EXHIBIT 10.4

CONSTRUCTION LOAN AGREEMENT

THIS CONSTRUCTION LOAN AGREEMENT (“Agreement”), made and entered into effective
as of March 13, 2006, by and between SHOREFOX DEVELOPMENT, LLC, a Delaware
limited liability company, whose address is 62801 U.S. Highway 40, Granby,
Colorado 80446, Attention: Mr. Steven S. Bromberg (“Borrower”), and CNL INCOME
PARTNERS, LP, a Delaware limited partnership, whose address is CNL Center at
City Commons, 450 South Orange Avenue, Orlando, Florida 32801-3336 Attention:
Chief Financial Officer, Attention: Corporate Counsel (“Lender”).

W I T N E S S E T H:

Lender and Borrower have agreed that Lender will make a loan(s) to Borrower in
connection with the development of a proposed mixed use subdivision of
single-family and commercial uses on approximately 1,555 acres of real property
(the “Project”) described on Exhibit “A” attached hereto (the “Land”) and the
financing and/or acquisition of the Land, certain Improvements and related
personal property (the “Property”) in an aggregate amount not to exceed
$40,000,000.00 (the “Loan”).

The Loan is evidenced by a Promissory Note executed by Borrower and dated the
date hereof (as amended from time to time, the “Note”) and secured by that
certain Commercial Deed of Trust, Assignment of Lease and Rents, Security
Agreement and Fixture Filing dated as of the date hereof (as amended from time
to time, the “Instrument”) in favor of Lender.

One of the conditions for closing on such Loan is the execution of this
Agreement, which describes the procedures, terms and requirements for the
funding and administration of the Loan in connection with the construction of
the Project.

NOW, THEREFORE, in consideration of the execution of this Agreement and the
separate agreements, conditions, covenants, representations and warranties of
the parties to this Agreement, it is agreed, covenanted, represented and
warranted by and between the parties as follows:

1. DEFINITIONS. The following terms shall have the meanings set forth below
throughout this Agreement unless the context clearly indicates a contrary intent
between the parties.

(a) Advance Period means the period during which Borrower can request advances
under the Loan, which period shall commence on the date hereof and expire on
March     , 2008.

(b) Affiliate means, with respect to any designated Person, any Person that,
directly or indirectly, controls or is controlled by or is under common control
with such designated Person and, without limiting the generality of the
foregoing, shall include, (i) any Person who is a director or officer of,
partner in, trustee of, or blood or legal relative, guardian or representative
of the designated Person, or any Person who acts or serves in a similar capacity
with respect to the designated Person, (ii) any Person of which or whom the
designated Person is a director or officer, partner, trustee, or blood or legal
relative, guardian or representative, or with respect to which or whom, the
designated Person acts or serves in a similar capacity; and (iii) any Person,
who, directly or indirectly, is the legal or beneficial owner of or controls 10%
or more of any class of equity securities of the designated Person. For the
purposes of this definition, “control” (including, with correlative meanings,
the terms “controlled by” and “under common control with”), as used with respect
to any Person, shall mean the possession, directly or indirectly, of the power
to cause the direction of the management and policies of such Person, whether
through the ownership of voting equities, by contract or otherwise.

(c) Agreement means this Construction Loan Agreement.

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(d) Applicable Laws collectively means and includes all present and future laws
and any amendments (whether common law, statute, rule, order, regulation or
otherwise), permits, and other requirements or guidelines of governmental
authorities applicable to any Property and relating to the environment and
environmental conditions or to any Hazardous Substance or Hazardous Substance
Activity (including, without limitation, CERCLA, the Federal Resource
Conservation and Recovery Act of 1976, 42 U.S.C. § 6901, et seq., the Hazardous
Materials Transportation Act, 49 U.S.C. § 1801, et seq., the Federal Water
Pollution Control Act, 33 U.S.C. § 1251, et seq., the Clean Air Act, 42 U.S.C. §
7401, et seq., the Toxic Substances Control Act, 15 U.S.C. § 2601-2629, the Safe
Drinking Water Act, 42 U.S.C. § 300f-300j, the Emergency Planning and Community
Right-To-Know Act, 42 U.S.C. § 11001, et seq., the Endangered Species Act, and
any so-called “Super Fund” or “Super Lien” law, environmental laws administered
by the Environmental Protection Agency or applicable state agency, any similar
state and local laws and regulations, all amendments thereto and all
regulations, orders, decisions, and decrees now or hereafter promulgated
thereunder.

(e) Approved Carriers means insurance carriers which have a long-term debt
rating of claims paying in the category “A-” or better as rated by Best’s
Insurance Rating Service or otherwise reasonably acceptable to Lender.

(f) Borrower means SHOREFOX DEVELOPMENT, LLC, a Delaware limited liability
company, and its successors and permitted assigns

(g) Casualty means any damage, injury or loss to the Property by fire,
lightning, hail, windstorm, explosion, flood or other hazard or casualty.

(h) Chattel Paper has the meaning ascribed to such term under the Uniform
Commercial Code.

(i) Collateral means all of the collateral securing, in whole or in part, the
payments and performance of Borrower’s liabilities and obligations under the
Loan Documents and related to the Property (except and unless otherwise
specifically otherwise set forth herein).

(j) Completion Date means the date by which the Improvements approved by Lender
shall be fully completed by or for Borrower in accordance with the Plans and
Specifications and the schedule for completion agreed to by Borrower and Lender,
but in any event on or before March 10 2008.

(k) Commitment means the loan commitment made by Lender and accepted by
Borrower, and any written amendments, extensions, modifications, replacements or
substitutions thereto.

(l) Construction Reserve Account means that certain Reserve Account described in
Section 6(c) of this Agreement, which account shall be in Lender’s name, shall
be controlled exclusively by Lender and shall be used for construction
disbursements by Lender pursuant to Section 3(b) of this Agreement.

(m) Construction Budget means the budget of the costs attached hereto as
Schedule 1(m) to acquire the Land (if applicable) and acquire and construct the
Improvements as prepared in accordance with the Plans and Specifications and
other materials provided by Borrower and Engineer and submitted to and approved
by Lender prior to the execution of this Agreement.

(n) Contracts means all contracts and agreements related to the development or
operation of the Property, or benefiting Borrower to which the Borrower or
Individual Owners now are, or hereafter will be, bound, or a party, beneficiary
or assignee (other than rights evidenced by Chattel Paper, Documents or the
Instrument) including, without limitation all agreements and documents executed
and delivered with respect to such contracts, including without limiting the
generality of the foregoing, any agreements, documents or arrangements by which
Shorefox Metro District/s and/or the Town of Granby give or acknowledge an
obligation or intent to pay or repay the Borrower or any other person or entity
for funds advanced to or on behalf of the districts by the Borrower for district
organization, operations, infrastructure and services, including without
limitation advance and reimbursement agreements and facilities acquisition
agreements and all revenues, rentals and other sums of money due and to become
due thereunder from any of the foregoing.

 

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(o) Copyrights means all United States or other registered and unregistered
copyrights, all licenses thereto, and all applications therefor, and all
reissues, divisions, continuations, renewals, extensions, modifications,
supplements thereto or to any part thereof, and the right to sue for past,
present and future infringements of the foregoing, and all rights corresponding
to the foregoing throughout the world.

(p) Default has the meaning ascribed to such term in paragraph 6 of this
Agreement

(q) District Bonds means any bonds issued by the Shorefox Metropolitan District
No, 1 or the Shorefox Metropolitan District No. 2, or any other Governmental
Authority relating to all or any portion of the Property.

(r) Document has the meaning ascribed to such term under the UCC and which
relate to the Property.

(s) Encumbrances means all liens, mortgages, deeds of trust, conditional sales
agreements, land installment contracts, security interests, encumbrances,
leases, restrictions, easements, licenses, covenants, agreements, rights of way,
rights of redemption, options and other rights and burdens of any kind.

(t) Engineer means Carroll & Lange, Inc. of Winter Park, Colorado, and such
other engineers and replacement engineers as may be approved by Lender.

(u) Environmental Report means that certain Phase I Environmental Site
Assessment dated October 5, 2005, prepared by Ground Engineering Consultants,
Inc. Job No. 05-3406.

(v) Equipment means any “equipment,” as such term is defined in the UCC, used or
bought and not included within Inventory, now or hereafter owned or leased by
Borrower or Individual Owners and, in any event, shall include, but shall not be
limited to, all machinery, tools, computer software, office equipment,
furniture, appliances, fixtures, vehicles, motor vehicles, and any manuals,
instructions and similar items which relate to the foregoing, and any and all
additions, substitutions and replacements of any of the foregoing, wherever
located, together with all improvements thereon and all attachments, components,
parts, equipment and accessories installed thereon or affixed thereto.

(w) GAAP means generally accepted accounting principles consistently applied.

(x) General Contractor means Adolfson & Peterson Construction, from Aurora,
Colorado, and such other contractors or Construction Manager with whom Borrower
may hereafter contract for the construction of the Improvements.

(y) General Intangibles has the meaning ascribed to such term under the UCC and
which relate to the Property.

(z) Governmental Authorities means all federal, state, regional, county, city,
municipal, and other governmental or quasi-governmental courts, judicial bodies,
agencies, boards, commissions and authorities of any kind and include, without
limitation, all utility districts, commissions or related entities.

(aa) Guarantor(s) means each or all Person(s), if any, who have guaranteed or
are otherwise liable, in whole or in part, for the payment or performance of any
of Borrower’s obligations under the Loan Documents, including without limitation
Shorefox, LLC, a Delaware limited liability company which has executed a related
Guaranty dated as of the dated of this Agreement.

(bb) Improvements means the infrastructure improvements described in the Plans
and Specifications and in the application for the Loan. Without limiting the
foregoing, the term “Improvements” shall include grading,

 

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roadways, drainage, utilities, curbs and paving, all as described in the Plans
and Specifications or described in the application for the Loan, and all
building materials, machinery, appliances and equipment to be incorporated in or
affixed to the Improvements described in the Plans and Specifications. The
specific Improvements and budget for more Improvements is attached hereto as
Schedule 1(bb).

(cc) Instrument means collectively: (a) that Commercial Deed of Trust, Security
Agreement and Fixture Filing from Borrower to Lender dated of even date herewith
granting a security interest in its respective portion of Property and securing
the payment and performance of Borrower’s obligations under the Note and the
Loan Documents; (b) that Commercial Deed of Trust, Security Agreement and
Fixture Filing from Individual Owners to Lender dated of even date herewith
granting a security interest in their respective portion of Property and
securing the payment and performance of Borrower’s obligations under the Note
and the Loan Documents; and (c) all amendments, extensions, modifications,
replacements and substitutions thereto.

(dd) Interest Reserve Account means that certain Reserve Account described in
Section 6(b) of this Agreement, which account shall be in Lender’s name, shall
be controlled exclusively by Lender, and shall be used for payment of interest
due from Borrower from time to time pursuant to said Section 6(b).

(ee) Inventory means all inventory of every type or description relating to the
Property, including all “inventory” as such term is defined in the UCC, now
owned or hereafter acquired and wherever located, whether raw, in process or
finished, and all materials usable in processing the same and all documents of
title covering any inventory, including, without limitation, work in process,
now owned or hereafter acquired or manufactured and held for sale in the
ordinary course of business; all present and future substitutions thereof, parts
and accessories thereof and all additions thereto; and all proceeds thereof and
products of such inventory in any form whatsoever.

(ff) Investment Property means any “investment property” as such term is defined
in the UCC and which relates to the Property and in any event shall include, but
not be limited to, a security, whether certificated or uncertificated, security
entitlement, securities account, commodity contract, or commodity account.

(gg) Individual Owners means Steven S. Bromberg, Jeff Martin, and Jana Huse.

(hh) Laws means all laws, regulations, rules, ordinances, orders, rulings,
decisions and interpretations imposed by any Governmental Authority, arbitrator
or mediator or otherwise existing under applicable law.

(ii) Land means the real property described in and encumbered by the Instrument
and more particularly described on attached Exhibit “A” and (exclusive of the
Improvements) any and all other improvements thereon and all rights and
interests appurtenant hereto (except for the Improvements).

(jj) Legal Actions means all actions, suits, hearings, investigations or other
proceedings of any kind brought at law, in equity, or otherwise before any
Governmental Authority, arbitrator or mediator.

(kk) Legal Requirements means: (a) all Laws; (b) Borrower’s and Guarantor’s
articles of incorporation, bylaws, partnership agreements, joint venture
agreements, articles of organization, operating agreements, trust agreements,
and any other similar or related organizational documents; (c) all of Borrower’s
and Guarantor’s contracts and agreements with other Persons; and (d) all
Encumbrances.

(ll) Lender means CNL INCOME PARTNERS, LP, a Delaware limited partnership, and
its successors and assigns.

(mm) Lender Approved Appraisal means the appraisal for the Property received and
approved by Lender, as the same may be modified from time to time subject to
Lender’s approval.

(nn) Lender’s Inspector means any firm or entity designated as such by Lender
from time to time.

(oo) License means the license to use Trademarks and other intellectual
property.

 

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(pp) Loan means the loan from Lender to Borrower identified in the recitals to
this Agreement and any amendments, extensions, modifications, replacements or
substitutions thereto.

(qq) Loan Documents means: (a) this Agreement, the Commitment, the Note, the
Instrument, all guaranties and other documents executed by the Borrower,
Individual Owners or Guarantor, and all other documents related thereto; (b) all
attachments, exhibits, certificates, schedules and opinions issued in connection
with any of the foregoing; and (c) all amendments, extensions, modifications,
replacements, and substitutions to any of the foregoing.

(rr) Major Taking shall mean any condemnation or other taking by eminent domain,
or conveyance in lieu thereof, of a portion of the Property for which a claim
for payment of an award for such taking and for damages in connection therewith
is fifty percent (50%) or more of the value of the Property.

(ss) Maximum Loan Amount means the maximum amount which may be borrowed with
respect to the Loan. Such amount shall not exceed the lesser of
(a) $40,000,000.00 or (b) an amount which does not exceed 55% of the Lender
Approved Appraisal for the Property. Notwithstanding the foregoing, in no event
shall the Maximum Loan Amount, plus any other indebtedness secured by the
Property, exceed 85% of the Lender Approved Appraisal.

(tt) Major Casualty shall mean any Casualty for which the cost to replace or
repair would exceed $100,000.00.

(uu) Net Proceeds shall mean proceeds (including cash and the value of any
non-cash consideration) from the sale of all or a portion of the Property minus
costs not to exceed 10%, consisting of normal and customary closing costs
including recording fees, title insurance, 2.5% Orvis fee and broker commission
not to exceed 7%.

(vv) Note means the Promissory Note of even date herewith executed by Borrower
and payable to the order of Lender in the principal amount of FORTY MILLION AND
NO/100 DOLLARS (US $40,000,000.00) which evidences the Loan, the proceeds of
which shall be used for the acquisition of the Property and the construction of
the Improvements, together with all amendments, extensions, modifications,
replacements and substitutions thereto.

(ww) Orvis means The Orvis Company, Inc., a Vermont corporation.

(xx) Patents means all United States or other registered and unregistered
patents, all licenses thereto, and all applications therefor, and all reissues,
divisions, continuations, renewals, extensions, modifications, supplements
thereto or to any part thereof, and the right to sue for past, present and
future infringements of the foregoing, and all rights corresponding to the
foregoing throughout the world.

(yy) Permitted Encumbrances means: (a) all Encumbrances to which Lender has
provided Borrower with its prior written approval; (b) liens arising from real
estate taxes or public charges for sewer, water, drainage or other public
improvements not yet due and payable; (c) liens being contested as permitted in
the Instrument; and (d) Encumbrances expressly permitted in the Instrument or in
this Loan Agreement, if applicable.

(zz) Persons means all individuals, corporation, partnerships, joint ventures,
associations, trusts, limited liability companies, and other legal entities.

(aaa) Plans and Specifications means the final plans and specifications for the
Improvements which are in the process of being prepared by the Engineer, as such
may be hereafter approved by Lender in writing, and all amendments,
modifications, replacements and substitutions to such plans and specifications
which may be prepared by Engineer and approved by Lender in writing from time to
time.

(bbb) Property means the Land, the Improvements and all related personal and
real property of any kind related thereto.

 

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(ccc) Receivables means any “account” as such term is defined in the UCC and
which relates to the Property and in any event shall include, but not be limited
to, all rights to payment for any lands or goods sold or leased, or services
performed, by the Borrower or Individual Owners and related to the Property,
whether now in existence or arising from time to time hereafter, including,
without limitation, rights evidenced by an account, note, contract, security
agreement, chattel paper, or other evidence of indebtedness or security,
together with (a) all security pledged, assigned, hypothecated or granted to or
held by the Borrower or Individual Owners to secure the foregoing, (b) all the
Borrower’s or Individual Owners’ rights, title, and interest in and to any lands
or goods, the sale of which gave rise thereto, (c) guarantees, endorsements and
indemnifications on, or of, any of the foregoing, (d) all powers of attorney for
the execution of any evidence of indebtedness or security or other writing in
connection therewith, (e) all books, correspondence, credit files, records,
ledger cards, invoices, and other papers relating thereto, including without
limitation all similar information stored on a magnetic or digital medium or
other similar storage device and other papers and documents in the possession or
under the control of the Borrower or any computer bureau from time to time
acting for the Borrower or Individual Owners, (f) all evidences of the filing of
financing statements and other statements and the registration of other
instruments in connection therewith and amendments thereto, notices to other
creditors or secured parties, and certificates from filing or other registration
officers, (g) all credit information, reports and memoranda relating thereto,
and (h) all other writings related in any way to the foregoing.

