Document:

meminttransferagmt_8k112508.htm

    MEMBERSHIP
INTEREST TRANSFER AGREEMENT

    

    

    THIS MEMBERSHIP INTEREST TRANSFER
AGREEMENT (“Agreement”), dated as of this 19th day of
November, 2008, by and among ST. CHARLES COMMUNITY, LLC, a
Delaware limited  liability company (hereinafter, the “Seller”), and
U.S. HOME CORPORATION, a
Delaware corporation (hereinafter, the “Purchaser”).

    

    WITNESSETH:

    

    WHEREAS, Seller is the owner
of fifty percent (50%) of the membership interests of St. Charles Active Adult
Community, LLC, a Maryland limited liability company (the “Company”);
and

    

    WHEREAS, Purchaser is the
owner of fifty percent (50%) of the membership interests in the Company;
and

    

    WHEREAS, the Company was
formed as a Maryland limited liability company pursuant to those certain
Articles of Organization of the Company filed with the Maryland State Department
of Assessments and Taxation on September 21, 2004 (the “Articles of
Organization”) and that certain Operating Agreement of the Company dated as of
September 28, 2004 (the “Operating Agreement”); and

    

    WHEREAS, pursuant to the
provisions of the Operating Agreement, Seller was appointed and has acted as
Manager (as such term is defined in the Operating Agreement) of the Company from
and after the formation of the Company; and

    

    WHEREAS, the Seller desire to
sell its entire, undivided fifty percent (50%) membership interest (the
“Membership Interest”) in the Company to Purchaser, and Purchaser desires to
acquire from Seller, Seller’s entire undivided Membership Interest in the
Company, in accordance with the terms, provisions and conditions set forth
herein below; and

    

    WHEREAS, Seller and Purchaser
further desire to terminate the Affiliated Agreements (defined hereinafter) in
accordance with the terms, provisions and conditions set forth herein
below.

    

    NOW, THEREFORE, in
consideration of the foregoing premises, the reciprocal agreements of the
parties herein contained, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:

    

    1.           Agreement.
 

    1.1           Purchase and Sale of
Membership Interest.

    

              (a) Seller agrees to sell,
assign, convey and deliver to Purchaser, and Purchaser agrees to purchase from
Seller, its entire, undivided Membership Interest in the Company, free and clear
of all liens and encumbrances, for the price and upon the terms and subject to
the conditions herein contained.

     

         
 (b) Upon payment of the Purchase Price in full, and from and
after Closing (defined hereinafter) hereunder, Seller shall be deemed to have
assigned, transferred, and set over to Purchaser, its successors and assigns,
all of Seller's right, title and interest in, under and to all of the Membership
Interest, including, without limitation, all rights to share in such profits and
losses, to receive such distribution or distributions, and to receive such
allocations of income, gain, loss, deduction or credit or similar items to which
Seller, as a Member in the Company, was entitled, all right, title and interest
in and to Seller’s capital account, all rights of the Seller as a Member of the
Company to exercise any and all rights and powers of a Member of the Company and
to participate in the management of the business and affairs of the Company, all
rights of the Seller as the Manager of the Company to exercise any and all
rights and powers of the Manager, and any and all other rights otherwise inuring
to the Seller by virtue of owning the Membership Interest and being a member of
the Company, whether under the Operating Agreement, the Maryland Limited
Liability Company Act or otherwise.  The Seller acknowledge and agree
that so long as this Agreement remains in effect, Seller shall not be entitled
to any distributions or allocations of profit, income or cash from the Company,
and Seller hereby waives any and all claims with respect thereto.  In
the event Seller files a partial year tax return for the Company after Closing
hereunder, such return shall be prepared in accordance with the provisions of
the Operating Agreement, provided however, Purchaser shall have the right to
approve the allocations of profits and losses to the Company and its
Members.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

                1.2           Affiliated
Agreements. At Closing hereunder, Seller, Purchaser and/or the
Company, as the case may be, shall cause the following agreements referred to or
contemplated in the Operating Agreement to be terminated upon the terms and
subject to the conditions hereinafter contained (collectively, the “Affiliated
Agreements”):

    

    (a) that
certain Joint Venture Agreement For St. Charles Active Adult Community dated
November 14, 2002 between Seller and Purchaser, as amended by (i) a First
Amendment to Joint Venture Agreement dated February 13, 2003, (ii) a Second
Amendment to Joint Venture Agreement dated February 28, 2003, (iii) a Third
Amendment to Joint Venture Agreement dated February 28, 2003, and (iv) a Fourth
Amendment to Joint Venture Agreement dated March, 2003 (collectively, the “Joint
Venture Agreement”);

    

    (b) that
certain Management and Development Agreement dated November 23, 2004 between
Seller, as manager, and the Company, as owner (the “Management and Development
Agreement”); and

    

    (c) that
certain Purchase Agreement dated November 23, 2004 between the Company, as
seller,  and the Purchaser, as purchaser, as amended by a First
Amendment to Purchase Agreement dated June 20, 2006 (collectively, the “Purchase
Agreement”).

    

    2.           Purchase
Price.  The purchase price to be paid by Purchaser to Seller
(the “Purchase Price”) for the Membership Interest shall be Three Million Four
Hundred Sixty-seven Thousand and No/100 Dollars ($3,467,000.00), payable as set
forth in Section 3.4 hereunder.

    

    3.           Closing.

    

    3.1           Conditions Precedent to the
Obligations of Purchaser. Each and every obligation of Purchaser to be
performed at Closing shall be subject to the satisfaction, prior to or at
Closing, of each the following conditions precedent:

    

    (a) All
proceedings, with respect to the Company or otherwise, to be taken in connection
with the transactions contemplated by this Agreement, and all documents incident
thereto, shall be reasonably satisfactory in form and substance to Purchaser and
Purchaser’s counsel, and Seller shall have made available to Purchaser for
examination the originals or true and correct copies of all documents related to
the Membership Interest and the Property in Seller’s possession or control,
which Purchaser may reasonably request in writing, in connection with the
transactions contemplated by this Agreement.

    

    (b) During
the period from the Effective Date through the Closing Date (as hereafter
defined), there shall not have occurred, and there shall not exist on the
Closing Date, any condition or fact which is or may be materially adverse to the
financial condition of the Company.  For purposes of this condition,
Purchaser acknowledges that it owns the other fifty percent (50%) membership
interest in the Company, and is familiar with the business and affairs of the
Company as of the Effective Date, including, but not limited to, its financial
standing.

    

    (c) During
the period from the Effective Date through the Closing Date, (i) neither the
Company nor any real property, personal property or other assets of the Company
shall have been adversely affected by reason of any loss, taking, moratorium,
condemnation, destruction or physical damage, whether or not insured
against.

    

    (d) During
the period from the Effective Date through the Closing Date, there shall not
have occurred any materially adverse change in the physical or environmental
condition of the Property, or any part thereof.

    

    (e) The
representations and warranties made by Seller in this Agreement shall be true
and correct in all material respects as of the Closing Date with the same force
and effect as if said representations and warranties had been made on the
Closing Date.  Seller shall provide Purchaser at Closing with a
factually accurate written certificate (“Closing Certificate”) confirming that
all such representations and warranties remain true and complete on the Closing
Date, as if such representations and warranties had been made on the Closing
Date.  Notwithstanding that certain of Seller’s representations and
warranties may be limited to the extent of the Seller’s knowledge (or other
similar qualifiers) of the facts stated therein, the condition precedent to
Purchaser’s obligation to settle hereunder shall not be so limited, and the
satisfaction of said condition shall depend upon the actual correctness as of
the time of Closing of the facts stated in all such representations and
warranties.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (f) From and
after the Effective Date, Seller shall be prepared to perform and/or observe,
and as of Closing, Seller shall have performed and observed, each in all
material respects, all covenants, obligations and agreements required of Seller
under this Agreement.

    
       

    

    (g) Fee
simple title to the Property (as hereafter defined) shall be vested in the
Company and shall be good of record and in fact, insurable at standard rates and
free and clear of all liens, encumbrances, leases and tenancies, except for the
following exceptions: (a) the lien of any real estate taxes and assessments for
the then current tax year, (b) those exceptions shown on Schedule B of that
certain owner’s title insurance policy issued to the Company (the “Company’s
Title Insurance Policy”), a copy of which is attached as Exhibit A hereto and
made a part hereof, (c) such additional instruments, liens, encumbrances,
easements and/or rights of way as have been recorded in the Land Records of the
County in connection with the development and construction on the Property since
the date of the Company’s Title Insurance Policy, and (d) the lien, operation
and effect of the first lien deed of trust and any amendments thereto on the
Property to secure the Chevy Chase Loan (defined hereinafter) (collectively, the
“Permitted Exceptions”).  In addition, Purchaser shall have acquired
the binding commitment (which commitment, Purchaser shall diligently pursue)
from a nationally recognized title insurance company selected by Purchaser (the
“Purchaser’s Title Insurance Company”) to issue to Purchaser (or at Purchaser’s
election, the Company) on the Closing Date, at Purchaser’s expense, an A.L.T.A.
owner’s title insurance policy (or, at Purchaser’s election, an endorsement to
the Company’s Title Insurance Property) with a “non-imputation endorsement” and
such other endorsements reasonably requested by Purchaser (collectively, the
“Purchaser’s Title Policy”) in the amount of Eleven Million Dollars
($11,000,000.00), insuring the fee simple estate in the Property  to
be vested of record in the Company, subject solely to the Permitted
Exceptions.

