10KSB

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-KSB

(Mark One)

ý  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the fiscal year ended December 31, 2003

OR

o  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number 1-14462

AMERIVEST PROPERTIES INC.

(Name of small business issuer in its charter)

Maryland	84-1240264
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
1780 South Bellaire Street, Suite 100 Denver, Colorado	80222
(Address of Principal Executive Offices)	(Zip Code)
(303) 297-1800
(Issuer’s Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act:

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, $.001 par value	American Stock Exchange

Securities registered under Section 12(g) of the Exchange Act:

None.
(Title of Class)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to be the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.o

The issuer’s revenues for its most recent fiscal year were: $29,865,670

The aggregate market value of the issuer’s voting common stock held by non-affiliates of the issuer at June 30, 2003 was $91,890,833 (computed on the basis of $6.26 per share which was the reported closing sale price of the issuer’s common stock on the American Stock Exchange on June 30, 2003).

APPLICABLE ONLY TO CORPORATE REGISTRANTS

The number of shares outstanding of the issuer’s common stock at March 18, 2004 was 17,523,066.

Transitional Small Business Disclosure Format (check one): Yes o No ý

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the issuer’s definitive proxy statement for its 2004 annual meeting of shareholders are incorporated by reference into Part III of this Annual Report on Form 10-KSB.

TABLE OF CONTENTS

Part I
Item 1	Description of Business
Item 2	Properties
Item 3	Legal Proceedings
Item 4	Submission of Matters to a Vote of Security Holders
Part II
Item 5	Market for Common Equity and Related Stockholder Matters
Item 6	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7	Financial Statements
Item 8	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Item 8A	Controls and Procedures
Part III
Item 9	Directors, Executive Officers, Promoters and Control Persons; Compliance With Section 16(a) of the Exchange Act
Item 10	Executive Compensation
Item 11	Security Ownership of Certain Beneficial Owners and Management
Item 12	Certain Relationships and Related Transactions
Item 13	Exhibits and Reports on Form 8-K
Item 14	Principal Accountant Fees and Services

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PART I

ITEM 1.  DESCRIPTION OF BUSINESS

Overview

AmeriVest Properties Inc. is incorporated under the laws of the State of Maryland and operates as a self-administered and self-managed real estate investment trust (REIT).  We were incorporated in the State of Maryland in 1999.  We are a fully-integrated self-managed REIT and primarily invest in and operate commercial office buildings in select markets and lease the commercial office buildings to small and medium size tenants.  At December 31, 2003, we own 30 properties, which include an aggregate of 2,222,079 square feet, located in metropolitan Denver, Dallas, Phoenix and Indianapolis.

Business Strategy

We focus our efforts on the acquisition, rehabilitation and development of multi-tenant office buildings with a targeted average tenant size of between 2,000 and 4,000 square feet in select cities.

We believe that office space for small to medium size businesses is a large and underserved market.  According to data compiled by the Office of Advocacy of the U.S. Small Business Administration in 2002, 89% of all U.S. businesses employed fewer than 20 employees.  As a result, we believe that many businesses have office space requirements of no more than 4,000 square feet.

Small to medium size businesses often have specific needs and limitations that are different from larger businesses.  For example, small and medium size businesses cannot usually afford large corporate staffs to manage office leasing.  These businesses have needs similar to larger firms, such as access to cutting edge technology, conference facilities, high quality telecommunications equipment and other amenities, but usually do not have a comparable budget to those firms.  Our strategy is to focus on providing an office product targeted to this large market and its underserved needs in a cost effective manner.  The key elements of our strategy include:

Provide a Superior, Consistent Product

We seek to provide a level of amenities to the small and medium size businesses in our office properties that usually only larger companies would be able to obtain.  We accomplish this through new development, redevelopment of existing properties and improved management with a focus on customer service.  Upon acquiring a building, the AmeriVest design team evaluates the building’s architectural design, common areas, technology and amenities relative to our targeted small business tenant.  Based on the results of the design team’s evaluation, a design intent package and capital improvement budget is established for each acquisition which will dictate the improvements to be made to the property over the next few years.  Although the specific improvements and amenities may differ among buildings, all are designed to enhance the experience for the small and medium size business tenant.

The design and technology features incorporated into some of our buildings include keyless entry card systems to allow secure access 24 hours a day to individual suites, surveillance camera systems, and common area conference rooms with the latest telecommunications and presentation equipment available to all tenants without additional charge.  Entry lobbies may feature touchpad electronic directories and, where possible, our buildings are engineered to provide control of heating and air conditioning in individual tenant suites.  Many properties include a unique art program in common areas and corridors.  Signage for tenant suites in many buildings allows for the tenant’s individual logo to be incorporated on a common background.  Many properties are wired to offer high speed voice and data service from multiple telecom providers.  Over time we plan to add some of these and additional small tenant amenities to all of our core buildings as market demand and capital constraints dictate.

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Streamline the Leasing Process

We provide our clients with a leasing philosophy that is designed to meet the unique needs of a small to medium size tenant with limited staffing and real estate expertise.  We operate our multi-tenant buildings under a “no-hassle” leasing experience, using a simplified standard lease that has been designed for fairness to both tenant and landlord.  For every property, the lease transaction starts with our rate matrix, a standardized menu of rental rates based on lease terms and market lease rates for our submarkets.  This rate matrix reduces negotiating time and provides for fairness and consistency to our tenants.  We also incorporate a high quality standard tenant finish package, greatly reducing the time to design and build out finished space.  In some buildings, we build completely finished suites in varying sizes on a purely speculative basis.  Our streamlined process greatly reduces negotiation and space planning time and allows the tenant to move into its space sooner and with less aggravation than is typical in the leasing process, reducing the lease transaction time and cost for the tenant and us.

Provide a High Level of Service

We have developed and employ a positive, service-oriented mentality to our tenants.  Our core buildings feature a regional “Tenant Relations Advocate” whose job description is to interface regularly with all tenants and maximize tenant retention.  The Tenant Relations Advocate is dedicated to tenant issues with a singular focus on tenant retention.  The Tenant Relations Advocate personifies our service-oriented mentality and is available to resolve minor tenant service complaints before they develop into major issues.

Our Tenant Relations Advocates work with team leaders for each region, who in turn report to a senior manager in our Denver headquarters, providing direct and regular feedback on tenant concerns.  We believe that our customer-focused management will improve our tenant retention rates.

Target Select Cities

We have focused on employing our strategy in buildings or projects containing at least 100,000 square feet, within select cities where we hope to build meaningful multi-property portfolios.  We target cities that possess enough total office square footage to offer the possibility of multiple acquisitions and liquidity in the event of a desired sale, a healthy number of small businesses and positive growth dynamics.  Historically, in order to maximize management efficiencies, we have focused on markets in relatively close proximity to our headquarters in Denver.  As we grow, we plan to expand our radius to include cities within the United States and Canada that possess our desired characteristics.

As a result of our focused strategy, we believe that our properties provide office space that is particularly attractive for small to medium size tenants.  By executing on our strategy we believe we have been able to maintain high occupancy rates while still maintaining strong rent per square foot trends in our core markets compared to the general office market.

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Operating Performance and Stockholder Return

Since 1997, our first full year as a public company, our average annual total return to stockholders has been 23.0%.  The following table compares our total return, based on stock price appreciation and reinvestment of all dividends, with the office REIT and equity REIT sectors, as reported by the National Association of Real Estate Investment Trusts (NAREIT), and the total return of the S&P 500, also reported by NAREIT.

Total Return(1) to Stockholders

	AmeriVest(2)		Office REIT(3)		Equity REIT(3)		S & P 500(3)
1 -Year  (2003)	25.4	%	34.0	%	37.1	%	28.7	%
2 -Year Avg.  (2002-2003)	20.8	%	13.9	%	20.5	%	3.3	%
3 -Year Avg.  (2001-2003)	24.8	%	11.5	%	18.3	%	(1.8	)%
4 -Year Avg.  (2000-2003)	23.2	%	17.5	%	20.3	%	(3.6	)%
5 -Year Avg.  (1999-2003)	23.5	%	14.8	%	15.3	%	1.3	%
6 -Year Avg.  (1998-2003)	19.6	%	9.5	%	9.9	%	5.9	%
7 -Year Avg.  (1997-2003)	23.0	%	12.2	%	11.3	%	9.8	%

(1) Total return based on stock price appreciation and reinvestment of all dividends.

(2) Morningstar, Inc. (Morningstar.com)

(3) National Association of Real Estate Investment Trusts (NAREIT)

We believe that by focusing on a specific property type in cities with a growing small tenant market, we should be able to increase our revenues, earnings and cash flows.  Although there is no assurance or guarantee, it is our intention that growth in our revenues, earnings and cash flows, over the long term, will result in an increase in our stock price and the total return to our stockholders.

Acquisitions and Developments

2004 Transactions

On March 16, 2004, the Company acquired the Camelback Lakes office building.  Camelback Lakes is located in Phoenix, Arizona and contains approximately 203,000 square feet on 12.04 acres of land.  The purchase price for Camelback Lakes was $31,980,000, which was paid with $21,000,000 from our $42,000,000 senior secured revolving line of credit from Fleet National Bank (Secured Fleet Facility) and the balance from our $30,000,000 unsecured revolving line of credit from Fleet National Bank (Unsecured Fleet Facility).

On March 16, 2004, the Company sold its Texas Bank Buildings for $4,100,000.  The four properties are located in Clifton, Georgetown, Henderson and Mineral Wells, Texas, contain an aggregate of 60,095 square feet and had an aggregate net book value of approximately $3,195,000 at December 31, 2003.

2003 Transactions

Greenhill Park Acquisition

On December 4, 2003, the Company acquired the Greenhill Park office building.  Greenhill Park is located in Addison, Texas and contains approximately 252,000 square feet.  Greenhill Park is subject to a ground lease.  The purchase price for Greenhill Park was $10,500,000, which was paid with $5,250,000 from the Secured Fleet Facility and the balance in cash from a portion of the proceeds from our 2003 public offering.

Scottsdale Norte Acquisition

On October 7, 2003, the Company acquired the Scottsdale Norte office building.  Scottsdale Norte is located in Scottsdale, Arizona and contains approximately 79,000 square feet on 5.451 acres of land.  The purchase price for Scottsdale Norte was $12,250,000, which was paid with $6,630,000 from the assumption of the existing loan from Southern Farm Bureau Life Insurance Company and the balance in cash from a portion of the proceeds

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from our 2003 public offering.

Financial Plaza Acquisition

On September 10, 2003, the Company acquired the Financial Plaza office building.  Financial Plaza is located in Mesa, Arizona and contains approximately 311,000 square feet on 6.0673 acres of land.  The purchase price for Financial Plaza was $39,000,000, which was paid with $24,750,000 from the assumption of the existing loan from Allstate Life Insurance Company and the balance in cash from a portion of the proceeds from our 2003 public offering.

Keystone Office Park IV Development

During 2003, the Company completed the construction of an approximately 18,000 square foot building adjacent to the existing Keystone Office Park in Indianapolis, Indiana.  This building was constructed to accommodate the expansion needs of some of the existing tenants as well as market demand.  The building opened for occupancy in August 2003 and had an occupancy rate of approximately 68% at December 31, 2003.

Southwest Gas Acquisition

On February 6, 2003, the Company acquired the Southwest Gas office building.  The Southwest Gas Building is located in Phoenix, Arizona and contains approximately 148,000 square feet on 7.38 acres of land.  The purchase price for the Southwest Gas Building was $17,000,000, which was paid with $11,900,000 from the Secured Fleet Facility and the balance from a short-term loan, also from Fleet National Bank.  This short-term loan was refinanced with the Unsecured Fleet Facility.

2002 Transactions

Chateau Plaza Acquisition

On November 25, 2002, the Company acquired the Chateau Plaza office building.  Chateau Plaza is located in Dallas, Texas and contains approximately 171,000 square feet on one acre of land.  The purchase price for Chateau Plaza was $22,000,000, which was paid with $15,400,000 from the Secured Fleet Facility and the balance paid in cash from a portion of the proceeds from our 2002 public offering.

Centerra Acquisition

On November 12, 2002, the Company acquired the Centerra office building.  Centerra is located in Denver, Colorado and contains approximately 186,000 square feet on 1.15 acres of land.  The purchase price for Centerra was $18,658,300, which was paid with $13,057,660 from the Secured Fleet Facility and the balance paid in cash from a portion of the proceeds from our 2002 public offering.

Keystone Land Acquisition

On September 6, 2002, the Company acquired 2.55 acres of undeveloped land, adjacent to Keystone Office Park in Indianapolis, Indiana, from Sheridan Realty Partners, L.P., an affiliate, for $320,000.  The purchase price was determined based on the fair market value of the land and was paid through the issuance of 52,893 shares of our common stock ($6.05 per share).  In late 2002, the Company commenced construction of an approximately 18,000 square foot building on this land.

Parkway Centre II Acquisition

On September 5, 2002, the Company acquired the Parkway Centre II office building.  Parkway Centre II is located in Plano, Texas and contains approximately 152,000 square feet on 6.4 acres of land.  The purchase price for Parkway Centre II was $22,000,000, which was paid with $17,000,000 from the assumption of the existing loan from J.P. Morgan Chase Commercial Mortgage Securities Corp. and the balance paid in cash from a portion of the

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proceeds from our 2002 public offering.

2001

Kellogg Building Acquisition

On December 21, 2001, the Company acquired the Kellogg Building.  The Kellogg Building is located in Littleton, Colorado and contains approximately 112,000 square feet on five acres of land.  The purchase price for the Kellogg Building was $13,550,000, which was paid with $9,500,000 from the proceeds of a loan from US Bank National Association and the balance paid in cash from a portion of the proceeds from our 2001 public offering.

Panorama Falls Sale

On December 6, 2001, the Company sold an 80% tenancy-in-common interest in the Panorama Falls building to a long-term investor affiliated with a large shareholder.  Panorama Falls is located in Englewood, Colorado and contains approximately 60,000 square feet on six acres of land.  The sales price for the interest in Panorama Falls was $4,880,000 payable as follows:

•$2,180,000 to KeyBank National Association to pay down a portion of the mortgage loan;

•assumption of 80% of the remaining mortgage loan in the amount of $2,395,732; and

•the remainder of $304,268 in cash, less closing costs.

Arrowhead Fountains Acquisition

On November 19, 2001, the Company acquired the Arrowhead Fountains office building.  Arrowhead Fountains is located in Peoria, Arizona and contains approximately 96,000 square feet on five acres of land.  The purchase price for Arrowhead Fountains was $12,750,000, which was paid with $9,300,000 from the assumption of the existing loan from Nationwide Life Insurance Company and the balance paid in cash from a portion of the proceeds from our 2001 public offering.

Odessa Sale

On October 23, 2001, the Company sold its office building in Odessa, Texas for $132,500.  The sale resulted in a gain on sale of $12,747.

Giltedge Sale

On June 1, 2001, the Company sold the Giltedge office building in Appleton, Wisconsin for $3,650,000.  The sale resulted in a gain on sale of $1,143,698.  The cash proceeds from this transaction of $458,030 were used to complete a tax-deferred exchange under Section 1031 of the Internal Revenue Code.

AmeriVest Plaza at Inverness Acquisition

On April 1, 2001, the Company acquired from Sheridan Investments, LLC, an affiliate, 100% of the ownership interests of Sheridan Plaza at Inverness, LLC.  Sheridan Plaza at Inverness, LLC owns two office buildings (which are known as AmeriVest Plaza at Inverness) located in Englewood, Colorado containing approximately 119,000 square feet on 6.7 acres of land.  The purchase price was $22,895,067 and consisted of:

•$705,135 for our 9.639% preferred membership interest in Sheridan Investments, LLC, the owner of all of the membership interests in Sheridan Plaza at Inverness LLC, which was transferred back to Sheridan Investments, LLC;

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•$6,474,329 paid with (1) 1,057,346 shares of our common stock, at a price of $5.69 per share (based on an average market price of the shares over a period of several days before and after the date of the announcement of the acquisition) and (2) the cash proceeds of $458,030 from the sale of the Giltedge building;

•assumption of the mortgage loan in the amount of $14,954,425; and

•assumption of other liabilities in the amount of $761,178.

The acquisition was structured as a tax-deferred exchange of the Giltedge office building under Section 1031 of the Internal Revenue Code.  Due to the related party nature of this transaction, accounting principles generally accepted in the United States require us to record this acquisition at its historical net book value.  The difference between the purchase price and the historical net book value was $4,507,557 and has been recorded as a non-cash dividend during 2001.

Disclosure Regarding Forward-Looking Statements And Cautionary Statements

This annual report includes “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933, as amended.  All statements other than statements of historical facts included in or incorporated by reference into this annual report, including statements regarding our expected financial position, business strategy, plans and objectives of management for future operations, expected capital expenditures, expected funding sources, planned investments and forecasted dates, are forward-looking statements.  These forward-looking statements are based on our current expectations, beliefs, assumptions, estimates and projections about the industry and markets in which we operate.  Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and variations of such words and similar expressions are often used to identify forward-looking statements.  Although we believe that the expectations and assumptions reflected in the forward-looking statements are reasonable, these statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict and many of which are beyond our control.  Therefore, actual outcomes and results may differ materially from what is expressed, forecasted or implied in such forward-looking statements.  We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

Additional cautionary statements concerning important factors that could cause actual results to differ materially from our expectations are disclosed in this annual report, including the statements contained in the “Risk Factors” section below.  All written and oral forward-looking statements attributable to us or persons acting on our behalf subsequent to the date of this annual report are expressly qualified in their entirety by such cautionary statements.

Risk Factors

Our variable rate debt subjects us to interest rate risk.

At December 31, 2003, approximately $33.6 million, or 21%, of our total mortgage debt was at variable rates ranging from 275 to 400 basis points over LIBOR.  The weighted-average interest rate on this variable rate debt was approximately 5% at December 31, 2003.  All of this variable rate debt is due in 2005.  Increases in interest rates could increase our interest expense, which would adversely affect net earnings and cash available for payment of our debt obligations and distributions to our stockholders.

We face a competitive market, which could limit our ability to lease our properties or secure attractive investment opportunities.

Our business strategy contemplates expansion through acquisition.  The commercial real estate industry is highly competitive, and we compete with substantially larger companies, including substantially larger REITs, for the acquisition, development and operation of properties.  Some of these companies are national or regional

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operators with far greater resources than we have.  As a result, we may not be able or have the opportunity to make suitable investments on favorable terms in the future.  Competition in a particular area also could adversely affect our ability to lease our properties or to increase or maintain rental rates.  Thus, the presence of these competitors may impede the continuation and development of our business.

Our debt level may have a negative impact on our income and our ability to pay dividends.

We have incurred indebtedness in connection with the acquisition of our properties, and we may incur new indebtedness in the future in connection with our acquisition, development and operating activities.  At December 31, 2003, we had approximately $159.5 million of long-term indebtedness, of which approximately $52.6 million in the aggregate is due in 2005 and 2006.  As a result of our use of debt, we are subject to the risks normally associated with debt financing, including:

•that our cash flow will be insufficient to make required payments of principal and interest;

•that we will be unable to refinance some or all of our indebtedness or that any refinancing will not be on terms as favorable as those of the existing indebtedness;

•that required payments on mortgages and on our other indebtedness are not reduced if the economic performance of any property declines;

•that debt service obligations will reduce funds available for distribution to our stockholders; and

•that any default on our indebtedness could result in acceleration of those obligations.

If the economic performance of any of our properties declines, our ability to make debt service payments would be adversely affected.  If a property is mortgaged to secure payment of indebtedness and we are unable to meet mortgage payments, we may lose that property to lender foreclosure with a consequent loss of income and asset value.

We do not have a policy limiting the amount of debt that we may incur; however, our Secured Fleet Facility limits our total liabilities to 70% of gross assets, as calculated in accordance with the loan agreement.  This threshold will decrease to 65% at June 30, 2004.  Our total liabilities to total market capitalization ratio was approximately 57% at December 31, 2003.  Our leverage levels may make it difficult to obtain any additional financing based on our current portfolio or to refinance existing debt on favorable terms or at all.  Our leverage levels also may adversely affect the market value of our stock if we are perceived as more risky than our peers.

Some of our buildings are subject to special income tax considerations, which could result in substantial tax liability upon their sale.

If we sell any of our Sheridan Center buildings before 2006 (ten years after the original acquisition date of the property or the property exchanged for that property), we will be required to pay tax at the highest applicable corporate rate on the excess of the buildings’ fair market value at the effective time of our REIT election over its adjusted basis at such time (or, if lesser, the excess of the fair market value of the building at the time of the sale over its adjusted basis at the time of the sale).

Because we used proceeds from the sale of a small office building in Wisconsin to purchase AmeriVest Plaza in an exchange qualifying under Section 1031 of the Internal Revenue Code, we may also be required to hold AmeriVest Plaza until 2006 in order to avoid corporate tax on the appreciation of the exchanged property as of the effective date of our REIT election.  If we are subject to tax on any such gain at the highest corporate rate, the amount of this corporate tax could be substantial.  We may not have sufficient cash available to pay the corporate taxes resulting from the sale of these properties.

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New developments and acquisitions may fail to perform as we expect.

Over the last few years, we have focused our efforts on the acquisition and redevelopment of multi-tenant office buildings.  We intend to continue to selectively develop and acquire office properties.  In deciding whether to acquire or develop a particular property, we make assumptions regarding the expected future performance of that property. In particular, we estimate the return on our investment based on expected occupancy and rental rates.  If the property is unable to achieve the expected occupancy and rental rates, it may fail to perform as we expected in analyzing our investment.  When we acquire a property, we often reposition or redevelop that property with the goal of increasing profitability.  Our estimate of the costs of repositioning or redeveloping an acquired property may prove inaccurate, which may result in our failure to meet our profitability goals.  Additionally, we may acquire new properties not fully leased and the cash flow from existing operations may be insufficient to pay the operating expenses and debt service associated with that property until the property is fully leased.  If one or more of these new properties do not perform as expected or we are unable to successfully integrate new properties into our existing operations, our financial performance may be adversely affected.

Development and construction risks could adversely affect our profitability.

We are currently improving several of our properties and may develop new properties in the future.  Our renovation, redevelopment, development and related construction activities may subject us to the following risks:

•We may be unable to obtain, or suffer delays in obtaining, necessary zoning, land-use, building, occupancy and other required governmental permits and authorizations, which could result in increased costs or our abandonment of these projects.

•We may incur construction costs for a property which exceed our original estimates due to increased costs for materials or labor or other costs, such as asbestos or mold abatement, that we did not anticipate.

•We may not be able to obtain financing on favorable terms, which may make us unable to proceed with our development activities.

•We may be unable to complete construction and lease-up of a property on schedule, which could result in increased debt service expense or construction costs.

Additionally, the time frame required for development, construction and lease-up of these properties means that we may have to wait years for a significant cash return.  Because we are required to make cash distributions to our stockholders to maintain our REIT tax status, if the cash flow from operations or refinancing is not sufficient, we may be forced to borrow additional money to fund such distributions.

Failure to succeed in new markets may limit our growth.

We may make selected acquisitions outside our current market areas from time to time as appropriate opportunities arise.  Our historical experience is in metropolitan Denver, Dallas, Phoenix and Indianapolis, and we may not be able to operate successfully in other market areas new to us.  We may be exposed to a variety of risks if we choose to enter into new markets. These risks include:

•a lack of market knowledge and understanding of the local economies;

•an inability to identify acquisition or development opportunities;

•an inability to attract tenants to our properties in these new markets;

•an inability to obtain construction trades people; and

•an unfamiliarity with local government and permitting procedures.

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Any of these factors could adversely affect the profitability of projects outside our current markets and limit the success of our acquisition, development and leasing strategy.

Real estate investments are inherently risky, which could adversely affect our profitability and our ability to make distributions to our stockholders.

Real estate investments are subject to varying degrees of risk.  If we acquire or develop properties and they do not generate sufficient operating cash flow to meet operating expenses, including debt service, capital expenditures and tenant improvements, our income and ability to pay dividends to our stockholders will be adversely affected. Income from properties may be adversely affected by:

•decreases in rent and/or occupancy rates due to competition, economic or other factors;

•increases in operating costs such as real estate taxes, insurance premiums, site maintenance and utilities;

•changes in interest rates and the availability of financing; and

•changes in laws and governmental regulations, including those governing real estate usage, zoning and taxes.

Future terrorist attacks in the United States and international hostilities may result in declining economic activity, which could reduce the demand for and the value of our properties.

Future terrorist attacks in the United States, such as the attacks that occurred in New York and Washington, D.C. on September 11, 2001, and other acts of terrorism or war, whether in the United States or abroad, may result in declining economic activity and reduced demand for our properties.  A decrease in demand would make it difficult for us to renew or re-lease our properties at lease rates equal to or above historical rates.  Terrorist activities also could directly impact the value of our properties through damage, destruction or loss.  To the extent that our tenants are impacted by future attacks, their businesses similarly could be adversely affected, including their ability to continue to honor obligations under their existing leases.

These types of events also may adversely affect the markets in which our securities trade.  These acts may cause further erosion of business and consumer confidence and spending and may result in increased volatility in national and international financial markets and economies.  Any one of these events may cause a decline in the demand for real estate, delay the time in which our new or renovated properties reach stable occupancy, increase our operating expenses due to increased physical security and insurance costs for our properties and limit our access to capital or increase our cost of raising capital.

General economic conditions may adversely affect our financial condition and results of operations.

Periods of economic slowdown or recession in the United States and in other countries, rising interest rates or declining demand for real estate, or the public perception that any of these events may occur, could result in a general decline in rents or an increased incidence of defaults by our tenants under existing leases, which would adversely affect our financial position, results of operations and cash flow, as well as the trading price of our securities and our ability to satisfy our debt service obligations and to make distributions to our stockholders.

Unfavorable changes in local market and economic conditions could hurt occupancy or rental rates.

Currently, our properties are located in metropolitan Denver, Dallas, Phoenix and Indianapolis. Economic conditions in our local markets may significantly affect occupancy and rental rates.  Occupancy and rental rates, in turn, may significantly affect our profitability and our ability to satisfy our financial obligations.  The economic condition of our local markets may depend on one or more industries and, therefore, an economic downturn in one of these industry sectors may adversely affect our performance in that market.  Local real estate market conditions

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may include a large supply of competing space, and we compete for tenants based on rental rates, attractiveness and location of a property, and quality of maintenance and management services.

We are subject to the credit risk of our tenants, which could result in lease payments not being made and a significant decrease in our revenues.

We are subject to the credit risk of our tenants.  Many of our tenants are small companies with nominal net worth.  We cannot assure you that our tenants will not default on their leases and fail to make rental payments to us.  In particular, local economic conditions and factors affecting the industries in which our tenants operate may affect our tenants’ ability to make lease payments to us.  Moreover, we may be unable to locate a replacement tenant in a timely manner or on comparable or better terms if a tenant defaults on its lease.  The loss of rental revenues from a number of our tenants may adversely affect our profitability and our ability to meet our financial obligations.

We may be unable to renew leases or re-lease space on a timely basis or on comparable or better terms, which could significantly decrease our revenues.

A significant number of our leases on our 100%-owned properties, representing approximately 46% of our annualized lease revenue expire on or before December 31, 2005.  Current tenants may elect not to renew their leases upon the expiration of their terms.  Alternatively, current tenants may attempt to terminate their leases prior to the expiration of their current terms.  Many of our leases are for relatively short terms of a few years.  If non-renewals or terminations occur, we may not be able to locate a qualified replacement tenant and, as a result, we would lose a source of revenue while remaining responsible for the payment of our obligations.  Moreover, the terms of a renewal or new lease may be less favorable than current lease terms.  This may cause affected properties to be impaired.

Loss of a significant tenant could lead to a substantial decrease in our cash flow and an impairment of the value of our real estate.

Although we target tenants seeking 2,000 to 4,000 square feet of office space, we may have several significant tenants from time to time, the loss of any of which could adversely affect our cash flow and may cause affected properties to be impaired.

Chateau Plaza in Dallas, Texas is approximately 70% (120,607 square feet) leased to a single tenant, Dean Foods Company, under a direct lease through December 2005.  However, the tenant has the option to terminate the lease upon eight months written notice.  Should the tenant elect to terminate the lease early, it is obligated to pay a termination penalty equal to three months of the current base rent plus any unamortized tenant improvement and leasing costs.  The loss of this tenant could adversely affect our cash flow until we are able to re-lease the vacated space.  Our lease with Dean Foods Company accounts for approximately $2,760,000 of our annual revenue.

Currently, eleven of our thirteen Texas State Buildings are leased to various agencies of the State of Texas.  Although each of these leases includes a specific termination date, the State of Texas may terminate a lease at any time if state appropriated funds necessary to pay the required rents are unavailable or federally funded programs are curtailed.  If the State of Texas were to terminate or fail to renew a lease, it may be difficult for us to locate another tenant on a timely basis or on comparable or better terms, especially for those buildings located in smaller cities and more remote locations.  The State of Texas also may elect not to renew leases with us upon expiration.  For the years ended December 31, 2003 and 2002, leases with the State of Texas accounted for approximately $1,577,000 and $1,775,000 in revenue, respectively.  In November 2001, the State of Texas vacated our Clint, Texas building, which accounted for $125,676 in annual revenue.  In 2002 and 2003, we recorded impairment charges for this property of $275,000 and $334,592, respectively, due to difficulties in finding a replacement tenant.  Impairment charges recorded on this property have reduced its net book value to its estimated fair value of $100,000.  In December 2002, the State of Texas vacated our Paris, Texas building, which accounted for $242,567 in annual revenue.  In 2003, we recorded an impairment charge for this property of $1,131,340 due to difficulties in finding a replacement tenant.  The impairment charge recorded on this property has reduced its net book value to its estimated fair value of $43,000.  The leases for two properties in Amarillo and Bellville, Texas expire in August 2004 and December 2004, respectively, and it has yet to be determined if the State of Texas will renew its leases.  These properties account for approximately $308,000 in aggregate annual revenue and had an aggregate net book value of

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approximately $1,683,000 at December 31, 2003.  The Clint, Texas building and Paris, Texas building remain vacant at the date of this report.

Our uninsured and underinsured losses could result in loss of value of our properties.

There are certain types of losses, generally of a catastrophic nature, such as earthquakes and floods, that may be uninsurable or not economically insurable, as to which our facilities are at risk in their particular locations.  Our management uses its discretion in determining amounts, coverage limits and deductibility provisions of insurance, with a view to obtaining appropriate insurance on our investments at a reasonable cost and on suitable terms.  These decisions may result in our having insurance coverage that, in the event of a substantial loss, would not be sufficient to repay us for the full current market value or current replacement cost.  Also, due to inflation, changes in codes and ordinances, environmental considerations, and other factors, it may not be feasible to use insurance proceeds to replace a building after it has been damaged or destroyed.

The success of our company depends on the continuing contributions of our key personnel.

We have a highly skilled management team and specialized workforce managing our properties.  We do not have employment agreements with any of our executive officers or key employees and, thus, any executive officer or key employee may terminate his or her relationship with us at any time.

There is limited liquidity in our real estate investments, which could limit our flexibility.

Real estate investments are relatively illiquid.  Our ability to vary our portfolio in response to changes in economic and other conditions will be limited.  We may not be able to dispose of an investment when we find disposition advantageous or necessary, and the sale price of any disposition may not recoup or exceed the amount of our investment.  In addition, federal tax laws limit our ability to sell properties that we have owned for fewer than four years, and this may affect our ability to sell properties without adversely affecting returns to our stockholders.

Furthermore, certain of our mortgage loans provide for penalties upon the early termination of the respective loan.  This may restrict our ability to sell those subject properties.

We may suffer environmental liabilities which could result in substantial costs.

Under various environmental laws, a current or previous owner or operator of real property may be liable for the costs of removal or remediation of hazardous or toxic substances, including asbestos-containing materials and mold, that are located on or under the property.  These laws often impose liability whether the owner or operator knew of, or was responsible for, the presence of those substances. In connection with our ownership and operation of properties, we may be liable for these costs, which could be substantial.  Also, our ability to arrange for financing secured by that real property might be adversely affected because of the presence of hazardous or toxic substances or the failure to properly remediate any contamination.  In addition, we may be subject to claims by third parties based on damages and costs resulting from environmental contamination at or emanating from our properties.  In particular, two lawsuits have been filed against our AmeriVest Properties Texas Inc. subsidiary alleging that our Mission, Texas property is contaminated with airborne contaminants.  Our insurance company is defending us in these lawsuits.  These lawsuits, or similar lawsuits, if adversely determined, could have a material adverse effect on our business and financial condition, and we cannot assure you that other lawsuits will not be filed against us with respect to this building or our other buildings.

After the acquisition of the Sheridan Center buildings, we embarked on an asbestos remediation program in accordance with applicable federal and state requirements, using licensed contractors to remove, wherever accessible or otherwise required, asbestos-containing materials in the buildings, including ceiling tiles, drywall joint compound, wood and metal fire doors, wall texture, mudded pipe elbows and valves, thermal systems insulation, floor tile and mastic and boiler insulation.  Most of the remediation has been completed, except for one building, which is expected to be completed over the next few years as tenants vacate spaces, allowing access to the asbestos materials.

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Non-compliance with the Americans with Disabilities Act could result in compliance costs and fines.

Under the Americans with Disabilities Act of 1990, or the ADA, all public accommodations are required to meet certain federal requirements related to physical access and use by disabled persons.  While we believe we are in compliance with the ADA requirements, a determination that we are not in compliance with the ADA could require capital expenditures to remove access barriers and non-compliance could result in the imposition of fines or an award of damages to private litigants.  If we were required to make modifications to comply with the ADA or other governmental rules and regulations, our ability to make expected distributions to our stockholders could be adversely affected.

The ability of our stockholders to control our policies or effect a change in control of our company is limited, which may not be in our stockholders’ best interests.

Charter and Bylaws Provisions.  Some provisions of our charter and bylaws may delay or prevent a change in control of our company or other transactions that could provide our stockholders with a premium over the then-prevailing market price of our common or preferred stock or that might otherwise be in the best interests of our stockholders.  These provisions include:

•Classified Board of Directors and size of Board of Directors fixed within range; removal of directors only for cause.  Our Board of Directors is divided into three classes with staggered terms of office.  The total number of directors is fixed by a majority vote of the Board of Directors within a range of a minimum of three and a maximum of nine.  Directors may only be removed for cause.  These provisions may make it more difficult for a third party to gain control of our Board of Directors.  At least two annual meetings of stockholders, instead of one, generally would be required to effect a change in a majority of our Board of Directors, and the number of directors cannot be increased above the maximum number of directors specified in our charter without board and stockholder approvals.

•Two-thirds stockholder vote required to approve some amendments to the charter.  Some amendments to our charter must be approved by the affirmative vote of stockholders holding at least 66 2/3% of the outstanding shares of our common stock, voting together as a single class.  These voting requirements may make amendments to our charter that stockholders believe desirable more difficult to effect.

•Issuance of preferred stock without stockholder approval.  Our Board of Directors has the ability to authorize the issuance of preferred stock without stockholder approval and to set or change the designation, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications, or terms or conditions of redemption of the preferred stock.  Our Board of Directors could therefore authorize series of preferred stock that may have voting provisions that could delay or prevent a change in control or other transaction that might involve a premium price or otherwise be in the best interests of our stockholders.

•Ownership Limitation.  In order to assist us in maintaining our qualification as a REIT, our Articles of Incorporation contain provisions generally limiting the ownership of shares of our capital stock by any single stockholder to 9% of our outstanding shares, unless waived by our Board of Directors.  At our 2003 annual meeting, our stockholders approved the amendment and restatement of our Articles of Incorporation to include the ownership limitation provisions in our Articles of Incorporation.  Prior to the 2003 annual meeting, these ownership limitation provisions were contained in our bylaws.  These provisions could also delay or prevent an acquisition or change in control of our company that could benefit our stockholders.

Maryland Business Statutes.  As a Maryland corporation, we are subject to the provisions of the Maryland General Corporation Law.  Maryland law imposes restrictions on some business combinations and requires compliance with statutory procedures before some mergers and acquisitions can occur.  These provisions of Maryland law may have the effect of discouraging offers to acquire us even if the acquisition would be advantageous to our stockholders.  These provisions include:

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•Unsolicited takeover provisions.  Maryland law provides that the Board of Directors of a Maryland corporation is not subject to higher duties with regard to actions taken in a takeover context.  These provisions may make it more difficult to effect an unsolicited takeover of a Maryland corporation.  Maryland law also allows publicly held corporations with at least three independent directors to elect to be governed, without shareholder approval, by all or any part of Maryland law provisions relating to extraordinary actions and unsolicited takeovers.

•Business combination with interested stockholders.  The Maryland Business Combination Act provides that, unless exempted, a Maryland corporation may not engage in business combinations, including mergers, dispositions of 10% or more of its assets, issuances of shares and other specified transactions, with an “interested stockholder” or its affiliates, for five years after the most recent date on which the interested stockholder became an interested stockholder and thereafter unless specified criteria are met.

Control share acquisition.  The Maryland Control Shares Acquisition Act provides that shares acquired by any person over one-tenth, one-third and a majority of the voting power of a corporation do not have voting rights, except to the extent approved by the vote of two-thirds of the shares of common stock entitled to be cast on the matter.

Other constituencies.  Maryland law expressly authorizes a Maryland corporation to include in its charter a provision that allows the Board of Directors to consider the effect of a potential acquisition of control on stockholders, employees, suppliers, customers, creditors and communities in which offices or other establishments of the corporation are located.  Our current charter does not include a provision of this type.  Maryland law also provides, however, that the inclusion or omission of this type of provision in the charter of a Maryland corporation does not create an inference concerning factors that may be considered by the Board of Directors regarding a potential acquisition of control.  This law may allow our Board of Directors to reject an acquisition proposal even though the proposal is in the best interests of our stockholders.

Other Maryland laws.  Maryland law also permits the Board of Directors, without stockholder approval, and even if contrary to a company’s bylaws or charter, to classify the Board of Directors, require a two-thirds vote for the removal of directors and give the Board of Directors sole power to fill Board vacancies occurring for any reason.

There is a limited market for our common stock, which could hinder the ability of our stockholders to sell our shares.

Historically, there has been limited trading volume for our common stock and there may be a limited trading volume for our preferred stock.  Our equity market capitalization places us at the low end of market capitalization among all REITs.  Because of our small market capitalization, most of our investors are individuals.  We cannot assure you that the market for our securities will remain at current levels or expand.  Due to our limited trading volume and small market capitalization, many investors may not be interested in owning our securities because of the inability to acquire or sell a substantial block of our stock at one time.  This illiquidity could have an adverse effect on the market price of our securities. In addition, a stockholder may not be able to borrow funds using our securities as collateral because lenders may be unwilling to accept the pledge of securities having such a limited market.  Any substantial sale of our securities could have a material adverse effect on the market price of our securities.

We may not be able to pay dividends to our stockholders regularly.

Our ability to pay dividends in the future depends on our ability to operate profitably and to generate cash from our operations in excess of debt service obligations and required capital expenditures.  Because we have had to finance our growth, we have not been able to generate sufficient cash from our operations to cover all these obligations and have had to fund certain capital expenditures from external sources, including borrowings and equity offerings.  The payment of dividends is in the sole discretion of our Board of Directors.  We cannot assure you that we will be able to pay dividends consistently with historical payments.

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We may incur tax liabilities if we fail to qualify as a REIT.

We believe that we have been organized and operated so as to qualify as a REIT under the Internal Revenue Code of 1986, as amended, since our taxable year ended December 31, 1996.  However, we cannot assure you that we will continue to be qualified as a REIT.  Qualification as a REIT involves the application of highly technical and complex Internal Revenue Code provisions for which there are only limited judicial or administrative interpretations.  The determination of various factual matters and circumstances not entirely within our control may affect our ability to qualify as a REIT.  In addition, legislation, new regulations, administrative interpretations or court decisions may significantly change the requirements for qualification as a REIT or the federal income tax consequences of that qualification.

In order to qualify as a REIT, at all times during the second half of each taxable year following our first taxable year, no more than 50% in value of our shares may be owned, directly or indirectly and by applying constructive ownership rules, by five or fewer individuals, including some tax-exempt entities.  Our Articles of Incorporation provide restrictions regarding the transfer of shares, including a 9% limitation on the ownership of our shares by any stockholder, that are intended to assist us in continuing to satisfy this share ownership requirement.

If we were unable to qualify as a REIT in any taxable year, we would not be allowed a deduction for distributions to stockholders in computing our taxable income and would be subject to federal income tax on our taxable income at regular corporate rates and possibly to the alternative minimum tax.  Unless we are entitled to relief under certain Internal Revenue Code provisions, we also would be disqualified from treatment as a REIT for the four taxable years following the year during which REIT qualification was lost.  As a result, the funds available for distribution to our stockholders would be reduced for each of the years involved.  In addition, we may have to incur substantial indebtedness or may have to liquidate substantial investments in order to pay the resulting federal income tax liabilities if differences in timing exist between the receipt of income and payment of our tax obligations.  Although we currently intend to operate in a manner designed to qualify as a REIT, it is possible that future economic, market, legal, tax or other considerations may cause us to revoke our REIT election.

We may have to borrow money to make required distributions to our stockholders.

In order to qualify as a REIT, we generally are required each year to distribute to our stockholders at least 90% of our REIT taxable income, excluding any net capital gains.  To the extent that we satisfy the distribution requirement, but distribute less than 100% of our taxable income, we will be subject to federal corporate income tax on our undistributed taxable income.  In addition, we will be subject to a 4% nondeductible excise tax on the amount, if any, by which certain distributions paid by us with respect to any calendar year are less than the sum of 85% of our ordinary income for that year plus 95% of our capital gain net income for that year plus any undistributed taxable income from prior periods.  We intend to make distributions to our stockholders to comply with the 90% distribution requirement and to avoid corporate income tax and the nondeductible excise tax.  We may have to borrow funds on a short-term basis to meet the 90% distribution requirement and to avoid corporate income tax and the nondeductible excise tax if differences in timing between taxable income and cash available for distribution exist.  Because we already have significant debt obligations and are highly leveraged, we may not be able to borrow these funds at favorable interest rates or at all.

Adverse legislative or regulatory tax changes may affect the tax treatment of us or our stockholders.

At any time, the federal income tax laws governing REITs or the administrative interpretations of those laws may be amended.  Any of those new laws or interpretations thereof may take effect retroactively and could adversely affect our company or you, as a shareholder.  On May 28, 2003, the President signed into law tax legislation that reduces the federal tax rate on both dividends and long-term capital gains for individuals to 15% through 2008.  Because REITs generally are not subject to corporate income tax, this reduced tax rate generally does not apply to ordinary REIT dividends, which continue to be taxed at the higher tax rates applicable to ordinary income.  The new 15% tax rate applies to:

•long-term capital gains recognized on the disposition of REIT shares;

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•REIT capital gain distributions (except to the extent attributable to real estate depreciation, in which case such distributions continue to be subject to a 25% tax rate);

•REIT dividends attributable to dividends received by a REIT from non-REIT corporations, such as taxable REIT subsidiaries; and

•REIT dividends attributable to income that was subject to corporate income tax at the REIT level (e.g., to the extent that a REIT distributes less than 100% of its taxable income).

This new law could cause shares in non-REIT corporations to be a relatively more attractive investment to individual investors than shares in REITs.  The legislation also could have an adverse effect on the market price of our securities.

Competition

The business of managing, leasing and operating office buildings is competitive and we compete for tenants with other office buildings, including buildings owned by larger companies with more financial and other resources available to them.  This competition could limit our ability to lease our properties, increase or maintain rental rates, or secure attractive investment opportunities.  We will need to compete for tenants based on rental rates, attractiveness and location of a property, and quality of maintenance and management services.  We believe that our niche focus on multi-tenant office buildings with smaller average tenant sizes will improve our ability to compete.

Employees

At December 31, 2003, we had 51 employees.

Environmental Matters

Under various federal, state and local laws and regulations, an owner or operator of real property may be liable for the costs of removal or remediation of certain hazardous or toxic substances on that property.  These laws often impose such liability regardless of whether the owner caused or knew of the presence of hazardous or toxic substances and regardless of whether the storage of those substances was in violation of a tenant’s lease.  Furthermore, the costs of remediation or removal of those substances may be substantial, and the presence of hazardous or toxic substances, or the failure to promptly remediate those substances, may adversely affect the owner’s ability to sell the property or to borrow money using the property as collateral.  In connection with the ownership and operation of the properties, we may be potentially liable for such costs.

We have obtained an environmental assessment of each of our properties.  These environmental assessments have not revealed any environmental conditions that management believes will subject us to material liability.  In addition, we have not been, nor do we have knowledge that any of the previous owners of the properties have been, notified by any governmental authority of any material noncompliance, liability or claim relating to hazardous or toxic substances or other environmental substances in connection with any of the properties.  Although we have obtained environmental assessments of the properties, and although we are not aware of any notifications by any governmental authority of any material noncompliance, it is possible that our assessments do not reveal all environmental liabilities or that there are material environmental liabilities of which we are unaware.  For a description of pending legal proceedings involving environmental issues, see “Legal Proceedings.”

After the acquisition of the Sheridan Center buildings, we embarked on an asbestos remediation program in accordance with applicable federal and state requirements, using licensed contractors to remove, wherever accessible or otherwise required, asbestos-containing materials in the buildings, including ceiling tiles, drywall joint compound, wood and metal fire doors, wall texture, mudded pipe elbows and valves, thermal systems insulation, floor tile and mastic and boiler insulation.  Most of the remediation has been completed, except for one building, which is expected to be completed over the next few years as tenants vacate spaces, allowing access to the asbestos materials.

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ITEM 2.  PROPERTIES

At December 31, 2003, we own and operate 30 office properties in metropolitan Denver, Dallas, Phoenix and Indianapolis.  Given access to capital, we believe we will continue to be able to identify and complete acquisition and development opportunities.

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The following table provides certain information about each of our office properties owned at December 31, 2003:

			At December 31, 2003:				At December 31, 2002:
Building/ Location	Year Acquired	Rentable Area(1)	Occupancy Rate(2)		Average Rent Per SF(3)		Occupancy Rate(2)		Average Rent Per SF(3)
Same Store-
Chateau Plaza Dallas, TX	2002	171,294	100.0	%	$	22.70	97.6	%	$	22.79
Centerra Denver, CO	2002	186,377	72.9	%	19.89		68.1	%	20.78
Parkway Centre II Plano, TX	2002	151,968	95.4	%	20.61		97.9	%	20.84
Kellogg Building Littleton, CO	2001	111,580	85.8	%	21.04		98.6	%	21.92
Arrowhead Fountains Peoria, AZ	2001	96,092	100.0	%	21.85		100.0	%	21.41
AmeriVest Plaza at Inverness Englewood, CO	2001	118,720	91.3	%	23.10		99.2	%	23.57
Sheridan Center Denver, CO	2000	140,162	82.7	%	16.36		79.5	%	15.83
	Subtotal	976,193	88.9	%	$	20.84	89.9	%	$	21.13
2003 Acquisitions and Developments-
Greenhill Park Addison, TX	2003	251,917	76.7	%	$	18.84	N/A		N/A
Scottsdale Norte Scottsdale, AZ	2003	79,223	80.9	%	23.16		N/A		N/A
Financial Plaza Mesa, AZ	2003	310,828	80.5	%	23.02		N/A		N/A
Keystone Office Park(4) Indianapolis, IN	1999/2003	114,060	86.4	%	17.71		97.1	%	$	17.33
Southwest Gas Building Phoenix, AZ	2003	147,660	80.4	%	22.10		N/A		N/A
	Subtotal	903,688	80.2	%	$	21.05	N/A		N/A
Informal Joint Venture-
Panorama Falls(5) Englewood, CO	2000	59,561	78.0	%	$	19.01	70.8	%	$	19.15
	Subtotal	59,561	78.0	%	$	19.01	70.8	%	$	19.15
Non-Core-
Texas Bank Buildings(6) Texas	1998	60,095	100.0	%	$	15.88	97.4	%	$	16.00
Texas State Buildings(7) Texas	1997-98	222,542	76.8	%	9.00		77.7	%	9.05
	Subtotal	282,637	81.7	%	$	10.79	81.9	%	$	10.81
	Total	2,222,079	84.2	%	$	19.63	88.0	%	$	18.86

(1)Includes office space but excludes storage, telecommunications and garage space.

(2)Includes space leased but not yet occupied.

(3)Annualized cash basis revenue divided by leased rentable area.

(4)A fourth building was constructed during 2003; as such, 2002 is not comparable.

(5)20% of the property is owned by AmeriVest and 80% of the property is owned by Freemark Abbey Panorama, LLC as tenants in common.

(6)These four buildings are leased approximately 63% to Bank of America.  The buildings are located in Clifton, Georgetown, Henderson and Mineral Wells, Texas.  These buildings were sold on March 16, 2004.

(7)Eleven of these thirteen buildings are leased primarily to various agencies of the State of Texas.  The buildings are located in Lubbock, El Paso (2), Clint, Temple, Bellville, Columbus, Hempstead, Mission, Arlington, Marshall, Amarillo and Paris, Texas.

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The following charts illustrate the geographic distribution of our 100%-owned core properties (1) at December 31, 2003 by square footage and 2003 revenues:

Figure 1 – Geographic Distribution by Square Footage

Figure 2 – Geographic Distribution by 2003 Revenues

(1)Does not include Texas Bank Buildings, Texas State Buildings or Panorama Falls.

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The following table categorizes the area leased to tenants of our 100%-owned core properties(1) by industry at December 31, 2003:

Industry	Percentage of Area
Wholesale trade and manufacturing	15.5	%
Consulting and business services	10.6	%
Health care	9.2	%
Financial services – advisement and brokerage	9.2	%
Real estate	8.4	%
Financial services – insurance	8.0	%
Legal	7.2	%
Financial services – mortgage	6.4	%
Energy	6.3	%
Computer systems and software	5.3	%
Telecommunications	3.3	%
Other	3.1	%
Accounting	3.0	%
Financial services – banking	2.2	%
Travel, entertainment and food service	1.4	%
Engineering	0.6	%
Advertising and marketing	0.3	%

(1) Does not include Texas Bank Buildings, Texas State Buildings or Panorama Falls.

Consolidated Lease Expirations

The following schedule details the tenant(1) lease expirations for our 100%-owned properties(2) at December 31, 2003:

Year	Number of Expiring Leases	Expiring Square Footage	Expiring Annual Revenue		Percentage of Total Annual Revenue
2004	109	311,746	$	5,892,566	17.0	%
2005	102	483,812	10,062,586		28.9	%
2006	93	249,916	4,488,091		12.9	%
2007	50	301,149	6,030,583		17.3	%
2008	39	169,641	3,232,124		9.3	%
2009	14	99,592	2,181,460		6.3	%
2010	6	77,652	1,175,004		3.4	%
2011	3	13,490	186,072		0.5	%
2012	6	70,805	1,517,168		4.4	%
Total	422	1,777,803	$	34,765,654	100.0	%

(1) Excludes Kellogg Executive Suite and month-to-month tenants.

(2) Does not include Panorama Falls.

Description of Specific Properties

At December 31, 2003, Financial Plaza was the only property whose book value was greater than or equal to 10% of our consolidated assets.  A description of this property is set forth below.

Financial Plaza

On September 10, 2003, we acquired the Financial Plaza office building in Mesa, Arizona.  The property is comprised of a 16-story office building, a 2-story retail building and a 5-story parking garage containing approximately 311,000 square feet on 6.0673 acres of land.  The parking garage contains approximately 1,000 spaces.  Financial Plaza was built in 1986.

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Financial Plaza is the dominant high-rise office asset in the entire Southeast Valley submarket, offering panoramic views of the Phoenix metropolitan area from its higher floors, high quality interior finishes and extensive exterior landscaping.  The property enjoys excellent access to the Phoenix highway system via the nearby Superstition Freeway and to the many amenities of the Fiesta Mall, located across the street.  Competition for Financial Plaza comes principally from a wide range of smaller properties of lesser quality located throughout the Southeast Valley, which compete on price, as well as two new comparable Class A properties, which are well leased at similar rates to Financial Plaza.

We intend to provide certain amenities including, but not limited to, common area conference rooms, electronic directories and common area and tenant finish upgrades at Financial Plaza.  The improvements to be performed are based on our design team’s evaluation and are subject to budget approval.

Financial Plaza is leased to 42 tenants at base rental rates ranging from $18.50 to $26.35 per square foot.  The average effective annual rent per square foot at December 31, 2003 was $23.02.  Lease terms range from three to ten years.

The occupancy rate for Financial Plaza was 81% at December 31, 2003 and 82% at December 31, 2002.  Occupancy information for prior years is not available.  One tenant, an insurance company, occupies 10% or more of the rentable area.  This tenant occupies 36,833 square feet, or approximately 12% of the building, under a direct lease through April 2005.  This tenant is also responsible for its pro-rata share of operating expenses.

The following schedule details the tenant lease expirations for Financial Plaza at December 31, 2003:

Year	Number of Expiring Leases	Expiring Square Footage	Expiring Annual Revenue		Percentage of Total Annual Revenue
2004	5	17,613	$	430,670	7.7	%
2005	8	53,626	1,181,970		21.2	%
2006	12	31,990	739,583		13.3	%
2007	12	88,801	1,926,816		34.6	%
2008	2	17,424	391,718		7.0	%
2009	1	7,333	175,992		3.2	%
2010	1	6,962	181,012		3.2	%
2011	—	—	—		—
2012	1	24,444	546,610		9.8	%
Total	42	248,193	$	5,574,371	100.0	%

For 2003, the real estate taxes for Financial Plaza were $774,117 as determined by the Maricopa County Treasurer.

Financial Plaza had a federal tax basis of $29,810,670 at December 31, 2003.  For federal income tax purposes, depreciation is computed using the straight-line method over a useful life of 39 years, for a depreciation rate of 2.56% per year.  For financial reporting purposes, depreciation is determined and computed in accordance with generally accepted accounting principles.

We hold fee simple title to this property.  See “Mortgage Loans and Notes Payable” below for information regarding the financing of this property.

Property Improvements

We currently intend to spend approximately $9,500,000 for capital improvements, including tenant improvements, at our properties during 2004.  This amount is in addition to amounts that will be expended for routine maintenance and repairs.  This amount is to be funded from working capital, additional borrowing, the conversion of outstanding options and warrants, and the sale of additional equity securities.

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Mortgage Loans and Notes Payable

The Company finances its properties with mortgage loans and has other debt instruments, such as lines of credit, available to it.  The following is a summary of the Company’s outstanding mortgage loans and notes payable, classified by interest type (fixed or variable) and in order of maturity, at December 31, 2003 and 2002:

			2003				2002
Lender	Mortgaged Property	Maturity Date	Principal Balance		Interest Rate(1)			Principal Balance		Interest Rate(1)
Fixed  Rate
Teachers Insurance and Annuity Association of America	AmeriVest Plaza at Inverness	1/10/2006	$	14,572,888	7.90	%		$	14,721,273	7.90	%
Greenwich Capital Financial Products	Parkway Centre II Centerra Southwest Gas Building	10/1/2008	38,876,849		5.13	%		—		—
Allstate Life Insurance Company	Financial Plaza	10/5/2010	24,669,760		5.25	%		—		—
Southern Farm Bureau Life Insurance Company	Scottsdale Norte	4/1/2011	6,625,460		7.90	%		—		—
Teachers Insurance and Annuity Association of America	Sheridan Center Arrowhead Fountains Kellogg Building	1/1/2013	29,309,686		7.40	%		29,700,000		7.40	%
Jefferson Pilot	Texas Bank Buildings	5/1/2013	1,292,749		9.00	%		1,377,372		9.00	%
Security Life of Denver Insurance Company	Keystone Office Park – 1st	5/1/2022	4,334,828		8.00	%		4,435,814		8.00	%
Security Life of Denver Insurance Company	Keystone Office Park – 2nd	5/1/2022	485,638		8.63	%		496,064		8.63	%
Transatlantic Capital Company, LLC	Texas State Buildings	8/1/2028	5,660,436		7.66	%		5,735,061		7.66	%
		Subtotal	$	125,828,294	6.41	%		$	56,465,584	7.65	%
Variable Rate
Fleet National Bank – $42 million Senior Secured Line of Credit	Chateau Plaza Greenhill Park	11/12/2005	$	18,470,020	3.90	%		$	28,457,660	4.17	%
Fleet National Bank – $30 million Unsecured Line of Credit	Unsecured	11/12/2005	15,149,725		5.17	%		—		—
J.P. Morgan Chase	Parkway Centre II	—	—		—			17,000,000		3.39	%
KeyBank National Association	Panorama Falls	—	—		—			4,072,283		3.91	%
		Subtotal	$	33,619,745	4.47	%		$	49,529,943	3.88	%
Other Notes Payable
Lease Capital Corporation	Phone system	10/31/2007	$	82,371	11.11	%		$	98,705	11.11	%
		Subtotal	$	82,371	11.11	%		$	98,705	11.11	%
		Total	$	159,530,410	6.01	%		$	106,094,232	5.89	%

(1) Interest only, does not include amortization of deferred financing costs or unused facility fees.

Insurance

We believe that each of our properties is adequately covered by insurance under a blanket policy.

Policies and Objectives With Respect to Certain Activities

The following is a discussion of our policies with respect to investment, financing and other activities.  The policies with respect to these activities have been determined by our Board of Directors and, although our Board currently does not contemplate any changes to these policies, our Board may change these policies without a vote or other approval of stockholders.

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Acquisition, Development and Investment Policies

Our business and growth strategies are designed to maximize total return to stockholders over the medium- and long-term with a niche property type and geographic focus.  Our current policies contemplate the possibility of:

•direct ownership of real estate properties, including ownership through wholly-owned subsidiaries, focusing on office properties with average tenant sizes of between 2,000 and 4,000 square feet;

•indirect participation in those types of properties through investments in corporations, business trusts, general partnerships, limited partnerships, joint ventures and other legal entities; and

•development and acquisition of unimproved property or the acquisition and conversion of existing structures.

At the present time, all of our existing and contemplated investments in real estate properties are held through direct ownership.  Generally, we intend to hold our properties for the long term.  However, we may sell properties when we believe the economic benefits, including the income tax consequences, warrant such action.  Our long-term view is to focus on multi-tenant office buildings in select cities and dispose of non-core assets and property types when economically and operationally feasible.

Although we have no formal policy as to the allocation of assets among our investments, we generally intend to limit investment in a single property to a maximum of 25% of our total assets.  We expect to fund future development and acquisitions utilizing funds from additional indebtedness, future offerings of our securities, sale or exchange of existing properties, and retained cash flow.  In order to maintain our qualification as a REIT, we must make annual distributions to our stockholders of at least 90% of our REIT taxable income, which does not include net capital gains.  This requirement may impair our ability to use retained cash flow for future acquisitions.

Financing Policies

We intend to make additional investments in properties and may incur indebtedness to make those investments or to meet the distribution requirements imposed by the REIT provisions of the Internal Revenue Code of 1986, as amended, to the extent that cash flow from our operations, investments and working capital is insufficient.  Additional indebtedness incurred by us may be secured by part or all of our real estate properties.  Our Board of Directors has placed no limitations on the number or amount of secured indebtedness or mortgages that may be placed on any one of our properties, however, our Secured Fleet Facility limits our total liabilities to 70% of gross assets, as calculated in accordance with the loan agreement.

Secured indebtedness incurred by us may be in the form of purchase money obligations to the sellers of properties, or publicly or privately placed debt instruments or financing from banks, institutional investors or other lenders.  This indebtedness may be recourse to all or any part of our assets, or may be limited to the particular property to which the indebtedness relates.  The proceeds from any borrowings by us may be used for, among other things, refinancing existing indebtedness, financing development and acquisition of properties, financing renovation or redevelopment of properties, the payment of dividends, and working capital.

If our Board of Directors decides to raise additional equity capital, our Board has the authority, generally without stockholder approval and provided we have sufficient authorized shares, to issue additional common stock or preferred stock in any manner, and on such terms and for such consideration, as our Board deems appropriate, including in exchange for property.  Existing stockholders have no preemptive right to purchase shares issued in any offering, and any such offering might cause a dilution of a stockholder’s investment in us.

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ITEM 3.  LEGAL PROCEEDINGS

On June 14, 2001, a lawsuit was filed in the District Court, Hidalgo County, Texas against Innerarity Austin, Inc., a Nevada corporation, and our AmeriVest Properties Texas, Inc. subsidiary, by Laura Smith alleging that the defendants were negligent and breached various duties in allowing our Mission, Texas building to be contaminated with airborne contaminants while leasing the premises to the plaintiff’s employer, the Texas Department of Human Services.  Innerarity Austin, Inc. was the previous owner of the property.  The plaintiff alleges that due to the acts and omissions of the defendants, she has suffered serious and some permanent injuries and severe physical and mental pain.  The plaintiff seeks monetary and other relief, including exemplary damages, in excess of $50,000, and pre-judgment and post-judgment interest as provided by law, costs of the lawsuit and such other relief to which the plaintiff may be justly entitled.

On February 11, 2002, a lawsuit was filed in the District Court, Hidalgo County, Texas against our AmeriVest Properties Texas, Inc. subsidiary and Woodhaven Management Corporation, our external property manager, by Irma and Yreneo Carranza alleging that the defendants were negligent in maintaining our Mission, Texas building while leasing the premises to the plaintiff’s employer, the Texas Department of Human Services.  The plaintiff alleges that due to the acts and omissions of the defendants, she has suffered serious and some permanent injuries and severe physical and mental pain, including loss of consortium.  The plaintiff seeks monetary and other relief, including exemplary damages, and pre-judgment and post-judgment interest as provided by law, costs of the lawsuit and such other relief to which the plaintiff may be justly entitled.

On August 23, 2002, a lawsuit was filed in the District Court, County of Arapahoe, Colorado, against our AmeriVest Broadway Properties, Inc. subsidiary, Sheridan Realty Advisors, LLC (SRA), our former outside advisor, Porter Construction Services, Inc., and others by Jane Doe alleging that the defendants were negligent in maintaining security at our Panorama Falls building.  The plaintiff alleges that due to the acts and omissions of the defendants, she was sexually assaulted and continues to suffer from physical injuries and mental anguish.  The plaintiff seeks monetary relief, including exemplary damages, and pre- and post-judgment interest as provided by law, costs of the lawsuit and such other relief to which the plaintiff may be justly entitled.

We have asserted a general denial of the material allegations in all lawsuits and our insurance companies are defending us in these lawsuits and are responsible for all costs.  We believe that these lawsuits will not be adversely determined and will not have any material adverse effect on our business and financial condition.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

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PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common stock has traded on the American Stock Exchange under the symbol “AMV” since January 27, 2000.

The table below presents the range of high and low sale prices for our common stock during each of the quarters indicated, as reported by the American Stock Exchange and Nasdaq SmallCap Stock Market and the cash dividends per share paid with respect to those quarters:

	Common Stock
Quarter Ended	High		Low		Dividend Per Share
March 31, 2002	$	6.55	$	5.45	$	0.125
June 30, 2002	6.45		5.56		0.125
September 30, 2002	6.30		5.40		0.130
December 31, 2002	6.29		5.00		0.130
March 31, 2003	6.55		5.66		0.130
June 30, 2003	6.65		5.85		0.130
September 30, 2003	6.75		6.11		0.130
December 31, 2003	7.21		6.50		0.130

On March 17, 2004, the closing sale price for our common stock was $6.95 per share, as reported by the American Stock Exchange.  On March 17, 2004, there were approximately 8,000 stockholders of AmeriVest, consisting of 321 holders of record.  The information concerning beneficial owners is based on information provided by brokers and depositories who hold shares in their names on behalf of others.

Dividend Policy

Since our initial public offering in November 1996, we have paid a dividend each quarter.  We intend to pay quarterly dividends in the future.  Future dividends will be at the discretion of our Board of Directors and will depend on a number of factors, including our operating results and financial condition.  We cannot assure you that any dividends will be paid or that the historical level of dividends will be maintained.

Recent Sales of Unregistered Securities

During the fourth quarter of 2003, we issued shares of common stock that were not registered under the Securities Act of 1933 in the following transactions:

We issued 3,247 shares of common stock upon exercise of stock options by a former employee.  The issuance of these shares of common stock was made pursuant to an exemption from registration in accordance with Section 4(2) of the Securities Act based on a representation to us from the entity receiving the shares that such entity was a sophisticated investor who was knowledgeable about our operations and financial condition and was able to evaluate the risks and merits of receipt of the shares.

We issued 16,000 shares of common stock upon exercise of previously issued warrants.  The issuance of these shares of common stock was made pursuant to an exemption from registration in accordance with Section 4(2) of the Securities Act based on a representation to us from the entity receiving the shares that such entity was a sophisticated investor who was knowledgeable about our operations and financial condition and was able to evaluate the risks and merits of receipt of the shares.

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ITEM 6.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a discussion and comparison of the financial condition and results of operations of AmeriVest as of and for the years ended December 31, 2003 and 2002.  These discussions should be read in conjunction with our consolidated financial statements and notes to consolidated financial statements.

Introduction

AmeriVest is a REIT which owns and operates commercial office buildings in select markets catering to small and medium size businesses.  At December 31, 2003, we own 30 properties totaling 2,222,079 square feet compared to 26 properties totaling 1,416,350 square feet at December 31, 2002.  We generate revenue primarily through the rental of office space at our properties.  The demand for our products is correlated, in general, to the national economy, and more specifically, to the demand for office space by small and medium size tenants in metropolitan Denver, Dallas, Phoenix and Indianapolis.  We increased our revenues and expenses significantly by adding approximately 800,000 square feet to our portfolio through the acquisition of four properties and the development of another building at an existing property during 2003, combined with the inclusion of the operations of our 2002 acquisitions for a full year.

Results of Operations

The following is a comparison of the years ended December 31, 2003 and 2002:

	2003			2002			Change
REAL ESTATE OPERATING REVENUE
Rental revenue	$	29,865,670		$	16,385,965		$	13,479,705
REAL ESTATE OPERATING EXPENSES
Property operating expenses-
Operating expenses	8,117,055			3,935,774			4,181,281
Real estate taxes	3,721,266			1,628,455			2,092,811
Management fees	141,150			173,011			(31,861		)
General and administrative expenses	3,527,747			1,755,104			1,772,643
Advisory and capital projects fees	—			1,367,380			(1,367,380		)
Interest expense	7,867,534			4,144,231			3,723,303
Depreciation and amortization expense	7,023,923			3,362,508			3,661,415
Impairment of investment in real estate	1,465,932			275,000			1,190,932
Total operating expenses	31,864,607			16,641,463			15,223,144
OTHER INCOME/(LOSS)
Interest income	73,470			164,519			(91,049		)
Equity in loss of unconsolidated affiliate	(54,953		)	(66,295		)	11,342
Total other income	18,517			98,224			(79,707		)
NET LOSS	$	(1,980,420	)	$	(157,274	)	$	(1,823,146	)

Rental revenue increased by approximately $13,480,000, or 82%, from 2002 to 2003.  Approximately $5,638,000 of the increase is due to the inclusion of the operating results from the 2003 acquisitions (Southwest Gas, Financial Plaza, Scottsdale Norte and Greenhill Park) and approximately $8,540,000 is due to the inclusion of the operating results from the 2002 acquisitions (Parkway Centre II, Centerra and Chateau Plaza) for a full year in 2003 versus a partial year in 2002.  Offsetting these increases is a decrease of approximately $480,000 due to a 1% decline in our existing portfolio (core properties owned for the full year) occupancy rate combined with a weak rental market which negatively impacted rental revenue.  A majority of the decline in the existing portfolio was experienced in the Denver market where the soft economy forced some companies to downsize or go out of business.  The remaining decrease of approximately $218,000 was due to the loss of the tenant, an agency of the State of Texas, at our Paris, Texas property in December 2002.  We have been unsuccessful in re-leasing this property; see the impairment discussion below for more information.

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The total portfolio occupancy rate was 84.2% at December 31, 2003, a decline from 88.0% at December 31, 2002.  This decrease is primarily attributable to the 2003 acquisitions, which were approximately 79% occupied at year end, however, the above-mentioned 1% decline in our existing portfolio occupancy rate also contributed to the overall decline in occupancy.

