BLUEGREEN CORP
LOAN AGREEMENT
<DOCUMENT>
<TYPE>EX-10.149
<SEQUENCE>3
<FILENAME>d52129_ex10-149.txt
<DESCRIPTION>LOAN AGREEMENT
<TEXT>

                                                                       EX-10.149

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                                 LOAN AGREEMENT
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                         Dated as of September 25, 2002

                                     Between

                      BLUEGREEN CORPORATION OF THE ROCKIES,
                             a Delaware corporation,

                           BLUEGREEN GOLF CLUBS, INC.,
                             a Delaware corporation,

                     BLUEGREEN PROPERTIES OF VIRGINIA, INC.
                             a Delaware corporation,

                          BLUEGREEN SOUTHWEST ONE, L.P.
                       a Delaware limited partnership, and

                                 the "Borrower"

                                       and

                        RESIDENTIAL FUNDING CORPORATION,
                             a Delaware corporation

                                  the "Lender"
<PAGE>

                                TABLE OF CONTENTS

ARTICLE I    DEFINITIONS ....................................................  2

Section 1.1  Certain Defined Terms ..........................................  2
Section 1.2  Other Definitional Provisions .................................. 16

ARTICLE II   THE LOAN ....................................................... 17

Section 2.1  Agreement to Lend and Borrow; Evidence of Indebtedness
             and Maturity ................................................... 17
Section 2.2  Disbursements of the Loan ...................................... 17
Section 2.3  Commitment Fees ................................................ 17
Section 2.4  No Reduction in Commitment Fee ................................. 18
Section 2.5  Interest ....................................................... 18
Section 2.6  Interest Rate Limitation ....................................... 18
Section 2.7  Repayment of Principal ......................................... 19
Section 2.8  Prepayment of the Loan ......................................... 20
Section 2.9  Payments ....................................................... 20
Section 2.10 Applications of Payments; Late Charges and Default Rate ........ 20
Section 2.11 Approval Period ................................................ 21
Section 2.12 Extension ...................................................... 21
Section 2.13 Revolving Nature of Loan ....................................... 22
Section 2.14 Security ....................................................... 22

ARTICLE III  APPROVAL OF PROJECTS; DISBURSEMENTS OF THE LOAN ................ 23

Section 3.1  Project Approvals; Project Commitments and Project Documents ... 23
Section 3.2  Project Closings ............................................... 23
Section 3.3  Disbursements .................................................. 24
Section 3.4  Provisions Applicable to All Disbursements ..................... 27
Section 3.5  Application of Disbursements ................................... 28
Section 3.6  The Lender May Make Disbursement Notwithstanding
             Noncompliance .................................................. 28

ARTICLE IV   REPRESENTATIONS AND WARRANTIES ................................. 29

Section 4.1  Consideration .................................................. 29
Section 4.2  Organization ................................................... 29
Section 4.3  Authorization .................................................. 29
Section 4.4  Governmental Consents .......................................... 29
Section 4.5  Validity ....................................................... 30
Section 4.6  Financial Position ............................................. 30
Section 4.7  Governmental Regulations ....................................... 30
Section 4.8  Employee Benefit Plans ......................................... 30
Section 4.9  Securities Activities .......................................... 30
Section 4.10 No Material Adverse Change ..................................... 30
Section 4.11 Payment of Taxes ............................................... 31
Section 4.12 Litigation ..................................................... 31


                                       i
<PAGE>

Section 4.13 Environmental Matters .......................................... 31
Section 4.14 No Burdensome Restrictions ..................................... 32
Section 4.15 Full Disclosure ................................................ 32
Section 4.16 Adequate Consideration ......................................... 32

ARTICLE V    COVENANTS OF THE BORROWER ...................................... 33

Section 5.1  Consideration .................................................. 33
Section 5.2  Reporting Requirements ......................................... 33
Section 5.3  Borrower's Operations and Management ........................... 35
Section 5.4  Insurance ...................................................... 36
Section 5.5  Financial Covenants ............................................ 37
Section 5.6  Sole Lender; No Transfers ...................................... 38
Section 5.7  Further Assurances ............................................. 38

ARTICLE VI   THE PROJECTS ................................................... 39

Section 6.1  Consideration .................................................. 39
Section 6.2  Title to Project ............................................... 39
Section 6.3  No Prior Liens or Claims ....................................... 39
Section 6.4  Access to the Project .......................................... 40
Section 6.5  Compliance with Project Requirements and Laws and Regulations .. 40
Section 6.6  Covenants, Zoning, Codes, Permits and Consents ................. 40
Section 6.7  Utilities ...................................................... 40
Section 6.8  Map, Permits. Licenses and Approvals ........................... 41
Section 6.9  Approval of Plans and Specifications and Approval of Budget .... 41
Section 6.10 Construction Start and Completion .............................. 41
Section 6.11 Personal Property Incorporation ................................ 42
Section 6.12 Contractors and Contracts ...................................... 42
Section 6.13 Evidence of Ownership of Materials ............................. 42
Section 6.14 Changes to Plans and Specifications and Budget ................. 42
Section 6.15 Lender Inspections, Appraisal and Information .................. 43
Section 6.16 Correction of Defects .......................................... 43
Section 6.17 Protection Against Lien Claims ................................. 43
Section 6.18 Conveyance, Lease or Encumbrance ............................... 44
Section 6.19 Golf Courses ................................................... 44
Section 6.20 Security Instruments ........................................... 45
Section 6.21 Further Assurances; Cooperation ................................ 45
Section 6.22 Negative Covenants ............................................. 45
Section 6.23 Signs .......................................................... 46

ARTICLE VII  SALES OF LOTS AND GOLF PARCELS AND RELEASES FROM DEED
             OF TRUST ....................................................... 47

Section 7.1  Sales Operations and Seller's Obligations ...................... 47
Section 7.2  Releases from Lien of Deed of Trust ............................ 47


                                       ii
<PAGE>

ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES ................................. 49

Section 8.1  Events of Default .............................................. 49
Section 8.2  Remedies ....................................................... 52
Section 8.3  Authorization to Apply Assets to Payment of Loan ............... 55

ARTICLE IX   MISCELLANEOUS .................................................. 56

Section 9.1  Successors and Assigns; No Assignment by the Borrower .......... 56
Section 9.2  Notices ........................................................ 56
Section 9.3  Borrower's Representative ...................................... 57
Section 9.4  Changes, Waivers, Discharge and Modifications in Writing ....... 58
Section 9.5  No Waiver; Remedies Cumulative ................................. 58
Section 9.6  Costs, Expenses and Taxes ...................................... 59
Section 9.7  Disclaimer by the Lender; No Joint Venture ..................... 59
Section 9.8  Indemnification ................................................ 60
Section 9.9  Consultants .................................................... 61
Section 9.10 Governing Law .................................................. 61
Section 9.11 Titles and Headings ............................................ 61
Section 9.12 Counterparts ................................................... 61
Section 9.13 The Lender's Rights with Respect to Loan ....................... 61
Section 9.14 Confidentiality ................................................ 61
Section 9.15 Time is of the Essence ......................................... 62
Section 9.16 No Third Parties Benefited ..................................... 62
Section 9.17 Severability ................................................... 62
Section 9.18 Jurisdiction ................................................... 62
Section 9.19 Waiver of Jury Trial ........................................... 63
Section 9.20 Interpretation ................................................. 63
Section 9.21 Destruction of Note ............................................ 63
Section 9.22 Entire Agreement ............................................... 64

EXHIBIT A CONDITIONS TO OBLIGATION OF THE LENDER TO MAKE THE LOAN .......... A-i

EXHIBIT B PROJECT REQUIREMENTS ............................................. B-i

EXHIBIT C PROJECT UNDERWRITING DOCUMENTS ................................... C-i

EXHIBIT D FORM OF PROJECT COMMITMENT ....................................... D-i

EXHIBIT E FORM OF DRAW REQUEST CERTIFICATION ............................... E-i

EXHIBIT F FORM OF INVENTORY PROJECT COST DETAIL
             REPORT (IN230DTL) ............................................. F-i

EXHIBIT G FORM OF INVENTORY PROJECT COST REPORT (IN230) .................... G-i

EXHIBIT H FORM OF INVENTORY REPORT (GL592) ................................. H-i


                                      iii
<PAGE>

                                 LOAN AGREEMENT

      THIS LOAN AGREEMENT (this "Loan Agreement") is made as of September 25,
2002 by and between BLUEGREEN CORPORATION OF THE ROCKIES, a Delaware
corporation, BLUEGREEN GOLF CLUBS, INC., a Delaware corporation, BLUEGREEN
PROPERTIES OF VIRGINIA, INC., a Delaware corporation, and BLUEGREEN SOUTHWEST
ONE, L.P., a Delaware limited partnership, (collectively and jointly and
severally, the "Borrower") and RESIDENTIAL FUNDING CORPORATION, a Delaware
corporation (the "Lender").

                                    RECITALS:

      A. The Borrower has applied to the Lender for a revolving loan in the
principal amount of $50,000,000.00 (the "Loan") to finance various residential
acquisition and development projects which the Borrower anticipates undertaking.

      B. The Lender is willing to make the requested loan upon and subject to
the terms and conditions set forth in this Loan Agreement.

                                   AGREEMENT:

      NOW, THEREFORE, in consideration of the covenants and conditions herein
contained, the parties agree as follows:


                                       1
<PAGE>

ARTICLE I DEFINITIONS

Section 1.1 Certain Defined Terms

As used herein (including any Exhibits attached hereto), the following terms
have the meanings set forth below (unless expressly stated to the contrary):

"ABF Collateral" means the Lots and Golf Parcels and all personal property and
fixtures located thereon or associated therewith which secure the Loan.

"ABF Disbursement Amount" means, on any date of determination, as determined by
Lender, the amount of the Loan available to be disbursed with respect to the ABF
Collateral, which amount will be equal to the difference of:

      (a) the lesser of:

            (1) the Loan Amount;

            (2) the total for all Projects of, for each Project, the lesser of
      65% of the ABF Value and 60% of the Value; and

            (3) 65% of the Approved Costs spent by the Borrower

minus

      (b) the ABF Outstanding Amount.

"ABF Outstanding Amount" means, on any date of determination, the principal
amount of the Loan which the Lender has determined is outstanding with respect
to the ABF Collateral.

"ABF Value" means, on any date of determination by the Lender, the sum total of,
for each Project, 75% of the Schedule A Value of the Lots; provided, however,
that (i) Golf Parcels will remain as part of the ABF Collateral until released
in accordance with the terms of the Loan Documents; and (ii) only that portion
of the ABF Value of any Project that equals 25% or less of the ABF Value for all
Projects will be considered the ABF Value of that Project.

"Addendum to Note" means the Addendum to Note that a Project Owner will be
required to sign if such Project Owner is not already a Borrower, as the same
may be amended or otherwise modified from time to time.

"Affiliate" means a Person that, directly or indirectly, controls, is controlled
by, or is under common control with, a referenced Person.

"Anniversary Date" means September 30, 2003 and the same day of each succeeding
year during the term of the Loan.


                                       2
<PAGE>

"Appraisal Report" means, with respect to a Project, a real estate appraisal
report which (i) has been prepared by an Appraiser, (ii) at the time it is
submitted to the Lender is not more than 3 months old, or was updated by letter
not more than 3 months prior to the date of submission to the Lender, (iii)
states that it is prepared in accordance with the applicable standards of the
American Institute of Real Estate Appraisers for such reports, (iv) provides an
appraisal of the Value of the Project or portion thereof required to be
appraised thereunder, and (v) employs a customary methodology and provides
limiting conditions satisfactory to the Lender.

"Appraiser" means, with respect to a Project, a Person who is qualified to
appraise property similar in size and scope to the Project which such Person is
acceptable to the Lender in its sole and absolute discretion.

"Approved Costs" means the amount spent by the Borrower with respect to the
categories of costs in the Budget identified by the Lender as approved costs,
which shall include Land acquisition costs (including reasonable closing costs
actually paid to unaffiliated third parties), acquisition commissions,
capitalized interest, and hard development costs (including engineering and
architectural costs, permit and impact fees, and bonding costs), but shall
exclude soft costs such as marketing costs, advertising costs, Borrower's
overhead costs, and carrying costs.

"Approval Period" means the period during which new projects will be considered
for approval for funding from proceeds of the Loan, which period will commence
on the date of this Loan Agreement and will end on the Approval Period
Termination Date.

"Approval Period Termination Date" means the second Anniversary Date, as such
date may be extended pursuant to the terms of Section 2.12.

"Assignment" means, with respect to a Project, that certain Assignment of
Construction Items previously executed or to be executed by the Borrower in
favor of the Lender, as the same may be amended or otherwise modified from time
to time.

"Borrower" means, initially, Bluegreen Corporation of The Rockies, Bluegreen
Golf Clubs, Inc., Bluegreen Properties of Virginia, Inc., and Bluegreen
Southwest One, L.P., together with all Project Owners, jointly and severally.

"Borrower's Certificate" means the Borrower's calculation of the ABF
Disbursement Amount based on the Schedule A Value or the Value and the Approved
Costs spent for each Project, substantially in the form of Schedule 1 to the
Draw Request Certification.

"Budget" means, with respect to a Project, the itemized budget for the
acquisition of the Land and the Development Work for such Project, submitted to
and approved by the Lender, and attached as Schedule 1 to the Project Commitment
(together with the Schedule A Values) as such budget may be amended in
accordance with the provisions of this Loan Agreement.

"Business Day" means a day other than Saturday, Sunday or a day on which
national banks are legally closed for business in the States of Minnesota and
Florida and Illinois.


                                       3
<PAGE>

"Change" means, with respect to a Project, any material extra work not
contemplated by the Plans and Specifications, the installation of materially
additional or different materials from that set forth in the Plans and
Specifications, or any other material change in the Plans and Specifications.

"Commitment Fee" means the annual fee the Borrower is required to pay to the
Lender during the period from the date of this Loan Agreement through the
Maturity Date, which fee is an annual amount, payable in advance on the dates
set forth in Section 2.3, equal to 0.33% per annum of the Loan Amount.

"Construction Agreements" means, with respect to a Project, all agreements
entered into between the Borrower and any contractor, architect, engineer,
supplier or other Person with respect to the development of the Project, as such
agreements may be amended or otherwise modified from time to time in accordance
with the Loan Agreement.

"Debt" means, for any Person, without duplication, the sum of the following:

            (1) indebtedness for borrowed money,

            (2) obligations evidenced by bonds, debentures, notes or other
      similar instruments,

            (3) obligations to pay the deferred purchase price of property or
      services,

            (4) obligations as lessee under leases which have been or should be,
      in accordance with GAAP, recorded as capital leases,

            (5) obligations of such Person to purchase securities (or other
      property) which arise out of or in connection with the sale of the same or
      substantially similar securities or property,

            (6) obligations of such Person to reimburse any bank or other Person
      in respect of amounts actually paid under a letter of credit or similar
      instrument,

            (7) indebtedness or obligations of others secured by a lien on any
      asset of such Person, whether or not such indebtedness or obligations are
      assumed by such Person (to the extent of the value of the asset),

            (8) obligations under direct or indirect guaranties in respect of,
      and obligations (contingent or otherwise) to purchase or otherwise
      acquire, or otherwise to assure a creditor against loss in respect of,
      indebtedness or obligations of others of the kinds referred to in clauses
      (1) through (7) above, and

            (9) liabilities in respect of unfunded vested benefits under plans
      covered by Title IV of ERISA.


                                       4
<PAGE>

"Deed of Trust" means, with respect to a Project, that certain Construction Deed
of Trust, Security Agreement and Fixture Filing with Assignment of Rents,
Proceeds and Agreements previously executed or to be executed by the Borrower,
or the applicable Project Owner, as trustor, for the benefit of the Lender, as
the same may be amended or otherwise modified from time to time, including but
not limited to modifications made by means of Deed of Trust Modifications.

"Deed of Trust Modification" means, with respect to any Deed of Trust, a
modification agreement entered into between the Borrower or the Project Owner,
as applicable, and the Lender, modifying the terms and conditions of the Deed of
Trust in order to (i) add to the lien of the Deed of Trust Additional Lots, or
(ii) make such other modifications to the Deed of Trust as the Lender shall
require from time to time.

"Development Work" means, with respect to a Project, the work of development to
be performed on or with respect to the Land (including, without limitation, the
installation of utilities, roads and all related on-site and off-site
improvements) as set out in the Project Commitment, (i) in connection with the
development of the Land into Finished Lots upon which construction of Homes may
commence, all of which work and construction will be completed by or on behalf
of the Borrower in accordance with the Plans and Specifications, but will not
include the Homes, and/or (ii) the construction of amenities (including, without
limitation, club houses and equipment structures) on Golf Parcels.

"Draw Request Certification" means a certification of the Borrower delivered to
the Lender substantially in the form of Exhibit E.

"ERISA" means the Employee Retirement Income Security Act of 1974, as amended
from time to time, and the regulations and rulings issued thereunder.

"Environmental Indemnity" means that certain Hazardous Substances Remediation
and Indemnification Agreement dated as of the date hereof executed by the
Borrower and the Guarantor in favor of the Lender, as the same may be amended or
otherwise modified from time to time.

"Event of Default" means the occurrence, after any applicable grace period, of
any of the events listed in Section 8.1.

"Finished Lot" shall mean a Lot on which the Development Work is completed and
as to which Borrower is entitled to receive a building permit for the
construction of a Home in due course upon filing of a permit application, but
upon which no construction of a Home has been commenced.

"Force Majeure Event" means fire, flood, labor dispute, weather, governmental
action or other cause beyond the reasonable control of the Borrower that delays
the Development Work.

"GAAP" means generally accepted accounting principles set forth in the opinions
and pronouncements of the Accounting Principles Board of the American Institute
of Certified Public


                                       5
<PAGE>

Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as may be
approved by a significant segment of the accounting profession prevalent in the
United States of America.

"Golf Parcel" means any portion of Land developed or to be developed as a golf
course, together with related amenities including, without limitation, club
houses and equipment structures.

"Gross Selling Price" is the amount set forth in a sales agreement as the total
amount to be paid to the Borrower for a Lot or Golf Parcel, including but not
limited to, the base sales price for such Lot plus any lot premium and deposit
paid by the purchaser, less any developer concessions and the cost of golf
memberships included in the Gross Selling Price.

"Guarantor" means Bluegreen Corporation, a Massachusetts corporation.

"Guaranty" means that certain Guaranty Agreement of even date herewith executed
by the Guarantor in favor of the Lender, as the same may be amended or otherwise
modified from time to time.

"Hazardous Materials" means the following:

            (1) any oil, flammable substances, explosives, radioactive
      materials, hazardous wastes or substances, toxic wastes or substances or
      any other materials or pollutants, exposure to which is prohibited,
      limited or regulated by any governmental authority pursuant to any
      Hazardous Materials Law;

            (2) asbestos in any form which is or could become friable, urea
      formaldehyde foam insulation, transformers or other equipment which
      contain dielectric fluid containing levels of polychlorinated biphenyls in
      excess of 50 parts per million, exposure to which is prohibited, limited
      or regulated by any governmental authority pursuant to any Hazardous
      Materials Law;

            (3) any chemical, material or substance defined as or included in
      the definition of "hazardous substances", "hazardous wastes", "hazardous
      materials", "extremely hazardous waste", "restricted hazardous waste", or
      "toxic substances" or words of similar import under any Hazardous Material
      Laws; and

            (4) any other chemical, material or substance, exposure to which is
      prohibited, limited or regulated by any governmental authority pursuant to
      any Hazardous Materials Law.

"Hazardous Materials Claims" means any and all enforcement, clean-up, removal or
other governmental or regulatory actions or orders threatened, instituted or
completed pursuant to any Hazardous Materials Laws, together with all claims
made or threatened by any third party relating to damage, contribution, cost
recovery compensation, loss or injury resulting from any Hazardous Materials.


