” in the boxes labeled “Total(s)”on the last sheet of the completed schedule. Report the total from the column labeled “Amount of Claim” also on the Summary of Schedules and, if the debtoris an individual with primarily consumer debts, report the total from the column labeled “Unsecured Portion” on the Statistical Summary of CertainLiabilities and Related Data. ¨Check this box if debtor has no creditors holding secured claims to report on this Schedule D. CREDITOR’S NAMEAND MAILING ADDRESSINCLUDING ZIP CODE,AND ACCOUNT NUMBER(See instructions above.) CODEBTOR Husband, Wife, Joint, or Community CONTINGENT UNLIQUIDATED DISPUTED AMOUNT OFCLAIMWITHOUTDEDUCTINGVALUE OFCOLLATERAL UNSECUREDPORTION, IFANY HWJC DATE CLAIM WAS INCURRED,NATURE OF LIEN, ANDDESCRIPTION AND VALUEOF PROPERTYSUBJECT TO LIEN Account No. 2008, 2009 Forsyth CountyTax Commissioner1092 Tribble Gap Rd.Cumming, GA 30040 - property tax approx. 20.58 acres, Alpharetta, Forsyth County, GA 30005(book value = $2,353,751.00; tax assessed value =$1,852,200.00) Value $ 2,353,751.00 36,418.96 36,418.96Account No. mortgage RBC Builder FinanceAttn: Jim McDunn301 Grant Street; Suite 4325Pittsburgh, PA 15219 X - approx. 20.58 acres, Alpharetta, Forsyth County, GA 30005(book value = $2,353,751.00; tax assessed value =$1,852,200.00) Value $ 2,353,751.00 2,353,751.00 0.00Account No. additional notice address RBC Builder FinanceAttn: Legal11011 Richmond Ave.; Suite 850Houston, TX 77042 - Value $ 0.00 0.00 0.00Account No. Value $ Subtotal(Total of this page) 2,390,169.96 36,418.96 Total(Report on Summary of Schedules) 2,390,169.96 36,418.960 continuation sheets attached Copyright (c) 1996-2009 - Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6E (Official Form 6E) (12/07) In re Buckhead Overlook, LLC, Case No. 09-90332-MHM Debtor SCHEDULE E - CREDITORS HOLDING UNSECURED PRIORITY CLAIMSA complete list of claims entitled to priority, listed separately by type of priority, is to be set forth on the sheets provided. Only holders of unsecuredclaims entitied to priority should be listed in this schedule. In the boxes provided on the attached sheets, state the name, mailing address, including zip code,and last four digits of the account number, if any, of all entities holding priority claims against the debtor or the property of the debtor, as of the date of thefiling of the petition. Use a separate continuation sheet for each type of priority and label each with the type of priority.The complete account number of any account the debtor has with the creditor is useful to the trustee and the creditor and may be provided if the debtorchooses to do so. If a minor child is a creditor, state the child’s initials and the name and address of the child’s parent or guardian, such as “A.B., a minorchild, by John Doe, guardian.” Do not disclose the child’s name. See, 11 U.S.C. § 112 and Fed. R. Bankr. P. 1007(m).If any entity other than a spouse in a joint case may be jointly liable on a claim, place an “X” in the column labeled “Codebtor,” include the entity onthe appropriate schedule of creditors, and complete Schedule H-Codebtors. If a joint petition is filed, state whether the husband, wife, both of them, or themarital community may be liable on each claim by placing an “H,” “W,” “J,” or “C” in the column labeled “Husband, Wife, Joint, or Community.” If theclaim is contingent, place an “X” in the column labeled “Contingent.” If the claim is unliquidated, place an “X” in the column labeled “Unliquidated.” If theclaim is disputed, place an “X” in the column labeled “Disputed.” (You may need to place an “X” in more than one of these three columns.)Report the total of claims listed on each sheet in the box labeled “Subtotals” on each sheet. Report the total of all claims listed on this Schedule E inthe box labeled “Total” on the last sheet of the completed schedule. Report this total also on the Summary of Schedules.Report the total of amounts entitled to priority listed on each sheet in the box labeled “Subtotals” on each sheet. Report the total of all amountsentitled to priority listed on this Schedule E in the box labeled “Totals” on the last sheet of the completed schedule. Individual debtors with primarilyconsumer debts report this total also on the Statistical Summary of Certain Liabilities and Related Data.Report the total of amounts not entitled to priority listed on each sheet in the box labeled “Subtotals” on each sheet. Report the total of all amounts notentitled to priority listed on this Schedule E in the box labeled “Totals” on the last sheet of the completed schedule. Individual debtors with primarilyconsumer debts report this total also on the Statistical Summary of Certain Liabilities and Related Data. nCheck this box if debtor has no creditors holding unsecured priority claims to report on this Schedule E.TYPES OF PRIORITY CLAIMS (Check the appropriate box(es) below if claims in that category are listed on the attached sheets) ¨¨Domestic support obligationsClaims for domestic support that are owed to or recoverable by a spouse, former spouse, or child of the debtor, or the parent, legal guardian, orresponsible relative of such a child, or a governmental unit to whom such a domestic support claim has been assigned to the extent provided in 11 U.S.C. §507(a)(1). ¨¨Extensions of credit in an involuntary caseClaims arising in the ordinary course of the debtor’s business or financial affairs after the commencement of the case but before the earlier of theappointment of a trustee or the order for relief. 11 U.S.C. § 507(a)(3). ¨¨Wages, salaries, and commissionsWages, salaries, and commissions, including vacation, severance, and sick leave pay owing to employees and commissions owing to qualifyingindependent sales representatives up to $10,950* per person earned within 180 days immediately preceding the filing of the original petition, or thecessation of business, whichever occurred first, to the extent provided in 11 U.S.C. § 507(a)(4). ¨¨Contributions to employee benefit plansMoney owed to employee benefit plans for services rendered within 180 days immediately preceding the filing of the original petition, or the cessationof business, whichever occurred first, to the extent provided in 11 U.S.C. § 507(a)(5). ¨¨Certain farmers and fishermenClaims of certain farmers and fishermen, up to $5,400* per farmer or fisherman, against the debtor, as provided in 11 U.S.C. § 507(a)(6). ¨¨Deposits by individualsClaims of individuals up to $2,425* for deposits for the purchase, lease, or rental of property or services for personal, family, or household use, thatwere not delivered or provided. 11 U.S.C. §507(a)(7). ¨¨Taxes and certain other debts owed to governmental unitsTaxes, customs duties, and penalties owing to federal, state, and local governmental units as set forth in 11 U.S.C. § 507(a)(8). ¨¨Commitments to maintain the capital of an insured depository institutionClaims based on commitments to the FDIC, RTC, Director of the Office of Thrift Supervision, Comptroller of the Currency, or Board of Governors ofthe Federal Reserve System, or their predecessors or successors, to maintain the capital of an insured depository institution. 11 U.S.C. § 507(a)(9). ¨¨Claims for death or personal injury while debtor was intoxicated Claims for death or personal injury resulting from the operation of a motor vehicle or vessel while the debtor was intoxicated from using alcohol, adrug, or another substance. 11 U.S.C. § 507(a)(10). *Amounts are subject to adjustment on April 1, 2010, and every three years thereafter with respect to cases commenced on or after the date of adjustment.0 continuation sheets attached Copyright (c) 1996-2009 - Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6F (Official Form 6F) (12/07) In re Buckhead Overlook, LLC, Case No. 09-90332-MHM Debtor SCHEDULE F - CREDITORS HOLDING UNSECURED NONPRIORITY CLAIMSState the name, mailing address, including zip code, and last four digits of any account number, of all entities holding unsecured claims withoutpriority against the debtor or the property of the debtor, as of the date of filing of the petition. The complete account number of any account the debtor haswith the creditor is useful to the trustee and the creditor and may be provided if the debtor chooses to do so. If a minor child is a creditor, state the child’sinitials and the name and address of the child’s parent or guardian, such as “A.B., a minor child, by John Doe, guardian.” Do not disclose the child’s name.See, 11 U.S.C. §112 and Fed. R. Bankr. P. 1007(m). Do not include claims listed in Schedules D and E. If all creditors will not fit on this page, use thecontinuation sheet provided.If any entity other than a spouse in a joint case may be jointly liable on a claim, place an “X” in the column labeled “Codebtor,” include the entity onthe appropriate schedule of creditors, and complete Schedule H - Codebtors. If a joint petition is filed, state whether the husband, wife, both of them, or themarital community may be liable on each claim by placing an “H,” “W,” “J,” or “C” in the column labeled “Husband, Wife, Joint, or Community.”If the claim is contingent, place an “X” in the column labeled “Contingent.” If the claim is unliquidated, place an “X” in the column labeled“Unliquidated.” If the claim is disputed, place an “X” in the column labeled “Disputed.” (You may need to place an “X” in more than one of these threecolumns.)Report the total of all claims listed on this schedule in the box labeled “Total” on the last sheet of the completed schedule. Report this total also on theSummary of Schedules and, if the debtor is an individual with primarily consumer debts, report this total also on the Statistical Summary of CertainLiabilities and Related Data. nCheck this box if debtor has no creditors holding unsecured claims to report on this Schedule F. CREDITOR’S NAME,MAILING ADDRESSINCLUDING ZIP CODE,AND ACCOUNT NUMBER(See instructions above.) CODEBTOR Husband, Wife, Joint, or Community CONTINGENT UNLIQUIDATED DISPUTED AMOUNT OF CLAIM HWJC DATE CLAIM WAS INCURRED ANDCONSIDERATION FOR CLAIM. IF CLAIMIS SUBJECT TO SETOFF, SO STATE. Account No. Account No. Account No. Account No. 0 continuation sheets attached Subtotal(Total of this page) Total(Report on Summary of Schedules) 0.00 Copyright (c) 1996-2009 - Best Case Solutions - Evanston, IL - (800) 492-8037 S/N:21149-091118 Best Case Bankruptcy B6C (Official Form 6G) (12/07) In re Buckhead Overlook, LLC, Case No. 09-90332-MHM Debtor SCHEDULE G - EXECUTORY CONTRACTS AND UNEXPIRED LEASESDescribe all executory contracts of any nature and all unexpired leases of real or personal property. Include any timeshare interests. State nature of debtor’sinterest in contract, i.e., “Purchaser”, “Agent”, etc. State whether debtor is the lessor or lessee of a lease. Provide the names and complete mailing addresses ofall other parties to each lease or contract described. If a minor child is a party to one of the leases or contracts, state the child’s initials and the name andaddress of the child’s parent or guardian, such as “A.B., a minor child, by John Doe, guardian.” Do not disclose the child’s name. See, 11 U.S.C. §112 and Fed.R. Bankr. P. 1007(m). nCheck this box if debtor has no executory contracts or unexpired leases. Name and Mailing Address, Including Zip Code,of Other Parties to Lease or Contract Description of Contract or Lease and Nature of Debtor’s Interest.State whether lease is for nonresidential real property.State contract number of any government contract.0 continuation sheets attached to Schedule of Executory Contracts and Unexpired Leases Copyright (c) 1996-2009 - Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6H (Official Form 6H) (12/07) In re Buckhead Overlook, LLC, Case No. 09-90332-MHM Debtor SCHEDULE H - CODEBTORSProvide the information requested concerning any person or entity, other than a spouse in a joint case, that is also liable on any debts listed by debtorin the schedules of creditors. Include all guarantors and co-signers. If the debtor resides or resided in a community property state, commonwealth, or territory(including Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Puerto Rico, Texas, Washington, or Wisconsin) within the eight year periodimmediately preceding the commencement of the case, identify the name of the debtor’s spouse and of any former spouse who resides or resided with thedebtor in the community property state, commonwealth, or territory. Include all names used by the nondebtor spouse during the eight years immediatelypreceding the commencement of this case. If a minor child is a codebtor or a creditor, state the child’s initials and the name and address of the child’s parentor guardian, such as “A.B., a minor child, by John Doe, guardian.” Do not disclose the child’s name. See, 11 U.S.C. §112 and Fed. R. Bankr. P. 1007(m). ¨Check this box if debtor has no codebtors. NAME AND ADDRESS OF CODEBTOR NAME AND ADDRESS OF CREDITORAndrew H. Chandler, Jr.126 N. Rantun CourtNorcross, GA 30071 RBC Builder FinanceAttn: Jim McDunn301 Grant Street; Suite 4325Pittsburgh, PA 15219James B. Parker2105 Woodfalls DriveCumming, GA 30041 RBC Builder FinanceAttn: Jim McDunn301 Grant Street; Suite 4325Pittsburgh, PA 15219Parker Chandler Homes, LLC11465 Sunset Hills RoadSuite 510Reston, VA 20190 RBC Builder FinanceAttn: Jim McDunn301 Grant Street; Suite 4325Pittsburgh, PA 152190 continuation sheets attached to Schedule of Codebtors Copyright (c) 1996-2009 - Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy United States Bankruptcy CourtNorthern District of Georgia, Atlanta Division In re Buckhead Overlook, LLC Case No. 09-90332-MHM Debtor(s) Chapter 7DISCLOSURE OF COMPENSATION OF ATTORNEY FOR DEBTOR(S) 1.Pursuant to 11 U.S.C. § 329(a) and Bankruptcy Rule 2016(b), I certify that I am the attorney for the above-named debtor and that compensation paid tome within one year before the filing of the petition in bankruptcy, or agreed to be paid to me, for services rendered or to be rendered on behalf of thedebtor(s) in contemplation of or in connection with the bankruptcy case is as follows: For legal services, I have agreed to accept $3,000.00Prior to the filing of this statement I have received $3,000.00Balance Due $0.00 2.$299.00 of the filing fee has been paid. 3.The source of the compensation paid to me was:¨ Debtor ¢ Other (specify): Comstock Homes of Atlanta, LLC 4.The source of compensation to be paid to me is:¢ Debtor ¨ Other (specify): 5. ¢I have not agreed to share the above-disclosed compensation with any other person unless they are members and associates of my law firm. ¨I have agreed to share the above-disclosed compensation with a person or persons who are not members or associates of my law firm. A copy ofthe agreement, together with a list of the names of the people sharing in the compensation is attached. 6.In return for the above-disclosed fee, I have agreed to render legal service for all aspects of the bankruptcy case, including: a.Analysis of the debtor’s financial situation, and rendering advice to the debtor in determining whether to file a petition in bankruptcy; b.Preparation and filing of any petition, schedules, statement of affairs and plan which may be required; c.Representation of the debtor at the meeting of creditors and confirmation hearing, and any adjourned hearings thereof; d.[Other provisions as needed] 7.By agreement with the debtor(s), the above-disclosed fee does not include the following service:representation of the debtor(s) in adversary proceedings.CERTIFICATIONI certify that the foregoing is a complete statement of any agreement or arrangement for payment to me for representation of the debtor(s) in thisbankruptcy proceeding. Dated: November 25, 2009 /s/ Paul Reece Marr Paul Reece Marr Paul Reece Marr, P.C. Suite 960 300 Galleria Parkway Atlanta, GA 30339 (770) 984-2255 pmarr@mindspring.com Software Copyright (c) 1996-2009 Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6 Summary (Official Form 6 - Summary) (12/07)United States Bankruptcy CourtNorthern District of Georgia, Atlanta Division In re Buckhead Overlook, LLC, Case No. 09-90332-MHM Debtor Chapter 7SUMMARY OF SCHEDULESIndicate as to each schedule whether that schedule is attached and state the number of pages in each. Report the totals from Schedules A, B, D, E, F, I, and J inthe boxes provided. Add the amounts from Schedules A and B to determine the total amount of the debtor’s assets. Add the amounts of all claims fromSchedules D, E, and F to determine the total amount of the debtor’s liabilities. Individual debtors must also complete the “Statistical Summary of CertainLiabilities and Related Data” if they file a case under chapter 7, 11, or 13. NAME OF SCHEDULE ATTACHED(YES/NO) NO. OFSHEETS ASSETS LIABILITIES OTHERA - Real Property Yes 1 2,353,751.00 B - Personal Property Yes 3 0.00 C - Property Claimed as Exempt No 0 D - Creditors Holding Secured Claims Yes 1 2,390,169.96 E - Creditors Holding Unsecured Priority Claims (Total of Claims on ScheduleE) Yes 1 0.00 F - Creditors Holding Unsecured Nonpriority Claims Yes 1 0.00 G - Executory Contracts and Unexpired Leases Yes 1 H - Codebtors Yes 1 I - Current Income of Individual Debtor(s) No 0 N/AJ - Current Expenditures of Individual Debtors) No 0 N/ATotal Number of Sheets of ALL Schedules 9 Total Assets 2,353,751.00 Total Liabilities 2,390,169.96 Copyright (c) 1996-2009 - Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy Form 6 - Statistical Summary (12/07)United States Bankruptcy CourtNorthern District of Georgia, Atlanta Division In re Buckhead Overlook, LLC, Case No. 09-90332-MHM Debtor Chapter 7STATISTICAL SUMMARY OF CERTAIN LIABILITIES AND RELATED DATA (28 U.S.C. § 159)If you are an individual debtor whose debts are primarily consumer debts, as defined in § 101(8) of the Bankruptcy Code (11 U.S.C.§ 101(8)), filing a caseunder chapter 7, 11 or 13, you must report all information requested below. ¨Check this box if you are an individual debtor whose debts are NOT primarily consumer debts. You are not required to report any informationhere.This information is for statistical purposes only under 28 U.S.C. § 159.Summarize the following types of liabilities, as reported in the Schedules, and total them. Type of Liability AmountDomestic Support Obligations (from Schedule E) Taxes and Certain Other Debts Owed to Governmental Units (from Schedule E) Claims for Death or Personal Injury While Debtor Was Intoxicated (from Schedule E) (whether disputed or undisputed) Student Loan Obligations (from Schedule F) Domestic Support, Separation Agreement, and Divorce Decree Obligations Not Reported on Schedule E Obligations to Pension or Profit-Sharing, and Other Similar Obligations (from Schedule F) TOTAL State the following: Average Income (from Schedule 1, Line 16) Average Expenses (from Schedule J, Line 18) Current Monthly Income (from Form 22A Line 12; OR, Form 22B Line 11; OR, Form 22C Line 20 ) State the following: 1. Total from Schedule D, “UNSECURED PORTION, IF ANY” column 2. Total from Schedule E, “AMOUNT ENTITLED TO PRIORITY” column 3. Total from Schedule E, “AMOUNT NOT ENTITLED TO PRIORITY, IF ANY” column 4. Total from Schedule F 5. Total of non-priority unsecured debt (sum of 1, 3, and 4) Copyright (c) 1996-2009 - Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6 Declaration (Official Form 6 - Declaration). (12/07)United States Bankruptcy CourtNorthern District of Georgia, Atlanta Division In re Buckhead Overlook, LLC Case No. 09-90332-MHM Debtor(s) Chapter 7DECLARATION CONCERNING DEBTORS SCHEDULESDECLARATION UNDER PENALTY OF PERJURY ON BEHALF OF CORPORATION OR PARTNERSHIPI, the C.E.O. of Comstock Homebuilding Companies, Inc., its Manager of the corporation named as debtor in this case, declare under penalty of perjurythat I have read the foregoing summary and schedules, consisting of 11 sheets, and that they are true and correct to the best of my knowledge, information,and belief. Date November 25, 2009 Signature /s/ Christopher Clemente Christopher Clemente C.E.O. of Comstock Homebuilding Companies, Inc., itsManagerPenalty for making a false statement or concealing property: Fine of up to $500,000 or imprisonment for up to 5 years or both.18 U.S.C. §§ 152 and 3571. Software Copyright (c) 1996-2009 Best Case Solutions, Inc. - Evanston, IL - (800) 492-8037 Best Case Bankruptcy United States Bankruptcy CourtNorthern District of Georgia, Atlanta Division In re Buckhead Overlook, LLC Case No. 09-90332-MHM Debtor(s) Chapter 7CORPORATE OWNERSHIP STATEMENT (RULE 7007.1)Pursuant to Federal Rule of Bankruptcy Procedure 7007.1 and to enable the Judges to evaluate possible disqualification or recusal, the undersigned counselfor Buckhead Overlook, LLC in the above captioned action, certifies that the following is a (are) corporation(s), other than the debtor or a governmentalunit, that directly or indirectly own(s) 10% or more of any class of the corporation’s(s’) equity interests, or states that there are no entities to report underFRBP 7007.1:Comstock HomebuildingCompanies, Inc.11465 Sunset Hills Rd; Ste 500Reston.VA 20190¨ None [Check if applicable] November 25, 2009 /s/ Paul Reece MarrDate Paul Reece Marr Signature of Attorney or Litigant Counsel for Buckhead Overlook, LLC Paul Reece Marr, P.C. Suite 960 300 Galleria Parkway Atlanta, GA 30339 (770) 984-2255 pmarr@mindspring.com Software Copyright (c) 1996-2009 Best Case Solutions, Inc. - Evanston, IL - (800) 492-8037 Best Case Bankruptcy UNITED STATES BANKRUPTCY COURTNORTHERN DISTRICT OF GEORGIAATLANTA DIVISION In re: : Case No. 09-90332-MHM : BUCKHEAD OVERLOOK, LLC, : Chapter 7 : Debtor. : : CERTIFICATE OF SERVICEI, Paul Reece Marr, certify that I am over the age of 18 and that on the below referenced date I served a copy of the attached STATEMENT OFFINANCIAL AFFAIRS AND SCHEDULES by first class U.S. Mail, with adequate postage prepaid on the following persons or entities at the addresses statedon the attached list:Martha A. MillerMartha A. Miller, PC229 Peachtree Street, NESuite 2415Atlanta, GA 30303This the 25 day of November, 2009. /s/ Paul Reece MarrPaul Reece MarrPaul Reece Marr, P.C.300 Galleria Pkwy; Ste 960Atlanta, GA 30339770/984-2255 –2–th Exhibit 10.83UNITED STATES BANKRUPTCY COURTNORTHERN DISTRICT OF GEORGIAATLANTA DIVISION In re: : Case No. 09-90335-MHM : POST PRESERVE, LLC, : Chapter 7 : Debtor. : : DEBTOR’S STATEMENT OF FINANCIAL AFFAIRS, SCHEDULES, ANDSUPPLEMENTAL MATRIXPost Preserve, LLC, “Debtor” herein, hereby files its STATEMENT OF FINANCIAL AFFAIRS, SCHEDULES, AND SUPPLEMENTAL MATRIX.Prepared and submitted by:PAUL REECE MARR, P.C.Debtor’s counselBy: /s/ Paul Reece MarrPaul Reece MarrGA Bar #471230 Suite 960300 Galleria Parkway, N.W.Atlanta, GA 30339770/984-2255 –1– B7 (Official Form 7) (12/07)United States Bankruptcy CourtNorthern District of Georgia, Atlanta Division In re Post Preserve, LLC Case No. 09-90335-mhm Debtor(s) Chapter 7STATEMENT OF FINANCIAL AFFAIRSThis statement is to be completed by every debtor. Spouses filing a joint petition may file a single statement on which the information for both spousesis combined. If the case is filed under chapter 12 or chapter 13, a married debtor must furnish information for both spouses whether or not a joint petition isfiled, unless the spouses are separated and a joint petition is not filed. An individual debtor engaged in business as a sole proprietor, partner, family farmer, orself-employed professional, should provide the information requested on this statement concerning all such activities as well as the individual’s personalaffairs. To indicate payments, transfers and the like to minor children, state the child’s initials and the name and address of the child’s parent or guardian,such as “A.B., a minor child, by John Doe, guardian.” Do not disclose the child’s name. See, 11 U.S.C. § 112; Fed. R. Bankr. P. 1007(m).Questions 1 - 18 are to be completed by all debtors. Debtors that are or have been in business, as defined below, also must complete Questions 19-25. Ifthe answer to an applicable question is “None,” mark the box labeled “None.” If additional space is needed for the answer to any question, use and attach aseparate sheet properly identified with the case name, case number (if known), and the number of the question.DEFINITIONS“In business.” A debtor is “in business” for the purpose of this form if the debtor is a corporation or partnership. An individual debtor is “in business”for the purpose of this form if the debtor is or has been, within six years immediately preceding the filing of this bankruptcy case, any of the following: anofficer, director, managing executive, or owner of 5 percent or more of the voting or equity securities of a corporation; a partner, other than a limited partner,of a partnership; a sole proprietor or self-employed full-time or part-time. An individual debtor also may be “in business” for the purpose of this form if thedebtor engages in a trade, business, or other activity, other than as an employee, to supplement income from the debtor’s primary employment.“Insider.” The term “insider” includes but is not limited to: relatives of the debtor; general partners of the debtor and their relatives; corporations ofwhich the debtor is an officer, director, or person in control; officers, directors, and any owner of 5 percent or more of the voting or equity securities of acorporate debtor and their relatives; affiliates of the debtor and insiders of such affiliates; any managing agent of the debtor. 11 U.S.C. §101. 1. Income from employment or operation of businessNonen State the gross amount of income the debtor has received from employment, trade, or profession, or from operation of the debtor’s business,including part-time activities either as an employee or in independent trade or business, from the beginning of this calendar year to the datethis case was commenced. State also the gross amounts received during the two years immediately preceding this calendar year. (A debtorthat maintains, or has maintained, financial records on the basis of a fiscal rather than a calendar year may report fiscal year income. Identifythe beginning and ending dates of the debtor’s fiscal year.) If a joint petition is filed, state income for each spouse separately. (Marrieddebtors filing under chapter 12 or chapter 13 must state income of both spouses whether or not a joint petition is filed, unless the spousesare separated and a joint petition is not filed.) AMOUNT SOURCE 2. Income other than from employment or operation of businessNonen State the amount of income received by the debtor other than from employment, trade, profession, or operation of the debtor’s businessduring the two years immediately preceding the commencement of this case. Give particulars. If a joint petition is filed, state income foreach spouse separately. (Married debtors filing under chapter 12 or chapter 13 must state income for each spouse whether or not a jointpetition is filed, unless the spouses are separated and a joint petition is not filed.) AMOUNT SOURCE Software Copyright (c) 1996-2009 Best Case Solutions, Inc. - Evanston, IL - (800) 492-8037 Best Case Bankruptcy 3. Payments to creditorsNonen Complete a. or b., as appropriate, and c. a. Individual or joint debtor(s) with primarily consumer debts. List all payments on loans, installment purchases of goods or services, andother debts to any creditor made within 90 days immediately preceding the commencement of this case unless the aggregate value of allproperty that constitutes or is affected by such transfer is less than $600. Indicate with an (*) any payments that were made to a creditor onaccount of a domestic support obligation or as part of an alternative repayment schedule under a plan by an approved nonprofit budgetingand creditor counseling agency. (Married debtors filing under chapter 12 or chapter 13 must include payments by either or both spouseswhether or not a joint petition is filed, unless the spouses are separated and a joint petition is not filed.) NAME AND ADDRESSOF CREDITOR DATES OFPAYMENTS AMOUNT PAID AMOUNT STILLOWING Nonen b. Debtor whose debts are not primarily consumer debts: List each payment or other transfer to any creditor made within 90 daysimmediately preceding the commencement of the case unless the aggregate value of all property that constitutes or is affected by suchtransfer is less than $5,475. If the debtor is an individual, indicate with an asterisk (*) any payments that were made to a creditor on accountof a domestic support obligation or as part of an alternative repayment schedule under a plan by an approved nonprofit budgeting andcreditor counseling agency. (Married debtors filing under chapter 12 or chapter 13 must include payments by either or both spouses whetheror not a joint petition is filed, unless the spouses are separated and a joint petition is not filed.) NAME AND ADDRESS OFCREDITOR DATES OFPAYMENTS/TRANSFERS AMOUNTPAID ORVALUE OFTRANSFERS AMOUNT STILLOWING Nonen c. All debtors: List all payments made within one year immediately preceding the commencement of this case to or for the benefit ofcreditors who are or were insiders. (Married debtors filing under chapter 12 or chapter 13 must include payments by either or both spouseswhether or not a joint petition is filed, unless the spouses are separated and a joint petition is not filed.) NAME AND ADDRESS OFCREDITOR AND RELATIONSHIPTO DEBTOR DATE OF PAYMENT AMOUNT PAID AMOUNT STILLOWING 4. Suits and administrative proceedings, executions, garnishments and attachmentsNone¨ a. List all suits and administrative proceedings to which the debtor is or was a party within one year immediately preceding the filing of thisbankruptcy case. (Married debtors filing under chapter 12 or chapter 13 must include information concerning either or both spouses whetheror not a joint petition is filed, unless the spouses are separated and a joint petition is not filed.) CAPTION OF SUIT ANDCASE NUMBER NATURE OF PROCEEDING COURT OR AGENCY ANDLOCATION STATUS ORDISPOSITIONParamont Grading Companyvs. Comstock Homes ofAtlanta, LLC and PostPreserve, LLC, case no.07A-10018-8 business dispute Gwinnett County, GA Superior Court judgment dated 10/21/2009 Nonen b. Describe all property that has been attached, garnished or seized under any legal or equitable process within one year immediatelypreceding the commencement of this case. (Married debtors filing under chapter 12 or chapter 13 must include information concerningproperty of either or both spouses whether or not a joint petition is filed, unless the spouses are separated and a joint petition is not filed.) NAME AND ADDRESS OF PERSON FORWHOSE BENEFIT PROPERTY WAS SEIZED DATE OF SEIZURE DESCRIPTION AND VALUE OFPROPERTY 2 Software Copyright (c) 1996-2009 Best Case Solutions, Inc. - Evanston, IL - (800) 492-8037 Best Case Bankruptcy 5. Repossessions, foreclosures and returnsNonen List all property that has been repossessed by a creditor, sold at a foreclosure sale, transferred through a deed in lieu of foreclosure orreturned to the seller, within one year immediately preceding the commencement of this case. (Married debtors filing under chapter 12 orchapter 13 must include information concerning property of either or both spouses whether or not a joint petition is filed, unless the spousesare separated and a joint petition is not filed.) NAME AND ADDRESS OFCREDITOR OR SELLER DATE OF REPOSSESSION,FORECLOSURE SALE,TRANSFER OR RETURN DESCRIPTIONAND VALUE OFPROPERTY 6. Assignments and receivershipsNonen a. Describe any assignment of property for the benefit of creditors made within 120 days immediately preceding the commencement of thiscase. (Married debtors filing under chapter 12 or chapter 13 must include any assignment by either or both spouses whether or not a jointpetition is filed, unless the spouses are separated and a joint petition is not filed.) NAME AND ADDRESS OF ASSIGNEE DATE OF ASSIGNMENT TERMS OF ASSIGNMENT OR SETTLEMENT Nonen b. List all property which has been in the hands of a custodian, receiver, or court-appointed official within one year immediately precedingthe commencement of this case. (Married debtors filing under chapter 12 or chapter 13 must include information concerning property ofeither or both spouses whether or not a joint petition is filed, unless the spouses are separated and a joint petition is not filed.) NAME AND ADDRESS OFCUSTODIAN NAME AND LOCATION OFCOURT CASE TITLE &NUMBER DATE OF ORDER DESCRIPTION AND VALUE OFPROPERTY 7. GiftsNonen List all gifts or charitable contributions made within one year immediately preceding the commencement of this case except ordinary andusual gifts to family members aggregating less than $200 in value per individual family member and charitable contributions aggregatingless than $100 per recipient. (Married debtors filing under chapter 12 or chapter 13 must include gifts or contributions by either or bothspouses whether or not a joint petition is filed, unless the spouses are separated and a joint petition is not filed.) NAME AND ADDRESS OFPERSON OR ORGANIZATION RELATIONSHIP TODEBTOR, IF ANY DATE OF GIFT DESCRIPTION ANDVALUE OF GIFT 8. LossesNonen List all losses from fire, theft, other casualty or gambling within one year immediately preceding the commencement of this case or sincethe commencement of this case. (Married debtors filing under chapter 12 or chapter 13 must include losses by either or both spouseswhether or not a joint petition is filed, unless the spouses are separated and a joint petition is not filed.) DESCRIPTION AND VALUEOF PROPERTY DESCRIPTION OF CIRCUMSTANCES AND,IF LOSS WAS COVERED IN WHOLE OR INPART BY INSURANCE, GIVE PARTICULARS DATE OF LOSS 9. Payments related to debt counseling or bankruptcyNone¨ List all payments made or property transferred by or on behalf of the debtor to any persons, including attorneys, for consultation concerningdebt consolidation, relief under the bankruptcy law or preparation of the petition in bankruptcy within one year immediately preceding thecommencement of this case. NAME AND ADDRESSOF PAYEE DATE OF PAYMENT,NAME OF PAYOR IF OTHERTHAN DEBTOR AMOUNT OF MONEYOR DESCRIPTION AND VALUEOF PROPERTYPaul Reece Marr, P.C.Suite 960300 Galleria ParkwayAtlanta, GA 30339 04/21/2009 Comstock Homes of Atlanta, LLC $3,000.00 attorney fee + $299.00 filing fee 3 Software Copyright (c) 1996-2009 Best Case Solutions, Inc. - Evanston, IL - (800) 492-8037 Best Case Bankruptcy 10. Other transfersNonen a. List all other property, other than property transferred in the ordinary course of the business or financial affairs of the debtor, transferredeither absolutely or as security within two years immediately preceding the commencement of this case. (Married debtors filing underchapter 12 or chapter 13 must include transfers by either or both spouses whether or not a joint petition is filed, unless the spouses areseparated and a joint petition is not filed.) NAME AND ADDRESS OF TRANSFEREE,RELATIONSHIP TO DEBTOR DATE DESCRIBE PROPERTY TRANSFERREDAND VALUE RECEIVED Nonen b. List all property transferred by the debtor within ten years immediately preceding the commencement of this case to a self-settled trust orsimilar device of which the debtor is a beneficiary. NAME OF TRUST OR OTHER DEVICE DATE(S) OF TRANSFER(S) AMOUNT OF MONEYOR DESCRIPTIONAND VALUE OF PROPERTYOR DEBTOR’S INTEREST IN PROPERTY 11. Closed financial accountsNonen List all financial accounts and instruments held in the name of the debtor or for the benefit of the debtor which were closed, sold, orotherwise transferred within one year immediately preceding the commencement of this case. Include checking, savings, or other financialaccounts, certificates of deposit, or other instruments; shares and share accounts held in banks, credit unions, pension funds, cooperatives,associations, brokerage houses and other financial institutions. (Married debtors filing under chapter 12 or chapter 13 must includeinformation concerning accounts or instruments held by or for either or both spouses whether or not a joint petition is filed, unless thespouses are separated and a joint petition is not filed.) NAME AND ADDRESS OF INSTITUTION TYPE OF ACCOUNT, LAST FOURDIGITS OF ACCOUNT NUMBER,AND AMOUNT OF FINAL BALANCE AMOUNT AND DATE OF SALEOR CLOSING 12. Safe deposit boxesNonen List each safe deposit or other box or depository in which the debtor has or had securities, cash, or other valuables within one yearimmediately preceding the commencement of this case. (Married debtors filing under chapter 12 or chapter 13 must include boxes ordepositories of either or both spouses whether or not a joint petition is filed, unless the spouses are separated and a joint petition is notfiled.) NAME AND ADDRESS OF BANKOR OTHER DEPOSITORY NAMES AND ADDRESSESOF THOSE WITH ACCESSTO BOX OR DEPOSITORY DESCRIPTION OF CONTENTS DATE OF TRANSFER ORSURRENDER, IF ANY 13. SetoffsNonen List all setoffs made by any creditor, including a bank, against a debt or deposit of the debtor within 90 days preceding the commencementof this case. (Married debtors filing under chapter 12 or chapter 13 must include information concerning either or both spouses whether ornot a joint petition is filed, unless the spouses are separated and a joint petition is not filed.) NAME AND ADDRESS OF CREDITOR DATE OF SETOFF AMOUNT OF SETOFF 14. Property held for another personNonen List all property owned by another person that the debtor holds or controls. NAME AND ADDRESS OF OWNER DESCRIPTION AND VALUE OF PROPERTY LOCATION OF PROPERTY 4 Software Copyright (c) 1996-2009 Best Case Solutions, Inc. - Evanston, IL - (800) 492-8037 Best Case Bankruptcy 15. Prior address of debtorNone¨ If the debtor has moved within three years immediately preceding the commencement of this case, list all premises which the debtoroccupied during that period and vacated prior to the commencement of this case. If a joint petition is filed, report also any separate addressof either spouse. ADDRESS NAME USED DATES OF OCCUPANCY5400 Laurel Springs Pkwy, Suite 201, Suwanee, GA 30024 Post Preserve, LLC 01/01/2006 - 09/30/2008405 Wakefield Bluff Court, Alpharetta, GA 30004 Post Preserve, LLC 10/01/2008 - 04/15/2009 16. Spouses and Former SpousesNonen If the debtor resides or resided in a community property state, commonwealth, or territory (including Alaska, Arizona, California, Idaho,Louisiana, Nevada, New Mexico, Puerto Rico, Texas, Washington, or Wisconsin) within eight years immediately preceding thecommencement of the case, identify the name of the debtor’s spouse and of any former spouse who resides or resided with the debtor in thecommunity property state.NAME 17. Environmental Information. For the purpose of this question, the following definitions apply: “Environmental Law” means any federal, state, or local statute or regulation regulating pollution, contamination, releases of hazardous ortoxic substances, wastes or material into the air, land, soil, surface water, groundwater, or other medium, including, but not limited to,statutes or regulations regulating the cleanup of these substances, wastes, or material. “Site” means any location, facility, or property as defined under any Environmental Law, whether or not presently or formerly ownedor operated by the debtor, including, but not limited to, disposal sites. “Hazardous Material” means anything defined as a hazardous waste, hazardous substance, toxic substance, hazardous material,pollutant, or contaminant or similar term under an Environmental LawNonen a. List the name and address of every site for which the debtor has received notice in writing by a governmental unit that it may be liable orpotentially liable under or in violation of an Environmental Law. Indicate the governmental unit, the date of the notice, and, if known, theEnvironmental Law: SITE NAME AND ADDRESS NAME AND ADDRESS OFGOVERNMENTAL UNIT DATE OF NOTICE ENVIRONMENTAL LAW Nonen b. List the name and address of every site for which the debtor provided notice to a governmental unit of a release of Hazardous Material.Indicate the governmental unit to which the notice was sent and the date of the notice. SITE NAME AND ADDRESS NAME AND ADDRESS OFGOVERNMENTAL UNIT DATE OF NOTICE ENVIRONMENTAL LAW Nonen c. List all judicial or administrative proceedings, including settlements or orders, under any Environmental Law with respect to which thedebtor is or was a party. Indicate the name and address of the governmental unit that is or was a party to the proceeding, and the docketnumber. NAME AND ADDRESS OFGOVERNMENTAL UNIT DOCKET NUMBER STATUS OR DISPOSITION 5 Software Copyright (c) 1996-2009 Best Case Solutions, Inc. - Evanston, IL - (800) 492-8037 Best Case Bankruptcy 18. Nature, location and name of businessNonen a. If the debtor is an individual, list the names, addresses, taxpayer identification numbers, nature of the businesses, and beginning andending dates of all businesses in which the debtor was an officer, director, partner, or managing executive of a corporation, partner in apartnership, sole proprietor, or was self-employed in a trade, profession, or other activity either full- or part-time within six yearsimmediately preceding the commencement of this case, or in which the debtor owned 5 percent or more of the voting or equity securitieswithin six years immediately preceding the commencement of this case. If the debtor is a partnership, list the names, addresses, taxpayer identification numbers, nature of the businesses, and beginning and endingdates of all businesses in which the debtor was a partner or owned 5 percent or more of the voting or equity securities, within six yearsimmediately preceding the commencement of this case. If the debtor is a corporation, list the names, addresses, taxpayer identification numbers, nature of the businesses, and beginning andending dates of all businesses in which the debtor was a partner or owned 5 percent or more of the voting or equity securities within sixyears immediately preceding the commencement of this case. NAME LAST FOUR DIGITS OFSOCIAL-SECURITY OROTHER INDIVIDUALTAXPAYER-I.D. NO.(ITIN)/ COMPLETE EIN ADDRESS NATURE OF BUSINESS BEGINNING ANDENDING DATESNonen b. Identify any business listed in response to subdivision a., above, that is “single asset real estate” as defined in 11 U.S.C. §101.NAME ADDRESS The following questions are to be completed by every debtor that is a corporation or partnership and by any individual debtor who isor has been, within six years immediately preceding the commencement of this case, any of the following: an officer, director, managingexecutive, or owner of more than 5 percent of the voting or equity securities of a corporation; a partner, other than a limited partner, of apartnership, a sole proprietor or self-employed in a trade, profession, or other activity, either full- or part-time. (An individual or joint debtor should complete this portion of the statement only if the debtor is or has been in business, as definedabove, within six years immediately preceding the commencement of this case. A debtor who has not been in business within those six yearsshould go directly to the signature page.) 19. Books, records and financial statementsNone¨ a. List all bookkeepers and accountants who within two years immediately preceding the filing of this bankruptcy case kept or supervisedthe keeping of books of account and records of the debtor. NAME AND ADDRESS DATES SERVICES RENDEREDJeff Dauer11465 Sunset Hills Rd5th FloorReston, VA 20190 None¨ b. List all firms or individuals who within the two years immediately preceding the filing of this bankruptcy case have audited the books ofaccount and records, or prepared a financial statement of the debtor. NAME ADDRESS DATES SERVICES RENDEREDPriceWaterhouse Coopers, LLC Attn: Chris Dietrick1800 Tysons Blvd.Me Lean, VA 22102 None¨ c. List all firms or individuals who at the time of the commencement of this case were in possession of the books of account and records ofthe debtor. If any of the books of account and records are not available, explain. NAME ADDRESSJeff Dauer 11465 Sunset Hills Road5th FloorReston, VA 20190 6 Software Copyright (c) 1996-2009 Best Case Solutions, Inc. - Evanston, IL - (800) 492-8037 Best Case Bankruptcy Nonen d. List all financial institutions, creditors and other parties, including mercantile and trade agencies, to whom a financial statement wasissued by the debtor within two years immediately preceding the commencement of this case. NAME AND ADDRESS DATE ISSUED 20. InventoriesNonen a. List the dates of the last two inventories taken of your property, the name of the person who supervised the taking of each inventory, and thedollar amount and basis of each inventory. DATE OF INVENTORY INVENTORY SUPERVISOR DOLLAR AMOUNT OF INVENTORY(Specify cost, market or other basis) Nonen b. List the name and address of the person having possession of the records of each of the two inventories reported in a., above. DATE OF INVENTORY NAME AND ADDRESSESOF CUSTODIAN OFINVENTORY RECORDS 21. Current Partners, Officers, Directors and ShareholdersNonen a. If the debtor is a partnership, list the nature and percentage of partnership interest of each member of the partnership. NAME AND ADDRESS NATURE OF INTEREST PERCENTAGE OF INTEREST None¨ b. If the debtor is a corporation, list all officers and directors of the corporation, and each stockholder who directly or indirectly owns,controls, or holds 5 percent or more of the voting or equity securities of the corporation. NAME AND ADDRESS TITLE NATURE AND PERCENTAGEOF STOCK OWNERSHIPComstock Homebuilding Companies, Inc.11465 Sunset Hills Rd.Suite 500Reston, VA 20190 manager sole member 22. Former partners, officers, directors and shareholdersNonen a. If the debtor is a partnership, list each member who withdrew from the partnership within one year immediately preceding thecommencement of this case. NAME ADDRESS DATE OF WITHDRAWAL Nonen b. If the debtor is a corporation, list all officers, or directors whose relationship with the corporation terminated within one year immediatelypreceding the commencement of this case. NAME AND ADDRESS TITLE DATE OF TERMINATION 23. Withdrawals from a partnership or distributions by a corporationNonen If the debtor is a partnership or corporation, list all withdrawals or distributions credited or given to an insider, including compensation inany form, bonuses, loans, stock redemptions, options exercised and any other perquisite during one year immediately preceding thecommencement of this case. NAME & ADDRESSOF RECIPIENT,RELATIONSHIP TO DEBTOR DATE AND PURPOSEOF WITHDRAWAL AMOUNT OF MONEYOR DESCRIPTION ANDVALUE OF PROPERTY 7 Software Copyright (c) 1996-2009 Best Case Solutions, Inc. - Evanston, IL - (800) 492-8037 Best Case Bankruptcy 24. Tax Consolidation Group.Nonen If the debtor is a corporation, list the name and federal taxpayer identification number of the parent corporation of any consolidated groupfor tax purposes of which the debtor has been a member at any time within six years immediately preceding the commencement of the case. NAME OF PARENT CORPORATION TAXPAYER IDENTIFICATION NUMBER (EIN) 25. Pension Funds.Nonen If the debtor is not an individual, list the name and federal taxpayer identification number of any pension fund to which the debtor, as anemployer, has been responsible for contributing at any time within six years immediately preceding the commencement of the case. NAME OF PENSION FUND TAXPAYER IDENTIFICATION NUMBER (EIN) 8 Software Copyright (c) 1996-2009 Best Case Solutions, Inc. - Evanston, IL - (800) 492-8037 Best Case Bankruptcy DECLARATION UNDER PENALTY OF PERJURY ON BEHALF OF CORPORATION OR PARTNERSHIPI declare under penalty of perjury that I have read the answers contained in the foregoing statement of financial affairs and any attachments thereto and thatthey are true and correct to the best of my knowledge, information and belief. Date November 25, 2009 Signature /s/ Christopher Clemente Christopher ClementeC.E.O., Comstock Homebuilding Companies, Inc., itsManager[An individual signing on behalf of a partnership or corporation must indicate position or relationship to debtor.]Penalty for making a false statement: Fine of up to $500,000 or imprisonment for up to 5 years, or both. 18 U.S.C. §§ 152 and 3571 9 Software Copyright (c) 1996-2009 Best Case Solutions, Inc. - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6A (Official Form 6A) (12/07) In re Post Preserve, LLC, Case No. 09-90335-mhm Debtor SCHEDULE A - REAL PROPERTYExcept as directed below, list all real property in which the debtor has any legal, equitable, or future interest, including all property owned as acotenant, community property, or in which the debtor has a life estate. Include any property in which the debtor holds rights and powers exercisable for thedebtor’s own benefit. If the debtor is married, state whether husband, wife, both, or the marital community own the property by placing an “H,” “W,” “J,” or“C” in the column labeled “Husband, Wife, Joint, or Community.” If the debtor holds no interest in real property, write “None” under “Description andLocation of Property.”Do not include interests in executory contracts and unexpired leases on this schedule. List them in Schedule G - Executory Contracts andUnexpired Leases.If an entity claims to have a lien or hold a secured interest in any property, state the amount of the secured claim. See Schedule D. If no entity claims tohold a secured interest in the property, write “None” in the column labeled “Amount of Secured Claim.” If the debtor is an individual or if a joint petition isfiled, state the amount of any exemption claimed in the property only in Schedule C - Property Claimed as Exempt, Description and Location of Property Nature of Debtor’sInterest in Property Husband,Wife,Joint, orCommunity Current Value ofDebtor’s Interest inProperty, withoutDeducting any SecuredClaim or Exemption Amount ofSecured Claim acreage, approximately 33 acres, Forsyth County, GA, parcelnumber 038 011 (book value = $3,182,026.00; tax assessedvalue = $1,476,450.00) fee simple — 3,182,026.00 3,190,811.05 Sub-Total > 3,182,026.00 (Total of this page) Total > 3,182,026.00 0 continuation sheets attached to the Schedule of Real Property (Report also on Summary of Schedules) Copyright (c) 1996-2009 - Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6B (Official Form 6B) (12/07) In re Post Preserve, LLC, Case No. 09-90335-mhm Debtor SCHEDULE B - PERSONAL PROPERTYExcept as directed below, list all personal property of the debtor of whatever kind. If the debtor has no property in one or more of the categories, placean “x” in the appropriate position in the column labeled “None.” If additional space is needed in any category, attach a separate sheet properly identifiedwith the case name, case number, and the number of the category. If the debtor is married, state whether husband, wife, both, or the marital community ownthe property by placing an “H,” “W,” “J,” or “C” in the column labeled “Husband, Wife, Joint, or Community.” If the debtor is an individual or a jointpetition is filed, state the amount of any exemptions claimed only in Schedule C - Property Claimed as Exempt.Do not list interests in executory contracts and unexpired leases on this schedule. List them in Schedule G - Executory Contracts and UnexpiredLeases.If the property is being held for the debtor by someone else, state that person’s name and address under “Description and Location of Property.” If theproperty is being held for a minor child, simply state the child’s initials and the name and address of the child’s parent or guardian, such as “A.B., a minorchild, by John Doe, guardian.” Do not disclose the child’s name. See, 11 U.S.C. §112 and Fed. R. Bankr. P. 1007(m). Type of Property NONE Description and Location of Property Husband,Wife,Joint, orCommunity Current Value ofDebtor’s Interest in Property,without Deducting anySecured Claim or Exemption1. Cash on hand X 2. Checking, savings or other financial accounts,certificates of deposit, or shares in banks,savings and loan, thrift, building and loan,and homestead associations, or credit unions,brokerage houses, or cooperatives. X 3. Security deposits with public utilities,telephone companies, landlords, and others. X 4. Household goods and furnishings, includingaudio, video, and computer equipment. X 5. Books, pictures and other art objects,antiques, stamp, coin, record, tape, compactdisc, and other collections or collectibles. X 6. Wearing apparel. X 7. Furs and jewelry. X 8. Firearms and sports, photographic, and otherhobby equipment. X 9. Interests in insurance policies. Nameinsurance company of each policy and itemizesurrender or refund value of each. X 10. Annuities. Itemize and name each issuer. X Sub-Total > 0.00(Total of this page) 2 continuation sheets attached to the Schedule of Personal Property Copyright (c) 1996-2009 - Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6B (Official Form 6B) (12/07) - Cont. In re Post Preserve, LLC, Case No. 09-90335-mhm Debtor SCHEDULE B - PERSONAL PROPERTY(Continuation Sheet) Type of Property NONE Description and Location of Property Husband,Wife,Joint, orCommunity Current Value of Debtor’sInterest in Property, withoutDeducting anySecured Claim or Exemption11. Interests in an education IRA as defined in26 U.S.C. § 530(b)(1) or under a qualifiedState tuition plan as defined in 26 U.S.C. §529(b)(l). Give particulars. (File separatelythe record(s) of any such interests). 11 U.S.C.§521 (c).) X 12. Interests in IRA, ERISA, Keogh, or otherpension or profit sharing plans. Giveparticulars. X 13. Stock and interests in incorporated andunincorporated businesses. Itemize. X 14. Interests in partnerships or joint ventures.Itemize. X 15. Government and corporate bonds and othernegotiable and nonnegotiable instruments. X 16. Accounts receivable. X 17. Alimony, maintenance, support, and propertysettlements to which the debtor is or may beentitled. Give particulars. X 18. Other liquidated debts owed to debtorincluding tax refunds. Give particulars. X 19. Equitable or future interests, life estates, andrights or powers exercisable for the benefit ofthe debtor other than those listed in ScheduleA - Real Property. X 20. Contingent and noncontingent interests inestate of a decedent, death benefit plan, lifeinsurance policy, or trust. X 21. Other contingent and unliquidated claims ofevery nature, including tax refunds,counterclaims of the debtor, and rights tosetoff claims. Give estimated value of each. X Sub-Total > 0.00(Total of this page) Sheet 1 of 2 continuation sheets attached to the Schedule of Personal Property Copyright (c) 1996-2009 - Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6B (Official Form 6B) (12/07) - Cont. In re Post Preserve, LLC, Case No. 09-90335-mhm Debtor SCHEDULE B - PERSONAL PROPERTY(Continuation Sheet) Type of Property NONE Description and Location of Property Husband,Wife,Joint, orCommunity Current Value of Debtor’sInterest in Property, withoutDeducting anySecured Claim or Exemption22. Patents, copyrights, and other intellectualproperty. Give particulars. X 23. Licenses, franchises, and other generalintangibles. Give particulars. X 24. Customer lists or other compilationscontaining personally identifiableinformation (as defined in 11 U.S.C.