-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, BJKxK7nMSy9JcnfkkpwES2lWI4kUdRRupdeu54lH50TsFXwkg2hB34rA/7jl2m8G Yz6lDOz7k+BOzVWQrXdKCw== 0000950147-94-000133.txt : 19941207 0000950147-94-000133.hdr.sgml : 19941207 ACCESSION NUMBER: 0000950147-94-000133 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19941118 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19941202 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONTINENTAL HOMES HOLDING CORP CENTRAL INDEX KEY: 0000796122 STANDARD INDUSTRIAL CLASSIFICATION: 1531 IRS NUMBER: 860554624 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-10700 FILM NUMBER: 94563114 BUSINESS ADDRESS: STREET 1: 7001 N SCOTTSDALE RD STE 2050 CITY: SCOTTSDALE STATE: AZ ZIP: 85253 BUSINESS PHONE: 6024830006 MAIL ADDRESS: STREET 1: 7001 N SCOTTSDALE ROAD STREET 2: SUITE 2050 CITY: SCOTTSDALE STATE: AZ ZIP: 85253 8-K 1 CURRENT REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) November 18, 1994 ----------------- CONTINENTAL HOMES HOLDING CORP. (Exact name of registrant as specified in its charter) Delaware 0-14830 86-0554624 (State or other jurisdiction of (Commission (I.R.S. Employer incorporation or organization) File Number) Identification No.) 7001 North Scottsdale Road, Suite 2050 Scottsdale, Arizona 85253 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (602) 483-0006 Not Applicable _____________________________________________________________________________ (Former name or former address, if changed since last report) Item 2. Acquisition or Disposition of Assets On November 18, 1994, Continental Homes Holding Corp. (the "Company") consummated the acquisition of Heftler Realty Co., a Florida Corporation ("Heftler"). The acquisition was effected pursuant to a Stock Purchase Agreement (the "Agreement") between Herbert Heftler, Monica Heftler, Roger Heftler, Joel Kovin, Thomas Iglesias, Jack Shell, and Candice Sharpsteen (collectively "Seller") and the Company. Under the terms of the Agreement, the total consideration given to Seller was $28,500,000 in cash paid at closing. The sources of funds used for the acquisition were funds generated from operations and borrowings under the Company's existing lines of credit with Bank One, Arizona N.A. and Norwest Bank. The consideration was determined pursuant to arms-length negotiations between the Company and Seller. In 1993, Heftler ranked as the third largest builder in Dade County, Florida and the 11th largest builder in Broward County, Florida both in terms of revenues and units closed. Since its founding almost fifty years ago, Heftler has built and sold more that 27,000 homes in 15 states and Puerto Rico. Heftler began its Florida operations in 1956 and has operated exclusively in South Florida for the last 19 years. Item 7. Financial Statements and Exhibits (a) Financial Statements of Business Acquired. It is impracticable to provide the required financial information for Heftler at the time this report on Form 8-K is filed. The required financial statements will be filed under Form 8-K/A as soon as practicable but in no event later than February 1, 1995. (b) Pro Forma Financial Information. It is impracticable to provide the required pro forma financial information for Heftler at the time this report on Form 8-K is filed. The required pro forma financial information will be filed under cover of a Form 8-K/A as soon as practicable but in no event later than February 1, 1995. (c) Exhibits. 2.1 Stock Purchase Agreement between Seller and Continental Homes Holding Corp. dated November 3, 1994. 10.1 Loan Agreement dated November 17, 1994 between Bank One, Arizona NA ("BOAZ") and Heftler Realty Co. ("Heftler"). 10.2 Promissory Note dated November 17, 1994 by Heftler in favor of BOAZ in the principal amount of $10,000,000. 10.3 Master Loan Agreement dated August 29, 1994 between NationsBank of Florida, N.A. ("Nations") and Heftler. 10.4 First Amendment to Loan Agreement dated November 16, 1994 between Nations and Heftler. 10.5 Consolidation Promissory Note dated November 16, 1994 by Heftler in favor of Nations in the principal amount of $20,000,000. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. CONTINENTAL HOMES HOLDING CORP. Date: December 2, 1994 /s/ Kenda B. Gonzales ------------------ ----------------------------- Kenda B. Gonzales Secretary and Treasurer (Chief Financial Officer) EX-2.1 2 STOCK PURCHASE AGREEMENT EXHIBIT 2.1 STOCK PURCHASE AGREEMENT REGARDING HEFTLER REALTY CO. November 2, 1994 TABLE OF CONTENTS Page 1. Definitions 2. Purchase and Sale of Purchased Shares . . . . . . . . . . . . . . . 6 (a) Basic Transaction . . . . . . . . . . . . . . . . . . . . . . . 6 (b) Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . 6 (c) Good Faith Deposit . . . . . . . . . . . . . . . . . . . . . . . 6 (d) Diligence Period . . . . . . . . . . . . . . . . . . . . . . . . 7 (e) The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 7 (f) Deliveries at the Closing . . . . . . . . . . . . . . . . . . . 7 (g) Dividends for Taxes of Seller . . . . . . . . . . . . . . . . . 7 3. Representations and Warranties of the Buyer. . . . . . . . . . . . . 8 (a) Organization, Power . . . . . . . . . . . . . . . . . . . . . . 8 (b) Authorization of Transaction . . . . . . . . . . . . . . . . . . 8 (c) Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . . . . 8 (d) Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 (e) Noncontravention of the Buyer . . . . . . . . . . . . . . . . . 8 4. Representations and Warranties of the Seller . . . . . . . . . . . . 9 (a) Authorization of Transaction . . . . . . . . . . . . . . . . . . 9 (b) Noncontravention of the Seller . . . . . . . . . . . . . . . . . 10 (c) Brokers' Fees of the Seller . . . . . . . . . . . . . . . . . . 10 (d) Organization, Qualification and Corporate Power . . . . . . . . 10 (e) Capitalization of the Company . . . . . . . . . . . . . . . . . 11 (f) Ownership of the Joint Venture, etc . . . . . . . . . . . . . . 11 (g) Noncontravention of the Company, etc . . . . . . . . . . . . . . 11 (h) Financial Statements . . . . . . . . . . . . . . . . . . . . . . 12 (i) Events Subsequent to Date of Audited Financial Statements . . . 12 (j) Legal Compliance . . . . . . . . . . . . . . . . . . . . . . . . 14 (k) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 15 (l) Leasehold for Company Headquarters . . . . . . . . . . . . . . . 17 (m) Real Property . . . . . . . . . . . . . . . . . . . . . . . . . 17 (n) Intellectual Property . . . . . . . . . . . . . . . . . . . . . 22 (o) Personal Property . . . . . . . . . . . . . . . . . . . . . . . 23 (p) Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 (q) Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 (r) Notes and Accounts Receivable . . . . . . . . . . . . . . . . . 25 (s) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 (t) Product Warranty . . . . . . . . . . . . . . . . . . . . . . . . 26 (u) Product Liability . . . . . . . . . . . . . . . . . . . . . . . 26 (v) Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 (w) Employee Benefits Plans . . . . . . . . . . . . . . . . . . . . 27 (x) Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 (y) Environment, Health, and Safety . . . . . . . . . . . . . . . . 31 (z) Transactions with Related Parties . . . . . . . . . . . . . . . 32 (aa) Special Taxing Districts . . . . . . . . . . . . . . . . . . . 32 (bb) Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 32 5. Pre-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . 32 (a) General . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 (b) Notices and Consents . . . . . . . . . . . . . . . . . . . . . . 32 (c) Operation of Business . . . . . . . . . . . . . . . . . . . . . 33 (d) Preservation of Business . . . . . . . . . . . . . . . . . . . . 33 (e) Full Access . . . . . . . . . . . . . . . . . . . . . . . . . . 33 (f) Notice of Developments . . . . . . . . . . . . . . . . . . . . . 33 (g) Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . 33 (h) Title Insurance . . . . . . . . . . . . . . . . . . . . . . . . 33 (i) Platting of Pembroke Shores . . . . . . . . . . . . . . . . . . 34 (j) Lawsuits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 (k) Acquisition and Disposition of Real Property . . . . . . . . . . 34 (l) Tax Information . . . . . . . . . . . . . . . . . . . . . . . . 34 (m) Sale of Joint Venture Property, etc . . . . . . . . . . . . . . 34 (n) Option to Exclude Assets . . . . . . . . . . . . . . . . . . . . 34 6. Post-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . 34 (a) General . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 (b) Litigation Support . . . . . . . . . . . . . . . . . . . . . . . 35 (c) Transition . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 (d) Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . 35 (e) Life Insurance Policies . . . . . . . . . . . . . . . . . . . . 36 (f) Dividends for Taxes . . . . . . . . . . . . . . . . . . . . . . 36 (g) Barnett Financing Statements . . . . . . . . . . . . . . . . . . 36 7. Conditions to Obligation to Close and Covenant of Seller . . . . . . 36 (a) Conditions to Obligation of the Buyer . . . . . . . . . . . . . 36 (b) Conditions to Obligation of the Seller . . . . . . . . . . . . 39 (c) Financing from Herbert Heftler . . . . . . . . . . . . . . . . 40 8. Remedies; Indemnifications . . . . . . . . . . . . . . . . . . . . 41 (a) General . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 (b) Survival of Representations and Warranties . . . . . . . . . . 41 (c) Post-Closing Indemnification Provisions for Benefit of the Buyer . . . . . . . . . . . . . . . . . . 41 (d) Post-Closing Indemnification Provisions for Benefit of the Seller . . . . . . . . . . . . . . . . . . . . 43 (e) Matters Involving Third Parties . . . . . . . . . . . . . . . 43 (f) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 44 (g) Other Indemnification Provisions . . . . . . . . . . . . . . . 44 9. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 (a) Termination of Agreement . . . . . . . . . . . . . . . . . . . . 45 (b) Effect of Termination . . . . . . . . . . . . . . . . . . . . . 45 10. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 (a) Press Releases and Public Announcements . . . . . . . . . . . . 45 (b) No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . 45 (c) Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . 45 (d) Succession and Assignment . . . . . . . . . . . . . . . . . . . 46 (e) Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 46 (f) Heading . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 (g) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 (h) Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 47 (i) Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . 47 (j) Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 47 (k) Cost of Transaction . . . . . . . . . . . . . . . . . . . . . . 48 (l) Legal Fees & Costs . . . . . . . . . . . . . . . . . . . . . . . 47 (m) Gender and Number . . . . . . . . . . . . . . . . . . . . . . . 47 (n) Obligations of Seller . . . . . . . . . . . . . . . . . . . . . 47 (o) Construction . . . . . . . . . . . . . . . . . . . . . . . . . . 47 (p) Incorporation of Exhibits, Annexes, and Schedules . . . . . . . 48 (q) Submission to Jurisdiction . . . . . . . . . . . . . . . . . . . 48 (r) Hart-Scott-Rodino . . . . . . . . . . . . . . . . . . . . . . . 48 (s) Time of Essence . . . . . . . . . . . . . . . . . . . . . . . . 48 (t) WAIVER OF TRIAL BY JURY . . . . . . . . . . . . . . . . . . . . . . . 48 (u) Power of Attorney; Deposit of Shares . . . . . . . . . . . . . . . . 49 STOCK PURCHASE AGREEMENT Agreement ("Agreement") entered into as of November 2, 1994 by and between Continental Homes Holding Corp., a Delaware corporation (the "Buyer"), and those persons set forth on Exhibit A hereto (collectively and severally, "Seller"). Seller owns all of the issued and outstanding capital stock of the Heftler Realty Co., a Florida corporation ("Company"); and each Person comprising the Seller owns that number of shares of the Seller's capital stock set forth opposite his name on Exhibit A. This Agreement contemplates a transaction in which the Buyer will purchase from the Seller, and the Seller will sell to the Buyer, all of the issued and outstanding capital stock of the Company ("Purchased Shares") in return for the consideration specified below. Now, therefore, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties, and covenants herein contained, the parties hereto agree as follows. 1. Definitions. "Adverse Consequences" means all material actions, suits, proceedings, hearings, investigations, charges, complaints, claims, demands, injunctions, judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and fees, including court costs and reasonable attorneys' fees and expenses. "Affiliated Group" means any affiliated group within the meaning of Code Sec. 1504 or any similar group defined under a similar provision of state, local or foreign law. "Assets" means all property and interests of the Company, whether real, personal or mixed, tangible or intangible, wherever located, as of the date hereof and acquired after the date hereof but prior to Closing. "Basis" means any past or present fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction that if known to a reasonable person would cause such reasonable person to determine that a particular specified consequence is likely to result therefrom. "Buyer" has the meaning set forth in the preface above. "Closing" has the meaning set forth in Section 2(e) below. "Closing Date" has the meaning set forth in Section 2(e) below. "Code" means the Internal Revenue Code of 1986, as amended, and regulations promulgated thereunder. "Company" has the meaning set forth in the preface above. "Company Names" has the meaning set out in Section 4(o)(iii). "Confidential Information" means any information concerning the businesses and affairs of the Company that is not already generally available to the public. "Deferred Intercompany Transaction" has the meaning set forth in Treas. Reg. Section 1.1502-13. "Disclosure Schedule" has the meaning set forth in Section 4 below. "Environmental, Health and Safety Laws" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Resource Conservation and Recovery Act of 1976, and the Occupational Safety and Health Act of 1970 each as amended, together with all other laws (including rules, regulations, codes, injunctions, judgments, orders, decrees, and rulings, thereunder) of federal, state, local, and foreign governments (and all agencies thereof) concerning pollution or protection of the environment, public health and safety, or employee health and safety, including laws relating to emissions, discharges, releases, or threatened releases of pollutants, contaminants, or chemical, industrial, hazardous, or toxic materials or wastes into ambient air, surface water, ground water, or lands or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, or chemical, industrial, hazardous, or toxic materials or wastes. "Environmental Reports" mean all reports, studies and audits prepared by environmental consultants relating to the Assets which were prepared at the request of or are otherwise in the possession of the Company or the Seller. "Extremely Hazardous Substance" means any chemical or substance: (i) contained in the list published under Sec. 302 of the Emergency Planning and Community Right-to-Know Act of 1986, as amended; (ii) contained in the United States Department of Transportation Hazardous Materials Table (49 CFR Section 172.101, including the appendix to Section 172.101); (iii) identified by the Environmental Protection Agency as a Hazardous substance in 40 CFR Part 302; (iv) any asbestos containing material; (v) petroleum or any petroleum product or material in any way derived from or concerning any petroleum product or any oil or substances containing oil. "Financial Statements" has the meaning set forth in Section 4(i) below. "GAAP" means United States generally accepted accounting principles as in effect from time to time. "Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. "Indemnified Party" has the meaning set forth in Section 8 below. "Indemnifying Party" has the meaning set forth in Section 8 below. "Intellectual Property" means (a) all inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all patents, patent applications, and patent disclosures, together with all reissuances, continuations, continuations-in-part, revisions, extensions, and re-examinations thereof, (b) all trademarks, service marks, trade dress, logos, trade names, and corporate names, together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith, and all applications, registrations, and renewals in connection therewith, (c) all copyrightable works, all copyrights, and all applications, registrations, and renewals in connection therewith, (d) all mask works and all applications, registrations, and renewals in connection therewith, (e) all rights of publicity with respect to the Company Names, (f) all trade secrets and confidential business information (including ideas, research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals), (g) all computer software (including data and related documentation), (h) all other proprietary rights, and (i) all copies and tangible embodiments (in whatever form or medium) of all of the foregoing items included within the definition of Intellectual Property. "Interim Financial Statements" has the meaning set forth in Section 4(i) below. "Joint Venture" means HHP Venture, a Florida joint venture, of Pasadena Homes, Inc., a Florida corporation, Heftler Realty Co., a Florida corporation, and K. Hovnanian at Pembroke Isles, Inc., a Florida corporation, pursuant to the Joint Venture Agreement. "Joint Venture Agreement" means that certain Agreement dated November 18, 1993, as amended by that First Amendment to Agreement dated December 15, 1993, by that Second Amendment to Agreement dated July 20, 1994, by and among the partners of the Joint Venture, and by that Third Amendment to Agreement, dated October 28, 1994. "Knowledge" means actual knowledge after reasonable investigation; provided, however, that (a) Knowledge of any Person included in the term "Seller" shall be imputed to all persons constituting the Seller; and (b) reasonable investigation by Seller with respect to any matters shall mean that Seller has made inquiry of (i) employees, officers, directors. shareholders, agents, managers, independent contractors and partners (as applicable) of the Company and the Joint Venture who Seller believes have within their job responsibilities the duty to monitor such matters, (ii) M. Randolph Prince with respect to tax matters only and (iii) consulting engineers, architects, land planners, attorneys and accountants, if any, hired by the Company or the Joint Venture with respect to matters handled or analyzed by them. "Liability" means any material liability (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due), including without limitation any liability for Taxes and any liability under Environmental, Health and Safety Laws. "Material Adverse Effect" means a material adverse effect on the business, financial condition, operations, or results of operations of the Company or the Joint Venture or an event or occurrence that prevents the parties from consummating the transactions contemplated by this Agreement. "NationsBank" means NationsBank of Florida, N.A. "NationsBank Agreement" means that Master Loan Agreement, dated as of August 29, 1994, by and between the Company and NationsBank and all other Loan Documents (as such term is defined in such Master Loan Agreement). "Ordinary Course of Business" means the ordinary and usual course of the Company's business consistent with the Company's past custom and practice and sound industry practice (including with respect to quantity, quality, price and frequency). "Outside Closing Date" has the meaning set forth in Section 2(e) below. "Owned Real Property" has the meaning set forth in Section 4(n)(i) of the Disclosure Schedule. "Pembroke Shores" means that real property described on Exhibit B hereto. "Person" means any natural or legal entity, including, without limitation, an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, or a governmental entity (or any department, agency, or political subdivision thereof). "Preferred Builder's Warranty Program" means the limited dwelling warranty program made available pursuant to that Dwelling Warranty attached as Exhibit C, by Preferred Builders Warranty Corp. to purchasers of certain homes constructed by the Company. "Purchase Price" has the meaning set forth in Section 2(b) below. "Purchased Shares" means all of the issued and outstanding shares of the capital stock of the Company as of the date hereof and as of Closing. "Securities Act" means the Securities Act of 1933, as amended, and regulations promulgated thereunder. "Security Interest" means any mortgage, pledge, lien, encumbrance, or other security interest, including nonconsensual liens, other than liens for Taxes not yet due and payable. "Seller" has the meaning set forth in the preface above. "Skylake Letter of Credit" means that Irrevocable Letter of Credit No. 354 in the amount of $2,275,800.00 issued August 1, 1994 by The Skylake State Bank for the account of the Company in favor of Broad and Cassel. "Stockholders' Agreements" means collectively: (i) that Stockholders' Agreement, dated as of October 1, 1988, by and among Herbert Heftler, Monica A. Heftler, Roger Heftler, Thomas Iglesias, Joel B. Kovin, Candace Sharpsteen and Jack Shell (collectively the "Stockholders"), and the Company, as amended by that First Amendment to Stockholders' Agreement, dated as of May 31, 1991, between the Stockholders and the Company, as amended by that Termination Agreement, dated as of September 22, 1992, by and among the Stockholders, Richard Molinari and the Company, and as amended by that Second Amendment to Stockholders' Agreement, dated as of November 2, 1993, by and between the Stockholders and the Company; (ii) that Stockholders' Agreement, by and among the Company, Herbert Heftler, Monica Heftler and Roger Heftler; (iii) that Stockholders' Agreement, dated as of May 31, 1991, by and among the Company, Herbert Heftler and Roger Heftler, as amended by that First Amendment to Stockholders' Agreement, dated as of September 27, 1991, by and among the Company, Herbert Heftler and Roger Heftler; and (iv) that Stockholders' Agreement, dated as of May 31, 1991, by and among the Company, Herbert Heftler and Joel B. Kovin. "Stock Incentive Plan" means that Stock Incentive Plan of the Company adopted pursuant to that consent in writing of the Directors of the Company dated September 9, 1988. "Surveys" has the meaning set forth in Section 5(i) below. "Tax" means any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp (including, without limitation documentary stamp tax and surtax), intangibles, occupation, premium, windfall profits, environmental (including taxes under Code Sec. 59A), customs-duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not. "Tax Return" means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof. "Title Policies" means those certain policies of owner's title insurance insuring the title to the Owned Real Property and the endorsements thereto listed in Section 4(m)(i) of the Disclosure Statement (also see Section 4(m)(i)(O) below). "Unaudited" means as prepared by the Company. 2. Purchase and Sale of Purchased Shares. A. Basic Transaction. On and subject to the terms and conditions of this Agreement, the Buyer agrees to purchase from the Seller, and the Seller agrees to sell to the Buyer, all of the Purchased Shares for the consideration specified below in this Section 2. B. Purchase Price. The total consideration (the "Purchase Price") for the sale, transfer, conveyance and delivery of the Purchased Shares to the Buyer and the covenant not to compete set forth in Section 6(e) is the sum of $28,500,000. The Purchase Price shall be payable by application of the Good Faith Deposits (as defined in this Section 2) to payment of the Purchase Price at Closing, with the balance of the Purchase Price to be paid to Seller at Closing by means of a completed Federal Funds transfer of immediately available funds to such bank and account within the continental United States of America designated by the Seller to the Buyer in writing at least five business days prior to the Closing Date. C. Good Faith Deposit. Upon execution and delivery of this Agreement by Seller and Buyer, Buyer will deposit $100,000 with Mershon, Sawyer, Johnston, Dunwody & Cole as escrow agent ("Escrow Agent"), which amount shall be placed in an interest bearing escrow account at such federally insured financial institution as Seller and Buyer may mutually agree and designate to Escrow Agent. Such amount (inclusive of interest) ("Initial Deposit") shall be refunded to Buyer if at any time during the Due Diligence Period (as defined below in this Section 2) Buyer shall determine, in its sole discretion, that Buyer is not satisfied with the results of its due diligence and shall give written notice to Seller and Escrow Agent that Buyer is declining to proceed with the transaction herein contemplated or Seller shall breach or terminate this Agreement. If no such notice is given on or before the expiration of the Due Diligence Period, the Initial Deposit shall not be refundable to Buyer except as otherwise provided herein, and the Buyer shall thereupon deliver to Escrow Agent an additional $400,000 deposit to bind the transaction herein contemplated, which additional deposit shall also be placed into the interest bearing escrow account ("Second Deposit"). The Initial Deposit and the Second Deposit, inclusive of all interest earned thereon, are herein referred to collectively as the "Good Faith Deposit". If the Closing shall fail to occur through no fault or breach of Buyer, the Good Faith Deposit shall be refundable in full to Buyer upon written demand of Buyer to Escrow Agent. If the Closing shall occur, the Good Faith Deposit shall be applied to the payment of the Purchase Price. If the Closing shall fail to occur as a result of Buyer's breach of this Agreement, the Good Faith Deposit shall be paid to and retained by Seller as agreed and liquidated damages, and not as a penalty, as Seller's sole and exclusive remedy hereunder. The parties recognize and agree that Seller's damages upon Buyer's default would be substantial but are not ascertainable with any degree of certainty, and the parties have therefore determined that forfeiture of the Good Faith Deposit to Seller is a fair and reasonable provision for liquidated damages. The parties hereto agree to execute and deliver to Escrow Agent an Escrow Agreement, substantially on the foregoing terms and with such additional provisions as the Escrow Agent may reasonably require, upon the execution and delivery of this Agreement and further agree to thereafter timely provide Escrow Agent with such written instructions as may be reasonably necessary or appropriate to carry out the foregoing terms. In all events, the Escrow Agent shall have the right (but not the obligation) to institute an interpleader action if any conflict, dispute or claim shall arise concerning the Good Faith Deposit or any part thereof. The Escrow Agent shall have no liability for its acts or omissions in the performance of its duties as Escrow Agent unless the same shall be judicially determinated to constitute gross negligence or willful misconduct. The parties acknowledge that the Escrow Agent is counsel to Buyer but is acting solely in a ministerial capacity with respect to the Good Faith Deposit at the request of and as an accommodation to the parties. The parties knowingly and voluntarily waive any claim of conflict against the Escrow Agent with respect to the Good Faith Deposit, the Escrow Agreement herein contemplated and the Escrow Agent's performance thereunder. D. Diligence Period. Buyer shall be afforded the right to conduct such due diligence reviews and inspections of the Company, the Assets, the Joint Venture and matters pertaining thereto as Buyer shall, in its sole discretion, deem expedient for a period ("Due Diligence Period") ending on November 2, 1994. Seller agrees to fully cooperate with Buyer and will use its best efforts to cause the Company, its employees and all others to cooperate with Buyer in all due diligence reviews Buyer may wish to conduct. Buyer shall have the absolute right to terminate this Agreement and receive a refund of the Initial Deposit for any reason whatsoever by giving written notice of termination to Seller and Escrow Agent on or before expiration of the Due Diligence Period; and upon such termination neither Seller nor Buyer shall any further rights or obligations under this Agreement. E. The Closing. The closing of the transaction contemplated by this Agreement (the "Closing") shall take place at the offices of Mershon Sawyer in Miami, Florida, commencing at 9:00 a.m. local time on or before November 30, 1994 or such date as the Buyer and the Seller may mutually determine, or on such other date to which the Closing may be extended as provided below in the following sentence (the date on which Closing actually occurs is herein called the "Closing Date"). If all conditions to Closing have been accomplished or waived, except that the waiting period under the Hart-Scott-Rodino Act shall not have expired or been terminated, then Buyer or Seller may elect to extend the Closing Date to a date no later than December 31, 1994 (the "Outside Closing Date"). F. Deliveries at the Closing. At the Closing, (i) the Seller will deliver to the Buyer the various certificates, instruments, and documents referred to in Section 7(a) below, (ii) the Buyer will deliver to the Seller the various certificates, instruments, and documents referred to in Section 7(b) below, (iii) the Seller will deliver to the Buyer stock certificates representing all of the Purchased Shares, endorsed in blank, or accompanied by duly executed assignment documents, with the signatures thereon guaranteed by a commercial bank located in Dade County, Florida selected by the Seller and reasonably satisfactory to the Buyer, (iv) Seller and Buyer will execute and deliver a joint written instruction to Escrow Agent to disburse the Good Faith Deposit to the order of Seller, and (v) the Buyer will deliver to the Seller the balance of the Purchase Price specified in Section 2(b) above. G. Dividends for Taxes of Seller. At the Closing, the Seller will cause the Company (i) to estimate the book income before tax for the Company for the period January 1, 1994 through the Closing Date, (ii) to pay to the Seller a dividend in an amount equal to 39.6% of such income for that period, which dividend shall not be duplicative of any dividend paid prior to the Closing Date, and (iii) pay to the Seller a dividend representing the Seller's deferred personal federal income taxes for 1993 in the amount of $481,000.00 which dividend shall not be duplicative of any dividend paid to the Seller prior to the Closing Date. 3. Representations and Warranties of the Buyer. The Buyer represents and warrants to the Seller that the statements contained in this Section 3 are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Section 3). A. Organization, Power. Buyer is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own, operate and lease its properties and to carry on its business as now being conducted. The copy of the Certificate of Incorporation of Buyer certified by the Secretary of State of the State of Delaware and the copy of the By- Laws of Buyer certified by the Secretary of Buyer attached hereto as Exhibit D are true and correct. B. Authorization of Transaction. The Buyer has full power and authority (including full corporate power and authority) to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement constitutes the valid and legally binding obligation of the Buyer, enforceable in accordance with its terms and conditions. The Buyer need not give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order to lawfully and effectively consummate the transactions contemplated by this Agreement, except for the filing required under the Hart-Scott-Rodino Act. C. Brokers' Fees. The Buyer has not engaged any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which the Seller could become liable or obligated. D. Investment. The Buyer is not acquiring the Purchased Shares with a view to or for sale in connection with any distribution thereof within the meaning of the Securities Act. Buyer understands and acknowledges that the Purchased Shares have not been, and will not be registered under the Securities Act, or the state securities or Blue Sky laws of any jurisdiction, and that the transaction contemplated by this Agreement has not been reviewed by, passed on or submitted to any federal or state agency or commission. Buyer understands that its acquisition of the Purchased Shares is intended to be exempt from registration under the Securities Act. Buyer will not sell or otherwise transfer the Purchased Shares without registration under the Securities Act and applicable state securities laws or relying on an exemption therefrom, and fully understands and agrees that it must bear the economic risks of its purchase for an indefinite period of time because, among other reasons, the Purchased Shares have not been registered under the Securities Act or under the securities laws of any state and, therefore, cannot be resold, pledged, assigned, hypothecated or otherwise disposed of unless the Purchased Shares are subsequently registered under the Securities Act and under the applicable securities laws of the appropriate states or unless an exemption from such registration is available. E. Noncontravention of the Buyer. Except where it will not have a Material Adverse Effect, neither the execution and delivery of this Agreement by Buyer nor the consummation by Buyer of the transactions contemplated hereby will (A) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or a court, to which Buyer is subject or any provision of its charter or bylaws, or (B) conflict with, or result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument, or other arrangement, to which Buyer is a party or by which it is bound or to which any of its assets is subject. 4. Representations and Warranties of the Seller. The Seller represents and warrants to the Buyer that the statements contained in this Section 4 are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Section 4), except as set forth in the disclosure schedule delivered by the Seller to the Buyer on the date hereof, initialed by the parties and attached hereto as Exhibit E (the "Disclosure Schedule"). Each item in the Disclosure Schedule that is an exception to the representations and warranties set forth in this Section 4 must reference at least one particular lettered and numbered paragraph of this Section 4 to which such exception applies. The mere listing (or inclusion of a copy) of a document or other item in the Disclosure Schedule shall not be deemed adequate to disclose an exception to a representation or warranty made herein, it being necessary for Seller to give some explanation of the way in which the document or other item constitutes an exception, unless that is obvious. The Seller need not disclose any item more than once as long as such item is disclosed in an appropriate Section of the Disclosure Schedule. Seller warrants that the Disclosure Schedule is arranged in paragraphs corresponding to the lettered and numbered paragraphs contained in this Section 4. If prior to Closing Seller becomes aware of information that makes any disclosure set out in the Disclosure Schedule inaccurate, incomplete, or misleading, Seller shall promptly give written notice to Buyer of such information, and such written notice shall be an amendment to the Disclosure Schedule if Seller's notice expressly states that the notice is an amendment to the Disclosure Schedule. Without the prior consent of Buyer, Seller shall not, and shall not cause or permit the Company to, intentionally act or fail to act so as to cause an effect that would require an amendment to the Disclosure Schedule except for such amendments as might be necessitated by the operations of the Company in the Ordinary Course of Business. Any amendment of the Disclosure Schedule must be accepted in writing by Buyer as a condition precedent to the Buyer's obligations hereunder except for such amendments as might be necessitated by the operations of the Company in the Ordinary Course of Business. A. Authorization of Transaction. The Seller has full power and authority to execute and deliver this Agreement and to perform the Seller's obligations hereunder. This Agreement constitutes the valid and legally binding obligation of the Seller, enforceable in accordance with its terms and conditions. Except to comply with the Hart-Scott-Rodino Act, the Seller need not give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order to consummate the transactions contemplated by this Agreement. B. Noncontravention of the Seller. Except where it will not have a Material Adverse Effect, neither the execution and the delivery by Seller of this Agreement, nor the consummation by Seller of the transactions contemplated hereby, will (A) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which the Seller is subject or (B) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument, or other arrangement to which the Seller is a party or by which he is bound or to which any of the Seller's assets is subject. C. Brokers' Fees of the Seller. Except for the payment to be made to Prudential Securities Incorporated (the "Prudential Securities Payment"), neither the Seller, the Joint Venture nor the Company has any Liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which the Buyer could become liable or obligated. The Seller acknowledges and represents its obligation to fully and timely pay the Prudential Securities Payment, and further acknowledges that said Payment shall not be paid by the Company, the Joint Venture or the Buyer. At Closing, Seller shall deliver to Buyer a written release executed by Prudential Securities Incorporated releasing the Company, the Joint Venture and the Buyer of any claim for brokerage, consulting or other fees and expenses. D. Organization, Qualification and Corporate Power. i. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Florida, and has all requisite corporate power and authority to own and lease the Assets and to carry on its business and activities as currently conducted. Attached hereto as Exhibit F are true, correct and complete copies of the articles of incorporation and bylaws, each as amended to the date hereof, of the Company. The Company only does business in the State of Florida. The minute books (containing the records of meetings of the stockholders, the board of directors, and any committees of the board of directors), the stock certificate books, and the stock record books of the Company are correct and complete. The Company is not in default under or in violation of any provision of its charter or bylaws. ii. To Seller's Knowledge, the Joint Venture is a general partnership duly organized and validly existing under the laws of the State of Florida and has all requisite power and authority under the partnership laws of the State of Florida to own and lease the property and assets which it currently owns and leases and to carry on its business and activities as currently conducted. Attached hereto as Exhibit G is (A) a true, correct, and complete copy of the Joint Venture Agreement of the Joint Venture, as amended through the date of this Agreement, modified, or clarified to the date hereof, and (B) the Land Trust Agreement of the Joint Venture. To Seller's Knowledge, none of the joint venturers is in default under, or is in violation of, any provisions of the Joint Venture Agreement. E. Capitalization of the Company. The entire authorized capital stock of the Company consists of 10,000 shares of common stock of which 990 shares are issued and outstanding and 10 shares of common stock are held in treasury. All of the issued and outstanding Purchased Shares have been duly authorized, are validly issued, fully paid, and nonassessable, have not been issued in violation of the pre-emptive rights or first refusal rights of any Person, and are held beneficially and of record by the Seller free and clear of all liens, charges, encumbrances, claims, rights of others, mortgages, pledges, Taxes or Security Interests, and are not subject to any agreements or understandings among any Persons with respect to the voting or transfer thereof, except for any Security Interests set out in the Disclosure Schedule, all of which shall be released on or before the Closing Date. There are no outstanding subscriptions, options, convertible securities, warrants or calls of any kind issued or granted by, or binding upon, the Seller or the Company to purchase or otherwise acquire any security of or equity interest in the Company. The Seller has full legal right to sell, assign and transfer the Purchased Shares to the Buyer and, upon delivery of the certificates representing the Purchased Shares to the Buyer pursuant to the terms hereof, the Buyer shall receive good and marketable title to the Purchased Shares free and clear of any liens, charges, encumbrances, pledges, Security Interests, claims or rights of others. F. Ownership of the Joint Venture, etc. Except for a 37.93% joint venture interest in the Joint Venture, the Company does not own or possess any interest (direct or indirect, contingent or otherwise) in any Person. To Seller's Knowledge, the 62.07% interest in the Joint Venture not owned by the Company is owned as described in Section 4(f) of the Disclosure Schedule. The Company's ownership interests in the Joint Venture and the profits and losses thereof are free and clear of all liens, charges, encumbrances, claims, rights of others, mortgages, pledges, or Security Interests, and are not subject to any agreement or understanding between or among any Persons with respect to the transfer or voting thereof, except as set forth in the Joint Venture Agreement. There are no outstanding subscriptions, options, convertible securities, warrants or calls of any kind issued or granted by, or binding upon the Company or the Joint Venture to purchase or otherwise acquire any security or equity interest in the Joint Venture. There are no outstanding subscriptions, options, rights, warrants, convertible securities or other agreements or commitments obligating the Joint Venture to issue any ownership interests therein.. G. Noncontravention of the Company, etc. To Seller's Knowledge and subject only to compliance with the Hart-Scott-Rodino Act, neither the execution and the delivery of this Agreement by the Seller, nor the consummation by the Seller of the Seller's obligations contemplated hereby, will (i) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which the Company is subject or any provision of the charter or bylaws of the Company, or to which the Joint Venture is subject or any provisions of the Joint Venture Agreement, or (ii) except as set forth in Section 4(g) of the Disclosure Schedule, conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any Person the right to accelerate, terminate, modify, or cancel, or require any notice under, any agreement, contract, lease, license, instrument, or other arrangement to which the Company or the Joint Venture is a party or by which either is bound or to which either of them is subject (or result in the imposition of any Security Interest upon either of their assets). Subject only to the Hart-Scott- Rodino Act, neither the Company nor the Joint Venture is required to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order for the Seller to consummate the Seller's obligations under this Agreement. H. Financial Statements. Attached hereto (or not less than three (3) business days prior to the Closing Date there shall be attached hereto) as Exhibit H are the following financial statements of the Company (collectively the "Financial Statements"): (i) audited balance sheet and statement of income, changes in stockholders' equity and cash flow as of and for the twelve month period ended May 31, 1994 ("Audited Financial Statements"); (ii) Unaudited balance sheets and statements of income and changes in stockholders' equity (the "Interim Financial Statements") as of and for the 5 month period ended October 31, 1994; and (iii) Unaudited balance sheet and statement of income and changes in stockholders' equity as of and for the fiscal year ended December 31, 1993 and December 31, 1992. The Financial Statements (including the notes thereto) have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby, present fairly the financial condition of the Company, as of such dates and the results of operations of the Company for such periods, and are complete; provided, however, that the Interim Financial Statements are subject to normal year-end adjustments (which will not be material, individually or in the aggregate) and lack footnotes and other presentation items. Section 4(h) of the Disclosure Schedule lists all Liabilities of the Company and the Joint Venture that are secured by any Security Interest, any purchase money liens, or liens having rental payments under capital lease arrangements. I. Events Subsequent to Date of Audited Financial Statements. Since the date of the Audited Financial Statements, other than as set out in the Disclosure Schedule, there has not been any change in the business, condition (financial or otherwise), operations, results of operations, or future prospects of the Company or the Joint Venture, except for such changes that would not have a Material Adverse Effect and except for changes in general economic conditions and laws, if any. Except as shown on the Financial Statements or the Disclosure Schedule, and without limiting the generality of the foregoing, since the date of the Audited Financial Statements neither the Company nor the Joint Venture has: i. sold, leased, transferred, or assigned any of its assets, tangible or intangible, other than for a fair consideration in the Ordinary Course of Business; ii. entered into any agreement, contract, lease, or license (or series of related agreements, contracts, leases, and licenses) outside the Ordinary Course of Business; iii. been a party to or been bound by any agreement, contract, lease, or license (or series of related agreements, contracts, leases, and licenses) which has been accelerated, terminated, modified or canceled by any other Person, except in the Ordinary Course of Business; iv. imposed any Security Interest upon any of its assets, tangible or intangible, except for the Company, pursuant to, and as contemplated by, the NationsBank Agreement; v. made any capital expenditure (or series of related capital expenditures) outside the Ordinary Course of Business; vi. made any capital investment in, any loan to, or any acquisition of the securities or assets of, any other Person (or series of related capital investments, loans, and acquisitions) outside the Ordinary Course of Business; vii. issued any note, bond, or other debt security or created, incurred, assumed, or guaranteed any indebtedness for borrowed money or capitalized lease obligation, except as may be otherwise agreed by Buyer and Seller; viii. delayed or postponed the payment of accounts payable and other Liabilities outside the Ordinary Course of Business; ix. canceled, compromised, waived, or released any right or claim (or series of related rights and claims) outside the Ordinary Course of Business; x. granted any license or sublicense of any rights under or with respect to any Intellectual Property; xi. suffered any change, or made or authorized any change, in its Articles of Incorporation or Bylaws or the Joint Venture Agreement, unless Buyer shall have received prior notice of such change and shall have consented thereto in writing; xii. issued, sold, or otherwise disposed of any of its capital stock or ownership interests or granted any options, warrants, or other rights to purchase or obtain (including upon conversion, exchange, or exercise) any of its capital stock or ownership interests; xiii. declared, set aside, or paid any dividend or made any distribution with respect to its capital stock or ownership interests (whether in cash or in kind) or redeemed, purchased, or otherwise acquired any of its capital stock or ownership interests, except for cash dividends paid or set aside by the Company in an amount sufficient for the payment of (A) the Seller's personal federal income taxes for the period from January 1, 1994 through the Closing Date but Seller represents that such dividends shall not exceed 39.6% of the Company's book income before tax for that period, and shall not be duplicative of any dividend previously made for such purpose and (B) the Seller's deferred personal federal income taxes for 1993 in the amount of $481,000.00 to the extent not previously paid; xiv. experienced any damage, destruction, or loss (whether or not covered by insurance) to its property which damage, destruction or loss will have a Material Adverse Effect; xv. made any loan to, or entered into any other transaction with, any of its directors, officers, shareholders, partners, owners, independent contractors, managers and employees; xvi. entered into any employment contract or collective bargaining agreement, written or oral, or modified the terms of any existing such contract or agreement; xvii. granted any increase in the base compensation of any of its directors, officers, managers, independent contractors and employees outside the Ordinary Course of Business; xviii. adopted, amended, modified, or terminated any bonus, profit- sharing, incentive, severance, or other plan, contract, or commitment for the benefit of any of its directors, officers, and employees (or taken any such action with respect to any other Pension Benefit Plan as defined in Section 4(w) below); xix. made any other change in employment terms or contractual arrangements for any of its directors, officers, managers, independent contractors and employees outside the Ordinary Course of Business; xx. made or pledged to make any charitable or other capital contribution outside the Ordinary Course of Business; xxi. suffered any other material occurrence, event, incident, action, failure to act, or transaction outside the Ordinary Course of Business; xxii. made any change in accounting methods or principles which would be required to be disclosed under GAAP, or reclassified or restated any material asset or liability; xxiii. mortgaged, pledged, or granted or permitted to be created and remain in existence any Security Interests on any of its assets or any of its ownership interest in the Joint Venture, other than liens for real and personal property taxes for the year 1994 which are not yet due and payable and other than pursuant to, and as contemplated by, the NationsBank Agreement; or xxiv. committed to any of the foregoing. J. Legal Compliance. To Seller's Knowledge, each of the Company and the Joint Venture has complied in all material respects with all applicable laws (including rules, regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and charges thereunder) of federal, state, local and foreign governments (and all agencies thereof); and no action, suit, proceeding, hearing, investigation, complaint, claim, demand, or notice has been filed or commenced against any of the Company or the Joint Venture alleging any failure so to comply. K. Tax Matters. To Seller's Knowledge: i. The Company has filed all Tax Returns that it was required to file. All such Tax Returns were correct and complete in all material respects. Section 4(k) of the Disclosure Schedule lists all federal, state, local, and foreign income Tax Returns filed with respect to the Company for taxable periods ended on or after July 31, 1987, indicates those Tax Returns that have been audited, and indicates those Tax Returns that currently are the subject of audit or with respect to which a notice of audit has been received. All Taxes owed by the Company and each Person included within the Seller (whether or not shown on any Tax Return) have been paid except as shown in Section 4(k) of the Disclosure Schedule. The Company currently is not the beneficiary of any extension of time within which to file any Tax Return. The Joint Venture has not filed and has never been required to file Tax Returns. No claim is being made by any authority in a jurisdiction where the Company or the Joint Venture does not file Tax Returns that it is or may be subject to taxation by that jurisdiction. There are no Security Interests on any of the assets of any of the Company or the Joint Venture that arose in connection with any failure (or alleged failure) to pay any Tax. ii. The Company and the Joint Venture have withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any creditor, stockholder, owner, or other third party. The Company and the Joint Venture have withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee or independent contractor. iii. Neither Seller, the Company nor the Joint Venture expects any authority to assess any additional taxes for any period for which tax returns have been filed that are not specifically provided for in the Financial Statements. Without limiting the generality of the foregoing, the Seller warrants that the Company has no liability for any built-in gains tax under Code Sec. 1374 resulting from the sale of property during any of the Company's S Corporation years through the short period ending on the Closing Date. There is no dispute or claim concerning any Tax Liability of the Company or the Joint Venture either (A) claimed or raised by any authority in writing or (B) as to which any of the Seller, the directors and officers (and employees responsible for Tax matters) of the Company and owners or manager of the Joint Venture has Knowledge. Except as shown on the Disclosure Schedule, the Seller has delivered to the Buyer correct and complete copies of all federal income Tax Returns, examination reports, and statements of deficiencies assessed against or agreed to by the Company or the Joint Venture relating to tax periods ending on or after July 31, 1987 including but not limited to the final tax return filed by the Company as a "C" Corporation. iv. The Company has not filed and/or will not file prior to Closing any amendments to any Tax Returns previously filed by the Company. v. Neither the Company nor the Joint Venture has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency. vi. The Company has not filed a consent under Code Sec. 341(f) concerning collapsible corporations. Neither the Company nor the Joint Venture has made any payments, is obligated to make any payments, or is a party to any agreement that under certain circumstances could obligate it to make any payments that will not be deductible under Code Sec. 280G. The Company has not been a United States real property holding corporation within the meaning of Code Sec. 897(c)(2) during the applicable period specified in Code Sec. 897(c)(1)(A)(ii). The Company has disclosed on its federal tax returns all positions taken therein that could give rise to a substantial understatement of federal income tax within the meaning of Code Sec. 6662. The Company is not a party to any Tax allocation or sharing agreement. The Company (A) has not been a member of an