10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

Form 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2010

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number

001-34126

Homeowners Choice, Inc.

(Exact name of Registrant as specified in its charter)

Florida	20-5961396
(State of Incorporation)	(IRS Employer Identification No.)

2340 Drew Street, Suite 200

Clearwater, FL 33765

(Address, including zip code of principal executive offices)

(727) 213-3600

(Registrant’s telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ¨    No  ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The aggregate number of shares of the Registrant’s Common Stock, no par value, outstanding on May 10, 2010 was 6,139,524.

HOMEOWNERS CHOICE, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

		Page
ITEM 1	FINANCIAL STATEMENTS
	Condensed Consolidated Balance Sheets, March 31, 2010 (unaudited) and December 31, 2009	1
	Condensed Consolidated Statements of Earnings Three months ended March  31, 2010 and 2009 (unaudited)	2
	Condensed Consolidated Statements of Cash Flows Three months ended March  31, 2010 and 2009 (unaudited)	3
	Condensed Consolidated Statement of Stockholders’ Equity Three months ended March  31, 2010 (unaudited)	4
	Notes to Condensed Consolidated Financial Statements (unaudited)	5-17
	Report by Independent Registered Public Accounting Firm	18
	Report of Independent Registered Public Accounting Firm	19
ITEM 2	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	20-29
ITEM 3	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	29
ITEM 4	CONTROLS AND PROCEDURES	29
	PART II – OTHER INFORMATION
ITEM 1	LEGAL PROCEEDINGS	29
ITEM 1a	RISK FACTORS	29
ITEM 2	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	30-31
ITEM 6	EXHIBITS	32-35
	SIGNATURES	36
	CERTIFICATIONS

PART I – FINANCIAL INFORMATION

Item 1 – Financial Statements

HOMEOWNERS CHOICE, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Dollars in thousands, except share amounts)

	At March 31, 2010		At December 31, 2009
	(Unaudited)
Assets
Investment in fixed maturity securities, held-to-maturity, at amortized cost (fair value $7,756 and $4,250)	$	7,556	4,049
Investments in fixed maturity securities, available-for-sale, at fair value (amortized cost $19,778 and $19,763)		19,909	19,266
Time deposits		13,634	13,507
Short-term investments		7,301	11,521
Total investments		48,400	48,343
Cash and cash equivalents		54,440	43,453
Accrued interest and dividends receivable		321	176
Premiums receivable		4,284	4,899
Assumed reinsurance balances receivable		—	19,525
Prepaid reinsurance premiums		9,402	7,205
Deferred policy acquisition costs		7,126	10,496
Property and equipment, net		471	399
Deferred income taxes		1,862	2,438
Other assets		1,869	958
Total assets	$	128,175	137,892
Liabilities and Stockholders’ Equity
Losses and loss adjustment expenses		20,805	19,178
Unearned premiums		46,930	68,509
Advance premiums		6,623	713
Assumed reinsurance balances payable		5,211	—
Accrued expenses		3,495	3,742
Income taxes payable		80	167
Other liabilities		326	205
Total liabilities		83,470	92,514
Stockholders’ equity:
Preferred stock (no par value 20,000,000 shares authorized, no shares issued or outstanding)		—	—
Common stock, (no par value, 40,000,000 shares authorized, 6,202,492 and 6,456,635 shares issued and outstanding in 2010 and 2009)		—	—
Additional paid-in capital		19,407	21,164
Retained earnings		25,218	24,520
Accumulated other comprehensive income (loss)		80	(306	)
Total stockholders’ equity		44,705	45,378
Total liabilities and stockholders’ equity	$	128,175	137,892

See accompanying Notes to Consolidated Financial Statements.

1

HOMEOWNERS CHOICE, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Earnings

(Unaudited)

(Dollars in thousands, except per share amounts)

	Three Months Ended March 31,
	2010			2009
Revenue
Gross premiums earned	$	30,344		30,337
Premiums ceded		(14,103	)	(9,007	)
Net premiums earned		16,241		21,330
Net investment income		531		358
Other		215		635
Total revenue		16,987		22,323
Expenses
Losses and loss adjustment expenses		9,813		10,022
Policy acquisition and other underwriting expenses		4,292		920
Other operating expenses		1,696		1,244
Total expenses		15,801		12,186
Income before income taxes		1,186		10,137
Income taxes		488		3,853
Net income	$	698		6,284
Basic earnings per share	$	.11		.91
Diluted earnings per share	$	.10		.87
Dividends per share	$	—		—

See accompanying Notes to Condensed Consolidated Financial Statements.

2

HOMEOWNERS CHOICE, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(Dollars in thousands)

	Three Months Ended March 31,
	2010			2009
Cash flows from operating activities:
Net income	$	698		6,284
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation		44		121
Amortization of discounts on investments in fixed maturity securities		(14	)	—
Loss on disposal of property and equipment		—		82
Depreciation and amortization		22		13
Deferred income taxes		334		566
Changes in operating assets and liabilities:
Premiums receivable		615		(24,382	)
Assumed reinsurance balances receivable		19,525		—
Advance premiums		5,910		—
Prepaid reinsurance premiums		(2,197	)	1,729
Reinsurance balances receivable		—		157
Accrued interest and dividends receivable		(145	)	(1	)
Other assets		(911	)	228
Assumed reinsurance balances payable		5,211		—
Ceded reinsurance balances payable		—		3,770
Deferred policy acquisition costs		3,370		(3,595	)
Losses and loss adjustment expenses		1,627		3,896
Unearned premiums		(21,579	)	8,066
Income taxes payable		(87	)	3,282
Accrued expenses and other liabilities		(126	)	4,421
Net cash provided by operating activities		12,297		4,637
Cash flows from investing activities:
Purchase of property and equipment, net		(94	)	(11	)
Purchase of fixed maturity securities		(3,508	)	—
Increase in time deposits, net		(127	)	—
Decrease (increase) in short-term investments, net		4,220		(6,180	)
Net cash provided by (used in) investing activities		491		(6,191	)
Cash flows from financing activities:
Proceeds from the exercise of common stock options		—		20
Repurchases of common stock		(1,801	)	(37	)
Excess tax benefit from stock options exercised		—		4
Net cash used in financing activities		(1,801	)	(13	)
Net increase (decrease) in cash and cash equivalents		10,987		(1,567	)
Cash and cash equivalents at beginning of period		43,453		81,060
Cash and cash equivalents at end of period	$	54,440		79,493
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	240		—
Cash paid for interest	$	—		—
Non-cash investing activity -
Unrealized gain on investments in fixed maturity securities, available for sale, net of tax	$	386		—

See accompanying Notes to Consolidated Financial Statements.

3

HOMEOWNERS CHOICE, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Stockholders’ Equity

Three Months Ended March 31, 2010

(Dollars in thousands, except share amounts)

	Common stock				Additional Paid-In Capital		Retained Earnings	Accumulated Change in Other Comprehensive (Loss)/Income		Total
	Shares		Amount
Balance at December 31, 2009	6,456,635		$	—	21,164		24,520	(306	)	45,378
Net income (unaudited)	—			—	—		698	—		698
Change in unrealized loss on available-for-sale securities, net of income tax benefit (unaudited)	—			—	—		—	386		386
Comprehensive income (unaudited)										1,084
Repurchases and retirement of common stock (unaudited)	(254,143	)		—	(1,801	)	—	—		(1,801	)
Stock-based Compensation (unaudited)	—			—	44		—	—		44
Balance at March 31, 2010 (unaudited)	6,202,492		$	—	19,407		25,218	80		44,705

See accompanying Notes to Condensed Consolidated Financial Statements.

4

HOMEOWNERS CHOICE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(unaudited)

Note 1 – Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited, condensed consolidated financial statements for Homeowners Choice, Inc. and its subsidiaries (collectively, the “Company”), which consist of Homeowners Choice Property & Casualty Insurance Company, Inc., Homeowners Choice Managers, Inc., Southern Administration, Inc., and Claddaugh Casualty Insurance Company, Ltd., have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information, and the Securities and Exchange Commission (“SEC”) rules for interim financial reporting. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, in the opinion of management, the accompanying financial statements reflect all normal recurring adjustments necessary to present fairly the Company’s financial position as of March 31, 2010 and the results of operations and cash flows for the periods presented. The results of operations for the interim periods presented are not necessarily indicative of the results of operations to be expected for any subsequent interim period or for the fiscal year ending December 31, 2010. The accompanying unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2009 included in the Company’s Form 10-K, which was filed with the SEC on March 30, 2010.

In preparing the interim unaudited condensed consolidated financial statements, management was required to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures at the financial reporting date and throughout the periods being reported upon. Certain of the estimates result from judgments that can be subjective and complex and consequently actual results may differ from these estimates.

Material estimates that are particularly susceptible to significant change in the near-term relate to the determination of loss and loss adjustment expenses, assumed reinsurance balances payable, the recoverability of deferred policy acquisition costs, and the determination of federal income taxes. Although considerable variability is inherent in these estimates, management believes that the amounts provided are reasonable. These estimates are continually reviewed and adjusted as necessary. Such adjustments are reflected in current operations.

All significant intercompany balances and transactions have been eliminated.

Reclassifications. Certain reclassifications of prior period amounts have been made to conform to the current period presentation.

Advance Premiums. Advance premiums represent premiums that have been collected in advance of the policy effective date.

(continued)                    

5

HOMEOWNERS CHOICE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(unaudited)

Note 2 – Recent Accounting Pronouncements

Accounting Standards Update No. 2009-16. In December 2009, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2009-16 (“ASU 2009-16”), Transfers and Servicing (Topic 860), Accounting for Transfers of Financial Assets. The amendments in ASU 2009-16 improve financial reporting by eliminating the exceptions for qualifying special-purpose entities from the consolidation guidance and the exception that permitted sale accounting for certain mortgage securitizations when a transferor has not surrendered control over the transferred assets. In addition, the amendments require enhanced disclosures about the risks that a transferor continues to be exposed to because of its continuing involvement in transferred financial assets and improves comparability and consistency in accounting for transferred financial assets through clarifications of the requirements for isolation and limitations on portions of financial assets that are eligible for sale accounting. ASU 2009-16 is effective as of the beginning of the first annual reporting period beginning after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. The adoption of this guidance did not have a material effect on the Company’s consolidated financial condition or results of operations.

Accounting Standards Update No. 2010-06. In January 2010, the FASB issued Accounting Standards Update No. 2010-06 (“ASU 2010-06”), Fair Value Measurements and Disclosures (Topic 820), Improving Disclosures about Fair Value Measurements. The amendments in ASU 2010-06 require new disclosures about the different classes of assets and liabilities measured at fair value, the valuation techniques and inputs used, the activity in Level 3 fair value measurements, and the transfers between Levels 1, 2, and 3. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements, which are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The adoption of this guidance did not have a material effect on the Company’s consolidated financial condition or results of operations.

Accounting Standards Update No. 2010-10. In February 2010, the FASB issued Accounting Standards Update No. 2010-10 (“ASU 2010-10”), Consolidation (Topic 810), Amendments for Certain Investment Funds. The amendments in ASU 2010-10 defer the effective date of the amendments to the consolidation requirements in Topic 810 for a reporting company’s interest in an entity (1) that has all attributes of an investment company or (2) for which it is industry practice to apply measurement principles for financial reporting purposes that are consistent with those followed by investment companies. In addition, the amendments in ASU 2010-10 clarify certain considerations and circumstances under which entities should evaluate variable interests. These amendments are effective as of the beginning of a reporting entity’s first annual period that begins after November 15, 2009, and for interim periods within that first annual reporting period. The adoption of this guidance did not have a material effect on the Company’s consolidated financial condition or results of operations.

(continued)                    

6

HOMEOWNERS CHOICE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

Note 2 – Recent Accounting Pronouncements, continued

Accounting Standards Update No. 2010-11. In March 2010, the FASB issued Accounting Standards Update No. 2010-11 (“ASU 2010-11”), Derivatives and Hedging (Topic 815), Scope Exception Related to Embedded Credit Derivatives. ASU 2010-11 provides clarifications and related additional examples to improve financial reporting by resolving potential ambiguity about the breadth of the embedded credit derivative scope exception in various paragraphs under Topic 815. The amendments in this update will be effective at the beginning of the reporting entity’s first fiscal quarter beginning after June 15, 2010 with early adoption permitted. The adoption of this guidance is not expected to have a material effect on the Company’s consolidated financial condition or results of operations.

Accounting Standards Update No. 2010-12. In April 2010, the FASB issued Accounting Standards Update No. 2010-12 (“ASU 2010-12”), Income Taxes (Topic 740), Accounting for Certain Tax Effects of the 2010 Health Care Reform Acts. The amendments in ASU 2010-12 clarify the SEC’s position on the timing difference between the signing dates for the Health Care and Education Reconciliation Act of 2010 and the Patient Protection and Affordable Care Act. In making this clarification, the SEC announced there would be no objection to the view that the two acts should be considered together for accounting purposes. The adoption of this guidance did not have an effect on the Company’s consolidated financial condition or results of operations.

Accounting Standards Update No. 2010-13. In April 2010, the FASB issued Accounting Standards Update No. 2010-13 (“ASU 2010-13”), Compensation – Stock Compensation (Topic 718), Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades. This update provides amendments to Topic 718 to clarify that an employee share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity securities trades should not be considered to contain a condition that is not a market, performance, or service condition. Such an award should not be classified as a liability if it otherwise qualifies as equity. The amendments were designed to improve GAAP because they improve consistency in financial reporting by eliminating diversity in practice. ASU 2010-13 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010. Early adoption is permitted. The adoption of this guidance is not expected to have an effect on the Company’s consolidated financial condition or results of operations.

(continued)                    

7

HOMEOWNERS CHOICE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

Note 2 – Recent Accounting Pronouncements, continued

Accounting Standards Update No. 2010-15. In April 2010, the FASB issued Accounting Standards Update No. 2010-15 (“ASU 2010-15”), Financial Services – Insurance (Topic 944), How Investments Held through Separate Accounts Affect an Insurer’s Consolidation Analysis of Those Investments. The amendments in ASU 2010-15 clarify that an insurance entity should not consider any separate account interest held for the benefit of policy holders in an investment to be the insurer’s interests and should not combine those interests with its general account interest in the same investment when assessing the investment for consolidation, unless the separate account interests are held for the benefit of a related party policy holder as defined in the Variable Interest Subsections of Subtopic 810-10 and those Subsections require the consideration of related parties. Such separate accounts represent assets that are typically maintained by a life insurance entity for purposes of funding obligations to individual contract holders under fixed-benefit or variable annuity contracts, pension plans, and similar contracts. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010. Early adoption is permitted. The adoption of this guidance is not expected to have an effect on the Company’s consolidated financial condition or results of operations.

Note 3 – Investments

The Company has investments in fixed maturity securities comprised of corporate bonds, which are classified as held-to-maturity at March 31, 2010 and December 31, 2009. The amortized cost and estimated fair value of these investments at March 31, 2010 are summarized as follows (in thousands):

	Amortized Cost		Gross Unrealized Gain	Gross Unrealized Loss		Fair Value
Corporate Bonds	$	7,556	225	(25	)	7,756

The amortized cost and estimated fair value of these investments at December 31, 2009 are summarized as follows (in thousands):

	Amortized Cost		Gross Unrealized Gain	Gross Unrealized Loss		Fair Value
Corporate Bonds	$	4,049	237	(36	)	4,250

(continued)                    

8

HOMEOWNERS CHOICE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

Note 3 – Investments, continued

The Company has investments in available-for-sale, fixed maturity securities comprised of U.S. Treasury notes and commercial mortgage-backed securities, all of which are carried at fair value. At March 31, 2010, the amortized cost, gross unrealized gains and losses, and fair value of the Company’s available-for-sale fixed maturity securities by security type were as follows (in thousands):

	Amortized Cost		Gross Unrealized Gain	Gross Unrealized Loss		Fair Value
U.S. Treasury notes	$	14,719	—	(429	)	14,290
Commercial mortgage-backed securities		5,059	560	—		5,619
Total	$	19,778	560	(429	)	19,909

At December 31, 2009, the amortized cost, gross unrealized gains and losses, and fair value of the Company’s available-for-sale fixed maturity securities by security type were as follows (in thousands):

	Amortized Cost		Gross Unrealized Gain	Gross Unrealized Loss		Fair Value
U.S. Treasury notes	$	14,712	—	(505	)	14,207
Commercial mortgage-backed securities		5,051	44	(36	)	5,059
Total	$	19,763	44	(541	)	19,266

The scheduled maturities of fixed maturity securities at March 31, 2010 are as follows (in thousands):

	Amortized Cost		Fair Value
Available-for-sale
Due after five years through ten years	$	14,719	14,290
Commercial mortgage-backed securities		5,059	5,619
		19,778	19,909
Held-to-maturity
Due after one year to five years		1,913	2,136
Due after five years to ten years		5,643	5,620
		7,556	7,756
Total	$	27,334	27,665

(continued)                    

9

HOMEOWNERS CHOICE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

Note 3 – Investments, continued

The Company regularly reviews its individual investment securities for other-than-temporary impairment. The Company considers various factors in determining whether each individual security is other-than-temporarily impaired, including:

• the financial condition and near-term prospects of the issuer, including any specific events that may affect its operations or earnings;

• the length of time and the extent to which the market value of the security has been below its cost or amortized cost;

• general market conditions and industry or sector specific factors;

• nonpayment by the issuer of its contractually obligated interest and principal payments; and

• the Company’s intent and ability to hold the investment for a period of time sufficient to allow for the recovery of costs.

Securities with gross unrealized loss positions at March 31, 2010, aggregated by investment category and length of time the individual securities have been in a continuous loss position, are as follows (in thousands):

	Less Than twelve months
	Gross Unrealized Loss			Fair Value
U.S. Treasury notes	$	(429	)	14,290
Corporate bonds		(25	)	3,852
Total	$	(454	)	18,142

The Company believes there were no fundamental issues such as credit losses or other factors with respect to any of its securities. The unrealized losses on investment securities were caused by interest rate changes. It is expected that the securities would not be settled at a price less than the par value of the investments. Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company has the ability and intent to hold these investments until a market price recovery or maturity, the Company does not consider any of its investments in fixed maturity securities to be other-than-temporarily impaired at March 31, 2010.

(continued)                    

10

HOMEOWNERS CHOICE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements, Continued

(unaudited)

Note 4 – Fair Value Measurements

Fair values of the Company’s available-for-sale fixed maturity securities are determined in accordance with Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosure, using valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Fair values are generally measured using quoted prices in active markets for identical securities or other inputs that are observable either directly or indirectly, such as quoted prices for similar securities. In those instances where observable inputs are not available, fair values are measured using unobservable inputs. Unobservable inputs reflect the Company’s own assumptions about the assumptions that market participants would use in pricing the security and are developed based on the best information available in the circumstances. Fair value estimates derived from unobservable inputs are significantly affected by the assumptions used, including the discount rates and the estimated amounts and timing of future cash flows. The derived fair value estimates cannot be substantiated by comparison to independent markets and are not necessarily indicative of the amounts that would be realized in a current market exchange.

The fair values for fixed maturity securities that do not trade on a daily basis are determined by management, utilizing prices obtained from an independent pricing service and information provided by brokers. Management reviews the assumptions and methods utilized by the pricing service and then compares the relevant data and pricing to broker-provided data. The Company gains assurance of the overall reasonableness and consistent application of the assumptions and methodologies and compliance with accounting standards for fair value determination through ongoing monitoring of the reported fair values.

The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels as follows:

Level 1 – Unadjusted quoted prices in active markets for identical assets.

Level 2 – Other inputs that are observable for the asset, either directly or indirectly.

Level 3 – Inputs that are unobservable.

The following table presents information about the Company’s available-for-sale fixed maturity securities measured at fair value as of March 31, 2010, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value (dollars in thousands):

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Balance as of March 31, 2010
Fixed maturity securities, available-for-sale	$	14,290	5,619	—	19,909

(continued)                    

11

HOMEOWNERS CHOICE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements, Continued

(unaudited)

Note 5 — Reinsurance

The Company cedes a portion of its homeowners insurance exposure to other entities under catastrophe excess of loss reinsurance treaties. The Company remains liable with respect to claims payments in the event that any of the reinsurers are unable to meet their obligations under the reinsurance agreements. The Company evaluates the financial condition of its reinsurers and monitors concentrations of credit risk arising from similar geographic regions, activities or economic characteristics of the reinsurers to minimize its exposure to significant losses from reinsurer insolvencies.

The impact of the catastrophe excess of loss reinsurance treaties on premiums written and earned is as follows (dollars in thousands):

	Three Months Ended March 31,
	2010			2009
Premiums Written
Direct	$	14,874		41,157
Assumed		(6,110	)	(2,754	)
Gross written		8,764		38,403
Ceded		(14,103	)	(9,007	)
Net premiums written		(5,339	)	29,396
Premiums Earned
Direct	$	23,318		9,573
Assumed		7,026		20,764
Gross earned		30,344		30,337
Ceded		(14,103	)	(9,007	)
Net premiums earned	$	16,241		21,330

During the three months ended March 31, 2010 and 2009, there were no recoveries pertaining to reinsurance contracts that were deducted from losses incurred. At March 31, 2010 and 2009, prepaid reinsurance premiums related to 26 and 30 reinsurers, respectively, and there were no amounts receivable with respect to reinsurers. Thus, there were no concentrations of credit risk associated with reinsurance receivables and prepaid reinsurance premiums as of March 31, 2010 and 2009.

(continued)                    

12

HOMEOWNERS CHOICE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

(unaudited)

Note 6 — Losses and Loss Adjustment Expenses

The liability for losses and loss adjustment expenses (“LAE”) is determined on an individual case basis for all claims reported. The liability also includes amounts for unallocated expenses, anticipated future claim development and losses incurred, but not reported.

