Document:

Mortgage Agreement with Resorts Funding Group, LLC

    Exhibit
      10.95

     

    

      This
        instrument was prepared by and return to: 

      Jason
        G. Williams, Esq. 

      2460
        Sand Lake Road

      Orlando,
        Florida 32809

       

      MORTGAGE
        AND SECURITY AGREEMENT

      

      

      This
        instrument (hereinafter referred to as this “Mortgage”)
        is
        made this 23rd day of April, 2007, by and between COSTA
        BLANCA II REAL ESTATE, LLC,
        a
        Florida limited liability company, COSTA
        BLANCA III REAL ESTATE, LLC,
        a
        Florida limited liability company, TDS
        TOWN HOMES (PHASE 1), LLC,
        a
        Florida limited liability company, TDS
        TOWN HOMES (PHASE 2), LLC,
        a
        Florida limited liability company (hereinafter collectively referred to as
        “Mortgagor”)
        with
        an address of 2460 Sand Lake Road, Orlando, Florida 32809, and RESORTS
        FUNDING GROUP, LLC,
        a
        Florida limited liability company or its successors or assigns (hereinafter
        referred to as “Lender”)
        with
        an address of 2460 Sand Lake Road, Orlando, Florida 32809.

       

      WITNESSETH:

       

      WHEREAS,
        Mortgagor’s affiliate, American Leisure Holdings, Inc., a Nevada corporation
        (“Borrower”)
        has
        executed to the order of Lender a Promissory Note of even date herewith in
        the
        principal amount of $10,000,000.00 (the “Note”),
        which
        Note was executed pursuant to a Credit Agreement of even date herewith between
        Borrower and Lender (“Credit
        Agreement”).

       

      NOW,
        THEREFORE, to secure the payment of all sums due under, and the performance
        and
        observance by Mortgagor and Borrower, as applicable, of all terms, covenants
        and
        conditions contained in, the Note and the Credit Agreement, this Mortgage,
        and
        all additional Notes and other documents secured by this Mortgage pursuant
        to
        the terms of Section 1.18 hereof (all such documents are collectively referred
        to as “Loan
        Documents”),
        and
        in order to charge the properties, interests and rights hereinafter described
        with such payment, performance and observance, and in consideration of the
        credit extended to Mortgagor, the receipt and sufficiency of which are hereby
        acknowledged, Mortgagor has granted, bargained, sold and conveyed and does
        by
        these presents grant, bargain, sell, convey, assign, mortgage, deliver, set
        over, warrant and confirm unto the said Lender and its successors and assigns,
        the Land, Improvements, Fixtures and Personal Property, and Other Rights
        and
        Property (all of which are hereinafter sometimes referred to collectively
        as the
“Premises”),
        more
        particularly described as follows and located and situate in Polk County,
        Florida:

       

      (i) the
        real
        property described in said Exhibit A
        (the
“Land”);
        and

       

      
        
          
          

        

        
           

          
            

          

        

        
          
          

        

      

      (ii) all
        buildings, structures and other improvements of every nature whatsoever now
        or
        hereafter situated on the Land (the “Improvements”);
        and

       

      (iii) all
        fixtures, equipment, general intangibles, goods, inventory and personal property
        of every kind and nature whatsoever (whether tangible or intangible), now
        or
        hereafter owned by Mortgagor and located in, on, about or attached to the
        Land
        or Improvements or used or intended to be used with or in connection with
        the
        construction, use, operation, maintenance or enjoyment of the Land or
        Improvements or derived or arising from or relating or appertaining to the
        Land
        or Improvements or the use, operation, maintenance or enjoyment thereof,
        and all
        extensions, additions, improvements, betterments, renewals, replacements
        or
        proceeds (including, but not limited to, insurance and condemnation proceeds)
        of
        the foregoing, including, but not limited to, all gas and electric fixtures
        and
        apparatus, plumbing fixtures and apparatus, heating, ventilating and air
        conditioning fixtures and apparatus, carpeting and other floor coverings,
        furniture, furnishings, machinery, building materials and supplies, sprinklers,
        fire extinguishers and other safety and security equipment and apparatus,
        elevators, engines, motors, ranges and other cooking apparatus, washers,
        dryers,
        water heaters, refrigerators, appliances, window screens, awnings, storm
        sashes,
        mirrors, mantels, furniture, furnishings, vehicles, pool equipment, books,
        records, accounts, trade names, trademarks, goodwill, all building and other
        permits, surveys, architectural and engineering plans and specifications,
        certifications, studies and work product prepared and hereafter prepared
        relating to the design or construction of the Improvements or proposed
        improvements, governmental approvals, certificates of occupancy and completion,
        licenses, authorizations, insurance policies and the proceeds thereof,
        agreements with any utility companies, all deposits associated with the
        foregoing, any consents and approvals which Mortgagor may now or hereafter
        own
        with respect to or in connection with the Premises; all warranties and
        guaranties covering any appliances, equipment and fixtures now or hereafter
        located on or placed upon the Premises, including, without limitation, air
        conditioning, heating and other appliances and equipment; all existing and
        future contracts, leases, rental agreements, franchise agreements, management
        contracts, construction contracts, and other contracts, licenses, and permits
        now or hereafter affecting the Premises or any part thereof; all existing
        and
        future contracts in connection with the use, management, sale, leasing and
        maintenance of the Premises or any portion thereof; all accounts, accounts
        receivable, other receivables, contract rights, chattel paper, instruments
        and
        documents; any other obligations or indebtedness owed to Mortgagor in connection
        with the Premises from whatever source arising; all rights of Mortgagor to
        receive any performance or any payments in money or kind; all guaranties
        of the
        foregoing and security thereof; all right, title and interest of Mortgagor
        in
        and with respect to goods, services or property that give rise to or that
        secure
        any of the foregoing; and all right, title and interest of Mortgagor in any
        such
        property subject to or covered by a security agreement, conditional sales
        contract, chattel mortgage or similar lien or claim together with the benefit
        of
        any deposits or payments now or hereafter made by Mortgagor or on its behalf,
        all of which shall be deemed to be a portion of the security for the
        indebtedness herein mentioned and to be covered by this Mortgage (the
“Fixtures
        and Personal Property”);
        and

       

      (iv) any
        and
        all other, further or additional title, estates, interests or rights which
        may
        at any time be acquired by Mortgagor in or to the Land, Improvements, and
        Fixtures and Personal Property; all leases, rental agreements and other
        occupancy agreements pertaining to the Land or the Improvements or any part
        thereof; all easements, rights-of-way, gores of land, vaults, streets, ways
        alleys, passages, sewer rights, waters, water courses, water rights and powers;
        all estates, rights, titles, interests, privileges, liberties, tenements,
        hereditament and appurtenances whatsoever, in any way belonging, relating
        to or
        appertaining to the Premises, or any part thereof, or which hereafter shall
        in
        any way belong, relate or be appurtenant thereto, whether now owned or hereafter
        acquired by Mortgagor; and the reversion and reversions, remainder and
        remainders, and rents, issues, profits, revenues thereof (including but not
        limited to, all condemnation payments, insurance proceeds, payments under
        leases
        and tenancies, sale proceeds, purchase deposits, tenant security deposits
        and
        escrow funds), and all the estate, right, title, interest, property, possession,
        claim and demand whatsoever at law, as well as in equity, of Mortgagor of,
        in
        and to the same (the “Other
        Rights and Property”).

       

      
        
          
          

        

        
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      TO
        HAVE
        AND TO HOLD the Premises and all estate therein, together with all the rights,
        privileges, and appurtenances thereunto belonging, and all proceeds, products,
        replacements, additions, betterments, extensions, improvements, substitutions,
        renewals and accessions to any of the foregoing, unto the said Lender and
        its
        successors and assigns forever.

       

      PROVIDED,
        HOWEVER, that (a) if Mortgagor, Borrower, or any other party shall have promptly
        paid or caused to be paid to Lender the Obligations (as that term is defined
        in
        the Credit Agreement), all without any deduction or credit for taxes or other
        similar charges paid by Mortgagor, (b) if Mortgagor and Borrower shall have
        fully kept, performed and observed all the covenants and promises in the
        Note,
        in this Mortgage, in all other Loan Documents, and in all instruments relating
        to or securing any note or notes executed pursuant to Section 1.18 hereof
        and
        secured by the lien of this Mortgage to be kept, performed or observed by
        Mortgagor, then Lender shall execute a satisfaction of this Mortgage and
        thereupon this Mortgage shall cease and terminate.

       

      Mortgagor
        does hereby expressly covenant, agree and stipulate with Lender as
        follows:

       

      ARTICLE
        I

      

      Section
        1.1. Payment
        of Note and Other Sums.
        Borrower shall pay the principal sum evidenced by said Note and Loan Documents
        and all interest thereon promptly as each payment becomes due, and all other
        sums required to be paid pursuant to the provisions of the Note and the Loan
        Documents, at the times and in accordance with the provisions of said Note
        and
        the other Loan Documents.

       

      Section
        1.2. Warranty
        of Title.
        Mortgagor hereby represents, warrants and covenants to and with Lender that
        Mortgagor is lawfully seized and possessed of an indefeasible and marketable
        estate in fee simple in the Premises; that Mortgagor has good right, full
        power
        and lawful authority in law and in equity to convey, mortgage and encumber
        the
        same in fee simple pursuant to this Mortgage; that the Premises are free
        and
        clear of all liens, encumbrances and claims of any kind whatsoever except
        for
        those listed on Exhibit B attached hereto and incorporated herein (“Permitted
        Exceptions”);
        that
        Mortgagor will make at Mortgagor’s expense and at no expense to Lender such
        other and further assurances to perfect the fee simple estate in and to the
        Land
        and title to the Premises, in Lender as may hereafter be required; and that
        Mortgagor hereby fully warrants unto Lender the title to said Premises subject
        only to the matters appearing in the title policy delivered by Mortgagor
        to
        Lender in connection with this Mortgage
        and will defend the same against the lawful claims and demands of all persons
        whomsoever.

       

      
        
          
          

        

        
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      Section
        1.3. Monthly
        Deposits.
        Upon
        the demand of Lender which may be made at any time after the occurrence of
        an
        Event of Default (as hereinafter defined), Mortgagor will deposit with Lender,
        on the due date of each monthly payment under the Note, such amounts as in
        the
        estimation of Lender shall be necessary or proper to pay all taxes, assessments,
        insurance premiums and other similar charges relating to the Premises as
        they
        become due. All of said deposits are to be held by Lender, free of any liens
        or
        claims on the part of creditors of Mortgagor and as part of the security
        of
        Lender, and shall be used by Lender to pay current taxes, assessments, insurance
        premiums, and other sums payable in connection with the Premises and other
        similar charges on the Premises as the same accrue and are payable. Payment
        of
        such items from said sums may be made by Lender even though such payments
        will
        benefit subsequent owners of the Premises or the Land. Said deposits shall
        not
        be, nor be deemed to be, trust funds but may be commingled with the general
        funds of Lender. If said deposits are insufficient to pay such taxes,
        assessments, insurance premiums and similar charges in connection with the
        Premises in full as the same become payable, Mortgagor will deposit with
        Lender
        such additional sum or sums as may be required in order for Lender to pay
        such
        taxes, assessments, insurance premiums and other charges payable in connection
        with the Premises in full. Upon any default or event of default under the
        provisions of this Mortgage, the Note, the Credit Agreement, or any of the
        other
        Loan Documents, Lender may, at its option, apply any money in the fund resulting
        from said deposits to the payment of the indebtedness secured hereby in such
        manner as it may elect.

       

      Section
        1.4. Payment
        of Taxes, Liens and Utility Charges.

       

      (a) Mortgagor
        shall pay or cause to be paid on or before delinquency thereof all taxes,
        assessments, dues, fines, fees, impositions and public charges of every
        character whatsoever, whether general or special, now or hereafter levied,
        assessed, confirmed or imposed on or in respect of, or which may be a lien
        upon,
        the Premises or the Land or any part thereof, or any right, interest or estate
        therein, and shall promptly submit to Lender such evidence of the due and
        punctual payment thereof as Lender may require.

       

      (b) Mortgagor
        will keep said Premises free from all lien claims of every kind, whether
        paramount or subordinate to this Mortgage (other than the Permitted Exceptions),
        and Mortgagor will have any such liens discharged within thirty (30) days
        of
        filing of any such lien.

       

      (c) Mortgagor
        further agrees to pay all earnings, income, profits and excess profits taxes
        and
        other governmental charges levied, assessed or imposed by the United States
        of
        America or by any state, county, municipality or other taxing authority upon
        Mortgagor or in respect of the Premises.

       

      (d) Mortgagor
        will promptly pay or cause to be paid all charges made by utility companies,
        whether public or private, for services furnished or used in connection with
        said Premises.

       

      
        
          
          

        

        
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      (e) In
        the
        event of the passage of any state, federal, municipal or other governmental
        law,
        order, rule or regulation, in any manner changing or modifying the laws now
        in
        force governing the taxation of debts secured by mortgages or the manner
        of
        collecting taxes so as to affect adversely Lender, Mortgagor will promptly
        pay
        any such tax on or before the due date thereof.; and if Mortgagor fails to
        make
        such prompt payment or if any such state, federal, municipal or other
        governmental law, order, rule or regulation prohibits Mortgagor from making
        such
        payment or would penalize Lender if Mortgagor makes such payment, then the
        entire balance of the principal sum secured by this Mortgage and all interest
        accrued thereon shall, without notice, immediately become due and payable
        at the
        option of Lender. Nothing contained herein, however, shall require Mortgagor
        to
        pay taxes on the overall income of Lender.

       

      Section
        1.5. Insurance.

       

      (a) Mortgagor
        shall procure or cause to be procured, and deliver to and continuously maintain
        for the benefit of Mortgagor and Lender, as their respective interests may
        appear, original paid up insurance policies from such insurance companies,
        in
        such amounts, in form and substance, with such expiration dates and containing
        a
        non-contributory standard mortgagee clauses, and a mortgagee loss payable
        endorsement in favor of Lender, all as may be required and satisfactory to
        Lender, and providing the following types of insurance covering the Premises,
        Mortgagor, and the interests and liabilities incident to the ownership,
        possession and operation thereof:

       

      (i) insurance
        against loss or damage by fire, lightning, extended coverage, windstorm,
        hail,
        explosion riot, riot attending a strike, civil commotion, aircraft, vehicles,
        smoke, vandalism and malicious mischief, and against such mischief and against
        such other hazards as, under good insurance practices, from time to time
        are
        insured against for properties of similar character and location, the amount
        of
        which insurance shall be not less than the greater of (A) the balance of
        the
        indebtedness secured hereby or (B) 100% of the full replacement cost of the
        Premises, without deduction for depreciation, and which policies of insurance
        shall contain satisfactory replacement cost and agreed amount/stipulated
        value
        endorsements; and

       

      (ii) accident
        and broad form comprehensive liability insurance for Mortgagor in such amount
        as
        may be required by Lender;

       

      (iii) if
        at any
        time the Land or any portion thereof is located in a “Flood
        Hazard Area”
        pursuant to the Flood Disaster Act Protection Act of 1973 or any successor
        or
        supplemental act thereto, flood insurance in such amount as may be required
        by
        Lender; and

       

      (iv) such
        other insurance (including, but not limited to, rental value and business
        interruption insurance, war risk insurance, builder’s risk insurance, and
        worker’s compensation insurance) on Mortgagor, the Premises or any part thereof,
        or for the benefit of Mortgagor, as may from time to time be reasonably required
        by Lender against such other insurance casualties or risk.

       

      
        
          
          

        

        
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      (b) In
        the
        event of the occurrence of an insured or uninsured casualty loss, Lender
        shall
        have the option to declare the Note and all other sums secured hereby to
        be
        immediately due and payable.