    

    In the
event any of the conditions precedent contained in this Agreement have not been
satisfied on or before the Closing Date (unless the failure of any such
condition precedent is caused by the direct action of Purchaser, which direct
action continues after fifteen (15) days written notice from Seller to
Purchaser), then Purchaser shall thereafter have the right, by written notice
given to Seller on or before the Closing Date, to either (i) terminate this
Agreement upon written notice to Seller, in which event neither party shall have
any further liability hereunder, except for such liabilities that expressly
survive termination of this Agreement, and the Affiliated Agreements shall
remain in full force and effect, or (ii) waive such unsatisfied condition(s) by
written notice to Seller given on or before the Closing Date, and proceed to
Closing as provided herein, provided however, any such waiver shall not
constitute a waiver by Purchaser of any breach by Seller of any of its
covenants, representations, or warranties under this Agreement, or (iii) extend
the Closing Date until that date which is ten (10) days after satisfaction of
all such conditions precedent, provided however, if Purchaser elects item (iii),
Purchaser shall thereafter continue to have the right to elect item (i) or (ii)
above.  Notwithstanding the foregoing, in the event Purchaser elects
to extend the Closing Date pursuant to item (iii) above, Seller shall use its
best efforts to satisfy all unsatisfied conditions precedent to Closing;
provided however, in the event that despite such effort Seller fails to satisfy
all unsatisfied conditions precedent to Closing on that date which is sixty (60)
days after the original Closing Date, then Purchaser shall, within ten (10) days
after the expiration of such sixty (60) day period, elect item (i) or (ii) above
by written notice given to Seller.  In the event Purchaser fails to
provide said notice within such ten (10) day period, Purchaser shall be deemed
to have elected item (i).

    

    3.2           Closing
Date.  Provided that all of the conditions precedent set forth
in this Agreement have been satisfied, or waived by Purchaser as set forth
above, the closing (“Closing”) of the transfer of the Membership Interest
pursuant to this Agreement shall occur on November 26, 2008 (the “Closing Date”)
at the offices of the Purchaser’s Title Insurance Company (the “Settlement
Agent”).  Time shall be of the essence as to the Closing
Date.

    

    3.3           Seller’s
Obligations. On the Closing Date, Seller shall:

    

    (a) execute, acknowledge and
deliver to Purchaser an Assignment of Membership Interest, in the form attached
as Exhibit B,
with special warranty of title, conveying to Purchaser all of Seller’s
Membership Interest free and clear of any and all Liens (as hereinafter
defined).

    

    (b) pay all costs which Seller is
obligated to pay under the terms of this Agreement;

    

    (c) approve, execute and deliver
to Purchaser and the Settlement Agent a settlement statement prepared by the
Settlement Agent and approved by the parties reflecting all payments and
adjustments (if any) pertinent to the sale and purchase of the Membership
Interest;

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (d) execute and deliver to the
Settlement Agent a sworn statement that Seller is not a “foreign person” or a
“foreign corporation”, as the case may be, and containing such other information
as may be required by Section 1445(b)(2) of the Internal Revenue Code and the
regulations thereunder;

    

    (e) execute and deliver to
Purchaser’s Title Insurance Company any and all affidavits, indemnities and
other documentation which may be reasonably required by the Purchaser’s Title
Insurance Company, including but not limited to a non-imputation affidavit in
usual and customary form;

    
       

    

    (f) execute
and deliver the Closing Certificate to Purchaser;

    
       

    

    (g) deliver
to Purchaser the fully executed Contract Assignments (defined hereinafter),
fully executed by all necessary parties;

    

    (h) execute
and deliver original counterparts of the Joint Venture Termination Agreement
(defined hereinafter) and the Purchase Agreement Termination Agreement (defined
hereinafter) to Purchaser, and shall cause the Company to execute and deliver
original counterparts of the Management and Development Agreement Termination
Agreement (defined hereinafter) to Purchaser;

    

    (i) execute
and deliver to Purchaser such resolutions or other documentation reasonably
satisfactory to Purchaser necessary to evidence Seller’s resignation and
termination as the Manager, an authorized person, and officer of the
Company;

    

    (j) deliver
any and all documents and other information with respect to the Company’s bank,
credit or investment accounts of the Company, and execute and deliver to
Purchaser such resolutions or other documentation reasonably satisfactory to
Purchaser and as required by the financial institutions administering such
accounts, necessary to evidence Seller’s removal and termination as an
authorized person on such accounts;

    

    (k) cause the
return of the letter of credit Deposit (as such term is defined in the Purchase
Agreement) in the amount of One Million Dollars ($1,000,000.00) being held by
the escrow agent in accordance with the Purchase Agreement, and execute and
deliver to Purchaser authorization to cancel such letter of credit in form and
substance required by the issuer of such letter of credit, and as otherwise
required by Purchaser;

    

    (l) execute
and deliver all additional documents which may be reasonably necessary or
appropriate to carry out the provisions of this Agreement; and

    

    (m) deliver
the Financial Statements (defined hereinafter).

    

    3.4           Purchaser’s
Obligations.  On the Closing Date, Purchaser
shall:

    

    (a) pay the Purchase Price in
full to Settlement Agent in immediately available funds, by cashier’s or
certified check or wire transfer of funds, for delivery to Seller upon
consummation of the Closing;

    

    (b) approve, execute and deliver
to Seller and the Settlement Agent a settlement statement prepared by the
Settlement Agent and approved by the parties reflecting all payments and
adjustments (if any) pertinent to the sale and purchase of the Membership
Interest;

    

    (c) execute
and deliver original counterparts of the Joint Venture Termination Agreement
(defined hereinafter) and the Purchase Agreement Termination Agreement (defined
hereinafter) to Seller, and shall cause the Company to execute and deliver
original counterparts of the Management and Development Agreement Termination
Agreement (defined hereinafter) to Seller; and

    

    (d) execute
and deliver all additional documents which may be reasonably necessary or
appropriate to carry out the provisions of this Agreement; and

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    4.           Representations and
Warranties.

     

              4.1            
Seller’s
Representations and Warranties - as to the Seller. Subject to the
terms of this Agreement, Seller represents, warrants and covenants to Purchaser
that, as of the Effective Date and again as of the Closing Date:

    

    (a) Seller is
the sole owner, beneficially, legally and of record, of the Membership Interest
and possesses all requisite power and authority to enter into and perform this
Agreement and to carry out the transactions contemplated herein.  All
consents, approvals, and authorizations from any person or entity required for
the execution and delivery of this Agreement by Seller, and the compliance by
Seller with all the provisions hereof, have been obtained and will be in effect
as of the Closing Date.

    
       

    

    (b) The
transfer by Seller of its Membership Interest in the Company, pursuant to this
Agreement, does not conflict with and will not result in any breach of the
terms, conditions or provisions of, constitute a default under, or result in or
permit the creation or imposition of any Lien (defined hereinafter) upon the
Membership Interest or the Property pursuant to any indenture, mortgage, or
other agreement or instrument or any judgment, decree, order or decision to
which Seller or the Company is a party or by which Seller and/or its Membership
Interest and/or the Company and/or the Property are bound, other than the Chevy
Chase Loan Documents.

    

    (c) There is
no pending, and to the best of Seller’s knowledge no threatened, action, suit,
arbitration, or legal, administrative, or other proceeding, in any court or by
or before any governmental agency affecting Seller’s Membership Interest in the
Company or affecting the Company or the Property or in any manner related to or
arising out of the ownership, management, or operation of the Property by the
Company or otherwise.

    

    (d) No
bankruptcy, insolvency, rearrangement, reorganization or similar action or
proceeding, whether voluntary or involuntary, is pending or, to Seller's
knowledge, threatened against Seller or the Company, and Seller has no intention
of filing or commencing any such action or proceeding.

    

    (e) Seller
has made “capital contributions” to the Company totaling Four Million Six
Hundred Twenty-six Thousand Eight Hundred Ninety-four Dollars ($4,626,894) and
“additional capital contributions” to the Company totaling Zero Dollars ($0) and
Seller’s “capital account” has a positive balance of Three Million Four Hundred
Sixty-six Thousand Eight Hundred Ninety-four Dollars
($3,466,894).  For purposes of this Agreement, the terms “capital
contribution”, “additional capital contribution” and “capital account” shall
have the meanings assigned to them in the Operating Agreement.  From
and after Closing hereunder, (i) Seller’s capital account shall transfer and
carry over to Purchaser in accordance with the provisions of Treas. Reg.
§1.704-1(b)(2)(iv)(1), and (ii) all loans made by Seller to the Company shall be
deemed discharged, and paid in full.

     

    (f) As of the
Closing Date, any and all obligations or liabilities which the Company or
Purchaser may have under any management agreement, development agreement, loan
transaction or similar or related agreements or transactions, including but not
limited to the Management and Development Agreement, which may require the
Company to pay any fees, compensation or other payments to Seller or to any
other person related to or controlled, directly or indirectly, by Seller with
respect to the Company or the Property shall be terminated and no longer binding
upon the Company or Purchaser, other than the payment of the Road Fee (defined
hereinafter in Section 5.1(c)).  Notwithstanding the foregoing, the
Company and Purchaser, as applicable, shall remain subject to the obligations
contained in the PUD Documents (as defined below) to the same extent that any
owner of real property in the St. Charles Planned Unit Development is subject to
the PUD Documents.

