**Exhibit 10.12**

 

**CARVE-OUT GUARANTY**

 

THIS CARVE-OUTGUARANTY (this “Guaranty”) dated as of January 27, 2005, is made byCOMSTOCK HOMEBUILDING COMPANIES, INC., a Delaware corporation (“Guarantor”),in favor of CORUS BANK, N.A. (“Lender”).

 

**R E C I T A L S:**

 

A.                                   COMSTOCKPENDERBROOK, L.C., a Virginia limited liability company (“Borrower”),and Lender have entered into a loan in the maximum principal sum of $67,000,000(the “Loan”) pursuant to a loan agreement of even date herewith (the “LoanAgreement”) and certain other documents.

 

B.                                     Inconnection with the Loan, Borrower has executed and delivered to Lender apromissory note, dated the date hereof (said note, together with any extensionsthereof or modifications or amendments thereto and any notes issued in substitutionor exchange therefor, being hereinafter referred to collectively as the “Note”).

 

C.                                     Tosecure the payment of the obligations and liabilities of Borrower to Lenderunder the Loan Agreement and the Note, Borrower has executed and delivered toLender a deed of trust and certain other documents and instruments evidencingand securing the Loan, including but not limited to a Deed of Trust withAbsolute Assignment of Leases and Rents, Security Agreement and Fixture Filingfor the Loan, dated as of the date hereof (the “Deed of Trust”), whichis a lien on the Property.

 

D.                                    Lenderhas required, as a condition precedent to making the Loan, that Guarantorexecute and deliver this Guaranty.

 

E.                                      Guarantorhas a financial interest in Borrower and it will be to the direct financialinterest and benefit of Guarantor to assist Borrower to obtain the Loan fromLender.

 

F.                                      Guarantorhereby acknowledges that this Guaranty is required by Lender as a conditionprecedent and inducement to Lender to make the Loan.

 

NOW, THEREFORE, FOR VALUE RECEIVED, in consideration of the foregoingRecitals, each of which is an integral part hereof and this Guaranty shall beconstrued in light thereof, and in consideration of Lender making the Loan toBorrower and for other good and valuable consideration, the receipt andadequacy of which is hereby acknowledged, Guarantor agrees as follows:

 

# 1.                                       Definitions.

 

## (a)                                  Exceptas otherwise set forth herein, all capitalized terms used but not definedherein shall have the meanings ascribed to such terms in the Deed of Trust or,if not

 

----

 

defined therein, in the LoanAgreement, which definitions are incorporated herein by reference as if fullyset forth herein.

##  

## (b)                                 Asused herein, the term “Loan Party” shall mean any one or more ofBorrower, Guarantor and any other Person which is a party to thisGuaranty,  the Completion Guaranty, theEnvironmental Indemnity Agreement or the Loan Documents, other than Lender.

##  

## (c)                                  Allreferences in this Guaranty, the Completion Guaranty, the Environmental IndemnityAgreement and every other Loan Document to the Loan Agreement, the Note, theDeed of Trust, the Completion Guaranty, the Environmental Indemnity Agreementand each and every other Loan Document shall mean the Loan Agreement, the Note,the Deed of Trust, the Completion Guaranty, the Environmental IndemnityAgreement and each and every other Loan Document and all modifications,amendments, supplements, extensions, replacements or restatements thereof orthereto.

##  

# 2.                                       Guaranty.

#  

## (a)                                  Guarantorabsolutely, unconditionally and irrevocably guarantees, as a principal obligorand not as a surety, to Lender any loss (including principal), cost, damage orexpense suffered by Lender due to:

##  

### (i)                                     fraudof Borrower or Guarantor;

###  

### (ii)                                  thewillful misconduct of Borrower or Guarantor and/or material misrepresentationsby Borrower or Guarantor in connection with the Loan;

###  

### (iii)                               thecommission of intentional waste with regard to the Property;

###  

### (iv)                              theintentional misconduct of Borrower or Guarantor causing the cancellation of anyinsurance required under the Loan Agreement or any other Loan Document;

###  

### (v)                                 thefailure of Borrower or Guarantor after the occurrence of an Event of Default toapply any income generated by the Property (including, but not limited to,rental receipts and/or security deposits) to any expenses of the Propertyand/or payments of the Secured Obligations due to Lender, or to deliver suchincome to Lender upon demand;

###  

### (vi)                              thetransfer or conveyance of the Property or any material portion thereof in violationof the provisions of the Deed of Trust, the Loan Agreement or any other LoanDocument;

###  

### (vii)                           Borrower’sfailure to construct, operate or market the Property or utilize the Loanproceeds in accordance with the Loan Agreement in any material way; or

 

----

 

### (viii)                        Borrower’sacceptance of rental payments, if any, more than thirty (30) days in advance ofthe due date.

