LIMITED PARTNERSHIP AGREEMENT OF NAVO SOUTH DEVELOPMENT PARTNERS, LTD.

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EXHIBIT 10.4

LIMITED PARTNERSHIP AGREEMENT

OF

NAVO SOUTH DEVELOPMENT PARTNERS, LTD.

(A TEXAS LIMITED PARTNERSHIP)

THESE PARTNERSHIP INTERESTS HAVE NOT BEEN REGISTERED

UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR

PURSUANT TO THE PROVISIONS OF ANY STATE SECURITIES ACT

CERTAIN RESTRICTIONS ON TRANSFERS OF INTERESTS

ARE SET FORTH HEREIN

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LIMITED PARTNERSHIP AGREEMENT

OF

NAVO SOUTH DEVELOPMENT PARTNERS, LTD.

This Limited Partnership Agreement of Navo South Development Partners, Ltd.

(the "Partnership") dated as of the 18th day of December,2003, is made and

entered into by and among G.P. Navo South, L.L.C., a Texas limited liability

company, as General Partner, and ASHTON DALLAS RESIDENTIAL L.L.C., a Texas

limited liability company (sometimes referred to as "Ashton Woods Homes"),

HORIZON HOMES, LTD., a Texas limited partnership (sometimes referred to as

"Horizon Homes"), and PRIORITY DEVELOPMENT, L.P., a Delaware limited partnership

(sometimes referred to as "Priority Development"), collectively as Limited

Partners, whether one or more.

WHEREAS, the General Partner and the Limited Partners wish to form a

limited partnership under the Texas Revised Limited Partnership Act for the

purpose of acquiring certain real property, holding such property for investment

and appreciation, and selling or leasing such property.

NOW, THEREFORE, in consideration of the mutual promises made herein, the

parties, intending to be legally bound, hereby agree as follows:

ARTICLE 1

Definitions

The capitalized terms used in this Agreement shall, unless the context

otherwise requires, have the meanings specified in this Article.

1. "Act" means the Texas"Revised Limited Partnership Act, as amended from

time to time.

2. "Adjusted Capital Account Deficit" means, with respect to any Partner,

the deficit balance, if any, in such Partner's capital account as of the end of

the relevant fiscal year, after giving effect to the following adjustments:

(a)Credit to such capital account any amounts which such Partner is deemed

to be obligated to restore pursuant to Treasury Regulations Sections

1.704-1(b)(2)(ii)(c), 1.704-2(g)(1) and 1.704-2(i)(5); and

(b) Debit to such capital account the items described in Treasury

Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6).

The foregoing definition of "Adjusted Capital Account Deficit" is intended

to comply with the provisions of the Treasury Regulations Sections

1.704-1(b)(2)(ii) (d) and 1.704-2, and shall be interpreted consistently

therewith.

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3. "Affiliate" means any person who directly or indirectly through one or

more intermediaries controls or is controlled by or is under common control

with the person to whom reference is made. The term "control" as used herein

(including the terms "controlling," "controlled by," and "under common control

with") means the Possession, direct or indirect, of the power (i) to vote 50% or

more of the outstanding Voting securities of a person, or (ii) otherwise to

direct the management policies of such person by contract or otherwise.

4. "Agreement" means this Limited Partnership Agreement of Navo South

Development Partners, Ltd.

5. "Budget" means the cash budget prepared by the General Partner setting

forth the estimated Project costs and expenses and other expenditures, projected

revenues and capital and operating expenditures, as well as reasonable reserves

for future cash needs, all as approved from time by a Majority Interest of the

Partners.

6. "Capital Contributions" means the total of all capital contributions

made by the Partners hereunder.

7. "Capital Profits" means any Profits to the extent such Profits arise

from the sale or disposition of all or any portion of the Property.

8. "Code" means the Internal Revenue Code of 1986, as amended from time to

time.

