Exhibit 10.3


 


STOCK PURCHASE
AGREEMENT


 


BY AND AMONG


 


MERITAGE HOMES
OF FLORIDA, INC.


 


AND


 


THE
STOCKHOLDERS OF GREATER HOMES, INC.


 


 


Dated August 24, 2005


 


 


Certain Confidential Information contained in
this Exhibit was omitted by means of redacting a portion of the text and
replacing it with an asterisk.  This Exhibit (containing
the non-public information) has been filed separately with the Secretary of the
Securities and Exchange Commission without redaction pursuant to Confidential
Treatment Request under Rule 24b-2 of the Securities Exchange Act of 1934.


 





















 


TABLE OF CONTENTS


 


	
  ARTICLE I

  	
  STOCK
  PURCHASE

  	
   

  
	
   

  	
   

  	
   

  
	
  1.1

  	
  Closing

  	
   

  
	
  1.2

  	
  Sale and Delivery

  	
   

  
	
  1.3

  	
  Stock Purchase

  	
   

  
	
  1.4

  	
  Purchase Price

  	
   

  
	
  1.5

  	
  Certain Contracted Projects

  	
   

  
	
  1.6

  	
  Holdback and Adjustment

  	
   

  
	
  1.7

  	
  Stockholder Closing Costs

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  REPRESENTATIONS
  AND WARRANTIES OF BUYER

  	
   

  
	
   

  	
   

  	
   

  
	
  2.1

  	
  Organization and Qualification

  	
   

  
	
  2.2

  	
  Authority Relative to this
  Agreement

  	
   

  
	
  2.3

  	
  No Conflicts

  	
   

  
	
  2.4

  	
  Sufficient Funds

  	
   

  
	
  2.5

  	
  No Consents

  	
   

  
	
  2.6

  	
  No Brokers

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  REPRESENTATIONS
  AND WARRANTIES OF STOCKHOLDERS

  	
   

  
	
   

  	
   

  	
   

  
	
  3.1

  	
  Ownership of the Shares

  	
   

  
	
  3.2

  	
  Authorization, Validity and
  Effect of Agreements

  	
   

  
	
  3.3

  	
  No Brokers

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  REPRESENTATIONS
  AND WARRANTIES OF STOCKHOLDERS AS TO THE COMPANY

  	
   

  
	
   

  	
   

  	
   

  
	
  4.1

  	
  Organization and
  Qualification

  	
   

  
	
  4.2

  	
  Capitalization

  	
   

  
	
  4.3

  	
  Subsidiaries and Other
  Interests

  	
   

  
	
  4.4

  	
  No Conflicts

  	
   

  
	
  4.5

  	
  No Consents

  	
   

  
	
  4.6

  	
  Financial Statements;
  Absence of Undisclosed Liabilities

  	
   

  
	
  4.7

  	
  No Material Adverse Changes

  	
   

  
	
  4.8

  	
  Absence of Certain
  Developments

  	
   

  
	
  4.9

  	
  Permitted Liens; Good Title
  to and Condition of Assets

  	
   

  
	
  4.10

  	
  Descriptions of Real
  Property

  	
   

  
	
  4.11

  	
  Real Property

  	
   

  
	
  4.12

  	
  A. Contract Property Real
  Estate

  	
   

  
	
  4.13

  	
  Warranties

  	
   

  
	
  4.14

  	
  Environmental Matters

  	
   

  
	
  4.15

  	
  Tax Matters

  	
   

  
	
  4.16

  	
  Restrictions
  on Business Activities

  	
   

  
	
  4.17

  	
  Intellectual
  Property

  	
   

  
	
  4.18

  	
  Litigation

  	
   

  
	
  4.19

  	
  Employees

  	
   

  
	
  4.20

  	
  Employee Benefit
  Plans

  	
   

  
	
  4.21

  	
  Insurance

  	
   

  
	
  4.22

  	
  Affiliate
  Transactions

  	
   

  
	
  4.23

  	
  Compliance
  with Laws

  	
   

  
	
  4.24

  	
  Permits

  	
   

  
	
  4.25

  	
  Membership
  Records; Minute Books

  	
   

  
	
  4.26

  	
  Budgets

  	
   

  
	
  4.27

  	
  Disclosure

  	
   

  
	
  4.28

  	
  Condominiums

  	
   

  
	
  4.29

  	
  Retail
  Sales Contracts

  	
   

  



 


i





















 


	
  4.30

  	
  Covenants,
  Conditions and Restrictions

  	
   

  
	
  4.31

  	
  Associations

  	
   

  
	
  4.32

  	
  Coastal
  Construction Control Line

  	
   

  
	
  4.33

  	
  Registration

  	
   

  
	
  4.34

  	
  Licensing

  	
   

  
	
  4.35

  	
  Construction

  	
   

  
	
  4.36

  	
  Florida’s
  Construction Lien Law

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  CONDUCT OF
  STOCKHOLDERS PENDING THE CLOSING

  	
   

  
	
   

  	
   

  	
   

  
	
  5.1

  	
  Conduct of
  Business Pending the Closing

  	
   

  
	
  5.2

  	
  Business
  Relationships

  	
   

  
	
  5.3

  	
  Notification
  of Certain Matters

  	
   

  
	
  5.4

  	
  Required
  Approvals

  	
   

  
	
  5.5

  	
  Tax Matters

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  COVENANTS
  AND ADDITIONAL AGREEMENTS

  	
   

  
	
   

  	
   

  	
   

  
	
  6.1

  	
  Noncompetition

  	
   

  
	
  6.2

  	
  Protection of
  Information

  	
   

  
	
  6.3

  	
  Employment

  	
   

  
	
  6.4

  	
  Break-Up Fee

  	
   

  
	
  6.5

  	
  Land
  Banking

  	
   

  
	
  6.6

  	
  Insurance
  Rights and Indemnification

  	
   

  
	
  6.7

  	
  Stockholders’
  Representative

  	
   

  
	
  6.8

  	
  Stockholder
  Advances and Other Debt Payments at Closing

  	
   

  
	
  6.9

  	
  No
  Negotiations

  	
   

  
	
  6.10

  	
  Independent
  Auditors

  	
   

  
	
  6.11

  	
  Right to
  Enter and Inspect

  	
   

  
	
  6.12

  	
  Public
  Announcements

  	
   

  
	
  6.13

  	
  Further
  Assurances

  	
   

  
	
  6.14

  	
  Post
  Closing Cooperation

  	
   

  
	
  6.15

  	
  Existing
  Closing Agent Arrangements

  	
   

  
	
  6.16

  	
  Post
  Closing Matters

  	
   

  
	
  6.17

  	
  Commercial
  Portions of Holly Hills, the Trails and Cypress Preserve

  	
   

  
	
  6.18

  	
  Deemed
  Asset Acquisition

  	
   

  
	
  6.19

  	
  Release of
  Guarantees By Stockholders

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
  TAX MATTERS

  	
   

  
	
   

  	
   

  	
   

  
	
  7.1

  	
  Indemnification
  Obligations With Respect to Taxes

  	
   

  
	
  7.2

  	
  Straddle Period

  	
   

  
	
  7.3

  	
  Tax Returns
  and Payment Responsibility

  	
   

  
	
  7.4

  	
  Tax Contests

  	
   

  
	
  7.5

  	
  Assistance
  and Cooperation

  	
   

  
	
  7.6

  	
  Retention
  of Tax Records

  	
   

  
	
  7.7

  	
  Other Tax Matters

  	
   

  
	
  7.8

  	
  Special
  Definitions

  	
   

  
	
  7.9

  	
  Unconditional
  Obligations

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
  INDEMNIFICATION
  AND WARRANTY AND RESERVE ADMINISTRATION

  	
   

  
	
   

  	
   

  	
   

  
	
  8.1

  	
  Indemnification
  of Stockholders by Buyer

  	
   

  
	
  8.2

  	
  Indemnification
  of Buyer by Stockholders

  	
   

  
	
  8.3

  	
  Limits on
  Indemnity; Certain Provisions and Procedures

  	
   

  
	
  8.4

  	
  Procedure
  for Indemnification

  	
   

  
	
  8.5

  	
  Warranty
  and Reserve Administration

  	
   

  



 


ii





















 


	
  ARTICLE IX

  	
  TITLE MATTERS

  	
   

  
	
   

  	
   

  	
   

  
	
  9.1

  	
  Existing
  Title Policies and Surveys

  	
   

  
	
  9.2

  	
  Title Insurance

  	
   

  
	
  9.3

  	
  Approved
  Title Exceptions

  	
   

  
	
  9.4

  	
  Additional
  Agreements

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE X

  	
  CONDITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  10.1

  	
  Conditions
  to Obligation of Stockholders

  	
   

  
	
  10.2

  	
  Conditions
  to Obligations of Buyer

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI

  	
  CLOSING

  	
   

  
	
   

  	
   

  	
   

  
	
  11.1

  	
  Stockholders’
  Obligations

  	
   

  
	
  11.2

  	
  Buyer’s
  Obligations

  	
   

  
	
  11.3

  	
  Transfer
  Fees, Title Costs, and Closing Costs and Other Fees; Prorations

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XII

  	
  SURVIVAL AND
  INDEMNITIES

  	
   

  
	
   

  	
   

  	
   

  
	
  12.1

  	
  Survival of
  Representations and Warranties

  	
   

  
	
  12.2

  	
  Nature of
  Statements

  	
   

  
	
  12.3

  	
  Dispute
  Resolution

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIII

  	
  TERMINATION/REMEDIES

  	
   

  
	
   

  	
   

  	
   

  
	
  13.1

  	
  Termination

  	
   

  
	
  13.2

  	
  Effect of
  Termination

  	
   

  
	
  13.3

  	
  Specific
  Performance

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIV

  	
  GENERAL
  PROVISIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  14.1

  	
  Notices

  	
   

  
	
  14.2

  	
  Counterparts

  	
   

  
	
  14.3

  	
  Governing
  Law

  	
   

  
	
  14.4

  	
  Assignment

  	
   

  
	
  14.5

  	
  Gender and
  Number

  	
   

  
	
  14.6

  	
  Schedules
  and Exhibits

  	
   

  
	
  14.7

  	
  Waiver of
  Provisions

  	
   

  
	
  14.8

  	
  Costs

  	
   

  
	
  14.9

  	
  Amendment

  	
   

  
	
  14.10

  	
  Severability

  	
   

  
	
  14.11

  	
  Binding
  Effect

  	
   

  
	
  14.12

  	
  Construction

  	
   

  
	
  14.13

  	
  Time
  Periods

  	
   

  
	
  14.14

  	
  Headings

  	
   

  
	
  14.15

  	
  Entire
  Agreement

  	
   

  
	
  14.16

  	
  Enforcement
  of Rights

  	
   

  
	
  14.17

  	
  No Third
  Beneficiaries

  	
   

  
	
  14.18

  	
  Deferral of
  Offsets, Character of Amounts Offset

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XV

  	
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  15.1

  	
  Definitions

  	
   

  
	
  15.2

  	
  Other Definitions

  	
   

  



 


	
  Exhibits

  	
   

  	
   

  	
   

  
	
  Exhibit A

  	
  –

  	
  Dispute Resolution
  Procedures

  	
   

  
	
  Exhibit B

  	
  –

  	
  Form of Option
  Agreement

  	
   

  
	
  Exhibit C

  	
  –

  	
  Escrow Agreement

  	
   

  



 


iii





















 


	
  Schedules

  	
   

  	
   

  	
   

  
	
  Schedule 1.6B(1)

  	
   

  	
  July 31, 2005 Balance Sheet

  	
   

  
	
  Schedule 6.3A

  	
  –

  	
  Executive Officer Compensation

  	
   

  
	
  Schedule 6.15

  	
  –

  	
  Commercial Properties

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Stockholders’ Disclosure Schedule

  	
   

  
	
  Section 3.1

  	
  –

  	
  Ownership of Shares

  	
   

  
	
  Section 3.3

  	
  –

  	
  Stockholders’ Broker

  	
   

  
	
  Section 4.3A

  	
  –

  	
  Subsidiaries and Capitalization

  	
   

  
	
  Section 4.3D

  	
  –

  	
  Convertible Debt

  	
   

  
	
  Section 4.4

  	
  –

  	
  Conflicts

  	
   

  
	
  Section 4.5

  	
  –

  	
  Consents

  	
   

  
	
  Section 4.6

  	
  –

  	
  Financial Statements

  	
   

  
	
  Section 4.7

  	
  –

  	
  Material Adverse Changes

  	
   

  
	
  Section 4.8

  	
  –

  	
  Certain Developments

  	
   

  
	
  Section 4.9

  	
  –

  	
  Permitted Liens

  	
   

  
	
  Section 4.10

  	
  –

  	
  Descriptions of Real Property

  	
   

  
	
  Section 4.11

  	
  –

  	
  Real Property

  	
   

  
	
  Section 4.11X

  	
  –

  	
  Related Party Projects and Other Contract Property

  	
   

  
	
  Section 4.12

  	
  –

  	
  Material Contracts

  	
   

  
	
  Section 4.13

  	
  –

  	
  Warranties

  	
   

  
	
  Section 4.14

  	
  –

  	
  Environmental Matters

  	
   

  
	
  Section 4.15A

  	
  –

  	
  Tax Records

  	
   

  
	
  Section 4.15B

  	
  –

  	
  Filing of Returns and Related Matters

  	
   

  
	
  Section 4.15C

  	
  –

  	
  Audit Matters

  	
   

  
	
  Section 4.15D

  	
  –

  	
  General Tax Matters

  	
   

  
	
  Section 4.15E

  	
  –

  	
  Tax Attributes

  	
   

  
	
  Section 4.15F

  	
  –

  	
  Roll-Back Taxes

  	
   

  
	
  Section 4.17

  	
  –

  	
  Intellectual Property

  	
   

  
	
  Section 4.18

  	
  –

  	
  Litigation

  	
   

  
	
  Section 4.19

  	
  –

  	
  Employees

  	
   

  
	
  Section 4.20

  	
  –

  	
  Employee Benefit Plans

  	
   

  
	
  Section 4.21

  	
  –

  	
  Insurance

  	
   

  
	
  Section 4.22

  	
  –

  	
  Affiliate Transactions

  	
   

  
	
  Section 4.23

  	
  –

  	
  Compliance With Laws

  	
   

  
	
  Section 4.24

  	
  –

  	
  Permits

  	
   

  
	
  Section 4.26

  	
  –

  	
  Budgets

  	
   

  
	
  Section 4.29

  	
  –

  	
  Sales Contracts

  	
   

  
	
  Section 4.31

  	
  –

  	
  Associations

  	
   

  
	
  Section 4.35

  	
  –

  	
  Offsite Infrastructure Work in Process

  	
   

  
	
  Section 9.1

  	
  –

  	
  Title Reports and Surveys

  	
   

  



 


iv





















 


STOCK
PURCHASE AGREEMENT


 


This Stock
Purchase Agreement (this “Agreement”)
is made as of August 24, 2005, by and among Meritage Homes of Florida, Inc.,
an Arizona corporation (“Buyer”) and
the Stockholders (the “Stockholders”)
of Greater Homes, Inc., a Florida corporation (“Greater Homes”), named on the signature page hereto.


 


RECITALS


 


1.                                       The Stockholders
collectively own all of the issued and outstanding shares of the Capital Stock
of Greater Homes (the “Shares”)
including, without limitation, all of the Class A Voting Common Stock,
$0.10 par value per share and all of the Class B Non-Voting Common Stock,
$0.10 par value per share (the “Company Stock”).


 


2.                                       Subject to the
terms and conditions of this Agreement, the Stockholders have agreed to sell
the Shares to Buyer, and Buyer has agreed to purchase the Shares from the
Stockholders (the “Stock Purchase”),
in exchange for the consideration set forth in this Agreement.


 


3.                                       Buyer is a wholly-owned
subsidiary of Meritage Homes Corporation, a Maryland corporation (“Meritage”) and Meritage is joining this Agreement for the
sections enumerated on the signature page.


 


4.                                       As a result of
Buyer’s acquisition of the Shares of Company Stock and the Greater Homes land
development, homebuilding, sales and related operations conducted by the
Company (the “Business”), Buyer
has legitimate business interests that it desires to protect in the specific
geographic region of Florida by entering into this Agreement, including trade
secrets, confidential business information, substantial relationships with
existing and prospective customers, suppliers and subcontractors and goodwill
associated with the ongoing Business.


 


5.                                       Buyer
acknowledges that in advance of Buyer’s actual acquisition of the Shares of
Company Stock and the Closing as contemplated hereunder, the Stockholders and
Greater Homes have legitimate and significant business interests making up the
Business that they desire to protect, including trade secrets, confidential
business information, substantial relationships with existing and prospective
customers, suppliers and subcontractors and goodwill associated with the
ongoing Business, all of which interests of Greater Homes and the Stockholders
are to be fully protected in advance of Closing hereunder in accordance with
the terms of this Agreement and that certain Letter of Confidentiality
regarding the Transaction and Evaluation Material from Robert A. Mandell to
John R. Landon dated May 2, 2005.


 


6.                                       The parties
desire to make certain representations, warranties, covenants and agreements in
connection with the Stock Purchase, and also to prescribe various conditions to
the transaction.


 





















 


In
consideration of the covenants and mutual agreements set forth herein and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged and, in reliance upon the representations and warranties
contained herein, the parties agree as follows:


 


ARTICLE I

STOCK PURCHASE


 


1.1                                 Closing.  The closing of the Stock Purchase (the “Closing”) will take place at 10:00 a.m.
local time on the 1st day of September, 2005 at the offices of Greenberg
Traurig, LLP in Orlando, Florida or such other time and place as agreed to
between Buyer and the Stockholders no less than three business days prior to an
anticipated Closing.  The day on which
the Closing actually occurs is herein sometimes referred to as the “Closing Date.”


 


1.2                                 Sale
and Delivery.  At the Closing, on the
terms and subject to the conditions set forth herein, the Stockholders shall
sell and deliver to Buyer the Shares free and clear of all Liens, and Buyer
shall purchase and accept the Shares from the Stockholders.


 


1.3                                 Stock
Purchase.  Buyer will purchase the
Company Stock by making the purchase price payment at Closing described in Section 1.4
to or for the benefit of the Stockholders.


 


1.4                                 Purchase
Price.


 


A.                                   At the Closing,
Buyer will pay to the Stockholders (pro rata in proportion to the number of
Shares of the Company Stock owned by each of them as of the Closing) an amount
equal to (i) the Adjusted Book Equity as reflected on the Preliminary
Closing Balance Sheet, plus (ii) $39,140,000, minus (iii) any
Stockholder advances deducted pursuant to Section 6.8; provided, however,
$[ * ] of the purchase price (the “Holdback
Fund”) will be delivered to a designated escrow account as set forth
in Section 1.6A.


 


B.                                     Buyer will pay to
the Stockholders a deferred purchase price payment equal to 50% of the net
income of the Company (after taking into account income taxes) for the month of
September 2005 as determined in accordance with GAAP but excluding
transactions outside the ordinary course of business.  Buyer will make such payment to the
Stockholders at the time the purchase price adjustment payment(s) are made
pursuant to Section 1.6B.  Any
payment made by Buyer to the Stockholders under this Section 1.4B will be
part of the purchase price for the Company Stock hereunder and will not be
subject to any right of setoff for any indemnification claims of Buyer
hereunder, except that the parties agree that Buyer’s payment pursuant to this Section 1.4B,
may, where applicable, be offset against any amounts due to Buyer pursuant to Section 1.6B.


 


1.5                                 Certain
Contracted Projects.


 


A.                                   The Company has contracted
to purchase the real property for the following subdivision projects (the “Related Party Projects”) from affiliates of the Stockholders
(the “Related Parties”) pursuant to the
following agreements:  (i) Cypress
Preserve, pursuant to that certain Agreement between the Company, as buyer, and
Cypress Preserve, LLC, an affiliate of the Stockholders, as seller dated April 21,
2005 (the “Cypress










*                 Confidential information on this page has been
omitted and filed separately with the Securities Exchange Commission pursuant
to a Confidential Treatment Request.


 


2





















 


Preserve Agreement”);  (ii) Overlook at Lake Louisa Phase II,
pursuant to that certain Agreement between the Company, as buyer, and Lake
Louisa Land, LLC, an affiliate of the Stockholders, as seller dated April 21,
2005 (the “Lake Louisa Agreement”); (iii) Orangetree
Phase 6, pursuant to that certain Agreement between the Company, as buyer, and
Orangetree Commercial, LLC, an affiliate of the Company, as seller dated January 26,
2005 (as amended from time to time thereafter, the “Orangetree
Agreement”); (iv) Arbor Ridge 4 pursuant to that certain
Agreement between the Company, as buyer, and Greater Properties, Inc., a
corporation owned by the Stockholders, as seller dated August 18, 2005 (as
amended from time to time thereafter, the “Arbor Ridge 4 Agreement”;
and (v) Arbor Ridge 5 pursuant to that certain Agreement between the
Company, as buyer and Arbor Ridge, LLC, an affiliate of the Stockholders, as
seller, dated August 18, 2005 (as amended from time to time thereafter,
the “Arbor Ridge 5 Agreement”)(the Cypress
Preserve Agreement, Lake Louisa Agreement, Orangetree Agreement, Arbor Ridge 4
Agreement and Arbor Ridge 5 Agreement are collectively referred to herein as
the “Related Party Agreements”).  In connection with and immediately prior to
the Closing, the parties hereto agree that the Related Party Agreements will be
restated and amended by written instrument executed by each seller and the
Company in substantial accordance with the form Option Agreement attached hereto
at Exhibit B (the “Form Option Agreement”), subject to the following
business terms:


 


(1)                                  With
respect to Cypress Preserve, the option term shall expire on October 1,
2005, the deposit shall be [ * ] of the base purchase price and the base
purchase price shall be $[ * ].


 


(2)                                  With
respect to Overlook at Lake Louisa Phase II, the option term shall expire on October 1,
2005, the deposit shall be [ * ] of the base purchase price and the base
purchase price shall be $[ * ].


 


(3)                                  With
respect to Orangetree Phase 6, the option term shall expire on October 1,
2005, the deposit shall be [ * ] of the purchase price and the purchase price
shall be $[ * ].


 


(4)                                  With
respect to Arbor Ridge 4, the option term shall expire one year from the date
of Closing, the deposit shall be [ * ] of the base purchase price, and the base
purchase price shall be $[ * ], plus all expended development and soft costs
together with an annual compounded escalator of [ * ]%.


 


(5)                                  With
respect to Arbor Ridge 5, the option term shall commence upon the Closing under
this Agreement and shall expire on September 18, 2007, provided that the
closing of the transfer of title to Arbor Ridge 5 shall not occur before September 18,
2006.  The deposit shall be [ * ] of the
base purchase price, and the base purchase price shall be $[ * ], plus all
expended soft costs together with an annual compounded escalator of [ * ]%.


 


In subparagraphs 4 and 5 above, the annual
escalator shall not apply to the amount of the deposits paid and the unfunded
development costs.


 










*                 Confidential
information on this page has been omitted and filed separately with the
Securities Exchange Commission pursuant to a Confidential Treatment Request.


3





















 


B.                                     The Company has
entered into that certain Real Estate Sale Contract with D Ranch, Ltd., as
seller and partial fee owner, dated May 3, 2004 (“D Ranch
Contract”), as well that certain Real Estate Sale Contract with Roy
M. Bridges and Ginger F. Bridges, as sellers and partial fee owners, dated August 17,
2004 and as amended from time to time (“Bridges Contract”)
concerning real property referred to as the “Trails of St. John’s” (both
contracts collectively referred to as the “Trails
Purchase Contracts”), which Trails Purchase Contracts grant the
Company the exclusive right to acquire real property relating to the Trails of
St. John’s subdivision project.


 


The Stockholders and Buyer understand that the Bridges Contract is
scheduled to close on or about January 15, 2006 and the Stockholders agree
to use reasonable efforts to extend the Bridges Contract Closing Date.  If the Buyer or the Company do not agree to
close the Bridges Contract on the Bridges Contract Closing Date, the Buyer
agrees to cause the Bridges Contract to be assigned to the Stockholders for the
Company’s cost and the Stockholders covenant to close the Bridges Contract and
to purchase the Bridges Property.  The
Stockholders will grant the Company the option to purchase the Bridges property
from the Stockholders, at the Stockholders cost, which shall be exercisable by
the Company only at the time the Buyer pays the additional purchase price of
$6,444,000.00 (the “Additional Purchase Price”)
pursuant to this Section 1.5B (the “Bridges Option”).  If the Company does not pay the Additional
Purchase Price, the Bridges Option shall terminate and be cancelled.


 


If the Trails of St. John Project (the project consisting of the D
Ranch Property and the Bridges Property) obtains the Trails Zoning, as
hereinafter defined, on or before March 31, 2006, or thirty days prior to
the closing date of the D Ranch Contract, if such closing date is extended
beyond May 1, 2006 (the “Zoning Date”),
the Buyer shall pay to the Stockholders within five business days of the Zoning
Date the Additional Purchase Price of $6,444,000.00.  If the Trails Zoning is not obtained by the
Zoning Date, the Buyer shall have the option, but not the requirement, to pay
the Stockholders the Additional Purchase Price. 
If the Buyer elects not to pay the Stockholders the Additional Purchase
Price, the Stockholders shall have the option of purchasing the D Ranch
Contract (the “St. John’s Contingent Sale”) from
the Company for the Company’s cost.  If
the Stockholders do not elect to purchase the D Ranch Contract from the Company,
the Buyer agrees that neither it nor the Company shall close on the D Ranch
Contract or assign it to any third party, but will allow it to terminate
without closing and neither the Buyer nor the Company shall subsequently
purchase the D Ranch Property.  If the
Stockholders exercise their option for the St. John’s Contingent Sale, the
Stockholders agree to indemnify the Buyer and the Company as set forth in Section 8.3B(4).


 


The Trails Zoning on the Trails of St. Johns Project shall be defined
as zoning from the local government having jurisdiction therefore and approval
by the State of Florida Department of Community Affairs and adoption by the
local government, of an amendment to the local government’s Comprehensive Land
Plan and zoning code which will allow the construction of at least 1,030
residential dwelling units.  The zoning
shall not be considered granted until the applicable appeals period has expired
without challenge.


 


4





















 


If the Stockholders close on the Bridges property and/or the D Ranch
Property, they shall have the right to develop it for residential purposes and
sell it for residential construction, but shall not have the right to build or
sell any residential dwellings thereon.


 


1.6                                 Holdback
and Adjustment.


 


A.                                   Holdback.  At the Closing, Buyer will deliver to a
designated escrow account the Holdback Fund, in cash by wire transfer of
immediately available funds, pursuant to the terms of an escrow agreement with
First American Title Insurance Company, Orlando, Florida, substantially in the
form of Exhibit C attached
hereto (the “Escrow Agreement”) to
be executed among Buyer and the Stockholders, and the designated escrow
agent.  The Holdback Fund will be held in
an interest-bearing escrow account to satisfy indemnification and other claims
of Buyer that may arise under this Agreement.


 


The balance of
the Holdback Fund, including any interest or other earnings earned on the
Holdback Fund, will be delivered by the designated escrow agent to the Stockholders’
Representative on the [ * ] anniversary of the Closing Date, less any amount
previously disbursed by Escrow Agent to Buyer pursuant to the terms of the
Escrow Agreement and less any additional amount that Buyer is entitled to
retain under Articles VII or VIII of this Agreement, less any amount that is
disputed and subject to the dispute resolution provisions of Exhibit A.


 


B.                                     Adjusted Book
Equity Calculation; Purchase Price Adjustment.


 


(1)                                  Schedule 1.6B(1) sets
forth a balance sheet of the Company as of July 31, 2005 which to the
Knowledge of Stockholders is prepared in accordance with GAAP (the “July Balance Sheet”), and reflects the
Adjusted Book Equity as of such date. 
The parties hereby accept and agree to the July Balance Sheet,
absent fraud, mistake or concealment and subject to their respective rights
under this Agreement.


 


(2)                                  For the purpose of
making an initial determination of Adjusted Book Equity, the Stockholders will
deliver to Buyer, at least five days prior to the Closing, a balance sheet,
prepared on a basis consistent with the July Balance Sheet and in
accordance with GAAP, reflecting the estimated closing balances for the Company
as of the Closing Date (or the end of the month immediately preceding the
Closing Date) (the “Preliminary Closing
Balance Sheet”).  The
Preliminary Closing Balance Sheet will be used for determining the total amount
of the cash payment to be made by Buyer at Closing pursuant to Section 1.4A.


 


(3)                                  No later than one
month after the Closing Date, Buyer will deliver to the Stockholders’
Representative the Final Closing Balance Sheet reflecting its determination of
actual closing balances for the Company, prepared on a basis consistent with
the July Balance Sheet and the Preliminary Closing Balance Sheet.


 


(4)                                  The Final Closing
Balance Sheet will become final and binding on the parties, absent fraud,
mistake or concealment and subject to their respective rights under this
Agreement, unless within thirty (30) days following delivery thereof to the
Stockholders’ Representative, the Stockholders’ Representative notifies Buyer
in writing that the Stockholders’ 


 










*                 Confidential
information on this page has been omitted and filed separately with the
Securities Exchange Commission pursuant to a Confidential Treatment Request.


 


5





















 


Representative objects thereto.  If the Stockholders’ Representative objects
to the Final Closing Balance Sheet, and after good faith consultation with
respect to the objection, the parties are unable to reach an agreement within
thirty (30) days, then the parties will resolve the dispute in the manner
provided in Exhibit A;
provided, however, that the arbitrator will be an accounting firm of national
standing (other than the firm then currently, or within the prior three years,
serving as auditors for Meritage or the Company) as may be mutually agreed upon
by Buyer and the Stockholders’ Representative or appointed by the AAA if Buyer
and Stockholders’ Representative are unable to agree on such accounting firm
within forty-five (45) days after the Stockholders’ Representative’s notice of
objection (the “Accounting Arbitrator”).  The determination of the Accounting
Arbitrator will be final and binding on all parties absent manifest error or
mistake, and judgment on the arbitration award may be enforced in any court
having jurisdiction.  Buyer and the
Stockholders will each pay the cost of their own accounting and other
professionals and will bear equally the fees and expenses of the Accounting
Arbitrator.  Upon determination of the
Final Closing Balance Sheet pursuant to this Section 1.6B, Buyer will make
any payment to the Stockholders required by Section 1.6B(5) or the
Stockholders will make any payment to Buyer required by Section 1.6B(5),
in each case within three business days of final determination.


 


(5)                                  If the Adjusted Book
Equity as reflected on the Final Closing Balance Sheet is less than the
Adjusted Book Equity as reflected on the Preliminary Closing Balance Sheet,
then the Stockholders shall pay to Buyer cash in an amount equal to the
difference.  If the Adjusted Book Equity
as reflected on the Final Closing Balance Sheet is more than the Adjusted Book
Equity as reflected on the Preliminary Closing Balance Sheet, then Buyer shall
pay to the Stockholders (pro rata in proportion to the number of Shares of the
Company Stock owned by each of them as of the Closing) cash in an amount equal
to the difference.  The parties expressly
agree that any obligation of the Stockholders to pay cash to Buyer under this Section 1.6B(5) will
not count against the Indemnification Cap and will not reduce or otherwise
apply to the Basket Threshold.  Any
amount paid by Buyer to the Stockholders pursuant to this Section 1.6(B)(5) will
be part of the purchase price for the Company Stock hereunder and will not be
subject to any right of setoff for any indemnification claims of Buyer
hereunder.


 


1.7                                 Stockholder
Closing Costs.  All attorneys’ fees,
brokers’ fees and any and all closing costs incurred directly or indirectly by
the Company or the Stockholders will be paid directly out of the closing
proceeds.


 


ARTICLE II

REPRESENTATIONS AND WARRANTIES OF BUYER


 


Buyer hereby
represents and warrants to the Stockholders as of the date of this Agreement
and as of the Closing Date as follows:


 


2.1                                 Organization
and Qualification.  Buyer is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Arizona and has the requisite corporate power and
authority to own and operate its properties and to carry on its business as now
conducted.


 


6





















 


2.2                                 Authority
Relative to this Agreement.  Buyer
has the requisite power and authority to enter into this Agreement and to carry
out its obligations hereunder.  The
execution and delivery of this Agreement by Buyer and the consummation by Buyer
of the transactions to which it is a party that are contemplated hereby
(including execution of the other Transaction Documents to which it is a party)
have been duly authorized, and no other actions or proceedings, corporate or
otherwise, on the part Buyer are necessary to authorize this Agreement and such
transactions.  This Agreement has been
duly executed and delivered by Buyer and (assuming this Agreement constitutes a
valid and binding obligation of the other parties hereto) constitutes (and the
Transaction Documents when executed and delivered by Buyer will constitute)
valid and binding obligations of Buyer enforceable against Buyer in accordance
with their terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, or other similar laws relating to the
enforcement of creditors’ rights generally and by general principles of equity.


 


2.3                                 No
Conflicts.  Buyer is not subject to or
obligated under (i) any provision of its articles of incorporation or
bylaws, (ii) any agreement, arrangement or understanding, (iii) any
license, franchise or permit or (iv) any law, regulation, order, judgment
or decree, which would be breached or violated by its execution, delivery and
performance of this Agreement and the consummation by it of the transactions
contemplated hereby, except, in the case of clauses (ii), (iii) and (iv),
for any such breaches, violations, rights of termination or acceleration or
encumbrances which are not reasonably likely, individually or in the aggregate,
to have a material adverse effect on its business, properties, condition
(financial or otherwise) or results of operations or ability to conduct the
business currently conducted by it.


 


2.4                                 Sufficient
Funds.  Buyer (or Meritage) has
available sufficient funds in cash to pay the purchase price, to pay all fees
and expenses related to the transactions contemplated hereby and to consummate
the transactions contemplated hereby.


 


2.5                                 No
Consents.  No authorization, consent,
or approval of, or filing with, any Governmental Authority is necessary on the
part of Buyer for the consummation by Buyer of the transactions to which it is
a party that are contemplated by this Agreement, except for any such
authorizations, consents, approvals or filings, the failure of which to obtain
or make is not reasonably likely, individually or in the aggregate, to have a
material adverse effect on its business, properties, condition (financial or otherwise)
or results of operations or ability to conduct the business currently conducted
by it.


 


2.6                                 No
Brokers.  No broker, finder or
similar agent has been employed by or acted on behalf of, directly or
indirectly, Buyer or any of its affiliates in connection with this Agreement or
the other Transaction Documents or the transactions contemplated hereby or
thereby.  Neither Buyer nor any of its
affiliates has entered into any arrangement or other contract of any kind with
any Person, or taken any other actions, which would obligate Stockholders, the
Company or any of their respective affiliates to pay any brokerage commission,
finder’s fee or any similar compensation in connection with this Agreement, the
other Transaction Documents or the transactions contemplated hereby or thereby.


 


7





















 


ARTICLE III

REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS


 


Except as set forth in the disclosure schedule delivered by the
Stockholders to Buyer at or prior to the execution hereof that is arranged in
sections corresponding to the numbered and lettered sections contained in this
Agreement (the “Stockholders’ Disclosure
Schedule”), the Stockholders, jointly and severally, represent and
warrant to Buyer, as of the date of this Agreement and as of the Closing Date,
as follows:


 


3.1                                 Ownership
of the Shares.  Each Stockholder is
the sole record and beneficial owner of the Shares of Company Stock set forth
next to such Stockholder’s name in Section 3.1 of the Stockholders’
Disclosure Schedule, free and clear of all Liens.  Such Shares are duly registered in the name
of such Stockholder on the stock register records of Greater Homes.  Upon delivery to Buyer at the Closing of the
certificates representing the Shares, Buyer will own the Shares, free and clear
of any Liens, and will receive good and marketable title to the Shares.  The stock certificates evidencing the Shares
were not issued directly or indirectly in respect of any stock certificates issued
in replacement of any lost, damaged, mutilated or destroyed stock certificates
evidencing any shares of capital stock of Greater Homes or any of its
predecessors.  The Shares represent all
of the issued and outstanding Capital Stock of Greater Homes.  The Shares are not subject to any voting
trust or stockholder agreement or other similar contract, including any such
contract restricting or otherwise relating to the voting, dividend rights or
disposition of the Shares, except for that certain Amended and Restated
Shareholders’ Agreement dated as of December 31, 2004 by and between the
Stockholders and Greater Homes.


 


3.2                                 Authorization,
Validity and Effect of Agreements. 
Each Stockholder has all requisite power, authority and capacity to
execute and deliver this Agreement and all the Transaction Documents to be
executed and delivered by such Stockholder and to consummate the transactions
contemplated hereby and thereby.  This
Agreement has been duly executed and delivered by each Stockholder.  This Agreement and the Transaction Documents
to be executed by each Stockholder (when executed and delivered pursuant hereto
and assuming this Agreement constitutes a valid and binding obligation of the
Buyer) will constitute, the valid and legally binding obligations of each of
the Stockholders, enforceable against them in accordance with their respective
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency, moratorium or other similar laws relating to creditors’ rights and
general principles of equity, whether at equity or law.


 


3.3                                 No
Brokers.  Except as disclosed in Section 3.3
of the Stockholders’ Disclosure Schedule, no broker, finder or similar agent
has been employed by or acted on behalf of, directly or indirectly, any of the
Stockholders, or any of their affiliates (including the Company) in connection
with this Agreement or the other Transaction Documents or the transactions
contemplated hereby or thereby.  None of
the Stockholders nor any of their affiliates (including the Company) has
entered into any arrangement or other contract of any kind with any Person, or
taken any other actions, which would obligate Buyer, the Company or any of
their respective subsidiaries to pay any brokerage commission, finder’s fee or
any similar compensation in connection with this Agreement, the other
Transaction Documents or the transactions contemplated hereby or thereby.


 


8





















 


ARTICLE IV

REPRESENTATIONS AND WARRANTIES

OF STOCKHOLDERS AS TO THE COMPANY


 


Except as set
forth in the Stockholders’ Disclosure Schedule, the Stockholders, jointly and
severally, represent and warrant to Buyer, as of the date of this Agreement and
as of the Closing Date, as follows:


 


4.1                                 Organization
and Qualification.  Greater Homes is
a corporation duly organized, validly existing, and in good standing under the
laws of State of Florida and has the requisite corporate power and authority to
own and operate its properties and to carry on the Business as it is now being
conducted.


 


4.2                                 Capitalization.


 


A.                                   The authorized
Capital Stock of Greater Homes consists of 20,000 shares of Company Stock,
consisting of 10,000 Class A Common Shares with a par value of $0.10 each
and 10,000 Class B Common Shares with a par value of $0.10 each.  Of these authorized shares, 10,000 Class A
Common Shares and 10,000 Class B Common Shares are issued and
outstanding.  Except for the Shares,
there are no outstanding shares of Company Stock or other Capital Stock, or
securities or other interests exercisable or exchangeable for or convertible
into Capital Stock.


 


B.                                     All issued and
outstanding Capital Stock of Greater Homes is duly authorized, validly issued,
fully paid and nonassessable, and none of such Capital Stock has been issued in
violation of or is subject to any option, call, right of first refusal,
preemptive, subscription or similar right. 
There are no options, warrants, calls, subscriptions, convertible
securities, convertible debt or other rights or other contracts which obligate
Greater Homes to issue, or Greater Homes or any of the Stockholders to transfer
or sell, any Capital Stock of Greater Homes or any securities exercisable or
exchangeable for, or convertible into, such Capital Stock, except as may be
contained in that certain Amended and Restated Shareholders’ Agreement dated as
of December 31, 2004 by and between the Stockholders and Greater Homes.


 


4.3                                 Subsidiaries
and Other Interests.


 


A.                                   Section 4.3A of
the Stockholders’ Disclosure Schedule sets forth a list of all of Greater
Homes’ directly and indirectly owned Subsidiaries and other joint ventures or
less than 50% owned Persons together with (i) the jurisdiction of
organization, (ii) for each Person, (x) that is a corporation, the amount
of its authorized Capital Stock, the amount of its outstanding Capital Stock
and the record and beneficial owners of its outstanding Capital Stock, and (y)
that is a limited liability company, joint venture or partnership, the names
and interests of the members or partners thereof.  Except as set forth in Section 4.3A of
the Stockholders’ Disclosure Schedule, Greater Homes owns directly or
indirectly all of the outstanding Capital Stock of each of the Subsidiaries and
other Persons listed on Section 4.3A of the Stockholders’ Disclosure
Schedule, and such interests are held free and clear of all Liens.  Except for the Subsidiaries and other Persons
listed in Section 4.3A of the Stockholders’ Disclosure Schedule, the
Company does not hold directly or indirectly any Capital Stock of any other
Person.