                                       6
<PAGE>

"Hazardous Materials Laws" means any federal, state or local laws, ordinances
and the regulations, policies or publications promulgated pursuant thereto
relating to (i) the environment, (ii) health and safety, (iii) any Hazardous
Materials (including, without limitation, the use, handling, transportation,
production, disposal, discharge or storage thereof), (iv) industrial hygiene or
(v) environmental conditions on, under or about property, including, without
limitation, soil and groundwater conditions; including, but not limited to, the
following, as now or hereafter amended:

            (1) Federal Statutes: the Clean Air Act, 42 U.S.C. Section 7401, et
      seq.; the Clean Water Act, 33 U.S.C. Section 7401, et seq.; the
      Comprehensive Environmental Response, Compensation and Liability Act of
      1980, 42 U.S.C. Section 9601, et seq., as amended by the Superfund
      Amendments and Reauthorization Act of 1986, 42 U.S.C. Section 11001, et
      seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C.
      Section 1251, et seq.; the Hazardous Materials Transportation Act, as
      amended, 49 U.S.C. Section 1801, et seq.; the Resource Conservation and
      Recovery Act, 42 U.S.C. Section 6901, et seq.; the Safe Drinking Water
      Act, 42 U.S.C. Sections 300f to 300j; the Solid Waste Disposal Act, 42
      U.S.C. Section 3251, et seq.; and the Toxic Substances Control Act, 15
      U.S.C. Section 2601, et seq.; all as amended from time to time;

            (2) Colorado Statutes and Regulations: Colo. Rev. Stat. ("C.R.S.")
      Sections 25-7-101 et seq., and associated regulations at 5 Code of
      Colorado Regulations ("CCR") Sections 1001-1 et seq.; C.R.S. Sections
      2-8-101 et seq., and associated regulations at 5 CCR Sections 1002-21 et
      seq., 1003-1 et seq.; C.R.S. Sections 25-15-101 et seq. and associated
      regulations at 6 CCR Section 1007-3 et seq.; C.R.S. Section 25-16-101 and
      associated regulations at 6 CCR Sections 1007-2 et seq.; C.R.S.
      25-16.5-101 et seq., all as amended from time to time;

            (3) North Carolina General Statutes: Sections 143-215.77, and
      130A-310, all as amended from time to time;

            (4) Texas Code Sections: the Texas Natural Resources Code; the Texas
      Water Code; the Texas Health and Safety Code; and the Uniform Fire Code,
      as adopted by and now or hereafter in effect in the State of Texas or any
      governmental authority therein, all as amended from time to time; and

            (5) Virginia Code Sections: 10.1-1300 et seq., 10.1-1400 et seq.,
      10.1-2500 et seq., 21-287, 21-288, 21-364, 32.1-27, 32.1-164, 32.1-176,
      44-146.37, 62.1-44.2 et seq., 62.1-194.1, 62.1-252, and 62.1-270, all as
      amended from time to time.

"Homes" means, with respect to a Project, the single family residences,
condominium homes and/or attached townhouses that will be constructed by third
parties on the Finished Lots.

"Indemnified Party" means the Lender and any Affiliate of Lender and any
successors or assigns of Lender or any such Affiliate and each of their
officers, directors, employees, agents, attorneys, consultants and advisors.


                                       7
<PAGE>

"Inspector" means, with respect to a Project, the inspector(s) or engineer(s)
engaged by the Lender, at the expense of the Borrower, to provide to Lender
consultation services in connection with the Project.

"Interest Due Date" means the 15th calendar day of each month in which the
Lender has sent a statement of interest due pursuant to the terms of Section
2.5(b).

"Interest Rate" means the per annum Prime Rate plus 1.0%.

"Inventory Project Cost Detail Report (IN230DTL)" means Borrower's report that
shows the detail transactions comprising the Inventory Project Cost Report
(IN230) substantially in the form attached hereto as Exhibit F.

"Inventory Project Cost Report (IN230)" means Borrower's report that shows, for
each Project, the current estimated Approved Costs by category and the amount
spent to date by the Borrower in performing the Development Work substantially
in the form attached hereto as Exhibit G. The Borrower must generate and deliver
such report to the Lender in connection with each request for Lender to
determine the ABF Disbursement Amount and at any other time that Lender
requests.

"Inventory Report (GL592)" means Borrower's report showing, for each Project,
the Schedule A Value of the remaining Lots, the projected sales value of each
remaining Golf Parcel, the remaining gross inventory, the remaining net
inventory and the open, sold and closed Lot counts substantially in the form
attached hereto as Exhibit H.

"Land" means, with respect to a Project, that certain real property which is
suitable for and substantially entitled for the construction of Homes or a Golf
Parcel thereon and related on and off-site improvements and upon which the
Borrower will perform the Development Work, as such real property is legally
described in the Deed of Trust.

"Land Banking" means the practice of acquiring unimproved real property and not
commencing the initial phase of development of such real property within 6
months after the date of acquisition.

"Land Speculation" means the practice of acquiring either (i) unimproved real
property and reselling such real property without adding value by development of
such real property, or (ii) real property for which a plat has not been obtained
or which is not substantially entitled for the development of a residential
project.

"Laws and Regulations" shall mean (i) all laws, regulations, orders, codes,
ordinances, rules, statutes and policies of all local, regional, county, state
and federal governmental authorities having jurisdiction over a Project and (ii)
all restrictive covenants and other title encumbrances, permits and approvals,
leases and other rental agreements which in any case relate to the development,
occupancy, ownership, management, use, and/or operation of a Project.


                                       8
<PAGE>

"Lender" means Residential Funding Corporation, a Delaware corporation, its
successors or assigns.

"Lender's Escrow Instructions" shall mean, with respect to a Project, the escrow
instructions issued by the Lender, or the Lender's legal counsel on behalf of
the Lender, to the Title Company and accepted in writing by the Title Company,
specifying (i) the terms and conditions under which the Title Company may
disburse the initial disbursement of the Loan for the Project and (ii) the
Lender's requirements with respect to the title insurance policy to be issued
with respect to the Project.

"Lender's Release Price" shall mean, with respect to a Project and any parcel of
the Land which Borrower requests Lender to release from the lien of the Deed of
Trust encumbering such Project, the amount required to be paid to Lender prior
to such release, which amount shall equal, (i) the amount specified in Section
2.7(1) (as to Lots) or the amount specified in Section 2.7(2) (as to Golf
Parcels) or the amount specified in Section 2.7(3) (as to a Project respecting
which there is a Project Specific Default), plus (ii) any past due interest or
fees owed to the Lender pursuant to the terms of the Loan Documents.

"Loan" means the revolving loan described in this Loan Agreement in a principal
amount not to exceed the Loan Amount.

"Loan Agreement" means this Loan Agreement, as the same may be amended or
otherwise modified from time to time in accordance with the terms hereof.

"Loan Amount" shall mean $50,000,000.00.

"Loan Documents" means, as to the Loan, all documents, instruments, agreements,
assignments and certificates relating thereto, including, without limitation,
any and all loan or credit agreements, promissory notes, deeds of trust,
mortgages, financing statements, security agreements, assignments of rents,
assignments of leases, assignments of contracts, environmental indemnities,
guaranties, contractor's consent agreements, lender's title insurance policies,
opinions of counsel, evidences of authorization or incumbency, escrow
instructions, and architect's consent agreements to be executed (and
acknowledged where applicable) by the Borrower, the Guarantor and/or the Lender
(where applicable), all in connection with the Lender making the Loan to the
Borrower as the same may be amended or otherwise modified from time to time in
accordance with this Loan Agreement. The Loan Documents will include, but not be
limited to, the following:

            (5) this Loan Agreement;

            (6) the Note;

            (7) the Guaranty;

            (8) the Environmental Indemnity; and

            (9) the Project Documents.


                                       9
<PAGE>

"Lots" shall mean, with respect to a Project, the tracts of real property within
the Land comprising such Project, including all Additional Lots, that have been
or will be developed for the subsequent construction thereon of Homes. With
respect to Projects consisting of condominium homes, Lots shall include the
undivided interest in the Land associated with each condominium home.

"Map" shall mean, with respect to a Project, a final subdivision or parcel map
consistent with the Plans and Specifications and with the Laws and Regulations.

"Material Adverse Change" means any material and adverse change in, or a change
which has a material adverse effect upon, any of:

            (10) the business, properties, operations or condition (financial or
      otherwise) of any entity comprising the Borrower or of the Guarantor
      which, with the giving of notice or the passage of time, or both, could
      reasonably be expected to result in either (i) the Guarantor failing to
      comply with any of the financial covenants contained in Section 5.5 or
      (ii) the inability of the Guarantor or of any entity comprising the
      Borrower to perform its or their respective obligations pursuant to the
      terms of the Loan Documents; or

            (11) the legal or financial ability of any entity comprising the
      Borrower or of the Guarantor to perform its or their respective
      obligations under the Loan Documents and to avoid any Potential Default or
      Event of Default; or

            (12) the legality, validity, binding effect or enforceability
      against any entity comprising the Borrower or against the Guarantor of any
      Loan Document.

"Maturity Date" means the first to occur of (i) September 30, 2006 which is the
date approximately 4 years from the date of this Loan Agreement (as such date
may be extended in writing by the Lender and the Borrower from time to time), or
(ii) the date on which the Loan is required to be repaid pursuant to Section
8.2.

"Net Worth" means (i) total assets, as would be reflected on a balance sheet
prepared on a consolidated basis and in accordance with GAAP, consistently
applied, exclusive of Intellectual Property, experimental or organization
expenses, franchises, licenses, permits, and other intangible assets, treasury
stock, unamortized underwriters' debt discount and expenses, and goodwill minus
(ii) total liabilities, as would be reflected on a balance sheet prepared on a
consolidated basis and in accordance with GAAP consistently applied.

"Note" means that certain Revolving Promissory Note dated of even date herewith
and executed by the Borrower, as maker, and made payable to the order of the
Lender, as holder, in the amount of $50,000,000.00 and maturing on the Maturity
Date, to evidence the Loan, as such Revolving Promissory Note may be amended or
otherwise modified from time to time.

"Permitted Exceptions" means, with respect to a Project, (i) real estate taxes
and assessments not yet due and payable and possible supplemental assessments
for improvements constructed on the Land, (ii) exceptions to title which are
approved in writing by the Lender (including such


                                       10
<PAGE>

easements, dedications, covenants and such which Lender consents to in writing
after the date of this Loan Agreement), and (iii) the exceptions set forth in
the Title Policy.

"Person" means an individual, partnership, corporation (including a business
trust), limited liability company, joint stock company, trust, unincorporated
association, joint venture or other entity, or a government or any political
subdivision or agency thereof.

"Plans and Specifications" means, with respect to a Project, the final set of
architectural, structural, mechanical, electrical, grading, sewer, water, street
and utility plans and specifications for the Development Work to be included
within such Project, including all supplements, amendments and modifications
thereto signed and affixed with the architect's registration stamp or seal, all
in form and substance reasonably satisfactory to the Lender and the Inspector.

"Potential Default" means the existence of any event, which with the giving of
notice, the passage of time, or both, would constitute an Event of Default
hereunder or an event of default (however described) under any other of the Loan
Documents.

"Prepayment Price" shall mean an amount equal to (i) the principal amount of the
Loan to be prepaid, as requested by the Borrower, with no premium thereon, plus
(ii) all accrued interest to the date of prepayment on the principal amount
prepaid.

"Prime Rate" means the rate that is indicated in the Telerate as the prime
lending rate announced from time to time by Bank One, National Association, a
national banking association, as in effect from time to time, it being
understood that the Prime Rate is a reference rate and does not necessarily
represent the lowest or best rate actually charged to any customer. In the event
that such rate is no longer shown in the Telerate, the Borrower and the Lender
will agree on a substitute source for determining the prime lending rate of Bank
One, National Association.

"Project" means any acquisition and/or development project as to which the
Lender has issued a Project Commitment and made proceeds of the Loan available
for disbursement, which such project shall include (i) the Land and (ii) the
Development Work to be completed on the Land.

"Project Commitment" means, with respect to a Project, the project commitment
issued by the Lender to the Borrower for the Project, wherein the Lender agrees,
subject to the terms and conditions of such project commitment and the other
Loan Documents, to make proceeds of the Loan available for the Project. The
Project Commitments will be substantially in the form of Exhibit D.

"Project Concentration Limitation" means that, for any Project, at the time of
determination:

      (c) the ABF Value may not exceed 25% of the ABF Value for all Projects;

      (d) the Value may not exceed 25% of the Value for all Projects; and

      (e) the Approved Costs spent may not exceed 25% of the Approved Costs
spent for all Projects.


                                       11
<PAGE>

"Project Documents" means, with respect to a Project, all documents,
instruments, agreements, assignments and certificates relating thereto,
including, without limitation, any and all loan or credit agreements, promissory
notes, deeds of trust, mortgages, financing statements, security agreements,
assignments of rents, assignments of leases, assignments of contracts,
environmental indemnities, guaranties, contractor's consent agreements, lender's
title insurance policies, opinions of counsel, evidences of authorization or
incumbency, escrow instructions, and architect's consent agreements previously
executed or to be executed (and acknowledged where applicable) by any of the
entities comprising the Borrower, by the Guarantor and/or the Lender (where
applicable), all in connection with the Lender making proceeds of the Loan
available to the Borrower for the Project, as the same may be amended or
otherwise modified from time to time in accordance with this Loan Agreement. The
Project Documents will include, but not be limited to, the following:

            (1) the Project Commitment;

            (2) the Deed of Trust;

            (3) the Assignment;

            (4) in the event the Project is to be owned by a new Project Owner,
      the Addendum to Note;

            (5) the UCC Financing Statement;

            (6) the Plans and Specifications;

            (7) the Lender's Escrow Instructions; and

            (8) the Title Policy.

The Project Documents will include those forms of documents, instruments,
agreements, assignments and certificates which the Lender approves at the time
of its execution and delivery of this Loan Agreement, as evidenced by a written
certificate executed by the Borrower and the Lender. The forms of the Project
Documents may be supplemented or amended from time to time to add or amend form
Project Documents approved by the Lender.

"Project Owner" means the Person who owns a particular Project or Projects, and
which Person must also be a Borrower.

"Project Requirements" means, for any project proposed to be included as a
Project pursuant to the terms of this Loan Agreement, the requirements listed in
Exhibit B.

"Project Security Instruments" means, with respect to a Project, all pledge
agreements, guaranties, deeds of trust, mortgages, security agreements,
assignments and other agreements or instruments previously executed or to be
executed by the Borrower and/or the Guarantor granting in favor of the Lender a
lien or encumbrance on or a security interest in any property or right or
interest of the Borrower and/or the Guarantor as security for the Loan, as the
same may


                                       12
<PAGE>

be amended or otherwise modified from time to time in accordance with this Loan
Agreement, including but not limited to the following:

            (9) the Deed of Trust;

            (10) the UCC Financing Statement; and

            (11) the Assignment.

"Project Specific Default" means a default under the Loan related to the
development, operation or management of a particular Project or to a particular
entity forming Borrower, which default is identified in one or more of Section
8.1(10) and Section 8.1(14) through Section 8.1(19).

"Project Underwriting Documents" means, for any project proposed to be included
as a Project pursuant to the terms of this Loan Agreement, the documents listed
in Exhibit C and any other documents relating to the proposed project which the
Lender requests, all in form and substance satisfactory to the Lender.

"Schedule A Value" means the reasonable value assigned by the Borrower to a Lot
in a Project, and submitted to the Lender for approval as Schedule A to the
Budget with all other documents regarding a proposed Project and approved by the
Lender.

"Title Insurance Company" means First American Title Company or such other title
insurance company acceptable to the Lender.

"Title Policy" means, with respect to a Project, that certain policy of title
insurance accepted by the Lender for the Project, which policy of title
insurance shall:

            (12) be issued in the amount specified by the Lender in the Lender's
      Escrow Instructions;

            (13) be issued by the Title Insurance Company;

            (14) insure the Lender that the applicable Deed of Trust is an
      enforceable first lien against marketable fee simple title to the Project,
      subject only to Permitted Exceptions;

            (15) provide mechanics' lien coverage;

            (16) have all standard exceptions deleted therefrom; and

            (17) comply with the applicable requirements of Schedule 1 to
      Exhibit B.

"Transfer" means the occurrence of any of the following:

      (f) with respect to any Project and/or any entity comprising the Borrower,


                                       13
<PAGE>

            (1) any sale, conveyance, assignment, transfer, alienation,
      mortgage, conveyance of security title, encumbrance or other disposition
      of any kind of the Project, or any other transaction the result of which
      is, directly or indirectly, to divest the Borrower of any portion of its
      title to or interest in the Project, voluntarily or involuntarily, other
      than transfers and sales of the Lots and Golf Parcels in the ordinary
      course of business, it being the express intention of the Borrower and the
      Lender that the Borrower is prohibited from granting to any Person a lien
      or encumbrance upon a Project (other than Permitted Encumbrances),
      regardless of whether such lien is senior or subordinate to the Lender's
      lien;

            (2) any sale, conveyance, assignment, transfer, alienation,
      mortgage, conveyance of security title, encumbrance or other disposition
      of any kind of any other collateral for the Loan, or any other transaction
      the result of which is, directly or indirectly, to divest the Borrower of
      any portion of its title to or interest in such collateral, voluntarily or
      involuntarily, it being the express intention of the Borrower and the
      Lender that the Borrower is prohibited from granting to any Person a lien
      or encumbrance upon such other collateral, regardless of whether such lien
      is senior or subordinate to the Lender's lien;

            (3) any merger, consolidation or dissolution involving the Borrower;

            (4) the sale or transfer of a majority of the assets of the
      Borrower;

      (g) with respect to any Borrower which is a corporation:

            (1) the transfer of any portion of the voting stock of the Borrower;

            (2) the transfer of any portion of the voting stock of any
      corporation which is the direct or indirect owner of 10% or more of the
      voting stock of the Borrower;

            (3) the transfer of any partnership interest in any partnership
      which is the direct or indirect owner of 10% or more of the voting stock
      of the Borrower; or

            (4) the transfer of any membership interest in any limited liability
      company which is the direct or indirect owner of 10% or more of the voting
      stock of the Borrower;

      (h) with respect to any Borrower which is a partnership:

            (1) any merger, consolidation or dissolution involving the general
      partner of the Borrower;

            (2) the sale or transfer of a majority of the assets of any general
      partner of the Borrower;

            (3) the transfer of any general partnership interest in the Borrower
      to another Person;


                                       14
<PAGE>

            (4) with respect to any general partner of the Borrower which is a
      corporation, the transfer of any portion of the voting stock of such
      general partner to another Person;

            (5) with respect to any general partner of the Borrower which is a
      general partnership or limited partnership, the transfer of any
      partnership interest of such general partner to another Person;

            (6) with respect to any general partner of the Borrower which is a
      limited liability company, the transfer of any membership interest of such
      general partner to another Person;

            (7) the conversion of any general partnership interest of the
      Borrower to a limited partnership interest; or

            (8) the addition of any general partner or limited partner to the
      Borrower;

      (i) with respect to any Borrower which is a limited liability company:

            (1) any merger, consolidation or dissolution involving the managing
      member of the Borrower;

            (2) the sale or transfer of a majority of the assets of any managing
      member of the Borrower;

            (3) the transfer of any managing member interest in the Borrower to
      another Person;

            (4) with respect to any managing member of the Borrower which is a
      corporation, the transfer of any portion of the voting stock of such
      managing member to another Person;

            (5) with respect to any managing member of the Borrower which is a
      general partnership or limited partnership, the transfer of any
      partnership interest of such general partner to another Person;

            (6) with respect to any managing member of the Borrower which is a
      limited liability company, the transfer of any membership interest of such
      general partner to another Person;

            (7) the conversion of any managing member interest of the Borrower
      to a non-managing member interest; or

            (8) the addition of any managing member or member to the Borrower.

"UCC Financing Statement" means, with respect to a Project, any UCC financing
statement, whether executed or not by the applicable Project Owner, naming such
Project Owner, as debtor, in favor of the Lender, as secured party, in
connection with the Lender making proceeds of the


                                       15
<PAGE>

Loan available to the Borrower for the Project, as such UCC financing statement
may be amended or otherwise modified from time to time with or without Project
Owner's signature.

"Value" means 75% of the value which an Appraiser assigns to a Project or any
part thereof as to which a value is being determined, as set forth in an
Appraisal Report and based upon the following:

            (9) the value of the Land or any part thereof which is part of a
      Project shall be determined based on the as-is value of the Land and the
      Development Work; and

            (10) the value of any Lot or Golf Parcel sold or under contract to
      be sold pursuant to a sales agreement shall be determined based upon the
      Gross Selling Price set forth in the applicable sales agreement.

Section 1.2 Other Definitional Provisions

      (a) Accounting terms not defined herein will have the respective meanings
given to them under GAAP. To the extent that the definitions of accounting terms
herein are inconsistent with the meanings of such terms under GAAP, the
definitions contained herein will control.

      (b) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Loan Agreement will refer to this Loan Agreement as a
whole and not to any particular provision of this Loan Agreement.

      (c) In this Loan Agreement in the computation of periods of time from a
specified date to a later specified date, the word "from" means "from and
including" and the words "to" and "until" each means "to but excluding".