9. "Distributable Cash Flow" means the amount, if any, of Partnership cash

on hand, as of the date of calculation, which is not necessary to meet the

immediate and reasonably foreseeable cash needs of the Partnership such that the

same is available for distribution to the Partners, as determined from time to

time by the General Partner with the approval of a Majority Interest of the

Limited Partners.

10. "General Partner" means G.P. Navo South, L.L.C., a Texas limited

liability company, or any successor in such capacity.

11. "Land" means the approximately 259.55 acre tract of land in Denton

County, Texas described in Schedule B hereto which is to be purchased by the

Partnership and developed into single family residential lots.

12. "Limited Partner" means any of the parties identified as such on

Schedule A attached hereto, acting in his or its capacity as a limited partner

of the Partnership, or any successor in such capacity.

13. "Majority Interest of the Limited Partners" means one (1) or more

Limited Partners who own in the aggregate more than fifty percent (50%) of the

total Partnership Interests of the Limited Partners, exclusive of the

Partnership Interest owned by any Limited Partner who is not entitled to vote

pursuant to Section 4.1(d) hereof, after receipt by the Limited Partners

entitled to vote of notice of such item requiring a vote and/or approval of the

Limited Partners.

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14. "Majority Interest of the Partners" means one (1) or more Partners who

own in the aggregate more than fifty percent (50%) of the total Partnership

Interests of all of the Partners, exclusive of the Partnership Interest owned by

any Partner who is not entitled to vote pursuant to Section 4.1(d) hereof, after

receipt by the Partners entitled to vote of notice of such item requiring a vote

and/or approval of the Partners.

15. "Minimum Gain" means, with respect to all norecourse liabilities of

the Partnership, the minimum amount of gain that would be realized by the

Partnership if the Partnership disposed of the Partnership Property subject to

such liability in full satisfaction thereof computed in accordance with Treasury

Regulations Section 1.704-2(d).

16. "Minimum Gain Share" means, for such Partner, such Partner's share of

Minimum Gain for the fiscal year (after taking into account any decrease in

Minimum Gain for such year), such share to be determined under Treasury

Regulations Section 1.704-2(g).

17. "Net Capital Contributions" means the aggregate of Capital

Contributions made by the Partners reduced (but not below zero) by the aggregate

distributions to such Partners under Section 6.1(a) hereof.

18. "Optional Loans" means the loans made by the Partners in accordance

with Section 4.1 below.

19. "Partner" means the General Partner or any Limited Partner.

20. "Partnership" means the Texas limited partnership formed pursuant to

this Agreement.

21. "Partnership Interest" means the percentage of ownership interest of a

Partner in the Partnership at any particular time.

22. "Profits and Losses" means, for each fiscal year or other period, an

amount equal to the Partnership's income or loss for such year or period

determined in accordance with Code Section 703(a) (for this purposes, all items

of income, gain, loss, or deduction required to be stated separately pursuant to

Code Section 703(a)(1) shall be included in taxable income or loss), with the

following adjustments:

(a) Any income of the Partnership that is exempt from federal income tax

and not otherwise taken into account in computing Profits or Losses pursuant to

this definition shall be added to such taxable income or loss;

(b) Any expenditures of the Partnership described in Code Section

705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to

Treasury Regulations Section 1.7041(b)(2)(iv)(i) and not otherwise taken into

account in computing Profits or Losses pursuant to this definition, shall be

subtracted from such taxable income or loss;

(c) Gain or loss resulting from any disposition of Partnership property

with respect to which gain or loss is recognized for federal income tax purposes

shall be computed by reference to the fair

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market value of the property disposed of, notwithstanding that the adjusted tax

basis of such property differs from such fair market value;

(d) In lieu of the depreciation, amortization, and other cost recovery

deductions taken into account for computing such taxable income or loss there

shall be taken into account depreciation, amortization and other deductions for

such fiscal year or period, computed in accordance with the fair market value of

the property to which such deductions relate.

23. "Treasury Regulations" means the income tax regulations promulgated

under the Code, as amended from time to time.