(ddd) Reserve Account means any of the Tax and Insurance Reserve Account, the
Interest Reserve Account, and the Construction Reserve Account established
pursuant to Section 6(c).

(eee) Taxes mean all ad valorem, excise, documentary, transfer, filing,
recordation and other taxes, special and other assessments, water, sewer and
other rents, metropolitan district, sanitary district and other public charges
levied or assessed upon the Land, the Property, the Loan, the Instrument or the
other Loan Documents.

(fff) Tax and Insurance Reserve Account means that certain Reserve Account
described in Section 6(a) of this Agreement which account shall be in Lender’s
name, shall be controlled exclusively by Lender, and shall be used for payment
of Taxes and insurance premiums due from time to time with respect to the
Property pursuant to said Section 6(a).

(ggg) Trademarks means all United States or other registered or unregistered
trademarks together with the goodwill of the business connected with the use
thereof, and symbolized thereby, all licenses thereto, and all applications
therefor, and all reissues, divisions, continuations, renewals, extensions,
modifications, supplements thereto or to any part thereof, and the right to sue
for past, present and future infringements of the foregoing, and all rights
corresponding to the foregoing throughout the world.

(hhh) Total Casualty shall mean any Casualty for which the cost to replace or
repair would exceed fifty percent (50%) of the value of the Property.

(iii) UCC means the Uniform Commercial Code as adopted in the State of Colorado.

2. BORROWER’S REPRESENTATIONS, WARRANTIES AND COVENANTS. Borrower hereby
represents and warrants to and covenants with Lender that:

(a) Organization and Good Standing. Borrower is an entity duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and in good standing under the laws of the State of Colorado. There are no
proceedings or actions pending, threatened or contemplated for the liquidation,
termination or dissolution of Borrower.

(b) Authorization. The Note, this Agreement, the Instrument and the other Loan
Documents, and all other notes and loan documents evidencing all other
obligations of Borrower to Lender, if any, have been duly authorized, executed
and delivered by Borrower and constitute valid and binding obligations of
Borrower, enforceable against Borrower in accordance with their respective
terms. The execution and delivery of this Agreement and the other the Loan
Documents will not violate or contravene in any way the organizational

 

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documents of Borrower or any indenture, agreement or instrument to which
Borrower is a party or by which Borrower or its property may be bound, or be in
conflict with, result in a breach of or constitute a default under any such
indenture, agreement or other instrument, or result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the property or assets of Borrower, except as contemplated by the provisions
of this Agreement and such Loan Documents, and no action or approval with
respect thereto by any third person is required. No approval, consent, order or
authorization of any Governmental Authority and no designation, registration,
declaration or filing with any Governmental Authority is required in connection
with the execution and delivery of the Notes, this Agreement or the Loan
Documents.

(c) Litigation. There is no Legal Action, claim, litigation or condemnation
proceeding pending, or, to the knowledge of Borrower, threatened, against the
Property or Borrower, which would affect the Property or Borrower’s ability to
perform its obligations in connection with the Loan. No proceedings in
bankruptcy or insolvency have ever been instituted by or against Borrower or any
affiliate thereof, and no such proceeding is now pending or contemplated. There
is no Legal Action, litigation, legal or administrative proceeding,
investigation or other action of any nature commenced, pending, or, to the
knowledge of Borrower, threatened against or affecting Borrower, the Property or
any interest or right therein or any Guarantor which has not been disclosed in
detail in writing to Lender and which may involve the possibility of any
judgment or liability not fully covered by insurance, or materially or adversely
affect any of the assets of Borrower or Borrower’s right to carry on business as
now conducted, or affect the continued employment of any officer, director, or
employee of Borrower. No condemnation proceeding affecting the Property is
pending, or, to the knowledge of Borrower, threatened.

(d) Title; Encumbrances. Except with respect to the Permitted Encumbrances, if
any, Borrower is now in possession of the Property currently at the Land or
otherwise under Borrower’s or its agents control; Borrower’s possession of the
Property is peaceable and undisturbed; Borrower does not know any facts by
reason of which any claim to the Property, or any part thereof, might arise or
be set up adverse to Borrower; and the Property is free and clear of (i) any
lien for Taxes (except real property taxes not yet due and payable for the
calendar year in which this Agreement is being executed), and (ii) any
easements, rights-of-way, restrictions, encumbrances, liens or other exceptions
to title by mortgage, decree, judgment, agreement, instrument, or, to the
knowledge of Borrower, proceeding in any court. No part of the Property is all
or part of Borrower’s homestead.

(e) Taxes. Borrower shall promptly pay all Taxes on the Property, the
Collateral, the Loan, and the Loan Documents as they become due and payable
subject only to the Taxes being contested as permitted by the Instrument. The
Property constitutes a separate tax lot or parcel for property tax purposes.

(f) Leasehold Interests. As of the date of this Agreement, no Person has any
leasehold estate in, or any lease or other agreement granting the right to use
or occupy any portion of the Property except for the lessee(s) under the
Lease(s) identified in the title policy insuring Lender’s interest in the
Property, if any (“Leases”); no rental in excess of one month’s rent has been
prepaid under any of the Leases by the parties thereto in accordance with its
terms; the execution of the Instrument will not constitute an event of default
under any of the Leases; none of the tenants under any of the Leases has rights
of offset or counterclaim against the Borrower, as landlord, or otherwise; all
of the material obligations of the landlord pursuant to the Leases have been
performed; and all tenants are current in the payment of rent.

(g) No Lien Claims. All charges for labor, materials or other work of any kind
furnished in connection with the construction, improvement, renovation or
rehabilitation of the Property or any portion thereof that have been submitted
to Borrower have been paid in full, and no unreleased lien claim or affidavit
claiming a lien against the Property, or any portion thereof, for the supplying
of labor, materials or services for the construction of improvements on the
Property has been executed or recorded in the mechanic’s lien or other
appropriate records in the county in which the Property is located.

(h) Plans and Specifications. Borrower will provide Lender with an accurate and
complete set of the Plans and Specifications prior to the commencement of
construction of any Improvements which Plans and Specifications will be subject
to the review and approval of Borrower, Lender, and all relevant Governmental
Authorities. Borrower shall not make any material changes to the Plans or
Specifications that have been approved by Lender without obtaining the prior
written consent of Lender which may be withheld by Lender in its sole,

 

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reasonable discretion. The Plans and Specifications shall be construed so that
any Improvements or parts thereof exhibited in the Plans but not mentioned in
the Specifications, or vice versa, shall be deemed to be exhibited in the Plans
and mentioned in the Specifications.

(i) Surveys. Borrower has provided Lender with an accurate and complete boundary
survey of the Property prior to the execution of this Agreement. Promptly upon
the completion of the Improvements, Borrower shall furnish Lender with an “as
built” survey by a registered surveyor approved by Lender showing the location
of all improvements, water, gas, electric and sewer lines, easements, parking
areas, and other items affecting the ownership or use of the Property. Such
survey shall confirm that the Improvements have been constructed in accordance
with all Legal Requirements and the location of the Improvements does not
encroach upon, breach or violate any easement, building or set back line, or
similar restriction affecting the Property.

(j) Contracts for Services and Labor; Assignment for Security Purposes. Borrower
has provided the Lender or will provide the Lender prior to commencement of
construction of any Improvements with accurate and complete copies of all
contracts and agreements with the Engineer, General Contractor, subcontractors,
laborers, and major vendors and materialmen pertaining to the Property. Borrower
shall not enter into any such contracts or agreements involving a Borrower
obligation of more than $25,000.00, nor thereafter amend or modify any such
contract or agreement so as to increase Borrower’s obligation thereunder by more
than $25,000.00, nor assign nor cancel any such contract or agreement without
the prior written consent of Lender which may be withheld by Lender in its
reasonable discretion. To secure the payment and performance of Borrower’s
obligations under this Agreement and the Loan Documents, Borrower hereby assigns
to Lender all of its right, title and interest in the contracts and agreements
with the Surveyor, Engineer, General Contractor, subcontractors, laborers,
vendors and materialmen pertaining to the Property, whether now owned or
hereafter acquired by Borrower, and shall obtain and provide Lender, as required
by Lender in its sole discretion, with the written consent of such Persons to
the assignment of those documents. Borrower shall provide Lender with copies of
all notices and amendments, cancellations, extensions, modifications,
replacements and substitutions pertaining to such contracts and agreements
within twenty-four (24) hours after Borrower’s receipt thereof.

(k) Permits, Licenses and Approvals; Availability of Property. Prior to the
commencement of construction of the Improvements, Borrower shall have obtained
all necessary permits and approvals from the applicable Governmental Authorities
for completion of the portion of the Improvements being undertaken at that time,
including without limitation those licenses, permits, and approvals described in
Schedule 2(k). Once commenced, Borrower shall diligently complete all
Improvements, shall file all necessary plats, shall execute and (if necessary)
record all required public works agreements or other similar documents, and
shall comply with all other Legal Requirements. Once obtained, Borrower shall
maintain in full force and effect all licenses, privileges, and certificates and
be entitled to use all streets, easements, utilities and related services and
facilities which are necessary for the acquisition, construction, use,
occupancy, sale and enjoyment of the Property and Collateral.

(l) Use of Loan Proceeds, Construction of Improvements, Protection of Collateral
and Property. Each Loan advance of principal to Borrower shall be made subject
to and in accordance with the terms of this Agreement. Borrower shall use all
Loan proceeds solely for the acquisition of the Land (if applicable), the
acquisition and construction of the Improvements, and for such other purposes as
set forth in this Agreement or which may be approved by Lender in writing from
time to time. The proceeds of the Loan will not be used for the purchase of
margin stock, or for personal, family, household or agricultural use.

Borrower shall cause the Improvements to be constructed strictly in accordance
with the Plans and Specifications and other relevant materials provided to
Lender and in a thorough and workmanlike manner. Borrower shall promptly pay or
cause to be paid, when due, all of the labor expenses, costs for equipment and
materials, permit and license fee, and other costs associated with the
acquisition of the Land (if applicable) and the acquisition and construction of
the Improvements.

Borrower shall: (a) bear the risk of and shall protect the Property and
Collateral (including, but not limited to, all equipment and goods to be used in
connection with the construction of the Improvements) from all loss, theft,
vandalism, removal, destruction and damage of any kind; (b) maintain the
Property and Collateral in good repair and working condition; and (c) not commit
or permit any act which would reduce the value of the Property or Collateral.

 

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(m) Commencement of Work. Except as otherwise disclosed to and approved by
Lender in writing, no work of any kind (including the removal of existing
buildings and improvements, test borings, grading, or site preparation work) has
been or shall be commenced or performed upon the Property and no materials or
equipment have been or shall be delivered to or stored upon the Property within
the preceding ninety (90) days from the date of this Agreement, and no contract
or agreement for the performance of work on the Property or any part thereof has
been or shall be executed or otherwise agreed to prior to the execution of this
Agreement, the recording of the Instrument, and the filing and recording of any
other Loan Documents. No Notice of Commencement or claim of lien affecting the
Property or the Improvements has been filed in the Public Records of Grand
County, Colorado and no such Notice of Commencement or claim of lien will be
filed prior to the recording of the Instrument.

(n) Construction of Improvements; Interruptions in the Construction Process.
Borrower shall: (a) commence construction of the Improvements as soon as the
weather permits but in any event on or before May 15, 2006; (b) diligently
pursue the acquisition and construction of the Improvements until the completion
thereof; and (c) cause such Improvements to be fully completed on or before the
Completion Date in a good and workmanlike manner, in accordance with the Plans
and Specifications, other materials provided to Lender, and all Legal
Requirements, within all applicable setback lines, and free and clear of all
Encumbrances except for the liens and security interests created by the Loan
Documents and the Permitted Encumbrances. Except for a winter season
interruption in the work while the existence of frozen ground or snow prevents
construction, if the construction of the Improvements shall be interrupted for a
continuous period of seven (7) days at any time and such interruption shall not
be due to acts of God, strikes, war or other causes beyond the control of
Borrower, and if Lender in good faith determines that the construction of the
Improvements has been discontinued or is not being carried on with reasonable
dispatch thereby (regardless of whether or not such activity constitutes a
default under this Agreement), Lender may, but shall not be obligated to,
purchase such materials and employ such workers to protect or complete the
Improvements as Lender may deem necessary in its sole discretion.

(o) Absence of Moratoriums, Stoppage of Construction by Lender. As of the date
of the initial funding under, and as of the date of this Agreement, no
moratorium has been imposed nor, to the best knowledge of Borrower, is
threatened by any Governmental Authority which might interfere with the
acquisition, construction, use, occupation and enjoyment of the Property
including, without limitation, moratoriums on tying into or using utilities or
on the issuance of any licenses or permits. If Lender determines in good faith
that any material deviations have occurred from the Plans and Specifications,
any defective or unworkmanlike labor, equipment or materials have been acquired
or used in the construction of the Improvements, or the Improvements do not
satisfy any of the other terms and conditions set forth in this Agreement and
the other Loan Documents, Lender shall be entitled to immediately order the
construction of the Improvements to cease until such problems have been
corrected to its satisfaction and, if any corrective action required by Lender
is not commenced by Borrower within seven (7) days after Lender’s request and
completed promptly thereafter, Lender shall have the right (but not the
obligation) to declare Borrower to be in default upon its obligations under this
Agreement and the other Loan Documents and, at Borrower’s expense, take any
action deemed necessary by Lender to correct the foregoing problems or complete
the acquisition and construction of the Improvements.

(p) Inspection of Property, Collateral, and Related Work, Materials and
Documents. Borrower shall permit Lender, Lender’s Inspector and any relevant
Government Authorities to inspect the Property, Collateral, and any related
work, materials, information, or documents at any time. Lender shall not be
required to advance any monies for the work performed or equipment and materials
to be acquired or used in the acquisition of the Land, construction, or
operation of the Improvements until they shall be: (a) provided for the benefit
of, delivered to, and incorporated into the Property; and (b) approved by Lender
or Lender’s Inspector as strictly complying with the Plans and Specifications
and other materials provided to Lender.

(q) Funds for Completion. Upon Lender’s request from time to time, Borrower
shall provide Lender with satisfactory evidence that Borrower possesses
sufficient funds in excess of the Loan proceeds to complete the Improvements.

 

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(r) Solvency of Borrower. Borrower is solvent pursuant to the laws of the United
States, as reflected by the entries in Borrower’s books and records and as
reflected by the actual facts.

(s) Security Interest. To secure the payment and performance of Borrower’s
obligations under this Agreement and the other Loan Documents, Borrower hereby
grants to Lender a security interest in all of the following monies and other
property, whether now owned or hereafter acquired by Borrower: (a) all loan
proceeds, retainages and other property deposited with or otherwise in the
possession of Lender; (b) all permits and licenses from any Governmental
Authority pertaining to the Property; and (c) all insurance and other reserves,
deferred payments, deposits, refunds, costs savings, claims and payments of any
kind pertaining to the Property. If Borrower defaults upon the payment or
performance of any of its obligations under this Agreement or the other Loan
Documents, Lender may, at its option, use any of the foregoing monies and
property for the acquisition, construction, or protection of the Property and
Collateral or apply such available monies and property in accordance with the
terms of the Note. Nothing contained herein shall prevent Lender from exercising
any of its other rights and remedies with respect to such monies and property
that Lender may possess under the Loan Documents or applicable law.

(t) Use of Property. Borrower shall not use, operate, occupy or maintain the
Property or Collateral or permit the use, operation, occupancy or maintenance of
the Property or Collateral in violation of: (i) any Legal Requirement;
(ii) insurance policy pertaining to the Property or Collateral; (iii) or any
term or condition contained in the Loan Documents. In addition, such use,
operation, occupancy or maintenance of the Property and Collateral shall not
constitute a nuisance of any kind.

(u) Insurance. From the date hereof until the completion of construction of the
Improvements at the Property, Borrower shall maintain:

(i) Builder’s risk insurance with extended coverage insurance against loss or
damage by fire, lightning, windstorm, hail, explosion, riot, riot attending a
strike, civil commotion, aircraft, vehicles, smoke, vandalism and malicious
mischief and other risks from time to time included under “Extended Coverage”
policies in an amount equal to the complete cost of the Improvements and other
improvements, if any, on the Land; and

(ii) Comprehensive general public liability insurance, employer and workers’
compensation insurance of not less than $1,000,000 per occurrence against claims
and liability for bodily injury or property damage to persons or property, with
umbrella liability coverage of not less than $5,000,000, naming Lender as an
additional insured.

