Document:

EX-10.3

Exhibit 10.3

ISSUING AND PAYING AGENCY AGREEMENT

This Agreement, dated as of August 16, 2007, is by and between CME Group Inc. (the “Issuer”)
and JPMorgan Chase Bank, National Association (“JPMorgan”).

1. APPOINTMENT AND ACCEPTANCE

The Issuer hereby appoints JPMorgan as its issuing and paying agent in connection with the
issuance and payment of certain short-term promissory notes of the Issuer (the “Notes”), as further
described herein, and JPMorgan agrees to act as such agent upon the terms and conditions contained
in this Agreement.

2. COMMERCIAL PAPER PROGRAMS

The Issuer may establish one or more commercial paper programs under this Agreement by
delivering to JPMorgan a completed program schedule (the “Program Schedule”), with respect to
each such program. JPMorgan has given the Issuer a copy of the current form of Program
Schedule and the Issuer shall complete and return its first Program Schedule to JPMorgan prior to
or simultaneously with the execution of this Agreement. In the event that any of the information
provided in, or attached to, a Program Schedule shall change, the Issuer shall promptly inform
JPMorgan of such change in writing.

3. NOTES

All Notes issued by the Issuer under this Agreement shall be short-term promissory notes,
exempt from the registration requirements of the Securities Act of 1933, as amended, as indicated
on the Program Schedules, and from applicable state securities laws. The Notes may be placed by
dealers (the “Dealers”) pursuant to Section 4 hereof. Notes shall be issued in either certificated
or book-entry form.

4. AUTHORIZED REPRESENTATIVES

The Issuer shall deliver to JPMorgan a duly adopted corporate resolution from the Issuer’s
Board of Directors (or other governing body) authorizing the issuance of Notes under each program
established pursuant to this Agreement and a certificate of incumbency, with specimen signatures
attached, of those officers, employees and agents of the Issuer authorized to take certain actions
with respect to the Notes as provided in this Agreement (each such person is hereinafter referred
to as an “Authorized Representative”). Until JPMorgan receives any subsequent incumbency
certificates of the Issuer, JPMorgan shall be entitled to rely on the last incumbency certificate
delivered to it for the purpose of determining the Authorized Representatives. The Issuer
represents and warrants that each Authorized Representative may appoint other officers, employees
and agents of the Issuer (the “Delegates”), including without limitation any Dealers, to issue
instructions to JPMorgan under this Agreement, and take other actions on the Issuer’s behalf
hereunder, provided that notice of the appointment of each Delegate is delivered to JPMorgan in
writing. Each such appointment shall remain in effect unless and until revoked by the Issuer in a
written notice to JPMorgan.

5. CERTIFICATED NOTES

If and when the Issuer intends to issue certificated notes (“Certificated Notes”), the Issuer
and JPMorgan shall agree upon the form of such Notes. Thereafter, the Issuer shall from time to
time deliver to JPMorgan adequate supplies of Certificated Notes which will be in bearer form,
serially numbered, and shall be executed by the manual or facsimile signature of an Authorized
Representative. JPMorgan will acknowledge receipt of any supply of Certificated Notes received
from the Issuer, noting any exceptions to the shipping manifest or transmittal letter (if any), and
will hold the Certificated Notes in safekeeping for the Issuer in accordance with JPMorgan’s
customary practices. JPMorgan shall not have any liability to the Issuer to determine by whom or
by what means a facsimile signature may have been affixed on Certificated Notes, or to determine
whether any facsimile or manual signature is genuine, if such facsimile or manual signature
resembles the specimen signature attached to the Issuer’s certificate of incumbency with respect to
such Authorized Representative. Any Certificated Note bearing the manual or facsimile signature of
a person who is an Authorized Representative on the date such signature was affixed shall bind the
Issuer after completion thereof by JPMorgan, notwithstanding that such person shall have ceased to
hold his or her office on the date such Note is countersigned or delivered by JPMorgan.

6. BOOK-ENTRY NOTES

The Issuer’s book-entry notes (“Book-Entry Notes”) shall not be issued in physical form, but
their aggregate face amount shall be represented by a master note (the “Master Note”) in the form
of Exhibit A executed by the Issuer pursuant to the book-entry commercial paper program of The
Depository Trust Company (“DTC”). JPMorgan shall maintain the Master Note in safekeeping, in
accordance with its customary practices, on behalf of Cede & Co., the registered owner thereof and
nominee of DTC. As long as Cede & Co. is the registered owner of the Master Note, the beneficial
ownership interest therein shall be shown on, and the transfer of ownership thereof shall be
effected through, entries on the books maintained by DTC and the books of its direct and indirect
participants. The Master Note and the Book-Entry Notes shall be subject to DTC’s rules and
procedures, as amended from time to time. JPMorgan shall not be liable or responsible for sending
transaction statements of any kind to DTC’s participants or the beneficial owners of the Book-Entry
Notes, or for maintaining, supervising or reviewing the records of DTC or its participants with
respect to such Notes. In connection with DTC’s program, the Issuer understands that as one of the
conditions of its participation therein, it shall be necessary for the Issuer and JPMorgan to enter
into a Letter of Representations, in the form of Exhibit B hereto, and for DTC to receive and
accept such Letter of Representations. In accordance with DTC’s program, JPMorgan shall obtain
from the CUSIP Service Bureau a written list of CUSIP numbers for Issuer’s Book-Entry Notes, and
JPMorgan shall deliver such list to DTC. The CUSIP Service Bureau shall bill the Issuer directly
for the fee or fees payable for the list of CUSIP numbers for the Issuer’s Book-Entry Notes.