 


9





















 


B.                                     Each Subsidiary
and other Person listed on Section 4.3A of the Stockholders’ Disclosure Schedule is
a corporation duly incorporated, or a limited liability company or limited
partnership duly formed, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or formation.  Neither Greater Homes nor any of the
Subsidiaries or other Persons listed on Section 4.3A of the Stockholders’
Disclosure Schedule is required to be licensed or qualified to do business
in any state based on the character of its properties owned or leased by it in
any state or in which the transaction of its business makes such qualification
or licensing necessary, other than its state of incorporation or formation.  Greater Homes and each of the Subsidiaries
and other Persons listed on Section 4.3A of the Stockholders’ Disclosure Schedule has
all requisite power and authority to own, operate and lease its properties and
assets and carry on its business as now conducted.  The copies of the articles of incorporation
and bylaws or other governing documents of Greater Homes and the Subsidiaries
and other Persons listed on Section 4.3A of the Stockholders’ Disclosure Schedule previously
provided to Buyer are true, correct and complete.


 


C.                                     All of the
outstanding Capital Stock of each Subsidiary and other Person listed on Section 4.3A
of the Stockholders’ Disclosure Schedule is duly authorized, validly
issued, fully paid and nonassessable, and none of such Capital Stock has been
issued in violation of or is subject to any option, call, right of first
refusal, preemptive, subscription or similar right.  The outstanding Capital Stock of Greater
Homes and each of the Subsidiaries and other Persons listed on Section 4.3A
of the Stockholders’ Disclosure Schedule has been issued in compliance
with all applicable securities laws.


 


D.                                    Except as set forth
in Section 4.3D of the Stockholders’ Disclosure Schedule, there are no
options, warrants, calls, subscriptions, convertible securities, convertible
debt or other rights or other contracts which obligate any Subsidiary and other
Person listed on Schedule 4.3A of the Stockholders’ Disclosure Schedule to
issue, transfer or sell any Capital Stock of such Person or any securities
exercisable or exchangeable for, or convertible into, such Capital Stock.


 


E.                                      None of Greater
Homes or the Subsidiaries and other Persons listed on Section 4.3A has any
outstanding bonds, debentures, notes or other obligations the holders of which
have the right to vote (or which are convertible into or exercisable or
exchangeable for securities having the right to vote) with its shareholders,
members or partners on any matter and there are no equity equivalent interests
in the ownership or earnings of any of Greater Homes or the Subsidiaries and
other Persons listed on Section 4.3A of the Stockholders’ Disclosure
Schedule.  There are no obligations,
contingent or otherwise, of the Company or any of the Subsidiaries and other
Persons listed on Section 4.3A of the Stockholders’ Disclosure Schedule to
repurchase, redeem or otherwise acquire any of the Capital Stock of such
Persons or to make any investment (in the form of a loan, capital contribution
or otherwise) in any Person.


 


F.                                      None of Greater
Homes or the Subsidiaries and other Persons listed on Section 4.3A of the
Stockholders’ Disclosure Schedule is in default or breach (and no event
has occurred which with notice or lapse of time or both, would constitute a
breach or default) of any terms or provision of its articles of incorporation or
bylaws (or other similar constituent documents).


 


10





















 


4.4                                 No
Conflicts.  Except as set forth in Section 4.4
of the Stockholders’ Disclosure Schedule and subject to the
authorizations, consents, approvals and filings referred to in Section 4.5
and on Section 4.5 of the Stockholders’ Disclosure Schedule, the Company
is not subject to nor obligated under (i) any provision of its articles of
incorporation or bylaws (or similar constituent documents of any of its
Subsidiaries), (ii) any contract, agreement, arrangement or understanding,
(iii) any license, franchise or permit or (iv) any law, regulation,
order, judgment or decree, which would be breached or violated, or in respect
of which a right of termination or acceleration would arise, or pursuant to
which any encumbrance on any of their assets would be created, by the
Stockholders’ execution, delivery, and performance of this Agreement or any of
the other Transaction Documents and the consummation by them of the
transactions contemplated hereby.


 


4.5                                 No
Consents.  Except as set forth in Section 4.5
of the Stockholders’ Disclosure Schedule, no authorization, consent, or
approval of, or filing with, any Governmental Authority or pursuant to any
contract to which the Company or any of the Stockholders is a party to is
necessary on the part of the Company for the consummation of the transactions
that are contemplated by this Agreement.


 


4.6                                 Financial
Statements; Absence of Undisclosed Liabilities.


 


A.                                   Section 4.6 of
the Stockholders’ Disclosure Schedule sets forth:  (i) the reviewed and unaudited financial
statements of the Company as of, and for the fiscal years ended, December 31,
2004, 2003, and 2002; and (ii) the unaudited financial statements of the
Company as of, and for the seven month period ended, July 31, 2005 (the “Balance Sheet Date” and, the financial
statements described in the immediately preceding clauses (i) and (ii),
collectively, the “Financial Statements”).  The interim financial statements of the Company
referenced above in clause (ii) of this Section 4.6A have been
prepared on a GAAP basis, consistent with the Company’s annual financial
statements except for GAAP adjustments to convert the federal income tax
statements to GAAP statements (such adjustments include but are not limited to
reversal of deferred gain, capitalized interest, vacation liability,
capitalized real estate taxes and warranty reserves).  The other Financial Statements fairly present
(in accordance with the federal income tax basis of accounting) in all material
respects the financial position of the Company as of the dates thereof and the
results of the Company’s operations and cash flows for the periods then ended,
except for the absence of footnotes


 


B.                                     There are no
material obligations or liabilities relating to or affecting the Company
(whether accrued, absolute, contingent, liquidated, unliquidated or otherwise,
whether due or to become due and regardless of when asserted), except (i) liabilities
reflected in the Financial Statements or disclosed in the notes thereto, (ii) liabilities
which have arisen in the ordinary course of business after the Balance Sheet
Date and (iii) liabilities specifically disclosed in Section 4.6 of
the Stockholders’ Disclosure Schedule.


 


4.7                                 No
Material Adverse Changes.  Except as
set forth in Section 4.7 of the Stockholders’ Disclosure Schedule, since
the Balance Sheet Date, there has not been any change in the assets, financial
condition, or operating results, customer, employee, or supplier relations,
business condition, or financing arrangements of the Company, which has had, or
to the


 


11





















 


Knowledge of
Stockholders, is reasonably likely to have, individually or in the aggregate, a
material adverse effect on the Business.


 


4.8                                 Absence
of Certain Developments.  Except as
set forth in Section 4.8 of the Stockholders’ Disclosure Schedule or
except as contemplated in and consistent with the terms of this Agreement,
since the Balance Sheet Date, the Company has not:


 


A.                                   changed its
accounting methods or practices (including any change in depreciation or
amortization policies or rates) or revalued any of its assets;


 


B.                                     declared or paid
any dividend or distributions;


 


C.                                     borrowed any
amount under existing lines of credit, or otherwise incurred or become subject
to any indebtedness, except in the ordinary course of business and in a manner
and in amounts that are in keeping with past practices;


 


D.                                    discharged or
satisfied any material Lien (other than Liens arising as a matter of law for
property taxes and assessments and business and personal property taxes,
mechanic’s liens and similar items discharged in the ordinary course of
business consistent with past practices);


 


E.                                      except as is
reasonably necessary for the ordinary operation of the Business and in a manner
and in amounts that are in keeping with past practices, mortgaged, pledged, or
subjected to any Lien any of its assets with a fair market value in excess of
$25,000, except Liens for current property taxes not yet delinquent;


 


F.                                      sold, assigned or
transferred (including, without limitation, transfers to any employees,
shareholders, or affiliates) any material assets or canceled any material debts
or claims, except, in each case, in the ordinary course of business consistent
with past practices;


 


G.                                     sold, assigned, or
transferred any patents, trademarks, trade names, copyrights, trade secrets, or
other intangible assets or disclosed any proprietary or confidential
information to any person other than Buyer;


 


H.                                    suffered any
extraordinary loss or waived any material right or claim, including any
write-off or compromise of any contract or account receivable, except to the
extent reserved in the Preliminary Closing Balance Sheet;


 


I.                                         except as
previously disclosed to Buyer, taken any other action or entered into any
material land transaction or other transaction other than in the ordinary
course of business consistent with past practices, or entered into any
transaction with an employee, shareholder, partner, member or officer of the
Company, or its affiliates;


 


J.                                        suffered any
theft, damage, destruction or loss of or to any property or properties owned or
used by it, whether or not covered by insurance, except for any such theft,
damage, destruction or loss that is not reasonably likely, individually or in
the aggregate, to have a material adverse effect on the Business;


 


12





















 


K.                                    except as
previously disclosed to Buyer, increased the annualized level of compensation
of or granted any extraordinary bonuses, benefits, or other forms of direct or
indirect compensation to any employee, officer, director or consultant that
aggregate in excess of $25,000, or adopted, amended or modified any employee
benefit plans;


 


L.                                      except as is
reasonably necessary for the ordinary operation of the Business and in a manner
and in amounts that are in keeping with past practices, made any capital
expenditures or commitments for property, plant and equipment that aggregate in
excess of $25,000;


 


M.                                 engaged or agreed to
engage in any extraordinary transactions or distributions, or, except as is
reasonably necessary for the ordinary operation of the Business and in keeping
with past practices, entered into any contract, written or oral, that involves
consideration or performance by it of a value exceeding $25,000 or a term
exceeding one year;


 


N.                                    made any loans or
advances to, or guarantees for the benefit of, any persons; or


 


O.                                    made charitable
contributions or pledges which in the aggregate exceed $10,000.


 


4.9                                 Permitted
Liens; Good Title to and Condition of Assets.  The Company’s title to its assets (other than
the Real Property, title to which is addressed in Section 4.11 below) is
free and clear of material Liens other than those listed on Section 4.9 of
the Stockholders’ Disclosure Schedule (collectively, the “Permitted Liens”).  To the Knowledge of Stockholders, except as
is not reasonably likely, individually or in the aggregate, to have a material
adverse effect on the Business, all of the Company’s tangible personal property
assets are in good condition and repair, ordinary wear and tear excepted, and
are usable in the ordinary course of business. 
Except as contemplated by this Agreement, the Company’s assets represent
all of the assets necessary or required by Buyer to continue to operate the
Company’s business as conducted prior to the Closing Date.  The Company owns, or leases under valid
leases, all property, machinery, equipment and other tangible and intangible
assets necessary for the conduct of the Business.  Except as contemplated by this Agreement,
none of the assets attributable to, or necessary to the operation of, the
Company’s Business, as conducted immediately prior to the Closing Date, are
held or owned by an entity other than the Company, except for those certain
leased assets specified in Schedule 4.9 of the Stockholders’ Disclosure
Schedule.  Except as disclosed in Section 4.9
of the Stockholders’ Disclosure Schedule and except as contemplated by
this Agreement, there are no parents, shareholders or affiliates of the Company
that directly own any assets, licenses, permits or other authorizations
relating to the Company’s assets or the Business.


 


4.10                           Descriptions
of Real Property.  Section 4.10
of the Stockholders’ Disclosure Schedule contains a true, correct and
complete list and legal descriptions of all real property assets that the
Company owns, controls by option or other rights, or has a vendee’s interest to
purchase.  Said Section 4.10 is
divided into three parts:  Part A
describes the Fee Property; Part B describes the Related Party Projects;
and Part C describes the Contract Property.  This schedule identifies the Fee
Property, Related Party Projects and Contract Property.  The schedule also


 


13





















 


includes the
following:  list of all properties and
the legal description of each parcel and classification of each property and
ownership/control structure (fee, related party contract, or contract), and
with respect to the Contract Property the name of the fee owner, contract
vendor and contract vendee, as the case may be, and identification of the
documents creating the Company’s interest. 
Section 9.1 of the Stockholders’ Disclosure Schedule sets
forth Reports that contain an accurate legal description for each parcel of the
(i) Fee Property, (ii) Related Party Projects and (iii) Contract
Property.  The foregoing representation
in clause (iii) of the previous sentence is qualified by the Knowledge of
Stockholders.


 


4.11                           Real
Property.  Except as set forth on Section 4.11
of the Stockholders’ Disclosure Schedule:


 


A.                                   With respect to any
agreements, arrangements, contracts, leases, licenses, covenants, conditions,
deeds, deeds of trust, rights-of-way, easements, mortgages, restrictions,
surveys, title insurance policies and other documents granting to the Company
title to or an interest in or otherwise affecting the Fee Property or Related
Party Projects, no breach or event of default exists, and no condition or event
has occurred that with the giving of notice, the lapse of time, or both would
constitute a breach or event of default by the Company, and to the Knowledge of
Stockholders, there are no third parties in default in a manner that would
create liability or have a material adverse effect on the Company.


 


B.                                     The Fee Property
and Related Party Projects have all necessary access to and from public
highways, streets and roads and no pending or, to the Knowledge of
Stockholders, threatened proceeding or other fact or condition exists that
could limit or result in the termination of such access.


 


C.                                     Electric, gas (if
applicable), sewage, telephone and water utility facilities are available for
connection and service to homes constructed or being constructed on the Fee
Property or Related Party Projects, subject to such installation and connection
charges with respect thereto which in the ordinary course of business are
payable upon issuance of building permits or certificates of occupancy.  This representation is limited to the
Knowledge of the Stockholders with respect to connections constructed or
installed by a third party.


 


D.                                    No condemnation,
eminent domain or similar proceeding exists, is pending or, to the Knowledge of
Stockholders, is threatened with respect to, or that could affect, any of the
Fee Property or Related Party Projects. 
The foregoing representation does not apply to any dedication required
by governmental agency in connection with the governmental approvals applicable
to a project.


 


E.                                      To the Knowledge
of Stockholders, any buildings and improvements on the Fee Property or Related
Party Projects to the extent installed or constructed by the Company are in
material compliance with all Applicable Laws and do not violate, in any
material respect, (i) any set-back, (ii) zoning law, ordinance,
regulation, statute or other governmental restriction in the nature thereof or (iii) any
restrictive covenant affecting any such Fee Property or Related Party
Projects.  The foregoing representation
does not apply to any improvements constructed, altered or not properly
maintained by a retail buyer on a Lot not currently owned by the


 


14





















 


Company or its
affiliates.  The Stockholders make no
representations or warranties related to compliance by homeowners, tenants and
other third parties following closing of home purchases.


 


F.                                      There are no
parties in possession of any portion of the Fee Property or Related Party
Projects as lessees, tenants at sufferance or trespassers.


 


G.                                     Except as incurred
in the ordinary course of business or as reflected in the Preliminary Closing
Balance Sheet or the Final Closing Balance Sheet, there are no material unpaid
charges, debts, liabilities, claims or obligations arising from the
construction, occupancy, ownership, use or operation of the Fee Property or
Related Party Projects.  No Fee Property
or Related Party Projects are subject to any material condition or obligation
to any Governmental Authority or other person requiring the owner or any transferee
thereof to donate land, money or other property or to make off-site public
improvements.  With respect to the Fee
Property and Related Party Projects, the Company is not delinquent in the
funding of any homeowners association reserves relating to maintenance,
repairs, capital improvements, operating deficiencies and similar items for
which the Company is or will be responsible and obligated for funding pursuant
to the respective terms of the association documents or Florida law (i.e., to
the extent such items are due and payable before Closing).


 


H.                                    To the Knowledge of
Stockholders, all known developer related fees, charges, assessments for public
improvements and development costs have been included and provided in the cost
estimates provided by the Stockholders to Buyer applicable to the Company’s Fee
Property and Related Party Projects. 
Provided, however, nothing herein shall be a representation that fees,
charges, or actual site construction costs and similar costs associated with
any Fee Property and Related Party Projects not yet developed, or under
contract pursuant to a fixed price contract, may not increase between the time
of this Agreement and the time of actual development.  The cost estimates provided are estimates but
cannot constitute assurances for ultimate costs for the Fee Properties not yet
fully developed.


 


I.                                         To the
Knowledge of Stockholders, there is no moratorium applicable to any of the Real
Property on (i) the issuance of building permits for the construction of
houses, or certificates of occupancy therefore or (ii) the purchase of
sewer or water taps.


 


J.                                        Each of the
lots included in the Fee Property and Related Party Projects is stable and
otherwise suitable for the construction of a residential structure thereon, as
set forth in the soil report related to each such subdivision.


 


K.                                    To the Knowledge of
Stockholders, except as set forth in the Environmental Reports or Surveys, the
Fee Property and Related Party Projects do not contain “wetlands,” as defined,
or subject to regulation, by the Army Corps of Engineers, the Environmental
Protection Agency, the Florida Department of Environmental Protection, the
applicable water management district, the applicable county and the
municipalities located therein, or, to the Knowledge of Stockholders, a level
of radon or radon’s daughter above action levels of the U.S. Environmental
Protection Agency and is not located within nor does the Fee Property or
Related Party Projects include a “critical”, “preservation”, “conservation” or “habitat
conservation area” area of recognized historical or archeological importance or
similar type of area subject to regulation under any Environmental Laws.  No portion of the Fee Property or


 


15





















 


Related Party Projects
is situated within a “noise cone” such that the Federal Housing Administration
will not approve mortgages due to the noise level classification of such Fee
Property or Related Party Projects.


 


L.                                      The Fee Property
and the Related Party Projects have not been used as a gravesite, landfill or
waste disposal area, except as specified on the Stockholders’ Disclosure
Schedule.


 


M.                                 No Proceeding, claim
or demand is pending or, to the Knowledge of Stockholders, threatened which
involves any of the Fee Property or Related Party Projects, or against the
Company or the Associations with respect to any of the Fee Property or Related
Party Projects, including without limitation proceedings, claims or demands
involving construction defects or deficiencies. 
All of the developed Fee Property and Related Party Projects and the
lots included therein are in material compliance with all Applicable Laws,
including without limitation, zoning and subdivision laws and ordinances and
the Fee Property and Related Party Projects are zoned to permit single family
home construction, and none of the development-site preparation and
construction work performed on the Fee Property or Related Party Projects have
concentrated or diverted surface water or percolating water improperly onto or
from the Fee Property or Related Party Projects or caused or resulted in a
release of any Hazardous Substance in violation of any Environmental Law.


 


N.                                    With the exception
of retail sales contracts, the Company has not granted to any person any contract
or other right to the use of any portion of the Fee Property or Related Party
Projects or to the furnishing or use of any facility or amenity on or relating
to the Fee Property or Related Party Projects except as to the rights of
homeowners granted pursuant to the CCRs.


 


O.                                    To the Knowledge of
Stockholders, all of the completed Housing Units, buildings and improvements
constructed on the Fee Property and Related Party Projects as of the Closing
and all improvements under construction on the Fee Property and Related Party
Projects but not completed as of Closing were constructed in a good and
workmanlike manner, substantially comply with Applicable Laws, are structurally
sound, are in good and proper working condition and repair, normal wear and
tear, normal maintenance and normal warranty and customer services matters
excepted, and are free of mold, asbestos and radon at levels above legally
acceptable limits under Applicable Law.


 


P.                                      To the Knowledge
of Stockholders, any improvements, buildings and infrastructure constructed by
or on behalf of the Company included within the Fee Property and Related Party
Projects are located within the boundary lines of the Fee Property and Related
Party Projects and do not encroach upon the land of any adjacent owner; to the
Knowledge of Stockholders, (i) no improvements of any third Person
encroach upon the Fee Property or Related Party Projects and (ii) no
Person has any unrecorded right, title or interest in the Fee Property or
Related Party Projects, whether by right of adverse possession, prescriptive
easement or otherwise, except as otherwise specified on Section 4.11 of
the Stockholders’ Disclosure Schedule and shown on the Surveys.  To the Knowledge of Stockholders, all
improvements, buildings and infrastructure within the Fee Property and Related
Party Projects have been built in


 


16





















 


substantial
accordance with all applicable legal requirements.  This provision is not applicable to any
improvements or buildings constructed or altered by purchasers following
closings of portions of the Fee Property.


 


Q.                                    The Fee Property
and Related Party Projects are being developed and used in compliance with all
covenants, easements and restrictions affecting the Fee Property and Related
Party Projects (the foregoing representation does not apply to any violation
caused by a third-party after the lot was conveyed by the Company to a retail
buyer), and all obligations of the Company on the Fee Property and Related
Party Projects with regard to such covenants, easements and restrictions have
been and are being performed in a proper and timely manner.


 


R.                                     The Stockholders
have no actual knowledge to the contrary that all the property adjacent to the
Fee Property and Related Party Projects is free from Hazardous Substances
(other than Permitted Materials) and is not in violation of any Environmental
Law and no environmental lien in favor of any Governmental Authority has
attached to any of the Fee Property or Related Party Projects.


 


S.                                      To the Knowledge
of Stockholders, there are no historical or archeological materials or
artifacts of any kind or any Indian ruins of any kind located on the Fee
Property or Related Party Projects.


 


T.                                     To the Knowledge
of Stockholders, except as disclosed in the wildlife and environmental reports
listed on the Stockholders’ Disclosure Schedule (“Environmental
Reports”), no parts of the Fee Property or Related Party Projects
are “critical habitat” as defined in the Federal Endangered Species Act, 16
U.S.C. Section 1531 et. seq., as amended, or in regulations promulgated
thereunder, nor are any “endangered species” or “threatened species” located on
the Fee Property or Related Party Projects, as defined therein, or under any
similar state or local Environmental Law.


 


U.                                    To the Knowledge of
Stockholders, the Fee Property and Related Party Projects are not within a
flood plain, flood way or flood control district as reflected in the currently
adopted 100-year flood plain of the Federal Emergency Management Agency, that
would interfere with the development of projects as shown on the project pro
formas and projections prepared by the Company and given to Buyer.


 


V.                                     The Company has no
liability for any ad valorem real estate taxes or non-ad valorem real estate
assessments, or any interest or penalty in respect thereof, of any nature that
may be assessed against Buyer or that are or may become a lien against the Fee
Property or Related Party Projects, other than the lien for current Fee
Property or Related Party Projects taxes, special taxes and assessments paid
with the 2005 real estate taxes bill and which are not yet delinquent.


 


W.                                To the Knowledge of
Stockholders, with the exception of the Wolf Creek lien matter, all work
performed on or about the Fee Property and Related Party Projects within six
months prior to the date of this Agreement has been paid for or will be
reflected as a liability in the ordinary course of business in the Final
Closing Balance Sheet.  Section 4.11
of the Stockholders’ Disclosure Schedule includes a complete description
of the Wolf Creek lien


 


17





















 


matter, which
involved a recorded lien in the amount of approximately $90,000 against the
South Ridge property that was bonded off of the subject property by the Company
by posting a cash bond (any funds due the Company from the release of said bond
shall be paid to the Stockholders).


 


X.                                    The Company owns
good, marketable and insurable fee title to the Fee Property, subject to the
Approved Title Exceptions (defined below) the Company debt to be retired at the
Closing in accordance with this Agreement.


 


Y.                                     The Fee Property
listed on Section 4.11Y of Stockholders’ Disclosure Schedule (the “Excluded Assets”) is specifically excluded
from the property to be obtained by Buyer as a result of its purchase of the
Company Stock pursuant to the terms of this Agreement.


 


Z.                                     With respect to
the Related Party Agreements for Cypress Preserve, Overlook at Lake Louisa
Phase II, Arbor Ridge 4, Arbor Ridge 5, and Orangetree Phase 6 (i) the
Company by and through the Related Party Agreements has legally valid, binding
and enforceable contract rights to purchase the Related Party Projects, (ii) a
true, correct and complete copies of the Related Party Agreements and all amendments,
documents and instruments relating thereto (i.e., diligence materials, survey,
memorandum of contract right, title commitment, etc.) have been provided to
Buyer, (iii) the Related Party Agreements are enforceable and in good
standing, and neither the contract vendor nor the Company are in default under
the Related Party Agreements, and (iv) the contract vendors under the
Related Party Agreements own good, marketable and insurable fee title to their
respective portions of the Related Party Projects subject only to the Approved
Title Exceptions.


 


AA.                         The Company has not developed
a project as a condominium under the Condominium Act within the past twenty
(20) years, and the only project that the Company is currently planning to
develop as a condominium is the Fountains at Crystal Creek.  The Company
has not offered any units within the Fountains at Crystal Creek for sale under
the Condominium Act, and a condominium prospectus for the project has not been
prepared to date.


 


4.12                           A.                                   Contract
Property Real Estate.


 


(1)                                  With respect to
Contract Property, to the Knowledge of Stockholders, there are no matters
applicable to the Company’s development projects that would preclude their
future development for residential purposes as intended.  However, the Company is still performing due
diligence on the Trails of St. John’s, Murrell, Holly Hill, Providence and
Aviana as described in Section 4.25 of the Stockholders’ Disclosure
Schedule.


 


(2)                                  With respect to the
Contract Property, (i) the Company, by and through the purchase contracts
listed on Section 4.10 of the Stockholders’ Disclosure Schedule (the “Third-Party Purchase Agreements”), has
legally valid, binding and enforceable contract rights to purchase the Contract
Property, (ii) true, correct and complete copies of the Third-Party
Purchase Agreements and all amendments, documents and instruments relating
thereto (i.e., diligence materials, surveys, memoranda of contract rights, if
any, title commitments, etc.) have been provided to Buyer, (iii) to the
Knowledge of the Stockholders, the Third-Party Purchase Agreements are
enforceable and in good standing, and neither the contract vendor nor the


 


18





















 


Company are in
default under the Third-Party Purchase Agreements and (iv) to the
Knowledge of the Stockholders, the contract vendors under the Third-Party
Purchase Agreements are the fee owners of each respective property.  To the Knowledge of Stockholders there are no
parties in possession as lessees, tenants at sufferance or trespassers of any
portion of the Related Party Projects and Contract Property other than the fee
owners thereof and parties referenced on the applicable title Reports.


 


(3)                                  Buyer acknowledges
that Stockholders, on behalf of the Company, are continuing to negotiate and
pursue additional purchases of land for development and use in the Company’s
home building business in Central Florida as this Agreement is being negotiated
and between the time of execution of the Agreement and the anticipated closing
date hereunder.  The Stockholders will
provide to Buyer true, correct and complete copies of any and all executed
letters of intent, contracts and diligence materials related to such additional
purchases.  All such contracts shall
provide that the Company shall have the right to terminate said contract and
receive the return of all earnest money deposits on a date no earlier than
fifteen (15) days after the Closing, and shall provide that the Company shall
have the right to assign such contracts to a third-party land banker.  Accordingly, in the event that Buyer chooses
not to retain such new contracts as an obligation of the Company upon Buyer’s
review of same, Buyer shall notify the Stockholders accordingly.


 


B.                                     Contracts.


 


(1)                                  To the Knowledge of
Stockholders, Section 4.12 of the Stockholders’ Disclosure Schedule lists
as of the date hereof all Material Contracts. 
Within 5 days after the date of this Agreement, to the extent not
previously provided, the Stockholders will have provided to Buyer a true and
correct copy of each Material Contract together with all amendments, waivers or
other changes thereto.


 


(2)                                  Each of the Material
Contracts is valid, binding and in full force and effect on the Company in all
material respects and, to the Knowledge of Stockholders, is valid, binding and
in full force and effect in all material respects on each of the other parties
thereto.  Except as set forth on Section 4.12
of the Stockholders’ Disclosure Schedule, no Material Contract has been amended
or supplemented and the Company has not, and to the Knowledge of Stockholders
no other party thereto has, assigned any of its rights or delegated any of its
duties thereunder.


 


(3)                                  To the Knowledge of
Stockholders, (i) except as set forth on Section 4.12 of the
Stockholders’ Disclosure Schedule, no breach or default by the Company exists
under any Material Contract and, (ii) no event has occurred with respect
to the Company that with the lapse of time or action or inaction by the Company
would result in a breach thereof or a default thereunder.


 


(4)                                  Except as
specifically disclosed in Section 4.12 of the Stockholders’ Disclosure
Schedule, (i) since the Balance Sheet Date, no supplier or materialman has
indicated in writing that it will stop or decrease the rate of business done
with the Company, except for changes in the ordinary course of business and, (ii) to
the Knowledge of the Stockholders, the Company has performed in all respects
the obligations which have been


 


19





















 


required to be
performed by the Company under the Material Contracts and the Company has not
been advised of or received any claim of default under any Material Contract
and (iii) to the Knowledge of the Stockholders, there has been no breach
by the Company of any Material Contract and there has been no breach of any
Material Contract by any other party thereto.


 


(5)                                  To the Knowledge of
Stockholders, upon the Closing each Material Contract will be enforceable by
the Company in accordance with its terms, except as the enforceability thereof
may be limited by bankruptcy, insolvency, reorganization or other similar laws
relating to the enforcement of creditors’ rights generally and by general
principles of equity.


 


(6)                                  The Company has paid
all material rental and other payments due under the leases under which the
Company is the lessee in accordance with its terms.  With respect to each such lease, the Company
has been in peaceable possession of the buildings, equipment, machinery, real
property, vehicles or other tangible property covered thereby since the
commencement of the original term of such lease.  No express indulgence, postponement or waiver
of the Company’s obligations under any such lease has been granted by the
lessor.  To the Knowledge of
Stockholders, subject to the terms of the leases, the Company possesses full
right and power to occupy or possess, as the case may be, all of the
buildings, equipment, machinery, real property, vehicles and other tangible
property covered by such leases.


 


(7)                                  To the Knowledge of
Stockholders, the representations and warranties set forth in Sections 4.12B(2) through
4.12B(6) also are true with respect to contracts that are not Material
Contracts.


 


4.13                           Warranties.  Except as set forth on Section 4.13 of
the Stockholders’ Disclosure Schedule, the Company has not given or made any
express warranties to third parties with respect to any property or products
sold or services performed by the Company and, to the Knowledge of
Stockholders, there are no facts or the occurrence of any event forming the
basis of any present claim against the Company for liabilities due to any
express or implied warranty.  Section 4.13
of the Stockholders’ Disclosure Schedule includes forms of the Company’s
residential sales contracts containing applicable guaranty, warranty and
indemnity provisions.


 


4.14                           Environmental
Matters.


 


A.                                   The Company is, and
to the Knowledge of the Stockholders, always has been, in material compliance
with all Environmental Laws governing its business, properties and assets, including,
without limitation: (i) all requirements relating to the Discharge and
Handling of Hazardous Substances, (ii) all requirements relating to
notice, record keeping and reporting, (iii) all requirements relating to
obtaining and maintaining Permits for the ownership of its properties and
assets and the operation of the Business, including Permits relating to the
Handling and Discharge of Hazardous Substances or (iv) all applicable
writs, orders, judgments, injunctions, governmental communications, decrees,
informational requests or demands issued pursuant to, or arising under, any
Environmental Laws.


 


B.                                     Except as set
forth on Section 4.14 of the Stockholders’ Disclosure Schedule and
shown on the environmental reports listed on Section 4.11 (part T) of the
Stockholders’ Disclosure Schedule, there are no, and, to the Knowledge of
Stockholders, there is


 


20





















 


no basis for,
any orders, warning letters, notices of violation (collectively “Notices”) or Proceedings against or
involving the Company or the Related Parties, the Business or its assets issued
by any Governmental Authority or third party with respect to any Environmental
Laws or Permits issued to the Company or the Related Parties thereunder in connection
with, related to, or arising out of the ownership by the Company or the Related
Parties of its properties or assets or the operation of the Business which have
not been resolved to the satisfaction of the issuing Governmental Authority or
third party in a manner that would not impose any material obligation, burden
or continuing liability on Buyer in the event that the transactions
contemplated by this Agreement are consummated, or which could have a material
adverse effect on the Business or the Company’s assets or its financial
condition or its results of operations including, without limitation: (i) Notices
or Proceedings related to the Company or the Related Parties being potentially
responsible parties for a federal, state, regional or local environmental
cleanup site or for corrective action under any applicable Environmental Laws, (ii) Notices
or Proceedings in connection with any federal, state, regional or local
environmental cleanup site, or in connection with any of the real property or
premises where the Company or the Related Parties have transported, transferred
or disposed of Hazardous Substances, (iii) Notices or Proceedings relating
to the Company being responsible to undertake any response or remedial actions
or clean-up actions of any kind or (iv) Notices or Proceedings related to
the Company or the Related Parties being liable under any Environmental Laws
for personal injury, property damage, natural resource damage or clean up
obligations.  Schedule 4.11(part T)
of the Stockholder’s Disclosure Schedule also lists any and all applicable
reports and Assessments relevant to the various projects.


 


C.                                     Except for the
Permitted Materials and except as set forth on Section 4.14 of the
Stockholders’ Disclosure Schedule, the Company has not Handled or Discharged,
nor allowed or arranged for any third party to Handle or Discharge, Hazardous
Substances to, at or upon: (i) any location other than a site lawfully
permitted to receive such Hazardous Substances, (ii) any of the Real
Property or (iii) any site which (a) pursuant to CERCLA or any
similar state law has been placed on the National Priorities List or its state
equivalent or (b) with respect to which the Environmental Protection
Agency or the relevant state agency or other Governmental Authority has
notified the Company that such governmental authority has proposed or is
proposing to place on the National Priorities List or its state
equivalent.  To the Knowledge of
Stockholders there has not occurred, nor is there presently occurring, a Discharge,
or threatened Discharge, of any Hazardous Substance on, into or beneath the
surface of any of the Fee Property or Related Party Projects requiring a Notice
or report to be made to a Governmental Authority or in violation of any
applicable Environmental Laws.


 


D.                                    Section 4.14
of the Stockholders’ Disclosure Schedule identifies the operations and
activities and locations thereof, if any, which to the Knowledge of
Stockholders have been conducted and are being conducted by the Company on any
of the Fee Property or Related Party Projects which have involved the Handling
or Discharge of Hazardous Substances, other than Permitted Materials.


 


E.                                      Except as set
forth on Section 4.14 of the Stockholders’ Disclosure Schedule, the
Company does not use, and has never used, any Aboveground Storage Tanks or
Underground Storage Tanks, and there are not now nor, to the Knowledge of
Stockholders, have


 


21





















 


there ever
been, any Underground Storage Tanks beneath any of the Fee Property or Related
Party Projects that are required to be registered and/or upgraded under
applicable Environmental Laws.


 


F.                                      Section 4.14
of the Stockholders’ Disclosure Schedule identifies (i) all
environmental audits, assessments or occupational health studies undertaken by
the Company or its agents or, to the Knowledge of Stockholders, undertaken by
any Governmental Authority or any third party, relating to or affecting the
Company or any of the Fee Property or Related Party Projects, (ii) the
results of any ground, water, soil, air or asbestos monitoring undertaken by
the Company or their agents or, and to the extent available or made known to
the Company, undertaken by any Governmental Authority or any third party,
relating to or affecting the Company or any of the Fee Property or Related
Party Projects, which indicate the presence of Hazardous Substances at levels
requiring a notice or report to be made to a governmental authority or in
violation of any applicable Environmental Laws, (iii) all material written
communications between the Company and any Governmental Authority arising under
or related to Environmental Laws and (iv) all outstanding citations issued
under OSHA, or similar state or local statutes, laws, ordinances, codes, rules,
regulations, orders, rulings or decrees, relating to or affecting either the
Company or any of the Fee Property or Related Party Projects.


 


4.15                           Tax
Matters.


 


A.                                   Copies of Tax
Returns, Audit Reports, Other Relevant Tax Documents.  Except as set forth in Section 4.15A of
the Stockholders’ Disclosure Schedule, the Company has delivered or caused to
be delivered to Buyer complete and correct copies of:


 


(1)                                  all federal and state
Tax Returns filed by or in respect of the Company relating to periods ending on
or after December 31, 2001;


 


(2)                                  any and all other Tax
Returns filed by or in respect of the Company requested by Buyer;


 


(3)                                  any and all audit
reports relating to Taxes and issued by or with respect to the Company on or
after December 31, 2001; and


 


(4)                                  any and all revenue
agent examination reports,  information
document requests, notices of proposed deficiencies, notices of deficiency,
protests, petitions, settlement agreements, closing agreements, private letter
ruling requests and technical advice memoranda received by, submitted by, or
agreed to by, or on behalf of, the Company in respect of taxable periods ending
on or after December 31, 1998, or to which the Company is subject.


 


B.                                     Filing of Tax
Returns, Payment of Taxes, Related Matters. 
Except as set forth in Section 4.15B of the Stockholders’
Disclosure Schedule:


 


(1)                                  all Tax Returns
currently required to be filed by or with respect to the Company have been
filed and all such Tax Returns were correct and complete in all material
respects;


 


22










 













 


(2)                                  all Taxes currently
due and owing, as of the date hereof, by or in respect of the Company (whether
or not shown on any Tax Return) have been paid;


 


(3)                                  all other Taxes of or
in respect of the Company and relating to periods ending on or as of the Closing
Date, including, but not limited to any Tax due arising out of the transactions
contemplated by this Agreement, (whether or not a Tax Return is due on such
date) either have been paid, properly accrued or otherwise adequately reserved
on the Financial Statements, or will be accrued on the books and records of the
Company from time to time through the Closing Date with statements thereof made
available to Buyer, and on the Final Closing Balance Sheet;


 


(4)                                  the Company has
timely paid all required current estimated payments of Taxes in amounts
sufficient to avoid interest charges and underpayment penalties;


 


(5)                                  the Company has paid
all applicable Taxes on its initial purchase of its furniture, fixtures and
equipment;


 


(6)                                  except for the
Company’s December 31, 2004 federal income Tax Return which has received
an extension until September 15, 2005, the Company is not currently the
beneficiary of any extension of time to file any Tax Return;


 


(7)                                  there are no Liens
for Taxes (other than liens for sales and payroll Taxes not yet due and payable
and liens for non-delinquent current real property taxes) upon any of the
assets of the Company;


 


(8)                                  the Company disclosed
on each Tax Return filed by or in respect of the Company all positions taken
thereon that could give rise to a substantial understatement penalty of federal
income Taxes within the meaning of Code Section 6662; and


 


(9)                                  the Company complied
with all applicable requirements relating to the withholding of Taxes
(including withholding and reporting requirements under Code Sections 1441
through 1464, 3401 through 3406, 6041, and 6049) and has within the times and
in the manner prescribed by law paid over such amounts to the proper taxing
authorities in connection with any amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other third party, and all
Forms W-2 and 1099 (and state law counterparts thereof) required with respect
thereto have been properly completed and timely filed.


