-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, H52VtBjaVSjOTWBYa9sbQixLTNuFBgEgg0Qfja99jXkfU9wFt0pQed/+yJv9MuWp 4BXlZjv+9myxVsOUIQvBYw== 0000950144-01-004369.txt : 20010402 0000950144-01-004369.hdr.sgml : 20010402 ACCESSION NUMBER: 0000950144-01-004369 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ORIOLE HOMES CORP CENTRAL INDEX KEY: 0000074928 STANDARD INDUSTRIAL CLASSIFICATION: OPERATIVE BUILDERS [1531] IRS NUMBER: 591228702 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-06963 FILM NUMBER: 1585910 BUSINESS ADDRESS: STREET 1: 1690 S CONGRESS AVE STE 200 CITY: DELRAY BEACH STATE: FL ZIP: 33445 BUSINESS PHONE: 4072742000 FORMER COMPANY: FORMER CONFORMED NAME: ORIOLE LAND & DEVELOPMENT CORP DATE OF NAME CHANGE: 19720615 10-K405 1 g68169e10-k405.txt ORIOLE HOMES CORP. 12/31/2000 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------------------ FORM 10-K Annual Report pursuant to Section 13 of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 2000 File No. 1-6963 ORIOLE HOMES CORP. - -------------------------------------------------------------------------------- 1690 South Congress Avenue, Suite 200, Delray Beach, Florida 33445 (561) 274-2000 FLORIDA 59-1228702 ------------------------- -------------------------- (State of Incorporation) (I.R.S. Employer I.D.) Securities registered pursuant of Section 12(b) of the act: NAME OF EACH EXCHANGE ON TITLE OF EACH CLASS WHICH REGISTERED - ------------------------------------- -------------------------- Class A Common Stock, $.10 par Value American Stock Exchange Class B Common Stock, $.10 par Value American Stock Exchange The Registrant (1) HAS filed all reports required to be filed by Section 13 of the Securities Exchange Act of 1934 during the preceding twelve months; and (2) HAS been subject to the filing requirements for at least the past 90 days. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [X]. As of March 14, 2001, the Company had outstanding 1,863,649 shares of its Class A Common Stock and 2,761,875 shares of its Class B Common Stock. The aggregate market value of voting stock held by non-affiliates of the Registrant is $7,404,200 as of March 14, 2001. Part III of this Report is incorporated by reference to the Registrant's Proxy Statement which will be filed for the 2001 Annual Meeting, to be held on May 10, 2001. 2 ORIOLE HOMES CORP. FORM 10-K TABLE OF CONTENTS
PAGE ---- Part I Item 1. Business ...................................................................... 1 Item 2. Properties .................................................................... 11 Item 3. Legal Proceedings ............................................................. 11 Item 4. Submission of Matters to a Vote of Security-Holders ........................... 11 Part II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters ................................................. 12 Item 6. Selected Financial Data ....................................................... 13 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ......................................... 14 Item 7A. Quantitative and Qualitative Disclosures About Market Risk..................... 20 Item 8. Financial Statements and Supplementary Data ................................... 21 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ......................................... 44 Part III Item 10. Directors and Executive Officers of the Registrant ........................... 44 Item 11. Executive Compensation ....................................................... 44 Item 12. Security Ownership of Certain Beneficial Owners and Management ............................................................. 44 Item 13. Certain Relationships and Related Transactions ............................... 44 Part IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K ......................................................... 45 Signatures .................................................................................... 48 Exhibit Index................................................................................... 49
3 PART I ITEM 1 BUSINESS GENERAL Oriole Homes Corp. (together with its consolidated subsidiaries, the "Company" or "Oriole") builds and sells single-family homes, patio homes, townhomes, villas, duplexes and low and mid-rise condominiums, principally in southeast Florida. Oriole was incorporated in the State of Florida in 1968 as the successor to six corporations that had engaged in the construction and sale of single-family homes in Florida since 1963. The Company's executive office is located at 1690 South Congress Avenue, Suite 200, Delray Beach, Florida 33445, and its telephone number is (561) 274-2000. The Company is a leader in the "active adult" (age 55 and over) market in south Florida. In 2000, approximately 92% of the Company's home sales were derived from sales of homes in communities designed exclusively for active adults. Oriole designs its product mix in response to the preferences of active adults, a demographic group which, according to U.S. Census reports, enjoys a high percentage of discretionary income in this marketplace and is the fastest growing segment of the population in the United States. In 2000, homes in the Company's active adult communities sold at prices that ranged from $100,000 to $205,000. Approximately 51% of these sales were for cash. During the year ended December 31, 2000, the average sales price for homes delivered by the Company was $163,700. 1 4 HOME BUILDING DATA (IN 000's) The following table sets forth information concerning sales, new contracts and backlog for each of the past five years for the Company's homes: Years Ended December 31, (Dollars in Thousands)
2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- Total Sales Sales value $ 91,989 $77,454 $82,737 $106,788 $100,661 Number of homes 562 501 522 676 597 Total New Contracts Sales value $150,770 $73,082 $75,876 $102,392 $110,122 Number of homes 848 463 491 653 670 Total Backlog Sales value $ 87,962 $29,181 $33,553 $ 40,414 $ 44,810 Number of homes 460 174 212 243 266
The Company anticipates delivering substantially all backlog, both in number of homes and dollar amount, within a twelve month period. It generally takes eight to twelve months after execution of a contract to deliver a home. OPERATING STRATEGIES The Company has attempted to maximize its financial return by (i) acquiring tracts of developed and undeveloped land and marketing this land in phases, (ii) developing planned communities, which permit the Company to take advantage of certain economies of scale, (iii) generally beginning construction only after a home is contracted for, and (iv) acting as general contractor and hiring subcontractors on a fixed-price or other negotiated cost-effective basis. In 1999, Oriole implemented certain strategic initiatives to help enhance profit margins, including the installation of a new information technology system. This system provided the infrastructure to support the evaluation, modification and automation of certain business processes in order to reduce home delivery time, enhance the quality of home construction and standardize options. 2 5 To leverage this infrastructure, in 2000 Oriole implemented additional strategic initiatives to increase site traffic, customer referrals and new sales. These included new merchandising programs to better focus on the needs of our primary target market, an e-commerce initiative to enhance responsiveness to our customers, and homebuyer surveys through an independent organization to improve customer satisfaction. Market-driven attributes which have contributed to Oriole's success include, (i) construction of quality homes within communities that offer a significant range of amenities, and therefore satisfy customers who have provided a continual source of referrals, (ii) the offering of a wide selection of competitively priced housing, which includes a substantial product mix, (iii) extensive knowledge of the Florida market, (iv) a land acquisition and development strategy that both permits development and construction in phases and ensures availability of strategically located land for future marketing, and (v) a merchandising program which promotes community lifestyle advantages. The Company will continue to adhere to most of its current operating strategies but will also adopt new strategies as it deems appropriate to meet evolving and increasingly competitive market conditions. In this regard, the Company continues to extend its geographic market into the central Florida area to take advantage of accelerated demand in those areas. In the past, it has reduced reliance on the outright purchase of large tracts of land with the use of "rolling" options, which allows the Company an exclusive right to the future purchase of a predetermined quantity of land at a price fixed at the original contract date, thereby allowing it to reduce market and investment risk. The Company also pursues strategic alliances. A typical strategic alliance allows for shared resources and risk between homebuilders and/or vendors in the purchase, development and marketing of parcels of land. An alliance may take various forms; i.e., direct investment, joint ventures, etc The Company's acquisition, through its wholly owned subsidiary, of certain assets of a real estate project known as the "Vizcaya Project" in August, 2000, is an example of a strategic alliance structured as a direct investment. Under the terms of the transaction, the Company's subsidiary acquired the Vizcaya Project with a $6.5 million capital contribution from the 3 6 Company and a portion of the acquisition and development loan facility obtained by the subsidiary, $2.0 million of which was guaranteed by the Company. The Company's subsidiary then entered into a Builders Agreement with another developer to manage the Vizcaya Project. Certain affiliates of that developer also provided guarantees for the subsidiary's acquisition and construction loan. Pursuant to various agreements between the Company's subsidiary and the managing developer, the Company's subsidiary is entitled to priority with respect to return of its capital and a preferred return while the managing developer earns a development fee and a bonus based upon shares in profits. By sharing resources and risk with the managing developer, this structure permitted the Company to reduce its market and investment risk. See also Notes B and I to Consolidated Financial Statements. QUALITY CONSTRUCTION AND DIVERSE AMENITIES. The Company creates a total lifestyle experience for the active adult. The communities usually include extensive product mix and recreational facilities, which range from intimate social clubhouses and swimming pools to multi-million dollar clubhouse environments which include tennis courts, indoor and outdoor swimming pools, theaters for the performing arts, health clubs/spas and other amenities. PRODUCT DIVERSIFICATION AND MERCHANDISING. The Company spends considerable effort in developing design, marketing and merchandising concepts for each of its communities. The design concepts determine the size, style and price range of homes, the layout of common areas and individual lots and the overall community presentation. The product line offered depends upon many factors, including the housing generally available in the area and the needs of a particular target market. After establishing design concepts and a marketing plan, the Company undertakes development activities which can include site planning and engineering and the construction of roads, sewer, water and drainage facilities and recreational facilities. Oriole seeks to appeal to a wide variety of buyers in different geographic locations with different individual risk profiles and lifestyle preferences and, accordingly, the Company offers a diversity of home styles and price ranges including single family, patio, townhomes, villas, duplexes and low and mid-rise condominiums. Sales prices range from $100,000 to $450,000, with an average price of $163,700 for homes delivered during 2000. See "COMMUNITIES CURRENTLY UNDER DEVELOPMENT OR CONSTRUCTION", at page 6. The Company offers a variety of options and upgrades for each of its homes. Options permit buyers some flexibility to customize their homes on a design fee basis. Options also provide the Company with higher margins while 4 7 allowing the Company to maintain the efficiencies of a production builder. The Company believes the availability of options increases the appeal of its homes and makes them desirable to a wide variety of buyers. LAND ACQUISITION AND DEVELOPMENT. The Company selects locations for its developments on the basis of accessibility to infrastructure such as major highways and thoroughfares, shopping areas, medical facilities and community cultural and recreation centers. The land is then separated into development phases and concepts. The Company generally develops tracts of land that require site improvements prior to construction. This work sometimes requires that the Company maintain performance bonds with the appropriate regulatory authorities. Oriole's general policy is not to begin construction of single-family homes prior to the execution of a sales contract, which minimizes the costs and risk of completed but unsold inventory. The Company will, however, begin multi-family construction (duplex, townhouse, villa and multi-story complexes) when (a) sales contracts are executed for a predetermined percentage of the total units available and (b) profit can be enhanced by matching production schedule to deliveries. LAND SALES. In the normal course of its business, the Company has and may sell land which either can be sold at an advantageous price due to market conditions or because it no longer meets the Company's marketing needs. Sales of this land may also be made because it is located in areas where the Company considers its inventory to be excessive or because the land has been zoned for commercial use. 5 8 COMMUNITIES CURRENTLY UNDER DEVELOPMENT OR CONSTRUCTION The following table summarizes information as of December 31, 2000 with respect to the Company's principal projects under development or construction during 2000.
TOTAL UNITS SOLD UNITS SOLD NAME AND YEAR UNITS AND AND LOCATION OF DEVELOPMENT PLANNED DELIVERED DELIVERED IN UNITS UNDER UNITS UNDER REMAINING DEVELOPMENT STARTED TYPE (2) THRU 2000 2000 CONSTRUCTION(1) CONTRACT UNITS(2) - ----------------------------- -------- ------------ ------------ -------------- ------------------ ------------ -------------- AT DECEMBER 31, 2000 ------------------------------------------------ Country Glen 1993 Single 300 154 17 14 47 82 Cooper City Family Coral Lakes 1992 Active 1,372 (3) 789 229 72 141 213 Delray Beach Adult Palm Isles West 1995 Active 235 189 42 2 0 4 Boynton Beach Adult Majestic Isles 1994 Active 450 382 63 3 4 1 Boynton Beach Adult Addison Green 1998 Active 130 4 29 4 26 71 Boynton Beach Adult Summer Chase 1989 Active 221 210 10 0 0 1 Lake Worth Adult Stonecrest 1995 Active 715 (4) 274 102 24 44 295 Ocala Adult Terrace Homes 1999 Mixed 99 -- -- 0 75 24 Celebration Vizcaya 2000 Active 504 145 70 81 123 236 Delray Beach Adult
- --------- (1) Includes model units. (2) Includes model units and potential units to be constructed. (3) Reduction in original number of units purchased. (4) Includes purchase of additional land. 6 9 COUNTRY GLEN is a community of single-family homes located in Cooper City. The community consists of 300 units with recreational facilities under development and construction. Prices range from $298,000 to $500,000. CORAL LAKES is an active adult community in Boynton Beach with a multi-million dollar on-site clubhouse which includes substantial amenities. The community of 1,372 units features condominiums in four-story buildings, coach homes and single-family residences including the enclave of Tuscany. Prices range from under $98,000 to $232,500. PALM ISLES WEST, an active adult community in Boynton Beach, features 235 duplex and single-family residences priced from $120,000 to $186,000. Residents of this community enjoy the convenience of a swimming pool and sun deck within the community and share other amenities with Palm Isles, a completed Oriole active adult community. MAJESTIC ISLES is an active adult community of 450 duplex and single-family residences located in Boynton Beach. Prices range from $128,000 to $183,000. The community features an intimate, luxury clubhouse with swimming pool and tennis courts. ADDISON GREEN is a gated community with a private recreation area in a section of the Aberdeen Golf and Country Club located in Boynton Beach. Aberdeen with its Tennis and Fitness Center overlooks an 18-hole golf course. Oriole's 130 single-family residences, with two-car garages, are priced from $160,000 to $190,000. SUMMER CHASE is a community for active adults located in Lake Worth. The community features 221 single-family residences with two-car garages. The price range is $145,000 to $169,000. A social clubhouse is available to all residents along with tennis courts and pool. STONECREST is an active adult community located in Marion County consisting of 715 single-family homes priced from $82,500 to $262,000, offering championship golf and a recreational clubhouse which includes indoor and outdoor pools. TERRACE HOMES AT CELEBRATION, located in Disney's planned community in Osceola County near Orlando, will feature multi-family condominium residences priced between $130,000 and $205,000. Land development began in the fall of 2000, with construction and deliveries expected in 2001. VIZCAYA, located in Delray Beach, is an active adult community being developed as part of a strategic alliance with Centerline Homes at Delray, Inc. The community features a multi-million dollar on-site clubhouse and other amenities. 7 10 CONSTRUCTION Oriole is normally the general contractor for the construction of its developments. Company employees monitor the construction of each project, participate in design and building decisions, coordinate the activities of subcontractors and suppliers, maintain quality and cost controls and monitor compliance with zoning and building codes. Subcontractors typically are retained for a specified phase of development pursuant to a contract that obligates construction at a fixed price. Agreements with subcontractors are generally subject to competitive bidding, with the Company continuously negotiating prices and other significant terms with its subcontractors At December 31, 2000, the Company employed approximately 49 full-time people in the construction operation. Most materials are obtained by subcontractors and are readily available from numerous sources at commercially reasonable prices. The Company has not experienced any material delays in construction due to shortages of materials or labor, but has experienced cost increases due to shortages of certain types of experienced labor. There has been a significant increase in construction activity in Florida that has resulted in material shortages for some competitors and could, but has not yet, affected the Company's supply of labor and materials. MARKETING AND SALES The Company sells its homes primarily through commissioned employees who typically work in model sales centers or from offices located in model homes in the communities. The Company may also sell through independent brokers. Oriole's sales and marketing organization consists of approximately 41 full-time employees, many of whom are licensed real estate agents in Florida. The Company advertises in newspapers and magazines, by direct mail, on billboards and by radio, television and via the Internet through its website. In fiscal 2000, the Company's aggregate advertising cost was about $2.7 million. Oriole maintains model homes in most of its communities and management believes that these units play a particularly important role in the Company's marketing and merchandising efforts. 8 11 COMPETITION AND MARKET INFLUENCES The business of developing and selling residential properties and planned communities is highly competitive and fragmented. The Company competes with numerous large and small builders on the basis of a number of interrelated factors, including location, reputation, amenities, design, quality and price. Some competing builders have nationwide operations and substantially greater financial resources. The Company's products must also compete with resales of existing homes and available rental housing. As discussed, management believes that the Company's primary competitive strengths have been location, reputation, price, design, value engineering, amenities and over 24,000 satisfied customers who provide Oriole with a continuous source of referrals. In general, the housing industry is cyclical and is affected by consumer confidence levels, prevailing economic conditions and interest rates. A variety of factors affect the demand for new homes, including the availability and cost of labor and materials, changes in costs associated with home ownership, changes in consumer preferences, demographic trends and the availability and cost of mortgage financing. The Company has enjoyed doing business in a geographic area with relatively positive market demand factors for a number of years including higher than U.S. average population growth, employment growth and household and per capita income. In addition, market demographics is strongly weighted in favor of the Company's primary customer base, namely older segments of the population with an average head of household age of 54 + years. There is no guarantee, however, that these positive trends will continue. REGULATION AND ENVIRONMENTAL MATTERS In developing a community, the Company must obtain the approval of numerous government authorities that regulate such matters as permitted land uses, density levels, the installation of utilities such as water, drainage and waste disposal, and the dedication of acreage for open space, parks, schools and other community purposes. Several authorities in Florida have imposed impact fees as a means of defraying the costs of providing certain governmental services to developing areas. The amount of these fees has increased significantly during recent years. Building codes generally require the use of specific construction materials which increases the energy efficiency of homes. In addition, each county in which the Company is building has imposed restrictive zoning and density requirements in order to limit the number of persons who live and work within certain boundaries. Counties and cities within Florida have also, at times, declared moratoriums on the issuance of building 9 12 permits and imposed other restrictions in the areas where sewage treatment facilities and other public facilities do not reach minimum standards. Certain permits and approvals will be required to complete the communities under development and currently being planned by Oriole. To date, restrictive zoning laws, impact fees, and imposition of moratoriums have not had a material adverse effect on the Company's development activities. However, there is no assurance that such restrictions will not adversely affect the Company in the future. The Company is also subject to a variety of federal, state and local statutes, ordinances, rules and regulations concerning protection of the environment. Environmental laws vary greatly depending on the community's location, the site's environmental conditions and the present and former uses of the site. These environmental laws may result in delays, causing the Company to incur substantial compliance and other costs, and prohibit or severely restrict development. Prior to consummating the purchase of land, the Company engages independent environmental engineers to evaluate the land for the presence of hazardous or toxic materials, wastes, or substances. Oriole has not been adversely affected to date by the presence or potential presence of such materials, but there is no assurance that environmental issues will not adversely affect the Company in the future. The Florida Local Government Comprehensive Planning and Land Development Regulation Act (the "Act") provides that public facilities, including, but not limited to: sewer, solid waste, drainage, potable water, parks, roads and recreation facilities, shall be available concurrently with the impact of land development projects that would use such facilities. This requirement is known as the "concurrency" requirement and counties and cities are required to implement concurrency by adopting local comprehensive plans and land development regulations. These plans and regulations establish the guidelines for concurrency review and the exemptions from the concurrency requirement. All of the Company's projects have been found to satisfy concurrency requirements. The Company must also comply with regulations by federal and state authorities relating to the sale and advertising of residential real estate, including the preparation of registration statements or other disclosure type documents to be filed with designated regulatory agencies. 10 13 CUSTOMER FINANCING AND SERVICES The Company arranges title insurance for, and provides closing services to, buyers of the Company's homes and other outside customers. Oriole also works with mortgage lenders to provide buyers with conventional financing programs. By making available a variety of attractive programs, the Company is able to more efficiently expedite the entire sales transaction by assuring that necessary mortgage commitments and other conditions of sale are expedited. The State of Florida requires that certain customer deposits be held in segregated bank accounts. As of December 31, 2000, the Company has posted bonds of $1.25 million and had entered into an escrow agreement with a bank and the State of Florida which allows the Company to use customer deposits under certain circumstances. EMPLOYEES The Company employs approximately 129 full-time persons, 6 of whom are senior executives and 22 of whom are management personnel. The Company has had no major work stoppages as a result of labor disputes and believes that relations with its employees and its subcontractors are good. There are no collective bargaining agreements with employees. ITEM 2 PROPERTIES The Company leases 19,700 square feet of space in a two-story office building in Delray Beach as its principal business office. The lease expires December 31, 2002 and can be renewed, at the Company's option, for an additional five year period. ITEM 3 LEGAL PROCEEDINGS The Company is a party to various lawsuits, all of which are of a routine nature and are incidental to the Company's present business activities. These proceedings are not material, nor would the adverse resolution thereof materially affect the business or properties of the Company. ITEM 4 SUBMISSION OF MATTERS TO A VOTE BY SECURITY HOLDERS No matters were submitted to security holders during the 4th quarter. The Annual Meeting of Shareholders of the Registrant has been scheduled for May 10, 2001. The Company will file its definitive proxy materials pursuant to Regulation 14A on or prior to April 30, 2001. 11 14 PART II ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY The Company has two classes of common stock, Class A Common Stock and Class B Common Stock, which, at December 31, 2000, were held by approximately 230 and 193 shareholders of record, respectively. Both the Class A Common Stock and the Class B Common Stock are traded on the American Stock Exchange under the symbols OHC.A and OHC.B. The following sets forth the range of high and low sale prices: CLASS A CLASS B ---------- --------- QUARTER 2000 HIGH LOW HIGH LOW ------------ ---- ---- ---- --- First 3.25 1.56 3.00 1.13 Second 2.75 1.88 2.13 1.63 Third 1.88 1.50 1.63 1.13 Fourth 2.00 1.38 1.38 .75 CLASS A CLASS B ---------- --------- QUARTER 1999 HIGH LOW HIGH LOW ------------ ---- ---- ---- --- First 2.69 2.00 2.50 1.81 Second 2.00 1.50 2.00 1.50 Third 2.75 1.88 2.81 1.06 Fourth 2.38 1.50 1.50 .88 On March 14, 2001, the last reported sales prices of the Class A Common Stock and Class B Common Stock were $1.75 and $1.50 per share, respectively. On the same date, there were 230 shareholders of record of Class A Common Stock and 193 shareholders of record of Class B Common Stock. The Company currently intends to retain its future earnings to finance the development of its business. In addition, the Company is currently restricted from the payment of cash dividends on its Common Stock under the terms of the indenture governing the $70.0 million 12 1/2% Senior Notes, due January 15, 2003. Accordingly, the Company does not anticipate paying any cash dividends on its Common Stock in the foreseeable future. The payment of any dividends will ultimately be at the discretion of the Company's Board of 12 15 Directors and will depend upon, among other things, future earnings, the success of the Company's development activities, capital requirements, restrictions in financing arrangements, the general financial condition of the Company and general business conditions. ITEM 6 SELECTED FINANCIAL DATA The following table sets forth selected financial data for the Company and its consolidated subsidiaries and should be read in conjunction with the financial statements included elsewhere in this Form 10-K. The data set forth below as of and for the years ended December 31, 2000, 1999, 1998, 1997 and 1996 have been derived from the Company's audited consolidated financial statements.
- ---------------------------------------------------------------------------------------------------------------------- IN THOUSANDS (EXCEPT PER SHARE DATA) 2000 1999 1998 1997 1996 - ---------------------------------------------------------------------------------------------------------------------- Revenues 95,655 87,936 91,065 116,190 111,619 Net income (loss) (2,581) (5,042) 82 (20,850) 85 Shareholders' equity 39,355 41,937 46,979 46,897 67,747 Average Shareholders' Return on Equity (7.0%) (12.02%) .17% (44.46%) .13% Total Assets 114,578 102,041 135,226 145,060 175,546 Net income (loss) per share (Class A and B) (.56) (1.09) .02 (4.51) .02 Dividends- Class A -- -- -- -- -- Dividends- Class B -- -- -- -- -- Average Shares Outstanding 4,626 4,626 4,626 4,626 4,626
13 16 ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW REVENUES. The following table sets forth for the periods indicated certain components of the revenues expressed as a percentage of total revenues. See "Results of Operations" for a discussion of factors affecting the components during the periods indicated.
- -------------------------------------------------------------------------------------------------------------------- PERCENTAGE OF TOTAL REVENUES YEARS ENDED DECEMBER 31, - -------------------------------------------------------------------------------------------------------------------- 2000 1999 1998 ----------------------------------------------------- Sale of homes 96.2% 88.1% 90.9% Sales of land -- -- -- Other operating revenues 0.1 2.3 4.2 Interest, rentals and other income 2.7 2.7 3.5 Gain on sales of property and equipment and land held for investment, net 1.0 6.9 1.4 Selling, general and administrative expenses 15.7 16.0 16.6 Net income (loss) (2.6) (5.0) .1 - --------------------------------------------------------------------------------------------------------------------
BACKLOG. The following table sets forth the Company's backlog at December 31, 2000, 1999 and 1998. Backlog generally represents units under a standard contract for which a full deposit has been received and any statutory rescission right has expired. The Company generally fills backlog within twelve months and estimates that the period between receipt of a sales contract and delivery of the completed home to be eight to twelve months. Trends in the Company's backlog are subject to change from period to period corresponding to changes in certain economic conditions, including consumer confidence levels and the availability and cost of financing. - ----------------------------------------------------------------------------- NUMBER AGGREGATE OF VALUE DECEMBER 31 UNITS (DOLLARS IN MILLIONS) - ----------------------------------------------------------------------------- 2000 460 88.0 1999 174 29.2 1998 212 33.6 - ----------------------------------------------------------------------------- 14 17 EVENT IMPACTING COMPARABILITY This discussion reflects the impact on the results of operations of the acquisition of the Vizcaya Project. Among other things, the acquisition contributed the delivery of 70 homes producing aggregate revenue of $13.1 million and net income of $401,000 to results for the year ended December 31, 2000. The Company's backlog at December 31, 2000 related to the Vizcaya Project is 123 homes having an aggregate sales volume of $24.0 million. RESULTS OF OPERATIONS YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999 Revenues from home sales increased $14.5 million (18.8%) during the fiscal year 2000 as compared to 1999 primarily due to an increase in the number of homes delivered as a result of the acquisition of the Vizcaya Project. As compared to the 501 homes delivered in 1999, Oriole delivered 562 homes in 2000, 70 of which for $13.1 million were contributed by the Viscaya Project. There was a 5.9% increase in the average selling price of homes delivered in 2000 to $163,700 from $154,600. The number of contracts executed and the aggregate dollar value of those contracts increased to 848 and $150.8 million respectively, in 2000, from 463 and $73.1 million, respectively, in 1999. Of this amount, 193 and $37.1 million, respectively, related to the Vizcaya Project. The average selling price of homes contracted in 2000 increased 12.7 % to $177,800 from $157,800 in 1999. Non-homebuilding revenues decreased to $1.0 million in 2000 as compared to $8.0 million in 1999. This decrease occurred because the prior year included both proceeds from the sale of certain properties held for investment and the associated rental income derived from those properties. These income streams were not duplicated in 2000 due to the sale of the underlying assets in 1999. Interest, rentals and other income was approximately the same in 2000 as it was in 1999. Cost of home sales increased to $82.9 million (18.0%) in 2000 from $70.3 million in 1999. However, cost of sales actually decreased as a percentage of home sales in 2000 to 90.1% from 90.8% in 1999 due to higher average selling prices. Selling, general and administrative expenses increased $1.0 million (6.9%) in 2000 as a result of the Vizcaya Project. These expenses decreased as a percentage of total revenue to 15.7% from 16.0% due to the increase in total revenue. The Company incurred a net loss in 2000 of $2.6 million or $0.56 per share, as compared to a net loss of $5.0 million, or $1.09 per share, in 1999. 15 18 Significantly, the 1999 net loss was affected by several one-time transactions which included (a) a loss of $4.9 million to write down the value of land inventory for 250 unsold housing units to fair market value less cost to sell; (b) a loss of $1.4 million to write down the value of an investment in a joint venture; and (c) a gain of $6.1 million from the sale of certain properties and equipment. In addition,1999 also included an additional $2.0 million in rental income derived from the properties and equipment sold. EBITDA, adjusted to exclude the 1999 non-cash valuation adjustments and gains on property and equipment, increased $0.9 million to $4.4 million for 2000 from $3.5 million in 1999, primarily due to the impact of the Vizcaya Project. EBITDA was also effected by the other factors influencing net income discussed above. RESULTS OF OPERATIONS YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998 Revenues from home sales decreased $5.3 million (6.4%) during the fiscal year 1999 as compared to 1998 primarily as a result of a reduction in the number of homes delivered. Oriole delivered 501 homes in 1999 compared to 522 in 1998, with a slight decrease in the average selling price of deliveries from $158,500 to $154,600. The number of new contracts signed and the aggregate dollar value of those contracts decreased to 463 and $73.1 million, respectively, in 1999 from 491 and $75.9 million, respectively, in 1998. The average selling price of homes contracted in 1999 was approximately the same as in 1998. Non-homebuilding revenues increased $3.0 million in 1999 as compared to the same period in 1998 due to the sale of certain property and equipment and land held for investment. Interest, rentals and other income decreased $0.8 million in 1999 compared to the same period in 1998 primarily as the result of a decrease in rental income due to one of the property sales noted above. Cost of home sales decreased by $1.1 million (1.5%) to $70.3 million in 1999 as compared to 1998. As a percentage of home sales, cost of sales actually increased in 1999 to 90.8% from 86.3% in 1998 due to the impact of higher previously capitalized interest. Selling, general and administrative expenses decreased $1.0 million (6.8%). This improvement was the result of reductions in advertising, promotion and sales commission expense associated with a workforce reduction program. The Company incurred a net loss in 1999 of $5.0 million, or $1.09 per 16 19 share, as compared to net income of $0.1 million, or $0.02 per share in 1998. Included in this net loss are non-cash pre-tax charges of $4.9 million representing an inventory valuation adjustment affecting the value of land inventory for approximately 250 unsold housing units located in four developments and a write-down of $1.4 million of an investment in a joint venture. EBITDA, adjusted to exclude the 1999 non-cash valuation adjustments and gains on property and equipment, increased $0.5 million to $9.8 million in 1999 from $9.3 million in 1998 primarily due to the increase in non-homebuilding revenues. EBITDA was also affected by the other factors influencing net income discussed above. 17 20 FINANCIAL POSITION. The following table sets forth selected balance sheet items of the Company at December 31, 2000 and 1999. - ------------------------------------------------------------------------------- YEARS ENDED DECEMBER 31, (DOLLARS IN MILLIONS) - ------------------------------------------------------------------------------- 2000 1999 ------------------------------------ Cash $21.7 $18.7 Inventories 84.9 73.0 Senior Notes, at face value 34.9 43.1 Other Liabilities 40.6 17.0 - ------------------------------------------------------------------------------- LIQUIDITY AND CAPITAL RESOURCES The Company's cash requirements vary from period to period depending upon changes in inventory, land acquisition and development requirements, construction in progress and, to a lesser extent, the Company's current net income. The Company obtains funds for its cash requirements from operations, proceeds from the sale of investment property and from borrowings. In connection with land acquisitions and development, the Company may borrow money secured by land and improvements. In addition, the Company has a revolving line of credit in the amount of $10.0 million (the "Revolving Line of Credit") available for general cash requirements. As of December 31, 2000, the Company had approximately $21.7 million in cash and cash equivalents and substantially the entire amount of the Revolving Line of Credit was available. The Revolving Line of Credit expires on June 30, 2001 and the Company anticipates that it will be able to renew this credit facility on terms comparable to the current arrangement. The Company believes that these resources are sufficient to provide for its cash requirements during 2001. In 2000 the Company used available cash to repurchase $8.3 million of the Company's 12 1/2% Senior Notes due January 15, 2003 and invested $4.5 million in the Vizcaya project. As of December 31, 2000, Senior Notes having a face value of $34.9 million were outstanding. Under the terms of the Senior Notes indenture (the "Indenture"), the Company may redeem the Senior Notes at 100% of their principal amount after January 15, 2001. 18 21 The Indenture required the Company to meet sinking fund payments on the original $70.0 million issue of $17.5 million on each of January 15, 2001 and 2002. These payments have been made. In addition, the Indenture restricts the amount and type of additional indebtedness that the Company may incur and restricts the purchase by the Company of its common stock and the payment of cash dividends until the Company has achieved cumulative net income in excess of $77.3 million. As of December 31, 2000, the Company was not permitted to purchase common stock or pay cash dividends. Borrowings under the Revolving Line of Credit are secured by a mortgage on certain real property of the Company. Under the terms of the Revolving Line of Credit, the Company is subject to customary covenants and restrictions, including those relating to maintenance of consolidated tangible net worth and the issuance of certain types of additional debt. Oriole believes that it will be able to further extend the Revolving Line of Credit beyond its scheduled June 30, 2001 expiration date or obtain a replacement credit facility if necessary, but there can be no assurance that it will be able to extend its existing facility or obtain a replacement credit facility. Oriole has mortgages on certain property. The interest rate on one mortgage is adjusted periodically to a LIBOR market rate index plus .275%, or the bank's prime rate, at the Company's option and, with respect to the other mortgage loan, adjusts periodically to the bank's prime rate. As of December 31, 2000, the Company had no firm commitments for capital expenditures. FORWARD LOOKING STATEMENTS Certain statements made in this document, including certain statements made in Management's Discussion and Analysis, are "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements which are predictive in nature, which depend upon or refer to future events or conditions, which include words such as "expects," "anticipates," "intends," "plans," "believes," "estimates," or similar expressions, or which involve hypothetical events. In addition, any statements concerning future financial performance (including future revenues, earnings, or growth rates), ongoing business strategies or prospects, and possible future 19 22 Company actions, which may be provided by management, are also forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based upon current expectations and projections about future events and are subject to risks, uncertainties, and assumptions about the Company, economic and market factors and the industry in which the Company does business, among other things. These statements are not guaranties of future performance and the Company has no specific intention to update these statements. Actual events and results may differ materially from those expressed or forecasted in forward-looking statements due to a number of factors. The principal important risk factors that could cause the Company's actual performance and future events and actions to differ materially from such forward-looking statements, include but are not limited to the following: changes in consumer preferences, increases in interest rates, a reduction in labor availability, increases in the cost of labor and materials, changes in the regulatory environment particularly as relates to zoning and land use, competitive pricing pressures, changes in federal income tax laws, the general state of the economy, both nationally and in the Company's market, and unseasonable weather trends. INFLATION The Company, as well as the home building industry in general, may be adversely affected during periods of high inflation, primarily because of higher land and construction costs. In addition, higher mortgage interest rates may affect the affordability and availability of permanent mortgage financing to prospective purchasers. Inflation also increases the cost of labor and materials. The Company attempts to pass through to its customers any increases in its costs through increased selling prices. During the last three years, the Company has experienced a reduction in gross margins on the sale of homes due in part to the inability to pass on increased construction costs. There is no assurance that inflation will not have an adverse impact on the future results of operations of the Company. INTEREST RATES Overall housing demand is adversely affected by increases in interest costs. If mortgage interest rates increase significantly, this may negatively impact the ability of a homebuyer to secure adequate financing. Although about 51% of the Company's current sales are for cash, there is no guarantee that future sales will be made on such terms in comparable amounts. As such, higher interest rates may adversely affect the Company's revenues, gross margins and/or net income. ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK NOT APPLICABLE. 20 23 ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
PAGE ---- Consolidated Balance Sheets as of December 31, 2000 and 1999 ....................................................................................... 22 Consolidated Statements of Operations for the Years Ended December 31, 2000, 1999 and 1998 ................................................................................. 24 Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 2000, 1999 and 1998 ................................................................................. 25 Consolidated Statements of Cash Flows for the Years Ended December 31, 2000, 1999 and 1998 ................................................................................. 26 Notes to Consolidated Financial Statements ....................................................................... 27 Management's Responsibility for Financial Statements ............................................................. 42 Report of Independent Accountants ................................................................................ 43
21 24 ORIOLE HOMES CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31,
2000 1999 ------------ ------------ ASSETS Cash and cash equivalents $ 21,707,756 $ 18,708,081 ------------ ------------ Receivables Mortgage notes -- 262,240 ------------ ------------ Inventories Land 62,346,437 49,170,778 Homes completed or under construction 34,445,028 27,562,235 Model homes 4,310,488 3,856,810 ------------ ------------ 101,101,953 80,589,823 Less estimated costs of completion included in inventories 16,242,461 7,574,038 ------------ ------------ 84,859,492 73,015,785 ------------ ------------ Property and equipment, at cost Land 81,379 152,448 Buildings 664,065 2,671,438 Furniture, fixtures and equipment 3,044,175 2,595,802 ------------ ------------ 3,789,619 5,419,688 Less accumulated depreciation 2,127,155 2,978,526 ------------ ------------ 1,662,464 2,441,162 ------------ ------------ Investments in and advances to joint ventures -- 1,242,240 ------------ ------------ Land held for investment, at cost 1,857,300 1,857,300 ------------ ------------ Other Prepaid expenses 1,713,099 1,075,934 Unamortized debt issuance costs 392,752 661,429 Other assets 2,384,853 2,776,732 ------------ ------------ 4,490,704 4,514,095 ------------ ------------ Total assets $114,577,716 $102,040,903 ============ ============
The accompanying notes are an integral part of these statements 22 25 ORIOLE HOMES CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS - CONTINUED DECEMBER 31, LIABILITIES AND SHAREHOLDERS' EQUITY
1999 2000 ------------ ------------ LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Line of credit $ 10,000 $ 10,000 Mortgage notes payable 20,415,730 4,306,372 Accounts payable and accrued liabilities 10,022,048 8,555,721 Customer deposits 10,190,140 4,583,143 Senior notes 34,584,277 42,648,760 ------------ ------------ Total liabilities 75,222,195 60,103,996 ------------ ------------ Shareholders' equity Class A common stock, $.10 par value Authorized - 10,000,000 shares issued and outstanding - 1,863,649 in 2000 and 1999 and 1,864,144 in 1998 186,365 186,365 Class B common stock, $.10 par value Authorized - 10,000,000 shares issued and outstanding - 2,761,875 in 2000 and 1999 and 2,761,375 in 1998 276,188 276,188 Additional paid-in capital 19,267,327 19,267,327 Retained earnings 19,625,641 22,207,027 ------------ ------------ Total shareholders' equity 39,355,521 41,936,907 ------------ ------------ Total liabilities and shareholders' equity $114,577,716 $102,040,903 ============ ============
The accompanying notes are an integral part of these statements. 23 26 ORIOLE HOMES CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31,
2000 1999 1998 ------------ ------------ ------------ Revenues Sales of homes $ 91,989,406 $ 77,454,410 $ 82,736,768 Sales of land 15,000 -- 8,500 Other operating revenues 73,115 2,003,522 3,873,699 Gain on sale of property and equipment, net 930,872 3,745,618 -- Gain on sales of land held for investment and other assets, net -- 2,305,603 1,225,190 Interest, rentals and other income 2,646,882 2,426,739 3,221,183 ------------ ------------ ------------ 95,655,275 87,935,892 91,065,340 ------------ ------------ ------------ Costs and expenses Cost of homes 82,939,937 70,308,875 71,420,904 Inventory valuation adjustment -- 4,860,636 -- Cost of land sold 11,603 -- 2,097 Loss on joint venture investment -- 1,430,083 -- Costs relating to other operating revenues 190,475 1,892,866 3,289,012 Selling, general and administrative expenses 15,054,416 14,074,117 15,095,165 Interest costs incurred 6,003,735 6,888,691 8,764,448 Interest capitalized (deduct) (5,963,505) (6,477,555) (7,588,039) ------------ ------------ ------------ 98,236,661 92,977,713 90,983,587 ------------ ------------ ------------ Net income (loss) $ (2,581,386) $ (5,041,821) $ 81,753 ============ ============ ============ Net income (loss) per Class A and Class B common share available for common stockholders - Basic and Diluted $ (.56) $ (1.09) $ .02 ============ ============ ============ Weighted average number of common stock outstanding - Basic and Diluted 4,625,524 4,625,524 4,625,524 ============ ============ ============
The accompanying notes are an integral part of these statements. 24 27 ORIOLE HOMES CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
COMMON STOCK ------------------------------------------------------- CLASS A CLASS B ADDITIONAL -------------------------- ----------------------- PAID-IN RETAINED SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS ---------- --------- --------- -------- ----------- --------------- Balance at January 1, 1998 1,864,149 $ 186,415 2,761,375 $276,138 19,267,327 $ 27,167,095 Net income for 1998 -- -- -- -- -- 81,753 ---------- --------- --------- -------- ----------- --------------- Balance at December 31, 1998 1,864,149 $ 186,415 2,761,375 $276,138 19,267,327 $ 1,227,248,848 Net loss for 1999 -- -- -- -- -- (5,041,821) Stock conversion (500) (50) 500 50 -- -- ---------- --------- --------- -------- ----------- --------------- Balance at December 31, 1999 1,863,649 $ 186,365 2,761,875 $276,188 $19,267,327 $ 22,207,027 Net loss for 2000 -- -- -- -- -- (2,581,386) Balance at December 31, 2000 1,863,649 $ 186,365 2,761,875 $276,188 $19,267,327 $ 19,625,641 ========== ========= ========= ======== =========== ===============
The accompanying notes are an integral part of this statement. 25 28 ORIOLE HOMES CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31,
2000 1999 1998 ------------ ------------ ------------ Cash flows from operating activities Net income (loss) $ (2,581,386) $ (5,041,821) $ 81,753 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities Depreciation 312,585 892,446 1,320,976 Amortization 481,194 759,715 785,769 Gain on sales of property, equipment and land held for investment, net (970,289) (6,051,221) (1,225,190) Inventory valuation adjustment -- 4,860,636 -- Loss on joint venture investment -- 1,430,083 -- (Increase) decrease in operating assets Receivables 262,240 691,044 (685,961) Income taxes receivable -- -- 765,437 Inventories 14,578,211 17,601,052 (3,651,987) Other assets (35,200) 878,440 1,121,158 Increase (decrease) in operating liabilities Accounts payable and accrued liabilities 363,912 (3,109,137) (1,476,633) Customer Deposits 2,914,842 (512,039) (1,293,963) ------------ ------------ ------------ Total adjustments 17,907,495 17,441,019 (4,340,394) ------------ ------------ ------------ Net cash provided by (used in) operating activities 15,326,109 12,399,198 (4,258,641) ------------ ------------ ------------ Cash flows from investing activities Return from joint ventures 1,242,240 616,273 1,206,404 Acquisition of project, net of cash acquired (22,672,617) -- -- Capital expenditures (1,109,945) (694,787) (1,084,857) Sales of property and equipment and land held for investment 2,364,530 20,661,638 2,354,403 ------------ ------------ ------------ Net cash provided by (used in) investing activities (20,175,792) 20,583,124 2,475,950 ------------ ------------ ------------ Cash flows from financing activities Proceeds from mortgage notes 28,631,913 1,575,101 3,750,000 Payment of mortgage notes (12,522,555) (13,239,114) (218,060) Repurchase of senior notes (8,260,000) (13,168,000) (11,022,000) ------------ ------------ ------------ Net cash provided by (used in) investing activities 7,849,358 (24,832,013) (7,490,060) ------------ ------------ ------------ Net increase (decrease) in cash and cash equivalents 2,999,675 8,150,309 (9,272,751) Cash and cash equivalents at beginning of year 18,708,081 10,557,772 19,830,523 ------------ ------------ ------------ Cash and cash equivalents at end of year $ 21,707,756 $ 18,708,081 $ 10,557,772 ============ ============ ============ Supplemental disclosures of cash flow information Cash paid during the year for: Interest (net of amount capitalized) $ 1,358,648 $ 820,159 $ 1,620,812 Income taxes $ -- $ -- $ 2,627
The accompanying notes are an integral part of these statements 26 29 ORIOLE HOMES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION BASIS OF PRESENTATION AND BUSINESS The consolidated financial statements include the accounts of Oriole Homes Corp. and all wholly-owned subsidiaries (the "Company"). Significant intercompany accounts and transactions, if any, have been eliminated in consolidation. Certain prior year balances have been reclassified to conform to the current year presentation. The Company, a Florida corporation, is engaged principally in the design, construction, marketing and sale of single-family homes, patio homes, townhomes, villas, duplexes and low and mid-rise condominiums in Palm Beach, Broward, Martin, Lee, Marion and Osceola counties in Florida. REVENUE RECOGNITION The Company records sales of real estate in accordance with generally accepted accounting principles governing profit recognition for real estate transactions. INVENTORIES Inventories are carried at land cost, plus accumulated development and construction costs (including capitalized interest and real estate taxes). Homes which are completed and being held for sale aggregate approximately $8,213,000 in 2000 and $10,200,000 in 1999. The accumulated costs of land and homes is not in excess of estimated fair value less cost to sell. Estimated fair value less cost to sell is based upon sales and backlog in the normal course of business less estimated cost to complete and dispose of the property. The Company's management, on a continuous basis, reviews individual projects in inventory for potential adjustments to fair value. The Company capitalizes certain interest costs incurred on land under development and homes under construction. Such capitalized interest is included in cost of home sales when the units are delivered. PROPERTY AND EQUIPMENT Property and equipment is stated at cost. The Company provides for depreciation of property and equipment by the straight-line method over the following estimated useful lives of the various classes of depreciable assets: Buildings 25 to 31.5 years Furniture, fixtures and equipment 5 to 7 years 27 30 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION - Continued SENIOR NOTE ISSUANCE COSTS AND UNAMORTIZED DISCOUNT Costs incurred in connection with the Senior Notes have been deferred and are being amortized by using the interest method over the term of the debt. CASH EQUIVALENTS Cash equivalents consist of highly liquid investments with maturities of one month or less when purchased. NET INCOME (LOSS) PER SHARE Net income (loss) per common share is computed by dividing net income (loss) by the weighted average shares outstanding during each year. The computation of diluted net income (loss) per share includes all dilutive common stock equivalents in the weighted average shares outstanding during each year, except in loss years when their inclusion would be antidilutive. ADVERTISING The Company expenses advertising costs as incurred. Advertising expense for the years ended December 31, 2000, 1999 and 1998 was $2,557,809, $1,584,483 and $2,079,033, respectively. ESTIMATES In preparing financial statements in conformity with generally accepted accounting principles, management makes estimates and assumptions that affect the reported amounts and disclosures of assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. INCOME TAXES The Company accounts for income taxes under Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). This statement requires an asset and liability approach to account for income taxes. The Company provides deferred income taxes for temporary differences that will result in taxable or deductible amounts in future years based on the reporting of certain costs in different periods for financial statement and income tax purposes. A valuation allowance is established for deferred tax assets when it is more likely than not that a tax benefit will not be realized. NOTE B - ACQUISITION On August 8, 2000, pursuant to a Purchase and Sale Agreement and a Builder's Agreement dated as of the same date between a wholly owned subsidiary of the Company (OH Investments, Inc.) and the Seller, the Company acquired a real estate project known as the "Vizcaya Project". This community consists of 504 single-family units being marketed to active adults at least 55 years of age. The Seller is a homebuilder with operations in Southeast Florida. 28 31 NOTE B - ACQUISITION- Continued The total cost for the acquisition of the Vizcaya Project was $27,510,034, which consists of amounts paid to Seller, liabilities assumed and transaction costs paid by the Company. The Company invested $6,500,000 in cash in OH Investments, Inc. and provided a limited guaranty of the Vizcaya loan in an amount not to exceed $2,000,000. Since the acquisition of the Vizcaya Project consisted of developed and undeveloped land, no goodwill was recorded in connection with the acquisition. Under the terms of the Builder's Agreement, Centerline Homes at Delray, Inc. ("Centerline-Delray") agreed, among other things, to complete and manage the Vizcaya Project. The Builder's Agreement provides that Centerline-Delray will be entitled to receive certain bonus payments depending upon the performance of the Project after the Company has been repaid its cash investment of $6.5 million and a preferred return of 25% per annum on its cash investment. The accompanying consolidated statement of operations of the Company includes results of operations relating to the Vizcaya Project from August 8, 2000, the acquisition date. Among other things, the acquisition resulted in the delivery of 70 homes producing aggregate revenue of approximately $13.1 million and net income of $401,000 for the period ended December 31, 2000. The backlog at December 31, 2000 related to the Vizcaya Project is 123 homes having an aggregate value of $23,972,656. Unaudited pro forma consolidated revenues and net loss of the Company, giving effect to the acquisition of the Vizcaya Project as if it had occurred on January 1, 2000, equal revenues of $108,695,587 and a loss of $2,216,106 for the year ended December 31, 2000. These pro forma results do not include any adjustments and do not purport to be indicative of the actual results of operations that would have been reported had the acquisition of the Vizcaya Project actually occurred on January 1, 2000. NOTE C - MORTGAGE NOTES First and second mortgage notes receivable bear interest at rates ranging from 7.75% to 10.0%. The Company's receivables are primarily mortgages, which are collateralized by real estate. The amounts were paid in full during 2000. 29 32 NOTE D - INVENTORIES Information related to the interest component capitalized in the Company's inventories is as follows:
YEARS ENDED DECEMBER 31, ------------------------------------------------ 2000 1999 1998 ----------- ------------ ------------ Interest capitalized in inventories, beginning of period $10,593,706 $ 14,221,491 $ 12,626,682 Interest capitalized 5,963,505 6,477,555 7,588,039 Interest expensed to cost of sales - operations 5,971,739 (6,480,654) (5,993,230) Interest expensed - valuation adjustment -- (3,624,686) -- ----------- ------------ ------------ Interest capitalized in inventories, end of period $10,585,472 $ 10,593,706 $ 14,221,491 =========== ============ ============
NOTE E - INVENTORY AND FIXED ASSET VALUATION ADJUSTMENTS The Company follows Statement of Financial Accounting Standards ("SFAS") No. 121, which requires that long-lived assets held and used by an entity be reviewed for impairment whenever events or changes indicate that the net book value of the asset may not be recoverable. An impairment loss is recognized if the sum of the undiscounted expected future cash flows from the use of the asset is less than the net book value of the asset. The Company periodically reviews the carrying value of its assets and, if such reviews indicate a lack of recovery of the net book value, adjusts the assets accordingly. In this regard, the Company recorded in the second and fourth quarters of 1999, non-cash valuation adjustments totaling $2,480,695 and $2,379,941 respectively or $.54 and $.42 per common share, respectively. These adjustments reduced certain inventory to estimated fair value less cost to sell. The inventory adjustments pertained to land inventory for approximately 344 unsold housing units located in four developments. NOTE F - LIFE INSURANCE The Company has purchased life insurance on the lives of two of its officers and their spouses who own significant shares of common stock of the Company. An irrevocably designated trustee of the officers is the beneficiary. Upon the death of the officers or termination of the policies, the Company shall receive an amount equal to the aggregated premiums paid less any policy loans and unpaid interest or cash withdrawals received by the Company. The accumulated premiums paid by the Company on the above policies through the years ended December 31, 2000 and 1999 were $1,160,466 and $1,007,713, respectively, and are classified as other assets. 30 33 NOTE F - LIFE INSURANCE - Continued In connection with the policies, the Company has an option with the officers to acquire all or any part of the Class A or Class B common stock of the Company owned by such individuals at the market price of such securities at the time of their death. NOTE G - INVESTMENT IN JOINT VENTURE The Company had one investment in a joint venture in 1999. The joint venture constructed and sold homes. During the year ended December 31, 1999, there was no advance from the Company to the joint venture. In January, 2000, the Company received $1,242,240 from the sale of its remaining lots. The balance of the Company's investment of $1,430,183 was unrecoverable and was written off as of December 31, 1999. NOTE H - LINE OF CREDIT The Company may borrow up to $10,000,000 at an interest rate of prime plus 1.5% under a revolving loan agreement (line of credit) with a bank, secured by a mortgage on certain real property. At December 31, 2000, $9,990,000 was available under this line of credit. The line of credit can be used to finance ongoing development and construction of residential real estate and short-term capital needs and only requires monthly interest payments. The loan agreement, among other things, restricts the Company from incurring additional debt and requires a consolidated tangible net worth (as amended) of not less than $37,000,000. The loan agreement expires June 30, 2001. The average interest rate and balance outstanding for the revolving line of credit payable to the bank, based on a weighted average, is as follows: 2000 1999 ---------- ---------- Daily average outstanding borrowings $ 75,753 $ 10,000 Average interest rate during the period 11.0% 9.6% Interest rate at the end of the period 11.0% 10.0% Maximum outstanding during the year $ 510,000 $ 10,000 31 34 NOTE I - MORTGAGE NOTES PAYABLE Mortgage notes payable at December 31, 2000 and 1999, are as follows:
2000 1999 -------------- ---------- Acquisition loan/mortgage note, interest at the specified LIBOR Market Rate Index plus 0.275% or the prime rate of the bank as selected each month by the Company. At December 31, 2000, the interest rate was 9.5% ; secured by certain land and improvements; accrued interest paid monthly and partial payments of principal to be made upon the delivery of homes. Principal must be paid in full at maturity on December 31, 2001. $2,167,046 $3,306,372 Promissory note, dated July 21, 1999, interest at 8.0% principal and accrued interest due January 21, 2000. Promissory note of $1,000,000 was paid in full on January 21, 2000. -- 1,000,000 Vizcaya Project mortgage note, interest at the prime rate of the bank. At December 31, 2000, the interest rate was 9.5%; secured by certain land and improvements; accrued interest paid monthly and partial payments of principal to be made upon delivery of homes. Principal must be paid in full at maturity on February 08, 2003. 18,248,684 -- -------------- ----------- $20,415,730 $ 4,306,372 ============== ============
On December 22, 1998, the Company entered into a Construction Loan Agreement with a bank providing for a loan totaling $6,750,000 (the "Loan") and a letter of credit facility in the amount of $200,000 in connection with the Company's acquisition of certain real property (the "Land") and the construction of single family residential homes thereon (the "Homes"). The Loan is comprised of a $3,750,000 acquisition loan (the "Acquisition Loan") relating to the purchase of the Land and a revolving credit facility in an amount of up to $3,000,000 outstanding at any time to be used to finance construction of the Homes (the "Revolving Loan"). At December 31, 2000, $2,167,046 was outstanding, none of which was attributable to the revolving credit facility. On August 8, 2000, in connection with the Vizcaya Project, a wholly owned subsidiary of the Company borrowed an aggregate principal amount of $26,787,200, of which $9,580,430 is for future construction costs (the "Vizcaya Loan"). The Vizcaya Loan is secured by real property and other assets acquired in connection with the acquisition of the Vizcaya Project. The Company has agreed to guarantee up to an aggregate of $2.0 million of the Vizcaya Loan. Certain individual guarantors, not related to the Company, have agreed to jointly and severally guarantee the Vizcaya Loan. At December 31, 2001, $18,248,684 was outstanding. 32 35 NOTE J - INCOME TAXES Deferred tax assets and liabilities reflect the future income tax effects of temporary differences between the consolidated financial statement amounts and liabilities and their respective tax bases. As of December 31, 2000 and 1999, the significant components of the Company's deferred tax assets and liabilities were:
2000 1999 ------------ ------------ AMT credit carryover $ 113,877 $ 113,877 Federal net operating loss carryforward 9,269,465 7,261,430 State net operating loss carryforward 2,286,892 1,962,063 Inventory valuation adjustment 1,715,847 3,019,334 Reserve for warranties 334,472 572,170 Percentage of completion 441,224 89,663 Inventory capitalization 51,433 134,073 ------------ ------------ Total deferred tax asset, before valuation allowance 14,193,210 13,152,610 Less valuation allowance 12,092,561 11,045,277 ------------ ------------ Total deferred tax assets, net of valuation allowance 2,100,649 2,107,333 ------------ ------------ Deferred expenses (2,090,708) (2,068,124) Accelerated depreciation (9,941) (39,209) ------------ ------------ Total deferred tax liabilities (2,100,649) (2,107,333) ------------ ------------ Net deferred tax (liability) asset $ -- $ -- ============ ============
The net change in the valuation allowance for the years ended December 31, 2000 and 1999 were increases of $1,047,284 and $2,082,368, respectively. The principal reasons for the difference between the total tax expense and the amount computed by applying the statutory federal income tax rate to income (loss) before income taxes is the valuation allowance and the effects of state income taxes. At December 31, 2000, the Company has federal and state net operating loss carryforwards (NOLs) of $27,263,133 and $41,579,867, respectively. Of this amount, $6,128,138 of the federal NOLs expire in 2012 and $21,134,995 will begin to expire in 2018. The Company's state NOLs expire principally in the years 2012 through 2014. The complete realization of the value of the NOLs is dependent on various factors, including future profitability. NOTE K - CUSTOMER DEPOSITS Certain customer deposits, pursuant to statutory regulations of the State of Florida or by agreement between the customer and the Company, are held in segregated bank accounts. At December 31, 2000 and 1999, cash in the amounts of approximately $3,631,248 and $416,000, respectively, was so restricted. 33 36 NOTE K - CUSTOMER DEPOSITS - Continued The Company entered into an escrow agreement with a certain bank and the Division of Florida Land Sales and Condominiums which allows the Company to use customer deposits which were previously maintained in an escrow account. Deposits of up to $107,229 in 2000 and $357,000 in 1999, which could be released to the Company, are guaranteed by performance bonds aggregating $1,250,000 and $1,000,000 for 2000 and 1999. NOTE L - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES Accounts payable and accrued liabilities include the following: 2000 1999 ----------- ---------- Accounts payable $ 5,978,314 $3,903,935 Accrued interest 2,513,191 2,506,592 Accrued warranties on homes 941,974 1,480,016 Other accrued liabilities 588,569 665,178 ----------- ---------- $10,022,048 $8,555,721 =========== ========== NOTE M - SENIOR NOTES Senior notes consist of the following:
2000 1999 ------------ ------------ 12 1/2% senior notes due January 15, 2003 at par with an effective interest rate of 13.02% $ 70,000,000 $ 70,000,000 Repurchase of senior notes to be used as part of sinking fund (35,136,000) (26,876,000) Unamortized discount (279,723) (475,240) ------------ ------------ $ 34,584,277 $ 42,648,760 ============ ============
On January 13, 1993, the Company issued 12 1/2% senior notes ("Senior Notes"), due January 15, 2003. The Senior Notes have a face value of $70,000,000 and were issued at a discount of $1,930,600. The Senior Notes are senior unsecured obligations of the Company subject to redemption at the Company's option on or after January 15, 2001 at 100% of the principal amount. Under the terms of the indenture ("Indenture"), the Company must make Senior Notes sinking fund payments of $17,500,000 by January 15, 2001 and January 15, 2002. As of December 31, 2000, the Company has satisfied the requirements of the sinking fund payments. The Indenture also contains provisions restricting the amount and type of indebtedness the Company may incur, the purchase by the Company of its stock and the payment of cash dividends. At December 31, 2000, the payment of cash dividends is prohibited and will be restricted until the Company posts cumulative net income in excess of $77,350,000. 34 37 NOTE N - INCOME (LOSS) PER SHARE Included in diluted income per share are common stock equivalents relating to options to purchase 61,000 shares for 1998. In the years 2000 and 1999, options were excluded in the computation of loss per share as they would be antidilutive. Options to purchase 35,400 shares of common stock at prices ranging from $1.50 to $8.62 per share, which were outstanding during 2000, were not included in the computation of diluted per share data because the exercise prices were greater than the average market price of the common shares during such period. NOTE O - STOCK OPTIONS The Company has two stock option plans accounted for under APB Opinion 25 and related interpretations. The plans allow the Company to grant options to employees for the purchase of up to 400,000 shares of Class B common stock and non-employee Directors for the purchase of up to 20,000 shares of Class B common stock. The options have terms of five years for employees and ten years for non-employee Directors when issued. The stock options for employee's vest at the end of the second year, and stock options for non-employee Directors vest 50% after each of the first and second year of service on the Board. The exercise price of each option equals the market price of the Company's Class B Common stock on the date of grant. Accordingly, no compensation cost has been recognized for the plans. Had compensation cost for the plans been determined based on the fair value of the options at the grant dates consistent with the method of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), the Company's net income (loss) and income (loss) per share would have been reduced to the proforma amounts indicated below.