§ 101(41A)) provided to the debtor byindividuals in connection with obtaining aproduct or service from the debtorprimarily for personal, family, or householdpurposes. X 25. Automobiles, trucks, trailers, and othervehicles and accessories. X 26. Boats, motors, and accessories. X 27. Aircraft and accessories. X 28. Office equipment, furnishings, andsupplies. X 29. Machinery, fixtures, equipment, andsupplies used in business. X 30. Inventory. X 31. Animals. X 32. Crops - growing or harvested. Giveparticulars. X 33. Fanning equipment and implements. X 34. Farm supplies, chemicals, and feed. X 35. Other personal property of any kind notalready listed. Itemize. X Sub-Total > 0.00(Total of this page) Total > 0.00 Sheet 2 of 2 continuation sheets attached to the Schedule of Personal Property (Report also on Summary of Schedules) Copyright (c) 1996-2009 - Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6D (Official Form 6D) (12/07) In re Post Preserve, LLC, Case No. 09-90335-mhm Debtor SCHEDULE D - CREDITORS HOLDING SECURED CLAIMSState the name, mailing address, including zip code, and last four digits of any account number of all entities holding claims secured by property of thedebtor as of the date of filing of the petition. The complete account number of any account the debtor has with the creditor is useful to the trustee and thecreditor and may be provided if the debtor chooses to do so. List creditors holding all types of secured interests such as judgment liens, garnishments,statutory liens, mortgages, deeds of trust, and other security interests.List creditors in alphabetical order to the extent practicable. If a minor child is a creditor, the child’s initials and the name and address of the child’sparent or guardian, such as “A.B., a minor child, by John Doe, guardian.” Do not disclose the child’s name. See, 11 U.S.C. §112 and Fed. R. Bankr. P.1007(m). If all secured creditors will not fit on this page, use the continuation sheet provided.If any entity other than a spouse in a joint case may be jointly liable on a claim, place an “X” in the column labeled “Codebtor”, include the entity onthe appropriate schedule of creditors, and complete Schedule H - Codebtors. If a joint petition is filed, state whether the husband, wife, both of them, or themarital community may be liable on each claim by placing an “H”, “W”, “J”, or “C” in the column labeled “Husband, Wife, Joint, or Community”.If the claim is contingent, place an “X” in the column labeled “Contingent”. If the claim is unliquidated, place an “X” in the column labeled“Unliquidated”. If the claim is disputed, place an “X” in the column labeled “Disputed”. (You may need to place an “X” in more than one of these threecolumns.)Total the columns labeled “Amount of Claim Without Deducting Value of Collateral” and “Unsecured Portion, if Any” in the boxes labeled “Total(s)”on the last sheet of the completed schedule. Report the total from the column labeled “Amount of Claim” also on the Summary of Schedules and, if the debtoris an individual with primarily consumer debts, report the total from the column labeled “Unsecured Portion” on the Statistical Summary of CertainLiabilities and Related Data. ¨Check this box if debtor has no creditors holding secured claims to report on this Schedule D. CREDITOR’S NAMEAND MAILING ADDRESSINCLUDING ZIP CODE,AND ACCOUNT NUMBER(See instructions above.) CODEBTOR Husband, Wife, Joint, or Community CONTINGENT UNLIQUIDATED DISPUTED AMOUNT OFCLAIMWITHOUTDEDUCTINGVALUE OFCOLLATERAL UNSECUREDPORTION, IFANY HWJC DATE CLAIM WAS INCURRED,NATURE OF LIEN, ANDDESCRIPTION AND VALUEOF PROPERTYSUBJECT TO LIEN Account No. property taxes Forsyth CountyTax Commissioner1100 East Main StreetCumming, GA 30040 - acreage, approximately 33 acres, Forsyth County, GA,parcel number 038 011 (book value = $3,182,026.00; taxassessed value = $1,476,450.00) Value $3,182,026.00 14,090.05 8,785.05Account No. 08/11/2008 Mickey Thomas & Sons12195 Hwy 92Suite 114-214Woodstock, GA 30188 - Notice of Lien Filing Value $0.00 1,942.00 1,942.00Account No. additional notice address Mickey Thomas & Sons6065 Southard TraceSuite 106Woodstock, GA 30188 - Value $0.00 0.00 0.00Account No. 10/21/2009 Paramont Grading CompanyJohn Pearson, Registered Agent4405 Canton HwyCumming, GA 30040 X - judgment Value $0.00 307,855.21 307,855.21 Subtotal(Total of this page) 323,887.26 318,582.261 continuation sheets attached Copyright (c) 1996-2009 - Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6D (Official Form 6D) (12/07) - Cont. In re Post Preserve, LLC, Case No. 09-90335-mhm Debtor SCHEDULE D - CREDITORS HOLDING SECURED CLAIMS(Continuation Sheet) CREDITOR’S NAMEAND MAILING ADDRESSINCLUDING ZIP CODE,AND ACCOUNT NUMBER(See instructions.) CODEBTOR Husband, Wife, Joint, or Community CONTINGENT UNLIQUIDATED DISPUTED AMOUNT OFCLAIMWITHOUTDEDUCTINGVALUE OFCOLLATERAL UNSECUREDPORTION,IFANY HWJC DATE CLAIM WAS INCURRED,NATURE OF LIEN, ANDDESCRIPTION AND VALUEOF PROPERTYSUBJECT TO LIEN Account No. deed to secure debt RBC Builder FinanceAttn: Legal11011 Richmond Ave.; Suite 850Houston, TX 77042 X - acreage, approximately 33 acres, Forsyth County, GA,parcel number 038 011 (book value = $3,182,026.00; taxassessed value = $1,476,450.00) Value $3,182,026.00 3,176,721.00 0.00Account No. - additional notice address RBC Builder FinanceAttn: Jim McDunn301 Grant Street; Suite 4325Pittsburgh, PA 15219 Value $0.00 0.00 0.00Account No. - notice only S. Gregory Joy, Esq.Smith, Currie & Hancock LLP245 P’tree Cntr Ave NE; # 2700Atlanta, GA 30303-1227 Value $0.00 0.00 0.00Account No. Value $ Account No. Value $ Subtotal(Total of this page) 3,176,721.00 0.00 Total(Report on Summary of Schedules) 3,500,608.26 318,582.26Sheet 1 of 1 continuation sheets attached to Schedule of Creditors Holding Secured Claims Copyright (c) 1996-2009 - Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6E (Official Form 6E) (12/07) In re Post Preserve, LLC, Case No. 09-90335-mhm Debtor SCHEDULE E - CREDITORS HOLDING UNSECURED PRIORITY CLAIMSA complete list of claims entitled to priority, listed separately by type of priority, is to be set forth on the sheets provided. Only holders of unsecuredclaims entitled to priority should be listed in this schedule. In the boxes provided on the attached sheets, state the name, mailing address, including zip code,and last four digits of the account number, if any, of all entities holding priority claims against the debtor or the property of the debtor, as of the date of thefiling of the petition. Use a separate continuation sheet for each type of priority and label each with the type of priority.The complete account number of any account the debtor has with the creditor is useful to the trustee and the creditor and may be provided if the debtorchooses to do so. If a minor child is a creditor, state the child’s initials and the name and address of the child’s parent or guardian, such as “A.B., a minorchild, by John Doe, guardian.” Do not disclose the child’s name. See, 11 U.S.C. §112 and Fed. R. Bankr. P. 1007(m).If any entity other than a spouse in a joint case may be jointly liable on a claim, place an “X” in the column labeled “Codebtor,” include the entity onthe appropriate schedule of creditors, and complete Schedule H-Codebtors. If a joint petition is filed, state whether the husband, wife, both of them, or themarital community may be liable on each claim by placing an “H,” “W,” “J,” or “C” in the column labeled “Husband, Wife, Joint, or Community.” If theclaim is contingent, place an “X” in the column labeled “Contingent,” If the claim is unliquidated, place an “X” in the column labeled “Unliquidated.” If theclaim is disputed, place an “X” in the column labeled “Disputed.” (You may need to place an “X” in more than one of these three columns.)Report the total of claims listed on each sheet in the box labeled “Subtotals” on each sheet. Report the total of all claims listed on this Schedule E inthe box labeled “Total” on the last sheet of the completed schedule. Report this total also on the Summary of Schedules.Report the total of amounts entitled to priority listed on each sheet in the box labeled “Subtotals” on each sheet. Report the total of all amountsentitled to priority listed on this Schedule E in the box labeled “Totals” on the last sheet of the completed schedule. Individual debtors with primarilyconsumer debts report this total also on the Statistical Summary of Certain Liabilities and Related Data.Report the total of amounts not entitled to priority listed on each sheet in the box labeled “Subtotals” on each sheet. Report the total of all amounts notentitled to priority listed on this Schedule E in the box labeled “Totals” on the last sheet of the completed schedule. Individual debtors with primarilyconsumer debts report this total also on the Statistical Summary of Certain Liabilities and Related Data. ¢Check this box if debtor has no creditors holding unsecured priority claims to report on this Schedule E.TYPES OF PRIORITY CLAIMS (Check the appropriate box(es) below if claims in that category are listed on the attached sheets) ¨Domestic support obligationsClaims for domestic support that are owed to or recoverable by a spouse, former spouse, or child of the debtor, or the parent, legal guardian, orresponsible relative of such a child, or a governmental unit to whom such a domestic support claim has been assigned to the extent provided in 11 U.S.C.§507(a)(1). ¨Extensions of credit in an involuntary caseClaims arising in the ordinary course of the debtor’s business or financial affairs after the commencement of the case but before the earlier of theappointment of a trustee or the order for relief. 11 U.S.C. §507(a)(3). ¨Wages, salaries, and commissionsWages, salaries, and commissions, including vacation, severance, and sick leave pay owing to employees and commissions owing to qualifyingindependent sales representatives up to $10,950* per person earned within 180 days immediately preceding the filing of the original petition, or thecessation of business, whichever occurred first, to the extent provided in 11 U.S.C. § 507(a)(4). ¨Contributions to employee benefit plansMoney owed to employee benefit plans for services rendered within 180 days immediately preceding the filing of the original petition, or the cessationof business, whichever occurred first, to the extent provided in 11 U.S.C. §507(a)(5). ¨Certain farmers and fishermenClaims of certain farmers and fishermen, up to $5,400* per farmer or fisherman, against the debtor, as provided in 11 U.S.C. § 507(a)(6). ¨Deposits by individualsClaims of individuals up to $2,425* for deposits for the purchase, lease, or rental of property or services for personal, family, or household use, thatwere not delivered or provided. 11 U.S.C. § 507(a)(7). ¨Taxes and certain other debts owed to governmental unitsTaxes, customs duties, and penalties owing to federal, state, and local governmental units as set forth in 11 U.S.C. § 507(a)(8). ¨Commitments to maintain the capital of an insured depository institutionClaims based on commitments to the FDIC, RTC, Director of the Office of Thrift Supervision, Comptroller of the Currency, or Board of Governors ofthe Federal Reserve System, or their predecessors or successors, to maintain the capital of an insured depository institution. 11 U.S.C. §507(a)(9). ¨Claims for death or personal injury while debtor was intoxicated Claims for death or personal injury resulting from the operation of a motor vehicle or vessel while the debtor was intoxicated from using alcohol a drugor another substance. 11 U.S.C. § 507(a)(10). *Amounts are subject to adjustment on April 1, 2010, and every three years thereafter with respect to cases commenced on or after the date of adjustment.0 continuation sheets attached Copyright (c) 1996-2009 - Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6F (Official Form 6F) (12/07) In re Post Preserve, LLC, Case No. 09-90335-mhm Debtor SCHEDULE F - CREDITORS HOLDING UNSECURED NONPRIORITY CLAIMSState the name, mailing address, including zip code, and last four digits of any account number, of all entities holding unsecured claims withoutpriority against the debtor or the property of the debtor, as of the date of filing of the petition. The complete account number of any account the debtor haswith the creditor is useful to the trustee and the creditor and may be provided if the debtor chooses to do so. If a minor child is a creditor, state the child’sinitials and the name and address of the child’s parent or guardian, such as “A.B., a minor child, by John Doe, guardian.” Do not disclose the child’s name.See, 11 U.S.C. §112 and Fed. R. Bankr. P. 1007(m). Do not include claims listed in Schedules D and E. If all creditors will not fit on this page, use thecontinuation sheet provided.If any entity other than a spouse in a joint case may be jointly liable on a claim, place an “X” in the column labeled “Codebtor,” include the entity onthe appropriate schedule of creditors, and complete Schedule H - Codebtors. If a joint petition is filed, state whether the husband, wife, both of them, or themarital community may be liable on each claim by placing an “H,” “W,” “J,” or “C” in the column labeled “Husband, Wife, Joint, or Community.”If the claim is contingent, place an “X” in the column labeled “Contingent.” If the claim is unliquidated, place an “X” in the column labeled“Unliquidated.” If the claim is disputed, place an “X” in the column labeled “Disputed.” (You may need to place an “X” in more than one of these threecolumns.)Report the total of all claims listed on this schedule in the box labeled “Total” on the last sheet of the completed schedule. Report this total also on theSummary of Schedules and, if the debtor is an individual with primarily consumer debts, report this total also on the Statistical Summary of CertainLiabilities and Related Data. ¨Check this box if debtor has no creditors holding unsecured claims to report on this Schedule F. CREDITOR’S NAME,MAILING ADDRESSINCLUDING ZIP CODE,AND ACCOUNT NUMBER(See instructions above.) CODEBTOR Husband, Wife, Joint, or Community CONTINGENT UNLIQUIDATED DISPUTED AMOUNT OF CLAIM HWJC DATE CLAIM WAS INCURRED ANDCONSIDERATION FOR CLAIM. IF CLAIMIS SUBJECT TO SETOFF, SO STATE. Account No. account payable Atlantic Risk5850 Waterloo RoadNumber 240Columbia, MD 21045 - 175.00Account No. account payable Builders Design & Leasing Inc.7601 Lindbergh DriveGaithersburg, MD 20879 - 551.00Account No. account payable Forsyth County110 East Main StreetCumming, GA 30040 - 500.00Account No. account payable Forsyth County Water Dept.PO Box 100003Cumming, GA 30028-8303 - 176.00 Subtotal(Total of this page) 1,402.001 continuation sheets attached Copyright (c) 1996-2009 - Best Case Solutions - Evanston, IL - (800) 492-8037 S/N:21149-091118 Best Case Bankruptcy B6F (Official Form 6F) (12/07) - Cont. In re Post Preserve, LLC, Case No. 09-90335-mhm Debtor SCHEDULE F - CREDITORS HOLDING UNSECURED NONPRIORITY CLAIMS(Continuation Sheet) CREDITOR’S NAME,MAILING ADDRESSINCLUDING ZIP CODE,AND ACCOUNT NUMBER(See instructions above.) CODEBTOR Husband, Wife, Joint, or Community CONTINGENT UNLIQUIDATED DISPUTED AMOUNT OF CLAIM HWJC DATE CLAIM WAS INCURRED ANDCONSIDERATION FOR CLAIM. IF CLAIMIS SUBJECT TO SETOFF, SO STATE. Account No. - account payable Mason Bahr, LLPAttn: Chip CarterTwo Ravinia Drive; Suite 610Atlanta, GA 30346 6,568.75Account No. - account payable Sawnee EMCPO Box 2153Birmingham, AL 35287-2530 28.34Account No. - account payable The Erosion Company, Inc.PO Box 740209Atlanta, GA 30374-0209 303.90Account No. - account payable Travelers Casualty & SuretyCo. of AmericaOne Tower SquareHartford, CT 06183-9062 UnknownAccount No. - account payable William Scotsman, Inc.PO Box 91975Chicago, IL 60693-1975 5,544.75 Subtotal(Total of this page) 12,445.74 Total(Report on Summary of Schedules) 13,847.74Sheet no. 1 of 1 sheets attached to Schedule of Creditors Holding Unsecured Nonpriority Claims Copyright (c) 1996-2009 - Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6G (Official Form 6G) (12/07) In re Post Preserve, LLC, Case No. 09-90335-mhm Debtor SCHEDULE G - EXECUTORY CONTRACTS AND UNEXPIRED LEASESDescribe all executory contracts of any nature and all unexpired leases of real or personal property. Include any timeshare interests. State nature of debtor’sinterest in contract, i.e., “Purchaser”, “Agent”, etc. State whether debtor is the lessor or lessee of a lease. Provide the names and complete mailing addresses ofall other parties to each lease or contract described, If a minor child is a party to one of the leases or contracts, state the child’s initials and the name andaddress of the child’s parent or guardian, such as “A.B., a minor child, by John Doe, guardian.” Do not disclose the child’s name. See, 11 U.S.C. §112 and Fed.R. Bankr. P. 1007(m).n Check this box if debtor has no executory contracts or unexpired leases. Name and Mailing Address, Including Zip Code,of Other Parties to Lease or Contract Description of Contract or Lease and Nature of Debtor’s Interest.State whether lease is for nonresidential real property.State contract number of any government contract. 0 continuation sheets attached to Schedule of Executory Contracts and Unexpired Leases Copyright (c) 1996-2009 - Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6H (Official Form 6H) (12/07) In re Post Preserve, LLC, Case No. 09-90335-mhm Debtor SCHEDULE H - CODEBTORSProvide the information requested concerning any person or entity, other than a spouse in a joint case, that is also liable on any debts listed by debtorin the schedules of creditors. Include all guarantors and co-signers. If the debtor resides or resided in a community property state, commonwealth, or territory(including Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Puerto Rico, Texas, Washington, or Wisconsin) within the eight year periodimmediately preceding the commencement of the case, identify the name of the debtor’s spouse and of any former spouse who resides or resided with thedebtor in the community property state, commonwealth, or territory. Include all names used by the nondebtor spouse during the eight years immediatelypreceding the commencement of this case. If a minor child is a codebtor or a creditor, state the child’s initials and the name and address of the child’s parentor guardian, such as “A.B., a minor child, by John Doe, guardian.” Do not disclose the child’s name. See, 11 U.S.C. §112 and Fed. R. Bankr. P. 1007(m).¨ Check this box if debtor has no codebtors. NAME AND ADDRESS OF CODEBTOR NAME AND ADDRESS OF CREDITORAndrew W. Chandler126 N. Rantun CourtNorcross, GA 30071 RBC Builder FinanceAttn: Legal11011 Richmond Ave.; Suite 850Houston, TX 77042James B. Parker, Jr.2105 Woodfalls DriveCumming, GA 30041 RBC Builder FinanceAttn: Legal11011 Richmond Ave.; Suite 850Houston, TX 77042Parker Chandler Homes, LLC11465 Sunset Hills RdSuite 500Suwanee, GA 30024 RBC Builder FinanceAttn: Legal11011 Richmond Ave.; Suite 850Houston, TX 77042Parker Chandler Homes, LLC11465 Sunset Hills RdSuite 500Suwanee, GA 30024 Paramont Grading CompanyJohn Pearson, Registered Agent4405 Canton HwyCumming, GA 300400 continuation sheets attached to Schedule of Codebtors Copyright (c) 1996-2009 - Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy United States Bankruptcy CourtNorthern District of Georgia, Atlanta Division In re Post Preserve, LLC Case No. 09-90335-mhm Debtor(s) Chapter 7DISCLOSURE OF COMPENSATION OF ATTORNEY FOR DEBTOR(S) 1.Pursuant to 11 U.S.C. § 329(a) and Bankruptcy Rule 2016(b), I certify that I am the attorney for the above-named debtor and that compensation paid tome within one year before the filing of the petition in bankruptcy, or agreed to be paid to me, for services rendered or to be rendered on behalf of thedebtor(s) in contemplation of or in connection with the bankruptcy case is as follows: For legal services, I have agreed to accept $3,000.00Prior to the filing of this statement I have received $3,000.00Balance Due $0.00 2.$ 299.00 of the filing fee has been paid. 3.The source of the compensation paid to me was:¨ Debtor n Other (specify): Comstock Homes of Atlanta, LLC 4.The source of compensation to be paid to me is:n Debtor ¨ Other (specify): 5.n I have not agreed to share the above-disclosed compensation with any other person unless they are members and associates of my law firm. ¨I have agreed to share the above-disclosed compensation with a person or persons who are not members or associates of my law firm. A copy ofthe agreement, together with a list of the names of the people sharing in the compensation is attached. 6.In return for the above-disclosed fee, I have agreed to render legal service for all aspects of the bankruptcy case, including: a.Analysis of the debtor’s financial situation, and rendering advice to the debtor in determining whether to file a petition in bankruptcy; b.Preparation and filing of any petition, schedules, statement of affairs and plan which may be required; c.Representation of the debtor at the meeting of creditors and confirmation hearing, and any adjourned hearings thereof; d.[Other provisions as needed] 7.By agreement with the debtor(s), the above-disclosed fee does not include the following service:representation of the debtor(s) in adversary proceedings.CERTIFICATIONI certify that the foregoing is a complete statement of any agreement or arrangement for payment to me for representation of the debtor(s) in thisbankruptcy proceeding. Dated: November 25, 2009 /s/ Paul Reece Marr Paul Reece MarrPaul Reece Marr, P.C.Suite 960300 Galleria ParkwayAtlanta, GA 30339(770) 984-2255pmarr@mindspring.com Software Copyright (c) 1996-2009 Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6 Summary (Official Form 6 - Summary) (12/07)United States Bankruptcy CourtNorthern District of Georgia, Atlanta Division In re Post Preserve, LLC, Case No. 09-90335-mhm Debtor Chapter 7SUMMARY OF SCHEDULESIndicate as to each schedule whether that schedule is attached and state the number of pages in each. Report the totals from Schedules A, B, D, E, F, I, and J inthe boxes provided. Add the amounts from Schedules A and B to determine the total amount of the debtor’s assets. Add the amounts of all claims fromSchedules D, E, and F to determine the total amount of the debtor’s liabilities. Individual debtors must also complete the “Statistical Summary of CertainLiabilities and Related Data” if they file a case under chapter 7, 11, or 13. NAME OF SCHEDULE ATTACHED(YES/NO) NO. OFSHEETS ASSETS LIABILITIES OTHERA - Real Property Yes 1 3,182,026.00 B - Personal Property Yes 3 0.00 C - Property Claimed as Exempt No 0 D - Creditors Holding Secured Claims Yes 2 3,500,608.26 E - Creditors Holding Unsecured Priority Claims (Total of Claims on Schedule E) Yes 1 0.00 F - Creditors Holding Unsecured Nonpriority Claims Yes 2 13,847.74 G - Executory Contracts and Unexpired Leases Yes 1 H - Codebtors Yes 1 I - Current Income of Individual Debtor(s) No 0 N/AJ - Current Expenditures of Individual Debtor(s) No 0 N/ATotal Number of Sheets of ALL Schedules 11 Total Assets 3,182,026.00 Total Liabilities 3,514,456.00 Copyright (c) 1996-2009 - Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy Form 6 - Statistical Summary (12/07)United States Bankruptcy CourtNorthern District of Georgia, Atlanta Division In re Post Preserve, LLC, Case No. 09-90335-mhm Debtor Chapter 7STATISTICAL SUMMARY OF CERTAIN LIABILITIES AND RELATED DATA (28 U.S.C. § 159)If you are an individual debtor whose debts are primarily consumer debts, as defined in § 101(8) of the Bankruptcy Code (11 U.S.C. § 101(8)), filing a caseunder chapter 7, 11 or 13, you must report all information requested below. ¨Check this box if you are an individual debtor whose debts are NOT primarily consumer debts. You are not required to report any informationhere.This information is for statistical purposes only under 28 U.S.C. § 159.Summarize the following types of liabilities, as reported in the Schedules, and total them. Type of Liability Amount Domestic Support Obligations (from Schedule E) Taxes and Certain Other Debts Owed to Governmental Units (from Schedule E) Claims for Death or Personal Injury While Debtor Was Intoxicated (from Schedule E) (whether disputed or undisputed) Student Loan Obligations (from Schedule F) Domestic Support, Separation Agreement, and Divorce Decree Obligations Not Reported on Schedule E Obligations to Pension or Profit-Sharing, and Other Similar Obligations (from Schedule F) TOTAL State the following: Average Income (from Schedule I, Line 16) Average Expenses (from Schedule J, Line 18) Current Monthly Income (from Form 22A Line 12; OR, Form 22B Line 11; OR, Form 22C Line 20 ) State the following: 1. Total from Schedule D, “UNSECURED PORTION, IF ANY” column 2. Total from Schedule E, “AMOUNT ENTITLED TO PRIORITY” column 3. Total from Schedule E, “AMOUNT NOT ENTITLED TO PRIORITY, IF ANY” column 4. Total from Schedule F 5. Total of non-priority unsecured debt (sum of 1, 3, and 4) Copyright (c) 1996-2009 - Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6 Declaration (Official Form 6 - Declaration). (12/07)United States Bankruptcy CourtNorthern District of Georgia, Atlanta Division In re Post Preserve, LLC Case No. 09-90335-mhm Debtor(s) Chapter 7DECLARATION CONCERNING DEBTOR’S SCHEDULESDECLARATION UNDER PENALTY OF PERJURY ON BEHALF OF CORPORATION OR PARTNERSHIPI, the C.E.O., Comstock Homebuilding Companies, Inc., its Manager of the corporation named as debtor in this case, declare under penalty of perjurythat I have read the foregoing summary and schedules, consisting of 13 sheets, and that they are true and correct to the best of my knowledge, information,and belief. Date November 25, 2009 Signature /s/ Christopher Clemente Christopher ClementeC.E.O., Comstock Homebuilding Companies, Inc., itsManagerPenalty for making a false statement or concealing property: Fine of up to $500,000 or imprisonment for up to 5 years or both.18 U.S.C. §§ 152 and 3571. Software Copyright (c) 1996-2009 Best Case Solutions, Inc. - Evanston, IL - (800) 492-8037 Best Case Bankruptcy United States Bankruptcy CourtNorthern District of Georgia, Atlanta Division In re Post Preserve, LLC Case No. 09-90335-mhm Debtor(s) Chapter 7CORPORATE OWNERSHIP STATEMENT (RULE 7007.1)Pursuant to Federal Rule of Bankruptcy Procedure 7007.1 and to enable the Judges to evaluate possible disqualification or recusal, the undersigned counselfor Post Preserve, LLC in the above captioned action, certifies that the following is a (are) corporation(s), other than the debtor or a governmental unit, thatdirectly or indirectly own(s) 10% or more of any class of the corporation’s(s’) equity interests, or states that there are no entities to report under FRBP 7007.1:Comstock HomebuildingCompanies, Inc.11465 Sunset Hills Rd; 5th FlrReston, VA 20190¨ None [Check if applicable] November 25, 2009 /s/ Paul Reece MarrDate Paul Reece MarrSignature of Attorney or LitigantCounsel for Post Preserve, LLCPaul Reece Marr, P.C.Suite 960300 Galleria ParkwayAtlanta, GA 30339(770) 984-2255pmarr@mindspring.com Software Copyright (c) 1996-2009 Best Case Solutions, Inc. - Evanston, IL - (800) 492-8037 Best Case Bankruptcy SUPPLEMENTAL MATRIXS. Gregory Joy, Esq.Smith, Currie & Hancock LLP245 P’tree Cntr Ave NE; # 2700Atlanta, GA 30303-1227Travelers Casualty & SuretyCo. of AmericaOne Tower SquareHartford, CT 06183-9062 UNITED STATES BANKRUPTCY COURTNORTHERN DISTRICT OF GEORGIAATLANTA DIVISION In re: : Case No. 09-90335-MHM : POST PRESERVE, LLC, : Chapter 7 : Debtor. : : CERTIFICATE OF SERVICEI, Paul Reece Marr, certify that I am over the age of 18 and that on the below referenced date I served a copy of the attached STATEMENT OFFINANCIAL AFFAIRS, SCHEDULES, AND SUPPLEMENTAL MATRIX by first class U.S. Mail, with adequate postage prepaid on the following persons orentities at the addresses stated on the attached list:Martha A. MillerMartha A. Miller, PC229 Peachtree Street, NESuite 2415Atlanta, GA 30303This the 25 day of November, 2009. /s/ Paul Reece MarrPaul Reece MarrPaul Reece Marr, P.C.300 Galleria Pkwy; Ste 960Atlanta, GA 30339770/984-2255 –2–th Exhibit 10.84UNITED STATES BANKRUPTCY COURTNORTHERN DISTRICT OF GEORGIAATLANTA DIVISION In re: : Case No. 09-90334-MHM : PARKER CHANDLER HOMES, LLC, : Chapter 7 : Debtor. : : DEBTOR’S STATEMENT OF FINANCIAL AFFAIRS, SCHEDULES, ANDSUPPLEMENTAL MATRIXParker Chandler Homes, LLC, “Debtor” herein, hereby files its STATEMENT OF FINANCIAL AFFAIRS, SCHEDULES, AND SUPPLEMENTALMATRIX. Prepared and submitted by:PAUL REECE MARR, P.C.Debtor’s counselBy: /s/ Paul Reece Marr Paul Reece Marr GA Bar #471230Suite 960300 Galleria Parkway, N.W.Atlanta, GA 30339770/984-2255 –1– B7 (Official Form 7) (12/07)United States Bankruptcy CourtNorthern District of Georgia, Atlanta Division In re Parker Chandler Homes, LLC Case No. Debtor(s) Chapter 7STATEMENT OF FINANCIAL AFFAIRSThis statement is to be completed by every debtor. Spouses filing a joint petition may file a single statement on which the information for both spousesis combined. If the case is filed under chapter 12 or chapter 13, a married debtor must furnish information for both spouses whether or not a joint petition isfiled, unless the spouses are separated and a joint petition is not filed. An individual debtor engaged in business as a sole proprietor, partner, family farmer, orself-employed professional, should provide the information requested on this statement concerning all such activities as well as the individual’s personalaffairs. To indicate payments, transfers and the like to minor children, state the child’s initials and the name and address of the child’s parent or guardian,such as “A.B., a minor child, by John Doe, guardian.” Do not disclose the child’s name. See, 11 U.S.C. § 112; Fed. R. Bankr. P. 1007(m).Questions 1 - 18 are to be completed by all debtors. Debtors that are or have been in business, as defined below, also must complete Questions 19 - 25.If the answer to an applicable question is “None,” mark the box labeled “None.” If additional space is needed for the answer to any question, use andattach a separate sheet properly identified with the case name, case number (if known), and the number of the question.DEFINITIONS“In business.” A debtor is “in business” for the purpose of this form if the debtor is a corporation or partnership. An individual debtor is “in business”for the purpose of this form if the debtor is or has been, within six years immediately preceding the filing of this bankruptcy case, any of the following: anofficer, director, managing executive, or owner of 5 percent or more of the voting or equity securities of a corporation; a partner, other than a limited partner,of a partnership; a sole proprietor or self-employed full-time or part-time. An individual debtor also may be “in business” for the purpose of this form if thedebtor engages in a trade, business, or other activity, other than as an employee, to supplement income from the debtor’s primary employment.“Insider,” The term “insider” includes but is not limited to: relatives of the debtor; general partners of the debtor and their relatives; corporations ofwhich the debtor is an officer, director, or person in control; officers, directors, and any owner of 5 percent or more of the voting or equity securities of acorporate debtor and their relatives; affiliates of the debtor and insiders of such affiliates; any managing agent of the debtor. 11 U.S.C. § 101. 1. Income from employment or operation of businessNone¨ State the gross amount of income the debtor has received from employment, trade, or profession, or from operation of the debtor’s business,including part-time activities either as an employee or in independent trade or business, from the beginning of this calendar year to the datethis case was commenced. State also the gross amounts received during the two years immediately preceding this calendar year. (A debtorthat maintains, or has maintained, financial records on the basis of a fiscal rather than a calendar year may report fiscal year income. Identifythe beginning and ending dates of the debtor’s fiscal year.) If a joint petition is filed, state income for each spouse separately. (Marrieddebtors filing under chapter 12 or chapter 13 must state income of both spouses whether or not a joint petition is filed, unless the spousesare separated and a joint petition is not filed.) AMOUNT SOURCE $0.00 2009 year to Petition Date total revenue $4,854,694.00 2008 total revenue $19,322,461.00 2007 total revenue Software Copyright (c) 1996-2009 Best Case Solutions, Inc. - Evanston, IL - (800) 492-8037 Best Case Bankruptcy 2. Income other than from employment or operation of businessNonex State the amount of income received by the debtor other than from employment, trade, profession, or operation of the debtor’s businessduring the two years immediately preceding the commencement of this case. Give particulars. If a joint petition is filed, state income foreach spouse separately. (Married debtors filing under chapter 12 or chapter 13 must state income for each spouse whether or not a jointpetition is filed, unless the spouses are separated and a joint petition is not filed.) AMOUNT SOURCE 3. Payments to creditorsNonex Complete a. or b., as appropriate, and c. a. Individual or joint debtor(s) with primarily consumer debts. List all payments on loans, installment purchases of goods or services, andother debts to any creditor made within 90 days immediately preceding the commencement of this case unless the aggregate value of allproperty that constitutes or is affected by such transfer is less than $600. Indicate with an (*) any payments that were made to a creditor onaccount of a domestic support obligation or as part of an alternative repayment schedule under a plan by an approved nonprofit budgetingand creditor counseling agency, (Married debtors filing under chapter 12 or chapter 13 must include payments by either or both spouseswhether or not a joint petition is filed, unless the spouses are separated and a joint petition is not filed.) NAME AND ADDRESSOF CREDITOR DATES OFPAYMENTS AMOUNT PAID AMOUNT STILLOWING Nonex b. Debtor whose debts are not primarily consumer debts: List each payment or other transfer to any creditor made within 90 daysimmediately preceding the commencement of the case unless the aggregate value of all property that constitutes or is affected by suchtransfer is less than $5,475. If the debtor is an individual, indicate with an asterisk (*) any payments that were made to a creditor on accountof a domestic support obligation or as part of an alternative repayment schedule under a plan by an approved nonprofit budgeting andcreditor counseling agency. (Married debtors filing under chapter 12 or chapter 13 must include payments by either or both spouses whetheror not a joint petition is filed, unless the spouses are separated and a joint petition is not filed.) NAME AND ADDRESS OFCREDITOR DATES OFPAYMENTS/TRANSFERS AMOUNTPAID ORVALUE OFTRANSFERS AMOUNT STILLOWING Nonex c. All debtors: List all payments made within one year immediately preceding the commencement of this case to or for the benefit ofcreditors who are or were insiders. (Married debtors filing under chapter 12 or chapter 13 must include payments by either or both spouseswhether or not a joint petition is filed, unless the spouses are separated and a joint petition is not filed.) NAME AND ADDRESS OFCREDITOR AND RELATIONSHIPTO DEBTOR DATE OF PAYMENT AMOUNT PAID AMOUNT STILL OWING 4. Suits and administrative proceedings, executions, garnishments and attachmentsNone¨ a. List all suits and administrative proceedings to which the debtor is or was a party within one year immediately preceding the filing of thisbankruptcy case. (Married debtors filing under chapter 12 or chapter 13 must include information concerning either or both spouses whetheror not a joint petition is filed, unless the spouses are separated and a joint petition is not filed.) CAPTION OF SUITAND CASE NUMBER NATURE OF PROCEEDING COURT OR AGENCYAND LOCATION STATUS ORDISPOSITIONAtlanta CommunitiesMagazine, Inc. vs. ComstockHomes of Atlanta, LLC, cvno. 08C20804 1 suit on account State Court of GwinnettCounty, GA filed 12/08/2008Comstock Homes of Atlanta,LLC v. R. Jerry Thacker, cvno. 07-3400-EM business dispute Superior Court of CherokeeCounty, GA filed 11/26/2007Landmark DesignAssociates, LLC vs.Comstock Homes of Atlanta,Inc., cv no. 08C163656 complaint on account State Court of GwinnettCounty, GA filed 09/30/2008 2 Software Copyright (c) 1996-2009 Best Case Solutions, Inc. - Evanston, IL - (800) 492-8037 Best Case Bankruptcy CAPTION OF SUITAND CASE NUMBER NATURE OF PROCEEDING COURT OR AGENCYAND LOCATION STATUS OR DISPOSITIONNew South Publishing, Inc.vs. Comstock Homes ofAtlanta, LLC, cvno. 09C04613-1 complaint on account State Court of GwinnettCounty, GA filed 03/19/2009Paramont Grading Companyvs. Comstock Homes ofAtlanta, LLC andPost Preserve, LLC,case no. 07A-10018-8 business dispute Gwinnett County, GASuperior Court judgment dated 10/21/2009ProBuild South, LLC vs.Comstock Homes of Atlanta, LLC, caseno. 09C-04512-2 business dispute Gwinnett County, GA StateCourt judgment dated 10/28/2009Robert Bowden, Inc. vs.Comstock Homes of Atlanta,LLC as successor ofParker-Chandler Homes, Inc.and James B. Parker, Jr.,case no. 08-A-18948-1 complaint on account and personalguaranty State Court of Cobb County, GA judgment dated 7/6/2009Signature Communities, LLCand Signature Communitiesat High Grove, LLC,Appelants, v Parker-Chandler Homes, Inc.n/k/a Comstock Homes ofAtlanta, LLC, Andrew H.Chandler, Jr. and James B.Parker, Appellees,No. A09A0924 business dispute Court of Appeals of GA Appellate Court held forDefendantsStuart Mechancial Service,Inc. vs. Comstock Homes ofAtlanta, LLC,cv no. 09C-03545-5 complaint on account Gwinnett County State Court judgment dated 7/9/2009Tabas, LLLP vs. ComstockHomes of Atlanta, LLC,case no. 07A-09201 8 Complaint for Specific Performanceof Contract and Damages Gwinnett County, GASuperior Court judgment dated 6/10/2009The Lamar Companies vs. ComstockHomes of Atlanta, LLC,cv no. 08C182295 complaint on account State Court of GwinnettCounty, GA filed 10/27/2008 Nonex b. Describe all property that has been attached, garnished or seized under any legal or equitable process within one year immediatelypreceding the commencement of this case. (Married debtors filing under chapter 12 or chapter 13 must include information concerningproperty of either or both spouses whether or not a joint petition is filed, unless the spouses are separated and a joint petition is not filed.) NAME AND ADDRESS OF PERSON FORWHOSE BENEFIT PROPERTY WAS SEIZED DATE OF SEIZURE DESCRIPTION AND VALUE OFPROPERTY 3 Software Copyright (c) 1996-2009 Best Case Solutions, Inc. - Evanston, IL - (800) 492-8037 Best Case Bankruptcy 5. Repossessions, foreclosures and returnsNone¨ List all property that has been repossessed by a creditor, sold at a foreclosure sale, transferred through a deed in lieu of foreclosure orreturned to the seller, within one year immediately preceding the commencement of this case. (Married debtors filing under chapter 12 orchapter 13 must include information concerning property of either or both spouses whether or not a joint petition is filed, unless the spousesare separated and a joint petition is not filed.) NAME AND ADDRESS OFCREDITOR OR SELLER DATE OF REPOSSESSION,FORECLOSURE SALE,TRANSFER OR RETURN DESCRIPTION AND VALUE OFPROPERTYBank of Americac/o Valerie L. Combs, Esq.Troutman Sanders LLPSuite 5200; 600 P’tree Street, NEAtlanta, GA 30308 12/04/2008 various lots in Brentwood Estates and SenatorsRidge Subdvisions, Jackson County, GA[aggregate foreclosure sale price = $491,988.00;estimated aggregate secured debt =$1,453,508.00]Branch Banking & Trust Co.c/o Courington & Chisholm, PCkathleen Horne, Esq.17 West McDonough StreetSavannah, GA 31401 09/02/2008 various lots in Settindown, Maristone, GlennIvey, and Wyngate Subdivisions, ForsythCounty, GA [estimated aggregate fair marketvalue = $6,898,500.00; estimated aggregatesecured debt = $12,837,128.00]Regions Bank,c/o Bryan T. Glover, Esq.Burr & Forman, L.L.P.Suite 1100; 171 17th StreetAtlanta, GA 30363 09/02/2008 8.50 acres, Forsyth County, GA [estimated fairmarket value = $264,000.00; secured debt =$699,774.00] 6. Assignments and receivershipsNonex a. Describe any assignment of property for the benefit of creditors made within 120 days immediately preceding the commencement of thiscase. (Married debtors filing under chapter 12 or chapter 13 must include any assignment by either or both spouses whether or not a jointpetition is filed, unless the spouses are separated and a joint petition is not filed.) NAME AND ADDRESS OF ASSIGNEE DATE OFASSIGNMENT TERMS OF ASSIGNMENT OR SETTLEMENT Nonex b. List all property which has been in the hands of a custodian, receiver, or court-appointed official within one year immediately precedingthe commencement of this case. (Married debtors filing under chapter 12 or chapter 13 must include information concerning property ofeither or both spouses whether or not a joint petition is filed, unless the spouses are separated and a joint petition is not filed.) NAME AND ADDRESSOF CUSTODIAN NAME AND LOCATIONOF COURTCASE TITLE & NUMBER DATE OFORDER DESCRIPTION AND VALUE OFPROPERTY 7. GiftsNonex List all gifts or charitable contributions made within one year immediately preceding the commencement of this case except ordinary andusual gifts to family members aggregating less than $200 in value per individual family member and charitable contributions aggregatingless than $100 per recipient. (Married debtors filing under chapter 12 or chapter 13 must include gifts or contributions by either or bothspouses whether or not a joint petition is filed, unless the spouses are separated and a joint petition is not filed.) 4 Software Copyright (c) 1996-2009 Best Case Solutions, Inc. - Evanston, IL - (800) 492-8037 Best Case Bankruptcy NAME AND ADDRESS OFPERSON OR ORGANIZATION RELATIONSHIP TODEBTOR, IF ANY DATE OF GIFT DESCRIPTION ANDVALUE OF GIFT 8. LossesNonex List all losses from fire, theft, other casualty or gambling within one year immediately preceding the commencement of this case or sincethe commencement of this case. (Married debtors filing under chapter 12 or chapter 13 must include losses by either or both spouseswhether or not a joint petition is filed, unless the spouses are separated and a joint petition is not filed.) DESCRIPTION AND VALUEOF PROPERTY DESCRIPTION OF CIRCUMSTANCES AND,IF LOSS WAS COVERED IN WHOLE OR INPART BY INSURANCE, GIVE PARTICULARS DATE OF LOSS 9. Payments related to debt counseling or bankruptcyNone¨ List all payments made or property transferred by or on behalf of the debtor to any persons, including attorneys, for consultation concerningdebt consolidation, relief under the bankruptcy law or preparation of the petition in bankruptcy within one year immediately preceding thecommencement of this case. NAME AND ADDRESSOF PAYEE DATE OF PAYMENT,NAME OF PAYOR IF OTHERTHAN DEBTOR AMOUNT OF MONEYOR DESCRIPTION AND VALUEOF PROPERTYPaul Reece Marr, P.C.Suite 960300 Galleria ParkwayAtlanta, GA 30339 04/21/2009 $3,000.00 attorney fee +$299.00 filing fee 10. Other transfersNone¨ a. List all other property, other than property transferred in the ordinary course of the business or financial affairs of the debtor, transferredeither absolutely or as security within two years immediately preceding the commencement of this case. (Married debtors filing underchapter 12 or chapter 13 must include transfers by either or both spouses whether or not a joint petition is filed, unless the spouses areseparated and a joint petition is not filed.) NAME AND ADDRESS OF TRANSFEREE,RELATIONSHIP TO DEBTOR DATE DESCRIBE PROPERTY TRANSFERREDAND VALUE RECEIVEDvarious the debtor sold various properties to thirdparties in the ordinary course of business duringthe referenced time period Nonex b. List all property transferred by the debtor within ten years immediately preceding the commencement of this case to a self-settled trust orsimilar device of which the debtor is a beneficiary. NAME OF TRUST OR OTHERDEVICE DATE(S) OFTRANSFER(S) AMOUNT OF MONEY OR DESCRIPTION ANDVALUE OF PROPERTY OR DEBTOR’SINTEREST IN PROPERTY 11. Closed financial accountsNonex List all financial accounts and instruments held in the name of the debtor or for the benefit of the debtor which were closed, sold, orotherwise transferred within one year immediately preceding the commencement of this case. Include checking, savings, or other financialaccounts, certificates of deposit, or other instruments; shares and share accounts held in banks, credit unions, pension funds, cooperatives,associations, brokerage houses and other financial institutions. (Married debtors filing under chapter 12 or chapter 13 must includeinformation concerning accounts or instruments held by or for either or both spouses whether or not a joint petition is filed, unless thespouses are separated and a joint petition is not filed.) 5 Software Copyright (c) 1996-2009 Best Case Solutions, Inc. - Evanston, IL - (800) 492-8037 Best Case Bankruptcy NAME AND ADDRESS OF INSTITUTION TYPE OF ACCOUNT, LAST FOURDIGITS OF ACCOUNT NUMBER,AND AMOUNT OF FINAL BALANCE AMOUNT AND DATE OF SALEOR CLOSING 12. Safe deposit boxesNonex List each safe deposit or other box or depository in which the debtor has or had securities, cash, or other valuables within one yearimmediately preceding the commencement of this case. (Married debtors filing under chapter 12 or chapter 13 must include boxes ordepositories of either or both spouses whether or not a joint petition is filed, unless the spouses are separated and a joint petition is notfiled.) NAME AND ADDRESS OF BANKOR OTHER DEPOSITORY NAMES AND ADDRESSESOF THOSE WITH ACCESSTO BOX OR DEPOSITORY DESCRIPTIONOF CONTENTS DATE OF TRANSFER ORSURRENDER, IF ANY 13. SetoffsNonex List all setoffs made by any creditor, including a bank, against a debt or deposit of the debtor within 90 days preceding the commencementof this case. (Married debtors filing under chapter 12 or chapter 13 must include information concerning either or both spouses whether ornot a joint petition is filed, unless the spouses are separated and a joint petition is not filed.) NAME AND ADDRESS OF CREDITOR DATE OF SETOFF AMOUNT OF SETOFF 14. Property held for another personNonex List all property owned by another person that the debtor holds or controls. NAME AND ADDRESS OF OWNER DESCRIPTION AND VALUE OF PROPERTY LOCATION OF PROPERTY 15. Prior address of debtorNone¨ If the debtor has moved within three years immediately preceding the commencement of this case, list all premises which the debtoroccupied during that period and vacated prior to the commencement of this case. If a joint petition is filed, report also any separate addressof either spouse. ADDRESS NAME USED DATES OF OCCUPANCY5400 Laurel Springs Pkwy; Suite 201Suwanee, GA 30024 Comstock Homes of Atlanta, LLC 01/01/2006 - 09/30/2008405 Wakefield Bluff CourtAlpharetta, GA 30004 Comstock Homes of Atlanta, LLC 10/01/2008 - 04/15/2009 16. Spouses and Former SpousesNonex If the debtor resides or resided in a community property state, commonwealth, or territory (including Alaska, Arizona, California, Idaho,Louisiana, Nevada, New Mexico, Puerto Rico, Texas, Washington, or Wisconsin) within eight years immediately preceding thecommencement of the case, identify the name of the debtor’s spouse and of any former spouse who resides or resided with the debtor in thecommunity property state.NAME 17. Environmental Information. For the purpose of this question, the following definitions apply; “Environmental Law” means any federal, state, or local statute or regulation regulating pollution, contamination, releases of hazardous ortoxic substances, wastes or material into the air, land, soil, surface water, groundwater, or other medium, including, but not limited to,statutes or regulations regulating the cleanup of these substances, wastes, or material. “Site” means any location, facility, or property as defined under any Environmental Law, whether or not presently or formerly ownedor operated by the debtor, including, but not limited to, disposal sites. “Hazardous Material” means anything defined as a hazardous waste, hazardous substance, toxic substance, hazardous material,pollutant, or contaminant or similar term under an Environmental Law Nonex a. List the name and address of every site for which the debtor has received notice in writing by a governmental unit that it may be liable orpotentially liable under or in violation of an Environmental Law. Indicate the governmental unit, the date of the notice, and, if known, theEnvironmental Law: 6 Software Copyright (c) 1996-2009 Best Case Solutions, Inc. - Evanston, IL - (800) 492-8037 Best Case Bankruptcy SITE NAME AND ADDRESS NAME AND ADDRESS OFGOVERNMENTAL UNIT DATE OF NOTICE ENVIRONMENTALLAW Nonex b. List the name and address of every site for which the debtor provided notice to a governmental unit of a release of Hazardous Material.Indicate the governmental unit to which the notice was sent and the date of the notice. SITE NAME AND ADDRESS NAME AND ADDRESS OFGOVERNMENTAL UNIT DATE OF NOTICE ENVIRONMENTALLAW Nonex c. List all judicial or administrative proceedings, including settlements or orders, under any Environmental Law with respect to which thedebtor is or was a party. Indicate the name and address of the governmental unit that is or was a party to the proceeding, and the docketnumber. NAME AND ADDRESS OFGOVERNMENTAL UNIT DOCKET NUMBER STATUS OR DISPOSITION 18. Nature, location and name of businessNonex a. If the debtor is an individual, list the names, addresses, taxpayer identification numbers, nature of the businesses, and beginning andending dates of all businesses in which the debtor was an officer, director, partner, or managing executive of a corporation, partner in apartnership, sole proprietor, or was self-employed in a trade, profession, or other activity either full- or part-time within six yearsimmediately preceding the commencement of this case, or in which the debtor owned 5 percent or more of the voting or equity securitieswithin six years immediately preceding the commencement of this case. If the debtor is a partnership, list the names, addresses, taxpayer identification numbers, nature of the businesses, and beginning and endingdates of all businesses in which the debtor was a partner or owned 5 percent or more of the voting or equity securities, within six yearsimmediately preceding the commencement of this case. If the debtor is a corporation, list the names, addresses, taxpayer identification numbers, nature of the businesses, and beginning andending dates of all businesses in which the debtor was a partner or owned 5 percent or more of the voting or equity securities within sixyears immediately preceding the commencement of this case. NAME LAST FOUR DIGITS OFSOCIAL-SECURITY OROTHER INDIVIDUALTAXPAYER-I.D. NO.(ITIN)/COMPLETE EIN ADDRESS NATURE OF BUSINESS BEGINNING ANDENDING DATES Nonex b. Identify any business listed in response to subdivision a., above, that is “single asset real estate” as defined in 11 U.S.C. § 101. NAME ADDRESSThe following questions are to be completed by every debtor that is a corporation or partnership and by any individual debtor who is or has been,within six years immediately preceding the commencement of this case, any of the following: an officer, director, managing executive, or owner of more than5 percent of the voting or equity securities of a corporation; a partner, other than a limited partner, of a partnership, a sole proprietor or self-employed in atrade, profession, or other activity, either full- or part-time.(An individual or joint debtor should complete this portion of the statement only if the debtor is or has been in business, as defined above, within sixyears immediately preceding the commencement of this case. A debtor who has not been in business within those six years should go directly to the signaturepage.) 19. Books, records and financial statementsNone¨ a. List all bookkeepers and accountants who within two years immediately preceding the filing of this bankruptcy case kept or supervisedthe keeping of books of account and records of the debtor. 7 Software Copyright (c) 1996-2009 Best Case Solutions, Inc. - Evanston, IL - (800) 492-8037 Best Case Bankruptcy NAME AND ADDRESS DATES SERVICES RENDEREDJeff Dauer11465 Sunset Hills Rd5th FloorReston, VA 20190 None¨ b. List all firms or individuals who within the two years immediately preceding the filing of this bankruptcy case have audited the books ofaccount and records, or prepared a financial statement of the debtor. NAME ADDRESS DATES SERVICES RENDEREDPriceWaterhouse Coopers, LLC Attn: Chris Dietrick 1800 Tysons Blvd. McLean, VA 22102 None¨ c. List all firms or individuals who at the time of the commencement of this case were in possession of the books of account and records ofthe debtor. If any of the books of account and records are not available, explain. NAME ADDRESSJeff Dauer 11465 Sunset Hills Rd 5th Floor Reston, VA 20190 Nonex d. List all financial institutions, creditors and other parties, including mercantile and trade agencies, to whom a financial statement wasissued by the debtor within two years immediately preceding the commencement of this case. NAME AND ADDRESS DATE ISSUED 20. InventoriesNonex a. List the dates of the last two inventories taken of your property, the name of the person who supervised the taking of each inventory, andthe dollar amount and basis of each inventory. DATE OF INVENTORY INVENTORY SUPERVISOR DOLLAR AMOUNT OF INVENTORY(Specify cost, market or other basis) Nonex b. List the name and address of the person having possession of the records of each of the two inventories reported in a., above. DATE OF INVENTORY NAME AND ADDRESSES OF CUSTODIAN OF INVENTORYRECORDS 21. Current Partners, Officers, Directors and ShareholdersNonex a. If the debtor is a partnership, list the nature and percentage of partnership interest of each member of the partnership. NAME AND ADDRESS NATURE OF INTEREST PERCENTAGE OF INTEREST None¨ b. If the debtor is a corporation, list all officers and directors of the corporation, and each stockholder who directly or indirectly owns,controls, or holds 5 percent or more of the voting or equity securities of the corporation. NAME AND ADDRESS TITLE NATURE AND PERCENTAGEOF STOCK OWNERSHIPComstock Homebuilding Companies, Inc. manager sole member11465 Sunset Hills Rd Suite 500 Reston, VA 20190 8 Software Copyright (c) 1996-2009 Best Case Solutions, Inc. - Evanston, IL - (800) 492-8037 Best Case Bankruptcy 22. Former partners, officers, directors and shareholdersNonex a. If the debtor is a partnership, list each member who withdrew from the partnership within one year immediately preceding thecommencement of this case. NAME ADDRESS DATE OF WITHDRAWAL Nonex b. If the debtor is a corporation, list all officers, or directors whose relationship with the corporation terminated within one year immediatelypreceding the commencement of this case. NAME AND ADDRESS TITLE DATE OF TERMINATION 23. Withdrawals from a partnership or distributions by a corporationNonex If the debtor is a partnership or corporation, list all withdrawals or distributions credited or given to an insider, including compensation inany form, bonuses, loans, stock redemptions, options exercised and any other perquisite during one year immediately preceding thecommencement of this case. NAME & ADDRESSOF RECIPIENT,RELATIONSHIP TO DEBTOR DATE AND PURPOSEOF WITHDRAWAL AMOUNT OF MONEYOR DESCRIPTION ANDVALUE OF PROPERTY 24. Tax Consolidation Group.Nonex If the debtor is a corporation, list the name and federal taxpayer identification number of the parent corporation of any consolidated groupfor tax purposes of which the debtor has been a member at any time within six years immediately preceding the commencement of the case. NAME OF PARENT CORPORATION TAXPAYER IDENTIFICATION NUMBER (EIN) 25. Pension Funds.Nonex If the debtor is not an individual, list the name and federal taxpayer identification number of any pension fund to which the debtor, as anemployer, has been responsible for contributing at any time within six years immediately preceding the commencement of the case. NAME OF PENSION FUND TAXPAYER IDENTIFICATION NUMBER (EIN) 9 Software Copyright (c) 1996-2009 Best Case Solutions, Inc. - Evanston, IL - (800) 492-8037 Best Case Bankruptcy DECLARATION UNDER PENALTY OF PERJURY ON BEHALF OF CORPORATION OR PARTNERSHIPI declare under penalty of perjury that I have read the answers contained in the foregoing statement of financial affairs and any attachments thereto and thatthey are true and correct to the best of my knowledge, information and belief. Date 11/25/2009 Signature /s/ Christopher Clemente Christopher Clemente[An individual signing on behalf of a partnership or corporation must indicate position or relationship to debtor.]Penalty for making a false statement: Fine of up to $500,000 or imprisonment for up to 5 years, or both. 18 U.S.C. §§ 152 and 3571 10 Software Copyright (c) 1996-2009 Best Case Solutions, Inc. - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6A (Official Form 6A) (12/07) In re Parker Chandler Homes, LLC Case No. Debtor(s) SCHEDULE A – REAL PROPERTYExcept as directed below, list all real property in which the debtor has any legal, equitable, or future interest, including all property owned as a co-tenant, community property, or in which the debtor has a life estate. Include any property in which the debtor holds rights and powers exercisable for thedebtor’s own benefit. If the debtor is married, state whether the husband, wife, both, or the marital community own the property by placing an “H,” “W,” “J,”or “C” in the column labeled “Husband, Wife, Joint, or Community.” If the debtor holds no interest in real property, write “None” under “Description andLocation of Property.”Do not include interests in executory contracts and unexpired leases on this schedule. List them in Schedule G - Executory Contracts andUnexpired Leases.If an entity claims to have a lien or hold a secured interest in any property, state the amount of the secured claim. See Schedule D. If no entity claims tohold a secured interest in the property, write “none” in the column labeled “Amount of Secured Claim.”If the debtor is an individual or if a joint petition is filed, state the amount of any exemption claimed in the property only in Schedule C - PropertyClaimed as Exempt. Description and Location of Property Nature of Debtor’sInterest in Property HusbandWife JointorCommunity Current Valueof Debtor’sInterest inProperty,withoutDeducting anySecured Claimor Exemption Amount ofSecured ClaimLots 26, 28, 30, Allen Creek subdivision, Talmo, Jackson County, GA 30575(book value = $60,201.00, tax assessed value = $127,490.00) fee simple — $60,201.00 $15,893,229.00Lots 4, 5, 7, 19, 20, 22, 24, 25, 27, and 28, Arcanum Subdivision, Cumming,Forsyth County, GA 30040 (book value = $181,221.00, tax assessed value =$340,000.00) fee simple — $181,221.00 $15,893,229.00Lots 1, 2, 7, 14, and 16, Failing Water Subdivision, Woodstock, Cherokee County,GA 30188 (book value = $243,851.00, tax assessed value = $825,000.00) fee simple — $243,851.00 $15,893,229.00Lot 25, Glenn Ivey Subdivision, Cumming, Forsyth County, GA 30040 (bookvalue = $216,220.00, tax assessed value = $78,948.00) fee simple — $216,220.00 $199,094.00Lot 36, Glenn Ivey Subdivision, Cumming, Forsyth County, GA 30040 (bookvalue = $35,968.00, tax assessed value = $23,600.00) fee simple — $35,968.00 $71,087.00Lot 23, Wyngate Subdivision, Alpharetta, GA 30040 (book value = $280,887.00,tax assessed value = $32,000.00) fee simple — $280,887.00 $279,023.00 Total: $1,018,348.00 (Report also on Summary of Schedules) Sheet 1 of 1 total sheets in Schedule of Real Property Software Copyright (c) 1996-2009 Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6B (Official Form 6B) (12/07) In re Parker Chandler Homes, LLC Case No. Debtor(s) SCHEDULE B - PERSONAL PROPERTYExcept as directed below, list all personal property of the debtor of whatever kind. If the debtor has no property in one or more of the categories, placean “x” in the appropriate position in the column labeled “None.” If additional space is needed in any category, attach a separate sheet properly identifiedwith the case name, case number, and the number of the category. If the debtor is married, state whether the husband, wife, both, or the marital communityown the property by placing an “H,” “W,” “J,” or “C” in the column labeled “Husband, Wife, Joint, or Community.” If the debtor is an individual or a jointpetition is filed, state the amount of any exemptions claimed only in Schedule C - Property Claimed as Exempt.Do not include interests in executory contracts and unexpired leases on this schedule. List them in Schedule G - Executory Contracts andUnexpired Leases.If the property is being held for the debtor by someone else, state that person’s name and address under “Description and Location of Property.” If theproperty is being held for a minor child, simply state the child’s initials and the name and address of the child’s parent or guardian, such as “A.B., a minorchild, by John Doe, guardian.” Do not disclose the child’s name. See, 11 U.S.C. §112 and Fed R. Bankr. P. 1007(m). Type of Property NONE Description and Location of Property Husband,Wife,Joint orCommunity Current Value ofDebtor’s Interest In Property,With-Out Deducting AnySecured Claim or Exemption1. Cash on hand. X 2. Checking, savings or otherfinancial accounts, certificates ofdeposit or shares in banks,savings and loan, thrift, buildingand loan, and homesteadassociations, or credit unions,brokerage houses, orcooperatives. checking account # -6303 at United Bank — $0.00 checking account # -6307 at United Bank — $0.00 checking account # -6345 at United Bank — $0.003. Security deposits with publicutilities, telephone companies,landlords, and others. X 4. Household goods and furnishings,including audio, video, andcomputer equipment. X 5. Books; pictures and other artobjects; antiques; stamp, coin,record, tape, compact disc, andother collections or collectibles. X 6. Wearing apparel. X 7. Furs and jewelry. X 8. Firearms and sports,photographic, and other hobbyequipment. X 9. Interests in insurance policies.Name insurance company of eachpolicy and itemize surrender orrefund value of each. X Software Copyright (c) 1996-2009 Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6B (Official Form 6B) (12/07) - Cont. In re Parker Chandler Homes, LLC Case No. Debtor (If known)SCHEDULE B - PERSONAL PROPERTY(Continuation Sheet) Type of Property NONE Description and Location of Property Husband,Wife,Joint orCommunity Current Value ofDebtor’s Interest In Property,With-Out Deducting AnySecured Claim or Exemption10. Annuities. Itemize and name each issuer. X 11. Interests in an education IRA as defined in26 U.S.C. §530(b)(1) or under a qualifiedState tuition plan as defined in 26 U.S.C.§529(b)(1). Give particulars. (Fileseparately the record(s) of any suchinterest(s). 