**Exhibit 10.4**

** **

**EXECUTION COPY**

 

**GUARANTY AGREEMENT**

 

**THIS GUARANTY AGREEMENT** (this “Guaranty”) is made as of the 28 day of September, 2005, by **COMSTOCK HOMEBUILDING COMPANIES, INC.**, a Delawarecorporation (the “ Guarantor”) in favor of **BANK OF AMERICA, N.A.**,a national banking association (the “Lender”), and its successors and assigns.

 

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

 

**WHEREAS,**Lender has made an acquisition and development loan to Comstock Bellemeade,L.C. (“Borrower”) in the maximum principal amount of $46,725,000.00 (or so muchthereof as shall be advanced) and/or may issue letters of credit for theBorrower’s account in connection therewith, including, without limitation, a$1,000,000.00 letter of credit (such extensions of credit being hereinsometimes called individually and/or collectively the “Loan”);

 

**WHEREAS,** as acondition precedent to making the Loan, the Lender has required, among otherthings, the execution and delivery of this Guaranty by Guarantor;

 

**WHEREAS,** theLoan shall be made in accordance with the terms and conditions of a LoanAgreement of even date herewith, between the Lender and Borrower (as amended,modified or supplemented from time to time, the “Loan Agreement”);

 

**WHEREAS,** theLoan shall be evidenced by certain notes, applications or agreements for theissuance of a letter or letters of credit, including, without limitation, thatcertain Deed of Trust Note of even date herewith, from Borrower payable to theorder of the Lender in the maximum principal amount of $46,725,000.00, or somuch thereof as shall be advanced, that certain Letter of Credit Note in theprincipal amount of $1,000,000.00 of even date herewith, from Borrower payableto the order of the Lender, and any other instrument or agreement executed fromtime to time by the Borrower in favor of the Lender, as any of the same mayfrom time to time be amended, modified, replaced or supplemented (collectively,the “Note”);

 

**WHEREAS,** theGuaranty is or shall be secured by one or more Credit Line Deed(s) of Trust andSecurity Agreements now or hereafter executed and delivered by the Borrower tocertain trustees for the benefit of the Lender, including, without limitation,that certain Credit Line Deed of Trust and Security Agreement of even dateherewith, from Borrower as grantor, to certain trustees for the benefit of theLender (as amended, modified or supplemented from time to time, collectively,the “Deeds of Trust”), covering certain real property as more particularlydescribed therein, as well as all improvements located thereon;

 

**WHEREAS,** it isintended that this Guaranty extend to the Loan and all other amounts owingunder any of the “Loan Documents” (hereinafter defined), without any need forany notice to the Guarantor of the making of the Loan or advances thereunder 

 

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and without any need for any supplements oramendments to this Guaranty or any other documentation to be executed by theGuarantor; and

 

**WHEREAS,**unless otherwise defined herein, all capitalized terms used herein shall havethe meanings assigned to them in the Loan Agreement.

 

**W I T N E S S E T H:**

 

For good and valuable consideration, the receipt andadequacy of which are hereby acknowledged, and as a material inducement to theLender to extend credit to the Borrower from time to time, the Guarantor herebyguarantees to the Lender the prompt and full payment and performance of theIndebtedness and the other obligations in connection with the Loan as definedand described below in this Guaranty (hereinafter sometimes collectively calledthe “Obligations”), upon the following terms and conditions:

 

**1.             Guaranty ofPayment.**  The Guarantor hereby unconditionally andirrevocably guarantees to the Lender the punctual payment when due, whether byscheduled payment date, upon maturity, lapse of time, by acceleration ofmaturity, or otherwise, and at all times thereafter, of all principal, interest(including interest accruing after the commencement of any bankruptcy orinsolvency proceeding by or against the Borrower, whether or not allowed insuch proceeding), fees, late charges, costs, expenses, indemnificationindebtedness (including, without limitation, indemnification for environmentalmatters), and other sums of money now or hereafter due and owing pursuant to (a) theterms of the Note, the Loan Agreement, the Deed(s) of Trust, and any and allother documents executed by the Borrower in connection with the Loan (the “LoanDocuments”), now or hereafter existing, and specifically including any and alladvances made by the Lender under the Loan Documents from sources other thanthe Loan, and interest on such advances, and (b) all renewals, extensions,increases, refinancings, modifications, supplements or amendments to suchindebtedness, or any of the Loan Documents, or any part thereof (suchindebtedness being hereinafter collectively called the “Indebtedness”).  This Guaranty covers the Indebtedness,whether presently outstanding or arising subsequent to the date hereof, whetheror not presently contemplated by the Guarantor, the Borrower or the Lender, andwhether or not the same shall be incurred after satisfaction, payment orreduction of any previous Indebtedness, including all amounts advanced and/orreadvanced by the Lender in stages or installments.  The guaranty of the Guarantor as set forth inthis Section is a continuing guaranty of payment and not a guaranty ofcollection.