                                       16
<PAGE>

ARTICLE II THE LOAN

Section 2.1 Agreement to Lend and Borrow; Evidence of Indebtedness and Maturity

      (a) The Lender agrees, on the terms and conditions hereinafter set forth,
to make the Loan to the Borrower for the purpose of providing financing for
Projects; provided however, that the obligation of the Lender to make the Loan
is conditioned upon the Lender's receipt of the documents set forth in Exhibit A
attached hereto. The Borrower will repay the Loan pursuant to Section 2.7, may
prepay the Loan pursuant to Section 2.8 and may reborrow proceeds of the Loan
pursuant to this Section 2.1(a) and Section 2.13.

      (b) Concurrent with the execution and delivery of this Loan Agreement, the
Borrower will execute and deliver to the Lender the Note, evidencing the
indebtedness incurred by the Borrower pursuant to the terms of this Loan
Agreement.

      (c) The outstanding principal balance of the Loan, together with accrued
and unpaid interest thereon and all other amounts payable by the Borrower under
the terms of the Loan Documents, will be due and payable on the Maturity Date.

Section 2.2 Disbursements of the Loan

      The Lender shall make disbursements of the Loan in accordance with and
subject to the terms of Article III hereof.

Section 2.3 Commitment Fees

      (a) The Borrower shall pay to the Lender the annual Commitment Fee for
each annual period in which the Commitment Fee is required to be paid on or
before the first day of the applicable annual period.

      (b) The Commitment Fee shall be paid as follows:

            (1) upon execution and delivery of this Loan Agreement, the Borrower
      shall pay (A) the initial annual payment of the Commitment Fee, plus (B)
      the amount of $458.33 per day from the date of execution and delivery of
      this Loan Agreement through September 30, 2002; and

            (2) subsequent annual payments of the Commitment Fee shall be paid
      upon each Anniversary Date.

      (c) If the Borrower fails to pay any Commitment Fee as required under this
Section 2.3 in a timely manner, the Borrower hereby authorizes the Lender to
disburse to itself proceeds of the Loan to pay such Commitment Fee. The Lender
in its sole discretion (but without any obligation to do so) may make such
disbursements notwithstanding the existence of an Event of Default or Potential
Default. Such disbursements will be added to the outstanding


                                       17
<PAGE>

principal balance of the Loan. The authorization hereby granted is irrevocable,
and no further direction or authorization from the Borrower is necessary for the
Lender to make such disbursements. If the Lender disburses to itself Loan
proceeds to pay itself a Commitment Fee without first having received a request
from the Borrower to make such a disbursement, then the Lender shall send to the
Borrower a statement that shows the amount of Loan proceeds disbursed to pay
such Commitment Fee and an explanation of the Lender's calculation of the
amount.

Section 2.4 No Reduction in Commitment Fee

      The Borrower acknowledges that the Commitment Fees required to be paid to
the Lender pursuant to the provisions of Section 2.3 will be due and owing to
the Lender in advance for each annual period regardless of whether the Loan
remains outstanding for the entire annual period and regardless of whether the
Loan Amount is paid in its entirety during such annual period. In the event
either the Borrower repays or is required to repay the Loan prior to the end of
such annual period, the Borrower will not be entitled to any refund of the
Commitment Fee previously paid. Upon termination of this Loan Agreement, no
additional Commitment Fees will thereafter be due to the Lender.

Section 2.5 Interest

      (a) The Loan will bear interest from the date of disbursement hereunder on
the unpaid principal at an annual rate equal to the Interest Rate.

      (b) On or before the 5th Business Day of each month, commencing with the
first month after the Lender has disbursed proceeds of the Loan, the Lender
shall send to the Borrower a statement setting forth the amount of interest due
for the previous month. The Borrower will pay the interest due for the previous
month on or before the Interest Due Date.

Section 2.6 Interest Rate Limitation

      The provisions of this Loan Agreement and the other Loan Documents are
hereby expressly limited so that in no contingency or event whatever will the
amount paid or agreed to be paid to the Lender for the use, forbearance or
detention of the sums evidenced by this Loan Agreement exceed the maximum amount
permissible under applicable law. If from any circumstance whatever the
performance or fulfillment of any provision of this Loan Agreement or of any
other Loan Document should involve or purport to require any payment in excess
of the limit prescribed by law, then the obligation to be performed or fulfilled
is hereby reduced to the limit of such validity. In addition, if, from any
circumstance whatever, the Lender should ever receive as interest an amount
which would exceed the highest lawful rate under applicable law, then the amount
which would be excessive interest will be applied as an optional reduction of
principal in accordance with the terms of Section 2.10 (or, at the Lender's
option, be paid over to the Borrower), and will not be counted as interest.


                                       18
<PAGE>

Section 2.7 Repayment of Principal

      Principal of the Loan will be due and payable as follows:

            (1) Upon the sale of a Lot, the Borrower will repay the principal
      amount of the Loan in an amount equal to the greater of 55% of the Gross
      Selling Price or 55% of the Schedule A Value for the Lot.

            (2) Upon the sale of a Golf Parcel, the Borrower will repay a part
      of the ABF Outstanding Amount based upon the portion of the total amount
      available under the Loan applicable to the Golf Parcel being sold, which
      amount shall be calculated in accordance with the following formula:

                                                 (0.65 x GAC)
                   Lender's Release Price = OA x (----------)
                                                 (  DA + OA )

      (where OA=ABF Outstanding Amount, GAC=Approved Costs for such Golf Parcel,
      and DA=ABF Disbursement Amount.)

In the event that, for any reason, the proceeds from any such sale are
insufficient to pay in full the required principal payment, then the Borrower
shall, simultaneous with the payment of such proceeds to the Lender, make an
additional payment to the Lender from its own funds of an amount equal to the
difference between the required principal payment and such proceeds. In no event
shall the Borrower make a draw on the Loan to pay to the Lender the required
difference.

            (3) Upon a Project Specific Default and so long as there is no other
      Event of Default or Potential Default, the Borrower may, at its option
      (but only if exercised prior to the earlier of (i) the Lender's exercise
      of its remedies under Section 8.2 and (ii) 30 days after the occurrence of
      the Project Specific Default), repay the portion of the total amount
      available under the Loan applicable to the Project as to which there is a
      Project Specific Default, which amount shall be calculated in accordance
      with the following formula:

                                                ( 0.65 x V )
                    Lender's Release Price = OA (----------)
                                                (  DA + OA )

      (where OA=ABF Outstanding Amount, V=ABF Value of such Project, and DA=ABF
      Disbursement Amount).

            (4) In the event that the ABF Disbursement Amount is less than
      $0.00, the Borrower must immediately make a principal repayment in an
      amount sufficient to eliminate any such deficit within two (2) Business
      Days after notice from Lender.

            (5) On the Maturity Date, the Borrower will repay the entire
      remaining principal amount of the Loan.


                                       19
<PAGE>

Section 2.8 Prepayment of the Loan

      The Borrower will have the right to prepay the Loan at any time without
premium or penalty, in full or in part at a price equal to the Prepayment Price.

Section 2.9 Payments

      (a) All payments of principal, interest and fees on the Loan must be made
to the Lender by federal funds wire transfer as instructed by the Lender in
immediately available funds not later than 1:00 p.m. (Minneapolis time) on the
dates such payments are to be made. Any payment received after 1:00 p.m.
(Minneapolis time) will be deemed received by the Lender on the next Business
Day.

      (b) If any payment of principal, interest or fees to be made by the
Borrower becomes due on a day other than a Business Day, such payment will be
made on the next succeeding Business Day and such extension of time will be
included in computing any interest with respect to such payment.

      (c) Throughout the term of the Loan, interest and fees will be calculated
on the basis of a 360-day year consisting of 12 months, each month consisting of
30 days.

Section 2.10 Applications of Payments; Late Charges and Default Rate

      (a) Payments received by the Lender pursuant to the terms hereof will be
applied in the following manner:

            (1) first, to the payment of all expenses, charges, costs and fees
      incurred by or payable to the Lender and for which the Borrower is
      obligated pursuant to the terms of the Loan Documents;

            (2) second, to the payment of all interest accrued to the date of
      such payment, except that the payments made pursuant to Section 2.7(1)
      through Section 2.7(5) will be applied to the payment of principal in
      accordance with subparagraph (3) below and not to the payment of interest;
      and

            (3) third, to the payment of principal.

      Notwithstanding anything to the contrary contained herein, after the
occurrence and during the continuation of an Event of Default, all amounts
received by the Lender from any party will be applied in such order as the
Lender, in its sole discretion, may elect.

      (b) If any installment of interest and/or the payment of principal is not
received by the Lender within 5 Business Days after the due date thereof, then
in addition to the remedies conferred upon the Lender pursuant to Section 8.2
hereof and the other Loan Documents, the Lender may elect to assess a late
charge of 4% of the amount of the installment due and unpaid, which late charge
will be added to the delinquent amount to compensate the Lender for the


                                       20
<PAGE>

expense of handling the delinquency. The Borrower and the Lender agree that such
late charge represents a good faith and fair and reasonable estimate of the
probable cost to the Lender of such delinquency. The Borrower acknowledges that
during the time that any such amount is in default, the Lender will incur losses
which are impracticable, costly and inconvenient to ascertain and that such late
charge represents a reasonable sum considering all of the circumstances existing
on the date of the execution of this Loan Agreement and represents a reasonable
estimate of the losses the Lender will incur by reason of late payment. The
Borrower further agrees that proof of actual losses would be costly,
inconvenient, impracticable and extremely difficult to fix. Acceptance of such
late charge will not constitute a waiver of the default with respect to the
overdue installment, and will not prevent the Lender from exercising any of the
other rights and remedies available hereunder.

      (c) Upon the occurrence of an Event of Default (and so long as such Event
of Default shall continue), the entire unpaid balance of the Note together with
accrued and unpaid interest thereon shall bear interest at the Default Rate
pursuant to and as defined in Article VIII of the Note.

Section 2.11 Approval Period

      (a) During the Approval Period, Borrower may request that a residential
housing subdivision or a phase thereof be approved as a Project for funding from
the proceeds of the Loan by complying with the terms and conditions of Section
3.1.

      (b) Commencing on the Approval Period Termination Date, Borrower may not
request the approval of new Projects, although proceeds of the Loan will,
subject to the other provisions of the Loan Documents, continue to be disbursed
with respect to the then existing Projects.

Section 2.12 Extension

      Borrower may, not earlier than 90 days and not later than 45 days prior to
the then effective Approval Period Termination Date (as it may be extended from
time to time pursuant to this Section 2.12), request in writing that the
Approval Period and the Maturity Date each be extended for 12 months, or an
increment thereof, or such other time period as proposed by the Borrower. Lender
may, in its sole and absolute discretion, consent or not consent to such request
by giving written notice thereof to Borrower not less than 30 days prior to the
then effective Approval Period Termination Date. If Lender fails to give such
notice Lender will be deemed not to have consented to such extension. If the
Lender consents to such request, the Approval Period Termination Date and the
Maturity Date will each be extended by the time period as agreed to by the
parties, from the then effective Approval Period Termination Date and Maturity
Date, respectively. In the event of such consent by the Lender, the Borrower and
the Guarantor shall execute and deliver to the Lender such amendments or
modifications to the Loan Documents as the Lender shall require.


                                       21
<PAGE>

Section 2.13 Revolving Nature of Loan

      The Loan is a revolving loan and any amounts which are repaid may, subject
to the terms of the Loan Documents limiting the amounts which may be drawn for
any Project and the terms restricting disbursements of proceeds of the Loan, be
redrawn.

Section 2.14 Security

      Payment of the Loan by the Borrower and performance of the Borrower's
other obligations under the Loan Documents will be secured by the Guaranty and
the collateral described in the Project Security Instruments. The Borrower
warrants that the Project Security Instruments will create a valid and
first-lien position with respect to the Projects, subject only to Permitted
Exceptions.


                                       22
<PAGE>

ARTICLE III APPROVAL OF PROJECTS; DISBURSEMENTS OF THE LOAN

Section 3.1 Project Approvals; Project Commitments and Project Documents

      (a) During the Approval Period, the Borrower may submit to the Lender
projects proposed to be included as Projects, all pursuant to and in accordance
with the terms of this Loan Agreement.

      (b) In order to include a proposed project as a Project, the Borrower must
submit to the Lender a complete description of the proposed project, including
the Project Underwriting Documents, and evidence that the proposed project
complies with the Project Requirements.

      (c) In the event that any Project is to be owned by a Person other than
Borrower, the Project Underwriting Documents must specify the Project Owner,
which must be a Person which is owned 100% by Borrower. The Project Documents
relating to that Project will contain a provision whereby the Project Owner, in
addition to Borrower, assumes all of the obligations of Borrower then, or at any
time in the future, contained in this Loan Agreement and the other Loan
Documents and agrees to be bound by and comply with all the terms hereof and
thereof. In such an instance, the Project Underwriting Documents must include
(i) the name of the Project Owner, (ii) the charter and organizational documents
for the Project Owner, including such documents as will specify who is to manage
the Project Owner, and (iii) such other information as the Lender, in its sole
and absolute discretion, will require regarding the Project Owner.

      (d) Upon its receipt of the Project Underwriting Documents, the Lender
will have 30 days to review and, in its sole and absolute discretion, approve or
disapprove the proposed project as a Project which may be financed from proceeds
of the Loan. Upon any such approval, the Lender will issue a Project Commitment
with respect thereto and such proposed project will become a Project for
purposes of this Loan Agreement.

Section 3.2 Project Closings

      Upon issuance of a Project Commitment with respect to a Project, the
Borrower and the Lender shall proceed to execute and deliver the other required
Project Documents for such Project and close the transaction, thereafter
allowing proceeds of the Loan to be disbursed for such Project. The following
shall be the conditions precedent to the closing for each Project:

            (1) The Borrower has delivered to the Lender the Project
      Underwriting Documents, all the documents described in the Project
      Commitment, executed originals of the other Project Documents and such
      other agreements, instruments, certificates and opinions as the Lender
      requires in connection with such Project.


                                       23
<PAGE>

            (2) The Deed of Trust must be duly recorded and in a first-priority
      lien position, which first-priority lien positions shall be evidenced and
      insured by the Title Policy.

            (3) The Lender's security interests in all personal property and any
      fixtures covered by the Deed of Trust must be duly perfected and in a
      first-priority lien position.

            (4) All taxes, fees and other charges in connection with the
      preparation, execution, delivery and recording/filing of the Project
      Documents have been paid by Borrower. All delinquent taxes, assessments or
      other governmental charges or liens affecting the Project, if any, have
      been paid, or if not paid, the Borrower has posted a bond or other
      security acceptable to the Lender with respect to such unpaid taxes.

            (5) As to any Project Owner for which an opinion of legal counsel
      has not previously been delivered to the Lender, an opinion in
      substantially the form required by paragraph (b) of Exhibit A.

            (6) As to any Project Owner for which such resolutions have not
      previously been delivered to the Lender, a certified copy of the
      resolutions adopted by the Project Owner authorizing the Project Owner to
      incur or assume the debt related to the Loan and the Project and
      authorizing certain officers of the Project Owner to execute and deliver
      the Project Documents.

Section 3.3 Disbursements

      (a) Provided that no Event of Default or Potential Default exists, and
subject to the terms and conditions set forth herein, including the provisions
of Section 3.4, the Lender will use its reasonable best efforts to disburse to
the Borrower the amount requested relating to the Development Work within 5
Business Days after receipt of a Draw Request Certification meeting the
requirements of this Loan Agreement. In the event the Lender is unable to make
the disbursement within such time period, the Lender will disburse the proceeds
of the Loan as soon thereafter as possible. All disbursements will be delivered
to Borrower by federal funds wire transfer as instructed by Borrower.

      (b) Determination of ABF Disbursement Amount. The ABF Disbursement Amount
is available for disbursement by the Lender to the Borrower subject to the terms
and conditions for disbursement set forth in this Loan Agreement.

            (1) At Borrower's option, but in no event more frequently than once
      per calendar month, Borrower may request that Lender determine the
      then-current ABF Disbursement Amount, which request must be accompanied by
      a then-current:

                  (A) Borrower's Certification;

                  (B) Draw Request Certification;


                                       24
<PAGE>

                  (C) Inventory Report (GL592) for each Project; and

                  (D) Inventory Project Cost Report (IN230) for each Project.

      The Lender may, on any date it determines, deliver a copy of the most
      recent Inventory Project Cost Report (IN230) to the Inspector. The
      Inspector may take such actions as the Lender and Inspector deem necessary
      to verify the status of the ABF Collateral as set forth in such Inventory
      Project Cost Report (IN230), including random inspections of the Projects
      to confirm the accuracy of the Inventory Project Cost Report (IN230). The
      Borrower will take any and all actions requested by the Lender or
      Inspector to enable the Inspector to make such verifications, including
      but not limited to taking such actions as are necessary to allow the
      Inspector access to the Projects. The Lender has the right, at its
      discretion, to require the Inspector to inspect and evaluate the Projects
      and the Development Work as the Lender deems appropriate. The Borrower
      shall pay the costs and fees of one such inspection per Project per
      calendar quarter; provided, however, if any such inspection shall reveal
      that the completed Development Work is less than the Borrower's
      representation to the Lender of the completed Development Work, then the
      Lender may, in addition to any other remedy, require the Borrower to pay
      all costs and fees of the Inspector from that point forward.

            (2) Upon receipt of a complete and satisfactory request for
      determination of the ABF Disbursement Amount, the Lender will determine
      the ABF Value, and make such adjustments thereto as the Lender determines,
      all in its sole discretion, based upon, (i) Lots and Finished Lots which
      have been removed as ABF Collateral, (ii) the Project Concentration
      Limitation, (iii) a materially detrimental change, in the Lender's
      reasonable judgment, in the operations or value of a Project which
      justifies, in the Lender's judgment, that the Project be disregarded for
      purposes of determining ABF Value, (iv) a Project that is disregarded by
      the Lender for purposes of determining ABF Value pursuant to Section 6.16,
      and (v) such other information which the Lender deems relevant.

            (3) Upon determination of the ABF Value, the Lender will determine
      the ABF Disbursement Amount, taking into account changes in the ABF Value
      as determined pursuant to Section 3.3(b)(2) above and the ABF Outstanding
      Amount on any day of determination.

      (c) Date Down Endorsements. The Lender may, on the first Business Day of
each month, request from the Title Company a "date down" endorsement to each
Title Policy insuring that there are no liens imposed by law for services, labor
or materials appearing in the public records, and insuring the full amount of
each such Title Policy, provided that any such endorsement may show mechanics'
liens if and only if the Title Company will issue an endorsement which insures
the Lender against any loss by reason of such mechanics' liens and the Borrower
has complied in all respects with the requirements of Section 6.17. Up to 6
"date down" endorsements per Project per year shall be purchased at the
Borrower's expense.


                                       25
<PAGE>

      (d) Disbursements. Provided that no Event of Default or Potential Event of
Default exists, and subject to the terms and conditions set forth herein, so
long as the Lender receives a Draw Request Certification meeting the
requirements of this Loan Agreement on or before 2:00 p.m. (Minneapolis time) on
any Business Day, the Lender will use its reasonable best efforts to disburse to
the Borrower the amount requested in such Draw Request Certification on the next
Business Day following such Business Day on which the Lender received such Draw
Request Certification, provided that in the event the Lender is unable to make
the disbursement within such time period, the Lender will disburse the proceeds
of the Loan as soon thereafter as possible. All disbursements will be delivered
to the Borrower by federal funds wire transfer as instructed by the Borrower.

      (e) The ABF Funding System. Lender grants the Borrower, as licensee, a
nonexclusive, nontransferable license to use the ABF Funding System.

            (1) By its acceptance and use of the ABF Funding System, the
      Borrower agrees to use the ABF Funding System only for the Borrower's own
      business. The Borrower shall not (i) permit any parent (other than the
      Guarantor), subsidiary, affiliated entity or third party to use the ABF
      Funding System, (ii) process or permit to be processed the data of any
      person or entity other than the Lender or the Borrower, or (iii) use the
      ABF Funding System in the operation of a service bureau.

            (2) The Borrower agrees that the ABF Funding System and all related
      information constitute the confidential and proprietary information of the
      Lender. The Borrower, its employees and agents shall at all times maintain
      the confidentiality of the ABF Funding System and any related information
      and refrain from selling, licensing, publishing, displaying, distributing,
      disclosing or otherwise making available the ABF Funding System or related
      information to any third party, or using the ABF Funding System or related
      information except as authorized by this Loan Agreement.