    

    (g) This
Agreement constitutes Seller’s valid and legally binding obligation enforceable
against Seller and its legal representatives, and their respective successors
and permitted assigns, in accordance with its terms.  The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby by Seller will not (a) to Seller’s knowledge,
violate any law, governmental regulation, order, or decree to which Seller or
the Company is subject or any agreement or other instrument to which Seller or
the Company is a party or by which it is bound, (b) result in a breach or
default under any agreement or other binding commitment of Seller or the Company
(other than the Chevy Chase Loan Documents), or any provision of the
organizational documents of Seller or the Company, or (c) require any consent or
approval or vote that has not been taken or given, or at the time of the
transaction involved, shall not have been taken or given.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (h) Other
than as contained in the Permitted Exceptions, the Required Documents (defined
hereinafter) or the Approvals (defined hereinafter), Seller has not made, on
behalf of itself, the Property, or the Company, any commitments or
representations to any applicable governmental authorities, homeowners
associations, any adjoining or surrounding property owners, or any other person
or entity, which would in any manner be binding upon Purchaser or the Company or
interfere with Purchaser’s or the Company’s ability to develop and improve the
Property.

     

    (i) Seller,
as manager under the Management and Development Agreement, has fully performed
each and every action and obligation required to be performed by manager under
the Management and Development Agreement substantially in accordance with the
terms and provisions of the Management and Development Agreement, and no “Event
of Default” (as such term is defined in the Management and Development
Agreement) has occurred thereunder.

    

    4.2   Seller’s Representations and
Warranties - as to the Company. Subject to the terms of this
Agreement, Seller represents, warrants and covenants to Purchaser that, as of
the Effective Date and again as of the Closing Date:

     

    (a) The
Membership Interest is good and marketable, free and clear of any and all liens,
encumbrances, pledges, security agreements, options, claims, charges and
restrictions of any nature or kind whatsoever (collectively,
“Liens”).  The Membership Interest has not previously been assigned,
no other person has any right to purchase any of the Membership Interest, Seller
has the right and ability to transfer the Membership Interest, no other person
or entity has any legal or beneficial interest in the Membership Interest and,
except for Purchaser or as may have been created by Purchaser, no other person
or entity has any other legal or beneficial interest in the ownership of the
Company.

    

    (b) The
Membership Interest constitutes all membership interests owned by Seller in the
Company.  To Seller’s knowledge, the Membership Interest has not been
certificated, and no certificates or other evidence of the Membership Interest
exists.

    

    (c) As set
forth in the Company’s Title Insurance Policy, the Company is the fee simple
owner, beneficially, legally and of record, of good and marketable, fee simple
title in and to that certain real property and its improvements located in St.
Charles, Charles County (the “County”), Maryland, as shown in Parcel A,
Gleneagles Neighborhood, as more fully described on Exhibit C, attached
hereto and made a part hereof (the “Property”).  The Property is the
Company’s primary asset.  To Seller’s knowledge, there are no Liens or
encumbrances or restrictions of any kind, nature or description affecting the
Property except for the lien of the Chevy Chase Loan Documents, the Permitted
Exceptions or those contained in the Required Documents or the
Approvals.

    

    (d) To
Seller’s knowledge, the Company has acquired all Approvals for its current uses
as to the currently developed phase or phases of the Property, as required by
all applicable governmental authorities, and such Approvals are in full force
and effect.

    

    (e) Attached
hereto as Exhibit
D and made a part hereof is a complete list of all management, service,
subcontractor, supplier, general contractor, concession, maintenance,
architectural, engineering, testing, consulting, public works, development,
construction, and utility contracts and other agreements to which the Company or
Seller (either pursuant to the Operating Agreement or the Management and
Development Agreement) is a party, including but not limited to the Affiliated
Agreements and the Chevy Chase Loan Documents (defined hereinafter in subsection
(j) of this Section) (collectively, the “Contracts”), with respect to its
ownership, operation and management of the Property.  Seller
represents and warrants, to Seller’s knowledge, that (i) all Contracts are in
full force and effect in accordance with their respective terms, and (ii) no
default or breach exists under any of the Contracts and there exists no
condition or circumstance which, with the giving of notice or the passage of
time, or both, would result in a default, breach or termination right of any
party to such Contracts. To the extent that any Contracts are entered into by
Seller rather than the Company, such Contracts shall be so identified on Exhibit D and
assigned to the Company at Closing pursuant to an assignment agreement, the form
and substance of which shall be subject to Purchaser’s reasonable approval (the
“Contract Assignments”).

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (f) Attached
hereto as Exhibit
E and made a part hereof is a complete list of all payment, performance,
maintenance and other bonds, letters of credit and other forms of surety issued
by or on behalf of Seller or the Company (collectively, the “Bonds”), with
respect to or required by the Approvals, the Contracts, or the ownership,
operation or management of the Property.  Seller represents and
warrants, to Seller’s knowledge, that (i) all Bonds required by the Approvals
have been posted in accordance with the requirements of the Approvals and the
applicable governmental authorities, (ii) the Bonds are in full force and effect
in accordance with their respective terms, and (iii) no default or breach exists
under any of the Bonds and there exists no condition or circumstance which, with
the giving of notice or the passage of time, or both, would result in a default,
breach or liability with respect to such Bonds.  In the event any Bond
is in the name of the Seller, rather than the Company, then the Company shall
have the right, from and after Closing hereunder, to work under such Bonds until
such time as the Company has assumed or replaced such Bonds in accordance with
Section 4.5(c), subject however, to the provisions of Section 4.5(d), which the
Company shall diligently pursue.

    

    (g) The
Company is duly organized, validly existing and in good standing as a Maryland
limited liability company.  Attached hereto as Exhibit "F" are true
and correct copies of the Articles of Organization and Operating Agreement of
the Company (the "LLC Documents").  To Seller’s knowledge, the
Articles of Organization and Operating Agreement are in full force and effect
and have not been modified or amended.

    
       

    

    (h) To
Seller’s knowledge, the only activity of the Company since its inception has
been the acquisition of the Property, obtaining the Approvals and its
performance in accordance with the Contracts, Approvals and the
Bonds.

    

    (i) All bills
and claims for current billing periods for labor performed and goods, services
or materials furnished to or for the benefit of the Property have been (or prior
to the Closing Date will be) paid in full from funds of the Company, and, to
Seller’s knowledge, there are no mechanics’ liens or materialmen’s liens
(whether or not perfected) on or affecting the Property.  Any funds
which the Company may owe or any liability which the Company may have in
contravention of the representations and warranties set forth in this subsection
are set forth in complete and accurate detail in Exhibit G, including
but not limited to the name of the creditor, the amounts owed (or the amounts in
dispute) and the addresses, phone numbers and account numbers with such
creditors.

     

    (j) To
Seller’s knowledge, the Company has no monetary or other obligation,
indebtedness, commitment or liability, known or unknown, choate or inchoate, to
any third party, except for those obligations identified in the Required
Documents, the Approvals, Exhibit G, and that
certain loan (the “Chevy Chase Loan”) made by Chevy Chase Bank in the amount of
Eight Million Dollars ($8,000,000.00) pursuant to a certain loan agreement dated
March 1, 2005, which loan has a current outstanding balance of Three Million
Five Hundred Dollars ($3,500,000.00), and any and all other documents evidencing
or securing such loan (collectively, the “Chevy Chase Loan
Documents”).  To Seller’s knowledge, other than with respect to
Seller’s conveyance of its Membership Interest pursuant to this Agreement, no
event exists or is likely to exist in the future which, with the passage of time
or the giving of notice, or both, constitutes or will constitute a default by
the Company under any of the Chevy Chase Loan Documents.  The parties
acknowledge and agree that the Chevy Chase Loan shall not be paid or satisfied
from proceeds of the Purchase Price paid at Closing, but rather, the Chevy Chase
Loan shall remain in effect until such time as Purchaser elects to satisfy
it.

     

    (k) Any and
all tax reports and returns of any nature whatsoever required to be filed by law
through current periods have been duly filed by the Seller or the Company, as
the case may be, and all payments, if any, required for the periods covered by
such returns, including all late penalties, have been paid in full from funds of
the Company.

    

    (l) Since its
inception, the Company has had no income other than with respect to the
Property, and, to Seller’s knowledge, shall have no outstanding or unpaid
expenses as of Closing unless specifically identified on Exhibit
G.

    

    (m) To
Seller’s knowledge, the Company has no employees and has entered into no
agreement or contract to hire any employees.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (n) The
Company is the sole “Declarant” pursuant to that certain Declaration of
Covenants, Conditions and Restrictions, Gleneagles Subdivision, the Heritage at
St. Charles, dated October 24, 2005, and recorded among the Land Records of
Charles County, Maryland at Liber 5514, Folio 24 (the “Declaration”), and no
rights or obligations of the Declaration pursuant to the Declaration have been
assigned or conveyed.  From and after Closing hereunder, Seller shall
have no rights whatsoever as the Declarant or otherwise under the Declaration
with respect to the Property, provided however, nothing contained herein is
intended to waive or diminish any rights Seller may have in its capacity as the
declarant of the master association for the St. Charles Planned Unit
Development, including but not limited to any organizational document,
declaration, covenant, easement, restriction or other similar or like document
which is now or hereafter recorded among the Land Records of Charles County,
Maryland (collectively, the “PUD Documents”) or the obligations arising
thereunder, related to or in connection with the development and management of
the St. Charles Planned Unit Development.