ARTICLE 2

ORGANIZATION

SECTION 2.1. FORMATION AND CONTINUATION OF BUSINESS

The Partnership has been formed under and pursuant to the provisions of

the Act. The parties hereto hereby agree to continue the business of the

Partnership pursuant to this Agreement.

SECTION 2.2. NAME, PLACE OF BUSINESS AND OFFICE

(a) The Partnership shall be conducted under the name and style of Navo

South Development Partners Ltd., The Partnership shall maintain its principal

office at the following address: 12890 Hillcrest Road, Suite 103, Dallas, Texas

75230. The General Partner may at any time change the location of the

Partnership's office and may establish additional offices, if it deems it

advisable. The General Partner shall promptly give the Partners written notice

of any change in location of the principal office of the Partnership.

(b) The General Partner shall serve as agent for service of process on the

Partnership. The General Partner shall timely record an appropriate certificate

of limited partnership in the proper records in the State of Texas and shall

take such steps as are necessary to qualify the Partnership to conduct business

in other states, as required by local law.

SECTION 2.3. PURPOSES AND CHARACTERS OF BUSINESS; POWERS

(a) The purposes and character of the business of the Partnership are as

follows:

(1) to acquire the Land;

(2) to obtain debt financing for the acquisition of the Land and

to mortgage or grant liens on Partnership assets as security

therefore;

(3) to subdivide and develop the Land into residential lots with

roads and underground utility facilities;

(4) to own, manage, operate, lease and sell the Land; and

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(5) to do any and all things necessary or desirable to carry out

the foregoing activities and any other activity contemplated

by this Agreement.

(b) The Partnership shall have any and all powers which are necessary or

desirable to carry out the purposes and business of the Partnership. The

Partnership shall carry out the foregoing activities pursuant to the

arrangements set forth in this Agreement. The Partnership shall not engage in

any other business or activity without the unanimous consent of the Partners.

SECTION 2.4. ACQUISITION OF THE LAND

The Land is owned by Denton 380 Associates, L.P., an unrelated third

party. The Partners shall cause the Partnership to purchase the Land in

accordance with the provisions of a contract of sale entered into by J. Baker

Acquisition Corporation Which will be assigned to the Partnership.

SECTION 2.5. DEVELOPMENT AGREEMENT

The Partnership shall enter into a contract with J. Baker Corporation

(the "Development Manager") to supervise the development of the Land. The

Development Manager shall be entitled to receive such fees as may be specified

in a development agreement with the Partnership which has been approved by a

Majority Interest of the Limited & Partners.

SECTION 2.6. TERM

The Partnership term commenced on the effective date of the Original

Agreement and shall continue in full force and effect until December 31,2015,

unless dissolved earlier pursuant to the provisions hereof.

ARTICLE 3

PARTNERSHIP CAPITAL

SECTION 3.1. CAPITAL CONTRIBUTIONS

Upon the formation of the Partnership the partners shall contribute to the

capital of the Partnership the respective amounts specified on Schedule A. No

Partner shall have an obligation to make any further Capital Contributions to

the Partnership.

SECTION 3.2. PARTNERSHIP CAPITAL

(a) No Partner shall be paid interest on any Capital Contribution to the

Partnership.

(b) No Partner shall have the right to withdraw all or any part of its

Capital Contribution or to receive any return of any portion of its Capital

Contribution, except as may be otherwise specifically provided in this

Agreement. The obligations of the Partners to contribute Capital Contributions

are personal to the Partners and may not be enforced by any third party.

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(c) Under circumstances involving a return of any Capital Contribution, no

Partner shall have the right to receive property other than cash.

SECTION 3.3. LIABILITY OF PARTNERS

(a) The Limited Partners shall not be liable for the debts, liabilities,

contracts or any other obligation of the partnership, except to the extent

provided in the Act. No Partner shall be liable for the debts or liabilities of

any other Partner.

(b) No Partner shall be required to contribute to the capital of, or loan,

the Partnership any funds other than those amounts required to be made under

this Agreement.