7. ISSUANCE INSTRUCTIONS TO JPMORGAN; PURCHASE PAYMENTS

The Issuer understands that all instructions under this Agreement are to be directed to
JPMorgan’s Commercial Paper Operations Department in accordance with Section 18 hereof. JPMorgan
shall provide the Issuer, or, if applicable, the Issuer’s Dealers, with access to JPMorgan’s Money
Market Issuance System or other electronic means (collectively, the “System”) in order that
JPMorgan may receive electronic instructions for the issuance of Notes. Electronic instructions
must be transmitted in accordance with the procedures furnished by JPMorgan to the Issuer or its
Dealers in connection with the System. These transmissions shall be the equivalent to the giving
of a duly authorized written and signed instruction which JPMorgan may act upon without liability.
In the event that the System is inoperable at any time, an Authorized Representative or a Delegate
may deliver written, telephone or facsimile instructions to JPMorgan, which instructions shall be
verified in accordance with any security procedures agreed upon by the parties. JPMorgan shall
incur no liability to the Issuer in acting upon instructions believed by JPMorgan in good faith to
have been given by an Authorized Representative or a Delegate. In the event that a discrepancy
exists between a telephonic instruction and a written confirmation, the telephonic instruction will
be deemed the controlling and proper instruction. JPMorgan may electronically record any customary
conversations made pursuant to this Agreement, and the Issuer hereby consents to such recordings.
All issuance instructions regarding the Notes must be received by 1:00 P.M. New York time in order
for the Notes to be issued or delivered on the same day.

	 	 	 	 	 
	(a)

	 	Issuance and Purchase of Book-Entry Notes.

	 	Upon receipt of

issuance instructions from

the Issuer or its Dealers

with respect to Book-Entry

Notes, JPMorgan shall

transmit such instructions

to DTC and direct DTC to

cause appropriate entries

of the Book-Entry Notes to

be made in accordance with

DTC’s applicable rules,

regulations and procedures

for book-entry commercial

paper programs. JPMorgan

shall assign CUSIP numbers

to the Issuer’s Book-Entry

Notes to identify the

Issuer’s aggregate

principal amount of

outstanding Book-Entry

Notes in DTC’s system,

together with the

aggregate unpaid interest

(if any) on such Notes.

Promptly following DTC’s

established settlement

time on each issuance

date, JPMorgan shall

access DTC’s system to

verify whether settlement

has occurred with respect

to the Issuer’s Book-Entry

Notes. Prior to the close

of business on such

business day, JPMorgan

shall deposit immediately

available funds in the

amount of the proceeds due

the Issuer (if any) to the

Issuer’s account at

JPMorgan and designated in

the applicable Program

Schedule (the “Account”),

provided that JPMorgan has

received DTC’s

confirmation that the

Book-Entry Notes have

settled in accordance with

DTC’s applicable rules,

regulations and

procedures. JPMorgan

shall have no liability to

the Issuer whatsoever if

any DTC participant

purchasing a Book-Entry

Note fails to settle or

delays in settling its

balance with DTC or if DTC

fails to perform in any

respect.
	(b)

	 	Issuance and Purchase of Certificated Notes.

	 	Upon receipt of issuance

instructions with respect

to Certificated Notes,

JPMorgan shall: (a)

complete each Certificated

Note as to principal

amount, date of issue,

maturity date, place of

payment, and rate or

amount of interest (if

such Note is interest

bearing) in accordance

with such instructions;

(b) countersign each

Certificated Note; and (c)

deliver each Certificated

Note in accordance with

the Issuer’s instructions,

except as otherwise set

forth below. Whenever

JPMorgan is instructed to

deliver any Certificated

Note by mail, JPMorgan

shall strike from the

Certificated Note the word

“Bearer,” insert as payee

the name of the person so

designated by the Issuer

and effect delivery by

mail to such payee or to

such other person as is

specified in such

instructions to receive

the Certificated Note.

The Issuer understands

that, in accordance with

the custom prevailing in

the commercial paper

market, delivery of

Certificated Notes shall

be made before the actual

receipt of payment for

such Notes in immediately

available funds, even if

the Issuer instructs

JPMorgan to deliver a

Certificated Note against

payment. Therefore, once

JPMorgan has delivered a

Certificated Note to the

designated recipient, the

Issuer shall bear the risk

that such recipient may

fail to remit payment of

such Note or return such

Note to JPMorgan.

Delivery of Certificated

Notes shall be subject to

the rules of the New York

Clearing House in effect

at the time of such

delivery. Funds received

in payment of Certificated

Notes shall be credited to

the Account.