 


C.                                     Audit, Related Tax Matters.  Except as set forth in Section 4.15C of
the Stockholders’ Disclosure Schedule:


 


(1)                                  no audit or
administrative, judicial or other proceeding, suit or action in respect of
Taxes due from or with respect to the Company is pending, is presently being
conducted, or to the Knowledge of Stockholders, is threatened;


 


(2)                                  the Company has not
received from any taxing authority any (i) notice indicating an intent to
open an audit or other review, (ii) request for information relating


 


 


23





















 


to Taxes or (iii) notice
of deficiency or proposed adjustment for any amount of Tax proposed, asserted,
or assessed against the Company;


 


(3)                                  there are no
outstanding agreements extending or waiving the statutory period of limitation
applicable to any claim for the collection or assessment or reassessment of
Taxes due from the Company for any taxable period;


 


(4)                                  there is no power of
attorney currently in force with respect to any matter relating to Taxes of the
Company;


 


(5)                                  no claim has been
made by any taxing authority in a jurisdiction where the Company does not file
Tax Returns that the Company is or may be subject to taxation in that
jurisdiction; and


 


(6)                                  with respect to any
past audit, review or examination by any relevant taxing authority of issues
relating to Taxes of the Company, no issue raised or addressed therein is
reasonably expected to recur in a later taxable period of the Company;


 


D.                                    General Tax Matters.  Except as set forth in Section 4.15D of
the Stockholders’ Disclosure Schedule:


 


(1)                                  the Company has not
been a member of an affiliated group (as defined in Code Section 1504) and
has never filed or been included in a combined, consolidated or unitary income
Tax Return;


 


(2)                                  the Company is not a
party to or bound by any tax allocation or tax sharing agreement and has no
current or potential contractual or other obligation to indemnify any other
Person with respect to Taxes;


 


(3)                                  the Company has not
distributed stock of another Person or had its stock distributed by another Person
in a transaction that was purported or intended to be governed in whole or in
part by Code Sections 355 or 361, other than with respect to the distribution
in 2004 of the shares of capital stock of Greater Properties, Inc., a
Florida corporation, by the Company to the Stockholders;


 


(4)                                  the Company was not
acquired in a qualified stock purchase under Code Section 338(d)(3) and
no elections under Code Section 338(g), protective carryover basis
elections, or offset prohibition elections are applicable to the Company;


 


(5)                                  the Company has not,
at any time, (i) owned any assets outside the United States, (ii) conducted
a trade or business outside the United States or (iii) owned an equity or
creditor interest in any other entity that either (x) owned assets or (y)
conducted a trade or business outside the United States;


 


(6)                                  the Company is not a
member of any partnership or joint venture (or entity treated similarly for Tax
purposes) or the holder of a beneficial interest in a trust, in each case for
any taxable period for which the applicable statute of limitations has not
expired,


 


24





















 


except for
Moss Park Investments, LLC, a Florida limited liability company, and Greater
Home Funding, LLC, a Florida limited liability company;


 


(7)                                  the Company neither
is an S corporation within the meaning of Code Section 1361(a)(1), nor has
outstanding liabilities for Taxes under Code Sections 1363(d), 1374, or 1375;


 


(8)                                  the unpaid aggregate
Taxes of the Company (i) did not as of the date of the July Balance
Sheet exceed the reserve for tax liability (rather than any reserve for
deferred Taxes established to reflect timing differences between book and Tax
income) set forth in the Financial Statements and (ii) do not exceed that
reserve as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of the Company;


 


(9)                                  since July 31,
2005, the Company has not incurred any liability for Taxes arising from
extraordinary gains or losses, as that term is used in GAAP;


 


(10)                            the Company has not
consummated, participated in, or served as either a “tax shelter organizer” or “tax
shelter promoter” in any “tax shelter transaction,” as such terms are defined
in Code Sections 6011, 6111, and 6662 prior to the amendment of the American
Jobs Creation Act of 2004;


 


(11)                            the Company (i) has
not consummated, (ii) has neither “participated” nor is currently “participating”
in or (iii) is or was a “material advisor” in respect of (x) a “tax
shelter transaction”, (y) a “listed transaction” or (z) a “reportable
transaction”, as such terms are defined in Code Sections 6011, 6012, 6111,
6662, 6662A, or 6707A;


 


(12)                            no income under any
arrangement or understanding to which the Company is a party will be attributed
to the Company which is not represented by income to which the Company is
legally entitled;


 


(13)                            the Company has not issued
or assumed any indebtedness that is subject to Code Section 279;


 


(14)                            the Company has not made
any payments, is not obligated to make any payments, and is not a party to any
agreement that under certain circumstances could obligate it to make any
payments, that will not be deductible under Code Sections 162(a), 162(m), 280G,
or 404 or that could give rise to any amounts subject to excise tax under Code Section 4999;


 


(15)                            the Company has no
obligation to pay compensation subject to Code Section 409A pursuant to a
deferred compensation plan that does not comply with the requirements of Code Section 409A;


 


(16)                            no property owned by the
Company is (i) property required to be treated as owned by another person
or entity pursuant to the provisions of Code Section 168(f)(8), (ii) constitutes
tax-exempt use property within the meaning of Code Section 168(h)(1) of
the Code,  (iii) is tax-exempt bond
financed property within the meaning of Code Section 168(g),


 


25





















 


(iv) is
subject to Code Section 168(g)(1)(A), (v) is limited use property
within the meaning of Revenue Procedure 76-30, (vi) directly or indirectly
secures any debt the interest which is tax exempt under Code Section 103
or (vii) is subject to a lease under Code Section 7701(h);


 


(17)                            the Company will not be
required to include any item of income in, or exclude any item of deduction
from, taxable income for any taxable period (or portion thereof) ending after
the Closing Date as a result of any (i) change in method of accounting for
a taxable period ending on or before the Closing Date, (ii) closing
agreement described in Code Section 7121 executed on or before the Closing
Date, (iii) installment sale or open transaction disposition made on or
before the Closing Date, (iv) prepaid amount received on or before the
Closing Date, (v) the completed contract method of accounting, (vi) the
long-term contract method of accounting (within the meaning of Code Section 460)
or (vii) Code Section 481 or any other comparable provision of state
or local, domestic or foreign Tax law or for any other reason;


 


(18)                            the Company does not have
any elections in effect under Code Sections 108, 441, 472, 1017, 1033, or 4797;


 


(19)                            the Company has not filed a
consent under Section 341(f) of the Code;


 


(20)                            the Company does not engage
in business in, or derive income from, any state, local, territorial, or foreign
taxing jurisdiction other than those for which Tax Returns have been filed;


 


(21)                            with respect to Greater
Home Funding, LLC (the “LLC-1”), (i) to
the Knowledge of the Stockholders, no election has been made to treat the LLC-1
as a corporation pursuant to United States Treasury Regulations 301.7701 et.
seq. or the corresponding provisions of state or local law, (ii) the
articles of organization of the LLC-1 were filed on November 30, 2000 and
there have been no amendments to the LLC-1’s articles of organization filed
with the Florida Secretary of State, (iii) the operating agreement of the
LLC-1 was adopted effective January 4, 2001, there have been no amendments
to the LLC-1’s operating agreement, and no other agreements (written or oral)
govern or address the relationship between, and the rights and obligations in
respect of,  the LLC-1 members (iv) Buyer’s
purchase of the Company Common Stock contemplated by this Agreement will not
trigger any “change of control” in respect of the LLC-1 or the Company’s
interest in the LLC-1, or otherwise affect the status of the LLC-1, the Company’s
status as a member of, or the Company’s membership rights or economic interests
in, the LLC-1, or trigger any obligation or option on the part of any Person to
acquire the Company’s interest in the LLC-1, or any obligation on the part of
the Company or any other party to purchase the remaining interests in the LLC-1;
and (v) the Company does not currently have a deficit balance in its
capital account with respect to the LLC-1; and


 


(22)                            with respect to Moss Park
Investments, LLC, (the “LLC-2”), (i) no
election has been made to treat the LLC-2 as a corporation pursuant to United
States Treasury Regulations 301.7701 et. seq. or the corresponding provisions
of state or local law, (ii) the articles of organization of the LLC-2 were
filed on March 20, 2003 and there have been no amendments to the LLC-2’s
articles of organization filed with the Florida Secretary of State, (iii)


 


26





















 


the operating
agreement of the LLC-2 was adopted effective March 20, 2003, there have
been no amendments to the LLC-2’s operating agreement, and no other agreements
(written or oral) govern or address the relationship between, and the rights
and obligations in respect of,  the LLC-2
members (iv) Buyer’s purchase of the Company Common Stock contemplated by
this Agreement will not trigger any “change of control” in respect of the LLC-2
or the Company’s interest in the LLC-2, or otherwise affect the status of the
LLC-2, the Company’s status as a member of, or the Company’s membership rights
or economic interests in, the LLC-2, or trigger any obligation or option on the
part of any Person to acquire the Company’s interest in the LLC-2, or any
obligation on the part of the Company or any other party to purchase the
remaining interests in the LLC-2; and (v) the Company does not currently
have a deficit balance in its capital account with respect to the LLC-2.


 


E.                                      Tax Attributes, Other
Tax Information.


 


(1)                                  Section 4.15E(1) of
the Stockholders’ Disclosure Schedule sets forth, with respect to the
Company:


 


(a)                                  the basis of the
Company in its assets;


 


(b)                                 the basis of the stock
of each business entity in which the Company owns or has owned at least a 5%
equity interest; and


 


(c)                                  the amount of any (i) net
operating loss, (ii) net capital loss, (iii) unused investment (iv) unused
foreign tax or tax credit, (v) excess charitable contribution or (vi) other
Tax credit, allocable to the Company or the Company’s assets.


 


(2)                                  Section 4.15E(2) of
the Stockholders’ Disclosure Schedule sets forth any applicable limitation
on the use of any of the attributes set forth in the preceding subsection (e.g.,
net operating loss, net capital loss, unused investment, unused foreign tax
credit, excess charitable contribution or other Tax credit, etc.), whether by
reason of Code Sections 269, 382, 383, or 384, state, foreign, local law or
otherwise, (other than limitations arising by reason of the transactions
contemplated by this Agreement);


 


(3)                                  Section 4.15E(3) of
the Stockholders’ Disclosure Schedule sets forth a list containing the
following information:


 


(a)                                  all countries,
states, cities or other jurisdictions in which the Company has within the past
three years or is currently:


 


(i)                                     subject to an
obligation to file Tax Returns or to collect sales or use Taxes;


 


(ii)                                  (x) a beneficiary of
any real or personal property Tax exemptions or concessions, reduced rates, or
Tax credits, (y) the annual benefit of each such item and (z) the terms governing
expiration or phase-out of each such item;


 


(iii)                               required to register for
Tax purposes;


 


27





















 


(iv)                              qualified to do business;
or


 


(v)                                 is or has been liable
for any Taxes on a “nexus” basis at any time for taxable periods ending after December 31,
1998 (with detail on the type of connections in each respective jurisdiction);


 


(4)                                  Section 4.15E(4) of
the Stockholders’ Disclosure Schedule sets forth a list of each business
entity with respect to which the Company owns directly or indirectly at least a
5% equity interest as well as the current income tax classification of such
entity (whether corporation, partnership, disregarded entity, etc.);


 


(5)                                  Section 4.15E(5) of
the Stockholders’ Disclosure Schedule sets forth all material elections
for income Taxes made by the Company that are currently in force or to which
the Company is bound; and


 


(6)                                  Section 4.15E(6) of
the Stockholders’ Disclosure Schedule sets forth the amount of any
deferred gain or loss allocable to the Company arising out of any deferred
inter-company transactions.


 


F.                                      Roll-Back
Taxes.  Except as set forth on Section 4.15F
of the Stockholders’ Disclosure Schedule, the Real Property is not and will not
be subject to any “roll-back” tax or similar tax subjecting the owner of such
Real Property to any retroactive assessment.


 


G.                                     Special
Definitions.  Any reference to the
term “Company” as used in this Section 4.15 shall encompass the Company,
any entity in which the Company owns or has owned at least a 5% equity
interest, and any predecessor entity of any of the foregoing.


 


4.16                           Restrictions
on Business Activities.  There are no
agreements (non-compete or otherwise), arrangements, commitments, judgments,
injunctions, orders or decrees to which the Company is party or which are
otherwise binding on the Company or its assets that has prohibited or impaired,
or is reasonably likely to prohibit or impair, the operation of the Business as
it is now being conducted.


 


4.17                           Intellectual
Property.  Section 4.17 of the
Stockholders’ Disclosure Schedule sets forth a general description of the
material Intellectual Property which the Company has rights to use in the
conduct of its Business, which Intellectual Property includes but is not
limited to, all drawings, renderings, plans and specifications relating to all
homes and improvements built by and/or offered for sale by the Company.  The conduct of the Business as it is now
being conducted and the conduct and the use and exploitation of the
Intellectual Property do not infringe or misappropriate any rights held or
asserted by any person, and, to the Knowledge of Stockholders, no person is
infringing on the Intellectual Property. 
No payments are required for the continued use of the Intellectual
Property.  None of the Intellectual
Property has ever been declared invalid or unenforceable by any Governmental
Authority, or is the subject of any pending or threatened action for
opposition, cancellation, declaration, infringement, invalidity,
unenforceability, misappropriation or like claim, action or proceeding.  Except as set forth in Section 4.17 of
the Stockholders’ Disclosure Schedule all house, architectural,
engineering,


 


28





















 


construction
and development plans used by the Company are owned outright by the Company or
are licensed to the Company without further payment of any fee and will
continue in full force in effect upon the Closing without further costs due
thereafter.


 


4.18                           Litigation.  Except as set forth on Section 4.18 of
the Stockholders’ Disclosure Schedule, there are no suits, claims, actions,
arbitrations, investigations or proceedings entered against, now pending, or,
to the Knowledge of Stockholders, threatened against the Company or its assets
before any Governmental Authority which are reasonably likely, individually or
in the aggregate, to have a material adverse effect on the Business.  Except as set forth on Section 4.18 of
the Stockholders’ Disclosure Schedule, the Company is not subject to any continuing
court or administrative order, writ, injunction or decree applicable to the
Business, or to its property or employees, and the Company is not in default
under any order, writ, injunction or decree of any Governmental Authority
applicable to the Business.


 


4.19                           Employees.  Attached as Section 4.19 of the
Stockholders’ Disclosure Schedule is a list of names, current annual rates
of salary, bonus, employee benefits, accrued vacation and sick time, employment
bonus, commissions and other compensation and benefits and perquisites,
including the provision of company owned automobiles, of all the employees and
agents of the Company.  To the Knowledge
of Stockholders, no key employee of the Company, and no group of the Company’s
employees, have any plans to terminate his, her, or their employment.  The Company is not a party to any collective
bargaining agreement with any labor union or association.  There are no discussions, negotiations,
demands or proposals involving the Company that are pending or that have been
conducted or made with or by any labor union or association, and there are no
pending or, to the Knowledge of Stockholders, threatened labor disputes,
strikes or work stoppages that may affect the Company or the
Business.  The Company is in compliance
in all material respects with all federal and state laws respecting employment
and employment practices, terms and conditions of employment, and wages and
hours, and are not engaged in any unfair labor practices.  Except as accrued on the Preliminary Closing
Balance Sheet or as set forth in Section 4.19 of the Stockholders’
Disclosure Schedule, the Company may terminate any employee, with or without
cause, without liability or obligation, other than for salary, bonuses,
vacation, sick time and similar obligations accrued through the date of any
such termination and for the obligations of the Company under employee benefit
plans of the Company referred to in Section 4.20 below.


 


4.20                           Employee
Benefit Plans.


 


A.                                   Section 4.20 of
the Stockholders’ Disclosure Schedule sets forth a true and complete list
of (i) each “employee pension benefit plan” as defined in Section 3(2) of
ERISA, (ii) each “employee welfare benefit plan” as defined in Section 3(1) of
ERISA and (iii) each employment consulting, engagement, retainer or golden
parachute agreement or arrangement, employment bonus or other incentive
compensation, stock option, stock purchase, stock or other equity related
award, restricted stock, phantom stock, deferred compensation, profit-sharing,
severance pay, change in control, retention, salary continuation, sick leave,
vacation pay, leave of absence, paid time off, loan, educational assistance,
legal assistance and other material fringe benefit plan, program, agreement or
arrangement, in each case which is sponsored, maintained or contributed to by
the Company or any ERISA Affiliate, or under which Company, any


 


29





















 


Subsidiary or
any ERISA Affiliate otherwise has liability, for the benefit of any current or
former employee or director of the Company (and any eligible dependent and
beneficiary thereof) (collectively, the “Employee
Benefit Plans”).  Except as
set forth on Section 4.20A of the Stockholders’ Disclosure Schedule,
neither Greater Homes nor any Subsidiary has outstanding or is a party to or
subject to any liability under any agreement, arrangement, plan or policy
subject to or entitled to grandfathered treatment under Code Section 409A
and the regulations and other guidance issued thereunder.  With respect to each Employee Benefit Plan,
complete and accurate copies of the following documents (if applicable), have
been made available to Purchaser or its counsel:  (i) the most recent plan document
constituting the Employee Benefit Plan and all amendments thereto, and any
related trust documents, (ii) the most recent summary plan description and
all related summaries of material modifications, (iii) the Form 5500
and attached schedules filed with the Internal Revenue Service for the past
three plan years, (iv) the financial statements and actuarial valuations
for the past three fiscal years (including Financial Accounting Standards Board
report nos. 87, 106 and 112), (v) the most recent Internal Revenue Service
determination letter and (vi) all trust agreements, plan contracts with
service providers or with insurers providing benefits to participants or
liability insurance for fiduciaries or bonding. 
The Company has no unwritten or undocumented Employee Benefit Plans.


 


B.                                     The Company has
performed and complied in all material respects with all of its respective
obligations under or with respect to the Employee Benefit Plans.  Each Employee Benefit Plan and related trust
agreement, annuity contract or other funding instrument complies with and has
been administered and operated in compliance in all material respects in
accordance with its terms and with all Applicable Laws, including but not
limited to the Code and ERISA, and neither Greater Homes nor any Subsidiary has
direct or indirect liability under the requirements provided by any and all
Applicable Laws, including but not limited to ERISA, COBRA, HIPAA and the Code,
and applicable to a Employee Benefit Plan. 
Neither Greater Homes nor any Subsidiary has any liability by virtue of
being a member of a controlled group with a person who has liability under the
Code or ERISA.  All amendments and
actions required to bring each of the Employee Benefit Plans into conformity in
all material respects with all of the applicable provisions of ERISA, the Code
and other Applicable Laws have been made or taken except to the extent that
such amendments or actions are not required by Applicable Law to be made or
taken until a date after the Closing Date. 
No proceeding with respect to an Employee Benefit Plan (other than routine
claims for benefits) are pending or, to the Knowledge of Stockholders,
threatened which could result in or subject the Company to any liability.  There are no audits, investigations or
examinations pending or, to the Knowledge of Stockholders, threatened with
respect to any Employee Benefit Plan by the IRS, the United States Department
of Labor, the PBGC or any other similar Governmental Authority.  There is no material violation of ERISA or
the Code with respect to the filing of applicable reports, documents and notice
regarding the Employee Benefit Plans with the Secretary of Labor and the
Secretary of Treasury or the furnishing of such documents to the participants
or beneficiaries of the Employee Benefit Plans.


 


C.                                     None of the
Employee Benefit Plans is a “multiemployer plan” within the meaning of Section 3(37)
of ERISA, and neither the Company nor any of its ERISA Affiliates have ever
maintained, been required to contribute to or been required to pay any amount
with respect to a “multiemployer plan” at any time in the past six years.  None of the Employee


 


30





















 


Benefit Plans
is subject to Title IV of ERISA or to the funding requirements of Section 412
of the Code or Section 302 of ERISA, and neither the Company nor any of
its ERISA Affiliates have ever had any obligation to or liability (contingent
or otherwise) with respect to any such plan. 
Each Employee Benefit Plan and its related trust intended to be
qualified under Sections 401(a) and 501(a) of the Code, respectively,
has so qualified and has received a favorable determination, opinion or
advisory letter from the Internal Revenue Service and nothing has occurred with
respect to such Employee Benefit Plan since the date of such letter which could
cause the loss of such qualification or the imposition of any material
liability, penalty or tax under ERISA or the Code.  Neither the Company nor, to the Knowledge of
Stockholders, any “party in interest” or “disqualified person” with respect to
any Employee Benefit Plan, has engaged in a “prohibited transaction” within the
meaning of Section 406 of ERISA or Section 4975 of the Code with
respect to any Employee Benefit Plan that could result in a material tax or
penalty.  No Employee Benefit Plan, or
any fiduciary of any such Employee Benefit Plan has (i) engaged in any
transaction prohibited by ERISA or the Code, (ii) breached any fiduciary
duty owed by it with respect to the Plans or (iii) engaged in any
transaction as a result of which the Company would be subject to any liability
pursuant to Sections 406 or 409 of ERISA or to either a civil penalty assessed
pursuant to Section 502(i) or Section 502(l) of ERISA or a tax
imposed pursuant to Section 4975 of the Code.


 


D.                                    All contributions
and premiums (including all employer contributions and employee salary
reduction contributions) that are due with respect to any Employee Benefit Plan
have been made within the time periods prescribed by Applicable Law or by the
terms of such Employee Benefit Plan or any agreement relating thereto to the
respective Employee Benefit Plan, and all contributions, liabilities or
expenses of any Employee Benefit Plan (including workers’ compensation) for any
period ending on or before the Closing Date which are not yet due will have been
paid or accrued in accordance with GAAP on or prior to the Closing Date.  All premiums or other payments for all
periods ending before the Closing Date that are due on or before such Closing
Date from the Company will have been paid with respect to each Employee Benefit
Plan.


 


E.                                      Except for health
care continuation requirements under Section 4980B of the Code and Part 6
of Subtitle I of ERISA (“COBRA”)
or applicable state law, the Company has no obligations for retiree health or
retiree life benefits (whether or not insured) to any current or former
employee or director after his or her termination of employment or service with
the Company.  All group health plans (as
defined in Code Section 5001(b)) of the Company have been operated in
compliance in all material respects with the applicable requirements of COBRA.


 


F.                                      Except as
disclosed on Section 4.20 of the Stockholders’ Disclosure Schedule,
neither the execution and delivery of this Agreement nor the consummation of
the transactions contemplated herein will, either alone or in combination with
any other event, (i) result in any payment becoming due, or increase the
amount of compensation due, to any current or former employee or director of
the Company, (ii) increase any benefits payable under any Employee Benefit
Plan or (iii) result in any acceleration of the time of payment or vesting
of any such compensation or benefits. 
Further, the Company has not announced any type of plan or binding
commitment to create any additional Employee Benefit Plan, to enter into any
agreement


 


31





















 


with any
current or former employee or director, or to amend or modify any existing
Employee Benefit Plan or agreement with any current or former employee or
director.


 


G.                                     Neither Greater
Homes nor any Subsidiary has terminated or taken action to terminate (in whole
or in part) any employee benefit plans as defined in ERISA Section 3(3).


 


H.                                    Neither the Company
nor any Subsidiary maintains any Employee Benefit Plan or other benefit
arrangement covering any employee or former employee outside of the United
States and has never been obligated to contribute to any such plan.


 


I.                                         None of the
rights of the Company under any Employee Benefit Plan will be impaired by the
consummation of the transactions contemplated by this Agreement, and all of the
rights of the Company thereunder will be enforceable by Buyer at or after the
Closing Date without the consent or agreement of any other party.  Each Employee Benefit Plan (including any
Employee Benefit Plan covering former employees and retirees) may be amended or
terminated by Purchaser on or at any time after the Closing Date.


 


4.21                           Insurance.  Section 4.21 of the Stockholders’
Disclosure Schedule lists and describes each material insurance policy
(collectively, the “Policies”) and
fidelity bond, including performance improvement bonds, maintenance bonds,
labor and material bonds and other bonds related to the Real Property
(collectively, the “Bonds”),
maintained by the Company with respect to its properties or the Business, and
sets forth the date of expiration of each such Policy.  All of such Policies and Bonds are in full
force and effect and the Company is not in material default with respect to its
obligations under any of such Policies or Bonds.  Except as set forth on Section 4.21 of
the Stockholders’ Disclosure Schedule, there is no claim of the Company pending
under any of such Policies or Bonds as to which coverage has been questioned,
denied or disputed by the underwriters of such Policies or Bonds and, to the
Knowledge of Stockholders, there has been no threatened termination of, or
material premium increase with respect to, any of such Policies.  To the Knowledge of Stockholders, the
insurance coverage of the Company is customary for entities of similar size
engaged in similar lines of business.


 


4.22                           Affiliate
Transactions.  Except as set forth on
Section 4.22 of the Stockholders’ Disclosure Schedule and except for
the transactions contemplated by this Agreement, neither the Company nor any
employee, officer, director, shareholder or affiliate of the Company, or any
member of their immediate family, or any entity in which any of such persons
owns any beneficial interest (other than a publicly held corporation whose
stock is traded on a national securities exchange or in the over-the-counter
market and less than 1% of the stock of which is beneficially owned by any of
such persons) has any agreement with the Company or any interest in any
property (real, personal, or mixed, tangible or intangible) used in or
pertaining to the Business.  For purposes
of the preceding sentence, the members of the immediate family of a person will
consist of the spouse, parents, children, siblings, mothers- and fathers-in-law,
sons- and daughters-in-law and brothers- and sisters-in-law of such person.


 


4.23                           Compliance
with Laws.  The Company is not
conducting the Business in violation of any Applicable Laws which affect the
Business or the Company’s assets, except for any such violations that are not
reasonably likely, individually or in the aggregate, to have a material


 


32





















 


adverse effect
on the Business.  The Company has not
received any notice of any claims against the Company alleging a violation of
any Applicable Laws, except as set forth in Section 4.23 of the
Stockholders’ Disclosure Schedule or except for such claims that are not
reasonably likely, individually or in the aggregate, to have a material adverse
effect on the Business.  Without limiting
the generality of the foregoing, the Company is not in violation of, and has
not received a notice or charge asserting any violation of, OSHA, or any other
state or federal acts (including rules and regulations thereunder)
regulating or otherwise affecting employee health and safety, except for such
violations that are not reasonably likely, individually or in the aggregate, to
have a material adverse effect on the Business. 
The Company has not in violation of any Applicable Laws given or agreed
to give any money, gift or similar benefit (other than incidental gifts of
articles of nominal value) to any actual or potential customer, supplier,
governmental employee or any other person in a position to assist or hinder the
Stockholders in connection with any actual or proposed transaction.


 


4.24                           Permits.


 


A.                                   The Company
possesses all approvals, authorizations, certificates, consents, franchises,
licenses and permits of Governmental Authorities necessary for the lawful
conduct of the Business (collectively, the “Permits”).  Such Permits are in full force and effect in
all material respects, the Company is in compliance with the terms thereof,
except for such failures to comply which are not reasonably likely,
individually or in the aggregate, to have a material adverse effect on the
Business, and to the Knowledge of Stockholders, no basis exists for any
limitation, revocation or withdrawal of any Permit.


 


B.                                     The Company also
possesses (or there have been granted by the applicable Governmental
Authorities) with respect to the Fee Property the subdivision, development,
construction and sale permits, and other authorizations, approvals, and
entitlements set forth in Section 4.24A of the Stockholders’ Disclosure Schedule (collectively
“Land Use Entitlements”) for those
projects that are identified as “Fully Entitled” in said Section 4.24A.  The Company also possesses (or there have
been granted by the applicable Governmental Authorities) with respect to the
Fee Property partial Land Use Entitlements as set forth in Section 4.24B
of the Stockholders’ Disclosure Schedule for those projects that are
identified as not being Fully Entitled in said Section 4.24B, and where no
Land Use Entitlements have been received, the Unentitled Properties are listed
on Section 4.24C.  Except as set
forth on Section 4.24 of the Stockholders’ Disclosure Schedule, with
respect to the Fee Property identified as Fully Entitled, (i) no approvals
are required as of the Closing from any Governmental Authority to complete the
development and, subject to the issuance of building permits, conduct of
inspections and issuance of certificates of occupancy in the course of
business, construction of homes and the sale thereof and (ii) there are in
full force and effect validly issued building permits for each home currently
under construction or completed on the Fee Property.  No decision-making body has denied or
withheld any Land Use Entitlements except for such denials as are not
reasonably likely, individually or in the aggregate, to have a material adverse
effect on the Business.  To the Knowledge
of the Stockholders, there are no matters applicable to the Company’s other
proposed development projects listed on Section 4.24(D) (including
Related Party Projects and Contract Property) that would preclude their future
development for residential purposes as projected in the Company’s current
performance projections provided to Buyer. 
However, the Company is


 


33





















 


still
performing due diligence on the Contract Property, including obtaining the
entitlements and negotiating the agreements with governmental authorities which
are listed on Section 4.24C have not yet been completed, so no assurance
can be given that such development will ultimately be permitted or will occur.  The Company is in the continuing process of
working toward such ability to develop said projects which are listed on Schedule 4.24(D) attached
hereto.


 


C.                                     All required
surface water management permits for the portions of the Fee Property being
developed by the Company (as opposed to acquiring fully developed platted lots
have been issued by the applicable water management district and any other
applicable governing body except as set forth on Schedule 4.24(E).


 


4.25                           Membership
Records; Minute Books.  The minute
books of the Company made available to Buyer in connection with its due
diligence procedures and to be transferred pursuant to the transactions
contemplated herein are the only minute books of the Company and its
subsidiaries and contain an accurate summary of all meetings of directors (or
committees thereof) and members or shareholders or actions by written consent
since the time of incorporation of the Company.


 


4.26                           Budgets.  Section 4.26 of the Stockholders’
Disclosure Schedule sets forth the site development budgets for the Real
Property.  Such budgets include adequate
provision for (i) costs to complete remaining site improvement work and
amenities and (ii) the Company’s obligation to fund any homeowners’
association reserve and deficiency amounts to the extent of such obligations
through December 31, 2005.  Such
budgets are complete and were prepared by the Company in good faith and the
assumptions underlying such budgets are reasonable.


 


4.27                           Disclosure.  To the Knowledge of Stockholders, neither
this Agreement nor the Stockholders’ Disclosure Schedule or Exhibits
hereto contains any untrue statement of a material fact or, to the Knowledge of
Stockholders, omits to state a material fact necessary to make the statements
contained herein or therein, in light of the circumstances in which they were
made, not misleading, and there is no fact which has not been disclosed to
Buyer which materially adversely affects or could reasonably be anticipated to
materially adversely affect the financial condition, results of operations,
customer, employee or supplier relations, business condition or prospects of
the Company or the Company’s assets or the Business.  To the Knowledge of Stockholders (i) there
are no defects, deficiencies or inaccuracies in any of the information
furnished by the Stockholders to Buyer with respect to the Business and (ii) all
information furnished by the Stockholders to Buyer with respect to the Business
is materially accurate and complete.


 


4.28                           Condominiums.  The Company has not developed any project as
a condominium under the Condominium Act, and the Fountains at Crystal Creek is
the only project that the Company is currently planning as a condominium under
the Condominium Act.  The Fountains at
Crystal Creek is in the early stages of planning, and, therefore, no
condominium prospectus has been prepared for filing with the State of Florida
and no portion of the Project has been advertised or otherwise offered for sale
to any prospective retail buyers.


 


4.29                           Retail
Sales Contracts.  Section 4.29
of the Stockholders’ Disclosure Schedule lists as of the date hereof all
of the executory retail sales agreements that the Company has


 


34





















 


entered into
concerning the sale and delivery of homes within the Fee Property (the “Retail Sales Contracts”) and the earnest
money deposits made pursuant thereto.  To
the Knowledge of Stockholders, each of the Retail Sales Contracts complies with
Applicable Laws and is valid, binding and in full force and effect and is free
of default as to each the Company’s performance thereunder and as to the retail
buyer’s obligations thereunder.  A true,
correct and complete copy of the Company’s representative form of retail sales
contract and all riders, amendments, addenda, disclosures and attachments
related thereto is attached to Section 4.29 of the Stockholders’
Disclosure Schedule.  True, correct and
complete copies of the Retail Sales Contracts and all riders, amendments,
addenda, disclosures, attachments, selections, change orders and floor plans
have been delivered to Buyer.  All
earnest money deposits for single family homes have been paid directly to the
Company in accordance with Applicable Laws. 
The Company has not entered into any retail sales contracts for homes
planned on the Related Party Projects or the Contract Property.


 


4.30                           Covenants,
Conditions and Restrictions.  All
Housing Units currently owned by the Company and constructed by the Company
prior to the date hereof conform in all material respects with the requirements
of any applicable covenants, conditions, restrictions and declarations (the “CCRs”) and have received all requisite
approvals required pursuant to the CCRs.


 


4.31                           Associations.  A complete list of all Associations currently
controlled by the Company is attached hereto as Section 4.31 of the
Stockholders’ Disclosure Schedule.  All
of the Associations that are controlled by the Company are operated in
accordance with Applicable Laws, and have been duly organized and are in good
standing under Applicable Laws, and have been operated and managed by the
Company in accordance with Applicable Laws and all organizational documents
applicable thereto, including without limitation, the articles of
incorporation, bylaws, CCRs applicable to each Association.  All of the Associations that were at one time
or another controlled by the Company and have since been turned-over to the
respective property owners were operated, managed and funded by the Company in
accordance with Applicable Laws and all organizational documents applicable
thereto, including without limitation, the articles of incorporation, bylaws,
and covenants applicable to each Association and the Company has no further
liability or obligation thereto.  The
minute books of all Associations currently controlled by the Company have been
made available to Buyer and shall remain in the corporate offices of the
Company after Closing.  The Company shall
fund, prior to Closing and preparation of the Preliminary Closing Balance
Sheet, all deficits and reserves if additional funding is required by law.


 


4.32                           Coastal
Construction Control Line.  No portion of the Real Property is affected by the
Coastal Construction Control Line as defined in Section 161.053,
Florida Statutes.


 


4.33                           Registration.  No portion of the Real Property is registered
under nor required to be registered under the Interstate Land Sales and Full
Disclosure Act, 15 U.S.C. Section 1700, et seq., or the Florida Land Sales
Practices Act, Fla. Stat. Section 498 et seq.


 


4.34                           Licensing.  The Company is a licensed general contractor
in accordance with Florida law and Chapter 489, Fla. Stat., and its license no.
is QB001204.  The qualifying agents


 


35





















 


for the
Company are Simon Snyder, license no. CR057959, and Charles W. Gregg, license
no. CGCA11271.


 


4.35                           Construction.  All development and construction work
currently in process on the Real Property is being performed on property owned
in fee by the Company and included within the definition of Real Property;
provided, however, that certain infrastructure work listed on Section 4.35
of the Stockholders’ Disclosure Schedule is currently being constructed by
the Company on property not owned by the Company in accordance with the fee
owner’s written authorization.  All
vertical home construction, including the work in process, is being constructed
on platted and improved lots owned in fee by the Company, or, with respect to
the Moss Park Project, owned by Moss Park Investments, LLC, a joint venture
controlled by the Company.


 


4.36                           Florida’s
Construction Lien Law.  The Company
is in compliance with all requirements of Florida’s Construction Lien Law,
Chapter 713, Fla. Stat., et seq.


 


ARTICLE V

CONDUCT OF STOCKHOLDERS PENDING THE CLOSING


 


The Stockholders
hereby covenant and agree that from the date hereof to the Closing Date:


 


5.1                                 Conduct
of Business Pending the Closing. 
Except as contemplated by this Agreement, (i) the Company will
carry on the Business in the ordinary course, in accordance with all Applicable
Laws and in substantially the same manner as previously conducted and (ii) without
the prior written consent of Buyer (which consent shall not be unreasonably
withheld), the Company will not, directly or indirectly:


 


A.                                   cancel or terminate
or permit to be canceled or terminated the Company’s current insurance (or
reinsurance) policies or permit any of the coverage thereunder to lapse, unless
simultaneous with such termination, cancellation or lapse, replacement policies
providing coverage equal to or greater than the coverage under the canceled,
terminated or lapsed policies for substantially similar premiums are in full
force and effect;


 


B.                                     sell, lease,
encumber or otherwise dispose of any of their assets other than, in the case of
lots and homes held for sale in the ordinary course, the sale of such lots or
homes in the ordinary course of business as previously conducted;


 


C.                                     acquire or enter
into any option or other agreement to acquire any real property or other
material assets;


 


D.                                    default under any
Material Contract;


 


E.                                      violate or fail
to comply in any material respect with any Applicable Laws;


 


36





















 


F.                                      fail to maintain
and repair their assets in accordance with the ordinary course of business;


 


G.                                     except as
contemplated by this Agreement or previously disclosed to Buyer or in the
ordinary course of business, enter into any employment, severance or similar
agreements or arrangements with, or adopt, modify or amend any bonus, profit
sharing, compensation, stock option, pension, retirement, deferred
compensation, employment, severance or other benefit plan, trust, fund or group
arrangement resulting in a material increase in benefits to employees,
officers, directors or consultants of the Company;


 


H.                                    except in the
ordinary course of business, consistent with past practices, modify or
terminate any Material Contract or enter into any new contracts;


 


I.                                         acquire (by
merger, exchange, consolidation, acquisition of stock or assets or otherwise) any
corporation, partnership, joint venture or other business organization or
division or material assets thereof;


 


J.                                        issue or create
any additional shares of Capital Stock of the Company or any Subsidiary;


 


K.                                    except as
contemplated by this Agreement, enter into any obligations, subscriptions,
options or other commitments under which any additional shares of Capital Stock
of the Company or any Subsidiary might be directly or indirectly authorized,
issued or transferred, or incur any indebtedness for borrowed money or issue
any debt securities except the borrowing of working capital in the ordinary
course of business and consistent with past practice;


 


L.                                      except in the
ordinary course of business, consistent with past practices, pay any material
obligation or liability, fixed or contingent, other than current liabilities;


 


M.                                 waive or compromise
any right or claim (other than as required to resolve any pending or threatened
litigation disclosed in the Stockholders’ Disclosure Schedule or warranty
claims);


 


N.                                    except as
previously disclosed to Buyer, pay any dividends or make any distributions;


 


O.                                    start more spec
homes than is consistent with past practices;


 


P.                                      commit any act
described in Section 4.8, except (i) as set forth in Section 4.8
of the Stockholders’ Disclosure Schedule (ii) as contemplated in and
consistent with the terms of this Agreement, (iii) except as previously
disclosed to Buyer, or (iv) in the ordinary course of business;


 


Q.                                    other than in the
ordinary course of business, terminate or consent to the termination of any
Retail Sales Contracts;


 


37





















 


R.                                     enter into any new
retail sales contracts for Lots or any work in process except in the ordinary
course of business consistent with past practices or enter into any new Retail
Sales Contracts for Lots or any work in process with any Stockholder or any of
his affiliates or family members;


 


S.                                      remove,
terminate, amend or adopt any new (or consent to the foregoing)  covenant, condition or reservation applicable
to the Real Property;


 


T.                                     agree to do any of
the actions described in the preceding clauses A through S.


 


5.2                                 Business
Relationships.  The Stockholders will
cause the Company to:


 


A.                                   preserve intact the
Company’s assets and properties;


 


B.                                     maintain all
facilities and equipment in good condition, ordinary wear and tear excepted;


 


C.                                     keep available the
services of the Company’s officers and employees as a group, except for (i) voluntary
resignations by employees (other than those induced or encouraged by the
Company or the Stockholders) and (ii) terminations for cause;


 


D.                                    maintain
satisfactory relationships with material suppliers, distributors, customers and
others having material business relationships with the Company;


 


E.                                      upon execution of
this Agreement, adopt Buyer’s policy with respect to purchases of homes by
employees and their relatives, family members and affiliates; and


 


F.                                      continue to
operate, maintain and fund all homeowner associations applicable to the Real
Property in accordance with prior practices, the requirements of applicable law
and sound business practices.


 


5.3                                 Notification
of Certain Matters.  The Stockholders
will:


 


A.                                   confer on a regular
basis with representatives of Buyer and report operational matters and the
general status of the Business and ongoing operations;


 


B.                                     notify Buyer of
any material adverse change in the normal course of the Business or in the
operation of the Company’s properties and of any Governmental Authority or
third party complaints, investigations or hearings (or communications
indicating that the same may be contemplated);


 


C.                                     not take any
action which would render, or which reasonably may be expected to render, any
representation or warranty made by them in this Agreement untrue at, or at any
time prior to, the Closing; and


 


38





















 


D.                                    promptly notify
Buyer if the Stockholders discover that any representation or warranty made by
the Stockholders in this Agreement was when made, or has subsequently become,
untrue.


 


5.4                                 Required
Approvals.  As promptly as
practicable after the date of this Agreement, Buyer and the Stockholders will
cooperate in making all filings required by Applicable Laws in order to
consummate the transactions contemplated by this Agreement.  The parties also will cooperate with each
other in obtaining all consents required by Section 10.2B.


 


5.5                                 Tax
Matters.  Without the prior written
consent of Buyer, the Company shall not make or change any Tax election, change
an annual accounting period, adopt or change any accounting method, file any
Tax Return except in compliance with Article VII, enter into any closing
agreement, settle any Tax claim or assessment relating to the Company or any
Company Subsidiary, surrender any right to claim a refund of Taxes, consent to
an extension or waiver of the limitation period applicable to any Tax claim or
assessment relating to the Company or take any similar action relating to the
filing of any Tax Return or the payment of any Tax if such election, change, amendment,
agreement, or settlement, surrender, consent or other action would have the
effect of increasing the Taxes of the Company for any period after the Closing
Date or decreasing any Tax attribute of the Company existing on the Closing
Date.  Any reference to the term “Company”
as used in this Section 5.5 shall encompass the Company, any entity in
which the Company owns or has owned at least a 5% equity interest, and any
predecessor entity of any of the foregoing.