       

      (c) Lender
        is
        hereby authorized and empowered, at its option, to adjust or compromise any
        loss
        under any insurance policies maintained pursuant to this Section, and to
        collect
        and receive the proceeds from any such policy or policies. Each insurance
        company is hereby authorized and directed to make payment for all such losses
        directly to Lender, instead of to Mortgagor and Lender jointly. In the event
        any
        insurance company fails to disburse directly and solely to Lender but disburses
        instead either solely to Mortgagor or to Mortgagor and Lender jointly, Mortgagor
        agrees immediately to endorse and transfer such proceeds to Lender. Upon
        the
        failure of Mortgagor to endorse and transfer such proceeds as aforesaid,
        Lender
        may execute such endorsements or transfers for and in the name of Mortgagor
        and
        Mortgagor hereby irrevocably appoints Lender as Mortgagor’s agent and
        attorney-in-fact so to do. Subject to the provisions of Section 1.7(g), after
        deducting from said insurance proceeds all of its reasonable expenses incurred
        in the collection and administration of such sums, including attorneys’ fees,
        Lender may apply the net proceeds or any part thereof, at its option, (i)
        to the
        payment of the indebtedness secured hereby, whether or not due and in whatever
        order Lender elects, (ii) to the repair and/or restoration of the Premises,
        and/or (iii) for any other purposes or objects for which Lender is entitled
        to
        advance funds under this Mortgage or any of the other Loan Documents, all
        without affecting the lien and security interest created by this Mortgage,
        and
        any balance of such moneys then remaining shall be paid to Mortgagor or the
        person or entity lawfully entitled thereto. Lender shall not be held responsible
        for any failure to collect any insurance proceeds due under the terms of
        any
        policy regardless of the cause of such failure.

       

      (d) At
        least
        thirty (30) days prior to the expiration date of each policy maintained pursuant
        to this Section, a renewal or replacement thereof satisfactory to Lender
        shall
        be delivered to Lender. Mortgagor shall deliver to Lender receipts evidencing
        the payment for all such insurance policies and renewals or replacements.
        Mortgagor hereby assigns to Lender all unearned premiums under any insurance
        policies related in any way to the Premises as further security hereunder.
        In
        the event of the foreclosure of this Mortgage or any other transfer of title
        to
        the Premises in extinguishment or partial extinguishment of the indebtedness
        secured hereby, all right, title and interest of Mortgagor in and to all
        insurance policies then in force shall pass to the purchaser or to Lender,
        its
        nominee or other transferee of the Premises, as the case may be, and Lender
        is
        hereby irrevocably appointed by Mortgagor as attorney-in-fact for Mortgagor
        to
        assign any such policy to said purchaser or to Lender, its nominee or other
        transferee, as the case may be, without accounting to Mortgagor for any unearned
        premiums thereon.

       

      (e) All
        insurance policies must contain a mortgagee’s clause acceptable to Lender, with
        a stipulation that coverage will not be terminated, canceled, diminished
        or
        altered without a minimum of thirty (30) days’ prior written notice to Lender,
        and without any disclaimer of the insurer’s liability for failure to give such
        notice. All deductible provisions must be fully acceptable to Lender. Mortgagor
        may obtain insurance form any insurance company that Mortgagor may choose
        that
        is reasonably acceptable to Lender.

       

      (f) If
        Mortgagor fails to provide any required insurance or fails to continue such
        insurance in force, Lender may do so at Mortgagor’s expense as provided in
        Section 2.7. 

       

      
        
          
          

        

        
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      MORTGAGOR
        ACKNOWLEDGES THAT IF LENDER SO PURCHASES ANY SUCH INSURANCE, THE INSURANCE
        WILL
        PROVIDE LIMITED PROTECTION AGAINST PHYSICAL DAMAGE TO THE PREMISES, UP TO
        THE
        BALANCE OF THE NOTE; HOWEVER, MORTGAGOR’S EQUITY IN THE COLLATERAL MAY NOT BE
        INSURED. IN ADDITION, THE INSURANCE MAY NOT PROVIDE ANY PUBLIC LIABILITY
        OR
        PROPERTY DAMAGE INDEMNIFICATION AND MAY NOT MEET THE REQUIREMENTS OF ANY
        FINANCIAL RESPONSIBILITY LAWS.

       

      (g) For
        purposes of insurance coverage on the Premises, Mortgagor authorizes Lender
        to
        provide to any person (including any insurance agent or mortgage company)
        all
        information Lender deems appropriate, whether regarding the Premises or the
        loan
        evidenced by the Note.

       

      Section
        1.6. Condemnation.
        If all
        or any material part of the Premises shall be damaged or taken through
        condemnation (which term when used in this Mortgage shall include any damage
        or
        taking by any governmental authority and any transfer by private sale in
        lieu
        thereof), either temporarily or permanently, the entire indebtedness secured
        hereby shall, at the option of Lender, become immediately due and payable.
        Mortgagor immediately upon obtaining knowledge of any proposed taking of
        the
        Premises or any part thereof, will notify Lender. Lender shall be entitled
        to
        all compensation, awards, damages, claims, rights of action, proceeds, and
        other
        payments, and the right thereto, and is hereby authorized, at its option,
        to
        commence, appear in and prosecute, in its own or Mortgagor’s name, any action or
        proceeding relating to any condemnation and to settle or compromise any claim
        in
        connection with a condemnation. All such compensation, awards, damages, claims,
        rights of action, proceeds and other payments, and the rights thereto are
        hereby
        assigned by Mortgagor to Lender and Lender is authorized, at its option,
        to
        collect and receive the same and to give proper receipts and acquittances
        therefor without any obligation to question the amount thereof. After deducting
        from said condemnation proceeds all of its expenses incurred in the collection
        and administration of such sums, including attorney’s fees, Lender may apply the
        net proceeds or any part thereof, at its option, (a) to the payment of the
        indebtedness secured hereby, whether or not due and in whatever order Lender
        elects, (b) to the repair and/or restoration of the Premises and/or (c) for
        any
        other purposes or objects for which Lender is entitled to advance funds under
        this Mortgage or any of the other Loan Documents, all without affecting the
        security interest created by this Mortgage, and any balance of such moneys
        then
        remaining shall be paid to Mortgagor or any other person or entity lawfully
        entitled thereto. Mortgagor agrees to execute such further assignments of
        any
        compensation, awards, damages, claims, rights of action, proceeds, and other
        payments, as Lender may require.

       

      Section
        1.7. Care
        of Premises.

       

      (a) Mortgagor
        will keep the Premises in good condition and repair, will not commit or suffer
        any waste and will not do or suffer to be done anything which will increase
        the
        risk of fire or other hazard to the Premises or any part thereof or which
        would
        or could result in the cancellation of any insurance policy carried with
        respect
        to the Premises.

       

      (b) Mortgagor
        will not construct any improvements on the Premises nor remove, demolish
        or
        alter the design or structural character of any building, fixture, chattel
        or
        other part of the Premises without the prior written consent of Lender, and
        Mortgagor will not permit the removal, demolition or alteration of any
        Improvements. Mortgagor shall not take any action to rezone the Premises
        nor
        shall Mortgagor impose any restrictions, agreements or liabilities upon the
        Premises without, in each case, the prior written consent of
        Lender.

       

      
        
          
          

        

        
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      (c) If
        the
        Premises or any part thereof is damaged by fire, windstorm, flood or other
        cause, Mortgagor will give immediate oral and written notices of the same
        to
        Lender.

       

      (d) Lender
        is
        hereby authorized and empowered to enter and to authorize others to enter
        upon
        any or all of the Premises, at any reasonable time and from time to time,
        to
        inspect the same, to perform or observe any covenants, conditions or terms
        which
        Mortgagor shall fail to perform, meet or comply with, or for any other purpose
        in connection with the protection or preservation of Lender’s security, without
        thereby becoming liable to Mortgagor or any person in possession holding
        under
        Mortgagor. Mortgagor agrees that it will open and cause its agents, managers,
        operators, tenants or lessees to open to Lender all areas within the Premises
        reasonably necessary or convenient with respect to the requirements hereof,
        and
        Mortgagor represents that each lease of the Premises provides reasonable
        inspection rights to Mortgagor which may be exercised by Lender.

       

      (e) Mortgagor
        will promptly comply with all present and future laws, ordinances, rules
        and
        regulations of any governmental authority affecting the Premises or any part
        thereof. Mortgagor shall also comply with all restrictions, agreements or
        obligations binding upon Mortgagor, the Premises, the Land or any portion
        thereof.

       

      (f) If
        all or
        any part of the Premises shall be damaged by fire or other casualty, Mortgagor
        will promptly restore the Premises to the equivalent of its original condition
        and if a part of the Premises shall be taken through condemnation, Mortgagor
        will promptly restore, repair or alter the remaining portions of the Premises
        in
        a manner satisfactory to Lender. Notwithstanding the foregoing, Mortgagor
        shall
        not be obligated so to restore, repair or alter unless in each instance,
        Lender
        agrees to make available to Mortgagor (pursuant to a procedure satisfactory
        to
        Lender) any net insurance or condemnation proceeds actually received by Lender
        hereunder in connection with such casualty loss or condemnation, to the extent
        such proceeds are required to defray the expense of such restoration, repair
        or
        alteration; provided, however, that the insufficiency of any such insurance
        or
        condemnation proceeds to defray the entire expense of restoration, repair
        or
        alteration shall in no way relieve Mortgagor of its obligation to restore,
        repair or alter. In the event all or any portion of the Premises shall be
        damaged or destroyed by fire, windstorm, flood or other casualty or by
        condemnation, Mortgagor shall promptly deposit with Lender a sum equal to
        the
        amount by which the estimated cost of the restoration of the Premises (as
        determined by Lender in its good faith judgment) exceeds the actual net
        insurance or condemnation proceeds with respect to such damage or
        destruction.

       

      (g) Notwithstanding
        the provisions of Sections 1.5 and 1.6 hereof to the contrary, in the event
        that
        any portion or portions of the Premises are damaged or destroyed by fire
        or by
        any other casualty, or are the subject of a “de minimis” (for purposes of this
        Section 1.7(g) the term “de minimis” shall mean an amount, as determined by
        Lender in its sole discretion, which does not adversely affect the actual
        use of
        the Improvements) condemnation, and
        such
        damage, destruction, or condemnation results in the need for repair, rebuilding,
        or restoration work to be performed on the Premises (such repair, rebuilding,
        or
        restoration is referred to herein as the “Work”),
        Lender shall allow Mortgagor to use the amount by which the proceeds of all
        insurance policies, judgments, settlements, or awards collected with respect
        to
        such damage, destruction, or condemnation (except such amounts as are
        attributable to a loss of rents) exceed the cost, if any, to Lender for the
        recovery of such proceeds (said net amount is defined herein as the
“Reconstruction
        Funds”),
        to
        perform the Work, so long as the following conditions have been
        met:

       

      
        
          
          

        

        
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      (i) No
        Event
        of Default exists hereunder, under the Note, or under any other of the Loan
        Documents;

       

      (ii) Mortgagor
        shall have delivered evidence satisfactory to Lender that the Improvements
        may
        be reconstructed in accordance with all applicable zoning and building codes,
        and all rules, regulations, and ordinances of governmental authorities and
        that,
        upon completion of the Work, the condition of the Improvements will be at
        least
        equal in value and general utility to that which existed immediately prior
        to
        such casualty or condemnation;

       

      (iii) Mortgagor
        shall have delivered evidence satisfactory to Lender that sufficient funds,
        including the Reconstruction Funds, are available to perform the Work and
        that
        the Work is capable of completion at least three (3) months prior to the
        maturity date of the Note;

       

      (iv) Mortgagor
        shall have delivered evidence satisfactory to Lender that business interruption
        or income insurance proceeds payable to Mortgagor as a result of the damage
        or
        destruction, or income from the Improvements, or that sources other than
        the
        Reconstruction Funds, are sufficient to cover payments of debt service, costs,
        and expenses under and in connection with the Note during the period the
        Work is
        to be performed;

       

      (v) Lender
        shall be satisfied, in its sole discretion, that the Work can be completed
        and
        the Improvements can be ready for occupancy at least three (3) months prior
        to
        the maturity of the Note;

       

      (vi) All
        parties having existing or expected possessory interest in the Premises agree
        in
        a manner satisfactory to Lender that they will continue or extend their intent
        and arrangements for the contract terms then in effect following the work
        or are
        otherwise required to do so under the terms of their respective
        contracts;

       

      (vii) All
        parties having operating, management, or franchise interests in or arrangements
        concerning the Property agree that they will continue their interests and
        arrangements for the contract terms then in effect following the
        Work;

       

      (viii) The
        cost
        of the Restoration Work does not exceed 50% of the value of the Improvements
        immediately prior to the damage, destruction or condemnation; and

       

      (ix) Lender
        shall be satisfied that it will not incur any liability to any other person
        as a
        result of such use or release of insurance proceeds.

       

      
        
          
          

        

        
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      In
        the
        event that the conditions set forth in Section 1.7(g) above are satisfied,
        Lender shall make the Reconstruction Funds available to Mortgagor for the
        Work
        only under the following procedures, terms, and conditions:

       

      1. Mortgagor
        shall execute and deliver to Lender a copy of a contract with a licensed
        contractor acceptable to Lender setting forth a fixed price for the Work
        and a
        completion date that acceptable to Lender and that is at least three (3)
        months
        prior to the maturity date of the Note;

       

      2. Mortgagor
        shall demonstrate to Lender that the Reconstruction Funds are at least equal
        to
        the fixed price of the Work as set forth in said contract or shall deposit
        with
        Lender funds in the amount by which such fixed price exceeds the Reconstruction
        Funds;

       

      3. The
        Work
        shall be supervised by an architect or engineer and performed in accordance
        with
        plans and specifications prepared by such architect or engineer and approved
        by
        Lender;

       

      4. The
        Reconstruction Funds, plus any additional funds deposited by Mortgagor, shall
        be
        received and held by Lender and disbursed in accordance with the terms and
        conditions used by Lender in connection with the a loan disbursing agreement
        to
        be prepared by Lender and Mortgagor’s expense, and Mortgagor shall reimburse
        Lender for costs and expenses incurred in connection with such
        disbursements;

       

      5. Upon
        completion of and final payment for the Work, any remaining Reconstruction
        Funds
        shall, at the option of Lender, be applied to the indebtedness and obligations
        secured by this Mortgage (whether or not then due) in such order as Lender
        shall
        elect or paid over to Mortgagor; provided, however, that in either event,
        any
        remaining additional funds deposited by Mortgagor for excess costs shall
        be
        refunded to Mortgagor; and

       

      6. Mortgagor
        shall otherwise comply with the terms and conditions of this Mortgage and
        the
        other Loan Documents during the performance of the Work.

       

      In
        the
        event any one or more of the conditions set forth in this Section 1.7(g)
        is at
        any time not satisfied, Lender may elect, in its discretion, to apply the
        Reconstruction Funds to the indebtedness and obligations secured hereby,
        whether
        or not clue, in such manner as Lender shall elect. Without limiting the
        generality of the foregoing, if an Event of Default shall exist and be
        continuing hereunder, or if Mortgagor shall fail diligently to pursue and
        complete the Work, Lender may, in its sole discretion, apply any undisbursed
        Reconstruction Funds and any of Mortgagor’s deposits against the balance of the
        indebtedness and obligations secured hereby, whether or not due, in such
        manner
        as Lender shall elect.

       

      Section
        1.8. Further
        Assurances; After Acquired Property.
        At any
        time, and from time to time, upon request by Lender, Mortgagor will make,
        execute and deliver or cause to be made, executed and delivered, to Lender
        and,
        where appropriate, cause to be recorded or re-recorded and/or filed or refiled
        at such time and from time to time, and in such offices and places as shall
        be
        deemed desirable by Lender, any and all such other and further mortgages,
        security agreements, financing statements, continuation statements, instruments
        of further assurance, certificates
        and other documents as may, in the opinion of Lender, be necessary or desirable
        in order to effectuate, complete, or perfect, or to continue and preserve
        (a)
        the obligations of Mortgagor under the Loan Documents and this Mortgage,
        and (b)
        the lien of this Mortgage as a first and prior perfected lien upon all of
        the
        Premises, whether now owned or hereafter acquired by Mortgagor subject only
        to
        the matters appearing in the title policy delivered by Mortgagor to Lender
        in
        connection with this Mortgage. Upon any failure by Mortgagor so to do, Lender
        may make, execute, record, file, rerecord and/or re-file any and all such
        mortgages, security agreements, financing statements, continuation statements,
        instruments, certificates and documents for and in the name of Mortgagor,
        and
        Mortgagor hereby irrevocably appoints Lender the agent and attorney-in-fact
        of
        Mortgagor so to do. The lien hereof will automatically attach, without further
        act, to all after acquired property attached to and/or used in the operation
        of
        the Premises, the Land or any part thereof.