	8.	 	USE OF SALES PROCEEDS IN ADVANCE OF PAYMENT	 

JPMorgan shall not be obligated to credit the Issuer’s Account unless and until payment of the
purchase price of each Note is received by JPMorgan. From time to time, JPMorgan, in its sole
discretion, may permit the Issuer to have use of funds payable with respect to a Note prior to
JPMorgan’s receipt of the sales proceeds of such Note. If JPMorgan makes a deposit, payment or
transfer of funds on behalf of the Issuer before JPMorgan receives payment for any Note, such
deposit, payment or transfer of funds shall represent an advance by JPMorgan to the Issuer to be
repaid promptly, and in any event on the same day as it is made, from the proceeds of the sale of
such Note, or by the Issuer if such proceeds are not received by JPMorgan.

	9.	 	PAYMENT OF MATURED NOTES	 

Notice that the Issuer will not redeem any Note on the relative Initial Redemption Date (as
defined in the applicable Extendible Commercial Note Announcement) must be received in writing by
JPMorgan by 11:00 A.M. on such Initial Redemption Date. On any other day when a Note matures or is
prepaid, the Issuer shall transmit, or cause to be transmitted, to the Account, prior to 2:00 P.M.
New York time on the same day, an amount of immediately available funds sufficient to pay the
aggregate principal amount of such Note and any applicable interest due. JPMorgan shall pay the
interest (if any) and principal on a Book-Entry Note to DTC in immediately available funds, which
payment shall be by net settlement of JPMorgan’s account at DTC. JPMorgan shall pay Certificated
Notes upon presentment. JPMorgan shall have no obligation under the Agreement to make any payment
for which there is not sufficient, available and collected funds in the Account, and JPMorgan may,
without liability to the Issuer, refuse to pay any Note that would result in an overdraft to the
Account.

10. OVERDRAFTS

(a) Intraday overdrafts with respect to each Account shall be subject to
JPMorgan’s policies as in effect from time to time.

(b) An overdraft will exist in an Account if JPMorgan, in its sole discretion, (i)
permits an advance to be made pursuant to Section 8 and, notwithstanding the
provisions of Section 8, such advance is not repaid in full on the same day as it
is made, or (ii) pays a Note pursuant to Section 9 in excess of the available
collected balance in such Account. Overdrafts shall be subject to JPMorgan’s
established banking practices, including, without limitation, the imposition of
interest, funds usage charges and administrative fees. The Issuer shall repay any
such overdraft, fees and charges no later than the next business day, together
with interest on the overdraft at the rate established by JPMorgan for the
Account, computed from and including the date of the overdraft to the date of
repayment.

11. NO PRIOR COURSE OF DEALING

No prior action or course of dealing on the part of JPMorgan with respect to advances of the
purchase price or payments of matured Notes shall give rise to any claim or cause of action by the
Issuer against JPMorgan in the event that JPMorgan refuses to pay or settle any Notes for which the
Issuer has not timely provided funds as required by this Agreement.

12. RETURN OF CERTIFICATED NOTES

JPMorgan will in due course cancel any Certificated Note presented for payment and return such
Note to the Issuer. JPMorgan shall also cancel and return to the Issuer any spoiled or voided
Certificated Notes. Promptly upon written request of the Issuer or at the termination of this
Agreement, JPMorgan shall destroy all blank, unissued Certificated Notes in its possession and
furnish a certificate to the Issuer certifying such actions.

13. INFORMATION FURNISHED BY JPMORGAN

Upon the reasonable request of the Issuer, JPMorgan shall promptly provide the Issuer with
information with respect to any Note issued and paid hereunder, provided, that the Issuer
delivers such request in writing and, to the extent applicable, includes the serial number or note
number, principal amount, payee, date of issue, maturity date, amount of interest (if any) and
place of payment of such Note.

14. REPRESENTATIONS AND WARRANTIES

The Issuer represents and warrants that: (i) it has the right, capacity and authority to enter
into this Agreement; and (ii) it will comply with all of its obligations and duties under this
Agreement. The Issuer further represents and agrees that each Note issued and distributed upon its
instruction pursuant to this Agreement shall constitute the Issuer’s representation and warranty to
JPMorgan that such Note is a legal, valid and binding obligation of the Issuer, subject to
applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally and
subject, as to enforceability, to general principles of equity (regardless of whether enforcement
is sought in a proceeding in equity or at law), and that such Note is being issued in a transaction
which is exempt from registration under the Securities Act of 1933, as amended, and any applicable
state securities law.

