Exhibit
10.3

     

    PARTICIPATION
AGREEMENT

     

    THIS
PARTICIPATION AGREEMENT (this “Participation
Agreement”) is made as of February 3, 2010, by and between SPT-LAKE ELSINORE HOLDING CO.,
LLC, a Delaware limited liability company (“Seller”),
and D. R. HORTON LOS ANGELES
HOLDING COMPANY,
INC., a California corporation (“Buyer”),
collectively the “Parties”.

    


    Recitals:

     

    A           Pursuant
to that certain Purchase and Sale Agreement and Joint Escrow Instructions, dated
for reference purposes as of December 8, 2009, by and between Seller and Buyer, as may
be amended from time to time (collectively, the “Purchase
Agreement”), Buyer is acquiring from Seller 65 residential single family
lots, situated in Lake Elsinore, California (the “Property”).

     

    B           As
additional consideration for the purchase of the Property, and in addition to
the Purchase Price, Buyer has agreed to pay to Seller the ‘Participation Amount’
(as defined below), if any, that may be received by Buyer from the sale of a
Unit (as defined below), subject to the terms and conditions set forth
below.

     

    NOW,
THEREFORE, in consideration of the above and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties hereby
agree as follows:

     

    1.           Definitions.
Capitalized terms used in this Participation Agreement and not defined below or
in Schedule
“1”
attached hereto shall have the meanings set forth in the Purchase
Agreement.

     

    a.           “Escrow
Agent” means
the escrow agent for the sale of Units.

     

    b.           “Home Closing
Statement” means a written
statement prepared by the Escrow Agent identifying the homebuyer, the property
address, the date of the Unit closing and the Gross Sales Price of the home as
reflected on the HUD-1 settlement statement, solely for the purpose of Seller
verifying compliance with Buyer's obligation to pay the Participation
Amount.

     

    c.           “Participation
Amount” means those amounts payable by Buyer to Seller pursuant to Section 2
below.

     

    d.           “Gross
Profit” is defined in Schedule
“1”
attached hereto.

     

    e.           “Gross Profit
Margin” is defined in Schedule
“1”
attached hereto.

     

    f.           “Unit” means
a Lot improved by Buyer with a single family dwelling for sale to the
home-buying public.

     

    2.           Participation
Amount. Seller shall be entitled to receive fifty percent (50%) of any
Gross Profit that exceeds a twenty-four percent (24%) Gross Profit Margin on the
sale of the Units to be developed by Buyer on the Lots (the “Participation
Amount”).

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    3.           Payment
of Participation Amount. Within ninety (90) days after the sale of the
last Unit constructed within the Property, Buyer shall deliver an accounting to
Seller together with a payment in an amount equal to the Participation Amount,
if any, for the residences.

     

    4.           Financial
Records and Statements of Buyer. Buyer shall keep and maintain, or cause
to be kept and maintained, accurate financial books and records with respect to
the development of the Property in accordance with generally accepted accounting
principles as modified by the provisions of this Agreement.  Seller
shall have the right at all reasonable times and upon at least 5 business days
prior written notice, to inspect Buyer’s books and records for the purposes of
verifying the retail purchase price received by Buyer for Units, the Gross
Profit Margin calculation, and the allowable deductions used in calculating
Gross Profit and any other deductions or credits claimed by Buyer in determining
the amount of the Participation Amount.  Any deficiency in amounts due
Seller for the Participation Amount determined based upon such review by Seller
shall be due and payable by Buyer to Seller within 15 days after receipt of
notice thereof from Seller.  If Seller’s audit discloses that
Participation Amount was less than the amounts previously paid to Seller, Seller
shall pay to Buyer an amount equal to the excess of such amounts received over
the Participation Amount within 15 days after Seller’s receipt of the
audit.  Notwithstanding any provision to the contrary in this
Agreement, including in any Exhibit or Schedule hereto, Seller shall not be
entitled to a copy of a homebuyer’s HUD-1 settlement statement or any other
information that Buyer or the escrow agent for the sale of Units would not be
permitted by law to disclose; in such event, Buyer shall provide to Seller such
substitute documentary information sufficient for Seller to enable Seller to
verify the terms of sale of each Unit. Seller shall have thirty (30) days from
Buyer’s delivery to Seller of the accounting and supporting data within which to
make a written objection regarding Buyer’s proposed Participation
Amount.

