AIRCRAFT MORTGAGE AND SECURITY AGREEMENT

Exhibit 10.3

AIRCRAFT MORTGAGE

AND SECURITY AGREEMENT

between

MARTIN AVIATION, INC.

and

WILLIAM LYON HOMES, INC.

dated as of September 9, 2009

Aircraft:

Gulfstream G-IV, Serial Number 1140

Registration Number: N77WL

Engines: Rolls-Royce

Model: Tay MK 611-8

Serial Numbers: 16388 and 16387

AIRCRAFT MORTGAGE AND SECURITY AGREEMENT

THIS AIRCRAFT MORTGAGE AND SECURITY AGREEMENT (“Mortgage”) dated as of the 9th day of September, 2009, between MARTIN AVIATION, INC. , a corporation formed under the laws of the State of California, having its headquarters at 19300 Ike Jones Road, Santa Ana, California 92707 (“Mortgagor”), and WILLIAM LYON HOMES, INC., a corporation formed under the laws of the State of California, having its headquarters at 4490 Von Karman, Newport Beach, California 92660 (“Lender”).

W I T N E S S E T H :

WHEREAS, Mortgagor has purchased the Aircraft, the Parts, the Engines and their components and attachments and has executed that certain Secured Promissory Note dated as of September 9, 2009 (the “Note”) to Lender pursuant to which Mortgagor has assumed indebtedness owed to Lender by Presley CMR, Inc., a California corporation (“Presley CMR”), the seller of the Aircraft, as payment of a portion of the purchase price; and

WHEREAS, Lender and Mortgagor wish that the payment of all amounts due under the Note be secured by a security interest as herein provided;

NOW, THEREFORE, the parties hereto agree and declare as follows:

For and in consideration of the premises hereof and to secure (i) the performance of all Secured Obligations (as defined below), and (ii) payment of all amounts due under the Note, Mortgagor does hereby mortgage, hypothecate, pledge, confirm and grant a security interest in, lien upon and right of set-off against, the property described in Granting Clauses I and II, whether now owned or hereafter acquired (which property, including all property hereafter specifically subjected to this Mortgage and any other agreement supplemented hereto, is referred to herein as the “Mortgaged Property”), forever with power of sale, to Lender, its successors and assigns:

GRANTING CLAUSE I

All right, title and interest of Mortgagor in and to the Aircraft, the Parts, the Engines (as defined below) and their components and attachments, and all manuals and log books and other documentation relating thereto as defined in the Aircraft Purchase and Sale Agreement between Presley CMR and Mortgagor dated September 3, 2009 (the “Purchase Agreement”).

GRANTING CLAUSE II

All proceeds of insurance from any loss of, or damage to, any properties mentioned or referred to in Granting Clause I and any other proceeds of any kind resulting from any Event of Loss (as defined below) with respect thereto (other than insurance proceeds payable to or for the benefit of Mortgagor as owner trustee or in its individual capacity).

TO HAVE AND TO HOLD, the Mortgaged Property under and subject to the terms and conditions set forth herein, for the benefit and security of all Secured Obligations and of all and singular the present and future holders thereof and to secure the payment and performance of the Secured Obligations, ratably and without any preference, distinction or priority as to lien or otherwise of any such Secured Obligations over any other Secured Obligation by reason of the difference in time of the actual making, issue, delivery, incurrence or sale of the respective Secured Obligations or for any other reason whatsoever, except as herein otherwise expressly provided or referred to, and so that each and every Secured Obligation, whether outstanding on the date of this Mortgage or hereafter issued and delivered or incurred shall have the same lien and security, and so that each and every such Secured Obligation shall be equally and proportionately secured hereby as if it had been made, issued, delivered and incurred simultaneously with the execution and delivery of this Mortgage.