            (3) The Lender will maintain all proprietary rights, including
      patent, copyright, trade secret, trademark and other proprietary rights,
      in and to the ABF Funding System and its corresponding documentation.

            (4) The Borrower agrees that only the Lender will have the right to
      alter, maintain, enhance or otherwise modify the ABF Funding System. The
      Borrower will not disassemble, decompile, re-engineer, reverse engineer or
      otherwise attempt to discover the source code or structural framework of
      the ABF Funding System's program. The Borrower will not use the ABF
      Funding System for unauthorized entry into the Lender's computer network.

            (5) The Lender warrants that it is authorized to grant this license
      and to the best of its knowledge, the ABF Funding System does not infringe
      on anyone's proprietary rights. The Lender does not warrant that the
      functions contained in the ABF Funding System will meet the Borrower's
      requirements, or that the operation of the program will be error free. No
      information or advice provided by the Lender will create a warranty, nor
      will the Borrower rely on such information or advice.


                                       26
<PAGE>

================================================================================
            (6) The foregoing warranty is in lieu of all other warranties,
      express or implied, including but not limited to those of title,
      merchantability, fitness for a particular purpose, or any warranty arising
      from course of dealing, usage or trade practice.

            (7) The Lender shall not be liable to the Borrower for any damage,
      including indirect, special, incidental, exemplary or consequential
      damages (including, without limitation, lost profits) related to the ABF
      Funding System or resulting from the use of or inability to use the ABF
      Funding System, arising from any cause of action, including contract,
      warranty, strict liability or negligence, even if the Lender has been
      notified of the possibility of such damages, or for any claim by any other
      party.
================================================================================

            (8) The Borrower acknowledges that any breach of this Section 3.3(e)
      would cause irreparable harm to the Lender for which any remedy at law
      would be inadequate. Therefore, in addition to any and all remedies
      available at law, the Lender will be entitled to seek equitable relief
      (including but not limited to an injunction) in the event of any
      threatened or actual violation of such provisions.

            (9) The terms and conditions of this Section 3.3(e) will terminate
      simultaneously with the termination of this Loan Agreement, provided that
      the provisions hereof regarding confidentiality and proprietary rights
      will survive such termination. Upon termination of this Loan Agreement,
      the Borrower agrees to delete from all computer systems and magnetic media
      all copies of the ABF Funding System and destroy related written material
      and documentation.

Section 3.4 Provisions Applicable to All Disbursements

      The obligation of Lender to make any disbursement requested by the
Borrower of proceeds of the Loan is subject to fulfillment of all of the
following conditions precedent:

            (1) No Event of Default or Potential Default has occurred and is
      continuing, or would result from such disbursements or from the
      application of the proceeds therefrom.

            (2) The requested disbursement of proceeds of the Loan will not
      exceed the ABF Disbursement Amount.

            (3) Following the requested disbursement of proceeds of the Loan,
      the ABF Outstanding Amount of the Loan shall not exceed the lesser of:

                  (A) the Loan Amount;

                  (B) the total for all Projects of, for each Project, the
            lesser of 65% of the ABF Value and 60% of the Value; and

                  (C) 65% of the Approved Costs spent by the Borrower on
            completed Development Work.


                                       27
<PAGE>

            (4) Each Project shall comply with all requirements set forth in the
      Project Commitment for such Project and the other Loan Documents.

            (5) No liens (other than liens for real property taxes that are not
      yet delinquent) have been filed against the Project, except as permitted
      by Section 6.17.

            (6) All statements made in the applicable Draw Request Certification
      shall be true and correct on and as of the date of the requested
      disbursement, before and after giving effect thereto and to the
      application of the proceeds therefrom.

            (7) The representations and warranties of the Borrower and the
      Guarantor contained in the Loan Documents are true and correct in all
      material respects on and as of the date of the requested disbursement,
      before and after giving effect thereto and to the application of the
      proceeds therefrom, as though made on and as of such date.

Section 3.5 Application of Disbursements

      (a) All Loan proceeds disbursed to the Borrower will be used in the
ordinary course of the Borrower's business, subject to the provisions of
Sections 3.5(b) and (c).

      (b) The Borrower shall not permit the use of Loan proceeds for Land
Banking or Land Speculation.

      (c) The Borrower shall not use any part of the proceeds of the Loan to (i)
purchase or carry any margin stock (within the meaning of Regulation U issued by
the Board of Governors of the Federal Reserve System), (ii) repay or otherwise
refinance indebtedness of the Borrower or others incurred to purchase or carry
any margin stock, (iii) extend credit for the purpose of purchasing or carrying
any margin stock, or (iv) acquire any security in any transaction that is
subject to Section 13 or 14 of the Securities Exchange Act of 1934, as amended,
and regulations promulgated thereunder.

Section 3.6 The Lender May Make Disbursement Notwithstanding Noncompliance

      Notwithstanding the failure of any condition precedent to the Lender's
obligation to make any disbursement hereunder, the Lender may make such
disbursement if the Lender, in its sole discretion, determines the making of the
same to be advisable. The making of any disbursement, either before or after the
satisfaction of all conditions precedent with respect to the Lender's obligation
to make the same, will not be deemed to constitute an approval or acceptance by
the Lender of the Development Work theretofore completed or a waiver of such
condition with respect to a subsequent disbursement.


                                       28
<PAGE>

ARTICLE IV REPRESENTATIONS AND WARRANTIES

Section 4.1 Consideration

      As an inducement to the Lender to execute this Loan Agreement, make the
Loan and disburse the proceeds of the Loan, each of the entities forming the
Borrower, jointly and severally, represent and warrant to the Lender the truth
and accuracy of the matters set forth in this Article IV.

Section 4.2 Organization

      Each of the entities comprising the Borrower and the Guarantor are duly
organized, validly existing and in good standing under the laws of its state of
organization, are duly qualified to do business and are in good standing in
every jurisdiction where their business or properties require such
qualification. Each of the entities comprising the Borrower and the Guarantor
have all requisite power and authority to own and operate its properties and to
carry on its business as now conducted or proposed to be conducted.

Section 4.3 Authorization

      The execution, delivery and performance by the Guarantor and each of the
corporations (including any corporations acting as partners or general partners
of any partnerships comprising the Borrower) and the partnerships comprising the
Borrower of the Loan Documents have been duly authorized by all necessary action
and do not and will not (i) contravene the Articles of Incorporation or Bylaws
of any of such corporations or charter documents of such partnerships, (ii)
contravene any law, rule or regulation or any order, writ, judgment, injunction
or decree or any contractual restriction binding on or affecting any of the
entities comprising Borrower, (iii) require any approval or consent of any
member, partner, shareholder or any other Person, other than approvals or
consents which have been previously obtained and disclosed in writing to the
Lender, (iv) result in a breach of or constitute a default under any indenture
or loan or credit agreement or any other agreement, lease or instrument to which
any of the entities comprising the Borrower is a party or by which any of such
entities or its properties may be bound or affected, or (v) result in, or
require the creation or imposition of, any lien of any nature (other than the
liens contemplated hereby) upon or with respect to any of the properties now
owned or hereafter acquired by any of the entities comprising the Borrower. None
of the entities comprising the Borrower is in default under any such law, rule,
regulation, order, writ, judgment, injunction, decree or contractual restriction
or any such indenture, agreement, lease or instrument.

Section 4.4 Governmental Consents

      No authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required for the
due execution, delivery and


                                       29
<PAGE>

performance by any of the entities forming the Borrower and by the Guarantor of
the Loan Documents or any other document executed pursuant thereto or in
connection therewith.

Section 4.5 Validity

      The Loan Documents have been duly executed and delivered by and constitute
the legal, valid and binding obligations of each of the entities forming the
Borrower and of the Guarantor, enforceable in accordance with their respective
terms.

Section 4.6 Financial Position

      As of the dates prepared, the financial statements and all financial data
heretofore delivered to the Lender in connection with the Loan and/or relating
to each of the entities forming the Borrower and to the Guarantor are true,
correct and complete in all material respects and were prepared in accordance
with GAAP consistently applied. Such financial statements fairly present the
financial position of the Persons who are the subject thereof as of the dates
thereof.

Section 4.7 Governmental Regulations

      None of the entities forming Borrower nor the Guarantor are subject to
regulation under the Investment Company Act of 1940, the Federal Power Act, the
Public Utility Holding Company Act of 1935, the Interstate Commerce Act, as the
same may be amended from time to time, or any federal or state statute or
regulation limiting its ability to incur Debt.

Section 4.8 Employee Benefit Plans

      None of the entities forming Borrower nor the Guarantor maintain any
pension, retirement, profit sharing or similar employee benefit plan that is
subject to ERISA other than a plan pursuant to which such entity's contribution
requirement is made contemporaneously with the employees' contributions.

Section 4.9 Securities Activities

      None of the entities forming Borrower nor the Guarantor are engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying any margin stock (as defined in
Regulation U of the Board of Governors of the Federal Reserve System in effect
from time to time) and not more than 25% of the value of the assets of either
such entity consists of such margin stock.

Section 4.10 No Material Adverse Change

      No Material Adverse Change has occurred.


                                       30
<PAGE>

Section 4.11 Payment of Taxes

      All tax returns and reports required to be filed by each of the entities
forming the Borrower and by the Guarantor have been timely filed, or proper
extensions for filing have been obtained. All taxes, assessments, fees and other
governmental charges upon each of the entities forming the Borrower and upon the
Guarantor and their properties, assets, income and franchises which are due and
payable have been paid when due and payable, or proper extensions for payment
have been obtained, except to the extent that such taxes, assessments, fees and
other governmental charges or the failure to pay the same would not be material
to the respective business, properties, assets, operations, condition (financial
or otherwise) or business prospects of such entity. None of the entities forming
the Borrower nor the Guarantor have any knowledge of any proposed tax assessment
against any of the entities forming the Borrower or the Guarantor that could be
material to the business, properties, assets, operations, condition (financial
or otherwise) or business prospects of any of such Persons.

Section 4.12 Litigation

      There is no pending or, to the knowledge of any of the entities forming
the Borrower, threatened action, suit, proceeding or arbitration against or
affecting any of the entities forming the Borrower or the Guarantor before any
court, governmental agency or arbitrator, which may result in a Material Adverse
Change.

Section 4.13 Environmental Matters

      (a) Projects. The representations, warranties and covenants of each of the
entities forming the Borrower and of the Guarantor with respect to all
environmental matters relating to the Projects are set forth in the
Environmental Indemnity.

      (b) Non-Projects. As to each "Non-Project" (defined as any project to be
developed, under development, or developed by any of the entities forming the
Borrower or the Guarantor other than a Project), the operations of the owner
comply in all respects with all Hazardous Materials Laws except such
noncompliance which would not (if enforced in accordance with applicable law)
reasonably be expected to result, individually or in the aggregate, in a
Material Adverse Change. As of the date of this Loan Agreement, (i) neither any
of the entities forming the Borrower, the Guarantor, nor their present
properties or operations is subject to any outstanding written order from, or
settlement or consent agreement with, any governmental authority or other
Person, nor is any of the foregoing subject to any judicial or docketed
administrative proceeding respecting any Hazardous Materials Law, Hazardous
Materials Claim or Hazardous Material, and (ii) there are no other conditions or
circumstances known to any of the entities forming the Borrower or the Guarantor
which may give rise to any Hazardous Materials Claim arising from the operations
of any of the entities forming the Borrower or of the Guarantor.


                                       31
<PAGE>

Section 4.14 No Burdensome Restrictions

      None of the entities forming the Borrower nor the Guarantor are a party to
or bound by any contract or agreement, or subject to any charter or corporate
restriction or any requirement of law, which would reasonably be expected to
result in a Material Adverse Change.

Section 4.15 Full Disclosure

      None of the statements contained in any exhibit, report, statement or
certificate furnished by or on behalf of any entity forming the Borrower or of
the Guarantor in connection with the Loan Documents contains any untrue
statement of a material fact, or omits any material fact required to be stated
therein or necessary to make the statements made therein, in light of the
circumstances under which they are made, not misleading; provided, however, that
it is recognized by the Lender that projections and forecasts provided and to be
provided by the entities forming the Borrower and the Guarantor, while
reflecting such entities' good faith projections and forecasts, based upon
methods and data each such entity believes to be reasonable and accurate, are
not to be viewed as facts and that actual results during the period or periods
covered by any such projections and forecasts may differ from the projected or
forecasted results.

Section 4.16 Adequate Consideration

      Each of the entities forming the Borrower represents and warrants to the
Lender that prior to entering into this Loan Agreement, it has reviewed the
benefits to be provided to it as a result of the Lender making the Loan and has
concluded that such benefits are reasonably equivalent in value to the
collateral to be pledged to secure the Loan and the obligations assumed and to
be assumed by each of the entities forming the Borrower pursuant to the Loan
Documents.


                                       32
<PAGE>

ARTICLE V COVENANTS OF THE BORROWER

Section 5.1 Consideration

      As an inducement to the Lender to execute this Loan Agreement, make the
Loan and make each disbursement of the Loan, the Borrower hereby covenants that,
so long as any amount payable hereunder or under any other Loan Document remains
unpaid or the Lender has any commitment to disburse the Loan hereunder, each of
the entities forming the Borrower shall comply with the covenants set forth in
this Article V.

Section 5.2 Reporting Requirements

      Each of the entities forming the Borrower shall furnish or cause to be
furnished to the Lender the following notices and reports:

            (1) Monthly Reports. The following reports related to the Projects:

                  (A) Within 30 days after the end of each calendar month a copy
            of the Financial Summary for Financial Managers (also referred to as
            the Board of Directors' package) for the previous month, including,
            without limitation, summary projected inventory economics for each
            Project and a consolidated profit and loss statement on a monthly
            and year to date basis; and

                  (B) on or about the 10th day after the end of each calendar
            month, for each Project an Inventory Report (GL592) and an Inventory
            Project Cost Report (IN230).

            (2) Quarterly Financial Reports. As soon as possible after each
      fiscal quarter of the Guarantor (other than the last quarter of any fiscal
      year) and in any event within 5 days after submission to the Securities
      and Exchange Commission, the following: (i) a copy of the Guarantor's 10Q
      filing certified by the Chief Financial Officer of the Guarantor to fairly
      present the financial condition of said entity on a fully consolidated
      basis at the end of such fiscal quarter and the results of the operations
      of such entity on a fully consolidated basis for the period ending on such
      date; and (ii) copies of any and all other financial reports and
      corrections thereto and to the 10Q filings required of the Guarantor under
      federal laws and regulations.

            (3) Annual Financial Statements. As soon as possible after each
      fiscal year of the Guarantor and in any event within 5 days after
      submission to the Securities and Exchange Commission, the following: (i) a
      copy of the Guarantor's 10K filing certified by the Chief Financial
      Officer of the Guarantor to fairly present the financial condition of said
      entity on a fully consolidated basis at the end of such fiscal year and
      the results of the operations of such entity on a fully consolidated basis
      for the period ending on such date; and (ii) copies of any and all other
      financial reports and corrections thereto and to the 10K filings required
      of the Guarantor under federal laws and regulations.


                                       33
<PAGE>

            (4) Notice of Labor Controversy or other Force Majeure Event. As
      soon as possible and in any event within 5 Business Days after the
      Guarantor or any of the entities comprising the Borrower has knowledge of
      its occurrence, written notice of any labor controversy or other force
      majeure event resulting in a material strike, work stoppage, shutdown or
      other material disruption against or involving any of the entities
      comprising the Borrower, the Guarantor, or any Project.

            (5) Notice of Material Adverse Change. As soon as possible after its
      occurrence, written notice and a description of any matter which has
      resulted, or may result, in a Material Adverse Change.

            (6) Notice of Defaults or Potential Defaults. As soon as possible
      and in any event within 5 Business Days after any of the entities
      comprising the Borrower or the Guarantor have knowledge of the occurrence
      of any Potential Default or Event of Default hereunder or an event of
      default (however described) under any other of the Loan Documents, written
      notice and a description of such Potential Default, Event of Default or
      event of default and the action which such entity proposes to take with
      respect thereto.

            (7) Notices of Default Regarding Other Development Projects. As soon
      as possible and in any event within 5 Business Days after any of the
      entities comprising the Borrower or the Guarantor have knowledge of the
      occurrence of (i) any event of default under any loan or other financing
      facility, including seller financing, made for a development or
      construction project comparable to a Project and involving any of the
      entities comprising the Borrower, the Guarantor, or any of their
      Affiliates which event of default might result in a Material Adverse
      Change, or (ii) any material event of default under any other loan or
      credit agreement relating to other debt incurred by any of the entities
      comprising the Borrower, the Guarantor, or any of their Affiliates written
      notice and a description of such event of default, the cure period and the
      action which such entity proposes to take with respect thereto.

            (8) Notice of Litigation. As soon as possible and in any event
      within 5 Business Days after institution thereof, written notice and a
      description of any material adverse litigation, action or proceeding
      commenced against the Guarantor or any entity comprising the Borrower, or
      any of their Affiliates, or relating to any Project, and any adverse
      determination in any such litigation, action or proceeding.

            (9) Notices Regarding Hazardous Materials. As soon as possible after
      the Guarantor or any entity comprising the Borrower obtains knowledge of
      any material occurrence, written notice and a description of the release
      of any Hazardous Material, or any liability with respect thereto, on,
      under or in connection with a Project and the action which such entity or
      the Project Owner (if they are different) proposes to take with respect
      thereto.

            (10) Notices Regarding Projects. As soon as possible and in any
      event within 5 Business Days after receipt by the Guarantor or any entity
      comprising the Borrower, copies of all (i) notices of violation relating
      to and adversely affecting any Project that


                                       34
<PAGE>

      such entity or the Project Owner receives from any governmental agency or
      authority, (ii) notices of default that the Guarantor or any entity
      comprising the Borrower receives under the Construction Agreements or any
      other agreement relating to and adversely affecting any Project, and (iii)
      notices of default that the Guarantor or any entity comprising the
      Borrower receives under any agreement relating to the borrowing of money
      by the Guarantor or any entity comprising the Borrower for any Project
      from any Person.

            (11) Other Information. Such other information respecting the
      business, properties, assets, operations and condition, financial or
      otherwise, of the Guarantor or any entity comprising the Borrower, their
      Affiliates and the Projects, including, without limitation, copies of
      Project development and sales reports, Inventory Project Cost Detail
      Report (IN230DTL)s, and any other rights or interests subject to the Loan
      Documents, as the Lender may from time to time reasonably request. In
      addition, each or any of the entities comprising the Borrower shall
      provide to the Lender upon the Lender's request (which the Lender may make
      at its sole discretion) a summary report of accounts payable aging, which
      must comply with the certification requirements of Section 5.2(2), except
      that no statement of cash flow will be required.

Section 5.3 Borrower's Operations and Management

      Each entity comprising the Borrower shall:

            (1) Compliance with Laws, Etc. Comply in all material respects, with
      all applicable laws, rules, regulations and orders of any governmental
      authority, including but not limited to the Laws and Regulations, the
      noncompliance with which may result in a Material Adverse Change.

            (2) Payment of Taxes and Claims. Pay (i) all taxes, assessments and
      other governmental charges imposed upon it or any of its properties or
      assets or in respect of any of its franchises, business, income or profits
      before any penalty accrues thereon, and (ii) subject to Section 6.17, with
      respect to the Projects, all claims (including, without limitation, claims
      for labor, services, materials and supplies) for sums which have become
      due and payable and which by law have or may become a lien upon any of its
      properties or assets, except for those claims disputed by any of the
      entities comprising the Borrower in accordance with Section 6.17(b), but
      only so long as there is no threat of foreclosure of such lien.

            (3) Maintenance of Properties; Books and Records. Maintain or cause
      to be maintained:

                  (A) in good repair, working order and condition all properties
            and assets material to the continued conduct of the business of the
            Borrower, and from time to time make or cause to be made all
            necessary repairs, renewals and replacements thereof; and


                                       35
<PAGE>

                  (B) proper books, records and accounts in which full, true and
            correct entries in accordance with GAAP consistently applied are
            made of all financial transactions and matters involving its assets
            and business.

            (4) Change in Nature of Business. Make no material change in the
      nature of its business as carried on at the date hereof.

            (5) Maintenance of Existence. Maintain and preserve its existence
      and all rights, privileges, qualifications, permits, licenses, franchises
      and other rights material to its business.

            (6) Change in State of Registration or location of Executive
      Offices. Make no change to its state of organization or the location of
      its executive offices without giving the Lender at least 30 days' prior
      written notice.

            (7) Management. Maintain professional and qualified management and
      staff to manage, operate and maintain its assets and business, including
      but not limited to the Projects.