Activity in the liability for unpaid losses and LAE is summarized as follows (dollars in thousands):

	Three Months Ended March 31,
	2010			2009
Balance, beginning of period	$	19,178		$	14,763
Incurred related to:
Current period		9,421			10,368
Prior periods		392			(346	)
Total incurred		9,813			10,022
Paid related to:
Current period		(2,958	)		(2,279	)
Prior periods		(5,228	)		(3,847	)
Total paid		(8,186	)		(6,126	)
Balance, end of period	$	20,805			18,659

The Company writes insurance in the state of Florida, which could be exposed to hurricanes or other natural catastrophes. Although the occurrence of a major catastrophe could have a significant effect on our monthly or quarterly results, the Company believes that such an event would not be so material as to disrupt the overall normal operations of the Company. However, the Company is unable to predict the frequency or severity of any such events that may occur in the near term or thereafter.

Note 7 — Income Taxes

During the three months ended March 31, 2010 and 2009, the Company recorded approximately $0.5 million and $3.9 million, respectively, of income taxes, which resulted in estimated annual effective tax rates of approximately 41% and 38%, respectively. The Company’s estimated annual effective tax rate differs from the statutory federal income tax rate due to state income taxes, stock-based compensation and other nondeductible items.

(continued)                    

13

HOMEOWNERS CHOICE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements, Continued

(unaudited)

Note 8 — Earnings Per Share

A summary of the numerator and denominator of the basic and fully diluted earnings per share is presented below (dollars and shares in thousands, except per share amounts):

	Three Months Ended March 31,
	2010		2009
Numerator -
Net earnings	$	698	6,284
Denominator:
Weighted average shares - basic		6,285	6,894
Effect of dilutive securities:
Stock options		529	361
Shares issuable upon conversion of warrants		—	—
Weighted average shares - diluted		6,814	7,255
Earnings per share–basic	$	.11	.91
Earnings per share–diluted	$	.10	.87

For the three months ended March 31, 2010 and 2009, 1,738,335 and 1,771,668 warrants, respectively, to purchase 905,001 and 938,334 shares of common stock, respectively, were excluded from the computation of diluted earnings per share because the exercise price of $9.10 exceeded the average market price of the Company’s common stock. For the three months ended March 31, 2009, 40,000 options to purchase 40,000 shares of common stock were excluded from the computation of diluted earnings per share because the exercise price of $7.00 exceeded the average market price of the Company’s common stock.

(continued)                    

14

HOMEOWNERS CHOICE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements, Continued

(unaudited)

Note 9 — Stockholders’ Equity

Common Stock

Effective March 18, 2009, the Company’s Board of Directors authorized a plan to repurchase up to $3.0 million (inclusive of commissions) of the Company’s common shares. The repurchase plan allowed the Company to repurchase shares from time to time through March 19, 2010. This repurchase plan was supplemented in December 2009 upon approval by the Board of Directors to extend the repurchase authority by an additional $3.0 million and continue until the repurchase plan is terminated by the Company or the maximum number of dollars has been expended. The shares may be purchased for cash in open market purchases, block transactions and privately negotiated transactions in accordance with applicable federal securities laws. The share repurchase plan may be modified, suspended, terminated or extended by the Company any time without prior notice. During the three months ended March 31, 2010, the Company repurchased and retired a total of 54,143 shares at an average price of $7.35 per share and a total cost, inclusive of fees and commissions, of $401,000, or $7.41 per share. At March 31, 2010, a total of $2,488,000 is available in connection with this plan.

In addition, effective January 20, 2010, the Company repurchased and retired a total of 200,000 shares of the Company’s common stock at a price of $7.00 per share for a total cost of $1,400,000 (see Note 12 – “Related Party Transaction”). Such repurchase was not part of a publicly announced plan or program.

Common Stock Warrants

At March 31, 2010, the Company has reserved 905,001 shares of common stock for issuance upon the exercise of its common stock warrants, all of which were issued coincident with the Company’s initial public offering (“IPO”). A summary of the warrant activity for the three months ended March 31, 2010 is presented below:

	Number Of  Warrants Issued		Number of Common Shares Issuable Upon Conversion of Warrants
Warrants issued with IPO units	1,666,668		833,334
Warrants issued to the Company’s placement agents net of 66,666 warrants forfeited and 33,000 warrants repurchased	72,000		72,000
Warrants outstanding at December 31, 2009	1,738,668		905,334
Placement agent warrants repurchased by the Company at a price of $1.20 per warrant in January 2010	(333	)	(333	)
Warrants outstanding at March 31, 2010	1,738,335		905,001

(continued)                    

15

HOMEOWNERS CHOICE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements, Continued

(unaudited)

Note 9 — Stockholders’ Equity, continued

The warrants may be exercised at an exercise price equal to $9.10 per share on or before July 30, 2013. At any time after January 30, 2009 and before the expiration of the warrants, the Company at its option may cancel the warrants in whole or in part, provided that the closing price per share of the Company’s common stock has exceeded $11.38 for at least ten trading days within any period of twenty consecutive trading days, including the last trading day of the period. The placement agents also have the option to effect a cashless exercise in which the warrants would be exchanged for the number of shares which is equal to the intrinsic value of the warrant divided by the current value of the underlying shares.

Preferred Stock

At March 31, 2010, the Company is authorized to issue 20,000,000 shares of preferred stock, no par value. The authorized but unissued preferred stock may be issued in one or more series and the shares of each series shall have such rights as determined by the Company’s Board of Directors.

Note 10 — Comprehensive Income

The components of comprehensive income are as follows (dollars in thousands):

	Three Months Ended March 31,
	2010			2009
Net income	$	698		6,284
Other comprehensive income:
Change in unrealized gain on investments:
Unrealized gain arising during the period	$	628		—
Deferred income taxes on above change		(242	)	—
Total other comprehensive income		386		—
Comprehensive income	$	1,084		6,284

Note 11 — Stock-Based Compensation

Stock Option Plan

The Company accounts for stock-based compensation under the fair value recognition provisions of ASC Topic 718 – “Compensation – Stock Compensation.”

The Company’s 2007 Stock Option and Incentive Plan (the “Plan”) provides for granting of stock options to employees, directors, consultants, and advisors of the Company. Under the Plan, options may be granted to purchase a total of 6,000,000 shares of the Company’s common stock. At March 31, 2010, options to purchase 4,810,000 shares are available for grant under the Plan. The outstanding options vest over periods ranging from immediately vested to five years and are exercisable over the contractual term of ten years.

(continued)                    

16

HOMEOWNERS CHOICE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements, Continued

(unaudited)

Note 11 — Stock-Based Compensation, continued

A summary of the activity in the Company’s stock option plan is as follows (dollars in thousands, except per share amounts):

	Number of Options	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at December 31, 2009	1,130,000	$	2.66
Outstanding at March 31, 2010	1,130,000	$	2.66	7.2 years	$	4,360
Exercisable at March 31, 2010	939,334	$	2.56	7.2 years	$	3,704

At March 31, 2010, there was approximately $140,000 of unrecognized compensation expense related to nonvested stock-based compensation arrangements granted under the Plan, which the Company expects to recognize over a weighted-average period of fourteen (14) months. The total fair value of shares vesting and recognized as compensation expense was approximately $44,000 and $121,000, respectively, for the three month periods ended March 31, 2010 and 2009 and the associated income tax benefit recognized was $13,000 and $43,000, respectively. No options were exercised during the three month period ended March 31, 2010. The total intrinsic value of options exercised during the three month period ended March 31, 2009 was $22,000 and the associated income tax benefit recognized was $4,000.

No options were granted during the three month periods ended March 31, 2010 and 2009.

Note 12 — Related Party Transaction

Effective January 20, 2010, the Company repurchased and retired a total of 200,000 shares of the Company’s common stock at a price of $7.00 per share for a total cost of $1,400,000. Such shares were repurchased under a stock purchase agreement with one of the Company’s directors at a price below the $7.95 market value of the Company’s common stock on the date of the transaction. Such repurchases were not part of a publicly announced plan or program.

Note 13 — Subsequent Events

On April 13, 2010, the Company entered into a Sale, Purchase and Escrow Agreement to purchase an office building, including land, in Tampa, Florida for $7.1 million. The agreement required the Company to deliver to its escrow agent two nonrefundable deposits totaling $1.0 million, which the Company has fully paid as of May 13, 2010 upon completion of a 30-day review and approval period. The Company expects to complete the acquisition before May 31, 2010. The Company plans to relocate all of its operations to this facility in the fourth quarter of 2010.

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Report by Independent Registered Public Accounting Firm

Hacker, Johnson & Smith, PA, the Company’s independent registered public accounting firm, has made a limited review of the financial data as of March 31, 2010, and for the three month periods ended March 31, 2010 and 2009 presented in this document, in accordance with standards established by the Public Company Accounting Oversight Board.

Their report furnished pursuant to Article 8-03 of Regulation S-X is included herein.

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Report of Independent Registered Public Accounting Firm

Homeowners Choice, Inc.

Clearwater, Florida:

We have reviewed the accompanying condensed consolidated balance sheet of Homeowners Choice, Inc. and Subsidiaries (the “Company”) as of March 31, 2010, the related condensed consolidated statements of earnings and cash flows for the three month periods ended March 31, 2010 and 2009, and the condensed consolidated statement of stockholders’ equity for the three month period ended March 31, 2010. These interim condensed consolidated financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim condensed consolidated financial statements for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board, the consolidated balance sheet as of December 31, 2009, and the related consolidated statements of earnings, stockholders’ equity and cash flows for the year then ended (not presented herein); and in our report dated March 26, 2010, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2009, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ Hacker, Johnson & Smith PA

HACKER, JOHNSON & SMITH PA

Tampa, Florida

May 5, 2010

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ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion in conjunction with our condensed consolidated financial statements and related notes and information included under this Item 2 and elsewhere in this quarterly report on Form 10-Q and in our Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 30, 2010. Unless the context requires otherwise, as used in this Form 10-Q, the terms “HCI,” “we,” “us,” “our,” “the Company,” “our company,” and similar references refer to Homeowners Choice, Inc. and its subsidiaries.

Forward-Looking Statements

In addition to historical information, this quarterly report contains forward-looking statements as defined under federal securities laws. Such statements involve risks and uncertainties, such as statements about our plans, objectives, expectations, assumptions or future events. These statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from any future results, performances or achievements expressed or implied by the forward-looking statements. Typically, forward-looking statements can be identified by terminology such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions. Among the important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include but are not limited to the effect of governmental regulation; changes in insurance regulations; the frequency and extent of claims; uncertainties inherent in reserve estimates; catastrophic events; a change in the demand for, pricing of, availability or collectability of reinsurance; restrictions on our ability to change premium rates; increased rate pressure on premiums; changing rates of inflation; and other risks and uncertainties detailed herein and from time to time in our SEC reports.

OVERVIEW

Homeowners Choice, Inc. is a property and casualty insurance holding company incorporated in Florida in 2006. Through our subsidiaries, we provide property and casualty homeowners’ insurance, condominium-owners’ insurance, and tenants’ insurance to individuals owning property in Florida. We offer these insurance products at competitive rates, while pursuing profitability using selective underwriting criteria. Our principal revenues are earned premiums, which are reported net of reinsurance costs, and investment income. We cede a substantial portion of our earned premiums to reinsurers to mitigate risks primarily associated with hurricanes and other catastrophic events. Our principal expenses are claims from policyholders, policy acquisition costs, and other underwriting expenses. As of March 31, 2010, we had total assets of $128.2 million and stockholders’ equity of $44.7 million. Our net income was $698,000 for the three months ended March 31, 2010. Our book value per share increased to $7.21 as of March 31, 2010 compared to $7.03 as of December 31, 2009.

We began operations in June of 2007 by participating in a “take-out program” through which we assumed insurance policies held by Citizens Property Insurance Corporation (“Citizens”), a Florida state-supported insurer. The take-out program is a legislatively mandated program designed to reduce the State’s risk exposure by encouraging private companies to assume policies from Citizens. We currently have approximately 69,000 property and casualty insurance policies in force. These policies were assumed in seven separate assumption transactions which took place in July and November 2007, February, June, October and December 2008, and December 2009, and account for substantially all of our premium revenue since inception. Of those policies assumed, approximately

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86% are homeowners’ insurance policies, and the remaining 14% are a combination of policies written for condominium-owners and tenants. Our existing policies represent approximately $127.0 million in annualized premiums.

Citizens requires us to offer renewals on the policies we acquire for a period of three years subsequent to the initial expiration of the assumed policies. The policyholders have the option to renew with us or they may ask their agent to place their coverage with another insurance company. They may also elect to return to Citizens, i.e. opt out, prior to the policy renewal date. We strive to retain these policies by offering competitive rates to our policyholders, which may be below the rates we initially charged in our take-out program.

We face various challenges to implementing our operating and growth strategies. Since we write policies that cover Florida homeowners, condominium owners, and tenants, we cover losses that may arise from, among other things, catastrophes, which could have a significant effect on our business, results of operations, and financial condition. To mitigate our risk of such losses, we cede a portion of our exposure to other entities under catastrophe excess of loss reinsurance treaties. Even without catastrophic events, we may incur losses and loss adjustment expenses that deviate substantially from our estimates and that may exceed our reserves, in which case our net income and capital would decrease. Our operating and growth strategies may also be impacted by regulation and supervision of our business by the State of Florida, which must approve our policy forms and premium rates as well as monitor our insurance subsidiary’s ability to meet all requirements for regulatory compliance. Additionally, we compete with large, well-established insurance companies as well as other specialty insurers that, in most cases, possess greater financial resources, larger agency networks, and greater name recognition.

Recent Developments

On April 13, 2010, we entered into a Sale, Purchase and Escrow Agreement to purchase an office building, including land, in Tampa, Florida for $7.1 million. The agreement required us to deliver to our escrow agent two nonrefundable deposits totaling $1.0 million, which the Company has fully paid as of May 13, 2010 upon completion of a 30-day review and approval period. We expect to complete the acquisition before May 31, 2010. We plan to relocate all of our operations to this facility in the fourth quarter of 2010.

21

RESULTS OF OPERATIONS

The following table summarizes our results of operations for the three months ended March 31, 2010 and 2009 (dollars in thousands, except per share amounts):

	Three Months Ended March 31,
	2010			2009
Operating Revenue
Gross premiums earned	$	30,344			30,337
Premiums ceded		(14,103	)		(9,007	)
Net premiums earned		16,241			21,330
Net investment income		531			358
Other Income		215			635
Total operating revenue		16,987			22,323
Operating Expenses
Losses and loss adjustment expenses		9,813			10,022
Policy acquisition and other underwriting expenses		4,292			920
Other operating expenses		1,696			1,244
Total operating expenses		15,801			12,186
Income before income taxes		1,186			10,137
Income taxes		488			3,853
Net income	$	698			6,284
Ratios to Net Premiums Earned:
Loss Ratio		60.42	%		46.99	%
Expense Ratio		36.87	%		10.14	%
Combined Ratio		97.29	%		57.13	%
Ratios to Gross Premiums Earned:
Loss Ratio		32.34	%		33.04	%
Expense Ratio		19.73	%		7.13	%
Combined Ratio		52.07	%		40.17	%
Per Share Data:
Basic earnings per share	$	.11		$	.91
Diluted earnings per share	$	.10		$	.87

Comparison of the Three Months Ended March 31, 2010 to the Three Months Ended March 31, 2009

Our results of operations for the three months ended March 31, 2010 reflect net income of $698,000, or $.10 earnings per diluted share, compared to net income of $6.3 million, or $.87 earnings per diluted share, for the three months ended March 31, 2009.

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Revenue

Gross Premiums Earned for the three months ended March 31, 2010 were $30.3 million and reflect the revenue from policies assumed from Citizens in connection with the seven assumption transactions through December 2009 and the revenue on the renewal of these policies. Gross premiums earned for the three months ended March 31, 2009 were $30.3 million and reflect the revenue from policies assumed from Citizens in connection with the six assumption transactions through December 2008 and the revenue on the renewal of these policies. Our gross earned premiums for the three months ended March 31, 2010 and 2009 were offset by policyholder opt outs processed during the respective quarters. The amounts related to these policyholder opt outs were significantly higher in 2010 as compared to 2009.

Premiums Ceded for the three months ended March 31, 2010 and 2009 were $14.1 million and $9.0 million, respectively. Our premiums ceded represent amounts paid to reinsurers to cover losses from catastrophes that exceed the thresholds defined by our catastrophe excess of loss reinsurance treaties. Our reinsurance rates, which become effective on June 1 of each year, are based primarily on policy exposures reflected in gross premiums earned. Thus, the $5.1 million increase in premiums ceded during 2010 is primarily due to the increase in our policy exposure base between June 1, 2008 and June 1, 2009. In addition, our reinsurers imposed a general rate increase of approximately seven percent effective June 1, 2009. Premiums ceded were 46.5% and 29.7% of gross premiums earned during the three months ended March 31, 2010 and 2009, respectively.

Net Premiums Earned for the three months ended March 31, 2010 and 2009 were $16.2 million and $21.3 million, respectively, and reflect the gross premiums earned less the appropriate reinsurance costs as described above. Net premiums earned decreased by $5.1 million in 2010 as compared to 2009 as a result of the increases in our reinsurance premiums and policyholder opt outs as described above.

Net Premiums Written during the three months ended March 31, 2010 and 2009 totaled $(5.3) million and $29.4 million, respectively. Net premiums written represent the premiums charged on policies issued during a fiscal period less any applicable reinsurance costs. During 2010, our net premiums written were negative primarily as a result of the larger than anticipated opt outs (policyholders’ decisions to return to Citizens) on policies assumed in December 2009.

The following is a reconciliation of our total Net Premiums Written to Net Premiums Earned for the three months ended March 31, 2010 and 2009 (dollars in thousands):

	Three Months Ended March 31,
	2010			2009
Net Premiums Written	$	(5,339	)	29,396
Decrease (Increase) in Unearned Premiums		21,580		(8,066	)
Net Premiums Earned	$	16,241		21,330

Net Investment Income for the three months ended March 31, 2010 and 2009 was $531,000 and $358,000, respectively. There were no other than temporary impairments recorded during the three months ended March 31, 2010 and 2009. The $173,000 increase in total investment income is primarily due to interest income received from our investments in fixed maturity securities, which were added to our investment portfolio beginning in the second quarter of 2009. This increase was

23

offset by a reduction in interest income with respect to various certificates of deposit redeemed since March 31, 2009.

Other Income for the three months ended March 31, 2010 and 2009 of $215,000 and $635,000, respectively, primarily reflects the policy fee income we earn with respect to our issuance of renewal policies. Policy fees decreased $412,000 during 2010 as a direct result of the decrease in policies written.

Expenses

Our Losses and Loss Adjustment Expenses amounted to $9.8 million and $10.0 million, respectively, during the three months ended March 31, 2010 and 2009.

Our losses and loss adjustment expense reserves (“Reserves”), which are more fully described below under “Critical Accounting Policies and Estimates,” are specific to homeowners insurance, which is our only line of business. These Reserves include both case reserves on reported claims and our reserves for incurred but not reported (“IBNR”) losses. At each period-end date, the balance of our Reserves is based on our best estimate of the ultimate cost of each claim for those known cases and the IBNR loss reserves are estimated based primarily on our historical experience. Our Reserves increased from $19.2 million at March 31, 2009 to $20.8 million at March 31, 2010. The $1.6 million increase in our Reserves during 2010 is comprised of a $6.5 million increase specific to the three months ended March 31, 2010 offset by a reduction of $4.4 million and $0.5 million in our Reserves for 2009 and 2008, respectively. The $6.5 million in Reserves established for 2010 claims is due to the increase in our policy exposure, which resulted in an increase in the amount of reported losses in 2010. The decrease of $4.9 million specific to our 2009 and 2008 accident-year reserves is due to favorable development arising from lower than expected loss development during 2010 relative to expectations used to establish our Reserve estimates at the end of 2009. Factors that are attributable to this favorable development may include a lower severity of claims than the severity of claims considered in establishing our Reserves and actual case development may be more favorable than originally anticipated.

Policy Acquisition and Other Underwriting Expenses for the three months ended March 31, 2010 and 2009 of $4.3 million and $0.9 million, respectively, primarily reflect the amortization of deferred acquisition costs, commissions payable to agents for production and renewal of policies, and premium taxes and policy fees. The $3.4 million increase in 2010 is primarily due to increases in our commissions specific to our renewal business, which accounted for $23.3 million of our gross earned premiums in 2010 compared to $9.6 million in 2009. In addition, we experienced increases in our premium taxes, payroll and other underwriting expenses in 2010 reflective of the increase in renewal policy volume.

Other Operating Expenses for the three months ended March 31, 2010 and 2009 were $1.7 million and $1.2 million, respectively. Such expenses include administrative compensation and related benefits, corporate insurance, professional fees, office lease and related expenses, information system expense, and other general and administrative costs. The $452,000 increase is primarily attributable to an increase of $489,000 in 2010 for administrative compensation and related benefits offset by a decrease of $37,000 in net other operating expenses. The increase attributable to compensation and related benefits relates to our 2010 retention bonus program for directors and executive officers and, also, to new employees hired since March 31, 2009. As of March 31, 2010, we had 57 employees compared to 36 employees as of March 31, 2009.

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Income Taxes for the three months ended March 31, 2010 and 2009 were $0.5 million and $3.9 million, respectively, for state and federal income taxes resulting in an effective tax rate of 41% for 2010 and 38.0% for 2009.