2000 1999 1998 ---------------- --------------- --------------- Net income (loss) As reported $ (2,581,386) $ (5,041,821) $ 81,753 Pro forma $ (2,587,140) $ (5,047,666) $ 70,936 Basic income (loss) per share As reported $ (.56) $ (1.09) $ .02 Pro forma $ (.56) $ (1.09) $ .02
The fair value of each option grant is estimated on the date of grant using the binomial options-pricing model with the following weighted-average assumptions used for grants in 2000, 1999 and 1998, respectively: expected volatility of 37.06, 37.59 and 36.52 percent; risk-free interest rate of 6.30, 5.91 and 6.91 percent; and expected life of 7.3, 6.3 and 5.8 years. 35 38 NOTE O - STOCK OPTIONS - Continued A summary of the status of the Company's stock option plans as of December 31, 2000, 1999 and 1998, and changes during the years ending on those dates is presented below:
2000 1999 1998 -------------------------- --------------------------- -------------------------- Weighted Weighted Weighted Average Average Average Shares Exercise Shares Exercise Shares Exercise (000) Price (000) Price (000) Price --------------- -------------- --------------- -------------- -------------- ----------- Outstanding at beginning of year 71.3 $5.99 61.0 $7.06 92.3 $7.34 Granted 2.4 1.81 19.0 2.06 2.4 4.50 Exercised -- -- -- -- -- -- Forfeited 25.9 6.88 8.7 7.37 33.7 5.7 ----- ----- ----- ----- ----- ----- Outstanding at end of year 47.8 $5.08 71.3 $5.99 61.0 $ .17 Options Exercisable at year end 39.2 $5.77 52.3 $7.28 57.4 $7.28 Weighted- average fair value of options granted during the year -- $1.27 -- $1.20 -- $2.49
The following information applies to options outstanding at December 31, 2000: Number outstanding 47,800 Range of exercise prices $1.50 to $8.62 Weighted-average exercise price $5.08 Weighted-average remaining contractual life 2.86 NOTE P - COMMON STOCK Class A and Class B common stock have identical dividend rights with the exception that the Class B common stock is entitled to a $.025 per share additional dividend. Class A common stock is entitled to one vote per share while Class B common stock is entitled to one-tenth vote per share. Holders of Class B common stock are entitled to elect 25% of the Board of Directors as long as the number of outstanding shares of Class B common stock is at least 10% of the number of outstanding shares of both classes of common stock. At the option of the holder of record, each share of Class A common stock may be converted at any time into one share of Class B common stock. 36 39 NOTE Q - LEASING ARRANGEMENTS RENTAL PROPERTIES In connection with certain developments, the Company leases recreation facilities. These leases are accounted for as operating leases. The following schedule provides an analysis of the Company's property under operating leases (included in property and equipment) by major classes as of December 31, 2000 and 1999:
2000 1999 ---------- ---------- Land $ 81,379 $ 152,448 Buildings 664,065 2,671,438 ---------- ---------- 745,444 2,823,886 Less accumulated depreciation 582,198 1,478,276 ---------- ---------- $ 163,246 $1,345,610 ========== ==========
On June 30, 1999, the Company sold a 480 rental apartment complex for $19.0 million, which resulted in a gain on sale of property and equipment in the amount of $3.75 million. The approximate future minimum rental income expected under these leases as of December 31, 2000 is $31,626 annually through the year 2005. Subsequently, the leases are subject to rental escalations for cost of living and expire through various periods ending 2019, 2021 and 2069. OFFICE AND OTHER LEASES The Company leases its headquarters office, a warehouse and certain model homes under lease agreements extending through 2003, with options to renew for up to five years, accounted for as operating leases. The approximate future minimum rental payments as of December 31, 2000 are as follows: 2001 $ 439,715 2002 450,522 2003 223,560 ----------- $ 1,113,797 =========== Total rent expense, including common area maintenance expenses, for each of the years ended December 31, 2000, 1999 and 1998 amounted to approximately $360,000, $384,000 and $366,000, respectively. 37 40 NOTE R - DEFERRED COMPENSATION PLAN The Company has a defined contribution plan (the "Plan") established pursuant to Section 401(k) of the Internal Revenue Code. Participant employees may elect to contribute up to 15% of pretax annual compensation as defined in the Plan, subject to certain limitations. The Company will match 25% of the participant's contributions, not to exceed 6% of the participant's annual compensation. The Company's contributions to the Plan amounted to $65,925 in 2000, $47,925 in 1999 and $44,688 in 1998. NOTE S - FINANCIAL INSTRUMENTS The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value: CASH AND CASH EQUIVALENTS The carrying amount approximates fair value because of the short maturity of those instruments. MORTGAGE NOTES RECEIVABLES The carrying amount approximates fair value due to interest rates currently offered for loans with similar terms to borrowers of similar credit quality not being significantly different. LINE OF CREDIT The carrying amount of the line of credit approximates fair value due to the length of the maturity and interest rate being tied to market indices. MORTGAGE NOTES PAYABLE The carrying amount of the mortgage notes payable approximates fair value due to the interest rate not being significantly different from the current market rates available to the Company. SENIOR NOTES The Senior Notes are not listed on any exchange. Prices offered to the Company by individual holders and dealers in the Senior Notes are used to estimate fair value of the Company's Senior Notes. The estimated fair value of the outstanding Senior Notes at December 31, 2000 and 1999 is $ 32,772,160 and $41,399,040, respectively. NOTE T - SEGMENT INFORMATION The Company has the following two reportable segments: home building and rental operations. The home building segment develops and sells residential properties and planned communities. On January 1, 1999, the rental operations segment consisted of 529 units in two separate properties. On June 30, 1999 the Company sold a 480 rental apartment complex. The accounting policies used to develop segment information correspond to those described in the summary of significant accounting policies and other information. Segment net income or loss is based on income or loss from operations before income taxes, the cumulative effect of changes in accounting principles, and the allocation of selling, general or administrative costs. 38 41 NOTE T - SEGMENT INFORMATION - Continued The following information about the two segments is for the years ended December 31, 2000, 1999 and 1998, in thousands (000).
Home Rental Building Operations Other Total -------- ---------- ----- ----- DECEMBER 31, 2000 Revenues $ 94,986 -- $ 669 $ 95,655 Interest expense 6,012 -- -- 6,012 Depreciation and amortization 476 -- -- 476 Segment net income (loss) (2,822) -- 241 (2,581) Segment assets 113,833 -- 745 114,578 Expenditures for segment assets 1,110 -- -- 1,110 DECEMBER 31, 1999 Revenues $ 81,613 $ 2,003 $4,320 $ 87,936 Interest expense 6,892 -- -- 6,892 Depreciation and amortization 1,251 450 1 1,702 Segment net income (loss) (9,195) 111 4,042 (5,042) Segment assets 99,876 1,734 431 102,041 Expenditures for segment assets 695 -- -- 695 DECEMBER 31, 1998 Revenues $ 86,610 $ 3,874 $ 581 $ 91,065 Interest expense 7,170 -- -- 7,170 Depreciation and amortization 1,313 792 2 2,107 Segment net income (loss) (740) 585 237 82 Segment assets 119,669 14,779 778 135,226 Expenditures for segment assets 689 396 -- 1,085
During 1999, the Company recorded valuation adjustments to its homebuilding segment in the amount of $6,290,719. 39 42 NOTE U - SELECTED QUARTERLY FINANCIAL DATA (Unaudited) A summary of selected quarterly information for the years ended December 31 is as follows:
1999 Quarter Ended --------------------------------------------------------- (In thousands, except per share data) March 31(2) June 30(3) September 30 December 31(4) ----------- ---------- ------------ -------------- Total revenue $28,462 $24,799 $ 16,172 $ 18,503 Net income (loss) before taxes 1,079 109 (1,129) (5,101) Net income (loss) 1,079 109 (1,129) (5,101) Net income (loss) per Class A and B common share - Basic & Diluted 0.23 0.03 (0.25) (1.10)
2000 Quarter Ended --------------------------------------------------------- (In thousands, except per share data) March 31 June 30 September 30 December 31(4) ----------- ---------- ------------ -------------- Revenue $ 17,202 $ 13,214 $21,667 (1) $43,572 (1) Net income (loss) before taxes (793) (1,582) (1,505) 1,299 Net income (loss) (793) (1,582) (1,505) 1,299 Net income (loss) per Class A and B common share - Basic & Diluted (0.17) (0.34) (0.33) 0.28
--------------------------------------------------- (1) Includes the acquisition of the Vizcaya Project, which contributed aggregate revenue of $4.2 million and $8.9 million in the third and forth quarters, respectively. (2) Includes gain on sale of property of $1.9 million. (3) Includes a non-cash inventory valuation adjustment of $2.5 million and gain on the sale of a rental apartment complex of $3.75 million. (4) Includes a non-cash inventory valuation adjustment of $2.4 million and the write-down of a joint venture investment of $1.4 million. NOTE V - RELATED PARTY TRANSACTIONS In December 2000 the Company sold and leased back nine model homes used by the Vizcaya Project from an entity controlled by certain officers/shareholders of the Company (the "Related Party"). In connection with this transaction, the results of operations for the fiscal year 2000 includes revenue of $1,953,810, rent expense of $18,630 and interest income of $3,925. The Related Party paid $1,365,010 in cash and issued a promissory note subordinate to the buyer purchase money loan in the amount of $588,800. Interest on the note of 8.0% per annum is payable monthly beginning December 30, 2000 and the principal must be paid in full no later than maturity on December 30, 2003. The selling prices of the model homes approximated fair market value. 40 43 NOTE W - COMMITMENTS AND CONTINGENCIES The Company is involved, from time to time, in litigation arising in the ordinary course of business, none of which is expected to have a material adverse effect on the Company's consolidated financial position or results of operations. The Company is also subject to the normal and customary obligations associated with entering into contracts for the purchase, development and sale of real estate in the routine conduct of its business. 41 44 MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS The management of Oriole Homes Corp. is responsible for the preparation of the accompanying consolidated financial statements and related information and for their integrity and objectivity. Management believes that the consolidated financial statements reasonably present the Company's financial position and results of operations in accordance with generally accepted accounting principles. Management also has included in the Company's financial statements amounts that are based on management's best estimates and judgments. The Board of Directors, through the Audit Committee, is responsible for ensuring that both management and the independent auditors fulfill their respective responsibilities with regard to the financial statements. The Audit Committee is composed of two non-management independent Directors. The Committee meets periodically with management and the independent auditors to assure that each is carrying out its responsibilities. The opinion of the independent auditors, based upon their audit of the consolidated financial statements, is contained in this annual report. Joseph Pivinski Vice President - Finance Chief Financial Officer 42 45 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Directors Oriole Homes Corp. We have audited the accompanying consolidated balance sheets of Oriole Homes Corp. and Subsidiaries as of December 31, 2000 and 1999, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Oriole Homes Corp. and Subsidiaries at December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. Grant Thornton LLP Miami, Florida February 23, 2001 43 46 ITEM 9 DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE This item is not applicable. PART III ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by Item 10 is incorporated herein by reference to Registrant's definitive proxy statement to be filed pursuant to Regulation 14A, in conjunction with the Company's Annual Meeting of Shareholders. ITEM 11 EXECUTIVE COMPENSATION The information required by the Item 11 is incorporated herein by reference to Registrant's definitive proxy statement to be filed pursuant to Regulation 14A, in conjunction with the Company's Annual Meeting of Shareholders scheduled to be held on May 10, 2001. ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this Item 12 is incorporated herein by reference to Registrant's definitive proxy statement to be filed pursuant to Regulation 14A, in conjunction with the Company's Annual Meeting of Shareholders scheduled to be held on May 10, 2001. ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this Item 13 is incorporated herein by reference to Registrant's definitive proxy statement to be filed pursuant to Regulation 14A, in conjunction with the Company's Annual Meeting of Shareholders scheduled to be held on May 10, 2001. 44 47 PART IV ITEM 14 EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K (a) Financial Statements See Item 8 (b) Reports on Form 8-K There were no reports on Form 8-K for the three months ended December 31, 2000. (c) Exhibits Exhibit Number ------ 3.1 Articles of Incorporation, as amended, of Registrant. 3.2 Composite By-Laws of Registrant. 4.1 Form of 12-1/2% Senior Note. 4.2 Form of Indenture between the Registrant and Sun Bank National Association, Trustee. 10.1 Lease Agreement, dated May 7, 1991 between the Registrant and Arbors Associates, Ltd. 10.2 First Amendment to Lease Agreement dated as of April 30, 1998, between Registrant and Arbors Associates, Ltd. 10.3 Revolving Loan Agreement dated July 13, 1993, between Ohio Savings Bank, F.S.B. and the Registrant. 10.4 First Amendment to Revolving Loan Agreement. 10.5 Second Amendment to Revolving Loan Agreement. 10.6 Mortgage and Security Agreement dated as of July 13, 1993. 10.7 Mortgage, Assignment and Financing Statement Spreader Agreement dated May 31, 1995. 10.8 Future Advance, Mortgage, Assignment and Financing Statement Extension, Modification and Spreader Agreement dated August 23, 1995. 10.9 Future Advance, Mortgage, Assignment and Financing Statement Extension, Modification and Spreader Agreement dated January 12, 1996. 10.10 Mortgage and Loan Modification and Extension Agreement dated July 1, 1997. 10.11 Mortgage and Loan Modification and Extension Agreement dated October 15, 1998. 10.12 Second Amendment to Revolving Loan Agreement dated July 1, 1997. 45 48 10.13 Construction Loan Agreement dated December 22, 1998 between First Union National Bank and the Registrant. 10.14 Mortgage and Security Agreement dated December 22, 1998 between First Union National Bank and the Registrant. 10.15 Stock Option Agreement with Richard D. Levy dated February 22, 1995. 10.16 Stock Option Agreement with Richard D. Levy dated May 14, 1996. 10.17 Stock Option Agreement with Harry A. Levy dated February 22, 1995. 10.18 Stock Option Agreement with Harry A. Levy dated May 14, 1996. 10.19 Stock Option Agreement with Mark A. Levy dated February 22, 1995. 10.20 Stock Option Agreement with Mark A. Levy dated May 14, 1996. 10.21 Stock Option Agreement with George Richards dated May 22, 1997. 10.22 Stock Option Agreement with George Richards dated May 20, 1998. 10.23 Stock Option Agreement with Paul Lehrer dated May 4, 1994. 10.24 Stock Option Agreement with Paul Lehrer dated May 15, 1995. 10.25 Stock Option Agreement with Paul Lehrer dated May 16, 1996. 10.26 Stock Option Agreement with Paul Lehrer dated May 22, 1997. 10.27 Stock Option Agreement with Paul Lehrer dated May 20, 1998. 10.28 Stock Option Agreement with Joseph Pivinski dated December 14, 1998. 10.29 Joint Venture Agreement between the Company and Regency Homes, Inc. dated December 31, 1993. 10.30 Registrant's 401(k) Defined Contribution Benefit Plan. 10.31 Registrant's 1994 Stock Option Plan for Employees (filed as Exhibit A to the proxy statement dated April 5, 1994 for the Company's Annual Meeting of Shareholders held on May 9, 1994). 10.32 Registrant's 1994 Stock Option Plan for Non-Employee Directors (filed as Exhibit B to the proxy statement dated April 5, 1994 for the Company's Annual Meeting of Shareholders held on May 9, 1994). 10.33 Stock Option Agreement with Paul Lehrer dated May 12, 1999. 10.34 Stock Option Agreement with George Richards dated May 12, 1999. 10.35 Stock Option Agreement with Michael Rich dated October 4, 1999. 10.36 Purchase and Sale Agreement between OH Investments, Inc. and Upjohn-Delray Limited Partnership dated August 8, 2000. 10.37 Builder's Agreement between OH Investments, Inc and Centerline Homes at Delray, Inc. dated August 8, 2000. 46 49 10.38 Master Loan Agreement between OH Investments, Inc. and Guaranty Federal Savings Bank, F.S.B. dated August 8, 2000. 10.39 Acquisition Loan Agreement between Guaranty Federal Savings Bank, F.S.B. and OH Investments, Inc. dated August 8, 2000. 10.40 Sale and Lease Back Agreement between OH Investments, Inc. and C.V.M.H. Inc. 10.41 Lease (Specimen) between OH Investments, Inc. and C.V.M.H. Inc. dated December 1, 2000. 10.42 Stock Option Agreement with Paul Lehrer dated May 10, 2000. 10.43 Stock Option Agreement with George Richards dated May 10, 2000. 22.1 List of Registrant's Subsidiaries. 23.1 Consent of Grant Thornton LLP. 47 50 SIGNATURES Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized. ORIOLE HOMES CORP. DATE March 30, 2001 /s/ R.D. LEVY --------------------- ----------------------------------- R.D. Levy, Chairman of the Board, Chief Executive Officer, Director DATE March 30, 2001 /s/ J. PIVINSKI --------------------- ----------------------------------- J. Pivinski, Vice President - Finance, Treasurer, Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934 this Annual Report has also been signed by the following persons on behalf of the Registrant in the capacities indicated. MEMBERS OF THE BOARD OF DIRECTORS DATE March 30, 2001 /s/ R.D. LEVY --------------------- ----------------------------------- R.D. Levy, Chairman of the Board, Chief Executive Officer, Director DATE March 30, 2001 /s/ HARRY A. LEVY --------------------- ----------------------------------- Harry A. Levy, Director DATE March 30, 2001 /s/ MARK LEVY --------------------- ----------------------------------- Mark Levy, Chief Operating Officer, Director DATE March 30, 2001 /s/ PAUL R. LEHRER --------------------- ----------------------------------- Paul R. Lehrer, Director DATE March 30, 2001 /s/ GEORGE R. RICHARDS --------------------- ----------------------------------- George R. Richards, Director 48 51 EXHIBIT INDEX Exhibit Number ------ 3.1 Articles of Incorporation, as amended, of Registrant. (6) 3.2 Composite By-Laws of Registrant. (7) 4.1 Form of 12-1/2% Senior Note. (1) 4.2 Form of Indenture between the Registrant and Sun Bank National Association, Trustee. (2) 10.1 Lease Agreement, dated May 7, 1991 between the Registrant and Arbors Associates, Ltd. (3) 10.2 First Amendment to Lease Agreement dated as of April 30, 1998, between Registrant and Arbors Associates, Ltd. (8) 10.3 Revolving Loan Agreement dated July 13, 1993, between Ohio Savings Bank, F.S.B. and the Registrant. (9) 10.4 First Amendment to Revolving Loan Agreement. (10) 10.5 Second Amendment to Revolving Loan Agreement. (11) 10.6 Mortgage and Security Agreement dated as of July 13, 1993. (12) 10.7 Mortgage, Assignment and Financing Statement Spreader Agreement dated May 31, 1995. (13) 10.8 Future Advance, Mortgage, Assignment and Financing Statement Extension, Modification and Spreader Agreement dated August 23, 1995. (14) 10.9 Future Advance, Mortgage, Assignment and Financing Statement Extension, Modification and Spreader Agreement dated January 12, 1996. (15) 10.10 Mortgage and Loan Modification and Extension Agreement dated July 1, 1997. (16) 10.11 Mortgage and Loan Modification and Extension Agreement dated October 15, 1998. (17) 10.12 Second Amendment to Revolving Loan Agreement dated July 1, 1997. (18) 10.13 Construction Loan Agreement dated December 22, 1998 between First Union National Bank and the Registrant. (19) 10.14 Mortgage and Security Agreement dated December 22, 1998 between First Union National Bank and the Registrant. (20) 10.15 Stock Option Agreement with Richard D. Levy dated February 22, 1995.(21) 10.16 Stock Option Agreement with Richard D. Levy dated May 14, 1996. (22) 10.17 Stock Option Agreement with Harry A. Levy dated February 22, 1995. (23) 10.18 Stock Option Agreement with Harry A. Levy dated May 14, 1996. (24) 49 52 10.19 Stock Option Agreement with Mark A. Levy dated February 22, 1995. (25) 10.20 Stock Option Agreement with Mark A. Levy dated May 14, 1996. (26) 10.21 Stock Option Agreement with George Richards dated May 22, 1997. (27) 10.22 Stock Option Agreement with George Richards dated May 20, 1998. (28) 10.23 Stock Option Agreement with Paul Lehrer dated May 4, 1994. (29) 10.24 Stock Option Agreement with Paul Lehrer dated May 15, 1995. (30) 10.25 Stock Option Agreement with Paul Lehrer dated May 16, 1996. (31) 10.26 Stock Option Agreement with Paul Lehrer dated May 22, 1997. (32) 10.27 Stock Option Agreement with Paul Lehrer dated May 20, 1998. (33) 10.28 Stock Option Agreement with Joseph Pivinski dated December 14, 1998. (34) 10.29 Joint Venture Agreement between the Company and Regency Homes, Inc. dated December 31, 1993. (4) 10.30 Registrant's 401(k) Defined Contribution Benefit Plan. (5) 10.31 Registrant's 1994 Stock Option Plan for Employees (filed as Exhibit A to the proxy statement dated April 5, 1994 for the Company's Annual Meeting of Shareholders held on May 9, 1994). (35) 10.32 Registrant's 1994 Stock Option Plan for Non-Employee Directors (filed as Exhibit B to the proxy statement dated April 5, 1994 for the Company's Annual Meeting of Shareholders held on May 9, 1994). (36) 10.33 Stock Option Agreement with Paul Lehrer dated May 12, 1999. (37) 10.34 Stock Option Agreement with George Richards dated May 12, 1999. (38) 10.35 Stock Option Agreement with Michael Rich dated October 4, 1999. (39) 10.36 Purchase and Sale Agreement between OH Investments, Inc. and Upjohn-Delray Limited Partnership dated August 8, 2000. 10.37 Builder's Agreement between OH Investments, Inc. and Centerline Homes at Delray, Inc. dated August 8, 2000. 10.38 Master Loan Agreement between OH Investments, Inc. and Guaranty Federal Savings Bank, F.S.B. dated August 8, 2000. 10.39 Acquisition Loan Agreement between Guaranty Federal Savings Bank, F.S.B. and OH Investments, Inc. dated August 8, 2000. 10.40 Sale and Lease Back Agreement between OH Investments, Inc. and C.V.M.H. Inc. dated December 1, 2000. 10.41 Lease (Specimen) between OH Investments, Inc. and C.V.M.H. Inc. dated December 1, 2000. 10.42 Stock Option Agreement with Paul Lehrer dated May 10, 2000. 50 53 10.43 Stock Option Agreement with George Richards dated May 10, 2000. 10.44 Mortgage and Loan Modification and Extension Agreement. 22.1 List of Registrant's Subsidiaries. 23.1 Consent of Grant Thornton LLP. 51 54 EXHIBIT INDEX NOTES (1) Filed as Exhibit 4.1 to the Company's registration statement on Form S-2 (no. 33-51680). (2) Filed as Exhibit 4.2 to the Company's registration statement on Form S-2 (no. 33-51680). (3) Filed as Exhibit 10.1 to the Company's registration statement on Form S-2 (no. 33-51680). (4) Filed as Exhibit 10.7 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993. (5) Filed as Exhibit 10.6 to the Company's registration statement on Form S-2 (no. 33-46123). (6) Filed as Exhibit 3.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (7) Filed as Exhibit 3.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (8) Filed as Exhibit 10.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (9) Filed as Exhibit 10.3 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (10) Filed as Exhibit 10.4 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (11) Filed as Exhibit 10.5 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (12) Filed as Exhibit 10.6 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (13) Filed as Exhibit 10.7 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (14) Filed as Exhibit 10.8 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (15) Filed as Exhibit 10.9 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (16) Filed as Exhibit 10.10 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (17) Filed as Exhibit 10.11 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (18) Filed as Exhibit 10.12 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (19) Filed as Exhibit 10.13 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (20) Filed as Exhibit 10.14 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (21) Filed as Exhibit 10.15 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (22) Filed as Exhibit 10.16 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (23) Filed as Exhibit 10.17 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. 52 55 (24) Filed as Exhibit 10.18 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (25) Filed as Exhibit 10.19 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (26) Filed as Exhibit 10.20 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (27) Filed as Exhibit 10.21 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (28) Filed as Exhibit 10.22 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (29) Filed as Exhibit 10.23 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (30) Filed as Exhibit 10.24 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (31) Filed as Exhibit 10.25 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (32) Filed as Exhibit 10.26 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (33) Filed as Exhibit 10.27 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (34) Filed as Exhibit 10.28 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (35) Filed as Exhibit 10.31 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (36) Filed as Exhibit 10.32 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (37) Filed as Exhibit 10.33 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999. (38) Filed as Exhibit 10.34 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999. (39) Filed as Exhibit 10.35 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. 53 EX-10.36 2 g68169ex10-36.txt PURCHASE AND SALE AGREEMENT W/CENTERLINE 1 EXHIBIT 10.36 PURCHASE AND SALE AGREEMENT THIS PURCHASE AND SALE AGREEMENT ("AGREEMENT") is made and entered into by and among OH INVESTMENTS, INC., a Florida corporation ("BUYER"), UPJOHN-DELRAY LIMITED PARTNERSHIP, a Florida limited partnership ("SELLER") and CENTERLINE HOMES OF DELRAY, INC., a Florida corporation ("CENTERLINE"). WITNESSETH: WHEREAS, Seller is the owner and holder of fee simple title to the Property (hereinafter defined) with respect to which Seller has taken certain actions in connection with the development of a five hundred four (504) Residential Unit (hereinafter defined) active adult community known as "Vizcaya" ("PROJECT"); and WHEREAS, Buyer seeks to purchase the Property from Seller, and Seller seeks to sell the Property to Buyer, all pursuant to and in accordance with the terms and conditions of this Agreement as set forth herein. NOW, THEREFORE, in consideration of TEN ($10.00) DOLLARS, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, each intending to be legally bound, do hereby agree as follows: 1. RECITALS. The recitations set forth above in the preamble of this Agreement are true and correct and are incorporated herein by this reference. 2. DEFINITION OF PROPERTY. As used herein, the term "Property" shall mean, collectively, all right, title and interest of Seller in and to the following: A. all that certain real property consisting of approximately one hundred thirty-four (134) acres in total area, together with any and all improvements thereon and the privileges and appurtenances thereto appertaining, situate, lying and being in the City of Delray Beach, County of Palm Beach, State of Florida, and more commonly known as "Vizcaya" ("LAND"). The legal description of the Land is set forth on SCHEDULE "A" attached hereto and made a part hereof; and B. all of the buildings, structures, fixtures, facilities, installations and other improvements of every kind and description in, on, over and under the Land, including, without limitation, any and all plumbing, air conditioning, heating, ventilating, mechanical, electrical and other utility systems, parking lots and facilities, landscaping, roadways, sidewalks, security devices, signs and light fixtures (collectively, "IMPROVEMENTS"); and C. all furniture, furnishings, fixtures, equipment, machinery, maintenance vehicles and equipment, tools, parts, building materials and supplies, inventory, carpeting, window treatments, and other tangible personal property of every kind and description, situated in, on, over and under the Land and Improvements, or used in connection with the Land, Improvements and Project, owned by Seller or in which Seller otherwise has an interest, together with all 2 replacements and substitutions therefore (collectively, "TANGIBLE PERSONAL PROPERTY"). A complete and accurate itemization of the Tangible Personal Property is set forth on SCHEDULE "B" attached hereto and made a part hereof; and D. all existing, surveys, blue prints, drawings, plans and specifications (including, without limitation, construction, architectural, electrical, engineering, structural, mechanical and plumbing) and other documentation prepared for or with respect to the Project, Land and Improvements, or any part or portion thereof, together with all supporting documentation relating thereto; and E. all tests, studies, reports, analysis and the like (including, without limitation, environmental and soil) prepared for or with respect to the Project, Land and Improvements, or any part or portion thereof, together with all supporting documentation relating thereto; and F. all materials relating to the zoning and land use (including, without limitation, zoning and re-zoning applications and approvals; plats or plat applications and approvals; land use planning studies, reports, application and approvals; comprehensive planning and zoning studies, reports applications and approvals; concurrency studies, reports applications and approvals; and development of regional impact studies, reports, applications and approvals) prepared for or with respect to the Project, Land and Improvements, or any part or portion thereof, together with all supporting documentation; and G. all documents prepared and executed in connection with the creation, formation, organization, structuring and empowering of any and all associations charged with the responsibility of administering, running, operating, overseeing, maintaining and repairing the Project, Land and Improvements, or any portion thereof, including, but not limited to, Articles of Incorporation, Bylaws, Declarations, as well as any and all rights that Seller has under the same (The rights of Seller under any of the aforementioned documents shall be referred to herein as "Document Rights"); and H. all market and feasibility research, studies, reports, analysis and any other similar or related types of studies, reports and analysis relating the sale and/or lease of residential units at the Project ("RESIDENTIAL UNITS") by Seller to third persons ("RESIDENTIAL UNIT PURCHASERS") prepared for or with respect to the Project, Land and Improvements, together with all supporting documentation relating thereto; and I. all sales lists, data and correspondence with respect to Residential Unit Purchasers who have purchased, who have executed contracts to purchase ("PURCHASE CONTRACTS"), who have executed non-binding reservations for particular lots within the Project or who are prospective purchasers of Residential Units from Seller, together with all supporting documentation relating thereto; and J. all Purchase Contracts executed by Residential Unit Purchasers for Residential Units, and the deposits given by said Residential Unit Purchasers in connection therewith. Summaries of all executory Purchase Contracts (including, without limitation, the Residential Unit under contract, 2 3 the name and address of the Residential Unit Purchaser, the execution date of the Purchase Contract, the amount of the purchase price, the amount of the deposit and the estimated closing date) are set forth in SCHEDULE "C" attached hereto and made a part hereof; and K. all sales and marketing brochures, booklets, manuals and promotional and advertising materials concerning, related to or associated with the Project, Land and Improvements, together with all supporting documentation relating thereto; and L. all correspondence with vendors, suppliers, utility companies, governmental authorities and other third parties, together with all supporting documentation relating thereto; and M. any and all other existing documents concerning, relating to or associated with the ownership, operation, management and development of the Project, Land and Improvements (Items D through and including M are collectively referred to herein as, the "DOCUMENTS"); and N. to the extent assignable by Seller, all development rights and approvals, including vested rights, if any; all assignable rights of Seller in and to impact of development allocations or credits for zoning, planning, density, utility or concurrency purposes, if any; all rights to and under any zoning or subdivision approvals or ordinances, resolutions of any governmental authority, and any plat applications, proposed or adopted plats, site plans, development orders, approvals, consents, permits, certificates and other governmental licenses, and evidence of variances, special exceptions or exemptions or vested rights, or of density or concurrency allocations; and all other rights to and under all applications, fees, deposits, licenses, permits and any and all other governmental approvals, if any, concerning, relating to or associated with the ownership, operation, development and/or proposed use of and improvements to the Project, Land and Improvements (collectively, "GOVERNMENTAL APPROVALS"); and O. all right, title and interest of Seller in and to Third Party Contracts (hereinafter defined) and the other intangible personal property ("INTANGIBLE PERSONAL PROPERTY") owned by Seller or in which Seller otherwise has an interest and used in connection with or arising from the business now or hereafter conducted on or from the Land and Improvements, including, without limitation, lease and other contract rights, the name "Vizcaya" as well as any and all other names, telephone exchange numbers, copyrights and trademarks owned by Seller. Summaries of all current employment, union, purchase, service and maintenance agreements, brokerage agreements, equipment leases and any other agreements, contracts, licenses and permits concerning, related to or associated with, in any way, to the Property ("THIRD PARTY CONTRACTS") are set forth in SCHEDULE "D" attached hereto and made a part hereof. 3. AGREEMENT TO PURCHASE AND SELL. Buyer agrees to purchase from Seller, and Seller agrees to sell to Buyer, the Property pursuant to and in accordance with the terms and conditions of this Agreement as set forth herein. 3 4 4. PURCHASE PRICE; PAYMENT. The purchase price for the Property shall be the total and aggregate sum of ___________________ ($_________) DOLLARS ("PURCHASE PRICE"). The Purchase Price shall be subject to adjustment for the credits and prorations as set forth elsewhere in this Agreement and shall be payable by Buyer to Seller by way of cash, wire transfer, certified check or attorney's trust account check. 5. AGREEMENT TO ENTER INTO BUILDER'S AGREEMENT AND BUILDER'S AGREEMENT CONTINGENCY. It shall be a condition precedent to Buyer's obligation to close title and consummate the transaction contemplated by this Agreement that on or before Closing (hereinafter defined), Buyer and Centerline shall have entered into and executed the Agreement to Enter Builder's Agreement (hereinafter defined) and Builder's Agreement (hereinafter defined). It is acknowledged by and among the parties to this Agreement, that the Agreement to Enter Builder's Agreement grants Buyer the right to conduct various title, survey and general due diligence investigations with regard to the Property through and including the date of closing of the Agreement to Enter Builder's Agreement, and further grants to Buyer the right to terminate the Agreement to Enter Builder's Agreement at any time, and for any reason whatsoever, through and including the date of closing of the Agreement to Enter into Builder's Agreement based upon said investigations. In the event both Buyer and Centerline have not entered into and executed the Agreement to Enter Builder's Agreement and/or the Builder's Agreement on or before Closing due to Buyer having terminated the same due to the aforementioned investigations, or for any other reason whatsoever, then Buyer shall have the right to terminate this Agreement on written notice to Seller, whereupon, neither Buyer, Seller nor Centerline shall have any further liability each to the other in connection with this Agreement, except as to those matters which expressly survive the Closing or earlier termination of this Agreement. 6. CONDITION OF PROPERTY. Both Buyer and Seller hereby acknowledge and agree that the Property is being sold and conveyed in its "AS IS" condition. Notwithstanding the foregoing however, the Property shall be in substantially the same condition at the time of Closing as the condition of the Property was on the Effective Date (hereinafter defined). In this regard, Seller and Centerline shall not take any substantive action with regard to the Property, other than in the ordinary course of business, without first obtaining the prior written consent of the Buyer, which said consent shall not be unreasonably withheld or delayed. 7. REPRESENTATIONS OF SELLER AND CENTERLINE. Both Seller and Centerline hereby represent and warrant to Buyer, which said representations and warranties shall be true and correct as of the Effective Date and shall continue to be true and correct as of Closing, the following: A. Seller has the full right, power and authority to own and convey the Property, and does not need any further consents, joinders or other authorization from any governmental or private entity, corporation, partnership, firm, individual or other person or entity to execute, deliver and perform its obligations under this Agreement, and to consummate the transactions contemplated hereby. 4 5 B. Seller owns good, marketable and insurable fee simple title to the Property and the Property shall be conveyed to Buyer, free and clear of all liens, claims and encumbrances, except for those "Permitted Exceptions" set forth on EXHIBIT "E" attached hereto and made a part hereof. C. To the best of Seller's and Centerline's knowledge, there is no condemnation proceeding pending with respect to any portion of the Property and neither Seller nor Centerline have received any notice, nor have any knowledge of any pending or contemplated condemnation proceeding which could affect any portion of the Property. D. Seller is neither a "foreign person" nor a "foreign corporation" (as those terms are defined in Section 7701 of the Internal Revenue Code of 1986, as amended). E. There are no attachments, executions, assignments for the benefit of creditors, voluntary or involuntary proceedings in bankruptcy or any other litigation, hearing, proceeding or the like, whatsoever, either pending, threatened or contemplated by or against either Seller, Centerline or the Property. F. Neither this Agreement nor the terms and provisions hereof nor any action contemplated to be taken by Seller or Centerline hereunder or pursuant hereto violates or conflicts with any agreement to which Seller, Centerline or the Property is subject. G. Centerline shall enter into, execute and deliver to Buyer the Agreement to Enter Builder's Agreement and the Builder's Agreement on or before Closing as required by this Agreement. The truth and accuracy of each and every representation and warranty set forth in this Paragraph 7, from the Effective Date through and including the date of Closing, shall be a condition precedent to Buyer consummating this Agreement and closing on title. All of the aforementioned representations and warranties of Seller and Centerline shall survive Closing for a period of one (1) years. 8. CLOSING. The "Closing" of this transaction shall commence at 10:00 AM Eastern Standard Time at the law offices of Ruden, McClosky, Smith, Schuster & Russell, P.A., located in Fort Lauderdale, Florida on a date which is the earlier to occur of: (i) such date as Buyer shall designate on ten (10) days written notice to Seller; provided however, that Buyer shall have waived any and all conditions and contingencies to Closing to the extent that Buyer elects to accelerate the Closing date; or, (ii) another date, time and location mutually agreed upon, in writing, by the parties. Notwithstanding anything to the contrary contained herein, the Closing shall not take place later than August 15, 2000. 9. SELLER'S DELIVERIES. A. Centerline shall prepare the following documents, subject to Buyer's reasonable approval, to be executed and delivered by Seller at closing: 5 6 I. A statutory warranty deed ("DEED"), properly executed, acknowledged and in recordable form, conveying fee simple title to the Property and the improvements thereon, if any, to Buyer; II. A properly executed and acknowledged affidavit of title, no lien and possession in the usual and customary form, provided that the same is acceptable to Buyer's title insurance company; III. A properly executed and acknowledged gap affidavit in the usual and customary form, provided that the same is acceptable to Buyer's title insurance company; IV. A properly executed and acknowledged affidavit of non-foreign status in the usual and customary form; V. A properly executed bill of sale conveying all Tangible Personal Property and Intangible Personal Property, or make an assignment thereof, from Seller to Buyer, free and clear of all liens, claims and encumbrances; VI. Proper evidence of Seller's authority to enter into and consummate the transaction contemplated by this Agreement by way of certified resolution, consent or other applicable document; VII. All of the original Documents, Governmental Approvals, Third Party Contracts and other documentation concerning all or any part of the Property; VIII. A properly executed assignment of Purchase Contracts and Deposits; IX. A properly executed assignment of Governmental Approvals; X. A properly executed assignment of Documents; XI. A properly executed assignment of Document Rights; XII. A properly executed assignment of Third Party Contracts; XIII. Properly executed resignations of any and all directors and/or officers that have been appointed by, affiliated with or acting on behalf of Seller of any and all associations charged with the responsibility of administering, running, operating, overseeing, maintaining and repairing the Project, Land and/or Improvements, or any portion thereof; XIV. A closing statement; and XV. Any other information, certificate, affidavit, document and/or instrument reasonably required by Buyer, Buyer's attorney, Buyer's title company or Buyer's mortgagee. 6 7 10. BUYER'S DELIVERIES. At Closing, Buyer shall deliver to Seller the following items: (i) the Purchase Price, (ii) proper evidence of Buyer's authority to enter into and consummate the transaction contemplated by this Agreement by way of certified resolution, consent or other applicable document, (iii) a closing statement; and (iv) such other information, certificate, affidavit, document and/or instrument reasonably required by Seller or Centerline or their respective attorneys. 11. COST AND EXPENSES. A. Centerline shall pay for documentary stamps, recording fees and other transfer taxes on any and all title curative instruments. Seller and Centerline shall each pay for their own respective attorney's fees and costs. B. Buyer shall pay for (i) the documentary stamps and any and all other transfer taxes on the deed; (ii) the recording fee for the deed; (iii) the Commitment (as that term is defined in the Agreement to enter in Builder's Agreement to be executed by and between Buyer and Centerline); (iv) the title insurance premium for an owner's policy of title insurance; (v) the title insurance premium for a mortgagees policy of title insurance; (vi) its own attorney's fees and costs; and (vii) all fees, cost and expenses incurred in connection with the performance of the Due Diligence Investigation (as that term is defined in the Agreement to enter into Builder's Agreement [defined hereinafter]). All of the aforementioned costs and expenses of Buyer however, shall be deemed to be, and paid as, Project Expenses (as that term is defined in the Builder's Agreement). 12. DEFAULT; REMEDIES. A. In the event of a breach by Seller of its obligation to close title in accordance with the terms and provisions of this Agreement, other than due to Buyer's default, or if any of Seller's or Centerline's representations, covenants or warranties contained in this Agreement shall not be true, complete and correct in all material respects, Buyer shall have the option of (i) terminating this Agreement on written notice to Seller and Centerline, whereupon, Seller or Centerline, whichever may be in default, or if both are in default, then both Seller and Centerline, shall be liable to Buyer for, and pay Buyer an amount equal to, Buyer's actual out of pocket expenses, including attorney's fees incurred by Buyer in connection with drafting, negotiating and finalizing this Agreement and conducting its Due Diligence Investigations (collectively, "BUYER'S TRANSACTIONAL COSTS") all within ten (10) days of Buyer's demand, and upon Buyer's receipt of Buyer's Transactional Costs, in full, this Agreement shall terminate and neither Buyer, Seller nor Centerline shall have any further liabilities each to the other in connection with this Agreement, except as to those matters which expressly survive the Closing or earlier termination of this Agreement; and/or (ii) enforcing the terms of this Agreement by obtaining a decree of specific performance or other equitable remedy from a court of competent jurisdiction. The aforementioned remedies shall be cumulative and in addition to one another, and not exclusive of one another, 7 8 thereby permitting Buyer to exercise and pursue any one or more of the said remedies at the same time. Seller and Centerline hereby waive any defense of lack of mutuality of remedy that either may have in connection with this Agreement . 13. SURVIVAL AND INDEMNIFICATION A. In the event that the Closing shall occur, then Seller and/or Centerline, whichever is the cause of the Claim (hereinafter defined), hereby agrees to indemnify, defend, protect and save and hold Buyer harmless, Buyer's respective successors and assigns, and the officers, directors, trustees, partners, shareholders, managers, members, agents and employees of any of the foregoing from and against any suit, demand, claim, cause of action, loss, damages, injury, fine, penalty, obligation to pay money, cost, liability or expense, including investigation costs and attorneys', consultants' and expert witness fees (collectively, "CLAIM") that arises, or is alleged to have arisen from the breach of any one or more of the representations and warranties of Seller and/or Centerline pursuant to Paragraph 7 of this Agreement. B. Upon demand made by Buyer to either or both Seller and/or Centerline (individually, "INDEMNITOR" and collectively, "INDEMNITORS") with respect to any Claim, said Indemnitor shall be obligated, within twenty (20) days following said demand, to either (i) pay said Claim on behalf of, and without cost to, Buyer, or (ii) assume the defense of the Claim on behalf of Buyer, unless both the Indemnitors and Buyer are named in the same litigation and representation of them by the same counsel would be inappropriate. Subject to the foregoing, the indemnifying party shall have the right to conduct and control the defense of any Claim for which it is providing indemnification by counsel it selects, provided that said counsel, and the conduct of the defense, shall be subject to the reasonable approval of Buyer. Buyer shall cooperate fully in the defense of the Claim and shall provide access to all information, documents and witnesses pertinent to the Claim that are under its control. The indemnifying party shall have the right, in its sole discretion, to compromise, settle or otherwise dispose of any Claim for which it has accepted and is providing indemnification pursuant to this Agreement; provided that (i) said settlement does not obligate Buyer to do or refrain from doing anything, other than making a lump-sum monetary payment to the plaintiffs (which payment shall be made on behalf of Buyer by, and at the sole cost and expense of, the indemnifying party), and entering into a mutual release with plaintiffs, which instrument shall be subject to Buyer's reasonable review and approval and shall not impose any obligations that this Agreement precludes from being imposed and shall not require Buyer to make any admission of wrongdoing or fault, (ii) said settlement will not be a matter of public record and the fact of said settlement will not tend to prejudice the conduct of other matters in which Buyer is or may be a defendant, and (iii) the indemnifying party provides Buyer with evidence, reasonably satisfactory to the indemnified party, that the indemnifying party possesses sufficient funds to fully pay for any such settlement; provided, however, that the indemnified party shall be informed of all material settlement offers and be given a reasonable opportunity to comment on same. C. If the Indemnitors do not timely pay the Claim or assume the defense of the Claim in accordance herewith, Buyer shall have the right to pay said Claim or take over the defense of said Claim and to settle said Claim on any terms it deems reasonable, provided that (i) Buyer shall first have given the Indemnitors an additional five (5) business days prior written notice, after 8 9 the expiration of the twenty (20) day period provided in Paragraph 13.B. above, and the Indemnitors shall not have paid the Claim or assumed the defense of the Claim within said additional period of five (5) business days, and (ii) Buyer shall notify the Indemnitors prior to agreeing to the terms of any settlement. Any such settlement (and the costs and expenses incurred in defending and/or selling the Claim) shall be valid as against the Indemnitors for the purposes of the Indemnitors' indemnity obligations, and the Indemnitors shall pay or reimburse said amounts to Buyer on demand. D. All amounts due to Buyer under this Paragraph 13 shall bear interest from the date due until the time paid at the Citibank "Prime Rate," plus four percent per annum. The payment of said interest shall not, however, authorize the indemnifying party to defer the payment of amounts otherwise due hereunder. E. The amount of the indemnifying party's liability under this Agreement shall be determined taking into account any applicable insurance proceeds actually received or entitled to be received by, and other savings that actually reduce the impact of loss upon Buyer. F. Notwithstanding anything contained herein to the contrary, (i) Buyer hereby assumes the payment and performance of, and agrees to pay, perform and discharge, from and after the date of Closing, all debts, duties and obligations to be paid, performed and/or discharged by Seller under the Third Party Contracts, Purchase Contracts, Governmental Approvals and/or the Documents, including, but not limited to, any costs associated with defects, repairs or warranties, and (ii) Buyer and Centerline hereby agree to use their best efforts to replace all existing bonds that have been obtained by and in the name of Upjohn in connection with the Project and that are still of record and in full force and effect as of the date of Closing within thirty (30) days of Closing ("BONDS"). Buyer and Centerline, as the case may be under (i) and (ii) above, shall indemnify, defend and hold Seller harmless, from and against, any and all claims, losses, liabilities, damages, costs and expenses (including reasonable attorney's fees) resulting by reason of the failure of (i) Buyer to pay, perform or discharge any of the debts, duties or obligations assumed by Buyer hereby, and (ii) Buyer and Centerline to remove and replace the Bonds. 14. NOTICES. All notices, requests, demands or other communications required or permitted under this Agreement shall be in writing and delivered personally or by certified mail, return receipt requested, postage prepaid, or by facsimile transmission, or by overnight courier (such as Federal Express) for next day delivery, addressed as follows: As to Buyer: OH Investments, Inc. Attn: Joseph Pivinski, Vice-President of Finance 1690 S. Congress Ave. Delray Beach, FL 33445 Fax: (561) 274-0066 With a copy to: Ruden, McClosky, Smith, Schuster & Russell, P.A. Attn.: Mark F. Grant, Esq. 200 East Broward Boulevard, 18th Floor Fort Lauderdale, Florida 33301 Fax: (954) 333-4004 9 10 With a copy to: Ruden, McClosky, Smith, Schuster & Russell, P.A. Attn.: Thomas O. Katz, Esq. 200 East Broward Boulevard, 18th Floor Fort Lauderdale, Florida 33301 Fax: (954) 333-4019 As to Seller: Upjohn-Delray Limited Partnership c/o Hearthstone 1401 East Broward Boulevard, Suite 302 Fort Lauderdale, Florida 33301 Attn.: Marcus Buerosse Fax: (954) 522-3558 With a copy to: Hearthstone 55 Fransico Street, Suite 700 San Francisco, California 94133 Attn.: Tracy T. Carver, Esq. Fax:______________________ As to Centerline: Centerline Homes of Delray, Inc. 12534 Wiles Road Coral Springs, Florida 33076 Attn: Craig Perry Fax: (954) 344-4176 With a copy to: Larry A. Rothenberg, P.A. 900 North Federal Highway Suite 460 Boca Raton, Florida 33432 Fax: (561) 394-0571 Notices given by facsimile transmission shall be deemed given and received when receipted by sender, notices give by overnight courier shall be deemed given and received on the next business day and notices given by certified mail shall be deemed given and received three days after it was sent. Either party hereto may change the address for receiving notices, requests, demands or other communication by notice sent in accordance with the terms of this Section. 15. REAL ESTATE BROKER. In connection with this transaction, Buyer and Seller represent and warrant, each to the other, that no real estate brokers, agents, intermediaries, or finders (collectively, the "BROKERS") were involved herein and entitled to a commission, fee or payment (collectively, "COMMISSION") of any kind whatsoever. Buyer and Seller agree to indemnify, defend and hold each other harmless from any claim or claims for Commission asserted by any party other than Brokers as a result of dealings with Buyer or Seller. This Paragraph 15 shall survive the Closing or earlier termination of this Agreement. 10 11 16. SUCCESSORS AND ASSIGNS. This Agreement shall bind Buyer and Seller and anyone succeeding to their interests in, to or under this Agreement. 17. ASSIGNMENT. Buyer shall have the right to freely assign this Agreement without the prior consent of Seller. Seller agrees to acknowledge such assignee as the purchaser hereunder and to consummate the transaction contemplated hereby with such assignee, whereupon Buyer shall be fully released of and from any and all obligations hereunder. 18. POSSESSION. Possession of the Property shall be deemed to have passed to Buyer at Closing. 19. AMENDMENT. This Agreement may not be amended, altered, or modified except by a written instrument executed by both Buyer and Seller. 20. FURTHER ASSURANCES. Buyer and Seller agree to execute and deliver such additional documents and to perform such additional acts as may become necessary to effectuate the intent and purposes of the parties set forth in this Agreement. 21. CHOICE OF LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Florida without regard to conflict of law principals. Venue for any legal proceeding arising from or in connection with this Agreement shall be in Broward County, Florida. 22. THIRD PARTIES. There are no third-party beneficiaries to this Agreement. 23. PRONOUNS. All pronouns used in this Agreement shall be effective to identify the persons referred to, regardless of their gender and whether they are singular or plural. 24. SEVERABILITY. The invalidity or unenforceability of any provision of this Agreement shall in no way affect the validity or enforceability of any of the other provisions of this Agreement. 25. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be considered an original and all of which when taken together, shall be deemed to be one (1) and the same Agreement. 26. ATTORNEYS' FEES. If litigation arises out of or in connection with this Agreement, whether incurred before, during or after trial, in bankruptcy court, or on appeal, the prevailing party shall be entitled to recover its attorneys' fees and costs from the non-prevailing party. 27. GOOD FAITH. The parties shall endeavor in good faith to fulfill the terms of this Agreement. 11 12 28. SCHEDULES. All Schedules attached to this Agreement are incorporated herein by this reference. 29. EFFECTIVE DATE. The "Effective Date" of this Agreement shall be the date on which the last of the Buyer or Seller executes the same and Buyer receives a copy thereof. 30. COUNTING OF DAYS. In the event that a date on which performance by either Buyer or Seller is to occur falls on a Saturday, Sunday or federal or state holiday, then the time for such performance shall be extended to the next business day immediately following thereafter. 31. BUILDER'S AGREEMENT. The term "Builder's Agreement" as used in this Agreement shall mean the agreement to be executed by and between Buyer and Centerline at Closing. 32. AGREEMENT TO ENTER INTO BUILDER'S AGREEMENT. The term "Agreement to enter into Builder's Agreement" as used in this Agreement shall mean the agreement to be executed by and between Buyer and Centerline at Closing. 33. 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 department. 34. ENTIRE AGREEMENT. This Agreement, including the Schedules attached hereto, embodies the entire understanding between the parties, and supersedes any and all prior agreements and understandings, written or oral, formal or informal. 