11 U.S.C. §521 (c).) X 12. Interests in IRA, ERISA, Keogh, or otherpension or profit sharing plans. Giveparticulars. X 13. Stock and interests in incorporated andunincorporated businesses. Itemize. X 14. Interests in partnerships or joint ventures.Itemize. X 15. Government and corporate bonds and othernegotiable and nonnegotiable instruments. X 16. Accounts receivable. X 17. Alimony, maintenance, support, andproperty settlements to which the debtor isor may be entitled. Give particulars. X 18. Other liquidated debts owed to debtorincluding tax refunds. Give particulars. X 19. Equitable or future interests, life estates,and rights or powers exercisable for thebenefit of the debtor other than those listedin Schedule A - Real Property. X 20. Contingent and noncontingent interests inestate of a decedent, death benefit plan, lifeinsurance policy, or trust. X Software Copyright (c) 1996-2009 Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6B (Official Form 6B) (12/07) - Cont. In re Parker Chandler Homes, LLC Case No. Debtor (If known)SCHEDULE B - PERSONAL PROPERTY(Continuation Sheet) Type of Property NONE Description and Location of Property Husband,Wife,Joint orCommunity Current Value ofDebtor’s Interest In Property,With-Out Deducting AnySecured Claim or Exemption21. Other contingent and unliquidated claims ofevery nature, including tax refunds,counterclaims of the debtor, and rights to setoffclaims. Give estimated value of each. X 22. Patents, copyrights, and other intellectualproperty. Give particulars. X 23. Licenses, franchises, and other generalintangibles. Give particulars. X 24. Customer lists or other compilations containingpersonally identifiable information (as definedin 11 U.S.C. §101(41A)) provided to the debtorby individuals in connection with obtaining aproduct or service from the debtor primarily forpersonal, family, or household purposes. X 25. Automobiles, trucks, trailers, and other vehiclesand accessories. X 26. Boats, motors, and accessories. X 27. Aircraft and accessories. X 28. Office equipment, furnishings, and supplies. X 29. Machinery, fixtures, equipment, and suppliesused in business. X 30. Inventory. X 31. Animals. X 32. Crops - growing or harvested. Give particulars. X 33. Farming equipment and implements. X 34. Farm supplies, chemicals, and feed. X 35. Other personal property of any kind not alreadylisted. Itemize. X Total > $0.00(Report also on Summary of Schedules) Software Copyright (c) 1996-2009 Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6D (Official Form 6D) (12/07) In re Parker Chandler Homes, LLC Case No. Debtor(s) SCHEDULE D - CREDITORS HOLDING SECURED CLAIMSState the name, mailing address, including zip code, and last four digits of any account number of all entities holding claims secured by property of thedebtor as of the date of filing of the petition. The complete account number of any account the debtor has with the creditor is useful to the trustee and thecreditor and may be provided if the debtor chooses to do so. List creditors holding all types of secured interests such as judgment liens, garnishments,statutory liens, mortgages, deeds of trust, and other security interests.List creditors in alphabetical order to the extent practicable. If a minor child is the creditor, state the child’s initials and the name and address of thechild’s parent or guardian, such as “A.B., a minor child, by John Doe, guardian.” Do not disclose the child’s name. See, 11 U.S.C. § 112 and Fed R. Bankr. P.1007(m). If all secured creditors will not fit on this page, use the continuation sheet provided.If any entity other than a spouse in a joint case may be jointly liable on a claim, place an “X” in the column labeled “Codebtor,” include the entity onthe appropriate schedule of creditors, and complete Schedule H - Codebtors. If a joint petition is filed, state whether the husband, wife, both of them, or themarital community may be liable on each claim by placing an “H,” “W,” “J,” or “C” in the column labeled “Husband, Wife, Joint, or Community.”If the claim is contingent, place an “X” in the column labeled “Contingent.” If the claim is unliquidated, place an “X” in the column labeled“Unliquidated.” If the claim is disputed, place an “X” in the column labeled “Disputed.” (You may need to place an “X” in more than one of these threecolumns).Total the columns labeled “Amount of Claim Without Deducting Value of Collateral” and “Unsecured Portion, if Any” in the boxes labeled “Total(s)”on the last sheet of the completed schedule. Report the total from the column labeled “Amount of Claim Without Deducting Value of Collateral” also on theSummary of Schedules and, if the debtor is an individual with primarily consumer debts, report the total from the column labeled “Unsecured Portion, if Any”on the Statistical Summary of Certain Liabilities and Related Data. ¨Check this box if debtor has no creditors holding secured claims to report on this Schedule D. CREDITOR’S NAME ANDMAILING ADDRESSINCLUDING ZIP CODE ANDAN ACCOUNT NUMBER(See Instructions Above) CODEBTOR Husband, Wife, Joint or Community CONTINGENT UNLIQUIDATED DISPUTED AMOUNT OF CLAIMWITHOUTDEDUCTING VALUEOF COLLATERAL UNSECUREDPORTION,IF ANY HWJC DATE CLAIM WAS INCURRED,NATURE OF LIEN, ANDDESCRIPTION AND VALUEOF PROPERTYSUBJECT TO LIEN ACCOUNT NO. NA claim of lien Atlanta Glass & Mirror, Inc.196 Rio CircleDecatur, GA 30030 VALUE $0.00 $1,138.70 $1,138.70ACCOUNT NO. NA $199,094.00 $0.00 Branch Banking & Trust Co.Attn: Warren Sandberg16410 Heritage Blvd.; 3rd FlrBowie, MD 20716 deed to secure debt Lot 25, Glenn Ivey Subdivision, Cumming, ForsythCounty, GA 30040 (book value = $216,220.00, taxassessed value = $78,948.00) VALUE $216,220.00 Sheet 1 of 6 total sheets in Schedule of Creditors Holding Secured Claims Software Copyright (c) 1996-2009 Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6D (Official Form 6D) (12/07) - Cont. In re Parker Chandler Homes, LLC Case No. Debtor(s) SCHEDULE D - CREDITORS HOLDING SECURED CLAIMS(Continuation Sheet) CREDITOR’S NAME ANDMAILING ADDRESSINCLUDING ZIP CODE ANDAN ACCOUNT NUMBER(See Instructions Above) CODEBTOR Husband, Wife, Joint or Community CONTINGENT UNLIQUIDATED DISPUTED AMOUNT OF CLAIMWITHOUTDEDUCTING VALUEOF COLLATERAL UNSECUREDPORTION,IF ANY HWJC DATE CLAIM WAS INCURRED,NATURE OF LIEN, ANDDESCRIPTION AND VALUEOF PROPERTYSUBJECT TO LIEN ACCOUNT NO. Branch Banking & Trust Co.Attn: Warren Sandberg16410 Heritage Blvd.; 3rd FlrBowie, MD 20716 NA deed to secure debt Lot 23, Wyngate Subdivision, Alpharetta, GA 30040(book value = $280,887.00, tax assessed value =$32,000.00) VALUE $280,887.00 $279,023.00 $0.00ACCOUNT NO. NA additional notice address Branch Banking & Trust Co.Attn: Keri Jackson1308 Devils Reach Rd; Ste 200Woodbridge, VA 22192 VALUE $0.00 $0.00 $0.00ACCOUNT NO. 0244175 NA lease 2 copiers Canon Financial Services, Inc.14904 Collections Center DriveChicago, IL 60693 VALUE $1,000.00 $5,836.69 4,836.69ACCOUNT NO. NA 9/3/2008 claim of lien Jenkins Brothers’ Constructionc/o Brian F. Hansen, Esq.11625 Rainwater Dr. Suite 350Alpharetta, GA 30004 VALUE $0.00 $3,657.60 $3,657.60ACCOUNT NO. NA 1/30/2008 claim of lien L&W Supply Corp.Larry Edmondson101 Jonesboro Rd.Mcdonough, GA 30253 VALUE $0.00 $0.00 $0.00Sheet 2 of 6 total sheets in Schedule of Creditors Holding Secured Claims Software Copyright (c) 1996-2009 Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6D (Official Form 6D) (12/07) - Cont. In re Parker Chandler Homes, LLC Case No. Debtor(s) SCHEDULE D - CREDITORS HOLDING SECURED CLAIMS(Continuation Sheets) CREDITOR’S NAME ANDMAILING ADDRESSINCLUDING ZIP CODE ANDAN ACCOUNT NUMBER(See Instructions Above) CODEBTOR Husband, Wife, Joint or Community CONTINGENT UNLIQUIDATED DISPUTED AMOUNT OF CLAIMWITHOUTDEDUCTING VALUEOF COLLATERAL UNSECUREDPORTION,IF ANY HWJC DATE CLAIM WAS INCURRED,NATURE OF LIEN, ANDDESCRIPTION AND VALUEOF PROPERTYSUBJECT TO LIEN ACCOUNT NO. X NA 10/21/2009 judgment business dispute X X X $261,372.00 $261,372.00 Paramont Grading CompanyJohn Pearson, Registered Agent4405 Canton HwyCumming, GA 30040 VALUE $0.00 ACCOUNT NO. NA 10/28/2009 judgment business dispute X $3,434.04 ProBuild South, LLC12215 East 61st StreetBroken Arrow, OK 74012 VALUE $0.00 $3,434.04 ACCOUNT NO. X NA deed to secure debt Lot 36, Glenn Ivey Subdivision, Cumming, ForsythCounty, GA 30040 (book value = $35,968.00, taxassessed value = $23,600.00) $71,087.00 $35,119.00 RBC Builder FinanceAttn: Legal11011 Richmond Ave.; Suite 850Houston, TX 77042 VALUE $35,968.00 ACCOUNT NO. NA additional notice address $0.00 $0.00 RBC Builder FinanceAttn: Jim McDunn301 Grant St; number 4325Pittsburgh, PA 15219 VALUE $0.00 ACCOUNT NO. NA 1/30/2008 claim of lien $11,061.48 $11,061.48 Residential Drywall, Inc.c/o Suzanne WoolumPO Box 1390Hiram, GA 30141 VALUE $0.00 Sheet 3 of 6 total sheets in Schedule of Creditors Holding Secured Claims Software Copyright (c) 1996-2009 Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6D (Official Form 6D) (12/07) - Cont. In re Parker Chandler Homes, LLC Case No. Debtor(s) SCHEDULE D - CREDITORS HOLDING SECURED CLAIMS(Continuation Sheet) CREDITOR’S NAME ANDMAILING ADDRESSINCLUDING ZIP CODE ANDAN ACCOUNT NUMBER(See Instructions Above) CODEBTOR Husband, Wife, Joint or Community CONTINGENT UNLIQUIDATED DISPUTED AMOUNT OF CLAIMWITHOUTDEDUCTING VALUEOF COLLATERAL UNSECUREDPORTION,IF ANY HWJC DATE CLAIM WAS INCURRED,NATURE OF LIEN, ANDDESCRIPTION AND VALUEOF PROPERTYSUBJECT TO LIEN ACCOUNT NO. NA claim of lien $18,585.00 $18,585.00 Rich Drywall, Inc.Daphne Jackson3425 Chartwell RidgeSuwanee, GA 30024 VALUE $0.00 ACCOUNT NO. X NA 7/6/2009 judgment business account payable $5,526.00 $5,526.00Robert Bowden, Inc.Attn: Stephen Cola, CEOPO Box 4237Marietta, GA 30061-4237 VALUE $0.00 ACCOUNT NO. NA claim of lien $3,606.57 $3,606.57 Southern Staircase, Inc.Suite E6025 Shiloh RdAlpharetta, GA 30005 VALUE $0.00 ACCOUNT NO. NA 7/9/2008 judgment $5,486.00 $5,486.00 Stuart Mechancial Service, IncAttn: James M. Stuart5267 Palmero CourtBuford, GA 30518-5848 VALUE $0.00 ACCOUNT NO. NA 6/10/2009 judgment X X X $1,501,859.00 $1,501,859.00 Tabas, LLLPAttn: Albert M. Ashkouti6075 Barfield Rd Ste 110Atlanta, GA 30328 VALUE $0.00 Sheet 4 of 6 total sheets in Schedule of Creditors Holding Secured Claims Software Copyright (c) 1996-2009 Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6D (Official Form 6D) (12/07) - Cont. In re Parker Chandler Homes, LLC Case No. Debtor(s) SCHEDULE D - CREDITORS HOLDING SECURED CLAIMS(Continuation Sheet) CREDITOR’S NAME ANDMAILING ADDRESSINCLUDING ZIP CODE ANDAN ACCOUNT NUMBER(See Instructions Above) CODEBTOR Husband, Wife, Joint, or Community CONTINGENT UNLIQUIDATED DISPUTED AMOUNT OF CLAIMWITHOUTDEDUCTING VALUEOF COLLATERAL UNSECUREDPORTION,IF ANY HWJC DATE CLAIM WAS INCURRED,NATURE OF LIEN, ANDDESCRIPTION AND VALUEOF PROPERTYSUBJECT TO LIEN ACCOUNT NO. Wachovia Bank, N.A.Attn: Joe Morrocco150 Fayetteville StreetRaleigh, NC 27602 NA additional notice address VALUE $0.00 $0.00 $0.00ACCOUNT NO. Wachovia Bank, N.A.Ron Sanders- S. Tower VA 1927 1753Pinnacle Drive; 5th FloorMc Lean, VA 22102 NA deeds to unsecured debt Lots 26, 28, 30, Allen Creek subdivision,Jackson County, GA; Lots 4, 5, 7, 19, 20, 22, 24,25, 27, 28, Arcanum Subdivision, ForsythCounty, GA; and Lots 1, 2, 7, 14, 16, FallingWater Subdivision, Cherokee County, GA.(Book value = $485,273.00, tax assessed value =$1,292,490.00) VALUE $485,273.00 $15,893,229.00 $15,407,956.00ACCOUNT NO. NA additional notice address Wachovia Bank, N.A.Attn: Patrick McGovern123 South Broad Street Philadelphia,PA 19109 VALUE $0.00 $0.00 $0.00ACCOUNT NO. NA claim of lien Woodman Gutters, Inc.PO Box 740209Atlanta, GA 30374-0209 VALUE $0.00 $2,317.00 $2,317.00Sheet 5 of 6 total sheets in Schedule of Creditors Holding Secured Claims Software Copyright (c) 1996-2009 Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6D (Official Form 6D) (12/07) - Cont. In re Parker Chandler Homes, LLC Case No. Debtor(s) SCHEDULE D - CREDITORS HOLDING SECURED CLAIMS(Continuation Sheet) CREDITOR’S NAME ANDMAILING ADDRESSINCLUDING ZIP CODE ANDAN ACCOUNT NUMBER(See Instructions Above) CODEBTOR Husband, Wife, Joint, or Community CONTINGENT UNLIQUIDATED DISPUTED AMOUNT OF CLAIMWITHOUTDEDUCTING VALUEOF COLLATERAL UNSECUREDPORTION,IF ANY HWJC DATE CLAIM WAS INCURRED,NATURE OF LIEN, ANDDESCRIPTION AND VALUEOF PROPERTYSUBJECT TO LIEN ACCOUNT NO. NA Woodman Insulation Co., Inc.1230 Samples Industrial DriveCumming, GA 30041 claim of lien VALUE $0.00 $2,508.00 $2,508.00 Total(s)(Use only on last page) $18,268,821.08 $17,268,463.08 (Report also onSummary ofSchedules) If applicable,report also onStatisticalSummary ofCertainLiabilities andRelated Data)Sheet 6 of 6 total sheets in Schedule of Creditors Holding Secured Claims Software Copyright (c) 1996-2009 Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6E (Official Form 6E) (12/07) In re Parker Chandler Homes, LLC Case No. Debtor(s) SCHEDULE E - CREDITORS HOLDING UNSECURED PRIORITY CLAIMSA complete list of claims entitled to priority, listed separately by type of priority, is to be set forth on the sheets provided. Only holders of unsecuredclaims entitled to priority should be listed in this schedule. In the boxes provided on the attached sheets, state the name, mailing address, including zip code,and last four digits of the account number, if any, of all entities holding priority claims against the debtor or the property of the debtor, as of the date of thefiling of the petition. Use a separate continuation sheet for each type of priority and label each with the type of priority.The complete account number of any account the debtor has with the creditor is useful to the trustee and the creditor and may be provided it he debtorchooses to do so. If a minor child is a creditor, state the child’s initials and the name and address of the child’s parent or guardian, such as “A.B., a minorchild, by John Doe, guardian.” Do not disclose the child’s name. See, 11 U.S.C. §112 and Fed. R. Bankr. P. 1007(m).If any entity other than a spouse in a joint case may be jointly liable on a claim, place an “X” in the column labeled “Codebtor,” include the entity onthe appropriate schedule of creditors, and complete Schedule H-Codebtors. If a joint petition is filed, state whether the husband, wife, both of them, or themarital community may be liable on each claim by placing an “H,” “W,” “J,” or “C” in the column labeled “Husband, Wife, Joint, or Community.” If theclaim is contingent, place an “X” in the column labeled “Contingent.” If the claim is unliquidated, place an “X” in the column labeled “Unliquidated.” If theclaim is disputed, place an “X” in the column labeled “Disputed.” (You may need to place an “X” in more than one of these three columns.)Report the total of claims listed on each sheet in the box labeled “Subtotals” on each sheet. Report the total of all claims listed on this Schedule E inthe box labeled “Total” on the last sheet of the completed schedule. Report this total also on the Summary of Schedules.Report the total of amounts entitled to priority listed on each sheet in the box labeled “Subtotals” on each sheet. Report the total of all amountsentitled to priority listed on this Schedule E in the box labeled “Totals” on the last sheet of the completed schedule. Individual debtors with primarilyconsumer debts report this total also on the Statistical Summary of Certain Liabilities and Related Data.Report the total of amounts not entitled to priority listed on each sheet in the box labeled “Subtotals” on each sheet. Report the total of all amounts notentitled to priority listed on this Schedule E in the box labeled “Totals” on the last sheet of the completed schedule. Individual debtors with primarilyconsumer debts report this total also on the Statistical Summary of Certain Liabilities and Related Data. ¨Check this box if debtor has no creditors holding unsecured priority claims to report on this Schedule E.TYPES OF PRIORITY CLAIMS (Check the appropriate box(es) below if claims in that category are listed on the attached sheets) ¨Domestic Support ObligationsClaims for domestic support that are owed to or recoverable by a spouse, former spouse, or child of the debtor, or the parent, legal guardian, orresponsible relative of such a child, or a governmental unit to whom such a domestic support claim has been assigned to the extent provided in 11 U.S.C.§507(a)(1). ¨Extensions of credit in an involuntary caseClaims arising in the ordinary course of the debtor’s business or financial affairs after the commencement of the case but before the earlier of theappointment of a trustee or the order for relief. 11 U.S.C. § 507(a)(3). ¨Wages, salaries, and commissionsWages, salaries, and commissions, including vacation, severance, and sick leave pay owing to employees and commissions owing to qualifyingindependent sales representatives up to 510,950* per person earned within 180 days immediately preceding the filing of the original petition, or thecessation of business, whichever occurred first, to the extent provided in 11 U.S.C. § 507(a)(4). ¨Contributions to employee benefit plansMoney owed to employee benefit plans for services rendered within 180 days immediately preceding the filing of the original petition, or the cessationof business, whichever occurred first, to the extent provided in 11 U.S.C. § 507(a)(5).Sheet 1 of 3 total sheets in Schedule of Creditors Holding Unsecured Priority Claims Software Copyright (c) 1996-2009 Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6E (Official Form 6E) (12/07) - Cont. In re Parker Chandler Homes, LLC Case No. Debtor(s) SCHEDULE E - CREDITORS HOLDING UNSECURED PRIORITY CLAIMS(Continuation Sheet) ¨Certain farmers and fishermenClaims of certain farmers and fishermen, up to 5,400* per farmer or fisherman, against the debtor, as provided in 11 U.S.C. § 507(a)(6). ¨Deposits by individualsClaims of individuals up to $2,425* for deposits for the purchase, lease, or rental of property or services for personal, family, or household use, thatwere not delivered or provided. 11 U.S.C. § 507(a)(7). xTaxes and Certain Other Debts Owed to Governmental UnitsTaxes, customs duties, and penalties owing to federal, state, and local governmental units as set forth in 11 U.S.C. §507(a)(8). ¨Commitments to Maintain the Capital of an Insured Depository InstitutionClaims based on commitments to the FDIC, RTC, Director of the Office of Thrift Supervision, Comptroller of the Currency, or Board of Governors ofthe Federal Reserve System, or their predecessors or successors, to maintain the capital of an insured depository institution. 11 U.S.C. § 507(a)(9). ¨Claims for Death or Personal Injury While Debtor Was IntoxicatedClaims for death or personal injury resulting from the operation of a motor vehicle or vessel while the debtor was intoxicated from using alcohol, adrug, or another substance. 11 U.S.C. § 507(a)(10). *Amounts are subject to adjustment on April 1, 2010, and every three years thereafter with respect to cases commenced on or after the date of adjustment.Sheet 2 of 3 total sheets in Schedule of Creditors Holding Unsecured Priority Claims Software Copyright (c) 1996-2009 Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6E (Official Form 6E) (12/07) - Cont. In re Parker Chandler Homes, LLC Case No. Debtor(s) SCHEDULE E - CREDITORS HOLDING UNSECURED PRIORITY CLAIMS(Continuation Sheet) Taxes and Certain Other DebtsOwed to Governmental Units Type of Priority CREDITOR’S NAME,AND MAILING ADDRESSINCLUDING ZIP CODE,AND ACCOUNT NUMBER(See Instructions.) CODEBTOR Husband, Wife, Joint, or Community CONTINGENT UNLIQUIDATED DISPUTED AMOUNTOF CLAIM AMOUNT NOTENTITLED TOPRIORITY, IF ANY AMOUNTENTITLED TOPRIORITY HWJC DATE CLAIM WAS INCURREDAND CONSIDERATION FORCLAIM Account No. Cherokee Cnty Tax Commissioner2780 Marietta StreetCanton, GA 30114 NA ad valorem taxes $14,626.12 0.00 $14,626.12Account No. Forsyth County Tax Commissioner1092 Tribble Gap Rd.Cumming, GA 30040 NA ad valorem taxes $44,176.75 0.00 $44,176.75Account No. NC Department of RevenuePO Box 2500Raleigh, NC 27640-0520 NA ad valorem taxes $104.24 0.00 $104.24 Subtotals:(Totals of this page) 58,907.11 0.00 58,907.11 Total:(Use only on last page of the completed ScheduleE. Repeat also on the Summary of Schedules.) 58,907.11 Totals:(Use only on last page of the completed ScheduleE. If applicable, report also on the StatisticalSummary of Certain Liabilities and Related Data. 0.00 58,907.11Sheet 3 of 3 total sheets in Schedule of Creditors Holding Unsecured Priority Claims Software Copyright (c) 1996-2009 Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6F (Official Form 6F) (12/07) In re Parker Chandler Homes, LLC Case No. Debtor(s) SCHEDULE F - CREDITORS HOLDING UNSECURED NONPRIORITY CLAIMSState the name, mailing address, including zip code, and last four digits of any account number of all entities holding unsecured claims withoutpriority against the debtor, as of the date of filing of the petition. The complete account number of any account the debtor has with the creditor is useful tothe trustee and the creditor and may be provided if the debtor chooses to do so. If a minor child is a creditor, state the child’s initials and the name and addressof the child’s parent or guardian, such as “A.B., a minor child, by John Doe, guardian.” Do not disclose the child’s name. See 11 U.S.C. § 112 and Fed. R.Bankr. P. 1007(m). Do not include claims listed in Schedules D and E. If all creditors will not fit on this page, use the continuation sheet provided.If any entity other than a spouse in a joint case may be jointly liable on a claim, place an “X” in the column labeled “Codebtor,” include the entity onthe appropriate schedule of creditors, and complete Schedule H - Codebtors. If a joint petition is filed, state whether the husband, wife, both of them, or themarital community may be liable on each claim by placing an “H,” “W,” “J,” or “C” in the column labeled “Husband, Wife, Joint, or Community.”If the claim is contingent, place an “X” in the column labeled “Contingent.” If the claim is unliquidated, place an “X” in the column labeled“Unliquidated.” If the claim is disputed, place an “X” in the column labeled “Disputed.” (You may need to place an “X” in more than one of these threecolumns).Report the total of all claims listed on this schedule in the box labeled “Total” on the last sheet of the completed schedule. Report this total also on theSummary of Schedules and, if the debtor is an individual with primarily consumer debts, report this total also on the Statistical Summary of CertainLiabilities and Related Data. ¨Check this box if debtor has no creditors holding secured claims to report on this Schedule F. CREDITOR’S NAME,MAILING ADDRESSINCLUDING ZIP CODE,AND ACCOUNT NUMBER(See instructions above) CODEBTOR Husband, Wife, Joint, or Community CONTINGENT UNLIQUIDATED DISPUTED AMOUNT OFCLAIM HWJC DATE CLAIM WAS INCURRED ANDCONSIDERATION FOR CLAIM. IF CLAIMIS SUBJECT TO SETOFF, SO STATE. ACCOUNT NO. 071 -032623 Aaron Rents & Sells Furniture8198 Terminal Rd.Lorton, VA 22079 NA account payable 939.70ACCOUNT NO. ADT Security Services, Inc.PO Box 371967Pittsburgh, PA 15250-7067 NA account payable 191.16ACCOUNT NO. 06-C-21224 S6 Advanced Reporting Services183 Katielee CoveDallas, GA 30132 NA account payable 591.85Sheet 1 of 15 total sheets in Schedule of Creditors Holding Unsecured Nonpriority Claims Software Copyright (c) 1996-2009 Best Case Solutions - Evanston, IL - (800) 492-8037 21149 Best Case Bankruptcy B6F (Official Form 6F) (12/07) - Cont. In re Parker Chandler Homes, LLC Case No. Debtor(s) SCHEDULE F - CREDITORS HOLDING UNSECURED NONPRIORITY CLAIMS(Continuation Sheet) CREDITOR’S NAME,MAILING ADDRESSINCLUDING ZIP CODE,AND ACCOUNT NUMBER(See instructions above.) CODEBTOR Husband, Wife, Joint, or Community CONTINGENT UNLIQUIDATED DISPUTED AMOUNT OFCLAIM HWJC DATE CLAIM WAS INCURRED ANDCONSIDERATION FOR CLAIM. IF CLAIMIS SUBJECT TO SETOFF, SO STATE. ACCOUNT NO. Anand Narayanan andSunitha Subbarao2910 Buford Dr; Apt. 910Buford, GA 30519 NA account payable 6,340.00ACCOUNT NO. Andrade’s Clean Up, Inc.4141 North Arnold Mill Rd.Woodstock, GA 30188 NA account payable 300.00ACCOUNT NO. Arrow ExterminatorsPO Box 707Cumming, GA 30028-0707 NA account payable 95.00ACCOUNT NO. various AT&T-GAPO Box 105262Atlanta, GA 30348-5262 NA accounts payable 2,043.59ACCOUNT NO. Atlanta Communities Magazine1000 Parkwood CircleSuite 260Atlanta, GA 30339 X NA account payable X 11,190.00ACCOUNT NO. Atlantic Risk5850 Waterloo RoadNumber 240Columbia, MD 21045 NA account payable 200.00Sheet 2 of 15 total sheets in Schedule of Creditors Holding Unsecured Nonprioritv Claims Software Copyright (c) 1996-2009 Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6F (Official Form 6F) (12/07) - Cont. In re Parker Chandler Homes, LLC Case No. Debtor(s) SCHEDULE F - CREDITORS HOLDING UNSECURED NONPRIORITY CLAIMS(Continuation Sheet) CREDITOR’S NAME,MAILING ADDRESSINCLUDING ZIP CODE,AND ACCOUNT NUMBER(See instructions above.) CODEBTOR Husband, Wife, Joint, or Community CONTINGENT UNLIQUIDATED DISPUTED AMOUNT OFCLAIM HWJC DATE CLAIM WAS INCURRED ANDCONSIDERATION FOR CLAIM. IF CLAIMIS SUBJECT TO SETOFF, SO STATE. ACCOUNT NO. Blu-John.Com. Inc.257 Castleberry Ind. Dr.Cumming, GA 30040 NA account payable 321.00ACCOUNT NO. Broadriver Communication Corp.1000 Hemphill Ave NWAtlanta, GA 30318-5441 NA account payable 337.31ACCOUNT NO. Builders Design & Leasing Inc.7601 Lindbergh DriveGaithersburg, MD 20879 NA account payable 6,574.52ACCOUNT NO. C. Lee Davis, Esq.506 Roswell StreetBuilding 200; Suite 230Marietta, GA 30060 NA notice only; attorney forRobert Bowden, Inc. 0.00ACCOUNT NO. Cherokee County Waterand Sewer AuthorityPO Box 5000Canton, GA 30114 NA account payable 14,626.12ACCOUNT NO. City of Suwanee330 Town Center AvenueSuwanee, GA 30024 NA liability under performancebonds X X 0.00Sheet 3 of 15 total sheets in Schedule of Creditors Holding Unsecured Nonpriority Claims Software Copyright (c) 1996-2009 Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6F (Official Form 6F) (12/07) - Cont. In re Parker Chandler Homes, LLC Case No Debtor(s) SCHEDULE F - CREDITORS HOLDING UNSECURED NONPRIORITY CLAIMS(Continuation Sheet) CREDITOR’S NAME,MAILING ADDRESSINCLUDING ZIP CODE,AND ACCOUNT NUMBER(See instructions above.) CODEBTOR Husband, Wife, Joint, or Community CONTINGENT UNLIQUIDATED DISPUTED AMOUNT OF CLAIM HWJC DATE CLAIM WAS INCURRED ANDCONSIDERATION FOR CLAIM. IF CLAIMIS SUBJECT TO SETOFF, SO STATE. ACCOUNT NO. NA account payable 1,600.00Clear Channel OutdoorPO Box 402379Atlanta, GA 30384-2379 ACCOUNT NO. NA account payable 400.00Conroy & Associates, PC4550 Atwater CourtSuite 203Buford, GA 30518 ACCOUNT NO. NA account payable 1,246.96Consumer Source, Inc.PO Box 402039Atlanta, GA 30384-2035 ACCOUNT NO. NA account payable 125.00Copper Electric, Inc.2320 Hewatt Rd.Snellville, GA 30039 ACCOUNT NO. NA account payable 175.00De Jesus Painting, Inc.5466 Copperfield Ct.Lilburn, GA 30047 ACCOUNT NO. NA account payable 8.48Dell Business CreditPO Box 5275Carol Stream, IL 60197-5275 Sheet 4 of 15 total sheets in Schedule of Creditors Holding Unsecured Nonpriority Claims Software Copyright (c) 1996-2009 Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6F (Official Form 6F) (12/07) - Cont. In re Parker Chandler Homes, LLC Case No Debtor(s) SCHEDULE F - CREDITORS HOLDING UNSECURED NONPRIORITY CLAIMS(Continuation Sheet) CREDITOR’S NAMEMAILING ADDRESSINCLUDING ZIP CODE,AND ACCOUNT NUMBER(See instructions above.) CODEBTOR Husband, Wife, Joint, or Community CONTINGENT UNLIQUIDATED DISPUTED AMOUNT OF CLAIM HWJC DATE CLAIM WAS INCURRED ANDCONSIDERATION FOR CLAIM. IF CLAIMIS SUBJECT TO SETOFF, SO STATE. ACCOUNT NO. NA notice only 0.00Douglas Thompson, Esq.Douglas Thompson, PC1S72-C Independence SquareDunwoody, GA 30338 ACCOUNT NO. NA account payable 779.76First Multiple Listing Service5457 Roswell RdSuite 208Atlanta, GA 30342 ACCOUNT NO. NA liability under performance bonds X X 0.00Forsyth County Government110 East Main StreetCumming, GA 30040 ACCOUNT NO. NA account payable 1,243.53Forsyth County WaterPO Box 100003Cumming, GA 30028-8303 ACCOUNT NO. NA account payable 85.50GE Appliance HPS-NCPO Box 281865Atlanta, GA 30384-1865 ACCOUNT NO. NA account payable 408.00Georgia Duplicating ProductsPO Box 3547Macon, GA 31205 Sheet 5 of 15 total sheets in Schedule of Creditors Holding Unsecured Nonpriority Claims Software Copyright (c) 1996-2009 Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6F (Official Form 6F) (12/07) - Cont. In re Parker Chandler Homes, LLC Case No Debtor(s) SCHEDULE F - CREDITORS HOLDING UNSECURED NONPRIORITY CLAIMS(Continuation Sheet) CREDITOR’S NAME,MAILING ADDRESSINCLUDING ZIP CODE,AND ACCOUNT NUMBER(See instructions above.) CODEBTOR Husband, Wife, Joint, or Community CONTINGENT UNLIQUIDATED DISPUTED AMOUNT OF CLAIM HWJC DATE CLAIM WAS INCURRED ANDCONSIDERATION FOR CLAIM. IF CLAIMIS SUBJECT TO SETOFF, SO STATE. ACCOUNT NO. 11735-99026 07 NA account payable 713.29Georgia Power96 AnnexAtlanta, GA 30396-0001 ACCOUNT NO. NA account payable 11,234.72Glenn Ivey HOA, Inc.c/o Community Club Mgmt11735 Pointe PlaceRoswall, GA 30076 ACCOUNT NO. NA account payable 5.96Graham & Penman, LLPThe Pinnacle - Suite 5003455 Peachtree Road, N.E.Atlanta, GA 30326 ACCOUNT NO. NA account payable 2,850.00Graphic Services, Inc.7997 Wellingford DriveManassas, VA 20109 ACCOUNT NO. 6035322133151260 NA corporate credit card account 1,348.68Home Depot Credit ServicesPO Box 6029The Lakes, NV 88901-6029 ACCOUNT NO. NA account payable 100.00Hooshang Khoshnood5715 Sourwood RoadCumming, GA 30040 Sheet 6 of 15 total sheets in Schedule of Creditors Holding Unsecured Nonpriority Claims Software Copyright (c) 1996-2009 Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6F (Official Form 6F) (12/07) - Cont. In re Parker Chandler Homes, LLC Case No Debtor(s) SCHEDULE F - CREDITORS HOLDING UNSECURED NONPRIORITY CLAIMS(Continuation Sheet) CREDITOR’S NAME,MAILING ADDRESSINCLUDING ZIP CODE,AND ACCOUNT NUMBER(See instructions above.) CODEBTOR Husband, Wife, Joint, or Community CONTINGENT UNLIQUIDATED DISPUTED AMOUNT OF CLAIM HWJC DATE CLAIM WAS INCURRED ANDCONSIDERATION FOR CLAIM. IF CLAIMIS SUBJECT TO SETOFF, SO STATE. ACCOUNT NO. NA accounts payable 150.38Infiniti EnergyPO Box 791263Baltimore, MD 21279-1263 ACCOUNT NO. NA account payable 0.00INSCO DICOPO Box 19725Irvine, CA 92623 ACCOUNT NO. NA notice only; attorneys for New South Publishing,Inc. 0.00J. Christopher Simpson, Esq.for New South Publishing, Inc.3490 Piedmont Rd, NE; #300Atlanta, GA 30305 ACCOUNT NO. NA account payable 1,610.97Jackson County TaxCommissionPO Box 247Jefferson, GA 30549 ACCOUNT NO. NA notice only; attorneys for ProBuild South, LLC 0.00James C. Buschfor ProBuild South, LLC701 Whitlock Avenue, K-47Marietta, GA 30064 ACCOUNT NO. NA notice only, attorneys for Atlanta CommunitiesMagazine, Inc. 0.00Jason White, Esq.for Atlanta Communities Magazi3340 P’tree Rd NE; Ste 2540Atlanta, GA 30326 Sheet 7 of 15 total sheets in Schedule of Creditors Holding Unsecured Nonpriority Claims Software Copyright (c) 1996-2009 Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6F (Official Form 6F) (12/07) - Cont. In re Parker Chandler Homes, LLC Case No Debtor(s) SCHEDULE F - CREDITORS HOLDING UNSECURED NONPRIORITY CLAIMS(Continuation Sheets) CREDITOR’S NAME,MAILING ADDRESSINCLUDING ZIP CODE,AND ACCOUNT NUMBER(See instructions above.) CODEBTOR Husband, Wife, Joint, or Community CONTINGENT UNLIQUIDATED DISPUTED AMOUNT OF CLAIM HWJC DATE CLAIM WAS INCURRED ANDCONSIDERATION FOR CLAIM. IF CLAIMIS SUBJECT TO SETOFF, SO STATE. ACCOUNT NO. NA notice only; attorney for Andrew H. Chandler andJames B. Parker, co-defendants in the SignatureCommunities litigation 0.00John A. Christy, Esq.Schreeder, Wheeler & Flint LLP1100 P’tree St NE; Ste 800Atlanta, GA 30309 ACCOUNT NO. NA account payable 150.00Just Tubs7924 Benchmark DriveFlowery Branch, GA 30542 ACCOUNT NO. NA account payable 529.97Kerxton Insurance Agency3922 Ponder DriveNumber 120Fairfax, VA 22030 ACCOUNT NO. NA account payable 6,000.00L&S Holdings, LLC6135 Polo DriveCumming, GA 30040 ACCOUNT NO. NA account payable 54,616.88Landmark Design, Ltd.4460 Commerce DriveBuford, GA 30518 ACCOUNT NO. NA account payable 100.00Liberty Bond Servicesc/o Atlantic Risk5850 Waterloo Rd; number 240Columbia, MD 21045 Sheet 8 of 15 total sheets in Schedule of Creditors Holding Unsecured Nonpriority Claims Software Copyright (c) 1996-2009 Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6F (Official Form 6F) (12/07) - Cont. In re Parker Chandler Homes, LLC Case No Debtor(s) SCHEDULE F - CREDITORS HOLDING UNSECURED NONPRIORITY CLAIMS(Continuation Sheet) CREDITOR’S NAME,MAILING ADDRESSINCLUDING ZIP CODE,AND ACCOUNT NUMBER(See instructions above.) CODEBTOR Husband, Wife, Joint, or Community CONTINGENT UNLIQUIDATED DISPUTED AMOUNT OF CLAIM HWJC DATE CLAIM WAS INCURRED ANDCONSIDERATION FOR CLAIM. IF CLAIMIS SUBJECT TO SETOFF, SO STATE. ACCOUNT NO. NA account payable 100.00Marcelino Reyes Painting, Inc.651 Roscoe Davis RoadMonroe, GA 30656 ACCOUNT NO. NA notice only 0.00Marc V. Thomes, Esq.Merbaum Law Group, PC5755 North Point PkwySuite 284Alpharetta, GA 30004 ACCOUNT NO. NA account payable 12,813.00Mason Bahr, LLPAttn: Chip CarterTwo Ravinia Drive; Suite 610Atlanta, GA 30346 ACCOUNT NO. NA account payable 68.27Masterpiece Lighting, Inc.774 Forrest StreetAtlanta, GA 30313 ACCOUNT NO. NA account payable 1,060.00McClain & MerrittAttn: Ed Goodgame11625 Rainwatter Dr; Ste 125Alpharetta, GA 30004 ACCOUNT NO. NA additional notice address 0.00McClain & Merritt3445 Peachtree Rd NESuite 500Atlanta, GA 30326-1276 Sheet 9 of 15 total sheets in Schedule of Creditors Holding Unsecured Nonpriority Claims Software Copyright (c) 1996-2009 Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6F (Official Form 6F) (12/07) - Cont. In re Parker Chandler Homes, LLC Case No Debtor(s) SCHEDULE F - CREDITORS HOLDING UNSECURED NONPRIORITY CLAIMS(Continuation Sheet) CREDITOR’S NAME,MAILING ADDRESSINCLUDING ZIP CODE,AND ACCOUNT NUMBER(See instructions above.) CODEBTOR Husband, Wife, Joint, or Community CONTINGENT UNLIQUIDATED DISPUTED AMOUNT OF CLAIM HWJC DATE CLAIM WAS INCURRED ANDCONSIDERATION FOR CLAIM. IF CLAIMIS SUBJECT TO SETOFF, SO STATE. ACCOUNT NO. NA account payable 69.00McNair Law Firm, P.A.Attn: Lynn Stevens2411 Oak Street; Number 206Myrtle Beach, SC 29577 ACCOUNT NO. NA account payable 1,895.00Mickey Thomas & Sons6065 Southard TraceSuite 106Cumming, GA 30040 ACCOUNT NO. NA account payable 1,200.00Move Sales, Inc.PO Box 13239Scottsdale, AZ 85267-3239 ACCOUNT NO. NA complaint for damages 12,860.00New South Publishing, Inc.450 North ridge PkwySuite 202Atlanta, GA 30350 ACCOUNT NO. NA additional notice address 0.00New South Publising, Inc.1303 Hightower trallSuite 106Cumming, GA 30040 ACCOUNT NO. NA account payable 9,600.00NEXT, LLC3535 Highway 81Loganville, GA 30052 Sheet 10 of 15 total sheets in Schedule of Creditors Holding Unsecured Nonpriority Claims Software Copyright (c) 1996-2009 Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6F (Official Form 6F) (12/07) - Cont. In re Parker Chandler Homes, LLC Case No Debtor(s) SCHEDULE F - CREDITORS HOLDING UNSECURED NONPRIORITY CLAIMS(Continuation Sheet) CREDITOR’S NAME,MAILING ADDRESSINCLUDING ZIP CODE,AND ACCOUNT NUMBER(See instructions above.) CODEBTOR Husband, Wife, Joint, or Community CONTINGENT UNLIQUIDATED DISPUTED AMOUNT OF CLAIM HWJC DATE CLAIM WAS INCURRED ANDCONSIDERATION FOR CLAIM. IF CLAIMIS SUBJECT TO SETOFF, SO STATE. ACCOUNT NO. X NA notice only; collection attorney 0.00NEXT, LLCc/o Andrew N. Gross; Suite 2001201 P’tree St NE; Bldg 400 ACCOUNT NO. NA notice only, attorney for Landmark DesignAssociates, LLC 0.00Paul W. Andrew, Esq.for Landmark Design AssociatesSeven Lumpkin StreetLawrenceville, GA 30045 ACCOUNT NO. NA liability under performance bonds X X 0.00Paulding County Govenment240 Constitution RoadDallas, GA 30132 ACCOUNT NO. 8852882 NA account payable 17.17Pitney Bowes GlobalPO Box 856460Louisville, KY 40285-6460 ACCOUNT NO. 8000-9090-0253-4571 NA account payable 42.16Pitney Bowes Purchase PowerPO Box 856042Louisville, KY 40285-6042 ACCOUNT NO. X NA account payable 0.00Platte River Insurance Co.2975 Vine CircleDecatur, GA 30033 Sheet 11 of 15 total sheets in Schedule of Creditors Holding Unsecured Nonpriority Claims Software Copyright (c) 1996-2009 Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6F (Official Form 6F) (12/07) - Cont. In re Parker Chandler Homes, LLC Case No. Debtor(s) SCHEDULE F - CREDITORS HOLDING UNSECURED NONPRIORITY CLAIMS(Continuation Sheet) CREDITOR’S NAME,MAILING ADDRESSINCLUDING ZIP CODE,AND ACCOUNT NUMBER(See instructions above.) CODEBTOR Husband, Wife, Joint, or Community CONTINGENT UNLIQUIDATED DISPUTED AMOUNT OF CLAIM HWJC DATE CLAIM WAS INCURRED ANDCONSIDERATION FOR CLAIM. IF CLAIMIS SUBJECT TO SETOFF, SO STATE. ACCOUNT NO. R. Jerry Thackerc/o Larry C. Oldham, P.C.416 Pirkle Ferry R, Ste K-500Cumming, GA 30040 NA notice only 0.00ACCOUNT NO. Rajendra Tummala1880 Lynwood PlaceAlpharetta, GA 30004 NA account payable 5,000.00ACCOUNT NO. Richard M. Howe, Esq.for Stuart Mechanical Service4385 Kimball Bridge Rd Ste 100Alpharetta, GA 30022 NA notice only; attorneys for Stuart MechanicalService, Inc. 0.00ACCOUNT NO. S. Gregory Joy, Esq.Smith, Currie & Hancock LLP245 P’tree Cntr Ave NE; # 2700Atlanta, GA 30303-1227 NA notice only; attorneys forParamont Grading Company 0.00ACCOUNT NO. various Sawnee EMCPO Box 2153Birmingham, AL 35287-2530 NA accounts payable 750.80ACCOUNT NO. various Scana EnergyPO Box 100157Columbia, SC 29202-3157 NA accounts payable 455.77Sheet 12 of 15 total sheets in Schedule of Creditors Holding Unsecured Nonpriority Claims Software Copyright (c) 1996-2009 Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6F (Official Form 6F) (12/07) - Cont In re Parker Chandler Homes, LLC Case No. Debtor(s) SCHEDULE F - CREDITORS HOLDING UNSECURED NONPRIORITY CLAIMS(Continuation Sheet) CREDITOR’S NAME,MAILING ADDRESSINCLUDING ZIP CODE,AND ACCOUNT NUMBER(See instructions above.) CODEBTOR Husband, Wife, Joint, or Community CONTINGENT UNLIQUIDATED DISPUTED AMOUNT OF CLAIM HWJC DATE CLAIM WAS INCURRED ANDCONSIDERATION FOR CLAIM. IF CLAIMIS SUBJECT TO SETOFF, SO STATE. ACCOUNT NO. Signature Communities, LLC5400 Laurel Springs PkwyBldg 100 - Suite 102Suwanee, GA 30024 X NA business dispute X 300,000.00ACCOUNT NO. Soon Tan12260 Osprey DriveAlpharetta, GA 30004 NA account payable 19,968.00ACCOUNT NO. DC 1041221 Staples Business AdvantageDept DC 85105Hartford, CT 06150-0851 NA account payable 0.00ACCOUNT NO. Stephen Ross Plumbing, Inc.5140 Carson CourtBuford, GA 30518 NA account payable 3,215.00ACCOUNT NO. Sutter McClellan & Gilbreath1424 North Brown RoadNumber 300Lawrenceville, GA 30043-8107 NA account payable 200.00ACCOUNT NO. The Atlanta JournalP.O. Box 105375Atlanta, GA 30348-5375 NA account payable 2,088.00Sheet 13 of 15 total sheets in Schedule of Creditors Holding Unsecured Nonpriority Claims Software Copyright (c) 1996-2009 Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6F (Official Form 6F) (12/07) - Cont. In re Parker Chandler Homes, LLC Case No. Debtor(s) SCHEDULE F - CREDITORS HOLDING UNSECURED NONPRIORITY CLAIMS(Continuation Sheet) CREDITOR’S NAME,MAILING ADDRESSINCLUDING ZIP CODE,AND ACCOUNT NUMBER(See instructions above.) CODEBTOR Husband, Wife, Joint, or Community CONTINGENT UNLIQUIDATED DISPUTED AMOUNT OF CLAIM HWJC DATE CLAIM WAS INCURRED ANDCONSIDERATION FOR CLAIM. IF CLAIMIS SUBJECT TO SETOFF, SO STATE. ACCOUNT NO. The Caiaccio Law Firm, LLC3455 Peachtree Rd NENumber 500Atlanta, GA 30326 NA account payable 0.00ACCOUNT NO. The Lamar Companiesc/o Howe and Associates4385 Kimball Bridge Rd Ste 100Alpharetta, GA 30022 NA account payable 4,128.00ACCOUNT NO. Travelers Casualty &Surety Co. of AmericaHartford, CT 06183-9062 NA account payable 100.00ACCOUNT NO. Tyler Dixon, Esq.Raiford & Dixon, LLC6065 Roswell Road; Suite 200Atlanta, GA 30328 NA notice only; attorneys for Tabas, LLLP 0.00ACCOUNT NO. Wildes-Spirit Design & PrintngPO Box 1510White Plains, MD 20695 NA account payable 2,016.74ACCOUNT NO. William Rogers, Esq.Whelchel, Dunlap, et alPO Box oneGainesville, GA 30503 NA notice only 0.00Sheet 14 of 15 total sheets in Schedule of Creditors Holding Unsecured Nonpriority Claims Software Copyright (c) 1996-2009 Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6F (Official Form 6F) (12/07) - Cont. In re Parker Chandler Homes, LLC Case No. Debtor(s) SCHEDULE F - CREDITORS HOLDING UNSECURED NONPRIORITY CLAIMS(Continuation Sheet) CREDITOR’S NAME,MAILING ADDRESSINCLUDING ZIP CODE,AND ACCOUNT NUMBER(See instructions above.) CODEBTOR Husband, Wife, Joint, or Community CONTINGENT UNLIQUIDATED DISPUTED AMOUNT OF CLAIM HWJC DATE CLAIM WAS INCURRED ANDCONSIDERATION FOR CLAIM. IF CLAIMIS SUBJECT TO SETOFF, SO STATE. ACCOUNT NO. Wise Guys Conracting11128 Industrial RoadManassas, VA 20109-3909 NA account payable 108.00 Total(Use only on last page of the completed Schedule F.)(Report also on Summary of Schedules and, if applicable, on theStatistical Summary of Certain Liabilities and Related Data.) 506,988.24Sheet 15 of 15 total sheets in Schedule of Creditors Holding Unsecured Nonpriority Claims Software Copyright (c) 1996-2009 Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6G (Official Form 6G) (12/07) In re Parker Chandler Homes, LLC Case No. Debtor(s) SCHEDULE G - EXECUTORY CONTRACTS AND UNEXPIRED LEASESDescribe all executory contracts of any nature and all unexpired leases of real or personal property. Include any timeshare interests. State nature ofdebtor’s interest in contract, i.e., “Purchaser,” “Agent,” etc. State whether debtor is the lessor or lessee of a lease. Provide the names and complete mailingaddresses of all other parties to each lease or contract described. If a minor child is a party to one of the leases or contracts, state the child’s initials and thename and address of the child’s parent or guardian, such as “A.B., a minor child, by John Doe, guardian.” Do not disclose the child’s name. See, 11 U.S.C.§112 and Fed. R. Bankr. P. 1007(m). ¨Check this box if debtor has no executory contracts or unexpired leases. NAME AND MAILING ADDRESS,INCLUDING ZIP CODE,OF OTHER PARTIES TO LEASE OR CONTRACT. DESCRIPTION OF CONTRACT OR LEASE ANDNATURE OF DEBTOR’S INTEREST. STATEWHETHER LEASE IS FOR NONRESIDENTIALREAL PROPERTY. STATE CONTRACTNUMBER OF ANY GOVERNMENT CONTRACT.Canon Financial Services, Inc. 2 copiers14904 Collections Center Drive Chicago, IL 60693 Sheet 1 of 1 total sheets in Schedule of Executory Contracts and Unexpired Leases Software Copyright (c) 1996-2009 Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6H (Official Form 6H) (12/07) In re Parker Chandler Homes, LLC Case No. Debtor(s) SCHEDULE H – CODEBTORSProvide the information requested concerning any person or entity, other than a spouse in a joint case, that is also liable on any debts listed by thedebtor in the schedules of creditors. Include all guarantors and co-signers. If the debtor resides or resided in a community property state, commonwealth, orterritory (including Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Puerto Rico, Texas, Washington, or Wisconsin) within the eightyears immediately preceding the commencement of this case, identify the name of the debtor’s spouse and of any former spouse who resides or resided withthe debtor in the community property state, commonwealth, or territory. Include all names used by the nondebtor spouse during the eight years immediatelypreceding the commencement of this case. If a minor child is a codebtor or a creditor, state the child’s initials and the name and address of the child’s parentor guardian, such as “A.B., a minor child, by John Doe, guardian.” Do not disclose the child’s name. See, 11 U.S.C. §112 and Fed. R. Bankr. P. 1007(m). ¨Check this box if debtor has no codebtors. NAME AND ADDRESS OF CODEBTOR NAME AND ADDRESS OF CREDITORAndew H. Chandlerc/o John Christy, Esq.100 P’tree St NE; #800Atlanta, GA 30309 Signature Communities, LLC5400 Laurel Springs PkwyBldg 100 - Suite 102Suwanee, GA 30024Comstock Homes Realty, LLC11465 Sunset Hills Rd5th FloorReston, VA 20190 NEXT, LLCc/o Andrew N. Gross; Suite 2001201 P’tree St NE; Bldg 400Comstock HomebuildingCompanies, Inc.11465 Sunset Hills Rd; 5th FlrReston, VA 20190 Atlanta Communities Magazine1000 Parkwood CircleSuite 260Atlanta, GA 30339James B. Parker, Jr.2105 Woodfall DriveCumming, GA 30041 Robert Bowden, Inc.Attn: Stephen Cole, CEOPO Box 4237Marietta, GA 30061-4237James B. Parker, Jr.2105 Woodfall DriveCumming, GA 30041 Signature Communities, LLC5400 Laurel Springs PkwyBldg 100 - Suite 102Suwanee, GA 30024Post Preserve, LLC11465 Sunset Hills RoadSuite 20190Reston,VA 20190 Paramont Grading CompanyJohn Pearson, Registered Agent4405 Canton HwyCumming, GA 30040Andew H. Chandlerc/o John Christy, Esq.100 P’tree St NE; #800Atlanta, GA 30309 Platte River Insurance Co.2975 Vine CircleDecatur, GA 30033Sheet 1 of 2 total sheets in Schedule of Codebtors Software Copyright (c) 1996-2009 Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6H (Official Form 6H) (12/07) - cont. In re Parker Chandler Homes, LLC Case No. SCHEDULE H - CODEBTORS(Continuation Sheet) NAME AND ADDRESS OF CODEBTOR NAME AND ADDRESS OF CREDITORAndew H. Chandlerc/o John Christy, Esq.100 P’tree St NE; #800Atlanta, GA 30309 Platte River Insurance Co.2975 Vine CircleDecatur, GA 30033James B. Parker, Jr.2105 Woodfall DriveCumming, GA 30041 RBC Builder FinanceAttn: Legal11011 Richmond Ave.; Suite 850Houston, TX 77042James B. Parker, Jr.2105 Woodfall DriveCumming, GA 30041 RBC Builder FinanceAttn: Legal11011 Richmond Ave.; Suite 850Houston, TX 77042Sheet 2 of 2 total sheets in Schedule of Codebtors Software Copyright (c) 1996-2009 Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy United States Bankruptcy CourtNorthern District of Georgia, Atlanta Division In re Parker Chandler Homes, LLC Case No. Debtor(s) Chapter 7DISCLOSURE OF COMPENSATION OF ATTORNEY FOR DEBTOR(S) 1.Pursuant to 11 U.S.C. § 329(a) and Bankruptcy Rule 2016(b), I certify that I am the attorney for the above-named debtor and that compensation paid tome within one year before the filing of the petition in bankruptcy, or agreed to be paid to me, for services rendered or to be rendered on behalf of thedebtor(s) in contemplation of or in connection with the bankruptcy case is as follows: For legal services, I have agreed to accept $3,000.00Prior to the filing of this statement I have received $3,000.00Balance Due $0.00 2.$299.00 of the filing fee has been paid. 3.The source of the compensation paid to me was:x Debtor ¨ Other (specify): 4.The source of compensation to be paid to me is:x Debtor ¨ Other (specify): 5.x I have not agreed to share the above-disclosed compensation with any other person unless they are members and associates of my law firm. ¨I have agreed to share the above-disclosed compensation with a person or persons who are not members or associates of my law firm. A copy ofthe agreement, together with a list of the names of the people sharing in the compensation is attached. 6.In return for the above-disclosed fee, I have agreed to render legal service for all aspects of the bankruptcy case, including: a.Analysis of the debtor’s financial situation, and rendering advice to the debtor in determining whether to file a petition in bankruptcy; b.Preparation and filing of any petition, schedules, statement of affairs and plan which may be required; c.Representation of the debtor at the meeting of creditors and confirmation hearing, and any adjourned hearings thereof; d.[Other provisions as needed] 7.By agreement with the debtor(s), the above-disclosed fee does not include the following service:representation of the debtor(s) in adversary proceedings.CERTIFICATIONI certify that the foregoing is a complete statement of any agreement or arrangement for payment to me for representation of the debtor(s) in thisbankruptcy proceeding. Dated: 11/25/2009 /s/ Paul Reece Marr Paul Reece Marr Paul Reece Marr, P.C. Suite 960 300 Galleria Parkway Atlanta, GA 30339 (770) 984-2255pmarr@mindspring.com Software Copyright (c) 1996-2009 Best Case Solutions - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6 Summary (Form 6 - Summary) (12/07)United States Bankruptcy CourtNorthern District of Georgia, Atlanta Division In re Parker Chandler Homes, LLC Case No. Debtor(s) Chapter 7SUMMARY OF SCHEDULESIndicate as to each schedule whether that schedule is attached and state the number of pages in each. Report the totals from Schedules A, B, D, E, F, I, and J inthe boxes provided. Add the amounts from Schedules A and B to determine the total amount of the debtor’s assets. Add the amounts of all claims fromSchedules D, E, and F to determine the total amount of the debtor’s liabilities. Individual debtors also must complete the “Statistical Summary of CertainLiabilities and Related Data” if they file a case under chapter 7,11, or 13. NAME OF SCHEDULE ATTACHED(YES/NO) NO. OFSHEETS ASSETS LIABILITIES OTHERA - Real Property Yes 1 $1,018,348.00 B - Personal Property Yes 3 $0.00 C - Property Claimed as Exempt No 0 D - Creditors Holding Secured Claims Yes 4 $18,268,821.08 E - Creditors Holding Unsecured Priority Claims(Total of Claims on Schedule E) Yes 2 $58,907.11 F - Creditors Holding Unsecured Nonpriority Claims Yes 16 $506,988.24 G - Executory Contracts and Unexpired Leases Yes 1 H - Codebtors Yes 1 I - Current Income of Individual Debtor(s) No 0 $N/AJ - Current Expenditures of Individual Debtor(s) No 0 $N/ATOTAL 28 $1,018,348.00 $18,834,716.43 Form 6 - Statistical Summary (12/07)United States Bankruptcy CourtNorthern District of Georgia, Atlanta Division In re Parker Chandler Homes, LLC Case No. Debtor(s) Chapter 7STATISTICAL SUMMARY OF CERTAIN LIABILITIES AND RELATED DATA (28 U.S.C. § 159)If you are an individual debtor whose debts are primarily consumer debts, as defined in § 101(8) of the Bankruptcy Code (11 U.S.C. § 101(8)), filing acase under chapter 7, 11 or 13, you must report all information requested below.x Check this box if you are an individual debtor whose debts are NOT primarily consumer debts. You are not required to report any information here.This information is for statistical purposes only under 28 U.S.C. § 159.Summarize the following types of liabilities, as reported in the Schedules, and total them. Type of Liability Amount Domestic Support Obligations (from Schedule E) $ Taxes and Certain Other Debts Owed to Governmental Units(from Schedule E) $ Claims for Death or Personal Injury While Debtor Was Intoxicated (from Schedule E) (whether disputed or undisputed) $ Student Loan Obligations (from Schedule F) $ Domestic Support, Separation Agreement, and Divorce Decree Obligations Not Reported on Schedule E $ Obligations to Pension or Profit-Sharing, and Other Similar Obligations (from Schedule F) $ TOTAL $ State the following: Average Income (from Schedule I, Line 16) $ Average Expenses (from Schedule J, Line 18) $ Current Monthly Income (from Form 22A Line 12; OR, Form 22B Line 11;OR, Form 22C Line 20) $ State the following: 1. Total from Schedule D, “UNSECURED PORTION, IF ANY” column $ 2. Total from Schedule E, “AMOUNT ENTITLED TO PRIORITY” column. $ 3. Total from Schedule E, “AMOUNT NOT ENTITLED TO PRIORITY, IF ANY” column $ 4. Total from Schedule F $ 5. Total of non-priority unsecured debt (sum of 1, 3, and 4) $ Software Copyright (c) 1996-2009 Best Case Solutions, Inc. - Evanston, IL - (800) 492-8037 Best Case Bankruptcy B6 Declaration (Official Form 6 - Declaration) (12/07)United States Bankruptcy CourtNorthern District of Georgia, Atlanta Division In re Parker Chandler Homes, LLC Case No. Debtor(s) Chapter 7DECLARATION CONCERNING DEBTOR’S SCHEDULESDECLARATION UNDER PENALTY OF PERJURY ON BEHALF OF CORPORATION OR PARTNERSHIPI, the of the corporation named as debtor in this case, declare under penalty of perjury that I have read the foregoing summary and schedules, consistingof 30 sheets, and that they are true and correct to the best of my knowledge, information, and belief. Date 11/25/2009 Signature /s/ Christopher Clemente Christopher ClementePenalty for making a false statement or concealing property: Fine of up to $500,000 or imprisonment for up to 5 years or both.18 U.S.C. §§ 152 and 3571. Software Copyright (c) 1996-2009 Best Case Solutions, Inc. - Evanston, IL - (800) 492-8037 Best Case Bankruptcy United States Bankruptcy CourtNorthern District of Georgia, Atlanta Division In re Parker Chandler Homes, LLC Case No. Debtor(s) Chapter 7CORPORATE OWNERSHIP STATEMENT (RULE 7007.1)Pursuant to Federal Rule of Bankruptcy Procedure 7007.1 and to enable the Judges to evaluate possible disqualification or recusal, the undersigned counselfor Parker Chandler Homes, LLC in the above captioned action, certifies that the following is a (are) corporation(s), other than the debtor or a governmentalunit, that directly or indirectly own(s) 10% or more of any class of the corporation’s(s’) equity interests, or states that there are no entities to report underFRBP 7007.1:Comstock HomebuildingCompanies, Inc.11465 Sunset Hills Rd; #500Reston, VA 20190 ¨None [Check if applicable] 11/25/2009 /s/ Paul Reece MarrDate Paul Reece MarrSignature of Attorney or LitigantCounsel for Parker Chandler Homes, LLCPaul Reece Marr, P.C.Suite 960300 Galleria ParkwayAtlanta, GA 30339(770) 984-2255pmarr@mindspring.com Software Copyright (c) 1996-2009 Best Case Solutions, Inc. - Evanston, IL - (800) 492-8037 Best Case Bankruptcy SUPPLEMENTAL MATRIXAnand Narayanan andSunitha Subbarao2910 Buford Dr; Apt. 910Buford, GA 30519Douglas Thompson, Esq.Douglas Thompson, PC1872-C Independence SquareDunwoody, GA 30338Marc V. Thomses, Esq.Merbaum Law Group, PC5755 North Point PkwySuite 284Alpharetta, GA 30004Rajendra Tummala1880 Lynwood PlaceAlpharetta, GA 30004Soon Tan12260 Osprey DriveAlpharetta, GA 30004William Rogers, Esq.Whelchel, Dunlap, et alPO Box oneGainesville, GA 30503 UNITED STATES BANKRUPTCY COURTNORTHERN DISTRICT OF GEORGIAATLANTA DIVISION In re: : Case No. 09-90334-MHM : PARKER CHANDLER HOMES, LLC, : Chapter 7 : Debtor. : : CERTIFICATE OF SERVICEI, Paul Reece Marr, certify that I am over the age of 18 and that on the below referenced date I served a copy of the attached STATEMENT OFFINANCIAL AFFAIRS, SCHEDULES, AND SUPPLEMENTAL MATRIX by first class U.S. Mail, with adequate postage prepaid on the following persons orentities at the addresses stated on the attached list:Tamara Miles OgierEllenberg, Ogier,Rothschild & Rosenfeld170 Mitchell St. S.W.Atlanta, GA 30303This the 25 day of November, 2009. /s/ Paul Reece MarrPaul Reece MarrPaul Reece Marr, P.C.300 Galleria Pkwy; Ste 960Atlanta, GA 30339770/984-2255 –2–th Exhibit 10.85AGREEMENT OF SUBLEASETHIS AGREEMENT OF SUBLEASE (“Sublease”) is made as of the 31 day of December, 2009 by and between Comstock Asset Management, L.C.(“Sublandlord”) and Comstock Property Management, L.C., a Virginia limited liability company (“Subtenant”).WITNESSETHWHEREAS, pursuant to a Lease Agreement between Sublandlord and 11465 SH I, LC (f/k/a Comstock Partners, L.C.) (“Landlord”) dated October 1,2004, as amended (“Lease”), Landlord leased to Sublandlord a portion (“Premises”) of Landlord’s building (“Building”) at 11465 Sunset Hills Road, Reston,Virginia.WHEREAS, Subtenant desires to sublet from Sublandlord a portion of the Premises, and Subtenant and Sublandlord desire to enter into this Sublease toset forth their respective rights, duties and liabilities relating to the Subleased Premises.NOW, THEREFORE, in consideration of the mutual covenants herein and for other valuable consideration, the receipt and sufficiency of which ishereby acknowledged by the parties, Sublandlord and Subtenant mutually agree and intend to be legally bound as follows: 1.Subleased Premises. Sublandlord leases to Subtenant those premises known as “Suite 410,” comprising 7,620 rentable square feet, and “Suite 110,”comprising 550 rentable square feet, as the same are depicted on Exhibit A attached hereto (collectively, the “Subleased Premises”). 2.Sublease Term. A.The “Sublease Term” shall commence on January 1, 2010, or at such later date as the Subleased Premises becomes available for use andoccupancy by Subtenant, or when Sublandlord has secured the consent of the Landlord (“Commencement Date”). B.The Sublease Term shall expire on the last day of the calendar month which completes three years after the Commencement Date (i.e.,December 31, 2012) (“Expiration Date”). C.After the Commencement Date, the parties shall promptly execute a Commencement and Expiration Date Memorandum substantially in theLandlord’s standard form, which is attached hereto as Exhibit B, wherein the parties shall specify the Commencement Date, the Expiration Dateand the date on which Subtenant is to commence paying Basic Rent. 3.Basic Rent. Subtenant shall pay to Sublandlord rent in equal monthly installments on the first (1) day of each month. If the Commencement Date isnot the 1 of the month, then for the initial partial month of the Sublease Term, Subtenant shall pay to Sublandlord a prorated amount of the MonthlyBasic Rent. The Basic Rent during the Sublease Term hereunder will be as follows: Suite 110 - 550 SF Suite 410 – 7,620 SF Premises Annual Monthly Rent PSF Annual Monthly Rent PSF Monthly TotalLease Year 1 $11,000.00 $916.67 $20.00 $188,595.00 $15,716.25 $24.75 $16,632.92Lease Year 2 $11,440.00 $953.33 $20.80 $196,138.80 $16,344.90 $25.74 $17,298.23Lease Year 3 $11,897.60 $991.47 $21.63 $203,984.35 $16,998.70 $26.77 $17,990.16 11465 – CPM Sublease 1 of 13 ststst 4.Late Payments. Should Monthly installments of the Basic Rent not be made on or before the 5 day of a calendar month, the payment shall beconsidered overdue and Sublandlord may begin charging Subtenant an interest rate per annum equal to the sum of (i) the prime rate of interestestablished and publicly announced by The Chase Manhattan Bank, N.A., New York, plus (ii) four percent (4%), until such payment is made. In noevent shall the default rate of interest be less then twelve percent (12%) nor more then eighteen percent (18%). 5.Subordination. This Sublease is in all respects subject and subordinated to the Lease between Landlord and Sublandlord, a copy of which is attachedhereto and incorporated as Exhibit E. 6.Assignment. No assignment of this Sublease nor further sublease of any portion of the Subleased Premises shall be made without the prior writtenconsent of Sublandlord and approval of Landlord. 7.Operating Expenses. A pro-rata portion of any operating expenses due under the Lease in excess of the Sublease Base Year (2009) shall be payable asadditional rent hereunder in the same manner as Basic Rent. 8.Parking. Subtenant will have the right to utilize a proportionate share of Sublandlord’s parking spaces at the Building at no cost during the SubleaseTerm. The number of parking spaces and the location of reserved parking spaces, if any, available for Subtenant’s use under the current parkingprogram for the Building are set forth on Exhibit C attached hereto and incorporated herein. 