PROVIDED, HOWEVER, these grants are upon the condition that, unless and until an Event of Default has occurred and is continuing, neither Lender nor its successors or assigns shall disturb Mortgagor’s possession and use of the Aircraft, Engines, Parts or other property constituting all or part of the Mortgaged Property, subject to the further covenants, conditions, uses and trusts, and except as specifically set forth herein; and

IT IS HEREBY COVENANTED AND AGREED by and between the parties hereto that the Mortgaged Property is to be held and applied on the further covenants, conditions, uses and trusts set forth herein:

ARTICLE I - DEFINITIONS

1.1 Defined Terms . As used in this Mortgage, except as otherwise indicated herein, the following terms shall have the meanings set forth below or in the location indicated:

(a) “Aircraft” shall mean the Gulfstream G-IV, Serial No. 1140, FAA Registration No. N77WL, together with all Engines and all Parts.

(c) “Engine” shall mean those certain two Rolls-Royce Model Tay MK 611-8, Serial No. 16388 and Serial No. 16387, and any replacement Engine purchased in accordance with Paragraph 3.3(b) of this Mortgage.

(d) “Event of Default” shall have the meaning given to it pursuant to Paragraph 4.1 of this Mortgage.

(e) “Event of Loss” with respect to the Aircraft or any Engine shall mean any of the following events:

(i) loss of the Aircraft or any Engine or the use thereof due to destruction, damage beyond repair or rendition of such Aircraft or Engine permanently unfit for normal use from any reason whatsoever;

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(ii) any damage to the Aircraft or Engine (including those requiring the completion of an FAA Form 337, “Major Repair And Alteration Statement”) which results in an insurance settlement with respect to such Aircraft or Engine on the basis of total loss;

(iii) the theft, disappearance, condemnation, confiscation, attachment, sequestration, distraint or seizure of, or requisition of title to or use or possession of, such Aircraft or Engine for a period of sixty (60) consecutive days; or

(iv) the operation or location of the Aircraft, while under condemnation, confiscation, seizure, requisition or otherwise in any area excluded from coverage by any insurance policy in effect with respect to the Aircraft required by the provisions of this Mortgage or of the Purchase Agreement.

(f) “FAA” shall mean the United States Federal Aviation Administration, or the agency or official of the United States of America at the time administering the functions of the Federal Aviation Administration with respect to the regulation of aircraft.

(g) “Federal Aviation Act” shall mean the Federal Aviation Act of 1958, as amended from time to time, or any similar legislation of the United States enacted to supersede, amend or supplement such Act.

(h) “Insurer’s Certificate” shall mean a certificate of a Qualified Insurance Broker.

(i) “Mortgage” shall mean this Aircraft Mortgage and Security Agreement, as it from time to time may be supplemented or amended by any other supplements or amendments executed by and between Mortgagor and Lender.

(j) “Mortgaged Property” shall have the meaning specified in the paragraph of introduction immediately preceding the Granting Clauses of this Mortgage.

(k) “Note” shall mean the “Note” as defined in the Purchase Agreement.

(l) “Parts” shall mean all appliances, parts, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (but excluding complete Engines), so long as the same shall be (i) incorporated or installed in or attached to the Aircraft or any Engine, or (ii) otherwise subject to this Mortgage.

(m) “Person” shall mean an individual, a corporation, a limited liability company, a partnership, an unincorporated organization, an association, a joint-stock company, a joint venture, a trust, an estate or a government or any agency or political subdivision thereof.

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(n) “Qualified Insurance Broker” shall mean an aircraft insurance broker, designated by Mortgagor and satisfactory to Lender.

(o) “Secured Obligations” shall mean all obligations of Mortgagor under the Purchase Agreement and the Note, and all obligations of Mortgagor under this Mortgage and all future obligations under any loan agreements, promissory notes and other obligations of Mortgagor to Lender or Presley CMR arising from the Purchase Agreement.

Capitalized terms not otherwise defined in this Mortgage shall have the meanings set forth in the Purchase Agreement.