Section 5.4 Insurance

      (a) Each of the entities comprising the Borrower will maintain or cause
its contractors to maintain the insurance required by the terms of this Loan
Agreement and will deposit with the Lender original, duplicate original or
certified copies of insurance certificates issued by insurance companies with
current Best's Key Ratings of not less than A/IX (as to those policies
maintained by the Borrower) and A/VII (as to those policies maintained by its
contractors) and written in form and content acceptable to the Lender, providing
the following minimum insurance coverages:

            (1) "Comprehensive General Liability" insurance in the minimum
      "general aggregate" amount of $2,000,000 for the Borrower and $1,000,000
      for its contractors, in the minimum "occurrence" limit of $2,000,000 for
      the Borrower and $1,000,000 for its contractors, and in the minimum
      "umbrella" amount of $10,000,000 for the Borrower, all against claims for
      "personal injury" liability, including bodily injury, death or damage to
      the project liability, including completed operations and contractual
      liability and also including owners' and contractors' protective coverage
      naming the Lender as an additional insured.

            (2) Insurance with respect to its properties, assets and business
      against loss or damage of the kinds customarily insured against by Persons
      of established reputation engaged in the same or similar business and
      similarly situated, of such types and in such amounts as are customarily
      carried under similar circumstances by such other Persons, all in
      accordance with reasonably prudent industry standards.


                                       36
<PAGE>

            (3) Workers' compensation insurance as prescribed by the laws of
      each state in which the Borrower is required to maintain such insurance,
      and employers' liability with limits as prescribed by law.

            (4) For each Project, broad form course of construction insurance
      covering all risks in the minimum amount of the proposed construction cost
      for such Project on a replacement cost basis, against loss or damage by
      hazards customarily included within "extended coverage" policies, and any
      other risks or hazards which in the Lender's reasonable judgment should be
      insured against, with a Lender's Loss Payable Endorsement naming the
      Lender as an additional insured, together with a full replacement cost
      endorsement (without provisions for co-insurance).

            (5) For each Project, flood insurance in the maximum amount of the
      budgeted construction costs or the maximum coverage available, whichever
      is less, designating the Lender as payee, or evidence satisfactory to the
      Lender that the Project is not located within an area designated as within
      the 100 year flood plain under the National Flood Insurance Program.

      (b) Each policy of insurance required under this Section 5.4 must contain
the "standard non-contributory mortgagee clause" and the "standard lenders' loss
payable clause," or their equivalents, in favor of the Lender and/or its
assignees, and must provide that it will not be modified or canceled without 30
days' prior written notice to the Lender. The Borrower must also furnish the
Lender with receipts for the payment of premiums on such policies or other
evidence of such payment reasonably satisfactory to the Lender.

      (c) In the event an entity comprising the Borrower does not deposit with
the Lender a new policy of insurance with evidence of payment of premiums
thereon at least 30 days prior to the expiration of any expiring policy, then
the Lender may, but will not be obligated to, procure such insurance, and such
entity will pay the premiums thereon to the Lender promptly upon demand.

      (d) The Lender will not, by the fact of approving, disapproving,
accepting, preventing, obtaining or failing to obtain any such insurance, incur
any liability for the form or legal sufficiency of insurance contracts, solvency
of insurers or payment of losses, and the Borrower hereby expressly assumes full
responsibility therefor and all liability related thereto, if any.

Section 5.5 Financial Covenants

      The Borrower shall comply with, or ensure compliance with, the following:

            (1) Net Worth. The Guarantor will maintain a Net Worth equal to or
      in excess of $130,000,000;

            (2) Ratio of Total Liabilities to Net Worth. At all times, the ratio
      of the Debt of the Guarantor determined in accordance with GAAP
      consistently applied on a


                                       37
<PAGE>

      consolidated basis, and including but not limited to contingent
      liabilities, to its Net Worth shall not exceed 2.5:1.

Section 5.6 Sole Lender; No Transfers

      None of the entities comprising the Borrower (including the Project
Owners) may borrow moneys from, or lease, pledge, or in any way encumber all or
any portion of a Project or the Land to or for the benefit of a lender other
than the Lender, except for leases and purchase money loans for equipment
purchased in the ordinary course of business. The entities comprising the
Borrower will not make any Transfer unless the Borrower has obtained the written
consent of the Lender, which consent may be granted or withheld in the Lender's
sole and absolute discretion.

Section 5.7 Further Assurances

      The Borrower shall execute and deliver, or cause the execution and
delivery, at any time and from time to time any and all instruments, agreements
and documents, and will take such other action, or cause such other action to be
taken, as the Lender reasonably requires to maintain, perfect or insure the
Lender's security provided for under the Loan Documents, including, without
limitation, the execution of amendments to the Loan Documents.


                                       38
<PAGE>

ARTICLE VI THE PROJECTS

Section 6.1 Consideration

      As an inducement to the Lender to finance each Project and to make each
disbursement of the Loan for the Projects, the Borrower represents and warrants
the truth and accuracy of the matters regarding each Project set forth in this
Article VI and hereby covenants regarding each Project as set forth in this
Article VI. Each of the representations, warranties and covenants in this
Article VI is made by the Borrower with respect to each Project individually,
and as to all Projects collectively. The Borrower's execution and delivery to
the Lender of the Project Commitment and other Project Documents for a Project
shall be deemed a reaffirmation by the Borrower of the representations,
warranties and covenants in this Article VI as to that Project.

Section 6.2 Title to Project

      The Project Owner is, or will be upon acquisition of the Land and during
the Development Work, the sole legal and beneficial owner of the Land and the
Development Work, free and clear of all claims, liens and encumbrances other
than Permitted Exceptions. Title to all of the personal property which forms a
part of the Development Work is or will be vested solely in the Project Owner,
free and clear of all claims, liens and encumbrances, and the security interest
of the Lender in such personal property is a first lien thereon.

Section 6.3 No Prior Liens or Claims

      (a) As to Projects for which no work has commenced prior to the
recordation of the Deed of Trust, except as otherwise may have been approved in
writing by the Lender and as to which the Lender shall have received such
endorsements (including mechanics lien coverage) to the Title Policy as the
Lender may require to assure the priority of the Deed of Trust as a valid first
lien on the Project, neither the Project Owner, nor anyone acting on the Project
Owner's behalf has (i) commenced construction of the Development Work, or any
grading or site clearance related thereto, (ii) purchased, contracted for or
otherwise brought upon the Land any materials, specially fabricated or
otherwise, to be incorporated into the Development Work, or (iii) entered into
any contract or arrangement, the performance of which by any other party thereto
could give rise to a lien or claim on the Project or any portion thereof.

      (b) As to Projects as to which the Project Owner has disclosed that work
has commenced and Lender has consented to such prior work, and notwithstanding
that, prior to recordation of the Deed of Trust, the Project Owner has (i)
commenced certain construction activity on the Land, (ii) purchased, contracted
for or otherwise brought upon the Land materials, specially fabricated or
otherwise, to be incorporated into the Development Work, and/or (iii) entered
into certain contracts or arrangements, the performance of which by any other
party thereto could give rise to a lien or claim on the Project or any portion
thereof, the Borrower represents none of such activities has given rise, nor
shall any such activities give rise in the


                                       39
<PAGE>

future, to any liens against the Project which could impair the priority of the
Deed of Trust as a valid first lien on the Project.

Section 6.4 Access to the Project

      All roads, streets, traffic turn lanes, and access ways necessary for the
full utilization of the Project for its intended purpose have either been bonded
around or completed or the necessary rights of way have either been acquired by
the appropriate governmental authority or have been dedicated to public use and
accepted by the appropriate governmental authority, and all necessary steps have
been taken by the Project Owner and the appropriate governmental authority to
assure the complete construction and installation thereof by the time needed for
construction and/or occupancy and operation of the Project.

Section 6.5 Compliance with Project Requirements and Laws and Regulations

      The Project, the proposed and actual use thereof, and the Development Work
when completed will comply in all material respects with the Project
Requirements and with the Laws and Regulations, and there is no action or
proceeding pending or, to the knowledge of the Borrower (after due inquiry),
threatened before any court, quasi-judicial body or administrative agency at the
time of any disbursement by the Lender relating to the validity of the Loan or
the proposed or actual use of the Project.

Section 6.6 Covenants, Zoning, Codes, Permits and Consents

      The Borrower is familiar and has complied with all of the Laws and
Regulations to be complied with in connection with the construction of the
Development Work. All permits, licenses, consents, approvals or authorizations
by, or registrations, declarations, withholding of objections or filings with
any governmental body necessary in connection with the valid execution, delivery
and performance of the Loan Documents, and any and all other documents executed
in connection with any of the foregoing, necessary for the subdivision of the
Land, and necessary for the construction of the Development Work, and necessary
for the marketing and sale of the Lots and Golf Parcels, have been obtained, or
in a timely manner will be obtained, and are valid, adequate and in full force
and effect. Construction of the Development Work and the intended use thereof
will in all respects conform to and comply with all Laws and Regulations,
including without limitation all applicable zoning, subdivision, environmental
protection, use and building codes, laws, regulations and ordinances.

Section 6.7 Utilities

      All utility services and facilities necessary for the construction, sale
and occupancy of the Project and the operation thereof for its intended purpose
are either available at the boundaries of the Land, or, if not, all necessary
steps have been taken by the Project Owner and the local authority or public
utility company which provides such services to assure the complete installation
and availability thereof when needed for construction, sale, occupancy and
operation of the Project.


                                       40
<PAGE>

Section 6.8 Map, Permits. Licenses and Approvals

      The Project Owner has obtained, or will in a timely manner obtain, the
Map. The Project Owner shall properly comply with and keep in effect the Map and
all permits, licenses and approvals which are required to be obtained from
governmental bodies in order to construct, occupy, operate, market and sell the
Project. The Project Owner shall promptly deliver copies of the Map and all such
permits, licenses and approvals to the Lender.

Section 6.9 Approval of Plans and Specifications and Approval of Budget

      (a) The Plans and Specifications are a true, complete and accurate
reflection of the Development Work that the Project Owner will construct. The
Plans and Specifications are satisfactory to the Project Owner and have been
reviewed and approved by the Project Owner and the general contractor for the
Project (if different from the Project Owner), and have also been approved as
required by all governmental bodies or agencies having jurisdiction (including,
without limitation, any local design review boards) and, if required, by the
beneficiary of any restrictive covenant affecting the Project. There are no
structural defects in the Development Work as shown in the Plans and
Specifications, and no violation of any of the Laws and Regulations exists with
respect to the Plans and Specifications.

      (b) After diligent investigation of all relevant conditions and due
consultation with such parties as the Project Owner deems appropriate, the
Project Owner represents that the Budget identifies on a line item basis all
costs to be incurred in connection with the Development Work and all costs for
which proceeds of the Loan are to be disbursed. The Budget reflects the Project
Owner's best, true, accurate and complete estimate of the costs shown therein
and of the costs estimated to be necessary to construct the Development Work in
accordance with the Plans and Specifications.

Section 6.10 Construction Start and Completion

      Subject to a Force Majeure Event (but not having any effect on Section
8.1(14) and Section 8.1(16)), the Project Owner shall commence construction of
the Development Work no later than the date set forth in the Project Commitment
and shall thereafter diligently proceed with construction and completion of the
Development Work in a good and workmanlike manner in the normal course of
business as a prudent developer. The Project Owner shall cause the Development
Work at all times to materially conform to the Laws and Regulations and shall
accomplish completion of the Development Work in the manner of a prudent
developer. The Project Owner shall cooperate at all times with the Lender in
bringing about the timely completion of each element of the Development Work,
and the Project Owner shall use best efforts to resolve all disputes arising
during the work of construction in a manner which shall allow work to proceed
expeditiously.


                                       41
<PAGE>

Section 6.11 Personal Property Incorporation

      All personal property for which the Lender advances Loan proceeds for the
Project is to be stored on the Land and in the Lender's judgment must be
reasonably secure from damage and theft and fully insured at all times.

Section 6.12 Contractors and Contracts

      Upon demand by the Lender, the Project Owner shall furnish to the Lender,
from time to time, correct lists, to the extent known or obtainable, of all
contractors and subcontractors employed in connection with the Development Work.
Each such list shall show, to the extent known or obtainable, the name, address
and telephone number of each such contractor or subcontractor, a general
statement of the nature of the work to be done, the labor and materials to be
supplied, the names of materialmen, and the approximate dollar value of such
labor, work and materials with respect to each. Upon an Event of Default, the
Lender shall have the right, and at any time the Inspector shall have the right
(in both cases without either the obligation or the duty), to contact directly
each contractor, subcontractor and materialman to verify the facts disclosed by
said list or for any other purpose.

Section 6.13 Evidence of Ownership of Materials

      If requested by the Lender, the Project Owner shall promptly deliver to
the Lender any bills of sale, statements, receipts, contracts or agreements
under which the Project Owner claims title to any materials, fixtures or
articles incorporated into the Development Work.

Section 6.14 Changes to Plans and Specifications and Budget

      (a) The Borrower shall promptly inform the Lender of all Changes to the
Budget or the Plans and Specifications.

      (b) The Lender is under no duty to review or inform the Borrower of the
quality or suitability of the Plans and Specifications, any contract or
subcontract or any changes thereto. Without limitation of the foregoing, if the
gross profit margin of a Project is less than 25%, then the Project Owner shall
obtain the Lender's prior written approval of any Change which might adversely
affect the value of the Lender's security or which, regardless of cost, is a
material change in structure, design, function or exterior appearance.

      (c) Nothing herein or elsewhere in the Loan Documents excuses the Project
Owner from any obligation to obtain, to the extent that such approvals may be
required, (i) the approvals of the appropriate governmental authorities to any
Change and (ii) from the appropriate persons or entities approvals of any
alterations in the Map, the Plans and Specifications or any work, materials or
contracts that are required by any of the Laws and Regulations or under the
terms of the Project Commitment or the other Loan Documents.


                                       42
<PAGE>

Section 6.15 Lender Inspections, Appraisal and Information

      During normal business hours, the Project Owner shall arrange for the
Lender, the Inspector or any other authorized representative of the Lender, at
the expense of the Borrower, to visit, inspect or appraise the Project, the
materials to be used thereon or therein, contracts, records, plans,
specifications and shop drawings relating thereto, whether kept at the
Borrower's offices or at the Project construction site or elsewhere, and the
books, records, accounts and other financial and accounting records of the
Borrower wherever kept, and to make copies and take extracts thereof and
therefrom as often as may be reasonably requested by the Lender. The Borrower
will cooperate with the Lender to enable the Lender, the Inspector or such other
authorized representatives of the Lender to conduct such visits, inspections and
appraisals. The costs of the Inspector and the other authorized representatives
of the Lender, and of such inspections and appraisals shall be borne by the
Borrower and shall be paid within 30 days of the Borrower's receipt of any
invoice with respect thereto. Borrower agrees to keep at its offices or at the
Project, and to make available to the Lender during normal business hours, the
Plans and Specifications on an as-built basis or, if unavailable, the final set
of plans and specifications from which the Development Work was constructed
("As-Builts"), certified by a licensed architect or licensed contractor as true,
correct and complete As-Builts.

Section 6.16 Correction of Defects

      If the Lender in its reasonable judgment determines that any Development
Work or materials fail to conform to the Map, any Laws and Regulations, the
Plans and Specifications, or that they otherwise depart from any of the
requirements of this Loan Agreement, the Lender may withhold disbursements until
the matter is corrected and if such matters are not addressed to the reasonable
satisfaction of the Lender within thirty (30) days from written notice thereof,
the Lender may require the Development Work be stopped. If this occurs, the
Project Owner shall promptly correct the work to the Lender's satisfaction, and
pending completion of such corrective work shall not allow any other work which
is dependent upon or directly related to the work requiring correction to
proceed. During the period that the Lender withholds disbursements and/or
requires that Development Work be stopped in accordance with this Section 6.16,
the Lender may, at its sole option, disregard the affected Project for purposes
of calculating the ABF Disbursement Amount. No such action by the Lender shall
affect the Project Owner's obligation to complete each element of the
Development Work within the times required by this Loan Agreement. The advance
of any Loan proceeds shall not constitute a waiver of the Lender's right to
require compliance with this covenant.

Section 6.17 Protection Against Lien Claims

      (a) The Project Owner shall pay and discharge, or cause to be paid and
discharged, promptly and fully all claims for labor done and materials and
services furnished in connection with the Development Work, and take or cause to
be taken all reasonable steps to forestall the assertion of claims of lien
against the Project or any part thereof. Upon the request of the Lender, the
Project Owner shall obtain a lien waiver with respect to each payment by or to
the Project Owner and each of the various subcontractors and materialmen (and
the major


                                       43
<PAGE>

subcontractors and submaterialmen under them). The Lender, at any time, at its
option, may require that any disbursement made hereunder be made by joint check
made payable to the Project Owner and the subcontractor or sub-subcontractor for
whose account such payment is to be made, as joint payees.

      (b) Nothing herein contained shall require the Project Owner to pay any
claims for labor, materials, or services which the Project Owner in good faith
disputes and which the Project Owner, at its own expense, currently and
diligently contests, provided that, in the event the aggregate amount of claims
filed with respect to the Project exceeds $25,000, within 30 days after the
Project Owner's actual receipt of notice of filing of that claim of lien which
exceeds the specified amount, the Project Owner shall take one of the following
actions with respect to all subsequent claims:

            (1) record or cause to be recorded in the office of the recorder of
      the county in which the Project is located a surety bond sufficient to
      release said claim of lien, or

            (2) make or cause to be made a deposit of cash in the amount of 150%
      of the claim of lien with the Lender; or

            (3) deliver or cause to be delivered to the Lender a specific
      endorsement to the Title Policy which insures the Lender against any loss
      by reason of such claim of lien, or

            (4) deliver or cause to be delivered to the Lender such other
      assurance as may be acceptable to the Lender.

Section 6.18 Conveyance, Lease or Encumbrance

      The Project Owner shall not sell, agree to sell, convey, transfer, dispose
of or further encumber the Project or any portion thereof or interest therein
(other than the sale of Lots and Units on and subject to the terms of this Loan
Agreement), or enter into a lease covering all or any portion thereof or
interest therein, either voluntarily, involuntarily or otherwise, or enter into
an agreement to do so, without the prior written consent of the Lender being
first had and obtained. All easements, declarations, covenants, conditions,
restrictions and dedications affecting the Project shall be submitted to the
Lender for its approval, accompanied by a drawing or survey showing the precise
location thereof, and such approval shall be obtained prior to the execution or
granting of any thereof by the Project Owner. The Project Owner shall not
execute any lease of any portion of the Project without the prior written
consent of the Lender. The Project Owner shall promptly notify the Lender of any
event of default or cancellation under any lease now or hereafter in effect.

Section 6.19 Golf Courses

      The Borrower shall develop the Golf Parcels for use as golf courses and,
once completed, will manage and operate the golf course(s) during its ownership
of same. If the Borrower that is the Project Owner of the Golf Parcel desires to
enter into an agreement with another person for


                                       44
<PAGE>

the management and operation of such Golf Parcel as a golf course, such Person
must be a reputable and experienced manager and operator of golf courses
satisfactory to the Lender and the Borrower must first: (i) obtain Lender's
written consent to the agreement, and (ii) deliver to the Lender an agreement
satisfactory to the Lender executed by the Borrower and such Person, which
agreement contains:

            (1) the Borrower's collateral assignment and pledge to the Lender
      all of its right, title and interest in, to and under the agreement
      between the Borrower and such Person regarding the Golf Parcel;

            (2) such Person acknowledges the assignment referenced in subsection
      (1); and

            (3) such other terms, provisions and conditions as the Lender may
      reasonably require.

Section 6.20 Security Instruments

      From time to time, upon the request of the Lender, the Project Owner shall
execute and deliver to the Lender a security instrument or instruments naming
the Lender as secured party covering all contracts of any kind entered into in
connection with the Development Work (including any memberships permitting use
of the Golf Parcels as golf courses) and all other property of any kind
whatsoever owned by the Project Owner and used, or to be used, in the use and
enjoyment of the Project and concerning which the Lender may have any doubt as
to its being subject to the lien of the Project Security Documents.

Section 6.21 Further Assurances; Cooperation

      The Project Owner will at any time and from time to time upon request of
the Lender take or cause to be taken any action, execute, acknowledge, deliver
or record any further documents, opinions, mortgages, security agreements,
financing statements or other instruments or obtain such additional insurance as
the Lender in its reasonable discretion deems necessary or appropriate to carry
out the purposes of this Loan Agreement and to preserve, protect and perfect the
security interest intended to be created and preserved in the Project and the
Development Work.