###  

## (b)                                 Guarantorabsolutely, unconditionally and irrevocably guarantees, as a principal obligorand not as a surety, to Lender any loss (including principal), cost, damage orexpense suffered by Lender upon the occurrence of any of the following, whetheror not the loss, cost, damage or expense suffered by Lender is caused by any ofthe following:

##  

### (i)                                     ifBorrower, Guarantor or any other Person now or hereafter liable for the Loanfiles a voluntary bankruptcy petition under any section or chapter of theBankruptcy Code or any similar law or regulation or is a party to a collusiveinvoluntary bankruptcy petition or any receivership proceedings, in whichBorrower, Guarantor or any other Person now or hereafter liable for the Loan isthe debtor, or the making of an assignment for the benefit of its creditors byBorrower, Guarantor or any other Person now or hereafter liable for the Loan orthe filing of a case or proceeding by Borrower for its dissolution orliquidation;

###  

### (ii)                                  ifBorrower, Guarantor or any other Person now or hereafter liable for the Loanbecomes a party to any case, action, suit or proceeding which suspends,reduces, impedes, or impairs Lender’s right of recourse to the Property or anypart thereof, provided however, that: (1) the bringing of a good faithcounterclaim which if not raised in an enforcement action would be barred, andwhich does not seek to enjoin the enforcement action of Lender; or (2) the goodfaith denial of facts alleged by Lender in an enforcement action, shall notgive rise to liability under this subsection (ii); or

###  

### (iii)                               ifBorrower or Guarantor engages in any intentional act, omission, ormisrepresentation, which has the effect of suspending, delaying, reducing,impeding, or impairing Lender’s right of recourse to the Property or any partthereof.

###  

Payments madepursuant to this Guaranty shall be made regardless of any defense, right ofset-off or claims which Borrower, Guarantor or any other Loan Party may haveagainst Lender.  Lender may apply any andall such payments to the Secured Obligations in any order of priority as Lendershall, in its sole discretion, determine.

 

# 3.                                       IrrevocableGuaranty.

#  

## (a)                                  **This is an absolute, irrevocable, present andcontinuing guaranty of payment and not of collection.**

##  

## (b)                                 Theobligations of Guarantor hereunder are independent of and in addition to theobligations of Borrower and any other Loan Party under the Completion Guaranty,the Environmental Indemnity Agreement or any other Loan Document and a separateaction or actions may be brought or prosecuted against Guarantor, whether anyaction is brought against

 

----

 

Borrower or any other LoanParty or whether Borrower or any other Loan Party is joined in any action oractions.  In any action to enforce thisGuaranty, Lender, at its election, may proceed against Guarantor, with orwithout:  (i) joining Borrower or anyother Loan Party in any such action; (ii) commencing any action against orobtaining any judgment against Borrower or any other Loan Party; or (iii)commencing any proceeding to enforce the Note or the Loan Agreement or torealize upon all or any part of the Property; provided,however,nothing herein contained shall preclude Lender from suing on the Note and theLoan Agreement or foreclosing the Loan Documents or from exercising any otherrights, remedies or power under the Completion Guaranty, the EnvironmentalIndemnity Agreement or any Loan Document, and if such foreclosure or otherrights, powers or remedies are availed of, only the net proceeds therefrom,after deduction of all charges and expenses of every kind and naturewhatsoever, shall be applied in reduction of the Secured Obligations.  Lender shall not be required to institute orprosecute proceedings to recover any deficiency as a condition of any paymenthereunder or enforcement hereof. Nevertheless, in the event Lender elects to pursue its remedies underany one or more of the other Loan Documents and any disposition of the Propertyor any part thereof results in a deficiency, Guarantor hereby further promisesand agrees to immediately pay to Lender the amount of such deficiency.  At any sale of the Property, whether byforeclosure or otherwise, Lender may, at its discretion, purchase all or anypart of such the Property, offered for sale for its own account, and may applyagainst the amount bid therefor the unpaid balance or any part thereof to theSecured Obligations.

##  

## (c)                                  Theobligations and liabilities of Guarantor hereunder shall not be diminished oroffset by any payment by Guarantor under any other agreement, document, orinstrument entered into by Guarantor in favor of Lender.

##  

# 4.                                       Returnof Payments.  Guarantor agrees that,if at any time all or any part of the payments theretofore applied by Lender toany of the Secured Obligations is rescinded or returned by Lender or Lender isrequired to pay any amount thereof to any other Person for any reasonwhatsoever (including, without limitation, the insolvency, bankruptcy,liquidation or reorganization of any party or the determination that suchpayment is held to constitute a preference under the bankruptcy laws):  (i) such Secured Obligations shall, for thepurposes of this Guaranty, be deemed to have continued in existence to theextent of such payment, notwithstanding such application by Lender, and thisGuaranty shall continue to be effective or be reinstated, as the case may be,as to such Secured Obligations, all as though such application by Lender hadnot been made and Guarantor agrees to pay such amount to Lender upon demand;and (ii) any security interest granted by Guarantor to Lender to secure Lender’sperformance under this Guaranty shall be deemed to be reinstatednotwithstanding any release by Lender of such security interest or pledge.  Guarantor shall execute any document,instrument or financing statement necessary or desirable to effect thisprovision.

#  

# 5.                                       NoDischarge.  Guarantor agrees that theobligations, covenants and agreements of Guarantor under this Guaranty shallnot be discharged, affected or impaired by:

#  

## (a)                                  therenewal or extension of time for the payment and/or performance of theobligations under the Completion Guaranty, the Environmental IndemnityAgreement or any of the Secured Obligations under any other Loan Document,whether made or performed with or without notice to or the knowledge or consentof Guarantor;

 

----

 

## (b)                                 anymodification or amendment of the Loan Documents, with or without notice to orthe knowledge or consent of Guarantor, including but not limited to any furtheror future extensions of credit which shall become a part of the SecuredObligations, any change or modification of the interest rate, payment terms,maturity date or any other covenant of any agreement of Borrower or any otherLoan Party;

##  

## (c)                                  anytransfer, waiver, compromise, settlement, modification, surrender, or releaseof the Note, the Loan Agreement, the Completion Guaranty, the EnvironmentalIndemnity Agreement or any of the other Loan Documents;