ARTICLE II - REPRESENTATIONS AND WARRANTIES

2.1 Ownership; Priority Lien; No Violation . Subject to Presley CMR’s obligation under the Purchase Agreement to deliver the Aircraft free and clear of all liens, claims, mortgages, interests and encumbrances, Mortgagor represents and warrants that on the date of execution of the Note and this Mortgage and for as long as the Note and this Mortgage shall remain in full force and effect:

(a) The Aircraft and Engines then being subjected to this Mortgage are free and clear of all liens, charges and encumbrances created by Mortgagor or any fractional interest owner taking title from Mortgagor, and Mortgagor, for the purposes of this Mortgage, shall be deemed to be the legal title holder of the Aircraft and Engines;

(b) This Mortgage has been duly executed and delivered by Mortgagor. This Mortgage is enforceable in accordance with its terms against Mortgagor and third parties subject, as to enforcement, to bankruptcy, insolvency, reorganization and other laws affecting creditors’ rights generally and to general equity principles; and

(c) Neither the execution and delivery by Mortgagor of this Mortgage nor compliance by Mortgagor with any of the terms and provisions of this Mortgage will, in any way, conflict with, result in any breach of, or constitute a default under, or result in the creation of any lien (other than the lien permitted under this Mortgage) upon any property of Mortgagor under:

(i) any statute, rule or regulation of the United States of America,

(ii) any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan, credit agreement or other agreement or instrument to which Mortgagor is a party or by which it or any of its properties may be bound or affected, or

(iii) any order, writ, injunction, decree, judgment, award, determination, direction or demand of any Federal, State, municipal or other governmental department, court, commission, board, bureau, agency or instrumentality, domestic or foreign, which is binding on Mortgagor.

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2.2 Insurer’s Certificate . Mortgagor shall deliver to Lender an Insurer’s Certificate as to the due compliance with the insurance provisions of Paragraph 3.4 hereof.

ARTICLE III - COVENANTS OF MORTGAGOR

3.1 Registration, Maintenance and Operation of Aircraft and Engines .

(a) Registration and Insignia .

(i) At or prior to the Closing Date (as defined in the Purchase Agreement), at its own cost and expense, and at all times during the term of this Mortgage, Mortgagor shall cause the Aircraft to be duly registered, in the name of Mortgagor in accordance with the Federal Aviation Act, and the Aircraft shall not be registered under the laws of any other country without the prior written consent of Lender.

(ii) On or before the date of this Mortgage, Mortgagor shall fasten or cause to be fastened and maintained in or on the Aircraft and each Engine, in a prominent location, nameplates identifying the interest of Lender in and to the Aircraft or Engines, as follows:

“PROPERTY OF MARTIN AVIATION, INC. SUBJECT TO A PERFECTED SECURITY INTEREST GRANTED TO WILLIAM LYON HOMES, INC. UNDER AN AIRCRAFT MORTGAGE AND SECURITY AGREEMENT DATED AS OF SEPTEMBER 9, 2009.”

Mortgagor shall not allow the name of any Person other than Lender to be placed on the Aircraft and Engines as a designation that might be interpreted as a lien thereon, provided, that Mortgagor may cause the Aircraft to be lettered and otherwise marked in an appropriate manner for convenience of identification of the interest therein of Mortgagor.

(b) Maintenance . After the Closing Date, and except as may otherwise be agreed in writing by Mortgagor and Lender, Mortgagor, at its own cost and expense during the term of the Purchase Agreement and until full and complete payment of the Note and of all amounts due or to become due under the Purchase Agreement, shall:

(i) make all necessary payments in order to maintain current enrollment of the Engines under any maintenance service plan established by the manufacturer;

(ii) maintain, service, repair, overhaul and test, or cause the same to be done to, the Aircraft and each Engine so as to keep them in as good operating condition as when subjected to the lien hereof, ordinary wear and tear excepted, fully operational, duly certified and in airworthy condition and in at least such condition as may be necessary to:

(A) enable the airworthiness certification of the Aircraft and the Engines by the FAA to be maintained in good standing at all time under the Federal Aviation Act and other applicable laws of the United States of America; and

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(B) comply with all regulations of the FAA and any other governmental agency having jurisdiction;

(iii) maintain all records, logs and other materials required by the FAA to be maintained in respect of the Aircraft and the Engines (and in the event the Aircraft and any Engine is repossessed pursuant to Article IV hereof, deliver all such materials pertaining thereto to Lender); and

(iv) promptly furnish to Lender such information as may be required to enable Lender to file any reports required to be filed by Lender with any governmental authority because of its interest in the Mortgaged Property.

(c) Operations . Mortgagor shall not permit the Aircraft and any Engine to be maintained, serviced, repaired, overhauled, tested, used or operated in violation of any law or any rule, regulation or order of any governmental authority having jurisdiction thereover, or in violation of any airworthiness certificate, license or registration relating to the Aircraft or any Engine issued by any such authority, or in violation or breach of any representation or warranty made with respect to obtaining insurance on the Aircraft or any term or condition of such insurance policy.

3.2 Alterations, Modifications and Additions .

(a) Alterations, Modifications and Additions . Mortgagor, at its own cost and expense, shall make such alterations and modifications in and additions to the Aircraft and Engines as may be required from time to time to meet all applicable standards of the Federal Aviation Administration or other governmental authority having jurisdiction over the Aircraft and Engines.

So long as no Event of Default shall have occurred and be continuing, Mortgagor, at its own cost and expense, and from time to time, may make such alterations and modifications in, and additions to, the Aircraft and any Engine as Mortgagor may deem desirable in the proper conduct of its business; provided, that no such alteration, modification or addition shall diminish the value or utility of the Aircraft or such Engine, or impair the condition or airworthiness thereof, below the value, utility, condition or airworthiness thereof immediately prior to such alteration, modification or addition assuming the Aircraft or such Engine were measured by the value, utility and airworthiness, and in the condition and state of repair required to be maintained by the terms hereof. All Parts incorporated or installed in or attached to or added to the Mortgaged Aircraft or any Mortgaged Engine as the result of any alteration, modification or addition shall conform to the requirements of Paragraph 3.2(a) hereof and, without further act or deed, shall become subject to the lien of this Mortgage.

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So long as no Event of Default shall have occurred and be continuing, Mortgagor, at any time, may remove any Part from the Aircraft or Engine if:

(i) such Part is in addition to, and not in replacement of, or substitution for, any Part incorporated or installed in or attached to the Aircraft or any Engine; provided, however, that Mortgagor may replace or substitute any Part if required under Paragraph 3.1 above;

(ii) such Part is not required to be incorporated or installed in, or attached or added to, the Aircraft or such Engine pursuant to the terms of Paragraphs 3.1(b), 3.1(c) or Paragraph 3.2 hereof; and

(iii) such Part can be readily removed from the Aircraft or any Engine without diminishing or impairing the value, utility, condition and airworthiness of the Aircraft or such Engine.

Upon any such removal, such Part shall cease to be a “Part” within the meaning hereof.

(b) Liability of Lender . Lender shall not bear any liability or cost for any alteration, modification or addition, or for any grounding or suspension of certification of the Aircraft or any Engine, or for loss to Mortgagor of any revenue in respect of the Aircraft or any Engine, however arising.

3.3 Event of Loss .

(a) Event of Loss with Respect to the Aircraft . Upon the occurrence of an Event of Loss with respect to the Aircraft, Mortgagor shall give Lender prompt written notice thereof, stating the circumstances of such Event of Loss. No later than thirty (30) days after the date of such Event of Loss, Mortgagor shall:

(i) repay the outstanding principal balance under the Note and all other Secured Obligations in full, or

(ii) enter into, at the expense of Mortgagor, an agreement in all respects satisfactory to Lender for repair of the Aircraft sufficient to return the Aircraft to the same or better condition as the Aircraft was in prior to the Event of Loss.