Affiliated Group filing a consolidated federal income Tax Return or (B) has no Liability for the Taxes of any Person under Treas. Reg. Section 1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract, or otherwise. vii. Section 4(k) of the Disclosure Schedule sets forth the following information with respect to the Company and the Joint Venture as of the most recent practicable date: (A) the basis of the Company and the Joint Venture in their respective assets; (B) the amount of any net operating loss, net capital loss, unused investment or other credit, unused foreign tax, or excess charitable contribution allocable to the Company; and (C) the amount of any deferred gain or loss allocable to the Company arising out of any deferred intercompany transaction as set forth in Treas. Reg. Section 1.1502-3. viii. The unpaid Taxes of the Company (A) did not, as of the Interim Financial Statements, exceed the reserve for tax liability (rather than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of the Interim Financial Statements (rather than in any notes thereto) and (B) do not exceed that reserve as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of the Company in filing its Tax Returns. ix. Neither the Company, the Seller (with respect to the Company) nor the Joint Venture has any pending requests for rulings with any taxing authority. x. None of the property owned or used by the Company or the Joint Venture is subject to any lease other than a "true" lease as that term is commonly used for federal income tax purposes. xi. Neither the Company nor the Joint Venture is under any contractual obligation to indemnify any other person with respect to Taxes or is a party to any agreement providing for payment of Taxes, except as contemplated by this Agreement. xii. The Company will not be required, as a result of a change in method of accounting, to include any adjustment under Section 481(c) of the Code in any period after the Closing Date. xiii. Neither the Seller nor the Company (nor any director, officer or employee responsible for tax matters) is aware of facts, circumstances or events which could cause the Company to be classified as other than an "S corporation" or cause termination of its "S Corporation" status as defined at Code Section 1361 (including agreements, distributions or other facts which could result in a determination that the Company does not comply with Code Section 1361(b)(1)(D)) for the entire period for which the Company has reported Taxes as an "S Corporation". xiv. The Company shall prepare all short period tax returns for the current tax year through the date of Closing. All taxable income earned by the Company through the date of Closing shall be included in such short- period return. L. Leasehold for Company Headquarters. The headquarters for the Company located at 9450 Sunset Drive, Miami, Florida 33173 is occupied pursuant to a lease agreement, a correct and complete copy of which, together with all amendments thereto, is attached hereto as Exhibit I (the "Headquarters Lease"). The Company does not have a leasehold interest in any other real property. M. Real Property. i. Section 4(m) of the Disclosure Schedule lists and contains the legal description of all real property that the Company owns or has rights to acquire, including, without limitation parcels 3, 4, 5 and 9 of Pembroke Shores (according to the Site Plan for Pembroke Shores dated January 27, 1994 (as revised August 26, 1994), prepared by R. P. Legg and Associates, Inc.) that is owned by a land trust pursuant to the Joint Venture Agreement and will be conveyed to the Company without material diminution to acreage and without diminution to the density provided in such site plan (collectively "Owned Real Property"), identifying the owner of each parcel and whether each parcel is housing inventory, lot inventory, or land. Except as set out in the Disclosure Schedule, with respect to each such parcel of real property: (a) the identified owner has good, marketable and indefeasible fee title to the Owned Real Property (as identified in the Disclosure Schedule), and except as set out in the Title Policies and endorsements thereto defined in the Disclosure Schedule, free and clear of any Security Interest, easement, covenant, or other restriction, except for liens for real estate taxes not yet delinquent and notices of commencement recorded in the Ordinary Course of Business; (b) there are no pending or, to the Knowledge of Seller, threatened condemnation proceedings, moratoria, lawsuits, or administrative actions relating to the property or other matters affecting materially and adversely the current use, occupancy, or value thereof; (c) except as set out in the Title Policies, there are no leases, subleases, licenses, concessions, or other agreements, written or oral, granting to any party or parties the right of use or occupancy of any portion of the Owned Real Property provided that the representation made in this Section 4(m)(i)(C) shall be limited , with respect to Pembroke Shores, to Seller's Knowledge thereof; (d) there are no outstanding contracts, options or rights of first refusal to purchase any of the Owned Real Property or any portion thereof or interest therein except for contracts for the sale of homes as described in Section 4(m) of the Disclosure Schedule, all of which were entered into in the Ordinary Course of Business; (e) there are no parties (other than the Company or the Joint Venture) in possession of the Owned Real Property, other than as disclosed in Section 4(m)(i) of the Disclosure Schedule provided that the representation made in this Section 4(m)(i)(E) shall be limited, with respect to Pembroke Shores, to Seller's Knowledge thereof; (f) Section 4 (m)(i) of the Disclosure Statement identifies each lot or parcel of Owned Real Property upon which a unit has been completed or is being constructed and indicates which lots or parcels are subject to a contract of sale (and if so, the name of the purchaser, the deposit received, the purchase price and anticipated closing date). To Seller's Knowledge, each lot or parcel and the buildings located thereon are consistent and in compliance with the applicable local government comprehensive plan and applicable zoning laws and ordinances and have received all approvals of governmental authorities (including licenses and permits) for the construction and, if the unit is completed, the use and occupancy thereof. Section 4 (m)(i) of the Disclosure Schedule includes a true, complete and correct copy of the Company's standard form contract for the sale of houses, which the Seller represents to be the form used for all pending sales of houses. Section 4 (m)(i) of the Disclosure Schedule also contains true, correct and complete copies of the Company's standard form reservation receipt, which Seller represents to be the form used by the Company for all pending reservations of the right to purchase any lot or parcel constituting any part of the Owned Real Property from the Company, and a list of all such pending reservations including the amount deposited and the purchase price placed on the receipt or quoted verbally in connection with each such reservation; (g) section 4 (m)(i) of the Disclosure Statement identifies each lot or parcel of Owned Real Property upon which no housing unit has been, or is being, constructed. Section 4 (m)(i) identifies (a) the nature and type of housing units planned for each such lot or parcel ("Planned Improvements"); (b) the status to Seller's Knowledge of all government approvals required to permit construction of the Planned Improvements and all government approvals obtained through the Closing Date with respect to the Planned Improvements; (c) an identification of all developer's agreements to Seller's knowledge in effect, together with all amendments thereto; (d) the status of construction to Seller's Knowledge of all land improvements and infrastructure required to complete developed lots which will allow construction of the Planned Improvements; (e) a list the nature and extent to Seller's Knowledge of all off-site and on-site obligations required in connection with the Planned Improvements, and the status to Seller's Knowledge of each and the instrument creating each such obligation; (f) a full description to Seller's Knowledge of all mitigation requirements that the Company or the Joint Venture must satisfy with respect to the Owned Real Property, all such requirements completed through the Closing Date and the instrument pursuant to which each such mitigation obligation was imposed; and (g) a list to Seller's Knowledge of the impact fees applicable to the Planned Improvements, the impact fees paid through the Closing Date and the instrument creating the obligation to pay each such impact fee. To Seller's Knowledge, the development of the Planned Improvements on each such parcel is consistent, and will be in compliance, with applicable local government comprehensive plan and zoning laws and ordinances currently in effect (without the necessity of amending the local government comprehensive plan or zoning laws or obtaining changes to, or variances from existing zoning except as disclosed in Section 4(m) of the Disclosure Schedule and except as will not cause a substantial change in the accuracy of any of the representations and warranties contained in Section 4(m)(i)); (h) to Seller's Knowledge, except as disclosed in Section 4 (m)(i) of the Disclosure Statement, the existing and the Planned Improvements have the right to receive (pursuant to enforceable agreements) electricity, telephone, potable water, solid waste, sanitary sewer and storm sewer service, all of which are adequate in accordance with all applicable laws, ordinances, rules and regulations to serve the existing and Planned Improvements and are provided via public roads or via permanent, irrevocable, unencumbered, appurtenant easements benefiting the parcel of real property. The agreements establishing such rights are identified in Section 4 (m)(i) of the Disclosure Statement; (i) to Seller's Knowledge, the existing and the Planned Improvements are vested for purposes of "concurrency" (i.e., for purposes contemplated by Section 163.3180 Florida Statutes and the applicable local government comprehensive plan) and construction and use thereof will not be delayed, impaired or prohibited on the grounds that there is inadequate infrastructure available concurrent with construction to adequately serve the improvement. The period of vesting and the instruments, if any, pursuant to which such vested rights were created are set forth in Section 4 (m)(i) of the Disclosure Statement; (j) to Seller's Knowledge, there are no unusual physical site characteristics that will prevent construction of, or will result in unusual costs of construction of, the Planned Improvements (including, without limitation, unusual soil conditions, existence of plants or animals that are endangered, threatened or are of special concern or any habitat of the foregoing, existence of wetlands, or the need to dredge and fill). To Seller's Knowledge, there is no fact or circumstance that will cause any of the Planned Improvements to be delayed substantially beyond the respective dates set forth in Section 4(m) of the Disclosure Schedule; (k) each parcel of Owned Real Property has legal access to dedicated public rights-of-way without the necessity of obtaining or relying upon easements from any third party, except for such easements as have been or will be obtained by the Company prior to the Closing Date; (l) to Seller's Knowledge, neither Seller nor the Company nor the Joint Venture has received any notice of any violations of any zoning laws, building laws or other regulatory laws, statutes, ordinances or agreements relating to the Owned Real Property that would have a Material Adverse Effect; (m) except as disclosed in Section 4 (m)(i) of the Disclosure Statement, the Owned Real Property is not subject to any homeowners' or property owners' associations. Section 4 (m)(i) of the Disclosure Statement identifies each such association that was formed by, or is controlled by, the Company or to which the Owned Real Property is subject. To Seller's Knowledge, as to each such association the Company or the Joint Venture, as applicable, has fully complied with all of its obligations under the documents establishing the association and all applicable laws, and has paid all dues and other obligations to the associations that were the obligations of the Company to pay. To Seller's Knowledge, with respect to each association that is or was formerly controlled by the Company or the Joint Venture, the budgets fairly represented the costs for which the association was liable and established adequate reserves for replacement of all capital improvements (and all required payments with respect to such reserves have been made); (n) to Seller's knowledge except as disclosed in Section 4(m)(i) of the Disclosure Statement, the Owned Real Property is not subject to any special taxing district in existence as of the Closing Date. Section 4 (m)(i) of the Disclosure Statement identifies any such district that was formed by Seller or the Joint Venture; (o) the Company possesses good, valid, and enforceable policies of owner's title insurance) with respect to each parcel of Owned Real Property ("Title Policies"). Each such Title Policy is listed in Section 4(m)(i) of the Disclosure Statement and true and complete copies of each such policy (including all endorsements and amendments thereto) have been provided by Seller to Buyer. To Seller's Knowledge, the Title Policies accurately reflect the current status of title with respect to the Owned Real Property and there have been no additional liens, encumbrances, or other matters affecting the status of the title of the Owned Real Property except as set forth in Section 4(m)(i) of the Disclosure Schedule; (p) Seller has no Knowledge of any legislation, ordinance, or other governmental action pending or contemplated that would have a Material Adverse Effect upon the ability to construct and sell the Planned Improvements, except as set forth in Section 4 (m)(i) of the Disclosure Statement; (q) Seller has delivered to Buyer those surveys and plats of the Owned Real Property identified in Section 4(m)(i) of the Disclosure Schedule (the "Surveys"). Subsequent to the last certificate date of each such Survey, there have arisen, to Seller's Knowledge, no new encroachments or other matters of survey other than as listed in Section 4(m)(i) of the Disclosure Schedule. The representations and warranties made above in Sections 4(m)(i)(C) through (Q) shall be limited, with respect to the Owned Real Property described in the Disclosure Schedules as the "Titusville Property", the "Rolling Green Ridge Property", the two lots owned by the Company in the "Chapel Trail Property" and the two lots owned by the Company in the "Lago Mar Property", to the matters, if any, set forth in the Disclosure Schedule with respect to those properties. ii. The Headquarters Lease is the only lease or sublease for real property to which the Company is a party. The Joint Venture is not the lessor or the lessee of any real property. With respect to the Headquarters Lease: (a) the lease is legal, valid, binding, enforceable, and in full force and effect in all material respects; (b) the lease will continue to be legal valid, binding, enforceable, and in full force and effect on identical terms following the consummation of the transactions contemplated hereby; (c) neither the Company nor to the Knowledge of Seller the landlord is in breach or default, and no event has occurred which, with notice or lapse of time, would constitute a material breach or default or permit termination, modification, or acceleration thereunder; (d) neither the Company nor, to the Knowledge of Seller, has the landlord repudiated any provision thereof; (e) there are no material disputes, oral agreements, or forbearance programs in effect as to the lease; (f) the Company has not assigned, transferred, conveyed, mortgaged, deeded in trust, or encumbered any interest in the leasehold; (g) the leased premises have received all approvals of governmental authorities (including licenses and permits) required in connection with the operation thereof and have been operated and maintained substantially in accordance with applicable laws, rules, and regulations; and (h) the leased premises are supplied with utilities and other services necessary for the operation thereof. iii. Except for (a) the Company's right to acquire parcels 3, 4, 5 and 9 of Pembroke Shores according to the preliminary site plan thereof under the Joint Venture Agreement and (b) contracts for the sale of individual housing units as set forth in Section 4 (m)(i) of the Disclosure Schedule, neither the Company nor, to Seller's knowledge, the Joint Venture is a party to any contract, agreement, option or understanding pursuant to which the Company, the Joint Venture or any other Person has the option or other right to acquire real property or any interest therein. N. Intellectual Property. i. To Seller's Knowledge, the Company and the Joint Venture own or have the right to use pursuant to license, sublicense, agreement, or permission all Intellectual Property necessary for the operation of their respective businesses as presently conducted. To Seller's Knowledge, each item of Intellectual Property owned or used by the Company or the Joint Venture immediately prior to the Closing hereunder will be owned or available for use by the Company or the Joint Venture on identical terms and conditions immediately subsequent to the Closing hereunder. ii. To Seller's Knowledge, neither the Company nor the Joint Venture has interfered with, infringed upon, misappropriated, or otherwise come into conflict with any Intellectual Property rights of third parties, and (b) none of the Seller and the directors and officers (and employees with responsibility for Intellectual Property matters) of the Company has ever received any charge, complaint, claim, demand, or notice alleging any such interference, infringement, misappropriation, or violation (including any claim that the Company or the Joint Venture must license or refrain from using any Intellectual Property rights of any third party). To Seller's Knowledge, no third party has interfered with, infringed upon, misappropriated, or otherwise come into conflict with any Intellectual Property rights of the Company or the Joint Venture. iii. To Seller's Knowledge, Section 4(n) of the Disclosure Schedule sets forth all names, trade names, trademark and service marks owned by the Company or the Joint Venture, respectively ("Company Names"); and no other Person has the right to use the Company Names either in the identical form or in such near resemblance as to be likely, when applied to the goods or services of such entity, to cause confusion, or to cause mistake, or to deceive. iv. Pursuant to the agreements between the Company and Sotolongo Oliva & Associates identified in Section 4(n) of the Disclosure Schedule (the "Architect's Agreements"), the Company has the right to use all housing plans, blueprints, elevation drawings, diagrams, and the like (collectively the "Plans") which have been or are currently being used by it in the construction of homes and all Intellectual Property rights relating to the Plans used by it. The Company has the right to use such Plans now and in the future without further payment of fees or other compensation to any other Person, except as set forth in the Architect's Agreements. v. The parties agree and acknowledge that the parties intend for the Buyer and the Company, upon Closing and thereafter, to have the sole and exclusive right to use the Company Names and all other marks and names which include the term "Heftler", and any and all variations thereof, whether or not incorporating any design features or the like and whether or not registered. Accordingly, the Seller agrees that, upon Closing, the Seller shall not thereafter use any of the Company Names. The Seller further agrees that, upon Closing, the Seller shall not thereafter adopt or use (alone or with others) any trade name, trademark, service mark, logo, device, or the like which is or may be confusingly similar to any or all of the Company Names. The Seller agrees and acknowledges that Seller intends to relinquish all rights to use the term "Heftler" (whether alone or with other terms, design features, or the like or not) as a trade name, trademark, service mark, or the like in the real estate business. O. Personal Property. i. To Seller's Knowledge, Section 4(o) of the Disclosure Schedule lists all motor vehicles owned, leased, or otherwise used by the Company, all of which are included in the September 30, 1994 Interim Financial Statements. ii. To Seller's Knowledge, the Company and the Joint Venture, respectively, own or lease all buildings, machinery, equipment, and other items of personal property actually used by them, located on their premises, or necessary for the conduct of their respective businesses as presently conducted. Prior to the date hereof, the Seller has caused the Company and the Joint Venture to deliver to the Buyer copies of all leases covering such personal property. To Seller's Knowledge, each such item of personal property is free from material defects (patent and latent), has been maintained in accordance with normal industry practice, is in good operating condition and repair (subject to normal wear and tear), and is suitable for the purposes for which it presently is used. P. Inventory. To Seller's Knowledge, the inventory of the Company and of the Joint Venture consists of raw materials and supplies, houses, houses under construction, finished lots, and undeveloped land all of which are (i) free from material defect, and (ii) have (with respect to houses and houses under construction) been engineered and constructed properly, taking into account soils and other existing conditions, in accordance with all applicable plans, specifications, laws, regulations, codes, ordinances and standards, including, without limitation, the South Florida Building Code, and (iii) not obsolete, damaged, or defective, subject only to the reserve for inventory write-down, if any, set forth in the Financial Statements as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of such entities. Q. Contracts. The Disclosure Schedule lists the following contracts and other agreements to which the Company or the Joint Venture is a party, or under which either of them has rights or obligations: i. any agreement (or group of related agreements) for the lease of property to or from any Person, exclusive of sign or storage leases, or leases costing less than $1,000 a year and in the Ordinary Course of Business; ii. any agreement (or group of related agreements) for the purchase or sale of raw materials, commodities, supplies, products, or other personal property, or for the furnishing or receipt of services (including, without limitation, all construction contracts and infrastructure contracts), the performance of which will extend over a period of more than one year, result in a material loss to the Company or the Joint Venture or involve consideration in excess of $10,000 (but excluding contracts for any single house to be sold in the Ordinary Course of Business listed in Section 4(q) of the Disclosure Schedule); iii. any material agreement concerning a partnership or joint venture; iv. any agreement (or group of related agreements) under which the Company or the Joint Venture has created, incurred, assumed, or guaranteed any indebtedness for borrowed money, or any capitalized lease obligation, in excess of $1,000 or under which Company or the Joint Venture has imposed a Security Interest on any of its assets, tangible or intangible; v. any agreement concerning confidentiality or noncompetition; vi. any agreement with any Person included in the definition of Seller or any Affiliates; vii. any profit sharing plan, stock option plan, stock purchase plan, or stock appreciation plan, and any bonus, incentive, supplemental income, deferred compensation, severance, vacation, personnel policies or other material plan, arrangement, program, policy, practice or understanding for the benefit of its current or former directors, officers, and employees outside the Ordinary Course of Business; viii. any collective bargaining agreement; ix. any agreement for the employment (other than at will) of any individual on a full-time, part-time, consulting or other basis providing annual compensation in excess of $15,000 or providing severance benefits; x. any agreement under which either the Company or, to Seller's Knowledge, the Joint Venture has advanced or loaned any amount to any of their respective directors, officers, shareholders, partners, independent contractors, managers and employees outside the Ordinary Course of Business; xi. any agreement under which the consequences of a default or termination could have a Material Adverse Effect; xii. any agreement concerning any indemnity, guaranty or other contingent liability, including any surety bond and any letter of credit; xiii. any agreement with any lender concerning any loan or loan workout where there is any Liability, contingent or otherwise; xiv. all casualty, liability, or other insurance policy or agreement; and xv. any other agreement (or group of related agreements) the performance of which involves consideration in excess of $10,000. Seller has delivered to the Buyer a correct and complete copy of each written agreement (as amended to date) listed in Section 4(q) of the Disclosure Schedule (or a list thereof for subcontracts for the construction of homes and not the written agreements all of which are in substantially the form of Exhibit J hereto ), and a written summary setting forth the material terms and conditions of each oral agreement referred to in the Disclosure Schedule. To Seller's Knowledge, with respect to each such agreement: (A) the agreement is legal, valid, binding, enforceable, and in full force and effect in all material respects; (B) the agreement will continue to be legal, valid, binding, enforceable, and in full force and effect on identical terms following the consummation of the transactions contemplated hereby; (C) the Company is not, and to Seller's Knowledge no other party is, in material breach or default, and no event has occurred which with notice or lapse of time would constitute a breach or default, or permit termination, modification, or acceleration, under such agreement; and (D) no party has repudiated any material provision of such agreement. R. Notes and Accounts Receivable. To Seller's Knowledge, all notes and accounts receivable of the Company and the Joint Venture are reflected properly on their books and records, are valid receivables subject to no setoffs or counterclaims, are current and collectible, have not been assigned (except in the Ordinary Course of Business), and will be collected in accordance with their terms at their recorded amounts, subject only to the reserve for bad debts set forth in the Financial Statements and the financial statements of the Joint Venture as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of the Company and the Joint Venture. S. Litigation. To Seller's Knowledge, Section 4(s) of the Disclosure Schedule sets forth each instance in which the Company or the Joint Venture or their respective assets and interests is subject to any outstanding complaint (in litigation), injunction, judgment, order, decree, ruling, or is threatened to be made a party to any action, suit, proceeding, hearing, or investigation of, in, or before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator. None of the actions, suits, proceedings, hearings, and investigations set forth in the Disclosure Schedule could reasonably be expected to result in any Material Adverse Effect. T. Product Warranty. To Seller's Knowledge, all structures and improvements sold, constructed or delivered by the Company (including, without limitation, all structures and improvements constructed on behalf of the Company by subcontractors) have been designed and built in a good and workman-like manner and in substantial conformity with (i) all plans, specifications and applicable contractual commitments; (ii) all express and implied warranties; and (iii) all applicable laws, regulations, codes, industry standards and building codes (including, without limitation, the South Florida Building Code with respect to structures and improvements subject thereto). Except as set out in Section 4(t) of the Disclosure Schedule, Seller has no Knowledge of any Basis for any present or future product warranty claim against the Company in excess of $1,000.00 per claim. No product manufactured, sold, leased, or delivered by either the Company or the Joint Venture is subject to any guaranty, warranty, or other indemnity (except pursuant to applicable law) beyond the applicable standard terms and conditions of sale or lease, which terms and conditions are set forth in Section 4(t) of the Disclosure Schedule including copies of the standard terms and conditions of sale or lease for each of the Company and the Joint Venture, containing applicable guaranty, warranty, and indemnity provisions. U. Product Liability. Except as set out in Section 4(u) of the Disclosure Schedule, neither the Company nor the Joint Venture has, to Seller's Knowledge, any Liability (and to Seller's Knowledge there is no Basis for any present or future action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand against the Company or the Joint Venture giving rise to any Liability) in excess of $1,000.00 per claim arising out of any injury to individuals or property as a result of the ownership, possession, or use of any product manufactured, sold, leased, or delivered by any of such entities. V. Employees. To Seller's Knowledge, no executive, key employee, or group of employees of the Company other than Herbert Heftler has expressed any plans to terminate employment with the Company during the next 12 months. Neither the Company nor the Joint Venture, is a party to or bound by any collective bargaining agreement, nor has either of them experienced any strikes, unresolved grievances, unresolved claims of unfair labor practices, or other collective bargaining disputes within the last three years. Neither the Company nor, to Seller's Knowledge, the Joint Venture has committed any material unfair labor practice. Seller has no Knowledge of any organizational effort presently being made or threatened by or on behalf of any labor union with respect to employees of the Company or the Joint Venture. Section 4(v) of the Disclosure Schedule sets forth a complete listing of all employees of the Company, inclusive of employment classifications. To Seller's Knowledge, no material representations, warranties, or promises have been made to or agreements have been reached with any employee at variance with the provisions of the employee manual with respect to their employment, compensation, benefits, or other consideration or matters with respect to the employment by the Company. W. Employee Benefits Plans. i. The Disclosure Schedule contains a list of each "employee welfare benefit plan" (as defined in Section 3 of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")): (A) which is (or had within the three-year period before the Closing Date been) maintained or administered by the Company, (B) to which the Company contributes or is (or had within the three-year period before the Closing Date been) legally obligated to contribute, or (C) under which the Company has (or had within the three-year period before the Closing Date) any liability, with respect to its current or former employees or independent contractors (collectively the "Welfare Benefit Plans" and individually a "Welfare Benefit Plan"). ii. The Disclosure Schedule also contains a list of each "employee pension benefit plan" (as defined in ERISA Section 3): (A) which is (or had within the three-year period before the Closing Date been) maintained or administered by the Company, (B) to which the Company contributes or is (or had within the three-year period before the Closing Date been) legally obligated to contribute, or (C) under which the Company has (or had within the three-year period before the Closing Date) any liability with respect to its current or former employees or independent contractors (collectively the "Pension Benefit Plans" and individually a "Pension Benefit Plan"). iii. The Disclosure Schedule also contains a list of each employee benefit plan, program, arrangement, agreement, policy or commitment whether insured or uninsured, funded or unfunded, that is not a Welfare Benefit Plan or Pension Benefit Plan, relating to deferred compensation, bonus or compensation in addition to regular pay or wages, stock options, employee stock purchases, severance, unemployment, flexible benefits, disability, vacation, sickness, leave of absence, fringe benefits, employee awards, educational assistance or reimbursement, equity participation (including but not limited to stock appreciation and phantom stock), restricted stock, employee discounts, excess benefits, secular or vesting trust, child or dependent care, long-term and nursing home care, and profit sharing: (A) which is maintained or administered by the Company; (B) to which the Company contributes, or is legally obligated to contribute; or (C) under which the Company has any liability, with respect to its current or former employees or independent contractors (collectively, the "Employee Plans" and individually an "Employee Plan"). Solely for the purposes of this Section, the Employee Plans, Welfare Benefit Plans and Pension Benefit Plans are collectively referred to as "Employee Benefit Plans" and individually referred to as an "Employee Benefit Plan." iv. As of the Closing Date, the fair market value (determined in accordance with the Code and ERISA) of the assets (excluding for this purpose any accrued but unpaid contributions) of each Pension Benefit Plan, that is a defined benefit plan as defined in ERISA Section 3(35), exceed the present value of all benefits accrued under each such Pension Benefit Plan determined on a termination basis using the assumptions established by the Pension Benefit Guaranty Corporation ("PBGC") as in effect on such date. With respect to each Pension Benefit Plan, the funding method used in connection with such Pension Benefit Plan has at all times satisfied and will as of the Closing Date satisfy any and all requirements under ERISA or the Code. There is as of the date hereof no "accumulated funding deficiency" as defined in ERISA Section 302(a)(2) and Code Section 412(a) (whether or not waived) which exists, asserted or unasserted, with respect to any plan year of any Pension Benefit Plan. v. There is no action, lawsuit, claim for benefits, proceeding, investigation, audit or arbitration pending, as of the date of this Agreement and as of the Closing Date, involving any Employee Benefit Plan. vi. There are no liabilities of the Company, contingent or otherwise, accrued or unaccrued, asserted or unasserted, with respect to any Employee Benefit Plan. vii. With respect to each Employee Benefit Plan, the Disclosure Schedule sets forth the amount of any contribution made or expense incurred with respect to the Plan's most recent fiscal year ended prior to the date of this Agreement, and the amount of any contribution made, or expense incurred with respect to the period between the close of the Plan's most recent fiscal year and the date hereof, and the amount of any contribution or expense payable in accordance with the contribution formula set forth in any Employee Benefit Plan, authorized by the governing body or duly authorized officer of the Company, or for which the Company is otherwise liable with respect to the period between the close of the most recent plan year for any such plan and the Closing Date. viii. All contributions (including all employer contributions and employee salary reduction contributions) which were due have been paid to each such Employee Benefit Plan which is an Employee Pension Benefit Plan and all contributions to any period ending on or before the Closing Date which were not yet due have been paid to each such Employee Pension Benefit Plan or accrued in accordance with the past custom and practice of the Company. All premiums or other payments for all periods ending on or before the Closing Date have been paid with respect to each such Employee Benefit Plan which is an Employee Welfare Benefit Plan. ix. Each Pension Benefit Plan has at all times qualified under Section 401(a) or 403(a) of the Code and has been tax exempt under Section 501(a) of the Code; each such Pension Benefit Plan at all times prior to the date hereof has been operated and administered in compliance with any and all requirements of the Tax Reform Act of 1986 as amended without regard to when such plan is required to be amended to comply with such Act. x. (1) No Pension Benefit Plan has ever acquired or held any "employer security" or "employer real property" each as defined in Section 407(d) of ERISA or if it has, any such acquisition or holding, as so set forth, has at all times been in compliance with ERISA, the Code and all other applicable laws, rules and regulations. (2) No Pension Benefit Plan has ever engaged in a "prohibited transaction" as that term is defined in Code Section 4975 or if it has, any such transaction is set forth in detail in Section 4(w) of the Disclosure Schedule. (3) No Fiduciary has any liability for breach of fiduciary duty or any other failure to act or comply in connection with the administration or investment of the assets of any such Employee Benefit Plan. No action, suit, proceeding, hearing, or investigation with respect to the administration or the investment of the assets of any such Employee Benefit Plan (other than routine claims for benefits) is pending or to the knowledge of the Seller and the officers and directors of the Company threatened. Neither the Seller nor the directors and officers of the Company has any Knowledge of any Basis for any such action, suit, proceeding, hearing or investigation. xi. There are no premiums due to PBGC for any Pension Benefit Plan and the Company has not incurred nor does it expect to incur any liability to the PBGC or otherwise under ERISA Sections 4062, 4063 or 4064 or to a trust under ERISA Section 4049. xii. The Company has not taken any action, and no proceeding has been commenced by the PBGC to terminate or partially terminate any Pension Benefit Plan and no condition, fact or circumstance exists which would permit a distress termination of any Pension Benefit Plan under ERISA Section 4042(c). xiii. Separately identified on the Disclosure Schedule are true and complete copies of: (A) each Employee Benefit Plan listed on the Disclosure Schedule (including any amendments or modifications), and all related trust agreements, custodial agreements, agency agreements, insurance or annuity contracts, and any other funding instruments), including any amendments or modifications to such agreements or instruments; (B) the most recent summary plan description for each Welfare Benefit Plan and each Pension Benefit Plan (and any subsequent summary of material modifications) and any other written description of such plans or written interpretations of such plans whether or not distributed to participants or beneficiaries; (C) the most recent determination letter issued by the Internal Revenue Service with respect to each Pension Benefit Plan and each private letter ruling or determination letter issued by the Internal Revenue Service relating to any Employee Benefit Plan; (D) the Annual Reports on the form 5500 Series (and each related summary annual report) required to be filed with any governmental agency for each Employee Benefit Plan for the three (3) most recent plan years (together with any actuarial, accounting, fiduciary or trustee reports for such plan years; (E) documentation or reports reflecting any tests showing compliance with Code Sections 415, 401(k) and 401(m), as applicable, with respect to each Pension Benefit Plan; (F) minutes of the governing body of the Company, each plan administrator or administrative committee relating to each Employee Benefit Plan; (G) filings with, or reports to, the PBGC with respect to each Pension Benefit Plan; (H) each advisory opinion, private exemption or other letter from the U.S. Department of Labor or PBGC or Internal Revenue Service relating to any Employee Benefit Plan; and (I) all information relating to the termination, merger or curtailment of any Employee Benefit Plan of the Company occurring in any of the five (5) calendar years preceding the date of this Agreement, have heretofore been delivered to the Purchaser. xiv. All required reports and descriptions (including Form 5500 Annual Reports, Summary Annual Reports, PBGC-1s and Summary Plan Descriptions) have been filed or distributed appropriately with respect to each such Employee Benefit Plan. The requirements of Part 6 of Subtitle B of Title 1 of ERISA and of Code Section 4980B have been met with respect to each such Employee Benefit Plan which is an Employee Welfare Benefit Plan. xv. All trust agreements, custodial agreements, investment management agreements, insurance or annuity contracts (or any other funding instruments) and any other agreement relating to any Employee Benefit Plan are legally valid and binding and in full force and effect. xvi. The Company does not have any obligation to provide any medical or health benefits to any former employees or retired employees, except to the extent required by Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (hereinafter referred to as "COBRA"). xvii. The Company has complied with the requirements of COBRA and the rules and regulations thereunder. The Company shall be solely responsible and liable for providing any and all benefits to employees or others (or their covered dependents) of the Company required under COBRA arising from any qualifying event as defined under Code Section 4980B(f)(3) and ERISA Section 603 occurring on or before the Closing Date. The Disclosure Schedule contains a list of: (a) all persons who have elected or who are eligible to elect COBRA continuation coverage under any of the Welfare Benefit Plans, (b) the dates of each qualifying event and COBRA continuation coverage periods for each such person; and (c) the claims experience of each such person for the preceding twelve months plus pending claims for benefits which as of the date of such Schedule have not yet been paid and a prognosis with respect to each such person who has had a significant claim in the preceding twelve months. xviii. No condition, fact, or circumstances exists, or will exist at Closing, which would prevent the Company from amending or terminating any Employee Benefit Plan with respect to any current, former or retired employee or independent contractor of the Company. xix. Neither the Joint Venture nor any other member of the Controlled Group of Corporations that includes the Joint Venture has sponsored, maintained, or contributed to any Pension Benefit Plan within six years prior to the Closing Date. xx. The Joint Venture does not maintain and never has maintained or contributed, or ever has been required to contribute to any Employee Welfare Benefit Plan except in compliance with all laws and regulations relating to any medical, health, or life insurance or other welfare-type benefits. xxi. Neither the Company (nor any other member of any controlled group of corporations that now includes or previously included the Company) contributes to, ever has contributed to, or ever has been required to contribute to any Multi-employer Plan or has any liability (including withdrawal Liability) under any Multi-employer Plan. X. Guaranties. To Seller's Knowledge, neither the Company nor the Joint Venture is a guarantor or otherwise is liable for any Liability or obligation (including indebtedness) of any other Person. Y. Environment, Health, and Safety. i. To Seller's Knowledge, except as disclosed in the Environmental Reports, (A) the Company and the Joint Venture have each complied with all Environmental, Health, and Safety Laws applicable to them or to the Owned Real Property or the Headquarters Lease in all material respects, and (B) no action, suit, proceeding, hearing, or written notice, investigation, charge, complaint, claim, or demand has been filed or commenced against either of them alleging any failure so to comply. To Seller's Knowledge, without limiting the generality of the preceding sentence, the Company and the Joint Venture have each obtained and been in substantial compliance with all of the terms and conditions of all permits, licenses, and other authorizations which are required under, and have in all material respects complied with all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules, and timetables which are contained in, all Environmental, Health, and Safety Laws applicable to them or to the Owned Real Property or the Headquarters Lease. ii. To Seller's Knowledge, there has been no material Liability asserted against either the Company or the Joint Venture (and neither of such entities has handled or disposed of any substance, arranged for the disposal of any substance, exposed any employee or other individual to any substance or condition, or owned or operated any property or facility in any manner that could reasonably be expected to give rise to any material Liability) for damage to any site, location, or body of water (surface or subsurface), for any illness of or personal injury to any employee or other individual, or for any reason under any applicable Environmental, Health, and Safety Law. iii. To Seller's Knowledge, the Owned Real Property does not contain asbestos, PCB's, methylene chloride, trichloroethylene, 1,2- transdichloroethylene, dioxins, dibenzofurans, or Extremely Hazardous Substances, except for the following which are handled in material compliance with applicable Environmental, Health, and Safety Laws: (A) as to the Headquarters Lease only, chemicals, substances or materials routinely used in office areas and janitorial supplies, cleaning fluids, pesticides and herbicides reasonably necessary for the day-to-day operations of the Owned Real Property, and (B) chemicals, substances or materials reasonably necessary for the construction or repair of improvements on the Owned Real Property. Z. Transactions with Related Parties. Except as disclosed in Section 4(z) of the Disclosure Schedule, neither the Seller, nor, to Seller's Knowledge, any officer, director, shareholder, partner, manager, independent contractor or employee of the Company or the Joint Venture, nor any spouse, parent, or child of any of them, has any direct or indirect interest in any competitor, supplier or customer of any of such entities or in any Person from whom or to whom any of such entities leases any property (real or personal), or in any other Person with whom any of such entities is doing business (other than any other Person acting as a customer of any of such entities). AA. Special Taxing Districts. Except as disclosed in Section 4(aa) of the Disclosure Schedule, neither the Company nor the Joint Venture is a party to any agreement with any special taxing district. BB. Disclosure. This Agreement and the Exhibits and Schedules hereto do not contain any untrue statements of material fact by the Seller or omit to state a material fact necessary to make the statements by Seller herein contained not misleading. 5. Pre-Closing Covenants. The parties agree as follows with respect to the period between the execution of this Agreement and the Closing: A. General. Each of the parties will use his or its reasonable best efforts to take all action and to do all things necessary, proper, or advisable in order to consummate and make effective the transactions contemplated by this Agreement (including satisfaction, but not waiver, of the closing conditions set forth in Section 7 below). B. Notices and Consents. The Seller will cause each of the Company and the Joint Venture to give any notices to third parties, and will cause each of such entities to use its reasonable efforts to obtain any third- party consents that are required for this transaction or that the Buyer reasonably may request. Without limiting the generality of the foregoing, the Seller shall obtain the written consent and estoppel of (i) the partners of the Joint Venture and (ii) NationsBank, all in form and content reasonably satisfactory to the Buyer, provided that a consent and estoppel will not be required from NationsBank if Herbert Heftler provides financing to the Company in accordance with Section 7(c). Each of the Parties will (and the Seller will cause each of the Company and the Joint Venture to) give any notices to, make any filings with, and use its reasonable efforts to obtain any authorizations, consents, and approvals of governments and governmental agencies in connection with the matters referred to in Section 3(b), Section 4(a), and Section 4(g) above. Without limiting the generality of the foregoing, each of the parties will file any Notification and Report Forms and related material that he or it may be required to file with the Federal Trade Commission and the Antitrust Division of the United States Department of Justice under the Hart-Scott-Rodino Act, will use his or its reasonable best efforts to obtain an early termination of the applicable waiting-period, and will make any further filings pursuant thereto that may be necessary, proper, or advisable in connection therewith, provided that all such filings will be prepared by Buyer (Seller shall cooperate, and shall cause the Company to cooperate, in supplying the information necessary to the preparation of such filings) and at Buyer's expense. C. Operation of Business. Except as set out on the Disclosure Schedule, the Seller will cause the Company and the Joint Venture to refrain from engaging in any practice, taking any action, or entering into any transaction outside the Ordinary Course of Business. Without limiting the generality of the foregoing, except as set out on the Disclosure Schedule, the Seller will cause the Company and the Joint Venture to refrain from engaging in any practice, taking any action, or entering into any transaction of the sort described in Section 4(i) above. D. Preservation of Business. The Seller will cause the Company and the Joint Venture to keep their respective businesses and properties substantially intact, including present operations, physical facilities, working conditions, and relationships with lessors, licensors, suppliers, customers, and employees. E. Full Access. The Seller will permit, and the Seller will cause each of the Company and the Joint Venture to permit, representatives of the Buyer to have full access at all reasonable times to all premises, properties, personnel, books, records (including Tax records), contracts, and documents of or pertaining to each of such entities. F. Notice of Developments. Each party will give prompt written notice to the others of any material adverse development causing a breach of any of his or its own representations and warranties in Section 3 and Section 4 above, respectively. No disclosure by any Party pursuant to this Section 5(f), however, shall be deemed to amend or supplement the Disclosure Schedule or to prevent or cure any misrepresentation, breach of warranty, or breach of covenant. G. Exclusivity. Seller will not (and Seller will not cause or permit the Company and will not vote to allow the Joint Venture to) (i) solicit, initiate, or encourage the submission of any proposal or offer from any Person relating to the acquisition of any ownership interest or capital stock or other voting securities, or any substantial portion of the assets of the Company and/or the Joint Venture (including any acquisition structured as a merger, consolidation, or share exchange) or (ii) participate in any discussions or negotiations regarding, furnish any information with respect to, assist or participate in, or facilitate in any other manner any effort or attempt by any Person to do or seek any of the foregoing. The Seller will notify the Buyer immediately if any Person makes any proposal, offer, inquiry, or contact with respect to any of the foregoing. H. Title Insurance. Buyer may arrange to obtain endorsements (the costs of which shall be paid by Buyer) to each of the Title Policies which endorsements shall (a) bring the effective date of each Title Policy current through the date of Closing and (b) provide such other assurance as the Buyer shall reasonably request. Seller will cooperate with Buyer in efforts to obtain such endorsements. If Buyer deems it necessary or desirable to obtain new policies of owner's title insurance in order to obtain the above coverage, Buyer may elect to obtain new policies in lieu of endorsements. Each title insurance policy delivered under this Section 5(h) shall insure title to the real property and all recorded easements benefiting such real property, and shall at Buyer's option have an endorsement of the survey exception, limiting it to an exception to "shortages in area" only. I. Platting of Pembroke Shores. Seller shall cause the Company to diligently continue efforts to obtain final plat approval from all governmental bodies having jurisdiction with respect to the plat of the Pembroke Shores. J. Lawsuits. Seller will cause the Company, and will vote to require the Joint Venture, to preserve all rights under any existing lawsuits to which any of the Company or the Joint Venture is a party and Seller will not permit the Company (and will not vote to allow the Joint Venture to) (i) incur any expenses in connection with any such lawsuits other than those expenses that are reasonably necessary to preserve their rights in connection with any such lawsuit, or (ii) settle any lawsuits without Buyer's prior consent. K. Acquisition and Disposition of Real Property. The Company will not, and will not vote to permit the Joint Venture to, acquire or dispose of or agree to acquire or dispose of any interest in real property, other than sales of single family houses by the Company in the Ordinary Course of Business. L. Tax Information. The Seller will provide all schedules, computations and details of carry forward attributes necessary for future tax work, including (i) detailed federal tax depreciation schedules, including accumulated depreciation by asset, (ii) schedule of previous and future book-tax differences related to stock incentive plan expenses, (iii) detail of tax capitalization (sec. 263A) methodology, including differences between book and tax capitalized values for any assets as of the Closing Date, (iv) schedule of all deferred temporary differences between book and tax basis in assets and liabilities, and (v) detail of any tax attributes, including quantification of earnings & profits, carrying forward from the Company's last C corporation year. M. Sale of Joint Venture Property, etc. The Joint Venture shall not transfer, assign, convey, create a lien, security interest or other encumbrance on (except for liens, security interests or other encumbrances permitted by the Joint Venture Agreement) or otherwise dispose of any interest in any part of Pembroke Shores. N. Option to Exclude Assets. If the Buyer so notifies Seller not less than Five (5) days prior to Closing, the Buyer may elect to require the Seller to cause the Company to convey to a third party chosen by Seller prior to Closing either or both of the real property owned by the Company in Brevard County, Florida known as the "Titusville" property and the real property located in Palm Beach County, Florida known as the "Rolling Green Ridge" property. If Buyer makes such election, Seller shall cause the Company to convey to a third party prior to Closing either or both of such properties in accordance with the election of Seller. 