35. RECORDING. Buyer shall not be permitted to record this Agreement or any memorandum of its terms without the prior written consent of Seller. [INTENTIONALLY LEFT BLANK] 12 13 IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date set forth below their respective signatures. WITNESS SELLER: UPJOHN-DELRAY LIMITED PARTNERSHIP, a Florida limited partnership By: FL RFC/WA GP, L.C., a Florida limited liability company, General Partner By: Hearthstone, Inc., a California corporation, Manager _______________________ By:______________________________________ Tracy T. Carver, Senior Vice President- General Counsel _______________________ Date:____________________________________ BUYER: OH INVESTMENTS, INC., a Florida corporation ________________________ By:______________________________________ Richard D. Levy, Chief Executive Officer ________________________ Date:___________________________________ CENTERLINE: CENTERLINE HOMES OF DELRAY, INC., a Florida corporation ________________________ By:_____________________________________ Printed Name:___________________________ Title:__________________________________ ________________________ Date:__________________________________ 13 14 EXHIBIT A LEGAL DESCRIPTION 14 15 EXHIBIT B TANGIBLE PERSONAL PROPERTY 15 16 EXHIBIT C PURCHASE CONTRACT INFORMATION 16 17 EXHIBIT D THIRD PARTY CONTRACTS 17 18 EXHIBIT E PERMITTED EXCEPTIONS 18 EX-10.37 3 g68169ex10-37.txt BUILDERS AGREEMENT 1 EXHIBIT 10.37 BUILDER'S AGREEMENT THIS BUILDER'S AGREEMENT ("AGREEMENT") is made and entered into as of the ___ day of August 2000, by and between, OH INVESTMENTS, INC., a Florida corporation ("OWNER") and CENTERLINE HOMES AT DELRAY, INC., a Florida corporation ("DEVELOPER"). W I T N E S S E T H: WHEREAS, Owner is or anticipates becoming the Owner of all that certain real property consisting of approximately one hundred thirty-four (134) acres in total area, situate, lying and being in the County of Palm Beach, State of Florida, the legal description of which is set forth on EXHIBIT "A" attached hereto and made a part hereof, and more commonly known as "Vizcaya" ("PROPERTY"); and WHEREAS, Upjohn-Delray Limited Partnership ("UPJOHN"), the previous owner of the Property, has commenced development of the Property as an active adult community containing five hundred four (504) residential housing units ("RESIDENTIAL UNITS") and related amenities known as "Vizcaya" ("PROJECT"), but has not completed development of the Project; and WHEREAS, Developer was the limited partner of Upjohn and the developer of the Project during the time Upjohn owned the Property and Project, and WHEREAS, Owner seeks to continue the development of the Project to completion; and WHEREAS, Owner desires to engage the services of Developer as an independent contractor to continue with the planning, development, marketing, construction and sale of the Residential Units comprising the Project, and Developer desires to accept such engagement, all in accordance with and subject to the terms, conditions and provisions set forth in this Agreement. NOW, THEREFORE, for and in consideration of the premises, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Owner and Developer hereby agree as follows: Section 1. ENGAGEMENT OF DEVELOPER. 1.1. ENGAGEMENT. Owner engages Developer to act as the developer of the Project and to perform the services described below, and Developer accepts such engagement. Section 2. DEVELOPMENT OF THE PROJECT. 2.1. DEVELOPMENT PLAN. Attached hereto as EXHIBIT "B", and made a part hereof, is Developer's development plan ("DEVELOPMENT PLAN") for the Project which is approved by Owner, and which sets forth among other things, 2 Developer's detailed plan regarding the order, manner and method in which the Project shall be constructed, including, but not limited to all plans and specifications, designs, schedules, budgets and programs. The Development Plan may be amended or supplemented only upon the prior written approval of Owner. 2.2. NOTIFICATION BY DEVELOPER; DEVELOPMENT PLAN. Within five (5) business days after Developer becomes aware that the Development Plan must be revised for any reason whatsoever, and at such other times as may be agreed upon by Owner and Developer, Developer shall furnish to Owner a proposed revised Development Plan with explanation for the revisions for Owner's review and approval. 2.3. PROJECT SCHEDULE. Attached hereto as EXHIBIT "C", and made a part hereof, is Developer's construction schedule ("PROJECT SCHEDULE") for the Project which is approved by Owner, and which sets forth among other things, Developer's detailed projections of construction commencement and completion dates for: (i) Residential Units; (ii) amenities for Residential Units and the Project ("AMENITIES"); and (iii) the Project (the Residential Units and Amenities are sometimes referred to herein as, the "IMPROVEMENTS"). The Project Schedule may be amended or supplemented only upon the written approval of Owner. 2.4 NOTIFICATION BY DEVELOPER; PROJECT SCHEDULE. Within five (5) business days after Developer becomes aware that any action or performance shown on the Project Schedule will be delayed more than ten (10) days beyond the commencement or completion date that is specified for such action or performance, and at such other times as may be agreed upon by Owner and Developer, Developer shall furnish to Owner proposed additional or revised schedules with explanation for the deviations from the Project Schedule for Owner's review and approval. 2.5. FULL COST DEVELOPMENT BUDGET. Attached hereto as EXHIBIT "D", and made a part hereof, is Developer's budget ("FULL COST DEVELOPMENT BUDGET") for the Project which is approved by Owner, and which sets forth among other things Developer's detailed projections of all projected costs and expenses of the Project, including, but not limited to the (i) development, construction, marketing, sales, allocated overhead and other expenditures; (ii) sales absorption estimates; and (iii) average sales prices for the Residential Units. 2.6. NOTIFICATION BY DEVELOPER; FULL COST DEVELOPMENT BUDGET. Upon the earlier of (i) within three (3) business days after Developer becomes aware that the projected cost to complete any line item (a) of Fifty Thousand ($50,000) Dollars or greater (on an annual basis) in the Developer's Full Cost Development Budget shall exceed two (2%) percent of the amounts budgeted for such line item, including but not limited to the budgeted cost of each individual Residential Unit, or (b) of less than Fifty Thousand ($50,000) Dollars in the Developer's Full Cost Development Budget shall exceed by Five Thousand ($5,000) Dollars of the amounts budgeted for such line item, or (ii) at any time Owner may request, Developer shall furnish to Owner proposed revised Full Cost Development Budgets with explanation for the deviations from the Full Cost Development Budget for Owner's review and approval. Developer shall have no obligation to pay for any increase in the Full Cost Development Budget, but only 2 3 so long as such increases were approved by Owner in writing. In accordance with Section 13.6 hereof, Developer shall be liable to Owner for, and indemnify, defend and hold Owner harmless against any and all unauthorized expenditures or incurrence of liability that Developer makes in connection with the Project. 2.7. RECORDS. In the event of any inconsistency between Owner's and Developer's accounting books and records for the Project, Owner's accounting books and records for the Project shall control. Section 3. FUNDING OF THE PROJECT. 3.1. FINANCING. Owner has obtained (or will obtain) the necessary financing for the Project in accordance with the Full Cost Development Budget in the form of two (2) loans from Guaranty Federal Bank, F.S.B. ("LENDER"), one being an acquisition and development loan in the amount of Sixteen Million Two Hundred Fifty Eight Thousand Three Hundred One ($16,258,301) Dollars ("A&D LOAN") and the second being a construction loan in the amount of Eleven Million ($11,000,000) Dollars ("CONSTRUCTION LOAN") (collectively, the "LOANS"). It is hereby agreed and acknowledged by and between Owner and Developer, that Craig Perry, Debra Perry, Stephen Margolis and Lori Margolis, shall guaranty, jointly and severally, the full amount of both the A&D Loan and the Construction Loan, and that Oriole Homes Corp., a Florida Corporation ("ORIOLE") shall only guaranty, up to the aggregate amount of the first Two Million ($2,000,000) Dollars of the Loans; it being the intention of the parties hereto that Oriole's total and aggregate guaranty for both the A&D Loan and the Construction Loan combined, shall never exceed the total and aggregate amount of Two Million ($2,000,000) Dollars. Developer shall assist Owner, including, without limitation, to (a) negotiate the appropriate instruments and documents evidencing and securing such financing, and (b) provide such guarantees as may be necessary to obtain such financing so that the financing is non-recourse to Owner, Owner's officers, directors, agents, employees, shareholders and partners thereof. Developer agrees to execute and deliver any and all other documents reasonably requested by Owner or required by Lender in connection with the financing for the Project. Developer will not accept any additional proposal for financing without first obtaining Owner's consent. Developer shall cause the Project to comply with the terms, covenants and provisions contained in any loan document or other agreement encumbering or affecting the Project or any security agreement now or hereafter encumbering or affecting the personal property located at the Project. A default (as that term is used in connection with the loan documents for each of the Loans) under the loan documents caused by Developer shall be deemed to be a default under this Agreement. In the event of a default under the loan documents caused by Developer thereby triggering a default under this Agreement, and Owner shall cause that default to be cured, Developer shall still be deemed to have defaulted under this Agreement and Owner shall be entitled to enforce any and all remedies available to Owner under this Agreement against Developer; it being the intention of the parties hereto that Developer shall not benefit from nor be the beneficiary of Owner's curing of any default under the loan documents caused by Developer. Developer shall provide Owner promptly with copies of all notices which may be received by Developer from Lender. 3 4 3.2. CONSTRUCTION DRAW PROCEDURE. The construction draw procedure under this Agreement shall be the same construction draw procedure as set forth in the loan documents for the A&D Loan and the Construction Loan. Section 4. SERVICES TO BE PERFORMED BY DEVELOPER. 4.1. GENERAL SERVICES. Developer will plan, develop, market, construct and sell (including the closing of sales) the Residential Units comprising the Project and perform all necessary services and duties in connection therewith (or cause such services or duties to be rendered and performed by others). The Developer shall cause the Project to be developed, constructed, marketed and sold (i) substantially in accordance with the Development Plan, Project Schedule, plans and specifications for the Project ("PLANS AND SPECIFICATIONS") and Marketing Program (hereinafter defined) as approved by Owner, and (ii) in substantial compliance with the terms of the Full Cost Development Budget, except for variations from the Full Cost Development Budget approved in writing by Owner; provided however, that Developer shall be permitted to make expenditures which vary from the Full Cost Development Budget provided that the aggregate of all variances from the Full Cost Development Budget (as modified by Developer and approved by Owner, from time to time) shall not exceed a total of three (3%) percent of the aggregate expense set forth in the Full Cost Development Budget ("PERMITTED VARIANCES"). It is expressly agreed that Developer shall have no right or authority to take any action which is not in substantial compliance with the Development Plan, Project Schedule, Plans and Specifications and Marketing Program set forth in (i) above or to make any expenditure or take any action which will result in the expenditure of amounts in excess of those set forth in the Full Cost Development Budget, subject to the Permitted Variances, described in (ii) above. In accordance with Section 13.6 hereof, Developer shall be liable to Owner for, and indemnify, defend and hold Owner harmless against, any and all unauthorized expenditures or incurrence of liability that Developer makes in connection with the Project 4.2. APPROVALS. Owner acknowledges that Developer has obtained and that Developer has provided evidence to the Owner that Developer has procured proper zoning, land use and all other development approvals for the Project as well as approvals from all other units of federal, state and local government (and quasi-government) having jurisdiction over the Project in order to enable Developer to obtain building permits on behalf of Owner, including the final approval of the site plan, subject only to the payment of applicable building permit fees in the amounts as set forth in the Full Cost Development Budget. Developer shall provide Owner with at least ten (10) business days advance written notice of Developer's intent to apply for, or to attend any hearing, in connection with, any and all zoning, land use and all other development approvals for the Project as well as approvals from all other units of federal, state and local government (and quasi-government) having jurisdiction over the Project sought by Developer from the Effective Date through and including the completion of the Project and the sale and closing of the last Residential Unit. Developer shall further furnish Owner with copies of all correspondence between Developer and all units of federal, state and local government (and quasi-government) in connection with approvals for the Project. Developer shall provide proof and assurances to Owner that such zoning approvals and permits have been, or will be, granted in a timely fashion so as to not materially and adversely affect the progress of the Project as set forth in the Project Schedule. 4 5 4.3. PERMITS. Developer shall undertake all actions as may be necessary to apply for, obtain, maintain in good standing and comply with all certificates, licenses, permits, laws, ordinances, orders, rules, regulations and requirements of federal, state and municipal governments, courts, departments, commissions, boards and officers, or other bodies exercising similar functions, which may be necessary for and/or applicable to the Project. Developer shall provide Owner with at least ten (10) business days advance written notice of Developer's intent to apply for or pull any and all certificates, licenses or permits in connection with the Project, other than the building permits necessary for the construction of the Residential Units and the certificates of occupancy (or the equivalent thereof) necessary for Residential Unit Purchaser's to occupy the same. Developer shall further furnish Owner with copies of all correspondence between Developer and all units of federal, state and local government (and quasi-government) in connection with any and all certificates, licenses and permits for the Project sought by Developer from the Effective Date through and including the completion of the Project and sale and closing of the last Residential Unit. Owner agrees to execute and deliver any and all applications and other documents reasonably requested by Developer, and otherwise to cooperate to the fullest extent with Developer in applying for, obtaining and maintaining such certificates, licenses and permits as are reasonably required. Developer shall promptly deliver to Owner copies of all notices Developer receives from any federal, state or local agency alleging non-compliance with any certificate, license or permit which was issued for the Project. 4.4. BEST EFFORTS. Developer shall use its best efforts, and Developer shall devote the requisite and sufficient amounts of time, in order to proceed continuously and diligently to do all things necessary to enable the Residential Units, Phases and the Project to be developed and constructed, and the Residential Units to be offered for sale and sold (and closed) in accordance with this Agreement, including but not limited to: (i) the Development Plan; (ii) Project Schedule; (iii) the Plans and Specifications; (iv) the Full Cost Development Budget; and (v) the Marketing Program. 4.5. GENERAL CONTRACTOR. Owner acknowledges that Developer is appointing Centerline Homes Construction, Inc., a Florida corporation ("CHC"), one of Developer's affiliates, to act as the general contractor for Developer in carrying out the construction activities required under this Agreement. A copy of the construction contract that has been executed by and between Developer and CHC is attached hereto and made a part hereof as EXHIBIT "E". For the purposes of such activities, Developer and CHC shall have joint and several liability for all obligations under this Section 4 (in its entirety) and all references to Developer in this Section 4 (in its entirety) shall be read as referring to both Developer and CHC. Developer shall enter into an agreement with CHC, in a form satisfactory to Owner, setting forth the obligations of CHC in accordance with this Section 4 (in its entirety) and Developer shall have the obligation of paying any amounts to CHC which are due and owing from Developer. Developer shall cause CHC to comply with all requirements to keep and maintain a general contractor's license under the laws of Florida. Any termination of Developer under this Agreement shall also be a termination of CHC as the general contractor for the Project. The signature by CHC at the end of this Section 4.5 shall be conclusive evidence that CHC has read, understands, acknowledges, consents to and agrees to be bound by, subject to and comply with the provisions of this Section 4.5. 5 6 Centerline Homes Construction, Inc., a Florida corporation By:____________________________________ Printed Name:___________________________ Title:___________________________________ Date:___________________________________ 4.6. OTHER CONTRACTORS AND CONSULTANTS. It is acknowledged by and between Owner and Developer that Developer has previously executed contracts with various consultants, architects, contractors and/or suppliers necessary for any and all improvements, materials, supplies, labor and other services to be performed in connection with the Project. A list of said consultants, architects, contractors and/or suppliers currently providing services and materials in connection with the Project, and the contracts executed by each respective consultant, architects, contractor and supplier is attached hereto and made a part hereof as EXHIBIT "F". Owner acknowledges and approves all of the consultants, architects, contractors and/or suppliers and their respective contracts set forth in EXHIBIT "F". Commencing from the Effective Date, Developer shall select and, on behalf of and in the name of Owner, negotiate and enter into contracts with all other consultants, architects, contractors and/or suppliers necessary for any and all improvements, materials, supplies, labor and other services to be performed in connection with the Project. The selection of attorney's and consultants by Developer in connection with the Project shall be subject to Owner's prior written approval. All contracts entered into by Developer pursuant to this Section 4.6 shall be in accordance with the Full Cost Development Budget; provided however, that any contract (i) for an amount in excess of FIFTY THOUSAND ($50,000) DOLLARS, (ii) regardless of amount that is for a period of, or a commitment that shall take, more than one (1) year, including extensions and options to extend, and (iii) that is not an arms length contract in that the same is executed by and between Developer and an affiliate of Developer, must be submitted to Owner for Owner's prior written approval. 4.7. SUBCONTRACTS. Commencing from the Effective Date, all subcontracts for services or material shall be obtained through a competitive bidding process wherein the lowest responsible bidder shall be awarded the subcontract, and said subcontracts shall be in a form approved in writing by Owner. Prior to commencing the bidding process, Developer shall submit to Owner a list of subcontractors and materialmen it intends to provide with a bid package. Within ten (10) days following receipt of such list, Owner shall have the right to add additional subcontractors and materialmen to the list by providing Developer with the names Owner wishes to add within the ten (10) day period. Developer shall submit to Owner for its approval all contracts awarded to the lowest responsible bidder, and any modifications addendum, amendments or change orders thereto, prior to execution by Developer. Owner shall not be required to execute any such contracts. All contracts with subcontractors and materialmen shall be in the form attached hereto as EXHIBIT "G". All subcontracts with design professionals shall include the addendum attached hereto as EXHIBIT "H", or incorporating in said contract similar terms. 4.8. EMPLOYEE AND SUPERVISION OF EMPLOYEES. Developer shall employ, train, supervise and discharge such employees as are necessary for the development and management of the Project and the sale of the Residential Units in accordance with this Agreement. Developer represents that the Full Cost 6 7 Development Budget contemplates Developer employing all employees which are required to carry out the development and management of the Project and the sale of Residential Units in accordance with this Agreement. 4.9. ADMINISTRATION. Developer shall provide the administration and coordination of all work at the Project. Specifically, during the development and construction period, Developer shall perform not less than the following: (1). Developer shall furnish or arrange for all consultants, skills, labor, materials, supplies, equipment, services, machinery, tools and other items of every description required for the prompt and efficient completion of the Residential Units, Amenities, Phases and the Project in a good and workmanlike manner. The selection and hiring of all consultants and subcontractors shall be subject to Owner's prior approval, which shall not be unreasonably withheld nor delayed. (2). Developer shall cause to be constructed, in accordance with the Development Plan, Project Schedule, Full Cost Development Budget and Plans and Specifications, all of the Improvements as specified in the Plans and Specifications. With regard to model homes, any field changes or modifications to the Plans and Specifications during the course of construction of said model homes shall be noted on the Plans and Specifications, shall be approved and signed by the architect, and a copy delivered to Owner for its records. (3). Comply with each and every loan document that has been executed by Owner and/or Developer in connection with the Loans. (4). As soon as reasonably possible after completion of the Improvements and all inspections of the same, Developer shall submit to Owner "as built" Plans and Specifications and a certificate of compliance executed by Developer's appropriate state-licensed consultants (engineer, architect and/or landscape architect, etc.). The certificate of compliance shall certify such Improvements as substantially conforming to the Plans and Specifications. (5). Cause construction and progress meetings to be held regularly (not less than once a month, or more frequently if requested by Owner) to discuss such matters with Owner such as procedures, progress, problems and scheduling. (6). Supervise subcontractor activity daily at the Project including engaging, as a Project Expense (hereinafter defined), a Project construction supervisor who shall be at the Project daily. (7). Maintain cost accounting records on authorized work performed under unit costs, additional work performed on the basis of actual costs of labor and materials or other work requiring accounting records. (8). Collaborate in the processing and approval of submissions required by any unit of federal, state or local governmental agency. 7 8 (9). Submit draw requests and supporting documentation to the Owner on a monthly basis for Owner's approval for the payment of work performed at the Project, which such requests and documentation are contemplated to be submitted to Lender as loan construction draws. (10). Perform such additional supervisory functions as Owner reasonably deems necessary to accomplish the orderly and proper construction of the Project in accordance with this Agreement. (11). Diligently prepare all necessary documents and instruments required for the posting of any bonds, letters of credit, deposits or other forms of security required by any federal, state or local governmental or quasi-governmental entities in connection with the Project, as well as the financing thereof, and further attempt to obtain timely reductions of such security during the development of the Project and the ultimate exoneration of such security when satisfied. 4.10. INSURANCE. Owner shall obtain insurance in the form and content and from companies reasonably acceptable to Owner for all risks regarding the Project as more fully set forth in EXHIBIT "I" attached hereto and made a part hereof. Owner shall renew annually said insurances. The cost of said insurances, any modification to said insurances and all renewals of said insurances shall be paid by Oriole as a Project Expense. Developer shall be obligated to investigate and make a full written report of all accidents or claims for damage relating to the ownership, operation and maintenance of the Project, including any damage or destruction to or at the Project and the estimated cost of repair, and cooperate with and make all reports required by any insurance company. Owner, and not Developer, shall have the right to vary or modify any portion of the insurance program all in the reasonable discretion of Owner. 4.11. BOOKS AND RECORDS. Developer shall maintain complete and accurate books, records and accounts of all costs and expenses incurred and all income and receipts received in connection with the Project. All such books and records of Developer which relate to the Project will be available for inspection and audit by Owner or any of Owner's authorized representatives, as a Project Expense, at all reasonable times during normal business hours. In the event of any inconsistency between Owner's and Developer's accounting books and records for the Project, Owner's accounting books and records for the Project shall control as provided in Section 2.7 hereof. 4.12. OPERATING ACCOUNTS. Developer shall establish a commercial checking account ("OPERATING ACCOUNT") at SunTrust or such other bank as Owner may select ("BANK") in the name of Owner with copies of monthly statements of the same being forwarded directly to Owner by Bank. Developer is authorized, subject to the terms, conditions and provisions found elsewhere in this Agreement, to withdraw funds from the Operating Account on behalf of Owner for the purpose of making payment of Project Expenses and disbursements authorized herein; provided that such expenditures may only be made in accordance with the Full Cost Development Budget; provided further, that all such withdrawals will only be permitted with the signature of a representative of Owner after a default by Developer hereunder. 8 9 4.13. HOMEOWNERS' ASSOCIATION. Developer has caused to be formed a nonprofit community association known as "Vizcaya Neighborhood Property Owners Association, Inc., a Florida not-for-profit corporation ("POA"). In connection therewith, Developer has also caused to be prepared and filed the declaration of covenants, conditions and restrictions ("DECLARATION"), articles of incorporation ("ARTICLES") and bylaws ("BYLAWS") of the POA (collectively, the "DOCUMENTATION"). Owner acknowledges and approves the formation, preparation and filing of the POA and its respective Documents. Any and all additional non-profit community associations "ASSOCIATIONS") shall be formed by Developer subject to the prior written consent of Owner. The documentation in connection with any and all Associations, including declarations, articles of incorporation and bylaws shall be subject to the prior written approval of Owner and no recording or filing shall be made with respect to the same in any public records or with any governmental agency, nor will such documentation be disseminated to the public, until Owner's approval is obtained. Owner acknowledges that Developer has provided Owner with a budget for the Association prepared by a qualified analyst. All costs incurred in connection with the foregoing shall be Project Expenses. Owner and Developer shall actively participate on the board of directors for the POA and all other Associations and Developer shall submit to Owner all meeting agendas, and within five (5) days from availability, the minutes of the meetings for a period commencing from the formation of the POA and any and all other Associations through one (1) year following the closing of the sale of the last Residential Unit that is part of the respective POA and Association. Owner shall appoint the maximum number of individuals permitted by law to serve as directors for the POA and all other Associations during the aforementioned time period. Of the total number of directors that Owner appoints, all but one (1) shall be named by Developer and the remaining one (1) shall be named by Owner. Owner shall nevertheless have the right to approve all directors named by Developer with such approval not to be unreasonably withheld. If Owner elects however, to name more than one (1) director to the POA or any other Association after the execution of this Agreement, then Developer shall cause the applicable number of those directors selected by Developer to be appointed as a director to tender resignations within thirty (30) days after receiving written notice from Owner that Owner seeks to appoint additional directors, and upon said resignation, Owner shall be entitled to appoint the applicable number of replacement directors. Developer shall not make any commitments to the POA or any other Associations on behalf of Owner without Owner's prior written approval. 4.14. COMPLIANCE WITH LAWS. Developer, its employees, agents, and subcontractors shall comply with all laws (including, without limitation, the Florida Construction Lien Law), ordinances and regulations, permits, licenses and approvals obtained from any governmental or quasi-governmental entity in connection with the Project, including, but not limited to, the construction of the Improvements and the sales activities (including, without limitation, any required licensing of Developer's salespersons). 4.15. NOTICE OF DEFECTS AND DEVIATION. Developer shall notify Owner in writing of any defect in any work performed by Developer, its licensed professionals or its subcontractors, or any deviation from the Plans and Specifications of any Improvement, or any lack of diligence or breach by any subcontractor or materials supplier, or any signs discovered upon visual 9 10 inspection which may indicate a possible defect within three (3) days after becoming aware of such defect, deviation, lack of diligence or breach. In addition, Developer shall render to Owner such reports as Owner may reasonably request, with respect to the progress of work on the Project. 4.16. PROPERTY MAINTENANCE AND PROTECTION. During the term of this Agreement, Developer shall maintain the Property free of weeds, debris, pests and toxic or hazardous substances with the exception of what is legal, reasonable, sufficient and prudent to operate the necessary machinery and equipment to construct the Improvements. In addition, Developer shall at all times reasonably protect the Project and all Improvements, whether or not completed, from being damaged by the work of Developer or any subcontractor or other persons or causes, including, but not limited to, vandals and the elements. 4.17. PROTECTION FROM AND AGAINST LIENS. Developer shall not suffer or permit to be enforced against the Property, or any part thereof, any mechanics', laborers', materialmen's, contractors', subcontractors' or any other liens, except to the extent caused solely by an Event of Default of Owner, arising from or any claim for damages stemming from any work of construction or improvement in connection with the Project, or any other claim or demand (including stop notice demands) howsoever it may arise. Developer shall pay or cause to be paid, and removed from the public records if recorded, all of said liens, claims and demands the earlier of: (i) within fifteen (15) days after the lien, claim or demand has been filed in the public records, or (ii) before any action is brought to enforce them against the Property. Developer hereby indemnifies and shall defend and hold Owner and the Property free and harmless from all liability for any and all such liens, claims and demands, pursuant to Section 13.6 hereof. Notwithstanding anything to the contrary contained in this Section, if Developer shall in good faith contest the validity of any such lien, claim or demand, and if such lien, claim or demand is not the result of Developer's negligence or breach of this Agreement, Developer shall, as a Project Expense: (i) furnish to Owner a surety bond, satisfactory to Owner, in an amount equal to such contested lien, claim or demand indemnifying Owner against liability for same, or (ii) if Owner shall request, Developer shall procure and record the bond provided for by applicable law, freeing the Property from the effect of such lien, claim or demand or action thereon. Provided that the lien, claim or demand is not the result of Developer's negligence or breach of this Agreement, Developer shall, as a Project Expense, pay and satisfy any adverse judgment that may be rendered thereon before the enforcement thereof against Owner or the Property. The provisions of this Section shall survive any termination of this Agreement. Section 5. RIGHTS AND DUTIES OF OWNER. 5.1. INSPECTIONS. Owner shall have the right, but not the obligation, to inspect the progress and quality of all work performed by or under the supervision of Developer in connection with the Project, to require the replacement of any defective or improper work and to refuse payment of any funds until such matters have been remedied. Inspections by Owner shall not in any manner constitute Owner approval or acceptance of the progress or quality of the work. The failure of Owner to inspect shall not relieve Developer of its duties under this Agreement. 5.2. NATURE OF OWNER'S APPROVAL. The approval by Owner of any plans, specifications, designs or other items relating to the Project or other matters relating to Developer's performance pursuant to this Agreement shall be 10 11 construed only as an approval of conformity of the same for the Project. Such approval by Owner of such documents and other items will not be deemed approved for purposes of engineering, architectural, design, safety, structural, adequacy or compliance with laws or regulations. Owner, by its approval of any item, assumes no liability or responsibility therefor, or for any defect in any Improvement made pursuant thereto. In the event that Owner withholds its approval of any matter, and Developer revises its request for approval to conform to Owner's objections, such change shall not be considered a direction by the Owner. Such revised request shall be deemed to be with the Developer's consent unless Developer expressly states in writing in its request that Developer is not in agreement with the proposal, and Owner acknowledges in writing that it is directing Developer to act in the proposed manner. The requirements of this Section cannot be waived by Owner except by a writing signed by Owner. 5.3. TAXES, LOANS AND OTHER PAYMENTS. Owner shall pay, as Project Expenses, when due, all taxes, assessments and other impositions applicable to the Project including all loan payments (including required escrows of taxes and/or insurance premiums, insuring Owner and the Property, if any). 5.4. OWNERSHIP OF PLANS AND MATERIALS. As between Owner and Developer, all Development Plans, Project Schedules, Full Cost Development Budgets and all materials part of the Marketing Program prepared in connection with the Project by or for Developer shall, at all times, be solely the property of Owner. As between Owner and Developer, all Plans and Specifications shall, at all times be solely the property of the Developer; provided however, that Owner shall have full access to and the right to use said Plans and Specifications until the completion of Project and the sale and closing of the last Residential Unit. This right of access to and use of the Plans and Specifications by Owner shall continue even in the event of a default, either by Owner or Developer, which causes this Agreement to terminate. All consultants' contracts shall provide that Owner and Owner's successors and assigns are entitled to receive from the consultant upon demand all work product for the Project generated by the consultant, and shall have the right to use that work product without further compensation. Developer shall cause to be included in each contract for services with design professionals the language contained in EXHIBIT "J" hereto and made a part hereof. In the event that Developer utilizes any design-build subcontractors for any portion of the Project, Developer shall include in each such subcontract language similar to that in EXHIBIT "K" attached hereto and made a part hereof, so as to provide Owner with the same license and rights to use the design product of each such design-build subcontractor. Upon the expiration or earlier termination of this Agreement, Developer shall deliver immediately to Owner all copies in Developer's possession of all such documents for Owner's use as it deems appropriate. This Section shall survive the termination of this Agreement. Section 6. SALES AND MARKETING PROGRAM. 6.1. CREATION OF MARKETING PROGRAM. Owner and Developer agree that it is in their mutual interest to create a high level of demand for the Residential Units through advertising and other means. Accordingly, a marketing program has been designed by Developer, and approved by Owner, which is intended to attract home buyers to the Project and which shall present an image commensurate with the quality and pricing of homes to be sold in the Project 11 12 ("MARKETING PROGRAM"). Any change to the Marketing Program shall be subject to the written approval of Owner. Developer shall be responsible to make sure that the Marketing Program fully complies with all federal and state laws that are in effect during the term of the Project. 6.2. MARKETING PROGRAM CONTENT. The Marketing Program shall including, but not be limited to, marketing, promotion and advertising services for the Project and Developer shall make such expenditures in support thereof as Developer shall deem appropriate, consistent with the Full Cost Development Budget. All decisions regarding the content of the Marketing Program and any expenditures thereon shall be approved by Owner in writing. 6.3. IMPLEMENTATION OF MARKETING PROGRAM. The implementation and execution of the Marketing Program shall commence promptly following the execution of this Agreement so that sales promotion and advertising activities can begin by the time specified by the Project Schedule. Any such program and all sales tools, including promotional, advertising material, disclaimer and disclosure programs, warranty programs, Developer allowances and other public relations activities shall be subject to Owner's prior review and approval. Owner shall have the right at its election to designate who shall prepare any and all sales agreements or other documents necessary for the sales program. 6.4. EXCLUSIVE SALES AGENT. Developer shall act as the exclusive sales agent for the sale of the Residential Units, and to the extent required by Florida law, shall keep and maintain a Florida Real Estate Broker's license. Developer shall comply with all requirements under Florida law in connection with the marketing and sale of the Residential Units, and pursuant to Section 13.6 shall defend, indemnify and hold Owner harmless from and against, any and all claims arising out of the brokerage activities. In the event Developer shall be in Default (hereinafter defined) under this Agreement, Owner may elect to remove Developer as the sales agent and appoint some person or entity other than Developer as the exclusive sales agent or as an additional, nonexclusive sales agent for the Project, and the cost of any new agent shall be deducted from the Full Cost Development Budget. Developer shall employ a sales and marketing director, reasonably acceptable to Owner, to oversee Developer's sales responsibilities under this Agreement. 6.5. DEVELOPER'S ROLE IN SALES ACTIVITY. In addition to any duties relating to the sales of Residential Units set forth elsewhere in this Agreement, Developer shall perform each of the following without additional compensation to that provided for in Section 9 hereof: (1). SUPERVISION OF SALES ACTIVITY. Whether or not Developer is acting as the exclusive sales agent, Developer shall assign one of Developer's employees experienced in residential sales to be responsible for managing the sales activity. Only if required or approved by Owner, such person shall work on-site. Developer shall ensure that all sales activities are supervised and conducted in a manner that complies with all applicable laws and regulations. (2). REVIEW AND EXECUTION OF SALES AGREEMENTS. Salespersons shall be authorized only to obtain offers from prospective buyers of the 12 13 Residential Units and shall have no authority to accept such offers or enter into binding agreements for the sale of the Residential Units. Developer shall be responsible for reviewing each and every Sales Agreement (hereinafter defined), and each sale shall be effected using only those forms of Sales Agreements and other documents previously approved by Owner. Attached hereto as EXHIBIT "L", and made a part hereof, is the form of sale agreement that has been approved by Owner ("SALES AGREEMENT"). (3). CLOSING INSTRUCTIONS. The persons who are authorized to sign sales agreements on behalf of Owner also shall be authorized to execute closing instructions on behalf of Owner to effectuate the closing of sales of the Residential Units to buyers; provided however, that the form of closing instructions to be used shall be substantially similar to the master closing instructions executed by Owner prior to the closing of the first Residential Unit in the Project. The master escrow instructions shall be prepared by Larry A. Rothenberg, P.A ("ESCROW AGENT") and shall set forth, among other things, sales incentives, tax prorations, sales commissions and all other disbursements to be made upon the closing of each Residential Unit and shall specifically designate the individuals who Owner has authorized to execute closing instruments on Owner's behalf. The closing agent for all sales of Residential Units shall be Escrow Agent. All title insurance policies to be issued in conjunction with the Project shall be issued by a title company selected by Escrow Agent. Escrow Agent shall not be entitled to any fees for and in connection with the closings of Residential Units other than those closing fees built into the Sales Agreements as closing costs to be paid by the Residential Unit Purchasers. (4). NO COMMISSIONS. Whether or not Developer is serving as the exclusive sales agent for the Residential Units, Developer shall be entitled to no commissions or other compensation in connection with its activities performed pursuant to this Agreement with respect to sales. If employees of Developer are assigned as salespersons on-site, however, either because Developer is designated as the exclusive sales agent or otherwise, such employees, if properly licensed, shall be entitled to receive commissions from sales of Residential Units in accordance with such schedule of sales commissions as is approved by Owner in writing. (5). SALES REPRESENTATIONS. Developer and any sales persons shall be authorized only to make representations concerning the Project or sale of the Residential Units that are approved by in writing Owner. Developer shall be responsible for closely monitoring the activities and performance of all salespersons and shall be responsible for, and pursuant to Section 13.6 shall indemnify, defend and hold Owner harmless against, any unauthorized representations that they make. Section 7. COST AND EXPENSES. 7.1. OPERATING EXPENSES. All costs of developing, constructing, marketing and selling the Improvements and the Project in accordance with the Full Cost Development Budget shall be paid by Developer as Project Expenses. In the event, however, that sufficient funds are not budgeted to pay such costs and there is insufficient cash to pay budgeted items due to slow sales or closings or for any other reason whatsoever, Developer will immediately notify Owner. Section 8. REPORTING AND MONITORING. 13 14 8.1. During the entire Term (hereinafter defined) of the Project, Developer shall provide Owner with the following reports: (1). A weekly summary of sales and traffic at the Project. (2). A monthly sales and marketing report detailing sales traffic at the Project, a list of Residential Units sold and Residential Units under construction. (3). A monthly color-coded site plan showing all Residential Units to be sold which also identifies all Residential Units sold and under construction in one color and all Residential Units sold and closed in another color. (4). A monthly balance sheet for Owner. (5). A monthly and year to date income statement and operating cash flow statement for Owner, as well as, any and all tax information regarding the Project. (6). A quarterly comparison of the original Full Cost Development Budget to the combination of actual costs incurred and the projected costs to complete the Project. (7). A quarterly production report detailing the status of the construction of Residential Units at the Project. Developer shall promptly notify Owner of any variance in the Full Cost Development Budget to the extent there is a variance of more than FIFTY THOUSAND ($50,000) DOLLARS in the aggregate of expenses from that set forth in the Full Cost Development Budget. (8). A monthly list of aged accounts payable. (9). A year-end analysis of all of the reports required under this Section. At the request of Owner, all such reports shall be audited by an independent accounting firm selected by Owner to be paid as Project Expenses. (10). Quarterly written report detailing the status of bonds, letters of credit, deposits or such other items of security which may have been pledged for the development of the Property, the Project or construction of the Improvements. Section 9. COMPENSATION. 9.1. DEFINITIONS. For purposes of this Section 9, the following terms shall be defined as follows: (1). AFFILIATE. When used with reference to a specified person, (a) any person who, directly or indirectly, through one or more intermediaries, controls or is controlled by or is under common control with the specified person, (b) any person who is an officer of, partner in or trustee of, or serves in a similar capacity with respect to, the specified person or of which the specified person is an officer, partner or trustee, or with respect to which the specified person serves in a similar capacity, or (c) any person who, 14 15 directly or indirectly, is the beneficial owner of more than ten (10%) percent of any class of equity securities of, or otherwise has a substantial beneficial interest in, the specified person or of which the specified person is directly or indirectly the owner of more than ten (10%) percent of any class of equity securities or in which the specified person has a substantial beneficial interest. (2). CAPITAL INVESTMENT. All sums paid or incurred by Oriole Homes Corp. or its subsidiaries (collectively, "ORIOLE") to or for the benefit of Owner or the Project, including, but not limited to, any and all amounts contributed to the capital of Owner by Oriole for the acquisition of the Property, construction of the Improvements, and all other amounts paid in furtherance of the completion of the Project. (3). FIRST TIER BONUS. An amount equal to the excess of (i) the total Profits received by Owner as of the Target Return Date, over (ii) the amount of the Capital Investment. (4). PROFITS. Those amounts paid or distributed to Owner out of the gross revenues from sales at the Project, less any and all expenses incurred (including capital expenses) in the acquisition of the Property, the development of the Improvements, the marketing and sale of the Improvements, debt service on any financing in connection with the Loans, property taxes, the establishment and maintenance of appropriate reserves, and any and all other expenses incurred with respect to the Project, whether or not specified in the Full Cost Development Budget. No amount shall be considered as "Profits" for purposes of this Section unless and until such amount is paid out of the Operating Account to an account of Owner for which no employee, officer or director of Developer has any signatory power, or to Oriole. (5). SECOND TIER BONUS. An amount equal to fifty (50%) percent of all Profits earned subsequent to the Target Return Date and after payment in full of the First Tier Bonus, provided that for purposes of this definition, any payments of the Second Tier Bonus shall not reduce the amount of the Profits with respect to which the Second Tier Bonus is calculated. (6). TARGET RETURN DATE. The date on which the Owner has received total Profits from sales at the Project equal to, when calculated on a present value basis and based upon a discount rate of twenty-five (25%) percent per annum, the Capital Investment (with both distributions of Profits and Capital Investments being calculated as of the date made). The foregoing is intended to represent a twenty-five (25% percent per annum "rate of return" on the Capital Investment. 9.2. BASE COMPENSATION. As consideration for its services to Owner, Developer shall be entitled to those payments specified in the Full Cost Development Budget. Except as otherwise provided in the Full Cost Development Budget or herein, neither Developer nor any of its Affiliates shall be entitled to any compensation for its services to be provided hereunder, or to any payment for any goods to be provided by Developer or its Affiliates. Developer hereby agrees that neither it nor any of its Affiliates shall solicit or accept any rebates, kickbacks, set-offs, or other payments from any other party by or with respect to any goods or services provided for the benefit of the Project. Any 15 16 and all goods provided by Developer or its Affiliates for the Project shall be sold to Owner at the cost for such goods paid by Developer or its Affiliates. Notwithstanding any language contained herein to the contrary, Developer shall have earned payment under this Section 9.2 and shall be entitled to the same only in the event Developer successfully meets the cumulative net margin for the sales of residential Units for the Project on a quarterly basis as set forth in the performa previously provided to Owner as part of the Full Cost Development Budget ("NET MARGIN REQUIREMENT"). A determination of whether or not Developer has satisfied the Net Margin Requirement shall be made on the fifteenth (15th) day of each quarter ("DETERMINATION DATE") commencing on the second quarter immediately following the execution of this Agreement; it being the intention of Owner and Developer that the Net Margin Requirement shall not apply to the first quarter immediately following the execution of this Agreement. In the event Developer fails to meet the Net Margin Requirement on any given Determination Date, then Developer shall have earned, and only be entitled to fifty (50%) percent of the payment otherwise payable under this Section 9.2; provided however, the unpaid fifty (50%) percent of the payment Developer would have otherwise been entitled to under this Section 9.2 if Developer had satisfied the Net Margin Requirement shall accrue until, and be payable upon, Developer satisfying the Net Margin Requirement on any subsequent Determination Date during the time that this Agreement is in effect. 9.3. PERFORMANCE BONUS. As additional consideration to Developer for its services to be provided hereunder, in addition to the payments specified in the Full Cost Development Budget, Developer shall be entitled to performance Bonuses equal to the total of the First Tier Bonus and the Second Tier Bonus, which performance bonuses shall be paid as follows: (1). From and after the Target Return Date, Developer shall be entitled to be paid the First Tier Bonus only after the earlier to occur of (i) the Loans have been repaid to Lender in full, or (ii) Owner and Developer agree, in a writing signed by both parties, that Developer is entitled to payment of all or a portion of the First Tier Bonus. The First Tier Bonus, if and when payable, shall be paid out of the Profits that are earned subsequent to the Target Return Date. (2). From and after the payment in full to the Developer of the First Tier Bonus, the Developer shall be entitled to be paid the Second Tier Bonus. The Second Tier Bonus shall only be paid as and when Profits in an amount equal to the Second Tier Bonus are paid or distributed to Owner. (3). See Exhibit "M" for Example of application of payment under this Section 9. 9.4. PROJECT EXPENSE. The term "Project Expense" as used throughout this entire Agreement shall mean all costs, expenses or charges, whether capitalized or expensed for tax or accounting purposes, with respect to the acquisition, development, construction, improvement, ownership, operation, maintenance, upkeep and financing of the Project, including but not limited to, costs and expenses associated with the Improvements, infrastructure, ad valorum taxes, advertising expenses, professional fees, insurance premiums, cost of maintenance, wages and debt service (including principal and interest) in respect of any indebtedness related to the Project. 16 17 Section 10. TERM AND TERMINATION. 10.1. TERM. This Agreement will commence as of the date first above-written and will continue thereafter until the earlier to occur of: (i) the completion of the Project and the sale of all the Residential Units to be constructed thereon, (ii) a Developer Event of Default (hereinafter defined) by Developer if Owner elects to terminate this Agreement as a result thereof; or (iii) an Owner Event of Default by Owner (hereinafter defined) if Developer elects to terminate this Agreement as a result thereof ("TERM"). Upon the expiration of the Term, Developer shall deliver to Owner, at Developer's expense, copies of all books, records (including all computer software) and materials related to the Project, and Owner and Developer will account to each other with respect to all matters outstanding and all sums owing as of the effective date of expiration of the Term. 10.2. TERMINATION FOR CAUSE BY OWNER. In the event Developer commits an Event of Default under Section 11.1 which is not cured within the time period specified in Section 11.2, Owner shall have the right, at its option, to terminate this Agreement upon written notice to Developer. The effective date of any termination under this Section shall be retroactively deemed to be the date Developer's Event of Default actually occurred. In the event Owner terminates this Agreement pursuant to this Section, the following provisions shall apply: (1). DEVELOPER'S COMPENSATION. Developer's entitlement to compensation pursuant to this Agreement shall be governed by the provisions of Section 9, but shall have no right after such termination to enter upon the Property, except upon three (3) days advance written notice to Owner for the sole purpose of collecting the personal effects of Developer's employees and any other items requested by Owner to be removed by Developer. (2). RIGHT OF ENTRY. In addition to any other rights of Owner hereunder, Owner may take possession of and use, in completing the Project or any portion thereof, such materials, machinery, tools, equipment, appliances and other items of personal property as may be located on the Property upon such termination which have been paid for by Owner or which are not removed by Developer, free of charge and without liability to Developer for any use or damage. (3). WITHHOLDING. Notwithstanding any other provision of this Agreement, Owner shall be entitled to withhold any further payments to Developer until all liability of Developer resulting from such termination shall have been determined and satisfied. 10.3. TERMINATION FOR CAUSE BY DEVELOPER. In the event Owner commits an Event of Default which is not cured pursuant to Section 11.4, Developer shall have the right, at its option, to terminate this Agreement upon written notice to Owner; provided however, Developer may only exercise its rights under this Section 10.3 if Developer is not in Default of this Agreement. 10.4. OWNER'S UNFETTERED RIGHT TO DEAL WITH THE PROPERTY UPON ANY TERMINATION. Developer acknowledges that, upon any termination of this Agreement, Owner shall have the right to deal with the Property in any way it desires including, but not limited to, selling all or a portion of the Project or Property, completely changing any existing Development Plan, or postponing or terminating any development of the Property. Developer acknowledges that Owner's dealing with the Property after any termination of this Agreement, including 17 18 termination upon the expiration of its term, could result in Developer receiving more than, less than or none of what Developer may have received pursuant to this Agreement had the Project been completed pursuant to this Agreement with Developer's involvement and the Residential Units sold as contemplated. Developer further acknowledges that it shall have no right whatsoever to dictate or provide any input regarding the development of the Property after any termination of this Agreement. In addition, if after any termination, Owner employs itself or any other person to fulfill any of the obligations contemplated to be performed by Developer pursuant to this Agreement, Owner shall have the right to pay a reasonable overhead fee for itself or other person (including its affiliates) as a Project Expense. 10.5. REMOVAL OF PERSONAL PROPERTY BY DEVELOPER. Upon termination of this Agreement, Developer shall cease and quit all activities and entry upon the Property. Upon such termination, except for a termination under Section 10.2, Developer shall, without expense to Owner, remove or cause to be removed from the Property all movable signs, furnishings, equipment, trade fixtures, merchandise and other movable personal property owned by Developer and installed or placed, except for items Owner has requested be left for use by Owner or any persons acting through or under Owner. Developer shall repair all damage to the Property and remove debris and rubbish resulting from such removal. If Developer fails to remove any of such signs, furnishings, equipment, trade fixtures, merchandise or other personal property within thirty (30) days after such expiration or termination of this Agreement, then Owner may, at its sole option: (i) deem any or all of such items abandoned and as such, shall become the sole property of Owner, or (ii) remove any or all of such items and dispose of same in any manner, or store same for Developer, in which event the expense of such disposition or storage shall be borne by Developer and shall immediately become due and payable by Developer to Owner, and Owner may, at its option, deduct such expenses from any amount due and payable to Developer. 