DEVELOPMENT LOAN AGREEMENT

for a loan in the amount of

$8,800,000.00

MADE BY AND BETWEEN

GOLD PEAK AT PALOMINO PARK LLC, a Colorado limited liability company c/o Wellsford Real Properties, Inc.
6700 Palomino Parkway
Highlands Ranch, Colorado 80130

AND

KEYBANK NATIONAL ASSOCIATION,
(Income Property Group)
a national banking association,
1675 Broadway, Suite 400
Denver, Colorado 80202

Dated as of April 6, 2005

DEVELOPMENT LOAN AGREEMENT

Project Commonly Known as
“Gold Peak at Palomino Park”

        THIS DEVELOPMENT LOAN AGREEMENT (“ Agreement ”) is made as of April 6, 2005, by and between GOLD PEAK AT PALOMINO PARK LLC, a Colorado limited liability company (“ Borrower ”), and KEYBANK NATIONAL ASSOCIATION, a national banking association, its successors and assigns (“ Lender ”).

         W I T N E S S E T H :

RECITALS

A.     Borrower is the owner in fee simple of land located in the City of Highlands Ranch, County of Douglas, State of Colorado, and legally described in Exhibit A attached hereto (the “ Land ”). Borrower proposes to construct a condominium project to be known as “Gold Peak at Palomino Park” on the Land consisting of thirty-nine (39) two (2)-story buildings containing two hundred fifty-nine (259) Units (as hereinafter defined) and approximately seven hundred twenty-three (723) parking spaces consisting of two hundred twenty (220) attached two-car garages, thirty-nine (39) attached one-car garages, thirty-two (32) detached one-car garages and two hundred twelve (212) surface parking spaces (the “ Project ”).

B.     Borrower has applied to Lender for a loan in the amount of up to Eight Million Eight Hundred Thousand and 00/100 DOLLARS ($8,800,000.00) (the “ Loan ”) to reimburse Borrower for development costs incurred in connection with the development of the Project, and Lender is willing to make the Loan on the terms and conditions hereinafter set forth.

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

         Incorporation of Recitals and Exhibits . The foregoing preambles and all other recitals set forth herein are made a part hereof by this reference. Exhibits A through I, to this Agreement are attached hereto are incorporated in this Agreement and expressly made a part hereof by this reference.

ARTICLE 1
DEFINITIONS

1.1 Defined Terms . The following terms as used herein shall have the following meanings:

         Adjusted Prime Rate : A rate per annum equal to the sum of (a) the Prime Rate Margin and (b) the greater of (i) the Prime Rate or (ii) one percent (1%) in excess of the Federal Funds Rate. Any change in the Adjusted Prime Rate shall be effective immediately from and after a change in the Adjusted Prime Rate (or the Federal Funds Rate, as applicable).

         Affiliate : With respect to a specified person or entity, any individual, partnership, corporation, limited liability company, trust, unincorporated organization, association or other entity which, directly or indirectly, through one or more intermediaries, controls or is controlled by or is under common control with such person or entity, including, without limitation, any general or limited partnership in which such person or entity is a partner.

         Agreement : This Development Loan Agreement.

         Appraisal : An MAI certified appraisal of the Project performed in accordance with FIRREA and Lender's appraisal requirements by an appraiser selected and retained by Lender.

         Architect/Engineer : Harrington Architectural Partnership LLC, a Colorado limited liability company.

         Architect’s/Engineer’s Certificate : A certificate in the form of Exhibit E attached hereto executed by the Architect/Engineer in favor of Lender.

         Assignment of Condominium Documents : That certain Conditional Assignment of Condominium Unit Sales Contracts, Condominium Documents and Condominium Developer’s Rights executed of even date herewith by Borrower in favor of Lender, as the same may be amended, supplemented, extended, renewed, replaced and/or restated from time to time in accordance with its terms.

         Authorized Representative : David M. Strong.

         Bankruptcy Code : Title 11 of the United States Code entitled “Bankruptcy” as now or hereafter in effect, or any successor thereto or any other present or future bankruptcy or insolvency statute.

         Budget : The budget specifying all costs and expenses of every kind and nature whatever to be incurred by Borrower in connection with the development of the Project prior to the Maturity Date.

         Budget Line Item : As such term is defined in Section 7.2.

         Business Day : A day of the year on which banks are not required or authorized to close in Cleveland, Ohio.

         Change Order : Any request for changes in the Plans and Specifications (other than minor field changes).

         Closing Date : Means the date of this Agreement.

         Commitment Fee : As such term is defined in Section 5.1.

         Completion Date : September 1, 2006.

         Completion Guaranty : A guaranty of performance and completion in form and substance acceptable to Lender, executed by Guarantor.

         Condominium : The Gold Peak at Palomino Park Condominium, a condominium to be established in accordance with the Condominium Statute pursuant to the Condominium Documents.

         Condominium Building . Each residential condominium structure, containing five (5) or seven (7) Units that the Borrower will construct on each Condominium Building Site with proceeds of the Construction Loan.

         Condominium Building Site . A Building Site upon which a Condominium Building shall be constructed.

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         Condominium Documents: All of the documents required by the Condominium Statute or otherwise, relating to the submission of the Project to the provisions of the Condominium Statute or to the regulation, operation, administration or sale thereof after such submission, including, but not limited to Declaration, Map, Articles of Incorporation, by-laws and rules and regulations of a condominium association, management agreement, and the Contract of Sale and deed forms to be used in connection with the sale of the Units or Parking Spaces, all of which must be reasonably acceptable to Lender in form and substance.

         Condominium Statute : C.R.S. 38-33.3-101 et seq., as the same may be amended from time to time.

         Construction or construction : The construction and equipping of the Improvements in accordance with the Plans and Specifications required to be performed by Borrower for the development of the Project.

         Construction Commencement Date : Not later than thirty (30) days from the date of this Agreement.

         Construction Loan . That certain revolving loan in the amount of Twenty Million and 00/100 Dollars ($20,000,000.00) from Lender to Borrower for construction of Condominium Buildings and parking garages.

         Construction Schedule : A schedule reasonably satisfactory to Lender and Lender’s Consultant, establishing a timetable for completion of the Construction, showing, on a monthly basis, the anticipated progress of the Construction and also showing that the Improvements can be completed on or before the Completion Date.

         Contingency Fund : A Budget Line Item which shall represent an amount necessary to provide reasonable assurances to Lender that additional funds are available to be used if additional costs and expenses are incurred or additional interest accrues on the Loan, or unanticipated events or problems occur.

         Contract Deposits: All reservations, deposits, down payments, or the like paid under Contracts of Sale or reservation receipts for Units at the Project.