##  

## (d)                                 therelease or agreement not to sue without reservation of rights of Borrower orany other Loan Party;

##  

## (e)                                  theexistence of any defenses to enforcement of the Note, the Loan Agreement, theCompletion Guaranty, the Environmental Indemnity Agreement or any of the otherLoan Documents, other than payment in full of all the Secured Obligations;

##  

## (f)                                    anyfailure, omission, delay or inadequacy, whether entire or partial, of Lender toexercise any right, power or remedy regarding the Loan or to enforce or realizeupon (or to make Guarantor party to the enforcement or realization upon) any ofLender’s security for the Loan, including, without limitation, the Property;

##  

## (g)                                 theexistence of any set-off, claim, reduction, or diminution of the SecuredObligations, or any defense of any kind or nature, which Guarantor may haveagainst Borrower,  Borrower’s members orany other Loan Party or which Borrower, Guarantor or any other Loan Party hasagainst Lender;

##  

## (h)                                 theapplication of payments received from any source to the payment of anyobligation other than the Secured Obligations, even though Lender mightlawfully have elected to apply such payments to any part or all of the SecuredObligations;

##  

## (i)                                     theaddition of any and all other endorsers, guarantors, obligors and other personsliable for the payment and/or performance of the Secured Obligations, and theacceptance of any other security for the payment and/or performance of theSecured Obligations;

##  

## (j)                                     thepower or authority or lack of power or authority of Borrower to execute anddeliver the Note or the Loan Agreement, or of Borrower or any other Loan Partyto execute, acknowledge or deliver any one or more of the Loan Documents;

##  

## (k)                                  thevalidity or invalidity of the Note, the Loan Agreement, the CompletionGuaranty, the Environmental Indemnity Agreement or the other Loan Documents;

##  

## (l)                                     theexistence or non-existence of Borrower or any other Loan Party as a legalentity;

##  

## (m)                               thetransfer by Borrower or any other Loan Party of all, or any part of, or any interestin all or any part of the Property;

 

----

 

## (n)                                 theinstitution by or against Borrower, Borrower’s members or any other Loan Partyof bankruptcy, reorganization, readjustment, receivership or insolvencyproceedings of any nature, or the disaffirmation of the Completion Guaranty,the Environmental Indemnity Agreement or any one or more of the Loan Documentsin any such proceedings or otherwise;

##  

## (o)                                 anyirregularity or the unenforceability (by reason of any Governmental Authority’spurporting to reduce or amend or otherwise affect the Secured Obligations), orthe release or discharge of Borrower or Borrower’s members in any receivership,bankruptcy, winding-up or other creditor proceedings;

##  

## (p)                                 thedetermination by a court of competent jurisdiction that Borrower or any otherLoan Party is not required to pay and/or perform the Secured Obligationspursuant to operation of law;

##  

## (q)                                 theacceptance by Lender of payment of a part of the Secured Obligations, or anyfailure, neglect or omission on the part of Lender to realize on or protect anyof the Secured Obligations or any real estate, personal property, or mortgageor lien security given as security therefor, or to exercise any lien upon, orright of appropriation of, any monies, credits or property of Borrower towardliquidation of the Secured Obligations;

##  

## (r)                                    thefailure by Lender or anyone acting on behalf of Lender to perfect or maintainperfection of any lien or security interest upon any part of the Property givenat any time to secure repayment of the Secured Obligations; or

##  

## (s)                                  anyright or claim whatsoever which Guarantor may have against Borrower, Borrower’smembers, any other Loan Party or Lender or the successors or assigns of any ofthem;

##  

all whether or not Guarantor shall have had notice or knowledge of anyact or omission referred to in the foregoing clauses (a) through (s) of thisSection.

 

**Guarantor intends that Guarantor shall remainliable hereunder as a principal obligor until the Secured Obligations shallhave been indefeasibly paid in full and all the Secured Obligations performedin accordance with the terms and conditions of the Note and the other LoanDocuments, notwithstanding any fact, act, event or occurrence which mightotherwise operate as a legal or equitable discharge of a surety or guarantor.**

 

# 6.                                       ApplicationOf Amounts Received.  Any amountsreceived by Lender from whatever source on account of the Secured Obligationsmay be applied by Lender toward the payment of the Secured Obligations, and insuch order of application, as Lender may from time to time elect, in accordancewith the provisions of the Loan Documents.

#  

# 7.                                       Waiver.

#  

## (a)                                  Guarantorexpressly waives:

##  

### (i)                                     noticeof the acceptance by Lender of this Guaranty;

 

----

 

### (ii)                                  noticeof the existence, creation, payment or nonpayment of the Secured Obligations orany modification, extension, or amendment thereof;

###  

### (iii)                               presentment,demand, protest, notice of protest, notice of presentment, notice of dishonor,default, non-payment, maturity, release, compromise, settlement, extension,renewal of the Loan or any obligation under the Loan Documents, notice ofmaturity, release, compromise or settlement of any or all commercial paper,accounts, contract rights, documents, instruments, chattel paper and guaranteesat any time held by Lender with respect to the transactions contemplated in theLoan Documents, and all other notices whatsoever;

###  

### (iv)                              anyfailure by Lender to inform Guarantor of any facts Lender may now or hereafterknow about Borrower, any other Loan Party, the Property, the SecuredObligations or the transactions contemplated by the Loan Documents;