     

    5.           Default
and Remedies.

     

    a.           Default. A default shall be
deemed to have occurred if the breaching party has not effected or commenced to
effect a cure within ten (10) days after a written notice from the other party
specifying the breach.

     

    b.           Dispute Resolution. If there
is a dispute between the parties regarding the calculation and/or payment of the
Participation Amount, then either party may elect to have such dispute resolved
pursuant to Section 32 of the Purchase Agreement, the terms of which are
incorporated herein by this reference.

     

    6.           Notice.
Any notice authorized, required, or permitted to be given hereunder shall be
delivered to the parties at the addresses and in the manner set forth in the
Purchase Agreement.

     

    7.           Miscellaneous
Provisions.

     

    a.           Governing Law. This
Participation Agreement shall be governed and interpreted under the laws of the
State of California.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    b.           Section Headings. The section
headings used in this Participation Agreement are for reference and convenience
purposes only, and shall not be used in the interpretation of this Participation
Agreement.

     

    c.           Exhibits. All exhibits
attached hereto are incorporated in this Participation Agreement by reference
and made a part of this Participation Agreement.

     

    d.           Integration; Amendment in
Writing. This Participation Agreement contains the entire agreement
between the Parties relating to the payment of any Participation Amount, and
neither party shall be bound by any oral statement or oral or written agreement
made prior to or contemporaneous with this Participation Agreement and not
included within this Participation Agreement.  The foregoing does not
affect the validity of the Purchase Agreement. This Participation Agreement
cannot be amended except by written agreement executed by the
Parties.

     

    e.           No Partnership or Joint
Venture. Nothing contained in this Participation Agreement is intended to
create, nor shall it ever be construed to make, Seller and Buyer partners or
joint venturers.

     

    f.           Severability. The provisions
of this Participation Agreement are severable, and if any provision or part
hereof or the application thereof to any person or circumstances shall ever be
held by any court of competent jurisdiction to be invalid or unconstitutional
for any reason, the remainder of this Participation Agreement and the
application of such provisions or part hereof to other persons or circumstances
shall not be affected thereby.

     

    g.           Effective Date. The effective
date of this Participation Agreement is the date the Initial Closing
occurs.

     

    h.           Dates for Performance. Should
the date for the giving of any notice, the performance of any act, or the
beginning or end of any period provided for in this Participation Agreement fall
on a Saturday, Sunday or other legal holiday, such date shall be extended to the
next succeeding business day which is not a Saturday, Sunday or legal
holiday.

     

    i.           Counterparts and Electronic
Signatures. This Participation Agreement may be executed in one or more
counterparts, of each which shall be deemed an original, but all of which
together shall constitute one and the same instrument. In addition, if any party
uses facsimile-transmitted signed documents, or signed documents which have been
electronically scanned and transmitted by email, Escrow Agent, Escrow Holder and
the other party are authorized to rely upon such documents as if they bore
original signatures.

     

    [Signatures appear
on the following page]

     

    
      
         


      

      
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    IN
WITNESS WHEREOF, the parties hereto have caused this Participation Agreement to
be executed as of the day and year first written above.