15. DISCLAIMERS

Neither JPMorgan nor its directors, officers, employees or agents shall be liable for any act
or omission under this Agreement except in the case of gross negligence or willful misconduct. IN
NO EVENT SHALL JPMORGAN BE LIABLE FOR SPECIAL, INDIRECT OR CONSEQUENTIAL LOSS OR DAMAGE OF ANY KIND
WHATSOEVER (INCLUDING BUT NOT LIMITED TO LOST PROFITS), EVEN IF JPMORGAN HAS BEEN ADVISED OF THE
LIKELIHOOD OF SUCH LOSS OR DAMAGE AND REGARDLESS OF THE FORM OF ACTION. In no event shall JPMorgan
be considered negligent in consequence of complying with DTC’s rules, regulations and procedures.
The duties and obligations of JPMorgan, its directors, officers, employees or agents shall be
determined by the express provisions of this Agreement and they shall not be liable except for the
performance of such duties and obligations as are specifically set forth herein and no implied
covenants shall be read into this Agreement against them. Neither JPMorgan nor its directors,
officers, employees or agents shall be required to ascertain whether any issuance or sale of any
Notes (or any amendment or termination of this Agreement) has been duly authorized or is in
compliance with any other agreement to which the Issuer is a party (whether or not JPMorgan is also
a party to such agreement).

16. INDEMNIFICATION

The Issuer agrees to indemnify, defend and hold harmless JPMorgan, its directors, officers,
employees and agents (collectively, “indemnitees”) from and against any and all liabilities,
claims, losses, damages, penalties, reasonable costs and expenses (including reasonable attorneys’
fees and disbursements) suffered or incurred by or asserted or assessed against any indemnitee
arising in respect of this Agreement, except in respect of any indemnitee for any such liability,
claim, loss, damage, penalty, cost or expense resulting from the gross negligence or willful
misconduct of such indemnitee. This indemnity will survive the termination of this Agreement.

17. OPINION OF COUNSEL

The Issuer shall deliver to JPMorgan all documents it may reasonably request relating to the
existence of the Issuer and authority of the Issuer for this Agreement, including, without
limitation, an opinion of counsel, substantially in the form of Exhibit C hereto.

18. NOTICES

All notices, confirmations and other communications hereunder shall (except to the extent
otherwise expressly provided) be in writing and shall be sent by first-class mail, postage prepaid,
by telecopier or by hand, addressed as follows, or to such other address as the party receiving
such notice shall have previously specified to the party sending such notice:

If to the Issuer: CME Group Inc.

20 South Wacker Drive 

Chicago, Illinois 60606

Attention of: Chief Financial Officer (Telecopy No. (312) 930-3016)

with copies to Treasurer (Telecopy No. (312) 930-3016) and to General
Counsel (Telecopy No. (312) 930-4556)

If to JPMorgan concerning the daily issuance and redemption of Notes:

	 	 	 	 	 
	 	 	Attention: Money Market Operations
	 	 	420 West Van Buren, 5th Floor
	
 
	 	Chicago, IL 60606

Telephone:

Facsimile:
	 	

(800) 499-3176/ (312) 954-0445

(312) 954-0432
	All other:	 	Attention: Commercial Paper JPM
	 	 	4 New York Plaza 21st Floor
	
 
	 	New York NY 10004-2413

Telephone:

Facsimile:
	 	

(212) 623-8220

(212) 623-8420/21

19. COMPENSATION

The Issuer shall pay compensation for services pursuant to this Agreement in accordance with
the pricing schedules furnished by JPMorgan to the Issuer from time to time and upon such payment
terms as the parties shall determine. The Issuer shall also reimburse JPMorgan for any fees and
charges imposed by DTC with respect to services provided in connection with the Book-Entry Notes.

20. BENEFIT OF AGREEMENT

This Agreement is solely for the benefit of the parties hereto and no other person shall
acquire or have any right under or by virtue hereof.

21. TERMINATION

This Agreement may be terminated without affecting the respective liabilities of the parties
hereunder arising prior to such termination: (i) upon 30 days notice to the other party for any
reason; or (ii) immediately upon notice to the other party if any of the following events shall
occur:

(a) either party shall materially breach this Agreement or fail to observe or perform
any material covenant, condition or agreement contained in this Agreement;

(b) an involuntary proceeding shall be commenced or an involuntary petition shall be
filed seeking (i) liquidation, reorganization or other relief in respect of the Issuer or
its debts, or of a substantial part of its assets, under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the
appointment of a receiver, trustee, custodian, sequestrator, conservator or similar
official for the Issuer or for a substantial part of its assets, or an order or decree
approving or ordering any of the foregoing shall be entered; or

(c) the Issuer shall (i) voluntarily commence any proceeding or file any petition
seeking liquidation, reorganization or other relief under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii)
consent to the institution of, or fail to contest in a timely and appropriate manner, any
proceeding or petition described in the immediately preceding paragraph, (iii) apply for or
consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for the Issuer or for a substantial part of its assets, (iv) file an
answer admitting the material allegations of a petition filed against it in any such
proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any
action for the purpose of effecting any of the foregoing.

22. FORCE MAJEURE

In no event shall JPMorgan be liable for any failure or delay in the performance of its
obligations hereunder because of circumstances beyond JPMorgan’s control, including, but not
limited to, acts of God, flood, war (whether declared or undeclared), terrorism, fire, riot,
strikes or work stoppages for any reason, embargo, government action, including any laws,
ordinances, regulations or the like which restrict or prohibit the providing of the services
contemplated by this Agreement, inability to obtain material, equipment, or communications or
computer facilities, or the failure of equipment or interruption of communications or computer
facilities, and other causes beyond JPMorgan’s control whether or not of the same class or kind as
specifically named above.