6. Post-Closing Covenants. The parties agree as follows with respect to the period following the Closing: A. General. In case at any time after the Closing any further action is necessary or desirable to carry out the purposes of this Agreement, each of the parties will take such further action (including the execution and delivery of such further instrument and documents) as any other party reasonably may request, all at the sole cost and expense of the requesting party (unless the requesting party is entitled to indemnification therefor under Section 8 below). The Seller acknowledges and agrees that from and after the Closing the Buyer will be entitled to possession of all documents, books, records (including Tax records), agreements, and financial data belonging to the Company. B. Litigation Support. In the event and for so long as Seller, Buyer or the Company actively is contesting or defending against any action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand in connection with (i) any transaction contemplated under this Agreement or (ii) any fact, situation, circumstance, status, condition, activity, practice, occurrence, event, incident, action, failure to act, or transaction on or prior to the Closing Date involving the Company or the Joint Venture, each of the other parties will cooperate with him or it and his or its counsel in the contest or defense, make available their personnel, and provide such testimony and access to their books and records as shall be necessary in connection with the contest or defense, all at the sole cost and expense of the contesting or defending party (unless the contesting or defending party is entitled to indemnification therefor under Section 8 below). C. Transition. Seller will not take any action that is designed or intended to have the effect of discouraging any lessor, licensor, customer, supplier, or other business associate of the Company or the Joint Venture from maintaining the same business relationships with such entities after the Closing as it maintained with such entities prior to the Closing. Seller will refer all customer inquiries relating to the businesses of such entities to Buyer from and after the Closing. D. Confidentiality. Seller will treat and shall retain in strict confidence all of the Confidential Information, refrain from using any of the Confidential Information in competition with or otherwise in a manner detrimental to Buyer, the Company or the Joint Venture except in connection with this Agreement, and deliver promptly to Buyer or destroy, at the request and option of Buyer, any tangible embodiments (and all copies) of the Confidential Information which are in his possession. In the event that Seller is requested or required (by oral question or request for information or documents in any legal proceeding, interrogatory, subpoena, civil investigative demand, or similar process) to disclose any Confidential Information, then Seller will notify Buyer promptly of the request or requirement so that Buyer may seek an appropriate protective order or waive compliance with the provisions of this Section 6(d). If, in the absence of a protective order or the receipt of a waiver hereunder, Seller is, on the advice of counsel, compelled to disclose any Confidential Information to any tribunal or else stand liable for contempt, Seller may disclose the Confidential Information to the tribunal; provided, however, that Seller shall use his best efforts to obtain, at the request of Buyer, an order or other assurance that confidential treatment will be accorded to such portion of the Confidential Information required to be disclosed as Buyer shall designate. The foregoing provisions shall not apply to any Confidential Information which is generally available to the public immediately prior to the time of disclosure. E. Life Insurance Policies. On or before thirty (30) days after the Closing Date: (i) Roger Heftler shall notify the Buyer of whether he wishes to have the Company assign to him that Life Insurance Policy No. 0511919 issued by Manufacturers Life Insurance Company on the life of Roger Heftler in the amount of $2,500,000.00 and that Life Insurance Policy No. 1304081 issued by National Life of Vermont on the life of Roger Heftler in the amount of $125,000.00 (collectively, the "Life Insurance Policies"); (ii) if he shall have notified the Buyer that he wishes to receive an assignment of the Life Insurance Policies, then he shall have paid to the Company an amount equal to the cash surrender value and any and all other amounts due under the Life Insurance Policies which is approximately $75,000.00 in exchange for the assignment of the Life Insurance Policies to him by the Company; and (iii) if he does not wish to receive an assignment of the Life Insurance Policies, he shall cooperate with the Company in obtaining a cancellation of the Life Insurance Policies and the payment to the Company of the cash surrender values and all other amounts due under the Life Insurance Policies. F. Dividends for Taxes. When the final federal income tax return of the Company for the period from January 1, 1994 through the Closing Date is filed, an adjustment to the dividends for 1994 personal federal income Taxes of the Seller paid at the Closing pursuant to Section 2(g) shall be made based on the final taxable income of the Company for that period so that the Seller will have received dividends for 1994 in an amount equal to 39.6% of such final taxable income (the "Final Dividend"). If the dividends paid to the Seller at the Closing pursuant to Section 2(g) with respect to the income of the Company from January 1, 1994 through the Closing Date are less than the Final Dividend, then the Company shall pay to the Seller the amount of such deficiency. If the dividends paid to the Seller at the Closing with respect to the income of the Company from January 1, 1994 through the Closing Date are more than the amount of the Final Dividend, then the Seller shall pay to the Company an amount equal to such excess. G. Barnett Financing Statements. Not later than sixty (60) days after the Closing Date, the Seller shall deliver to the Buyer UCC-3 Statements of Change in form reasonably satisfactory to the Buyer terminating the following UCC-1 Financing Statements; (i) UCC-1 Financing Statement by the Company in favor of Barnett Bank of South Florida, N.A. filed June 20, 1994 with the Florida Secretary of State under file number 94-0000124831; and (b) UCC-1 Financing Statement by the Company in favor of Barnett Bank of South Florida, N.A. filed June 15, 1994 in Official Records Book 16402 at Page 3187 of the Public Records of Dade County, Florida. 7. Conditions to Obligation to Close and Covenant of Seller. A. Conditions to Obligation of the Buyer. The obligation of the Buyer to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions: i. the representations and warranties of the Seller set forth in Section 4 above shall be true and correct in all material respects at and as of the Closing Date; ii. the Seller shall have performed and complied with all of his covenants hereunder in all material respects through the Closing; iii. the Company and the Joint Venture shall have procured and delivered to the Buyer all of the third party consents specified in Section 5(b) above, except where failure to do so will not have a Material Adverse Effect provided that the consent of NationsBank shall not be required if Herbert Heftler provides financing to the Company in accordance with Section 7(a)(xvii); iv. Seller shall have delivered to Buyer not less than three (3) Business Days prior to the Closing Date the Financial Statements (including, without limitation, the October 31, 1994 Interim Financial Statements), and the October 31, 1994 Interim Financial Statements shall not differ materially and adversely from the September 30, 1994 Interim Financial Statements of the Company; v. no action, suit, or proceeding shall be pending or threatened before any court or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would (A) prevent consummation of any of the transactions contemplated by this Agreement, (B) cause any of the transactions contemplated by this Agreement to be rescinded following consummation, (C) affect materially and adversely the right of the Buyer to own the Purchased Shares and to control the Company or (D) affect materially and adversely the right of any of the Company or the Joint Venture to own its assets and to operate its businesses (and no such injunction, judgment, order, decree, ruling, or charge shall be in effect); vi. the Seller shall have delivered to the Buyer a certificate to the effect that each of the conditions specified above in Section 7(a)(i) - (iv) is satisfied in all respects; and to his Knowledge, 7(a)(v); vii. all applicable waiting periods (and any extensions thereof) under the Hart-Scott-Rodino Act shall have expired or otherwise been terminated and the parties shall have received all other authorizations, consents, and approvals of governments and governmental agencies, if any are required; viii. the Buyer shall have received from counsel to the Seller an opinion in form reasonably satisfactory to the parties and their respective counsel; ix. the Buyer shall have received the resignation, effective as of the Closing, of Herbert Heftler (a) from each position as director and officer of the Company or the Joint Venture, and (b) as a member of each architectural control committee and as a member of each board of directors of any homeowner's association, with respect to any real property owned by the Company or the Joint Venture; x. those persons identified in Exhibit K shall have entered into Employment Agreements with the Company in the form and on the terms of those certain Employment Agreements attached hereto as Exhibit K ("Employment Agreements"); xi. all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to the Seller and the Buyer; xii. Buyer shall have received an Agreement Not To Compete, in the form of Exhibit L, executed by Herbert Heftler and Monica A. Heftler; xiii. Buyer shall have received a consent and estoppel certificate in the form of Exhibit M, and an amendment to the Joint Venture Agreement in the form of Exhibit N, executed by all partners of the Joint Venture; xiv. except for changes in the Ordinary Course of Business the Unaudited consolidated balance sheets and statements of income and changes in stockholders' and partners' equity as of and for the period ended the last day of the calendar month immediately preceding the month in which Closing occurs are not materially and adversely different than the October 31, 1994 Interim Financial Statements; xv. all letters of credit identified on Exhibit O, including, without limitation the Skylake Letter of Credit, shall have been replaced, or shall continue in effect, on substantially the same terms and conditions as govern such letters of credit on the date of this Agreement; xvi. the Buyer shall have received copies of all current casualty, liability, and other insurance policies, including without limitation Preferred Builders Warranty Program with respect to the Company and the Joint Venture; xvii. (A) the Buyer shall have received confirmation satisfactory to the Buyer that NationsBank has consented to the Buyer's purchase of the Purchased Shares with the result that the NationsBank Agreement shall continue in full force and effect pursuant to its terms and that NationsBank has consented to increase the loan to the Company to not less than $20,000,000 which shall include an amount sufficient to replace the Skylake Letter of Credit (or such other terms to which the Buyer may agree) following consummation of the transactions herein contemplated without breach, default or acceleration thereunder (or any act or omission which with the giving of notice, lapse of time or both would constitute a breach or default or permit acceleration thereunder), or (B) Buyer and Herbert Heftler shall have entered into agreements for the furnishing of financing to the Company on the same terms and conditions as provided in the NationsBank Agreement in accordance with Section 7(c); xviii. the Buyer shall have received a written termination satisfactory to Buyer of each of the Stockholders' Agreements executed by the respective parties thereto; xix. none of the Owned Real Property is found to contain or be contaminated by an Extremely Hazardous Substance and Seller has not been found to have generated, transported or disposed of any Extremely Hazardous Substance on any property or land for which Seller may have a material liability; xx. the Buyer shall have received written terminations satisfactory to the Buyer of that Co-Ownership Agreement, dated as of September 27, 1991, by and between Thomas Iglesias, Joel B. Kovin, Candace Sharpsteen and Jack Shell (the "Owners"), and of that Split Dollar Insurance Agreement, dated as of September 27, 1991, by and between the Company and the Owners, as amended by that Termination Agreement, dated as of September 22, 1992, by and between the Company, Richard Molinari and the Owners; and xxi. as of the Closing Date, the Joint Venture Agreement shall not have been amended without Buyer's prior written consent (which consent will not be unreasonably withheld). The Buyer may waive any condition specified in this Section 7(a) if it executes a writing so stating at or prior to the Closing. B. Conditions to Obligation of the Seller. The obligation of the Seller to consummate the transactions to be performed by Seller in connection with the Closing is subject to satisfaction of the following conditions: i. the representations and warranties of the Buyer set forth in Section 3 above shall be true and correct in all material respects at and as of the Closing Date; ii. the Buyer shall have performed and complied with all of its covenants hereunder in all material respects through the Closing, including without limitation payment of the Purchase Price; iii. no action, suit, or proceeding shall be pending or threatened before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would (A) prevent consummation of any of the transactions contemplated by this Agreement or (B) cause any of the transactions contemplated by this Agreement to be rescinded following consummation (and no such injunction, judgment, order, decree, ruling, or charge shall be in effect); iv. the Buyer shall have delivered to the Seller a certificate to the effect that each of the conditions specified above in 7(b)(i)-(iii) is satisfied in all respects; v. all applicable waiting periods (and any extensions thereof) under the Hart-Scott-Rodino Act shall have expired or otherwise been terminated and the Seller, the Buyer, the Company and the Joint Venture shall have received all other authorizations, consents, and approvals of governments and governmental agencies referred to in this Agreement; vi. in connection with any Liabilities shown on or reflected in the Financial Statements and which will remain outstanding after the Closing (the Parties hereto acknowledge that the Liabilities listed on Exhibit P attached hereto will be paid at the Closing), the Seller shall have either (A) been released from and against all liability relating to any outstanding guarantees executed by Seller in connection with such Liabilities or (B) received an indemnity from the Company in form and substance satisfactory to Seller and Buyer pursuant to which the Company shall indemnify and hold Seller harmless from and against all liability relating to any such guarantees; vii. all actions to be taken by the Buyer in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to the Seller; viii. the Company and those Persons identified in Exhibit K shall have entered into Employment Agreements in the form and on the terms of those certain Employment Agreements attached hereto as Exhibit K; ix. if NationsBank issues a letter of credit to replace the Skylake Letter of Credit, then, simultaneously with the Closing, Herbert Heftler shall be released from any and all liability with respect to the Skylake Letter of Credit and any and all liens, security interests and assignments of any assets of Herbert Heftler given in connection with the Skylake Letter of Credit shall be released; and x. the Seller shall have received from counsel to the Buyer an opinion reasonably satisfactory to the parties and their respective counsel. The Seller may waive any condition specified in this Section 7(b) if he executes a writing so stating at or prior to the Closing. C. Financing from Herbert Heftler. If NationsBank does not consent to the Buyer's purchase of the Purchased Shares with a result that the NationsBank Agreement does not continue in full force and effect with provision for an increase in the loan to the Company to not less than $20,000,000.00 including an amount sufficient to replace the Skylake Letter of Credit, or if NationsBank does not make a new loan to the Company on the aforesaid terms and conditions, then Herbert Heftler shall furnish financing to the Company on the same terms and conditions as provided in the NationsBank Agreement, including, without limitation, the furnishing of a revolving credit facility of not less than $12,000,000.00 and a letter of credit facility of not less than $5,000,000.00. 8. Remedies; Indemnifications. A. General. Prior to Closing, if Buyer is in material default of this Agreement, Seller's sole remedy shall be to receive the Good Faith Deposit as liquidated damages pursuant to Section 2(c) above. After Closing, if the Buyer, after ten (10) days' written notice and opportunity to cure, is in material default under this Agreement, the Seller shall be entitled to all rights and remedies available to Seller at law or in equity including, without limitation, the right to seek specific performance of Buyer's obligations hereunder. Before or after Closing, if the Seller, after ten (10) days' notice and opportunity to cure, is in material default under this Agreement, the Buyer shall be entitled to all rights and remedies available to Buyer at law or in equity including, without limitation, the right to seek specific performance of the Seller's obligations hereunder. Seller acknowledges that monetary damages would not adequately compensate Buyer for Seller's breach or default hereunder. B. Survival of Representations and Warranties. All of the representations, warranties and indemnities of the parties contained in this Agreement shall survive the Closing hereunder and continue in full force and effect thereafter through the earlier of: (i) expiration of the applicable statutes of limitations shall have expired for claims which may be brought hereunder and for claims in respect of which a party is entitled to indemnification hereunder may be brought; or (ii) seven (7) years from the Closing Date. C. Post-Closing Indemnification Provisions for Benefit of the Buyer. After Closing, and provided that Buyer or the Company makes a written claim for indemnification against the Seller pursuant to Section 10(g) below, the Seller agrees to indemnify the Buyer, the Buyer's officers, directors, employees and agents and the Company and hold each of them harmless from any claim, loss, liability, cost or expense (including reasonable attorney's fees and court costs at all levels) (collectively, "Losses") incurred by the Buyer or the Company occurring or resulting from: (i) any breach of any warranty, representation or covenant by the Seller contained in this Agreement (or the allegation of facts by a third party which if true would constitute a breach by the Seller); (ii) the non- performance by the Seller hereunder; (iii) claims of whatever nature (including, without limitation, claims for personal injury, wrongful death or property damage) against the Company (including, without limitation, the Company in its capacity as a general partner of the Joint Venture) or any of the Assets based upon facts, circumstances, causes of action or occurrences arising prior to the Closing, except for such facts, circumstances, causes of action and occurrences as have been specifically, properly and accurately disclosed on the Disclosure Schedule or in the Financial Statements; or (iv) any Tax imposed on the Seller, the Company or the Joint Venture for all periods prior to the Closing Date or on the Seller or the Company for any built-in-gain under Code Section 1376 resulting from the sale of property during any of the Company's S corporation years through the short period ending on the Closing Date.. The preceding clause (iv) is intended to impose strict liability to indemnify the Buyer and the Company with respect to any Loss suffered by the Buyer or the Company for any Tax imposed on Seller, the Company or the Joint Venture for all periods prior to the Closing Date or on the Seller or the Company for any built-in gain under Code Sec. 1374 resulting from the sale of property during any of the Company's S corporation years through the short period ending on the Closing Date, even though Seller may not have breached any representation or warranty contained in Section 4(k) by reason of Seller's lack of knowledge with respect to those representations and warranties. The foregoing notwithstanding, the Seller shall have no obligation to indemnify the Buyer or the Company for: (i) any matter referenced in (i), (ii), or (iii) in the immediately preceding paragraph until one or both of the Buyer and the Company have suffered Losses in excess of the aggregate amount of $100,000.00 as a result thereof (after which point the Seller's obligation to indemnify for such matters shall be unqualified); (ii) any Loss occurring or resulting from any product warranty claim by a purchaser of a housing unit, or from injury to an individual or property, of less than $1,000.00, provided that, if any Loss occurring or resulting from any product warranty claim by a purchaser of a housing unit, or from injury to an individual or property, shall be in the amount of $1,000.00 or more, only the amount, if any, of each such Loss in excess of $1,000.00 shall be counted towards the $100,000.00 limitation stated in the immediately preceding clause (i); and (iii) any Loss occurring or resulting from any matter disclosed in Section 4 of the Disclosure Schedule if such matter has been properly and accurately disclosed in the Disclosure Schedule, . The limitations set forth in this paragraph shall not be applicable with respect to the indemnification contemplated by Clause (iv) (regarding Taxes) in the immediately preceding paragraph or with respect to any breach by Seller (or the allegation of facts by a third party which, if true, would constitute a breach by Seller) of any representation, warranty or covenant set forth in Section 4(w) (regarding employee benefit plans). If any third party shall notify the Buyer or the Company with respect to any matter which may give rise to a claim for indemnification or if the Buyer or the Company shall incur a Loss for which indemnification may be provided under this Section 8 (each an "Indemnified Claim"), then the Buyer or the Company, as the case may be, shall notify the Seller and any insurance carrier providing applicable coverage of the Indemnified Claim. If the carrier under any insurance policy applicable to the Indemnified Claim denies coverage, then the Indemnified Claim shall be defended in accordance with Section 8(e). If any third party may be responsible for an Indemnified Claim, then the Buyer or the Company, as the case may be, shall seek recovery of the Indemnified Claim from such third party by appropriate proceedings diligently pursued. If all or any portion of the Indemnified Claim cannot be recovered from any such third party (or from an applicable insurance carrier) by appropriate proceedings diligently pursued, then the Seller shall pay such Indemnified Claim subject to the provisions of this Section 8(c). If Buyer has given all notices of an Indemnified Claim to Seller as required by this Section 8, then, in the event Seller shall otherwise become liable for such Indemnified Claim under this Section 8, the obligation for indemnification shall not be barred by any statute of limitations or by the survival period provided in this Section 8; provided, further that Buyer shall have notified Seller that such Indemnified Claim is still pending within ninety (90) days prior to the end of such survival period; and, provided further, that demand for payment upon Seller is made within ninety (90) days after the obligation of the Seller to indemnify such Indemnified Claim becomes final. D. Post-Closing Indemnification Provisions for Benefit of the Seller. If after Closing, in the event the Buyer breaches or has breached (or in the event any third party alleges facts that, if true, would mean the Buyer has breached) any of its representations, warranties, covenants and agreements contained herein, and, provided that the Seller makes a written claim for indemnification against the Buyer pursuant to Section 10(g) below within the survival period for such claim, then the Buyer agrees to indemnify the Seller from and against the entirety of any Loss (including any Loss the Seller may suffer after the end of any applicable survival period) occurring or resulting from the breach (or the alleged breach); provided, however, that the Buyer shall not have any obligation to indemnify the Seller from and against any Loss occurring or resulting from the breach of any representation, or warranty, covenant or agreement contained herein until the Seller has suffered Losses by reason of any such breach or breaches in excess of the aggregate amount of $100,000 (after which point the Buyer will be obligated to indemnify the Seller from and against further Loss). E. Matters Involving Third Parties. Subject to Sections 8(c) and 8(d) above: i. If any third party shall notify the Seller or the Buyer (the "Indemnified Party") with respect to any matter (a "Third Party Claim") which may give rise to a claim for indemnification against any other party (the "Indemnifying Party") under this Section 8, then the Indemnified Party shall promptly notify each Indemnifying Party thereof in writing; provided, however, that no delay on the part of the Indemnified Party in notifying any Indemnifying Party shall relieve the Indemnifying Party from any obligation hereunder unless (and then solely to the extent) the Indemnifying Party thereby is prejudiced. ii. Any Indemnifying Party will have the right to defend the Indemnified Party against the Third Party Claim with counsel of its choice reasonably satisfactory to the Indemnified Party so long as (A) the Indemnifying Party notifies the Indemnified Party in writing within 15 days after the Indemnified Party has given notice of the Third Party Claim that the Indemnifying Party will indemnify the Indemnified Party from and against the entirety of any Loss the Indemnified Party may suffer resulting from, arising out of, relating to, in the nature of, or caused by the Third Party Claim, (B) the Indemnifying Party provides the Indemnified Party with evidence reasonably acceptable to the Indemnified Party that the Indemnifying Party will have the financial resources to defend against the Third Party Claim and fulfill its indemnification obligations hereunder, (C) the Third Party Claim involves only money damages and does not seek an injunction or other equitable relief that could have a Material Adverse Effect, (D) settlement of, or an adverse judgment with respect to, the Third Party Claim is not, in the good faith judgment of the Indemnified Party, likely to establish a precedential custom or practice materially adverse to the continuing business interests of the Indemnified Party, and (E) the Indemnifying Party conducts the defense of the Third Party Claim actively and diligently. iii. So long as the Indemnifying Party is conducting the defense of the Third Party Claim in accordance with Section 8(e)(ii) above, (A) the Indemnified Party may retain separate co-counsel at its sole cost and expense and participate in the defense of the Third Party Claim, (B) the Indemnified Party will not consent to the entry of any judgment or enter into any settlement or with respect to the Third Party Claim without the prior written consent of the Indemnifying Party (not to be withheld unreasonably) and (C) the Indemnifying Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnified Party (not to be withheld unreasonably) unless the judgment or proposed settlement involves only the payment of money damages by one or more of the Indemnifying Parties and does not impose an injunction or other equitable relief upon the Indemnified Party that could have a Material Adverse Effect. iv. In the event any of the conditions in Section 8(e)(ii) above is or becomes unsatisfied however, (A) the Indemnified Party may defend against, and consent to the entry of any judgment or enter into any settlement with respect to, the Third Party Claim in any manner it reasonably may deem appropriate (and the Indemnified Party need not consult with, or obtain any consent from, (but shall advise) any Indemnifying Party in connection therewith), (B) the Indemnifying Parties will reimburse the Indemnified Party promptly and periodically for the costs of defending against the Third Party Claim (including reasonable attorneys' fees and expenses), and (C) the Indemnifying Parties will remain responsible for any Loss the Indemnified Party may suffer resulting from, arising out of, relating to, in the nature of, or caused by the Third Party Claim to the fullest extent provided in this Section 8. F. Insurance. For seven (7) years from and after the Closing Date, the Buyer shall cause the Company to maintain each type of insurance coverage in the amount maintained by the Company as of the date of this Agreement so long as such type of coverage is available from a recognized commercial insurance carrier selected by the Buyer and accepted by the Seller (which acceptance shall not be unreasonably withheld). If such coverage is unavailable and cannot be obtained as provided in the immediately preceding sentence, then Buyer shall notify Seller sixty (60) days (or as soon as is otherwise practical if Buyer has not been notified of such unavailability before sixty (60) days prior to the termination of such coverage) prior to the termination of the existing insurance policy at that time. Further, in the event Buyer dissolves the Company or otherwise causes the Company to cease to exist as an entity, Buyer will thereafter for the remainder of the period of seven (7) years after the Closing Date cause the Company to be included as a named insured on Buyer's insurance policies so that the intent and effect of this Section 8(f) remains unchanged. If any claim that would give rise to indemnification under this Section 8 during such seven year period is still pending at the end of such seven year period, Buyer shall be responsible to maintain the insurance required herein until all such claims are disposed of. G. Other Indemnification Provisions. The Seller will not make any claim for indemnification against the Company or the Joint Venture by reason of the fact that Seller was a director, officer, employee, or agent of either such entity or was serving at the request of the Company or the Joint Venture as a partner, trustee, director, officer, employee, or agent of another entity (whether such claim is for judgments, damages, penalties, fines, costs, amounts paid in settlement, losses, expenses, or otherwise and whether such claim is pursuant to any statute, charter document, bylaw, agreement, or otherwise) with respect to any action, suit, proceeding, complaint, claim, or demand brought by the Buyer against the Seller (whether such action, suit, proceeding, complaint, claim, or demand is pursuant to this Agreement, applicable law, or otherwise). 9. Termination. A. Termination of Agreement. The parties may terminate this Agreement as provided below: i. the Buyer and the Seller may terminate this Agreement by mutual written consent at any time prior to the Closing; ii. the Buyer may terminate this Agreement by giving written n tice to the Seller on or before the Closing Date or the Outside Closing Date, as the case may be, if the conditions to Closing in Section 7(a) are not satisfied by the Closing Date or the Outside Closing Date; and iii. the Seller may terminate this Agreement by giving written notice to the Buyer on or before the Closing Date or the Outside Closing Date, as the case may be, if the conditions to Closing in Section 7(b) are not satisfied by the Closing Date or the Outside Closing Date. B. Effect of Termination. If either Party terminates this Agreement pursuant to Section 9(a) above as a result of a default of the other Party, the Parties shall have the rights and remedies set forth in Section 8 above. 10. Miscellaneous. A. Press Releases and Public Announcements. No Party shall issue any press release or make any public announcement relating to the subject matter of this Agreement prior to the Closing without the prior approval of the other Party hereto; provided, however, that any Party may make any public disclosure it believes in good faith is required by applicable law or any listing or trading agreement concerning its publicly-traded securities (in which case the disclosing Party will use its reasonable best efforts to advise the other Parties prior to such disclosure). B. No Third-Party Beneficiaries. This Agreement shall not confer any rights or remedies upon any Person other than the parties and their respective heirs, successors and permitted assigns. C. Entire Agreement. This Agreement (including the documents referred to herein) constitutes the entire agreement among the parties and supersedes any prior understandings, agreements, or representations by or among the parties, written or oral, to the extent they related in any way to the subject matter hereof. D. Succession and Assignment. This Agreement shall be binding upon and inure to the benefit of the parties named herein and their respective heirs, successors and permitted assigns. No party may assign either this Agreement or any of his or its rights, interests, or obligations hereunder without the prior written approval of the other party hereto; provided, however, that the Buyer may (i) assign any or all of its rights and interests hereunder to one or more of its Affiliates and (ii) designate one or more of its Affiliates to perform its obligations hereunder (in any or all of which cases the Buyer nonetheless shall remain responsible for the performance of all of its obligations hereunder). E. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. F. Heading. The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. G. Notices. All notices, requests, demands, claims, and other communications hereunder will be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given if (and then two business days after) it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below: If to the Seller: Copy to: c/o Heftler Realty Co. Juan E. Rodriguez, Esq. 9450 Sunset Drive Salomon, Kanner, Damian Miami, Florida 33173 &Rodriguez,P.A. Attention: Mr. Joel B. Kovin Suite 2550 Telecopy No.: (305) 279-1619 World Trade Center 80 S.W. 8th Street Miami, Florida 33130 Telecopy No.: (305) 374-1719 If to the Buyer: Copy to: Continental Homes Holding Corp. David B. McCrea, Esq. c/o Timothy C. Westfall, Esq. Mershon, Sawyer, Johnston, Vice President/General Counsel Dunwody & Cole 7001 North Scottsdale Rd. 4500 First Union Financial Suite 2050 Center Scottsdale, Arizona 85253 200 S. Biscayne Blvd. Telecopy No.: (602) 991-1682 Miami, Florida 33131 Telecopy No.: (305) 376-8655 Each person included in the term Seller hereby irrevocably appoints Joel B. Kovin as agent for the receipt of notice under this Agreement. Notice of any matter under this Agreement given to Joel B. Kovin in accordance with this Section 10(g) shall be binding on each such person. Any party may send any notice, request, demand, claim, or other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Any Party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other Parties notice in the manner herein set forth. H. Governing Law. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of Florida without giving effect to any choice or conflict of law provision or rule (whether of the State of Florida or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Florida. I. Amendments and Waivers. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by the Buyer and the Seller. No waiver by any party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence. J. Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. K. Cost of Transaction. Each of the parties will bear his or its own costs and expenses (including legal fees and expenses) incurred in connection with the negotiation, preparation, execution and delivery of this Agreement and the transaction contemplated hereby. L. Legal Fees & Costs. In the event that either Seller or Buyer elects to incur legal expenses to enforce or interpret this Agreement or to claim damages for any alleged breach or default in the performance of this Agreement or any misrepresentation contained in this Agreement, the prevailing party shall be entitled to recover all its legal expenses arising in connection therewith, including, without limitation, attorneys' fees, costs and disbursements through appeal, in addition to such other relief to which such party may be entitled. M. Gender and Number. Whenever the context of this Agreement requires, the gender all of words herein shall include the masculine, feminine and neuter, and the number of all words shall include singular and the plural. N. Obligations of Seller. All covenants, agreements, representations, warranties, and obligations of the Seller in this Agreement are binding on each Person included in the Seller, in proportion to the percentage of the Purchased Shares owned by each such Person as set forth on Exhibit A. O. Construction. The parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement. Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The word "including" shall mean including without limitation. The parties intend that each representation, warranty, and covenant contained herein shall have independent significance. If any party has breached any representation, warranty, or covenant contained herein in any respect, the fact that there exists another representation, warranty, or covenant relating to the same subject matter (regardless of the relative levels of specificity) which the party has not breached shall not detract from or mitigate the fact that the Party is in breach of the first representation, warranty, or covenant. P. Incorporation of Exhibits, Annexes, and Schedules. Any Exhibits, Annexes, and Schedules identified in this Agreement are incorporated herein by reference and made a part hereof. Q. Submission to Jurisdiction. Each of the parties submits to the personal jurisdiction of any state or federal court sitting in Miami, Florida in any action or proceeding arising out of or relating to this Agreement. Each of the parties waives any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety, or other security that might be required of any other party with respect thereto. Nothing in this Section 10(q), however, shall affect the right of any party to bring any action or proceeding arising out of or relating to this Agreement in any other court in which jurisdiction and venue are proper. Each party agrees that a final non-appealable judgment in any action or proceeding so brought shall be conclusive and may be enforced by suit on the judgment or in any other manner provided by law or at equity. R. Hart-Scott-Rodino. It is agreed that Buyer shall pay the $45,000 filing fee with respect to the Hart-Scott-Rodino filing. Said payment shall serve as independent consideration for this Agreement, and in no event shall Seller be obligated to repay such sum or to reimburse Buyer for same. S. Time of Essence. Time shall be of the essence in performance of the obligations under this Agreement. T. WAIVER OF TRIAL BY JURY. THE PARTIES EACH HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER IN CONTRACT OR TORT OR OTHERWISE. THE PARTIES EACH HEREBY AGREE AND CONSENT THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTIONS SHALL BE DECIDED BY COURT TRIAL, WITHOUT A JURY, AND THAT ANY PARTY MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. U. Power of Attorney; Deposit of Shares. Each Person included in the Seller hereby names and appoints Juan E. Rodriquez, Esq. as his or her true and lawful attorney (the "Attorney-in-Fact"), with full power of substitution, in the name and on behalf of each such Person for the following purposes: i. Each Person included in the Seller shall within 10 days following execution of this Agreement deliver to and deposit with the Attorney-in-Fact the certificate or certificates representing the Purchased Shares owned by such Person, duly endorsed in blank for transfer or accompanied by assignment(s) separate from certificate duly executed by such Person. The Attorney-in-Fact shall accept the delivery and deposit and take possession of and hold such certificate(s) for the Purchased Shares (and accompanying assignments) on behalf of such Person pending the Closing. ii. At the Closing, the Attorney-in-Fact shall deliver and surrender to the Buyer such certificate(s) (duly endorsed or accompanied by duly executed assignment(s) as provided above) of each Person included in the Seller in exchange for the Purchase Price at Closing, and the Attorney-in-Fact shall remit to each Person included in the Seller such Person's pro rata portion of the Purchase Price (net of expenses authorized by such Person). iii. In the event of the termination of this Agreement pursuant to Section 9, the Attorney-in-Fact shall forthwith return to the Persons included in the Seller the certificate(s) for the Purchased Shares (together with any assignment(s) separate from certificate) owned by such Persons. iv. The Attorney-in-Fact is empowered, authorized and directed to take any and all action and execute any and all assignments, transfers, certificates, receipts, notices, instructions other documents and instruments on behalf of each Person included in the Seller which may be necessary or desirable prior to, at or after Closing in order to perform and carry out the foregoing actions to be performed and carried out by the Attorney-in-Fact on behalf and in the name of such Person, to perform and carry out the obligations and exercise the rights of such Person under this Agreement and to carry out and consummate the Closing and the sale of the Purchased Shares owned by such Person pursuant to this Agreement. v. Prior to the Closing, each Person included in the Seller shall be entitled to vote the Purchased Shares owned and represented by the certificate(s) surrendered by such Person and to receive all dividends or other distributions of whatever kind or nature in respect of such Purchased Shares. vi. Each Person included in the Seller hereby ratifies and approves, as fully and to all intents and purposes as such Person might or could do in person, the actions taken or omitted to be taken by the Attorney-in-Fact on behalf of such Person pursuant to this Section. The authority granted to the Attorney-in-Fact under this Section is irrevocable and shall be terminable only upon termination of this Agreement pursuant to Section 9 hereof. The power of the attorney herein conferred on the Attorney-in-Fact shall survive, and not be affected by, the death or disability of any or all Persons included in the Seller. vii. The Seller shall indemnify the Attorney-in-Fact against and hold him harmless from any liability, costs, damages or expenses (including reasonable attorneys' fees) arising from or growing out of any actions taken or omitted to be taken by such Attorney-in-Fact hereunder, except in the case of bad faith or willful misconduct. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. BUYER CONTINENTAL HOMES HOLDING CORP. By: /s/Timothy C. Westfall ------------------------- Title: Vice President SELLER SIGNATURES ARE SET FORTH ON FOLLOWING PAGE EX-10.1 3 LOAN AGREEMENT EXHIBIT 10.1 LOAN AGREEMENT DATE: November 17, 1994 PARTIES: Borrower: HEFTLER REALTY CO., a Florida corporation Borrower 9450 Sunset Drive Address: Miami, Florida 33173 Bank: BANK ONE, ARIZONA, NA, a national banking association Bank Address: Post Office Box 29542 Phoenix, Arizona 85038 Attention: Real Estate Finance Division Facsimile No.: (602) 221-1372 AGREEMENT: For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Borrower and Bank agree as follows: SCHEDULE OF TERMS. 2. Commitment Amount: $10,000,000.00, as the same may be reduced from time to time pursuant to Sections 3.1.2, 3.1.3 and 3.1.4. Maximum Allowed Advances: (i) With respect to each parcel of Raw Land upon which construction of Improvements has commenced, the lesser of (A) fifty percent (50%) of the Raw Land Costs of such parcel, plus fifty percent (50%) of the Development Costs related to such parcel or (B) sixty-five percent (65%) of the respective Raw Land/If Improved Appraised Value for Raw Land in Florida or seventy percent (70%) of the respective Raw Land/If Improved Appraised Value for Raw Land in Arizona; (ii) With respect to each Improved Lot, the lesser of (A) sixty-five percent (65%) of the respective Lot Costs for each Improved Lot in Florida or seventy percent (70%) of the respective Lot Costs for each Improved Lot in Arizona, or (B) sixty-five percent (65%) of the respective Improved Lot Appraised Value for each Improved Lot in Florida or seventy percent (70%) of the respective Improved Lot Appraised Value for each Improved Lot in Arizona; (iii) With respect to each Presold Unit, the lesser of (A) eighty percent (80%) of the respective Unit Base Appraised Value for each Presold Unit in Arizona or seventy-five percent (75%) of the respective Unit Base Appraised Value for each Presold Unit in Florida, or (B) eighty percent (80%) of the sales price in the respective Purchase Contract for each Presold Unit in Arizona or seventy-five percent (75%) of the respective Purchase Contract for each Presold Unit in Florida, or (C) ninety (90%) of the respective Unit Total Costs; (iv) with respect to each Spec Unit, the lesser of (A) seventy-five percent (75%) of the respective Unit Base Appraised Value, or (B) ninety percent (90%) of the respective Unit Total Costs; (v) with respect to each Model Unit, the lesser of (A) seventy percent (70%) of the respective Unit Base Appraised Value, or (B) ninety percent (90%) of the respective Unit Total Costs; provided, however, that the Maximum Allowed Advance, as so determined, may be adjusted from time to time by Bank pursuant to any applicable Reclassification Adjustment, Term Adjustment, Presold Adjustment, Model Adjustment, Spec Adjustment, or Raw Land Adjustment. Title Company: FIRST AMERICAN TITLE INSURANCE COMPANY, a California corporation. Unit Completion Date: Twelve (12) Calendar Months after such Unit first constitutes Eligible Collateral 3.3.1 Each of the Persons listed on a signature authorization form executed by Borrower and delivered to Bank from time to time, and approved by Bank. Initially, each of the Persons listed on Exhibit A acting alone is authorized to request Advances. 3.4.1 Commitment Fee: Five-eighths of one percent (.625%) per annum of the Commitment Amount. Quarterly Loan Fee: Five-eighths of one percent (.625%) per annum of the Commitment Amount. 3.4.2 Unused Commitment Fee Rate: One-quarter of one percent (.25%) per annum. 5.1.5, 6.2, 6.3.1, and 6.3.2. Financial statements and accounting system requirements: Accrual Basis and GAAP. 5.1.5 Fiscal year of Borrower: From January 1 to December 31. 6.3.1. Financial statements due within thirty (30) days after the end of each Calendar Month. Financial statements due within forty-five (45) days after the end of each fiscal quarter. Certification requirements: Borrower prepared financial statements. Person(s) to sign financial statements on behalf of Borrower: Each of the Persons listed on a signature authorization form executed by Borrower and delivered to Bank from time to time, and approved by Bank. Initially, each of those Persons listed on Exhibit A are authorized to sign financial statements. 6.3.2 Financial statements due within 90 days after the end of each fiscal year of Borrower. Certification requirements: Independent certified public accountant satisfactory to Bank to audit financial statements and deliver an unqualified opinion on the financial statements. 6.7.1 Minimum property insurance amount: Replacement Value per Unit. 6.7.2 Minimum liability insurance amount: Per occurrence: $500,000.00. General aggregate: $1,000,000.00. Minimum umbrella excess liability insurance amount: $20,000,000.00. Minimum business motor vehicle liability insurance amount: $500,000.00. 