(c) The General Partner shall not be liable for the return of all or any

portion of the Capital Contributions of the Limited Partners.

SECTION 3.4. CAPITAL ACCOUNTS

(a) (1) A capital account shall be established and maintained for each

Partner.

(2) A Partner's capital account shall be credited with (A) the

amount of cash and the fair market value of any property contributed by such

Partner to the Partnership; (B) such Partner's allocable share of Profit, income

and gain; and (C) the amount of any partnership liabilities that are expressly

assumed by the Partner or that are secured any Partnership property distributed

to such Partner.

(3) A Partner's capital account shall be debited with (A) the

amount of cash and the fair market Value of any Partnership property distributed

to such Partner pursuant to any provision of this Agreement; (B) such Partner's

allocable share of losses, deductions and other losses; and (C) the amount of

any liabilities of such Partner's that are expressly assumed by the Partnership

or that are secured by any Property contributed by such Partner to the

Partnership.

(4) Upon the occurrence of certain events (as described in Treasury

Regulations Section 1.704-1 (b) (2) (iv) (f), a Majority Interest of the

Partners may agree to increase or decrease the capital accounts of the Partners

to reflect a revaluation of Partnership property on the Partnership's books.

(5) From time to time the General Partner (with the consent of a

Majority Interest of the Partners) may make such modifications to the manner in

which the capital accounts are computed to comply with Treasury Regulations

Sections 1.704-1(b) and 1.704-2, provided that such modifications are not

likely to have a material effect on the amounts distributable to any Partner

pursuant to this Agreement or on the taxable income or loss allocated to any

Partner.

(6) The capital account of each Partner shall be determined after

giving effect to all transactions which have been effected prior to the time

when such determination is made giving rise to the allocation of Profits and

Losses and to all of the Partner's contributions and distributions theretofore

made.

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(7) In the event that any Partner makes a loan to the Partnership

(which may only be made with the consent of a Majority Interest of the

Partners), such loan shall not be considered a contribution to the capital of

the Partnership and shall not increase the capital account of the lending

Partner. Repayment of such loans shall not be deemed withdrawals from the

capital of the Partnership.

(8) The foregoing provisions and the other provisions of this

Agreement relating to the maintenance of capital accounts are intended to comply

with Treasury Regulations Sections 1.704-1(b) and 1.704-2, and shall be

interpreted and applied in a manner consistent with these regulations.

(b)Any fees, salary, or other compensation paid to a Partner pursuant to

this Agreement and any returns on capital provided herein shall be treated as

guaranteed payments under Code Section 707(c). The guaranteed payments shall

not be treated as distributions to such Partner for federal income tax purposes.

Such payments to a Partner shall not reduce the Partner's capital account,

except to the extent of its distributive share of any Partnership Losses or

other downward capital adjustments resulting from the guaranteed payment.

(c) Any person who acquires a Partnership Interest directly from a

Partner, or whose Partnership Interest is increased by means of a transfer or

deemed transfer of all or part of the interest of another Partner, shall have a

single capital account which includes the capital account balance of the

Partnership Interest so acquired or transferred.

(d) No Partner shall have any obligation to restore a deficit balance in

its capital account. Furthermore, a deficit capital account balance of a Partner

shall not be deemed a liability of such Partner or an asset of the Partnership.

SECTION 3.5. PARTNERSHIP INTERESTS

The Partnership Interest of each Partner is set forth opposite its

respective name on Schedule A, attached hereto.

ARTICLE 4

OPTIONAL LOANS

SECTION 4.1. OPTIONAL LOANS

(a) If at any time additional funds are required by the Partnership to

cover operating deficits or other cash needs of the Partnership, the General

Partner shall notify the Partners in writing of the need for the Partners to

loan funds to the Partnership (any loans made pursuant to this Section 4.1 are

hereinafter singularly called an "Optional Loan" and collectively called the

"Optional Loans". Such notice shall set forth the reason for such needed funds,

the total amount of money needed, each Partner's prorate share of the Optional

Loan and the due date thereof, which shall be within ten (10) business days of

the written notice.