    

    (o) Seller
has delivered to Purchaser complete copies of (i) the annual financial
statements of the Company for its fiscal years ending 2006 and 2007 prepared by
Seller and (ii) quarterly financial statements of the Company for the current
fiscal year prepared by Seller (collectively, the “Financial
Statements”).   To Seller’s knowledge, the Financial Statements
have been prepared in accordance with generally accepted accounting principles
consistently applied throughout all periods.

    
       

    

    4.3   Seller’s Representations and
Warranties - as to the Property. Subject to the terms of this Agreement,
Seller represents, warrants and covenants to Purchaser that, as of the Effective
Date and again as of the Closing Date:

    

    (a) Except as
set forth in the Permitted Exceptions, there are no leases, tenancies, licenses
or other rights of occupancy or use for any portion of the Property, and, to
Seller’s knowledge, there are no parties in possession of any portion of the
Property as trespassers, tenants or licensees.

    

    (b) To
Seller’s knowledge, there does not exist in connection with the use and
operation of the Property any violation of any federal, state, county, or
municipal law, ordinance, order or regulation, any zoning, fire, health,
building, land use or similar regulation, or of any private restriction,
easements, covenant or conditions of record.  To Seller’s knowledge,
the Company is in compliance with all laws, ordinances, rules, rulings, orders,
regulations, and requirements of all governmental or quasi-governmental bodies
or entities having jurisdiction or authority thereover, including but not
limited to zoning and subdivision laws and regulations.

     

    (c) To the
best of Seller’s knowledge, (i) the Property is free of Hazardous Materials (as
defined below); (ii) none of the Property has been used for the storage,
manufacture, repair or disposal of Hazardous Materials; (iii) no complaint,
order, citation or notice with regard to air emissions, water discharges, noise
emissions, Hazardous Materials or any other environmental, health or safety
matters affecting the Property, or any portion thereof, from any person,
government or entity, has been received by Seller or the Company; and (iv) all
federal, state and local environmental laws and regulations affecting the
property and Hazardous Materials have been fully complied
with.  “Hazardous Materials” means toxic materials, hazardous waste,
hazardous substances [as such terms are defined in the Resource Conservation and
Recovery Act of 1976, as amended (42 U.S.C. 6901, et seq.) or in the
Comprehensive Environmental Response Compensation and Liability Act of 1980, as
amended (42 U.S.C. 9601 et seq.) or in other federal, state or county laws
governing such matters], asbestos or asbestos-related products, oils,
petroleum-derived compounds, radon, PCB’s, gas or oil storage tanks, or other
such hazardous materials or pesticides.

    

    (d) No notice
has been received by Seller or the Company of any violation of any federal,
state or local law, or ordinance or regulation, relating to industrial hygiene
or to the environmental conditions on, under or about the Property, including,
but not limited to, soil and ground water condition.  To the best of
Seller’s knowledge, the Property (including the surface and subsurface soil,
surface water, ground water, and improvements) is free of (i) any waste or
debris, (ii) contamination, and (iii) substances the presence of which is
prohibited by any law.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (e) Seller
has no information or knowledge of any change contemplated in any applicable
laws, ordinances, or regulations, or any judicial or administrative action,
including any condemnation or moratorium, or any action by adjacent landowners,
or natural or artificial conditions upon the Property which would prevent, limit
or impede the Company’s development or use of the Property in accordance with
the Approvals.

    

    (f) Seller
has not received notice, either oral or written, and has no knowledge that any
governmental or quasi-governmental agency or authority intends to commence
construction of any special or off-site improvements or impose any special or
other assessment against the Property or any part thereof, except as may be
provided in the Permitted Exceptions.

     

                    (g) Seller
has no knowledge of any fact, condition, action, or proceeding of any kind or
character not heretofore disclosed by Seller to Purchaser in writing, that would
materially adversely affect the development or construction upon the Property in
accordance with the Approvals, including but not limited
to:  (i) planned or threatened rezoning actions, including
without limitation any rezoning or modification to the existing zoning which
would reduce the number of units contained in the Approvals or impose any local
or state development fees or charges with respect to the construction of the
units contemplated in the Approvals, (ii) planned or threatened road
widenings, scenic easements, or other takings by eminent domain or condemnation,
or claims of adverse possession or prescriptive easements, (iii) adverse
subsurface conditions such as underground mines, caves, unusual rock formations,
buried military ordnance,  burial sites, or archeological or
paleontological sites, (iv) the presence or inhabitance of any threatened or
endangered species, or (v) any planned or actual application or proposal to
include the Property or any part thereof in any national or state register of
historic places or sites or to designate the Property or any part thereof as an
historic landmark.

    
       

    

    4.4           Seller’s General
Representations and Warranties. Subject to the terms of this
Agreement, Seller represents, warrants and covenants to Purchaser that, as of
the Effective Date and again as of the Closing Date:

    

    (a) Any and
all representations and warranties made by Seller in this Agreement are being
made by Seller on behalf of itself, in its capacity as the Manager pursuant to
the Operating Agreement, and in its capacity as the manager pursuant to the
Management and Development Agreement.

    

    (b) To
Seller’s knowledge, the representations and warranties made by Seller in this
Agreement do not omit to state any material fact necessary to make the
representations and warranties made, in light of the circumstances under which
they were made, not misleading.

    

    (c) To
Seller’s knowledge, all documents which have been delivered, and are to be
delivered, by the Seller pursuant to this Agreement are true, complete and
correct.  Seller is not aware of any facts which it has not disclosed
to Purchaser which could materially and adversely affect the Company, the
Property and/or the Company’s ability to conduct business operations after the
Closing Date.  Seller has provided, and shall provide, Purchaser with
full access to all data, information, documents and other materials to which
Purchaser may have therefore requested access pursuant to this
Agreement.

    

    (d) Between
the date hereof and Closing, Seller agrees to take no action which would cause
any of the above-listed representations and warranties to become untrue, and
agrees to take all reasonable measures necessary to prevent said representations
and warranties from becoming untrue.  Seller shall promptly notify
Purchaser upon Seller’s obtaining knowledge that any representation or warranty
set forth herein has become inaccurate.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    4.5           Purchaser’s Representations,
Warranties and Covenants. Subject to the terms of this Agreement,
Purchaser represents, warrants and covenants to Seller that, as of the Effective
Date and again as of the Closing Date:

    

    (a) Purchaser is a Delaware
corporation existing in good standing, duly incorporated and authorized to do
business under the laws of the State of Maryland, has the full right, power and
authority to enter into and perform its obligations under this Agreement and has
performed all requisite action required to authorize the execution and delivery
of this Agreement and to consummate the transactions contemplated thereunder
(except as set forth in Section 9.17 below, which Purchaser shall diligently
pursue).  The execution and delivery of this Agreement by Purchaser
constitutes the legal, valid and binding obligations of and enforceable against
Purchaser.  The persons executing this Agreement on behalf of
Purchaser have the authority to enter into this Agreement and to bind Purchaser
in accordance with its terms without obtaining any other consents or approvals
from third parties (except as set forth in Section 9.17 below, which Purchaser
shall diligently pursue).

    

    (b) The
execution and delivery of this Agreement by Purchaser and the consummation of
transactions contemplated thereunder will not violate any law or governmental
regulation, order, or decree to which Purchaser is subject with respect to any
other agreement or instrument to which Purchaser is a party or by which it is
bound.

     

    (c) From and
after Closing, Purchaser shall cause the Company to, if permitted by the County
and any other applicable governmental authority, at Purchaser’s election either
(i) assume all obligations under the Bonds pursuant to an assignment agreement
acceptable to the County and the Company, and signed by Seller (which assignment
agreement shall, among other provisions, release Seller from any personal
liability under such Bonds), or (ii) post replacement bonds or letters of credit
with the County in form and substance acceptable the County and the
Company.  In the event the Company posts replacement bond(s) or
letter(s) of credit with the County as set forth in item (ii), it shall have no
obligation to pursue the return of Seller’s bonds or letters of credit; however,
it shall cooperate with Seller, at no cost to Purchaser, in Seller’s efforts to
have its bonds or letters of credit released.

     

    (d) In the
event Seller has any continuing personal liability under the Bonds after
Closing, then the Company and Purchaser shall jointly and severally indemnify,
defend and hold harmless the Seller from any and all loss, costs, claims or
liability arising after Closing resulting from the Company’s failure to perform
any bonded work after Closing in accordance with the terms and provisions of the
Bonds.  The terms and provisions of this Subsection shall survive
Closing until the earlier of the date on which (i) all obligations under the
Bonds have been assumed by the Company pursuant to Section 4.5(c)(i), or (ii)
the Company replaces the Bonds pursuant to Section 4.5(c)(ii).