Property operating expenses increased by approximately $6,242,000 from 2002 to 2003.  Approximately $2,182,000 of the increase is due to the inclusion of the 2003 acquisitions and approximately $3,562,000 is due to the inclusion of the 2002 acquisitions for a full year in 2003.  The remainder of the increase was experienced in our existing portfolio and non-core properties.  The main components of the additional expense consisted of increases in real estate taxes, utilities and regional property management personnel.  Real estate taxes increased from approximately $1,628,000, or 10% of revenue, in 2002 to approximately $3,721,000, or 12% of revenue, in 2003.  Currently, seven of the twelve core properties have been acquired in the past two years.  Upon acquisition, the properties are often reassessed by the local municipalities at the purchase price and real estate taxes increase accordingly.  While the Company utilizes outside property tax consulting firms to protest the valuations of any properties that are deemed to be overvalued, it records the actual expense in the year incurred with any amounts refunded to the Company through this process recorded when realized.  Regional operating management personnel were added in the latter half of 2003 in the Phoenix and Dallas markets in anticipation of continued growth.  We recently hired a regional manager for the Denver market and would add regional personnel for any new markets entered into in the future.  The Company believes it is important to its strategy to self-manage its properties with key experienced management in the local markets.  The Company focuses on the control of operating expenses as a percent of revenue and as it continues to grow and gain scale in each of its markets, believes that it will be able to maintain or increase its operating margins.

To support the continued growth of the Company, we continued to incur additional general and administrative expenses, including salary, consulting, legal and accounting costs.  Included in 2003 were charges of approximately $258,000 in compensation expense for bonuses to our Chief Executive Officer, Chief Operating Officer and Chief Investment Officer as provided by the Company’s 2003 Long-Term Incentive Plan, approximately $170,000 in severance expense to our former Chief Financial Officer and approximately $125,000 in recruiting fees related to corporate and regional hires.  Legal and accounting fees have continued to increase as the Company has grown and it is anticipated that they will continue to increase in 2004, particularly with respect to activities necessary to comply with the Sarbanes-Oxley Act of 2002.

The advisory and capital projects fees expense recognized in 2002 represents the fees earned by SRA, in accordance with the Advisory Agreement, for 2002 property acquisitions and as provided for in the Termination of Advisory Agreement we executed with SRA.  Effective January 1, 2002, the Advisory Agreement was amended whereby certain SRA employees became our employees and as a result, the advisory and capital project fees were expensed.  Prior to January 1, 2002, these fees were capitalized.  Additionally, due to the termination of the Advisory Agreement effective November 1, 2002 whereby all remaining SRA employees became our employees, these fees have been eliminated.  Beginning November 1, 2002, the salaries of these additional employees are included in general and administrative expenses.

Interest expense increased by approximately $3,723,000 from 2002 to 2003.  Of this increase, approximately $1,095,000 relates to mortgage loans on the 2003 acquisitions and approximately $2,041,000 relates to mortgage loans on the 2002 acquisitions held for an entire year in 2003.  In addition, approximately $610,000 of the increase is due to the refinancing of the Sheridan Center, Arrowhead Fountains and Kellogg Building variable rate loans with a weighted average rate of 4.5% with a fixed rate portfolio loan with a fixed rate of 7.4%.  Although the refinancings have negatively impacted our results, we believe it was the proper course of action to have our long-term assets financed with long-term, fixed rate debt, which provides more stability and certainty.  The increase in interest expense is also attributable to the interest and fees related to the short-term loan, which was used in the acquisition of the Southwest Gas Building and later refinanced with the Unsecured Fleet Facility.  This facility provides the Company with more flexibility and a readily available vehicle for financing acquisitions and other capital needs.  The cost of this facility will have a more material effect on operations in 2004.

The increase in depreciation and amortization expense is due to the increase in depreciable assets resulting from the above-mentioned acquisitions.  Furthermore, the Company’s adoption of Statement of Financial Accounting Standards (SFAS) No. 141 “Business Combinations”, which, among other things, requires an allocation

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of the purchase price of a property to an intangible asset representing the value associated with the in-place leases, has had and will continue to have a significant impact on the Company’s depreciation and amortization expense as more properties are acquired.  The intangible assets are amortized over the remaining life of the in-place leases which generally range from 24 to 55 months.

During 2003, the Company recorded a $334,592 impairment charge for a 12,979 square foot building in Clint, Texas and a $1,131,340 impairment charge for a 33,312 square foot building in Paris, Texas.  Both properties had been previously leased to agencies of the State of Texas.  The Clint building has been vacant since November 2001 and the Paris building has been vacant since December 2002.  The Company has been unsuccessful in re-leasing these properties but will continue in its efforts, however there are no near term prospects.  The Company recorded a $275,000 impairment charge related to the Clint property in 2002.  Impairment charges recorded on these properties have reduced their net book values to their estimated fair values of $100,000 and $43,000 for Clint and Paris, respectively.  The Company arrived at the estimated fair values using a combination of the property tax assessment values, values estimated by the our property tax consulting firms and local real estate brokers.

Liquidity and Capital Resources

Operating Activities

Net cash flows provided by operations were approximately $10,651,000 for the year ended December 31, 2003.  This results primarily from the Company’s operating results adjusted for non-cash expenses and a general increase in our payables and other liabilities for expenses that have not yet been paid in excess of the prior year.  The increase from the prior year period is primarily due to the inclusion of the operations of the late-2002 and 2003 property acquisitions.  Cash flow from operations is the primary source to fund dividend payments, debt service and capital expenditures.

 Investing Activities

Net cash flows used in investing activities were approximately $56,062,000 for the year ended December 31, 2003, of which approximately $47,858,000, net of debt assumed, was used to acquire the Southwest Gas, Financial Plaza, Scottsdale Norte and Greenhill Park properties.  The remainder is primarily composed of costs to complete the construction of the fourth building at Keystone Office Park, capital improvement, tenant improvement and leasing commission costs.

Financing Activities

Net cash flows provided by financing activities were approximately $44,570,000 for the year ended December 31, 2003.  Of this amount, approximately $33,267,000 represents the net proceeds from the June 2003 common stock offering.  The remainder is primarily composed of net loan draws used for acquisitions and proceeds from the exercising of options and warrants, offset by scheduled principal payments on mortgage loans, payment of financing costs related to the refinancings and new loans, dividend payments and payments into escrow accounts as required by certain lenders.

Future Sources of Capital

The following table summarizes future minimum base rent to be received under non-cancelable tenant leases for the Company’s commercial properties expiring each year, at December 31, 2003:

	Less than 1 Year		2-3 Years		4-5 Years		Over 5 Years		Total
Minimum Rents	$	32,854,456	$	44,937,455	$	20,654,809	$	10,148,577	$	108,595,297

The Company desires to acquire additional properties.  In order to do so, it will utilize current sources of debt financing and possibly incur additional debt and/or obtain additional equity capital.  The Company also intends to obtain credit facilities for short and long-term borrowings with commercial banks or other financial institutions.

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The issuance of such securities or increase in debt to acquire additional properties, of which there is no assurance, could adversely affect the amount of cash available to pay dividends to stockholders.

In January 2004, the Company filed a shelf registration statement (Form S-3) under which the Company could potentially raise up to $200,000,000 through the issuance of common stock or preferred stock.  The proceeds from those issuances, if any, would be used to acquire and improve new and existing properties, repay borrowings under our lines of credit or other loans and for working capital and general corporate purposes.

The Company has two credit facilities from Fleet National Bank, a $42,000,000 senior secured revolving line of credit (Secured Fleet Facility) and a $30,000,000 unsecured revolving line of credit (Unsecured Fleet Facility).  At December 31, 2003, there was $18,470,020 outstanding with $23,529,980 available under the Secured Fleet Facility and $15,149,725 outstanding with $14,850,275 available under the Unsecured Fleet Facility.  Available amounts under these facilities will be used to acquire and improve new and existing properties, as well as for working capital.

Future Uses of Capital, Contractual Commitments and Off-Balance Sheet Arrangements

The following table details the contractual obligations at December 31, 2003.  These include scheduled maturities of mortgage loans and notes payable as well as a ground lease for Greenhill Park that expires on December 1, 2083:

	Less than 1 Year		2-3 Years		4-5 Years		Over 5 Years		Total
Mortgage Loans and  Notes Payable	$	2,244,174	$	52,622,828	$	39,785,256	$	64,878,152	$	159,530,410
Ground Lease	642,165		1,505,181		1,726,032		225,671,046		229,544,424
Total	$	2,886,339	$	54,128,009	$	41,511,288	$	290,549,198	$	389,074,834

With respect to the ground lease, the lease requires the Company to make monthly rental payments based on the value of the land that is re-established every ten years.  The annual minimum rent increases every ten years to the greater of (i) 10% of the fair market value of the land, or (ii) 10% of the initial value of the land compounded annually at 3%.  The next base rent calculation will be performed on January 1, 2006.  In addition to the annual base rent, the ground lessor is entitled to a participating rent equal to 25% of gross revenue receipts in excess of $6,723,205.  The combined annual base rent and participating rent is limited to the greater of (i) 10% of the fair market value of the land, or (ii) 50% of the difference between the gross revenue receipts and $6,723,205.

Debt Covenants

Certain of its mortgage lenders require the Company to comply with certain debt covenants as described in the specific loan documents, including the loan-to-value ratio, the interest coverage ratio, the fixed charge coverage ratio and the dividend payout ratio.  At December 31, 2003, the Company was in compliance with all of its debt covenants with the exception of the dividend payout ratio covenant as required by the Secured Fleet Facility and the Unsecured Fleet Facility.  The Company received a waiver from Fleet National Bank for this event of non-compliance with this covenant for the year ended December 31, 2003.  In addition, on March 16, 2004, the Company amended its Secured Fleet Facility and Unsecured Fleet Facility loan agreements to modify certain of its debt covenants.  The Company believes it will be in compliance with these modified covenants based on forecasted operating results, however, there is no assurance that the Company will remain in compliance with these amended covenants.

Inflation

Management believes that inflation should not have a material adverse effect on our operations.  Our office leases require the tenants to pay increases in operating expenses should any inflationary pressures materialize.

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New Accounting Principles

In December 2003, the Financial Accounting Standards Board (FASB) issued FASB Interpretation (FIN) No. 46 (Revised), “Consolidation of Variable Interest Entities”, which addresses how a business enterprise should evaluate whether it has a controlling financial interest in an entity through means other than voting rights and accordingly should consolidate the entity.  FIN 46R replaces FIN 46, “Consolidation of Variable Interest Entities”, which was issued in January 2003.  The Company will be required to apply FIN 46R to variable interests in variable interest entities (VIEs) created after December 31, 2003.  For variable interests in VIEs created before January 1, 2004, this interpretation will be applied beginning on March 31, 2004.  For any VIEs that must be consolidated under FIN 46R that were created before January 1, 2004, the assets, liabilities and non-controlling interests of the VIE initially would be measured at their carrying amounts with any difference between the net amount added to the balance sheet and any previously recognized interest being recognized as the cumulative effect of an accounting change.  If determining the carrying amounts is not practicable, fair value at the date this interpretation first applies may be used to measure the assets, liabilities and non-controlling interest in the VIE.  The Company has an interest in an entity whose sole purposes is to own and operate the Panorama Falls building in Englewood, Colorado, which may be considered a VIE.  The Company’s losses are limited to its investment in the tenancy-in-common relationship of approximately $1,364,000, the amounts due from the related party of approximately $3,372,000, and any underlying rents receivable.  This interest is being accounted for under the equity method of accounting and is included as an investment in unconsolidated affiliate in our consolidated balance sheets.

Critical Accounting Policies

The discussion and analysis of the Company’s financial condition and results of operations are based upon its consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.  The preparation of these financial statements require management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of the financial statements.  Actual results may differ from these estimates under different assumptions or conditions.

Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, which would potentially result in materially different results under different assumptions and conditions.  The Company believes that its critical accounting policies include those items described below.

Investment in Real Estate

Upon acquisition, the purchase price of a property is allocated to land, building and improvements and other intangible assets and associated liabilities as required by SFAS No. 141 “Business Combinations.”  The allocation to land is based on an estimate of its fair value based on all available information including appraisals.  The allocation to other intangible assets represents the value associated with the in-place leases, including leasing commission, legal and other related costs.  Also required by SFAS No. 141, is the creation of an intangible asset or liability resulting from in-place leases being above or below the market rental rates on the date of acquisition.  This asset or liability is amortized over the life of the related in-place leases as an adjustment to revenue.

Investment in real estate is stated at cost.  Depreciation and amortization are computed on a straight-line basis over the estimated useful lives as follows:

Description	Estimated Useful Lives
Land	Not depreciated
Buildings and improvements	20 to 40 years
Furniture, fixtures and equipment	5 to 7 years
Tenant improvements, tenant leasing commissions  and other intangible assets	Term of related lease

Maintenance and repairs are expensed as incurred and improvements are capitalized.  The cost of assets sold or retired and the related accumulated depreciation and/or amortization are removed from the accounts and the

29

resulting gain or loss is reflected in operations in the period in which such sale or retirement occurs.  Allocating the purchase price of a property to the different components of investment in real estate, determining whether expenditures meet the criteria for capitalization and assigning depreciable lives is considered to be critical because it requires management to exercise significant judgment.

Valuation of Real Estate Assets

Long-lived assets to be held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company continually evaluates the recoverability of its long-lived assets based on estimated future cash flows from and the estimated liquidation value of such long-lived assets, and provides for impairment if such undiscounted cash flows are insufficient to recover the carrying amount of the long-lived asset.  Valuation of real estate assets is considered to be critical because the evaluation of impairment and the determination of fair values involve management’s assumptions relating to future economic events that could materially affect the determination of the fair value, and therefore the carrying value of real estate.

Revenue Recognition

Certain leases provide for tenant occupancy during periods for which no rent is due or where minimum rent payments increase during the term of the lease.  Rental revenue is recorded for the full term of each lease on a straight-line basis.  Accordingly, the Company records a receivable from tenants for rents that it expects to collect over the remaining lease term as deferred rents receivable.  When the Company acquires a property, the term of the existing leases is considered to commence as of the acquisition date for the purposes of this calculation.  Revenue recognition is considered to be critical because the evaluation of the realizability of such deferred rents receivable involves management’s assumptions relating to such tenant’s viability.

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ITEM 7.  FINANCIAL STATEMENTS

AMERIVEST PROPERTIES INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

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INDEPENDENT AUDITORS’ REPORT

The Board of Directors

AmeriVest Properties Inc.:

We have audited the accompanying consolidated balance sheets of AmeriVest Properties Inc. as of December 31, 2003 and 2002, and the related consolidated statements of operations, stockholders’ equity and cash flows for the years then ended.  These consolidated financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America.  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of AmeriVest Properties Inc. as of December 31, 2003 and 2002, and the results of their operations and their cash flows for the yearsthen ended in conformity with accounting principles generally accepted in the United States of America.

	KPMG LLP
Denver, Colorado
February 20, 2004, except for
Note 5, which is as of
March 16, 2004

F-1

CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2003 AND 2002

	2003			2002
ASSETS
Investment in real estate-
Land	$	29,647,423		$	20,730,999
Buildings and improvements	187,560,948			124,597,852
Furniture, fixtures and equipment	799,730			467,188
Tenant improvements	6,159,440			2,969,044
Tenant leasing commissions	1,063,204			450,647
Intangible assets	11,468,120			2,153,229
Less: accumulated depreciation and amortization	(12,806,269		)	(6,383,631		)
Net investment in real estate	223,892,596			144,985,328
Cash and cash equivalents	1,478,285			2,318,566
Escrow deposits	5,778,427			2,335,519
Investment in unconsolidated affiliate	1,364,032			1,390,560
Due from related party	3,371,526			3,257,826
Due from unconsolidated affiliate	262,347			217,578
Accounts receivable	296,377			286,691
Deferred rents receivable	1,401,455			671,737
Deferred financing costs, net of accumulated amortization of $519,399 and $130,773, respectively	2,301,043			1,243,907
Prepaid expenses and other assets	354,374			475,875
Total assets	$	240,500,462		$	157,183,587
LIABILITIES
Mortgage loans and notes payable	$	159,530,410		$	106,094,232
Accounts payable and accrued expenses	2,736,657			2,384,620
Accrued real estate taxes	3,169,183			1,714,594
Prepaid rents, deferred revenue and security deposits	2,697,635			1,656,507
Dividends payable	2,262,170			1,437,834
Total liabilities	170,396,055			113,287,787
STOCKHOLDERS’ EQUITY
Preferred stock, $.001 par value Authorized – 5,000,000 shares Issued and outstanding – none	—			—
Common stock, $.001 par value Authorized – 75,000,000 and 15,000,000 shares, respectively Issued and outstanding – 17,401,309 and 11,060,260 shares, respectively	17,401			11,060
Capital in excess of par value	91,706,371			55,247,483
Distributions in excess of accumulated earnings	(21,619,365		)	(11,362,743		)
Total stockholders’ equity	70,104,407			43,895,800
Total liabilities and stockholders’ equity	$	240,500,462		$	157,183,587

See accompanying notes to consolidated financial statements.

F-2

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002

	2003			2002
REAL ESTATE OPERATING REVENUE
Rental revenue	$	29,865,670		$	16,385,965
REAL ESTATE OPERATING EXPENSES
Property operating expenses-
Operating expenses	8,117,055			3,935,774
Real estate taxes	3,721,266			1,628,455
Management fees	141,150			173,011
General and administrative expenses	3,527,747			1,755,104
Advisory and capital projects fees	—			1,367,380
Interest expense	7,867,534			4,144,231
Depreciation and amortization expense	7,023,923			3,362,508
Impairment of investment in real estate	1,465,932			275,000
Total operating expenses	31,864,607			16,641,463
OTHER INCOME/(LOSS)
Interest income	73,470			164,519
Equity in loss of unconsolidated affiliate	(54,953		)	(66,295		)
Total other income	18,517			98,224
NET LOSS	$	(1,980,420	)	$	(157,274	)
LOSS PER SHARE
Basic	$	(0.13	)	$	(0.02	)
Diluted	$	(0.13	)	$	(0.02	)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
Basic	14,686,369			9,341,608
Diluted	14,686,369			9,341,608

See accompanying notes to consolidated financial statements.

F-3

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002

						Distributions
				Capital in		in Excess of
	Common Stock			Excess of		Accumulated
	Shares	Amount		Par Value		Earnings			Total
Balance at December 31, 2001	6,682,259	$	6,682	$	31,132,650	$	(6,142,347	)	$	24,996,985
Issuance of common stock-
Public offering, net of offering costs	4,140,000	4,140		22,744,898		—			22,749,038
Acquisition of land	52,893	53		319,947		—			320,000
Property improvements	21,114	21		117,373		—			117,394
Warrants exercised	54,150	54		270,696		—			270,750
Stock options exercised	60,000	60		270,756		—			270,816
Dividend Re-Investment Plan (DRIP)	47,196	47		269,830		—			269,877
Equity-based compensation	2,648	3		15,730		—			15,733
Issuance of incentive warrants	—	—		61,095		—			61,095
Amortization of incentive warrants	—	—		44,508		—			44,508
Dividends declared	—	—		—		(5,063,122		)	(5,063,122		)
Net loss	—	—		—		(157,274		)	(157,274		)
Balance at December 31, 2002	11,060,260	11,060		55,247,483		(11,362,743		)	43,895,800
Issuance of common stock-
Public offering, net of offering costs	5,750,000	5,750		33,261,703		—			33,267,453
Warrants exercised	495,045	495		2,474,730		—			2,475,225
Stock options exercised	33,247	33		163,015		—			163,048
DRIP	49,081	49		297,936		—			297,985
Equity-based compensation	13,676	14		261,504		—			261,518
Dividends declared	—	—		—		(8,276,202		)	(8,276,202		)
Net loss	—	—		—		(1,980,420		)	(1,980,420		)
Balance at December 31, 2003	17,401,309	$	17,401	$	91,706,371	$	(21,619,365	)	$	70,104,407

See accompanying notes to consolidated financial statements.

F-4

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002

	2003			2002
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(1,980,420	)	$	(157,274	)
Adjustments to reconcile net loss to net cash provided by operating activities-
Depreciation and amortization expense	7,023,923			3,362,508
Impairment of investment in real estate	1,465,932			275,000
Amortization of deferred financing costs	515,318			189,755
Write-off of unamortized deferred financing costs	29,843			135,258
Equity in loss of unconsolidated affiliate	54,953			66,295
Equity-based compensation	261,518			60,241
Changes in assets and liabilities-
Accounts receivable	(9,686		)	95,989
Deferred rent receivable	(729,718		)	(297,345		)
Prepaid expenses and other assets	121,501			(33,306		)
Accounts payable and accrued expenses	1,402,037			1,070,280
Other accrued liabilities	2,495,717			659,644
Net cash flows provided by operating activities	10,650,918			5,427,045
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions, developments and improvements of real estate, net of debt assumed	(52,006,298		)	(48,662,156		)
Tenant improvements	(3,322,017		)	(1,191,800		)
Tenant leasing commissions	(688,809		)	(165,362		)
Deposits on real estate acquisitions	—			(170,000		)
Amounts paid to unconsolidated affiliate	(44,769		)	(123,104		)
Net cash flows used in investing activities	(56,061,893		)	(50,312,422		)
CASH FLOWS FROM FINANCING ACTIVITIES
Additions to mortgage loans and notes payable	110,899,725			60,589,117
Repayments of mortgage loans and notes payable	(88,985,672		)	(30,971,098		)
Payment of deferred financing costs	(1,602,297		)	(971,035		)
Net proceeds from common stock offering	33,267,453			22,749,038
Net proceeds from exercising of options and warrants	1,588,273			541,566
Net change in escrow deposits	(3,442,908		)	(1,662,306		)
Dividends paid	(7,153,880		)	(4,190,694		)
Net cash flows provided by financing activities	44,570,694			46,084,588
NET CHANGE IN CASH AND CASH EQUIVALENTS	(840,281		)	1,199,211
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	2,318,566			1,119,355
CASH AND CASH EQUIVALENTS, END OF YEAR	$	1,478,285		$	2,318,566
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest	$	6,841,482		$	3,763,091
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Mortgage loans assumed	$	31,380,000		$	17,000,000
Common stock issued to the DRIP	$	297,985		$	269,877
Common stock issued for improvements of real estate	$	—		$	117,394

See accompanying notes to consolidated financial statements.

F-5

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002

NOTE 1 – ORGANIZATION

AmeriVest Properties Inc. (the Company) is incorporated under the laws of the State of Maryland and operates as a self-administered and self-managed real estate investment trust (REIT).  The Company primarily invests in and operates commercial office buildings in selective markets and leases the commercial office buildings to small and medium size tenants.  At December 31, 2003, the Company owns and operates, through its wholly-owned subsidiaries, the following properties:

Property	Location
Greenhill Park	Addison, TX
Scottsdale Norte	Scottsdale, AZ
Financial Plaza	Mesa, AZ
Southwest Gas Building	Phoenix, AZ
Chateau Plaza	Dallas, TX
Centerra	Denver, CO
Parkway Centre II	Plano, TX
Kellogg Building	Littleton, CO
Arrowhead Fountains	Peoria, AZ
AmeriVest Plaza at Inverness	Englewood, CO
Sheridan Center	Denver, CO
Keystone Office Park	Indianapolis, IN
Panorama Falls(1)	Englewood, CO
Texas Bank Buildings(2)	Texas
Texas State Buildings(3)	Texas

(1)20% of the property is owned by the Company, 80% of the property is owned by Freemark Abbey Panorama, LLC as a tenant in common with the Company.

(2)These four buildings are leased approximately 63% to Bank of America.  The buildings are located in Clifton, Georgetown, Henderson and Mineral Wells, Texas.  These building were sold on March 16, 2004.

(3)Eleven of these thirteen buildings are leased primarily to various agencies of the State of Texas.  The buildings are located in Lubbock, El Paso (2), Clint, Temple, Bellville, Columbus, Hempstead, Mission, Arlington, Marshall, Amarillo and Paris, Texas.

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements include the consolidated operations of the Company and its wholly-owned subsidiaries.  All significant inter-company accounts and transactions have been eliminated in consolidation.  Certain prior period balances have been reclassified to conform to current period presentation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Investment in Real Estate

Upon acquisition, the purchase price of a property is allocated to land, building, leasing commissions and other intangible assets and associated liabilities.  The allocation to land is based on the Company’s estimate of its

F-6

fair value based on all available information including appraisals.  The allocation to intangible assets represents the value associated with the in-place leases, including leasing commissions, legal and other related costs.  The purchase price allocation may also include the creation of an intangible asset or liability resulting from in-place leases being above or below the market rental rates on the date of acquisition.  This asset or liability is amortized over the life of the remaining in-place leases as an adjustment to revenue.

Investment in real estate is stated at cost.  Depreciation and amortization are computed on a straight-line basis over the estimated useful lives as follows:

Description	Estimated Useful Lives
Land	Not depreciated
Buildings and improvements	20 to 40 years
Furniture, fixtures and equipment	5 to 7 years
Tenant improvements, tenant leasing commissions and other intangible assets	Term of related lease

Maintenance and repairs are expensed as incurred and improvements are capitalized.  The cost of assets sold or retired and the related accumulated depreciation and/or amortization are removed from the accounts and the resulting gain or loss is reflected in operations in the period in which such sale or retirement occurs.

Other Intangible Assets

The intangible assets are amortized over the remaining life of the in-place leases which generally range from 24 to 55 months.  Estimated amortization expense for the next five years is: $3,593,744 in 2004, $3,246,830 in 2005, $2,174,973 in 2006, $554,443 in 2007 and $6,614 in 2008.

Long-Lived Assets

Long-lived assets to be held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  The Company continually evaluates the recoverability of its long-lived assets based on estimated future cash flows from and the estimated liquidation value of such long-lived assets, and provides for impairment if such undiscounted cash flows are insufficient to recover the carrying amount of the long-lived asset.  If an asset is deemed to be impaired, the book value will be written down to its estimated fair value.

Cash Equivalents

For purposes of reporting cash flows, the Company considers as cash equivalents all highly liquid investments with a maturity of three months or less at the time of purchase.

Escrow Deposits

In accordance with the loan agreements for five of the Company’s loans, the lenders require the Company to maintain reserves for real estate taxes, property insurance, capital improvements and/or tenant improvements.

Deferred Financing Costs

Deferred financing costs include fees and costs incurred to obtain long-term financing.  These costs are amortized over the terms of the respective loans and are included as a component of interest expense in the accompanying consolidated statements of operations.

Fair Value

The Company’s financial instruments include accounts receivable, deferred rents receivable, accounts payable and accrued expenses and mortgage loans and notes payable.  The fair value of the Company’s mortgage

F-7

loans and notes payable is estimated by discounting the future cash flows of each instrument at current rates expected for similar debt instruments of comparable maturities and risk.  The fair values of these financial instruments were not materially different from their carrying or contract values with the exception of mortgage loans and notes payable as detailed below:

	2003				2002
	Carrying Amount		Fair  Value		Carrying Amount		Fair  Value
Mortgage loans and notes payable	$	159,530,410	$	161,141,311	$	106,094,232	$	111,429,642

Revenue Recognition

Certain leases provide for tenant occupancy during periods for which no rent is due or where minimum rent payments increase during the term of the lease.  The Company records rental revenue for the full term of each lease on a straight-line basis.  Accordingly, the Company records a receivable from tenants for rents that the Company expects to collect over the remaining lease term as deferred rents receivable in the accompanying consolidated balance sheets.  When the Company acquires a property, the term of existing leases is considered to commence as of the acquisition date for the purposes of this calculation.

Concentrations of Credit Risk

The Company leases office space to commercial businesses in metropolitan Denver, Dallas, Phoenix and Indianapolis.  The Company also leases office space to State of Texas governmental agencies.  The terms of the leases generally require basic rent payments at the beginning of each month.  Credit risk associated with the lease agreements is limited to the amount of rents receivable from tenants less any related security deposits.  Leases with the State of Texas governmental agencies may be canceled by the lessee should funding for the specific governmental agency on a complete agency basis be decreased or discontinued.

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and cash equivalents.  The Company maintains cash accounts at three financial institutions.  The Company periodically evaluates the credit worthiness of these financial institutions, and maintains cash accounts only in large high quality financial institutions, thereby minimizing exposure for deposits in excess of federally insured amounts.  On occasion, cash on deposit may exceed federally insured amounts.

Sales of Properties

The Company accounts for the sale of properties under the full accrual method.  Gains or losses on sale are recognized only after closing takes place, title has transferred, an adequate down payment has been received by the Company and the collectibility of the receivable from the buyer, if applicable, is reasonably assured.

Income Taxes

Effective January 1, 1996, the Company elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code (the Code), as amended.  As a REIT, the Company generally would not be subject to federal income taxation at the corporate level to the extent it distributes annually at least 100% of its REIT taxable income, as defined in the Code, to its stockholders and satisfies certain other requirements.  Accordingly, no provision has been made for federal income taxes in the accompanying consolidated financial statements.  As of December 31, 2003, the Company has satisfied the requirements as defined in the Code.

Certain of the Company’s subsidiaries are subject to certain state excise and franchise taxes.  The provision for such state taxes has been reflected in general and administrative expense in the accompanying consolidated statements of operations and has not been separately stated due to its insignificance.

For federal income tax purposes, the cash dividends paid to stockholders may be characterized as ordinary income, return of capital (generally non-taxable) or capital gains.  Dividends declared for the year ended December 

F-8

31, 2003 totaled $8,276,202 and are characterized for tax purposes as 36% ordinary income and 64% return of capital.  Dividends declared for the year ended December 31, 2002 totaled $5,063,122 and are characterized for tax purposes as 56% ordinary income and 44% return of capital.

Equity-Based Compensation

The Company applies Accounting Principles Board (APB) Opinion No. 25 and related interpretations in accounting for its equity-based compensation.  Accordingly, the Company does not recognize compensation cost for options granted to employees whose exercise price is equal to or exceeds the fair value of the underlying stock as of the grant date and which qualify for fixed plan treatment.

Equity-based compensation issued to non-employees is accounted for based on the fair value of the equity instruments issued.  The measurement date is considered to be the issuance date, or if there are performance vesting provisions, when earned.

The Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standards (SFAS) No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure, an amendment of FASB Statement No. 123.”  Had compensation cost for the Company’s stock option plan been determined based on the fair value at the grant date consistent with the provisions of SFAS No. 148, the Company’s net loss and loss per share for the years ended December 31, 2003 and 2002 would have been changed to the pro forma amounts indicated below:

	2003			2002
Net loss – as reported	$	(1,980,420	)	$	(157,274	)
Plus: Recognized equity-based compensation	261,518			15,733
Total equity-based compensation expense based on fair value	(211,893		)	(13,506		)
Net loss – pro forma	$	(1,930,795	)	$	(155,047	)
Loss per share (basic) – as reported	$	(0.13	)	$	(0.02	)
Loss per share (diluted) – as reported	$	(0.13	)	$	(0.02	)
Loss per share (basic) – pro forma	$	(0.13	)	$	(0.02	)
Loss per share (diluted) – pro forma	$	(0.13	)	$	(0.02	)

New Accounting Principles

In December 2003, the Financial Accounting Standards Board (FASB) issued FASB Interpretation (FIN) No. 46 (Revised), “Consolidation of Variable Interest Entities”, which addresses how a business enterprise should evaluate whether it has a controlling financial interest in an entity through means other than voting rights and accordingly should consolidate the entity.  FIN 46R replaces FIN 46, “Consolidation of Variable Interest Entities”, which was issued in January 2003.  The Company will be required to apply FIN 46R to variable interests in variable interest entities (VIEs) created after December 31, 2003.  For variable interests in VIEs created before January 1, 2004, this interpretation will be applied beginning on March 31, 2004.  For any VIEs that must be consolidated under FIN 46R that were created before January 1, 2004, the assets, liabilities and non-controlling interests of the VIE initially would be measured at their carrying amounts with any difference between the net amount added to the balance sheet and any previously recognized interest being recognized as the cumulative effect of an accounting change.  If determining the carrying amounts is not practicable, fair value at the date this interpretation first applies may be used to measure the assets, liabilities and non-controlling interest in the VIE.  The Company has an interest in an entity whose sole purposes is to own and operate the Panorama Falls building in Englewood, Colorado, which may be considered a VIE.  The Company’s losses are limited to its investment in the tenancy-in-common relationship of approximately $1,364,000, the amounts due from the related party of approximately $3,372,000, and any underlying rents receivable.

F-9

NOTE 3 – ACQUISITIONS AND DEVELOPMENTS

2003 Transactions

Greenhill Park Acquisition

On December 4, 2003, the Company acquired the Greenhill Park office building located in Addison, Texas.  Greenhill Park is subject to a ground lease, see Note 10 – Commitments and Contingencies for additional information.  The purchase price for Greenhill Park was $10,500,000, which was paid with $5,250,000 from the Secured Fleet Facility and the balance in cash from a portion of the proceeds from our 2003 public offering.

Scottsdale Norte Acquisition

On October 7, 2003, the Company acquired the Scottsdale Norte office building located in Scottsdale, Arizona.  The purchase price for Scottsdale Norte was $12,250,000, which was paid with $6,630,000 from the assumption of the existing loan from Southern Farm Bureau Life Insurance Company and the balance in cash from a portion of the proceeds from our 2003 public offering.

Financial Plaza Acquisition

On September 10, 2003, the Company acquired the Financial Plaza office building located in Mesa, Arizona.  The purchase price for Financial Plaza was $39,000,000, which was paid with $24,750,000 from the assumption of the existing loan from Allstate Life Insurance Company and the balance in cash from a portion of the proceeds from our 2003 public offering.

Keystone Office Park IV Development

During 2003, the Company completed the construction of a building adjacent to the existing Keystone Office Park in Indianapolis, Indiana.  This building was constructed to accommodate the expansion needs of some of the existing tenants as well as market demand.  The building opened for occupancy in August 2003.

Southwest Gas Acquisition

On February 6, 2003, the Company acquired the Southwest Gas office building located in Phoenix, Arizona.  The purchase price for the Southwest Gas Building was $17,000,000, which was paid with $11,900,000 from the Secured Fleet Facility and the balance from a short-term loan, also from Fleet National Bank.  This short-term loan was refinanced with the Unsecured Fleet Facility.

The following unaudited pro forma financial information is presented as if the Company had acquired these properties as of the beginning of the periods presented.  This information is presented for illustrative purposes only and may not be indicative of the results that actually would have occurred if the acquisitions had been in effect on the dates indicated or which may be obtained in the future.

	2003			2002
Revenue	$	38,748,968		$	30,907,407
Net (loss)/income	$	(2,399,638	)	$	37,412
(Loss)/earnings per share – basic	$	(0.16	)	$	0.00
(Loss)/earnings per share – diluted	$	(0.16	)	$	0.00

The unaudited pro forma financial information for 2003 is not comparable to the 2002 pro forma information as the operating results from the 2002 acquisitions are reflected from the acquisition date and are not presented as if they occurred as of the beginning of the period.

F-10

2002 Transactions

Chateau Plaza Acquisition

On November 25, 2002, the Company acquired the Chateau Plaza office building located in Dallas, Texas.  The purchase price for Chateau Plaza was $22,000,000, which was paid with $15,400,000 from the Secured Fleet Facility and the balance paid in cash from a portion of the proceeds from our 2002 public offering.

Centerra Acquisition

On November 12, 2002, the Company acquired the Centerra office building located in Denver, Colorado. The purchase price for Centerra was $18,658,300, which was paid with $13,057,660 from the Secured Fleet Facility and the balance paid in cash from a portion of the proceeds from our 2002 public offering.

Keystone Land Acquisition

On September 6, 2002, the Company acquired a parcel of undeveloped land, adjacent to Keystone Office Park in Indianapolis, Indiana, from Sheridan Realty Partners, L.P., an affiliate, for $320,000.  The purchase price was determined based on the fair market value of the land and was paid through the issuance of 52,893 shares of our common stock ($6.05 per share).  In late 2002, the Company commenced construction of a fourth building on this land.

Parkway Centre II Acquisition

On September 5, 2002, the Company acquired the Parkway Centre II office building located in Plano, Texas.  The purchase price for Parkway Centre II was $22,000,000, which was paid with $17,000,000 from the assumption of the existing loan from J.P. Morgan Chase Commercial Mortgage Securities Corp. and the balance paid in cash from a portion of the proceeds from our 2002 public offering.

NOTE 4 – INVESTMENT IN UNCONSOLIDATED AFFILIATES

In December 2001, the Company completed the sale of an 80% tenancy in common interest in the Panorama Falls building to a related party, retaining the remaining 20% interest.  This interest is being accounted for under the equity method of accounting and is included as an investment in an unconsolidated affiliate in the accompanying consolidated balance sheets.  The Company also holds the mortgage loan on Panorama Falls in the amount of $4,214,408 and has recorded a receivable for 80% of this amount, as due from related party with the remaining 20%, included in the investment in unconsolidated affiliate balance.  The property had a net book value of $6,915,557 at December 31, 2003.  This investment may be considered a variable interest entity, see the discussion of FIN 46R under Note 2 – Significant Accounting Policies for additional information.

F-11

NOTE 5 – MORTGAGE LOANS AND NOTES PAYABLE

The Company finances its properties with mortgage loans and other debt instruments available, such as lines of credit.  See above under Note 3 – Acquisitions and Developments for property specific financing activity.  The following is a summary of the Company’s outstanding mortgage loans and notes payable, classified by interest type (fixed or variable) and in order of maturity, at December 31, 2003 and 2002:

			2003				2002
Lender	Mortgaged Property	MaturityDate	PrincipalBalance		InterestRate(1)		PrincipalBalance		InterestRate(1)
Fixed Rate
Teachers Insurance and Annuity Association of America	AmeriVest Plaza at Inverness	1/10/2006	$	14,572,888	7.90	%	$	14,721,273	7.90	%
Greenwich Capital Financial Products	Parkway Centre II Centerra Southwest Gas Building	10/1/2008	38,876,849		5.13	%	—		—
Allstate Life Insurance Company	Financial Plaza	10/5/2010	24,669,760		5.25	%	—		—
Southern Farm Bureau Life Insurance Company	Scottsdale Norte	4/1/2011	6,625,460		7.90	%	—		—
Teachers Insurance and Annuity Association of America	Sheridan Center Arrowhead Fountains Kellogg Building	1/1/2013	29,309,686		7.40	%	29,700,000		7.40	%
Jefferson Pilot	Texas Bank Buildings	5/1/2013	1,292,749		9.00	%	1,377,372		9.00	%
Security Life of Denver Insurance Company	Keystone Office Park – 1st	5/1/2022	4,334,828		8.00	%	4,435,814		8.00	%
Security Life of Denver Insurance Company	Keystone Office Park – 2nd	5/1/2022	485,638		8.63	%	496,064		8.63	%
Transatlantic Capital Company, LLC	Texas State Buildings	8/1/2028	5,660,436		7.66	%	5,735,061		7.66	%
		Subtotal	$	125,828,294	6.41	%	$	56,465,584	7.65	%
Variable Rate
Fleet National Bank – $42 million Senior Secured Line of Credit	Chateau Plaza Greenhill Park	11/12/2005	$	18,470,020	3.90	%	$	28,457,660	4.17	%
Fleet National Bank – $30 million Unsecured Line of Credit	Unsecured	11/12/2005	15,149,725		5.17	%	—		—
J.P. Morgan Chase	Parkway Centre II	—	—		—		17,000,000		3.39	%
KeyBank National Association	Panorama Falls	—	—		—		4,072,283		3.91	%
		Subtotal	$	33,619,745	4.47	%	$	49,529,943	3.88	%
Other Notes Payable
Lease Capital Corporation	Phone system	10/31/2007	$	82,371	11.11	%	$	98,705	11.11	%
		Subtotal	$	82,371	11.11	%	$	98,705	11.11	%
		Total	$	159,530,410	6.01	%	$	106,094,232	5.89	%

(1) Interest only, does not include amortization of deferred financing costs or unused facility fees.

Refinancings

In September 2003, the Company borrowed $39,000,000 from Greenwich Capital Financial Products (see terms above).  The proceeds were used to repay (i) a portion of the Secured Fleet Facility that was secured by Centerra and the Southwest Gas Building, respectively and (ii) a loan from J.P. Morgan Chase secured by Parkway Centre II.  This loan allowed the Company to fix the interest rate on a large portion of variable rate debt.

In December 2002, the Company borrowed $29,700,000 from Teachers Insurance and Annuity Association of America (see terms above).  The proceeds were used to repay (i) two loans from US Bank National Association secured by Sheridan Center and the Kellogg Building, respectively and (ii) a loan from Nationwide Life Insurance Company secured by Arrowhead Fountains.  This loan allowed the Company to fix the interest rate on a large portion of variable rate debt.

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Lines of Credit

In November 2002, the Company obtained a senior secured revolving line of credit from Fleet National Bank (the Secured Fleet Facility) (see terms above).  The original available amount under this facility was $30,000,000, which was increased to $42,000,000 in February 2003.  The Secured Fleet Facility is currently secured by Chateau Plaza and Greenhill Park and had an outstanding balance of $18,470,020 at December 31, 2003 with $23,530,000 of availability.

In February 2003, the Company obtained a $5,100,000 short-term loan from Fleet National Bank which was used for the acquisition of the Southwest Gas Building.  In August 2003, the Company refinanced this loan with a $15,000,000 unsecured revolving line of credit from Fleet National Bank (the Unsecured Fleet Facility) (see terms above), which was increased to $30,000,000 in December 2003.  The Unsecured Fleet Facility had an outstanding balance of $15,149,725 at December 31, 2003 with $14,850,275 of availability.

Other Information

The following table details the scheduled maturities of mortgage loans and notes payable outstanding at December 31, 2003:

2004	$	2,244,174
2005	36,017,028
2006	16,605,800
2007	2,516,001
2008	37,269,255
Thereafter	64,878,152
Total	$	159,530,410

Certain of its mortgage lenders require the Company to comply with certain debt covenants as described in the specific loan documents, including the loan-to-value ratio, the interest coverage ratio, the fixed charge coverage ratio and the dividend payout ratio.  At December 31, 2003, the Company was in compliance with all of its debt covenants with the exception of the dividend payout ratio covenant as required by the Secured Fleet Facility and the Unsecured Fleet Facility.  The Company received a waiver from Fleet National Bank for this event of non-compliance with this covenant for the year ended December 31, 2003.  In addition, on March 16, 2004, the Company amended its Secured Fleet Facility and Unsecured Fleet Facility loan agreements to modify certain of its debt covenants.  The Company believes it will be in compliance with these modified covenants based on forecasted operating results, however, there is no assurance that the Company will remain in compliance with these amended covenants.

Certain of its mortgage lenders require the Company to escrow funds to be used for the payment of future real estate taxes, property insurance, tenant improvements, leasing commissions and other capital expenditures.  At December 31, 2003 and 2002, these amounts totaled $5,778,427 and $2,335,519, respectively, and are classified as escrow deposits on the accompanying consolidated balance sheets.

NOTE 6 – STOCK OFFERINGS

During June 2003, the Company offered 5,750,000 shares of common stock, including 750,000 shares to cover over-allotments, at a price of $6.20 per share.  The Company received approximately $33,267,000, net of underwriting commissions and expenses.  The proceeds were used to repay a portion of the outstanding balance on the senior secured revolving line of credit with Fleet National Bank (the Secured Fleet Facility), for capital improvements and as working capital.  The Company intends to use available amounts on the Secured Fleet Facility to fund future property acquisitions.

During May and June 2002, the Company offered 4,140,000 shares of common stock, including 540,000 shares to cover over-allotments, at a price of $6.05 per share.  The Company received $22,749,038, net of the

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underwriting commissions and offering expenses.  The proceeds were used to acquire additional properties, for capital improvements and for general corporate purposes.

NOTE 7 – TENANT LEASES

The following table summarizes future minimum base rent to be received under non-cancelable tenant leases for the Company’s commercial properties expiring each year, at December 31, 2003:

2004	$	32,854,456
2005	26,745,103
2006	18,192,352
2007	12,553,306
2008	8,101,503
Thereafter	10,148,577
Total	$	108,595,297

Some leases also provide for additional rent based on increases in operating expenses.  These increases are generally payable annually in the succeeding year.

For the years ended December 31, 2003 and 2002, there were no tenants who accounted for greater than 10% of revenues.

NOTE 8 – IMPAIRMENT OF INVESTMENT IN REAL ESTATE

During 2003, the Company recorded a $334,592 impairment charge for a property in Clint, Texas and a $1,131,340 impairment charge for a property in Paris, Texas.  Both properties had been previously leased to agencies of the State of Texas.  The Clint building has been vacant since November 2001 and the Paris building has been vacant since December 2002.  The Company has been unsuccessful in re-leasing these properties but will continue in its efforts, however there are no near term prospects.  The Company had previously recorded a $275,000 impairment charge related to the Clint property in 2002.  Impairment charges recorded on these properties have reduced their net book values to their estimated fair values of $100,000 and $43,000 for Clint and Paris, respectively.  The Company arrived at the estimated fair values using a combination of the property tax assessment values, values estimated by the Company’s property tax consulting firms and local real estate brokers.  The Company continues to monitor their non-core properties for any indications of impairment.

NOTE 9 – EQUITY-BASED COMPENSATION

2003 Long-Term Incentive Plan

Effective January 1, 2003, the Company adopted the 2003 Long-Term Incentive Plan (the LTIP) as a means to compensate employees and directors with equity-based compensation.  The LTIP provides for the grant of up to 500,000 shares of common stock in the form of non-qualified and incentive stock options, stock appreciation rights, bonus stock, stock units, performance shares, performance units, restricted stock and restricted stock units.

During 2003, 58,000 shares of restricted common stock were granted to each of William T. Atkins, the Chief Executive Officer and Chairman, and Charles K. Knight, the Chief Operating Officer and President, under the LTIP, and such shares vest over a five year period.

1995 and 1998 Stock Option Plans

Pursuant to the Company’s 1995 and 1998 Stock Option Plans (collectively, the 95-98 Option Plans), the Company may grant options to purchase an aggregate of 330,000 shares of the Company’s common stock to key employees, directors, and other persons who have or are contributing to the success of the Company.  The options granted pursuant to the 95-98 Option Plans may be incentive options qualifying for beneficial tax treatment for the recipient, non-qualified options or non-qualified, non-discretionary options.  Directors who are not employees of the

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Company (Outside Directors) automatically receive options to purchase 12,000 shares pursuant to the 95-98 Option Plans at the time of their election.  None of these options are exercisable at the time of grant.  One-third of these options become exercisable on December 30^th of each of the first three years immediately following the date of grant.  The exercise price for options granted to Outside Directors is the fair market value of the common stock on the date of grant, and all options granted to Outside Directors expire five years from the date of grant.  On the date that all of an Outside Director’s options become exercisable, options to purchase an additional 12,000 shares, none of which are exercisable at that time, shall be granted to that Outside Director.

The status of outstanding options granted pursuant to the Company’s Option Plans was as follows:

	Number of Options Outstanding		Number of Options Exercisable	Weighted- Average Exercise Price		Weighted- Average Fair Value		Range of Exercise Prices
December 31, 2001	214,000		164,000	$	4.74			$3.97-5.70
Granted at fair value	24,000			$	6.22	$	0.58	$6.22
Exercised	(60,000	)		$	4.51			$4.38-4.81
Forfeited	(20,000	)		$	4.90			$4.75-5.00
December 31, 2002	158,000		112,000	$	5.04			$3.97-6.22
Granted at fair value	83,000			$	6.60	$	0.69	$6.16-7.10
Exercised	(33,247	)		$	4.90			$3.97-6.16
December 31, 2003	207,753		147,753	$	5.24			$4.13-7.10

The fair value of each grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:

	2003		2002
Dividend yield	7.9	%	8.5	%
Volatility	27.0	%	27.0	%
Discount rate	2.9	%	2.9	%
Expected life (years)	4.6		5.0

The weighted average remaining contractual life of options outstanding at December 31, 2003 was approximately 3 years.

At December 31, 2003 and 2002, options to purchase 12,000 and 95,000 shares, respectively, were available for grant pursuant to the 95-98 Option Plans.

Warrants

At December 31, 2003 the status of exercisable warrants is as follows:

Issue Date	Exercisable	Exercise Price		Expiration Date
January 2000	273,500	$	5.00	January 2005
July 2000	63,105	$	5.00	July 2005
June 2001	50,000	$	7.00	July 2005

NOTE 10 – COMMITMENTS AND CONTINGENCIES

Ground Lease

Greenhill Park is subject to a 99-year ground lease expiring on December 1, 2083.  The lease requires the Company to make monthly rental payments based on the value of the land that is re-established every ten years.  The annual minimum rent increases every ten years to the greater of (i) 10% of the fair market value of the land, or (ii)

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10% of the initial value of the land compounded annually at 3%.  The next base rent calculation will be performed on January 1, 2006.  In addition to the annual base rent, the ground lessor is entitled to a participating rent equal to 25% of gross revenue receipts in excess of $6,723,205.  The combined annual base rent and participating rent is limited to the greater of (i) 10% of the fair market value of the land, or (ii) 50% of the difference between the gross revenue receipts and $6,723,205.

Term	Annual Minimum Rent
2004 – 2005	$	642,165
2006 – 2015	863,016
2016 – 2025	1,159,822
2026 – 2035	1,558,704
2036 – 2045	2,094,768
2046 – 2055	2,815,193
2056 – 2065	3,783,384
2066 – 2075	5,084,552
2076 – 2083	6,833,213

Legal Claims

From time to time, the Company and/or its subsidiaries may become involved in litigation relating to claims arising out of its operations in the normal course of business. The following is a discussion of outstanding legal claims against the Company and by the Company:

On June 14, 2001, a lawsuit was filed in the District Court, Hidalgo County, Texas against Innerarity Austin, Inc., a Nevada corporation, and the Company’s wholly-owned subsidiary, AmeriVest Properties Texas, Inc., by Laura Smith alleging that the defendants were negligent and breached various duties in allowing the Company’s Mission, Texas building to be contaminated with airborne contaminants while leasing the premises to the plaintiff’s employer, the Texas Department of Human Services.  Innerarity Austin, Inc. was the previous owner of the property.  The plaintiff alleges that due to the acts and omissions of the defendants, she has suffered serious and some permanent injuries and severe physical and mental pain.  The plaintiff seeks monetary and other relief, including exemplary damages, in excess of $50,000, and pre-judgment and post-judgment interest as provided by law, costs of the lawsuit and such other relief to which the plaintiff may be justly entitled.

On February 11, 2002, a lawsuit was filed in the District Court, Hidalgo County, Texas against the Company’s wholly-owned subsidiary, AmeriVest Properties Texas, Inc., and Woodhaven Management Corporation, the Company’s external property manager, by Irma and Yreneo Carranza alleging that the defendants were negligent in maintaining the Company’s Mission, Texas building while leasing the premises to the plaintiff’s employer, the Texas Department of Human Services.  The plaintiff alleges that due to the acts and omissions of the defendants, she has suffered serious and some permanent injuries and severe physical and mental pain, including loss of consortium.  The plaintiff seeks monetary and other relief, including exemplary damages, and pre-judgment and post-judgment interest as provided by law, costs of the lawsuit and such other relief to which the plaintiff may be justly entitled.

On August 23, 2002, a lawsuit was filed in the District Court, County of Arapahoe, Colorado, against the Company’s wholly-owned subsidiary, AmeriVest Broadway Properties, Inc., Sheridan Realty Advisors, LLC (SRA), Porter Construction Services, Inc. and others by Jane Doe alleging that the defendants were negligent in maintaining security at our Panorama Falls building.  The plaintiff alleges that due to the acts and omissions of the defendants, she was sexually assaulted and continues to suffer from physical injuries and mental anguish.  The plaintiff seeks monetary relief, including exemplary damages, and pre- and post-judgment interest as provided by law, costs of the lawsuit and such other relief to which the plaintiff may be justly entitled.

The Company has asserted a general denial of the material allegations in all lawsuits and the Company’s insurance companies are defending the Company in these lawsuits and are responsible for all costs.  The Company believes that these lawsuits will not be adversely determined and will not have any material adverse effect on the Company’s business and financial condition.

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NOTE 11 – RELATED PARTY TRANSACTIONS

Sheridan Realty Advisors, LLC (SRA)

Effective January 1, 2000 through December 31, 2001, all of the Company’s properties were managed under a Property Management and Advisory Agreement (as amended and restated on March 12, 2001 and December 31, 2001, the Agreement) with SRA, which also managed the day-to-day operations of the Company and assisted and advised the Board of Directors on real estate acquisitions and investment opportunities.  SRA is owned by two of our executives, William T. Atkins and Alexander S. Hewitt.  Effective January 1, 2002, the Company acquired the administrative and property management and accounting services business of SRA for approximately $50,000, which resulted in the Company employing most of SRA’s employees and the elimination of the related fees.  Furthermore, effective November 1, 2002, the Company terminated the Agreement in accordance with the Termination of Advisory Agreement entered into on December 27, 2002.  Due to the amendment of the Agreement effective January 1, 2002 whereby certain SRA employees became employees of the Company, the advisory and capital project fees were expensed in 2002.  Prior to January 1, 2002, these fees were capitalized.  Additionally, due to the termination of the Advisory Agreement effective November 1, 2002 whereby all remaining SRA employees became employees of the Company, these fees have been eliminated.  Beginning on November 1, 2002, the salaries of these additional employees are included in general and administrative expenses.

In accordance with the Agreement, SRA received an administrative fee, a property management and accounting fee, an advisory fee and a capital project fee for these services.  The property management fee was calculated as 5% of gross collected rents, the advisory fee was calculated as 5% of capital deployed for real property acquisitions and the capital project fee was calculated as 3% of the total cost of capital projects in excess of $100,000.  The following is a detail of the fees for the years ended December 31, 2003 and 2002:

	2003		2002
Advisory fee	$	—	$	1,267,380
Capital project fee	—		100,000
Total	$	—	$	1,367,380

Sheridan Realty Partners, L.P.

On September 6, 2002, the Company acquired a parcel of undeveloped land, adjacent to Keystone Office Park in Indianapolis, Indiana, from Sheridan Realty Partners, L.P., an affiliate.  See Note 3 – Acquisitions and Developments for additional information.

Panorama Falls Sale

On December 6, 2001, the Company sold an 80% tenancy in common interest in the Panorama Falls buildings to a related party.  See Note 4 – Investment in Unconsolidated Affiliates for additional information.

NOTE 12 – COMPREHENSIVE INCOME

There are no adjustments necessary to net income as presented in the accompanying consolidated statements of operations to derive comprehensive income in accordance with SFAS No. 130, “Reporting Comprehensive Income.”

NOTE 13 – LOSS PER SHARE

There are no adjustments necessary to the basic weighted average number of common shares outstanding to arrive at the diluted weighted average number of common shares outstanding as the Company recognized a net loss for the years ended December 31, 2003 and 2002 and the impact would be anti-dilutive.  The amounts excluded from the calculation due to their anti-dilutive effect are as follows: 28,567 options, 76,075 warrants and 116,000 shares of restricted common stock.

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NOTE 14 – SUBSEQUENT EVENTS

On March 16, 2004, the Company acquired the Camelback Lakes office building located in Phoenix, Arizona.  The purchase price for Camelback Lakes was $31,980,000, which was paid with $21,000,000 from the Secured Fleet Facility and the balance from Unsecured Fleet Facility.

On March 16, 2004, the Company sold its Texas Bank Buildings for $4,100,000.  The four properties are located in Clifton, Georgetown, Henderson and Mineral Wells, Texas and had an aggregate net book value of approximately $3,195,000 at December 31, 2003.

F-18

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 8A.  CONTROLS AND PROCEDURES

The Company carried out an evaluation under the supervision and with participation of the Company’s management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934 as of December 31, 2003.  Based on their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that disclosure controls and procedures were effective as of the end of the period covered by this report to ensure that information required to be disclosed by the Company in its reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms.  There was no change in the Company’s internal controls over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

Information required by Item 9 is incorporated by reference to the description under the section entitled “Directors and Executive Officers” of our definitive proxy statement for the 2004 annual meeting of our stockholders.

ITEM 10.  EXECUTIVE COMPENSATION

Information required by Item 10 is incorporated by reference to the description under the section entitled “Executive Compensation” of our definitive proxy statement for the 2004 annual meeting of our stockholders.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information required by Item 11 is incorporated by reference to the description under the sections entitled “Directors and Officers” and “Beneficial Owners of Securities” of our definitive proxy statement for the 2004 annual meeting of our stockholders.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information required by Item 12 is incorporated by reference to the description under the section entitled “Transactions Between AmeriVest and Related Parties” of our definitive proxy statement for the 2004 annual meeting of our stockholders.

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

See Index to Exhibits.

(b)  Reports On Form 8-K

During the fourth quarter of our fiscal year ended December 31, 2003, we filed the following Current Reports on Form 8-K:

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1.Current Report on Form 8-K/A dated September 10, 2003 (filed November 7, 2003).  This Current Report consisted of an amendment to the Current Report on Form 8-K dated September 10, 2003 filed on September 16, 2003 and included disclosures under “Item 7. Financial Statements and Exhibits.”  The financial statements included were an Independent Auditors’ Report; Statement of Revenue and Certain Expenses for the six months ended June 30, 2003 (unaudited) and for the year ended December 31, 2002; Notes to Statement of Revenue and Certain Expenses; Pro Forma Consolidated Balance Sheet as of December 31, 2002 (unaudited); Pro Forma Consolidated Statement of Operations for the six months ended June 30, 2003 (unaudited); Pro Forma Consolidated Statement of Operations for the year ended December 31, 2002 (unaudited); Notes to Pro Forma Consolidated Financial Statements (unaudited); Statement of Estimated Taxable Operating Results and Cash to be Made Available by Operations for the Year ended December 31, 2002 (unaudited); and Note to Statement of Estimated Taxable Operating Results and Cash to be Made Available by Operations (unaudited).  (Financial Plaza)

2.Current Report on Form 8-K dated October 7, 2003 (filed November 13, 2003).  This Current Report included disclosures under “Item 5. Other Events.”  (Scottsdale Norte)

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information required by Item 14 is incorporated by reference to the description under the section entitled “Principal Accountant Fees and Services” of our definitive proxy statement for the 2004 annual meeting of our stockholders.

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SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

AMERIVEST PROPERTIES INC.
By:	/s/ William T. Atkins
William T. Atkins, Chief Executive Officer

Date:  March 18, 2004

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ William T. Atkins	Chief Executive Officer (Principal	March 18, 2004
William T. Atkins	Executive Officer) and Chairman of the Board
/s/ Charles K. Knight	Chief Operating Officer, President and	March 18, 2004
Charles K. Knight	Director
/s/ Kathryn L. Hale	Chief Financial Officer (Principal	March 18, 2004
Kathryn L. Hale	Financial Officer and Principal Accounting Officer) and Secretary
/s/ Patrice Derrington	Director	March 18, 2004
Patrice Derrington
	Director
James F. Etter
/s/ Harry P. Gelles	Director	March 18, 2004
Harry P. Gelles
/s/ Alexander S. Hewitt	Director	March 18, 2004
Alexander S. Hewitt
/s/ Robert W. Holman, Jr.	Director	March 18, 2004
Robert W. Holman, Jr.
/s/ John A. Labate	Director	March 18, 2004
John A. Labate
	Director
Jerry J. Tepper

34

EXHIBIT INDEX

Number	Description
2	Form of Agreement and Plan of Merger of AmeriVest and AMVP Inc. (to reincorporate in Maryland).  Incorporated by reference to Exhibit A of AmeriVest’s Definitive Proxy Statement concerning AmeriVest’s June 29, 1999 Annual Meeting of Stockholders filed with the SEC on May 27, 1999.
3.1	Articles of Amendment and Restatement of Articles of Incorporation.  Incorporated by reference to Exhibit 3.1 of AmeriVest’s Registration Statement on Form SB-2/A filed with the SEC on May 29, 2003 (Registration No. 333-105183.
3.2A	Amended and Restated Bylaws as amended and restated as of April 16, 2002.  Incorporated by reference to Exhibit 3.2 of AmeriVest’s Registration Statement on Form SB-2 filed with the SEC on April 19, 2003 (Registration No. 333-86676).
3.2B	First Amendment to Amended and Restated Bylaws dated May 20, 2003.  Incorporated by reference to Exhibit 3.2B of AmeriVest’s Registration Statement on Form SB-2/A filed with the SEC on May 29, 2003 (Registration No. 333-105183).
4.1	Specimen Common Stock Certificate.  Incorporated by reference to Exhibit 4.1(a) of AmeriVest’s Registration Statement on Form SB-2 filed with the SEC on June 21, 1996 (Registration No. 333-5114-D).
10.1	1995 Stock Option Plan.  Incorporated by reference to Exhibit 10.9 of AmeriVest’s Annual Report on Form 10-KSB for the year ended December 31, 1997 filed with the SEC on March 30, 1998.
10.2	1998 Stock Option Plan.  Incorporated by reference to AmeriVest’s Definitive Proxy Statement concerning AmeriVest’s May 21, 1998 Annual Meeting of Stockholders filed with the SEC on March 30, 1998.
10.3	Dividend Reinvestment Plan.  Incorporated by reference to AmeriVest’s Registration Statement on Form S-3 filed with the SEC on August 21, 2000 (Registration No. 333-44210).
10.4A	Revolving Credit Agreement among AmeriVest Properties Inc. and Fleet National Bank, as administrative agent, and the lenders party thereto, dated November 12, 2002.  Incorporated by reference to Exhibit 10.1 of AmeriVest’s Current Report on Form 8-K filed with the SEC on December 30, 2002.
10.4B	Revolving Credit Note by AmeriVest Properties Inc. to Fleet National Bank, as agent, dated November 12, 2002.  Incorporated by reference to Exhibit 10.2 of AmeriVest’s Current Report on Form 8-K filed with the SEC on December 30, 2002.
10.4C	First Amendment to Revolving Credit Agreement between AmeriVest Properties Inc. and Fleet National Bank, as administrative agent, and the lenders party thereto, dated February 6, 2003.  Incorporated by reference to Exhibit 10.1 of AmeriVest’s Current Report on Form 8-K filed with the SEC on February 21, 2003.
10.5A	Cross-Collateralization and Cross-Default Agreement among AmeriVest Properties Inc., AmeriVest Sheridan Center Inc., AmeriVest Kellogg Inc. and AmeriVest Arrowhead Inc. and Teachers Insurance and Annuity Association of America dated December 23, 2002.  Incorporated by reference to Exhibit 10.21A of AmeriVest’s Annual Report on Form 10-KSB for the year ended December 31, 2002 filed with the SEC on March 31, 2003.
10.5B	Promissory Note by AmeriVest Arrowhead Inc. to Teachers Insurance and Annuity Association of America dated December 23, 2002.  Incorporated by reference to Exhibit 10.21B of AmeriVest’s Annual Report on Form 10-KSB for the year ended December 31, 2002 filed with the SEC on March 31, 2003.
10.5C	Promissory Note by AmeriVest Kellogg Inc. to Teachers Insurance and Annuity Association of America dated December 23, 2002.  Incorporated by reference to Exhibit 10.21C of AmeriVest’s Annual Report on Form 10-KSB for the year ended December 31, 2002 filed with the SEC on March 31, 2003.
10.5D	Promissory Note by AmeriVest Sheridan Center Inc. to Teachers Insurance and Annuity Association of America dated December 23, 2002.  Incorporated by reference to Exhibit 10.21D of AmeriVest’s Annual Report on Form 10-KSB for the year ended December 31, 2002 filed with the SEC on March 31, 2003.
10.8A	Deed of Trust between AmeriVest Mesa Inc. and Allstate Life Insurance Company dated

35

	September 8, 2003.  Incorporated by reference to Exhibit 10.1 of AmeriVest’s Current Report on Form 8-K filed with the SEC on November 7, 2003.
10.8B	Mortgage Note by AmeriVest Mesa Inc. to Allstate Life Insurance Company dated September 8, 2003.  Incorporated by reference to Exhibit 10.2 of AmeriVest’s Current Report on Form 8-K filed with the SEC on November 7, 2003.
10.9A	Loan Agreement between AmeriVest Centerra Inc., AmeriVest Parkway Inc., and AmeriVest Black Canyon Inc. and Greenwich Capital Financial Products Inc. dated September 19, 2003.
10.9B	Promissory Note by AmeriVest Centerra Inc., AmeriVest Parkway Inc., and AmeriVest Black Canyon Inc. to Greenwich Capital Financial Products Inc. dated September 19, 2003.
10.10	AmeriVest Properties Inc. 2003 Long-Term Incentive Plan.  Incorporated by reference to Exhibit 10.22 of AmeriVest’s Registration Statement on Form SB-2/A filed with the SEC on May 29, 2003 (Registration No. 333-105183).
10.11	Severance Agreement and Release between AmeriVest Properties Inc. and D. Scott Ikenberry
10.12A	Unsecured Revolving Credit Agreement among AmeriVest Properties Inc. and Fleet National Bank, as administrative agent, and the lenders party thereto, dated December 15, 2003.
10.12B	Revolving Credit Note by AmeriVest Properties Inc. to Fleet National Bank, as agent, dated December 15, 2003.
10.13	Contract of Sale between LSF Presidio Investment I, LLC and AmeriVest Camelback Inc. dated January 15, 2004.  (Camelback Lakes)
10.14	Termination of Advisory Agreement between AmeriVest Properties Inc. and Sheridan Realty Advisors, LLC dated December 27, 2002.  Incorporated by reference to Exhibit 10.1 of AmeriVest’s Current Report on Form 8-K filed with the SEC on January 7, 2003.
10.15	Amended Revolving Line of Credit Agreement dated March 11, 2002 between AmeriVest Properties Inc. and Sheridan Investments, LLC.  Incorporated by reference to Exhibit 10.13B of AmeriVest’s Annual Report on Form 10-KSB for the year ended December 31, 2001 filed with the SEC on April 1, 2002.
21	Subsidiaries of AmeriVest Properties Inc.
23	Consent of KPMG LLP
31	Section 302 Certifications of Chief Executive Officer and Chief Financial Officer
32	Section 906 Certifications of Chief Executive Officer and Chief Financial Officer
99	Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Share Dividends

36

EX-10.9A

Exhibit 10.9A

LOAN AGREEMENT

Dated as of September 19, 2003

Between

AMERIVEST CENTERRA INC.

AMERIVEST PARKWAY INC.