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(b) In addition, if a Partner or Affiliate of a Partner makes payment

directly to a creditor or another Partner in satisfaction of any indebtedness of

the Partnership pursuant to a guaranty, indemnity or otherwise, or if any

collateral interest given by a Partner or Affiliate of a Partner to such

creditor to secure the Partnership debt shall be foreclosed and the proceeds

applied to such debt, then in any such case, the Partner making such payment or

suffering such foreclosure (or whose Affiliate made payment or suffered the

foreclosure) shall be deemed to have made an Optional Loan to the Partnership in

the amount of the debt paid or value of the property foreclosed.

(c) Each Optional Loan shall bear interest at the rate of ten percent

(10%) per annum, shall only be payable from the gross revenues received by the

Partnership from the ownership, operation and sale of the Land, and shall be so

repaid before any distribution of Distributable Cash Flow.

(d) Each Partner shall be obligated to loan to the Partnership its share

(which shall be prorata, based on Partnership Interests) of Optional Loan within

ten (10) business days of the date the General Partner gives notice of the need

therefor or the date on which a Partner is deemed to have made an Optional Loan

pursuant to subparagraph (b) hereof, as applicable. No Partner shall be

personally liable to the Partnership or the other Partners for any failure to

make its share of any Optional Loan. However, any Partner (a "Defaulting

Partner") who fails to loan its share of the Optional Loan shall be deemed in

default hereunder and the other Partners (the "Contributing Partners") shall

make a loan, prorata, on behalf of the Defaulting Partner and shall have the

rights set forth in this Section 4.1 as a consequence thereof. Upon the

occurrence of such default, the Defaulting Party shall no longer be entitled to

cast any vote or otherwise participate in the management or operation of the

Partnership until the amount of the such Defaulting Partner's share of the

Optional Loan, together with interest thereon at the rate of ten percent (10%)

per annum, has been repaid to the Contributing Partners or the Contributing

Partners may exercise the Option, as set forth in Section 7.4(b). Further, until

such time as such Defaulting Partner's share of the Optional Loan has been so

repaid, all distributions of Distributable Cash Flow or other sums which would

otherwise be made to the Defaulting Partner under this Agreement shall instead

be distributed to the Contributing Partners in repayment of the amount of the

Defaulting Partner's share of the Optional Loan plus interest thereon has been

fully paid to the Contributing Partners.

ARTICLE 5

RIGHTS, POWERS AND DUTIES OF THE GENERAL PARTNER

SECTION 5.1. MANAGEMENT AND CONTROL OF THE PARTNERSHIP

(a) The General Partner shall have all the rights, powers and obligations

of a general partner of a limited partnership under the Act. Except as otherwise

provided in subsections (b) and (c) of this Section, the General Partner shall

have the full and exclusive right to manage and control the business and affairs

of the Partnership and to make all decisions on behalf of the Partnership

(without the joinder or consent of any Limited Partner), including (but not

limited to) the following:

(1) to acquire the Land and make improvements thereto;

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(2) to sell, exchange, lease, sublease or otherwise transfer assets

of the Partnership in the ordinary course of business;

(3) to hire and terminate Partnership employees, if any, and engage

the services of attorneys, consultants, accountants and other independent

contractors;

(4) to collect all payments due and owing to the Partnership;

(5) to incur and pay all expenses, debts and obligations of the

Partnership at such time or times; and from any source of funds of the

Partnership as the General Partner deem necessary or desirable;

(6) to execute and deliver from time to time such documents on

behalf of the Partnership as the General Partner may deem necessary or desirable

in the conduct of Partnership business;

(7)to perform, or cause to be performed, all the Partnership's

obligations under any agreement to which the Partnership or any nominee of the

Partnership is a party;

(8)to obtain and maintain any and all types of insurance coverage

on the assets and business of the Partnership and to protect the General Partner

and the Partnership against liability from third parties in such amounts as the

General Partner may deem necessary or desirable;