9.Condition, Acceptance and Use of Subleased Premises A.Sublandlord will deliver the Subleased Premises with certain improvements having been constructed based upon plans and specificationspreviously approved by the parties. Upon the Commencement Date, Subtenant shall accept the Subleased Premises in their existing conditionand state of repair. Sublandlord and Subtenant acknowledge that the Subleased Premises contains certain furniture, fixtures and/or equipment(“Existing FF&E”) which is the property of Landlord, an inventory of which is set forth on Exhibit D attached hereto and incorporated herein.Without payment of additional rent, Subtenant shall have the right to use the Existing FF&E during the Sublease Term. At the expiration of theSublease Term, the Existing FF&E shall be delivered to Landlord in condition substantially the same as its condition as of the effective datehereof, with the exception of normal wear and tear. Subtenant acknowledges that no representations, statements or warranties, express or implied,have been made by or on behalf of the Sublandlord in respect to the condition of the Subleased Premises, or the use or occupation that may bemade thereof, and that Sublandlord shall in no event whatsoever be liable for any latent defects in the Subleased Premises or in the ExistingFF&E. Sublandlord shall enforce the provisions of the Lease with regard to Landlord’s obligations to provide services to the Subleased Premisesand common areas. B.Acceptance of the Subleased Premises by Subtenant shall be construed as recognition that the Subleased Properties are in a good state of repairand in sanitary condition. Sublandlord shall not be liable for any losses or damages incurred by Subtenant due to failure of operation of theheating, cooling, or other utility equipment or due to the necessity of repair of the same. 11465 – CPM Sublease 2 of 13 th C.The Subleased Premises shall be used or occupied by Subtenant solely for executive and general office uses as permitted in Section 6 of theLease and shall not be used for any other purpose. Subtenant shall not use or occupy the Subleased Premises for any unlawful purpose nor placeany excessive or unreasonable demands upon the Building. D.Subtenant shall surrender the Subleased Premises at the expiration of the Sublease Term, or upon earlier termination thereof, in the samecondition as when Subtenant took possession, reasonable wear and tear excepted. E.Except as specifically provided herein, Sublandlord shall have no responsibility whatsoever with respect to the Subleased Premises, thecondition thereof or Subtenant’s property situated therein, except for loss, injury or damage caused by Sublandlord’s gross negligence or willfulmisconduct. Sublandlord shall not be liable for the failure by Landlord to keep and perform, according to the terms of the Lease, Landlord’sduties, covenants, agreements, obligations, restrictions, conditions and provisions, nor for any delay or interruption in Landlord’s keeping andperforming the same. Sublandlord hereby assigns to Subtenant, for so long as this Sublease shall be in force and effect, any and all rights ofSublandlord under the Lease with respect to the Subleased Premises and causes of action which Sublandlord may have against Landlord withrespect to the Subleased Premises because of any default by Landlord under the Lease, excluding, however, any right of self-help or rentabatement. Sublandlord agrees to cooperate with and join Subtenant in any claims or suits brought by Subtenant against Landlord under theLease, provided that such participation shall be without cost or expense to Sublandlord. Subtenant has inspected the Subleased Premises and itscontents to its satisfaction and, except as specifically set forth herein, agrees to accept the Subleased Premises and its contents in its “as-is,where-is” condition without any obligations on Sublandlord to repair or modify the same. F.Sublandlord and Subtenant, and each of their affiliates, shall have a shared right to use the reception area(s), conference room(s) and kitchenfacilities within Suite 410 and shall cooperate with each other to establish reasonable requirements for advance scheduling (the partiesacknowledging that the rentable square footage of Suite 410 upon which Basic Rent and operating expenses are determined has been reduced toreflect this right). Sublandlord reserves the right to use and to grant other persons a license to use the exterior hallway of Suite 110, the door towhich shall remain unlocked at all times. 10.Default Under Superior Leases. A.Subtenant agrees to assume and perform, according to the terms of the Lease, all of the duties, covenants, agreements and obligations ofSublandlord under the Lease, as and when required by the Lease, with respect to the Subleased Premises, except Sublandlord’s duty to make rentpayments to Landlord. Subtenant further agrees to keep and obey, according to the terms of the Lease, all of the rules, restrictions, conditions andprovisions which pertain to the Subleased Premises, and are imposed by the terms of the Lease upon Sublandlord with respect to the SubleasedPremises or upon the use of the Subleased Premises. Subtenant agrees that it will take good care of the Subleased Premises, and will commit nowaste, and will not do, suffer, or permit to be done any injury to the same. It is hereby understood and agreed that Subtenant’s rights to use,possess and enjoy the Subleased Premises are subject to the terms, conditions, rules and regulations of the Lease and the rights and remedies ofLandlord thereunder. Subtenant agrees to indemnify, defend, and protect Sublandlord against, and to hold Sublandlord 11465 – CPM Sublease 3 of 13 harmless from, any liability, damages, costs or expenses of any kind or nature, including court costs and reasonable attorneys’ fees, resultingfrom any failure by Subtenant to perform, keep and obey the terms of this Sublease and the requirements of the Lease with respect to theSubleased Premises. Any failure by Subtenant to perform, keep and obey the same shall be a default by Subtenant hereunder. B.Subtenant shall not act in any manner which would cause a default under the terms of the Lease. Within five (5) business days of Sublandlord’sreceipt of notice of any default under the Lease which may jeopardize Subtenant’s quiet enjoyment of the Subleased Premises, Sublandlord shallnotify Subtenant of the nature of the default and of Sublandlord’s intention to cure such default. In the event Subtenant or Sublandlord receivesa notice of default from Landlord as a direct result of Subtenant’s actions, then Subtenant shall have all the rights to cure such event of defaultthat Sublandlord enjoys under the Lease; provided, however, that in the event Subtenant fails to timely cure any event of default, Sublandlordshall have the right to terminate this Sublease and Subtenant shall vacate the Subleased Premises within thirty (30) days (or such lesser period asmay be required to effect a cure of the default under the Lease). Further, Sublandlord shall have the right to recover from Subtenant all damagesto which Sublandlord is entitled including, without limitation, reletting expenses (vacancy, commissions, improvements, etc.) and any unpaidrent due hereunder up until the time of the reletting of the Subleased Premises; provided, that Sublandlord’s re-occupying of the SubleasedPremises will be deemed a reletting with respect to such portion of the space as is re-occupied by Sublandlord. C.Subtenant shall be in default of this Sublease to the extent that Subtenant fails to abide by the terms or conditions of this Sublease and/or theLease, with Subtenant being afforded the rights as to notice of default and curing of default as set forth above. Furthermore, if any default underthe Lease shall occur with respect to Subtenant, or if Subtenant fails to perform of any of its own covenants and obligations under this Sublease,then and in any of said cases, Subtenant shall be deemed in default, and Sublandlord shall have the right to exercise all remedies set forth in theLease as if Sublandlord were “Landlord” and Subtenant were “Tenant” thereunder. D.Subtenant hereby waives trial by jury in any action, proceeding, claim or counterclaim brought by Landlord or Sublandlord with respect to anymatter whatsoever arising out of or in any way connected with this Sublease, the relationship between Sublandlord and Subtenant, and/orSubtenant’s use or occupancy of the Subleased Premises. Subtenant further waives receipt of any notice to quit the Subleased Premises in theevent of any default hereunder. E.In the event either party files suit at law or equity to enforce the terms of this Sublease, the party substantially prevailing in such action shallrecover from the other party its reasonable expenses, including, but not limited to, court costs and reasonable attorneys’ fees. All such expensesshall bear interest at the highest rate allowable under the laws of the Commonwealth of Virginia until paid in full by the substantially non-prevailing party. 11.Insurance. During the Sublease Term, Subtenant shall maintain insurance in force with a company licensed to do business in Virginia, with policylimits of at least Two Million Dollars ($2,000,000.00) general liability and One Million Dollars ($1,000,000.00) property damage. Sublandlord shallbe named as an additional insured thereunder and Subtenant shall provide Sublandlord with a certificate of such insurance prior to the CommencementDate. Subtenant and 11465 – CPM Sublease 4 of 13 Sublandlord each hereby waive any and all rights of recovery against the other, or against the officers, employees, agents, members, managers andrepresentatives of the other, for loss of or damage to such waiving party or its property of the property of other under its control to the extent that suchloss or damage is insured against under any insurance policy in force at the time of such loss or damage and such loss or damage has been paid by theinsurance company. The insuring party shall, upon obtaining the policies of insurance required hereunder, give notice to the insurance carrier orcarriers that the foregoing mutual waiver of subrogation is contained in this Sublease. 12.Notices. Every notice, approval, consent or other communication authorized or required by this Sublease (“Notice”) shall not be effective unless sameshall be in writing and sent postage prepaid by the United States registered or certified mail, return receipt requested, or delivered by hand, and awritten receipt acknowledging such postal or hand delivery obtained for each designated recipient (or proof of refusal), directed to the other party atthe following addresses (indicating the date and to whom delivered), or such other address as either party may designate by Notice given from time totime in accordance with this paragraph: If to Subtenant: Comstock Property Management, L.C. 11465 Sunset Hills Road Suite 410 Reston, Virginia 20190 Attention: Gregory Benson With a copy to: Comstock Homebuilding Companies, Inc. 11465 Sunset Hills Road Suite 410 Reston, Virginia 20190 Attention: Jubal Thompson If to Sublandlord: Comstock Asset Management, L.C. 11465 Sunset Hills Road Suite 400 Reston, VA 20190 Attention: Christopher Clemente 13.Security. Upon full execution of the Sublease, Sublandlord shall deliver to Subtenant a reasonable number of suite entry keys for the SubleasedPremises and a reasonable number of Building perimeter security access cards, at no cost to Subtenant. 14.Identity. Sublandlord shall obtain Landlord’s consent, if necessary, for Subtenant’s Building Directory strips. 15.Landlord Approval. In the event the Lease requires the prior written consent of Landlord prior to an action by Subtenant, then Sublandlord, on behalfof Subtenant, shall initiate action to gain consent from Landlord within ten (10) days of Subtenant’s notice to Sublandlord concerning such proposedaction. The preceding sentence notwithstanding, in the event the Lease specifies the time period in which Landlord must respond to such a request forconsent, then such specified time period shall control. 16.Quiet Enjoyment. Subtenant shall have the peaceful and quiet use of the Subleased Premises, and all rights, servitude and privileges belonging or inanywise appertaining thereto or granted thereby, for the Sublease Term, without hindrance or interruption by Sublandlord. Sublandlord warrants that ithas the full right and authority to enter into this Sublease for the full term hereof. 11465 – CPM Sublease 5 of 13 17.Security Deposit. Upon Sublease execution, Subtenant shall provide or cause to be provided to Sublandlord a Security Deposit in the amount of$50,000.00. Subtenant may satisfy this requirement by delivery of a promissory note guaranteed by Comstock Homebuilding Companies, Inc. 18.Holdover. If Tenant shall hold over possession of the Subleased Premises after the end of the Sublease Term, then in such event this Sublease shallcontinue on a month-to-month basis at 150% of the Basic Rent, adjusted to a monthly basis, and subject to all the other conditions, provisions andobligations of this Sublease insofar as the same are applicable, or as the same shall be adjusted, to a month-to-month tenancy. 19.Communications. Subtenant agrees that all communications regarding the tenancy under this Sublease shall be directed or copied to the Sublandlordwho will in the case of property management issues contact Landlord. 20.Entire Agreement. This Sublease, together with the Exhibits attached hereto, contains and embodies the entire agreement of the parties hereto, and norepresentations, inducements or agreements, oral or otherwise, between the parties not contained in this Sublease and the Exhibits, shall be of any forceand effect. This Sublease may not be modified, changed or terminated in whole or in part in any manner other than by an agreement in writing dulysigned by the parties hereto.IN WITNESS WHEREOF, this Agreement of Sublease has been executed by the parties as of the date first hereinabove written. SUBLANDLORD: SUBTENANT:Comstock Asset Management, L.C. Comstock Property Management, L.C. By: Comstock Homebuilding Companies, Inc.By: By: Christopher Clemente, Manager Gregory Benson, Chief Operating Officer* * * 11465 – CPM Sublease 6 of 13 GUARANTYFor value received, the undersigned hereby absolutely, unconditionally, jointly and severally guarantees performance of Subtenant’s obligations under theSublease, including but not limited to full payment of all amounts coming due under this Sublease (including all reasonable attorneys fees and collectionexpenses), waives notice demand and any reporting requirement, and agrees that this guaranty is an obligation independent of the obligations of Subtenanthereunder that may be enforced by Sublandlord pursuant to a separate action regardless of whether any action is first brought against Subtenant. GUARANTOR:[Corporate Seal] Comstock Homebuilding Companies, Inc., a Delaware corporationBy: By: Name: Gregory BensonTitle: Chief Operating OfficerLANDLORD’S CONSENT AND AGREEMENT11465 SH I, LC, a Virginia limited liability company, as “Landlord” under the Lease hereby consents to the foregoing Agreement of Sublease betweenComstock Asset Management, L.C. and Comstock Property Management, L.C. dated December 31, 2009 and the terms and conditions thereunder. Landlord’sconsent herein shall not modify or affect the Lease or relieve Sublandlord from any liability thereunder. 11465 SH I, LCBy: Christopher Clemente, Manager Date: 11465 – CPM Sublease 7 of 13 EXHIBIT ASubleased PremisesSuite 410 11465 – CPM Sublease 8 of 13 EXHIBIT ASubleased Premises(continued)SUITE 110 11465 – CPM Sublease 9 of 13 EXHIBIT BForm of Commencement MemorandumCommencement and Expiration Date MemorandumThis Commencement and Expiration Date Memorandum is dated as of , 20 between Comstock Asset Management, L.C.(“Sublandlord”) and Comstock Property Management, L.C., a Virginia limited liability company (“Subtenant”).W I T N E S S E T H:WHEREAS, Sublandlord and Subtenant are parties to that certain Agreement of Sublease dated , 20 (the “Sublease”) relating topremises in the Building located at 11465 Sunset Hills Road in Reston, Virginia.NOW THEREFORE, Sublandlord and Subtenant hereby confirm as follows: 1.The Sublease Commencement Date is , 20 . 2.The scheduled Expiration Date is , 20 . 3.The Rentable Area of the Subleased Premises is square feet. 4.Landlord may rely upon the foregoing statements.IN WITNESS WHEREOF, Sublandlord and Subtenant have caused this Memorandum to be executed by their respective duly authorized managers,members, partners or officers as of the date first set forth above. SUBLANDLORD: SUBTENANT:Comstock Asset Management, L.C. Comstock Property Management, L.C. By: Comstock Homebuilding Companies, Inc.By: By: Christopher Clemente, Manager Gregory Benson, President 11465 – CPM Sublease 10 of 13 EXHIBIT CNumber and Location of Parking Spaces Category/Type of Space Number of SpacesReserved and Assigned to Tenant: 5Reserved for Tenants Only, but Unassigned: 10Unreserved and Unassigned: 8Total Spaces: 23Reserved Spaces: To be assignedby LandlordLandlord reserves the right to reconfigure the parking for the Property by establishing or relocating reserved parking spaces, subject to and in accordancewith the Lease. 11465 – CPM Sublease 11 of 13 EXHIBIT DExisting FF&E[Final approved list of Existing FF&E to be attached following occupancy.] Item Quantity 11465 – CPM Sublease 12 of 13 EXHIBIT ELease[To be attached.] 11465 – CPM Sublease 13 of 13 Exhibit 10.86Builder’s Co-Pilot Software License AgreementThis License Agreement dated January 1, 2010 governs the use by Comstock Homebuilding Companies, Inc. (hereafter “Licensee”), 11465 SunsetHills Road #500 Reston VA 20190 (Phone: 703- 883-1700) of the Builder’s Co-Pilot software and system which is owned and licensed by I-Connect, L.C.,with a principal place of business at 11465 Sunset Hills Road, Suite 400, Reston, Virginia 20190 (hereafter “ICG”). Subject to the timely payment byLicensee of the fees and charges set forth on the attached “Schedule of Fees and Usage Rights,” Licensee shall have the following rights:1. Definitions(a) “Software” or “System” refers to the Builder’s Co-Pilot brand of real estate development data management software program supplied by ICG herewith,and corresponding documentation, associated media, printed materials, and online or electronic documentation. (b) “Computer” means computer,workstation, terminal, handheld PC, pager, “smart phone,” or other digital electronic device. (c) “User Manual” means a compendium of operatinginstructions and system features that is provided to Licensee upon installation and configuration of the System. The User Manual addresses most, but not all,features and functions of the System and Licensee understands and agrees that the User Manual can and will be updated by ICG from time to time. It is agreedthat upon provision to Licensee of an updated version of the User Manual, that updated User Manual will supersede and replace the earlier User Manual,which update will be effective when Licensee actually receives the updated User Manual.2. License(a) Licensee may install, use, access, display, run, or otherwise interact with as many versions of the Software as is authorized on the attached “Schedule ofFees and Usage Rights.”(b) Licensee may make one additional copy of the Software in machine-readable form solely for backup purposes. Licensee must reproduce on any such copyall copyright notices and any other proprietary legends on the original copy of the Software.(c) Licensee agrees that ICG may audit use of the Software for compliance with these terms at any time, upon reasonable notice. Audit rights include access tonetwork and system log data and other resources capable of detailing the use of the Software by Licensee.(d) Licensee’s rights under this Agreement are non-exclusive.Additional Terms for Managed Service DeploymentWhere Licensee elects to operate the System locally and on its computers and network, except for the express support obligations agreed to by ICG herein,Licensee is and shall at all times remain responsible for data retention and related data protection and back up procedures.In the event Licensee chooses the managed service deployment option, where the System is operated and Licensee’s data is stored and processed on ICGcontrolled computers and networks, ICG shall use current and industry approved commercially reasonable efforts to protect Licensee’s data and to ensure thatLicensee’s authorized users are able to access and use the System 24 hours a day, 7 days a week and throughout the calendar year. In undertaking to make theSystem and Licensee’s data continuously available, Licensee recognizes that 1) interruptions can occur that are beyond the reasonable control of ICG arisingfrom hardware, software and network issues, and 2) routine maintenance and upgrades to the System will necessarily require that the System and Licensee’sdata be temporarily unavailable. ICG Confidential Page 1 of 6 shall undertake and use its commercially reasonable efforts to minimize all such interruptions and as to Licensee’s data shall cause periodic and regularbackups to be made using ICG’s established on-site and off-site data protection procedures.3. License Grant. Other than as set forth in Section 2, Licensee may not make or distribute copies of the Software, or electronically transfer the Software fromone computer to another or over a network. Licensee may not alter, merge, modify, adapt or translate the Software, or decompile, reverse engineer,disassemble, or reduce the Software to a human-perceivable form. Unless otherwise provided herein, Licensee may not rent, lease, or sublicense the Software.Licensee may transfer its rights hereunder to a successor entity provided ICG is notified in advance of and approves such transfer. Unless specifically agreedto by ICG in writing or otherwise provided herein, Licensee may not modify the Software or create derivative works based upon the Software. Licensee mayreceive the Software in more than one medium but shall only install or use one medium. Licensee shall comply with the User Manual and with all reasonableinstructions provided by ICG when using the System and processing data on ICG data storage facility. In the event Licensee fails to comply with any materialprovision of this Agreement, ICG may terminate the license, all Licensee usage rights shall cease and Licensee must destroy all copies of the Software (withall other rights of ICG and provisions protecting ICG surviving any such termination arising from breach by Licensee).4. Ownership. Licensee is authorized to make use the Software and, if applicable, the ICG network and data storage capacities. This license is non-exclusiveand ICG retains all right, title and interest, including all copyright and intellectual property rights, in and to, the Software and System. All rights notspecifically granted in this Agreement, including US and International Copyrights, are reserved to ICG.5. LIMITED WARRANTY AND DISCLAIMER(a) ICG warrants that, for a period of ninety (90) days from the date of delivery, and when used with a recommended hardware configuration, the Software will,subject to the following, perform in substantial conformance with the User Manual documentation supplied with the Software.(b) THE SOFTWARE AND SYSTEM IS PROVIDED “AS IS” AND ICG EXPRESSLY DISCLAIMS ALL WARRANTIES AND ALL LIABILITIESASSOCIATED WITH DATA INPUTTED, PROCESSED, STORED OR MADE AVAILABLE BY OR THROUGH THE SOFTWARE OR PURSUANTTO ANY DATA STORAGE OR ACCESS SERVICES OFFERED BY ICG HEREUNDER. EXCEPT AS SET FORTH IN THE FOREGOING LIMITEDWARRANTY, ICG AND ITS SUPPLIERS DISCLAIM ALL OTHER WARRANTIES AND REPRESENTATIONS, WHETHER EXPRESS, IMPLIED,OR OTHERWISE, INCLUDING THE WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. WHILEREASONABLE EFFORTS HAVE BEEN MADE, ICG DOES NOT WARRANT THAT THE SOFTWARE IS COMPLETELY ERROR-FREE. SOMESTATES DO NOT ALLOW THE EXCLUSION OF IMPLIED WARRANTIES, SO THE ABOVE EXCLUSION MAY NOT APPLY.6. Exclusive Remedy. Licensee exclusive remedy for any breach of warranty is to return the Software to ICG. Provided that any non-compliance with theabove warranty is reported in writing to ICG no more than ninety (90) days following delivery of the Software, ICG will use reasonable commercial efforts tosupply Licensee with a replacement copy of the Software that substantially conforms to the User Manual documentation, provide a replacement for defectivemedia, or refund the purchase price for the Confidential Page 2 of 6 Software, at ICG’s sole option. ICG shall have no responsibility if the Software has been altered in any way, if the media has been damaged by misuse,accident, abuse, modification or misapplication, or if the failure arises out of use of the Software with other than a recommended hardware configuration. Anymisuse, accident, abuse, modification or misapplication of the Software voids all warranties. THIS REMEDY IS THE SOLE AND EXCLUSIVE REMEDYAVAILABLE FOR BREACH OF EXPRESS OR IMPLIED WARRANTIES WITH RESPECT TO THE SOFTWARE AND RELATEDDOCUMENTATION.7. LIMITATION OF LIABILITY. NEITHER ICG NOR ITS SUPPLIERS SHALL BE LIABLE TO LICENSEE OR ANY THIRD PARTY FOR ANYINDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, COVER OR CONSEQUENTIAL DAMAGES (INCLUDING, BUT NOT LIMITED TO, DAMAGESFOR THE INABILITY TO USE EQUIPMENT OR ACCESS DATA, LOSS OF BUSINESS, LOSS OF PROFITS, BUSINESS INTERRUPTION OR THELIKE), ARISING OUT OF THE USE OF, OR INABILITY TO USE, THE SOFTWARE AND BASED ON ANY THEORY OF LIABILITY INCLUDINGBREACH OF CONTRACT, BREACH OF WARRANTY, TORT (INCLUDING NEGLIGENCE), PRODUCT LIABILITY, BREACH OF COPYRIGHT,INFRINGEMENT OR INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES INCLUDING BUT NOT LIMITED TO ANY RIGHTS HELD BYOWNERS OF WEBSITES AGAINST WHICH THE SOFTWARE IS APPLIED OR USED, OR OTHERWISE, EVEN IF ICG OR ITSREPRESENTATIVES HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND EVEN IF A REMEDY SET FORTH HEREIN ISFOUND TO HAVE FAILED OF ITS ESSENTIAL PURPOSE. ICG’S TOTAL LIABILITY TO LICENSEE FOR ACTUAL DAMAGES FOR ANYCAUSE WHATSOEVER WILL BE LIMITED TO THE GREATER OF $2000 OR THE AMOUNT PAID FOR THE SOFTWARE THAT CAUSEDSUCH DAMAGE.8. Basis of Bargain. The Limited Warranty and Disclaimer, Exclusive Remedies and Limited Liability set forth above are fundamental elements of the basisof the agreement between ICG and Licensee. ICG would not be able to provide the Software on an economic basis without such limitations. Such LimitedWarranty and Disclaimer, Exclusive Remedies and Limited Liability inure to the benefit of ICG’s licensors.9. No Distinction between End Users. The foregoing limitations or exclusions of warranties and liability contained in this Agreement affect all usersregardless of type or size.10. General. This Agreement shall be governed by the internal laws of the Commonwealth of Virginia, without giving effect to principles of conflict of laws.Licensee hereby consents to the exclusive jurisdiction and venue of the state courts or federal courts sitting in the Commonwealth of Virginia, to resolve anydisputes arising under this Agreement. In each case this Agreement shall be construed and enforced without regard to the United Nations Convention on theInternational Sale of Goods.This Agreement contains the complete agreement between the parties with respect to the subject matter hereof, and supersedes all prior or contemporaneousagreements or understandings, whether oral or written. Licensee agree that any varying or additional terms contained in any purchase order or other writtennotification or document issued in relation to the Software licensed hereunder shall be of no effect. The failure or delay of ICG to exercise any of its rightsunder this Agreement or upon any breach of this Confidential Page 3 of 6 Agreement shall not be deemed a waiver of those rights or of the breach.No amendment may be made to this Agreement unless by writing signed by both parties.If any provision of this Agreement shall be held by a court of competent jurisdiction to be contrary to law that provision will be enforced to the maximumextent permissible and the remaining provisions of this Agreement will remain in full force and effect.Notice to a party shall be as follows:I-Connect, L.C.Attn: Amitesh Sinha11465 Sunset Hills RoadSuite 410Reston, Virginia 20190Fax: (703) 471-3982Email: amitesh@iconnectgroup. comComstock Homebuilding Companies, Inc.Attn: Zerrick Pearson11465 Sunset Hills Road #500Reston, VA 20190Fax: (703) 760-1520Email: zpearson@comstockhomebuilding.comWith a copy to:Comstock Homebuilding Companies, Inc.Attn: Jubal Thompson11465 Sunset Hills Road #500Reston, VA 20190Fax: (703) 760-1520Email: jthompson@comstockhomebuilding.comTrademarks and Trade Dress: ICG, the ICG logo, Builders CoPilot Logo and other trademarks presented in the Software and the Software and System(including in documentation and the User Manual) are the intellectual property of ICG. Third party trademarks, trade names, product names and logos may bethe trademarks or registered trademarks of their respective owners. Licensee may not remove or alter any trademark, trade names, product names, logo,copyright or other proprietary notices, legends, symbols or labels in the Software. Confidential Page 4 of 6 ACCEPTED: I-Connect, LC Comstock Homebuilding Companies, Inc.By: /s/ Amitesh Sinha By: /s/ Christopher ClementeName: Amitesh Sinha Name: Christopher ClementeTitle: Title: CEO Confidential Page 5 of 6 Schedule of Fees and Usage RightsInitial Deposit and Payment: Upon execution of this Agreement Licensee shall pay a $ 0 initial payment for license fees and for any additional servicesrequested from ICG.License Fees: Licensee shall compensate ICG for use of the software and the system by paying Usage Fees based upon the number of “Neighborhoods” set upand used by Licensee in each month of use. For each Month, Licensee shall pay to I-Connect $6,000 for an unlimited number of Neighborhoods. As usedherein, Neighborhood means the neighborhood or Community where homes are being built or completed building by Licensee or agents of Licensee by theLicensee or agents of Licensee.ECard / eBlast / Internet Marketing via Emails Charges: Included Confidential Page 6 of 6 Exhibit 10.87Comstock Homebuilding Companies, Inc.Effective on or about December 23, 2009, Stonehenge Funding, LC (“Stonehenge”) exercised its option to purchase that certain Senior Note and Amendedand Restated Indenture dated March 14, 2008 by and between Comstock Homebuilding Companies, Inc. (“CHCI”) and JPMorgan Chase Funding, Inc, assuccessor (the “JP Morgan Note”). Based upon a request by the independent members of the Board of Directors of CHCI for a modification of the JP MorganNote, the terms below are a binding agreement to modify the terms and conditions of the JP Morgan Note. The parties shall negotiate and execute definitivedocumentation that shall contain the substantive terms hereof together with such other terms and conditions as the parties shall agree. The parties agree to usereasonable best efforts to complete such documentation as promptly as practicable following the date of the execution and delivery hereof. Neither thiscommitment nor any subsequent modification agreement of the JP Morgan Note is intended to violate any restrictions imposed upon CHCI or Stonehenge byCHCI’s lenders. Stonehenge and CHCI will hereafter commit the necessary resources to document and report the modifications agreed hereby. Borrower: Comstock Homebuilding Companies, Inc.Noteholder/Lender: Stonehenge Funding, LC. (Lender or Noteholder).Guarantors: In consideration of Stonehenge entering into this agreement and modifying the terms of the JP Morgan Note,CHCI hereby reaffirms its guaranty. Stonehenge shall not require any additional guarantees.Principal Balance Adjustment: It is understood that the current unpaid principal balance due Noteholder under the JP Morgan Note is$9,000,000 (not including past due interest of approximately $874,800 as of December 31, 2009). Uponsatisfaction of the Principal Reduction Conditions, set forth below , the Principal Balance shall be reduced by50% to $4,500,000 (Reduced Principal Balance). The JP Morgan Note may be prepaid, in part or in whole, atanytime by Borrower without penalty or premium, subject however, to the restrictions imposed by the existinglenders to the Borrower or Borrower’s subsidiaries secured project lenders. It is understood that the Borrower iscurrently carrying the value of the JP Morgan Note on its books at approximately $12,742,650.Forgiveness of Accrued Interest: It is understood that the accrued but unpaid outstanding interest due Noteholder under the JP Morgan Note asof December 31, 2009 was approximately $874,800. Upon execution and delivery of this agreement, alloutstanding interest, late fees and penalties up through December 31, 2009 (Past Due Interest), are herebyforgiven in full and Stonehenge shall enter into such reasonable confirmatory documentation to evidence same,as may be requested by CHCI’s auditors and/or lenders. It is understood and agreed that the Principal ReductionConditions set forth below shall not apply to the Forgiveness of the Past Due Interest.Interest Rate: Effective as of January 1, 2010 the interest rate under the JP Morgan Note is hereby reduced by approximately50% to be 300 basis points above the 1-year Libor Rate (currently approximately 1.00%) on a floating basis,adjusted monthly (Reduced Interest Rate), which shall accrue on the Reduced Principal Balance of only$4,500,000 until the earlier of (i) Maturity, or (ii) 90 days after the prohibitions applicable to interest paymentsbeing paid to Stonehenge under the Key & Guggenheim Subordination Agreements expire. However, on aquarterly basis within 5 days of the date that an interest payment would have been due under the JP MorganNote, Stonehenge may elect to receive shares of Class A common stock of CHCI (or warrants for the purchasethereof) with a cumulative value equal to the value of the scheduled interest payment rather than allowing such scheduled payment of interest to continue to accrue. Notwithstanding the foregoing, in the event apetition of bankruptcy (voluntarily or involuntary) is filed by or against CHCI prior to the full repayment ofamounts due under the JP Morgan Note, as modified, this interest rate reduction provision shall be null andvoid as it relates to any accrued but unpaid interest accruing after January 1, 2010.Existing Warrants CHCI understands that Stonehenge has acquired the previously issued warrants to purchase 1,500,000 shares ofCHCI Class A common stock (“Existing Warrant”) issued to JP Morgan on March 14, 2008. Concurrent withthe execution hereof, Stonehenge agrees to provide promptly for the cancellation of 500,000 shares under theExisting Warrant owned by Stonehenge. CHCI will thereafter re-issue to Stonehenge, or its assigns, one or morewarrants for the purchase, in the aggregate, of up to 1,000,000 shares of CHCI Class A common stock onidentical terms as set forth in the Existing Warrant. It is understood by Stonehenge that CHCI will then issue 500,000 stock options to managers/employees ofCHCI, as approved by the Compensation Committee of the Board of CHCI, in consultation with its taxadvisors.Maturity Date: It is understood that the current Maturity Date under the JP Morgan Note is March 14, 2013 (“Current MaturityDate”). The parties hereby agree to modify the Maturity Date to be as follows: the sooner of (i) 90 days after therestrictions applicable to interest payments under the Key and Guggenheim Subordination Agreements expire,(ii) the date the JP Morgan Note would become subject to mandatory prepayment with the next availableproceeds of future equity or debt financings, or (iii) Current Maturity Date (collectively the “Modified MaturityDate”),subject to the automatic extensions provided for in the following section titled “Interest Reclassificationand Automatic Maturity Extensions”.Interest Reclassification and AutomaticMaturity Extension: It is understood that in the event current prohibitions by Key or Guggenheim upon CHCI making principal orinterest payments to Stonehenge under the JP Morgan Note continue to be effective on the Current MaturityDate, then in such event CHCI shall not be required to make payments on the Current Maturity Date, and insuch event the Interest Reclassification and Automatic Extensions described in this section shall apply. CHCIshall be entitled to two (2) Interest Reclassification and Automatic Extension Periods, each for a period of six(6) months. Within 30 days of each Interest Reclassification and Automatic Maturity Extension periodcommencing (the 30 day of each six month extension period) CHCI shall deliver to Stonehenge, at no cost toStonehenge, warrants for the purchase of Class A common stock with a net cumulative value (the value abovethe cumulative exercise price applicable to the warrants) equal to 9% of the then outstanding balance dueStonehenge under the JP Morgan Note as of the day such warrants are freely tradable by Stonehenge. Suchwarrants shall expire 7 years after the date of issuance if not exercised prior to such date and shall be in additionto the then current applicable Reduced Interest Rate which would continue to be due under the JP MorganNote. The parties will confer with their respective tax experts and counsel in an effort to structure this provisionin a manner that is most advantageous to CHCI with regards to cost recognition and applicable tax code.Stonehenge understands that if both Interest Reclassification and Automatic Extensions are elected by CHCIthat Stonehenge may not receive repayment of the Reduced Principal Balance prior to March 14, 2014. 2th Principal Reduction Conditions The loan modifications contemplated hereby shall provide for the principal amount due under the JP MorganNote to be reduced to the Reduced Principal Balance upon ): Stonehenge receiving a written waiver of restrictions imposed upon Stonehenge from JP Morgan regarding themodifications contemplated herein; such waiver currently anticipated to be received by the end of January,2010, or the payment of the deferred purchase price due JP Morgan by Stonehenge under its agreement toacquire the JP Morgan Note.Subordination: It is understood by Stonehenge that Stonehenge may from time to time be required to reaffirm the subordinationagreements entered into by the parties with Key Bank and Guggenheim Corporate Funding in connection withloans advanced and currently outstanding on Borrower’s subsidiaries Eclipse property and Penderbrookproperty, the forms of which are attached hereto as Exhibit A. Stonehenge further agrees to reasonablysubordinate the JP Morgan Note to future project lenders of CHCI or its subsidiaries.Financial Covenants: Stonehenge shall forbear upon the enforcement of all financial covenants contained in the JP Morgan Note forso long as there is no other event of Default occurring thereunder, including but not limited to the covenantsregarding: • Borrower maintaining a Net Worth in excess of $35 million • Borrower maintaining a Leverage Ratio of no more than 3:1 • Borrower maintaining a Fixed Charge Ratio of less than 5:1 • Borrower maintaining a Fixed Charge Coverage Ratio of no less than 2:1 Other Covenants/Limitations: Stonehenge and CHCI will work in good faith with each other to reach definitive agreement regardingmodification to various other terms contained in the JP Morgan Note, including but not limited to: • Modify governing law and proper jurisdiction from the State of New York to the Commonwealth ofVirginia. • Remove Borrower requirement to obtain opinion of counsel letters throughout Loan except for as of theclosing date. • Remove requirement to name/use a Trustee. • Remove Borrower restriction on issuance of new debt if there is an Event of Default by Borrower under theLoan, provided such new debt is subordinate in all respects to the JP Morgan Note.Certain Covenants Not subject toModification: CHCI understands and agrees that certain covenants of the JP Morgan Note shall not be modified, including butnot necessarily limited to: • The requirement that Borrower deposit monies if there is a change in control of Borrower. • The requirement that Borrower notice Lender and obtain Lender’s consent to any change of control. • The requirement that Borrower obtain Lender consent to merger of Borrower. 3 Events of Default: Those set forth in the JP Morgan Note, except as contemplated to be modified as set forth herein, or otherwiseagreed to by the parties hereto.Change of Control: It is understood by CHCI that Stonehenge’s willingness to execute on the purchase of the JP Morgan Note andto modify the note in a manner beneficial to the Borrower is strictly based on CHCI being under the guidanceand control of the two majority vote controlling shareholders, Chris Clemente and Greg Benson (ControllingShareholders). Should a change of control occur for any reason whatsoever, the JP Morgan Note shall accelerateand shall become immediately due and payable, provided however, a merger with an affiliate for the purpose ofcompleting a corporate change of domicile shall not be deemed a change of control for the purposes of thisprovision.Confidentiality: This Summary of Terms and Conditions is delivered to you with the understanding that, neither this term sheetnor any of its terms or substance shall be disclosed, directly or indirectly to any other person except (i) to youremployees and advisors who are directly involved in the consideration of this matter or (ii) as disclosure may bedetermined necessary or advisable by CHCI counsel under applicable securities or corporate disclosure laws oras may be compelled in a judicial or administrative proceeding or as otherwise required by law.The parties hereto, intending to be legally bound, have caused this agreement to be effective as of the last date set forth below; subject only to theformal approval of the independent members of the Board of Directors of CHCI.[SIGNATURES FOLLOW] Comstock Homebuilding Companies, Inc.By: Name: Title: Date: ___/____/2010 Stonehenge Funding, LC:By: Name: Title: Date: ___/____/2010 4 SUBORDINATION AND STANDSTILL AGREEMENTNOTICE:THIS SUBORDINATION AND STANDSTILL AGREEMENTRESULTS IN YOUR PRIORITY OF PAYMENT BECOMINGSUBJECT TO AND OF LOWER PRIORITYTHAN THE PRIORITY AND LIENOF SOME OTHER OR LATER INSTRUMENTTHIS SUBORDINATION AND STANDSTILL AGREEMENT (this “Agreement”) is made this _______ day of December, 2009, by and amongCOMSTOCK HOMEBUILDING COMPANIES, INC., a Delaware corporation (“Guarantor”), KEYBANK NATIONAL ASSOCIATION, a national bankingassociation (“KeyBank”), individually and as agent for itself and the Senior Lenders (as hereinafter defined) (“Agent”), and STONEHENGE FUNDING, LC,a Virginia limited liability company (“Subordinate Lender”).W I T N E S S E T H:WHEREAS, Guarantor has executed that certain Amended and Restated Indenture and amended Senior Note due 2013 dated as of March 14, 2008, inthe principal sum of $9,000,000 in favor of Subordinate Lender (collectively, the “Subordinate Note”); andWHEREAS, pursuant to the Senior Loan Agreement (as hereinafter defined), the Senior Lenders (as hereinafter defined) provided a credit facility toBorrower (as hereinafter defined);WHEREAS, Guarantor has executed a certain Senior Guaranty (as hereinafter defined) in favor of Agent pursuant to the Senior Loan Agreement, whichSenior Guaranty is secured by the Senior Assignment of Interests (as hereinafter defined);WHEREAS, the obligations of Borrower and Guarantor under the Senior Loan Documents (as hereinafter defined) are secured by, among other things,the Senior Security Documents (as hereinafter defined);NOW, THEREFORE, in consideration of the mutual benefits accruing to the parties hereto and other valuable consideration, the receipt and sufficiencyof which consideration are hereby acknowledged, it is hereby declared, understood and agreed as follows:1. Definitions.(a) “Agent” has the meaning given such term in the introductory paragraph to this Agreement. Unless otherwise specified herein, “Agent” shallmean KeyBank National Association in its capacity as agent under the Senior Loan Agreement.(b) “Bankruptcy Code” means Title 11, United States Code, as amended from time to time, or any successor statute thereto.(c) “Borrower” means, collectively, Comstock Station View, L.C., a Virginia limited liability company, and Comstock Potomac Yard, L.C., aVirginia limited liability company.(d) “Cash Collateral Agreement” shall mean that certain Cash Collateral and Control Agreement dated October 30, 2009 and executed byBorrower in favor of Agent for the benefit of the Senior Lenders, and as may be further amended, modified, increased, consolidated, restated orreplaced. 5 (e) “Collateral” means all of the real, personal and other property now or hereafter encumbered by or securing the Senior Note, the Senior LoanAgreement, the Senior Security Documents, the Cash Collateral Agreement or the Senior Guaranty, or any documents now or hereafter entered into ordelivered in connection with any of them, and all of each Obligor’s right, title and interest in and to such property, whether existing or future, and allsecurity interests, security titles, liens, claims, pledges, encumbrances, conveyances, endorsements and guaranties of whatever nature now or hereaftersecuring any Obligor’s obligations under the Senior Loan Documents or any part thereof, and all products and proceeds of the foregoing.(f) “Enforcement Action” means the commencement of any litigation or proceeding at law or in equity, the commencement of any foreclosureproceeding, the exercise of any statutory or non-judicial power of sale, the taking of a deed or assignment in lieu of foreclosure, seeking to obtain ajudgment, seeking the appointment of or the obtaining of a receiver or the taking of any other enforcement action against, or the taking of possessionor control of, or the exercise of any rights or remedies with respect to, any Obligor or the Collateral, any other property or assets of any Obligor or anyportion thereof.(g) “Insolvency Proceeding” means any proceeding, whether voluntary or involuntary, under the Bankruptcy Code, or any other bankruptcy,insolvency, liquidation, reorganization, composition, extension, arrangement, adjustment or other similar proceeding concerning any Obligor, anyaction for the winding-up or dissolution of any Obligor, any proceeding (judicial or otherwise) concerning the application of the assets of any Obligorfor the benefit of its creditors, the appointment of or any proceeding seeking the appointment of a trustee, receiver or other similar custodian for all orany substantial part of the assets of any Obligor, a general assignment for the benefit of creditors or any proceeding or action seeking the marshaling ofthe assets and liabilities of any Obligor, or any other action concerning the adjustment of the debts of any Obligor or the cessation of business by anyObligor, in each case under any applicable domestic or foreign federal or state law. For the purposes hereof, an “Insolvency Proceeding” shall alsoinclude the taking, seeking or approving of any action in any proceeding described in the foregoing sentence by, against or concerning any otherPerson that could adversely affect any Obligor, any other obligor with respect to the Subordinate Loan, the Collateral, the Senior Loan Documents, theAgent, the Senior Lenders or any Enforcement Action under the Senior Security Documents or any other Senior Loan Document.(h) “KeyBank” means KeyBank National Association.(i) “Obligors” means Borrower and Guarantor, and each other guarantor or obligor of or with respect to any part of the Senior Debt.(j) “Required Lenders” means, individually or collectively (as the context may require or permit), the “Majority Lenders” under and as defined inthe Senior Loan Agreement.(k) “Senior Assignment of Interests” means that certain Assignment of Interests dated March 14, 2008 executed by Guarantor in favor of Agentfor the benefit of the Senior Lenders, as amended by that certain First Amendment to Assignment of Interests dated October 30, 2009, and as the samemay be further amended, extended, supplemented, consolidated, renewed, restated or otherwise modified from time to time,. 6 (l) “Senior Debt” means the (i) principal of, premium, if any, and interest on the Senior Note or pursuant to the Senior Loan Agreement (whetherpayable under the Senior Note, the Senior Loan Agreement, or the Senior Guaranty or any other Senior Loan Document), (ii) prepayment fees, exit fee,yield maintenance charges, breakage costs, late charges, default interest, agent’s fees, costs of collection, protective advances, advances to curedefaults, and indemnities, (iii) any other amount or obligations (including any fee or expense) due or payable with respect to the Senior Loan or any ofthe Senior Loan Documents (including interest and any other of the foregoing amounts accruing after the commencement of any InsolvencyProceeding, and any other interest that would have accrued but for the commencement of such Insolvency Proceeding, whether or not any such interestis allowed as an enforceable claim in such Insolvency Proceeding and regardless of the value of the Collateral at the time of such accrual), whetheroutstanding on the date of this Agreement or hereafter incurred, whether as a secured claim, undersecured claim, unsecured claim, deficiency claim orotherwise, and all renewals, modifications, amendments, supplements, consolidations, restatements, extensions, refinances, and refundings of anythereof.(m) “Senior Guaranty” means that certain Unconditional Guaranty of Payment and Performance dated as of March 14, 2008 executed byGuarantor in favor of Agent for the benefit of the Senior Lenders, as amended by that certain First Amendment to Unconditional Guaranty of Paymentand Performance dated October 30, 2009, and as the same may be from time to time amended, extended, supplemented, consolidated, renewed, restatedor otherwise modified.(n) “Senior Lenders” means “Lenders” as defined in the Senior Loan Agreement.(o) “Senior Loan” means the up to $40,391,200.00 credit facility provided pursuant to the Senior Loan Agreement, as the same may be amended,modified, increased, consolidated, restated or replaced as provided herein.(p) “Senior Loan Agreement” means that certain Loan Agreement dated as of March 14, 2008 executed by Borrower and KeyBank NationalAssociation, individually and as Agent for the Senior Lenders, and certain other parties now or hereafter a party thereto, as modified by that certainFirst Amendment to Loan Agreement dated as of October 30, 2009, and as may be further amended, modified, increased, consolidated, restated orreplaced.(q) “Senior Loan Documents” means the Senior Security Documents, the Senior Note, the Senior Loan Agreement, the Senior Guaranty, theSenior Assignment of Interests, the Cash Collateral Agreement and any other documents, agreements or instruments now or hereafter executed anddelivered by or on behalf of any Obligor or any other person or entity in connection with the Senior Loan, and any documents, agreements orinstruments hereafter executed and delivered by or on behalf of any Obligor or any other person or entity in connection with any refinancing of theSenior Loan, as any of the same may be from time to time amended, extended, supplemented, consolidated, renewed, restated or otherwise modified.(r) “Senior Note” means that certain Amended and Restated Note dated March 14, 2008 executed by Borrower in favor of KeyBank NationalAssociation, as originally executed, or if varied, extended, supplemented, consolidated, amended, replaced, renewed, modified, or restated from time totime as so varied, extended, supplemented, consolidated, amended, replaced, renewed, modified or restated. 7 (s) “Senior Security Documents” means the “Security Documents” as defined in the Senior Loan Agreement, the Cash Collateral Agreement andeach other Senior Loan Document securing any or all of the Senior Loan, together with any and all acknowledgments, powers, certificates, UCCfinancing statements or other documents or instruments executed and delivered in connection therewith.(t) “Subordinate Debt” means the principal amount of the indebtedness evidenced by the Subordinate Note, together with any interest, premium,yield maintenance charges, breakage costs, late charges, default interest, costs of collection, protective advances, advances to cure defaults,indemnities, reimbursement obligations and any other amount or obligation (including any fee or expense) due thereon or payable with respect theretoor pursuant to the Subordinate Loan Documents, whether outstanding on the date of this Agreement or hereafter incurred, and all permitted renewals,modifications, amendments, supplements, consolidations, restatements, extensions, refinances and refundings of any thereof.(u) “Subordinate Loan Documents” means the Subordinate Note and any other document, agreement or instrument now or hereafter executed anddelivered by or on behalf of Guarantor in connection with the indebtedness evidenced by the Subordinate Note, as any of the same may be from time totime amended, extended, supplemented, consolidated, renewed, restated or otherwise modified as permitted herein.(v) Except as otherwise provided herein, capitalized terms used herein that are not otherwise defined herein shall have the meanings set forth inthe Senior Loan Agreement.2. Effectiveness of Agreement. This Agreement shall be deemed effective as of the date of execution.3. Priority of Collateral and Payments. Guarantor and Subordinate Lender covenant and agree that the payment of the Subordinate Debt is herebyunconditionally and expressly made junior, subordinate and subject in right and time of payment and in all other respects to the indefeasible prior paymentin full in cash of all Senior Debt. Without limiting the foregoing, the Subordinate Loan Documents, as well as all of the rights and remedies of SubordinateLender under the Subordinate Loan Documents or otherwise in and to the Collateral or other property or assets of the Obligors, are hereby unconditionallyand expressly made subject and subordinate in lien and subordinate in payment to the Senior Debt, and to all of the rights and remedies, of KeyBank, asagent under the Senior Loan Agreement, and the Senior Lenders, under the Senior Loan Documents and to the Collateral or other property or assets of theObligors. In addition, in furtherance of and without limiting the foregoing, Subordinate Lender agrees that:(a) Subordinate Lender shall have no right, lien or claim in and to the Collateral and the proceeds thereof (including, without limitation, anyrights with respect to insurance proceeds and condemnation awards), or any other property or assets of any Obligor until such time as the perioddescribed in Paragraph 4 hereof shall have lapsed; 8 (b) Subordinate Lender hereby expressly waives any rights to require or request that the Agent and the Senior Lenders marshal the Collateral infavor of Subordinate Lender or to equitably subordinate the rights, liens or security interests of Agent and the Senior Lenders under the Senior LoanDocuments, whether pursuant to the Bankruptcy Code or otherwise. Agent and the Senior Lenders shall have the right at any and all times to determinethe order in which, or whether, (i) recourse is sought against any Obligor or any other obligor with respect to the Senior Debt, or (ii) any or all of thecollateral security for the indebtedness and obligations under the Senior Loan Documents in which a lien has been granted to or obtained by Agentshall be enforced. Subordinate Lender hereby waives any and all rights to require that Agent and/or the Senior Lenders pursue or exhaust any rights orremedies with respect to any Obligor or any other party prior to exercising their rights and remedies with respect to the Collateral or any other propertyor assets of the Obligors. Agent and the Senior Lenders may forbear collection, grant indulgences, release, compromise or settle the Senior Debt, or sell,take, exchange, surrender or release collateral or security therefor, consent to or waive any breach of, or any act, omission or default under, any of theSenior Loan Documents, apply any sums received by or realized upon by Agent and the Senior Lenders against liabilities of the Obligors to Agent andthe Senior Lenders in such order as Agent and the Senior Lenders shall determine in their sole discretion, and otherwise deal with any and all partiesand the Collateral or other property or assets of the Obligors as they deem appropriate. Agent and the Senior Lenders shall have no liability toSubordinate Lender for, and Subordinate Lender hereby waives any claim, right, action or cause of action which it may now or hereafter have againstAgent and the Senior Lenders arising out of, any waiver, consent, release, indulgence, extension, delay or other action or omission, any release of anyObligor, release of any of the Collateral securing such indebtedness and obligations, the failure to realize upon any Collateral or other property orassets of any Obligor, or the failure to exercise any rights or remedies of Agent and the Senior Lenders under the Senior Loan Documents;(c) Subordinate Lender hereby expressly consents to and authorizes, at the option of the Senior Lenders the acceptance of additional SeniorSecurity Documents, or the release of any Obligor. Subordinate Lender hereby expressly consents to and authorizes, at the option of the Agent, theamendment, extension, restatement, consolidation, increase, renewal, refinance or other modification, in whole or in part, of all or any of the SeniorLoan Documents, including, without limitation, increasing or decreasing the stated principal amount of the Senior Loan, extending or shortening theterm of the Senior Loan, increasing or decreasing the interest rate payable as provided in the Senior Loan Agreement or altering any other paymentterms under the Senior Loan Documents;(d) Subordinate Lender hereby absolutely and irrevocably waives, to the fullest extent permitted by law, any rights they may have, by contract,at law or in equity, to be subrogated to the Agent’s and the Senior Lenders’ rights against the Obligors under the Senior Loan Documents or to theAgent’s liens and security interests on any of the Collateral. If Subordinate Lender shall acquire by indemnification, subrogation or otherwise, any lien,estate, right or other interest in or with respect to the Collateral or other property or assets of any Obligor, that lien, estate, right or other interest shall besubordinate to the Senior Security Documents and the other Senior Loan Documents as provided herein and shall be held in trust for the benefit of, andassigned to, Agent in accordance with this Agreement; 9 (e) Subordinate Lender agrees that it shall not agree to, and nothing herein or in the Senior Loan Documents shall be deemed to evidenceapproval of Agent or the Senior Lenders of, any increase to the Subordinate Note, or any other amendment or modification of the Subordinate LoanDocuments except for modifications or amendments that do not negatively impact Agent or the Senior Lenders and are of the general type set forth onSchedule A attached hereto and made a part hereof; provided, however, that no amendment or modification to the Subordinate Loan Documents shallin any event (i) increase the stated principal amount of the Subordinate Debt, (ii) shorten the term of the Subordinate Debt, (iii) increase the interest rateon the Subordinate Debt, (iv) provide collateral or other security for the Subordinate Debt, (v) provide for additional obligors of the Subordinate Debtor (vi) include more restrictive covenants, conditions or defaults than those existing as of the date hereof. Subordinate Lender and Guarantor shallpromptly provide to Agent a fully executed copy of any amendment or modification to the Subordinate Note;(f) Subordinate Lender acknowledges that Agent and Senior Lenders have not made nor do they now make any representations or warranties,express or implied, nor do they assume any liability to Subordinate Lender, with respect to the creditworthiness or financial condition of Guarantor,any Obligor or any other Person. Subordinate Lender acknowledges that it has, independently and without reliance upon Agent or any Senior Lender,and based upon such information and documents as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreementand the Subordinate Loan. Subordinate Lender will, independently and without reliance upon Agent or any Senior Lender, based upon suchinformation and documents as it deems appropriate at the time, continue to make its own credit analysis and decisions in taking or not taking actionunder this Agreement and the Subordinate Loan Documents. None of Agent or any Senior Lender shall have any duty or responsibility, either initiallyor on a continuing basis, to provide Subordinate Lender with any credit or other information with respect to Guarantor or any other Obligor, whethercoming into its possession before the making of the Senior Loan or at any time or times thereafter. Subordinate Lender agrees that none of Agent or anySenior Lender owes any fiduciary duty to Subordinate Lender in connection with the administration of the Senior Loan and the Senior LoanDocuments and Subordinate Lender agrees not to assert any such claim;(g) Unless the “Majority Lenders” (as defined in the Senior Loan Agreement) shall have consented in writing to such modification oramendment, no modification or amendment of the Subordinate Loan Documents shall be binding except for modifications or amendments that do notnegatively impact Agent or the Senior Lenders and are of the general type set forth on Schedule A attached hereto and made a part hereof; provided,however, that no amendment or modification to the Subordinate Loan Documents shall in any event (i) increase the stated principal amount of theSubordinate Debt, (ii) shorten the term of the Subordinate Debt, (iii) increase the interest rate on the Subordinate Debt, (iv) provide collateral or othersecurity for the Subordinate Debt, (v) provide for additional obligors of the Subordinate Debt or (vi) include more restrictive covenants, conditions ordefaults than those existing as of the date hereof. Subordinate Lender and Guarantor shall promptly provide to Agent a fully executed copy of anyamendment or modification to the Subordinate Note;(h) If, notwithstanding the provisions of this Agreement, any payment or distribution of any kind or character (whether in cash, securities, orother property) shall be received by Subordinate Lender directly or indirectly from any Obligor (whether out of or in connection with the Collateral,upon any payment or distribution of the assets of any Obligor of any kind or character to creditors upon or in connection with any InsolvencyProceeding or otherwise) in contravention of the terms of this Agreement, such payment, distribution or 10 security shall not be commingled with any asset of Subordinate Lender, but rather shall be held in trust for the benefit of, and shall be paid over ordelivered and transferred to, the Agent or its representative, for application to the payment of the Senior Debt remaining unpaid, until all of the SeniorDebt shall have been indefeasibly paid in full in cash. In any such event, Agent may, but it shall not be obligated to, demand, claim and collect anysuch payment or distribution that would, but for the subordination provisions, be payable or deliverable with respect to the Subordinate Debt.