AMERIVEST BLACK CANYON INC.,

collectively, as Borrower

and

GREENWICH CAPITAL FINANCIAL PRODUCTS INC.,

as Lender

Property Locations:	Centerra Office Building, Denver, CO
	Parkway Centre II, Plano, TX
	Southwest Gas Building, Phoenix, AZ

TABLE OF CONTENTS

1.	DEFINITIONS; PRINCIPLES OF CONSTRUCTION
	1.1	Specific Definitions
	1.2	Index of Other Definitions
	1.3	Principles of Construction
2.	GENERAL LOAN TERMS
	2.1	The Loan
	2.2	Interest; Monthly Payments
		2.2.1	Generally
		2.2.2	Default Rate
		2.2.3	Taxes
		2.2.4	New Payment Date
	2.3	Loan Repayment
		2.3.1	Repayment
		2.3.2	Mandatory Prepayments
		2.3.3	Defeasance
		2.3.4	Optional Prepayments
	2.4	Release of Property
		2.4.1	Release on Defeasance
		2.4.2	Sale of a Property
		2.4.3	Release on Payment in Full
	2.5	Payments and Computations
		2.5.1	Making of Payments
		2.5.2	Computations
		2.5.3	Late Payment Charge
	2.6	Fees
		2.6.1	Origination Fees
3.	CASH MANAGEMENT AND RESERVES
	3.1	Cash Management Arrangements
	3.2	Required Repairs
		3.2.1	Completion of Required Repairs
		3.2.2	Required Repairs Reserves
	3.3	Taxes and Insurance
	3.4	Capital Expense Reserves
	3.5	Rollover Reserves
	3.6	Operating Expense Subaccount
	3.7	Casualty/Condemnation Subaccount
	3.8	Security Deposits
	3.9	Cash Collateral Subaccount.
	3.10	Grant of Security Interest; Application of Funds
	3.11	Property Cash Flow Allocation

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4.	REPRESENTATIONS AND WARRANTIES
	4.1	Organization; Special Purpose
	4.2	Proceedings; Enforceability
	4.3	No Conflicts
	4.4	Litigation
	4.5	Agreements
	4.6	Title
	4.7	No Bankruptcy Filing
	4.8	Full and Accurate Disclosure
	4.9	Tax Filings
	4.10	No Plan Assets
	4.11	Compliance
	4.12	Contracts
	4.13	Federal Reserve Regulations; Investment Company Act
	4.14	Easements; Utilities and Public Access
	4.15	Physical Condition
	4.16	Leases
	4.17	Fraudulent Transfer
	4.18	Ownership of Borrower
	4.19	Purchase Options
	4.20	Management Agreement
	4.21	Hazardous Substances
	4.22	Name; Principal Place of Business
	4.23	Other Debt
5.	COVENANTS
	5.1	Existence
	5.2	Taxes and Other Charges
	5.3	Access to Property
	5.4	Repairs; Maintenance and Compliance; Alterations
		5.4.1	Repairs; Maintenance and Compliance
		5.4.2	Alterations
	5.5	Performance of Other Agreements
	5.6	Cooperate in Legal Proceedings
	5.7	Further Assurances
	5.8	Environmental Matters
		5.8.1	Hazardous Substances
		5.8.2	Environmental Monitoring
	5.9	Title to the Property
	5.10	Leases
		5.10.1	Generally
		5.10.2	Material Leases

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		5.10.3	Minor Leases
		5.10.4	Additional Covenants with respect to Leases
	5.11	Estoppel Statement
	5.12	Property Management
		5.12.1	Management Agreement
		5.12.2	Termination of Manager
	5.13	Special Purpose Bankruptcy Remote Entity
	5.14	Assumption in Non-Consolidation Opinion
	5.15	Change in Business or Operation of Property
	5.16	Debt Cancellation
	5.17	Affiliate Transactions
	5.18	Zoning
	5.19	No Joint Assessment
	5.20	Principal Place of Business
	5.21	Change of Name, Identity or Structure
	5.22	Indebtedness
	5.23	Licenses
	5.24	Compliance with Restrictive Covenants, Etc
	5.25	ERISA
	5.26	Prohibited Transfers
		5.26.1	Generally
		5.26.2	Transfer and Assumption
	5.27	Liens
	5.28	Dissolution
	5.29	Expenses
	5.30	Indemnity
6.	NOTICES AND REPORTING
	6.1	Notices
	6.2	Borrower Notices and Deliveries
	6.3	Financial Reporting
		6.3.1	Bookkeeping
		6.3.2	Annual Reports
		6.3.3	Monthly/Quarterly Reports
		6.3.4	Other Reports
		6.3.5	Annual Budget
		6.3.6	Breach
7.	INSURANCE; CASUALTY; AND CONDEMNATION
	7.1	Insurance
		7.1.1	Coverage
		7.1.2	Policies

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	7.2	Casualty
		7.2.1	Notice; Restoration
		7.2.2	Settlement of Proceeds
	7.3	Condemnation
		7.3.1	Notice; Restoration
		7.3.2	Collection of Award
	7.4	Application of Proceeds or Award
		7.4.1	Application to Restoration
		7.4.2	Application to Debt
		7.4.3	Procedure for Application to Restoration
8.	DEFAULTS
	8.1	Events of Default
	8.2	Remedies
		8.2.1	Acceleration
		8.2.2	Remedies Cumulative
		8.2.3	Severance
		8.2.4	Delay
		8.2.5	Lender’s Right to Perform
9.	SPECIAL PROVISIONS
	9.1	Sale of Note and Secondary Market Transaction
		9.1.1	General; Borrower Cooperation
		9.1.2	Use of Information
		9.1.3	Borrower Obligations Regarding Disclosure Documents
		9.1.4	Borrower Indemnity Regarding Filings
		9.1.5	Indemnification Procedure
		9.1.6	Contribution
		9.1.7	Rating Surveillance
		9.1.8	Severance of Loan
10.	MISCELLANEOUS
	10.1	Exculpation
	10.2	Brokers and Financial Advisors
	10.3	Retention of Servicer
	10.4	Survival
	10.5	Lender’s Discretion
	10.6	Governing Law
	10.7	Modification, Waiver in Writing
	10.8	Trial by Jury
	10.9	Headings/Exhibits
	10.10	Severability

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10.11	Preferences
10.12	Waiver of Notice
10.13	Remedies of Borrower
10.14	Prior Agreements
10.15	Offsets, Counterclaims and Defenses
10.16	Publicity
10.17	No Usury
10.18	Conflict; Construction of Documents
10.19	No Third Party Beneficiaries
10.20	Yield Maintenance Premium
10.21	Assignment
10.22	Set-Off
10.23	Counterparts

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LOAN AGREEMENT

LOAN AGREEMENT dated as of September 19, 2003 (as the same may be modified, supplemented, amended or otherwise changed, this “Agreement”) between AMERIVEST CENTERRA INC., a Colorado corporation, AMERIVEST PARKWAY INC., a Texas corporation, and AMERIVEST BLACK CANYON INC., an Arizona corporation (together with their permitted successors and assigns, “Borrower”), and GREENWICH CAPITAL FINANCIAL PRODUCTS INC., a Delaware corporation (together with its successors and assigns, “Lender”).

1.DEFINITIONS; PRINCIPLES OF CONSTRUCTION

1.1Specific Definitions.  The following terms have the meanings set forth below:

Affiliate:  as to any Person, any other Person that, directly or indirectly, is in Control of, is Controlled by or is under common Control with such Person or is a director or officer of such Person or of an Affiliate of such Person.

Allocated Loan Amount:  shall mean the amount set forth opposite the particular Project on Schedule 6 attached hereto.

Approved Capital Expenses:  Capital Expenses incurred by Borrower, which Capital Expenses shall either be (i) included in the Approved Capital Budget for the current calendar month or (ii) approved by Lender, in its reasonable discretion.

Approved Leasing Expenses:  actual out-of-pocket expenses incurred by Borrower and payable to third parties that are not Affiliates of Borrower or Guarantor in leasing space at the Property pursuant to Leases entered into in accordance with the Loan Documents, including brokerage commissions and tenant improvements, which expenses (i) are (A) specifically approved by Lender in connection with approving the applicable Lease, which approval shall not be unreasonably withheld by Lender, (B) incurred in the ordinary course of business and on market terms and conditions in connection with Leases which do not require Lender’s approval under the Loan Documents, or (C) otherwise approved by Lender, which approval shall not be unreasonably withheld or delayed, and (ii) are substantiated by executed Lease documents and brokerage agreements.

Approved Operating Expenses:  operating expenses incurred by Borrower which (i) are included in the Approved Operating Budget for the current calendar month, (ii) are for real estate taxes, insurance premiums, electric, gas, oil, water, sewer or other utility service to the Property or (iii) have been approved by Lender, which approval shall not be unreasonably withheld by Lender.

Available Cash:  as of each Payment Date during the continuance of Cash Management Period, the amount of Rents, if any, remaining in the Deposit Account after the application of all of the payments required under clauses (i) through (vii) of Section 3.11(a).

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Black Canyon Mortgage:  shall mean that certain Deed of Trust entered into as of the date hereof and given by AmeriVest Black Canyon Inc. to Lender and encumbering the Project located in Phoenix, Arizona.

Business Day:  any day other than a Saturday, Sunday or any day on which commercial banks in New York, New York are authorized or required to close.

Calculation Date:the last day of each calendar quarter during the Term.

Capital Expenses:  expenses that are capital in nature or required under GAAP to be capitalized.

Cash Management Period:  shall commence upon Lender giving notice to the Clearing Bank of the occurrence of any of the following: (i) the Stated Maturity Date, or (ii) a Default or an Event of Default; and shall end upon Lender giving notice to the Clearing Bank that the sweeping of funds into the Deposit Account may cease, which notice Lender shall only be required to give if (1) the Loan and all other obligations under the Loan Documents have been repaid in full or (2) the Stated Maturity Date has not occurred and with respect for the matters described in clause (ii) above, such Event of Default has been cured and no other Event of Default has occurred and is continuing.

Centerra Mortgage:  shall mean that certain Deed of Trust entered into as of the date hereof and given by AmeriVest Centerra Inc. to Lender and encumbering the Project located in Denver, Colorado.

Code:  the Internal Revenue Code of 1986, as amended and as it may be further amended from time to time, any successor statutes thereto, and applicable U.S. Department of Treasury regulations issued pursuant thereto in temporary or final form.

Control:  with respect to any Person, either (i) ownership directly or indirectly of 49% or more of all equity interests in such Person or (ii) the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, through the ownership of voting securities, by contract or otherwise.

Debt:  the unpaid Principal, all interest accrued and unpaid thereon, any Yield Maintenance Premium and all other sums due to Lender in respect of the Loan or under any Loan Document.

Debt Service:  with respect to any particular period, the greater of (i) scheduled Principal and interest payments due under the Note in such period or (ii) the product of (A) the outstanding principal as of the end of such period multiplied by (B) 10.09%.

Debt Service Coverage Ratio:  as of any date, the ratio calculated by Lender of (i) the Net Operating Income for the 12 month period ending with the most recently completed calendar month to (ii) the Debt Service with respect to such period.

Default:  the occurrence of any event under any Loan Document which, with the giving of notice or passage of time, or both, would be an Event of Default.

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Default Rate:  a rate per annum equal to the lesser of (i) the maximum rate permitted by applicable law, or (ii) 5% above the Interest Rate, compounded monthly.

Defeasance Collateral:  U.S. Obligations, which provide payments (i) on or prior to, but as close as possible to, all Payment Dates and other scheduled payment dates, if any, under the Note after the Defeasance Date and up to and including the Stated Maturity Date, and (ii) in amounts equal to or greater than the Scheduled Defeasance Payments.

Defeasance Percentage:  the percentage derived by dividing, (i) in the case of an initial Partial Defeasance, the original principal amount of the Defeased Note by the original principal amount of the Note or (ii) in the case of a subsequent Defeasance, the amount of the subsequent Defeased Note by the original principal amount of its corresponding Undefeased Note.

Deposit Bank:  Wachovia Bank, National Association, or such other bank or depository selected by Lender in its discretion.

Eligible Institution:  a depository institution insured by the Federal Deposit Insurance Corporation the short term unsecured debt obligations or commercial paper of which are rated at least A-1 by S&P, P-1 by Moody’s and F-1+ by Fitch. in the case of accounts in which funds are held for thirty (30) days or less or, in the case of Letters of Credit or accounts in which funds are held for more than thirty (30) days, the long term unsecured debt obligations of which are rated at least “AA” by Fitch and S&P and “Aa2” by Moody’s.

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

ERISA Affiliate:  all members of a controlled group of corporations and all trades and business (whether or not incorporated) under common control and all other entities which, together with Borrower, are treated as a single employer under any or all of Section 414(b), (c), (m) or (o) of the Code.

GAAP:  generally accepted accounting principles in the United States of America as of the date of the applicable financial report.

GCM:  Greenwich Capital Financial Products Inc.

Governmental Authority:  any court, board, agency, commission, office or authority of any nature whatsoever for any governmental unit (federal, state, county, district, municipal, city or otherwise) now or hereafter in existence.

Guarantor:  AmeriVest Properties Inc., a Maryland corporation.

Interest Period:  (i) the period from the date hereof through the first day thereafter that is the last day of a calendar month and (ii) each period thereafter from the 1st day of each calendar month through the last day of each such calendar month; except that the Interest Period, if any, that would otherwise commence before and end after the Maturity Date shall end on the Maturity Date.

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Interest Rate:  a rate of interest equal to five and thirteen one-hundredths percent (5.13%) per annum, which includes a servicing fee of three (3) basis points per annum (or, when applicable pursuant to this Note or any other Loan Document, the Default Rate).

Key Principal(s):  AmeriVest Properties Inc.

Leases:  all leases and other agreements or arrangements heretofore or hereafter entered into affecting the use, enjoyment or occupancy of, or the conduct of any activity upon or in, the Property or the Improvements, including any guarantees, extensions, renewals, modifications or amendments thereof and all additional remainders, reversions and other rights and estates appurtenant thereunder.

Legal Requirements:  statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions of Governmental Authorities affecting Borrower, any Loan Document or all or part of the Property or the construction, ownership, use, alteration or operation thereof, whether now or hereafter enacted and in force, and all permits, licenses and authorizations and regulations relating thereto, and all covenants, agreements, restrictions and encumbrances contained in any instrument, either of record or known to Borrower, at any time in force affecting all or part of the Property.

Lien:  any mortgage, deed of trust, lien (statutory or otherwise), pledge, hypothecation, easement, restrictive covenant, preference, assignment, security interest or any other encumbrance, charge or transfer of, or any agreement to enter into or create any of the foregoing, on or affecting all or any part of the Property or any interest therein, or any direct or indirect interest in Borrower, including any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, the filing of any financing statement, and mechanic’s, materialmen’s and other similar liens and encumbrances.

Loan Documents:  this Agreement and all other documents, agreements and instruments now or hereafter evidencing, securing or delivered to Lender in connection with the Loan, including the following, each of which is dated as of the date hereof:  (i) the Note made by Borrower to Lender in the aggregate principal amount equal to the Loan (the “Note”), (ii) the three (3) Deeds of Trust, Assignment of Leases and Rents and Security Agreement made by Borrower in favor of Lender which covers the Properties (collectively, the “Mortgage”), (iii) the three (3) Assignments of Leases and Rents from Borrower to Lender, (iv) Assignment of Agreements, Licenses, Permits and Contracts from Borrower to Lender, (v) the Clearing Account Agreement (the “Clearing Account Agreement”) among Borrower, Lender, Manager and Clearing Bank, (vi) the Deposit Account Agreement (the “Deposit Account Agreement”) among Borrower, Lender, Manager and the Deposit Bank and (vii) the Guaranty of Recourse Obligations made by Guarantor; as each of the foregoing may be (and each of the foregoing defined terms shall refer to such documents as they may be) amended, restated, replaced, supplemented or otherwise modified from time to time.

Loan to Value Ratio:shall mean the ratio, as determined by Lender, of the principal balance of the Note and all other indebtedness secured by liens or encumbrances

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against the Property to the fair market value of the Property, as such fair market value is determined based upon an M.A.I. appraisal satisfactory to Lender.

Management Agreement:  the management agreement between Borrower and Manager, pursuant to which Manager is to manage the Property, as same may be amended, restated, replaced, supplemented or otherwise modified from time to time in accordance with Section 5.12.

Manager:  AmeriVest Properties Inc., a Maryland corporation, or any successor, assignee or replacement manager appointed by Borrower in accordance with Section 5.12.

Material Alteration:  any alteration affecting structural elements of the Property the cost of which exceeds $250,000; provided, however, that in no event shall (i) any Required Repairs, (ii) any tenant improvement work performed pursuant to any Lease existing on the date hereof or entered into hereafter in accordance with the provisions of this Agreement, or (iii) alterations performed as part of a Restoration, constitute a Material Alteration.

Material Lease:  all Leases which individually or in the aggregate with respect to the same tenant and its Affiliates (i) cover more than 7,500 square feet of the Improvements or (ii)  have a gross annual rent of more than 5% of the total annual Rents or (iii) demise at least one full floor of the Improvements.

Maturity Date:  the date on which the final payment of principal of the Note (or the Defeased Note, if applicable) becomes due and payable as therein provided, whether at the Stated Maturity Date, by declaration of acceleration, or otherwise.

Minor Lease:  any Lease that is not a Material Lease.

Note: shall mean that certain Promissory Note dated as of the date hereof in the principal amount of $39,000,000 given by Borrower to Lender.

Net Operating Income:  for any period, the underwritten net cash flow of the Property determined by Lender in its sole and absolute discretion in accordance with Lender’s then current underwriting standards for loans of this type and the then current underwriting standards of the Rating Agencies (including adjustments for market vacancy, bankrupt tenants, leasing costs and capital items).

Officer’s Certificate:  a certificate delivered to Lender by Borrower which is signed by a senior executive officer of Borrower.

Other Charges:  all ground rents, maintenance charges, impositions other than Taxes, and any other charges, including vault charges and license fees for the use of vaults, chutes and similar areas adjoining the Property, now or hereafter levied or assessed or imposed against the Property or any part thereof.

Parkway Mortgage:  shall mean that certain Deed of Trust entered into as of the date hereof and given by AmeriVest Parkway Inc. to Lender and encumbering the Project located in Plano, Texas.

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Partial Release:  shall have the meaning accorded to such term in Section 2.4.2.

Partial Release Amount:  shall mean (i) an amount equal to 125% of the Allocated Loan Amount allocated to the released Project, and (ii) the (A) Prepayment Consideration applicable thereto or (B) Yield Maintenance Premium, as applicable.

Payment Date:  the 1st day of each calendar month or, upon Lender’s exercise of its right to change the Payment Date in accordance with Section 2.2.4, the New Payment Date (in either case, if such day is not a Business Day, the Payment Date shall be the first Business Day thereafter).  The first Payment Date hereunder shall be November 1, 2003.

Permitted Encumbrances:  (i) the Liens created by the Loan Documents, (ii) all Liens and other matters disclosed in the Title Insurance Policy, (iii) Liens, if any, for Taxes or Other Charges not yet due and payable and not delinquent, (iv) any workers’, mechanics’ or other similar Liens on the Property provided that any such Lien is bonded or discharged within 45 days after Borrower first receives notice of such Lien and (v) such other title and survey exceptions as Lender approves in writing in Lender’s discretion.

Permitted Transfers:  (i) a Lease entered into in accordance with the Loan Documents, (ii) a Permitted Encumbrance, (iii) a Transfer and Assumption or (iv) provided that no Default or Event of Default shall then exist, a Transfer of an interest in Borrower provided that (A) such Transfer shall not (x) cause the transferee (other than Key Principal), together with its Affiliates, to acquire Control of Borrower or to increase its direct or indirect interest in Borrower to an amount which equals or exceeds 49% or (y) result in Borrower no longer being Controlled by Key Principal(s), (B) after giving effect to such Transfer, Key Principal(s) shall continue to own at least 51% of all equity interests (direct or indirect) in Borrower, (C) Borrower shall give Lender notice of such Transfer together with copies of all instruments effecting such Transfer not less than 10 days prior to the date of such Transfer, and (D) the legal and financial structure of Borrower and its members and the single purpose nature and bankruptcy remoteness of Borrower and its members after such Transfer, shall satisfy Lender’s then current applicable underwriting criteria and requirements or (v) provided that no Default or Event of Default shall then exist, a Transfer of an interest in Borrower which shall cause the transferee to increase its direct or indirect interest in Borrower to an amount which equals or exceeds 49% or which results in a change of Control of Borrower, provided that (A) such Transfer is first approved by Lender in its sole and absolute discretion, and (B) if such Transfer occurs after a Secondary Market Transaction, Borrower, at its sole cost and expense, shall have (1) delivered (or caused to be delivered) to Lender, a Rating Comfort Letter, (2) delivered (or caused to be delivered) to Lender and the applicable Rating Agencies, a substantive non consolidation opinion with respect to Borrower in form and substance satisfactory to Lender and the applicable Rating Agencies and (3) reimbursed Lender for all reasonable expenses incurred by it in connection with such Transfer.

Person:  any individual, corporation, partnership, limited liability company, joint venture, estate, trust, unincorporated association, any other person or entity, and any federal, state, county or municipal government or any bureau, department or agency thereof and any fiduciary acting in such capacity on behalf of any of the” foregoing.

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Plan:  (i) an employee benefit or other plan established or maintained by Borrower or any ERISA Affiliate or to which Borrower or any ERISA Affiliate makes or is obligated to make contributions and (ii) which is covered by Title IV of ERISA or Section 302 of ERISA or Section 412 of the Code.

Prepayment Consideration shall be the amount equal to the greater of (i) one percent (1%) of the aggregate Loan balance at the time of prepayment, or (ii) (A) the amount of the monthly interest which would otherwise be payable on the principal balance being prepaid from the date of the first day of the calendar month immediately following the date of prepayment (unless prepayment is tendered on the first day of any calendar month during the term of the Note, in which case from the date of prepayment) to and including the Maturity Date; over (B) the amount of the monthly interest the Lender would earn if the principal balance being prepaid were reinvested for the period from the first day of the calendar month immediately following the date of prepayment (unless prepayment is tendered on the first day of any calendar month during the term of this Note, in which case from the date of prepayment) to and including the Maturity Date at the Treasury Rate (as hereinafter defined), such difference to be discounted to present value at the Treasury Rate.  The “Treasury Rate” shall be the annualized yield on securities issued by the United States Treasury having a maturity corresponding to the remaining term to the originally scheduled Maturity Date of this Note, as quoted in Federal Reserve Statistical Release [H. 15(519)] under the heading “U.S. Government Securities - Treasury Constant Maturities” for the Treasury Rate Determination Date (as defined below), converted to a monthly equivalent yield.  If yields for such securities of such maturity are not shown in such publication, then the Treasury Rate shall be determined by Lender by linear interpolation between the yields of securities of the next longer and next shorter maturities.  If said Federal Reserve Statistical Release or any other information necessary for determination of the Treasury Rate in accordance with the foregoing is no longer published or is otherwise unavailable, then the Treasury Rate shall be reasonably determined by Lender based on comparable data.  The term “Treasury Rate Determination Date” shall mean the date which is five (5) banking days prior to the scheduled prepayment date.

Project:  shall mean each of the office buildings located at the following addresses:  (i) the Centerra Office Building, Denver, Colorado; (ii) Parkway Centre II, Plano, Texas; and (iii) the Southwest Gas Building, Phoenix, Arizona (each a “Project” and collectively, the “Projects”)

Project Owner:  shall mean any of:  AmeriVest Centerra Inc., a Colorado corporation, AmeriVest Parkway Inc., a Texas corporation and AmeriVest Black Canyon Inc., an Arizona corporation.

Property or Properties:  the parcels of real property and Improvements thereon owned by Borrower and encumbered by the Mortgages; together with all rights pertaining to such real property and Improvements, and all other collateral for the Loan as more particularly described in the Granting Clauses of the Mortgages and referred to therein as the Mortgaged Property or Trust Property, as applicable.  The Properties are known as the Centerra Office Building located in Denver, Colorado, Parkway Center II located in Plano, Texas and the Southwest Gas Building located in Phoenix, Arizona.

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Rating Agency:  each of Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies Inc. (“S&P”), Moody’s Investors Service Inc. (“Moody’s”), and Fitch IBCA Duff & Phelps or any other nationally-recognized statistical rating organization to the extent any of the foregoing have been engaged by Lender or its designee in connection with or in anticipation of any Secondary Market Transaction.

Rating Comfort Letter:  a letter issued by each of the applicable Rating Agencies which confirms that the taking of the action referenced to therein will not result in any qualification, withdrawal or downgrading of any existing ratings of Securities created in a Secondary Market Transaction.

Release Date:  the earlier to occur of (i) the forty second (42nd) Payment Date of the Term and (ii) the date that is two (2) years from the “startup day” (within the meaning of Section 860G(a)(9) of the Code) of the REMIC Trust established in connection with a Securitization involving this Loan.

REMIC Trust:  a “real estate mortgage investment conduit” within the meaning of Section 860D of the Code that holds the Note.

Rents:  all rents, rent equivalents, moneys payable as damages (including payments by reason of the rejection of a Lease in a Bankruptcy Proceeding) or in lieu of rent or rent equivalents, royalties (including all oil and gas or other mineral royalties and bonuses), income, fees, receivables, receipts, revenues, deposits (including security, utility and other deposits), accounts, cash, issues, profits, charges for services rendered, and other payment and consideration of whatever form or nature received by or paid to or for the account of or benefit of Borrower, Manager or any of their agents or employees from any and all sources arising from or attributable to the Property and the Improvements, including all receivables, customer obligations, installment payment obligations and other obligations now existing or hereafter arising or created out of the sale, lease, sublease, license, concession or other grant of the right of the use and occupancy of the Property or rendering of services by Borrower, Manager or any of their agents or employees and proceeds, if any, from business interruption or other loss of income insurance.

Scheduled Defeasance Payments:  (i) in the case of a Full Defeasance, the Monthly Debt Service Payment Amount required under the Note (or, to the extent that there has been a previous Partial Defeasance, the Undefeased Note, as the case may be), for all Payment Dates occurring after the Defeasance Date (including the outstanding Principal balance on the Note (or, Undefeased Note, as the case may be) as of the Stated Maturity Date) and (ii) in the case of a Partial Defeasance, the Monthly Debt Service Payment Amount multiplied by the Defeasance Percentage for all Payment Dates occurring after the Defeasance Date (including the outstanding Principal Balance on the Note (or the Undefeased Note, as the case may be) as of the Stated Maturity Date).

Security Agreement:  a security agreement in form and substance that would be satisfactory to Lender (in Lender’s sole but good faith discretion) pursuant to which Borrower grants Lender a perfected, first priority security interest in the Defeasance Collateral Account and the Defeasance Collateral.

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Servicer:  a servicer selected by Lender to service the Loan.

State:  the state in which the Property is located.

Stated Maturity Date:  October 1, 2008, as such date may be changed in accordance with Section 2.2.4.

Taxes:  all real estate and personal property taxes, assessments, water rates or sewer rents, maintenance charges, impositions, vault charges and license fees, now or hereafter levied or assessed or imposed against all or part of the Property.

Term:  the entire term of this Agreement, which shall expire upon repayment in full of the Debt and full performance of each and every obligation to be performed by Borrower pursuant to the Loan Documents.

Title Insurance Policy:  the TLTA mortgagee title insurance policy as to the Project known as Parkway Center II in Plano, Texas, and the ALTA mortgagee title insurance policy as to the Projects known as the Centerra Office Building in Denver, Colorado and the Southwest Gas Building in Phoenix, Arizona, each in the form acceptable to Lender issued with respect to the Property and insuring the Lien of the Mortgage.

Transfer:  any sale, conveyance, transfer, lease or assignment, or the entry into any agreement to sell, convey, transfer, lease or assign, whether by law or otherwise, of, on, in or affecting (i) all or part of the Property (including any legal or beneficial direct or indirect interest therein), or (ii) any direct or indirect interest in Borrower (including any profit interest).

UCC:  the Uniform Commercial Code as in effect in the State or the state in which any of the Cash Management Accounts are located, as the case may be.

U.S. Obligations:  direct full faith and credit obligations of the United States of America that are not subject to prepayment, call or early redemption.

Welfare Plan:  an employee welfare benefit plan, as defined in Section 3(1) of ERISA.

Yield Maintenance Premium:  an amount which, when added to the outstanding Principal, would be sufficient to purchase U.S. Obligations which provide payments (a) on or prior to, but as close as possible to, all successive scheduled payment dates under this Agreement through the Stated Maturity Date and (b) in amounts equal to the Monthly Debt Service Payment Amount required under this Agreement through the Stated Maturity Date together with the outstanding principal balance of the Note as of the Stated Maturity Date assuming all such Monthly Debt Service Payments are made (including any servicing costs associated therewith).  In no event shall the Yield Maintenance Premium be less than zero.

1.2Index of Other Definitions.  The following terms are defined in the sections or Loan Documents indicated below:

“Approved Annual Budget “ - 6.3.5

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“Annual Budget “ - 6.3.5

“Approved Capital Budget” - 6.3.5

“Approved Operating Budget” - 6.3.5

“Applicable Taxes” - 2.2.3

“Award” - - 7.3.2

“Bankruptcy Proceeding” - 4.7

“Borrower’s Recourse Liabilities” - 10.1

“Capital Reserve Subaccount” - 3.4

“Cash Collateral Subaccount” - 3.9]

“Cash Management Accounts” - 3.10

“Casualty” - - 7.2.1

“Casualty/Condemnation Prepayment” - 2.3.2

“Casualty/Condemnation Subaccount” - 3.7

“Clearing Account” - 3.1

“Clearing Account Agreement” - 1.1 (Definition of Loan Documents)

“Clearing Bank” - 3.1

“Condemnation” - - 7.3.1

“Defeasance Collateral Account” - 2.3.3

“Defeasance Event” - 2.3.3

“Defeasance Date” - 2.3.3

“Defeased Note” - 2.3.3

“Deposit Account” - 3.1

“Deposit Account Agreement” - 1.1 (Definition of Loan Documents)

“Disclosure Document” - 9.1.2

“Easements” - - 4.14

“Eligible Account” - Deposit Account Agreement

“Endorsement” - - 5.26

“Environmental Laws” - 4.21

“Equipment” - - Mortgage

“Event of Default” - 8.1

“Exchange Act” - 9.1.2

“GCM Group” - 9.1.3

“Hazardous Substances” -  4.21

“Improvements” - - Mortgage

“Indemnified Liabilities” - 5.30

“Indemnified Party” - 5.30

“Independent Director” - Schedule 5

“Insurance Premiums” - 7.1.2

“Insured Casualty” - 7.2.2

“Issuer” - - 9.1.3

“Late Payment Charge” - 2.5.3

“Lender’s Consultant” - 5.7.1

“Liabilities” - - 9.1.3

“Licenses” - - 4.11

“Loan” - - 2.1

“Monthly Debt Service Payment Amount” - 2.2.1

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“Moody’s” - - 1.1 (Definition of Rating Agency)

“Mortgage” - - 1.1 (Definition of Loan Documents)

“New Payment Date” - 2.2.4

“Note” - - 1.1 (Definition of Loan Documents)

“Notice” - - 6.1

“Operating Expense Subaccount” - 3.6

“Partial Defeasance” - 2.3.3

“Permitted Indebtedness” - 5.22

“Permitted Investments” - Deposit Account Agreement

“Permitted Prepayment Date” - 2.3.4

“Policies” - - 7.1.2

“Principal” - - 2.1

“Proceeds” - - 7.2.2

“Proposed Material Lease” - 5.10.2

“Provided Information” - 9.1.1

“Qualified Carrier” - 7.1.1

“Registration Statement” - 9.1.3

“Remedial Work” - 5.7.2

“Rent Roll” - 4.16

“Required Records” - 6.3.6

“Required Repairs” - 3.2.1

“Required Repairs Subaccount” - 3.2.2

“Restoration” - - 7.4.1

“Rollover Reserve Subaccount” - 3.5

“S&P” - - 1.1 (Definition of Rating Agency)

“Secondary Market Transaction” - 9.1.1

“Securities” - - 9.1.1

“Securities Act” - 9.1.2

“Security Deposit Account” - 3.8

“Security Deposit Subaccount” - 3.8

“Significant Casualty” - 7.2.2

“Special Purpose Bankruptcy Remote Entity” - 5.13

“Springing Recourse Event” - 10.1

“Subaccounts” - - 3.1

“Successor Borrower” - 2.3.3

“Tax and Insurance Subaccount” - 3.3

“Toxic Mold” - 4.21

“Transfer and Assumption” - 5.26

“Transferee Borrower” - 5.26

“Undefeased Note” - 2.3.3

“Underwriter Group” - 9.1.3

“Underwriters” - - 9.1.3

1.3Principles of Construction.  Unless otherwise specified, (i) all references to sections and schedules are to those in this Agreement, (ii) the words “hereof,” “herein” and “hereunder” and words of similar import refer to this Agreement as a whole and not to any

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particular provision, (iii) all definitions are equally applicable to the singular and plural forms of the terms defined, (iv) the word “including” means “including but not limited to,” and (v) accounting terms not specifically defined herein shall be construed in accordance with GAAP.

2.GENERAL LOAN TERMS

2.1The Loan.  Lender is making a loan (the “Loan”) to Borrower on the date hereof, in the original principal amount (the “Principal”) of $39,000,000.00, which shall mature on the Stated Maturity Date.  Borrower acknowledges receipt of the Loan, the proceeds of which are being and shall be used to (i) repay and discharge existing loans relating to the Property, (ii) fund certain of the Subaccounts, and (iii) pay transaction costs.  Any excess proceeds may be used for any lawful purpose. No amount repaid in respect of the Loan may be reborrowed.

2.2Interest; Monthly Payments.

2.2.1Generally.  From and after the date hereof, interest on the unpaid Principal shall accrue at the Interest Rate and be payable as hereinafter provided.  On the date hereof, Borrower shall pay interest on the unpaid Principal from the date hereof through and including September 30, 2003.  On November 1, 2003 and each Payment Date thereafter through and including October 1, 2008, the Principal and interest thereon at the Interest Rate shall be payable in equal monthly installments of $230,953.76 (the “Monthly Debt Service Payment Amount”); which is based on the Interest Rate and a 300-month amortization schedule.  The Monthly Debt Service Payment Amount due on any Payment Date shall first be applied to the payment of interest accrued during the preceding Interest Period and the remainder of such Monthly Debt Service Payment Amount shall be applied to the reduction of the unpaid Principal.  All accrued and unpaid interest shall be due and payable on the Maturity Date.  If the Loan is repaid on any date other than on a Payment Date (whether prior to or after the Stated Maturity Date), Borrower shall also pay interest that would have accrued on such repaid Principal to but not including the next Payment Date.

2.2.2Default Rate.  After the occurrence and during the continuance of an Event of Default, the entire unpaid Debt shall bear interest at the Default Rate, and shall be payable upon demand from time to time, to the extent permitted by applicable law.

2.2.3Taxes.  Any and all payments by Borrower hereunder and under the other Loan Documents shall be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding taxes imposed on Lender’s income, and franchise taxes imposed on Lender by the law or regulation of any Governmental Authority (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to in this Section 2.2.3 as “Applicable Taxes”).  If Borrower shall be required by law to deduct any Applicable Taxes from or in respect of any sum payable hereunder to Lender, the following shall apply:  (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.2.3), Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) Borrower shall make such deductions and (iii) Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with

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applicable law.  Payments pursuant to this Section 2.2.3 shall be made within ten days after the date Lender makes written demand therefor.

2.2.4New Payment Date.  Lender shall have the right, to be exercised not more than once during the term of the Loan, to change the Payment Date to a date other than the first day of each month (a “New Payment Date”), on 30 days’ written notice to Borrower; provided, however, that any such change in the Payment Date: (i) shall not modify the amount of regularly scheduled monthly principal and interest payments, except that the first payment of principal and interest payable on the New Payment Date shall be accompanied by interest at the interest rate herein provided for the period from the Payment Date in the month in which the New Payment Date first occurs to the New Payment Date, and (ii) shall extend the Stated Maturity Date to the New Payment Date occurring in the month set forth in the definition of Stated Maturity Date.

2.3Loan Repayment.

2.3.1Repayment.  Borrower shall repay the entire outstanding principal balance of the Note in full on the Maturity Date, together with interest thereon to (but excluding) the date of repayment and any other amounts due and owing under the Loan Documents.  Borrower shall have no right to prepay or defease all or any portion of the Principal except in accordance with Section 2.3.2, Section 2.3.3, and Section 2.4.  Except during the continuance of an Event of Default, all proceeds of any repayment, including any prepayments of the Loan, shall be applied by Lender as follows in the following order of priority:  First, accrued and unpaid interest at the Interest Rate; Second, to Principal; and Third, to and any other amounts then due and owing under the Loan Documents.  If prior to the Stated Maturity Date the Debt is accelerated by reason of an Event of Default, then Lender shall be entitled to receive, in addition to the unpaid Principal and accrued interest and other sums due under the Loan Documents, an amount equal to the Yield Maintenance Premium applicable to such Principal so accelerated.  During the continuance of an Event of Default, all proceeds of repayment, including any payment or recovery on the Property (whether through foreclosure, deed-in-lieu of foreclosure, or otherwise) shall, unless otherwise provided in the Loan Documents, be applied in such order and in such manner as Lender shall elect in Lender’s discretion.

2.3.2Mandatory Prepayments.  The Loan is subject to mandatory prepayment in certain instances of Insured Casualty or Condemnation (each a “Casualty/Condemnation Prepayment”), in the manner and to the extent set forth in Section 7.4.2.  Each Casualty/Condemnation Prepayment, after deducting Lender’s costs and expenses (including reasonable attorneys’ fees and expenses) in connection with the settlement or collection of the Proceeds or Award, shall be applied in the same manner as repayments under Section 2.3.1, and if such Casualty/Condemnation Payment is made on any date other than a Payment Date, then such Casualty/Condemnation Payment shall include interest that would have accrued on the Principal prepaid to but not including the next Payment Date.  Provided that no Event of Default is continuing, any such mandatory prepayment under this Section 2.3.2 shall be without the payment of the Yield Maintenance Premium.  Notwithstanding anything to the contrary contained herein, each Casualty/Condemnation Prepayment shall be applied in inverse order of maturity and shall not extend or postpone the due dates of the monthly installments due under the Note or this Agreement, or change the amounts of such installments.

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2.3.3Defeasance

(a)Conditions to Defeasance.  Provided no Event of Default shall be continuing, Borrower shall have the right on any Payment Date after the Release Date and prior to the Permitted Prepayment Date to voluntarily defease the entire amount of the Principal (a “Full Defeasance”) or a portion of the Principal evidenced by the Note (a “Partial Defeasance”) (any such Full Defeasance or Partial Defeasance, a “Defeasance”)by providing Lender with the Defeasance Collateral (a “Defeasance Event”), subject to the satisfaction of the following conditions precedent:

(i)Borrower shall give Lender not less than twenty (20) days prior written notice specifying a Payment Date (the “Defeasance Date”) on which the Defeasance Event is to occur.

(ii)Borrower shall pay to Lender (A) all payments of Principal and interest due on the Loan to and including the Defeasance Date and (B) all other sums, then due under the Note, this Agreement and the other Loan Documents;

(iii)Borrower shall deposit the Defeasance Collateral into the Defeasance Collateral Account and otherwise comply with the provisions of subsections (b) and (c) of this Section 2.3.3;

(iv)Borrower shall execute and deliver to Lender a Security Agreement in respect of the Defeasance Collateral Account and the Defeasance Collateral;

(v)Borrower shall deliver to Lender an opinion of counsel for Borrower that is standard in commercial lending transactions and subject only to customary qualifications, assumptions and exceptions opining, among other things, that (i) Lender has a legal and valid perfected first priority security interest in the Defeasance Collateral Account and the Defeasance Collateral, (ii) if a securitization has occurred, the REMIC Trust formed pursuant to such securitization will not fail to maintain its status as a “real estate mortgage investment conduit” within the meaning of Section 860D of the Code as a result of a Defeasance Event pursuant to this Section 2.3.3, (iii) the Defeasance Event will not result in a deemed exchange for purposes of the Code and will not adversely affect the status of the Note as indebtedness for federal income tax purposes, (iv) delivery of the Defeasance Collateral and the grant of a security interest therein to Lender shall not constitute an avoidable preference under Section 547 of the Bankruptcy Code or applicable state law and (v) a non-consolidation opinion with respect to the Successor Borrower;

(vi)In the case of a Partial Defeasance, the execution and delivery by Borrowers of all necessary documents to amend and restate the Note and issue two substitute notes: one having a principal balance equal to the defeased portion of the original Note (the “Defeased Note”) and the other having a principal balance equal to the undefeased portion of the original Note (the “Undefeased Note”).  The Defeased Note and Undefeased Note shall have terms identical to the terms of the Note, except for the principal balance and a pro rata allocation of the Monthly Debt Service Payment Amount.  After a Partial Defeasance, all references hereunder and in the other Loan Documents to “Note” shall be deemed to mean the

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Undefeased Note, unless expressly provided to the contrary.  A Defeased Note cannot be the subject of any further Defeasance;

(vii)Borrower shall deliver to Lender a Rating Comfort Letter as to the Defeasance Event;

(viii)Borrower shall deliver an Officer’s Certificate certifying that the requirements set forth in this Section 2.3.3 have been satisfied;

(ix)Borrower shall deliver a certificate of a “big four” or other nationally recognized public accounting firm acceptable to Lender certifying that the Defeasance Collateral will generate monthly amounts equal to or greater than the Scheduled Defeasance Payments;

(x)Borrower shall deliver such other certificates, opinions, documents and instruments as Lender may reasonably request; and

(xi)Borrower shall pay all costs and expenses of Lender incurred in connection with the Defeasance Event, including Lender’s reasonable attorneys’ fees and expenses and Rating Agency fees and expenses.

(b)Defeasance Collateral Account.  On or before the date on which Borrower delivers the Defeasance Collateral, Borrower shall open at any Eligible Institution the defeasance collateral account (the “Defeasance Collateral Account”) which shall at all times be an Eligible Account.  The Defeasance Collateral Account shall contain only (i) Defeasance Collateral, and (ii) cash from interest and principal paid on the Defeasance Collateral.  All cash from interest and principal payments paid on the Defeasance Collateral shall be paid over to Lender on each Payment Date and applied first to accrued and unpaid interest and then to Principal.  Any cash from interest and principal paid on the Defeasance Collateral not needed to pay accrued and unpaid interest or Principal shall be retained in the Defeasance Collateral Account as additional collateral for the Loan.  Borrower shall cause the Eligible Institution at which the Defeasance Collateral is deposited to enter an agreement with Borrower and Lender, satisfactory to Lender in its sole discretion, pursuant to which such Eligible Institution shall agree to hold and distribute the Defeasance Collateral in accordance with this Agreement.  The Successor Borrower shall be the owner of the Defeasance Collateral Account and shall report all income accrued on Defeasance Collateral for federal, state and local income tax purposes in its income tax return.  Borrower shall prepay all cost and expenses associated with opening and maintaining the Defeasance Collateral Account.  Lender shall not in any way be liable by reason of any insufficiency in the Defeasance Collateral Account.

(c)Successor Borrower.  In connection with a Defeasance Event under this Section 2.3.3, Borrower shall, if required by the Rating Agencies or if Borrower elects to do so, establish or designate a successor entity (the “Successor Borrower”) which shall be a Single Purpose Bankruptcy Remote Entity and which shall be approved by the Rating Agencies.  Any such Successor Borrower may, at Borrower’s option, be an Affiliate of Borrower unless the Rating Agencies shall require otherwise.  Borrower shall transfer and assign all obligations, rights and duties under and to the Defeased Note, together with the Defeasance Collateral to such

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Successor Borrower.  Such Successor Borrower shall assume the obligations under the Note and the Security Agreement and Borrower shall be relieved of its obligations under such documents.  Borrower shall pay a minimum of $1,000 to any such Successor Borrower as consideration for assuming the obligations under the Note and the Security Agreement.  Borrower shall pay all costs and expenses incurred by Lender, including Lender’s attorney’s fees and expenses, incurred in connection therewith.

2.3.4Optional Prepayments.  From and after the third Payment Date prior to the Stated Maturity Date (the “Permitted Prepayment Date”), Borrower shall have the right to prepay all or any portion of the Principal, provided that Borrower gives Lender at least 15 days’ prior written notice thereof.  If any such prepayment is not made on a Payment Date, Borrower shall also pay interest that would have accrued on such prepaid Principal to, but not including, the next Payment Date.  Any such prepayment shall be made without payment of the Yield Maintenance Premium.

2.4Release of Property.

2.4.1Release on Defeasance.  If Borrower has elected to defease the Note and the requirements of Section 2.3.3 and this Section 2.4 have been satisfied, the Properties shall be released from the Lien of the Mortgage and the Defeasance Collateral pledged pursuant to the Security Agreement shall be the sole source of collateral securing the Notes.  In connection with the release of the Lien, Borrower shall submit to Lender, not less than twenty (20) days prior to the Defeasance Date (or such shorter time as is acceptable to Lender in its sole discretion), a release of Lien (and related Loan Documents) for execution by Lender.  Such release shall be in a form appropriate in the jurisdiction in which the Properties are located and contain standard provisions protecting the rights of the releasing lender.  In addition, Borrower shall provide all other documentation Lender reasonably requires to be delivered by Borrower in connection with such release, together with an Officer’s Certificate certifying that such documentation (i) is in compliance with all Legal Requirements, and (ii) will effect such release in accordance with the terms of this Agreement.  Borrower shall pay all costs, taxes and expenses associated with the release of the Lien of the Mortgage, including Lender’s reasonable attorneys’ fees.

2.4.2Sale of a Property.       Borrower shall be permitted at any time after the Release Date, to release any one (1) of the Projects (a “Partial Release”) from the Lien of the respective Mortgage thereon upon a bona fide third-party sale of such property, and Lender shall take such actions as are necessary to effectuate, pursuant to this Section 2.4.2, the release of the Lien of the respective Mortgage thereon (and related Loan Documents), upon satisfaction of each of the following conditions to the reasonable satisfaction of the Lender:

(i)Lender shall have received from the Borrower at least sixty (60) days prior written notice (a “Partial Release Notice”) of the date proposed for such Partial Release (the “Release Date”) together with a copy of the applicable contract of sale (or an executed term sheet which states all of the material terms of the sale (provided a fully executed contract substantively in the form of the term sheet, is delivered to Lender prior to the closing of such sale and Partial Release)) and all related documents,

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which Release Date shall be a Payment Date or, if not a Payment Date, Borrower shall pay interest on the Partial Release Amount through the next Payment Date on the Release Date;

(ii)Lender shall have the right, exercisable within thirty (30) days after the date of its receipt of the Partial Release Notice, to require that Borrower defease the Note secured by the Lien of the Mortgage encumbering the proposed Release Project in accordance with the terms and conditions of Section 2.3.3, in lieu of having a Partial Release effectuated under this Section 2.4.2 if Lender has not exercised such option in writing within such 30-day period, it shall be assumed that the Borrower shall proceed with a Partial Release pursuant to the terms of this Section 2.4.2;

(iii)Borrower shall remit to the Lender on the Release Date an amount equal to, as applicable, (i) the Partial Release Amount for the applicable Project (which amount shall be determined by Lender and disclosed to Borrower within thirty (30) days after the date of Lender’s receipt of the Partial Release Notice), or (ii) the Yield Maintenance Premium for the partial defeasance, as applicable, and any amounts due under Section 2.3;

(iv)the sale of such Project is pursuant to an arms’ length agreement to a third party not Affiliated with the Borrower or Guarantor;

(v)no sale of any Project shall be permitted on or before the Release Date;

(vi)Borrower shall pay to the Lender all sums then due and payable under the Note, this Agreement, the Mortgage and the other Loan Documents;

(vii)concurrently with such sale, the Borrower owning the Project being released shall dissolve and liquidate;

(viii)after giving effect to such Partial Release, each remaining Borrower shall remain a Special Purpose Bankruptcy Remote Entity;

(ix)Lender shall execute on the date of such Partial Release, a release of Lien and Borrower shall execute any related Loan Documents in connection with such Partial Release, each of which shall be prepared by Lender and in a form appropriate in the jurisdiction in which the applicable Project is located, as applicable;

(x)After giving effect to such Partial Release (i.e., after deducting net operating income and debt service attributable to the Project proposed to be released), the Borrower shall have delivered an M.A.I. appraisal of the remaining Projects encumbered by the Liens of the Mortgages, the results of which shall, as determined by Lender, evidence a Loan to Value Ratio

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that is no greater than the Loan to Value Ratio existing immediately prior to the Partial Release;

(xi)After giving effect to such Partial Release (i.e., after deducting net operating income and debt service attributable to the Project proposed to be released), the remaining Projects encumbered by the Lien of the Mortgages (excluding the Released Project) shall be no less than the greater of (i) the Debt Service Coverage Ratio for the Loan for all three (3) Projects for the 12-month period immediately preceding the Partial Release Date and (ii) the Debt Service Coverage Ratio on the date hereof, which is 1.25:1.00;

(xii)the Lender shall have received from the Borrower with respect to the matters referred to in clauses (vii) and (viii), (x) statements of the Net Operating Income and Debt Service (both on a consolidated basis and separately for the applicable Project to be released for the applicable measuring period) and (y) based on the foregoing statements of Net Operating Income and Debt Service, calculations of the Debt Service Coverage Ratio for the twelve (12) month period preceding the date of Partial Release Notice with and without giving effect to the proposed Partial Release, accompanied by an officer’s certificate that such statements, calculations and information are true, correct and complete in all material respects;

(xiii)Borrower, at their sole cost and expense, shall have delivered to the Lender (A) one or more endorsements to the lender’s policies of title insurance delivered to Lender on the date hereof in connection with the Mortgages insuring that, after giving effect to such Partial Release, (x) the Liens created by the remaining Mortgages and insured thereby are first priority Liens on the remaining Projects, subject only to the Permitted Encumbrances applicable to such Projects, and (y) that such policies are each in full force and effect and unaffected by such Partial Release, and (B) a copy of the final closing settlement statement for such sale;

(xiv)If the Loan, by itself or together with other loans, has been the subject of a Secondary Market Transaction, then Lender shall have received a Rating Comfort Letter from the applicable Rating Agencies stating that the Partial Release does not result in a downgrade of the Loan or the securities of which it is a part;

(xv)Borrower shall pay all of the reasonable costs and expenses incurred by Lender in connection with the sale and Partial Release of the Project and the release of such Project from the lien of the applicable Loan Documents;

(xvi)no Event of Default exists and is continuing at the time of the Partial Release Notice or on the Release Date; and

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(xvii)Borrower and Guarantor shall execute and deliver such documents as Lender may reasonably requested to confirm the continued validity of the Loan Documents and the Liens thereof, and shall have delivered to the Lender an officer’s certificate confirming that, to Borrower’s knowledge, the remaining Borrowers and Guarantor are not in default under, and have, as of the date of such Partial Release, no offsets, counterclaims or defenses to the indebtedness due under the Loan Documents, and to Borrower’s knowledge, the matters referred to in clause (xvi) above are true and correct, and certifying that all conditions precedent for such Partial Release contained in this Agreement have been satisfied.

2.4.3Release on Payment in Full.  Lender shall, upon the written request and at the expense of Borrower, upon payment in full of the Debt in accordance herewith, release the Lien of the Loan Documents.

2.5Payments and Computations.

2.5.1Making of Payments.  Each payment by Borrower shall be made in funds settled through the New York Clearing House Interbank Payments System or other funds immediately available to Lender by 12:00 p.m., New York City time, on the date such payment is due, to Lender by deposit to such account as Lender may designate by written notice to Borrower.  Whenever any such payment shall be stated to be due on a day that is not a Business Day, such payment shall be made on the first Business Day thereafter.  All such payments shall be made irrespective of, and without any deduction, set-off or counterclaim whatsoever and are payable without relief from valuation and appraisement laws and with all costs and charges incurred in the collection or enforcement thereof, including attorneys’ fees and court costs.

2.5.2Computations.  Interest payable under the Loan Documents shall be computed on the basis of the actual number of days elapsed over a 360-day year.

2.5.3Late Payment Charge.  If any Principal, interest or other sum due under any Loan Document is not paid by Borrower on the date on which it is due, Borrower shall pay to Lender upon demand an amount equal to the lesser of 5% of such unpaid sum or the maximum amount permitted by applicable law (the “Late Payment Charge”), in order to defray the expense incurred by Lender in handling and processing such delinquent payment and to compensate Lender for the loss of the use of such delinquent payment.  Such amount shall be secured by the Loan Documents.

2.6Fees.

2.6.1Origination Fees.  On the date hereof, Borrower shall pay to Lender an origination fee of $-0-.

3.CASH MANAGEMENT AND RESERVES

3.1Cash Management Arrangements.  Borrower shall cause all Rents to be transmitted directly by non-residential tenants of the Property into a trust account (the “Clearing

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Account”) maintained by Borrower at a local bank selected by Borrower, which shall at all times be an Eligible Institution (the “Clearing Bank”) as more fully described in the Clearing Account Agreement.  Without in any way limiting the foregoing, all Rents received by Borrower or Manager shall be deposited into the Clearing Account within one Business Day of receipt thereof.  Funds deposited into the Clearing Account shall be swept by the Clearing Bank on a daily basis into Borrower’s operating account at the Clearing Bank, unless a Cash Management Period is continuing, in which event such funds shall be swept on a daily basis into an Eligible Account at the Deposit Bank controlled by Lender (the “Deposit Account”) and applied and disbursed in accordance with this Agreement.  Funds in the Deposit Account shall be invested at Lender’s discretion only in Permitted Investments.  Lender will also establish subaccounts of the Deposit Account which shall at all times be Eligible Accounts (and may be ledger or book entry accounts and not actual accounts) (such subaccounts are referred to herein as “Subaccounts”).  The Deposit Account and any Subaccount will be under the sole control and dominion of Lender, and Borrower shall have no right of withdrawal therefrom.  Borrower shall pay for all expenses of opening and maintaining all of the above accounts.

3.2Required Repairs.

3.2.1Completion of Required Repairs.  Borrower shall perform each item of the repairs and environmental remedial work at the Property described on Schedule 1 (the “Required Repairs”), and shall complete such Required Repairs in the following time frames: (i) all items referenced on Schedule 1 as Code Issues and Deferred Maintenance shall be completed by Borrower within three (3) months after the date hereof, and (ii) all items referenced on Schedule 1 as ADA issues shall be completed by Borrower within six (6) months after the date hereof.

3.2.2Required Repairs Reserves.  On the date hereof, Borrower shall deposit with Lender the aggregate amount of $249,625.00 as being the amount required to complete the Required Repairs and Lender shall cause such amount to be transferred to a Subaccount which shall bear interest, which interest earned shall become a part of such subaccount (the “Required Repairs Subaccount”).  Provided no Default or Event of Default shall have occurred and is continuing, Lender shall disburse funds held in the Required Repairs Subaccount to Borrower, within 15 days after the delivery by Borrower to Lender of a request therefor (but not more often than once per month), in increments of at least $5,000, accompanied by the following items (which items shall be in form and substance reasonably satisfactory to Lender): (i) an Officer’s Certificate (A) certifying that the Required Repairs or any portion thereof which are the subject of the requested disbursement have been substantially completed in a good and workmanlike manner and in material accordance with all applicable Legal Requirements, (B) identifying each Person that supplied materials or labor in connection with such Required Repairs or any portion thereof and (C) stating that each such Person has been or, upon receipt of the requested disbursement, will be paid in full with respect to the portion of the Required Repairs which is the subject of the requested disbursement; (ii) copies of appropriate Lien waivers or other evidence of payment satisfactory to Lender; (iii) at Lender’s option, a title search for the Property indicating that it is free from all Liens not previously approved by Lender; (iv) a copy of each License required to be obtained with respect to the portion of the Required Repairs which is the subject of the requested disbursement; and (v) such other evidence as Lender shall reasonably request that the Required Repairs which are the subject of the

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requested disbursement have been completed and paid for.  Provided no Default or Event of Default shall have occurred and is continuing, upon Borrower’s completion of all Required Repairs in accordance with this Section 3.2, Lender shall release any funds remaining in the Required Repairs Subaccount, if any, to Borrower.

3.3Taxes and Insurance.  Borrower shall pay to Lender on each Payment Date (i) one-twelfth of the Taxes that Lender estimates will be payable during the next 12 months in order to accumulate with Lender sufficient funds to pay all such Taxes at least 30 days prior to their respective due dates and (ii) one-twelfth of the Insurance Premiums that Lender estimates will be payable for the renewal of the coverage afforded by the Policies upon the expiration thereof in order to accumulate with Lender sufficient funds to pay all such Insurance Premiums at least 30 days prior to the expiration of the Policies.  Such amounts will be transferred by Lender to a Subaccount (the “Tax and Insurance Subaccount”).  Provided that no Default or Event of Default has occurred and is continuing, Lender will (a) apply funds in the Tax and Insurance Subaccount to payments of Taxes and Insurance Premiums required to be made by Borrower pursuant to Sections 5.2 and 7.1, provided that Borrower has promptly supplied Lender with notices of all Taxes and Insurance Premiums due, or (b) reimburse Borrower for such amounts upon presentation of evidence of payment; subject, however, to Borrower’s right to contest Taxes in accordance with Section 5.2.  In making any payment relating to Taxes 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 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.  If Lender determines in its reasonable judgment that the funds in the Tax and Insurance Subaccount will be insufficient to pay (or in excess of) the Taxes or Insurance Premiums next coming due, Lender may increase (or decrease) the monthly contribution required to be made by Borrower to the Tax and Insurance Subaccount.

3.4Capital Expense Reserves.  Borrower shall pay on the date hereof and on each Payment Date to Lender an amount initially equal to $8,100.42 per month.  Lender will transfer such amounts into a Subaccount, which shall bear interest, which interest earned shall become a part of such subaccount (the “Capital Reserve Subaccount”).  Additionally, upon thirty (30) days’ prior notice to Borrower, Lender may reassess the amount of the monthly payment required under this Section 3.4 from time to time in its reasonable discretion (based upon its then current underwriting standards).  Provided that no Default or Event of Default has occurred and is continuing, Lender shall disburse funds held in the Capital Reserve Subaccount to Borrower, within 15 days after the delivery by Borrower to Lender of a request therefor (but not more often than once per month), in increments of at least $5,000 provided that (i) such disbursement is for an Approved Capital Expense; (ii) Lender shall have (if it desires) verified (by an inspection conducted at Borrower’s reasonable expense) performance of the work associated with such Approved Capital Expense; and (iii) the request for disbursement is accompanied by (A) an Officer’s Certificate certifying (1) that such funds will be used to pay or reimburse Borrower for Approved Capital Expenses and a description thereof, (2) that all outstanding trade payables (other than those to be paid from the requested disbursement or those constituting Permitted Indebtedness) have been paid in full, (3) that the same has not been the subject of a previous disbursement, and (4) that all previous disbursements have been used to pay the previously identified Approved Capital Expenses, and (B) lien waivers or other evidence of payment

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satisfactory to Lender, (C) at Lender’s option, a title search for the Property indicating that the Property is free from all Liens, claims and other encumbrances not previously approved by Lender and (D) such other evidence as Lender shall reasonably request that the Approved Capital Expenditures at the Property to be funded by the requested disbursement have been completed and are paid for or will be paid upon such disbursement to Borrowers.  Any such disbursement of more than $10,000 to pay (rather than reimburse) Approved Capital Expenses may, at Lender’s option, be made by joint check payable to Borrower and the payee on such Approved Capital Expenses.

3.5Rollover Reserves.  Borrower shall pay to Lender $55,101.92 on each Payment Date. Lender will maintain all amounts so deposited by Borrower hereunder in a Subaccount, which shall bear interest, which interest earned shall become a part of such subaccount (the “Rollover Reserve Subaccount”).  Borrower shall also pay to Lender for transfer into the Rollover Reserve Subaccount all payments received from tenants in connection with the early termination or cancellation of any Leases, including fees, penalties and commissions.   If Lender determines in its reasonable judgment that the funds in the Rollover Reserve Subaccount will be insufficient to pay (or in excess of) the amounts due or to become due for Approved Leasing Expenses, Lender may increase (or decrease) the monthly contribution required to be made by Borrower to the Rollover Reserve Subaccount.  Provided that no Default or Event of Default has occurred and is continuing, Lender shall disburse funds held in the Rollover Reserve Subaccount to Borrower, within 15 days after the delivery by Borrower to Lender of a request therefor (but not more often than once per month), in increments of at least $5,000, provided (i) such disbursement is for an Approved Leasing Expense; (ii) Lender shall have (if it desires) verified (by an inspection conducted at Borrower’s reasonable expense) performance of any construction work associated with such Approved Leasing Expense; and (iii) the request for disbursement is accompanied by (A) an Officer’s Certificate certifying (1) that such funds will be used only to pay (or reimburse Borrower for) Approved Leasing Expenses and a description thereof, (2) that all outstanding trade payables (other than those to be paid from the requested disbursement or those constituting Permitted Indebtedness) have been paid in full, (3) that the same has not been the subject of a previous disbursement, and (4) that all previous disbursements have been used only to pay (or reimburse Borrower for) the previously identified Approved Leasing Expenses, and (B) reasonably detailed supporting documentation as to the amount, necessity and purpose therefor.  Any such disbursement of more than $10,000 to pay (rather than reimburse) Approved Leasing Expenses may, at Lender’s option, be made by joint check payable to Borrower and the payee of such Approved Leasing Expenses.

3.6Operating Expense Subaccount.  During a Cash Management Period, Borrower shall pay to Lender on or before each Payment Date the monthly amount set forth in the Approved Operating Budget for the following month as being necessary for payment of Approved Operating Expenses at the Property for such month, which amounts shall be transferred into a Subaccount for the payment of Approved Operating Expenses (the “Operating Expense Subaccount”).  Provided no Default or Event of Default has occurred and is continuing, Lender shall disburse funds held in the Operating Expense Subaccount to Borrower, within 15 days after delivery by Borrower to Lender of a request therefor (but not more often than once per month), in increments of at least $1,000, provided (i) such disbursement is for an Approved Operating Expense; and (ii) such disbursement is accompanied by (A) an Officer’s Certificate certifying (1) that such funds will be used to pay Approved Operating Expenses and a

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description thereof, (2) that all outstanding trade payables (other than those to be paid from the requested disbursement or those constituting Permitted Indebtedness) have been paid in full, (3) that the same has not been the subject of a previous disbursement, and (4) that all previous disbursements have been or will be used to pay the previously identified Approved Operating Expenses, and (B) reasonably detailed documentation satisfactory to Lender as to the amount, necessity and purpose therefor.

3.7Casualty/Condemnation Subaccount.  Borrower shall pay, or cause to be paid, to Lender all Proceeds or Awards due to any Casualty or Condemnation to be transferred to a Subaccount (the “Casualty/Condemnation Subaccount”) in accordance with the provisions of Section 7.  All amounts in the Casualty/Condemnation Subaccount shall disbursed in accordance with the provisions of Section 7.

3.8Security Deposits.  Each Project Owner shall keep all of its respective security deposits under Leases at its respective Project held in a separately designated account under such Project Owner’s control at the Clearing Bank (and in the case of a letter of credit, assigned with full power of attorney and executed sight drafts to Lender) so that the security deposits shall not be commingled with any other funds of the respective Project Owner (each such account, the “Security Deposit Account”).  During a Cash Management Period, each Project Owner shall, upon Lender’s request, if permitted by applicable Legal Requirements, turn over to Lender the security deposits (and any interest theretofore earned thereon) under Leases, to be held by Lender in a Subaccount (the “Security Deposit Subaccount”) subject to the terms of the Leases.  Security deposits held in the Security Deposit Subaccount will be released by Lender upon notice from the applicable Project Owner together with such evidence as Lender may reasonably request that such security deposit is required to be returned to a tenant pursuant to the terms of a Lease or may be applied as Rent pursuant to the rights of such Project Owner under the applicable Lease.  Any letter of credit or other instrument that a Project Owner receives in lieu of a cash security deposit under any Lease entered into after the date hereof shall (i) be maintained in full force and effect in the full amount unless replaced by a cash deposit as hereinabove described, and (ii) if permitted pursuant to any Legal Requirements, name Lender as payee or mortgagee thereunder (or at Lender’s option, be fully assignable to Lender).

3.9Cash Collateral Subaccount.

(a)If a Cash Management Period shall have commenced, then on the immediately succeeding Payment Date and on each Payment Date thereafter during the continuance of such Cash Management Period, all Available Cash shall be paid to Lender, which amounts shall be transferred by Lender into a Subaccount (the “Cash Collateral Subaccount”) as cash collateral for the Debt.  Any funds in the Cash Collateral Account and not previously disbursed or applied shall be disbursed to Borrower upon the termination of such Cash Management Period or as expressly permitted in this Section 3.9 with regards to leasing commissions and tenant improvement costs.  Lender shall have the right, but not the obligation, at any time (i) during the continuance of an Event of Default or (ii) subsequent to the second Calculation Date following the commencement of a Cash Management Period (whether or not an Event of Default is then continuing), in its sole and absolute discretion to apply all sums then on deposit in the Cash Collateral Subaccount to the Debt, in such order and in such manner as Lender shall elect in its sole and absolute discretion, including to make a prepayment of Principal

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(together which the applicable Yield Maintenance Premium or Prepayment Premium applicable thereto).

(b)Notwithstanding the terms of Section 3.9(a), if the event in clause (ii) of the definition of “Cash Management Period” is the event which caused the commencement of the subject Cash Management Period, then, and only then, will the Borrower be permitted to obtain disbursements (in increments of at least $5,000) for the payment of Approved Leasing Expenses within 15 days of its request therefore (but disbursement shall not be made more often than once per month) from the funds remaining in the Cash Collateral Account after the application by Lender of funds therein in accordance with Section 3.11 below, upon the satisfaction of the following conditions to the satisfaction of Lender: (i) no Default or Event of Default has occurred and is continuing, (ii) such disbursement is for an Approved Leasing Expense; (iii) Lender shall have (if it desires) verified (by an inspection conducted at Borrower’s expense) performance of any construction work associated with such Approved Leasing Expense; and (iv) the request for disbursement is accompanied by: (A) an Officer’s Certificate certifying (1) that such funds will be used only to pay (or reimburse Borrower for) Approved Leasing Expenses and a description thereof, (2) that all outstanding trade payables (other than those to be paid from the requested disbursement or those constituting Permitted Indebtedness) have been paid in full, (3)  that the same has not been the subject of a previous disbursement, and (4) that all previous disbursements have been used only to pay (or reimburse Borrower for) the previously identified Approved Leasing Expenses, (B) reasonably detailed supporting documentation as to the amount, necessity and purpose therefor, and (C) copies of executed interim or final lien waivers if the disbursement is in connection with tenant improvement expenses.  Any such disbursement to pay (rather than reimburse) Approved Leasing Expenses shall be made by joint check payable to Borrower and the payee of such Approved Leasing Expenses.

3.10Grant of Security Interest; Application of Funds.  As security for payment of the Debt and the performance by Borrower of all other terms, conditions and provisions of the Loan Documents, Borrower hereby pledges and assigns to Lender, and grants to Lender a security interest in, all Borrower’s right, title and interest in and to all Rents and in and to all payments to or monies held in the Clearing Account, the Deposit Account, all Subaccounts created pursuant to this Agreement (collectively, the “Cash Management Accounts”).  Borrower hereby grants to Lender a continuing security interest in, and agrees to hold in trust for the benefit of Lender, all Rents in its possession prior to the (i) payment of such Rents to Lender or (ii) deposit of such Rents into the Deposit Account.  Borrower shall not, without obtaining the prior written consent of Lender, further pledge, assign or grant any security interest in any Cash Management Account, or permit any Lien to attach thereto, or any levy to be made thereon, or any UCC Financing Statements, except those naming Lender as the secured party, to be filed with respect thereto.  This Agreement is, among other things, intended by the parties to be a security agreement for purposes of the UCC.  Upon the occurrence and during the continuance of an Event of Default, Lender may apply any sums in any Cash Management Account in any order and in any manner as Lender shall elect in Lender’s discretion without seeking the appointment of a receiver and without adversely affecting the rights of Lender to foreclose the Lien of the Mortgage or exercise its other rights under the Loan Documents.  Cash Management Accounts shall not constitute trust funds and may be commingled with other monies held by Lender.  All interest which accrues on the funds in any Cash Management Account (other than the Tax and

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Insurance Subaccount) shall accrue for the benefit of Borrower and shall be taxable to Borrower and shall be added to and disbursed in the same manner and under the same conditions as the principal sum on which said interest accrued.  Upon repayment in full of the Debt, all remaining funds in the Subaccounts, if any, shall be promptly disbursed to Borrower.

3.11Property Cash Flow Allocation.

(a)During any Cash Management Period, all Rents deposited into the Deposit Account during the immediately preceding Interest Period shall be applied on each Payment Date as follows in the following order of priority: (i) First, to make payments into the Tax and Insurance Subaccount as required under Section 3.3; (ii) Second, to pay the monthly portion of the fees charged by the Deposit Bank in accordance with the Deposit Account Agreement; (iii) Third, to Lender to pay the Monthly Debt Service Payment Amount due on such Payment Date (plus, if applicable, interest at the Default Rate and all other amounts, other than those described under other clauses of this Section 3.11(a), then due to Lender under the Loan Documents); (iv) Fourth, to make payments into the Capital Reserve Subaccount as required under Section 3.4; (v) Fifth, to make payments into the Rollover Reserve Subaccount as required under Section 3.5; (vi) Sixth, during the continuance of a Cash Management Period, to make payments for Approved Operating Expenses as required under Section 3.6; (vii) Seventh, after the consummation of a Secondary Market Transaction, to pay the pro rata portion of the expenses described in Section 9.1.7; and (viii) Lastly, payments to Borrowers of any remaining amounts.

(b)The failure of Borrower to make all of the payments required under clauses (i) through (vii) of Section 3.11(a) in full on each Payment Date shall constitute an Event of Default under this Agreement; provided, however, if adequate funds are available in the Deposit Account for such payments, the failure by the Deposit Bank to allocate such funds into the appropriate Subaccounts shall not constitute an Event of Default.

(c)Notwithstanding anything to the contrary contained in this Section 3.11, after the occurrence of a Default or an Event of Default, Lender may apply all Rents deposited into the Deposit Account and other proceeds of repayment in such order and in such manner as Lender shall elect.

4.REPRESENTATIONS AND WARRANTIES

Borrower represents and warrants to Lender as of the date hereof that, except to the extent (if any) disclosed on Schedule 2 with reference to a specific Section of this Article 4:

4.1Organization; Special Purpose.  Each Borrower has been duly organized and is validly existing and in good standing under the laws of the state of its formation, with requisite power and authority, and all rights, licenses, permits and authorizations, governmental or otherwise, necessary to own its properties and to transact the business in which it is now engaged.  Each Borrower is duly qualified to do business and is in good standing in each jurisdiction where it is required to be so qualified in connection with its properties, business and operations.  Each Borrower is a Special Purpose Bankruptcy Remote Entity.

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4.2Proceedings; Enforceability.  Borrower has taken all necessary action to authorize the execution, delivery and performance of the Loan Documents.  The Loan Documents have been duly executed and delivered by Borrower and constitute legal, valid and binding obligations of Borrower enforceable against Borrower in accordance with their respective terms, subject to applicable bankruptcy, insolvency and similar laws affecting rights of creditors generally, and general principles of equity.  The Loan Documents are not subject to, and Borrower has not asserted, any right of rescission, set-off, counterclaim or defense, including the defense of usury.  No exercise of any of the terms of the Loan Documents, or any right thereunder, will render any Loan Document unenforceable.

