Hearthside Holdings, Inc., in favor of Agent (as modified, amended, restated, supplemented, renewed or replaced from time to time, the “ Holdings’ Pledge ”), pursuant to which such pledgor pledged to Agent as additional security for the Loan its ownership interests in Hearthside Homes, Inc.), (iv) Pledge and Security Agreement, dated as of September 15, 2006, by Signal Landmark Holdings, Inc., in favor of Agent, pursuant to which such pledgor pledged to Agent as additional security for the Loan its ownership interests in Signal Landmark (as modified, amended, restated, supplemented, renewed or replaced from time to time, the “ Signal Landmark Pledge ”), (v) Pledge and Security Agreement, dated as of September 15, 2006, by Hearthside Homes, Inc., in favor of Agent (as modified, amended, restated, supplemented, renewed or replaced from time to time, the “ Homes’ Pledge ” and, together with the Borrower Pledge, the Holdings’ Pledge, and the Homes’ Pledge, collectively, the “ Pledges ”), pursuant to which such pledgor pledged to Agent as additional security for the Loan its ownership interests in it subsidiaries identified therein, and (vi) certain other collateral assignments or security agreements for the benefit of the Agents and/or Lenders, including, without limitation, UCC-1 financing statements executed and delivered in connection with the Loan.

C.            The Guarantors have executed and delivered to Agent, as agent for the Lenders, the Unconditional Guaranty, dated as of September 15, 2006 (as the same may have been or may hereafter be modified, amended, restated, supplemented, renewed or replaced from time to time, the “ Payment Guaranty ”), made by the Guarantors for the benefit of Agent and the Lenders with respect to the Loan and certain other obligations of the Borrower.  The Loan Agreement, the Notes, the Deed of Trust, the Pledges, the Payment Guaranty, and all other Loan Documents (as defined in the Loan Agreement), as the same may have been or may hereafter be modified, amended, restated, supplemented, renewed or replaced from time to time, are referred to herein, collectively, as the “ Loan Documents .”

D.            Certain Events of Default have occurred under the Loan Agreement and the other Loan Documents, as described on Exhibit “A ” attached hereto (collectively, the “ Stated Defaults ”).

I.             The Borrower and the Guarantors have requested that Agent and Lenders forbear for a limited period of time (designated as the “Forbearance Period” in Section 4 ) from exercising certain rights and remedies provided to Agent and the Lenders under the Loan Documents and otherwise available at law or in equity as a result of the occurrence of the Stated Defaults, which remedies include but are not limited to publishing a notice of default under the Deed of Trust.  Subject to the terms and conditions contained herein, the Agent and Lenders are prepared to forbear from the exercise of their respective rights and remedies, but only during the Forbearance Period, except as otherwise expressly provided herein.

NOW, THEREFORE, FOR AND IN CONSIDERATION of the foregoing Recitals of Fact, the covenants hereinafter contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows:

2

Section 1.               Recitals of Fact .

(a)           The Borrower Parties represent and warrant that all of the above Recitals of Fact are true and correct and incorporated herein by reference, and may be relied on by the Agent and the Lenders as to their truth, completeness, and correctness.

(b)           The Borrower Parties acknowledge that the Agent and the Lenders are relying on the truth, completeness, and correctness of the statements and representations of the Borrower Parties in this Agreement, and the Borrower Parties represent that this Agreement contains no material misrepresentations or omissions by them.

Section 2.               Acknowledgment of Outstanding Indebtedness . The Borrower and the Guarantors acknowledge that:

(a)           The outstanding indebtedness owed by the Borrower to the Lenders under the Loan as of September 30, 2009 is as follows:

The above Loan amounts, plus all other Obligations, are subject to increase, decrease or other adjustment as a result of interest, Default Rate interest, late charges, fees and other charges including, without limitation, attorneys’ fees and other costs of collection which are payable to the Agent and/or the Lenders under the Loan Documents.  All amounts set forth above are due and payable without offset, deduction or counterclaim of any kind or character whatsoever.