 


ARTICLE VI

COVENANTS AND ADDITIONAL AGREEMENTS


 


6.1                                 Noncompetition.  Each Stockholder agrees that:


 


A.                                   For the period
beginning on the Closing Date and ending on the later of (i) the [ * ]
anniversary of the Closing Date or (ii) [ * ] years after such Stockholder
ceases to work for the Company or Buyer or Meritage (the “Restriction Period”), regardless of the
reason for the Stockholder’s cessation of employment with the Company, such
Stockholder and his affiliates, agents, spouse and issue will not, directly or
indirectly, either as a joint venturer, partner, member, shareholder, owner,
lender, director, advisor or consultant or in any similar capacity, engage, or
prepare to engage, in the construction or sale of any residential housing,
including, but not limited to, any residential land development, residential
lot development, residential land banking or residential real estate
speculation or related activities or investments, or any other business related
to the sale, construction or development of owned residential housing
(including low-, mid- and high-rise condominiums or apartment to condo
conversions) in [ * ], (a “Competing Business”).  For the avoidance of doubt, the restrictions
set forth in this Section 6.1A apply to (i) any activities taken in
anticipation of, or to prepare for, the performance of or investment in, any
Competing Business and (ii) passive investments in residential real
estate.


 


B.                                     Notwithstanding
the terms of Section 6.1A above, if a Stockholder’s employment with the
Company or Buyer is terminated by the Company or Buyer, as the case may be,
without cause prior to the [ * ] anniversary of the Closing Date, the
Restriction Period


 










*                 Confidential
information on this page has been omitted and filed separately with the
Securities Exchange Commission pursuant to a Confidential Treatment Request.


 


39





















 


with respect to such Stockholder will
automatically become, and be limited to, the period beginning on the date of
such termination of employment and ending on the [ * ] anniversary of the
Closing Date.


 


C.                                     The restrictions
set forth in Section 6.1A shall not apply to any activity of any
Stockholder that consists of, or relates to, any of the following:  [ * ]; provided, however, that (x) with
respect to each of clauses (i) through (v), such Stockholder continues to
devote substantially all of his time and attention to the business of the
Company during normal working hours consistent with the terms of the Employment
Agreement between such Stockholder and the Company and (y) with respect to
clauses (iii) and (iv), [ * ].


 


D.                                    Each Stockholder
agrees that, during the Restriction Period, neither such Stockholder nor any of
his affiliates will recruit, hire or discuss employment with any person who is,
or within the one year period preceding the date of such activity was, an
employee of the Company or Buyer, or solicit any customer or supplier of the
Company or Buyer or otherwise attempt to induce any such customer or supplier
to discontinue its relationship with the Company or Buyer.


 


E.                                      For purposes of
this Section 6.1, the term Buyer includes Meritage and all of Buyer’s and
Meritage’s subsidiaries, joint ventures and affiliates.


 


F.                                      Each Stockholder
hereby agrees that the Restriction Period and the other provisions and
restrictions set forth herein are reasonable and necessary to protect Buyer and
its successors and assigns in the use and employment of the goodwill of the
Business, including the goodwill created by the Stockholder, and that the
purchase price provides valuable consideration for the restrictions set forth
in this Agreement.  Each Stockholder
further agrees that damages cannot compensate the Buyer in the event of a
violation of this Section 6.1 and that, if such violation should occur,
injunctive relief shall be essential for the protection of the Buyer and its
successors and assigns.  Accordingly,
each Stockholder hereby covenants and agrees that, in the 


 










*                 Confidential
information on this page has been omitted and filed separately with the
Securities Exchange Commission pursuant to a Confidential Treatment Request.


 


40





















 


event any of
the provisions of this Section 6.1 are violated or breached by such
Stockholder, Buyer shall be entitled to obtain injunctive relief against such
Stockholder, upon due notice, but without bond where a court deems appropriate,
in addition to such further or other relief as may be available at equity or
law.  Obtainment of such an injunction by
the Company shall not be considered an election of remedies or a waiver of any
right to assert any other remedies which Buyer has at law or in equity.  No waiver of any breach or violation hereof
shall be implied from forbearance or failure by Buyer to take action thereof.


 


G.                                     Each Stockholder
hereby agrees that the Restriction Period with respect to such Stockholder
shall be extended for a period equal to the duration of any breach of this Section 6.1
by such Stockholder as determined by a court or arbitrator of competent
jurisdiction.


 


H.                                    In the event that a
court or arbitrator of competent jurisdiction determines that the Restriction
Period or any other provision or restriction of this Section 6.1 is
overbroad, overlong or otherwise not reasonably necessary to protect the
legitimate business interests of Buyer, then the court or arbitrator shall
modify the Restriction Period or such over provision or restriction and grant
only the relief that is reasonably necessary to protect the legitimate business
interests of Buyer.


 


I.                                         Nothing
contained in this Section 6.1 will prohibit any Stockholder or any
affiliate, agent, spouse or issue of a Stockholder from investing in the
securities of any entity that engages in a Competing Business, provided that
any such securities are listed on a national securities exchange or traded in
the over-the-counter market or registered under Section 12(g) of the
Securities Exchange Act of 1934, and such investment does not exceed, in the
case of any class of securities, 3% of the value of such class of securities at
the time of such investment.


 


6.2                                 Protection
of Information.


 


A.                                   The Stockholders
recognize and acknowledge that the trade secrets of the Company, the Buyer and
Meritage and all other confidential and proprietary information of a business,
financial or other nature, including without limitation, proprietary
information of the Company, Buyer and Meritage, as it exists from time to time
(collectively, “Confidential Information”),
are valuable and unique assets of Buyer and Meritage (and post-Closing, of the
Company that inure to Buyer and Meritage) and therefore agree that, during the
Restriction Period, they will not, and they will each use reasonable commercial
efforts to ensure that they and their advisers, agents and consultants do not,
disclose any Confidential Information concerning the Company, Buyer or
Meritage, to any person, firm, corporation, partnership, limited liability
company, association or other entity, for any reason whatsoever, unless
previously authorized in writing to do so by Buyer or Meritage.  It is understood that Confidential
Information shall not include any information that is or becomes generally
available to the public other than as a result of an unauthorized disclosure by
any Stockholder, or that is disclosed by any Stockholder in accordance with the
terms of a prior written consent of Buyer or Meritage.  It is understood that Confidential
Information includes information pertaining to the Business which was acquired
by Buyer pursuant to this Agreement.  For
the purpose of enforcing this provision, Buyer or Meritage may resort to any
remedy available to it under the law.


 


41





















 


B.                                     The protection of
information provisions set forth in Section 6.2A shall also apply to the
Buyer with respect to confidential information of the Company and the
Stockholders prior to Closing and the Company and the Stockholders shall have
the same remedies afforded Buyer in Section 6.2A with respect to any
pre-closing breach by Buyer of this Section 6.2B.  The parties agree that Buyer’s
confidentiality obligations with respect to Confidential Information shall
cease effective as of the Closing with respect to any matters relating to the
business of the Company.


 


6.3                                 Employment.  The Stockholders shall cause the Company to
pay at the Closing all compensation, benefits, perquisites and other payments
earned by the Company’s employees for periods prior to the Closing Date (other
than payments accrued on the Preliminary Closing Balance Sheet) and remaining
unpaid as of the Closing Date, in accordance with the terms of the agreements,
plans or policies governing such payments, as applicable.


 


A.                                   Buyer hereby agrees
to engage each of Robert A. Mandell, Charles W. Gregg, Hampton P. Conley,
Stephen Gallagher and Simon Snyder as an employee of Buyer and pursuant to
employment agreements to be entered into by and between the Company and such
persons (the “Employment Agreements”).  The initial annual compensation to be paid to
these officers is listed on Schedule 6.3A. 
For those persons listed above that hold a license permitting them to
act as a general or building contractor within the State of Florida and serve
to qualify the Company for licensing purposes in the State of Florida, the
Employment Agreement will provide that during the term of the Employment
Agreement, the employee will (i) continue to hold and maintain in good
standing such license and serve to qualify the Company, (ii) make all
public appearances before the State of Florida in connection with both his
individual license and the qualifying status of the Company, (iii) cooperate
with the Company in connection with all applications and licensing matters and (iv) fulfill
all obligations and responsibilities of a qualifying agent.


 


Managers of the Company selected by Buyer will enter into
confidentiality and/or employment agreements with Buyer on terms mutually
agreed upon between Buyer and such persons.


 


B.                                     Buyer shall use
reasonable commercial efforts, without incurring any material incremental
monetary obligation, to credit all employees hired pursuant to this Section 6.3
with service with the Company for purposes of seniority, eligibility and
vesting under all employee benefit plans, programs or arrangements of Buyer or
Meritage, as applicable, under which such employees may be eligible to
participate.


 


C.                                     Buyer shall use
reasonable commercial efforts, without incurring any material incremental
monetary obligation, to waive all limitations as to preexisting condition
exclusions and waiting periods with respect to participation and coverage
requirements applicable to the employees of Buyer under any welfare benefit
plans that such employees are eligible to participate in after the Closing,
other than to the extent that exclusions or waiting periods already in effect
with respect to such employees have not been satisfied as of the Closing under
any welfare benefit plan maintained for such employees immediately prior to the
Closing.


 


42





















 


D.                                    Metropolitan
Florida Realty, Inc. (“Metropolitan”)
and the Company have common ownership. 
At the Closing, the Stockholders and Metropolitan will assist Buyer in
hiring those independent contractors utilized by Metropolitan for Greater Homes
matters, as identified by Buyer; provided, however, that neither Buyer nor the
Company shall be responsible for any compensation or benefits outside of the
ordinary course of business. 
Notwithstanding anything to the contrary in this Section 6.3D,
Buyer agrees that nothing in this Section 6.3D will preclude payments by
the Company of commissions for pending home sales pending on the Closing Date
involving the Company, including commissions, fees, accrued vacation or sick
pay, severance or other similar employment related costs relating to such
persons for periods or transactions prior to the Closing Date.  The Stockholders agree to cause Metropolitan
to cease operations and be dissolved as soon as practicable following the
Closing Date.


 


6.4                                 Break-Up
Fee.


 


A.                                   If the transactions
contemplated by this Agreement are not consummated because the Stockholders
fail to close such transactions even though all conditions to the obligations
of the Stockholders under Section 10.1 have been satisfied, then (i) the
Stockholders (or the Company) jointly and severally shall reimburse Buyer for
its reasonable expenses (including attorneys’ fees and fees of other
professional advisors) incurred in connection with the negotiation of the
transactions and the preparation of the Transaction Documents; provided,
however, that such reimbursement will not exceed the sum of $[ * ], and (ii) if,
prior to September 1, 2006, the Stockholders agree, or the Company agrees,
to a term sheet, letter of intent or definitive agreement, whether oral or in
writing, relating to the sale of the Business to a third party, in whole or in
part, whether through purchase, merger, consolidation or other business
combination (other than sales of inventory or immaterial portions of the
Company’s assets in the ordinary course) or such transaction is ultimately
consummated, then upon the occurrence of either such event, subject to Section 13.3,
the Stockholders (or the Company) jointly and severally will pay to Buyer the
sum of $[ * ] (the “Break-Up Fee”).


 


B.                                     If the
transactions contemplated by this Agreement are not consummated because Buyer
fails to close such transactions even though all conditions to the obligations
of Buyer under Section 10.2 have been satisfied, then (i) Buyer or
Meritage shall reimburse the Stockholders for their reasonable expenses
(including attorneys’ fees and fees of other professional advisers, but
excluding any fees which are in form or substance a success fee contingent upon
the closing) incurred in connection with the negotiation of the transactions
and the preparation of the Transaction Documents; provided, however, that such
reimbursement will not exceed the sum of $[ * ], and (ii) if, prior to September 1,
2006, Buyer or Meritage or any of Meritage’s Subsidiaries agrees to a term
sheet, letter of intent or definitive agreement, whether oral or in writing,
relating to the acquisition of another residential homebuilder in the Orlando,
Florida market, in whole or in part, whether through purchase, merger,
consolidation or other business combination or such transaction is ultimately
consummated, then upon the occurrence of either such event, subject to Section 13.3,
Buyer and Meritage, jointly and severally, agree to pay to the Stockholders’
Representative the Break-Up Fee.


 


C.                                     The parties agree
that the Break-Up Fee is a reasonable estimate of the damages to be suffered by
the other party or parties in the event that a party or parties fail to 


 










*                 Confidential
information on this page has been omitted and filed separately with the
Securities Exchange Commission pursuant to a Confidential Treatment Request.


 


43





















 


close the transactions contemplated hereunder
as set forth above in this Section 6.4 and that the Break-Up Fee is not
intended by the parties to be a penalty for any such circumstance.


 


6.5                                 Land
Banking.  The Stockholders will
cooperate with Buyer with respect to arrangements to sell and convey at Closing
any portions of the Real Property or model homes designated by Buyer on terms
and conditions reasonably acceptable to Buyer and reasonably approved by the
Stockholders (to the extent any terms affect the Stockholders, as opposed to
the Company), which cooperation shall include placing any portions of the
property in third party land banks provided by Buyer for the benefit of the
Company and/or Buyer.  Buyer agrees to
pay for any costs incurred by the Company and/or Stockholders in connection
with such activities.  In the event of
any such conveyances, then all of the terms of this Agreement shall inure to
the benefit of Buyer’s designee as well as to Buyer, and the title policy to be
issued in connection with such land bank transactions and updated Survey shall
be issued in the name of the Buyer’s designee. 
The parties agree that any transactions pursuant to this Section 6.5
will not affect the purchase price to be paid by Buyer for the Company
Stock.  Notwithstanding anything to the
contrary in this Section 6.5, the actual lots taken down pursuant to the
foregoing land bank projects will be taken down by the Company.


 


6.6                                 Insurance
Rights and Indemnification.  The
Stockholders shall cause Buyer to be named as an additional insured as of the
Closing (in form reasonably acceptable to Buyer) on all insurance policies of
the Company that cover any liabilities of the Company arising with respect to
acts or omissions on or prior to the Closing Date.


 


6.7                                 Stockholders’
Representative.  The Stockholders
shall at all times maintain a representative (the “Stockholders’ Representative”) for purposes of taking certain
actions and giving certain consents on behalf of the Stockholders as specified
herein.  Each Stockholder hereby appoints
Robert A. Mandell as the Stockholders’ Representative, provided however, if
Robert A. Mandell dies, is incapacitated or unavailable to act, Charles W.
Gregg is hereby authorized to take all actions hereunder as the Stockholders’
Representative.  The Stockholders, each
having voting power in proportion to such Stockholder’s pro rata ownership of
the Company Stock immediately prior to the Closing, may elect one or more
replacements to be the Stockholders’ Representative appointed hereunder by
majority vote of such interests, provided that Buyer is notified in writing
thereof (including written agreement by such replacement to serve as
Stockholders’ Representative as set forth herein).  Each Stockholder acknowledges that actions
taken, consents given and representations made by the Stockholders’
Representative on behalf of the Stockholders pursuant hereto shall be binding
upon the Stockholders.  This appointment
and grant of power and authority by each Stockholder is coupled with an
interest and is irrevocable and shall not be terminated by any act of the
Stockholders or by operation of law, whether by the death or incapacity of the
Stockholders or by the occurrence of any other event.  The Stockholders’ Representative is
authorized by the Stockholders to take any action on behalf of the Stockholders
to facilitate or administer the transactions contemplated hereby, including
without limitation, amending this Agreement, settling indemnification claims
and executing such other documents or instruments as the Stockholders’
Representative deems appropriate.


 


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6.8                                 Stockholder
Advances and Other Debt Payments at Closing.  At or prior to the Closing, any Stockholders
(or affiliates thereof) that have any advances outstanding and owing to the
Company will repay the advances prior to the Closing.  At Buyer’s election, it may deduct the net
amount of these advances against the purchase price payment at Closing set
forth in Section 1.4A.  In addition,
the Company will use its available cash balances to payoff existing debt on the
Closing Date, but only to extent of such cash balances and only to the extent
permissible by applicable Florida law with respect to deposits made by the
Company’s customers.  At the Closing, the
Buyer will payoff any remaining Company debt.


 


6.9                                 No
Negotiations.  The Stockholders will
not, directly or indirectly, through any officer, director, agent, member,
shareholder, affiliate or otherwise, solicit, initiate or encourage submission
of any proposal or offer from any person or entity (including any of its
officers, directors, partners, employees, or agents) relating to any
liquidation, dissolution, recapitalization, merger, consolidation or
acquisition or purchase of all or part of the Company’s assets or properties,
or any equity interest in the Company, or other similar transaction or business
combination involving the Company or its assets or the Business, or participate
in any negotiations regarding, or furnish to any other person any information
with respect to, or otherwise cooperate in any way with, or assist, participate
in, facilitate or encourage, any effort or attempt by any other person or
entity to do or seek any of the foregoing. 
The Stockholders will promptly notify Buyer if any such proposal or
offer, or any inquiry from or contact with any person with respect thereto, is
made and will promptly provide Buyer with such information regarding such
proposal, offer, inquiry or contact as Buyer may request and will inform the
other party of its/their inability to discuss any transaction or to provide any
confidential information to such party.


 


6.10                           Independent
Auditors.  Subsequent to the Closing,
Buyer intends to engage its independent auditors to complete an audit of the
Company’s financial statements (prepared in accordance with Regulation S-X
promulgated by the SEC as of and for the two years ended December 31,
2004).  The Stockholders agree to
cooperate with the performance and completion of such audit, including
providing any information and customary representation letters requested by the
independent auditors and causing the Company’s existing accounting firm to
provide reasonable and customary assistance to Buyer’s independent
auditors.  The parties agree that 50% of
the cost of such audit will be borne by the Company (post-Closing) and 50%,
subject to a maximum of $25,000, will be borne by the Stockholders.  The parties agree that the cost of the audit
contemplated by this Section 6.10 shall not be deducted for purposes of
determining net earnings in connection with any bonus payments to the
Stockholders pursuant to the Employment Agreements.


 


6.11                           Right
to Enter and Inspect.  From time to
time prior to the Closing, upon reasonable notice, subject to applicable law,
Buyer will have reasonable access, during normal business hours, to enter the
Real Property with Buyer’s representatives and agents to examine the Real
Property and the assets and properties, conduct environmental studies (not
including soil or groundwater or other testing unless agreed to in writing by
the Company), engineering feasibility studies, and other tests and studies
reasonable and customary for a transaction of the type contemplated hereby, and
otherwise to evaluate, inspect and examine the Company’s assets, its properties
and the Business.  Buyer shall indemnify,
insure, and defend the Company, the


 


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Stockholders
and their respective officers, directors, employees, representatives and
agents, from and against, and reimburse each of them for, any and all losses,
costs, damages, harm, claims and liabilities, and mechanics’ and materialmens’
liens which may be asserted against any of the foregoing indemnified parties,
in connection with the access, examination, evaluation, inspection,
investigation and tests and studies made by Buyer or its representatives or
agents.


 


6.12                           Public
Announcements.  Up to and including
Closing, Buyer and the Stockholders will agree on the form and content of the
initial press release regarding the transactions contemplated hereby and the
parties hereto will not issue any press release or public announcement,
including announcements by any party for general reception by or dissemination
to employees, agents or customers, with respect to this Agreement and the other
transactions contemplated by this Agreement without the prior written consent
of the other parties hereto (which consent will not be withheld unreasonably);
provided, however, that Meritage may make any disclosure or announcement that,
in the opinion of its counsel, it is obligated to make pursuant to Applicable
Laws (including federal securities laws) or pursuant to applicable regulation
of the New York Stock Exchange or any national securities exchange, as
applicable.  In the event that Meritage
is requested pursuant to, or required by, applicable regulation of the New York
Stock Exchange or any national securities exchange or Applicable Laws (including
federal securities laws) to make any disclosure or announcement concerning the
Company or the transactions contemplated hereby, Buyer agrees that it shall
provide the Stockholders with prompt notice of such request and shall use its
reasonable best efforts to disclose or announce only the information which it
is advised by counsel is legally required.


 


6.13                           Further
Assurances.  Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use its
commercially reasonable efforts to take, or cause to be taken, all action and
to do, or cause to be done, all things necessary, proper or advisable to
consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement and the other Transaction Documents, including
using its commercially reasonable efforts in obtaining all necessary waivers,
consents and approvals and effecting all necessary registrations and filings
and submissions of information requested by Governmental Authorities.  The Stockholders and Buyer agree that they,
at any time before or after the Closing, at the requesting parties’ expense,
will execute, acknowledge, and deliver any further consents, deeds,
assignments, assumptions, conveyances, other assurances, documents and instruments
of transfer or receipt either necessary to consummate the Stock Purchase and at
the requesting parties’ expense, will take any other action consistent with the
terms of this Agreement and the other Transaction Documents that may reasonably
be requested for the purpose of assigning, assuming, transferring, granting,
conveying and confirming to Buyer, or reducing to possession, the Company Stock
to be conveyed and transferred pursuant to this Agreement and the other
Transaction Documents, provided, however, that if the Stockholders were
required pursuant to Section 11.1 to deliver any document at the Closing
and failed to do so, the Stockholders agree that they will, after the Closing,
and at their expense, deliver such document to Buyer.  After the Closing, the parties will cooperate
in good faith and use commercially reasonable efforts to resolve any issues
which may arise in the transfer of the Company Stock and the Business.


 


6.14                           Post
Closing Cooperation.  The parties
hereto shall cooperate with each other after Closing to facilitate the
development of the Real Property and those certain related


 


46





















 


commercial
parcels title to which shall be retained by (or conveyed subsequently to) the
Stockholders by and/or through Greater Properties, Inc. in Holly Hills,
Oaks at Brandy Lakes, Cypress Preserve and the Trails of St. John’s.  The foregoing cooperation shall include but
shall not necessarily be limited to, the providing of requisite cross-access to
the respective parcels, creating applicable property owner’s associations and
community development districts, and the development of infrastructure
improvements.  Assessments levied by the
associations and/or community development districts, and the costs for any
infrastructure improvements benefiting both commercial and residential parcels
(on-site and off-site improvements) shall be shared equitably between the
parties and the respective commercial and residential parcels pursuant to
relative benefits enjoyed by each parcel.


 


6.15                           Existing
Closing Agent Arrangements.  The
parties acknowledge that prior to the Closing, the Company has designed John F.
Lowndes, and/or Lowndes, Drosdick, Doster, Kantor & Reed, P.A., as
closing agent and/or escrow agent for a number of pending real property
transactions involving the Company and for the Retail Sales Contracts.  At the Closing, the Company will cause John
F. Lowndes to deliver an acknowledgment that the Company can select any closing
agent and/or escrow agent it desires after the Closing.


 


6.16                           Post
Closing Matters.  Buyer agrees that
without the consent of the Stockholders’ Representative, which consent shall
not be unreasonably withheld, the Company will not transfer the Real Property
to another Subsidiary of Meritage Homes Corporation, except for the landbank
transfers contemplated by this Agreement.


 


6.17                           Commercial
Portions of Holly Hills, the Trails and Cypress Preserve.  Buyer hereby acknowledges that three parcels
included within the Related Party Projects and Contract Properties (Holly
Hills, the Trails at St. Johns, and Cypress Preserve) include commercial
portions that are to be acquired and developed for commercial purposes by
Greater Properties, Inc. or another commercial entity to be designated by
the Stockholders.  Accordingly, at
Closing, if not previously executed, partial assignments of the Holly Hills
purchase contract, the Trails Purchase Contracts and the Cypress Preserve
purchase contract shall, with the written consent of the applicable contract
vendors, be executed by the Company in favor of Greater Properties, Inc.
or other entity or entities designated by the Stockholders applicable to the
commercial portions of said parcels under contract.  The Stockholders shall be responsible for
securing each contract vendor’s consent to the foregoing partial assignments
prior to Closing; provided, however, that if one or more contract vendor’s
consent is not secured by Closing, the partial assignment shall not be executed
for said property and the Company shall be obligated to convey that commercial
portion of the respective project to the Stockholders’ designated entity by
special warranty deed immediately upon closing the acquisition of the
respective project, and, in such event, the Stockholders’ designated entity
receiving title shall pay any additional closing costs incurred by such
transfer of the commercial parcel to the Company and from the Company to the
Stockholders’ designated entity (i.e., recording fees, title insurance costs,
documentary stamp taxes applicable to the conveyance of the commercial portion
of the respective property to the Company and to the Stockholder’s designated
entity).   At closing under each contract
(either by direct conveyance from the contract vendor to the Stockholder’s designated
entity, or by conveyance through the Company as referenced above), the
applicable purchase price shall be allocated pro rata on an acreage basis
between the Company and the Stockholder’s designated


 


47





















 


entity
partially assigned each said contract. 
In addition, the off-site infrastructure costs for such projects shall
be allocated pro rata on an acreage basis between the Company and the
designated commercial entity partially assigned each said contract.


 


6.18                           Deemed
Asset Acquisition.  Neither party
will make an election under Code Section 338 (or any corresponding
provision of state, local or foreign law) to treat Buyer’s acquisition of the
Shares in accordance with this Agreement as a deemed acquisition of the Company’s
assets.


 


6.19                           Release
of Guarantees By Stockholders.  As
soon as practicable after Closing, but in no event later than 6 months after
Closing, the Stockholders will have caused all the guarantees listed on Section 4.12
of the Stockholder’s Disclosure Schedule by the Company of any
indebtedness, liabilities, performance obligations, capital or net worth of
persons other than the Company or its Subsidiaries to be released.


 


ARTICLE VII

TAX MATTERS


 


7.1                                 Indemnification
Obligations With Respect to Taxes. 
The Stockholders shall indemnify and hold harmless Buyer, its
successors, heirs and assigns, and each of their affiliates, subsidiaries,
stockholders, officers and directors, from and against all Losses incurred by
them directly and indirectly with respect to, in connection with, or arising
from:


 


A.                                   all Taxes (or the
non-payment thereof) of the Company for all taxable periods ending on or before
the Closing Date and the portion through the end of the Closing Date for any
taxable period that includes (but does not end on) the Closing Date;


 


B.                                     all Taxes (or the
non-payment thereof) of any member of an affiliated, consolidated, combined or
unitary group of which the Company (or any predecessor of any of the foregoing)
is or was a member on or before the Closing Date, including pursuant to
Treasury Regulations Section 1.1502-6 or any analogous or similar state,
local or foreign law or regulation;


 


C.                                     any and all Taxes
(or the non-payment thereof) of any Person (other than the Company) imposed on the
Company as a transferee or successor by contract or pursuant to any law, rule or
regulation, which Taxes relate to an event or transaction occurring before the
Closing Date;


 


D.                                    any and all
additional Taxes (or the non-payment thereof) for which the Stockholders are
responsible pursuant to this Agreement, including, without limitation, (i) any
and all Taxes described in Section 7.3C and which are not otherwise
encompassed in Section 7.1A and (ii) any and all Taxes described in Section 7.7C;
and


 


E.                                      any Losses in
connection with a reduction of Tax attributes described in Section 7.3C.


 


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7.2                                 Straddle
Period.


 


A.                                   For purposes of this
Article VII, whenever it is necessary to determine the liability for Taxes
of the Company for a period that includes but does not end on the Closing Date
(a “Straddle Period”), the
determination of the Taxes for the portion of the Straddle Period ending on and
the taxable year or period beginning after the Closing Date shall be determined
(i) in the case of Taxes that are either (x) based upon or related to
income or receipts or (y) imposed in connection with any sale or other transfer
or assignment of property, by assuming that the Company had a taxable year or
period which ended at the close of the Closing Date and closing the books of
the Company as of such date (and for such purpose the taxable period of any
partnership, joint venture or other pass-through entity in which the Company
holds a beneficial interest shall be deemed to terminate at such time), except
that exemptions, allowances or deductions that are calculated on an annual
basis, such as the deduction for depreciation shall be apportioned on a time
basis and (ii) in the case of Taxes not described in clause (i) that
are imposed on a periodic basis and measured by the level of any item, shall be
deemed to be the amount of such Taxes (including any minimum) for the entire
period (or, in the case of such Taxes determined on an arrears basis, the
amount of such Taxes for the immediately preceding period) multiplied by a
fraction the numerator of which is the number of calendar days in the period
ending on the Closing Date and the denominator of which is the number of
calendar days for the entire period.


 


B.                                     In the context of
real or personal property Taxes, it is expressly provided herein that any
deferred Taxes in respect of real or personal property owned by the Company in
one or more taxable periods ending on or before the Closing Date shall be
treated for all purposes of this Agreement as a Tax of the Company in respect
of taxable periods ending on or before the Closing Date, irrespective of the
fact that the Tax may not have otherwise been due in respect of such taxable
period.  The deferred Taxes described in
the preceding sentence shall include, without limitation, (i) any real
estate holdback or similar Tax which results in an adjustment to the amount of
Taxes previously due in respect of a taxable period ending on or before the
Closing Date and (ii) any real estate property Tax in respect of real
property which failed to be included on any applicable assessment roll in a
taxable period ending on or before the Closing Date.


 


7.3                                 Tax
Returns and Payment Responsibility.


 


A.                                   The Stockholders
will be responsible for and will, at their expense, cause to be prepared and
duly filed in a manner consistent with past practice (subject to any departure
required to comply with any applicable law), (i) all Tax Returns of the
Company that are due before the Closing Date and (ii) all Tax Returns of
the Company for all taxable periods ending on or before the Closing Date.  The Stockholders shall submit such Tax Returns
to Buyer not later than 30 days prior to the due date (including extensions)
for filing of such Tax Returns and Buyer shall have the right to review such
Tax Returns and to review all work papers and procedures used to prepare any
such Tax Return.  Notwithstanding the
foregoing, the Stockholders shall provide to Buyer prior to Closing a copy of
the December 31, 2004 federal and state Tax Returns.  If the Buyer, within ten days after delivery
of any such Tax Return, notifies the Stockholders in writing that it objects to
any of the items in such Tax Return, the 


 


49





















 


parties shall
attempt in good faith to resolve the dispute and, if they are unable to do so,
the disputed items shall be resolved (within a reasonable time, taking into
account the deadline for filing such Tax Return) by a nationally recognized
independent accounting firm chosen by both Buyer and Stockholders (other than
the firm then currently serving, or within the prior three years serving as,
auditors or accountants for Buyer, the Stockholders or the Company).  Upon resolution of all such items, the
relevant Tax Return shall be filed on that basis.  The costs, fees and expenses of such
accounting firm with respect to the resolution of such dispute shall be borne
equally by the Stockholders and Buyer. 
The Stockholders shall pay any Taxes due in respect of the Tax Returns
described in this section.  Stockholders’
payment shall be made within ten days following the earlier of any agreement
reached between the parties and the parties’ receipt of the decision of the
accounting firm.  Without affecting the
indemnification obligations of the Stockholders under this Agreement, in the
event that the Stockholders fail to prepare and file or cause to be prepared
and filed any Tax Return that they are required to file pursuant to this
paragraph, Buyer shall have the right, but not the obligation, to prepare and
file all such Tax Returns at the expense of the Stockholders.  The Stockholders shall, on or before the
Closing Date, make a good faith estimate of the amount of any Tax liability
with respect to all Tax Returns described in this Section 7.3.


 


B.                                     Buyer shall cause
to be prepared and filed, in a manner consistent with past practice (subject to
any departure required to comply with any applicable law), all Tax Returns with
respect to the Company other than those that are the responsibility of the
Stockholders pursuant to the preceding paragraph.  All Tax Returns that are to be prepared and
filed by Buyer pursuant to this paragraph and that relate to Taxes for which
the Stockholders are liable under this Article VII (including Straddle
Period Tax Returns) shall be submitted to the Stockholders not later than 20
days prior to the due date (including extensions) for filing of such Tax
Returns.  To the extent that any such Tax
Returns reflect Taxes for which the Stockholders are liable pursuant to this
Agreement, the Stockholders shall have the right to consent to the filing of
such Tax Return, which consent shall not be unreasonably withheld.  The Stockholders shall pay to Buyer the Taxes
for which they are liable pursuant to this Article VII, but which are
payable with Tax Returns to be filed by Buyer pursuant to this paragraph at
least ten days prior to the due date for the payment of such Taxes.


 


C.                                     Anything in this
Agreement to the contrary notwithstanding, the Stockholders shall be
responsible for the payment of, and shall indemnify Buyer against, any and all
Taxes attributable to the transactions referenced in the definition of
Applicable Tax Obligations (the “Applicable Transactions”)
(including any and all applicable withholding and employment Taxes) arising in
connection with an audit adjustment of the relevant Tax Return.  Further, if the Applicable Transactions
reduce the amount of the Tax attributes of the Company, the Stockholders shall
also pay to Buyer the reasonably anticipated Tax cost or detriment to Buyer and
Company of such reduction.  For this
purpose, it is expressly provided that those Applicable Transactions (if any)
that occur on the Closing Date shall be deemed to have occurred on the Closing
Date prior to the Closing and, accordingly, it is hereby acknowledged and
agreed that the so-called “next-day” rule of U.S. Treasury Regulations Section 1.1502-76(b)(2)(ii)(B) (or
any other potentially applicable law or regulation that might otherwise treat
such Applicable Transactions as occurring after the Closing Date) shall not
apply.  Except as otherwise determined in
a proceeding involving the Internal Revenue Service or other relevant 


 


50





















 


taxing
authority, the Company’s characterization of the income tax treatment of the
Applicable Transactions shall be controlling and the Stockholders shall report
the Applicable Transactions in a manner consistent therewith.


 


D.                                    Nothing in this Article VII
shall prohibit Buyer (or Company, if directed by Buyer) to amend, refile or
otherwise modify (or grant an extension of any statute of limitation with
respect to) any Tax Return relating in whole or in part to the Company with
respect to any taxable year or period ending on or before the Closing Date or
with respect to any Straddle Period provided such amendment, refiling,
modification, or extension will not have an adverse affect on the liability of
the Stockholders or Company for which the Stockholders are liable pursuant to
this Agreement.  The Stockholders shall
not amend, refile or otherwise modify (or grant an extension of any statute of
limitation with respect to) any Tax Return relating in whole or in part to the
Company with respect to any taxable year or period ending on or before the
Closing Date or with respect to any Straddle Period without the prior written
consent of the Buyer.  Any consents contemplated
by this Section 7.3D shall not be unreasonably withheld, conditioned or
delayed or have an adverse effect on the consenting party.


 


7.4                                 Tax
Contests.


 


A.                                   In the event (i) any
Stockholder or his or her affiliates or (ii) Buyer or its affiliates receive
notice of any pending or threatened Tax audits or assessments or other disputes
concerning Taxes with respect to which the other party may incur liability
under this Article VII, the party in receipt of such notice shall promptly
notify the other party of such matter in writing, provided that failure to
comply with this provision shall not affect a party’s right to indemnification
hereunder unless such failure materially adversely affects the party’s ability
to challenge such Tax audits or assessments.


 


B.                                     Except in the
context of the income tax treatment of the Applicable Transactions, the
Stockholders shall have the right to represent the interests of the Company in
any Tax audit or administrative or court proceeding relating to any Tax for any
taxable period ending on or before the Closing Date, and to employ counsel of
their choice at their expense. 
Notwithstanding the foregoing, the Stockholders shall be obligated to
keep Buyer informed of the progress of any such proceeding and shall not be
entitled to resolve, settle, compromise or abandon any issue or claim without
the prior written consent of Buyer if such action would adversely affect the
liability for Taxes or otherwise of Buyer or the Company for any period after
the Closing Date to any extent (including, but not limited to, the imposition
of income Tax deficiencies, the reduction of asset basis or cost adjustments,
the lengthening of any amortization or depreciation periods, the denial of
amortization or depreciation deductions or the reduction of the loss or credit
carry forwards) without the prior written consent of Buyer; provided, however,
such consent shall not be required to the extent that the Stockholders have
indemnified Buyer against the effect of any such settlement.  Where consent to a settlement is withheld by
Buyer pursuant hereto, Buyer may continue or initiate any further proceedings
at its own expense, provided that the liability of the Stockholders after
giving effect to this Agreement, shall not exceed the liability that would have
resulted from the settlement or amended return.


 


51





















 


C.                                     Buyer shall have
the sole right to represent the interests of the Company in any Tax audit or
administrative or court proceeding relating to Taxes with respect to taxable
periods including (but not ending on) or beginning after the Closing Date and
to employ counsel of its choice at its expense, provided that Buyer shall not
be entitled to settle, either administratively or after the commencement of
litigation, any claim regarding Taxes that would adversely affect the liability
of the Stockholders for any Taxes for any period ending on or before the
Closing Date or for any Straddle Period, without the prior consent of the
Stockholders’ Representative, which consent shall not be unreasonably withheld;
provided, however, such consent shall not be required to the extent that Buyer
has indemnified the Stockholders against the effects of such settlement.  Where consent to a settlement is withheld by
the Stockholders’ Representative pursuant to this section, the Stockholders may
continue or initiate any further proceedings at their own expense, provided
that the liability of Buyer, after giving effect to this Agreement, shall not
exceed the liability that would have resulted from the settlement or amended
return.


 


7.5                                 Assistance
and Cooperation.  After the Closing
Date, the Stockholders, on the one hand, and Buyer, on the other hand, shall
(and shall cause their respective affiliates to): (i) assist the other
party in preparing and filing any Tax Returns or reports which such other party
is responsible for preparing and filing in accordance with this Article VII,
(ii) cooperate fully in preparing for any audits of, or disputes with
taxing authorities regarding, any Tax Returns of the Company, (iii) make
available to the other and to any taxing authority as reasonably requested all
information, records, and documents relating to Taxes of the Company, (iv) provide
timely notice to the other in writing of any pending or threatened Tax audits
or assessments of the Company for taxable periods for which the other may have
a liability under this Article VII and (v) furnish the other with
copies of all correspondence received from any taxing authority in connection
with any Tax audit or information request with respect to any such taxable
period.  The Stockholders and Buyer
agree, upon request, to provide the other party with all information that
either party may be required to report pursuant to Code Section 6043.  Further, the Stockholders shall use
reasonable commercial efforts, before or after the Closing Date, to obtain any
certificate or other documents from a taxing authority or any other Person as
may be necessary to mitigate, reduce or eliminate any Tax that could be imposed
(including without limitation with respect to the transactions contemplated
hereby).


 


7.6                                 Retention
of Tax Records.  After the Closing
Date, the Stockholders, Buyer and the Company will preserve all information,
records or documents relating to liabilities for Taxes of the Company until six
months after the expiration of any applicable statue of limitations (including
extensions thereof) with respect to the assessment of such Taxes, provided that
neither party shall dispose of any of the foregoing items without first
offering such items to the other party.


 


7.7                                 Other
Tax Matters.


 


A.                                   Payment by
Stockholders.  If applicable, the
Stockholders shall immediately pay Buyer any Tax refund (or reduction in Tax
liability) received by the Stockholders and resulting from a carryback of a
post-acquisition Tax attribute of the Company when such refund or reduction is
realized.  The Stockholders shall
cooperate with Buyer and 


 


52





















 


Company in
obtaining such refunds (or reduction in Tax liability), including through the
filing of amended Tax Returns.


 


B.                                     Termination of
Tax Sharing Agreements.  If
applicable, any and all Tax sharing agreements or similar agreements with
respect to or involving the Company shall be terminated as of the Closing Date
and, after the Closing Date, neither the Stockholders, Buyer nor the Company
shall be bound thereby or have any liability thereunder.


 


C.                                     Payment of
Transfer and Similar Taxes.  All
transfer, documentary, sales, use, stamp, registration, excise, intangible, and
other similar Taxes and fees (including any penalties and interest) incurred in
connection with this Agreement, or any of the transactions contemplated hereby,
if any, shall be paid by the Stockholders when due, and the Stockholders will
file all necessary Tax Returns and other documentation with respect to any such
transfer, documentary, sales, use, stamp, registration, excise, intangible and
other similar Taxes and fees (including any penalties and interest) and, if
required by applicable law. 
Notwithstanding the foregoing, Buyer shall pay all such Taxes and fees
that relate to any transfer of any real property of the Company in connection
with the Closing to any landbank entity at the request or direction of Buyer or
Meritage.


 


D.                                    Conduct
Effecting Post-Closing Taxes.  Except
as otherwise required by law, as occurs in the ordinary course of business and
consistent with past practice, or with the consent of Buyer, the Stockholders
covenant and agree that neither they nor their Affiliates (including the
Company and any Subsidiary prior to the Closing) shall file or amend any Tax
Return, file any claim for refund, change any method of Tax accounting, settle
or compromise any federal, state, local or foreign Tax liability regarding the
Company or any Subsidiary, or make or change any Tax election with respect to
any Tax period, in each case that may result in any increased tax liability of,
or loss of Tax benefits by, Buyer, the Company or any Subsidiary in respect of
any Tax period ending after the Closing Date.