###  

### (v)                                 noticeof any and all changes in the terms, covenants or conditions of the Note or ofthe other Loan Documents, including extension and renewal;

###  

### (vi)                              anyand all substitutions, exchanges or releases of all or any part of theProperty;

###  

### (vii)                           therelease or agreement not to sue without reservation of rights of anyone liablein any way for the repayment of the Secured Obligations;

###  

### (viii)                        allrights to notice and a hearing prior to Lender’s taking possession or controlof, or to Lender’s replevy, attachment or levy upon the Property;

###  

### (ix)                                anybond or security which might be required by any court prior to allowing Lenderto exercise any of Lender’s remedies;

###  

### (x)                                   therelease or agreement not to sue without reservation of rights of anyone liablein any way for repayment of the Loan; and

###  

### (xi)                                thebenefit of all valuation, appraisement, extension and exemption laws;

###  

it being understood and agreed that Lender has no duty to so inform andthat Guarantor is fully responsible for being and remaining informed byBorrower of all circumstances bearing on the existence or creation of the riskof nonpayment and/or nonperformance of the Secured Obligations.

 

----

 

## (b)                                 Creditmay be granted or continued from time to time by Lender to Borrower withoutnotice to or authorization from Guarantor, including but not limited to makingadditional loans or other financial accommodations by Lender to Borrower or anyother Loan Party regardless of the financial or other condition of Borrower,any other Loan Party or the Property and Guarantor agrees that the obligations,covenants and agreements of Guarantor under this Guaranty shall not bedischarged, affected or impaired thereby.

##  

## (c)                                  Nomodification or waiver of any of the provisions of this Guaranty shall bebinding upon Lender or Guarantor except as expressly set forth in a writingduly signed and delivered on behalf of Lender.

##  

## (d)                                 Guarantorfurther agrees that any exculpatory language pertaining to Borrower or to anyother Loan Party contained in the Note, the Loan Agreement or any other LoanDocument shall in no event apply to this Guaranty, and will not prevent Lenderfrom proceeding against Guarantor to enforce this Guaranty.

##  

## (e)                                  Guarantorhereby waives the benefit of any law that would otherwise restrict or limitLender in the exercise of its right, which is hereby acknowledged, toappropriate without notice at any time hereafter any indebtedness or obligationmatured or unmatured owing from Lender to Guarantor.  Lender may, from time to time, without demandor notice of any kind, appropriate and apply toward the payment of such of theSecured Obligations, and in such order of application, as Lender may, from timeto time, elect any and all such balances, credits, deposits, accounts, moneys,cash equivalents and other assets, or in the name of Guarantor, then orthereafter with Lender.  Guarantor herebyassigns and transfers to Lender any and all cash, negotiable instruments,documents of title, chattel paper, securities, certificates of deposit, depositaccounts, other cash equivalents and other assets of Guarantor, in thepossession or control of Lender for any purpose.

##  

## (f)                                    Guarantorhereby waives the filing of a claim with a court in the event of receivershipor bankruptcy of Borrower and waives every defense, cause of action,counterclaim or setoff which Guarantor may now have or hereafter may have toany action by Lender in enforcing this Guaranty, including, without limitation,every defense, counterclaim or setoff which Guarantor may now have, orhereafter may have, against Borrower, any other Loan Party or any other partyliable to Lender in any manner, other than mandatory counterclaims.  Guarantor ratifies and confirms whateverLender may do pursuant to the terms hereof and with respect to all or any partof the Property and agrees that Lender shall not be liable for any error injudgment or mistakes of fact or law; provided that nothing contained hereinshall be deemed to limit Lender’s liability for gross negligence or willfulmisconduct.  Guarantor hereby agrees thatGuarantor may be joined as a party defendant in any legal proceeding(including, but not limited to, a foreclosure proceeding) instituted by Lenderagainst Borrower or any other Loan Party.

##  

# 8.                                       EnforcementCosts:  If:

 

## (a)                                  thisGuaranty, the Loan Agreement, the Note, the Completion Guaranty, theEnvironmental Indemnity Agreement or any other Loan Document is placed in thehands of an attorney for collection or enforcement or is collected or enforcedthrough any legal proceeding;

 

----

 

## (b)                                 anattorney is retained to represent Lender in any bankruptcy, reorganization,receivership, or other proceedings affecting creditors’ rights and involving aclaim under this Guaranty, the Note, the Completion Guaranty, the EnvironmentalIndemnity Agreement or any Loan Document;

##  

## (c)                                  anattorney is retained to protect or enforce the security interest created by anyone or more of the Loan Documents; or

##  

## (d)                                 anattorney is retained to represent Lender in any other proceedings whatsoever inconnection with a default by Guarantor under this Guaranty, or a default byBorrower or any other Loan Party in connection with the Loan, any of the otherLoan Documents, the Completion Guaranty, the Environmental Indemnity Agreementor the Property, or to protect or preserve any property which is collateral forthe Loan,

##  

then Guarantor shall pay toLender upon demand all reasonable attorneys’ fees, costs and expenses,including without limitation, court costs, filing fees, recording costs,expenses of foreclosure, title insurance premiums, minutes of foreclosure andall other costs and expense incurred in connection therewith (all of which arereferred to herein as “Enforcement Costs”), in addition to all other amountsdue hereunder. Any Enforcement Costs, together with interest thereon at theInterest Rate (as defined in the Note), shall be a part of the SecuredObligations, secured by the Property, payable by Guarantor to Lender inaccordance with the provisions of this Guaranty and the Loan Documents.  Any reference to attorney’s fees in thisGuaranty, the Completion Guaranty, the Environmental Indemnity Agreement or inany other Loan Document shall include fees of any separate law firm or in-housecounsel employed by Lender in connection with the Loan.  Notwithstanding anything to the contrarycontained herein, fees of in-house counsel shall be charged at rates of mediumto large sized law firms in the City of Chicago, Illinois for attorneys ofcomparable expertise and experience.