 

**2.             Guaranty ofPerformance.**  The Guarantor additionally herebyunconditionally and irrevocably guarantees to the Lender the timely performanceof all other obligations of the Borrower under all of the Loan Documents,including without limitation, completion of the Improvements and compliancewith all covenants regarding environmental matters.

 

**3.             PrimaryLiability of the Guarantor.**  This Guaranty is an absolute,irrevocable and unconditional guaranty of payment and performance.  The Guarantor shall be liable for the paymentand performance of the Obligations, as set forth in this

 

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Guaranty, as a primary obligor.  This Guaranty shall be effective as a waiverof, and the Guarantor hereby expressly waives any and all rights to which theGuarantor may otherwise have been entitled under any suretyship laws in effectfrom time to time, including any right or privilege, whether existing understatute, at law or in equity, to require the Lender to take prior recourse orproceedings against any collateral, security or Person (hereinafter defined)whatsoever.  Upon the occurrence of:  (i) any Default under the Loan, (ii) anyreasonable determination by the Lender that a material adverse change hasoccurred in the financial condition of the Guarantor, (iii) thedissolution or insolvency of Guarantor, subject to the provisions of Section 4below, or (iv) any transfer of assets of Guarantor without receiving fairvalue in exchange therefor, the Indebtedness shall be deemed immediately dueand payable at the election of the Lender, and the Guarantor shall, on demandand without presentment, protest, any notice whatsoever, pay the amount duethereon to the Lender or perform or observe the agreement, covenant, term orcondition, as the case may be, and it shall not be necessary for the Lender, inorder to enforce such payment or performance by Guarantor, first to institutesuit or pursue or exhaust any rights or remedies against the Borrower or othersliable on the Obligations or for such performance, or to institute suit orpursue or exhaust any rights or remedies against the Borrower or Guarantor orother sureties of the Obligations as contemplated by applicable law or toenforce any rights against any security that shall ever have been given tosecure the Obligations, or to join the Borrower or any others liable for thepayment or performance of the Obligations or any part thereof in any action toenforce this Guaranty, or to resort to any other means of obtaining payment orperformance of the Obligations.  The term“Person” as used herein shall mean all of the Borrower and the Guarantor.

 

**4.             Representations,Warranties, and Covenants of the Guarantor.** Guarantor hereby represents, warrants, and covenants that: (a) Guarantorwill derive substantial benefit, directly or indirectly, from the making of theLoan to the Borrower and from the making of this Guaranty by the Guarantor; (b) thisGuaranty is duly authorized and valid, and is binding upon and enforceableagainst the Guarantor; (c) the Guarantor is not, and the execution,delivery and performance by the Guarantor of this Guaranty will not cause theGuarantor to be, in violation of or in default with respect to any law or indefault (or at risk of acceleration of indebtedness) under any agreement orrestriction by which the Guarantor is bound or affected; (d) Guarantor isa duly organized, validly existing limited liability company in good standingunder the laws of the Commonwealth of Virginia, is lawfully doing business inthe jurisdiction where it operates, and has full power and authority to enterinto and perform this Guaranty; (e) except as may have been disclosed tothe Lender in writing, there is not now pending against or affecting theGuarantor, nor, to the knowledge of the Guarantor, is there threatened, anyaction, investigation, suit or proceeding by or before any administrativeagency which if adversely determined would materially impair or affect theGuarantor’s financial condition (f) all financial statements andinformation heretofore furnished to the Lender by the Guarantor do, and allfinancial statements and information hereafter furnished to the Lender by the Guarantorwill, fully and accurately present the financial condition of the Guarantor asof their dates and the results of the Guarantor’s operations for the periodstherein specified, and, since the date of the most recent financial statementsof the Guarantor heretofore furnished to the Lender, no material adverse changehas occurred in the financial condition of the Guarantor, nor, except as

 

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heretofore disclosed in writing to theLender, has the Guarantor incurred any material liability, direct or indirect,fixed or contingent; (g) after giving effect to this Guaranty, theGuarantor is solvent, is not engaged or about to engage in business or atransaction for which the property of the Guarantor is an unreasonably smallcapital, and does not intend to incur or believes that it will incur debts thatwill be beyond its ability to pay as such debts mature; (h) the Lender hasno duty at any time to investigate or inform the Guarantor of the financial orbusiness condition or affairs of the Borrower or any change therein, and theGuarantor will keep fully appraised of the Borrower’s financial and businesscondition; (i) the Guarantor acknowledges and agrees that the Guarantormay be required to pay and perform the Obligations in full without assistanceor support from the Borrower or any other Person; and (j) the Guarantor hasread and fully understand the provisions contained in the Loan Agreement, theDeed(s) of Trust, and the other Loan Documents, each of which may be modified,extended, supplemented or extended from time to time without notice to orconsent from the Guarantor and without affecting the obligations of theGuarantor under this Guaranty.