 


7.8                                 Special
Definitions.  Any reference to the
term “Company” as used in this Article VII shall encompass the Company,
any entity in which the Company owns or has owned at least a 5% equity interest
and any predecessor entity of any of the foregoing.


 


7.9                                 Unconditional
Obligations.  Notwithstanding
anything to the contrary in this Agreement, the obligations of the Stockholders
and Buyer under this Article VII shall be unconditional and absolute,
shall not be limited, shall not be subject to a deductible, threshold, cap or
similar concept, and shall remain in effect until 90 days after the expiration
of all applicable statutes of limitation as to time.


 


ARTICLE VIII

INDEMNIFICATION AND WARRANTY AND RESERVE ADMINISTRATION


 


8.1                                 Indemnification
of Stockholders by Buyer.  Buyer
shall indemnify, insure and defend the Company and the Stockholders and their
respective legal representatives, heirs, successors and assigns from and
against, and reimburse each of them for, any and all Losses incurred by them,
directly or indirectly, with respect to, in connection with, or arising from,
the following:


 


53





















 


(1)                                  A breach by Buyer of
any representation, warranty, covenant, restriction or agreement made by Buyer
in this Agreement or in any of the Transaction Documents or in any certificate
or other closing document delivered by Buyer to the Stockholders thereunder;
and


 


(2)                                  The operation of the
Company by Buyer or Meritage or the ownership or operation of the Company by
Buyer or Meritage, following the Closing Date (except for acts and matters
caused by Stockholders after the Closing Date in their role as employees of the
Company and except for matters that constitute Specifically Excluded
Liabilities for which the Stockholders have agreed to indemnify Buyer
hereunder).


 


8.2                                 Indemnification
of Buyer by Stockholders.


 


A.                                   Subject to the
limitations set forth herein, the Stockholders shall indemnify, insure and
defend Buyer and Meritage and their direct and indirect subsidiaries and
affiliates, and their respective officers, directors, shareholders, successors
and assigns from and against, and reimburse each of them for, any and all
costs, expenses, losses, damages, fines, penalties or liabilities (including,
without limitation, interest which may be imposed in connection therewith,
court costs, litigation expenses, and reasonable attorneys’ and accounting
fees) (collectively, “Losses”)
incurred by them, directly or indirectly, with respect to, in connection with,
or arising from, the following:


 


(1)                                  a breach by any
Stockholder of any representation, warranty, covenant, restriction or agreement
made by any Stockholder in this Agreement or in any of the Transaction
Documents or in any certificate or other closing document delivered by such
Stockholder to Buyer thereunder including damages for breaches continuing
subsequent to the Closing Date until discovered and after a reasonable period
for Buyer to cure; and


 


(2)                                  any Specifically
Excluded Liabilities.


 


B.                                     “Specifically  Excluded Liabilities” means collectively any liabilities,
obligations or expenses, whether fixed or contingent, known or unknown, matured
or unmatured, executory or non-executory, relating to or consisting of:


 


(1)                                  liabilities and
obligations of the Company as of the Closing Date that are not reflected on the
Preliminary Closing Balance Sheet or the Final Closing Balance Sheet;


 


(2)                                  except to the extent
accrued or reserved for on the Preliminary Closing Balance Sheet or the Final Closing
Balance Sheet, all sales contracts for Housing Units or real property or
improvements thereon, closed by the Company prior to the Closing Date (“Excluded Contracts”);


 


(3)                                  except to the extent
accrued or reserved for on the Preliminary Closing Balance Sheet or the Final
Closing Balance Sheet, (i) all liabilities and obligations relating to any
land and lot development subdivision improvements completed by the Company
prior to the Closing Date, and (ii) all Construction Claims related to the
property or 


 


54





















 


improvements,
which are the subject of Excluded Contracts, whether brought before or after
the Closing Date, to the extent such claims arise out of occurrences or
omissions commencing on or prior to the Closing Date, even if they do not
become known until after such date (“Excluded
Construction Claims”);


 


(4)                                  (i) any Losses
relating to Taxes that are set forth in Section 7.1 and any other Taxes
(including deferred Tax liabilities) applicable to the Company or the
Stockholders arising out of or relating to periods through and including the
Closing Date or as a result of the transactions contemplated by this Agreement
(whether such transactions occur before, on, or after the Closing Date)
including, without limitation, any Losses or adverse Tax consequences resulting
from the Stockholders’ amendment prior to Closing of the Related Party
Agreements, the St. John’s Contingent Sale, the transactions contemplated with
respect to the Bridges Option, and the transactions contemplated by Sections
6.14 and 6.17 but expressly excluding the land bank transactions contemplated
by Section 6.5  (collectively, the “Applicable Tax
Obligations”), (ii) any liabilities or obligations or expenses
of the Company related to pending or threatened litigation against the Company
(including, without limitation, the matters listed in Section 4.18 of the
Stockholders’ Disclosure Schedule) (“Pre-Closing
Litigation”), (iii) except to the extent reflected in the
budgets included in Section 4.26 of the Stockholders’ Disclosure Schedule,
any pre-closing liabilities, obligations or expenses relating to any
environmental matter or condition applicable to the Fee Property and Related
Party Projects that has not been disclosed to Buyer by the Company or the
Stockholders (“Pre-Closing Environmental
Matters”), and (iv) any pre-closing liability or obligation to,
or in respect of, any employees or former employees of the Company, including
without limitation: (a) any employment agreement, whether or not written,
between the Company and any person, (b) under any employee plan at any
time maintained, contributed to or required to be contributed to by or with
respect to the Company or under which the Company may incur liability, or any
contributions, benefits or liabilities therefor, or any liability with respect
to the Company’s withdrawal or partial withdrawal from or termination of any
employee plan or (c) with respect to any claim of an unfair labor
practice, or any claim under any state unemployment compensation or worker’s
compensation law or regulation or under any federal or state employment
discrimination law or regulation. It is expressly provided herein that the term
“Applicable Tax Obligations” shall include, without limitation, any and
all Taxes of the Company associated with the December 2004 capitalization
of Greater Properties, Inc. and the subsequent transfer by the Company to
the Stockholders of the stock of Greater Properties, Inc.;


 


(5)                                  any Losses suffered
or Taxes incurred by the Company or Buyer relating to (i) the
recharacterization for Tax purposes of all or part of the “Bonus Payments” (as
contemplated by Section 5 of the Employment Agreements) as a component of
the purchase price for Buyer’s acquisition of the Company Stock and/or (ii) any
loss of deductibility for Tax purposes of such Bonus Payments by the Company.


 


The indemnification in this Section 8.2B(5) shall
be limited to, and not exceed, an amount equal to fifty percent (50%) of the
difference between (1) the Tax loss suffered by Buyer or Company with
respect to this matter and (2) the difference between capital gains income
tax treatment and ordinary income tax treatment on the Bonus Payments paid
under Stockholders’ Employment Agreements (the “Potential
Tax Savings”).  If the
Stockholders fail 


 


55





















 


to cooperate with Buyer and Company by taking all reasonable actions
requested by Buyer or the Company with respect to obtaining a reclassification
of the Stockholders’ income tax on the Bonus Payments, this indemnification
shall be increased by an amount equal to the Potential Tax Savings.  If this indemnification is not increased by
an amount equal to the Potential Tax Savings, as provided in the previous
sentence, this indemnification shall be increased by the amount equal to all
refunds of Tax received by the Stockholders with respect to any
reclassification of the income tax treatment of the Bonus Payments.  For purposes of this Section 8.2B(5),
the Potential Tax Savings and Buyer’s or Company’s Tax loss (as the case may
be) shall be computed by assuming that the Stockholders, Buyer and Company pay
Taxes at the highest applicable marginal federal and state income tax rates;
and


 


(6)                                  any pre-closing
advances by the Company to the Stockholders and their affiliates.


 


8.3                                 Limits
on Indemnity; Certain Provisions and Procedures.


 


A.                                   For purposes of
determining any amounts or items that are subject to indemnification pursuant
to this Agreement, any qualifications relating to materiality, material adverse
effect, or the like will be disregarded.


 


B.                                     The parties agree
that the indemnification obligation of the Stockholders will be capped at a
total amount of $[ * ] (the “Indemnification
Cap”); provided, however, notwithstanding anything in this paragraph
to the contrary, the Indemnification Cap will not apply to or in respect of:


 


(1)                                  any fraud or
intentional misstatement or omission;


 


(2)                                  a breach by any
Stockholder party of their respective obligations set forth in Sections 6.1 and
6.2;


 


(3)                                  any Liens on the
Shares of Company Stock or any Liens on the assets of the Company (including
costs to release any such Liens post-Closing), other than Liens relating to
debt of the Company reflected on the Preliminary Closing Balance Sheet or the
Final Closing Balance Sheet in accordance with GAAP;


 


(4)                                  Applicable Tax
Obligations;


 


(5)                                  Pre-Closing
Litigation;


 


(6)                                  Pre-Closing
Environmental Matters; 


 


(7)                                  solely as to any
Stockholder, any Losses relating to pre-closing labor or employment related
claims involving such Stockholder, including, but not limited to, sexual
harassment, discrimination or similar matters;


 


(8)                                  any Losses or Taxes
set forth in or Section 8.2B(5);


 










*                 Confidential
information on this page has been omitted and filed separately with the
Securities Exchange Commission pursuant to a Confidential Treatment Request.


 


56





















 


(9)                                  a breach of the
representations set forth in Sections 4.11X, 4.11Z and 4.12A(2) herein;
provided, however, that, in the event of a breach of the foregoing
representations, the Stockholders’ shall not be liable thereunder for a loss
incurred by the Company to the extent that said loss is reimbursed by any title
insurance company pursuant to any title insurance policy issued to the Company
before or after the date hereof; and


 


(10)                            any Losses incurred by
Buyer that would have been covered under Greater Homes’ Commercial General
Liability Insurance Policy for the policy year September 1, 2000 – August 31,
2001 had said policy included completed operations coverage.  Buyer agrees
that it will use commercially reasonable efforts to seek coverage for such
Losses under all potentially applicable insurance policies.


 


C.                                     The Stockholders
will have no obligation to indemnify Buyer under this Agreement from and
against any Losses unless and until, and to the extent that, the aggregate
Losses suffered by Buyer exceed $[ * ] (the “Basket
Threshold”).


 


D.                                    Notwithstanding
anything to the contrary set forth in this Agreement, the Stockholders shall
have no indemnification obligation to Buyer for any Loss until the Company has
exhausted all reserves accrued on the Final Closing Balance Sheet with respect
to that Loss.


 


E.                                      Any amounts due
from the Stockholders to Buyer hereunder may, without limitation, be satisfied
from the Holdback Fund, any amounts due to the Stockholders under Section 5
of their respective Employment Agreements (subject to Section 14.18), or
from the deferred payment relating to the Trails of St. John’s project set
forth in Section 1.5B.


 


F.                                      The
indemnification obligations of Charles W. Gregg and Robert A. Mandell shall be
joint and several for all of the indemnification obligations of the
Stockholders set forth herein and the indemnification obligations of the other
Stockholders shall be several, except that each Stockholder, including Messrs. Gregg
and Mandell, will be solely liable for any breach of such Stockholder’s
obligations set forth in Sections 6.1 and 6.2 and no Stockholder will be liable
for any such breach by another Stockholder.


 


G.                                     Except as provided
in Articles VII or XIII or Section 12.3, the sole remedies for breach of
this Agreement are specified in this Article VIII and limited as provided
in this Article VIII.


 


8.4                                 Procedure
for Indemnification.  Unless
otherwise provided in this Agreement, Section 8.4 will govern the
procedure for indemnification under Article VIII of this Agreement.  The parties agree that Article VII
governs the procedures relating to certain Tax matters and Section 1.6B
governs certain adjustment matters.


 


A.                                   The party which is
entitled to be indemnified hereunder (the “Indemnified
Party”) shall promptly give notice hereunder to the party required
to indemnify (the “Indemnifying Party”)
after obtaining written notice of any claim as to which recovery may be sought
against the indemnifying party because of the indemnity in Section 8.1 or Section 8.2
hereof and, if such indemnity shall arise from the claim of a third party,
shall permit the Indemnifying Party to assume the defense of any such claim and
any litigation resulting from


 










*                 Confidential
information on this page has been omitted and filed separately with the
Securities Exchange Commission pursuant to a Confidential Treatment Request.


 


57





















 


such claim, provided that, Buyer may, in its
discretion, undertake, at the Stockholders’ cost and expense, the defense of
any claim for which the Stockholders are responsible hereunder with respect to
any lots, land, rights to purchase lots or land, project or subdivision of the
Company that are owned by the Company as of the Closing Date, provided that any
and all such costs and expenses must be reasonable.  Notwithstanding the foregoing, the right to
indemnification hereunder shall not be affected by any failure of an
Indemnified Party to give such notice, or delay by an Indemnified Party in
giving such notice, unless, and then only to the extent that, the rights and
remedies of the Indemnifying Party shall have been prejudiced as a result of the
failure to give, or delay in giving, such notice.  Failure by an Indemnifying Party to notify an
Indemnified Party of its election to defend any such claim or action by a third
party within 10 days after notice thereof shall have been given to the Indemnifying
Party shall be deemed a waiver by the Indemnifying Party of its right to defend
such claim or action.


 


B.                                     If the
Indemnifying Party assumes the defense of such claim or litigation, the
Indemnifying Party shall take all steps necessary in the defense or settlement
of such claim or litigation, and will hold the Indemnified Party harmless from
and against any and all damages caused by or arising out of any settlement
approved by the Indemnifying Party or any judgment in connection with such
claim or litigation.  The Indemnifying
Party shall not, in the defense of such claim or any litigation resulting
therefrom, consent to entry of any judgment (other than a judgment of dismissal
on the merits without costs) except with the written consent of the Indemnified
Party, or enter into any settlement (except with the written consent of the
Indemnified Party) which does not include as an unconditional term thereof the
giving by the claimant or the plaintiff to the Indemnified Party of a release
from all liability in respect of such claim or litigation.


 


C.                                     If the
Indemnifying Party does not assume the defense of any such claim by a third
party or litigation after receipt of notice from the Indemnified Party to do
so, the Indemnified Party may defend against such claim or litigation in such
manner as it deems appropriate, and unless the Indemnifying Party shall deposit
with the Indemnified Party a sum equivalent to the total amount demanded in
such claim or litigation plus the Indemnified Party’s estimate of the costs of
defending the same, the Indemnified Party may settle such claim or litigation
on such terms as it may deem appropriate and the Indemnifying Party shall
promptly reimburse the Indemnified Party for the amount of such settlement and
for all damages incurred by the Indemnified Party in connection with the
defense against or settlement of such claim or litigation.


 


D.                                    The Indemnifying
Party shall promptly reimburse the Indemnified Party for the amount of any
judgment rendered with respect to any claim or litigation by a third party in
such litigation and for all damage incurred by the Indemnified Party in
connection with the defense against such claim or litigation, whether or not
resulting from, arising out of, or incurred with respect to, the act of a third
party.


 


E.                                      Anything in this Section 8.4
to the contrary notwithstanding, the party not primarily responsible for the
defense of a claim or litigation may, with counsel of its choice and at its
expense, participate in the defense of any such claim or litigation.


 


58





















 


8.5                                 Warranty
and Reserve Administration.  Buyer
will cause the Company to administer all Excluded Construction Claims after the
Closing Date using reasonable commercial efforts generally consistent with the
manner in which Meritage has administered its own claims in the past, which the
Stockholders acknowledge includes taking certain actions to cure or mitigate
problems as a preemptive measure against a drawn out or contentious battle with
a homeowner or homeowners.  The
Stockholders acknowledge that such procedures may include discharging warranty
claims in the ordinary course of business for customer goodwill reasons.  Notwithstanding the foregoing, Buyer will not
settle any Excluded Construction Claim, or series of related Excluded
Construction Claims, in excess of $[ * ] without the prior written consent of
the Stockholders’ Representative.  With
respect to any Excluded Construction Claim, or any series of related Excluded
Construction Claims, of $[ * ] or less and with respect to Excluded
Construction Claims, or any series of related Excluded Construction Claims, for
which the Stockholders’ Representative consents in writing to settlement, the
Stockholders will be deemed to have agreed to the amount of such claim as
resolved by Buyer.  If the Stockholders
consent to settlement is required for an Excluded Construction Claim and the
Stockholders’ Representative does not approve of a settlement proposal, within
10 days of Buyer giving written notice to the Stockholders’ Representative of
such proposal, which notice shall set forth in reasonable detail the terms of
such proposal and the amount thereof, the Stockholders shall assume all
responsibility for handling the claim; provided, however, that if the
Stockholders do not assume the handling of such claim within such period, then
Buyer may retain the defense of such claim, with fees of Buyer’s counsel and
all settlements or judgments in respect thereof to be paid by the
Stockholders.  The Stockholders will
cause the Company to establish prior to the Closing Date a warranty reserve in
accordance with GAAP, which reserve will be reflected on the Preliminary
Closing Balance Sheet and the Final Closing Balance Sheet.


 


ARTICLE IX

TITLE MATTERS


 


9.1                                 Existing
Title Policies and Surveys.  Section 9.1
of the Stockholders’ Disclosure Schedule includes a list of and true,
correct and complete copies of the current title insurance policies or
commitments for all Fee Property, Related Party Projects and Contract Property
(to the extent any policies exist for the Contract Property under contract)
(individually, a “Report” or
collectively, the “Reports”), and
a list of each survey (individually, a “Survey”
or collectively, “Surveys”) of all
or any portion of the Real Property in the Company’s or the Stockholders’
possession or control.  True, correct and
complete copies of the Reports and Surveys have been provided to Buyer.


 


9.2                                 Title
Insurance.


 


A.                                   The Company shall
obtain and provide to Buyer a (i) a certified title chain update (the “Title Update”) issued by First American Title Insurance
Company (the “Title Company”) with
respect to the Real Property other than the Title Insurance Properties (defined
below), and (ii) a title insurance commitment (the “Title Commitment”) issued by the Title
Company committing to issue to the Company’s designated land banker an ALTA
Owner’s Policy – Form B 1970 (rev. 10-17-70 and 10-17-84) upon
satisfaction of the requirements set forth in Schedule B – Section I
thereof for the Title Insurance Properties (defined below).


 










*                 Confidential
information on this page has been omitted and filed separately with the
Securities Exchange Commission pursuant to a Confidential Treatment Request.


 


59





















 


B.                                     At Closing, the
Stockholders will cause the Title Company to (i) update the Title Update
to the most recent effective date available with respect to those portions of
the Real Property other than the Title Insurance Properties, and (ii) endorse
or mark-up the Title Commitment to have an effective date as of the Closing
Date and to unconditionally commit to issue to the Company’s designated land
banker an ALTA Owner’s Policy – Form B 1970 (rev. 10-17-70 and 10-17-84)
(the “Title Policy”) for the
following portions of the Real Property: 
Fountains at Crystal Creek, Indian Lakes 7 & 8, Lake Jessup and
Oaks at Brandy Lakes (all to be owner’s policies to insure the Company’s
designated land banker’s fee interest)(collectively the “Title Insurance Properties”).  The Title Policy shall insure the foregoing
in the amount of the purchase price allocable to each of the Title Insurance
Properties or the amount specified by Buyer.  
The Title Updates shall not bring forward the effective dates of the
existing Reports, but shall list new matters arising since the applicable
effective dates of the Reports.  The
Title Policy will include such endorsements authorized to be issued in Florida
as Buyer may reasonably require, including without limitation the following
endorsements:  survey, contiguity,
planned unit development, Florida Endorsement Form 9.1 (FF 9.1) (for
vacant lands), and Florida Endorsement Form 9.2 (FF 9.2) (for improved
lands).  The Stockholders shall cause the
Company to satisfy the Title Company’s requirements for the issuance of the
Title Policy and endorsements, other than those, if any, within Buyer’s
control.  The promulgated premium for the
Title Policy and related endorsements shall be paid by the Buyer, and all
abstract and search fees relating to the Title Update will be paid by the
Stockholders.


 


9.3                                 Approved
Title Exceptions.  Buyer shall take
title subject the following (the “Approved
Title Exceptions”):  (i) encumbrances
disclosed on schedule B-II of the title commitments included in the Reports,
(ii) encumbrances disclosed on schedule B of the title insurance
policies included in the Reports, and (iii) matters shown on the Existing
Surveys; provided, however, notwithstanding the foregoing, the Approved Title
Exceptions shall not include (nor shall Buyer be obligated to accept title
subject to) any of the following (collectively the “Disapproved Title Exceptions”):  (y) all monetary liens or encumbrances,
property taxes, existing improvement district liens, specific assessments
(other than liens for year 2005 and other than mortgages to be paid off at
Closing) not due and payable when the Closing occurs; and (z) the gap and
standard exceptions (including but not limited to the survey and parties in
possession exceptions) with respect to the Title Insurance Properties.  


 


The
Stockholders shall use their best efforts to cause the Company to cure the
Disapproved Title Exceptions by Closing, but, if, prior to Closing, any of the
Disapproved Title Exceptions are not cured by the Company to the reasonable
satisfaction of Buyer, then Buyer may either (i) terminate this Agreement
in the event that the title defect impacts more than ten acres of the Real
Property, (ii) accept title subject to the Disapproved Title Exceptions or
(iii) exclude that portion of the Real Property that is subject to the
Disapproved Title Exceptions, in which case the purchase price will be adjusted
accordingly based on a pro-rata allocation of the purchase price across the
total acreage of the land included within the Real Property.


 


Additionally,
with respect to the Title Insurance Properties only, the Company shall, prior
to Closing, cause those Surveys applicable to the Title Insurance Properties to
be updated to include (i) new field work to within 30 days of the Closing,
(ii) a certification to the Company, Buyer and its designated land banker,
and (iii) any other of Buyer’s reasonable requirements.  


 


60





















 


Buyer shall
have five (5) days from receipt of each Title Update (but not later than
Closing), the updated Title Commitment and updated Surveys within which to
review same and to give notice of its dissatisfaction with any new matters
shown thereon that render title unmarketable or otherwise have a material
adverse impact on the Company’s intended development of the projects as shown
on the current performance projections, and any such objectionable matters
shall be treated as a Disapproved Title Exception.


 


9.4                                 Additional
Agreements.  Subject to the terms and
conditions herein provided, each of the parties hereto agrees to take, or cause
to be taken, all action and to do, or cause to be done, all things necessary,
proper or advisable to consummate and make effective as promptly as practicable
the transactions contemplated by this Agreement, including obtaining all
necessary waivers, consents and approvals consistent with this Agreement and
effecting all necessary registrations and filings and submissions of
information requested by governmental authorities.  The Stockholders agree that they will, at any
time before or after the Closing, execute, acknowledge and deliver any further
deeds, assignments, conveyances and other assurances, documents and instruments
of transfer reasonably requested by Buyer or the Title Company, and will take
any other action consistent with the terms of this Agreement that may
reasonably be requested by Buyer or the Title Company, for the purpose of
conveying, assigning, transferring, granting, conveying and confirming to the
Company and/or Buyer (as the case may be), or reducing to possession, any or
all property and rights to be conveyed and transferred by this Agreement.  If requested by Buyer, the Stockholders
further agree to prosecute or otherwise enforce in their name for the benefit
of Buyer, at the cost of the Stockholders, any claims, rights, or benefits that
are transferred to Buyer by this Agreement and that require prosecution or
enforcement in their name; provided, however, that the costs associated with
the land banking transactions contemplated in Paragraph 6.5 herein shall not be
paid by the Stockholders and shall be paid as otherwise provided herein.  After the Closing and for a period of six
months thereafter, the parties will cooperate in good faith and use
commercially reasonable efforts to resolve any issues that may arise in the
transition of the Business.


 


ARTICLE X

CONDITIONS


 


10.1                           Conditions
to Obligation of Stockholders.  The
obligations of the Stockholders to close this transaction are subject to their
reasonable satisfaction (or waiver by the Stockholders’ Representative in
writing) of the following conditions on and as of the Closing:


 


A.                                   Absence of
Certain Actions and Events.  There
will not be threatened, instituted, or pending any action or proceeding, before
any Governmental Authority:  (i) challenging
or seeking to make illegal, or to delay or otherwise directly or indirectly to
restrain or prohibit, the consummation of the transactions contemplated hereby,
or seeking to obtain damages in connection therewith or (ii) invalidating
or rendering unenforceable any material provision of this Agreement (including,
without limitation, the Exhibits, the Schedules or the Stockholders’ Disclosure
Schedule); and there will not be any action taken, or any statute, rule,
regulation, judgment, order or injunction proposed, enacted, entered, enforced,
promulgated, issued or deemed applicable to the transactions contemplated
hereby by any Governmental 


 


61





















 


Authority,
which may, directly or indirectly, prohibit consummation of the transactions
contemplated hereby.


 


B.                                     Truthfulness of
Representations and Warranties.  The
representations and warranties of Buyer set forth in Article II of this
Agreement will be true and correct in all material respects as of the Closing
Date as if made at and as of the Closing Date.


 


C.                                     Compliance.  Buyer will in all material respects have
performed each obligation and agreement and complied with each covenant to be
performed and complied with by it hereunder at or prior to the Closing.


 


D.                                    Other Agreements.  The Transaction Documents contemplated by Section 14.15
will have been executed and performed by Buyer.


 


10.2                           Conditions
to Obligations of Buyer.  The
Stockholders will have delivered any applicable updates to the Stockholders’
Disclosure Schedule to Buyer immediately prior to Closing and Buyer’s
obligations to close this transaction are subject to its reasonable
satisfaction (or waiver by Buyer in writing) of the following conditions on and
as of the Closing:


 


A.                                   Consents and
Approvals.  The Company and the
Stockholders shall have obtained and delivered to Buyer all consents and
approvals (i) listed in Section 4.5 of the Stockholders’ Disclosure
Schedule, (ii) necessary to amend and restate the Related Party Agreements
and all other contracts relating to the Related Party Projects as provided
herein and (iii) reasonably requested by Buyer, its lender (if any) and
the Title Company to consummate the transactions contemplated herein.


 


B.                                     Absence of
Material Adverse Developments.  After
the date hereof, Buyer will not have discovered any fact or circumstance not
disclosed herein regarding the Business, the Company’s assets, or its
properties, condition (financial or otherwise), results of operations, or
prospects which is or could be, individually or in the aggregate with other
such facts and circumstances reasonably determined to be materially adverse to
the Company, the Company’s assets or the Business.


 


C.                                     No Damage or
Destruction.  After the date hereof,
there will have been no damage, destruction or loss of or to any of the Company’s
assets, whether or not covered by insurance, which is reasonably likely,
individually or in the aggregate, to have a material adverse effect on the
Company or its assets or the Business.


 


D.                                    Environmental
Assessments.  Buyer will be
reasonably satisfied with the results of all environmental assessments of the
Real Property.


 


E.                                      Preliminary
Closing Balance Sheet.  Buyer will
have received, at least five days prior to the Closing, the Preliminary Closing
Balance Sheet, which will comply with Section 1.6B(2).


 


F.                                      Absence of
Certain Actions and Events.


 


62





















 


(1)                                  There will not be
threatened, instituted, or pending any action or proceeding, before any
Governmental Authority or agency:  (i) challenging
or seeking to make illegal, or to delay or otherwise directly or indirectly to
restrain or prohibit, the consummation of the transactions contemplated hereby,
or seeking to obtain damages in connection therewith, (ii) seeking to
prohibit direct or indirect ownership of the Company Stock by Buyer or the
operation by Buyer of all or a material portion of the Company’s assets or the
Business, or to compel Buyer or any of its subsidiaries to divest of or to hold
separately all or a material portion of the Business or the Company’s assets as
a result of the transactions contemplated hereby, (iii) seeking to impose
or confirm limitations on the ability of Buyer effectively to exercise directly
or indirectly full rights of ownership of any of the Company Stock and the
Company’s assets or properties, (iv) invalidating or rendering
unenforceable any material provision of this Agreement (including, without
limitation, the Exhibits, the Schedules or Stockholders’ Disclosure Schedule)
or (v) which otherwise might materially adversely affect Buyer or any of
its subsidiaries or affiliates as determined by Buyer;


 


(2)                                  There will not be any
action taken, or any statute, rule, regulation, judgment, order, or injunction
proposed, enacted, entered, enforced, promulgated, issued, or deemed applicable
to the transactions contemplated hereby by any Governmental Authority, which
may, directly or indirectly, prohibit consummation of the transactions
contemplated hereby; and


 


(3)                                  There will not have
occurred any of the following events having a material adverse effect on Buyer
or Meritage:  (i) a declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States or any limitation by United States authorities on the extension
of credit by lending institutions, (ii) a commencement of war, armed
hostilities, terrorist attack, or other international or national calamity
directly or indirectly involving the United States or (iii) in the case of
any of the foregoing existing at the date hereof, a material acceleration or
worsening thereof.


 


G.                                     Truthfulness of
Representations and Warranties.  The
representations and warranties of the Stockholders in this Agreement and in any
certificate or other instrument delivered pursuant to the provisions hereof, or
in connection with the transactions contemplated hereby will be true and
correct in all material respects as of the Closing Date as if made at and as of
the Closing Date.


 


H.                                    Compliance.  The Stockholders will in all material
respects have performed each obligation and agreement and complied with each
covenant to be performed and complied with by them hereunder at or prior to the
Closing.


 


I.                                         Stockholder
Advances and Debt Repayment.  Unless
Buyer has elected pursuant to Section 6.8 to deduct the net amount of
Stockholder advances against the purchase price payment, the Stockholders shall
have repaid all advances or notes, or at the election of any applicable
Stockholder, such Stockholder shall repay any such advances or notes at
closing.  The Stockholders will have also
caused the Company to repay its outstanding debt to the extent of available
cash balances and have all guarantees by the Company of any indebtedness, liabilities,



 


63





















 


performance
obligations or capital or net worth of Persons of than the Company and its
subsidiaries released, in each case as contemplated by Section 6.8.  


 


J.                                        Related
Party Agreements.  The requirements
of Paragraph 1.5 herein will have been satisfied.


 


K.                                    Grassy Lakes.  At Closing, Greater Properties, Inc., an
affiliate of the Company controlled by the Stockholders, as optionor, and the
Company, as optionee, shall enter into an option agreement (the “Grassy Lakes Option Agreement”) to purchase
that certain real property known as the Grassy Lakes property and more
particularly described on Section 10.2G of the Stockholders’ Disclosure
Schedule.  The Grassy Lakes Option
Agreement shall be in substantial accordance with the Form Option
Agreement, subject, however, to the following terms:  (i) the term of the option shall be for
four years; (ii) the purchase price shall initially be $40,000 per acre,
plus a 11.5% annual escalator, which shall apply on an annual basis, with an
appropriate pro ration for partial years; (iii) a deposit of $50,000 upon
the closing of the transaction contemplated by this Agreement; provided
however, such deposit shall be refundable to Buyer at any time within 120 days
of Closing and upon such refund the option will be cancelled; and (iv) the
closing of the conveyance pursuant to the option, if exercised, shall occur
within 60 days of optionee’s exercise of the option.


 


L.                                      Other
Agreements.  Buyer will have received
the Transaction Documents contemplated by Section 14.15 executed by the
parties thereto and all conditions to Closing and closing deliveries thereto
will be satisfied or made as the case may be. 
The Stockholders shall have obtained acknowledgements and any and all necessary
consents and provisions from the optionors, contract vendees, fee owners and
their lenders contemplated by Section 1.5 herein and otherwise reasonably
requested by Buyer and its lender, if any. 
The Stockholders will have terminated any stockholders, voting or
similar arrangements involving or relating to the Company, any subsidiaries or
the Company Stock.  


 


ARTICLE XI

CLOSING


 


11.1                           Stockholders’
Obligations.  In addition to any
other documents required to be delivered by the Stockholders at Closing
pursuant to this Agreement, the Stockholders will deliver to Buyer or other
applicable person at Closing the following:


 


A.                                   Shares of Company
Stock.  All of the shares of Company
Stock, properly endorsed and transferred to Buyer.  The Stockholders will also execute and
deliver evidence of termination of any existing stockholders, voting or other
similar agreements.


 


B.                                     Books and
Records.  All books, records, and
other data relating to the Company.


 


C.                                     Resolutions and
Certifications.  Copies of the texts
of the resolutions by which the corporate action on the part of the Company and
the Stockholders necessary to approve this Agreement and the transactions
contemplated hereby were taken and certificates executed on behalf of the
Company by its corporate secretary certifying to Buyer that such 


 


64





















 


copies are
true, correct and complete copies of such corporate action or resolutions and
that such corporate action and resolutions were duly adopted and have not been
amended or rescinded.  The Stockholders
will also deliver to Buyer at the Closing a certificate that the
representations and warranties of the Stockholders contained in this Agreement
remain true and correct in all material respects as if made on the Closing
Date.


 


D.                                    Consents.  The consents contemplated by Section 10.2B.


 


E.                                      Legal Opinion.  Buyer will have received opinions from
Lowndes, Drosdick, Doster, Kantor & Reed, P.A. addressed to Buyer, in
a form reasonably acceptable to Buyer and its counsel, regarding matters
customary for transactions of this type, including, but not limited to,
opinions regarding capitalization, delivery of the Company Stock free and clear
of all adverse claims, due organization and authorization, no conflicts and
similar matters and the enforceability of the Related Party Agreements and the
Trails Purchase Contracts.


 


F.                                      Certificate of
Non-Foreign Status.  Certificates
complying with U.S. Treasury Regulations Section 1.1445-2(b)(2), in form
and substance satisfactory to Buyer, duly executed, and certifying, under
penalties of perjury, that each Stockholder and the Company is not a foreign
person within the meaning of Code Section 1445.


 


G.                                     Real Property
Documents.  All documents required to
cure any title defects in accordance with Article 9 herein; any documents
reasonably required by Buyer or its lender to correct and/or adjust the Related
Party Agreements, if any; releases of all recorded claims of lien and mortgage
liens encumbering the Fee Property; the assignment and assumption of land bank
documents for the Contract Property in accordance with this Agreement; gap
affidavit signed by the Stockholders and Related Parties (as the case may be)
in favor of the Buyer as reasonably required by Buyer with respect to the Fee
Property and Related Party Projects other than the Title Insurance Properties;
special warranty deed and non-foreign affidavit in favor of Buyer’s designated
land banker with respect to the Title Insurance Properties, and a gap and
construction lien affidavit signed by the Stockholders in favor of the Buyer,
Buyer’s designated land banker and the Title Company with respect to the Title
Insurance Properties, provided that the affidavit with respect to Lake Jessup
shall not include affirmation on construction liens. 


 


H.                                    Other Agreements
and Documents.  Executed copies of
each of the Transaction Documents and such other documents as Buyer or its
counsel or any lender of Buyer may reasonably request prior to the Closing,
including the acknowledgment from John F. Lowndes and Lowndes, Drosdick, Doster,
Kantor & Reed, P.A. contemplated by Section 6.15, in order to
effectuate the transactions contemplated under this Agreement.


 


I.                                         Resignations.  Resignations from each member of the board of
directors of the Company and, for those offices selected by Buyer, resignations
from the officers holding such offices as selected by Buyer, and as selected by
Buyer, any resignations from each member appointed by the Company to any
homeowners association, Condominium Association and community development
district board of supervisors.


 


65





















 


J.                                        Backup
Withholding Form.  The Stockholders
will have furnished the Escrow Agent IRS forms W-8 or W-9, as applicable.


 


11.2                           Buyer’s
Obligations.  In addition to any
other documents required to be delivered by Buyer at Closing pursuant to this
Agreement, Buyer will deliver to the Stockholders at Closing the following:


 


A.                                   Purchase Price.  The purchase price contemplated by Section 1.4,
to the extent payable at Closing.


 


B.                                     Other Agreements
and Documents.  Executed copies of
each of the Transaction Documents and such other documents as the Stockholders
or Stockholders’ counsel may reasonably request prior to the Closing in order
to effectuate the transactions contemplated under this Agreement.


 


C.                                     Debt Payoff.  In connection with the Closing, the Buyer
will payoff any remaining Company debt. 


 


D.                                    Certifications.  Buyer will deliver to the Stockholders on the
Closing Date a certificate that the representations of Buyer contained in this Agreement
remain true and correct in all material respects as if made on the Closing
Date.


 


11.3                           Transfer
Fees, Title Costs, and Closing Costs and Other Fees; Prorations.


 


A.                                   Title Policy Fees.  The cost of the title insurance searches and
owner’s title premium for the Title Policy insuring the Title Insurance
Properties determined in Article IX will be paid or accrued by the Company
and reflected in the Preliminary Closing Balance Sheet.  The Buyer shall pay all costs applicable to
Buyer’s landbanking transfers and transactions.


 


B.                                     Recording and
Other Fees.  Recording fees for any
documents will be paid or accrued by the Company and reflected in the
Preliminary Closing Balance Sheet.  The
Company will also pay or accrue all fees and expenses, including assumption and
transfer fees actually incurred by the Company or Stockholders in obtaining any
consents and approvals required to be obtained by the Company or Stockholders
under this Agreement or otherwise in consummating the transactions contemplated
by this Agreement, which payments or accruals will be reflected in the
Preliminary Closing Balance Sheet.


 


C.                                     Prorations.  Real estate ad valorem taxes and general and
special assessments, utilities, rents, Association assessments and payments on
Real Property and all costs and expenses related to the Contract Property will
be prorated as of the Closing Date, based upon the most current information
then available, and shall be paid or accrued by the Company and reflected in
the Preliminary Closing Balance Sheet.  As of Closing, the Stockholders shall cause
the Company to have made all assessment, capital and reserve contributions to
all homeowners associations required by Applicable Laws.


 


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ARTICLE XII

SURVIVAL AND INDEMNITIES


 


12.1                           Survival
of Representations and Warranties. 
Regardless of any investigation at any time made by or on behalf of any
party hereto, or of any information any party may have in respect thereof, all
representations and warranties made hereunder or pursuant hereto or in
connection with the transactions contemplated hereby will survive the Closing
for a period of [ * ], except that (i) the representations
and warranties relating to environmental matters, as well as those set forth in
Article III, will survive until [ * ], and (ii) the representations
and warranties relating to tax matters will survive [ * ].


 


12.2                           Nature
of Statements.  Any agreements,
covenants, undertakings, provisions or actions contained in this Agreement,
which contemplate action by any of the parties to this Agreement after the
Closing will survive the Closing of this Agreement, including, but not limited
to, the agreements, covenants, undertakings, provisions and actions set forth
in Sections 1.5, 1.6, 6.1, 6.2, 6.4, 6.5, 6.6, 6.7, 6.10, 6.13 and Articles VII
and VIII.


 


12.3                           Dispute
Resolution.  Except as provided
otherwise herein, all claims, disputes and other matters in controversy (except
for matters related to fraud, the Employment Agreements or any breach of
Sections 6.1 or 6.2) arising directly or indirectly out of or relating to this
Agreement and the other Transaction Documents, or the breach, termination or
validity of this Agreement and the other Transaction Documents, whether
contractual or non-contractual, and whether during the term or after the
termination of this Agreement (each a “Dispute”),
shall be resolved exclusively in accordance with the Dispute Resolution
Procedures attached as Exhibit A.  Notwithstanding the foregoing, nothing herein
will prohibit the parties from pursuing equitable remedies.


 


ARTICLE XIII

TERMINATION/REMEDIES


 


13.1                           Termination.  This Agreement may be terminated as follows:


 


A.                                   by mutual written
consent of the Stockholders and Buyer;


 


B.                                     by either Buyer,
on the one hand, or the Stockholders, on the other hand, if the other party
breaches any of its material representations, warranties, or covenants
contained herein, provided, however, the breaching party will be afforded a ten
(10) day cure period upon written notice of breach; 


 


C.                                     by Buyer pursuant
to Section 9.3; or


 


D.                                    by either Buyer or
the Stockholders if the transactions contemplated hereunder have not closed on
or before after September 30, 2005 unless such date is extended by written
amendment to this Agreement; provided, however, that the party or parties
exercising the right to terminate this Agreement pursuant to this Section 13.1D
must not be in material default of any term or provision of this Agreement.


 










*                 Confidential
information on this page has been omitted and filed separately with the
Securities Exchange Commission pursuant to a Confidential Treatment Request.