       

      
        
          
          

        

        
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      Section
        1.9. Books,
        Records, Accounts and Annual Reports.
        Mortgagor will keep and maintain or will cause to be kept and maintained,
        at
        Mortgagor’s expense, proper and accurate books, records and accounts reflecting
        all items of income and expense in connection with the operation of the Premises
        and in connection with any services, materials, equipment or furnishings
        provided in connection with use or operation of the Premises or the construction
        of Improvements. Lender shall have the right from time to time at all times
        during normal business hours to examine all books, records and accounts relating
        to the Premises and Mortgagor at the office of Mortgagor or other person
        or
        entity maintaining such books, records and accounts and to make copies or
        extracts thereof as Lender shall desire. Mortgagor will furnish to Lender
        at any
        time within forty-five (45) days after demand by Lender, financial statements
        and reports as Lender may reasonably request with respect to Mortgagor or
        the
        Premises.

       

      Section
        1.10. Estoppel
        Affidavits.
        Mortgagor, upon ten (10) days’ prior written notice, shall furnish Lender a
        written statement, duly acknowledged, setting forth the unpaid principal
        of, and
        interest on, the indebtedness secured hereby and whether or not any offsets
        or
        defenses exist against such indebtedness and, if such offsets or defenses
        are
        alleged to exist, such statement shall detail the specific facts relating
        thereto.

       

      Section
        1.11. Subrogation.
        Lender
        shall be subrogated to the claims and liens of all parties whose claims or
        liens
        are discharged or paid with the proceeds of the indebtedness secured
        hereby.

       

      Section
        1.12. Expenses.
        Mortgagor will promptly pay or reimburse Lender, upon demand, for all reasonable
        attorneys’ fees, costs and expenses incurred by Lender in any proceeding
        involving the estate of a decedent or an insolvent, or in any action, legal
        proceeding or dispute of any kind in which Lender is made a party, or appears
        as
        a party, in connection with or affecting the indebtedness secured hereby,
        this
        Mortgage, any of the other Loan Documents, the interest created hereby,
        Mortgagor or any Guarantor, including but not limited to the foreclosure
        of this
        Mortgage, any proceeding relating to bankruptcy, insolvency or other relief
        for
        debtors, any condemnation action involving the Premises or any action to
        protect
        the security hereof; and all such amounts shall be added to the indebtedness
        secured by the lien of this Mortgage.

       

      
        
          
          

        

        
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      Section
        1.13. Assignment
        of Contracts and Other Agreements.
        As
        additional collateral and further security for the indebtedness secured hereby,
        Mortgagor does hereby assign to Lender the interest of Mortgagor in and to
        any
        and all contracts, leases, rental agreements, franchise agreements, management
        contracts, construction contracts, and other contracts, licenses and permits
        now
        or hereafter affecting the Premises, or any part thereof, and Mortgagor agrees
        to execute and deliver to Lender such additional instruments, in form and
        substance satisfactory to Lender, as may hereafter be requested by Lender
        to
        evidence and confirm said assignment; provided, however, that acceptance
        of any
        such assignment shall not be construed as a consent by Lender to any contract,
        lease, rental agreement, franchise agreement, management contract, construction
        contract, or other contract, license or permit, or to impose upon Lender
        any
        obligation with respect thereto. Mortgagor shall faithfully keep and perform,
        or
        cause to be kept and performed, all of the covenants, conditions, and agreements
        contained in each of said instruments, now or hereafter existing, on the
        part of
        Mortgagor to be kept and performed and shall at all times do all things
        necessary to compel performance by each other party to said instruments of
        all
        obligations, covenants and agreements by such other party to be performed
        thereunder.

       

      Section
        1.14. Leases.
        Mortgagor hereby collaterally assigns and transfers to Lender all the rents,
        issues and profits of the Premises, whether now or hereafter accruing, and
        hereby gives to and confers upon Lender the right, power and authority to
        collect such rents, issues and profits. From time to time, upon the request
        of
        Lender, Mortgagor shall give further evidence of the foregoing assignment
        to
        Lender by executing and delivering to Lender specific assignments (in form
        and
        substance satisfactory to Lender) of the rents, issues and profits. From
        time to
        time, Mortgagor shall also execute and deliver to Lender any notice to tenants
        or other document reasonably required by Lender. Mortgagor irrevocably appoints
        Lender its true and lawful attorney-in-fact, at the option of Lender at any
        time
        and from time to time after the occurrence of any Event of Default under
        this
        Mortgage (whether or not Lender takes possession of the Premises), to demand,
        receive and enforce payment, to give receipts, releases and satisfactions,
        and
        to sue, in the name of Mortgagor or Lender, for all such rents, issues and
        profits and apply the same to the indebtedness secured hereby; provided,
        however, that Mortgagor shall have permission to collect such rents, issues
        and
        profits (but rents shall not be collected for more than one month in advance)
        prior to the occurrence of any Event of Default under this Mortgage. Upon
        the
        occurrence of any Event of Default, the permission hereby given to Mortgagor
        to
        collect such rents, issues and profits shall terminate and such permission
        shall
        not be reinstated upon the cure of the Event of Default without Lender’s
        specific written consent. Further, upon the occurrence of any Event of Default,
        Mortgagor shall immediately turn over to Lender all rents, issues and profits
        in
        the actual or constructive possession of Mortgagor (or its agents or
        affiliates), together with an accounting thereof. Exercise of Lender’s rights
        under this Section, and the application of any rents, issues and profits
        to the
        indebtedness secured hereby, shall not cure or waive any default. To the
        fullest
        extent allowed by law, the assignment of the rents, issues and profits of
        the
        Premises in this Section is intended to be an absolute assignment from Mortgagor
        to Lender and not merely the passing of a security interest but Mortgagor
        shall
        have the right to collect the same so long as no Event of Default under this
        Mortgage shall have occurred.

       

      Upon
        any
        occurrence of any Event of Default under this Mortgage, Lender may, at any
        time
        without notice, either in person, by agent or by a receiver appointed by
        a
        court, and without regard
        to
        the adequacy of any security for the indebtedness hereby secured, enter upon
        and
        take possession of the Premises, or any part thereof, and in its own name
        sue
        for or otherwise collect such rents, issues and profits, including those
        past
        due and unpaid, and apply the same in accordance with the provisions of Section
        2.3(b) hereof The collection of such rents, issues and profits, or the entering
        upon and taking possession of the Premises, or the application thereof as
        aforesaid, shall not cure or waive any Event of Default or notice of default
        hereunder or invalidate any act done in response to such Event of Default
        or
        pursuant to such notice of default.

       

      
        
          
          

        

        
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      Mortgagor
        shall not execute any other assignment of the income, rents, issues or profits,
        or any part thereof, from the Premises to any person or entity other than
        Lender.

       

      Mortgagor
        covenants that it shall, at its sole cost and expense, (a) duly and punctually
        perform and discharge, or cause to be performed and discharged, all of the
        obligations and undertakings of Mortgagor or its agents under all leases
        affecting the Premises, (b) use its best efforts to enforce or secure, or
        cause
        to be enforced or secured, the performance of each and every obligation and
        undertaking of the respective tenants under such leases, (c) promptly notify
        Lender if Mortgagor receives any notice from a tenant claiming that Mortgagor
        is
        in default under a lease, and (d) appear in and defend any action or proceeding
        arising under or in any manner connected with the leases.

       

      Mortgagor
        shall not execute any leases pertaining to the Property without the prior
        written consent of Lender, which consent shall not be unreasonably withheld
        and
        all leases shall be inferior and subordinate to the lien of this Mortgage
        and
        the terms of each lease shall so expressly provide.

       

      Section
        1.15. No
        Sale or Encumbrance of Premises; No Additional Financing.
        Mortgagor hereby acknowledges to Lender that (a) the identity and expertise
        of
        Mortgagor were and continue to be material circumstances upon which Lender
        has
        relied in connection with, and which constitute valuable consideration to
        Lender
        for, the extending to Mortgagor of the indebtedness evidenced by the Note,
        and
        (b) any change in such identity or expertise could materially impair or
        jeopardize the security granted to Lender by this Mortgage. Mortgagor therefore
        covenants and agrees with Lender that Mortgagor shall not sell, transfer,
        convey, mortgage, encumber, lease or otherwise dispose of the Premises or
        any
        part thereof or any interest therein or engage in additional financing with
        respect thereto without the prior written consent of Lender (which consent
        may
        be granted or denied in Lender’s sole and absolute discretion); provided,
        however that Mortgagor shall have the right to dispose of articles of Fixtures
        and Personal Property if and only (i) simultaneously therewith Mortgagor
        replaces such articles with like articles of equal or greater value, (ii)
        the
        replacements are not subject to any liens or encumbrances whatsoever other
        than
        the lien of this Mortgage, and (iii) the replacements are fully paid for
        by
        Mortgagor and are not subject to any conditional sales contract or financing
        device. Any change in the legal or equitable title of the Premises or in
        the
        beneficial ownership of the Premises (including any change in the ownership
        or
        control of the any partnership interests or stock of Mortgagor or any partners
        thereof), whether or not of record and whether or not for consideration,
        or any
        sale or other disposition of any interest of Mortgagor except in accordance
        with
        the terms of this Mortgage shall be deemed a transfer of an interest in the
        Premises.

       

      
        
          
          

        

        
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      In
        the
        event that ownership of the Premises, or any part thereof, becomes vested
        in any
        person or persons other than Mortgagor, without the prior written approval
        of
        Lender, Lender may, without notice to Mortgagor, waive such default and deal
        with such successor or successors in interest with reference to this Mortgage,
        in the same manner as with Mortgagor, without in any way releasing, discharging
        or otherwise affecting the liability of Mortgagor hereunder, or for the
        indebtedness hereby secured. No sale of the Premises, no forbearance on the
        part
        of Lender, no extension of the time for the payment of the indebtedness secured
        hereby nor any change in the terms thereof consented to by Lender shall in
        any
        way whatsoever operate to release, discharge, modify, change or affect the
        original liability of Mortgagor herein, either in whole or in part, nor shall
        the full force and effect of this lien be altered thereby. Any deed, assignment
        or other instrument conveying the Premises or any part thereof, shall provide
        that the grantee thereunder assumes all of the grantor’s obligations under this
        Mortgage, the Note and all other instruments or agreements evidencing or
        securing the repayment of the indebtedness secured hereby. In the event such
        deed shall not contain such assumption, the grantee under such deed shall
        nevertheless be deemed to have assumed such obligations by acquiring the
        Premises or such portion thereof subject to this Mortgage.

       

      Section
        1.16. Maintenance
        of Borrowing Entity.

       

      (a) If
        Mortgagor is a partnership or joint venture, Mortgagor shall maintain and
        continue in existence in its current form the partnership agreement of
        Mortgagor; said agreement shall not be amended or modified in any manner
        whatsoever without Lender’s prior written consent, which consent shall not be
        unreasonably withheld; and except as expressly permitted in the Loan Agreement,
        no partner shall sell, transfer, dispose of, or encumber such partner’s interest
        in Mortgagor without the prior written consent of Lender.

       

      (b) If
        Mortgagor, or any general partner of Mortgagor is a corporation or a company,
        Mortgagor or each such managing member shall maintain and continue in existence
        as a corporation and/or company duly organized and in good standing under
        the
        laws of the state or country of its incorporation and shall continue to be
        qualified as a foreign corporation and/or company and remain in good standing
        in
        Florida and it shall not liquidate, dissolve or suffer an expiration or
        revocation of its charter, and except as expressly permitted in the Loan
        Agreement, no change in the ownership or control of Mortgagor or such general
        partner shall occur without the prior written consent of Lender, whether
        by sale
        of assets, merger, consolidation, sale of stock interests in Mortgagor or
        such
        managing member, or any other circumstances where the effect is to pass
        ownership of any interest in Mortgagor or such managing member or to pass
        control of Mortgagor or the managing member from the persons now exercising
        control to others.

       

      Section
        1.17. Security
        Agreement.
        The
        Fixtures and Personal Property and Other Rights and Property hereinbefore
        described shall be deemed to be part of the real estate and mortgaged hereby
        to
        the fullest extent permitted by law, and as to the balance of such property
        Mortgagor grants to Lender a security interest therein in accordance with
        the
        Uniform Commercial Code of the State of Florida and, as to such property,
        this
        Mortgage shall be considered a security agreement under said Uniform Commercial
        Code. With respect to such property, Lender is a “secured party” and Mortgagor
        is a “debtor” under the Uniform Commercial Code with their respective addresses
        being set forth in Section 3.9 below.

       

      
        
          
          

        

        
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      Section
        1.18. Future
        Advances.
        This
        Mortgage is given to secure not only existing indebtedness, but also such
        future
        advances as are made within twenty years from the date hereof, to the same
        extent as if such future advances were made on the date of the execution
        of this
        Mortgage. The total amount of indebtedness that may be so secured may decrease
        or increase from time to time, but the total unpaid balance so secured at
        one
        time shall not exceed $20,000,000.00 plus disbursements made for the payment
        of
        taxes, levies or insurance on the Premises, with interest on such disbursements.
        Nothing contained herein, however, shall obligate Lender to make any future
        advances. If Lender makes any future advances, (a) the term “Note”,
        as
        used in this Mortgage, shall include all promissory notes and other documents
        evidencing such future advances in addition to the Promissory Note identified
        in
        the “WHEREAS” clause of this Mortgage, and (b) the term “Loan
        Documents”
shall
        include all documents executed in connection with the futures advance(s)
        in
        addition to all other documents described in Section 1.1
        above.

       

      Section
        1.19. Leases;
        Rent Rolls.
        Mortgagor covenants that it shall not, without the prior express written
        consent
        of Lender, which consent shall not be unreasonably withheld, enter into any
        lease affecting all or any portion of the Premises, or materially modify,
        terminate, or consent to the cancellation or surrender of any lease, or permit
        any tenant under any lease to assign or sublet its rights thereunder. Further,
        Lender specifically reserves the right to approve the form and content of
        all
        leases, all proposed tenants, and any assignee or sublessee of any existing
        tenant. Mortgagor shall deliver to Lender a rent roll for the Premises, in
        form
        and detail satisfactory to Lender, at such times as Lender may request, together
        with a copy of all leases, rental agreements and occupancy agreements with
        respect to the Premises. Mortgagor shall not collect any rent under any leases,
        rental agreements or other occupancy agreements pertaining to the Premises
        more
        than one month in advance, except for security deposits not to exceed two
        months
        rent which are deposited in a segregated account at Lender and held and
        maintained by Mortgagor in full compliance with all applicable laws. The
        rights
        of all tenants and other occupants of the Premises must at all times be fully
        subordinate to the terms of this Mortgage and the other Loan
        Documents.

       

      Section
        1.20. Reappraisal
        Provisions.
        Lender
        may obtain, at Mortgagor’s expense upon Lender’s reasonable determination that
        an updated appraisal is appropriate (including, without limitation, to comply
        with any regulatory requirements applicable to Lender), but in no event more
        frequently than once every two calendar years, an appraisal of the Premises
        or
        any part thereof prepared by a third-party appraiser engaged directly by
        Lender
        in accordance with written instructions from Lender. Each such appraiser
        and
        appraisal shall be satisfactory to Lender (including satisfaction of applicable
        regulatory requirements). Mortgagor shall cooperate fully with any such
        appraiser and provide all such documents and information as such appraiser
        may
        request in connection with the appraiser’s performance and preparation of such
        appraisal. The cost of each such appraisal shall be due and payable by Mortgagor
        on demand and shall be secured by this Mortgage and the other Loan Documents.
        Mortgagor acknowledges that Lender was induced to enter into the subject
        loan
        transaction based upon a specific loan-to-value ratio (the “Original
        Loan-to-Value Ratio”)
        calculated by dividing the aggregate principal amount of the Note by the
        appraised value (the “Original
        Appraised Value”)
        of the
        Premises set forth in the appraisal Mortgagor submitted to Lender prior to
        the
        execution of this Mortgage. If any updated appraisal received by Lender pursuant
        to this Section reflects that the appraised value of the Premises has decreased
        from the Original Appraised Value and if such decrease results in a loan
to-value
        ratio which is higher than the Original Loan-to-Value Ratio, Mortgagor shall
        within ten (10) days of Lender’s written request make a principal payment (the
“Prepayment”)
        under
        the Note in an amount sufficient to maintain the Original Loan-to-Value Ratio.
        Such Prepayment shall not entitle Mortgagor to a release of any of the Premises.
        Mortgagor’s failure to promptly and fully comply with Lender’s requirements
        under this Section 1.21 shall, without further notice, constitute an Event
        of
        Default under this Mortgage.