         Contract of Sale: A legally enforceable contract, in form and content reasonably satisfactory to Lender and Lender’s counsel, between Borrower and a bona fide third party purchaser for the sale and purchase of an individual Unit with a Contract Deposit of not less than $2,500.00, which Contract Deposit shall have been paid and such deposit shall be in the form of cash or immediately available funds and held by the Title Insurer in an account established by such Title Insurer at Lender.

Each contract must by the terms thereof (i) be expressly inferior and subordinate to the lien of any deeds of trust now or hereafter existing for the benefit of Lender which encumbers the Project, (ii) be non-assignable without the Lender’s prior written consent, and (iii) otherwise comply with all requirements of Governmental Authorities so that the purchaser of such Unit shall have no election or right to rescind such contract without the loss of its Contract Deposit. A purchaser shall not be considered a bona fide third party purchaser if it has contracted, directly or indirectly, for the purchase of more than two (2) Units. In addition, no more than two (2) Units may be purchased by purchasers of multiple Units. Moreover, a bona fide third party purchaser shall not include the Borrower, any member or manager of the Borrower, any stockholder, director, officer, partner, member or manager of any member or manager

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of Borrower, or any partner, member, manager, stockholder, director or officer of any constituent party of any member or manager of the Borrower, or any member of the immediate family or affiliate (as defined in Rule 405 of the Securities Act of 1933) of any of the foregoing parties.

         Control : As such term is used with respect to any person or entity, including the correlative meanings of the terms “controlled by” and “under common control with”, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of such person or entity, whether through the ownership of voting securities, by contract or otherwise.

         Daily LIBOR Rate : The rate of interest calculated by Lender on a daily basis equal to the one month rate of interest (rounded upward to the next highest 1/16th of 1%) of the one month London interbank offered rate for deposits in U.S. Dollars at approximately 11:00 a.m. (London time) on the second preceding Business Day; as determined and adjusted from time to time in Lender’s sole discretion. For purposes of this Definition, “Business Day” means a day other than a Saturday or Sunday on which commercial banks are open for international business, including dealings in U. S. Dollar deposits, in London, England.

         Deed of Trust : A Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing (Development Loan), executed by Borrower for the benefit of Lender securing this Agreement, the Note, and all obligations of Borrower in connection with the Loan, granting a first priority lien on Borrower’s fee interest in the Project, subject only to the Permitted Exceptions.

         Default or default : Any event, circumstance or condition, which, if it were to continue uncured, would, with notice or lapse of time or both, constitute an Event of Default hereunder.

         Default Rate : A rate per annum equal to three percentage points (300 basis points) in excess of the Interest Rate otherwise applicable on each outstanding advance of the Loan, but shall not at any time exceed the highest rate permitted by law.

         Deficiency Deposit : As such term is defined in Section 8.1.

         Environmental Indemnity : An environmental indemnity from the Borrower and Guarantor, jointly and severally, indemnifying Lender with regard to all matters related to Hazardous Material and other environmental matters.

         Environmental Proceedings : Any environmental proceedings, whether civil (including actions by private parties), criminal, or administrative proceedings, relating to the Project.

         Environmental Report : An environmental report prepared at Borrower’s expense by a qualified environmental consultant approved by Lender, dated not more than three (3) months prior to the date of this Agreement and addressed to Lender (or subject to separate letter agreement permitting Lender to relay on such environmental report) and satisfactory to Lender in form and substance, as determined by Lender in its sole discretion.

         ERISA : The Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder from time to time.

         Event of Default : As such term is defined in Article 13.

         Extended Maturity Date : As such term is defined in Section 3.6.

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         Extension Option : As such term is defined in Section 3.6.

         Extention Term : The period of time commencing on the day after the Initial Maturity Date and ending on the Extended Maturity Date.

         Federal Funds Rate : Shall mean, for any day, the rate per annum (rounded upward to the nearest on one-hundredth of one percent (1/100 of 1%)) announced by the Federal Reserve Bank of Cleveland on such day as being the weighted average of the rates on overnight federal funds transactions arranged by federal funds brokers on the previous trading day, as computed and announced by such Federal Reserve Bank in substantially the same manner as such Federal Reserve Bank computes and announces the weighted average it refers to as the “Federal Funds Effective Rate.”

         FIRREA : The Financial Institutions Reform, Recovery And Enforcement Act of 1989, as amended from time to time.

         General Contract : The contract between Borrower and General Contractor, pertaining to the construction of all onsite and offsite Improvements for the Project.

         General Contractor : Tri-Star Construction West, LLC, a Colorado limited liability company.

         Governmental Approvals : Collectively, all consents, licenses, and permits and all other authorizations or approvals required from any Governmental Authority for the Construction in accordance with the Plans and Specifications.

         Governmental Authority : Any federal, state, county or municipal government, or political subdivision thereof, any governmental or quasi-governmental agency, authority, board, bureau, commission, department, instrumentality, or public body, or any court, administrative tribunal, or public utility.

         Guarantor : Wellsford Real Properties, Inc., a Maryland corporation.

         Hazardous Material : Means and includes gasoline, petroleum, asbestos containing materials, explosives, radioactive materials or any hazardous or toxic material, substance or waste which is defined by those or similar terms or is regulated as such under any Law of any Governmental Authority having jurisdiction over the Project or any portion thereof or its use, including: (i) any “hazardous substance” defined as such in (or for purposes of) the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.A. § 9601(14) as may be amended from time to time, or any so-called “superfund” or “superlien” Law, including the judicial interpretation thereof; (ii) any “pollutant or contaminant” as defined in 42 U.S.C.A. § 9601(33); (iii) any material now defined as “hazardous waste” pursuant to 40 C.F.R. Part 260; (iv) any petroleum, including crude oil or any fraction thereof; (v) natural gas, natural gas liquids, liquefied natural gas, or synthetic gas usable for fuel; (vi) any “hazardous chemical” as defined pursuant to 29 C.F.R. Part 1910; and (vii) any other toxic substance or contaminant that is subject to any other Law or other past or present requirement of any Governmental Authority. Any reference above to a Law, includes the same as it may be amended from time to time, including the judicial interpretation thereof.

     Improvements .        (A) All earthwork, infrastructure and other improvements necessary for the development on the Land of thirty-nine (39) Condominium Building Sites, and to make each such Condominium Building Site suitable for the issuance of a building permit for the construction of a Condominium Building and Units therein, and (B) the construction of the amenities identified in the

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Plans and Specifications, without limitation, the clearing, filling to grade, compacting and grading of the Land, the installation and paving of roads, the installation of a drainage system, the installation of water and sewer lines and other utilities to the Land and to each individual Condominium Building Site and to the amenities, landscaping and all other improvements needed to develop the Land, both onsite and offsite which are necessary to permit construction, use, occupancy and enjoyment of the Condominium Buildings and Units, all in accordance with the Plans and Specifications.

         In Balance or in balance : As such term is defined in Section 8.1.

         Including or including : Including but not limited to.

         Initial Maturity Date . November 1, 2006.