 


67





















 


13.2                           Effect
of Termination.  In the event of
termination of this Agreement as provided in Section 12.1, this Agreement
will become void and there will be no liability or further obligation hereunder
on the part of Buyer or the Stockholders or their respective shareholders,
members, officers or directors, except (i) the Stockholders and Buyer will
remain obligated for their obligations under Section 6.2 for a period of
one year and (ii) each party will remain obligated for its obligations set
forth in Section 6.4, to the extent applicable.


 


13.3                           Specific
Performance.


 


A.                                   Subject to Section 13.3B,
any party may seek specific performance with respect to the obligation of
another party or parties to close the transactions contemplated hereunder in
the event that such party or parties fail to close such transactions in
accordance with the terms of this Agreement. 
The party or parties who is or are entitled to specific performance must
file and serve an action within 10 business days after the Closing Date or it
or they will have waived the right to do so.


 


B.                                     The right to the
Break-Up Fee under Section 6.4 and the right to specific performance under
Section 13.3A will be mutually exclusive such that a party may seek to
enforce only one such right or remedy, all others being waived upon such
election.


 


ARTICLE XIV

GENERAL PROVISIONS


 


14.1                           Notices.  All notices, consents, and other
communications hereunder will be in writing and deemed to have been duly given
when (i) delivered by hand, (ii) sent by telecopier (with receipt
confirmed) or (iii) when received by the addressee, if sent by Express
Mail, FedEx, or other express delivery service (with delivery confirmation), in
each case to the appropriate addresses and telecopier numbers set forth below
(or to such other addresses and telecopier numbers as a party may designate as
to itself by notice to the other):


 


	
  If to Buyer:

  	
   

  	
  2745 North Dallas Parkway, Suite 600

  
	
   

  	
   

  	
  Plano, Texas 75093

  
	
   

  	
   

  	
  Telephone: (972) 543-8100

  
	
   

  	
   

  	
  Facsimile: (972) 543-8201

  
	
   

  	
   

  	
  Attn: John R. Landon

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  8501 East Princess Drive, Suite 290

  
	
   

  	
   

  	
  Scottsdale, Arizona 85255

  
	
   

  	
   

  	
  Phone: (480) 609-3330

  
	
   

  	
   

  	
  Fax: (480) 998-9178

  
	
   

  	
   

  	
  Attn: Chief Financial Officer

  



 


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  With a copy to:

  	
   

  	
  Snell & Wilmer L.L.P.

  
	
   

  	
   

  	
  One Arizona Center

  
	
   

  	
   

  	
  Phoenix, Arizona 85004-0001

  
	
   

  	
   

  	
  Phone: (602) 382-6252

  
	
   

  	
   

  	
  Fax: (602) 382-6070

  
	
   

  	
   

  	
  Attn: Steven D. Pidgeon, Esq.

  
	
   

  	
   

  	
   

  
	
  If to Stockholders:

  	
   

  	
  Robert A. Mandell

  
	
   

  	
   

  	
  1105 Kensington Park Drive

  
	
   

  	
   

  	
  Altamonte Springs, Florida 32714

  
	
   

  	
   

  	
  Phone: (407) 869-0300

  
	
   

  	
   

  	
  Fax: (407) 862-0057

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Lowndes, Drosdick, Doster, Kantor &
  Reed, P.A.

  
	
   

  	
   

  	
  215 North Eola Drive

  
	
   

  	
   

  	
  P.O. Box 2809

  
	
   

  	
   

  	
  Orlando, Florida 32801

  
	
   

  	
   

  	
  Phone: (407) 418-6401

  
	
   

  	
   

  	
  Fax: (407) 843-4495

  
	
   

  	
   

  	
  Attn: John F. Lowndes, Esq.

  



 


14.2                           Counterparts.  The Transaction Documents may be executed in
any number of counterparts, and any of such counterparts may be sent by
facsimile transmission, and each counterpart, whether an original or a
facsimile of an original, will constitute an original instrument, and all such
separate counterparts will constitute one and the same agreement.


 


14.3                           Governing
Law.  The validity, construction, and
enforceability of this Agreement will be governed in all respects by the laws
of the State of Florida, without regard to its conflict of laws rules.  Venue for any proceeding shall lie in Orange
County, Florida.


 


14.4                           Assignment.  This Agreement will not be assigned by
operation of law or otherwise, (i) except that Buyer may assign all or any
portion of its rights under this Agreement to any wholly owned subsidiary of
Meritage, but no such assignment will relieve Buyer or its successor of its
primary liability for all obligations of Buyer, respectively, hereunder and (ii) except
that this Agreement may be assigned by operation of law to any corporation or
entity with or into which Buyer may be merged or consolidated or to which Buyer
transfers all or substantially all of its assets, and such corporation or
entity assumes this Agreement and all obligations and undertakings of Buyer
hereunder, but no such assignment will relieve Buyer or its successor of their
liability for the respective obligations of Buyer, hereunder.  Any assignment in violation of the provisions
of this Agreement will be null and void.


 


14.5                           Gender
and Number.  The masculine, feminine,
or neuter pronouns used herein will be interpreted without regard to gender,
and the use of the singular or plural will be deemed to include the other
whenever the context so requires.


 


14.6                           Schedules
and Exhibits.  The Stockholders’
Disclosure Schedule, Schedules and Exhibits referred to in this Agreement and
attached to this Agreement are incorporated in this 


 


69





















 


Agreement by
such reference as if fully set forth in the text of this Agreement.  The specific disclosure of any matter in any Section of
the Stockholders’ Disclosure Schedule will constitute disclosure of such
matter to Buyer for purposes of each and every one of the representations and
warranties made by the Stockholders in this Agreement where it is reasonably
apparent a specific disclosure in one section of the Stockholders’
Disclosure Schedule relates to another representation or warranty.


 


14.7                           Waiver
of Provisions.  The terms, covenants,
representations, warranties and conditions of this Agreement may be waived only
by a written instrument executed by the party waiving compliance.  The failure of any party at any time to
require performance of any provisions hereof will, in no manner, affect the
right at a later date to enforce the same. 
No waiver by any party of any condition, or breach of any provision, term,
covenant, representation or warranty contained in this Agreement, whether by
conduct or otherwise, in any one or more instances, will be deemed to be or
construed as a further or continuing waiver of any such condition or waiver of
the breach of any other provision, term, covenant, representation or warranty
of this Agreement.


 


14.8                           Costs.  If any legal action or any arbitration or
other proceeding is brought for the enforcement of this Agreement, or because
of an alleged dispute, breach, default or misrepresentation in connection with
any of the provisions of this Agreement, the successful or prevailing party or
parties will be entitled to recover reasonable attorneys’ fees, accounting fees
and other costs incurred in that action or proceeding, in addition to any other
relief to which it or they may be entitled.


 


14.9                           Amendment.  This Agreement may not be amended except by
an instrument in writing approved by Buyer and the Stockholders’ Representative
and signed on behalf of each of the parties hereto.


 


14.10                     Severability.  If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement will remain in full force and
effect and will in no way be affected, impaired or invalidated and the court
will modify this Agreement or, in the absence thereof, the parties will
negotiate in good faith to modify this Agreement to preserve each party’s anticipated
benefits under this Agreement.


 


14.11                     Binding
Effect.  Subject to the provisions
and restrictions of Section 14.4, the provisions of this Agreement are
binding upon and will inure to the benefit of the parties and their respective
heirs, personal representatives, successors and assigns.


 


14.12                     Construction.  References in this Agreement to “Sections,” “Articles,”
“Exhibits,” “Schedules,” and “Stockholders’ Disclosure Schedule” are to the
Sections and Articles in, and the Schedules, Exhibits and Stockholders’
Disclosure Schedule to, this Agreement, unless otherwise noted.


 


14.13                     Time
Periods.  Except as expressly
provided for in this Agreement, the time for performance of any obligation or
taking any action under this Agreement will be deemed to expire at 5:00 p.m.
(Dallas, Texas time) on the last day of the applicable time period provided for



 


70





















 


in this
Agreement.  If the time for the
performance of any obligation or taking any action under this Agreement expires
on a Saturday, Sunday or legal holiday, the time for performance or taking such
action will be extended to the next succeeding day which is not a Saturday,
Sunday or legal holiday.


 


14.14                     Headings.  The headings of this Agreement are for purposes
of reference only and will not limit or define the meaning of any provision of
this Agreement.


 


14.15                     Entire
Agreement.  This Agreement, the other
Transaction Documents and all certificates, schedules and other documents
attached to or deliverable under such agreements, including the Stockholders’
Disclosure Schedules constitute the entire agreement, including with respect to
representations and warranties, between the parties pertaining to the subject
matter contained in the Transaction Documents. 
Except for the existing Letter of Confidentiality referenced in Recital
4 of this Agreement which shall remain in full force and effect, all prior and
contemporaneous agreements, representations and understandings of the parties,
oral or written, are superseded by and merged in the Transaction
Documents.  No supplement, modification
or amendment of the Transaction Documents will be binding unless in writing and
executed by the parties thereto.


 


14.16                     Enforcement
of Rights.  Except as otherwise
provided in the Transaction Documents, Buyer’s rights under, and the remedies
to enforce, this Agreement are joint and several as to the Stockholders.  Buyer is completely free to enforce any or
all of its rights under this Agreement against any Stockholder with or without
the concurrence or joinder of any other Stockholder.


 


14.17                     No
Third Beneficiaries.  Except as
otherwise set forth in the Transaction Documents and except as specifically
provided in Section 14.4 of this Agreement and similar provisions in the
other Transaction Documents, neither this Agreement nor any other Transaction
Agreement is intended to, and none of them shall, create any rights in any
other Person other than the parties to such agreements.


 


14.18                     Deferral
of Offsets, Character of Amounts Offset.  Anything in this Agreement to the contrary
notwithstanding, if Buyer or Company shall have the authority to offset or
reduce amounts otherwise payable as compensation to the Stockholders under the
Employment Agreements in order to satisfy any amounts otherwise owing by the
Stockholders to the Buyer or the Company, Buyer or the Company shall provide
the Stockholders ten (10) days advance written notice before making the
actual offset or reduction during which time the Stockholders (or any one of
them) shall have the opportunity to pay the Buyer or Company the precise amount
owing that would otherwise be satisfied from amounts payable to the
Stockholders in respect of their respective capacities as employees of the
Company pursuant to their respective Employment Agreements.  If no such payment is made by the
Stockholders’ Representative in accordance with the preceding sentence, Buyer
or Company shall be authorized to proceed forthwith to offset or reduce the
amounts owing to the Stockholders under their respective Employment
Agreements.  In respect of (i) any
and all amounts due from Stockholders to Buyer or to the Company and (ii) which
are otherwise satisfied or paid through offsets or reductions in amounts
payable by the Company to the Stockholders under the Employment Agreements with



 


71





















 


the Company
(whether in accordance with Sections 1.5B, 8.3E of this Agreement or
otherwise), it is expressly provided herein that any such offset or reduction
in the amount payable under the Employment Agreements shall not be considered a
reduction in the amount of taxable compensation deemed paid or payable to the
Stockholder in his capacity as an employee; it being acknowledged and agreed
that any such Stockholder shall be deemed (x) first, to have received in his
capacity as an employee the full amount to which the Stockholder was entitled
to receive as an employee in accordance with the terms of the respective
Employment Agreement and (y) second, to have paid to the Company or Buyer from
the amount receivable as an employee the amount that was actual offset or
reduced from the amount to which the Stockholder was entitled in his capacity
as an employee under the respective Employment Agreement.


 


ARTICLE XV

DEFINITIONS


 


15.1                           Definitions.  The following terms will have the meanings
set forth below where used in this Agreement and identified with initial
capital letters.


 


“Aboveground Storage Tank” will have the
meaning ascribed to such term in Sections 6901, et seq., as amended, of RCRA, or any applicable
state or local statute, law, ordinance, code, rule, regulation, order, ruling
or decree governing Aboveground Storage Tanks.


 


“Adjusted  Book
Equity” will mean the total stockholders’ equity of the Company as
reflected on the Preliminary Closing Balance Sheet and the Final Closing
Balance Sheet, as the case may be, which are to be prepared in accordance with
GAAP; provided, however, that with respect to both the Preliminary Closing
Balance Sheet and the Final Closing Sheet, any repayments of the Company’s debt
by Buyer, whether pursuant to the last sentence of Section 6.8 or
otherwise, shall not affect the calculation of Adjusted Book Equity for
purposes of the calculation under this Agreement.


 


“Applicable Laws” will mean all federal,
state, regional, local or other governmental or quasi-governmental statutes,
laws, rules, regulations, codes, ordinances, orders, plans, injunctions,
decrees, rulings or judicial or administrative interpretations thereof,
including without limitation the Condominium Act, the Real Estate Settlement
Procedures Act, the Interstate Land Sales and Full Disclosure Act, 15 U.S.C. Section 1700,
et seq., and the Florida Land Sales Practices Act, Fla. Stat. Section 498
et seq. and Environmental Laws, which are applicable to the Stockholders,
Buyer, the Company or the use, development, sale, operation or condition of the
Company’s assets.


 


“Associations” will mean all property owners
and condominium owners associations applicable to the Real Property.


 


“Capital Stock” means common stock,
preferred stock, partnership interests, limited liability company interests or
other equity ownership interests entitling the holder thereof to vote with
respect to matters involving the issuer thereof or to share proportionately in
its profits.


 


“Code” will mean the Internal Revenue Code
of 1986, as amended and the Treasury Regulations promulgated thereunder,
together with any notice, regulation, ruling or other form of


 


72





















 


published guidance with respect thereto, and any corresponding
provision in any state, local or foreign Tax law.


 


“Company” means collectively Greater Homes
(formally known as The Greater Construction Corporation) and each of its
Subsidiaries and other joint ventures or greater than 50% owned Persons.


 


“Condominium Act” will mean Chapter 718,
Florida Statutes, and all rules promulgated by the Division of Florida
Land Sales, Condominiums, and Mobile Homes of the Department of Business and
Professional Regulation.


 


“Construction Claims” will mean all claims,
including, without limitation, claims for breach of contract, claims for breach
of express or implied warranty, construction defect claims, claims for lost
profits, consequential damages, and incidental and other damages, and all
losses, costs and expenses relating to any work required to be done by the
Company, or any corrective work required to be done by the Company, on a
completed Housing Unit (including, without limitation, claims related to mold)
or on streets, gradings, landscaping and homeowners’ association improvements
and all other similar subdivision work.


 


“Contract Property” or “Contract Properties” will mean those
portions of Real Property identified on Section 4.10 of the Stockholders’
Disclosure Schedule as properties that the Company has under contract to
purchase, including, but not limited to, Trails of St. John’s project.


 


“Discharge” or “Discharged”
will mean any manner of spilling, leaking, dumping, discharging, releasing or
emitting, as any of such terms may further be defined in any Environmental Law,
into any medium including, without limitation, ground water, surface water,
soil or air.


 


“Environmental Law” or “Environmental Laws” will mean all federal,
state, regional, local or other governmental or quasi-governmental statutes,
laws, Applicable Laws, rules, regulations, codes, ordinances, orders, plans,
injunctions, decrees, ruling or judicial or administrative interpretations
thereof, as amended from time to time, which govern or relate to pollution,
protection of the environment, protection of endangered or threatened species
of flora or fauna, public health and safety, air emissions, water discharges,
hazardous or toxic substances, solid or hazardous waste or occupational health
and safety, historic preservation, the protection of historic and natural and
archeological resources, and the development and use of land as any of these
terms are or may be defined in such statutes, laws, rules, regulations, codes,
ordinances, orders, plans, injunctions, decrees, rulings or judicial or
administrative interpretations thereof, including, without limitation: the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended by the Superfund Amendment and Reauthorization Act of 1986, 42
U.S.C. Section 9601, et seq. (collectively “CERCLA”); the Solid Waste Disposal Act, as amended by the
Resource Conversation and Recovery Act of 1976 and subsequent Hazardous and
Solid Waste Amendments of 1984, 42 U.S.C. Sections 6901, et seq. (collectively “RCRA”); the Hazardous Materials
Transportation Act, as amended, 49 U.S.C. Sections 1801, et seq.; the Clean
Water Act, as amended, 33 U.S.C. Section 1311, et seq.; the Clean Air Act,
as amended, 42 U.S.C. Section 7401-7642; the Toxic Substances Control Act,
as amended, 15 U.S.C.


 


73





















 


Sections 2601, et seq.; the Federal Insecticide, Fungicide, and
Rodenticide Act as amended, 7 U.S.C. Section 136-136y (“FIFRA”); the Emergency Planning and
Community Right-to-Know Act of 1986 as amended, 42 U.S.C. Sections 11001, et
seq. (Title III of SARA) (“EPCRA”);
and the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C.
Sections 651, et seq. (“OSHA”);
the National Environmental Policy Act; and the National Historic Preservation
Act.


 


“ERISA” will mean the Employee Retirement
Income Security Act of 1974, as amended.


 


“ERISA
Affiliate” means, with respect to any Person, (i) under common
control within the meaning of Section 4001(b)(1) of ERISA with such
Person or (ii) together with such Person is treated as a single employer
under Sections 414(b), (c), (m) or (o) of the Code.


 


“Fee Property” or “Fee Properties” will mean those portions of
Real Property that the Company owns in fee as identified on Section 4.10
of the Stockholders’ Disclosure Schedule.


 


“Final Closing Balance Sheet” will mean a
balance sheet reflecting the closing balances for the Business, prepared in
accordance with GAAP, as of the Closing Date.


 


“Fully Entitled” will mean, with respect to
any project included within the Real Property, that the project has
unconditionally received all of the following which entitle the project to be
developed with the number of residential units provided on Section 4.10 of
the Stockholders’ Disclosure Schedule, and that any applicable appeals period
has expired without challenge:  all
requisite land use, zoning, and planned unit development approvals, and
governmental and quasi-governmental approvals and permits;  site plan and/or PSP approval; unconditionally
vested concurrency certification; issuance of all required environmental
resource, habitat and species permits, including but not limited to permits
from the applicable water management district, the Army Corp of Engineers, the
Fish and Wildlife Service, and the Florida Department of Environmental
Protection.


 


“GAAP” will mean generally accepted
accounting principles, including but not limited to, appropriate reserves or
accruals for Taxes, warranty claims, Condominium Association reserves,
Association reserves, vacation, sick pay, severance obligations and other
similar types of employment obligations.


 


“Governmental Authority” will mean any
nation or government, any state or other political subdivision or
quasi-governmental authority thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, including, without limitation, any government authority, agency,
department, board, commission or instrumentality of the United States, any
State of the United States, or any political subdivision thereof, and any
tribunal or arbitrator(s) of competent jurisdiction, and any self-regulatory
organizations.


 


“Handle”
or “Handles” will mean any manner of
generating, accumulating, storing, treating, disposing of, transporting,
transferring, labeling, handling, manufacturing or using, as any of such terms
may further be defined in any Environmental Law, of any Hazardous Substances or
Waste.


 


74










 













 


“HIPAA”
means the Health Insurance Portability and Accountability Act of 1996.


 


“Hazardous
Substances” will be construed broadly to include any toxic or
hazardous substance, material or waste and any other contaminant, pollutant or
constituent thereof, whether liquid, solid, semi-solid, sludge and/or gaseous,
including without limitation, chemicals, compounds, by-products, pesticides,
asbestos containing materials, petroleum or petroleum products, polychlorinated
biphenyls, airborne, waterborne or soil contamination, the presence of which
requires or may require investigation or remediation under any Environmental
Laws or which are or become regulated, listed, or controlled by, under, or
pursuant to any Environmental Laws, including, without limitation, RCRA,
CERCLA, the Hazardous Materials Transportation Act, the Toxic Substances
Control Act, the Clean Air Act, the Clean Water Act, FIFRA, EPCRA and OSHA, or
any similar federal, state, regional or local statute, or any future amendments
to, or regulations implementing such statutes, laws, ordinances, codes, rules,
regulations, orders, rulings, or decrees or which has been or will be
determined or interpreted at any time by any Governmental Authority to be a
hazardous or toxic substance regulated under any other statute, law,
regulation, order, code, rule, order or decree.


 


“Housing
Unit” will mean (i) a residential dwelling constructed or to be
constructed on a lot, together with the associated lot or (ii) any
condominium unit.


 


“Intellectual Property” means:


 


A.            all
of the Company’s rights, title, and interest in and to all (i) architectural,
building, and engineering designs, drawings, specifications and plans, (ii) all
proprietary information or rights including any and all plans, and other
project related information of prior and currently active real estate projects,
(iii) copyrights, whether registered or not, patents, trademarks whether
registered or not, and applications, registrations and renewals with respect
thereto, (iv) goodwill associated therewith and (v) all agreements or
licenses relating thereto; and


 


B.            all
of the Company’s books, instruments, papers and records of whatever nature and
wherever located, whether in written form or another storage medium, including
without limitation (i) copies of accounting and financial records, (ii) property
records and reports, (iii) environmental records and reports, (iv) personnel
and labor relations records and (v) property, sales, or transfer tax
records and returns.


 


“Knowledge of Stockholders” means no facts
or information have come to the attention of any Stockholder after reasonable
inquiry that would make him aware of any inaccuracy of the representations or
warranties of Stockholders.


 


“Lien” means, with respect to any asset, any
mortgage, deed of trust, lien (statutory or otherwise), pledge, lease,
easement, restriction, covenant, charge, security interest or other
encumbrance, of any kind or nature in respect of such asset, whether or not
filed, recorded or otherwise perfected under applicable law, including any
conditional sale or other title retention agreement, and any lease in the
nature thereof, any option or other agreement to sell, and any filing of, or
agreement to give, any financing statement under the Uniform Commercial Code
(or equivalent statutes) of any jurisdiction.


 


75





















 


“Material Contracts” means the following
contracts and agreements to which the Company is a party or by which the
Company or any of its assets are bound:


 


(a)           all contracts for
the purchase of real property;


 


(b)           all agreements or
indentures relating to the borrowing by the Company of money in excess of
$25,000 or to mortgaging, pledging or otherwise placing a Lien over $25,000 on
any of the Company’s assets, or the guaranty by the Company of any obligation
of another person for borrowed money or any other obligation of another person,
other than endorsements made for collection;


 


(c)           property leases
involving more than $25,000 in payments due after the Closing Date;


 


(d)           all other contracts
or groups of related contracts with the same party continuing over a period of
more than six months from the date or dates thereof or involving more than
$25,000 per annum;


 


(e)           all employment,
consulting, bonus, severance or similar agreements to which the Company is a
party;


 


(f)            all agreements
providing for any guarantee, bond or indemnification by the Company; and


 


(g)           all other agreements
material to the Company or not entered into in the ordinary course of business.


 


Notwithstanding the foregoing, the term “Material Contracts” will not include home sales contracts.


 


“Meritage” means Meritage Homes Corporation,
a Maryland corporation, and the parent of Buyer.


 


“PBGC” means the Pension Benefit Guaranty
Corporation.


 


“Permitted Materials” will mean (i) reasonable
amounts of gasoline and oil or other vehicle lubricants stored in the vehicles
and equipment used on the Real Property, (ii) reasonable amounts of
fertilizers, herbicides and/or pesticides and ordinary, everyday painting and
cleaning supplies, used only in the ordinary course of completing and
maintaining the buildings, landscaping and improvements on the Real Property
and (iii) standard building components and materials which are properly
and lawfully installed in or incorporated into the improvements and may
lawfully remain therein in accordance with Applicable Laws, taking into account
the nature, purpose and intended use and occupancy thereof; provided that in
all cases all such components, materials, substances and other items referred
to in clauses (i) through (iii), above, are stored, transported, used,
installed, incorporated and disposed of, in accordance with all Applicable
Laws.


 


76





















 


“Person” will mean any natural person, corporation,
general or limited partnership, limited liability company, trust, sole
proprietorship, or other entity, organization or association of any kind.


 


“Pre-Closing Amendment Transactions” will
mean the pre-closing transactions described in Section 1.5A.


 


“Proceedings” will mean claims, suits,
actions, arbitrations, dispute resolution proceedings, judgments, penalties,
fines or administrative or judicial investigations or proceedings.


 


“Real Property” means all of the Company’s
right, title, and interest in and to all real property assets, whether or not
disclosed on the Final Closing Balance Sheet, including all of the Company’s
right, title and interest in and to all (i) land, and buildings, fixtures
and improvements located thereon or attached thereto, (ii) lots under
development and finished lots, and all houses under development, completed
homes and model homes, (iii) purchase contracts and option agreements for
the purchase of lots or land for development and related escrow instructions
and deposits, (iv) the Fee Property, Related Party Projects and Contract
Property and (v) easements, franchises, licenses, permits, and
rights-of-way appurtenant to or otherwise benefiting, and all development
rights, mineral rights, water rights, utility capacity reservations, and other
rights and appurtenances affecting or pertaining to, the items described in
clauses (i), (ii), (iii) and (iv).


 


“SEC” will mean the Securities and Exchange
Commission.


 


“Stock
Purchase” will have the meaning set forth in the second recital of
this Agreement.


 


“Subsidiary” or “Subsidiaries” means, with respect to any Person, any
corporation, limited liability company, partnership, joint venture or other
entity of which such Person (either alone or through or together with any other
subsidiary), owns, directly or indirectly, securities or other interests the
holders of which are generally entitled to at least 50% of the vote for the
election of the board of directors or other similar governing body of such
corporation or other legal entity, or otherwise having the power to direct the
business and policies of that Person.


 


“Taxes” will mean any and all federal,
state, local or foreign income, gross receipts, transaction, privilege, sales,
license, excise, severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Code Section 59A), customs duties,
capital stock, franchise, profits, withholding, social security (or similar),
unemployment, payroll, employment, recapture, disability, real property,
personal property, intangible property, capital gains, net worth, occupation,
ad valorem, sales, use, transfer, registration, value-added, alternative or
add-on minimum, estimated, “roll-back” any other taxes, assessments or
government charges of any kind whatsoever, including any interest, penalty or
addition thereto, whether disputed or not, whether computed on a separate or
consolidated, unitary or combined basis or in any other manner, and including
any obligation to indemnify or otherwise assume or succeed to the Tax liability
of any other Person.


 


77





















 


“Tax Return” will mean any return,
declaration, report, claim to refund or information return or statement
relating to Taxes, including any schedule or attachment thereto, and
including any amendment thereof.


 


“Transaction Documents” means this
Agreement, the Escrow Agreement and the Employment Agreements.


 


“Underground Storage Tank” will have the
meaning ascribed to such term in Section 6901 et seq., as amended, of RCRA,
or any applicable state or local statute, law, ordinance, code, rule,
regulation, order ruling or decree governing Underground Storage Tanks.


 


“Waste” will be construed broadly to include
any abandoned or disposed agricultural wastes, biomedical wastes, biological
wastes, bulky wastes, construction and demolition debris, garbage, household
wastes, industrial solid wastes, liquid wastes, recyclable materials, sludge,
solid wastes, special wastes, used oils, white goods and yard trash as those
terms are defined under any applicable Environmental Laws.


 


15.2         Other Definitions.  Other defined terms used in this Agreement
are referenced as follows:


 


	
  Defined
  Term

  	
   

  	
  Reference

  
	
  Accounting Arbitrator

  	
   

  	
  Section 1.6B(4)

  
	
  Additional Purchase Price

  	
   

  	
  Section 1.5B

  
	
  Agreement

  	
   

  	
  Introductory paragraph

  
	
  Applicable Tax Obligations

  	
   

  	
  Section 8.2B(4)

  
	
  Applicable Transactions

  	
   

  	
  Section 7.3C

  
	
  Approved Title Exceptions

  	
   

  	
  Section 9.3

  
	
  Arbor 4 Option Agreement

  	
   

  	
  Section 1.5A

  
	
  Arbor 5 Option Agreement

  	
   

  	
  Section 10.2K

  
	
  Balance Sheet Date

  	
   

  	
  Section 4.6A

  
	
  Basket Threshold

  	
   

  	
  Section 8.3C

  
	
  Bonds

  	
   

  	
  Section 4.21

  
	
  Break-Up Fee

  	
   

  	
  Section 6.4A

  
	
  Bridges Contract

  	
   

  	
  Section 1.5B

  
	
  Bridges Option

  	
   

  	
  Section 1.5B

  
	
  Business

  	
   

  	
  Third recital

  
	
  Buyer

  	
   

  	
  Introductory paragraph

  
	
  CCRs

  	
   

  	
  Section 4.30

  
	
  Closing

  	
   

  	
  Section 1.1

  
	
  Closing Date

  	
   

  	
  Section 1.1

  
	
  COBRA

  	
   

  	
  Section 4.20E

  
	
  Company Stock

  	
   

  	
  First recital

  
	
  Competing Business

  	
   

  	
  Section 6.1A

  
	
  Confidential Information

  	
   

  	
  Section 6.2A

  
	
  Cypress Preserve Agreement

  	
   

  	
  Section 1.5A

  
	
  Disapproved Title Exceptions

  	
   

  	
  Section 9.3

  



 


78





















 


	
  Defined
  Term

  	
   

  	
  Reference

  
	
  Dispute

  	
   

  	
  Section 12.3

  
	
  D Ranch Contract

  	
   

  	
  Section 1.5D

  
	
  Employee Benefits Plans

  	
   

  	
  Section 4.20A

  
	
  Employment Agreements

  	
   

  	
  Section 6.3A

  
	
  Environmental
  Reports

  	
   

  	
  Section 4.11T

  
	
  Escrow
  Agreement

  	
   

  	
  Section 1.6A

  
	
  Excluded
  Assets

  	
   

  	
  Section 4.11Y

  
	
  Excluded
  Contracts

  	
   

  	
  Section 8.2B(2)

  
	
  Excluded Construction Claims

  	
   

  	
  Section 8.2B(3)

  
	
  Financial Statements

  	
   

  	
  Section 4.6A

  
	
  Form Option Agreement

  	
   

  	
  Section 1.5A

  
	
  Grassy Lakes Option Agreement

  	
   

  	
  Section 10.2I

  
	
  Greater Homes

  	
   

  	
  Introductory paragraph

  
	
  Holdback
  Fund

  	
   

  	
  Section 1.4A

  
	
  Indemnification Cap

  	
   

  	
  Section 8.3B

  
	
  Indemnified Party

  	
   

  	
  Section 8.4A

  
	
  July Balance Sheet

  	
   

  	
  Section 1.6B(1)

  
	
  Lake Louisa
  Agreement

  	
   

  	
  Section 1.5A

  
	
  Land Use Entitlements

  	
   

  	
  Section 4.24B

  
	
  LLC-1

  	
   

  	
  Section 4.15D(21)

  
	
  LLC-2

  	
   

  	
  Section 4.15D(22)

  
	
  Losses

  	
   

  	
  Section 8.2A

  
	
  Meritage

  	
   

  	
  Third recital

  
	
  Metropolitan

  	
   

  	
  Section 6.3D

  
	
  Notices

  	
   

  	
  Section 4.14B

  
	
  Orangetree Agreement

  	
   

  	
  Section 1.5A

  
	
  Permits

  	
   

  	
  Section 4.24A

  
	
  Permitted Liens

  	
   

  	
  Section 4.9

  
	
  Policies

  	
   

  	
  Section 4.21

  
	
  Potential Tax Savings

  	
   

  	
  Section 8.2B(5)

  
	
  Pre-Closing Environmental Matters

  	
   

  	
  Section 8.2B(4)

  
	
  Pre-Closing Litigation

  	
   

  	
  Section 8.2B(4)

  
	
  Preliminary Closing Balance Sheet

  	
   

  	
  Section 1.6B(2)

  
	
  Related Parties

  	
   

  	
  Section 1.5A

  
	
  Related Party Agreements

  	
   

  	
  Section 1.5A

  
	
  Related
  Party Projects

  	
   

  	
  Section 1.5A

  
	
  Report

  	
   

  	
  Section 9.1

  
	
  Restricted Period

  	
   

  	
  Section 6.1A

  
	
  Retail Sales Contracts

  	
   

  	
  Section 4.29

  
	
  Section 338 Election

  	
   

  	
  Section 6.18

  
	
  Shares

  	
   

  	
  First recital

  
	
  Specifically Excluded Liabilities

  	
   

  	
  Section 8.2B

  
	
  St. John’s Contingent Sale

  	
   

  	
  Section 1.5B

  
	
  Stockholders

  	
   

  	
  Introductory paragraph

  



 


79





















 


	
  Defined
  Term

  	
   

  	
  Reference

  
	
  Stockholders’ Disclosure Schedule

  	
   

  	
  First paragraph of Article III

  
	
  Stockholders’ Representative

  	
   

  	
  Section 6.7

  
	
  Stock
  Purchase

  	
   

  	
  Second
  recital

  
	
  Straddle
  Period

  	
   

  	
  Section 7.2A

  
	
  Survey

  	
   

  	
  Section 9.1

  
	
  Third-Party Purchase Agreements

  	
   

  	
  Section 4.11AA

  
	
  Title Commitment

  	
   

  	
  Section 9.2A

  
	
  Title Company

  	
   

  	
  Section 9.2A

  
	
  Title Insurance Properties

  	
   

  	
  Section 9.2B

  
	
  Title Policy

  	
   

  	
  Section 9.2B

  
	
  Trails Purchase Contracts

  	
   

  	
  Section 1.5B

  
	
  Trails Zoning

  	
   

  	
  Section 6.18

  
	
  Zoning Date

  	
   

  	
  Section 1.5B

  



 


80





















 


IN
WITNESS WHEREOF, the parties have caused this
Agreement to be executed on the date first written above.


 


	
   

  	
  MERITAGE HOMES OF FLORIDA, INC.,
  

  an Arizona corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ John R.
  Landon

  	
   

  
	
   

  	
  Name:

  	
  John R. Landon

  	
   

  
	
   

  	
  Title:

  	
  Co-Chairman and Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  STOCKHOLDERS

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Robert
  A. Mandell

  	
   

  
	
   

  	
  Robert A. Mandell

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Charles
  W. Gregg

  	
   

  
	
   

  	
  Charles W. Gregg

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Hampton
  P. Conley

  	
   

  
	
   

  	
  Hampton P. Conley

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Stephen
  Gallagher

  	
   

  
	
   

  	
  Stephen Gallagher

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Simon
  Snyder

  	
   

  
	
   

  	
  Simon Snyder

  	
   

  
						



 


 


[Signature
Page to Stock Purchase Agreement]


 


81





















 


	
   

  	
  By signing below Meritage Homes Corporation
  joins in this Agreement for the purpose of Sections 1.3, 1.4, 1.6B(5), 2.4,
  6.2B, 6.3, 6.4, 6.5, 6.8, 6.12, 6.14, 6.16, 8.1, 8.4, 11.2 and 13.3 and
  agrees that it will have the same rights and responsibilities with respect to
  these sections in this Agreement as Buyer.

  
	
   

  	
   

  
	
   

  	
  MERITAGE HOMES CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  	
  /s/ John R. Landon

  
	
   

  	
  Name:

  	
  John R. Landon

  
	
   

  	
  Title:

  	
  Co-Chairman and Chief Executive Officer

  



 


 


[Signature
Page to Stock Purchase Agreement]


 


82





















 


Exhibit A


 


Dispute
Resolution Procedures


 


All claims,
disputes and other matters in controversy (herein called “Dispute”) arising directly or indirectly
out of or related to the Agreement, or the breach thereof, whether contractual
or noncontractual, and whether during the term or after the termination of such
Agreement, will be resolved exclusively according to the procedures set forth
in this Exhibit A.


 


1.             Negotiation.  The parties will attempt to settle disputes
arising out of or relating to the Agreement or the breach thereof by a meeting
of two designated representatives of each party within five days after a
request by either of the parties to the other party asking for the same.


 


2.             Mediation.  If such dispute cannot be settled at such
meeting either party within five days of such meeting may give a written notice
(a “Dispute Notice”) to the other
party setting forth the nature of the dispute. 
The parties will attempt in good faith to resolve the dispute by
mediation in Orange County, Florida under the Commercial Mediation Rules of
the American Arbitration Association (“AAA”)
in effect on the date of the Dispute Notice. 
The parties will select a person who will act as the mediator under this
Paragraph 2 within fifteen (15) days after the Dispute Notice is given, failing
which the mediator will be appointed by the AAA upon the request of either
party.  If the dispute has not been
resolved by mediation as provided above within 30 days after delivery of the Dispute
Notice, then the dispute will be determined by arbitration in accordance with
the provisions of Paragraph 3 hereof.


 


3.             Arbitration.  Any dispute that is not settled through
mediation as provided in Paragraph B above will be resolved by arbitration in
Orange County, Florida, governed by the Federal Arbitration Act, 9 U.S.C. § 1
et seq., and administered by the AAA under its Commercial Arbitration Rules in
effect on the date of the Dispute Notice, as modified by the provisions of this
Section 3, by a single arbitrator. 
The arbitrator selected, in order to be eligible to serve, will be a
lawyer with at least 15 years experience specializing in business matters.  In the event the parties cannot agree on a
mutually acceptable single arbitrator from the list submitted by the AAA, the
AAA will appoint the arbitrator who will meet the foregoing criteria.  The arbitrator will base the award on
applicable law and judicial precedent and, unless both parties agree otherwise,
will include in such award the findings of fact and conclusions of law upon
which the award is based.  Judgment on
the award rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof.


 


Notwithstanding the foregoing or anything in
the Transaction Documents to the contrary:


 


A.            Upon the application by either party to a court for an
order confirming, modifying or vacating the award, the court will have the
power to review whether, as a matter of law based on the findings of fact
determined by the arbitrator, the award should be confirmed, modified or
vacated in order to correct any errors of law made by the arbitrator.  In order to effectuate such judicial review
limited to issues of law, the parties agree (and will stipulate to the court)
that the findings of fact made by the arbitrator will be final and binding on
the parties and will serve as the facts to be submitted to and relied on by the
court in determining the extent to which the award should be confirmed,
modified or vacated.  For the purposes of
this Section 3A permitting 


 





















 


judicial review of the award, the parties
hereby submit to the exclusive jurisdiction of the federal and state courts
located in Orange County, Florida and agree that the review will be conducted
by one of those courts.


 


B.            Either party will have the right to apply to any court
for an order to specifically enforce their rights under the Agreement and the
other Transaction Documents, including but not limited to a party’s obligation
to close the transaction and the confidentiality provisions contained in the
Agreement.


 


C.            Nothing herein will prohibit the parties from pursuing
equitable remedies in a court of competent jurisdiction.


 


4.             Costs and Attorneys’ Fees.  If either party fails to proceed with
mediation or arbitration as provided herein or unsuccessfully seeks to stay
such mediation or arbitration, or fails to comply with any arbitration award,
or is unsuccessful in vacating or modifying the award pursuant to a petition or
application for judicial review, the other party will be entitled to be awarded
costs, including reasonable attorneys’ fees, paid or incurred by such other
party in successfully compelling such arbitration or defending against the
attempt to stay, vacate or modify such arbitration award and/or successfully
defending or enforcing the award.


 


5.             Tolling
of Statute of Limitations.  All
applicable statutes of limitations and defenses based upon the passage of time
will be tolled while the procedures specified in this Exhibit A are pending.  The parties will take such action, if any,
required to effectuate such tolling.


 


2





















 


Exhibit B


 


Form of
Option Agreement


 


(See attached)


 





















 


OPTION
AGREEMENT


(     Project
Name      )


 


THIS
OPTION AGREEMENT (the “Agreement”) is entered into effective as of the        
day of                 ,
2005 (the “Effective Date”), by
and between Landbanker
(“Owner”),
and Greater Homes, Inc.,  a Florida corporation, a
division of Meritage Homes (“Builder”).


 


RECITALS


 


A.            Owner owns the real property legally
described on Exhibit A
attached hereto (the “Property”
and/or  “Subdivision”), which Property consists of              
platted residential lots (the “Lots”), along with certain common areas, located in
                       
County, Florida (the “County”).


 


B.            Owner hereby grants to Builder an
option to purchase the Property in accordance with the terms of this Agreement.


 


AGREEMENT


 


For good and valuable consideration, Owner
and Builder agree as follows:


 


1.             Grant of Option; Term.


 


1.1           Grant.  In consideration of (a) the payment by
Builder to Owner of an amount equal to $                 
(the “Deposit”) on
the date hereof, and (b) the payment and performance by Builder of its
obligations under this Agreement, Owner hereby grants to Builder the exclusive
right and option (the “Option”)
to purchase the Property in accordance with the terms of this
Agreement.  This Agreement constitutes an
option and does not obligate Builder to purchase all or any portion of the
Property.