       

      
        
          
          

        

        
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      Section
        1.21. Loan
        Documents; Partial Releases.
        Mortgagor hereby agrees to comply with all provisions of the Loan Documents.
        All
        advances of Lender made pursuant to the Loan Documents, all costs and expenses
        incurred by Lender under the Loan Documents, and all obligations of Mortgagor
        under and in connection with the Loan Documents shall be secured
        hereby.

       

      Section
        1.22. Section
        697.07 of the Florida Statutes.
        Mortgagor agrees that the assignment of leases and rents contained in this
        Mortgage is intended shall provide Lender with all the rights and remedies
        of
        mortgagees pursuant to Section 697.07 of the Florida Statutes (hereinafter
        “Section
        697.07”),
        as it
        may be amended from time to time. However, in no event shall this reference
        diminish, alter, impair, or affect any other rights and remedies of Lender,
        including but not limited to, the appointment of a receiver as provided in
        this
        Mortgage or any rights or powers of the receiver in law or equity or as
        otherwise provided in this Mortgage. In addition, the assignment of leases
        and
        rents in this Mortgage shall be fully operative without regard to value of
        the
        Premises and without regard to the adequacy of the Premises to serve as security
        for the obligations owed by Mortgagor to Lender and shall be in addition
        to any
        rights arising under Section 697.07. Further, except for the notices expressly
        required under this Mortgage, if any, Mortgagor to the fullest extent allowed
        by
        law Mortgagor waives any notice of default or demand for turnover of rents
        by
        Lender, together with any rights under Section 697.07 to apply to a court
        to
        deposit the rents into the registry of the court or such other depository
        as the
        court may designate.

       

      Section
        1.23. Condominium
        Provisions.
        Mortgagor shall not submit any of the Land to a declaration of condominium
        without the prior written consent of Lender. However, if a declaration of
        condominium is recorded against the Land or any portion thereof with the
        prior
        written consent of Lender, (a) Mortgagor shall abide by all of the terms,
        covenants and restrictions contained in the declaration of condominium, bylaws,
        rules and regulations, and all other condominium documents, and all licenses,
        use agreements and other documents pertaining to the use of any recreational
        facilities or common areas, (b) Mortgagor shall promptly pay, when due, all
        assessments imposed by any condominium association or other governing body
        of
        the condominium documents, (c) Mortgagor shall not, without the prior written
        consent of Lender, partition or subdivide the Land or consent to or otherwise
        allow the abandonment or termination of the condominium or any amendment
        of the
        declaration of condominium, bylaws, rules or regulations, license, agreement
        or
        other document pertaining to the condominium, and (d) Mortgagor shall fully
        comply with all obligations applicable to Mortgagor as the developer of the
        condominium imposed by federal, state or local law.

       

      
        
          
          

        

        
          -16-

          
            

          

        

        
          
          

        

      

      ARTICLE
        II

       

      Section
        2.1. Event
        of Default.
        The
        phrase “Event
        of Default”,
        wherever used in this Mortgage, shall mean and include any one or more of
        the
        following events:

       

      (a) Failure
        by Borrower or Mortgagor to pay, as and when due and payable, any installments
        of principal and/or interest under the Note or other Loan Documents or any
        required deposits for taxes, assessments, insurance premiums, and other similar
        charges, or any other portion of the indebtedness secured hereby within ten
        (10)
        days of when due; or

       

      (b) Failure
        by Mortgagor to duly keep, observe and perform any other covenant, condition
        or
        agreement of this Mortgage to be kept or performed by Mortgagor and the
        continuance of such failure for thirty (30) days after written notice by
        Lender
        to Mortgagor of such occurrence;

       

      (c) Failure
        by Mortgagor duly to observe or perform any term, covenant, condition or
        agreement in any other documents now or hereafter evidencing, securing or
        otherwise relating to the Note, this Mortgage or the indebtedness secured
        hereby
        (including, without limitation, the Environmental Agreement, and an Assignment
        of Leases, Rents and Profits of even date herewith, as such documents may
        be
        modified and amended from time to time, and all other Loan Documents) which
        is
        not remedied within thirty (30) days written notice by Lender to Mortgagor
        of
        any such occurrence. If Mortgagor cannot cure within thirty (30) days but
        is
        diligently pursuing cure, then time shall be tolled for an additional thirty
        (30) day period; or

       

      (d) The
        occurrence of a default or event of default under any of the Loan Documents
        which is not remedied within the cure period, if any, provided with respect
        thereto; or

       

      (e) Any
        representation or warranty of Mortgagor contained in this Mortgage or in
        any of
        the other Loan Documents or any representation or warranty of any Mortgagor
        or
        other party in any of the Loan Documents or otherwise in connection with
        the
        indebtedness evidenced by the Note or any other notes executed pursuant to
        Section 1.18 hereof proves to be untrue or misleading in any material respect;
        or

       

      (f) Mortgagor
        shall (i) have an order entered for relief with respect to it under the Federal
        Bankruptcy Code or any other law pertaining to bankruptcy, insolvency or
        debtor
        relief, whether now or hereafter existing and whether Federal, state or foreign,
        (ii) not pay, or admit in writing its inability to pay, its debts generally
        as
        they become due, (iii) make an assignment for the benefit of creditors, (iv)
        apply for, seek, consent to, or acquiesce in, the appointment of a receiver,
        custodian, trustee, examiner, liquidator or similar official for it or any
        substantial part of its property, (v) institute any proceeding seeking the
        entry
        of any order for relief under the Federal Bankruptcy Code or any other law
        pertaining to bankruptcy, insolvency or debtor relief, whether now or hereafter
        existing and whether Federal, state or foreign, to adjudicate it a bankrupt
        or
        insolvent, or seeking dissolution, winding up, liquidation, reorganization,
        arrangement, adjustment or composition of it or its debts under any law relating
        to
        bankruptcy, insolvency or reorganization or relief of debtors or fail to
        file an
        answer or other pleading denying the material allegations of any such proceeding
        filed against it, (vi) take any action to authorize or effect any of the
        foregoing actions set forth in this subsection (g), or (vii) fail to
        contest in good faith any appointment or proceeding described in subsection
        (h)
        below; or

       

      
        
          
          

        

        
          -17-

          
            

          

        

        
          
          

        

      

       

      (g) Without
        the application, approval or consent of Mortgagor, a receiver, trustee,
        examiner, liquidator or similar official shall be appointed for Mortgagor
        or any
        substantial part of its property, or a proceeding described in subsection
        (f)
        shall be instituted against Mortgagor and such appointment continues
        undischarged or such proceeding continues undismissed or unstayed for a period
        of 30 consecutive days; or

       

      (h) Mortgagor
        shall sell, transfer, convey, mortgage, encumber, lease or otherwise dispose
        of
        the Premises or any part thereof or any interest therein or engage in financing
        with respect thereto in violation of the provisions of this Mortgage or
        Mortgagor, or any managing member of Mortgagor (if a corporation) is liquidated
        or dissolved or its charter expires or is revoked or its ownership or control
        changes in violation of Section 1.16 above, or Mortgagor or any such managing
        member (if a partnership or business association) is dissolved or partitioned,
        or a general partner withdraws, resigns or is removed, or the interest of
        a
        general partner therein is sold, transferred, disposed of or encumbered in
        violation of Section 1.16 above; or

       

      (i) The
        institution of foreclosure or other proceedings to enforce any mortgage,
        security interest, lien or encumbrance of any kind on the Premises or any
        portion thereof, whether superior or subordinate to this Mortgage (provided,
        that the foregoing shall not be deemed to constitute Lender’s consent to any
        mortgage, security interest, lien or encumbrance on the Premises which is
        otherwise prohibited by this Mortgage); or

       

      (j) The
        occurrence of any event or circumstance which pursuant to the terms of this
        Mortgage or any of the other Loan Documents is stated to be an Event of Default
        under this Mortgage; or

       

      (k) The
        occurrence of any material adverse change in the financial condition of
        Mortgagor.

       

      Section
        2.2. Lender’s
        Rights, Acceleration, Foreclosure and Sale.
        Upon
        the occurrence of any Event of Default (after the giving of notice and the
        expiration of any applicable cure period that is expressly required in Section
        2.1 above), then the whole of the indebtedness secured hereby shall, at the
        option of Lender, without notice or demand, become immediately due and payable
        for all purposes, time being of the essence of this Mortgage, anything in
        the
        Note, this Mortgage or any of the other Loan Documents to the contrary
        notwithstanding, and, thereupon, or at any time during the existence of any
        Event of Default, Lender may proceed by suit or suits at law or in equity
        or by
        any other appropriate proceeding or remedy to (a) enforce the payment of
        the Note or the performance by Mortgagor of any other term or provision of
        the
        Note or any of the Loan Documents or enforce any other rights possessed by
        Lender, (b) foreclose this Mortgage by judicial proceedings, and/or (c)
        pursue any other right or remedy available to Lender. Any failure of Lender
        to
        exercise any of said options shall not constitute a waiver
        of
        the right to exercise the same at any other time; and all of the rights and
        remedies of Lender shall be cumulative.

       

      
        
          
          

        

        
          -18-

          
            

          

        

        
          
          

        

      

       

      Section
        2.3. Right
        of Lender to Enter and Take Possession.
        

       

      (a) If
        an
        Event of Default shall have occurred, Mortgagor, upon demand of Lender, shall
        forthwith surrender to Lender the actual possession of the Premises, and
        Lender
        may (by itself or through a receiver) enter and take possession of the Premises
        and may exclude Mortgagor and Mortgagor’s agents and employees wholly
        therefrom.

       

      (b) Upon
        every such entering and taking of possession, Lender may hold, store, use,
        operate, manage, control, and maintain the Premises and conduct the business
        thereof, and, from time to time, (i) make or perform construction, repairs,
        renewals, replacements, additions, betterments and improvements thereto and
        thereon and purchase or otherwise acquire additional fixtures, personalty
        and
        other property; (ii) insure or keep the Premises insured; (iii) manage and
        operate the Premises and exercise all the rights and powers of Mortgagor
        in its
        name or otherwise with respect to the same and (iv) enter into any and all
        agreements with respect to the exercise by others of any of the powers herein
        granted Lender, all as Lender may from time to time determine to be to its
        best
        interest. Lender may collect and receive all of the income, rents, profits,
        issues and revenues of the Premises, including the past due as well as those
        accruing thereafter, and Lender may apply any moneys and proceeds received
        by
        Lender, in such order and priority as Lender in its sole discretion may
        determine, to (1) all expenses of taking, holding, managing and operating
        the
        Premises (including compensation for the services of all persons employed
        for
        such purposes); (2) the cost of all such construction, maintenance, repairs,
        renewals, replacements, additions, betterments, improvements, purchases,
        and
        acquisitions; (3) the cost of such insurance; (4) such taxes, assessments
        and
        other charges as Lender may determine to pay; (5) other proper charges upon
        the
        Premises or any part thereof; (6) the reasonable compensation and expenses
        of attorneys and agents of Lender; (7) accrued interest; (8) deposits for
        taxes,
        insurance and similar items required hereunder; (9) principal; and/or (10)
        any
        other sums that may be due and payable to Lender under or pursuant to any
        of the
        Loan Documents.

       

      (c) For
        the
        purpose of carrying out the provisions of this Section 2.3, Mortgagor hereby
        constitutes and appoints Lender the true and lawful attorney-in-fact of
        Mortgagor to do and perform, from time to time, any and all actions necessary
        and incidental to such purpose and does, by these presents, ratify and confirm
        any and all actions of said attorney-in-fact in the Premises.

       

      (d) If
        Lender
        shall surrender possession of the Premises to Mortgagor as a result of the
        acceptance by Lender of any cure of any Event of Default, the right of Lender
        to
        thereafter take possession, from time to time, pursuant to this Section shall
        exist if any subsequent Event of Default shall occur.

       

      Section
        2.4. Appointment
        of a Receiver.

       

      (a) If
        an
        Event of Default shall have occurred, Lender shall be entitled, upon notice
        to
        Mortgagor but without regard to the adequacy of any security for the
        indebtedness hereby
        secured or the solvency of any party bound for its payment, upon ex-parte
        application to the appointment of a receiver to take possession of and to
        operate the Premises and to collect the rents, profits, issues, and revenues
        thereof and such receiver shall have all the powers of Mortgagor, including,
        without limitation, those powers set forth in Section 2.3(b) above. Mortgagor
        hereby specifically waives the right to object to the appointment of a receiver
        and hereby expressly agrees that such appointment shall be made as an admitted
        equity and as a matter of absolute right to Lender.

       

      
        
          
          

        

        
          -19-

          
            

          

        

        
          
          

        

      

       

      (b) Mortgagor
        will pay to Lender upon demand all expenses and costs, including receiver’s
        fees, reasonable attorneys’ fees, legal costs and agent’s compensation, incurred
        pursuant to the provisions contained in this Section, and all such expenses
        shall be secured by this Mortgage.

       

      Section
        2.5. Discontinuance
        of Proceedings and Restoration of Status of the Parties.
        In case
        Lender shall have proceeded to enforce any right or remedy under this Mortgage
        by receiver, entry or otherwise, and such proceedings shall have been
        discontinued or abandoned for any reason or shall have been determined adversely
        to Lender, then and in every such case Mortgagor and Lender shall be restored
        to
        their former positions and rights hereunder, and all rights, powers and remedies
        of Lender shall continue as if no such proceeding had been taken.

       

      Section
        2.6. Remedies
        Cumulative.
        No
        right, power or remedy conferred upon or reserved to Lender by this Mortgage
        or
        any of the Loan Documents is intended to be exclusive of any other right,
        power
        or remedy, but each and every such right, power and remedy shall be cumulative
        and concurrent and shall be in addition to any other right, power and remedy
        given hereunder or now or hereafter existing at law or in equity or by
        statute.

       

      Section
        2.7. Performance
        by Lender of Defaults by Mortgagor.
        If
        Mortgagor shall default in the payment of any tax, lien, assessment or other
        charge levied or assessed against the Premises (unless the same has been
        transferred to bond); in the payment of any utility charge, whether public
        or
        private; in the payment of any insurance premium; in the procurement of
        insurance coverage and the delivery of the insurance policies required
        hereunder; in the performance of any obligations of Mortgagor under any leases
        affecting the Premises; or in the performance or observance of any other
        covenant, condition or term of this Mortgage or any of the other Loan Documents,
        then Lender, at its option, may perform or observe the same, and all payments
        made for costs or expenses incurred by Lender in connection therewith shall
        be
        secured hereby and shall be, without demand, immediately repaid by Mortgagor
        to
        Lender with interest at the Default Rate provided in the Note. Lender shall
        be
        the sole judge of the legality, validity and priority of any such tax, lien,
        assessment, charge, claim, premium or obligation; of the necessity for any
        such
        actions; and of the amount necessary to be paid in satisfaction thereof.
        Lender
        is hereby empowered to enter and to authorize others to enter upon the Premises
        or any part thereof, for the purpose of performing or observing any such
        defaulted covenant, condition or term, or exercising Lender’s rights hereunder,
        without thereby becoming liable to Mortgagor or any person in possession
        holding
        under Mortgagor. In order to accelerate the maturity of the indebtedness
        secured
        hereby because of the failure of Mortgagor to pay any taxes, lien, assessment,
        charge, premium, rent or other sums, liabilities or obligations as herein
        provided, it shall not be necessary nor requisite that Lender shall first
        pay
        the same, nor shall Lender’s payment of the same constitute a waiver of the
        default hereunder or otherwise affect Lender’s option
        to
        accelerate the indebtedness secured hereby, foreclose this Mortgage and/or
        exercise any other right or remedy provided hereunder or under any of the
        Loan
        Documents.