 

In addition, during the term of the Loan, Lendermust be satisfied that Guarantor’s financial condition meets the followingrequirements:

 

(i) Adjusted Tangible Net Worth (ATNW) shall beat least $65,000,000 for fiscal year 2005, increasing by 50% of consolidatedafter tax net earnings for each year thereafter.   Adjusted Tangible Net Worth is defined asGAAP net worth plus subordinated debt approved by Agent less any goodwill,organizational costs, leasehold improvements and Affiliate and/or stockholderreceivables and investments in joint ventures; and

 

(ii) Debt to Tangible Net Worth (“LeverageRatio”) shall be 3.50:1.  Leverage Ratiois the total Adjusted Liabilities to Adjusted Tangible Net Worth (ATNW).  Adjusted Liabilities is defined as GAAP totalliabilities less Variable Interest Entities, less subordinated debt due torelated parties and investments in affiliates and joint ventures that are notco-borrowers (“Related Venturer Subordinated Debt”), less subordinated debt (“DirectSubordinated Debt”), plus any other debt guaranteed by Borrower.  For purposes hereof, a “Variable InterestEntity” is either: (A) an entity that is consolidated for financialstatement purposes when (1) the equity investment at risk is notsufficient to permit the entity from financing its activities withoutadditional subordinated financial support from other parties or (2) equityholders either (a) lack direct or indirect ability to make decisions aboutthe entity (b) are not obligated to absorb expected losses of the entityor (c) do not have the right to receive expected residual returns of theentity if they occur or (B) a “variable interest entity” as defined inGuarantor’s SEC-filed financial statements and as the definition of such termis amended from time to time based upon guidance from the Financial AccountingStandards Board.   For purposes ofclarity, the primary beneficiary of a Variable Interest Entity is the partythat absorbs a majority of the Variable Interest Entity’s expected losses,receives a majority of the entity’s expected residual returns, or both, as aresult of ownership, contractual or other financial interests in the entity.

 

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The Guarantor’s representations, warranties andcovenants are a material inducement to the Lender to enter into the other LoanDocuments and shall survive the execution hereof and any bankruptcy,foreclosure, transfer of security or other event affecting the Borrower, theGuarantor, any other party, or any security for all or any part of theObligations.

 

**5.             FinancialInformation.**  The Guarantor shall furnish or cause to befurnished to the Lender upon request any financial statements for Guarantor andany entity related to the Guarantor containing such information and in suchform as Lender may from time to time reasonably determine, provided theobligations of the Guarantor hereunder have not already terminated.

 

Without limiting the generality of the foregoing,the Guarantor shall furnish to the Lender financial statements as follows:

 

(a)           assoon as available, but in no event later than ninety (90) days after the closeof its fiscal year (but in no event earlier than the date such financialstatements must be submitted to governmental authorities), financial statements(all of which financial statements may include, as requested by the Lender, abalance sheet, income statement, sources and uses of funds for such fiscaland/or calendar year, projected sources and uses of funds for the coming year,detailed listing and description of all contingent liabilities, tax returns,written verification of liquidity and such other supporting schedules anddocumentation which the Lender may request). All such financial statements shall be audited by a certified publicaccountant acceptable to the Lender in all respects; and

 

(b)           ifrequested by the Lender, within forty-five (45) days after the close of itsquarterly business period (but in no event earlier than the date such financialstatements must be submitted to governmental authorities), the financialstatements to be filed with applicable governmental authorities.

 

**6.             CertainAgreements and Waivers by the Guarantor.**

 

(a)           TheGuarantor hereby waives the benefits of Va. Code Ann. § 49-25 and § 49-26as amended and agrees that neither the Lender’s rights or remedies nor theObligations shall be released, diminished, impaired, reduced or affected by anyone or more of the following events, actions, facts, or circumstances, and theliability of the Guarantor under this Guaranty shall be absolute andunconditional irrespective of:

 

(i)            anylimitation of liability or recourse in any other Loan Document or arising underany law;

 

(ii)           any claim or defense that this Guaranty was made withoutconsideration or is not supported by adequate consideration;

 

(iii)          the taking or accepting of any other security or guarantyfor, or right of recourse with respect to, any or all of the Obligations;

 

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(iv)          any homestead exemption or other exemption under applicablelaw;

 

(v)           any release, surrender, abandonment, exchange, alteration,sale or other disposition, subordination, deterioration, waste, failure toprotect or preserve, impairment, or loss of, or any failure to create orperfect any lien or security interest with respect to, or any other dealingswith, any collateral or security at any time existing or purported, believed orexpected to exist in connection with any or all of the Obligations, includingany impairment of the Guarantor’ s recourse against any Person or collateral;

 

(vi)          whether express or by any operation of law, any full orpartial release of the liability of the Guarantor, the Borrower or any otherparty hereunder or under any of the other Loan Documents;