Borrower shall not act as a co-insurer under any of the foregoing insurance
policies.

(iii) Performance and Other Bonds. Borrower shall procure and deliver to Lender
a performance bond and a labor and materials payment bond in such form and
substance as are satisfactory to Lender in its sole reasonable discretion in
amounts adequate to ensure the timely completion of construction of the
Improvements. Without limiting the foregoing, such bonds shall be issued by a
corporate surety approved by the United States Treasury Department, utilize an
American Institute of Architect’s form or comparable coverage, name Borrower and
Lender as co-obligees, and be in an amount equal to or greater than the complete
cost of the Improvements.

Upon completion of construction of the Improvements at the Property, Borrower
shall keep all buildings and other insurable Improvements now existing or
hereafter erected on the Property insured by Approved Carriers (as hereinafter
defined) against loss by fire, hazards included within an all-risk “extended
coverage” endorsement and such other hazards, casualties, liabilities and
contingencies, including rent loss and/or business interruption coverage, as
applicable, as Lender shall require and in such amounts and for such periods
provided in this paragraph 2(u). All premiums on insurance policies shall be
paid, at Lender’s option, in the manner provided under the Instrument, or by
Borrower making payment, when due, directly to the carrier.

 

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Borrower shall purchase a blanket or other policies of insurance with respect to
all buildings and other insurable Property with such Approved Carriers, in such
amounts and covering such risks including, but not limited to, (i) loss or
damage by fire, lightning, hail, windstorm, explosion, earthquake (if in a high
risk area), and such other hazards, casualties and contingencies insured in an
“all-risk” policy, all on an occurrence basis (including at least twelve
(12) months rental or business interruption insurance and broad form boiler and
machinery insurance, if applicable); (ii) loss or damage by flood, if the
Property is in a 100-year flood hazard area as defined by the Federal Emergency
Management Agency under the National Flood Insurance Program, in an amount equal
to the greater of the replacement cost of the Property or the maximum amount
available through the National Flood Insurance Program, but in no event less
than the maximum amount available under the Flood Disaster Protection Act of
1973, and regulations issued pursuant thereof, as amended from time to time, or
such lesser standard as Lender may permit, in form complying with the “insurance
purchase requirement” of that Act; (iii) commercial general liability
(including, liquor liability if Borrower serves alcoholic beverages on the
Property) with limits equal to or greater than $1,000,000.00 per occurrence,
including product and liquor liability equal to or greater than $2,000,000.00
aggregate, and employer’s liability and workers’ compensation in amounts which
are customary practice; (iv) an umbrella policy in the amount of $5,000,000.00
per occurrence in excess of the above comprehensive general liability, product
and liquor liability, if applicable, and employer’s liability requirements; and
(v) such other insurance as Lender may reasonably require from time to time or
which is required by the Loan Documents; provided, that each policy shall
provide by way of endorsement, rider or otherwise that no such insurance policy
shall be canceled or non-renewed, unless such insurer shall have first given
Lender thirty (30) days prior written notice thereof and ten (10) days notice in
the case of premium nonpayment, such property policy shall be on a replacement
cost basis (without coinsurance) and in amount not less than one hundred percent
(100%) of the insurable value (based upon replacement cost) of the Property and
the deductible clause, if any, property policy may not exceed the lesser of
(x) one percent (1%) of the face amount of the policy, (y) $25,000.00, and
(z) five percent (5%) of the gross annual income of or revenue from the
applicable Property. Borrower shall cause all property insurance carried in
accordance with this paragraph 2(u) to be payable to Lender as a mortgagee and
not as a coinsured, and, in the case of all policies of insurance carried by
each lessee for the benefit of Borrower, if any, to cause all such policies to
be payable to Lender as Lender’s interest may appear. The Borrower shall also
cause the Lender to be named as an Additional Insured with respect to the
commercial general liability and umbrella policies.

All insurance policies and renewals thereof shall be in a form reasonably
acceptable to Lender as provided in this paragraph 2(u) and all property
policies shall include a standard mortgagee clause in favor of and in a form
acceptable to Lender. After a Default, Lender shall have the right to hold the
policies, and Borrower shall promptly furnish to Lender all renewal
certificates, if Lender requests all receipts of paid premiums. At least ten
(10) days prior to the expiration date of a policy, Borrower shall deliver to
Lender a renewal policy insurance certificate(s) in form and substance
reasonably satisfactory to Lender, together with an outline of the material
terms of such renewal policy.

In the event of loss, Borrower shall give prompt written notice to the insurance
carrier and to Lender. In the event of any Casualty (as hereinafter defined)
after a Default hereunder or if Borrower is not diligently pursuing resolution
of claims with respect to the Property and such non-action could result in a
materially adverse effect on the value of the Property, Borrower hereby
irrevocably appoints, authorizes and empowers Lender (which appointment is
coupled with an interest), and/or its assigns with respect to the Loan, as
attorney-in-fact for Borrower to make proof of loss, to adjust and compromise
any claim under insurance policies, to appear in and prosecute any action
arising from such insurance policies, to collect and receive insurance proceeds,
and to deduct therefrom Lender’s reasonable expenses incurred in the collection
of such proceeds; provided however, that nothing contained in this paragraph 6
shall require Lender to incur any expense or take any action hereunder.
Insurance proceeds shall be payable to Borrower if Borrower is not in Default
hereunder (and no event exists which, with the passing of time or giving of
notice, would constitute a Default hereunder) and the cost to replace or repair
the Property is $25,000.00 or less. Borrower further authorizes Lender, at
Lender’s option, to hold the proceeds if the cost of such replacement or repair
exceeds $25,000.00; provided they are used to reimburse Borrower or pay for the
cost of reconstruction or repair. Borrower shall apply the balance of such
proceeds remaining after restoration or repair, for reinvestment in the
operation of the Borrower.

In the event Borrower is in Default or in the event any Major Casualty or Total
Casualty occurs, then at Lender’s option, all insurance proceeds (except rent
loss) shall be paid to Lender and applied to the payment of sums

 

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secured by the Instrument, whether or not then due, in the order of application
set forth in this Agreement and the other Loan Documents, in which event the
Lender shall have the right to accelerate all amounts payable hereunder, and
Borrower shall have the right to prepay any remaining balance due, without any
prepayment premium. Borrower covenants that in no event shall Borrower use any
insurance proceeds from loss or damage to the Property or Condemnation Proceeds
to rebuild any buildings or improvements on any real property other than the
Property (except with respect to excess proceeds used for reinvestment as
described above). Notwithstanding the foregoing, except in the event of a Total
Casualty or a Major Casualty, so long as Borrower is not in Default hereunder
(and no event exists which, with the passing of time or giving of notice, would
constitute a Default hereunder), and Lender is satisfied that Lender (and/or
Borrower) is holding sufficient funds for such restoration and repair, then the
Lender shall not unreasonably withhold its approval for the application of
insurance proceeds for the cost of restoration and repair of the Property as
provided below.

If the insurance proceeds from any Casualty are held by Lender or by Borrower to
pay mechanics, materialmen and suppliers of materials, including Borrower, for
the cost of restoration and repair of the Property, Borrower shall restore the
Property to the equivalent of the type and class of construction existing before
such casualty, with new materials as required by the current building codes or
such other condition as Lender may approve in writing. If the insurance proceeds
from a Casualty are held by Lender, Lender shall disburse (no more than once a
month) such proceeds to, or on behalf of, Borrower for restoration and repair of
the Property, and Lender may, at Lender’s option, condition disbursement of said
proceeds on Lender’s reasonable approval of such plans and specifications of an
architect satisfactory to Lender, contractor’s cost estimates, architect’s
certificates, waivers of liens, sworn statements of mechanics and materialmen
and such other evidence of costs, percentage completion of construction,
application of payments, and satisfaction of liens as Lender may reasonably
require; provided, however, in the event of a Default, any or all such proceeds
may be applied, at Lender’s option, in the manner prescribed in this Agreement
and the other Loan Documents. If the insurance proceeds are applied to the
payment of the sums secured by the Instrument, any such application of proceeds
to principal shall not extend or postpone the due dates of the required monthly
payments or change the amounts of such payments unless Lender and Borrower
otherwise agree in writing. If the Property is sold pursuant to paragraph 6(d)
hereof or if Lender acquires title to the Property, Lender shall have all of the
right, title and interest of Borrower in and to the proceeds resulting from any
damage to the Property prior to such sale or acquisition.

(v) Financial and Other Information Provided to Lender. Borrower shall provide
and cause Guarantors to provide Lender with any financial statements and other
information requested by Lender in accordance with the provisions of this
Agreement and the other Loan Documents. All representations, warranties, and
other information provided or to be provided to Lender by or on behalf of
Borrower, any Guarantor, or any other Person in connection with the Loan shall
be accurate and complete in all respects as of the dates thereof. There have
been no material adverse changes, financial or otherwise, in the condition of
Borrower from that disclosed to Lender in connection with the issuance by Lender
of the Commitment, or in any supporting data submitted in connection with the
Loan, and all of the information contained therein was true and correct in all
material respects when submitted and is now substantially materially true and
correct on the date hereof.

(w) Books and Records. Borrower shall keep and maintain at all times at
Borrower’s address stated below, or such other place as Lender may approve in
writing, complete and accurate books of accounts and records adequate to reflect
correctly Borrower’s financial condition and the results of the operation of the
Property and copies of all written contracts, leases and other instruments which
affect the Property. Such books, records, contracts, leases and other
instruments shall be in accordance with GAAP consistently applied, and shall be
subject to examination and inspection by Lender at all times during normal
business hours after reasonable notice of not less than twenty-four (24) hours
and Lender shall have the right to make such copies or abstracts thereof as
Lender may desire. Borrower shall furnish to Lender, within one hundred twenty
(120) days after the end of each fiscal year of Borrower: (i) its audited
current signed financial statements (including an annual balance sheet,
profit/loss statement, statement of cash flow and footnotes) of Borrower;
(ii) an income and expense statement of the operation of the Property (including
the total rents and other income received from any tenant, total gross receipts
from operations and total expenses), each in reasonable detail and certified by
Borrower and, if Lender shall require, by an independent certified public
accountant; (iii) Borrower shall furnish to Lender current signed sales report,
with copies of all sales contracts, certified to be correct by Borrower; and
(iv) an annual statement disclosing all contingent liabilities. Borrower shall
furnish to Lender, (x) within forty-five (45) days after the end of each fiscal

 

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quarter of Borrower, an unaudited financial statement of Borrower, a statement
of income and expenses of the Property and a sales report, with copies of all
sales contracts; and (y) within forty-five (45) days after the end of each
fiscal year a year-end statement of income and expenses of the Property, each in
reasonable detail and certified by Borrower to be true, correct and accurate to
the best of its knowledge. Borrower shall furnish to Lender, certified copies of
all tax returns of the Borrower within forty-five (45) days of filing. In
addition, within thirty (30) days after payment, Borrower shall furnish to
Lender copies of paid tax and assessments for the Property. In addition,
Borrower shall also furnish such other interim statements of Borrower as Lender
may reasonably require from time to time. Borrower shall advise Lender of its
fiscal year-end date and shall not change such year-end date without Lender’s
prior written consent.

(x) Estoppel Certificates. Borrower shall within ten (10) days of a written
request from Lender furnish Lender with a written statement, duly acknowledged,
(a) setting forth to Borrower’s knowledge (i) the then outstanding principal
balance of the Note and all other sums, if any, then due and payable by Borrower
to Lender under the provisions of the Note or this Agreement or Loan Documents
relating to the Property and any right of set-off, counterclaim or other defense
which exists against such sums and the obligations under the Loan Documents;
(ii) that no Default or event which, with the passage of time or the giving of
notice, would constitute a Default exists; and (iii) other matters reasonably
requested by Lender; and (b) attaching true, correct and complete copies of the
Note, and the Instrument and any other Loan Documents and all modifications,
amendments and substitutions thereof.

(y) Condemnation. Borrower shall promptly notify Lender of any action or
proceeding known to Borrower relating to any condemnation or other taking,
whether direct or indirect, of the Property, or part thereof, and Borrower shall
appear in and prosecute any such action or proceeding unless otherwise directed
by Lender in writing. During the continuance of a Default or, if Lender has made
the determination, in its reasonable discretion, that Borrower is not diligently
and effectively prosecuting such action or proceeding and, such lack of
prosecution could result in a materially adverse effect on the value of the
Property, then immediately upon written notice to Borrower of Lender’s
determination, Borrower authorizes Lender, at Lender’s option, as
attorney-in-fact for Borrower, to commence, appear in and prosecute, in Lender’s
or Borrower’s name, any action or proceeding relating to any condemnation or
other taking of the Property, whether direct or indirect, and to settle or
compromise any claim in connection with such condemnation or other taking.
Borrower hereby irrevocably appoints Lender as its attorney-in-fact (coupled
with an interest) for the purposes described in, and as limited by, the
immediately preceding sentence. The proceeds of any award, payment or claim for
damages, direct or consequential, in connection with any Major Taking, whether
direct or indirect, of the Property, or part thereof, or for conveyances in lieu
of condemnation, after payment of reasonable costs and expenses, including
reasonable attorneys’ fees (“Condemnation Proceeds”), are hereby assigned to and
shall be paid to Lender subject to the rights of landlord under the Lease if the
Instrument is on a leasehold, and subject to the provisions of the following
subparagraphs

In the event such condemnation or other taking involves Condemnation Proceeds of
$25,000.00 or less, and Borrower is not in Default under the Loan Documents (and
no event exists which, with the passing of time or giving of notice, would
constitute a Default), then Borrower shall retain the Condemnation Proceeds
which shall be applied to the prompt repair and restoration of the remaining
portion of the Property for use of the Property as contemplated by this
Agreement, and the excess proceeds, if any, shall be used for reinvestment in
the operations of the Borrower. In the event such condemnation or other taking
involves Condemnation Proceeds in excess of $25,000.00 and, Borrower is not in
Default under the Loan Documents (and no event exists with the passage of time
or the giving of notice would constitute a Default) then upon written request of
Lender, the Condemnation Proceeds shall be assigned and paid to Lender, and
Borrower shall repair and restore the remaining portion of the Property and
Lender shall distribute the Condemnation Proceeds in the same manner as Lender
distributes insurance proceeds under this Agreement and the other Loan
Documents. In the event such condemnation or other taking involves a Major
Taking, or to the extent that Condemnation Proceeds are not adequate for
feasible repair and restoration of the Property, or Lender otherwise reasonably
determines that the condemnation or other taking would (after repair and
restoration) render the Property inadequate for Borrower to meet its obligations
under this Agreement, or if Borrower is in Default under the Loan Documents (or
an event exists which, with the passing of time or giving of notice, would
constitute a Default), then the Condemnation Proceeds shall, at Lender’s sole
option, be assigned and paid to Lender and applied to the payment of sums
secured by the Instrument, whether or not due, in accordance with the Note.
After application of the Condemnation Proceeds for the repair and restoration of
the Property as set forth herein, any excess proceeds shall, at Lender’s sole
option, be applied to the principal balance of the Note without penalty or
premium, or paid directly to Borrower for reinvestment in the operation of the
Borrower.

 

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The foregoing provisions providing for the application of Condemnation Proceeds
to the sums secured by the Instrument are agreed to be necessary to prevent an
impairment of Lender’s security resulting from such taking. In the event,
however, that any provision hereof providing for the application of any
Condemnation Proceeds to the indebtedness secured by the Instrument is held to
be unenforceable, in whole or in part, then all Condemnation Proceeds not
payable to Lender for immediate application to the sums secured by the
Instrument as the result of such invalidity, shall be applied by Borrower to the
restoration of the Property for use of the Property as contemplated by this
Agreement with the balance thereof, if any, first being deposited with Lender
for additional amounts due under paragraph 2 of the Instrument, if any, which
balance shall be held and applied as provided for therein and second, being
retained by (or remitted to) Borrower for reinvestment in the operation of the
Borrower.

(z) No Additional Indebtedness. Borrower shall not incur any other indebtedness,
whether secured, unsecured or preferred equity except: (1) trade payables (not
more than sixty (60) days outstanding) incurred in the ordinary course of
business, (2) construction financing for the clubhouse, golf course, lodge,
commercial area, and any other distinct non-residential improvement planned by
Borrower to be constructed on the Property and located as shown on the plan
attached hereto as Schedule 2(z), which construction financing will be subject
to Lender’s approval, and (3) $20,000,000.00 of existing indebtedness to Aspen
Shorefox, LLC, which indebtedness has been fully subordinated to the Loan as to
payment and security on terms and conditions acceptable to Lender, pursuant to a
subordination agreement entered into by Lender and Aspen Shorefox, LLC prior to
the date hereof. Lender shall not unreasonably withhold its approval for the
construction financing referenced in this section provided that the conditions
described in the following section 2(aa)(ii) are satisfied and the Borrower
provides evidence to the Lender in a form satisfactory to Lender in its sole
discretion that the proceeds from such construction financing will be used
solely for the development and construction of the Improvements to the Property.
Notwithstanding the foregoing, in no event shall additional indebtedness secured
by the Property be permitted if the aggregate of the added indebtedness with all
other indebtedness secured by the Property (including the Maximum Loan Amount)
exceed 85% of the Lender Approved Appraisal.