4.3No Conflicts.  The execution, delivery and performance of the Loan Documents by Borrower and the transactions contemplated hereby will not conflict with or result in a material breach of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any Lien (other than pursuant to the Loan Documents) upon any of the property of Borrower pursuant to the terms of, any agreement or instrument to which Borrower is a party or by which its property is subject, nor will such action result in any violation of the provisions of any statute or any order, rule or regulation of any Governmental Authority having jurisdiction over Borrower or any of its properties.  Borrower’s rights under the Licenses and the Management Agreement will not be adversely affected by the execution and delivery of the Loan Documents, Borrower’s performance thereunder, the recordation of the Mortgage, or the exercise of any remedies by Lender.  Any consent, approval, authorization, order, registration or qualification of or with any Governmental Authority required for the execution, delivery and performance by Borrower of the Loan Documents has been obtained and is in full force and effect.

4.4Litigation.  There are no actions, suits or other proceedings at law or in equity by or before any Governmental Authority now, or to Borrower’s knowledge, pending or threatened against or affecting Borrower, the Manager or the Property, which, if adversely determined, might materially adversely affect the condition (financial or otherwise) or business of Borrower, Manager or the condition or ownership of the Property.

4.5Agreements.  Borrower is not a party to any agreement or instrument or subject to any restriction which might adversely affect Borrower or the Property, or Borrower’s business, properties, operations or condition, financial or otherwise.  Borrower is not in default in any material respect in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any Permitted Encumbrance or any other agreement or instrument to which it is a party or by which it or the Property is bound.

4.6Title.  Borrower has good and indefeasible title in fee to the real property located in Texas and good, marketable and indefeasible title in fee to the real property located in Colorado and Arizona, and good title to the balance of the Property, free and clear of all Liens except the Permitted Encumbrances.  All transfer taxes, deed stamps, intangible taxes or other amounts in the nature of transfer taxes required to be paid by any Person under applicable Legal Requirements in connection with the transfer of the Property to Borrower have been paid.  The Mortgage when properly recorded in the appropriate records, together with any UCC Financing Statements required to be filed in connection therewith, will create (i) a valid, perfected first priority lien on the Borrower’s interest in the Property and (ii) valid and perfected first priority

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security interests in and to, and perfected collateral assignments of, all personalty (including the Leases), all in accordance with the terms thereof, in each case subject only to any applicable Permitted Encumbrances.  All mortgage, recording, stamp, intangible or other similar taxes required to be paid by any Person under applicable Legal Requirements in connection with the execution, delivery, recordation, filing, registration, perfection or enforcement of any of the Loan Documents have been paid.  The Permitted Encumbrances do not materially adversely affect the value, operation or use of the Property, or Borrower’s ability to repay the Loan.  No Condemnation or other proceeding has been commenced or, to Borrower’s knowledge, is contemplated with respect to all or part of the Property or for the relocation of roadways providing access to the Property.  There are no claims for payment for work, labor or materials affecting the Property which are or may become a Lien prior to, or of equal priority with, the Liens created by the Loan Documents.  There are no outstanding options to purchase or rights of first refusal affecting all or any portion of the Property.  To Borrower’s knowledge, the survey for the Property delivered to Lender does not fail to reflect any material matter affecting the Property or the title thereto.  All of the Improvements included in determining the appraised value of the Property lie wholly within the boundaries and building restriction lines of the Property, and no improvement on an adjoining property encroaches upon the Property, and no easement or other encumbrance upon the Property encroaches upon any of the Improvements, except those insured against by the Title Insurance Policy.  Each parcel comprising the Property is a separate tax lot and is not a portion of any other tax lot that is not a part of the Property.  There are no pending or proposed special or other assessments for public improvements or otherwise affecting the Property, or any contemplated improvements to the Property that may result in such special or other assessments.

4.7No Bankruptcy Filing.  Borrower is not contemplating either the filing of a petition by it under any state or federal bankruptcy or insolvency law or the liquidation of all or a major portion of its property (a “Bankruptcy Proceeding”), and Borrower has no knowledge of any Person contemplating the filing of any such petition against it.  In addition, Borrower nor any principal nor Affiliate of either has been a party to, or the subject of a Bankruptcy Proceeding for the past ten years.

4.8Full and Accurate Disclosure.  No statement of fact made by Borrower in any Loan Documents contains any untrue statement of a material fact or omits to state any material fact necessary to make statements contained therein not misleading.  There is no material fact presently known to Borrower that has not been disclosed to Lender which adversely affects, or, as far as Borrower can foresee, might adversely affect, the Property or the business, operations or condition (financial or otherwise) of Borrower.  All financial data, including the statements of cash flow and income and operating expense, that have been delivered to Lender in respect of Borrower and the Property (i) are true, complete and correct in all material respects, (ii) accurately represent the financial condition of Borrower and the Property as of the date of such reports, and (iii) to the extent prepared by an independent certified public accounting firm, have been prepared in accordance with GAAP consistently applied throughout the periods covered, except as disclosed therein.  Borrower has no contingent liabilities, liabilities for taxes, unusual forward or long-term commitments, unrealized or anticipated losses from any unfavorable commitments or any liabilities or obligations not expressly permitted by this Agreement.  Since the date of such financial statements, there has been no materially adverse change in the financial

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condition, operations or business of Borrower or the Property from that set forth in said financial statements.

4.9Tax Filings.  To the extent required, Borrower has filed (or has obtained effective extensions for filing) all federal, state and local tax returns required to be filed and have paid or made adequate provision for the payment of all federal, state and local taxes, charges and assessments payable by Borrower.  Borrower believes that its tax returns (if any) properly reflect the income and taxes of Borrower for the periods covered thereby, subject only to reasonable adjustments required by the Internal Revenue Service or other applicable tax authority upon audit.

4.10No Plan Assets.  As of the date hereof and throughout the Term (i) Borrower is not and will not be an “employee benefit plan,” as defined in Section 3(3) of ERISA, subject to Title I of ERISA, (ii) none of the assets of Borrower constitutes or will constitute “plan assets” of one or more such plans within the meaning of 29 C.F.R. Section 2510.3-101, (iii) Borrower is not and will not be a “governmental plan” within the meaning of Section 3(32) of ERISA, and (iv) transactions by or with Borrower are not and will not be subject to state statutes regulating investment of, and fiduciary obligations with respect to, governmental plans.

4.11Compliance.  Borrower and the Property and the use thereof comply in all material respects with all applicable Legal Requirements (including with respect to parking and applicable zoning and land use laws, regulations and ordinances).  Borrower is not in default or violation of any order, writ, injunction, decree or demand of any Governmental Authority, the violation of which might materially adversely affect the condition (financial or otherwise) or business of Borrower.  The Property is used exclusively for an office building and other appurtenant and related retail uses.  In the event that all or any part of the Improvements are destroyed or damaged, said Improvements can be legally reconstructed to their condition prior to such damage or destruction, and thereafter exist for the same use without violating any zoning or other ordinances applicable thereto and without the necessity of obtaining any variances or special permits.  No legal proceedings are pending or, to the knowledge of Borrower, threatened with respect to the zoning of the Property.  Neither the zoning nor any other right to construct, use or operate the Property is in any way dependent upon or related to any property other than the Property. All certifications, permits, licenses and approvals, including certificates of completion and occupancy permits required for the legal use, occupancy and operation of the Property (collectively, the “Licenses”), have been obtained and are in full force and effect.  The use being made of the Property is in conformity with the certificate of occupancy issued for the Property and all other restrictions, covenants and conditions affecting the Property.

4.12Contracts.  There are no service, maintenance or repair contracts affecting the Property that are not terminable on one month’s notice or less without cause and without penalty or premium.  All service, maintenance or repair contracts affecting the Property have been entered into at arms-length in the ordinary course of Borrower’s business and provide for the payment of fees in amounts and upon terms comparable to existing market rates.

4.13Federal Reserve Regulations; Investment Company Act.  No part of the proceeds of the Loan will be used for the purpose of purchasing or acquiring any “margin stock” within the meaning of Regulation U of the Board of Governors of the Federal Reserve System or

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for any other purpose that would be inconsistent with such Regulation U or any other regulation of such Board of Governors, or for any purpose prohibited by Legal Requirements or any Loan Document.  Borrower is not (i) an “investment company” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended; (ii) a “holding company” or a “subsidiary company” of a “holding company” or an “affiliate” of either a “holding company” or a “subsidiary company” within the meaning of the Public Utility Holding Company Act of 1935, as amended; or (iii) subject to any other federal or state law or regulation which purports to restrict or regulate its ability to borrow money.

4.14Easements; Utilities and Public Access.  All easements, cross easements, licenses, air rights and rights-of-way or other similar property interests (collectively, “Easements”), if any, necessary for the full utilization of the Improvements for their intended purposes have been obtained, are described in the Title Insurance Policy and are in full force and effect without default thereunder.  The Property has rights of access to public ways and is served by water, sewer, sanitary sewer and storm drain facilities adequate to service it for its intended uses.  All public utilities necessary or convenient to the full use and enjoyment of the Property are located in the public right-of-way abutting the Property, and all such utilities are connected so as to serve the Property without passing over other property absent a valid easement.  All roads necessary for the use of the Property for its current purpose have been completed and dedicated to public use and accepted by all Governmental Authorities.

4.15Physical Condition.  The Property, including all Improvements, parking facilities, systems, Equipment and landscaping, are in good condition, order and repair in all material respects; there exists no structural or other material defect or damages to the Property, whether latent or otherwise.  Borrower has not received notice from any insurance company or bonding company of any defect or inadequacy in the Property, or any part thereof, which would adversely affect its insurability or cause the imposition of extraordinary premiums or charges thereon or any termination of any policy of insurance or bond.  No portion of the Property is located in an area as identified by the Federal Emergency Management Agency as an area having special flood hazards.  The Improvements have suffered no material casualty or damage which has not been fully repaired and the cost thereof fully paid.

4.16Leases.  The rent roll attached hereto as Schedule 3 (the “Rent Roll”) is true, complete and correct in all material respects, and the Property is not subject to any Leases other than the Leases described in the Rent Roll.  Except as set forth on the Rent Roll: (i) each Lease is in full force and effect; (ii) the tenants under the Leases have accepted possession of and are in occupancy of all of their respective demised premises, have commenced the payment of rent under the Leases, and there are no offsets, claims or defenses to the enforcement thereof; (iii) all rents due and payable under the Leases have been paid and no portion thereof has been paid for any period more than 30 days in advance; (iv) the rent payable under each Lease is the amount of fixed rent set forth in the Rent Roll, and there is no claim or basis for a claim by the tenant thereunder for an adjustment to the rent; (v) no tenant has made any claim against the landlord under any Lease which remains outstanding, there are no defaults on the part of the landlord under any Lease, and no event has occurred which, with the giving of notice or passage of time, or both, would constitute such a default; (vi) to Borrower’s best knowledge, there is no present material default by the tenant under any Lease; (vii) all security deposits under Leases are as set forth on the Rent Roll and are held consistent with Section 3.8; (viii) Borrower is the sole owner

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of the entire lessor’s interest in each Lease; (ix) each Lease is the valid, binding and enforceable obligation of the Borrower and the applicable tenant thereunder; (x) no Person has any possessory interest in, or right to occupy, the Property except under the terms of the Lease; and (xi) each Lease is subordinate to the Loan Documents, either pursuant to its terms or pursuant to a subordination and attornment agreement.  None of the Leases contains any option to purchase or right of first refusal to purchase the Property or any part thereof.  Neither the Leases nor the Rents have been assigned or pledged except to Lender, and no other Person has any interest therein except the tenants thereunder.

4.17Fraudulent Transfer.  Borrower has not entered into the Loan or any Loan Document with the actual intent to hinder, delay, or defraud any creditor, and Borrower has received reasonably equivalent value in exchange for its obligations under the Loan Documents.  Giving effect to the transactions contemplated by the Loan Documents, the fair saleable value of Borrower’s assets exceeds and will, immediately following the execution and delivery of the Loan Documents, exceed Borrower’s total liabilities, including subordinated, unliquidated, disputed or contingent liabilities, including the maximum amount of its contingent liabilities or its debts as such debts become absolute and matured.  Borrower’s assets do not and, immediately following the execution and delivery of the Loan Documents will not, constitute unreasonably small capital to carry out its business as conducted or as proposed to be conducted.  Borrower does not intend to, and does not believe that it will, incur debts and liabilities (including contingent liabilities and other commitments) beyond its ability to pay such debts as they mature (taking into account the timing and amounts to be payable on or in respect of obligations of Borrower).

4.18Ownership of Borrower.  The Board of Directors in each Borrower are listed on Schedule 4 attached hereto, and the sole interest holders in each Borrower are listed on Schedule 4 attached hereto, and such interest holders are the owners of all of the issued and outstanding capital stock of Borrower, all of which capital stock has been validly issued and fully paid and is nonassessable.  The stock of each Borrower is owned free and clear of all Liens, warrants, options and rights to purchase.  Borrower has no obligation to any Person to purchase, repurchase or issue any stock in it.  The organizational chart attached hereto as Schedule 4 is complete and accurate and illustrates all Persons who have a direct or indirect ownership interest in each Borrower.

4.19Purchase Options.  Neither the Property nor any part thereof is subject to any purchase options or other similar rights in favor of third parties.

4.20Management Agreement.  The Management Agreement is in full force and effect.  There is no default, breach or violation existing thereunder, and no event has occurred (other than payments due but not yet delinquent) that, with the passage of time or the giving of notice, or both, would constitute a default, breach or violation thereunder, by either party thereto.

4.21Hazardous Substances.  To Borrower’s knowledge (i) the Property is not in violation of any Legal Requirement pertaining to or imposing liability or standards of conduct concerning environmental regulation, contamination or clean-up, including the Comprehensive Environmental Response, Compensation and Liability Act, the Resource Conservation and Recovery Act, the Emergency Planning and Community Right-to-Know Act of 1986, the

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Hazardous Substances Transportation Act, the Solid Waste Disposal Act, the Clean Water Act, the Clean Air Act, the Toxic Substance Control Act, the Safe Drinking Water Act, the Occupational Safety and Health Act, any state super-lien and environmental clean-up statutes (including with respect to Toxic Mold), any local law requiring related permits and licenses and all amendments to and regulations in respect of the foregoing laws (collectively, “Environmental Laws”); (ii) the Property is not subject to any private or governmental Lien or judicial or administrative notice or action or inquiry, investigation or claim relating to hazardous, toxic and/or dangerous substances, toxic mold or fungus of a type that may pose a risk to human health or the environment or would negatively impact the value of the Property (“Toxic Mold”) or any other substances or materials which are included under or regulated by Environmental Laws (collectively, “Hazardous Substances”); (iii) to Borrower’s knowledge, no Hazardous Substances are or have been (including the period prior to Borrower’s acquisition of the Property), discharged, generated, treated, disposed of or stored on, incorporated in, or removed or transported from the Property other than in compliance with all Environmental Laws; (iv) to Borrower’s knowledge, no Hazardous Substances are present in, on or under any nearby real property which could migrate to or otherwise affect the Property; (v) to Borrower’s knowledge, no Toxic Mold is on or about the Property which requires remediation; (vi) no underground storage tanks exist on the Property and the Property has never been used as a landfill; and (vii) there have been no environmental investigations, studies, audits, reviews or other analyses conducted by or on behalf of Borrower which have not been provided to Lender.

4.22Name; Principal Place of Business.  Borrower does not use and will not use any trade name and has not done and will not do business under any name other than its actual name set forth herein.  The principal place of business of Borrower is its primary address for notices as set forth in Section 6.1, and Borrower has no other place of business.

4.23Other Debt.  There is no indebtedness with respect to the Property or any excess cash flow or any residual interest therein, whether secured or unsecured, other than Permitted Encumbrances and Permitted Indebtedness.

All of the representations and warranties in this Article 4 and elsewhere in the Loan Documents (i) shall survive for so long as any portion of the Debt remains owing to Lender and (ii) shall be deemed to have been relied upon by Lender notwithstanding any investigation heretofore or hereafter made by Lender or on its behalf, provided, however, that the representations, warranties and covenants set forth in Section 4.21 shall survive in perpetuity.

5.COVENANTS

Until the end of the Term, Borrower hereby covenants and agrees with Lender that:

5.1Existence.  Each of Borrower shall (i) do or cause to be done all things necessary to preserve, renew and keep in full force and effect its existence, rights, and franchises, (ii) continue to engage in the business presently conducted by it, (iii) obtain and maintain all Licenses, and (iv) qualify to do business and remain in good standing under the laws of each jurisdiction, in each case as and to the extent required for the ownership, maintenance, management and operation of the Property.

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5.2Taxes and Other Charges.  Borrower shall pay all Taxes and Other Charges as the same become due and payable, and deliver to Lender receipts for payment or other evidence satisfactory to Lender that the Taxes and Other Charges have been so paid no later than 30 days before they would be delinquent if not paid (provided, however, that Borrower need not pay such Taxes nor furnish such receipts for payment of Taxes paid by Lender pursuant to Section 3.3).  Borrower shall not suffer and shall promptly cause to be paid and discharged any Lien against the Property, and shall promptly pay for all utility services provided to the Property.  After prior notice to Lender, Borrower, at its own expense, may contest by appropriate legal proceeding, promptly initiated and conducted in good faith and with due diligence, the amount or validity or application of any Taxes or Other Charges, provided that (i) no Default or Event of Default has occurred and is continuing, (ii) such proceeding shall suspend the collection of the Taxes or such Other Charges, (iii) such proceeding shall be permitted under and be conducted in accordance with the provisions of any other instrument to which Borrower is subject and shall not constitute a default thereunder, (iv) no part of or interest in the Property will be in danger of being sold, forfeited, terminated, canceled or lost, (v) Borrower shall have furnished such security as may be required in the proceeding, or as may be requested by Lender, to insure the payment of any such Taxes or Other Charges, together with all interest and penalties thereon, which shall not be less than 125% of the Taxes and Other Charges being contested, and (vi) Borrower shall promptly upon final determination thereof pay the amount of such Taxes or Other Charges, together with all costs, interest and penalties.  Lender may pay over any such security or part thereof held by Lender to the claimant entitled thereto at any time when, in the judgment of Lender, the entitlement of such claimant is established.

5.3Access to Property.  Borrower shall permit agents, representatives, consultants and employees of Lender to inspect the Property or any part thereof at reasonable hours upon reasonable advance notice.

5.4Repairs; Maintenance and Compliance; Alterations.

5.4.1Repairs; Maintenance and Compliance.  Borrower shall at all times maintain, preserve and protect all franchises and trade names, and Borrower shall cause the Property to be maintained in a good and safe condition and repair and shall not remove, demolish or alter the Improvements or Equipment (except for alterations performed in accordance with Section 5.4.2 and normal replacement of Equipment with Equipment of equivalent value and functionality).  Borrower shall promptly comply with all Legal Requirements and immediately cure properly any violation of a Legal Requirement.  Borrower shall notify Lender in writing within one Business Day after Borrower first receives notice of any such non-compliance.  Borrower shall promptly repair, replace or rebuild any part of the Property that becomes damaged, worn or dilapidated and shall complete and pay for any Improvements at any time in the process of construction or repair.

5.4.2Alterations.  Borrower may, without Lender’s consent, perform alterations to the Improvements and Equipment which (i) do not constitute a Material Alteration, (ii) do not adversely affect Borrower’s financial condition or the value or Net Operating Income of the Property and (iii) are in the ordinary course of Borrower’s business.  Borrower shall not perform any Material Alteration without Lender’s prior written consent, which consent shall not be unreasonably withheld or delayed; provided, however, that Lender may, in its sole and

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absolute discretion, withhold consent to any alteration the cost of which is reasonably estimated to exceed $1,000,000 or which is likely to result in a decrease of Net Operating Income by 2.5% or more for a period of 30 days or longer.  Lender may, as a condition to giving its consent to a Material Alteration, require that Borrower deliver to Lender security for payment of the cost of such Material Alteration in an amount equal to 125% of the cost of the Material Alteration as estimated by Lender.  Upon substantial completion of the Material Alteration, Borrower shall provide evidence satisfactory to Lender that (i) the Material Alteration was constructed in accordance with applicable Legal Requirements and substantially in accordance with plans and specifications approved by Lender (which approval shall not be unreasonably withheld or delayed), (ii) all contractors, subcontractors, materialmen and professionals who provided work, materials or services in connection with the Material Alteration have been paid in full and have delivered unconditional releases of lien and (iii) all material Licenses necessary for the use, operation and occupancy of the Material Alteration (other than those which depend on the performance of tenant improvement work) have been issued.  Borrower shall reimburse Lender upon demand for all out-of-pocket costs and expenses (including the reasonable fees of any architect, engineer or other professional engaged by Lender) incurred by Lender in reviewing plans and specifications or in making any determinations necessary to implement the provisions of this Section 5.4.2.

5.5Performance of Other Agreements.  Borrower shall observe and perform each and every term to be observed or performed by it pursuant to the terms of any agreement or instrument affecting or pertaining to the Property, including the Loan Documents.

5.6Cooperate in Legal Proceedings.  Borrower shall cooperate fully with Lender with respect to, and permit Lender, at its option, to participate in, any proceedings before any Governmental Authority which may in any way affect the rights of Lender under any Loan Document.

5.7Further Assurances.  Borrower shall, at Borrower’s sole cost and expense, (i) execute and deliver to Lender such documents, instruments, certificates, assignments and other writings, and do such other acts reasonably necessary or desirable, to evidence, preserve and/or protect the collateral at any time securing or intended to secure the Debt and/or for the better and more effective carrying out of the intents and purposes of the Loan Documents, as Lender may reasonably require from time to time; and (ii) upon Lender’s request therefor given from time to time after the occurrence of any Default or Event of Default pay for (a) reports of UCC, federal tax lien, state tax lien, judgment and pending litigation searches with respect to each Borrower and (b) searches of title to the Property, each such search to be conducted by search firms reasonably designated by Lender in each of the locations reasonably designated by Lender.

5.8Environmental Matters.

5.8.1Hazardous Substances.  So long as Borrower owns or is in possession of the Property, Borrower shall (i) keep the Property free from Hazardous Substances and in compliance with all Environmental Laws, (ii) promptly notify Lender if Borrower shall become aware that (A) any Hazardous Substance is on or near the Property, (B) the Property is in violation of any Environmental Laws or (C) any condition on or near the Property shall pose a threat to the health, safety or welfare of humans and (iii) remove such Hazardous Substances

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and/or cure such violations and/or remove such threats, as applicable, as required by law (or as shall be required by Lender in the case of removal which is not required by law, but in response to the opinion of a licensed hydrogeologist, licensed environmental engineer or other qualified environmental consulting firm engaged by Lender (“Lender’s Consultant”)), promptly after Borrower becomes aware of same, at Borrower’s sole expense.  Nothing herein shall prevent Borrower from recovering such expenses from any other party that may be liable for such removal or cure.

5.8.2Environmental Monitoring.

(a)Borrower shall give prompt written notice to Lender of (i) any proceeding or inquiry by any party (including any Governmental Authority) with respect to the presence of any Hazardous Substance on, under, from or about the Property, (ii) all claims made or threatened by any third party (including any Governmental Authority) against Borrower or the Property or any party occupying the Property relating to any loss or injury resulting from any Hazardous Substance, and (iii) Borrower’s discovery of any occurrence or condition on any real property adjoining or in the vicinity of the Property that could cause the Property to be subject to any investigation or cleanup pursuant to any Environmental Law.  Upon becoming aware of the presence of mold or fungus at the Property, Borrower shall (i) undertake an investigation to identify the source(s) of such mold or fungus and shall develop and implement an appropriate remediation plan to eliminate the presence of any Toxic Mold, (ii) perform or cause to be performed all acts reasonably necessary for the remediation of any Toxic Mold (including taking any action necessary to clean and disinfect any portions of the Property affected by Toxic Mold, including providing any necessary moisture control systems at the Property), and (iii) provide evidence reasonably satisfactory to Lender of the foregoing.  Borrower shall permit Lender to join and participate in, as a party if it so elects, any legal or administrative proceedings or other actions initiated with respect to the Property in connection with any Environmental Law or Hazardous Substance, and Borrower shall pay all reasonable attorneys’ fees and disbursements incurred by Lender in connection therewith.

(b)Upon Lender’s request, at any time and from time to time, Borrower shall provide an inspection or audit of the Property prepared by a licensed hydrogeologist, licensed environmental engineer or qualified environmental consulting firm reasonably approved by Lender assessing the presence or absence of Hazardous Substances on, in or near the Property, and if Lender in its good faith judgment determines that reasonable cause exists for the performance of such environmental inspection or audit, then the cost and expense of such audit or inspection shall be paid by Borrower. Such inspections and audit may include soil bearings and ground water monitoring.  If Borrower fails to provide any such inspection or audit within 30 days after such request, Lender may order same, and Borrower hereby grants to Lender and its employees and agents access to the Property and a license to undertake such inspection or audit.

(c)If any environmental site assessment report prepared in connection with such inspection or audit recommends that an operations and maintenance plan be implemented for any Hazardous Substance, whether such Hazardous Substance existed prior to the ownership of the Property by Borrower, or presently exists or is reasonably suspected of existing, Borrower shall cause such operations and maintenance plan to be prepared and

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implemented at its expense upon request of Lender, and with respect to any Toxic Mold, Borrower shall take all action necessary to clean and disinfect any portions of the Improvements affected by Toxic Mold in or about the Improvements, including providing any necessary moisture control systems at the Property.  If any investigation, site monitoring, containment, cleanup, removal, restoration or other work of any kind is reasonably necessary under an applicable Environmental Law (“Remedial Work”), Borrower shall commence all such Remedial Work within 30 days after written demand by Lender and thereafter diligently prosecute to completion all such Remedial Work within such period of time as may be required under applicable law.  All Remedial Work shall be performed by licensed contractors approved in advance by Lender and under the supervision of a consulting engineer approved by Lender.  All costs of such Remedial Work shall be paid by Borrower, including Lender’s reasonable attorneys’ fees and disbursements incurred in connection with the monitoring or review of such Remedial Work.  If Borrower does not timely commence and diligently prosecute to completion the Remedial Work, Lender may (but shall not be obligated to) cause such Remedial Work to be performed at Borrower’s expense.  Notwithstanding the foregoing, Borrower shall not be required to commence such Remedial Work within the above specified time period: (x) if prevented from doing so by any Governmental Authority, (y) if commencing such Remedial Work within such time period would result in Borrower or such Remedial Work violating any Environmental Law, or (z) if Borrower, at its expense and after prior written notice to Lender, is contesting by appropriate legal, administrative or other proceedings, conducted in good faith and with due diligence, the need to perform Remedial Work.  Borrower shall have the right to contest the need to perform such Remedial Work, provided that, (1) Borrower is permitted by the applicable Environmental Laws to delay performance of the Remedial Work pending such proceedings, (2) neither the Property nor any part thereof or interest therein will be sold, forfeited or lost if Borrower fails to promptly perform the Remedial Work being contested, and if Borrower fails to prevail in contest, Borrower would thereafter have the opportunity to perform such Remedial Work, (3) Lender would not, by virtue of such permitted contest, be exposed to any risk of any civil liability for which Borrower has not furnished additional security as provided in clause (4) below, or to any risk of criminal liability, and neither the Property nor any interest therein would be subject to the imposition of any Lien for which Borrower has not furnished additional security as provided in clause (4) below, as a result of the failure to perform such Remedial Work and (4) Borrower shall have furnished to Lender additional security in respect of the Remedial Work being contested and the loss or damage that may result from Borrower’s failure to prevail in such contest in such amount as may be reasonably requested by Lender but in no event less than one hundred twenty-five percent (125%) of the cost of such Remedial Work as estimated by Lender or Lender’s Consultant and any loss or damage that may result from Borrower’s failure to prevail in such contest.

(d)Borrower shall not install or permit to be installed on the Property any underground storage tank.

5.9Title to the Property.  Borrower will warrant and defend the title to the Property, and the validity and priority of all Liens granted or otherwise given to Lender under the Loan Documents, subject only to Permitted Encumbrances, against the claims of all Persons.

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5.10Leases.

5.10.1Generally.  Upon request, Borrower shall furnish Lender with executed copies of all Leases then in effect.  All renewals of Leases and all proposed leases shall provide for rental rates and terms comparable to existing local market rates and shall be arm’s length transactions with bona fide, independent third-party tenants.

5.10.2Material Leases.  Borrower shall not enter into a proposed Material Lease or a proposed renewal, extension or modification of an existing Material Lease without the prior written consent of Lender, which consent shall not, so long as no Event of Default is continuing, be unreasonably withheld or delayed.  Prior to seeking Lender’s consent to any Material Lease, Borrower shall deliver to Lender a copy of such proposed lease (a “Proposed Material Lease”) blacklined to show changes from the standard form of Lease approved by Lender and then being used by Borrower.  Lender shall approve or disapprove each Proposed Material Lease or proposed renewal, extension or modification of an existing Material Lease for which Lender’s approval is required under this Agreement within 10 Business Days of the submission by Borrower to Lender of a written request for such approval, accompanied by a final copy of the Proposed Material Lease or proposed renewal, extension or modification of an existing Material Lease.  If requested by Borrower, Lender will grant conditional approvals of Proposed Material Leases or proposed renewals, extensions or modifications of existing Material Leases at any stage of the leasing process, from initial “term sheet” through negotiated lease drafts, provided that Lender shall retain the right to disapprove any such Proposed Material Lease or proposed renewal, extension or modification of an existing Material Lease, if subsequent to any preliminary approval material changes are made to the terms previously approved by Lender, or additional material terms are added that had not previously been considered and approved by Lender in connection with such Proposed Material Lease or proposed renewal, extension or modification of an existing Material Lease.

5.10.3Minor Leases.  Notwithstanding the provisions of Section 5.10.2 above, provided that no Event of Default is continuing, renewals, amendments and modifications of existing Leases and proposed leases, shall not be subject to the prior approval of Lender provided (i) the proposed lease would be a Minor Lease or the existing Lease as amended or modified or the renewal Lease is a Minor Lease, (ii) the proposed lease shall be written substantially in accordance with the standard form of Lease which shall have been approved by Lender, subject to any commercially reasonable changes made in the course of negotiation with the applicable tenant, (iii) the Lease as amended or modified or the renewal Lease or series of leases or proposed lease or series of leases: (a) shall provide for net effective rental rates comparable to existing local market rates, (b) shall have an initial term (together with all renewal options) of not less than three years or greater than ten years, (c) shall provide for automatic self-operative subordination to the Mortgage and, at Lender’s option, (x) attornment to Lender and (y) the unilateral right by Lender, at the option of Lender, to subordinate the Lien of the Mortgage to the Lease, and (d) shall not contain any option to purchase, any right of first refusal to purchase, any right to terminate (except in the event of the destruction or condemnation of substantially all of the Property), any requirement for a non-disturbance or recognition agreement, or any other provision which might adversely affect the rights of Lender under the Loan Documents in any material respect.  Borrower shall deliver to Lender copies of all Leases which are entered into pursuant to the preceding sentence together with Borrower’s certification that it has satisfied all of the conditions of the preceding sentence within ten days after the execution of the Lease.

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5.10.4Additional Covenants with respect to Leases.  Borrower (i) shall observe and perform the material obligations imposed upon the lessor under the Leases and shall not do or permit anything to impair the value of the Leases as security for the Debt;  (ii) shall promptly send copies to Lender of all notices of default that Borrower shall send or receive under any Lease; (iii) shall enforce, in accordance with commercially reasonable practices for properties similar to the Property, the terms, covenants and conditions in the Leases to be observed or performed by the lessees, short of termination thereof; (iv)  shall not collect any of the Rents more than one month in advance (other than security deposits); (v) shall not execute any other assignment of lessor’s interest in the Leases or the Rents (except as contemplated by the Loan Documents); (vi) shall not modify any Lease in a manner inconsistent with the Loan Documents; (vii) shall not convey or transfer or suffer or permit a conveyance or transfer of the Property so as to effect a merger of the estates and rights of, or a termination or diminution of the obligations of, lessees under Leases; (viii) shall not consent to any assignment of or subletting under any Material Lease unless required in accordance with its terms without the prior consent of Lender, which, with respect to a subletting, may not, so long as no Event of Default is continuing,  be unreasonably withheld or delayed; and (ix) shall not cancel or terminate any Lease or accept a surrender thereof (except in the exercise of Borrower’s commercially reasonable judgment in connection with a tenant default under a Minor Lease) without the prior consent of Lender, which consent shall not, so long as no Event of Default is continuing, be unreasonably withheld or delayed.

5.11Estoppel Statement.  After request by Lender, Borrower shall within ten (10) days furnish Lender with a statement addressed to Lender, its successors and assigns, duly acknowledged and certified, setting forth (i) the unpaid Principal, (ii) the Interest Rate, (iii) the date installments of interest and/or Principal were last paid, (iv) any offsets or defenses to the payment of the Debt, and (v) that the Loan Documents are valid, legal and binding obligations and have not been modified or if modified, giving particulars of such modification, provided, Lender shall only request such estoppel statements from Borrower as needed by Lender in connection with its secondary market transactions.

5.12Property Management.

5.12.1Management Agreement.  Borrower shall (i) cause the Property to be managed pursuant to the Management Agreement; (ii) promptly perform and observe all of the covenants required to be performed and observed by it under the Management Agreement and do all things necessary to preserve and to keep unimpaired its rights thereunder; (iii) promptly notify Lender of any default under the Management Agreement of which it is aware; (iv) promptly deliver to Lender a copy of each financial statement, business plan, capital expenditure plan, and property improvement plan and any other notice, report and estimate received by Borrower under the Management Agreement; and (v) promptly enforce the performance and observance of all of the covenants required to be performed and observed by Manager under the Management Agreement.  Without Lender’s prior written consent, Borrower shall not (a) surrender, terminate, cancel, extend or renew the Management Agreement or otherwise replace the Manager or enter into any other management agreement (except pursuant to Section 5.12.2); (b) reduce or consent to the reduction of the term of the Management Agreement; (c) increase or consent to the increase of the amount of any charges under the Management Agreement; (d) otherwise modify, change, supplement, alter or amend in any material respect, or waive or release any of its rights

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and remedies under, the Management Agreement; (e) suffer or permit the occurrence and continuance of a default beyond any applicable cure period under the Management Agreement (or any successor management agreement) if such default permits the Manager to terminate the Management Agreement (or such successor management agreement); or (f) suffer or permit the ownership, management or control of the Manager to be transferred to a Person other than an Affiliate of Borrower.

5.12.2Termination of Manager.  If (i) as of any Calculation Date, Borrower fails to maintain a Debt Service Coverage Ratio of at least 1.20x or (ii) an Event of Default shall be continuing, or (iii) Manager is in default under the Management Agreement, or (iv) upon the gross negligence, malfeasance or willful misconduct of the Manager, Borrower shall, at the request of Lender, terminate the Management Agreement and replace Manager with a replacement manager acceptable to Lender in Lender’s discretion and the applicable Rating Agencies on terms and conditions satisfactory to Lender and the applicable Rating Agencies.  All calculations of the Debt Service Coverage Ratio for purposes of this Section 5.12.2 shall be subject to verification by Lender.  Borrower’s failure to appoint an acceptable manager within thirty (30) days after Lender’s request of Borrower to terminate the Management Agreement shall constitute an immediate Event of Default.  Borrower may from time to time appoint a successor manager to manage the Properties, which successor manager and Management Agreement shall be approved in writing by Lender in Lender’s discretion and the applicable Rating Agencies.

5.13Special Purpose Bankruptcy Remote Entity.  Each Borrower shall at all times be a Special Purpose Bankruptcy Remote Entity.  No Borrower shall directly or indirectly make any change, amendment or modification to its organizational documents, or otherwise take any action which could result in Borrower not being a Special Purpose Bankruptcy Remote Entity.  A “Special Purpose Bankruptcy Remote Entity” shall have the meaning set forth on Schedule 5 hereto.

5.14Assumption in Non-Consolidation Opinion.  Each Borrower shall each conduct its business so that the assumptions (with respect to each Person) made in that certain substantive non-consolidation opinion letter dated the date hereof delivered by Borrower’s counsel in connection with the Loan, shall be true and correct in all material respects.

5.15Change in Business or Operation of Property.  Borrower shall not purchase or own any real property other than the Property and shall not enter into any line of business other than the ownership and operation of the Property, or make any material change in the scope or nature of its business objectives, purposes or operations, or undertake or participate in activities other than the continuance of its present business or otherwise cease to operate the Property as an office building property with associated retail uses, or terminate such business for any reason whatsoever (other than temporary cessation in connection with renovations to the Property).

5.16Debt Cancellation.  Borrower shall not cancel or otherwise forgive or release any claim or debt (other than termination of Leases in accordance herewith) owed to Borrower by any Person, except for adequate consideration and in the ordinary course of Borrower’s business.

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5.17Affiliate Transactions.  Borrower shall not enter into, or be a party to, any transaction with an Affiliate of Borrower except in the ordinary course of business and on terms which are fully disclosed to Lender in advance and are no less favorable to Borrower or such Affiliate than would be obtained in a comparable arm’s length transaction with an unrelated third party.

5.18Zoning.  Borrower shall not initiate or consent to any zoning reclassification of any portion of the Property or seek any variance under any existing zoning ordinance or use or permit the use of any portion of the Property in any manner that could result in such use becoming a non conforming use under any zoning ordinance or any other applicable land use law, rule or regulation, without the prior consent of Lender.

5.19No Joint Assessment.  Borrower shall not suffer, permit or initiate the joint assessment of the Property (i) with any other real property constituting a tax lot separate from the Property, and (ii) with any portion of the Property which may be deemed to constitute personal property, or any other procedure whereby the lien of any taxes which may be levied against such personal property shall be assessed or levied or charged to the Property.

5.20Principal Place of Business.  Borrower shall not change its principal place of business or chief executive office without first giving Lender 30 days’ prior notice.

5.21Change of Name, Identity or Structure.  Borrower shall not change its name, identity (including its trade name or names) or Borrower’s corporate, partnership or other structure without notifying Lender of such change in writing at least thirty (30) days prior to the effective date of such change and, in the case of a change in Borrower’s structure, without first obtaining the prior written consent of Lender.  Borrower shall execute and deliver to Lender, prior to or contemporaneously with the effective date of any such change, any financing statement or financing statement change required by Lender to establish or maintain the validity, perfection and priority of the security interest granted herein.  At the request of Lender, Borrower shall execute a certificate in form reasonably satisfactory to Lender listing the trade names under which Borrower intends to operate the Property, and representing and warranting that Borrower does business under no other trade name with respect to the Property.

5.22Indebtedness.  Borrower shall not directly or indirectly create, incur or assume any indebtedness other than the Debt and unsecured trade payables incurred in the ordinary course of business relating to the ownership and operation of the Property which do not exceed, at any time, a maximum amount of 1% of the original amount of the Principal and are paid within thirty (30) days of the date incurred (collectively, “Permitted Indebtedness”).

5.23Licenses.  Borrower shall not Transfer any License required for the operation of the Property.

5.24Compliance with Restrictive Covenants, Etc.  Borrower will not modify, waive in any material respect or release any Easements, restrictive covenants or other Permitted Encumbrances, or suffer, consent to or permit the foregoing, without Lender’s prior written consent, which consent shall not be unreasonably withheld by Lender.

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5.25ERISA.

(a)Borrower shall not engage in any transaction which would cause any obligation, or action taken or to be taken, hereunder (or the exercise by Lender of any of its rights under the Note, this Agreement or the other Loan Documents) to be a non-exempt (under a statutory or administrative class exemption) prohibited transaction under ERISA.

(b)Borrower shall not maintain, sponsor, contribute to or become obligated to contribute to, or suffer or permit any ERISA Affiliate of Borrower to, maintain, sponsor, contribute to or become obligated to contribute to, any Plan or any Welfare Plan or permit the assets of Borrower to become “plan assets,” whether by operation of law or under regulations promulgated under ERISA.

(c)Borrower shall deliver to Lender such certifications or other evidence from time to time throughout the Term, as requested by Lender in its sole discretion, that (A) Borrower is not and does not maintain an “employee benefit plan” as defined in Section 3(3) of ERISA, which is subject to Title I of ERISA, or a “governmental plan” within the meaning of Section 3(3) of ERISA; (B) Borrower is not subject to state statutes regulating investments and fiduciary obligations with respect to governmental plans; and (C) one or more of the following circumstances is true:

(i)Equity interests in Borrower are publicly offered securities, within the meaning of 29 C.F.R. §2510.3-101(b)(2);

(ii)Less than twenty-five percent (25%) of each outstanding class of equity interests in Borrower are held by “benefit plan investors” within the meaning of 29 C.F.R. §2510.3-101(f)(2); or

(iii)Borrower qualifies as an “operating company” or a “real estate operating company” within the meaning of 29 C.F.R. §2510.3-101(c) or (e).

5.26Prohibited Transfers.

5.26.1Generally.  Borrower shall not directly or indirectly make, suffer or permit the occurrence of any Transfer other than a Permitted Transfer.

5.26.2Transfer and Assumption.

(a)Notwithstanding the foregoing, Borrower shall have a one-time right to Transfer the Property to another party (the “Transferee Borrower”) and have the Transferee Borrower assume all of Borrower’s obligations under the Loan Documents, and have replacement guarantors and indemnitors assume all of the obligations of the indemnitors and guarantors of the Loan Documents (collectively, a “Transfer and Assumption”). Borrower may make a written application to Lender for Lender’s consent to the Transfer and Assumption, subject to the conditions set forth in paragraphs (b) and (c) of this Section 5.26.2.  Together with such written application, Borrower will pay to Lender the reasonable review fee then required by Lender.  Borrower also shall pay on demand all of the reasonable costs and expenses incurred by Lender, including reasonable attorneys’ fees and expenses, and including the fees and expenses of Rating Agencies and other outside entities, in connection with considering any proposed Transfer and Assumption, whether or not the same is permitted or occurs.

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(b)Lender’s consent, which may be withheld in Lender’s reasonable discretion, to a Transfer and Assumption shall be subject to the following conditions:

(i)No Default or Event of Default has occurred and is continuing;

(ii)Borrower has submitted to Lender true, correct and complete copies of any and all information and documents of any kind requested by Lender concerning the Property, Transferee Borrower, replacement guarantors and indemnitors and Borrower;

(iii)Evidence satisfactory to Lender has been provided showing that the Transferee Borrower and such of its Affiliates as shall be reasonably designated by Lender comply and will comply with Section 5.13 hereof, as those provisions may be modified by Lender taking into account the ownership structure of Transferee Borrower and its Affiliates;

(iv)If the Loan, by itself or together with other loans, has been the subject of a Secondary Market Transaction, then Lender shall have received a Rating Comfort Letter from the applicable Rating Agencies;

(v)If the Loan has not been the subject of a Secondary Market Transaction, then Lender shall have determined in its reasonable discretion (taking into consideration such factors as Lender may determine, including the attributes of the loan pool in which the Loan might reasonably be expected to be securitized) that no rating for any securities that would be issued in connection with such securitization will be diminished, qualified, or withheld by reason of the Transfer and Assumption;

(vi)Borrower shall have paid all of Lender’s reasonable costs and expenses in connection with considering the Transfer and Assumption, and shall have paid the amount requested by Lender as a deposit against Lender’s costs and expenses in connection with the effecting the Transfer and Assumption;

(vii)Borrower, the Transferee Borrower, and the replacement guarantors and indemnitors shall have indicated in writing in form and substance reasonably satisfactory to Lender their readiness and ability to satisfy the conditions set forth in subsection (c) below; and

(viii)The identity, experience, and financial condition of the Transferee Borrower and the replacement guarantors and indemnitors shall be reasonably satisfactory to Lender.

(c)If Lender consents to the Transfer and Assumption, the Transferee Borrower and/or Borrower as the case may be, shall immediately deliver the following to Lender:

(i)Borrower shall deliver to Lender an assumption fee in the amount of 1.00% of the then unpaid Principal;

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(ii)Borrower, Transferee Borrower and the original and replacement guarantors and indemnitors shall execute and deliver to Lender any and all documents required by Lender, in form and substance required by Lender, in Lender’s sole discretion;

(iii)Counsel to the Transferee Borrower and replacement guarantors and indemnitors shall deliver to Lender opinions in form and substance reasonably satisfactory to Lender as to such matters as Lender shall require, which may include opinions as to substantially the same matters and were required in connection with the origination of the Loan;

(iv)Borrower shall cause to be delivered to Lender, an endorsement (relating to the change in the identity of the vestee and execution and delivery of the Transfer and Assumption documents) to the Title Insurance Policies in form and substance reasonably acceptable to Lender, in Lender’s reasonable discretion (the “Endorsement”); and

(v)Borrower shall deliver to Lender a payment in the amount of all remaining unpaid costs incurred by Lender in connection with the Transfer and Assumption, including but not limited to, Lender’s reasonable attorneys fees and expenses, all recording fees, and all fees payable to the title company for the delivery to Lender of the Endorsement.

5.27Liens.  Without Lender’s prior written consent, Borrower shall not create, incur, assume, permit or suffer to exist any Lien on all or any portion of the Property or any direct or indirect legal or beneficial ownership interest in Borrower, except Liens in favor of Lender and Permitted Encumbrances, unless such Lien is bonded or discharged within 30 days after Borrower first receives notice of such Lien.

5.28Dissolution.  Borrower shall not (i) engage in any dissolution, liquidation or consolidation or merger with or into any other business entity, (ii) engage in any business activity not related to the ownership and operation of the Property or (iii) transfer, lease or sell, in one transaction or any combination of transactions, all or substantially all of the property or assets of Borrower except to the extent expressly permitted by the Loan Documents.

5.29Expenses.  Borrower shall reimburse Lender upon receipt of notice for all reasonable out-of-pocket costs and expenses (including reasonable attorneys’ fees and disbursements) incurred by Lender in connection with the Loan, including (i) the preparation, negotiation, execution and delivery of the Loan Documents and the consummation of the transactions contemplated thereby and all the costs of furnishing all opinions by counsel for Borrower; (ii) Borrower’s and Lender’s ongoing performance under and compliance with the Loan Documents, including confirming compliance with environmental and insurance requirements; (iii) the negotiation, preparation, execution, delivery and administration of any consents, amendments, waivers or other modifications of or under any Loan Document and any other documents or matters requested by Lender; (iv) filing and recording of any Loan Documents; (v) title insurance, surveys, inspections and appraisals; (vi) the creation, perfection or protection of Lender’s Liens in the Property and the Cash Management Accounts (including fees and expenses for title and lien searches, intangibles taxes, personal property taxes,

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Mortgage, recording taxes, due diligence expenses, travel expenses, accounting firm fees, costs of appraisals, environmental reports and Lender’s Consultant, surveys and engineering reports); (vii) enforcing or preserving any rights in response to third party claims or the prosecuting or defending of any action or proceeding or other litigation, in each case against, under or affecting Borrower, the Loan Documents, the Property, or any other security given for the Loan; (viii) fees charged by Rating Agencies in connection with the Loan or any modification thereof and (ix) enforcing any obligations of or collecting any payments due from Borrower under any Loan Document or with respect to the Property or in connection with any refinancing or restructuring of the Loan in the nature of a “work-out”, or any insolvency or bankruptcy proceedings.  Any costs and expenses due and payable to Lender hereunder which are not paid by Borrower within ten days after demand may be paid from any amounts in the Deposit Account, with notice thereof to Borrower.  The obligations and liabilities of Borrower under this Section 5.29 shall survive the Term and the exercise by Lender of any of its rights or remedies under the Loan Documents, including the acquisition of the Property by foreclosure or a conveyance in lieu of foreclosure.

5.30Indemnity.  Borrower shall defend, indemnify and hold harmless Lender and each of its Affiliates and their respective successors and assigns, including the directors, officers, partners, members, shareholders, participants, employees, professionals and agents of any of the foregoing (including any Servicer) and each other Person, if any, who Controls Lender, its Affiliates or any of the foregoing (each, an “Indemnified Party”), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel for an Indemnified Party in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not Lender shall be designated a party thereto, court costs and costs of appeal at all appellate levels, investigation and laboratory fees, consultant fees and litigation expenses), that may be imposed on, incurred by, or asserted against any Indemnified Party (collectively, the “Indemnified Liabilities”) in any manner, relating to or arising out of or by reason of the Loan, including: (i) any breach by Borrower of its obligations under, or any material misrepresentation by Borrower contained in, any Loan Document; (ii) the use or intended use of the proceeds of the Loan; (iii) any information provided by or on behalf of Borrower, or contained in any documentation approved by Borrower; (iv) ownership of the Mortgage, the Property or any interest therein, or receipt of any Rents; (v) any accident, injury to or death of persons or loss of or damage to property occurring in, on or about the Property or on the adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways; (vi) any use, nonuse or condition in, on or about the Property or on adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways; (vii) performance of any labor or services or the furnishing of any materials or other property in respect of the Property; (viii) the presence, disposal, escape, seepage, leakage, spillage, discharge, emission, release, or threatened release of any Hazardous Substance on, from or affecting the Property; (ix) any personal injury (including wrongful death) or property damage (real or personal) arising out of or related to such Hazardous Substance; (x) any lawsuit brought or threatened, settlement reached, or government order relating to such Hazardous Substance; (xi) any violation of the Environmental Laws which is based upon or in any way related to such Hazardous Substance, including the costs and expenses of any Remedial Work; (xii) any failure of the Property to comply with any Legal Requirement; (xiii) any claim by brokers, finders or similar persons claiming to be entitled to a commission in connection with any Lease or other

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transaction involving the Property or any part thereof, or any liability asserted against Lender with respect thereto; and (xiv) the claims of any lessee of any portion of the Property or any Person acting through or under any lessee or otherwise arising under or as a consequence of any Lease; provided, however, that Borrower shall not have any obligation to any Indemnified Party hereunder to the extent that it is finally judicially determined that such Indemnified Liabilities arise from the gross negligence, illegal acts, fraud or willful misconduct of such Indemnified Party.  Any amounts payable to any Indemnified Party by reason of the application of this paragraph shall be payable on demand and shall bear interest at the Default Rate from the date loss or damage is sustained by any Indemnified Party until paid.  The obligations and liabilities of Borrower under this Section 5.30 shall survive the Term and the exercise by Lender of any of its rights or remedies under the Loan Documents, including the acquisition of the Property by foreclosure or a conveyance in lieu of foreclosure.

6.NOTICES AND REPORTING

6.1Notices.  All notices, consents, approvals and requests required or permitted hereunder or under any other Loan Document (a “Notice”) shall be given in writing and shall be effective for all purposes if either hand delivered with receipt acknowledged, or by a nationally recognized overnight delivery service (such as Federal Express), or by certified or registered United States mail, return receipt requested, postage prepaid, or by facsimile and confirmed by facsimile answer back, in each case addressed as follows (or to such other address or Person as a party shall designate from time to time by notice to the other party):  If to Lender: Greenwich Capital Financial Products Inc., 600 Steamboat Road, Greenwich, Connecticut 06830, Attention: Mortgage Loan Department, Telecopier (203) 618-2052, with a copy to: Brownstein Hyatt & Farber, P.C., 410 17^th Street, 22^nd Floor, Denver, Colorado 80202, Attn:  Ana L. Tenzer, Esq., Telecopier: (303) 223-1111; if to Borrower: c/o AmeriVest Properties Inc., 1780 South Bellaire Street, Suite 100, Denver, CO 80222, Attention: John Greenman, Telecopier: (303) 296-7353, with a copy to: Jenkens & Gilchrist, 1445 Ross Avenue, Suite 3200, Dallas, TX 75202-2799, Attention: Stephen Voelker, Esq., Telecopier: (214) 855-4300.  A notice shall be deemed to have been given:  in the case of hand delivery, at the time of delivery; in the case of registered or certified mail, when delivered or the first attempted delivery on a Business Day; in the case of overnight delivery, upon the first attempted delivery on a Business Day; or in the case of facsimile, upon the confirmation of such facsimile transmission.

6.2Borrower Notices and Deliveries.  Borrower shall (a) give prompt written notice to Lender of: (i) any litigation, governmental proceedings or claims or investigations pending or threatened against Borrower which might materially adversely affect Borrower’s condition (financial or otherwise) or business or the Property; (ii) any material adverse change in Borrower’s condition, financial or otherwise, or of the occurrence of any Default or Event of Default of which Borrower has knowledge; and (b) furnish and provide to Lender: (i) any Securities and Exchange Commission or other public filings, if any, of Borrower, Manager, or any Affiliate of any of the foregoing within two (2) Business Days of such filing and (ii) all instruments, documents, boundary surveys, footing or foundation surveys, certificates, plans and specifications, appraisals, title and other insurance reports and agreements, reasonably requested, from time to time, by Lender.  In addition, after request by Lender, as reasonably needed by Lender in connection with its secondary market transactions, Borrower shall furnish to Lender (x) within ten days, a certificate addressed to Lender, its successors and assigns reaffirming all

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representations and warranties of Borrower set forth in the Loan Documents as of the date requested by Lender or, to the extent of any changes to any such representations and warranties, so stating such changes, and (y) within 30 days, tenant estoppel certificates addressed to Lender, its successors and assigns from each tenant at the Property in form and substance reasonably satisfactory to Lender, provided, Lender shall only request such estoppel statements from Borrower as needed by Lender in connection with its secondary market transactions.

6.3Financial Reporting.

6.3.1Bookkeeping.  Borrower shall keep on a calendar year basis, in accordance with GAAP, proper and accurate books, records and accounts reflecting all of the financial affairs of Borrower and all items of income and expense and any services, Equipment or furnishings provided in connection with the operation of the Property, whether such income or expense is realized by Borrower, Manager or any Affiliate of Borrower.  Lender shall have the right from time to time during normal business hours upon reasonable notice to examine such books, records and accounts at the office of Borrower or other Person maintaining them, and to make such copies or extracts thereof as Lender shall desire.  After an Event of Default, Borrower shall pay any costs incurred by Lender to examine such books, records and accounts, as Lender shall determine to be necessary or appropriate in the protection of Lender’s interest.

6.3.2Annual Reports.  Borrower shall furnish to Lender annually, within 120 days after each calendar year, a complete copy of Borrower’s annual financial statements audited by a “big four” accounting firm or another independent certified public accountant (accompanied by an unqualified opinion from such accounting firm or other independent certified public accountant) reasonably acceptable to Lender, each in accordance with GAAP and containing balance sheets and statements of profit and loss for Borrower and the Property in such detail as Lender may request.  Each such statement (x) shall be in form and substance reasonably satisfactory to Lender, (y) shall set forth the financial condition and the income and expenses for the Property for the immediately preceding calendar year, including statements of annual Net Operating Income as well as (1) a list of tenants, if any, occupying more than twenty percent of the rentable space of the Property, (2) a breakdown showing (a) the year in which each Lease then in effect expires, (b) the percentage of rentable space covered by such Lease, (c) the percentage of base rent with respect to which Leases shall expire in each such year, expressed both on a per year and a cumulative basis and (z) shall be accompanied by an Officer’s Certificate certifying (1) that such statement is true, correct, complete and accurate in all material respects and presents fairly the financial condition of the Property and has been prepared in accordance with GAAP and (2) whether there exists a Default or Event of Default, and if so, the nature thereof, the period of time it has existed and the action then being taken to remedy it.

6.3.3Monthly/Quarterly Reports.  Borrower shall furnish to Lender within 20 days after the end of each calendar month or 45 days after the end of each calendar quarter (as indicated below) the following items: (i) monthly and year-to-date operating statements, noting Net Operating Income and other information necessary and sufficient under GAAP to fairly represent the financial position and results of operation of the Property during such calendar month, all in form satisfactory to Lender; (ii) a balance sheet for such calendar month; (iii) a comparison of the budgeted income and expenses and the actual income and expenses for each month and year-to-date for the Property, together with a detailed explanation

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of any variances of 10% or more between budgeted and actual amounts for such period and year-to-date; (iv) a statement of the actual Capital Expenses made by Borrower during each calendar quarter as of the last day of such calendar quarter; (v) a statement that Borrower has not incurred any indebtedness other than indebtedness permitted hereunder; (vi) an aged receivables report and (vii) rent rolls identifying the leased premises, names of all tenants, units leased, monthly rental and all other charges payable under each Lease, date to which paid, term of Lease, date of occupancy, date of expiration, material special provisions, concessions or inducements granted to tenants, and a year-by-year schedule showing by percentage the rentable area of the Improvements and the total base rent attributable to Leases expiring each year) and a delinquency report for the Property.  Each such statement shall be accompanied by an Officer’s Certificate certifying (1) that such items are true, correct, accurate in all material respects, and complete and fairly present the financial condition and results of the operations of Borrower and the Property in accordance with GAAP (subject to normal year-end adjustments) and (2) whether there exists a Default or Event of Default, and if so, the nature thereof, the period of time it has existed and the action then being taken to remedy it.

6.3.4Other Reports.  Borrower shall furnish to Lender, within ten Business Days after request, such further detailed information with respect to the operation of the Property and the financial affairs of Borrower,  or Manager as may be reasonably requested by Lender or any applicable Rating Agency.

6.3.5Annual Budget.  Borrower shall prepare and submit (or shall cause Manager to prepare and submit) to Lender within 30 days after a Cash Management Period and by November 30th of each year thereafter during the Term until such Cash Management Period has ended, for approval by Lender, which approval shall not be unreasonably withheld or delayed, a proposed pro forma budget for the Property for the succeeding calendar year (the “Annual Budget”, and each Annual Budget approved by Lender is referred to herein as the “Approved Annual Budget”)), and, promptly after preparation thereof, any revisions to such Annual Budget.  The Annual Budget shall consist of (i) an operating expense budget showing, on a month-by-month basis, in reasonable detail, each line item of the Borrower’s anticipated operating income and operating expenses (on a cash and accrual basis), including amounts required to establish, maintain and/or increase any monthly payments required hereunder (and once such Annual Budget has been approved by Lender, such operating expense budget shall be referred to herein as the “Approved Operating Budget”), and (ii) a Capital Expense budget showing, on a month-by-month basis, in reasonable detail, each line item of anticipated Capital Expenses (and once such Annual Budget has been approved by Lender, such Capital Expense budget shall be referred to herein as the “Approved Capital Budget”).  Until such time that any Annual Budget has been approved by Lender, the prior Approved Annual Budget shall apply for all purposes hereunder (with such adjustments as reasonably determined by Lender (including increases for any non-discretionary expenses)).

6.3.6Breach.  If Borrower fails to provide to Lender or its designee any of the financial statements, certificates, reports or information (the “Required Records”) required by this Section 6.3.6 within 30 days after the date upon which such Required Record is due, Borrower shall pay to Lender, at Lender’s option and in its discretion, an amount equal to $5,000 for each Required Record that is not delivered; provided Lender has given Borrower at least 15 days prior notice of such failure.  In addition, 30 days after Borrower’s failure to deliver any

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Required Records, Lender shall have the option, upon 15 days notice to Borrower to gain access to Borrower’s books and records and prepare or have prepared at Borrower’s expense, any Required Records not delivered by Borrower.

7.INSURANCE; CASUALTY; AND CONDEMNATION

7.1Insurance.

7.1.1Coverage.  Borrower, at its sole cost, for the mutual benefit of Borrower and Lender, shall obtain and maintain during the Term the following policies of insurance:

(a)Property insurance insuring against loss or damage customarily included under so called “all risk” or “special form” policies including fire, lightning, flood, earthquake, vandalism, and malicious mischief, boiler and machinery and, if available and subject to subsection (j) below, coverage for damage or destruction caused acts of “Terrorists” (or such policies shall have no exclusion from coverage with respect thereto) and such other insurable hazards as, under good insurance practices, from time to time are insured against for other property and buildings similar to the premises in nature, use, location, height, and type of construction.  Such insurance policy shall also insure costs of demolition and increased cost of construction (which insurance for demolition and increased cost of construction may contain a sub-limit satisfactory to Lender).  Each such insurance policy shall (i) be in an amount equal to the greatest of (A) 100% of the then replacement cost of the Improvements without deduction for physical depreciation, (B) the unpaid Principal, and (C) such amount as is necessary so that the insurer would not deem Borrower a co-insurer under such policies, (ii) have deductibles no greater than the lesser of $10,000 or 5% of Net Operating Income per occurrence, (iii) be paid quarterly in advance and (iv) contain an agreed amount replacement cost endorsement with a waiver of depreciation, and shall cover, without limitation, all tenant improvements and betterments that Borrower is required to insure on a replacement cost basis.  If the insurance required under this subparagraph is not obtained by blanket insurance policies, the insurance policy shall be endorsed to also provide guaranteed building replacement cost to the Improvements and such tenant improvements in an amount to be subject to the consent of Lender, which consent shall not be unreasonably withheld.  Lender shall be named Loss Payee on a Standard Mortgagee Endorsement.

(b)Flood insurance if any part of the Property is located in an area now or hereafter designated by the Federal Emergency Management Agency as a Zone “A” & “V” Special Hazard Area, or such other Special Hazard Area if Lender so requires in its sole discretion.  Such policy shall (i) be in an amount equal to the greater of (A) 100% of the full replacement cost of the Improvements on the Property (without any deduction for depreciation) (B) the maximum limit of coverage available and (ii) have a maximum permissible deductible of $3,000.

(c)Public liability insurance, including (i) “Commercial General Liability Insurance”, (ii) “Owned”, “Hired” and “Non Owned Auto Liability”; and (iii) umbrella liability coverage for personal injury, bodily injury, death, accident and property damage, such insurance providing in combination no less than containing minimum limits per occurrence of

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$1,000,000 and $2,000,000 in the aggregate for any policy year; together with at least $26,000,000 excess and/or umbrella liability insurance for any and all claims with no deductible.  The policies described in this subsection shall also include coverage for elevators, escalators, independent contractors, “Contractual Liability” (covering, to the maximum extent permitted by law, Borrower’s obligation to indemnify Lender as required under this Agreement and the other Loan Documents), “Products” and “Completed Operations Liability” coverage.

(d)Rental loss and/or business interruption insurance (i) with Lender being named as “Lender Loss Payee”, (ii) in an amount equal to one hundred percent (100%) of the projected Rents from the Property during the period of restoration; and (iii) containing an extended period of indemnity endorsement which provides that after the physical loss to the Property has been repaired, the continued loss of income will be insured until such income either returns to the same level it was at prior to the loss, or the expiration of eighteen (18) months from the date that the Property is repaired or replaced and operations are resumed, whichever first occurs, and notwithstanding that the policy may expire prior to the end of such period.  The amount of such insurance shall be increased from time to time during the Term as and when the estimated or actual Rents increase.

(e)Comprehensive boiler and machinery insurance covering all mechanical and electrical equipment against physical damage, rent loss and improvements loss and covering, without limitation, all tenant improvements and betterments that Borrower is required to insure pursuant to the lease on a replacement cost basis and in an amount equal to the greater of (i) $2,000,000 and (ii) 100% of the full replacement cost of the Improvements on such Property (without any deduction for depreciation).

(f)Worker’s compensation and disability insurance with respect to any employees of Borrower, as required by any Legal Requirement.

(g)During any period of repair or restoration, builder’s “all-risk” insurance in an amount equal to not less than the full insurable value of the Property, against such risks (including fire and extended coverage and collapse of the Improvements to agreed limits) as Lender may request, in form and substance acceptable to Lender.

(h)Coverage to compensate for the cost of demolition and the increased cost of construction in an amount satisfactory to Lender.

(i)Such other insurance (including environmental liability insurance, earthquake insurance, mine subsidence insurance and windstorm insurance) as may from time to time be reasonably required by Lender in order to protect its interests.

(j)Notwithstanding anything in subsection (a) above to the contrary, Borrower shall be required to obtain and maintain coverage in its property insurance Policy (or by a separate Policy) against loss or damage by terrorist acts provided that such coverage is available.  Borrower shall obtain such coverage from a carrier which otherwise satisfies the rating criteria specified in Section 7.1.2 (a “Qualified Carrier”) or in the event that such coverage is not available from a Qualified Carrier, Borrower shall obtain such coverage from the highest rated insurance company providing such coverage.  If such coverage with respect to

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terrorist acts is available as aforesaid, Borrower shall obtain and maintain such coverage in an amount equal to 100% of the “Full Replacement Cost” of the Property.

7.1.2Policies.  All policies of insurance (the “Policies”) required pursuant to Section 7.1.1 shall (i) be issued by companies approved by Lender and licensed to do business in the State, with a claims paying ability rating of “AA” or better by S&P (and the equivalent by any other Rating Agency) and a rating of A:X or better in the current Best’s Insurance Reports; (ii) name Lender and its successors and/or assigns as their interest may appear as the mortgagee (in the case of property insurance) or an additional insured (in the case of liability insurance); (iii) contain (in the case of property insurance) a Non-Contributory Standard Mortgagee Clause and a Lender’s Loss Payable Endorsement, or their equivalents, naming Lender as the person to which all payments made by such insurance company shall be paid; (iv) contain a waiver of subrogation against Lender; (v) be assigned and the originals thereof delivered to Lender; (vi) contain such provisions as Lender deems reasonably necessary or desirable to protect its interest, including (A) endorsements providing that neither Borrower, Lender nor any other party shall be a co-insurer under the Policies, (B) that Lender shall receive at least 30 days’ prior written notice of any modification, reduction or cancellation of any of the Policies, (C) an agreement whereby the insurer waives any right to claim any premiums and commissions against Lender, provided that the policy need not waive the requirement that the premium be paid in order for a claim to be paid to the insured and (D) providing that Lender is permitted to make payments to effect the continuation of such policy upon notice of cancellation due to non-payment of premiums; (vii) in the event any insurance policy (except for general public and other liability and workers compensation insurance) shall contain breach of warranty provisions, such policy shall provide that with respect to the interest of Lender, such insurance policy shall not be invalidated by and shall insure Lender regardless of (A) any act, failure to act or negligence of or violation of warranties, declarations or conditions contained in such policy by any named insured, (B) the occupancy or use of the premises for purposes more hazardous than permitted by the terms thereof, or (C) any foreclosure or other action or proceeding taken by Lender pursuant to any provision of the Loan Documents; and (viii) be satisfactory in form and substance to Lender and approved by Lender as to amounts, form, risk coverage, deductibles, loss payees and insureds.  Borrower shall pay the premiums for such Policies (the “Insurance Premiums”) as the same become due and payable and furnish to Lender evidence of the renewal of each of the Policies together with (unless such Insurance Premiums have been paid by Lender pursuant to Section 3.3) receipts for or other evidence of the payment of the Insurance Premiums reasonably satisfactory to Lender.  If Borrower does not furnish such evidence and receipts at least 30 days prior to the expiration of any expiring Policy, then Lender may, but shall not be obligated to, procure such insurance and pay the Insurance Premiums therefor, and Borrower shall reimburse Lender for the cost of such Insurance Premiums promptly on demand, with interest accruing at the Default Rate.  Borrower shall deliver to Lender a certified copy of each Policy within 30 days after its effective date.  Within 30 days after request by Lender, Borrower shall obtain such increases in the amounts of coverage required hereunder as may be reasonably requested by Lender, taking into consideration changes in the value of money over time, changes in liability laws, changes in prudent customs and practices, and the like.

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7.2Casualty.

7.2.1Notice; Restoration.  If the Property is damaged or destroyed, in whole or in part, by fire or other casualty (a “Casualty”), Borrower shall give prompt notice thereof to Lender.  Following the occurrence of a Casualty, Borrower, regardless of whether insurance proceeds are available, shall promptly proceed to restore, repair, replace or rebuild the Property in accordance with Legal Requirements to be of at least equal value and of substantially the same character as prior to such damage or destruction.