Ratios:

The loss ratio applicable to the three months ended March 31, 2010 (loss and loss adjustment expenses related to net premiums earned) was 60.4% compared to 47.0% for the three months ended March 31, 2009. Our loss ratio was negatively impacted by a significant increase in our reinsurance costs during 2010, which reduced our net premiums earned.

The expense ratio applicable to the three months ended March 31, 2010 (policy acquisition and other underwriting expenses related to net premiums earned plus compensation, employee benefits, and other operating expenses) was 36.9% compared to 10.1% for the three months ended March 31, 2009. We have experienced an increase in our expense ratio due to increases in our premium taxes, payroll, and other underwriting expenses required to manage our policies in force as we have renewed more policies in 2010 than in 2009 (see Policy Acquisition and Other Underwriting Expenses above). In addition, our expense ratio was negatively impacted by a significant increase in our reinsurance costs during 2010, which reduced our net premiums earned.

The combined loss and expense ratio (total of all expenses related to net premiums earned) is the key measure of underwriting performance traditionally used in the property and casualty industry. A combined ratio under 100.00% generally reflects profitable underwriting results. A combined ratio over 100.00% generally reflects unprofitable underwriting results. Our combined ratio for the three months ended March 31, 2010 was 97.3% compared to 57.1% for the three months ended March 31, 2009.

The combined loss and expense ratio to gross premiums earned for the three months ended March 31, 2010 was 52.1% compared to 40.2% for the three months ended March 31, 2009.

Seasonality of Our Business

We expect to experience increases in our losses and loss adjustment expenses during the period from June 1 through November 30 each year as this period is typically the period during which hurricanes and other tropical storms occur. As a result of such seasonal variations in our reported losses, we anticipate our operating profits during the period from June 1 through November 30 each year will be negatively impacted by an increase in losses and loss adjustment expenses. Conversely, we expect more favorable operating results during the period from December 1 through May 31 each year.

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LIQUIDITY AND CAPITAL RESOURCES

Since inception, our liquidity requirements have been met through issuance of our common stock and funds from operations. We expect our future liquidity requirements will be met by funds from operations, primarily the cash received by our insurance subsidiary from premiums written and investment income.

Our insurance subsidiary requires liquidity and adequate capital to meet ongoing obligations to policyholders and claimants and to fund operating expenses. In addition, we attempt to maintain adequate levels of liquidity and surplus to manage any differences between the duration of our liabilities and invested assets. In the insurance industry, cash collected for premiums from policies written is invested, interest and dividends are earned thereon, and loss and loss adjustment expenses are paid out over a period of years. This period of time varies by the circumstances surrounding each claim. A substantial portion of our losses and loss adjustment expenses are fully settled and paid within 90 days of the claim receipt date. Additional cash outflow occurs through payments of underwriting costs such as commissions, taxes, payroll, and general overhead expenses.

We believe that we maintain sufficient liquidity to pay our insurance subsidiary’s claims and expenses, as well as satisfy commitments in the event of unforeseen events such as reinsurer insolvencies, inadequate premium rates, or reserve deficiencies. We maintain a comprehensive reinsurance program at levels management considers adequate to diversify risk and safeguard our financial position.

In the future, we anticipate our primary use of funds will be to pay claims and operating expenses.

Cash Flows

Our cash flows from operating, investing and financing activities for the three months ended March 31, 2010 and 2009 are summarized below.

Cash Flows for the Three Months Ended March 31, 2010

Net cash provided by operating activities for the three months ended March 31, 2010 was approximately $12.3 million, which resulted primarily from the collection of $19.5 million from Citizens and $5.9 million in advance premiums offset by cash disbursed for operating expenses and losses and loss adjustment expenses. Net cash provided by investing activities of $0.5 million was primarily due to the net amount of $4.2 million received from the redemption of various certificates of deposit offset by the net amount of $3.5 million used to purchase various fixed maturity securities. Net cash used in financing activities totaled $1.8 million, which was due to the repurchases during the period of our shares and warrants.

Cash Flows for the Three Months Ended March 31, 2009

Net cash provided by operating activities for the three months ended March 31, 2009 was approximately $4.6 million, which consisted primarily of cash received from net written premiums less cash disbursed for operating expenses and losses and loss adjustment expenses. Net cash used in investing activities of $6.2 million was primarily the result of our purchase of short-term investments.

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Investments

The main objective of our investment policy is to maximize our after-tax investment income with a minimum of risk given the current financial market. Our excess cash is invested primarily in money market accounts, certificates of deposit (i.e., CDs maturing in less than thirteen months), and time deposits (i.e. CDs maturing in more than twelve months).

At March 31, 2010, we have approximately 27% of our available cash apportioned among investments in U.S. Treasury notes, commercial mortgage-backed securities, and corporate bonds. Such investments include securities that will be held-to-maturity and, also, certain investments that are available-for-sale. Fixed maturities classified as available-for-sale are carried at fair value while fixed maturities classified as held-to-maturity are carried at amortized cost. Changes in the general interest rate environment affect the returns available on new fixed maturity investments. While a rising interest rate environment enhances the returns available on new investments, it reduces the market value of existing fixed maturity investments and thus the availability of gains on disposition. A decline in interest rates reduces the returns available on new investments but increases the market value of existing investments, creating the opportunity for realized investment gains on disposition.

With the exception of large national banks, it is our current policy not to maintain cash deposits of more than an aggregate of $5.5 million in any one bank at any time. In the future, we may alter our investment policy to include or increase investments in federal, state and municipal obligations, preferred and common equity securities and real estate mortgages, as permitted by applicable law, including insurance regulations.

OFF-BALANCE SHEET ARRANGEMENTS

As of December 31, 2009, we had no off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.

CONTRACTUAL OBLIGATIONS

As a smaller reporting company as defined by Rule 229.10(f)(1) of the Exchange Act, we are not required to provide the information under this item.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

We have prepared our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires us to make estimates and judgments to develop amounts reflected and disclosed in our financial statements. Material estimates that are particularly susceptible to significant change in the near term are related to our losses and loss adjustment expenses (“Reserves”), which include amounts estimated for claims incurred but not yet reported. Reserves are determined by establishing liabilities in amounts estimated to cover incurred losses and loss adjustment expenses. Such Reserves are determined based on our assessment of claims reported and the development of pending claims. These Reserves are based on individual case estimates for the reported losses and loss adjustment expenses and estimates of such amounts that are incurred but not reported (“IBNR”). Changes in the estimated liability are charged or credited to operations as the losses and loss adjustment expenses are adjusted.

The IBNR reserves represent our estimate of the ultimate cost of all claims that have occurred but have not been reported to us and, in some cases, may not yet be known to the insured. Estimating the IBNR component of our Reserves involves considerable judgment on the part of management. At March 31, 2010, $6.5 million of the total $20.8 million we have reserved for losses and loss adjustment expenses is specific to our estimate of claims incurred but not reported. The remaining $14.3 million relates to known cases which have been reported but not yet fully settled in which case we have booked a reserve based on our best estimate of the ultimate cost of each claim. At March 31, 2010, $9.4 million of the $14.3 million in reserves for known cases relates to claims incurred during prior years.

Based on all information known to us, we believe our Reserves at March 31, 2010 are adequate to cover our claims for losses that had occurred as of that date including losses yet to be reported. However, these estimates are subject to trends in claim severity and frequency and must continually be reviewed by management. As part of the process, we review historical data and consider various factors, including known and anticipated regulatory and legal developments, changes in social attitudes, inflation and economic conditions. As experience develops and other data becomes available, these estimates are revised, as required, resulting in increases or decreases to the existing unpaid losses and loss adjustment expenses. Adjustments are reflected in the results of operations in the period in which they are made and the liabilities may deviate substantially from prior estimates.

In addition to Reserves, we believe our accounting policies specific to premium revenue recognition, losses and loss adjustment expenses, reinsurance, deferred policy acquisition costs, income taxes, and stock-based compensation expense involve our most significant judgments and estimates material to our consolidated financial statements. These accounting estimates and related risks that we consider to be our critical accounting estimates are more fully described in our Annual Report on Form 10-K, which we filed with the SEC on March 30, 2010. For the three months ended March 31, 2010, there have been no material changes with respect to any of our critical accounting policies.

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RECENT ACCOUNTING PRONOUNCEMENTS

For information with respect to recent accounting pronouncements and the impact of these pronouncements on our consolidated financial statements, see Note 2 to our Notes to Condensed Consolidated Financial Statements.

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company as defined by Rule 229.10(f)(1) of the Exchange Act, we are not required to provide the information under this item.

ITEM 4 – CONTROLS AND PROCEDURES

Under the supervision and with the participation of our Chief Executive Officer (our principal executive officer) and Chief Financial Officer (our principal financial officer), we have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report, and, based on this evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that these disclosure controls and procedures are effective.

There have been no changes in our internal controls over financial reporting during the quarter ended March 31, 2010 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II – OTHER INFORMATION

ITEM 1 – LEGAL PROCEEDINGS

The Company is a party to claims and legal actions arising routinely in the ordinary course of our business. Although we cannot predict with certainty the ultimate resolution of the claims and lawsuits asserted against us, we do not believe that any currently pending legal proceedings to which we are a party will have a material adverse effect on our consolidated financial position, results of operations or cash flows.

ITEM 1a – RISK FACTORS

There have been no material changes from the risk factors previously disclosed in the section entitled “Risk Factors” in our Form 10-K, which was filed with the Securities and Exchange Commission on March 30, 2010.

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ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a) Sales of Unregistered Securities

None.

(b) Use of Proceeds

None.

(c) Repurchases of Securities

Effective March 18, 2009, our Board of Directors authorized a plan to repurchase up to $3.0 million (inclusive of commissions) of the Company’s common shares. The repurchase plan allowed the Company to repurchase shares from time to time through March 19, 2010. This repurchase plan was supplemented in December 2009 upon approval by the Board of Directors to extend the repurchase authority by an additional $3.0 million and continue until the repurchase plan is terminated by the Company or the maximum number of dollars has been expended. The shares may be purchased for cash in open market purchases, block transactions and privately negotiated transactions in accordance with applicable federal securities laws. The share repurchase plan may be modified, suspended, terminated or extended by the Company any time without prior notice. During the quarter ended March 31, 2010, the Company repurchased and retired a total of 54,143 shares at an average price of $7.35 per share and a total cost, inclusive of fees and commissions, of $401,000, or $7.41 per share, under this authorized repurchase program. The following table provides information with respect to shares repurchased during the quarter ended March 31, 2010:

	(a) Total Number Of Shares Repurchased		(b) Average Price  Paid Per Share		(c) Total  Number of Shares Purchased as Part of Publicly Announced Plan or  Program	(d) Maximum Number (or Approximate Dollar Value) of  Shares that May Yet be Purchased
Period
January 1-31, 2010	207,636	*		7.93	7,303	$	2,831,000
February 1-28, 2010	12,930			7.64	12,930		2,731,000
March 1-31, 2010	33,910			7.11	33,910		2,488,000
Total	254,476	*	$	7.35	54,143

*Includes 200,000 shares of common stock repurchased by the Company from one of the Company’s directors in January 2010 at a price of $7.00 per share for a total purchase price of $1.4 million. Also includes 333 placement agent warrants repurchased by the Company in January 2010 at a price of $1.20 per warrant for a total purchase price of $400. Such repurchases were not part of a publicly announced plan or program.

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Working Capital Restrictions and Other Limitations on Payment of Dividends

We are not subject to working capital restrictions or other limitations on the payment of dividends. Our insurance subsidiary, however, is subject to restrictions on the dividends it may pay to our parent corporation, Homeowners Choice, Inc. Those restrictions could impact our ability to pay dividends if our Board of Directors determines to do so.

Under Florida law, a domestic insurer such as our insurance subsidiary, Homeowners Choice Property & Casualty Insurance Company, Inc., may not pay any dividend or distribute cash or other property to its stockholders except out of that part of its available and accumulated capital and surplus funds which is derived from realized net operating profits on its business and net realized capital gains. For a three-year period beginning March 30, 2007, our insurance subsidiary, as a newly licensed Florida insurer, is precluded from paying dividends unless approved in advance by the Florida Office of Insurance Regulation. Additionally, Florida statutes preclude our insurance subsidiary from making dividend payments or distributions to stockholders without prior approval of the Florida Office of Insurance Regulation if the dividend or distribution would exceed the larger of (1) the lesser of (a) 10.0% of its capital surplus or (b) net income, not including realized capital gains, plus a two year carry forward, (2) 10.0% of capital surplus with dividends payable constrained to unassigned funds minus 25% of unrealized capital gains or (3) the lesser of (a) 10.0% of capital surplus or (b) net investment income plus a three year carry forward with dividends payable constrained to unassigned funds minus 25% of unrealized capital gains.

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ITEM 6 – EXHIBITS

The following documents are filed as part of this report:

EXHIBIT NUMBER	DESCRIPTION
3.1	Articles of Incorporation, with amendments. Incorporated by reference to the correspondingly numbered exhibit to our Registration Statement on Form S-1 (File No. 333-150513), originally filed April 30, 2008, effective July 24, 2008, as amended.
3.2	Bylaws as amended April 16, 2009. Incorporated by reference to the correspondingly numbered exhibit to our Current Report on Form 8-K filed April 23, 2009.
4.1	Form of Common Stock Certificate. Incorporated by reference to the correspondingly numbered exhibit to our Post-Effective Amendment No. 1 to our Registration Statement on Form S-1 (File No. 333-150513) filed August 6, 2008.
4.2	Warrant Agreement dated July 30, 2008 between Homeowners Choice, Inc. and American Stock Transfer & Trust Company. Incorporated by reference to the correspondingly numbered exhibit to our Post-Effective Amendment No. 1 to our Registration Statement on Form S-1 (File No. 333-150513) filed August 6, 2008.
4.3	Form of Warrant Certificate. Incorporated by reference to the correspondingly numbered exhibit Post-Effective Amendment No. 1 to our Registration Statement on Form S-1 (File No. 333-150513) filed August 6, 2008.
4.4	Warrant Agreement dated July 30, 2008 between Homeowners Choice, Inc. and Anderson & Strudwick, Incorporated. Incorporated by reference to the correspondingly numbered exhibit to our Post-Effective Amendment No. 1 to our Registration Statement on Form S-1 (File No. 333-150513) filed August 6, 2008.
4.5	Form of Warrant Certificate issued to Anderson & Strudwick. Incorporated. Incorporated by reference to the correspondingly numbered exhibit to our Post-Effective Amendment No. 1 to our Registration Statement on Form S-1 (File No. 333-150513) filed August 6, 2008.

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4.6	Form of Unit Certificate. Incorporated by reference to the correspondingly numbered exhibit to our Post-Effective Amendment No. 1 to our Registration Statement on Form S-1 (File No. 333-150513) filed August 6, 2008.
4.7	Warrant Agreement dated July 30, 2008, between Homeowners Choice, Inc. and GunnAllen Financial, Inc. Incorporated by reference to the correspondingly numbered exhibit to our Post-Effective Amendment No. 1 to our Registration Statement on Form S-1 (File No. 333-150513) filed August 6, 2008.
4.8	Letter Agreement dated August 1, 2008 among Homeowners Choice, Inc., Anderson & Strudwick, Incorporated and GunnAllen Financial, Inc., whereby we waive certain cancellation rights under warrants issued to the other parties. Incorporated by reference to the correspondingly numbered exhibit to our Post-Effective Amendment No. 1 to our Registration Statement on Form S-1 (File No. 333-150513) filed August 6, 2008.
4.9	See Exhibits 3.1 and 3.2 of this report for provisions of the Articles of Incorporation, as amended, and our Bylaws, as amended, defining certain rights of security holders. See also Exhibits 10.6 and 10.7 defining certain rights of the recipients of stock options and other equity-based awards.
10.1	Executive Agreement dated May 1, 2007 between Homeowners Choice, Inc. and Francis X. McCahill, III. Incorporated by reference to the correspondingly numbered exhibit to our Registration Statement on Form S-1 (File No. 333-150513), originally filed April 30, 2008, effective July 24, 2008, as amended.
10.2	Executive Agreement dated May 1, 2007 between Homeowners Choice, Inc. and Richard R. Allen. Incorporated by reference to the correspondingly numbered exhibit to our Registration Statement on Form S-1 (File No. 333-150513), originally filed April 30, 2008, effective July 24, 2008, as amended.
10.3	Sale, Purchase and Escrow Agreement, dated March 13, 2010, between CAT-FLA Owner LLC and HCPCI Holdings LLC.
10.5	Consulting Agreement dated June 1, 2007 between Homeowners Choice, Inc. and Scorpio Systems, Inc. Incorporated by reference to the correspondingly numbered exhibit to our Registration Statement on Form S-1 (File No. 333-150513), originally filed April 30, 2008, effective July 24, 2008, as amended. See amendment to Consulting Agreement at Exhibit 10.12.

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10.6	Homeowners Choice, Inc. 2007 Stock Option and Incentive Plan. Incorporated by reference to the correspondingly numbered exhibit to our Form 10-Q filed August 29, 2008.
10.7	Form of Incentive Stock Option Agreement. Incorporated by reference to the correspondingly numbered exhibit to our Registration Statement on Form S-1 (File No. 333-150513), originally filed April 30, 2008, effective July 24, 2008, as amended.
10.9	Software License Agreement executed April 8, 2008 with an effective date of November 1, 2007 by and between Homeowners Choice, Inc. and Scorpio Systems, Inc. Incorporated by reference to the correspondingly numbered exhibit to our Registration Statement on Form S-1 (File No. 333-150513), originally filed April 30, 2008, effective July 24, 2008, as amended.
10.10	PR-M Non-Bonus Assumption Agreement dated December 1, 2007 by and between Homeowners Choice Property & Casualty Insurance Company, Inc. and Citizens Property Insurance Corporation. Incorporated by reference to the correspondingly numbered exhibit to our Form 10-K filed March 30, 2010.
10.11	Service Contract for Homeowners Claims Handling dated January 29, 2010, but effective January 1, 2010, by and between Homeowners Choice Managers, Inc. and Johns Eastern Company, Inc. Incorporated by reference to the correspondingly numbered exhibit to our Form 10-K filed March 30, 2010.
10.12	Amendment dated August 21, 2008 to Consulting Agreement dated June 1, 2007 between Homeowners Choice, Inc. and Scorpio Systems, Inc. Incorporated by reference to Exhibit 10.12 to Form 8-K filed August 21, 2008.
10.13	Excess Catastrophe Reinsurance Contract effective June 1, 2009 by Homeowners Choice Property and Casualty Insurance Company, Inc. and Subscribing Reinsurers. Incorporated by reference to the correspondingly numbered exhibit to our Form 10-Q filed August 12, 2009.

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10.14	Reinstatement Premium Protection Reinsurance Contract effective June 1, 2009 by Homeowners Choice Property and Casualty Insurance Company, Inc. and Subscribing Reinsurers. Incorporated by reference to the correspondingly numbered exhibit to our Form 10-Q filed August 12, 2009.
10.15	Multi-Year Excess Catastrophe Reinsurance Contract dated June 1, 2008 by Homeowners Choice Property and Casualty Insurance Company, Inc. and Subscribing Reinsurers. Incorporated by reference to the correspondingly numbered exhibit to our Form 10-Q filed August 29, 2008.
10.17	Form of indemnification agreement for our officers and directors. Incorporated by reference to the correspondingly numbered exhibit to our Form 10-Q filed August 12, 2009.
10.18	Lease Agreement dated April 8, 2008 between 2340 Drew St, LLC and Homeowners Choice, Inc. Incorporated by reference to the correspondingly numbered exhibit to our Registration Statement on Form S-1 (File No. 333-150513), originally filed April 30, 2008, effective July 24, 2008, as amended.
31.1	Certification of the Chief Executive Officer
31.2	Certification of the Chief Financial Officer
32.1	Written Statement of the Chief Executive Officer Pursuant to 18 U.S.C.ss.1350
32.2	Written Statement of the Chief Financial Officer Pursuant to 18 U.S.C.ss.1350

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, who has signed this report on behalf of the Company.

	HOMEOWNERS CHOICE, INC.
May 14, 2010	By	/s/ Francis X. McCahill III
		Francis X. McCahill III
		President and Chief Executive Officer
		(Principal Executive Officer)
May 14, 2010	By	/s/ Richard R. Allen
		Richard R. Allen
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

A signed original of this document has been provided to Homeowners Choice, Inc. and will be retained by Homeowners Choice, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

36

EX-10.3

Exhibit 10.3

SALE, PURCHASE AND ESCROW AGREEMENT

BETWEEN

CAT-FLA OWNER LLC

a Delaware limited liability company

(Seller)

AND

HCPCI HOLDINGS LLC,

a Florida limited liability company

(Purchaser)

AND

DRIVER, MCAFEE, PEEK & HAWTHORNE, P.L.