(aa) Partial Releases; Subordination For Construction Financing. Without the
prior written consent of Lender and except to the extent otherwise set forth in
this section, Borrower shall not sell, convey, mortgage, grant, bargain,
encumber, pledge, assign, grant options with respect to, or otherwise transfer
or dispose of (directly or indirectly, voluntarily or involuntarily, by
operation of law or otherwise, and whether or not for consideration or of
record) the Property or any part thereof or any legal or beneficial interests
therein, other than as follows:

(i) Provided the Borrower is not in default under the Loan Documents, Borrower
may sell portions of the Property from time to time in an arms length sale for
fair market value to an unrelated third party and Lender will deliver an
executed partial release of the Lender’s Deed of Trust with respect to the
portion of the Property to be conveyed (“Release Property”), provided that
Borrower has delivered to Lender not less than 15 days prior to the sale the
following: (A) a written request for release of the Release Property, (B) a
survey prepared by a registered land surveyor with a legal description and
acreage of the Release Property, (C) calculation of the “Release Price” to be
paid by Borrower to Lender at or prior to the delivery by Lender of the partial
release, (D) an executed copy of the contract for purchase and sale and all
amendments thereto, together with copies of all closing documents prior to
closing, (E) an appraisal at Borrower’s expense evidencing that the stated
principal amount of the Loan (1) does not exceed 55% of the appraised value of
the remaining Real Property (as increased by the value of any improvements
incorporated into the remaining Real Property), and (2) plus any other
indebtedness secured by the remaining Real Property does not exceed 85% of the
appraised value of the remaining Real Property (as increased by the value of any
improvements incorporated into the remaining Real Property, (F) payment of
Lender’s costs and expenses, including legal fees, incurred by Lender in
connection with any such Borrower, and (G) such additional information and
documentation as Lender may reasonably request after receiving Borrower’s
request for release which information and documentation may include without
limitation satisfactory evidence of fair market value, easements and other
rights with respect to the Release Property as Lender may reasonably deem
necessary or advisable for the development, use, sale, or operation of the
Property remaining subject to the Deed of Trust. The “Release Price” payable by

 

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Borrower to Lender as a condition for such sale and delivery of a partial
release shall be 75% of the Net Proceeds, and shall be paid prior to or
simultaneously with the Lender’s delivery of the release directly from the
closing agent at the closing of the sale if not sooner paid by Borrower.

(ii) Provided the Borrower in not in default under any of the Loan Documents,
Borrower may encumber a portion or portions of the Property with a Deed of Trust
to secure construction financing (the “Construction Deed of Trust”) for a
clubhouse, golf course, lodge, commercial area, and other non-residential areas
planned by Borrower to be constructed on the Property, subject to the following:
(A) a written request for Lender’s consent to further encumbrance of the portion
of the Property to be encumbered (the “Encumbered Property”) is delivered to
Lender not less than 15 days prior to the proposed date of closing the
financing, together with a survey prepared by a registered land surveyor with a
legal description and acreage of the Encumbered Property and such other
information and documentation as required by this section, (B) the indebtedness
has been approved by Lender pursuant to section 2(z) above, (C) the Encumbered
Property is limited to that portion of the Property which is to be improved with
the construction financing and such additional area as may be reasonably
necessary for the operation of the improvements, (D) the closing of the
construction loan for the development of such golf course, club house, lodge,
commercial area and/or other non residential areas shall be prior to or
simultaneously with the delivery of the Lender’s consent and subordination, and
(E) ) the Lender and the construction lender have executed an inter-creditor
agreement acceptable to the Lender providing the Beneficiary with notice and
opportunity to cure any default on the construction loan, and (F) an appraisal
at Borrower’s expense evidencing that the stated principal amount of the Loan
(I) does not exceed 55% of the appraised value of the remaining Real Property
(as increased by the value of any improvements incorporated into the remaining
Real Property) and (II) plus any other indebtedness secured by the remaining
Real Property does not exceed 85% of the appraised value of the remaining Real
Property (as increased by the value of any improvements incorporated into the
remaining Real Property), (E) payment of Lender’s costs and expenses, including
legal fees, incurred by Lender in connection with any such Borrower, and
(F) such additional information and documentation as Lender may reasonably
request after receiving Borrower’s request for release, which information and
documentation may include without limitation satisfactory evidence of fair
market value, and easements and other rights with respect to the Encumbered
Property as Lender may reasonably deem necessary or advisable for the
development, use, sale, or operation of the Property remaining subject to the
Deed of Trust. Provided that the conditions of this section are satisfied to
Lender’s satisfaction, Lender agrees that it will consent to the Construction
Deed of Trust and subordinate the lien of Lender’s Deed of Trust to the
Construction Deed of Trust pursuant to a Subordination Agreement in form and
substance reasonably acceptable to Lender.

(bb) Negative Pledge. No membership interests in Borrower or its members or
managers shall be pledged or encumbered.

(cc) Satisfaction of Conditions Precedent. All of the conditions and
requirements imposed upon Borrower in connection with the Loan have been
complied with and satisfied prior to the execution of this Agreement.

(dd) Single Purpose Entity. Until the Loan is paid in full Borrower represents,
covenants and agrees that Borrower is, shall be, and shall continue to be a
“Single Purpose Entity.” A “Single Purpose Entity” means that Borrower shall
comply with all of those provisions set forth in its Amended and Restated
Limited Liability Company Agreement that describe what is required from Borrower
to qualify as a “single purpose entity.”

3. CONDITIONS PRECEDENT FOR ADVANCES.

(a) Initial Advance. Borrower has requested and Lender has approved the
disbursement to or for the benefit of Borrower at closing of a portion of the
loan proceeds in payment or reimbursement of certain closing costs, and other
costs and expenses incurred by Borrower (the “Initial Advance”), all as detailed
in the loan closing statement executed by Borrower and Lender contemporaneously
herewith. Borrower represents that the Initial Advance is in reimbursement of
costs and expenses incurred by Borrower for closing costs, or for hard and soft
costs incurred by Borrower in connection with the development of the Property
which have not been and shall not be reimbursed to Borrower by Aspen Shorefox,
LLC or any other lender.

 

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(b) Advances from Construction Reserve Account. Lender has agreed to advance a
portion of the Loan proceeds into the Construction Reserve Account. These monies
shall belong to Borrower, but under control of Lender and shall accrue interest
from and after the date of deposit into the Construction Disbursement Account
with Borrower’s tax identification number noted on the account, all as described
in Section 6(c) of this Loan Agreement. Borrower may from time to time submit to
Lender a draw request for Loan proceeds to be released to Borrower from the
Construction Reserve Account. Prior to the first advance of Loan proceeds from
the Construction Reserve Account, the following conditions precedent shall be
satisfied:

(i) Compliance With Agreement. Borrower and Guarantor shall have complied with
all of the terms and conditions set forth in this Agreement and not be in
default thereunder.

(ii) Loan Documents. Borrower shall have provided to Lender all of the Loan
Documents dated, completed, executed and acknowledged by all of the appropriate
parties and Borrower and all of the other parties (other than Lender) shall have
complied with all of the terms and conditions set forth in the Loan Documents,
shall not be in Default thereunder, and would not be a Default thereunder but
for the passage of time or the giving of notices or both.

(iii) Equity Requirements. Borrower shall have delivered to Lender evidence
satisfactory to Lender in its reasonable discretion that all amounts in excess
of the amount of Loan proceeds deposited into the Construction Reserve Account
which are necessary to complete construction of the Improvements have been
expended by Borrower for such purposes, or have been deposited by Borrower into
the Construction Reserve Account.

(iv) Application for Advance. Borrower shall have provided Lender with a request
for the initial advance and related documentation in accordance with the terms
and conditions set forth in this Agreement.

(v) Lien Waivers. Borrower shall have provided Lender with any lien waivers
relating to the Property as reasonably required by Lender.

(vi) Notices of Construction and Disbursement. Borrower shall promptly provide
Lender, after Lender’s written request, with written evidence that all required
notices pertaining to the construction of the Improvements or any disbursements
in connection therewith have been recorded (which in any event shall be after
recordation of the Instrument) with the appropriate Governmental Authorities in
a proper and timely manner and posted as may be required by applicable law.

(vii) Plans and Specifications. Borrower shall have provided Lender with a copy
of the Plans and Specifications together with evidence of the approval of such
Plans and Specifications by the Engineer and all applicable Governmental
Authorities. Without limiting the foregoing, the Plans and Specifications shall
be certified by the Engineer to be in compliance with all applicable codes.

(viii) Surveys. Borrower shall have provided Lender with any boundary or other
surveys for the Property required by this Agreement or the other Loan Documents.

(ix) Project Budget. Borrower shall have provided Lender with a Construction
Budget, which shall include a breakdown of the costs and expenses required to
construct the Improvements in such form and detail as may be required by Lender
in its sole discretion. A copy of the initial estimated Construction Budget is
attached hereto as Schedule 1(m), which Budget will be modified so as to
incorporate budget details which match the bids and contracts entered into by
Borrower for construction of the detailed description of the phase of
Improvements to be constructed with such funds pursuant to Schedule 1(bb), all
of which modified budgets and Improvements details are subject to Lender’s prior
approval as a condition to the first advance for any such phase of the
Improvements.

 

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(x) Certificates from the Engineer and General Contractor. Borrower shall cause
the Engineer and the General Contractor to provide documentation adequately
demonstrating that the detailed line-item construction budget is appropriate for
the portion of the Improvements to be constructed from Loan proceeds deposited
into the Construction Reserve Account, including copies of contracts supporting
such budgeted amounts. The Engineer shall provide an Opinion of Probable Cost of
Construction for the planned Improvements. The General Contractor shall provide
a preliminary construction schedule to demonstrate the anticipated construction
timeframes. The Engineer and General Contractor shall submit a letter stating
that they are satisfied that the Improvements as described in the approved Plans
and Specifications can be acquired and constructed in accordance with the
Opinion of Probable costs and on or before the Completion Date in the
construction schedule. The description of the Improvements, the Opinion of
Probable Cost, the contracts supporting the budget, the line item budget and the
construction timeframes, and the Engineer and General Contractor certificates
related thereto are all subject to the prior approval of Lender

(xi) Acknowledgments by Borrower, the Guarantor, Engineer, General Contractor
and Other Persons. Borrower shall have provided Lender with such additional
acknowledgments from Borrower, the Guarantor, Engineer, General Contractor,
subcontractors, laborers, vendors, materialmen and other Persons upon written
request of Lender as it may reasonably require.

(xii) Permits and Licenses. Borrower shall have provided Lender with all of the
governmental permits, licenses and approvals necessary for the satisfaction of
any Legal Requirement or the terms and conditions set forth in this Agreement
and the other Loan Documents, with respect to the portion of the Improvements to
be constructed from Loan proceeds deposited into the Construction Reserve
Account.

(xiii) Compliance with Zoning and Other Legal Requirements. Borrower shall have
provided Lender with written evidence of Borrower’s compliance with all zoning,
building, sanitary, and other Legal Requirements and the availability of
utilities for the Improvements. Such written evidence shall be in a form
acceptable to Lender in its sole reasonable discretion.

(xiv) Assignment of Borrower’s Interest in Permits, Licenses and Agreements.
Borrower shall have provided Lender with written assignments of all of
Borrower’s right, title and interest in all of the permits, licenses, and
agreements (including, but not limited to, those between Borrower and the
Engineer, General Contractor, and major subcontractors, laborers, vendors and
materialmen) pertaining to the Property and written consents to such assignments
from all relevant Persons. Such assignments and consents shall be in a form and
from such Persons as required by Lender in its sole reasonable discretion.

(xv) Title Insurance. Borrower shall have provided Lender with an ALTA
mortgagee’s title insurance policy (or marked up commitment) for the Property in
such form, with such limits and endorsements and issued by such companies as may
be acceptable to Lender in its sole reasonable discretion. Such title insurance
policy shall insure that the Instrument and any other liens securing the payment
and performance of Borrower’s obligations under the Loan Documents shall
constitute a first priority lien on the Property subject only to the Permitted
Encumbrances. All costs and expenses associated with obtaining the ALTA
mortgagee title policy and endorsements thereto in connection with construction
draws, including attorneys’ fees and legal costs, for the Property, shall be
borne by the Borrower.

(xvi) Subordinations. Aspen Shorefox, LLC, a Nevada limited liability company,
shall have executed and delivered to Lender such subordinations or other
agreements as may be required by Lender in its sole discretion.

(xvii) Contracts and Bonds. Borrower shall have provided Lender with a copy of
all contracts for the construction of the portion of the Improvements to be
constructed from Loan proceeds deposited

 

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into the Construction Reserve Account, together with a performance and payment
bond in such form and amounts and from such companies as may be acceptable to
Lender in its sole discretion for each construction contract costing in excess
of $1,000,000, unless such bonding requirement is waived by Lender in its sole
and absolute discretion. All contracts must be guaranteed maximum price or a
fixed price contract unless otherwise agreed by Lender.

(xviii) Insurance. Borrower shall have provided Lender with all of the insurance
policies, endorsements or loss payable clauses required by this Agreement and
the other Loan Documents in such form and amounts and from such companies as may
be acceptable to Lender in its sole discretion.

(xix) Opinion Letter. Borrower shall have provided Lender with an opinion letter
from its legal counsel in a form acceptable to Lender in its sole reasonable
discretion and dated as of the initial funding of the Loan.

(xx) Environmental Hazards. Borrower shall have provided Lender with written
evidence of the absence of any environmental contamination or hazardous
materials (as defined by any Law) with respect to the Property or Collateral as
set forth in the Commitment.

(xxi) Lender’s Inspector. Lender’s Inspector shall have approved the request for
advance and related documents as well as the Plans and Specifications,
Construction Budget, Construction/Disbursement Schedule (if any), and all other
issues pertaining to the Property or Collateral.

(xxii) Appraisal. Borrower shall have provided to Lender an appraisal, in form
and substance acceptable to Lender, from an appraiser acceptable to Lender,
which appraisal shall indicate that the appraised value for the Property shall
equal or exceed the amount required by this Agreement to permit the amount of
the initial advance.

(xxiii) Other Monies and Documents. Borrower shall have provided Lender with all
payments, certificates, instruments, and other documents required to be paid or
delivered to Lender under the Commitment, this Agreement and other Loan
Documents or a request in writing by Lender it its sole reasonable discretion.

(c) Additional Advances Into Construction Reserve Account. Provided that
Borrower is not in default hereunder, Borrower may request and Lender will
advance into the Construction Reserve Account, additional Loan proceeds in an
amount of not less than $5,000,000.00 per advance. In no event will Lender be
obligated to advance an amount which, when added to all other advances of
Lender, will cause the aggregate of all advances by Lender to exceed the Maximum
Loan Amount.

4. CONDITIONS PRECEDENT FOR SUBSEQUENT ADVANCES. Borrower may request additional
advances from time to time from the Construction Reserve Account subject to
satisfaction of the following conditions:

(a) Authorization and Agreement. Borrower and Guarantors shall have complied
with all of the terms and conditions set forth in this Agreement and the other
Loan Documents and not be in default thereunder.

(b) Loan Documents. Borrower shall have provided to Lender all of the Loan
Documents dated, completed, executed and acknowledged by all of the appropriate
parties and Borrower and all of the other parties (other than Lender) shall have
complied with all of the terms and conditions set forth in the Loan Documents
and not be in default thereunder.

(c) Applications for Subsequent Advances. Borrower shall have provided Lender
with an application for each subsequent advance and related documentation in
accordance with the terms and conditions set forth in this Agreement.

 

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(d) Additional Lien Waivers. Borrower shall have provided Lender with any lien
waivers relating to the construction of the Improvements reasonably required by
Lender prior to funding a subsequent advance.

(e) Additional Notices of Construction and Disbursement. Borrower shall have
provided Lender with written evidence that all additional required notices
pertaining to the construction of the Improvements or any disbursements in
connection therewith have been recorded with the appropriate Governmental
Authorities in a proper and timely manner.

(f) Plans and Specifications and Construction Budget. The construction of the
Improvements shall have strictly conformed to the Plans and Specifications and
Construction Budget as of the date of each subsequent advance of all Loan
proceeds; provided however that changes to the Plans and Specifications and the
Construction Budget, which do not offset the overall cost of the Improvements by
more than $500,000, or any line item in the Lender approved Construction Budget
by more than 10%, and which otherwise comply with all Legal Requirements and are
approved by the General Contractor and Engineer shall be permitted and notice
thereof delivered to Lender’s Inspector.

(g) Additional Surveys. Borrower shall have provided Lender with any additional
boundary or other surveys for the Property required by this Agreement or the
other Loan Documents.

(h) Additional Certificates from Engineer and General Contractor. Borrower shall
have provided Lender with written certificates from the Engineer and General
Contractor confirming that the Improvements (as of the date of the requested
advance) have been constructed in accordance with the Plans and Specifications
and all Legal Requirements, and that all Improvements referenced in any
Certification and Draw Requisition advance have been completed as of the date of
requested advance.

