CONSTRUCTION LOAN AGREEMENT

This Agreement is made on the date stated below among the Borrower and Lender who are identified below.  This Agreement relates to the manner of disbursement of the loan proceeds from the Note described below to or for the benefit of Borrower and for the construction of the Improvements on the Property described below.  The Note is secured by a first and superior Deed of Trust lien on the Property.

1.              Agreement to Loan .  Lender shall make a loan (the "Loan") to Borrower in the amount stated above to be used for (i) $[______] for refinancing a portion of the purchase price of the Property and (ii) the remainder toward costs of labor performed and materials furnished (collectively called the "Work") pursuant to this agreement. The amount loaned will not exceed 65% of the anticipated sales price of the improved property.

2.              Conditions for Initial Advance .  Prior to, or at the time of the initial advance of the proceeds of the Loan to Borrower, Lender shall be in receipt of the following:

a. This Agreement;

b. Note executed by Borrower and payable to the order of Lender;

c. Deed of Trust covering the Property and all Improvements constructed or to be constructed thereon (collectively called the "Improvements") and securing the obligations of borrower hereunder, together with all documents executed in connection with the Loan as may be required by Lender;

d. A Mortgagee's Policy of Title Insurance, or Interim Construction Binder if acceptable to Lender, insuring that the lien created by the Deed of Trust constitutes a valid lien on the Improvements and has the dignity and priority required by the Lender;

e. Proof of payment of premiums for insurance policies for (i) public liability insurance and Worker's Compensation insurance for Borrowers; (ii) hazard insurance (builder's risk) providing all risk coverage on the Improvements, including material stored on the Property or elsewhere; and (iii) flood insurance, if applicable; all policies with standard mortgage clauses attached in favor of Lender which shall provide that such insurance may not be canceled without thirty (30) days prior written notice to Lender;

f. Evidence that the plans and specifications for the construction of the Improvements and the actual construction thereof have been met and are meeting the approval of the appropriate subdivision planning committee, if any, and comply with the requirements of any restrictions and zoning ordinances applying to the Property;

g. Satisfactory survey of the Property, with such certificate thereon as Lender may reasonably require; and

h. Proof that Borrower has expended on the improvements, for and up to the amounts budgeted therefore, the amount of the budget in excess of the loan amount.

i. Borrower, at Borrower's expense, shall provide Lender any inspections Lender desires in connection with the improvements and/or property condition, from such parties as Lender shall require.

j. Proof acceptable to Lender that the amount funded by Lender never exceeds 65% of the lesser of the fair market value of the Property as of the date of such funding (as determined by Lender, or the costs of the property and improvements through the date of each such advance.

k. Full compliance with and funding under all other loans and agreements between Borrower and Lender whether or not related to this loan or this Property.

l. Such other documents as may be required by Lender.

3.              Free of Liens .  Borrower agrees to complete the actual construction of the Improvements free of liens or rights of liens of mechanics, materialmen, laborers, or any governmental agencies, in accordance with the agreed upon plans and specifications, and agrees that no materials, fixtures, or any other part of such Improvements shall be purchased or installed under conditional sales agreements or under any other arrangements wherein the right is reserved or accrues to anyone to remove or to repossess any such items, or to consider them as personal property.  In the event that any materials, fixtures, or any other part of the Improvements shall have been accomplished, purchased, or installed under conditional sales agreements, or under any other arrangement prior to the date hereof, Borrower shall furnish waivers in recordable form deemed sufficient by Lender waiving any rights reserved or accrued to anyone, or shall furnish a bond deemed sufficient by Lender to assure the priority of the Lender's lien upon the Improvements.