    

    (e) Purchaser
shall use commercially reasonable efforts to obtain from Chevy Chase Bank at
Closing a release, in a form reasonably acceptable to Seller in all respects, in
Seller’s sole discretion, of any guaranty or individual obligation of Seller
under the Chevy Chase Bank Loan Documents (the “Seller Loan
Release”).  It is a condition to Seller’s obligations to proceed to
Closing under this Agreement that the Seller Loan Release be held in escrow at
Closing for the immediate release to Seller after Closing, provided however,
Seller shall have the right to waive this condition in writing in Seller’s sole
discretion.  In the event the Seller Loan Release condition is not
satisfied at Closing and Seller waives this condition, then from and after
Closing, Purchaser shall, and shall cause the Company to, (i) keep and maintain
the Chevy Chase Loan in full force and effect at all times, and shall cause no
default thereunder; and (ii) indemnify, defend and hold harmless the Seller from
any and all loss, costs, claims or liability under the Chevy Chase Loan
Documents resulting from (1) the Seller’s conveyance of the Membership Interests
pursuant to this Agreement,  or (2) any breach of the Chevy Chase Loan
Documents arising after Closing hereunder.  Purchaser’s obligations in
items (i) and (ii) of this Subsection shall survive Closing until the earlier of
the date on which (i) the Seller Loan Release is delivered to Seller, or (ii)
the Chevy Chase Loan is satisfied and paid in full.

    

    (f) Purchaser
is the sole owner of the balance of the membership interests in the Company,
being the other fifty percent (50%) membership interest in the Company existing
as of the Effective Date of this Agreement, and as of Closing
Date.  Purchaser or Purchaser’s affiliate is acting as the home
builder for the construction and sale of new homes on the
Property.  As such, to the extent that any representation or warranty
of the Seller proves to be untrue as a result of any direct action or inaction
of the Purchaser or its affiliates on the Property, the inaccuracy of such
representation and warranty shall not be used as the basis of the Purchaser’s
failure to proceed to Closing under this Agreement.  Moreover,
Purchaser has made its own independent investigation of the value of the
Membership Interest, and deems the Purchase Price under this Agreement to be a
fair and adequate compensation for the purchase of the Membership Interest,
subject to the terms and provisions of this Agreement.  Purchaser
further represents and warrants that it has no knowledge of any fact or
circumstance which would cause any of the Seller’s representations and
warranties hereunder to be untrue or incomplete in any way.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (g) Purchaser
shall, at no cost to Purchaser, promptly provide to the Seller any and all tax
information or financial information related to the Company reasonably requested
by Seller to prepare and file its 2008 federal and state tax returns, as they
relate to the Membership Interest, and shall cooperate and provide to the
Seller, at no cost to Purchaser, promptly any and all reasonably requested
information in connection therewith.

     

    
                4.6     Survival.  The
representations and warranties made by Seller and by Purchaser as set forth
herein shall, unless otherwise specifically stated herein to the contrary,
survive hereafter and after Closing until the expiration of the applicable
statute of limitations, if any, thereon.

       

    

    5.           Affiliated
Agreements.

    

    5.1.           Termination
Agreements. At Closing hereunder, the Affiliated Agreements shall be
terminated in accordance with the following terms and conditions:

    

    (a) Joint Venture
Agreement. At Closing hereunder, Seller and Purchaser shall execute
and deliver a termination agreement in the form attached hereto as Exhibit H (the “Joint
Venture Termination Agreement”), whereupon, (i) the Joint Venture Agreement
shall be deemed null and void and of no further force or effect, and (ii) except
for any obligations or liabilities set forth in this Agreement and those which,
pursuant to the Joint Venture Termination Agreement, expressly survive
termination of the Joint Venture Agreement, each party shall be released from
any further obligations or liabilities thereunder.

    

    (b)  Management and Development
Agreement. At Closing hereunder, Seller shall execute and deliver, and
Seller shall cause the Company to execute and deliver, a termination agreement
in the form attached hereto as Exhibit I (the
“Management and Development Agreement Termination Agreement”), whereupon, (i)
the Management and Development Agreement shall be deemed null and void and of no
further force or effect and Seller shall be deemed to have resigned as manager,
(ii) Purchaser and the Company shall be released from any and all obligations to
make payments to the Seller, as a Member, manager or otherwise, including but
not limited to management fees, and any all outstanding and/or future payments
or fees shall be deemed paid in full and waived by Seller, and (iii) except for
any obligations or liabilities set forth in this Agreement and those which,
pursuant to the Management and Development Agreement Termination Agreement,
expressly survive termination of the Management and Development Agreement, each
party shall be released from any further obligations or liabilities
thereunder.  At and following Closing, in addition to the Purchase
Price, the Purchaser shall reimburse to the Seller the actual costs incurred by
Seller to duplicate files and records in connection with the turnover and
transition of management of the Company to the Purchaser, provided however, in
no event shall the aggregate amount of such reimbursement exceed Five Thousand
Dollars ($5,000.00).

    

    (c) Purchase
Agreement. At Closing hereunder, Seller shall cause the Company to
execute and deliver, and Purchaser shall execute and deliver, a termination
agreement in the form attached hereto as Exhibit J (the
“Purchase Agreement Termination Agreement”), whereupon, (i) the letter of credit
Deposit (as such term is defined in the Purchase Agreement) in the amount of One
Million Dollars ($1,000,000.00) shall be returned to Purchaser, along with a
written certification from Seller authorizing its cancellation, (ii) the
Purchase Agreement shall be deemed null and void and of no further force or
effect, provided however, any and all representations, warranties and
obligations of the Company with respect to lots previously sold to Purchaser
shall survive such termination, (iii) Purchaser shall be released from any and
all obligations to make any payments to the Seller or the Company under the
Purchase Agreement, and the Company shall be released from any and all
obligations to make any payments to the Seller under the Purchase Agreement,
including but not limited to any pump station fees, road fees, costs to
construct a community center or other recreational facilities or amenities,
water and/or sewer connection fees, off-site construction fees, or off-site road
fees, and any all outstanding and/or future payments or fees under the Purchase
Agreement shall be deemed paid in full and waived by the Company and Seller,
(iv) any and all refunds, rebates and/or credits in connection with or in anyway
related to the payment of any charges for connection of the Property to the
sewer and/or water system of the County, or any other applicable governmental or
quasi-governmental authority imposed on the Property, including but not limited
to any charges related to the provision of a sewer connection of the Property to
the Mattawoman Interceptor, are and shall remain the sole property of the
Company, Seller shall assign to the Company any and all rights with respect
thereto, and Seller shall have no further rights or claims with respect thereto,
and (v) except for any obligations or liabilities set forth in this Agreement
and those which, pursuant to the Purchase Agreement Termination Agreement,
expressly survive termination of the Purchase Agreement, each party shall be
released from any further obligations or liabilities
thereunder.  Notwithstanding the foregoing, the Company shall remain
obligated to pay a road fee to Seller in the amount of Seven Hundred Fifty
Dollars ($750.00) per lot (the “Road Fee”), which Road Fee is more particularly
described in Section 2.03.1(c) of the Purchase Agreement, provided however,
notwithstanding the provisions of the Purchase Agreement, the Road Fee
applicable to a lot shall be payable to Seller within thirty (30) days after the
settlement of the conveyance of such lot from either the Company or Purchaser,
to a third party; it being understood and agreed that the Road Fee shall not be
payable upon the conveyance of a lot from the Company to Purchaser, or its
affiliates.

    
       

    

    6.           Pre-Settlement Obligations
of Seller.

              

              6.1           Delivery of Required
Documents. Within five (5) business days following the Effective Date,
Seller, at its sole cost and expense, shall have delivered to Purchaser,
current, accurate and complete copies of all of the following documents as and
if in Seller’s possession or control (the “Required Documents”):

     

                   (a) Those
certain subdivision plats identified as The Heritage at St. Charles, Sections I,
II and III, and recorded among the Plat Records of the County at Plat Book 55,
Page 233; Plat Book 56, Page 244; and Plat Book 57, Page 512, respectively (the
“Plats”).

    

    (b) Those
certain Site Plans prepared Whitman, Requardt & Associates dated March 22,
2004 and entitled The Heritage at St. Charles (the “Site Plans”).

    

    (c) The
latest Plans and Specifications and the Budget and Development Plan (as such
terms are defined in the Management and Development Agreement).

    

    (d) All
architectural drawings and specifications, as-built plans, access documents and
engineering and physical inspection reports, relating to the
Property.

    

    (e) All
certificates of occupancy, permits, licenses, entitlements, approvals and other
authorizations required in connection with the development, construction and
operation of the Property.

    

    The
plats, plans, permits, licenses and other documents and approvals referenced in
items (a) through (e) above shall be referred herein collectively as the
“Approvals”.

    

    (f) Any
existing survey of the Property.

    

    (g) All
certificates and policies of insurance evidencing all casualty, liability and
other insurance coverages which are maintained by the Company and/or Seller with
respect to the Property.

    

    (h) All
leasing, brokerage and commission agreements in Seller’s possession or control,
if any, relating to the Property.

    

    (i) All
assessment notices and bills for real estate, personal property and any other
taxes affecting the Property, for special assessments and for water, sewer and
other charges for each of the preceding three (3) years, together with evidence
of payment thereof, and a summary of any contested tax assessments.

    

    (j) All
Contracts.

    

    (k) All
Bonds.