 

(vii)         thedeath, insolvency, bankruptcy, disability, dissolution, liquidation,termination, receivership, reorganization, merger, consolidation, change ofform, structure or ownership, sale of all assets, or lack of corporate,partnership or other power of the Borrower, the Guarantor or any other party atany time liable for the payment or performance of any or all of theObligations;

 

(viii)        eitherwith or without notice to or consent of the Guarantor, any renewal, extension,modification or rearrangement of the terms of any or all of the Obligationsand/or any of the Loan Documents, including, without limitation, materialalterations of the terms of payment (including changes in maturity date(s),interest rate(s) and amortization) or performance or any other terms thereof,or any waiver, termination, or release of, or consent to departure from, any ofthe Loan Documents or any other guaranty of any or all of the Obligations, orany adjustment, indulgence, forbearance, or compromise that may be granted fromtime to time by the Lender to the Borrower, the Guarantor, and/or any otherPerson at any time liable for the payment or performance of any or all of theObligations;

 

(ix)           anyneglect, lack of diligence, delay, omission, failure, or refusal of the Lenderto take or prosecute (or in taking or prosecuting) any action for thecollection or enforcement of any of the Obligations, or to foreclose or take orprosecute any action to foreclose (or in foreclosing or taking or prosecutingany action to foreclose) upon any security therefor, or to exercise (or inexercising) any other right or power with respect to any security therefor, or to take orprosecute (or in taking or prosecuting) any action in connection with any LoanDocument, or any failure to sell or otherwise dispose of in a commerciallyreasonable manner any collateral securing any or all of the Obligations;

 

(x)            any failure of the Lender to notify the Guarantor of anycreation, renewal, extension, rearrangement, modification, supplement,subordination, or assignment of the Obligations or any part thereof, or of anyLoan Document, or of any release of or change in any security, or of any other action taken or refrained from beingtaken by the Lender against the Borrower or any security or other recourse, orof any new agreement between the Lender and the Borrower,

 

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it being understood that the Lender shall not berequired to give the Guarantor any notice of any kind under any circumstanceswith respect to or in connection with the Obligations, any and all rights tonotice that the Guarantor may have otherwise had being hereby waived by theGuarantor;

 

(xi)           any refund of any payment by the Borrower or any otherparty liable for the payment or performance of any or all of the Obligations;

 

(xii)          theexistence of any claim, set-off, or other right that the Guarantor may at anytime have against the Borrower, the Lender (other than pursuant to a finaljudgment), or any other Person, whether or not arising in connection with thisGuaranty or any other Loan Document;

 

(xiii)         theunenforceability of all or any part of the Obligations against the Borrower,whether because the Obligations exceed the amount permitted by law or violateany usury law, or because the act of creating the Obligations, or any partthereof, is beyond the scope of powers granted, or because the officers or Persons creating sameacted in excess of their authority, or because of a lack of validity orenforceability of or defect or deficiency in any of the Loan Documents, orbecause the Borrower has any valid defense, claim or offset with respectthereto, or because the Borrower’s obligation ceases to exist by operation oflaw, or because of any other reason or circumstance, it being agreed that theGuarantor shall remain liable hereunder regardless of whether the Borrower orany other Person are found not liable on the Obligations, or any part thereof,for any reason (and regardless of any joinder of the Borrower or any otherparty in any action to obtain payment or performance of any or all of theObligations);

 

(xiv)        any order, ruling or plan of reorganization emanating fromproceedings under Title 11 of the United States Code with respect to theBorrower or any other Person, including any extension, reduction,composition, or other alteration of the Obligations, whether or not consented toby the Lender; or

 

(xv)         anyfailure to notify the Guarantor of, or obtain the Guarantor’s consent to, themaking of the Loan or any advances thereunder.

 

(b)           Inthe event that any payment by the Borrower or any other Person to the Lender isheld to constitute a preference, fraudulent transfer or other voidable paymentunder any bankruptcy, insolvency or similar law, or if for any other reason theLender is required to refund such payment or pay the amount thereof to anyother party, such payment by the Borrower or any other party to the Lendershall not constitute a release of the Guarantor from any liability hereunder,and this Guaranty shall continue to be effective or shall be reinstated(notwithstanding any prior release, surrender or discharge by the Lender ofthis Guaranty or of the Guarantor), as the case may be, with respect to, andthis Guaranty shall apply to, any and all amounts so refunded by the Lender orpaid by the Lender to another Person (which amounts shall constitute part ofthe Obligations), and any interest paid by the Lender and any reasonableattorneys’ fees, costs and expenses paid or incurred by the Lender inconnection with any such event.  It isthe intent of the Guarantor and the Lender that

 

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theobligations and liabilities of the Guarantor hereunder are absolute andunconditional under any and all circumstances and that until the Obligationsare fully and finally paid and performed, and not subject to refund ordisgorgement, the obligations and liabilities of the Guarantor hereunder shallnot be discharged or released, in whole or in part, by any act or occurrencethat might, but for the provisions of this Guaranty, be deemed a legal orequitable discharge or release of any of the Guarantor except as otherwise setforth herein.  The Lender shall beentitled to continue to hold this Guaranty in its possession for a period ofone year from the date the Obligations are paid and performed in full and forso long thereafter as may be necessary to enforce any obligation of theGuarantor hereunder and/or to exercise any right or remedy of the Lenderhereunder.