(b)           The Borrower Parties acknowledge and agree that, except as hereafter otherwise stated by Agent in writing in its sole and absolute discretion, interest on the Loan calculated at the Default Rate will accrue and be payable from and after October 1, 2009.

Section 3.               Acknowledgement of Continuation of Liabilities .

(a)           The obligations in Section 2 and all other respective liabilities and obligations of the Borrower Parties under the Loan Documents shall, except as expressly modified in this Agreement, remain in full force and effect, and shall not be released, impaired, diminished or in any other way modified or amended as a result of the execution and delivery of this Agreement or by the agreements and undertakings of the parties contained herein.  The Borrower Parties hereby ratify and confirm each of the Loan Documents to which they are respectively a party and the rights granted thereunder in favor of the Agent and Lenders, and acknowledge and agree that the Loan Documents constitute valid and legally binding obligations against each Borrower Party that is a party thereto and are enforceable against such Borrower Party, the Property and all other Collateral in accordance with their terms without any defenses thereto.  The Borrower Parties hereby confirm that the security interests and liens granted pursuant to the Loan Documents continue to secure the obligations of the Borrower under the

3

Loan Documents and any obligations incurred following the Effective Date, and that such security interests and liens remain in full force and effect.

(b)           The Borrower Parties acknowledge and agree that the Stated Defaults have occurred and are continuing under the Loan Documents, and that any and all notices thereof required to be sent to the Borrower Parties, or any of them, under the Loan Documents have been properly and timely provided by the Agent on behalf of Lenders (or, if not so provided, are hereby waived) and all applicable cure periods, if any, have expired; that the indebtedness under the Loan shall remain due and payable pursuant to the terms of the Loan Agreement (except as otherwise expressly provided herein); that, except as expressly set forth in this Agreement, this Agreement is not intended to be, and shall not be deemed or construed to be, a satisfaction, reinstatement, novation, modification or release of the Loan, the Loan Documents, or any of them, or a waiver by the Agent or Lenders of any of their rights under the Loan Documents, or any of them, or at law or in equity; that none of this Agreement or any payments made or other actions taken pursuant to this Agreement shall be deemed to cure the Stated Defaults that have occurred under the Loan Documents or to cure or reinstate the Loan or the Loan Documents; and that, except as otherwise expressly provided in this Agreement, Agent and Lenders reserve all of their respective rights and remedies in connection with the Stated Defaults, under the Loan Documents and at law and in equity and are immediately entitled to execute such rights and remedies upon a Forbearance Termination Event (as defined in Section 7 ).

(c)           The Guarantors acknowledge and agree that the term “Guarantied Obligations” under the Payment Guaranty includes, without limitation, all amounts required to be paid by the Borrower to the Agent or Lenders under the terms of this Agreement.

Section 4.               Forbearance .

(a)           Subject to the satisfaction of the conditions precedent in Section 5 , for the period (hereinafter referred to as the “ Forbearance Period ”) beginning on the Effective Date and ending on the Forbearance Termination Date defined in Section 4(b) , the Agent and Lenders, without waiving, curing or affecting the Stated Defaults, hereby agree to forbear from the exercise of any of their rights and remedies available under the Loan Agreement and other Loan Documents on account of the Stated Defaults.  The Agent’s and Lenders’ forbearance provided for herein shall be effective only with respect to the Stated Defaults.

(b)           The Forbearance Period will terminate upon the earlier to occur of the following (the “ Forbearance Termination Date ”):

(i)            November 1, 2009, at 5:00 p.m. (California time), or

(ii)           the occurrence of any other Forbearance Termination Event.

(c)           During the Forbearance Period and provided no Forbearance Termination Event has occurred, and further provided that the terms and conditions of this Agreement are satisfied, the Agent and Lenders agree that they will not exercise any default remedies against the Borrower or the Guarantors (except as otherwise expressly provided in this Agreement) as a result of the Stated Defaults.

4

(d)           On the Forbearance Termination Date, all forbearances, deferrals and indulgences granted by the Agent and Lenders in this Section 4 shall automatically terminate, and the Agent and Lenders shall thereupon be entitled immediately to exercise any and all rights and remedies under the Loan Documents, this Agreement and otherwise available at law or in equity, including, without limitation, publishing a notice of default under the Deed of Trust and foreclosing on the Property, and all other Collateral, all without further notice or demand of any kind.