     

    
      
        
          
            	
                    Seller:

                  	
                    SPT-LAKE
      ELSINORE HOLDING CO., LLC, a Delaware limited

                    liability
      company

                  
	 
      	 
      	 
      
	 
      	
                    By:

                  	
                    Shopoff
      Partners, L.P., a Delaware limited partnership, sole

                    member

                  
	 
      	 
      	 
      
	 
      	 
      	
                    By:

                  	
                    Shopoff
      General Partner, LLC, a Delaware

                    limited
      liability company, general partner

                  
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	
                    By:

                  	
                    Shopoff
      Properties Trust, Inc., a Maryland

                    corporation,
      manager

                  
	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	
                    By:

                  	
                    /s/ William
      A. Shopoff

                  
	 
      	 
      	 
      	 
      	 
      	
                    William
      A. Shopoff,

                  
	 
      	 
      	 
      	 
      	 
      	
                    President
      and CEO

                  
	 
      	 
      	 
      	 
      	 
      	 
      
	
                    Buyer:

                  	
                    D.
      R. HORTON LOS ANGELES HOLDING COMPANY, INC., a

                    California
      corporation                                                       

                  
	 
      	 
      	 
      
	 
      	
                    By:

                  	
                    /s/
      Stephen Fitzpatrick

                  
	 
      	 
      	
                    Stephen
      Fitzpatrick, Vice
President

                  


          

        

      

    


    
      
         


      

      
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    SCHEDULE
1

     

    Definition of “Gross Profit
Margin”

     

    
      
        
          	
                  IF:

                	 
      	 
      
	 
      	 
      	 
      
	
                  A =
      Sales Revenue

                	 
      	
                  Defined
      as the sum of the sales price of each residence pursuant to a sale to a
      member of the home buying public as reflected on the Home Closing
      Statement for such residence, including any premium for location,
      elevation, view or lot size, but excluding prices for extras and options
      offered by Buyer in connection with the sale of any residence, including
      special or upgraded amenities, floor plan modifications, room options,
      appliance upgrades, cabinetry upgrades, countertop upgrades, finish
      carpentry upgrades, electrical options, fireplace options and all other
      options and upgrades, and minus sales incentives or concessions given to
      the home buyer.

                
	 
      	 
      	 
      
	
                  B =
      Land & Improvements

                	 
      	
                  Defined
      as Purchase Price paid to Seller for the Property plus all escrow, title
      and closing costs, costs of third parties in connection with due diligence
      review of the Property, brokerage commissions and legal fees, incurred and
      paid by Buyer in connection with the acquisition of title to the Property;
      additional improvements by Buyer (see Schedule 1-B) including but not
      limited to, grading, paving, curb, gutter and sidewalk, erosion control,
      landscaping, irrigation, walls and fences, mailboxes, dirt hauling, and
      repairs to asphalt and concrete; miscellaneous site specialties; soft
      costs including but not limited to civil, soils, and structural
      engineering, architects, design professionals and other consultants; meter
      deposits, mailboxes and pressure regulators, soils testing, export of lot
      spoils, and lot re-certifications; any association fees; the costs of
      non-recurring, capitalized indirect construction costs (which for the
      purposes of this agreement shall be 1.50% of Sales Revenue); the costs of
      DRE and HOA setup and administration (not including HOA dues); and permits
      and fees paid by Buyer in connection with developing the Property,
      including plan check and inspection fees, but excluding fees paid for
      obtaining building permits for the residences.

                
	 
      	 
      	 
      
	
                  C =
      Sticks and Bricks

                	 
      	
                  Defined
      as hard construction cost items and fees paid at building permit (see
      Schedule 1-A).

                
	 
      	 
      	 
      
	
                  D =
      Other Costs

                	 
      	
                  Defined
      as all costs paid by Buyer in connection with the close of escrow for the
      sale of residences to members of the home-buying public, including, but
      not limited to, closing costs, including normal escrow and title charges
      and property taxes, documentary transfer tax, buyer referral fees,
      Homeowner Association Fees, third party co-broker real estate commissions,
      and a warranty expense accrual calculated at 1.0% of the sales
      price for detached product and 1.5% for attached
    product.