(i) Additional Acknowledgments by Borrower, Guarantor, Engineer, General
Contractor and Other Persons. Borrower shall have provided Lender with such
additional acknowledgments from Borrower, the Guarantor, Engineer,
subcontractors, laborers, vendors, materialmen and other Persons as may be
reasonably required by Lender.

(j) Additional Permits and Licenses. Borrower shall have provided Lender with
any additional governmental permits, licenses and approvals necessary for the
satisfaction of any Legal Requirement or the terms and conditions set forth in
this Agreement and the other Loan Documents.

(k) Assignment of Borrower’s Interest in Additional Permits, Licenses and
Agreements. Borrower shall have provided Lender with written assignments of
Borrower’s rights, title and interest in all of the additional permits and
licenses and written consents to such assignments from all relevant Persons.
Such assignments and consents shall be in a form and from such Persons as
required by Lender in its sole discretion.

(l) Additional Approvals. Lender shall have provided Borrower with all of the
additional approvals required under this Agreement or the other Loan Documents.

(m) Updates to Title Insurance. Borrower shall have provided Lender with an
endorsement to the ALTA mortgagee title insurance policy described in paragraph
3(q) which updates the date of the title insurance policy to the date of the
requested advance, increases (if necessary) the amount of the title insurance
policy to the full amount of the advanced Loan proceeds, and confirms the
absence of any changes to the ownership of or Encumbrances upon the Property.
All costs and expenses associated with obtaining the endorsement to the ALTA
mortgagee title policy including attorneys’ fees and costs shall be borne by
Borrower.

(n) Additional Subordinations. Borrower shall have provided Lender with such
additional subordinations or other agreements from the owner of any Encumbrance
upon the Property as may be reasonably required by Lender.

 

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(o) Maintenance and Renewal of Bonds and Insurance. Borrower shall have provided
Lender with written evidence as required by Lender of the continued existence
and renewal (if necessary) of all performance and payment bonds and insurance
policies, endorsements and loss payable clauses described in this Agreement and
the other Loan Documents.

(p) Updates to Opinion Letter. To the extent required by Lender in writing (but
only as Borrower is in material non-compliance with any representation warranty,
covenant or other provision hereof), Borrower shall have provided Lender with an
update to the opinion letter from its legal counsel.

(q) Environmental Hazards. To the extent reasonably required by Lender in
writing, Borrower shall have provided Lender with any additional evidence of the
absence of any environmental contamination or hazardous materials (as defined by
any Law) with respect to the Property or Collateral.

(r) Lender’s Inspector. Lender’s Inspector shall have approved the request for
the Loan advance and related documents after taking into account any other
relevant issues pertaining to the Property or Collateral.

(s) Additional Appraisals. Borrower shall have provided to Lender an additional
appraisal, in form and substance acceptable to Lender, from an appraiser
acceptable to Lender, which appraisal shall indicate that the current amount
outstanding under the Loan and the amount of the requested advance will not
cause the principal balance of the Loan to exceed the Maximum Loan Amount.

(t) Additional Monies and Documents. Borrower shall have provided Lender with
any payments, certificates, instruments, and other documents required to be paid
or delivered to Lender under this Agreement and other Loan Documents or as
reasonably requested by Lender in writing.

(u) Advance Period. The Advance Period shall not have expired.

5. ADVANCE PROCEDURES.

(a) Applications for and Use of Advances. All applications for the advance of
Loan proceeds from the Construction Reserve Account under this Agreement shall
be in such form as may be required by Lender in its sole discretion. The
proceeds of each advance shall be used by Borrower solely to pay the obligations
described in the application therefor and as set forth in this Agreement.

Borrower shall submit to Lender each request for a disbursement on a form
Certificate and Draw Requisition attached hereto as Schedule 5(a). Each
Certificate and Draw Requisition shall have attached the following documents
(i) a Construction Funding Checklist in the form attached hereto as Schedule
5(a) and supporting documentation, and (ii) AIA Forms G-702 and G-703. Borrower
also shall provide to Lender: (a) a certificate from the Engineer certifying to
Lender that all Improvements referenced in the most recent Certification and
Draw Requisition have been completed as of the date thereof, that such
Improvements conform to the Plans and Specifications, and that all work
performed in connection with the construction of the Improvements has been
completed in accordance the requirements of all Governmental Authorities; and
(b) all other certificates or documents that may be required by Lender in its
sole discretion including, but not limited to, copies of all bills, invoices,
requests for payment, lien waivers, and other evidence of the satisfactory
delivery and completion of the labor and materials described in the advance
application.

In connection with any disbursements under this Agreement for equipment to be
used in the operation of the Property and Improvements, Borrower shall submit to
Lender with each request for disbursement all documents that may be required by
Lender in its sole reasonable discretion including, but not limited to, copies
of all bills, invoices, requests for payment and other evidence of the
satisfactory delivery and installation of the equipment described in the request
for disbursement.

(b) Disbursement of Advances. Upon the satisfaction of the conditions precedent
for any advance described in this Agreement or the other Loan Documents, Lender
shall use reasonable efforts to review the

 

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requested advance and if approved, release the approved amount of the advance
from the Construction Reserve Account to Borrower or for its benefit within ten
(10) days after such request. Lender, at its election, may issue checks or
drafts payable directly or jointly to Borrower, General Contractor, and/or the
relevant subcontractors, laborers, vendors and materialmen. Lender shall not be
liable to Borrower for any lost discounts or other damages suffered by Borrower
that result from any delay in the processing or payment of any requested advance
under any circumstances.

(c) Retainages. Lender, in its sole discretion, shall be entitled to require
retainage for all advances to Borrower’s contractor(s) in an amount equal to ten
percent (10%) of each advance. Lender shall advance all of the retainages to or
for the benefit of Borrower’s contractor(s) upon the submission of an
application by Borrower for the disbursement of such retainages and the
satisfaction of the following conditions: (a) both the Engineer and Lender’s
Inspector shall have certified to Lender that a distinct component of the
Improvements has been completed justifying release of such retainage and such
component is in conformity with the Plans and Specifications and all Legal
Requirements; (b) Borrower shall have provided Lender with a final “as built”
survey of the completed component of the Property as required by Lender; and
(c) Borrower shall have provided Lender with final and complete lien waivers
from the Engineer, General Contractor, and all subcontractors and major
suppliers of materials for the Improvements with respect to the completed
component.

(d) Number of Advances. Lender shall not be obligated to make advances from the
Construction Reserve Account more often than once per month during the term of
the Loan.

(e) Approval by Lender’s Inspector. All advances of Loan proceeds shall be
subject to the prior inspection and approval by Lender’s Inspector of the
Property and all related information and documents. Such inspections and
approvals shall be made solely for Lender’s benefit and no other Person shall be
entitled to rely thereon. Borrower hereby acknowledges that, upon providing
Borrower with notice thereof, Lender shall be entitled to designate an
additional or substitute Lender’s Inspector in its sole discretion. All of the
fees and costs incurred by Lender’s Inspectors shall be paid by Borrower.
Lender’s Inspector shall be responsible only to Lender and shall not be liable
or obligated to any other Person for its work in connection with the Property.

(f) Lender’s Use of Loan Proceeds and Retainages. Lender shall be entitled to
use and disburse the Loan proceeds and retainages to pay for any costs or
expenses in connection with the Loan, the construction and completion of the
Improvements, the acquisition of equipment for the operation of the
Improvements, and the payment or performance of Borrower’s obligations under
this Agreement and the other Loan Documents. Such amounts advanced by Lender
shall be treated as an advance under the Loan in all respects.

(g) Lender’s Refusal to Advance Loan Proceeds. Lender shall not be required to
make an advance of Loan proceeds to or for the benefit of Borrower under the
following conditions:

(i) The amount of the requested advance together with all prior advances exceeds
the Maximum Loan Amount or the amount in the Construction Reserve Account;

(ii) The requested advance is inconsistent in any material respect with the
Construction Budget, or any other information and materials provided to Lender
in connection with the projected costs and expenses pertaining to the
Improvements;

(iii) A default exists under this Agreement or any of the other Loan Documents
(except for Lender’s default upon its obligations thereunder);

(iv) The construction of the Improvements has been interrupted in violation of
the terms and conditions set forth in this Agreement or the other Loan
Documents;

(v) An unauthorized Encumbrance has been filed or otherwise asserted against the
Property or Collateral or any part thereof and such Encumbrance has not been
released or bonded over as set forth in this Agreement and the other Loan
Documents;

 

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(vi) The Improvements have been substantially destroyed or damaged and, in the
judgment of Lender, there is no reasonable likelihood, that the Improvements can
be completed as required by this Agreement and the other Loan Documents on or
before the Completion Date;

(vii) Any Legal Action is pending which may have a material adverse effect upon;
(i) Borrower, any Guarantor, the Engineer or General Contractor; (ii) the
Property or Collateral; or (iii) any of the transactions described in or
contemplated by this Agreement and the other Loan Documents, provided that any
lien that has been released of record or removed from the Property by posting of
a bond or otherwise, shall not be deemed to have a material adverse effect.

(viii) Borrower, any Guarantor, Engineer or General Contractor dies, becomes
mentally incompetent, is dissolved or terminated, ceases to operate its
business, becomes insolvent, makes an assignment for the benefit of creditors,
admits in writing its inability to pay its debts as they mature, becomes the
subject of any voluntary or involuntary bankruptcy, insolvency or debtor
rehabilitation proceeding, or has a receiver appointed for all or any part of
its property; or

(ix) Lender believes in good faith that: (i) the Improvements materially deviate
or shall materially deviate from the Plans and Specifications or contain any
material defects in workmanship or materials; (ii) the Improvements shall not be
completed by the Completion Date; (iii) the Improvements cannot be completed in
accordance with the Plans and Specifications and the other information and
materials provided to Lender for the remaining Loan proceeds; or (iv) Borrower,
any Guarantor, the Engineer or the General Contractor has suffered a material
adverse change in its financial condition, business operations, or property.

(h) Responsibility for Additional Funds. Borrower shall provide all monies
necessary for the completion of the Improvements and the performance of
Borrower’s obligations under this Agreement and the other Loan Documents that
exceed the amount of available proceeds under the Loan. Nothing contained herein
shall entitle Borrower to place any unauthorized Encumbrances upon the Property.

(i) Conditions Solely for Benefit of Lender. All of the conditions precedent to
any Loan advances shall be imposed solely for the benefit of Lender and not any
other Person. Such conditions precedent may be waived in writing, in whole or in
part, by Lender in its sole discretion.

(j) Limitations on Lender’s Liability to Borrower or Other Persons. The sole
relationship between Borrower and Lender shall be that of Borrower and Lender
and Lender shall not be responsible for the management of Borrower’s business or
the construction of the Improvements under any circumstances. Without limiting
the foregoing, Lender shall not be required to pay any of Borrower’s obligations
to any third party and shall not be deemed to have made any representations or
warranties, express or implied to Borrower or any other Person as a result of
its approval of the Plans and Specifications or disbursement of any Loan
proceeds. Lender shall not be liable to Borrower for any claims, damages,
liabilities or Legal Actions arising from its exercise of any power of attorney,
right or remedy described in this Agreement or the other Loan Documents unless
such action was taken in a grossly negligent or intentionally harmful manner.
Lender shall not be liable to any Person besides Borrower for any actions taken
or not taken by Lender under this Agreement and the other Loan Documents. Lender
shall not be required to take any actions not specifically required by such
documents.

(k) Specific Issues Raised by Environmental Inspection of the Property. Borrower
acknowledges the existence of the following issues related to the environmental
condition of the Property, including those raised by the Environmental Report
delivered to Lender, and agree to carry out, using properly qualified persons
having all current and applicable certifications and licenses necessary under
Applicable Laws (and acceptable to Lender in its reasonable discretion), the
following assessment and/or remedial procedures and actions (collectively, the
“Environmental Site Work”), and in strict accordance with Applicable Law, within
ninety (90) days from the date of this Agreement:

(i) Borrower shall properly handle, transport and dispose of all solid waste
located on the Property, including as identified in the Environmental Report,
and shall subsequently undertake a limited

 

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Phase II subsurface investigation of the solid waste disposal area identified in
the Environmental Report, including soil and/or groundwater samples (as
appropriate depending on Property conditions). The purpose of the subsurface
investigation is to determine the existence of any environment impacts above any
action levels established under Applicable Law. If environmental impacts above
action levels are identified, Borrower shall immediately undertake all
appropriate remedial activities to timely address the impacts in strict
accordance with Applicable Law, sufficient to obtain a written determination of
no further action without conditions or functional equivalent (“NFA”) from the
regulatory agency having jurisdiction over the Property and the environmental
impacts and to allow the Improvements to timely proceed without any material
adverse effect. Borrower’s remedial obligations, if any, under this section
shall not be complete until an NFA is issued and a copy is receive and accepted
by Lender.

(ii) Borrower has conducted an Endangered Species Act survey of the Property to
determine if any flora or fauna of concern (“FOC”) under Applicable Law are
identified at the Property. If any FOC are identified on or affecting the
Property, Borrower shall undertake such activities to address the issues to the
written satisfaction of the Colorado Division of Wildlife and any other
regulatory agency with jurisdiction over the Property and the FOC sufficient to
allow the Improvements to timely proceed without any material adverse effect.
Borrower shall deliver to Lender a copy of all plans submitted to and responses
received from the applicable agency, if any.

Borrower shall provide draft copies to Lender of any and all reports, whether
intended for Borrower or for any third parties, including any regulatory
agencies, for comment and approval by Lender within ten (10) business days of
receipt by Lender. Borrower shall provide two (2) originals of any such reports,
certified for the use and benefit of Lender, within five (5) business days from
delivery of the final reports to Borrower.

Lender shall have the right, but not the obligation, to review, comment on and
approve all proposed assessment and/or remedial proposals for the Environmental
Site Work, or any of them, prior to implementation of said proposals. Lender
shall provide initial comments within twenty one (21) days from Lender’s receipt
of said proposals and shall approve said proposals once the proposals are
acceptable to Lender in its reasonable discretion.

If Borrower shall fail to complete the Environmental Site Work required by this
Agreement, then Lender shall have the right but not the obligation to perform
said Environmental Site Work and seek reimbursement from Borrower for all
reasonable direct costs, expenses and damages, including, but not limited to,
reasonable attorneys’, consultants’ and administrative fees. This right shall be
exercisable only if Lender has reason to believe that Borrower is not performing
the Environmental Site Work and has given Borrower ten (10) business days prior
written notice of its intention to commence said Environmental Site Work, and
only if Borrower cannot provide Lender with reasonable documented evidence
within said ten days that Borrower is in fact pursuing completion of the
Environmental Site Work.

6. RESERVE ACCOUNTS.

(a) Tax and Insurance Reserve Account. On the Closing Date, Borrower shall
deposit or cause to be deposited into the Tax and Insurance Reserve Account
amounts approved by Lender as the estimated cost of the Taxes and insurance
premiums applicable to the Property, which amounts are set forth in the loan
closing statement executed by Lender and Borrower contemporaneously herewith.
Additionally, Borrower shall pay to Lender on each date that a monthly payment
is due under the Loan (a “Payment Date”), one-twelfth of the Taxes and insurance
premiums that Lender estimates will be payable during the next ensuing twelve
(12) months in order to accumulate with Lender sufficient funds to pay all such
Taxes and insurance premiums at least thirty (30) days prior to their respective
due dates, which amounts shall be deposited into the Tax and Insurance Reserve
Account pursuant to the Pledge Agreement executed by Borrower in favor of Lender
(the “Pledge Agreement). Provided no Event of Default shall have occurred and be
continuing, Lender will apply funds in the Tax and Insurance Reserve Account to
payments of Taxes and insurance premiums required to be made by Borrower
pursuant to the requirements of this Loan Agreement and under the Instrument. In
making any payment relating to the Tax and insurance premiums, Lender may do so
according to any bill, statement or estimate procured from the appropriate
public office (with respect to Taxes) or insurer or agent (with respect to
insurance premiums), without inquiry into

 

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the accuracy of such bill, statement or estimate or into the validity of any
tax, assessment, sale, forfeiture, tax lien or title or claim thereof. Any
amount remaining in the Tax and Insurance Reserve Account after the Loan has
been paid in full shall be returned to Borrower. In allocating such excess,
Lender may deal with the Person shown on the records of Lender to be the owner
of the Property. If at any time Lender reasonably determines that the funds in
the Tax and Insurance Reserve Account are not or will not be sufficient to pay
Taxes at least thirty (30) days prior to their respective due dates and
insurance premiums at least thirty (30) days prior to the expiration of the
policies, Lender shall notify Borrower of such determination and Borrower shall
deposit with Lender within ten (10) days thereafter the amount of such
deficiency determined by Lender.