6.8 Other indebtedness of Borrower to be subordinated: None. DEFINITIONS. In this Agreement, the following terms shall have the following meanings: "Advance" means an advance by Bank to Borrower hereunder. "Agreement" means this Loan Agreement, as it may be amended, modified, extended, renewed, restated, or supplemented from time to time. "Approvals and Permits" means each and all approvals, authorizations, bonds, consents, certificates, franchises, licenses, permits, registrations, qualifications, and other actions and rights granted by or filings with any Persons necessary, appropriate, or desirable for acquisition of Raw Land or Improved Lots, for construction of Units, for occupancy, ownership, and use by Borrower and other Persons of the Units, or for the conduct of the business and operations of Borrower. "Arizona" means Maricopa County, Arizona. "Available Commitment" means, at any time, the lowest of (i) the applicable Commitment Amount less the aggregate of all Letter of Credit Subcommitment amounts, or (ii) or the total of (A) the aggregate of the current Maximum Allowed Advances with respect to all Raw Land and Improved Lots that constitute Eligible Collateral, plus (B) the aggregate of the current Unit Collateral Values for all Units that constitute Eligible Collateral, less (C) the aggregate of all Letter of Credit Subcommitment amounts. "Borrower Loan Documents" means the Loan Documents executed or delivered by Borrower from time to time. "Borrowing Base Report" means Borrower's monthly report disclosing the matters required pursuant to Section 6.3.7. "Business Day" means a day of the year on which banks are not required or authorized to close in Phoenix, Arizona. "Calendar Month" shall mean the twelve (12) calendar months of the year. Any payment or obligation that is due or required to be performed within a specified number of Calendar Months shall become due on the day in the last of such specified number of Calendar Months that corresponds numerically to the date on which such payment or obligation was incurred or commenced, provided, however, that with respect to any obligation that is incurred or commences on the 29th, 30th, or 31st day of any Calendar Month and if the Calendar Month in which such payment or obligation would otherwise be due does not have a numerically corresponding date, such payment or obligation shall become due on the first day of the next succeeding Calendar Month. "Cash Collateral Account" means a deposit account maintained by Bank, in Bank's name, and subject to the terms and conditions of the Cash Collateral Agreement. "Cash Collateral Agreement" means that Cash Collateral Agreement by and between Borrower and Bank of even date herewith, governing the use of monies held in the Cash Collateral Account, as it may be amended, modified, extended, renewed, restated, or supplemented from time to time. "CHHC" means Continental Homes Holding Corp., a Delaware corporation. "Collateral Certificate" means the certificate delivered to Bank pursuant to Section 6.3.8. "Collateral" means the property, interests in property, and rights to property securing any or all Obligations from time to time. "Commitment" means the agreement by Bank in Section 3.1 to issue Letters of Credit and to make Advances pursuant to the terms and conditions herein and in the Letter of Credit Agreements. "Commitment Amount" means the amount specified in Section 1. "Conversion Date" means November 17, 1996; provided, however, that Bank may, in Bank's absolute and sole discretion, extend the Conversion Date annually for periods of twelve (12) months each, upon such terms and conditions as Bank may require, in its absolute and sole discretion, and with such changes to this Agreement or the terms and conditions herein as Bank may require, in its absolute and sole discretion, including, without limitation, any changes in or additions to required financial and other covenants, or such earlier date determined pursuant to Section 3.1.2 or Section 3.1.3. "Conversion Period" means the period of time following the Conversion Date during which the Commitment Amount is reduced from time to time pursuant to Section 3.1.2. "Debt" means, as to any Person, without limitation, (i) any indebtedness of such Person for borrowed money, (ii) all indebtedness of such Person evidenced by bonds, debentures, notes, letters of credit, drafts or similar instruments, (iii) all indebtedness of such Person to pay the deferred purchase price of property or services, (iv) all capital lease obligations of such Person, (v) all Debt of others secured by a lien on any asset of such Person, whether or not such Debt is assumed by such Person or guaranteed by such Person, and (vi) with respect to Borrower, payables and accrued liabilities relating to Borrower's homebuilding activities. Debt specifically excludes any indebtedness of Borrower to CHHC or any wholly owned subsidiaries of CHHC. The amount of Debt of any Person at any date pursuant to clauses (i)-(iv) and (vi) above shall be as would appear as a liability upon a balance sheet of such Person prepared on a consolidated basis in accordance with GAAP. "Debt to Tangible Net Worth Ratio" means, with respect to Borrower, the ratio of (ii) Borrower's Debt to (ii) Borrower's Tangible Net Worth. "Deed of Trust" and "Deeds of Trust" mean, respectively, each and all Deeds of Trust, Assignment of Leases and Rents, Security Agreement, Fixture Filing and Financing Statement and each and all Mortgages, Assignment of Leases and Rents, Security Agreement, Fixture Filing, and Financing Statement, in each case securing the Note and the other Obligations, granted from time to time by Borrower, as trustor or mortgagor, for the benefit of Bank, as beneficiary or mortgagee, as the same may be amended, modified, extended, renewed, restated, or supplemented from time to time, each being substantially in the form of Exhibit B, provided, however in the case of any Deed of Trust to be recorded in Florida, such form may be modified as appropriate for recordation in that state or to minimize excise tax thereon, if practicable. "Development Costs" means costs, expenses and fees for services, work, and materials previously used in construction of the Improvements for a parcel of Raw Land as approved by Bank in its reasonable discretion, and which are accompanied by such invoices, lien waivers and other supporting documentation reasonably required by Bank, and which are confirmed by Bank's on-site inspection. Development Costs, in any event, shall specifically not include Borrower's overhead or other "soft costs." "Draw Request" means a completed, written request in a form acceptable to or specified by Bank from Borrower to Bank for an Advance, together with such other documents and information as Bank may require or specify from time to time. "Eligible Collateral" means Raw Land, Improved Lots and Units which satisfy each of the following requirements: (i) such Raw Land, Improved Lots, and Units have been approved by Bank pursuant to the applicable portions of Section 4.2; (ii) Borrower has satisfied the conditions precedent set forth in Section 4.3 with respect to such Raw Land, Improved Lots, and Units; and (iii) such Raw Land, Improved Lots and Units have not become subject to Section 3.3.8. "Environmental Agreement" and "Environmental Agreements" means, respectively, each and all Environmental Indemnity Agreements executed by Borrower from time to time, for the benefit of Bank, and relating to the Collateral, as the same may be amended, modified, extended, renewed, restated, or supplemented from time to time. "ERISA" means the Employee Retirement Income Security Act of 1974 and the regulations and published interpretations thereunder, as in effect from time to time. "Event of Default" means the occurrence of any event identified as an Event of Default in the Note or any of the other Loan Documents. "Florida" means the counties of Dade and Broward, Florida, and such other counties in Florida as Bank may approve in its absolute and sole discretion. "GAAP" means generally accepted accounting principles consistently applied. "Governmental Authority" means any government, any court, and any agency, authority, body, bureau, department, or instrumentality of any government. "Impositions" has the meaning specified in the Deed of Trust. "Improved Lot" means a Lot (i) owned by Borrower and (ii) located in a Subdivision where all Improvements have been installed and accepted by the applicable Governmental Authorities, and evidence of such installation and acceptance has been approved by Bank and verified by Bank's inspector(s) or employee(s). "Improved Lot Appraisal" means, with respect to each Improved Lot, an appraisal of an Improved Lot in the applicable Subdivision selected by Bank, as it will exist upon completion of the Improvements (i) ordered by Bank, (ii) prepared by an appraiser satisfactory to Bank, (iii) in compliance with all federal and state standards for appraisals, (iv) reviewed by Bank, and (iv) in form and substance satisfactory to Bank in its absolute and sole discretion. "Improved Lot Appraised Value" means the value of a typical Improved Lot in the applicable Subdivision, as selected by Bank, without lot premiums, options, and upgrades, approved or determined by Bank in its absolute and sole discretion after review of a Improved Lot Appraisal. "Improved Lot Term" means the maximum period for which an Improved Lot may continue to qualify as Eligible Collateral, as set forth in Section 3.3.4. "Improvements" means (i) offsite improvements on land (including without limitation, curbs, grading, landscaping, sprinklers, storm and sanitary sewers, paving, sidewalks, and utilities) necessary to make the land suitable for the construction of single family homes, and (ii) any common area improvements to be constructed on the land. "Initial Approved Raw Land, Improved Lots and Units" means the Raw Land, Improved Lots and Units located in Arizona and approved by Bank as Eligible Collateral as of the date hereof, and which are more particularly described on Exhibit C hereto. "Intangible Assets" means all intangible assets under GAAP, including, without limitation, copyrights, franchises, goodwill, licenses, non- competition covenants, organization or formation expenses, patents, service marks, service names, trademarks, tradenames, write-up in the book value of any asset in excess of the acquisition cost of the asset to such Person, any amount, however designated on the balance sheet, representing the excess of the purchase price paid for assets or stock acquired over the value assigned thereto on the books of such Person, unamortized leasehold improvements expense not recoverable at the end of the lease term, and unamortized debt discount. "Letter of Credit" means a standby letter of credit in Bank's standard form from time to time issued pursuant to Section 3.2 in conjunction with the construction of off-site improvements relating to Eligible Collateral for the benefit of the Governmental Authority, utility company, improvement district, or similar Person specified as beneficiary of the Letter of Credit in an amount requested by Borrower and approved by Bank. "Letter of Credit Agreement" means Bank's standard form Application for Standby Letter of Credit and Standby Letter of Credit Agreement. "Letter of Credit Subcommitment" means the face amount of each Letter of Credit. "Lien or Encumbrance" and "Liens and Encumbrances" mean, respectively, each and all of the following: (i) any lease or other right to use; (ii) any assignment as security, conditional sale, grant in trust, lien, mortgage, pledge, security interest, title retention arrangement, other encumbrance, or other interest or right securing the payment of money or the performance of any other liability or obligation, whether voluntarily or involuntarily created and whether arising by agreement, document, or instrument, under any law, ordinance, regulation, or rule (federal, state, or local), or otherwise; and (iii) any option, right of first refusal, or other interest or right. "Loan Documents" means this Agreement, the Note, the Deeds of Trust, the Letter of Credit Agreements executed and delivered by Borrower in connection with the Letters of Credit, the Cash Collateral Agreement, the Environmental Agreements, and any other agreements, documents, or instruments evidencing, guarantying, securing, or otherwise relating to the Note, as such agreements, documents, and instruments may be amended, modified, extended, renewed, or supplemented from time to time. "Loan Party" means Borrower and each other Person that from time to time is or becomes obligated to Bank under any Loan Document or grants any Collateral. "Lot" means an individual lot designated on the final subdivision plat or filing for each Subdivision. "Lot Cost" means the actual costs paid by Borrower to third parties not affiliated with Borrower to acquire a Lot plus Development Costs allocated to such Lot, all as approved by Bank in its absolute and sole discretion. "Lot Takedown Deficit" means the Minimum Lot Takedown Requirement for a Subdivision for a fiscal quarter minus the number of Improved Lots in such Subdivision reclassified as a Unit during such fiscal quarter. In no event will the Lot Takedown Deficit be less than zero (0). "Material Adverse Change" means any change in the assets, business, financial condition, operations, or results of operations of any Loan Party or any other event or condition that in the reasonable opinion of Bank is (i) reasonably likely to affect the likelihood of performance by any Loan Party of any of the Obligations, (ii) reasonably likely to affect the ability of any Loan Party to perform any of the Obligations, (iii) reasonably likely to affect the legality, validity, or binding nature of any of the Obligations or any Lien or Encumbrance securing any of the Obligations, or (iv) reasonably likely to affect the priority of any Lien or Encumbrance securing any of the Obligations. "Maximum Allowed Advances" has the meaning specified in Section 1. "Maximum Rate" has the meaning specified in the Note. "Minimum Lot Takedown Requirement" means the number of Improved Lots in a specified Subdivision required by Bank to be reclassified as a Unit during each fiscal quarter (and not on a cumulative basis for one or more fiscal quarters) following the initial inclusion of such Improved Lots as Eligible Collateral (as determined by Bank). Unless otherwise agreed to by Bank in its sole and absolute discretion, the Minimum Lot Takedown Requirement is nine (9) Improved Lots per Subdivision per each fiscal quarter, as measured on an individual, and not aggregate, Subdivision basis. "Model Adjustment" means, with respect to a Model Unit, a decrease in the otherwise applicable percentages used to determine the Maximum Allowed Advance to (i) sixty-five percent (65%) following the eighteenth Calendar Month of the initial inclusion (as determined by Bank) of the Model Unit as Eligible Collateral, and to (ii) sixty percent (60%) following the twenty- first Calendar Month of the initial inclusion (as determined by Bank) of the Model Unit as Eligible Collateral. "Model Term" means the maximum period for which a Model Unit may continue to qualify as Eligible Collateral, as set forth in Section 3.3.4. "Model Unit" means a Unit constructed and furnished initially for inspection by prospective purchasers that is not intended to be sold until all or substantially all other Units in the Subdivision are sold. "Net Income" means, for any period, the net income (loss) of any Person for such period, determined in accordance with GAAP. "Net Sales Proceeds" means the gross sales price of an Improved Lot, Unit or parcel of Raw Land set forth in the Purchase Contract therefor, less (i) customary tax prorations, (ii) ordinary and customary real estate brokerage commissions payable to any Person who is neither (A) employed by or affiliated with Borrower, nor (B) engaged in on-site sales at the site where the Improved Lot, Unit or parcel of Raw Land is located, and (iii) reasonable and customary closing costs, including any "points" paid by Borrower for the benefit of such purchaser. "Nonrecourse Debt" means indebtedness secured by a lien on property of Borrower, if and only if the liability for such indebtedness (and any interest thereon) is limited to the security of Borrower's rights in such property, without direct or indirect liability on the part of Borrower for such indebtedness. "Note" means the Promissory Note, dated of even date herewith, of Borrower payable to Bank, as it may be amended, modified, extended, renewed, restated, or supplemented from time to time. "Obligations" means the obligations of the Loan Parties under the Loan Documents (including without limitation, the obligation to pay the Reimbursement Amount). "Operating Losses" means operating losses of Borrower, calculated in accordance with GAAP. "Permitted Exceptions" has the meaning specified in the Deed of Trust. "Person" means a natural person, a partnership, a joint venture, an unincorporated association, a corporation, a trust, any other legal entity, or any Governmental Authority. "Presold Adjustment" means, with respect to a Presold Unit, decreases in the otherwise applicable percentages used to determine the Maximum Allowed Advance to fifty percent (50%) following the ninth Calendar Month of the initial inclusion (as determined by Bank) of the Presold Unit as Eligible Collateral. "Presold Term" means the maximum period for which a Presold Unit may continue to qualify as Eligible Collateral, as set forth in Section 3.3.4. "Presold Unit" means a Unit that is subject to a Purchase Contract. "Project" means all of the Raw Land, Improved Lots and Units that are owned by Borrower and are encumbered by a Deed of Trust from time to time. "Purchase Contract" means a bona fide written agreement between Borrower and a third Person purchaser for sale in the ordinary course of Borrower's business of any Unit and the related Lot, or an Improved Lot, or a parcel of Raw Land, and such agreement is accompanied by a cash earnest money deposit or down payment in an amount that is customary and that is satisfactory to Bank. "Raw Land" means any real property owned by Borrower and encumbered by a Deed of Trust and is not an Improved Lot or a Unit. "Raw Land Adjustment" means, with respect to a parcel of Raw Land, (i) a decrease in the otherwise applicable percentages used to determine the Maximum Allowed Advances to forty percent (40%) following the Conversion Date, and (ii) a limitation on the aggregate amount of Maximum Allowed Advances for all parcels of Raw Land included in Eligible Collateral to fifteen percent (15%) of the Available Commitment following the Conversion Date. "Raw Land Costs" means the actual costs paid by Borrower to third parties not affiliated with Borrower to acquire a parcel of Raw Land, all as approved by Bank in its absolute and sole discretion. Raw Land Costs, in any event, shall specifically not include Borrower's overhead or other "soft costs." "Raw Land/If Improved Appraisal" means, with respect to each parcel of Raw Land that is Eligible Collateral, an appraisal of such parcel of Raw Land (i) ordered by Bank, (ii) prepared by an appraiser satisfactory to Bank, (iii) in compliance with all federal and state standards for appraisals, (iv) reviewed by Bank, and (v) in form and substance satisfactory to Bank in its absolute and sole discretion. "Raw Land/If Improved Appraised Value" means the value of a parcel of Raw Land, as it will exist upon completion of all Improvements, as approved or determined by Bank in its absolute and sole discretion after review of a Raw Land/If Improved Appraisal. "Raw Land Term" means the maximum period for which a parcel of Raw Land may continue to qualify as Eligible Collateral, as set forth in Section 3.3.4. "Reclassification Adjustment" means with respect to each type of Collateral (i.e., each parcel of Raw Land, each Improved Lot, and each Unit that is classified as such under this Agreement which becomes reclassified as a different type of Collateral under this Agreement, a change in the otherwise Maximum Allowed Advance to the respective amount set forth in Section 1 for such Collateral as reclassified; provided, however, that in all cases the Maximum Allowed Advance, as so determined, may be adjusted from time to time by Bank pursuant to any applicable Term Adjustment, Raw Land Adjustment, Presold Adjustment, Model Adjustment or Spec Adjustment. "Reduction Date" has the meaning specified in Section 3.1.2. "Reimbursement Amount" means the amount Borrower is obligated to pay to Bank under the Letter of Credit Agreement in respect of a draft drawn or drawn and accepted under the Letter of Credit, which amount shall be the amount of the draft or acceptance and all costs, expenses, fees, and other amounts then payable by Borrower to Bank under the Letter of Credit Agreement. "Requirements" shall have the meaning specified in the Deed of Trust. "Seller Financing" means indebtedness of Borrower secured by a Lien or Encumbrance on property of Borrower, where such indebtedness is owed to, and Lien or Encumbrance is for the benefit of, the Person that sold such property to Borrower and such indebtedness represents a portion of the purchase price payable by Borrower to such Person for said property. "Shortage" means the amount by which the Maximum Allowed Advance applicable to a Unit, Improved Lot or Raw Land exceeds the Net Sales Proceeds received from the sale of such Unit, Improved Lot, or Raw Land. "Spec Adjustment" means, with respect to a Spec Unit, a decrease in the otherwise applicable percentages used to determine the Maximum Allowed Advance to (i) sixty-five percent (65%), following the sixth Calendar Month of the initial inclusion (as determined by Bank) of the Spec Unit as Eligible Collateral, and to (ii) fifty percent (50%) following the ninth Calendar Month of the initial inclusion (as determined by Bank) of the Spec Unit as Eligible Collateral. "Spec Term" means the maximum period for which a Spec Unit may continue to qualify as Eligible Collateral, as set forth in Section 3.3.4. "Spec Unit" means a Unit constructed for the purpose of addition to Borrower's inventory of Units and not subject to a Purchase Contract. A Unit that is not a Presold Unit or a Model Unit shall be deemed a Spec Unit. "Specific Unit Budget" means an actual construction budget for each Unit proposed to be included in Eligible Collateral containing the information required in the corresponding Unit Budget for that type of Unit. "Standard Number of Days" means the standard number of days established by Bank from time to time to allow for delivery to Bank of drafts drawn under letters of credit issued by Bank and presented to financial institutions other than Bank for delivery to Bank. Bank may change such number of days at any time and from time to time in its absolute and sole discretion without notice to Borrower and may have a different number of days for commercial letters of credit and standby letters of credit. "Subdivision" means a group of Lots designated on an individual subdivision plat or filing; provided, however, that with respect to multiple subdivision plats or filings that are phases of a larger development or are part of the same planned community, or are advertised under common marketing plans, and which include a common product line, then all of the Lots shown on such subdivision plats or filings shall be deemed in the aggregate to constitute a single Subdivision. "Tangible Net Worth" means, with respect to Borrower, the sum of all capital accounts (including without limitation, any paid-in capital, capital surplus, and retained earnings), less the sum of (i) the value on Borrower's books of all Intangible Assets, and (ii) loans and advances to stockholders, directors, officers, and employees of Borrower. "Term Adjustment" means (i) with respect to a Presold Unit remaining in Eligible Collateral beyond the first nine (9) months of the Presold Unit's Term, a decrease in the otherwise applicable Maximum Allowed Advance to the lesser of (A) fifty percent (50%) of the Unit Base Appraised Value or (B) fifty percent (50%) of the sales price in the respective Purchase Contract, or (C) fifty percent (50%) of the respective Unit Total Costs; (ii) with respect to a Spec Unit remaining in Eligible Collateral beyond the first six (6) months of the Spec Unit's Term, a decrease in the otherwise applicable Maximum Allowed Advance to the lesser of (A) sixty-five percent (65%) of the respective Unit Base Appraised Value, or (B) sixty-five percent (65%) of the respective Unit Total Costs; and with respect to a Spec Unit remaining in Eligible Collateral beyond the first nine (9) months of the Spec Unit's Term, a decrease in the otherwise applicable Maximum Allowed Advance to the lesser of (I) fifty percent (50%) of the respective Unit Base Appraised Value, or (II) fifty percent (50%) of the respective Unit Total Costs; (iii) with respect to a Model Unit remaining in Eligible Collateral beyond the first eighteen (18) months of the Model Unit's Term, a decrease in the otherwise applicable Maximum Allowed Advance to the lesser of (A) sixty-five percent (65%) of the respective Unit Base Appraised Value, or (B) sixty-five percent (65%) of the respective Unit Total Costs, and with respect to a Model Unit remaining in Eligible Collateral beyond the first twenty-one (21) months of the Model Unit's Term, a decrease in the otherwise applicable Maximum Allowed Advance to the lesser of (I) sixty percent (60%) of the respective Unit Base Appraised Value, or (II) sixty percent (60%) of the respective Unit Total Costs; (iv) with respect to a parcel of Raw Land remaining in Eligible Collateral beyond the Conversion Date, (i) a decrease in the otherwise applicable percentages used to determine the Maximum Allowed Advances to forty percent (40%); and (ii) a limitation on the aggregate amount of Maximum Allowed Advances for all parcels of Raw Land included in Eligible Collateral to fifteen percent (15%) of the Available Commitment; and (v) with respect to any parcel of Raw Land, Improved Lot or Unit whose Raw Land Term, Improved Lot Term or Unit Term has expired, a decrease in the otherwise applicable Maximum Allowed Advance to zero (0) and the exclusion of such Raw Land, Improved Lot or Unit from Eligible Collateral. "Termination Date" means the date twelve (12) Calendar Months after the Conversion Date. "Title Company" means the title insurance company and any reinsurers or co- insurers required by Bank specified in Section 1, which company, reinsurers, and co-insurers shall be satisfactory to Bank in its absolute and sole discretion. "Title Policy" and "Title Policies" mean, respectively, each and all title insurance policies and endorsements thereto and reinsurance or co-insurance agreements and endorsements described in this Agreement insuring the Deeds of Trust. "Unit" means a single-family dwelling (i) constructed or to be constructed on an Improved Lot, provided, however, that construction shall have commenced or be completed on such dwelling (as determined by Bank); and (ii) described in a set of Unit Plans and Specifications, including, without limitation, any furniture, furnishings, fixtures, and equipment to be installed therein as shown in the respective Unit Plans and Specifications. For purposes of this Agreement, each Unit is either (A) a Model Unit, (B) a Presold Unit, or (C) a Spec Unit. "Unit Base Appraisal" means, with respect to each type of Unit, an appraisal of the Unit and a typical Lot selected by Bank, as they will exist upon completion of the Unit (i) ordered by Bank, (ii) prepared by an appraiser satisfactory to Bank, (iii) in compliance with all federal and state standards for appraisals, (iv) reviewed by Bank, and (iv) in form and substance satisfactory to Bank in its absolute and sole discretion. "Unit Base Appraised Value" means the value of a Unit and a typical Lot, without lot premiums, options, and upgrades, approved or determined by Bank in its absolute and sole discretion after review of a Unit Base Appraisal. "Unit Budget" means, with respect to each type of Unit, the budget of the costs, expenses, and fees necessary for or related to construction of one type of Unit approved by Bank in its absolute and sole discretion. Such budget (i) shall include a typical sale price for the Unit and a typical Lot, the onsite cost of labor and materials directly related to construction of the type of Unit (including, without limitation, construction permits, building permits, tap fees, improvement district fees and fees charged by Governmental Authorities prior to the start of construction), (ii) shall exclude costs and expenses related to upgrades, options, and decorator items, (iii) shall include the other costs, expenses, and fees for the type of Unit (including, without limitation, property taxes, insurance, escrow and title fees, processing and closing fees, wiring fees, legal fees, appraisal fees, closing costs, insurance costs, and costs of direct project supervision), (iv) shall include "soft costs" including but not limited to, supervision costs, an estimation of construction interest and reserves for repair and maintenance, and (v) shall exclude advertising and marketing costs, expenses, and fees and any amendments or modifications thereof consented to by Bank in its absolute and sole discretion. There shall be a separate budget for each type of Unit. "Unit Collateral Value" means the percentage of the Maximum Allowed Advances Borrower may obtain against a Unit that constitutes Eligible Collateral based on the Unit's stage of construction, determined on the actual percentage of completion of such Unit as determined by Bank in its absolute and sole discretion rounded down to the nearest five percent (5%). "Unit Completion Date" has the meaning specified in Section 1. "Unit Plans and Specifications" means, with respect to each type of Unit, plans and specifications for construction of that type of Unit, prepared by an architect, certified by Borrower to Bank, and approved by Bank in its absolute and sole discretion, together with any amendments or modifications thereof consented to by Bank in its absolute and sole discretion. "Unit Sales Price" means the price at which a Unit is to be sold to a purchaser under the applicable Purchase Contract. "Unit Term" means the maximum period for which a Unit may continue to qualify as Eligible Collateral, as set forth in Section 3.3.4. "Unit Total Costs" means, with respect to each type of Unit, the total costs, expenses, and fees included in the respective Unit Budget, plus one- half (1/2) of the Lot Cost for the Lot related to such Unit. "Unmatured Event of Default" means any condition or event that with notice, passage of time, or both would be an Event of Default. LETTER OF CREDIT AND LOAN FACILITY. i Loan Facility. i Commitment. Subject to the terms and conditions of this Agreement, Bank agrees to make Advances to Borrower from time to time on or before the Termination Date, provided that the aggregate amount of Advances outstanding from time to time shall not exceed the Available Commitment. Proceeds of Advances may be used only for the purpose described in Sections 3.2.2 and 5.1.6. Advances shall be on a revolving basis. Advances repaid may be re-borrowed subject to the terms and the conditions herein and any re-borrowing shall be deemed a refinancing of amounts repaid. Although the outstanding principal of the Note may be zero from time to time, the Loan Documents shall remain in full force and effect until the Commitment terminates, the Letters of Credit have expired or are drawn in full, all drafts drawn or drawn and accepted under all Letters of Credit have been paid in full, and all Obligations are paid and performed in full. If monies are being held in the Cash Collateral Account at any time, Bank shall be entitled to apply such monies to the outstanding balance of the Advances. Upon occurrence of an Event of Default or an Unmatured Event of Default, Bank, in its absolute and sole discretion and without notice, may suspend the commitment to make Advances. In addition, upon occurrence of an Event of Default, Bank, in its absolute and sole discretion and without notice, may terminate the commitment to make Advances. The obligation of Borrower to repay all Advances is evidenced by the Note. ` Borrower acknowledges that Bank is entering into this Agreement in reliance upon, and in connection with, the acquisition by CHHC of all of the issued and outstanding shares of stock in Borrower. If CHHC does not acquire such stock on or before the earlier of (i) two (2) Business Days after Bank executes this Agreement or (ii) December 30, 1994 (the earlier of such dates is referred to as the "Automatic Expiration Date"), then (A) Bank will have no further obligation to make Advances hereunder, and the Commitment will terminate automatically, and (B) Borrower will pay to Bank in immediately available funds on or before the Automatic Expiration Date, all principal, interest, and other amounts owed by Borrower to Bank in connection with the Loan Documents. Upon receipt of such funds, Bank will execute, record and file as applicable Deeds of Full Release and Reconveyance and Terminations of Financing Statements as reasonably necessary in order to release the Collateral. Upon such payment by Borrower, Borrower will have no further liability to Bank under the Loan Documents, except the Environmental Agreements. ii Conversion Period. The Conversion Date shall occur (a) on the calendar date or anniversary date thereof set forth in the definition of Conversion Date in Section 2; or (b) if Borrower's quarterly financial statements submitted to Bank pursuant to Section 6.3.1.2 show Operating Losses for two (2) consecutive fiscal quarters, then unless Bank in its sole and absolute discretion agrees otherwise, the Conversion Date shall automatically occur and the Conversion Period shall automatically commence, effective as of the first day of the first Calendar Month immediately following the second such fiscal quarter. From and after the Conversion Date, the Commitment Amount shall be reduced on the first day of each quarter-annual period (a "Reduction Date") as follows: Commitment Remaining Period Reduction Commitment - - ------ ---------- ---------- 3 Calendar Months after Conversion Date $2,500,000 $7,500,000 6 Calendar Months after Conversion Date $2,500,000 $5,000,000 9 Calendar Months after Conversion Date $2,500,000 $2,500,000 Termination Date $2,500,000 $0 iii Acceleration of Conversion Date upon the Occurrence of a Material Adverse Change. Notwithstanding anything in this Agreement to the contrary, Bank may, in its absolute and sole discretion, accelerate the Conversion Date immediately upon the occurrence of a Material Adverse Change, and commence the Conversion Period and the reductions in the Commitment Amount set forth in Section 3.1.2. Bank may exercise its right to cause the Conversion Date to occur pursuant to this Section 3.1.3 pursuant to a written notice to Borrower setting forth the accelerated Conversion Date, which notice may be given by Bank at any time after the occurrence of a Material Adverse Change and Bank's failure to exercise such right with respect to a Material Adverse Change shall not be deemed to waive Bank's rights pursuant to this Section 3.1.3 with respect to any other Material Adverse Change whether similar or dissimilar. If Bank exercises its right pursuant to this Section 3.1.3, Borrower shall not be entitled to a refund of any fees previously paid and shall continue to be obligated to pay all fees accruing from and after the Conversion Date; provided, however, with respect to fees paid by Borrower in advance on the date hereof pursuant to Section 3.4.1, the portion of such fees attributable to the period commencing on the accelerated Conversion Date and ending on the regularly scheduled Conversion Date shall be credited by Bank against any fees payable by Borrower pursuant to Section 3.4.1 or Section 3.4.2 during the Conversion Period. iv Voluntary Reductions in Commitment Amount. At any time during the Conversion Period, Borrower may elect to reduce the Commitment Amount in amounts greater than those set forth in Section 3.1.2; provided, however, Borrower shall have provided Bank written notice of Borrower's desire to reduce the Commitment Amount, and Borrower shall have paid to Bank any amount payable pursuant to Section 3.5 after giving effect to the reduction in the Commitment Amount. Any such additional reductions shall be applied toward the amount of any subsequent scheduled reductions. ii Letters of Credit. i Issuance of Letters of Credit. Subject to the terms and conditions of this Agreement and the applicable Letter of Credit Agreements and subject to the policies, procedures, and requirements of Bank in effect from time to time for issuance of Letters of Credit (including, without limitation, payment of letter of credit fees), Bank agrees to issue from time to time, after CHHC acquires the stock of Borrower (as described in Section 3.1.1) and on or before the Termination Date, Letters of Credit upon request by and for the account of Borrower, provided that as to each requested Letter of Credit Borrower has delivered to Bank a completed and executed Letter of Credit Agreement, and provided further that (i) the date that is the Standard Number of Days after the last date for payment of drafts drawn or drawn and accepted under the requested Letter of Credit is before twelve (12) months after the Termination Date, and (ii) the expiration date of each Letter of Credit shall be on or before one year after the date the Letter of Credit is issued. The issuance fee for a Letter of Credit will be one percent (1%) of the Letter of Credit Subcommitment amount, payable prior to, and as a condition of, issuance. Each reference in this Agreement to "issue" or "issuance" or other forms of such words in relation to Letters of Credit shall also include any extension or renewal of a Letter of Credit. Upon occurrence of an Event of Default or an Unmatured Event of Default, Bank, in its absolute and sole discretion and without notice, may suspend the commitment to issue Letters of Credit. In addition, upon occurrence of an Event of Default, Bank, in its absolute and sole discretion and without notice, may terminate the commitment to issue Letters of Credit. ii Issuance Procedure. To obtain a Letter of Credit, Borrower shall complete and execute a Letter of Credit Agreement and submit it to the letter of credit department of Bank and to the address of Bank specified on the first page of this Agreement. In no event shall Bank have any obligation to act upon an oral request for a Letter of Credit, or any request that otherwise does not conform to Bank's policies and procedures. Upon receipt of a completed and executed Letter of Credit Agreement, Bank will process the application in accordance with the policies, procedures, and requirements of Bank then in effect. If the application meets the requirements of Bank and is within the policies of Bank then in effect, and meets the regulatory requirements applicable thereto, Bank will issue the requested Letter of Credit. iii Reimbursement of Bank for Payment of Drafts Drawn or Drawn and Accepted Under the Letter of Credit. The obligation of Borrower to reimburse Bank for payment by Bank of drafts drawn or drawn and accepted under a Letter of Credit shall be as provided in the Letter of Credit Agreement. Bank will notify Borrower of payment by Bank of a draft drawn or drawn and accepted under a Letter of Credit and of the Reimbursement Amount and will give Borrower the election (i) to pay the Reimbursement Amount pursuant to the respective Letter of Credit Agreement or (ii) to pay the Reimbursement Amount by Bank making an Advance, subject to the terms and conditions of this Agreement and applying the proceeds of the Advance to pay the Reimbursement Amount. If Borrower does not communicate to Bank its election within two (2) Business Days after notification by Bank of payment of the draft or acceptance, then Borrower shall be deemed to have elected to pay the Reimbursement Amount by Bank making an Advance hereunder, provided that if the terms and conditions in this Agreement for an Advance hereunder are not satisfied, Borrower shall be deemed to have elected to pay the Reimbursement Amount pursuant to the Letter of Credit Agreement. The Advance to pay the Reimbursement Amount will be dated the date that Bank pays the respective draft or acceptance and will accrue interest from and after such date. If Borrower is to pay the Reimbursement Amount pursuant to the Letter of Credit Agreement, Borrower shall also pay to Bank interest on the Reimbursement Amount from and including the date Bank pays the respective draft or acceptance at the Variable Rate (as defined in the Note) until the Reimbursement Amount and such interest are paid in full, provided that if Borrower fails to pay the Reimbursement Amount and accrued interest thereon within five (5) days after notification by Bank to Borrower of payment of the respective draft or acceptance, interest thereafter will accrue at the Default Rate (as such term is defined in the Note). Such interest shall be computed on the basis of a 360-day year and accrue on a daily basis for the actual number of days elapsed. Notwithstanding the above, if Borrower elects or is deemed to have elected to pay the Reimbursement Amount pursuant to the Letter of Credit Agreement and fails to pay the Reimbursement Amount and interest thereon within five (5) days after notification by Bank to Borrower, Bank, in its absolute and sole discretion and without notice to Borrower and regardless of whether the terms and conditions in this Agreement for such Advances are satisfied, may make an Advance under this Agreement in the amount of the Reimbursement Amount and accrued interest thereon and apply the proceeds of such Advance to pay the Reimbursement Amount and accrued interest. iv Limits on Letters of Credit. Anything in the Loan Documents to the contrary notwithstanding, the sum from time to time of (i) the aggregate amount of outstanding and undrawn Letters of Credit, (ii) the aggregate amount of outstanding and unpaid drafts drawn and accepted under Letters of Credit, (iii) the aggregate amount of unpaid Reimbursement Amounts, and (iv) the amount of outstanding and unpaid Advances shall not exceed the sum of (A) the Available Commitment and (B) the aggregate of the Letter of Credit Subcommitment amounts. In addition, the sum from time to time of the amounts described in clauses (i), (ii), and (iii) shall not exceed twenty- five percent (25%) of the Commitment Amount. iii Advances. i Method for Advances and Letters of Credit. A Letter of Credit may be issued and Advances may be made by Bank at the written request of the Person or Persons designated in Section 1. Such Person or Persons are hereby authorized by Borrower to direct the disposition of the proceeds of Advances and to request Letters of Credit until written notice of the revocation of such authority is received from Borrower by Bank and Bank has had a reasonable time to act upon such notice. Bank shall have no duty to monitor for Borrower or to report to Borrower the use of Letters of Credit or proceeds of Advances. ii Use of Advances. Advances shall be used only to pay interest and fees due under the Loan Documents (including without limitation Reimbursement Amounts due Bank) and to pay or reimburse Borrower for costs, expenses, and fees actually incurred by Borrower in connection with the acquisition of Raw Land, Improved Lots, or Units, the construction of Improvements, the construction of Units, and other costs incurred by Borrower in the ordinary course of Borrower's business, as Bank may approve in its reasonable discretion. iii Determination of Amount of Advances. The Available Commitment, the Maximum Allowed Advance for each parcel of Raw Land, each Improved Lot, and each Unit, the Unit Collateral Value, and the amount of each Advance shall be determined by Bank based upon: (i) the Borrowing Base Report and the Collateral Certificate most recently submitted by Borrower (adjusted to reflect Collateral sold, Reclassification Adjustments, Term Adjustments and other adjustments and limitations pursuant to this Agreement), (ii) Bank's inspections made pursuant to Sections 6.13 and 6.18 (as such inspections may result in any adjustments to reflect any variance between (A) the Borrowing Base Report and the Collateral Certificate, and (B) the results of such inspections), and (iii) such other information as Bank may reasonably require in order to verify such amounts. Notwithstanding anything herein or in any other Loan Document to the contrary, Bank may withhold from any Advance the amount of Florida documentary stamp or intangible tax due on such Advance, and pay the same directly to the taxing authority. Nothing herein shall limit or impair any obligation of Borrower for payment of such taxes arising under any Loan Document, applicable hereof, or otherwise, if Bank shall fail to do so. iv Term Periods. Each parcel of Raw Land, Improved Lot and Unit shall constitute Eligible Collateral only during the applicable Term therefor set forth below; provided, however, that in no event shall any Term exceed the Termination Date: ` Raw Land Term. A parcel of Raw Land will constitute Eligible Collateral for not more than the Raw Land Term commencing on the date an Advance is first made against Eligible Collateral that includes such parcel; provided, however, any parcel of Raw Land remaining in Eligible Collateral after the Conversion Date shall be subject to a Term Adjustment for purposes of determining the Maximum Allowed Advance. The Raw Land Term will be determined by Bank in its reasonable discretion and established at the time the parcel of Raw Land first constitutes Eligible Collateral. ` Improved Lot Term. An Improved Lot will constitute Eligible Collateral for not more than the Improved Lot Term commencing on the date an Advance is first made against Eligible Collateral that includes such Improved Lot. The Improved Lot Term will be determined by Bank in its reasonable discretion and established at the time the Improved Lot first constitutes Eligible Collateral. Bank may elect to establish, in Bank's reasonable discretion, a Minimum Lot Takedown Requirement with respect to the Subdivision in which the Improved Lot is located and measure the Improved Lot Term for all Improved Lots in such Subdivision in the aggregate, based on the Minimum Lot Takedown Requirement. If the Minimum Lot Takedown Requirement for a Subdivision is not satisfied during any fiscal quarter, then the Improved Lot Term will be deemed to have expired with respect to the number of Improved Lots (to be designated by Bank) in such Subdivision equal to the Lot Takedown Deficit for such Subdivision for such fiscal quarter. ` Presold Unit. A Presold Unit may constitute Eligible Collateral for not more than twelve (12) Calendar Months from the date an Advance is first made against Eligible Collateral that includes such Presold Unit; provided, however, any Presold Unit remaining as Eligible Collateral for more than nine (9) Calendar Months from the date an Advance is first made against Eligible Collateral that includes such Presold Unit shall be subject to a Term Adjustment for purposes of determining the applicable Maximum Allowed Advance. ` Spec Unit. A Spec Unit may constitute Eligible Collateral for not more than twelve (12) Calendar Months from the date an Advance is first made against Eligible Collateral that includes such Spec Unit; provided, however, (i) any Spec Unit remaining as Eligible Collateral for more than six (6) Calendar Months from the date an Advance is first made against Eligible Collateral that includes such Spec Unit shall be subject to a Term Adjustment for purposes of determining the applicable Maximum Allowed Advance, and (ii) any Spec Unit remaining as Eligible Collateral for more than nine (9) Calendar Months from the date an Advance is first made against Eligible Collateral that includes such Spec Unit shall be subject to a Term Adjustment for purposes of determining the applicable Maximum Allowed Advance. ` Model Unit. A Model Unit may constitute Eligible Collateral for not more than thirty (30) Calendar Months from the date an Advance is first made against Eligible Collateral that includes such Model Unit; provided, however, (i) any Model Unit remaining as Eligible Collateral for more than eighteen (18) Calendar Months from the date an Advance is first made against Eligible Collateral that includes such Model Unit shall be subject to a Term Adjustment for purposes of determining the applicable Maximum Allowed Advance; and (ii) any Model Unit remaining as Eligible Collateral for more than twenty-one (21) Calendar Months from the date an Advance is first made against Eligible Collateral that includes such Model Unit shall be subject to a Term Adjustment for purposes of determining the applicable Maximum Allowed Advance. v Intentionally Omitted. vi Classification and Reclassification of Units. Bank may classify or reclassify Raw Land, Improved Lots and Units as to type from time to time, or change Borrower's proposed classification of any and all Raw Land, Improved Lots and Units, provided that such reclassified Raw Land, Improved Lot or Unit meets the requirements set forth herein for that type of Collateral. At any time a parcel of Raw Land, Improved Lot or Unit is reclassified as to type, such reclassification shall give rise to a Reclassification Adjustment to the Maximum Allowed Advance applicable to such Collateral. In no event shall a reclassification change the commencement date of any Unit Term. vii Release of Raw Land, Improved Lots and Units at Request of Borrower. So long as no Event of Default or Unmatured Event of Default has occurred and is continuing, Borrower may request releases of Raw Land, Improved Lots or Units from the lien and encumbrance of a Deed of Trust from time to time; provided, however, Bank shall be under no obligation to release any Raw Land, Improved Lot or Unit unless each of the following conditions precedent is satisfied: (i) in the case of any Raw Land, Improved Lot or Unit that is being released for the purpose of sale, (A) Borrower shall have paid to Bank, from Borrower's own funds (including Net Sales Proceeds), the greater of (X) the applicable Maximum Allowed Advance or (Y) the Net Sales Proceeds; provided, however, that if more than one Improved Lot is sold to a single purchaser, then the release price shall be 130% of the aggregate Maximum Allowed Advances for such Improved Lots; (B) Borrower shall have delivered to Bank a closing report pursuant to Section 6.3.3; and (C) both before and after giving effect to such release and any payments to be made pursuant to clause (i)(A) of this sentence, the outstanding Advances do not exceed the Available Commitment and Borrower has made any payments then required pursuant to Section 3.5; or (ii) with respect to releases for purposes other than sale, both before and after giving effect to such release, the outstanding Advances do not exceed the Available Commitment and Borrower has made any payments required pursuant to Section 3.5, and Borrower shall have paid to Bank, from Borrower's own funds, an amount equal to the Maximum Allowed Advance for such parcel of Raw Land, Improved Lot or Unit; and (iii) Borrower shall have satisfied the conditions precedent for releases set forth in the Deed of Trust encumbering the property to be released. Any amounts payable to Bank under subparagraph (i) and (ii), including, without limitation, Net Sales Proceeds, shall be applied to the outstanding principal balance of all Advances and, if no unpaid Advances are then outstanding, for deposit to the Cash Collateral Account. viii Extraordinary Events Affecting Raw Land, Improved Lots or Units. Upon the occurrence of any of the following events, Raw Land, Improved Lots, and Units at any time constituting Eligible Collateral may be declared by Bank to no longer be Eligible Collateral: ` Material Damage, Destruction, or Condemnation. Any Unit or Improvements are materially damaged or destroyed, or any Raw Land, Improved Lot or Unit becomes subject to any condemnation proceeding. ` Default Regarding Title Insurance. The requirements of the Loan Documents for title insurance with respect to any Collateral are not satisfied. ix Advances During Conversion Period. Borrower may continue to request Advances and Letters of Credit during the Conversion Period. Such Advances and Letters of Credit may be made by Bank pursuant to the terms and conditions of this Agreement. iv Fees. As additional consideration for the Commitment, Borrower agrees to pay to Bank (subject to the provisions hereof and of the other Loan Documents limiting the charging, collection and receipt of interest to the maximum amount permitted by applicable law) the following fees, from Borrower's own funds, which shall be earned by Bank on the date due under the Loan Documents and shall be non-refundable to Borrower: i Commitment and Other Fees. ` Commitment Fee. A fee for the Commitment at the annual rate set forth in Section 1, computed for the period commencing on the date hereof and ending on the scheduled Conversion Date, and which shall be payable as follows: $62,500.00 payable on or before the date hereof, and $62,500.00 payable on or before November 30, 1995. ` Extension Fee. In addition to the Commitment Fee, as a condition precedent to any extension of the Conversion Date (and without in any way obligating Bank to extend the Conversion Date, which is intended to be in the absolute and sole discretion of Bank), Borrower shall pay to Bank a fee determined by Bank in its absolute and sole discretion. ` Quarterly Loan Fee. On the Conversion Date and on the last day of each three (3) month period thereafter, Borrower shall pay to Bank a Quarterly Loan Fee at the rate specified in Section 1 on the Commitment amount then in effect, after giving effect to any reductions thereof pursuant to Sections 3.1.2 and 3.1.4. ii Unused Commitment Fee. An Unused Commitment Fee computed at the rate per annum set forth in Section 1 on a portion of the unused Commitment Amount, calculated from the date hereof and payable monthly in arrears. For each month (or portion thereof) the Unused Commitment Fee shall be equal to: (i) seventy-five percent (75%) of the Commitment Amount (as in effect at the beginning of such month) minus (ii) the "average monthly outstandings" for the month (or portion thereof) with respect to which the unused commitment is being computed, with the resulting number multiplied by (iii) one-twelfth (1/12th) of the rate per annum set forth in Section 1. As used herein, "average monthly outstandings" means the sum of the outstanding Loan balance at the end of each calendar day during the month (or portion thereof) for which the Unused Commitment Fee is being computed, divided by the number of days in that month (or portion thereof). If the Unused Commitment Fee is being computed for less than a full month, the percentage used in clause (iii) above shall be computed on a daily basis for the number of days for which the fee is being computed. Such fee shall continue to payable during the Conversion Period, until the Termination Date. iii Attorneys' Costs, Expenses, and Fees. Attorneys' costs, expenses, and fees for Bank's counsel as provided in the Loan Documents, payable on or before the date hereof and during the term of the Commitment, from time to time upon the presentation by Bank of statements therefor. iv Appraisal Fees, Title Insurance Premium, and Other Costs, Expenses, and Fees. Appraisal fees, appraisal review fees, title insurance premiums, and other costs, expenses, and fees that Borrower is obligated to pay pursuant to the Loan Documents, including without limitation, all fees and costs associated with periodic inspections of the Project, in the amounts specified by Bank, payable on or before the date hereof, and monthly thereafter during the term of the Commitment; provided, however, that Borrower shall be obligated to pay the cost of only four (4) periodic inspections of the Project in any twelve (12) month period. v Mandatory Prepayments. If for any reason at any time the outstanding principal amount of Advances exceeds the Available Commitment, Borrower shall, within five (5) business days after receipt of notice from Bank, make a payment to Bank in an amount equal to the sum of (i) such excess principal, and (ii) accrued and unpaid interest thereon. CONDITIONS PRECEDENT i Conditions Precedent to Effectiveness of this Agreement and to the Effectiveness of the Commitment. This Agreement and the Commitment shall become effective only upon satisfaction of the following conditions precedent, in each case as determined by Bank in its absolute and sole discretion: i Representations and Warranties Accurate. The representations and warranties by each Loan Party in the Loan Documents are correct on and as of the date of this Agreement, as though made on and as of such date. ii Documents. Bank has received the following agreements, documents, and instruments, each duly executed by the parties thereto and in form and substance satisfactory to Bank in its absolute and sole discretion: ` Loan Documents. The Loan Documents, which shall include all agreements, documents, and instruments specified by Bank. ` Corporation, Limited Liability Company, or Partnership Documents. If any Loan Party is a corporation, a limited liability company, or a partnership, certified copies of (i) resolutions of its board of directors or, if all members or all general partners do not sign the Loan Documents, resolutions of the members of the limited liability company or partners of the partnership, as the case may be, authorizing such Loan Party to execute, deliver, and perform its Loan Documents and to grant to Bank the Liens and Encumbrances on the Collateral in the Loan Documents and certifying the names and signatures of the officer(s), member(s), manager(s), or partner(s), as the case may be, of such Loan Party authorized to execute the Loan Documents and, in the case of Borrower, to request Advances on behalf of Borrower, (ii) the certificate of incorporation and bylaws, limited liability company operating agreement, or partnership agreement, as the case may be, of such Loan Party and all amendments thereto, (iii), if any Loan Party is a general partnership or joint venture, the filed or recorded fictitious name certificate for such Loan Party and all amendments thereto, (iv), if any Loan Party is a limited partnership, the filed or recorded certificate of limited partnership of such Loan Party and all amendments thereto, and (v) a certificate of good standing as a corporation, limited liability company, or limited partnership, as the case may be, from the jurisdiction of formation or organization of such Loan Party. ` Insurance Policies. The policies of insurance required under the Loan Documents. ` Financial Statements. Audited financial statements prepared by independent certified public accountants acceptable to Bank, including, without limitation, a balance sheet, a cash flow statement, reconciliation of net worth, and a profit and loss statement of Borrower, for the twelve-month period ending May 31, 1994. ` Contracts. If required by Bank, all executed contracts relating to design and construction of the Units or Improvements between Borrower and any other Person (including, without limitation, each architect and each contractor or subcontractor for labor, material, or services). ` of Filings and Recordings. Evidence of the completion of all recordings and filings to establish or maintain the perfection and priority of the Liens and Encumbrances on the Collateral granted in the Loan Documents. ` Opinion Letter. A favorable opinion from a law firm representing Borrower covering such matters as Bank may require. iii Payment of Costs, Expenses, and Fees. All costs, expenses, and fees to be paid by the Loan Parties under the Loan Documents on or before the effectiveness of this Agreement, the effectiveness of the Commitment, or the making of the Advance have been paid in full. iv Initial Approved Raw Land, Improved Lots and Units. All conditions precedent set forth in Section 4.2 hereof shall have been satisfied with respect to the Initial Approved Raw Land, Improved Lots and Units. v Defaults. No Event of Default or Unmatured Event of Default shall have occurred and be continuing. vi Other Actions by Loan Parties. The Loan Parties have performed such other actions as Bank may reasonably require. ii Conditions Precedent to Approval of Raw Land, Improved Lots and Units. After CHHC has acquired the stock of Borrower (as described in Section 3.1.1), Borrower may, from time to time, request Bank to approve additional Raw Land, Improved Lots and Units as Eligible Collateral, or to reclassify existing Raw Land, Improved Lots and Units. Reclassifications of Eligible Collateral will be reasonably approved by Bank so long as such Eligible Collateral satisfies the applicable requirements of this Agreement. Approvals of new Raw Land, Improved Lots and Units as Eligible Collateral shall be at Bank's absolute and sole discretion and Bank shall have no obligation to approve such Raw Land, Improved Lots or Units. In any event, Bank will only consider approval of Raw Land, Improved Lots and Units located in Florida (except the Initial Approved Raw Land, Improved Lots and Units, which are located in Arizona). When requesting consideration of new Raw Land, Improved Lots or Units as Eligible Collateral, and with respect to the Initial Approved Raw