(Escrow Agent)

TABLE OF CONTENTS

Article I RECITALS		1
1.1.	Real Property	1
1.2.	Personal Property	1
1.3.	Purchase and Sale	1
Article II PURCHASE PRICE		1
2.1.	Price	1
2.2.	Investments	2
2.3.	Interest on the Deposit	2
Article III CONDITIONS TO THE PARTIES’ OBLIGATIONS		2
3.1.	Conditions to Purchaser’s Obligation to Purchase	2
3.2.	Conditions to Seller’s Obligation to Sell	3
Article IV PURCHASER’S DELIVERIES AND SELLER’S DELIVERIES TO TITLE AGENT		4
4.1.	Purchaser’s Deliveries	4
4.2.	Seller’s Deliveries	4
4.3.	Failure to Deliver	5
Article V INVESTIGATION OF PROPERTY		6
5.1.	Delivery of Documents	6
5.2.	Physical Inspection of Property	6
5.3.	Investigation Period	8
5.4.	Effect of Termination	9
5.5.	No Obligation to Cure	9
5.6.	Copies of Third Party Reports	9
Article VI THE CLOSING		9

6.1.	Date and Manner of Closing	9
Article VII PRORATION, FEES, COSTS AND ADJUSTMENTS		9
7.1.	Prorations	9
7.2.	Seller’s Closing Costs	11
7.3.	Purchaser’s Closing Costs	11
Article VIII DISTRIBUTION OF FUNDS AND DOCUMENTS		12
8.1.	Delivery of the Purchase Price	12
8.2.	Other Monetary Disbursements	12
8.3.	Recorded Documents	12
8.4.	Documents to Purchaser	12
8.5.	Documents to Seller	12
8.6.	All Other Documents	13
Article IX RETURN OF DOCUMENTS AND FUNDS UPON TERMINATION		13
9.1.	Return of Seller’s Documents	13
9.2.	Return of Purchaser’s Documents	13
9.3.	Deposit	13
9.4.	Disbursement of Deposit	14
9.5.	No Effect on Rights of Parties; Survival	14
Article X DEFAULT		14
10.1.	Seller’s Remedies	14
10.2.	Purchaser’s Remedies	15
Article XI REPRESENTATIONS AND WARRANTIES		15
11.1.	Seller’s Warranties and Representations	15
11.2.	Purchaser’s Warranties and Representations	17
11.3.	No Other Warranties and Representations	18

11.4.	Know Your Customer	19
Article XII CASUALTY AND CONDEMNATION		19
Article XIII CONDUCT PRIOR TO CLOSING		20
13.1.	Conduct	20
13.2.	Actions Prohibited	20
13.3.	Modification of Existing Leases and Contracts	20
13.4.	New Leases and Contracts	21
13.5.	Confidentiality	21
13.6.	Right to Cure	22
Article XIV NOTICES		22
Article XV TRANSFER OF POSSESSION		23
15.1.	Transfer of Possession	23
15.2.	Delivery of Documents at Closing	23
Article XVI GENERAL PROVISIONS		23
16.1.	Captions	23
16.2.	Exhibits	23
16.3.	Entire Agreement	23
16.4.	Modification	23
16.5.	Attorneys’ Fees	23
16.6.	Governing Law	24
16.7.	Time of Essence	24
16.8.	Survival	24
16.9.	Assignment by Purchaser	24
16.10.	Severability	24
16.11.	Successors and Assigns	24

16.12.	Interpretation	24
16.13.	Counterparts	24
16.14.	Recordation	24
16.15.	Limitation on Liability	24
16.16.	Possession of Seller	25
16.17.	Business Day	25
16.18.	Waiver of Jury Trial	25
16.19.	Other Duties of Escrow Agent	25
16.20.	Disputes	26
16.21.	Reports	26
16.22.	Radon Notice	26
16.23.	Brokers	26

EXHIBITS

EXHIBIT A	—	Legal Description of Land
EXHIBIT B	—	Form of Tenant Estoppel Certificate
EXHIBIT C	—	Form of Assignment and Assumption of Leases, Contracts and Other Property Interests
EXHIBIT D	—	Form of Bill of Sale
EXHIBIT E	—	Leases
EXHIBIT F	—	Contracts
EXHIBIT G	—	Form of Notice to Tenants
EXHIBIT H	—	FIRPTA Affidavit
EXHIBIT I	—	Form of Deed
EXHIBIT J	—	Owner’s Affidavit
EXHIBIT K	—	Permitted Exceptions
SCHEDULE 11.1.7  —     List of Notices
SCHEDULE 11.1.9  —     List of Material Litigation
SCHEDULE 11.1.10  —     List of Environmental Reports

INDEX OF DEFINED TERMS

Term	Section
Agreement	Introduction
Additional Funds	2.1.2
Assignment of Leases and Contracts	4.1.2
Bill of Sale	4.1.3
CAM Charges	7.1.5
Closing	6.1
Closing Date	6.1
Contracts	4.2.2
Deed	4.2.1
Deposit	2.1.1
Effective Date	Introduction
Escrow Agent	Introduction
Improvements	1.1
Investigation Period	5.3.2
Land	1.1
Leases	4.2.1
Lists	11.2.5
OFAC	11.2.5
Order	.11.2.5
Owner’s Affidavit	4.2.8
Permitted Encumbrances	4.2.1
Permitted Exceptions	5.3.1
Personal Property	1.2
Property	1.2
Proprietary Information	13.5
Purchase Price	2.1
Purchaser	Introduction
Real Property	1.1
Seller	Introduction
Seller’s Broker	11.1.1
Survey	5.1.2
Tenant Estoppel Certificate	3.1.5
Tenant Payments	7.1.1
Title Commitment	5.1.1
Title Company	3.1.3
Title Objections	5.3.1
Title Policy	3.1.3

SALE, PURCHASE AND ESCROW AGREEMENT

This Sale, Purchase and Escrow Agreement (“Agreement”), dated as of April     , 2010 (the “Effective Date”), is made by and between CAT-FLA OWNER LLC, a Delaware limited liability company (“Seller”), and HCPCI HOLDINGS LLC, a Florida limited liability company (“Purchaser”), and constitutes (i) a contract of sale and purchase between the parties and (ii) an escrow agreement among Seller, Purchaser and DRIVER, MCAFEE, PEEK & HAWTHORNE, P.L. (“Escrow Agent”), the consent of which appears at the end hereof.

ARTICLE I

RECITALS

1.1. Real Property. Seller owns and holds fee title to that certain land located at 5300 West Cypress Street, Tampa, Florida, 33607 in Hillsborough County, Florida (the “Land”), as described in Exhibit A attached hereto, together with the building and other improvements located thereon, excluding any fixtures, equipment and moveable personal property belonging to any tenants thereon (collectively, the “Improvements”) and known as the Cypress Commons Building. The Land and the Improvements may be collectively referred to herein as the “Real Property.”

1.2. Personal Property. In connection with the Real Property, Seller may possess (i) certain governmental permits and approvals, (ii) certain contractual rights (including the Leases and Contracts, as defined herein) and other intangible assets, and (iii) certain other items of tangible personal property which are located on the Real Property and used by Seller in connection with the operation and maintenance thereof (collectively, the “Personal Property”). The Real Property and the Personal Property are hereinafter collectively referred to as the “Property.”

1.3. Purchase and Sale. Seller now desires to sell and Purchaser now desires to purchase all of Seller’s right, title and interest in and to the Property, upon the terms and covenants and subject to the conditions set forth below.

ARTICLE II

PURCHASE PRICE

2.1. Price. In consideration of the covenants herein contained, Seller hereby agrees to sell and Purchaser hereby agrees to purchase the Property for a total purchase price of Seven Million One Hundred Thousand Dollars ($7,100,000.00) (the “Purchase Price”), which shall be paid by Purchaser as follows:

2.1.1. Deposit. Purchaser has delivered concurrently with its execution of this Agreement, or will deliver within two (2) business days after the Effective Date, to Escrow Agent by bank wire of immediately available funds the sum of One Hundred Thousand Dollars ($100,000.00) (the “Deposit”). The Deposit shall be nonrefundable upon expiration of the Investigation Period subject only to the satisfaction of the Conditions to Purchaser’s Obligations to Purchase in Section 3.1.

2.1.2. Addition to Deposit. On or before the expiration of the Investigation Period (as defined in Section 5.3.2), Purchaser shall deliver to Escrow Agent, by bank wire transfer of immediately available funds, an additional non-refundable deposit of Nine Hundred Thousand Dollars ($900,000.00) (the “Additional Funds”), unless Purchaser shall have terminated this Agreement in accordance with Section 5.3. Upon delivery to the Escrow Agent, the Additional Funds shall be deemed part of the Deposit. If Purchaser fails to deliver the Additional Funds to Escrow Agent on or before the expiration of the Investigation Period (provided Purchaser has not terminated this Agreement in accordance with Section 5.3), such failure shall be a default under this Agreement.

2.1.3. Balance of Purchase Price. Purchaser shall, on or before the Closing (as defined in Section 6.1), deliver to Escrow Agent, by bank wire transfer of immediately available funds, a sum equal to the balance of the Purchase Price. The balance of the Purchase Price to be received by Seller at Closing shall be adjusted to reflect prorations, closing costs, and other adjustments pursuant to Section 7.1 and Section 2.3.

2.2. Investments. Following the collection of the Deposit, Escrow Agent shall invest the Deposit in an interest-bearing account or certificate of deposit with a banking institution with an office in Jacksonville, Florida. Purchaser and Seller acknowledge that any amount over $250,000.00 shall not be insured, and both parties release and hold harmless Escrow Agent from all losses, costs and liabilities which may accrue or be incurred related to such lack of insurance.

2.3. Interest on the Deposit. Any interest earned on the Deposit shall be credited and delivered to the party receiving the Deposit, provided, however, that if the transaction closes, at Closing any interest earned on the Deposit shall be credited to Purchaser by applying the same against the Purchase Price.

ARTICLE III

CONDITIONS TO THE PARTIES’ OBLIGATIONS

3.1. Conditions to Purchaser’s Obligation to Purchase. Purchaser’s obligation to purchase is expressly conditioned upon each of the following:

3.1.1. Performance by Seller. Performance in all material respects of the obligations and covenants of, and deliveries required of, Seller hereunder.

3.1.2. Delivery of Title and Possession. Delivery at the Closing of (i) the Deed (as defined in Section 4.2.1) and (ii) possession as provided in Section 15.1.

3.1.3. Title Insurance. Delivery at the Closing of the standard current form of American Land Title Association (ALTA) owner’s policy of title insurance (the “Title Policy”), or irrevocable commitments to issue the same, with liability in the amount of

2

the Purchase Price issued by Fidelity National Title Insurance Company (the “Title Company”), through its agent, Commercial Property Title, LLC (the “Title Agent”), insuring that fee title to the Real Property vests in Purchaser subject to the Permitted Encumbrances (as defined in Section 4.2.1). At its option, Purchaser may request the Title Company to issue additional title insurance endorsements if the same are available for this transaction and if Purchaser pays for the extra cost of such additional endorsements, provided that the unavailability of, or Title Company’s failure to issue, any such additional endorsements shall not affect Purchaser’s obligations under this Agreement.

3.1.4. Seller’s Representations. The representations and warranties by Seller set forth in Section 10.1 being true and correct in all material respects as of the Closing except as modified by notice (in accordance with Section 11.1) to which Purchaser does not object in writing by the later of (i) three (3) business days after receipt thereof or (ii) the end of the Investigation Period.

3.1.5 Tenant Estoppel Certificates. At least five (5) business days prior to the scheduled date of Closing, Purchaser shall have received tenant estoppel certificates (“Tenant Estoppel Certificates”) in substantially the form attached hereto as Exhibit B (or, if different, the form required by the applicable Lease) and otherwise reasonably satisfactory to Purchaser from such tenants who lease (i) in the aggregate, at least seventy-five percent (75%) of the leased space in the Property, and (ii) individually occupy at least 5,000 square feet of space (“Required Tenant”); provided that any such Tenant Estoppel Certificate shall be accepted by Purchaser so long as it does not indicate the continuing existence of an actual material default of Seller as landlord under the applicable Lease or otherwise contain information which materially differs from the information contained in the applicable rent roll provided by Seller. Seller will deliver Purchaser’s copies of signed Tenant Estoppel Certificates promptly following Seller’s receipt thereof. Seller may, in lieu of delivering estoppel certificates from such tenants, deliver an estoppel letter with respect to such Lease or Leases, signed by Seller; provided, however that Purchaser shall not be required to accept a Seller estoppel letter with respect to any Required Tenant. If Seller subsequently delivers to Purchaser an estoppel certificate from a tenant as to which Seller has delivered its own estoppel certificate, Seller’s estoppel certificate shall be deemed to be withdrawn and null and void upon such delivery.

3.2. Conditions to Seller’s Obligation to Sell. Seller’s obligation to sell is expressly conditioned upon each of the following:

3.2.1. Performance by Purchaser. Performance in all material respects of the obligations and covenants of, and deliveries required of, Purchaser hereunder.

3.2.2. Receipt of Purchase Price. Receipt of the Purchase Price and any adjustments due Seller under Article VII at the Closing in the manner herein provided.

3.2.3. Approvals. Receipt by Seller of all necessary corporate and other organizational approvals.

3

ARTICLE IV

PURCHASER’S DELIVERIES AND SELLER’S DELIVERIES TO TITLE AGENT

4.1. Purchaser’s Deliveries. Provided all conditions precedent set forth in Section 3.1 have been satisfied, Purchaser shall, at or before the Closing, deliver to Title Agent each of the following:

4.1.1. Purchase Price. The Purchase Price as set forth in Article II.

4.1.2. Assignment of Leases and Contracts. Two (2) executed counterparts of the Assignment and Assumption of Leases, Contracts and Other Property Interests (the “Assignment of Leases and Contracts”) in the form of Exhibit C attached hereto.

4.1.3. Bill of Sale. Two (2) executed counterparts of a bill of sale (the “Bill of Sale”) in the form of Exhibit D attached hereto.

4.1.4. Closing Statement. An executed settlement statement reflecting the prorations and adjustments required under Article VII.

4.1.5. Cash – Prorations. The amount, if any, required of Purchaser under Article VII.

4.1.6 Purchaser Broker Lien Waiver. The Purchaser Broker Lien Waiver in accordance with Section 16.23 herein.

4.2. Seller’s Deliveries. Seller shall, at or before the Closing, deliver to Title Agent each of the following:

4.2.1. Deed. A special warranty deed (the “Deed”) in the form of Exhibit I attached hereto, executed and acknowledged by Seller, pursuant to which Seller shall convey title to the Real Property subject to the following (collectively, the “Permitted Encumbrances”):

(a) Non-delinquent real property taxes and all assessments and unpaid installments thereof which are not delinquent.

(b) The applicable leases enumerated in Exhibit E attached hereto and any applicable leases executed in accordance with this Agreement after the Effective Date hereof (collectively, the “Leases”), and the rights of the tenants thereunder.

(c) Any mortgage, deed of trust, or other lien, encumbrance, easement or other exception or matter voluntarily imposed or consented to by Purchaser prior to or as of the Closing.

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(d) All exceptions (including printed exceptions) to title contained or disclosed in the Title Commitment (as defined in Section 5.1.1) other than applicable Title Objections (as defined in Section 5.3.1) identified and not thereafter waived by Purchaser.

(e) Laws, ordinances, governmental regulations, and all building, zoning, land use and any subdivision ordinances and regulations affecting the occupancy, use or enjoyment of the Property.

(f) All matters, rights and interests that would be discovered by an inspection or current survey of the Property.

4.2.2. Assignment of Leases and Contracts. Two (2) executed counterparts of the Assignment of Leases and Contracts in the form of Exhibit C attached hereto, and (whether through the closing escrow or through such other method of delivery as the parties may establish) original executed Leases (or copies if originals are not in Seller’s possession) and the service contracts, equipment leases, maintenance agreements and other contracts affecting the Property enumerated in Exhibit F attached hereto (collectively, the “Contracts”) assigned thereby.

4.2.3. Bill of Sale. Two (2) executed counterparts of the Bill of Sale.

4.2.4. Notices to Tenants. A notice signed by Seller (or Seller’s manager for the Improvements) addressed to the tenants under the Leases in the form of Exhibit G attached hereto.

4.2.5. FIRPTA Affidavit. Two (2) executed copies of an affidavit in the form of Exhibit H attached hereto with respect to the Foreign Investment in Real Property Tax Act.

4.2.6. Closing Statement. An executed settlement statement reflecting the prorations and adjustments required under Article VII.

4.2.7. Cash – Prorations. The amount, if any, required of Seller under Article VII.

4.2.8. Owner’s Affidavit. An Owner’s Affidavit in the form of Exhibit J attached hereto (the “Owner’s Affidavit”).

4.2.9 Seller Broker Lien Waiver. The Seller Broker Lien Waiver in accordance with Section 16.23 herein.

4.3. Failure to Deliver. The failure of Purchaser or Seller to make any delivery required above by and in accordance with this Article IV which is not waived by the other party shall constitute a default hereunder by Purchaser or Seller, as applicable.

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ARTICLE V

INVESTIGATION OF PROPERTY

5.1. Delivery of Documents. To the extent in Seller’s possession, Seller shall deliver, cause to be delivered, or make available to Purchaser within two (2) business days after the Effective Date (unless provided otherwise) the following:

5.1.1. Preliminary Title Commitment. Within seven (7) days after the Effective Date, a current preliminary title commitment covering the Real Property issued by the Title Company, together with copies of all documents referred to as exceptions therein (collectively, the “Title Commitment”).

5.1.2. Survey. To the extent in Seller’s possession, the most recent survey of the Real Property prepared by a licensed surveyor (collectively, the “Existing Survey”). Seller shall obtain, at Purchaser’s sole cost and expense, an updated survey of the Real Property, which updated survey shall be certified to Purchaser, Seller, Title Company, Title Agent and such other parties as Purchaser may elect (the “Survey”). Promptly upon receipt of the Survey, Seller shall provide the Purchaser, Title Company and Title Agent with a sealed original of the same. Seller makes no warranties or representations as to the accuracy or completeness of the Existing Survey or the Survey or the qualifications of the surveyor who prepared the same, and Purchaser shall have no right to rely upon any information contained in the Existing Survey.

5.1.3. Leases and Contracts. Copies of the Leases and the Contracts.

5.1.4. Plans and Specifications. Copies of all plans and specifications for the Improvements.

5.1.5. Reports. Copies of the most recent environmental report prepared by third parties.

5.1.6. Financial Information. Copies of the current rent roll for the Property and operating statements for 2008, 2009 and 2010 (year-to-date) reflecting the operation of the Property.

If requested by Seller, Purchaser shall provide written verification of its receipt of those items listed in this Section 5.1.

5.2. Physical Inspection of Property.

5.2.1. Notice and Access. Provided that Purchaser has given Seller at least one (1) business day advance notice in writing, Seller shall allow Purchaser and Purchaser’s engineers, architects or other employees and agents reasonable access to the Property during normal business hours for the limited purposes provided herein.

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5.2.2. Scope of Inspections. Purchaser and its engineers, architects and other employees and agents may exercise such access solely for the purposes of (i) reviewing contracts, books and records relating to the Property (other than any privileged, proprietary or confidential records), soil reports, environmental studies and reports, surveys, and building and systems plans; (ii) reviewing records relating to operating expenses and other instruments and correspondence relating to the Property; and (iii) inspecting the physical condition of the Property and conducting non-intrusive physical and environmental tests and inspections thereof. PURCHASER SHALL NOT CONDUCT OR ALLOW ANY PHYSICALLY INTRUSIVE TESTING OF, ON OR UNDER THE PROPERTY WITHOUT FIRST OBTAINING SELLER’S WRITTEN CONSENT IN EACH INSTANCE AS TO THE TIMING AND SCOPE OF THE WORK TO BE PERFORMED AND THE PARTIES ENTERING INTO AN AMENDMENT HERETO MEMORIALIZING SUCH SCOPE OF WORK AND ANY ADDITIONAL AGREEMENTS OF THE PARTIES WITH RESPECT TO SUCH TESTING.

5.2.3. Insurance. Purchaser agrees that it will cause it and any person accessing the Property hereunder to be covered by not less than $1,000,000 commercial general liability insurance (with, in the case of Purchaser’s coverage, a contractual liability endorsement, insuring its indemnity obligation under this Agreement), insuring all activity and conduct of such person while exercising such right of access and naming Seller as an additional insured, issued by a licensed insurance company qualified to do business in the State in which the Property is located and otherwise reasonably acceptable to Seller.

5.2.4. No Interference. Purchaser agrees that, in the exercise of the right of access granted hereby, it will not unreasonably interfere with or permit unreasonable interference with any person occupying or providing service at the Property. Purchaser agrees that it or its agents will not communicate or correspond with any tenants at the Property or any vendors providing service to the Property without the prior, written consent of Seller.

5.2.5. Indemnification. Purchaser agrees to indemnify, defend and hold harmless Seller and its affiliates, members, partners, subsidiaries, shareholders, officers, directors, employees and agents from any loss, injury, damage, cause of action, liability, claim, lien, cost or expense, including reasonable attorneys’ fees and costs, arising from the exercise by Purchaser or its employees, consultants, agents or representatives of the right of access under this Agreement or out of any of the foregoing. The indemnity in this Section 5.2.5 shall survive the Closing or any termination of this Agreement.

5.2.6. Seller’s Right To Be Present. Purchaser agrees to give Seller prior written notice at least one (1) business day in advance of its intent to conduct any inspections or tests so that Seller will have the opportunity to have a representative present during any such inspection or test, the right to do which Seller expressly reserves. Purchaser agrees to cooperate with any reasonable request by Seller in connection with the timing of any such inspection or test. Purchaser agrees to provide Seller with a copy of any written inspection or test report or summary prepared by any third party within ten (10) days of Purchaser’s receipt of such inspection, report or summary.

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5.2.7. Expense of Inspections and Compliance With Laws. Purchaser agrees that any inspection, test or other study or analysis of the Property shall be performed at Purchaser’s expense and in strict accordance with all applicable laws, ordinances, codes and other governmental requirements.

5.2.8. Repair and Restoration of Property. Purchaser agrees at its own expense to promptly repair or restore the Property, or, at Seller’s option, to reimburse Seller for any repair or restoration costs, if any inspection or test requires or results in any damage to or alteration of the condition of the Property. The obligations set forth in this Section 5.2.8 shall survive the Closing or any termination of this Agreement.