7.2.2Settlement of Proceeds.  If a Casualty covered by any of the Policies (an “Insured Casualty”) occurs where the loss does not exceed $250,000, provided no Default or Event of Default has occurred and is continuing, Borrower may settle and adjust any claim without the prior consent of Lender; provided such adjustment is carried out in a competent and timely manner, and Borrower is hereby authorized to collect and receipt for the insurance proceeds (the “Proceeds”).  In the event of an Insured Casualty where the loss equals or exceeds $250,000 (a “Significant Casualty”), Lender may, in its sole discretion, settle and adjust any claim without the consent of Borrower and agree with the insurer(s) on the amount to be paid on the loss, and the Proceeds shall be due and payable solely to Lender and held by Lender in the Casualty/Condemnation Subaccount and disbursed in accordance herewith.  If Borrower or any party other than Lender is a payee on any check representing Proceeds with respect to a Significant Casualty, Borrower shall immediately endorse, and cause all such third parties to endorse, such check payable to the order of Lender.  Borrower hereby irrevocably appoints Lender as its attorney-in-fact, coupled with an interest, to endorse such check payable to the order of Lender.  The reasonable expenses incurred by Lender in the settlement, adjustment and collection of the Proceeds shall become part of the Debt and shall be reimbursed by Borrower to Lender upon demand.  Notwithstanding anything to the contrary contained herein, if in connection with a Casualty any insurance carrier makes a payment under a property insurance Policy that Borrower proposes be treated as business or rental interruption insurance, then, notwithstanding any designation (or lack of designation) by the insurance carrier as to the purpose of such payment, as between Lender and Borrower, such payment shall not be treated as business or rental interruption insurance proceeds unless Borrower has demonstrated to Lender’s satisfaction that the remaining net Proceeds that will be received from the property insurance carriers are sufficient to pay 100% of the cost of fully restoring the Improvements or, if such net Proceeds are to be applied to repay the Debt in accordance with the terms hereof, that such remaining net Proceeds will be sufficient to pay the Debt in full.

7.3Condemnation.

7.3.1Notice; Restoration.  Borrower shall promptly give Lender notice of the actual or threatened commencement of any condemnation or eminent domain proceeding affecting the Property (a “Condemnation”) and shall deliver to Lender copies of any and all papers served in connection with such Condemnation.  Following the occurrence of a Condemnation, Borrower, regardless of whether an Award is available, shall promptly proceed to restore, repair, replace or rebuild the Property in accordance with Legal Requirements to the extent practicable to be of at least equal value and of substantially the same character (and to have the same utility) as prior to such Condemnation.

7.3.2Collection of Award.  Lender is hereby irrevocably appointed as Borrower’s attorney-in-fact, coupled with an interest, with exclusive power to collect, receive

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and retain any award or payment in respect of a Condemnation (an “Award”) and to make any compromise, adjustment or settlement in connection with such Condemnation.  Notwithstanding any Condemnation (or any transfer made in lieu of or in anticipation of such Condemnation), Borrower shall continue to pay the Debt at the time and in the manner provided for in the Loan Documents, and the Debt shall not be reduced unless and until any Award shall have been actually received and applied by Lender to the reasonable expenses of collecting the Award and to discharge of the Debt. Lender shall not be limited to the interest paid on the Award by the condemning authority but shall be entitled to receive out of the Award interest at the rate or rates provided in the Note.  If the Property is sold, through foreclosure or otherwise, prior to the receipt by Lender of such Award, Lender shall have the right, whether or not a deficiency judgment on the Note shall be recoverable or shall have been sought, recovered or denied, to receive all or a portion of the Award sufficient to pay the Debt.  Borrower shall cause any Award that is payable to Borrower to be paid directly to Lender.  Lender shall hold such Award in the Casualty/Condemnation Subaccount and disburse such Award in accordance with the terms hereof.

7.4Application of Proceeds or Award.

7.4.1Application to Restoration.  If an Insured Casualty or Condemnation occurs where (i) the loss is in an aggregate amount less than the 15% of the unpaid Principal, (ii) in the reasonable judgment of Lender, the Property can be restored within six months, and prior to six months before the Stated Maturity Date and prior to the expiration of the rental or business interruption insurance with respect thereto, to the Property’s pre-existing condition and utility as existed immediately prior to such Insured Casualty or Condemnation and to an economic unit not less valuable and not less useful than the same was immediately prior to the Insured Casualty or Condemnation, and after such restoration will adequately secure the Debt and (iii) no Default or Event of Default shall have occurred and be then continuing, then the Proceeds or the Award, as the case may be (after reimbursement of any expenses incurred by Lender), shall be applied to reimburse Borrower for the cost of restoring, repairing, replacing or rebuilding the Property (the “Restoration”), in the manner set forth herein.  Borrower shall commence and diligently prosecute such Restoration.  Notwithstanding the foregoing, in no event shall Lender be obligated to apply the Proceeds or Award to reimburse Borrower for the cost of Restoration unless, in addition to satisfaction of the foregoing conditions, both (x) Borrower shall pay (and if required by Lender, Borrower shall deposit with Lender in advance) all costs of such Restoration in excess of the net amount of the Proceeds or the Award made available pursuant to the terms hereof; and (y) Lender shall have received evidence reasonably satisfactory to it that during the period of the Restoration, the Rents will be at least equal to the sum of the operating expenses, if any, and Debt Service, as reasonably determined by Lender.

7.4.2Application to Debt.  Except as provided in Section 7.4.1, any Proceeds and/or Award may, at the option of Lender in its discretion, be applied to the payment of (i) accrued but unpaid interest on the Note, (ii) the unpaid Principal and (iii) other charges due under the Note and/or any of the other Loan Documents, or applied to reimburse Borrower for the cost of any Restoration, in the manner set forth in Section 7.4.3.  Any such prepayment of the Loan shall be without any Yield Maintenance Premium, unless an Event of Default has occurred and is continuing at the time the Proceeds are received from the insurance company or the Award is received from the condemning authority, as the case may be, in which event Borrower shall

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pay to Lender an additional amount equal to the Yield Maintenance Premium, if any, that may be required with respect to the amount of the Proceeds or Award applied to the unpaid Principal.

7.4.3Procedure for Application to Restoration.  If Borrower is entitled to reimbursement out of the Proceeds or an Award held by Lender, such Proceeds or Award shall be disbursed from time to time from the Casualty/Condemnation Subaccount upon Lender being furnished with (i) evidence satisfactory to Lender of the estimated cost of completion of the Restoration, (ii) a fixed price or guaranteed maximum cost construction contract for Restoration satisfactory to Lender, (iii) prior to the commencement of Restoration, all immediately available funds in addition to the Proceeds or Award that in Lender’s judgment are required to complete the proposed Restoration, (iv) such architect’s certificates, waivers of lien, contractor’s sworn statements, title insurance endorsements, bonds, plats of survey, permits, approvals, licenses and such other documents and items as Lender may reasonably require and approve in Lender’s discretion, and (iv) all plans and specifications for such Restoration, such plans and specifications to be approved by Lender prior to commencement of any work.  Lender may, at Borrower’s expense, retain a consultant to review and approve all requests for disbursements, which approval shall also be a condition precedent to any disbursement.  No payment made prior to the final completion of the Restoration shall exceed 90% of the value of the work performed from time to time; funds other than the Proceeds or Award shall be disbursed prior to disbursement of such Proceeds or Award; and at all times, the undisbursed balance of such Proceeds or Award remaining in the hands of Lender, together with funds deposited for that purpose or irrevocably committed to the satisfaction of Lender by or on behalf of Borrower for that purpose, shall be at least sufficient in the reasonable judgment of Lender to pay for the cost of completion of the Restoration, free and clear of all Liens or claims for Lien.  Provided no Default or Event of Default then exists, any surplus that remains out of the Proceeds held by Lender after payment of such costs of Restoration shall be paid to Borrower.  Any surplus that remains out of the Award received by Lender after payment of such costs of Restoration shall, in the discretion of Lender, be retained by Lender and applied to payment of the Debt or returned to Borrower.

8.DEFAULTS

8.1Events of Default.  An “Event of Default” shall exist with respect to the Loan if any of the following shall occur:

(a)any portion of the Debt is not paid when due or any other amount under Section 3.11(a)(i) through (vii) and (ix) is not paid in full on each Payment Date (provided, however, if adequate funds are available in the Deposit Account for such payments, the failure by the Deposit Bank to allocate such funds into the appropriate Subaccounts shall not constitute an Event of Default);

(b)any of the Taxes are not paid when due (unless Lender is paying such Taxes pursuant to Section 3.3), subject to Borrower’s right to contest Taxes in accordance with Section 5.2;

(c)the Policies are not kept in full force and effect, or are not delivered to Lender upon request;

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(d)a Transfer other than a Permitted Transfer occurs;

(e)any representation or warranty made by Borrower or Guarantor or in any Loan Document, or in any report, certificate, financial statement or other instrument, agreement or document furnished by Borrower or Guarantor in connection with any Loan Document, shall be false or misleading in any material respect as of the date the representation or warranty was made;

(f)Borrower,  or Guarantor shall make an assignment for the benefit of creditors, or shall generally not be paying its debts as they become due;

(g)a receiver, liquidator or trustee shall be appointed for Borrower,  or Guarantor; or Borrower,  or Guarantor shall be adjudicated a bankrupt or insolvent; or any petition for bankruptcy, reorganization or arrangement pursuant to federal bankruptcy law, or any similar federal or state law, shall be filed by or against, consented to, or acquiesced in by, Borrower,  or Guarantor, as the case may be; or any proceeding for the dissolution or liquidation of Borrower,  or Guarantor shall be instituted; provided, however, if such appointment, adjudication, petition or proceeding was involuntary and not consented to by Borrower,  or Guarantor, as the case may be, only upon the same not being discharged, stayed or dismissed within 60 days;

(h)Borrower breaches any covenant contained in Sections 5.12.1 (a) - (f), 5.13, 5.15, 5.22, 5.25 or 5.28;

(i)except as expressly permitted hereunder, the actual or threatened alteration, improvement, demolition or removal of all or any of portion of the Improvements without the prior written consent of Lender;

(j)an Event of Default as defined or described elsewhere in this Agreement or in any other Loan Document occurs including, without limitation, in the Parkway Mortgage, the Centerra Mortgage or the Black Canyon Mortgage; or any other event shall occur or condition shall exist, if the effect of such event or condition is to accelerate or to permit Lender to accelerate the maturity of any portion of the Debt;

(k)a default occurs under any term, covenant or provision set forth herein or in any other Loan Document which specifically contains a notice requirement or grace period and such notice has been given and such grace period has expired;

(l)any of the assumptions contained in any substantive non-consolidation opinion, delivered to Lender by Borrower’s counsel in connection with the Loan or otherwise hereunder, were not true and correct as of the date of such opinion or thereafter became untrue or incorrect;

(m)a default shall be continuing under any of the other terms, covenants or conditions of this Agreement or any other Loan Document not otherwise specified in this Section 8.1, for ten days after notice to Borrower (and Guarantor, if applicable) from Lender, in the case of any default which can be cured by the payment of a sum of money, or for 30 days after notice from Lender in the case of any other default; provided, however, that if such

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non-monetary default is susceptible of cure but cannot reasonably be cured within such 30-day period, and Borrower (or Guarantor, if applicable) shall have commenced to cure such default within such 30-day period and thereafter diligently and expeditiously proceeds to cure the same, such 30-day period shall be extended for an additional period of time as is reasonably necessary for Borrower (or Guarantor, if applicable) in the exercise of due diligence to cure such default, such additional period not to exceed 60 days.

8.2Remedies.

8.2.1Acceleration.  Upon the occurrence of an Event of Default (other than an Event of Default described in paragraph (f) or (g) of Section 8.1) and at any time and from time to time thereafter, in addition to any other rights or remedies available to it pursuant to the Loan Documents or at law or in equity, Lender may take such action, without notice or demand, that Lender deems advisable to protect and enforce its rights against Borrower and in and to the Property; including declaring the Debt to be immediately due and payable (including unpaid interest), Default Rate interest, Late Payment Charges, Yield Maintenance Premium and any other amounts owing by Borrower), without notice or demand; and upon any Event of Default described in paragraph (f) or (g) of Section 8.1, the Debt (including unpaid interest, Default Rate interest, Late Payment Charges, Yield Maintenance Premium and any other amounts owing by Borrower) shall immediately and automatically become due and payable, without notice or demand, and Borrower hereby expressly waives any such notice or demand, anything contained in any Loan Document to the contrary notwithstanding.

8.2.2Remedies Cumulative.  Upon the occurrence of an Event of Default, all or any one or more of the rights, powers, privileges and other remedies available to Lender against Borrower under the Loan Documents or at law or in equity may be exercised by Lender at any time and from time to time, whether or not all or any of the Debt shall be declared, or be automatically, due and payable, and whether or not Lender shall have commenced any foreclosure proceeding or other action for the enforcement of its rights and remedies under any of the Loan Documents.  Any such actions taken by Lender shall be cumulative and concurrent and may be pursued independently, singly, successively, together or otherwise, at such time and in such order as Lender may determine in its discretion, to the fullest extent permitted by law, without impairing or otherwise affecting the other rights and remedies of Lender permitted by law, equity or contract or as set forth in the Loan Documents.  Without limiting the generality of the foregoing, Borrower agrees that if an Event of Default is continuing, (i) to the extent permitted by applicable law, Lender is not subject to any “one action” or “election of remedies” law or rule, and (ii) all Liens and other rights, remedies or privileges provided to Lender shall remain in full force and effect until Lender has exhausted all of its remedies against the Property, the Mortgage has been foreclosed, the Property has been sold and/or otherwise realized upon in satisfaction of the Debt or the Debt has been paid in full.  To the extent permitted by applicable law, nothing contained in any Loan Document shall be construed as requiring Lender to resort to any portion of the Property for the satisfaction of any of the Debt in preference or priority to any other portion, and Lender may seek satisfaction out of the entire Property or any part thereof, in its discretion.

8.2.3Severance.  Lender shall have the right from time to time to sever the Note and the other Loan Documents into one or more separate notes, mortgages and other

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security documents in such denominations and priorities of payment and liens as Lender shall determine in its discretion for purposes of evidencing and enforcing its rights and remedies.  Borrower shall execute and deliver to Lender from time to time, promptly after the request of Lender, a severance agreement and such other documents as Lender shall request in order to effect the severance described in the preceding sentence, all in form and substance reasonably satisfactory to Lender.  Borrower hereby absolutely and irrevocably appoints Lender as its true and lawful attorney, coupled with an interest, in its name and stead to make and execute all documents necessary or desirable to effect such severance, Borrower ratifying all that such attorney shall do by virtue thereof.

8.2.4Delay.  No delay or omission to exercise any remedy, right or power accruing upon an Event of Default, or the granting of any indulgence or compromise by Lender shall impair any such remedy, right or power hereunder or be construed as a waiver thereof, but any such remedy, right or power may be exercised from time to time and as often as may be deemed expedient.  A waiver of one Default or Event of Default shall not be construed to be a waiver of any subsequent Default or Event of Default or to impair any remedy, right or power consequent thereon.  Notwithstanding any other provision of this Agreement, Lender reserves the right to seek a deficiency judgment or preserve a deficiency claim in connection with the foreclosure of the Mortgage to the extent necessary to foreclose on all or any portion of the Property, the Rents, the Cash Management Accounts or any other collateral.

8.2.5Lender’s Right to Perform.  If Borrower fails to perform any covenant or obligation contained herein and such failure shall continue for a period of ten (10) Business Days after Borrower’s receipt of written notice thereof from Lender, without in any way limiting Lender’s right to exercise any of its rights, powers or remedies as provided hereunder, or under any of the other Loan Documents, Lender may, but shall have no obligation to, perform, or cause performance of, such covenant or obligation, and all costs, expenses, liabilities, penalties and fines of Lender incurred or paid in connection therewith shall be payable by Borrower to Lender upon demand and if not paid shall be added to the Debt ( and to the extent permitted under applicable laws, secured by the Mortgage and other Loan Documents) and shall bear interest thereafter at the Default Rate.  Notwithstanding the foregoing, Lender shall have no obligation to send notice to Borrower of any such failure.

9.SPECIAL PROVISIONS

9.1Sale of Note and Secondary Market Transaction.

9.1.1General; Borrower Cooperation.  Lender shall have the right at any time and from time to time (i) to sell or otherwise transfer the Loan or any portion thereof or the Loan Documents or any interest therein to one or more investors, (ii) to sell participation interests in the Loan to one or more investors or (iii) to securitize the Loan or any portion thereof in a single asset securitization or a pooled loan securitization of rated single or multi-class securities (the “Securities”) secured by or evidencing ownership interests in the Note and the Mortgage (each such sale, assignment, participation and/or securitization is referred to herein as a “Secondary Market Transaction”).  In connection with any Secondary Market Transaction, Borrower shall, at Borrower’s reasonable expense not to exceed $15,000 (for purposes of this Section 9 only, the “Expenses Cap”), use all reasonable efforts and cooperate fully and in good

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faith with Lender and otherwise assist Lender in satisfying the market standards to which Lender customarily adheres or which may be reasonably required in the marketplace or by the Rating Agencies in connection with any such Secondary Market Transactions, including: (a) to (i) to provide such financial and other information with respect to the Property, Borrower and its Affiliates, Manager and any tenants of the Property not otherwise delivered under the terms hereof, (ii)  provide business plans and budgets relating to the Property and (iii)  perform or permit or cause to be performed or permitted such site inspection, appraisals, surveys, market studies, environmental reviews and reports, engineering reports and other due diligence investigations of the Property, as may be reasonably requested from time to time by Lender or the Rating Agencies or as may be necessary or appropriate in connection with a Secondary Market Transaction or Exchange Act requirements (the items provided to Lender pursuant to this paragraph (a) being called the “Provided Information”), together, if customary, with appropriate verification of and/or consents to the Provided Information through letters of auditors or opinions of counsel of independent attorneys acceptable to Lender and the Rating Agencies; (b) at Borrower’s expense subject to the Expense Cap, cause counsel to render opinions as to non-consolidation and any other opinion customary in securitization transactions with respect to the Property, Borrower and its Affiliates, which counsel and opinions shall be reasonably satisfactory to Lender and the Rating Agencies; (c) make such representations and warranties as of the closing date of any Secondary Market Transaction with respect to the Property, Borrower and the Loan Documents as are customarily provided in such transactions and as may be reasonably requested by Lender or the Rating Agencies and consistent with the facts covered by such representations and warranties as they exist on the date thereof, including the representations and warranties made in the Loan Documents; (d) provide current certificates of good standing and qualification with respect to Borrower from appropriate Governmental Authorities; and (e) execute such amendments to the Loan Documents and Borrower’s organizational documents, as may be requested by Lender or the Rating Agencies or otherwise to effect a Secondary Market Transaction, provided that nothing contained in this subsection (e) shall result in a material economic change in the transaction.  Borrower shall pay all reasonable third party costs and expenses incurred by Lender in connection with a Secondary Market Transaction.  Borrower’s cooperation obligations set forth herein shall continue until the Loan has been paid in full.

9.1.2Use of Information.  Borrower understands that all or any portion of the Provided Information and the Required Records may be included in disclosure documents in connection with a Secondary Market Transaction, including a prospectus or private placement memorandum (each, a “Disclosure Document”) and may also be included in filings with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended (the “Securities Act”), or the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), or provided or made available to investors or prospective investors in the Securities, the Rating Agencies, and service providers or other parties relating to the Secondary Market Transaction.  If the Disclosure Document is required to be revised, Borrower shall cooperate with Lender in updating the Provided Information or Required Records for inclusion or summary in the Disclosure Document or for other use reasonably required in connection with a Secondary Market Transaction by providing all current information pertaining to Borrower, Manager and the Property necessary to keep the Disclosure Document accurate and complete in all material respects with respect to such matters.

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9.1.3Borrower Obligations Regarding Disclosure Documents.  In connection with a Disclosure Document, Borrower shall: (a) if requested by Lender, certify in writing that Borrower has carefully examined those portions of such Disclosure Document, pertaining to Borrower, the Property, Manager and the Loan, and that such portions do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; and (b) indemnify (in a separate instrument of indemnity, if so requested by Lender) (i) any underwriter, syndicate member or placement agent (collectively, the “Underwriters”) retained by Lender or its issuing company affiliate (the “Issuer”) in connection with a Secondary Market Transaction, (ii) Lender and (iii) the Issuer that is named in the Disclosure Document or registration statement relating to a Secondary Market Transaction (the “Registration Statement”), and each of the Issuer’s directors, each of its officers who have signed the Registration Statement and each person or entity who controls the Issuer or the Lender within the meaning of Section 15 of the Securities Act or Section 30 of the Exchange Act (collectively within (iii), the “GCM Group”), and each of its directors and each person who controls each of the Underwriters, within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act (collectively, the “Underwriter Group”) for any losses, claims, damages or liabilities (the “Liabilities”) to which Lender, the GCM Group or the Underwriter Group may become subject (including reimbursing all of them for any legal or other expenses actually incurred in connection with investigating or defending the Liabilities) insofar as the Liabilities arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any of the Provided Information or in any of the applicable portions of such sections of the Disclosure Document applicable to Borrower, Manager, the Property or the Loan, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated in the applicable portions of such sections or necessary in order to make the statements in the applicable portions of such sections in light of the circumstances under which they were made, not misleading; provided, however, that Borrower shall not be required to indemnify Lender for any Liabilities relating to untrue statements or omissions which Borrower identified to Lender in writing at the time of Borrower’s examination of such Disclosure Document.

9.1.4Borrower Indemnity Regarding Filings.  In connection with filings under the Exchange Act, Borrower shall (i) indemnify Lender, the GCM Group and the Underwriter Group for any Liabilities to which Lender, the GCM Group or the Underwriter Group may become subject insofar as the Liabilities arise out of or are based upon the omission or alleged omission to state in the Provided Information a material fact required to be stated in the Provided Information in order to make the statements in the Provided Information, in light of the circumstances under which they were made not misleading and (ii) reimburse Lender, the GCM Group or the Underwriter Group for any legal or other expenses actually incurred by Lender, GCM Group or the Underwriter Group in connection with defending or investigating the Liabilities.

9.1.5Indemnification Procedure.  Promptly after receipt by an indemnified party under Section 9.1.3 or 9.1.4 of notice of the commencement of any action for which a claim for indemnification is to be made against Borrower, such indemnified party shall notify Borrower in writing of such commencement, but the omission to so notify Borrower will not relieve Borrower from any liability that it may have to any indemnified party hereunder

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except to the extent that failure to notify causes prejudice to Borrower.  If any action is brought against any indemnified party, and it notifies Borrower of the commencement thereof, Borrower will be entitled, jointly with any other indemnifying party, to participate therein and, to the extent that it (or they) may elect by written notice delivered to the indemnified party promptly after receiving the aforesaid notice of commencement, to assume the defense thereof with counsel satisfactory to such indemnified party in its discretion.  After notice from Borrower to such indemnified party under this Section 9.1.5, Borrower shall not be responsible for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, if the defendants in any such action include both Borrower and an indemnified party, and any indemnified party shall have reasonably concluded that there are any legal defenses available to it and/or other indemnified parties that are different from or additional to those available to Borrower, then the indemnified party or parties shall have the right to select separate counsel to assert such legal defenses and to otherwise participate in the defense of such action on behalf of such indemnified party or parties.  Borrower shall not be liable for the expenses of more than one separate counsel unless there are legal defenses available to it that are different from or additional to those available to another indemnified party.

9.1.6Contribution.  In order to provide for just and equitable contribution in circumstances in which the indemnity agreement provided for in Section 9.1.3 or 9.1.4 is for any reason held to be unenforceable by an indemnified party in respect of any Liabilities (or action in respect thereof) referred to therein which would otherwise be indemnifiable under Section 9.1.3 or 9.1.4, Borrower shall contribute to the amount paid or payable by the indemnified party as a result of such Liabilities (or action in respect thereof); provided, however, that no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person not guilty of such fraudulent misrepresentation.   In determining the amount of contribution to which the respective parties are entitled, the following factors shall be considered:  (i) the GCM Group’s and Borrower’s relative knowledge and access to information concerning the matter with respect to which the claim was asserted; (ii) the opportunity to correct and prevent any statement or omission; and (iii) any other equitable considerations appropriate in the circumstances.  Lender and Borrower hereby agree that it may not be equitable if the amount of such contribution were determined by pro rata or per capita allocation.

9.1.7Rating Surveillance.  Lender will retain the Rating Agencies to provide rating surveillance services on Securities.  The pro rata expenses of such surveillance will be paid for by Borrower based on the applicable percentage of such expenses determined by dividing the then outstanding Principal by the then aggregate outstanding amount of the pool created in the Secondary Market Transaction which includes the Loan.

9.1.8Severance of Loan.  Lender shall have the right, at any time (whether prior to, in connection with, or after any Secondary Market Transaction), with respect to all or any portion of the Loan, to modify, split and/or sever all or any portion of the Loan as hereinafter provided.  Without limiting the foregoing, Lender may (i) cause the Note and the Mortgage to be split into a first and second mortgage loan, (ii) create one more senior and subordinate notes (i.e., an A/B or A/B/C structure), (iii) create multiple components of the Note or Notes (and allocate or reallocate the principal balance of the Loan among such components) or (iv) otherwise sever

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the Loan into two or more loans secured by mortgages and by a pledge of partnership or membership interests (directly or indirectly) in Borrower (i.e., a senior loan/mezzanine loan structure), in each such case, in whatever proportion and whatever priority Lender determines; provided, however, in each such instance the outstanding principal balance of all the Notes evidencing the Loan (or components of such Notes) immediately after the effective date of such modification equals the outstanding principal balance of the Loan immediately prior to such modification and the weighted average of the interest rates for all such Notes (or components of such Notes) immediately after the effective date of such modification equals the interest rate of the original Note immediately prior to such modification.  If requested by Lender, Borrower (and Borrower’s constituent members, if applicable, and Guarantor) shall execute within two (2) Business Days after such request, such documentation as Lender may reasonably request to evidence and/or effectuate any such modification or severance.

10.MISCELLANEOUS

10.1Exculpation.  Subject to the qualifications below, Lender shall not enforce the liability and obligation of Borrower to perform and observe the obligations contained in the Loan Documents by any action or proceeding wherein a money judgment shall be sought against Borrower, except that Lender may bring a foreclosure action, an action for specific performance or any other appropriate action or proceeding to enable Lender to enforce and realize upon its interest and rights under the Loan Documents, or in the Property, the Rents or any other collateral given to Lender pursuant to the Loan Documents; provided, however, that, except as specifically provided herein, any judgment in any such action or proceeding shall be enforceable against Borrower only to the extent of Borrower’s interest in the Property, in the Rents and in any other collateral given to Lender, and Lender shall not sue for, seek or demand any deficiency judgment against Borrower in any such action or proceeding under or by reason of or under or in connection with any Loan Document.  The provisions of this Section shall not, however, (i) constitute a waiver, release or impairment of any obligation evidenced or secured by any Loan Document; (ii) impair the right of Lender to name Borrower as a party defendant in any action or suit for foreclosure and sale under the Mortgage to the extent required by applicable law or regulation; (iii) affect the validity or enforceability of any of the Loan Documents or any guaranty made in connection with the Loan or any of the rights and remedies of Lender thereunder; (iv) impair the right of Lender to obtain the appointment of a receiver; (v) impair the enforcement of the Assignment of Leases; (vi) constitute a prohibition against Lender to commence any other appropriate action or proceeding in order for Lender to fully realize the security granted by the Mortgage or to exercise its remedies against the Property; or (vii) constitute a waiver of the right of Lender to enforce the liability and obligation of Borrower, by money judgment or otherwise, to the extent of any loss, damage, cost, expense, liability, claim or other obligation incurred by Lender (including attorneys’ fees and costs reasonably incurred) arising out of or in connection with the following (all such liability and obligation of Borrower for any or all of the following being referred to herein as “Borrower’s Recourse Liabilities”): (a) fraud or intentional misrepresentation by Borrower,  or Guarantor in connection with obtaining the Loan; (b) waste of the Property or any portion thereof by Borrower; (c) any Proceeds paid by reason of any Insured Casualty or any Award received in connection with a Condemnation or other sums or payments attributable to the Property not applied in accordance with the provisions of the Loan Documents (except to the extent that Borrower did not have the legal right, because of a bankruptcy, receivership or similar judicial proceeding, to direct disbursement of such sums

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or payments); (d) all Rents of the Property received or collected by or on behalf of the Borrower after an Event of Default and not applied to payment of Principal and interest due under the Note (including any received or collected by or on behalf of Borrower after an Event of Default, except to the extent that Borrower did not have the legal right, because of a bankruptcy, receivership or similar judicial proceeding to direct the disbursement of such sums), and to the payment of actual and reasonable operating expenses of the Property, as they become due or payable; (e) misappropriation of tenant security deposits and rents collected in advance, or of funds held by Borrower for the benefit of another party; (f) if Lender has waived the monthly collection for real and personal property taxes and insurance premiums, then the failure by Borrower to pay Taxes, (g) the breach of any representation, warranty, covenant or indemnification in any Loan Document concerning Environmental Laws or Hazardous Substances, including Sections 4.21 and 5.8, and clauses (viii) through (xi) of Section 5.30; (h) Borrower’s failure to pay transfer fees and charges due Lender under the Loan Documents in connection with any subordinate financing or any transfer of all or any part of the Premises, or any interest therein, from Borrower to Borrower’s transferee, or transfer of beneficial interest in Borrower (if Borrower is not a natural person or persons but is a corporation, partnership, trust or other legal entity), (i) in the event Lender has waived the requirement for third party property management, then any management fee taken by Borrower or any principal of Borrower after an event of default, or (j) with respect to any Substantial Lease (as defined below), in the event Lender (through foreclosure, deed in lieu of foreclosure or otherwise) acquires the Property or any estate therein, or portion thereof, and Lender thereafter becomes (A) liable to the tenant under such Substantial Lease for any act or omission of Borrower or any prior landlord, (B) subject to any offsets or defenses which such tenant might have against Borrower or any prior landlord, (C) liable beyond Lender’s equity in the Property, or (D) bound by any option or other right of such tenant to purchase or sell all or any portion of the Property; provided, however, that Borrower shall not have any personal liability under this clause (j) with respect to any Substantial Lease to the extent that the tenant thereunder waived its rights with respect to the foregoing matters listed in clauses (A) through (D) above, either in its Substantial Lease or in a subordination, non-disturbance and attornment agreement executed by tenant and Borrower with respect to such Substantial Lease at any time prior to the date any such rights are exercised by such tenant.  For purposes of this Section, each of the following Leases (as the same may be amended or assigned after the date hereof) shall be deemed to be a “Substantial Lease”: that certain Lease dated March 14, 2002 between SyChip Incorporated, as tenant, and AmeriVest Parkway Inc., as landlord.

Notwithstanding anything to the contrary in this Agreement or any of the Loan Documents, (A) Lender shall not be deemed to have waived any right which Lender may have under Section 506(a), 506(b), 1111(b) or any other provisions of the U.S. Bankruptcy Code to file a claim for the full amount of the Debt or to require that all collateral shall continue to secure all of the Debt in accordance with the Loan Documents, and (B) Lender’s agreement not to pursue personal liability of Borrower as set forth above SHALL BECOME NULL AND VOID and shall be of no further force and effect, and the Debt shall be fully recourse to Borrower in the event that one or more of the following occurs (each, a “Springing Recourse Event”): (i) an Event of Default described in Section 8.1(d) shall have occurred or (ii) a breach of the covenants set forth in Section 5.13, or (iii) the occurrence of any condition or event described in either Section 8.1(f) or Section 8.1(g) and, with respect to such condition or event described in Section 8.1(g), either Borrower, Guarantor or any Person owning an interest (directly or indirectly) in Borrower, or

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Guarantor consents to, aids, solicits, supports, or otherwise cooperates or colludes to cause such condition or event or fails to contest such condition or event.

10.2Brokers and Financial Advisors.  Borrower hereby represents that it has dealt with no financial advisors, brokers, underwriters, placement agents, agents or finders in connection with the Loan other than Northmarq Capital Inc..  Borrower shall indemnify and hold Lender harmless from and against any and all claims, liabilities, costs and expenses (including attorneys’ fees, whether incurred in connection with enforcing this indemnity or defending claims of third parties) of any kind in any way relating to or arising from a claim by any Person that such Person acted on behalf of Borrower in connection with the transactions contemplated herein.  The provisions of this Section 10.2 shall survive the expiration and termination of this Agreement and the repayment of the Debt.

10.3Retention of Servicer.  Lender reserves the right to retain the Servicer to act as its agent hereunder with such powers as are specifically delegated to the Servicer by Lender, whether pursuant to the terms of this Agreement, any pooling and servicing agreement or similar agreement entered into as a result of a Secondary Market Transaction, the Deposit Account Agreement or otherwise, together with such other powers as are reasonably incidental thereto.  Borrower shall pay any reasonable fees and expenses of the Servicer in connection with a release of the Property, assumption or modification of the Loan, enforcement of the Loan Documents or any other action taken by Servicer hereunder on behalf of Lender.

10.4Survival.  This Agreement and all covenants, agreements, representations and warranties made herein and in the certificates delivered pursuant hereto shall survive the making by Lender of the Loan and the execution and delivery to Lender of the Note, and shall continue in full force and effect so long as any of the Debt is unpaid or such longer period if expressly set forth in this Agreement.  All Borrower’s covenants and agreements in this Agreement shall inure to the benefit of the respective legal representatives, successors and assigns of Lender.

10.5Lender’s Discretion.  Whenever pursuant to this Agreement or any other Loan Document, Lender exercises any right given to it to approve or disapprove, or consent or withhold consent, or any arrangement or term is to be satisfactory to Lender or is to be in Lender’s discretion, the decision of Lender to approve or disapprove, to consent or withhold consent, or to decide whether arrangements or terms are satisfactory or not satisfactory, or acceptable or unacceptable or in Lender’s discretion shall (except as is otherwise specifically herein provided) be in the sole discretion of Lender and shall be final and conclusive.

10.6Governing Law.

(a)THE PROCEEDS OF THE NOTE DELIVERED PURSUANT HERETO WERE DISBURSED FROM THE STATE OF NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN

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SUCH STATE AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA, EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE CREATION, PERFECTION, AND ENFORCEMENT OF THE LIENS CREATED PURSUANT TO THE LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE STATE IN WHICH THE PROPERTY IS LOCATED, IT BEING UNDERSTOOD THAT, TO THE FULLEST EXTENT PERMITTED BY THE LAW OF SUCH STATE, THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE VALIDITY AND THE ENFORCEABILITY OF ALL LOAN DOCUMENTS AND THE DEBT, EXCEPT AS EXPRESSLY PROVIDED HEREIN WITH RESPECT TO THE PROVISIONS FOR THE CREATION, PERFECTION, AND ENFORCEMENT OF THE LIENS CREATED PURSUANT TO THE LOAN DOCUMENTS.  TO THE FULLEST EXTENT PERMITTED BY LAW, BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS AGREEMENT AND THE NOTE, AND THIS AGREEMENT AND THE NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK PURSUANT TO § 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.

(b)ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR BORROWER ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN NEW YORK COUNTY, NEW YORK AND BORROWER WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING.  BORROWER DOES HEREBY DESIGNATE AND APPOINT CSC CORPORATION AT 1177 AVENUE OF THE AMERICAS, 17^TH FLOOR, NEW YORK, NEW YORK 10036-2721, AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND AGREES THAT SERVICE OF PROCESS UPON SAID AGENT AT SAID ADDRESS AND WRITTEN NOTICE OF SAID SERVICE OF BORROWER MAILED OR DELIVERED TO BORROWER IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON BORROWER (UNLESS LOCAL LAW REQUIRES ANOTHER METHOD OF SERVICE), IN ANY SUCH SUIT, ACTION OR PROCEEDING IN THE STATE OF NEW YORK.  BORROWER (i) SHALL GIVE PROMPT NOTICE TO LENDER OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (ii) MAY AT ANY TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT WITH AN OFFICE IN NEW YORK, NEW YORK (WHICH OFFICE SHALL BE DESIGNATED AS THE ADDRESS FOR SERVICE OF PROCESS), AND (iii) SHALL PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN OFFICE IN NEW YORK, NEW YORK OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.

10.7Modification, Waiver in Writing.  No modification, amendment, extension, discharge, termination or waiver of any provision of this Agreement or of any other Loan Document, nor consent to any departure by Borrower therefrom, shall in any event be effective

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unless the same shall be in a writing signed by the party against whom enforcement is sought, and then such waiver or consent shall be effective only in the specific instance, and for the purpose, for which given.  Except as otherwise expressly provided herein, no notice to or demand on Borrower shall entitle Borrower to any other or future notice or demand in the same, similar or other circumstances.  Neither any failure nor any delay on the part of Lender in insisting upon strict performance of any term, condition, covenant or agreement, or exercising any right, power, remedy or privilege hereunder, or under any other Loan Document, shall operate as or constitute a waiver thereof, nor shall a single or partial exercise thereof preclude any other future exercise, or the exercise of any other right, power, remedy or privilege.  In particular, and not by way of limitation, by accepting payment after the due date of any amount payable under any Loan Document, Lender shall not be deemed to have waived any right either to require prompt payment when due of all other amounts due under the Loan Documents, or to declare an Event of Default for failure to effect prompt payment of any such other amount.

10.8Trial by Jury.  BORROWER AND LENDER HEREBY AGREE NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVE ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH.  THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY BORROWER AND LENDER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE.  EITHER PARTY IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY THE OTHER.

10.9Headings/Exhibits.  The Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.  The Exhibits attached hereto, are hereby incorporated by reference as a part of the Agreement with the same force and effect as if set forth in the body hereof.

10.10Severability.  Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

10.11Preferences.  Upon the occurrence and continuance of an Event of Default, Lender shall have the continuing and exclusive right to apply or reverse and reapply any and all payments by Borrower to any portion of the Debt.  To the extent Borrower makes a payment to Lender, or Lender receives proceeds of any collateral, which is in whole or part subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of such payment or proceeds received, the Debt or part thereof intended to be satisfied shall be revived and continue in full force and effect, as if such payment or proceeds had not been received by Lender.  This provision shall survive the expiration or termination of this Agreement and the repayment of the Debt.

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10.12Waiver of Notice.  Borrower shall not be entitled to any notices of any nature whatsoever from Lender except with respect to matters for which this Agreement or any other Loan Document specifically and expressly requires the giving of notice by Lender to Borrower and except with respect to matters for which Borrower is not, pursuant to applicable Legal Requirements, permitted to waive the giving of notice.  Borrower hereby expressly waives the right to receive any notice from Lender with respect to any matter for which no Loan Document specifically and expressly requires the giving of notice by Lender to Borrower.

10.13Remedies of Borrower.  If a claim or adjudication is made that Lender or any of its agents, including Servicer, has acted unreasonably or unreasonably delayed acting in any case where by law or under any Loan Document, Lender or any such agent, as the case may be, has an obligation to act reasonably or promptly, Borrower agrees that neither Lender nor its agents, including Servicer, shall be liable for any monetary damages, and Borrower’s sole remedy shall be to commence an action seeking injunctive relief or declaratory judgment.  Any action or proceeding to determine whether Lender has acted reasonably shall be determined by an action seeking declaratory judgment.  Borrower specifically waives any claim against Lender and its agents, including Servicer, with respect to actions taken by Lender or its agents on Borrower’s behalf.

10.14Prior Agreements.  This Agreement and the other Loan Documents contain the entire agreement of the parties hereto and thereto in respect of the transactions contemplated hereby and thereby, and all prior agreements, understandings and negotiations among or between such parties, whether oral or written, are superseded by the terms of this Agreement and the other Loan Documents.

10.15Offsets, Counterclaims and Defenses.  Borrower hereby waives the right to assert a counterclaim, other than a compulsory counterclaim, in any action or proceeding brought against it by Lender or its agents, including Servicer, or otherwise offset any obligations to make payments required under the Loan Documents.  Any assignee of Lender’s interest in and to the Loan Documents shall take the same free and clear of all offsets, counterclaims or defenses which Borrower may otherwise have against any assignor of such documents, and no such offset, counterclaim or defense shall be interposed or asserted by Borrower in any action or proceeding brought by any such assignee upon such documents, and any such right to interpose or assert any such offset, counterclaim or defense in any such action or proceeding is hereby expressly waived by Borrower.

10.16Publicity.  All news releases, publicity or advertising by Borrower or its Affiliates through any media intended to reach the general public, which refers to the Loan Documents, the Loan, Lender or any member of the GCM Group, a Loan purchaser, the Servicer or the trustee in a Secondary Market Transaction, shall be subject to the prior written approval of Lender.  Lender shall have the right to issue any of the foregoing without Borrower’s approval in connection with a secondary market transaction.

10.17No Usury.  Borrower and Lender intend at all times to comply with applicable state law or applicable United States federal law (to the extent that it permits Lender to contract for, charge, take, reserve or receive a greater amount of interest than under state law) and that this Section 10.17 shall control every other agreement in the Loan Documents.  If the applicable

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law (state or federal) is ever judicially interpreted so as to render usurious any amount called for under the Note or any other Loan Document, or contracted for, charged, taken, reserved or received with respect to the Debt, or if Lender’s exercise of the option to accelerate the maturity of the Loan or any prepayment by Borrower results in Borrower having paid any interest in excess of that permitted by applicable law, then it is Borrower’s and Lender’s express intent that all excess amounts theretofore collected by Lender shall be credited against the unpaid Principal and all other Debt (or, if the Debt has been or would thereby be paid in full, refunded to Borrower), and the provisions of the Loan Documents immediately be deemed reformed and the amounts thereafter collectible thereunder reduced, without the necessity of the execution of any new document, so as to comply with applicable law, but so as to permit the recovery of the fullest amount otherwise called for thereunder.  All sums paid or agreed to be paid to Lender for the use, forbearance or detention of the Loan shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full stated term of the Loan until payment in full so that the rate or amount of interest on account of the Debt does not exceed the maximum lawful rate from time to time in effect and applicable to the Debt for so long as the Debt is outstanding.  Notwithstanding anything to the contrary contained in any Loan Document, it is not the intention of Lender to accelerate the maturity of any interest that has not accrued at the time of such acceleration or to collect unearned interest at the time of such acceleration.

10.18Conflict; Construction of Documents.  In the event of any conflict between the provisions of this Agreement and any of the other Loan Documents, the provisions of this Agreement shall control.  The parties hereto acknowledge that each is represented by separate counsel in connection with the negotiation and drafting of the Loan Documents and that the Loan Documents shall not be subject to the principle of construing their meaning against the party that drafted them.

10.19No Third Party Beneficiaries.  The Loan Documents are solely for the benefit of Lender and Borrower and nothing contained in any Loan Document shall be deemed to confer upon anyone other than the Lender and Borrower any right to insist upon or to enforce the performance or observance of any of the obligations contained therein.

10.20Yield Maintenance Premium.  Borrower acknowledges that (a) Lender is making the Loan in consideration of the receipt by Lender of all interest and other benefits intended to be conferred by the Loan Documents and (b) if payments of Principal are made to Lender prior to the Stated Maturity Date, for any reason whatsoever, whether voluntary, as a result of Lender’s acceleration of the Loan after an Event of Default, by operation of law or otherwise, Lender will not receive all such interest and other benefits and may, in addition, incur costs.  For these reasons, and to induce Lender to make the Loan, Borrower agrees that, except as expressly provided in Section 7, all prepayments, if any, whether voluntary or involuntary, will be accompanied by the Yield Maintenance Premium.  Such Yield Maintenance Premium shall be required whether payment is made by Borrower, by a Person on behalf of Borrower, or by the purchaser at any foreclosure sale, and may be included in any bid by Lender at such sale.  Borrower further acknowledges that (A) it is a knowledgeable real estate developer and/or investor; (B) it fully understands the effect of the provisions of this Section 10.20, as well as the other provisions of the Loan Documents; (C) the making of the Loan by Lender at the Interest Rate and other terms set forth in the Loan Documents are sufficient consideration for Borrower’s obligation to pay a Yield Maintenance Premium (if required); and (D) Lender would not make

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the Loan on the terms set forth herein without the inclusion of such provisions.  Borrower also acknowledges that the provisions of this Agreement limiting the right of prepayment and providing for the payment of the Yield Maintenance Premium and other charges specified herein were independently negotiated and bargained for, and constitute a specific material part of the consideration given by Borrower to Lender for the making of the Loan except as expressly permitted hereunder.

10.21Assignment.  The Loan, the Note, the Loan Documents and/or Lender’s rights, title, obligations and interests therein may be assigned by Lender and any of its successors and assigns to any Person at any time in its discretion, in whole or in part, whether by operation of law (pursuant to a merger or other successor in interest) or otherwise.  Upon such assignment, all references to Lender in this Loan Agreement and in any Loan Document shall be deemed to refer to such assignee or successor in interest and such assignee or successor in interest shall thereafter stand in the place of Lender.  Borrower may not assign its rights, title, interests or obligations under this Loan Agreement or under any of the Loan Documents.

10.22Set-Off.  In addition to any rights and remedies of Lender provided by this Loan Agreement and by law, Lender shall have the right, without prior notice to Borrower, any such notice being expressly waived by Borrower to the extent permitted by applicable law, upon any amount becoming due and payable by Borrower hereunder (whether at the stated maturity, by acceleration or otherwise) to set-off and appropriate and apply against such amount any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by Lender or any Affiliate thereof to or for the credit or the account of Borrower.  Lender agrees promptly to notify Borrower after any such set-off and application made by Lender; provided that the failure to give such notice shall not affect the validity of such set-off and application.

10.23Counterparts.  This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument.

[Remainder of page intentionally left blank; signature page follows]

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IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to be duly executed by their duly authorized representatives, all as of the day and year first above written.

AMERIVEST CENTERRA INC., a Colorado corporation
By:	John B. Greenman
	Name:					John B. Greenman
	Title:		Vice President
AMERIVEST PARKWAY INC., a Texas corporation
By:	John B. Greenman
	Name:				John B. Greenman
	Title:		Vice President
AMERIVEST BLACK CANYON INC., an Arizona corporation
By:	John B. Greenman
	Name:						John B. Greenman
	Title:			Vice President
GREENWICH CAPITAL FINANCIAL PRODUCTS INC., a Delaware corporation
By:	Gary E. Swon
	Name:						Gary E. Swon
	Title:	Managing Director

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EX-10.9B

Exhibit 10.9B

PROMISSORY NOTE

$39,000,000.00 September 19, 2003

FOR VALUE RECEIVED, AMERIVEST CENTERRA INC., AMERIVEST PARKWAY INC. AND AMERIVEST BLACK CANYON INC., each having an address c/o AmeriVest Properties Inc. at 1780 South Bellaire Street, Suite 100 Denver, CO  80222 (“Maker”), hereby promises to pay to the order of GREENWICH CAPITAL FINANCIAL PRODUCTS INC., a Delaware corporation, at its principal place of business at 600 Steamboat Road, Greenwich, Connecticut 06830 (together with its successors and assigns “Payee”) or at such place as the holder hereof may from time to time designate in writing, the principal sum of THIRTY-NINE MILLION AND 00/100 DOLLARS ($39,000,000.00) (the “Principal”), in lawful money of the United States of America, with interest on the unpaid principal balance from time to time outstanding at the Interest Rate, in installments as follows:

A.A payment of $66,690.00 on the date hereof, representing interest from the date of funding through September 30, 2003;

B.On November 1, 2003 (which shall be the first Payment Date hereunder) and each Payment Date thereafter through and including September 1, 2008, the Principal and interest thereon at the Interest Rate shall be payable in equal monthly installments of $230,953.76 (the “Monthly Debt Service Payment Amount”); which is based on the Interest Rate and a 300-month amortization schedule; each of such payments, subject to the provisions of Section 3.11 of the Loan Agreement (hereinafter defined), to be applied (a) to the payment of interest computed at the rate aforesaid; and (b) the balance applied toward the reduction of the principal sum; and

C.The balance of the principal sum of this Note together with all accrued and unpaid interest thereon shall be due and payable on the Maturity Date.

1.Definitions.  Capitalized terms used but not otherwise defined herein shall have the meanings given in that certain Loan Agreement (the “Loan Agreement”) dated the date hereof between Maker and Payee.  The following terms have the meanings set forth below:

Business Day:  any day other than a Saturday, Sunday or any day on which commercial banks in New York, New York are authorized or required to close.

Default Rate:  a rate per annum equal to the lesser of (i) the maximum rate permitted by applicable law, or (ii) 5% above the Interest Rate, compounded monthly.

Interest Period:  (i) the period from the date hereof through the first day thereafter that is the last day of a calendar month and (ii) each period thereafter from the 1^st day of each calendar month through the last day of each such calendar month; except that the Interest Period, if any, that would otherwise commence before and end after the Maturity Date shall end on the Maturity Date.

Interest Rate:  a rate of interest equal to five and thirteen one-hundredths percent (5.13%) per annum, which includes a servicing fee of three (3) basis points (or, when applicable pursuant to this Note or any other Loan Document, the Default Rate).

Maturity Date:  the date on which the final payment of principal of this Note (or the Defeased Note, if applicable) becomes due and payable as therein provided, whether at the Stated Maturity Date, by declaration of acceleration, or otherwise.

Payment Date:  the 1st day of each calendar month or, upon Payee’s exercise of its right to change the Payment Date in accordance with Section 2.2.4 of the Loan Agreement, the New Payment Date (in either case, if such day is not a Business Day, the Payment Date shall be the first Business Day thereafter).  The first Payment Date hereunder shall be November 1, 2003.

Prepayment Consideration shall be the amount equal to the greater of (i) one percent (1%) of the aggregate Loan balance at the time of prepayment, or (ii) (A) the amount of the monthly interest which would otherwise be payable on the principal balance being prepaid from the date of the first day of the calendar month immediately following the date of prepayment (unless prepayment is tendered on the first day of any calendar month during the term of this Note, in which case from the date of prepayment) to and including the Maturity Date; over (B) the amount of the monthly interest the Lender would earn if the principal balance being prepaid were reinvested for the period from the first day of the calendar month immediately following the date of prepayment (unless prepayment is tendered on the first day of any calendar month during the term of this Note, in which case from the date of prepayment) to and including the Maturity Date at the Treasury Rate (as hereinafter defined), such difference to be discounted to present value at the Treasury Rate.  The “Treasury Rate” shall be the annualized yield on securities issued by the United States Treasury having a maturity corresponding to the remaining term to the originally scheduled Maturity Date of this Note, as quoted in Federal Reserve Statistical Release [H. 15(519)] under the heading “U.S. Government Securities – Treasury Constant Maturities” for the Treasury Rate Determination Date (as defined below), converted to a monthly equivalent yield.  If yields for such securities of such maturity are not shown in such publication, then the Treasury Rate shall be determined by Lender by linear interpolation between the yields of securities of the next longer and next shorter maturities.  If said Federal Reserve Statistical Release or any other information necessary for determination of the Treasury Rate in accordance with the foregoing is no longer published or is otherwise unavailable, then the Treasury Rate shall be reasonably determined by Lender based on comparable data.  The term “Treasury Rate Determination Date” shall mean the date which is five (5) banking days prior to the scheduled prepayment date.

Stated Maturity Date:  October 1, 2008, as such date may be changed in accordance with Section 2.2.4 of the Loan Agreement.

Yield Maintenance Premium: an amount which, when added to the outstanding Principal, would be sufficient to purchase U.S. Obligations which provide payments (a) on or prior to, but as close as possible to, all successive scheduled payment dates under this Note through the Stated Maturity Date and (b) in amounts equal to the Monthly Debt Service Payment Amount required under this Note through the Stated Maturity Date together with the outstanding principal balance of this Note as of the Stated Maturity Date assuming all such Monthly Debt

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Service Payments are made (including any servicing costs associated therewith).  In no event shall the Yield Maintenance Premium be less than zero.

2.Payments and Computations.  Interest on the unpaid Principal shall be computed on the basis of the actual number of days elapsed over a 360-day year.  All amounts due under this Note shall be payable without setoff, counterclaim or any other deduction whatsoever and are payable without relief from valuation and appraisement laws and with all costs and charges incurred in the collection or enforcement hereof, including, attorneys’ fees and court costs.

3.Loan Documents.  This Note is evidence of that certain loan made by Payee to Maker contemporaneously herewith and is executed pursuant to the terms and conditions of the Loan Agreement.  This Note is secured by and entitled to the benefits of, among other things, the Mortgage and the other Loan Documents.  Reference is made to the Loan Documents for a description of the nature and extent of the security afforded thereby, the rights of the holder hereof in respect of such security, the terms and conditions upon which this Note is secured and the rights and duties of the holder of this Note.  No reference herein to and no provision of any other Loan Document shall alter or impair the obligation of Maker, which is absolute and unconditional (except for Section 10.1 of the Loan Agreement), to pay the principal of and interest on this Note at the time and place and at the rates and in the monies and funds described herein.  All of the agreements, conditions, covenants, provisions and stipulations contained in the Loan Documents to be kept and performed by Maker are by this reference hereby made part of this Note to the same extent and with the same force and effect as if they were fully set forth in this Note, and Maker covenants and agrees to keep and perform the same, or cause the same to be kept and performed, in accordance with their terms.

4.Loan Acceleration; Prepayment.  The Debt, shall without notice become immediately due and payable at the option of Payee if any payment required in this Note is not paid on the date on which it is due or upon the happening of any other Event of Default.  Maker shall have no right to prepay or defease all or any portion of the Principal except in accordance with Sections 2.3.2, 2.3.3, 2.3.4 and 2.4 of the Loan Agreement.  If prior to the third Payment Date prior to the Stated Maturity Date (i) Maker shall (notwithstanding such prohibition of prepayment) tender, and Payee shall, in its sole discretion, elect to accept, payment of the Debt, or (ii) the Debt is accelerated by reason of an Event of Default, then the Debt shall include, and Payee shall be entitled to receive, in addition to the outstanding principal and accrued interest and other sums due under the Loan Documents, an amount equal to the (i) Prepayment Consideration that would be required in connection with a Partial Release if a Partial Release were to occur at the time of Payee’s acceptance of such tender or other receipt of the Debt (through foreclosure or otherwise), as the case may be, and (ii) Yield Maintenance Premium, if any, that would be required in connection with a Defeasance if a Defeasance were to occur at the time of Payee’s acceptance of such tender or other receipt of the Debt (through foreclosure or otherwise), as the case may be.  The principal balance of this Note is subject to mandatory prepayment, without premium or penalty, in certain instances of Insured Casualty or Condemnation, as more particularly set forth in Sections 2.3.2 and 7.4.2 of the Loan Agreement.  Except during the continuance of an Event of Default, all proceeds of any repayment, including permitted prepayments of Principal, shall be applied in accordance with Section 2.3.1 of the Loan Agreement.  During the continuance of an Event of Default, all proceeds of repayment,

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including any payment or recovery on the Property (whether through foreclosure, deed-in-lieu of foreclosure, or otherwise) shall, unless otherwise provided in the Loan Documents, be applied in such order and in such manner as Payee shall elect in Payee’s discretion.

5.Default Rate.  After the occurrence and during the continuance of an Event of Default, the entire unpaid Debt shall bear interest at the Default Rate, and shall be payable upon demand from time to time, to the extent permitted by applicable law.

6.Late Payment Charge.  If any Monthly Debt Service Payment Amount is not paid by Maker on the date on which it is due, Maker shall pay to Payee upon demand an amount equal to the lesser of 5% of such unpaid sum or the maximum amount permitted by applicable law, in order to defray the expense incurred by Payee in handling and processing such delinquent payment and to compensate Payee for the loss of the use of such delinquent payment.

7.Amendments.  This Note may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act or failure to act on the part of Maker or Payee, but only by an agreement in writing signed by the party against whom enforcement of any modification, amendment, waiver, extension, change, discharge or termination is sought.  Whenever used, the singular number shall include the plural, the plural the singular, and the words “Payee” and “Maker” shall include their respective successors, assigns, heirs, executors and administrators.  If Maker consists of more than one person or party, the obligations and liabilities of each such person or party shall be joint and several.

8.Waiver.  Maker and all others who may become liable for the payment of all or any part of the Debt do hereby severally waive presentment and demand for payment, notice of dishonor, protest, notice of protest, notice of nonpayment, notice of intent to accelerate the maturity hereof and of acceleration.  No release of any security for the Debt or any person liable for payment of the Debt, no extension of time for payment of this Note or any installment hereof, and no alteration, amendment or waiver of any provision of the Loan Documents made by agreement between Payee and any other person or party shall release, modify, amend, waive, extend, change, discharge, terminate or affect the liability of Maker, and any other person or party who may become liable under the Loan Documents, for the payment of all or any part of the Debt.

9.Exculpation.  It is expressly agreed that recourse against Maker for failure to perform and observe its obligations contained in this Note shall be limited as and to the extent provided in Section 10.1 of the Loan Agreement.

10.Notices.  All notices or other communications required or permitted to be given pursuant hereto shall be given in the manner specified in the Loan Agreement directed to the parties at their respective addresses as provided therein.

11.Joint and Several.  Each Person constituting Maker hereunder shall have joint and several liability for the obligations of Maker hereunder.

12.Governing Law.  THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE APPLICABLE LAW PERTAINING IN THE STATE OF NEW YORK (OTHER THAN THOSE CONFLICT OF LAW

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PROVISIONS THAT WOULD DEFER TO THE SUBSTANTIVE LAWS OF ANOTHER JURISDICTION).  WITHOUT IN ANY WAY LIMITING THE PRECEDING CHOICE OF LAW, THE PARTIES ELECT TO BE GOVERNED BY NEW YORK LAW IN ACCORDANCE WITH, AND RELYING (AT LEAST IN PART) ON,- § 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK, AS AMENDED, OR ANY CORRESPONDING OR SUCCEEDING PROVISIONS THEREOF.

13.Special State Provisions. Maker agrees that the interest rate contracted for by Maker includes the interest rate set forth in this Note plus any other charges, fees, costs and expenses that are either (a) described herein, in any security instrument securing this Note, or in any other document or instrument executed by Maker in connection with the Loan of which this Note is a part, or (b) incident to the transaction of which this Note is a part and paid or payable by Maker to the extent the same are deemed interest under applicable law, including without limitation any default interest, prepayment charges or consideration, late charges, loan application fees, or loan origination fees.

[Signature Page Follows]

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IN WITNESS WHEREOF, Maker has executed this Promissory Note as of the day and year first written.

AMERIVEST CENTERRA INC., a Colorado corporation
By:		John B. Greenman
		Name:		John B. Greenman
		Title:	Vice President
AMERIVEST PARKWAY INC., a Texas corporation
By:		John B. Greenman
		Name:		John B. Greenman
		Title:	Vice President
	AMERIVEST BLACK CANYON INC., an Arizona corporation
By:		John B. Greenman
		Name:		John B. Greenman
		Title:	Vice President

EX-10.11

Exhibit 10.11

SEVERANCE AGREEMENT AND RELEASE

This Severance Agreement and Release (“Agreement”) is made as of the            day of December, 2003, between AmeriVest Properties Inc. (the “Company”), including its successors, subrogees, assigns, principals, agents, partners, heirs, employees, shareholders, officers, directors, subsidiaries, affiliates, divisions and associates, and D. Scott Ikenberry (“Ikenberry”).  Company and its successors, subrogees, assigns, principals, agents, partners, heirs, employees, shareholders, officers, directors, subsidiaries, affiliates, divisions and associates shall be collectively referred to as the “Released Parties.”  Released Parties and Ikenberry shall be collectively referred to as the “Parties.”

RECITALS

WHEREAS, Ikenberry has been employed and/or associated with the Released Parties and currently holds the title of Chief Financial Officer (“CFO), and the Parties wish to enter into this Agreement to terminate Ikenberry’s employment and/or association with the Released Parties; and in exchange for consideration as outlined herein, Ikenberry knowingly and voluntarily agrees to the covenants contained herein; and the Parties wish to fully and finally resolve all issues, claims and potential claims between them.

TERMS

1.Termination.  Ikenberry’s employment and/or association with the Released Parties shall end on January 9, 2004 or on such earlier date as is agreed upon by Company’s new CFO and Ikenberry (“commencement date”).

2.Payments and Consideration.  Ikenberry’s regular compensation (“severance”) will continue for a period of twelve months from the commencement date (“severance period”).  The severance paid to Ikenberry by Company shall be payable monthly at Ikenberry’s current monthly salary, and shall be tendered in accordance with the established pay periods under which the Parties have previously operated.  During the severance period, Ikenberry shall, also, receive the following:  i) the same insurance and other benefits that are payable to other corporate executives, including health, dental and vision insurance and 401K plan participation; ii) an office and executive suite services at the Kellogg Executive Suites in Littleton, Colorado, at no charge to Ikenberry; and iii) outplacement or recruiting assistance, not to exceed $10,000.00, to assist Ikenberry during this transition, if requested by Ikenberry.  Upon the expiration of the severance period, Ikenberry shall be entitled to claim COBRA benefits as may be permitted, at his sole cost and expense.

3.Duties of Ikenberry During Severance Period.  Ikenberry shall cooperate and work with Company’s new CFO to transition responsibility for oversight of all finance and accounting functions from Ikenberry to Company’s new CFO for the periods and as set forth hereafter.  During the first sixty (60) days after the commencement date, and at the discretion of Company’s new CFO, Ikenberry shall provide on-site assistance up to 100 hours per month.  Thereafter, Ikenberry shall have no regular duties and shall not be required to maintain an office at the Company, but shall make himself available for up to a maximum of ten (10) hours per month to answer/respond to questions and provide guidance to Company’s new CFO and Company.  Should Ikenberry’s assistance be required by Company’s new CFO and/or Company for more than ten (10) hours per month, Ikenberry shall receive a consulting fee of $100.00 per

hour for every hour over ten (10) hours during the severance period.  This requirement for assistance shall cease at the end of the severance period.

4. Indemnification.  In the event that any taxing authority, local, state or federal, seeks additional payment of taxes on any of the amounts paid to Ikenberry under this Agreement, Ikenberry shall indemnify and hold the Released Parties harmless against any and all amounts (including, without limitation, income taxes, attorneys’ fees, penalties, and interest) payable and sought by any taxing authority, local, state or federal, as a result of the Agreement and any payments considered taxable thereunder, including any attorneys’ fees and costs incurred in relation thereto.  The Company shall withhold taxes as required by federal, state and local laws and regulations.  This indemnification applies only to such claims as are caused by Ikenberry’s requests, as honored by Company, to treat his income other than as is required by law or regulation.

5.Warrants and LLC.  All warrants held by Ikenberry shall remain exercisable in accordance with their terms.  Ikenberry shall receive a distribution of his interests in Sheridan Realty Corp. at the same time as other members receive distributions, provided distributions are actually made.

6.General Releases.

a.Ikenberry does hereby voluntarily and knowingly release and discharge the Released Parties from any and all claims, actions, causes of action, liabilities, demands, rights, damages, costs, attorneys’ fees, expenses and controversies of every kind and description through the date of this Agreement.  These releases shall include, by way of example and not limitation, all claims which arise out of, relate to, or are based on (i) Ikenberry’s employment and/or association with the Released Parties and the termination thereof, (ii) any and all contracts, binding promises and statements to, from or between the Parties, (iii) the common laws of any state, (iv) Title VII of the Civil Rights Act of 1964, as amended, (v) claims under the Civil Rights Act of 1991, (vi) claims under 42 U.S.C. § 1981, § 1981a, § 1983, § 1985, or § 1988, (vii) the Age Discrimination in Employment Act of 1967, as amended, (viii) the Employee’s Income Retirement Security Act of 1974, as amended, (ix) claims under the Older Workers Benefit Protection Act of 1990, and (x) claims under all other local, state and federal statutes, any of which could be raised, filed and/or brought in any court of competent jurisdiction and/or in any local, state and federal administration agency or administration.  However, Ikenberry does not release any claims he may have under any stock option or warrant agreements.

b.Notwithstanding the generality of the foregoing releases, they shall not be construed as a release of any claim Ikenberry may have to unemployment benefits.  Ikenberry may make a claim for such benefits, and the Released Parties will provide truthful information in response to questions from the responsible State agency.

c.Notwithstanding the recitation of the claims set forth above, or whether quoted herein or not, and for the purpose of effectuating a full and final release herein between the Parties, Ikenberry expressly acknowledges that this Agreement is intended to include and contemplates the extinguishment, without limitation, of all claims which he now has or does not know or suspect to exist in his favor at the time of the execution hereof.

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d.In exchange for the covenants contained in this Agreement, the Released Parties hereby voluntarily and knowingly release and discharge Ikenberry from any and all claims, actions, causes of action, liabilities, demands, rights, damages, costs, attorneys’ fees, expenses and controversies of every kind and description through the date of this Agreement.

7.Unknown Facts.  This Agreement includes claims of every nature and kind, known or unknown, suspected or unsuspected, foreseen or unforeseen, matured or unmatured, liquidated or unliquidated, through the date of this Agreement.  The Parties acknowledge that they may hereafter discover facts different from, or in addition to, those which they now know to be, or believe to be, true with respect to the Agreement, and voluntarily and with full knowledge agree that this Agreement and the releases contained herein shall be and remain effective in all respects, notwithstanding such different or additional facts or the discovery thereof.

8.Covenant Not to Sue.  Ikenberry covenants that he will not initiate a lawsuit or proceeding, legal, administrative or other, or otherwise assert any claim, action, cause of action, demand, right, or controversy of any kind which he has herein released.  Ikenberry will not provide any material assistance in any currently pending or subsequent litigation against the Released Parties; provided, however, that this restriction shall not prevent Ikenberry from responding to compulsory process.  In the event Ikenberry is subject to a compulsory disclosure, Ikenberry shall first give the Released Parties seventy-two (72) hours advance notice before he makes any disclosure to allow the Released Parties to obtain appropriate Protective Orders or other injunctive relief.

9.Return of Documents.  Ikenberry shall, no later than 60 days after the commencement date, return all of the Released Parties’ documents and/or records, in any form, and copies of all of the Released Parties’ documents and/or records, in any form, obtained or maintained during the course of his employment and/or association with the Released Parties.

10.Non-Disparagement.  Ikenberry agrees not to make to any person any statement that disparages the Released Parties or reflects negatively on the Released Parties, including, but not limited to, statements regarding the Released Parties’ financial business or condition and/or their officers, directors, board members, employees, and affiliates.  The Released Parties agree not to make to any person any statement that disparages Ikenberry or reflects negatively on Ikenberry, including, but not limited to, statements regarding Ikenberry’s performance or any related matter while employed and/or associated with the Released Parties.

11.Ikenberry Warranties.  Ikenberry warrants and represents as follows:

a.He has read this Agreement, and agrees to the conditions and obligations set forth in it.

b.He has had a reasonable time to consider the terms of this Agreement and has been advised by the Released Parties, in writing, to seek legal counsel.

c.He has had twenty-one (21) days in which to consider the Agreement, and, if he executes this agreement less than twenty-one (21) days from receipt, it is with the express understanding that he had the full twenty-one (21) days available if so desired; further, Ikenberry waives any and all rights to a twenty-one (21) day period to consider the terms of his release of claims under the Age Discrimination in Employment Act

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(“ADEA”) if he signs this Agreement prior to the expiration of the twenty-one (21) day period.

d.He has not relied on any statement made by the Released Parties or their agents or representatives, either express or implied, either by statement or omission, in making the decision to enter into this Agreement.  He voluntarily executes this Agreement after having had full opportunity to consult with legal counsel, and without being pressured or influenced by any person or by any statement or representation of any person acting on behalf of another Party, including the officers, agents and attorneys for any other Party.

e.He has been informed and understands that (i) to the extent that this Agreement waives or releases any claims he might have under the Age Discrimination in Employment Act, Ikenberry may rescind such waiver and release within seven (7) calendar days of the execution of this Agreement, and (ii) any such rescission must be in writing and hand delivered to the Released Parties, or, if sent by mail, postmarked within the seven (7) day period, sent only by certified mail, return receipt requested, and addressed to the Released Parties.

f.This Agreement is subject to the terms of the Older Workers Benefit Protection Act of 1990 (“OWBPA”).  Ikenberry acknowledges and agrees that he is voluntarily and with full knowledge releasing any and all claims, including any claims he has or could have brought under the OWBPA, and including any claim(s) under the ADEA, with full knowledge of the consequences of such release.

g.He acknowledges and agrees that this Agreement is written in a manner calculated to be understood, and that he understands the same.

h.He has full and complete legal capacity to enter into this Severance Agreement.

i.He has had a full and fair opportunity to investigate the facts underlying any claims he believes he may have against the Released Parties.  Ikenberry enters into this Agreement acknowledging that there may be facts of which he is not aware; but Ikenberry, nonetheless, enters into this Agreement with the intent of providing the Released Parties with a full and final release of all known and unknown, suspected or unsuspected, foreseen or unforeseen, matured or unmatured, liquidated or unliquidated, claims, based on all known and unknown facts.

12.Acknowledgment With Respect to Payments.  Ikenberry hereby admits, acknowledges and agrees that he has been fully compensated for all wages, benefits, vacation pay and/or bonus amounts which are, or could be, due to him under the terms of his employment and/or association with the Released Parties.