(i) Notwithstanding anything to the contrary set forth herein, Subordinate Lender shall not be permitted to receive any payments with respect tothe Subordinate Debt until such time as the Senior Debt shall have been indefeasibly paid in full in cash, and Senior Lenders have no further obligationto make advances under the Senior Loan Documents. All payments or distributions upon or with respect to the Subordinate Debt which are received bySubordinate Lender contrary to the provisions of this Agreement shall be received and held in trust by the Subordinate Lender for the benefit of SeniorLenders and shall be paid over to Agent in the same form as so received (with any necessary endorsement) to be applied (in the case of cash) to, or heldas collateral (in the case of non-cash property or securities) for performance of the Senior Debt in accordance with the terms of the Senior LoanDocuments.4. Certain Actions Regarding Subordinate Debt. Until such time as the Senior Debt shall have been indefeasibly paid in full in cash, and SeniorLenders have no further obligation to make advances under the Senior Loan Documents, Subordinate Lender shall not take any of the following actions withrespect to the Subordinate Debt until one (1) year and one (1) day following the indefeasible payment in full of the Senior Debt in cash without the priorwritten consent of the “Majority Lenders” (as defined in the Senior Loan Agreement):(a) Declare a default or event of default under the Subordinate Loan Documents, accelerate all or any portion of the Subordinate Debt or exerciseany of its remedies (including, without limitation, any Enforcement Action) under the Subordinate Loan Documents or at law or in equity;(b) Commence, directly or indirectly, any legal or other proceedings against any Obligor, or commence any Enforcement Action;(c) Consent to or enter into any amendment or modification of any of the Subordinate Loan Documents except for modifications or amendmentsthat do not negatively impact Agent or the Senior Lenders and are of the general type set forth on Schedule A attached hereto and made a part hereof;provided, however, that no amendment or modification to the Subordinate Loan Documents shall in any event (i) increase the stated principal amountof the Subordinate Debt, (ii) shorten the term of the Subordinate Debt, (iii) increase the interest rate on the Subordinate Debt, (iv) provide collateral orother security for the Subordinate Debt, (v) provide for additional obligors of the Subordinate Debt or (vi) include more restrictive covenants,conditions or defaults than those existing as of the date hereof. Subordinate Lender and Guarantor shall promptly provide to Agent a fully executedcopy of any amendment or modification to the Subordinate Note; or(d) Commence, directly or indirectly, or consent to any Insolvency Proceeding by or against any Obligor. 11 5. Bankruptcy Issues.(a) The provisions of this Agreement shall be applicable both before and after the commencement, whether voluntary or involuntary, of anyInsolvency Proceeding by or against any Obligor and all references herein to any Obligor shall be deemed to apply to any such Obligor as a debtor-in-possession and to any trustee in bankruptcy for the estate of any such Obligor. Furthermore, this Agreement and the subordinations contained hereinshall apply notwithstanding the fact that all or any part of the Senior Debt or any claim for or with respect to the Senior Debt is subordinated, avoidedor disallowed, in whole or in part, in any Insolvency Proceeding or by other applicable federal, state or foreign law; provided, however, that if thesubordination or disallowance of the claims of the Senior Lenders are predicated on gross misconduct or bad faith of the Senior Lenders, then thesubordination provisions set forth herein shall not apply. Without limiting the foregoing, Subordinate Lender expressly covenants and agrees that thisAgreement is enforceable under applicable bankruptcy law and should be enforced under Section 510(a) of the Bankruptcy Code. Until such time asthe Senior Debt has been indefeasibly paid in full in cash and Senior Lenders have no further obligation to make any advances under the Senior LoanDocuments, Subordinate Lender shall not, and shall not solicit any person or entity to: (i) seek, commence, file, institute, consent to or acquiesce in anyInvoluntary Proceeding with respect to any Obligor or the Collateral; (ii) seek to consolidate any Obligor with any other person or entity in anyInsolvency Proceeding; or (iii) take any action in furtherance of any of the foregoing.(b) Subordinate Lender hereby agrees that it shall not make any election, give any consent, commence any action or file any motion, notice orapplication or take any other action in any Insolvency Proceeding (including, without limitation, any action under Section 105 of the BankruptcyCode) with respect to the Subordinate Debt or the other Subordinate Loan Documents in any case by or against any Obligor or their property withoutthe prior written consent of Senior Lenders, which may be granted or withheld in Senior Lenders’ sole and absolute discretion; provided, however, thatwith respect to any such Insolvency Proceeding, (i) the Subordinate Lender may file a proof of claim, (ii) the Agent may vote in any such InsolvencyProceeding any and all claims of Subordinate Lender, and Subordinate Lender hereby appoints the Agent as its agent, and grants to the Agent anirrevocable power of attorney coupled with an interest, and its proxy, for the purpose of exercising any and all rights and taking any and all actionsavailable to the Subordinate Lender in connection with any case by or against any Obligor or their property in any Insolvency Proceeding, includingwithout limitation, the right to vote to accept or reject a plan, to make any election under Section 1111(b) of the Bankruptcy Code; provided, however,that with respect to any proposed plan of reorganization in respect of which creditors are voting, Agent or Senior Lenders may vote on behalf of suchSubordinate Lender only if Agent’s or Senior Lender’s claim is included in a class of claims that is “impaired” as contemplated by Section 1124 of theBankruptcy Code under the proposed plan of reorganization, in Agent’s sole and absolute discretion, and (iii) Subordinate Lender shall not challengethe validity or amount of any claim submitted in such Insolvency Proceeding by the Agent or the Senior Lenders or any valuations of the Collateralsubmitted by the Agent or the Senior Lenders, in such Insolvency Proceeding or take any other action in such Insolvency Proceeding, which is adverseto their enforcement of any claim or receipt of adequate protection (as that term is defined in the Bankruptcy Code). In furtherance of the foregoing,Subordinate Lender hereby assigns to the Agent the right to vote all of Subordinate Lender’s claims against Obligors, including the right to approve orobject to any plan of reorganization, in any 12 Insolvency Proceeding with respect to the Subordinate Debt or the other Subordinate Loan Documents in any case by or against any Obligor, provided,however, that with respect to any proposed plan of reorganization in respect of which creditors are voting, Agent or Senior Lenders may vote on behalfof such Subordinate Lender only if Agent’s or Senior Lender’s claim is included in a class of claims that is “impaired” as contemplated underSection 1124 of the Bankruptcy Code under the proposed plan of reorganization, in Agent’s sole and absolute discretion. In the event that suchassignment shall be held invalid or unenforceable, then the provisions hereof prohibiting the right of Subordinate Lender to make any election, voteon any plan of reorganization, give any consent, commence any action or file any motion, notice or application or take any other action in anyproceeding without the prior written consent of Senior Lenders shall not be affected thereby. To the extent not prohibited by the Bankruptcy Code, theFederal Rules of Bankruptcy Procedure or other applicable law, the Agent shall be free to exercise such voting rights as the Agent shall determine in itssole and absolute discretion, and the Agent shall have no duty or obligation to file, prosecute, pursue or protect any such claim and shall otherwisehave no duties, liabilities or obligations to Subordinate Lender with respect thereto. Subordinate Lender hereby appoints the Agent as its agent, andgrants to Senior Lender an irrevocable power of attorney coupled with an interest for the purpose of exercising any and all rights and taking any and allactions available to Subordinate Lender in connection with the assignment to Senior Lender of the voting rights described herein. Without in any waylimiting the generality of Paragraph 8 hereof, Subordinate Lender hereby agrees that, upon the request of the Agent, Subordinate Lender shall do,execute, acknowledge and deliver to Senior Lender all and every such further acts, deeds, conveyances and instruments as the Agent may request forthe better assuring and evidencing of the foregoing appointment and grant and assignment of such voting rights.(c) In the event that Subordinate Lender shall fail to file a proof of claim with respect to the Subordinated Debt after ten (10) days written noticefrom the Agent, the Agent shall have the right to file such proof of claim on behalf of Subordinate Lender. Notwithstanding the foregoing and anyprovisions contained herein to the contrary, the Subordinate Lender may (i) take any action, which is not adverse to the priority status of the Agent orSenior Lenders or to the Agent’s or Senior Lenders’ exercise of their remedies, to protect and preserve the Subordinate Lender’s claim, and (ii) file anynecessary responses or pleadings in opposition to any pleading objecting to or seeking to disallow or reduce the Subordinate Lender’s claim.(d) To the extent any transfer, payment or distribution of assets with respect to the Senior Debt (whether in cash, property or securities andwhether by or on behalf of any Obligor as proceeds of security or enforcement of any right of setoff or otherwise) is declared to be fraudulent orpreferential, set aside or required to be paid to any Obligor, the estate in bankruptcy thereof, any third party, or a trustee, receiver or other similar partyunder any bankruptcy, insolvency, receivership or similar law, then if such payment is recovered by, or paid over to, Borrower or any other Obligor, theestate in bankruptcy thereof, any third party, or such trustee, receiver or other similar party, the Senior Debt or part thereof originally intended to besatisfied shall be deemed to be reinstated to the extent of the amount actually paid by the Agent or Senior Lenders with respect to the Senior Debt (the“Repayment”) to any Obligor, the estate in bankruptcy thereof, any third party, or a trustee, receiver or other similar party under any bankruptcy,insolvency, receivership or similar law, and outstanding as if such payment or distribution had not occurred, and this Agreement and the agreementsand subordination contained herein shall be reinstated with respect to any such transfer, payment or distribution to the extent of such Repayment. TheAgent shall not be required to contest any such declaration or obligation to return such payment or distribution. 13 6. Approvals and Waivers of Subordinate Lender. Subordinate Lender declares, covenants, agrees, and acknowledges that:(a) It consents to and authorizes all provisions of the Senior Security Documents and each of the other Senior Loan Documents.(b) It intentionally and unconditionally subordinates the Subordinate Debt to the Senior Debt in accordance with the foregoing and understandsthat in reliance upon, and in consideration of, this subordination and the other agreements and representations set forth herein, specific loans andadvances are being and will be made and, as part and parcel thereof, specific monetary and other obligations are being and will be entered into whichwould not be made or entered into but for said reliance upon this subordination and the other agreements and representations set forth herein.(c) It, in its capacity as the holder of the Subordinate Debt, intentionally and unconditionally waives and relinquishes any right to challenge thevalidity, enforceability and binding effect of any of the Senior Security Documents or the other Senior Loan Documents, and any lien, encumbrance,claim or security interest now or hereafter created thereunder, or the attachment, perfection or priority thereof, regardless of the order of recording orfiling of any thereof, or compliance by Agent or the Senior Lenders with the terms of any of the Senior Security Documents or the other Senior LoanDocuments, by reason of any matter, cause or thing now or hereafter occurring, nor shall Subordinate Lender raise any such matter, cause or thing as adefense to the enforcement thereof.(d) It acknowledges and agrees that the agreements herein shall be effective at all times notwithstanding taking of possession of any of theCollateral or other property or assets of any Obligor by Agent or the order in which any loan, advance or extension of credit included in the obligationsevidenced or secured by the Senior Security Documents and the other Senior Loan Documents or evidenced by the Subordinate Loan Documents ismade (Subordinate Lender hereby waiving the benefits of any statute or rule of law which would produce a result contrary to or in conflict with theforegoing).(e) It expressly waives notice of the acceptance of the subordinations and other agreements set forth herein, notice of reliance on suchsubordinations and other agreements, and notice of the creation of any Senior Debt after the date hereof.(f) It, in its capacity as the holder of the Subordinate Debt, waives any right to receive notice from Agent or the Senior Lenders of the occurrenceof a default under the Senior Loan Documents or the commencement of an Enforcement Action.(g) It, in its capacity as the holder of the Subordinate Debt, agrees that it will not in any manner challenge, oppose, object to, interfere with ordelay (i) the validity or enforceability of this Agreement, including without limitation, any provisions regarding the relative priority of the rights andduties of Agent and Senior Lenders and the Subordinate Lender, or (ii) Agent’s or any Senior Lender’s security interest in, liens on and rights as to theObligors, and any Collateral or any other property or assets of any Obligor, or any Enforcement Actions of Agent or any Senior Lender (including,without limitation, any efforts by Agent to obtain relief from the automatic stay under Section 362 of the Bankruptcy Code). 14 (h) It acknowledges that any default, material misrepresentation or breach of warranty by it under this Agreement shall constitute an Event ofDefault under the Senior Loan Agreements.7. Representations. Subordinate Lender represents and warrants to, and covenants and agrees with, the Agent as follows:(a) It has all requisite power and authority to execute, deliver and perform its duties and obligations under this Agreement;(b) It is the owner and holder of the Subordinate Debt;(c) The execution, delivery and performance by it of this Agreement has been duly authorized by all requisite action;(d) The outstanding principal balance of the Subordinate Debt is $________________ as the date hereof;(e) This Agreement constitutes a valid and legally binding obligation of Subordinate Lender in accordance with its terms, subject to applicablebankruptcy, insolvency, reorganization, moratorium and other laws affecting creditors’ rights generally;(f) The Subordinate Debt is a general unsecured obligation of Guarantor, Subordinate Lender has no liens, claims, charges, pledges or securityinterests or other encumbrances, whether by contract, operation of law or otherwise, upon any property or right of Borrower or any other Obligor tosecure the Subordinate Debt, and until the indefeasible payment in full in cash of the Senior Debt, and the Senior Lenders have no further obligation tomake advances under the Senior Loan Documents, Subordinate Lender shall not obtain or claim, or seek to obtain, any lien, claim, charge, pledge,security interest or other encumbrance upon any of the property or rights of Borrower, any Obligor or any other Person; and(g) There are no documents, agreements, instruments or understandings, oral or written, evidencing, securing or otherwise relating to theSubordinate Debt other than the Subordinate Note.8. Further Assurance. Subordinate Lender hereby agrees that, within five (5) Business Days after request by Agent, it shall do, execute, acknowledgeand deliver all and every such further acts, deeds, conveyances and instruments, in recordable form, as Agent may reasonably request for the better assuringand evidencing of the foregoing subordinations and agreements.9. Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the Commonwealth of Virginia (excluding thelaws applicable to conflicts or choice of law).10. Entire Agreement. This Agreement shall be the whole and only agreement with regard to the subordination of the Subordinate Debt to the SeniorDebt and the subordination of other liens, rights and claims of Subordinate Lender to the liens, rights and claims of Agent and Senior Lenders, and shallsupersede any prior agreements as to such subordination. 15 11. Notices. All notices, demands, requests and other communications made hereunder shall be in writing and shall be properly given and deemeddelivered on the date of delivery if sent by personal delivery or nationally recognized overnight courier and on the third business day following mailing ifsent by certified or registered mail, postage prepaid, return receipt requested, as follows: If to Agent: KeyBank National Association, As Agent 1200 Abernathy Road, N.E. Suite 1550 Atlanta, Georgia 30328 Attn: Ms. Jennifer Wells Telecopy No.: (770) 510-2195With a copy to: McKenna Long & Aldridge LLP Suite 5300 303 Peachtree Street, N.E. Atlanta, Georgia 30308 Attn: William F. Timmons, Esq. Telecopy No.: (404) 527-4198If to Guarantor: Comstock Homebuilding Companies, Inc. 11465 Sunset Hills Road, 5 Floor Reston, Virginia 20190 Attn: Christopher Clemente Telecopy No.: (703) 760-1520With a copy to: Comstock Homebuilding Companies, Inc. 11465 Sunset Hills Road, 5 Floor Reston, Virginia 20190 Attn: Jubal Thompson, Esq. Telecopy No.: (703) 760-1520If to Subordinate Lender: With a copy to: or to such other addresses as any party hereto may request by notice served as required hereunder.12. Changes to this Agreement. This Agreement may not be changed, terminated or modified, nor shall any provision of this Agreement be waived,except by an agreement in writing, signed by each of the parties hereto. No waiver shall extend to or affect any obligation not expressly waived or impair anyright consequent thereon. No course of dealing or delay or omission on the part of the Agent in exercising any right shall operate as a waiver thereof orotherwise be prejudicial thereto. No notice to or demand upon Subordinate Lender shall entitle Subordinate Lender to other or further notice or demand insimilar or other circumstances. 16thth 13. Waiver of Jury Trial. GUARANTOR, AGENT, AND SUBORDINATE LENDER HEREBY WAIVE THEIR RESPECTIVE RIGHT TO A JURY TRIALWITH RESPECT TO ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THE SENIOR GUARANTY, THESENIOR LOAN AGREEMENT OR ANY OTHER SENIOR LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS(VERBAL OR WRITTEN) OR ACTIONS BY EITHER PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR AGENT AND SENIOR LENDERSTO ENTER INTO CERTAIN WAIVERS AND AGREEMENTS GIVEN IN CONNECTION WITH THE SENIOR LOAN DOCUMENTS. SUBORDINATELENDER (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF AGENT HAS REPRESENTED, EXPRESSLY OR OTHERWISE,THAT AGENT WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND (B) ACKNOWLEDGE THATAGENT AND SENIOR LENDERS HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND CERTAIN WAIVERS AND AGREEMENTSRELATED TO THE SENIOR LOAN DOCUMENTS TO WHICH EACH IS A PARTY BY, AMONG OTHER THINGS, THE WAIVERS ANDCERTIFICATIONS CONTAINED HEREIN.14. No Third-Party Beneficiary. No person or entity (including, without limitation, any Obligor) is intended to be a third-party beneficiary of, and noone other than the Agent, the Senior Lenders, Subordinate Lender and its respective successors and assigns shall have any rights under this Agreement.15. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the Agent, Senior Lenders, Subordinate Lender andtheir respective successors, successors-in-title and assigns.16. Counterparts. This Agreement may be executed in any number of counterparts, all of which counterparts, when taken together, shall constitute oneoriginal agreement.17. Actions by Agent and Senior Lenders; Consent of Agent and Senior Lenders. Any consent required of Agent or Senior Lenders in this Agreementmay be given or withheld in the sole and unfettered discretion of Agent or Senior Lenders, as applicable.18. Time of Essence. Time is of the essence with respect to each and every covenant, agreement and obligation of the parties hereto under thisAgreement.19. Transfer. Each Senior Lender may sell, assign, transfer, pledge, encumber, hypothecate or enter into participations for all or any part of its respectiveinterests in the Senior Loan Documents and the Senior Debt. The Subordinate Lender may not sell, assign, transfer, pledge, encumber, hypothecate or enterinto participations for all or any part of its interest in the Subordinate Loan Documents or the Subordinate Debt, and any attempted sale, assignment, transfer,pledge, encumbrance, hypothecation or participation shall be void and of no force and effect; provided, however, that so long as the total aggregate amountof cash equity contributed to, and maintained with, the Subordinate Lender by Christopher Clemente and/or Gregory Benson, or their respective immediatefamily members or trusts established for their benefit, or 17 any entity owned or controlled by Mr. Clemente and/or Mr. Benson, is equal to or greater than One Million and No/100ths Dollars ($1,000,000) (“EquityContribution”), the Subordinate Lender may participate out or otherwise sell, assign, transfer, pledge, encumber, or hypothecate portions of the its interest inthe Subordinate Loan Documents or the Subordinate Debt so long as the Equity Contribution is maintained for so long as the Senior Debt remainsoutstanding and provided further that any such subsequent transfer is made subject to all of the terms, conditions and restrictions of this Agreement.20. No Joint Venture; No Fiduciary Relationship. This Agreement shall not be construed to create a partnership or joint venture between the partieshereto. Nothing contained in this Agreement or otherwise is intended to create an agency, trustee or fiduciary relationship between Subordinate Lender, onthe one hand, and Agent or the Senior Lenders, on the other hand.21. NOT A LOAN; NO DUTY TO PURCHASE. THIS AGREEMENT SHALL IN NO WAY BE CONSTRUED AS PROVIDING AN EXTENSION OFCREDIT BY ANY PARTY TO ANY OTHER OF THE PARTIES. NO PARTY SHALL HAVE THE OBLIGATION TO PURCHASE THE LOAN OF ANYOTHER PARTY HERETO UPON ANY DEFAULT BY BORROWER, GUARANTOR OR ANY OTHER PERSON UNDER ANY OF THE SUBORDINATELOAN DOCUMENTS OR IN ANY OTHER EVENT WHATSOEVER.22. Judicial Interpretation. In the event the provisions of this Agreement require judicial or other interpretation, it is agreed that the court interpretingor construing same shall not apply a presumption that the terms hereof shall be more strictly construed against one party by reason of the rule of constructionthat a document is to be more strictly construed against a party who by itself or through its agents prepared the same, it being agreed that all parties to thisAgreement participated in the preparation of this Agreement.[SIGNATURES BEGIN ON THE FOLLOWING PAGE] 18 IN WITNESS WHEREOF, the parties hereto have executed this Agreement under seal as of the day and year first set forth above. AGENT:KEYBANK NATIONAL ASSOCIATION,individually and as AgentBy: Name: Title: [Signatures Continued On Next Page] 19 GUARANTOR:Comstock Homebuilding Companies, Inc., aDelaware corporationBy: Name: Christopher Clemente Title: Chief Executive Officer[Signatures Continued On Next Page] 20 SUBORDINATE LENDER:STONEHENGE FUNDING, LC, a Virginia limited liabilitycompanyBy: Name: Title: 21 SCHEDULE AWaiver or Forbearance of Defaults or Events of DefaultReduction or Debt Forgiveness of InterestReduction or Debt Forgiveness of PrincipalConversion of Debt to StockElimination or Modification of Existing Warrants for Purchase of StockElimination or Modifications to Covenants that do not negatively impact Senior LenderExtension of Maturity DateReduction of Interest RateAcknowledgement of Subordination 22 SUBORDINATION AND STANDSTILL AGREEMENTNOTICE:THIS SUBORDINATION AND STANDSTILL AGREEMENTRESULTS IN YOUR PRIORITY OF PAYMENT BECOMINGSUBJECT TO AND OF LOWER PRIORITYTHAN THE PRIORITY AND LIENOF SOME OTHER OR LATER INSTRUMENTTHIS SUBORDINATION AND STANDSTILL AGREEMENT (this “Agreement”) is made this _______ day of December, 2009, by and amongCOMSTOCK HOMEBUILDING COMPANIES, INC., a Delaware corporation (“Guarantor”), and GUGGENHEIM CORPORATE FUNDING, LLC, asadministrative agent (“Agent”) for the benefit of the several banks and other financial institutions or entities from time-to-time parties to the Senior LoanAgreement, defined below (“Senior Lenders”), and STONEHENGE FUNDING, LC, a Virginia limited liability company (“Subordinate Lender”).W I T N E S S E T H:WHEREAS, Guarantor has executed that certain Amended and Restated Indenture and amended Senior Note due 2013 dated as of March 14, 2008, inthe principal sum of $9,000,000 in favor of Subordinate Lender (collectively, the “Subordinate Note”); andWHEREAS, pursuant to the Senior Loan Agreement (as hereinafter defined), the Senior Lenders (as hereinafter defined) provided a credit facility toBorrower (as hereinafter defined);WHEREAS, Guarantor has executed a certain Senior Guaranty (as hereinafter defined) in favor of Agent pursuant to the Senior Loan Agreement;WHEREAS, the obligations of Borrower and Guarantor under the Senior Loan Documents (as hereinafter defined) are secured by, among other things,the Senior Security Documents (as hereinafter defined);NOW, THEREFORE, in consideration of the mutual benefits accruing to the parties hereto and other valuable consideration, the receipt and sufficiencyof which consideration are hereby acknowledged, it is hereby declared, understood and agreed as follows:1. Definitions.(a) “Agent” has the meaning given such term in the introductory paragraph to this Agreement. Unless otherwise specified herein, “Agent” shallmean Guggenheim Corporate Funding, LLC in its capacity as agent under the Senior Loan Agreement.(b) “Bankruptcy Code” means Title 11, United States Code, as amended from time to time, or any successor statute thereto.(c) “Borrower” means Comstock Penderbrook, L.C., a Virginia limited liability company.(d) “Cash Collateral Agreement” shall mean that certain Cash Collateral Agreement dated December 22, 2009 and executed by Borrower in favorof Agent for the benefit of the Senior Lenders, and as may be further amended, modified, increased, consolidated, restated or replaced.(e) “Collateral” means all of the real, personal and other property now or hereafter encumbered by or securing the Senior Note, the Senior LoanAgreement, the Senior Security Documents, the Cash Collateral Agreement or the Senior Guaranty, or any documents 23 now or hereafter entered into or delivered in connection with any of them, and all of each Obligor’s right, title and interest in and to such property,whether existing or future, and all security interests, security titles, liens, claims, pledges, encumbrances, conveyances, endorsements and guaranties ofwhatever nature now or hereafter securing any Obligor’s obligations under the Senior Loan Documents or any part thereof, and all products andproceeds of the foregoing.(f) “Enforcement Action” means the commencement of any litigation or proceeding at law or in equity, the commencement of any foreclosureproceeding, the exercise of any statutory or non-judicial power of sale, the taking of a deed or assignment in lieu of foreclosure, seeking to obtain ajudgment, seeking the appointment of or the obtaining of a receiver or the taking of any other enforcement action against, or the taking of possessionor control of, or the exercise of any rights or remedies with respect to, any Obligor or the Collateral, any other property or assets of any Obligor or anyportion thereof.(g) “Insolvency Proceeding” means any proceeding, whether voluntary or involuntary, under the Bankruptcy Code, or any other bankruptcy,insolvency, liquidation, reorganization, composition, extension, arrangement, adjustment or other similar proceeding concerning any Obligor, anyaction for the winding-up or dissolution of any Obligor, any proceeding (judicial or otherwise) concerning the application of the assets of any Obligorfor the benefit of its creditors, the appointment of or any proceeding seeking the appointment of a trustee, receiver or other similar custodian for all orany substantial part of the assets of any Obligor, a general assignment for the benefit of creditors or any proceeding or action seeking the marshaling ofthe assets and liabilities of any Obligor, or any other action concerning the adjustment of the debts of any Obligor or the cessation of business by anyObligor, in each case under any applicable domestic or foreign federal or state law. For the purposes hereof, an “Insolvency Proceeding” shall alsoinclude the taking, seeking or approving of any action in any proceeding described in the foregoing sentence by, against or concerning any otherPerson that could adversely affect any Obligor, any other obligor with respect to the Subordinate Loan, the Collateral, the Senior Loan Documents, theAgent, the Senior Lenders or any Enforcement Action under the Senior Security Documents or any other Senior Loan Document.(h) “Obligors” means Borrower and Guarantor, and each other guarantor or obligor of or with respect to any part of the Senior Debt.(i) “Senior Assignment of Interests” means that certain Amended and Restated Deed of Trust With Absolute Assignment Of Leases And Rents,Security Agreement and Fixture Filing executed by Borrower, as Grantor, in favor of the Agent and Senior Lenders, as beneficiaries, and as the samemay be further amended, extended, supplemented, consolidated, renewed, restated or otherwise modified from time to time,.(j) “Senior Debt” means the (i) principal of, premium, if any, and interest on the Senior Note or pursuant to the Senior Loan Agreement (whetherpayable under the Senior Note, the Senior Loan Agreement, or the Senior Guaranty or any other Senior Loan Document), (ii) prepayment fees, exit fee,yield maintenance charges, breakage costs, late charges, default interest, agent’s fees, costs of collection, protective advances, advances to curedefaults, and indemnities, (iii) any other amount or obligations (including any fee or expense) due or payable with respect to the Senior Loan or any ofthe Senior Loan Documents (including interest and any other of the foregoing amounts accruing after the commencement of any InsolvencyProceeding, 24 and any other interest that would have accrued but for the commencement of such Insolvency Proceeding, whether or not any such interest is allowedas an enforceable claim in such Insolvency Proceeding and regardless of the value of the Collateral at the time of such accrual), whether outstanding onthe date of this Agreement or hereafter incurred, whether as a secured claim, undersecured claim, unsecured claim, deficiency claim or otherwise, and allrenewals, modifications, amendments, supplements, consolidations, restatements, extensions, refinances, and refundings of any thereof.(k) “Senior Guaranty” means, collectively, that certain Limited Guaranty executed by the Guarantor and that certain Completion Guarantyexecuted by the Guarantor, each dated as of February 22, 2007 in favor of Agent for the benefit of the Senior Lenders, and as the same may be from timeto time amended, extended, supplemented, consolidated, renewed, restated or otherwise modified.(l) “Senior Lenders” means “Lenders” as defined in the Senior Loan Agreement.(m) “Senior Loan” means the up to $28,000,000 credit facility provided pursuant to the Senior Loan Agreement, as the same may be amended,modified, increased, consolidated, restated or replaced as provided herein.(n) “Senior Loan Agreement” means that certain Loan Agreement dated as of February 22, 2007 executed by Borrower, Guarantor and Agent ,and certain other parties now or hereafter a party thereto, and as may be further amended, modified, increased, consolidated, restated or replaced.(o) “Senior Loan Documents” means the Senior Security Documents, the Senior Note, the Senior Loan Agreement, the Senior Guaranty, theSenior Assignment of Interests, the Cash Collateral Agreement and any other documents, agreements or instruments now or hereafter executed anddelivered by or on behalf of any Obligor or any other person or entity in connection with the Senior Loan, and any documents, agreements orinstruments hereafter executed and delivered by or on behalf of any Obligor or any other person or entity in connection with any refinancing of theSenior Loan, as any of the same may be from time to time amended, extended, supplemented, consolidated, renewed, restated or otherwise modified.(p) “Senior Note” means that certain note which may be executed by Borrower in favor of Agent and Senior Lenders pursuant to the Senior LoanAgreement, as originally executed, or if varied, extended, supplemented, consolidated, amended, replaced, renewed, modified, or restated from time totime as so varied, extended, supplemented, consolidated, amended, replaced, renewed, modified or restated.(q) “Senior Security Documents” means the Senior Assignment of Interests and each and every other security document as referenced in theSenior Loan Agreement, the Cash Collateral Agreement and each other Senior Loan Document securing any or all of the Senior Loan, together withany and all acknowledgments, powers, certificates, UCC financing statements or other documents or instruments executed and delivered in connectiontherewith. 25 (r) “Subordinate Debt” means the principal amount of the indebtedness evidenced by the Subordinate Note, together with any interest, premium,yield maintenance charges, breakage costs, late charges, default interest, costs of collection, protective advances, advances to cure defaults,indemnities, reimbursement obligations and any other amount or obligation (including any fee or expense) due thereon or payable with respect theretoor pursuant to the Subordinate Loan Documents, whether outstanding on the date of this Agreement or hereafter incurred, and all permitted renewals,modifications, amendments, supplements, consolidations, restatements, extensions, refinances and refundings of any thereof.(s) “Subordinate Loan Documents” means the Subordinate Note and any other document, agreement or instrument now or hereafter executed anddelivered by or on behalf of Guarantor in connection with the indebtedness evidenced by the Subordinate Note, as any of the same may be from time totime amended, extended, supplemented, consolidated, renewed, restated or otherwise modified as permitted herein.(t) Except as otherwise provided herein, capitalized terms used herein that are not otherwise defined herein shall have the meanings set forth inthe Senior Loan Agreement.2. Effectiveness of Agreement. This Agreement shall be deemed effective as of the date of execution.3. Priority of Collateral and Payments. Guarantor and Subordinate Lender covenant and agree that the payment of the Subordinate Debt is herebyunconditionally and expressly made junior, subordinate and subject in right and time of payment and in all other respects to the indefeasible prior paymentin full in cash of all Senior Debt. Without limiting the foregoing, the Subordinate Loan Documents, as well as all of the rights and remedies of SubordinateLender under the Subordinate Loan Documents or otherwise in and to the Collateral or other property or assets of the Obligors, are hereby unconditionallyand expressly made subject and subordinate in lien and subordinate in payment to the Senior Debt, and to all of the rights and remedies, of Agent and theSenior Lenders under the Senior Loan Agreement under the Senior Loan Documents and to the Collateral or other property or assets of the Obligors. Inaddition, in furtherance of and without limiting the foregoing, Subordinate Lender agrees that:(a) Subordinate Lender shall have no right, lien or claim in and to the Collateral and the proceeds thereof (including, without limitation, anyrights with respect to insurance proceeds and condemnation awards), or any other property or assets of any Obligor until such time as the perioddescribed in Paragraph 4 hereof shall have lapsed;(b) Subordinate Lender hereby expressly waives any rights to require or request that the Agent and the Senior Lenders marshal the Collateral infavor of Subordinate Lender or to equitably subordinate the rights, liens or security interests of Agent and the Senior Lenders under the Senior LoanDocuments, whether pursuant to the Bankruptcy Code or otherwise. Agent and the Senior Lenders shall have the right at any and all times to determinethe order in which, or whether, (i) recourse is sought against any Obligor or any other obligor with respect to the Senior Debt, or (ii) any or all of thecollateral security for the indebtedness and obligations under the Senior Loan Documents in which a lien has been granted to or obtained by Agentshall be enforced. Subordinate Lender hereby waives any and all rights to require that Agent and/or the Senior Lenders pursue or exhaust any rights orremedies with respect to any Obligor or any other party prior to exercising their rights and remedies with respect to the Collateral or any other propertyor assets of the Obligors. Agent and the Senior Lenders may forbear collection, grant indulgences, release, compromise or settle the Senior Debt, or sell,take, 26 exchange, surrender or release collateral or security therefor, consent to or waive any breach of, or any act, omission or default under, any of the SeniorLoan Documents, apply any sums received by or realized upon by Agent and the Senior Lenders against liabilities of the Obligors to Agent and theSenior Lenders in such order as Agent and the Senior Lenders shall determine in their sole discretion, and otherwise deal with any and all parties andthe Collateral or other property or assets of the Obligors as they deem appropriate. Agent and the Senior Lenders shall have no liability to SubordinateLender for, and Subordinate Lender hereby waives any claim, right, action or cause of action which it may now or hereafter have against Agent and theSenior Lenders arising out of, any waiver, consent, release, indulgence, extension, delay or other action or omission, any release of any Obligor, releaseof any of the Collateral securing such indebtedness and obligations, the failure to realize upon any Collateral or other property or assets of any Obligor,or the failure to exercise any rights or remedies of Agent and the Senior Lenders under the Senior Loan Documents;(c) Subordinate Lender hereby expressly consents to and authorizes, at the option of the Senior Lenders the acceptance of additional SeniorSecurity Documents, or the release of any Obligor. Subordinate Lender hereby expressly consents to and authorizes, at the option of the Agent, theamendment, extension, restatement, consolidation, increase, renewal, refinance or other modification, in whole or in part, of all or any of the SeniorLoan Documents, including, without limitation, increasing or decreasing the stated principal amount of the Senior Loan, extending or shortening theterm of the Senior Loan, increasing or decreasing the interest rate payable as provided in the Senior Loan Agreement or altering any other paymentterms under the Senior Loan Documents;(d) Subordinate Lender hereby absolutely and irrevocably waives, to the fullest extent permitted by law, any rights they may have, by contract,at law or in equity, to be subrogated to the Agent’s and the Senior Lenders’ rights against the Obligors under the Senior Loan Documents or to theAgent’s liens and security interests on any of the Collateral. If Subordinate Lender shall acquire by indemnification, subrogation or otherwise, any lien,estate, right or other interest in or with respect to the Collateral or other property or assets of any Obligor, that lien, estate, right or other interest shall besubordinate to the Senior Security Documents and the other Senior Loan Documents as provided herein and shall be held in trust for the benefit of, andassigned to, Agent in accordance with this Agreement;(e) Subordinate Lender agrees that it shall not agree to, and nothing herein or in the Senior Loan Documents shall be deemed to evidenceapproval of Agent or the Senior Lenders of, any increase to the Subordinate Note, or any other amendment or modification of the Subordinate LoanDocuments except for modifications or amendments that do not negatively impact Agent or the Senior Lenders and are of the general type set forth onSchedule A attached hereto and made a part hereof; provided, however, that no amendment or modification to the Subordinate Loan Documents shallin any event (i) increase the stated principal amount of the Subordinate Debt, (ii) shorten the term of the Subordinate Debt, (iii) increase the interest rateon the Subordinate Debt, (iv) provide collateral or other security for the Subordinate Debt, (v) provide for additional obligors of the Subordinate Debtor (vi) include more restrictive covenants, conditions or defaults than those existing as of the date hereof. Subordinate Lender and Guarantor shallpromptly provide to Agent a fully executed copy of any amendment or modification to the Subordinate Note; 27 (f) Subordinate Lender acknowledges that Agent and Senior Lenders have not made nor do they now make any representations or warranties,express or implied, nor do they assume any liability to Subordinate Lender, with respect to the creditworthiness or financial condition of Guarantor,any Obligor or any other Person. Subordinate Lender acknowledges that it has, independently and without reliance upon Agent or any Senior Lender,and based upon such information and documents as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreementand the Subordinate Loan. Subordinate Lender will, independently and without reliance upon Agent or any Senior Lender, based upon suchinformation and documents as it deems appropriate at the time, continue to make its own credit analysis and decisions in taking or not taking actionunder this Agreement and the Subordinate Loan Documents. None of Agent or any Senior Lender shall have any duty or responsibility, either initiallyor on a continuing basis, to provide Subordinate Lender with any credit or other information with respect to Guarantor or any other Obligor, whethercoming into its possession before the making of the Senior Loan or at any time or times thereafter. Subordinate Lender agrees that none of Agent or anySenior Lender owes any fiduciary duty to Subordinate Lender in connection with the administration of the Senior Loan and the Senior LoanDocuments and Subordinate Lender agrees not to assert any such claim;(g) Unless the Agent and Senior Lenders shall have consented in writing to such modification or amendment, no modification or amendment ofthe Subordinate Loan Documents shall be binding except for modifications or amendments that do not negatively impact Agent or the Senior Lendersand are of the general type set forth on Schedule A attached hereto and made a part hereof; provided, however, that no amendment or modification tothe Subordinate Loan Documents shall in any event (i) increase the stated principal amount of the Subordinate Debt, (ii) shorten the term of theSubordinate Debt, (iii) increase the interest rate on the Subordinate Debt, (iv) provide collateral or other security for the Subordinate Debt, (v) providefor additional obligors of the Subordinate Debt or (vi) include more restrictive covenants, conditions or defaults than those existing as of the datehereof. Subordinate Lender and Guarantor shall promptly provide to Agent a fully executed copy of any amendment or modification to theSubordinate Note;(h) If, notwithstanding the provisions of this Agreement, any payment or distribution of any kind or character (whether in cash, securities, orother property) shall be received by Subordinate Lender directly or indirectly from any Obligor (whether out of or in connection with the Collateral,upon any payment or distribution of the assets of any Obligor of any kind or character to creditors upon or in connection with any InsolvencyProceeding or otherwise) in contravention of the terms of this Agreement, such payment, distribution or security shall not be commingled with anyasset of Subordinate Lender, but rather shall be held in trust for the benefit of, and shall be paid over or delivered and transferred to, the Agent or itsrepresentative, for application to the payment of the Senior Debt remaining unpaid, until all of the Senior Debt shall have been indefeasibly paid in fullin cash. In any such event, Agent may, but it shall not be obligated to, demand, claim and collect any such payment or distribution that would, but forthe subordination provisions, be payable or deliverable with respect to the Subordinate Debt. 28 (i) Notwithstanding anything to the contrary set forth herein, Subordinate Lender shall not be permitted to receive any payments with respect tothe Subordinate Debt until such time as the Senior Debt shall have been indefeasibly paid in full in cash, and Senior Lenders have no further obligationto make advances under the Senior Loan Documents. All payments or distributions upon or with respect to the Subordinate Debt which are received bySubordinate Lender contrary to the provisions of this Agreement shall be received and held in trust by the Subordinate Lender for the benefit of SeniorLenders and shall be paid over to Agent in the same form as so received (with any necessary endorsement) to be applied (in the case of cash) to, or heldas collateral (in the case of non-cash property or securities) for performance of the Senior Debt in accordance with the terms of the Senior LoanDocuments.4. Certain Actions Regarding Subordinate Debt. Until such time as the Senior Debt shall have been indefeasibly paid in full in cash, and SeniorLenders have no further obligation to make advances under the Senior Loan Documents, Subordinate Lender shall not take any of the following actions withrespect to the Subordinate Debt until one (1) year and one (1) day following the indefeasible payment in full of the Senior Debt in cash without the priorwritten consent of the Agent and Senior Lenders:(a) Declare a default or event of default under the Subordinate Loan Documents, accelerate all or any portion of the Subordinate Debt or exerciseany of its remedies (including, without limitation, any Enforcement Action) under the Subordinate Loan Documents or at law or in equity;(b) Commence, directly or indirectly, any legal or other proceedings against any Obligor, or commence any Enforcement Action;(c) Consent to or enter into any amendment or modification of any of the Subordinate Loan Documents except for modifications or amendmentsthat do not negatively impact Agent or the Senior Lenders and are of the general type set forth on Schedule A attached hereto and made a part hereof;provided, however, that no amendment or modification to the Subordinate Loan Documents shall in any event (i) increase the stated principal amountof the Subordinate Debt, (ii) shorten the term of the Subordinate Debt, (iii) increase the interest rate on the Subordinate Debt, (iv) provide collateral orother security for the Subordinate Debt, (v) provide for additional obligors of the Subordinate Debt or (vi) include more restrictive covenants,conditions or defaults than those existing as of the date hereof. Subordinate Lender and Guarantor shall promptly provide to Agent a fully executedcopy of any amendment or modification to the Subordinate Note; or(d) Commence, directly or indirectly, or consent to any Insolvency Proceeding by or against any Obligor.5. Bankruptcy Issues.(a) The provisions of this Agreement shall be applicable both before and after the commencement, whether voluntary or involuntary, of anyInsolvency Proceeding by or against any Obligor and all references herein to any Obligor shall be deemed to apply to any such Obligor as a debtor-in-possession and to any trustee in bankruptcy for the estate of any such Obligor. Furthermore, this Agreement and the subordinations contained hereinshall apply notwithstanding the fact that all or any part of the Senior Debt or any claim for or with respect to the Senior Debt is subordinated, avoidedor disallowed, in whole or in part, in any Insolvency Proceeding or by other applicable federal, state or foreign law; provided, however, that if thesubordination or disallowance of the claims of the Senior Lenders are predicated on gross 29 misconduct or bad faith of the Senior Lenders, then the subordination provisions set forth herein shall not apply. Without limiting the foregoing,Subordinate Lender expressly covenants and agrees that this Agreement is enforceable under applicable bankruptcy law and should be enforced underSection 510(a) of the Bankruptcy Code. Until such time as the Senior Debt has been indefeasibly paid in full in cash and Senior Lenders have nofurther obligation to make any advances under the Senior Loan Documents, Subordinate Lender shall not, and shall not solicit any person or entity to:(i) seek, commence, file, institute, consent to or acquiesce in any Involuntary Proceeding with respect to any Obligor or the Collateral; (ii) seek toconsolidate any Obligor with any other person or entity in any Insolvency Proceeding; or (iii) take any action in furtherance of any of the foregoing.(b) Subordinate Lender hereby agrees that it shall not make any election, give any consent, commence any action or file any motion, notice orapplication or take any other action in any Insolvency Proceeding (including, without limitation, any action under Section 105 of the BankruptcyCode) with respect to the Subordinate Debt or the other Subordinate Loan Documents in any case by or against any Obligor or their property withoutthe prior written consent of Senior Lenders, which may be granted or withheld in Senior Lenders’ sole and absolute discretion; provided, however, thatwith respect to any such Insolvency Proceeding, (i) the Subordinate Lender may file a proof of claim, (ii) the Agent may vote in any such InsolvencyProceeding any and all claims of Subordinate Lender, and Subordinate Lender hereby appoints the Agent as its agent, and grants to the Agent anirrevocable power of attorney coupled with an interest, and its proxy, for the purpose of exercising any and all rights and taking any and all actionsavailable to the Subordinate Lender in connection with any case by or against any Obligor or their property in any Insolvency Proceeding, includingwithout limitation, the right to vote to accept or reject a plan, to make any election under Section 1111(b) of the Bankruptcy Code; provided, however,that with respect to any proposed plan of reorganization in respect of which creditors are voting, Agent or Senior Lenders may vote on behalf of suchSubordinate Lender only if Agent’s or Senior Lender’s claim is included in a class of claims that is “impaired” as contemplated by Section 1124 of theBankruptcy Code under the proposed plan of reorganization, in Agent’s sole and absolute discretion, and (iii) Subordinate Lender shall not challengethe validity or amount of any claim submitted in such Insolvency Proceeding by the Agent or the Senior Lenders or any valuations of the Collateralsubmitted by the Agent or the Senior Lenders, in such Insolvency Proceeding or take any other action in such Insolvency Proceeding, which is adverseto their enforcement of any claim or receipt of adequate protection (as that term is defined in the Bankruptcy Code). In furtherance of the foregoing,Subordinate Lender hereby assigns to the Agent the right to vote all of Subordinate Lender’s claims against Obligors, including the right to approve orobject to any plan of reorganization, in any Insolvency Proceeding with respect to the Subordinate Debt or the other Subordinate Loan Documents inany case by or against any Obligor, provided, however, that with respect to any proposed plan of reorganization in respect of which creditors arevoting, Agent or Senior Lenders may vote on behalf of such Subordinate Lender only if Agent’s or Senior Lender’s claim is included in a class ofclaims that is “impaired” as contemplated under Section 1124 of the Bankruptcy Code under the proposed plan of reorganization, in Agent’s sole andabsolute discretion. In the event that such assignment shall be held invalid or unenforceable, then the provisions hereof prohibiting the right ofSubordinate Lender to make any election, vote on any plan of reorganization, give any consent, commence any action or file any motion, notice orapplication or take any other action in any proceeding without the prior written consent of Senior Lenders shall not be affected thereby. To the extentnot prohibited by the Bankruptcy Code, the 30 Federal Rules of Bankruptcy Procedure or other applicable law, the Agent shall be free to exercise such voting rights as the Agent shall determine in itssole and absolute discretion, and the Agent shall have no duty or obligation to file, prosecute, pursue or protect any such claim and shall otherwisehave no duties, liabilities or obligations to Subordinate Lender with respect thereto. Subordinate Lender hereby appoints the Agent as its agent, andgrants to Senior Lender an irrevocable power of attorney coupled with an interest for the purpose of exercising any and all rights and taking any and allactions available to Subordinate Lender in connection with the assignment to Senior Lender of the voting rights described herein. Without in any waylimiting the generality of Paragraph 8 hereof, Subordinate Lender hereby agrees that, upon the request of the Agent, Subordinate Lender shall do,execute, acknowledge and deliver to Senior Lender all and every such further acts, deeds, conveyances and instruments as the Agent may request forthe better assuring and evidencing of the foregoing appointment and grant and assignment of such voting rights.(c) In the event that Subordinate Lender shall fail to file a proof of claim with respect to the Subordinated Debt after ten (10) days written noticefrom the Agent, the Agent shall have the right to file such proof of claim on behalf of Subordinate Lender. Notwithstanding the foregoing and anyprovisions contained herein to the contrary, the Subordinate Lender may (i) take any action, which is not adverse to the priority status of the Agent orSenior Lenders or to the Agent’s or Senior Lenders’ exercise of their remedies, to protect and preserve the Subordinate Lender’s claim, and (ii) file anynecessary responses or pleadings in opposition to any pleading objecting to or seeking to disallow or reduce the Subordinate Lender’s claim.