4.              First Advance/Progress Payments .  A portion of the proceeds of the Loan will be advanced to refinance a portion of the purchase price for the Property. The remaining sums will be advanced only for Work done preceding the date of request as required by Lender, but only after Borrower has expended sums under the budget in excess of the loan amount.  Written application for each advance, in form approved by Lender, shall be filed a reasonable time before the date upon which an advance is desired, certified to by the architect, if any, and (if required by Lender) approved by Lender's inspector, and shall contain such information as Lender may request.  The amount of each advance of the Loan shall be the amount which has actually been incurred for labor and materials (but in no event in excess of the amount allocated thereto on the Budget), as approved by Lender, less amounts for which sums have previously been advanced and less ten percent (10%) (the "Retainage") if required by Lender, and such amount shall be advanced under the Loan on behalf of Borrower. Except as provided herein, all advances shall be evidenced by (a) a check issued jointly to Borrower and any contractor or supplier, or (b) a deposit to an account established for that purpose, at Lender's option. Borrower, at Borrower's expense, shall provide Lender any inspections Lender desires in connection with the improvements and/or property condition, from such parties as Lender shall require.

a. Condition Precedent .  As a condition precedent to each disbursement of the loan proceeds, Borrower shall furnish or cause to be furnished to Lender the following documents covering each disbursement as required by Lender:

1. A certificate executed by Borrower that he is not in default under any of the loan documents and that all representations and warranties of Borrower contained in any such loan documents remain accurate, true and correct;

2. Evidence satisfactory to Lender that the remaining undisbursed funds are sufficient to complete construction of the premises;

3. A summary of amounts actually spent from previous advances;

4. Executed lien waivers in recordable form, deemed sufficient by Lender, signed by the general contractor and all subcontractors as provided below;

5. Certificates from Borrower of acceptance of the improvements for which a draw is made;

6. Borrower, at Borrower's expense, shall provide Lender any inspections Lender desires in connection with the improvements and/or property condition, from such parties as Lender shall require;

7. Borrower shall provide Lender (i) proof that the house being constructed contains square feet of liveable space acceptable to Lender, (ii) proof that the cost of construction does not exceed a per square feet cost acceptable to Lender, and (iii) proof that Borrower has paid or contributed any sums necessary in excess of the loan funds available; and

8. Such other items as Lender shall reasonably require.

b. Disbursements .  Disbursements will be made by Lender in accordance with the schedule hereinabove set forth, subject, however, to the condition that no advance shall be made unless at the time of such advance all work previously done has been done in good and workmanlike manner.  If requested by Lender, affidavits or other evidence shall be furnished establishing to Lender's satisfaction that the undisbursed loan money is sufficient to complete the building, free and clear of all liens and encumbrances, and to pay all costs and expenses in connection with the making of the Loan.  Lender may at its option require as a condition precedent to the making of the first disbursement any or all of the following:

1.Satisfactory survey showing the location of the improvements thereon;

2.Partial or full compliance with the requirements and with the contingencies heretofore and hereinafter made with regard to the construction in the amount to be disbursed; and

3.A satisfactory showing (including affidavits, lien waivers or receipts if requested by Lender) of the payment of all bills for labor performed and material furnished in the construction of the Improvements up to the time of demand for such payment.

c. No Default .  Each request for an advance shall be deemed a representation and warranty by Borrower to Lender that, as of the date of such request, no default exists in the terms of this Agreement.  Anything to the contrary notwithstanding, Lender may in any event withhold payment of any advance until it has been furnished with satisfactory evidence that all bills for labor and material have been paid or, in lieu thereof (at Lender's sole option), it has been provided with lien waivers or bonds deemed sufficient by Lender.  Lender shall have no obligation to require or obtain lien waivers or receipts, and even if it requires presentation to it of lien waivers or receipts, it shall have no responsibility for the validity thereof or for the correctness of the amount thereof.  Lender shall have no obligation to see that the advances made by it are actually used to pay for labor and materials furnished and used in the construction of the Improvements.  Borrower understands that these are Borrower's responsibilities, and Borrower assumes all risks in connection therewith.

d. Limitations on Advances .  Lender reserves the right, at any time when Lender shall in its sole judgment and discretion deem it necessary or desirable, to limit a part or all of any or all advances to those amounts necessary to pay the costs incurred or to be incurred in the actual development or construction of the Improvements and to exclude from any or all advances those amounts which, in Lender's sole judgment and discretion, are merely incidental to the development or construction of the Improvements or are excessive or not properly documented.

e. Plans and Specifications .  The Borrower shall furnish to Lender from time to time, as and when reasonably required by Lender, evidence reasonably satisfactory to Lender that the Borrower has or can obtain all necessary mate