Land, Improved Lots and Units, Borrower shall deliver to Bank such documentation as Bank may require, and each of the following conditions precedent shall have been satisfied, as determined by Bank in its absolute and sole discretion: i Plat. Borrower shall have delivered to Bank and Bank shall have approved one or more recorded plats, one of which covers each Improved Lot and Unit and, if applicable, each parcel of Raw Land. Each plat must contain a legal description of the land covered by the plat, must describe and show all boundaries of and lot lines within such land, all streets and other dedications, and all easements affecting such land, and must satisfy such additional requirements as Bank may prescribe in its absolute and sole discretion. ii Survey. Borrower shall have delivered to Bank and Bank shall have approved one or more current surveys, one of which covers each parcel of Raw Land not covered by a plat described in Section 4.2.1. Each survey must be certified by, and stamped with the professional seal of, a surveyor or civil engineer satisfactory to Bank and licensed in the State in which the Raw Land is located. Each survey must satisfy the then current requirements for an ALTA or similar survey and such additional requirements as Bank may prescribe in its absolute and sole discretion. iii Preliminary Title Report. Borrower shall have provided to Bank, and Bank shall have approved, in its absolute and sole discretion, one or more preliminary title reports, one of which covers each Unit, Improved Lot or parcel of Raw Land, by the Title Company, together with a copy of each Schedule B item. iv Deed of Trust/Modification to Deed of Trust. Borrower shall have executed, delivered, acknowledged, and recorded Deeds of Trust (or modifications to existing Deeds of Trust) covering the Raw Land, Improved Lots and Units (together with any financing statements and assignments of declarant's rights required by Bank). v Title Insurance. Borrower shall have provided to Bank and Bank shall have approved an American Land Title Association or similar loan policy or policies of title insurance or an endorsement to an existing title policy or policies or an irrevocable and unconditional commitment to issue such policy or policies or endorsement issued by the Title Company and a commitment by the Title Company to issue disbursement endorsements at Bank's request insuring the Deed of Trust encumbering each such Improved Lot, Unit or parcel of Raw Land. Each such policy shall have a liability limit of not less than the Commitment Amount and shall provide coverage and otherwise be in form and substance satisfactory to Bank (including without limitation mechanic's lien coverage, comprehensive coverage, and revolving credit coverage) insuring Bank's interest under the applicable Deed of Trust as a valid first lien on the property encumbered by the Deed of Trust. Such policy shall be accompanied by such reinsurance and co-insurance agreements and endorsements as Bank may require in its absolute and sole discretion. Such policy must contain only such exceptions as are satisfactory to Bank in its absolute and sole discretion and must have attached such endorsements as Bank may require in its absolute and sole discretion. vi Insurance Policies. Borrower shall have provided to Bank the policies of insurance required under the Loan Documents. vii Assessments, Charges, and Taxes. For Impositions that Bank has approved in writing in its absolute and sole discretion for payment in installments pursuant to the Deed of Trust, evidence that such installments are current and evidence of Borrower's future payment obligations. For all other Impositions and all utility and services charges, evidence that they have been paid in full. viii No Contracts and No Commencement of Construction. Except as approved in writing by Bank, neither Borrower nor any other Loan Party nor any other Person on behalf of Borrower shall have (i) filed an affidavit of commencement or commenced construction of any Improvements or any Unit (including, without limitation, the clearing, grubbing, or staking of the land on which any such Unit is to be located), (ii) contracted for, purchased, or otherwise brought upon any such Collateral any materials specifically fabricated or otherwise to be incorporated in any Improvements or any Unit, (iii) entered into any construction contract relating to any Improvements or any Unit, or (iv) entered into any agreement, arrangement, or understanding the performance of which could or would give rise to a Lien or Encumbrance on any Raw Land, Lot or any Unit. The provisions of this Section 4.2.8 shall not apply to Collateral that is being reclassified as another type of Collateral. ix Contracts. If required by Bank, Borrower shall have delivered to Bank all executed contracts relating to design and construction of the Units or Improvements between Borrower and any other Person (including, without limitation, each architect and each contractor or subcontractor for labor, material, or services). x Payment of Costs, Expenses, and Fees. All costs, expenses, and fees to be paid by the Loan Parties under the Loan Documents on or before the effectiveness of this Agreement, the effectiveness of the Commitment, or the making of the Advance, including, without limitation recording, documentary stamp tax and intangible taxes, shall have been paid in full. xi Other Actions by Loan Parties. The Loan Parties have performed such other actions as Bank may reasonably require. iii Additional Conditions Precedent to the Inclusion of Each Parcel of Raw Land, Each Improved Lot and Each Unit in Eligible Collateral. In addition to the conditions precedent for Advances herein, Borrower may include and maintain a parcel of Raw Land, an Improved Lot or a Unit in Eligible Collateral only if the following conditions precedent are satisfied, in each case as determined by Bank in its absolute and sole discretion, and provided Bank has inspected each such parcel of Raw Land, Improved Lot or Unit, which inspections Bank will be required to make only once in each Calendar Month on or before the tenth (10th) day of each Calendar Month: i Conditions Previously Satisfied. All of the conditions precedent set forth in Section 4.2 shall have been satisfied with respect to each such parcel of Raw Land, Improved Lot or Unit. ii Documents. Bank has received the following agreements, documents, and instruments, each duly executed by the parties thereto and in form and substance satisfactory to Bank in its absolute and sole discretion: ` Appraisal. Either (i) a Unit Base Appraisal for the respective type of Unit, valid as determined by Bank in its absolute and sole discretion, and, if requested by Bank, an updated Unit Base Appraisal for the respective type of Unit, (ii) an Improved Lot Appraisal for the Improved Lots in the respective Subdivision with the date of valuation within 120 days of the date of the request to include the Improved Lot in Eligible Collateral, (iii) a Raw Land/If Improved Appraisal for parcels of Raw Land, with the date of valuation within 120 days of the date of the request to include the Raw Land in Eligible Collateral. The Unit Base Appraised Value, Improved Lot Appraised Value, or Raw Land/If Improved Appraised Value for the respective Collateral shall have been approved by Bank in its absolute and sole discretion. ` Unit Budget. A Unit Budget for the respective type of Unit. ` Unit Plans and Specifications. Unit Plans and Specifications for the respective type of Unit. ` Purchase Contract. If such Unit is a Presold Unit, a copy of a Purchase Contract for such Unit. ` Construction. At the request of Bank, evidence that construction has commenced or been completed on the Unit or the Improvements, as applicable. ` Environmental Questionnaire. The form of environmental questionnaire requested by Bank, fully completed and duly executed by Borrower. The answers to the questions in the questionnaire must be satisfactory to Bank in its absolute and sole discretion. ` Environmental Assessment. If required by Bank, a report of an environmental assessment of each parcel of Raw Land, Improved Lot and Unit addressed to Bank by an environmental engineer acceptable to Bank containing such information, results, and certifications as Bank may require, in its absolute and sole discretion. Depending upon the results of the environmental assessment, Borrower shall also provide such follow up testing, reports, and other actions as may be required by Bank in its absolute and sole discretion. The contents of the environmental assessment report and any follow up must be satisfactory to Bank in its absolute and sole discretion. All environmental reports shall be the sole property of Bank. Bank shall have no obligation to release any environmental report to Borrower or any other Person. ` Flood Zone. Evidence as to whether (i) each parcel of Raw Land, Improved Lot and Unit is located in an area designated by the United States Department of Housing and Urban Development as having special flood or mudslide hazards, and (ii) the community in which each such parcel of Raw Land, Improved Lot and Unit is located is participating in the National Flood Insurance Program. ` Services. Evidence, which may be in the form of letters from local utility and other service companies or local Governmental Authorities, that (i) telephone service, electric power, garbage removal, storm sewer, sanitary sewer, water, and any other services or utilities required by Bank exist at the boundary of each parcel of Raw Land, Improved Lot and Unit and are available thereto, (ii) such services and utilities are adequate to serve such property, and (iii) no conditions exist to affect Borrower's or any subsequent owner's right to connect to, to obtain, and to have unlimited use of such services and utilities, except for the payment of a normal connection charge and except for payment of subsequent charges for such services and utilities to the service or utility supplier. ` Improvements. Evidence for each Improved Lot and Unit that all Improvements have been installed and accepted by the applicable Governmental Authorities, and Bank has received written evidence acceptable to Bank from Bank's inspector(s) or from Bank's employee(s) that construction of the Improvements complies with plans and specifications previously approved by Bank. ` Soils Tests. If required by Bank, a soils test report addressed to Bank prepared by a licensed soils engineer acceptable to Bank showing the locations of, and containing boring logs for, all borings, together with recommendations for the design of the foundations of the Units. ` Bonds. If required by Bank, payment, performance, materials, delivery, or other bonds in form and substance and issued by companies satisfactory to Bank in its absolute and sole discretion. ` Other Items. Such other agreements, documents, and instruments as Bank may reasonably require (including, without limitation, if required by Bank, a copy of the zoning for the Lots, all related stipulations, and the zoning ordinances; a copy of all conditions, covenants, and restrictions related to the Lots; a copy of any public reports or disclosures required under applicable state or federal law; a copy of the architectural committee approval and any other approvals required under the conditions, covenants, and restrictions). iii Defaults. No Event of Default or Unmatured Event of Default shall have occurred and be continuing. iv Other Actions by Loan Parties. The Loan Parties have performed such other actions as Bank may reasonably require. iv Additional Conditions Precedent to Advances. Bank shall be obligated to make an Advance or to issue a Letter of Credit only upon satisfaction by Borrower of the following additional conditions precedent, as determined by Bank in its absolute and sole discretion: i Representations and Warranties Accurate. The representations and warranties by each Loan Party in the Loan Documents are correct on and as of the date of the Advance or the date of issuance of the Letter of Credit, as though made on and as of such date, and after giving effect to such Advance or issuance. ii Defaults. No Event of Default or Unmatured Event of Default shall have occurred and be continuing both before and after giving effect to such issuance or Advance. iii Draw Request. Borrower shall have delivered or sent by facsimile to Bank a Draw Request for such Advance. Bank shall not be required to make any requested Advance before one (1) Business Day after receipt of the Draw Request. iv Letters of Credit. With respect to any Letter of Credit, Borrower shall have complied with the terms and conditions of Section 3 hereof. v Title Policy Endorsements. If required by Bank in its absolute and sole discretion, Bank has received (i) such continuation endorsements and date-down endorsements to the Title Policies, in form and substance satisfactory to Bank in its absolute and sole discretion, as Bank determines necessary to insure the priority of the Deed of Trust as a valid first lien on the Raw Land, Improved Lots, and the Units described therein as of the date of and including the amount covered by the requested Advance, or (ii) an unconditional, irrevocable written commitment by the Title Company to issue such endorsements. Borrower has furnished to the Title Company such surveys and other documents and information as Bank or the Title Company may require for the Title Company to issue such endorsements. vi Inspection Report. Bank has received written evidence acceptable to Bank from Bank's inspector(s) or from Bank's employee(s) performing inspections for Bank (i) that construction of the Unit complies with the respective Plans and Specifications, and (ii) that Borrower has completed the Unit to the stage necessary to obtain the requested Advance. vii Foundation Endorsement. If required by Bank in its absolute and sole discretion, and if available under applicable law, after completion of the foundation of any Unit and before any further Advances for such Unit, Bank has received a foundation endorsement with respect to such foundation to be attached to the applicable Title Policy. This endorsement shall insure that the foundation is within the boundary line of the respective Lot, does not violate any applicable covenants, conditions, restrictions, agreements, or other items described in the Title Policy or otherwise applicable to the Lot or the applicable subdivision, and does not encroach upon any easements, rights of way, or other rights affecting or applicable to the Lot or the applicable subdivision or any part thereof. viii Approvals and Inspections by Governmental Authorities. As required by Bank, all inspections and approvals by Governmental Authorities required for the stage of completion of the infrastructure or the Unit have been obtained and Bank has received evidence thereof satisfactory to Bank. ix Payment of Costs, Expenses, and Fees. All costs, expenses, and fees to be paid by the Loan Parties under the Loan Documents on or before the Advance have been paid in full. Borrower hereby authorizes Bank, and Bank reserves the right in its absolute and sole discretion, to verify any documents and information submitted to Bank in connection with this Agreement. Bank may elect, in its absolute and sole discretion, to waive any of the foregoing conditions precedent. Any such waiver shall be effective only if (i) it is in writing executed by Bank, (ii) it specifically identifies the condition precedent, and (iii) it states whether the condition precedent is waived as a requirement of the effectiveness of this Agreement, as a requirement of the effectiveness of the Commitment, or as a requirement for a particular Advance or Letter of Credit, or otherwise. Any such waiver shall be limited to the condition(s) precedent therein and the requirements therein. Delay or failure by Bank to insist on satisfaction of any condition precedent shall not be a waiver of such condition precedent or any other condition precedent. If Borrower is unable to satisfy any condition precedent of an Advance or a Letter of Credit, the making of the Advance or the issuance of the Letter of Credit shall not preclude Bank from thereafter declaring the condition or event causing such inability to be an Event of Default. BORROWER REPRESENTATIONS AND WARRANTIES. i Closing Representations and Warranties. Borrower represents and warrants to Bank as of the date of this Agreement: i Corporate, Limited Liability Company, or Partnership Existence and Authorization. If Borrower is a corporation, a limited liability company, or a partnership, Borrower is validly existing, and in the case of a corporation or limited liability company is in good standing, under the laws of the jurisdiction of its formation or organization and has the requisite power and authority to execute, deliver, and perform the Borrower Loan Documents. The execution, delivery, and performance by Borrower of the Borrower Loan Documents have been duly authorized by all requisite action by or on behalf of Borrower and will not conflict with, or result in a violation of or a default under, the certificate of incorporation and bylaws, the limited liability company operating agreement, or the partnership agreement of Borrower, as the case may be. ii No Approvals etc. No approval, authorization, bond, consent, certificate, franchise, license, permit, registration, qualification, or other action or grant by or filing with any Person is required in connection with the execution, delivery, or performance by Borrower of the Borrower Loan Documents, except for the approval of NationsBank of Florida, which approval has been received by Borrower. iii No Conflicts. The execution, delivery, and performance by Borrower of the Borrower Loan Documents will not conflict with, or result in a violation of or a default under: any applicable law, ordinance, regulation, or rule (federal, state, or local); any judgment, order, or decree of any arbitrator, other private adjudicator, or Governmental Authority to which Borrower is a party or by which Borrower or any of the assets or property of Borrower is bound; any of the Approvals and Permits; or any agreement, document, or instrument to which Borrower is a party or by which Borrower or any of the assets or property of Borrower is bound. iv Execution and Delivery and Binding Nature of Borrower Loan Documents. The Borrower Loan Documents have been duly executed and delivered by or on behalf of Borrower. The Borrower Loan Documents are legal, valid, and binding obligations of Borrower, enforceable in accordance with their terms against Borrower, except as such enforceability may be limited by bankruptcy, insolvency, moratorium, reorganization, or similar laws and by equitable principles of general application. v Accurate Information. All information in any loan application, financial statement, certificate, or other document, and all other information delivered by or on behalf of Borrower to Bank in obtaining the Commitment is correct and complete, and there are no omissions therefrom that result in any such information being incomplete, incorrect, or misleading as of the date thereof. There has been no Material Adverse Change relative to Borrower since the date of such information. All financial statements heretofore delivered to Bank by Borrower were prepared in accordance with the requirements in Section 1 and accurately present the financial conditions and results of operations as at the dates thereof and for the periods covered thereby. The fiscal year of Borrower is as set forth in Section 1. vi Purpose of Advances. The purpose of Advances is to pay interest and fees due under the Loan Documents and to pay or reimburse Borrower for costs, expenses, and fees actually incurred by Borrower in connection with the acquisition of Raw Land, Improved Lots or Units, the construction of Improvements, the construction of Units, and other costs incurred by Borrower in the ordinary course of Borrower's business, as Bank may approve in its reasonable discretion. The purpose of Advances is a business purpose and not a personal, family, or household purpose, and no portion of the Collateral is being used or claimed as Borrower's residential or business homestead. vii Legal Proceedings; Hearings, Inquiries, and Investigations. Except as disclosed to Bank in writing prior to the date of this Agreement, (i) no legal proceeding is pending or, to best knowledge of Borrower, threatened before any arbitrator, other private adjudicator, or Governmental Authority to which Borrower is a party or by which Borrower or any assets or property of Borrower may be bound or affected that if resolved adversely to Borrower could result in a Material Adverse Change, and to the best knowledge of Borrower, there exist no facts that would form any basis for any of the foregoing, and (ii) no hearing, inquiry, or investigation relating to Borrower or any assets or property of Borrower is pending or, to the best knowledge of Borrower, threatened by any Governmental Authority (other than in connection with customary zoning and platting). viii No Event of Default or Unmatured Event of Default. No Event of Default and no Unmatured Event of Default has occurred and is continuing. ix Approvals and Permits; Assets and Property. Borrower has obtained and there are in full force and effect all Approvals and Permits necessary for the conduct of the business of the Borrower, provided that Borrower may not have obtained all of the Approvals and Permits necessary for the construction of Improvements and Units. Borrower owns or leases all assets and property necessary for conduct of the business and operations of Borrower. Such assets and property are not subject to any Liens and Encumbrances, other than the Permitted Exceptions. x Taxes. Borrower has filed or caused to be filed all tax returns (federal, state, and local) required to be filed by Borrower and has paid all taxes and other amounts shown thereon to be due (including, without limitation, any interest or penalties). xi ERISA. Borrower is in compliance with ERISA. No Reportable Event or Prohibited Transaction (as defined in ERISA) or termination of any plan has occurred and no notice of termination has been filed with respect to any plan established or maintained by Borrower and subject to ERISA. Borrower has not incurred any material funding deficiency within the meaning of ERISA or any material liability to the Pension Benefit Guarantee Corporation in connection with any such plan established or maintained by Borrower. Borrower is not a party to any Multiemployer Plan (as defined in ERISA). xii Compliance with Law. Neither Borrower nor the Project is in violation of any law, ordinance, regulation, or rule (federal, state, or local). xiii Unit Budgets and Unit Plans and Specifications. Each Unit Budget contains all costs, expenses, and fees to be incurred by Borrower in connection with Units of the respective Unit plan type. Each Unit Plans and Specifications and related working drawings are an accurate and complete description of the respective Unit type. ii Representations and Warranties Upon Requests for Advances. Each request for an Advance shall be a representation and warranty by Borrower to Bank that the representations and warranties in this Section 5 are correct and complete as of the date the Advance and that the conditions precedent in Section 4 are satisfied as of the date of the Advance. iii Representations and Warranties Upon Delivery of Financial Statements, Documents, and Other Information. Each delivery by Borrower to Bank of financial statements, other documents, or information after the date of this Agreement (including, without limitation, documents and information delivered in obtaining an Advance) shall be a representation and warranty that such financial statements, other documents, or information is correct and complete, that there are no omissions therefrom that result in such financial statements, other documents, or information being incomplete, incorrect, or misleading as of the date thereof, and that such financial statements accurately present the financial condition and results of operations of Borrower as at the dates thereof and for the periods covered thereby. BORROWER AFFIRMATIVE COVENANTS. Until the Commitment terminates in full and the Obligations are paid and performed in full, Borrower agrees that, unless Bank otherwise agrees in writing in Bank's absolute and sole discretion: i Corporate, Limited Liability Company, or Partnership Existence. If Borrower is a corporation, a limited liability company, or a partnership, Borrower shall continue to be validly existing, and in the case of a corporation or a limited liability company in good standing, under the law of the jurisdiction of its organization or formation. ii Books and Records; Access By Bank. Borrower will maintain a single, standard, modern system of accounting, in accordance with the requirements in Section 1 (including, without limitation, a single, complete, and accurate set of books and records of its assets, business, financial condition, operations, property, prospects, and results of operations) in accordance with good accounting practices. During business hours Borrower will give representatives of Bank access to all assets, property, books, records, and documents of Borrower and will permit such representatives to inspect such assets and property and to audit, copy, examine, and make excerpts from such books, records, and documents. iii Information and Statements. Borrower shall furnish to Bank the following information and statements, each of which shall, unless otherwise indicated, be signed on behalf of Borrower by the person(s) then authorized to request Advances on behalf of Borrower pursuant to Section 1: i Fiscal Period Financial Statements. As soon as available and in any event within the number of days set forth in Section 1 after the end of each fiscal period of Borrower set forth in Section 1, except the last period in each fiscal year of Borrower: ` Monthly Statements. Copies of the balance sheet and income statements of Borrower, together with such supporting schedules as required by Bank, as of the end of such fiscal period and for the portion of the fiscal year of Borrower ending with such fiscal period, in each case setting forth in comparative form the figures for the corresponding period for the preceding fiscal year, all in reasonable detail, prepared in accordance with the requirements in Section 1, containing the certifications specified in Section 1, and signed on behalf of Borrower by a person named in Section 1. ` Quarterly Statements. Copies of the balance sheet and income statement of Borrower, together with such supporting schedules as required by Bank, for the fiscal period and for the portion of the fiscal year of Borrower ending with such fiscal period, in each case setting forth in comparative form the figures for the corresponding period for the preceding fiscal year, and a twenty-four (24) month projection of cash flow for Borrower, all in reasonable detail, prepared in accordance with the requirements in Section 1, containing the certifications specified in Section 1, and signed on behalf of Borrower by a person named in Section 1. ii Annual Financial Statements. As soon as available and in any event within the number of days set forth in Section 1 after the end of each fiscal year of Borrower, copies of the balance sheet of Borrower as of the end of such fiscal year and statements of income and retained earnings and a statement of cash flow of Borrower for such fiscal year, in each case setting forth in comparative form the figures for the preceding fiscal year of Borrower, all in reasonable detail and prepared in accordance with the requirements in Section 1, containing the certifications specified in Section 1, and signed on behalf of Borrower by a person named in Section 1. Borrower's annual financial statements shall also be accompanied by Borrower's budget and business plan for each of the upcoming two (2) fiscal years, all in reasonable detail and containing such information as Bank may request. The budget and business plan shall be signed on behalf of Borrower by a person named in Section 1. iii Closing Report. On each Business Day, a report of all Unit, Improved Lot, and Raw Land sales closed on the previous Business Day, in form and substance satisfactory to Bank, which report shall be supported by settlement statements given to Bank within five (5) days thereafter relating to each Unit, Improved Lot, and Raw Land sale, together with a reconciliation of the most recently submitted Borrowing Base Report and recalculation of Eligible Collateral after giving effect to such closings. For purposes of this paragraph, a sale will be deemed to have closed when Title Company has received all funds necessary to close the sale and to pay Bank all sums owed to Bank pursuant to Section 3.3.7. iv Sales Reports and Inventory Reports. As soon as the same are available, and in any event within ten (10) days after the end of each Calendar Month, (i) a monthly report showing sales of Units, Improved Lots, and Raw Land during the preceding month, and (ii) a monthly report showing (A) the inventory of Units under construction and Improved Lots as of the end of the preceding Calendar Month, and (B) Units and Improved Lots in progress as of the end of the preceding Calendar Month. Such reports shall contain such detailed information as Bank may require. v Backlog Report. Within ten (10) days after the end of each Calendar Month, a backlog report, effective as of the end of such Calendar Month, reflecting the number of Units then under construction pursuant to contracts for sale, at the request of Bank, the anticipated delivery date of all such Units, and the aggregate value of such Units upon completion thereof. vi Gross Profit Analysis. Within thirty (30) days after the end of each Calendar Month, an analysis of gross profit and a profit and loss statement for each Subdivision, as of the end of such Calendar Month, and cumulatively for the calendar year. vii Borrowing Base Report. Within fifteen (15) days after the end of each Calendar Month, a Borrowing Base Report in form and content satisfactory to Bank, showing for each parcel of Raw Land, Improved Lot and Unit that is part of the Project, the following: ` All Collateral. With respect to all Collateral, (i) the address, (ii) the subdivision name, (iii) the date of the first Advance against such Unit, Improved Lot, or Raw Land in Eligible Collateral, (iv) the Maximum Allowed Advance for such Units, Improved Lots, or parcels of Raw Land, including a designation of all applicable percentages used to calculate the Maximum Allowed Advance, (v) a separate summary of new starts for Unit construction, (vi) the Raw Land Costs and Development Costs related to each parcel of Raw Land, the Lot Costs related to each Improved Lot, and the Lot Costs related to each Unit, and (vii) a separate summary of all Collateral not included in Eligible Collateral. ` Raw Land. With respect to each parcel of Raw Land, (i) Raw Land/If Improved Appraised Value, (ii) Development Costs expended to date, (iii) number of projected lots, (iv) percentage of construction complete, and (v) anticipated completion date for Improvements. ` Improved Lots. With respect to each Improved Lot, (i) the Lot number and the Subdivision as indicated on the recorded plat of the Subdivision, and (ii) Improved Lot Appraised Value. ` Units. With respect to each Unit, (i) the Lot number as indicated on the recorded plat of the Subdivision, (ii) the Unit plan type, (iii) whether the Unit is a Presold Unit, a Spec Unit or a Model Unit, (iv) the Unit construction budget, (v) percentage of completion, (vi) the Unit Base Appraised Value, (vii) the selling price of the Unit or the amount of the Purchase Contract, as applicable, (viii) the estimated closing date of the sale of the Unit, if the Unit is a Presold Unit, (ix) the maximum Advance against the Unit based upon the stage of completion (the Unit Collateral Value), and (x) the Unit Total Cost. viii Collateral Certificate. Within fifteen (15) days after the end of each Calendar Month, a Collateral Certificate (which accompanies the Borrowing Base Report for such month) in form and substance satisfactory to Bank setting forth the following: (a) The information required to be shown on the Borrowing Base Report, together with a designation of each parcel of Raw Land, Improved Lot and Unit included in Eligible Collateral. (b) The total number of Letter of Credit Subcommitments and the amount of each Letter of Credit Subcommitment. ix Other Indebtedness. Within forty-five (45) days after the end of each fiscal quarter, a Certificate in form and substance satisfactory to Bank stating that Borrower is in compliance with all covenants, terms, and conditions applicable to Borrower under or pursuant to the Loan Documents and any other Debt owed by Borrower to any other Person. x Land Holdings. Within forty-five (45) days after the end of each fiscal quarter, a detailed schedule of all land owned by Borrower setting forth, without limitation, the location and book value of all such holdings. xi Certificate of Compliance. A certificate in form and substance satisfactory to Bank that Borrower is in compliance with all financial covenants set forth in Sections 6.22 and 7.3. Such certificate shall accompany Borrower's quarterly and annual financial statements required in Section 6.3.1 and 6.3.2. xii Other Items and Information. Such other information concerning Borrower, the Project, and the assets, business, financial condition, operations, property, prospects, and results of operations of Borrower as Bank reasonably requests from time to time. In this regard, immediately upon request of Bank, Borrower shall deliver to Bank counterparts and/or conditional assignments as security of any and all construction contracts, receipted invoices, bills of sale, statements, conveyances, and other agreements, documents, and instruments of any nature relating to the Project or under which Borrower claims title to any materials or supplies used or to be used in the Project. Also, in this regard, immediately upon request of Bank, Borrower shall deliver to Bank a complete list of all contractors, subcontractors, material suppliers, other vendors, artisans, and laborers performing work or services or providing materials or supplies for the Project. iv Law; Judgments; Material Agreements; Approvals and Permits. Borrower shall comply with all laws, ordinances, regulations, and rules (federal, state, and local) and all judgments, orders, and decrees of any arbitrator, other private adjudicator, or Governmental Authority relating to Borrower, the Project, or the assets, business, operations, or property of Borrower. Borrower shall comply in all material respects with all material agreements, documents, and instruments to which Borrower is a party or by which Borrower, the Project, or any of the other assets or property of Borrower is bound or affected. Borrower shall comply with all Requirements (including, without limitation, as applicable, requirements of the Federal Housing Administration and the Veterans Administration) and all conditions and requirements of all Approvals and Permits. Borrower shall obtain and maintain in effect from time to time all Approvals and Permits required for the business activities and operations then being conducted by Borrower in the Project. v Taxes and Other Indebtedness. Except for Impositions being contested in accordance with the Deed of Trust and except for Impositions that Bank has agreed in its absolute and sole discretion may be paid in installments as provided in the Deed of Trust, Borrower shall pay and discharge (i) before delinquency all taxes, assessments, and governmental charges or levies imposed upon it, upon its income or profits, or upon any property belonging to it, or upon the Note, any Deed of Trust, or the indebtedness evidenced or secured thereby, (ii) when due all lawful claims (including, without limitation, claims for labor, materials, and supplies), which, if unpaid, might become a Lien or Encumbrance upon any of its assets or property, and (iii) all its other indebtedness. vi Assets and Property. Borrower will maintain, keep, and preserve all of its assets and property (tangible and intangible) (including, without limitation, the Project) necessary or useful in the proper conduct of its business and operations in good working order and condition, ordinary wear and tear excepted. vii Insurance. The following insurance shall be obtained and maintained and all related premiums shall be paid as they become due: i Property. Insurance of the Project against damage or loss by fire, lightning, and other perils, on an all-risks basis, such coverage to be in an amount not less than the amount set forth in Section 1. During the period of construction of the Project, such policy shall be written in the so-called "Builder's Risk Completed Value Non-Reporting Form," on an all-risks basis, with no coinsurance requirement except as approved by Bank, and shall contain a provision granting the insured permission to complete and/or occupy the Project. ii Liability. Commercial general liability insurance protecting Borrower and Bank against loss or losses from liability imposed by law or assumed in any agreement, document, or instrument and arising from bodily injury, death, or property damage with a limit of liability of not less than the respective amounts specified in Section 1 per occurrence and general aggregate. Also, "umbrella" excess liability insurance in an amount not less than the amount set forth in Section 1. Such policies must be written on an occurrence basis so as to provide blanket contractual liability, broad form property damage coverage, and coverage for products and completed operations. In addition, there shall be obtained and maintained business motor vehicle liability insurance protecting Borrower and Bank against loss or losses from liability relating to motor vehicles owned, non-owned, or hired used by Borrower, any contractor, any subcontractor, or any other Person in any manner related to the Project with a limit of liability of not less than the amount set forth in Section 1 (combined single limit for personal injury (including bodily injury and death) and property damage). iii Flood. A policy or policies of flood insurance in the maximum amount of flood insurance available with respect to the Project under the Flood Disaster Protection Act of 1973, as amended. This requirement will be waived upon presentation of evidence satisfactory to the Bank that no portion of the Project is located within an area identified by the U.S. Department of Housing and Urban Development as having special flood hazards. iv Workman's Compensation. Workman's compensation insurance, disability benefits insurance, and such other forms of insurance as required by law covering loss resulting from injury, sickness, disability, or death of employees of Borrower, any contractor, and any subcontractor located on or assigned to the Project. Borrower shall cause each contractor and each subcontractor having employees located on or assigned to the Project to obtain and maintain this same coverage for all eligible employees. v Engineer. If required by Bank, each engineer, each soils engineer, and each environmental contractor employed by Borrower in connection with the Project shall maintain engineer's professional liability insurance with a limit of liability of not less than the amount approved by Bank. Each policy shall permit claims for a period of not less than three (3) years after the completion of the Project. vi Architect. If required by Bank, each architect employed by Borrower in connection with the Project shall maintain architect's professional liability insurance with a limit of liability of not less than the amount approved by Bank. This policy shall permit claims for a period of not less than three (3) years after the completion of the Project. vii Additional Insurance. Borrower shall obtain and maintain such other policies of insurance as Bank may request in writing. viii Other. All policies for required insurance shall be in form and substance satisfactory to Bank in its absolute and sole discretion. Unless otherwise agreed by Bank in advance in its absolute and sole discretion, required insurance may not be provided under any blanket insurance policy. All required insurance shall be procured and maintained in financially sound and generally recognized responsible insurance companies selected by Borrower and approved by Bank. Such companies must be authorized to write such insurance in the states of Florida and Arizona. Each company shall be rated "A" or better by A.M. Best Co., in Bests' Key Guide, or such other rating acceptable to Bank in Bank's absolute and sole discretion. All property policies evidencing required insurance shall name Bank as first mortgagee and loss payee. All liability policies evidencing required insurance shall name Bank as additional insured. The policies shall not be cancelable as to the interests of the Bank due to the acts of Borrower. The policies shall provide for at least thirty (30) days prior written notice of the cancellation or modification thereof to Bank. ix Evidence. The original or a certified copy of each insurance policy or, if acceptable to Bank in its absolute and sole discretion, certificates of insurance evidencing that such insurance is in full force and effect, shall be delivered to Bank, together with proof of the payment of the premiums thereof. At least fifteen (15) days prior to the expiration of such policies, Borrower shall furnish Bank evidence that such policy has been renewed or replaced in the form of the original or a certified copy of the renewal or replacement policy or, if acceptable to Bank in its absolute and sole discretion, a certificate reciting that there is in full force and effect, with a term covering at least the next succeeding calendar year, insurance of the types and in the amounts required in this Section 6.7. viii Subordination of Other Indebtedness. The indebtedness of Borrower described in Section 1 shall be subordinated to the Obligations of Borrower in a manner satisfactory to Bank. So long as no Event of Default or Unmatured Event of Default has occurred, Borrower shall be entitled to repay such indebtedness in the ordinary course of business. ix ERISA. Borrower will fund each Defined Benefit Plan and Defined Contribution Plan (as such terms are defined in ERISA) established or maintained by Borrower so that there is never an Accumulated Funding Deficiency (as defined in Section 412 of the Internal Revenue Code of 1986, as amended). x Appraisals. Bank shall have the right to order Unit Base Appraisals, Raw Land/If Improved Appraisals and Improved Lot Appraisals from time to time. Each Appraisal is subject to review and approval by Bank. Borrower agrees upon demand by Bank to pay to Bank the cost and expense for such Appraisals and a fee determined by Bank for review of each such Appraisal by Bank. All FNMA appraisals or other appraisals of Units accepted by Bank that do not have a specific expiration date shall be updated at Bank's request. Based on the updated, respective Unit Base Appraised Value, Raw Land/If Improved Appraised Value and Improved Lot Appraised Value approved or determined by Bank in its absolute and sole discretion, Bank shall have the right to revise the Unit Budget and the Maximum Allowed Advances applicable to any Mandatory Collateral at any time. If the outstanding principal amount of Advances exceeds the available Commitment as a result of such revision, then Borrower shall be required to make a mandatory prepayment to Bank pursuant to Section 3.5. xi Commencement and Completion. As requested by Bank, Borrower shall cause construction of Improvements and Units to be prosecuted and completed in good faith, with due diligence, and without delay. Borrower may commence construction of Improvements and Units at any time. Each Unit shall be fully completed and ready for occupancy not later than the respective Unit Completion Date or shall be excluded from Eligible Collateral on the respective Unit Completion Date. Borrower shall obtain the issuance of a permanent certificate of occupancy or other equivalent permit required by the applicable Governmental Authority and, if requested by Bank, deliver a copy thereof to Bank on or before the respective Unit Completion Date. Borrower shall cause Units to be constructed (i) in a good and workmanlike manner, (ii) in compliance with all applicable Requirements, and (iii), unless otherwise consented to by Bank in advance in writing in the absolute and sole discretion of Bank, in accordance with the respective Unit Plans and Specifications. Upon demand by Bank, Borrower shall correct any defect in the Units or any departure from any applicable Requirements or, to the extent not theretofore approved in writing by Bank, the respective Unit Plans and Specifications. Borrower understands and agrees that inspection of the Units by or on behalf of Bank, the review by Bank of Draw Requests and related documents and information, the making of Advances by Bank, any actions by Bank under Section 6.13, and any other actions by Bank shall not be a waiver of Bank's right to require compliance with this Section 6.11. xii Title Insurance. If Title Company pays any claims under any Title Policies, Borrower will take any and all actions necessary to cause the total liability under the Title Policies to remain at or to be increased to the Commitment Amount notwithstanding the payment of such claim or claims, including without limitation, providing any supplemental Title Policies or endorsements or reinsurance agreements if requested by Bank, the cost of which shall be paid by Borrower. Upon payment of any such claims, Borrower will obtain and provide to Bank any and all documentation reasonably requested by Bank to ensure that the maximum coverage provided for hereunder shall not have been diminished as a result of the payment of such claims. xiii Rights of Inspection; Correction of Defects; Agency. Bank and its agents, employees, and representatives shall have the right at any time and from time to time to enter upon the Project in order to inspect the Project. If Bank, in its judgment, determines that any materials or work do not conform with the respective Unit Plans and Specifications or with any applicable Requirements or are otherwise not in conformity with sound building practice, Bank shall have the right to stop the work and to order replacement or correction of any such materials or work regardless of whether or not such materials or work have theretofore been incorporated in the Units, regardless of whether Bank's representatives have previously inspected such work or materials, and regardless of whether Bank has previously made Advances to pay for such work or materials. Borrower shall promptly make such replacement or correction. Inspection by Bank or by Bank's inspectors of the Project or the Units is for the sole purpose of protecting the security of Bank and is not to be construed as a representation by Bank that there has been compliance with the Unit Plans and Specifications or the applicable Requirements or that the Units are free of defects in materials or workmanship. Borrower may make or cause to be made such other independent inspections as Borrower may desire for its own protection. Borrower hereby appoints and authorizes Bank, as Borrower's agent and attorney-in-fact, to record any notices of completion, cessation of labor, and other notices that Bank determines to be necessary to record to protect any interest of Bank under the Loan Documents. This agency and power of attorney is coupled with an interest and is irrevocable. Based on any such inspections, Bank shall have the right in its absolute and sole discretion to revise the Unit Budget and the Maximum Allowed Advances applicable to any Raw Land, Improved Lot or Unit at any time. If the outstanding principal amount of advances exceeds the Available Commitment as a result of such revision, then Borrower shall be required to make a mandatory prepayment to Bank pursuant to Section 3.5. xiv Miscellaneous. Any inspections or determinations made by Bank or lien waivers, receipts, or other agreements, documents, and instruments obtained by Bank are made or obtained solely for Bank's own benefit and not in any way for the benefit or protection of Borrower. Bank may accept and rely on any information from Architect, any other Person providing labor, materials, or services for Improvements or Units, Borrower, or any other Person as to labor or materials furnished or incorporated in the Improvements or Units and the cost and payment therefor and as to all other matters relating to construction of Improvements or the Units and the Project without the necessity of verifying such information. Bank has no obligation to Borrower to ensure compliance by Architect or any other Person in carrying out construction of the Improvements or Units. xv Verification of Costs. Bank shall have the right at any time and from time to time to review and verify all costs, expenses, and fees in each Unit Budget. Based on its review and verification of costs, expenses, and fees in each Unit Budget, Bank shall have the right to adjust any and all such budgeted amounts. xvi Use of Proceeds of Advances. Borrower shall use proceeds of Advances only for the purposes described in Sections 3.3.2 and 5.1.6. xvii Cross-Collateralization. At Bank's request at any time and from time to time, Borrower agrees to execute and deliver such additional agreements, documents, and instruments as Bank determines to be necessary or appropriate so that all Collateral shall also secure any or all (as determined by Bank) other obligations of Borrower to Bank and/or so that any or all property, interests in property, and rights to property selected by Bank securing other obligations of Borrower to Bank also secure the Obligations. Borrower agrees to pay all costs, expenses, and fees incurred by Bank in connection with any and all such cross-collateralization requests by Bank (including, without limitation, taxes, costs, expenses, and fees of Bank's attorneys). xviii Lender's Inspector(s). Borrower agrees that during construction of Units, Bank shall have the right to employ an outside inspector or inspectors who shall review as agent for Bank all construction activities undertaken in regard to Units and who shall prepare reports of such reviews. Alternatively, Bank may elect to have employees of Bank perform such reviews and prepare such reports. In addition, the employees of Bank will review the inspection reports of any outside inspector(s), will review Draw Requests, will perform other activities related to Draw Requests, and will perform other activities in administering and monitoring the Advances. xix Further Assurances. Borrower shall promptly execute, acknowledge, and deliver such additional agreements, documents, and instruments and do or cause to be done such other acts as Bank may reasonably request from time to time to better assure, preserve, protect, and perfect the interest of Bank in the Collateral and the rights and remedies of Bank under the Loan Documents. xx Costs and Expenses of Borrower's Performance of Covenants and Satisfaction of Conditions. Borrower will perform all of its obligations and satisfy all conditions under the Loan Documents at its sole cost and expense. xxi Payment of Net Sales Proceeds. Borrower shall, upon the closing of a sale of any Unit, Improved Lot or parcel of Raw Land, pay to Bank for application to the outstanding unpaid aggregate amount of Advances hereunder, an amount equal to the Net Sales Proceeds from such sale and, if applicable, any Shortage. To the extend that such Net Sales Proceeds are held by Title Company or any other Person, Borrower shall take all action requested by Bank to cause such Net Sales Proceeds to be paid directly to Bank. If Borrower collects or receives any such Net Sales Proceeds, Borrower shall forthwith, upon receipt, transmit and deliver the same to Bank, in the form of cash. Any such amounts which may be so received by Borrower will not be commingled with any other of Borrower's funds or property, but will be held separate and apart from Borrower's own funds or property and upon express trust for Bank until delivery is made to Bank. xxii Financial Covenants. Borrower shall maintain, at all times: i Tangible Net Worth. Tangible Net Worth in an amount not less than $24,000,000.00 as of November 30, 1994, and increasing thereafter during each fiscal quarter (with the first such fiscal quarter commencing December 1, 1994) by an amount equal to fifty percent (50%) of Borrower's net profit after tax, as shown on Borrower's quarterly financial statements delivered to Bank pursuant to Section 6.3.1.2 for the immediately preceding fiscal quarter. ii Debt to Tangible Net Worth Ratio. A Debt to Tangible Net Worth Ratio of not more than 1.4 to 1. iii Spec and Model Limit. An inventory of Spec Units and Model Units that in the aggregate does not exceed the number of Presold Units. xxiii Construction and Sales Records. Borrower shall, at all times, maintain complete and accurate records of Borrower's construction and sales activities and shall, upon prior notice thereof by Bank, permit Bank to review such records upon request by Bank at any time and from time to time during regular business hours. Such records shall include, without limitation, (i) any and all documents, instruments, contracts and agreements relating to the construction or sale of Units or Improvements entered into by Borrower with or for the benefit of purchasers, contracts, subcontractors, or other Persons, as applicable, (ii) lien waivers and releases with respect to all construction in place, (iii) requests for disbursement and voucher submitted by contracts, subcontractors, or other Persons, and (iv) all permits, licenses and approvals necessary for the continuation and completion of construction. BORROWER NEGATIVE COVENANTS. Until the Commitment terminates in full and the Obligations are paid and performed in full, Borrower agrees that, unless Bank otherwise agrees in writing in Bank's absolute and sole discretion: i Corporate, Limited Liability Company, and Partnership Restrictions. If Borrower is a corporation, a limited liability company, or a partnership, Borrower shall not issue any capital stock or other securities of or any limited liability company interest or partnership interest in Borrower or grant any option, right-of-first-refusal, warrant, or other right to purchase any capital stock or other securities of or any limited liability company interest or partnership interest in Borrower, except to CHHC. Borrower shall not be dissolved or liquidated. Borrower shall not amend, modify, restate, supplement, or terminate its certificate of incorporation or bylaws, its limited liability company operating agreement, or its partnership agreement, as the case may be. If a corporation, Borrower shall not reorganize itself or consolidate with or merge into any other corporation or permit any other corporation to be merged into Borrower. If a limited liability company, Borrower shall not consolidate or merge with any corporation, any other limited liability company, or any other legal entity. ii Change in or Reacquisition of Ownership Interests in Borrower. In addition to any requirement in any other Loan Document, if Borrower is a corporation, a limited liability company, or a partnership, Borrower will not repurchase any capital stock of or any limited liability company interest or partnership interest in Borrower or any option, right-of-first refusal, warrant or other right to purchase any capital stock or other securities of or any limited liability company interest or partnership interest in Borrower. In addition, Borrower will not suffer to occur or exist, whether occurring voluntarily or involuntarily, after the date of this Agreement any change in the legal or beneficial ownership of any capital stock of or limited liability company interest or partnership interest in Borrower, without the prior written consent of Bank in its absolute and sole discretion. iii Other Indebtedness. Borrower shall not grant a Lien or Encumbrance on any asset of Borrower as security for any Debt except (i) pursuant to this Agreement; (ii) the Liens and Encumbrances granted by Borrower to NationsBank of Florida encumbering property located in Florida and securing repayment of that promissory note in the original principal amount of $20,000,000.00, to be executed by Borrower in connection with CHHC's acquisition of the stock of Borrower, and which will be payable to NationsBank of Florida; and (iii) Nonrecourse Debt and/or Seller Financing not to exceed in the aggregate $2,500,000.00 at any time. For purposes of this Section 7.3, Debt specifically includes any indebtedness of Borrower subordinated to the Obligations of Borrower pursuant to Section 6.8. BANK'S OBLIGATIONS TO BORROWER ONLY AND DISCLAIMER BY BANK. No Person, other than Borrower and Bank, shall have any rights hereunder or be a third- party beneficiary hereof. Bank is not a joint venturer or a partner with Borrower. Prior to an Event of Default and thereafter until Bank elects in writing to assume specific obligations of Borrower, Bank shall not be obligated to any Person providing labor, materials, or other services for the Project and payment of funds from Advances directly to any such Persons shall not give or be a recognition of any third-party beneficiary status. PUBLICITY. Bank shall have the right to place one or more signs on the Lots at location(s) visible from public street(s) indicating that Bank has provided financing for the Project. NO BROKERS. Except as disclosed by Borrower to Bank in writing prior to the date of this Agreement, each of Borrower and Bank represent and warrant to the other that it knows of no broker's or finder's fee due in respect of the transaction described in this Agreement and that it has not used the services of a broker or a finder in connection with this transaction. PROVISIONS IN THE NOTE GOVERN THIS AGREEMENT. This Agreement is subject to certain terms and provisions in the Note, to which reference is made for a statement of such terms and provisions. ASSUMED NAMES. Borrower acknowledges that Borrower sometimes does business under the name Heftler Homes. For purposes of the Loan Documents, "Borrower" shall mean Heftler Realty Co. and Heftler Realty Co. doing business under each and all of the assumed names for Borrower described in this Section 12. COUNTERPART EXECUTION. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same document. Signature pages may be detached from the counterparts and attached to a single copy of this Agreement to physically form one document. COMPLETE AGREEMENT. The written Loan Documents represent the final agreement and reflect the reasonable expectations of the parties and may not be contradicted by evidence of prior, contemporaneous, or subsequent oral agreements of the parties. There are no unwritten oral agreements between the parties. CHOICE OF LAW. The Loan Documents shall be governed by the laws of the State of Arizona, without giving effect to conflict of laws principles, except that the laws of the State of Florida shall govern the creation, attachment, perfection, priority, and foreclosure of liens on the Collateral located in Florida, and except to the extent such laws are preempted by applicable federal laws. SAVINGS CLAUSE. This Agreement and all of the other Loan Documents are intended to be performed in accordance with, and only to the extent permitted by, all applicable usury laws. If any provision hereof or of any of the other Loan Documents or the application thereof to any person or circumstance shall, for any reason and to any extent, be invalid or unenforceable, neither the application of such provision to any other person or circumstance nor the remainder of the instrument in which such provision is contained shall be affected thereby and shall be enforced to the greatest extent permitted by law. It is expressly stipulated and agreed to be the intent of the holder hereof to at all times comply with the usury and other applicable laws now or hereafter governing the interest payable on the indebtedness evidenced by the Note. If at any time from any circumstance whatsoever, fulfillment of any provision hereof shall render usurious, or if the applicable law is ever revised, repealed or judicially interpreted so as to render usurious, any amount called for under the Note, this Agreement, or under any of the other Loan Documents, or contracted for, charged, taken, reserved or received with respect to the indebtedness evidenced by the Note, or if Bank's exercise of the option to accelerate the maturity of the Note, or if any prepayment by Borrower results in Borrower having paid any interest in excess of that permitted by law, then it is the express intent of Borrower and Bank that all excess amounts theretofore collected by Bank be credited on the principal balance of the Note (or, if the Note and all other indebtedness arising under or pursuant to the other Loan Documents have been paid in full, refunded to Borrower), and the provisions of the Note and the other Loan Documents immediately be deemed reformed and the amounts thereafter collectable hereunder and thereunder reduced, without the necessity of the execution of any new document, so as to comply with the then applicable law, but so as to permit the recovery of the fullest amount otherwise called for hereunder or thereunder. All sums paid, or agreed to be paid, by Borrower for the use, forbearance, detention, taking, charging, receiving or reserving of the indebtedness of Borrower to Bank under the Note or arising under or pursuant to the other Loan Documents shall, to the maximum extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full term of such indebtedness until payment in full so that the rate or amount of interest on account of such indebtedness does not exceed the usury ceiling from time to time in effect and applicable to such indebtedness for so long as such indebtedness is outstanding. To the extent federal law permits Bank to contract for, charge or receive a greater amount of interest, Bank will rely on federal law, for the purpose of determining the Maximum Rate. Notwithstanding anything to the contrary contained herein or in any of the other Loan Documents, it is not the intention of Bank to accelerate the maturity of any interest that has not accrued at the time of such acceleration or to collect unearned interest at the time of such acceleration. DATED as of the date first above stated. BANK ONE, ARIZONA, NA, a national banking association By: /s/Rhonda R. Williams ------------------------------- Name: Rhonda R. Williams ---------------------------- Title: Assistant Vice President ---------------------------- HEFTLER REALTY CO., a Florida corporation By: /s/Roger Heftler ------------------------------- Name: Roger Heftler ---------------------------- Title: Secretary ---------------------------- EXHIBIT A TO LOAN AGREEMENT PERSONS AUTHORIZED TO REQUEST ADVANCES NAME SIGNATURE Roger Heftler /s/Roger Heftler - - ------------- ------------------------------------------------------ Joel B. Kovin /s/Joel B. Kovin - - ------------- ------------------------------------------------------ - - ------------- ------------------------------------------------------ - - ------------- ------------------------------------------------------ EX-10.2 4 PROMISSORY NOTE EXHIBIT 10.2 PROMISSORY NOTE Principal Amount: $10,000,000.00 Date: November 17, 1994 Home Office, Phoenix, Arizona PROMISE TO PAY AND INTEREST. For value received, the undersigned ("Borrower"), promises to pay to BANK ONE, ARIZONA, NA, a national banking association, or order ("Bank") at its above office, or at such other place as Bank may designate in writing, in lawful money of the United States of America, the principal sum of TEN MILLION AND NO/100 DOLLARS ($10,000,000.00), or such lesser amount as shall have been disbursed and is unpaid as shown on the records of Bank which shall be conclusive as to such amount, with interest thereon from the date advanced at the applicable rate from time to time ("Interest Rate") from time to time on each advance ("Advance") under the Loan Agreement of even date herewith between Borrower and Bank, as amended, modified, extended, renewed, restated, and supplemented from time to time ("Loan Agreement"), from the date advanced as follows: (a) Except to the extent that an Advance bears interest at the Fixed Rate, as defined herein, pursuant to this Note, interest shall accrue on the unpaid principal of each Advance at the Variable Rate. Interest at the Variable Rate shall be computed on the basis of a 360 day year and accrue on a daily basis for the actual number of days elapsed. (b) To the extent Borrower shall elect as provided in this Note and to the extent not otherwise provided in this Note, interest shall accrue on the unpaid principal of an Advance at the Fixed Rate. Interest at the Fixed Rate shall be computed on the basis of a 360 day year and accrue on a daily basis for the actual number of days elapsed. As used in this Note: "Business Day" means a day of the year on which banks are not required or authorized to close in Phoenix, Arizona, and, with respect to a Fixed Rate Advance, a day on which dealings are carried on in the London interbank market. "Eurocurrency Liabilities" has the meaning assigned to that term in Regulation D of the Board of Governors to the Federal Reserve System, as in effect from time to time. "Eurodollar Rate Reserve Percentage" for the Interest Period for each Fixed Rate Advance means the reserve percentage applicable two (2) Business Days before the first day of such Interest Period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, but not limited to, any emergency, supplemental, or other marginal reserve requirement) for a member bank of the Federal Reserve System in San Francisco with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (or with respect to any other category of liabilities which includes deposits by reference to which the Interest Rate on Fixed Rate Advances is determined) having a term equal to such Interest Period. "Fixed Rate" means the rate per annum equal to the sum of (i) two and one-half percent (2.5%) per annum, and (ii) the rate per annum obtained by dividing (A) the rate of interest determined by Bank, based on Telerate System reports or such other source as may be selected by Bank, to be the "London Interbank Offered Rate" at which deposits in United States dollars are offered by major banks in London, England, one (1) Business Day before the first day of the respective Interest Period by (B) a percentage equal to one hundred percent (100%) minus the Eurodollar Rate Reserve Percentage for the period equal to such Interest Period. "Fixed Rate Advance" means an Advance that bears or is requested to bear interest at the Fixed Rate. "Interest Period" means, for each Fixed Rate Advance, the period commencing on the date of such Fixed Rate Advance and ending on the last day of the period selected by Borrower pursuant to the provisions herein and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period selected by Borrower pursuant to the provisions herein. The duration of each Interest Period shall be 30, 60, 90, or 120 days, as selected by Borrower (A), for a new Advance, in the request for a Fixed Rate Advance or (B), for an outstanding Advance, in the request for a Fixed Rate Advance to continue bearing interest at the Fixed Rate; provided, however, that: (i) Interest Periods commencing on the same date shall be of the same duration; (ii) Whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day, provided that if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day; and (iii) No Interest Period with respect to any Advance shall extend beyond the Maturity Date. "Regulatory Change" means any change effective after the date of this Note in United States federal, state, or foreign law, regulations, or rules or the adoption or making after such date of any interpretation, directive, or request applying to a class of banks including Bank, of or under any United States federal, state, or foreign law, regulation or rule (whether or not having the force of law) by any court or governmental or monetary authority charged with the interpretation or administration thereof. "Variable Rate" means the rate per annum equal to the sum of (i) one- half of one percent (.5%) per annum, and (ii) the rate per annum most recently publicly announced by Bank, or its successors, in Phoenix, Arizona, as its "prime rate," as in effect from time to time. The Variable Rate will change on each day that the "prime rate" changes. The "prime rate" is not necessarily the best or lowest rate offered by Bank, and Bank may lend to its customers at rates that are at, above, or below its "prime rate." "Variable Rate Advance" means an Advance that bears or that is requested to bear interest at the Variable Rate. Each request for an Advance under the Loan Agreement shall, in addition to complying with the other requirements in the Loan Agreement, (i) specify the date and amount of the requested Advance, (ii) specify whether the Advance shall be an Advance that bears interest at the Variable Rate or shall be an Advance that bears interest at the Fixed Rate, and (iii) if the Advance is to bear interest at the Fixed Rate, (A) specify the Interest Period, (B) be delivered to Bank at least two (2) Business Days prior to the date of the requested Advance, (C) be in a minimum amount of $1,000,000 with integral multiples of $500,000 in excess thereof, and (D), when added to the number of previous Advances bearing interest at the Fixed Rate, not cause the aggregate number of all outstanding Advances bearing interest at the Fixed Rate to exceed three (3). Any Advance not complying with the foregoing requirements for an Advance bearing interest at the Fixed Rate shall bear interest at the Variable Rate. If Borrower desires that a Fixed Rate Advance continue to bear interest at the Fixed Rate after the end of an existing Interest Period, Borrower shall deliver to Bank a notice making such election and specifying the new Interest Period. If Borrower does not deliver such notice within such time, then after the existing Interest Period the Fixed Rate Advance shall become a Variable Rate Advance and shall bear interest at the Variable Rate. Borrower may on any Business Day, upon written notice to and received by Bank not later than 12:00 p.m. (Phoenix, Arizona local time) (i) on the second Business Day, in the case of any conversion of a Variable Rate Advance into a Fixed Rate Advance and (ii) on the first Business Day in the case of any conversion of a Fixed Rate Advance into a Variable Rate Advance, prior to the date of the proposed conversion, convert any Advance of one type into an Advance of the other type; provided, however, that any conversion of a Fixed Rate Advance (A) shall only be made on the last day of the applicable Interest Period, (B) shall be made only as to an Advance in a minimum amount of $1,000,000 with integral multiples of $500,000 in excess thereof, and (C) shall not result after such requested conversion in the aggregate number of Fixed Rate Advances exceeding three (3). Each such notice of a conversion shall specify the date of such conversion and the Advance(s) to be converted. Notwithstanding any provision of the Loan Documents to the contrary, Bank shall be entitled to fund and maintain its funding of all or any part of any Advance in any manner it sees fit; provided, however, that for the purposes of this Note, all determinations hereunder shall be made as if Bank had actually funded and maintained each Fixed Rate Advance during the Interest Period therefor through the purchase of deposits having a maturity corresponding to the last day of the Interest Period and bearing an interest rate equal to the Fixed Rate for such Interest Period. If, due to any Regulatory Change, there shall be any increase in the cost to Bank of agreeing to make or making, funding, or maintaining Fixed Rate Advances (including, without limitation, any increase in any applicable reserve requirement), then Borrower shall from time to time, upon demand by Bank, pay to Bank such amounts as Bank may reasonably determine to be necessary to compensate Bank for any additional costs that Bank reasonably determines are attributable to such Regulatory Change and Bank will notify the Borrower of any Regulatory Change that will entitle Bank to compensation pursuant to this paragraph as promptly as practicable, but in any event within 90 days after Bank obtains knowledge thereof; provided, however, that if Bank fails to give such notice within 90 days after it obtains knowledge of such a Regulatory Change, Bank shall, with respect to compensation payable in respect of any costs resulting from such Regulatory Change, only be entitled to payment for costs incurred from and after the date that Bank does give such notice. Bank will furnish to Borrower a certificate setting forth in reasonable detail the basis for the amount of each request by Bank for compensation under this paragraph. Determinations by Bank of the amounts required to compensate Bank shall be conclusive, absent manifest error. Bank shall be entitled to compensation in connection with any Regulatory Change only for costs actually incurred by Bank. Notwithstanding any provision of the Loan Documents, if Bank shall notify Borrower that as a result of a Regulatory Change it is unlawful for Bank to make Advances at the Fixed Rate, or to fund or maintain Fixed Rate Advances, (i) the obligations of Bank to make Advances at the Fixed Rate and to convert Advances to the Fixed Rate shall be suspended until Bank shall notify Borrower that the circumstances causing such suspension no longer exist, and (ii) in the event such Regulatory Change makes the maintenance of Advances at the Fixed Rate unlawful, Borrower shall forthwith prepay in full all Fixed Rate Advances then outstanding, together with interest accrued thereon and all amounts in connection with such prepayment specified in the paragraph in this Note titled "PREPAYMENT," unless Borrower, within five (5) Business Days of notice from Bank, converts all Fixed Rate Advances then outstanding into Variable Rate Advances pursuant to the conversion procedures in this Note and pays all amounts in connection with such prepayments or conversions specified in the paragraph in this Note titled "PREPAYMENT." Notwithstanding any other provision of the Loan Documents, if prior to the commencement of any Interest Period, Bank shall determine (i) that United States dollar deposits in the amount of any Fixed Rate Advance to be outstanding during such Interest Period are not readily available to Bank in the London interbank market, or (ii) by reason of circumstances affecting the London interbank market, adequate and reasonable means do not exist for ascertaining the Fixed Rate for such Interest Period in the manner prescribed above in the definition of "Fixed Rate," then Bank shall promptly give notice thereof to Borrower and the obligation of Bank to create, continue, or effect by conversion any Fixed Rate Advance in such amount and for such Interest Period shall terminate until United States dollar deposits in such amount and for the Interest Period shall again be readily available in the London interbank market and adequate and reasonable means exist for ascertaining the Fixed Rate. Notwithstanding the foregoing, if at any time the contract rate shall exceed the Maximum Rate, thereby causing the interest on this Note to be limited to the Maximum Rate, then any subsequent reduction in the contract rate shall not reduce the rate of interest on this Note below the Maximum Rate until the total amount of interest accrued on this Note equals the amount of interest which would have accrued on this Note if the contract rate had at all times been in effect. The term "Maximum Rate," as used herein, shall mean at the particular time in question the maximum rate of interest which, under applicable law, may then be charged on this Note. If such maximum rate of interest changes after the date hereof and this Note provides for a fluctuating rate of interest, the Maximum Rate shall be automatically increased or decreased, as the case may be, without notice to Borrower from time to time as of the effective date of each change in such maximum rate. All accrued interest shall be due and payable on December 1, 1994, and continuing on the same day of each successive month thereafter until that date that is twelve (12) months after the Conversion Date (the "Maturity Date"); the "Conversion Date" shall have the meaning set forth in the Loan Agreement. Prior to the Maturity Date, principal shall be due and payable as provided in the Loan Agreement, including, without limitation, Section 3.4 thereof. All capitalized terms used herein and not otherwise defined shall have the meanings given to such terms in the Loan Agreement. On the Maturity Date, Borrower shall pay to Bank the unpaid principal, all accrued and unpaid interest, and all other amounts ("Other Amounts") payable by Borrower to Bank under the Loan Documents. Principal shall bear interest at the Interest Rate from the date of disbursement until the due date thereof, whether due by acceleration or otherwise. Principal, interest, and Other Amounts not paid when due and any judgment therefor shall bear interest from its due date or the judgment date, as applicable, until paid at a rate ("Default Rate") equal to the lesser of (i) the sum of (A) four percent (4%) per annum and (B) the Variable Rate; or (ii) the Maximum Rate, if any, and such interest shall be immediately due and payable. All interest shall be computed on the basis of a 360-day year and accrue on a daily basis for the actual number of days elapsed. Borrower agrees to pay an effective rate of interest that is the sum of (i) the interest rate provided herein and (ii) any additional rate of interest resulting from any other charges or fees paid or to be paid in connection herewith that are determined to be interest or in the nature of interest; provided, however, that in no event shall the amounts payable under clause (i) and (ii) exceed the Maximum Rate. APPLICATION OF PAYMENTS. At the option of Bank, payments shall be applied to principal, interest, and Other Amounts in such order as Bank shall determine. This Note evidences a revolving line of credit. Amounts paid or prepaid hereunder may be reborrowed in accordance with the Loan Agreement. PREPAYMENT. Except as to payments due under this paragraph with respect to payment or conversion of a Fixed Rate Advance on a day other than the last Business Day in the Interest Period for such Fixed Rate Advance, Borrower may prepay the outstanding principal balance hereof in whole or in part at any time prior to the Maturity Date without penalty or premium as stated in such notice by Borrower; provided, however, that if any payment of all or any portion of a Fixed Rate Advance shall be made other than on the last day of the Interest Period for such Fixed Rate Advance for any reason (including, without limitation, any optional or required prepayment and any acceleration of the Maturity Date) then, anything in the Loan Documents to the contrary notwithstanding, Borrower shall pay to Bank contemporaneously with such prepayment, a payment equal to any losses, costs, or expenses that Bank may reasonably incur as a result of such prepayment, including, without limitation, any loss (including, without limitation, loss of anticipated profits), cost, or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by Bank to fund or maintain such Fixed Rate Advance. Borrower agrees to also make a payment under the immediately preceding sentence upon each conversion of a Fixed Rate Advance to a Variable Rate Advance on a date other than the last Business Day of the Interest Period for such Fixed Rate Advance to be determined as if the amount so converted had been prepaid on the date of conversion. The obligations of Borrower and the rights of Bank under this paragraph shall survive payment and performance of the obligations of the Loan Parties under the Loan Documents and shall remain in full force and effect without termination. Bank will furnish to Borrower a certificate setting forth in reasonable detail the basis for the amount of each request by Bank for payment under this paragraph. The determination by Bank of amounts due under this paragraph shall be conclusive, absent manifest error. LATE CHARGE. If any payment of principal and/or interest is not received by Bank within fifteen (15) days after its due date, then, in addition to the other rights and remedies of Bank, a late charge of four percent (4%) of the amount due and unpaid will be charged to Borrower without notice to Borrower, such late charge to be immediately due and payable; provided, however, that the obligation to pay a late charge shall be subject to the provisions hereof limiting the charging, collection and receipt of interest to the Maximum Rate. NO COUNTERCLAIMS, DEDUCTIONS, ETC. All payments and other obligations of Borrower under the Loan Documents will be made and performed without counterclaim, deduction, defense, deferment, reduction, or set-off. EVENTS OF DEFAULT. Each of the following shall be an event of default ("Event of Default"): Failure by any Loan Party to pay when due any amount payable by such Loan Party under any of the Loan Documents or failure by Borrower to pay when due any other indebtedness of Borrower to Bank and, in each case, the continuation of such failure for fifteen (15) days after the due date. Failure by any Loan Party to comply with Sections 6.22, 7.1, 7.2 or 7.3 of the Loan Agreement. Failure by any Loan Party to comply with Sections 6.16 or 6.21 of the Loan Agreement and the continuation of such failure for five (5) days after notice thereof from Bank. If Borrower's quarterly financial statements submitted to Bank pursuant to the Loan agreement show Operating Losses for two (2) consecutive fiscal quarters. Failure by any Loan Party to comply with any covenants, terms, and conditions applicable to such Loan Party under or pursuant to any other Debt owed by such Loan Party to any other Person, and the continuation of such failure after the expiration of any contractual grace or cure periods provided with respect to such Debt. Failure by any Loan Party to perform any other obligation not involving the payment of money, or to comply with any other term or condition applicable to such Loan Party, in any of the Loan Documents (that is not otherwise described in any other Event of Default under this Note) and the continuation of such failure for thirty (30) days after notice thereof from Bank (or such shorter period as may otherwise be set forth in the Loan Documents). Any representation or warranty made by any Loan Party in any of the Loan Documents or otherwise or any information delivered by any Loan Party to Bank in obtaining or hereafter in connection with the credit evidenced by this Note is materially incomplete, incorrect, or misleading as of the date made or delivered. Bank believes in good faith that a Material Adverse Change has occurred after the date of the financial statements and other information provided by any Loan Party in obtaining the credit evidenced by this Note. "Material Adverse Change" means any change in the assets, business, financial condition, operations, or results of operations of any Loan Party or any other event or condition that in the reasonable opinion of Bank is (i) reasonably likely to affect the likelihood of performance by any Loan Party of any of the obligations in the Loan Documents, (ii) reasonably likely to affect the ability of any Loan Party to perform any of the obligations in any of the Loan Documents, (iii) reasonably likely to affect the legality, validity, or binding nature of any of the obligations in the Loan Documents or any lien, security interest, or other encumbrance securing any of the obligations under the Loan Documents, or (iv) reasonably likely to affect the priority of any lien or encumbrance securing any of the obligations in the Loan Documents. Any Loan Party (i) is unable or admits in writing such Loan Party's inability to pay such Loan Party's monetary obligations as they become due, (ii) makes a general assignment for the benefit of creditors, or (iii) applies for, consents to, or acquiesces in, appointment of a trustee, receiver, or other custodian for such Loan Party or any or all of the property of such Loan Party, or in the absence of such application, consent, or acquiescence by such Loan Party a trustee, receiver, or other custodian is appointed for such Loan Party or any or all of the property of such Loan Party. Commencement of any case under the Bankruptcy Code (Title 11 of the United States Code) or commencement of any other bankruptcy, arrangement, reorganization, receivership, custodianship, or similar proceeding under any federal, state, or foreign law by or against any Loan Party. The dissolution or liquidation of any Loan Party; the consolidation or merger of any Loan Party with any other Person; or the taking of any action by any Loan Party toward a dissolution, liquidation, consolidation, or merger. Any Loan Party or any other person on behalf of any Loan Party claims that any Loan Document is not legal, valid, binding, and enforceable against any Loan Party, that any lien, security interest, or other encumbrance securing any of the obligations under the Loan Documents is not legal, valid, binding, and enforceable, or that the priority of any lien, security interest, or other encumbrance securing any of the obligations in the Loan Documents is different than the priority represented and warranted in the Loan Documents. The occurrence of any condition or event that is a default or is designated as a default, an event of default, or an Event of Default in any other Loan Document or in any agreement, document, or instrument relating to any other indebtedness of Borrower to Bank. Failure by Continental Homes Holding Corp., a Delaware corporation ("CHHC") to purchase, on or before the earlier of (i) two (2) business days after the date that Bank executes the Loan Agreement, or (ii) December 30, 1994, one hundred percent (100%) of the issued and outstanding shares of stock in Borrower. Failure by counsel for CHHC and counsel for Borrower and reasonably acceptable to Bank to issue to Bank, within two (2) business days after the date of this Note, opinion letters in form and substance reasonably satisfactory to Bank concerning CHHC's acquisition of Borrower's stock as described in Paragraph 14 and concerning the loan documents executed in connection with this Note. Failure by CHHC, or the Board of Directors of Borrower to deliver to Bank, within two (2) business days after the date of this Note, Ratifications of Loan Documents following consummation of the stock purchase described in Paragraph 14. Failure by CHHC to issue to Bank, within two (2) business days after the date of this Note, a Certificate in form and substance reasonably satisfactory to Bank concerning certain Indentures executed by CHHC. RIGHTS AND REMEDIES OF BANK. Upon occurrence of an Event of Default, Bank may, at its option, in its absolute and sole discretion, and without demand or notice, (i) declare the obligations in the Loan Documents to be immediately due and payable, whereupon the obligations in the Loan Documents shall be immediately due and payable, and (ii) exercise any or all other rights and remedies of Bank concurrently or consecutively in such order as Bank elects. The rights and remedies of Bank shall be cumulative and non- exclusive. Delay, discontinuance, or failure to exercise any right or remedy of Bank shall not be a waiver thereof, or of any other right or remedy of Bank, or of the time of the essence provision. Exercise of any right or remedy of Bank shall not cure or waive any Event of Default or invalidate any act done in response to any Event of Default. LIMIT ON LIABILITY OF BANK. In exercising rights and remedies, neither Bank nor any stockholder, director, officer, employee, agent, or representative of Bank shall have any liability for any injury to the assets, business, operations, or property of Borrower or any other liability to Borrower, other than for its own gross negligence or willful misconduct. SURVIVAL. The representations, warranties, and covenants of the Loan Parties in the Loan Documents shall survive the execution and delivery of the Loan Documents and the making of advances to Borrower. INTEGRATION, ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION, WAIVER, APPROVAL, CONSENT, ETC. The Loan Documents contain the complete understanding and agreement of Borrower and Bank and supersede all prior representations, warranties, agreements, arrangements, understandings, and negotiations. No provision of the Loan Documents may be changed, discharged, supplemented, terminated, or waived except in a writing signed by the parties thereto. Delay or failure by Bank to insist on performance of any obligation when due or compliance with any other term or condition in the Loan Documents shall not operate as a waiver thereof or of any other obligation, term, or condition or of the time of the essence provision. Acceptance of late payments shall not be a waiver of the time of the essence provision, the right of Bank to require that subsequent payments be made when due, or the right of Bank to declare an Event of Default if subsequent payments are not made when due. Any approval, consent, or statement that a matter is satisfactory by Bank under the Loan Documents must be in writing executed by Bank and shall be construed to apply only to the person(s) and facts specifically set forth in the writing. BINDING EFFECT. The Loan Documents shall be binding upon and shall inure to the benefit of Bank and the Loan Parties and their successors and assigns and the executors, legal administrators, personal representatives, heirs, devisees, and beneficiaries of the Loan Parties; provided, however, that the Loan Parties may not assign any of their rights or delegate any of their obligations under the Loan Documents and any purported assignment or delegation shall be void. Bank may from time to time in its absolute and sole discretion assign it rights and delegate its obligations under the Loan Documents, in whole or in part, without notice to or consent by any Loan Party (including, without limitation, participations). In addition to any greater or lesser limitation provided by law, no Loan Party shall assert against any assignee of Bank any claims or defenses such Loan Party may have against Bank, except claims and defenses arising under the Loan Documents. COSTS, EXPENSES, AND FEES. Borrower agrees to pay on demand all external and internal costs, expenses, and fees (including, without limitation, as applicable, inside and outside attorneys, paralegals, document clerks and specialists, appraisal, appraisal review, environmental assessment, environmental testing, environmental cleanup, other inspection, processing, title, filing, and recording costs, expenses, and fees) of Bank (i) in the negotiation, execution, delivery, and modification of the Loan Documents, (ii) in the making of advances, in the monitoring the activities of Borrower, and otherwise in administering the credit evidenced by this Note, (iii) in enforcement of the Loan Documents and exercise of the rights and remedies of Bank, (iv) in defense of the legality, validity, binding nature, and enforceability of the Loan Documents and the perfection and priority of the liens and encumbrances granted in the Loan Documents, (v) in gaining possession of, holding, repairing, maintaining, preserving, and protecting the property ("Collateral") securing the obligations in the Loan Documents, (vi) in selling or otherwise disposing of the Collateral, (vii) otherwise in relation to the Loan Documents, the Collateral, or the rights and remedies of Bank under the Loan Documents or relating to the Collateral, and (viii) in preparing for the foregoing, whether or not any legal proceeding is brought or other action is taken. Such costs, expenses, and fees shall include, without limitation, all such costs, expenses, and fees incurred in connection with any bankruptcy, receivership, replevin, or other court proceedings (whether at the trial or appellate level). Borrower agrees, to the extent permitted by applicable law, to pay interest on such costs, expenses, and fees at the Default Rate from the date incurred by Bank until paid in full. SEVERABILITY. If any provision or any part of any provision of the Loan Documents is unenforceable, the enforceability of the other provisions or the other provisions and the remainder of the subject provision, respectively, shall not be affected and they shall remain in full force and effect. CHOICE OF LAW. The Loan Documents shall be governed by the laws of the State of Arizona, without giving effect to conflict of laws principles, except that the laws of the State of Florida shall govern the creation, attachment, perfection, priority, and foreclosure of liens on the Collateral located in Florida, and except to the extent such laws are preempted by applicable federal laws. TIME OF ESSENCE. Time is of the essence with regard to each provision of the Loan Documents as to which time is a factor. NOTICES AND DEMANDS. All demands or notices under the Loan Documents shall be in writing (including, without limitation, telecopy, telegraphic, telex, or cable communication) and mailed, telecopied, telegraphed, telexed, cabled, or delivered to the respective party hereto at the address specified at the end of this paragraph or such other address as shall have been specified in a written notice. Any demand or notice mailed shall be mailed first-class mail, postage-prepaid, return-receipt-requested and shall be effective upon the earlier of (i) actual receipt by the addressee, and (ii) the date shown on the return-receipt. Any demand or notice not mailed will be effective upon the earlier of (i) actual receipt by the addressee, and (ii) the time the receipt of the telecopy, telegram, telex, or cable is mechanically confirmed. Address for Notices to Borrower: Heftler Realty Co. 9450 Sunset Drive Miami, Florida 33173 Address for Notices to Bank: Bank One, Arizona, NA Post Office Box 29542 Phoenix, Arizona 85038 Attention: Real Estate Finance Division, Dept. A-383 JOINT AND SEVERAL OBLIGATIONS. All obligations in any of the Loan Documents executed by more than one Loan Party shall be the joint and several obligations of each such person, and each reference in any Loan Document to Borrower, Obligor, or Trustor shall be a reference to each such person individually and all such persons collectively. COMMUNITY PROPERTY AND SEPARATE PROPERTY OF BORROWER. If Borrower includes one or more persons who are married to each other or to other persons, each such person included in Borrower agrees that (i) the Loan Documents executed by Borrower are made on behalf of the marital community of each person included in Borrower and his or her spouse, and (ii) Bank may have recourse against the separate property of each person included in Borrower and the community property of each such person included in Borrower and his or her spouse for satisfaction of the obligations of Borrower under the Loan Documents. BANK'S RIGHT OF SET-OFF. Borrower grants to Bank (i) the right at any time and from time to time after an Event of Default, in the absolute and sole discretion of Bank and without demand or notice to the Borrower, to set-off and apply deposits (whether certificates of deposit, demand, general, savings, special, time, or other, and whether provisional or final) held by Bank for Borrower and any other liabilities or other obligations of Bank to Borrower ("Deposits, Liabilities, and Obligations") against or to the obligations of Borrower under the Loan Documents, regardless of whether the Deposits, Liabilities, and Obligations are contingent, matured, or unmatured, and (ii) a security interest in the Deposits, Liabilities, and Obligations to secure the obligations of Borrower under the Loan Documents. In addition, Borrower grants to Bank the right upon the occurrence of an event that with notice, passage of time, or both would be an Event of Default to segregate all Deposits, Liabilities, and Obligations into an account or otherwise under the sole control of Bank. INDEMNIFICATION OF BANK. Borrower agrees to indemnify, hold harmless, and on demand defend Bank and its stockholders, directors, officers, employees, agents, and representatives for, from, and against any and all damages, losses, liabilities, costs, and expenses (including, without limitation, costs and expenses of litigation and reasonable attorneys' fees) arising from any claim or demand in respect of the Loan Documents, the Collateral, or the transaction described in the Loan Documents and arising at any time, whether before or after payment and performance of the Obligations in full, excepting any such matters arising solely from the gross negligence or willful misconduct of Bank. The obligations of Borrower and the rights of Bank under this paragraph shall survive payment and performance of the Obligations in full and shall remain in full force and effect without termination. RESCISSION OR RETURN OF PAYMENTS. If at any time or from time to time, whether before or after payment and performance of the obligations of the Loan Parties under the Loan Documents in full, all or any part of any amount received by Bank in payment of, or on account of, any obligation of the Loan Parties under the Loan Documents is or must be, or is claimed to be, avoided, rescinded, or returned by Bank to Borrower or any other Person for any reason whatsoever (including, without limitation, bankruptcy, insolvency, or reorganization of Borrower or any other Person), such obligation and any liens, security interests, and other encumbrances that secured such obligations at the time such avoided, rescinded, or returned payment was received by Bank shall be deemed to have continued in existence or shall be reinstated, as the case may be, all as though such payment had not been received. NO CONSTRUCTION AGAINST BANK OR BORROWER. The Loan Documents are the result of negotiations between Borrower and Bank. Accordingly, the Loan Documents shall not be construed for or against Borrower or Bank, regardless of which party drafted the Loan Documents or any part thereof. HEADINGS. The headings at the beginning of each section of the Loan Documents are solely for convenience and are not part of the Loan Documents. NUMBER AND GENDER. In the Loan Documents the singular shall include the plural and vice versa and each gender shall include the other genders. MULTIPLE CREDIT ACCOMMODATIONS. If from time to time Borrower has more than one loan or other credit accommodation with Bank, Borrower agrees that, unless otherwise agreed by Bank and Borrower in writing, (i) the Loan Documents and the agreements, documents, and instruments evidencing and relating to such other loan(s) and credit accommodation(s) shall all remain in effect and neither shall supersede the other, regardless of whether the Loan Documents and such other agreements, documents, and instruments have differing terms, conditions, and requirements, and (ii), regardless of any such differences, Borrower shall comply with all the terms, conditions, and requirements of the Loan Documents and of such other agreements, documents, and instruments. WAIVER OF STATUTE OF LIMITATIONS. Borrower waives, to the full extent permitted by law, the right to plead any statutes of limitations as a defense to any or all obligations under the Loan Documents. WAIVERS BY BORROWER. Borrower (i) waives, to the full extent permitted by law, presentment, notice of dishonor, protest, notice of protest, notice of intent to accelerate, notice of acceleration, notice of dishonor, and all other notices or demands of any kind (except notices specifically provided for in the Loan Documents), and (ii) agrees that Bank may enforce this Note and any other Loan Documents against any person included in Borrower without first having sought enforcement against any other Loan Party or any Collateral. SAVINGS CLAUSE. This Note and all of the other Loan Documents are intended to be performed in accordance with, and only to the extent permitted by, all applicable usury laws. If any provision hereof or of any of the other Loan Documents or the application thereof to any person or circumstance shall, for any reason and to any extent, be invalid or unenforceable, neither the application of such provision to any other person or circumstance nor the remainder of the instrument in which such provision is contained shall be affected thereby and shall be enforced to the greatest extent permitted by law. It is expressly stipulated and agreed to be the intent of the holder hereof to at all times comply with the usury and other applicable laws now or hereafter governing the interest payable on the indebtedness evidenced by this Note. If at any time from any circumstance whatsoever, fulfillment of any provision hereof shall render usurious, or if the applicable law is ever revised, repealed or judicially interpreted so as to render usurious, any amount called for under this Note or under any of the other Loan Documents, or contracted for, charged, taken, reserved or received with respect to the indebtedness evidenced by this Note, or if Bank's exercise of the option to accelerate the maturity of this Note, or if any prepayment by Borrower results in Borrower having paid any interest in excess of that permitted by law, then it is the express intent of Borrower and Bank that all excess amounts theretofore collected by Bank be credited on the principal balance of this Note (or, if this Note and all other indebtedness arising under or pursuant to the other Loan Documents have been paid in full, refunded to Borrower), and the provisions of this Note and the other Loan Documents immediately be deemed reformed and the amounts thereafter collectable hereunder and thereunder reduced, without the necessity of the execution of any new document, so as to comply with the then applicable law, but so as to permit the recovery of the fullest amount otherwise called for hereunder or thereunder. All sums paid, or agreed to be paid, by Borrower for the use, forbearance, detention, taking, charging, receiving or reserving of the indebtedness of Borrower to Bank under this Note or arising under or pursuant to the other Loan Documents shall, to the maximum extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full term of such indebtedness until payment in full so that the rate or amount of interest on account of such indebtedness does not exceed the usury ceiling from time to time in effect and applicable to such indebtedness for so long as such indebtedness is outstanding. To the extent federal law permits Bank to contract for, charge or receive a greater amount of interest, Bank will rely on federal law, for the purpose of determining the Maximum Rate. Notwithstanding anything to the contrary contained herein or in any of the other Loan Documents, it is not the intention of Bank to accelerate the maturity of any interest that has not accrued at the time of such acceleration or to collect unearned interest at the time of such acceleration. HEFTLER REALTY CO., a Florida corporation By: /s/Roger Heftler ---------------------------------------- Name: Roger Heftler --------------------------------------- Title: Secretary --------------------------------------- EX-10.3 5 MASTER LOAN AGREEMENT EXHIBIT 10.3 MASTER LOAN AGREEMENT THIS LOAN AGREEMENT, dated as of the 29th day of August, 1994 (the "Loan Agreement" or "Agreement"), is made by and between Heftler Realty Co., a Florida corporation ("Borrower"), with its principal offices at 9450 Sunset Drive, Miami, FL 33173, and NationsBank of Florida, N.A., a national banking association organized and existing under the laws of the United States, with its offices located at Suite 101, 701 West Cypress Creek Road, Fort Lauderdale, Florida 33309 ("Bank"). RECITALS A. Borrower has applied to Bank for a revolving line of credit loan in the principal amount of $8,000,000.00 (the "Construction Line") to be used for the purpose of acquiring and developing single family and townhouse lots as well as the construction of Units thereon in Approved Projects located in Broward and Dade County, Florida, as well as the issuance of Letters of Credit to serve as performance bonds for projects financed with such loan facility (and for the letter of credit guaranty of payment in the amount of $2,300,000.00 to the master developer for the Pembroke Shores project) [the foregoing collectively referred to herein as the "Loan"]. B. Bank has agreed to establish a Borrowing Base secured by the assets of the Borrower and the property described in the Mortgage under which the Borrower may acquire and develop land and construct Units thereon pursuant to the plans, specifications, terms, and conditions approved by Bank. C. Bank is willing to make the Loan described above based on the terms and conditions set forth in this Loan Agreement and in the Loan Documents referred to herein. NOW, THEREFORE, in consideration of the premises, of the loan advances which may be agreed to by Bank and Borrower hereinafter and the Note, Mortgage and other Loan Documents given by Borrower in evidence thereof, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Borrower and Bank hereby agree as follows: ARTICLE I Definitions 1.1 For the purposes hereof: (a) "Approved Projects" means the collective reference to the developments identified in Section 2.3 of this Agreement, together with the Land, the Improvements, rights, property, and appurtenances as defined, described or identified in the Mortgage, and means, as the context may require, an individual Unit, as well as the aggregate of all such Units. (b) "Architect" means such licensed architect or architectural firm (if not the Borrower) which will serve as Borrower's supervising architect. Borrower shall retain a supervising architect who will perform various services in connection with the construction of Improvements on behalf of Borrower under a "full-service" contract with Borrower for each Approved Project. Bank's construction consultant and Borrower's Architect shall not be the same person or firm. (c) "Borrower's Representative" means the person or persons designated in writing to Bank by Borrower as being authorized to submit Draw Requests on Borrower's behalf per the Borrowing Base Certificate and to consent to changes in the Cost Breakdown. Unless and until changed by written notice to Bank, Borrower designates Joel Kovin and Roger Heftler as its Borrower's Representative(s). (d) "Borrowing Base" means the value of collateral against which Loan proceeds are disbursed as described on the Borrowing Base Certificate. (e) "Borrowing Base Availability" means availability of funding under the Borrowing Base as computed on the Borrowing Base Schedule "A" attached hereto as Exhibit "2". (f) "Borrowing Base Certificate" means the certificate set forth on Exhibit "1" attached hereto which annexes Exhibits "2", "3" and "4" defining the monthy available funding. (g) "Closing Date" means the date as of which this Loan Agreement is executed by Borrower and Bank. (h) "Collateral" means the Mortgaged Property, Rents, Intangible Property, Corporate Assets and other property and property rights as defined in and encumbered by the Mortgage and Security Agreements both of even date herewith. (i) "Commitment" means Bank's commitment letter to Borrower dated July 28, 1994 and all amendments thereto. The parties intend that this Agreement and the Loan Documents shall supersede and replace the Commitment. (j) "Construction Documents" means the stipulated sum construction contract between Borrower and the General Contractor, if a General Contractor is engaged, and all other contracts, plans or documents concerning the construction of the Improvements and any addenda, amendments or modifications thereto. The Construction Documents shall include a hard cost breakdown and a maximum fixed cost for the performance of all services, labor, and materials furnished thereunder. (k) "Construction Inspector" means the architectural or engineer- ing firm or such party which Bank shall designate to perform various services on behalf of Bank. The services to be performed by Bank's Construction Inspector shall include the issuance of reports and certification solely for the benefit of Bank and shall not impose upon Bank any obligation to make inspections, or to correct or require any other person to correct any defects, or to notify any person with respect to such defects, review of the Plans and all proposed changes to them, preparation of a "cost breakdown" construction analysis, periodic inspection of construction and development work for conformity with the Plans and approval of Draw Requests. (l) "Construction Line" means the $8,000,000.00 of the Loan amount available for acquisition and development of single family and townhouse lots and the construction of Units thereon. (m) "Cost" means the costs submitted by Borrower to Bank which are reviewed and approved by Bank. (n) "Cost Breakdown" means the detailed trade breakdown of the cost of constructing the Improvements and an itemization of non-construction and Land costs, all as approved by Bank from time to time. (o) "Default" means a violation of any term, covenant, or condition hereunder or a Default as defined under any of the other Loan Documents. (p) "Default Condition" means the occurrence or existence of an event or condition which, upon the giving of notice or the passage of time, or both, would constitute a Default. (q) "Draw Request" means a written request for any disbursement of Loan proceeds, which shall be submitted for each requested disbursement as set forth in Article V and VI hereof, in accordance with the Request for Funding form attached hereto as Exhibit "5". (r) "Engineer" means such licensed engineer or engineering firm (if not the Borrower) which will serve as Borrower's supervising engineer in accordance with the Plans for each Approved Project. (s) "Financing Statements" means the UCC financing statements filed in order to perfect Bank's lien on certain personal property and corporate assets as more particularly described therein. (t) "Firm Contract" means an arm's length, bona-fide binding contract for purchase and sale, in form and content satisfactory to Bank, for the sale of a Unit to a purchaser unaffiliated and unrelated to Borrower under which (i) Borrower has received a cash deposit equal to a minimum of five (5%) percent; (ii) Borrower is not obligated to provide any purchase- money financing, (iii) all applicable statutory cancellation or rescission periods have expired, (iv) there are no contingencies other than a first mortgage financing contingency for which Borrower has confirmed to Lender that purchaser has made a mortgage application, (v) the closing date for the contract is within thirty (30) days of the date of issuance of the Certifi- cate of Occupancy for the Unit. (u) "General Contractor" means the Borrower (or such licensed general contractor or contracting firm as to site development work) who will serve as the general contractor in accordance with the Construction Documents. (v) "Governmental Authorities" means any local, state, or federal governmental agency, regulatory body or office, or any quasi-governmental office (including health and environmental), or any officer or official of any such agency, office, or body whose consent or approval is required as a prerequisite to the commencement of the construction of the Improvements or to the operation and occupancy of the Improvements or the Approved Project or to the performance of any act or obligation or the observance of any agreement, provision or condition of whatsoever nature herein contained. (w) "Improvements" means all site development and Units constructed or to be constructed on the Land as defined in the Mortgage, together with all fixtures and appurtenances now or later to be located on the Land and/or in such Improvements. (x) "Land" means the real property described in the Mortgage at the inception of the Loan and as may be later included by modification and spreader agreement. (y) "Letters of Credit" means the $5,000,000.00 committed by Bank for standby letters of credit issued for the account of the Borrower through the actions of the Bank, as the same may be transferred, renewed, modified, amended or restated from time to time in the manner provided therein, which shall serve as performance bonds for the Approved Projects (and for the letter of credit guaranty of payment in the amount of $2,300,000.00 to the master developer for the Pembroke Shores project). (z) "Loan Documents" means this Loan Agreement, the Note and any funding agreement, the Mortgage, the Financing Statements, and any other document or writing executed in connection therewith or in furtherance thereof. (aa) "Model Unit" means a Unit constructed and furnished initially for inspection by prospective purchasers. (bb) "Mortgage" means the Real Estate Mortgage, Assignment and Security Agreement of even date herewith executed by Borrower for the benefit of Bank encumbering the Collateral (as defined in the Mortgage), and any extensions, modifications, renewals or replacements thereof. (cc) "Note" means the promissory note dated as of the Closing Date executed by Borrower in favor of Bank in the amount of $8,000,000.00 as well as any promissory note, sub-note, or other notes issued by Borrower in substitution, replacement, extension, future advance, amendment or renewal of the Note or any such promissory note or notes. (dd) "Permitted Encumbrances" means those liens, encumbrances, easements and other matters defined in the Mortgage as "Permitted Encumbrances". (ee) "Plans" means plans and specifications for the construction of the Improvements submitted to and approved by Bank from time to time, and including such amendments thereto as may from time to time be made by Borrower and approved by Bank. (ff) "Pre-Sold Unit" means a Unit owned by Borrower and covered by a Firm Contract. (gg) "Security Documents" means the Mortgage, the Financing Statements, and any other instrument executed to establish and perfect Bank's lien, and any extensions, modifications, renewals, or replacements thereof. (hh) "Spec Unit" means a Unit owned by the Borrower for which a Firm Contract has not been received or approved and which is not used as a Model Unit. (ii) "Subsequently Approved Project" means the collective reference to the developments subsequently approved by Bank for inclusion under the Borrowing Base, together with the Land, the Improvements, rights, property, and appurtenances as defined, described or identified in the Mortgage (as spread upon the Subsequently Approved Project), and means, as the context may require, an individual Unit, as well as the aggregate of all such Units. If the proposed project meets the criteria set forth in Article III herein and is located in either Broward or Dade County, Florida, such project shall be designated a Subsequently Approved Project. With respect to projects owned by Borrower not meeting the criteria set forth in Article III herein and not located in such Counties, approval of the project shall be at Bank's sole discretion and Bank shall under no circumstances be obligated to disburse Loan proceeds except as expressly set forth in this Loan Agreement. (jj) "Title Policy" means the mortgagee title policy meeting the requirements of this Loan Agreement. (kk) "Unit" means a portion of the Land and its respective improvements constituting a single family or townhouse dwelling unit. Capitalized terms not defined in this Loan Agreement shall have the meanings ascribed to them in the Mortgage. ARTICLE II The Loan 2.1 Loan Terms. Subject to the terms and conditions of this Loan Agreement, Bank will lend and Borrower will borrow up to a principal sum of $8,000,000.00 which borrowing shall be evidenced by the Note. Also, all of the terms, definitions, conditions, and covenants of the Note, the Mortgage, and any other documents executed in connection therewith or pursuant thereto are expressly made a part of this Loan Agreement by reference in the same manner and with the same effect as if set forth herein at length and shall have the meaning set forth in such instrument(s) unless otherwise defined herein. 