    

    6.2           Seller’s
Covenants. Seller covenants and agrees with Purchaser
that:

    

    (a) From
and after Closing hereunder, Seller agrees, at no cost to Seller, to cooperate
with Purchaser to effect a smooth and efficient continuation of the affairs of
the Company, including but not limited to the preservation of relations with
contractors, lenders, suppliers, laborers, vendors, tenants (if any) and others
with whom the Company transacts business.  From and after Closing
hereunder, Seller, its members and officers, further agrees to cooperate with
Purchaser, at no cost to Seller, with respect to all proceedings related to any
site plan, subdivision plan or plat approvals, zoning/master planning, and
development and construction permitting or approvals for the
Property.  This provision is not intended to abrogate or alter the
rights or discretions of the Seller as the developer of the St. Charles Planned
Unit Development with respect to the Property or any lands surrounding the
Property or under any of the PUD Documents.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (b)
Without the prior written approval of Purchaser, neither Seller nor the Company
shall, from the Effective Date until the Closing Date: (i) except as may be
required by the Approvals, enter into or extend any agreements affecting all or
any part of the Property or the Company; (ii) sell, assign, or convey any right,
title or interest in the Property to any third party, or create or permit to
exist any lien, encumbrance or charge thereon; (iii) sell, assign, pledge,
hypothecate, donate, give, transfer or exchange its Membership Interest, or any
portion thereof, with or to any person or entity, (iv) except as may be required
by the Approvals, grant any easement or right-of-way across the Property, or (v)
except as may be required by the Approvals, make any commitments or
representations to any applicable governmental authorities, any adjoining or
surrounding property owners, any civic association, any utility, or any other
person or entity that would in any manner be binding upon Purchaser, the Company
or the Property, or (vi) except as may be required by the Approvals or otherwise
required by the terms of this Agreement, make (or permit to be made) any
physical changes or physical alterations to or upon the Property or any part
thereof, including without limitation any dumping or filling on the
Property.

     

    (c) From the
Effective Date through the Closing Date, during normal business hours, Seller
shall provide Purchaser and Purchaser’s attorneys, accountants, engineers,
consultants and other agents, with access to all financial information, reports,
financial statements, insurance policies, agreements, contracts, tax returns,
rent schedules, leases, engineering plans, soil tests, environmental studies,
plats, surveys, books and records and other documents and materials relating to
the Company and the Property in its possession or control, and shall otherwise
fully cooperate, at no cost to Seller, with Purchaser and Purchaser’s agents as
requested by Purchaser in relation to Purchaser’s study of the Membership
Interest, the Property and the business conducted by the Company.

    

    (d) Seller
shall maintain all of Seller's insurance policies relating to the Property, or
any part thereof, in full force and effect until the Closing Date.

    

    (e) Seller
shall promptly furnish to Purchaser from time to time all information pertaining
to the Property, in Seller’s possession or control, reasonably requested by
Purchaser or its representatives and shall continue to permit Purchaser and its
representatives to make inspections and tests of the Property at Purchaser’s
sole risk and expense.

    (f) Seller
shall provide Purchaser promptly upon receipt any notices, written or oral,
received by Seller with respect to the Property from any private party or
governmental entity.

    

    7.           Default.

    

    7.1           Seller’s
Default.  If Seller shall be obligated to proceed to Closing
under the provisions of this Agreement and shall fail to do so for any reason
whatsoever or Seller otherwise defaults in the performance of its obligations
hereunder, and if such failure or default continues after fifteen (15) days
written notice to Seller and an opportunity to cure, then Purchaser shall have
the right to elect, as determined in its sole discretion, (i) to seek any legal
or equitable relief and damages against Seller, including, without limitation,
compelling Seller to convey the Membership Interest to Purchaser by a suit for
specific performance, and/or (ii) to declare this Agreement to be terminated, in
which event Seller shall reimburse Purchaser for all costs incurred by Purchaser
in connection with this Agreement including, without limitation, reasonable
attorney’s fees.

    

    7.2           Purchaser’s
Default.  If Purchaser shall be obligated to proceed to Closing
under the provisions of this Agreement and shall fail to do so for any reason
whatsoever or Purchaser is otherwise in default hereunder, and if such failure
or default continues after fifteen (15) days written notice to Purchaser, then
Seller shall have the right, as its sole and exclusive remedy, hereby waiving
any and all other rights and remedies available at law or in equity, to declare
this Agreement to be terminated, in which event Purchaser shall reimburse Seller
for all costs incurred by Seller in connection with this Agreement, including,
without limitation, reasonable attorney’s fees.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    7.3           Litigation.  In
the event that any litigation or legal proceedings are brought to enforce the
terms of this Agreement, in addition to the rights and remedies set forth
herein, the prevailing party shall be entitled to an award of the costs of
enforcement of this Agreement, including, but not limited to, reasonable
attorney’s fees.  Any such litigation or legal proceeding shall be
brought in a competent court in the State of Maryland or the United States
District Court for the District of Maryland (Greenbelt Division) (depending upon
jurisdiction for the amount and type of controversy).

    

    8.           Indemnification and Hold
Harmless; Release.

    

    (a) This
Agreement. In the event of a breach of any agreement,
representation, warranty or covenant by Seller made in this Agreement, then and
in such event,  Seller shall indemnify, defend and hold harmless
Purchaser and the Company, and their members, employees, members, financial
advisors, attorneys, accountants, successors and assigns, against any claim,
liability, loss, damage or expense (including and without limitation, reasonably
attorneys’ fees and other costs for investigating and litigating claims) in
connection with such breach.

    

    (b) The
Company.

    
                 
(i)           By
Seller.                          (1)
Except as provided herein, from and after Closing, Seller shall defend,
indemnify and hold harmless Purchaser and the Company, and their members,
successors and assigns, from and against any and all claims, liabilities, taxes,
interest, fines, penalties, suits, actions, proceedings, demands, damages,
losses, costs and expenses (including reasonable attorneys’ fees and court
costs) of every kind and nature arising out of, resulting from, or in connection
with all liabilities or obligations of the Company related to any act, failure
to act or omission of the Company prior to the Closing Date, including without
limitation, any liabilities or obligations of the Company arising out of the
Company’s previously filed tax returns or in any way related to federal and
state income tax, property tax (both real and personal), sales tax, payroll tax
or any other taxes attributable to periods up to the Closing Date, provided
however, Seller’s total liability under this subsection shall not exceed fifty
percent (50%) of any such total liability.  It is expressly intended
that this provision shall not apply to or relate to any cost or expense incurred
by the Company in the ordinary course of its business and affairs, which may
have been properly incurred prior to the Closing Date, but is not payable until
after the Closing Date.

     

        
(2) Notwithstanding the provisions of Section 8(b)(i)(1) to the contrary, the
Seller shall indemnify, defend and hold harmless the Purchaser and the Company,
and their members, successors and assigns, from any costs, expense, claim,
liability or damage incurred by reason of the gross negligence or willful
misconduct of the Seller, as Manager under the Operating Agreement, and by
reason of the Seller, as Manager, acting outside the scope of its authority
under the Operating Agreement, including reasonable attorneys’ fees and costs
incurred by them in connection with the defense of any action based on such
gross negligence, willful misconduct or actions outside the scope of the
Seller’s authority as Manager.  Purchaser acknowledges that it is not
aware of any such liability on the part of the Seller as of the Effective
Date.  Notwithstanding anything to the contrary, this duty of
indemnification shall expire one (1) year following the Closing
Date.

     

                      (ii)           By the Company and
Purchaser. From and after Closing, the Company and Purchaser shall
defend, indemnify and hold harmless Seller, and its members, successors and
assigns, from and against any and all claims, liabilities, taxes, interest,
fines, penalties, suits, actions, proceedings, demands, damages, losses, costs
and expenses (including reasonable attorneys’ fees and court costs) of every
kind and nature arising out of, resulting from, or in connection with all
liabilities or obligations of the Company of any kind arising after the Closing
or in any manner related to any act, failure to act or omission of the Company
from and after the Closing.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     
(c) Management
and Development Agreement. Notwithstanding the provisions of Section
5.1 to the contrary, the Seller shall indemnify, defend and hold harmless the
Company and Purchaser, their employees and agents, from any costs, expense,
claim, liability or damage incurred by reason of the gross negligence or willful
misconduct of the Seller, as manager, and by reason of the Seller, as manager,
acting outside the scope of its authority under the Management and Development
Agreement, including reasonable attorneys’ fees and costs incurred by them in
connection with the defense of any action based on such gross negligence,
willful misconduct or actions outside the scope of the Seller’s authority as
manager.  Purchaser acknowledges that it is not aware of any such
liability on the part of the Seller as of the Effective
Date.  Notwithstanding anything to the contrary, this duty of
indemnification shall expire one (1) year following the Closing
Date.

    

     
(d) Release. Except
as otherwise set forth in this Agreement, Purchaser and Seller, for itself, as a
Member and Manager of the Company, as manager under the Management and
Development Agreement, and otherwise, and on behalf of their successors,
assigns, members, stockholders, officers, directors, parents, subsidiaries and
agents, hereby irrevocably and unconditionally remise, release, acquit and
forever discharge each other and the Company from every manner of action and
actions, cause and causes of action, suits, debts, sums of money, accounts,
reckonings, covenants, contracts, controversies, agreements, damages, judgments,
claims, charges, complaints, liabilities, fees, expenses and demands in law,
under agreement, in equity or otherwise, know or unknown, whether vicarious,
derivative or direct, whatsoever arising directly or indirectly from or related
to the Membership Interest, the Company, the Operating Agreement, the Affiliated
Agreements, or otherwise.