 

(c)           Ifacceleration of the time for payment of any amount payable by the Borrowerunder the Note or any other Loan Document is stayed or delayed by any law ortribunal, all such amounts shall nonetheless be payable by the Guarantor ondemand by the Lender.

 

**7.             Waiver of Trialby Jury; Consent to Jurisdiction.**  ** WITHOUTINTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO ARBITRATE ANY “DISPUTE”(FOR PURPOSES OF THIS SECTION, AS DEFINED IN THE “DISPUTE RESOLUTION” SECTION)AS SET FORTH IN THIS NOTE,  AGREEMENT, ORGUARANTY, AS APPLICABLE, TO THE EXTENT ANY “DISPUTE” IS NOT SUBMITTED TOARBITRATION OR IS DEEMED BY THE ARBITRATOR OR BY ANY COURT WITH JURISDICTION TOBE NOT ARBITRABLE OR NOT REQUIRED TO BE ARBITRATED, BORROWER AND LENDER WAIVETRIAL BY JURY IN RESPECT OF ANY SUCH “DISPUTE” AND ANY ACTION ON SUCH “DISPUTE.”  THIS WAIVER IS KNOWINGLY, WILLINGLY ANDVOLUNTARILY MADE BY BORROWER AND LENDER, AND BORROWER AND LENDER HEREBYREPRESENT THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANYPERSON OR ENTITY TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFYOR NULLIFY ITS EFFECT.  THIS PROVISION ISA MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO THE LOAN DOCUMENTS.  BORROWER AND LENDER ARE EACH HEREBYAUTHORIZED TO FILE A COPY OF THIS SECTION IN ANY PROCEEDING AS CONCLUSIVEEVIDENCE OF THIS WAIVER OF JURY TRIAL. BORROWER FURTHER REPRESENTS AND WARRANTS THAT IT HAS BEEN REPRESENTED INTHE SIGNING OF THIS NOTE, AGREEMENT, OR GUARANTY, AS APPLICABLE, AND IN THEMAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, OR HAS HAD THE OPPORTUNITYTO BE REPRESENTED BY INDEPENDENT LEGAL COUNSEL SELECTED OF ITS OWN FREE WILL,AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.**

 

The Guarantor irrevocably submits to thenonexclusive jurisdiction of any state or federal court sitting in theJurisdiction of Choice over any suit, action or proceeding arising out of, orrelating to, this Guaranty, and irrevocably agrees that all claims in respectof such action or proceeding may be heard and determined in such

 

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stateor federal court.  The Guarantor irrevocablywaives, to the fullest extent permitted by law, any objection that theGuarantor may now or hereafter have to the laying of venue of any such suit,action or proceeding brought in any such court, and any claims that any suchsuit, action or proceeding is brought in an inconvenient forum.  Final judgment in any such suit, action orproceeding brought in any such court shall be conclusive and binding upon theGuarantor and may be enforced in any court in which the Guarantor are subjectto jurisdiction, by a suit upon such judgment provided that service of processis effected upon the Guarantor as provided in the Loan Documents or asotherwise permitted by applicable law.

 

**8.             Dispute Resolution**.

 

(a)           Arbitration.  Except to the extent expressly provided below,any Dispute shall, upon the request of either party, be determined by bindingarbitration in accordance with the Federal Arbitration Act, Title 9, UnitedStates Code (or if not applicable, the applicable state law), the then-current rules forarbitration of financial services disputes of the American ArbitrationAssociation, or any successor thereof (“AAA”) and the “Special Rules” set forthbelow.  “Dispute” means any controversy,claim or dispute between or among the parties to this Note, Agreement, orGuaranty,  as applicable, including anycontroversy, claim or dispute arising out of or relating to (a) this Note,Agreement, or Guaranty, as applicable, (b) any other Loan Documents, (c) anyrelated agreements or instruments, or (d) the transaction contemplatedherein or therein (including any claim based on or arising from an allegedpersonal injury or business tort). In the event of any inconsistency, theSpecial Rules shall control.  Thefiling of a court action is not intended to constitute a waiver of the right ofBorrower or Lender, including the suing party, thereafter to require submittalof the Dispute to arbitration.  Any partyto this Note, Agreement, or Guaranty, as applicable, may bring an action, includinga summary or expedited proceeding, to compel arbitration of any Dispute in anycourt having jurisdiction over such action. For the purposes of this Dispute Resolution Section only, the terms“party” and “parties” shall include**anyparent corporation, subsidiary or affiliate of Lender involved in theservicing, management or administration of any obligation described in orevidenced by this Note, Agreement, or Guaranty, as applicable, together withthe officers, employees, successors and assigns of each of the foregoing.