(b) Event of Loss with Respect to a Mortgaged Engine . Upon the occurrence of an Event of Loss with respect to an Engine, which Event of Loss does not constitute an Event of Loss with respect to the Aircraft, Mortgagor shall give Lender prompt written notice thereof, stating the circumstances of such Event of Loss. As soon as possible, but no later than thirty (30) days after the date of such Event of Loss, Mortgagor shall:

(i) repay the outstanding principal balance under the Note and all other Secured Obligations in full, or

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(ii) enter into, at the expense of Mortgagor, an agreement for the purchase of a new Engine compatible with the Aircraft to replace the Engine which is the subject of such Event of Loss.

Upon delivery of such new Engine pursuant to such agreement, Mortgagor shall cause such new Engine to be installed on the Aircraft and specifically subject such new Engine to the lien hereof, delivering to Lender all documents required or useful in connection therewith.

3.4 Insurance . At or prior to the Closing Date, Mortgagor will carry, at the cost and expense of Mortgagor:

(a) public liability insurance (including, without limitation, passenger legal liability);

(b) property damage insurance (including, without limitation, airport property damage liability and contractual liability); and

(c) all-risk ground and flight aircraft hull insurance (including, without limitation, war risk, hijacking and similar perils insurance).

The amount of such all-risk ground and flight aircraft hull insurance at no time and in no event shall be less than Eight Million Two Hundred Fifty Thousand Dollars U.S. (US$8,250,000.00). In the case of public liability, the amount thereof maintained shall in no event be less than Twenty-Five Million Dollars U.S. (US$25,000,000.00). All insurance required to be maintained by this Paragraph 3.4 shall be maintained in effect with financially sound and reputable insurers satisfactory to Lender and shall be evidenced by one (1) or more policies, each of which shall provide:

(i) in the case of all-risk ground and flight aircraft hull insurance that Lender is designated as a loss payee (but without imposing upon Lender any obligation imposed upon the insured, including, without limitation, the liability to pay the premiums of such policies), and that, in the event of any damage or loss to the Aircraft or any Engine, all payments shall be made to Lender at its address:

WILLIAM LYON HOMES, INC.

4490 Von Karman

Newport Beach, California 92660

(ii) in the case of public liability and property damage insurance, that Lender is an additional named insured (but without imposing upon Lender any obligation, including, without limitation, the liability to pay the premiums for such policies), and that all of the provisions thereof shall operate in the same manner as if there were a separate policy covering each insured (provided that such policies shall operate in the same manner as if there were a separate policy covering each insured);

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(iii) that, as against Lender, the insurer waives any rights of subrogation, set-off, counterclaim or any other deduction, whether by attachment or otherwise;

(iv) that, in respect of the interest of Lender in such policy or policies, the insurance shall not be invalidated by any action or inaction of Mortgagor or of any other Person (other than Lender) and shall insure Lender regardless of any breach or violation by Mortgagor or any other Person (other than Lender ) of any warranties, declarations or conditions contained in such policies; and

(v) that, if such insurance is canceled for any reason whatsoever or changes in any material respect in relation to the interest of Lender or is allowed to lapse for nonpayment of premium, such cancellation, change or lapse shall not be effective as to Lender for thirty (30) days after receipt by Lender of written notice by the insurer of such cancellation, change or lapse. All proceeds of insurance policies required to be in effect hereof, if for any reason not paid directly to Lender and if not then required to be paid over by Lender to Mortgagor pursuant to Paragraph 3.6 hereof, shall be deposited by Mortgagor with Lender.

3.5 Location of Aircraft . Mortgagor shall not base the Aircraft in a location outside of the United States of America, and Mortgagor shall not operate or locate the Aircraft or any Engine or permit the Aircraft or any Engine to be operated or located in:

(a) any area or on any route excluded from coverage under the provisions of any insurance policy required by the terms of Paragraph 3.4 above; or

(b) any recogn