10.6. OTHER RIGHTS OF OWNER UPON TERMINATION. In the event of any termination of this Agreement, Owner shall be free to make any changes and arrangements as Owner deems appropriate in order to obtain completion of the duties which are the obligation of Developer under this Agreement. Upon any termination of this Agreement, Owner and Developer shall be relieved of further performance owed to the other under this Agreement, except as expressly set forth herein, and except that a termination shall in no way affect Developer's indemnity obligations or other legal liability to Owner or invalidate, reduce or restrict the rights of Owner or Developer to pursue remedies for any breach of performance or wrongful act, error or omission occurring prior to the termination, regardless of whether the nonperformance, act, error or omission was known by the aggrieved party at the time of termination. In addition, Developer shall perform all obligations under this Agreement relating to the cessation and quitting of activities; entry upon the Property; and the turnover of all documents and other materials relating to the Project or the sale of the 18 19 Residential Units, regardless of whether Developer believes the termination is proper or justified. In accordance with Section 13.6, Developer shall defend, indemnify and hold Owner harmless from and against, any and all damage or expenses Owner incurs, including all consequential damages and loss of profits due to delays or any other interference by Developer in Owner's development, construction, use, operation, sale or other disposition of the Property or the Residential Units after any termination, as well as reasonable attorneys' fees, which are caused by any breach by Developer of its obligations under this Agreement or any other failure by Developer to cooperate with Owner in the orderly turnover of management of the Project to Owner or its specified representatives or contractors. Section 11. DEFAULT. 11.1. DEVELOPER EVENTS OF DEFAULT. Upon the occurrence of any one or more of the following acts or events which are not cured by Developer within the time periods set forth in Section 11.2 hereof after written notice thereof, shall constitute "Developer Events of Default": (1). Developer's refusal or failure to supply the Project with sufficient properly skilled workmen or to provide suitable and adequate materials, supplies, tools, machinery and equipment, or to proceed with the work with such promptness and diligence as will assure the proper and satisfactory completion thereof in accordance with the Project Schedule and Full Cost Development Budget. (2). Developer's refusal or failure to staff and keep open the sales office for two (2) consecutive days, or Developer's refusal or failure to provide the requisite number of construction workers working on the Project site for five (5) consecutive days, both subject to force majeure, (3). The refusal of Developer to repay Owner within five (5) days from Owner's request any expenses incurred without Owner's approval in excess of the Full Cost Development Budget. (4). Developer's inability, refusal or other failure to keep the Property free of all mechanics', materialmen's and other liens. (5). Developer's failure to comply with any federal, state or local statute, rule, regulation or ordinance. (6). Any attempt to make or suffer to be made any encumbrance, assignment or other transfer of this Agreement, or any right or interest hereunder, without Owner's written consent, whether voluntary or involuntary, or by, or pursuant to, court order or legal process or otherwise. (7). Whether voluntarily or involuntarily: (i) the placing of all or substantially all of any of Developer's, or any affiliate of Developer's, assets in the control of a receiver or trustee, and such receivership or trusteeship continues for a period of thirty (30) days; (ii) Developer, or any affiliate of Developer, makes an assignment for the benefit of creditors or being adjudicated bankrupt; (iii) Developer, or any affiliate of Developer institutes any proceedings under the federal bankruptcy laws or other laws relating to insolvency of debtors, whether existing as of the date of this Agreement or hereafter enacted, wherein such entity seeks to be 19 20 adjudicated bankrupt or to be discharged of its debts, or to effect a plan of liquidation, composition or reorganization; or (iv) the instituting by others of such proceedings against Developer, or any affiliate of Developer, and Developer, or any such affiliate of Developer consents thereto or acquiesces therein by pleading or default, or such proceedings are not contested and discharged within thirty (30) days. (8). The listing by an administrative officer of a union fringe benefit fund of Developer or one of Developer's subcontractors on the Project as being delinquent in payment of fringe benefit obligations to such fund. (9). Developer's inability, refusal or other failure to perform any other of its obligations or the falsity of any representations or warranty given by the Developer under this Agreement or the Purchase and Sale Agreement dated as of even date herewith, and executed by and between Owner, Developer and Upjohn-Delray Limited Partnership. (10). Craig Perry leaves the full time employment of Developer for any reason whatsoever, or is unable to devote the requisite time to Developer necessary for Developer to complete the Project in accordance with the terms and conditions of this Agreement. (11). Failure of Developer to report any Full Cost Development Budget variances in excess of the Permitted Variance. (12). The expenditure of funds by Developer other than in accordance with the Full Cost Development Budget, subject to the Permitted Variance. (13). Failure of Developer to submit any of the reports as required by this Agreement. (14). Failure of Developer to obtain (and renew at least forty five (45) days prior to the date renewal is due) and maintain insurance in the amounts and for the coverage required by this Agreement or to provide Owner with copies of all policies of insurance. (15). Failure by Developer to send Owner promptly any notice alleging a default or to notify Owner timely of an event of default under any agreement affecting the Project, including financing for the Project. (16). The default by Developer, in any material respect, of the performance of any of its obligations under this Agreement. (17). A default under the loan documents caused by Developer with the intention, understanding and acknowledgment by and between the parties hereto that Developer shall not benefit from nor be the beneficiary of Owner's curing of any default under the loan documents caused by Developer. (18). A violation of the Non-Compete Agreement (hereinafter defined). 20 21 11.2. NOTICE OF DEFAULT TO DEVELOPER. Upon the occurrence of a Developer Event of Default as specified in Section 11.1 above, Developer shall be in default under this Agreement ("DEFAULT"). Developer shall have the right to cure an Event of Default, other than those described in Subsections 11.1(2), (3), (4) and (8), at any time on or before thirty (30) days following receipt of a notice of the Event of Default from Owner to Developer. Developer shall have the right to cure those Developer Events of Default described in Subsections 11.1(2), (3), (4) and (8) at any time on or before three (3) days following receipt of a notice of the same from Owner to Developer. 11.3. EVENTS OF DEFAULT OF OWNER. Owner's inability, refusal or other failure to perform any of its obligations pursuant to this Agreement shall constitute an Event of Default by Owner. 11.4. NOTICE OF DEFAULT TO OWNER. In the event of an occurrence of an Event of Default by Owner as specified in Section 11.3 above, Owner shall be considered to be in default under this Agreement as of the date specified in a written notice of such default given by Developer to Owner, which date of default shall not be less than thirty (30) days after Developer properly delivers to Owner notice of the Event of Default which specifies precisely the nature of the Event of Default and how it may be cured. Owner shall have the right to cure an Event of Default at any time on or before the date of default specified in Developer's notice of default to Owner; provided however, that if the nature of the Event of Default, other than any Event of Default attributable to the nonpayment of money, is of a nature that cannot be cured prior to the date of default specified in Developer's notice of default to Owner, Owner shall not be considered to be in default under this Agreement so long as, prior to such date of default, Owner has commenced appropriate steps calculated to cure such Event of Default and thereafter diligently pursues the cure of such Event of Default to completion. 11.5. OWNER PAYING CLAIMS. Should Developer fail to pay and discharge, or cause to be paid and discharged, when due and payable, any charge upon or in connection with the Property for which Developer is responsible, or any lien or claim for labor, material or professional services by consultants caused by Developer and employed or used in, or any damages arising out of, the construction and sale or other conveyance of any Residential Unit or common area, or any claim by a private party or a governmental agency or entity relating to the violation or alleged violation of any law now or hereafter enacted, and if Developer after ten (10) days written notice from Owner shall fail to pay and discharge the same, then Owner may, at its option and in addition to declaring an Event of Default of Developer and pursuing any other right or remedy available to Owner under this Agreement, pay the charge, lien, claim or demand, or settle or discharge any action therefor or satisfy any judgment thereon, and all costs, expenses and other sums incurred or paid by Owner in connection therewith including, but not limited to, attorneys' fees and court costs, shall be paid to Owner by Developer upon written demand, together with interest thereon at the Wall Street Journal Prime Rate plus five (5%) percent, or the maximum rate allowed by law, whichever is less, from the date incurred or paid by Owner until repaid. 21 22 11.6. NO WAIVER. Either party to this Agreement may waive any right or remedy it may have, or any Event of Default or Default under this Agreement by the other party, or any provision of this Agreement to the extent it benefits such waiving party; provided however, that such waiver shall not be effective against the waiving party unless it is in writing, signed by the waiving party and specifically refers to this Agreement and the right, remedy, Event of Default, Default or provision being waived. No waiver shall be deemed to be a waiver of any other matter, right, remedy, Event of Default, Default or provision other than that specified in the written notice, whether occurring earlier or later or with respect to the same or similar right, remedy, Event of Default, Default or provision that is being waived. No action or failure to take any action by a party to this Agreement will be deemed to be a waiver by such party of any right, Event of Default or Default under this Agreement. No acceptance by any party of any amount due to it pursuant to this Agreement which is less than the amount due shall be deemed to be other than acceptance of a payment on account of the amount due and no endorsement or statement accompanying or in respect of any receipt, acceptance or payment shall be deemed to be an accord and satisfaction. 11.7. REMEDIES CUMULATIVE; EQUITABLE RELIEF. All rights and remedies of the parties pursuant to this Agreement are cumulative with one another and with any other rights or remedies which may be available under applicable law, and the exercise or failure to exercise of any right or remedy shall not preclude the exercise of that right or remedy at other times or of any other right or remedy at any time. Section 12. INSURANCE. 12.1. DEVELOPER'S INSURANCE. Developer shall maintain as a Project Expense, at all times during the term of this Agreement, and for such additional periods as are hereinafter described, with insurance companies licensed to do business in Florida, with rating classifications of "A" or better and financial size category ratings of "VII" or better according to the latest addition of the A.M. Best Company Key Rating Guide, and acceptable to Owner, insurance coverages in the amounts and to the extent described in EXHIBIT "N" attached hereto and made a part hereof. Any deviation from the insurance requirements of this Section 12 (in its entirety) can only be approved in writing by Owner. This provision cannot be waived except in writing by Owner 12.2. SUBCONTRACTORS' INSURANCE. Developer shall cause all subcontractors, materialmen and other persons engaged to perform work required by Developer under to this Agreement to maintain at their expense, insurance coverages in the amounts and to the extent described in EXHIBIT "O" attached hereto and made a part hereof, and shall be required to be included in each such subcontract. Developer shall provide Owner evidence of such insurance coverages in the form and manner acceptable to Owner prior to the commencement of any work by such subcontractors. 12.3. PROFESSIONAL LIABILITY INSURANCE. Developer shall cause all architects, engineers, surveyors, consultants and other design professionals engaged by Developer to perform services for the Project to maintain, at their expense, insurance coverages in the amounts and to the extent described in EXHIBIT "P" attached hereto and made a part hereof, and 22 23 shall be required to be included in each such design professional's contract. Developer shall provide Owner evidence of such insurance coverages in the form and manner acceptable to Owner prior to the commencement of any work or the performance of any services by such professional in connection with the Project. 12.4. PROJECT INSURANCE. From the commencement of construction of the Improvements throughout the Term of this Agreement, and for such additional periods as are hereinafter described, Owner shall maintain, as a Project Expense, and with companies with rating classifications of "A" or better and financial size category ratings of "VII" or better according to the latest edition of the A.M. Best Key Rating Guide, and acceptable to Owner, "all risk" or "special form" property insurance ("completed value" form), and coverage for the perils of earth movement and earthquake, and if the Project is in a flood area, the perils of water damage, mud slide and flood. Such insurance shall include "course of construction" coverage in an amount at all times equal to the full replacement value of the Improvements and shall extend coverage for completed Improvements until such time as property coverage is provided by the purchaser. Any deductible amount under such insurance shall not exceed TWENTY FIVE THOUSAND ($25,000) DOLLARS. 12.5. INSURED INTERESTS AND ADDITIONAL INSURED. All policies of insurance required to be maintained by Developer and its Subcontractors pursuant to this Agreement, with the exception of Workers' Compensation, Employer's Liability and Automobile Liability policies, shall name Owner, any governmental entity requesting coverage and any third party lenders as additional insureds. Owner shall be provided the same extent of coverage as provided to Developer. All endorsements effecting such additional insured status shall be acceptable to Owner. 12.6. FAILURE TO MAINTAIN INSURANCE. If Developer or its subcontractors, architects, engineers, consultants or others engaged to perform work under to this Agreement fail to maintain any insurance required by this Agreement, Developer shall be liable for all losses and costs resulting from said failure. In the event Developer or any of its subcontractors fail to secure or maintain any policy of insurance required, Owner may, at its sole discretion and without obligation to do so, secure such policy of insurance in the name of and for the account of Developer, or other person or entity, and Developer shall pay the cost thereof, or Owner may offset such cost from sums otherwise due Developer. If Owner chooses to exercise this option, Developer shall cooperate fully with Owner in effecting the policy, including, but not limited to, completing or causing others to complete any required application, making contacts with the insurer and other parties on behalf of Owner and supplying any relevant information and documentation. 12.7. EVIDENCE OF INSURANCE. Prior to the execution of this Agreement, Developer shall have furnished to Owner either: (i) the original or a certified copy of each insurance policy required to be in force upon the commencement of this Agreement, bearing notations evidencing the payment of premiums and an endorsement showing the required additional insureds; or (ii) a 23 24 certificate of the insurance accompanied by an endorsement showing the required additional insureds satisfactory to Owner in substance and form, certifying the issuance and effectiveness of such policy in the amount of coverage afforded thereby and certifying that the policy shall not be canceled without thirty (30) days prior written notice to additional insureds, accompanied by a copy of such policy as soon as available, but prior to the commencement of any work on the Project by Developer or its subcontractors. Throughout the Term of this Agreement, Developer shall furnish Owner with the documentation described in the preceding sentence (i) with respect to the insurance first obtained after the date of this Agreement, within thirty (30) days after such insurance is first obtained, and (ii) evidencing renewal of all insurance required to be maintained by Developer pursuant to this Agreement not less than thirty (30) days prior to the expiration of the insurance. Owner's lack of objection to Developer's failure to provide the information as required by this Section, or to Developer's failure to comply with the insurance requirements of this Agreement, shall not constitute waiver of such requirements. Any waiver of such requirements must be in writing signed by Owner. 12.8. MUTUAL RELEASE AND WAIVER OF SUBROGATION. Owner and Developer for themselves and to the extent legally possible for them to do so, on behalf of their insurers, hereby waive and release each other from any liability for any loss or damage to the other, or loss of their property located upon the Project, which loss or damage is of the type covered by the insurance required to be maintained by it hereunder, irrespective of any negligence on the part of Owner or Developer which may have contributed to or caused such loss. Developer shall obtain for the benefit of Owner a waiver of any right of subrogation which the insurer of such insured parties may acquire against Owner by virtue of the payment of any such loss covered by such insurance. In the event that Developer is by law, statute or governmental regulation unable to obtain a waiver of the right of subrogation for the benefit of Owner, then, during any period of time when such waiver is unattainable, Developer shall be deemed not to have released any subrogated claim of its insurance carrier against Owner, and during the same period of time Developer shall be deemed not to have released the insured party who has been unable to obtain such waiver from any claims they or their insurance carriers may assert which otherwise would have been released pursuant to this Section. In the event that Developer is unable to obtain such waiver of the right of subrogation for the benefit of Owner, Developer shall, within thirty (30) days of receiving notice of such inability, give Owner written notice of such inability. To the extent commercially reasonable to do so, the parties will endeavor to use the insurance coverages provided herein to the maximum extent such coverages are applicable for any damage or loss. 12.9. RIGHT TO MODIFY INSURANCE REQUIREMENTS. Owner reserves the right from time to time to modify the insurance requirements contained in this Agreement, and to require Developer to obtain additional or more extensive coverages as may appear reasonable to Owner. Owner shall give written notice to Developer of changed requirements and Developer shall make all reasonable efforts to comply with such requirements. Section 13. WARRANTIES, REPRESENTATION AND INDEMNIFICATION 24 25 13.1. WARRANTIES FROM DEVELOPER TO PURCHASERS. Developer shall extend to the purchaser of each Residential Unit a one year express warranty on such terms and conditions as shall be reasonably approved by Owner. All warranties to the purchasers of Residential Units shall be on the warranty form attached hereto and made a part hereof as EXHIBIT "Q" with such modifications as may be approved by Owner in writing, and Developer shall not give any other warranties to such purchasers, either in separate documents or in the sales agreements for the Residential Units; provided however, that in the case of a condominium Residential Unit, Developer shall extend to the purchaser of each such Residential Unit, those warranties to be given by a Developer under the Florida Condominium Act. Developer shall provide to Owner a weekly report showing the status of all warranty claims. Developer shall remedy any defects brought to the attention of Developer within the terms and provisions of the warranty. The remedying of the defects and the performance of the obligations of Developer under the warranties shall be made in a prompt and diligent manner. Insofar as possible, and when necessary, the repair or remedy of any defect shall be commenced within three (3) days of the receipt by Developer of notice thereof and shall thereafter be diligently pursued to completion. The cost of repair or remedy of any defect shall be a Project Expense to be charged against the warranty reserve which shall have an initial balance in an amount not less than One Hundred Ninety Six Thousand Four Hundred ($196,400) Dollars ("RESIDENTIAL UNIT WARRANTY RESERVE") as established in the Full Cost Development Budget, provided that once the Warranty Reserve has been exhausted, the cost of all normal call-back and customer service work and repair of defects required to be performed by Developer pursuant to warranties given to purchasers of Residential Units shall be paid by Developer and shall not be a Project Expense. Developer shall also establish a reserve to be used to repair or remedy any and all defects in connection with the Amenities, including but not limited to, any and all club houses and other commonly used facilities by the residents of the Project ("AMENITIES RESERVE"). Insofar as possible, and when necessary, the repair or remedy of any defect in connection with the Amenities shall be commenced within three (3) days of the receipt by Developer of notice thereof and shall thereafter be diligently pursued to completion. The cost of repair or remedy of any defect shall be a Project Expense to be charged against the Amenities Reserve established in the Full Cost Development Budget, provided that once the Amenities Reserve has been exhausted, the cost of all work and repair of defects required to be performed by Developer under this Paragraph shall be paid by Developer and shall not be a Project Expense. After Owner's final accounting for the Project and distribution of any remaining funds held by Owner as Residential Unit Warranty Reserves and/or Amenities Reserve have occurred, the cost of all normal call-back and customer service work and repair of any defects shall be paid in equal shares by Developer and Owner, provided that Developer shall pay, at its sole expense, without any delay in Developer's performance, for such repairs or remedial work (i) when the cost of such work would reduce Owner's total return as shown in Section 9 or when (ii) the cost of any repairs or remedial work is attributable to Developer's breach of this Agreement, negligence or other wrongful conduct. The provisions of this Section shall not confer any rights whatsoever upon any purchaser of the Residential Units or make any such purchaser a third-party beneficiary to this Agreement. Owner shall have the right at its election to purchase from a third party warranty insurance coverage and the cost, of any such coverage shall be a Project Expense. 25 26 13.2. MAGNUSON-MOSS WARRANTY ACT AND OTHER STATUTES; NO WARRANTIES. Without limiting the application of any other provision of this Agreement, it is understood that it shall be the responsibility of Developer at its sole expense to comply with all of the requirements of the Magnuson-Moss Warranty Act and any rules promulgated thereunder, as well as all other applicable laws relating to the giving of warranties, as they may apply to the sale or other conveyance of Residential Units, fixtures and consumer goods sold in conjunction therewith including, but not limited to, any provisions relating to the presale availability of warranty terms. Also without limitation, it is further understood that it shall be the responsibility of Developer, at its sole expense, to comply with any other federal, state or local statute, ordinance, rule or regulation enacted or promulgated for the protection of consumers or persons purchasing or leasing real or personal property, as such legislation or rules apply to the sale or other conveyance of Residential Units and consumer goods sold in conjunction therewith. The parties understand that certain adverse consequences may result under the Magnuson-Moss Warranty Act and other statutes if Owner or Developer is deemed to have made an express warranty for any consumer goods sold in conjunction with the Residential Units or to have adopted an express warranty of the manufacturer. Developer shall not make or adopt any warranty and shall clearly and conspicuously disclose the same to the purchasers of the consumer goods. As used in this Agreement, "consumer goods" shall include any tangible personal property or fixtures normally used for personal, family or household purposes, including any such property which is intended to be or actually is installed in a Residential Unit. Developer shall maintain records reasonably satisfactory to Owner, documenting Developer's compliance with its responsibilities under this Section. The records shall be available for inspection by Owner, its agents or representatives at any reasonable time during normal business hours. 13.3. ASSIGNMENT OF WARRANTIES. Upon any termination of this Agreement, all warranties in which Developer may then have an interest relating to work, labor, skill or materials furnished in connection with the construction of the Improvements or development of the Project shall thereupon be deemed assigned to, and the property of, Owner without further act or consideration. This provision shall survive any termination of this Agreement. 13.4. DEVELOPER'S REPRESENTATIONS AND WARRANTIES TO OWNER. In addition to any other representations and warranties of Developer contained in this Agreement, Developer warrants and represents that the following facts are true and correct as of the date of this Agreement, and Developer's making of each request for disbursement of funds by Owner pursuant to Section 3.2 shall constitute a new representation and warranty that the following facts remain true and correct as of the date of the request, unless previously disclosed in writing by Developer to Owner. These representations and warranties, and any liability of Developer arising therefrom, shall survive any termination of this Agreement. (1). To the best of Developer's knowledge, there are no actions, suits, material claims, legal proceedings or other proceedings to which Developer is a party, pending or threatened, involving or affecting the Property or the Project or any portion thereof, at law or in equity, before any court or governmental agency, domestic or foreign. 26 27 (2). To the best of Developer's knowledge, there is no governmental authority that considers the Improvements contemplated by the Development Plan or the current or intended operation, use or ownership of the Property or Project to violate or have violated any fire, zoning, health, building code or other ordinance, law or regulation or order of any government or any agency, body or subdivision thereof, or that any investigation has been commenced or is contemplated regarding such possible violation. (3). To the best of Developer's knowledge, there are no pending or threatened proceedings in eminent domain or otherwise which would affect the Property or the Improvements or any portion thereof, nor any facts which might give rise to such actions or proceedings. (4). To the best of Developer's knowledge, there are no liens or encumbrances upon, or claims to or covenants, conditions and restrictions; easements, rights-of way or other matters affecting the Property, except as indicated in the title report and any survey delivered by Developer to Owner prior to Developer's making or remaking of this representation and warranty and except as previously disclosed in writing by Developer to Owner. (5). To the best of Developer's knowledge, there is no material adverse fact or condition relating to the Property or any portion thereof, or affecting Developer's ability to fulfill its obligations under the Agreement, which has not been specifically disclosed in writing by Developer to Owner. (6). To the best of Developer's knowledge, Developer has complied with all laws, ordinances, rules and regulations including, but not limited to, those relating to zoning, land division, building, fire, health and safety, of any governmental agency, body or subdivision thereof bearing on the construction of the Improvements or the operation, ownership or use of the Improvements or the Property. (7). To the best of Developer's knowledge, there are no contracts or other agreements for services, supplies or materials affecting the use, operation or management of the Property that Developer has not disclosed in writing to Owner. (8). Neither this Agreement nor anything provided to be done hereunder violates or shall violate any contract, agreement or instrument to which Developer is a party or which affects the Property or the Project or any part thereof. The execution, consent or acknowledgment of no other person is necessary in order to validate the execution of this Agreement by Developer or permit the consummation of the transactions contemplated herein. (9). Developer is not in default in respect to any of its obligations or liabilities under this Agreement or otherwise pertaining to the Property or the Project, nor is there any existing state of facts or circumstances or condition or event which would constitute or result in any such default upon the giving of notice or the passage of time or both. 27 28 (10). Developer has the full right and authority to enter into this Agreement and to perform all of Developer's obligations hereunder, and each of the persons signing this Agreement on behalf of Developer is authorized to do so, and the signature or consent of no other person or entity is required. (11). To the extent required by law in order to fully perform its obligations pursuant to this Agreement, Developer and/or developer's affiliates are licensed and in good standing as a real estate broker and building contractor as required under the laws of the State of Florida and, to the best of Developer's knowledge, Developer has all other licenses and is in compliance with all other laws and regulations which may affect Developer's ability to perform pursuant to this Agreement. (12). Developer has not contracted with or employed any broker, finder or agent and has not agreed to pay or otherwise incur any brokerage fee, finder's fee or commission with respect to the transaction contemplated by this Agreement, nor has Developer dealt with anyone purporting to act in the capacity of a broker or finder with respect thereto. (13). There have been no acts or omissions of Developer which would constitute a default under this Agreement. 13.5. OWNER'S LIMITED LIABILITY. Owner shall not be liable to Developer for any loss, damage, injury or claim of any kind or character to any person or property, except to the extent caused by the willful misconduct of Owner or its officers, directors, affiliates or employees, arising from or caused in connection with the development of the Property or the construction or sale or other conveyance of Residential Units. 13.6. DEVELOPER'S LIABILITY; INDEMNITY. Developer hereby indemnifies and shall defend and hold Owner harmless, its partners and their partners, members and managers, its lenders, and each of their respective officers, directors, affiliates, partners, members, managers, agents, employees, licensees, invitees and contractors against all loss, expense (including, but not limited to, attorneys' fees and court costs), damage, injury, liability, cause of action or claim of any kind or character (individually a "CLAIM" and collectively "CLAIMS") in any way arising from or caused by (i) Developer's breach of this Agreement; (ii) the gross negligent or willful misconduct of Developer, its officers, directors, employees, agents, licensees, consultants, vendors or subcontractors, or any affiliate of Developer (collectively, the "DEVELOPER PARTIES"); (iii) any defect in the Plans and Specifications, or the design or construction of, or materials used in any of the Improvements or in any machine, equipment, appliance or other item of personal property installed or located therein; (iv) any defect in soils or in the preparation of soils or in the design and accomplishment of 28 29 grading; (v) any violation or alleged violation by any of the Developer Parties of any law existing as of the date of this Agreement or hereafter enacted; (vi) any gross negligent acts or omissions or other tortious conduct of Developer or any of the Developer Parties; (vii) any accident on the Property or other casualty thereon; (viii) any representations by Developer or any of the Developer Parties not specifically approved by Owner; (ix) any other cause whatsoever in connection with Developer's use of, or activities on, the Property or Developer's performance under this Agreement; and (x) the inaccuracy or incorrectness of any representation or warranty of Developer to Owner under this Agreement. The indemnity and agreement to defend and hold harmless by Developer shall apply to any claim or action asserted by a private party or by a governmental agency or entity under any statute or case law in effect as of the date of this Agreement or hereafter including, but not limited to, any claim or action for treble or punitive damages or assessment of fine or penalty; and the indemnity and agreement to defend and hold harmless by Developer are intended to apply with respect to loss, expense, damage, injury or claim arising during the term of this Agreement or following any expiration or other termination of this Agreement, and shall survive the expiration or other termination of this Agreement. Developer hereby grants Owner a security interest in Developer's compensation in connection with the Project to secure all of Developer's obligations under this Agreement, including, but not limited to, the foregoing indemnity, and Owner shall have the right of setoff against any and all compensation payable to Developer under Section 9 hereof with respect to Developer's indemnity obligations. Developer's obligations to defend, indemnify and hold Owner harmless as described above shall be interpreted in the broadest possible manner, provided that, as to any indemnified party, said obligations shall not apply to injury, death or damage to property arising from the sole negligence or the sole willful misconduct of said indemnified party or its officers, agents, servants, or independent contractors who are directly responsible to the indemnified party, or for defects of designs furnished by such persons; but provided further that the foregoing limitations shall not apply as to any insurance required by this Agreement. If any claim is made against Owner for damages on account of injury or damage of any sort in connection with Developer's work under this Agreement, Owner shall have the right, at its option, to withhold from Developer any payments due Developer hereunder until such claim is finally settled to the satisfaction of the Owner. These obligations of Developer shall not be construed to negate, abridge, or otherwise reduce any right of indemnity or any other rights to which Owner would otherwise be entitled: 13.7. ENVIRONMENTAL REPRESENTATION, WARRANTY, AND INDEMNITY. Owner has acquired or will acquire the Property based upon Developer's representation that Developer has fully investigated the Property for any "Hazardous Substances" (as defined below). In connection therewith, Owner acknowledges receipt of an environmental study prepared by _____________________ dated _________, on behalf of Developer, a copy of which is attached hereto and made a part hereof as EXHIBIT "R" ("ENVIRONMENTAL REPORT"). Other than the information contained in the Environmental Report, Developer warrants to Owner that to the best of Developer's knowledge there are no Hazardous Substances currently existing on, in or under the Property, or that are a threat to be released onto or under the Property from sources either on the Property or off the Property, and that no above or underground storage 29 30 tanks are located on the Property. Developer hereby agrees to indemnify, defend and hold Owner, its partners and their partners, members and managers, its lenders, and each of their respective officers, directors, affiliates, partners, agents, employees, licensees, invitees, contractors, successors and assigns (collectively, the "INDEMNIFIED PARTIES") harmless from and against any and all claims, damages, liabilities, costs or expenses, including reasonable attorneys' and consultants' fees (collectively "DAMAGES") suffered or incurred by any of the Indemnified Parties as a result of (i) any Hazardous Substance existing on, in or under the Property as of the date of this Agreement; (ii) subsequently released or discharged onto, in or under the Property or Improvements from sources existing on or off the Property as of the date of this Agreement; or (iii) released or discharged, onto, in or under the Property or Improvements by Developer, contractor or any subcontractor during the course of development of the Project. The liability of Developer as set forth in the preceding sentence includes, without limitation, the cost of, or liability for, investigation, clean-up or remediation of environmental damage; any damages resulting in diminution in value or adverse effect on the marketability of the Project or any portion thereof; any fines, penalties, interest, assessments, judgments or other liabilities arising from any laws relating to Hazardous Substances; any liabilities for property damage, personal injury, injury to natural resources, and consequential damages; and any amounts expended by any of the Indemnified Parties to settle or compromise any claim or allegation of liability arising out of Hazardous Substances. As used herein, "Hazardous Substances" means (i) any chemical, compound, material, mixture or substance that is now or hereafter defined or listed in, or otherwise classified pursuant to or regulated by, any laws, regulations, rules or orders defining or listing materials as hazardous, toxic, infectious, carcinogenic or otherwise injurious to human health or the environment; (ii) asbestos; (iii) PCB's; (iv) radioactive materials; and (v) any petroleum or petro-chemical substances. These obligations shall apply regardless of fault on the part of either Developer or an Indemnified Party, whether active or passive, it being the intention of this Section that Developer is responsible for all costs and losses arising from any Hazardous Substance existing on, in or under the Property as of the date of this Agreement, or released or discharged on, in or under the Project prior to its completion, except as to materials released or discharged by Owner. Developer shall be fully responsible for removal or transportation of any Hazardous Substances found on the Project after the date of this Agreement; and shall sign any transportation manifests in its own name and not in the name of the Owner. Each of the obligations of this Section shall survive any subsequent acquisition of the Property by Owner and any termination of this Agreement. Developer hereby releases Owner from any claim (present or future, known or unknown) for contribution or indemnity arising out of any Hazardous Substances in, on or under the Project, except as to materials released or discharged by Owner. 13.8. REQUIRED INDEMNITY CLAUSE TO BE INCLUDED IN SUBCONTRACTS AND DESIGN PROFESSIONAL CONTRACTS. Developer shall include in each of its subcontracts for design and construction of the Project the language contained in EXHIBIT "S" (for design professional contracts), or EXHIBIT "T" (for construction subcontracts), as the case may be. Section 14. MISCELLANEOUS. 14.1 CONFIDENTIALITY AND RESTRICTIONS ON DISCLOSURE. Neither Owner nor Developer shall, unless Owner or Developer has obtained the prior written consent of the other, release, publish, distribute or otherwise disclose, and shall not authorize or permit any person or entity to release, publish, distribute or otherwise disclose, any information regarding the financial arrangement between Owner and Developer under this Agreement nor the market studies prepared for the Project; provided however, Developer recognizes and acknowledges that Owner is a publicly held company, and as such, is subject to certain federal and state auditing and securities laws that will require the 30 31 disclosure and dissemination of information that might otherwise not be permitted under this Paragraph. Developer specifically consents and agrees to Owner's disclosure and dissemination of the information required by federal and state law auditing and securities laws, provided that said information is disclosed and disseminated in connection said federal and state law requirements. All publicity with respect to this Agreement and Project shall be coordinated, approved and released through Owner. 14.2 ASSIGNMENT. (1). BY DEVELOPER. Developer may not encumber, assign or otherwise transfer this Agreement or any right or interest hereunder without the prior written consent of Owner, which consent shall be in Owner's sole and absolute discretion. Developer acknowledges that, in entering into this Agreement, Owner has bargained for the services specifically of Developer, and therefor, Developer agrees that Owner may for any reason in Owner's sole discretion, withhold its consent to any encumbrance, assignment or other transfer of any right, obligation or interest under this Agreement by Developer. Any encumbrances, assignments or other transfers, whether voluntary or involuntary, by operation of law, under legal process, by receivership, in bankruptcy or otherwise, without such prior written consent, shall be void and shall confer no rights whatsoever. The following shall be considered to be an assignment of this Agreement: (i) any change in control or majority voting power of Developer, and (ii) any transfer, assignment or hypothecation of any stock or interest in Developer to any person or entity that is not a stockholder or interest holder of Developer as of the date of this Agreement, in the aggregate in excess of twenty-five (25%) percent of such stock or interest as of the date of this Agreement. (2). BY OWNER. Owner may encumber, assign or otherwise transfer any right or interest under this Agreement (i) with the written consent of Developer which shall not be unreasonably withheld or (ii) without the prior written consent of Developer, if Owner remains liable for its obligations hereunder; provided, however, that Owner may be released of all its obligations hereunder and without Developer's consent encumber, assign or otherwise transfer any right or interest under this Agreement together with the sale or other transfer of the Property to an entity having a financial net worth substantially equal to or greater than that of Owner as of the date hereof or to a lender on the Project, or to a general or limited partnership in which Owner is a general partner having significant managerial responsibilities, or to a corporation in which Owner owns, directly or indirectly, a majority of the stock or to any other business entity in which Owner has significant managerial responsibilities. The foregoing provisions shall not be construed to require Owner to obtain Developer's consent to obtaining third-party financing secured by the Property and/or the Project or otherwise encumbering the Property and/or the Project. 14.3. ATTORNEYS' FEES. If any party commences an action against the other party to interpret or enforce any of the terms of this Agreement or as the result of a breach by the other party of any terms hereof, the losing (or defaulting) party will pay to the prevailing party all reasonable attorneys fees, costs and expenses incurred in connection with the prosecution or defense of such action, including those incurred in any trial, arbitration or appellate proceedings, whether or not the action is prosecuted to a final judgment. 31 32 14.4. NOTICE. All notices, requests, consents or other communications required or permitted under this Agreement will be in writing (including facsimile transmission) and will be addressed to: As to Developer: Centerline Homes at Delray, Inc. 12534 Wiles Road Coral Springs, Florida 33076 Attention: Craig Perry Facsimile: (954) 344-4176 with a copy to: Larry A. Rothenberg, P.A. 900 North Federal Highway, Suite 460 Boca Raton, Florida 33432 Facsimile: (561) 394-0571 As to Owner: OH Investments, Inc. Attn: Joseph Pivinski, Vice-President of Finance 1690 S. Congress Ave. Delray Beach, FL 33445 Fax: (561) 274-0066 Facsimile:__________________ With a copy to: Ruden, McClosky, Smith, Schuster & Russell, P.A. Attn.: Mark F. Grant, Esq. 200 East Broward Boulevard, 18th Floor Fort Lauderdale, Florida 33301 Facsimile: (954) 333-4004 With a copy to: Ruden, McClosky, Smith, Schuster & Russell, P.A. Attn.: Thomas O. Katz, Esq. 200 East Broward Boulevard, 18th Floor Fort Lauderdale, Florida 33301 Facsimile: (954) 333-4019 Each such notice will be deemed delivered (i) on the date delivered, if by personal delivery, (ii) on the date of transmission prior to 5:00 PM, if by written confirmed facsimile transmission, (iii) on the date upon which the return receipt if signed or delivery is refused or the notice is designated by postal authorities as not deliverable, as the case may be, if mailed, and (iv) on the next business day, if by a nationally recognized overnight mail courier. By giving to the other party at least fifteen (15) days written notice thereof, the parties hereto and their respective successors and assigns will have the right from time to time and at any time during the term of this Agreement to change their respective addresses and each will have the right to specify as its address any other address. 14.5. NON-COMPETE AGREEMENT. Developer shall devote its best efforts, attention and energies to the planning, development, construction and marketing of the Project as well as the planning, development, construction, marketing and sale of Residential Units comprising the Project at all times 32 33 during the Non-Competition Time Period (hereinafter defined). During the Non-Competition Time Period, Developer, Craig Perry and Stephen Margolis ("DEVELOPER PRINCIPALS") shall not, directly or indirectly, engage in, or have any interest in any person, firm, corporation, or business (whether as an employee, officer, director, agent, security holder, consultant, investor or similar position) that engages in the acquisition, development, construction, marketing, sale and/or rental of single family homes, multifamily homes, condominiums, townhomes, apartments or any other type of units to be constructed or already existing that are intended for persons the age of fifty-five (55) years or over ("COMPETING DEVELOPMENTS"): (i) in the following geographical area (a) no closer north than Okeechobee Boulevard (b) no closer east than Interstate 95, (c) no closer south than the Palm Beach County Line, and (d) no closer west than the Palm Beach County Line ("NON-COMPETE ZONE"); and, (ii) for the time period being the earlier to occur of (a) December 31, 2003, or (b) Four Hundred (400) Residential Units are under binding Sales Agreements and/or have closed ("NON-COMPETITION TIME PERIOD"). Notwithstanding anything to the contrary contained hereinabove, Developer and the Developer Principals shall be permitted during the Non-Competition Time Period to enter into and close on contracts for the acquisition of raw land within the Non-Compete Zone as well as commence the governmental approval process for any and all necessary governmental approvals, permits, licenses, consents and the like (collectively, "APPROVALS"), prior to the expiration of the Non-Competition Time Period even if the Approvals are for Competing Developments. 14.6. OTHER PROJECTS. Subject to the general provisions and restrictions set forth elsewhere in this Agreement, both Owner and Developer may acquire, develop, construct, operate and manage other real estate (or any one or more of the foregoing) on its own behalf or on behalf of any other person or entity during the term hereof. Notwithstanding the existence of this Agreement, subject to the provisions and restrictions set forth in this Agreement, Owner and Developer may engage in any activity it chooses, without having or incurring any obligation to offer any interest in such activities to the other. Subject to the provisions and restrictions set forth in this Agreement, neither this Agreement nor any activity undertaken pursuant hereto will prevent Owner or Developer from engaging in such activities or require Owner or Developer to participate in such activities of the other, and, as a material part of the consideration for Owner's and Developer's execution of this Agreement, Owner and Developer hereby waives, relinquishes and reserves any such right or claim of participation, subject to the provisions and restrictions set forth in this Agreement. Developer will not be required to spend all of its time in the performance of its duties hereunder, but rather will spend such time as is reasonably necessary to satisfy its obligations hereunder and to successfully complete the Project. Notwithstanding the foregoing, Developer shall not participate, directly or indirectly, in any project or endeavor which would materially and adversely affect the success or viability of the Project or render it unable to completely fulfill its obligations under this Agreement. 14.7. AFFILIATE TRANSACTIONS. In the performance of its duties hereunder, Developer may retain, employ or contract with or on behalf of Owner, any affiliate, subsidiary or other related person or entity for the furnishing of materials or services in connection with the Project; provided however, that the terms of any such agreement shall be (i) approved in writing in advance by 33 34 Owner, and (ii) at least as favorable to Owner as would be obtained by Developer in a comparable arm's length transaction with a person or entity other than Developer's affiliate, subsidiary or other related person or entity. 14.8. INDEPENDENT CONTRACTOR. Developer's performance of its duties hereunder will be as an independent contractor on behalf of the account of Owner. Under no circumstances will Developer be deemed an owner of the Property or Project, or to be a partner or a joint venturer with Owner in the development of the Project, under the terms hereof, nor will Owner have any obligation or liability, in tort or contract, with respect to the Property or Project, either by virtue of this Agreement or otherwise which may be directly attributed to the act or acts of Developer. In acknowledging that Developer is acquiring no rights whatsoever in the Property or Project, Developer shall not assert, in any legal action or otherwise, any right or interest in the Property or Project and will not record any lis pendens or any similar notice or lien against the Property. 14.9. GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE. This Agreement and the rights of the parties hereunder will be governed by, and interpreted in accordance with, the laws of the State of Florida and any applicable laws of the Untied States of America. Any legal action or proceeding with respect to this Agreement shall be brought in Palm Beach County, Florida, in the courts of the State of Florida or of the United States for the Southern Division of Florida, and by execution and delivery of this Agreement the parties hereby irrevocably accept for themselves and in respect of their property, generally and unconditionally, the jurisdiction of the aforesaid courts. The parties hereby irrevocably waive any objection which they may now or hereafter have to the laying of venue of any action or proceeding arising out of or in connection with this Agreement brought in the aforesaid courts and hereby further irrevocably waive and agree not to plead or claim that any such action or proceeding has been brought in an inconvenient forum. 14.10. SUCCESSORS AND ASSIGNS. Except as herein otherwise specifically provided, this Agreement will be binding upon and inure to the benefit of the parties and their successors and permitted assigns. 14.11. THIRD PARTIES. There are no third-party beneficiaries to this Agreement. 14.12. SEVERABILITY. If any provision or portion of this Agreement shall become illegal, unenforceable, invalid, null or void or against public policy for any reason, or shall be held by any court of competent jurisdiction to be illegal, unenforceable, invalid, null or void or against public policy, the legality, validity or enforceability of the remaining provisions or portions of this Agreement shall not be affected thereby. 14.13. GOOD FAITH. The parties shall endeavor in good faith to fulfill the terms of this Agreement. 14.14. EFFECTIVE DATE. The "Effective Date" of this Agreement shall be the date on which the last of the Buyer or Seller executes the same. 34 35 14.15. COUNTING OF DAYS. In the event that a date on which performance by either Buyer or Seller is to occur falls on a Saturday, Sunday or federal or state holiday, then the time for such performance shall be extended to the next business day immediately following thereafter. 14.16. COUNTERPARTS. This Agreement may be executed in several counterparts, each of which will be deemed an original but all of which will constitute one and the same instrument. 14.17. TIME OF ESSENCE. Time is of the essence as to each provision of this Agreement. 14.18. APPROVAL PROCEDURE. Owner shall notify Developer of Owner's approval or disapproval of each item submitted for Owner's approval within ten (10) business days from Owner's receipt thereof. Upon Owner's approval, one copy of each approved document bearing Owner's endorsement shall be returned to Developer. No approval shall be effective unless it is in writing and specifically refers to the matter being approved. In the event Owner fails to notify Developer of Owner's approval or disapproval of an item within a required period, Owner shall be deemed to have disapproved such item at the expiration of such period. 14.19. FURTHER ASSURANCES. Each party agrees to execute and deliver any and all additional instruments and documents and do any and all acts and things as may be necessary or expedient to more fully effectuate this Agreement and carry on the business contemplated hereunder. 14.20. EQUITABLE REMEDIES. In the event of a breach or threatened breach of this Agreement by any party, the remedy at law in favor of the other party may be inadequate and such other party, in addition to any and all other rights which may be available, will accordingly have the right of specific performance in the event of any breach, or injunction in the event of any threatened breach of this Agreement by any party. 14.21. FORCE MAJEURE. Inability of either party to commence or complete its non-monetary obligations hereunder by the dates herein required resulting from delays caused by strikes, picketing, acts of God, war, emergencies, shortages or unavailability of materials or other causes beyond either party's reasonable control which have been timely communicated to the other party, will extend the period for the performance of the obligations for the period equal to the period(s) of any such delay(s). 14.22. INCORPORATION OF EXHIBITS. All Exhibits attached to this Agreement are incorporated herein by this reference. 14.23 PROJECT RECOGNITION. Unless Developer is terminated either with or without cause, in all promotional, sales, and marketing material, Developer shall be given equal recognition with Owner for the development of the Project. Unless otherwise specifically notified by Owner to the contrary, 35 36 Developer is authorized to include all sales revenues, number of units sold, and other similar information from the Project as applicable to Developer for building industry reporting purposes. 14.24. ENTIRE AGREEMENT. This Agreement, including the Exhibits attached hereto, embodies the entire understanding between the parties, and supersedes any and all prior agreements and understandings, written or oral, formal or informal. 14.25. CAPTIONS. The captions used in this Agreement are for convenience only and are not a part of this Agreement and do not in any way limit, amplify or explain any of the provisions of this Agreement. 14.26. WAIVER OF TRIAL BY JURY. Owner and Developer hereby knowingly voluntarily and intentionally waive the right either may have to a trial by jury with respect to any litigation based on or arising out of, under or in connection with this Agreement and/or any document contemplated to be executed in conjunction herewith or any course of conduct, course of dealing, statements (whether verbal or written) or any actions of any other party to this Agreement. 14.27 DEVELOPER'S INDIVIDUAL INDEMNITY OBLIGATION. Craig Perry and Stephen Margolis, and their respective spouses, Debra Perry and Lori Margolis (together, the "DEVELOPER INDIVIDUALS") shall indemnify, defend and hold harmless Owner, its lenders and each of their respective officers, directors, affiliates, agents, employees, licensees, invitees and contractors against all "claims" (as defined in Section 13.6) which Developer is responsible for under this Agreement to the extent such claims are not fully satisfied by Developer. Developer and the Developer Individuals acknowledge that Owner shall have the right to join the Developer Individuals in any action or legal proceeding brought by Owner against Developer and to enforce the obligations of the Developer Individuals set forth herein in such action or legal proceeding, it being expressly understood and agreed that Owner will not have to wait to pursue the Developer Individuals until after a final judgement against Developer is obtained. Developer Individuals surrender any and all defenses based on principles of guaranty or suretyship law, it being the purpose and intent of this Agreement that the respective obligations of the Developer and the Developer Individuals, as such are set forth in this Agreement and subject to the conditions set forth in this Section 14.26, are absolute and unconditional under all circumstances. The provisions of this Section shall survive any termination of this Agreement. 14.28. KEY MAN INSURANCE. Owner may, but shall not be obligated to, obtain and maintain in full force and effect, life insurance policies on the life of Craig Perry and Stephen Margolis ("KEY MEN"), in such amounts as Owner, from time to time, shall deem appropriate ("KEY MAN LIFE INSURANCE POLICIES"), with the cost of the same being a Project Expense. The Key Men shall take such actions, including submitting to medical examinations, as shall be required for Owner to obtain and maintain such Key Man Life Insurance Policies. Owner shall be the sole owner of the Key Man Life Insurance Policies issued to it, and shall have the sole right in and to, with Developer have no right or claim in or to, any and all proceeds paid in connection therewith. The provisions of this Section shall survive any termination of this Agreement. 