THIS DEVELOPMENT AGREEMENT (this "Agreement") is made this 4^th day of March, 2004 (the "Effective Date"), by and between ST. CHARLES COMMUNITY, LLC, a Maryland limited liability company (the "Developer") and U.S. HOME CORPORATION, a Delaware corporation (the "Builder").

A. The Developer is engaged in the subdivision and development of a residential planned unit development community located in Charles County, Maryland and known as St. Charles ("St. Charles").

B. A portion of the St. Charles community identified by cross-hatching on the drawing attached hereto as Exhibit A is being developed by the Developer as a residential community known as Fairway Village ("Fairway Village"). The development plans for Fairway Village contemplate that from and after the Effective Date, Fairway Village will be developed with an additional approximately 1,950 residential lots (each, a "Lot" and collectively, the "Lots"), such Lots to be for the construction of attached and detached single family homes (and not condominiums or multifamily units) (each, a "Unit" and collectively, the "Units").

C. The Developer and the County Commissioners of Charles County, Maryland, a body corporate (the "County") are parties to an Order dated as of December 13, 1989, as amended on August 15, 1994, as further amended on July 22, 2002 (collectively, the "Order"), pursuant to which the Developer has agreed, inter alia, to make certain public facility improvements as more fully described in the Order (the "Public Facility Improvements") to facilitate the development of Fairway Village.

D. The Developer and the County have further agreed, on terms and conditions more fully set forth in the Order, that the cost of the Public Facility Improvements will be financed through the issuance by the County of its general obligation bonds (the "Bond Financing").

E. The County has required that the Developer secure its obligations with respect to the Bond Financing with the posting of one or more letters of credit (each, an "LOC" and collectively, the "LOC's"), from time to time with the County.

F. To facilitate the development of Fairway Village, the Builder has agreed to post one or more of the LOC's required in connection with the Bond Financing, on the terms and conditions set forth in this Agreement, and in return therefor, the Builder will have the right to purchase Lots in Fairway Village on a preferential basis, also on the terms and conditions set forth in this Agreement.

NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which is acknowledged, the Developer and the Builder agree as follows:

1. Letters of Credit. The Builder agrees that at any time, and from time to time, upon not less than thirty (30) days written notice from the Developer, the Builder will provide one or more LOC's in form substantially similar to the form attached hereto as Exhibit B, to secure the obligations of the Developer to the County pursuant to the Bond Financing. In no event shall the aggregate face amount of LOC's posted by the Builder from time to time be required to exceed a sum equal to Twenty Million Dollars ($20,000,000.00). Each LOC shall be issued by a financial institution acceptable to the County in its sole discretion, shall be irrevocable for a period of one year, and shall contain an "evergreen" provision, which provides for automatic renewal of the LOC unless prior written notice of non-renewal is given by the issuer of the LOC not less than thirty (30) days prior to the expiration thereof, in which event the County shall have the right to draw upon the full amount thereof and hold such proceeds as cash collateral hereunder in lieu thereof, unless a substitute LOC acceptable to the County is posted by the Builder at least fifteen (15) days prior to such expiration date. The Developer agrees that Bank One will be an acceptable issuer of the LOC. The Builder shall pay all costs and expenses associated with providing the LOC's from time to time, including, without limitation, all issuance fees, and such LOC's shall be issued solely on the credit of the Builder. The Builder acknowledges that the aggregate face amount of the LOC's required to be provided by the Builder may both increase and decrease from time to time, provided that the maximum amount secured by the LOC's at any time shall not exceed $20,000,000.00.

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