         Interest Rate Agreement . As such term is defined in Section 3.8.

         Interest Rate Protection Product . As such term is defined in Section 3.8.

         Internal Revenue Code : The Internal Revenue Code of 1986, as amended from time to time.

         Land : As such term is defined in Recital A.

         Laws : Collectively, all federal, state and local laws, statutes, codes, ordinances, orders, rules and regulations, including judicial opinions or precedential authority in the applicable jurisdiction.

         Late Charge : As such term is defined in Section 3.6.

         Leases : The collective reference to all leases, subleases and occupancy agreements affecting the Project or any part thereof now existing or hereafter executed and all amendments, modifications or supplements thereto approved in writing by Lender.

         Lender : As defined in the opening paragraph of this Agreement.

         Lender's Consultant : An independent consulting architect, inspector, and/or engineer designated by Lender in Lender's sole discretion.

         LIBOR Business Day : A Business Day on which dealings in U.S. dollars are carried on in the London Interbank Market.

         LIBOR Rate Margin : 1.65 percent (one hundred sixty-five (165) basis points) per annum.

         Loan : As defined in Recital B.

         Loan Amount : The maximum amount of the Loan as set forth in Section 3.1(b) as reduced by principal payments made from time to time.

         Loan Documents : The collective reference to this Agreement, the documents and instruments listed in Section 3.2, and all the other documents and instruments entered into from time to time, evidencing or securing the Loan or any obligation of payment thereof or performance of Borrower’s or Guarantor’s obligations in connection with the transaction contemplated hereunder, and any Interest Rate Agreement, each as amended.

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         Major Subcontractor : Any subcontractor under a Major Subcontract.

         Major Subcontracts : All subcontracts between Borrower or General Contractor and any subcontractors and materials suppliers which provide for an aggregate contract price equal to or greater than $100,000.00.

         Material Adverse Change or material adverse change : If, in Lender’s reasonable discretion, the business prospects, operations or financial condition of a person, entity or property has changed in a manner which could impair the value of Lender’s security for the Loan, prevent timely repayment of the Loan or otherwise prevent the applicable person or entity from timely performing any of its material obligations under the Loan Documents.

         Maturity Date : The Initial Maturity Date, provided, if Borrower timely satisfies the conditions to extend the term of the Loan pursuant to Section 3.7, then the Maturity Date shall be extended to the Extended Maturity Date.

         Net Sales Proceeds : Shall mean the purchase price for each Unit and garage or parking space, including all amounts paid for extras and the like (excluding, however, amounts for extras and the like paid for from sources other than Loan proceeds), less a third party brokerage fee not to exceed six percent (6%) of such purchase price to the extent due from Borrower and customary closing costs and adjustments paid by the Borrower for deed stamps, recording fees, taxes, title insurance premiums and a $575.00 fee paid to a third-party warranty management company not to exceed three percent (3%) of such purchase price.

         Note : A promissory note, in the Loan Amount, executed by Borrower and payable to the order of Lender, evidencing the Loan.

         Operating Account : A deposit account opened and maintained by Borrower with Lender, to be utilized in the manner set forth in Section 3.1(c).

         Payment Guaranty : A guaranty of payment executed by Guarantor and pursuant to which the Guarantor guarantees payment of principal, interest and other amounts due under the Loan Documents.

         Permitted Exceptions : Those matters listed on Schedule B to the Title Policy to which title to the Project may be subject on the date of the initial Loan disbursement and thereafter such other title exceptions as Lender may reasonably approve in writing.

         Plans and Specifications : Detailed plans and specifications for the Improvements, as approved by Lender, as modified hereafter with Lender’s prior written approval or as otherwise expressly permitted by this Agreement.

         Prime Rate : That interest rate established from time to time by Lender as Lender’s prime rate, whether or not such rate is publicly announced; the Prime Rate may not be the lowest interest rate charged by Lender for commercial or other extensions of credit;

         Prime Rate Margin : 0% (zero basis points) per annum.

         Proceeding : As such term is defined in Section 16.15.

         Project : As set forth in Recital A .

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         Required Permits : Each building permit, environmental permit, utility permit, land use permit, wetland permit and any other permits, approvals or licenses issued by any Governmental authority which are required in connection with Construction.

         Soil Report : A soil test report prepared by a licensed engineer satisfactory to Lender indicating to the satisfaction of Lender that the soil and subsurface conditions underlying the Project will support the Improvements.

         State : The state of Colorado.

         Subcontracts : Subcontracts for labor or materials to be furnished to the Project.

         Tenant : The tenant under a Lease.

         Title Insurer : Land Title Guarantee Company as agent for Chicago Title Insurance Company, or such other title insurance company licensed in the State as may be approved in writing by Lender.

         Title Policy : An ALTA Mortgagee’s Loan Title Insurance Policy acceptable to Lender in its sole discretion with extended coverage issued by the Title Insurer insuring the lien of the Deed of Trust as a valid first, prior and paramount lien upon the Project and all appurtenant easements, and subject to no other exceptions other than the Permitted Exceptions.

         Transfer : Any sale, transfer, lease (other than a Lease approved by Lender), conveyance, alienation, pledge, assignment, mortgage, encumbrance hypothecation or other disposition of (a) all or any portion of the Project or any portion of any other security for the Loan, (b) all or any portion of the Borrower’s right, title and interest (legal or equitable) in and to the Project or any portion of any other security for the Loan, or (c) any interest in Borrower or any interest in any entity which directly or indirectly holds an interest in, or directly or indirectly controls, Borrower.

         Unavoidable Delay : Any delay in the construction of the Project, caused by natural disaster, fire, earthquake, floods, explosion, extraordinary adverse weather conditions, inability to procure or a general shortage of labor, equipment, facilities, energy, materials or supplies in the open market, failure of transportation, strikes or lockouts for which Borrower has notified Lender in writing.

         Unit.         Each residential condominium unit located within a Condominium Building which is constructed on the Land.

         1.2 Other Definitional Provisions . All terms defined in this Agreement shall have the same meanings when used in the Note, Deed of Trust, any other Loan Documents, or any certificate or other document made or delivered pursuant hereto. The words “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement.

ARTICLE 2
BORROWER’S REPRESENTATIONS AND WARRANTIES

         2.1 Representations and Warranties . To induce Lender to execute this Agreement and perform its obligations hereunder, Borrower hereby represents and warrants to Lender as follows:

(a)     Borrower has good and marketable fee simple title to the Project, subject only to the Permitted Exceptions.

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(b)     No litigation or proceedings are pending, or to the best of Borrower’s knowledge threatened, against Borrower or Guarantor, which could, if adversely determined, cause a Material Adverse Change with respect to Borrower, Guarantor or the Project. There are no pending Environmental Proceedings and Borrower has no knowledge of any threatened Environmental Proceedings or any facts or circumstances which may give rise to any future Environmental Proceedings.