13.Confidential Information and Trade Secrets.  Ikenberry acknowledges that during the course of his employment and/or association with the Released Parties, he has been privy to the Released Parties’ confidential business information and trade secrets, including, without limitation, their financial status, new product and marketing development, pricing and marketing policies and procedures, and other similar repositories of records containing information relating to any confidential information the Released Parties consider competitive

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information and trade secrets within the industry.  Ikenberry acknowledges that he is obligated and has an ongoing fiduciary duty to the Released Parties to refrain from disclosing confidential business information and trade secrets to anyone outside of the Released Parties, and he hereby agrees not to make any such disclosures following the termination of his employment and/or association with the Released Parties for a period of two (2) years after the commencement date, unless such disclosure is compelled in a judicial proceeding.  In the event Ikenberry is subject to a compulsory disclosure, Ikenberry shall first give the Released Parties seventy-two (72) hours advance notice before he makes any disclosure to allow the Released Parties to obtain appropriate Protective Orders or other injunctive relief.

14.Non-Solicitation.  For a period of twelve (12) months from the commencement date, Ikenberry shall not, directly or indirectly, influence or attempt to influence customers or vendors of Company, or any of its subsidiaries or affiliates, to divert their business to any competitor, as defined herein, of Company.  For a period of twelve (12) months from the commencement date, Ikenberry shall not employ, engage or seek to employ or engage, directly or directly, any individual or entity who is or was employed or engaged by Company, or any of its affiliates, until the expiration of six (6) months following the termination of such person’s or entity’s employment or engagement with Company, or any of its affiliates.

15.No Admission of Liability.  The Parties agree that nothing contained herein, and no action taken by any party hereto with regard to the Agreement, shall be construed as an admission by any party of liability for any purpose whatsoever.

16.Entire Agreement.  This Agreement constitutes the complete understanding between the Parties; no other promises or agreements shall be binding unless signed by these Parties.  This Agreement also represents fair and reasonable, and full and final, settlement of any obligation due by the Released Parties to Ikenberry as part of his employment and/or association with the Released Parties.  This Agreement cannot be altered, amended, or modified in any respect, except by a writing duly executed by both Parties.  No oral statements by any employee, representative or agent of the Released Parties shall modify or otherwise affect the terms and provisions of this Agreement.

17.Choice of Law.  This Agreement shall be governed by and construed in accordance with Colorado law, irrespective of where such action may arise or whether any jurisdiction other than Colorado has accepted jurisdiction of this matter.

18.Counterparts.  This Agreement may be executed in counterparts, each of which counterpart, when so executed and delivered, shall be deemed an original, and, taken together, shall constitute one and the same instrument.

19.Severability.  In the event that any court or other enforcement authority determines that any provision of this Agreement is unenforceable, the provision at issue shall be enforced to the maximum extent permitted by law, and all other provisions shall remain in full force and effect.  In the event that any of the provisions of Section 13, related to geographic area or duration, shall be deemed to exceed the maximum area or period of time which a court of competent jurisdiction or other enforcement authority would deem enforceable, the area and/or period shall, for the purposes of this Agreement, be deemed to be the maximum area and/or period which a court of competent jurisdiction or other enforcement authority would deem valid and enforceable in any state in which such court of competent jurisdiction or other enforcement

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authority is convened for the purpose of interpreting this Agreement, Section 13, or any other section upon which a dispute may arise.

20.Full Defense.  Ikenberry agrees and acknowledges that this Agreement and its releases can be pleaded as a full and complete defense, and can be used for the basis of an injunction against any action or any other proceeding which may subsequently be instituted, prosecuted or attempted by Ikenberry, which is based upon any matter related to Ikenberry’s employment and/or association with the Released Parties, or the termination of that employment and/or association with the Released Parties, or which is based in whole, or in part, upon any matter covered, related to or referred to in this Agreement.

IN WITNESS WHEREOF, the Parties have executed this Agreement on the dates written below.

By:  D. SCOTT IKENBERRY	By: AMERIVEST PROPERTIES, INC.
D. Scott Ikenberry	Charles K. Knight
	Charles K. Knight
	President
Date:	Date:

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EX-10.12A

Exhibit 10.12A

UNSECURED REVOLVING CREDIT AGREEMENT

AMONG

AMERIVEST PROPERTIES INC.

AND

FLEET NATIONAL BANK, AS ADMINISTRATIVE AGENT

AND

THE LENDERS PARTY HERETO

TABLE OF CONTENTS

§1.	DEFINITIONS AND RULES OF INTERPRETATION
	§1.1	Definitions
	§1.2	Rules of Interpretation
§2.	REVOLVING LOAN FACILITY
	§2.1	Commitment to Lend
	§2.2	The Notes
	§2.3	Interest on Loans
	§2.4	Conversion Options
	§2.5	Requests for Loans
	§2.6	Funds for Loans
§3.	REPAYMENT OF THE LOANS
	§3.1	Maturity
	§3.2	Mandatory Repayments of Loan
	§3.3	Optional Repayments of Loans
§4.	CERTAIN GENERAL PROVISIONS
	§4.1	Facility Fees
	§4.2	Unused Fee
	§4.3	Funds for Payments
	§4.4	Computations
	§4.5	Additional Costs, Etc
	§4.6	Capital Adequacy
	§4.7	Certificate
	§4.8	Indemnity
	§4.9	Default Interest and Late Charges
	§4.10	Inability to Determine LIBOR Rate
	§4.11	Illegality
	§4.12	Replacement of Lenders
	§4.13	Limitation on Interest
§5.	NO LIMITATION ON RECOURSE
	§5.1	[Intentionally Omitted.]
	§5.2	No Limitation on Recourse
§6.	REPRESENTATIONS AND WARRANTIES
	§6.1	Authority; Etc
	§6.2	Governmental Approvals
	§6.3	Title to Properties; Leases
	§6.4	Financial Statements

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	§6.5	No Material Changes
	§6.6	Franchises, Patents, Copyrights, Etc
	§6.7	Litigation
	§6.8	No Materially Adverse Contracts, Etc
	§6.9	Compliance With Other Instruments, Laws, Etc
	§6.10	Tax Status
	§6.11	Event of Default
	§6.12	Investment Company Act
	§6.13	Absence of Financing Statements, Etc
	§6.14	[Intentionally Omitted.]
	§6.15	Certain Transactions
	§6.16	Benefit Plans; Multiemployer Plans; Guaranteed Pension Plans
	§6.17	Regulations U and X
	§6.18	Environmental Compliance
	§6.19	Subsidiaries and Affiliates
	§6.20	Leases
	§6.21	Loan Documents
	§6.22	Property
§7.	AFFIRMATIVE COVENANTS OF THE BORROWER
	§7.1	Punctual Payment
	§7.2	Maintenance of Office
	§7.3	Records and Accounts
	§7.4	Financial Statements, Certificates and Information
	§7.5	Notices
	§7.6	Existence; Maintenance of REIT Status; Maintenance of Properties
	§7.7	Insurance
	§7.8	Taxes
	§7.9	Inspection of Properties and Books
	§7.10	Compliance with Laws, Contracts, Licenses, and Permits
	§7.11	Use of Proceeds
	§7.12	Reserved
	§7.13	[Intentionally Omitted.]
	§7.14	Interest Rate Protection
	§7.15	Further Assurance
	§7.16	Reserved
	§7.17	Environmental Indemnification
	§7.18	Response Actions
	§7.19	Environmental Assessments
	§7.20	Employee Benefit Plans
	§7.21	More Restrictive Agreements
§8.	CERTAIN NEGATIVE COVENANTS OF THE BORROWER

ii

	§8.1	Restrictions on Indebtedness
	§8.2	Restrictions on Liens, Etc
	§8.3	Restrictions on Investments
	§8.4	Merger, Consolidation, Acquisition and Disposition of Properties
	§8.5	Sale and Leaseback
	§8.6	Compliance with Environmental Laws
	§8.7	Distributions
	§8.8	[Intentionally Omitted.]
	§8.9	Related Companies
§9.	FINANCIAL COVENANTS OF THE BORROWER
	§9.1	Reserved
	§9.2	Reserved
	§9.3	Total Liabilities to Gross Asset Value
	§9.4	Adjusted EBITDA to Interest Expense
	§9.5	EBITDA to Fixed Charges
	§9.6	Minimum Tangible Net Worth
§10.	CONDITIONS TO EFFECTIVENESS
	§10.1	Loan Documents
	§10.2	Good Standing Certificates and Certified Copies
	§10.3	By-laws; Resolutions
	§10.4	Incumbency Certificate; Authorized Signers
	§10.5	Opinions of Counsel Concerning Organization and Loan Documents
	§10.6	Payment of Fees
	§10.7	Compliance Certificate
§11.	CONDITIONS TO ALL BORROWINGS
	§11.1	Representations True; No Event of Default; Compliance Certificate
	§11.2	No Legal Impediment
	§11.3	Governmental Regulation
	§11.4	Proceedings and Documents
§12.	EVENTS OF DEFAULT; ACCELERATION; ETC
	§12.1	Events of Default and Acceleration
	§12.2	Termination of Commitments
	§12.3	Remedies
	§12.4	Distribution of Proceeds
§13.	SETOFF
§14.	THE AGENT

iii

	§14.1	Authorization
	§14.2	Employees and Agents
	§14.3	No Liability
	§14.4	No Representations
	§14.5	Payments
	§14.6	Holders of Notes
	§14.7	Indemnity
	§14.8	Agent as Lender
	§14.9	Resignation
	§14.10	Notification of Defaults and Events of Default
	§14.11	Duties in the Case of Enforcement
§15.	EXPENSES
§16.	INDEMNIFICATION
§17.	SURVIVAL OF COVENANTS, ETC
§18.	ASSIGNMENT; PARTICIPATIONS; ETC
	§18.1	Conditions to Assignment by Lenders
	§18.2	Certain Representations and Warranties; Limitations; Covenants
	§18.3	Register
	§18.4	New Notes
	§18.5	Participations
	§18.6	Pledge by Lender
	§18.7	No Assignment by Borrower
	§18.8	Disclosure
§19.	NOTICES, ETC
§20.	GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE
§21.	HEADINGS
§22.	COUNTERPARTS
§23.	ENTIRE AGREEMENT
§24.	WAIVER OF JURY TRIAL AND CERTAIN DAMAGE CLAIMS
§25.	CONSENTS, AMENDMENTS, WAIVERS, ETC
§26.	SEVERABILITY

iv

§27.	RELATIONSHIP
§28.	DEALINGS WITH THE BORROWER
§29.	NO UNWRITTEN AGREEMENTS
§30.	TIME OF THE ESSENCE
§31.	RIGHTS OF THIRD PARTIES

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UNSECURED REVOLVING CREDIT AGREEMENT

This UNSECURED REVOLVING CREDIT AGREEMENT is made as of the 15th day of December, 2003, by and among AMERIVEST PROPERTIES INC., a Maryland corporation (the “Borrower”), and FLEET NATIONAL BANK, a national banking association (“FNB”), the other lending institutions which are listed on Schedule 1 or hereafter become a party hereto, (the “Lenders”) and FLEET NATIONAL BANK, as agent for itself and such other lending institutions (the “Agent”).

WHEREAS, the Borrower has requested and FNB has agreed to provide a revolving credit facility in the principal amount of up to $30,000,000.00, and portions of such facility may be assigned to other lending institutions.

NOW, THEREFORE, to accomplish these purposes, the Agent, the Borrower and the Lenders hereby agree as follows:

§1.DEFINITIONS AND RULES OF INTERPRETATION

§1.1Definitions.  The following terms shall have the meanings set forth in this §l or elsewhere in the provisions of this Agreement referred to below:

Adjusted EBITDA.  EBITDA minus the Reserve Amount for all Real Estate Assets owned by Borrower or any of the Related Companies.

Affiliated Lenders.  Any commercial bank which is (i) the parent corporation of any of the Lenders originally listed on Schedule 1, (ii) a wholly-owned subsidiary of any of the Lenders or (iii) a wholly-owned subsidiary of the parent corporation of any of the Lenders.

Agent.  Fleet National Bank acting as agent for the Lenders or any successor agent.

Agent’s Head Office.  The Agent’s head office located at 100 Federal Street, Boston, Massachusetts 02110, or at such other location as the Agent may designate from time to time.

Agreement.  This Unsecured Revolving Credit Agreement, including the Schedules and Exhibits hereto.

Agreement Regarding Fees.  The Agreement Regarding Fees of even date herewith between Borrower and FNB.

Arranger.  Fleet Securities, Inc. or any successor.

Assignment and Acceptance.  See §18.

Balance Sheet Date.  September 30, 2003.

Borrower.  As defined in the preamble hereto.

Borrowing Date.  The date on which any Loan is made or is to be made, and the date on which any Loan is converted or continued in accordance with §2.4.

Business Day.  Any day other than a Saturday, Sunday or day which shall be in the Commonwealth of Massachusetts a legal holiday or day on which banking institutions are required or authorized to close and, in the case of LIBOR Loans, also a day which is a LIBOR Business Day.

Capitalized Leases.  Leases under which the Borrower is the lessee or obligor, the discounted future rental payment obligations under which are required to be capitalized on the balance sheet of the Borrower in accordance with Generally Accepted Accounting Principles.

CERCLA.  See §6.18.

Change in Control.  The occurrence of any of the following events: (A) if during any twelve month period on or after the Closing Date while any portion of the Loan remains outstanding or Lenders have any obligation to make further Loans, individuals who at the beginning of such period constituted the Board of Directors of the Borrower (together with any new directors whose election by the Board of Directors or whose nomination for election by the shareholders of the Borrower was approved by a vote of at least a majority of the members of the Board of Directors then in office who either were members of the Board of Directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the members of the Board of Directors then in office; or (B) if there occurs a change of control of the Borrower of a nature that would be required to be reported in response to Item 1a of Form 8-K filed pursuant to Section 13 or 15 under the Securities Exchange Act of 1934, or in any other filing by the Borrower with the Securities and Exchange Commission; or (C) if the Borrower or any Related Company consolidates with, is acquired by, or merges into or with any Person.

Closing Date.  The date upon which this Agreement shall become effective pursuant to §10 and the initial Loan shall be advanced.

Code.  The Internal Revenue Code of 1986, as amended and in effect from time to time.

Commitment.  With respect to each Lender, the amount set forth from time to time on Schedule 1.1 hereto as the amount of such Lender’s commitment to make Loans to the Borrower.

Compliance Certificate.  A certificate in the form of Exhibit C hereto signed by a Responsible Officer setting forth in reasonable detail computations evidencing compliance with the covenants contained in §9.1 through §9.6, §8.3(d) and §8.7.

Controlled Unconsolidated Entity.  An Unconsolidated Entity to the extent that the Borrower has the authority to make management decisions on behalf of such Unconsolidated Entity, or when this term is used with respect to the negative covenants herein, an Unconsolidated Entity in which the Borrower has the right or ability to prevent such Unconsolidated Entity from taking the action which is prohibited by the applicable negative covenant.

Conversion Request.  A notice given by the Borrower to the Agent of its election to convert or continue a Loan in accordance with §2.4.

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Default.  See §12.1.

Distribution.  The declaration or payment of any dividend or distribution of cash or cash equivalents to the shareholders of the Borrower or the limited partners of any operating partnership in which the Borrower is a general partner.

Dollars or $.  Dollars in lawful currency of the United States of America.

Domestic Lending Office.  Initially, the office of each Lender designated as such in Schedule 1.1 hereto; thereafter, such other office of such Lender, if any, located within the United States that will be making or maintaining Prime Rate Loans.

EBITDA.  For any period of calculation and without duplication, net income (loss) of Borrower for such period (determined in accordance with Generally Accepted Accounting Principles, before allocations to minority interests and excluding all amounts attributable to the net income or net losses of Unconsolidated Entities) plus the sum of the following amounts (but only to the extent included in determining net income (loss) for such period):  (a) depreciation and amortization expense of Borrower for such period plus (b) Interest Expense for such period plus (c) income tax expense of Borrower in respect of such period plus (d) extraordinary losses of Borrower, losses from the sale of assets of Borrower and losses resulting from forgiveness of debt by Borrower, all for such period minus (e) extraordinary gains of Borrower and gains from the sale of assets of Borrower for such period plus (f) any cash dividends or distributions actually received (and not reinvested) by Borrower from its Unconsolidated Entities.

Effective Date.  The date upon which this Agreement shall become effective pursuant to §10.

Eligible Assignee.  Any of (a) a commercial bank organized under the laws of the United States, or any State thereof or the District of Columbia, and having total assets in excess of $1,000,000,000; (b) a savings and loan association or savings bank organized under the laws of the United States, or any State thereof or the District of Columbia, and having a net worth of at least $100,000,000, calculated in accordance with Generally Accepted Accounting Principles; (c) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development (the “OECD”), or a political subdivision of any such country, and having total assets in excess of $1,000,000,000, provided that such bank is acting through a branch or agency located in the country in which it is organized or another country which is also a member of the OECD; and (d) the central bank of any country which is a member of the OECD; (e) an insurance company and other institutional investor having a net worth of at least $100,000,000 that, in the reasonable judgment of the Agent, has substantial experience in real estate lending or investing in loans similar to the Loans; (f) an investment fund or similar entity having a net worth of at least $100,000,000 that is engaged in making, purchasing or holding bank loans or similar extensions of credit and that is managed by an investment advisor that, in the reasonable judgment of the Agent, has substantial experience in real estate lending or investing in loans similar to the Loans or (g) an Affiliated Lender, provided, however that neither the Borrower, any of the Related Companies or any of the Unconsolidated Entities nor any affiliate thereof shall be Eligible Assignees.

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Employee Benefit Plan.  Any employee benefit plan within the meaning of §3 (3) of ERISA maintained or contributed to by the Borrower or any ERISA Affiliate, other than a Multiemployer Plan.

Environmental Laws.  See §6.18(a).

ERISA.  The Employee Retirement Income Security Act of 1974, as amended and in effect from time to time.

ERISA Affiliate.  Any Person which is treated as a single employer with the Borrower under §414 of the Code.

ERISA Reportable Event.  A reportable event with respect to a Guaranteed Pension Plan within the meaning of §4043 of ERISA and the regulations promulgated thereunder as to which the requirement of notice has not been waived.

Eurocurrency Reserve Rate.  For any day with respect to a LIBOR Loan, the maximum rate (expressed as a decimal) at which any Lender subject thereto would be required to maintain reserves (a “Eurocurrency Reserve”) under Regulation D of the Board of Governors of the Federal Reserve System (or any successor or similar regulations relating to such reserve requirements) against “Eurocurrency Liabilities” (as that term is used in Regulation D), if such liabilities were outstanding. The Eurocurrency Reserve Rate shall be adjusted automatically on and as of the effective date of any change in the Eurocurrency Reserve Rate.

Event of Default.  See §12.1.

Facility Percentage.  With respect to each Lender, the percentage set forth from time to time on Schedule 1.1 hereto as such Lender’s percentage of the Total Commitment.

Fixed Charges.  With respect to any fiscal period of the Borrower, an amount equal to the sum of (i) Interest Expense, (ii) regularly scheduled installments of principal payable with respect to all Indebtedness of Borrower and the Related Companies, excluding any balloon payments due at the maturity of such Indebtedness, plus (iii) all dividend payments due to the holders of any preferred stock of the Borrower.

FNB.  See preamble.

Funds From Operations.  With respect to any fiscal period of the Borrower, an amount equal to net income (computed in accordance with Generally Accepted Accounting Principles) from the operation of Real Estate Assets, excluding gains (or losses) from debt restructuring and sales of property, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect funds from operations on the same basis.

Generally Accepted Accounting Principles.  Principles that are (a) consistent with the principles promulgated or adopted by the Financial Accounting Standards Board and its predecessors, as in effect from time to time and (b) consistently applied with past financial statements of the Borrower adopting the same principles; provided that a certified public

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accountant would, insofar as the use of such accounting principles is pertinent, be in a position to deliver an unqualified opinion (other than a qualification regarding changes in Generally Accepted Accounting Principles) as to financial statements in which such principles have been properly applied.

Gross Asset Value.  At any date, Borrower’s total assets, adjusted to add back the accumulated depreciation of its real estate assets, all as determined in accordance with Generally Accepted Accounting Principals as of such date, plus $4,507,557 (which amount represents the difference between the purchase price and historical net book value of Sheridan Plaza upon Borrower’s acquisition in 2001).

Guaranteed Pension Plan.  Any employee pension benefit plan within the meaning of §3(2) of ERISA maintained or contributed to by the Borrower or any ERISA Affiliate the benefits of which are guaranteed on termination in full or in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer Plan.

Hazardous Substances.  See §6.18(b).

Indebtedness.  All obligations, contingent and otherwise, that in accordance with Generally Accepted Accounting Principles should be classified upon the obligor’s balance sheet as liabilities, or to which reference should be made by footnotes thereto, including, without limitation, all of the following, whether or not so classified: (a) the Obligations, (b) all debt and similar monetary obligations, whether direct or indirect; (c) all liabilities secured by any mortgage, pledge, negative pledge, security interest, lien, negative lien, charge, or other encumbrance existing on property owned or acquired subject thereto, whether or not the liability secured thereby shall have been assumed; (d) all guarantees, endorsements and other contingent obligations whether direct or indirect in respect of indebtedness or obligations of others, including any liability as the general partner of a partnership, any obligation to supply funds to or in any manner to invest in, directly or indirectly, the debtor, to purchase indebtedness, or to assure the owner of indebtedness against loss, through an agreement to purchase goods, supplies, or services for the purpose of enabling the debtor to make payment of the indebtedness held by such owner or otherwise, and the obligations to reimburse the issuer in respect of any letters of credit; and (e) such obligor’s liabilities, contingent or otherwise of the type set forth in (a) through (d) above, under any joint venture, limited liability company or partnership agreement.

Intangible Assets.  Collectively, (i) the amount (to the extent reflected in determining Borrower’s total assets) of all write-ups (other than write-ups resulting from foreign currency translations and write-ups of assets of a going concern business made within 12 months after the acquisition of such business) in the book value of any asset (other than real property assets) owned by Borrower, and (ii) goodwill, patents, trademarks, service marks, trade names, anticipated future benefit of tax loss carry forwards, copyrights, organization or developmental expenses, deferred financing costs, and other intangible assets.

Interest Expense.  With respect to any fiscal period of the Borrower, an amount equal to the sum of the following with respect to all Indebtedness of the Borrower and the Related Companies: (i) total interest expense, accrued in accordance with Generally Accepted

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Accounting Principles plus (ii) all capitalized interest determined in accordance with Generally Accepted Accounting Principles.

Interest Payment Date.  As to any Prime Rate Loan or LIBOR Loan, the first day of each calendar month.

Interest Period.  With respect to each Loan, (a) initially, the period commencing on the Borrowing Date of such Loan and ending on the last day of one of the periods set forth below, as selected by the Borrower in a Loan Request or Conversion Request, as applicable, (i) for any Prime Rate Loan, the day on which such Prime Rate Loan is paid in full or converted to a LIBOR Loan; and (ii) for any LIBOR Loan, 1, 2 or 3 months; and (b) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Loan and ending on the last day of one of the periods set forth above, as selected by the Borrower in a Conversion Request; provided that all of the foregoing provisions relating to Interest Periods are subject to the following:

(A)if any Interest Period with respect to a LIBOR Loan would otherwise end on a day that is not a LIBOR Business Day, that Interest Period shall be extended to the next succeeding LIBOR Business Day unless the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the immediately preceding LIBOR Business Day;

(B)if any Interest Period with respect to a Prime Rate Loan would end on a day that is not a Business Day, that Interest Period shall end on the next succeeding Business Day;

(C)if the Borrower shall fail to give notice as provided in §2.4, the Borrower shall be deemed to have requested a conversion of the affected LIBOR Loan to a Prime Rate Loan on the last day of the then current Interest Period with respect thereto;

(D)any Interest Period relating to any LIBOR Loan that begins on the last LIBOR Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last LIBOR Business Day of a calendar month; and

(E)any Interest Period relating to any LIBOR Loan that would otherwise extend beyond the Maturity Date shall end on the Maturity Date.

Investments. All expenditures made and all liabilities incurred (contingently or otherwise) for the acquisition of stock, partnership or membership interests or Indebtedness of, or for loans, advances, capital contributions or transfers of property to, or in respect of any guaranties (or other commitments as described under Indebtedness), or obligations of, any Person. In determining the aggregate amount of Investments outstanding at any particular time: (a) the amount of any Investment represented by a guaranty shall be taken at not less than the principal amount of the obligations guaranteed and still outstanding; (b) there shall be included as an Investment all interest accrued with respect to Indebtedness constituting an Investment unless and until such interest is paid; (c) there shall be deducted in respect of each such Investment any amount received as a return of capital (but only by repurchase, redemption, retirement, repayment, liquidating dividend or liquidating distribution); (d) there shall not be

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deducted in respect of any Investment any amounts received as earnings on such Investment, whether as dividends, interest or otherwise, except that accrued interest included as provided in the foregoing clause (b) may be deducted when paid; and (e) there shall not be deducted from the aggregate amount of Investments any decrease in the value thereof.

Lenders.  FNB and the other lending institutions listed from time to time on Schedule 1 hereto and any other Person who becomes an assignee of any rights of a Lender pursuant to §18 or a Person who acquires all or substantially all of the stock or assets of a Lender.

LIBOR.  As applicable to any LIBOR Loan, the rate per annum as determined on the basis of the offered rates for deposits in U.S. Dollars, for a period of time comparable to the Interest Period applicable to such LIBOR Loan which appears on the Telerate page 3750 as of 11:00 a.m. London time on the day that is two LIBOR Business Days preceding the first day of such LIBOR Loan; provided, however, if the rate described above does not appear on the Telerate System on any applicable interest determination date, the LIBOR rate shall be the rate (rounded upward, if necessary, to the nearest one hundred-thousandth of a percentage point), determined on the basis of the offered rates for deposits in U.S. dollars for a period of time comparable to the Interest Period applicable to such LIBOR Loan which are offered by four major banks in the London interbank market at approximately 11:00 a.m. London time, on the day that is two (2) LIBOR Business Days preceding the first day of such LIBOR Loan as selected by the Agent.  The principal London office of each of the four major London banks will be requested to provide a quotation of its U.S. Dollar deposit offered rate.  If at least two such quotations are provided, the rate for that date will be the arithmetic mean of the quotations.  If fewer than two quotations are provided as requested, the rate for that date will be determined on the basis of the rates quoted for loans in U.S. dollars to leading European banks for a period of time comparable to the Interest Period applicable to such LIBOR Loan offered by major banks in New York City at approximately 11:00 a.m. New York City time, on the day that is two Business Days preceding the first day of such Interest Period applicable to such LIBOR Loan.  In the event that the Agent is unable to obtain any such quotation as provided above, it will be deemed that LIBOR pursuant to a LIBOR Loan cannot be determined and §4.10 shall be applicable.  In the event that the Board of Governors of the Federal Reserve System shall impose a Eurocurrency Reserve with respect to LIBOR deposits of Agent, then for any period during which such Eurocurrency Reserve shall apply, LIBOR shall be equal to the amount determined above divided by an amount equal to 1 minus the Eurocurrency Reserve Rate.

LIBOR Business Day.  Any day on which commercial banks are open for international business (including dealings in Dollar deposits) in London, England.

LIBOR Lending Office.  Initially, the office of each Lender designated as such in Schedule 1.1 hereto; thereafter, such other office of such Lender, if any, that shall be making or maintaining LIBOR Loans.

LIBOR Loans.  Loans bearing interest calculated by reference to LIBOR.

LIBOR Prepayment Fee.  See §3.3(a).

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Loan Documents.  This Agreement, the Notes, and any and all other agreements, documents and instruments now or hereafter evidencing, securing or otherwise relating to the Loans.

Loan Request.  See §2.5.

Loans.  The Loans made or to be made by the Lenders to the Borrower pursuant to §2.

Majority Lenders.  As of any date, the Lenders whose aggregate Facility Percentages constitute at least fifty-one percent (51%).

Material Adverse Effect.  A material adverse effect on (i) any of the Real Estate, (ii) the business, results of operations or financial condition of the Borrower and the Related Companies taken as a whole, (iii) the ability of the Borrower to perform its obligations under the Loan Documents, or (iv) the validity or enforceability of any of the Loan Documents or the remedies or material rights of the Agent or the Lenders thereunder.

Maturity Date.  The earlier of (i) November 12, 2005 or (ii) such date as the Secured Revolving Credit Agreement may be terminated and the loans thereunder prepaid, or such earlier date on which the Loans shall become due and payable pursuant to the terms hereof.

Multiemployer Plan.  Any multiemployer plan within the meaning of §3(37) of ERISA maintained or contributed to by the Borrower or any ERISA Affiliate.

Net Offering Proceeds.  All cash proceeds received after the Closing Date by the Borrower, as a result of the sale of common, preferred or other classes of stock of the Borrower less customary costs and discounts of issuance paid by Borrower in connection therewith.

Net OP Proceeds.  All cash proceeds received and the fair market value of all property contributed, after the Closing Date, as a result of the issuance of any limited partnership interests, limited liability company interests or other equity interests in any entity that is a Related Company (such entities being sometimes called “operating partnerships”) less customary costs and discounts of issuance paid by such operating partnership or Borrower in connection therewith.

Net Operating Income.  With respect to any fiscal period of the Borrower and with respect to any one or more of the Real Estate Assets, the total rental and other income from the operation of such Real Estate Assets, after deducting all expenses and other proper charges incurred by the Borrower in connection with the operation of such Real Estate Assets during such fiscal period, including, without limitation, real estate taxes and bad debt expenses, but before payment or provision for debt service charges, income taxes, and depreciation, amortization, and other non-cash expenses, all as determined in accordance with Generally Accepted Accounting Principles except that there shall be no rent leveling adjustments made when computing Net Operating Income.

Notes.  See §2.2.

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Obligations.  All indebtedness, obligations and liabilities of the Borrower to any of the Lenders and the Agent, individually or collectively, under this Agreement or any of the other Loan Documents or in respect of any of the Loans or the Notes or other instruments at any time evidencing any thereof, whether existing on the date of this Agreement or arising or incurred hereafter, direct or indirect, joint or several, absolute or contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured, arising by contract, operation of law of otherwise.

Outstanding.  With respect to the Loans, the aggregate unpaid principal thereof as of any date of determination.

Outstanding Obligations.  As of any date of determination, the sum of the outstanding principal amount of the Loans.

PBGC.  The Pension Benefit Guaranty Corporation created by §4002 of ERISA and any successor entity or entities having similar responsibilities.

Permitted Liens.  Liens, security interests and other encumbrances permitted by §8.2.

Person.  Any individual, corporation, partnership, trust, unincorporated association, business, or other legal entity, and any government or any governmental agency or political subdivision thereof.

Prepayment Date.  See §3.3.

Prime Rate.  The variable per annum rate of interest designated from time to time by FNB as its Prime Rate. The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate being charged to any customer.  Changes in the rate of interest resulting from changes in the Prime Rate shall take place immediately without notice or demand of any kind.

Prime Rate Loans.  Those Loans bearing interest calculated by reference to the Prime Rate.

Properties.  All Real Estate Assets, Real Estate, and all other assets, including, without limitation, intangibles and personalty owned by the Borrower.

Real Estate.  All real property at any time owned, leased (as lessee or sublessee) or operated by the Borrower, or any of the Related Companies or any Controlled Unconsolidated Entity.

Real Estate Assets.  Those fixed and tangible properties consisting of land, buildings and/or other improvements owned by the Borrower, by any of the Related Companies or by any Controlled Unconsolidated Entity at the relevant time of reference thereto, but excluding all leaseholds other than leaseholds under ground leases having an unexpired term of 30 years.

Record.  The grid attached to any Note, or the continuation of such grid, or any other similar record, including computer records, maintained by any Lender with respect to any Loan referred to in such Note.

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Related Companies.  The entities listed and described on Schedule 1.3 hereto, or thereafter, any entity whose financial statements are consolidated or combined with the Borrower’s pursuant to Generally Accepted Accounting Principles, or any ERISA Affiliate.

Release.  See §6.18(c)(iii).

Reserve Amount.  With respect to any Real Estate Assets or group of Real Estate Assets, a normalized annual reserve for capital expenditures, replacement reserves and leasing costs at the rate of $0.25 per year per square foot of net leasable area contained in all buildings on such Real Estate Assets.

Responsible Officer.  With respect to the Borrower, any one of its Chairman, President, Chief Executive Officer, Chief Financial Officer, or Executive Vice Presidents or Vice Presidents.

Secured Revolving Credit Agreement.  The Revolving Credit Agreement dated November 12, 2002 among the Borrower, FNB and other Lenders party thereto and FNB as Agent, as amended by a First Amendment dated February 6, 2003, and as further amended from time to time, pursuant to which FNB and other Lenders party thereto have provided Borrower with a revolving line of credit in the maximum principal amount of $42,000,000.

Subsidiary.  Any corporation, association, trust, or other business entity of which the designated parent or other controlling Person shall at any time own directly or indirectly through a Subsidiary or Subsidiaries at least a majority (by number of votes) of the outstanding Voting Interests.

Tangible Net Worth.  At any date, Borrower’s total assets, adjusted to add back the accumulated depreciation of its real estate assets, less its Intangible Assets, less its Total Liabilities, all as determined in accordance with Generally Accepted Accounting Principals as determined as of such date. 

Total Commitment.  The sum of the Commitments of the Lenders, as in effect from time to time.

Total Liabilities.  The sum, without duplication of (i) all consolidated liabilities of the Borrower determined in accordance with the accounting principles used in the preparation of the financial statements delivered pursuant to §7.4, including capital leases, accounts payable, accrued expenses, mortgage payables, notes payable, senior notes, convertible debentures, subordinated debentures, and secured or unsecured debt owed to banks or other financial institutions, (ii) all Indebtedness of the Borrower whether or not so classified, including, without limitation, all outstanding Loans under this Agreement, (iii) the balance available for drawing under letters of credit issued for the account of the Borrower and (iv) Borrower’s Unconsolidated Entity Percentage of the Indebtedness of all Unconsolidated Entities.

Type.  As to any Loan its nature as a Prime Rate Loan or a LIBOR Loan.

Unconsolidated Entity.  As of any date, any Person in whom the Borrower or any Related Company holds an Investment, and whose financial results would not be consolidated under

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Generally Accepted Accounting Principles with the financial statements of the Borrower, if such statements were prepared as of such date. Unconsolidated Entities existing on the date hereof are set forth in Schedule 1.3.

Unconsolidated Entity Percentage.  With respect to any Unconsolidated Entity, the percentage interest of the Borrower or any Related Company in such Unconsolidated Entity which shall be the greatest of the following: (a) the relative nominal direct and indirect ownership interest owned by Borrower or any Related Company (expressed as a percentage) in such Unconsolidated Entity, (b) the proportion (expressed as a percentage) of Borrower’s relative contingent liability for the Indebtedness of such Unconsolidated Entity to that entity’s total Indebtedness, or (c) the relative and indirect economic interest owned by Borrower or any Related Company (calculated as a percentage) in such Unconsolidated Entity determined in accordance with the applicable provisions of the declaration of trust, articles or certificate of incorporation, articles of organization, partnership agreement, limited liability operating agreement, joint venture agreement or other applicable organizational document of such Unconsolidated Entity.

Voting Interests.  Stock or similar ownership interests, of any class or classes (however designated), the holders of which are at the time entitled, as such holders, (a) to vote for the election of a majority of the directors (or persons performing similar functions) of the corporation, association, partnership, trust or other business entity involved, or (b) to control, manage or conduct the business of the corporation, partnership, association, trust or other business entity involved.

§1.2Rules of Interpretation.

(a)A reference to any document or agreement shall include such document or agreement as amended, modified or supplemented from time to time in accordance with its terms and the terms of this Agreement.

(b)The singular includes the plural and the plural includes the singular.

(c)A reference to any law includes any amendment or modification to such law.

(d)A reference to any Person includes its permitted successors and permitted assigns.

(e)Accounting terms not otherwise defined herein have the meanings assigned to them by Generally Accepted Accounting Principles applied on a consistent basis by the accounting entity to which they refer and, except as otherwise expressly stated, all use of accounting terms with respect to the Borrower shall reflect the consolidation of the financial statements of Borrower and the Related Companies.

(f)The words “include”, “includes” and “including” are not limiting.

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(g)All terms not specifically defined herein or by Generally Accepted Accounting Principles, which terms are defined in the Uniform Commercial Code as in effect in Massachusetts, have the meanings assigned to them therein.

(h)Reference to a particular “§” refers to that section of this Agreement unless otherwise indicated.

(i)The words “herein”, “hereof”, “hereunder” and words of like import shall refer to this Agreement as a whole and not to any particular section or subdivision of this Agreement.

(j)The words “so long as any Loan or Note is outstanding” shall mean so long as such Loan or Note is not indefeasibly paid in full in cash.

§2.REVOLVING LOAN FACILITY.

§2.1Commitment to Lend.  Subject to the provisions of §2.5 and the other terms and conditions set forth in this Agreement, each of the Lenders severally agrees to lend to the Borrower and the Borrower may borrow, repay, and reborrow from time to time between the Effective Date and the Maturity Date upon notice by the Borrower to the Agent given and approved by the Agent in accordance with §2.5, such sums as are requested by the Borrower up to a maximum aggregate principal amount of Outstanding Obligations (after giving effect to all amounts requested) at any one time equal to such Lender’s Commitment, provided that the sum of the Outstanding Obligations (after giving effect to all amounts requested) shall not at any time exceed the Total Commitment. The Loans shall be made pro rata in accordance with each Lender’s Facility Percentage and the Lenders shall at all times immediately adjust inter se any inconsistency between each Lender’s outstanding principal amount and each Lender’s Commitment.  Each request for a Loan hereunder shall constitute a representation and warranty by the Borrower that the conditions set forth in §10 or §11 (whichever is applicable) have been satisfied in all material respects on the date of such request and will be satisfied on the proposed Borrowing Date of the requested Loan, provided that the making of such representation and warranty by Borrower shall not limit the right of any Lender not to lend upon a determination by the Majority Lenders that such conditions have not been satisfied.

§2.2The Notes.  The Loans shall be evidenced by separate promissory notes of the Borrower in substantially the form of Exhibit A hereto (each a “Note”), and completed with appropriate insertions.  One or more Notes shall be payable to the order of each Lender in an aggregate principal amount equal to such Lender’s Commitment. The Borrower irrevocably authorizes each Lender to make or cause to be made, at or about the time of the Borrowing Date of any Loan or at the time of receipt of any payment of principal on such Lender’s Note, an appropriate notation on such Lender’s Record reflecting the making of such Loan or (as the case may be) the receipt of such payment. The outstanding amount of the Loans set forth on such Lender’s Record shall (absent manifest error) be prima facie evidence of the principal amount thereof owing and unpaid to such Lender, but the failure to record, or any error in so recording, any such amount on the Record shall not limit or otherwise affect the obligations of the Borrower hereunder or under any Note to make payments of principal of or interest on any Note when due. Upon receipt of an affidavit of an officer of any Lender as to the loss, theft, destruction or

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mutilation of its Note or any other security document which is not of public record, and, in the case of any such loss, theft, destruction or mutilation, upon cancellation of such Note or other security document, Borrower will issue, in lieu thereof, a replacement Note or other security document in the same principal amount thereof and otherwise of like tenor.

§2.3Interest on Loans.

(a)Each Prime Rate Loan shall bear interest for the period commencing with the Borrowing Date thereof and ending on the last day of the Interest Period with respect thereto at the rate equal to 2.5% per annum above the Prime Rate.

(b)Each LIBOR Loan shall bear interest for the period commencing with the Borrowing Date thereof and ending on the last day of the Interest Period with respect thereto at the rate equal to 4.0% per annum above LIBOR determined for such Interest Period.

(c)The Borrower unconditionally promises to pay interest on each Loan in arrears on each Interest Payment Date with respect thereto.

§2.4Conversion Options.

(a)The Borrower may elect from time to time to convert any outstanding Loan to a Loan of another Type, provided that (i) with respect to any such conversion of a LIBOR Loan to a Prime Rate Loan, the Borrower shall give the Agent at least three (3) Business Days, prior written notice of such election; (ii) with respect to any such conversion of a LIBOR Loan into a Prime Rate Loan, such conversion shall only be made on the last day of the Interest Period with respect thereto; (iii) subject to the further proviso at the end of this section and subject to §2.4(b) and §2.4(d) hereof with respect to any such conversion of a Prime Rate Loan to a LIBOR Loan, the Borrower shall give the Agent at least three (3) LIBOR Business Days, prior written notice of such election and (iv) no Loan may be converted into a LIBOR Loan when any Default or Event of Default has occurred and is continuing. On the date on which such conversion is being made, each Lender shall take such action as is necessary to transfer its Facility Percentage of such Loans to its Domestic Lending Office or its LIBOR Lending Office, as the case may be. All or any part of outstanding Loans of any Type may be converted as provided herein, provided further that each Conversion Request relating to the conversion of a Prime Rate Loan to a LIBOR Loan shall be for an amount equal to $5,000,000 or an integral multiple of $1,000,000 in excess thereof and shall be irrevocable by the Borrower.

(b)Any Loans of any Type may be continued as such upon the expiration of an Interest Period with respect thereto by compliance by the Borrower with the notice provisions contained in §2.4(a); provided that no LIBOR Loan may be continued as such when any Default or Event of Default has occurred and is continuing but shall be automatically converted to a Prime Rate Loan on the last day of the first Interest Period relating thereto ending during the continuance of any Default or Event of Default of which the officers of the Agent active upon the Borrower’s account have actual knowledge.

(c)In the event that the Borrower does not notify the Agent of its election hereunder with respect to any Loan, such Loan shall be automatically converted to a Prime Rate Loan at the end of the applicable Interest Period.

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(d)The Borrower may not elect to convert a Prime Rate Loan to a LIBOR Loan pursuant to §2.4(a) or elect to continue a LIBOR Loan pursuant to §2.4(b) if, after giving effect thereto, there would be greater than five (5) LIBOR Loans outstanding.  Any Loan Request for a LIBOR Loan that would create greater than five (5) LIBOR Loans outstanding shall be deemed to be a Conversion Request for a Prime Rate Loan.

§2.5Requests for Loans.  The Borrower shall give to the Agent written notice in the form of Exhibit B hereto of each Loan requested hereunder (a “Loan Request”) no less than (a) one (1) Business Day prior to the proposed Borrowing Date of any Prime Rate Loan and (b) three (3) LIBOR Business Days prior to the proposed Borrowing Date of any LIBOR Loan.  Each such notice shall specify (i) the principal amount of the Loan requested, (ii) the proposed Borrowing Date of such Loan, (iii) the Interest Period for such Loan, and (iv) the Type of such Loan, and shall be accompanied by a Compliance Certificate based on the most recent certificate deliver pursuant to §7.4(d) with updated calculations evidencing compliance with the covenants contained in §9.3 through §9.6 hereof after giving effect to such requested Loan.  Within one (1) Business Day after receipt of a Loan Request, the Agent shall provide to each of the Lenders by facsimile a copy of such Loan Request and accompanying Compliance Certificate and each Lender shall, within 24 hours thereafter, notify the Agent if it believes that any of the conditions contained in §11 of this Agreement has not been met or waived.  If such a notice is given the Majority Lenders shall promptly determine whether all of the conditions contained in §11 of this Agreement have been met or waived.  If no such notice is given by any Lender or if following such notice the Majority Lenders determine that the conditions contained in §11 have been met or waived, each of the Lenders shall be obligated to fund its Facility Percentage of the requested Loans.  Each such Loan Request shall be irrevocable and binding on the Borrower and the Borrower shall be obligated to accept the Loan requested from the Lenders on the proposed Borrowing Date.  Each Loan Request shall be in a minimum aggregate amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof.

§2.6Funds for Loans.

(a)Subject to §2.5 and the other provisions of this Agreement, not later than 11:00 a.m. (Boston time) on the proposed Borrowing Date of any Loans, each of the Lenders will make available to the Agent, at the Agent’s Head Office, in immediately available funds, the amount of such Lender’s Facility Percentage of the amount of the requested Loans.  Upon receipt from each Lender of such amount, and upon receipt of the documents required by §§10 or 11 (whichever is applicable) and the satisfaction of the other conditions set forth therein, to the extent applicable, the Agent will make available to the Borrower the aggregate amount of such Loans made available to the Agent by the Lenders.  The failure or refusal of any Lender to make available to the Agent at the aforesaid time and place on any Borrowing Date the amount of its Facility Percentage of the requested Loans shall not relieve any other Lender from its several obligation hereunder to make available to the Agent the amount of such other Lender’s Facility Percentage of any requested Loans but shall not obligate any other Lender or Agent to fund more than its Facility Percentage of the requested Loans or to increase its Facility Percentage.

(b)The Agent may, unless notified to the contrary by any Lender prior to a Borrowing Date, assume that such Lender has made available to the Agent on such Borrowing Date the amount of such Lender’s Facility Percentage of the Loans to be made on such

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Borrowing Date, and the Agent may (but it shall not be required to), in reliance upon such assumption, make available to the Borrower a corresponding amount.  If any Lender makes available to the Agent such amount on a date after such Borrowing Date, such Lender shall pay to the Agent on demand an amount equal to the product of (i) the average computed for the period referred to in clause (iii) below, of the weighted average interest rate paid by the Agent for federal funds acquired by the Agent during each day included in such period, times (ii) the amount of such Lender’s Facility Percentage of such Loans, time (iii) a fraction, the numerator of which is the number of days or portion thereof that elapsed from and including such Borrowing Date to the date on which the amount of such Lender’s Commitment Percentage of such Loans shall become immediately available to the Agent, and the denominator of which is 365.  A statement of the Agent submitted to such Lender with respect to any amounts owing under this paragraph shall be prima facie evidence of the amount due and owing to the Agent by such Lender.  If such Lender does not pay such corresponding amount upon the Agent’s demand therefor, the Agent will promptly notify the Borrower, and the Borrower shall promptly pay such corresponding amount to the Agent.  The Agent shall also be entitled to recover from the Borrower interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Agent to the Borrower to the date such corresponding amount is recovered by the Agent at a per annum rate equal to the applicable rate for such Loan.

§3.REPAYMENT OF THE LOANS.

§3.1Maturity.  The Borrower unconditionally promises to pay on the Maturity Date, and there shall become absolutely due and payable on the Maturity Date, all of the Loans outstanding on such date, together with any and all accrued and unpaid interest and charges thereon.

§3.2Mandatory Repayments of Loan.  If at any time the sum of the Outstanding Obligations exceeds the Total Commitment, then the Borrower shall immediately pay the amount of such excess to the Agent for the respective accounts of the Lenders for application to the Loans.  Borrower further covenants and agrees that, notwithstanding anything to the contrary contained herein (if anything), at least one (1) time during each calendar year during the term of this Agreement, Borrower shall repay all outstanding Loans (and accrued and unpaid interest thereon and other amounts payable hereunder (including all amount payable in connection with such prepayment)) such that there shall be a zero balance hereunder and Borrower shall maintain such zero balance for a period of not less than thirty (30) days from the date of such prepayment.

§3.3Optional Repayments of Loans.  The Borrower shall have the right, at its election, to repay the outstanding amount of the Loans, as a whole or in part, on any Business Day, without penalty or premium; provided that the full or partial prepayment of the outstanding amount of any LIBOR Loans made pursuant to this §3.3 may be made only on the last day of the Interest Period relating thereto, except as set forth below in this §3.3. The Borrower shall give the Agent no later than 10:00 a.m., Boston time, at least two (2) Business Days’ prior written notice of any prepayment pursuant to this §3.3 of any Prime Rate Loans and four (4) LIBOR Business Days, notice of any proposed repayment pursuant to this §3.3 of any LIBOR Loans, specifying the proposed date of payment of Loans and the principal amount to be paid.  The Agent shall promptly notify each Lender of the principal amount of such payment to be received

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by such Lender. Each such partial prepayment of the Loans shall be in an integral multiple of $1,000,000 and, to the extent requested by the Agent, shall be accompanied by the payment of all charges outstanding on all Loans and of accrued interest on the principal repaid to the date of payment. The principal payments so received shall be applied first to the principal of Prime Rate Loans and then to the principal of LIBOR Loans.  Notwithstanding anything contained herein to the contrary, the Borrower may make a full or partial prepayment of a LIBOR Loan on a date other than the last day of the Interest Period relating thereto, if all optional prepayments (in whole or in part) on such Loans shall be accompanied by, and the Borrower hereby promises to pay, a prepayment fee in an amount determined by the Agent in the following manner:

(a)LIBOR Prepayment Fee.  Borrower acknowledges that prepayment or acceleration of a LIBOR Loan during an Interest Period shall result in the Lenders incurring additional costs, expenses and/or liabilities and that it is extremely difficult and impractical to ascertain the extent of such costs, expenses and/or liabilities.  (For all purposes of this Section, any Loan not being made as a LIBOR Loan in accordance with the Loan Request or Conversion Request therefor, as a result of Borrower’s cancellation thereof, shall be treated as if such LIBOR Loan had been prepaid.)  Therefore, on the date a LIBOR Loan is prepaid or the date all sums payable hereunder become due and payable, by acceleration or otherwise (“Prepayment Date”), Borrower will pay to Agent, for the account of each Lender, (in addition to all other sums then owing), an amount (“LIBOR Prepayment Fee”) determined by the Agent as follows: The current rate for United States Treasury securities (bills on a discounted basis shall be converted to a bond equivalent) with a maturity date closest to the end of the Interest Period as to which prepayment is made, shall be subtracted from the interest rate applicable to the LIBOR Loan being prepaid.  If the result is zero or a negative number, there shall be no LIBOR Prepayment Fee.  If the result is a positive number, then the resulting percentage shall be multiplied by the amount of the prepayment of the LIBOR Loan.  The resulting amount shall be divided by 360 and multiplied by the number of days remaining in the Interest Period as to which the prepayment is being made. The resulting amount shall be the LIBOR Prepayment Fee.

(b)Upon the written notice to Borrower from Agent, Borrower shall immediately pay to Agent, for the account of the Lenders, the LIBOR Prepayment Fee.  Such written notice (which shall include calculations in reasonable detail) shall, in the absence of manifest error, be conclusive and binding on the parties hereto.

(c)Borrower understands, agrees and acknowledges the following:  (i) no Lender has any obligation to purchase, sell and/or match funds in connection with the use of the LIBOR Rate as a basis for calculating the rate of interest on a LIBOR Loan; (ii) the LIBOR Rate is used merely as a reference in determining such rate; and (iii) Borrower has accepted the LIBOR Rate as a reasonable and fair basis for calculating such rate and a LIBOR Prepayment Fee.  Borrower further agrees to pay the LIBOR Prepayment Fee, if any, whether or not a Lender elects to purchase, sell and/or match funds.

§4.CERTAIN GENERAL PROVISIONS.

§4.1Facility Fees.  On the Closing Date, and on other dates specified in the Agreement Regarding Fees, the Borrower shall pay to FNB the fees with respect to the Loan in the amounts

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specified in the Agreement Regarding Fees.  All such fees shall be fully earned when paid and nonrefundable under any circumstances.

§4.2Unused Fee.  The Borrower shall pay to the Agent for the accounts of the Lenders in accordance with their respective Facility Percentages an Unused Fee calculated at the rate of 0.75% per annum on the daily amount by which the Total Commitment exceeds the Outstanding Obligations for each calendar month.  The Unused Fee shall be payable monthly in arrears on or before the third Business Day of each calendar month for the immediately preceding calendar month commencing on the first such date following the date hereof, with a final payment on the Maturity Date or any earlier date on which the Commitments shall terminate.

§4.3Funds for Payments.

(a)All payments of principal, interest, closing fees, commitment fees and any other amounts due hereunder (other than as provided in §4.1, §4.5 and §4.6) or under any of the other Loan Documents, and all prepayments, shall be made to the Agent, for the respective accounts of the Lenders, at the Agent’s Head Office, in each case in Dollars in immediately available funds.

(b)All payments by the Borrower hereunder and under any of the other Loan Documents shall be made without setoff or counterclaim and free and clear of and without deduction for any taxes, levies, imposts, duties, charges, fees, deductions, withholdings, compulsory liens, restrictions or conditions of any nature now or hereafter imposed or levied by any jurisdiction or any political subdivision thereof or taxing or other authority therein unless the Borrower is compelled by law to make such deduction or withholding.  If any such obligation is imposed upon the Borrower with respect to any amount payable by it hereunder or under any of the other Loan Documents, the Borrower shall pay to the Agent, for the account of the Lenders or (as the case may be) the Agent, on the date on which such amount is due and payable hereunder or under such other Loan Document, such additional amount in Dollars as shall be necessary to enable the Lenders or the Agent to receive the same net amount which the Lenders or the Agent would have received on such due date had no such obligation been imposed upon the Borrower. The Borrower will deliver promptly to the Agent certificates or other valid vouchers for all taxes or other charges deducted from or paid with respect to payments made by the Borrower hereunder or under such other Loan Document.

§4.4Computations.  All computations of interest on the Loans and of other fees to the extent applicable shall be made on the basis of 360-day year and the actual number of days elapsed. Except as otherwise provided in the definition of the term “Interest Period” with respect to LIBOR Loans, whenever a payment hereunder or under any of the other Loan Documents becomes due on a day that is not a Business Day, the due date for such payment shall be extended to the next succeeding Business Day, and such extension of time shall be included in computing interest and fees in connection with such payment. The outstanding amount of the Loans as reflected on the Records from time to time shall (absent manifest error) be considered correct and binding on the Borrower unless within thirty (30) Business Days after receipt by the Agent or any of the Lenders from Borrower of any notice by the Borrower of such outstanding amount, the Agent or such Lender shall notify the Borrower to the contrary.

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§4.5Additional Costs, Etc.  If any present or future applicable law (which expression, as used herein, includes statutes, rules and regulations thereunder and interpretations thereof by any competent court or by any governmental or other regulatory body or official charged with the administration or the interpretation thereof and requests, directives, instructions and notices at any time or from time to time hereafter made upon or otherwise issued to any Lender or the Agent by any central bank or other fiscal, monetary or other authority, whether or not having the force of law), shall:

(a)subject any Lender or the Agent to any tax, levy, impost, duty, charge, fee, deduction or withholding of any nature with respect to this Agreement, the other Loan Documents, such Lender’s Commitment or the Loans (other than taxes based upon or measured by the income or profits of such Lender or the Agent), or

(b)materially change the basis of taxation (except for changes in taxes on income or profits) of payments to any Lender of the principal of or the interest on any Loans or any other amounts payable to any Lender under this Agreement or the other Loan Documents, or

(c)impose or increase or render applicable (other than to the extent specifically provided for elsewhere in this Agreement) any special deposit, reserve, assessment, liquidity, capital adequacy or other similar requirements (whether or not having the force of law) against assets held by, or deposits in or for the account of, or Loans by, or commitments of an office of any Lender, or

(d)impose on any Lender any other conditions or requirements with respect to this Agreement, the other Loan Documents, the Loans, the Commitment, or any class of Loans or commitments of which any of the Loans or the Commitment forms a part;

and the result of any of the foregoing is

(i)to increase the cost to such Lender of making, funding, issuing, renewing, extending or maintaining any of the Loans or such Lender’s Commitment, or

(ii)to reduce the amount of principal, interest or other amount payable to such Lender or the Agent hereunder on account of the Commitments or any of the Loans, or

(iii)to require such Lender or the Agent to make any payment or to forego any interest or other sum payable hereunder, the amount of which payment or foregone interest or other sum is calculated by reference to the gross amount of any sum receivable or deemed received by such Lender or the Agent from the Borrower hereunder,

then, and in each such case, the Borrower will, upon demand made by such Lender or (as the case may be) the Agent at any time and from time to time and as often as the occasion therefor may arise, pay to such Lender or the Agent, to the extent permitted by law, such additional amounts as will be sufficient to compensate such Lender or the Agent for such additional cost, reduction, payment or foregone interest or other sum.

§4.6Capital Adequacy.  If any present or future law, governmental rule, regulation, policy, guideline or directive (whether or not having the force of law) or the interpretation

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thereof by a court or governmental authority with appropriate jurisdiction affects the amount of capital required or expected to be maintained by banks or bank holding companies and any Lender or the Agent determines that the amount of capital required to be maintained by it is increased by or based upon the existence of the Loans made or deemed to be made pursuant hereto, then such Lender or the Agent may notify the Borrower of such fact, and the Borrower shall pay to such Lender or the Agent from time to time on demand, as an additional fee payable hereunder, such amount as such Lender or the Agent shall determine in good faith and certify in a notice to the Borrower to be an amount that will adequately compensate such Lender or the Agent in light of these circumstances for its increased costs of maintaining such capital. Each Lender and the Agent shall allocate such cost increases among its customers in good faith and on an equitable basis.

§4.7Certificate.  A certificate setting forth any additional amounts payable pursuant to §§4.5 or 4.6 and a brief explanation of such amounts which are due, submitted by any Lender or the Agent to the Borrower, shall be prima facie evidence that such amounts are due and owing.

§4.8Indemnity.  In addition to the other provisions of this Agreement regarding any such matters, the Borrower agrees to indemnify each Lender and to hold each Lender harmless from and against any loss, cost or reasonable expense (including loss of anticipated profits) that such Lender may sustain or incur as a consequence of (a) a default by the Borrower in payment of the principal amount of or any interest on any LIBOR Loans as and when due and payable, including any such loss or expense caused by Borrower’s breach or other default and arising from interest or fees payable by such Lender to lenders of funds obtained by it in order to maintain its LIBOR Loans, (b) a default by the Borrower in making a borrowing or conversion after the Borrower has given (or is deemed to have given) a Loan Request or a Conversion Request, (c) the making of any payment of a LIBOR Loan or the making of any conversion of a LIBOR Loan to a Prime Rate Loan on a day that is not the last day of the applicable Interest Period with respect thereto, including interest or fees payable by such Lender to lenders of funds obtained by it in order to maintain any such LIBOR Loan and (d) any failure by the Borrower to prepay a LIBOR Loan on the date specified in a prepayment notice given by the Borrower.

§4.9Default Interest and Late Charges.  During any period when an Event of Default has occurred and is continuing, or after the Maturity Date or after judgment has been rendered on any Note, Borrower’s right to select LIBOR Loans shall cease and the unpaid principal of all Loans shall, at the option of each Lender bear interest at a rate which is four (4) percentage points per annum greater than that which would otherwise be applicable to Prime Rate Loans. If the entire amount of any required principal and/or interest is not paid in full within ten (10) days after the same is due, Borrower shall pay to the Agent a late fee equal to five percent (5%) of the required payment.

§4.10Inability to Determine LIBOR Rate.  In the event, prior to the commencement of any Interest Period relating to any LIBOR Loan, the Agent shall reasonably determine that adequate and reasonable methods do not exist for ascertaining the LIBOR Rate that would otherwise determine the rate of interest to be applicable to any LIBOR Loan during any Interest Period, the Agent shall forthwith give notice of such determination (which shall be conclusive and binding on the Borrower) to the Borrower. In such event (a) any Loan Request or Conversion Request with respect to LIBOR Loans shall be automatically withdrawn and shall be

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deemed a request for Prime Rate Loans, (b) each LIBOR Loan will automatically, on the last day of the then current Interest Period thereof, become a Prime Rate Loan, and (c) the obligations of the Lenders to make LIBOR Loans shall be suspended until the Agent reasonably determines that the circumstances giving rise to such suspension no longer exist, whereupon the Agent shall so notify the Borrower.

§4.11Illegality.  Notwithstanding any other provisions herein, if any present or future law, regulation, treaty or directive or in the interpretation or application thereof shall make it unlawful for any Lender to make or maintain LIBOR Loans, such Lender shall forthwith give notice of such circumstances to the Borrower and thereupon (a) the Commitment of such Lender to make LIBOR Loans or convert Loans of another Type to LIBOR Loans shall forthwith be suspended and (b) the LIBOR Loans then outstanding shall be converted automatically to Prime Rate Loans on the last day of each Interest Period applicable to such LIBOR Loans or within such earlier period as may be required by law. The Borrower hereby agrees promptly to pay to the Agent for the account of such Lender, upon demand, any additional amounts necessary to compensate such Lender for any costs incurred by such Lender in making any conversion in accordance with this §4.11, including any interest or fees payable by such Lender to lenders of funds obtained by it in order to make or maintain its LIBOR Loans hereunder. If, at any time, the rate of interest, together with all amounts which constitute interest and which are reserved, charged or taken by the Lenders as compensation for fees, services or expenses incidental to the making, negotiating or collection of the Loans or the other Obligations, shall be deemed by any competent court of law, governmental agency or tribunal to exceed the maximum rate of interest permitted to be charged by any Lender to Borrower under applicable law, then, during such time as such rate of interest would be deemed excessive, that portion of each sum paid attributable to that portion of such interest rate that exceeds the maximum rate of interest so permitted shall be deemed a voluntary prepayment of principal without penalty (including, without limitation, prepayment fees required pursuant to §3.3(a) hereof).  As used herein, the term “applicable law” shall mean the law in effect as of the date hereof, provided, however, that in the event there is a change in the law which results in a higher permissible rate of interest, then this Agreement and the Notes shall be governed by such new law as of its effective date.

§4.12Replacement of Lenders.  If any of the Lenders shall make a notice or demand upon the Borrower pursuant to §4.5, §4.6, or §4.11 based on circumstances or laws which are not generally applicable to the Lenders organized under the laws of the United States or any State thereof, the Borrower shall have the right to replace such Lender with an Eligible Assignee selected by the Borrower and approved by the Agent.  In such event the assignment shall take place on a date set by the Agent at which time the assigning Lender and the Eligible Assignee shall enter into an Assignment and Acceptance as contemplated by §18.1 (and clause (d) thereof shall not be applicable) and the assigning Lender shall receive from the Eligible Assignee a sum equal to the outstanding principal amount of the Loans owed to the assigning Lender together with accrued interest thereon plus all other amounts then due to the assigning Lender hereunder.

§4.13Limitation on Interest.  Notwithstanding anything in this Agreement to the contrary, all agreements between the Borrower and the Lenders and the Agent, whether now existing or hereafter arising and whether written or oral, are hereby limited so that in no contingency, whether by reason of acceleration of the maturity of any of the Obligations or otherwise, shall the interest contracted for, charged or received by the Lenders exceed the

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maximum amount permissible under applicable law.  If, from any circumstance whatsoever, interest would otherwise by payable to the Lenders in excess of the maximum lawful amount, the interest payable to the Lenders shall be reduced to the maximum amount permitted under applicable law; and if from any circumstance the Lenders shall ever receive anything of value deemed interest by applicable law in excess of the maximum lawful amount, an amount equal to any excessive interest shall be applied to the reduction of the principal balance of the Obligations and to the payment of interest or, if such excessive interest exceeds the unpaid balance of principal of the Obligations, such excess shall be refunded to the Borrower.  All interest paid or agreed to be paid to the Lenders shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full period until payment in full of the principal of the Obligations (including the period of any renewal or extension thereof) so that the interest thereon for such full period shall not exceed the maximum amount permitted by applicable law.  This section shall control all agreements between the Borrower and the Lenders and the Agent.

§5.NO LIMITATION ON RECOURSE.

§5.1[Intentionally Omitted.]

§5.2No Limitation on Recourse.  The Obligations are full recourse obligations of the Borrower and all of its Real Estate Assets and other properties and assets shall be available for the indefeasible payment in full in cash and performance of the Obligations.

§6.REPRESENTATIONS AND WARRANTIES.  The Borrower represents and warrants to the Agent and each of the Lenders as of the Closing Date and as of the date of each Loan hereunder as follows.

§6.1Authority; Etc.

(a)Organization; Good Standing.  The Borrower (i) is a Maryland corporation duly organized, validly existing and in good standing under the laws of the State of Maryland, (ii) has all requisite power to own its properties and conduct its business as now conducted and as presently contemplated, and (iii) to the extent required by law is in good standing as a foreign entity and is duly authorized to do business in the State of Colorado and in each other jurisdiction where such qualification is necessary except where a failure to be so qualified in such other jurisdiction would not have a Material Adverse Effect. Each Related Company is a corporation, partnership or limited liability company duly organized, validly existing and in good standing under the laws of the State of its formation, has all requisite power to own its properties and conduct its business as presently contemplated and is duly authorized to do business in the State in which the property owned by it is located and in each other jurisdiction where such qualification is necessary.

(b)Authorization.  The execution, delivery and performance of this Agreement and the other Loan Documents to which the Borrower is to become a party and the transactions contemplated hereby and thereby (i) are within the authority of the Borrower, (ii) have been duly authorized by all necessary proceedings on the part of the Borrower, (iii) do not conflict with or result in any breach or contravention of any provision of law, statute, rule or regulation to which the Borrower is subject or any judgment, order, writ, injunction, license or

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permit applicable to the Borrower and (iv) do not conflict with any provision of its charter documents or bylaws of, or any agreement or other instrument binding upon, the Borrower or to which any of its properties are subject.

(c)Enforceability.  Assuming due authorization, execution and delivery by all other parties thereto, the execution and delivery of this Agreement and the other Loan Documents to which the Borrower is or is to become a party will result in valid and legally binding obligations of the Borrower enforceable against it in accordance with the respective terms and provisions hereof and thereof, except as enforceability is limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting generally the enforcement of creditors’ rights and except to the extent that availability of the remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding therefor may be brought.

§6.2Governmental Approvals.  The execution, delivery and performance by the Borrower of this Agreement and the other Loan Documents to which the Borrower is or is to become a party and the transactions contemplated hereby and thereby do not require the approval or consent of, or filing with, any governmental agency or authority other than those already obtained.

§6.3Title to Properties; Leases.

(a)Each Related Company holds good and clear record and marketable (or indefeasible, with respect to Real Estate located in Texas) fee simple or leasehold title, as applicable, to the Real Estate, subject to no rights of others, including any mortgages, conditional sales agreements, title retention agreements, liens or encumbrances except for the Permitted Liens.

(b)Except as indicated on Schedule 6.3 hereto, the Borrower owns all of the properties reflected in the balance sheet of the Borrower as of the Balance Sheet Date or acquired since that date (except properties sold or otherwise disposed of in the ordinary course of business since that date), subject to no rights of others, including any mortgages, leases, conditional sales agreements, title retention agreements, liens or other encumbrances except Permitted Liens.

§6.4Financial Statements.  The following financial statements have been furnished to each of the Lenders.

(a)A balance sheet of the Borrower as of the Balance Sheet Date, and a statement of income, statement of changes in shareholders’ equity and statement of cash flows for the fiscal year then ended, accompanied by an auditor’s report prepared without qualification. Such balance sheet and statements of income, of changes in shareholders’ equity and of cash flows have been prepared in accordance with Generally Accepted Accounting Principles and fairly present the financial condition of the Borrower in all material respects as of the close of business on the date thereof and the results of operations, changes in shareholders’ equity and cash flows for the fiscal year then ended. There are no contingent liabilities of the Borrower as of such date involving material amounts, known to the officers of the Borrower not disclosed in said balance sheet and the related notes thereto.

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(b)A balance sheet and a statement of income, statement of changes in shareholders, equity and statement of cash flows of the Borrower for each of the fiscal quarters of the Borrower ended since the Balance Sheet Date certified by Borrower’s chief financial officer to have been prepared in accordance with Generally Accepted Accounting Principles consistent with those used in the preparation of the annual audited statements delivered pursuant to paragraph (a) above and to fairly present the financial condition of the Borrower in all material respects as of the close of business on the dates thereof and the results of operations, of changes in shareholders’ equity and of cash flows for the fiscal quarters then ended (subject to year-end adjustments). There are no contingent liabilities of the Borrower as of such dates involving material amounts, known to the officers of the Borrower, not disclosed in such balance sheets and the related notes thereto.

§6.5No Material Changes.  Since the Balance Sheet Date, there has occurred no material adverse change in the financial condition or assets or business of the Borrower as shown on or reflected in the balance sheet of the Borrower as of the Balance Sheet Date, or the statement of income for the fiscal year then ended, other than changes in the ordinary course of business that have not had a Material Adverse Effect.

§6.6Franchises, Patents, Copyrights, Etc.  The Borrower possesses (either directly or through the Related Companies) all franchises, patents, copyrights, trademarks, trade names, licenses and permits, and rights in respect of the foregoing, adequate for the conduct of its business substantially as now conducted without known conflict with any rights of others, including all Permits.

§6.7Litigation.  Except as listed and described on Schedule 6.7 hereto, there are no actions, suits, proceedings or investigations of any kind pending or, to Borrower’s knowledge, threatened against the Borrower or any of the Related Companies before any court, tribunal or administrative agency or board that, if adversely determined, might, either in any case or in the aggregate, have a Material Adverse Effect or materially impair the right of the Borrower or any of the Related Companies to carry on business substantially as now conducted by it, or result in any material liability not adequately covered by insurance, or for which adequate reserves are not maintained on the balance sheet of the Borrower.