(9) to institute, prosecute, defend and settle any legal,

arbitration or administrative actions or proceedings on behalf of or against the

Partnership;

(10) to pay all taxes, assessments, and other impositions applicable

to Partnership assets and undertake when appropriate any action or proceeding

seeking to reduce such taxes, assessments or other impositions;

(11) to open and maintain bank accounts for the deposit of

Partnership funds, with withdrawals to be made upon the signature of the Manager

of the General Partner and one representative of one of the members of the

General Partner;

(12) to make such elections as are necessary or desirable pursuant

to the Code;

(13) to act as "tax matters partner" for the Partnership in any

Internal Revenue Service administrative proceeding in accordance with and to the

extent allowable by the applicable provisions of the Code; and

(14) to perform any and all acts, deemed by the General Partner as

necessary or desirable to conduct the business and affairs of the Partnership.

Except as provided hereinabove, the General Partner shall not be entitled

to any fee or compensation for its services hereunder. The General Partner may

be removed, with or without cause, at any time by the unanimous vote of the

Limited Partners. Upon removal of the General Partner, the former General

Partner shall hold its Partnership Interest as and become a Limited

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Partner and a successor General Partner shall be selected by a Majority Interest

of the Limited Partners.

(b) Without the consent of a Majority Interest of the Partners, the

General Partner shall not have the power or authority to take any action on

behalf of the Partnership with respect to the following:

(1) the sale, exchange or other disposition of all or substantially

all of the Property, except in accordance with the approved Budget;

(2) to make any expenditure or incur any obligation on behalf of the

Partnership except for expenditures and obligations incurred in accordance with

the Budget;

(3) to borrow money on behalf of the Partnership other than the

Optional Loans and ordinary trade debt or obligations reflected in the Budget;

(4) to mortgage, pledge, assign, encumber or grant security

interests in Partnership assets, revenues or incomes;

(5) to dissolve and wind up the Partnership;

(6) to permit any Partner to make a loan to the Partnership other

than the Optional Loans (for purposes hereof, funds expended by the General

Partner for which it is entitled to reimbursement under Section 5.3 here of

shall not be considered a loan to the Partnership);

(7) to admit any new Partner to the Partnership;

(8) to do any act in contravention of this Agreement;

(9) to do any act that would make it impossible to carry out the

purposes and business of the Partnership, as set forth in Section 2.3;

(10) to confess a judgment against the Partnership, except in

connection with the execution of mortgages and other security instruments;

(11 to possess Partnership property, or assign, pledge or

hypothecate Partnership property, for other than a Partnership purpose;

(12) as "Tax Matters Partner", (or its equivalent under state law),

to conclude a settlement or agreements extending the Statute of limitations

binding on the Partnership or any Partner with the Internal Revenue Service (or

any state taxing authority); or

(13) subject to the provision of Section 6.1 hereof, determine the

amount of Distributable Cash Flow and the timing of a distribution thereof to

the Partners.

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SECTION 5.2. AUTHORITY OF THE GENERAL PARTNER

Any person dealing with the Partnership or the General Partner may rely

upon a certificate signed by the General Partner concerning:

(a) the identity of the General Partner or any other Partner;

(b) the existence or nonexistence any fact that may constitute

conditions precedent to acts by the General Partner or in any other manner

germane to the affairs of the Partnership;

(c) any person who is authorized to execute and deliver any

instrument or document of the Partnership; or

(d) any act or failure to act by the Partnership or concerning any

other matter whatsoever involving the Partnership or any Partner.

SECTION 5.3. FEES AND OTHER COMPENSATION

The General Partner shall not be entitled to receive any fees, salary or

other compensation for services rendered in managing the business and affairs of

the Partnership. The General Partner shall be entitled to reimbursement by the

Partnership from time to time for all reasonable and necessary out of

pocket-expenses (as determined by the Limited Partners) incurred by the General

Partner in connection with the management and supervision of the business and

affairs of the Partnership.

SECTION 5.4. DEVOTIO