(c)     Borrower is a duly organized and validly existing limited liability company and has full power and authority to execute, deliver and perform all Loan Documents to which Borrower is a party, and such execution, delivery and performance have been duly authorized by all requisite action on the part of Borrower.

(d)     No consent, approval or authorization of or declaration, registration or filing with any Governmental Authority or nongovernmental person or entity, including any creditor, partner, or member of Borrower or Guarantor, is required in connection with the execution, delivery and performance of this Agreement or any of the Loan Documents.

(e)     The execution, delivery and performance of this Agreement, the execution and payment of the Note and the granting of the Deed of Trust and other security interests under the other Loan Documents have not constituted and will not constitute, upon the giving of notice or lapse of time or both, a breach or default under any other agreement to which Borrower or Guarantor is a party or may be bound or affected, or a violation of any law or court order which may affect the Project, any part thereof, any interest therein, or the use thereof.

(f)     There is no default under this Agreement or any of the other Loan Documents, nor any condition which, after notice or the passage of time or both, would constitute a default or an Event of Default under said documents.

(g)     No condemnation of any portion of the Project, (ii) no condemnation or relocation of any roadways abutting the Project, and (iii) no proceeding to deny access to the Project from any point or planned point of access to the Project, has commenced or, to the best of Borrower’s knowledge, is contemplated by any Governmental Authority.

(h)     The amounts set forth in the Budget present a full and complete itemization by category of all costs, expenses and fees which Borrower reasonably expects to pay or reasonably anticipates becoming obligated to pay to complete the Construction of the Improvements.

(i)     Neither the Construction of the Improvements nor the use of the Project when completed and the contemplated accessory uses will, to the best of Borrower’s knowledge, violate (i) any Laws (including subdivision, zoning, building, environmental protection and wetland protection Laws), or (ii) any building permits, restrictions of record, or agreements affecting the Project or any part thereof. Neither the zoning authorizations, approvals or variances nor any other right to construct or to use the Project is to any extent dependent upon or related to any real estate other than the Land. All Government Approvals required for the Construction in accordance with the Plans and Specifications have been or will be obtained prior to the initial disbursement, all Laws relating to the Construction of the Improvements have been complied with, and all permits and licenses required for the operation of the Project which cannot be obtained until the Construction is completed can be obtained if the Improvements are completed in accordance with the Plans and Specifications.

(j)     The Project will have adequate water, gas and electrical supply, storm and sanitary sewerage facilities, other required public utilities, fire and police protection, and means of access

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between the Project and public highways; none of the foregoing will be foreseeably delayed or impeded by virtue of any requirements under any applicable Laws.

(k)     No brokerage fees or commissions are payable by or to any person in connection with this Agreement or the Loan to be disbursed hereunder.

(l)     All financial statements and other information previously furnished by Borrower or Guarantor to Lender in connection with the Loan are true, complete and correct in all material respects and fairly present the financial conditions of the subjects thereof as of the respective dates thereof and do not fail to state any material fact necessary to make such statements or information not misleading, and no Material Adverse Change with respect to Borrower or Guarantor has occurred since the respective dates of such statements and information. Neither Borrower nor Guarantor has any material liability, contingent or otherwise, not disclosed in such financial statements.

(m)     Except as disclosed in that certain Phase I Environmental Site Assessment – Gold Peak at Palomino Park report prepared by Terracon Consulting Engineers and Scientists – Project No. 25047934 and dated January 11, 2005, to Borrower’s actual knowledge, (i) the Project is in a clean, safe and healthful condition, and, except for materials used in the ordinary course of the Construction of the Improvements, is free of all Hazardous Material and is in compliance with all applicable Laws; (ii) neither Borrower nor, to the best knowledge of Borrower, any other person or entity, has ever caused or permitted any Hazardous Material to be placed, held, located or disposed of on, under, at or in a manner to affect the Project, or any part thereof, and the Project has never been used (whether by Borrower or, to the best knowledge of Borrower, by any other person or entity) for any activities involving, directly or indirectly, the use, generation, treatment, storage, transportation, or disposal of any Hazardous Material; (iii) neither the Project nor Borrower is subject to any existing, pending, or, to the best of Borrower’s knowledge, threatened investigation or inquiry by any Governmental Authority, and the Project is not subject to any remedial obligations under any applicable Laws pertaining to health or the environment; and (iv) there are no underground tanks, vessels, or similar facilities for the storage, containment or accumulation of Hazardous Materials of any sort on, under or affecting the Project.

(n)     The Project is taxed separately without regard to any other property and for all purposes the Project may be mortgaged, encumbered, conveyed and otherwise dealt with as an independent parcel.

(o)     The Loan is not being made for the purpose of purchasing or carrying “margin stock” within the meaning of Regulation G, T, U or X issued by the Board of Governors of the Federal Reserve System, and Borrower agrees to execute all instruments necessary to comply with all the requirements of Regulation U of the Federal Reserve System.

(p)     Borrower is not a party in interest to any plan defined or regulated under ERISA, and the assets of Borrower are not “plan assets” of any employee benefit plan covered by ERISA or Section 4975 of the Internal Revenue Code.

(q)     Borrower is not a “foreign person” within the meaning of Section 1445 or 7701 of the Internal Revenue Code. Borrower uses no trade name other than its actual name set forth herein.

(r)     The principal place of business of Borrower is 6700 Palomino Parkway, Highlands Ranch, Colorado 80130. Borrower’s place of formation or organization is the State of Colorado.

(s)     Neither Borrower nor Guarantor is (or will be) a person with whom Lender is restricted from doing business under regulations of the Office of Foreign Asset Control (“OFAC”) of the

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Department of the Treasury of the United States of America (including, those Persons named on OFAC’s Specially Designated and Blocked Persons list) or under any statute, executive order (including, the September 24, 2001 Executive Order Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism), or other governmental action and is not and shall not engage in any dealings or transactions or otherwise be associated with such persons. In addition, Borrower hereby agrees to provide to the Lender with any additional information that the Lender deems necessary from time to time in order to ensure compliance with all applicable Laws concerning money laundering and similar activities.

(t)     Contracts of Sale . To the best of Borrower’s knowledge, all of the Contracts of Sale when entered into will be valid and enforceable. The Borrower will not commit or suffer any act or omission which would or could constitute a default on its part entitling any purchaser to damages, rights of set-off or right to terminate any Contract of Sale. All Contract Deposits shall be held pursuant to the Contract of Sale by the Title Insurer.

(u)     Condominium Documents . To the extent such approval is required, the Condominium Documents will be approved by all applicable federal, state or local governmental agencies or entities with approval authority over such documents, and Borrower agrees to maintain such approvals in good standing throughout the term of the Loan.