§6.8No Materially Adverse Contracts, Etc.  The Borrower is not subject to any charter, trust or other legal restriction, or any judgment, decree, order, rule or regulation that has or is expected in the future to have a Material Adverse Effect. The Borrower is not a party to any contract or agreement that has or is expected, in the judgment of the Borrower’s officers, to have a Material Adverse Effect. None of the Related Companies is subject to any charter, trust or other legal restriction, or any judgment, decree, order, rule or regulation that has or is expected in the future, in the judgment of the Borrower’s officers, to have a Material Adverse Effect. None of the Related Companies is a party to any contract or agreement that has or is expected, in the judgment of the Borrower’s officers, to have any Material Adverse Effect.

§6.9Compliance With Other Instruments, Laws, Etc.  Neither the Borrower nor any Related Company is in violation of any provision of its charter documents, by-laws, or any agreement or instrument to which it may be subject or by which it or any of its properties may be

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bound or any decree, order, judgment, statute, license, rule or regulation, in any of the foregoing cases in a manner that could have a Material Adverse Effect.

§6.10Tax Status.  The Borrower (a) has made or filed all federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject, (b) has paid all taxes and other governmental assessments and charges shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and by appropriate proceedings, and (c) has set aside on its books reserves reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply.  There are no delinquent taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Borrower know of no basis for any such claim.

§6.11Event of Default.  No Default or Event of Default has occurred and is continuing.

§6.12Investment Company Act.  Neither the Borrower nor any Related Company is an “investment company”, or an “affiliated company” or a “principal underwriter” of an “investment company”, as such terms are defined in the Investment Company Act of 1940.

§6.13Absence of Financing Statements, Etc.  There is no financing statement, security agreement, chattel mortgage, real estate mortgage, equipment lease, financing lease, option, encumbrance or other document existing, filed or recorded with any filing records, registry, or other public office, that purports to cover, affect or give notice of any present or possible future lien or encumbrance on, or security interest in, any property of the Borrower, except Permitted Liens.

§6.14[Intentionally Omitted.]

§6.15Certain Transactions.  Except as set forth on Schedule 6.15 hereto, none of the officers or employees of the Borrower is presently a party to any transaction with the Borrower or any Related Company (other than for services as employees, officers and trustees), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, trustee or such employee or, to the knowledge of the Borrower, any corporation, partnership, trust or other entity in which any officer, trustee or any such employee or natural Person related to such officer, trustee or employee or other Person in which such officer, trustee or employee has a direct or indirect beneficial interest has a substantial interest or is an officer or trustee.

§6.16Benefit Plans; Multiemployer Plans; Guaranteed Pension Plans.  As of the date hereof as to any Multiemployer Plan or Guaranteed Pension Plan, neither the Borrower nor any ERISA Affiliate maintains or contributes to any Multiemployer Plan or Guaranteed Pension Plan. To the extent that Borrower or any ERISA Affiliate hereafter maintains or contributes to any Employee Benefit Plan or Guaranteed Pension Plan, it shall at all times do so in compliance with §7.20 hereof.

§6.17Regulations U and X.  No portion of any Loan shall be used, in whole or in part, for the purpose of purchasing or carrying any “margin security” or “margin stock” as such terms

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are used in Regulations U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224.

§6.18Environmental Compliance.  To the best of Borrower’s knowledge, Borrower makes the following representations and warranties:

(a)Except as may be set forth on Schedule 6.18 attached hereto, none of the Borrower, any of the Related Companies or any operator of the Real Estate or any portion thereof, or any operations thereon is in violation, or alleged material violation, of any judgment, decree, order, law, license, rule or regulation pertaining to environmental matters (hereinafter collectively referred to as the “Environmental Laws”), including without limitation, those arising under the Resource Conservation and Recovery Act (“RCRA”), the Comprehensive Environmental Response, Compensation and Liability Act of 1980 as amended (“CERCLA”), the Superfund Amendments and Reauthorization Act of 1986 (“SARA”), the Federal Clean Water Act, the Federal Clean Air Act, the Toxic Substances Control Act, or any state or local statute, regulation, ordinance, order or decree relating to health, safety or the environment, including, without limitation, the environmental statutes, regulations, orders and decrees of the States in which any of the Real Estate may be located, which violation involves the Real Estate or would have a Material Adverse Effect.

(b)Except as set forth on Schedule 6.18 attached hereto, none of the Borrower or the Related Companies has received written notice from any third party including, without limitation any federal, state or local governmental authority, (i) that it has been identified by the United States Environmental Protection Agency (“EPA”) as a potentially responsible party under CERCLA with respect to a site listed on the National Priorities List, 40 C.F.R. Part 300 Appendix B (1986) ; (ii) that any hazardous waste, as defined by 42 U.S.C. §9601(5), any hazardous substances as defined by 42 U.S.C. §9601(14), any pollutant or contaminant as defined by 42 U.S.C. §9601(33) or any toxic substances, oil or hazardous materials or other chemicals or substances regulated by any Environmental Laws (“Hazardous Materials”) which it has generated, transported or disposed of have been found at any site at which a federal, state or local agency or other third party has conducted or has ordered that the Borrower or any of the Related Companies conduct a remedial investigation, removal or other response action pursuant to any Environmental Law; or (iii) that it is or shall be a named party to any claim, action, cause of action, complaint, or legal or administrative proceeding (in each case, contingent or otherwise) arising out of any third party’s incurrence of costs, expenses, losses or damages of any kind whatsoever in connection with the release of Hazardous Materials.

(c)Except as set forth on Schedule 6.18 attached hereto, (i) no portion of the Real Estate has been used for the handling, processing, storage or disposal of Hazardous Materials except in material compliance with applicable Environmental Laws; and except as set forth on Schedule 6.18, no underground tank or other underground storage receptacle for Hazardous Materials is located on any portion of the Real Estate; (ii) in the course of any activities conducted by the Borrower, any of the Related Companies or the operators of the Real Estate, no Hazardous Materials have been generated or are being used on the Real Estate except in material compliance with applicable Environmental Laws; (iii) there has been no present, or to the best of Borrower’s knowledge past, releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, disposing or dumping (a “Release”) or threatened

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Release of Hazardous Materials on, upon, into or from the Real Estate; (iv) to the best of Borrower’s knowledge, there have been no Releases on, upon, from or into any real property in the vicinity of any of the Real Estate which, through soil or groundwater contamination, may have come to be located on, and which would have a material adverse effect on the value of, such Real Estate; and (v) to the best of Borrower’s knowledge, any Hazardous Materials that have been generated on any of the Real Estate have been transported off-site only by carriers having an identification number issued by the EPA, treated or disposed of only by treatment or disposal facilities maintaining valid permits as required under applicable Environmental Laws, which transporters and facilities have been and are, to the best of the Borrower’s knowledge, operating in material compliance with such permits and applicable Environmental Laws. Notwithstanding that any representation contained herein may be limited to the knowledge of the Borrower, any such limitation shall not affect the covenants specified in §7.10 or elsewhere in this Agreement.

§6.19Subsidiaries and Affiliates.  The Borrower has no Subsidiaries except for the Related Companies listed on Schedule 1.3. The Borrower is not a partner in any partnership and is not a member of any limited liability company, other than the Unconsolidated Entities listed on Schedule 1.3.

§6.20Leases.  Upon request from Agent the Borrower will deliver to the Agent a rent roll for each parcel of Real Estate which shall accurately and completely sets forth all relevant information with respect to the leases, the rents payable by tenants, and a description of any tenant improvements or work to be done, furnished or paid for by the landlord, or credited or allowed to a tenant.

§6.21Loan Documents.  All of the representations and warranties of the Borrower made in the other Loan Documents or any document or instrument delivered or to be delivered to the Agent or the Lenders pursuant to or in connection with any of such Loan Documents are true and correct in all material respects.

§6.22Property.  All of the Borrower’s, the Related Companies’ and the Controlled Unconsolidated Entities’ properties are in good repair and condition, subject to ordinary wear and tear.  The Borrower has completed or caused to be completed an appropriate investigation of the environmental condition of each such property as of the later of the date of the Borrower’s, the Related Companies’ or the Controlled Unconsolidated Entities’ purchase thereof or the date upon which such property was last security for Indebtedness of such Person, including preparation of a “Phase I” report and, if appropriate, a “Phase II” report, in each case prepared by a recognized environmental engineer in accordance with customary standards which discloses that such property is not in violation of the representations and covenants set forth in this Agreement, unless such violation has been disclosed in writing to the Agent and remediation actions satisfactory to Agent are being taken.  There are no unpaid or outstanding real estate or other taxes or assessments on or against any property of the Borrower, the Related Companies or the Controlled Unconsolidated Entities which are payable by such Person (except only real estate or other taxes or assessments, that are not yet due and payable).  Except as set forth in Schedule 6.22 hereto, there are no pending eminent domain proceedings against any property of the Borrower, the Related Companies or the Controlled Unconsolidated Entities or any part thereof, and, to the knowledge of the Borrower, no such proceedings are presently threatened or

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contemplated by any taking authority which may individually or in the aggregate have any materially adverse effect on the business or financial condition of the Borrower.  To Borrower’s knowledge after due inquiry and investigation none of the property of Borrower, the Related Companies or the Controlled Unconsolidated Entities is now damaged or injured as a result of any fire, explosion, accident, flood or other casualty in any manner which individually or in the aggregate would have any materially adverse effect on the business or financial condition of the Borrower.

§7.AFFIRMATIVE COVENANTS OF THE BORROWER.  Borrower covenants and agrees as follows, so long as any Loan or Note is outstanding or the Lenders have any obligations to make Loans:

§7.1Punctual Payment.  The Borrower will unconditionally duly and punctually pay the principal and interest on the Loans and all other amounts provided for in the Note, this Agreement, and the other Loan Documents all in accordance with the terms of the Note, this Agreement and the other Loan Documents.

§7.2Maintenance of Office.  The Borrower will maintain its chief executive office at 1780 S. Bellaire Street, Suite 515, Denver, CO 80222 or at such other place in the United States of America as the Borrower shall designate upon written notice to the Agent to be delivered within fifteen (15) days of such change, where notices, presentations and demands to or upon the Borrower in respect of the Loan Documents may be given or made.

§7.3Records and Accounts.  The Borrower will (a) keep true and accurate (in all material respects) records and books of account in which full, true and correct entries (in all material respects) will be made in accordance with Generally Accepted Accounting Principles and (b) maintain adequate accounts and reserves for all taxes (including income taxes), depreciation and amortization of its properties, contingencies, and other reserves.

§7.4Financial Statements, Certificates and Information.  The Borrower will deliver to each of the Lenders:

(a)as soon as practicable, but in any event not later than ninety (90) days after the end of each fiscal year of the Borrower, the audited balance sheet of the Borrower at the end of such year, and the related audited statement of income, statement of changes in shareholders, equity and statement of cash flows for such year, each setting forth in comparative form the figures for the previous fiscal year and all such statements to be in reasonable detail, prepared in accordance with Generally Accepted Accounting Principles, and accompanied by an auditor’s report prepared without qualification by or by an independent certified public accountant reasonably acceptable to the Agent;

(b)as soon as practicable, but in any event not later than forty-five (45) days after the end of each of the first three (3) fiscal quarters of the Borrower, copies of the unaudited balance sheets of the Borrower as at the end of such quarter, and the related unaudited statement of income, statement of changes in shareholders’ equity and statement of cash flows for the portion of the Borrower’s fiscal year then elapsed, all in reasonable detail and prepared in accordance with Generally Accepted Accounting Principles, together with a certification by the

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principal financial or accounting officer of the Borrower that the information contained in such financial statements fairly presents the financial position of the Borrower on the date thereof (subject to year-end adjustments);

(c)as soon as practicable, but in any event no later than forty-five (45) days after the end of each fiscal quarter of the Borrower, the Borrower will provide the Agent with, for each parcel of Real Estate: (i) a rent roll dated as of the end of such fiscal quarter in form reasonably satisfactory to the Agent, (ii) a statement of the Net Operating Income for each parcel of Real Estate for such fiscal quarter and year to date and (iii) after the last quarter of each year, a detailed statement of all income and expenses for each parcel of Real Estate for such year;

(d)simultaneously with the delivery of the financial statements referred to in subsections (a) and (b) above, a Compliance Certificate;

(e)as soon as practicable, but in any event not later than ninety (90) days after the end of each fiscal year of the Borrower, copies of the Form 10-K statement filed with the Securities and Exchange Commission (“SEC”) for such fiscal year, and as soon as practicable, but in any event not later than forty-five (45) days after the end of each fiscal quarter, copies of the Form 10-Q statement filed with the SEC for such fiscal quarter, provided that in either case if the SEC has granted an extension for the filing of such statements, Borrower shall deliver such statements to the Agent simultaneously with the filing thereof with the SEC;

(f)promptly following the filing or mailing thereof, copies of all other material of a financial nature filed with the SEC, and each Lender will be included on Borrower’s mailing list so that it will receive copies of all press releases issued by the Borrower;

(g)as soon as practicable, but in any event not later than sixty (60) days prior to the beginning of each fiscal year of the Borrower a cash flow budget for the Borrower and a property budget for each parcel of Real Estate for such fiscal year; and

(h)from time to time such other financial data and information as the Agent may reasonably request;

§7.5Notices.

(a)Defaults.  The Borrower will promptly notify the Agent in writing of the occurrence of any Default or Event of Default. If any Person shall give any notice or take any other action in respect of a claimed default (whether or not constituting a Default or an Event of Default under this Agreement) under any note, evidence of Indebtedness, indenture or other obligation to which or with respect to which the Borrower or any of the Related Companies is a party or obligor, whether as principal or surety, and such default would permit the holder of such note or obligation or other evidence of Indebtedness to accelerate the maturity thereof, the Borrower shall forthwith give written notice thereof to the Agent and each of the Lenders, describing the notice or action and the nature of the claimed default.

(b)Environmental Events.  The Borrower will promptly notify the Agent in writing of any of the following events: (i) upon Borrower’s obtaining knowledge of any violation of any Environmental Law regarding any Real Estate or Borrower’s operations which violation

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could have a Material Adverse Effect; (ii) upon Borrower’s obtaining knowledge of any potential or known Release, or threat of Release, of any Hazardous Substance at, from, or into any Real Estate which it reports in writing or is reportable by it in writing to any governmental authority and which is material in amount or nature or which could materially affect the value of such Real Estate; (iii) upon Borrower’s receipt of any notice of violation of any Environmental Laws or of any Release or threatened Release of Hazardous Substances, including a notice or claim of liability or potential responsibility from any third party (including without limitation any federal, state or local governmental officials) and including notice of any formal inquiry, proceeding, demand, investigation or other action with regard to (A) Borrower’s or any Person’s operation of any Real Estate to the extent it may result in a Material Adverse Effect, (3) contamination on, from or into any Real Estate to the extent it may result in a Material Adverse Effect, or (C) investigation or remediation of off-site locations at which Borrower or any of its predecessors are alleged to have directly or indirectly disposed of Hazardous Substances; or (iv) upon Borrower’s obtaining knowledge that any expense or loss has been incurred by such governmental authority in connection with the assessment, containment, removal or remediation of any Hazardous Substances with respect to which Borrower or any of the Related Companies may be liable or for which a lien may be imposed on any Real Estate to the extent such liability may result in a Material Adverse Effect.

(c)Notification of Claims.  The Borrower will, immediately upon becoming aware thereof, notify the Agent in writing of any setoff, claims (including, with respect to any of the Real Estate, environmental claims), withholdings or other defenses which could have a Material Adverse Effect.

(d)Notice of Litigation and Judgments.  The Borrower will give notice to the Agent in writing within fifteen (15) days of becoming aware of any litigation or proceedings threatened in writing or any pending litigation and proceedings affecting any of the Real Estate or affecting the Borrower or any of the Related Companies or to which the Borrower or any of the Related Companies is or is to become a party involving an uninsured claim (or as to which the insurer reserves rights) against the Borrower or any of the Related Companies that at the time of giving of notice could reasonably be expected to have a Materially Adverse Effect, and stating the nature and status of such litigation or proceedings. The Borrower will give notice to the Agent, in writing, in form and detail reasonably satisfactory to the Agent, within ten (10) days of any judgment not covered by insurance, final or otherwise, against the Borrower or any Related Company in an amount in excess of $50,000.

§7.6Existence; Maintenance of REIT Status; Maintenance of Properties.  The Borrower will do or cause to be done all things necessary to preserve and keep in full force and effect its existence as a Maryland corporation and its status as a self administered real estate investment trust under the Code. The Borrower will do or cause to be done all things necessary to preserve and keep in full force and effect the existence of each Related Company.  Borrower will comply in all material respects with all applicable rules and regulations of the SEC relating to its publicly held stock. Borrower will continue to have its stock listed on one of the major stock exchanges in the United States, and will comply in all material respects with all applicable rules of the stock exchange where the stock is so listed. The Borrower will do or cause to be done all things necessary to preserve and keep in full force all of its rights and franchises which in the judgment of the Borrower may be necessary to properly and advantageously conduct the

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businesses being conducted by it, or by any of the Related Companies. The Borrower will continue to engage primarily in the businesses now conducted by it and in related businesses.

§7.7Insurance.  With respect to the properties and businesses of Borrower and the Related Companies, the Borrower will maintain or cause to be maintained insurance with financially sound and reputable insurers against such casualties and contingencies as shall be in accordance with the general practices of businesses engaged in similar activities in similar geographic areas and in amounts, containing such terms, in such forms and for such periods as may be reasonable and prudent.

§7.8Taxes.  The Borrower will pay real estate taxes, other taxes, assessments and other governmental charges against the Real Estate before the same become delinquent, and will duly pay and discharge, or cause to be paid and discharged, before the same shall become overdue, all taxes, assessments and other governmental charges imposed upon it and its other properties, sales and activities, or any part thereof, or upon the income or profits therefrom, as well as all claims for labor, materials, or supplies that if unpaid might by law become a lien or charge upon any of its properties; provided that any such tax, assessment, charge, levy or claim need not be paid if the validity or amount thereof shall currently be contested in good faith by appropriate proceedings and if the Borrower shall have set aside on its books adequate reserves with respect thereto; and provided further that the Borrower will pay all such taxes, assessments, charges, levies or claims forthwith upon the commencement of proceedings to foreclose any lien that may have attached as security therefor. Promptly after payment of real estate taxes, other taxes, assessments and other governmental charges against the Real Estate, Borrower will provide evidence of such payments to the Agent, in the form of receipted tax bills or other form reasonably acceptable to the Agent.

§7.9Inspection of Properties and Books.  The Borrower shall permit the Lenders, through the Agent’s or any Lender’s other designated representatives, at the Borrower’s expense to visit and inspect any of the Real Estate or any of Borrower’s offices, to examine the books of account of the Borrower and the Related Companies (and to make copies thereof and extracts therefrom) and to discuss the affairs, finances and accounts of the Borrower with, and to be advised as to the same by, its officers, all at such reasonable times and intervals as the Agent or any Lender may reasonably request.

§7.10Compliance with Laws, Contracts, Licenses, and Permits.  The Borrower will comply, and will cause all Related Companies to comply, with (a) all applicable laws and regulations now or hereafter in effect wherever its business is conducted, including all Environmental Laws, (b) the provisions of all applicable partnership agreements, charter documents and by-laws, (c) all agreements and instruments to which it is a party or by which it or any of its Real Estate Assets may be bound including any leases, and (d) all applicable decrees, orders, and judgments. If at any time any Permit from any governmental Person shall become necessary or required in order that the Borrower may fulfill or be in compliance with any of its obligations hereunder or under any of the Loan Documents, the Borrower will promptly take or cause to be taken all reasonable steps within the power of the Borrower to obtain such authorization, consent, approval, permit or license and furnish the Agent and the Lenders with evidence thereof.

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§7.11Use of Proceeds.  Subject to the provisions of §2.5 hereof, the proceeds of the Loans shall be used by the Borrower to refinance the existing $15,000,000.00 loan from FNB to Borrower, for making Investments permitted by §8.3, and for working capital and other purposes consistent with the covenants contained herein.

§7.12Reserved.

§7.13[Intentionally Omitted.]

§7.14Interest Rate Protection.  Borrower shall maintain in effect interest rate caps, swaps or other interest hedging contracts with counterparties and in form and substance reasonably satisfactory to the Agent covering such portion of Borrower’s variable rate debt as may be required by the Agent.

§7.15Further Assurance.  The Borrower will cooperate with the Agent and the Lenders and execute such further instruments and documents and perform such further acts as the Agent and the Lenders shall reasonably request to carry out to their satisfaction the transactions contemplated by this Agreement and the other Loan Documents.

§7.16Reserved.

§7.17Environmental Indemnification.  The Borrower covenants and agrees that it will indemnify and hold the Agent and each Lender harmless from and against any and all claims, expense, damage, loss or liability incurred by the Agent or any Lender (including all reasonable costs of legal representation incurred by the Agent or any Lender, but excluding, as applicable, for the Agent or a Lender any claim, expense, damage, loss or liability as a result of the gross negligence or willful misconduct of the Agent or such Lender) relating to (a) any Release or threatened Release of Hazardous Substances on any Real Estate; (b) any violation of any Environmental Laws with respect to conditions at any Real Estate or the operations conducted thereon; or (c) the investigation or remediation of off-site locations at which the Borrower or its predecessors are alleged to have directly or indirectly disposed of Hazardous Substances. It is expressly acknowledged by the Borrower that this covenant of indemnification shall survive any modification, release or discharge of any or all of the Loan Documents or the payment of the Loans and shall inure to the benefit of the Agent and the Lenders, and their successors and assigns.

§7.18Response Actions.  The Borrower covenants and agrees that if any Release or disposal of Hazardous Substances shall occur or shall have occurred on any Real Estate, the Borrower will cause the prompt containment and removal of such Hazardous Substances and remediation of such Real Estate as necessary to comply with all Environmental Laws or to preserve the value of such Real Estate.

§7.19Environmental Assessments.  If the Agent in its good faith judgment, after discussion with the Borrower, has reason to believe that the environmental condition of any Real Estate has deteriorated, after reasonable notice by the Agent, whether or not a Default or an Event of Default shall have occurred, the Agent may, from time to time, for the purpose of assessing and ensuring the value of such Real Estate, obtain one or more environmental assessments or audits of such Real Estate prepared by an independent engineer or other qualified

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consultant or expert approved by the Agent to evaluate or confirm (i) whether any Hazardous Substances are present in the soil or water at such Real Estate and (ii) whether the use and operation of such Real Estate complies with all Environmental Laws. Environmental assessments may include without limitation detailed visual inspections of such Real Estate including, without limitation, any and all storage areas, storage tanks, drains, dry wells and leaching areas, and the taking of soil samples, surface water samples and ground water samples, as well as such other investigations or analyses as the Agent deems appropriate. All such environmental assessments shall be at the sole cost and expense of the Borrower.

§7.20Employee Benefit Plans. 

(a)Representation.  The Borrower and its ERISA Affiliates do not currently maintain or contribute to any Guaranteed Pension Plan or Multiemployer Plan.

(b)Notice.  The Borrower will obtain the consent of the Agent, which consent shall not be unreasonably withheld, conditioned or delayed, prior to the establishment of any Employee Benefit Plan or Guaranteed Pension Plan by the Borrower or any ERISA Affiliate.

(c)In General.  Each Employee Benefit Plan maintained by the Borrower or any ERISA Affiliate will be operated in compliance in all material respects with the provisions of ERISA and, to the extent applicable, the Code, including but not limited to the provisions thereunder respecting prohibited transactions.

(d)Terminability of Welfare Plans.  With respect to each Employee Benefit Plan maintained by the Borrower or an ERISA Affiliate which is an employee welfare benefit plan within the meaning of §3(1) or §3(2)(B) of ERISA, the Borrower, or the ERISA Affiliate, as the case may be, has the right to terminate each such plan at any time (or at any time subsequent to the expiration of any applicable bargaining agreement) without liability other than liability to pay claims incurred prior to the date of termination.

(e)Multiemployer Plans.  Without the consent of the Agent, the Borrower will not enter into, maintain or contribute to, any multiemployer Plan.

(f)Unfunded or Underfunded Liabilities.  The Borrower will not, at any time, have accruing unfunded or underfunded liabilities with respect to any Employee Benefit Plan, Guaranteed Pension Plan or Multiemployer Plan, or permit any condition to exist under any Multiemployer Plan that would create a withdrawal liability.

§7.21More Restrictive Agreements.  Without limiting the terms of §8.1, should the Borrower enter into or modify any agreements or documents pertaining to any existing or future Indebtedness, which agreements or documents include covenants (whether affirmative or negative), warranties, representations, defaults or events of default (or any other provision which may have the same practical effect as any of the foregoing) which are individually or in the aggregate more restrictive against the Borrower than those set forth herein or in any of the other Loan Documents, the Borrower shall promptly notify the Agent and, if requested by Majority Lenders, the Borrower, the Agent and the Majority Lenders shall promptly amend this Agreement and the other Loan Documents to include some or all or such more restrictive provisions as determined by the Majority Lenders in their sole discretion.  Notwithstanding the

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foregoing, this §7.21 shall not apply to covenants in agreements or documents relating to Indebtedness that relate only to specific Real Estate that is collateral for such Indebtedness.

§8.CERTAIN NEGATIVE COVENANTS OF THE BORROWER.  The Borrower covenants and agrees as follows, so long as any Loan or Note is outstanding or the Lenders have any obligation to make any Loans:

§8.1Restrictions on Indebtedness.  The Borrower will not, and the Borrower will not permit any of the Related Companies or any Controlled Unconsolidated Entity to create, incur, assume, guarantee or become or remain liable, contingently or otherwise, with respect to any Indebtedness other than:

(a)Indebtedness arising under the Secured Revolving Credit Agreement or under any of the Loan Documents;

(b)current liabilities of the Borrower incurred in the ordinary course of business but not incurred through (i) the borrowing of money, or (ii) the obtaining of credit except for credit on an open account basis customarily extended and in fact extended in connection with normal purchases of goods and services;

(c)Indebtedness in respect of taxes, assessments, governmental charges or levies and claims for labor, materials and supplies to the extent that payment therefor shall not at the time be required to be made in accordance with the provisions of §7.8;

(d)Indebtedness in respect of judgments or awards that have been in force for less than the applicable period for taking an appeal so long as execution is not levied thereunder or in respect of which the Borrower shall at the time in good faith be prosecuting an appeal or proceedings for review and in respect of which a stay of execution shall have been obtained pending such appeal or review;

(e)endorsements for collection, deposit or negotiation and warranties of products or services, in each case incurred in the ordinary course of business;

(f)Indebtedness of Borrower or the Related Companies to the extent the same does not create a violation of §9.3, §9.4 or §9.5 and is subject to terms and conditions consistent with conventional commercial real estate lending practices, provided that upon the creation or assumption of any such Indebtedness in an amount exceeding $5,000,000 Borrower shall provide the Agent with a notice describing the terms of such Indebtedness and the security therefor and a Compliance Certificate with updated calculations reflecting such Indebtedness.

§8.2Restrictions on Liens, Etc.  The Borrower will not, and the Borrower will not permit any Related Company or Controlled Unconsolidated Subsidiary to, (a) create or incur or agree not to create or incur or suffer to be created or incurred or to exist any lien, encumbrance, mortgage, pledge, charge, restriction or other security interest of any kind upon any of its assets or properties of any character, or upon the rents, income or profits therefrom; (b) suffer to exist for a period of more than thirty (30) days after the same shall have been incurred any Indebtedness (not permitted by §8.1(c)) or claim or demand against it that if unpaid might by law or upon bankruptcy or insolvency, or otherwise, be given any priority whatsoever over its

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general creditors; or (c) sell, assign, pledge or otherwise transfer any rents, issues, profits, accounts, contract rights, general intangibles, chattel paper or instruments relating to any of its assets or properties of any character other than in connection with the sale of the Real Estate to which they pertain as permitted hereunder; provided that the Borrower may create or incur or suffer to be created or incurred or to exist:

(i)liens to secure taxes, assessments and other governmental charges in respect of obligations not overdue, the Indebtedness with respect to which is permitted by §8.1(c);

(ii)deposits or pledges made in connection with, or to secure payment of, workers compensation, unemployment insurance, old age pensions or other social security obligations;

(iii)liens in respect of judgments or awards, the Indebtedness with respect to which is permitted by §8.1(d);

(iv)liens of carriers, warehousemen, mechanics and materialmen, and other like liens in existence less than 60 days from the date of creation thereof in respect of obligations not overdue, the Indebtedness with respect to which is permitted by §8.1(c);

(v)encumbrances consisting of leases, easements, rights of way, covenants, restrictions on the use of real property and defects and irregularities in the title thereto;  and other minor liens or encumbrances none of which in the opinion of the Borrower interferes materially with the use of the property affected in the ordinary conduct of the business of the Borrower, and which matters (x) do not individually or in the aggregate have a materially adverse effect on the use or value of the Real Estate and (xx) do not make title to such property unmarketable by the conveyancing standards in effect where such property is located; and

(vi)liens on Real Estate to secure the Indebtedness permitted by §8.1(f).

§8.3Restrictions on Investments.  The Borrower will not, and will not permit any of the Related Companies or any Controlled Unconsolidated Entity to make or permit to exist or to remain outstanding any Investment except Investments in:

(a)marketable direct or guaranteed obligations of the United States of America that mature within one (1) year from the date of purchase by the Borrower;

(b)demand deposits, certificates of deposit, bankers acceptances and time deposits of United States banks having total assets in excess of $1,000,000,000;

(c)securities commonly known as “commercial paper” issued by a corporation organized and existing under the laws of the United States of America or any state thereof that at the time of purchase have been rated and the ratings for which are not less than “P 1” if rated by Moody’s Investors Services, Inc., and not less than “A 1” if rated by Standard and Poor’s;

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(d)Investments in office properties (but not including office properties that are under construction) consistent with Borrower’s business plan submitted to the Agent prior to the date hereof and Investments in the following categories so long as the aggregate amount of each of the following categories of Investments does not exceed the specified percentage of Gross Asset Value set forth in the following table and so long as the aggregate amount, without duplication, of all Investments described in such categories does not exceed, at any time, fifteen percent (15%) of Gross Asset Value:

Category of Investment	Maximum Percentage of Gross Asset Value
Real Estate Assets that are not office buildings or office parks	5	%
Unconsolidated Entities primarily engaged in either the business of ownership of real estate located in the United States	10	%
Undeveloped land	5	%
Mortgages and notes receivable	5	%

§8.4Merger, Consolidation, Acquisition and Disposition of Properties.

(a)The Borrower will not, and will not permit any of the Related Companies or any Controlled Unconsolidated Entity to become a party to any merger or consolidation, or agree to or effect any stock acquisition, or enter into any partnership or joint venture other than partnerships or joint ventures relating to Unconsolidated Entities to the extent allowed by §8.3(d).

(b)[Intentionally Omitted.]

(c)Borrower will not, and will not permit any of the Related Companies or any Controlled Unconsolidated Entity to acquire or sell or otherwise dispose of Real Estate Assets pursuant to a single transaction or a series of related transactions if the aggregate price or other consideration exceeds $5,000,000 unless prior to such acquisition, sale or transfer, the Borrower shall provide the Agent with a notice describing the terms of such transaction and a Compliance Certificate with updated calculations reflecting such transaction, and, if the aggregate price or other consideration for an acquisition of Real Estate Assets exceeds $30,000,000, unless prior to such acquisition, the Borrower shall have obtained the consent of the Majority Lenders.

(d)The Borrower shall not transfer any assets to any of the Related Companies or any Unconsolidated Entity, and shall not make any other material changes to the structure of its corporate organization or the manner in which it operates its business, except with the prior written consent of the Agent.

§8.5Sale and Leaseback.  The Borrower will not enter into any arrangement, directly or indirectly, whereby the Borrower shall sell or transfer any property owned by it in order then or thereafter to lease such property or lease other property that the Borrower intends to use for substantially the same purpose as the property being sold or transferred. The Borrower will not

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permit any of the Related Companies or any Controlled Unconsolidated Entity to enter into any such arrangement.

§8.6Compliance with Environmental Laws.  The Borrower will not do, and will not permit any of the Related Companies or any Controlled Unconsolidated Entity to do, any of the following: (a) use any of the Real Estate or any portion thereof as a facility for the handling, processing, storage or disposal of Hazardous Materials except for immaterial amounts of Hazardous Materials used in the routine maintenance and operation of the Real Estate and in compliance with applicable law, (b) cause or permit to be located on any of the Real Estate any underground tank or other underground storage receptacle for Hazardous Materials except in material compliance with Environmental Laws, (c) generate any Hazardous Materials on any of the Real Estate except in material compliance with Environmental Laws, or (d) conduct any activity at any Real Estate or use any Real Estate in any manner so as to cause a Release.

§8.7Distributions.  Borrower shall not permit the total Distributions by it during any fiscal year to exceed ninety percent (90%) of Funds from Operations except that such limitation on Distributions may be exceeded to the extent necessary for the Borrower to maintain its REIT status provided that the Borrower provides the Agent with a letter from its accountants or attorneys setting forth the basis for computation of the amount of such necessary excess Distributions.  During any period when any Default or Event of Default has occurred and is continuing the total Distributions by the Borrower will not exceed the minimum amount necessary for the Borrower to maintain its REIT status.

§8.8[Intentionally Omitted.]

§8.9Related Companies.  The Borrower will not amend the articles of incorporation or bylaws or other organizational documents of any of the Related Companies other than as may be required by any lender in connection with the incurrence of Indebtedness permitted under §8.1.  Borrower will not, directly or indirectly, make or permit to be made, by voluntary or involuntary means, any sale, assignment, transfer, disposition, mortgage, pledge, hypothecation or encumbrance of its interest in any Related Company or Unconsolidated Entity or any dilution of its interest in any Related Company or Unconsolidated Entity.

§9.FINANCIAL COVENANTS OF THE BORROWER.  The Borrower covenants and agrees as follows, so long as any Loan or Note is outstanding or any Lender has any obligation to make any Loan:

§9.1Reserved. 

§9.2Reserved. 

§9.3Total Liabilities to Gross Asset Value.  The Borrower will not permit Total Liabilities to exceed seventy percent (70%) of Gross Asset Value, calculated as of the end of each fiscal quarter through and including the fiscal quarter ending March 31, 2004. Beginning with the fiscal quarter ending June 30, 2004, the Borrower will not permit Total Liabilities to exceed sixty-five percent (65%) of Gross Asset Value, calculated as of the end of each fiscal quarter.

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§9.4Adjusted EBITDA to Interest Expense.  The Borrower will not permit the ratio of its Adjusted EBITDA to Interest Expense to be less than 1.75 to 1.0 for any period of four consecutive fiscal quarters, calculated as of the end of each fiscal quarter through and including the fiscal quarter ending March 31, 2004.  Beginning with the period of four consecutive fiscal quarters ending June 30, 2004, the Borrower will not permit the ratio of its Adjusted EBITDA to Interest Expense to be less than 2.0 to 1.0 for any period of four consecutive fiscal quarters, calculated as of the end of each fiscal quarter.

§9.5EBITDA to Fixed Charges.  The Borrower will not permit the ratio of its EBITDA to Fixed Charges to be less than 1.5 to 1.0 for any period of four consecutive fiscal quarters, calculated as of the end of each fiscal quarter through and including the fiscal quarter ending March 31, 2004.  Beginning with the period of four consecutive fiscal quarters ending June 30, 2004, the Borrower will not permit the ratio of its EBITDA to Fixed Charges to be less than 1.75 to 1.0 for any period of four consecutive fiscal quarters, calculated as of the end of each fiscal quarter.

§9.6Minimum Tangible Net Worth.  The Borrower will not at any time permit its Tangible Net Worth to be less than the sum of $25,000,000, plus 75% of Net Offering Proceeds after March 31, 2003, plus 100% of Net OP Proceeds after March 31, 2003.

§10.CONDITIONS TO EFFECTIVENESS.  This Agreement shall become effective when each of the following conditions precedent have been satisfied:

§10.1Loan Documents.  Each of the Loan Documents shall have been duly executed and delivered by the respective parties thereto, shall be in full force and effect and shall be in form and substance satisfactory to each of the Lenders. Each Lender shall have received a fully executed original of its Note prior to or on the Closing Date.

§10.2Good Standing Certificates and Certified Copies.  The Agent shall have received (i) a Certificate of Good Standing for the Borrower from the State of Maryland and a certificate of qualification for the Borrower to do business from the State of Colorado, and (ii) a copy of the Borrower’s Articles of Incorporation certified by the Maryland Secretary of State.

§10.3By-laws; Resolutions.  All action on the part of the Borrower necessary for the valid execution, delivery and performance by the Borrower of this Agreement and the other Loan Documents to which it is or is to become a party shall have been duly and effectively taken, and evidence thereof satisfactory to the Agent shall have been provided to the Agent. The Agent shall have received from the Borrower true copies of its by-laws and the resolutions adopted by its Board of Directors authorizing the transactions described herein, each certified by its secretary to be true and complete and in effect on the Closing Date.

§10.4Incumbency Certificate; Authorized Signers.  The Agent shall have received from the Borrower an incumbency certificate, dated as of the Closing Date, signed by a duly authorized officer of the Borrower and giving the name and bearing a specimen signature of each Responsible Officer.

§10.5Opinions of Counsel Concerning Organization and Loan Documents.  Each of the Lenders and the Agent shall have received favorable opinions addressed to the Lenders and the

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Agent and dated as of the Closing Date, in form and substance reasonably satisfactory to the Lenders and the Agent from Borrower’s counsel, which opinion may rely on opinions from other law firms approved by the Lenders as to matters of law applicable in the various states where the Borrower is organized.

§10.6Payment of Fees.  The Borrower shall have paid to the Agent the fees pursuant to §4.1 and shall have paid all other expenses as provided in §15 hereof then outstanding.

§10.7Compliance Certificate.  The Agent shall have received a Compliance Certificate showing compliance with §8.3(d), and §9.3 through §9.6 as of September 30, 2003 and for the fiscal periods ending thereon.

§11.CONDITIONS TO ALL BORROWINGS.  The obligations of the Lenders to make any Loan, whether on or after the Closing Date shall also be subject to the satisfaction of the following conditions precedent:

§11.1Representations True; No Event of Default; Compliance Certificate.  Each of the representations and warranties of the Borrower contained in this Agreement, the other Loan Documents or in any document or instrument delivered pursuant to or in connection with this Agreement shall be true and correct in all material respects as of the date as of which they were made and shall also be true and correct in all material respects at and as of the time of the making of such Loan, with the same effect as if made at and as of that time (except to the extent of changes resulting from transactions contemplated or permitted by this Agreement and the other Loan Documents and changes occurring in the ordinary course of business that singly or in the aggregate are not materially adverse, and except to the extent that such representations and warranties relate expressly to an earlier date); the Borrower shall have performed and complied with all terms and conditions herein required to be performed by it or prior to the Borrowing Date of such Loan; and no Default or Event of Default shall have occurred and be continuing on the date of any Loan Request or on the Borrowing Date of such Loan; and Agent shall have received a Compliance Certificate with computations evidencing compliance with the covenants contained in §9.1 through §9.6 hereof after giving effect to such requested Loan.

§11.2No Legal Impediment.  No change shall have occurred in any law or regulations thereunder or interpretations thereof that in the reasonable opinion of any Lender would make it illegal for such Lender to make such Loan.

§11.3Governmental Regulation.  Each Lender shall have received such statements in substance and form reasonably satisfactory to such Lender as such Lender shall require for the purpose of compliance with any applicable regulations of the Comptroller of the Currency or the Board of Governors of the Federal Reserve System.

§11.4Proceedings and Documents.  All proceedings in connection with the transactions contemplated by this Agreement, the other Loan Documents and all other documents incident thereto shall be reasonably satisfactory in substance and in form to the Agent, and the Lenders shall have received all information and such counterpart originals or certified or other copies of such documents as the Agent may reasonably request.

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§12.EVENTS OF DEFAULT; ACCELERATION; ETC.

§12.1Events of Default and Acceleration.  If any of the following events (“Events of Default” or, if the giving of notice or the lapse of time or both is required, then, prior to such notice or lapse of time, “Defaults”) shall occur:

(a)the Borrower shall fail to pay any principal of the Loans when the same shall become due and payable;

(b)the Borrower shall fail to pay any interest on the Loans or any other sums due hereunder or under any of the other Loan Documents within five (5) days after the same shall become due and payable;

(c)the Borrower shall fail to comply with any of its covenants contained in §3.2, §7.5, §7.6, §7.7, §7.8, §8 or §9 hereof;

(d)the Borrower shall fail to perform any other term, covenant or agreement contained herein or in any of the other Loan Documents (other than those specified elsewhere in this §12) for thirty (30) days after written notice of such failure from Agent to the Borrower;

(e)any representation or warranty of the Borrower in this Agreement or any of the other Loan Documents or in any other document or instrument delivered pursuant to or in connection with this Agreement, shall prove to have been false in any material respect upon the date when made or deemed to have been made or repeated, provided, however, that with respect to the representations and warranties of the Borrower contained in §6.18 and §6.22, if the condition or event making the representation and warranty false is capable of being cured by the Borrower, no enforcement action has been commenced against the Borrower or the applicable Real Estate on account of such condition or event nor is the applicable Real Estate subject to risk of forfeiture due to such condition or event, and the Borrower promptly commences the cure thereof after the Borrower’s first obtaining knowledge of such condition or event, the Borrower shall have a period of thirty (30) days after the date that the Borrower first obtained knowledge of such condition or event during which the Borrower may cure such condition or event (or, if such condition or event is not reasonably capable of being cured within such thirty (30) day period, such additional period of time as may be reasonably required in order to cure such condition or event but in any event such period shall not exceed six (6) months from the date that the Borrower first obtained knowledge of such condition or event), and no Event of Default shall exist hereunder during such thirty (30) day or additional period so long as the Borrower continuously and diligently pursues the cure of such condition or event and the other conditions to such cure period have not changed;

(f)the Borrower, any of the Related Companies or any Controlled Unconsolidated Entity shall fail to pay at maturity, or within any applicable period of grace, any Indebtedness, or shall fail to observe or perform any material term, covenant or agreement contained in any agreement by which it is bound, evidencing or securing Indebtedness for such period of time as would permit (assuming the giving of appropriate notice if required) the holder or holders thereof or of any obligations issued thereunder to accelerate the maturity thereof, and in any event, such failure shall continue for thirty (30) days, unless the aggregate amount of all such defaulted Indebtedness plus the amount of any unsatisfied judgments described in paragraph (i) of this §12.1 is less than $5,000,000.00;

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(g)any of the Borrower, any of the Related Companies or any Controlled Unconsolidated Entity shall make an assignment for the benefit of creditors, or admit in writing its inability to pay or generally fail to pay its debts as they mature or become due, or shall petition or apply for the appointment of a trustee or other custodian, liquidator or receiver of any substantial part of its properties or shall commence any case or other proceeding under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar law of any jurisdiction, now or hereafter in effect, or shall take any action to authorize or in furtherance of any of the foregoing, or if any such petition or application shall be filed or any such case or other proceeding shall be commenced against any such Person and such Person shall indicate its approval thereof, consent thereto or acquiescence therein;

(h)a decree or order is entered appointing any such trustee, custodian, liquidator or receiver or adjudicating the Borrower, any of the Related Companies or any Controlled Unconsolidated Entity bankrupt or insolvent, or approving a petition in any such case or other proceeding, or a decree or order for relief is entered in respect of the Borrower, any of the Related Companies or any Controlled Unconsolidated Entity in an involuntary case under federal bankruptcy laws as now or hereafter constituted;

(i)there shall remain in force, undischarged, unsatisfied and unstayed, for more than thirty days, whether or not consecutive, any uninsured final judgment against the Borrower, any of the Related Companies or any Controlled Unconsolidated Entity that, with other outstanding uninsured final judgments, undischarged, against the Borrower, any of the Related Companies or any Controlled Unconsolidated Entity plus the amount of any defaulted Indebtedness under paragraph (f) of this §12.1, exceeds in the aggregate $5,000,000.00;

(j)if any of the Loan Documents or any material provision of any Loan Documents shall be unenforceable, cancelled, terminated, revoked or rescinded otherwise than in accordance with the terms thereof or with the express prior written agreement, consent or approval of the Agent, or any action at law, suit or in equity or other legal proceeding to make unenforceable, cancel, revoke or rescind any of the Loan Documents shall be commenced by or on behalf of the Borrower, or any court or any other governmental or regulatory authority or agency of competent jurisdiction shall make a determination that, or issue a judgment, order, decree or ruling to the effect that, any one or more of the Loan Documents is illegal, invalid or unenforceable in accordance with the terms thereof;

(k)the Borrower, any of the Related Companies or any Controlled Unconsolidated Entity shall be indicted for a federal crime, a punishment for which could include the forfeiture of any assets of the Borrower;

(l)the Borrower shall fail to pay, observe or perform any term, covenant, condition or agreement contained in any agreement, document or instrument evidencing, securing or otherwise relating to any Indebtedness of the Borrower to any Lender (other than the Obligations) and/or relating to any Permitted Lien (other than the Obligations) within any applicable period of grace provided for in such agreement, document or instrument;

(m)[Intentionally Omitted];

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(n)any “Event of Default”, as defined in any of the other Loan Documents, shall occur; or

(o)Any two or more of William Atkins, Charles Knight and John Greenman shall cease to be a senior executive officer of the Borrower and the Board of Directors of the Borrower shall not, within six months thereafter, hire a substitute officer who has been approved by the Majority Lenders, with each Lender having the right to approve or disapprove any proposed successor in its sole reasonable discretion;

(p)a Change of Control shall occur without the prior written consent of all Lenders;

(q)any “Event of Default” as defined in the Secured Revolving Credit Agreement shall occur;

then, and in any such event, so long as the same may be continuing, the Agent may, and upon the request of the Majority Lenders shall, by notice in writing to the Borrower declare all amounts owing with respect to this Agreement, the Notes and the other Loan Documents to be, and they shall thereupon forthwith become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower; provided that in the event of any Event of Default specified in §§12.1(g) or 12.1(h), all such amounts shall become immediately due and payable automatically and without any requirement of notice from the Agent or action by the Majority Lenders.

§12.2Termination of Commitments.  If any one or more Events of Default specified in §12.1(g) or §12.1(h) shall occur, any unused portion of the Commitments hereunder, shall forthwith terminate and the Lenders shall be relieved of all obligations to make Loans to the Borrower.  If any other Event of Default shall have occurred and be continuing, any Lender may by notice to the Borrower terminate the unused portion of its Commitment hereunder, and upon such notice being given such unused portion of its Commitment hereunder shall terminate immediately and such Lender shall be relieved of all further obligations to make Loans. No termination of such Lender’s Commitment hereunder shall relieve the Borrower of any of the Obligations or any of its existing obligations to such Lender arising under other agreements or instruments.

§12.3Remedies.  In case any one or more of the Events of Default shall have occurred, and whether or not the Lenders shall have accelerated the maturity of the Loans pursuant to §12.1, each Lender, if owed any amount with respect to the Loans, may, with the consent of the Majority Lenders, direct the Agent to proceed to protect and enforce the rights and remedies of the Agent and the Lenders under this Agreement, the Notes or any of the other Loan Documents by suit in equity, action at law or other appropriate proceeding, whether for the specific performance of any covenant or agreement contained in this Agreement and the other Loan Documents or any instrument pursuant to which the obligations are evidenced, including to the full extent permitted by applicable law the obtaining of the ex parte appointment of a receiver and, if any amount shall have become due, by declaration or otherwise, to proceed to enforce the payment thereof or any other legal or equitable right of such Lender. No remedy herein conferred upon any Lender or the Agent or the holder of any Note is intended to be exclusive of any other

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remedy and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or any other provision of law.

§12.4Distribution of Proceeds.  In the event that, during the continuance of any Default or Event of Default, the Agent or any Lender as the case may be, receives any monies in connection with the enforcement of any of the Loan Documents, or otherwise with respect to the realization upon any of the assets of the Borrower, such monies shall be distributed for application as follows:

(a)First, to the payment of, or (as the case may be) the reimbursement of the Agent for or in respect of all reasonable costs, expenses, disbursements and losses which shall have been incurred or sustained by the Agent in connection with the collection of such monies by the Agent, for the exercise, protection or enforcement by the Agent of all or any of the rights, remedies, powers and privileges of the Agent or the Lenders under this Agreement or any of the other Loan Documents or in support of any provision of adequate indemnity to the Agent against any taxes or liens which by law shall have, or may have, priority over the rights of the Agent to such monies;

(b)Second, to all other Obligations in such order or preference as the Majority Lenders may determine; provided, however, that in the event that any Lender shall have wrongfully failed or refused to make an advance under §2.6 and such failure or refusal shall be continuing, advances made by other Lenders during the pendency of such failure or refusal shall be entitled to be repaid as to principal and accrued interest in priority to the other Obligations described in this subsection (b), and distributions in respect of such Obligations shall be made among the Lenders pro rata in accordance with each Lender’s respective Facility Percentage; and provided, further, that the Agent may in its discretion make proper allowance to take into account any Obligations not then due and payable;

(c)Third, upon payment and satisfaction in full or other provisions for payment in full satisfactory to the Lenders and the Agent of all of the obligations, and to the payment of any obligations required to be paid pursuant to applicable laws applicable to such enforcement; and

(d)Fourth, the excess, if any, shall be returned to the Borrower or to such other Persons as are legally entitled thereto.

§13.SETOFF.  Borrower hereby grants to each Lender, a continuing lien, security interest and right of setoff as security for all liabilities and obligations to such Lender hereunder, whether now existing or hereafter arising, upon and against all deposits, credits, collateral and property, now or hereafter in the possession, custody, safekeeping or control of such Lender or in transit to it.  At any time, without demand or notice (any such notice being expressly waived by Borrower), any Lender may, WITH THE PRIOR APPROVAL OF THE AGENT, setoff the same or any part thereof and apply the same to any liability or obligation of Borrower hereunder even though unmatured and regardless of the adequacy of any other collateral securing the Obligations.  ANY AND ALL RIGHTS TO REQUIRE ANY LENDER TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH

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SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED. Each of the Lenders agrees with each other Lender that (a) if an amount to be set off is to be applied to Indebtedness of the Borrower to such Lender, other than Indebtedness evidenced by the Notes held by such Lender, such amount shall be applied ratably to such other Indebtedness and to the Indebtedness evidenced by all such Notes held by such Lender, and (b) if such Lender shall receive from the Borrower, whether by voluntary payment, exercise of the right of setoff, counterclaim, cross action, enforcement of the claim evidenced by the Notes held by such Lender by proceedings against the Borrower at law or in equity or by proof thereof in bankruptcy, reorganization, liquidation, receivership or similar proceedings, or otherwise, and shall retain and apply to the payment of the Note or Notes held by such Lender any amount in excess of its ratable portion of the payments received by all of the Lenders with respect to the Notes held by all of the Lenders, such Lender will make such disposition and arrangements with the other Lenders with respect to such excess, either by way of distribution, pro tanto assignment of claims, subrogation or otherwise as shall result in each Lender receiving in respect of the Notes held by it its proportionate payment as contemplated by this Agreement; provided that if all or any part of such excess payment is thereafter recovered from such Lender, such disposition and arrangements shall be rescinded and the amount restored to the extent of such recovery, but without interest.  Notwithstanding the foregoing, no Lender shall exercise a right of setoff if such exercise would limit or prevent the exercise of any other remedy or other recourse against the Borrower.

§14.THE AGENT.

§14.1Authorization.  The Agent is authorized to take such action on behalf of each of the Lenders and to exercise all such powers as are hereunder and under any of the other Loan Documents and any related documents delegated to the Agent, together with such powers as are reasonably incident thereto, provided that no duties or responsibilities not expressly assumed herein or therein shall be implied to have been assumed by the Agent.  The obligations of Agent hereunder are primarily administrative in nature, and nothing contained in this Agreement or any of the other Loan Documents shall be construed to constitute the Agent as a trustee for any Lender or to create any agency or fiduciary relationship.  Agent shall act as the contractual representative of the Lenders hereunder, and notwithstanding the use of the term “Agent”, it is understood and agreed that the Agent shall not have any fiduciary duties or responsibilities to any Lender by reason of this Agreement or any other Loan Document and is acting as an independent contractor, the rights and duties of which are limited to those expressly set forth in this Agreement and the other Loan Documents.

§14.2Employees and Agents.  The Agent may exercise its powers and execute its duties by or through employees or agents and shall be entitled to take, and to rely on, advice of counsel concerning all matters pertaining to its rights and duties under this Agreement and the other Loan Documents. The Agent may utilize the services of such Persons as the Agent in its sole discretion may reasonably determine, and all reasonable fees and expenses of any such Persons shall be paid by the Borrower.

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§14.3No Liability.  Neither the Agent nor any of its shareholders, directors, officers or employees nor any other Person assisting them in their duties nor any agent or employee thereof, shall be liable for any waiver, consent or approval given or any action taken, or omitted to be taken, in good faith by it or them hereunder or under any of the other Loan Documents, or in connection herewith or therewith, or be responsible for the consequences of any oversight or error of judgment whatsoever, except that the Agent or such other Person, as the case may be, may be liable for losses due to its willful misconduct or gross negligence as determined by a court of competent jurisdiction after the exhaustion of all applicable appeal periods.

§14.4No Representations.  The Agent shall not be responsible for the execution or validity or enforceability by or against Borrower of this Agreement, the Notes, any of the other Loan Documents or any instrument at any time constituting, or intended to constitute, collateral security for the Notes, or for the value of any such collateral security or for the validity, enforceability or collectability of any such amounts owing with respect to the Notes, or for any recitals or statements, warranties or representations made herein or in any of the other Loan Documents or in any certificate or instrument hereafter furnished to it by or on behalf of the Borrower, or be bound to ascertain or inquire as to the performance or observance of any of the terms, conditions, covenants or agreements herein or in any instrument at any time constituting, or intended to constitute, collateral security for the Notes. The Agent shall not be bound to ascertain whether any notice, consent, waiver or request delivered to it by the Borrower or any holder of any of the Notes shall have been duly authorized or is true, accurate and complete. The Agent has not made nor does it now make any representations or warranties, express or implied, nor does it assume any liability to the Lenders, with respect to the credit worthiness or financial condition of the Borrower or its Subsidiaries or any other Person.  Each Lender acknowledges that it has, independently and without reliance upon the Agent or any other Lender, and based upon such information and documents as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement.  Each Lender also acknowledges that it will, independently and without reliance upon the Agent or any other Lender, based upon such information and documents as it deems appropriate at the time, continue to make its own credit analysis and decisions in taking or not taking action under this Agreement and the other Loan Documents.  Agent’s counsel has only represented Agent and FNB in connection with the Loan Documents and the only attorney-client relationship or duty of care is between Agent’s counsel and Agent or FNB. Each Lender has been independently represented by separate counsel on all matters regarding the Loan Documents and the granting and perfecting of liens in the Collateral.

§14.5Payments.

(a)A payment by the Borrower to the Agent hereunder or any of the other Loan Documents for the account of any Lender shall constitute a payment to such Lender subject to the pro rata rights to repayment based upon the Facility Percentage of each Lender. The Agent agrees, promptly after the Agent’s receipt of good funds as determined in accordance with Agent’s customary practices, to distribute to each Lender such Lender’s pro rata share of payments received by the Agent for the account of the Lenders except as otherwise expressly provided herein or in any of the other Loan Documents.

(b)If in the opinion of the Agent the distribution of any amount received by it in such capacity hereunder, under the Notes or under any of the other Loan Documents might

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involve it in liability, it may refrain from making distribution until its right to make distribution shall have been adjudicated by a court of competent jurisdiction. If a court of competent jurisdiction shall adjudge that any amount received and distributed by the Agent is to be repaid, each Person to whom any such distribution shall have been made shall either repay to the Agent its proportionate share of the amount so adjudged to be repaid or shall pay over the same in such manner and to such Persons as shall be determined by such court.

(c)Notwithstanding anything to the contrary contained in this Agreement or any of the other Loan Documents, any Lender that fails (i) to make available to the Agent its pro rata share of any Loan or (ii) to comply with the provisions of §12 and §13 with respect to making dispositions and arrangements with the other Lenders, where such Lender’s share of any payment received, whether by setoff or otherwise, is in excess of its pro rata share of such payments due and payable to all of the Lenders, in each case as, when and to the full extent required by the provisions of this Agreement, or to adjust promptly such Lender’s outstanding principal and its pro rata Facility Percentage as provided in §2.1 hereof, shall be deemed delinquent (a “Delinquent Lender”) and shall be deemed a Delinquent Lender until such time as such delinquency is satisfied.  A Delinquent Lender shall be deemed to have assigned any and all payments due to it from the Borrower, whether on account of outstanding Loans, interest, fees or otherwise, to the remaining nondelinquent Lenders for application to, and reduction of, their respective pro rata shares of all outstanding Loans.  The Delinquent Lender hereby authorizes the Agent to distribute such payments to the nondelinquent Lenders in proportion to their respective pro rata shares of all outstanding Loans.  In addition to the rights and remedies that may be available to the Agent at law and in equity, a Defaulting Lender’s right to participate in the administration of the Loan Documents, including, without limitation, any rights to consent to or direct any action or inaction of the Agent pursuant to this Agreement or otherwise, or to be taken into account in the calculation of Majority Lenders or any matter requiring approval of all of the Lenders, shall be suspended while such Lender is a Defaulting Lender.  A Delinquent Lender shall be deemed to have satisfied in full a delinquency when and if, as a result of application of the assigned payments to all outstanding Loans of the nondelinquent Lenders, the Lenders’ respective pro rata shares of all outstanding Loans have returned to those in effect immediately prior to such delinquency and without giving effect to the nonpayment causing such delinquency.

§14.6Holders of Notes.  The Agent may deem and treat the payee of any Note as the absolute owner or purchaser thereof for all purposes hereof until it shall have been furnished in writing with a different name by such payee or by a subsequent holder, assignee or transferee.

§14.7Indemnity.  The Lenders ratably agree hereby to indemnify and hold harmless the Agent from and against any and all claims, actions and suits (whether groundless or otherwise), losses, damages, costs, expenses (including any expenses for which the Agent has not been reimbursed by the Borrower as required by §15), and liabilities of every nature and character arising out of or related to this Agreement, the Notes, or any of the other Loan Documents or the transactions contemplated or evidenced hereby or thereby, or the Agent’s actions taken hereunder or thereunder, except to the extent that any of the same shall be directly caused by the Agent’s willful misconduct or gross negligence as determined by a court of competent jurisdiction after the exhaustion of all applicable appeal periods.

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§14.8Agent as Lender.  In its individual capacity, FNB shall have the same obligations and the same rights, powers and privileges in respect to its Commitment and the Loans made by it, and as the holder of any of the Notes as it would have were it not also the Agent.

§14.9Resignation.  The Agent may resign at any time by giving sixty (60) days, prior written notice thereof to the Lenders and the Borrower.  Upon any such resignation, the Majority Lenders shall have the right to appoint a successor Agent.  Unless a Default or Event of Default shall have occurred and be continuing, appointment of such successor Agent shall be subject to the reasonable approval of the Borrower.  If no successor Agent shall have been so appointed by the Majority Lenders and shall have accepted such appointment within thirty (30) days after the giving of notice of resignation or removal of the Borrower has disapproved or failed to approve a successor agent within such period, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be a financial institution having a rating of not less than A2/P2 or its equivalent by Standard & Poor’s Corporation. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent’s resignation, the provisions of this Agreement and the other Loan Documents shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent.

§14.10Notification of Defaults and Events of Default.  Each Lender hereby agrees that, upon learning of the existence of a Default or an Event of Default, it shall promptly notify the Agent thereof. The Agent hereby agrees that upon receipt of any notice under this §14.10 it shall promptly notify the other Lenders of the existence of such Default or Event of Default.

§14.11Duties in the Case of Enforcement.  In case one of more Events of Default have occurred and shall be continuing, and whether or not acceleration of the obligations shall have occurred, the Agent shall, if (a) so requested by the Majority Lenders and (b) the Lenders have provided to the Agent such additional indemnities and assurances against expenses and liabilities as the Agent may reasonably request, proceed to enforce the provisions of the Loan Documents and exercise all or any legal and equitable and other rights or remedies as it may have. The Majority Lenders may direct the Agent in writing as to the method and the extent of any such exercise, the Lenders hereby agreeing to indemnify and hold the Agent harmless from all liabilities incurred in respect of all actions taken or omitted in accordance with such directions, provided that the Agent need not comply with any such direction to the extent that the Agent reasonably believes the Agent’s compliance with such direction to be unlawful or commercially unreasonable in any applicable jurisdiction or would subject to the Agent to civil liability.

§15.EXPENSES.  The Borrower agrees to pay (a) any taxes (including any interest and penalties in respect thereto) payable by the Agent or any of the Lenders (other than taxes based upon the Agent’s or any Lender’s net income), including any intangibles taxes in connection with the Loan Documents, or other taxes payable on or with respect to the transactions contemplated by this Agreement, including any taxes payable by the Agent or any of the Lenders after the Closing Date (the Borrower hereby agreeing to indemnify the Lenders with respect thereto), (b) the reasonable fees, expenses and disbursements of the Agent’s counsel or any local counsel to the Agent incurred in connection with the preparation, administration or interpretation of the Loan Documents and other instruments mentioned herein, each closing hereunder, and amendments, modifications, approvals, consents or waivers hereto or hereunder, (c) the reasonable fees, costs, expenses and disbursements of the Agent incurred in connection with the preparation, administration or interpretation

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of the Loan Documents and other instruments mentioned herein, (d) the fees, costs, expenses and disbursements of the Agent incurred in connection with the syndication and/or participation of the Loans, (e) all reasonable out-of-pocket expenses (including reasonable attorneys’ fees and costs, which attorneys may be employees of any Lender or the Agent and the fees and costs of appraisers, engineers, investment bankers, surveyors or other experts retained by the Agent or any Lender in connection with any such enforcement proceedings) incurred by any Lender or the Agent in connection with (i) the enforcement of or preservation of rights under any of the Loan Documents against the Borrower or the administration thereof after the occurrence of a Default or Event of Default (including, without limitation, expenses incurred in any restructuring and/or “workout” of the Loans), and (ii) any litigation, proceeding or dispute whether arising hereunder or otherwise, in any way related to the Agent’s or the Lender’s relationship with the Borrower, any Controlled Unconsolidated Entity or any of the Related Companies, (f) all reasonable fees, expenses and disbursements of the Agent incurred in connection with UCC searches, UCC filings or mortgage recordings, (g) all reasonable costs incurred by the Agent in the future in connection with its inspection of the Real Estate, and (h) the reasonable fees, costs, expenses and disbursements of the Agent incurred in connection with the granting of any collateral by the Borrower, including, without limitation, the costs incurred by the Agent in connection with its inspection of such collateral, and the fees and disbursements of the Agent’s counsel. The covenants of this §15 shall survive payment or satisfaction of payment of amounts owing with respect to the Notes.

§16.INDEMNIFICATION.  The Borrower agrees to indemnify and hold harmless the Agent and the Lenders and the shareholders, directors, agents, officers, subsidiaries, and affiliates of the Agent and the Lenders and any Person that controls the Agent or any Lender from and against any and all claims, actions or causes of action and suits whether groundless or otherwise, and from and against any and all liabilities, losses, settlement payments, obligations, damages and expenses of every nature and character arising out of this Agreement or any of the other Loan Documents or the transactions contemplated hereby or which otherwise arise in connection with the financing including, without limitation except to the extent caused by the gross negligence or willful misconduct of a Lender or the Agent as determined by a court of competent jurisdiction after the exhaustion of all applicable appeal periods (but such limitation on indemnification shall only apply to the Agent or Lender that is being grossly negligent or committing willful misconduct), (a) any actual or proposed use by the Borrower of the proceeds of any of the Loans, (b) any actual or alleged infringement of any patent, copyright, trademark, service mark or similar right of the Borrower, (c) the Borrower entering into or performing this Agreement or any of the other Loan Documents or (d) with respect to the Borrower and its respective properties, the violation of any Environmental Law, the Release or threatened Release of any Hazardous Substances or any action, suit, proceeding or investigation brought or threatened with respect to any Hazardous Substances (including, but not limited to claims with respect to wrongful death, personal injury or damage to property), (e) any cost, claim liability, damage or expense in connection with any harm the Borrower may be found to have caused in the role of a broker, in each case including, without limitation, the reasonable fees and disbursements of counsel and allocated costs of internal counsel incurred in connection with any such investigation, litigation or other proceeding. In litigation, or the preparation therefor, the Lenders

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and the Agent shall each be entitled to select their own separate counsel and, in addition to the foregoing indemnity, the Borrower agrees to pay promptly the reasonable fees and expenses of such counsel. If, and to the extent that the obligations of the Borrower under this §16 are unenforceable for any reason, the Borrower hereby agrees to make the maximum contribution to the payment in satisfaction of such obligations which is permissible under applicable law. The provisions of this §16 shall survive the repayment of the Loans and the termination of the obligations of the Lenders hereunder and shall continue in full force and effect as to the Lenders so long as the possibility of any such claim, action, cause of action or suit exists under applicable law, rule or regulation.

§17.SURVIVAL OF COVENANTS, ETC.  All covenants, agreements, representations and warranties made herein, in the Notes, in any of the other Loan Documents or in any documents or other papers delivered by or on behalf of the Borrower pursuant hereto shall be deemed to have been relied upon by the Lenders and the Agent, notwithstanding any investigation heretofore or hereafter made by it, and shall survive the making by the Lenders of the Loans, as herein contemplated, and shall continue in full force and effect so long as any amount due under this Agreement or the Notes or any of the other Loan Documents remains outstanding or the Lenders have any obligation to make any Loans. The indemnification obligations of the Borrower provided herein and the other Loan Documents shall survive the full repayment of amounts due and the termination of the obligations of the Lenders hereunder and thereunder to the extent provided herein and therein. All statements contained in any certificate delivered to the Agent or any Lender at any time executed on behalf of the Borrower pursuant hereto or in connection with the transactions contemplated hereby shall constitute representations and warranties by the Borrower hereunder.

§18.ASSIGNMENT; PARTICIPATIONS; ETC.

§18.1Conditions to Assignment by Lenders.  Except as provided herein, each Lender may assign to one or more Eligible Assignees all or a portion of its interests, rights and obligations under this Agreement (including all or a portion of its Facility Percentage and the same portion of the Loans at the time owing to it, and the Notes held by it); provided that (a) the Agent shall have given its prior written consent to such assignment except that such consent shall not be needed with respect to an assignment from a Lender to one of its Affiliated Lenders, (b) each such assignment shall be of a constant, and not a varying, percentage of all the assigning Lender’s rights and obligations under this Agreement, (c) each assignment shall be in an amount of not less than $3,000,000 that is a whole multiple of $1,000,000, (d) each Lender shall either assign its entire Commitment or shall retain, free of any such assignment, an amount of its Commitment of not less $3,000,000 and (e) the parties to such assignment shall execute and deliver to the Agent, for recording in the Register (as hereinafter defined), an Assignment and Acceptance, substantially in the form of Exhibit D hereto (an “Assignment and Acceptance”) , together with any Notes subject to such assignment. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, (i) the assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender hereunder, and (ii) the assigning Lender shall, to the extent provided in such assignment and upon payment to the Agent of the registration fee referred to in §18.3, be released from its obligations under this Agreement.

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§18.2Certain Representations and Warranties; Limitations; Covenants.  By executing and delivering an Assignment and Acceptance, the parties to the assignment thereunder confirm to and agree with each other and the other parties hereto as follows: (a) other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim, the assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement, the other Loan Documents or any other instrument or document furnished pursuant hereto; (b) the assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or any other Person primarily or secondarily liable in respect of any of the Obligations, or the performance or observance by the Borrower or any other Person primarily or secondarily liable in respect of any of the obligations of any of their obligations under this Agreement or any of the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto or the validity or enforceability or priority of any lien or any Collateral; (c) such assignee confirms that it has received a copy of this Agreement, together with copies of the most recent financial statements referred to in §6.4 and §7.4 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (d) such assignee will, independently and without reliance upon the assigning Lender, the Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit and Collateral decisions in taking or not taking action under this Agreement, (e) such assignee represents and warrants that it is an Eligible Assignee; (f) such assignee appoints and authorizes the Agent to take such action as “Agent” on its behalf and to exercise such powers under this Agreement and the other Loan Documents as are delegated to the Agent by the terms hereof or thereof, together with such powers as are reasonably incidental thereto; (g) such assignee agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as a Lender; and (h) such assignee represents and warrants that it is legally authorized to enter into such Assignment and Acceptance.

§18.3Register.  The Agent shall maintain a copy of each Assignment and Acceptance delivered to it and a register or similar list (the “Register”) for the recordation of the names and addresses of the Lenders and the Facility Percentages of, and principal amount of the Loans owing to the Lenders from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower and the Lenders at any reasonable time and from time to time upon reasonable prior notice.  Upon each such recordation, the assigning Lender agrees to pay to the Agent a registration fee in the sum of $5,000.00.  The Agent may amend Schedules 1 and 1.1 hereof to reflect the recording of any such assignments.