(b) Interest Reserve Account. On the Closing Date, Borrower shall deposit with
Lender the amount of $1,900,000.00 for the purpose of establishing a reserve
fund to pay regular interest payments that will be due and payable by Borrower
under this Agreement and the Note during the first year of the Loan. The
foregoing amount shall be deposited on the date hereof and on each Payment Date
into the Interest Reserve Account pursuant to the Pledge Agreement. So long as
no Event of Default shall have occurred and be continuing below, if the funds
available in the Interest Reserve Account are not sufficient to pay the full
amount of the monthly interest payment then due, Lender may, without the
necessity of notifying Borrower, disburse a portion of the funds in the Interest
Reserve Account on such Payment Date in an amount equal to such deficiency, and
the same shall be applied to payment of the monthly interest payment then due
pursuant to the terms of this Agreement. Borrower agrees and acknowledges that
neither the insufficiency of the amount of, nor the unavailability of, funds in
the Interest Reserve Account is intended to, and shall therefore not, constitute
a limitation on the obligation of Borrower to pay the monthly interest payments
under this Agreement. Borrower shall promptly upon the demand of Lender make
additional deposits to the Interest Reserve Account as Lender may from time to
time require in order to ensure the availability of sufficient funds in the
Interest Reserve Account to pay the monthly interest payments coming due under
the Loan. Upon full payment of the Loan in accordance with the Loan Documents,
the balance of the Interest Reserve Account then in Lender’s possession, if any,
shall be paid over to Borrower.

(c) Construction Reserve Account. Borrower shall perform the work at the
Property to effectuate the development of the Property with roads, drainage,
utilities, grading and other improvements as set forth in the budget and
schedule and in any plans, specifications, engineering and other professional
reports and any architect’s engineer’s, construction and other material
agreements relating thereto submitted to and approved by Lender in its
reasonable discretion. On the Closing Date, Borrower shall deposit or cause to
be deposited into the Construction Reserve Account established pursuant to the
Pledge Agreement an amount sufficient to design, permit, construct and install
Borrower’s yet to be defined first phase of Improvements. If at any time Lender
reasonably determines that the funds in the Construction Reserve Account are not
or will not be sufficient to pay the cost of completing the Lender approved
phase of the Improvements, Lender shall notify Borrower of such determination
and Borrower shall deposit with Lender within ten (10) days thereafter the
amount of such deficiency determined by Lender. Lender shall disburse the funds
to Borrower out of the Construction Reserve Account upon satisfaction by
Borrower of each of the conditions with respect to each such disbursement set
forth in Section 3 of this Loan Agreement. Nothing in this Loan Agreement shall
(i) make Lender responsible for performing or completing any Improvements;
(ii) require Lender to expend funds in addition to the Reserve funds to complete
any Improvements; (iii) obligate Lender to proceed with any Improvements; or
(iv) obligate Lender to demand from Borrower additional sums to complete any
Improvements.

(d) Reserve Funds Generally. Borrower grants to Lender a first-priority
perfected security interest in all of the Reserve Accounts and any and all
monies now or hereafter deposited in each Reserve Account as additional security
for the obligations of Borrower under the Loan Documents. Until expended or
applied in accordance herewith, the Reserve Accounts shall constitute additional
security for payment of such obligations. Upon the occurrence of an Event of
Default, Lender may, in addition to any and all other rights and remedies
available to Lender, apply any sums then present in any or all of the Reserve
Accounts to the reduction of the outstanding principal balance in any order in
its sole discretion. The Reserve Accounts shall not constitute trust funds and
may be commingled with other monies held by Lender. Borrower shall not, without
obtaining the prior consent of Lender, further pledge, assign or grant any
security interest in any Reserve Account, or the monies deposited therein or
permit any lien or encumbrance to attach thereto, or any levy to be made
thereon, or any UCC-1 Financing Statements, except those naming Lender as the
secured party, to be filed with respect thereto. The Reserve Funds shall be held
in a depository account at a commercial bank selected by Lender and shall bear
interest

 

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at a money market rate selected by Lender. All interest or other earnings on a
Reserve Account shall be added to and become a part of such Reserve Account and
shall be disbursed in the same manner as other monies deposited in such Reserve
Account. Borrower shall have the right to direct Lender to invest sums on
deposit in a Reserve Account in certain permitted investments provided that
(a) such investments are then regularly offered by the depository bank for
accounts of this size, category and type, (b) such investments are permitted by
applicable federal, state and local rules, regulations and laws (c) the maturity
date of the investment is not later than the date on which funds in the
applicable Reserve Account are required for payment of an obligation for which
such Reserve Account was created, and (d) no Event of Default shall have
occurred and be continuing. Borrower shall be responsible for payment of any
federal, state or local income or other tax applicable to the interest or income
earned on the funds in the Reserve Accounts. Borrower shall bear all reasonable
costs associated with the investment of the sums in the Reserve Accounts. Such
costs shall be deducted from the income or earnings on such investment, if any,
and to the extent such income or earnings shall not be sufficient to pay such
costs, such costs shall be paid by Borrower promptly on demand by Lender. Lender
shall have no liability for the rate of return earned or losses incurred on the
investment of the sums in permitted investments. Borrower shall indemnify Lender
and hold Lender harmless from and against any and all actions, suits, claims,
demands, liabilities, losses, damages, obligations and costs and expenses
(including, without limitation, litigation costs and reasonable attorneys’ fees
and expenses) arising from or in any way connected with the Reserve Accounts or
the performance of the obligations for which the Reserve Accounts were
established except to the extent it is judicially determined that such actions,
suits, claims, demands, liabilities, losses, damages, obligations and costs and
expenses were caused by the gross negligence or willful misconduct of Lender.

7. EVENTS OF DEFAULT AND REMEDIES.

(a) Defaults. Each of the following shall constitute a “Default” under this
Agreement and the other Loan Documents:

(i) failure of Borrower to make any payment of interest or principal due under
the Note, the Instrument or any of the other Loan Documents within five
(5) calendar days after such amount is due;

(ii) failure of Borrower (except as set forth under clause (i) above) to pay any
amount, costs, expenses or fees (including attorneys’ fees) of Lender, as
required by any provision of the Note, the Instrument, this Agreement or any of
the other Loan Documents within ten (10) days after Lender’s written demand for
such amount;

(iii) failure of Borrower (except as set forth under clauses (i), (ii), (iv),
(v), (viii) or (x) of this Section 7(a)) to comply with or perform, or any
breach or violation by Borrower of, any warranty, representation, covenant,
agreement, prohibition, restriction or condition contained in this Agreement, in
the Note, the Instrument, or in any of the other Loan Documents, which failure
or breach or violation continues uncured to Lender’s reasonable satisfaction for
thirty (30) calendar days after the delivery by Lender of written notice to
Borrower describing such failure or breach or violation; provided, however, that
if such failure or breach or violation shall be not be curable within said
thirty (30) calendar day period and Borrower is diligently attempting to cure
such failure or breach or violation within such thirty (30) calendar day period,
then such failure or breach or violation shall not constitute a Default unless
it shall continue uncured to Lender’s reasonable satisfaction for sixty
(60) calendar days after the delivery by Lender of such notice to Borrower;

(iv) the construction of the Improvements has been interrupted in violation of
the terms and conditions set forth in this Agreement or the other Loan
Documents, except if the construction is temporarily interrupted by virtue of
labor unrest, materials shortage, natural disaster, weather, Acts of God, and
other causes beyond the reasonable control of the Borrower; Borrower has given
Lender written notice of the interruption specifying the cause of the
interruption and the expected time of the interruption within ten (10) days
after such interruption is encountered, and no such interruption shall exceed 60
days in the aggregate;

 

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(v) the Improvements are not fully completed on or before the Completion Date;
provided, however that the time for completion of the Improvements shall be
extended by the period of time, if any, that construction is delayed by virtue
of labor unrest, materials shortage, natural disaster, weather, Acts of God, and
other causes beyond the reasonable control of the Borrower; provided, however,
that no such extension shall be permitted with respect to any delay unless
written notice of the delay specifying the cause of the delay and the expected
time of the delay is delivered to Lender within ten (10) days after such delay
is encountered, and no such extension shall exceed 60 days in the aggregate;

(vi) an unauthorized Encumbrance has been filed or otherwise asserted against
the Property or Collateral or any part thereof and such Encumbrance has not been
released or bonded over as required by this Agreement or the other Loan
Documents;

(vii) Lender believes in good faith that: (i) the Improvements materially
deviate or shall materially deviate from the Plans and Specifications and other
information and materials provided to Lender or contain any material defects in
workmanship or materials which deviations or defects the Borrower shall not have
commenced to correct within seven (7) days from Lender’s notice to Borrower
thereof and thereafter diligently pursued the correction thereof to completion
as quickly as reasonably possible, not to exceed 30 days after such notice;
(ii) the Improvements cannot be completed in accordance with the Plans and
Specifications and other information and materials provided to Lender for the
remaining Loan proceeds; or (iii) Borrower, any Guarantor, the Engineer or the
General Contractor has suffered a material adverse change in its financial
condition, business operations, or property;

(viii) except as provided in and permitted under the Note or Instrument, any
sale, assignment, transfer, conveyance, mortgaging, encumbering or other change
in, or collateral assignment of, the legal title to or beneficial interest in
the Property or Borrower, or any part thereof, or any interest therein,
including, without limitation, the granting of any subordinate lien, whether
voluntarily or involuntarily by operation of law and whether or not of record or
for consideration;

(ix) any default shall occur under any of the other Loan Documents which remains
uncured after the expiration of any applicable notice and/or cure period;

(x) a material misrepresentation or material error or withholding of material
information by Borrower incident to the Loan or the Loan Documents; and

(xi) the occurrence of any event deemed to be a default under paragraphs 7(b) or
7(c) hereof.

(b) Acceleration in case of Borrower’s Insolvency. If Borrower or any Guarantor
shall voluntarily file a petition under the Federal Bankruptcy Code (the
“Code”), as such Code may from time to time be amended, or under any similar or
successor Federal statute relating to bankruptcy, receivership, insolvency,
arrangements or reorganizations, or under any state bankruptcy or insolvency
act, or file an answer in an involuntary proceeding admitting insolvency or
inability to pay debts, or if Borrower or any Guarantor shall fail to obtain a
vacation or stay of involuntary proceedings brought for the reorganization,
dissolution or liquidation of Borrower or such Guarantor respectively, within
sixty (60) days of the filing of such involuntary proceeding, or if Borrower or
any Guarantor shall be adjudged a bankrupt, or if a trustee or receiver shall be
appointed for Borrower or any Guarantor or for any of Borrower’s property or any
Guarantor’s property, or if the Property shall become subject to the
jurisdiction of a Federal bankruptcy court or similar state court, or if
Borrower or any Guarantor shall make an assignment for the benefit of Borrower’s
or such Guarantor’s creditors, or if there is an attachment, execution or other
judicial seizure of any portion of Borrower’s or such Guarantor’s assets and
such seizure is not discharged within ten (10) days, then Borrower shall be in
Default under the Instrument and Lender may, at Lender’s option, declare all of
the sums secured by the Instrument to be immediately due and payable without
prior notice to Borrower, and Lender may invoke any remedies permitted by
Section 7(d) of this Agreement. Any reasonable attorneys’ fees and other
expenses incurred by Lender in connection with Borrower’s or any Guarantor’s
bankruptcy or any of the other aforesaid events shall be additional indebtedness
of Borrower secured by the Instrument pursuant to paragraph 8 of the Instrument.

 

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(c) Transfers of the Property or Beneficial Interests in Borrower; Assumption.
Except as otherwise provided in this Section 7(c), on sale or transfer of
(i) all or any part of the Property, or any interest therein, or (ii) beneficial
interests of Borrower (if Borrower is not a natural person or persons but is a
corporation, partnership, trust or other legal entity), Borrower shall be in
Default under the Instrument and this Agreement and Lender may, at Lender’s
option, declare all of the sums secured by the Instrument and due under the
provisions of this Agreement to be immediately due and payable, and Lender may
invoke any remedies permitted by Section 7(d) of this Agreement and applicable
law. This option shall not apply in case of:

(i) transfers by devise or descent or by operation of law upon the death of a
member; and

(ii) sales or transfers of beneficial interests in Borrower provided that such
sales or transfers, together with any prior sales or transfers of beneficial
interests in Borrower, but excluding sales or transfers under subparagraph
(i) above, do not result in more than twenty-five percent (25%) of the
beneficial interests in Borrower having been sold or transferred since the date
hereof.

(iii) The conveyance by Borrower to the Town of Granby of the “Security Lot” of
35 acres in the North Ranch Rural Estates as required in Section 6.7.1 of the
Annexation and Development Agreement between the Town of Granby and Shorefox,
LLC

(d) Remedies. Upon the occurrence of a default under this Agreement or the other
Loan Documents, Lender shall be entitled to:

(i) cease making any additional advances to Borrower under the Loan or any other
financial arrangements with Borrower;

(ii) declare all of the sums secured by the Instrument to be immediately due and
payable without further demand;

(iii) foreclose the Instrument by judicial proceeding or the exercise of the
power of sale thereunder;

(iv) collect all costs and expenses incurred in pursuing such remedies,
including, but not limited to, attorneys’ fees and costs of documentary
evidence, abstracts and title reports;

(v) complete the acquisition and construction of the Improvements and take all
actions and execute all documents for such purpose in Borrower’s name or its
name which Lender deems appropriate in its sole discretion; and

(vi) invoke any other rights and remedies permitted by applicable law or in
equity or provided in this Agreement, the Note, the Instrument or the other Loan
Documents.

Lender shall be entitled to collect all reasonable costs and expenses incurred
in pursuing such remedies, including, but not limited to, reasonable attorneys’
fees as allowed by law and costs of documentary evidence, abstracts and title
reports.

8. ADDITIONAL TERMS AND CONDITIONS.

(a) Protection of Lender’s Security. If any action or proceeding is commenced
which materially adversely affects the Property or title thereto and the
interest of Lender therein, including, but not limited to, eminent domain,
insolvency, code enforcement, or arrangements or proceedings involving a
bankrupt or decedent’s estate, and Borrower is in Default or Borrower is not
diligently pursuing available legal rights or remedies with respect to such
actions or proceedings and such non-action could result in a material adverse
effect on the value of the

 

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Property, then Lender at Lender’s option may make such appearances, disburse
such sums and take such action as Lender deems necessary, in its sole
discretion, to protect Lender’s interest, including, but not limited to,
(i) disbursement of attorneys’ fees, (ii) entry upon the Property to make
repairs, (iii) procurement of satisfactory insurance as provided in this
Agreement and the other Loan Documents, (iv) the payment of any taxes and/or
assessments levied against the Property and then due and payable, and
(v) discharge (by payment, bonding or otherwise) of any lien on the Property
which is not a Permitted Encumbrance. In addition, with respect to an
environmental condition which may materially adversely affect the Property
during the term of the Loan or the interest of Lender therein, including, but
not limited to any actual or suspected on-site environmental pollution
conditions which are, or are reasonably believed to be, in violation of
applicable environmental laws and which have, or are reasonably believed to
have, a material adverse effect on the Property or the Borrower, or upon a
Default, then Lender (or its agent, contractor or designee), at Lender’s option,
shall have the right to enter the Property to conduct tests and investigate any
such pollution conditions. If the environmental assessment reveals environmental
pollution at or above actionable levels under applicable law, and Lender
reasonably determines that Borrower is not diligently pursuing remediation with
respect thereto, then Lender may, at Lender’s sole option, engage third party
providers to undertake such remediation up to the limits of the secured creditor
pollution policy relating to the Property.

(b) Indemnification and Hold Harmless. Lender shall not assume or be responsible
for the performance of any of Borrower’s obligations under the Loan Documents or
with respect to the Property or Collateral under any circumstances. Borrower
shall immediately provide Lender with written notice of and indemnify and hold
Lender and its shareholders, directors, officers, employees and agents
(collectively “Indemnified Parties”) harmless from all claims, damages,
liabilities (including attorneys’ fees and legal expenses), causes of action,
actions, suits and other Legal Actions (collectively “Claims”) pertaining to its
business operations, the construction of the Improvements, the Property, or the
Collateral (including, but not limited to, those arising from Lender’s
performance of Borrower’s obligations under this Agreement so long as Lender
does not act in a grossly negligent or intentionally harmful manner). Borrower,
upon the request of Lender, shall hire legal counsel to defend the Indemnified
Parties from such Claims, and pay the attorneys fees, legal expenses, and other
costs incurred in connection therewith. In the alternative, the Indemnified
Parties shall be entitled to employ their own legal counsel to defend such
Claims at Borrower’s cost.

(c) Further Assurances. Borrower shall execute and cause to be executed all
documents and take and cause to be taken all actions reasonably deemed necessary
by Lender, to carry out the intent and purposes of this Agreement and the other
Loan Documents.

(d) Notice to Other Persons. Borrower shall file and record such documents and
otherwise provide notice to such Persons as Lender deems necessary, in its sole
discretion, to protect its interest under this Agreement and the other Loan
Documents or with respect to the Property.