36 37 IN WITNESS WHEREOF, Owner, Developer and the Developer Individuals have executed this Agreement as of the date first above written, which date for all purposes shall be considered to be the date of this Agreement. WITNESSES OWNER: OH INVESTMENTS, INC., a Florida corporation ____________________ Signature ____________________ Printed Name By:_________________________________________ ____________________ Richard D. Levy, Chief Executive Officer Signature ____________________ Printed Name DEVELOPER: ____________________ CENTERLINE HOMES AT DELRAY, Signature INC., a Florida corporation Printed Name By:__________________________________________ ____________________ Printed Name:________________________________ Signature Title:______________________________ ____________________ Printed Name [signature pages continue on next page] 37 38 [signature page] DEVELOPER INDIVIDUALS: ____________________ Signature ____________________ Printed Name ___________________________ ____________________ Craig Perry Signature ____________________ Printed Name ____________________ Signature ____________________ Printed Name ___________________________ ____________________ Debra Perry Signature ____________________ Printed Name ____________________ Signature ____________________ Printed Name ___________________________ ____________________ Stephen Margolis Signature ____________________ Printed Name ____________________ Signature ____________________ Printed Name ___________________________ ____________________ Lori Margolis Signature ____________________ Printed Name 38 39 EXHIBIT A LEGAL DESCRIPTION 39 40 EXHIBIT B DEVELOPMENT PLAN 40 41 EXHIBIT C PROJECT SCHEDULE 41 42 EXHIBIT D FULL COST DEVELOPMENT BUDGET 42 43 EXHIBIT E CHC CONSTRUCTION CONTRACT 43 44 EXHIBIT F LIST OF CURRENT CONSULTANTS, ARCHITECTS, CONTRACTORS AND SUPPLIERS 44 45 EXHIBIT G FORM SUBCONTRACTOR CONSTRUCTION CONTRACT 45 46 EXHIBIT H FORM ADDENDUM FOR DESIGN PROFESSIONAL CONTRACTS 46 47 EXHIBIT I OWNERS INSURANCES 47 48 EXHIBIT J FORM LANGUAGE FOR DESIGN PROFESSIONAL CONTRACTS 48 49 EXHIBIT K FORM LANGUAGE FOR DESIGN-BUILD SUBCONTRACTOR CONTRACTS 49 50 EXHIBIT L FORM SALES AGREEMENT 50 51 EXHIBIT M SECTION 9.3(3) EXAMPLE 51 52 EXHIBIT N DEVELOPER INSURANCES 52 53 EXHIBIT O CONTRACTOR/SUBCONTRACTOR INSURANCES 53 54 EXHIBIT P PROFESSIONAL INSURANCES (SEE EXHIBIT H) 54 55 EXHIBIT Q RESIDENTIAL UNIT WARRANTY 55 56 EXHIBIT R ENVIRONMENTAL REPORTS 56 57 EXHIBIT S FORM LANGUAGE FOR DESIGN PROFESSIONAL CONTRACTS 57 58 EXHIBIT T FORM LANGUAGE FOR CONSTRUCTION CONTRACTS 58 EX-10.38 4 g68169ex10-38.txt MASTER LOAN AGREEMENT 1 EXHIBIT 10.38 MASTER LOAN AGREEMENT Date: As of August 8, 2000 This Master Loan Agreement (this "LOAN AGREEMENT") is made by and between OH INVESTMENTS, INC., a Florida corporation (hereinafter called "BORROWER," whether one or more), whose address is 1690 5. Congress Avenue, Suite 200, Delray Beach, Florida 33445, and GUARANTY FEDERAL BANK, F.S.B., a federal savings bank organized and existing under the laws of the United States (hereinafter called "LENDER"), whose address is 8333 Douglas Avenue, Dallas, Texas 75225, in connection with a revolving loan (hereinafter called the "LOAN"), from Lender to Borrower, for the acquisition and/or refinancing of residential lots (the "LOTS"). and the construction of single-family residences thereon (the "RESIDENCES"), and the acquisition and development of certain land located in Delray Beach, Palm Beach County, Florida consisting of four hundred twenty-nine (429) Lots in the master-planned community known as "Vizcaya" (the "ACQUISITION LAND"), together with the acquisition of fully-completed Lots comprising a portion of the Acquisition Land upon which Residences may be constructed thereon (the "INVENTORY LOTS") (the Lots, the Residences, the Acquisition Land and the Inventory Lots are hereinafter sometimes collectively called hereinafter the "PROPERTIES" and individually a "Property"), all in accordance with the terms, conditions and limitations set forth herein and the Approved Budget attached hereto as EXHIBIT B. The Properties shall be in residential subdivisions approved by Lender, as set forth in EXHIBIT A attached hereto, and incorporated herein by reference, and in additional residential subdivisions, as may hereafter be approved by Lender from time to time. The number of Residences to be constructed shall be limited and the price range of the Residences shall be as stipulated on EXHIBIT A attached hereto. The amount of Acquisition Land and the number of Inventory Lots shall be limited as stipulated on EXHIBIT A attached hereto. The Loan shall be in the amount of $26,787,200.00 (the "LOAN AMOUNT"). This Loan Agreement is a master agreement and shall govern all of the advances made under that certain Revolving Promissory Note of even date herewith (the "NOTE"), secured by one or more mortgages, from time to time executed by Borrower, for the benefit of Lender, covering certain Lots and Residences constructed or to be constructed thereon and also covering the Acquisition Land and the Inventory Lots. In connection with the Loan, Borrower and Lender hereby agree as follows: 1. NOTE, AUTHORITY, ETC. Simultaneously with the execution and delivery of this Loan Agreement, Borrower shall execute and deliver to, procure for, and deposit with and pay to Lender, the following, all in form and substance satisfactory to Lender: (a) The Note evidencing the Loan. (b) Such documents and instruments as Lender may reasonably require to evidence the status, organization or authority of Borrower and any guarantor of the Loan. (c) A Guaranty Agreement (collectively, the "GUARANTY") 2 executed by each of the guarantor(s) set forth on EXHIBIT A attached hereto and incorporated herein by reference ("GUARANTOR," whether one or more). (d) An Approved Budget, in the form attached hereto as EXHIBIT B and incorporated herein by reference. (e) Financial statements of Borrower and any Guarantor of the Loan (the "FINANCIAL STATEMENTS"). 2. REQUIREMENTS FOR FIRST ADVANCE. Prior to the first advance secured by a Mortgage (as hereinafter defined), Borrower shall execute and deliver to, procure for and deposit with and pay to Lender the following, all in form and substance satisfactory to Lender, such requirements also being applicable prior to the first advance secured by each additional Mortgage: (a) Such documents as Lender may reasonably require to evidence, govern or secure the payment of the Loan, including a mortgage (each individual mortgage is hereinafter called a "MORTGAGE", and all mortgages securing the Loan are hereinafter called the "MORTGAGES"), securing the payment of the Note and Loan and evidencing a first lien or charge on that portion of the Properties covered by the Mortgage. (b) A commitment to issue the ALTA Policy (hereafter described) effective through the date of closing, and following the recordation of the Mortgage, an ALTA loan policy of title insurance (with Florida modifications and such applicable endorsements as Lender shall reasonably require) (the "ALTA POLICY"), issued by a company or companies reasonably acceptable to Lender, agreeing to insure Lender in the aggregate amount of the Loan Allocation (hereafter defined) for each Property covered by such Mortgage (the "AGGREGATE LOAN ALLOCATION"), that such Mortgage and any other liens securing payment of the Note and Loan have the priority required by Lender. If reasonably required by Lender, the ALTA Policy shall be extended and endorsed to cover each and every advance at the time such advance is made. Provided, however, the maximum title insurance for title insurance underwriters must be not less than the amount of the Note, and if required by Lender, from time to time, Borrower shall cause to be issued to Lender an additional ALTA Policy or ALTA Policies, in such amounts and from such title insurance underwriters as are reasonably acceptable to Lender. Additionally, if required by Lender at any time, a construction escrow agreement shall be entered into by and among Borrower, Lender and the title company issuing the ALTA Policy (a "CONSTRUCTION ESCROW AGREEMENT") which, in addition to the terms of this Loan Agreement, shall also govern the process of advances made hereunder, but in no event shall the Construction Escrow Agreement replace or deem invalid or inapplicable the terms of this Loan Agreement, and the terms and conditions of such agreement shall only be in addition to the terms, requirements and conditions of this Loan Agreement governing advances. (c) Policies of all-risk builder's risk insurance on each Property covered by such Mortgage, owner's liability insurance, worker's compensation insurance, and such other insurance as Lender may 2 3 reasonably require, with standard mortgagee clauses attached naming Guaranty Federal Bank, F.S.B., 8333 Douglas Avenue, Dallas, Texas 75225, Attention: Commercial Loan Insurance Administrator, as the insured mortgagee thereunder, such policies to be issued by companies reasonably satisfactory to Lender, with copies, or certificates thereof, being delivered to Lender. (d) A representative set of plans with respect to each type or model of Residence to be constructed by Borrower on every Lot covered by such Mortgage. (e) Recorded Subdivision Plat pertaining to all Lots covered by such Mortgage, approved by all applicable governmental authorities having jurisdiction. Borrower and Lender acknowledge and agree, however, that a portion of the Property covered by the Mortgage is in the process of being replatted and a Subdivision Plat (labeled "Vizcaya, Plat No. 4) for such portion of the Property has been prepared and submitted to the applicable governmental authority for approval. Borrower shall not commence any development or construction activities on such portion of the Property, and Lender shall not be required to make any advances for the development or construction of improvements, Lots or Residences on such portion of the Property, until the Subdivision Plat applicable to such portion has been approved by Lender and the applicable governmental authority (and Borrower shall provide Lender with evidence reasonably satisfactory to Lender of such approval), and following such approval the approved Subdivision Plat shall be recorded in the public records of Palm Beach County, Florida (but such recordation shall not be a condition to Borrower's commencement of development on such portion of the Property, provided that such recordation occurs promptly after approval of the Subdivision Plat is obtained by the applicable governmental authority). (f) Appraisal of the Lot(s) and the Residence(s) to be constructed thereon (if applicable) covered by such Mortgage, which shall be ordered directly by Lender, at Borrower's expense, prepared by an appraiser satisfactory to Lender. (g) Such sums for insurance, taxes, expenses, charges and fees customarily required by Lender. (h) Loan Commitment Fee in the amount set forth on EXHIBIT A attached hereto. (i) Evidence that each Lot covered by such Mortgage is not located within any designated flood plain or special flood hazard area, or, in the alternative, flood insurance in such form and amount acceptable to Lender. (j) True, correct and complete copies of all executed Contracts of Sale (the "CONTRACTS"), for the sale of a Property, covered by such Mortgage. 3 4 (k) Inspection fee as set forth on EXHIBIT A attached hereto. (1) If and as requested by Lender, (i) evidence that all applicable zoning ordinances and restrictive covenants affecting the Property covered by such Mortgage permit the use for which the Residences to be constructed thereon are intended and have been or will be complied with, (ii) evidence of the availability of all utilities to and for the Property covered by such Mortgage, (iii) evidence that all streets providing access to the Property covered by such Mortgage have been dedicated to public use and installed and accepted by the applicable governmental authorities, (iv) an environmental site assessment report with respect to the Property covered by such Mortgage which is prepared by a qualified firm reasonably acceptable to Lender and which certifies as follows: (A) there is no evidence that any hazardous materials have been generated, treated, stored, or disposed of on any of the Property covered by such Mortgage and none exists, on, under or at such Property; (B) there is no publicly available information or records, or evidence at the Property covered by such Mortgage or visible in the surrounding community, of environmental matters that could restrict the development or use of such Property or of any high voltage transmission lines, wetlands, or hazardous material, and (v) such other information and evidence as Lender shall reasonably require relating to Borrower or such Property. (m) A detailed cost breakdown for the construction of each Residence covered by such Mortgage. This Loan Agreement, the Note, the Mortgage, the Guaranty and any other documents evidencing or securing the Loan are collectively called hereinafter the "LOAN INSTRUMENTS." 3. REQUIREMENTS FOR SUBSEQUENT ADVANCES. Prior to any subsequent advances secured by a Mortgage, Borrower shall satisfy the following requirements and, if required by Lender, deliver to Lender evidence of such satisfaction, such requirements also being applicable prior to any subsequent advances secured by each additional Mortgage: (a) All conditions precedent to the first advance shall have been satisfied. (b) Such certificates, approvals and evidence of completion, in whole or in part, of the applicable construction item described on the Approved Budget, bills and invoices as Lender may request prior to making any disbursement hereunder. (c) Building permit(s) and all other permits required with respect to the Residences covered by such Mortgage. (d) Lender may require as a condition to each advance, a bills-paid affidavit from each original contractor and subcontractor, to be submitted with each draw request. (e) A copy of the recorded notice of commencement for the Property covered by such Mortgage, together with evidence that such notice was recorded subsequent to the recording of such Mortgage. 4 5 (f) The Borrower will comply in all respects with the Florida Construction Lien Law as the same may from time to time exist, and the Lender shall not be obligated to disburse any funds to the Borrower or any other person or entity if, in the opinion of the Lender and its counsel, such disbursement would result in a violation of such law. The Borrower will cause all materials, supplies and goods to be incorporated as part of the improvements to the Property to be delivered to the Property free and clear of all liens and encumbrances so that no other party shall have an interest therein. The Borrower shall immediately notify the Lender of any and all notices to owner or claims of lien, if any, and any similar documents, served upon or received by the Borrower or its designated agent concerning the improvements to the Property. If any mechanic's lien shall be filed against any Property or the improvements thereon or any interest therein by reason of work, labor, services or materials supplied or claimed to have been supplied, or any other liens or encumbrances, other than the Mortgage, shall be recorded, filed or suffered to exist, and if any such mechanic's lien or other lien or encumbrance is not discharged or bonded off within twenty (20) days of the filing or recording thereof, then the Lender may, at its option: (i) pay and discharge such lien or encumbrance; (ii) reserve funds from the loan contemplated herein or otherwise for payment of such lien or encumbrance; or (iii) obtain a surety bond for payment of such lien or encumbrance. In such case, the sum which the Lender shall have so paid, or any other costs incurred by the Lender in connection therewith, shall be deemed an advance under the Note and shall be payable in accordance with the terms thereof (whether or not such sum or losses results in an outstanding balance greater than the original principal amount of the Note). While any such lien or encumbrance remains of record and unbonded, the Lender may withhold making any further advances hereunder. In addition, upon written notice from the Lender to the Borrower, the existence of any such lien or encumbrance beyond the twenty (20) day period noted above shall constitute an Event of Default hereunder. 4. PROCEDURE FOR ADVANCES. Advances under the Loan shall be in accordance with the following: (a) Upon Borrower's compliance with the provisions of this Loan Agreement, provided that Borrower is not in default hereunder (beyond any applicable grace or cure period), and subject to all other provisions of this Loan Agreement, Lender will advance and disburse the Loan and Borrower's Deposit (hereinafter defined) in installments to Borrower for the payment of the acquisition or refinancing costs for any Lots and/or, after actual commencement of construction hereunder, for the payment of costs of labor, materials or services for the development of the Property and the construction of the Residences for work actually done during the preceding period less retainage (if required by Lender) in accordance with the Approved Budget and this Loan Agreement. As to all advances, a residential draw request therefor shall be executed and certified to by Borrower, containing the information as set forth on EXHIBIT C attached hereto, and such other information as may be reasonably requested by Lender from time to time, and shall be accompanied by such information as Lender may reasonably request including, down-date waivers from those contractors and subcontractors to whose contract the advance is allocable. Borrower shall be entitled only to payment in the amount approved by Lender in accordance with this Loan Agreement. Borrower agrees that Lender may make advances under the Loan before receiving Borrower's executed residential draw request and Borrower acknowledges that any such advance shall be deemed to be the amount requested by Borrower in such residential draw request even though the amount reflected in such 5 6 executed residential draw request may differ from the amount of the advance made by Lender. Advances under the Loan for any particular line item shall not exceed the amount of the Loan allocated to that particular line item as provided in the Approved Budget (except to the extent provided in the following sentence), and advances under the Loan for the stage of construction of any Residence shall not exceed the percentages set forth on PAGE 2 of EXHIBIT B as part of the Approved Budget. Borrower shall not amend the Approved Budget, or otherwise reallocate loan funds from one budget line item to another, without the prior written approval of Lender; provided, however, that Borrower may reallocate loan funds for "hard costs" from one "hard cost" budget line item to another not to exceed $50,000 per line item or $100,000 in the aggregate. If requested by Lender, Borrower shall maintain a special account at a bank selected by Borrower, satisfactory to Lender, into which all advances and other payments in connection with the construction of the Residences shall be deposited by Borrower, and against which checks shall be drawn only for costs incident to the Loan and the Property. Borrower hereby agrees that Lender shall have a security interest in any such special account. Any and all advances of the Loan shall be held by Borrower in trust and applied by Borrower solely for the purposes for which the funds have been advanced. Lender shall not be obligated to monitor nor determine Borrower's use or application of any advance. (b) Any provision herein to the contrary notwithstanding, the amount of the Loan allocated to be advanced for a Property (the "LOAN ALLOCATION" or if applicable to more than one Property, the "LOAN ALLOCATIONS") shall not exceed the following: (i) With respect to the acquisition and development of the Acquisition Land, Lots and Inventory Lots, the amount of the Loan Allocation to be advanced for such purposes shall not exceed the LESSER of (A) seventy-one and four-tenths of one percent (71.4%) of the actual direct costs of such acquisition and development (which shall be inclusive of interest reserve) for such Property, as determined by Lender (the "LOAN TO COST RATIO"), or (B) seventy-five percent (75%) of the value established by Lender or by an appraisal prepared by an appraiser satisfactory to Lender and otherwise in form and substance satisfactory to Lender which is applicable to such Property (the "LOAN TO VALUE RATIO"). (ii) With respect to the construction of Residences, the amount of the Loan Allocation to be advanced for the construction of each Residence shall not exceed the LESSER of the following: 6 7 (A) the difference of (1) one hundred percent (100%) of the actual direct costs of construction of such Residence, as determined by Lender (the "LOAN TO COST RATIO"), less (2) $36,800 (which is the amount of the Loan on a per Lot basis allocated to the acquisition and development of the Acquisition Land and Lots as shown on the Approved Budget, based upon a total acquisition and development budget of $15,787,200 and a total number of 429 Lots); or (B) the difference of(1) eighty percent (80%) of the lesser of(X) the value established by Lender or by an appraisal prepared by an appraiser satisfactory to Lender and otherwise in form and substance satisfactory to Lender which is applicable to such Residence or (Y) the sales price of the Residence (the "LOAN TO VALUE RATIO"), less (2) $36,800.00. (c) Notwithstanding any other requirements contained herein, if required by Lender, the final advance under a Loan Allocation will not be made until Lender has received the following evidence and documents or such of the following evidence and documents as is requested by Lender: (1) evidence that all requirements of governmental authorities having jurisdiction have been satisfied, (2) evidence that no mechanics' or materialmen's liens or other encumbrances have been filed and remain in effect against such Lot and/or Residence thereon, (3) evidence that such Residence has been completed, and (4) final lien releases or waivers by all parties who have supplied labor, materials, or services for the construction of such Residence, or who otherwise might be entitled to claim a contractual, statutory, or constitutional lien against such Residence. (d) Anything herein or in any of the other Loan Instruments to the contrary notwithstanding, at no time shall Lender be obligated to make any advance hereunder if the outstanding balance of the Loan equals or exceeds the Loan Amount, or the loans-to-one-borrower limitation imposed upon Lender by any applicable laws, rules, and regulations of entities having jurisdiction over Lender in connection with indebtedness owing by Borrower and its affiliates to Lender (the "LOANS-TO-ONE-BORROWER LIMITATION"). (e) The Borrower acknowledges that it has participated with the Lender in establishing the structure of this transaction and that it has independently determined the amount of documentary stamp taxes, intangible personal property taxes and other taxes due in connection herewith. The Borrower has not relied upon representations of the Lender or its counsel in calculating the amount of such taxes, and the Borrower shall be liable for any additional taxes (including interest and penalties) which may be due in connection with this transaction or any renewals hereof. To the extent permitted under Florida law, Borrower hereby agrees to indemnify and hold Lender harmless for any loss, damages, penalties and all costs and expenses (including attorneys and 7 8 paralegals' fees) incurred or suffered by Lender due to the failure of Borrower to pay any Florida documentary stamp tax, intangible personal property tax or any other tax or charge whatsoever imposed by the State of Florida on the Loan or the Loan Instruments. (f) Notwithstanding anything to the contrary set forth in this Loan Agreement, the Lender shall not be obligated to disburse any sums until it has received a waiver or release of liens from all contractors, subcontractors, materialmen or others who may be entitled to a lien for work performed or materials furnished through the date of the applicable draw request (conditioned only upon payment of the amounts to be paid to such parties from the applicable requested loan advance). At the option of the Lender, final payment shall not be made until all contractors, subcontractors, materialmen and suppliers have furnished the affidavit required by Section 713.06 (3)(d), Florida Statutes, and full releases of liens have been obtained from all lienors giving notice as defined in Section 713.01(19), Florida Statutes, and from all lienors recording claims of lien. If any contractor defaults or construction is abandoned for any reason, the Borrower shall promptly take all steps required by law or by the Lender to eliminate mechanic's, supplier's or construction liens on the Property and the improvements thereon. If any claims of lien are filed and not disposed of by the Borrower within twenty (20) days of filing, the Borrower, if requested by the Lender, will appoint the Lender its attorney-in-fact for the sole purpose of recording a Notice of Contest of Lien under Section 713.22, Florida Statutes. The Lender, without incurring any liability to the Borrower or any contractor, may deposit funds with the appropriate Clerk of the Circuit Court under Section 713.24, Florida Statutes, to transfer liens to such deposit and any such deposit shall be charged against the Borrower's account in the same manner as any disbursement to it or for its account under the Note. Nothing in this paragraph and no exercise by the Lender of any rights or options provided in this paragraph, shall limit the rights, options or remedies available to the Lender under any other provision of this Loan Agreement. 5. BORROWER'S DEPOSIT. If Lender determines at any time that the unadvanced portion of the Loan will be insufficient for payment in full of (a) costs of labor, materials, and services required for the construction of the Residences, (b) other costs and expenses specified in the Approved Budget, (c) interest from time to time owing or to become owing on the Loan, (d) other costs and expenses required to be paid in connection with the construction of the Residences in accordance with any governmental requirements, and (e) other costs and expenses arising in connection with the ownership, operation, development and/or construction of the Properties, then Borrower shall, within ten (10) days of Lender's request, deposit with Lender such sums (collectively, the "BORROWER'S DEPOSIT") as Lender may deem necessary, in addition to the Loan, for the completion of the Residences, the payment of all costs in connection with the construction of the Residences, and the performance of any obligation of Borrower to Lender. Borrower hereby agrees that Lender (a) shall have a security interest in any Borrower's Deposit, and (b) may apply any proceeds of any Borrower's Deposit for the purposes contemplated herein without any further consent or action on Borrower's part. Lender shall not be required to pay 8 9 interest on the Borrower's Deposit. Lender may advance all or a portion of the Borrower's Deposit prior to any advance of any portion of the Loan proceeds. Borrower shall promptly notify Lender in writing if and when the cost of the construction of the Residences exceeds, or appears likely to exceed, the amount of the unadvanced portion of the Loan and the unadvanced portion of the Borrower's Deposit. 6. WARRANTIES, REPRESENTATIONS, COVENANTS, AND AGREEMENTS. Borrower warrants, represents, covenants and agrees as follows: (a) Prior to the closing of the Loan and the recordation of the Mortgage, Borrower shall provide Lender with any and all evidence satisfactory to Lender (including, without limitation, lien waivers, release of liens, and subordination agreements from any and all contractors, subcontractors, architects, engineers, and materialmen who have performed or who may perform any work on the Property, or who have supplied or may supply materials for the development of the Property) that there are no liens or potential lien claims for any work of any kind pertaining to the development of the Property or the construction of any of the Residences, and the ALTA Policy shall insure the priority of the lien of the Mortgage against any and all existing and potential mechanics' and materialmens' liens or claims of lien, and Borrower HEREBY DOES AND SHALL INDEMNIFY AND HOLD LENDER HARMLESS FROM AND AGAINST ANY AND ALL SUCH LIENS OR CLAIMS OF LIEN WHICH IN ANY WAY RELATE TO WORK PERFORMED OR MATERIALS SUPPLIED TO THE PROPERTY PRIOR TO OR AFTER THE DATE OF THIS LOAN AGREEMENT, and Borrower shall at all times comply with PARAGRAPHS 3(F) AND 4(F) above; and Borrower shall comply with all requirements of Chapter 713, Florida Statutes, to achieve such purpose, including, without limitation, filing a Notice of Termination for all notices of commencement having been filed of record and, following the recordation of the Mortgage, recording a Notice of Recommencement with respect to the Property covered by the Mortgage. (b) Borrower will complete actual construction of each Residence, including all necessary utility connections, substantially in accordance with the plans and specifications submitted to and approved by Lender, and in accordance with good building practice and all applicable laws, ordinances, rules, regulations and restrictions, within nine (9) months from the date of commencement of construction. After construction of a Residence has been commenced, Borrower shall diligently proceed with said construction and will not permit cessation of the work of construction for a period in excess of fifteen (15) consecutive days without the written consent of Lender except for causes beyond the reasonable control of Borrower, and then not more than thirty (30) days in any event without such consent provided that Borrower is proceeding diligently in all other respects. (c) Without the prior written consent of Lender (which consent shall not be unreasonably withheld), Borrower will make no material change in the plans and specifications submitted to Lender. (d) After a default hereunder (beyond any applicable grace or cure period) or if Lender reasonably believes that the prospect of payment of the Note or the performance of the obligations under the Loan Instruments is impaired, Lender shall have the right, but not the obligation, to disburse and directly apply the proceeds of any advance 9 10 under the Loan to the satisfaction of any of Borrower's obligations hereunder. Any advance by Lender for such purpose shall be part of the Loan and shall be secured by the Mortgages, except an advance of a Borrower's Deposit. Borrower hereby authorizes Lender to hold, use, disburse, and apply the Loan and the Borrower's Deposit for payment of costs of construction of the Residences, expenses incident to the Loan and the Property, costs of completion of all necessary off-site development of the Property, and the payment or performance of any obligation of Borrower hereunder. Borrower hereby assigns and pledges the proceeds of the Loan and Borrower's Deposit to Lender for such purposes. Lender may advance and incur such expenses as Lender deems reasonably necessary for the completion of construction of the Residences and to preserve the Property and any other security for the Loan, and such expenses, even though in excess of the amount of the Loan, shall be secured by the Mortgages, and payable to Lender upon demand. Lender may disburse any portion of any advance at anytime, and from time to time, to persons other than Borrower for the purposes specified herein irrespective of the provisions of PARAGRAPH 4 hereof, and the amount of advances to which Borrower shall thereafter be entitled shall be correspondingly reduced. (e) All advances and disbursements of the Loan and Borrower's Deposit are subject to inspection of the Residences by Lender's appraiser, and Lender at its election may require five (5) business days after receipt of notice in writing before making any advance or payment, for the purpose of making an inspection or other determination. (f) Borrower will accept advances and disbursements in accordance with the provisions hereof and, if made to Borrower, will use or cause each such disbursement to be used solely for the payment of materials, labor, services, costs and expenses incurred in connection with the construction of the Residences or for such additional costs and expenses as may be approved in writing by Lender, and in payment or performance of any obligation of Borrower to Lender, and for no other purpose. (g) Borrower will permit Lender and Lender's agents and representatives (who may be a third-party designated from time to time by Lender), at any and all times, during regular business hours, to inspect said construction and the Residences and to examine and copy all of Borrower's books and records and all contracts and bills pertaining to said construction and the Residences. If applicable, Borrower shall pay Lender at the time of each inspection of a Residence, an inspection fee in the amount provided in EXHIBIT A attached hereto, for having Lender's representative (who may be a third-party designated from time to time by Lender) inspect the Property. After a default hereunder (beyond any applicable grace or cure period), if Lender shall examine the aforesaid books and records, Borrower shall pay within ten (10) days of written demand by Lender, subject to PARAGRAPH 12 hereof, reasonable expenses incurred by Lender as a result of such examination. (h) Lender has no liability or obligation whatsoever for the Residences or the construction or completion thereof or work performed thereon, and has no obligation except to advance the Loan as herein 10 11 agreed, and is not obligated to inspect the Residences; nor is Lender liable for the performance or default of any contractor or subcontractor, or for any failure to construct, complete, protect or insure the Residences, or for the payment of any cost or expense incurred in connection therewith, or for the performance or nonperformance of any obligation of Borrower to Lender; and nothing, including without limitation any disbursement hereunder or the deposit or acceptance of any document or instrument, shall be construed as a representation or warranty, express or implied, on Lender's part. (i) In the event of any default by Borrower as defined in PARAGRAPH 10 hereof (beyond any applicable grace or cure period), Lender (in addition to any and all other remedies permitted by law) may (i) exercise any of the rights provided in the Mortgage in event of default; (ii) enter upon the Property; (iii) employ watchmen to protect the Property (including personal property located thereon) from damage, injury or loss; (iv) continue any or all existing contracts for the completion of the Residences or enter into any new, additional or substitute contracts for the completion of the Residences, either in Lender's own name or in the name of Borrower; (v) advance such of the undisbursed Loan proceeds and/or Lender's own funds as may be necessary to remedy such default, including completion of the Residences, and in such event, all such advances shall be secured by the Mortgages and by all other security for the Loan, and Borrower will pay the same, together with interest thereon at the maximum lawful rate, to Lender upon demand; and (vi) elect not to make any further advances of the undisbursed Loan proceeds, and in such event Borrower shall not be entitled to any further advances under the Loan. (j) Without the prior written consent of Lender, no materials, equipment, fixtures or any other part of the Residences shall be purchased or installed under security agreements, conditional sale contracts or lease agreements, or other arrangement wherein a security interest or title to said property is retained or the right is reserved or accrues to anyone to remove or repossess any such items or to consider them as personal property. (k) Lender may (but shall not be obligated to) commence, appear in or defend any action or proceeding purporting to affect the Property or the rights or duties of Lender or Borrower or the payment of any funds hereunder, and in connection therewith may pay all necessary expenses, including reasonable attorneys' fees, which Borrower hereby agrees to pay to Lender upon demand. Borrower hereby irrevocably appoints and authorizes Lender, as Borrower's attorney-in-fact under a power of attorney coupled with an interest, to execute, file and record any notice of completion or cessation of labor or any other notice which Lender deems necessary or advisable to protect its interest hereunder or the security for the Loan. (l) Borrower may not assign or otherwise transfer this Loan Agreement or any right hereunder, and this Loan Agreement shall be binding upon Borrower and the representatives and successors of Borrower. In the event of the termination or dissolution of Borrower prior to the completion of the Residences or prior to the use, release 11 12 or disbursement of all proceeds of the Loan and any Borrower's Deposit, this Loan Agreement shall not, at the option of Lender, be terminated or affected by such dissolution or termination. (m) [Intentionally Omitted] (n) Borrower shall promptly inform Lender of (i) any litigation against Borrower or either Guarantor or affecting the Property, which, if determined adversely, might have a material adverse effect upon the financial condition of Borrower or either Guarantor or upon the Properties, or might cause a default hereunder, (ii) any material claim or controversy which might become the subject of such litigation, and (iii) any material adverse change in the financial condition of Borrower or any Guarantor. (o) Borrower shall promptly inform Lender if any Contracts are canceled and/or materially modified or if any lending institution cancels or materially modifies its commitment to finance a prospective buyer's acquisition of a Residence. (p) As required by Lender, Borrower shall provide Lender with the following matters relating to Borrower (all in form and content satisfactory to Lender): (1) unaudited Financial Statements within sixty (60) days of Borrower's fiscal year end; (2) unaudited Financial Statements within forty-five (45) days of each calendar quarter end (if requested by Lender); and (3) sales, closings and inventory reports of Residences, acceptable to Lender, within thirty (30) days of each calendar month end, during the term of the Loan. Borrower shall also cause each Guarantor and any other party obligated for the Loan to provide Lender its Financial Statement on or before April 15 of each calendar year, or more frequently as reasonably required by Lender. All Financial Statements shall be true, correct, and complete as of the dates specified therein and fully and accurately present the financial condition of Borrower and any other party obligated for the Loan, as appropriate, as of the dates specified. Borrower represents to Lender that on the date hereof, no material adverse change has occurred in the financial condition of Borrower or, to Borrower's knowledge, any other party obligated for the Loan since the dates the initial Financial Statements of Borrower and any other party obligated for the Loan were delivered to Lender. (q) A default under any other loan from Lender to Borrower (or an affiliate of Borrower) shall constitute a default under the Loan Instruments and a default under the Loan Instruments shall constitute a default under such other loans. (r) The ALTA Policy shall insure Lender, in the amount of the Aggregate Loan Allocation for each Property covered by such Mortgage, that such Mortgage and any other liens securing the payment of the Note and Loan have the priority required by Lender. If further required by Lender, the ALTA Policy shall be extended and endorsed to cover each and every advance under such Aggregate Loan Allocation at the time such advance is made. 12 13 (s) Subject to the provisions of PARAGRAPH 16 hereof, Borrower shall cause a Property to be released from a Mortgage at such times as provided in EXHIBIT A attached hereto (the "REQUIRED RELEASE DATE"). (t) Neither Borrower nor any other party shall occupy any Residence which is covered by a Mortgage. 7. REQUIRED PRINCIPAL PAYMENTS. Borrower shall pay the principal of the Note as therein provided and as provided in EXHIBIT A attached hereto. Further, if, at any time, the outstanding balance of the Loan exceeds (1) the Loan Amount or (2) the Loans-to-One-Borrower Limitation, or if, at any time, the amount of the Loan advanced by Lender for a particular Property exceeds the Loan to Value Ratio for such Property, Borrower shall immediately pay in cash to Lender, within ten (10) days of written demand therefor, the amount of such excess. Further, after nine (9) months from the recording of a Mortgage in the Real Property Records, Lender shall have the right to obtain an appraisal of the Property covered by such Mortgage, from an appraiser satisfactory to Lender, paid for by Borrower, and in the event such appraisal determines that the portion of the Loan advanced by Lender for such Property exceeds the Loan to Value Ratio for such Property, then Borrower shall also immediately pay in cash to Lender, within ten (10) days of written demand therefor, the amount of such excess. 8. REVOLVING LOAN. All or any portion of the principal of the Loan may be borrowed, paid, prepaid, repaid and reborrowed from time to time prior to maturity in accordance with the provisions of the Loan Instruments. The excess of borrowing (advances and re-advances) over repayments shall evidence the principal balance of the Loan from time to time and at any time. The aggregate amount of all advances under the Loan may exceed the Loan Amount, but neither the outstanding principal balance of the Loan nor the outstanding aggregate amount of the Loan Allocations shall ever exceed the Loan Amount. 9. MATURITY AND EXTENSION. Notwithstanding any provision in the Note to the contrary, the Note and Loan shall mature and may be extended as provided in EXHIBIT A attached hereto. 10. DEFAULT. The term "default" as used herein shall include a breach by Borrower of any agreement, warranty, representation or covenant contained in this Loan Agreement and as may be set forth on EXHIBIT A attached hereto (beyond any grace or cure period applicable thereto as provided herein or in the other Loan Instruments), and any default or "EVENT OF DEFAULT" by Borrower under any of the Loan Instruments (beyond any grace or cure period applicable thereto as provided herein or in the other Loan Instruments). In the event of a default by Borrower (beyond any applicable grace or cure period), as aforesaid, Lender, at its election, may declare all sums owing on account of the Loan to be immediately due and payable, exercise any and all remedies provided in the Loan Instruments or otherwise at law or in equity and/or make no additional advances hereunder. No waiver of any default on the part of Borrower shall be considered a waiver of any other or subsequent default, and no delay or omission in 13 14 exercising or enforcing the rights and powers of Lender shall be construed as a waiver of such rights and powers, and likewise no exercise or enforcement of any rights or powers hereunder by Lender shall be held to exhaust such rights and powers, and every such right and power may be exercised from time to time. 11. [Intentionally Omitted] 12. LIMITATION ON INTEREST. All agreements between Borrower and Lender, whether now existing or hereafter arising and whether written or oral, are hereby limited so that in no contingency, whether by reason of acceleration of the maturity of the Note or otherwise, shall the interest contracted for, charged or received by Lender exceed the maximum amount permissible under applicable law. If, from any circumstance Lender shall ever receive anything of value deemed interest by applicable law in excess of the maximum lawful amount, an amount equal to any excessive interest shall be applied to the reduction of the principal of the Note and not to the payment of interest, or if such excessive interest exceeds the unpaid balance of principal of the Note such excess shall be refunded to Borrower. All interest paid or agreed to be paid to the holder of the Note shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full period from the date of the Note until payment in full of the principal so that the interest thereon for such full period shall not exceed the maximum amount permitted by applicable law. This paragraph shall control all agreements between Borrower and Lender. 13. CHOICE OF LAW. EXCEPT WHERE FEDERAL LAW IS APPLICABLE (INCLUDING, WITHOUT LIMITATION, ANY FEDERAL USURY CEILING OR OTHER FEDERAL LAW WHICH, FROM TIME TO TIME, IS APPLICABLE TO THE INDEBTEDNESS HEREIN AND WHICH PREEMPTS STATE USURY LAWS), THIS LOAN AGREEMENT, THE NOTE, AND THE OTHER LOAN INSTRUMENTS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA. 14. NOTICES. All notices, demands, requests, and other communications required or permitted hereunder shall be in writing and shall be deemed to have been given when presented personally, or two (2) days after being deposited in a regularly maintained receptacle for the United States Postal Service, postage prepaid, registered or certified, return receipt requested, or one (1) day after being deposited with a reputable overnight courier (such as UPS or FedEx) for next-day delivery, addressed to Borrower or Lender, as the case may be, at the respective addresses set forth on the first page of this Loan Agreement, or such other address as Borrower or Lender may from time to time designate by written notice to the other as herein required. 15. FEES AND EXPENSES. Borrower agrees to pay when due Lender's fees, as set forth herein, the reasonable attorneys' fees and expenses of Lender's counsel, title insurance and examination charges, survey costs, hazard insurance premiums, filing and recording fees, and other reasonable expenses payable to third parties incurred by Lender in connection with the consummation of the transactions contemplated by this Loan Agreement, including all renewals, extensions and modifications thereof. Further, Borrower agrees to make each payment which it owes under the Loan Instruments not later than 2:00 p.m., 14 15 Dallas, Texas time, on the date such payment becomes due and payable (or the date any voluntary prepayment is made), in immediately available funds. Any payment received by Lender after such time will be deemed to have been made on the next following business day. 16. PARTIAL RELEASES. Borrower shall have the right to obtain partial releases of the Property subject to the following terms and conditions: (a) Borrower shall not be in default hereunder or under any other of the Loan Instruments (beyond any applicable grace or cure period); (b) Borrower shall submit a prepared partial release instrument (the "PARTIAL RELEASE") in form and substance reasonably satisfactory to Lender together with a lot and block description of the Property to be released. In addition, the Partial Release should be accompanied with information necessary for Lender to process the Partial Release, including the name and address of the title insurance company, if any, to whose attention the Partial Release should be directed, numbers that reference the Partial Release (i.e., order numbers, release numbers, etc.) and the date when the Partial Release is to become effective; (c) If required by Lender, all accrued and unpaid interest on the principal amount of the Loan being prepaid shall be paid at the time such Partial Release is requested; provided that any payment received by Lender after 2:00 p.m., Dallas, Texas time, will be deemed to have been made on the next following business day; (d) Payment to Lender of an amount in cash as provided on EXHIBIT A attached hereto; (e) Payment to Lender of all reasonable costs and expenses arising in connection with any Partial Release. Notwithstanding any provision herein to the contrary, at such time as Lender provides to the title company (which is closing the sale of a Residence) a "pay-off' quote for a Residence being released from a Mortgage, in accordance with this PARAGRAPH 16, Borrower shall not be entitled to any further advances under the Loan with respect to such Residence. 17. WAIVER OF JUDICIAL PROCEDURAL MATTERS. BORROWER HEREBY EXPRESSLY AND UNCONDITIONALLY WAIVES, IN CONNECTION WITH ANY SUIT, ACTION OR PROCEEDING BROUGHT BY LENDER IN CONNECTION WITH ANY OF THE LOAN INSTRUMENTS, ANY AND EVERY RIGHT IT MAY HAVE TO (I) INJUNCTIVE RELIEF, (II) A TRIAL BY JURY (AND LENDER HEREBY ALSO WAIVES TRIAL BY JURY IN CONNECTION WITH ANY SUIT, ACTION OR PROCEEDING ARISING IN CONNECTION WITH THE LOAN INSTRUMENTS), (III) INTERPOSE ANY COUNTERCLAIM THEREIN (OTHER THAN A COMPULSORY COUNTERCLAIM) AND (IV) HAVE THE SAME CONSOLIDATED WITH ANY OTHER OR SEPARATE SUIT, ACTION OR PROCEEDING (UNLESS OTHERWISE REQUIRED BY LAW). Nothing herein contained shall prevent or prohibit 15 16 Borrower from instituting or maintaining a separate action against Lender with respect to any asserted claim. 18. HEADINGS. The Paragraph headings hereof and in the Exhibits hereto are inserted for convenience of reference only and shall not alter, define, or be used in construing the text of such Paragraphs. 19. [Intentionally Omitted] 20. LIMITATIONS AND CONDITIONS OF ADVANCES. Anything in this Loan Agreement or any other of the Loan Instruments to the contrary notwithstanding, Lender shall have no obligation to make any Advances, unless and until Lender receives evidence satisfactory to it that Borrower has contributed at least $6,500,000.00 of Borrower's own funds toward the acquisition costs of the Acquisition Land and Inventory Lots. 21. REQUIREMENTS FOR FIRST ADVANCE WITH RESPECT TO ACQUISITION LAND. Lender shall advance funds under the Loan for Acquisition Land only upon the satisfaction (in Lender's sole discretion) of the conditions to advances provided in this Loan Agreement and of the following conditions precedent: (a) The execution and delivery by Borrower and Guarantor of such documents as Lender may require to evidence, govern or secure the portion of the Loan with respect to the Acquisition Land (including, without limitation, an Acquisition and Development Loan Agreement), with such revisions thereto as may be necessary in order to conform such documents with the terms and provisions of this Loan Agreement, and satisfaction of all conditions to advances as provided in such documents. (b) Receipt and approval by Lender of such financial information, permits, budgets, plans, specifications, title commitments, surveys, contracts, estoppels, title policies, environmental reports, soils reports, utility letters, zoning letters and other due diligence matters as Lender may require. (c) No default shall then exist under the Loan Instruments. (d) The payment by Borrower of all title policy costs, Lender's attorneys' fees and all closing costs. Each and every document evidencing, governing or securing the Loan with respect to Acquisition Land shall be included in the defined term "LOAN INSTRUMENTS." 22. HOMEOWNER'S ASSOCIATION; PROXY. Borrower shall cause the homeowners' association (whether now or hereafter existing) (the "HOMEOWNER'S ASSOCIATION") to comply with the terms and provisions of the Loan Instruments with respect to matters capable of performance by it. In addition, at all times Borrower shall grant Lender an irrevocable proxy with respect to Borrower's 16 17 voting rights in the Homeowner's Association (which voting rights may be exercised by Lender only upon a default hereunder beyond any applicable grace or cure period). 23. FINAL AGREEMENT. THE LOAN INSTRUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN LENDER AND BORROWER CONCERNING THE LOAN, AND THE LOAN INSTRUMENTS MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF LENDER AND BORROWER OR ANY AGENT, BROKER, EMPLOYEE OR REPRESENTATIVE OF EITHER OF THEM. THERE ARE NO ORAL AGREEMENTS BETWEEN LENDER AND BORROWER. (The balance of this page is intentionally left blank.) 17 18 BORROWER: OH INVESTMENTS, INC., a Florida corporation By: __________________________________________ Name: Richard D. Levy Title: Chief Executive Officer (Seal) LENDER: GUARANTY FEDERAL BANK, F.S.B., a federal savings bank By: __________________________________________ Name: _______________________________ Title: _______________________________ (Seal) 18 19 EXHIBIT A TO LOAN AGREEMENT 1. Introductory Paragraph. PROPERTY LIMITATIONS. At any given time, Residences, Inventory Lots and Acquisition Land financed under the Loan shall be limited to the following numbers, unless modified by Lender in writing: Total Residences: Eighty-five (85) Specs: Twelve (12) Models: Eight (8) Inventory Lots: Four hundred twenty-nine (429) Acquisition Land: See below. Borrower may increase the number of Specs allowed above by the same number by which Borrower is short of the Models allowed above. The outstanding aggregate amount of the Loan Allocation for Acquisition Land and Inventory Lots at any time shall never exceed $15,787,200.00. The term "SPECS" means a Residence which is not a Model and is not Under Contract. The term "MODEL" means a Residence specifically utilized for the purposes of marketing other residential products. The term "UNDER CONTRACT" shall mean Residences under written contract to sell to bona fide third parties unrelated to Borrower, having no contingency or any other conditions not reasonably susceptible to being satisfied, providing for earnest money deposits of at least $500.00, and for which Lender has received preliminary loan approval from a bona fide residential permanent lender. The term "INVENTORY RESIDENCE" means any Residence which is not a Model. 2. Introductory Paragraph. APPROVED SUBDIVISIONS. The following subdivisions and any additional subdivisions approved in writing by Lender (the "APPROVED SUBDIVISIONS") are approved by Lender for the Residences and Acquisition Land: SUBDIVISION COUNTY Vizcaya Palm Beach 3. Introductory Paragraph. APPROVED PRICE RANGE. The maximum base price (being the sales price without options) for a Residence shall not exceed $225,000.00. 1 20 4. Paragraph 1(c). GUARANTOR. Guarantor of the Loan shall be, collectively: Craig S. Perry, an individual, Stephen I. Margolis, an individual, Centerline Homes, Inc., a Florida corporation, and Oriole Homes Corp., a Florida corporation. 5. Paragraph 2(h). LOAN COMMITMENT FEE. Borrower shall pay to Lender a Loan Commitment Fee of $267,872.00 ($157,872.00 for the portion of the Loan allocated to acquisition and development, and $110,000.00 for the portion of the Loan allocated to the construction of Residences, as shown on the Approved Budget). 6. Paragraphs 2(k) and 6(g). INSPECTION FEE. An inspection fee in the amount of Lender's actual expense for such inspection, shall be paid to Lender (to be withheld by Lender from Borrower's next advance under the Loan) per inspection per Property covered by such Mortgage. 7. [Intentionally Omitted] 8. [Intentionally Omitted] 9. Paragraph 6(s). REQUIRED RELEASES. None. 10. Paragraph 7. REQUIRED PRINCIPAL REDUCTIONS. None. 11. Paragraph 9. MATURITY AND EXTENSION. The maturity date of the Note shall be February 8,2003 (the "STATED MATURITY DATE"). However, provided no Event of Default then exists hereunder or under any other Loan Instrument, Lender shall extend the maturity of the Note until August 8,2003 (the "EXTENDED MATURITY Date"), upon (a) payment of an extension fee to Lender in the amount of one-half of one percent (1/2%) of the sum of the then outstanding principal balance of the Loan plus all amounts which Lender then may be obligated to advance in the future hereunder, (b) written request by Borrower to Lender on or before ninety (90) days prior to the Stated Maturity Date, (c) execution by Borrower of an agreement, in form and substance satisfactory to Lender, renewing and extending the indebtedness evidenced by the Note and the liens and security interests created by the Loan Instruments for the extension period, (d) payment of all out-of-pocket costs and expenses of extending the maturity date of the Loan, including, but not limited to the reasonable fees and actual expenses of Lender's counsel, recording costs and any endorsement to the Title Policy approved by Lender, and (e) Borrower shall have obtained a Partial Release of no less than three hundred one (301) Residences. After the Stated Maturity Date, or the Extended Maturity Date, as applicable, no additional Mortgage shall be recorded, no advances shall be made and the entire outstanding principal balance of the Note and Loan and any accrued and unpaid interest due thereon shall be fully due and payable. 2 21 12. Paragraph 10. ADDITIONAL DEFAULTS. In addition to the events of default stipulated in the Loan Instruments, it shall be a default under this Loan Agreement if Borrower and Guarantors fail to comply with any of the following: (a) The combined net worth of Craig S. Perry and Stephen I. Margolis shall at no time be less than $4,000,000.00, calculated in conformity with generally accepted accounting principles ("GAAP") (applied on a consistent basis); (b) Craig S. Perry, Stephen I. Margolis and Centerline Homes, Inc. shall at all times remain as the developer and contractor/builder in connection with, and active in the management of, the development of the Property and the construction of the Residences; provided, however, Borrower may remove Craig Perry, Stephen Margolis and Centerline Homes, Inc. from their position as developer and contractor/builder and may terminate their continuing involvement in the development of the Property and the construction of Residences only if (i) such parties engage in fraudulent activities against Borrower or the Property, or engage in other intentional misconduct which materially and adversely affects the development of the Property, and (ii) Borrower replaces such parties with a developer and contractor/builder (who undertakes active management of the Property's development) acceptable to Lender (in its sole and absolute discretion) within thirty (30) days after the date of such proposed removal (the "REPLACEMENT DATE"). If Borrower fails to comply with the foregoing, then Borrower shall be in default hereunder unless, within sixty (60) days after the Replacement Date, Borrower pays the Loan in full by obtaining third-party lender financing or otherwise. (c) At all times, Craig S. Perry and Stephen I. Margolis shall maintain at least $500,000.00 in combined "net equity," which "net equity" shall be determined as follows: the sum of (a) cash on hand, and (b) marketable securities (i.e., securities which are traded on a recognized national securities exchange, including NYSE, NASDAQ and AMEX); (d) The minimum net worth of Oriole Homes Corp. shall at no time be less than $32,500,000.00, calculated in conformity with GAAP (applied on a consistent basis). 13. Paragraph 11. ADDITIONAL LOAN COVENANTS. Borrower shall fully perform and satisfy the following "ADDITIONAL LOAN COVENANTS": None. 14. Paragraph 16(d). RELEASE PRICE. The partial release price for each Property shall consist of the following: (A) an amount in cash equal to $42,320.00 (being one hundred fifteen percent [115%] of $36,800, the amount of the Loan allocated for each Lot) (the "LOT RELEASE PRICE"), together with (B) an amount in cash equal to one hundred percent (100%) of the outstanding balance of the Loan advanced by Lender for the construction of the Residence on such Lot (the "RESIDENCE RELEASE 3 22 PRICE"). The sum of the Lot Release Price and the Residence Release Price shall together be the partial release price applicable to the release of a Property from the Mortgage. Notwithstanding the foregoing, should Borrower fail to obtain a Partial Release of at least forty-eight (48) Residences (and Lots) during any six (6) month period beginning November 30, 2000, the Partial Release price for a Property shall be an amount in cash equal to one hundred twenty-five percent (125%) of the outstanding balance of the Loan advanced by Lender for each Lot and the construction of the Residence thereon. 4 23 EXHIBIT B TO LOAN AGREEMENT APPROVED BUDGET [ATTACHED] 24 ACQUISITION & DEVELOPMENT VIZCAYA - UPJOHN, INC. OHC INVESTMENTS 08/04/2000