       

      
        
          
          

        

        
          -20-

          
            

          

        

        
          
          

        

      

       

      Section
        2.8. Expenses.
        In any
        suit to foreclose the lien of this Mortgage or enforce any other remedy of
        Lender under this Mortgage, the Note or any of the other Loan Documents,
        there
        shall be allowed and included, as additional indebtedness in the judgment
        or
        decree, all expenditures and expenses which may be paid or incurred by or
        on
        behalf of Lender, including without limitation, those incurred for attorneys’
fees, documentary and expert evidence, stenographers’ charges, publication
        costs, survey costs, and costs (which may be estimated as to items to be
        expended after entry of the decree) of procuring all abstracts of title,
        title
        searches and examinations, title insurance policies, and similar data and
        assurances with respect to title as Lender may deem reasonably necessary
        either
        to prosecute such suit or to evidence to bidders at any sale which may be
        had
        pursuant to such decree the true condition of the title to or value of the
        Premises. All such expenditures and expenses and all expenses and fees as
        may be
        incurred in the protection of said Premises and the maintenance of the lien
        of
        this Mortgage or the enforcement of Lender’s rights or remedies hereunder or
        under any of the other Loan Documents, including without limitation, the
        reasonable fees of any attorneys employed by Lender in any litigation or
        proceeding affecting this Mortgage, the Note or the Premises, in the exercise
        of
        any rights or remedies, or in preparation for the commencement or defense
        of any
        proceeding or threatened suit or proceeding, and whether at the pre-trial,
        trial
        or any appellate level, shall be immediately due and payable by Mortgagor,
        with
        interest thereon at the Default Rate provided in the Note and shall be secured
        by this Mortgage.

       

      Section
        2.9. Sale
        of Separate Parcels.
        Waiver
        of Marshalling. In the event of any foreclosure sale of the Premises, the
        same
        may be sold in one or more parcels, and Lender may be the purchaser at any
        foreclosure of the Premises or any part thereof. Mortgagor for itself and
        all
        who may claim through or under Mortgagor, waives any and all right to have
        the
        property and estate comprising the Premises marshaled upon any foreclosure
        of
        the lien hereof, and Lender or any court having jurisdiction to foreclose
        said
        lien may sell the Premises in part or as an entirety.

       

      ARTICLE
        III

      

      Section
        3.1. Waivers;
        Remedies Cumulative; Etc.
        No
        waiver of any default in the performance of any covenant contained herein
        or in
        any obligation secured hereby shall at any time thereafter be held to be
        a
        waiver of any rights of the holder of the Note hereunder or under any of
        the
        Loan Documents, nor shall any waiver of a prior default operate to waive
        any
        subsequent default or defaults. All remedies provided for herein and in the
        Note
        and in the Loan Documents are cumulative and may, at the election of the
        holder
        of the Note, be exercised alternatively, successively or in any other manner
        and
        are in addition to any other rights provided by law or in equity.

       

      Section
        3.2. Headings.
        The
        headings of the sections, paragraphs and subdivisions of this Mortgage are
        for
        the convenience of reference only, are not to be considered a part hereof,
        and
        shall not limit or otherwise affect any of the terms hereof

       

      Section
        3.3. Invalid
        Provisions to Affect No Others.
        It is
        agreed that nothing herein contained nor any transaction related thereto
        shall
        be construed or so operate as to require Mortgagor
        to pay interest at a rate greater than it is lawful in such case to contract
        for, or to make any payment or to do any act contrary to law. If the fulfillment
        of any provision hereof or any transaction related hereto or to the Note,
        at the
        time performance of such provisions shall be due, shall involve transcending
        the
        limit of validity prescribed by law, then ipso facto, the obligation to be
        fulfilled shall be reduced to the limit of such validity; and if any clause
        or
        provision herein contained operates or would prospectively operate to invalidate
        this Mortgage in whole or in part, then such clause or provision only shall
        be
        held for naught, as though not herein contained, and the remainder of this
        Mortgage shall remain operative and in full force and effect.

       

      
        
          
          

        

        
          -21-

          
            

          

        

        
          
          

        

      

       

      Section
        3.4. Number
        and Gender, Construction.
        Whenever the singular or plural number, masculine or feminine or neuter gender
        is used herein, it shall equally include the others, as appropriate. Use
        of the
        terms “hereof’, “herein”, “hereunder” or words of similar import in this
        Mortgage shall refer to this Mortgage as a whole and not to any particular
        Section or provision of this Mortgage unless otherwise expressly provided.
        Use
        of the term “person” in this Mortgage shall refer to and mean any natural
        person, entity, corporation, association, firm, partnership or governmental
        authority.

       

      Section
        3.5. Changes.
        Neither
        this Mortgage nor any term hereof may be waived, changed, discharged or
        terminated except by an instrument in writing signed by the party against
        which
        enforcement of the change, waiver, discharge or termination is
        sought.

       

      Section
        3.6. Governing
        Law and Construction.
        This
        Mortgage and the Note secured hereby shall be governed by, and construed
        and
        enforced in accordance with, internal laws (and not the law of conflicts)
        of the
        State of Florida.

       

      Section
        3.7. Greater
        Estate.
        In the
        event that prior to the satisfaction of the indebtedness and the cancellation
        of
        this Mortgage of record, Mortgagor obtains a fee estate to such portion of
        the
        Land in which Mortgagor presently holds only a leasehold interest, then such
        fee
        estate shall automatically, and without further action of any kind on the
        part
        of Mortgagor, be and become subject to the lien of this Mortgage.

       

      Section
        3.8. Notice.
        Except
        as otherwise contemplated herein or required by statute, all notices, demands
        and other communications which are permitted or required under this Mortgage
        shall be in writing and signed by the party giving the same, and shall be
        delivered personally, sent by overnight courier, or sent by certified or
        registered United States mail, return receipt requested, postage prepaid,
        to the
        other party at the address set forth below:

       

      
        	
                To
                  Mortgagor:

              	
                Costa
                  Blanca II Real Estate, LLC

                Costa
                  Blanca III Real Estate, LLC

                TDS
                  Town Homes (Phase 1), LLC

                TDS
                  Town Homes (Phase 2), LLC

                2460
                  Sand Lake Road

                Orlando,
                  Florida 32809

                Attn:
                  Malcolm J. Wright

              

      

      
        
          
          

        

        
          -22-

          
            

          

        

        
          
          

        

      

      

      
        	 	 
	
                To
                  Lender:

              	
                Resorts
                  Funding Group, LLC

                2460
                  Sand Lake Road

                Orlando,
                  Florida 32809

                Attn:
                  Jason G. Williams

              

      

      

      or
        to
        such other address within the continental United States as may be from time
        to
        time designated by the parties. Each such notice or communication shall be
        deemed to have been given on the date of personal delivery, upon receipt
        if sent
        by overnight courier or three (3) days after the date of mailing, as the
        case
        may be.

       

      Section
        3.9. Time
        is of the Essence.
        It is
        specifically agreed that time is of the essence of the performance by Mortgagor
        of the obligations of Mortgagor under this Mortgage.

       

      Section
        3.10. Binding
        on Successors and Assigns.
        This
        Mortgage and all provisions hereof shall extend to and be binding upon Mortgagor
        and all persons claiming under or through Mortgagor, and the word “Mortgagor”
when
        used herein shall include all such persons and all persons liable for the
        payment of the indebtedness or any part thereof, whether or not such persons
        shall have executed the Note or this Mortgage. The word “Lender”
when
        used herein shall include the successors and assigns of Lender named
        herein.

       

      Section
        3.11. WAIVER
        OF RIGHT TO JURY TRIAL.
        MORTGAGOR AND LENDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
        THE
        RIGHT TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION BASED ON THE NOTE,
        THIS
        MORTGAGE, ANY OF THE OTHER LOAN DOCUMENTS, OR ANY COURSE OF DEALING, COURSE
        OF
        CONDUCT, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF MORTGAGOR
        OR
        LENDER. THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER EXTENDING CREDIT
        TO
        MORTGAGOR.

       

      [Signatures
        on the following pages]

      

      
        
          
          

        

        
          -23-

          
            

          

        

        
          
          

        

      

      IN
        WITNESS WHEREOF, Mortgagor has caused this Mortgage to be duly as of the
        day and
        year first above written.

      

      
        	
                EXECUTED
                  IN THE PRESENCE OF:

                 

                /s/
                  Jason Williams

                (Signature)

                Jason
                  Williams

                (Printed
                  Name)

                 

                /s/
                  Michael Crosbie

                (Signature)

                Michael
                  Crosbie

                (Printed
                  Name)

                 

                 

                 

              	 	
                COSTA
                  BLANCA II REAL ESTATE, LLC, a Florida limited liability
                  company

                 

                By:
                  Tierra del Sol Resort (Phase 2), Ltd., a Florida limited partnership,
                  its
                  manager

                 

                By:
                  TDS Management, LLC, a Florida limited liability company, its general
                  partner

                 

                By:
                  /s/ Malcolm J. Wright

                Name:
                  Malcolm J. Wright

                Title:
                  Manager

                 

                 

              
	
                 

                /s/
                  Jason Williams

                (Signature)

                Jason
                  Williams

                (Printed
                  Name)

                 

                /s/
                  Michael Crosbie

                (Signature)

                Michael
                  Crosbie

                (Printed
                  Name)

                 

                 

                 

              	 	
                 

                COSTA
                  BLANCA III REAL ESTATE, LLC, a Florida limited liability
                  company

                 

                By:
                  Tierra del Sol Resort (Phase 2), Ltd., a Florida limited partnership,
                  its
                  manager

                 

                By:
                  TDS Management, LLC, a Florida limited liability company, its general
                  partner

                 

                By:
                  /s/ Malcolm J. Wright

                Name:
                  Malcolm J. Wright

                Title:
                  Manager

                 

                 

              

      

      
        
          
          

        

        
          -24-

          
            

          

        

        
          
          

        

      

      

      
        	
                 

                 

                /s/
                  Jason Williams

                (Signature)

                Jason
                  Williams

                (Printed
                  Name)

                 

                /s/
                  Michael Crosbie

                (Signature)

                Michael
                  Crosbie

                (Printed
                  Name)

              	 	
                 

                TDS
                  TOWN HOMES (PHASE 1), LLC, a Florida limited liability
                  company

                 

                By:
                  Tierra del Sol Resort (Phase 1), Ltd., a Florida limited partnership,
                  its
                  manager

                 

                By:
                  TDS Management, LLC, a Florida limited liability company, its general
                  partner

                 

                 

                By:
                  /s/ Malcolm J. Wright

                Name:
                  Malcolm J. Wright

                Title:
                  Manager

                 

                 

              
	
                 

                 

                /s/
                  Jason Williams

                (Signature)

                Jason
                  Williams

                (Printed
                  Name)

                 

                /s/
                  Michael Crosbie

                (Signature)

                Michael
                  Crosbie

                (Printed
                  Name)

              	 	
                 

                TDS
                  TOWN HOMES (PHASE 2), LLC, a Florida limited liability
                  company

                 

                By:
                  Tierra del Sol Resort (Phase 2), Ltd., a Florida limited partnership,
                  its
                  manager

                 

                By:
                  TDS Management, LLC, a Florida limited liability company, its general
                  partner

                 

                 

                By:
                  /s/
                  Malcolm J. Wright

                Name:
                  Malcolm J. Wright

                Title:
                  Manager

              

      

      

      
        
          
          

        

        
          -25-

          
            

          

        

        
          
          

        

      

      

      
        	
                STATE
                  OF FLORIDA

                COUNTY
                  OF  ORANGE

              	 
	
                The
                  foregoing instrument was acknowledged before me this 23rd day of
                  April
                  2007, by Malcolm J. Wright, as Manager of TDS MANAGEMENT, LLC,
                  a Florida
                  limited liability company, the General Partner of TIERRA DEL SOL
                  RESORT
                  (PHASE 2), LTD., a Florida limited partnership, the Manager of
                  COSTA
                  BLANCA II REAL ESTATE, LLC, a Florida limited liability company,
                  on behalf
                  of the corporation, who is personally known to me or has produced
                  ___________ (state) driver’s license or        
                  as
                  identification.

              
	
                My
                  Commission Expires:

                 

                (AFFIX
                  NOTARY SEAL)

              	
                /s/
                  Linda Smith

                Notary
                  Public (Signature)

                Linda
                  Smith

                (Printed
                  Name)

              

      

      

      

      
        	
                STATE
                  OF FLORIDA

                COUNTY
                  OF  ORANGE

              	 
	
                The
                  foregoing instrument was acknowledged before me this 23rd day of
                  April
                  2007, by Malcolm J. Wright, as Manager of TDS MANAGEMENT, LLC,
                  a Florida
                  limited liability company, the General Partner of TIERRA DEL SOL
                  RESORT
                  (PHASE 2), LTD., a Florida limited partnership, the Manager of
                  COSTA
                  BLANCA III REAL ESTATE, LLC, a Florida limited liability company,
                  on
                  behalf of the corporation, who is personally known to me or has
                  produced
                  ___________ (state) driver’s license or        
                  as
                  identification.

              
	
                My
                  Commission Expires:

                 

                (AFFIX
                  NOTARY SEAL)

              	
                /s/
                  Linda Smith

                Notary
                  Public (Signature)

                Linda
                  Smith

                (Printed
                  Name)

              

      

      

      
        
          
          

        

        
          -26-

          
            

          

        

        
          
          

        

      

      

      
        	
                STATE
                  OF FLORIDA

                COUNTY
                  OF  ORANGE

              	 
	
                The
                  foregoing instrument was acknowledged before me this 23rd day of
                  April
                  2007, by Malcolm J. Wright, as Manager of TDS MANAGEMENT, LLC,
                  a Florida
                  limited liability company, the General Partner of TIERRA DEL SOL
                  RESORT
                  (PHASE 1), LTD., a Florida limited partnership, the Manager of
                  TDS TOWN
                  HOMES (PHASE 1), LLC, a Florida limited liability company, on behalf
                  of
                  the corporation, who is personally known to me or has produced
                  ___________
                  (state) driver’s license or        
                  as
                  identification.

              
	
                My
                  Commission Expires:

                 

                (AFFIX
                  NOTARY SEAL)

              	
                /s/
                  Linda Smith

                Notary
                  Public (Signature)

                Linda
                  Smith

                (Printed
                  Name)

              

      

      

      

      
        	
                STATE
                  OF FLORIDA

                COUNTY
                  OF  ORANGE

              	 
	
                The
                  foregoing instrument was acknowledged before me this 23rd day of
                  April
                  2007, by Malcolm J. Wright, as Manager of TDS MANAGEMENT, LLC,
                  a Florida
                  limited liability company, the General Partner of TIERRA DEL SOL
                  RESORT
                  (PHASE 2), LTD., a Florida limited partnership, the Manager of
                  TDS TOWN
                  HOMES (PHASE 2), LLC, a Florida limited liability company, on behalf
                  of
                  the corporation, who is personally known to me or has produced
                  ___________
                  (state) driver’s license or        
                  as
                  identification.

              
	
                My
                  Commission Expires:

                 

                (AFFIX
                  NOTARY SEAL)

              	
                /s/
                  Linda Smith

                Notary
                  Public (Signature)

                Linda
                  Smith

                (Printed
                  Name)

              

      

      

      
        
          
             

          

          
          

        

        
          -27-

          
            

          

        

        
          
          

          
          

        

      

      EXHIBIT
        A

      

      

      

      LEGAL
        DESCRIPTION 

      

      Tracts
        TH-1 A, TH-1 B, TH-2 A, TH-2 B, TH-2 C1, TH-2 C2, TH-2 D, TH-2 F, TH-2 G,
        TH-2 H
        and TH-2 K, TIERRA DEL SOL, according to the Plat thereof, as recorded in
        Plat
        Book 144, Pages 31 through 38, inclusive, of the public records of Polk County,
        Florida.

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      
        
          
            A-1

          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
          

        

      

      EXHIBIT
        B

       

      

      PERMITTED
        EXCEPTIONS

      

      1. Notice
        of
        Establishment of the Westridge Community Development District as set forth
        in
        instrument recorded in Book 5524, Page 369 . 

       

      2. Declaration
        of Consent to Jurisdiction of Community Development District and to Imposition
        of Special Assessments as set forth in instrument recorded in Book 6572,
        Page 385 . 

       

      3. Grant
        of
        Temporary Access and Construction easement granted to Westridge Community
        Development District by Tierra Del Sol Resort, Inc., a Florida corporation,
        dated December 21, 2005 and recorded January 4, 2006 in Book 6572,
        Page 395.

       

      4. Terms
        and
        conditions of Declaration of Easements as set forth in instrument recorded
        in Book 6572, Page 586 as corrected in the Corrective Declaration of
        Easements, dated December 21, 2005, and recorded July 5, 2006 in Book 6855,
        Page
        1241 . 