Section 6.22 Negative Covenants

      So long as any amount payable under any Loan Document still remains unpaid
or the Lender shall have any commitment to disburse the Loan hereunder, the
Project Owner shall not, unless the Lender shall otherwise consent in writing
(i) create, assume or suffer to exist any lien, security interest or other
charge or encumbrance, or any other type of preferential arrangement, upon the
collateral for the Loan assigned to the Lender pursuant to Project Security
Instruments, or (ii) sell, lease, transfer or otherwise dispose of (A) all or
substantially all of its assets (in a single transaction or a series of related
transactions), or (B) any of the collateral for the Loan assigned to the Lender
by the Project Owner except in the ordinary course of business.


                                       45
<PAGE>

Section 6.23 Signs

      Upon the request of the Lender, the Project Owner shall erect and place on
or in the vicinity of the Project a sign or signs indicating that the Lender has
provided construction financing for the Project. Said sign(s) shall comply with
Laws and Regulations and remain the property of the Lender and shall be required
to be removed only after the Development Work has been completed.


                                       46
<PAGE>

ARTICLE VII SALES OF LOTS AND GOLF PARCELS AND RELEASES FROM DEED OF TRUST

Section 7.1 Sales Operations and Seller's Obligations

      The Borrower shall at all times maintain adequate marketing capability for
the sale of the Lots and Golf Parcels.

Section 7.2 Releases from Lien of Deed of Trust

      (a) The Borrower may from time to time request that the Lender release one
or more Lots and/or Golf Parcels from the lien of the Deed of Trust and the
other Project Security Instruments encumbering such Lots and/or Golf Parcels.
The Lender agrees that it will use its best efforts to execute a partial release
that releases the Lender's lien on such Lot(s) and/or Golf Parcel(s) pursuant to
the Deed of Trust and the other Project Security Instruments within 5 Business
Days after receipt of the release, provided that the following conditions
precedent shall have been satisfied:

            (1) the Lender shall have received a written notice requesting the
      partial release no fewer than 5 Business Days prior to the date on which
      the partial release is to be effective, which notice shall specify (i) the
      Project, (ii) the specific Lots and/or Golf Parcels to be released, (iii)
      if such release is being requested in connection with a sale of the Lots
      and/or Golf Parcels, the Person to whom such Lots and/or Golf Parcels are
      being sold, which Person shall not be an Affiliate of any of the entities
      comprising the Borrower or of the Guarantor, and (iv) the Lender's Release
      Price(s) therefor;

            (2) the Lender shall have received evidence satisfactory to the
      Lender that, if the release is being sought precedent to a sale, (i) the
      closing of the sale and/or release of such Lots and/or Golf Parcels shall
      be conducted through an escrow with a title company specified by the
      Borrower and satisfactory to the Lender, and (ii) such title company shall
      have been instructed, which instructions shall have been acknowledged and
      agreed to by such title company and which cannot be changed or
      supplemented without the Lender's written concurrence, not to record the
      Lender's partial release until such title company receives in respect of
      such release an amount equal to Lender's Release Price for such Lots
      and/or Golf Parcels and is irrevocably committed to disburse such amount
      to the Lender;

            (3) the Lender shall have received executed originals of
      instruments, agreements and other documents, in form and substance
      satisfactory to the Lender, which the Lender determines are necessary or
      appropriate to evidence and/or effectuate the partial release and to
      modify the Loan Documents as a result thereof;


                                       47
<PAGE>

            (4) the Lender shall have received evidence satisfactory to the
      Lender that the Borrower has satisfied all conditions precedent in the
      Loan Documents relating to the release of the Lots and/or Golf Parcels;
      and

            (5) no Event of Default shall exist, unless the Event of Default is
      a Project Specific Default and the Borrower seeks Lender's release of the
      entire Project as to which the Project Specific Default applies.

      In connection with each release of a Lot and/or Golf Parcels, provided all
conditions to such release have been met, the Lender agrees to provide to the
title insurance company an estoppel letter, in form and substance satisfactory
to the Lender, specifying the Lender's Release Price.

      (b) In addition to the releases provided for in subparagraph (a), the
Lender agrees that, without requiring payment of any release price, it shall
release from the lien of the Deed of Trust and the other Project Security
Instruments those portions of the Project necessary for utility easements,
dedicated public roads, common elements (including any parts of the Project to
be transferred to a homeowners' association or the like), parks, greenbelts,
recreation areas, schools, medical facilities and other similar purposes,
provided that the following conditions precedent shall have been satisfied:

            (1) the Borrower complies with the requirements of subparagraphs
      (1), (3), (4) and (5) of subparagraph (a) above (except that the
      requirement of subparagraph (a)(1) requiring the written notice to specify
      the Lender's Release Price(s) shall not be applicable);

            (2) the Lender is furnished with a survey, or another document
      reasonably satisfactory to the Lender, depicting and describing the real
      property to be released, such as a Map; and

            (3) such requested release is consistent in all material respects
      with the site plan or other depiction of the Project provided to the
      Lender as part of the Project Underwriting Documents.


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<PAGE>

ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES

Section 8.1 Events of Default

      The occurrence and continuance of any of the following events constitutes
an "Event of Default" hereunder:

            (1) Any of the entities comprising the Borrower fails to pay any
      installment of principal on the Loan when due, whether at stated maturity,
      as a result of a mandatory prepayment requirement, upon acceleration or
      otherwise, or pay when due any interest, fees or other amounts payable
      hereunder or under the other Loan Documents.

            (2) Any representation made or warranty given by any of the entities
      comprising the Borrower or by the Guarantor herein or in any other Loan
      Document is at any time incorrect in any material respect.

            (3) Any of the entities comprising the Borrower or the Guarantor
      fails to perform or observe any term, covenant or agreement contained in
      this Loan Agreement or any other Loan Document, and such failure remains
      unremedied for 30 days after notice thereof from the Lender to the
      Borrower or the Guarantor; provided that in the event the Borrower or the
      Guarantor commence and are diligently pursuing to completion action to
      cure the failure, such 30 day period may be extended for such period of
      time as is necessary to cure the failure, but in no event longer then 120
      days from the date of the Lender's notice; provided further however, that
      in the event (i) the Lender reasonably determines that the failure to
      immediately declare an Event of Default could materially and adversely
      harm the rights of the Lender hereunder or under any other Loan Document,
      or the rights of the Lender with respect to the collateral pledged to
      secure the Loan, or (ii) the Lender reasonably determines that the failure
      to perform or observe the terms of this Loan Agreement or any other Loan
      Document cannot be remedied with the passage of 120 days, then the Lender
      may declare an immediate Event of Default in its notice given pursuant to
      this Section 8.1(3).

            (4) Any of the entities comprising the Borrower or the Guarantor
      asserts the invalidity or unenforceability of any Loan Document or any
      Loan Document is adjudicated to be invalid or unenforceable in any
      material respect.

            (5) Any event of default (however described) under any other Loan
      Document occurs and is not cured within the applicable grace period.

            (6) Any Project Security Instrument, for any reason, ceases to
      create a valid and perfected first priority lien on or in the Land or
      other collateral relating thereto as described in the Loan Documents, or
      any of the entities comprising the Borrower so states in writing.


                                       49
<PAGE>

            (7) The dissolution or winding up of any of the entities comprising
      the Borrower or the Guarantor.

            (8) Any Transfer occurs in violation of the provisions of Section
      5.6.

            (9) Any of the entities comprising the Borrower or the Guarantor
      fails to comply with any of the financial covenants set forth in Section
      5.5.

            (10) A Material Adverse Change occurs.

            (11) Any judgment or order for the payment of money in excess of
      $100,000, singularly or in the aggregate, is rendered against any of the
      entities comprising the Borrower or the Guarantor, and either (i)
      enforcement proceedings have been commenced by any creditor upon such
      judgment, or (ii) there is a period of 15 Business Days during which a
      stay of enforcement of such judgment or order, by reason of a pending
      appeal or otherwise, is not in effect.

            (12) Any of the entities comprising the Borrower or the Guarantor
      fails to pay any Debt (other than the Debt incurred by the Borrower and
      the Guarantor with respect to the Loan, the Events of Default with respect
      to which are set forth elsewhere in this Section 8.1), or any interest or
      premium thereon, when due (whether by scheduled maturity, required
      prepayment, acceleration, demand or otherwise) and such failure continues
      after the applicable grace period, if any, specified in the agreement or
      instrument relating to such Debt; any other default under any agreement or
      instrument relating to any such Debt, or any other event, occurs and
      continues after the applicable grace period, if any, specified in such
      agreement or instrument, if the effect of such failure to pay, default or
      event results in the acceleration, or permits the acceleration of, the
      maturity of such Debt; or any such Debt is declared to be due and payable,
      or is required to be prepaid (other than by a regularly scheduled required
      prepayment) prior to the stated maturity thereof; provided however that
      none of the foregoing events or inactions will constitute an Event of
      Default unless such event or inaction could result in a Material Adverse
      Change.

            (13) Any of the entities comprising the Borrower or the Guarantor
      generally does not pay its Debts as such Debts become due, or admits in
      writing its inability to pay its Debts generally, or makes a general
      assignment for the benefit of creditors; or any proceeding is instituted
      by or against any of the entities comprising the Borrower or the Guarantor
      seeking to adjudicate such party as bankrupt or insolvent, or seeking
      liquidation, winding up, reorganization, arrangement, adjustment,
      protection, relief or composition of such party's Debts under any law
      relating to bankruptcy, insolvency or reorganization or relief of debtors,
      or seeking the entry of an order for relief or the appointment of a
      receiver, trustee or other similar official for such party or for any
      substantial part of such party's property and, in the case of any such
      proceeding instituted against it (but not instituted by it), either such
      proceeding remains undismissed or unstayed for a period of 30 days
      (whether or not consecutive), or any of the actions sought in such
      proceeding (including, without, limitation, the entry of an order for
      relief


                                       50
<PAGE>

      against, or the appointment of a receiver, trustee, custodian or other
      similar official for, it or for any substantial part of its property)
      occur; or any of the entities comprising the Borrower or the Guarantor
      take any action to authorize any of the actions set forth above.

            (14) With respect to any Project, the Borrower fails to commence
      construction of the Development Work or fails to satisfy all of the
      conditions of this Loan Agreement with respect to disbursement of Loan
      proceeds for costs of such construction on or before the expiration of 3
      months after date the Project Commitment issued for such Project;
      provided, however such 3 month period shall be extended by one day for
      every day of an unforeseeable Force Majeure Event that actually delays the
      commencement of the construction of the Development Work.

            (15) With respect to any Project, the Lender determines that the
      Development Work differs substantially from what the Borrower represented
      in any of Borrower's Certificates, Inventory Project Cost Report (IN230)s,
      Inventory Summaries, and/or Draw Request Certifications.

            (16) With respect to any Project, cessation of the Development Work
      prior to completion for a continuous period of (i) 90 days or more if such
      cessation is caused by a Force Majeure Event, or (ii) 30 days or more if
      such cessation is not caused by a Force Majeure Event.

            (17) With respect to any Project, a court of competent jurisdiction
      enters an order enjoining construction of the Development Work, or such a
      court or an authorized governmental agency orders that sales of the Lots
      and/or Golf Parcels be suspended or halted, or any required approval,
      license or permit is withdrawn or suspended, and the order, withdrawal or
      suspension remains in effect for a period of 15 Business Days.

            (18) With respect to any Project, any surety obligated for any
      Development Work is called upon to perform its obligations and/or any
      person demands funds pursuant to any "set-aside" letter or "cash in lieu
      of bond agreement" issued by the Lender with respect to the Project.

            (19) The assignment by any of the entities comprising the Borrower
      or the Guarantor of the rents or the income of any Project, or any part
      thereof or of any other revenues or sales proceeds relating to the Project
      (other than to the Lender).

            (20) With respect to any Project, there occurs any attachment, levy,
      execution or other judicial seizure of any portion of the Project, any
      other collateral provided by any of the entities comprising the Borrower
      under any of the Loan Documents, or any substantial portion of the other
      assets of any of the entities comprising the Borrower, which is not
      released, expunged, discharged or dismissed prior to the earlier of (i) 20
      days after such attachment, levy execution or seizure, or (ii) the sale of
      the assets affected thereby.


                                       51
<PAGE>

            (21) The occurrence of an event of default (however designated or
      defined) with respect to any loan made by Lender or any Affiliate of
      Lender to any one or more of Guarantor, any entity comprising Borrower, or
      any of their respective Affiliates.

      Each of the entities comprising the Borrower acknowledges and agrees that
all material non-monetary defaults are conclusively deemed to be and are
defaults which impair the security of the Deed of Trust, and that the Lender
shall be entitled to exercise any appropriate remedy, including without
limitation, foreclosure of the Deed of Trust upon the occurrence of any such
material non-monetary default.

Section 8.2 Remedies

      Upon the occurrence of any Event of Default, the following provisions
apply:

            (1) If such event is an Event of Default specified in Section
      8.1(13), the Lender's commitment to fund the Loan will terminate and the
      indebtedness evidenced by the Note and any other amounts payable under
      this Loan Agreement and the other Loan Documents will immediately and
      automatically become due and payable.

            (2) Upon the occurrence of any other Event of Default, the Lender
      may, at its option, do any one or more of the following:

                  (A) Immediately terminate any further advance of Loan funds
            hereunder, and from time to time apply all or any portion of the
            undisbursed Loan funds to payment of accrued interest under the Note
            and/or upon any other obligations of the Borrower hereunder or under
            the Project Documents. Lender may also withhold any one or more
            disbursements after an event or condition occurs that with notice or
            the passage of time could become an Event of Default, unless the
            Borrower cures or corrects the event or condition to the reasonable
            satisfaction of the Lender prior to the occurrence of an Event of
            Default.

                  (B) Declare the Note to be immediately due and payable and
            record a notice of default under any Deed of Trust.

                  (C) Make any disbursements after the happening of any one or
            more Events of Default, without thereby waiving its right to demand
            payment of the Note and all other sums owing to Lender with respect
            to the Project Documents or any other rights or remedies described
            herein, and without liability to make any other or further
            disbursements, notwithstanding Lender's previous exercise of any
            such rights and remedies.

                  (D) Enter upon the Project and with or without legal process
            take possession of the Project without breaching the peace, remove
            the Borrower and all employees, contractors and agents of the
            Borrower therefrom, and complete or attempt to complete construction
            of the Development Work in accordance with the Plans and
            Specifications with such changes, additions or corrections therein
            as


                                       52
<PAGE>

            the Lender may from time to time and in its judgment deem
            appropriate, and market, sell or lease the Project, at the risk and
            expense of the Borrower. The Lender shall have the right at any time
            to discontinue any work commenced by it in respect to the
            Development Work or to change any course of action undertaken by it
            and not be bound by any limitations or requirements of time whether
            set forth herein or otherwise. The Lender shall have the right and
            power (but shall not be obligated) to assume any construction
            contract made by or on behalf of the Borrower in any way relating to
            the Development Work and to take over and use all or any part of the
            labor, materials, supplies and equipment contracted for, by or on
            behalf of the Borrower whether or not previously incorporated into
            the Development Work, in the discretion of the Lender. The Lender
            may also modify or terminate any contractual arrangements, subject
            to its right at any time to discontinue any work without liability.
            If the Lender chooses to complete the Development Work, the Lender
            shall not assume any liability to the Borrower or any other person
            for completing them, or for the manner or quality of their
            construction, and the Borrower expressly waives any such liability.
            In connection with any work of construction undertaken by the Lender
            pursuant to the provisions of this subsection (2)(D), the Lender may
            do any of the following:

                        i. engage builders, contractors, subcontractors,
                  architects, engineers, suppliers, inspectors, consultants and
                  others for the purpose of furnishing labor, materials,
                  equipment and other services in connection with the work of
                  construction, for the protection or clearance of title to the
                  Project, or for the protection of the Lender's interests with
                  respect thereto;

                        ii. pay, settle or compromise all bills or claims which
                  may become liens against the Project or which have been or may
                  be incurred in any manner in connection with completing
                  construction of the Development Work or for the protection or
                  clearance of title to the Project, or for the protection of
                  the Lender's interests with respect thereto;

                        iii. prosecute and defend all actions and proceedings in
                  connection with the Project;

                        iv. execute, acknowledge and deliver all other
                  instruments and documents in the name of the Borrower that are
                  necessary or desirable, to exercise the Borrower's rights
                  under contracts concerning the Project; and

                        v. take such other action, including the employment of
                  security personnel to protect the Development Work, or refrain
                  from taking action under this Loan Agreement as the Lender may
                  in its discretion determine from time to time.

            The Borrower shall be liable to the Lender for sums paid or incurred
      for completing construction of the Development Work whether the same shall
      be paid or incurred pursuant to the provisions of this Section or
      otherwise, and all payments made or


                                       53
<PAGE>

      liabilities incurred by the Lender hereunder of any kind whatsoever shall
      be paid by the Borrower to the Lender upon demand with interest at the
      rate set forth in the Note, and all of the foregoing shall be deemed and
      shall constitute disbursements under this Loan Agreement and be secured by
      the Project Documents. For the purpose of carrying out the provisions and
      exercising the rights, powers and privileges granted by this subsection
      (2)(D), the Borrower hereby unconditionally and irrevocably constitutes
      and appoints the Lender its true and lawful attorney-in-fact to enter into
      such contracts, perform such acts and incur such liabilities as are
      referred to in said Section in the name and on behalf of the Borrower.
      This power of attorney is coupled with an interest.

                  (E) If such event involves defective or unworkmanlike labor or
            materials are being used in the Development Work, encroachment(s) to
            which there has been no consent, or violation(s) of Laws and
            Regulations affecting the condition of title to the Project, the
            Lender shall have the right to immediately order stoppage of the
            construction and demand that such conditions be corrected and
            discontinue funding the proceeds of the Loan until such matters are
            corrected to the Lender's reasonable satisfaction. After issuance of
            such an order in writing, no further work shall be done on that
            portion of the Development Work where there is defective or
            unworkmanlike labor or materials, which encroaches without consent,
            or which violates Laws and Regulations or matters affecting title to
            the Project, without the prior written consent of the Lender, which
            consent shall not be unreasonably withheld, unless and until said
            condition has been fully corrected.

                  (F) Foreclose on any security for the Loan without waiving its
            rights to proceed against any other security or other entities or
            individuals directly or indirectly responsible for repayment of the
            Loan, or waive any and all security for the Loan as the Lender may
            in its discretion so determine, and pursue any such other remedy or
            remedies as the Lender may so determine to be in its best interest.

                  (G) If the Lender spends its funds in exercising or enforcing
            any of its rights or remedies under the Project Documents, the
            amount of funds spent shall be payable to the Lender upon demand,
            together with interest at the rate applicable to the principal
            balance of the Note, from the date such funds were spent until
            repaid. Such amounts shall be deemed secured by the Deed of Trust
            and other applicable Project Documents.

      Whether or not the Lender elects to employ any or all of the remedies
available to it in connection with an Event of Default, the Lender shall not be
liable for (i) the Borrower's or the Project Owner's construction of or failure
to construct, complete or protect the Development Work, (ii) the payment of any
expense incurred by the Lender for the construction or completion of the
Development Work undertaken by the Borrower or the Project Owner, or (iii) the
performance or non-performance of any other obligation of the Borrower.

      All remedies of the Lender provided for herein and in any other Loan
Documents are cumulative and shall be in addition to all other rights and
remedies provided by law or in equity.


                                       54
<PAGE>

The exercise of any right or remedy by the Lender hereunder shall not in any way
constitute a cure or waiver of default hereunder or under any other Loan
Document or invalidate any act done pursuant to any notice of default, or
prejudice the Lender in the exercise of any of its rights hereunder or under any
other Loan Document. If the Lender exercises any of the rights or remedies
provided in this Article VIII, that exercise shall not make the Lender, or cause
the Lender to be deemed to be, a partner or joint venturer of the Borrower. No
disbursement of Loan funds by the Lender shall cure any default of the Borrower,
unless the Lender agrees otherwise in writing in each instance.

      Upon the occurrence of any Event of Default, all of the Borrower's
obligations under the Loan Documents may become immediately due and payable
without notice of default, presentment or demand for payment, protest or notice
of nonpayment or dishonor, or other notices or demands of any kind or character,
at the Lender's option, exercisable in its sole discretion. If such acceleration
occurs, the Lender may apply the undisbursed Loan funds to the obligations of
the Borrower under the Loan Documents, in any order and proportions that the
Lender in its sole discretion may choose.