 

# 9.                                       TransferOf Secured Obligations. Notwithstanding any assignment or transfer of the Secured Obligations orany interest therein, all portions of such Secured Obligations, including thoseassigned or transferred, shall be and remain Secured Obligations for thepurposes of this Guaranty, and each and every immediate and successive assigneeor transferee of such Secured Obligations or interest shall, to the extent ofthe Secured Obligations or interests assigned or transferred, be entitled tothe benefits of this Guaranty to the same extent as if such assignee ortransferee were Lender; providedhowever, that unless theassignor or transferor shall otherwise consent in writing, the assignor ortransferor shall have an unimpaired right, prior to and superior to that of itsassignee or transferee, to enforce this Guaranty for its benefit as to suchportions of the Secured Obligations or interests therein not assigned ortransferred.

#  

# 10.                                 Subordination.  Any indebtedness or other obligation ofBorrower, now or hereafter held by or owing to Guarantor, is herebysubordinated to the payment and performance in full of the SecuredObligations.  Guarantor hereby covenants andagrees that it will not accept payment of principal, interest or any other amountof any indebtedness or other obligation of Borrower to Guarantor.  Such indebtedness or obligationof Borrower to Guarantor shall, at the option of Lender, be collected, enforcedand received by Guarantor as trustee for Lender, and shall be paid over toLender on account of the Secured Obligations, but without impairing oraffecting in any manner the liability of Guarantor under the other provisionsof this Guaranty.

 

----

 

Nothing in this Section orelsewhere in this Guaranty shall be construed as Lender’s authorization of orconsent to the creation or existence of any such indebtedness of Borrower toGuarantor.

#  

# 11.                                 GoverningLaw; Interpretation.

#  

## (a)                                  ThisGuaranty has been negotiated, executed and delivered in Fairfax County,Virginia and shall be governed by and construed in accordance with the internallaws of the Commonwealth of Virginia, without reference to the conflicts of lawprinciples of that state.  In anycontroversy, dispute or question arising hereunder, under the CompletionGuaranty, the Environmental Indemnity Agreement or under the other LoanDocuments, Guarantor consents to the exercise of jurisdiction over its personand property by any court of competent jurisdiction situated in theCommonwealth of Virginia (whether it be a court of such State, or a court ofthe United States of America situated in such State), and in connectiontherewith, agrees to submit to and be bound by, the jurisdiction of such courtupon Lender’s mailing of process by registered or certified mail, returnreceipt requested, postage repaid, to Guarantor at its address for receipt ofnotices under this Guaranty.

##  

## (b)                                 Theheadings of sections and paragraphs in this Guaranty are for convenience onlyand shall not be construed in any way to limit or define the content, scope, orintent of the provisions hereof.  As usedin this Guaranty, the singular shall include the plural, and masculine,feminine, and neuter pronouns shall be fully interchangeable, where the contextso requires.  If any provision of thisGuaranty or any paragraph, sentence, clause, phrase, or word, or theapplication thereof, in any circumstances, is adjudicated by a court ofcompetent jurisdiction to be invalid, the validity of the remainder of thisGuaranty shall be construed as if such invalid part were never included herein.

##  

## (c)                                  Timeis of the essence of this Guaranty.

##  

## (d)                                 Allpayments to be made hereunder shall be made in currency and coin of the UnitedStates of America which is legal tender for public and private debts at thetime of payment.

##  

## (e)                                  Whereverpossible each provision of this Guaranty shall be interpreted in such manner asto be effective and valid under applicable law, but if any provision of thisGuaranty shall be prohibited by or invalid under such law, such provision shallbe ineffective to the extent of such prohibition or invalidity, withoutinvalidating the remainder of such provision or the remaining provisions ofthis Guaranty.

##  

## (f)                                    Itis agreed that Guarantor’s liability is independent of any other guaranties atany time in effect with respect to all or any part of Borrower’s indebtednessto Lender, including, but not limited to, the Completion Guaranty, and thatGuarantor’s liability hereunder may be enforced regardless of the existence ofany such other guaranties.

##  

# 12.                                 Singularand Plural; Joint and Several Liability. If there is more than one Borrowerentity, all references to Borrower herein shall be Borrower or any one or moreof them.  All obligations and liabilitiesof Guarantor hereunder are in addition to, not in lieu of and are independentof:  (a) all obligations of Borrowerunder any other Loan Document, including the

 

----

 

Note and the Loan Agreement;and (b) any obligation of Guarantor under the Completion Guaranty, theEnvironmental Indemnity Agreement or any other Loan Document to which Guarantoris a party.  All obligations of Guarantorhereunder shall be joint and several.

#  

# 13.                                 EntireAgreement.  This Guaranty, the Note,the Completion Guaranty, the Environmental Indemnity Agreement and the otherLoan Documents constitute the entire agreement between the parties with respectto the subject matter hereof and supersede all prior such agreements andunderstandings, both written and oral. This Guaranty may not be modified or amended except by a writteninstrument signed by Lender and Guarantor. If this Guaranty is executed in several counterparts, each of thosecounterparts shall be deemed an original, and all of them together shallconstitute one and the same instrument.