(d) To the extent any transfer, payment or distribution of assets with respect to the Senior Debt (whether in cash, property or securities andwhether by or on behalf of any Obligor as proceeds of security or enforcement of any right of setoff or otherwise) is declared to be fraudulent orpreferential, set aside or required to be paid to any Obligor, the estate in bankruptcy thereof, any third party, or a trustee, receiver or other similar partyunder any bankruptcy, insolvency, receivership or similar law, then if such payment is recovered by, or paid over to, Borrower or any other Obligor, theestate in bankruptcy thereof, any third party, or such trustee, receiver or other similar party, the Senior Debt or part thereof originally intended to besatisfied shall be deemed to be reinstated to the extent of the amount actually paid by the Agent or Senior Lenders with respect to the Senior Debt (the“Repayment”) to any Obligor, the estate in bankruptcy thereof, any third party, or a trustee, receiver or other similar party under any bankruptcy,insolvency, receivership or similar law, and outstanding as if such payment or distribution had not occurred, and this Agreement and the agreementsand subordination contained herein shall be reinstated with respect to any such transfer, payment or distribution to the extent of such Repayment. TheAgent shall not be required to contest any such declaration or obligation to return such payment or distribution.6. Approvals and Waivers of Subordinate Lender. Subordinate Lender declares, covenants, agrees, and acknowledges that:(a) It consents to and authorizes all provisions of the Senior Security Documents and each of the other Senior Loan Documents.(b) It intentionally and unconditionally subordinates the Subordinate Debt to the Senior Debt in accordance with the foregoing and understandsthat in reliance upon, and in consideration of, this subordination and the other agreements and representations set forth herein, 31 specific loans and advances are being and will be made and, as part and parcel thereof, specific monetary and other obligations are being and will beentered into which would not be made or entered into but for said reliance upon this subordination and the other agreements and representations setforth herein.(c) It, in its capacity as the holder of the Subordinate Debt, intentionally and unconditionally waives and relinquishes any right to challenge thevalidity, enforceability and binding effect of any of the Senior Security Documents or the other Senior Loan Documents, and any lien, encumbrance,claim or security interest now or hereafter created thereunder, or the attachment, perfection or priority thereof, regardless of the order of recording orfiling of any thereof, or compliance by Agent or the Senior Lenders with the terms of any of the Senior Security Documents or the other Senior LoanDocuments, by reason of any matter, cause or thing now or hereafter occurring, nor shall Subordinate Lender raise any such matter, cause or thing as adefense to the enforcement thereof.(d) It acknowledges and agrees that the agreements herein shall be effective at all times notwithstanding taking of possession of any of theCollateral or other property or assets of any Obligor by Agent or the order in which any loan, advance or extension of credit included in the obligationsevidenced or secured by the Senior Security Documents and the other Senior Loan Documents or evidenced by the Subordinate Loan Documents ismade (Subordinate Lender hereby waiving the benefits of any statute or rule of law which would produce a result contrary to or in conflict with theforegoing).(e) It expressly waives notice of the acceptance of the subordinations and other agreements set forth herein, notice of reliance on suchsubordinations and other agreements, and notice of the creation of any Senior Debt after the date hereof.(f) It, in its capacity as the holder of the Subordinate Debt, waives any right to receive notice from Agent or the Senior Lenders of the occurrenceof a default under the Senior Loan Documents or the commencement of an Enforcement Action.(g) It, in its capacity as the holder of the Subordinate Debt, agrees that it will not in any manner challenge, oppose, object to, interfere with ordelay (i) the validity or enforceability of this Agreement, including without limitation, any provisions regarding the relative priority of the rights andduties of Agent and Senior Lenders and the Subordinate Lender, or (ii) Agent’s or any Senior Lender’s security interest in, liens on and rights as to theObligors, and any Collateral or any other property or assets of any Obligor, or any Enforcement Actions of Agent or any Senior Lender (including,without limitation, any efforts by Agent to obtain relief from the automatic stay under Section 362 of the Bankruptcy Code).(h) It acknowledges that any default, material misrepresentation or breach of warranty by it under this Agreement shall constitute an Event ofDefault under the Senior Loan Agreements.7. Representations. Subordinate Lender represents and warrants to, and covenants and agrees with, the Agent as follows:(a) It has all requisite power and authority to execute, deliver and perform its duties and obligations under this Agreement; 32 (b) It is the owner and holder of the Subordinate Debt;(c) The execution, delivery and performance by it of this Agreement has been duly authorized by all requisite action;(d) The outstanding principal balance of the Subordinate Debt is $9,000,000 as the date hereof;(e) This Agreement constitutes a valid and legally binding obligation of Subordinate Lender in accordance with its terms, subject to applicablebankruptcy, insolvency, reorganization, moratorium and other laws affecting creditors’ rights generally;(f) The Subordinate Debt is a general unsecured obligation of Guarantor, Subordinate Lender has no liens, claims, charges, pledges or securityinterests or other encumbrances, whether by contract, operation of law or otherwise, upon any property or right of Borrower or any other Obligor tosecure the Subordinate Debt, and until the indefeasible payment in full in cash of the Senior Debt, and the Senior Lenders have no further obligation tomake advances under the Senior Loan Documents, Subordinate Lender shall not obtain or claim, or seek to obtain, any lien, claim, charge, pledge,security interest or other encumbrance upon any of the property or rights of Borrower, any Obligor or any other Person; and(g) There are no documents, agreements, instruments or understandings, oral or written, evidencing, securing or otherwise relating to theSubordinate Debt other than the Subordinate Note.8. Further Assurance. Subordinate Lender hereby agrees that, within five (5) Business Days after request by Agent, it shall do, execute, acknowledgeand deliver all and every such further acts, deeds, conveyances and instruments, in recordable form, as Agent may reasonably request for the better assuringand evidencing of the foregoing subordinations and agreements.9. Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the Commonwealth of Virginia (excluding thelaws applicable to conflicts or choice of law).10. Entire Agreement. This Agreement shall be the whole and only agreement with regard to the subordination of the Subordinate Debt to the SeniorDebt and the subordination of other liens, rights and claims of Subordinate Lender to the liens, rights and claims of Agent and Senior Lenders, and shallsupersede any prior agreements as to such subordination.11. Notices. All notices, demands, requests and other communications made hereunder shall be in writing and shall be properly given and deemeddelivered on the date of delivery if sent by personal delivery or nationally recognized overnight courier and on the third business day following mailing ifsent by certified or registered mail, postage prepaid, return receipt requested, as follows: If to Agent: Guggenheim Corporate Funding, LLC135 East 57th StreetNew York, New York 10022Attention: Fund Controller Facsimile Number: (212) 644-8396Telephone: (212) 651-0840 33 With a copy to: LeClairRyan 999 Waterside Drive, Suite 2525 Norfolk, Virginia 23510 Attention: Ray W. King, Esq. Facsimile Number: (757) 624-3773 Telephone: (757) 441-8929If to Guarantor: Comstock Homebuilding Companies, Inc. 11465 Sunset Hills Road, 4 Floor Reston, Virginia 20190 Attn: Christopher Clemente Telecopy No.: (703) 760-1520With a copy to: Comstock Homebuilding Companies, Inc. 11465 Sunset Hills Road, 4 Floor Reston, Virginia 20190 Attn: Jubal Thompson, Esq. Telecopy No.: (703) 760-1520If to Subordinate Lender: Stonehenge Funding, L.C. 11465 Sunset Hills Road, 4 Floor Reston, Virginia 20190 Attn: Beau Schweikert Telecopy No.: (703) 230-1465With a copy to: Stonehenge Funding, L.C. 11465 Sunset Hills Road, 4 Floor Reston, Virginia 20190 Attn: Phil London, Esq. Telecopy No.: (703) 230-1465or to such other addresses as any party hereto may request by notice served as required hereunder.12. Changes to this Agreement. This Agreement may not be changed, terminated or modified, nor shall any provision of this Agreement be waived,except by an agreement in writing, signed by each of the parties hereto. No waiver shall extend to or affect any obligation not expressly waived or impair anyright consequent thereon. No course of dealing or delay or omission on the part of the Agent in exercising any right shall operate as a waiver thereof orotherwise be prejudicial thereto. No notice to or demand upon Subordinate Lender shall entitle Subordinate Lender to other or further notice or demand insimilar or other circumstances.13. Waiver of Jury Trial. GUARANTOR, AGENT, AND SUBORDINATE LENDER HEREBY WAIVE THEIR RESPECTIVE RIGHT TO A JURY TRIALWITH RESPECT TO ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THE SENIOR GUARANTY, THESENIOR LOAN AGREEMENT OR ANY OTHER SENIOR LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS(VERBAL OR WRITTEN) OR ACTIONS BY EITHER PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR AGENT AND SENIOR LENDERSTO ENTER INTO CERTAIN WAIVERS AND AGREEMENTS GIVEN IN CONNECTION WITH THE SENIOR LOAN DOCUMENTS. SUBORDINATELENDER 34thththth (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF AGENT HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT AGENTWOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND (B) ACKNOWLEDGE THAT AGENT ANDSENIOR LENDERS HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND CERTAIN WAIVERS AND AGREEMENTS RELATED TO THESENIOR LOAN DOCUMENTS TO WHICH EACH IS A PARTY BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINEDHEREIN.14. No Third-Party Beneficiary. No person or entity (including, without limitation, any Obligor) is intended to be a third-party beneficiary of, and noone other than the Agent, the Senior Lenders, Subordinate Lender and its respective successors and assigns shall have any rights under this Agreement.15. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the Agent, Senior Lenders, Subordinate Lender andtheir respective successors, successors-in-title and assigns.16. Counterparts. This Agreement may be executed in any number of counterparts, all of which counterparts, when taken together, shall constitute oneoriginal agreement.17. Actions by Agent and Senior Lenders; Consent of Agent and Senior Lenders. Any consent required of Agent or Senior Lenders in this Agreementmay be given or withheld in the sole and unfettered discretion of Agent or Senior Lenders, as applicable.18. Time of Essence. Time is of the essence with respect to each and every covenant, agreement and obligation of the parties hereto under thisAgreement.19. Transfer. Each Senior Lender may sell, assign, transfer, pledge, encumber, hypothecate or enter into participations for all or any part of its respectiveinterests in the Senior Loan Documents and the Senior Debt. The Subordinate Lender may not sell, assign, transfer, pledge, encumber, hypothecate or enterinto participations for all or any part of its interest in the Subordinate Loan Documents or the Subordinate Debt, and any attempted sale, assignment, transfer,pledge, encumbrance, hypothecation or participation shall be void and of no force and effect; provided, however, that so long as the total aggregate amountof cash equity contributed to, and maintained with, the Subordinate Lender by Christopher Clemente and/or Gregory Benson, or their respective immediatefamily members or trusts established for their benefit, or any entity owned or controlled by Mr. Clemente and/or Mr. Benson, is equal to or greater than OneMillion and No/100ths Dollars ($1,000,000) (“Equity Contribution”), the Subordinate Lender may participate out or otherwise sell, assign, transfer, pledge,encumber, or hypothecate portions of the its interest in the Subordinate Loan Documents or the Subordinate Debt so long as the Equity Contribution ismaintained for so long as the Senior Debt remains outstanding and provided further that any such subsequent transfer is made subject to all of the terms,conditions and restrictions of this Agreement.20. No Joint Venture; No Fiduciary Relationship. This Agreement shall not be construed to create a partnership or joint venture between the partieshereto. Nothing contained in this Agreement or otherwise is intended to create an agency, trustee or fiduciary relationship between Subordinate Lender, onthe one hand, and Agent or the Senior Lenders, on the other hand. 35 21. NOT A LOAN; NO DUTY TO PURCHASE. THIS AGREEMENT SHALL IN NO WAY BE CONSTRUED AS PROVIDING AN EXTENSION OFCREDIT BY ANY PARTY TO ANY OTHER OF THE PARTIES. NO PARTY SHALL HAVE THE OBLIGATION TO PURCHASE THE LOAN OF ANYOTHER PARTY HERETO UPON ANY DEFAULT BY BORROWER, GUARANTOR OR ANY OTHER PERSON UNDER ANY OF THE SUBORDINATELOAN DOCUMENTS OR IN ANY OTHER EVENT WHATSOEVER.22. Judicial Interpretation. In the event the provisions of this Agreement require judicial or other interpretation, it is agreed that the court interpretingor construing same shall not apply a presumption that the terms hereof shall be more strictly construed against one party by reason of the rule of constructionthat a document is to be more strictly construed against a party who by itself or through its agents prepared the same, it being agreed that all parties to thisAgreement participated in the preparation of this Agreement.[SIGNATURES BEGIN ON THE FOLLOWING PAGE] 36 IN WITNESS WHEREOF, the parties hereto have executed this Agreement under seal as of the day and year first set forth above. AGENT: GUGGENHEIM CORPORATE FUNDING, LLC,as Administrative Agent By: (SEAL)Name: Title: [Signatures Continued On Next Page] 37 GUARANTOR:Comstock Homebuilding Companies, Inc., aDelaware corporationBy: Name: Christopher Clemente Title: Chief Executive Officer[Signatures Continued On Next Page] 38 STONEHENGE FUNDING, LC SUBORDINATE LENDER:STONEHENGE FUNDING, LC, aVirginia limited liability companyBy: Name: Title: STONEHENGE FUNDING-PAGE 39 STONEHENGE FUNDING, LCSCHEDULE AWaiver or Forbearance of Defaults or Events of DefaultReduction or Debt Forgiveness of InterestReduction or Debt Forgiveness of PrincipalConversion of Debt to StockElimination or Modification of Existing Warrants for Purchase of StockElimination or Modifications to Covenants that do not negatively impact Senior LenderExtension of Maturity DateReduction of Interest RateAcknowledgement of Subordination STONEHENGE FUNDING-PAGE 40 Exhibit 10.88Execution CopySEVENTH LOAN MODIFICATION AGREEMENTTHIS SEVENTH LOAN MODIFICATION AGREEMENT (this “Agreement” or this “Modification”) is made effective as of the _____ day of February,2010 (the “Effective Date”), by and among: COMSTOCK HOMEBUILDING COMPANIES, INC., a Delaware corporation (the “Borrower,” whether one ormore) and BANK OF AMERICA, N.A., a national banking association, its successors and assigns (the “Lender”).RECITALS:WHEREAS, pursuant to the terms of that certain Revolving Line of Credit Note dated as of February 22, 2006, by and between Borrower and Lender(and as the same may be further modified, renewed, supplemented or restated, the “Note”), Lender made a loan (the “Loan”) to Borrower in the originalprincipal amount of Fifteen Million and No/100 Dollars ($15,000,000.00), as evidenced by the Note;WHEREAS, pursuant to that certain Loan Modification Agreement dated August 22, 2006 (the “First Loan Modification”), Borrower and Lenderagreed to modify the Loan to, among other things, (i) reduce the maximum outstanding principal amount of the Loan to Ten Million and No/100 Dollars($10,000,000.00); (ii) extend the Maturity Date of the Loan to November 22, 2006 and (iii) make certain other changes in connection with the Loan;WHEREAS, pursuant to the terms of that certain Second Loan Modification Agreement dated as of November 22, 2006 (the “Second LoanModification”), Borrower and Lender agreed to, among other things, (i) state that no further advances could be made under the Loan; (ii) reduce themaximum outstanding principal amount of the Loan to Five Million and No/100 Dollars ($5,000,000.00); (iii) extend the Maturity Date of the Loan toDecember 28, 2007; (iv) modify the payment terms of the Loan; and (v) and make certain other changes in connection with the Loan;WHEREAS, pursuant to the terms of that certain Third Loan Modification Agreement dated June 28, 2007 (the “Third Loan Modification”), Borrowerand Lender agreed to, among other things, (i) extend the Maturity Date of the Loan and (ii) modify the payment terms of the Loan (the “Third ModificationAgreement”);WHEREAS, in consideration of Lender entering into, among other things, the Third Modification Agreement, Highland Avenue (as hereinafterdefined) and Homes of Atlanta (as hereinafter defined) agreed, pursuant to the terms of certain modification agreements dated June 28, 2007 to secure theLoan with the Highland Property (as hereinafter defined) and the Atlanta Property (as hereinafter defined);WHEREAS, pursuant to the terms of that certain Fourth Modification Agreement dated December 27, 2007 (the “Fourth Loan Modification”),Borrower and Lender agreed to modify certain payment terms of the Loan;WHEREAS, pursuant to the terms of that certain Fifth Modification Agreement dated February 27, 2008 (the “Fifth Loan Modification”), Borrowerand Lender agreed to modify certain payment terms of the Loan; Page 1 WHEREAS, pursuant to the terms of that certain Sixth Modification Agreement dated November 26, 2008 (the “Sixth Loan Modification”), Borrowerand Lender agreed to modify certain payment terms of the Loan;WHEREAS, the outstanding principal balance under the Loan as of the date hereof is Three Million One Hundred Twenty Thousand and No/100Dollars ($3,120,000.00);WHEREAS Lender last received a loan payment from Borrower on May 28, 2008, and interest on the Loan has continued to accrue from and after suchdate;WHEREAS, in addition to being the holder of the Loan, Lender was also the holder of: (i) a certain loan made by Lender to Highland AvenueProperties, LLC (“Highland Avenue”) in the original principal amount of Four Million Eight Hundred Fifty One Thousand Two Hundred Thirty-Five andNo/100 Dollars ($4,851,235.00) (as the same has been or may be amended, renewed, supplemented or restated from time to time, the “Highland Loan”)which Highland Loan is secured by, among other things, certain property located in Atlanta, Georgia (the “Highland Property”) and (ii) a certain loan madeby Lender to Comstock Homes of Atlanta, LLC (“Homes of Atlanta”) in the original principal amount of Seven Million Five Hundred Thousand and No/100Dollars ($7,500,000.00)) (as the same has been or may be amended, renewed, supplemented or restated from time to time, the “Atlanta Loan”) which AtlantaLoan is secured by, among other things, certain property located in Jackson County and Paulding County, Georgia (the “Atlanta Property”); all of which hasbeen successfully foreclosed upon by Lender;WHEREAS, Borrower, Highland Avenue, Homes of Atlanta and Lender have all entered into that certain Forbearance and Conditional ReleaseAgreement (the “Forbearance Agreement”) dated November 26, 2008, whereby Lender agreed to release and hereby does release Borrower, HighlandAvenue and Homes of Atlanta from their obligations under the Highland Loan and Atlanta Loan, and forbear from the exercise of its right and remediesagainst Borrower, Highland Avenue and Homes of Atlanta under such loans;WHEREAS, at the request of the Borrower, Lender has agreed to, among other things, modify certain payment terms of the Loan;WHEREAS, Borrower’s obligations under the Note and the other Loan Documents (hereinafter defined) are hereinafter collectively called the“Obligations”; the Note and all other documents and any modification agreement previously, now or hereafter executed and delivered to evidence, secure,guarantee, or in connection with, the Obligations, as the same has been or may be amended, renewed, extended, amended, supplemented or restated, arehereinafter collectively called the “Loan Documents”; and all liens, security interests, assignments, superior titles, rights, remedies, powers, equities andpriorities securing the Note or providing recourse to Lender with respect thereto, are hereinafter collectively called the “Liens”; andNOW, THEREFORE, in consideration of the sum of Ten Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency ofwhich are hereby acknowledged by all parties, the parties agree as follows:1. Recitals. The recitals set forth above are a material part of this Agreement, and are incorporated herein as if restated in full. Page 2 2. Definitions. All capitalized terms herein, unless otherwise defined herein, shall have the same meaning ascribed to such terms as in the LoanDocuments.3. Interest Rate. Interest on the Loan shall continue to accrue in accordance with the terms of the Note, including and without limitation, the followingprovisions:The unpaid principal balance of this Note from day to day outstanding which is not past due, shall bear interest at a rate equal to the “StatedRate” (hereinafter defined) computed on the “Annual Basis” (hereinafter defined). As used herein, the term “Stated Rate” means a fluctuating rate ofinterest equal to the BBA LIBOR Daily Floating Rate (hereinafter defined) plus Two Hundred Twenty (220) basis points per annum. The Stated Rateshall change with each change in the BBA LIBOR Daily Floating Rate as of the date of any such change, without any requirement that the Lenderprovide notice to the Borrower. As used herein (i) the term “Annual Basis” means computation of interest for the actual number of days elapsed and asif each year were composed of 360 days, and (ii) the term “BBA LIBOR Daily Floating Rate” shall mean a fluctuating rate of interest per annum equalto the British Bankers Association LIBOR Rate (“BBA LIBOR”), as published by Reuters (or other commercially available source providingquotations of BBA LIBOR as selected by Lender from time to time) as determined for each Business Day at approximately 11:00 a.m. London time two(2) London Banking Days prior to the date in question, for U.S. Dollar deposits (for delivery on the first day of such interest period) with a one monthterm, as adjusted from time to time in Lender’s sole discretion for governmental reserve requirements, deposit insurance assessment rates and otherregulatory costs. If such rate is not available at such time for any reason, then a comparable rate will be reasonably selected by Lender. “Business Day”shall mean a day on which Lender is open for the conduct of substantially all of its banking business at its office in the city in which this Note ispayable (excluding Saturdays and Sundays). A “London Banking Day” is a day on which banks in London are open for business and dealing inoffshore dollars.If Lender determines that no adequate basis exists for determining the BBA LIBOR Daily Floating Rate, or that any applicable law or regulationor compliance therewith by Lender prohibits or restricts or makes impossible the charging of interest based on the BBA LIBOR Daily Floating Rateand Lender so notifies Borrower, then until Lender notifies Borrower that the circumstances giving rise to such suspension no longer exist, interestshall accrue and be payable on the unpaid principal balance of this Note from the date Lender so notifies Borrower until the Maturity Date of this Note(whether by acceleration, declaration, extension or otherwise) at a fluctuating rate of interest equal to the Prime Rate of Lender computed on theAnnual Basis. As used herein, (i) the term “Annual Basis” means computation of interest for the actual number of days elapsed and as if each year werecomposed of 360 days and (ii) the term “Prime Rate” means, on any day, the rate of interest per annum then most recently established by Lender as its“prime rate.” Any such rate is a general reference rate of interest, may not be related to any other rate, and may not be the lowest or best rate actuallycharged by Lender to any customer or a favored rate and may not correspond with future increases or decreases in interest rates charged by other lendersor market rates in general, and that Lender may make various business or other loans at rates of interest having no relationship to such rate. Each timethe Prime Rate changes, the per annum rate of interest on this Note shall change immediately and contemporaneously with such change in the PrimeRate. If Lender (including any subsequent holder of this Note) ceases to exist or to establish or publish a prime rate from which the Prime Rate is thendetermined, the applicable variable rate from which the Prime Rate is determined Page 3 thereafter shall be instead the prime rate reported in The Wall Street Journal (or the average prime rate if a high and a low prime rate are thereinreported), and the Prime Rate shall change without notice with each change in such prime rate as of the date such change is reported.4. Maturity. All of the Obligations, including (without limitation) all outstanding principal, accrued and unpaid interest, outstanding late charges,unpaid fees, and all other amounts outstanding under the Note and the other Loan Documents, shall be due and payable in full on December 28, 2018 (the“Maturity Date”). The Maturity Date may not be further extended by the Borrower. All amounts due under the Loan are due in full on the Maturity Date. Allreferences to the Maturity Date contained in the Loan Documents shall refer to the Maturity Date as defined in this Agreement.5. Payments. Payments of principal and interest under the Loan shall be due and payable as follows:(a) No payments of principal or interest shall be due prior to January 28, 2011 (“First Interest Payment Date”).(b) On the First Interest Payment Date, Borrower shall make a payment of all then accrued and unpaid interest on the Loan at the Stated Rate;(c) On February 28, 2011 and on the 28 of each month thereafter (each such date, a “Payment Date”) through and including Maturity Date,Borrower shall make monthly payments of all accrued and unpaid interest on the Loan at the Stated Rate.(d) Commencing January 28, 2012 and continuing on each and every successive Payment Date thereafter through November 28, 2018, inaddition to monthly payments of interest, Borrower shall make consecutive monthly payments of principal in the amount of Thirty-Seven ThousandOne Hundred Forty Two and 86/100 Dollars ($37,142.86) each.(e) On the Maturity Date, Borrower shall pay the entire outstanding principal balance of the Loan, together with all accrued but unpaid interestthereon at the Stated Rate, and all other amounts due under this Agreement or any other Loan Document.6. Modification Fees. Borrower shall pay a modification fee to the Lender in connection with this Modification in the amount of One HundredThousand and No/100 Dollars ($100,000.00) (the “Seventh Loan Modification Fee”), which fee shall be paid in full on the Effective Date hereof by wiretransfer. Borrower has previously agreed to pay a modification fee to the Lender in connection with the Sixth Modification in the amount of Four HundredNinety-One Thousand Nine Hundred Eighty-Eight and No/100 Dollars ($491,988.00) (the “Sixth Loan Modification Fee”), which fee shall accrue interest atthe Stated Rate from the date of the Sixth Modification until paid in full; such repayment terms being hereafter restated in this Modification. The Sixth LoanModification Fee shall continue to be due and payable as follows:(a) On the First Interest Payment Date, Borrower shall make a payment of all then accrued and unpaid interest on the Sixth Loan ModificationFee.(b) On each and every successive Payment Date thereafter through and including the Maturity Date, Borrower shall make monthly payments ofall accrued and unpaid interest on the Sixth Loan Modification Fee. Page 4th (c) Commencing January 28, 2012 and continuing on each and every successive Payment Date thereafter through November 28, 2018, inaddition to monthly payments of interest on the Sixth Loan Modification Fee, Borrower shall make monthly payments of a portion of the Sixth LoanModification Fee in the amount of Five Thousand Eight Hundred Fifty-Seven and 00/100 Dollars ($5,857.00) each.(d) On the Maturity Date, Borrower shall pay the entire unpaid balance of the Sixth Loan Modification Fee, together with all accrued but unpaidinterest thereon at the Stated Rate.7. Past Due Rate. Any principal of, and to the extent permitted by applicable law, any interest on such principal, and any other sum payable hereunder,which is not paid when due, including, without limitation, the Sixth Loan Modification Fee, shall bear interest from the date due and payable until paid,payable on demand, at a rate per annum (the “Past Due Rate”) equal to the Stated Rate plus four percent (4%).8. Late Charges. If Borrower fails to make any payment under the terms of the Loan as modified herein within fifteen (15) days after the date suchpayment is due, including and without limitation, the Sixth Loan Modification Fee, Borrower shall pay to Lender on demand a late charge equal to fourpercent (4%) of such payment. Such fifteen (15) day period shall not be construed as in any way extending the due date of any payment. The “late charge” isimposed for the purpose of defraying the expenses of the Lender incident to handling such delinquent payment. This charge shall be in addition to, and notin lieu of, the Past Due Rate and any other remedy Lender may have, whether authorized herein or by law, and is in addition to any fees and charges of anyagents or attorneys which Lender may employ upon the occurrence of a Default.9. Default. Upon the occurrence of any default under the Loan that is not cured within any applicable cure period, at Lender’s election, the fullprincipal amount of the Loan together with all accrued and unpaid interest thereon and the full Sixth Loan Modification Fee, together with all accrued andunpaid interest thereon and any applicable fees as set forth herein or in any of the other Loan Documents, shall be immediately due and payable in full.10. Borrower’s Representations and Warranties. The Borrower hereby represents and warrants that: (a) the execution and delivery of this Agreementdoes not contravene, result in a breach of, or constitute a default under, any deed of trust, loan agreement, indenture or other contract or agreement to whichBorrower is a party or by which Borrower or any of its properties may be bound (nor would such execution and delivery constitute such a default with thepassage of time or the giving of notice or both), and does not violate or contravene any law, order, decree, rule, regulation or restriction to which Borrower orany of Borrower’s property is subject; (b) this Agreement constitutes the legal, valid and binding obligations of Borrower enforceable in accordance with itsterms; (c) the execution and delivery of, and performance under, this Agreement are within Borrower’s power and authority without the joinder or consent ofany other party and have been duly authorized by all requisite action, and are not in contravention of any law, or of any indenture, agreement or undertakingto which Borrower is a party or by which it is bound; (d) there are no offsets, claims or defenses with respect to the Obligations; and (e) Borrower is dulyorganized and legally existing under the laws of the state of its organization and is duly qualified to do business in the Commonwealth of Virginia. Except asset forth on Exhibit A hereto or otherwise disclosed in its public filings from time to time, the Borrower further represents and warrants that there is nomaterial suit, judicial or administrative action, claim, investigation, inquiry, proceeding or demand pending (or, to Borrower’s knowledge, threatened)against (i) Borrower, or (ii) which affects Page 5 title to any of Borrower’s property or the Borrower’s title to any of Borrower’s property, or (iii) which affects the validity enforceability or priority of any ofthe Loan Documents. Borrower agrees to indemnify and hold the Lender harmless against any loss, claim damage, liability or expense (including, withoutlimitation, attorneys’ fees) incurred as a result of any representation or warranty made by Borrower herein which proves to be untrue or inaccurate in anyrespect, and any such occurrence shall constitute a default under the Loan Documents.11. Renewal; Lien Continuation; No Novation. Borrower hereby renews the Obligations and promises to pay and perform all Obligations as modifiedby this Agreement. All Obligations evidenced by the Note are hereby ratified and confirmed as valid, subsisting and the Liens are hereby ratified andconfirmed as valid, subsisting and securing the Obligations, as modified hereby. Nothing herein shall in any manner diminish, impair, waive or extinguishthe Note, the Obligations or the Liens. The execution and delivery of this Agreement shall not constitute a novation of the debt evidenced and secured by theLoan Documents.12. Expenses. Borrower shall pay all attorneys fees, costs and expenses incurred by Lender in connection with (i) this Agreement or (ii) therestructuring of the Loan.13. Authorization. At the time of execution of this Agreement, Borrower shall, if and to the extent requested by Lender, deliver to Lender (a) anopinion of Borrower’s counsel dated the date hereof, in form and substance satisfactory to Lender, that this Agreement has been duly authorized, executedand delivered by Borrower and is binding on, and enforceable against, the Borrower in accordance with its terms; and (b) such other evidence of dueauthorization and execution by the Borrower as the Lender may require.14. Further Assurances. The Borrower agrees to execute and deliver to the Lender, promptly upon request from Lender, such additional documents asmay be necessary or appropriate to consummate the transactions contemplated herein or to perfect, or continue the perfection of, the Liens.15. No Defenses. Borrower represents and warrants that Borrower has no claims, actions, causes of action, defenses, counterclaims or setoffs of any kindor nature which Borrower can assert against Lender in connection with the making, closing, administration, collection or enforcement by Lender of the LoanDocuments, this Agreement or any related agreements.16. No Waiver by Lender. Borrower acknowledges and agrees that the execution of this Agreement by the Lender is not intended nor shall it beconstrued as (a) an actual or implied waiver of any, default under the Note, any Deed to Secure Debt which encumbered the Highland Property or the AtlantaProperty or any other Loan Document, or (b) an actual or implied waiver of any condition or obligation imposed upon the Borrower pursuant to the Note, anyDeed to Secure Debt which encumbered the Highland Property or the Atlanta Property or any other Loan Document.17. Borrower’s Performance. If Borrower should fail to comply with any of the agreements, covenants or obligations of the Borrower under this orany other Loan Document, then Lender (in Borrower’s name or in its own name) may, but is under no obligation to, perform them or cause them to beperformed for the account of Borrower at Borrower’s sole expense. Any and all expenses thus incurred or paid by Lender shall be Borrower’s demandobligations to Lender and shall bear interest, from the date of Lender’s payment of any such obligation or expense for Borrower’s account until the date onwhich Borrower repays it to Lender, at the default rate of interest set forth in the Note. Upon making any such payment or incurring any such expense, Lendershall be Page 6 fully subrogated to all of the rights of the person or entity receiving such payment. Any amounts owing by Borrower to Lender pursuant to this provision orany other provision of this Agreement shall automatically and without notice constitute a portion of the Obligations evidenced by the Note secured by anyDeed to Secure Debt which encumbered the Highland Property or the Atlanta Property and the other Loan Documents. The amount and nature of any suchexpense and the time when paid shall be fully established by the affidavit of Lender or any of Lender’s officers or agents.18. Release. Upon the Effective Date, and in consideration of Lender’s entering into this Agreement, Borrower, for itself and its affiliates, heirs,executors, successors and assigns, hereby fully and forever release, relinquish, discharge, settle and compromise any and all claims, cross-claims,counterclaims, causes, damages and actions of every kind and character, and all suits, costs, damages, expenses, compensation and liabilities of everykind, character and description, whether direct or indirect, known or unknown, in law or in equity, which it has, had, may have, or will have againstLender, and/or any of its affiliates, parents, directors, agents, representatives, officers, employees, attorneys, consultants, or contractors (collectively,the “Lender Parties”) on account of, arising, or resulting from, or in any manner incidental to, any and every thing or event occurring or failing to occurat any time in the past up to and including the Effective Date hereof, including, without limitation, any claims relating to the Loan, the Loan Documents,this Agreement, any act and event relating to Lender’s administration of the Loans or any other obligations related thereto, any other transactioncontemplated by this Agreement, and any act and event at any time in the past up to and including the Effective Date hereof, relating to any LenderParties (collectively, the “Claims”). In addition, Borrower covenants not to sue any of the Lender Parties on account of any Claims.19. Miscellaneous. To the extent of any conflict between the Note (or any earlier modification of it) and this Agreement, this Agreement shall control.Except as hereby expressly modified, all terms of the Note and all other Loan Documents (as any of them may have been previously modified by any writtenagreement) remain in full force and effect. This Agreement (a) shall bind and benefit the parties hereto and their respective heirs, beneficiaries, administrators,executors, receivers, trustees, successors and assigns (provided, however, no party other than the Lender shall assign its rights hereunder without the priorwritten consent of the Lender); (b) may be modified or amended only by a writing signed by the Lender and the Borrower; (c) SHALL BE GOVERNED BY(INCLUDING BUT NOT LIMITED TO ITS VALIDITY, ENFORCEMENT AND INTERPRETATION) THE LAWS OF THE COMMONWEALTH OFVIRGINIA AND UNITED STATES FEDERAL LAW; (d) may be executed in several counterparts, and by the parties hereto on separate counterparts, and eachcounterpart, when executed and delivered, shall constitute an original agreement enforceable against all who signed it without production of or accountingfor any other counterpart, and all separate counterparts shall constitute the same agreement; and (e) embodies the entire agreement and understandingbetween the parties with respect to modifications of documents provided for herein and supersedes all prior conflicting or inconsistent agreements, consentsand understandings relating to such subject matter. “Borrower” shall include, in their individual capacities and jointly, all parties hereinabove named as theBorrower. The duties, covenants, conditions, obligations, and warranties of the Borrower in this Agreement shall be joint and several obligations of theBorrower and, if more than one, of each party named as the Borrower hereinabove, and each such party’s heirs, legal representatives, successors and assigns. Ifany Borrower is a corporation, partnership or other legal entity, the Borrower and the person or persons signing for it represent and warrant to the Lender thatthis Agreement is duly executed, acknowledged and delivered by the Borrower’s duly authorized representatives. Whenever used herein, the singular numbershall include the plural and the plural the singular, and any gender shall Page 7 be applicable to all genders. The use of the words “herein”, “hereof”, “hereunder” and other similar compounds of the word “here” shall refer to this entireAgreement and not to any particular section, paragraph or provision. The headings in this Agreement shall be accorded no significance in interpreting it.20. Financing Statements. Borrower authorizes the Lender, from time to time and without expense to the Lender, to file in such filing office or officesas the Lender may select, any financing statements and extensions, renewals or amendments thereof, naming the Borrower as debtor and in such form as theLender may require, in order to further evidence or perfect Lender’s security interests granted pursuant to the Loan Documents.[Signatures to Follow On Next Page] Page 8 EXECUTED ON THE DATE OR DATES OF THE ACKNOWLEDGMENTS HEREOF, BUT EFFECTIVE AS OF THE DATE FIRST STATED IN THISAGREEMENT. WITNESS: BORROWER: COMSTOCK HOMEBUILDING COMPANIES, INC.,a Delaware corporation By: Print Name: Print Name: Print Title:[SEAL]COMMONWEALTH OF VIRGINIA ) ) ss:COUNTY OF _____________ )I, _________________________________, a Notary Public in and for the aforesaid said jurisdiction, do hereby certify that_________________________, who is personally well known to me as (or satisfactorily proven to me to be) the person who signed the foregoing instrumentexecuted this _____ day of ________________, 2010, personally appeared before me in said jurisdiction and acknowledged that he is the___________________ of COMSTOCK HOMEBUILDING COMPANIES, INC., a Delaware corporation which is a party to the foregoing instrument; thathe has been duly authorized to execute and deliver the foregoing instrument for the purposes therein contained and that the same is his act and deed and theact and deed of COMSTOCK HOMEBUILDING COMPANIES, INC., a Delaware corporation.IN WITNESS WHEREOF, I have set my hand and Notarial Seal, this ____ day of __________________, 2010. Notary Public(SEAL) My Commission expires: [signatures continue on the next page] Page 9 WITNESS: LENDER: BANK OF AMERICA, N.A. By: Print Name: Print Name: Print Title:[CORPORATE SEAL] STATE OF CONNECTICUT ) ) ss: COUNTY OF FAIRFIELD ) I, _________________________________, a Notary Public in and for the aforesaid said jurisdiction, do hereby certify that ___________________,who is personally well known to me as (or satisfactorily proven to me to be) the person who signed the foregoing instrument executed this _____ day of_____________, 2010, personally appeared before me in said jurisdiction and acknowledged that he is the _____________________ of BANK OFAMERICA, N.A., a national banking association; that he has been duly authorized to execute and deliver the foregoing instrument for the purposes thereincontained and that the same is his act and deed and the act and deed of BANK OF AMERICA, N.A.IN WITNESS WHEREOF, I have set my hand and Notarial Seal, this _____ day of ____________, 2010. Notary Public(SEAL) My Commission expires: Page 10 Exhibit 10.89IN THE UNITED STATES DISTRICT COURTFOR THE EASTERN DISTRICT OF VIRGINIAAlexandria Division COMSTOCK POTOMAC YARD, L.C, ) ) Plaintiff, ) ) V. ) ) Civil Action No. 1:08-cv-894 ) BALFOUR BEATTY CONSTRUCTION, ) LLC ) ) ) Defendant. ) MEMORANDUM OPINIONThis is an action for breach of contract arising out of a “multi-use” condominium construction project located in Arlington, Virginia. The parties to thecontract are Plaintiff/Counter-Defendant Comstock Potomac Yard, L.C. (“Comstock”) and Defendant/Counter-Plaintiff Balfour Beatty Construction, LLC(“Balfour Beatty”). I.Background and Undisputed Factual HistoryOn or about November 12, 2004, Comstock, a developer, entered into a $92 million contract with Centex Construction Co., LLC for the constructionof a multi-use condominium complex called The Eclipse on Center Park Condominium (“the Project”) located in Arlington, Virginia. The Project involvedthe construction of two high rise towers (“the East and West Towers”), a below-ground parking garage, some 465 residential units, and 80,000 square feet ofcommercial retail space. Compl. ¶ 6; Answer ¶ 6. Balfour Beatty later acquired the rights to this General Conditions Contract. Pursuant to the Contract,Centex (later Balfour Beatty) served as the general contractor on the Project, contracting with and supervising specialized subordinate contractors throughoutconstruction of the complex. For its part, Comstock entered into a contract with Davis Carter Scott, Ltd. (“DCS”) on November 17, 2004, to retain DCS’services as the Project architect. (BB Ex. 97). 1 Among its primary obligations under the General Conditions Contract, Balfour was required to achieve “Substantial Completion” of the Project “notlater than Seven Hundred Sixty-Two (762) days from the date of commencement.” CPY Ex. 82, Contract § 3.3; Countercl. ¶ 11. This set December 16, 2006as the projected date of substantial completion. Countercl. ¶ 12.Throughout the pendency of construction, a number of disputes arose for which each party felt it incurred damages. Without delving into each of thoseissues, a number of these disputes centered on delays which prevented the Project’s full completion. On March 10, 2006, Balfour sent Comstock ScheduleUpdate 16 (“PY16”), which covered the period ending February 28, 2006, showing that each milestone would not be met. CPY Ex. 116.Balfour and Comstock ultimately negotiated a time extension in Change Order 15 on May 25, 2006, for which Comstock paid additional funds toBalfour. CPY Ex. 89-A; BB Ex. 511; Tr. 115:14 - 117:18.Complicating matters, in December of 2007, a subcontractor to Balfour Beatty named Atlas Comfort Systems, USA, LP (“Atlas”) filed two mechanic’sliens in the amount of approximately $1.4 million against the Project. In an attempt to resolve some of the disputes that had arisen between the parties, andwith the intention of removing these liens from the Project, Comstock and Balfour Beatty entered into a settlement agreement on January 30, 2008 called theLien-Free Completion Agreement (“LFCA”), though the LFCA left some disputed issues open for further negotiation. Change Order 15 had an “effective date” of May 25, 2006, though it was signed on May 31, 2006 by Comstock and on June 1, 2006 by Balfour. 211 As part of the Agreement, Balfour Beatty agreed that it would “not at any time file or record a lien against the Project.” Balfour Beatty, however, after itformed a belief that Comstock breached the new deal, filed two mechanic’s liens against the Project. After those lien filings, Comstock initiated the instantlawsuit against Balfour Beatty, alleging breach of contract (Count I), slander of title (Count II), and abuse of process (Count III). Balfour Beatty responded byfiling its own counterclaim asserting claims of breach of contract (Counterclaim Count I), breach of contract/specific performance (Counterclaim Count II),changes to the contract (Counterclaim Count III), breach of implied duty not to hinder or delay contract performance (Counterclaim Count IV), andenforcement of the mechanic’s liens (Counterclaim Count V). II.Procedural PostureComstock initiated this action by filing a Complaint on September 3, 2008. Balfour Beatty filed its Answer and Counterclaims on October 14, 2008.On April 20, 2009, the Court issued an Order and Memorandum Opinion finding that (1) the Lien-Free Completion Agreement was supported byconsideration; (2) the lien waiver provisions in the Agreement were unconditional; (3) Comstock did not breach the Agreement before Balfour Beatty filedthe liens; and (4) the liens were invalid. Because the Court invalidated those liens, the claims related to the liens (i.e., Counterclaim Count V and Third PartyComplaint Count I) were dismissed with prejudice, which resulted in the termination of the hundreds of Third Party Defendants as parties to this case. 3 On July 7, 2009, both parties moved for partial summary judgment regarding Comstock’s complaint, and Comstock moved for partial summaryjudgment on Balfour Beatty’s counterclaims. On August 14, 2009, the Court granted Balfour Beatty’s Motion for Summary Judgment regarding Comstock’sSlander of Title (Count II) and Abuse of Process (Count III) claims and granted Comstock’s Motion for Summary Judgment on the issue of whether BalfourBeatty breached the Lien-Free Completion as to the first two breach elements only and provided that Comstock may attempt to meet the third and finalelement by proving damages beyond a reasonable certainty at trial. The court also granted Comstock’s Motion for Summary Judgment as to Balfour Beatty’sdelay claims, holding that Balfour Beatty may only pursue the six primary delay claims that were outlined in Balfour’s expert’s report.A bench trial then proceeded before this Court from September 8 through September 16, 2009. Attached to and referenced throughout this Opinion isan addendum, detailing the Court’s findings of facts. III.Conclusions of LawAs a matter of law, this lengthy trial can be reduced to two claims for damages: 1) for breach of the contract to construct the Project (“the ConstructionContract”); and 2) for breach of the contract which the parties refer to as the Lien Fee Completion Agreement. In both instances, the Court notes that the lawin Virginia affords the words of a contract their full effect and does not allow a court to unjustifiably insert terms or obligations not contemplated by thecontracting parties. See Ames v. American Nat’l Bank, 163 Va. 1,38 (1934). 4 i.Count I: Breach of the Construction ContractAs noted above, the evidence introduced at trial, in large measure, revolved around whether or when Balfour achieved “Substantial Completion” onthe Project and who is responsible for any deviation from the Contract’s “Substantial Completion” date. Based on the foregoing findings of facts, the Courtreaches the following conclusions of law. a.The Contract, as Modified by Change Order 15, ControlsThe initial source of authority controlling construction of the Project is the November 12, 2004 Contract executed by Comstock and Balfour. TheContract provides that Balfour’s work on the Project would meet certain interim milestones, and that failure to do so would result in Balfour’s payment ofliquidated damages to Comstock. The Contract further provides that Balfour’s work on the entire project would meet a “Substantial Completion” deadline.Under the Contract, Substantial Completion constitutes: (i)Construction is complete, in accordance with the Contract Documents, so that [Comstock] can lawfully occupy or use the Work (or a designatedportion thereof for the use for which it is intended), (ii)all remaining punch list items can be reasonably and ordinarily expected to be completed within thirty (30) days, and (iii)A Temporary Certificate of Occupancy (“TCO”) for the portion of the Work required to achieve Substantial Performance as set forth in theContract Documents, including the Project Schedule, has been issued by Arlington County…., and (iv)90% of individual condominium units and all associated common areas within each milestone are complete for turnover/delivery to unit owners.Gen. Cond., § 8.1.3, CPY Ex. 82. The Contract also provides the process Balfour was to follow if circumstances arose which excusably delayed meeting thetimelines set forth in the Contract. Id. 5 Change Order 15 (“CO15”) modified the contract. Comstock argues that CO15 acted as an accord and satisfaction for all delays through April 30,2006. Generally, “[t]he doctrine of accord and satisfaction provides a method of discharging a contract or cause of action by which the parties may first agreeto give and accept something other than that which is due in settlement of the claim or demand of one party against the other, and then perform theiragreement.” WILLISTON ON CONTRACTS § 73:27; see also Lindsay v. McEnearney Associates, Inc., 260 Va. 48, 54 (Va. 2000). In CO15, Comstock furthercommitted to pay additional funds as consideration for the improvement of the revised interim milestones by two weeks. BB Ex. 511, ¶3(a)). These modifiedmilestones were based on a revised schedule Balfour prepared called PYR2.Importantly, although CO15 updated the Project’s timelines, it did not discard Balfour’s overarching requirement to achieve Substantial Completion asoriginally defined in the Contract. b.Balfour Beatty is Responsible for the Delays in Meeting the Projected Substantial Completion DateChange Order 15’s additional compensation and extension of “Substantial Completion” milestones were agreed to be “full consideration for any andall delays to the Project through April 30, 2006.” (CPY Ex. 89-A; BB Ex. 511). Thus, Balfour assumed responsibility for all delays to the Project throughApril 30, 2006 not provided for in CO15. It was abundantly clear from the evidence introduced at trial that the interim milestones and “SubstantialCompletion” dates were not ultimately met. Thus, the salient question for the Court is whether the contractual provisions which levy responsibility for thesedelays on Balfour remain in force or whether the occurrence of some fact relieves Balfour of that burden. 6 1.Balfour Beatty is Responsible for Those Delays Attributable to Poor Performance by SubcontractorsUnder the Contract, Balfour was required to “supervise and direct the Work, using [Balfour’s] best skill and attention. [Balfour] shall be solelyresponsible for and have control over construction means, methods, techniques, sequences, and procedures and for coordinating all portions of the Workunder the Contract…” CPY Ex. 82, Gen. Cond. §3.3.1. Specifically, even though Comstock paid certain subcontractors directly for design work, the Contractprovides:The Mechanical/Electrical/Plumbing portion of the Work is being performed by the Contractor on a design-build basis with Cherry Lane ElectricalService Company and Atlas Air Conditioning Company. Owner shall pay directly to Cherry Lane Electrical Service Company and Atlas AirConditioning Company the design costs under their respective subcontracts with Contractor. Nevertheless, Contractor shall be responsible forperformance of the MEP Work on a design-build basis in accordance with the Contract Documents.CPY Ex. 82, Gen. Cond. §3.1.5.Based on the attached findings of fact, the Court concludes that a central contributing factor to the delays incurred on the project after CO15 wasBalfour’s inadequate supervision of independent contractors. Under the Contract, it was specifically Balfour’s responsibility to increase manpower, increasethe number of working hours per shift or the number of shifts, in addition to advancing activities as needed to meet the milestones. Gen. Cond. §3.10.4.Moreover, as noted, it was Balfour’s contractual duty to oversee and direct the work of the subcontractors employed on the project. While Balfour points tothe facts that Comstock directly paid Cherry Lane and Atlas, the Contract specifically provides that “[Balfour] shall be responsible for 7 performance of the MEP Work on a design-build basis in accordance with the Contract Documents.” CPY Ex. 82, Gen. Cond. §3.1.5. The Contract furtherstates that Balfour was obligated to “supervise and direct the Work, using [Balfour’s] best skill and attention. [Balfour] shall be solely responsible for andhave control over construction means, methods, techniques, sequences, and procedures and for coordinating all portions of the Work under the Contract,including coordination of the duties of all trades.” CPY Ex. 82, Gen. Cond. §3.3.1.Comstock introduced a great deal of testimony and other evidence which demonstrated the inadequacy of the performance of these subcontractors. See,e.g., Findings of Fact at ¶20,40,52. Balfour’s efforts to introduce testimony which implied that responsibility for the performance of Atlas, Cherry Lane, andother subcontractors in building the Project was anything other than the province of Balfour proved unpersuasive. 2.Balfour Beatty’s Six (6) Grounds for Delay are Unavailing as Excusable Under the ContractPursuant to this Court’s August 14, 2009 Order and Memorandum Opinion, Balfour Beatty was restricted at trial to introducing evidence on its delayclaims to the six primary delays listed in Dr. Harmon’s report. The grounds asserted in that report are: (1) delays caused by Comstock’s alleged failure toobtain a building permit in a timely manner; (2) delays caused by the alleged late approval of sprinkler drawings; (3) delays caused by a lack of utilityservices (e.g., gas service) on the worksite that allegedly prevented Balfour Beatty from having the resources necessary to complete work; (4) delays causedby changes in the Fair Housing Act and Americans with Disabilities Act, which impacted, inter alia, the plumbing arrangement, cabinet installation, and wall 8 placement; (5) delays caused by incomplete drawings and plans regarding the landscaping areas surrounding the two towers and retail units; (6) delayscaused by a window order requiring Balfour Beatty to fabricate, ship, and install new windows on East Tower floors eight through eleven, which weredifferent than the lower windows.As a preliminary matter, the Contract is clear on what constitutes an “excusable delay” and what procedures must be followed before a delay qualifiesas “excusable.” To make a claim for Excusable Delay under the Contract, Balfour had to adhere to the following procedure:If the Contractor wishes to make Claim for an increase in the Contract Time, including claims for Excusable Delay…written notice as provided hereinshall be given. The Contractor’s Claim shall include an estimate of cost and of probable effect of delay on progress of the Work. In the case of acontinuing delay only one Claim is necessary. No adjustment to the Contract Time shall be granted, unless the Contractor furnishes documentationand evidence satisfactory to the Owner (1) demonstrating that the impacted activities are on the critical path of the Project’s schedule consistent withany scheduling requirements in the Contract Documents: (2) establishing that the delay is beyond the control and not the fault of the Contractor, itsSubcontractors or supplies: and (3) demonstrating that the Contractor has complied with all claims and notice submission requirements in theContract…(CPY Ex. 82, Gen. Cond. § 4.3.8.1). In other words, in order to establish an “excusable delay”: (l) the impacted activities must have been on the critical path;(2) the delay must have been beyond Balfour’s control (and that of its Subcontractors or suppliers); and (3) Balfour had to comply with all claims and noticesubmission requirements under the Contract. Based on the Court’s Findings of Fact, the Court is convinced that Balfour failed to adhere to the Contract’srequirements pertaining to excusable delays and that none of the grounds proffered by Balfour suffice as an “excusable” delay under the Contract. 