(e) Power of Attorney and Substituted Performance. Borrower hereby appoints
Lender as its attorney-in-fact to perform any action or execute any document
required to be taken or executed by Borrower under this Agreement and the other
Loan Documents or otherwise deemed necessary or advisable by Lender in its sole
discretion with respect to the Loan or Property. Lender shall be entitled, in
its sole discretion, to perform or refrain from performing any of Borrower’s
obligations described in this Agreement or the other Loan Documents and such
substituted performance shall not relieve Borrower from its obligations or cure
any default under this Agreement or the other Loan Documents. The powers of
attorney described in this paragraph are coupled with an interest and are
irrevocable, shall survive Borrower’s death or dissolution, and shall not be
affected by Borrower’s disability in any manner. Notwithstanding anything herein
to the contrary, prior to the occurrence of an event of default hereunder,
Lender’s powers of attorney granted herein shall be limited to the power to
execute such documents on behalf of Borrower as may be necessary in order to
perfect any security interest granted by Borrower to Lender in connection with
this Agreement or the other Loan Documents.

(f) Lender’s Costs and Expenses. Upon demand, Borrower shall pay all of the
following costs and expenses incurred by Lender in connection with the Loan or
Property; (a) all amounts expended by Lender to perform any of Borrower’s
obligations under this Agreement or the other Loan Documents or to complete the
construction of, protect, preserve, repair, foreclose upon, or dispose of the
Property or Collateral together with a

 

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reasonable fee for Lender’s performance of such services; (b) all amounts
expended by Lender to enforce any of its rights and remedies under this
Agreement and the other Loan Documents; (c) all of Lender’s reasonable
attorneys’ fees and legal costs and expenses including, but not limited to,
those incurred by Lender to enforce any of its rights or remedies under this
Agreement and the other Loan Documents; (d) all premiums and charges for title
insurance examinations and policies and endorsements or updates thereto; (e) all
survey costs; (f) all filing and recording fees; (g) all recordation and
transfer taxes; (h) all insurance premiums; (i) all bond premiums; (j) all fees
and expenses payable to Lender’s Inspector; (k) all fees of and expenses payable
to any architects, engineers, general contractors, construction managers, or
other Persons employed by Lender; (l) all fees for environmental reports and
investigations and the remediation of environmental problems; and (m) all other
costs and expenses reasonably incurred by Lender in its sole discretion. Such
amounts shall be construed as additional advances under the Loan, accrue
interest at the rates set forth in the Loan Documents, and be guarantied by the
Guarantor and secured by all of the Collateral.

(g) Application of Payments. All payments received by Lender in connection with
the Loan shall be applied first to expenses, then to accrued interest, and then
to principal owing under the Loan Documents (unless a different application is
required by the Note).

(h) Assignment and Hypothecation. Borrower shall not assign, convey, sell,
transfer or encumber this Agreement, any of the other Loan Documents, or any of
its rights or obligations thereunder without obtaining Lender’s prior written
approval (which may be withheld by Lender in its sole discretion) and any
attempt to take such action shall be void and shall constitute a default under
this Agreement and the other Loan Documents. Lender may assign, convey, sell,
transfer or encumber this Agreement and the other Loan Documents and its rights
and obligations thereunder, in whole or in part to any other Person without the
consent of Borrower or any third party.

(i) Time of Essence. Time is of the essence with respect to this Agreement and
the other Loan Documents.

(j) Modification. This Agreement and the other Loan Documents may be amended,
modified, replaced or substituted only in and by a writing signed by the parties
thereto.

(k) Waiver. Lender’s waiver of any of Borrower’s obligations under this
Agreement or the other Loan Documents must be contained in a writing signed by
Lender. Any waiver shall apply solely to the act or omission described therein
and not to any subsequent act or omission of any kind. Without limiting the
foregoing, no advance of Loan proceeds shall constitute a waiver of any
Borrower’s obligations under this Agreement or the other Loan Documents and no
waiver shall be implied from any delay or failure by Lender to take any action
following the occurrence of any default by Borrower under this Agreement or any
other Loan Document. Lender’s waiver of any of Borrower’s obligations under this
Agreement shall not limit Lender’s right to fully enforce Borrower’s obligations
under this Agreement subsequent to such waiver.

(l) Forbearance by Lender Not a Waiver. Any forbearance by Lender in exercising
any right or remedy hereunder or under the Instrument, or any of the other Loan
Documents or Instrument, or otherwise afforded by applicable law, shall not be a
waiver of or preclude the exercise of any right or remedy available to Lender.
The acceptance by Lender of payment of any sum secured by the Instrument after
the due date of such payment shall not be a waiver of Lender’s right to either
require prompt payment when due of all other sums so secured or to declare a
default for failure to make prompt payment. The procurement of insurance or the
payment of taxes or other liens or charges by Lender shall not be a waiver of
Lender’s right to accelerate the maturity of the indebtedness secured by the
Instrument or by any of the other Instruments after notice of such breach and
failure of Borrower to cure as hereinafter provided, nor shall Lender’s receipt
of any awards, proceeds or damages operate to cure or waive a default in payment
of sums secured by the Instrument or by any of the other Instruments.

(m) Resolution of Conflicts Between Loan Documents. Any conflicts between this
Agreement and any other of the Loan Documents shall be controlled by the
provisions of this Agreement.

(n) Notices. Except for any notice required under applicable law to be given in
another manner, (a) any notice to Borrower provided for in this Agreement or in
the Notes shall be given by mailing such notice by

 

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certified mail addressed to Borrower at Borrower’s address stated below or at
such other address as Borrower may designate by notice to Lender as provided
below, and (b) any notice to Lender shall be given by certified mail, return
receipt requested, to Lender’s address stated herein or to such other address as
Lender may designate by notice to Borrower as provided herein. Any notice
provided for in this Agreement or in the Notes shall be deemed to have been
given to Borrower or Lender when given in the manner designated herein.

All notices shall be sent to Borrower and Lender at the following addresses
unless written notice is given to the sending party that a different address
should be used for the receiving party in the future.

 

Borrower:    SHOREFOX DEVELOPMENT, LLC,    P.O. Box 4211    62801 U.S. Highway
40    Granby, Colorado 80446    Attention: Steven S. Bromberg With a copy to:   
Ronald S. Stern, Esq.    P.O. Box 50    Granby, Colorado 80446 Lender:    CNL
INCOME PARTNERS, LP    CNL Center at City Commons    450 South Orange Avenue   
Orlando, Florida 32801-3336    Attention: Chief Financial Officer,    Attention:
Corporate Counsel With a copy to:    Michael A. Ryan, Esquire    Lowndes,
Drosdick, Doster, Kantor & Reed, P.A.    P.O. Box 2809    215 North Eola Drive
   Orlando, Florida 32802

(o) Successors and Assigns. This Agreement and other Loan Documents shall be
binding upon and inure to the benefit of Borrower, Lender, and their respective
successors, permitted assigns, trustees, receivers, administrators, personal
representatives, legatees and devisees.

(p) Severability. If any provision of this Agreement or the other Loan Documents
shall be held invalid or unenforceable in any Legal Action, such holding shall
not invalidate or render unenforceable any other provision thereof. In
exercising any rights hereunder or taking any actions provided for herein,
Lender may act through its employees, agents or independent contractors as
authorized by Lender.

(q) Remedies Cumulative. Each remedy provided in the Loan Documents is distinct
and cumulative to all other rights or remedies under the Loan Documents or
afforded by law or equity, and may be exercised concurrently, independently, or
successively, in any order whatsoever.

(r) Applicable Law; Consent to Jurisdiction and Venue. This Agreement and the
other Loan Documents shall be governed by the laws of the State of Colorado
(unless the laws of another state are specifically described as the governing
law of any particular Loan Document). Borrower consents to the jurisdiction and
venue of any court located in the County of Grand, State of Colorado, in the
event of any Legal Action pertaining to this Agreement, the other Loan
Documents, or the enforcement of any right or obligation described therein.

(s) Miscellaneous. All of the terms contained in this Agreement and the other
Loan Documents shall be defined as set forth in the Uniform Commercial Code as
adopted by the state described in the preceding

 

30

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paragraph unless specifically defined otherwise therein. All headings contained
in the Agreement and the other Loan Documents are for convenience only and shall
not be interpreted to enlarge or restrict the provisions thereof. The use of any
gender, tense or conjugation in this Agreement or the other Loan Documents shall
be applicable to all genders, tenses and conjugations. This Agreement and the
other Loan Documents represent the complete and integrated understanding between
Borrower and Lender pertaining to the Loan and the terms and conditions
described in such documents. All prior and contemporaneous agreements and
understandings, written or oral, express or implied, shall be of no further
force and effect to the extent inconsistent therewith.

IN WITNESS WHEREOF, the parties hereto executed this Agreement or have caused
this Agreement to be executed and delivered by their duly authorized officer(s)
as of the date first set forth above.

 

        “BORROWER” WITNESSES:     

SHOREFOX DEVELOPMENT, LLC, a Delaware limited

liability company

       

By: SHOREFOX, LLC, a Delaware limited liability

company, its Manager

       

By: GGRR, LLC, a Delaware limited liability

company, its Manager

/s/

        By:   

/s/ Steven S. Bromberg

 

Name:

  

 

 

 

           Steven S. Bromberg, Manager

/s/

           Name:   

 

 

          

STATE OF COLORADO

COUNTY OF                     

Before me, a notary public, in and for said county, personally appeared Steven
S. Bromberg, known to me to be the person who, as Manager of GGRR, LLC, a
Delaware limited liability company on behalf of the company as Manager of
SHOREFOX, LLC, a Delaware limited liability company, on behalf of the company as
Manager of SHOREFOX DEVELOPMENT, LLC, a Delaware limited liability company, on
behalf of the company which executed the foregoing instrument, signed the same,
and acknowledged to me that he did so sign said instrument in the name and upon
behalf of said company as Manager; that the same is his free act and deed as
Manager, and the free act of said company; that he was duly authorized thereunto
by its members and managers (as applicable). In testimony whereof, I have
hereunto subscribed my name, and affixed my official seal at
                                    , this March 13, 2006.

 

    

/s/

(NOTARY SEAL)

     Notary Public, State of Colorado      Printed Name:
______________________________________      Notary Commission No.
______________________________      My Commission Expires:
_____________________________

 

31

--------------------------------------------------------------------------------

WITNESSES:     

SHOREFOX DEVELOPMENT, LLC, a Delaware

limited liability company

       

By: SHOREFOX, LLC, a Delaware limited liability

company, its Manager

          

By: GGRR, LLC, a Delaware limited liability

company, its Manager

/s/

        By:   

/s/ Larry Martin

 

Name:

  

 

 

 

           Larry Martin, Member

/s/

           Name:   

 

 

          

 

32

--------------------------------------------------------------------------------

       “LENDER”

Signed, sealed and delivered in the

presence of:

    

CNL INCOME PARTNERS, LP, a Delaware limited

partnership

      

By: CNL INCOME GP CORP., a Delaware

corporation, its General Partner

/s/

            By:   

/s/ Amy Sinelli

 

Name:

 

 

 

 

       

    Name:

    As Its:

  

Amy Sinelli

Vice President

/s/

           Name:  

 

 

          

STATE OF FLORIDA

COUNTY OF ORANGE

The foregoing instrument was acknowledged before me on this March 13, 2006, by
Amy Sinelli, as senior vice president of CNL INCOME GP CORP., a Delaware
corporation, on behalf of the corporation as the General Partner of CNL INCOME
PARTNERS, LP, a Delaware limited partnership, on behalf of the limited
partnership. He/She is personally known to me and did not take an oath.

 

/s/

 

Notary Public - State of Florida

Print Name: ____________________________

Commission Number: ____________________

Commission Expires: ____________________

 

33

--------------------------------------------------------------------------------

EXHIBIT “A”

LEGAL DESCRIPTION

A parcel of land, consisting of Parcel A (First Land) & Parcel B (First Option
Land) as described at Reception No. 2004-014126 of the Records of Grand County
and Exhibit A (Homestead) as described at Reception No. 2004-002008 except for
that portion described at Reception No. 2005-010430 of the Records of Grand
County being situated in the south one half of Section 19, that portion of the
west one half of the southwest one quarter of Section 20 lying north and west of
the centerline of the channel of the Colorado River, that portion of the
northwest one quarter of the northwest one quarter of Section 29 lying north and
west of the centerline of the channel of the Colorado River, that portion of the
the west one half of Section 30 lying north and west of the Right of Way of
Colorado State Highway No. 34, that portion of the north one half of the
northeast one quarter and the southwest one quarter of the northeast one quarter
of Section 30 lying north and west of the centerline of the northwest channel of
the Colorado River and that portion of the northwest one quarter of Section 31
lying north and west of the Right of Way of Colorado State Highway No. 34 all
contained within Township 2 North, Range 76 West of the 6th Principal Meridian;

and

The southeast one quarter and the east one half of the southwest one quarter of
Section 24, the southeast one quarter and a portion of the northeast one quarter
and a portion of the southwest one quarter of Section 25 lying north and east of
the Right of Way of U.S. Highway No. 40 and that portion of the northwest one
quarter and the northeast one quarter of Section 36 lying north of the Right of
Way of U.S. Highway No. 40 and that portion of the southeast one quarter of
Section 36 lying west of the Right of Way of U.S. Highway No. 34 all contained
within Township 2 North, Range 77 West of the 6th Principal Meridian;

and

Based on a field survey of said parcel which considers the common line of Range
76 and Range 77, Township 2 North as bearing N 01 Degrees 09 Minutes 00 Seconds
E as evidenced by an existing BLM brass cap at the southeast corner of
Section 25, Township 2 North, Range 77 West and an existing BLM brass cap at the
east one quarter corner of Section 24 Township 2 North Range 77 West and with
all bearings contained herein relative thereto said parcel is more particularly
described as follows;

Commencing at the east one quarter corner of Section 24, Township 2 North, Range
77 West, 6th Principal Meridian, said point being a BLM brass cap and the true
POINT OF BEGINNING;

Thence S 89 Degrees 18 Minutes 34 Seconds E along the north line of the south
one half of Section 19 a distance of 5296.50’ to the east one quarter corner of
Section 19, Township 2 North, Range 76 West being a BLM brass cap;

Thence S 86 Degrees 12 Minutes 41 Seconds E along the north line of the west one
half of the southwest one quarter a distance of 1184.75’ to the west center one
sixteenth corner of Section 20, Township 2 North, Range 76 West being an
aluminum cap, PLS #31942;

Thence S 01 Degrees 07 Minutes 34 Seconds W along the east line of the west one
half of the southwest one quarter a distance of 1769.27’ to a point in the
centerline of the channel of the Colorado River;

Thence along the meander line of the channel of the Colorado River the following
courses;

Thence S 47 Degrees 31 Minutes 16 Seconds W a distance of 126.92’ to a point;

Thence S 42 Degrees 04 Minutes 47 Seconds W a distance of 385.06’ to a point;

Thence S 45 Degrees 57 Minutes 27 Seconds W a distance of 187.55’ to a point;

Thence S 59 Degrees 04 Minutes 21 Seconds W a distance of 132.24’ to a point;

Thence S 47 Degrees 00 Minutes 55 Seconds W a distance of 330.54’ to a point;

Thence S 56 Degrees 49 Minutes 16 Seconds W a distance of 363.84’ to a point;

Thence S 44 Degrees 00 Minutes 00 Seconds W a distance of 245.45’ to a point;

Thence S 53 Degrees 16 Minutes 19 Seconds W a distance of 389.32’ to a point;

Thence S 76 Degrees 37 Minutes 49 Seconds W a distance of 90.41’ to a point;

Thence S 55 Degrees 25 Minutes 00 Seconds W a distance of 136.07’ to a point;

Thence S 45 Degrees 59 Minutes 23 Seconds W a distance of 397.26’ to a point;

Thence S 34 Degrees 46 Minutes 11 Seconds W a distance of 161.39’ to a point;

Thence S 28 Degrees 43 Minutes 51 Seconds W a distance of 233.56’ to a point;

Thence S 30 Degrees 00 Minutes 34 Seconds W a distance of 14.75’ to a point on
the north line of the southeast quarter of the northeast quarter of said
Section 30;

Thence departing the meander line of the channel of the Colorado River and
continuing N 88 Degrees 58 Minutes 16 Seconds W along the north line of the
southeast quarter of the northeast quarter of said Section 30 a distance of
240.58’ to a pin & cap, PLS#17480;

--------------------------------------------------------------------------------

Thence S 01 Degrees 29 Minutes 58 Seconds W along the west line of the southeast
quarter of the northeast quarter of said Section 30 a distance of 690.63’ to a
point in the centerline of the channel of the Colorado River;

Thence along the meander line of the channel of the Colorado River the following
courses;

Thence S 44 Degrees 52 Minutes 39 Seconds W a distance of 291.41’ to a point;

Thence S 68 Degrees 36 Minutes 35 Seconds W a distance of 56.89’ to a point;

Thence N 88 Degrees 59 Minutes 48 Seconds W a distance of 107.27’ to a point;

Thence N 68 Degrees 05 Minutes 50 Seconds W a distance of 185.40’ to a point;