5.3. Investigation Period. Purchaser shall have the right to make the following investigations.

5.3.1. Title and Survey. Purchaser shall have until 5:00 p.m. (New York Time) on the business day which is fifteen (15) days following Purchaser’s receipt of the Preliminary Title Commitment, to notify Seller of any objections (the “Title Objections”) with respect to the Title Commitment and the Survey based on its review thereof. Notwithstanding the foregoing, Purchaser shall have no right to object to any of the matters identified on Exhibit K attached hereto (the “Permitted Exceptions”) and the same shall remain, at all times, Permitted Encumbrances and shall be deemed approved by Purchaser. If Purchaser does not give such notice, such failure shall be conclusively deemed to be full and complete approval of the Title Commitment and the Survey, and any matter disclosed therein. If Purchaser does give such notice, Seller shall have three (3) days after receipt thereof to notify Purchaser in writing that Seller (a) will cause or (b) elects not to cause any or all of the Title Objections disclosed therein to be removed or insured over by the Title Company. Seller’s failure to notify Purchaser within such three (3) day period as to any Title Objection shall be deemed an election by Seller not to remove or have the Title Company insure over such Title Objection. If Seller notifies or is deemed to have notified Purchaser that Seller shall not remove nor have the Title Company insure over any or all of the Title Objections, Purchaser shall have until the end of the Investigation Period to (i) terminate this Agreement or (ii) waive such Title Objections and proceed to Closing without any abatement or reduction in the Purchase Price on account of such Title Objections. If Purchaser does not give such notice within said period, Purchaser shall be deemed to have elected to waive such Title Objections.

5.3.2. General Investigation. In addition, Purchaser shall have until 5:00 p.m. (New York Time) on the business day which is thirty (30) days following the Effective Date (the “Investigation Period”) to notify Seller that, as a result of Purchaser’s review of any documents (other than the Title Report or the Survey) or Purchaser’s investigation of the Property, it disapproves of any matter or item affecting the Property and terminates this Agreement. If Purchaser fails to give such notice of disapproval and termination

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with respect to any matter relating to the Property prior to the expiration of the Investigation Period, such failure shall be conclusively deemed to be full and complete approval of such matters and a satisfaction of this condition.

5.4. Effect of Termination. If Purchaser terminates this Agreement in accordance with Section 5.3, then subject to Section 5.2, all further rights and obligations of the parties shall cease and terminate without any further liability of either party to the other (except those obligations which are specifically provided to survive such termination as provided in this Agreement) and the Deposit shall be returned to Purchaser.

5.5. No Obligation to Cure. Nothing contained in this Agreement or otherwise shall require Seller to render its title marketable or to remove or correct any exception or matter disapproved by Purchaser or to spend any money or incur any expense in order to do so.

5.6. Copies of Third Party Reports. If the Investigation Period is extended for any reason, including by amendment to this Agreement, or if Seller otherwise requests, Purchaser, within three (3) days after such extension or request, shall provide Seller with copies of all third party reports and work product generated with respect to the Property.

ARTICLE VI

THE CLOSING

6.1. Date and Manner of Closing. Seller, Purchaser and Title Agent shall close the escrow and the transaction contemplated herein (the “Closing”) as soon as all conditions to closing contained in this Agreement have been satisfied (or deemed satisfied) or waived in writing which shall in any event be not later than 11:00 A.M. (New York Time) on May 31, 2010 (the “Closing Date”), time being of the essence (subject only to Seller’s express rights of remedy or cure provided herein, in which event Seller will give Purchaser not less than three (3) business days notice of the date of Closing), by recording and delivering all documents and funds as set forth in Article VII.

ARTICLE VII

PRORATION, FEES, COSTS AND ADJUSTMENTS

7.1. Prorations. Prior to the Closing, Seller shall determine the amounts of the prorations in accordance with this Agreement and notify Purchaser thereof. Purchaser shall review and approve such determination promptly and prior to the Closing, such approval not to be unreasonably withheld or delayed. Thereafter, Purchaser and Seller shall each inform Title Agent of such amounts.

7.1.1. Certain Items Prorated. In accordance with the notifications, Title Agent shall prorate between the parties (and the parties shall deposit funds therefor with Title Agent or shall instruct Title Agent to debit against sums held by Title Agent owing to such party), as of 11:59 p.m. of the day prior to the Closing, all income and expenses with respect to the Property and payable to or by the owner of the Property, including,

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without limitation: (i) all real property taxes and assessments on the basis of the fiscal period for which assessed (if the Closing shall occur before the tax rate is fixed, the apportionment of taxes shall be based on the tax rate for the preceding period applied to an amount equal to the gross Purchase Price, and after the Closing, when the actual real property taxes are finally fixed, Seller and Purchaser shall make a recalculation of such proration, and the appropriate party shall make the applicable payment reflecting the recalculation to the other party); (ii) rents and other tenant payments and tenant reimbursements (collectively, “Tenant Payments”) if any, received under the Leases, subject to Section 7.1.5 below; (iii) charges for water, sewer, electricity, gas, fuel and other utility charges, all of which shall be read promptly before Closing, unless Seller elects to close its own applicable account, in which event Purchaser shall open its own account and the respective charges shall not be prorated; (iv) amounts prepaid and amounts accrued but unpaid on service contracts and management contracts which are to be assumed by Purchaser; and (v) periodic fees for licenses, permits or other authorizations with respect to the Property. The obligation of the parties to recalculate the proration of taxes shall survive the Closing.

7.1.2. Leasing Commissions. At the Closing, Purchaser shall pay or reimburse Seller for all leasing commissions, tenant improvement costs and allowances, tenant concessions, and other charges payable by reason of or in connection with any Lease entered into after the Effective Date, any renewal or extension of an existing Lease after such date, and any new lease referred to in Section 13.4. Purchaser shall be and remain responsible for any leasing commissions, tenant improvement costs and allowances, tenant concessions and other charges payable for any renewal, extension or other option under any existing or future lease. For Leases executed prior to the Effective Date, Seller shall only be responsible for those leasing commissions and tenant improvement costs which are due and owing at Closing under the terms and conditions of the Leases as of the Effective Date and are associated with the initial occupancy of the tenants under such Leases.

7.1.3. Taxes.

(1) Real property tax refunds and credits received after the Closing which are attributable to a fiscal tax year prior to the Closing shall belong to Seller. Any such refunds and credits attributable to the fiscal tax year during which the Closing occurs shall be apportioned between Seller and Purchaser after deducting the reasonable out-of-pocket expenses of collection thereof. This apportionment obligation shall survive the Closing.

(2) If any tax appeal or certiorari proceedings shall not have been finally resolved or settled prior to the Closing and shall relate to any tax period a portion or all of which precedes the Closing, Seller shall be entitled to control the disposition of any such tax appeal or certiorari proceeding and any refunds received therefrom, net of any expenses incurred by Seller in connection therewith, shall be prorated between the parties on the basis of the portions accruing to periods before and after the Closing.

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7.1.4. Security and Other Deposits. At the Closing, Seller shall deliver to Purchaser all unapplied refundable security deposits (plus interest accrued thereon to the extent required to be paid by the applicable Lease or applicable law) held by Seller under the Leases, and Purchaser shall pay Seller an amount equal to all utility and contract deposits then held by third parties with respect to the Property and transferred to Purchaser hereunder.

7.1.5. Adjustments. Delinquent Tenant Payments, if any, shall not be prorated and all rights thereto shall be retained by Seller, who reserves the right to collect and retain such delinquent Tenant Payments. Purchaser agrees to use commercially reasonable efforts to collect such delinquent Tenant Payments and shall also cooperate with Seller in Seller’s efforts to collect such delinquent Tenant Payments; provided, however, that Seller shall not be entitled to commence any disposition or eviction proceeding against the delinquent Tenant. If at any time after the Closing Purchaser shall receive any such delinquent Tenant Payments, Purchaser shall within two (2) business days remit such Tenant Payments to Seller, provided that any monies received by Purchaser from a delinquent tenant shall be applied first to current rents then due and payable and then to delinquent rents in the inverse order in which they became due and payable. If the Tenant Payments required to be made by any tenants include escalation charges or reimbursements for real property taxes, operating expenses or other charges (collectively, “CAM Charges”), then any CAM Charges due under the Leases for the calendar year 2010 shall be reconciled by Purchaser within one hundred twenty (120) days after the end of such calendar year, and Purchaser shall prorate and adjust such CAM Charges with Seller based upon the Closing Date, with Purchaser being reimbursed by Seller for any over-collection of CAM Charges during Seller’s prior of ownership and applicable to calendar year 2010, and Purchaser reimbursing Seller for any under-collection of CAM Charges by Seller during Seller’s period of ownership and applicable to calendar year 2010. The provisions of this Section 7.1.5 shall survive the Closing.

7.1.6. Insurance. Seller’s existing liability and property insurance pertaining to the Property shall be canceled as of the Closing, and Seller shall receive any premium refund due thereon.

7.2. Seller’s Closing Costs. Seller shall pay (i) any documentary deed stamps or transfer tax on the Deed, (ii) any costs incurred in recording the Deed or any other instruments, (iii) Seller’s own attorneys’ fees, (iv) one-half of the cost of the title premium for the owner’s Title Policy, and (v) the brokerage commissions to be paid to the Seller Broker and Purchaser Broker as set forth in Section 16.23 herein.

7.3. Purchaser’s Closing Costs. Purchaser shall pay (i) the cost of the Title Commitment and one-half of cost of the title premium for the owner’s Title Policy, together with the cost of any lender’s title policy and any title insurance endorsements ordered by Purchaser or its lender, (ii) the cost of the Survey, (iii) any costs incurred in connection with Purchaser’s investigation of the Property pursuant to Article V, including the cost of any new environmental assessment commissioned by Purchaser, and (iv) Purchaser’s own attorneys’ fees.

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ARTICLE VIII

DISTRIBUTION OF FUNDS AND DOCUMENTS

8.1. Delivery of the Purchase Price. At the Closing, Title Agent shall deliver the Purchase Price to Seller, and the transaction shall not be considered closed until such delivery occurs.

8.2. Other Monetary Disbursements. Title Agent shall, at the Closing, arrange for wire transfer, (i) to Seller, or order, as instructed by Seller, all sums and any proration or other credits to which Seller is entitled and less any appropriate proration or other charges and (ii) to Purchaser, or order, any excess funds therefore delivered to Title Agent by Purchaser and all sums and any proration or other credits to which Purchaser is entitled and less any appropriate proration or other charges.

8.3. Recorded Documents. Title Agent shall cause the Deed and any other documents that Seller or Purchaser desires to record to be recorded with the appropriate county recorder and, after recording, returned to the grantee, beneficiary or person acquiring rights under said document or for whose benefit said document was required.

8.4. Documents to Purchaser. Title Agent shall at the Closing deliver by overnight express delivery to Purchaser the following:

(a) one conformed copy of the Deed;

(b) one original of the Assignment of Leases and Contracts;

(c) one original of the Bill of Sale;

(d) originals of the tenant estoppels;

(e) one original of the Notice to Tenants;

(f) one original of the FIRPTA Affidavit;

(g) one original of the Closing Statement;

(h) one original of the pro forma Title Policy; and

(i) one original of the Owner’s Affidavit.

8.5. Documents to Seller. Title Agent shall at the Closing deliver by overnight express delivery to Seller, the following:

(a) one conformed copy of the Deed;

(b) one original of the Assignment of Leases and Contracts;

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(c) one original of the Bill of Sale;

(d) copies of the tenant estoppels;

(e) one original of the Notice to Tenants;

(f) one original of the FIRPTA Affidavit;

(g) one original of the Closing Statement;

(h) one copy of the pro forma Title Policy; and

(i) one original of the Owner’s Affidavit.

8.6. All Other Documents. Title Agent shall at the Closing deliver by overnight express delivery, each other document received hereunder by Title Agent to the person acquiring rights under said document or for whose benefit said document was required.

ARTICLE IX

RETURN OF DOCUMENTS AND FUNDS UPON TERMINATION

9.1. Return of Seller’s Documents. If escrow or this Agreement is terminated for any reason, Purchaser shall, within five (5) days following such termination, deliver to Seller all documents and materials relating to the Property previously delivered to Purchaser by Seller and copies of all reports, studies, documents and materials obtained by Purchaser from third parties in connection with the Property and Purchaser’s investigation thereof. Such items shall be delivered without representation or warranty as to accuracy or completeness and with no right of Seller to rely thereon without the consent of the third party. Title Agent shall deliver all documents and materials deposited by Seller and then in Title Agent’s possession to Seller and shall destroy any documents executed by both Purchaser and Seller. Upon delivery by Title Agent to Seller (or such destruction, as applicable) of such documents and materials, Title Agent’s obligations with regard to such documents and materials under this Agreement shall be deemed fulfilled and Title Agent shall have no further liability with regard to such documents and materials to either Seller or Purchaser.

9.2. Return of Purchaser’s Documents. If escrow or this Agreement is terminated for any reason, Title Agent shall deliver all documents and materials deposited by Purchaser and then in Title Agent’s possession to Purchaser and shall destroy any documents executed by both Purchaser and Seller. Upon delivery by Title Agent to Purchaser (or such destruction, as applicable) of such documents and materials, Title Agent’s obligations with regard to such documents and materials under this Agreement shall be deemed fulfilled and Title Agent shall have no further liability with regard to such documents and materials to either Seller or Purchaser.

9.3. Deposit. If escrow or this Agreement is terminated (i) pursuant to Section 5.3, Section 10.2 or Article XII or (ii) due to the failure of a condition set forth in Section 3.1, then,

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subject to Section 5.2, Purchaser shall be entitled to obtain the return of the Deposit pursuant to Section 9.4 below. If the Closing does not take place and escrow or this Agreement is terminated for any other reason, Seller shall be entitled to the Deposit by retaining or causing Escrow Agent to deliver the Deposit to Seller pursuant to Section 9.4 below.

9.4. Disbursement of Deposit. If Escrow Agent receives a notice from either party instructing Escrow Agent to deliver the Deposit to such party, Escrow Agent shall deliver a copy of the notice to the other party within three (3) business days after receipt of the notice. If the other party does not object to the delivery of the Deposit as set forth in the notice within three (3) business days after receipt of the copy of the notice, Escrow Agent shall, and is hereby authorized to, deliver the Deposit to the party requesting it pursuant to the notice. Any objection hereunder shall be by notice setting forth the nature and grounds for the objection and shall be sent to Escrow Agent and to the party requesting the Deposit.

9.5. No Effect on Rights of Parties; Survival. The return of documents and monies as set forth above shall not affect the right of either party to seek such legal or equitable remedies as such party may have under Article X with respect to the enforcement of this Agreement. The obligations under this Article IX shall survive termination of this Agreement.

ARTICLE X

DEFAULT

10.1. Seller’s Remedies. If, for any reason whatsoever (other than the failure of a condition set forth in Section 3.1 and other than a termination of this Agreement pursuant to Section 5.3, Section 10.2 or Article XII), Purchaser fails to complete the acquisition as herein provided, Purchaser shall be in breach of its obligations hereunder and Seller shall be entitled to terminate this Agreement in its entirety by delivering notice to Purchaser and retain the Deposit as liquidated damages, in which event Seller shall also be released from any further obligations hereunder. PURCHASER AND SELLER HEREBY ACKNOWLEDGE AND AGREE THAT SELLER’S ACTUAL DAMAGES IN THE EVENT OF SUCH A BREACH OF THIS AGREEMENT BY PURCHASER WOULD BE EXTREMELY DIFFICULT OR IMPOSSIBLE TO DETERMINE, THAT THE AMOUNT OF THE DEPOSIT IS THE PARTIES’ BEST AND MOST ACCURATE ESTIMATE OF THE DAMAGES SELLER WOULD SUFFER IN THE EVENT THE TRANSACTION PROVIDED FOR IN THIS AGREEMENT FAILS TO CLOSE, AND THAT SUCH ESTIMATE IS REASONABLE UNDER THE CIRCUMSTANCES EXISTING ON THE DATE OF THIS AGREEMENT. PURCHASER AND SELLER AGREE THAT SELLER’S RIGHT TO RETAIN THE DEPOSIT SHALL BE THE SOLE REMEDY OF SELLER AT LAW IN THE EVENT OF SUCH A BREACH OF THIS AGREEMENT BY PURCHASER. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS SECTION 10.1, IF PURCHASER BRINGS AN ACTION AGAINST SELLER FOR AN ALLEGED BREACH OR DEFAULT BY SELLER OF ITS OBLIGATIONS UNDER THIS AGREEMENT, RECORDS A LIS PENDENS OR OTHERWISE ENJOINS OR RESTRICTS SELLER’S ABILITY TO SELL AND TRANSFER THE PROPERTY OR REFUSES TO CONSENT TO OR INSTRUCT RELEASE OF THE DEPOSIT TO SELLER IF REQUIRED BY ESCROW AGENT (EACH A “PURCHASER’S ACTION”), SELLER SHALL NOT BE

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RESTRICTED BY THE PROVISIONS OF THIS SECTION 10.1 FROM BRINGING AN ACTION AGAINST PURCHASER SEEKING EXPUNGEMENT OR RELIEF FROM ANY IMPROPERLY FILED LIS PENDENS, INJUNCTION OR OTHER RESTRAINT, AND/OR RECOVERING FEES, COSTS AND EXPENSES (INCLUDING ATTORNEYS’ FEES) WHICH SELLER MAY SUFFER OR INCUR AS A RESULT OF ANY PURCHASER’S ACTION BUT ONLY TO THE EXTENT THAT SELLER IS THE PREVAILING PARTY; AND THE AMOUNT OF ANY SUCH FEES, COSTS AND EXPENSES AWARDED TO SELLER SHALL BE IN ADDITION TO THE LIQUIDATED DAMAGES SET FORTH HEREIN. NOTHING IN THIS AGREEMENT SHALL, HOWEVER, BE DEEMED TO LIMIT PURCHASER’S LIABILITY TO SELLER FOR DAMAGES OR INJUNCTIVE RELIEF FOR BREACH OF PURCHASER’S INDEMNITY OBLIGATIONS UNDER SECTIONS 5.2.5 AND 16.23 BELOW OR FOR ATTORNEYS’ FEES AND COSTS AS PROVIDED IN SECTION 16.5 BELOW.

10.2. Purchaser’s Remedies. If the sale is not completed as herein provided solely by reason of any material default of Seller, Purchaser shall be entitled, as its sole and exclusive remedy, to either (i) terminate this Agreement (by delivering notice to Seller which includes a waiver of any right, title or interest of Purchaser in the Property) and or (ii) treat this Agreement as being in full force and effect and pursue only the specific performance of this Agreement, provided that Purchaser must commence any action for specific performance within thirty (30) days after the scheduled Closing Date. Purchaser waives any right to pursue any other remedy at law or equity for such default of Seller, including, without limitation, any right to seek, claim or obtain damages, punitive damages or consequential damages. In no case shall Seller ever be liable to Purchaser under any statutory, common law, equitable or other theory of law, either prior to or following the Closing, for any lost rents, profits, “benefit of the bargain,” business opportunities or any form of consequential damage in connection with any claim, liability, demand or cause of action in any way or manner relating to the Property, the condition of the Property, this Agreement, or any transaction or matter between the parties contemplated hereunder. Purchaser’s remedies hereunder are in addition to the right to receive the return of the Deposit, subject to Section 9.4, to the extent it is not applied to the Purchase Price in connection with Purchaser’s action for specific performance.

ARTICLE XI

REPRESENTATIONS AND WARRANTIES

11.1. Seller’s Warranties and Representations. The matters set forth in this Section 11.1 constitute representations and warranties by Seller which are now and (subject to matters contained in any notice given pursuant to the next succeeding sentence) shall, in all material respects, at the Closing be true and correct. If Seller has actual knowledge that any of the representations and warranties contained in this Article XI may cease to be true, Seller shall give prompt notice to Purchaser (which notice shall include copies of the instrument, correspondence, or document, if any, upon which Seller’s notice is based). As used in this Section 11.1, the phrase “to the extent of Seller’s actual knowledge” shall mean the actual knowledge of Troy M. Cox. There shall be no duty imposed or implied to investigate, inquire, inspect, or audit any such matters, and there shall be no personal liability on the part of such

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person. To the extent Purchaser has or acquires actual knowledge or is deemed to know prior to the expiration of the Investigation Period that these representations and warranties are inaccurate, untrue or incorrect in any way, such representations and warranties shall be deemed modified to reflect Purchaser’s knowledge or deemed knowledge.

11.1.1 Organization. Seller has been duly formed, validly exists and is in good standing in the jurisdiction of its formation and in the state in which the Property is located.

11.1.2. Power and Authority. Subject to Section 3.2.3, Seller has the legal power, right and authority to enter into this Agreement and to consummate the transactions contemplated hereby.

11.1.3. Proceedings. Seller has not received any written notice of any pending or threatened condemnation or similar proceeding affecting any part of the Property.

11.1.4. Contravention. Seller is not prohibited from consummating the transactions contemplated by this Agreement by any law, regulation, agreement, instrument, restriction, order or judgment.

11.1.5. Leases. Subject to Section 13.4, the Leases set forth on Exhibit E attached hereto comprise all of the leases affecting the Property on and after the Closing

11.1.6. Contracts. Subject to Section 13.4, the Contracts set forth on Exhibit F attached hereto comprise all of the material contracts affecting the Property on and after the Closing.

11.1.7. Compliance. Other than as set forth on Schedule 11.1.7 attached hereto, Seller has not received written notice from any governmental authority that the Property is not in material compliance with all applicable laws, except for such failures to comply, if any, which have been remedied.

11.1.8. Employees. Seller has no employees on-site at the Property providing on-site services to the Property and all such services are performed by Seller’s manager of the Property.