                


        

      

    

     

    
      SCHEDULE 1

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      
        	
                E =
      Gross Profit =

              	 
      	
                A –
      (B + C + D)

              
	 
      	 
      	 
      
	
                GROSS
      PROFIT MARGIN =

              	
                  

              	
                E ÷
      A

              


      

    

     

    
      SCHEDULE 1

    

     

    
      
         


      

      
         


        
          

        

      

      
         


      

    


    SCHEDULE
1-A

     

    Item

     

    Building
Permits

    Temporary
Power

    Phase I
Environmental

    Area
drains

    Utility
Connections

    Lot
Grade

    Termite

    Plumbing

    Concrete
Foundation

    Concrete
Flatwork

    Windows

    Fireplaces

    Framing

    Electric

    Light
Fixtures

    Prewire
Security

    Heating
& A/C

    Sheet
Metal

    Gutters

    Ornamental
Iron

    Stucco

    Exterior
Tiles

    Roofing

    Painting

    Garage
Doors

    Insulation

    Drywall

    Finish
Carpentry

    Hardware

    Cabinets

    Ceramic
Counter Tops

    Marble
Counter Tops

    Shower
Enclosure

    Appliances

    Flooring

    Clean-Up

    Grading

    Utility
Trenching

    Fencing

    Landscaping

    Contingency

     

    
      SCHEDULE 1-A

       

    

    
      
         


      

      
         


        
          

        

      

      
         


      

    


    SCHEDULE
1-B

     

    Land Development
Costs

     

    DEVELOPMENT
IMPROVEMENTS

    Erosion
Control

    Grading

    Storm
Drain

    Sewer

    Water

    Concrete

    Paving

    Utilities

    Landscape
and Irrigation

    Walls

    Misc.
Specialties

    Contingency

    


    SITE
FEES

    Utility
Fees

    Development
Fees

    Water
District Fees

    Sewer
District Fees

    Bonds

    School
Fees

    


    CONSULTANTS

    Dry
Utilities Engineer

    Civil
Engineer

    Landscape
Architect

    Soils
Engineer

    Architect

    Structural
Engineer

    Energy
Consultant

    Site
Consultant

    


    DEVELOPMENT
IMPROVEMENTS

    EROSION
CONTROL

    Sand
Bags, Silt Fencing, Jute Mesh

    Labor for
storm clean-up of slopes and streets

    


    GRADING

    Rough
Grade & Re-Grade

    Spin Lots
for House

    Dirt Haul
from Site

    Labor and
Equip. for Weed Control

     

    
      SCHEDULE 1-B

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    STORM
DRAIN

    


    SEWER

    


    WATER

    


    CONCRETE

    Sidewalks
& Approaches

    Grading

    Curb and
Gutter

    Repair of
Same

    


    PAVING

    Pave
Streets

    Cap
Streets

    Parking
Lot Grading

    Repairs,
Re-Seal

    


    UTILITIES

    Main
& Laterals, Joint Trench, Street Lights

    


    LANDSCAPE
AND IRRIGATION

    Slope
Installation

    Front
yards & Street Trees

    Water for
Slopes

    Landscape
Maint. (common area & slopes)

    Model
Landscaping

    


    WALLS/FENCING

    Retaining
Walls

    Perimeter
Walls

    Property
Line Walls (wood, wrought iron, concrete, etc.)

    Model
Trap Fence

    


    MISC.
SPECIALTIES

    Mail
Boxes

    Street
Signs

    Street
Sweeper

    Water
Truck

    Electric
Controllers & Temp. Power

    Temporary
Fences

    Misc.
Site Fees (Encroachment Permits, Variance)

    Plans
& Blueprints

    Trailers

    Toilets

    Trash
Bins

     

    
      SCHEDULE 1-B

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    CONTINGENCY

    


    SITE
FEES

    UTILITY
FEES

    Gas,
Electric, Telephone & Cable

    DEVELOPMENT
FEES

    WATER
DISTRICT FEES

    SEWER
DISTRICT FEES

    BONDS

    


    CONSULTANTS

    DRY
UTILITIES ENGINEER

    CIVIL
ENGINEER

    LANDSCAPE
ARCHITECT

    SOILS
ENGINEER

    ARCHITECT

    STRUCTURAL
ENGINEER

    ENERGY
CONSULTANT

    SITE
CONSULTANT (independent inspector)

     

    
      SCHEDULE 1-B