 


1.2           Term.  The initial term of the Option (the “Option Period”) shall
commence on the date hereof and shall expire on                           .


 


1.3           Application of Deposit.  Except as specifically provided for herein,
the Deposit shall be non-refundable to Builder for any reason whatsoever other
than the default of Owner.


 


2.             Use.  Subject to the terms of this Agreement,
Builder shall, during the term of this Agreement, have a license to use the
Property before its purchase thereof for purposes of inspection, making surveys
and staking, obtaining topographical information, installing the Subdivision
Improvements in accordance with Section 4.4, showing the Property to
prospective purchasers of homes from Builder, placing signage relating to the
marketing of the Property, parking purposes, and locating and operation of
Builder’s construction and sales trailers.


 


If Builder fails to acquire the Property as required herein, then upon
expiration of the Option, or the earlier termination of this Agreement, the
foregoing license granted to Builder to use the Property shall immediately
terminate and Builder shall vacate all of the Property and remove all personal
property therefrom.  Builder shall
restore the Property to the same condition


 


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as
when Builder entered upon the Property. 
Builder shall at all times during the term of this Agreement fully and
timely comply with all documents, instruments, covenants and restrictions of
record affecting the Property.  Builder
shall, at its expense, comply with all existing and future laws, codes,
ordinances, orders, rules, regulations and requirements of all governmental
Authorities pertaining to the Property and Builder’s activities relating
thereto, including any and all environmental laws.  Builder shall keep that Property free and
clear of all liens and encumbrances incurred by or resulting from the acts of
Builder and its agents, employees, contractors, subcontractors and
representatives (the “Builder Parties”)
prior to Closing, and Builder shall indemnify, defend and hold harmless Owner
for, from and against any such liens and encumbrances.


 


3.             Obligations of Builder.


 


3.1           Expenses.  The parties intend that Owner shall not be
required, during the term of this Agreement, to incur any expense or other
charge applicable to the Property except as expressly set forth herein.  Accordingly, all taxes, assessments,
impositions, insurance premiums, utility expenses, construction costs, all
obligations to and assessments of the owners’ association for the Property
and/or the project in which the Property are located (the “Association”), charges and
expenses related to any common areas, repair and maintenance expenses and all
other costs and expenses (but excluding income taxes and any LLC/corporate
annual tax charged to Owner pursuant to applicable law) of whatsoever character
or kind, general or special, ordinary or extraordinary, foreseen or unforeseen,
and of every kind and nature whatsoever (collectively, the “Expenses”),
shall be paid or discharged by Builder; provided, however, Owner shall have no
right, without Builder’s prior written consent, to incur costs relating to the
Property (other than to protect Owner’s interest in the Property) for which
Builder shall be responsible.  Without
limiting the foregoing, Builder shall as a material part of the consideration
to Owner in exchange for Owner’s grant of the Option to Builder: (i) pay
prior to delinquency all real estate taxes, special taxes, assessments and
other charges, including Association assessments, dues and charges pertaining
to any common area, roadway, water, wastewater, impact and any other fees
payable to any Approving Authority, or otherwise payable by Owner and
attributable to the Property, and any other portion of the Property which accrue
or become due during the term of this Agreement (regardless of whether such
taxes, assessments, fees or charges relate to periods prior to the term of this
Agreement), (ii) maintain during the term of this Agreement at its expense
the Property in good order, condition and repair (except that such obligation
shall cease, as to any common areas, upon conveyance of the common area to the
Association), (iii) pay prior to delinquency all charges for water,
electricity, telephone service, trash removal and all other services and
utilities used on or about the Property prior to the termination of this
Agreement, and (iv) maintain at its expense all insurance required to be
maintained under this Agreement and perform all other obligations to be
performed by Builder pursuant to this Agreement.  A copy of each check to the applicable County
Treasurer or Tax Assessor (or other taxing authority) for taxes attributable to
portions of the Property owned by Owner shall be sent to Owner promptly upon
the submission of same to the applicable taxing authority.  If Builder either fails to exercise its
rights to acquire all of the Property pursuant to Section 8
below, or is in default under this Agreement, then upon the termination of this
Agreement, Builder shall immediately pay Owner all unpaid Expenses which
accrued or became payable during the term of this Agreement with respect to the
portions of the Property not acquired by Builder.  The amounts payable by Builder shall be
determined based upon the latest available information (apportioned on a
per-Lot basis using a 365-day year), and when the actual bills are received,
the parties shall make such 


 


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payment, one to the other, as
is necessary so that Builder pays the actual amount of taxes and assessments
and other Expenses attributable to the term of this Agreement.


 


3.2           Taxes.  Builder acknowledges that it is acquiring the
Property for resale.  Builder hereby
assumes the liability for and agrees to pay: (a) all applicable
assessments, transfer taxes, sales taxes, transaction privilege taxes and other
or similar taxes or charges owing in connection with Builder’s acquisition of
the Property and in connection with Builder’s development and subsequent resale
of the Property, (b) all charges in connection with fire protection,
sidewalks, road maintenance, refuse or other services provided to the Property
ay any governmental authorities accrued during the term of this Agreement, and (c) any
tax or excise on receipts, gross receipts tax, or other tax (but excluding
income taxes, Florida Franchise Tax and any LLC/corporate annual tax charged to
Owner pursuant to applicable law), however described, which is levied or
assessed by the United States of America or the applicable municipality or
county or state against Owner in respect to all charges or payments made by
Builder under this Agreement or as a result of Owner’s receipt of such charges
or payments, and Builder shall indemnify, defend and hold harmless Owner and
all Owner-Related Persons (as defined in Section 6) for, from and against
Builder’s failure to pay all such amounts when due, and against all liability
and expense, including, without limitation, all penalties, interest and
reasonable attorneys’ fees and costs, from any such failure.


 


3.3           Construction Agreement and
Subdivision Improvements.  Builder
may construct subdivision improvements (collectively, the “Subdivision Improvements”) on the Property prior to acquiring title to it.


 


4.             Declaration.  Owner shall not encumber the Property with
any Declaration of Covenants, Conditions and Restrictions (a “Declaration”) without the prior written consent of Builder;
provided, however, Builder shall take title to the Property subject to any such
Declaration recorded against the Property as of the date hereof. As part of the
material consideration to Owner in exchange for Owner’s grant of the Option to
Builder, Builder shall, at its expense, perform all of the obligations of Owner
under the Declaration accruing during the term of this Agreement, including,
without limitation, making the payment of all fees, assessments, dues, charges
and other sums allocable to the Property, if any, prior to the due date thereof
and Builder shall otherwise comply during the term of this Agreement with all
provisions of the Declaration applicable to Builder, Owner or any of the
Property.  Prior to acquiring the
Property, Builder shall have no right to (i) record any covenants,
conditions or restrictions against the Property, (ii) amend, terminate or de-annex
any portion of the Property from, or agree to amend, terminate or de-annex any
portion of the Property from, the Declaration, or (iii) record any other
instrument, agreement, document or memorandum against the Property, without
Owner’s prior written consent, which consent Owner shall not unreasonably
withhold.


 


5.             Insurance.  During the term of this Agreement, Builder
shall, at its sole expense, procure and maintain commercial general liability
insurance against claims for bodily injury, death or property damage, occurring
in, on or about the Property or resulting from the use or maintenance thereof,
in an amount of at least $5,000,000 for each occurrence and $5,000,000.00 in
the general aggregate.


 


6.             Indemnity.  To the fullest extent permitted by law,
Builder does and shall indemnify, and hold harmless, and hereby releases and
discharges, Owner and Owner’s 


 


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members, managers and the
partners, directors and officers of its members and managers and their
respective owners, officers, members, directors, employees, agents, affiliates,
successors and assigns (collectively, the “Owner-Related Persons”),
except to the extent caused by the negligence or willful misconduct of any
Owner-Related Persons, for, from and against all claims, demands, liabilities,
losses, damages, costs and expenses, including but not limited to court costs
and reasonable attorneys’ fees and costs, arising out of or in connection with (a) Builder’s
use or occupancy of the Property or any portion thereof; (b) any work,
occurrence, conduct, act or omission maintained, performed, permitted or
suffered by Builder, a Builder Party, or any invitee or licensee of Builder, on
or about or pertaining to the Property or any portion thereof; (c) any
material act, omission, negligence or misconduct of Builder, a Builder Party or
an invitee or licensee; (d) any accident, injury or damage whatsoever
caused to any person, firm or corporation in or about the Property any
sidewalk, street or land adjacent thereto arising as a result of any act or
omission during the term of this Agreement; (e) the physical condition of
the Property or any portion thereof existing, created or arising prior to or
during the term of this Agreement, and the impact of any federal, state or
local law, common law, statute, ordinance, regulation, administrative rule,
policy or order, now in effect or at anytime hereafter enacted which pertains
or is applicable to or governs hazardous materials or substances, or the use,
permitting and/or environmental condition of the Property including the
subsurface thereof, and any property adjacent thereto, or which pertains to
health, industrial hygiene or the regulation or protection of the environment
and (f) any claim made against Owner or the Property relating to real
property taxes arising for any time periods during and before the term of this
Agreement.


 


7.             Purchase Price and Exercise of
Option.  Subject to compliance with
the provisions of this Section 8 and the other terms of this Agreement,
Builder shall purchase the Property by paying Owner the purchase price of $                      
(the “Purchase  Price”).


 


[Arbor Ridge 5 only]  In addition to the Purchase Price, Builder
shall pay to Owner at Closing an additional sum equal to (i) the product
of the Purchase Price multiplied by [ * ] percent ([ * ]%) and divided by 365
days, multiplied by (ii) the number of days between the date hereof and
the Closing Date (defined below).  By way
of example, if the Closing Date occurs on the 120th after the
effective date hereof, the additional sum due Owner under the preceding
sentence shall be calculated as follows: 
$             
[Purchase Price] x [ * ]/365 x 120 days = $                    .  The Purchase Price shall be paid in cash at Closing
and Builder shall be entitled to apply the Deposit to the Purchase Price.


 


7.1           Exercise of Option.  Builder shall purchase the Property by
providing Owner with at least five (5) business days prior written notice
of the date Builder desires to consummate the purchase of the Property (the “Closing”).  Such
written notice shall specify the date of the Closing (the “Closing Date”),
which shall be a date within the Option Period.    Builder shall have the right, from time to
time, to designate a third party to receive title to the Property directly from
Owner at Closing.


 


7.2           Closing Mechanics.  The Closing shall be consummated through an
escrow (“Escrow”)
established with the escrow agent whose name and address are shown on the
signature page hereof (“Escrow  Agent”) or with such other escrow agent mutually acceptable
to 


 










*      Confidential information on this page has
been omitted and filed separately with the Securities Exchange Commission
pursuant to a Confidential Treatment Request.


 


B-4





















 


Owner and Builder.  At or prior to the Closing, Builder shall pay
to Owner through Escrow the Purchase Price and each of the parties shall
execute and deliver such documents and perform such acts as are provided for herein,
or as are necessary, to consummate the sale of the Property, including without
limitation, the Deed, a non-foreign affidavit, a standard owner’s title
indemnity affidavit, and a satisfaction and release of all mortgage liens
burdening the Property (if any)


 


7.3           Failure to Timely Close.  Unless otherwise agreed to by Owner and
Builder, this Agreement shall immediately terminate and Builder shall have no
further right to acquire the Property if Builder does not acquire the Property
within the Term and such failure is not cured after notice and opportunity to
cure as described in herein.  Upon the
termination of Builder’s right to purchase the Property under this Agreement,
Builder shall have no right whatsoever to thereafter receive any refund of or
any credit for any portion of the Deposit.


 


7.4           Assignment of Warranties,
Contracts, Etc.  Effective at the
time Builder is in default and this Agreement has been terminated before
Builder acquires the Property, Builder does hereby assign to Owner (on a
non-exclusive basis) all of Builder’s rights in all guarantees and warranties
relating to the Subdivision Improvements or any off-site improvements, all
governmental agreements, permits and service contracts.


 


7.5           Further Assurances; Removal of
Property.  If Builder either fails to
acquire or to exercise all of its rights to acquire all of the Property
pursuant to this Agreement, or if this Agreement is terminated before Builder
acquires the Property, Builder shall: (i) execute all documents and take
all actions described in this Agreement to then be taken and as otherwise
reasonably requested by Owner to facilitate Owner’s continued development of
the Property and the sale of the Property; (ii) deliver to Owner legible
copies or originals of all reports, analyses, test results and other documents
(other than pro formas, financial, proprietary and other internally generated
documents) within the possession of Builder or any of its affiliates (or which
Builder or any of its affiliates has the right to possess) that in any manner
relate to the Property; (iii) transfer to Owner all signs and billboards
on the Property (Builder may first remove its name from any such sign or
billboard), or, if Owner so requests, remove same from the Property; and (iv) remove
all other personal property of Builder from the Property.


 


8.             Title, Excluded
Property; Conveyance.


 


8.1           Deeds and Exceptions to Title.  Upon a Closing, title to the Property shall
be conveyed to Builder (or its designee) by special warranty deed (the “Deed”) duly
executed by Owner and delivered and recorded at the Closing, subject to: (i) real
property taxes and assessments (general, special or other) that are a lien but
not yet delinquent and for subsequent assessments for 2005 and subsequent years
due to changes in the use or ownership, or both; (ii) covenants,
conditions and restrictions listed in Exhibit B attached hereto; (iii) any
matters shown on the applicable plat; (iv) any lien or encumbrance
relating to general or special assessments levied against the Property by any
federal, or local governmental or quasi-governmental entity or agency from and
after the Effective Date and not arising as a result of any act of Owner; and (v) any
additional matters arising in connection with any action or request of an
Applicable Authority or of Builder or a Builder Party (collectively, the “Permitted Exceptions”).  Any title


 


B-5





















 


defects with respect to the Property shall be governed by the
provisions of the Stock Purchase Agreement (defined below).


 


8.2           Forms of Documents.  The Deed shall be in substantially the form
of Exhibit E
hereto.  At a Closing, Owner shall
execute and deliver to Builder a Non-Foreign Affidavit.  Builder shall be entitled to obtain title
insurance policies for the Property, provided that the acquisition of such
insurance shall be at Builder’s sole expense and shall not delay any
Closing.  All Closing costs, including
title premiums, escrow fees and charges and recording costs, shall be paid by
Builder.


 


9.             Property Condition.  The terms of the Stock Purchase Agreement
shall govern the condition of the Property.


 


10.           Commissions.  Each party represents and warrants to the
other that it has not employed any broker or finder in connection with the
transactions contemplated by this Agreement. Each party shall indemnify, defend
and hold harmless the other from all liability and expense, including, without
limitation, reasonable attorneys’ fees and costs, arising from any claim by any
broker, agent or finder for commissions, finder’s fees or similar charges,
because of any act of such party.


 


11.           Regulatory Matters.


 


11.1         Interstate Land Sales Full
Disclosure Act and Florida Land Sales Practices Act.  Owner and Builder believe and intend that the
sales provided for herein are exempt from the Interstate Land Sales Full
Disclosure Act and Florida Land Sales Practices Act by reason of being within
one or more of the exemptions set forth therein or in the regulations
promulgated pursuant thereto.  In the
support of such exemption, Builder represents and warrants to Owner as follows,
which representation and warranty shall be true and correct at all times during
the term of this Agreement and shall survive the term of this Agreement:  Builder is regularly engaged in the business
of constructing residential, commercial or industrial buildings and/or
reselling or leasing property to persons engaged in such business, is acquiring
the Property in the ordinary course of that business and otherwise meets the
exemption prerequisites set forth in U.S.C. Section 1702(a)(7) and
further defined in 23 C.F.R. Section 1710.5(g) and 23 C.F.R. Section 1710,
Appendix A.  Builder shall indemnify,
defend and hold harmless Owner and all Owner-Related Persons for, from and
against any and all claims, demands, liabilities, obligations, and expenses
(including, without limitation, attorneys’ fees and costs) incurred as a result
of any misrepresentation by Builder in this Section.


 


11.2         Subdivision Laws.  Builder shall have the responsibility, at Builder’s
cost and expense, to do all things necessary to comply in all respects with all
applicable subdivision laws and regulations in order to permit the sale of
Property to Builder as contemplated under this Agreement.  Owner shall cooperate with Builder as may be
necessary or appropriate, at no cost or expense to Owner, in accomplishing the
foregoing.  Notwithstanding anything
herein to the contrary, Owner shall have no obligation hereunder to convey
Property to Builder in violation of applicable laws or regulations.


 


B-6





















 


11.3         Environmental Laws.  Builder shall have the responsibility, at
Builder’s cost expense, to comply with all Federal, State and local
environmental laws, regulations and requirements pertaining to the development
and operation of the Property, including but not limited to the obligation to
prepare and submit to the U.S. Environmental Protection Agency a Notice of
Intent (NOI) for Storm Water Discharges under the National Pollutant Discharge
Elimination System (NPDES) and to comply with all applicable pollution
prevention, control, monitoring, reporting, inspection and permitting
conditions and requirements related thereto.


 


12.           Default and Remedies.


 


12.1         Defaults.  If either party fails to (a) pay any sum
of money when due or close when and as provided in this Agreement and such
failure continues for a period of at least fifteen (15) business days after the
delivery of written notice thereof by the other party or (b) perform any
other covenant, agreement or condition as provided in this Agreement and such
failure continues for a period of at least thirty (30) days after the delivery
of written notice thereof by the other party, the non-performing party shall be
deemed to be in default hereunder.


 


12.2         Remedies.


 


12.2.1      Owner’s Default.  Subject to the following provisions in this Section 12.2.1,
in the event of a default hereunder by Owner, Builder shall be entitled
to:  (i) pursue a claim for actual
damages; (ii) terminate this Agreement and receive a refund of the
Deposit; or (iii) specifically enforce Owner’s obligations hereunder, it
being understood and agreed that the Property is unique and that the right of
specific performance is a just and equitable remedy on account of Owner’s
default.  Immediately upon any
termination of this Agreement in accordance with this Section 12.2.1(ii) above
and if Builder has not purchased the Property, after the Deposit (or remainder
thereof) is returned to Builder, Owner may instruct Escrow Agent to record the
Notice of Termination of Option and Quit Claim Deed referenced in Section 16.2
of this Agreement.


 


12.2.2      Builder’s Default.  In the event of a default hereunder by
Builder that has not been cured within the applicable cure period, Owner shall
be entitled as its sole and exclusive remedy to terminate this Agreement and
retain the Deposit and recover from Builder any then-unpaid Expenses payable by
Builder pursuant to Section 3.1 above.  The parties have agreed that Owner’s actual
damages in the event of a default by Builder would be extremely difficult or
impracticable to determine.  The parties
acknowledge that the amount of the Deposit, and Builder’s payment of any unpaid
Expenses pursuant to Section 3.1 above, has been agreed upon, after
negotiation, as the parties’ reasonable estimate of Owner’s damages and as
Owner’s exclusive remedy against Builder, at law or in equity, in the event of
a default under the Agreement by Builder and that payment of such amount to
Owner as liquidated damages is not intended as a forfeiture or penalty.


 


12.3         Costs and Fees.  If there is any legal action or proceeding
between the parties to enforce or interpret any provisions of this Agreement or
to protect or establish any right or remedy of any of them hereunder, the unsuccessful
party to such action or proceeding shall, in addition to any other remedies set
forth in this Agreement, pay to the prevailing party all costs and expenses
(including, but not limited to, reasonable attorneys’ fees and costs) incurred


 


B-7





















 


by such prevailing party in
such action or proceeding.  If any party
secures a judgment in any such action or proceeding, then any costs and
expenses (including, but not limited to, reasonable attorneys’ fees and costs)
incurred by the prevailing party in enforcing such judgment, or any costs and
expenses (including, but not limited to, reasonable attorneys’ fees and costs)
incurred by the prevailing party in any appeal from such judgment in connection
with such appeal shall be recoverable separately from and in addition to any
other amount included in such judgment. The preceding sentence is intended to
be severable from the other provisions of this Agreement, and shall survive and
not be merged into any such judgment.


 


12.4         Default Interest.  If any monies become payable by one party to
the other pursuant to this Agreement and are not paid when due, then all sums
unpaid shall bear interest at the lesser of (i) the rate of fifteen
percent (15%) per annum or (ii) the maximum rate allowed by applicable
law, from the date due until such sums (and all interest accrued thereon) have
been paid.


 


12.5         Waiver.  Excuse or waiver of the performance by a
party of any obligation under this Agreement shall only be effective if evidenced
by a written statement signed by the party claimed to have excused or waived
performance.  No delay in exercising any
right or remedy shall constitute a waiver thereof, and no waiver by Owner or
Builder of the breach of any covenant of this Agreement shall be construed as a
waiver of any preceding or succeeding breach of the same or any other covenant
or condition of this Agreement.


 


13.           Representations and Warranties of
Owner.  Owner hereby makes the
following representations, warranties and covenants to Builder as of the date
of this Agreement, and shall be deemed to remake same as of the date of each
Closing:


 


13.1         Authority.  Owner represents and warrants that Owner has
the full right, power and authority to sell and convey the Property to Builder
as provided in this Agreement and Owner will have throughout the term of this
Agreement the full right, power and authority to carry out its obligations
hereunder.


 


13.2         Title.  Owner represents and warrants that Owner owns
good, marketable and insurable title to the Property subject only to the
matters referenced herein.


 


13.3         Individual Authority.  Owner represents and warrants that the person
executing this Agreement and all documents related thereto on behalf of Owner
has and will have authority to do so.


 


13.4         No Liens.  Owner represents and warrants that there are
no judgments or other encumbrances against Owner that will attach to and become
a lien against the Property.


 


13.5         Further Covenants.  During the term of this Agreement and except
for financing liens by Owner’s lender which will be released by Owner’s lender
at Closing, Owner covenants that it will not undertake or permit any of the
following without Builder’s prior written consent: (i) grant any liens against
or other rights in the Property would be prior to Builder’s interests hereunder
or that would continue beyond Builder’s acquisition of the Property; (ii) alter
the Property; (iii) change the land use and zoning classifications and
regulations applicable to the Property; or (iv) encumber the Property with any
additional restrictions, conditions or easements.  


 


B-8





















 


14.           Representations and Warranties of
Builder.  Builder hereby makes the
following representations and warranties to Owner as of the date of this
Agreement, and shall be deemed to remake same as of the date of each Closing:


 


14.1         Authority.  Builder has the full right, power and
authority to purchase the Property from Owner as provided in this Agreement and
Builder will have throughout the term of this Agreement the full right, power
and authority to carry out its obligations hereunder.


 


14.2         Individual Authority.  The person executing this Agreement and all
documents related thereto on behalf of Builder has and will have authority to
do so.


 


15.           Condemnation.  Within ten (10) days following receipt
by Owner of any written notice of an existing or threatened legal proceeding
that could result in the taking of all or any portion of the Property under the
power of eminent domain or the conveyance by Owner under the threat thereof (a “Condemnation”), Owner shall give Builder written notice of
such existing or threatened Condemnation action together with an indication of
the portion of the Property affected thereby (the “Condemned
Lots”).  Builder shall then
have the right, within ten (10) business days from receipt of such notice,
to give written notice to Owner of whether Builder elects to retain its option
to all of the Condemned Lots or whether Builder elects to exclude all of the Condemned
Lots from the Option.  If Builder fails
to give notice within such ten (10) business day period, Builder shall be
deemed to have elected to retain the right to acquire the Condemned Lots in
accordance with the provisions of this Agreement, and, notwithstanding anything
to the contrary contained herein, any title matters pertaining to any such
Condemnation shall be deemed to be Permitted Title Exceptions.  If at anytime thereafter Builder acquires all
of the Condemned Lots, Builder shall be entitled to all Condemnation awards
associated therewith other than with respect to any portion of such award
attributable to, or awarded on account of, expenses (including attorneys’ fees
and costs) incurred by Owner in handling or contesting such Condemnation.  If Builder elects to exclude all of the
Condemned Lots, as provided hereinabove, this Agreement shall terminate with
respect to the Condemned Lots upon such election.  If this Agreement so terminates with respect
to such Condemned Lots, Builder shall be entitled to a credit against the
purchase price at Closing in an amount equal to a pro-rata portion (based on
the ratio of the acreage of the Condemned Lots to the total acreage of the
property) of the Deposit and Builder waives any right to any other part of the
Condemnation award, as damages or otherwise.


 


16.           Miscellaneous.


 


16.1         Notices.  Notice hereunder shall be given to Owner,
Builder and Escrow Agent at the address shown on the signature page hereof
in accordance with the Stock Purchase Agreement.


 


16.2         Memorandum of Option and Termination.  Simultaneously with the execution of this
Agreement: (i) Owner and Builder shall execute and acknowledge a
Memorandum of Option Agreement in the form attached hereto as Exhibit D
for recording in the real property records of the county in which the Property
is located, and (ii) Owner and Builder shall execute and deliver to Escrow
Agent a Notice of Termination of Option and Quit-Claim Deed in the form
attached hereto as Exhibit E releasing any and all interests of Builder
in the


 


B-9





















 


Lots.  The Memorandum of Option Agreement shall be
recorded against the Property immediately. 
If Builder fails to acquire the Property during the Option Period, or if
Builder is deemed to be in default under this Agreement as described in Section 12.1,
Escrow Agent is hereby irrevocably directed to automatically and without
further direction, (a) attach to the Notice of Termination of Option and
Quit-Claim Deed the legal description of the Property not acquired by Builder
and (b) record, on the first business day after the expiration of the
applicable cure period, the Notice of Termination of Option and Quit-Claim
Deed, and the parties expressly and irrevocably release Escrow Agent from liability
for doing so.  In addition, at the time
of the termination of the Option, at Owner’s reasonable request, Builder shall
also execute and record any other documents evidencing such termination.


 


16.3         Interpretation.  The captions of the Sections of this
Agreement are for convenience only and shall not govern or influence the
interpretation hereof.  This Agreement is
the result of negotiations between the parties and, accordingly, shall not be
construed for or against either party regardless of which party drafted this
Agreement or any portion thereof.


 


16.4         Successors and Assigns.  All of the provisions hereof shall inure to
the benefit of and be binding upon the personal representatives, heirs,
successors and assigns of Owner and Builder. 
Builder shall have the right to assign its interest hereunder without
the prior written consent of Owner. 
Notwithstanding anything herein to the contrary, Owner may not assign
its right, title, interest and obligations hereunder without first obtaining
the consent of Builder.


 


16.5         No Partnership:
Third Person.  It is not
intended by this Agreement to, and nothing contained in this Agreement shall,
create any partnership or joint venture or other arrangement or lender-borrower
relationship between Owner and Builder.  No
term or provision of this Agreement is intended to, or shall, be for the
benefit of any person, firm, corporation or other entity not a party hereto
(including, without limitation, any broker), and no such party shall have any
right or cause of action hereunder.


 


16.6         Entire Agreement.  This Agreement constitutes the entire
agreement between, and the reasonable expectations of, the parties pertaining
to the subject matter hereof; provided, however, that the terms and provisions
of that certain Stock Purchase Agreement by and among Meritage Homes of Florida, Inc.,
as buyer, and the Stockholders of Greater Homes, Inc., as seller, dated                 
(the “Stock Purchase Agreement”) apply and in
the event of an inconsistency between the terms of this Option Agreement and
the Stock Purchase Agreement, the terms of the Stock Purchase Agreement shall
govern.   All prior and contemporaneous
agreements, representations and understandings of the parties, oral or written,
are hereby superseded and merged herein.  No change or addition is to be made to this
Agreement except by a written agreement executed by all of the parties.  [With respect to Cypress
Preserve, Overlook at Lake Louisa Phase II and Orangetree Phase 6: Owner and
Builder desire to amend and restate the terms of that certain Agreement between
them dated                                    ,
which is replaced and superseded in its entirety with this Option Agreement]


 


16.7         Further Documents.  Builder and Owner shall execute and deliver
all such documents and perform all such acts as reasonably requested by the
other party from time to 


 


B-10





















 


time, prior to and following
each Closing, to carry out the matters contemplated by this Agreement.


 


16.8         Incorporation of Exhibits.  All exhibits attached to this Agreement are
by this reference incorporated herein.


 


16.9         Date of Performance.  If the date of performance of any obligation
or the last day of any time period provided for herein does not fall on a
business day, then the obligation shall be due and owing, and the time period
shall expire, on the first day thereafter which is a business day.  Unless otherwise stated, all references in
this Agreement to days shall refer to calendar days.  Business days shall be defined to mean all
days except Saturdays, Sundays and legal holidays or dates upon which the
applicable County clerk’s office is closed. 
Except as may otherwise be set forth herein, any performance provided
for herein shall be timely made if, and only if, completed by 5:00 p.m.,
Central Time, on the day of performance. 
The funds required from Builder and all acts required of Builder in
order to close the Escrows pursuant hereto shall be deposited with Escrow Agent
and be performed no later than 1:00 p.m., Central Time, on each Closing
Date and shall be available for immediate distribution to Owner at each
Closing.


 


16.10       Builder’s Interest.  The parties acknowledge and agree that
Builder’s interest in the Lots shall be strictly limited to the option interests
expressly described herein and it is the intent of the parties that, unless and
until Builder exercises its rights to purchase the Property as described
herein, Builder shall have no fee interest in the Property, equitable or
otherwise, and that fee title to the Property shall be held by Owner.  In no event shall this Agreement or the
Option be claimed or construed to constitute an equitable mortgage.


 


16.11       Survival.  Unless expressly provided to the contrary
herein, it is agreed that all of the terms, conditions, provisions, obligations
and indemnities contained in this Agreement shall survive each and every
exercise of an Option, and the Closing of the sale of any Lot and the
recordation of any Deed pursuant thereto, and all obligations and indemnities
contained in Sections 2, 3, 4, 6, 10 and 11 of this Agreement shall survive the
expiration, cancellation or termination of this Agreement, so that all such
obligations and indemnities shall continue to be binding upon the parties
hereto and their respective successors and assigns.


 


16.12       Time of the Essence.  Time is of the essence of this Agreement.


 


16.13       Governing Law.  This Agreement shall be governed by and
construed in accordance with the laws of the state of Florida.


 


16.14       No Third Party Beneficiary.  Builder’s covenants set forth in this
Agreement are solely for the benefit of Owner and shall be enforceable by no
other individual or entity.


 


16.15       Counterparts.  This Agreement shall be executed
simultaneously or in counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same agreement.


 


B-11





















 


16.16       Re-characterization.  It is recognized that Owner and Builder are
sophisticated real estate entities with substantial experience in the
residential home building industry and are advised by experienced legal
counsel.  It is the intent of Owner and
Builder that the transaction described in this Agreement be treated as an
option on the part of Builder to acquire Property.    Neither this Agreement nor this transaction
is intended to be, nor shall it be construed to be or create, any loan,
security device, equitable mortgage, or other financing transaction between the
parties.  In no event shall Builder have
any interest (direct or indirect, legal or equitable) in and to any of the
Property other than as expressly provided in this Agreement, unless and until
Builder shall have actually acquired fee simple title to one or more Property
through exercise of its option rights hereunder and purchase thereof in
accordance with the terms of this Agreement. 
Even though the parties hereto declare that their sole intent is that
this Agreement shall serve as an option agreement providing Builder the option
to purchase Property on and subject to the terms hereof, if nevertheless (and
without in any way consenting to a re-characterization of this Agreement), this
Agreement or the transaction described herein is ever characterized as a
financing arrangement, security device or equitable mortgage, then for such
purposes Builder hereby (i) irrevocably grants, transfers and assigns to
Owner, its successors and assigns, in trust, with power of sale and right of
reentry and possession, all of Builder’s right, title and interest now owned or
hereafter acquired in and to the Property (other than any Property previously
acquired and paid for by Builder pursuant to the terms hereof) and (ii) assigns
and grants to Owner all rents, issues and profits realized from or relating to
the Property (other than any Property previously acquired and paid for by
Builder pursuant to the terms hereof). 
The intent of this grant is that in the event of such
re-characterization, this Agreement shall be deemed to be a mortgage, with
power of sale, of the Property (other than any Property previously acquired and
paid for by Builder pursuant to the terms hereof) made by Builder in favor of
Owner in favor of Owner and in the event of a default by Builder hereunder,
Owner will be entitled to foreclose pursuant to a non-judicial trustee’s sale
procedure and/or exercise any other remedies available at law or in equity
(including the right to appoint a receiver). 
Further, in the event of such re-characterization and notwithstanding
anything to the contrary contained herein, all agreements between Builder and
Owner are hereby expressly limited so that in no event whatsoever shall the
total liability for payments in the nature of interest and other charges exceed
the applicable limits imposed by the usury laws of the State of Florida.  If any payments in the nature of interest and
other charge made hereunder are held to be in excess of the applicable limits
imposed by the usury laws of the State of Florida, it is agreed that any such
amount held to be in excess shall be considered payment of principal hereunder,
and any indebtedness evidenced hereby shall be reduced by such amount so that
the total liability for payments in the nature of interest and other charges
shall not exceed the applicable limits imposed by the usury laws of the State
of Florida.


 


17.           Encumbrance of Property.  During the term of this Option Agreement,
Owner shall have the right to encumber the Property or any portion thereof not
owned by Builder for an amount up to eighty percent (80%) of the Purchase
Price, provided that, in connection therewith and as a condition precedent
thereto, Builder, Owner and Owner’s Lender shall enter into (i) a
collateral Assignment and Subordination of Option Agreement (if required by
Owner’s Lender) and (ii) a Recognition, Subordination, Non-disturbance and
Attornment Agreement in the form attached hereto as Exhibit F.


 


B-12





















 


18.           FIN 46 Representation and
Warranties.  In order to assist
Builder in complying with FASB Interpretation No. 46 (Consolidation of
Variable Interest Entities), Owner agrees: 
(a) Owner will notify Builder before any new equity investors are
introduced as owners of Owner during the term of this Option Agreement and if
Builder determines that the addition of such new equity investors would require
Builder to consolidate Owner for financial reporting purposes under FIN 46,
then unless Owner agrees not to add such new equity investors, Builder may bulk
purchase all of the Property by using the formula defined as the Adjusted
Purchase Price in Section 15 of the Construction Agreement and upon such
purchase Owner will be relieved from any further obligations under this
Agreement and the Construction Agreement; (b) Builder and its auditors
have the right to verify certain financial representations made by Owner
through timely reviewing the Owner’s books and records, (c) should the
application of FIN 46 ever be required of the entity, Owner will provide
Builder with all required books and records of Owner necessary to analyze and
potentially consolidate the entity; and (d) Owner represents that the only
asset to be owned by Owner is the Property, unless otherwise approved by
Builder. The information required pursuant to clause (d) of the
immediately preceding sentence would include, but not be limited to, formation
documents, ownership structure, capital and profit participation percentages,
initial and continuing quarterly financial statements and copies of any loan
agreements.


 


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


 


	
   

  	
  OWNER:

  	
  Landbanker

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  BUILDER:

  	
  Greater
  Homes, Inc., a Florida corporation,

  
	
   

  	
   

  	
  a
  division of Meritage Homes

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  



 


B-13





















 


	
   

  	
  ESCROW
  AGENT:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   Title
  Company

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Escrow Agent

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
					



 


B-14





















 


LIST OF
EXHIBITS


 


	
  EXHIBIT “A”

  	
   

  	
  Legal Description

  
	
   

  	
   

  	
   

  
	
  EXHIBIT “B”

  	
   

  	
  Additional Permitted Exceptions

  
	
   

  	
   

  	
   

  
	
  EXHIBIT “C”

  	
   

  	
  Special Warranty Deed

  
	
   

  	
   

  	
   

  
	
  EXHIBIT “D”

  	
   

  	
  Memorandum of Option Agreement

  
	
   

  	
   

  	
   

  
	
  EXHIBIT “E”

  	
   

  	
  Notice of Termination of Option and
  Quit-Claim Deed

  
	
   

  	
   

  	
   

  
	
  EXHIBIT “F”

  	
   

  	
  Recognition, Subordination, Non-disturbance
  and Attornment Agreement

  



 





















 


EXHIBIT A


 


Legal Description of the Property


 


A-1





















 


EXHIBIT B


 


Additional
Permitted Exceptions


 


B-1





















 


EXHIBIT C


 


Special
Warranty Deed


 


 


	
  WHEN RECORDED, RETURN TO:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  



 


THIS SPECIAL WARRANTY DEED is made as of the     
day of           , 200  ,
by                             
(hereinafter called the “Grantor”), whose post office address is                                  
to GREATER HOMES, INC., a Florida
corporation (hereinafter called the “Grantee”), whose address is                                    .


 


W
I  T  N  E  S  S  E  T  H:


 


Grantor, in consideration of TEN AND NO/100
DOLLARS ($10.00) and other good and valuable consideration paid by Grantee, has
granted, bargained and sold, and by these presents does grant, bargain and
sell, to Grantee, Grantee’s successors and assigns, as appropriate, forever,
the following property situate in       County,
Florida, to-wit (the “Property”):


 


SEE EXHIBIT ”A”
ATTACHED HERETO AND MADE A PART HEREOF.


 


This conveyance is subject to those matters
set forth on Exhibit ”B” attached hereto and made a part hereof, none of
which are reimposed hereby; zoning and/or other restrictions imposed by
governmental authorities, and taxes subsequent to December 31, 200  .


 


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


 


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


 


AND, the Grantor hereby covenants with said
Grantee that the Grantor is lawfully seized of said land in fee simple; that
the Grantor has good right and lawful authority to sell and convey said land,
and hereby specially warrants the title to said land and will defend the same
against the lawful claims of all persons claiming by, through or under the said
Grantor.


 


C-1





















 


IN WITNESS WHEREOF, Grantor has executed this
Special Warranty Deed as of the day and year first above written.


 


	
  Signed, sealed and delivered

  in the presence of: 

  	
   

  
	
   

  	
   

  
	
  Sign:

  	
   

  	
   

  	
   

  
	
  Print:

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Sign:

  	
   

  	
   

  	
   

  
	
  Print:

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  



 


	
  STATE OF  FLORIDA

  	
  )

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  )

  	
  ss.:

  
	
   

  	
   

  	
   

  
	
  COUNTY OF                                      

  	
  )

  	
   

  



 


The foregoing instrument was acknowledged
before me this      day of               ,
200  , by                      ,
as                            
of                                                                                       ,
on its behalf.


 


	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Notary Public, State of Florida

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Print, Type or Stamp Commissioned Name of

  Notary Public)

  
	
   

  	
   

  	
   

  
	
   

  	
  o Personally Known OR o
  Produced Identification

  
	
   

  	
  Type of Identification Produced:

  	
   

  	
   

  
							



 


C-2





















 


EXHIBIT D


 


Memorandum of
Option Agreement


 


	
  WHEN RECORDED, RETURN TO:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  



 


MEMORANDUM OF OPTION AGREEMENT


 


BY
THIS MEMORANDUM OF OPTION AGREEMENT (“Memorandum”) entered into as of the     
day of                   ,
200   , LAND BANKER,
a         limited partnership (“Owner”), and MERITAGE HOMES OF ARIZONA,
INC., an Arizona limited
partnership (“Builder”), declare and agree as follows:


 


A.                                   Owner owns that
certain real property located in            
County,              
and described on Exhibit A
attached, which has been, or will be subdivided as Project, Section 6 (the “Lots”).


 


B.                                     Owner granted
to Builder, and does hereby grant to Builder, pursuant to that certain Option
Agreement between Builder and Owner of even date herewith (“Option Agreement”), the option
to purchase the Lots in accordance with the terms of the Option Agreement.


 


C.                                     The term of the
Option commenced upon the date this Memorandum was recorded in the Official
Records of             
County,       , and shall expire on              
provided, however, the Option may be extended until no later than                 
in accordance with the terms of the Option Agreement if Builder complies with
all of the requirements described in the Option Agreement.


 


D.                                    All of the
other terms, conditions and agreements contained within the Option Agreement
are fully incorporated herein by reference as if fully set forth herein.  This Memorandum is not intended to change any
of the terms of the Option Agreement.


 


IN
WITNESS WHEREOF, the parties have executed this Memorandum of Option Agreement
as of the date first set forth above.