    

      
(e) The provisions of this Section shall survive Closing.

    

    9.           Miscellaneous.

    

    9.1           Governing
Law. This Agreement shall be governed by, and construed in
compliance with the laws of the State of Maryland, applicable to contracts made
and to be performed solely therein, without giving effect to the choice of law
rules thereof.  The rule of construction that ambiguities are
construed against the draftsperson shall not apply to this
document.

    

    9.2           No Waiver. No
waiver by any party hereto or any breach of any covenant, condition or provision
hereof on the part of any other party hereto to be kept and performed shall be
considered to constitute a waiver of any such covenant, condition or provision,
or of any subsequent breach thereof.

    

    9.3           Severability. Should
any part of this Agreement be held or declared to be invalid or ineffectual, in
whole or in part, for any reason, by any court of competent jurisdiction,
neither the remaining portion of this Agreement nor any other term or terms
contained herein shall be invalidated, impaired or affected thereby and, in such
event, this Agreement shall be construed as if such invalid, or ineffectual part
had not been contained herein.

    

    9.4           Headings. The
headings in this Agreement are inserted solely for the convenience of reference
and shall not constitute part of this Agreement, nor shall they affect its
meaning, construction or effect.  All pronouns and variations thereof
shall be deemed to refer to the masculine, feminine, neuter, singular or plural,
and the identity of the individual or individuals or entity or entities as such
context may require.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    9.5           Amendment. Neither
this Agreement nor any provision hereof may be amended, modified, changed,
waived, discharged or terminated orally, but only by an instrument in writing,
signed by the party against which enforcement of the amendment, modification,
change, waiver, discharge or termination is sought.

    

    9.6           Broker. Seller
and Purchaser each represents and warrants to the other that it has not
authorized any broker, agent or finder to act on its behalf in respect to this
transaction.  Seller and Purchaser each hereby agree to indemnify and
hold harmless the other from and against any cost, expense, claim, liability or
damage resulting from a breach of the representation and warranty herein
contained.  The provisions of this subsection shall survive Closing or
any earlier termination of this Agreement.

    9.7           Notice. Any and
all notices, requests or other communications hereunder shall be deemed to have
been duly given if in writing and if transmitted by hand delivery, with receipt
therefor, by nationally recognized overnight delivery service, by facsimile with
confirmation, or by certified mail, return receipt requested, and first class
postage prepaid, as follows:

    (a) If to Seller, to 222
Smallwood Village Center, Waldorf, Maryland 20602, Attn: Mark
MacFarland,

    

    with a
copy to Stephen H. Scott, Esq., Chapman, Bowling & Scott, P.A., Post Office
Box 610, La Plata, Maryland 20646.

    

    (b) If to Purchaser, to 10211
Wincopin Circle, Suite 300, Columbia, MD 21044, Attn: Robert Jacoby, Division
President,

    

    with a
copy to Mark Sustana, Esquire, General Counsel, Lennar Corporation, 700 NW
107th Avenue,
Miami, Florida 33172 and to Matthew S. Wineman, Esquire, Rosenberg Martin
Greenberg, LLP, 25 South Charles Street, Suite 2115, Baltimore, MD
21201;

    

    or to
such other address as either party may furnish to the other by notice delivered
in accordance with this Paragraph.  Notice shall be deemed effective
when received if hand delivered or sent by facsimile, upon the first business
day following the date of posting with a nationally recognized delivery service,
or upon the second business day following the date of posting in the United
States mail.

    

    9.8           Survival. The
terms and provisions of this Agreement and the warranties and representations
described herein shall survive settlement hereunder and the execution and
delivery of the assignment of Seller’s Membership Interests, and shall not be
merged within.

    

    9.9           Further
Assurances. Seller and Purchaser agree to execute, acknowledge and
deliver any further agreements, documents or instruments that are reasonably
necessary or desirable to carry out the transactions contemplated by this
Agreement.

    

    9.10           Effective
Date. The Effective Date of this Agreement shall mean the latest
date beneath the signatures of the parties to this Agreement.

    

    9.11           Assignment. This
Agreement is not transferable or assignable by Seller herein or by Purchaser
herein without the prior written consent of the other party, provided however,
Purchaser shall have the right to assign this Agreement at Closing to an
affiliate or subsidiary of Purchaser.  The agreements, representations
and warranties contained herein shall be deemed to be made by and be binding
upon Seller and Purchaser, and their respective heirs, executors,
administrators, other personal representatives, and their respective successors
and permitted assigns.

    

    9.12           Counterparts.  This
Agreement may be executed in one or more counterparts, each of which shall be an
original against any party whose signature appears hereon, and all of which
taken together shall constitute one and the same instrument binding upon all
parties, notwithstanding that all parties are not signatories to the same
counterpart.                                

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

                           9.13         
  Waiver of
Jury Trial.  TO THE FULLEST EXTENT NOT PROHIBITED BY APPLICABLE
LAW, WHICH CANNOT BE WAIVED, EACH OF THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY,
INTENTIONALLY AND IRREVOCABLY WAIVES ANY AND ALL RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHT, POWER, REMEDY OR DEFENSE
ARISING OUT OF OR RELATED TO THIS AGREEMENT, WHETHER SOUNDING IN TORT OR
CONTRACT OR OTHERWISE, OR WITH RESPECT TO ANY COURSE OR CONDUCT, COURSE OR
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY RELATING
TO THIS AGREEMENT; AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED
BEFORE A JUDGE AND NOT BEFORE A JURY.  EACH OF THE PARTIES HERETO
FURTHER WAIVES ANY RIGHT TO SEEK TO CONSOLIDATE ANY SUCH LITIGATION IN WHICH A
JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER LITIGATION IN WHICH A JURY TRIAL
CANNOT OR HAS NOT BEEN WAIVED.  FURTHER, EACH OF THE PARTIES HERETO
HEREBY CERTIFIES THAT NONE OF ITS REPRESENTATIVES, AGENTS OR ATTORNEYS HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT IT WOULD NOT, IN THE EVENT OF SUCH
LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL
PROVISION.  EACH OF THE PARTIES HERETO ACKNOWLEDGES THAT THE
PROVISIONS OF THIS SECTION ARE A MATERIAL INDUCEMENT TO THE ACCEPTANCE OF THIS
AGREEMENT BY THE OTHER PARTIES HERETO.

    

    9.14   Business
Day. “Business Day” or “business day” shall mean any day other than
a Saturday, Sunday or federal holiday.

    

    9.15   Entire
Agreement. This Agreement contains all of the agreements and
understandings between the parties hereto with respect to the subject matter
hereof, and no oral agreements or written instrument, document or correspondence
shall be held to effect the provisions of this Agreement.  All
subsequent changes and modifications to this Agreement, to be valid, shall be by
written instrument executed by all parties hereto.

    

    9.16   Perpetuities. Notwithstanding
anything to the contrary herein contained all obligations shall be satisfied on
or before that date which is twenty-one years after the Effective Date. The
provisions of this Section are for the sole purpose of satisfying the Rule
Against Perpetuities and shall not be construed to delay any obligations
hereunder.

    

    9.17   Corporate Investment Committee. Notwithstanding any provision contained herein to the contrary,
Purchaser’s obligations under this Agreement are contingent upon its receipt of
the written approval of the Corporate Investment Committee of Lennar (the
Purchaser being a member of the Lennar Family of Builders).  Such
approval shall be evidenced, if at all, by written notice to Seller given not
later than the Closing Date (the “CIC Period”).  In the event that
said Corporate Investment Committee written approval is not obtained and written
notice thereof not given to the Seller not later than the expiration of the CIC
Period, this Agreement shall automatically terminate in which event neither
Party shall have any further obligation or liability.  No waiver of
such condition shall be implied, but shall be expressed, if at all, only by
written notice from Purchaser specifically waiving such
condition.  Purchaser shall diligently and promptly pursue such
approval.

    

    9.18   FASB Reporting.
Seller recognizes that Purchaser is subject to the requirements of
Interpretation No. 46, as such may have been amended ("FIN 46"), Consolidation
of Variable Interest Entities, an authoritative accounting pronouncement issued
by the Financial Accounting Standards Board.  Seller confirms that it
has an affirmative obligation to timely cooperate in all material respects (at
Purchaser’s expense) with the Purchaser's obligation to comply with the
financial reporting requirements of FIN 46, including providing certain
financial data and other information such as, but not limited to, asset
values,  development stage, cost estimation, etc.  Purchaser
agrees that such information shall be used only for financial reporting purposes
to comply with FIN 46 and such information shall not be distributed individually
to any other third party nor used for any other purpose. Such obligation shall
survive Closing.

    

    (Signatures
on Following Page)

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    IN WITNESS WHEREOF, Seller and
the Purchaser have signed and sealed this Agreement all as of day and year first
above written.