       

      5. Terms
        and
        conditions of Declaration of Easements as set forth in instrument recorded
        in Book 6585, Page 863 .

       

      6. Declaration
        Of Covenants, Restrictions And Easements recorded in Official Records Book
        7253,
        at Page 1901.

       

      7. Mortgage
        and Security Agreement made by TDS Town Homes (Phase 1), LLC, a Florida limited
        liability company, TDS Town Homes (Phase 2), LLC, a Florida limited liability
        company, Costa Blanca II Real Estate, LLC, a Florida limited liability company,
        Costa Blanca III Real Estate, LLC, a Florida limited liability company, and
        TDS
        Amenities, Inc., a Florida corporation, jointly and severally, as Mortgagor,
        to
        Kennedy Funding, Inc., a New Jersey corporation, as Mortgagee, dated April
        20,
        2007 and recorded April 24, 2007 in Official Records Book 7259, Page
        1.

      

      8. Assignment
        of Leases and Rents by TDS Town Homes (Phase 1), LLC, a Florida limited
        liability company, TDS Town Homes (Phase 2), LLC, a Florida limited liability
        company, Costa Blanca II Real Estate, LLC, a Florida limited liability company,
        Costa Blanca III Real Estate, LLC, a Florida limited liability company, and
        TDS
        Amenities, Inc., a Florida corporation, jointly and severally, as Assignor,
        to
        Kennedy Funding, Inc., a New Jersey corporation, as Assignee, dated April
        20,
        2007 and recorded April 24, 2007 in Official Records Book 7259, Page
        98.

      

      9. UCC-1
        Financing Statement by TDS Town Homes (Phase 1), LLC, a Florida limited
        liability company, TDS Town Homes (Phase 2), LLC, a Florida limited liability
        company, Costa Blanca II Real Estate, LLC, a Florida limited liability company,
        Costa Blanca III Real Estate, LLC, a Florida limited liability company, and
        TDS
        Amenities, Inc., a Florida corporation, jointly and severally, as Debtor,
        to
        Kennedy Funding, Inc., a New Jersey corporation, as Secured Party, recorded
        April 24, 2007 in Official Records Book 7259, Page 130.

       

       

      
        
           

        

        
          B-1EX-10.1

Exhibit 10.1

SEVERANCE AND CHANGE IN CONTROL AGREEMENT

This Agreement (the “Agreement”) is entered into as of the 17th day of May, 2007 by and
between Altus Pharmaceuticals Inc., a Delaware corporation (the “Company”), and Sheldon Berkle (the
“Executive”).

WHEREAS Executive is employed by the Company, and because of such employment, possesses
detailed knowledge of the Company and its business and operations;

WHEREAS Executive’s continued service to the Company is very important to the future success
of the Company;

WHEREAS the Company desires to enter into this Agreement to provide Executive with certain
financial protection that supplement the protections set forth in the May 6, 2005 Offer Letter
entered into between the Executive and the Company (the “Offer Letter”) (attached as Exhibit A,
hereto) in the event that Executive’s employment terminates under certain circumstances, and
thereby to provide Executive with incentives to remain with the Company;

WHEREAS the Board of Directors of the Company (the “Board”) acting through the Compensation
Committee has determined that it is in the best interests of the Company to enter into this
Agreement.

NOW THEREFORE for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company and Executive agree as follows:

1. Definitions.

(a) Cause. As used herein, “Cause” shall have the meaning assigned to it in the
Offer Letter. In addition, “Cause” is not limited to events which have occurred prior to the
termination of Executive’s service, nor is it necessary that the Board’s finding of “Cause” occur
prior to such termination. If the Board determines, subsequent to Executive’s termination of
service, that either prior or subsequent to Executive’s termination Executive engaged in conduct
which would constitute “Cause,” then Executive shall have no right to any benefit or compensation
under this Agreement.

(b) Change In Control. As used herein, a “Change in Control” shall have the meaning
assigned to it in the Offer Letter.

(c) Good Reason. As used herein, a “Good Reason” shall have the meaning assigned to
it in the Offer Letter, except that “reduction in base salary” shall be replaced with “material
reduction in base salary.” For purposes of this Agreement, “Good Reason” shall be interpreted in a
manner, and limited to the extent necessary, so that it will not cause adverse tax consequences for
either party with respect to Section 409A of the Internal Revenue Code of 1986, as amended (“Code
Section 409A”), and any successor statute, regulation and guidance thereto.

(d) Base Salary. As used herein, “Base Salary” shall mean Executive’s annual base
salary, excluding reimbursements, bonuses, benefits, and amounts attributable to stock options and
other non-cash compensation.

2. Standard Severance. In the event that Executive’s employment is involuntarily
terminated by action of the Company other than for Cause, Executive shall receive the following
(subject to Executive’s execution of a release of claims as described in Section
7):

(a) Severance Payments. Continuation of payments in an amount equal to Executive’s
then-current Base Salary for a twelve (12) month period (the “Severance Period,” if Section
2 applies) less all customary and required taxes and employment-related deductions, in
accordance with the Company’s normal payroll practices (provided such payments will be made at
least monthly).

(b) Separation Bonus. In the Company’s sole discretion, and conditioned upon
appropriate approval from the Compensation Committee, within forty-five (45) days following
Executive’s termination the Company may pay Executive a separation bonus not to exceed one hundred
percent (100%) of the target annual bonus to which Executive may have been entitled for the year in
which Executive is terminated, prorated for the portion of the year in which Executive was
employed, provided any such payments will be made within forty-five (45) days following Executive’s
termination with the Company.

(c) COBRA Payments. Upon completion of the appropriate COBRA forms, and subject to
all the requirements of COBRA, the Company shall continue Executive’s participation in the
Company’s health and dental insurance plans at the Company’s cost (except for Executive’s co-pay,
if any, which shall be deducted from his severance compensation) the 18 month COBRA eligibility
period following termination, to the same extent that such insurance is provided to similarly
situated Company executives.

(d) House And Automobile Lease. Assumption of payments under Executive’s house and
automobile leases in the Boston area for a twelve (12) month period following termination (or, if
shorter, until the expiration of the respective terms of such leases), up to an aggregate payment
of twenty-five thousand dollars ($25,000).

(e) No Duplication. In the event that Executive is eligible for Change in Control
Severance under Section 3 below, he shall not be eligible for and shall not receive
the Standard Severance as provided in this Section 2.

3. Change In Control Severance. In the event that a Change in Control occurs and within a
period of one (1) year following the Change in Control, either: (i) Executive’s employment is
involuntarily terminated by action of the Company other than for Cause, or (ii) Executive
terminates Executive’s employment voluntarily for Good Reason, then Executive shall receive the
following (subject to Executive’s execution of a release of claims as described in Section
7):

(a) Severance Payments. Continuation of payments in an amount equal to Executive’s
then-current Base Salary for an eighteen (18) month period (the “Severance Period,” if
Section 3 applies) less all customary and required taxes and employment-related
deductions, in accordance with the Company’s normal payroll practices (provided such payments will
be made at least monthly).

(b) Separation Bonus. Within forty-five (45) days following Executive’s termination,
payment of a separation bonus in an amount equal to one-and-a-half (1.5) times the target annual
bonus to which the Executive may have been entitled for the year in which Executive is terminated.

(c) COBRA Payments. Upon completion of the appropriate COBRA1/ forms, and
subject to all the requirements of COBRA, continuation of Executive’s participation in the
Company’s health and dental insurance plans at the Company’s cost (except for Executive’s co-pay,
if any, which shall be deducted from his severance compensation) during the Severance Period, to
the same extent that such insurance is provided to similarly situated Company executives.

(d) Outplacement. Direct payment of up to $15,000 of bona fide outplacement services,
provided that the outplacement company engaged by Executive provides reasonably detailed invoices
for such services to the Sr. Director, Human Resources at the Company within the outplacement
company’s normal billing cycle. Payment is limited to services received by Executive between the
date of his termination of employment and the date on which he begins new full-time employment, and
Executive hereby agrees to notify the Company immediately upon obtaining new full-time employment,
provided that all payments must be made before the end of the second year following the year in
which Executive terminates employment.

(e) House And Automobile Lease. Assumption of payments under Executive’s house and
automobile leases in the Boston area for a twelve (12) month period (or, if shorter, until the
expiration of the respective terms of such leases), up to an aggregate payment of twenty-five
thousand dollars ($25,000).

(f) No Duplication. In the event that Executive is eligible for Standard Severance
under Section 2 above, he shall not be eligible for and shall not receive the
Change in Control Severance as provided in this Section 3.

4. No Severance. In the event that Executive’s employment is terminated for any reason
other than those outlined in Sections 2 or 3, then Executive shall have no
right to the severance payments/benefits provided under this Agreement.

5. Distribution Limitation. If any payment or benefit Executive would receive under this
Agreement, when combined with any other payment or benefit Executive receives pursuant to a Change
in Control (for purposes of this section, a “Payment”) would: (i) constitute a “parachute payment”
within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”);
and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code
(the “Excise Tax”), then such Payment shall be either: (x) the full amount of such Payment; or (y)
such lesser amount (with cash payments being reduced before stock option compensation) as would
result in no portion of the Payment being subject to the Excise Tax, whichever of the foregoing
amounts, taking into account the applicable federal, state and local employments taxes, income
taxes, and the Excise Tax, results in Executive’s receipt, on an after-tax basis, of the greater
amount of the Payment notwithstanding that all or some portion of the Payment may be subject to the
Excise Tax.

6. Timing Of Payments. Notwithstanding any other provision with respect to the timing of
payments under Sections 2 or 3, if, at the time of Executive’s
termination, Executive is deemed to be a “specified employee” of the Company (within the meaning of
Code Section 409A(a)(2)(B)(i) and any successor statute, regulation and guidance thereto (“Code
Section 409A”)), then limited only to the extent necessary to comply with the requirements of Code
Section 409A, any payments to which Executive may become entitled under Sections 2
or 3 which are subject to Code Section 409A (and not otherwise exempt from its application)
will be withheld until the first (1st) business day of the seventh (7th) month following the
termination of Executive’s employment, at which time Executive shall be paid an aggregate amount
equal to the accumulated, but unpaid, payments otherwise due to Executive under the terms of
Sections 2 or 3.

7. Release of Claims. The Company shall not be obligated to pay Executive any of the
compensation set forth in Sections 2 and 3 unless and until Executive has
executed a timely full and general release of all claims against the Company and any affiliate,
parent or subsidiary and its and their officers, directors, employees, and agents, in a form
satisfactory to the Company.

8. Restrictive Covenant. Executive acknowledges and agrees that this Agreement provides
him with payments and benefits above and beyond those which the Company already is providing
Executive. In exchange for the payments and benefits provided herein, as well as other good and
valuable consideration, Executive hereby acknowledges and reaffirms his confidentiality,
non-competition and non-solicitation covenants under the Offer Letter.

9. No Impact On Employment Status. This Agreement is not intended to confer, and shall
not be interpreted as conferring, any additional employment rights on Executive, and has no impact
on either party’s right to terminate Executive’s employment under contract or applicable law.

10. Enforceability; Reduction. If any provision of this Agreement shall be deemed invalid
or unenforceable as written, this Agreement shall be construed, to the greatest extent possible, or
modified, to the extent allowable by law, in a manner which shall render it valid and enforceable
and any limitation on the scope or duration of any provision necessary to make it valid and
enforceable shall be deemed to be a part thereof. No invalidity or unenforceability of any
provision contained herein shall affect any other portion of this Agreement.

1/ “COBRA” is the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended.

1

11. Notices.

(a) All notices, requests, consents and other communications hereunder shall be in writing,
shall be addressed to the receiving party’s address set forth below or to such other address as a
party may designate by notice hereunder, and shall be either (i) delivered by hand, (ii) made by
telex, telecopy or facsimile transmission, (iii) sent by overnight courier, or (iv) sent by
registered or certified mail, return receipt requested, postage prepaid.

If to the Company:

General Counsel

Altus Pharmaceuticals Inc.

125 Sidney Street

Cambridge, MA 02139

With a copy to:

Jonathan L. Kravetz, Esq.

Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C.

1 Financial Center

Boston, MA 02111

If to Executive:

Sheldon Berkle

(b) All notices, requests, consents and other communications hereunder shall be deemed to have
been given either (i) if by hand, at the time of the delivery thereof to the receiving party at the
address of such party set forth above, (ii) if made by telex, telecopy or facsimile transmission,
at the time that receipt thereof has been acknowledged by electronic confirmation or otherwise,
(iii) if sent by overnight courier, on the next business day following the day such notice is
delivered to the courier service, or (iv) if sent by registered or certified mail, on the 5th
business day following the day such mailing is made.

12. Entire Agreement / No Duplication of Compensation or Benefits. This Agreement, along
with the Offer Letter (as modified by this Agreement), embodies the entire agreement and
understanding between the parties hereto with respect to the subject matter hereof and supersedes
all prior oral or written agreements and understandings relating to the subject matter hereof. No
statement, representation, warranty, covenant or agreement of any kind not expressly set forth in
this Agreement shall affect, or be used to interpret, change or restrict, the express terms and
provisions of this Agreement. The Offer Letter remains in effect to the extent still applicable,
provided that paragraphs 6 and 10 thereof are no longer of any force or effect. The terms of
Sections 2 and 3 above shall replace any agreement, policy or practice which
otherwise would obligate the Company to provide any severance compensation and/or benefits to
Executive, provided that this provision shall not be construed to otherwise limit Executive’s
rights to payments or benefits provided under any pension plan (as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended), deferred compensation, stock, stock
option or similar plan sponsored by the Company.

13. Modifications and Amendments. The terms and provisions of this Agreement may be
modified or amended only by written agreement executed by all parties hereto. Any such amendment
shall comply with the requirements of Code Section 409A, if applicable.

14. Waivers and Consents. The terms and provisions of this Agreement may be waived, or
consent for the departure therefrom granted, only by written document executed by the party
entitled to the benefits of such terms or provisions. No such waiver or consent shall be deemed to
be or shall constitute a waiver or consent with respect to any other terms or provisions of this
Agreement, whether or not similar. Each such waiver or consent shall be effective only in the
specific instance and for the purpose for which it was given, and shall not constitute a continuing
waiver or consent.

15. Assignment. The rights and obligations under this Agreement may not be assigned by
either party hereto without the prior written consent of the other party.

16. Benefit. All statements, representations, warranties, covenants and agreements in this
Agreement shall be binding on the parties hereto and shall inure to the benefit of the respective
successors and permitted assigns of each party hereto. Nothing in this Agreement shall be
construed to create any rights or obligations except among the parties hereto, and no person or
entity shall be regarded as a third-party beneficiary of this Agreement.

17. Arbitration. Any controversy, dispute or claim arising out of or in connection with
this Agreement will be settled by final and binding arbitration to be conducted in Boston,
Massachusetts pursuant to the national rules for the resolution of employment disputes of the
American Arbitration Association then in effect. The decision or award in any such arbitration
will be final and binding upon the parties, and judgment upon such decision or award may be entered
in any court of competent jurisdiction, or application may be made to any such court for judicial
acceptance of such decision or award and an order of enforcement. In the event that any procedural
matter is not covered by the aforesaid rules, the procedural law of Massachusetts will govern. Any
disagreement as to whether a particular dispute is arbitrable under this Agreement shall itself be
subject to arbitration in accordance with the procedures set forth herein. Notwithstanding the
foregoing, any right or obligation arising out of or concerning any separate contract or agreement
between the parties (including but not limited to the Offer Letter (as modified by this Agreement)
shall be decided in accordance with the dispute resolution mechanism provided for by such contract
or agreement.

2

18. Governing Law / Jurisdiction / Service of Process. This Agreement and the rights and
obligations of the parties hereunder shall be construed in accordance with and governed by the law
of the Commonwealth of Massachusetts, without giving effect to the conflict of law principles
thereof. Any legal action or proceeding with respect to this Agreement that is not subject to
arbitration pursuant to Section 17 will be brought in the courts of the
Commonwealth of Massachusetts in Middlesex Country or of the United States of America for the
District of Massachusetts, sitting in Boston. By execution and delivery of this Agreement, each of
the parties hereto accepts for itself and in respect of its property, generally and
unconditionally, the exclusive jurisdiction of the aforesaid courts. Each of the parties hereto
irrevocably consents to the service of process of any of the aforementioned courts in any such
action or proceeding by the mailing of copies thereof by certified mail, postage prepaid, to the
party at its address set forth in Section 11.