23. ENTIRE AGREEMENT

This Agreement, together with the exhibits attached hereto, constitutes the entire agreement
between JPMorgan and the Issuer with respect to the subject matter hereof and supersedes in all
respects all prior proposals, negotiations, communications, discussions and agreements between the
parties concerning the subject matter of this Agreement.

24. WAIVERS AND AMENDMENTS

No failure or delay on the part of any party in exercising any power or right under this
Agreement shall operate as a waiver, nor does any single or partial exercise of any power or right
preclude any other or further exercise, or the exercise of any other power or right. Any such
waiver shall be effective only in the specific instance and for the purpose for which it is given.
No amendment, modification or waiver of any provision of this Agreement shall be effective unless
the same shall be in writing and signed by the Issuer and JPMorgan.

25. BUSINESS DAY

Whenever any payment to be made hereunder shall be due on a day which is not a business day
for JPMorgan, then such payment shall be made on JPMorgan’s next succeeding business day.

26. COUNTERPARTS

This Agreement may be executed in counterparts, each of which shall be deemed an original and
such counterparts together shall constitute but one instrument.

27. HEADINGS

The headings in this Agreement are for purposes of reference only and shall not in any way
limit or otherwise affect the meaning or interpretation of any of the terms of this Agreement.

28. GOVERNING LAW

This Agreement and the Notes shall be governed by and construed in accordance with the
internal laws of the State of New York, without regard to the conflict of laws provisions thereof.

29. JURISDICTION AND VENUE

Each party hereby irrevocably and unconditionally submits to the non-exclusive jurisdiction of
the United States District Court for the Southern District of New York and any New York State court
located in the Borough of Manhattan in New York City and of any appellate court from any thereof
for the purposes of any legal suit, action or proceeding arising out of or relating to this
Agreement (a “Proceeding”). Each party hereby irrevocably agrees that all claims in respect of any
Proceeding may be heard and determined in such Federal or New York State court and irrevocably
waives, to the fullest extent it may effectively do so, any objection it may now or hereafter have
to the laying of venue of any Proceeding in any of the aforementioned courts and the defense of an
inconvenient forum to the maintenance of any Proceeding.

30. WAIVER OF TRIAL BY JURY

EACH PARTY HEREBY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDING ARISING OUT OF OR
RELATING TO ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

31. ACCOUNT CONDITIONS

Each Account shall be subject to JPMorgan’s account conditions, as in effect from time to
time.

(Signature page follows)

1

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on their behalf by
duly authorized officers as of the day and year first-above written.

JPMORGAN CHASE BANK, NATIONAL ASSOCIATION

By: /s/ Jennifer Fredericks

Name: Jennifer Fredericks

Title: Trust Officer

Date: August 16, 2007

CME GROUP INC.

	 	 	 
	By: James A. Pribel

	 

	Name:

	 	James A. Pribel
	
 
	 	 

	 	 	 
	Title: Director and Treasurer

	 

	Date:

	 	August 16, 2007
	
 
	 	 

2

EXHIBIT A

(DTC Master Note)

AND

EXHIBIT B

(DTC Letter of Representations)

TO FOLLOW

3

EXHIBIT C

FORM OF OPINION

[Company Letterhead]

August 16, 2007

To the Addressees listed on

Schedule I hereto

Ladies and Gentlemen:

I am the General Counsel of CME Group Inc., a Delaware corporation (the “Company”), and, as
such, I am furnishing this opinion in connection with each of (i) that certain Commercial Paper
Dealer Agreement, dated as of August 16, 2007 (the “Lehman Dealer Agreement”), between the Company,
as issuer, and Lehman Brothers Inc., as dealer (the “Lehman Dealer”), (ii) that certain Commercial
Paper Dealer Agreement, dated as of August 16, 2007 (the “Merrill Dealer Agreement” and, together
with the Lehman Dealer Agreement, collectively, the “Dealer Agreements”), among the Company, as
issuer, and Merrill Lynch Money Markets Inc., as dealer for Notes (as defined in the Merrill Dealer
Agreement) with maturities up to 270 days (“MLMM”), and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, as dealer for Notes (as defined in the Merrill Dealer Agreement) with maturities over
270 days (“MLPF&S” and, together with MLMM, collectively, the “Merrill Dealer”), (iii) that certain
Issuing and Paying Agency Agreement, dated as of August 16, 2007 (the “Issuing and Paying Agency
Agreement”), between the Company and JPMorgan Chase Bank, National Association, as issuing and
paying agent (the “Issuing and Paying Agent”), and (iv) the Master Note dated August 16, 2007 (the
“Master Note”). The Lehman Dealer Agreement, the Merrill Dealer Agreement, the Issuing and Paying
Agency Agreement and the Master Note shall hereafter be referred to collectively as the
“Transaction Agreements.” This opinion is being delivered pursuant to Section 3.6 of each Dealer
Agreement.