- -------------------------------------------------------------------------------------------------------------------------------- COST LOAN LOAN ALLOC. ITEM PER LOT BUDGET ALLOCATION PER LOT EXPOSURE EQUITY - -------------------------------------------------------------------------------------------------------------------------------- PROJECT Purchase Price of Lots and $30,082 $12,904.970 $6,404,970 $14,930 $0 $6.500,000 Lots Under Development TOTAL LAND COST $30,082 $12,904,970 $6,404,970 $14,930 $0 $6,500,000 HARD COSTS: Engineering and Architect $683 $293,007 $293,007 $683 $0 $0 Earthwork $359 $154,011 $154,011 $359 $0 $0 Sanitary Sewer $983 $421,707 $421,707 $983 $0 $0 Pavement and Curbs $1,357 $582,153 $582,153 $1,357 $0 $0 Water and Utilities $722 $309,738 $309,738 $722 $0 $0 Trenching $81 $34,749 $34,749 $81 $0 $0 Common Areas $8,100 $3,474,900 $3,474,900 $8,100 $0 $0 Guard House, Entry Monument $72 $30,888 $30,888 $72 $0 $0 Contingency 3.5% $625 $268,125 $268,125 $625 $0 $0 ---- OFF-SITE COSTS $4,960 $2,127.840 $2,127,840 $4,960 $0 $0 ---------- ---------- ------ -- -- TOTAL HARD COSTS: $17,942 $7,697,118 $7,697,118 $17,942 $0 $0 SOFT COSTS: Loan Fee $368 $157,872 $157,872 $368 $0 $0 Doc Stamp Tax $203 $87,087 $87,087 $203 $0 $0 Hearthstone Interest $0 $0 $0 $0 $0 $0 Real Estate Taxes $732 $314,028 $314,028 $732 $0 $0 Legal $24 $10,296 $10,296 $24 $0 $0 Appraisal $14 $6,006 $6,006 $14 $0 $0 Other $0 $0 $0 $0 $0 $0 Interest Expense @ 11.5% $2,587 $1,109,823 $1,109,823 $2,587 $0 $0 ------ ---------- ---------- ------ -- -- TOTAL SOFT COSTS: $3,928 $1,685,112 $1,685,112 $3,928 $0 $0 ------ ---------- ---------- ------- -- -- TOTAL COSTS: $51,952 $22,287,200 $15,787,200 $36,800 $0 $6,500,000 ------------------------------------------- ------------ ------------------------------------------------------------ CASH INJECTED AT CLOSING $6,500,000 EQUITY INJECTED DURING DEVELOPMENT $0 TOTAL SOURCES OF FUNDS $22,287,200 APPRAISAL VALUE (EST.) $21,050.000 ---------------- 70.84% 75.00% - -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- ORGINAL # OF LOTS 504 LOTS RELEASED BY JULY 3, 2000 75 REMAINING LOTS 429 TOTAL ACRES 117.00 DENSITY (LOTS PER ACRE) 3.67 LAND COST PER ACRE N/A DEVELOPMENT HARD COST PER ACRE $190,489 RELEASE PRICE $42,320 LOT RELEASE PRICE AS A PERCENTAGE OF AVERAGE LOAN PER LOT 115% ESTIMATED LOT RELEASES TO PAYOFF LOAN 383 AVERAGE OUTSTANDING BALANCE $4,750,740 AVERAGE UNFUNDED COMMITMENT $3,593,611 - --------------------------------------------------------------------------------------------------------------------------------
2 25 Draw 2-Start Up 11% Draw 3-1st Tie Beam 23% Draw 4-Interior Framed 12% Draw 5-Roughs Complete 12% Draw 6-Drywall Finished 11% Draw 7-Interior Painted, Cabinets In 12% Draw 8-Countertops, Tile Complete 4% Draw 9-Finals Complete 11% Draw 10-House Complete 4% 100% CUMULATIVE DRAW SCHEDULE Draw 1-Prestart/Fees Draw 2-Start Up 200% Draw 3-1st Tie Beam 189% Draw 4-Interior Framed 166% Draw 5-Roughs Complete 154% Draw 6-Drywall Finished 142% Draw 7-Interior Painted, Cabinets In 131% Draw 8-Countertops, Tile Complete 119% Draw 9-Finals Complete 115% Draw 10-House Completed 104% 3 26 EXHIBIT C APPLICATION FOR ADVANCE TO: Guaranty Federal Bank, F.S.B. FROM: _____________________ Date of this Application: ____________________ Loan No.: ____________________ Reference is made to the loan agreement dated _______, 2000 (and any and all amendments thereto, if any) (collectively referred to as the "AGREEMENT") between the undersigned ("BORROWER") and Guaranty Federal Bank, F.S.B. ("LENDER"). Terms that are defined in the Agreement are used herein. This Application for Advance is made pursuant to the Agreement for the sole purpose of inducing Lender to act by making an Advance of loan proceeds on the items listed in reliance upon the statements contained herein. The individual executing this Application for Advance on behalf of Borrower hereby certifies and agrees (i) that this Application for Advance is for work actually performed or delivered, and (ii) that any of the above sums which are paid and/or delivered to Borrower for the payee have or will be paid by Borrower to the person or firm entitled to said payment within ten (10) days of receipt of the Advance. The undersigned individual further acknowledges that such individual has full knowledge of all information and facts contained herein and that Borrower has authorized payment of the same. The undersigned individual has attached a copy of items of information and documentation, including invoices, canceled checks, lien waivers and other evidence as may be required by Lender for such Advance pursuant to the Agreement. The undersigned individual hereby certifies, on behalf of Borrower, that all representations and warranties contained in the Loan Instruments shall be true and correct on the date of the Advance, that only Lender approved changes have been made to the Plans and Specifications, that Lender has approved all [CHANGES IN THE CONSTRUCTION COST BREAKDOWN AND THE TOTAL PROJECT COSTS ARE SUFFICIENT TO COMPLETE THE PROJECT]. The undersigned individual represents, warrants and certifies under penalty of perjury, individually and on behalf of Borrower, that he/she has the full authority to execute this Application for Advance on behalf of Borrower and all disclosed principals and guarantors, and that this Application for Advance is true, correct and complete as of the date indicated. Borrower hereby submits this Application for Advance pursuant to the Agreement. The individual executing this Application for Advance on behalf of Borrower warrants and represents that he\she is authorized to execute and deliver this Application for Advance, and is fully cognizant of all facts and matters herein stated. Borrower understands that this Application for Advance is made for the purpose of inducing Lender to make an Advance to Borrower and that, in making any such Advance, Lender will rely upon the accuracy of the matters stated in this Application for Advance. 1 27 [INSTRUCTIONS: CHECK FIRST BOX IF ADVANCES ARE MADE BASED UPON A WIP OR BORROWING BASE REPORT; CHECK THE SECOND BOX IF ADVANCES ARE MADE BASED UPON ACTUAL COSTS INCURRED IN ACCORDANCE WITH THE BUDGET (AS AMENDED) APPROVED BY LENDER.] | | WIP or Borrowing Base 1. CURRENT BORROWING BASE. Borrower hereby represents to Lender, understanding that Lender is relying on such representation in making the Advance requested herein, that the Borrowing Base shown in the WIP Report (or borrowing base report) dated ____________ is true and correct. 2. REQUESTED AMOUNT OF ADVANCE. Borrower hereby requests an Advance in the amount of $__________ from the available to draw total of $___________________. | | Actual Costs On behalf of the Borrower, the undersigned has requested that Lender disburse to Borrower the aggregate amount of $ _______________, in connection with the project addresses described in the Check/DDA/Wire Transfer Disbursement Pre-List dated ___________________, and upon receipt of said amount declares that bills for all labor performed and materials used to date hereof, on the properties described in the Check/DDA/Wire Transfer Disbursement Pre-List dated ________________________, have been fully paid or will be paid with this Advance. Executed this ______ day of _______________, 2000. BORROWER: ______________________________________________________ a ____________________________________________________ By: _________________________________________________ Name:________________________________________ Title:_______________________________________ 2 EX-10.39 5 g68169ex10-39.txt ACQUISITION & DEVELOPMENT LOAN AGREEMENT 1 EXHIBIT 10.39 ACQUISITION AND DEVELOPMENT LOAN AGREEMENT by and between GUARANTY FEDERAL BANK, F.S.B. AND OH INVESTMENTS, INC. 2 ACQUISITION AND DEVELOPMENT LOAN AGREEMENT THIS ACQUISITION AND DEVELOPMENT LOAN AGREEMENT ("LOAN AGREEMENT") dated as of August 8, 2000, is made by and between GUARANTY FEDERAL BANK, F.S.B., a federal savings bank organized and existing under the laws of the United States ("LENDER"), whose address is 8333 Douglas Avenue, Dallas, Texas 75225, and OH INVESTMENTS, INC., a Florida corporation ("BORROWER"), whose address is 1690 S. Congress Avenue, Suite 200, Delray Beach, Florida 33445, with respect to a loan in the principal sum of FIFTEEN MILLION SEVEN HUNDRED EIGHTY-SEVEN THOUSAND TWO HUNDRED AND NO 100 DOLLARS ($15,787,200.00); and which loan is for "Acquisition Land" as described in, and constitutes a portion of, that $26,787,200.00 line of credit from Lender to Borrower (the "LINE OF CREDIT") governed by that Master Loan Agreement dated of even date herewith, executed by Lender and Borrower (the "MASTER LOAN AGREEMENT"). ARTICLE 1 DEFINITIONS For purposes of this Loan Agreement, the following terms shall have the respective meanings assigned to them. 1.1 ADVANCE: The term "ADVANCE" shall mean a disbursement by Lender of any of the proceeds of the Loan and/or the Borrower's Deposit. 1.2 AFFIDAVIT OF BORROWER: The term "AFFIDAVIT OF BORROWER" shall mean a sworn affidavit of Borrower (and such other parties as Lender may require) in form and substance satisfactory to Lender and Title Company to the effect that all statements, invoices, bills, and other expenses incident to the acquisition of the Property and the construction of the Improvements incurred to a specified date, whether or not specified in the Approved Budget, have been paid in full, except for (a) amounts retained pursuant to any Construction Contract, and (b) items to be paid from the proceeds of an Advance then being requested or in another manner satisfactory to Lender. 1.3 APPLICATION FOR ADVANCE: The term "APPLICATION FOR ADVANCE" shall mean a written application (on a form approved by Lender) by Borrower (and such other parties as Lender may require) to Lender specifying by name, current address, and amount all parties to whom Borrower is obligated for labor, materials, or services supplied for the construction of the Improvements and all other expenses incident to the Loan, the Property, and the construction of the Improvements, whether or not specified in the Approved Budget, requesting an Advance for the payment of such items, containing, if requested by Lender, an Affidavit of Borrower, accompanied by such schedules, affidavits, releases, waivers, statements, invoices, bills, and other documents as Lender may reasonably request. 1.4 APPROVED BUDGET: The term "APPROVED BUDGET" shall mean a budget or cost itemization prepared by Borrower specifying the cost by item of (a) all labor, materials, and services necessary for the construction of the Improvements in accordance with the Plans, all Governmental Requirements, and 1 3 the Purchase Agreements (if any), and (b) all other expenses anticipated by Borrower incident to the Loan, the Property, and the construction of Improvements. The Approved Budget shall be amended only with the written consent of Lender. The Approved Budget is attached hereto as Exhibit C and incorporated herein by reference. 1.5 BORROWER: The term "BORROWER" shall mean all parties named Borrower in the first paragraph of this Loan Agreement. 1.6 BORROWER'S DEPOSIT: The term "BORROWER'S DEPOSIT" shall have the meaning set forth in SECTION 4.10. 1.7 CODE: The term "CODE" shall mean the Uniform Commercial Code (as amended from time to time) as in force in the State in which the Property is located and, if different, the state of Borrower's residence. 1.8 COMPLETION DATE: The term "COMPLETION DATE" shall mean the date set forth on EXHIBIT D attached hereto. 1.9 CONSTRUCTION CONTRACT: The term "CONSTRUCTION CONTRACT" shall mean all construction contracts executed by Borrower for the construction of the Improvements, including, without limitation, contracts between Borrower and Contractor. 1.10 CONTRACTOR: The term "CONTRACTOR" shall mean the contractors, whether one or more, named in EXHIBIT D attached hereto, and such other contractors who enter into Construction Contracts for the construction of the Improvements. 1.11 DEBTOR RELIEF LAWS: The term "DEBTOR RELIEF LAWS" shall mean any applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement, insolvency, reorganization, or similar laws affecting the rights or remedies of creditors generally, as in effect from time to time. 1.12 DEVELOPED LOTS: The term "DEVELOPED LOTS" shall mean the lots, tracts or parcels of land, whether one or more, designated by lot and block on a recorded subdivision plat or map of the Property accepted by all Governmental Authorities and improved according to the Plans delivered to and approved by Lender. 1.13 ENGINEER: The term "ENGINEER" shall mean the Engineer named on EXHIBIT D attached hereto and incorporated herein by reference. 1.14 ENGINEERING CONTRACT: The term "ENGINEERING CONTRACT" shall mean a written agreement between Borrower and Engineer for engineering services pertaining to construction of the Improvements. 1.15 EVENT OF DEFAULT: The term "EVENT OF DEFAULT" shall mean the occurrence of any one of the following: 2 4 (a) Any indebtedness arising or owing under any of the Loan Instruments is not paid when due, whether by acceleration or otherwise, and such failure continues for a period of fifteen (15) days following the due date thereof. (b) Any covenant in this Loan Agreement or any of the other Loan Instruments is not fully and timely performed, or the occurrence of any default thereunder (other than the covenants involving the payment of sums described in SUBPART [A]) and such failure of performance or default is not cured within the cure period applicable thereto, if any, as provided herein or in the other Loan Instruments. (c) Any statement, representation or warranty in the Loan Instruments, any Financial Statements or any other writing delivered to Lender in connection with the Loan is false, misleading or erroneous in any material respect. (d) The cessation of the construction of the Improvements for more than fifteen (15) consecutive days without the written consent of Lender; provided, however, such fifteen (15) day period may be extended up to an additional fifteen (15) consecutive days for reasons beyond the reasonable control of Borrower or Contractor. (e) Failure of the construction of the Improvements or any materials for which an Advance has been requested to comply in all material respects with the Plans, any Governmental Requirements, or the requirements of any of the Purchase Agreements. (f) Failure of Borrower to satisfy any condition specified herein as precedent to the obligation of Lender to make an Advance after an Application for Advance has been submitted by Borrower to Lender. (g) A reasonable determination by Lender that construction of the Improvements will not be completed on or before the Completion Date. (h) Borrower, the owner of the Property (if other than Borrower), Guarantor or any person obligated to pay any part of the indebtedness arising or owing under any of the Loan Instruments: (1) generally does not pay its debts as they become due, admits in writing its inability to pay its debts or makes a general assignment for the benefit of creditors; or (2) commences any case, proceeding or other action seeking reorganization, arrangement, adjustment, liquidation, dissolution or composition of it or its debts under any Debtor Relief Laws; or (3) in any involuntary case, proceeding or other action commenced against it which seeks to have an order for relief entered against it, as debtor, or seeks reorganization, arrangement, adjustment, liquidation, dissolution or composition of it or its debts under any law relating to 3 5 bankruptcy, insolvency, reorganization or relief of debtors, (i) fails to obtain a dismissal of such case, proceeding or other action within sixty (60) days of its commencement, or (ii) converts the case from one chapter of the Federal Bankruptcy Code to another chapter, or (iii) is the subject of an order for relief; or (4) conceals, removes, or permits to be concealed or removed, any part of its property, with intent to hinder, delay or defraud its creditors or any of them, or makes or suffers a transfer of any of its property which may be fraudulent under any bankruptcy, fraudulent conveyance or similar law; or makes any transfer of its property to or for the benefit of a creditor at a time when other creditors similarly situated have not been paid; or suffers or permits, while insolvent, any creditor to obtain a lien upon any of its property through legal proceedings which is not vacated within sixty (60) days from the date thereof; or (5) has a trustee, receiver, custodian or other similar official appointed for or take possession of all or any part of the Property or any other of its property or has any court take jurisdiction of any other of its property which continues for a period of sixty (60) days (except where a shorter period is specified in the immediately following SUBPARAGRAPH [6]); or (6) fails to have discharged within a period of ten (10) days any attachment, sequestration, or similar writ levied upon any property of such person; or (7) fails to pay immediately any final money judgment against such person. (i) Title to all or any Part of the Property (other than (A) obsolete or worn personal property replaced by adequate substitutes of equal or greater value than the replaced items when new and (B) the sales of Residences [as defined in the Master Loan Agreement] pursuant to the terms of the Master Loan Agreement) shall become vested in any party other than the granting party named in the Mortgage, whether by operation of law or otherwise. Lender may, in its sole discretion, waive this Event of Default, but it shall have no obligation to do so, and any waiver may be conditioned upon such one or more of the following as Lender may require: the grantee's integrity, reputation, character, creditworthiness and management ability being satisfactory to Lender in its sole judgment, the grantee executing, prior to such sale or transfer, a written assumption agreement containing such terms as Lender may require, a principal paydown on the Note, an increase in the rate of interest payable under the Note, a transfer fee, and any other modification of the Loan Instruments which Lender may require. (j) Without the prior written consent of Lender, the owner of the Property (i) grants any encumbrance, easement or dedication, (ii) files any plat, condominium declaration or restriction relating to or affecting the Property, or (iii) includes the Property in (or initiates, requests, consents or joins any application for) any improvement or development district, unless contemplated by the Loan Instruments. 4 6 (k) Without the prior written consent of Lender (not to be unreasonably withheld or delayed), the owner of the Property enters into any lease of part or all of the Property. (1) Abandonment of the Property by its owner. (m) Lender reasonably determines that the physical condition of the Property has deteriorated. (n) The holder of any lien, security interest or assignment on the Property institutes foreclosure or other proceedings for the enforcement of its remedies thereunder. (o) An occurrence of any event or condition which results in a default in, or with notice or lapse of time could result in, the payment of any other indebtedness or performance of any other obligation of Borrower (or any affiliate of Borrower) to Lender, except where notice and opportunity to cure is required under the applicable loan instruments (including, without limitation, the Line of Credit). (p) The liquidation, termination, merger, dissolution, death or legal incapacity of Borrower, the owner of the Property (if other than Borrower), or any Guarantor (unless, with respect to the death of any guarantor, (A) a substitute guarantor acceptable to the Lender in its sole discretion replaces the deceased guarantor and/or (B) Borrower pledges additional collateral to secure the Loan in form, type and substance acceptable to Lender in its sole discretion, all within forty-five [45] days after the death of such guarantor). (q) [Intentionally Omitted] (r) The termination of any Construction Contract without Lender's prior written consent. (s) If Borrower, the owner of the Property (if other than Borrower) or Guarantor is a corporation, the sale, pledge or assignment of any shares of its stock without the prior written consent of Lender (provided, however, that such limitation shall not apply to Oriole Homes Corp.). If Borrower, the owner of the Property (if other than Borrower) or Guarantor is a partnership or joint venture, the sale, pledge or assignment of any of its general partnership or joint venture interests, or the withdrawal from or admission into it of any general partner or joint venturer without the prior written consent of Lender. (t) If any letter of credit or certificate of deposit is required to be delivered to Lender in connection with the Loan, then the failure, during the term of the Loan, to extend the expiration or maturity date of any such letter of credit or certificate of deposit as it exists from time to time and to deliver evidence thereof satisfactory to Lender, in its sole determination, at least thirty (30) days prior to such expiration or maturity date; provided, further, notwithstanding anything contained to the contrary herein or in any other of the Loan Instruments (including, without limitation, any provision hereof or thereof which may require Lender to provide Borrower, 5 7 Guarantor or any other party obligated hereunder or thereunder with any written notice prior to declaring an Event of Default), such parties shall not be entitled to receive nor shall Lender have any obligation to give any such notice if Borrower fails to perform any of its obligations under this SECTION (T) and such failure shall constitute an Event of Default under the Loan Instruments without any notification by Lender or the passage of time. (u) The occurrence of any default by Borrower under any Purchase Agreement, or the occurrence of any event or condition which, with notice or the passage of time, or both, could allow a Purchaser to terminate a Purchase Agreement, refuse to purchase any Developed Lot under any Purchase Agreement, or receive a return of any earnest money or option deposit. (v) The occurrence of any event or condition that results in any demand or request for payment and/or performance by any surety under any bond or bonds issued in connection with any set-aside letter issued by Lender with respect to the amount of the Loan available for certain construction costs. 1.16 FINANCIAL STATEMENTS: The term "FINANCIAL STATEMENTS" shall mean such balance sheets, profit and loss statements, reconciliations of capital and surplus, changes in financial condition, schedules of sources and applications of funds, operating statements with respect to the Property, and other financial information of Borrower and of Guarantor, as shall be required by Lender from time to time in accordance with the Loan Instruments, all of which shall be prepared in accordance with generally accepted accounting principles, which statements of Borrower, if required by Lender during the continuation of any Event of Default, shall be certified by an independent certified public accountant. 1.17 FINANCING STATEMENTS: The term "FINANCING STATEMENTS" shall mean the Form UCC-1 financing statements securing the Loan, to be filed with the appropriate offices for the perfection of a security interest in any of the Property. 1.18 GOVERNMENTAL AUTHORITY: The term "GOVERNMENTAL AUTHORITY" shall mean the United States, the state, the county, the city, or any other political subdivision in which the Property is located, and any other political subdivision, agency, or instrumentality exercising jurisdiction over Borrower, Guarantor, or the Property. 1.19 GOVERNMENTAL REQUIREMENTS: The term "GOVERNMENTAL REQUIREMENTS" shall mean all laws, ordinances, statutes, codes, rules, regulations, orders and decrees of any Governmental Authority applicable to Borrower, Guarantor, or the Property (including, without limitation, all laws, ordinances, statutes, codes, rules, regulations, orders, requirements and decrees relating to Hazardous Materials and relating to storm water discharge). 1.20 GUARANTOR: The term "GUARANTOR" shall mean all Guarantors (whether one or more) and, if more than one, each Guarantor individually named on EXHIBIT D attached hereto. 1.21 GUARANTY: The term "GUARANTY" shall mean a continuing guaranty executed by each Guarantor guaranteeing the payment and performance of obligations arising under the Loan Instruments. 6 8 1.22 HAZARDOUS MATERIALS: The term "Hazardous Materials" shall mean (a) any "hazardous waste" as defined by the Resource Conservation and Recovery Act of 1976 (42 U.S.C. Section 6901 et. seq.), as amended from time to time, and regulations promulgated thereunder; (b) any "hazardous substance" as defined by the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. section 9601 et. seq.), as amended from time to time, and regulations promulgated thereunder; (c) asbestos; (d) polychlorinated biphenyls; (e) any substance, the presence of which on the Property is prohibited by any Governmental Requirements; (f) any petroleum-based products; (g) underground storage tanks; and (h) any other substance which by any Governmental Requirements requires special handling in its collection, storage, treatment or disposal. 1.23 HAZARDOUS MATERIALS CONTAMINATION: The term "Hazardous Materials Contamination" shall mean the contamination (whether presently existing or hereafter occurring) of the Improvements, facilities, soil, groundwater, air or other elements on or of the Property by Hazardous Materials, or the contamination of the buildings, facilities, soil, groundwater, air or other elements on or of any other property as a result of Hazardous Materials at any time (whether before or after the date of this Loan Agreement) emanating from the Property. 1.24 IMPROVEMENTS: The term "IMPROVEMENTS" shall mean the Improvements identified on EXHIBIT D attached hereto. 1.25 INSPECTING ENGINEERS: The term "INSPECTING ENGINEERS" shall mean such employees, representatives or agents of Lender or third parties who may, from time to time, conduct inspections of the Property or offer other services related thereto. 1.26 INSURANCE POLICIES: The term "INSURANCE POLICIES" shall mean: (a) Comprehensive General Liability Insurance for owners and contractors, including blanket contractual liability, covering, among other things, products and completed operations for two (2) years after completion of Improvements, personal injury (including employees), independent contractors, explosion, collapse and underground hazards in an amount not less than $2,000,000.00 arising out of any one occurrence or in any increased amount reasonably required by Lender; (b) Comprehensive, Automobile Liability Insurance for contractors in an amount not less than $1,000,000.00 for bodily injury and $1,000,000.00 for property damage arising out of any one occurrence or in any increased amount reasonably required by Lender; (c) Workers' Compensation Insurance for contractors in an amount not less than the statutory minimum; and (d) Such other insurance as Lender reasonably may require. 7 9 All Insurance Policies shall (1) be issued by companies reasonably satisfactory to Lender and in form and substance satisfactory to Lender; (2) contain a loss payable clause naming Lender, as mortgagee, together with the standard mortgage clause in the form set forth on EXHIBIT D attached hereto; and (3) have a provision giving Lender thirty (30) days prior notice of cancellation or material change of the coverage. 1.27 LENDER: The term "LENDER" shall mean the Lender named in the first paragraph of this Loan Agreement. 1.28 LOAN: The term "LOAN" shall mean the Loan by Lender to Borrower, in the amount set forth in the first paragraph of this Loan Agreement, not to exceed, in the aggregate, the costs of labor, materials, and services supplied for the development of the Improvements, as specified in the Approved Budget, and all other expenses incident to the acquisition and development of the Property, all as specified in the Approved Budget; and which loan is for "ACQUISITION LAND" as described in the Master Loan Agreement, and constitutes a portion of the Line of Credit. 1.29 LOAN COMMITMENT FEE: The term "LOAN COMMITMENT FEE" shall mean the sum of money set forth on EXHIBIT B attached hereto, to be paid to Lender on the date hereof. 1.30 LOAN INSTRUMENTS: The term "LOAN INSTRUMENTS" shall mean this Loan Agreement, the Master Loan Agreement, the Mortgage, the Note, the Guaranty, the Financing Statements, and such other instruments evidencing, securing, governing, guaranteeing or otherwise pertaining to the Loan as shall, from time to time, be executed and/or delivered by Borrower, Guarantor. or any other party to Lender pursuant to this Loan Agreement, including, without limitation, each Affidavit of Borrower, each Application for Advance, and the Approved Budget. 1.31 LOAN MATURITY DATE: The term "LOAN MATURITY DATE" shall mean the maturity date as set forth in Paragraph 11 of Exhibit A to the Master Loan Agreement. 1.32 MORTGAGE: The term "MORTGAGE" shall mean the Mortgage securing the payment of the Note and the payment and performance of all obligations specified in the Mortgage and this Loan Agreement, and evidencing a valid and enforceable lien on the Property. 1.33 NOTE: The term "NOTE" shall mean that certain Revolving Promissory Note from Borrower to Lender dated of even date herewith in the stated amount of TWENTY SIX MILLION SEVEN HUNDRED EIGHTY SEVEN THOUSAND TWO HUNDRED AND NO/100 DOLLARS ($26,787,200), and evidencing the Line of Credit, a portion of which constitutes the Loan. 1.34 PLANS: The term "PLANS" shall mean the final working drawings and specifications for the construction of the Improvements. 1.35 PROPERTY: The term "PROPERTY" shall mean the real property described in EXHIBIT A attached hereto and incorporated herein by reference, together with the Improvements and all other property constituting the "Mortgaged Property," as described in the Mortgage. 8 10 1.36 PURCHASE AGREEMENTS: The term "PURCHASE AGREEMENTS" shall mean those agreements (if any) for the sale and purchase of Developed Lots entered into by Borrower, as more particularly identified on EXHIBIT D attached hereto and made a part hereof. 1.37 PURCHASERS: The term "PURCHASERS" shall mean those parties named as purchasers or buyers pursuant to the Purchase Agreements (if any). 1.38 PURCHASES: The term "PURCHASES" shall mean the purchase of Developed Lots by Purchasers under the Purchase Agreements (if any). 1.39 SURVEY: The term "SURVEY" shall mean a current certified survey of the Property satisfying certain requirements as set forth on EXHIBIT D attached hereto and/or a recorded plat or map of the Developed Lots, as required by Lender, which plat or map shall be approved and accepted by all Governmental Authorities having jurisdiction over any of the Property and by all utility companies whose services are required for the proposed use of the Property. 1.40 THIRD PARTY INDEBTEDNESS: The term "THIRD PARTY INDEBTEDNESS" shall mean any indebtedness or obligation now or hereafter owing by Borrower or Guarantor to any other lender or third party. 1.41 TITLE COMPANY: The term "TITLE COMPANY" shall mean the Title Company named on EXHIBIT D attached hereto. 1.42 TITLE INSURANCE: The term "TITLE INSURANCE" shall mean a title insurance policy, together with any endorsements thereto and title searches or services related thereto as Lender may require during the term of the Loan, in the amount of the Loan, insuring or committing to insure that the Mortgage constitutes a valid lien covering the Property having the priority required by Lender and subject only to those exceptions and encumbrances which Lender may approve, issued by the Title Company. ARTICLE 2 ADVANCES OF THE LOAN 2.1 COMMITMENT OF LENDER: Subject to the conditions hereof and of the Master Loan Agreement, and provided that no Event of Default shall then exist, Lender will make Advances to Borrower in accordance with this Loan Agreement and the Master Loan Agreement. 2.2 INTEREST ON THE LOAN: Interest on the Loan, at the rate specified in the Note, shall be computed on the unpaid principal balance which exists from time to time and shall be computed with respect to each Advance only from the date of such Advance. 2.3 ADVANCES: From time to time but not more frequently than as specified in EXHIBIT D hereto, Borrower shall submit an Application for Advance to Lender requesting an Advance for the payment of costs of labor, materials, 9 11 and services supplied for the construction of the Improvements or for the payment of other costs and expenses incident to the Loan, the acquisition of the property, or the construction of the Improvements, and specified in the Approved Budget. Lender may require an inspection of and an acceptable report on the Improvements by the Inspecting Engineers prior to making any Advance. Subsequent to actual commencement of construction of the Improvements, Advances for the payment of costs of labor, materials, and services supplied for the construction of the Improvements shall be made by Lender, upon compliance by Borrower with this Loan Agreement and the Master Loan Agreement, for work actually done during the preceding period. Advances for payment of costs of construction of the Improvements shall not exceed the aggregate of (a) the costs of labor, materials, and services incorporated into the Improvements in a manner acceptable to Lender, plus (b) if approved by Lender, the purchase price of all uninstalled materials to be utilized in the construction of the Improvements stored on the Property, or elsewhere with the written consent of, and in a manner acceptable to, Lender, less (c) retainage, if any, as set forth on EXHIBIT D attached hereto, and less (d) all prior Advances for payment of costs of labor, materials, and services for the construction of the Improvements, and further subject to any further limitations and provisions in the Master Loan Agreement. Each Application for Advance shall be submitted by Borrower to Lender a reasonable time (but not less than seven [7] days) prior to the date on which an Advance is desired by Borrower. Lender shall have no obligation to make the final Advance, including all retainage, if any, until Lender has received the following: (1) a completion certificate from the Inspecting Engineers, if any, (2) evidence that all Governmental Requirements have been satisfied, (3) evidence that no mechanics' or materialmen's lien or other encumbrance has been filed and remains in effect against the Property, (4) final lien releases or waivers by Engineer, Contractor, and all subcontractors, materialmen, and other parties who have supplied labor, materials, or services for the construction of the Improvements, or who otherwise might be entitled to claim a contractual, statutory, or constitutional lien against the Property, and (5) if available under local rules, the endorsement and extension of the Title Insurance to acknowledge completion of construction, without any encroachment, and compliance with all applicable matters of public record and Governmental Requirements, with no additional exception objectionable to Lender. 2.4 CONDITIONS TO THE FIRST ADVANCE: As a condition precedent to the first Advance hereunder, Borrower must satisfy the conditions set forth in Section 2 of the Master Loan Agreement and the conditions required hereby and execute and deliver to, procure for and deposit with, and pay to Lender, and if appropriate, record in the proper records with all filing and recording fees paid, the documents, certificates, and other items described in EXHIBIT B attached hereto and incorporated herein by reference, together with such other documents, instruments, and certificates as Lender may reasonably require from time to time. In addition, as a condition precedent to the first Advance for labor, materials, or construction services (whether or not it is the first Advance), Borrower and each original Contractor shall have jointly executed and recorded with the county clerk of the county in which the Property is situated an affidavit or notice of commencement of work, in form and substance approved by Lender, which contains the information required by Chapter 713, Florida Statutes, provided further that the date of commencement of work specified in such affidavit shall be subsequent to the date of recordation of the Mortgage. Such affidavit shall be executed and recorded after the date the work actually commenced, but not later than the 30th day thereafter. 10 12 2.5 CONDITIONS TO SUBSEQUENT ADVANCES: As a condition precedent to each Advance, in addition to all other requirements herein, Borrower must satisfy the following requirements and, if required by Lender, deliver to Lender evidence of such satisfaction: (a) All conditions precedent to the first Advance shall have been satisfied; (b) There shall then exist no Event of Default; (c) The representations and warranties made in this Loan Agreement shall be true and correct on and as of the date of each Advance, with the same effect as if made on that date; (d) At Lender's election, a bills-paid affidavit may be required from each original contractor and subcontractor to be submitted with each Application for Advance; (e) Borrower will procure and deliver to Lender, if required by Lender, releases or waivers of mechanics' liens, or with respect to matters which are contested pursuant to SECTION 4.22 evidence of compliance with the requirements of SECTION 4.22, and receipted bills showing payment through a date not earlier than the date of the immediately preceding Advance of all parties who have furnished materials or services or performed labor of any kind in connection with the construction of any of the Improvements; (f) The Title Insurance shall be endorsed and extended in form and substance satisfactory to Lender, if available under local rules, to cover each Advance with no additional title exception objectionable to Lender; and (g) All other conditions to advances as set forth in the Master Loan Agreement shall be satisfied. 2.6 REALLOCATION OF APPROVED BUDGET: Lender reserves the right to make Advances which are allocated to any of the designated items in the Approved Budget for such other purposes or in such different proportions as Lender may, in its sole discretion, deem necessary or advisable. Borrower may not reallocate items of cost or change the Approved Budget without the prior written consent of Lender (subject, however, to Section 4(a) of the Master Loan Agreement). 2.7 NO WAIVER: No Advance shall constitute a waiver of any condition precedent to the obligation of Lender to make any further Advance or preclude Lender from thereafter declaring the failure of Borrower to satisfy such condition precedent to be an Event of Default. 2.8 CONDITIONS PRECEDENT FOR THE BENEFIT OF LENDER: All conditions precedent to the obligation of Lender to make any Advance are imposed hereby solely for the benefit of Lender, and no other party may require satisfaction of any such condition precedent or be entitled to assume that Lender will refuse to 11 13 make any Advance in the absence of strict compliance with such conditions precedent. All requirements of this Loan Agreement may be waived by Lender, in whole or in part, at any time. 2.9 SUBORDINATION: Lender shall not be obligated to make, nor shall Borrower be entitled to, any Advance until such time as Lender shall have received, to the extent requested by Lender, subordination agreements from Engineer, Contractor, and all other persons furnishing labor, materials, or services for the design or construction of the Improvements, subordinating to the lien of the Mortgage any lien, claim, or charge they may have against Borrower or the Property. ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF BORROWER Borrower hereby represents and warrants as follows: 3.1 FINANCIAL STATEMENTS: The Financial Statements are true, correct, and complete in all material respects as of the dates specified therein and fully and accurately present the financial condition of Borrower and, if required and to Borrower's knowledge, of Guarantor as of the dates specified. No material adverse change has occurred in the financial condition of Borrower or, to Borrower's knowledge, of Guarantor since the dates of the Financial Statements. 3.2 SUITS, ACTIONS, ETC.: There are no conditions, circumstances, events, agreements, or material actions, suits, or proceedings pending or to the knowledge of Borrower threatened in any court or before or by any Governmental Authority against or affecting Borrower, Guarantor, or the Property, or involving the validity, enforceability, or priority of any of the Loan Instruments, at law or in equity. The consummation of the transactions contemplated hereby, and the performance of any of the terms and conditions hereof and of the other Loan Instruments, will not result in a breach of, or constitute a default in, any mortgage, deed of trust, lease, promissory note, loan agreement, credit agreement, partnership agreement, or other agreement to which Borrower or, to Borrower's knowledge, Guarantor is a party or by which Borrower or, to Borrower's knowledge, Guarantor may be bound or affected. Neither Borrower nor, to Borrower's knowledge, any Guarantor is in default under any Governmental Requirements. 3.3 VALID AND BINDING OBLIGATION: All of the Loan Instruments, and all other documents referred to herein to which Borrower or, to Borrower's knowledge, Guarantor is a party, upon execution and delivery will constitute duly authorized, valid and binding obligations of Borrower and, to Borrower's knowledge, of Guarantor, enforceable in accordance with their terms except as limited by Debtor Relief Laws. No basis presently exists for any claims against Lender under the Loan Instruments and enforcement of the Loan Instruments is subject to no defenses. 3.4 TITLE TO THE PROPERTY: Borrower holds, or prior to the first Advance will hold, full legal and equitable title to the Property subject only to title exceptions set forth in the Title Insurance. 12 14 3.5 [Intentionally Omitted] 3.6 INTERSTATE LAND SALES ACT: Borrower's development of the Property and the sale or lease of the Property by Borrower are exempt (and shall remain exempt) from the registration and any requirements of the Interstate Land Sales Full Disclosure Act and the Florida Land Sales Practices Act and the regulations promulgated thereunder. 3.7 DISCLOSURE: There is no fact known to Borrower that Borrower or, to Borrower's knowledge, Guarantor has not disclosed to Lender in writing that could materially adversely affect the property, business or financial condition of Borrower, Guarantor or the Property. 3.8 COMPLIANCE WITH ENVIRONMENTAL REQUIREMENTS; NO HAZARDOUS MATERIALS: (a) To the best of Borrower's knowledge, no Hazardous Materials are located on the Property or have been released into the environment, or deposited, discharged, placed or disposed of at, on, under or near the Property. To the best of Borrower's knowledge, no portion of the Property is being used or has ever been used at any previous time, for the disposal, storage, treatment, processing or other handling of Hazardous Materials and the Property is not affected by any Hazardous Materials Contamination. (b) To the best of Borrower's knowledge, no Hazardous Materials are located in the vicinity of the Property, no property adjoining the Property is being used or has ever been used for the disposal, storage, treatment, processing or other handling of Hazardous Materials, and any other property adjoining the Property is not affected by Hazardous Materials Contamination. (c) To the best of Borrower's knowledge, no asbestos or asbestos containing materials have been installed, used, incorporated into, or disposed of on the Property. (d) To the best of Borrower's knowledge, no polychlorinated biphenyls are located on or in the Property, in the form of electrical transformers, fluorescent light fixtures with ballasts, cooling oils, or any other device or form. (e) To the best of Borrower's knowledge, no underground storage tanks are located on the Property or were located on the Property and subsequently removed or filled. (f) To the best of Borrower's knowledge, no investigation, administrative order or notice, consent order and agreement, litigation or settlement with respect to Hazardous Materials or Hazardous Materials Contamination is proposed, threatened, anticipated or in existence with respect to the Property: To the best of Borrower's knowledge, the Property and its existing and prior uses comply and at all times have complied with any applicable Governmental Requirements relating to environmental matters or Hazardous Materials. To the best of Borrower's knowledge, there is no condition on the Property which is in violation of any applicable Governmental Requirements relating to 13 15 Hazardous Materials, and Borrower has received no communication from or on behalf of any Governmental Authority that any such condition exists. To the best of Borrower's knowledge, the Property is not currently on and after diligent investigation and inquiry, has never been on any federal or state "Superfund" or "Superlien" list, and Borrower is not aware that the Property is anticipated or threatened to be placed on such list. (g) All representations and warranties contained in this Section shall survive the consummation of the transactions contemplated in this Loan Agreement. Notwithstanding that the foregoing warranties and representations are "to the best of Borrower's knowledge," the existence of any of the foregoing at any time during the term of the Loan shall, at Lender's option, constitute an Event of Default hereunder and under any other of the Loan Instruments. 3.9 INDUCEMENT TO LENDER: The representations and warranties contained in the Loan Instruments are made by Borrower and Guarantor as an inducement to Lender to make the Loan and Borrower and Guarantor understand that Lender is relying on such representations and warranties and that such representations and warranties shall remain true and correct so long as any part of the Loan remains outstanding and shall survive any (a) bankruptcy, insolvency, receivership or other proceedings arising under any Debtor Relief Laws involving Borrower, Guarantor or the Property, (b) foreclosure of the Mortgage, or (c) conveyance of title to the Property in lieu of foreclosure of the Mortgage. 3.10 SUBMITTALS: The Loan Instruments and all financial statements, budgets, schedules, opinions, certificates, confirmations, Contractors' statements, applications, rent rolls, affidavits, agreements, any Construction Contract, any Engineering Contract, any Plans and other materials submitted to Lender in connection with or in furtherance of the Loan Instruments by or on behalf of Borrower, any Guarantor or any third party, fully and fairly state the matters with which they purport to deal, and neither misstate any material fact nor, separately or in the aggregate, fail to state any material fact necessary to make the statements made not misleading. 3.11 UTILITY AVAILABILITY: Subject only to payment of fees to be paid from the Approved Budget, all utility and municipal services required for the construction, occupancy and operation of the Improvements, including, but not limited to, water supply, storm and sanitary sewer systems, gas, electric and telephone facilities are available for use and tap-on at the boundaries of the Property or will be available when constructed or installed as part of the Improvements, and written permission has been or will be obtained from the applicable utility companies or municipalities to connect the Improvements into each of said services. 3.12 SYSTEM COMPLIANCE: The storm and sanitary sewer system, water system and all mechanical systems of the Property do (or when constructed will) comply with all applicable environmental, pollution control and ecological laws, ordinances, rules and regulations, and the applicable environmental protection agency, pollution control board and/or other Governmental Authorities having jurisdiction of the Property have issued or will issue their permits for the construction, tap-on and operation of those systems. 14 16 3.13 NO DEFAULT: No default, and no circumstances or events which with the passing of time or giving of notice, or both, would constitute a default, presently exists under any of the Loan Instruments. ARTICLE 4 COVENANTS AND AGREEMENTS OF BORROWER Borrower hereby covenants and agrees as follows: 4.1 COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS: Borrower shall timely comply with all Governmental Requirements and deliver to Lender evidence thereof. Borrower assumes full responsibility for the compliance of the Plans and the Property with all Governmental Requirements and with sound building and engineering practices and, notwithstanding any approvals by Lender, Lender shall have no obligation or responsibility whatsoever for the Plans or any other matter incident to the Property or the construction of the Improvements. Upon receipt by Borrower of any notice from a Governmental Authority of non-compliance with any Governmental Requirements, Borrower shall promptly provide Lender with notice thereof. 4.2 CONSTRUCTION CONTRACT: Borrower shall become party to no contract, including any Construction Contract, for the performance of any work on the Property or for the supplying of any labor, materials, or services for the construction of the Improvements except upon such terms and with such parties as shall be reasonably approved in writing by Lender. Any Construction Contract shall provide that all liens and security interests of the Contractor are subordinate to the Mortgage and that the Contractor waives any right to remove removable improvements and shall require all subcontracts and purchase orders to contain a provision subordinating the subcontractors' and materialmen's liens and security interests to the Mortgage and waiving any right to remove removable improvements. Any Construction Contract shall also provide that no change order shall be effective without the prior written approval of Lender except for nonstructural changes which do not change the cost of construction by more than $25,000.00 as to any one change or $50,000.00 in the aggregate; provided, further, no change order shall be effective until the consent of all Governmental Authorities required to be obtained is obtained. No approval by Lender of any Construction Contract or change order shall make Lender responsible for the adequacy, form, or content of such Construction Contract or change order. Borrower will not suffer or permit any breach or default to occur in any of the obligations of Borrower under any Construction Contract nor suffer or permit the same to terminate by reason of any failure of Borrower to meet any requirement thereof including those with respect to any time limitation within which the Improvements are to be completed and available for occupancy; Borrower will keep all Construction Contracts in full force and effect and promptly notify the Lender of any default thereunder; Borrower will comply with all conditions of all Construction Contracts and will execute all documents necessary for the consummation of the transactions contemplated thereby. 4.3 CONSTRUCTION OF THE IMPROVEMENTS: Borrower shall commence construction of the Improvements within thirty (30) days from the date hereof, and the construction of the Improvements shall be prosecuted with diligence and continuity, in a good and workmanlike manner, and in accordance with sound 15 17 building and engineering practices, all applicable Governmental Requirements, the Plans, and the requirements of any Purchase Agreement. Borrower shall complete construction of the Improvements on or before the Completion Date, free and clear of all liens or claims of any person or entity that could result in the filing of any lien (except those, if any, for which Borrower has furnished a bond or other security in compliance with SECTION 4.22 hereof), and shall not permit cessation of work for a period in excess of fifteen (15) consecutive days without the prior written consent of Lender, except for causes beyond the reasonable control of Borrower or Contractor, and then not more than fifteen (15) additional consecutive days in any event without such consent provided that Borrower is proceeding diligently in all other respects. 4.4 CORRECTION OF DEFECTS: Borrower shall correct or cause to be corrected (a) any material defect in the Improvements, (b) any material departure in the construction of the Improvements from the Plans, the Governmental Requirements, or the requirements of any Purchase Agreement, or (c) any encroachment by any part of the Improvements or any other structure located on the Property on any building line, easement, property line, or restricted area. 4.5 STORAGE OF MATERIALS: Borrower shall cause all materials supplied for, or intended to be utilized in, the construction of the Improvements, but not affixed to or incorporated into the Improvements or the Property, to be stored on the Property or at such other location as may be reasonably approved by Lender in writing, with adequate safeguards as required by Lender, to prevent loss, theft, damage, or commingling with other materials or projects. 4.6 INSPECTION OF THE PROPERTY: Borrower shall permit Lender, the Inspecting Engineer and any Governmental Authority, and their agents and representatives, to enter upon the Property and any location where materials intended to be utilized in the construction of the Improvements are stored for the purpose of inspection of the Property and such materials at all reasonable times. 4.7 NOTICES BY GOVERNMENTAL AUTHORITY, CASUALTY, CONDEMNATION: Borrower shall timely comply with and promptly furnish to Lender within five (5) days true and complete copies of any notice or claim by any Governmental Authority pertaining to the Property. Borrower shall promptly notify Lender of any fire or other casualty or any notice of taking or eminent domain action or proceeding affecting the Property. 4.8 SPECIAL ACCOUNT: Borrower shall maintain a special account at a bank selected by Borrower, reasonably satisfactory to Lender, into which all Advances and any other amounts or payments arising in connection with the ownership and operation of the Property, excluding direct disbursements made by Lender pursuant to SECTION 4.11 hereof, shall be deposited by Borrower, and against which checks shall be drawn only for the payment of (a) costs of labor, materials, and services supplied for the construction of the Improvements specified in the Approved Budget, and (b) other costs and expenses incident to the Loan, the Property, and the construction of the Improvements specified in the Approved Budget. 16 18 4.9 APPLICATION OF ADVANCES: Borrower shall disburse all Advances for payment of costs and expenses specified in the Approved Budget, and for no other purpose. 4.10 BORROWER'S DEPOSIT: If Lender reasonably determines at any time that the unadvanced portion of the Loan will be insufficient for payment in full of (a) costs of labor, materials, and services required for the construction of the Improvements, (b) other costs and expenses specified in the Approved Budget, (c) interest from time to time owing or to become owing on the Loan, (d) other costs and expenses required to be paid in connection with the construction of the Improvements in accordance with the Plans and any Governmental Requirements, and (e) other costs and expenses arising in connection with the ownership, operation, development and/or construction of the Property, then Borrower shall, within ten (10) days of Lender's written request, deposit with Lender such sums (collectively, the "BORROWER'S DEPOSIT") as Lender may deem reasonably necessary, in addition to the Loan, for the completion of the Improvements, the payment of all costs in connection with the construction of the Improvements, and the performance of any obligation of Borrower to Lender. Borrower hereby agrees that Lender (a) shall have a security interest in any Borrower's Deposit, and (b) may apply any proceeds of any Borrower's Deposit for the purposes contemplated herein without any further consent or action on Borrower's part. Lender shall not be required to pay interest on such Borrower's Deposit. Lender may advance all or a portion of the Borrower's Deposit prior to any portion of the Loan proceeds. Borrower shall promptly notify Lender in writing if and when the cost of the construction of the Improvements exceeds, or appears likely to exceed, the amount of the unadvanced portion of the Loan and the unadvanced portion of the Borrower's Deposit. 4.11 DIRECT DISBURSEMENT AND APPLICATION BY LENDER: Lender shall have the right, but not the obligation, to disburse and directly apply the proceeds of any Advance to the satisfaction of any of Borrower's obligations hereunder or under any other of the Loan Instruments. Any Advance by Lender for such purpose. except Borrower's Deposit, shall be part of the Loan and shall be secured by the Loan Instruments. Borrower hereby authorizes Lender to hold, use, disburse, and apply the Loan and the Borrower's Deposit for payment of costs of construction of the Improvements, expenses incident to the Loan and the Property, and the payment or performance of any obligation of Borrower hereunder or under any other of the Loan Instruments. Borrower hereby assigns and pledges the proceeds of the Loan and the Borrower's Deposit to Lender for such purposes. Lender may advance and incur such expenses as Lender deems necessary for the completion of construction of the Improvements and to preserve the Property, the Purchase Agreements (if any), and any other security for the Loan, and such expenses, even though in excess of the amount of the Loan, shall be secured by the Loan Instruments, and payable to Lender upon demand. Lender may disburse any portion of any Advance at any time, and from time to time, to persons other than Borrower for the purposes specified in this SECTION 4.11 irrespective of the provisions of SECTION 2.3 hereof, and the amount of Advances to which Borrower shall thereafter be entitled shall be correspondingly reduced. 4.12 COSTS AND EXPENSES: Borrower shall pay when due all costs and expenses required by this Loan Agreement, including, without limitation, (a) all taxes and assessments applicable to the Property, (b) all fees for filing or recording the Loan Instruments, (c) all fees and commissions lawfully due to 17 19 brokers, salesmen, and agents in connection with the Loan or the Property, (d) all reasonable fees and expenses of counsel to Lender, (e) all title insurance and title examination charges, including premiums for the Title Insurance, (f) all survey costs and expenses, including the cost of the Survey, (g) all premiums for the Insurance Policies, and (h) all other reasonable costs and expenses payable to third parties incurred by Lender in connection with the consummation of the transactions contemplated by this Loan Agreement, including, without limitation, all renewals, extensions, modifications, increases or refinancings thereof. 4.13 ADDITIONAL DOCUMENTS: Borrower shall execute and deliver to Lender, from time to time as requested by Lender, such other documents as shall reasonably be necessary to provide the rights and remedies to Lender granted or provided for by the Loan Instruments. 4.14 INSPECTION OF BOOKS AND RECORDS: Borrower shall permit Lender, at all reasonable times, to examine and copy the books and records of Borrower pertaining to the Loan and the Property, and all contracts, statements, invoices, bills, and claims for labor, materials, and services supplied for the construction of the Improvements. If Lender shall examine the aforesaid books and records, Borrower shall pay within ten (10) days of written demand by Lender, subject to SECTION 6.6 hereof, reasonable examination fees and expenses incurred by Lender as a result of such examination. 