19. Counterparts. This Agreement may be executed in one or more counterparts, and by
different parties hereto on separate counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.

3

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

ALTUS PHARMACEUTICALS INC.

By:     /s/ Jonathan Lieber      

Vice President and Chief Financial Officer

Date:      5/17/07      

EXECUTIVE:

     /s/ Sheldon Berkle     

Sheldon Berkle

Date:      5/10/07     

4

 EXHIBIT A

May 6, 2005

Mr. Sheldon Berkle

Dear Shelly:

We are very pleased to extend an offer for you to join Altus Pharmaceuticals

Inc. (“Altus” or the “Company”) as President, Chief Executive Officer and a

member of the Board of Directors. Through the discussions the Board of Directors

has had with you during the interview process, we have been impressed with your

substantial pharmaceutical industry experience, track record of accomplishments,

strong business intellect, and overall leadership skills. Our impressions have

been reinforced by the extremely positive set of reference calls that we also

conducted. We believe you are well qualified to assume the Chief Executive

Officer role at Altus and have every confidence that you will be successful in

this capacity.

Commensurate with this position, the Board is prepared to offer you an

exceptional compensation package. The position provides an annualized base

salary of $400,000 which will be paid on a biweekly basis. In addition to your

base salary, you will have the opportunity to earn an annual performance bonus

of up to 50% of your earned salary based on achievement of a series of personal

and Company objectives that the Board of Directors and you will define annually.

For 2005, objectives will be recommended by you for the Board’s review and

approval within thirty days after the Commencement Date (as defined below). The

2005 performance bonus will be awarded based on achievement against these

objectives and prorated based on the Commencement Date.

You will begin employment as Altus’ President and Chief Executive Officer on May

9, 2005 (the “Commencement Date”), working two days per week through May 31 in

order to accelerate your transition. During this period you will be paid at the

rate of two-fifths of your base salary. Starting on June 1, 2005, your work

schedule will shift to full-time, and your salary will commensurately increase.

You will also be eligible for a $150,000 loan from the Company on the

Commencement Date. Based on your continued employment, the loan will be forgiven

as to $75,000 on each of the first and second anniversaries of the Commencement

Date. Should you voluntarily terminate your employment before either

anniversary, the outstanding loan amount as of that date will be repaid by you

to the Company. Please note that if you resign for good reason (as defined

below), it will not be considered a voluntary termination by you of your

employment, and you will have no repayment obligation.

<PAGE>

Mr. Sheldon Berkle

May 6, 2005

Page 2 of 16

You will also have no repayment obligation if your employment is terminated by

Altus, except if such termination is for cause (as defined below).

You will also be entitled to 12 months severance at a rate equal to your

then-current base salary in the event that (1) Altus terminates your employment

without cause or you resign for good reason, or (2) you resign for good reason

within 6 months after a change in control (as defined below). The Company will

also, in such circumstances, assume payments under your house and automobile

leases in the Boston area for the 12-month severance period (or, if shorter,

until the expiration of the respective terms of such leases), up to an aggregate

of $25,000.

The President and Chief Executive Officer position provides you an initial grant

of stock options exercisable for a total of 1,300,000 shares of common stock at

an exercise price of $1.71 per share, the fair market value of Altus’ common

stock on the Commencement Date. This is a significant equity award and should be

viewed as a source of substantial long-term wealth creation potential assuming

you achieve success in leading the Company. One quarter of the options will vest

on the first anniversary of the Commencement Date. After this time, an

additional 1/48th of the total underlying option grant will vest on a monthly

basis, such that all the options will be vested after four years. The options

will have a ten-year term and will be subject to customary terms and conditions

set forth in a stock option agreement that we will provide you. In addition to

this initial grant, the Board of Directors would also plan to make annual stock

option grants to you based on the performance of the Company.

Your employment will be subject to employee non-disclosure and inventions

assignment covenants, as well as non-competition and non-solicitation covenants,

as set forth in the agreement annexed to this letter as Appendix A.

In addition to this compensation, you will be entitled to 5 weeks of paid

vacation annually, together with standard employee benefits which may be changed

from time to time as the Company deems appropriate. A description of current

benefits is set forth on Appendix B to this letter for your information.

As used in this letter, “cause” and “change in control” have the meanings set

forth in Altus’ 2002 Employee, Director and Consultant Stock Plan. Those

definitions are set forth in Appendix C to this letter. The definition of for

“good reason” is also set forth in Appendix C.

<PAGE>

Mr. Sheldon Berkle

May 6, 2005

Page 3 of 16

We hope you find the Altus offer and position attractive and look forward to

your favorable response. Please return one copy of this letter indicating your

acceptance by May 9, 2005.

Sincerely,

/s/ John Richard

John Richard

Chairman of the Board

I accept the terms of employment offered in this letter.

Signature: /s/ Sheldon Berkle            Date: May 10, 2005

——  —

Sheldon Berkle

<PAGE>

Mr. Sheldon Berkle

May 6, 2005

Page 4 of 16

APPENDIX A

May 6, 2005

Mr. Sheldon Berkle

Re: Non-Competition, Non-Solicitation, Non-Disclosure, Assignment

of Inventions

Dear Sheldon:

This letter is to confirm our understanding with respect to certain conditions

to your employment by Altus Pharmaceuticals Inc. (the “Company”), including (i)

your agreement not to compete with the Company, or any present or future parent,

subsidiary or affiliate of the Company (collectively with the Company, the

“Company Group”), (ii) your agreement to protect and preserve information and

property which is confidential and proprietary to the Company Group and (iii)

your agreement with respect to the ownership of inventions, ideas, copyrights

and patents which may be used in the business of the Company Group (the terms

and conditions agreed to in this letter are hereinafter referred to as the

“Agreement”). In consideration of the mutual promises and covenants contained in

this Agreement, and for other good and valuable consideration, the receipt and

sufficiency of which are hereby mutually acknowledged, we have agreed as

follows:

1. Prohibited Competition.

(a) Certain Acknowledgements and Agreements.

(i) We have discussed, and you recognize and acknowledge, the

competitive and proprietary aspects of the business of the Company Group.

(ii) You acknowledge that a business will be deemed

competitive with the Company Group if it engages in a business activity

which is, directly or indirectly, related to the research, development,

manufacture, marketing, selling or servicing of products or services that

are competitive with or otherwise similar to the products or services

being marketed, sold, serviced or under development or consideration by or

on behalf of the Company Group, including, but not limited to, services

and products related to the crystallization of proteins, antibodies or any

other matter.

<PAGE>

Mr. Sheldon Berkle

May 6, 2005

Page 5 of 16

(iii) You further acknowledge that, while you are employed by

the Company, the Company Group will furnish, disclose or make available to

you Confidential Information (as defined below) related to the business of

the Company Group and that the Company Group may provide you with unique

and specialized training. You also acknowledge that such Confidential

Information and such training have been developed and will be developed by

the Company Group through the expenditure by the Company Group of

substantial time, effort and money and that all such Confidential

Information and training could be used by you to compete with the Company

Group. You also acknowledge that if you become employed or affiliated with

any competitor of the Company Group in violation of your obligations in

this Agreement, it is inevitable that you would disclose the Confidential

Information to such competitor and would use such Confidential

Information, knowingly or unknowingly, on behalf of such competitor.

Further, while you are employed by the Company, you will be introduced to

customers and others with important relationships to the Company Group.

You acknowledge that any and all “goodwill” created through such

introductions belongs exclusively to the Company Group, including, without

limitation, any goodwill created as a result of direct or indirect

contacts or relationships between yourself and any strategic partners,

research and development collaborators, customers, patrons, vendors and

suppliers of the Company Group.

(iv) For purposes of this Agreement, “Confidential

Information” means confidential and proprietary information of the Company

Group, whether in written, oral, electronic or other form, including but

not limited to, any and all versions of the Company Group’s proprietary

pharmaceutical systems, data and documentation, all proprietary computer

system software, firmware, data, documentation and information now or

later created, developed, produced or marketed by the Company Group, or

any other information and facts concerning business plans, customers,

future customers, suppliers, licensors, licensees, partners,

collaborators, investors, affiliates or others, training methods and

materials, financial information, sales prospects, client lists,

inventions, or any other scientific, technical or trade secrets of the

Company Group or of any third party provided to you or the Company Group

under a condition of confidentiality, provided that Confidential

Information will not include information that is in the public domain

other than through any fault or act by you. The term “trade secrets,” as

used in this Agreement, will be given its broadest possible interpretation

under the law of the Commonwealth of Massachusetts and will include,

without limitation, anything tangible or intangible or electronically kept

or stored, which constitutes, represents, evidences or records secret,

scientific, technical, merchandising, production or management

information, or any design, process, procedure, formula, invention,

improvement or other confidential or proprietary information or documents.

(b) Non-Competition; Non-Solicitation. While you are employed by the

Company and for a period of twelve (12) months following the termination of your

<PAGE>

Mr. Sheldon Berkle

May 6, 2005

Page 6 of 16

employment by the Company for any reason or for no reason, you will not, without

the prior written consent of the Company:

(i) For yourself or on behalf of any other person or entity,

directly or indirectly, either as principal, partner, stockholder,

officer, director, member, employee, consultant, agent, representative or

in any other capacity, own, manage, operate or control, or be connected

with or employed by, or otherwise associate in any manner with, engage in

or have a financial interest in, any business or business activity which

is related to the research, development, manufacture, marketing, selling

or servicing of products or services that are competitive with the

products or services being marketed, sold, serviced or under active

development or serious consideration by or on behalf of the Company Group

anywhere in the world, including, but not limited to, services and

products related to the crystallization of proteins, antibodies or any

other matter, except that nothing contained herein will preclude you from

purchasing or owning securities of any such business if such securities

are publicly traded, and provided that your holdings do not exceed one

percent (1%) of the issued and outstanding securities of any class of

securities of such business; or

(ii) Either individually or on behalf of or through any third

party, directly or indirectly, solicit, divert or appropriate, or attempt

to solicit, divert or appropriate, for the purpose of competing with or

disrupting the relationship with the Company Group, any persons or

entities that are, or were, partners, collaborators, customers, patrons,

vendors or suppliers of the Company Group, or any prospective partners,

collaborators, customers, patrons, vendors or suppliers with respect to

which the Company Group has developed or made a presentation or engaged in

substantive discussions concerning establishing a relationship material to

the Company Group; or

(iii) Either individually or on behalf of or through any third

party, directly or indirectly, (A) hire, retain, solicit, entice,

encourage or persuade, or attempt to hire, retain, solicit, entice,

encourage or persuade, any director or employee of, or consultant to, the

Company Group to leave the service of the Company Group for any reason, or

(B) employ, cause to be employed, or solicit the employment or service of,

any director or employee of, or consultant to, the Company Group, in each

case while any such person is providing services to the Company Group or

within six months after any such person has ceased providing services to

the Company Group; or

(iv) Either individually or on behalf of or through any third

party, directly or indirectly, interfere with, or attempt to interfere

with, the relations between the Company Group and any partner,

collaborator, customer, patron, vendor or supplier of the Company Group.

(c) Reasonableness of Restrictions. You further recognize and

acknowledge that (i) the types of employment which are prohibited by this

Section 1 are narrow and reasonable in relation to the skills which represent

your principal salable asset both to the Company Group and to your other

prospective employers and (ii) the time

<PAGE>

Mr. Sheldon Berkle

May 6, 2005

Page 7 of 16

period and the geographical scope of the provisions of this Section 1 are

reasonable, legitimate and fair to you in light of the Company Group’s need to

pursue its business objectives and relationships, including, but not limited to,

its therapeutic product research and development efforts and the establishment

of collaborative partnerships, and in light of the limited restrictions on the

type of employment prohibited herein compared to the types of employment for

which you are qualified to earn your livelihood.

(d) Survival of Acknowledgements and Agreements. Your

acknowledgements and agreements set forth in this Section 1 will survive the

termination of this Agreement and the termination of your employment by the

Company for any reason or for no reason.

2. Protected Information. You will at all times, both during the period while

you are employed by the Company and after the termination of this Agreement and

the termination of your employment by the Company for any reason or for no

reason, maintain in confidence and will not, without the prior written consent

of the Company Group, use, except as required in the course of performance of

your duties for the Company Group or by court order, disclose or give to others

any Confidential Information. Upon the termination of your employment by the

Company for any reason or for no reason, or if the Company Group otherwise

requests, you will return to the Company Group all tangible Confidential

Information and copies thereof (regardless how such Confidential Information or

copies are maintained, including whether or not in electronic form or

otherwise). The terms of this Section 2 are in addition to, and not in lieu of,

any statutory or other contractual or legal obligation that you may have

relating to the protection of the Company Group’s Confidential Information. The

terms of this Section 2 will survive indefinitely any termination of this

Agreement and/or any termination of your employment by the Company for any

reason or for no reason.

3. Ownership of Ideas, Copyrights and Patents.

(a) Property of the Company. You acknowledge and agree that all

ideas, discoveries, creations, manuscripts and properties, innovations,

improvements, know-how, inventions, designs, developments, apparatus,

techniques, methods, biological processes, cell lines, laboratory notebooks and

formulae (collectively, the “Inventions”) which may be used in the current or

planned business of the Company Group or which in any way relates to such

business, whether patentable, copyrightable or not, which you may conceive,

reduce to practice or develop while you are employed by the Company (and, if

based on or related to any Confidential Information, within two years after

termination of such employment for any reason or for no reason), alone or in

conjunction with another or others, whether during or out of regular business

hours, whether or not on the Company Group’s premises or with the use of its

equipment, and whether at the request or upon the suggestion of the Company

Group or otherwise, will be the sole and exclusive property of the Company

Group, and you will not publish any of the Inventions without the prior written

consent of the Company Group. Without limiting the foregoing,

<PAGE>

Mr. Sheldon Berkle

May 6, 2005

Page 8 of 16

you also acknowledge and agree that all original works of authorship which are

made by you (solely or jointly with others) within the scope of your employment

or which relate to the business of the Company Group and which are protectable

by copyright are “works made for hire” pursuant to the United States Copyright

Act (17 U.S.C. Section 101). You hereby assign to the Company Group all of your

right, title and interest in and to all of the foregoing. You further represent

that, to the best of your knowledge and belief, none of the Inventions will

violate or infringe upon any right, patent, copyright, trademark or right of

privacy, or constitute libel or slander against or violate any other rights of

any person, firm or corporation, and that you will use your best efforts to

prevent any such violation.

(b) Cooperation. At any time during your employment by the Company

or after the termination of your employment by the Company for any reason or for

no reason, you will cooperate fully with the Company Group and its attorneys and

agents in the preparation and filing of all papers and other documents as may be

required to perfect the Company Group’s rights in and to any of such Inventions,

including, but not limited to, joining in any proceeding to obtain letters

patent, copyrights, trademarks or other legal rights with respect to any such

Inventions in the United States and in any and all other countries, provided

that the Company Group will bear the expense of such proceedings, and that any

patent or other legal right so issued to you personally will be assigned by you

to the Company Group without charge by you.

(c) Licensing and Use of Inventions. With respect to any Inventions,

and work of any similar nature (from any source), whenever created, which you

have not prepared or originated in the performance of your employment, but which

you provide to the Company Group or incorporate in any Company Group product or

system, you hereby grant to the Company Group a royalty-free, fully paid-up,

non-exclusive, perpetual and irrevocable license throughout the world to use,

modify, create derivative works from, disclose, publish, translate, reproduce,

deliver, perform, and dispose of, all such Inventions, and to authorize others

to do so. You will not include in any Inventions you deliver to the Company

Group or use on its behalf, without the prior written approval of the Company

Group, any material which is or will be patented, copyrighted or trademarked by

you or others unless you provide the Company Group with the written permission

of the holder of any patent, copyright or trademark owner for the Company Group

to use such material in a manner consistent with then-current Company Group

policy.

(d) Prior Inventions. Listed on Exhibit 3(d) to this Agreement are

any and all Inventions in which you claim or intend to claim any right, title

and interest (collectively, “Prior Inventions”), including, without limitation,

patent, copyright and trademark interests, which to the best of your knowledge

will be or may be delivered to the Company Group in the course of your

employment, or incorporated into any Company Group product or system. You

acknowledge that your obligation to disclose such information is ongoing while

you are employed by the Company.