In my examination, I have assumed the genuineness of all signatures, including endorsements,
the legal capacity and competency of natural persons, the authenticity of all documents submitted
to me as originals, the conformity to original documents of all documents submitted to us as
facsimile, electronic, certified or photostatic copies, and the authenticity of the originals of
such copies. When relevant facts were not independently established, I have relied upon statements
of governmental officials and upon representations made in or pursuant to the Transaction
Agreements, certificates of appropriate representatives of the Company.

In rendering the opinions set forth herein, I have examined and relied upon originals or
copies of the Transaction Agreements and such other documents as I have deemed necessary or
appropriate as a basis for the opinions set forth below.

Capitalized terms used herein and not otherwise defined herein shall have the same meanings
herein as ascribed thereto in the Dealer Agreements. As used herein, “Applicable Laws” means those
laws, rules and regulations which, in my experience, are normally applicable to transactions of the
type contemplated by the Transaction Agreements, without my having made any special investigation
as to the applicability of any specific law, rule or regulation, and which are not the subject of a
specific opinion herein referring expressly to a particular law or laws.

I am a member of the Bar of the State of Illinois and the foregoing opinions are limited to
matters involving the Federal laws of the United States of America and the General Corporation Law
of the State of Delaware and I do not express any opinion as to any other laws. I note that the
Transaction Agreements purport to be governed by the laws of the State of New York and I express no
opinion with respect to the laws of the State of New York.

Based upon the foregoing and subject to the limitations, qualifications, exceptions and
assumptions set forth herein, I am of the opinion that:

1. The Company is a corporation validly existing and in good standing under the laws of the
State of Delaware.

2. The Company has all the requisite corporate power and authority to execute, deliver and
perform its obligations under each of the Transaction Agreements. The execution and delivery of
each of the Transaction Agreements and the consummation by the Company of the transactions
contemplated thereby have been duly authorized by all requisite corporate action on the part of the
Company. Each of each Dealer Agreement and the Issuing and Paying Agency Agreement has been duly
executed and delivered by the Company.

3. In the event that an Illinois court were to apply the substantive laws of the State of
Illinois, notwithstanding the choice of law of the parties set forth in the Transaction Agreements,
and without regard to choice of law principles, each of the Transaction Agreements constitutes and,
in the case of the Notes, when issued in accordance with the Issuing and Paying Agency Agreement
and paid for by the purchasers thereof, will constitute, the valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms under the Applicable Laws
of the State of Illinois.

4. The execution and delivery by the Company of each of the Transaction Agreements and the
performance by the Company of its obligations under each of the Transaction Agreements, each in
accordance with its terms, do not (i) conflict with the certificate of incorporation or by-laws of
the Company, (ii) constitute a violation of, or a default under any material agreements or
instruments known to me (after due inquiry) to which the Company is a party or by which it is bound
or to which it is subject or result in the creation or imposition of any lien upon any property of
the Company pursuant to the terms of any such material agreement or instrument or (iii) violate any
order, writ, injunction or decree known to me (after due inquiry) of any court or governmental
authority or agency applicable to the Company.

5. The offer, sale and delivery of the Notes in the manner contemplated by the Dealer
Agreements do not require registration under the Securities Act of 1933, as amended, or
qualification of any indenture under the Trust Indenture Act of 1939, as amended (it being
understood that I express no opinion as to any subsequent resale of any Note); and the Notes will
rank at least pari passu with all other unsecured and unsubordinated indebtedness of the Company.

6. No consent, approval or authorization of, or filing, recording or registration with, any
governmental authority, which has not been obtained or taken and is not in full force and effect,
is required to authorize, or is required in connection with, the execution or delivery of any of
the Transaction Agreements by the Company or the enforceability of any of the Transaction
Agreements against the Company, except as may be required by the securities or Blue Sky laws of the
various states in connection with the offer and sale of the Notes.

7. To the best of my knowledge, except as disclosed in the Company’s public filings with the
Securities and Exchange Commission, there is no litigation or governmental proceeding pending or
threatened against the Company or any of its subsidiaries which would have a material adverse
effect on the ability of the Company to perform its obligations under the Transaction Agreements.

8. The Company is not an “investment company” within the meaning of the Investment Company Act
of 1940, as amended.

My opinions are subject to the following assumptions and qualifications:

(a) enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors’ rights generally and by general principles of
equity (regardless of whether enforcement is sought in equity or at law);

(b) I have assumed that each of the Transaction Agreements constitutes the valid and binding
obligation of each party to such Transaction Agreement (other than the Company to the extent
expressly set forth herein) enforceable against such other party in accordance with its terms;

(c) I express no opinion as to the effect on the opinions expressed herein of (i) the
compliance or non-compliance of any party (other than the Company to the extent expressly set forth
herein) to the Transaction Agreements with any state, federal or other laws or regulations
applicable to any of them or (ii) the legal or regulatory status or the nature of the business of
any party (other than the Company to the extent expressly set forth herein);

(d) I express no opinion as to the enforceability of any rights to contribution or
indemnification provided for in the Transaction Agreements which are violative of the public policy
underlying any law, rule or regulation (including any federal or state securities law, rule or
regulation);