    

                                         SELLER/DEVELOPER:

     

                                         ST. CHARLES COMMUNITY, LLC

     

                                         By: /s/Mark MacFarland (SEAL)

                                               
Mark MacFarland,

                           
  Chairman of the Management Committee

                                                               Date:
November 17, 2008

     

     

                                        PURCHASER/BUILDER:

       

                                          U.S. HOME CORPORATION

       

                                          By: /s/Robert Jacoby (SEAL)

                                             Robert
Jacoby,

                                                 Division
President

                                               
 Date: November 20, 2008

    

                                                     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    THE COMPANY HEREBY ACKNOWLEDGES
AND AGREES TO THE TERMS AND PROVISIONS OF THIS AGREEMENT:

                                         

     

                                         COMPANY: 

     

                                         ST. CHARLES ACTIVE ADULT COMMUNITY, LLC

                                                                                                               

                                                                                                          By:
St. Charles Community, LLC, member

                                                                                                       

                                         By: /s/Mark MacFarland (SEAL)

                                               
Mark MacFarland,

                                             Chairman of the Management
Committee

                                                               Date:
November 17, 2008

     

     

                                        COMPANY:

       

                                          ST. CHARLES ACTIVE ADULT COMMUNITY, LLC

       

                                              By: U.S.
Home Corporation, member

       

                                          By: /s/Robert Jacoby (SEAL)

                                             Robert
Jacoby,

                                                 Division
President

                                               
 Date: November 19, 2008

    

                                                     

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    EXHIBIT
A

    

    COMPANY’S TITLE INSURANCE
POLICY

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
B

    

    ASSIGNMENT OF
MEMBERSHIP INTEREST

    

    

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
C

    

    PROPERTY

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
D

    

    THE
CONTRACTS

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
E

    

    THE
BONDS

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
F

    

    THE LLC
DOCUMENTS

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
G

    

    CONTINUING
LIABILITIES

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
H

    

    JOINT VENTURE TERMINATION
AGREEMENT

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
I

    

    MANAGEMENT AND DEVELOPMENT
AGREEMENT TERMINATION AGREEMENT

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
J

    

    PURCHASE AGREEMENT
TERMINATION AGREEMENTExhibit 10.1

                             SUBSCRIPTION AGREEMENT

--------------------------------------------------------------------------------
THESE SHARE ARE OFFERED SOLELY TO ACCREDITED INVESTORS (PERSONS OR ENTITIES OF
SUBSTANTIAL MEANS WHO MUST MEET STRICT AND SIGNIFICANT FINANCIAL QUALIFICATIONS
AND CAN AFFORD A COMPLETE LOSS OF THEIR INVESTMENT). FOR MORE INFORMATION ON
QUALIFICATION AS AN ACCREDITED INVESTOR, PLEASE READ THE SECTION ENTITLED
"ACCREDITED INVESTORS" IN THE BODY OF THE MEMORANDUM OF WHICH THIS SUBSCRIPTION
AGREEMENT IS A PART.
--------------------------------------------------------------------------------

Instructions to Subscription Agreement:

         a. Investors wishing to subscribe to purchase SHARES of MARINE
         EXPLORATION INC should complete and sign this Subscription Agreement.

         b. CAREFULLY REVIEW THE MEMORANDUM OF WHICH THIS SUBSCRIPTION AGREEMENT
         IS AN EXHIBIT.

         c. Completed Subscription Agreements with completed Investor
         Questionnaire and payment should be returned to:

                          MARINE EXPLORATION INC, INC.
                   535 16th Street Suite 820, Denver, CO 80202

         d. Payment should be made to "MARINE EXPLORATION INC, INC."

Subscription Agreement:
-----------------------

The undersigned hereby offers and subscribes to purchase 225,000,000 (two
hundred twenty five million) SHARES set forth herein of MARINE EXPLORATION INC,
INC. ("MARINE EXPLORATION INC") for $50,000.00. The undersigned understands that
the SHARES are being issued without registration under the Securities Act of
1933, as amended (the "Act"), in reliance upon the private placement exemption
contained in Sections 3(b) and 4(2) of the Act, and Regulation D promulgated
thereunder, and that such reliance is based on the undersigned's representations
set forth below. To induce the Company to accept this subscription and issue and
deliver the SHARES, the undersigned agrees, warrants, and represents as follows:

1. This offer is subject to acceptance or rejection by MARINE EXPLORATION INC in
its sole discretion. This Agreement shall not be binding upon either party until
accepted by MARINE EXPLORATION INC.

2. The undersigned is purchasing the SHARES for his or her own account. The
undersigned has not offered or sold a participation in this purchase of SHARES,
and will not offer or sell the SHARES or interest therein or otherwise, in
violation of the Act.

3. The undersigned acknowledges that the SHARES have been offered to him or her
in direct communication between himself or herself and MARINE EXPLORATION INC,
and not through any advertisement of any kind.

<PAGE>

4. The undersigned acknowledges that he or she has read all the materials
included in the Memorandum, that the offer and sale of SHARES to the undersigned
were based on the representations and warranties of the undersigned in its
Subscription Agreement, and acknowledges that he or she has been encouraged to
seek his or her own legal and financial counsel to assist him or her in
evaluating this investment. The undersigned acknowledges that MARINE EXPLORATION
INC has given him or her and all of his or her counselors access to all
information relating to his or her business that they or any one of them has
requested. The undersigned acknowledges that he or she has sufficient knowledge,
financial and business experience concerning the affairs and conditions of
MARINE EXPLORATION INC so that he or she can make a reasoned decision as to this
investment in MARINE EXPLORATION INC and is capable of evaluating the merits and
risks of this investment.

5. The undersigned acknowledges that he or she is able to bear, and understands,
the economic risks of the proposed investment and all other risks disclosed in
the Memorandum under the caption RISK FACTORS.

6. The undersigned understands the following: THIS SECURITY HAS NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), IN RELIANCE UPON THE EXEMPTION FROM
REGISTRATION PROVIDED IN SECTION 4(2) AND REGULATION D UNDER THE ACT.

7. This Subscription Agreement has been delivered in, and shall be construed in
accordance with the laws of the State of Colorado.

8. The Company hereby represents and warrants as follows:

         (a) Neither the Company nor a predecessor of the Company, affiliated
         Company; officer, director or general partner of the Company; promoter
         of the Company presently connected with the Company in any capacity;
         beneficial owner of ten per cent or more of any class of equity
         securities of the Company; underwriter of the securities to be offered
         under this subsection or any partner, director or officer of such
         underwriter has, within five years of the date of this Agreement:

                  (i) Filed a registration statement which is the subject of a
                  currently effective registration stop order entered by any
                  state securities administrator or the Securities and Exchange
                  Commission;

                  (ii) Been convicted of any criminal offense in connection with
                  the offer, purchase or sale of a security, or involving fraud
                  or deceit;

                  (iii) Been subject to a state administrative enforcement order
                  or judgment finding fraud or deceit in connection with the
                  purchase, offer or sale of any security;

                  (iv) Been subject to a state administrative enforcement order
                  or judgment which prohibits, denies or revokes the use of an
                  exemption from registration in connection with the purchase,
                  offer or sale of a security; or

                  (v) Been subject to an order, judgment or decree of any court
                  of competent jurisdiction temporarily, preliminarily or
                  permanently restraining or enjoining such party from engaging
                  in or continuing to engage in any conduct or practice
                  involving fraud or deceit in connection with the purchase,
                  offer or sale of any security.

         (b) The Company made no advertising or general solicitation in any way
         in connection with this offering.

<PAGE>

         (c) The Company is not a development stage company with no specific
         business plan or purpose or a development stage company that has
         indicated that its business plan is to engage in a merger or
         acquisition with an unidentified company or companies; or other entity
         or person.

         (d) The Company hereby makes this offering in good faith reliance that
         the offering qualifies for an exemption from registration under Rule
         504 of the General Rules and Regulations promulgated under the
         Securities Act of 1933.

         (e) The Company shall file a notice on Form D in the form prescribed by
         rule of the Securities and Exchange Commission, not later than the day
         on which the Company receives from any person an executed subscription
         agreement or other contract to purchase the securities being offered or
         the Company receives consideration from any person, therefor, whichever
         is earlier.

         (f) No compensation was or will be given or paid, directly or
         indirectly, to any person in connection with this offering and sale of
         the SHARES.

9. THE UNDERSIGNED IS AN "ACCREDITED INVESTOR" UNDER THE INVESTOR SUITABILITY
STANDARDS IMPOSED BY RULE 501, SUBSECTION (A), OF THE GENERAL RULES AND
REGULATIONS PROMULGATED UNDER THE SECURITIES ACT OF 1933. FURTHERMORE, THE
UNDERSIGNED HAS SUCH KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS
SUCH IT IS CAPABLE OF EVALUATING THE RISKS AND MERITS OF AN INVESTMENT IN THE
COMPANY AND HAS THE FINANCIAL ABILITY TO BEAR THE ECONOMIC RISKS OF ITS
INVESTMENT.

Subscriber:

WestMountain Asset Management hereby offer and subscribe to purchase 225,000,000
number of SHARES set forth herein of MARINE EXPLORATION INC, INC. at $.0002 per
share. We have wired $50,000.00 to the account of MARINE EXPLORATION INC, INC.
at Community Banks of Colorado.

----------------------------
Subscriber Signature

----------------------------
Subscriber Name

-----------------------------------------------------------------
Subscriber Address, City, State, Zip

-----------------------------------------------------------------
Subscriber Entity Type (if not an individual)

MARINE EXPLORATION INC, INC.

The above and foregoing Subscription accepted this ______ day of _____________.

By:
    ----------------------------

its:
    ----------------------------

<PAGE>

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