2.2 Revolving Loan. The Loan is a revolving line of credit and the principal amount outstanding under the Loan may increase or decrease from time to time as Borrower draws and repays Loan funds thereunder. Provided Borrower is not in default, outstanding amounts under the Loan may be repaid or reborrowed from time to time subject to the terms, conditions and limitations set forth in this Agreement, but the principal balance of the Loan outstanding from time to time shall not exceed the original, principal amount of the Note. 2.3 Loan Purpose. The purpose of the Loan is to finance the acquisition and development of single family and townhouse lots and the construction of Units thereon in certain Approved Projects known as Lago Mar South, Lago Mar South - First Addition, Lago Mar South - 2nd Addition and Sunlake Estates all located in Dade County, Florida, and Chapel Trail, Pembroke Shores and Miramar Gardens, all located in Broward County, Florida, and Subsequently Approved Projects. Loan proceeds in the amount of $8,000,000.00 shall be used solely to fund acquisition, development and construction of Units described above for which Bank has approved the Plans. In addition to the Loan, $5,000,000.00, shall be available for standby letters of credit to serve a performance bonds for the Approved Projects and Subsequently Approved Projects (and for the letter of credit guaranty of payment in the amount of $2,300,000.00 to the master developer for the Pembroke Shores project). 2.4 Borrowing Base Availability: Limitations on Use of Loan Proceeds. Bank will disburse Loan proceeds for the purposes set forth above subject to the terms and conditions of this Loan Agreement and the following limitations. Availability for the Construction Line and Letters of Credit shall not exceed the sum of the amounts determined by the following formulas, less any amount of issued Letters of Credit. (a) Miramar Gardens: Twenty (20%) percent of the purchase price of the real property. (b) Land Under Development: Fifty (50%) percent of Cost. [For any new land parcel to continue to be included in the Borrowing Base, final site plan development must be submitted for approval to the appropriate county within ninety (90) days, approval must be received within one hundred eighty (180) days, and development must start within ninety (90) days of final site plan approval on the initial phase of each project.] (c) Fully Developed Lots: ("Fully Developed Lots" are defined as lots upon which a Certificate of Occupancy for a completed dwelling can be obtained.) Sixty five (65%) percent of Cost. (d) Site Development: Seventy five (75%) percent of development Costs per project. (e) Direct Overhead: Seventy five (75%) percent of Costs per project. (f) Construction: One hundred percent (100%) of Cost. To the extent that the total of advances outstanding under the Borrowing Base at any time exceeds the Borrowing Base Availability, Borrower shall within ten (10) days written notice from Bank prepay the Loan to such an extent. Borrower's investments in subsidiaries, affiliates and joint ventures will be excluded from the Borrowing Base (except for payments made under the master development contract for improvments associated with HHP Venture, a Florida partnership, for the development of Pembroke Shores). 2.5 Letters of Credit. Bank will issue standby letters of credit for Borrower to serve as performance bonds for Approved Projects in amounts not to cumulatively exceed $5,000,000.00. All Letters of Credit issued shall be reduced and/or cash secured so as not to exceed the amount available under the Borrowing Base. Issued Letters of Credit shall be deducted from the Borrowing Base Availability to determine amounts available for funding under the Construction line. No Letter of Credit may have an expiry beyond thirty (30) days before the maturity of the Loan unless such Letter of Credit is cash secured. 2.6 Construction Line Limitations. The following limitations shall apply to the use of Loan proceeds for the construction of Units under the Construction line: (a) Proceeds for the construction of Units shall be limited to fifteen (15) single family Spec and Model Units per Approved Project, not to exceed forty five (45) in the aggregate, and a total of fifteen (15) townhouse Spec and Model Units, at any one time, with the balance of proceeds available for the construction of Pre-Sold Units. (b) If the Borrower exceeds the limits set forth in Paragraph 2.6(a), then additional Spec and Model Unit construction shall be excluded from the Borrowing Base. All Pre-Sold Units upon which the sales contract has been canceled due to the default of the buyer and which are available for sale, shall become designated as a Spec Unit. (c) Excluding Model Units, each individual Unit financed under the Loan shall only be included in the Borrowing Base for a period not to exceed twelve (12) months from the date construction commences. 2.7 Loan Maturity. The maturity date of the Loan is August 29, 1996. On the Loan Maturity Date, all sums outstanding under the Loan shall be immediately due and payable, and the Bank's obligation to fund shall cease and terminate. At Borrower's request and at Bank's option, the Loan may be extended annually to maintain a two (2) year term. Request for such an extension must be made after receipt by Bank of the annual audited statement of the Borrower and at least ninety (90) days prior to each anniversary date of the Note. 2.8 Future Availability Under the Construction Line. At Borrower's request and provided Borrower is not in default under the Loan, Bank shall increase the amount of the Construction Line to $12,000,000.00. ARTICLE III Criteria for Acquisition and Development Financing Bank's obligations to create Approved Projects shall be expressly conditioned upon satisfaction of the following conditions, or execution and/or delivery to Bank of the following items, all in form and substance reasonably satisfactory to Bank and Bank's counsel: 3.1 Plans and Specifications. As to the development of Land and as to each Unit type, two sets of the Plans which have been approved by Borrower. The Plans must include architectural, structural, mechanical, plumbing, electrical and site development (including storm drainage, utility lines, mitigation, erosion control and landscaping) plans and specifications, as appropriate. The Plans for Units must have been architecturally and structurally approved by prevailing authorities and agencies and the existing homeowners' associations (if applicable). The Plans for site development must incorporate the recommendations of the soil testing report. 3.2 Concurrency Approval. Documentary evidence, satisfactory to Bank and its counsel, that Borrower's development proposal for the Approved Project and the construction of the Improvements are consistent with concurrency requirements and other applicable provisions of the local comprehensive plan and local land development regulations, as defined and required by the Local Government Comprehensive Planning and Land Development Regulations Act, Florida Statutes Section 163.3161, et seq. 3.3 Zoning Evidence: Written evidence from the appropriate governmental authority that the zoning of the property is proper for its intended use. 3.4 Utilities Evidence. Written Evidence from the appropriate Water Management District and all other necessary utility providers that there is available capacity for water and sewer service to the Units as well as the availability of electric and telephone service to the proposed Units. 3.5 Plat Approval. A copy of the recorded plat or if such plat is unrecorded, a copy of the approved preliminary plat. 3.6 Soil Tests. A certificate of a qualified engineer addressed to Bank stating that any necessary soil testing has been performed and soil conditions are satisfactory for the proposed development. 3.7 Cost Breakdown. A detailed cost breakdown for all costs associated with the construction of Units (all product types) and site development. Upon receipt of the foregoing, Bank will order the appraisal (as described in Paragraph 4.24 (with respect to any new product type, an appraisal for such type must be received and approved by Bank prior to being eligible for inclusion in the Borrowing Base). 3.8 Profit Proforma. A written proforma outlining the anticipated profit associated with the intended development and construction of Units on the property. 3.9 Environmental Report. An environmental assessment of the Land and Improvements performed at Borrower's expense by a licensed engineer or other environmental consultant satisfactory to Bank stating that: (a) The Land is not located within any area designated as a hazardous substance site by any governmental authority; (b) No hazardous or toxic wastes or other materials or substances regulated, controlled, or prohibited by any federal, state, or local environmental laws, including but not limited to asbestos, are located on the Land or Improvements; and (c) The Land has not been cited or investigated in the past for any violation of any such laws, regulations, or ordinances. If the Environmental assessments shall reveal any condition unacceptable to Bank, Bank shall be relieved of any obligation to approve the project for funding under the Loan. If the environmental assessment recommends, or if Bank so requests, in its sole and absolute discretion, a Phase II audit, additional testing or remedial action, Borrower, at its sole cost and expense shall promptly conduct such additional audits and testing and/or provide evidence that all necessary actions have been taken to remove any hazardous substance contamination and/or restore the site to a condition acceptable to Bank and all governmental agencies. 3.10 Site Plan. Final site plan development must be submitted for approval to the appropriate County within ninety (90) days, approval must be received within one hundred eighty (180) days, and development must start within ninety (90) days of final site plan approval on the initial phase of such project. 3.11 General Conditions. Subsequent Approved Projects shall be subject to the following criteria for inclusion under the Borrowing Base: (a) Location. Acquisition financing of projects outside of Dade and Broward Counties may be approved by Bank on an individual basis in Bank's sole and absolute discretion. (b) Land Acquisition Costs. Land Acquisition Costs in excess of $5,400,000.00 per project shall be excluded. (c) Developed Lot Acquisition Costs. Developed lot acquisition costs in excess of $7,500,000.00 per project shall be excluded. (d) Development Costs. Development costs in excess of $6,500,000.00 per project shall be excluded. (e) Lot Costs. The costs of developed lots shall not exceed $50,000.00 per lot. (f) Sales Price. The sales price of the proposed product shall not exceed $200,000.00 per Unit. (g) Fee Simple. The product must be for sale with fee simple title. (h) Height. The single family product must not exceed two (2) stories in height however Bank will consider three (3) story products at Borrower's request. ARTICLE IV General Pre-Closing Conditions Bank's obligations to close the loan shall be expressly conditioned upon satisfaction of the following conditions, or execution and/or delivery to Bank of the following items, all in form and substance reasonably satis- factory to Bank and Bank's counsel: 4.1 Note. The original Note, properly executed, shall have been delivered to Bank. 4.2 Mortgage. The Mortgage, which shall be a first lien on the Land and Improvements, shall have been properly executed in recordable form and delivered to Bank. 4.3 Indemnity: The Hazardous Substance Certificate and Indemnifica- tion Agreement, properly executed by Borrower shall have been delivered to Bank. 4.4 Financing Statements. The Financing Statements on forms approved for filing in the appropriate state and local filing offices shall have been properly executed. 4.5 Title Policy. A standard ALTA mortgagee title policy insuring the lien of the Mortgage as a first priority lien encumbering the Land and Improvements from a company or from companies approved by Bank (including any reinsurance agreements required by Bank, together with direct access provisions in favor of Bank): (1) providing coverage for the full principal amount of the Loan, (2) providing a variable rate endorsement, if appropri- ate, the Form 9 Endorsement, the Revolving Loan Endorsement, the Survey Endorsement, and any other endorsements requested by Bank, (3) deleting all "standard" exceptions except taxes for the current year, (4) insuring all appurtenant easements, (5) containing no bankruptcy or creditors' rights exceptions or exclusions; and (6) containing no title exceptions not approved by Bank. 4.6 Title Exceptions. Copies of all documents creating exceptions to the Title Policy. 4.7 Survey/Recorded Plat. If the Land is unplatted, three copies of a recent boundary survey of the Land prepared by a registered land surveyor acceptable to Bank and certified to Bank, the title insurance company, and Borrower. Such survey shall contain a certification as to the applicable flood zone(s) for the Land, and a certification that the survey was made in accordance with the Minimum Technical Standards for Surveys as set out in Chapter 21HH-6, Florida Administrative Code. If the Land is platted, a copy of the recorded plat for the Land, together with a certification that the plat is the most recent recorded plat on record. 4.8 Flood Hazards. Evidence as to whether or not the Land is located within an area identified as having "special flood hazards" as such term is used in the federal Flood Disaster Protection Act of 1973. 4.9 Flood Hazard Insurance. If all or any part of the Improvements is or is to be located in an area having "special flood hazards", a flood insurance application or policy naming the Bank as mortgagee must be submitted to Bank. Satisfactory evidence of premium payments must also be provided. 4.10 Builder's Risk Insurance. A builder's risk insurance policy meeting the requirements set forth in the Mortgage. 4.11 Liability Insurance. Liability insurance meeting the requirements set forth in the Mortgage. 4.12 Borrower's Organizational Documents and Resolutions. A certified copy, from the appropriate governmental body or corporate officer, of organizational documents of Borrower, and any partner of Borrower, as appropriate, certifying that Borrower and/or such partner (i) is duly organized, validly existing, and in good standing under the state of its existence, (ii) has the authority under such documents and laws to enter into the Loan as contemplated by the Loan Documents, and (iii) has made all appropriate filings, including without limitation, qualification to do business in the State of Florida, necessary to enter into the Loan and execute the Loan Documents. Additionally, Borrower shall provide (i) if appropriate, certified resolutions or other internal documents or writing of Borrower and such partner evidencing that Borrower and such partner have taken all requisite organizational action, and received all organizational approvals necessary to enter into the Loan and execute the Loan Documents, and (ii) such other documents or writings as Bank may request. 4.13 Fictitious Name Certificate. If Borrower utilizes or intends to utilize a fictitious name, a copy of the Fictitious Name Certificate of the Borrower issued by the Florida Secretary of State. 4.14 Attorney's Opinion: The written opinions of counsel to Borrower addressed to Bank acceptable to Bank and Bank's counsel as to those matters required by Bank. The attorney's opinion, with respect to the enforceability of remedies provided in any instrument may be made subject to or affected by, applicable bankruptcy, moratorium, reorganization, insolvency or similar laws from time to time in effect affecting the rights of creditors generally. As to matters of fact, such opinions may be qualified to the extent of the knowledge of such counsel based upon inquiry and reasonable investigation. 4.15 Restrictive Covenants. A copy of the executed and recorded homeowners' documents, filed articles of incorporation for the homeowners' associations, executed by-laws for the associations, and any other related documents as Bank may request for the Approved Projects. 4.16 Assignment of Contracts and Plans. Assignment for the benefit of the Bank of the Engineer's and Architect's contracts and Plans. 4.17 Permits and Governmental Approvals. A copy certified by Borrower of all applicable permits required for development and completion of the Improvements, including, without limitation, all site development and building permits, and all governmental approvals received to date for the completion of the Approved Project. 4.18 Taxpayer Identification Number. Borrower's federal taxpayer identification number. 4.19 Borrower's Affidavit. An affidavit of Borrower regarding the absence of any other parties in possession of the Land, stating that a notice of commencement has not been filed with respect to the Property, the non-commencement of construction, and such other matters as may be requested by Bank. 4.20 Loan Fees. Borrower agrees to pay to Bank a commitment fee in the amount of $60,000.00 for the first year of the initial two (2) year period and agrees to pay an additional $60,000.00 loan fee on the anniversary date of the Loan. Borrower further agrees to pay to Bank an additional commitment fee in the amount of one half(.50%) of one percentage point for each one (1) year extension granted, payable at the exercise of the extension such that for every year that the Commitment is outstanding, the Bank shall receive one half (.50) of one percentage point. With respect to the Letters of Credit, Borrower agrees to pay to Bank a fee equivalent to one half (.50%) of one percent of the amount of each Letter of Credit issued under the Loan. An additional one half (.50%) of one percent shall be due and payable on each anniversary date of Letters of Credit issued under the $5,000,000.00 sublimit. 4.21 Facilities For Handicapped. Bank shall have received and approved evidence, satisfactory to Bank, that the plans and specifications do, and the improvements, when constructed, will comply to the extent applicable with all legal requirements regarding access and facilities for handicapped or disabled persons, including, without limitation, and to the extent applicable, Part V of the Florida Building Construction Standards Act entitled "Accessibility by Handicapped Persons", Chapter 553, Fla Stat.; the Federal Architectural Barriers Act of 1988 (42 U.S.C. Section 4151, et.seq.), The Fair Housing Amendment Act of 1988 (42 U.S.C. Section 3601, et.seq), The Americans With Disabilities Act of 1990 (42 U.S.C. Section 12101 et. seq.), and The Rehabilitation Act of 1973 (29 U.S.C. Section 794). 4.22 Cost Breakdown. A detailed cost breakdown for each Unit type. 4.23 Contract. The proposed contract for sale and purchase of a completed Unit, and other documents to be used by Borrower to market and convey Units in the Approved Projects. 4.24 Appraisals. Appraisals will be required with values for "as is" and "as if fully completed." A ceiling will be established for costs eligible for inclusion in the Borrowing Base on a project by project basis as follows: fifty (50%) percent of "as is" for land held for development and seventy five (75%) percent of "as if" for the combined cost of land, development and direct overhead. Master appraisals will be required at Borrower's expense for product offered for sale and a ceiling will be established for construction costs eligible for inclusion in the Borrowing Base as follows: budgeted and actual construction costs per unit cannot exceed eighty (80%) percent of appraised value less the average lot cost (such average lot cost being determined by including land, development and direct overhead costs on a per unit prorata basis). 4.25 Miscellaneous. All other Loan Documents or items that are customarily provided in loan transactions of this type and all other loan documents or items set forth in the Commitment. ARTICLE V Site Development and Construction Disbursements Bank agrees that it will, from time to time, and so long as there shall exist no Default Condition or Default, but not more frequently than weekly, disburse Loan proceeds for site development and the construction of Units in the Approved Projects, subject to the terms and conditions of this Agreement. 5.1 Request for Initial Funding for Commencement of Site Develop- ment/Construction of a Unit. When Borrower wishes to commence funding for site development or construction of a particular Unit, Borrower shall submit a draw request, accompanied by all items required in Articles IV and VI, to the extent applicable. All supporting documentation shall be submitted no later than five days prior to the requested date of the initial disbursement. No disbursement by Bank shall constitute an approval or acceptance by Bank of any construction work or constitute a waiver by Bank of any conditions precedent to any future disbursements. Bank shall not be obligated to approve any disbursement of Loan funds for purposes other than those contemplated in this Agreement. The conditions set forth in Article VI hereof must be satisfied before Bank will make the first advance or disbursement for the construction of a Unit, and the conditions set forth in Article VII hereof must be and remain satisfied before Bank will make each subsequent disbursement or advance for Unit construction or Site Development, as applicable. 5.2 Interim Draw Requests. No later than five (5) days prior to each Loan disbursement by Bank, Borrower must submit to Bank a Draw Request, which shall include or be accompanied by the requirements set out herein for draws. 5.3 Disbursement Amounts. Following receipt of a Draw Request and after Bank has verified construction in place, Bank shall determine the amount of the disbursement it will make in accordance with the Borrowing Base Availability, provided no Default Condition or Default exists. Upon request by Bank related to the site development or specific Units, Borrower will provide detailed job cost schedules reflecting costs in place and budgeted line items. 5.4 Equity Requirements. Intentionally deleted. 5.5 Option to Disburse Funds to Pay Obligor or Contractors. If a Default shall exist, at its option, Bank may make Loan disbursements directly to any obligor of the Debt when such party shall be performing the obligations of Borrower hereunder or the general contractor or any unpaid subcontractor, laborer or material supplier providing labor, services or materials in connection with the construction of the Improvements, and the execution of this Loan Agreement by Borrower shall, and hereby does, constitute an irrevocable direction and authorization to Bank to so disburse the funds. No further direction or authorization from Borrower shall be necessary to warrant such direct disbursements and all such disbursements shall be secured by the Security Documents as fully as if made to Borrower, regardless of the disposition thereof by the general contractor, any subcontractor, laborer or material supplier so paid. 5.6 Inspection Fees. The cost to Borrower for inspecting the construction work in place will be $400.00 per month for all Approved Projects. In the event the Construction component of the Borrower Base is not needed to support funding under the Loan, Bank will waive such inspection fee. 5.7 Engineer's Certification. Borrower's in-house engineer (or the president or any vice president of the Borrower) will certify each Borrowing Base report with respect to all costs incurred for site development, the actual costs of work in place and that the remaining costs to complete each project's site development are within the budgets submitted by Borrower to Bank. With respect to Pembroke Shores and any other Approved Project for which an independent engineer has been hired, Bank will be provided with copies of the site development draw requests reflecting work in place as certified by said Engineer. ARTICLE VI Conditions Precedent to First Disbursement for a Unit Bank shall not be obligated to make the first Loan disbursement for construction of a particular Unit until all of the following conditions have been satisfied by proper evidence, execution and/or delivery to Bank of the following items, all in form and substance reasonably satisfactory to Bank and Bank's counsel: 6.1 There shall be no Loan Default or Default Condition. 6.2 The Land shall be free and clear of all liens and encumbrances except for Bank's Mortgage, the Permitted Exceptions and any lien approved by Bank. 6.3 All conditions precedent as set forth in Articles IV and V, as applicable, shall have been satisfied. 6.4 Bank shall have received an appraisal for such Unit, in form and substance satisfactory to Bank, indicating its "completed value". 6.5 If the Unit is a Pre-Sold Unit, the requirements necessary for establishing a Firm Contract shall have been met. 6.6 Bank shall have received satisfactory evidence that the Unit is covered by Borrower's builder's risk insurance policy (subsequent to the installation of the tie beam but prior to truss installation); if the Unit is located in a flood hazard zone, Bank shall have received satisfactory evidence that the Unit is covered by Borrower's flood insurance policy or that application for flood insurance has been made. No advance will be made toward the construction of the Unit subsequent to the slab being poured prior to the effective date of the flood hazard insurance application or policy. 6.7 Bank shall have received a true and correct copy of the Plans for that Unit type. 6.8 Bank shall have received a copy of the Notice of Commencement recorded for that Unit under the Florida Construction Lien Act, which Notice of Commencement must have been recorded after the recording of Bank's Mortgage. 6.9 If such Unit is not already encumbered by Bank's Mortgage, a spreader agreement, spreading the lien of Bank's Mortgage to the land upon which the Unit will be constructed, and providing Bank with a first priority lien, not subject to any exceptions to title which are unacceptable to Bank. Borrower shall have obtained, at its own expense, an endorsement to Bank's title policy insuring that the lien of the Mortgage is a first priority lien encumbering the Unit without any title exceptions which have not been approved by Bank. 6.10 Bank shall have received and approved Borrower's Draw Request. 6.11 There shall not be any construction prior to Bank's receipt of a recorded Notice of Commencement with respect to that Unit and no material shall have been provided to the portion of the Land where the Unit will be located which will be used in the construction of that Unit. 6.12 Bank is satisfied that all roads necessary for ingress and egress to the Unit and the Approved Project have been completed and that all utility services necessary for the construction of the Improvements are available at the boundaries of the Land and the lot upon which the Unit will be constructed is in a condition which permits construction of a Unit on the lot. ARTICLE VII Conditions Precedent to Disbursements Following the First Disbursement 7.1 Periodic Disbursements. Bank shall not be obligated to make any Loan disbursements for site development or construction of a Unit after the first disbursement until the following requirements and conditions have been and remain satisfied as of the date of each such disbursement: (a) The real estate is free and clear of all liens and encumbrances except for the Bank's Mortgage, Permitted Exceptions and any lien approved by Bank. (b) All evidence, statements and writings required to be furnished under the terms of this Agreement are true and omit no material fact, the omission of which may make them misleading. (c) All monies previously advanced have been used solely to pay for financing, labor, materials and fixtures used or to be used in the site development or construction of Improvements. (d) No mechanic's or materialmen's lien or other encumbrance shall have been filed and remain in effect against the Land or Improvements. (f) No Event of Default, as herein defined, shall have occurred. (g) The building permits for the site development and Improvements have been issued and are posted at the respective construction sites. (h) The representations and warranties made in the Loan Documents must be true and correct on and as of the date of each advance. (i) As to Unit Construction, as a condition to further disburse- ments after a Unit's foundation has been completed, Borrower shall deliver to Bank a foundation survey consistent with the requirements set forth in Section 4.8 hereof, in form and substance satisfactory to Bank. 7.2 Limitations on Disbursements. If any of the above conditions are not satisfied, as determined by Bank, in its sole discretion, Bank shall not be obligated to disburse any Loan proceeds. In addition to the foregoing requirements, Bank reserves the right to require the Borrower to furnish prior to each disbursement at Borrower's expense: (a) a waiver of lien or release of lien from any contractor, subcontractor, supplier, laborer or other lienor who has furnished labor, materials, or other services for construction of the Improvements or who has issued a Notice to Owner or filed a claim of lien; (b) a certificate from the Architect, Engineer, or Bank's inspector, certifying that the Improvements have been completed to date in accordance with the plans and specifications or have been substantially completed in accordance with the plans and specifica- tions; (c) an as-built survey; (d) any permits, certificate of occupancy, licenses, or other evidence of compliance with applicable laws and building codes; (e) an endorsement to Bank's title policy or other form of title update satisfactory to Bank evidencing that the Mortgage continues to be a first lien on the Property and that no intervening liens or other encumbrances not consented to by Bank have been filed against the Property since the recordation of the Mortgage; (f) affidavit of the Borrower that each person or entity supplying materials or performing labor or services in connection with the Improvements has been paid in full; (g) such other items as may be required by the Bank in its discretion. 7.3 Requirements for Disbursement at Unit Completion. At Bank's request, prior to the final disbursement for a Unit, Borrower shall provide the following items: (a) The unconditional certificate of occupancy or final certifi- cate of inspection by appropriate Governmental Authority for the Unit has been delivered to Bank; (b) The General Contractor's final waivers and releases of lien made by parties satisfactory to Bank shall have been delivered to Bank. (c) Three (3) copies of an "as-built" survey prepared by a registered surveyor consistent the survey requirements set forth in this Agreement and additionally detailing all of the Improvements in place. (d) Two (2) sets of detailed as-built Plans approved and identified as such in writing by Borrower, the Architect and the General Contractor. The two sets must include the Plans for all architectural, structural, mechanical, plumbing and electrical work. 7.4 Requirements for Disbursement at Site Development Completion. At Bank's request, prior to the final disbursement for site development of an Approved Project or Subsequently Approved Project, Borrower shall provide the following items: (a) Proof that the site development has been completed in accordance with the Plans and Bank has received an inspection report performed by the Construction Inspector in substance satisfactory to Bank and Construction Inspector's written approval of the final Draw Request. (b) Certificates of completion issued in satisfactory form to Bank by the Engineer and the General Contractor including the AIA G704 Certificate of Substantial Completion. (c) The General Contractor's final waivers and releases of lien made by parties satisfactory to Bank shall have been delivered to Bank. (d) Three (3) copies of an "as-built" survey prepared by a registered surveyor consistent the survey requirements set forth in this Agreement and additionally detailing all of the Improvements in place. (e) Two (2) sets of detailed as-built Plans approved and identified as such in writing by Borrower, the Engineer and the General Contractor. The two sets must include the Plans for all site development (including without limitation, mitigation, storm drainage, utility lines and landscaping) work. ARTICLE VIII The Borrower's Covenants and Agreements 8.1 Payment and Performance. Borrower will pay when due all sums owing to Bank under the Note, this Loan Agreement, the Mortgage and the other Loan Documents, and perform all obligations as outlined or referenced therein. 8.2 Further Assurances. On demand by Bank, Borrower will do any act and execute any additional documents reasonably required by Bank to secure the Loan, to confirm or perfect the lien of the Security Documents, including, but not limited to, additional financing statements or continua- tion statements, new or replacement notes and/or Security Documents and agreements supplementing, extending or otherwise modifying the Loan Docu- ments, certificates as to the amount of the indebtedness evidenced by the Note from time to time, and certificates that Borrower knows of no defaults by or defenses or set-offs against Bank. 8.3 Construction. The Borrower will: (a) continue conscien- tiously the construction of the Improvements; (b) not discontinue or permit the discontinuance of work on the Improvements unless delayed by the event of unavailability of materials at reasonable cost, strikes, other labor problems, governmental orders or other events which would support a defense by Borrower based upon impossibility of performance for reasons beyond the control of Borrower; (c) in any event, complete the Improvements, including installation of any required items of personalty in substantial compliance with the Plans, free and clear of liens or claims of liens for material supplied or for labor or services performed in connection with the construc- tion of the Improvements; and (d) not file, prior to the recording of the Mortgage, a Notice of Commencement (not previously terminated or agreed to by Bank) for any Approved Project. 8.4 Payment of Contractors. Borrower covenants to advise Bank immediately, and in writing if Borrower receives any claim of lien in connection with any services, labor or materials furnished in connection with the construction of Units, and to remove such liens within ten (10) days of the date of filing. Borrower shall comply with the Construction Contract Prompt Payment Law contained in the Florida Construction Lien Law, Chapter 713, Fla. Stat. 8.5 Fees and Expenses. Whether or not the Loan is made or all Loan proceeds disbursed hereunder, Borrower agrees to pay all expenses incurred by Bank, or by Borrower in order to meet Bank's requirements, in connection with the Loan, including without limitation, commitment and renewal fees or deposits to Bank, fees for appraisal, reappraisal, survey, recording, title insurance, builder's risk and other insurance premiums, brokerage commissions and claims of brokerage, property taxes, intangible taxes, documentary stamp taxes, architect's fees, engineer's fees, inspection fees, the General Contractor's fees, and such legal fees and costs incurred by Bank in connection with the making and administration of the Loan, the enforcement of Bank's rights under the Loan Documents, the renewal, modification, or extension of the Loan, or in connection with litigation or threatened litigation by a third party which arises because Bank made the Loan. Any such amounts paid by Bank shall constitute part of the indebtedness which is secured by the Security Documents, and shall be due and payable upon demand. 8.6 Insurance. Borrower covenants to maintain insurance as required herein and in the Mortgage. 8.7 Taxes and Insurance. Upon the request of Bank, Borrower shall submit to Bank such receipts and other statements which shall evidence, to the satisfaction of Bank, that all taxes, assessments and insurance premiums have been paid in full. 8.8 Title Policy. When requested by Bank during the Loan term, Borrower shall provide an endorsement to the Title Policy certifying that (a) real estate taxes due through such date have been paid; (b) no additional restrictions or encumbrances are of record which have not been approved by Bank; and (c) no liens or lis pendens have been filed against the Land or the Improvements. In the event that periodic title endorsements are not required to be issued in connection with the title insurance, Borrower agrees to cause title endorsements to be issued as reasonably required by Bank. When requested, after the final disbursement of Loan proceeds, Borrower will provide Bank with an endorsement to the Title Policy insuring the principal balance of the Loan and containing no exceptions not approved by Bank. 8.9 Additional Construction. Borrower shall not construct or permit the construction of any improvements on the Approved Projects other than those Improvements described in the Plans, or approved in writing by Bank. 8.10 Reporting Requirements. During the term of the Loan Borrower shall submit to Bank the following: (a) Monthly, within twenty (20) days of the end of each month, a Borrowing Base Certificate executed by Borrower certifying the value of the eligible assets in form and content acceptable to Bank. (b) Monthly, within twenty (20) days of the end of each month, internally prepared financial statement of the Borrower, including a balance sheet and income statement. (c) Monthly, within twenty (20) days of the end of each month, inventory status reports for all active projects, reflecting the number of units sold, closed and under construction, along with a current price list as set forth in the Borrowing Base Schedule "C" attached hereto as Exhibit "4". (d) Annually, within one hundred twenty (120) days of year end, by April 30, Borrower will provide Bank with current audited financial statements and such audit shall include verification of Borrowing Base asset allocations. 8.11 Appraisals. In addition to the appraisals required by Bank in connection with the disbursement of Loan proceeds for the development of lots and construction of Units, updated appraisals shall be prepared at Borrower's expense when requested by Bank or when required in connection with any extension options in the Note. Such appraisals shall be prepared in accordance with written instructions from Bank and by a professional appraiser selected and engaged by Bank. Borrower shall cooperate fully with the appraisal process and shall allow the appraisers reasonable access to the Approved Projects. 8.12 Hazardous Substances. Borrower affirms and incorporates by reference the representations, warranties, terms, conditions, and indemnities contained in that certain Hazardous Substance Certificate and Indemnification Agreement of even date herewith. 8.13 Leases Affecting Approved Project. Borrower shall not, without the express prior written consent of Bank, enter into any lease affecting the Approved Project or any part thereof. 8.14 Assignment of Contracts. As additional security for the Loan and for the performance by Borrower of all of its obligations hereunder, Borrower hereby assigns to Bank all of Borrower's interest in any and all contracts, agreements, permits, licenses, approvals, or other documents or writings relating to the construction, leasing, management or operation of the Improvements, including but not limited to the Construction Documents, the Architect's contract, the Engineer's contract, and the Plans. This assignment shall not, however, be deemed to impose upon Bank any of Borrower's obligations under any such contract. Incident to the assignment of the Construction Documents, the Architect's contract, the Engineer's contract, and the Plans, Borrower will fulfill the obligations of Borrower thereunder, enforce the performance thereof and give immediate notice to Bank of any default by the Architect, the Engineer, or the General Contractor thereunder. Further, Borrower will not, without the prior written consent of Bank (i) materially modify, or amend the terms of the Architect's contract, the Plans, Engineer's contract, or the Construction Documents; or (ii) waive or release the performance of any material obligation to be performed by the Architect, the Engineer, or the General Contractor thereunder. 8.15 Subordinate Financing. Borrower shall not permit there to exist nor shall Borrower obtain any subordinate financing of the Land or any other property granted as security for the Loan. 8.16 Transfer of Property of Borrower. The Borrower shall not permit any change in its ownership, its corporate or trade name, the nature and operation of its business or the nature and character of the Borrower or the Approved Projects, nor shall the Borrower sell, assign, transfer, hypothecate or dispose of all or any portion of the Land, Improvements, or the Approved Projects, except as may be permitted hereby, without the prior written consent of Bank, which consent shall be withheld or granted in Bank's sole and absolute discretion. 8.17 Partial Releases of Property. Provided the Borrower is not then in Default hereunder, under the Note, the Mortgage or any other Loan Document, Bank will provide partial releases in respect of its interest under the Mortgage and other Loan Documents (i) as to any Unit being conveyed to a single purchaser, for no additional release price and (ii) as to land, lots or more than one unit being conveyed to a single purchaser for a release price acceptable to Bank but at an amount not to exceed the eligible amount for funding for such property shown on the most recent Borrowing Base Certificate. Payments made for releases shall be applied by Bank against the outstanding principal of the Loan unless the release payment is calculated to take into account allocable interest or other constituent costs or accruals, in which event Bank may apply the release payment in accord with such calculations. Borrower agrees to reimburse Bank for all out-of-pocket fees and costs, including, without limitation, legal fees, in connection with the granting of such partial releases and shall provide Bank with any and all information requested by Bank with respect to the Unit to be released. 8.18 Disclosure of Contracts and Notices. Borrower shall disclose to Bank upon demand, the names of all persons with whom Borrower has contracted or intends to contract for any construction or for the furnishing of labor or materials therefor, and when required by Bank obtain the approval by Bank of all such persons. Borrower shall, at all times during the construction period of any Improvements, provide to the Bank, within 10 days of the Borrower's receipt thereof, copies of all notices to owner, claims of lien, and demands for sworn statement of account, issued by any party, whether pursuant to any notice of commencement or otherwise, in connection with the Approved Projects or the Land. 8.19 Construction Lien Law Notification Requirements: Borrower hereby authorizes Bank to provide written notices to Contractor and lienors providing notices to owner pursuant to Section 713.3471(1)(a), Fla. Stat., and Section 713.3471(2)(b), Fla. Stat., to the extent such notices are required by law. Borrower hereby releases Bank and waives all claims it may have against Bank for damages Borrower may incur as a result of Bank's failure to deliver said notices. Borrower hereby agrees to provide all required notices to the Contractor and all lienors providing notices to owner in compliance with Section 713.3471(2)(a), Fla. Stat., in a timely fashion. 8.20 Amendments to Cost Breakdown. If Borrower amends the Cost Breakdown or reallocate items in the Cost Breakdown such that written notice to the Contractor and lienors serving notices to owner would be required under Section 713.3471(2)(a), Fla. Stat. (1992), Borrower agrees to provide written notice to the Contractor and all required lienors in compliance with Section 713.3471(2)(a), Fla. Stat. Lender shall not be obligated to make any disbursements of Loan proceeds until Borrower has provided Lender with copies of any required notices to the Contractor and required lienors in compliance with Section 713.3471(2)(a), Fla. Stat., together with evidence that such notices have been countersigned by the Contractor and all lienors who are required to receive the notice under Section 713.3471(2)(a), Fla. Stat., thereby confirming receipt thereof. 8.21 Americans With Disabilities Act: Borrower covenants and agrees that, during the term of the Loan, to the extent such Act is applicable, the Improvements and Approved Projects will be in full compliance with the Americans with Disabilities Act ("ADA") of July 26, 1990, 42 U.S.C Section 12191, et. seq.) as amended from time to time, and the regulations promulgated pursuant thereto. Borrower shall be solely responsible for all ADA compliance costs, including without limitation, attorneys' fees and litigation costs, which responsibility shall survive the repayment of the Loan and foreclosure of the Land and Improvements. 8.22 Regulation "Z". The Loan is exempt from the provisions of the Federal Consumers Credit Protection Act (Truth-in-Lending Act) and Regulation "Z" of the Board of Governors of the Federal Reserve System, because Borrower is a person fully excluded therefrom, and/or because the Loan is only for business or commercial purposes of Borrower and the proceeds of the Loan are not being used for personal, household, family or agricultural purposes. 8.23 Financial Covenants. Borrower at all times maintain its financial condition as follows using generally accepted accounting principles consistently applied, except to the extent modified by the following definitions: (a) Minimum Tangible Net Worth: Borrower's "Tangible Net Worth", as defined as the aggregate of total shareholders' equity less any intangible assets and any obligations due from shareholders, partners, employees, and/or affiliates, shall not at any time be less than $21,000,000.00. (b) Ratio of Total Debt to Tangible Net Worth: The "Ratio of Borrower's Total Debt to Tangible Net Worth", defined as the aggregate of current liabilities and non-current liabilities (excluding contingent liabilities) divided by Tangible Net Worth, shall not at any time exceed one (1) to one (1). Borrower's investments in subsidiaries, affiliates and joint ventures will be excluded from the Borrower Base and will be deducted from Tangible Net Worth in calculating Debt/Tangible Net Worth coverage and Minimum Tangible Net Worth ratios. (c) Minimum Liquidity. Borrower's "Minimum Liquidity" as measured by unrestricted cash, defined as all available cash excluding any escrowed or pledged cash, shall not at any time be less than $1,000,000.00. (d) Losses. No losses in excess of $1,000,000.00 shall be incurred on an annual basis. (e) Dividends. Borrower's dividends shall be limited to seventy (70%) percent of the year end Net Profit. (f) Additional Debt. No additional debt shall be incurred, excluding Shareholder Debt which must be unsecured if present. For purposes of this Section 7.24, "Related Parties" shall mean the partners or shareholders of Borrower, or any corporations, trusts, partnership, or other entities in which Borrower owns directly, or indirectly, a fifty one (51%) percent interest. 8.24 Indemnifications. In connection with the making of the Loan, Borrower shall indemnify and hold Bank and its directors, officers, agents, employees and attorneys harmless from all liability, loss, expense or damage of any kind or nature, including, without limitation, any suits, proceedings, claims, demands, or damages (including attorneys' fees and costs paid or incurred in connection therewith at both trial and appellate levels), incurred or arising by reason of: (a) the Commitment or the making of the Loan (except for liability, loss, expense, or damage arising from the negligent or willful misconduct of Bank); (b) Any claim or action for the payment of any brokerage commissions or fees which may be claimed to be payable in connection with the Commitment; and (c) the past, present or future handling, storage, transportation, or disposal of hazardous substances upon the Property. These indemnification shall survive the full payment and performance of the obligations of the Borrower under the Loan Documents. 