9 a.Delays caused by Comstock’s alleged failure to obtain a building permit in a timely manner and the late approval of the sprinklerdrawings.Comstock’s alleged failure to obtain a building permit in a timely manner was a central point of contention between the parties at trial. In Dr. Harmon’sreport, the first identified delay proceeds from the theory that the delay in obtaining a building permit kept Balfour from obtaining the Fire Sprinkler Permits.In turn, Dr. Harmon’s second delay theorizes that because the Hydro inspections required a Fire Sprinkler Permit, all close-in approvals necessary to beginhanging drywall were consequently delayed due to the late approval of the sprinkler permit, which in turn, is attributable to Comstock’s failure to obtain abuilding permit.The Court declines to adopt this theory, however, because the evidence introduced at trial simply does not support the theory that Balfour was unableto obtain the sprinkler permits because of the lack of a building permit. The testimony of J.D. Martin indicated that construction was permitted to proceedabove street level prior to the issuance of the building permits on the Project and acquisition of the permits was not the driving force behind the Project’sdelays as Dr. Harmon represents. Tr. 260:1-8. Each trade, except the fire sprinkler work, attained at least some close-in inspection approvals before the Countyissued a building permit. Additionally, J.D. Martin’s testimony revealed that he did not refuse to evaluate Atlas’ sprinkler drawing because of the lack of abuilding permit. Moreover, the portion of Dr. Harmon’s report dealing with the supposed Building Permit delays was based on the Modified PYR2 start dates for theHanging Drywall Activity on the second floor (2W4070 and 2E4070, respectively). Tr. 1305:10-20, 1317:18 - 1318:6. Harmon used PYR2, theschedule that is “statused” through March 1, 2006 as opposed to PY18, the schedule that is statused through April 30, 2006, in order to calculate thedelay inserted for the purpose of her analysis. Tr. 1319:4-13. 1022 Despite Balfour’s protests to the contrary, failure to obtain sprinkler permits in a timely manner was ultimately Atlas’ responsibility as the design-buildcontractor under the Contract. Gen. Cond. §3.1.5. Martin testified that there were numerous reasons why the Atlas’ drawings were rejected, none of whichwere the absence of a building permit. Tr. 517:13-17. Rather, Martin rejected Atlas’ plans simply because they were not code-compliant. Tr. 517:18-20. Atlas’designs consistently contained defects, not the least of which was a discrepancy involving the size of the “fire” and “domestic” water linescoming into thebuildings from the street. As Dan Strotman testified at trial, based on the civil engineer’s drawings, which were complete when Atlas and Centex bid on theProject, the buildings were constructed with a six-inch fire line and a four-inch domestic line running into the building. Tr. 270:10-16. However, Atlas’design drawings for the fire sprinkler system allowed for an eight-inch fire line and a six-inch domestic water line. Id. This discrepancy caused significantdelays, as detailed in the Court’s Findings of Fact.Further, the notion that delays in hanging drywall are attributable to this building permit-sprinkler permit delay theory is equally unpersuasive.Balfour points to the testimony of Dan Strotman which indicated “there was the possibility that the building permit delayed [Balfour] in some respects.” Tr.362:21-23. Strotman further stated that “it’s possible that there were two to three to maybe four weeks of time that they could have been hanging drywall ifthey had a building permit in some areas. Not all areas, but in some.” Tr. 379:22 – 380:1-4. Strotman’s testimony on this point, however, struck the Court asfar from certain. More importantly, when considered in conjunction with evidence of the County’s willingness to approve plans without the building permitand of the other trade-related delays occurring on both Towers, the testimony of Strotman is all the more speculative. Mr. Strotman clarified that “[d]omestic service is the water that runs out of your tap that you drink or runs into the toilet or runs into the kitchen sink…The fire, the fire service is, serves the fire sprinklers. And it is not, it’s not tied into any kind of a meter, it goes directly to the fire pump out to thepiping to the sprinkler heads if they are activated.” 113 3 On the East Tower, the last close-in inspections on several upper floors were not for the fire sprinklers, but were for plumbing, electrical, mechanical, orgas work. Tr. 290:2-15; BB Ex. 1135, Tab 14. Accordingly, the argument that the hanging of drywall was delayed by anything other than Atlas’ slow anddeficient performance is unpersuasive. As the Court notes in its attached Findings of Fact, the same was true with close-in inspections on the upper level ofthe East Tower, where the plumbing and gas trades were the last to receive close-in approval. Tr. 290:16-20; BB Ex. 1135, Tab 14.In light of the foregoing, Comstock’s alleged failure to obtain a building permit in a timely manner was not an “excusable delay” under the Contract. b.Delays caused by a lack of utility services on the worksite that allegedly prevented Balfour from having the resources necessary to completework.Balfour also argues that Comstock failed to install certain utilities which were a necessary precursor to Balfour completing certain tasks. Chief amongthese was the installation of gas service, which Balfour asserts it needed to test the hot water and heating systems and other punchlist work. Balfour alsoargues that Comstock failed to procure telephone service for the Project in a timely manner, and therefore Balfour could not perform tests of the fire/life safetysystem.However, Balfour’s expert, Dr. Harmon, opined that the lack of gas service related only to punchlist activities. No other testimony or evidenceintroduced by Balfour indicates to the Court that the lack of gas service actually impaired Balfour and its subcontractors’ ability to perform work, punchlistor otherwise. As such, the Court 12 heard no credible evidence that if the gas service had been provided earlier, Balfour could have completed punchout work on time. Moreover, the temporaryphone line Comstock proposed would have not have prevented testing if Balfour had actually completed all its other work and stood ready to start tests ofthe life safety systems. In the end, these issues were simply not factors contributing to delays on the Project. c.Delays caused by CCB46 and 46R – changes in design to meet FHA and ADA requirements.Another of Balfour’s central grounds for excusable delay were the changes mandated in CCB46 and CCB 46R. These schedule updates dealt withredesigns of the condominium units to comply with ADA and FHA requirements, which the parties agree necessitated significant work, such as demolishingpipes, relocating risers, changing partition layouts, x-raying, and “core-drilling.”However, CCB46 was issued before CO15, and based on the evidence at trial, the Court is persuaded that any delays arising from the implementationof the CCB46 revisions were contemplated by the parties and subsumed within the CO15 agreement. Balfour further alleges that CCB46R delayed theprogress of “rough in” work. As noted above, the Court finds that Atlas’ “rough in” work was inconsistently paced and frequently delayed. CPY Exs. 262,358; BB Ex. 1180; Tr. 1610:18 – 1612:13. Balfour argues that the CCB46R altered the fire sprinkler designs. However, as Comstock notes, Balfour failed topresent any application drawing or calculation to demonstrate how CCB 46R actually altered the sprinkler design. Balfour’s own expert did not perform anyreview of the CCB 46 and 46R drawings. 13 Balfour also argues that the changes required by CCB 46R to the design of the cabinets delayed the installation of those cabinets in the individualcondominium units at the Project. However, the Court finds that Comstock mitigated the CCB 46R delays to cabinet fabrication by meeting with CAI, DCSand Balfour in Kansas City to review and approve revised cabinet shop drawings for CCB 46R changes, and also paying to expedite shipment of the cabinets.Tr. 295:15-23; CPY Ex. 335. The real delay in installing the cabinets in the individual condominiums was not due to any change in design beforemanufacturing, but due to the ongoing delays in hanging drywall at the time of the cabinets’ delivery. Tr. 302:3-12 d.Delays caused by incomplete drawings and plans regarding the landscaping in CCB64 and by CCB 72.Balfour also points to delays it attributes to changes necessitated by CCB64, which dealt with masonry work on two levels and was tied to landscapework and to CCB72, which required Balfour to fabricate and install new windows on the eighth through eleventh floors of the East tower. However, Balfouroffered little testimony or evidence regarding CCB 64 and CCB 72, and on the evidence presented, the Court does not deem this a legitimate basis for delayof the Project by Balfour. c.Comstock did not Order Balfour to AccelerateBalfour argues that Comstock directed Balfour to accelerate by indicating its wish to close as many units as possible in 2006. BB Br. at 11-12. TheCourt fails to see, however, how that directive by Comstock did anything other than express what was already understood by the parties at the time of CO15’sexecution: that Comstock desired Balfour to recover delays reflected in its PY18 schedule update and make as much progress on the condominium units aspossible. 14 Rather, § 3.10.4 of the Contract specifically provides that if it became apparent to Balfour that the Substantial Completion Date may not be met, unlessthe delays were excusable, Balfour was to:(a) Increase construction manpower to substantially eliminate the backlog of Work and overcome the delays to the Scheduled Substantial CompletionDate;(b) Increase the number of working hours per shift, shifts per day or the amount of construction equipment or any combination of constructionequipment or any combination of the foregoing…(c) Reschedule and expedite activities to overcome the delays to the Scheduled Substantial Completion Date.CPY Ex. 82, Gen. Cond. § 3.10.4). Moreover, if Balfour failed to do any of the foregoing within three days from Comstock’s request, Comstock could “takeappropriate action to overcome the delays to the Scheduled Substantial Completion Date…” Id.Because the Court holds that none of Balfour’s reasons proffered constitute an excusable delay, Comstock’s admonitions to Balfour to increase thepace of work at the project were not orders to accelerate entitling Balfour to the recovery of damages. d.Damages i.Liquidated DamagesThe Contract provides that failure to complete its work within the Contract time, and interim milestones set forth in Exhibit K. to the Contract, wouldresult in payment of liquidated damages by Balfour. Gen. Cond. § 8.1.4. The Contract also contains a clause which stated that that the liquidated damagesamounts were reasonable and did not function as a penalty. CPY Ex. 82; Gen. Cond. § 8.1.4. Under the Contract, if Balfour failed to meet the SubstantialCompletion dates set forth in the Project Schedule “due to the fault or neglect of [Balfour], [Balfour] shall pay to [Comstock] liquidated damages as follows”:West Tower:Floors 1-3 $1,500 per dayFloors 4-6 $3,000 per dayFloors 7-9 $4,500 per dayFloors 10-11 $6,000 per day 15 East Tower:Floors 1-3 $1,500 per dayFloors 4-6 $3,000 per dayFloors 7-9 $4,500 per dayFloors 10-11 $6,000 per dayCPY Ex. 82, Gen. Cond. § 8.1.4. The Contract also provided that liquidated damages owed on any calendar day shall not exceed $12,000 in the aggregate.”In CO 15, the parties revamped the dates at which Balfour would begin payment of Liquidated Damages if it failed to reach Substantial Completion asfollows: West Tower: Floors 2-3: 10/9/2006 $1,500 per day Floors 4-6: 11/17/2006 $3,000 per day Floors 7-9: 12/08/2006 $4,500 per day Floors 10-11: 12/20/2006 $6,000 per day East Tower:Floors 2-3: 11/22/2006 $1,500 per day Floors 4-6: 12/20/2006 $3,000 per day Floors 7-9 1/18/2007 $4,500 per day Floors 10-11: 2/8/2007 $6,000 per day Hoist & Trash Chute UnitsWest TowerLevels 2-4 12/08/2006 $4,500 per dayLevels 5-11 12/20/2006 $6,000 per dayEast TowerLevels 1-4 1/18/2007 $4,500 per dayLevels 5-11 2/8/2007 $6,000 per dayBB Ex. 511. Thus, through CO15, the parties maintained the underlying obligation for Balfour to pay liquidated damages should Balfour fail to meet thesemilestones, but pushed those milestones back for each level. Id. Under Comstock’s suggested calculations, Balfour would owe $9,069,000 in liquidateddamages. 16 Balfour argues, however, that CO15 went further in altering the conditions of the Contract. Balfour contends that CO15 changed the agreement so thatif “Owner Acceptance” – instead of “Substantial Completion” – was not achieved by the revised milestones, Balfour would begin paying liquidateddamages. One paragraph of CO15, ¶2.e., states that “[i]f Owner Acceptance is not achieved by the revised times of Completion/Interim Milestones dates,[Balfour] shall begin payment of Liquidated Damages as established in Section 8.1.4 of [the Contract]” pursuant to the revised milestone dates listed above.B.B. Ex. 511 (emphasis added). On the other hand, the very first page of CO15, which appears to be a cover sheet of sorts, explicitly states “[t]he date ofSubstantial Completion as of the date of this Change Order therefore is 02/15/2007.” (emphasis added). Other paragraphs in CO15 state that:1. a. Article 3, Section 3.3 of the Agreement is amended to change the Completion date of the Work by 60 Calendar Days to February 15, 2007....b. In order to satisfy these required dates, all facilities, systems, and improvements must be in place per Article 8 of [the Contract], and a Certificate ofOccupancy must have been issued by Arlington County.Id. Attempting to give full effect to the term “Owner Acceptance” as it appears in CO15 leads to the issue of whether the term is ambiguous.Of course, whether a term of a contract is ambiguous is a question of law. Nextel WIP Lease Corp. v. Sounders, 276 Va. 509, 516 (2008). Virginiaadheres to the “plain meaning” rule and the Court gives full effect to all contractual language if it can be read in conjunction without conflicting. Berry v.Klinger, 225 Va. 201, 208 (Va. 1983). Thus, “meaning must be given to every clause. The contract must be read as a single document.” Id. “Whendetermining a contract’s plain meaning, the words used are given 17 their usual, ordinary, and popular meaning.” Pocahontas Mining Ltd. Liability Co. v. Jewell Ridge Coal Corp., 263 Va. 169, 173 (Va. 2002). Reading CO15as a whole, it is clear “Owner Acceptance” is intended to represent a point of some significance in the Project’s progression, the nonoccurrence of which by acertain point in time would result in the levying of liquidated damages.Further, while “contractual provisions are not ambiguous merely because the parties disagree about their meaning,” it is clear that Balfour andComstock differ greatly in their interpretation of “Owner Acceptance” as it appears in CO15. Dominion Savings Bank, FSB v. Costello, 257 Va. 413,416 (Va.1999). Comstock and Balfour offer different meanings for the term as it appears in CO15. Comstock notes that “Owner Acceptance” is not defined in theContract or CO15, but also notes that the flow chart attached to CO15 indicates that “Owner Acceptance” would follow the completion of punchlist work andthe issuance of Certificates of Occupancy, just as the Contract contemplated with “Substantial Completion.” Thus, Comstock argues, “Owner Acceptance” asused in CO15, is merely analogous to “Substantial Completion” in the Contract and does not alter the point at which liquidated damages should ceaserunning. Balfour counters that liquidated damages cannot be imposed because “Owner Acceptance” occurred at some point prior to the dates provided in theLiquidated Damages chart appearing on page two of CO15.Absent from Balfour’s briefing, however, is any reference as to when “Owner Acceptance” actually occurred, other than a vague reference stating thatDecember 2008 was “two years after the initial Owner Acceptance dates.” B.B. Rebut, at 2. The contention, however, that Balfour had sufficiently met itscontractual obligations in late 18 2006 so as to warrant tolling liquidated damages is completely implausible in the face of evidence presented at trial. For instance, on January 13, 2007,Comstock sent a letter to Balfour, threatening default termination of the Contract due to recurring delays and unacceptable performance. B.B. Ex. 825.Further, CO15 seem indicates that the parties sought to push all timelines back by approximately sixty days, making Balfour’s proffered interpretation of“Owner Acceptance” completely inconsistent with that provision of CO15.Ultimately, whether “Owner Acceptance” is sufficiently ambiguous to warrant the consideration of parol evidence or not, the result is the same. Ifunambiguous, the Court reads “Owner Acceptance” consistently with the rest of CO15 as pushing the Substantial Completion date back from December 16,2006 to February 15, 2007, but not displacing the occurrence of “Substantial Completion” as the tolling event for liquidated damages. If the term isambiguous, the Court would look to evidence such as the testimony of Mr. Williams which supports the proposition that CO15 did not revise “SubstantialCompletion” as the tolling event for liquidated damages. Tr. 118:22-119:1.Balfour also raises a number of additional objections to the enforcement of the liquidated damages clause.First, Balfour argues that Comstock failed to present sufficient evidence to establish the cause and duration of the delays needed to properly assess anydelay damages. Balfour cites to TechDyn Systems Corp. v. Whittaker Corp., 245 Va. 291, 296 (Va. 1993), in which the Virginia Supreme Court noted “thatwhere there is evidence of damage from several causes, for a portion of which a defendant cannot be held liable, a plaintiff must present evidence that willshow within a reasonable degree of certainty the 19 share of damages for which that defendant is responsible.” Balfour cites this TechDyn as if the Virginia Supreme Court were discussing the standard forestablishing liability for liquidated damages specifically, when instead the court was discussing damages for delays generally.It has long been held that:Because of the difficulty of ascertaining with certainty the damages arising from failure to complete working contracts within the stipulated time, theparties to such contracts frequently provide for the payment of a specified amount as liquidated damages for failure to perform the contract in time andthe courts have unhesitatingly upheld and enforced such provision.Schmulbach v. Caldwell, 196 F. 16, 25 (4th Cir. 1912). Furthermore, “the purpose of a liquidated damages provision is to obviate the need for thenonbreaching party to prove actual damages.” O’Brian v. Langley School, 256 Va. 547, 552 (Va. 1998).Only if Balfour were to establish that the liquidated damages sought by Comstock amounted to an unenforceable penalty would Comstock be forced toprove actual damages. O’Brian, 256 Va. at 552. Under Virginia law, a clause for liquidated damages “will be construed as a penalty when the damageresulting from a breach of contract is susceptible of definite measurement, or where the stipulated amount would be grossly in excess of actual damages.”Brooks v. Bankson, 248 Va. 197, 208 (Va. 1994). Thus, the “amount agreed upon will be construed as enforceable…when the actual damages contemplated atthe time of the agreement are uncertain and difficult to determine with exactness, and when the amount fixed is not out of all proportion to the probable loss.”Id. (emphasis added). Analysis of these provisions “depends upon the intent of the parties as evidenced by the entire contract viewed in light of thecircumstances under which the contract was made.” Taylor v. Sanders, 233 Va. 73, 75, 353 S.E.2d 745, 747 (1987). Importantly, the burden to prove theimpropriety of enforcing the liquidated damages clause falls on Balfour as the breaching party. Boots, Inc. v. Prempal Singh, 274 Va. 513, 517 (Va. 2007). 20 Balfour does not argue that, at the time of contracting, Comstock’s damages in event of default were certain and not “difficult to determine.” Id. at 518.Rather, Balfour argues that since Comstock is at least partially responsible for delays to the project, liquidated damages cannot be assessed. However, giventhat the Court finds that Comstock was not responsible for delays to the project this argument falls under its own weight.Rather, the most difficult aspect of enforcing the liquidated damages clause is that the Contract’s benchmark for ending the imposition of liquidateddamages – the issuance of certificates of Substantial Completion – never occurred. Thus, as each party tacitly agrees, if the Court is to impose liquidateddamages, it must ascertain a “begin” and “end” date for the running of these damages.Comstock suggests that calculation of liquidated damages should begin at the new milestone dates established in CO15 previously referenced and endon December 1, 2008. Comstock supports December 1, 2008 as the cutoff for liquidated damages based on Comstock President Gregory Benson’s estimationthat it should have taken an extra ninety days to complete the punchlist work from the date Balfour ceased its work on the Project in August of 2008. Tr.680:7-18.Balfour argues that the Court should instead look to: the County’s issuance of Temporary Certificates of Occupancy (“TCO”) or Certificates ofOccupancy (“CO”); Comstock’s “use” and sale of individual condominium units; and/or Comstock’s “admissions” that the Project was substantiallycomplete. 21 Regarding Comstock’s purported “admissions” of substantial completion, none of the instances cited by Balfour suffice to toll the enforcement of theliquidated damages clause. Regarding Comstock’s use and sale of some of the individual condominium units in the West Tower, the Contract provides forComstock’s occupancy of the Project without forgoing its entitlement to liquidated damages. Gen. Cond. § 8.1.4. If Balfour considered any of the units in theProject to be substantially complete, Balfour could have initiated the procedure provided by §9.8.2 of the Contract, but failed to do so here. Furthermore, theContract’s explicit prerequisites for Substantial Completion also include that the punchlist be reasonably capable of completion within 30 days and that 90%of the units be complete for turnover/delivery to unit owners. Gen. Cond. §8.1.3. Balfour’s suggestion that the Court cease the running of liquidated damagesat the issuance of TCOs/COs or Comstock’s “use” and sale of some of the individual condominium units would disregard these contractual prerequisites.Balfour cites to Perini Corp. v. Greate Bay Hotel & Casino, Inc., 129 N.J. 479, 486,610 A.2d 364, 367 (1992), abrogated on other grounds by TretinaPrinting, Inc. v. Fitzpatrick & Assocs., 135 N.J. 349,640 A.2d 788 (1994) which discusses the general concept of substantial completion provisions in theconstruction industry. That court noted “[c]ourts have found that liquidated damages may not be imposed after the owner ‘is able to put the project to itsbeneficial use or the owner has taken occupancy’” and that “liquidated damages otherwise would become a penalty because those damages are designed toapproximate an owner’s loss before occupancy.” Perini, 610 A.2d at 367. 22 The fact that Comstock was able to “occupy” and sell some units does not indicate to the Court that Comstock was able to put the relevant portions ofthe Project to its “beneficial use.” Though Balfour notes that Comstock was able to sell a number of units by December 31, 2006 for a profit of some $46million, Comstock justifiably points out that it lost some $70 million in sales revenue. BB. Ex. 1209; Tr. 679:4-21. In the end, regardless of the limited extentto which Comstock was able to use some of the condominiums, the conditions set forth in §8.1,3 of the Contract still had to be satisfied. In fact, the Contractspecifically provides that “[u]nless otherwise agreed upon, partial occupancy or use of a portion or portions of the Work shall not constitute acceptance ofWork not complying with the requirements of the Contract Documents.” Gen. Cond. §9.9.3. Thus, enforcement of the liquidated damages clause does notconstitute a penalty because the Court finds that the Project was not being sufficiently used for its intended purpose nor did Balfour comply with theContract’s explicit prerequisites to substantial completion.The issue of “use” and sale of the West Tower units dovetails with Balfour’s additional argument that Comstock’s “occupancy” of the individual unitsdelayed Balfour’s performance and precludes Comstock’s collection of liquidated damages during that period. As noted, the Contract specifically providesthat Comstock’s exercise of its option under the Contract to occupy all or any portion of the Project prior to Substantial Completion did not:toll, waive or diminish in any way damages for which [Balfour] is responsible under this paragraph, except that if such occupancy further delaysSubstantial Completion of the Work, through no fault of [Balfour] or its Subcontractors, [Balfour] shall not be responsible for liquidated damagesduring the period of such additional delay.” 23 CPY Ex. 82, Gen. Cond. § 8.1.4. Balfour argues that Comstock did not properly occupy the units under the Contract because it failed to enter into anagreement pursuant to §9.9.1 of the Contract. That section provides:The Owner may occupy or use any completed or partially completed portion of the Work at any stage when such portion is designated by separateagreement with the Contractor, provided such occupancy or use is consented to by the insurer as required under Section 11.4.1.5 and authorized bypublic authorities having jurisdiction over the Work. Such partial occupancy or use may commence whether or not the portion is substantiallycomplete, provided the Owner and Contractor have accepted in writing the responsibilities assigned to each of them for payments, retainage, if any,security, maintenance, heat, utilities, damages to the Work and insurance, and have agreed in writing concerning the period for correction of the Workand commencement of warranties required by the Contract Documents. When the Contractor considers a portion substantially complete, the Contractorshall prepare and submit a list to the Architect as provided under Section 9.8.2. Consent of the Contractors to partial occupancy or use shall not beunreasonably withheld. The state of the progress of the Work shall be determined by written agreement between the Owner and Contractor, or if noagreement is reached, by decision of the Architect.CPY Ex. 82, Gen. Cond. §9.9.1. Comstock emphasizes the portion reading “[w]hen the Contractor considers a portion substantially complete, the Contractorshall prepare and submit a list to the Architect as provided under Section 9.8.2” as putting the onus on Balfour to satisfy any partial occupancy requirements.The Court agrees. Further, the Court looks to the final sentence which states that “[t]he state of the progress of the Work shall be determined by writtenagreement between the Owner and Contractor, or if no agreement is reached, by decision of the Architect” as indicative that this section is aimed at avertingfuture disputes regarding the condition of units should Comstock decide to occupy some of them, which never occurred here. Failure to enter into anagreement as contemplated by this section is therefore not fatal. Furthermore, as noted above, the Court finds that Comstock’s occupancy of the units did notfurther any delay to the 24 Project. Thus, even if Comstock failed to strictly comply with §9.9.1, that failure was immaterial to the overall performance of the Contract and shouldcertainly not work to excuse Balfour from its liquidated damages provision. See, e.g., Horton v. Horton, 254 Va. 111, 115 (Va. 1997)(“Generally, a partywho… breach[es] … a contract is not entitled to enforce the contract. An exception to this rule arises when the breach did not go to the ‘root of the contract’but only to a minor part of the consideration.”).Balfour further argues that liquidated damages cannot be imposed for delays to the East Tower because Comstock waived its claim to damages byagreeing to a change in the work schedule in a March 6, 2007 “Letter of Understanding.” However, that letter clearly stated that “the parties “could not cometo an agreement as to the cause, responsibility, fees, damages and/or a succinct timeline for completion of the project.” BB Ex. 861. Rather, that letter, atmost, memorialized the parties’ efforts to improve the pace of work on the Project and, by its own terms, was drafted as part of an effort to “come up withmutually agreeable goals and the process for schedule improvement.” Id. Balfour’s reliance on the letter is entirely misplaced and did not work to waiveComstock’s claim to liquidated damages.Finally, there is some discussion in the briefs (and previous briefs incorporated by reference) that Comstock forfeited its claim to liquidated damagesby failing to comply with a notice requirement which was a prerequisite to imposing liquidated damages. Balfour relies on §§4.2.1 and 4.3.2 which fall underthe general rubric of “Claims and Disputes.” Specifically, §4.3.2 states that claims by either party must be initiated within Balfour’s Post-Trial Brief references a March 6, 2006 Letter of Understanding, but based on its Proposed Findings of Fact, the Court is confidentBalfour is referencing the Letter of Understanding marked as BB Ex. 861, which, as noted above, actually shows a drafting date of February 25, 2007,though it was emailed as an attachment on March 6, 2007. 2544 twenty-one days of the occurrence of the event giving rise to the claim, unless otherwise provided in the Contract. Thus, Balfour argues, Comstock did notproperly notice its demand for liquidated damages and is now barred from doing so under §4.3.2 of the Contract.However, the Court cannot agree with Balfour that this provision limits Comstock’s ability to recover liquidated damages here. Rather, the Courtfavors the reading of the Contract that “gives full effect to all contractual language if it can be read in conjunction without conflicting.” Berry, 225 Va. at 208(Va. 1983). The Court reads §8.1.4 as imposing liquidated damages automatically upon failure to meet the provided milestones, which is only logical giventhe entire purpose of a liquidated damages provision as discussed above. Thus, the Contract “provides otherwise” under the explicit language of §4.3.2.Furthermore, reading §4.3.2 to mandate a noticed “claim” for each day liquidated damages runs (and for each individual floor) would read into the contractan onerous and inherently conflicting requirement. The Court declines to do so.Also problematic to Balfour’s waiver argument is the aforementioned lack of DCS’s issuance of Certificates of Substantial Completion and the otherunmet prerequisites to Substantial Completion. Under §8.1.3, of the Contract, Comstock had a completely justifiable ground for believing that liquidateddamages continued to run in the absence of these prerequisites being met, and thus the court is left to wonder when Balfour would have Comstock issue anotice of a “claim” under §4.3.2 when the “claim” was arguably still accruing through the pendancy of this suit. Rather, the Court finds Comstock’sFebruary 14, 2007 Letter indicating that Balfour had failed to meet all interim milestones in Change Order 15 is sufficient notice to Balfour that it wouldassess liquidated damages for Balfour’s late completion. CPY Ex. 844. 26 In light of the foregoing, the Court will enforce the liquidated damages provision of the Contract as suggested by Comstock, save one revision. Giventhat all contractual prerequisites for Substantial Completion were never met, one could argue that liquidated damages could continue running through thepresent date. That, however, would encroach too far into the realm of penalizing Balfour, which, of course, liquidated damages cannot do. GordonsvilleEnergy, L.P. v. Virginia Elec. and Power, Co. 257 Va. 344,355, (Va.l999)(“a liquidated damages provision may constitute a penalty and, therefore, beunenforceable when the amount agreed to is ‘out of all proportion to the probable loss.’” (citations omitted)).Under the Contract, Substantial Completion was to occur at a point in time when, inter alia, “all remaining punch list items can be reasonably andordinarily expected to be completed within thirty (30) days.” As mentioned, Comstock suggests December 1, 2008 as the cutoff for liquidated damages basedon Comstock President Gregory Benson’s estimation that it should have taken an extra ninety days to complete the lingering punch list work from the pointBalfour ceased its work on the Project in August of 2008. The Court gives great weight to this testimony by Mr. Benson, as he was on site almost daily oncethe delays began. Tr. 656: 2-6.However, since the Substantial Completion was to be measured, not when all punch list was completed, but when the work was within thirty days ofcompletion, November 1 is the more appropriate date for ceasing the imposition of liquidated damages. Given §8.1.4’s cap of $12,000 in liquidated damagesper day, the Court deducts $360,000 from Comstock’s calculation of liquidated damages, resulting in a final amount of $8,769,000. 27 In the end, the Court’s holding does nothing more than confirm that “a ‘liquidated damages’ clause leaves in the hands of the parties the issue of likelyactual owner damages to be sustained due to delayed completion, and contractors are presumed to have taken such clauses into consideration in pricing thecontracts they accept.” 5 BRUNER & O’CONNOR CONSTRUCTION LAW § 15:82 (citation omitted). ii.Other DamagesIn addition to the liquidated damages discussed above, Comstock asserts damages on several additional grounds. First, Comstock also seeks damagesrelated to “financing” and unit cancellations arising from Atlas’ filing of two liens which Balfour failed to timely discharge. Comstock seeks $2,994,720.00in damages for the “financing” fees and $303,813.00 in damages arising out of the unit cancellations. Comstock also seeks recovery for other damages itincurred in completing the Project after Balfour’s deficient performance. Comstock labels these damages as: “costs to supplement punchlists”; “additionaland extended personnel costs”; “estimated future costs to complete punchlist”; and “estimated future costs to complete warranty list” which allegedly total$4,472,689.22.An initial point of inquiry for the Court regarding all of these damages is whether they constitute direct or consequential damages. The Contractspecifically provides that the parties “waive Claims against each other for consequential damages arising out of or relating to this Contract.” Gen. Cond.§4.3.11. 28 1.Consequential vs. Direct DamagesThe parties agree that, as a matter of law, “[d]irect damages are those that flow ‘naturally’ from a breach of contract; i.e., those that, in the ordinary course ofhuman experience can be expected to result from the breach, and are compensable.” R.K. Chevrolet, Inc. v. Hayden, 253 Va. 50, 56, 480 S.E.2d 477 (1997).On the other hand, “[c]onsequential damages are those which arise from the intervention of ‘special circumstances’ not ordinarily predictable.” VirginiaPolytechnic Institute and State University v. Interactive Return Service, Inc., 595 S.E.2d 1, 7 (Va. 2004)(citing Roanoke Hosp. Ass’n v. Doyle & Russell, Inc.,214 S.E.2d 155, 160 (Va. 1975)).The Contract goes further and defines “consequential damages,” to include specifically:This mutual waiver includes… damages incurred by [Comstock] for rental expenses, for losses of use, income, profit, financing, business andreputation, and for loss of management or employee productivity or of the services of such persons;Gen. Cond. §4.3.11. As in all other contexts of this trial, the Court endeavors to give full effect to the terms of the Contract as they are written. Thus, theContract’s definition of “consequential damages” will control to the extent it specifically identifies waived damages. a.Comstock’s Claims for “Financing” and Unit Cancellation Costs Stemming from Balfour’s Failure to Discharge Its Subcontractors’ LiensThe Contract specifically compels Balfour to release or otherwise discharge subcontractor’s liens within five days for amounts paid by Comstock or foramounts that the subcontractor previously provided. Gen. Cond. §§3.18.3, 5.3.3. On December 14, 2007, Atlas filed two mechanic’s liens on the projecttotaling approximately 29 $1.3 million. CPY Ex. 5. Balfour breached the contract by failing to secure the release of those liens. Tr. 66:16-18. Balfour argues that, regardless of anybreach, Comstock’s assertion of damages totaling $2,994,720.00 in the form of various fees incurred in securing alternate financing are not direct damagesarising from such a breach.Comstock argues that the damages it seeks in the form of extra financing arise directly out of Balfour’s failure to bond off or otherwise obtain therelease of liens filed by Atlas on the Project and thus do not fall within the purview of the consequential damages waiver in the Contract. Balfour responds bypointing to §4.3.11 of the Contract which states that the parties’ waiver of consequential damages includes those losses “incurred by [Comstock] for… lossesof… income, profit, [and] financing.” (emphasis added).In reading §3.18.3 of the Contract in conjunction with §5.3.3, the Court infers that Comstock sought to protect itself from the negative consequenceswhich flow from a subcontractor’s filing of a lien on the project, one of which may logically be the impairment of Comstock’s ability to secure financingusing the Project property as collateral. However, the waiver explicitly contemplates and waives claims for losses incurred by Comstock for “losses of…financing.” Gen. Cond. § 4.3.11. The Court finds this to be a clear and unambiguous waiver of precisely the type of damages Comstock seeks. These liens are not to be confused with the two mechanic’s liens Balfour filed on July 29, 2008 after signing the LFCA, which is discussed later in thisOpinion.This amount is comprised of: a “Modification Fee” paid to Corus Bank of $133,276.64; the payment of a transaction fee of $200,000 to StonehengeFunding, LLC; the payment of fees of $530,520.00 and $2,122,520.00 to KeyBank; and $8,844.92 in legal fees as part of the payoff of the Corus loan. 305656 The Court is compelled to say the same about the ancillary losses Comstock asserts which arise from the lost sales of condominium units while theAtlas liens encumbered the Project. Comstock argues that it lost eight sales contracts during the time period that the Atlas liens were on the Project in thetotal amount of $2,885,419. Comstock does not appear to seek damages directly for those lost sales, perhaps because they too are explicitly waived, butrather argues that because of the unit cancellations, Comstock was not able to make payoffs to the bank which caused Comstock to incur additional interestof in the amount of $225,273.00 on a loan. Tr. 64:17-22; 65:8-20; Tr. 62:16 – 64:16; 65:4-7; CPY Ex. 253. Comstock also claims it paid homeowner’s feesfor these units that went unsold totaling $49,980.00 and real estate taxes associated with ownership of the units totaling $28,560.00. Tr. 64:17 – 66:2.Comstock fails to establish entitlement to these damages for two reasons. First, Comstock failed to introduce sufficient evidence to tie these lost salesto the liens on the Project. The Court did hear testimony, however, from Comstock’s own witnesses that the condominium market in Northern Virginia was onthe decline at the time the liens were filed. Tr. 667:1-5. Thus, there is every possibility that the lost sales contracts, and these corresponding fees, were theresult of something other than Balfour’s filing of the liens. Second, the Court must conclude that the Contract’s waiver of consequential damages provisionalso includes these kinds of losses. Again, the waiver covered “damages incurred by [Comstock] for rental expenses, for losses of use, income, profit,[and]financing…” Gen. Cond. §4.3.11. While these losses arguably fall under rental expenses or loss of income and profit, the Court would also note that itdoes not read the waiver as exclusive. This means that while the Court reads §4.3.11 to include certain types of losses, as it explicitly states, there is nocorresponding clause stating that the listed types of loss are somehow exclusive. The Court concludes that the incurred interest, homeowner fees, and taxesdo not “flow naturally” from the breach of the Contract, and therefore these are consequential damages which Comstock waived in signing the Contract. 31 b.Comstock’s Damages for Completion of the ProjectNext, Comstock seeks to recover a number of expenses it allegedly incurred in correcting and concluding Balfour’s deficient and incomplete work. Inorder to recover for breach of contract under Virginia, three elements must be established: (1) the existence of a legally enforceable obligation or promisebetween the defendant and plaintiff; (2) the defendant’s breach of this obligation or promise; and (3) injury or damage to the plaintiff caused by that breach.Brown v. Harms, 251 Va. 301, 306 (Va. 1996).Before proceeding, the Court concludes that, unlike the damages sought in the preceding section, the damages arising from Balfour’s unsatisfactorywork are not of the sort contemplated and waived by § 4.3.11 of the Contract. The Court also concludes that LFCA clearly reserves Comstock’s right to seekadditional damages under the Contract and only settled those charges which were specifically enumerated by the parties in executing the LFCA. i.Costs to Supplement Punchlist Paid to Third Parties and Additional and Extended Personnel CostsComstock argues that the Contract obligated Balfour to produce detailed lists of deficiencies, and that because Balfour did not do so, Comstock isentitled under the Contract to “supplement Balfour’s Work.” Specifically, if Balfour failed to perform work as required, §2.4.1 of the Contract provides:If the Contractor defaults or neglects to carry out…Work in accordance with the Contract Documents…and fails within a five-day period after receiptof written notice from the Owner to commence and continue correction of such default or neglect … the Owner may …correct such deficiencies. 32 CPY Ex. 82, Gen. Cond. § 2.4.1. However, if a dispute of this nature arose, the Contract provides:Except as provided otherwise in the contract, claims by either party must be initiated within 21 days after occurrence of the event giving rise to suchClaim or within 21 days after the claimant first recognizes the condition giving rise to the Claim, whichever is later. Claims must be initiated by writtennotice … If a party fails to submit a claim within the time limits required by the Contract Documents, such claim is hereby expressly waived.CPY Ex. 82; Gen. Cond. § 4.3.2.On August 10, 2007, Comstock issued an additional Notice pursuant to Article 2.4.1 of the Contract. In the notice letter, Comstock states that Balfourmust “commence and continue corrective repairs and warranty work to the flooring at the Project.” (Tr. 667:9-23 (Benson); CPY Ex. 183).Balfour proved unable to sufficiently complete punchlist work, so Comstock hired additional help. As noted in the Court’s Findings of Fact, Comstockhired Owens Corning and Warner Construction Consultants as external personnel to assist in creating and inspecting the punchlists, in addition to payingDCS to prepare a punchlist for “common areas.” CPY Ex. 232. Comstock also paid Quintilla Construction to provide punchlist labor such as painting,hanging drywall, adjustments, and minor installations in addition to Production Cleaning Services to clean the units for unit purchaser walk-throughsbecause Balfour was not doing so. Tr. 473:1-7; Tr. 593:11-13; Tr. 593:20 – 594:5; CPY Ex. 232. The total cost incurred by Comstock for this work was$1,835,120.73. CPY Ex. 232. 33 Additionally, Comstock added further personnel and resources to the Project as a result of Balfour’s incomplete work. CPY Ex. 233. Comstock alsohired additional contractors for security and punchlist work. Id. Comstock’s costs for these additional expenses were $492,479.13 in additional on-sitesupervision and $636,384.36 for third party security and punchlist work. CPY Ex. 233.Balfour also argues that these damages constitute double recovery when taken in conjunction with the liquidated damages discussed above. “Indetermining whether multiple damage awards constitute impermissible double recovery, the trial court must consider the nature of the claims involved, theduties imposed and the injury sustained.” Wilkins v. Peninsula Motor Cars, Inc., 266 Va. 558, 561 (Va. 2003)(citing Advanced Marine Enterprises v. PRCInc., 256 Va. 106,124, 501 S.E.2d 148, 159 (Va. 1998)). After looking to the claims involved and the injury sustained by Comstock, the Court rejects anyargument by Balfour that these damages are duplicative of those awarded above as liquidated damages. These damages go beyond those contemplated by theliquidated damages clause and are not “delay damages” as Balfour contends, but rather are the direct result of Balfour’s poor workmanship and abandonmentof the Project before it was completed.The Court finds all of the preceding damages to have been reasonably incurred as a direct and natural consequence of Balfour’s breach of the Contract.Comstock has established Balfour’s breaches of Contract by a preponderance and is thus entitled to recover its actual costs (which the Court finds to bereasonable) to supplement and perform Balfour’s Work. See, e.g., Brown, 251 Va. at 306. 34 ii.Estimated Future Costs to Finish Punchlist and Warranty List WorkFinally, Comstock also seeks to recover damages it incurred in the months following execution of the LFCA, and newly-discovered items that neededto be corrected and/or completed by Balfour. Comstock did not add these tasks to current punchlists and instead created a separate “Warranty List” to followthose tasks.Comstock argues that $248,145 worth of punch list work remained outstanding in addition to $1,260,502 worth of “warranty” items outstanding. Tr.605:1 – 606:2; CPY Ex. 234. Comstock argues that because it has proven all three elements of Balfour’s breaches of Contract, it is entitled to recover itsactual costs to supplement and perform Balfour’s Work and its estimated future costs to complete Balfour’s Work. See Filak v. George, 267 Va. 612, 619 (Va.2004).On this point, the parties disagree as to which portion of the Contract should control. Balfour points to §15.3 as a limit on Comstock’s “Warranty.”That section states that Comstock’s recovery on “warranty” claims are limited to the “reasonable cost of repairs already made” which would invalidate claimsfor expenses yet to be incurred. However, §15.3 explicitly applies to “warranty” claims asserted by an individual unit purchaser or the CondominiumAssociation and states that Balfour is responsible for repairs to the extent that it is determined to be responsible for deficient work. This seems to render thatprovision inapplicable. Comstock further argues that the Project is not in the “Contractual Warranty period” covered by §15.3 because the Project is still notSubstantially Complete. Thus, Comstock argues, §12.2.1.1, which provides that Balfour bears the cost to correct non-conforming or rejected work, shouldcontrol. On this point, the Court concludes that §12.2.1 is the controlling section of the Contract. 35 The Court’s difficulty in awarding these damages, however, does not arise from a debate over which contractual provision should apply, but rather fromthe fact that these costs are simply estimates of damages. As Balfour notes, Comstock provided nothing more than a list containing “estimates” of work yet tobe completed. CPY Ex. 234. As a general matter, “[p]rospective damages—damages that compensate for future losses reasonably certain to arise from a pastbreach of a contract—can be recovered if there is a total breach of a promise that has formed the consideration for an entire and indivisible contract.” 22 am.JUR. 2d DAMAGES § 488 (2009). Virginia appears to recognize that “[r]ecovery of future damages may be had if the damages are reasonably certain to occuror follow.” Kiser v. Amalgamated Clothing Workers of America, 169 Va. 574, 574, (Va.1938).The only evidence submitted by Comstock on this point are its own estimates of work that has yet to be performed, based on costs which have yet to beincurred. In particular, the Court has serious reservations regarding the certainty of Comstock’s damages arising from the outstanding cabinet punchlistitems, leaks in individual units, patio pavers, and potential duplicates of replacement glass. Comstock seems to anticipate this difficulty, and asks the Courtfor a specific finding that its future claims for actual costs expended to repair the “Warranty” items are not barred by the doctrine of res judicata. Mr. Kidwell testified that the cost to replace all deficient cabinet door fronts was $3,300 per kitchen, regardless of the work that actually needed to bedone. Tr. 606:20 – 607:15. While Comstock notes that Kidwell would credit the warranty list for the difference in cost between replacing the entirekitchen and the amount on the original punchlist, the Court has lingering doubts as to whether damages were actually properly assessed on a case bycase basis. 3677 The Court agrees that these claims are not yet ripe, and thus have not been actually litigated by this Court.In conclusion, the Court awards $2,964,002.22 in direct damages to Comstock as a result of Balfour’s breach of contract and the costs Comstockincurred to properly finish the Project as contemplated by the Contract. ii.Count II: Breach of the Lien Free Completion Agreement a.Damages and Attorneys’ Fees are the Only Issues RemainingIn an attempt to resolve some of the disputes that had arisen between the parties, and with the intention of removing liens Atlas had filed on the Project,Comstock and Balfour entered into an agreement on January 30, 2008, which the Court refers to simply as the LFCA. As part of the LFCA, Balfour agreedthat it would “not at any time file or record a lien against the Project,” but left other disputed issues open for further negotiation. Balfour, however,subsequently filed two mechanic’s liens against the Project after it believed Comstock breached the agreement. Balfour filed these liens against anyoneowning an interest in the Project, such as individual condominium unit owners, lenders, and trustees, thinking that this act was compelled by the Virginialien statute. See Va. Code. §§ 43-1 through §43-23.2. Balfour filed a third party complaint to join all owners, lenders, and trustees named in the mechanic’slien filings in the present action, and as a result, hundreds of parties were joined in this lawsuit. Because §12.2.1.1 of the Contract applies, however, the parties may find themselves able to agree on the amount due and avoid the need for any furtherlitigation.This is the sum of Comstock’s “Actual Costs to Supplement Punchlist Costs” (itemized separately as $1,835,120.73 and $636,384.46) and Comstock’s“Additional and Extended Personnel Costs” (itemized as $492,497.03). 378989 After a hearing on the validity of the liens, the Court then issued an Order and Memorandum Opinion finding that (1) the Lien-Free CompletionAgreement was supported by consideration; (2) the lien waiver provisions in the Agreement were unconditional; (3) Comstock did not breach the Agreementbefore Balfour Beatty filed the liens; and (4) the liens were invalid. As a result, the claims related to the liens were dismissed with prejudice, which resulted inthe termination of the hundreds of Third Party Defendants as parties. Then, as mentioned, on Summary Judgment the Court concluded that “Balfour Beattyhad a legally enforceable obligation to refrain from filing a mechanic’s lien. And… that Balfour Beatty violated this obligation by filing liens on theProject...” Aug. 14, 2007 Memo. Op. at 17. In its Memorandum Opinion, the Court granted partial summary judgment to Comstock on the first two elementsof its breach of contract claim arising out of Balfour’s breach of the Lien Free Completion Agreement (“LFCA”). Id. Thus, the only issues left for trial wereComstock’s damages arising from Balfour’s breach and whether Comstock could satisfactorily establish the reasonableness of attorneys’ fees incurred. Asthe only “damages” Comstock seeks from Balfour’s breach of the LFCA seem to be attorneys’ fees, the remainder of this section will be devoted to thatanalysis. Comstock seeks attorneys’ fees in the amount of $261,160.47, the sum of five separate firms’ fees involved in the Balfour lien litigation. In this Court’s Memorandum Opinion on the parties’ Cross-Motions for Summary Judgment, the Court noted that Comstock “alleged that it incurredsignificant direct damages to indemnify and defend third parties in this litigation as a result of Balfour Beatty’s lien filings. Whether these damages aredirect damages or consequential damages barred by contract is a disputed issue of material fact.” SJ Op. at 18 n.7. The Court’s discussion of attorneys’fees and the Hiss exception occurred in a section of the Court’s opinion preceding the Court’s discussion of Balfour’s breach of the LFCA. Thus, theonly one of the “three breach” elements remaining at trial was damages, but the reasonableness of attorneys’ fees in defending and maintaining the suitwith third parties under Hiss also obviously remained an issue and are thus both discussed here.As established in the previous footnote, Comstock referenced “direct damages” in indemnifying and/or defending third parties after Balfour’s breach ofthe LFCA. However, in Comstock’s breakdown of its damages, it only seems to seek recovery of the attorneys’ fees arising from LFCA matters as directdamages. 38l0111011 On the issue of attorneys’ fees, as this Court held previously, Virginia adheres to the “American Rule,” meaning that attorney’s fees are not recoverableby a prevailing litigant unless a statutory or contractual provision provides for such an award. See Lee v. Mulford, 269 Va. 562, 565 (Va. 2005); Dowling v.Rowan, 270 Va. 510, 521-522 (Va. 2005). The exception to this rule, however, applies “where a breach of contract has forced the plaintiff to maintain ordefend a suit with a third person[.]” Hiss v. Friedberg, 201 Va. 572, 577 (Va. 1960); see also Owen v. Shelton, 221 Va. 1051, 1055 (Va. 1981). In such aninstance, a plaintiff forced to defend third persons “may recover the counsel fees incurred by him in the former suit provided they are reasonable in theamount and reasonably incurred.” Id. However, retaining counsel must be a “direct and necessary consequence” of the defendant’s breach of contract. Id. at876-77.Comstock did not introduce expert testimony on the issue of the reasonableness of attorneys’ fees. Balfour argues that ordinarily, expert testimony willbe required to assist the fact finder on the reasonableness of attorneys’ fees. Mullins v. Richlands Nat. Bank, 403 S.E.2d 334, 335 (Va. 1991). The VirginiaSupreme Court has caged this “requirement,” however, noting that a party seeking attorneys’ fees “is not required to prove the reasonableness of the fees withexpert testimony in all instances.” Seyfarth, Shaw, Fairweather & Geraldson v. Lake Fairfax Seven Ltd. P ‘ship, 480 S.E.2d 471, 473 (Va. 1997)(emphasisadded). For its part, Comstock cites to an unreported Virginia Court of Appeals Case, Byrd v. Byrd, 1998 WL 136434 at *3 (Va. App. 1998), which held that“[e]xpert evidence is not necessary to establish the reasonableness of attorney’s fees.” In that case, evidence in the form of detailed bills and the party’stestimony that the fees were consistent with rates for that attorney and firm sufficed in establishing the reasonableness of the fees. Id. 39 The Court reads the law in Virginia as not requiring expert testimony to establish the reasonableness of fees, so long as there is adequate corroboratingevidence and testimony to ascertain the basis for the fees sought. Comstock sufficiently did so here. Balfour also contests whether these “damages” areproperly considered direct or consequential. In fact, the Court specifically left this question open in its August 14, 2008 Summary Judgment MemorandumOpinion. Aug. 14, 2008 Mem. Op. at 18 n. 7 (“Whether these damages are direct damages or consequential damages barred by contract is a disputed issue ofmaterial fact.”). Given, however, that the Court now finds these expenses to be a direct and natural consequence of Balfour’s breach, the Contract’s waiver isinapplicable.Although the Court held that Balfour forced Comstock to “maintain a suit with a third person” and thus fell within the Hiss exception, Comstock wasnot automatically entitled to attorneys’ fees. Rather, Comstock maintains the burden to prove that the fees were “reasonable in the amount and reasonablyincurred.” Id. In this Circuit, in order to ascertain that attorneys’ fees were reasonably incurred “a court must first determine a lodestar figure by multiplyingthe number of reasonable hours expended times a reasonable rate.” Robinson v. Equifax Information Services, LLC, 560 F.3d 235, 244 (4th Cir. 2009) (citingGrissom v. The Mills Corp., 549 F.3d 313, 320 (4th Cir.2008).This Circuit has adopted a twelve-factor test to calculate the “reasonable number of hours” and the “reasonable rate.” Id. These factors are:(1) the time and labor expended;(2) the novelty and difficulty of the questions raised;(3) the skill required to properly perform the legal services rendered;(4) the attorney’s opportunity costs in pressing the instant litigation;(5) the customary fee for like work;(6) the attorney’s expectations at the outset of the litigation;(7) the time limitations imposed by the client or circumstances;(8) the amount in controversy and the results obtained; 40 (9) the experience, reputation and ability of the attorney;(10) the undesirability of the case within the legal community in which the suit arose;(11) the nature and length of the professional relationship between attorney and client; and(12) attorneys’ fees awards in similar casesBarber v. Kimbrell’s Inc., 577 F.2d 216, 226 n. 28 (4th Cir.l978)(adopting twelve factors set forth in Johnson v. Get. Highway Express, Inc., 488 F.2d 714 (5thCir.1974), abrogated on other grounds by Blanchard v. Bergeron, 489 U.S. 87, 109 S.Ct. 939, 103 L.Ed.2d 67 (1989)). Further, “[a]fter determining thelodestar figure, ‘the court then should subtract fees for hours spent on unsuccessful claims unrelated to successful ones.’ ” Robinson, 560 F.3d at 245(citations omitted). Further, as this Circuit emphasizes:determination of the hourly rate will generally be the critical inquiry in setting the “reasonable fee,” and the burden rests with the fee applicant toestablish the reasonableness of a requested rate. In addition to the attorney’s own affidavits, the fee applicant must produce satisfactory ‘specificevidence of the ‘prevailing market rates in the relevant community’ for the type of work for which he seeks an award.’ Although the determination of a‘market rate’ in the legal profession is inherently problematic, as wide variations in skill and reputation render the usual laws of supply and demandlargely inapplicable, the Court has nonetheless emphasized that market rate should guide the fee inquiry.Plyler v. Evatt, 902 F.2d 273, 277 -278 (4th Cir. 1990).At this point, the record before the Court on the issue of attorneys’ fees consists of documentary evidence in the form of attorneys’ bills and thetestimony of Comstock’s Chief Financial Officer and President, respectively. Comstock’s Exhibit 240 indicates that in its representation of Comstockspecifically on the lien issues, and excluding time spent on its failed Slander of Title and Abuse of Process Claims, Quagliano & Seeger billed $114,859.51 inlegal fees, though a total number of hours and rate summary is not 41 included. Comstock’s Exhibit 241 are records pertaining to McGuire Woods’ brief participation in the suit representing KeyBank, which amounted to fees for.8 hours of work in the amount of $396. Comstock’s Exhibit 242 shows billing by Debra Fitzgerald-O’Connell (“O’Connell”), who represented thehomeowners at the Project in connection with the lien proceedings, for 111.75 hours of work for a total of 23,746.87. Exhibit 242 indicates that Miles &Stockbridge, P.C. was retained by the title insurance company that represented both Corus and KeyBank in connection with the lien proceedings, which ledto fees in the amount of 74,577.Unfortunately, the bill submitted into evidence does not indicate a breakdown of hours worked and rates which comprisethat final sum. Finally, Exhibit 244 contains invoices from McKenna Long & Aldridge (“McKenna”), who represented KeyBank, in the amount of$43,811.20.Comstock introduced testimony of Bruce Labovitz, Comstock’s former Chief Financial Officer, who testified to Comstock’s obligations to defend itslenders and work to have the liens Balfour placed on the Project removed. He also testified to the legal expenses Comstock incurred in defending against theliens. Labovitz further testified on the basis of his previous experience reviewing invoices for legal fees that the attorneys’ fees incurred in defending againstthe liens were in line with fees that Comstock pays to other attorneys in other like matters. Mr.Benson testified to Comstock’s belief that the liens existenceconstituted a default under their loan documents with their lender, giving rise to Comstock’s obligation to indemnify and defend the lenders, title holders,and the unit owners’ association. Tr. 685:6-10. Comstock also introduced all relevant billing invoices from the five separate firms involved in litigating thematter. See CPY Ex. 240-244. O’Connell’s bill indicates that she deducted a “courtesy discount” of $4,190.63.Comstock seeks recovery in the amount of $23,880.47, but that figure also includes approximately $133.60 in costs. This section of the Court’sOpinion is dedicated to the reasonableness of attorneys’ fees.Comstock seeks a total of $78,213.29, which includes $3,635.79 in costs. 42121314 121314 While the above evidence supplies the Court with much of the information needed to do its analysis under the aforementioned test, it lacks criticalinformation regarding whether the rates charged and time expended are reasonable in Northern Virginia. The Court is without affidavits and other evidentiarymaterials on which the Court can further analyze the fee request under the law of this Circuit. As such, the Court requests further briefing and adjoiningaffidavit submissions by the Comstock, limited to this discrete issue only. Balfour may respond to this further submission within 14 days. IV.ConclusionBased on the foregoing findings of fact and conclusions of law, the Court holds Balfour liable for breach of contract with damages in the followingamounts: $8,769,000. in liquidated damages and $2,964,002.22 in direct damages, for a total award of $11,733,002.22.As discussed, the Court is presently unable to decide the issue of the reasonableness of attorneys’ fees arising out of Balfour’s breach of the Lien FreeCompletion Agreement and requests supplemental briefing by the parties on this issue. Comstock shall file its initial brief on the matter within 21 days andBalfour shall file its brief in response within 14 days. An appropriate Order shall issue.Alexandria, VirginiaFebruary 23, 2010 /s/ Liam O’GradyLiam O’GradyUnited States District Judge 43 Exhibit 10.90PURCHASE AGREEMENTTHIS PURCHASE AGREEMENT, entered into this day of , 2009 (the “Effective Date”) between COMSTOCK STATION VIEW LC, aVirginia limited liability company, hereinafter known as “Seller,” and M/I HOMES OF DC, LLC, a Delaware limited liability company, hereinafter knownas “Purchaser.”WHEREAS, the Seller is the owner of certain real property located in Loudoun County, Virginia, as more specifically shown in the plat attachedhereto as Exhibit A, known as Station View, located on the southwest corner of Route 772 (Old Ryan Road) and Route 645 (Croson Lane) and identifiedas Loudoun County Tax Map 78, Parcel 21A and MCPI #120-28-5974, Loudoun County, Virginia, consisting of approximately 7.47 acres, to bedeveloped into FORTY SEVEN (47) townhome lots (the “Lots”), together with all improvements constructed thereon and all rights and appurtenancesappertaining thereto, (the “Property”); andWHEREAS, Seller desires to sell and Purchaser wishes to purchase the Property upon the terms and conditions hereafter set forth.NOW, THEREFORE, WITNESSETH: In consideration of the mutual promises and covenants herein contained, Seller hereby grants to Purchaser theright to purchase and the Purchaser agrees to purchase in fee simple the Property on the following terms and conditions:ARTICLE IPURCHASE, PAYMENT AND PRICE1.01 Property. Purchaser agrees to purchase the Property and Seller agrees to sell and convey all of Seller’s right, title and interest in and to the Propertytogether with any and all improvements, appurtenances, rights, privileges and easements benefiting, belonging, or pertaining to the Property and any right,title and interest of Seller in and to the land lying in the bed of any street, road or highway (open or proposed) in front of, adjoining or servicing the Propertyincluding condemnation awards or payments in lieu thereof as a result of change of grade, alignment or access rights (all of which shall be deemed part of theProperty for the purposes of this Agreement, but only to the extent currently existing), pursuant to the terms and conditions hereof. 1.02 Purchase Price. Subject to all of the terms and conditions of this Agreement, Seller agrees to sell and Purchaser agrees to purchase the Property at aprice of TWO MILLION EIGHT HUNDRED FORTY THOUSAND AND NO/100THS DOLLARS ($2,840,000.00) (the “Purchase Price”), which shall bepayable in cash at settlement.1.03 Price Adjustment. In the event that the final approved record plat, which has been approved by all appropriate government authorities (the “FinalRecord Plat”) together with federal and/or any other state or local approvals, including wetlands and/or Virginia DEQ permits, does not permit thedevelopment and construction of the number of Lots used to calculate the Purchase Price (i.e., FORTY SEVEN (47) townhome Lots), at any time, then thePurchase Price shall be appropriately adjusted downward, based upon a price of SIXTY THOUSAND FOUR HUNDRED TWENTY FIVE AND 53/100THSDOLLARS ($60,425.53) per Lot so that the total Purchase Price paid by Purchaser for the Property at settlement shall be calculated based upon the totalnumber of Lots permitted to be developed and constructed on the Property.ARTICLE IIDEPOSIT2.01 Amount.a. Within five (5) business days of the Effective Date, Purchaser shall deliver to Curran & Whittington, PLLC, located at 15100 Washington Street,Suite 201, Haymarket, VA 20169, (the “Escrow Agent”), a cash in the sum of ONE HUNDRED THIRTY THOUSAND AND NO/100THS DOLLARS($130,000.00), (the “Deposit”).2.02 Release. The Deposit, unless previously returned to the Purchaser or released to the Seller pursuant to the terms of this Agreement, shall becredited to the Purchase Price at settlement and closing. Provided Purchaser does not terminate the Agreement at the expiration of the Feasibility Study Period, and Seller has obtained Lender Approvalas herein defined, Escrow Agent shall, within three business days after receipt of a vendor invoice from Seller, with a copy delivered to Purchaser, disburseportions of the Deposit required to pay all normal and customary third party costs, approved by Purchaser, which approval shall not be unreasonablywithheld or delayed, incurred subsequent to the Effective Date hereof and associated with satisfying the pre-conditions set forth in Paragraph 5.01(e) below,provided however, in no event shall disbursements hereunder exceed Fifty Thousand and No/100ths Dollars ($50,000.00).ARTICLE IIITITLE AND SURVEY3.01 Title. The Seller covenants that at settlement and closing, it will be the fee simple owner of the Property subject to all instruments forming thechain of title to the Property that it will have full legal, beneficial, and equitable ownership of the Property and that it will have the right and power to conveythe Property. The Property is to be sold and conveyed free of liens, and title is to be good of record, merchantable and insurable. Title shall be fully insurableunder a full coverage advantage owner’s title policy issued by a recognized title insurance company of Purchaser’s choice, at standard rates and withoutrequirement or exception subject, however, to all standard pre-printed exceptions and to any easements, covenants, rights of way or declaration of covenantsof record that exist (the “Permitted Exceptions”). Prior to the expiration of the Feasibility Study Period, Purchaser may order (a) a title commitment (the “TitleCommitment”)or other evidence of title to the Lots acceptable to Purchaser in the amount of the Purchase Price, from a reputable title insurance company (the“Title Company”), and (b) a physical survey acceptable to the Title Company and Purchaser. Purchaser reserves the right to approve or disapprove any andall exceptions to title and/or matters of survey (the “Title Exceptions”), including without limitation, and whether or not of record, liens, encumbrances,easements, restrictions, reservations, rights, ingress from and egress to public thoroughfares, encroachments and claims, and commencement of condemnation proceedings. On or before the expiration of the Feasibility Study Period Purchaser shall give Seller notice (the “Purchaser’s Notice”) of anyTitle Exceptions which are not satisfactory to Purchaser. As to any Title Exceptions, Seller will advise Purchaser within ten (10) days of receipt of Purchaser’sNotice as to which of said Title Exceptions it is willing to cure (“Seller’s Notice”). In the event Seller is unwilling or unable to cure any Title Exceptions,Purchaser may: (a) cancel this Agreement in which event it shall be null and void and Escrow Agent, shall return to Purchaser the Deposit, and the partieshereto shall have no further rights and obligations under this Agreement, or (b) waive any item or items. Purchaser shall perfect its election by providingnotice to Seller; provided, however, that such election shall be without prejudice to Purchaser’s right to cancel this Agreement and receive the Deposit shouldthe Seller unreasonably delay in removing or be unable to cure any Title Exceptions it has agreed to cure. Failure to provide notice pursuant to (a) or(b) above within three business days from receipt of Seller’s Notice shall be deemed an election to waive a Title Exception.Seller agrees not to encumber the title to or permit the encumbrance of title to the Property after the Date of Execution of this Agreement unlessrequired to satisfy a precondition of settlement.Seller agrees to sign such customary affidavits, indemnities or other documents as reasonably necessary for the Title Company to delete the standardpreprinted exceptions from Purchaser’s title policy.Notwithstanding anything to the contrary above, any deeds of trust, judgments, unpaid state or federal taxes, inheritance taxes, unpaid real estate taxes,or any other liens against the Property that can be cured by the payment of money shall be first paid and released of record by the settlement agent or attorneyat settlement (if not sooner paid and released of record by Seller), utilizing the proceeds paid by Purchaser at settlement.The state of title at date of settlement and closing shall be the same as is disclosed by the Title Examination, except as may be required to satisfya precondition of settlement and further except for those matters and approved by Purchaser, or Seller shall be in default and Purchaser may exercise itsremedies pursuant to this paragraph or Paragraph 8.02 hereof. In the event this Agreement is terminated by Purchaser for reasons set forth within this paragraph, Escrow Agent, shall promptly return the Deposit tothe Purchaser, after which neither party shall have any further liability to the other hereunder, except for the indemnification of obligations set forth inParagraph 4.01.ARTICLE IVFEASIBILITY AND ENGINEERING4.01 Feasibility Study Period. Seller agrees to provide to Purchaser, within three (3) days of the date of this Agreement, copies of all plans, plats, tests,approvals, current homeowners association documents, proffers, title work, marketing report, environmental studies and soil studies, together with any and allapprovals received regarding the Lots within its possession (collectively, the “Due Diligence Items”). Purchaser and its agents, representatives, employeesand consultants shall have the right to conduct, at Purchaser’s sole expense, a review of the Due Diligence Items, such physical, environmental, engineering,and feasibility studies (the “Feasibility Studies”) as Purchaser deems appropriate in an effort to determine whether to proceed with the Closing. During thefeasibility study period, Purchaser and its agent, representatives, employees and consultants shall have the right, during normal business hours and from timeto time after the Effective Date of this Agreement, to enter upon the Property for the purpose of performing soil borings tests, engineering, and topographicsurveys and to make feasibility, zoning, marketing and economic tests and studies upon or of the Property in order to determine whether the Property issuitable for Purchaser’s needs. The feasibility study period shall expire at 5 P.M. eastern standard time THIRTY (30) DAYS from the Effective Date hereof (the“Feasibility Study Period”).In the event the results of the aforesaid engineering, zoning, feasibility, marketing and other tests and studies performed by or on behalf of Purchaserare not, in Purchaser’s sole exclusive, and nonreviewable discretion, satisfactory to Purchaser, Purchaser may at any time prior to expiration of the FeasibilityStudy Period, upon written notice to Seller, terminate this Agreement, after which event Escrow Agent, shall return the Deposit to the Purchaser and neither party shall have anyfurther liability to the other hereunder except as required by this Paragraph.Purchaser agrees to restore the Property to the extent changed by the Purchaser or its agents, at its sole expense, to the extent reasonably possible, to itscondition as of the Effective Date of this Agreement if this Agreement does not go to settlement due to Purchaser’s termination or default hereunder.In the event Purchaser, its agents, representatives, employees or consultants, enter upon the Property for the purpose contained herein, Purchaser agreesto promptly pay for all expenses thereof and further agrees to indemnify Seller from and against any and all loss, damage or claim resulting from thenegligence of this Purchaser, its agents, representatives, employees or consultants.4.02 Title Report and Engineering. In addition to any other plans Seller is obligated to deliver to Purchaser under this Agreement, Seller shall deliverto Purchaser without cost to Purchaser, within three (3) days after the Effective Date copies of all of the following (collectively, the “Documents”) to theextent that the Documents are in the possession or control of Purchaser: (a) preliminary title report for the Property, together with a copy of all documentslisted as exceptions in such report of title; (b) topographic surveys of the Property; (c) the engineering drawings for the water lines and for the streetimprovements for the Property; (d) level one environmental assessment for the Property; (e) traffic studies of the Property; (f) any other engineering plans,engineering studies, soil studies, soil tests, appraisals, surveys, or any other test results, plats, plans or studies Seller may have which relate to the Property,and (g) the approved preliminary plan, final plan and proposed record plat. Seller shall also certify to Purchaser that all such surveys, test results, plats, plansor studies have been or will by settlement and closing be paid for in full. ARTICLE VPRE-CONDITIONS OF SETTLEMENT5.01 Pre-Conditions. Should settlement not be completed on or before August 1, 2010 (“Outside Closing Date”), as a result of any pre-condition ofsettlement not being satisfied, Purchaser, at its sole discretion, may (i) terminate this Agreement in its entirety; or (ii) waive such pre-condition and proceed tosettlement. Should this Agreement be terminated pursuant to this paragraph, Escrow Agent, shall return the remaining portion of the Deposit to the Purchaserand thereafter the parties shall have no further obligation pursuant to this Agreement, except for the indemnification obligations set forth in Paragraph 4.01.The pre-conditions of settlement are as follows:a. No governmental action or inaction (such as but not limited to the imposition of a sewer, water or building permit moratorium shall have been taken,or shall have been publicly announced to be taken, by any applicable governmental authority, which; would increase the cost of, or materially increasethe processing time for obtaining all necessary permits or utilities required for the construction, sale and occupancy of residential dwellings on theProperty; would materially increase the cost of or materially delay construction of residential dwellings on the Property; or which prevent theresidential dwelling units to be constructed on the Property from being connected to a public sewer and water system (subject to the payment of tapfees and obtaining the customary permits).b. Title to the Property is as required by Paragraph 3.01 hereof;c. The Final Record Plat, materially consistent with Exhibit A attached hereto, approving no less than FORTY FIVE (45) townhome Lots, has beenrecorded or is ready for recordation, subject only to the posting of applicable bonds, among the land records of Loudoun County, Virginia.d. All material representations, warranties and covenants of Seller contained within this Agreement are true and correct;e. All offsite easements, if any, necessary for the development of the Property to include complete access to the property as well as any sight, water,sewer, and stormwater management easements shall be in place. f. Development permits, or their equivalent, have been issued or are ready to be issued, subject only to the posting of applicable bonds, for theDevelopment of the Lots. All federal, state and/or local wetlands and Virginia DEQ, if applicable, approvals and permits shall be in place or are readyto be issued, subject only to the posting of applicable bonds, allowing the development and construction of the FORTY-FIVE (45) townhomes on theProperty consistent with the Final Record Plat.ARTICLE VICLOSING AND POSSESSION6.01 Conveyance. Settlement and closing hereunder shall be held within TEN (10) business days after all pre-conditions of settlement are satisfied, orno later than the Outside Closing Date if Purchaser elects to proceed with settlement if a pre-condition has not been satisfied. Settlement and closing shall beconducted at the offices of Potomac Settlement Services, Inc., located at 15100 Washington Street, Suite 201, Haymarket, Virginia 20169 or by such otheragent or attorney designated by Purchaser in writing to Seller. Purchaser shall provide written notice to Seller of the exact time, date and place of settlementat least five (5) business days prior thereto. Copies of all closing documents to be executed and delivered by either Seller or Purchaser at closing, togetherwith a proposed closing statement, shall be delivered to Seller and Seller’s attorney and to Purchaser and Purchaser’s attorney for review at least two(2) business days prior to the scheduled closing date.6.02 Deed of Conveyance. At settlement Seller shall execute and deliver into settlement a Special Warranty Deed in proper form for recording amongthe land records of Loudoun County, Virginia. The cost of the preparation of the deed of conveyance, Seller’s attorney’s fees, a reasonable settlement fee,costs pertaining to payoff and release of existing trusts and liens, agricultural transfer tax for years through the year of closing, front foot benefit or similarcharges roll back or similar taxes (if applicable) and grantor’s tax shall be paid by the Seller. Purchaser shall pay all expenses of examination of title ,Purchaser’s attorney’s fees and title insurance premiums, if any and all other transfer and recording taxes. 6.03 Taxes and Assessments. Seller shall pay or credit against the Purchase Price (a) all delinquent real estate taxes, front foot benefit charges or similarcharges (the “Real Estate Taxes”), together with penalties and interest thereon, (b) all assessments which are a lien against the Property as of the date ofclosing, both current and reassessed, which are due and payable on or before closing, (c) all use recoupment taxes (agriculture or otherwise) for years throughthe year of closing, if any, and (d) all real estate taxes for years prior to the closing. The proration of undetermined taxes shall be based on a 365-day year andon the last available tax rate and valuations, giving effect to applicable exemptions, recently voted millage, change in tax rate or valuation, etc., whether ornot officially certified. It is the intention of the parties in making this tax proration for Purchaser to pay to Seller at closing the amount which Seller remitted,or will be required to remit, to the appropriate collector of taxes for the period of time after the closing date hereof. Should the Property be taxed as part of alarger parcel, the proration shall be based on the acreage of the Property versus the acreage of the larger parcel. Upon making the proration provided forherein, Seller and Purchaser agree that the amount so computed shall be subject to later adjustments should the amount credited at closing be incorrect basedupon actual tax bills received by Purchaser after closing. Seller hereby represents and warrants to Purchaser that (i) all assessments now a lien are shown onthe public records of the collector of real property taxes, (ii) no improvements have been installed by public authority or Seller, the costs of which are to beassessed against the Property in the future, and (iii) Seller has not been notified orally or in writing of possible future improvements by public authority, anypart of the cost of which would or might be assessed against the Property.6.04 Future Encumbrances. Seller agrees that from the date of execution hereof by Seller, Seller may not further encumber the Property other than thenecessary easements provided in Article V of this Agreement without the written consent of the Purchaser, which consent will not be unreasonably withheld. 6.05 FIRPTA. Seller hereby represents and warrants to Purchaser that Seller is not a “foreign person” within the meaning of Section 1445 of the InternalRevenue Code of 1986, and Seller further agrees, at closing, if requested, to furnish Purchaser an affidavit to this effect complying with the provisions ofSection 1445 of the Internal Revenue Code.6.06 Performance. The delivery to settlement attorney or agent of the cash payment, the executed deed of conveyance, and all other documents andinstruments required to be delivered by either party to the other by the terms of this Agreement shall be deemed to be good and sufficient tender ofperformance of the terms hereof. Seller shall give possession of the Property at the time of payment of Purchase Price and delivery of the appropriate deed ofconveyance.ARTICLE VIIDECLARATION OF COVENANTS7.01 Declaration of Covenants. The Property is not currently subject to a declaration of covenants, conditions and restrictions or similar document.ARTICLE VIIIDEFAULT8.01 Purchaser. In the event Purchaser shall default with respect to its obligations to proceed to full and final settlement on the Property, and if Seller isready, willing and able to perform, then Seller shall give written notice to Purchaser, with a copy to the Escrow Agent, that said default shall be cured withinten (10) days of Purchaser’s receipt of such notice. If Purchaser fails to cure the default within such ten (10) day cure period, then as the Seller’s fixed, agreedand liquidated damages, and as Seller’s sole remedy, the Deposit shall be paid to the Seller and thereafter the parties shall be relieved of all further liabilityand obligation under this Agreement, excluding, however, the indemnification obligations under Paragraph 4.01, which shall survive such termination. Theparties hereto agree that if Purchaser defaults on its obligations and fails to cure such default within the ten (10) day cure period, the actual damages therebyincurred by Seller would be difficult to measure and the receipt of the Deposit by Seller would in such circumstances represent reasonable compensation toSeller on account thereof. 8.02 Seller. In the event Seller fails to perform or breaches any of its representations, warranties, covenants or obligations to be performed by Seller, thePurchaser shall give to the Seller written notice, with a copy to the Escrow Agent, that such default shall be cured within ten (10) days for its failure to conveythe Property or thirty (30) days of Seller’s receipt of such notice for a any other default. If Seller fails to cure the default within the applicable ten (10) or thirty(30) day cure period, to Purchaser’s reasonable satisfaction, then, at Purchaser’s sole option, it shall either (i) terminate this Agreement, whereupon the Sellershall return the entire Deposit to the Purchaser as full liquidated damages and as its sole remedy, in lieu of any other claims or causes of action which may beavailable to Purchaser at law or in equity by reason of such default by Seller, after which event neither party shall have further liability hereunder, or(ii) pursue the remedy of specific performance except where Lender Approval has not been obtained, or (iii) waive such breach and proceed with settlement ofthe Property.ARTICLE IXAGENTS AND COMMISSION9.01 Liability. Seller and Purchaser each warrant to the other that neither has dealt with any agent, broker or finder with respect to the transactioncontemplated by this Agreement. In the event that any claim for commission or finder’s fee is brought by any person or entity as a consequence of thetransaction contemplated hereby, then the party whose acts gave rise to such claim shall hold harmless the other party against any loss, cost or expense of anynature, including but not limited to, court costs and reasonable attorney’s fees arising as a consequence of the claim for the commission or fee. ARTICLE XCONDEMNATION10.01 Notice and Award. Seller agrees to give Purchaser prompt notice of any actual or threatening taking of all or any portion of the Property bycondemnation or eminent domain prior to the date of closing hereunder. In the event that prior to closing hereunder there shall occur a taking bycondemnation or eminent domain or a proposed conveyance to a condemning authority in lieu of condemnation of all or any material portion of theProperty, then Purchaser, at its option, may either (i) terminate this Agreement by written notice to Seller whereupon the Escrow Agent shall return theDeposit to Purchaser and the parties shall not be further obligated to each other pursuant to this Agreement, except for the indemnification obligations setforth in Paragraph 4.01, or (ii) proceed to closing hereunder, with a reduction in the Purchaser Price, equal to SIXTY THOUSAND FOUR HUNDRED ANDTWENTY-FIVE AND 53/100THS DOLLARS ($60,425.53) per Lot for each Lot lost incident to the condemnation or to be lost pursuant to a threatenedcondemnation.ARTICLE XISELLER’S REPRESENTATIONS11.01 General. Seller hereby represents, warrants and covenants to Purchaser that Comstock Station View L.C., a Virginia limited liability company, isa duly organized and validly existing corporation under the laws of the Commonwealth of Virginia qualified to do business in the Commonwealth ofVirginia and in good standing; that Seller has the power as a limited liability company to execute and perform this Agreement; that all necessary consentsand approvals from the Seller have been obtained; and that the person executing this Agreement on behalf of Seller is duly empowered to bind Seller toperform its obligations hereunder. Copies of any necessary approvals are to be furnished by Seller upon written request by Purchaser.11.02 Specific. In addition to any other warranty made in connection with this Agreement, the Seller warrants and agrees (a) that the Seller is the feesimple owner of all of the Property which shall be sold to and acquired by Purchaser under this Agreement and at settlement will be the fee simple owner ofthe Property, and has no knowledge of off-record or undisclosed interest in the Property, and, with exception to the deed of trust secured against the Property, to Seller’s knowledge and belief, the Property has no other liens and encumbrances other than as shall bedisclosed by a proper title search conducted incident to 3.01 hereof by Purchaser ; (b) that Seller has not received written notice that the Property is subject toany unrecorded restrictive covenant or equitable servitude of any kind which would in any way limit the free choice of the Purchaser with respect to thenature or location of homes to be constructed on the Property, except as provided herein; (c) that to the best of Seller’s knowledge and belief: The Propertydoes not contain any hazardous substance, the Seller has not conducted or authorized the generation, transportation, storage, treatment or disposal at theProperty of any hazardous substance other than is customary resulting from construction on surrounding properties; that the Seller has not received anywritten notice of, and has no knowledge that, any government authority or any employee or agent thereof, or any private citizen, making a claim that there isa presence, release, threat of release, placement on or in the Property, or the generation, transportation, storage, treatment or disposal at the Property, of anyhazardous substance; to the best of Seller’s knowledge and belief nor has any “clean-up” of the Property occurred pursuant to the Environmental Laws (ashereinafter defined) which could give rise to liability on the part of Purchaser to reimburse any governmental authority for the costs of such clean-up or a lienor encumbrance on the Property. For purposes of this paragraph, “hazardous substance” means any materials in violation of any applicable environmentallaws or regulations including, but not limited to, Section 103 of the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.,9601 et seq., any “superlien” laws, any “superfund” laws, or similar federal, state or local laws, or any successor statutes thereto (the Environmental Laws”);(d) that to the best of Seller’s actual knowledge, the Property does not contain levels of natural asbestos unacceptable to any local, state or federal authority;(e) that to the best of Seller’s actual knowledge, the Property has not been used as a grave site or fill or borrow area; (f) no suit, actions, arbitration or legal,administrative or other proceeding is pending or has been threatened against the Property, or against Seller with respect to the Property, which, if adversely determined, could prevent or impair the ability of Seller to perform this Agreement or restrict Purchaser’s use or developmentof the Property, or any part thereof, except as set forth in Paragraph 15.01; (g) no bankruptcy, insolvency, rearrangement, or similar action or proceeding,whether voluntary or involuntary, is pending or threatened against Seller and Seller has no immediate intention of filing or commencing any such action orproceeding; (h) that Seller has granted no person any contract right or other legal right to the use of any portion of the Property or to the furnishing or use ofany facility or amenity on or relating solely to the Property; (i) Seller has not received any written notice that any part of the Property is subject to a right offirst refusal which has not been waived or other right which Seller, or any predecessor in title, may have granted to other persons or parties as to the Property,or any part thereof, whether written or verbal; (j) that no written notice has been received by Seller that any governmental or quasi-governmental agency orauthority intends to commence construction of any special or off-site improvements or impose any special or other assessment against the Property, or anypart thereof; (k) that the Property is not located within a flood hazard area or wetland except as referenced and disclosed on the Wetlands Permit attachedhereto as Exhibit B; (l) that Seller has not received any written notice alleging that it or the Property to be, or that with due notice or lapse of time or both itor the Property will be, in breach of default of any lawful statute, ordinance or regulation of the United States, State, County or City applicable to the Lots(“Legal Requirement”) which could materially adversely affect the ability of Seller to perform this Agreement or restrict Purchaser’s use or construction ofresidential homes on the Lots; and (m) that the execution of this Agreement will not conflict with or result in a breach of any of the terms or provisions of,constitute a default under, or cause or allow an acceleration of any note, mortgage, deed of trust, loan agreement or other document, instrument or agreementto which Seller is a party or by which the Property is encumbered or affected, except as otherwise disclosed in Paragraph 15.01. 11.03 Mechanic’s Liens. All contractors, subcontractors, laborers, and materialmen who are or did perform work upon or furnish labor or materials atSeller’s request to improve or benefit the Property prior to settlement have been or will be paid in full by Seller on or before the date of each settlement. Sellerwill execute at closing the necessary affidavits and other documents reasonably required by Purchaser’s title insurance company to eliminate from its titlepolicy any exceptions to filed or unfiled mechanic’s liens arising from any act of Seller or its subcontractors. Should at any time after settlement and closing anotice of intent to file a mechanic’s lien or a mechanic’s lien be filed against the Property arising from any act of Seller or its contractors, subcontractors,laborers or materialmen, Seller shall, within thirty (30) days of written notifications from Purchaser to Seller of the filing of such notice or lien, cause saidnotice or lien to be withdrawn or released of record, either by payment in full of all sums represented by said lien or by statutory bonding. Seller shallindemnify and hold Purchaser harmless against all costs and expenses (including reasonable attorney’s fees) incurred by Purchaser for Seller’s failure to do so.11.04 Zoning. Seller shall immediately provide Purchaser with written notice of any and all special zoning limitations or other restrictions with regardto the Property including, without limitation, restrictions (if any) relating to fencing, bike paths, walking paths, park areas, reserves, house sizes, garages,basements, no-build zones, lighting or other similar items. All such limitations or restrictions shall be subject to Purchaser’s approval which shall not beunreasonably withheld.11.05 Indemnification. Seller shall, and hereby does indemnify, protect and hold harmless the Purchaser of, and from, any and all liability and all loss,damage and expense including judgments, costs and attorney’s fees by reason of a material breach of Seller’s representations or warranties.11.06 Affidavit. All of the foregoing covenants, warranties and representations will be effective, repeated and true at the time of settlement and closingand Seller will provide an affidavit to that effect. 11.07 Survival. The warranties set forth above shall be materially true and accurate as of the date of Closing and will survive the conveyance of theProperty to Purchaser for a period of nine months and will be for the benefit of the Purchaser and its successors and/or assignees.ARTICLE XIIPURCHASER’S REPRESENTATIONS12.01 General. Purchaser hereby represents, warrants and covenants to Seller that Purchaser is a duly organized and validly existing limited liabilitycompany under the laws of Delaware, qualified to do business in the Commonwealth of Virginia and in good standing; that Purchaser has the power toexecute and perform this Agreement; that all necessary consents and approvals from the Purchaser have been obtained; and that person executing thisAgreement on behalf of Purchaser is duly empowered to bind Purchaser to perform its obligations hereunder. Copies of any necessary approvals are to befurnished by Purchaser upon written request by Seller.12.02 Indemnification. Purchaser shall, and hereby does indemnify, protect and hold harmless the Seller of, and from, any and all liability and all loss,damage and expense including judgments, costs and attorney’s fees by reason of a material breach of Purchaser’s representation or warranties.12.03 Survival. The warranties set forth above will survive the conveyance of the Property to Purchaser and will be for the benefit of the Seller and itssuccessors and/or assignees.ARTICLE XIIIESCROW AGENT13.01 Name. For the purposes of this Agreement the term “Escrow Agent” shall mean Curran & Whittington, PLLC., 15100 Washington Street, Suite201, Haymarket, Virginia 20169. Unless otherwise provided herein, any funds deposited with the Escrow Agent will be placed in a separate interest bearingescrow account. All interest earned thereon shall be considered part of the Deposit. 13.02 Liability. The Escrow Agent shall have no liability, personal or otherwise, absent gross negligence, fraud or willful misconduct on account of itsduties hereunder or in acting upon any signature, notice, demand, request, waiver, consent, receipt or other paper or document believed by Escrow Agent tobe genuine.13.03 Direction. In the event the Escrow Agent is in doubt as to its duties and liabilities under the provisions hereof, the Escrow Agent may, in its solediscretion, continue to hold the monies or instruments which are the subject of this escrow until the parties hereto mutually agree in writing to disbursementthereof, or until a judgment of a court of competent jurisdiction shall determine the rights of the parties hereto, or Escrow Agent may deposit all moniesand/or instruments then held pursuant to this Agreement with the clerk of the court having jurisdiction over the Property, and upon notifying all partiesconcerning such actions, all liability on the part of the Escrow Agent shall fully cease and terminate, except to the extent of accounting for any monies orinstruments heretofore delivered out of escrow.13.04 Indemnification. Seller and Purchaser shall jointly and severally defend, indemnify and hold harmless the Escrow Agent against and from anysuch liability and any and all costs, including attorney’s fees, in connections with this Purchase Agreement.ARTICLE XIVSUBDIVISION14.01 Subdivision. Subject to Paragraph 2.02 of this Agreement, Seller shall have the responsibility at its expense for administering, managing,directing and achieving the preparation, submission and governmental approval of all the plans to allow for the subdivision and development of the Propertyinto approximately FORTY-SEVEN (47) townhome Lots (“Development Plans”). The Seller represents and warrants that the final draft record plat has beensubmitted to, but not yet approved by, Loudoun County, Virginia, and is attached hereto as Exhibit A. The Final Record Plat shall not be materiallyamended/modified from what is depicted in Exhibit A, or otherwise provided for herein. If the Final Record Plat is requested to be modified, Seller shall provide the County’s comments and requested changes to Purchaser, upon receipt of which Purchaser shall have three business days to providewritten confirmation to Seller that Purchaser either accepts the County’s comments or rejects the County’s comments. If Purchaser accepts the County’scomments, the Parties shall, subject to satisfaction of the terms and conditions contained herein, proceed to settlement as provided in Paragraph 6.01. IfPurchaser rejects the County’s comments, Seller shall return the remaining portion of the Deposit to Purchaser, and neither party shall any further rights orresponsibilities under this Agreement. Upon receipt of approval of the Final Record Plat, and if requested by Purchaser, the Development Plans shall besubmitted by the Seller to Loudoun County for permits in a commercially reasonable manner and as soon as possible thereafter, the Final Record Plat shall besubmitted for recordation. The Purchaser agrees to pay all customary fees and to post the customary bonds incident thereto. Seller agrees no work will becommenced pursuant to said plans and permits without Purchaser’s written consent, until after settlement and closing. In the event settlement and closingdoes not occur for any reason, Seller agrees to assist in having any bonds, letters of credit and/or escrows released, including but not limited to immediatelyreplacing any such bonds, letter(s) of credit and/or escrows. Any right of Seller in all plans, approvals, permits and related engineering shall be assigned at nocost to Purchaser at settlement. Seller agrees to cooperate and execute any documents reasonably required to accomplish said assignment.14.02 “AS-IS” SALE OF PROPERTY. Subject to the express terms and provisions of this Agreement, the Property shall be sold and conveyed in its “asis, where is” condition, with all faults, on the Closing Date, without any representations or warranties whatsoever, express or implied, with all representationsand warranties hereby waived by Purchaser except as otherwise specifically set forth herein. PURCHASER ACKNOWLEDGES AND AGREES THATEXCEPT AS OTHERWISE SET FORTH IN THIS AGREEMENT, THE PROPERTY IS TO BE TRANSFERRED BY SELLER TO PURCHASER “AS IS, WITHALL FAULTS”, AND IN ITS CURRENT CONDITION. PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT, EXCEPT AS EXPRESSLY CONTAINED HEREIN, NEITHER SELLERNOR ANY AGENT, EMPLOYEE OR OTHER REPRESENTATIVE OF SELLER (OR PURPORTED AGENT, EMPLOYEE OR OTHER REPRESENTATIVEOF SELLER) HAS MADE (i) ANY GUARANTEE, REPRESENTATION, OR WARRANTY, EXPRESS OR IMPLIED (AND SELLER SHALL NOT HAVE ANYLIABILITY WHATSOEVER) AS TO THE VALUE, USES, HABITABILITY, CONDITION, DESIGN, OPERATION, FINANCIAL CONDITION ORPROSPECTS, OR FITNESS FOR PURPOSE OR USE OF THE PROPERTY (OR ANY PART THEREOF) OR THE PROPERTY INFORMATION, OR (ii) ANYOTHER GUARANTEE, REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO ANY PORTION OF THEPROPERTY (OR ANY PART THEREOF) OR THE PROPERTY INFORMATION. FURTHER, SUBJECT TO THE EXPRESS TERMS AND PROVISIONS OFTHIS AGREEMENT, SELLER SHALL HAVE NO LIABILITY FOR ANY LATENT, HIDDEN OR PATENT DEFECT AS TO THE PROPERTY OR THEFAILURE OF THE PROPERTY, OR ANY PART THEREOF, TO COMPLY WITH ANY APPLICABLE LAWS AND REGULATIONS. IN PARTICULAR,SUBJECT TO THE EXPRESS TERMS AND PROVISIONS OF THIS AGREEMENT, PURCHASER ACKNOWLEDGES AND AGREES THAT THE“PROPERTY INFORMATION” PROVIDED UNDER THIS AGREEMENT (AND ANY OTHER INFORMATION PURCHASER MAY HAVE OBTAINEDREGARDING IN ANY WAY ANY OF THE PROPERTY, INCLUDING, WITHOUT LIMITATION, ITS OPERATIONS OR ITS FINANCIAL HISTORY ORPROSPECTS FROM SELLER OR ITS AGENTS, EMPLOYEES OR OTHER REPRESENTATIVES) IS DELIVERED TO PURCHASER AS A COURTESY,WITHOUT REPRESENTATION OR WARRANTY AS TO ITS ACCURACY OR COMPLETENESS, AND NOT AS AN INDUCMENT TO ACQUIRE THEPROPERTY; THAT NOTHING CONTAINED IN SUCH DELIVERIES SHALL CONSTITUTE OR BE DEEMED TO BE A GUARANTEE, REPRESENTATIONOR WARRANTY, EXPRESS OR IMPLIED, IN ANY REGARD AS TO ANY OF THE PROPERTY (EXCEPT AS EXPRESSLY PROVIDED HEREIN); ANDTHAT PURCHASER IS RELYING ONLY UPON THE PROVISIONS OF THIS AGREEMENT AND ITS OWN INDEPENDENT ASSESSMENT OF THE PROPERTYAND ITS PROSPECTS IN DETERMINING WHETHER TO ACQUIRE THE PROPERTY.ARTICLE XVMISCELLANEOUS15.01 Lender Approval. Seller’s obligations under this Agreement are conditioned upon obtaining lender approval to release in full the existing deedof trust secured against the Property upon payment of the Purchase Price (“Lender Approval”). Seller agrees to diligently pursue Lender Approval. In theevent Seller fails to obtain Lender Approval , and provide written evidence satisfactory to Purchaser of said approval within TEN (10) days after theexpiration of the Feasibility Study Period, either party shall have the right to terminate this Agreement and the Deposit shall be immediately returned toPurchaser and the parties shall have no liability to each other.15.02 Notice. All notices and other communications hereunder shall be in writing and be deemed duly given if personally delivered, electronicallydelivered(so long as followed by overnight delivery by a recognized national carrier), telecopied with proof of receipt(so long as followed by overnightdelivery by a recognized national carrier) or mailed by certified mail, return receipt requested, postage prepaid; if to Seller to: Comstock Station View L.C. 11465 Sunset Hills Road, Fifth Floor Reston, Va 20910 ATTN: Ms. Elena Garrison Telecopier #703.760.1520 E-mail: egarrison@comstockhomebuilding.comwith a copy to: Comstock Station View L.C. 11465 Sunset Hills Road, Fifth Floor Reston, Va 20910 ATTN: Mr. Christopher Clemente Telecopier #703.760.1520 E-mail: cclemente@comstockhomebuilding.comand a copy to: Comstock Station View L.C. 11465 Sunset Hills Road, Fifth Floor Reston, Va 20910 ATTN: Mr. Jubal Thompson, Esquire Telecopier #703.760.1520 E-mail: jthompson@comstockhomebuilding.com andAnd if to Purchaser to: M/I Homes of DC, LLC c/o M/I Homes, Inc. 3 Easton Oval, Suite 500 Columbus, OH 43219 Attn: Robert H. Schottenstein telecopier #614-418-8080 Email:with a copy to: M/I Homes of DC, LLC c/o M/I Homes, Inc. 3 Easton Oval, Suite 500 Columbus, OH 43219 Attn: Thomas Mason, Esquire telecopier #614-418-8622 Email:and a copy to: M/I Homes of DC, LLC 21355 Ridgetop Circle, Suite 220 Sterling, Virginia 20166-6503 Attn: Dennis Kelleher telecopier #(703) 404-3040The parties hereto shall be responsible for notifying each other of any change of address.15.03 Financial Accounting. Seller recognizes that Purchaser is subject to the requirements of Revised Interpretation No. 46 (“FIN 46R”),Consolidation of Variable Interest Entities, an authoritative accounting pronouncement issued by the Financial Accounting Standards Board. Seller willreasonably cooperate with Purchaser with Purchaser’s obligation, if any, to comply with the financial reporting requirements of FIN 46R.15.04 Survival. The provisions hereof shall survive the execution and delivery of the deed(s) executed hereunder for a period of six months and shallnot be merged therein.15.05 Assignment. The principals to the Agreement mutually agree that the benefits hereunder are not assignable by either party without the writtenconsent of the other party. Notwithstanding the foregoing, Purchaser shall have the right to assign this Agreement to a limited liability company, partnership,corporation, or other entity in which Purchaser owns a membership, partnership or other equity interest. Additionally, Purchaser may assign its right topurchase certain Lots to other residential home builders and Seller shall not unreasonably withhold or delay consent of such an assignment. 15.06 Construction of Agreement.a. This Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which shall constitute one and thesame instrument.b. Titles to paragraphs and subparagraphs are for convenience only and are not intended to limit or expand the covenants and obligations expressedthereunder.c. Time shall be of the essence with regard to all terms and conditions of this Agreement.d. This Agreement contains the entire agreement among the parties hereto with respect to the Property. No change or modification of this Agreement, orany waiver of the provisions hereof, shall be valid unless same is in writing and signed by the parties hereto.e. Waiver of performance or satisfaction of timely performance or the satisfaction of any condition, covenant, requirement, obligation or warranty byone party shall not be deemed a waiver of the performance or satisfaction of any other condition, covenant, requirement, obligation or warranty unlessspecifically consented to in writing.f. In the event any moratorium on building residences is imposed by any governmental entity, the Purchaser shall be entitled to extend all time periodsimposed in this Agreement by a period equal to the length of the moratorium, provided, that if such moratorium shall extend beyond six (6) monthsfrom the date of settlement and closing provided for herein, either party may terminate this Agreement, in which event the Deposit shall be forthwithreturned to Purchaser and both parties shall be released of all further liability or obligation hereunder. g. It is the intention of the parties hereto that all questions with respect to the construction of this Agreement and the rights or liabilities of the partieshereunder shall be determined in accordance with the laws of the Commonwealth of Virginia.h. Any date specified in this Agreement which is a Saturday, Sunday or legal holiday, shall be extended to the first regular business day after such datewhich is not a Saturday, Sunday or legal holiday. Any reference herein to the singular shall include the plural and vice versa and reference to the male,female or neuter gender shall include reference to all other genders.i. This Agreement represents the result of bargaining and negotiations between the parties and of a combined draftsmanship effort. Consequently, Sellerand Purchaser expressly waive and disclaim, in connection with the interpretation of this Agreement, any rule of law requiring that ambiguous orconflicting terms be construed against the party whose attorney prepared this Agreement or any earlier draft of this Agreement.j. Nothing contained herein is intended to create, nor shall it ever be construed to make, Seller and Purchaser partners or joint ventures.k. Approvals granted hereunder by Purchaser are solely for its own benefit and shall not be relied upon by third parties or impose any liability uponPurchaser as to the accuracy or sufficiency of the item or matter being approved.l. In the Event that full performance under this Agreement has not occurred within ten (10) years of the date hereof, this Agreement shall terminate andbe of no further force and effect, with the Deposit being returned to Purchaser.15.07 Duration and Acceptance of Offer. Should this Agreement be ratified by one party prior to submission to the other party, Purchaser’s offer topurchase or Seller’s offer to sell, as the case may be, shall remain open for ( ) days after ratification by the first party to do so. Should theother party not ratify this Agreement within said ( ) day period, the offer to purchase or sell, as the case may b, is withdrawn and thisAgreement shall be null and void. 15.08 Severability. In the event that any part or all of any term, covenant, condition, agreement, provision or section of this Agreement shall beadjudged invalid or unenforceable by a court of competent and final jurisdiction, the same shall be severable from the remainder of this Agreement and thisAgreement shall not terminate or be deemed void or voidable, but shall continue in full force and effect and there shall be substituted for such invalidprovision a like, but legal and enforceable, provision which most nearly accomplishes the intention of the parties hereto, and if no such provision isavailable, the remainder of this Agreement shall be enforced. If such term, covenant, condition, agreement, provision or section of this Agreement is adjudgedinvalid due to its scope or breadth, such item shall be deemed valid to the extent of the scope or breadth permitted by law.15.09 Effective Date. The date on which this Agreement is accepted by the last party to accept and sign the Agreement shall be inserted as the effectivedate of this Agreement under the first paragraph hereof.15.10 WITNESS the following signatures and seals: SELLER: COMSTOCK STATION VIEW LC, a Virginia limited liability company By: Comstock Homebuilding Companies, Inc. Its managerWitness: By: Name: Christopher ClementeDate: Title: Chief executive Officer PURCHASER: M/I HOMES OF DC, LLC, a Delaware limited liability companyWitness: By: Name: Date: Title: Exhibit 21.1List of Subsidiaries Name State of Incorporationor Organization1. Buckhead Overlook, LLC Georgia2. Comstock Acquisitions, L.C. Virginia3. Comstock Aldie, L.C. Virginia4. Comstock Barrington Park, L.C. Virginia5. Comstock Bellemeade, L.C. Virginia6. Comstock Belmont Bay 5, L.C. Virginia7. Comstock Belmont Bay 89, L.C. Virginia8. Comstock Blooms Mill II, L.C. Virginia9. Comstock Brandy Station, L.C. Virginia10. Comstock Carter Lake, L.C. Virginia11. Comstock Cascades, L.C. Virginia12. Comstock Communities, L.C. Virginia13. Comstock Countryside, L.C. Virginia14. Comstock Delta Ridge II, L.L.C. Virginia15. Comstock East Capitol, L.L.C. Virginia16. Comstock Emerald Farm, L.C. Virginia17. Comstock Fairfax I, L.C. Virginia18. Comstock Flynn’s Crossing, L.C. Virginia19. Comstock Hamlets of Blue Ridge, L.C. Virginia20. Comstock Holland Road, L.L.C. Virginia21. Comstock Homes of Atlanta, LLC Georgia22. Comstock Homes of North Carolina, L.L.C. North Carolina23. Comstock Homes of Raleigh, L.L.C. North Carolina24. Comstock Homes of Washington, L.C. Virginia25. Comstock James Road, L.L.C. Georgia26. Comstock Kelton II, L.C. Virginia27. Comstock Lake Pelham, L.C. Virginia28. Comstock Landing, L.L.C. Virginia29. Comstock Loudoun Condos 1, L.C. Virginia30. Comstock Massey Preserve, L.L.C. Virginia31. Comstock North Carolina, L.L.C. North Carolina32. Comstock Penderbrook, L.C. Virginia33. Comstock Potomac Yard, L.C. Virginia34. Comstock Realty, LLC Georgia35. Comstock Ryan Park, L.C. Virginia36. Comstock Sherbrooke, L.C. Virginia37. Comstock Station View, L.C. Virginia38. Comstock Summerland, L.C. Virginia39. Comstock Wakefield, L.L.C. Virginia40. Comstock Wakefield II, L.L.C. Virginia41. Culpeper Commercial, L.C. Virginia42. Highland Avenue Properties, LLC Georgia43. Highland Station Partners, LLC Georgia44. Mathis Partners, LLC Georgia45. North Shore Raleigh II, L.L.C. Virginia46. Post Preserve, LLC Georgia47. Raleigh Resolution, L.L.C. Virginia48. Settlement Title Services, L.L.C. Virginia49. TCG Debt Fund II, L.C. Virginia50. TCG Fund I, L.C. Virginia51. Tribble Road Development, LLC Georgia Exhibit 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-123709) of Comstock Homebuilding Companies,Inc. of our report dated March 31, 2010 relating to the financial statements, which appears in this Form 10-K. /s/ PRICEWATERHOUSECOOPERS LLPMcLean, VirginiaMarch 31, 2010 Exhibit 31.1CERTIFICATION OF CHAIRMAN AND CHIEF EXECUTIVE OFFICERPURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Christopher Clemente, certify that:1. I have reviewed this annual report on Form 10-K of Comstock Homebuilding Companies, Inc. for the fiscal year ended December 31, 2009;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 thestatements 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 thefinancial condition, results of operations, and cash flows of the registrant as of, and for, the period 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 inExchange 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 theregistrant and have:a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries is made known to us by others within those entities, particularlyduring 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 oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposesin 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 effectivenessof the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscalquarter of the fiscal year ended December 31, 2009 that has materially affected, or is reasonably likely to materially affect, the registrant’s internal controlover financial reporting; and5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; andb) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.Date: March 31, 2010 /s/ CHRISTOPHER CLEMENTE Christopher Clemente Chairman and Chief Executive Officer (Principal executive officer) Exhibit 31.2CERTIFICATION OF CHIEF FINANCIAL OFFICERPURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Jeffrey R. Dauer, certify that:1. I have reviewed this annual report on Form 10-K of Comstock Homebuilding Companies, Inc. for the fiscal year ended December 31, 2009;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 thestatements 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 thefinancial condition, results of operations, and cash flows of the registrant as of, and for, the period 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 inExchange 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 theregistrant and have:a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring 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 oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposesin 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 effectivenessof the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscalquarter of the fiscal year ended December 31, 2009 that has materially affected, or is reasonably likely to materially affect, the registrant’s internal controlover financial reporting;5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; andb) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.Date: March 31, 2010 /s/ JEFFREY R. DAUER Jeffrey R. Dauer Chief Financial Officer (Principal financial officer) Exhibit 32.1CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report on Form 10-K of Comstock Homebuilding Companies, Inc. (the “Company”) for the year ended December 31,2009, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of Christopher Clemente, Chairman and Chief ExecutiveOfficer of the Company and Jeffrey R. Dauer, Chief Financial Officer of the Company, certify, to our best knowledge and belief, pursuant to 18 U.S.C. § 1350,as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: March 31, 2010 /s/ CHRISTOPHER CLEMENTE Christopher Clemente Chairman and Chief Executive OfficerDate: March 31, 2010 /s/ JEFFREY R. DAUER Jeffrey R. Dauer Chief Financial Officer

Continue reading text version or see original annual report in PDF format above