 

(b)           SpecialRules.

 

(i)            The arbitration shall be conducted in any U.S. statewhere real or tangible personal property collateral is located, or if there isno such collateral, in the City and County where Lender is located pursuant toits address for notice purposes in this Note, Agreement, or Guaranty, asapplicable.

 

(ii)           The arbitration shall be administered by AAA, who willappoint an arbitrator.  If AAA isunwilling or unable to administer or legally precluded from administering thearbitration, or if AAA is unwilling or unable to enforce or legally precludedfrom enforcing any and all provisions of this Dispute Resolution Section, theany party to this Note, Agreement, or Guaranty, as applicable, may substituteanother arbitration organization that has similar procedures to AAA and thatwill observe and enforce any and all provisions of this Dispute

 

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Resolution Section. All Disputes shall be determined by one arbitrator; however, if theamount in controversy in a Dispute exceeds Five Million Dollars ($5,000,000),upon the request of any party, the Dispute shall be decided by threearbitrators (for purposes of this Note, Agreement, or Guaranty, as applicable,referred to collectively as the “arbitrator”).

 

(iii)          All arbitration hearings will be commenced within ninety(90) days of the demand for arbitration and completed within ninety (90) daysfrom the date of commencement; provided, however, that upon a showing of goodcause, the arbitrator shall be permitted to extend the commencement of suchhearing for up to an additional sixty (60) days.

 

(iv)          The judgment and the award, if any, of the arbitrator shallbe issued within thirty (30) days of the close of the hearing.  The arbitrator shall provide a concisewritten statement setting forth the reasons for the judgment and for the award,if any.  The arbitration award, if any,may be submitted to any court having jurisdiction to be confirmed and enforced,and such confirmation and enforcement shall not be subject to arbitration.

 

(v)           The arbitrator will give effect to statutes of limitationsand any waivers thereof in determining the disposition of any Dispute and maydismiss one or more claims in the arbitration on the basis that such claim orclaims is or are barred.  For purposes ofthe application of the statute of limitations, the service on AAA underapplicable AAA rules of a notice of Dispute is the equivalent of thefiling of a lawsuit.

 

(vi)          Any dispute concerning this arbitration provision,including any such dispute as to the validity or enforceability of thisprovision, or whether a Dispute is arbitrable, shall be determined by thearbitrator; provided, however, that the arbitrator shall not be permitted tovary the express provisions of these Special Rules or the Reservations ofRights in subsection (c) below.

 

(vii)         The arbitrator shall have the power to award legal fees andcosts pursuant to the terms of this Note, Agreement, or Guaranty, asapplicable.

 

(viii)   The arbitration will take place on anindividual basis without reference to, resort to, or consideration of any formof class or class action.

 

(c)           Reservationsof Rights.  Nothing in this Note,Agreement, or Guaranty, as applicable, shall be deemed to (i) limit theapplicability of any otherwise applicable statutes of limitation and anywaivers contained in this Note, Agreement, or Guaranty, as applicable, or (ii) applyto or limit the right of Lender (A) to exercise self help remedies such as(but not limited to) setoff, or (B) to foreclose judicially or nonjudiciallyagainst any real or personal property collateral, or to exercise judicial ornonjudicial power of sale rights, (C) to obtain from a court provisionalor ancillary remedies such as (but not limited to) injunctive relief, writ ofpossession, prejudgment attachment, or the appointment of a receiver, or (D) topursue rights against a party to this Note, Agreement, or Guaranty, asapplicable, in a third-party proceeding in any action brought against Lender ina state, federal or international court, tribunal or hearing body

 

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(includingactions in specialty courts, such as bankruptcy and patent courts).  Lender may exercise the rights set forth inclauses (A) through (D), inclusive, before, during or after the pendencyof any arbitration proceeding brought pursuant to this Note, Agreement, orGuaranty, as applicable.  Neither theexercise of self help remedies nor the institution or maintenance of an actionfor foreclosure or provisional or ancillary remedies shall constitute a waiverof the right of any party, including the claimant in any such action, toarbitrate the merits of the Dispute occasioning resort to such remedies.  No provision in the Loan Documents regardingsubmission to jurisdiction and/or venue in any court is intended or shall beconstrued to be in derogation of the provisions in any Loan Document forarbitration of any Dispute.