         2.2 Survival of Representations and Warranties . Borrower agrees that all of the representations and warranties set forth in Section 2.1 and elsewhere in this Agreement are true as of the date hereof, and, except for matters which have been disclosed by Borrower and approved by Lender in writing, at all times thereafter. Each request for a disbursement under the Loan Documents shall constitute a reaffirmation of such representations and warranties, as deemed modified in accordance with the disclosures made and approved as aforesaid, as of the date of such request. It shall be a condition precedent to each disbursement of the Loan that each of said representations and warranties is true and correct as of the date of such requested disbursement. Each disbursement of Loan proceeds shall be deemed to be a reaffirmation by Borrower that each of the representations and warranties is true and correct as of the date of such disbursement. In addition, at Lender’s request, Borrower shall reaffirm such representations and warranties in writing prior to each disbursement hereunder.

ARTICLE 3
LOAN AND LOAN DOCUMENTS

         3.1 Agreement to Borrow and Lend; Lender’s Obligation to Disburse .

(a)     Subject to the terms, provisions and conditions of this Agreement and the other Loan Documents, Borrower agrees to borrow from Lender and Lender agrees to lend to Borrower the Loan, for the purposes and subject to all of the terms, provisions and conditions contained in this Agreement. Lender agrees, upon Borrower’s compliance with and satisfaction of all conditions precedent and provided the Loan is In Balance, no Material Adverse Change has occurred with respect to Borrower, Guarantor, or the Project and no default or Event of Default has occurred and is continuing hereunder, to disburse Loan proceeds to reimburse Borrower for a portion of the costs incurred by Borrower in connection with the development of the Project and the Construction of the Improvements, to the extent provided for in the Budget.

(b)     The maximum aggregate amount of the Loan shall not exceed Eight Million Eight Hundred Thousand Dollars ($8,800,000.00).

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(c)     Borrower shall open an Operating Account. Borrower authorizes Lender to disburse Loan proceeds by crediting the Operating Account; provided , however , that Lender shall not be obligated to use such method. Lender is further authorized to pay and principal or interest due upon the Note when and as same shall become due by debiting funds on deposit in the Operating Account.

         3.2 Loan Documents . Borrower agrees that it will, on the date of this Agreement execute and deliver or cause to be executed and delivered to Lender the following documents in form and substance acceptable to Lender:

(a)     The Note.

(b)     The Deed of Trust.

(c)     The Completion Guaranty.

(d)     The Payment Guaranty.

(e)     The Environmental Indemnity.

(f)     A collateral assignment of construction documents, including, without limitation, the General Contract, all architecture and engineering contracts, Plans and Specifications, permits, licenses, approvals and development rights, together with consents to the assignment and continuation agreements from the General Contractor, the architect and other parties reasonably specified by Lender.

(g)     Such UCC financing statements as Lender determines are advisable or necessary to perfect or notify third parties of the security interests intended to be created by the Loan Documents.

(h)     An Assignment of Declarant’s Rights.

(i)     An Assignment of Rights under Contracts of Sale.

(j)     Such other documents, instruments or certificates as Lender and its counsel may reasonably require, including such documents as Lender in its sole discretion deems necessary or appropriate to effectuate the terms and conditions of this Agreement and the Loan Documents, and to comply with the laws of the State.

         3.3 Term of the Loan . All principal, interest and other sums due under the Loan Documents shall be due and payable in full on the Maturity Date without relief from valuation and appraisement laws.

         3.4 Principal Repayment . The principal amount of the Loan shall be repaid as follows: Upon the initial advance of the proceeds of the Construction Loan, Borrower shall pay to Lender, on principal, a sum equal to $159,133.00 if a Condominium Building contains five (5) Units, or $240,190.00 if such Condominium Building contains seven (7) Units.

         3.5 Prepayments . Borrower shall have the right to make prepayments of the Loan, in whole or in part, without prepayment penalty, upon one (1) day’s prior written notice to Lender.

         3.6 Late Charge . Any and all amounts due hereunder or under the other Loan Documents, except principal and accrued interest due on the Maturity Date, which remain unpaid more than five (5)

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days after the date said amount was due and payable shall incur a fee (the “Late Charge”) of five percent (5%) per annum of said amount, or $25.00, whichever is greater, which payment shall be in addition to all of Lender’s other rights and remedies under the Loan Documents, provided that no Late Charge shall apply to the final payment of principal on the Maturity Date.

         3.7 Extension of Loan .

(a)     All principal, interest and other sums due under the Loan Documents shall be due and payable in full on the Maturity Date. All references herein to the Maturity Date shall mean the Initial Maturity Date, provided that Borrower shall have the right to extend the Maturity Date for one (1) additional period of six (6) months (“Extension Option 1”), and a second additional period of nine (9) months (“Extension Option 2”), thereby extending the Maturity Date to May 1, 2007 with respect to Extension Option 1 (the “First Extended Maturity Date”) and February 1, 2008 with respect to Extension Option 2 (the “Second Extended Maturity Date”).

(b)     Borrower may only exercise each of Extension Option 1 and Extension Option 2 upon satisfying the following conditions:

(i)

Borrower shall have delivered to Lender written notice of such election no earlier than sixty (60) days and no later than thirty (30) prior to the Initial Maturity Date or the First Extended Maturity Date, as applicable;

(ii)

Such notice with respect to Extension Option 2 is accompanied by an extension fee in the amount of one-tenth of one percent of the outstanding principal balance of the Loan. No extension fee shall be required with respect to Extension Option 1;

(iii)

Lender shall have received Borrower’s and Guarantor’s current financial statements, certified as correct by Borrower and Guarantor. There must be no material adverse change in Borrower’s or Guarantor’s financial condition;

(iv)

Construction of the Improvements has been completed in accordance with all requirements of this Loan Agreement;

(v)

With respect to Extension Option 1, Borrower shall have repaid on the principal amount of the Loan the sum of $4,500,000.00. With respect to Extension Option 2, Borrower shall have repaid on the principal amount of the Loan the sum of $6,000,000.00; and

(vi)

No Event of Default exists under the Loan Documents, nor any event which would be an Event of Default if not cured within the time allowed.

        3.8 Interest Rate Agreements .

(a)     If Borrower purchases an interest rate swap, cap, collar or other interest rate protection product (“Interest Rate Protection Product”) from Lender, Borrower shall enter into such party’s customary form of agreement (“Interest Rate Agreement”) relating to such Interest Rate

Protection Product. Any indebtedness incurred pursuant to an Interest Rate Agreement entered into by Borrower and Lender shall constitute indebtedness evidenced by the Note and secured by the Deed of Trust and the other Loan Documents to the same extent and effect as if the terms and provisions of such Interest Rate

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Agreement were set forth herein, whether or not the aggregate of such indebtedness, together with the disbursements made by Lender of the proceeds of the Loan, shall exceed the face amount of the Note.