11.1.9. Litigation. Other than as set forth on Schedule 11.1.9 attached hereto, to the extent of Seller’s actual knowledge, there is no material litigation affecting the Property, which litigation is not covered by insurance.

11.1.10. Environmental. Except as may be disclosed in the reports, studies or analyses set forth in the attached Schedule 11.1.10, Seller has no knowledge of any materially adverse environmental conditions affecting the Property. For purposes hereof, Seller’s knowledge is limited to the matters set forth in such reports, studies or analyses.

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11.2. Purchaser’s Warranties and Representations. The matters set forth in this Section 11.2 constitute representations, warranties and covenants by Purchaser which are now and shall, at the Closing, be true and correct.

11.2.1. Power and Authority. Purchaser has the legal power, right and authority to enter into this Agreement and to consummate the transactions contemplated hereby.

11.2.2. Independent Investigation. The consummation of this transaction shall constitute Purchaser’s acknowledgment that it has independently inspected and investigated the Property and has made and entered into this Agreement based upon such inspection and investigation and its own examination of the condition of the Property.

11.2.3. Purchaser Reliance. Purchaser is experienced in and knowledgeable about the ownership and management of real estate, and it has relied and will rely exclusively on its own consultants, advisors, counsel, employees, agents, principals and/or studies, investigations and/or inspections with respect to the Property, its condition, value and potential. Purchaser agrees that, notwithstanding the fact that it has received certain information from Seller or its agents or consultants, Purchaser has relied solely upon and will continue to rely solely upon its own analysis and will not rely on any information provided by Seller or its agents or consultants, except as expressly set forth in Section 11.1.

11.2.4. Compliance. Purchaser’s funds are derived from legitimate business activities. Purchaser is not a person with whom Seller is prohibited from engaging in this transaction due to any United States government embargos, sanctions, or terrorism or money laundering laws, including, without limitation, due to Purchaser or any party that has ownership in or control over Purchaser being (i) subject to United States government embargos or sanctions, or (ii) in violation of terrorism or money laundering laws.

11.2.5. ERISA. Purchaser represents, warrants and covenants that Purchaser is not using the assets of any (i) “employee benefit plan” (within the meaning of Section 3(3) of ERISA), (ii) “plan” (within the meaning of Section 4975(e)(1) of the Code), or (iii) entity whose underlying assets include “plan assets” by reason of a plan’s investment in such entity, to fund its purchase of the Property under this Agreement.

11.2.6. Patriot Act.

(1) Purchaser is in compliance with the requirements of Executive Order No. 133224, 66 Fed. Reg. 49079 (Sept. 25, 2001) (the “Order”) and other similar requirements contained in the rules and regulations of the Office of Foreign Assets Control, Department of the Treasury (“OFAC”) and in any enabling legislation or other Executive Orders or regulations in respect thereof (the Order and such other rules, regulations, legislation, or orders are collectively called the “Orders”). Further, Purchaser covenants and agrees to make its policies, procedures and practices regarding compliance with the Orders, if any, available to Seller for its review and inspection during normal business hours and upon reasonable prior notice.

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(2) Neither Purchaser nor any beneficial owner of Purchaser:

(A) is listed on the Specially Designated Nationals and Blocked Persons List maintained by OFAC pursuant to the Order and/or on any other list of terrorists or terrorist organizations maintained pursuant to any of the rules and regulations of OFAC or pursuant to any other applicable Orders (such lists are collectively referred to as the “Lists”);

(B) is a person or entity who has been determined by competent authority to be subject to the prohibitions contained in the Orders; or

(C) is owned or controlled by, or acts for or on behalf of, any person or entity on the Lists or any other person or entity who has been determined by competent authority to be subject to the prohibitions contained in the Orders.

(3) Patriot Act Notice. Purchaser hereby covenants and agrees that if Purchaser obtains knowledge that Purchaser or any of its beneficial owners becomes listed on the Lists or is indicted, arraigned, or custodially detained on charges involving money laundering or predicate crimes to money laundering, Purchaser shall immediately notify Seller in writing, and in such event, Seller shall have the right to terminate this Agreement in its entirety without penalty or liability to Purchaser immediately upon delivery of written notice thereof to Purchaser.

11.3. No Other Warranties and Representations. Except as specifically set forth in this Article XI, Seller has not made, does not make, and has not authorized anyone to make, any warranty or representation as to the Leases, the Contracts, any written materials delivered to Purchaser, the persons preparing such materials, the truth, accuracy or completeness of such materials, the present or future physical condition, development potential, zoning, building or land use law or compliance therewith, the operation, income generated by, or any other matter or thing affecting or relating to the Property or any matter or thing pertaining to this Agreement. Purchaser expressly acknowledges that no such warranty or representation has been made and that Purchaser is not relying on any warranty or representation whatsoever other than as is expressly set forth in this Article XI. Purchaser shall accept the Property “as is” and in its condition on the date of Closing subject only to the express provisions of this Agreement and hereby acknowledges and agrees that SELLER HAS NOT MADE, DOES NOT MAKE AND SPECIFICALLY NEGATES AND DISCLAIMS ANY REPRESENTATIONS, WARRANTIES OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, PAST, PRESENT, FUTURE OR OTHERWISE, OF, AS TO, CONCERNING OR WITH RESPECT TO, THE PROPERTY.

11.3.1. No Environmental Representations. Except as set forth in Section 11.1.10, Seller makes no representations or warranties as to whether the Property contains asbestos, radon or any hazardous materials or harmful or toxic substances, or pertaining to the extent, location or nature of same, if any. Further, to the extent that Seller has provided to Purchaser information from any inspection, engineering or environmental reports concerning asbestos, radon or any hazardous materials or harmful or toxic substances, Seller makes no representations or warranties with respect to the accuracy or completeness, methodology of preparation or otherwise concerning the contents of such reports.

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11.3.2. Release of Claims. Subject to the express provisions hereof, Purchaser acknowledges and agrees that Seller makes no representation or warranty as to, and Purchaser, for itself, its successors and assigns, hereby waives and releases Seller from any present or future claims, at law or in equity, whether known or unknown, foreseeable or otherwise, arising from or relating to, the Property, this Agreement or the transactions contemplated hereby, including without limitation the presence or alleged presence of asbestos, radon or any hazardous materials or harmful or toxic substances in, on, under or about the Property, including without limitation any claims under or on account of (i) the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as the same may have been or may be amended from time to time, and similar state statutes, and any regulations promulgated thereunder, (ii) any other federal, state or local law, ordinance, rule or regulation, now or hereafter in effect, that deals with or otherwise in any manner relates to, environmental matters of any kind, (iii) this Agreement, or (iv) the common law. Purchaser hereby specifically acknowledges that Purchaser has carefully reviewed this Section 11.3.2 and has discussed its import with legal counsel and that the provisions of this Section 11.3.2 are a material part of this Agreement. This Section 11.3.2 shall survive the Closing forever.

11.4. Know Your Customer. Purchaser acknowledges that Seller much complete certain “know your customer” procedures regarding Purchaser, including, without limitation, understanding who Purchaser is and Purchaser’s source of funds, and Purchaser shall reasonably cooperate with Seller in these efforts.

ARTICLE XII

CASUALTY AND CONDEMNATION

Promptly upon receipt of written notices thereof, Seller shall give Purchaser written notice of any condemnation, damage or destruction of the Property occurring prior to the Closing. If prior to the Closing all or a material portion of the Property is condemned, damaged or destroyed by an insured casualty, Purchaser shall have the option of either (i) applying the proceeds of any condemnation award or payment under any insurance policies (other than business interruption or rental loss insurance) toward the payment of the Purchase Price to the extent such condemnation awards or insurance payments have been received by Seller, receiving from Seller an amount equal to any applicable deductible under any such insurance policy and receiving an assignment from Seller of Seller’s right, title and interest in any such awards or payments not theretofore received by Seller, or (ii) terminating this Agreement by delivering written notice of such termination to Seller and Escrow Agent within ten (10) days after Purchaser has received written notice from Seller of such material condemnation, damage or destruction. If, prior to the Closing, a portion of the Property is condemned, damaged or destroyed and such portion is not a material portion of the Property, the proceeds of any condemnation award or payment and any applicable deductible under any insurance policies shall be applied toward the payment of the Purchase Price to the extent such condemnation

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awards or insurance payments have been received by Seller and Seller shall assign to Purchaser all of Seller’s right, title and interest in any unpaid awards or payments. For purposes of this Article XII, the term “material portion” shall mean greater than ten percent (10%) of the improvements on the Property or an absence of reasonable access to the Property. If the damage or destruction arises out of an uninsured risk, Seller shall elect, by written notice within ten (10) days of the occurrence of such damage or destruction either to terminate this Agreement or to close the transaction contemplated hereby with a reduction of the Purchase Price equal to the costs of repairing the Property, as reasonably estimated by an engineer engaged by Seller and reasonably acceptable to Purchaser.

ARTICLE XIII

CONDUCT PRIOR TO CLOSING

13.1. Conduct. From and after the date hereof, Seller shall operate the Property in accordance with its standard business procedures.

13.2. Actions Prohibited. Seller shall not, without the prior written approval of Purchaser, which approval will not be unreasonably withheld or delayed:

(i) make any material structural alterations or additions to the Property except as (a) in the ordinary course of operating the Property, (b) required for maintenance and repair, (c) required by any of the Leases or the Contracts, or (d) required by this Agreement;

(ii) sell, transfer, encumber or change the status of title of all or any portion of the Property;

(iii) change or attempt to change, directly or indirectly, the current zoning of the Real Property in a manner materially adverse to it; or

(iv) cancel, amend or modify, in a manner materially adverse to the Property, any license or permit held by Seller with respect to the Property or any part thereof which would be binding upon Purchaser after the Closing.

13.3. Modification of Existing Leases and Contracts. Prior to the expiration of the Investigation Period, Seller may cancel, amend and modify any of the Leases and any of the Contracts, provided notice is given to Purchaser within three (3) business days prior to such action and in any event at least three (3) business days prior to the expiration of the Investigation Period. After the expiration of the Investigation Period, Seller may not cancel, amend, or modify any material Contracts or Leases, in a manner binding upon Purchaser after the Closing, unless Seller gives Purchaser notice within five (5) business days after such action and provided such action is (i) approved by Purchaser in its reasonable discretion within five (5) business days of written request from Seller, provided that if Purchaser does not timely respond, Purchaser shall be deemed to have refused such action or (ii) required by any of the Leases or any of the Contracts.

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13.4. New Leases and Contracts. Prior to the expiration of the Investigation Period, Seller may enter into any new lease or contract affecting the Property, or any part thereof, provided notice is given to Purchaser within three (3) business days after such action and in any event at least three (3) business days prior to the expiration of the Investigation Period. After the expiration of the Investigation Period, Seller may not enter into any new lease or contract without Purchaser’s consent, which consent will not be unreasonably withheld, conditioned or delayed. Notwithstanding the preceding sentence, after the expiration of the Investigation Period, Seller may enter into any new contracts without Purchaser’s consent if doing so is in the ordinary course of operating the Property and the contract (i) will not be binding on Purchaser or (ii) is cancelable on thirty (30) days or less notice without penalty or premium. If Seller shall request Purchaser’s approval to any of the foregoing matters, Purchaser shall have five (5) business days from its receipt of such request to give Seller notice of its approval or disapproval of such matter. If Purchaser does not give such notice, such matter shall be deemed refused by Purchaser.

13.5. Confidentiality. Except as required by law or governmental regulation applicable to Purchaser (or any affiliate of Purchaser), prior to Closing, Purchaser shall maintain the confidentiality of this sale and purchase and shall not disclose the terms of this Agreement or of such sale and purchase to any third parties whomsoever other than investors or prospective investors in Purchaser or the principals of Purchaser’s Broker (if any), Escrow Agent, the Title Company and such other persons whose assistance is required in carrying out the terms of this Agreement. Purchaser shall not at any time issue a press release or otherwise communicate with media representatives regarding this sale and purchase unless such release or communication has received the prior written approval of Seller. Purchaser agrees that all documents and information regarding the Property of whatsoever nature made available to it by Seller or Seller’s agents and the results of all tests and studies of the Property (collectively, the “Proprietary Information”) are confidential and except as required by law or governmental regulation applicable to Purchaser (or any affiliate of Purchaser), Purchaser shall not disclose any Proprietary Information to any other person except those assisting it with the analysis of the Property, and only after procuring such person’s agreement to abide by these confidentiality restrictions. In addition, after Closing, Purchaser shall maintain the confidentiality of the amount of the Purchase Price for a period of one (1) year after the Closing Date and shall not, except as required by law or governmental regulation applicable to Purchaser (or any affiliate of Purchaser), disclose the Purchase Price to any third parties whomsoever other than the local property appraiser’s office, investors or prospective investors in Purchaser or the principals of Purchaser’s Broker (if any), Escrow Agent, the Title Company, Purchaser’s accountants, and such other persons whose assistance is required in carrying out the terms of this Agreement. Notwithstanding the preceding sentence, to the extent required by law, regulation or ordinance or any existing contractual obligations of Purchaser (or any affiliate of Purchaser), Purchaser may disclose the Purchase Price to third parties including but not limited to its shareholders, Securities and Exchange Commission officials, and any national, state or local governing bodies. Purchaser shall require that the Purchaser’s Broker also maintain the confidentiality of the amount of the Purchase Price for a period of one (1) year after the Closing Date. Purchaser shall be liable to Seller for any damages suffered by Seller, its members, or affiliates of Seller that directly or indirectly own a ten percent or greater interest in Seller, as result of a breach of Purchaser’s obligations set forth in this Section 13.5. In determining whether disclosure of

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Proprietary Information or other information described above is required by law, ordinance or governmental regulation applicable to Purchaser or an affiliate of Purchaser, Purchaser shall be entitled without incurring liability under this Section 13.5 to rely upon the opinion of its legal counsel and such opinion shall be final and binding on Seller and Seller’s members and affiliates. This Section 13.5 shall survive the Closing or termination of this Agreement.

13.6. Right to Cure. If any title defect or other matter which would entitle Purchaser to terminate this Agreement shall first arise after Purchaser notifies Seller of its Title Objections pursuant to Section 5.3.1 and prior to the Closing or if Seller shall have breached any representation or warranty hereunder, Seller may elect, by written notice to Purchaser, to cure such title defect or other matter by causing it to be removed, insured over or bonded to cure such breach and Seller may adjourn the Closing for up to thirty (30) days to do so. Nothing contained in this Section 13.6 shall require Seller to cure any such title defect or other matter or to incur any liability or expense to do so.

ARTICLE XIV

NOTICES

All notices, demands or other communications given hereunder shall be in writing and shall be deemed to have been duly delivered (i) upon the delivery (or refusal to accept delivery) by messenger or overnight express delivery service (or, if such date is not on a business day, on the business day next following such date), or (ii) on the third (3rd) business day next following the date of its mailing by certified mail, postage prepaid, at a post office maintained by the United States Postal Service, or (iii) upon the receipt by facsimile transmission as evidenced by a receipt transmission report (followed by delivery by one of the other means identified in (i)-(ii)), addressed as follows:

If to Purchaser, to:	HomeOwner’s Choice Inc. c/o The Boardwalk Company 31640 U.S. Hwy 19 North, Ste 1 Palm Harbor, FL 34684 Attn: Anthony Saravanos Facsimile: (727) 784-1008
with a copy to:	Politis, P.A. 2340 Drew Street, Suite 300 Clearwater, FL 33765 Attn: Peter Politis, Esq. Facsimile: (727) 726-1133
If to Seller, to:	CAT-FLA Owner LLC c/o Eola Capital LLC 512 East Washington Street Orlando, FL 32801 Attention: James R. Heistand; Troy M. Cox Facsimile: (407) 650-0597

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with a copy to:	Driver, McAfee, Peek & Hawthorne, P.L. 1 Independent Drive, Suite 1200 Jacksonville, Florida 32202 Attn: Matthew S. McAfee, Esq. Facsimile: (904) 301-1279
If to Escrow Agent, to:	Aminie Mohip, Esq. 12600 Roosevelt Blvd St Petersburg, Florida 33716 Facsimile: (727) 797-8504

Either party may, by notice given as aforesaid, change the address or addresses, or designate an additional address or additional addresses, for its notices, provided, however, that no notice of a change of address shall be effective until actual receipt of such notice.

ARTICLE XV

TRANSFER OF POSSESSION

15.1. Transfer of Possession. Possession of the Property shall be transferred to Purchaser at the time of Closing subject to the Permitted Encumbrances.

15.2. Delivery of Documents at Closing. At the time of Closing, Seller shall deliver to Purchaser originals or copies of any additional documents, instruments or records in the possession of Seller or its agents which are necessary for the ownership and operation of the Property.

ARTICLE XVI

GENERAL PROVISIONS

16.1. Captions. Captions in this Agreement are inserted for convenience of reference only and do not define, describe or limit the scope or the intent of this Agreement or any of the terms hereof.

16.2. Exhibits. All exhibits referred to herein and attached hereto are a part hereof.

16.3. Entire Agreement. This Agreement contains the entire agreement between the parties relating to the transaction contemplated hereby and all prior or contemporaneous agreements, understandings, representations and statements, oral or written, are merged herein.

16.4. Modification. No modification, waiver, amendment, discharge or change of this Agreement shall be valid unless the same is in writing and signed by the party against which the enforcement of such modification, waiver, amendment, discharge or change is or may be sought.

16.5. Attorneys’ Fees. Should any party hereto employ an attorney for the purpose of enforcing or construing this Agreement, or any judgment based on this Agreement, in any legal

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proceeding whatsoever, including insolvency, bankruptcy, arbitration, declaratory relief or other litigation, the prevailing party shall be entitled to receive from the other party or parties thereto reimbursement for all reasonable attorneys’ fees and all costs, whether incurred at the trial or appellate level, including but not limited to service of process, filing fees, court and court reporter costs, investigative costs, expert witness fees and the cost of any bonds, whether taxable or not, and such reimbursement shall be included in any judgment, decree or final order issued in that proceeding. The “prevailing party” means the party in whose favor a judgment, decree, or final order is rendered.

16.6. Governing Law. This Agreement shall be construed and enforced in accordance with the laws of the State in which the Property is located.

16.7. Time of Essence. Time is of the essence to this Agreement and to all dates and time periods set forth herein.

16.8. Survival. Unless otherwise expressly herein stated to survive, all representations, covenants, indemnities, conditions and agreements contained herein shall merge into and be superseded by the various documents executed and delivered at Closing and shall not survive the Closing.

16.9. Assignment by Purchaser. Purchaser may not assign its rights under this Agreement.

16.10. Severability. If any term, covenant, condition, provision or agreement herein contained is held to be invalid, void or otherwise unenforceable by any court of competent jurisdiction, the fact that such term, covenant, condition, provision or agreement is invalid, void or otherwise unenforceable shall in no way affect the validity or enforceability of any other term, covenant, condition, provision or agreement herein contained.

16.11. Successors and Assigns. All terms of this Agreement shall be binding upon, inure to the benefit of and be enforceable by, the parties hereto and their respective legal representatives, successors and assigns (subject to Section 16.9).

16.12. Interpretation. Seller and Purchaser acknowledge each to the other that both they and their counsel have reviewed and revised this Agreement and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any amendments or exhibits hereto.

16.13. Counterparts. This Agreement may be executed in any number of counterparts, each of which so executed shall be deemed an original; such counterparts shall together constitute but one agreement.

16.14. Recordation. This Agreement may not be recorded and any attempt to do so shall be of no effect whatsoever.

16.15. Limitation on Liability. In any action brought to enforce the obligations of Seller under this Agreement or any other document delivered in connection herewith, the

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judgment or decree shall be subject to the provisions of Section 10.2 and Section 16.8 and shall, otherwise in any event, be enforceable against Seller only up to a maximum of $50,000.00. The provisions of this Section shall survive the termination of this Agreement.

16.16. Possession of Seller. As used in this Agreement, the “possession” or “receipt” of a document, notice or similar writing by Seller shall be deemed to be only the possession, receipt or notice of such document by Seller.

16.17. Business Day. As used in this Agreement, “business day” shall be deemed to be any day other than a day on which banks in the State in which the Property is located shall be permitted or required to close.

16.18. Waiver of Jury Trial. PURCHASER AND SELLER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ANY ACTIONS OF EITHER PARTY ARISING OUT OF OR RELATED IN ANY MANNER WITH THIS AGREEMENT OR THE PROPERTY (INCLUDING WITHOUT LIMITATION, ANY ACTION TO RESCIND OR CANCEL THIS AGREEMENT OR ANY CLAIMS OR DEFENSES ASSERTING THAT THIS AGREEMENT WAS FRAUDULENTLY INDUCED OR IS OTHERWISE VOID OR VOIDABLE). THIS WAIVER IS A MATERIAL INDUCEMENT FOR SELLER TO ENTER INTO AND ACCEPT THIS AGREEMENT AND THE DOCUMENTS TO BE DELIVERED BY PURCHASER AT CLOSING, AND SHALL SURVIVE THE CLOSING OR TERMINATION OF THIS AGREEMENT. Each party hereby authorizes and empowers the other to file this Section 16.18 and this Agreement with the clerk or judge of any court of competent jurisdiction as a written consent to waiver of jury trial.