 

(d)           ConflictingProvisions for Dispute Resolution. If there is any conflict between the terms, conditions and provisions ofthis Section and those of any other provision or agreement for arbitrationor dispute resolution, the terms, conditions and provisions of this Section shallprevail as to any Dispute arising out of or relating to (i) this Note,Agreement, or Guaranty, as applicable, (ii) any other Loan Document, (iii) anyrelated agreements or instruments, or (iv) the transaction contemplatedherein or therein (including any claim based on or arising from an allegedpersonal injury or business tort).  In anyother situation, if the resolution of a given Dispute is specifically governedby another provision or agreement for arbitration or dispute resolution, theother provision or agreement shall prevail with respect to said Dispute.

 

(e)           Jury Trial Waiver in Arbitration.  Byagreeing to this Section, the parties irrevocably and voluntarily waive anyright they may have to a trial by jury in respect of any Dispute.

 

**9.             Attorneys’ Feesand Costs of Collection.**  The Guarantor shall pay ondemand all attorneys’ fees and all other costs and expenses incurred by theLender in the enforcement of or preservation of the Lender’s rights under thisGuaranty.  The Guarantor’s obligationsand liabilities under this Section 9 shall survive any payment ordischarge in full of the Obligations.

 

**10.          Term of Guaranty.**  ThisGuaranty shall continue in effect until such time as the Obligations have beenfully and finally paid and performed, except that, and notwithstanding anyreturn of this Guaranty to the Guarantor, this Guaranty shall continue ineffect (a) with respect to any of the Obligations that survive afterexpiration or termination of the Loan, (b) with respect to all obligationsand liabilities of the Guarantor for indemnification and for the payment of allcosts and expenses, as provided herein, and (c) as provided herein withrespect to preferential, fraudulent or other voidable payments or othertransfers.

 

**11.          Subordination.**  If,for any reason whatsoever, the Borrower is now or hereafter becomes indebted tothe Guarantor:

 

(a)           suchindebtedness and all interest thereon and all liens, security interests andrights now or hereafter existing with respect to property of the Borrowersecuring same shall, at all times, be subordinate in all respects to theObligations and to all liens, security interests and rights now or hereafterexisting to secure the Obligations; and

 

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(b)           TheGuarantor shall not be entitled to enforce or receive payment, directly orindirectly, of any such indebtedness of the Borrower to the Guarantor until theObligations have been fully and finally paid and performed.  Notwithstanding the foregoing, the Guarantormay receive payments upon close-out of any Project with regard to loans made bythe Guarantor to the owner of any such Project, or with regard to loans made toBorrower on behalf of the owner of any such Project.  Notwithstanding the foregoing, the Guarantormay receive payments from Borrower in the form of salaries or shareholder ormember dividends.

 

**12.          Subrogation.** Notwithstanding anything to the contrary contained herein (a) theGuarantor shall not have any right of subrogation in or under any of the LoanDocuments or to participate in any way therein, or in any right, title orinterest in and to any security or right of recourse for the Indebtedness,until the later of the date on which the Indebtedness has been fully andfinally paid, or the Loan has expired or been terminated, and (b) if theGuarantor is or becomes an “insider” (as defined in Section 101 of theUnited States Bankruptcy Code) with respect to the Borrower, then the Guarantorhereby irrevocably and absolutely waives any and all rights of contribution,indemnification, reimbursement or any similar rights against the Borrower withrespect to this Guaranty (including any right of subrogation, except to theextent of collateral held by the Lender), whether such rights arise under anexpress or implied contract or by operation of law.  It is the intention of the parties that theGuarantor shall not be deemed to be a “creditor” (as defined in Section 101of the United States Bankruptcy Code) of the Borrower by reason of theexistence of this Guaranty in the event that the Borrower or the Guarantorbecomes a debtor in any proceeding under the United States Bankruptcy code.

 

**13.          Notices.** Unless specifically provided otherwise, any notice for purposes of thisGuaranty shall be given in writing or by telecopier transmission and shall beaddressed or delivered to the respective addresses set forth at the end of thisGuaranty, or to such other address as may have been previously designated bythe intended recipient by notice given in accordance with this Section. If sentby prepaid, registered or certified mail (return receipt requested), the noticeshall be deemed effective when the receipt is signed or when the attemptedinitial delivery is refused or cannot be made because of a change in address ofwhich the sending party has not been notified; and if transmitted by telecopieror personal delivery, the notice shall be effective when received.  No notice of change of address shall beeffective except upon actual receipt.