Section 8.3 Authorization to Apply Assets to Payment of Loan

      Each of the entities comprising the Borrower hereby authorizes the Lender,
following the occurrence of an Event of Default, without notice or demand, to
apply any property, balances, credits, accounts or moneys of the Borrower or any
Affiliate of the Borrower then in the possession of the Lender, or standing to
the credit of the Borrower or any Affiliate of the Borrower, to the payment of
the Loan.


                                       55
<PAGE>

ARTICLE IX MISCELLANEOUS

Section 9.1 Successors and Assigns; No Assignment by the Borrower

      The provisions of this Loan Agreement will be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns,
provided that the Borrower may not assign or transfer any of its rights or
obligations under this Loan Agreement or any of the other Loan Documents without
the prior written consent of the Lender.

Section 9.2 Notices

      All notices, requests and demands to be made hereunder to the parties
hereto must be in writing (at the addresses set forth below) and may be given by
any of the following means:

            (1) personal delivery;

            (2) reputable overnight courier service;

            (3) electronic communication, whether by telex, telegram or
      telecopying (if confirmed in writing sent by registered or certified,
      first class mail, return receipt requested); or

            (4) registered or certified, first class mail, return receipt
      requested.

Any notice, demand or request sent pursuant to the terms of this Loan Agreement
will be deemed received (i) if sent pursuant subsection (1), upon such personal
delivery, (ii) if sent pursuant to subsection (2), on the next Business Day
following delivery to the courier service, (iii) if sent pursuant to subsection
(3), upon dispatch if such dispatch occurs between the hours of 9:00 a.m. and
5:00 p.m. (recipient's time zone) on a Business Day, and if such dispatch occurs
other than during such hours, on the next Business Day following dispatch and
(iv) if sent pursuant to subsection (4), 3 days following deposit in the mail.

      The addresses for notices are as follows:

      To the Lender:              Residential Funding Corporation
                                  8400 Normandale Lake Boulevard, Suite 250
                                  Minneapolis, Minnesota 55437
                                  Attention: Managing Director
                                             Business Capital Group
                                             Residential Construction
                                  Telephone No.:  (952) 857-6921
                                  Telecopier No.: (952) 857-6960


                                       56
<PAGE>

      With a copy to:             Residential Funding Corporation
                                  8400 Normandale Lake Boulevard, Suite 250
                                  Minneapolis, Minnesota 55437
                                  Attention: Chief Counsel
                                             Business Capital Group
                                  Telephone No.:  (952) 857-6911
                                  Telecopier No.: (952) 857-6949

      To the Borrower:            Bluegreen Corporation
                                  4960 Conference Way North, Suite 100
                                  Boca Raton, FL 33431
                                  Attention: John F. Chiste
                                  Telephone No.:  (561) 912-8010
                                  Telecopier No.: (561) 912-8123

      With courtesy copies to:    Bluegreen Corporation
                                  4960 Conference Way North, Suite 100
                                  Boca Raton, FL 33431
                                  Attention: Randi Tompkins
                                  Telephone No.:  (561) 912-8012
                                  Telecopier No.: (561) 912-8299

      The failure to provide courtesy copies will not affect or impair the
Lender's rights and remedies against the Borrower. Such addresses may be changed
by notice to the other parties given in the same manner as provided above.

      Notwithstanding the foregoing, all requests for disbursements of the Loan
pursuant to Article II above will be deemed received only upon actual receipt,
and such requests for disbursement must be given only to the Lender's primary
addressee.

Section 9.3 Borrower's Representative

      The Borrower hereby designates the following natural persons as its
representatives for purposes of (i) making all decisions with respect to the
Loan, the Projects and the Loan Documents, (ii) delivering all notices,
certificates, Draw Request Certifications, requests and other documents required
by the terms of the Loan Documents or requested by the Borrower in connection
with the Loan and (iii) taking all other actions requested by the Borrower in
connection with the Loan, the Projects and the Loan Documents:

             John F. Chiste, Chief Financial Officer
             Bluegreen Corporation
             4960 Conference Way North, Suite 100
             Boca Raton, FL 33431
             Telephone No.:  (561) 912-8010
             Telecopier No.: (561) 912-8123


                                       57
<PAGE>

             Terry Jones, Vice President
             Bluegreen Corporation
             4960 Conference Way North, Suite 100
             Boca Raton, FL 33431
             Telephone No.:  (561) 912-8025
             Telecopier No.: (561) 912-8123

In taking action pursuant to the terms of this Loan Agreement and the other Loan
Documents, the Lender shall be entitled to rely, without further investigation,
upon any notice, certificate, Draw Request Certification, request or other
document delivered in writing and executed or signed by such representative of
the Borrower. In addition, the Lender may, at its option, refuse to take action
in the event a notice, certificate, Draw Request Certification, request or other
document is delivered to Lender which has not been executed or delivered by such
representative of the Borrower and the Lender.

Section 9.4 Changes, Waivers, Discharge and Modifications in Writing

      No provision of this Loan Agreement or any of the other Loan Documents may
be changed, waived, discharged or modified except by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
modification is sought.

Section 9.5 No Waiver; Remedies Cumulative

      No disbursement of proceeds of the Loan will constitute a waiver of any
conditions to the Lender's obligation to make further disbursements nor, in the
event the Borrower is unable to satisfy any such conditions, will any such
waiver have the effect of precluding the Lender from thereafter declaring such
inability to constitute an event of default (however described) under this Loan
Agreement or any other Loan Document. No failure or delay on the part of the
Lender in the exercise of any power, right or privilege hereunder or under this
Loan Agreement or any other Loan Document will impair such power, right or
privilege or be construed to be a waiver of any event of default (however
described) or acquiescence therein, nor will any single or partial exercise of
any such power, right or privilege preclude any other or further exercise
thereof, or of any other right, power or privilege. Except as specifically
provided herein, all rights and remedies existing under this Loan Agreement and
the other Loan Documents are cumulative to and not exclusive of any rights or
remedies otherwise available.


                                       58
<PAGE>

Section 9.6 Costs, Expenses and Taxes

      The Borrower agrees to pay the costs, and all expenses incurred by the
Lender in connection with the preparation, execution, delivery, administration,
modification and amendment of this Loan Agreement, the other Loan Documents and
any other documents to be delivered hereunder. The costs and expenses to be paid
by the Borrower shall include, without limitation the following:

            (1) the reasonable fees and out-of-pocket expenses of counsel for
      the Lender, including in-house counsel to the Lender, with respect thereto
      and with respect to advising the Lender as to its rights and
      responsibilities under this Loan Agreement and the other Loan Documents;

            (2) any and all stamp and other taxes payable or determined to be
      payable in connection with the execution and delivery of this Loan
      Agreement, the other Loan Documents and the other documents to be
      delivered hereunder;

            (3) the fees, costs and expenses of any Appraisers retained by the
      Lender;

            (4) the fees, costs and expenses of any Inspectors retained by the
      Lender; and

            (5) the costs associated with the issuance of the "date down"
      endorsements required by the terms of Section 3.3(c).

      The Borrower further agrees to pay all costs and expenses of the Lender
(including, without limitation, reasonable counsel fees and expenses, court
costs and all other litigation expenses, including, but not limited to,
reasonable expert witness fees, document copying expenses, exhibit preparation,
courier expenses, postage expenses and communication expenses) in connection
with the enforcement of this Loan Agreement, the other Loan Documents and any
other documents delivered hereunder, including, without limitation, costs and
expenses incurred in connection with any bankruptcy, insolvency, liquidation,
reorganization, moratorium or other similar proceeding, or any refinancing or
restructuring in the nature of a "workout" of the Loan Documents and any other
documents delivered by the Borrower related thereto.

      Payment from the Borrower of amounts due pursuant to this Section 9.6 will
be due 10 days after it has received from the Lender written notice of the
nature of the item for which payment is required and the amount due.

Section 9.7 Disclaimer by the Lender; No Joint Venture

      The Borrower acknowledges, understands and agrees as follows:

            (1) The relationship between the Borrower and the Lender is, and
      will at all times remain, solely that of borrower and lender, and the
      Lender neither undertakes nor assumes any responsibility for or duty to
      the Borrower or any Affiliate to select, review,


                                       59
<PAGE>

      inspect, supervise, pass judgment upon or inform the Borrower of the
      quality, adequacy or suitability of any matter or thing submitted to the
      Lender for its approval.

            (2) The Lender owes no duty of care to protect the Borrower or any
      Affiliate or any other Person against negligent, faulty, inadequate or
      defective building or construction.

            (3) The Borrower is not and will not be an agent of the Lender for
      any purpose. The Lender is not a joint venture partner with the Borrower
      in any manner whatsoever. Approvals granted by the Lender for any matters
      covered under this Loan Agreement are to be narrowly construed to cover
      only the parties and facts identified in any such approval.

Section 9.8 Indemnification

      In addition to the separate and independent Environmental Indemnity, the
Borrower agrees to protect, indemnify, defend and hold harmless each Indemnified
Party from and against any and all claims, damages, losses, liabilities,
obligations, penalties, actions, judgments, suits, costs, disbursements and
expenses (including, without limitation, reasonable fees and expenses of counsel
and consultants and allocated costs of internal counsel (but not in duplication
of outside third party legal fees) that may be incurred by or asserted against
any Indemnified Party, in each case arising out of or in connection with or
related to any of the following:

            (1) the Loan, this Loan Agreement or any other Loan Document;

            (2) any Project;

            (3) the use of funds advanced under the Loan Documents; or

            (4) the failure of the Borrower or any other party to the Loan
      Documents (other than the Lender) to comply fully with any and all laws
      applicable to it;

whether or not an Indemnified Party is a party thereto and whether or not the
transactions contemplated hereby are consummated and WHETHER OR NOT ONE OR MORE
INDEMNIFIED PARTIES ARE SOLELY OR CONCURRENTLY NEGLIGENT, except (on an
Indemnified Party by Indemnified Party basis) to the extent such claims,
damages, losses, liabilities, obligations, penalties, actions, judgments, suits,
costs, obligation, penalties, disbursements and expenses are found in a final
non-appealable judgment by a court of competent jurisdiction to have resulted
from the gross negligence or willful misconduct of the Indemnified Party.
Without prejudice to the survival of any other agreement of the Borrower
hereunder, the agreements and obligations of the Borrower contained in this
Section 9.8 will survive the termination of this Loan Agreement and the other
Loan Documents and the payment in full of the Loan.


                                       60
<PAGE>

Section 9.9 Consultants

      The Borrower will pay any and all valid claims of any consultants,
advisors, brokers or agents whom it has retained or with whom it has initiated
contact with respect to the Loan who claims a right to any fees in connection
with the Loan, and will indemnify, defend and hold the Lender harmless from such
claims, whether or not they are valid.

Section 9.10 Governing Law

      This Loan Agreement and the Loan Documents are governed by and construed
in accordance with the laws of the Commonwealth of Virginia, except as to the
creation, perfection and enforcement of liens on and security interests in real
property, for which matters the law of the State or Commonwealth where each such
real property is located governs, and except as otherwise required by mandatory
provisions of law.

Section 9.11 Titles and Headings

      The titles and headings of sections of this Loan Agreement are intended
for convenience only and are not in any way to affect the meaning or
construction of any provision of this Loan Agreement.

Section 9.12 Counterparts

      This Loan Agreement may be executed in any number of counterparts, each of
which will be deemed an original and all of which will constitute one and the
same agreement with the same effect as if all parties had signed the same
signature page.

Section 9.13 The Lender's Rights with Respect to Loan

      Notwithstanding any provision to the contrary contained in this Loan
Agreement or any other Loan Document, the Lender may at any time sell, assign,
grant or transfer to any Person all or a portion of its interest in or rights
with respect to the Loan and in all or part of the obligations of the Borrower
and any other obligated party under the Loan Documents. Lender agrees to use its
best efforts to retain the servicing of the Loan.

Section 9.14 Confidentiality

      The Borrower and the Lender shall mutually agree on the contents of any
press release, public announcement or other public disclosure regarding this
Loan Agreement and the transactions contemplated hereunder to be made following
the mutual execution and delivery of this Loan Agreement; provided that the
Lender may disclose the terms hereof and give copies of the Loan Documents to
assignees and participants and to prospective assignees and participants. If
either party fails to respond to the other party in writing with either an
approval or a disapproval within 5 Business Days of a party's receipt of the
other party's request for consent or approval as expressly contemplated pursuant
to this Section 9.13, then such consent or approval


                                       61
<PAGE>

will be deemed to have been given, provided that such 5 Business Day period will
not commence to run unless and until the other party has received all
information, materials, documents and other matters required to be submitted to
it hereunder with respect to such consent or approval and all other information,
materials, documents and other matters reasonably essential to its decision
process.

Section 9.15 Time is of the Essence

      Time is of the essence of this Loan Agreement.

Section 9.16 No Third Parties Benefited

      This Loan Agreement is made and entered into for the sole protection and
legal benefit of the Borrower and the Lender and their permitted successors and
assigns, and no other Person will be a direct or indirect legal beneficiary of,
or have any direct or indirect cause of action or claim in connection with this
Loan Agreement or any of the other Loan Documents. The Lender will not have any
obligation to any Person not a party to this Loan Agreement or the other Loan
Documents.

Section 9.17 Severability

      The illegality or unenforceability of any provision of this Loan Agreement
or any instrument or agreement required hereunder will not in any way affect or
impair the legality or enforceability of the remaining provisions of this Loan
Agreement or any instrument or agreement required hereunder.

Section 9.18 Jurisdiction

      Any legal action or proceeding with respect to this Loan Agreement or any
of the other Loan Documents may be brought in the courts of the Commonwealth of
Virginia or of the United States sitting in New Kent County, Virginia. By
execution and delivery of this Loan Agreement, each of the Borrower and the
Lender consents, for itself and in respect of its property, to the jurisdiction
of those courts (other than a foreclosure proceeding, in which event any such
action, suit or proceeding must be brought in the appropriate forum in the state
in which the Property is located). Each of the Borrower and the Lender
irrevocably waives any objection, including any objection to the laying of venue
or based on the grounds of forum non conveniens which it may now or hereafter
have to the bringing of any action or proceeding in such jurisdiction in respect
to this Loan Agreement or any document related hereto. The Borrower and the
Lender each waives any personal service of any summons, complaint or other
process, which may be made by any other means permitted by Virginia law. Nothing
in this Section 9.18 will affect the right of the Lender to serve legal process
in any other manner permitted by law or limit the right of the Lender to bring
any action or proceeding against the Borrower or its property in the courts of
any other jurisdiction.


                                       62
<PAGE>

Section 9.19 Waiver of Jury Trial

================================================================================
The Borrower and the Lender waive their respective rights to a trial by jury or
any claim or cause of action based upon or arising out of or related to this
Loan Agreement, the other Loan Documents or the transactions contemplated hereby
or thereby in any action, proceeding or other litigation of any type brought by
any party against any other party, whether with respect to contract claims, tort
claims, or otherwise. The Borrower and the Lender agree that any such claim or
cause of action will be tried by a court trial without a jury.

Without limiting the foregoing, the parties further agree that their respective
right to a trial by jury is waived by operation of this section as to any
action, counterclaim or other proceeding which seeks, in whole or in part, to
challenge the validity or enforceability of this Loan Agreement or the other
Loan Documents or any provision hereof or thereof.

This waiver will apply to any subsequent amendments, renewals, supplements or
modifications to this Loan Agreement and the other Loan Documents.

The Borrower and the Lender hereby agree that this Loan Agreement constitutes a
written consent to waiver of trial by jury pursuant to the provisions of all
applicable laws and Borrower does hereby constitute and appoint Lender its true
and lawful attorney-in-fact, which appointment is coupled with an interest.
Borrower does hereby authorize and empower Lender, in the name, place and stead
of Borrower, to file this Loan Agreement with the clerk or judge of any court of
competent jurisdiction as a statutory written consent to waiver of trial by
jury.
================================================================================

Section 9.20 Interpretation

      This Loan Agreement and the other Loan Documents will not be construed
against the Lender merely because of the Lender's involvement in the preparation
of such documents and agreements.

Section 9.21 Destruction of Note

      In the event the Note is mutilated or destroyed by any cause whatsoever,
or otherwise lost or stolen and regardless of whether due to the act or neglect
of the Lender, the Borrower will execute and deliver to the Lender in
substitution therefor a duplicate promissory note containing the same terms and
conditions as the Note, within 10 days after the Lender notifies the Borrower of
any such mutilation, destruction, loss or theft of the Note. Upon the Borrower's
delivery of such duplicate promissory note, the Borrower will be relieved of all
obligations under the original Note and will thereafter be bound solely by the
provisions of such duplicate promissory note.


                                       63
<PAGE>

Section 9.22 Entire Agreement

      This Loan Agreement, together with the other Loan Documents, embodies the
entire agreement and understanding among the Borrower and the Lender and
supersedes all prior or contemporaneous agreements and understandings of such
persons, verbal or written, relating to the subject matter hereof and thereof
except for any prior arrangements made with respect to the payment by the
Borrower of (or any indemnification for) any fees, costs or expenses payable to
or incurred (or to be incurred) by or on behalf of the Lender.

                     [signatures appear on following pages]


                                       64
<PAGE>

      IN WITNESS WHEREOF, the Lender and the Borrower have caused this Loan
Agreement to be duly executed and delivered as of the date first above written.

                                        BORROWER:

                                        BLUEGREEN CORPORATION OF THE ROCKIES,
                                        a Delaware corporation

                                        By: /s/ John Chiste
                                           -------------------------------------
                                            John Chiste
                                            Treasurer


                                        BLUEGREEN GOLF CLUBS, INC.,
                                        a Delaware corporation

                                        By: /s/ John Chiste
                                           -------------------------------------
                                            John Chiste
                                            Treasurer


                                        BLUEGREEN PROPERTIES OF VIRGINIA, INC.,
                                        a Delaware corporation

                                        By: /s/ John Chiste
                                           -------------------------------------
                                            John Chiste
                                            Treasurer


                                        BLUEGREEN SOUTHWEST ONE, L.P.,
                                        a Delaware limited partnership

                                        By: Bluegreen Southwest Land, Inc.
                                            a Delaware corporation

                                               By: /s/ John Chiste
                                                  ------------------------------
                                                   John Chiste
                                                   Treasurer


                                       65
<PAGE>

                                        LENDER:

                                        RESIDENTIAL FUNDING CORPORATION,
                                        a Delaware corporation

                                        By: /s/ Brian Clauson
                                           ------------------------------

                                        Printed Name:  Brian Clauson
                                                     --------------------
                                        Title: Director-Project Manager
                                              ---------------------------

                                       66
<PAGE>

                                   EXHIBIT A

             CONDITIONS TO OBLIGATION OF THE LENDER TO MAKE THE LOAN

      The obligation of the Lender to make the Loan is conditioned upon the
Lender having received, in form and substance satisfactory to the Lender, each
of the following:

            (2) Executed originals of this Loan Agreement, the Note, the
      Guaranty and the Environmental Indemnity.

            (3) A favorable opinion from counsel for the Borrower with respect
      to the following:

                  (A) Each entity comprising the Borrower is duly organized,
            validly existing and in good standing as such entity under the laws
            of the State of Delaware, is duly qualified to do business and in
            good standing in every jurisdiction where its business or properties
            require such qualification and has all requisite power and authority
            to own and operate its properties and to carry on its business as
            now conducted.

                  (B) Each entity comprising the Borrower has the power and
            authority to execute and deliver, and perform its obligations under,
            the Loan Documents.

                  (C) The execution, delivery and performance by each entity
            comprising the Borrower of the Loan Agreement and the Note have been
            duly authorized by all necessary action and do not and will not (i)
            contravene the Certificate of Formation/Articles and Bylaws or
            charter documents of the Borrower; (ii) contravene any law, rule or
            regulation or, to such counsel's knowledge (after due
            investigation), any order, writ, judgment, injunction or decree or
            any contractual restriction binding on or affecting the Borrower;
            (iii) require any approval or consent of any member or any other
            Person other than approvals or consents which have been previously
            obtained and disclosed in writing to the Lender; (iv) to such
            counsel's knowledge (after due investigation), result in a breach of
            or constitute a default under any indenture or loan or credit
            agreement or any other agreement, lease or instrument to which the
            Borrower is a party or by which the Borrower or any of its
            properties may be bound or affected; or (v) to such counsel's
            knowledge (after due investigation), result in, or require the
            creation or imposition of, any lien of any nature (other than the
            contemplated liens) upon or with respect to any of the properties
            now owned or hereafter acquired by the Borrower; and, to such
            counsel's knowledge, the Borrower is not in default under any such
            law, rule, regulation, order, writ, judgment, injunction, decree or
            contractual restriction or any such indenture, agreement, lease or
            instrument.