(b)     Borrower hereby collaterally assigns to Lender any and all Interest Rate Protection Products purchased or to be purchased by Borrower in connection with the Loan, as additional security for the Loan, and agrees to provide Lender with any additional documentation requested by Lender in order to confirm or perfect such security interest during the term of the Loan. If Borrower obtains an Interest Rate Protection Product from a party other than Lender, Borrower shall deliver to Lender such third party’s consent to such collateral assignment. No Interest Rate Protection Product purchased from a third party may be secured by an interest in Borrower or the Project.

ARTICLE 4
INTEREST

         4.1 Interest Rate .

(a)     Provided that no Event of Default exists, the Loan will bear interest at the sum of (a) the Daily LIBOR Rate plus (b) the LIBOR Rate Margin. Borrower shall pay interest in arrears on the first (1 ^st ) Business Day of each calendar month in the amount of all interest accrued during the immediately preceding calendar month. The rate of interest shall change immediately and contemporaneously with any change in the Daily LIBOR Rate.

(b)     If the introduction of or any change in any Law, regulation or treaty, or in the interpretation thereof by any Governmental Authority charged with the administration or interpretation thereof, shall make it unlawful for Lender to maintain a Daily LIBOR Rate with respect to the Loan or any portion thereof, or to fund the Loan or any portion thereof in Dollars in the London interbank market, or to give effect to its obligations to charge interest, then (1) Lender shall notify Borrower that Lender is no longer able to maintain the Daily LIBOR Rate, and (2) the interest rate of the Loan shall automatically be converted to the Adjusted Prime Rate.

(c)     Interest on the Loan shall be calculated for the actual number of days elapsed on the basis of a 360-day year, including the first date of the applicable period to, but not including, the date of repayment.

ARTICLE 5
FEES AND LOAN EXPENSES

         5.1 Fees . The Borrower shall pay the following fees to Lender:

        Borrower shall pay to Lender on or before the date of this Agreement a commitment fee in the amount of $44,000.00 [(1/2% of the Loan amount] (the “Commitment Fee”). Such Commitment Fee is fully earned and non-refundable as of closing.

         5.2 Loan and Administration Expenses . Borrower unconditionally agrees to pay all expenses of the Loan, including all amounts payable pursuant to Section 5.1 and any and all other fees owing to Lender pursuant to the Loan Documents, and also including, without limiting the generality of the foregoing, all reasonable attorneys’ fees and expenses, all recording, filing and registration fees and charges, documentary taxes, all insurance premiums, title insurance premiums and other charges of the Title Insurer, survey fees and charges, cost of certified copies of instruments, cost of premiums on surety

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company bonds and the Title Policy, charges of the Title Insurer or other escrowee for administering disbursements, all fees and disbursements of Lender’s Consultant, all appraisal fees, insurance consultant’s fees, environmental consultant’s fees, and other expenses incurred by Lender in connection with the determination of whether or not Borrower has performed the obligations undertaken by Borrower hereunder or has satisfied any conditions precedent to the obligations of Lender hereunder. If any default or Event of Default occurs hereunder or under any of the Loan Documents or if the Loan or Note or any portion thereof is not paid in full when and as due, Borrower shall pay all costs and expenses of Lender (including, without limitation, court costs and counsel’s fees and disbursements and fees and costs of paralegals) incurred in attempting to enforce payment of the Loan and expenses of Lender incurred (including court costs and counsel’s fees and disbursements and fees and costs of paralegals) in attempting to realize, while a default or Event of Default exists, on any security or incurred in connection with the sale or disposition (or preparation for sale or disposition) of any security for the Loan. Borrower agrees to pay all brokerage, finder or similar fees or commissions payable in connection with the transactions contemplated hereby and shall indemnify and hold Lender harmless against all claims, liabilities, costs and expenses (including attorneys’ fees and expenses) incurred in relation to any claim by broker, finder or similar person.

         5.3 Time of Payment of Fees and Expenses . Lender may require the payment of outstanding fees and expenses as a condition to any disbursement of the Loan. Lender is hereby authorized, without any specific request or direction by Borrower, to make disbursements from time to time in payment of or to reimburse Lender for all Loan expenses and fees (whether or not, at such time, there may be any undisbursed amounts of the Loan allocated in the Budget for the same).

         5.4 Expenses and Advances Secured by Loan Documents . Any and all advances or payments made by Lender under this Article 5 from time to time shall, as and when advanced or incurred, constitute additional indebtedness evidenced by the Note and secured by the Deed of Trust and the other Loan Documents.

         5.5 Right of Lender to Make Advances to Cure Borrower’s Defaults . In the event that Borrower fails to perform any of Borrower’s covenants, agreements or obligations contained in this Agreement or any of the other Loan Documents (after the expiration of applicable grace periods, except in the event of an emergency or other exigent circumstances), Lender may (but shall not be required to) perform any of such covenants, agreements and obligations, and any amounts expended by Lender in so doing and shall constitute additional indebtedness evidenced by the Note and secured by the Deed of Trust and the other Loan Documents and shall bear interest at the Default Rate.

ARTICLE 6
REQUIREMENTS PRECEDENT
TO THE INITIAL DISBURSEMENT OF THE LOAN

         6.1 Non-Construction Conditions Precedent . Borrower agrees that Lender’s obligation to make the initial disbursement of the Loan and each subsequent disbursement is conditioned upon Borrower’s delivery, performance and satisfaction of the following conditions precedent in form and substance satisfactory to Lender:

(a)     Equity : Borrower shall have provided evidence reasonably satisfactory to Lender that Borrower’s equity invested in the Project, including the appraised value of the Land, is not less than the difference between the total Project cost as set forth in the Budget and the maximum Loan Amount; provided , however , in no event shall Borrower’s equity in the Project be less than $10,000,000.00;

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(b)     Title and Other Documents : Borrower shall have furnished to Lender the Title Policy together with legible copies of all title exception documents cited in the Title Policy and all other legal documents affecting the Project or the use thereof;

(c)     Survey : Borrower shall have furnished to Lender an ALTA/ACSM “Class A” Land Title Survey of the Project. Said survey shall be dated no earlier than ninety (90) days prior to the date of this Agreement and shall be made (and certified to have been made) form reasonably satisfactory to Lender in its sole discretion. Such survey shall be sufficient to permit issuance of the Title Policy in the form required by this Agreement. Such survey shall include the legal description of the Land;

(d)     Insurance Policies : Borrower shall have furnished to Lender not less than ten (10) days prior to the date of this Agreement policies or binders evidencing that insurance coverages are in effect with respect to the Project and Borrower, in accordance with the Insurance Requirements attached hereto as Exhibit D , for which the premiums have been fully prepaid with endorsements satisfactory to Lender;

(e)     No Litigation : Borrower shall have furnished evidence that no litigation or proceedings shall be pending or threatened which could or might cause a Material Adverse Change with respect to Borrower, Guarantor, or the Project;