16.19. Other Duties of Escrow Agent. Escrow Agent shall not be bound in any way by any other agreement or contract between Seller and Purchaser, whether or not Escrow Agent has knowledge thereof. Escrow Agent’s only duties and responsibilities with respect to the Deposit shall be to hold the Deposit and other documents delivered to it as agent and to dispose of the Deposit and such documents in accordance with the terms of this Agreement. Without limiting the generality of the foregoing, Escrow Agent shall have no responsibility to protect the Deposit and shall not be responsible for any failure to demand, collect or enforce any obligation with respect to the Deposit or for any diminution in value of the Deposit from any cause, other than Escrow Agent’s gross negligence or willful misconduct. Escrow Agent may, at the expense of Seller and Purchaser, consult with counsel and accountants in connection with its duties under this Agreement. Escrow Agent shall not be liable to the parties hereto for any act taken, suffered or permitted by it in good faith in accordance with the advice of counsel and accountants. Escrow Agent shall not be obligated to take any action hereunder that may, in its reasonable judgment, result in any liability to it unless Escrow Agent shall have been furnished with reasonable indemnity satisfactory in amount, form and substance to Escrow Agent.

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16.20. Disputes. Escrow Agent is acting as a stakeholder only with respect to the Deposit. If there is any dispute as to whether Escrow Agent is obligated to deliver the Deposit or as to whom the Deposit is to be delivered, Escrow Agent shall not make any delivery, but shall hold the Deposit until receipt by Escrow Agent of an authorization in writing, signed by all the parties having an interest in the dispute, directing the disposition of the Deposit, or, in the absence of authorization, Escrow Agent shall hold the Deposit until the final determination of the rights of the parties in an appropriate proceeding. Escrow Agent shall have no responsibility to determine the authenticity or validity of any notice, instruction, instrument, document or other item delivered to it, and it shall be fully protected in acting in accordance with any written notice, direction or instruction given to it under this Agreement and believed by it to be authentic. If written authorization is not given, or proceedings for a determination are not begun, within thirty (30) days after the date scheduled for the closing of title and diligently continued, Escrow Agent may, but is not required to, bring an appropriate action or proceeding for leave to deposit the Deposit with a court of the State in which the Property is located pending a determination. Escrow Agent shall be reimbursed for all costs and expenses of any action or proceeding, including, without limitation, attorneys’ fees and disbursements incurred in its capacity as Escrow Agent, by the party determined not to be entitled to the Deposit. Upon making delivery of the Deposit in the manner provided in this Agreement, Escrow Agent shall have no further liability hereunder. In no event shall Escrow Agent be under any duty to institute, defend or participate in any proceeding that may arise between Seller and Purchaser in connection with the Deposit. The parties acknowledge that Escrow Agent also represents Seller and in the event of any dispute between Seller and Purchaser, Purchaser acknowledges and agrees that Escrow Agent may represent Seller with respect to any disputes with respect to this Agreement or other matters, and Purchaser agrees that Escrow Agent shall not be disqualified or prevented from representing Seller by virtue of its capacity of Escrow Agent. The provisions of this Section 16.20 shall survive Closing.

16.21. Reports. Escrow Agent shall be responsible for the timely filing of any reports or returns required pursuant to the provisions of Section 6045(e) of the Internal Revenue Code of 1986 (and any similar reports or returns required under any state or local laws) in connection with the closing of the transaction contemplated by this Agreement.

16.22. Radon Notice. As required by Section 404.056(7), Florida Statutes, the following notification is made regarding radon gas:

RADON GAS: Radon is a naturally occurring radioactive gas that, when it has accumulated in a building in sufficient quantities, may present health risks to persons who are exposed to it over time. Levels of radon that exceed federal and state guidelines have been found in buildings in Florida. Additional information regarding radon and radon testing may be obtained from your county public health unit.

16.23. Brokers. The parties each represent and warrant to the other that the only real estate brokers, salesmen or finders involved in this transaction are CB Richard Ellis, Inc. (the “Seller Broker”) and Boardwalk Company (the “Purchaser Broker”)(Seller Broker and Purchaser Broker may be collectively referred to herein as the “Broker”), pursuant to the terms of separate written agreements between (i) Seller and Seller Broker and (ii) Seller Broker and    

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Purchaser Broker. If a claim for brokerage or similar fees in connection with this transaction is made by any broker, salesman or finder other than Broker claiming to have dealt through or on behalf of one of the parties to this Agreement, then that party shall indemnify, defend and hold the other party under this Agreement harmless from all liabilities, damages, claims, costs, fees and expenses whatsoever (including reasonable attorneys’ fees and court costs, including those for appellate matters and post judgment proceedings) with respect to said claim for brokerage. Seller shall be responsible for causing Seller Broker to deliver to Escrow Agent prior to Closing a conditional lien waiver for all fees due Seller Broker at Closing in connection with this Agreement, with such waiver only conditioned upon Seller Broker’s receipt of brokerage fees in the amount payable to Seller Broker as set forth on the Closing Statement (the “Seller Broker Lien Waiver”). Purchaser shall be responsible for causing Purchaser Broker to deliver to Escrow Agent prior to Closing a conditional lien waiver for all fees due Purchaser Broker at Closing in connection with this Agreement, with such waiver only conditioned upon Purchaser Broker’s receipt of brokerage fees in the amount payable to Purchaser Broker as set forth on the Closing Statement (the “Purchaser Broker Lien Waiver”). The provisions of this Section shall survive the Closing or the earlier termination of this Agreement.

16.24. Contribution to New Entity. Purchaser and Seller agree that Seller shall have the right, but not the obligation, to elect to form a new Florida limited liability company (“Newco”) immediately prior to the Closing Date for the purpose of taking title to the Property at Closing. As of the Closing Date, Newco will be wholly owned by Seller. Prior to Closing, Seller will transfer the Property to Newco in accordance with the terms and conditions of this Agreement as if Newco were the Purchaser hereunder; provided, however, that Purchaser shall remain obligated to pay the Purchase Price at Closing. At Closing, Newco shall assume all of the rights, duties and obligations of Purchaser under the Agreement (other than the obligation to pay the Purchase Price which remains with the Purchaser). At Closing (but after such transfer), Seller shall assign and transfer all of the membership units in Newco to Purchaser so that Purchaser is the sole owner of Newco pursuant to that membership unit power attached as Exhibit L, in consideration for receipt of the Purchase Price, and the other obligations and duties set forth in this Agreement. Seller represents that as of the Closing Date Seller will own all of the membership units in Newco, such units shall be unencumbered and that immediately prior to the transfer of the membership units, Newco shall have no liabilities, duties or obligations to any third party except as expressly set forth in this Agreement. Seller agrees to indemnify, defend and hold harmless Purchaser and its affiliates, members, partners, subsidiaries, shareholders, officers, directors, employees and agents from any loss, injury, damage, cause of action, liability, claim, lien, cost or expense, including reasonable attorneys’ fees and costs, arising from any liabilities, duties or obligations of Newco that are in existence prior to the transfer of the membership units, except as expressly set forth in this Agreement; provided, however, that Seller shall expressly not be liable for any liabilities, duties or obligations of Newco which (i) arise or are incurred by Newco after the transfer of the membership units to Purchaser or (ii) are set forth in this Agreement and are assumed by Newco at Closing. Seller shall be responsible for (i) the payment of documentary deed stamps incurred in such transfer of membership units, and (ii) filing the appropriate documentation with the Florida Department of Revenue and the local property appraiser’s office in connection with such transfer of membership units and (iii) any other additional costs associated with performing the transfer as stated in this Section 16.24.

(signature on following page)

27

IN WITNESS WHEREOF, this Agreement has been executed as of the date first set forth above.

SELLER:

CAT-FLA OWNER LLC, a Delaware limited liability company

By:

Name:

Title:

[PURCHASER’S SIGNATURE CONTAINED ON THE FOLLOWING PAGE]

28

PURCHASER:
HCPCI HOLDINGS LLC, a Florida limited liability company
By:
Name:	F.X. McCahill III
Title:	Manager

29

CONSENT AND AGREEMENT OF ESCROW AGENT

The undersigned Escrow Agent hereby agrees to (i) accept the foregoing Agreement, (ii) serve as escrow agent under said Agreement, and (iii) be bound by said Agreement in the performance of its duties as escrow agent.

DRIVER, MCAFEE, PEEK & HAWTHORNE, P.L.

By:

Name:

Title:

30

EXHIBIT A TO SALE, PURCHASE AND ESCROW AGREEMENT

Legal Description of Land

Lots 1 through 8, inclusive of PLAT OF THE MARENE PLACE, according to the plat thereof, recorded in Plat Book 16, page 2 of the public records of Hillsborough County, Florida, and Lot A of HANKIN’S & ZINN’S RESUBDIVISION of Lot 1, Block 29, of TAMPANIA, according to the plat thereof, recorded in Plat Book 12, page 98 of the public records of Hillsborough County, Florida, Less that part taken by orders of taking recorded in Minute Book 144, page 327 (for State Road 60) and In Official Records Book 2828, page 814 (for State Road 60, Frontage Road and Cypress Avenue) and in Official Records Book 3200, page 437 (for Cypress Avenue), of the public records of Hillsborough County, Florida, for right-of-way: the foregoing being more particularly described as follows:

Beginning at the Southeast corner of Lot A of Hankin’s and Zinn’s Re-Subdivision of Lot 1, Block 29 of Tampania, according to the plat thereof, recorded in Plat Book 12, page 98 of the public records of Hillsborough County, Florida, run thence North 89° 20’ 56” West, 226.12 feet along the South boundary of said Lot A to the Easterly right-of-way line of Frontage Road as recorded in Official Records Book 2828, page 814 of the public records of Hillsborough County, Florida; thence along said Easterly right-of-way line the following six (6) courses, (1) North 32 ° 24’ 32” West, 140.88 feet, (2) thence North 00° 08’ 49” West, 61.60 feet (61.48 feet calculated), (3) thence South 89° 22’ 06” West, 38.68 feet, (4) thence North 32° 24’ 32” West, 95.70 feet to a point of curvature, (5) thence Northwesterly 133.27 feet, along the arc of a curve to the right (having a radius of 480.00 feet, a central angle of 15° 54’ 29”, and a chord bearing and distance of North 24 ° 27’ 18” West, 132.84 feet) to a point of tangency, (6) thence North 16° 30’ 03” West 35.25 feet; thence along the intersection right-of-way line of Frontage Road and Cypress Street (as taken by said Official Records Book 2828, page 814), Northeasterly 28.22 feet along the arc of a curve to the right (having a radius of 15.00 feet and a chord bearing and distance of North 37° 23’ 36” East, 24.24 feet); thence South 88° 42’ 45” East, 451.52 feet along the South right-of-way line of Cypress Street as recorded in Official Records Book 2828, page 814 and Official Records Book 3200, page 437, of the public records of Hillsborough County, Florida; thence South 01°15’ 29” West, 427.29 feet along the East boundary of said Lot A and the West right-of-way line of North O’Brien Street to the Point of Beginning.

A-1

EXHIBIT B TO SALE, PURCHASE AND ESCROW AGREEMENT

Form of Tenant Estoppel Certificate

TENANT ESTOPPEL CERTIFICATE

                    , 2010

RE: Lease dated                      (the “Lease”) for Cypress Commons, 5300 W. Cypress Street, Tampa, FL 33609 (the “Property”)

The undersigned certifies to                                                   (“Purchaser”)                                                   (“Landlord”) and to Buyer’s mortgage lender,                                                   (“Lender”), and to each of their respective successors, transferees and assigns and acknowledges and agrees that:

1. The undersigned is the Tenant under the Lease.

2. The following information concerning the Lease is true and correct:

Landlord:                                                                                                       

Tenant:                                                                                   (“Tenant”)

Premises: Suite             (“Premises”)

Square Feet:                      rentable square feet

Amendments, Modifications, Assignments or Assumptions:

Commencement Date:                     

Expiration Date of Term:                     

Monthly rent under the Lease:

Fixed Minimum Rent: $                    

Operating Expense Installment (includes Insurance and Real Estate Taxes):                     .

Real Estate Tax Installment:                     .

Base Year:         

B-1

Base Year Stop Amount, if applicable (Operating expenses include

Insurance and Real Estate Taxes): $                    

Base Year Stop Amount, if applicable (Real Estate Taxes):                     

Tenant’s Pro Rata Share:                     

Scheduled Adjustments (if applicable):                     

Options (if applicable):                     

Amount of Security Deposit: $                    

3. The Lease contains the entire agreement between Landlord and Tenant with respect to the subject matter thereof, has not been modified or amended except as indicated above, no options to purchase or rights of first refusal are contained therein, and there are no other agreements between them, oral or written, regarding the Premises or the Property. Tenant has not assigned the Lease and has not subleased the Leased Premises or any part thereof.

4. The Lease (modified as indicated above) is presently in full force and effect in accordance with its terms and Tenant has accepted the Premises.

5. All rent and additional rent payable under the Lease as of the date of this letter has been paid in full and no rent or additional rent to become payable under the Lease has been paid more than 30 days in advance.

6. To the best of Tenant’s knowledge, no party to the Lease is in default thereunder, and no event has occurred which, with the giving of notice or the passage of time, or both, would constitute a default thereunder.

7. Tenant has no counterclaims, defenses or offsets to its obligations under the Lease or to the enforcement of any of the landlord’s rights thereunder.

8. Landlord has completed all alterations, additions, painting and refurbishing to the Premises and the Property required to be performed by Landlord, and there are no rent concessions, rebates, free rents or similar inducements except as set forth in the Lease.

9. The Lease is subject and subordinate to any and all existing and future mortgages and any ground lease of the Premises.

10 No voluntary actions or, to Tenant’s knowledge, involuntary actions are pending against Tenant under the bankruptcy laws of the United States or any state thereof.

11. Tenant acknowledges that if Lender succeeds to the interest of Landlord under the Lease, Lender shall not be liable for any act or omission of any prior landlord

B-2

(including Landlord), liable for the return of any advance rental deposit or any security deposit (unless such sums have actually been received by Lender as security for Tenant’s performance under the Lease), subject to any offset or defense which Tenant may have against any such prior landlord or bound by any rent or additional rent Tenant may have paid for more than the current month, or bound by any assignment, surrender, termination, cancellation, waiver, release, amendment or modification of the Lease not expressly permitted by the Lease made without its express written consent.

12. If Lender succeeds to the interest of Landlord under the Lease by any means, Tenant agrees to attorn to Lender and be bound to Lender under all the terms of the Lease on the condition that Lender does not disturb the possession of the Tenant under the Lease if the Lease is in full force and effect and the Tenant is not then in default under the Lease.

Tenant acknowledges that Purchaser and Lender have requested this certificate in connection with a proposed acquisition and financing of the Premises, and that each of Purchaser and Lender may rely on the information set forth in this certificate.

By:

Name:

Title:

Dated:

B-3

EXHIBIT C TO SALE, PURCHASE AND ESCROW AGREEMENT

Form of Assignment and Assumption of Leases,

Contracts and Other Property Interests

For good and valuable consideration, the receipt of which is hereby acknowledged, [INSERT NAME OF SELLER ENTITY], a Delaware limited liability company (“Assignor”) hereby irrevocably assigns, transfers and sets over to                                                  , a                      (“Assignee”) all of Assignor’s right, title and interest in and to (i) the lease agreements (the “Leases”) enumerated on Schedule A attached hereto and made a part hereof and relating to the property located at                                          (the “Property”), together with tenant security deposits held by Assignor under the Leases, (ii) to the extent assignable, the contracts (the “Contracts”) enumerated in Schedule B attached hereto and made a part hereof relating to the Property, (iii) to the extent assignable, any governmental permits and approvals (the “Permits and Approvals”) related to the improvements (the “Improvements”) located on the Property, and (iv) to the extent assignable, all contract rights (including, without limitation, all existing third-party warranties, if any, on materials and equipment constituting a part of or used in the operation and maintenance of the Improvements), licenses, permits, plans and specifications, surveys, soils reports, insurance proceeds by reason of damage to the Improvements, condemnation awards and all other rights, privileges or entitlements necessary to continue the use and operation of the Property and the Improvements.

Assignee hereby assumes all obligations in connection with the Leases, the Contracts, and the Permits and Approvals, arising or first becoming due and payable after the date hereof. [REFERENCE ANY OBLIGATIONS ASSUMED UNDER THE LEASING COMMISSION SECTION OF THE PRORATIONS].

Assignor hereby represents and warrants only that it has not previously assigned the Leases, the Contracts, the Permits and Approvals, contract rights and other rights assigned hereby. Assignor makes no other representation or warranty in connection with this Assignment and, except for the foregoing, this Assignment is made without recourse to Assignor.

All terms of this Assignment shall be binding upon, inure to the benefit of and be enforceable by the parties hereto and their respective legal representatives, successors and assigns.

No modification, waiver, amendment, discharge or change of this Assignment shall be valid unless the same is in writing and signed by the party against which the enforcement of such modification, waiver, amendment, discharge or change is or may be sought.

This Assignment shall be construed and enforced in accordance with the laws of the State in which the Property is located.

In any action brought to enforce the obligations of Assignor under this Assignment, the judgment or decree shall be subject to Section 16.15 of that certain Sale, Purchase and Escrow Agreement, dated as of                     , 20    , between Assignor, Assignee and                     , as Escrow Agent.

C-1

This Assignment may be executed in any number of counterparts, each of which so executed shall be deemed an original; such counterparts shall together constitute but one agreement.

IN WITNESS WHEREOF, Assignor and Assignee have each executed this Assignment of this              day of                     , 200    .

ASSIGNOR:

[INSERT NAME OF SELLER ENTITY], a Delaware limited liability company

By:

Name:

Title:

[ASSIGNEE’S SIGNATURE CONTAINED ON THE FOLLOWING PAGE]

C-2

ASSIGNEE:

[INSERT NAME OF PURCHASER ENTITY]

By:

Name:

Title:

C-3

EXHIBIT D TO SALE, PURCHASE AND ESCROW AGREEMENT

FORM OF BILL OF SALE

KNOW ALL MEN BY THESE PRESENTS, that [INSERT NAME OF SELLER ENTITY], a Delaware limited liability company (“Seller”), for good and valuable consideration paid by                                                              , a                      (“Purchaser”), hereby sells, conveys and assigns to Purchaser, its successors and assigns, all of Seller’s right, title and interest in and to the specified items of tangible personal property being more particularly referred to in Schedule A attached hereto (“Personal Property”) and located on the property at                                                                              .

TO HAVE AND TO HOLD the same unto Purchaser, its successors and assigns to and for its own use and behalf forever.

Purchaser agrees to pay all sales taxes payable by reason of the transfer to Purchaser of said Personal Property.

This Bill of Sale shall be without representation or warranty by, and without recourse to, Seller.

This Bill of Sale may be executed in any number of counterparts, each of which so executed shall be deemed an original; such counterparts shall together constitute but one agreement.

IN WITNESS WHEREOF, Seller and Purchaser have caused these presents to be signed by their duly authorized officers as of                     , 20    .