(e) I express no opinion as to the applicability or effect of any fraudulent transfer,
preference or similar law on the Transaction Agreements or any transactions contemplated thereby;

(f) I express no opinion on the enforceability of any provision in a Transaction Agreement
purporting to prohibit, restrict or condition the assignment of rights under such Transaction
Agreement to the extent such restriction on assignability is governed by the Uniform Commercial
Code;

(g) I express no opinion as to the enforceability of any provision of any Transaction
Agreement to the extent it purports to waive any objection a person may have that a suit, action or
proceeding has been brought in an inconvenient forum or a forum lacking subject matter
jurisdiction;

(h) for purposes of my opinion set forth in paragraph 5 above, I have assumed (a) the accuracy
of the representations and warranties and compliance with the agreements made by the Dealer in the
Dealer Agreements (b) compliance by the Dealer with the offering and transfer procedures and
restrictions required by the Dealer Agreements including, without limitation, the delivery to each
purchaser of the Notes of an offering memorandum containing a legend restricting offers, sales and
resales of the Notes in the form required by the Dealer Agreements and (c) the accuracy of the
representations and warranties made in accordance with such offering memorandum by the initial
purchasers of the Notes; and

(i) I express no opinion as to the enforceability of Section 7.3(a) of either Dealer
Agreement.

At the request of the Company, this opinion letter is, pursuant to Section 3.6 of each Dealer
Agreement, provided to you by me in my capacity as in-house counsel of the Company and may not be
relied upon by any person for any purpose other than in connection with the transactions
contemplated by the Transaction Agreements without, in each instance, my prior written consent. No
opinion is implied or is to be inferred beyond the opinions expressly stated above. I assume no
obligation to update this letter for events, changes in law or circumstances occurring after the
date of this opinion.

Very truly yours,

4

Schedule I to Opinion

Addressees

Lehman Brothers Inc., as Dealer for the Notes (under and as defined in the Lehman Dealer Agreement)

Merrill Lynch Money Markets Inc., as Dealer for Notes (as defined in the Merrill Dealer Agreement)
with maturities up to 270 days

Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Dealer for Notes (as defined in the Merrill
Dealer Agreement) with maturities over 270 days

JPMorgan Chase Bank, National Association, as Issuing and Paying Agent

5EX-10.1

THIRD AMENDMENT TO CREDIT AGREEMENT 

AND

CONSENT AND WAIVER 

THIS THIRD AMENDMENT TO CREDIT AGREEMENT AND CONSENT AND WAIVER (“Third Amendment”), dated as
of the 14th day of August, 2007, by and among AVATAR PROPERTIES INC., a Florida corporation
(“Borrower”), joined by AVATAR HOLDINGS INC., a Delaware corporation (“Guarantor”) and WACHOVIA
BANK, NATIONAL ASSOCIATION, in its capacity as Lender and its capacity as administrative agent
acting on behalf of the Lenders (“Agent”), GUARANTY BANK, in its capacity as Lender and FRANKLIN
BANK, SSB, a Texas Savings Bank, in its capacity as Lender (each a “Lender” and collectively the
“Lenders”). This Third Amendment shall become effective as of the date hereof.

R E C I T A L S:

WHEREAS, on September 20, 2005, Borrower and Guarantor entered into a Credit Agreement with
the Lenders, the Arranger and the other lenders from time to time party thereto, evidencing a
senior unsecured revolving credit facility which, as of the date of execution thereof, had a
maximum outstanding principal balance of $100,000,000 (as amended by the First Amendment to Credit
Agreement dated as of May 25, 2006 and the Second Amendment to Credit Agreement dated as of August
28, 2006, the “Credit Agreement”), and which was increased to a maximum outstanding principal
balance of $125,000,000 pursuant to that certain Commitment and Acceptance dated as of October 21,
2005; and

WHEREAS, in accordance with Section 10.02(b)(ii) of the Credit Agreement, Borrower has
requested a written consent from the Requisite Lenders approving an extension of the temporary
waiver granted in the Consent and Waiver dated as of December 4, 2006, by and among Borrower, Agent
and Lenders (“Consent and Waiver”), approving a temporary waiver of the housing inventory covenant
set forth in Section 6.08 of the Agreement;

WHEREAS, Borrower, Guarantor and Agent on behalf of the Lenders intend to enter into this
Third Amendment in order to (i) set forth modified terms and conditions of the Credit Agreement and
(ii) consent to and approve the extension of the Consent and Waiver;

NOW THEREFORE, in consideration of the sum of TEN DOLLARS ($10.00) and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, as well as the mutual
covenants herein contained, the parties hereto agree as follows:

1. RECITALS. The above recitals are true and correct and are incorporated herein by
this reference.

2. CAPITALIZED TERMS. Capitalized terms not defined herein shall have the meaning
ascribed to them in the Credit Agreement.