(f)     Utilities : Borrower shall have furnished to Lender (by way of utility letters or otherwise) evidence establishing to the satisfaction of Lender that the Project when constructed will have adequate water supply, storm and sanitary sewerage facilities, telephone, gas, electricity, fire and police protection, means of ingress and egress to and from the Project and public highways and any other required public utilities and that the Project is benefited by insured easements as may be required for any of the foregoing;

(g)     Attorney Opinions : Borrower shall have furnished to Lender an opinion from counsel for Borrower and Guarantor covering due authorization, execution and delivery and enforceability of the Loan Documents and also containing such other legal opinions as Lender shall reasonably require;

(h)     Appraisal : Lender shall have obtained an Appraisal, the appraised value of which shall provide for a loan-to-cost ratio and loan-to-value ratio not to exceed forty percent (40%), which Appraisal is satisfactory to Lender in all respects;

(i)     Searches : Borrower shall have furnished to Lender current bankruptcy, federal tax lien and judgment searches and searches of all Uniform Commercial Code financing statements filed in the State demonstrating the absence of adverse claims;

(j)     Financial Statements : Borrower shall have furnished to Lender current annual financial statements of Borrower, the Guarantor, the General Contractor and such other persons or entities connected with the Loan as Lender may reasonably request, each in form and substance and certified by such individual as acceptable to Lender. Borrower and the Guarantor shall provide such other additional financial information Lender reasonably requires;

(k)     Management Agreements : Borrower shall have delivered to Lender executed copies of any management and development agreements entered into by Borrower in connection with the Construction of the Improvements within the Project;

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(l)     Flood Hazard : Lender has received evidence that the Project is not located in an area designated by the Secretary of Housing and Urban Development as a special flood hazard area, or flood hazard insurance acceptable to Lender in its sole discretion;

(m)     Zoning : If the Title Policy does not include a zoning endorsement, Borrower shall have furnished to Lender a zoning letter in form reasonably acceptable to Lender as to compliance of the Project with zoning and similar laws;

(n)     Organizational Documents : Borrower shall have furnished to Lender proof satisfactory to Lender of Borrower’s and Guarantor’s authority, formation, organization and good standing in their respective state of incorporation or formation and, if applicable, qualification as a foreign entity in good standing in the State, of all corporate, partnership, trust and limited liability company entities (including Borrower and Guarantor) executing any Loan Documents, whether in their own name or on behalf of another entity. Borrower and Guarantor shall also provide certified resolutions in form and content satisfactory to Lender, authorizing execution, delivery and performance of the Loan Documents to be executed by each of them, and such other documentation as Lender may reasonably require to evidence the authority of the persons executing the Loan Documents;

(o)     Easements : Borrower shall have furnished Lender all easements reasonably required for the Construction, maintenance or operation of and access to the Project and such easements shall be insured by the Title Policy;

(p)     No Defaults : There shall be no uncured Default or Event of Default by Borrower hereunder;

(q)     Additional Documents : Borrower shall have furnished to Lender such other materials, documents, papers or requirements regarding the Project, Borrower and Guarantor as Lender shall reasonably request.

         6.2 Required Construction Documents . On or before the date of this Agreement, Borrower shall cause to be furnished to Lender the following, in form and substance satisfactory to Lender and Lender’s Consultant in all respects, for Lender’s approval:

(a)     Fully executed copies of the following, each satisfactory to Lender and Lender’s Consultant in all respects: (i) a General Contract with the General Contractor; (ii) Major Subcontracts; and (iii) all contracts with architects and engineers;

(b)     A schedule of values, including a trade payment breakdown, setting forth a description of all contracts let by Borrower and/or the General Contractor for the design, engineering, construction and equipping of the Improvements;

(c)     An initial sworn statement of the General Contractor, approved by Borrower, Architect/Engineer and Lender’s Consultant covering all work done and to be done, together with lien waivers covering all work and materials for which payments have heretofore been made by Borrower;

(d)     Copies of each of the Required Permits, except for those Required Permits which cannot yet be issued, in which event such Required Permits will be obtained by Borrower on a timely basis in accordance with all applicable building, land use, zoning and environmental codes, statutes and regulations and will be delivered to Lender at the earliest possible date. In all events the Required

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Permits required to be delivered prior to the initial disbursement of Loan proceeds shall include permits necessary to commence development of the Improvements;

(e)     Full and complete detailed Plans and Specifications for the Improvements in duplicate, prepared by the Architect/Engineer;

(f)     The Construction Schedule;

(g)     The Soil Report;

(h)     The Environmental Report;

(i)     A report from Lender’s Consultant which contains an analysis of the Plans and Specifications, the Budget, the Construction Schedule, the General Contract, all subcontracts then existing and the Soil Report. Such report shall be solely for the benefit of Lender and contain (i) an analysis satisfactory to Lender demonstrating the adequacy of the Budget to complete the Improvements and (ii) a confirmation that the Construction Schedule is realistic. Lender’s Consultant shall monitor construction of the Improvements and shall visit the Project at least one (1) time each month, and shall certify as to amounts of construction costs for all requested fundings;

(j)     The Architect’s/Engineer’s Certificate;

(k)     Certification from an engineer or other professional reasonably acceptable to Lender in a form acceptable to Lender confirming that any wetlands located on the Land will not preclude the development of the Project;

(l)     A Notice of Commencement, if required under applicable state or local law; and

(m)     Such other reports, materials and documents as Lender may reasonably require with respect to the Construction.

ARTICLE 7
BUDGET AND CONTINGENCY FUND

         7.1 Budget . Disbursement of the Loan shall be governed by the Budget, in form and substance acceptable to Lender in Lender’s reasonable discretion. The Budget shall specify the amount of equity invested in the Project, and all costs and expenses of every kind and nature whatever to be incurred by Borrower in connection with Construction of Improvements. The Budget shall include, in addition to the Budget Line Items described in Section 7.2 below, the Contingency Fund described in Section 7.3 below, and amounts satisfactory to Lender for soft costs and other reserves acceptable to Lender. The initial Budget is attached hereto as Exhibit F and made a part hereof. Once the Budget is approved by Lender all changes to the Budget shall in all respects be subject to the prior written approval of Lender.

         7.2 Budget Line Items . The Budget shall include as line items (“Budget Line Items”), to the extent determined to be applicable by Lender in its reasonable discretion, the cost of all labor, materials, equipment and fixtures needed for the completion of the Construction of the Improvements, and all other costs, fees and expenses relating in any way whatsoever to the Construction of the Improvements, real estate taxes, and all other sums due in connection with Construction of the Improvements and the ownership of the Land, the Loan, and this Agreement. Borrower agrees that all

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Loan proceeds disbursed by Lender shall be used only for the Budget Line Items for which such proceeds were disbursed. Subject to the provisions of Section 11.1(b) hereof, Borrower shall have the right to reallocate cost savings effected by final Change Order or other appropriate final documentation to other Budget Line Items subject to Lender’s prior written consent not to be unreasonably withheld, conditioned or delayed. Lender shall not be obligated to disburse any amount for any category of costs set forth as a Budget Line Item which is greater than the amount set forth for such category in the applicable Budget Line Item. Borrower shall pay as they become due all amounts set forth in the Budget with respect to costs to be paid for by Borrower.