(e)           The Borrower Parties understand and specifically acknowledge and agree that the forbearance provided in this Agreement does not relate or extend to any actions that the Agent or Lenders may take under the Loan Documents, at law or in equity, to preserve and protect any of the collateral described in the Loan Documents or the interests of the Agent or Lenders in any such collateral, including, without limiting the generality of the foregoing (i) the defending of or intervention in actions or assertions of claims (such as foreclosure proceedings, mechanics’ liens filings or proceedings, and stop notices) brought or made by third parties or by any Borrower Party, relating to any such collateral or the interests of the Agent or Lenders, or (ii) the sending of notices to any persons or entities concerning (A) the rights of the Agent or Lenders under the Loan Documents (including, without limitation, the filing of a proof of claim in any bankruptcy proceeding) and (B) the existence of security interests or liens in favor of the Agent or Lenders relating to such collateral.

(f)            [Intentionally Omitted.]

(g)           Notwithstanding anything to the contrary herein or in the Loan Documents, from and after the Effective Date neither Agent nor Lenders shall have any obligation to make Loans or any other advances under the Loan Documents.

Section 5.               Effectiveness of Agreement .  The undertakings of the Agent and Lenders and the Forbearance Period provided for herein shall not become effective unless, on or before 5:00 p.m. (California time) on October 1, 2009 (unless such date and time shall be extended in writing by the Agent in its sole and absolute discretion):

(a)           the Agent receives a duly executed counterpart of this Agreement from the Borrower and the Guarantor;

(b)           no Material Adverse Effect shall have occurred;

(c)           all legal fees and costs of the Agent’s and Lenders’ in-house and outside-retained attorneys in negotiating and documenting the terms and conditions of this Agreement and any other instruments or agreements executed concurrently herewith have been paid by the Borrower to the Agent and Lenders, or provision for such payment acceptable to Agent has been made;

(d)           all fees, expenses and costs in connection with the most recent appraisal, in the amount of $10,945.00, to the extent not previously paid, have been paid by Borrower, or provision for such payment acceptable to Agent has been made.

5

(e)           all other fees and expenses payable by the Borrower to the Agent or Lenders pursuant to the terms of the Loan Documents or this Agreement have been paid by the Borrower to the Agent or Lenders, including, without limitation, all costs of enforcement of the Loan incurred by the Agent or Lenders prior to the Effective Date, or provision for such payment acceptable to Agent has been made.

Upon such timely return of the executed counterparts of this Agreement and satisfaction of the conditions set forth above (or waiver in writing by the Agent of any such conditions in its sole and absolute discretion), the terms and conditions of this Agreement, including without limitation, the forbearance provided in Section 4 , shall be deemed effective and operative as of the Effective Date.

Section 6.               Representations and Warranties .

(a)           Except for the occurrence of the Stated Defaults and the representations and warranties set forth in sections 6.15, 6.16, and 6.17 of the Loan Agreement, each of the representations and warranties made by or on behalf of any Borrower Party contained in the Loan Documents or in any document or instrument delivered pursuant to or in connection with the Loan Agreement or any other Loan Document are true and correct in all material respects as of the date as of which they were made and is also true and correct in all material respects at and as of date of this Agreement, with the same effect as if made at and as of that time (except to the extent of changes resulting from transactions contemplated or permitted by the Loan Documents, changes previously disclosed to the Agent in writing and approved by the Agent in writing and except to the extent that such representations and warranties relate expressly to an earlier date).  Borrower Parties each further represent and warrant to the Agent and Lenders that the execution, delivery and performance by such Borrower Party of this Agreement have been duly authorized by all requisite limited liability company or other applicable legal action on the part of such Borrower Party and will not violate its certificate or articles of formation, limited liability company agreement, operating agreement or other organizational documents, or any indenture, lease, promissory note or other document, instrument or agreement to which any Borrower Party is a party or by which it or its assets are bound.

(b)           Each of the Borrower Parties represents and warrants to the Agent and Lenders that