3. REPRESENTATIONS; REAFFIRMATION. Borrower and Guarantor each represent and warrant
that, as of the date hereof and after giving effect to this Third Amendment: (a) no event or
condition shall have occurred and then be continuing which constitutes a Default or Event of
Default; (b) the representations and warranties contained in Article 4 of the Credit Agreement are
true and correct in all material respects (except to the extent any such representation or warranty
is stated to relate solely to an earlier date); and (c) Borrower has no offsets, defenses or
counterclaims as to the Facility extended by Lenders to Borrower, the Loan Documents or the
indebtedness evidenced thereby. Borrower and Guarantor hereby reaffirm as of the date hereof all
affirmative covenants and negative covenants contained in the Credit Agreement as if more fully set
forth herein.

4. AMENDMENTS.

Notwithstanding anything contained to the contrary in the Credit Agreement, the following
terms and conditions shall apply:

A. the following definition shall be deemed added in the correct alphabetical order to Article
1: “Accordion Option. Accordion Option shall have the meaning given such term in Section 2.02(i)
hereof.”

B. the definition of “Authorized Signatory” shall be deemed deleted and replaced with the
following definition: “Authorized Signatory means any of the General Counsel, Chief Executive
Officer/President, Corporate Secretary or Chief Financial Officer/Treasurer.”

C. the words “Unrestricted Cash,” shall be deemed added after the word “including” in the
second line of the definition of “Borrowing Base.”

D. the following definition shall be deemed added in the correct alphabetical order to Article
1: “Unrestricted Cash. Unrestricted Cash means all cash and cash equivalents as defined
by GAAP in amounts exceeding Ten Million Dollars ($10,000,000).”

5. EXTENSION OF CONSENT AND WAIVER.  In accordance with Section 10.02(b)(ii) of the
Credit Agreement, the Requisite Lenders hereby temporarily waive the restriction set forth in
Section 6.08 of the Credit Agreement limiting the sum of the Speculative Units and the Model Units
to an amount not to exceed twenty-five percent (25%) of the aggregate number of unit sales, as
measured during the last twelve (12) month period at the end of each fiscal year. The Requisite
Lenders hereby waive the restriction contained in Section 6.08 of the Credit Agreement for the
period commencing on October 1, 2006, extending through the last fiscal quarter of 2006 and the
fiscal year of 2007, and concluding on December 31, 2008. The twenty-five percent (25%)
restriction will be reinstated and become fully effective for the fiscal year commencing on January
1, 2009 and shall continue for each fiscal year thereafter until the end of the Term.

6. EFFECT OF THIRD AMENDMENT. Except as modified by this Third Amendment, the Credit
Agreement remains in full force and effect. In the event of any conflict between this Third
Amendment and the Credit Agreement, the provisions and intent of this Third Amendment shall
control.

7. COUNTERPARTS. This Third Amendment may be executed and delivered by one or more of
the parties hereto on any number of separate counterparts and a complete set of such counterparts
taken together shall be deemed to constitute one and the same instrument.

8. GOVERNING LAW. This Third Amendment shall be governed by the laws of the State of
Florida.

9. WAIVER OF JURY TRIAL.

EACH OF BORROWER AND GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY AND
ALL RIGHT IT MAY HAVE TO A TRAIL BY JURY IN RESPECT OF ANY LITIGATION (INCLUDING, BUT NOT LIMITED
TO, ANY CLAIMS, CROSS-CLAIMS OR THIRD-PARTY CLAIMS) ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS THIRD AMENDMENT TO CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS
CONTEMPLATED HEREIN. EACH OF BORROWER AND GUARANTOR HEREBY CERTIFIES THAT NO REPRESENTATIVE OR
AGENT OF THE LENDERS, NOR THE LENDERS’ COUNSEL, HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE
LENDERS, OR THE AGENT ON BEHALF OF THE LENDERS, WOULD NOT, IN THE EVENT OF SUCH LITIGATION, SEEK TO
ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION. EACH OF BORROWER AND GUARANTOR ACKNOWLEDGES
THAT THE LENDERS HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, INTER ALIA, THE PROVISIONS OF
THIS PARAGRAPH.

IN WITNESS WHEREOF, the parties have duly executed this Third Amendment to Credit Agreement
and Consent and Waiver on the day and year first above written.

	 	 	BORROWER:

AVATAR PROPERTIES INC., a Florida corporation

BY: /s/ Patricia K. Fletcher

NAME:Patricia K. Fletcher

TITLE: Executive Vice President

Date:     August 14, 2007     

JOINED IN BY GUARANTOR:

AVATAR HOLDINGS INC., a Delaware corporation

BY: /s/ Patricia K. Fletcher

NAME: Patricia K. Fletcher

TITLE: Executive Vice President

Date: August 14, 2007     

LENDERS:

WACHOVIA BANK, NATIONAL ASSOCIATION

BY: /s/ R. Scott Holtzapple

NAME: R. Scott Holtzapple

TITLE: Senior Vice President

Date: August 9, 2007     

GUARANTY BANK

BY:/s/ John Wedemeyer     

NAME: John Wedemeyer

TITLE: Vice President

Date: August 9, 2007     

FRANKLIN BANK, SSB, a Texas Savings Bank

BY:_/s/ Lawrence Shields     

NAME: Lawrence Shields

TITLE: Vice President

Date: August 9, 2007

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