         7.3 Contingency Fund . The Budget shall contain a Budget Line Item designated for the Contingency Fund. Borrower may from time to time request that the Contingency Fund be reallocated to pay needed costs of Construction. Such requests shall be subject to Lender’s written approval in its reasonable discretion. Borrower agrees that the decision with respect to utilizing portions of the Contingency Fund in order to keep the Loan In Balance shall be made by Lender in its reasonable discretion, and that Lender may require Borrower to make a Deficiency Deposit even if funds remain in the Contingency Fund.

         7.4 Optional Method for Payment of Interest . For Borrower’s benefit, the Budget includes a Budget Line Item for interest payments on the Loan. Borrower hereby authorizes Lender from time to time, for the mutual convenience of Lender and Borrower, to disburse Loan proceeds to pay all the then accrued interest on the Note regardless of whether Borrower shall have specifically requested a disbursement of such amount. Any such disbursement, if made, shall be added to the outstanding principal balance of the Note and shall, when disbursed, bear interest at the Daily LIBOR Rate plus the LIBOR Rate Margin, or Default Rate, as applicable. The authorization hereby granted, however, shall not obligate Lender to make disbursements of the Loan for interest payments (except upon Borrower’s qualifying for and requesting disbursement of that portion of the proceeds of the Loan allocated for such purposes in the Budget) nor prevent Borrower from paying accrued interest from its own funds.

ARTICLE 8
SUFFICIENCY OF LOAN

         8.1 Loan In Balance . Anything contained in this Agreement to the contrary notwithstanding, it is expressly understood and agreed that the Loan shall at all times be “In Balance”, on a Budget Line Item and an aggregate basis. A Budget Line Item shall be deemed to be “In Balance” only if Lender determines that the amount of such Budget Line Item is sufficient for its intended purpose. The Loan shall be deemed to be “In Balance” in the aggregate only when the total of the undisbursed portion of the Loan less the Contingency Fund (subject to Borrower’s reallocation rights under Section 7.2) equals or exceeds the aggregate of (a) the costs required to complete the Construction of the Improvements in accordance with the Plans and Specifications and the Budget; (b) the amounts to be paid as retainages to persons who have supplied labor or materials to the Project; and (c) all other hard and soft costs not yet paid for in connection with the Project, as such costs and amounts described in clauses (a), (b) and (c) may be estimated and/or approved in writing by Lender from time to time. Borrower agrees that if for any reason, in Lender’s reasonable discretion, the amount of such undistributed Loan proceeds shall at any time be or become insufficient for such purpose regardless of how such condition may be caused, Borrower will, within ten (10) days after written request by Lender, deposit the deficiency with Lender (“Deficiency Deposit”). The Deficiency Deposit shall first be exhausted before any further disbursement of Loan proceeds shall be made. Lender shall not be obligated to make any Loan disbursements if and for as long as the Loan is not In Balance.

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ARTICLE 9
CONSTRUCTION PAYOUT REQUIREMENTS

         9.1 Monthly Payouts . After the initial disbursement of Loan proceeds, further disbursements shall be made during Construction from time to time as the Construction progresses, but no more frequently than once in each calendar month. At Lender’s option, disbursements may be made by Lender into an escrow and subsequently disbursed to Borrower or its General Contractor, Subcontractors and materials suppliers by the Title Insurer or by Lender directly. If such option is exercised, those Loan proceeds shall be deemed to be disbursed to Borrower from the date of deposit into that escrow or the date of disbursement by Lender and interest shall accrue on those proceeds from that date, regardless of the date such proceeds are released by the Title Insurer if disbursed to such Title Insurer.

         9.2 Additional Documents to be Furnished for Each Disbursement . As a condition precedent to each disbursement of the Loan proceeds (including the initial disbursement), Borrower shall furnish or cause to be furnished to Lender the following documents covering each disbursement, in form and substance satisfactory to Lender:

(a)     A completed Borrower’s Certificate in the form of Exhibit G attached hereto and made a part hereof and a completed Soft and Hard Cost Requisition Form in the form of Exhibit H attached hereto and made a part hereof, each executed by the Authorized Representative of Borrower;

(b)     A completed standard AIA Form G702 and Form G703 signed by the General Contractor, subcontractors, and the Project Architect/Engineer, together with General Contractor’s sworn statements and unconditional waivers of lien, and all subcontractors’, material suppliers’ and laborers’ sworn statements and conditional waivers of lien, covering all work, paid with the proceeds of the prior draw requests, together with such invoices, contracts or other supporting data as Lender may require to evidence that all costs for which disbursement is sought have been incurred;

(c)     Paid invoices or other evidence satisfactory to Lender that fixtures and equipment, if any, have been paid for and are free of any lien or security interest therein, and paid soft cost invoices in excess of $10,000.00, together with an accounts payable listing with respect to soft cost invoices below such amount;

(d)     An endorsement to the Title Policy issued to Lender covering the date of disbursement and showing the Deed of Trust as a first, prior and paramount lien on the Project subject only to the Permitted Exceptions and real estate taxes that have accrued but are not yet due and payable and particularly that nothing has intervened to affect the validity or priority of the Deed of Trust;

(e)     Copies of any proposed or executed Change Orders on standard AIA G701 form which have not been previously furnished to Lender and which require and are not valid without the signatures of the General Contractor, Borrower and Architect/Engineer, together with a copy of the pending change order log;

(f)     Copies of all construction contracts (including Major Subcontracts and other Subcontracts, if required by Lender) which have been executed since the last disbursement, together with any Bonds obtained or required to be obtained with respect thereto;

(g)     All Required Permits and other Government Approvals then needed in connection with the Project; and

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(h)     Such other instruments, documents and information as Lender or the Title Insurer may reasonably request.

Disbursements shall be made approximately ten (10) days after receipt of all information required by Lender to approve the requested disbursements.

         9.3 Retainages . At the time of each disbursement of Loan proceeds, five percent (5%) of the total amount then due the General Contractor and the various contractors, subcontractors and material suppliers for costs of the Construction shall be withheld from the amount disbursed. Notwithstanding the foregoing, there shall be no retainage with respect to the General Contractor’s fees; provided, however, that the General Contractor’s fees shall not exceed the amount set forth in the Budget and shall be disbursed based on the percentage of completion of Construction. The retained Loan amounts for the Construction costs will be disbursed only at the time of the final disbursement of Loan proceeds under Article 12 below; provided, however, upon the satisfactory completion of one hundred percent (100%) of