                                   Exhibit A-i
<PAGE>

                  (D) The Loan Agreement and the Note have been duly authorized,
            executed and delivered and constitute the legal, valid and binding
            obligations of each entity comprising the Borrower enforceable in
            accordance with their respective terms.

                  (E) No authorization or approval or other action by, and no
            notice to or filing with, any governmental authority or regulatory
            body is required for the due execution, delivery and performance by
            each entity comprising the Borrower of the Loan Agreement or the
            Note or any other document executed pursuant thereto or in
            connection therewith.

                  (F) To such counsel's knowledge (after due investigation),
            there is no pending or threatened action, suit, proceeding or
            arbitration against or affecting each entity comprising the Borrower
            or any of its Affiliates before any court, governmental agency or
            arbitrator which, if adversely determined, would result in a
            Material Adverse Change.

                  (G) The remainder of the Loan Documents, when duly authorized,
            executed and delivered, will constitute the legal, valid and binding
            obligations of each entity comprising the Borrower enforceable in
            accordance with their respective terms.

                  (H) The amounts to be received by the Lender under the terms
            of the Loan Documents shall not constitute usurious or otherwise
            unlawful interest.

                  (I) The steps necessary to perfect the Lender's interest in
            the collateral required to be pledged pursuant to the terms of the
            Project Security Instruments.

                  (J) The choice of law provision(s) of the Loan Documents are
            enforceable.

                  (K) Such other opinions as the Lender reasonably request.

            (4) A favorable opinion from counsel for the Guarantor with respect
      to the following:

                  (A) The Guarantor is duly organized, validly existing and in
            good standing as a corporation under the laws of the Commonwealth of
            Massachusetts, is duly qualified to do business and in good standing
            in every jurisdiction where its business or properties require such
            qualification and has all requisite power and authority to own and
            operate its properties and to carry on its business as now
            conducted.

                  (B) The Guarantor has the power and authority to execute and
            deliver, and perform its obligations under, the Guaranty.


                                  Exhibit A-ii
<PAGE>

                  (C) The execution, delivery and performance by the Guarantor
            of the Guaranty has been duly authorized by all necessary action and
            does not and will not (i) contravene the Certificate of Formation or
            charter documents of the Guarantor; (ii) contravene any law, rule or
            regulation or, to such counsel's knowledge (after due
            investigation), any order, writ, judgment, injunction or decree or
            any contractual restriction binding on or affecting the Guarantor;
            (iii) require any approval or consent of any member or any other
            Person other than approvals or consents which have been previously
            obtained and disclosed in writing to the Lender; (iv) to such
            counsel's knowledge (after due investigation), result in a breach of
            or constitute a default under any indenture or loan or credit
            agreement or any other agreement, lease or instrument to which the
            Guarantor is a party or by which the Guarantor or any of its
            properties may be bound or affected; or (v) to such counsel's
            knowledge (after due investigation), result in, or require the
            creation or imposition of, any lien of any nature (other than the
            contemplated liens) upon or with respect to any of the properties
            now owned or hereafter acquired by the Guarantor; and, to such
            counsel's knowledge, the Guarantor is not in default under any such
            law, rule, regulation, order, writ, judgment, injunction, decree or
            contractual restriction or any such indenture, agreement, lease or
            instrument.

                  (D) The Guaranty has been duly executed and delivered and
            constitutes the legal, valid and binding obligations of the
            Guarantor enforceable in accordance with its terms.

                  (E) No authorization or approval or other action by, and no
            notice to or filing with, any governmental authority or regulatory
            body is required for the due execution, delivery and performance by
            the Guarantor of the Guaranty or any other document executed
            pursuant thereto or in connection therewith.

                  (F) To such counsel's knowledge (after due investigation),
            there is no pending or threatened action, suit, proceeding or
            arbitration against or affecting the Guarantor or any of its
            Affiliates before any court, governmental agency or arbitrator
            which, if adversely determined, would result in a Material Adverse
            Change.

                  (G) The choice of law provision of the Guaranty is
            enforceable.

                  (H) Such other opinions as the Lender reasonably requests.

            (5) Certified copies of the Articles and Bylaws (and all amendments
      thereto) for the Guarantor and the corporate entities comprising the
      Borrower, certified copies of the charter documents for all other entities
      comprising the Borrower, and an original Certificate of Good Standing for
      the Guarantor and each of the entities comprising the Borrower.

            (6) For the corporate entities comprising the Borrower, copies of
      the resolutions adopted by each such entity authorizing the Borrower to
      obligate itself with


                                  Exhibit A-iii
<PAGE>

      respect to the Loan and authorizing certain officers to execute and
      deliver this Loan Agreement and the other Loan Documents.

            (7) Copies of the resolutions adopted by the Guarantor authorizing
      the Guarantor to obligate itself with respect to the Loan and authorizing
      certain officers to execute and deliver the Guaranty.

            (8) For all non-corporate entities comprising the Borrower, copies
      of the resolutions adopted by the partners, general partner or manager (as
      applicable) authorizing such entity to obligate the Borrower with respect
      to the Loan and authorizing certain officers to execute and deliver this
      Loan Agreement and the other Loan Documents.

            (9) Payment of all costs and expenses incurred by the Lender,
      including, without limitation, the fees and costs of its legal counsel, in
      connection with the preparation, execution and delivery of this Loan
      Agreement, the Note, the Guaranty, the forms of the Project Documents and
      the Project Documents executed concurrently with this Loan Agreement.

            (10) Evidence satisfactory to the Lender that each entity comprising
      the Borrower and the Guarantor have approved the forms of the Project
      Documents approved by the Lender.


                                  Exhibit A-iv
<PAGE>

                                   EXHIBIT B

                              PROJECT REQUIREMENTS

--------------------------------------------------------------------------------
GENERAL                   A proposed Project may utilize proceeds of the Loan
                          for acquisition of the Land and Development Work for
                          single family residential Lots and Golf Parcels in
                          order to benefit and increase the value and
                          marketability of the ABF Collateral.

                          A proposed Project may be one of several Projects
                          anticipated to be developed by the Borrower in a
                          single contiguous development.
--------------------------------------------------------------------------------
ENTITLEMENTS              All proposed Projects must be suitable for and
                          substantially entitled for the commencement of the
                          Development Work, as applicable, including the
                          relative on and off-site improvements. Unless
                          otherwise agreed to by the Lender, the Land must be
                          fully entitled, and the Borrower must be able to
                          commence development of the Project, as contemplated
                          by the Project Underwriting Documents, upon payment of
                          fees to the governing municipality and issuance of
                          permits.
--------------------------------------------------------------------------------
GEOGRAPHIC REGION         Projects must be located in the 48 contiguous states
                          of the United States.
--------------------------------------------------------------------------------
COMMENCEMENT              The construction of the Development Work for a Project
OF WORK                   must commence within 3 months of the date of the
                          applicable Project Commitment.
--------------------------------------------------------------------------------


                                   Exhibit B-i
<PAGE>

                             SCHEDULE 1 to EXHIBIT B

                       REQUIRED TITLE POLICY ENDORSEMENTS

Projects in Texas are subject to the rules and regulations of the Texas
Department of Insurance ("TDI"), and title policies shall be written on TDI form
T-2, Mortgagee Policy of Title Insurance. Projects in states using American Land
Title Association ("ALTA") forms shall be insured using ALTA loan form
(10-17-92, or equivalent). The forms provided by First American Title Insurance
Company ("FA") should be used as a form by any other title insurer asked to
cover any Project in an ALTA state.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
Required Endorsements or Affirmative                ALTA                           TEXAS
              Coverage
------------------------------------------------------------------------------------------------
<S>                                       <C>                               <C>
Comprehensive                             ALTA 9                            T-19
------------------------------------------------------------------------------------------------
Revolving Credit                          FA 28.3                           T-35
------------------------------------------------------------------------------------------------
Variable Rate                             ALTA 6.0                          T-33
------------------------------------------------------------------------------------------------
Truth in Lending                          ALTA 2                            N/A
------------------------------------------------------------------------------------------------
Environmental Lien                        ALTA 8.1                          N/A
------------------------------------------------------------------------------------------------
First Loss Payable                        FA 50                             T-14
------------------------------------------------------------------------------------------------
Last Dollar                               FA 51                             T-15
------------------------------------------------------------------------------------------------
Patent Endorsement                        (if applicable)                   N/A
------------------------------------------------------------------------------------------------
Water Endorsement (water rights/(1)       (if applicable)                   N/A
future improvements or (2) surface
damage)
------------------------------------------------------------------------------------------------
Arbitration Deletion                      delete item in Conditions         Arbitration Deletion
                                          and Stipulations of policy
------------------------------------------------------------------------------------------------
Mortgagee Policy Aggregation (Tie-in)     FA 49.2                           T-16
------------------------------------------------------------------------------------------------
Creditors' Rights                         FA 45                             N/A
------------------------------------------------------------------------------------------------
Usury                                     state specific                    N/A
                                          FA 57 for VA, NC
                                          FA 126 for CO
------------------------------------------------------------------------------------------------
Gap                                       (exception removed)               Automatic
------------------------------------------------------------------------------------------------
Zoning                                    ALTA 3.0                          N/A
------------------------------------------------------------------------------------------------
</TABLE>


                                  Exhibit B-ii
<PAGE>

                                   EXHIBIT C

                         PROJECT UNDERWRITING DOCUMENTS

A.    GENERAL PROJECT INFORMATION:

      1.    Summary description of the proposed Project.

      2.    Purchase contract for the property.

      3.    Cash flow analysis, which will include the proposed Budget
            (including breakdown between Land acquisition costs and costs of
            Development Work and a Schedule A containing the projected Lot sales
            prices) for the proposed project.

      4.    Market report supporting absorption rates and information on
            product.

      5.    Appraisal report setting forth a value for the proposed Project
            acceptable to the Lender, if requested by the Lender.

      6.    The plat relating to such project.

      7.    Preliminary title report, including copies of all documents relating
            to exceptions.

B.    CONSTRUCTION INFORMATION AND DOCUMENTS:

      1.    Site plan.

      2.    Evidence of site plan approval and proper zoning.

      3.    Plans and Specifications, if required by the Lender.

      4.    ALTA survey, if required by the Lender.

      5.    Phase I environmental report.

      6.    Soils report.

      7.    Letters regarding utility availability.

      8.    Evidence of the Borrower's ability to satisfy the conditions of the
            site plan approval.

      9.    Evidence that the vertical improvements of the proposed Project are
            not and will not be within the 100 year flood plain.

C.    PROJECT LEGAL DOCUMENTS

      1.    Proposed or recorded CC&R's.

      2.    If a condominium, or otherwise applicable, a copy of the homeowner's
            association articles of incorporation, by-laws and budget.


                                   Exhibit C-i
<PAGE>

                                   EXHIBIT D

                           FORM OF PROJECT COMMITMENT

                               PROJECT COMMITMENT

[Commitment Date]

Bluegreen Corporation
4960 Conference Way North
Suite 100
Boca Raton, FL 33431
Attention:  John Chiste
            Chief Financial Officer

      RESIDENTIAL FUNDING CORPORATION, a Delaware corporation ("RFC") is pleased
to confirm that the Lender agrees to advance, in accordance with and pursuant to
the Loan Agreement referenced below, proceeds of the loan made to (the
"Borrower") with respect to the Project specified below, substantially upon the
terms outlined below. Capitalized terms used herein shall have the meanings
assigned those terms in the Loan Agreement dated as of September __, 2002
between the Borrower and RFC.

--------------------------------------------------------------------------------
GENERAL
--------------------------------------------------------------------------------
PROJECT                       Project Name
--------------------------------------------------------------------------------
PROJECT MATURITY DATE         The first to occur of (i) September __, 2006 (as
                              such date may be extended in writing by Lender and
                              The Borrower from time to time), or (ii) the date
                              on which the Loan is required to be repaid
                              pursuant to Section 8.2 of the Loan Agreement.
--------------------------------------------------------------------------------


                                   Exhibit D-i
<PAGE>

--------------------------------------------------------------------------------
PROJECT INFORMATION
--------------------------------------------------------------------------------
DESCRIPTION OF PROJECT        ACQUISITION OF LAND: Acquisition of land for a
                              _____ lot residential subdivision located in _____
                              County in the State of _____.
                              --------------------------------------------------
                              DEVELOPMENT WORK: The work of development to be
                              performed on or with respect to the Land
                              (including, without limitation, the installation
                              of utilities, roads and all related on-site and
                              off-site improvements) as set out in the Project
                              Commitment, (i) in connection with the development
                              of the Land into Finished Lots upon which
                              construction of Homes may commence, all of which
                              work and construction will be completed by or on
                              behalf of the Borrower in accordance with the
                              Plans and Specifications, but will not include the
                              Homes, and/or (ii) the construction of amenities
                              (including, without limitation, club houses and
                              equipment structures) on Golf Parcels.
                              --------------------------------------------------
                              PROJECT TYPE: [primary residential, recreational,
                              mixed use single family]
--------------------------------------------------------------------------------
BUDGET                        The Budget is attached hereto as Schedule 1.
--------------------------------------------------------------------------------
PLANS AND SPECIFICATIONS      The final set of architectural, structural,
                              mechanical, electrical, grading, sewer, water,
                              street and utility plans and specifications for
                              the Development Work to be included within such
                              Project, including all supplements, amendments and
                              modifications thereto signed and affixed with the
                              architect's registration stamp or seal, all in
                              form and substance reasonably satisfactory to the
                              Lender and the Inspector.
--------------------------------------------------------------------------------
INSPECTOR                     [name]
--------------------------------------------------------------------------------


                                  Exhibit D-ii
<PAGE>

--------------------------------------------------------------------------------
PROJECT DOCUMENTS
--------------------------------------------------------------------------------
PROJECT DOCUMENTS             Project Commitment
                              Deed of Trust
                              Environmental Indemnity
                              UCC Financing Statements
                              Assignment of Construction Items
                              Title Commitment and Title Policy, if issued
                              M.U.D. Bond Financing Agreement (if applicable)
--------------------------------------------------------------------------------
OTHER REQUIRED DOCUMENTS      Prior to closing this transaction, The Borrower
                              shall deliver to Lender the following:

                              All items listed in Exhibit C to the Loan
                              Agreement: Project Underwriting Documents
--------------------------------------------------------------------------------

      This Project Commitment is conditioned upon the absence of (i) any
material adverse change in the financial condition, operations or prospects of
the Borrower since the date of the most recent financial statements delivered to
Lender, (ii) any material action, suit or proceeding (including, without
limitation, any inquiry or investigation) pending or threatened with respect to
The Borrower that could have a material adverse affect on The Borrower and (iii)
the occurrence of any Event of Default or Potential Default (as those terms are
defined in the Loan Agreement) prior to the execution and delivery of the
Project Documents.

      The Project Documents shall be prepared by counsel to the Lender and shall
be satisfactory to the Lender. The Borrower shall be obligated to pay all costs
and expenses incurred to satisfy all conditions precedent, whether or not any
funds of the Loan are advanced with respect to the Project. The Lender shall not
be responsible or liable for consequential damages which may be alleged as a
result of the issuance of this Project Commitment. The provisions of this
paragraph shall survive any termination of this Project Commitment.

      This Project Commitment shall terminate unless (a) this Project Commitment
is accepted by you on or before ____________, 200__, and (b) definitive Project
Documents, satisfactory in form and substance to the Lender, have been entered
into on or before _____________, 200__, or such later date as is mutually
agreeable to the Lender and the Borrower.


                                  Exhibit D-iii
<PAGE>

                                         Sincerely,

                                         RESIDENTIAL FUNDING CORPORATION
                                         a Delaware corporation

                                         By: ___________________________________

                                         Printed Name: _________________________

                                         Title: ________________________________


                                         TERMS ACCEPTED:

                                         BLUEGREEN CORPORATION

                                         By: ___________________________________

                                         Printed Name: _________________________

                                         Title: ________________________________


                                  Exhibit D-iv
<PAGE>

                        SCHEDULE 1 TO PROJECT COMMITMENT

                                     BUDGET


                                   Exhibit D-v
<PAGE>

SCHEDULE 1 to PROJECT COMMITMENT

                                     BUDGET

                                [to be attached]


                                  Exhibit D-vi
<PAGE>

                              SCHEDULE A TO BUDGET

                                [to be attached]


                                  Exhibit D-vii
<PAGE>

                                   EXHIBIT E

                       FORM OF DRAW REQUEST CERTIFICATION

                           DRAW REQUEST CERTIFICATION

================================================================================

DRAW REQUEST NUMBER _____

Date:

LENDER:           RESIDENTIAL FUNDING CORPORATION, a Delaware corporation

BORROWER:         BLUEGREEN CORPORATION OF THE ROCKIES, a Delaware corporation,
                  BLUEGREEN GOLF CLUBS, INC., a Delaware corporation, BLUEGREEN
                  PROPERTIES OF VIRGINIA, INC., a Delaware corporation, and
                  BLUEGREEN SOUTHWEST ONE, L.P., a Delaware limited partnership

================================================================================

      Reference is made to that certain Loan Agreement dated as of
[_____________] between Lender and Borrower (as amended or otherwise modified
from time to time, the "Loan Agreement"). Capitalized terms used herein without
definition have the meanings set forth in the Loan Agreement, unless the context
requires otherwise.

      Borrower requests that Lender disburse to Borrower proceeds of the Loan to
Borrower in the amount of $____________.

      In connection with the requested disbursement, Borrower represents,
warrants and certifies to Lender as follows:

            (11) No Event of Default or Potential Default presently exists under
      the Loan Agreement or any other Loan Document.

            (12) All of the representations and warranties of Borrower under the
      Loan Agreement and the other Loan Documents are hereby remade and
      restated.

            (13) With respect to the Loan:

                  (A) the Borrower has satisfied all conditions precedent to the
            funding of the proceeds of the Loan as set forth in the Loan
            Documents;

                  (B) the Loan Documents are in full force and effect;


                                   Exhibit E-i
<PAGE>

                  (C) the Loan is secured by a first priority lien on the ABF
            Collateral and the other collateral described in the Loan Documents;

                  (D) all contractors, subcontractors, vendors, materialmen and
            other Persons entitled to payment with respect to the ABF Collateral
            have been paid or will be paid, subject to retainage, with the
            proceeds of the requested disbursement.

            (14) All insurance required to be maintained by Borrower remains in
      full force in effect, of the types, in the amounts and issued by insurers
      as previously approved by Lender.

            (15) All of the information contained in the most recent Budget,
      Borrower's Certification, Inventory Report (GL592) and Inventory Project
      Cost Report (IN230) delivered to Lender is true, complete and accurate,
      and such items do not contain any untrue statement of a material fact, or
      omit any material fact required to be stated therein or necessary to make
      the statement made therein, in light of circumstances under which they are
      made, not misleading.

                                         BORROWER:

                                         BLUEGREEN CORPORATION OF THE ROCKIES,
                                         a Delaware corporation

                                         By: ___________________________________
                                         Printed Name: _________________________
                                         Title: ________________________________


                                         BLUEGREEN GOLF CLUBS, INC.,
                                         a Delaware corporation

                                         By: ___________________________________
                                         Printed Name: _________________________
                                         Title: ________________________________


                                         BLUEGREEN PROPERTIES OF VIRGINIA, INC.,
                                         a Delaware corporation

                                         By: ___________________________________
                                         Printed Name: _________________________
                                         Title: ________________________________


                                  Exhibit E-ii
<PAGE>

                                         BLUEGREEN SOUTHWEST ONE, L.P.,
                                         a Delaware limited partnership

                                         By:  Bluegreen Southwest Land, Inc.
                                              a Delaware corporation

                                              By: ______________________________
                                              Printed Name: ____________________
                                              Title: ___________________________


                                  Exhibit E-iii
<PAGE>

                             SCHEDULE 1 to EXHIBIT E

                        SAMPLE OF BORROWER'S CERTIFICATE

                                [to be attached]


                                  Exhibit E-iv
<PAGE>

                                   EXHIBIT F

             FORM OF INVENTORY PROJECT COST DETAIL REPORT (IN230DTL)

                                [to be attached]


                                   Exhibit F-i
<PAGE>

                                   EXHIBIT G

                  FORM OF INVENTORY PROJECT COST REPORT (IN230)

                                [to be attached]


                                   Exhibit G-i
<PAGE>

                                   EXHIBIT H

                        FORM OF INVENTORY REPORT (GL592)

                                [to be attached]


                                      H-i

</TEXT>
</DOCUMENT>