SELLER

[INSERT NAME OF SELLER ENTITY], a Delaware limited liability company

By:

Name:

Title:

[PURCHASER’S SIGNATURE CONTAINED ON THE FOLLOWING PAGE]

D-1

PURCHASER

[INSERT NAME OF PURCHASER ENTITY]

By:

Name:

Title:

D-2

SCHEDULE A

TANGIBLE PERSONAL PROPERTY as of December 31, 2009

Owner: CAT-FLA OWNER LLC

Building: CYPRESS COMMONS

Address: 5300 West Cypress St, Tampa FL

ITEM NUMBER	‘	DATE ACQUIRED	ORIGINAL QUANTITY	ASSET VALUE PER ITEM	ORIGINAL TOTAL ASSET VALUE	DISPOSAL DATE(S)	QUANTITY DISPOSED	DISPOSAL VALUE	CURRENT ASSET VALUE	NOTES
1	Toolbox	2005	1	50.00	50.00			0.00	50.00	Unspecified location & quantity
2	Paint Cans	2005	1	0.00	—	2009	1	0.00	0.00	Unspecified location & quantity
3	Belts for HVAC	2005	1	75.00	75.00			0.00	75.00	Unspecified location & quantity
4	Light bulbs	2005	1	150.00	150.00			0.00	150.00	Unspecified location & quantity
5	Gas can	2005	1	15.00	15.00	2009	1	15.00	0.00	Unspecified location & quantity
6	Filter media	2005	1	0.00	—			0.00	0.00	Unspecified location & quantity
7	Sloan valves	2005	1	0.00	—	2009	1	0.00	0.00	Unspecified location & quantity
8	Tools and items used in building for routine maintenance	2005	1	0.00	—			0.00	0.00	Unspecified location & quantity
9	Alerton pc, monitor,keyboard, mouse, modem and HP laser deskjet 845c printer	2005	1	700.00	700.00			0.00	700.00	1st Floor Maintenance Office
10	Highwoods pc, keyboard, mouse, and HP Laserject 1012 printer	2005	1	100.00	100.00			0.00	100.00	1st Floor Maintenance Office
11	Fax / phone Hp 1010	2005	1	300.00	300.00	2009	1	300.00	0.00	1st Floor Maintenance Office
12	Desks	2005	2	200.00	400.00			0.00	400.00	1st Floor Maintenance Office
13	Large storage cabinets containing misc. plumbing, lockset, lighting and HVAC supplies	2005	5	100.00	500.00			0.00	500.00	1st Floor Maintenance Office

D-3

14	Office chairs	2005	8	50.00	400.00	2008	8	400.00	0.00	Disposed 2008
15	Four drawer file cabinets	2005	2	100.00	200.00			0.00	200.00	1st Floor Maintenance Office
16	2-wheel hand truck	2005	1	50.00	50.00			0.00	50.00	1st Floor Maintenance Office
17	RYOBI 18 volt battery drill with 1 space battery and charger	2005	1	150.00	150.00	2009	1	150.00	0.00	1st Floor Maintenance Office
18	Old toilet plunger	2005	1	0.00	—			0.00	0.00	1st Floor Maintenance Office
19	6 ft ladder	2005	1	65.00	65.00			0.00	65.00	1st Floor Maintenance Office
20	Four drawer Craftsman rolling tool cabinet	2005	1	300.00	300.00			0.00	300.00	1st Floor Maintenance Office
21	Incomplete sets of assorted sockets (inside Craftsman rolling tool cabinet)	2005	3	50.00	150.00			0.00	150.00	1st Floor Maintenance Office
22	24 inch pipe wrench	2005	1	25.00	25.00	2008	1	25.00	0.00	Disposed 2008
23	Rubber mallet	2005	1	0.00	—			0.00	0.00	1st Floor Maintenance Office
24	Set of drill bits	2005	1	25.00	25.00			0.00	25.00	1st Floor Maintenance Office
25	Hacksaw	2005	1	0.00	—	2009	1	0.00	0.00	1st Floor Maintenance Office
26	24 inch bolt cutter	2005	1	30.00	30.00	2008	1	30.00	0.00	Disposed 2008
27	Small ball peen hammer	2005	1	0.00	—	2009	1	0.00	0.00	1st Floor Maintenance Office
28	24 inch level	2005	1	0.00	—	2008	1	0.00	0.00	Disposed 2008
29	Hand tool box containing misc plumbing items	2005	1	75.00	75.00			0.00	75.00	1st Floor Maintenance Office
30	Plastic Keter brand plastic shelving units for light bulb storage	2005	2	50.00	100.00			0.00	100.00	1st Floor Maintenance Office
31	Dayton wet/dry vac	2005	1	100.00	100.00			0.00	100.00	1st Floor Maintenance Office
32	First aid kit	2005	1	50.00	50.00			0.00	50.00	1st Floor Maintenance Office
33	Small Admiral refrigerator	2005	1	100.00	100.00			0.00	100.00	1st Floor Maintenance Office
34	American flag	2005	1	100.00	100.00	2008	1	100.00	0.00	Disposed 2008
35	Small rolling table	2005	1	0.00	—			0.00	0.00	1st Floor Maintenance Office
36	Poster display easel	2005	1	25.00	25.00			0.00	25.00	1st Floor Maintenance Office

D-4

37	Security monitor with 1 Dedicated Micros recorder	2005	1	500.00	500.00	2009	1	500.00	0.00	1st Floor Maintenance Office
38	Cork board	2005	1	0.00	—	2009	1	0.00	0.00	1st Floor Maintenance Office
39	Blueprint / Work table	2005	1	0.00	—			0.00	0.00	1st Floor Maintenance Office
40	Best locks system, key punch machine, core machine, and punch label set	2005	1	500.00	500.00			0.00	500.00	1st Floor Maintenance Office
41	Craftsman bench grinder	2005	1	100.00	100.00	2009	1	100.00	0.00	1st Floor Maintenance Office
42	Hampton Bay high velocity floor fan	2005	1	45.00	45.00			0.00	45.00	1st Floor Maintenance Office
43	Miscellaneous office supplies	2005		0.00	50.00			0.00	50.00	1st Floor Maintenance Office
44	Janitorial cart	2005	1	75.00	75.00			0.00	75.00	1st Floor Maintenance Office
45	Sets of elevator protection pads	2005	2	200.00	400.00			0.00	400.00	1st Floor Maintenance Office
46	6 ft ladder	2005	1	65.00	65.00			0.00	65.00	1st Floor North Mechanical Room
47	8 ft ladder	2005	1	75.00	75.00			0.00	75.00	1st Floor South Mechanical Room
48	Sheet rock cart	2005	0	0.00	—			0.00	0.00	Outdoor Storage Area
49	Spare pump and motor assembly for cooling tower	2005	1	500.00	500.00	2009	1	500.00	0.00	Outdoor Storage Area
50	Sledge hammer	2005	1	35.00	35.00	2009	1	35.00	0.00	Outdoor Storage Area
51	4-inch spade shovel	2005	1	0.00	—			0.00	0.00	Outdoor Storage Area
52	Shovel	2005	1	0.00	—			0.00	0.00	Outdoor Storage Area
53	Garden hoses	2005	2	0.00	—	2009	2	0.00	0.00	Outdoor Storage Area
54	Janitorial cart	2005	1	75.00	75.00			0.00	75.00	Outdoor Storage Area
55	Light fixtures from PBS&J buildout	2005	5	10.00	50.00	2008	5	50.00	0.00	Disposed 2008
56	Light fixtures stored for BSP we need to remove	2005	15	0.00	—	2008	0	0.00	0.00	Disposed 2008
57	Picnic table	2005	1	0.00	—			0.00	0.00	Outdoor Items
58	Bench in front smoking area	2005	1	75.00	75.00	2008	1	75.00	0.00	Disposed 2008
59	Black ash cans	2005	3	20.00	60.00			0.00	60.00	Outdoor Items
60	Black trash can	2005	1	0.00	—			0.00	0.00	Outdoor Items

D-5

61	Trash / ash receptables	2005	3	20.00	60.00				0.00		60.00	Parking Garage and Front Smoking Area
62	Ash trays	2005	3	20.00	60.00				0.00		60.00	Parking Garage and Front Smoking Area
63	Large rug - under contract with CINTAS	2005	1	0.00	—				0.00		0.00	Lobby Area
64	Small rug - under contract with CINTAS	2005	1	0.00	—				0.00		0.00	Rear Service Entrance
65	Miscellaneous Christmas decorations	2005		0.00	500.00				0.00		500.00	4th Floor Machine Room (by parking garage)
66	Large hanging silver absract artwork	2005	1	0.00	—				0.00		0.00	Lobby Area
67	Surveillance cameras	2005	4	500.00	2,000.00	2009		4	2,000.00		0.00	Elevator Lobby First Floor
68	Mouse and mouse pad	2005	1	0.00	—				0.00		0.00
69	Keyboard	2005	1	0.00	—				0.00		0.00
70	Modem & router	2005	1	100.00	100.00				0.00		100.00
71	Pc	2005	1	500.00	500.00				0.00		500.00
72	Monitors	2005	5	0.00	—				0.00		0.00
73	5000 watt generator	2009	1	200.00	200.00				0.00		200.00	Transferred from the Atrium at Sabal Park
					—				0.00		0.00
					—				0.00		0.00
					—				0.00		0.00
					—				0.00		0.00
					—				0.00		0.00
					—				0.00		0.00
					—				0.00		0.00
					—				0.00		0.00
					—				0.00		0.00
SUBTOTAL ASSETS					10,260.00				4,280.00	$	5,980.00
GRAND TOTAL CURRENT ASSETS (Acquisitions less Dispositions)							$	5,980.00				Assets to be reported on Tangible Tax Return

D-6

EXHIBIT E TO SALE, PURCHASE AND ESCROW AGREEMENT

LEASES

List of Lease Documents

Cypress Commons / CAT/FLA Owner LLC

	Date Executed
FedTechServices, LLC
Office lease	07/27/09
Commencement Agreement	08/03/09
First Amendment of Lease	02/02/10
Commencement Agreement	02/08/10
Rocco of Tarpon Springs, Inc. (f.k.a. Glee, Inc.)
Office Lease	01/29/01
First Amendment to Office Lease Agreement	06/23/03
Second Amendment to Lease Agreement	07/09/04
Third Amendment to Lease Agreement	06/30/06
Consent Agreement	07/26/07
Assignment of Lease
Fourth Amendment to Lease Agreement	03/03/10
Innquest Software, Inc.
Office Lease	05/15/00
First Amendment to Lease Agreement	02/28/03
Second Amendment to Lease Agreement	01/04/07
Integra Construction Group, LLC
Office Lease	04/22/09
Joseph S. Lafata
Office Lease	09/24/02
First Amendment to Lease Agreement	11/30/07
Nestle USA, Inc.
Lease	06/19/92
First Amendment to Lease	06/19/92
Second Amendment to Lease Agreement	06/24/97
Third Amendment to Lease Agreement	09/26/02
Fourth Amendment to Lease Agreement	06/15/05
Fifth Amendment to Lease Agreement	09/18/08

E-1

EXHIBIT F TO SALE, PURCHASE AND ESCROW AGREEMENT

CONTRACTS

F-1

Ownership	Entity: CAT-FLA Owner
Property Entity:	Cypress Commons (1540e)	Service Contract Listing
Date:	3/24/2010
Location:	5300 West Cypress Street Tampa, FL 33607

Contract Type	Vendor Name	Standard or Vendor Contract Form	Term: Commencement/Expiration Date, termination option
Trash Removal	World One	standard	5/1/09-4/30/10 30 day termination
Janitorial- Cleaning	Master Maintenance, Inc.	standard	5/1/09-4/30/10 30 day termination
Landscaping- exterior	Landscape Maintenance Professionals	standard	5/1/09-4/30/10 30 day termination
Interior Landscaping	Foilage Design Systems	standard	5/1/09-4/30/10 30 day termination
Security	Security Forces, Inc	standard	5/1/09-4/30/10 30 day termination
Fountain Maintenance	Florida Fountain	standard	5/1/09-4/30/10 30 day termination
Pest Control-Exterior	Rentokil	standard	4/15/09-4/14/10 30 day termination
Pest Control-Interior	Rentokil	standard	4/15/09-4/14/10 30 day termination
HVAC Water Treatment	R2J Chemical Systems	standard	2/01/09-1/31/10 30 day termination
Life Safety	Rodan Fire Sprinkler	standard	5/15/09-5/14/10 30 day termination
Elevators	Schindler Elevator	standard	7/22/09-7/21/10 30 day termination
Elevator Monitoring	Servidian/Intelligent Access Systems	standard	5/1/09-4/30/10 30 day termination
Building Access Control	Servidian/Intelligent Access Systems	standard	5/1/09-4/30/10 30 day termination
Fire Alarm Monitoring	Servidian/Intelligent Access Systems	standard	5/1/09-4/30/10 30 day termination
Pond Maintenance	Aquatic Systems	standard	6/01/09-5/31/10 30 day termination
Metal Maintenance	All Florida Metal	standard	5/1/09-4/30/10 30 day termination

F-2

EXHIBIT G TO SALE, PURCHASE AND ESCROW AGREEMENT

FORM OF NOTICE TO TENANTS

                    , 200    

Re:

Dear Tenant:

Please be advised that effective                     , 20    , [INSERT NAME OF SELLER ENTITY] has sold the above-referenced property to                                                                          . Your security deposit has been transferred to such entity and such entity shall be responsible for holding the same in accordance with the terms of your lease. Effective                     , 20    , all future rental payments should be sent to the following address:

Any questions regarding maintenance and management of the property should be addressed to:

Very truly yours,

[INSERT NAME OF SELLER ENTITY], a

Delaware limited liability company

By:

Name:

Title:

G-1

EXHIBIT H TO SALE, PURCHASE AND ESCROW AGREEMENT

FIRPTA Affidavit

Transferor’s Certification of Non-Foreign Status

To inform [PURCHASER ENTITY], a                                          (“Transferee”), that withholding of tax under Section 1445 of the Internal Revenue Code of 1986, as amended (the “Code”), will not be required upon the transfer of certain real property to Transferee by [INSERT NAME OF SELLER ENTITY], a Delaware limited liability company (“Transferor”), the undersigned hereby certifies the following on behalf of Transferor:

1. Transferor is not a foreign corporation, foreign partnership, foreign trust or foreign estate (as those terms are defined in the Code and the Income Tax Regulations promulgated thereunder);

2. Seller is not a disregarded entity as defined in §1.1445-2(b)(2)(iii);

3. Transferor’s U.S. employer identification number is                      ; and

4. Transferor’s office address is                                                                          .

Transferor understands that this Certification may be disclosed to the Internal Revenue Service by Transferee and that any false statement contained herein could be punished by fine, imprisonment, or both.

Under penalty of perjury I declare that I have examined this Certification and to the best of my knowledge and belief it is true, correct and complete, and I further declare that I have authority to sign this document on behalf of Transferor.

Dated:                     

[INSERT NAME OF SELLER ENTITY], a

Delaware limited liability company

By:

Name:

Title:

H-1

EXHIBIT I TO SALE, PURCHASE AND ESCROW AGREEMENT

FORM OF DEED

PREPARED BY AND RETURN TO:

Matthew S. McAfee, Esq.

Driver, McAfee, Peek & Hawthorne, P.L.

1 Independent Drive., Suite 1200

Jacksonville, Florida 32202

SPECIAL WARRANTY DEED

THIS SPECIAL WARRANTY DEED is made and entered into as of this      day of                     , 200     by [INSERT NAME OF SELLER ENTITY], a Delaware limited liability company, whose post office address is c/o Capital Partners, Inc., 512 East Washington Street, Suite 200, Orlando, Florida 32801 (hereinafter called the “Grantor”), to                                                                  , a                                    , whose post office address is                                                               (hereinafter called the “Grantee”).

[Wherever used herein, the terms “grantor” and “grantee” shall include singular and plural, heirs, legal representatives, and assigns of individuals, and the successors and assigns of corporations, wherever the context so admits or requires.]

W I T N E S S E T H:

The Grantor, for and in consideration of the sum of Ten and No/100 Dollars ($10.00) and other valuable considerations, receipt whereof is hereby acknowledged, by these presents does grant, bargain, sell, alien, remise, release, convey and confirm unto the Grantee, all that certain land situated in                              County,                              (the “Property”), as more particularly described on Exhibit “A” attached hereto and incorporated herein by this reference.

TOGETHER with all the tenements, hereditaments and appurtenances thereto belonging or in anywise appertaining.

TO HAVE AND TO HOLD, the same in fee simple forever.

AND, the Grantor hereby covenants with the Grantee that it is lawfully seized of the Property in fee simple; that it has good right and lawful authority to sell and convey the Property; and the Grantor hereby covenants that Grantor will warrant and defend title to the Property against the lawful claims of all persons claiming by, through or under Grantor alone, but against none other.

The Property is subject to real property taxes accruing subsequent to December 31, 2009, and matters set forth on Exhibit “B” attached hereto and incorporated herein by this reference (and identified as Permitted Encumbrances); however, this reference shall not serve to reimpose the same.

I-1

IN WITNESS WHEREOF, the Grantor has caused these presents to be executed the day and year first above written.

Signed, sealed and delivered

in the presence of:

WITNESSES:	[INSERT NAME OF SELLER ENTITY], a
	Delaware limited liability company
Sign:
Witness #1	By:
Print:
	Name:
	Title:
Sign:
Witness #2
Print:

STATE OF	)
	) ss:
COUNTY OF	)

I hereby certify that the foregoing instrument was acknowledged before me this     day of                     , 20    , by                                                              , as                                               of [INSERT NAME OF SELLER ENTITY], a Delaware limited liability company, on behalf of the company. He [    ] is personally known to me, or [    ] has produced                                                               as identification.

Affix Notary Stamp or Seal Below:

NOTARY PUBLIC – signature above

Printed Name:

I-2

EXHIBIT “A”

LEGAL DESCRIPTION OF THE PROPERTY

I-3

EXHIBIT “B”

PERMITTED ENCUMBRANCES

I-4

EXHIBIT J TO SALE, PURCHASE AND ESCROW AGREEMENT

OWNER’S AFFIDAVIT

The undersigned Affiant, being first duly sworn, and being duly authorized to do so on behalf of the Owner named below, hereby makes the following affidavit to                                  (“Title Company”) and Commercial Property Title, LLC. (“Title Agent”) in connection with the transaction identified as follows:

AFFIANT:	[INSERT NAME OF SELLER ENTITY], a Delaware limited liability company.
OWNER:	[INSERT NAME OF SELLER ENTITY], a Delaware limited liability company.
PROPERTY:	Property located at                                          (as more particularly described in Schedule A to the Commitment set forth below).
COMMITMENT:		Commitment #                    .

1. Owner is the owner in fee simple of the Property, as more particularly described in the Commitment, and there are no other parties who are in possession, or who have or claim a right to be in possession, of any part of Property, except for the tenants set forth in Exhibit A attached hereto.

2. (a) No person has furnished any labor, services, or materials in connection with the construction or repair of any buildings or improvements on any of the Property within the last ninety (90) days; (b) there are no unpaid amounts due for any labor, material, or services in connection with the construction or repair of any improvements on any of the Property, or with respect to the Property itself, that could form the basis of a lien thereon; and (c) Owner has not received any notice of intention to file or record a lien in connection with any of the Property.

3. There has been no material change in the exterior aspects of any improvements on any of the Property as shown in the respective survey plans referred to in the Commitment.

4. All real estate taxes and municipal or county charges currently due and owing with respect to the Property have been paid, or will be paid prior to the date on which same will become delinquent.

5. As an inducement to Title Company and Title Agent to insure over any matters attaching or created during the “gap” in time between the last continuation of title and the recording of the appropriate deed, mortgage, or other instrument with respect to the Property, Owner shall promptly remove of record any matters filed of record during said gap period, but only to the extent caused by Owner.

J-1

6. This Affidavit is given with the understanding and intention that Title Company and Title Agent shall rely thereon in issuing the title insurance policy which is based on the Commitment.

7. THE UNDERSIGNED EXECUTES THIS AGREEMENT BECAUSE OF THE BENEFITS DIRECTLY AND INDIRECTLY ACCRUING TO IT BY REASON OF THE ISSUANCE OF THE POLICY.

Executed as of the      day of                     , 20    .

AFFIANT:

[INSERT NAME OF SELLER ENTITY],

a Delaware limited liability company

By:

Name:

Title:

STATE OF

COUNTY OF

The foregoing instrument was acknowledged before me on                     , 200    , by                                  as                                  of [INSERT NAME OF SELLER ENTITY], a Delaware limited liability company, on behalf of the limited liability company, who is personally known to me or who has produced                                                  as identification.

Name:

NOTARY PUBLIC, State of

(SEAL)Serial Number (if any)

My Commission Expires:

J-2

EXHIBIT K TO SALE, PURCHASE AND ESCROW AGREEMENT

PERMITTED EXCEPTIONS

1. Taxes and assessments for the year 2010 and subsequent years, which are not yet due and payable.

2. Easement in favor of Tampa Electric Company recorded in Official Records Book 4512, Page 96, of said records.

3. Drainage Easement in favor of City of Tampa recorded in Official Records Book 4578, Page 1161, of said records.

4. Matters contained in that certain Resolution No. 2002-1001 recorded in Official Records Book 11938, Page 659, of said records.

5. Rights of tenants occupying all or part of the insured land under unrecorded leases or rental agreements.

K-1

SCHEDULE 11.1.7 TO SALE, PURCHASE AND ESCROW AGREEMENT

List of Notices From Governmental Authorities

NONE

SCHEDULE 11.1.9 TO SALE, PURCHASE AND ESCROW AGREEMENT

List of Material Litigation

NONE

SCHEDULE 11.1.9 TO SALE, PURCHASE AND ESCROW AGREEMENT

List of Environmental Reports

Phase I Environmental Site Assessment for Cypress Commons, 5300 W. Cypress Street, Tampa, Hillsborough County, Florida, prepared for Capital Partners, Inc., 512 East Washington Street, Orlando, Florida, 32801, prepared by Andreyev Engineering, Inc., 4055 St. Johns Parkway, Sanford, Florida, 32771, Project No.EPEN-05-0356-E, dated October 18, 2005

Phase I Environmental Site Assessment of Cypress Center, Cypress Center Drive, Tampa, Florida, prepared for CB Richard Ellis Investors, 800 Boylston Street, Boston, Massachusetts, 02199, prepared by ATC Associates Inc., 5602 Thompson Center Court, Suite 405, Tampa, Florida, 33634, Project No. 60.75241.0046, dated August 1, 2007

Phase I Environmental Site Assessment for Cypress Commons, 5300 W. Cypress Street, Tampa, Hillsborough County, Florida, prepared for Eola Capital, 512 East Washington Street, Orlando, Florida, 32801, prepared by Andreyev Engineering, Inc., 4055 St. Johns Parkway, Sanford, Florida, 32771, Project No.EPEN-10-0005-A, dated January 28, 2010

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Francis X. McCahill III, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Homeowners Choice, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	/s/ FRANCIS X. MCCAHILL III
May 14, 2010	Francis X. McCahill III
	President and Chief Executive Officer (Principal Executive Officer)

A signed original of this document has been provided to Homeowners Choice, Inc. and will be retained by Homeowners Choice, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Richard R. Allen, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Homeowners Choice, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	/s/ RICHARD R. ALLEN
May 14, 2010	Richard R. Allen
	Chief Financial Officer (Principal Financial and Accounting Officer)

A signed original of this document has been provided to Homeowners Choice, Inc. and will be retained by Homeowners Choice, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.1

Exhibit 32.1

Written Statement of the Chief Executive Officer

Pursuant to 18 U.S.C. Section 1350

Solely for the purposes of complying with 18 U.S.C. ss.1350, I, the undersigned Chief Executive Officer of Homeowners Choice, Inc. (the “Company”), hereby certify, based on my knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2010 as filed with the Securities and Exchange Commission on May 14, 2010 (the “Report”), fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ FRANCIS X. MCCAHILL III

Francis X. McCahill III

President and Chief Executive Officer

May 14, 2010

A signed original of this document has been provided to Homeowners Choice, Inc. and will be retained by Homeowners Choice, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

Written Statement of the Chief Financial Officer

Pursuant to 18 U.S.C. Section 1350

Solely for the purposes of complying with 18 U.S.C. ss.1350, I, the undersigned Chief Executive Officer of Homeowners Choice, Inc. (the “Company”), hereby certify, based on my knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2010 as filed with the Securities and Exchange Commission on May 14, 2010 (the “Report”), fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ RICHARD R. ALLEN

Richard R. Allen

Chief Financial Officer

May 14, 2010

A signed original of this document has been provided to Homeowners Choice, Inc. and will be retained by Homeowners Choice, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.