#  

# 14.                                 Paymentand Performance of Secured Obligations. Lender agrees that the obligationsof Guarantor under this Guaranty shall terminate, subject to the provisions ofSection 4 hereof, when Lender shall have received indefeasible payment in fullof all the Secured Obligations and all other sums due and owing under thisGuaranty and all the Secured Obligations shall have been fully performed.

#  

# 15.                                 Successorsand Assigns; Miscellaneous.  ThisGuaranty shall inure to the benefit of and may be enforced by Lender and anysubsequent holder of the Note, the Loan Agreement, the Completion Guaranty, theEnvironmental Indemnity Agreement or the other Loan Documents, and all of thecovenants, agreements and obligations of Guarantor hereunder shall extend toand be binding upon and enforceable against Guarantor and the heirs,administrators, legal representatives, successors and assigns ofGuarantor.  This Guaranty and theobligations hereunder shall not be discharged, affected, or impaired, in wholeor in part, upon the bankruptcy, insolvency or death of Guarantor.

#  

# 16.                                 FurtherAssurances; Representation by Counsel.

#  

## (a)                                  Guarantorfurther covenants and agrees that Guarantor shall at any time and from time totime, upon the reasonable request of Lender, take, or cause to be taken, anyaction and execute and deliver any further documents which, in the reasonableopinion of Lender, may be necessary, required or desirable in order to carryout the intent and purposes of this Guaranty.

##  

## (b)                                 Guarantorhereby represents and warrants that it has consulted and conferred withcompetent legal counsel of its choice before executing this Guaranty, theCompletion Guaranty, the Environmental Indemnity Agreement and all other LoanDocuments.  Guarantor further representsand warrants that it has read and understood the terms of this Guaranty andintends to be bound hereby.  In the eventof an ambiguity or conflict in the terms hereof, the rule of constructionrequiring resolution against the drafter of the document shall not be applied.

##  

# 17.                                 Notices.  Any and all notices given in connection withthis Guaranty shall be deemed adequately given only if in writing and addressedto the party for whom such notices are intended at the address set forthbelow.  All notices shall be delivered inaccordance with the

 

----

 

notice provisions of the LoanAgreement.  Any and all notices referredto in this Guaranty, or which either party desires to give to the other, shallbe addressed as follows:

#  

| To  Guarantor:  | Comstock  Homebuilding Companies, Inc.          |
|-----------------|-------------------------------------------------|
|            | 11465 Sunset  Hills Road, Suite 510             |
|            | Reston, Virginia  20190                         |
|            | Attention: Christopher Clemente                 |
|            | Telecopy  Number: (703) 760-1520                |
|            |                                            |
| with a copy to: | Bankert & Associates, P.C.                  |
|            | 3025 Hamaker Court                              |
|            | Suite 501                                       |
|            | Fairfax, Virginia 22031                         |
|            | Attention: Joseph E. Bankert, Esq.              |
|            | Telecopy Number: (703) 876-4628                 |
|            |                                            |
| To Lender:      | Corus Bank, N.A.                                |
|            | 3959 N. Lincoln Avenue                          |
|            | Chicago, IL 60613                               |
|            | Attn: David Krischke, Assistant Vice  President |
|            | Telecopy Number: (773) 832-3553                 |
|            |                                            |
| with a copy to: | Corus Bank, N.A.                                |
|            | 3959 N. Lincoln Avenue                          |
|            | Chicago, IL 60613                               |
|            | Attn: Joel Solomon, General Counsel             |
|            | Telecopy Number: (773) 832-3536                 |
|            |                                            |
| with a copy to: | Sidley Austin Brown & Wood LLP              |
|            | 1501 K Street, N.W.                             |
|            | Washington, D.C. 20005                          |
|            | Attn: Andrea J. Cummings, Esq.                  |
|            | Telecopy Number: (202) 736-8711                 |

 

Any party hereto may, by notice given hereunder, designate any furtheror different addresses to which subsequent notices, certificates or othercommunications shall be sent.

 

# 18.                                 AdditionalRepresentations and Warranties.  Inaddition to and independent of any other obligation or liability under thisGuaranty, Guarantor hereby represents and warrants to Lender as follows:

#  

## (a)                                  Executionand Binding Effect.  This Guaranty,the Completion Guaranty, the Environmental Indemnity Agreement and each otherLoan Document to which Guarantor is a party and which is executed and deliveredor required to be executed and delivered on or before the date of which thisrepresentation and warranty is made, or deemed made, has been duly and

 

----

 

validly executed and deliveredby Guarantor.  This Guaranty, theCompletion Guaranty, the Environmental Indemnity Agreement and each such otherLoan Document constitutes, and the Completion Guaranty, the EnvironmentalIndemnity Agreement and each other Loan Document when executed and delivered byGuarantor will constitute, the legal, valid and binding obligations ofGuarantor, jointly and severally, enforceable against Guarantor in accordancewith its terms, subject to bankruptcy, insolvency and other laws affectingcreditor’s rights generally.  ThisGuaranty shall continue to be effective with respect to any guaranteedobligations arising or created after any attempted revocation by Guarantor andafter Guarantor’s death, in which event this Guaranty shall be binding uponGuarantor’s estate and Guarantor’s legal representatives and heirs.