 

**14.          Cumulative Rights.**  Theexercise by the Lender of any right or remedy hereunder or under any other LoanDocument, or at law or in equity, shall not preclude the concurrent orsubsequent exercise of any other right or remedy.  The Lender shall have all rights, remediesand recourses afforded to the Lender by reason of this Guaranty or any otherLoan Document or by law or equity or otherwise, and the same shall becumulative and concurrent and are intended to be, and shall be,nonexclusive.  No waiver of any defaulton the part of the Guarantor or of any breach of any of the provisions of thisGuaranty or of any other document shall be considered a waiver of any other orsubsequent default or breach, and no delay or omission in exercising orenforcing the rights and powers granted herein or in any other document shallbe

 

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construedas a waiver of such rights and powers, and no exercise or enforcement of anyrights or powers hereunder or under any other document shall be held to exhaustsuch rights and powers, and every such right and power may be exercised fromtime to time.  No provision of thisGuaranty or any right, remedy or recourse of the Lender with respect hereto, orany default or breach, can be waived, nor can this Guaranty or the Guarantor bereleased or discharged in any way or to any extent, except specifically in eachcase by a writing intended for that purpose (and which refers specifically tothis Guaranty) executed, and delivered to the Guarantor, by the Lender, exceptas otherwise provided herein.

 

**15.          Disclosure ofInformation.**  The Lender may sell or offer to sell the Loanor an interest in the Loan to one or more assignees or participants and maydisclose to any such assignee or participant or prospective assignee orparticipant any information the Lender has pertaining to the Loan, theObligations, this Guaranty, or the Guarantor. The Lender also may disclose any such information to any regulatory bodyhaving jurisdiction over the Lender and to any agent or attorney of the Lenderand in such other circumstances and to such other parties as necessary orappropriate in the Lender’s reasonable judgment.

 

**16.          Governing Law;Forum.**  This Guaranty is an agreement executed underseal, and its validity, enforcement, and interpretation, shall for all purposesbe governed by and construed in accordance with the laws of the Jurisdiction ofChoice and applicable United States federal law, and is intended to beperformed in accordance with, and only to the extent permitted by, suchlaws.  If the Guarantor is a corporation,the designation “(SEAL)” on this Guaranty shall be effective as the affixing ofGuarantor’s corporate seal physically to this Guaranty.  All obligations of the Guarantor hereunderare payable and performable at the place or places where the Obligations arepayable and performable.  The Guarantorhereby irrevocably submits generally and unconditionally for the Guarantor andin respect of the Guarantor’ respective property to the jurisdiction of anystate court, or any United States federal court, sitting in the state in whichany of the Land is located, over any suit, action or proceeding arising out ofor relating to this Guaranty or the Obligations.  The Guarantor hereby irrevocably waives, tothe fullest extent permitted by law, any objection that the Guarantor may nowor hereafter have to the laying of venue in any such court and any claim thatany such court is an inconvenient forum.

 

**17.          Counterparts.**  ThisGuaranty may be executed in multiple counterparts, each of which, for allpurposes, shall be deemed an original, and all of which together shallconstitute one and the same agreement.

 

**18.          Miscellaneous.**  ThisGuaranty embodies the entire agreement between the Lender and the Guarantorwith respect to the guaranty by the Guarantor of the Obligations.  This Guaranty supersedes all prior agreementsand understandings, if any, with respect to guaranty by the Guarantor of theObligations.  This Guaranty may not bemodified, amended or superseded except in a writing signed by the Lender andthe Guarantor referencing this Guaranty by its date and specificallyidentifying the portions hereof that are to be modified, amended orsuperseded.  This Guaranty is binding notonly on the Guarantor, but also on the Guarantor’s heirs, personalrepresentatives, successors and assigns. If any provision of this Guaranty or the

 

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application thereof to any Person orcircumstance shall, for any reason and to any extent, be declared to be invalidor unenforceable, neither the remaining provisions of this Guaranty nor theapplication of such provision to any other Person or circumstance shall beaffected thereby, and the remaining provisions of this Guaranty, or theapplicability of such provision to other Persons or circumstances, asapplicable, shall remain in effect and be enforceable to the maximum extentpermitted by applicable law.

 

 

**[SIGNATURES ON THE FOLLOWINGPAGE]**

 

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**IN WITNESS WHEREOF,** the Guarantor duly executed and delivered this Guaranty, intendingthat it be an instrument under seal, as of the date first written above.

 
| WITNESS: | **GUARANTOR****:**           |
|----------|------------------------------|
|     |                         |
|     |                         |
|     |                         | COMSTOCK HOMEBUILDING COMPANIES, |
|     | INC., a Delaware corporation |
|     |                         |
|     |                         |
| By:      | /s/ Jubal R. Thompson        |   |   | By: | /s/ Christopher Clemente |   |
|     | Name:                        | Jubal R. Thompson |   |   | Christopher Clemente, |
|     | Title:                       | General Counsel |   |   | Chief Executive Officer |
|     |                         |   |
| (Seal)   | Address:                     | 11465 Sunset Hills Road |
|     |                         | 5th Floor |
|     |                         | Reston, Virginia 20190 |
|          |                              |  |  |  |  |  |  |  |  |  |  |  |

 

**ADDRESS OF LENDER****:**

 

**BANK OF AMERICA, N.A.**

8300Greensboro Drive

Suite 300

McLean,Virginia 22102-3604

Attention:  Homebuilder Division

FaxNo:  (703) 761-8160

 

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