 


	
  Signed, sealed and delivered

  in the presence of: 

  	
  OWNER

  
	
   

  	
   

  
	
  (1)

  	
   

  	
   

  	
   

  
	
  Print:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (2)

  	
   

  	
   

  	
   

  
	
  Print:

  	
   

  	
   

  	
   

  



 


D-1





















 


	
  Signed, sealed and delivered

  in the presence of: 

  	
  BUILDER

  
	
   

  	
   

  
	
  (1)

  	
   

  	
   

  	
   

  
	
  Print:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (2)

  	
   

  	
   

  	
   

  
	
  Print:

  	
   

  	
   

  	
   

  



 


	
  STATE OF  FLORIDA

  	
  )

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  )

  	
  ss.:

  
	
   

  	
   

  	
   

  
	
  COUNTY OF

  	
  )

  	
   

  



 


The
foregoing instrument was acknowledged before me this              day
of              ,
200    , by                ,
as                        
of                                             ,
on its behalf.


 


	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Notary Public, State of Florida

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Print, Type or Stamp Commissioned Name of

  Notary Public)

  
	
   

  	
   

  	
   

  
	
   

  	
  o Personally Known OR o
  Produced Identification

  
	
   

  	
  Type of Identification Produced:

  	
   

  	
   

  
							



 


	
  STATE OF  FLORIDA

  	
  )

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  )

  	
  ss.:

  
	
   

  	
   

  	
   

  
	
  COUNTY OF

  	
  )

  	
   

  



 


The foregoing instrument was acknowledged
before me this      day of
         , 200  , by
             ,
as                
of
                           ,
on its behalf.


 


	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Notary Public, State of Florida

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Print, Type or Stamp Commissioned Name of

  Notary Public)

  
	
   

  	
   

  	
   

  
	
   

  	
  o Personally Known OR o
  Produced Identification

  
	
   

  	
  Type of Identification Produced:

  	
   

  	
   

  
							



 


D-2





















 


EXHIBIT E


 


Notice of
Termination of Option


 


	
  WHEN RECORDED, RETURN TO:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  



 


NOTICE OF TERMINATION
OF OPTION


AND QUIT-CLAIM DEED


 


THIS
NOTICE OF TERMINATION OF OPTION AND QUIT-CLAIM DEED is dated this            
day of                      ,
200   , between LANDBANKER (“Owner”), and GREATER HOMES, INC., a Florida corporation (“Builder”):


 


WHEREAS,
Owner granted to Builder a certain option pursuant to that certain Option
Agreement dated August    , 200   between Owner
and Builder; and


 


WHEREAS,
the option contained in the Option Agreement has been fully terminated and the
parties desire to evidence such termination by execution, delivery and
recordation of this Notice of Termination of Option and Quit-Claim Deed.


 


NOW,
THEREFORE, in consideration of the agreements set forth herein, and Ten Dollars
($10) and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereby agree as follows:


 


1.                                       The option
contained in the Option Agreement has been fully terminated and Builder has no
rights whatsoever thereunder, and the parties acknowledge the full and complete
termination of Builder’s rights in the option property.


 


2.                                       Builder does
hereby quit-claim to Owner all that certain real property situated in              
County,           described on Exhibit ”A”
attached hereto and incorporated herein by this reference.


 


[SIGNATURES ON FOLLOWING PAGE]


 


E-1





















 


IN WITNESS WHEREOF, the undersigned
have executed this Notice of Termination of Option and Quit-Claim Deed as of
the day and year first above written.


 


	
  Signed, sealed and delivered

  in the presence of: 

  	
  OWNER

  
	
   

  	
   

  
	
  (1)

  	
   

  	
   

  	
   

  
	
  Print:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (2)

  	
   

  	
   

  	
   

  
	
  Print:

  	
   

  	
   

  	
   

  



 


	
  Signed, sealed and delivered

  in the presence of: 

  	
  BUILDER

  
	
   

  	
   

  
	
  (1)

  	
   

  	
   

  	
   

  
	
  Print:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (2)

  	
   

  	
   

  	
   

  
	
  Print:

  	
   

  	
   

  	
   

  



 


	
  STATE OF  FLORIDA

  	
  )

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  )

  	
  ss.:

  
	
   

  	
   

  	
   

  
	
  COUNTY OF

  	
  )

  	
   

  



 


The foregoing instrument was acknowledged
before me this      day of          ,
200  , by              ,
as                
of                            ,
on its behalf.


 


	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Notary Public, State of Florida

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Print, Type or Stamp Commissioned Name of

  Notary Public)

  
	
   

  	
   

  	
   

  
	
   

  	
  o Personally Known OR o
  Produced Identification

  
	
   

  	
  Type of Identification Produced:

  	
   

  	
   

  
							



 


	
  STATE OF  FLORIDA

  	
  )

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  )

  	
  ss.:

  
	
   

  	
   

  	
   

  
	
  COUNTY OF

  	
  )

  	
   

  



 


The foregoing instrument was acknowledged
before me this      day of          ,
200  , by              ,
as                
of                            ,
on its behalf.


 


E-2





















 


	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Notary Public, State of Florida

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Print, Type or Stamp Commissioned Name of

  Notary Public)

  
	
   

  	
   

  	
   

  
	
   

  	
  o Personally Known OR o
  Produced Identification

  
	
   

  	
  Type of Identification Produced:

  	
   

  	
   

  
							



 


E-3





















 


EXHIBIT “F”


 


Recognition, Subordination, Non-Disturbance
And Attornment Agreement


 


PREPARED BY AND


WHEN RECORDED, RETURN TO:


 


Michael J. Sabatello, Esq.


Greenberg Traurig, P.A.


777 S. Flagler Drive, Suite 300 East


West Palm Beach, FL  33401


 


RECOGNITION, SUBORDINATION,
NON-DISTURBANCE AND ATTORNMENT AGREEMENT


 


THIS
AGREEMENT is made as of the      day of           ,
2005, among                             
(“Lender”),                            (“Borrower”)
and GREATER HOMES, INC., a Florida
corporation (“GREATER”).


 


WITNESSETH:


 


WHEREAS, Lender is the
owner and holder of a Mortgage, Assignment of Rents and Security Agreement and
certain related loan documents (collectively, the “Mortgage”)
from Borrower, given to secure a Promissory Note in the principal sum of                          
($          .00) (the “Note”), which Mortgage is recorded
in Official Record Book      , Page     ,
Public Records of              
County, Florida, and which Mortgage encumbers the property therein more
particularly described (“Property”);


 


WHEREAS, Borrower and
Greater have entered into that certain Option Agreement dated           
200 , (the “Option Agreement”)
which is evidenced by that certain Memorandum of Option recorded in Official
Record Book      , Page     ,
the Public Records of            
County, Florida, pursuant to which GREATER has the right and option to purchase
the Property in a series of incremental transactions;


 


WHEREAS, the parties
hereto mutually desire to confirm that the Option Agreement is subject and
subordinate to the lien of the Mortgage and thereupon to establish certain
rights for the benefit of GREATER and Lender, together with certain obligations
for attornment on the part of GREATER, all in the manner hereinafter provided.


 


F-1





















 


NOW,
THEREFORE, in consideration of the premises, the receipt
whereof is hereby acknowledged, Lender, Borrower and GREATER do hereby mutually
covenant and agree as follows:


 


1.                                       GREATER, for
itself, its successors and assigns, hereby covenants and agrees that the Option
Agreement is now and shall be subject and subordinate to the lien of the
Mortgage and to any now existing or future extensions, consolidations,
modifications or renewals thereof, advances thereunder, or supplements thereto,
with the same force and effect as if the Mortgage and such future extensions,
consolidations, modifications or renewals thereof, advances thereunder or
supplements thereto had been executed, acknowledged, delivered and recorded
prior to the execution, acknowledgment and delivery of the Option Agreement.


 


2.                                       Provided
GREATER is not in Default (as defined in the Option Agreement) under the terms
of the Option Agreement beyond any period given GREATER to cure such default,
and after notice, if any, required by the Option Agreement, then:


 


(a)                                  The rights of GREATER
to purchase the Property pursuant to the Option Agreement shall not be affected
or disturbed by Lender in the exercise of any of its rights under the Mortgage
or the Note.


 


(b)                                 In the event that
Lender or any other person acquires title to the Property pursuant to the
exercise of any remedy provided for in the Mortgage, the Option Agreement shall
not be terminated or affected by said foreclosure or sale or transfer in lieu
of foreclosure of any such proceedings and Lender hereby covenants that any
sale by it of the Property pursuant to the exercise of any rights and remedies
under the Mortgage or otherwise, shall be made subject to the Option Agreement
and the rights of GREATER thereunder; and GREATER covenants and agrees to
attorn to Lender or such other person and the Option Agreement shall continue
in full force and effect as a direct agreement between GREATER and Lender or
such other person upon all the terms, covenants, conditions and agreements set
forth in the Option Agreement.


 


(c)                                  If Lender or any
other person shall succeed to the interest of Borrower under the Option
Agreement, Lender or such other person shall be bound to GREATER under all of
the terms, covenants and conditions of the Option Agreement, and GREATER shall,
from and after Lender’s or such other person’s succession to the interest of
Borrower under the Option Agreement, have only the remedy of specific
performance, and no other, against Lender or such other person for the breach
of any agreement contained in the Option Agreement occurring after the date on
which Lender or such other person acquired title to the Property (the “Transfer Date”) that GREATER might
have had under the Option Agreement against Borrower if Lender or such other
person had not succeeded to the interest of Borrower;


 


(d)                                 Neither Lender nor any
other person which acquires title to the Property pursuant to the exercise of
any remedy provided for in the Mortgage shall have any personal liability for
any claims, demand or causes of action for money


 


F-2





















 


damages accruing prior to the Transfer Date which GREATER, as builder,
may have against Borrower, as owner, under any provisions of, or with respect
to, the Option Agreement, or on account of any matter, condition or
circumstance arising out of the relationship of Borrower and GREATER under the
Option Agreement, or Borrower’s prior ownership of the Property (“Pre-Transfer Claims”), but Lender’s
rights under the Option Agreement, including the right to receive the payment
of the option payments due under the Option Agreement, together with the
purchase price to be paid under the Option Agreement for the purchase of the
Property pursuant thereto, shall be subject to any rights and claims GREATER
may have under the Option Agreement that arise from Pre-Transfer Claims and
option payments and deposits made by GREATER in accordance with the Option
Agreement. Borrower and GREATER, by their joinder herein, acknowledge that
there are no Pre-Transfer Claims and option payments other then as discussed on
the Builder Assignment and Bill of Sale from Borrower to GREATER.  Such rights or claims by GREATER shall be
exercised solely by (i) the reduction of the purchase price which GREATER
is obligated to pay under the Option Agreement for the purchase of all of the
Lots, but only after the Note (including only (A) the principal balance
outstanding as of the date hereof, as increased by future advances or pending
disbursements to fund construction of improvements to the Property or to pay
other permitted expenses or protective advances incurred by Lender under the
documents evidencing its loan relationship with Borrower (the “Loan Documents”), and (B) interest
at the applicable rate) has been paid in full, or (ii) the reduction of
the amount of the Outstanding Investment of Owner, which shall operate to
reduce the amount of the monthly Option Payments which GREATER is obligated to
pay under the Option Agreement.  In no
event, however, shall such reduction in the Outstanding Investment of Owner
reduce the amount of the monthly Option Payment payable under the Option
Agreement below the amount of the interest payable monthly under the Note at
the applicable rate set forth in such Note, while the Loan remains in effect.


 


(e)                                  None of the
representations and warranties of Borrower, as owner, in the Option Agreement
shall apply to Lender except to the extent that they relate to actions of
Lender following the Transfer Date.


 


3.                                       Lender hereby
agrees to the changes made to the Option Agreement pursuant to the Consent.


 


4.                                       (a) Pursuant
to the provisions of the Consent, Borrower has agreed that the Agent (as
defined in the Consent) shall have a period of ten days in addition to the time
provided to GREATER under the terms and conditions of the Option Agreement
within which to cure any default under the Option Agreement arising from the
failure of GREATER to pay any sum of money due to the Borrower under the Option
Agreement.  Provided that no other
default exists under the Loan Documents which remains uncured, and provided
that the Borrower pays to Lender all sums due under the Loan Documents by the
dates when such sums are due, Lender agrees that it shall not declare Borrower
to be in default under the Loan Documents due to the default of GREATER under
the Option Agreement arising from the failure of Builder to pay sums due to
Borrower when due under the Option Agreement.


 


F-3





















 


(b)                                 Pursuant to the
provisions of the Consent, Borrower has agreed that the Agent shall have a
period of time in addition to the time provided to GREATER under the terms and
conditions of the Option Agreement within which to cure any default (a Curable
Non-Monetary Default) under the Option Agreement other than a default arising
from the failure of GREATER to pay any sum of money due to the Borrower under
the Option Agreement and other than an Uncurable Default (as defined in the
Consent). Provided that no other default exists under the Loan Documents which
remains uncured, and provided that the Borrower pays to Lender all sums due
under the Loan Documents by the dates when such sums are due, Lender agrees
that it shall not declare Borrower to be in default under the Loan Documents
due to the occurrence of a Curable Default until and unless GREATER shall fail
to cure such Curable Default within the time period provided in the Option
Agreement, and the Agent shall fail to cure such Curable Default within the
time period provided to Agent under the Consent.


 


(c)                                  Pursuant to the
provisions of the Consent, Borrower has acknowledged that there are certain
types of default under the Option Documents that cannot be cured by Agent.  Pursuant to the provisions of the Consent,
Borrower has agreed that, provided any and all other defaults under the Option
Documents are cured by GREATER or Agent within the time periods provided in the
Option Documents and the Consent, the cure of such Uncurable Default shall not
be a condition to Agents rights under the Consent and the Option Agreement
shall not be terminated by Owner as a result thereof.  Provided that no other default exists under
the Loan Documents which remains uncured, and provided that the Borrower pays
to Lender all sums due under the Loan Documents by the dates when such sums are
due, Lender agrees that it shall not declare Borrower to be in default under
the Loan Documents due to the occurrence of an Uncurable Default.


 


5.                                       Borrower, as
optionor under the Option Agreement and mortgagor under the Mortgage, acknowledges
and agrees, for itself and its successors and assigns, that except as otherwise
provided hereinabove:


 


(a)                                  this Agreement does
not: (i) constitute a waiver by Lender of any of its rights under any of
the Loan Documents; or (ii) in any way release Borrower from its
obligations to comply with the terms, provisions, conditions, covenants and
agreements of the Mortgage, any other Loan Document or the Option Agreement;
and


 


(b)                                 the provisions of the
Loan Documents remain in full force and effect and must be complied with by
Borrower; and


 


6.                                       In the event
any litigation shall be commenced among the parties hereto concerning this
Agreement, or the rights and duties of either in relation thereto, the
prevailing party in such litigation, including appellate proceedings, shall be
entitled to a reasonable sum as and for its attorneys’ fees in such litigation,
which shall be determined by the court in such litigation or in a separate
action brought for that purpose.


 


This
Agreement and all acts and transactions pursuant hereto and the rights and
obligations of the parties hereto shall be governed, construed and interpreted
in


 


F-4





















 


accordance with the laws of the State of Florida, without giving effect
to principles of conflicts of law.  Each
of the parties to this Agreement consents to the exclusive jurisdiction and
venue of the state and federal courts of the State of Florida, County of
Miami-Dade.  THE PARTIES HEREBY WAIVE ANY
RIGHT TO TRIAL BY JURY IN ANY PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED IN THIS AGREEMENT, WHETHER
NOT EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE.  THE PARTIES AGREE THAT ANY OF
THEM MAY FILE A COPY OF THIS PARAGRAPH WITH ANY COURT AS WRITTEN EVIDENCE
OF THE KNOWING, VOLUNTARY AND BARGAINED-FOR AGREEMENT BETWEEN THE PARTIES
IRREVOCABLY TO WAIVE TRIAL BY JURY AND THAT ANY PROCEEDING WHATSOEVER BETWEEN
THEM RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED IN THIS
AGREEMENT SHALL INSTEAD BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A
JUDGE SITTING WITHOUT A JURY


 


This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their successors and assigns, and without limiting such, it is expressly
understood that all references herein to Lender shall be deemed to include also
any subsequent holder of the Mortgage and/or any other persons succeeding to
title to the Property, or any part thereof, whether by virtue of foreclosure,
or sale or transfer in lieu of foreclosure, or pursuant to the exercise of any
rights and remedies under the Mortgage, or otherwise.


 


	
  WITNESSES:

  	
  LENDER:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
  Print Name:

  	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Print Name:

  	
   

  	
   

  	
   

  
							



 


F-5





















 


	
  STATE OF

  	
   

  	
  )

  
	
   

  	
   

  	
  )

  	
  ss.:

  	
   

  
	
  COUNTY OF

  	
   

  	
  )

  
						



 


The foregoing
instrument was acknowledged before me this     day of
       , 2005 by
                                       ,
as
                                    
of
                       
       a
                        ,
on behalf of the corporation.  He/she is
personally known to me or has produced                           
as identification.


 


	
  NOTARY SEAL

  	
  Notary:

  	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  	
   

  
	
   

  	
  Notary Public, State of

  	
   

  	
   

  
	
   

  	
  My commission expires:

  	
   

  	
   

  
								



 


F-6





















 


 


 


	
   

  	
   

  	
  BORROWER:

  
	
  Print Name:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Print Name:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  STATE OF

  	
   

  	
   

  	
   

  	
  )

  
	
   

  	
  )

  	
  ss.:

  	
   

  	
   

  
	
  COUNTY OF

  	
   

  	
   

  	
   

  	
  )

  
												



 


The foregoing instrument was acknowledged
before me this            day
of                     ,
2005 by
                    ,
as          of
                                  ,
on behalf of the company.  He/she is
personally known to me or has produced                     
as identification.


 


 


	
  NOTARY SEAL

  	
  Notary:

  	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  	
   

  
	
   

  	
  Notary Public, State of

  	
   

  	
   

  
	
   

  	
  My commission expires:

  	
   

  	
   

  
								



 


F-7





















 


	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
  Print Name:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Print Name:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  



 


	
  STATE OF  FLORIDA

  	
  )

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  )

  	
  ss.:

  
	
   

  	
   

  	
   

  
	
  COUNTY OF

  	
  )

  	
   

  



 


The foregoing instrument was acknowledged
before me this      day of      ,
2005 by
               ,
as                  
of
                            ,
on behalf of the company.  He/she is
personally known to me or has produced
                      
as identification.


 


	
  NOTARY SEAL

  	
  Notary:

  	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  	
   

  
	
   

  	
  Notary Public, State of Florida

  	
   

  
	
   

  	
  My commission expires:

  	
   

  	
   

  
							



 





















 


Exhibit C


 


Escrow
Agreement


 





















 


ESCROW
AGREEMENT


 


BY AND
AMONG


 


MERITAGE
HOMES OF FLORIDA, INC.,


 


THE
STOCKHOLDERS OF GREATER HOMES, INC.


 


AND


 


[FIRST
AMERICAN TITLE INSURANCE COMPANY]


 


Dated September [1], 2005


 





















 


ESCROW
AGREEMENT


 


This ESCROW AGREEMENT (this “Escrow Agreement”) dated as of September [1], 2005 (the
“Effective Date”) by and among Meritage
Homes of Florida, Inc., an Arizona corporation (“Buyer”),
the stockholders of Greater Homes, Inc., a Florida corporation (the “Company”) listed on the signature page hereto (each a “Stockholder” and collectively, the “Stockholders”)
and [First American Title Insurance Company], as escrow agent only (along with
any and all successor escrow agents, the “Escrow Agent”).  Capitalized terms not otherwise defined shall
have the meanings given to them in the Purchase Agreement (as such term is
defined below).


 


RECITALS


 


A.                                   Pursuant to the
Stock Purchase Agreement, dated August [22], 2005 (the “Purchase Agreement”), by and among Buyer and the
Stockholders, Buyer has purchased and the Stockholders have sold to Buyer their
common stock interests in the Company.


 


B.                                     Buyer has
delivered to the Stockholders the purchase price (as described in the Purchase
Agreement) pursuant to the terms of Section 1.4A of the Purchase Agreement,
other than the sum of $[ * ] (the “Escrow Amount”).


 


C.                                     Under the terms of
the Purchase Agreement the Stockholders have agreed to protect Buyer against
certain matters including, but not limited to, Specifically Excluded
Liabilities and breaches of representations, warranties, covenants and
agreements made by them thereunder.


 


D.                                    Buyer has agreed to
deliver the Escrow Amount to the Escrow Agent to be held, subject to the terms
and conditions hereinafter set forth, to satisfy claims against the Stockholders.


 


E.                                      The parties have
agreed that, to the extent that the Escrow Amount is not required to satisfy
such claims, any balance of the Escrow Amount will be paid to the Stockholders
as part of the Purchase Price subject to and in accordance with the terms and
conditions hereinafter set forth.


 


F.                                      The Escrow Agent
has agreed to act as Escrow Agent hereunder in accordance with the terms and
conditions hereinafter set forth.


 


AGREEMENT


 


NOW, THEREFORE, in
consideration of the mutual promises of the parties and other good and valuable
consideration, the parties agree as follows:


 


1.                                       Appointment
of Escrow Agent.  The parties hereby
appoint and designate the Escrow Agent as escrow agent to receive, hold and
disburse the Escrow Fund (as such term is defined in Section 2), and the
Escrow Agent hereby accepts such appointment and designation.


 










*                 Confidential
information on this page has been omitted and filed separately with the
Securities Exchange Commission pursuant to a Confidential Treatment Request.


 


C-1





















 


2.                                       Establishment
of Escrow Fund.  Upon execution of
this Escrow Agreement, Buyer will deposit with the Escrow Agent and, upon
receipt, the Escrow Agent will acknowledge receipt of the Escrow Amount (such
amount, together with investment income earned thereon pursuant to the terms
hereof, collectively, the “Escrow Fund”).  The Escrow Fund will be segregated from other
assets of the Escrow Agent.  The Escrow
Agent agrees to hold and administer the Escrow Fund subject to the terms of
this Escrow Agreement.


 


3.                                       Investment of
Escrow Fund.  The Escrow Agent will
invest the Escrow Fund, as directed in writing by the Stockholders received by
the Escrow Agent from time to time, only in one or more of the following: (i) direct,
short-term obligations of the United States Government or its
instrumentalities, (ii) mutual funds which invest all or substantially all
of their assets in direct, short-term obligations of the United States
Government, (iii) variable rate certificates of deposit, (iv) short-term
investments in money market accounts of one or more United States banks having
total assets in excess of $100,000,000, in each case having maturities of not
more than 90 days or (v) municipal or corporate bonds having a credit
rating of A (Moodys’ or Standard & Poor’s) or better.  The maximum maturity of any single issue will
not exceed 90 days.  The total amount of
income that is credited to the Escrow Fund from the date of the establishment
of the Escrow Fund will be referred to as the “Accumulated
Income.”  The Escrow Agent
will have no liability for any investment losses on investments permitted under
this Section 3, including any losses on any investment required to be
liquidated prior to maturity in order to make a payment required
hereunder.  Investments pursuant to such
investment instructions described above will in all instances be subject to
availability (including any time-of-day requirements).  In no instance will the Escrow Agent have any
obligation to provide investment advice of any kind.  All Accumulated Income will be credited to,
and will become a part of the Escrow Fund (and any losses on such investments
will be debited to the Escrow Fund).


 


4.                                       Payments from
Escrow Fund; Actions on Escrow Assets.


 


A.                                   At any time or times
subsequent to the Closing Date (as defined in the Purchase Agreement) and prior
to the Termination Date (as defined in Section 5 hereof), Buyer may make
claims against the Escrow Fund for reimbursement for claims pursuant to the
Purchase Agreement.  Such claims will be
made by Buyer by giving written notice, as provided for in Section 13, to
Stockholders’ Representative (as defined in the Purchase Agreement) and Escrow
Agent of each such claim, specifying in reasonable detail the amount and basis
thereof, which may be updated by written notice at a later time (a “Notice of Claim”).


 


B.                                     To object to any
claim made in a Notice of Claim, in whole or in part, (a “Disputed
Claim”), the Stockholders’ Representative must give written notice
of such objection (“Dispute Notice”)
to the Escrow Agent and Buyer at any time within 20 days after Buyer’s delivery
of the Notice of Claim.  All such notices
will be delivered to the Escrow Agent, as provided in Section 13
hereof.  If the Stockholders’ Representative
does not provide a Dispute Notice within such 20 day period, the claim
made in the Notice of Claim will be deemed to have been approved as a valid
claim in the full amount thereof (an “Accepted Claim”).


 


C.                                     If, pursuant to Section 4B,
the Stockholders’ Representative provides a Dispute Notice, in whole or in
part, Escrow Agent will retain a portion of the Escrow Fund


 


C-2





















 


sufficient to pay said Disputed Claim in full, and (i) will not
make any distribution on that Disputed Claim or part thereof (except for the
amount of any Accepted Claim as provided in Section 4B) until the Escrow
Agent receives joint written instruction from Buyer and the Stockholders’
Representative, or a notice of dispute resolution rendered pursuant to the
Dispute Resolution Procedures attached to the Purchase Agreement as Exhibit A (the “Dispute Resolution
Procedures”), indicating the amount and recipient of such
distribution, at which point such Disputed Claim will be deemed an Accepted
Claim for purposes of this Escrow Agreement.


 


D.                                    All Accepted Claims
will be paid to Buyer promptly from the Escrow Fund provided, however, that the
Escrow Agent will not be obligated to release or distribute amounts sooner than
two business days after the Escrow Agent has received the requisite notice or
paperwork in good form.  However, in no
event will the total amount of payments to Buyer on all claims exceed the sum
of (i) the amount originally deposited in the Escrow Fund, and (ii) the
Accumulated Income at the date of such release or distribution.


 


5.                                       Release and
Termination of Escrow Fund.


 


A.                                   This Escrow
Agreement will terminate on the [ * ] anniversary of the Closing Date (the “Termination Date”); provided, however, that if there are one
or more outstanding Notices of Claim on the Termination Date, then this Escrow
Agreement will continue in effect until any and all such claims are resolved.


 


B.                                     On the Termination
Date, the remaining balance of the Escrow Fund, less an amount adequate to cover
the sum of amounts specified in any and all outstanding Notices of Claim (the “Holdback”) will be delivered by the Escrow Agent to the
Stockholders as directed by the Stockholders’ Representative in writing.


 


C.                                     Notwithstanding
anything herein to the contrary, the Escrow Agent will promptly dispose of all
or any part of the Escrow Fund as directed by a writing signed jointly by the
Stockholders’ Representative and Buyer. 
The Escrow Agent will be entitled to rely on the instructions received
from the Stockholders’ Representative and Buyer, jointly, and will have no
liability to the Stockholders or Buyer for any and all payments made in
accordance with such instructions.


 


D.                                    Each Stockholder
acknowledges and agrees that the Stockholders’ Representative is solely
authorized to act on their behalf and that no individual Stockholder shall have
any right to provide a Dispute Notice under this Escrow Agreement.  With respect to the terms and operation of
this Escrow Agreement, each Stockholder further acknowledges and agrees that it
will look only to the Stockholders’ Representative in the event of any dispute
or disagreement with respect thereto and, in this regard, each Stockholder
agrees to indemnify and hold harmless Buyer and Escrow Agent against any claims
or losses it may suffer as a result of any such dispute or disagreement.  Until an alternative Stockholders’
Representative is appointed, the person that will act as Stockholders’
Representative is Robert A. Mandell.


 










*                 Confidential
information on this page has been omitted and filed separately with the
Securities Exchange Commission pursuant to a Confidential Treatment Request.


 


C-3





















 


6.                                       Duties and
Responsibilities of Escrow Agent.


 


A.                                   The Stockholders and
Buyer acknowledge and agree that the Escrow Agent:


 


(1)                                  will
not be responsible for any of the agreements (other than those agreements made
by Escrow Agent) referred to herein and will only be responsible for those
obligations specifically imposed on the Escrow Agent by this Escrow Agreement,
each of which are ministerial (and will not be construed to be fiduciary) in
nature, and no implied duties or obligations will be read into this Escrow
Agreement against or on the part of the Escrow Agent;


 


(2)                                  will
not be obligated to take any legal or other action hereunder which might in the
Escrow Agent’s judgment involve any expense or liability unless it will have
been furnished with indemnification acceptable to it in its sole discretion;


 


(3)                                  may
rely on and will be protected in acting or refraining from acting upon any
written notice, instruction (including, without limitation, wire transfer
instructions, whether incorporated herein or provided in a separate written
instruction), instrument, statement, request or document furnished to the
Escrow Agent hereunder and believed by it to be genuine and to have been signed
or presented by the proper person, and will have no responsibility for
determining the accuracy thereof; and


 


(4)                                  may
consult counsel satisfactory to the Escrow Agent, including in-house counsel,
if the Escrow Agent reasonably determines that such consultation is necessary,
and the Escrow Agent will receive full protection for any action taken,
suffered or omitted by the Escrow Agent in good faith and in accordance with
the reasonable reliance of such counsel.


 


B.                                     Neither the Escrow
Agent nor any of its directors, officers or employees will be liable to anyone
for any action taken, refrained from, or omitted by it or any of its directors,
officers or employees pursuant to this Escrow Agreement except in the case of
gross negligence, bad faith or willful misconduct.  The Stockholders and Buyer, jointly and
severally, covenant and agree to indemnify and hold harmless without limitation
the Escrow Agent and its directors, officers and employees, from and against
any claim, loss, liability or expense of any nature incurred by the Escrow
Agent arising out of or in connection with this Escrow Agreement or with the
administration of the Escrow Agent’s duties hereunder unless such loss,
liability or expense is caused by the Escrow Agent’s gross negligence, bad
faith or willful misconduct.  In no event
will the Escrow Agent be liable for indirect, punitive, special or
consequential damages.


 


C.                                     The Escrow Agent
will have no responsibility or liability on account of any action or omission
of any book-entry depository or subescrow agent employed by the Escrow Agent,
except to the extent that such action or omission of any book-entry depository
or subescrow agent was caused by the Escrow Agent’s own gross negligence, bad
faith or willful misconduct.


 


D.                                    The Stockholders
and Buyer each agree, jointly and severally, to pay or reimburse the Escrow
Agent for legal fees incurred in connection with the preparation of this


 


C-4





















 


Escrow Agreement and to pay the Escrow Agent’s reasonable compensation
for its normal services hereunder in accordance with the fee schedule attached
hereto as Schedule A.  The Escrow Agent will be entitled to
reimbursement by the Stockholders and Buyer (and the Stockholders and Buyer
hereby agree, jointly and severally to pay) on demand for all reasonable costs
and expenses incurred by it in connection with the administration of this
Escrow Agreement or the Escrow Fund created hereby which are in excess of its
compensation for normal services.


 


E.                                      The provisions of
this Section 6 will survive both the termination of this Escrow Agreement
and the resignation or removal of the Escrow Agent.


 


7.                                       Resignation
of Escrow Agent.  The Escrow Agent
may resign at any time upon giving 60 days written notice to the other parties
hereto.  The Stockholders and Buyer agree
that they will work together to appoint a successor escrow agent within 30 days
after receipt of such notice, and the Escrow Agent hereby agrees that, upon
receiving written instructions from the Stockholders and Buyer, it will turn
over and deliver to such successor Escrow Agent the Escrow Fund and other
amounts held by it pursuant to this Escrow Agreement in accordance with the
terms of such written instructions (as well as all applicable records and a
list of disbursements) and render an accounting as required by Section 10
hereof.


 


8.                                       Removal of
Escrow Agent.  The parties together
will have the right to remove the Escrow Agent hereunder by giving notice in
writing to the Escrow Agent, specifying the date upon which such removal will
take effect.  In the event of such
removal, the parties agree that they will appoint a successor Escrow Agent
within 30 days after the giving of such notice, and the Escrow Agent hereby
agrees that, upon receiving written instructions from the parties it will turn
over and deliver to such successor Escrow Agent the Escrow Fund and other
amounts held by it pursuant to this Escrow Agreement in accordance with the
terms of such written instructions (as well as all applicable records and a
list of disbursements) and render an accounting as required by Section 10
hereof.


 


9.                                       Successor
Escrow Agent.  Upon receipt of the
Escrow Fund pursuant to this Escrow Agreement, the successor Escrow Agent will
thereupon be bound by all of the provisions hereof and the term “Escrow Agent”
as used herein will mean such successor Escrow Agent.


 


10.                                 Accounting.  In the event of the resignation or removal of
the Escrow Agent, upon the termination of the Escrow Fund or this Escrow
Agreement, or upon written request by either the Stockholders’ Representative
or Buyer under reasonable circumstances, the Escrow Agent will render to the
requesting party, and to the successor Escrow Agent, if any, a written
accounting of its management of the Escrow Fund and all distributions thereof.


 


11.                                 Assignability.  This Agreement will be binding upon and inure
to the benefit of the parties hereto and their respective representatives,
successors and assigns.  Neither this
Agreement nor any rights, duties or obligations hereunder will be assigned by
any party hereto without the prior written consent of Buyer and the
Stockholders’ Representative, except that Buyer may assign its rights and
obligations under this Agreement to the same extent it is permitted to assign
its rights and obligations under the Purchase Agreement.


 


C-5





















 


12.                                 Law Governing.  This Escrow Agreement will be governed by and
construed in accordance with the laws of the State of Florida (other than
choice of law provisions thereof).


 


13.                                 Notices; Wiring
Instructions.


 


A.                                   Any notice or other
communication in connection with this Escrow Agreement will be deemed to be
delivered if in writing (or in the form of a telegram or facsimile
transmission, receipt telephonically communicated) addressed as provided below
and if either: (i) actually delivered electronically or physically at said
address (provided that if said address is a business, delivery is made during
normal business hours), or (ii) in the case of a letter, three (3) business
days will have elapsed after the same will have been deposited in the United
States mail, postage prepaid and registered or certified, return receipt
requested, or (iii) 48 hours will have elapsed after the same will have
been sent by nationally recognized overnight receipted courier:


 


	
  If to the Escrow Agent:

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Attn:

  	
   

  	
   

  
	
   

  	
   

  
	
  If to Buyer:

  
	
   

  	
   

  
	
   

  	
  8501 East Princess Drive, Suite 290

  
	
   

  	
  Scottsdale, Arizona 85255

  
	
   

  	
  Telephone: (480) 609-3336

  
	
   

  	
  Facsimile: (480) 998-9178

  
	
   

  	
  Attn: Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
  and

  
	
   

  	
   

  
	
   

  	
  2745 North Dallas Parkway, Suite 600

  
	
   

  	
  Plano, Texas 75093

  
	
   

  	
  Telephone: (972) 543-8100

  
	
   

  	
  Facsimile: (972) 543-8201

  
	
   

  	
  Attn: John R. Landon

  
				



 


C-6





















 


	
  with a copy to:

  
	
   

  	
   

  
	
   

  	
  Snell & Wilmer L.L.P.

  
	
   

  	
  One Arizona Center

  
	
   

  	
  Phoenix, Arizona 85004

  
	
   

  	
  Telephone: (602) 382-6000

  
	
   

  	
  Facsimile: (602) 382-6070

  
	
   

  	
  Attn: Steven D. Pidgeon, Esq.

  
	
   

  	
   

  
	
  If to Stockholders or the Stockholders’
  Representative:

  
	
   

  	
   

  
	
   

  	
  1105 Kensington Park Drive

  
	
   

  	
  Altamonte Springs, Florida 32714

  
	
   

  	
  Telephone: (407) 869-0300

  
	
   

  	
  Facsimile: (407) 862-0057

  
	
   

  	
  Attn: Robert Mandell

  
	
   

  	
   

  
	
  with a copy to:

  
	
   

  	
   

  
	
   

  	
  Lowndes, Drosdick, Doster, Kantor &
  Reed, P.A.

  
	
   

  	
  215 North Eola Drive

  
	
   

  	
  P.O. Box 2809

  
	
   

  	
  Orlando, Florida 32801

  
	
   

  	
  Phone: (407) 418-6401

  
	
   

  	
  Fax: (407) 843-4495

  
	
   

  	
  Attn: John F. Lowndes, Esq.

  



 


or to such other address, which any party may by certified or
registered mail notify the other.


 


B.                                     Any funds to be
paid to or by the Escrow Agent hereunder will be sent pursuant to such method
of payment and pursuant to such instruction as may be given in writing to the
Escrow Agent, as the case may be, in accordance with Section 13A above.


 


14.                                 Counterparts.  This Agreement may be executed in multiple
counterparts, each of which will be an original, but all of which together will
constitute one and the same agreement.


 


15.                                 Dispute Resolution.  It is understood and agreed that should any
dispute arise with respect to the delivery, ownership, right of possession,
and/or disposition of the Escrow Fund, or should any claim be made upon the
Escrow Agent or the Escrow Fund by a third party, the Escrow Agent upon receipt
of notice of such dispute or claim is authorized and will be entitled (at its
sole option and election) to retain in its possession, without liability to
anyone, all or any of said Escrow Fund until such dispute will have been
settled in accordance with the Dispute Resolution Procedures either by the
mutual written agreement of the parties involved or by a final order, decree or
judgment of a court in the United States of America, the time for perfection of
an appeal of such order, decree or judgment having expired.  The Escrow Agent may, but will be under no
duty whatsoever to, institute or defend any legal proceedings, which relate to
the Escrow Fund.


 


C-7





















 


16.                                 Modifications.  This Agreement may not be altered or modified
without the express written consent of the parties hereto.  No course of conduct will constitute a waiver
of any of the terms and conditions of this Escrow Agreement, unless such waiver
is specified in writing, and then only to the extent so specified.  A waiver of any of the terms and conditions
of this Escrow Agreement on one occasion will not constitute a waiver of the
other terms of this Escrow Agreement, or of such terms and conditions on any
other occasion.


 


17.                                 Severability and
Further Assurances.  The invalidity
or unenforceability of any provision of this Escrow Agreement will not affect
the validity or enforceability of any other provision hereof.  Each of the parties will, at the reasonable
request of another party, deliver to the requesting party all further documents
or other assurances as may reasonably be necessary or desirable in connection
with this Escrow Agreement.


 


18.                                 Tax Matters.


 


A.                                   The Escrow Fund will
be treated for income tax purposes as owned by the Stockholders pro rata in
proportion to the number of Shares of Company Stock owned by each of them as of
the Closing.


 


B.                                     The Stockholders
will report all income (if any) that is earned on, or derived from, the Escrow
Fund in the taxable year or years in which such income is properly includible
and pay all taxes attributable thereto.


 


C.                                     On or before the
Effective Date, the Stockholders will furnish the Escrow Agent with executed
copies of IRS Forms W-8 or W-9 as applicable, to evidence that Stockholders are
not subject to back-up withholding under the Internal Revenue Code.


 


D.                                    The Escrow Fund
will be assigned the federal income tax identification numbers of the
Stockholders as reflected in the IRS Forms referenced in the preceding
paragraph.


 


E.                                      The Escrow Agent
will report to the Internal Revenue Service, as of each calendar year-end, all
income (if any) earned by the Escrow Fund irrespective of whether such income
or a portion thereof has been distributed to the Stockholders.  Such reporting will be consistent with the preceding
paragraphs of this Section 18.


 


F.                                      Provided that the
Escrow Fund has not been absorbed by Accepted Claims or reserved for Disputed
Claims, the Escrow Agent will, not later than 15 business days following the
date of the reporting to the Internal Revenue Service described in the preceding
paragraph of this Section 18, pay to the Stockholders as directed by the
Stockholders’ Representative a sum equal to the aggregate amount of income
reported to the IRS pursuant to the preceding paragraph of this Section 18
multiplied by the highest marginal federal income tax rate for individuals for
the applicable tax year.


 


C-8





















 


IN WITNESS WHEREOF,
the parties have executed this Escrow Agreement or caused the same to be
executed by their duly authorized representatives, as of the date first stated
hereinabove.


 


	
   

  	
  [FIRST
  AMERICAN TITLE INSURANCE

  COMPANY]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MERITAGE HOMES OF FLORIDA, INC.,

  
	
   

  	
  an Arizona corporation

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 
  John R. Landon

  
	
   

  	
  Its: 
  Co-Chairman and Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
  STOCKHOLDERS

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Robert A. Mandell

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Charles W. Gregg

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Hampton P. Conley

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Stephen Gallagher

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Simon Snyder

  
						



 


[Signature
Page to Escrow Agreement]


 


C-9





















 


Schedule A


 


Escrow Agent Fees


 


[to come]