4.15 NO LIABILITY OF LENDER: Lender shall have no liability, obligation, or responsibility whatsoever with respect to the construction of the Improvements except to advance the Loan and the Borrower's Deposit pursuant to this Loan Agreement. Lender shall not be obligated to inspect the Property or the construction of the Improvements, nor be liable for the performance or default of Borrower, Engineer, the Inspecting Engineers, Contractor, or any other party, or for any failure to construct, complete, protect, or insure the Improvements, or for the payment of costs of labor, materials, or services supplied for the construction of the Improvements, or for the performance of any obligation of Borrower whatsoever. Nothing, including, without limitation, any Advance or acceptance of any document or instrument, shall be construed as a representation or warranty, express or implied, to any party by Lender. 4.16 NO CONDITIONAL SALE CONTRACTS, ETC.: No materials, equipment, or fixtures shall be supplied, purchased, or installed for the construction or operation of the Improvements pursuant to security agreements, conditional sale contracts, lease agreements, or other arrangements or understandings whereby a security interest or title is retained by any party or the right is reserved or accrues to any party to remove or repossess any materials, equipment, or fixtures intended to be utilized in the construction or operation of the Improvements. 4.17 DEFENSE OF ACTIONS: Lender may (but shall not be obligated to) commence, appear in, or defend any action or proceeding purporting to affect the Loan, the Property, or the respective rights and obligations of Lender and Borrower pursuant to this Loan Agreement. Lender may (but shall not be obligated to) pay all necessary expenses, including reasonable attorneys' fees and expenses incurred in connection with such proceedings or actions, which Borrower agrees to repay to Lender within ten (10) days of written demand; provided, however, in any proceeding or lawsuit between Borrower and Lender, if Borrower is the prevailing party, Borrower shall not be obligated to pay Lender's attorneys' fees. 18 20 4.18 ASSIGNMENT OF CONSTRUCTION CONTRACT: As additional security for the payment of the Loan, Borrower hereby transfers and assigns to Lender all of Borrower's rights and interest, but not its obligations, in, under, and to any Construction Contract, whether now existing or hereafter entered into, upon the following terms and conditions: (a) Borrower represents and warrants that the copy of each Construction Contract it has furnished to Lender is a true and complete copy thereof and that Borrower's interest therein is not subject to any claim, setoff, or encumbrance. (b) Neither this assignment nor any action by Lender shall constitute an assumption by Lender of any obligations under any Construction Contract, and Borrower shall continue to be liable for all obligations of Borrower thereunder, Borrower hereby agreeing to perform all of its obligations under any Construction Contract. Borrower indemnifies and holds Lender harmless against and from any loss, cost, liability, or expense (including, but not limited to, reasonable attorneys' fees) resulting from any failure of Borrower to so perform. (c) Lender shall have the right at any time (but shall have no obligation) to take in its name or in the name of Borrower such action as Lender may at any time determine to be necessary or advisable to cure any default under any Construction Contract or to protect the rights of Borrower or Lender thereunder. Lender shall incur no liability if any action so taken by it or in its behalf shall prove to be inadequate or invalid, and Borrower agrees to hold Lender free and harmless against and from any loss, cost, liability or expense (including, but not limited to, reasonable attorneys' fees) incurred in connection with any such action. (d) Borrower hereby irrevocably constitutes and appoints Lender as Borrower's attorney-in-fact, in Borrower's name or in Lender's name, to enforce all rights of Borrower under any Construction Contract. (e) Prior to an Event of Default, Borrower may exercise its rights as Owner under any Construction Contract, provided that Borrower shall not cancel or amend any Construction Contract or do or suffer to be done any act which would impair the security constituted by this assignment without the prior written consent of Lender. (f) This assignment shall inure to the benefit of Lender, its successors and assigns, including any purchaser upon foreclosure of the Mortgage, any receiver in possession of the Property, and any corporation formed by or on behalf of Lender which assumes Lender's rights and obligations under this Loan Agreement. 4.19 ASSIGNMENT OF PLANS: As additional security for the payment of the Loan, Borrower hereby transfers and assigns to Lender all of Borrower's right, title, and interest in and to the Engineering Contract and Plans, whether now existing or hereafter entered into or prepared, and hereby represents and warrants to and agrees with Lender as follows: 19 21 (a) The schedule of the Plans delivered to Lender is a complete and accurate description of the Plans and there have been no modifications thereof except as described in such schedule. (b) The Plans are complete and adequate in all material respects for the construction of the Improvements, which, when built and equipped in accordance therewith, shall be ready for the intended use thereof. When completed in accordance with the Plans, the Improvements will not encroach upon any building line, set back line, sideyard line, or any recorded or visible easement (or other easement of which Borrower is aware or has reason to believe may exist) which exists with respect to the Property. The Plans shall not be modified without the prior written consent of Lender, other than to make changes on non-structural items which do not change the cost of construction by more than $25,000.00 as to any one change or $50,000.00 in the aggregate; provided, further, no changes shall be made to the Plans until the consent of all Governmental Authorities required to be obtained is obtained. (c) Lender may use the Plans for any purpose relating to the Improvements, including, but not limited to, inspections of construction and the completion of the Improvements. (d) Lender's acceptance of this assignment shall not constitute approval of the Plans by Lender. Lender has no liability or obligation whatsoever in connection with the Plans and no responsibility for the adequacy thereof or for the construction of the Improvements contemplated by the Plans. Lender has no duty to inspect the Improvements, and if Lender should inspect the Improvements, Lender shall have no liability or obligation to Borrower arising out of such inspection. No such inspection nor any failure by Lender to make objections after any such inspection shall constitute a representation by Lender that the Improvements are in accordance with the Plans or constitute a waiver of Lender's right thereafter to insist that the Improvements be constructed in accordance with the Plans. (e) This assignment shall inure to the benefit of Lender, its successors and assigns, including any purchaser upon foreclosure of the Mortgage, any receiver in possession of the Property, and any corporation formed by or on behalf of Lender which assumes Lender's rights and obligations under this Loan Agreement. 4.20 ASSIGNMENT OF PURCHASE AGREEMENTS: As additional security for payment of the Loan, Borrower hereby transfers and assigns to Lender, to the extent assignable, the full interests of Borrower in the Purchase Agreements, if any, including, but not limited to, Borrower's right to receive funds deposited, escrowed or otherwise paid by Purchaser under the Purchase Agreements (if any). Borrower agrees to consummate the Purchases in accordance with the terms of the Purchase Agreements (if any) and prior to the expiration(s) thereof. The Purchase Agreements (if any) shall not be modified without the prior written consent of Lender. 20 22 4.21 PROHIBITION ON ASSIGNMENT OF BORROWER'S INTEREST: Borrower shall not assign or encumber any interest of Borrower hereunder or under the Loan Instruments without the prior written consent of Lender. 4.22 PAYMENT OF CLAIMS: Borrower shall promptly pay or cause to be paid when due all costs and expenses incurred in connection with the Property and the construction of the Improvements, and Borrower shall keep the Property and any funds due the Contractor free and clear of any lien, security interest, charge, or claim other than the encumbrance of the Mortgage and other liens or security interests approved in writing by Lender. Notwithstanding anything to the contrary contained in this Loan Agreement, Borrower (1) may contest the validity or amount of any claim of any contractor, consultant, engineer, architect, or other person providing labor, materials, or services with respect to the Property, (2) may contest any tax or special assessments levied by any Governmental Authority, and (3) may contest the enforcement of or compliance with any Governmental Requirements, and such contest on the part of Borrower shall not be a default hereunder and shall not release Lender from its obligations to make Advances hereunder; provided, however, that during the pendency of any such contest, Borrower shall furnish to Lender and Title Company an indemnity bond with corporate surety satisfactory to Lender and Title Company or other security acceptable to them in an amount equal to the amount being contested plus a reasonable additional sum to cover possible costs, interest, and penalties, and provided further that Borrower shall pay any amount adjudged by a court of competent jurisdiction to be due, with all costs, interest, and penalties thereon, before such judgment becomes a lien on the Property. 4.23 RESTRICTIONS AND ANNEXATION: Borrower shall not impose any restrictive covenants, easements or other encumbrances upon the Property, or execute or file any subdivision plat affecting the Property which is not contemplated by the Loan Instruments, or consent to the annexation of the Property to any city, without the prior written consent of Lender (which consent shall not be unreasonably withheld). 4.24 ADVERTISING BY LENDER: Borrower agrees that during the term of the Loan, Lender may erect and Borrower shall maintain (all at Lender's expense) on the Property one or more advertising signs indicating that the construction financing for the Property has been provided by Lender, provided such signage complies with all applicable laws. 4.25 CURRENT FINANCIAL STATEMENTS: Borrower shall provide Lender with Financial Statements of Borrower, each Guarantor, and any other party liable for the debt evidenced by the Loan Instruments, in accordance with and as provided in the Master Loan Agreement and the other Loan Instruments. Borrower and Guarantor shall, in addition, deliver to Lender such other financial statements, budgets, reports and other information regarding Borrower and Guarantor, any other party liable for the debt evidenced by the Loan Instruments, the Improvements or the Property as Lender may reasonably require from time to time during the period of the Loan. 4.26 INSPECTION FEES: Borrower shall pay to Lender the amount set forth on EXHIBIT B hereto, if any, as inspection fees to defray a portion of the cost incurred by Lender in having Inspecting Engineers inspect the construction of the Improvements. Such fees shall continue to be payable until the Improvements are finally completed, and shall be paid by direct advance by Lender to itself. 21 23 Such fees shall be in addition to the interest on the Loan, but shall be limited so that such fees and all charges constituting interest shall not, in the aggregate, exceed the maximum amount of interest permitted by applicable law. 4.27 TAX RECEIPTS: Borrower shall furnish Lender with receipts or tax statements marked "Paid" to evidence the payment of all taxes levied on the Property on or before thirty (30) days prior to the date such taxes become delinquent. 4.28 LOAN PARTICIPATIONS: Borrower acknowledges and agrees that Lender may, from time to time, sell or offer to sell interests in the Loan and the Loan Instruments to one or more participants. Borrower authorizes Lender to disseminate any information it has pertaining to the Loan, including, without limitation, complete and current credit information on Borrower, any of its principals and any Guarantor, to any such participant or prospective participant. 4.29 NOTICE OF LITIGATION, CLAIMS, AND FINANCIAL CHANGE: Borrower shall promptly inform Lender of (a) any litigation against Borrower or, to Borrower's knowledge, against any Guarantor or affecting the Property, which, if determined adversely, might have a material adverse effect upon the financial condition of Borrower or any Guarantor or upon the Property, or might cause an Event of Default, (b) any claim or controversy which might become the subject of such litigation, and (c) any material adverse change in the financial condition of Borrower or any Guarantor. For purposes hereof, material adverse change shall mean a decline of fifteen percent (15%) in the net worth of Borrower or any Guarantor as shown on the Financial Statements delivered to Lender from time to time during the term hereof in connection with the Loan. 4.30 HOLD HARMLESS: Borrower shall defend, at its own cost and expense, and hold Lender harmless from, any proceeding or claim in any way relating to the Property or the Loan Instruments (except to the extent arising out of the gross negligence or willful misconduct of Lender). All costs and expenses incurred by Lender in protecting its interests hereunder, including all court costs and reasonable attorneys' fees and expenses, shall be borne by Borrower. The provisions of this Section shall survive the payment in full of the Loan and all other indebtedness secured by the Mortgage and the release of the Mortgage as to events occurring and causes of action arising before such payment and release. 4.31 HAZARDOUS MATERIALS; INDEMNIFICATION: (a) Borrower agrees to (i) give notice to Lender immediately upon Borrower's acquiring knowledge of the presence of any Hazardous Materials on the Property or of any Hazardous Material Contamination with a full description thereof; (ii) promptly, at Borrower's sole cost and expense, comply with any Governmental Requirements requiring the removal, treatment or disposal of such Hazardous Materials or Hazardous Materials Contamination and provide Lender with satisfactory evidence of such compliance; and (iii) provide Lender, within thirty (30) days after demand by Lender, with a bond, letter of credit or similar financial assurance evidencing to Lender's satisfaction that the sufficient funds are available to pay the cost of removing, treating 22 24 and disposing of such Hazardous Materials or Hazardous Materials Contamination and discharging any assessments which may be established on the Property as a result thereof. (b) Borrower shall not cause or suffer any liens to be recorded against the Property as a consequence of, or in any way related to, the presence, remediation or disposal of Hazardous Material in or about the Property, including any state, federal or local so-called "Superfund" lien relating to such matters. (c) Borrower shall at all times retain any and all liabilities arising from the presence, handling, treatment, storage, transportation, removal or disposal of Hazardous Materials on the Property. Regardless of whether any Event of Default shall have occurred and be continuing or any remedies in respect of the Property are exercised by Lender, Borrower shall defend, indemnify and hold harmless Lender from and against any and all liabilities (including strict liability), suits, actions, claims, demands, penalties, damages (including, without limitation, lost profits, consequential damages, interest, penalties, fines and monetary sanctions), losses, costs or expenses (including, without limitation, consultants' fees, investigation and laboratory fees, reasonable attorneys' fees and remedial costs) (the foregoing are hereinafter collectively referred to as "LIABILITIES") which may now or in the future (whether before or after the culmination of the transactions contemplated by this Loan Agreement) be incurred or suffered by Lender by reason of, resulting from, in connection with, or arising in any manner whatsoever out of the breach of any warranty or covenant or the inaccuracy of any representation of Borrower contained or referred to in this Section or SECTION 3.8 of this Loan Agreement and Article 9 of the Mortgage or which may be asserted as a direct or indirect result of the presence on or under, or escape, seepage, leakage, spillage, discharge, emission or release from the Property of any Hazardous Materials or any Hazardous Materials Contamination or arise out of or result from the environmental condition of the Property or the applicability of any Governmental Requirements relating to Hazardous Materials, whether or not occasioned wholly or in part by any condition, accident or event caused by any act or omission of Borrower or Lender. Such Liabilities shall include, without limitation: (i) injury or death to any person; (ii) damage to or loss of the use of any property; (iii) the cost of any demolition and rebuilding of the Improvements, repair or remediation and the preparation of any activity required by any Governmental Authority; (iv) any lawsuit or proceeding brought or threatened, good faith settlement reached, or governmental order relating to the presence, disposal, release or threatened release of any Hazardous Material on, from or under the Property; and (v) the imposition of any lien on the Property arising from the activity of Borrower or Borrower's predecessors in interest on the Property or from the existence of Hazardous Materials or Hazardous Materials Contamination upon the Property. The covenants and agreements contained in this Section shall survive the consummation of the transactions contemplated by this Loan Agreement. 4.32 DISCLAIMER OF CONSTRUCTION OR PERMANENT FINANCING: Borrower acknowledges and agrees that Lender has not made any commitments, either express or implied, to extend the term of the Loan (unless otherwise expressly provided 23 25 herein) past the Loan Maturity Date or to provide Borrower with financing for the construction of any Improvements or any permanent financing other than those provided for in the Approved Budget. 4.33 BROKERAGE COMMISSION: Borrower and Lender each represent to the other that such party has not incurred, directly or indirectly, any liability on behalf of the other party for the payment of any real estate brokerage commissions or finder's fees or any other compensation to any agents, brokers, finders or salesmen in connection with the Loan. 4.34 PERIODIC APPRAISAL: Lender may obtain, at Borrower's expense, as often as required by Lender (but in no event more often than once in each calendar year) or more often as may be required by Governmental Requirements, an appraisal of any part of the Property prepared in accordance with written instructions from Lender by a third-party appraiser engaged directly by Lender (except that no such limitation shall apply upon the occurrence of an Event of Default). Each such appraiser and appraisal shall be satisfactory to Lender (including satisfaction of applicable regulatory requirements). The costs of each such appraisal shall be due and payable within ten (10) days of written demand, part of the Obligations, and secured by the Loan Documents. 4.35 CERTAIN REGULATORY MATTERS: The proceeds of the Loan are not being used and shall not be used to purchase or carry any "MARGIN STOCK" within the meaning of REGULATION "U" of the Board of Governors of the Federal Reserve System, nor to extend credit to others for that purpose. Borrower is in compliance (and will comply) in all material respects with the Employee Retirement Income Security Act of 1974, as amended, and Borrower has not incurred (and will not incur) any liability to the Pension Benefit Guaranty Corporation or any Tribunal succeeding to any or all of its functions thereunder. Borrower is not a "foreign person" within the meaning of the Internal Revenue Code of 1986, SECTIONS 1445 AND 7701. Borrower is not, and no Person having "control" (as that term is defined in 12 U.S.C. ss. 375(B) (5) or in regulations promulgated pursuant thereto) of Borrower is, an "executive officer," director," or "person who directly or indirectly or in concert with one or more persons owns, controls, or has the power to vote more than ten percent (10%) of any class of voting securities (as those terms are defined in 12 U.S.C. ss. 375(b), or in regulations promulgated pursuant thereto) of (a) Lender, (b) a bank holding company of which Lender is a subsidiary, (c) any subsidiary of a bank holding company of which Lender is a subsidiary, (d) any bank at which Lender maintains a correspondent account, or (e) any bank which maintains a correspondent account with Lender. 4.36 NOTICE OF COMMENCEMENT: After recordation of the Mortgage, Borrower and each original contractor shall jointly execute and record with the county clerk of the county in which the Property is situated a notice of commencement or a notice of recommencement of work, in form and substance approved by Lender, which contains the information required by Chapter 713, Florida Statutes, and Borrower shall otherwise comply with Section 6(a) of the Master Loan Agreement; with the date of commencement of work specified in such notice to be subsequent to the date of recordation of the Mortgage. 4.37 CONSTRUCTION OF RESIDENCES: Borrower shall construct single-family residences upon the Developed Lots, pursuant to plans and specifications approved by Lender (and in accordance with all applicable Governmental 24 26 Requirements) and with funds from sources other than the Loan (except to the extent funded as a portion of the Line of Credit), and shall complete such construction with due diligence and continuity, in a good and workmanlike manner and in accordance with the Master Loan Agreement and the other Loan Instruments. ARTICLE 5 RIGHTS AND REMEDIES OF LENDER 5.1 RIGHTS OF LENDER: Upon the occurrence of an Event of Default, Lender shall have the right, in addition to any other right or remedy of Lender, but not the obligation, in its own name or in the name of Borrower, to enter into possession of the Property; to perform all work necessary to complete the construction of the Improvements substantially in accordance with the Plans, Governmental Requirements, and the requirements of the Purchase Agreements (if any); and to employ watchmen and other safeguards to protect the Property. Borrower hereby appoints Lender as the attorney-in-fact of Borrower, with full power of substitution, and in the name of Borrower, if Lender elects to do so, upon the occurrence of an Event of Default, to (a) use such sums as are necessary,, including any proceeds of the Loan and the Borrower's Deposit, make such changes or corrections in the Plans, and employ such engineers, and contractors as may be required for the purpose of completing the construction of the Improvements substantially in accordance with the Plans, Governmental Requirements, and the requirements of the Purchase Agreements (if any), (b) execute all applications and certificates in the name of Borrower which may be required for completion of construction of the Improvements, (c) endorse the. name of Borrower on any checks or drafts representing proceeds of the Insurance Policies, or other checks or instruments payable to Borrower with respect to the Property, (d) do every act with respect to the construction of the Improvements which Borrower may do, and (e) prosecute or defend any action or proceeding incident to the Property. The power-of-attorney granted hereby is a power coupled with an interest and irrevocable. Lender shall have no obligation to undertake any of the foregoing actions, and if Lender should do so, it shall have no liability to Borrower for the sufficiency or adequacy of any such actions taken by Lender. 5.2 ACCELERATION: Upon the occurrence of an Event of Default, Lender may, at its option, declare the Loan immediately due and payable without notice of any kind. 5.3 CESSATION OF ADVANCES: Upon the occurrence of an Event of Default, the obligation of Lender to disburse the Loan and the Borrower's Deposit and all other obligations of Lender hereunder shall, at Lender's option, immediately terminate. 5.4 FUNDS OF LENDER: Any funds of Lender used for any purpose referred to in this ARTICLE 5 shall constitute Advances secured by the Loan Instruments and shall bear interest at the rate specified in the Note to be applicable after default thereunder (beyond any applicable cure or grace period). 5.5 NO WAIVER OR EXHAUSTION: No waiver by Lender of any of its rights or remedies hereunder, in the other Loan Instruments, or otherwise, shall be considered a waiver of any other or subsequent right or remedy of Lender; no 25 27 delay or omission in the exercise or enforcement by Lender of any rights or remedies shall ever be construed as a waiver of any right or remedy of Lender; and no exercise or enforcement of any such rights or remedies shall ever be held to exhaust any right or remedy of Lender. ARTICLE 6 GENERAL TERMS AND CONDITIONS 6.1 NOTICES: All notices, demands, requests, and other communications required or permitted hereunder or under any of the other Loan Instruments, shall be in writing and shall be deemed to have been given when presented personally, or two (2) days after being deposited in a regularly maintained receptacle for the United States Postal Service, postage prepaid, registered or certified, return receipt requested, or one (1) day after being deposited with a reputable overnight courier (such as UPS or FedEx) for next-day delivery, addressed to Borrower or Lender, as the case may be, at the respective addresses set forth on the first page of this Loan Agreement, or such other address as Borrower or Lender from time to time designate by written notice to the other as herein required. 6.2 NO ORAL AGREEMENTS; MODIFICATIONS: The Loan Instruments constitute the entire understanding and final agreement between the undersigned with respect to the transactions arising in connection with the Loan and supersede all prior, contemporaneous or subsequent written or oral understandings and agreements between the undersigned in connection therewith. No provision of this Loan Agreement or the other Loan Instruments may be modified, waived, or terminated except by instrument in writing executed by the party against whom a modification, waiver, or termination is sought to be enforced. THE LOAN INSTRUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN LENDER AND BORROWER CONCERNING THE LOAN AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF LENDER AND BORROWER OR ANY AGENT, BROKER, EMPLOYEE OR REPRESENTATIVE OF EITHER OF THEM. THERE ARE NO ORAL AGREEMENTS BETWEEN LENDER AND BORROWER. 6.3 SEVERABILITY: In case any of the provisions of this Loan Agreement shall for any reason be held to be invalid, illegal, or unenforceable, such invalidity, illegality, or unenforceability shall not affect any other provision hereof, and this Loan Agreement shall be construed as if such invalid, illegal, or unenforceable provision had never been contained herein. 6.4 ELECTION OF REMEDIES: Lender shall have all of the rights and remedies granted in the Loan Instruments and available at law or in equity, and these same rights and remedies shall be cumulative and may be pursued separately, successively, or concurrently against Borrower, Guarantor, or any property covered under the Loan Instruments at the sole discretion of Lender. The exercise or failure to exercise any of the same shall not constitute a waiver or release thereof or of any other right or remedy, and the same shall be nonexclusive. 26 28 6.5 FORM AND SUBSTANCE: All documents, certificates, insurance policies, and other items required under this Loan Agreement to be executed and/or delivered to Lender shall be in form and substance satisfactory to Lender. 6.6 LIMITATION ON INTEREST: All agreements between Borrower and Lender, whether now existing or hereafter arising and whether written or oral, are hereby limited so that in no contingency, whether by reason of acceleration of the maturity of any indebtedness governed hereby or otherwise, shall the interest contracted for, charged or received by Lender exceed the maximum amount permissible under applicable law. If, from any circumstance whatsoever, interest would otherwise be payable to Lender in excess of the maximum lawful amount, the interest payable to Lender shall be reduced to the maximum amount permitted under applicable law; and, if from any circumstance Lender shall ever receive anything of value deemed interest by applicable law in excess of the maximum lawful amount, an amount equal to any excessive interest shall be applied to the reduction of the principal of the Loan and not to the payment of interest, or if such excessive interest exceeds the unpaid balance of principal of the Loan such excess shall be refunded to Borrower. All interest paid or agreed to be paid to Lender shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full period until payment in full of the principal of the Loan (including the period of any renewal or extension thereof) so that interest thereon for such full period shall not exceed the maximum amount permitted by applicable law. This paragraph shall control all agreements between the Borrower and Lender. 6.7 NO THIRD PARTY BENEFICIARY: This Loan Agreement is for the sole benefit of Lender and Borrower and is not for the benefit of any third party. 6.8 BORROWER IN CONTROL: In no event shall Lender's rights and interests under the Loan Instruments be construed to give Lender the right to, or be deemed to indicate that Lender is in control of the business, management or properties of Borrower or has power over the daily management functions and operating decisions made by Borrower. 6.9 NUMBER AND GENDER: Whenever used herein, the singular number shall include the plural and the plural the singular, and the use of any gender shall be applicable to all genders. The duties, covenants, obligations, and warranties of Borrower in this Loan Agreement shall be joint and several obligations of Borrower and of each Borrower if more than one. 6.10 CAPTIONS: The captions, headings, and arrangements used in this Loan Agreement are for convenience only and do not in any way affect, limit, amplify, or modify the terms and provisions hereof. 6.11 PARTIAL RELEASES: Borrower shall have the right to obtain partial releases of the Residences subject to the terms and conditions set forth in, Section 16 and Exhibit A of the Master Loan Agreement. Borrower shall pay all costs and expenses of Lender arising in connection with any Partial Releases of the Property, including, but not limited to, reasonable legal fees and actual expenses of Lender's counsel, all title insurance premiums 27 29 arising as a result of endorsements required by Lender in connection with such Partial Release and all other reasonable costs arising in connection with the execution and delivery of the Partial Release. Notwithstanding the foregoing provisions of this SECTION 6.11, Lender shall have no obligation to release any part of the Property from the lien of the Mortgage as of the date of the Borrower's payment in full of the Loan (the "PAYOFF DATE") to the extent that any obligations under letters of credit, letters in lieu of bonds, set aside letters issued by Lender or other agreements between Borrower or Lender and the Governmental Authority having jurisdiction over any of the Property which maybe given to assure the Governmental Authority that the Improvements will be constructed in accordance with the Plans and to the satisfaction of any Governmental Authority (collectively, the "ADDITIONAL OBLIGATIONS") remain outstanding. From and after the Payoff Date, Lender will release parts of the Property subject to the proceeds from the sale being delivered to Lender with all of such proceeds to be held by Lender (without any obligation for payment of interest thereon) as a Special Deposit (herein so called) for the purpose of securing the Additional Obligations. At such time as the Special Deposit equals the amount of the Additional Obligations, the Borrower will not be required to deliver any additional proceeds in order to obtain a release of a portion of the Property. Further, as the Additional Obligations are permanently reduced (as evidenced by Lender's receipt of written confirmation of such reduction from the beneficiaries entitled thereto) Borrower shall be entitled to receive portions of the Special Deposit in amounts equal to the amounts by which the Additional Obligations are reduced from time to time. 6.12 CONTINUING LIABILITY: Borrower agrees to develop, construct and complete all of the Improvements substantially in accordance with the Plans and to the satisfaction of all Governmental Authorities. If Borrower does not complete the Improvements by the Completion Date or if the construction thereof is not satisfactory to Governmental Authorities having jurisdiction thereon, Lender shall have the option to complete the Improvements to the satisfaction of the Governmental Authorities. If Lender elects to construct and complete the Improvements or take such other action as may be necessary to obtain the approval of the Governmental Authorities for the construction of the Improvements, Borrower promises to pay to Lender, in addition to any other amounts which may be owing under any of the Loan Instruments, all sums expended by Lender to complete the Improvements to the satisfaction of the Governmental Authorities, and such amounts owing to Lender shall be payable on demand and shall bear interest at the rates provided in the Note. In addition, if Lender shall advance any funds or honor any letter of credit which it may have issued, on behalf of Borrower, to any Governmental Authority to assure completion of the Improvements, Borrower shall pay to Lender all amounts advanced by Lender or honored by Lender under such letters of credit, together with interest on such amount at the rates provided in the Note, when requested by Lender. The obligations of Borrower pursuant to this SECTION 6.12 are continuing obligations of Borrower, notwithstanding that Borrower may have paid the Note in full at the time such obligations may arise. 6.13 CONTINUING LIEN: The indebtedness and performance of obligations secured by the liens and security interests granted in the Loan Instruments include all indebtedness and all obligations of whatever kind or character, whether now owing, hereafter arising or hereafter to be performed in connection with the construction of the Improvements, whether fixed or contingent, and including, without limitation, those described in SECTION 6.12 hereof and the 28 30 Additional Obligations (collectively, the "OBLIGATIONS"). If any of the Obligations remain to be paid or are subject to performance by Borrower as of the Payoff Date, Lender shall not be obligated to release that portion of the Property remaining subject to the Mortgage (the "REMAINING PROPERTY") except in accordance with the provisions of SECTION 6.11 relating to the Special Deposit, and the Remaining Property shall continue to secure the payment and performance of the Obligations then remaining subject to the Mortgage as of the Payoff Date. 6.14 WAIVER OF JUDICIAL PROCEDURAL MATTERS: BORROWER HEREBY EXPRESSLY AND UNCONDITIONALLY WAIVES, IN CONNECTION WITH ANY SUIT, ACTION OR PROCEEDING BROUGHT BY LENDER IN CONNECTION WITH ANY OF THE LOAN INSTRUMENTS, ANY AND EVERY RIGHT IT MAY HAVE TO (I) INJUNCTIVE RELIEF, (II) A TRIAL BY JURY (AND LENDER HEREBY ALSO WAIVES TRIAL BY JURY IN CONNECTION WITH ANY SUIT, ACTION OR PROCEEDING ARISING IN CONNECTION WITH THE LOAN INSTRUMENTS), (III) INTERPOSE ANY COUNTERCLAIM THEREIN (OTHER THAN A COMPULSORY COUNTERCLAIM) AND (IV) HAVE THE SAME CONSOLIDATED WITH ANY OTHER OR SEPARATE SUIT, ACTION OR PROCEEDING (EXCEPT TO THE EXTENT REQUIRED BY LAW). Nothing herein contained shall prevent or prohibit Borrower from instituting or maintaining a separate action against Lender with respect to any asserted claim. 6.15 APPLICABLE LAW: EXCEPT WHERE FEDERAL LAW IS APPLICABLE (INCLUDING, WITHOUT LIMITATION, ANY FEDERAL USURY CEILING OR OTHER FEDERAL LAW WHICH, FROM TIME TO TIME, IS APPLICABLE TO THE INDEBTEDNESS EVIDENCED BY THE NOTE AND WHICH PREEMPTS STATE USURY LAWS), THIS AGREEMENT AND THE LOAN INSTRUMENTS SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA, AND THE LAWS OF THE UNITED STATES APPLICABLE TO TRANSACTIONS IN SUCH STATE. ARTICLE 7 SPECIAL PROVISIONS 7.1 EXTENSION OF LOAN MATURITY DATE: Upon satisfaction of all the requirements set forth in Paragraph 11 of Exhibit A to the Master Loan Agreement, then Lender will extend the Loan Maturity Date beyond the Stated Maturity Date (as defined in the Master Loan Agreement) for an additional six (6) month period. 7.2 CONDITION TO SUBSEQUENT ADVANCES: Anything in this Loan Agreement or-any other of the Loan Instruments to the contrary notwithstanding, Lender (i) shall have no obligation to make any Advances except from the Land Allocation, the Legal Allocation, the Appraisal/Environmental Allocation, the Taxes and Insurance Allocation, the Origination Fee Allocation and at Lender's option, the Interest & Expense Allocation, until Borrower has delivered all the items in EXHIBIT B hereto, and (ii) has not waived any requirement or obligation of 29 31 Borrower hereunder to deliver all the items denoted with an "*" on EXHIBIT B by making the Advances described in this SECTION 7.2 even though Lender may not have received all the items described in EXHIBIT B; provided further, however, Borrower's failure to deliver all the items in EXHIBIT B hereto, within ninety (90) days from the date hereof, shall at the option of Lender, constitute an Event of Default hereunder and any other of the Loan Instruments. 7.3 LOAN MATURITY DATE: In the absence of any Event of Default, the Loan shall mature, and any and all principal (and allocations) under the Line of Credit constituting or attributable to the Loan shall be fully due and payable on the Loan Maturity Date (as the same may be extended hereby). (THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK) 30 32 EXECUTED AND DELIVERED as of the date first recited. LENDER: GUARANTY FEDERAL BANK, F.S.B., a federal savings bank organized and existing under the laws of the United States By: _______________________________________________________ Name:________________________________________________ Title:_______________________________________________ BORROWER: OH INVESTMENTS, INC., a Florida corporation By:_________________________________________________________ Name: Richard D. Levy Title: Chief Executive Officer 31 33 EXHIBIT A LEGAL DESCRIPTION PARCEL 1: All of the Plat of "UPJOHN P.U.D. PLAT ONE", according to the Plat thereof, as recorded in Plat Book 86 at Pages 1 through 3 of the Public Records of Palm Beach County, Florida. LESS AND EXCEPT THE FOLLOWING: All of the Plat of "VIZCAYA, PLAT No. 1", according to the Plat thereof, as recorded in Plat Book 86 at Pages 88 and 89 of the Public Records of Palm Beach County, Florida. AND, All of the Plat of "VIZCAYA, PLAT No. 2", according to the Plat thereof, as recorded in Plat Book 86 at Pages 103 and 104 of the Public Records of Palm Beach County, Florida. AND, All of the Plat of "VIZCAYA, PLAT No. 3", according to the Plat thereof, as recorded in Plat Book 88 at Pages 12 and 13 of the Public Records of Palm Beach County, Florida. AND, A Portion of the Plat of "UPJOHN P.U.D. PLAT ONE", as recorded in Plat Book 86 at Pages 1 through 3 of the Public Records of Palm Beach County, Florida, lying in the East half (E 1/2) of the East half (E 1/2) of Section 21, Township 46 South, Range 42 East, Palm Beach County, Florida and this tract being more particularly described as follows: COMMENCING at the Northeast Corner of said section 21; thence South 02(degree)17'27" East, along the East line of the Northeast one-quarter of said Section 21, a distance of 63.63 feet to a point on the South line of the parcel claimed by the Lake Worth Drainage District in accordance with Chancery Case 407, as said Chancery Case is recorded on Official Records Book 6495, Page 761 of the Public Records of Palm Beach County, Florida (the same being the North Plat limits of the said Plat of "UPJOHN P.U.D. PLAT ONE"); thence South 88(degree)59'08" West, along the South line of said Chancery Case 407 (along said North Plat limits), a distance of 692.07 feet to the POINT of BEGINNING of the herein described tract of land; thence South 02(degree)05'52" East, a distance of 395.33 feet to a point of curvature on a curve concave to the Northeast and having a radius of 640.00 feet; thence Southeasterly, along the arc of said curve, through a central angle of 44(degree)36'24", having a chord bearing of South 24(degree)24'04" East and a chord length of 485.77 feet, a distance of 498.26 feet to the point of tangency; thence South 46(degree)42'16" East, a distance of 266.35 feet; thence South 43(degree)17'39" west, a distance of 403.59 feet to a point; thence South 87(degree)53'57" West, a distance of 734.00 feet to a point on the West line of the East half (E 1/2) of the East half (E 1/2) of said Section 21 (the same being the West Plat limits of the said Plat of "UPJOHN P.U.D. PLAT ONE"); thence North 02(degree)06'03" West, along the West line of the East half (E 1/2) of the East half (E 1/2) of said Section 21 (the same being said West Plat limits), a distance of 1330.14 feet to a point on the South line of said Chancery Case 407; thence North 88(degree)59'08" East, along the South line of said Chancery Case 407 (along said North Plat limits), a distance of 650.12 feet to the POINT of BEGINNING. 34 TOGETHER WITH - PARCEL 2: All of the Plat of "VIZCAYA, PLAT No. 1", according to the Plat thereof, as recorded in Plat Book 86 at Pages 88 and 89 of the Public Records of Palm Beach County, Florida. LESS AND EXCEPT THE FOLLOWING: Lots 6, 7, 8, 9,10,11,12, 13, 14, 16, 71 and 82, Block "A", Lots 1, 2, 4, 12, 16, 17, 20, 22, 27, 29, 30, 33 and 36, Block "B", Lots 1 and 3, Block "C" and Lots 1 and 5, Block "D". TOGETHER WITH - PARCEL 3: All of the Plat of "VIZCAYA, PLAT No. 2", according to the Plat thereof, as recorded in Plat Book 86 at Pages 103 and 104 of the Public Records of Palm Beach County, Florida. LESS AND EXCEPT THE FOLLOWING: Lots 18, 19, 20, 21, 26, 27, 30, 32, 33, 34, 35, 36, 37, 38, 44, 45, 47, 48, 50, 53, 54, 55, 57, 60, 65, 68, 69, 71, 72, 73 and 74, Block "E", Lot 21, Block "F" and Lots 1, 2, 4, 6, 7, 9, 10, 11, 12, 14, 15, 16, 17 and 18, Block "G". TOGETHER WITH - PARCEL 4: All of the Plat of "VIZCAYA, PLAT No. 3", according to the Plat thereof, as recorded in Plat Book 88 at Pages 12 and 13 of the Public Records of Palm Beach County, Florida. 2 35 EXHIBIT B CONDITIONS TO ADVANCE 1. Loan Commitment Fee in the amount of $157,872.00 in cash (for the portion of the Loan advanced pursuant to this Agreement); 2. Note; 3. Mortgage; 4. Guaranty Agreement(s); 5. Loans to One Borrower Affidavit (to the extent required); 6. Title Insurance; *7. Construction Contract; *8. Contractor's Consent and Agreement to the Assignment of the Construction Contract; *9. Engineering Contract, if in writing; *10. The Plans, as inspected and approved by Lender, together with an amount equal to Lender's actual expense for such review; *11. Consent by Engineer to the Assignment of the Plans and Engineering Contract; 12. Survey; 13. Financing Statements (Form UCC-1) with respect to the security interest granted in the Loan Instruments, together with evidence of the priority of the respective security interests perfected thereby; 14. Financial Statements; 15. Inspection fee in the amount of Lender's actual expense for such inspection, shall be paid to Lender (to be withheld by Lender from Borrower's next advance under the Loan) per inspection per Property; 16. Warranty Deed conveying title to the Property to Borrower, and "Seller" and "Purchaser" Closing Statements for Borrower's acquisition of the Property; 1 36 17. Final Subdivision Plat for Vizcaya, an addition to the City of Delray, Palm Beach County, Florida, approved by all necessary Governmental Authorities (except to the extent provided in Paragraph 2(e) of the Master Loan Agreement); *18. Evidence of approval of the Plans by all necessary Governmental Authorities; 19. Building permits and other permits required by the Governmental Requirements with respect to the construction and development of the Property (note that with respect to land totaling more than five [5] acres, evidence of such permits shall include [without limitation] the appropriate notice of intent to be covered by the federal storm water construction permit and a copy of the pollution prevention plan relating to such permit); 20. Evidence that all applicable zoning ordinances or restrictive covenants affecting the Property permit the use for which the Property is intended and have been or will be complied with; 21. Evidence of the Property's compliance with all Governmental Requirements, including, but not limited to, those relating to environmental compliance; 22. Evidence that all of the streets providing access to the Property either have been dedicated to public use or established by private easement, duly recorded in the records of the County in which the Property is located, and have been fully installed and accepted by Governmental Authority, that all costs and expenses of the installation and acceptance thereof have been paid in full, and that there are no restrictions on the use and enjoyment of such streets that adversely affect, limit, or impair Borrower's ability to develop and construct the Property or operate the Property for the purposes and in the manner represented to Lender; 23. Evidence of the availability of all utilities to the Property, including specifically, but without limitation, gas, electricity, sewer, water services, and cable television (if applicable); 24. Evidence of Borrower's compliance with or exemption from the requirements of the Interstate Land Sales Full Disclosure Act (the "LAND SALES ACT"), 15 U.S.C. Sec.1701, ET SEQ. and the Florida Land Sales Practices Act. Lender may refuse to grant a partial release with respect to any portion of the Property until Borrower presents evidence reasonably satisfactory to Lender that such portion will not be sold or leased by Borrower in violation of the Land Sales Act and the Florida Land Sales Practices Act; 25. Evidence that all necessary action on the part of Borrower has been taken with respect to the execution and delivery of this Loan Agreement and the consummation of the transactions contemplated hereby, so that this Loan Agreement and all Loan Instruments to be executed and delivered by or on behalf of Borrower will be valid and binding upon Borrower or the person or entity executing and delivering such document. Such evidence shall include a legal opinion of Borrower's and Guarantor's respective legal counsel confirming such authority, 2 37 validity, and binding effect, confirming that neither the Loan nor any of the financing arrangements contemplated by this Loan Agreement violate the usury laws of the State of Florida, or any other applicable jurisdiction, and covering such other matters as Lender may require; 26. A flood insurance policy, or binder therefor, in an amount equal to the outstanding principal amount of the Loan, or the maximum amount available under the Flood Disaster Protection Act of 1973 and regulations issued pursuant thereto (as amended by the National Flood Insurance Reform Act of 1994) (the "FLOOD DISASTER ACT"), whichever is less, in form complying with the "insurance purchase requirement" of the Flood Disaster Act or evidence that the Property is not in "flood prone area" or "area of special flood hazard" (as defined in the Flood Disaster Act); 27. Insurance Policies or Certificates of such Insurance Policies; 28. Breakdown of all costs and expenses required to complete development and construction of the Property, in detail and in amount acceptable to Lender; 29. Performance and payment bonds, naming Lender as joint obligee; 30. Payment Bond; 31. Application for Advance; 32. If either Borrower or Guarantor is a partnership or joint venture, a fully executed counterpart of the Agreement of Partnership or Joint Venture of Borrower or Guarantor and a certified copy of the Certificate of Borrower or Guarantor filed in the Office of the Secretary of State, if applicable, together with any consents of partners and evidence of the existence, good standing and authority of the general partners of Borrower or Guarantor which may be required by Lender; 33. If either Borrower or Guarantor is a corporation, articles of incorporation and bylaws of Borrower or Guarantor together with a certificate of incumbency, certified resolutions and certificates of existence, good standing and authority; 34. If either Borrower or Guarantor is a limited liability company, a copy of the fully executed Articles of Organization as filed in the Office of the Secretary of State and a copy of the Operating Agreement; 35. Assumed Name Certificate for Borrower, if applicable; 36. Evidence of FHA or VA approval of the subdivision comprised of the Property for acceptance of formal applications for commitments on individual properties or group submissions, if applicable; 3 38 37. Assurance of completion of subdivision or other similar instruments required by any Governmental Authority in connection with the construction and completion of the Improvements, if applicable; 38. Tax or assessment certificates or other similar evidences of payment from all appropriate bodies or entities which have taxing or assessing authority over any part of the Property, stating that all taxes and assessments are current; 39. Soils Report; 40. Either a report by a qualified third party unrelated to Borrower or an environmental site assessment or similar report by an engineer acceptable to Lender providing that there is no evidence that any Hazardous Materials have been or are being generated, treated, stored or disposed of on any of the Property and none exists on, under or at the Property or any of the property adjacent thereto; 41. Evidence of Borrower's payment of all costs of acquiring the Property, the Loan Commitment Fee, all legal and closing costs, all costs of obtaining the environmental site assessment described in ITEM 40 of this EXHIBIT B, and all costs of obtaining the appraisal described in ITEM 42 of this EXHIBIT B, from sources other than the Loan or financing secured by liens encumbering the Property, for costs of acquiring the Property; 42. Appraisal in form and substance satisfactory to Lender; 43. Evidence of Borrower's payment, from sources other than the Loan, of at least $6,500,000.00 of the costs of acquiring and improving the Property; and 44. Copies of the Purchase Agreements, if any, and evidence of the continuing validity thereof. - ------------------------------ [* THESE ITEMS TO BE FURNISHED TO LENDER AFTER THE INITIAL ADVANCE OF THE LOAN, BUT BEFORE ANY ADVANCES ARE MADE FOR SPECIFIC DEVELOPMENT COSTS (AS SET FORTH IN THE APPROVED BUDGET).] 4 39 EXHIBIT C APPROVED BUDGET [ATTACHED] 40 ACQUISITION & DEVELOPMENT VIZCAYA - UPJOHN, INC. OHC INVESTMENTS 08/04/2000
- -------------------------------------------------------------------------------------------------------------------------------- COST LOAN LOAN ALLOC. ITEM PER LOT BUDGET ALLOCATION PER LOT EXPOSURE EQUITY - -------------------------------------------------------------------------------------------------------------------------------- PROJECT Purchase Price of Lots and $30,082 $12,904.970 $6,404,970 $14,930 $0 $6.500,000 Lots Under Development TOTAL LAND COST $30,082 $12,904,970 $6,404,970 $14,930 $0 $6,500,000 HARD COSTS: Engineering and Architect $683 $293,007 $293,007 $683 $0 $0 Earthwork $359 $154,011 $154,011 $359 $0 $0 Sanitary Sewer $983 $421,707 $421,707 $983 $0 $0 Pavement and Curbs $1,357 $582,153 $582,153 $1,357 $0 $0 Water and Utilities $722 $309,738 $309,738 $722 $0 $0 Trenching $81 $34,749 $34,749 $81 $0 $0 Common Areas $8,100 $3,474,900 $3,474,900 $8,100 $0 $0 Guard House, Entry Monument $72 $30,888 $30,888 $72 $0 $0 Contingency 3.5% $625 $268,125 $268,125 $625 $0 $0 ---- OFF-SITE COSTS $4,960 $2,127,840 $2,127,840 $960 $0 $0 ---------- ---------- ---- -- -- TOTAL HARD COSTS: $17,942 $7,697,118 $7,697,118 $17,942 $0 $0 SOFT COSTS: Loan Fee $368 $157,872 $157,872 $368 $0 $0 Doc Stamp Tax $203 $87,087 $87,087 $203 $0 $0 Hearthstone Interest $0 $0 $0 $0 $0 $0 Real Estate Taxes $732 $314,028 $314,028 $732 $0 $0 Legal $24 $10,296 $10,296 $24 $0 $0 Appraisal $14 $6,006 $6,006 $14 $0 $0 Other $0 $0 $0 $0 $0 $0 Interest Expense @ 11.5% $2,587 $1,109,823 $1,109 823 $2,587 $0 $0 ------ ---------- ---------- ------ -- -- TOTAL SOFT COSTS: $3,928 $1,685,112 $1,685,112 $3,928 $0 $0 ------ ---------- ---------- ------- -- -- TOTAL COSTS: $51,952 $22,287,200 $15,787,200 $36,800 $0 $6,500,000 ------- ----------- ----------- ------- ------------ CASH INJECTED AT CLOSING $6,500,000 EQUITY INJECTED DURING DEVELOPMENT $0 TOTAL SOURCES OF FUNDS $22,287,200 APPRAISAL VALUE (EST.) $21,050.000 ---------------- 70.84% 75.00% - -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- ORGINAL # OF LOTS 504 LOTS RELEASED BY JULY 3, 2000 75 REMAINING LOTS 429 TOTAL ACRES 117.00 DENSITY (LOTS PER ACRE) 3.67 LAND COST PER ACRE N/A DEVELOPMENT HARD COST PER ACRE $190,489 RELEASE PRICE $42,320 LOT RELEASE PRICE AS A PERCENTAGE OF AVERAGE LOAN PER LOT 115% ESTIMATED LOT RELEASES TO PAYOFF LOAN 383 AVERAGE OUTSTANDING BALANCE $4,750,740 AVERAGE UNFUNDED COMMITMENT $3,593,611 - --------------------------------------------------------------------------------------------------------------------------------