Thence N 67 Degrees 13 Minutes 00 Seconds W a distance of 133.14’ to a point;

Thence S 70 Degrees 29 Minutes 52 Seconds W a distance of 60.39’ to a point;

Thence S 76 Degrees 13 Minutes 18 Seconds W a distance of 143.43’ to a point;

Thence S 63 Degrees 03 Minutes 24 Seconds W a distance of 58.91’ to a point;

Thence S 51 Degrees 04 Minutes 50 Seconds W a distance of 112.58’ to a point;

Thence S 31 Degrees 50 Minutes 22 Seconds W a distance of 206.22’ to a point;

Thence S 46 Degrees 06 Minutes 43 Seconds W a distance of 106.83’ to a point;

Thence S 69 Degrees 28 Minutes 51 Seconds W a distance of 167.28’ to a point on
the east line of the west half of said Section 30;

Thence departing the meander line of the channel of the Colorado River and
continuing S 01 Degrees 07 Minutes 53 Seconds W a distance of 61.69’ to the
center one quarter corner of said Section 30 being an aluminum cap PLS #31942;

Thence S 01 Degrees 07 Minutes 53 Seconds W along the east line of the west half
of said Section 30 a distance of 1764.77’ to a point on the northwesterly right
of way of Colorado Highway No. 34 being an aluminum cap, PLS # 31942;

Thence continuing along the northwesterly right of way of Colorado Highway
No. 34 for the following courses;

Thence along a curve to the left having a radius of 2915.00’, and an arc length
of 656.81’, a delta angle of 12 Degrees 54 Minutes 36 Seconds, a chord length of
655.42’, and a chord bearing of S 53 Degrees 08 Minutes 02 Seconds W to a point
of tangent being an aluminum cap, PLS # 31942;

Thence S 46 Degrees 40 Minutes 44 Seconds W a distance of 1385.58’ to a point of
curve being an aluminum cap, PLS #31942;

Thence along a curve to the left having a radius of 2915.00’, and an arc length
of 504.85’, a delta angle of 09 Degrees 55 Minutes 23 Seconds, a chord length of
504.22’, and a chord bearing of S 41 Degrees 43 Minutes 03 Seconds W, to a point
of tangent being an aluminum cap, PLS # 31942;

Thence S 36 Degrees 45 Minutes 21 Seconds W a distance of 782.71’ to a point of
curve being an aluminum cap, PLS # 31942;

Thence along a curve to the left having a radius of 1005.00’, and an arc length
of 277.79’, a delta angle of 15 Degrees 50 Minutes 14 Seconds, a chord length of
276.91’, and a chord bearing of S 28 Degrees 50 Minutes 14 Seconds W, to the
northeast corner of the Horn Ranch / Mountain Parks Electric Outright Exemption
being a pin and cap, PLS #22097;

Thence departing the northwesterly right of way of Colorado Highway No. 34 and
continuing for the following courses;

Thence N 74 Degrees 45 Minutes 54 Seconds W along the line of the Horn Ranch /
Mountain Parks Electric Outright Exemption a distance of 360.00’ to a pin and
cap, PLS # 22097;

Thence S 11 Degrees 22 Minutes 02 Seconds W along the line of the Horn Ranch /
Mountain Parks Electric Outright Exemption a distance of 427.34’ to a 1”
diameter pipe;

Thence S 11 Degrees 42 Minutes 55 Seconds E along the line of that parcel
described at Book 155, Page 293 a distance of 509.32’ to a 1” diameter pipe;

Thence S 12 Degrees 49 Minutes 28 Seconds E along the line of that parcel
described at Book 155, Page 293 a distance of 115.07’ to a 1” diameter steel
pin;

Thence S 29 Degrees 47 Minutes 23 Seconds E along the line of that parcel
described at Book 155, Page 293 a distance of 72.99’ to a point on the
northwesterly right of way of U.S. Highway No. 40;

Thence along a curve to the right on the northwesterly right of way of U.S.
Highway No. 40 having a radius of 268.30’, and an arc length of 42.77’, a delta
angle of 09 Degrees 07 Minutes 59 Seconds, a chord length of 42.72’, and a chord
bearing of S 22

--------------------------------------------------------------------------------

Degrees 32 Minutes 04 Seconds W to the southeast corner of Tract No.1 N.B. Burt
Subdivision being a spike and washer, PLS #3660;

Thence N 23 Degrees 32 Minutes 20 Seconds W along the line of N.B. Burt
Subdivision a distance of 184.48’ to a spike and washer, PLS #3660;

Thence N 87 Degrees 53 Minutes 30 Seconds W along the line of N.B. Burt
Subdivision a distance of 282.36’ to a spike and washer, PLS #3660;

Thence N 87 Degrees 40 Minutes 44 Seconds W along the line of N.B. Burt
Subdivision a distance of 170.23’ to a spike and washer, PLS #3660;

Thence N 87 Degrees 48 Minutes 42 Seconds W along the line of that parcel
described at Reception # 2000-000080 a distance of 355.26’ to a point on the
northeasterly right of way line of U.S. Highway No. 40 being an aluminum cap,
PLS #31942;

Thence continuing along the northeasterly right of way line of U.S. Highway
No. 40 for the following courses;

Thence N 58 Degrees 44 Minutes 16 Seconds W a distance of 2066.90’ to a point of
curve being an aluminum cap, PLS #31942;

Thence along a curve to the right having a radius of 2815.00’, and an arc length
of 1604.13’, a delta angle of 32 Degrees 39 Minutes 00 Seconds, a chord length
of 1582.51’, and a chord bearing of N 42 Degrees 24 Minutes 46 Seconds W, to a
point of tangent being an aluminum cap, PLS #31942;

Thence N 26 Degrees 05 Minutes 16 Seconds W a distance of 557.40’ to Station
No. 458+70.4 being a brass cap;

Thence departing the northeasterly right of way line of U.S. Highway No. 40 and
continuing for the following courses;

Thence N 80 Degrees 12 Minutes 08 Seconds E a distance of 1408.88’ to an
aluminum cap, PLS #31942, situated on the north-south centerline of said
Section 25;

Thence N 00 Degrees 40 Minutes 30 Seconds E along the north-south centerline of
said Section 25 a distance of 2209.10’ to the center one quarter corner of said
Section 25 being an aluminum cap, PLS #31942;

Thence N 88 Degrees 42 Minutes 25 Seconds E along the east-west centerline of
said Section 25 a distance of 317.48’ to an aluminum cap, PLS #31942;

Thence N 00 Degrees 40 Minutes 30 Seconds E a distance of 2586.81’ to an
aluminum cap, PLS #31942, situated on the north line of said Section 25;

Thence S 87 Degrees 18 Minutes 42 Seconds W along the north line of said
Section 25 a distance of 317.84’ to the north one quarter corner of said
Section 25 being a BLM brass cap;

Thence S 87 Degrees 19 Minutes 57 Seconds W along the north line of said
Section 25 a distance of 1366.54’ to the west one sixteenth corner of said
Sections 24 & 25 being a BLM brass cap;

Thence N 00 Degrees 20 Minutes 35 Seconds E along the west line of the southeast
one quarter of the southwest one quarter of said Section 24 a distance of
1324.72’ to the southwest one sixteenth corner of said Section 24;

Thence N 00 Degrees 19 Minutes 34 Seconds E along the west line of the northeast
one quarter of the southwest one quarter of said Section 24 a distance of
662.03’ to the center-north-southwest one sixtyfourth corner of said Section 24
being an aluminum cap, PLS #31942;

Thence N 87 Degrees 21 Minutes 30 Seconds E along the east-west centerline of
the northeast one quarter of the southwest one quarter of said Section 24 a
distance of 1371.38’ to the center-north-south one sixtyfourth corner of said
Section 24 being an aluminum cap, PLS #31942;

Thence N 87 Degrees 22 Minutes 20 Seconds E along the east-west centerline of
the northwest one quarter of the southeast one quarter of said Section 24 a
distance of 1378.93’ to the center-north-southeast one sixtyfourth corner of
said Section 24 being an aluminum cap, PLS #31942;

Thence N 00 Degrees 48 Minutes 48 Seconds E along the north-south centerline of
the southeast one quarter of said Section 24 a distance of 661.87’ to the
center-east one sixteenth corner of said Section 24 being an aluminum cap, PLS
#31942;

--------------------------------------------------------------------------------

Thence N 87 Degrees 23 Minutes 31 Seconds E along the east-west centerline of
said Section 24 a distance of 1382.78’ back to the east one quarter corner of
said Section 24 and the POINT OF BEGINNING;

Said parcel as described contains plus or minus 1511.66 acres.

AND

A parcel of land situated in Section 24, Township 2 North, Range 77 West of the
6th Principal Meridian being more particularly described as follows;

The north one half of the northeast one quarter of the southwest one quarter
(N1/2NE1/4SW1/4), and the north one half of the northwest one quarter of the
southeast one quarter (N1/2NW1/4SE1/4).

Said parcel of land contains plus or minus 41.78 acres.

--------------------------------------------------------------------------------

SCHEDULE 1(m)

CONSTRUCTION BUDGET

Shorefox Budget 2006

 

     2002 - 6/30/05    7-12/2005    2,006    2,007    2,008    2,009    2,010   
2,011    TOTAL

Land Planning, Zoning & Engineering, Architect

   928,175    369,815    2,052,074    2,052,074    769,528    256,509         
6,428,175

Enviro. Reclamation / Engineering & Water/Sewer Fee

   243,449    909,314    1,250,000    1,250,000                3,652,763

Roads & Utilities (11.5 miles @ $540/linear ft.)

   61,361    558,301    19,433,280    9,716,640    3,238,880            
33,008,462

River Reclamation, Ponds & Reservoirs

   136,728    121,981    1,131,604    2,829,010    1,131,604    565,802         
5,916,728

Landscaping / Architecture / Fencing / Tree Farm

         1,300,000    3,250,000    1,300,000    650,000          6,500,000

Mass Grading

         3,000,000                  

Bridge Construction

   59,929    44,303    2,210,127    245,570                2,559,929          
                                  

Total

   1,429,642    2,003,714    30,377,085    19,343,293    6,440,012    1,472,311
   0    0    58,066,057

Lodge North

         700,000    4,900,000    1,400,000             7,000,000

Resort Course South & Tripp Davis

   120,752    379,248       4,000,000    1,500,000             9,000,000

Resort Course South Landscaping

         500,000    750,000    250,000             1,500,000

Justin Leonard Design

      517,889    75,000    150,000    150,000    70,753          963,642

Clubhouse South

         1,250,000    5,900,000    1,850,000             9,000,000

Operations / Mtce Facility

            2,000,000    500,000             2,500,000                         
                   

Total

   120,752    897,137    2,525,000    17,700,000    5,650,000    70,753    0   
0    29,963,642

--------------------------------------------------------------------------------

SCHEDULE 1(bb)

Description of Improvements To Be Completed with each Phase – To Be completed
and approved by Lender

prior to advances from the Construction Reserve Account

Phase I—$20 Million Advanced by Lender

             linear feet of roadways and utilities, including
                                

             acres mass graded, including                                  [all
of South Ranch?]

             acres served with master drainage system including
                                 [all of South Ranch?]

Phase II - $             Million to be advanced by Lender [same information]

Phase III - $             Million to be advanced by Lender [same information]

Each description of a Phase of the Improvements must be accompanied by a
detailed line item Budget and accompanied by contracts and bids supporting the
Budgeted costs, as well as the Engineer’s and General Contractor’s certificates
required by this Agreement, all to Lender’s satisfaction

--------------------------------------------------------------------------------

SCHEDULE 2(z)

LOCATION OF GOLF COURSE, CLUBHOUSE AND LODGE

LOGO [g98873image001.jpg]

--------------------------------------------------------------------------------

LOGO [g98873image002.jpg]

--------------------------------------------------------------------------------

SCHEDULE 2(k)

Permits, Licenses and Approvals

A. Permits and approvals from the applicable Governmental Authorities for
completion of the portion of the Improvements being undertaken initially and
currently in place:

Planned Development Overlay District Preliminary Plan

Town of Granby Annexation and Development Agreement

Granby Sanitation District Pre-Inclusion Agreement

Army Corp of Engineers - Wetland Delineation acceptance & Temporary Bridge
Permit

B. Needed in the future:

Final Army Corp of Engineers 404 Permit including Permanent Bridge Permit

Storm Water Management Plan

Final CDOT Access Permit

Conditional Use Permit for Gravel Pit

Engineering Approvals from Town and Granby Sanitation District

--------------------------------------------------------------------------------

SCHEDULE 5(a)

CERTIFICATE AND DRAW REQUISITION

DRAW NO.    

THIS CERTIFICATE AND DRAW REQUISITION (“Certificate”) is made this             
day of                     , 200  , by and from SHOREFOX DEVELOPMENT, LLC, a
Delaware limited liability company (“Borrower”), to CNL INCOME PARTNERS, LP, a
Delaware limited partnership (“Lender”).

Borrower hereby requisitions an advance in the amount of $             pursuant
to the Construction Loan Agreement (“Loan Agreement”) dated March     , 2006,
between Borrower and Lender. All documentation required for disbursements under
the Loan Agreement, including the Construction Funding Checklist and AIA Form
G702 and G703, is attached hereto. The amounts to be disbursed shall be paid to
the persons or entities identified in the attached invoices.

In connection with this requisition, Borrower hereby certifies that:

(a) The obligation to make such payments was incurred by Borrower after the
execution of the Loan Agreement in connection with the completion of the
Improvements and has not been the basis of any prior requisition which has been
paid.

(b) Borrower has not received written notice of any lien, right to lien or
attachment upon, or claim affecting the right of such payee to receive payment
of any of the money payable under this requisition to any of the persons, firm
or corporations named in the documentation attached to this Certificate, or if
any notice of any such lien attachment or claim has been received, such lien,
attachment or claim has been or will be released or discharged upon payment of
this requisition. All previous sums disbursed by Lender to Borrower have been
paid in accordance with the Lender approved draw request and if to contractors,
builders or materialmen the Borrower has obtained lien waivers in connection
therewith.

(c) With respect to any amounts requisitioned hereunder to be paid for labor or
to contractors, builders or materialmen, (i) the obligation to make such payment
has been properly incurred, (ii) any such labor was actually furnished or
installed in or about the Improvements and (iii) such materials or supplies that
are or will be acquired, constructed or installed as part of the Improvements
either are not subject to any lien or security interest or, if they are so
subject, such lien or security interest will be released or discharged upon
payment of the above requisition.

(d) The representations and warranties of Borrower set forth in the Loan
Agreement and the Instrument (as defined below) are correct as of the date of
this Certificate;

(e) Borrower is not in default under the Loan Agreement and nothing has occurred
to the knowledge of Borrower which prevents the performance of its obligations
under the Loan Agreement; and

[Signatures on Next Page]

--------------------------------------------------------------------------------

(f) The advance requisitioned under this Certificate is part of the principal
sum secured by the Commercial Deed of Trust, Assignment of Lease and Rents,
Security Agreement and Fixture Filing dated March     , 2006 from Borrower to
Lender (“Instrument”) and subject to the terms of the Loan Agreement.

 

       

    SHOREFOX DEVELOPMENT, LLC, a Delaware

    limited liability company

       

    By: SHOREFOX, LLC, a Delaware limited liability

    company, its Manager

          

By: GGRR, LLC, a Delaware limited liability

company, its Manager

 

 

        By:   

 

 

Name:

  

 

 

 

           Steven S. Bromberg, Manager

 

 

 

           Name:   

 

 

          

--------------------------------------------------------------------------------

SCHEDULE 5(a)

CONSTRUCTION FUNDING CHECKLIST

 

Orvis Shorefox

Concept/City/State

  

Request for Draw #            

Request for Final Draw                                    ¨

Shorefox Development, LLC

Owner Name

  

 

Date of Draw Request

DOCUMENTATION REQUIRED FOR DRAW REQUISITION

 

     Submitted    CNL Waived    N/A

Progress photograph

   ¨    ¨    ¨

Suppliers/sub-contractors invoices for all work completed to date

   ¨    ¨    ¨

Lien waivers for all work completed to date

(Must be signed before advance/all signatures must be notarized)

   ¨    ¨    ¨

AIA G-702 and G-703

        

¨        Signed by Developer (tenant)

   ¨    ¨    ¨

¨        Signed by General Contractor

   ¨    ¨    ¨

¨        Certified by Inspecting Engineer

Any Change Orders:

   ¨    ¨    ¨

¨        Yes

¨        No

        

¨        Invoices/contractor signed approval/revised construction budget
attached

¨        Approved by CNL

¨        Paid by Borrower

        

ADDITIONAL DOCUMENTATION REQUIRED FOR FINAL PAYMENTS

 

¨ Contractor’s Final Affidavit and accompanying subcontractor and supplier lien
waivers

 

¨ Certificate of Occupancy/Licenses/Permits

 

¨ As-Built Survey

 

¨ Affidavit of Substantial Completion

 

¨ Evidence of Insurance

 

¨ Assignment of Development Rights, if not previously executed

 

¨ Assignment of Warranties, if not previously executed