##  

## (b)                                 Violationof Agreements.  To the best ofGuarantor’s knowledge, neither the execution and delivery of this Guaranty, norconsummation of the transactions herein or therein contemplated, norperformance of or compliance with the terms and conditions hereof or thereof,does or will at any time during the term hereof:

##  

### (i)                                     violatesor conflicts with any Laws, or

###  

### (ii)                                  violates,conflicts with or will result in a breach of any term or condition of, orconstitute a default under, or result in (or give rise to any right, contingentor otherwise, of any Person to cause) any termination, cancellation, prepaymentor acceleration of performance of, or result in the creation or imposition of(or give rise to any obligation, contingent or otherwise, to create or impose)any lien upon any property of Guarantor (except for any lien in favor of Lendersecuring the Secured Obligations) pursuant to, or otherwise result in (or giverise to any right, contingent or otherwise, of any Person to cause) any changein any right, power, privilege, duty or obligation of Guarantor under or inconnection with:

###  

#### (A)                              anyagreement or instrument creating, evidencing or securing any indebtedness orguaranty equivalent to which Guarantor is a party or by which it or any oftheir properties (now owned or hereafter acquired) may be subject or bound, or

####  

#### (B)                                anyother agreement or instrument or arrangement to which Guarantor is a party orby which it or any of its properties (now owned or hereafter acquired) may besubject or bound.

####  

## (c)                                  GovernmentApprovals and Filings.  To the bestof Guarantor’s knowledge, no approval, order, consent, authorization,certificate, license, permit or validation of, or exemption or other action by,or filing, recording or registration with, or notice to, any governmentalauthority (collectively, “Governmental Action”) is or will be necessaryin connection with the execution and delivery of this Guaranty, the CompletionGuaranty, the

 

----

 

Environmental IndemnityAgreement or any other Loan Document to which Guarantor is a party, theconsummation of the transactions herein or therein contemplated, theperformance of or compliance with the terms and conditions hereof or thereof,or to ensure the legality, validity, binding effect, enforceability oradmissibility in evidence hereof or thereof.

##  

## (d)                                 Violationof Laws.  To the best of Guarantor’sknowledge, Guarantor is not in violation of any applicable statute, regulationor ordinance of the United States of America, of any state, city, town, municipality,county or of any other jurisdiction, or of any agency thereof (including, butnot limited to any Hazardous Materials Laws (as defined in the EnvironmentalIndemnity Agreement)).

##  

## (e)                                  Solvency.  Guarantor: (i) is now and at all times duringthe term hereof shall be generally paying its debts as they mature; (ii) nowowns, and at all times during the term hereof shall own, property which, at afair valuation, is greater than the sum of its debts, and (iii) now has and atall times during the term hereof shall have capital sufficient to carry on itsbusiness and personal affairs and any such affairs in which it is about toengage.

##  

## (f)                                    Proceeding.  There is no condition, event or circumstanceexisting, or any litigation, arbitration, governmental or administrativeproceedings, actions, examinations, claims or demands pending nor, to Guarantor’sknowledge, threatened affecting Guarantor which are likely to result in aMaterial Adverse Effect, and Guarantor knows of no basis therefor.

##  

## (g)                                 TaxReturns.

##  

### (i)                                     Alltax and informational returns required to be filed by or on behalf of Guarantorhave been properly prepared, executed and filed.  All taxes, assessments, fees and othercharges upon Guarantor, or upon any of its properties or incomes, which are dueand payable have been paid other than those not yet delinquent and payablewithout premium or penalty, and except for those being diligently contested ingood faith by appropriate proceedings, and in each case adequate funds andprovisions for such taxes have been made by Guarantor.

###  

### (ii)                                  Guarantordoes not know of any proposed additional assessment or basis for any materialassessment for any additional taxes (whether or not reserved against).

###  

### (iii)                               Guarantorhas paid all charges shown to be due and payable on said tax returns or on anyassessments made against it or any of its property, and all other chargesimposed on it or any of its properties by any governmental authority.

###  

## (h)                                 DefaultUnder Other Agreements.  Guarantorhas not received any written notice of a default with respect to any indenture,loan agreement, mortgage, deed or other similar agreement relating to theborrowing of monies to which it is a party, and by which it is bound.

 

----

 

## (i)                                     Insurance.  Guarantor maintains with financially soundand reputable insurers, not related to or affiliated with Guarantor, insurancewith respect to its properties and assets and against at least suchliabilities, casualties and contingencies and in at least such types andamounts as is customary in the case of individuals having similar propertiesand assets similarly situated.

##  

## (j)                                     AdverseConditions.  No condition,circumstance, event, agreement, document, instrument, restriction, litigationor proceeding (or to Guarantor’s knowledge, threatened litigation or proceedingor basis therefor) relating to Guarantor exists (i) which are likely to resultin a Material Adverse Effect; (ii) which would constitute an Event of Defaultunder this Guaranty, the Completion Guaranty, the Environmental IndemnityAgreement or any of the Loan Documents; or (iii) which would constitute such anEvent of Default with the giving of notice or lapse of time or both.

##  

# 19.                                 AdditionalCovenants Of Guarantor.

 

## (a)                                  Guarantorshall deliver or cause to be delivered to Lender those reports and financialstatements set forth below.  All suchfinancial statements shall be internally prepared and shall fairly andaccurately present in all material respects the assets, liabilities andfinancial conditions of Guarantor and such other Persons, if any, describedtherein as of and for the periods ending of such dates set forth therein.