2 41 EXHIBIT D 1. The Engineer: Schnars Engineering Corporation 2. The Completion Date: August 8, 2002 3. Loan Maturity Date: February. 8, 2003 (subject to extension as provided herein). 4. The Contractor(s): Centerline Homes Construction, Inc.; Centerline Homes at Delray, Inc. 5. The Guarantor(s): Craig Perry, an individual, Steve Margolis, an individual, Centerline Homes, Inc., a Florida corporation, and Oriole Homes Corp., a Florida corporation. 6. The Improvements: 429 single-family residential lots in a subdivision to be known as Vizcaya master development, an addition to the City of Delray, Florida. 7. Purchase Agreements: None. 8. The Title Company: Reliance Title Company, as agent for Attorneys' Title Insurance Fund. 9. Retainage to be deducted from Advance: Ten percent (10%). 10. Frequency of Advances: Monthly. 11. The Survey Requirements: (a) FIELD NOTE DESCRIPTION. The Survey should contain a certified metes and bounds description and should comply with the following requirements: (i) The beginning point should be established by a monument located at the beginning point, or by reference to a nearby monument; (ii) The sides of the Property should be described by giving the distances and bearings of each; (iii) The distances, bearings, and angles should be taken from a recent instrument survey, or recently recertified instrument survey, by a licensed Professional Engineer or Registered Surveyor; (iv) Curved sides should be described by data including: length of arc, central angle, radius of circle for the arc and chord distance, and bearing; (v) The legal description should be a single perimeter description of the entire property; 42 (vi) The description should include a reference to all streets, alleys, and other rights-of-way that abut the Property surveyed, and the width of all rights-of-way mentioned should be given the first time these rights-of-way are referred to; and (vii) If the Property surveyed has been recorded on a map or plat as part of an abstract or subdivision, reference to such recording data should be made. (b) LOT AND BLOCK DESCRIPTION. If the Property is included within a properly established recorded subdivision or addition, then a lot and block description will be an acceptable substitute for a metes and bounds description, provided that the lot and block description must completely and properly identify the name or designation of the recorded subdivision or addition and give the recording information therefor. (c) MAP OR PLAT. The Survey should also contain a certified map or plat showing the following: (i) The plot to be covered by the Mortgage. (ii) The relation of the point of beginning of said plot to the monument from which it is fixed. The point of commencement and the point of beginning shall be marked by arrows pointing to "POC" and "POB." (iii) Monuments for corners and points of curve. (iv) All easements showing recording information therefor by volume and page. (v) The established building line, if any. (vi) All easements appurtenant to said plot. (vii) The boundary line of the street or streets abutting the plot and the width of said streets, with an arrow, touching each side of said streets and "ROW" shown. (viii) Encroachments and the extent thereof in terms of distance upon said plot or any easement appurtenant thereto. (ix) All items referenced in the field note description. (x) The total acreage and square feet in said plot. The survey should also contain all structures and improvements on said plot with horizontal lengths of all sides and the relation thereof by distances to (a) all boundary lines of the plot, (b) easements, (c) established building lines, and (d) street lines. 2 43 (d) CERTIFICATION. The certification for the Property description and the map or plat should be addressed to Lender (and to the interested title company, if required by the title company) signed by the surveyor, bearing current date, registration number, and seal and should be in the following form or its substantial equivalent: The undersigned hereby certifies to Guaranty Federal Bank, F.S.B., [Borrower] and [name of Title Company] that (i) this survey was made on the ground as per the field notes shown hereon and correctly shows the boundary lines and dimensions and area of the land indicated hereon and each individual parcel thereof indicated hereon, (ii) all monuments shown hereon actually exist, and the location, size and type of such monuments are correctly shown, (iii) this survey correctly shows the location of all buildings, structures, and other improvements, and visible items on the subject property (the "PROPERTY"), (iv) this survey correctly shows the location and dimensions of all alleys, streets, roads, rights-of-way, easements, and other matters of record of which the undersigned has been advised affecting the Property according to the legal description in such easements and other matters (with instrument, book, and page number indicated); (v) all utility lines serving the Property are shown on the survey; (vi) except as shown, there are no visible easements, rights-of-way, party walls, drainage ditches, streams, building setback lines or conflicts, visible encroachments onto adjoining premises, streets, or alleys by any of said buildings, structures, or other improvements, or visible encroachments onto the Property by buildings, structures, or other improvements situated on adjoining premises; (vii) the distance from the nearest intersecting street and road is as shown hereon; and (viii) the Property has direct access to dedicated public roads accepted for maintenance by the entity to which such roads were dedicated. The undersigned further certifies to said parties that no portion of the subject Property lies within an area identified by the Federal Emergency Management Agency or any other applicable governmental authority as a flood hazard area or flood plain. 12. Standard Mortgage Clause For All Risk Insurance Policy: The mortgage clause to be contained in the All Risk Insurance Policy covering the Improvements should be in the following form: This policy, as to the interest of mortgagee only therein, shall not be invalidated by any act or neglect of mortgagor or owner of the within described property, nor by any foreclosure or other proceedings or notice of sale relating to the property, nor by any change in the title or ownership of the property, nor by the occupation of the premises for purposes more hazardous than are permitted by this policy; provided that the mortgagee shall notify this Company of any change of ownership or increase of hazard which shall come to the knowledge of said mortgagee, and, unless permitted by this policy, it shall be noted hereon; and provided, further, that upon failure of the insured to render proof of loss, such 3 44 mortgagee upon notice shall render proof of loss in the form herein specified within ninety-one (91) days thereafter and shall be subject to the provisions hereof relating to appraisal and time of payment and of bringing suit. Failure upon the part of mortgagee to comply with any of the foregoing obligations shall render the insurance under this policy null and void as to the interest of mortgagee. This policy may be canceled as to the interest of any mortgagee named hereon by giving such mortgagee thirty (30) days written notice. If this Company shall claim that no liability existed as to mortgagor or owner, it shall, to the extent of payment of loss to mortgagee, be subrogated to all mortgagee's rights of recovery, but without impairing mortgagee's right to sue; or it may pay off the mortgage debt and require an assignment thereof and of the mortgage without recourse. The Policy shall be delivered to the mortgagee, Guaranty Federal Bank F.S.B., 8333 Douglas Avenue, Dallas, Texas 75225 and should make the reference to the Loan number described on the cover sheet hereof. The word "mortgagee" shall be construed to mean "mortgagee and/or trustee." 4 EX-10.40 6 g68169ex10-40.txt PURCHASE AND SALE AGREEMENT W/CVMH INC 1 EXHIBIT 10.40 PURCHASE AND SALE AGREEMENT THIS AGREEMENT made and entered into this 16th day of November, 2000 by and between OH INVESTMENTS, INC. a Florida Corporation whose address is 1690 South Congress Avenue, Suite 200, Delray Beach, Florida 33445, hereinafter referred to as "SELLER", and CVMH, Inc., a Florida corporation, and/or assigns, whose address is 1700 North University Drive, Suite 302, Coral Springs, Florida 33065, hereinafter referred to as "PURCHASER". W I T N E S S E T H : WHEREAS, Seller is the owner of real property, hereinafter the "Property" consisting of approximately 9 models in the development know as Vizcaya and legally described as: Lots, 6, 7, 8, 9, 10, 11 and 12, Block E VIZCAYA PLAT No. 2, Lot 9, Block F, VIZCAYA PLAT No. 2, and Lot 8, Block G, VIZCAYZ PLAT No. 2, according to the Plat thereof, as recorded in Plat Book 86, Pages 103 and 104, all of the Public Records of Palm Beach County, Florida. WHEREAS, Seller has agreed to sell and Purchaser has agreed to purchase on the terms and conditions hereinafter set forth. NOW, THEREFORE, the parties hereto intending to be legally bound hereby, and in consideration of the mutual covenants contained herein, as well as other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, agree as follows: 1. PROPERTY Seller agrees to sell and convey to Purchaser, and Purchaser agrees to purchase and pay for upon the provisions, terms and conditions herein set forth, the Property. 2. PURCHASE PRICE The purchase price to be paid by Purchaser to Seller for the Property is ONE MILLION NINE HUNDRED FIFTY THREE THOUSAND EIGHT HUNDRED TEN AND NO/100 ($1,953,810.00) (the "Purchase Price"), subject to adjustments as hereinafter provided. (Subject to promissory note, a copy of which is attached as Exhibit A) 3. TITLE EVIDENCE AND SURVEY Purchaser at Purchaser's expense shall obtain a title commitment ("Commitment") for an ALTA owner's policy of title insurance, to be issued by Reliance Title Company (the "Title Company"), setting forth the state of title of the Property and all exceptions, including easements, restrictions, rights-of-way, covenants, reservations and other conditions, if any, which affect the Property which would appear in such owner's policy of title insurance, when issued. In the event that Seller's title shall not be found to be good and marketable, Purchaser shall notify Seller with in TEN (10) days of discovering any defect, and Seller agrees to use reasonable diligence to make the said title good and marketable, and shall have a reasonable time to do so, which shall be not more than NINTY (90) days after notification of any title defects, and if after reasonable diligence on Seller's part said title shall not be made good and marketable within a reasonable time, all monies paid under this Agreement by Purchaser shall be returned to Purchaser, and the parties shall be released from all obligations hereunder. In alternative, Purchaser may, as its option, request that Seller deliver the title in its existing condition. 4. CLOSING The closing hereunder shall be on or before December 1, 2000. 2 5. CLOSING ADJUSTMENTS The following items shall be prorated at closing as of the close of business on the day immediately preceding the closing date (hereinafter referred to as the "ADJUSTMENT DATE"): 7.01 Real estate taxes, personal property taxes and sewer rents, if any, on the basis of the fiscal year for which assessed. In the event the taxes for the year of closing are unknown, the tax proration will be based upon the taxes for the prior year, and at the request of either party, the taxes for the current year shall be reprorated and adjusted when the tax bill for the current year is received and the actual amount of taxes is known. The provisions of this paragraph shall survive the closing. 7.02 At closing, Escrow Agent shall deliver the Deposit and Purchaser shall deliver the balance of the purchase price, subject to adjustments and prorations as provided in this agreement, in immediately available U.S. Dollars. 6. DOCUMENTS 8.01 SELLER'S DOCUMENT: Seller shall deliver or cause to be delivered to Purchaser at the closing the following documents: (a) Seller shall convey to Purchaser fee simple title to the Property subject only to the following (the "Permitted Exceptions"): (i) EXCEPTIONS. Exception for real property taxes for the year of closing; (ii) SURVEY. Any matters revealed by a survey of the property; (iv) PHYSICAL CONDITION. Any matters which a physical inspection of the Property would reveal; and (v) OTHER MATTERS. Such other matters as to which Purchaser may consent in writing. (b) No-Lien Affidavit: (c) Non-Foreign Affidavit: (d) Such other instruments and documents as may be reasonably required by Purchaser or Reliance Title Company to consummate the transaction herein contemplated and which instruments and documents are within the spirit of this Agreement. 7. SELLER'S REPRESENTATIONS Seller represents and warrants to Purchaser that the following are true and correct and will be true and correct at closing: 9.01 Seller is the fee simple, absolute owner of this premises. 9.02 Seller has no actual knowledge, nor has Seller received any notice of any claim, action or proceeding, actual or threatened, by any organization, person, individual or governmental agency which would adversely affect the use, occupancy or value of the property or any part thereof. If Seller receives knowledge or notice of any claims prior to the closing, Seller shall give Purchaser immediate notice thereof and if Seller does not agree to indemnify and hold Purchaser harmless from and against any and all losses, claims, actions, damages, liabilities and expenses (including attorney's fees and expenses) in connection therewith, Purchaser may cancel this Agreement, in which event, the earnest money shall be refunded to Purchaser and neither party shall have any further liability or obligation to the other hereunder. 9.03 Certified, confirmed and ratified special assessment liens as of the Closing Date are to be paid by Seller. Pending liens as of the Closing Date shall be assumed by Purchaser. If the improvement has been substantially completed as of Effective Date, such pending lien shall be considered certified, confirmed or ratified and Seller shall, at closing, be charged an amount equal to the last estimate of assessment for the improvement by the public body. 2 3 The provisions of this paragraph shall survive the closing. 8. DEFAULT PROVISIONS In the event of the failure or refusal of the Purchaser to close this transaction without fault on Seller's part and without failure of title or any conditions precedent to Purchaser's obligations hereunder, the Seller shall receive the Deposit together with all interest earned thereon as agreed as liquidated damages for said breach and as Seller's sole and exclusive remedy for the default of Purchaser whereupon the parties shall be relieved of all further obligations hereunder. In the event of a default by Seller under this Agreement, Purchaser at its option: (i) shall have the right to receive the return of the Deposit together with all interest earned thereon whereupon the parties shall be released from all further obligations under this Agreement, or alternatively, (ii) Purchaser shall have the right to seek specific performance of the Seller's obligations hereunder and/or to initiate an action for any and all remedies available at law. 9. DOCUMENTARY STAMPS AND INTANGIBLE TAXES AT CLOSING Purchaser shall pay the cost of documentary stamps due on the Deed of conveyance. The cost of an owner's title insurance policy shall be paid by the Purchaser. Each party shall bear the recording costs of any other instruments received by that party. Seller shall pay the recording costs on documents necessary to clear title at closing. Purchaser shall be responsible for payment of all costs associated with the filing and recording of the mortgage including the documentary stamps and intangible tax of same. 10. BROKERS The parties represent and warrant each to the other, which representation and warranty shall survive the closing, that there are no claims or amounts now or hereafter due for any brokerage or salesman commissions or finders fees in connection with the transactions set forth herein other than the brokerage commission due and payable to Allied Business Services, Inc. and Investments, Inc. as to which Seller hereby acknowledges its exclusive liability and agrees to pay, and each party further agrees to indemnify and hold and save the other party harmless from any other claims or demands for commissions and/or fees incurred by such party in connection with the transactions set forth herein. 11. ASSIGNMENT Purchaser shall have the right to assign all or any part of its right, title and interest in and to this Purchase Agreement at any time and from time to time to any trust (s), firm (s), partnership (s), person (s), or other entity (ies) or corporation (s) owned or controlled by any of the owners of Purchaser or persons related to them by marriage or degrees of consanguinity and this Purchase Agreement shall be binding upon and inure to the benefit of said assignee, their respective heirs, representatives, successors and assigns. 12. ESCROW AGENT The parties hereby indemnify and hold the escrow agent harmless from and against any loss, liability, claim or damage the escrow agent may incur or be exposed to in its capacity as escrow agent hereunder except for willful or malicious conduct. If there is any dispute as to the disposition of any proceeds held by the escrow agent pursuant to the terms of this Agreement, the escrow agent is hereby authorized to interplead said amount with any court of competent jurisdiction and thereby be released from all obligations hereunder. The parties recognize that the escrow agent is the law firm representing the Purchaser, and hereby agree that such law firm may continue to represent Purchaser in the event of any litigation pursuant to this Agreement. 3 4 13. NOTICES Any notices required or permitted to be given under this Agreement shall be delivered by hand or mailed by certified or registered mail, return receipt requested, in a postage prepaid envelope, and addressed as follows: If to the Purchaser LARRY A. ROTHENBERT, P.A. and/or Escrow Agent: 900 North Federal Highway Suite 460 Boca Raton, FL 33432 If to the Seller: With copy to: 14. ATTORNEY'S FEES In the event of any litigation between the parties under this Agreement, the prevailing party shall be entitled to reasonable attorney's fees and court costs for all levels of litigation, including but not limited to appellate proceedings. 15. CONSTRUCTION Irrespective of the place of execution or performance, this Agreement shall be governed by and constructed in accordance with the laws of the State of Florida and all conveyancing shall be in accordance with the laws of the State of Florida. This Agreement shall be constructed without regard to any presumption or other rule requiring construction against the party causing this Agreement to be drafted. If any words or phrases in this Agreement shall have been stricken or otherwise eliminated, whether or not any other words or phrases have been added, this Agreement shall be constructed as if the words or phrases go stricken or eliminated were never included in this Agreement and no implication or reference shall be drawn from the fact that said words of phrases were so stricken or otherwise eliminated. All terms and words used in this Agreement, regardless of the number or gender in which they are used, shall be deemed to include any other number or any other gender as the context may require. 16. MODIFICATION AND TERMINATION This Agreement cannot be changed or terminated orally or in any manner other than by a written agreement executed by both parties. 17. BINDING EFFECT The provisions of this Agreement shall extend to, bind and inure to the benefit of the parties hereto and their respective successors and assigns. IN WITNESS WHEREOF, the Seller and Purchaser have caused this Agreement to be executed the day and year first above written. WITNESS: SELLER OH INVESTMENTS, INC., a Florida Corporation - --------------------------- BY: - --------------------------- ---------------------------------------- PURCHASER: CVMH, INC. a Florida Corporation BY: - --------------------------- ---------------------------------------- 4 5 NOTE $588,800.00 Boca Raton, Florida FOR VALUE RECEIVED, the undersigned, promises to pay to OH INVESTMENTS, INC., A FLORIDA CORPORATION, or order, in the manner hereinafter specified, the principal sum of FIVE HUNDRED EIGHTY EIGHT THOUSAND EIGHT HUNDRED AND NO/100 DOLLARS ($588,800.00) with interest from date at the rate of 8% per cent, per annum on the balance from time to time remaining unpaid. The said principal and interest shall be payable in lawful money of the United States of America at 1690 S. Congress Avenue, Delray Beach, Florida 33445 or as such place as may hereafter be designated by written notice from the holder to the maker hereof, on the date and in the manner following: Payable monthly in interest only payments at the annual rate of 8% per annum in the amount of $3,925.40 (to be adjusted upon any principal reduction) commencing December 30, 2000 and continuing on the 30th day of each month thereafter until such time as this Note is paid in full from the proceeds of the sales of the lots as described herein below or until December 30, 2003 at which time all principal and accrued interest, if any, shall become due and payable. Payment of principal shall be paid to OH Investments, Inc., utilizing 100% of all net proceeds due C.V.M.H., Inc., upon the sale of each of the 9 models located at Vizcaya. This Note is subordinate and inferior to the loan given by South Trust Bank with the original principal balance of $1,365,000.00. If default be made in the payment of any of the sums or interest mentioned herein, or in the performance of any of the agreements contained herein, then the entire principal sum and accrued interest shall at the option of the holder hereof become at once due and collectible without notice, time being of the essence; and said principal sum and accrued interest shall both bear interest from such time until paid at the higher rate allowable under the laws of the State of Florida. Failure to exercise this option shall not constitute a waiver of the right to exercise the same in the event of any subsequent default. Each person liable hereon whether maker or endorser, hereby waives presentment, protest, notice, notice of protest and notice of dishonor and agrees to pay all costs, including a reasonable attorney's fee, whether to be brought or not, if, after maturity of this note or default hereunder, or under said mortgage, counsel shall be employed to collect this note or to protect the security of said mortgage. Whenever used herein the terms "holder", "maker" and "payee" shall be construed in the singular or plural as the contest may require or admit. Maker's Address C.V.M.H., Inc., a Florida corporation 1690 S. Congress Avenue BY:__________________________(SEAL) Delray Beach, FL 33445 ___________________________(SEAL) __________________________(SEAL) _________________________(SEAL) EX-10.41 7 g68169ex10-41.txt LEASE DATED DECEMBER 1, 2000 1 EXHIBIT 10.41 LEASE (Specimen) THIS INDENTURE, made and executed this___________day of November, 2000 by and between C.V.M.H. INC., hereinafter called the Lessor, and OH INVESTMENTS, INC., a Florida corporation, hereinafter called the Lessee. W I T N E S S E T H: That, for and in consideration of the payment of the rents and performance of the covenants contained herein on the part of the Lessee and in the matter hereinafter stated, the Lessor does hereby demise and lease said property to the Lessee and in consideration of the premises, the Lessee does hereby lease and hire the property from Lessor subject to the terms and conditions hereinafter set forth: 1. DESCRIPTION: A. The property is located in Palm Beach County, Florida and legally described as follows: Lot 9, Block F, of VIZCAYA, Plat No. 2, according to the Plat thereof, recorded in Plat Book 86, page 103, of the Public Records of Palm Beach County, Florida. B. Street Address: 7261 Cataluna Circle, Delray, Florida. 2. TERMS: The initial term hereof shall commence on the _______day of November, 2000 and continue on a month by month basis. 3. RENT: Rent shall be the amount of One Thousand Six Hundred and Forty Two and 54/100 Dollars ($1,642.54) and continue on a month by month basis, payable simultaneously with the execution of the Agreement. 4. PROPERTY CONDITION: Lessor hereby acknowledges that the property shall be used as a model and at lease termination agrees to accept said property in a good condition, i.e. carpets will be cleaned and any damaged tiles will be replaced. Lessee shall maintain, repair and replace, as needed, all furniture and accessories owned by Lessor. 5. UTILITIES/EXPENSES: Lessee shall be responsible for the payment of all expenses, including without limitation, homeowners' association dues, utilities and insurance. Lessee shall not be responsible for real estate taxes. 6. USE OF PREMISES: Lessee will use the premises as a Model for purposes of showing and selling other houses in the Community. 2 7. INSURANCE: Lessee shall add Lessor as additional insured on liability and property damages insurance policies. Lessee shall bear cost of all deductibles in the event of any damages. Lessee shall provide Lessor with a certificate of insurance from Lessee's insurance company verifying the coverage and the addition of Lessor as an additional insured under the policies. 8. ATTORNEYS FEES AND COSTS: In connection with any litigation arising out of this Agreement, the prevailing party shall be entitled to recover all costs incurred, including reasonable attorneys' fees, including without limitation, fees incurred in trial, appellate and bankruptcy proceedings. 9. ORDINANCES AND STATUES: Lessee shall comply with all statutes, ordinances, and requirements of all municipal, state and federal authorities now in force or which may hereafter be in force, pertaining to the use of the premises. 10. RESERVED RIGHTS: Lessor reserves the following rights, to-wit: To enter the premises, or any part thereof, at all reasonable hours for inspection, repairs, alterations; to exhibit the premises to prospective Lessees and /or purchasers; to enter the premises for any purpose whatsoever related to the safety, protection preservation or improvement of the premises of the building; and to retain and use pass keys to the premises; provided, however, that arrangements for such entry shall be made in advance. The exercise of the reserved rights of the Lessor shall never be deemed an eviction or disturbance of Lessee's peaceable use and possession of the premises and shall never render Lessor liable in any manner to Lessee or to any other person in the premises. Lessor reserves the right to sell the subject property; however, in the event of such sale, Lessor, his assigns, successors and/or heirs agree to honor all the terms and covenants of this Lease Agreement for the duration of this Lease Agreement. 11. INDEMNIFICATION: Lessor shall not be liable for any damage or injury to Lessee, or any person or to any property occurring on the premises, or any part thereof, or in common areas thereof. Lessee agrees to hold Lessor harmless from any claims for damages no matter how caused, except for injury or damages for which owner is legally responsible. 12. HOLD HARMLESS: Lessee agrees to hold Lessor harmless for any damages occurring on or to the property during the term of the agreement. 13. NOTICES: All notices and demands authorized or required to be given the Lessee hereunder, may be served upon Lessee in person or by regular mail and addressed to Lessee at the leased premises and shall be effective when mailed or served. Copies of all notices to Lessor shall be sent to: Attention: Craig Perry C/O Centerline Homes, Inc. 12534 Wiles Road Coral Springs, FL 33076 2 3 14. RIGHT OF LESSOR UPON DEFAULT: Upon failure to pay any installment of rent or any part thereof when due, or if Lessee shall violate any other term, condition, or covenant of the Lease, or if Lessee shall fail promptly to take possession of or shall abandon the premises, Lessee shall be deemed in default of this of this Lease. In such event, this Lease and all rights of Lessee as tenants shall terminate but the Lessee shall remain liable for the rent herein specified during the remaining term of the lease plus Lessor's costs of repossessing the premises, including but not limited to all costs and reasonable attorney's fees. The failure on the part of the Lessor to re-enter or repossess the premises, or to exercise any of its rights hereunder upon default, shall not preclude the Lessor from the exercise of any such rights during the continuance of such default or upon any subsequent default. Acceptance of past due rent will in no way act as a waiver of Lessor's right for the enforcement thereof. 15. INTERPRETATION: In interpreting the Lease, all captions and titles shall be disregarded, and when applicable, the singular of any word shall mean or apply to the plural, and the masculine form shall mean and apply to the feminine. 16. COVENANTS AND REPRESENTATIONS: All covenants and representations herein contained are binding upon and shall inure to the benefit of the heirs, executors, successors, administrators, and assigns of the Lessor and Lessee. It is further agreed that neither Lessor, nor any agent or representative of the Lessor has made any statement, promissory agreements, verbally or in writing, in conflict with or enlarging the terms of this Lease. 17. HOLDING OVER: Should the Lessee occupy said premises after the date of the expiration of this Lease with the consent of the Lessor, express or implied, such possession shall be construed to be a tenancy for month to month only, subject to all the conditions and restrictions of this Lease, and the Lessee agrees to pay rent therefore at the rate prevailing at the time of the expiration of said term. 18. ENTIRE AGREEMENT: This Lease constitutes the entire agreement between the parties, and may not be modified unless in writing and executed by the parties. 19. TIME: Time is of the essence of this Agreement. ---- WITNESS our hands and seals on the day and year written below. Signed and sealed in LESSOR: The presence of: By: - ----------------------------- ------------------------------ C.V.M.H. Inc. LESSEE: OH INVESTMENTS, INC. By: - ----------------------------- ----------------------------- NOTARY PUBLIC 3 EX-10.42 8 g68169ex10-42.txt STOCK OPTION AGREEMENT W/PAUL R. LEHRER 1 EXHIBIT 10.42 STOCK OPTION AGREEMENT FOR NONEMPLOYEE DIRECTORS AGREEMENT dated this 10th day of May, 2000, between Oriole Homes Corp., a Florida corporation (hereinafter called the "Company"), and Paul R. Lehrer (hereinafter called the "Eligible Director"). W I T N E S S E T H: WHEREAS, the Company's shareholders approved (on May 9, 1994) the adoption of the 1994 Stock Option Plan for Nonemployee Directors (the "Plan") pursuant to which each Eligible Director is entitled to receive a grant to purchase 1,200 Shares per year, up to a maximum of 6,000 Shares: WHEREAS, the Company's Board of Directors approved (on May 12, 1999) the adjustment of the maximum Shares pursuant to Article 7 of the 1994 Stock Option Plan for Nonemployee Directors (the "Plan") each Eligible Director is now entitled to a maximun of 12,000 Shares: WHEREAS, the Executive Committee of the Board of Directors of the Company (the "Committee") has this day granted to each Eligible Director an option to purchase 1,200 shares of Class B Common Stock, par value $.10 per share, (the "Shares") of the Company, and at the option price, all as hereinafter stated, such option to be exercisable not more than ten (10) years after the date hereof; and WHEREAS, the Eligible Director is willing to accept said option and to be bound by the terms and conditions thereof; and WHEREAS, the execution and delivery of this Agreement has been duly authorized by the Board of Directors of the Company; NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants herein contained and other good and valuable considerations, the receipt whereof is hereby acknowledged, the parties hereto, including to be legally bound hereby, agree as follows: GRANT OF OPTION: ADJUSTMENT OF SHARES COVERED BY OPTION 1.1 The Company hereby grants to the Eligible Director an option to purchase from the Company, upon the terms and conditions hereinafter set forth, 1,200 shares of Class B Common Stock, par value $.10 per share (the "Shares"), for a cash consideration of $1.813 per share. 1.2 The number of Shares above stated, and the purchase price thereof, may be subject to adjustment from time to time as provided herein. VESTING 2.1 This option shall vest and become nonforfeitable on the day of the Annual Meeting following the date hereof if the Eligible Director continues to serve as a Director. PAYMENTS FOR SHARES 3.1 The option price of the shares to be purchased pursuant to each exercise of the within option shall be paid to the Company by the Eligible Director in full in cash or by bank certified, cashier's or personal check at the time of exercise of the option. 2 EXERCISE OF OPTION 4.1 The within option may be exercised according to the following schedule: 4.1.1 Fifty (50%) percent of the options granted become exercisable on the date of the first Annual Meeting after the date hereof. 4.1.2 The remaining fifty (50%) percent of the options granted become exercisable on the date of the second Annual Meeting after the date hereof. TERM OF OPTION 5.1 The options granted shall expire ten years from the date hereof, but are subject to earlier termination as follows: 5.1.1 In the event of the termination of the optionee's service as a Director, other than by reason of retirement, total and permanent disability, or death, the options granted herein that have not been exercised shall automatically expire on the effective date of termination. 5.1.2 In the event of termination of the optionee by reason of retirement or total and permanent disability, all vested options shall become exercisable to the full extent of the number of Shares remaining then outstanding, regardless of whether such options were previously exercisable and each such option shall expire four years after the date of such termination or on the stated grant expiration date whichever is earlier. 5.1.3 In the event of the death of the optionee while he is still a Director, vested options as per Section 2.1 hereof shall become exercisable, to the full extent of Shares remaining covered by such options, regardless of whether such options were previously exercisable and each such option shall expire four years after the date of death of such optionee or on the stated grant expiration, whichever is earlier. RESTRICTIONS ON EXERCISE OF OPTION AND SALE OF STOCK BY ELIGIBLE DIRECTOR 6.1 The within option shall not be exercisable if: (a) The exercise thereof will involve a violation of any applicable federal or state securities law; or (b) The exercise thereof will require registration under the Securities Act of 1933, as amended, of the shares of stock or other securities of the Company to be purchased by the Eligible Director pursuant to such exercise. 6.2 The Company hereby agrees to make such reasonable efforts to comply with any applicable state securities law as the Committee of the Company shall determine are reasonably necessary but such efforts shall not subject the Company to unreasonable expense or hardship. 6.3 At the time of any exercise of the within option, the Eligible Director shall represent to and agree with the Company in writing that he is acquiring the shares in respect of which the option is being exercised for the purpose of investment and not with a view of distribution. 6.4 The Eligible Director agrees that he will not sell or otherwise dispose of any shares of stock or other securities of the Company purchased by him pursuant to the exercise of all or any portion of the within option at any 2 3 time unless there is an effective Registration Statement in respect of such shares or other securities under the provisions of the Securities Act of 1933, as amended, or counsel for the Company is reasonably satisfied that an exemption from such registration provisions is available to the Company and the Eligible Director. MISCELLANEOUS 7.1 This Agreement shall be binding upon and inure to the benefit of the Company and its successors and the Eligible Director and his executors, administrators or personal representatives provided that the within option shall be non-transferable by the Eligible Director otherwise than by will or by the laws of descent and distribution, and during the lifetime of the Eligible Director the option shall be exercisable only by him. 7.2 In the event there are any changes in the capitalization of the Company through merger, consolidation, recapitalization, stock dividend or other change in the corporate or capital structure of the Company, appropriate adjustments, as may seem equitable to the Committee shall be made in the number of shares and the exercise price per share of the options to prevent dilution of the rights granted hereunder. 7.3 This Agreement shall be deemed to be made under and shall be construed in accordance with the laws of the State of Florida. 7.4 This Agreement shall become effective as of the date hereof and, unless sooner terminated, shall remain in effect for a period of ten (10) years from the date hereof. This Agreement may be terminated at any time by mutual consent of the parties hereto, but no modification or amendment of this Agreement shall become effective until such modification or amendment shall have been approved by the Committee. IN WITNESS WHEREOF, the Company has caused this Stock Option Agreement to be executed by its President or Vice President and the Eligible Director has executed this Agreement, the day and year first above written. ORIOLE HOMES CORP. /s/ RICHARD D. LEVY --------------------------- Richard D. Levy Chief Executive Officer /s/ PAUL R. LEHRER ---------------------------- Paul R. Lehrer, Director 3 EX-10.43 9 g68169ex10-43.txt STOCK OPTION AGREEMENT W/ GEORGE R. RICHARDS 1 EXHIBIT 10.43 STOCK OPTION AGREEMENT FOR NONEMPLOYEE DIRECTORS AGREEMENT dated this 10th day of May, 2000, between Oriole Homes Corp., a Florida corporation (hereinafter called the "Company"), and George R. Richards (hereinafter called the "Eligible Director"). W I T N E S S E T H: WHEREAS, the Company's shareholders approved (on May 9, 1994) the adoption of the 1994 Stock Option Plan for Nonemployee Directors (the "Plan") pursuant to which each Eligible Director is entitled to receive a grant to purchase 1,200 Shares per year, up to a maximum of 6,000 Shares: WHEREAS, the Company's Board of Directors approved (on May 12, 1999) the adjustment of the maximum Shares pursuant to Article 7 of the 1994 Stock Option Plan for Nonemployee Directors (the "Plan") each Eligible Director is now entitled to a maximun of 12,000 Shares: WHEREAS, the Executive Committee of the Board of Directors of the Company (the "Committee") has this day granted to each Eligible Director an option to purchase 1,200 shares of Class B Common Stock, par value $.10 per share, (the "Shares") of the Company, and at the option price, all as hereinafter stated, such option to be exercisable not more than ten (10) years after the date hereof; and WHEREAS, the Eligible Director is willing to accept said option and to be bound by the terms and conditions thereof; and WHEREAS, the execution and delivery of this Agreement has been duly authorized by the Board of Directors of the Company; NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants herein contained and other good and valuable considerations, the receipt whereof is hereby acknowledged, the parties hereto, including to be legally bound hereby, agree as follows: GRANT OF OPTION: ADJUSTMENT OF SHARES COVERED BY OPTION 1.1 The Company hereby grants to the Eligible Director an option to purchase from the Company, upon the terms and conditions hereinafter set forth, 1,200 shares of Class B Common Stock, par value $.10 per share (the "Shares"), for a cash consideration of $1.813 per share. 1.2 The number of Shares above stated, and the purchase price thereof, may be subject to adjustment from time to time as provided herein. VESTING 2.1 This option shall vest and become nonforfeitable on the day of the Annual Meeting following the date hereof if the Eligible Director continues to serve as a Director. PAYMENTS FOR SHARES 3.1 The option price of the shares to be purchased pursuant to each exercise of the within option shall be paid to the Company by the Eligible Director in full in cash or by bank certified, cashier's or personal check at the time of exercise of the option. 2 EXERCISE OF OPTION 4.1 The within option may be exercised according to the following schedule: 4.1.1 Fifty (50%) percent of the options granted become exercisable on the date of the first Annual Meeting after the date hereof. 4.1.2 The remaining fifty (50%) percent of the options granted become exercisable on the date of the second Annual Meeting after the date hereof. TERM OF OPTION 5.1 The options granted shall expire ten years from the date hereof, but are subject to earlier termination as follows: 5.1.1 In the event of the termination of the optionee's service as a Director, other than by reason of retirement, total and permanent disability, or death, the options granted herein that have not been exercised shall automatically expire on the effective date of termination. 5.1.2 In the event of termination of the optionee by reason of retirement or total and permanent disability, all vested options shall become exercisable to the full extent of the number of Shares remaining then outstanding, regardless of whether such options were previously exercisable and each such option shall expire four years after the date of such termination or on the stated grant expiration date whichever is earlier. 5.1.3 In the event of the death of the optionee while he is still a Director, vested options as per Section 2.1 hereof shall become exercisable, to the full extent of Shares remaining covered by such options, regardless of whether such options were previously exercisable and each such option shall expire four years after the date of death of such optionee or on the stated grant expiration, whichever is earlier. RESTRICTIONS ON EXERCISE OF OPTION AND SALE OF STOCK BY ELIGIBLE DIRECTOR 6.1 The within option shall not be exercisable if: (a) The exercise thereof will involve a violation of any applicable federal or state securities law; or (b) The exercise thereof will require registration under the Securities Act of 1933, as amended, of the shares of stock or other securities of the Company to be purchased by the Eligible Director pursuant to such exercise. 6.2 The Company hereby agrees to make such reasonable efforts to comply with any applicable state securities law as the Committee of the Company shall determine are reasonably necessary but such efforts shall not subject the Company to unreasonable expense or hardship. 6.3 At the time of any exercise of the within option, the Eligible Director shall represent to and agree with the Company in writing that he is acquiring the shares in respect of which the option is being exercised for the purpose of investment and not with a view of distribution. 6.4 The Eligible Director agrees that he will not sell or otherwise dispose of any shares of stock or other securities of the Company purchased by him pursuant to the exercise of all or any portion of the within option at any time unless there is an effective Registration Statement in respect of such 2 3 shares or other securities under the provisions of the Securities Act of 1933, as amended, or counsel for the Company is reasonably satisfied that an exemption from such registration provisions is available to the Company and the Eligible Director. MISCELLANEOUS 7.1 This Agreement shall be binding upon and inure to the benefit of the Company and its successors and the Eligible Director and his executors, administrators or personal representatives provided that the within option shall be non-transferable by the Eligible Director otherwise than by will or by the laws of descent and distribution, and during the lifetime of the Eligible Director the option shall be exercisable only by him. 7.2 In the event there are any changes in the capitalization of the Company through merger, consolidation, recapitalization, stock dividend or other change in the corporate or capital structure of the Company, appropriate adjustments, as may seem equitable to the Committee shall be made in the number of shares and the exercise price per share of the options to prevent dilution of the rights granted hereunder. 7.3 This Agreement shall be deemed to be made under and shall be construed in accordance with the laws of the State of Florida. 7.4 This Agreement shall become effective as of the date hereof and, unless sooner terminated, shall remain in effect for a period of ten (10) years from the date hereof. This Agreement may be terminated at any time by mutual consent of the parties hereto, but no modification or amendment of this Agreement shall become effective until such modification or amendment shall have been approved by the Committee. IN WITNESS WHEREOF, the Company has caused this Stock Option Agreement to be executed by its President or Vice President and the Eligible Director has executed this Agreement, the day and year first above written. ORIOLE HOMES CORP. /s/ RICHARD D. LEVY ----------------------------------- Richard D. Levy Chief Executive Officer /s/ GEORGE R. RICHARDS ----------------------------------- George R. Richards, Director 3 EX-10.44 10 g68169ex10-44.txt MORTGAGE & LOAN MODIFICATION & EXTENSION AGREEMENT 1 EXHIBIT 10.44 This Instrument Prepared By: James Sadock, Jr., Esq. 5550 Glades Road, Suite 100 Boca Raton, Florida 33431 - ------------------------------------------------------------------------------- MORTGAGE AND LOAN MODIFICATION AND EXTENSION AGREEMENT -------------------------------------- (Revolving Loan) THIS MORTGAGE AND LOAN MODIFICATION AND EXTENSION AGREEMENT (the "Extension Agreement"), made as of this _____ day of July, 2000, by and between ORIOLE HOMES CORP., a Florida corporation (the "Mortgagor"), having its principal place of business at Suite 200, 1690 South Congress Avenue, Delray Beach, Florida 33445-6327, and OHIO SAVINGS BANK, a federal savings bank, f/k/a Ohio Savings Bank, F.S.B. and f/k/a Ohio Savings Bank, an Ohio corporation (the "Mortgagee"), having its principal place of business at 200 Ohio Savings Plaza, 1801 East Ninth Street, Cleveland, Ohio 44114; NOTE TO RECORDER: PLEASE CROSS REFERENCE TO: DOCUMENTARY STAMPS AND INTANGIBLE TAX OFFICIAL RECORDS BOOK 7800, ON THE FUTURE ADVANCE NOTE ($5,000,000) PAGE 1590, PUBLIC RECORDS OF ARE AFFIXED TO THE AGREEMENT RECORDED PALM BEACH COUNTY, FLORIDA IN OFFICIAL RECORDS BOOK 9085, PAGE 547, PUBLIC RECORDS OF PALM BEACH COUNTY, FLORIDA. DOCUMENTARY STAMPS AND INTANGIBLE TAX ON THE FUTURE ADVANCE NOTE ($2,000,000) AND INTANGIBLE TAX ON THE DEMAND NOTES ($3,000,000) ARE AFFIXED TO THE AGREEMENT RECORDED IN OFFICIAL RECORDS BOOK 8897, PAGE 53, OF SAID PUBLIC RECORDS. DOCUMENTARY STAMPS ON THE DEMAND NOTES ($3,000,000) ARE AFFIXED THERETO. DOCUMENTARY STAMPS AND INTANGIBLE TAX ON THE ORIGINAL AMOUNT OF THE ORIGINAL NOTE ($10,000,000) ARE AFFIXED TO THE MORTGAGE RECORDED IN OFFICIAL RECORDS BOOK 7800, PAGE 1590 OF SAID PUBLIC RECORDS. W I T N E S E T H: WHEREAS, in consideration for a revolving line of credit in the maximum amount of Ten Million Dollars ($10,000,000.00) (the "Loan") made by Mortgagee to Mortgagor, Mortgagor has executed and delivered to Mortgagee a certain Revolving Mortgage Note dated July 13, 1993, in the maximum principal amount of the Loan as aforesaid (the "Original Note"); 2 WHEREAS, the Original Note is secured by, among other things, a Mortgage and Security Agreement (Revolving Loan) dated July 13, 1993, from Mortgagor to Mortgagee and recorded on July 16, 1993, in Official Records Book 7800, Page 1590, of the Public Records of Palm Beach County, Florida (the "Mortgage"), which encumbers the land described on Exhibit A attached thereto (the "Original Land"); WHEREAS, by Mortgage, Assignment and Financing Statement Spreader Agreement dated May 31, 1995, from Mortgagor to Mortgagee recorded on June 6, 1995, in Official Records Book 8776, Page 262, of the Public Records of Palm Beach County, Florida, the lien, charge, encumbrance, operation and effect of the Mortgage was expanded and spread so as to encumber and effect the land described in Schedule A attached thereto (the "First Additional Land"); WHEREAS, by Future Advance, Mortgage, Assignment and Financing Statement Extension, Modification and Spreader Agreement dated August 23, 1995, from Mortgagor to Mortgagee recorded on August 30, 1995, in Official Records Book 8897, Page 53, of the Public Records of Palm Beach County, Florida (i) the lien, charge, encumbrance, operation and effect of the Mortgage was expanded and spread so as to encumber and effect the land described in Schedule A attached thereto (the "Second Additional Land"); (ii) the maturity date of the Mortgage was extended to July 1, 1997; and (iii) the Mortgage was modified to secure an additional $5,000,000 of indebtedness evidenced by a $1,000,000 Demand Revolving Promissory Note dated August 8, 1995, a $2,000,000 Demand Revolving Promissory Note dated August 15, 1995 and a $2,000,000 Revolving Future Advance Mortgage Note dated August 23, 1995 (collectively, the "August Notes") [the Original Note and the August Notes were consolidated by a $15,000,000 Consolidated Revolving Mortgage Note dated August 23, 1995 (the "First Consolidated Note")]; WHEREAS, by Future Advance, Mortgage, Assignment and Financing Statement Extension, Modification and Spreader Agreement dated January 12, 1996, from Mortgagor to Mortgagee recorded on January 17, 1996, in Official Records Book 9085, Page 547, of the Public Records of Palm Beach County, Florida (i) the lien, charge, encumbrance, operation and effect of the Mortgage was expanded and spread so as to encumber and effect the land described in Schedule A attached thereto (the "Third Additional Land"); and (ii) the Mortgage was modified to secure an additional $5,000,000 of indebtedness evidenced by a $5,000,000 Revolving Future Advance Mortgage Note dated January 12, 1996 (the "Future Advance Note") [the Future Advance Note and the First Consolidated Note were consolidated by a $20,000,000 Consolidated Revolving Mortgage Note dated January 12, 1996 (the "Second Consolidated Note")]; WHEREAS, by Mortgage and Loan Modification and Extension Agreement dated July 1, 1997, from Mortgagor to Mortgagee recorded on November 25, 1997, in Official Records Book 10101, Page 1103, of the Public Records of Palm Beach County, Florida (i) the Loan, as increased by the August Notes and the Future 2 3 Advance Note and consolidated by the First Consolidated Note and the Second Consolidated Note (the "Consolidated Loan"), was reduced to the maximum amount of Ten Million Dollars ($10,000,000.00) (the "Reduced Consolidated Loan") such Reduced Consolidated Loan being evidenced by a $10,000,000 Renewal Amended and Restated Consolidated Revolving Mortgage Note dated July 1, 1997 (the "Third Consolidated Note"), executed and delivered to Mortgagee by Mortgagor and secured by the Mortgage; and (ii) the maturity date of the Mortgage, pursuant to the terms and conditions of that certain Revolving Loan Agreement dated July 13, 1993 between Mortgagor and Mortgagee as amended by First Amendment to Revolving Loan Agreement dated August 23, 1995 and Second Amendment to Revolving Loan Agreement dated July 1, 1997 (collectively, the "Agreement") was extended to June 30, 1999; WHEREAS, by Mortgage and Loan Modification and Extension Agreement dated October 15, 1998, from Mortgagor to Mortgagee recorded on October 29, 1998, in Official Records Book 10719, Page 221, of the Public Records of Palm Beach County, Florida the maturity date of the Mortgage was extended to June 30, 2000; WHEREAS, by Second Mortgage and Loan Modification and Extension Agreement dated June 30, 2000, from Mortgagor to Mortgagee recorded on ______________, 2000, in Official Records Book _____, Page ___, of the Public Records of Palm Beach County, Florida the maturity date of the Mortgage was extended to July 31, 2000; WHEREAS, Mortgagor and Mortgagee have agreed to extend the maturity date of the Mortgage for eleven (11) additional months. NOW THEREFORE, in consideration of the premises and Ten Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, Mortgagor and Mortgagee hereby covenant and agree as follows: 1. RECITALS. The aforementioned recitals are true and correct and are hereby incorporated by this reference. 2. EXISTING INDEBTEDNESS. The indebtedness evidenced by the Original Note, the August Notes and the Future Advance Note, as consolidated by the First Consolidated Note, the Second Consolidated Note and the Third Consolidated Note, was incurred in good faith for value received and as of the date hereof the unpaid balance of the Third Consolidated Note is $10,000.00, and the Mortgagor has no defenses, counterclaims or offsets thereto. 3. EXTENSION. The maturity date of the Third Consolidated Note, as heretofore amended and as modified by this Extension Agreement, is extended to June 30, 2001, anything in said Third Consolidated Note to the contrary notwithstanding. 3 4 4. MODIFICATION. Clause A on the first page of the Mortgage is hereby superseded, restated and replaced by the following: A. In consideration for a revolving line of credit in the maximum amount of Ten Million Dollars ($10,000,000.00) (U.S.) (the "Loan") made by Mortgagee to Borrower, Borrower has executed and delivered to Mortgagee a certain Renewal Amended and Extended Consolidated Revolving Mortgage Note dated as of July 1, 1997, in the maximum principal amount of the Loan as aforesaid, payable in full as to principal and accrued interest on June 30, 2001 (the "Note"); 5. DEFINITIONS. Capitalized terms not defined herein shall have the same meaning as in the Mortgage or the Agreement, as the case may be. 6. REPRESENTATIONS AND WARRANTIES. Mortgagor represents and warrants that: (a) Mortgagor has full power, authority and legal right to execute this Extension Agreement and to keep and observe all of the terms of this Extension Agreement on Mortgagor's part to be observed or performed, and that, as of the date hereof (i) the warranties and representations of Mortgagor contained in the Agreement are true, correct and complete in all material respects; (ii) all the covenants, terms and conditions of the Agreement remain satisfied; and (iii) no Event of Default, or event which upon the lapse of time, the giving of notice, or both, could become an Event of Default, has occurred under the Agreement. (b) The aggregate principal obligation of the Mortgagor secured by the Mortgage is Ten Million and no/100 Dollars ($10,000,000.00) (U.S.) which sum (or such lesser amount as shall have been actually borrowed by Mortgagor from Mortgagee) shall be repaid in accordance with the terms of the Third Consolidated Note. (c) Mortgagor has not availed, is not availing and has no intention to avail itself of the right and opportunity available to it under Chapter 697.04(1)(b) Florida Statutes to file of record a notice limiting the maximum principal amount that may be secured under the future advance provisions of the Mortgage. Mortgagor makes this representation and warranty knowing that Mortgagee shall rely upon the same in consideration of the terms and conditions agreed to herein. 7. RATIFICATION OF LOAN DOCUMENTS. Mortgagor acknowledges that the Third Consolidated Note, as heretofore amended and as amended hereby, the Mortgage, as heretofore amended and as amended hereby, and any other document or instrument related thereto are valid and binding; and there are no defenses, set offs or counterclaims thereto; nothing herein invalidates or shall impair or release any covenant, condition, agreement or stipulation in the Loan Documents; and Mortgagor shall perform and comply with and abide by each of the covenants, agreements, conditions and stipulations of the Loan Documents as heretofore amended as amended hereby. 4 5 8. LIMITED MODIFICATION. Except to the limited extent expressly set forth herein, all other terms and provisions contained in the Third Consolidated Note and the Mortgage, both as heretofore amended, remain in full force and effect, and nothing herein and nothing done pursuant hereto shall affect or be construed to affect the lien, charge and encumbrance of, or warranty of title in the Mortgage, as heretofore amended, nor the priority thereof over other liens, charges, encumbrances or conveyances, and the Mortgaged Property (as that term is defined in the Mortgage) shall remain in all respects subject to the lien, charge and encumbrance of the Mortgage. This Extension Agreement constitutes a modification or amendment, and not a novation. 9. MISCELLANEOUS. (a) RECORDING. Mortgagor shall promptly cause this Extension Agreement to be filed, registered or recorded in such manner and in such places as may be required by any present or future law in order to publish notice of and fully to protect the lien of the Mortgage upon, and the interest of Mortgagee in, the Mortgaged Property. Mortgagor will pay all filing, administration and recording fees, and all expenses incident to the preparation, execution and acknowledgment of this Extension Agreement, and all Federal, state, county and municipal taxes, duties, assessments and charges now or hereafter arising out of or in connection with the filing, registration, recording, execution and delivery of this Extension Agreement, including without limitation any and all documentary stamps and/or intangible taxes. Mortgagor agrees to hold harmless and indemnify Mortgagee against any liability incurred by reason of the imposition of any such tax, duty, assessment or charge. Mortgagor shall pay such sums immediately upon receipt of notice of such amounts from the authority to which they are due and payable or from Mortgagee or its assigns. In the event Mortgagor fails to pay said sums, Mortgagee or its assignee may at its option pay such taxes and/or purchase and affix such documentary stamps. Any such payment by Mortgagee or its assignee shall be added to the indebtedness evidenced by the Third Consolidated Note and shall bear interest from the date advanced to the date of recovery at a rate equal to the lesser of five percent (5%) per annum higher than the rate of interest then accruing in accordance with the provisions of the first paragraph of the Third Consolidated Note or the maximum rate permissible under Florida Law. (b) SEVERABILITY. If any one or more of the provisions of this Extension Agreement is held to be invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision or provisions in every other respect and of the remaining provisions of this Extension Agreement shall not be in any way impaired, and each term or provision shall be construed to be legal, valid, binding and enforceable to the maximum extent permitted by law. (c) SURVIVAL OF COVENANTS, REPRESENTATIONS AND WARRANTIES. All warranties, representations and covenants made by Mortgagor herein or in any 5 6 certificate or other instrument delivered by it or on its behalf under this Extension Agreement shall be considered to have been relied upon by Mortgagee and shall survive regardless of any investigation made by Mortgagee or on its behalf. (d) HEADINGS. Paragraph headings have been inserted in this Extension Agreement as a matter of convenience of reference only; such paragraph headings are not part of this Extension Agreement and shall not be used in the interpretation of this Extension Agreement. (e) GOVERNING LAW. This Extension Agreement shall be governed by and construed in accordance with the laws of the State of Florida. (f) FURTHER INSTRUMENTS. Mortgagor agrees from time to time, as may be reasonably required by Mortgagee, to execute and deliver such further instruments and documents and do all matters and things which may be convenient or necessary to more effectively and completely carry out the intention herewith. (g) CONFLICTS. In the event of any conflict between the provisions hereof and of the Third Consolidated Note and/or the Mortgage, the provisions hereof shall govern and control. THE MORTGAGOR AND MORTGAGEE EACH WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR RELATED TO, ANY ASPECT OF THE TRANSACTION IN CONNECTION WITH WHICH THIS DOCUMENT IS BEING GIVEN OR ANY DOCUMENT EXECUTED OR DELIVERED IN CONNECTION WITH SUCH TRANSACTION. THIS WAIVER IS KNOWINGLY, INTENTIONALLY AND VOLUNTARILY MADE BY MORTGAGOR AND MORTGAGEE AND THE MORTGAGOR AND MORTGAGEE EACH ACKNOWLEDGES THAT NO ONE HAS MADE ANY REPRESENTATIONS OF FACT TO INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY OR NULLIFY ITS EFFECT. THE MORTGAGOR AND MORTGAGEE EACH FURTHER ACKNOWLEDGES HAVING BEEN REPRESENTED IN CONNECTION WITH THE TRANSACTION WITH RESPECT TO WHICH THIS DOCUMENT IS BEING GIVEN AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED BY ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH SUCH COUNSEL. THE MORTGAGOR AND MORTGAGOR EACH ACKNOWLEDGES HAVING READ AND UNDERSTOOD THE MEANING AND RAMIFICATIONS OF THIS WAIVER PROVISION. IN WITNESS WHEREOF, the Mortgagor has caused this Extension Agreement to be executed as of the date first above written. MORTGAGOR: Signed and Acknowledged in the Presence of: ORIOLE HOMES CORP., a Florida corporation - ----------------------------- Name Printed: ---------------- 6 7 By:_________________________________ Richard D. Levy, Chairman of the Board and Chief Executive Officer _____________________________ Name Printed: _______________ STATE OF FLORIDA ) )SS: COUNTY OF PALM BEACH ) Before me, a Notary Public in and for said County and State, on this day of July, 2000, personally appeared the above-named Oriole Homes Corp., a Florida corporation, by Richard D. Levy, its Chairman of the Board and Chief Executive Officer, who acknowledged to me that he did sign the foregoing instrument on behalf of said corporation, and that such signing was his free act and deed as such officer, and the free act and deed of said corporation. Richard D. Levy is personally known to me. _______________________________________ Print Name:____________________________ (SEAL) Notary Public, State of Florida at Large My Commission Expires: ________________ 7 8 IN WITNESS WHEREOF, the Mortgagee has caused this Extension Agreement to be executed as of the date first above written. MORTGAGEE: Signed and Acknowledged in the Presence of: OHIO SAVINGS BANK, a federal savings bank, f/k/a Ohio Savings Bank, F.S.B., f/k/a Ohio Savings Bank, an Ohio corporation - --------------------------------- Name Printed: -------------------- By: -------------------------------- Ralph C. Kirk, Vice President Name Printed: -------------------- STATE OF OHIO ) )SS: COUNTY OF CUYAHOGA ) Before me, a Notary Public in and for said County and State, on this ____ day of July, 2000, personally appeared the above-named Ralph C. Kirk, the Vice president of Ohio Savings Bank, a federal savings bank, f/k/a Ohio Savings Bank, F.S.B., f/k/a Ohio Savings Bank, an Ohio corporation, personally known by me, who acknowledged to me that he did sign the foregoing instrument on behalf of said Bank and that the same was the free act and deed of said Bank and his free act and deed, individually and as such officer. Print Name: ------------------------------- (SEAL) Notary Public, State of Ohio My Commission Expires: -------- 8 EX-22.1 11 g68169ex22-1.txt SUBSIDIARIES 1 EXHIBIT 22.1
NAME: PARENT COMPANY: ORIOLE HOMES CORP. 1690 S. Congress Avenue Delray Beach, Florida 33445 I.D. NO. 59-1228702 STATE CHARTER # 324927 ---------- ------ DATE STATE % FEDERAL OF OF CORPORATION NAME Ownership ID # INCORP. INCORP. - --------------------------------------------------------------------------------------------- ------------- ------------- Alpha Title Company (Division of Oriole Homes Corp.) 100 OHC Corp. 100 59-1642454 02/05/69 Florida Oriole G & T Management Corp. 100 59-1440660 06/30/72 Florida Oriole At Harbour Heights, Inc. 100 59-1887560 06/12/78 Florida South Florida Residential Mortgage Co. 100 59-2048128 09/03/80 Florida Oriole-Boca, Inc. 100 59-2305076 04/17/81 Florida The Pier Club, Inc. 100 59-2782368 02/23/87 Florida Oriole Fairway Point, Inc. 100 65-0396548 02/12/93 Florida Oriole Joint Venture, Ltd. 100 65-0456394 12/30/93 Florida Oriole Limited, Inc. 100 65-0456392 12/30/93 Florida Oriole Of Naples, Inc. 100 65-0551606 12/22/94 Florida Oriole At Stonecrest, Inc. 100 65-0612267 07/07/95 Florida Seabreeze Properties, Inc. 100 52-0941761 1971 Maryland OH Investments, Inc. 100 65-1028961 08/08/2000 Florida
EX-23.1 12 g68169ex23-1.txt CONSENT OF GRANT THORNTON LLP 1 EXHIBIT 23.1 CONSENT OF GRANT THORNTON LLP We have issued our report dated February 23, 2001, accompanying the consolidated financial statements and schedules incorporated by reference in the Annual Report of Oriole Homes Corp. on Form 10-K for the years ended December 31, 2000 and 1999. We hereby consent to the incorporation by reference of said report in the Registration Statement of Oriole Homes Corp. on Form S-8 (File No. 333-27321). Miami, Florida March 26, 2001 -----END PRIVACY-ENHANCED MESSAGE-----