8.24 Lien Waivers. Prior to each Loan disbursement, at Bank's request, Borrower shall provide lien waivers for any contractors, subcontractor, or suppliers who have filed a Notice to Owner for work being performed or materials being supplied on the Approved Projects. ARTICLE IX Representations and Warranties 9.1 Representations and Warranties. Borrower hereby represents and warrants to Bank that: (a) Representations and Warranties in Mortgage. All of the representations and warranties contained in the Mortgage are true and correct and are incorporated herein by reference as if set out in full. (b) Other Financing. The Borrower has not (i) received any other financing for the acquisition of the Land existing as of the date hereof for which a lien equal to or superior to Bank's mortgage could be successfully asserted, or (ii) received any other financing for the construction of the Improvements. (c) Plans. The Plans have been approved by the Borrower, the Guarantors, and each appropriate Governmental Authority. (d) Governmental Requirements and Other Requirements. Borrower will cause the Units to be constructed in accordance with the Plans submitted to and approved by Bank, and when so constructed the Land and the Units do and shall comply with all covenants, conditions and restrictions affecting the Land or any portion thereof, and do and shall comply with all Governmental Requirements. (e) Use of the Approved Projects. There is no (i) plan, study or effort by any Governmental Authority or any nongovernmental person or agency which may adversely affect the current or planned use of the Approved Projects, or (ii) any intended or proposed Governmental Requirement (including, but not limited to, zoning changes) which may adversely affect the current or planned use of the Approved Projects. (f) Moratorium. There is no moratorium or like governmental order or restriction now in effect with respect to the Approved Projects and, to the best of Borrower's knowledge, no moratorium or similar ordinance or restriction is now contemplated. (g) Permits. All permits, approvals and consents of Governmental Authorities and public and private utilities having jurisdiction necessary in connection with the Approved Projects have been issued and are in good standing. (h) Condition of Approved Projects. No defect or condition of the Land or the soil or geology thereof exists which will impair the construction, use, or the operation of the Approved Projects for their intended purpose. (i) Labor and Materials. All labor and materials contracted for in connection with the construction of the Improvements shall be used and employed solely on the Land in said construction and only in accordance with the Plans. (j) Surveys. The Survey, the recorded plat for the Land, and all plot plans and other documents heretofore furnished by the Borrower to Bank with respect to Land and Improvements are accurate and complete as of their respective dates. There are no encroachments onto the Land and no improve- ments on the Land encroach onto any adjoining property. (k) Construction Costs. The Costs supplied to Bank are accurate, true and correct and are satisfactory to Borrower. (l) Sale of Securities. The Borrower has not instituted, caused to be instituted or been a party to and, to the best of Borrower's knowledge, there has not been any public offering with respect to the Land and Improvements, or either, within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. (m) Construction Lien Law. At the time of Closing and at the time of the recording of the Mortgage, no work has been done on Improvements or on the Approved Projects by the Borrower or anyone else acting for, or on behalf of the Borrower, and no materials have been placed on the Property by any materialmen or by anyone else which has not been paid current by the Borrower. No Notice of Commencement (not previously terminated or agreed to by Bank) has been recorded in the Public Records with respect to the Approved Projects or the Land at the time of Closing. Borrower shall not permit the commencement of any excavation or construction work of any nature whatsoever, nor the delivery of any materials to the Approved Projects or the Land, prior to the recordation and posting of a Notice of Commencement as hereinafter set forth. Borrower shall execute an appropriate Notice of Commencement and cause the same to be recorded in the public records of the county in which the Property is located in sequence after the recording of the Mortgage. Borrower shall post a certified copy of the Notice of Commencement on the Approved Projects, in strict conformity with the Florida Construction Lien Law. If construction is commenced prior to the recordation and posting of the Notice of Commencement, or the Notice of Commencement is recorded prior to the Mortgage, Bank shall have the absolute right to cancel this Agreement and be immediately reimbursed by Borrower for all disbursements of loan proceeds, together with expenses and reasonable attorneys' fees incurred in connection therewith. Construction shall commence within 90 days after recordation of the Notice of Commencement. Construction shall proceed continuously in a workmanlike manner. Bank reserves the right to require Borrower to furnish an itemized cost breakdown for the Improvements to be constructed. (n) Representations and Warranties in Other Loan Documents. All of the representations and warranties contained in the other Loan Documents are true and correct. 9.2 Reliance on Representations. The Borrower acknowledges that Bank has relied upon the Borrower's representations and is not charged with any knowledge contrary thereto that may be received by an examination of the public records wherein the Land is located or that may have been received by any officer, director, agent, employee or shareholder of Bank. 9.3 Certificate Regarding Loan Status. Upon Bank's request, Borrower shall provide Bank with a written certification, certifying to such matters related to the Loan as Bank may request, including, but not limited to, a statement that Borrower is not in Default and that no Default Conditions have occurred. ARTICLE X Events of Default 10.1 Default. The occurrence of any one or more of the following events (time being of the essence as to this Loan Agreement and all of its provisions) constitutes a "Default" by Borrower under this Loan Agreement, and at the option of Bank, under the other Loan Documents: (a) Scheduled Payment. Borrower's failure to make any payment required under the Note when due. Notwithstanding the foregoing, Borrower shall have a ten (10) day grace period as to the payment of interest and other charges. (b) Monetary Default. Borrower's failure to make any other payment required by this Loan Agreement or the other Loan Documents when due. (c) Other. Borrower's failure to perform any other obligation imposed upon Borrower by this Loan Agreement or any other Loan Document within 30 days after written notice from Bank. This provision shall not be construed to provide Borrower with any grace period in complying with any obligations imposed on Borrower by the terms of the Loan Documents. (d) Representation. Any representation or warranty of Borrower contained in this Loan Agreement or in any certificate delivered pursuant hereto, or in any other instrument or statement furnished in connection herewith, proves to be incorrect or misleading in any adverse respect as of the time when the same shall have been made, including, without limitation, any and all financial statements, operating statements, and schedules attached thereto, furnished by Borrower to Bank or pursuant to any provision of this Loan Agreement. (e) Bankruptcy. Borrower (i) files a voluntary petition in bankruptcy or a petition or answer seeking or acquiescing in any reorganiza- tion or for an arrangement, composition, readjustment, liquidation, dissolution, or similar relief for itself pursuant to the United State Bankruptcy Code or any similar law or regulation, federal or state, relating to any relief for debtors, now or hereafter in effect; or (ii) makes an assignment for the benefit of creditors or admits in writing its inability to pay or fails to pay its debts as they become due; or (iii) suspends payment of its obligations or takes any action in furtherance of the foregoing; or (iv) consents to or acquiesces in the appointment of a receiver, trustee, custodian, conservator, liquidator or other similar official of Borrower, a general partner of Borrower for all or any part of the Collateral or other assets of such party, or either; or (v) has filed against it an involuntary petition, arrangement, composition, readjustment, liquidation, dissolution, or an answer proposing an adjudication of it as a bankrupt or insolvent, or is subject to reorganization pursuant to the United States Bankruptcy Code, an action seeking to appoint a trustee, receiver, custodian, or conservator or liquidator, or any similar law, federal or state, now or hereinafter in effect, and such action is approved by any court of competent jurisdiction and the order approving the same shall not be vacated or stayed within sixty (60) days from entry; or (vi) consents to the filing of any such petition or answer, or shall fail to deny the material allegations of the same in a timely manner. (f) Judgments. (1) A final judgment other than a final judgment in connection with any condemnation is entered against Borrower, that (i) adversely affects the value, use or operation of the Land or the Improvements in Bank's sole judgment, or (ii) adversely affects, or may adversely affect, the validity, enforceability or priority of the lien or security interest created by the Mortgage or any other Loan Document in Bank's sole judgment, or both; or (2) execution or other final process issues thereon with respect to the Land or the Improvements; and (3) Borrower does not discharge the same or provide for its discharge in accordance with its terms, or procure a stay of execution thereon, in any event within thirty (30) days from entry, or Borrower shall not, within such period or such longer period during which execution on such judgment shall have been entered, and cause its execution to be stayed during such appeal, or if on appeal such order, decree or process shall be affirmed and Borrower shall not discharge such judgment or provide for its discharge in accordance with its terms within sixty (60) days after the entry of such order or decree or affirmance, or if any stay of execution on appeal is released or otherwise discharged. (g) Liens. Any federal, state or local tax lien or any claim of lien for labor or materials or any other lien or encumbrance of any nature whatsoever is recorded against Borrower or the Land or Improvements and is not removed by payment or transferred to substitute security in the manner provided by law, within ten (10) days after it is recorded in accordance with applicable law. (h) Other Notes or Mortgages. Borrower's default in the performance or payment of Borrower's obligations under any other note, or under any other mortgage encumbering all or any part of the Land or the Improvements, if the other mortgage is permitted by the Bank, whether such other note or mortgage is held by Bank or by any other party. (i) Borrower Default Under Loan Documents. Borrower's default in the payment or performance of any of Borrower obligations under any of the Loan Documents, including this Loan Agreement and any riders thereto. (j) Borrower's Actions. Any action by Borrower which would, in the opinion of Bank, significantly endanger the security of the Loan will render the Loan payable on demand. (k) Borrower's Continued Existence. Borrower shall cease to exist or to be qualified to do or transact business in the State in which the Land and Improvements are located, or shall be dissolved or shall be a party to a merger or consolidation, or shall sell all or substantially all of its assets, or shall change its corporate name or trade name without prior written notice to Bank. (l) Stock in Borrower. Without the prior written consent of Bank, any shares of stock of Borrower are issued, sold, transferred, conveyed, assigned, mortgaged, pledged, or otherwise disposed of so as to result in change of control of Borrower, whether voluntarily or by operation of law, and whether with or without consideration, or any agreement for any of the foregoing is entered into. (m) Transfer of Property or Ownership. Any sale, conveyance, transfer, assignment, or other disposition or encumbrance of all or any part of the Land, Improvements, or the Approved Projects, or any ownership interest in Borrower or any guarantor without the prior consent of Bank or except as otherwise permitted hereby. (n) False Statement. Any statement or representation of Borrower contained in the loan application or any financial statements or other materials furnished to Bank or any other lender prior or subsequent to the making of the Loan secured hereby are discovered to have been false or incorrect or incomplete. (o) Default Under Indemnity. Borrower or any guarantor shall default under any obligation imposed by any indemnity whether contained within any of the Loan Documents, the Hazardous Waste Certification and Indemnification, or otherwise. (p) Cross Default. Any default by the Borrower under any other documents or instruments evidencing any other loans by Bank to Borrower or in any mortgages or other collateral documents securing such loans. (q) Non-Compliance with the Plans and Specifications. Failure of any of the materials supplied for the construction of the Units to comply with the Plans and Specifications or any requirements of any Governmental Authority unless the Borrower undertakes and diligently pursues the correction of such failure. (r) Projected Completion of Construction. Failure to construct the Improvements with reasonable dispatch, or the discontinuance of construction unless delayed by the event of unavailability of materials at reasonable cost, strikes, other labor problems, governmental orders or other events which would support a defense by Borrower based upon impossibility of performance for reasons beyond the control of Borrower, or determination by Bank that construction of the Improvements will not be timely completed and Borrower's failure to complete, cure or provide satisfactory assurances after notice or demand from Bank. (s) Non-Payment of Debts. Borrower is generally not paying its debts as such debts become due. (t) Securities Laws Violation. The assertion of any violation of the 1933 Securities Act, 1934 Securities Act or the Florida Blue Sky Laws by any Governmental Authorities or the institution of any securities litigation not dismissed within sixty (60) days of the commencement of same. (u) Non-Compliance with Homeowner Association Documents. Borrower shall fail to perform any duty required of it, fulfill any condition, abide by any covenant or in any manner default under the homeowners' association documents encumbering the Approved Projects, if any. (v) Adverse Actions. Any legal or equitable action is commenced against Borrower which, if adversely determined, could reasonably be expected to impair substantially the ability of Borrower to perform each and every obligation under the Loan Documents and this Agreement. (w) Government Challenges. The validity of any permit, approval or consent by any Governmental Authority relating to the Land, the Improve- ments, or the Approved Projects, or the operation thereof is challenged by a proceeding before a board, commission, agency, court or other authority having jurisdiction. (x) Letters of Credit. A Letter of Credit issued by Bank is drawn upon by the beneficiary of such instrument and Borrower, after notice from Bank, has not repaid Bank for the amount of the disbursement under such Letter of Credit within two (2) business days. During the two (2) business day period or until the amount disbursed is repaid to Bank, whichever is earlier, Bank shall suspend any disbursements to Borrower under the Loan. (y) Miscellaneous. If at any time the Bank shall determine that there has been a material adverse change in the financial condition or prospects of Borrower, which is not corrected or cured after reasonable notice from Bank. ARTICLE XI Bank's Rights and Remedies The following rights and remedies are available to Bank: 11.1 Acceleration. Upon the occurrence of a Default, the entire unpaid principal balance of the Loan and all accrued but unpaid interest thereon and any costs or expenses then due to Bank and any and all other obligations of Borrower to Bank, shall, at the option of Bank and without notice to Borrower, become immediately due and payable. 11.2 Completion of Construction. From and after the occurrence of a Default, Bank shall be entitled to have and use the Plans and the Construction Documents and, after first having given written notice to the Architect, the Engineer, or the General Contractor, shall be entitled from and after such notice to enjoy and enforce all of the rights of Borrower under the Architect's contract, Engineer's contract, the Plans or the Construction Contracts. Borrower hereby irrevocably constitutes and appoints Bank its true and lawful attorney-in-fact with full power of substitution in the Approved Projects to complete the Improvements in the name of Borrower. Borrower hereby empowers Bank as it attorney-in-fact as follows: (a) to use any funds of Borrower, including any Loan proceeds or equity deposits which may remain undisbursed hereunder, for the purpose of completing the Improvements in accordance with the Plans; (b) to make such additions, changes, modifications, or corrections in, or deviations from, the Plans as shall be necessary or desirable to complete the Improvements; (c) to employ such contractors, subcontractors, agents, architects, engineers, inspectors, or other parties as shall be required for said purposes; (d) to pay, settle, or compromise all existing bills and claims which may be liens against the Improvements or as may be necessary or desirable in the sole discretion of Bank for the completion of the Improvements or for clearance of title; (e) to direct use of and/or use all or any part of the labor, materials, supplies and equipment contracted for, owned by, or under the control of Borrower, whether or not previously incorporated into the Improvements; (f) to execute all applications and certificates in the name of Borrower which may be required by the Construction Documents, the Architect's contract, the Engineer's contract, Plans, or any of the contract documents; (g) to prosecute and defend all actions or proceedings in connection with the Approved Project or the construction of the Improvements and take such action and require such performance as Bank shall deem necessary under any performance or payment bond; and (h) to do any and every act with respect to construction or completion of the Improvements or the closing of any permanent financing which Borrower might do in its own behalf including, without limitation, execution, acknowledgment, and delivery of all instruments, documents, and papers in the name of Borrower as may be necessary or desirable in the sole discretion of Bank. It is further understood and agreed that this power of attorney which shall be deemed to be a power coupled with an interest, cannot be revoked. All sums expended by Bank pursuant hereto shall be deemed to have been disbursed to Borrower and secured by the Security Docu- ments, and the other Loan Documents. 11.3 Disputes. Where disputes have arisen which, in the opinion of Bank, may endanger timely completion of the Improvements or fulfillment of any condition or covenant herein, Bank may agree to disburse Loan proceeds for the account of Borrower without prejudice to Borrower's rights, if any, to recover said proceeds from the party to whom paid. Such agreement or agreements may take the form which Bank in its discretion deems proper, including, but without limiting the generality of the foregoing, agreements to indemnify (on behalf of Borrower and/or for Bank's own account) any title insurer against possible assertion of lien claims, agree- ments to pay disputed amounts and the like. All sums paid or agreed to be paid pursuant to such undertaking shall be advances of Loan proceeds. 11.4 Remedies Cumulative; Nonwaiver. All remedies of Bank provided for herein or in the other Loan Documents are cumulative and shall be in addition to any and all other rights and remedies provided for or available under the other Loan Documents, at law or in equity. The exercise of any right or remedy by Bank hereunder shall not in any way constitute a cure or waiver of a Default Condition or a Default hereunder or under the Loan Documents, or invalidate any act done pursuant to any notice of the occurrence of a Default Condition or Default, or prejudice Bank in the exercise of any of its rights hereunder or under any of the other Loan Docu- ments, unless, in the exercise of said rights, Bank realizes all amounts owed to it under the Loan Documents. 11.5 No Liability of Bank. Whether or not Bank elects to employ any or all remedies available to it in the event of an occurrence of a Default Condition or Default, Bank shall not be liable for the construction of or failure to construct or complete or protect the Improvements or for payment of any expense incurred in connection with the exercise or any remedy available to Bank or for the construction or Completion of the Improvements or for the performance or nonperformance of any other obligation of Borrower. 11.6 Security Interest. It is understood and agreed that Bank shall have and enjoy and is hereby granted a lien on, and a security interest in, all collateral described in the Mortgage, and including without limitation, any and all materials (stored on-site or off-site), reserves, deferred payments, deposits or advance payments for materials (stored on- site or off-site) undisbursed Loan proceeds, insurance refunds, impound accounts, refunds for overpayment of any kind, and such lien and security interest shall constitute additional security for the Indebtedness of Borrower to Bank, and Bank shall have and possess any and all rights and remedies of a secured party provided by law with respect to enforcement of and recovery on its security interest on such items and amounts. In the event of a conflict between this paragraph and any security interest granted pursuant to the Mortgage, the Mortgage shall control. 11.7 Cessation of Funding. Upon the occurrence of a Default, Bank shall have the right to immediately terminate further funding of site development and construction of all Units then under construction irrespec- tive of the stage of completion. ARTICLE XII General Conditions The following conditions shall be applicable throughout the term of this Loan Agreement: 12.1 Waivers. No waiver of any Default Condition or Default or breach by Borrower hereunder shall be implied from any delay or omission by Bank to take action on account of such Default Condition or Default, and no express waiver shall affect any Default Condition or Default other than the Default specified in the waiver and it shall be operative only for the time and to the extent therein stated. Waivers of any covenants, terms or conditions contained herein must be in writing and shall not be construed as a waiver of any subsequent breach of the same covenant, term or condition. The consent or approval by Bank to or of any act by Borrower requiring further consent or approval shall not be deemed to waive or render unneces- sary the consent or approval to or of any subsequent or similar act. No single or partial exercise of any right or remedy of Bank hereunder shall preclude any further exercise thereof or the exercise of any other or different right or remedy. 12.2 Benefit. This Loan Agreement is made and entered into for the sole protection and benefit of Bank and Borrower, their successors and assigns, and no other person or persons have any right to action hereon or rights to the Loan all proceeds at any time, nor shall Bank owe any duty whatsoever to any claimant for labor or services performed or material furnished in connection with the Approved Projects, or to apply any undis- bursed portion of the Loan to the payment of any such claim, or to exercise any right or power of Bank hereunder or arising from any Default Condition or Default by Borrower. 12.3 Assignment. The terms hereof shall be binding upon and inure to the benefit of the heirs, successors, assigns, and personal representa- tives of the parties hereto; provided, however, that Borrower shall not assign this Loan Agreement or any of its rights, interests, duties or obligations hereunder or any Loan proceeds or other moneys to be advanced hereunder in whole or in part without the prior written consent of Bank and that any such assignment (whether voluntary or by operation of law) without said consent shall be void. It is expressly recognized and agreed that Bank may assign this Loan Agreement, the Note, the Security Documents, and any other Loan Documents, in whole or in part, to any other person, firm, or legal entity provided that all of the provisions hereof shall continue in full force and effect and, in the event of such assignment, Bank shall thereafter be relieved of all liability under the Loan Documents and any Loan disbursements made by any assignee shall be deemed made in pursuant and not in modification hereof and shall be evidenced by the Note and secured by the Security Documents and any other Loan Documents. 12.4 Amendments. This Loan Agreement shall not be amended except by a written instrument signed by all parties hereto. 12.5 Terms. Whenever the context and construction so require, all words used in the singular number herein shall be deemed to have been used in the plural, and vice versa, and the masculine gender shall include the feminine and neuter and the neuter shall include the masculine and feminine. 12.6 Governing Law and Jurisdiction. This Loan Agreement and the other Loan Documents and all matters relating thereto shall be governed by and construed and interpreted in accordance with the laws of the State of Florida. Borrower hereby submits to the jurisdiction of the state and federal courts located in Florida and agree that Bank may, at its option, enforce its rights under the Loan Documents in such courts. 12.7 Publicity. At Bank's request and expense, and subject to applicable laws, regulations and restrictions, Borrower shall place upon the Approved Projects, at a location mutually acceptable to Borrower and Bank, a sign or signs advertising the fact that financing is being provided by Bank. Bank shall also have the right to secure printed publicity through newspaper and other media concerning the Approved Projects and source of financing. 12.8 Savings Clause. Invalidation of any one or more of the provisions of this Loan Agreement shall in no way affect any of the other provisions hereof, which shall remain in full force and effect. 12.9 Execution in Counterparts. This Loan Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same instrument, and in making proof of this Loan Agreement, it shall not be necessary to produce or account for more than one such counterpart. 12.10 Captions. The captions herein are inserted only as a matter of convenience and for reference and in no way define, limit or describe the scope of this Loan Agreement nor the intent of any provision hereof. 12.11 Notices. All notices required to be given hereunder shall be given in accordance with the requirements of the Mortgage. 12.12 Mandatory Arbitration. Any controversy or claim between or among the parties hereto including but not limited to those arising out of or relating to this Loan Agreement or any related agreements or instruments, including any claim based on or arising from an alleged tort, shall be determined by binding arbitration in accordance with the Federal Arbitration Act (or if not applicable, the applicable state law), the Rules of Practice and Procedure for the Arbitration of Commercial Disputes of Judicial Arbitration and Mediation Services, Inc. (J.A.M.S.), and the "Special Rules" set forth below. In the event of any inconsistency, the Special Rules shall control. Judgment upon any arbitration award may be entered in any court having jurisdiction. Any party to this Loan Agreement may bring an action, including a summary or expedited proceeding, to compel arbitration of any controversy or claim to which this Loan Agreement applies in any court having jurisdiction over such action. (a) Special Rules. The arbitration shall be conducted in the city of the Borrower's domicile at time of this Loan Agreement's execution and administered by J.A.M.S. who will appoint an arbitrator; if J.A.M.S. is unable or legally precluded from administering the arbitration, then the American Arbitration Association will serve. All arbitration hearings will be commenced within 90 days of the demand for arbitration; further, the arbitrator shall only, upon a showing of cause, be permitted to extend the commencement of such hearing for up to an additional 60 days. (b) Reservation of Rights. Nothing in this Loan Agreement shall be deemed to (i) limit the applicability of any otherwise applicable statutes of limitation or repose and any waivers contained in this Loan Agreement; or (ii) be a waiver by the Bank of the protection afforded to it by 12 U.S.C. Sec. 91 or any substantially equivalent state law; or (iii) limit the right of the Bank hereto (A) to exercise self help remedies such as (but not limited to) setoff, or (B) to foreclose against any real or personal property collateral, or (C) to obtain from a court provisional or ancillary remedies such as (but not limited to) injunctive relief or the appointment of a receiver. The Bank may exercise such self help rights, foreclose upon such property, or obtain such provisional or ancillary remedies before, during or after the pendency of any arbitration proceeding brought pursuant to this Agreement. At Bank's option, foreclosure under a deed of trust or mortgage may be accomplished by any of the following: the exercise of a power of sale under the deed of trust or mortgage, or by judicial sale under the deed of trust or mortgage, or by judicial foreclosure. Neither this exercise of self help remedies nor the institution or maintenance of an action for foreclosure or provisional or ancillary remedies shall constitute a waiver of the right of any party, including the claimant in any such action, to arbitrate the merits of the controversy or claim occasioning resort to such remedies. 12.13 Disbursement of Loan Funds at Renewal. If, in Bank's sole and absolute discretion, Bank agrees to extend the Loan, and the outstanding principal balance of the Loan is less than the original, principal Loan amount at the time of the extension, then Bank may, in its sole and absolute discretion, but is not obligated to, disburse sufficient Loan funds to increase the outstanding principal balance of the Loan up the original, principal amount of the Loan, provided that Borrower pledges to Bank as additional security for the Loan liquid collateral in kind and amount acceptable to Bank in its sole discretion and deposits the same in an account with Bank. In connection with any such pledge of liquid collateral, Borrower shall deliver to Bank any original securities or other instruments evidencing the collateral and shall execute such security agreements, assignments, powers-of-attorney, stock powers, endorsements, financing statements or other documentation as Bank may require to establish and perfect the security interest so granted by Borrower. Nothing contained herein shall constitute Bank's agreement or commitment to renew the Loan. IN WITNESS WHEREOF, Borrower and Bank have executed this Loan Agreement as of the above written date. Heftler Realty Co., a Florida corporation - - ------------------------------------------ Witness By: /s/ Joel B. Kovin - - ------------------------------------------ --------------------------- Witness Joel B. Kovin Its: Vice President "Borrower" NATIONSBANK OF FLORIDA, N.A. - - ------------------------------------------ Witness By: /s/ Carmen de Essaye - - ------------------------------------------ ---------------------------- Witness Carmen de Essaye Its:Assistant Vice President "Bank" EXHIBITS "1" Borrowing Base Certificate "2" Borrowing Base Schedule "A" "3" Borrowing Base Schedule "B" "4" Borrowing Base Schedule "C.1, C.2, and C.3" "5" Request For Funding EX-10.4 6 FIRST AMENDMENT TO LOAN AGREEMENT EXHIBIT 10.4 FIRST AMENDMENT TO LOAN AGREEMENT THIS AMENDMENT TO LOAN AGREEMENT made this 16 day of November, 1994, by and between Heftler Realty Co., a Florida corporation, 9450 Sunset Drive, Miami, FL 33173 (hereinafter referred to as "Borrower"), and NationsBank of Florida, N.A., a national banking association, with its offices located at Fort Lauderdale, Florida ("Bank" or "Lender"). W I T N E S S E T H: WHEREAS, Borrower and Lender have agreed to amend certain terms of the Loan Agreement between the parties dated August 29, 1994. NOW, THEREFORE, for and in consideration of the sum of Ten and No/100 ($10.00) Dollars and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows: 1. Article IV, Paragraph 4.20, Loan Fees, shall be amended by the addition of the following: In addition to all other amounts due and payable herewith, the Borrower covenants and agrees to pay to Lender a commitment fee in the amount of $32,000.00 at closing of the First Loan Modification for the first year of the initial two (2) year period, and agrees to pay an additional $40,000.00 loan fee on the anniversary date of the Loan. If this First Loan Modification does not close, then Borrower agrees to pay Lender $16,000.00 as a one-time commitment fee. Borrower further agrees to pay to Lender an additional commitment fee in the amount of one-half (0.50%) of one percentage point for each one (1) year extension granted, payable at the exercise of the extension such that for every year that the Commitment is outstanding, the Bank shall receive one-half (0.50%) of one percentage point. The Letters of Credit issued by Lender under the Loan shall require no additional commitment fee for the first year of the two (2) year Loan term. Thereafter, Borrower agrees to pay Lender one half (.50%) of one percent of the face value of such Letters of Credit on the anniversary date of the original Closing Date in the event that the commitment fee paid to Lender at that time excludes Letters of Credit. 2. Article IV, Paragraph 4.25, Miscellaneous, shall be deleted and the following substituted in its place: 4.25 Miscellaneous. All other Loan Documents or items that are customarily provided in loan transactions of this type and all other loan documents or items set forth in the Commitment, as requested by Lender. 3. Article VIII, Paragraph 8.10, Reporting Requirements, Subparagraph (d) shall be deleted and the following provisions added: (d) Annually, within ninety (90) days of year end, by August 31st, the Borrower will provide Lender with audited financial statements for itself, both including and excluding activities related to Arizona real property set forth on Exhibit "A" attached hereto ("Arizona Property"). Such audit shall include verification of Borrowing Base asset allocations for Borrower. (e) Quarterly, within sixty (60) days of the end of each quarter, financial statements of Borrower's new parent company, CONTINENTAL HOMES HOLDING CORP., a Delaware corporation, (hereinafter referred to as "Continental"), including balance sheet, income statement, and inventory reports on a project-by-project basis. (f) Annually, within ninety (90) days of year end, by August 31st, Continental will provide the Lender with current audited financial statements and such audit shall include consolidating schedules. (g) Quarterly, within sixty (60) days of each quarter end, the Borrower will provide Lender with quarterly financial statements for itself, both including and excluding activities related to the Arizona Property. 4. Article VIII, 8.23, Financial Covenants, Paragraphs (a), (b), (e) and (f) shall be deleted and following substituted in their place: (a) Minimum Tangible Net Worth: Borrower's "Tangible Net Worth", defined as the aggregate of total shareholders' equity less any intangible assets and any obligations due from shareholders, partners, employees, and/or affiliates, shall not at any time be less than $24,000,000.00 effective November ___, 1994, the date upon which the Continental Stock Purchase Agreement closes. (b) Ratio of Total Debt to Tangible Net Worth: The "Ratio of Borrower's Total Debt to Tangible Net Worth", defined as the aggregate of current liabilities and non-current liabilities (excluding contingent liabilities) divided by Tangible Net Worth, shall not at any time exceed 1.4 to 1. Borrower's payables to Continental and affiliates will be deducted from debt when calculating this ratio. Borrower's investments in, and receivables from Continental and affiliates will be deducted from Tangible Net Worth when calculating this ratio. (e) Minimum Tangible Net Worth Floor. Borrower's Minimum Tangible Net Worth floor of $24,000,000.00 will be increased by fifty (50%) percent of Net Income After Taxes on earnings subsequent to October 31, 1994. (f) Additional Debt. No additional debt shall be incurred, except as follows: (i) If present, intercompany debt shall be unsecured and repayment on same shall be prohibited in the event of default. Furthermore, intercompany debt shall be junior to Lender's debt, and will be repayable only in the event that Borrower is not in default and is in full compliance under the terms and conditions of the Loan Documents. (ii) Lender will allow a $10,000,000.00 credit facility from Bank One - Arizona ("Bank One") initially for the acquisition and develop- ment of the Arizona Property which is being sold to Borrower by Continental in the latter's leveraged purchase of Borrower. Subsequent to use for the Arizona Property, the Bank One line of credit may be used for Borrower's future Florida properties only, except that Lender shall have a right of first refusal to extend credit on any new projects financed by Borrower, and Lender through this right of first refusal will have the opportunity to replace the $10,000,000.00 Bank One line of credit through future increases to the Loan. 5. Article X, Events of Default, Paragraph 10.1, Default, Subparagraphs 10.1(l) and 10.1(m), shall be amended to add the following: Lender hereby consents to the sale of all of the outstanding shares of the Borrower to Continental. Said sale shall be in form and substance as set forth on Exhibit "B" attached hereto and made a part hereof by reference. Notwithstanding the foregoing, the approval is subject to Lender's receipt and satisfactory review of the following: a. Management contracts between Continental and Borrower's key management; b. The appraisal upon the Arizona Property; c. The definitive agreement between Borrower and Continental and d. Continental's Bond Indentures. 6. In the event the Stock Purchase Agreement with Continental does not close, then the financial covenants and reporting requirements provided above will be null and void, and the financial covenants and reporting requirements will revert back to those contained in the Loan Agreement. 7. The Commitment Letter from Lender to Borrower Dated November 15, 1994 shall be incorporated by reference into this Agreement. 8. All other terms and conditions of the Loan Agreement shall be amended consistent with the matters set forth above. IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first set forth above. Signed, sealed and delivered "BORROWER" in the presence of: Heftler Realty Co., a Florida corporation By: /s/ Joel B. Kovin - - -------------------------- ------------------------------- (Witness) Joel B. Kovin Vice President (seal) - - -------------------------- Type or Print Name - - -------------------------- Address: 9450 Sunset Drive (Witness) Miami, FL 33173 - - -------------------------- Type or Print Name "LENDER" NATIONSBANK OF FLORIDA, N.A., a national banking association BY: /s/ Carmen de Essaye - - -------------------------- ------------------------------- (Seal) Carmen de Essaye (Witness) Asst. Vice Pres. - - -------------------------- Type or Print Name Address: 701 W. Cypress Creek Rd. - - -------------------------- Suite 101 (Witness) Ft.Lauderdale, FL 33309 - - -------------------------- Type or Print Name Borrower's Taxpayer Identification No. 59-1237314 EX-10.5 7 CONSOLIDATION PROMISSORY NOTE EXHIBIT 10.5 CONSOLIDATION PROMISSORY NOTE (For Revolving Line of Credit) $20,000,000.00 - - -------------- November 16, 1994 Fort Lauderdale, Florida FOR VALUE RECEIVED, HEFTLER REALTY CO., a Florida corporation, (some- times hereinafter referred to as the "undersigned" or the "Borrower"), promises to pay to the order of NationsBank of Florida, N.A., a national banking association or any subsequent holder of this note ("Bank") at its principal offices located at 701 West Cypress Creek Road, Suite 101, Fort Lauderdale, Florida (or at such other place or places as Bank may designate) the principal sum of TWENTY MILLION and NO/100 DOLLARS ($20,000,000.00) or so much thereof as may be from time to time outstanding, plus interest thereon at the Rate hereinafter defined, all in accordance with the terms and conditions of this Promissory Note (the "Note") and in accordance with the Loan Agreement dated August 29, 1994, and as amended between Borrower and Bank (the "Loan Agreement"). This Note is secured by a Real Estate Mortgage, Assignment and Security Agreement dated August 29, 1994, as amended, filed for record in the Public Records of Dade and Broward County, Florida (the "Mortgage"), Security Agreements, UCC Financing Statements filed for record in the Public Records of Dade and Broward County, Florida, and in the Office of the Secretary of State of the State of Florida (the "Financing Statements"), the Loan Agreement and other agreements by and between Borrower and Bank. The Mortgage, the Financing Statements, the Letter(s) of Credit issued by Bank for the benefit of Borrower and such other agreements are hereinafter referred to collectively as the "Security Documents" and the loan evidenced thereby is hereinafter referred to as the "Loan." Terms used herein but not otherwise defined hereunder are defined as set forth in the Security Documents or the Loan Agreement. All of the terms, definitions, conditions and covenants of the Loan Agreement and the Security Documents are expressly made a part of this Note by reference in the same manner and with the same effect as if set forth herein at length, and any holder of this Note is entitled to the benefits of and remedies provided in the Loan Agreement and the Security Documents. Subject to the terms and conditions of this Note and the Security Documents, Bank shall advance funds to Borrower pursuant to the terms of the Loan Agreement, such that Borrower may borrow, partially or wholly repay, and reborrow, on a revolving basis, up to a maximum principal sum equal to the face amount of this Note at any one time outstanding. 1. Prime Rate. For purposes hereof, "Prime Rate" means the fluctuating rate of interest per annum established by Bank as its prime lending rate in effect from time to time whether or not such rate shall be otherwise published. Such Prime Rate is established by Bank as an index or base rate and may or may not at any time be the best or lowest rate of interest offered by Bank. 2. Interest. The outstanding Loan principal balance shall bear interest at a variable rate per annum equal to the Prime Rate plus one-half of one percent (0.50%). The interest rate hereunder shall be adjusted daily in accordance with fluctuations in the Prime Rate. Interest shall be computed on the basis of a daily amount of interest accruing on the daily outstanding principal balance during a 360-day year multiplied by the actual number of days the principal is outstanding during such applicable interest period. The initial Prime Rate at the time of execution of this Note is 7.75% so the initial Note rate is 8.25%. 3. Payment of Interest. Interest accrued in accordance with this Note shall be due and payable monthly, in arrears, on the first day of each month immediately following the calendar month for which said interest has accrued. All accrued but unpaid interest and principal shall be due and payable in full on the Maturity Date, as defined in Paragraph 6 below. All payments of principal and interest shall be made in lawful currency of the United States of America which shall be legal tender in payment of all debts, public and private, at the time of payment. 4. Prepayment. This Note may be prepaid in whole or in part at any time without fee, premium or penalty. Any partial prepayment shall be applied in accordance with paragraph 10 below and shall not postpone the due date of any subsequent periodic installments or the Maturity Date, or change the amount of such installments due, unless Bank shall otherwise agree in writing. 5. Late Charges. Should Borrower fail to pay the installments of interest or principal (if applicable) on any due date provided for herein or within ten (10) days thereafter, then Borrower further promises to pay a late payment charge equal to four percent (4%) of the amount of the unpaid installment as liquidated compensation to Bank for the extra expense to Bank to process and administer the late payment, Borrower agreeing, by execution hereof, that any other measure of compensation for a late payment is speculative and impossible to compute. This provision for late charges shall not be deemed to extend the time for payment or be a "grace period" or "cure period" that gives Borrower a right to cure a Default or Default Condition. Imposition of late charges is not contingent upon the giving of any notice or lapse of any cure period provided for in the Mortgage and shall not be deemed a waiver of any right or remedy of Bank, including without limitation, acceleration of this Note. 6. Maturity Date. The then outstanding principal balance plus all accrued but unpaid interest shall be due and payable on August 29, 1996 (the "Maturity Date"). 7. Default. Any failure of Borrower to comply with any term, covenant, or condition of this Note, including without limitation, Borrower's failure to pay principal, interest, or expenses when same shall become due or the existence of any Default Condition or Default under the Security Documents or Loan Agreement shall be deemed, at the option of Bank, a Default under this Note. Notwithstanding the foregoing, Borrower shall have a ten (10) day grace period as to the payment of interest and other charges. 8. Acceleration. Upon the occurrence of a Default hereunder or under the terms of any one or more of the Security Documents or the Loan Agreement, Bank may declare the then outstanding principal and all accrued but unpaid interest immediately due and payable and upon acceleration and thereafter this Note shall bear interest at the Default Rate, hereinafter defined, until all indebtedness evidenced hereby and secured by the Security Docu- ments has been paid in full. Further, in the event of such acceleration, the Loan, and all other indebtedness of Borrower to Bank arising out of or in connection with the Loan shall become immediately due and payable, without presentation, demand, protest or notice of any kind, all of which are hereby waived by Borrower. 9. Default Rate. After default or maturity or upon acceleration, and thereafter, the unpaid indebtedness then evidenced by this Note and due under and secured by the Security Documents shall bear interest at a fixed rate equal to the lesser of (a) the maximum rate then permitted under applicable law, or (b) twenty percent (20%) per annum. 10. Application of Payments. All sums received by Bank for application to the Loan may be applied by Bank to late charges, expenses, costs, interest, principal, and other amounts owing to Bank in connection with the Loan in the order selected by Bank in its sole discretion. 11. Expenses. In the event this Note is not paid when due on any stated or accelerated maturity date, or should it be necessary for Bank to enforce any other of its rights under this Note, the Loan Agreement, or the Security Documents, Borrower will pay to Bank, in addition to principal, interest and other charges due hereunder or under the Loan Agreement or the Security Documents, all costs of collection or enforcement, including reasonable attorneys' fees, paralegals' fees, legal assistants' fees, costs and expenses, whether incurred with respect to collection, litigation, bankruptcy proceedings, interpretation, dispute, negotiation, trial, appeal, defense of actions instituted by a third party against Bank arising out of or related to the Loan, enforcement of any judgment based on this Note, or otherwise, whether or not a suit to collect such amounts or to enforce such rights is brought or, if brought, is prosecuted to judgment. Notwithstanding the foregoing, the prevailing party in any litigation arising out of or related to the Loan shall recover its fees and costs described in this subparagraph from the non-prevailing party. 12. Waiver. All persons now or at any time liable for payment of this Note, whether directly or indirectly, including without limitation any Guarantor, hereby waive presentment, protest, notice of protest and dishonor. The undersigned expressly consents to any extensions and renewals, in whole or in part, to the release of any co-makers and any collateral security or portions thereof, given to secure this Note, and all delays in time of payment or other performance which Bank may grant, in its sole discretion, at any time and from time to time without limitation all without any notice or further consent of Borrower, and any such grant by Bank shall not be deemed a waiver of any subsequent delay or any of Bank's rights hereunder or under the Loan Agreement or the Security Documents. 13. Usury. In no event shall this or any other provision herein or in the Loan Agreement or Security Documents, permit the collection of any interest which would be usurious under the laws of the State of Florida. If any such interest in excess of the maximum rate allowable under applicable law has been collected, Borrower agrees that the amount of interest collected above the maximum rate permitted by applicable law, together with interest thereon at the rate required by applicable law, shall be refunded to Borrower, and Borrower agrees to accept such refund, or, at Borrower's option, such refund shall be applied as a principal payment hereunder. 14. Modification. This Note may not be changed orally, but only by an agreement in writing signed by the Bank and Borrower. 15. Applicable Law. This Note shall be governed by and construed in accordance with the laws of the State of Florida. 16. Notices. All notices or other communications required or permitted to be given pursuant to the provisions of this Note shall be given in accordance with the notice provisions of the Mortgage. 17. Successors and Assigns. As used herein, the terms "Borrower" and "Bank" shall be deemed to include their respective heirs, personal represen- tatives, successors and assigns. 18. Severability. In the event any one or more of the provisions of this Note shall for any reason be held to be invalid, illegal, or unenforceable, in whole or in part or in any respect, or in the event that any one or more of the provisions of this Note operates or would prospectively operate to invalidate this Note, then and in any of those events, only such provision or provisions shall be deemed null and void and shall not affect any other provision of this Note. The remaining provisions of this Note shall remain operative and in full force and effect and shall in no way be affected, prejudiced, or disturbed thereby. In the event any provisions of this Note are inconsistent with the provisions of the Loan Agreement, the Security Documents, or any other agreements or documents executed in connection with this Note, this Note shall control. 19. Captions; Pronouns. Captions are for reference only and in no way limit the terms of this Note. The pronouns used in this instrument shall be construed as masculine, feminine, or neuter as the occasion may require. Use of the singular includes the plural, and vice versa. 20. Business Day. Any reference herein or in the Loan Agreement or Security Documents to a day or business day shall be deemed to refer to a banking day which shall be a day on which Bank is open for the transaction of business, excluding any national holidays, and any performance which would otherwise be required on a day other than a banking day shall be timely performed in such instance, if performed on the next succeeding banking day. Notwithstanding such timely performance, interest shall continue to accrue hereunder until such payment or performance has been made. 21. Mandatory Arbitration. Any controversy or claim between or among the parties hereto including, but not limited to, those arising out of or relating to this agreement or any related agreements or instruments, including any claim based on or arising from an alleged tort, shall be determined by binding arbitration in accordance with the Federal Arbitration Act (or if not applicable, the applicable state law), the Rules of Practice and Procedure for the Arbitration of Commercial Disputes of Judicial Arbitration and Mediation Services, Inc. (J.A.M.S.), and the "Special Rules" set forth below. In the event of any inconsistency, the Special Rules shall control. Judgment upon any arbitration award may be entered in any court having jurisdiction. Any party to this agreement may bring an action, including a summary or expedited proceeding, to compel arbitration of any controversy or claim to which this agreement applies in any court having jurisdiction over such action. (a) Special Rules: The arbitration shall be conducted in the city of the Borrower's domicile at the time of this agreement's execution and administered by J.A.M.S. who will appoint an arbitrator; if J.A.M.S. is unable or legally precluded from administering the arbitration, then the American Arbitration Association will serve. All arbitration hearings will be commenced within 90 days of the demand for arbitration; further, the arbitrator shall only, upon a showing of cause, be permitted to extend the commencement of such hearing for up to an additional 60 days. (b) Reservations of Rights: Nothing in this agreement shall be deemed to (i) limit the applicability of any otherwise applicable statutes of limitation or repose and any waivers contained in this agreement; or (ii) be a waiver by the Bank of the protection afforded to it by 12 U.S.C. Section 91 or any substantially equivalent state law; or (iii) limit the right of the Bank hereto (A) to exercise self help remedies such as (but not limited to) setoff, or (B) to foreclose against any real or personal property collateral, or (C) to obtain from a court provisional or ancillary remedies such as (but not limited to) injunctive relief or the appointment of a receiver. The Bank may exercise such self help rights, foreclose upon such property, or obtain such provisional or ancillary remedies before, during or after the pendency of any arbitration proceeding brought pursuant to this agreement. At Bank's option, foreclosure under a mortgage or deed of trust may be accomplished by any of the following: the exercise of a power of sale under the deed of trust or mortgage, or by judicial sale under the deed of trust or mortgage, or by judicial foreclosure. Neither this exercise of self help remedies nor the institution or maintenance of an action for foreclosure or provisional or ancillary remedies shall constitute a waiver of the right of any party, including the claimant in any such action, to arbitrate the merits of the controversy or claim occasioning resort to such remedies. 22. Future Advance. This Note is a consolidation of that certain Promissory Note (For Revolving Line of Credit) dated August 29, 1994 in the original principal amount of Eight Million and No/100 Dollars ($8,000,000.00) and that certain Future Advance Promissory Note (For Revolving Line of Credit) dated November 16, 1994 in the original principal amount of Twelve Million and No/100 Dollars ($12,000,000.00) both made by Borrower in favor of Bank. IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed as of the day and year first above written. Heftler Realty Co., a Florida corporation By: /s/Joel B. Kovin --------------------- Joel B. Kovin Vice President (SEAL) DOCUMENTARY STAMPS ON THE AMOUNT OF THIS NOTE HAVE BEEN PAID AND AFFIXED TO THE MORTGAGE AND MORTGAGE MODIFICATION AGREEMENT SECURING THIS NOTE. -----END PRIVACY-ENHANCED MESSAGE-----