##  

### (i)                                     Adisclosure of any judgments and pending or threatened material litigationagainst Guarantor, Borrower or the Property promptly upon Guarantor’s awarenessof such litigation;

###  

### (ii)                                  Onor before April 30 of each year during the term of the Loan, federal and stateincome tax returns of Guarantor certified to be true, complete and correct byan authorized representative of Guarantor, as appropriate; provided, that if anextension is filed by Guarantor with the Internal Revenue Service or applicablestate revenue department, then if Lender is provided a true, correct andcomplete copy of such extension, Guarantor may deliver such income tax returnsto Lender simultaneously upon the filing thereof;

###  

### (iii)                               Withinninety (90) days of the end of each fiscal year, completed, signed and datedannual financial statements, including income statements and balance sheets, ofGuarantor, with such verifications, supporting documentation or additionalstatements as Lender may reasonably request, certified by an officer ofGuarantor as being true, correct and complete; and

###  

### (iv)                              Guarantorshall provide, from time to time during the term hereof, such other informationand reports, financial and otherwise, concerning Borrower, Guarantor and theProperty as Lender may reasonably request.

 

----

 

## (b)                                 Upondemand by Lender, at any time and from time to time, whether or not an Event ofDefault has occurred under the Note, the Loan Agreement or any other LoanDocument, Guarantor shall execute a reaffirmation of and shall remake thisGuaranty as of such date.  Failure ofGuarantor to reaffirm and remake this Guaranty at any time, on demand, shall bean Event of Default hereunder and under the Note, the Loan Agreement and theother Loan Documents, without notice or opportunity to cure.

 

# 20.                                 Jurisdictionand Venue.

 

## (a)                                  TOTHE MAXIMUM EXTENT PERMITTED BY LAW, GUARANTOR AND LENDER EACH HEREBY AGREESTHAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS GUARANTY BETRIED AND DETERMINED IN A FEDERAL COURT OR STATE COURT LOCATED IN THECOMMONWEALTH OF VIRGINIA.

##  

## (b)                                 TOTHE MAXIMUM EXTENT PERMITTED BY LAW, GUARANTOR AND LENDER EACH HEREBY EXPRESSLYWAIVES ANY RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENSOR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCEWITH THIS SECTION; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINSTANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT LENDER’S OPTION, IN THECOURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BEFOUND.  GUARANTOR HEREBY EXPRESSLY ANDIRREVOCABLY SUBMITS TO THE JURISDICTION OF THE FEDERAL AND STATE COURTS OF THECOMMONWEALTH OF VIRGINIA FOR THE PURPOSE OF SUCH LITIGATION AS SET FORTH ABOVEAND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY INCONNECTION WITH SUCH LITIGATION. GUARANTOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BYCERTIFIED OR REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE AT THEADDRESS OF GUARANTOR STATED ABOVE OR ANY OTHER METHOD PERMITTED BY LAW.  TO THE EXTENT THAT GUARANTOR HAS OR HEREAFTERMAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGALPROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITSPROPERTY, GUARANTOR HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITSOBLIGATIONS UNDER THIS GUARANTY.

##  

# 21.                                 Waiverof Jury Trial.  TO THE MAXIMUM EXTENTPERMITTED BY LAW, GUARANTOR AND LENDER EACH HEREBY KNOWINGLY VOLUNTARILY ANDINTENTIONALLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY ACTION,CAUSE OF ACTION, CLAIM, DEMAND OR PROCEEDING ARISING OUT OF, UNDER OR INCONNECTION WITH THIS GUARANTY, THE COMPLETION GUARANTY, THE ENVIRONMENTALINDEMNITY AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR IN ANY WAY CONNECTED WITH,RELATED TO OR INCIDENTAL TO THE DEALINGS OF GUARANTOR AND LENDER WITH RESPECTTO THIS GUARANTY, THE COMPLETION GUARANTY, THE ENVIRONMENTAL

 

----

 

INDEMNITY AGREEMENT OR ANYOTHER LOAN DOCUMENT, OR THE TRANSACTIONS RELATED HERETO, OR ANY COURSE OFCONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONSOF EITHER PARTY IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, ANDWHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE.  TO THE MAXIMUM EXTENT PERMITTED BY LAW,GUARANTOR AND LENDER HEREBY AGREE THAT ANY SUCH ACTION, CAUSE OF ACTION, CLAIM,DEMAND OR PROCEEDING SHALL BE DECIDED BY A COURT TRIAL WITHOUT A JURY AND THATGUARANTOR OR LENDER MAY FILE AN EXECUTED COPY OF THIS GUARANTY WITH ANY COURTOR OTHER TRIBUNAL AS WRITTEN EVIDENCE OF THE CONSENT OF GUARANTOR AND LENDER TOTHE WAIVER OF ITS RIGHT TO TRIAL BY JURY. NO PARTY SHALL SEEK TO CONSOLIDATE, BY COUNTER CLAIM OR OTHERWISE, ANYACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH AJURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED.

 

 

**[THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK]**

 

----

 

IN WITNESSWHEREOF, Guarantor has executed this Guaranty as of the date first abovewritten.

 

**GUARANTOR:**

 
| COMSTOCK  HOMEBUILDING COMPANIES, INC., |
|-----------------------------------------|
| a Delaware  corporation                 |
|                                    |
| By:                                     | /s/  Christopher Clemente |   |
| Name:  Christopher Clemente             |
| Title: Chief  Executive Officer         |

 

----