<PAGE>

Mr. Sheldon Berkle

May 6, 2005

Page 9 of 16

4. Disclosure to Future Employers. You will provide, and the Company, in its

discretion, may similarly provide, a copy of the covenants contained in Sections

1, 2 and 3 of this Agreement to any business or enterprise which you may,

directly or indirectly, own, manage, operate, finance, join, control, or in

which you may participate in the ownership, management, operation, financing, or

control, or with which you may be connected as an officer, director, employee,

partner, principal, agent, representative, consultant or otherwise.

5. Records. Upon termination of your employment by the Company for any reason

or for no reason and at any other time requested by the Company, you will

deliver to the Company Group any property of the Company Group which may be in

your possession, including products, materials, memoranda, notes, records,

reports, or other documents or photocopies of the same (regardless of how they

are maintained, including whether or not in electronic form).

6. Assignment. This Agreement will be binding upon and inure to the benefit

of (a) your heirs, executors and legal representatives upon your death and (b)

any successor of the Company. Any such successor of the Company will be deemed

substituted for the Company under the terms of this Agreement for all purposes.

For this purpose, “successor” means any person, firm, corporation or other

business entity which at any time, whether by purchase, merger or otherwise,

directly or indirectly acquires all or substantially all of the assets or

business of the Company. None of your rights to receive any form of compensation

payable pursuant to this Agreement may be assigned or transferred except by will

or the laws of descent and distribution. Any other attempted assignment,

transfer, conveyance or other disposition of your right to compensation or other

benefits will be null and void.

7. Notices. All notices, requests, demands and other communications called

for hereunder will be in writing and will be deemed given (a) on the date of

delivery if delivered personally, (b) one (1) day after being sent by a well

established commercial overnight service, or (c) four (4) days after being

mailed by registered or certified mail, return receipt requested, prepaid and

addressed to the parties or their successors at the following addresses, or at

such other addresses as the parties may later designate in writing:

If to the Company:

Altus Pharmaceuticals Inc.

125 Sidney Street

Cambridge, MA 02139

Attn: Chairman of the Board

With a copy to:

Jonathan L. Kravetz, Esq.

Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

<PAGE>

Mr. Sheldon Berkle

May 6, 2005

Page 10 of 16

One Financial Center

Boston, MA 02111

If to you:

At your home address as listed in your personnel file at the Company from time

to time

8. Representations. You hereby represent and warrant to the Company that you

understand this Agreement, that you enter into this Agreement voluntarily and

that your employment by the Company will not conflict with any legal duty owed

by you to any other party, or with any agreement to which you are a party or by

which you are bound, including, without limitation, any non-competition or

non-solicitation provision contained in any such agreement. You will indemnify

and hold harmless the Company Group and its officers, directors, security

holders, partners, members, employees, agents and representatives against loss,

damage, liability or expense arising from any claim based upon circumstances

alleged to be inconsistent with such representation and warranty.

9. Entire Agreement. This Agreement represents the entire agreement and

understanding between you and the Company concerning the subject matter herein,

and supersedes and replaces any and all prior or contemporaneous agreements and

understandings whether written or oral between you and the Company concerning

the subject matter herein.

10. Injunctive Relief. You hereby expressly acknowledge that any breach or

threatened breach of any of the terms and/or conditions set forth in Section 1,

2 or 3 of this Agreement will result in substantial, continuing and irreparable

injury to the Company Group. Therefore, in addition to any other remedy that may

be available to the Company Group, the Company Group will be entitled to

injunctive or other equitable relief by a court of appropriate jurisdiction in

the event of any breach or threatened breach of the terms of Section 1, 2 or 3

of this Agreement. The period during which the covenants contained in Section 1

will apply will be extended by any periods during which you are found by a court

to have been in violation of such covenants.

11. Arbitration. Any controversy, dispute or claim arising out of or in

connection with this Agreement, other than a controversy, dispute or claim

arising under Section 1, 2 or 3 hereof, will be settled by final and binding

arbitration to be conducted in Boston, Massachusetts pursuant to the national

rules for the resolution of employment disputes of the American Arbitration

Association then in effect. The decision or award in any such arbitration will

be final and binding upon the parties, and judgment upon such decision or award

may be entered in any court of competent jurisdiction, or application may be

made to any such court for judicial acceptance of such decision or award and an

order of enforcement. In the event that any procedural matter is not covered by

the aforesaid rules, the procedural law of Massachusetts will govern. Any

disagreement as to whether

<PAGE>

Mr. Sheldon Berkle

May 6, 2005

Page 11 of 16

a particular dispute is arbitrable under this Agreement shall itself be subject

to arbitration in accordance with the procedures set forth herein.

12. No Oral Modification, Cancellation or Discharge; Seal. This Agreement may

be amended or terminated only in writing signed by you and the Company. This

Agreement shall operate in all respects as an instrument under seal.

13. Governing Law; Jurisdiction and Venue. This Agreement will be governed by

the laws of the Commonwealth of Massachusetts, without giving effect to the

conflict of law principles thereof. Any legal action or proceeding with respect

to this Agreement that is not subject to arbitration pursuant to Section 11 will

be brought in the courts of the Commonwealth of Massachusetts or of the United

States of America for the District of Massachusetts. By execution and delivery

of this Agreement, each of the parties hereto accepts for itself and in respect

of its property, generally and unconditionally, the exclusive jurisdiction of

the aforesaid courts.

14. Acknowledgment. You acknowledge that you have had the opportunity to

discuss this matter with and obtain advice from your private attorney, have had

sufficient time to, and have carefully read and fully understand all the

provisions of this Agreement, and are knowingly and voluntarily entering into

this Agreement.

15. Severability. The parties intend this Agreement to be enforced as written.

However, (a) if any portion or provision of this Agreement is to any extent

declared illegal or unenforceable by a duly authorized court having

jurisdiction, then the remainder of this Agreement, or the application of such

portion or provision in circumstances other than those as to which it is so

declared illegal or unenforceable, will not be affected thereby, and each

portion and provision of this Agreement will be valid and enforceable to the

fullest extent permitted by law, and (b) if any provision, or part thereof, is

held to be unenforceable because of the duration of such provision, the

geographic area covered thereby, or other aspect or scope of such provision, the

court making such determination will have the power to reduce the duration or

geographic area of such provision, or other aspect or scope of such provision,

and/or to delete specific words and phrases (“blue-penciling”), and in its

reduced or blue-penciled form, such provision will then be enforceable and will

be enforced.

16. Counterparts. This Agreement may be executed in two or more counterparts,

and by different parties hereto on separate counterparts, each of which will be

deemed an original, but all of which together will constitute one and the same

instrument.

<PAGE>

Mr. Sheldon Berkle

May 6, 2005

Page 12 of 16

By signing below, you acknowledge and agree to the foregoing understandings and

agreements set forth herein.

ALTUS PHARMACEUTICALS INC.

By: /s/ John Richard

—

John Richard

Chairman of the Board

ACKNOWLEDGED AND AGREED:

/s/ Sheldon Berkle            May 10, 2005

——  —

Sheldon Berkle            Date

<PAGE>

Mr. Sheldon Berkle

May 6, 2005

Page 13 of 16

EXHIBIT 3(d)

PRIOR INVENTIONS

<PAGE>

Mr. Sheldon Berkle

May 6, 2005

Page 14 of 16

APPENDIX B

Altus offers a medical and dental plan which includes coverage of most

prescription drugs, annual physicals, young well-child care and vaccinations,

women’s health checkups, vision care, dental coverage, and other features. Altus

requires a 15% premium co-payment to be applied to health insurance costs, but

this co-payment is capped at a maximum of 1% of gross salary. We may advise you

to undergo a baseline medical surveillance exam, at our expense, for purposes of

occupational health screening. We offer Altus-paid life insurance in an amount

equal to approximately twice your base salary, as well as an industry-standard

disability insurance program. We also have a 401(k) tax-deferred savings plan.

This is a voluntary plan which you will be eligible for after your first full

calendar quarter of employment. The plan is administered at our expense,

allowing you to save a portion of your income in a tax-deferred manner. Employee

savings through the 401(k) plan are matched by a Company contribution in the

form of cash, currently on the basis of $0.75 of cash for every $1.00 saved by

the employee, up to the first 6% of salary, subject to certain limits required

by law.

<PAGE>

Mr. Sheldon Berkle

May 6, 2005

Page 15 of 16

APPENDIX C

For purposes of this letter agreement, “CAUSE” shall include (and is not limited

to) (i) dishonesty with respect to the Company or any Affiliate (an “Affiliate”

being any corporation which, for purposes of Section 424 of the Internal Revenue

Code, is a parent or subsidiary of the Company, direct or indirect), (ii)

insubordination, (iii) substantial malfeasance or nonfeasance of duty, (iv)

unauthorized disclosure of confidential information, (v) breach by you of any

material provision of any employment, consulting, advisory, nondisclosure,

non-competition or similar material agreement between you and the Company, which

breach is not cured to the satisfaction of the Board of Directors within ten

(10) days after notice to you by the Company of such breach, and (vi) conduct

substantially prejudicial to the business of the Company or any Affiliate. The

determination of the Board of Directors (unless it has delegated power to act on

its behalf to a committee, in which case the determination of the committee) as

to the existence of “cause” will be conclusive on you and the Company.

For purposes of this letter agreement, “CHANGE IN CONTROL” shall mean:

(i) the shareholders of the Company approve (a) any

consolidation or merger of the Company (x) where the shareholders of the

Company, immediately prior to the consolidation or merger, would not,

immediately after the consolidation or merger, beneficially own, directly or

indirectly, shares representing in the aggregate more than 50% of the combined

voting power of all the outstanding securities of the corporation issuing cash

or securities in the consolidation or merger (or of its ultimate parent

corporation, if any) or (y) where the members of the Board of Directors of the

Company, immediately prior to the consolidation or merger, would not,

immediately after the consolidation or merger, constitute more than 50% of the

board of directors of the corporation issuing cash or securities in the

consolidation or merger (or of its ultimate parent corporation, if any), (b) any

sale, lease, exchange or other transfer (in one transaction or a series of

transactions contemplated or arranged by any party as a single plan) of all or

substantially all of the assets of the Company, or (c) any plan or proposal for

the liquidation or dissolution of the Company.

(ii) individuals who, as of the date hereof, constitute

the entire Board of Directors of the Company (the “Incumbent Directors”) cease

for any reason to constitute at least 50% of the Board, provided that any

individual becoming a director subsequent to the date hereof whose election, or

nomination for election by the Company’s shareholders, was approved by a vote of

at least a majority of the then Incumbent Directors shall be, for purposes

hereof, considered as though such individual were an Incumbent Director; or

<PAGE>

Mr. Sheldon Berkle

May 6, 2005

Page 16 of 16

(iii) any “person”, as such term is used in Section

13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)

(other than the Company, any employee benefit plan of the Company or any entity

organized, appointed or established by the Company for or pursuant to the terms

of such plan), together with all “affiliates” and “associates” (as such terms

are defined in Rule 12b-2 under the Exchange Act) of such person, shall after

the date hereof become the “beneficial owner” or “beneficial owners” (as defined

in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of

securities of the Company representing in the aggregate 25% or more of either

(a) the then outstanding shares of the Common Stock of the Company or (b) the

combined voting power of all then outstanding securities of the Company having

the right under ordinary circumstances to vote in an election of the Board of

Directors of the Company (“Voting Securities”) (in either such case, other than

as a result of acquisitions of such securities directly from the Company).

Notwithstanding the foregoing, a “change in control” of the Company

shall not be deemed to have occurred for purposes of the foregoing clause (iii)

solely as the result of an acquisition of securities by the Company which, by

reducing the number of shares of Common Stock or other Voting Securities

outstanding, increases (a) the proportionate number of shares of Common Stock

beneficially owned by any person to 25% or more of the Common Stock then

outstanding or (b) the proportionate voting power represented by the Voting

Securities beneficially owned by any person to 25% or more of the combined

voting power of all then outstanding Voting Securities; provided, however, that

if any person referred to in clause (a) or (b) of this sentence shall thereafter

become the beneficial owner of any additional shares of Common Stock or other

Voting Securities (other than pursuant to a stock split, stock dividend or

similar transaction), then a “change in control” shall be deemed to have

occurred for purposes of the foregoing clause (iii).

For purposes of this letter agreement, resigning for “GOOD REASON” means you

terminate your employment after there has occurred (i) a material adverse change

in your duties, authority or responsibilities which causes your position with

the Company to become of significantly less responsibility or authority than it

was immediately prior to such change, or (ii) a reduction in your base salary or

(ii) a material diminution in the overall package of employee benefits as

described in Appendix B to the Offer Letter dated May 6, 2005, which change does

not also apply to other executive employees of the Company.

<PAGE>

September 29, 2005

Mr. Sheldon Berkle

Dear Shelly:

The purpose of this letter agreement (this “Agreement”) is to amend

that certain letter agreement between you and Altus Pharmaceuticals Inc. (the

“Company”) dated May 6, 2005 (the “Offer Letter”), in order to convert the loan

set forth in the fourth paragraph thereof into a stay bonus in order to comply

with the provisions of Section 402 of the Sarbanes-Oxley Act of 2002.

Capitalized terms used but not defined herein shall have the meanings ascribed

to them in the Offer Letter.

In consideration of your continued service to the Company as the

President, Chief Executive Officer and a member of the Board of Directors, and

the promises, conditions and representations set forth herein, and other good

and valuable consideration, the receipt and sufficiency of which is hereby

acknowledged by you and the Company, you and the Company hereby agree that the

Offer Letter is amended as follows:

1. AGREED AMENDMENT. In consideration of the termination of the

$150,000 loan made to you by the Company on the Commencement Date, you are

hereby granted a bonus of $153,500 (the “Bonus”) as of the date hereof. Such

Bonus shall be paid to you as follows: (a) $150,000 of the Bonus shall be paid

to you by means of your retention of the amount of the aforementioned loan,

which the Company hereby forgives, and (b) $3,500 shall be paid to you by means

of an additional payment from the Company. The Bonus will be fully taxable to

you upon payment. Should you voluntarily terminate your employment or the

Company terminates your employment for cause (as defined in the Offer Letter)

before the first anniversary of the Commencement Date, you shall repay to the

Company within ninety (90) days of such termination an amount equal to $150,000

less the amount of taxes incurred by you in connection with your receipt of such

portion of the Bonus. Should you voluntarily terminate your employment or the

Company terminates your employment for cause after the first anniversary and

before the second anniversary of the Commencement Date, you shall repay to the

Company within ninety (90) days of such termination an amount equal to $75,000

less the amount of taxes incurred by you in connection with your receipt of such

portion of the Bonus. If you remain in the continuous employment of the Company

between the Commencement Date and the second anniversary of the Commencement

Date, any obligation to repay the Bonus or a portion thereof shall lapse in its

entirety. Please note that if you resign for good reason (as defined in the

Offer Letter), it will not be considered a voluntary termination by you of your

employment, and you will have no repayment obligation. You will also have no

repayment obligation if your employment is terminated by Altus, except if such

termination is for cause.

<PAGE>

Mr. Sheldon Berkle

September 29, 2005

Page 2

2. GOVERNING LAW. This Agreement shall be deemed to have been made in

Massachusetts, shall take effect as an instrument under seal within

Massachusetts, and shall be governed by and construed in accordance with the

laws of Massachusetts, without giving effect to conflict of law principles.

3. EFFECT ON ORIGINAL AGREEMENT. Except as specifically provided in

this Agreement, no other amendments, revisions or changes are made to the Offer

Letter. All other terms and provisions of the Offer Letter shall remain in full

force and effect.

4. COUNTERPARTS. This Agreement may be executed in two or more

counterparts, each of which shall be deemed an original, but all of which

together shall constitute one and the same instrument.

By executing this Agreement, you are acknowledging that you have been

afforded sufficient time to understand, and seek advice from your personal

counsel, on the terms and effects of this Agreement, and that your agreements

hereunder are made voluntarily, knowingly and without duress, and that neither

the Company nor its agents or representatives have made any representations

inconsistent with the provisions of this Agreement.

Sincerely,

ALTUS PHARMACEUTICALS INC.

By: /s/ John Richard

—

John Richard

Chairman of the Board

CONFIRMED, ACKNOWLEDGED AND AGREED:

/s/ Sheldon Berkle

—

Sheldon Berkle

Dated: September 29, 2005

5

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