§18.4New Notes.  Upon its receipt of an Assignment and Acceptance executed by the parties to such assignment, together with each Note subject to such assignment, the Agent shall (a) record the information contained therein in the Register, and (b) give prompt notice thereof to the Borrower and the Lenders (other than the assigning Lender). Within five (5) Business Days

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after receipt of such notice, the Borrower, at its own expense, shall execute and deliver to the Agent, in exchange for each surrendered Note, a new Note to the order of such Eligible Assignee in an amount equal to the amount assumed by such Eligible Assignee pursuant to such Assignment and Acceptance and, if the assigning Lender has retained some portion of its Loans hereunder, a new Note to the order of the assigning Lender in an amount equal to the amount retained by it hereunder. Such new Notes shall provide that they are replacements for the surrendered Notes and that they do not constitute a novation, shall be in an aggregate principal amount equal to the aggregate principal amount of the surrendered Notes, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of the assigned Notes. The surrendered Notes shall be cancelled and returned to the Borrower.

§18.5Participations.  Each Lender may sell participations to one or more banks or other entities in a portion of such Lender’s rights and obligations under this Agreement and the other Loan Documents not to exceed forty-nine percent (49%) of its Facility Percentage; provided that (a) the Agent shall have given its prior written consent to such participation, except that any Lender may sell participations to its Affiliated Lenders without such consent, (b) each such participation shall be in an amount of not less than $3,000,000 that is a whole multiple of $1,000,000, (c) any such sale or participation shall not affect the rights and duties of the selling Lender hereunder to the Borrower and the Lender shall continue to exercise all approvals, disapprovals and other functions of a Lender, (d) such participation shall not entitle such participant to any rights or privileges under this Agreement or the Loan Documents, including, without limitation, the right to approve waivers, amendments or modifications, (e) such participant shall have no direct rights against the Borrower except the rights granted to the Lenders pursuant to §13, (f) such sale is effected in accordance with all applicable laws, (g) such participant shall not be a Person controlling, controlled by or under common control with, or which is not otherwise free from influence or control by, the Borrower, any Related Company or any Unconsolidated Entity or any affiliate thereof, and (h) no participant shall have the right to grant further participations or assign its rights, obligations or interests under such participation to other Persons without the prior written consent of the Agent.

§18.6Pledge by Lender.  Any Lender may at any time pledge or assign all or any portion of its interest and rights under this Agreement (including all or any portion of its Note) to any of the twelve Federal Reserve Banks organized under Section 4 of the Federal Reserve Act, 12 U.S.C. §341. No such pledge or the enforcement thereof shall release the pledgor Lender from its obligations hereunder or under any of the other Loan Documents.

§18.7No Assignment by Borrower.  The Borrower shall not assign or transfer any of its rights or obligations under any of the Loan Documents without the prior written consent of each of the Lenders.

§18.8Disclosure.  The Borrower agrees that in addition to disclosures made in accordance with standard banking practices any Lender may disclose information obtained by such Lender pursuant to this Agreement to assignees or participants and potential assignees or participants hereunder.

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§19.NOTICES, ETC.  Except as otherwise expressly provided in this Agreement, all notices and other communications made or required to be given pursuant to this Agreement or the Notes shall be in writing and shall be delivered in hand, mailed by United States registered or certified first class mail, postage prepaid, sent by overnight courier, or sent by telegraph, telecopy, telefax or telex and confirmed by delivery via courier or postal service, addressed as follows:

(a)if to the Borrower, at 1780 S. Bellaire Street, Suite 515, Denver, CO 80222 Attention: Chief Financial Officer, Telefax No. 303-296-7353 or at such other address for notice as the Borrower shall last have furnished in writing to the Agent; and

(b)if to the Agent, at 100 Federal Street, Boston, Massachusetts 02110, Attention: Structured Real Estate, and to 115 Perimeter Center Place, N.E., Suite 500, Atlanta, Georgia 30346, Attn: George Ojanuga, Director, Telefax No. 770-390-8434 or such other address for notice as the Agent shall last have furnished in writing to the Borrower.

(c)if to any Lender, at such Lender’s address set forth on such Lender’s signature page, or such other address for notice as such Lender shall have last furnished in writing to the Person giving the notice.

Any such notice or demand shall be deemed to have been duly given or made and to have become effective (i) if delivered by hand, overnight courier or facsimile to a responsible officer of the party to which it is directed, at the time of the receipt thereof by such officer or the sending of such facsimile (as evidenced by confirmation of successful transmission) and (ii) if sent by registered or certified first-class mail, postage prepaid, on the third Business Day following the mailing thereof.

§20.GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE.  This agreement and each of the other Loan Documents, except as otherwise specifically provided therein, and the rights and obligations of the parties hereunder shall be construed and interpreted in accordance with the laws of the Commonwealth Of Massachusetts (excluding the laws applicable to conflicts or choice of law). BORROWER AGREES THAT ANY SUIT BY IT FOR THE ENFORCEMENT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT ONLY IN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN AND BORROWER CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT FOR ANY SUIT BY AGENT OR ANY LENDER AND THE SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN §19. BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT FORUM. IN ADDITION TO THE COURTS OF THE COMMONWEALTH OR ANY FEDERAL COURT SITTING THEREIN, THE AGENT OR ANY LENDER MAY BRING ACTION(S) FOR ENFORCEMENT ON A NONEXCLUSIVE BASIS WHERE ANY COLLATERAL EXISTS AND THE BORROWER CONSENTS TO THE NON-EXCLUSIVE JURISDICTION OF SUCH COURTS AND THE SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN §19.

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§21.HEADINGS.  The captions in this Agreement are for convenience of reference only and shall not define or limit the provisions hereof.

§22.COUNTERPARTS.  This Agreement and any amendment hereof may be executed in several counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original, and all of which together shall constitute one instrument. In proving this Agreement it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom enforcement is sought.

§23.ENTIRE AGREEMENT.  This Agreement and the Loan Documents is intended by the parties as the final, complete and exclusive statement of the transactions evidenced by this Agreement and the Loan Documents.  All prior or contemporaneous promises, agreements and understandings, whether oral or written, are deemed to be superceded by this Agreement and the Loan Documents, and no party is relying on any promise, agreement or understanding not set forth in this Agreement and the Loan Documents. Neither this Agreement nor any term hereof may be changed, waived, discharged or terminated, except as provided in §25.

§24.WAIVER OF JURY TRIAL AND CERTAIN DAMAGE CLAIMS.  THE BORROWER, THE AGENT AND EACH LENDER HEREBY MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY, INCLUDING, WITHOUT LIMITATION, ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS OR ACTIONS OF AGENT OR THE LENDERS RELATING TO THE ADMINISTRATION OF THE LOANS OR ENFORCEMENT OF THE LOAN DOCUMENTS, AND AGREE THAT NO PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED.  EXCEPT AS PROHIBITED BY LAW, BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES.  BORROWER CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF AGENT OR ANY LENDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT AGENT OR ANY LENDER WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER.  THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR LENDERS TO PROVIDE THE COMMITMENTS AND MAKE THE LOANS.

§25.CONSENTS, AMENDMENTS, WAIVERS, ETC.  Except as otherwise expressly provided in this Agreement, any consent or approval required or permitted by this Agreement may be given, and any term of this Agreement or of any other instrument related hereto or mentioned herein may be amended, and the performance or observance by the Borrower of any terms of this Agreement or such other instrument or the continuance of any Default or Event of Default may be waived (either generally or in a particular instance and either retroactively or prospectively) with, but only with, the written consent of the Majority Lenders.  Notwithstanding

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the foregoing, none of the following may occur without the written consent of each Lender:  a decrease in the rate of interest on and the term of the Notes; an increase in the amount of the Commitments of the Lenders; a forgiveness, reduction or waiver of the principal of any unpaid Loan or any interest thereon or fee payable to the Lenders under the Loan Documents; the postponement of any date fixed for any payment of principal of or interest on the Loan; an extension of the Maturity Date; a change in the manner of distribution of any payments to the Lenders or the Agent; the release of the Borrower; an amendment of the definition of Majority Lenders or of any requirement for consent by all of the Lenders; any modification to require a Lender to fund a pro rata share of a request for an advance of the Loan made by the Borrower other than based on its Facility Percentage; an amendment to this §25; or an amendment of any provision of this Agreement or the Loan Documents which requires the approval of all of the Lenders or the Majority Lenders to require a lesser number of Lenders to approve such action.  No waiver shall extend to or affect any obligation not expressly waived or impair any right consequent thereon. No course of dealing or delay or omission on the part of the Agent or any Lender in exercising any right shall operate as a waiver thereof or otherwise be prejudicial thereto.  No notice to or demand upon the Borrower shall entitle the Borrower to other or further notice or demand in similar or other circumstances.

§26.SEVERABILITY.  The provisions of this Agreement are severable, and if any one clause or provision hereof shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction, and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision of this Agreement in any jurisdiction.

§27.RELATIONSHIP.  Neither the Agent nor any Lender has any fiduciary relationship with or fiduciary duty to the Borrower arising out of or in connection with the Agreement or the other Loan Documents or the transactions contemplated hereunder and thereunder, and the relationship between each Lender and the Borrower is solely that of a lender and borrower, and nothing contained herein or in any of the other Loan Documents shall in any manner be construed as making the parties hereto partners, joint venturers or any other relationship other than lender and borrower.

§28.DEALINGS WITH THE BORROWER.  The Agent, the Lenders and their affiliates may accept deposits from, extend credit to and generally engage in any kind of banking, trust or other business with the Borrower or any of its affiliates or Subsidiaries regardless of the capacity of the Agent or the Lenders hereunder.

§29.NO UNWRITTEN AGREEMENTS.  THE WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

§30.TIME OF THE ESSENCE.  Time is of the essence with respect to each and every covenant, agreement and obligation of the Borrower under this Agreement and the other Loan Documents.

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§31.RIGHTS OF THIRD PARTIES.

(a)This Agreement and the other Loan Documents are made and entered into for the sole protection and legal benefit of the Borrower, the Lenders, and the Agent, and their permitted successors and assigns, and no other Person shall be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any of the other Loan Documents.

(b)All conditions to the performance of the obligations of the Agent and the Lenders under this Agreement, including the obligation to make Loans, are imposed solely and exclusively for the benefit of the Agent and the Lenders and no other Person shall have standing to require satisfaction of such conditions in accordance with their terms or be entitled to assume that the Agent and the Lenders will refuse to make advances of proceeds of the Loan in the absence of strict compliance with any or all thereof and no other Person shall, under any circumstances, be deemed to be a beneficiary of such conditions, any and all of which may be freely waived in whole or in part by the Agent and the Lenders at any time if in their sole discretion they deem it desirable to do so.

[SIGNATURES BEGIN ON FOLLOWING PAGE]

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IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as a sealed instrument as of the date first set forth above.

BORROWER:
AMERIVEST PROPERTIES INC., a Maryland corporation
By:		John B. Greenman
Name:				John B. Greenman
Title:			Vice President
AGENT:
FLEET NATIONAL BANK, as Agent
By:	George Ojanuga
Name:  George Ojanuga
Title:  Director

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Lender Signature Page

FLEET NATIONAL BANK
By:	George Ojanuga
Name:  George Ojanuga
Title:  Director

Commitment:	$	30,000,000
Facility Percentage:	100		%

Notice Address:

Fleet National Bank

100 Federal Street

Boston, MA  02110

Attn: Structured Real Estate

With a copy to:

Fleet National Bank.

115 Perimeter Center Place, N.E.

Suite 500

Atlanta, GA 30346

Attn: George Ojanuga, Vice President

Fax:  (770)390-8434 or 391-9811

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EX-10.12B

Exhibit 10.12B

REVOLVING CREDIT NOTE

$30,000,000.00 December 15, 2003

FOR VALUE RECEIVED, the undersigned, AMERIVEST PROPERTIES INC., a Maryland corporation (the “Borrower”), promises to pay, without offset or counterclaim,  to the order of FLEET NATIONAL BANK (hereinafter, together with its successors in title and assigns, called the “Lender”) at the head office of Fleet National Bank, as Agent (the “Agent”) at 100 Federal Street, Boston, Massachusetts 02110 or at such other address as Agent may specify, the principal sum of THIRTY MILLION AND NO/100 DOLLARS ($30,000,000.00) or, if less, the aggregate unpaid principal amount of all Loans made by the Lender to the Borrower pursuant to the Unsecured Revolving Credit Agreement dated as of December 15, 2003 among the Lender, the Borrower,  the other lending institutions named therein and the Agent, as amended from time to time (the “Credit Agreement”).  Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to them in the Credit Agreement.  Unless otherwise provided herein, the rules of interpretation set forth in §1.2 of the Credit Agreement shall be applicable to this Note.

The Borrower also promises to pay (a) principal from time to time at the times provided in the Credit Agreement and (b) interest from the date hereof on the principal amount from time to time unpaid at the rates and times set forth in the Credit Agreement and in all cases in accordance with the terms of the Credit Agreement.  Late charges and other charges and default rate interest shall be paid by Borrower in accordance with the terms of the Credit Agreement.  The entire outstanding principal amount of this Note, together with all accrued but unpaid interest thereon, shall be due and payable in full on the Maturity Date.  The Lender may endorse the record relating to this Note with appropriate notations evidencing advances and payments of principal hereunder as contemplated by the Credit Agreement.

This Note is issued pursuant to, is entitled to the benefits of, and is subject to the provisions of the Credit Agreement.  The principal of this Note is subject to prepayment in whole or in part in the manner and to the extent specified in the Credit Agreement.  The principal of this Note, the interest accrued on this Note and all other Obligations of the Borrower are full recourse obligations of the Borrower, and all of its Real Estate Assets, and its other properties shall be available for the payment and performance of this Note, the interest accrued on this Note, and all of such other Obligations.  In case an Event of Default shall occur and be continuing, the entire unpaid principal amount of this Note and all of the unpaid interest accrued thereon may become or be declared due and payable in the manner and with the effect provided in the Credit Agreement.

Notwithstanding anything in this Note to the contrary, all agreements between the Borrower and the Lenders and the Agent, whether now existing or hereafter arising and whether written or oral, are hereby limited so that in no contingency, whether by reason of acceleration of the maturity of any of the Obligations or otherwise, shall the interest contracted for, charged or received by the Lenders exceed the maximum amount permissible under applicable law.  If, from any circumstance whatsoever, interest would otherwise by payable to the Lenders in excess of

the maximum lawful amount, the interest payable to the Lenders shall be reduced to the maximum amount permitted under applicable law; and if from any circumstance the Lenders shall ever receive anything of value deemed interest by applicable law in excess of the maximum lawful amount, an amount equal to any excessive interest shall be applied to the reduction of the principal balance of the Obligations and to the payment of interest or, if such excessive interest exceeds the unpaid balance of principal of the Obligations, such excess shall be refunded to the Borrower.  All interest paid or agreed to be paid to the Lenders shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full period until payment in full of the principal of the Obligations (including the period of any renewal or extension thereof) so that the interest thereon for such full period shall not exceed the maximum amount permitted by applicable law.  This section shall control all agreements between the Borrower and the Lenders and the Agent.

The Borrower and all endorsers hereby waive presentment, demand, protest and notice of any kind in connection with the delivery, acceptance, performance and enforcement of this Note, and also hereby assent to extensions of time of payment or forbearance or other indulgences without notice.

This Note and the obligations of the Borrower hereunder shall be governed by and interpreted and determined in accordance with the laws of the Commonwealth of Massachusetts (excluding the laws applicable to conflicts or choice of law).  The Borrower has waived its right to a jury trial with respect to any action or claim arising out of this Note pursuant to §24 of the Credit Agreement.

IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed in its name as an instrument under seal on the date first above written.

WITNESS:	AMERIVEST PROPERTIES INC.,
	a Maryland corporation
Jean M. Gonzales	By:	John B. Greenman
		Name:		John B. Greenman
		Title:	Vice President
					(CORPORATE SEAL)

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EX-10.13

Exhibit 10.13

CONTRACT OF SALE

BETWEEN

LSF PRESIDIO INVESTMENT I, LLC

and

AMERIVEST CAMELBACK INC.

2710-2850 E. Camelback Road

Phoenix, Arizona

TABLE OF CONTENTS

ARTICLE I PURCHASE AND SALE
	1.1	Property.
ARTICLE II PURCHASE PRICE
	2.1	Purchase Price.
	2.2	Method of Payment.
	2.3	Failure to Make Deposit.
	2.4	Independent Consideration
ARTICLE III
	3.1	Deliveries.
	3.2	Inspections.
	3.3	Inspection Period
	3.4	Disclaimer of Warranties.
	3.5	Release of Claims
	3.6	Contracts to be Assumed by Purchaser.
	3.7	Estoppels
	3.8	Subordination, Non-disturbance and Attornment
ARTICLE IV SURVEY AND TITLE
	4.1	Survey
	4.2	Title Commitment
	4.3	Title Policy.
	4.4	Title.
	4.5	Bill of Sale.
ARTICLE V SELLER’S COVENANTS
	5.1	Seller hereby covenants and agrees with Purchaser as follows:
ARTICLE VI CLOSING
	6.1	Closing Date.
	6.2	Closing
	6.3	Closing Prorations and Costs.

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	6.4	Real Estate Taxes and Special Assessments
	6.5	Closing Estimates and Final Adjustments.
ARTICLE VII CASUALTY
	7.1	Casualty.
	7.2	Condemnation.
	7.3	Waiver.
ARTICLE VIII REAL ESTATE COMMISSIONS
	8.1	Indemnity.
ARTICLE IX TERMINATION AND REMEDIES
	9.1	Remedies.
	9.2	Liquidated Damages.
ARTICLE X ASSIGNMENT OF CONTRACT
	10.1	Assignment.
ARTICLE XI MISCELLANEOUS
	11.1	Entire Agreement.
	11.2	Survival
	11.3	Time of Essence
	11.4	Notices
	11.5	Gender; Numbers
	11.6	Headings.
	11.7	Days
	11.8	Governing Law
	11.9	Holidays
	11.10	Attorneys’ Fees
	11.11	Interpretation
	11.12	Severability
	11.13	Amendments
	11.14	Acceptance of Offer
	11.15	Confidentiality
	11.16	Recording
	11.17	Counterparts

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	11.18	No Third Party Rights
	11.19	No Joint Venture
	11.20	Exhibits
	11.21	No Personal Liability
	11.22	Real Estate Reporting Person
	11.23	Exchange of Properties
ARTICLE XII REPRESENTATIONS AND WARRANTIES
	12.1	Purchaser’s Representations and Warranties
	12.2	Seller’s Representations and Warranties

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CONTRACT OF SALE

THIS CONTRACT OF SALE (this “Contract”) is entered into as of the Effective Date (as defined in Section 2.2(a) hereof) by and between LSF PRESIDIO INVESTMENT I, LLC, a Delaware limited liability company (the “Seller”), and AMERIVEST CAMELBACK INC., an Arizona corporation (the “Purchaser”), upon the terms and conditions set forth herein.

ARTICLE I

PURCHASE AND SALE

1.1Property.  For and in consideration of the premises, undertakings and mutual covenants of the parties set forth herein, Seller hereby agrees to sell, transfer, assign and/or convey unto Purchaser and Purchaser hereby agrees to accept, buy and pay for the following properties, rights, interests and assets (hereinafter referred to, collectively, as the “Property” and/or the “Project”):

(a)That certain tract of real property located in the City of Phoenix, Maricopa County, Arizona, described in Exhibit A attached hereto and by this reference incorporated herein for all purposes (the “Land”), together with all right, title and interest of Seller in and to (i) all improvements located thereon (the “Improvements”); (ii) the rights, benefits, privileges, easements, tenements, hereditaments, and appurtenances thereon or in anywise appertaining to such real property, including that certain Declaration of Conditions and Restrictions, recorded in Docket 12246, page 1155, records of Maricopa County, Arizona (the “Declaration”), subject, in each case however, to the “Permitted Exceptions” (as hereinafter defined); and (iii) all development rights, air rights, sewer rights and permits, water, water rights, riparian rights, and water stock relating to the Land;

(b)All equipment, machinery, furniture, furnishings, supplies, and other tangible personal property and fixtures of any kind owned by Seller and attached to or located within the Improvements and used in connection with the ownership, maintenance or operation of the Land or the Improvements, excluding any items of personal property owned by tenants at Project (“Tenants”) as set forth in the Rent Roll (hereafter defined) and further excluding any items of personal property owned by third parties and leased to Seller (collectively, the “Personalty”);

(c)All of Seller’s right, title, and interest in any leases, occupancy agreements, or other agreements demising space in, providing for the use of and/or occupancy of the Improvements or the Land (collectively, the “Leases”), as set forth on the rent roll attached hereto as Exhibit F (the “Rent Roll”);

(d)All of Seller’s right, title, and interest in all agreements, other than Leases, if any, for the leasing or licensing of rooftop space of equipment, telecommunications equipment, cable access and other space, equipment, and facilities

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that are located on or within the Project and generate income to Seller including agreement that may be made by Seller after the Effective Date and prior to Closing as permitted by this Agreement (“Licenses”);

(e)To the extent only the same are assignable by Seller to Purchaser, all of Seller’s right, title, and interest in and to any and all (i) contracts or agreements, such as maintenance, service or utility contracts relating to the ownership, maintenance and operation of the Land or the Improvements, which are to be assigned to Purchaser pursuant to the provisions of Section 3.6 below (but expressly excluding the property management agreement for the Project), (ii) warranties and guaranties currently in force and effect with respect to the Land, the Improvements, the Personalty, the Licenses, and/or the Leases, (iii) all permits or similar documents relating to the Land, the Improvements, the Personalty, the Licenses, and/or the Leases, (iv) telephone exchanges and other identifying material relating to the Property, (v) CAD files, plans, drawings, specifications, surveys, engineering reports and other technical descriptions of the Land or the Improvements, (vi) all leasing commission obligations, and (vii) other property (real, personal or mixed) owned by Seller and used in connection with the ownership, leasing, maintenance, service or operation of the Land, the Improvements, the Licenses, or the Leases; and

(f)All of Seller’s right, title and interest in and to all rights to the trade names, assumed names, or business names or similar names by which the Property is currently operated, including, but not limited to “Camelback Lakes Office Complex,” and the goodwill and other intangible assets associated with the operation of the Property by Seller except for any trade names, symbols, or marks relating to Seller’s name, the name of any direct or indirect general partner, member, or venturer in Seller, or any derivative of any of the foregoing.

The Property described in subsections (c), (d), (e), and (f) of this Section 1.1 is hereinafter sometimes referred to as the “Intangible Property.”  The Property shall not include, and Seller shall retain (to the extent each of the following accrued prior to Closing (defined below)), any cash, bank accounts, prepaid obligations and accounts receivable, claims and causes of action, and rights to receive insurance or condemnation proceeds; provided, however, any prepaid obligations so retained by Seller shall be prorated in accordance with the provisions of Article VI and casualty and condemnation proceeds shall be paid to Purchaser to the extent required by Article VII.

ARTICLE II

PURCHASE PRICE

2.1Purchase Price.  The purchase price for the Property shall be an amount equal to the sum of Thirty-two Million and No/100 Dollars ($32,000,000.00) (the “Purchase Price”).

2.2Method of Payment.  The Purchase Price shall be payable as follows:

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(a)“Effective Date” means the last date upon which Seller and Purchaser shall have fully executed this Contract, as indicated by the signature blocks set forth below.  Within three (3) Business Days (as hereinafter defined) after the Effective Date (such date hereinafter referred to as the “Escrow Date”), the parties hereto shall exchange fully executed originals of this Contract and shall cause one (1) fully executed original of this Contract to be delivered to Chicago Title Insurance Company (the “Escrow Agent”), whose national account office is located at 2001 Bryan Street, Suite 1700, Dallas, Texas 75201, Attention Ted Darby, and an earnest money deposit (the “Earnest Money Deposit”) in the amount of $320,000.00 in immediately available funds shall be deposited by Purchaser with the Escrow Agent.  The Earnest Money Deposit shall be placed in an interest bearing account by the Escrow Agent and any income or interest earned on the Earnest Money Deposit prior to Closing (as hereinafter defined) shall be deemed a part of the Earnest Money Deposit for all purposes of this Contract.  Notwithstanding anything to the contrary contained herein, Purchaser may, in Purchaser’s sole and absolute discretion, and at any time on or prior to the expiration of the Inspection Period elect to terminate this Contract in accordance with Section 3.3 hereof and receive a refund of the Earnest Money Deposit by giving written notice to Seller and Escrow Agent.  Upon such termination, the Earnest Money Deposit shall be immediately returned to Purchaser, and neither Seller nor Purchaser shall have any further rights or liabilities under this Contract, except as provided in Sections 3.2, 8.1, 9.1, 11.10, and 11.15 hereof.

(b)The balance of the Purchase Price, after reducing the Purchase Price by the amount of the Earnest Money Deposit (including all interest credited thereto pursuant to Section 2.2(a) above) and adjusting the Purchase Price to take into account prorations, charges and credits in accordance with the terms of this Contract, shall be paid by Purchaser in same day funds immediately available to the Escrow Agent at the Closing.

2.3Failure to Make Deposit.  If Purchaser fails to timely make the deposit of the Earnest Money Deposit with the Escrow Agent as provided for in Section 2.2, then Seller, in its sole discretion shall have the right to terminate this Contract, and upon any such termination neither Seller nor Purchaser shall have any further rights or liabilities under this Contract.

2.4Independent Consideration.  Notwithstanding anything herein to the contrary, Seller shall retain $100.00 as independent consideration for Seller’s performance hereunder from the proceeds of the Earnest Money Deposit delivered to the Title Company by the Purchaser.

ARTICLE III

DELIVERIES AND INSPECTIONS

3.1Deliveries.  Seller has, on or before the Effective Date, delivered to Purchaser, the following items and documents (the “Delivered Documents”) pertaining to the Property:

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(a)to the extent in Seller’s possession, copies of all certificates of insurance, certificates of occupancy, warranties, licenses, permits, authorizations and approvals relating to the construction, occupancy and operation of the Land and the Improvements;

(b)a complete copy of all Leases, including any amendments thereto;

(c)copies of all real estate tax bills for the calendar year, 2002 and 2003 and confirmation of rental tax payments;

(d)complete copies of all service, maintenance and similar contracts entered into by Seller in connection with the Property and all leasing commission obligations currently in effect on the Property (the “Service Contracts”);

(e)a copy of the most recent survey of the Land in Seller’s possession;

(f)to the extent in Seller’s possession, the most recent site plan and the most recent floor plans and building elevations for the buildings on the Property; and

(g)to the extent in Seller’s possession, and not otherwise addressed in (a) through (f) above, the items identified in Exhibit I attached hereto.

Failure of Purchaser to terminate this Contract prior to the expiration of the Inspection Period shall be deemed approval by Purchaser of any material or information delivered to Purchaser pursuant to this Section 3.1.  Purchaser acknowledges and agrees that, (a) Seller delivers the material and information described in this Section 3.1 without representation or warranty as to the accuracy thereof, and (b) Purchaser specifically acknowledges and agrees that Seller shall have no liability or responsibility for any inaccuracy thereof.  PURCHASER ACKNOWLEDGES AND UNDERSTANDS THAT THE DELIVERED DOCUMENTS AND OTHER MATERIALS AND ANY INFORMATION (AS DEFINED IN SECTION 11.15 HEREOF) PROVIDED TO PURCHASER PURSUANT TO THIS CONTRACT MAY HAVE BEEN PREPARED BY PARTIES OTHER THAN SELLER AND, EXCEPT AS EXPRESSLY SET FORTH IN THIS CONTRACT, THAT NEITHER SELLER NOR ANY OF ITS EMPLOYEES, AGENTS, BROKERS OR CONTRACTORS MAKE NOR HAVE MADE ANY REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, AS TO THE COMPLETENESS, CONTENT OR ACCURACY THEREOF.  PURCHASER SPECIFICALLY RELEASES SELLER, AND ITS EMPLOYEES, AGENTS, BROKERS AND CONTRACTORS FROM ALL CLAIMS, DEMANDS, CAUSES OF ACTION, JUDGMENTS, LOSSES, DAMAGES, LIABILITIES, COSTS AND EXPENSES (INCLUDING ATTORNEY’S FEES WHETHER SUIT IS INSTITUTED OR NOT), WHETHER KNOWN OR UNKNOWN, LIQUIDATED OR CONTINGENT, ASSERTED AGAINST OR INCURRED BY PURCHASER BY REASON OF THE INFORMATION CONTAINED IN (OR THAT SHOULD HAVE BEEN CONTAINED IN) SUCH DELIVERED DOCUMENTS AND/OR OTHER MATERIALS.

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3.2Inspections.  Purchaser and its employees and agents shall have the right and permission after the Effective Date and through the Inspection Periodto enter upon the Project or any part thereof at all reasonable times upon at least two (2) Business Days’ advance notice by Purchaser to Seller, in a manner not to unreasonably disturb any Tenant nor damage or injure the Project, to inspect all aspects of the Project, at Purchaser’s sole cost and expense, and to make such inspections, studies and tests of the Project, at Purchaser’s sole cost and expense, which Purchaser deems necessary or advisable; provided, however, that Seller shall have the right to approve and be present for any such inspections, studies and test of the Project.  Purchaser shall indemnify and hold harmless Seller from and against any and all losses, claims, costs (including attorney’s fees and costs of court), damages or judgments caused to the Project, any Tenant thereof, or Seller (including any mechanics’ and/or materialmen’s liens or claims thereof that may be filed or asserted against the Project or Seller by anyone performing such work, studies, tests or inspections or entering the Project or providing materials in connection therewith on behalf of Purchaser) which arise from or relate to such inspections, studies and tests made by or on behalf of Purchaser.  Immediately following any such inspections, studies and tests made by or on behalf of Purchaser, Purchaser shall be required, at Purchaser’s sole cost and expense, to return the Project to the condition the Project was in prior to commencement of such inspections, studies and tests.  Additionally, in the event the Closing does not occur (due to no fault of Seller), Purchaser shall promptly deliver to Seller, without representation or warranty, at no cost or expense to Seller, (i) copies of any and all studies, tests or inspection reports Purchaser has obtained or obtains with respect to the Property, and (ii) any and all copies of the Delivered Documents.  In addition, Seller will make available to Purchaser at Seller’s offices in Phoenix the general ledger and building maintenance reports for the Project for the most recent twelve (12) months.

Notwithstanding the foregoing, Purchaser shall not conduct a Phase II environmental assessment unless same is required by a Phase I inspection and provided Purchaser obtains Seller’s prior written consent, not to be unreasonably withheld.  Additionally, notwithstanding anything to the contrary set forth elsewhere in this Contract, Purchaser shall not, without first obtaining the prior written consent of Seller (which Seller may withhold in its sole and absolute discretion) disclose to any party whomsoever (other than Purchaser’s attorneys, consultants and lender) any environmental information Purchaser obtains with respect to the Property, unless such disclosure is required by applicable law or by order of a court or tribunal of competent jurisdiction.  In the event that Purchaser is or becomes legally compelled by applicable law or by order of a court or tribunal of competent jurisdiction to disclose any of such information, Purchaser will (if time and law permits) provide Seller with at least fifteen (15) days advance written notice (or if applicable law forces an earlier disclosure, with as much advance written notice as is possible under the circumstances) so that Seller may seek a protective order or other appropriate remedy and/or waive compliance with the provisions of this paragraph.  Purchaser shall promptly deliver to Seller, without representation or warranty, at no cost or expense to Seller, copies of any and all environmental information Purchaser has obtained or obtains with respect to the Property.

Purchaser has no right under this Contract to reduce the Purchase Price on account of any inspections, studies or tests made by Purchaser, or for any other reason.  Seller has no legal duty to agree to, nor even consider, any such request made by Purchaser.

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3.3Inspection Period.

(a)Purchaser’s obligations under this Contract shall be conditioned upon its receipt and approval, at Purchaser’s sole cost and expense, of various reports (geological, engineering, soil, drainage, flood plain, environmental, etc.) satisfactory to Purchaser of inspections and its review of the Property and of all matters related thereto, in each case in Purchaser’s sole and absolute discretion.  Purchaser shall have until 5:00 p.m., Mountain Standard Time, on February 11, 2004 (the “Inspection Period”), to make such inspections, review and approve the Delivered Documents, and otherwise review and approve the Property, all at Purchaser’s sole cost and expense.

(b)Prior to the expiration of the Inspection Period, Purchaser shall determine, in its sole and absolute discretion, whether it intends to purchase the Property, and if Purchaser determines that it does not wish to proceed with the acquisition of the Property from Seller pursuant to this Contract, Purchaser shall deliver on or prior to the expiration of the Inspection Period written notice (the “Non-Feasibility Notice”) to Seller and Escrow Agent that Purchaser has elected to terminate this Contract, and upon Seller’s and Escrow Agent’s receipt of such notice (i) this Contract shall terminate, (ii) Purchaser shall be entitled to receive a prompt refund of the Earnest Money Deposit, (iii) Purchaser shall return to Seller all of the Delivered Documents within four (4) days after such transaction, and (iv) neither Seller nor Purchaser shall have any further rights or liabilities under this Contract, except for the obligations contained in Sections 3.2, 3.3, 8.1, 9.1, 11.10, and 11.15 hereof, which shall survive any such termination.  If Purchaser fails to deliver the Non-Feasibility Notice to Seller and Escrow Agent on or before the expiration of the Inspection Period, all objections by Purchaser to the condition of the Property or status of title to the Property shall be deemed waived, Purchaser shall have no right to terminate this Contract pursuant to this Section 3.3, and the Earnest Money Deposit shall thereafter be retained in escrow as security for performance of this Contract by Purchaser.

3.4Disclaimer of Warranties.  PURCHASER IS ACQUIRING THE PROPERTY “AS IS” WITH ALL FAULTS AND DEFECTS.  EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS CONTRACT, SELLER HEREBY SPECIFICALLY DISCLAIMS ANY REPRESENTATION OR WARRANTY, ORAL OR WRITTEN, INCLUDING, BUT NOT LIMITED TO THOSE CONCERNING (I) THE NATURE AND CONDITION OF THE PROPERTY AND THE SUITABILITY OF THE PROPERTY FOR ANY AND ALL ACTIVITIES AND USES WHICH PURCHASER MAY ELECT TO CONDUCT THEREON, (II) THE MANNER, CONSTRUCTION, CONDITION AND STATE OF REPAIR OR LACK OF REPAIR OF ANY IMPROVEMENTS LOCATED ON THE PROPERTY, (III) THE NATURE AND EXTENT OF ANY RIGHT-OF-WAY, LEASES, POSSESSION, LIEN, ENCUMBRANCE, LICENSE, RESERVATION, CONDITION OR OTHERWISE, (IV) THE ACCURACY OF ANY INFORMATION PROVIDED TO PURCHASER, AND (V) THE COMPLIANCE OF THE PROPERTY OR ITS OPERATION WITH ANY LAWS, RULES, ORDINANCES, OR REGULATIONS OF ANY GOVERNMENT OR OTHER BODY, IT BEING SPECIFICALLY UNDERSTOOD THAT PURCHASER SHALL HAVE THE FULL OPPORTUNITY DURING THE INSPECTION

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PERIOD TO DETERMINE FOR ITSELF THE CONDITION OF THE PROPERTY.  THE SALE OF THE PROPERTY AS PROVIDED FOR HEREIN IS MADE ON AN “AS IS” BASIS, AND PURCHASER EXPRESSLY ACKNOWLEDGES THAT, IN CONSIDERATION OF THE AGREEMENTS OF SELLER HEREIN, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS CONTRACT, SELLER MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, OR ARISING BY OPERATION OF LAW, INCLUDING, BUT IN NO WAY LIMITED TO, ANY WARRANTY OF QUANTITY, QUALITY, CONDITION, HABITABILITY, MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE PROPERTY, ANY IMPROVEMENTS, THE PERSONALTY, OR SOIL, WATER, AIR OR OTHER ENVIRONMENTAL CONDITIONS.  EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS CONTRACT, SELLER SPECIFICALLY DISCLAIMS ANY WARRANTY, GUARANTY OR REPRESENTATION, ORAL OR WRITTEN, PAST OR PRESENT, EXPRESS OR IMPLIED, CONCERNING THE PROPERTY.  PURCHASER ACKNOWLEDGES THAT, EXCEPT AS EXPRESSLY PROVIDED HEREIN, PURCHASER IS PURCHASING THE PROPERTY BASED SOLELY UPON PURCHASER’S OWN INDEPENDENT INVESTIGATIONS AND FINDINGS AND NOT IN RELIANCE UPON ANY INFORMATION PROVIDED BY SELLER OR SELLER’S AGENTS OR CONTRACTORS. WITHOUT LIMITING THE FOREGOING, PURCHASER ACKNOWLEDGES THAT SELLER HAS MADE NO AGREEMENT TO ALTER, REPAIR OR IMPROVE ANY OF THE PROPERTY.

3.5Release of Claims.  Except as otherwise set forth herein, without limiting the provisions of Section 3.4, Purchaser releases Seller and its employees, agents and brokers from any and all claims (whether known or unknown, and whether contingent or liquidated) arising from or related to (a) any defects, errors or omissions in the design or construction of any improvements upon the Property, whether the same are a result of negligence or otherwise; or (b) other conditions (including environmental conditions) affecting the Property, whether the same are a result of negligence or otherwise.  The release set forth in this Section 3.5 specifically includes without limitation any claims under any Environmental Laws (hereafter defined), under the Americans with Disabilities Act of 1990, 42 U.S.C. §§ 12101 et seq. (or any other federal, state or local laws similar thereto), or with respect to any Environmental Risk (hereafter defined).  “Environmental Laws” means all laws (federal, state, local or foreign) relating to pollution or the environment or relating to public health, welfare, or safety, including without limitation, the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act (42 U.S.C. §§ 6901 et seq.), the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. §§ 9601 et seq.), the Emergency Planning and Community Right to Know Act (42 U.S.C. §§ 11001 et seq.), the Clean Air Act (42 U.S.C. §§ 7401 et seq.), the Clean Water Act (33 U.S.C. §§ 1251 et seq.), the Toxic Substances Control Act (15 U.S.C. §§ 2601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. §§ 1801 et seq.), the Occupational Safety and Health Act (29 U.S.C. §§ 651 et seq.), the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. §§ 136 et seq.), and the Safe Drinking Water Act (42 U.S.C. §§ 300f et seq.), as any of the same may be amended from time to time, any state or local law dealing with environmental matters, any common law, and any regulations, orders, rules, procedures, guidelines and the like promulgated in connection therewith, regardless of whether the same are in existence on the date of this Contract.  An “Environmental Risk” means any risk of liability under Environmental Laws, including without limitation, (a) the presence, release, or

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discharge of any petroleum or petroleum products or constituents, radioactive materials, asbestos in any form that is or could become friable, lead-based paint, polychlorinated biphenyls (“PCBs”); and (b) the presence, release, or discharge of any “hazardous substance,” “hazardous waste,” “hazardous materials,” “pollutants,” or “contaminants” (as defined by any Environmental Laws).  IT IS SPECIFICALLY INTENDED BY SELLER AND PURCHASER THAT THE RELEASE CONTAINED HEREIN BE WITHOUT LIMIT, IRRESPECTIVE OF THE CAUSE OR CAUSES OF ANY SUCH CLAIMS (INCLUDING, WITHOUT LIMITATION, PRE-EXISTING CONDITIONS, STRICT LIABILITY OR THE NEGLIGENCE OF ANY PARTY OR PARTIES [INCLUDING SELLER], WHETHER SUCH NEGLIGENCE BE SOLO, JOINT OR CONCURRENT, ACTIVE OR PASSIVE).

3.6Contracts to be Assumed by Purchaser.  At Closing, Purchaser shall take an assignment of and assume all of the Service Contracts, except for those Service Contracts capable of termination without penalty or payment of any kind that Purchaser elects in writing not to accept prior to the end of the Inspection Period (the “Rejected Contracts”); and Purchaser also shall assume all obligations under the Service Contracts but not the Rejected Contracts, which shall be terminated at Closing (the Service Contracts less the Rejected Contracts being herein referred to as the “Assigned Contracts”), which are to be performed after the Closing.  Purchaser also will cooperate with Seller in any efforts made by Seller to have Seller released from any liability that may accrue after the Closing under any of the Assigned Contracts.  After the end of the Inspection Period, Seller will terminate any Assigned Contract if directed by Purchaser, but only if Purchaser agrees in a written instrument in form and of content acceptable to Seller to pay all termination penalties and costs payable pursuant to such terminated Assigned Contract and otherwise agrees to indemnify and hold harmless Seller from all loss, cost and expense that may arise from such termination, and provided that no such termination shall be effective prior to the Closing.

3.7Estoppels.  Seller shall request that all Tenants execute statements in the form attached hereto as Exhibit G (“Tenant Estoppel”); provided, however, that if the form of Tenant Estoppel attached hereto as Exhibit G requests information in addition to or different from that required to be given pursuant to a Tenant’s Lease, such Tenant may execute an estoppel certificate in the form required pursuant to its Lease and be deemed to have provided a Tenant Estoppel within the meaning of this Section 3.7 and shall be deemed satisfactory to and accepted by Purchaser.  Receipt no later than five days prior to Closing of the Tenant Estoppels from Tenants leasing eighty-five percent (85%) of the leased net rentable area of the Improvements, to include Tenant Estoppels from 100% of the Tenants leasing 10,000 square feet or more of net rentable area in the Improvements, shall be a condition to Purchaser’s obligation to Close hereunder.  Seller shall deliver requests for the SNDAs (hereinafter defined) and Tenant Estoppels to the Tenants within ten days after the Effective Date.  Seller shall promptly deliver to Purchaser any Tenant Estoppels received by Seller.

3.8Subordination, Non-disturbance and Attornment.  Seller shall reasonably cooperate with Purchaser to obtain from all Tenants a subordination, non-disturbance, and attornment agreement in a form reasonably acceptable to Purchaser and Purchaser’s lender (“SNDA”) no later than five days prior to Closing.  Receipt of the SNDAs shall not be a condition of Purchaser’s obligation to Close.

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ARTICLE IV

SURVEY AND TITLE

4.1Survey.  Seller shall deliver to Purchaser within ten (10) days after the Effective Date of this Contract a copy of an update of the most recent survey of the Land in Seller’s possession (the “Survey”).  Purchaser shall have the right to obtain an additional update and re-certification of the Survey at Purchaser’s sole cost and expense.

4.2Title Commitment.

(a)Seller has delivered to Purchaser, on or before the Effective Date of this Contract, an ALTA Form 1992 title commitment (the “Title Commitment”) from the Escrow Agent setting forth the status of the title to the Land and the Improvements, pursuant to which the Escrow Agent agrees to insure title to the Land and the Improvements pursuant to an ALTA Owner’s Extended Coverage Policy in the full amount of the Purchase Price (the “Title Policy”), and (ii) legible copies of all documents referred to in the Title Commitment (the “Title Documents”).

(b)If any exceptions appear in the Title Commitment, other than the standard printed exceptions, that are unacceptable to Purchaser, then Purchaser shall, within ten (10) days after the Effective Date (the “Title Review Period”), notify Seller in writing of such fact.  If, on or before five (5) days after receipt of such notice (the “Title Cure Period”) from Purchaser, Seller fails to either cure or agree to cure by Closing any such objection (without having any obligation to do so), then Purchaser may terminate this Contract by delivering written notice to Seller and the Escrow Agent within five (5) days after the end of the Title Cure Period, and upon such termination Purchaser, subject to the provisions of Section 3.3 above, shall be entitled to a prompt return of the Earnest Money Deposit as Purchaser’s sole and exclusive remedy for Seller’s failure to eliminate or modify any title exceptions.  Failure of Purchaser to notify Seller and the Escrow Agent as aforesaid and/or to terminate this Contract as permitted under this Section 4.2 shall be deemed approval by Purchaser of any unacceptable exceptions which have not been eliminated or modified, and Purchaser shall accept such title as Seller can deliver.  For the purposes of this Contract, (i) the lien for general real estate taxes for the calendar year during which the Closing shall occur and subsequent years, (ii) all easements, restrictions, other conditions or encumbrances which are shown on the Title Commitment and/or the Survey and which are not objected to by Purchaser and/or are not cured by Seller as described above, (iii) the Declaration, and (iv) the Leases are hereinafter collectively referred to as the “Permitted Exceptions”.

4.3Title Policy.  Seller shall pay the premium for a standard owner’s policy of title insurance, and Purchaser shall pay the costs of any extended coverage and/or title endorsements that Purchaser elects to obtain.

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4.4Title.  At the Closing, Seller shall convey to Purchaser, by Special Warranty Deed in form attached hereto as Exhibit C (the “Deed”), indefeasible fee simple to the Land and the Improvements, free and clear of any and all liens, encumbrances, conditions, easements, assessments, restrictions and other conditions, except for the following:

(a)All of the Leases and other agreements, recorded and unrecorded, which burden the Property, and the rights of the tenants and other parties claiming thereunder;

(b)The Assigned Contracts; and

(c)The Permitted Exceptions.

4.5Bill of Sale.  At the Closing, Seller shall assign and transfer to Purchaser, by bill of sale and assignment of leases and service contracts executed by Seller and Purchaser in the form attached hereto as Exhibit D (the “Bill of Sale”), all of Seller’s right, title and interest in and to the Leases, Personalty, Assigned Contracts, and Intangible Property, free and clear of any and all liens, security interests, encumbrances, conditions, easements, assessments and restrictions, except for the matters described in Section 4.4 hereof.

ARTICLE V

SELLER’S COVENANTS

5.1Seller hereby covenants and agrees with Purchaser as follows:

(a)At all times from the Effective Date to the Closing, Seller shall cause to be maintained in force, “all-risk” casualty insurance upon the Project in the same amounts as the insurance coverage on the Project on the Effective Date.

(b)At all times from the Effective Date to the Closing, Seller shall operate and maintain the Project in substantially the same manner as it is now managed, and Seller shall use reasonable efforts to maintain the physical condition of the Project in its current condition, reasonable and ordinary wear and tear and damage by fire, other casualty and condemnation excepted.

(c)Seller shall neither transfer nor remove any Personalty or fixtures from the Project subsequent to the Effective Date, unless the same are no longer needed for the maintenance and operation of the Project or except for purposes of replacement thereof, in which case such replacements shall be promptly installed prior to Closing and shall be comparable in quality to the items being replaced.

(d)“New Document” means (1) any lease, lease extension, lease modification or lease termination; (2) any other document creating or consenting to an additional encumbrance upon the Land or the Improvements; and (3) any contract or agreement entered into by Seller that will bind Purchaser after the Closing, unless the

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same is terminable without penalty on no more than thirty (30) days notice.  Seller shall promptly notify Purchaser of any New Document.  Seller shall not, after the expiration of the Inspection Period, enter into any New Document without the prior written consent of Purchaser, which shall be deemed given if no response is made by Purchaser within five (5) Business Days after Seller’s written request for approval.

(e)Seller has finalized plans for updating and modifying the HVAC system for the Property.  The work remaining to be performed consists of replacing the four (4) original rooftop HVAC units that have not previously been replaced.  Seller either will complete the replacement of such units, at Seller’s cost, prior to Closing or provide to Purchaser a credit against the Purchase Price equal to 100% of the cost of the replacement work not performed by Closing as reasonably determined by Seller.

ARTICLE VI

CLOSING

6.1Closing Date.  Provided Purchaser does not elect to terminate this Contract pursuant to the provisions of this Contract permitting Purchaser to do so, the consummation of the purchase and sale contemplated hereby (the “Closing”) shall be held at the offices of the Escrow Agent on or before March 12, 2004 (the “Closing Date”); provided, however, Seller shall have the right to extend the Closing Date for up to an additional ten (10) business days in order to satisfy the conditions set forth in Section 3.7.

6.2Closing.

(a)Except as otherwise provided below, at Closing, Seller shall deliver or cause to be delivered to Purchaser each of the following items:

(1)The duly executed and acknowledged Deed, conveying the Land and the Improvements to Purchaser as provided in Section 4.4;

(2)The duly executed Bill of Sale as provided in Section 4.5;

(3)All master keys in Seller’s possession to all locks on the Project and the original copy of the Leases, to the extent in Seller’s possession;

(4)An executed affidavit confirming that Seller is not a foreign entity in accordance with the provisions of Section 1445 of the Internal Revenue Code of 1986, as amended;

(5)An executed notice to the Tenants under the Leases in the form of Exhibit E attached hereto (the “Notice to Tenant”);

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(6)Evidence acceptable to the Escrow Agent and Purchaser authorizing consummation by Seller of the purchase and sale transaction contemplated hereby and the execution and delivery of the closing documents on behalf of Seller;

(7)The originals of all books and records of account, correspondence with Tenants and suppliers, Assigned Contracts, Leases and all Lease files, Licenses, maintenance records and warranties, and other agreements, plans, and specifications and other items affecting the Property, to the extent in Seller’s possession;

(8)Intentionally Deleted.

(9)Pay all costs associated with Title Policy except any portion of the premium in excess of the premium for a standard coverage owner’s form and endorsements that Purchaser or its lender may desire to the Title Policy;

(10)Any other Closing documents that may be reasonably required by the Escrow Agent or Purchaser to consummate this purchase and sale; and

(11)The SNDAs, to the extent secured pursuant to Section 3.8 above, and Estoppels in accordance with Section 3.7 above.

(b)At the Closing, Purchaser shall:

(1)Deliver the Purchase Price for the Property required to be paid in accordance with Section 2.2;

(2)Deliver evidence acceptable to the Escrow Agent and Seller authorizing consummation by Purchaser of the purchase and sale transaction contemplated hereby and the execution and delivery of the closing documents on behalf of Purchaser;

(3)Execute the Bill of Sale described in Section 6.2(a)(2);

(4)Execute and deliver the “As-Is” Certificate in the form of Exhibit B hereto;

(5)Execute the Notice to Tenant and immediately deliver a copy of same to Tenant;

(6)Intentionally Deleted.

(7)Pay all costs associated with any premium in excess of the premium for a standard owner’s policy of title insurance and for any deletions,

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modifications, amendments or endorsements Purchaser or its lender may desire to the Title Policy; and

(8)Deliver all additional documents and instruments as in the opinion of the Escrow Agent are necessary to the proper consummation of this transaction.

6.3Closing Prorations and Costs.  Provided the Purchase Price for the Property required to be paid in accordance with Section 2.2 is received by the Title Company no later than 2:00 p.m., Mountain Standard Time, on the Closing Date, the items in subparagraphs (a) through (f) of this Section 6.3 shall be apportioned or prorated between Seller and Purchaser as of 11:59 p.m., Mountain Standard Time, on the day immediately preceding the Closing Date (with all prorations to be made on a 365 day year basis) (if funds are received after 2:00 PM, Mountain Standard Time, on the Closing Date, the prorations shall be made as of the Closing Date rather than the day immediately preceding the Closing Date):

(a)Assessments under Recorded Documents.  Any assessments under any recorded document constituting a lien or charge on the Property which are due and payable in the calendar year in which the Closing occurs.

(b)Collected Rent.  All collected rent and other income under the Leases in effect at the Closing, but excluding payments that may constitute rent but are provided for in other subparagraphs of this Section 6.3.  Seller shall be charged with any rentals actually collected by Seller before Closing but applicable to any period of time after Closing.  Uncollected rent and other income shall not be prorated.  If Purchaser collects after Closing any delinquent rents or other income relating to Seller’s period of ownership of the Property, Purchaser shall remit promptly such sums to Seller.  Purchaser shall bill and attempt to collect such delinquent rent and other income in the ordinary course of business, but shall not be required to take legal action, or terminate any Leases or threaten to terminate any Leases to collect any delinquencies.  After Closing, Seller shall have the right to institute legal action or otherwise collect any rents delinquent for any period prior to the Closing without prejudice to Purchaser’s obligations hereunder, however, Seller shall have no right to cause any such Tenant to be evicted or to exercise any other “landlord” remedy set forth in such Tenant’s lease other than to sue Tenants no longer in possession of the premises at the Project for collection.

(c)Utilities.  All utilities, including water, sewer, electric, and gas, based upon the last reading of meters prior to the Closing.  Seller shall endeavor to obtain meter readings on the day before the Closing Date, and if such readings are obtained, there shall be no proration of such items.  Seller shall pay at Closing the bills therefor for the period to and including the Closing Date, and Purchaser shall pay the bills therefor for the period subsequent thereto; provided, however, if the utility company will not issue separate bills or meter readings cannot be obtained on the day before the Closing Date, Purchaser will receive a credit against the Purchase Price for Seller’s portion and will pay the entire bill prior to delinquency after the Closing.  No proration shall be made for utility expenses that are separately metered to and paid directly by Tenant and for which

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Seller has no obligation to pay.  Additionally, Seller shall retain the right to receive reimbursement or refund of all security deposits held by any such utility companies in connection with the provision of services prior to the Closing Date and Purchaser shall arrange to make its own utility deposits.

(d)Fees and Charges under Service Contracts.  Fees and charges under such Assigned Contracts as are being assigned to and assumed by Purchaser at the Closing, on the basis of the periods to which such Assigned Contracts relate.

(e)Expense Reimbursement.  Where the Leases contain Tenant obligations for taxes, common area expenses, operating expenses or additional charges of any other nature (“Expense Reimbursement”), and where Seller shall have collected any portion thereof in excess of amounts incurred by Seller for such items for the period prior to the Closing Date, then there shall be an adjustment and credit given to Purchaser on the Closing Date for such excess amounts collected.  Purchaser shall apply all such excess amounts to the charges owed by Purchaser for such items for the period after the Closing Date and, if required by the Leases, shall rebate or credit the Tenants with any remainder.  If it is determined at any time after Closing that the amount collected during Seller’s ownership period exceeded expenses incurred during the same period by more than the amount previously credited to Purchaser at Closing, then Seller shall promptly pay to Purchaser the deficiency.  If it is determined after Closing that the amount collected during Seller’s ownership period exceeded expenses incurred during the same period by less than the amount previously credited to Purchaser at Closing, then Purchaser shall promptly pay to Seller the deficiency.  Also, if it is determined after Closing that the amount collected during Seller’s ownership period is less than the expenses incurred during the same period, then Purchaser shall promptly pay to Seller the deficiency upon receipt from Tenants of the deficiency.

(f)Other Income or Expenses.  Seller shall be responsible for and shall pay any and all Tenant improvement costs, Tenant improvement allowances, and leasing commissions in connection with the Leases listed on the Rent Roll.  Purchaser

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shall be responsible for and shall pay any and all Tenant improvement costs, Tenant improvement allowances, and leasing commissions pertaining to all New Documents entered into by Seller, in accordance with this Agreement, after the Effective Date and prior to the termination of the Inspection Period without Purchaser’s approval, or entered into by Seller after the termination of the Inspection Period which have been approved or deemed approved by Purchaser.  In addition, Purchaser shall receive a credit against the Purchase Price to the extent provided in Section 5.1(e) above All other expenses related to the ownership or operation of the Property shall be prorated in the manner customary in the State of Arizona.

(g)General Closing Costs.  Each party shall pay all of the fees and expenses of its own counsel in entering into and consummating the transactions described in this Contract.  Seller and Purchaser agree to execute any real estate transfer declarations required by the state, county or municipality in which the Project is located.  All other customary costs in connection with the Closing, including recording and similar charges, will be apportioned in accordance the custom in Maricopa County, Arizona.

(h)Tenant Security Deposits.  Seller shall retain all Tenant security deposits under the Leases, and Purchaser shall receive a credit at Closing against the Purchase Price equal to the sum of all such deposits.  Purchaser shall, immediately upon taking possession of the Property, deliver to all Tenants a copy of the Notice to each Tenant, notifying Tenant of the transfer of the Property to Purchaser and Purchaser’s receipt and responsibility for such Tenant’s security deposit.

(i)Possession of Property.  At the Closing, possession of the Property shall be delivered to Purchaser, subject only to the matters described in Section 4.4 above.

(j)Seller shall provide to Buyer at Closing a credit (“Credit”) against the balance of the Purchase Price payable at Closing in the amount by which (i) the base rental income, together with parking revenue in the amount of $115,000.00 (collectively “Base Rent”), as shown on the Rent Roll attached hereto as Exhibit F, for the twelve month period beginning on the first day of the month immediately after the month in which the Closing occurs is less than (ii) the amount of $4,300,000.00.  To the extent that the Rent Roll for the Property and corresponding Base Rent does not increase between the Effective Date and the date of Closing such that the Base Rent at Closing remains the same as that shown on the Rent Roll attached to this Agreement, Purchaser and Seller agree that if the Closing occurs in the month of March 2004 the Credit shall be $355,691; and if the Closing occurs in the month of April 2004 the Credit shall be $293,704.  If new Leases are entered into prior to Closing, then the Credit shall be adjusted to take into account the rent to be paid thereunder during such 12 month period, calculated in the same manner as set forth above in this Section 6.3(j).  Base Rent shall not be reduced by reason of any failure of a Tenant to pay rent or a default by Tenant under its Lease.

6.4Real Estate Taxes and Special Assessments.  Real estate taxes for the year in which the Closing occurs shall be prorated based on the date of the Closing.  Purchaser will be responsible for payment of all subsequent real estate taxes.  Purchaser or Seller shall be given a

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credit for such proration at the Closing.  All prorations will be based upon the last known actual net real estate taxes payable according to the public record, subject to post-Closing adjustments as provided herein.  Purchaser shall remit to Seller any refund of real estate taxes received with respect to the Property which pertain to the period of Seller’s ownership.

6.5Closing Estimates and Final Adjustments.

(a)In connection with the Closing, Seller agrees to prepare or cause its representatives or accountants to prepare a schedule of tentative adjustments required by Sections 6.3 and 6.4 and to provide such schedule to Purchaser and Escrow Agent not less than two (2) Business Days prior to the Closing Date for review and approval by Purchaser and its representatives or accountants.  Such adjustments, if and to the extent known or estimated and agreed upon as of the Closing Date, shall be paid by Purchaser to Seller (if the prorations result in a net credit to Seller), or by Seller to Purchaser (if the prorations result in a net credit to Purchaser) by a credit against the amount payable on account of the Purchase Price payable on the Closing Date.

(b)Any such adjustments not finally determined or agreed upon as of such Closing Date shall be paid by Purchaser to Seller, or by Seller to Purchaser, as the case may be, from time to time in cash as soon as practicable following the receipt or determination of the information necessary to make the adjustments after the Closing Date.  Seller and Purchaser agree to cooperate and use their best efforts to make such adjustments no later than one hundred and twenty (120) days after the Closing Date.

(c)Without limiting the generality of subparagraph (b) above, after year-end (or other applicable period) adjustments with the Tenants under the Leases for taxes, assessments, maintenance charges, and operating expenses, Purchaser shall prepare and present to Seller a calculation of the re-proration of taxes, assessments, Expense Reimbursements, and those operating expenses to which the Expense Reimbursements relate, based upon the actual amount of such items charged to or received by the parties for the year or other applicable fiscal period.  The parties shall make the appropriate adjusting payment between them within thirty (30) days after presentment to Seller of Purchaser’s calculation.

(d)For a period of twelve (12) months following the Closing Date, Purchaser and Purchaser’s successors and assigns shall make available to Seller and its successors and assigns, and Seller shall make available to Purchaser and Purchaser’s successors and permitted assigns, and their respective employees, agents and representatives all books and records maintained with respect to the Property which relate to any of the items to be prorated or allocated under this Contract in connection with such Closing, which books and records shall be made available for inspection and copying upon reasonable notice during ordinary business hours.  Any such inspection shall be at reasonable intervals and at the inspecting party’s sole cost and expense.

(e)Seller agrees to cooperate with Purchaser through March 31, 2005 in connection with any audit of the Property performed in connection with 8K

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compliance issues of the Securities and Exchange Commission, provided that such cooperation shall not require Seller to expend any funds or incur any expenses or liability, and if Seller incurs any expense, Purchaser shall reimburse Seller therefor.  The provisions of this Subsection 6.5(e) shall survive Closing.

ARTICLE VII

CASUALTY

7.1Casualty.  If prior to the Closing, (a) all or a substantial part of the Project is damaged or destroyed by fire or other casualty whatsoever, and (b) the cost of repair for which is reasonably estimated by a qualified independent third party retained by Seller to be less than $500,000, Purchaser shall accept the Project in its then condition and proceed with the Closing without any abatement or reduction in the Purchase Price, in which event Purchaser shall be entitled to (i) an assignment of all of Seller’s right, title and interest in and to any claims Seller may have under the insurance policies covering the Project and any insurance proceeds payable by reason of such casualty, and (ii) a credit against the Purchase Price in the amount of Seller’s insurance deductible(s).  If Purchaser is required to proceed under clause (b) above, Seller shall not compromise, settle or adjust any claims to such proceeds without Purchaser’s prior written consent.  If the cost of repair is reasonably estimated to exceed $500,000, the Purchaser may terminate this Contract by delivering written notice of such termination to Seller and the Escrow Agent within ten (10) days after Purchaser receives notice of that the estimated cost of repair will exceed $500,000.

If a portion of the Project is damaged by fire or other cause whatsoever, and Purchaser either has no right to terminate this Contract pursuant to Section 7.1, or Purchaser has elected, or is deemed to have elected, not to exercise such termination right, then this Contract shall continue in full force and effect, and Purchaser shall accept the Property in its then condition and proceed with the Closing, subject to the other provisions of this Contract, without any abatement or reduction in the Purchase Price.  In such event, Purchaser shall be entitled to (x) an assignment of all of Seller’s right, title and interest in and to any claims Seller may have under the insurance policies covering the Project and any insurance proceeds payable by reason of such casualty, and (y) a credit against the Purchase Price in the amount of Seller’s insurance deductible(s), and Seller shall not compromise, settle or adjust any claims to such proceeds without Purchaser’s prior written consent.

7.2Condemnation.  If eminent domain or condemnation proceedings are commenced against an immaterial portion of the Property, then this Contract shall not terminate, and at Closing all rights to the proceeds thereof shall be assigned by Seller to Purchaser.  Notwithstanding the foregoing, if any eminent domain or condemnation proceedings are commenced against any material portion of the Property, then Purchaser shall have the right, as its sole and exclusive remedy, to terminate this Contract by delivering written notice of such termination to Seller and the Escrow Agent within ten (10) days after Purchaser receives notice of the commencement of such proceedings.  Upon such termination, the Earnest Money Deposit shall be returned to Purchaser, and neither Seller nor Purchaser shall have any further rights or liabilities under this Contract, except as provided in Sections 3.2, 3.3, 8.1, 9.1, 11.10, and 11.15.

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If Purchaser elects not to terminate this Contract as provided by this Section 7.2, then the Closing shall take place as herein provided without abatement of the Purchase Price, and there shall be assigned to Purchaser at the Closing all right, title, and interest of Seller in and to any condemnation awards.

7.3Waiver.  Purchaser and Seller agree that the provisions of Sections 7.1 and 7.2 shall govern the respective rights and obligations of Purchaser and Seller with regard to the subject matter of Sections 7.1 and 7.2.

ARTICLE VIII

REAL ESTATE COMMISSIONS

8.1Indemnity.  Purchaser and Seller represent and warrant to each other that it has engaged no real estate broker or agent in connection with the sale of the Property other than Mike Auther, of Jacor Partners (the “Broker”).  Seller shall pay a real estate commission to the Broker, pursuant to the terms of a separate agreement between Seller and Broker.  Otherwise, each of Purchaser and Seller shall indemnify and hereby agree to hold the other party harmless from any brokerage or finder’s fee or commission claimed by any person claiming by, through or under the indemnifying party for or on account of this Contract or the transactions contemplated hereby.

ARTICLE IX

TERMINATION AND REMEDIES

9.1Remedies.

(a)Except as specifically provided otherwise herein, if Purchaser fails to perform its obligations at Closing for any reason other than a failure by Seller to perform its obligations hereunder, then Seller may as its exclusive remedy, terminate this Contract by delivering written notice of such termination to Purchaser and the Escrow Agent, in which event the Earnest Money Deposit shall be forfeited and paid to Seller as liquidated damages for Purchaser’s default hereunder.

(b)If Purchaser terminates this Contract pursuant to any provision hereof expressly permitting it to do so, the Earnest Money Deposit shall be immediately returned to Purchaser, and neither Seller nor Purchaser shall have any further rights or liabilities under this Contract, except for the indemnity obligations and other agreements contained in Sections 3.2, 3.3, 8.1, 11.10 and 11.15 hereof, which shall survive any such termination.

(c)Except as specifically provided otherwise herein, if, at or prior to Closing, Seller defaults in performing its obligations hereunder for any reason other than a failure by Purchaser to perform its obligations hereunder, and Seller fails to cure such default within ten (10) days after written notice from Purchaser to Seller specifying such

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default, Purchaser may, as its sole and exclusive remedy, either (i) terminate this Contract by delivering written notice of such termination to Seller and the Escrow Agent and receive a return of the Earnest Money Deposit, or (ii) pursue specific performance of Seller’s obligation to convey the Property to Purchaser, in which event Purchaser shall be deemed to have accepted the condition of Seller’s title to the Property.  Purchaser waives all other remedies (including the right to recover damages) arising from Seller’s breach of this Contract.

9.2Liquidated Damages.  Seller and Purchaser hereby acknowledge and agree they have included provisions for payment of liquidated damages in this Contract, because, in the event of a breach by Purchaser, the actual damages incurred by Seller can reasonably be expected to approximate the amount of liquidated damages called for herein, and because the actual amount of such damages would be difficult if not impossible to accurately measure.

ARTICLE X

ASSIGNMENT OF CONTRACT

10.1Assignment.  Purchaser shall not assign its rights or delegate its duties under this Contract without the written consent of Seller; provided, however, Purchaser may, without first obtaining Seller’s written consent, assign its rights under this Contract to any Affiliate (defined below) of Purchaser, or to a party acting as Purchaser’s qualified intermediary in a tax deferred exchange under Section 1031 of the Internal Revenue Code, so long as Purchaser gives Seller at least five (5) days’ prior written notice of such assignment.  In the event Purchaser assigns or delegates its rights hereunder in accordance with the immediately preceding sentence, Purchaser shall provide Seller with an original of the assignment document, which shall be subject to Seller’s approval (which approval shall not be unreasonably withheld, conditioned or delayed) and must (a) provide that the assignee assumes all of Purchaser’s obligations and liabilities hereunder, (b) expressly run to the benefit of Seller, and (c) contain provisions whereby the individual or entity initially executing this Contract agrees to be and remain jointly and severally liable for all of Purchaser’s obligations and liabilities (including, without limitation, obligations and liabilities in the nature of and/or relating to indemnity and/or reimbursement) hereunder, or alternatively, such individual or entity shall provide a written guaranty, in form and substance reasonably acceptable to Seller, guaranteeing any such assignee’s performance of such obligations and the payment and/or satisfaction of any such liabilities hereunder.  For the purposes of this paragraph, the term “Affiliate” means (x) an entity that directly or indirectly controls, is controlled by or is under common control with Purchaser, (y) an entity at least a majority of whose economic interest is owned by Purchaser or its principals, or (z) an entity in which Purchaser retains a direct interest of not less than 25% and which entity is controlled by Purchaser; and the term “control” means the power to direct the management of such entity through voting rights, ownership or contractual obligations.

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ARTICLE XI

MISCELLANEOUS

11.1Entire Agreement.  This Contract embodies the entire agreement between the parties and cannot be varied except by the written agreement of the parties.  All prior agreements between Seller and Purchaser relating to the subject matter hereof, including without limitation all letters of intent or proposed letters of intent, are terminated and of no further force and effect.  Except as otherwise expressly provided in this Contract, Seller makes no representations, warranties or agreements with respect to the Property.

11.2Survival.  All terms and provisions contained in this Contract shall merge into the documents executed at Closing and shall not survive the Closing; provided, however, the provisions of (i) Sections 6.3, Section 6.4 and Section 6.5 which contemplate performance of obligations after the Closing, and the provisions of Article XII, shall survive the Closing for a period of one (1) year following the Closing, and (ii) Section 3.4 and the provisions of Articles VIII, IX, and this Article XI shall survive forever without limitation.

11.3Time of Essence.  Time is of the essence in this Contract.

11.4Notices.  Any notice required or permitted to be delivered hereunder shall be deemed to be delivered (a) when received by the addressee if delivered by courier service, (b) if mailed, two (2) days after deposit in the United States mail, postage prepaid, certified mail, return receipt requested, or (c) if sent by telecopy, when transmission is received by the addressee with electronic or telephonic confirmation, in each such case addressed or telecopied to Seller or Purchaser, as the case may be, at the address or telecopy number set opposite the signature of such party hereto.

11.5Gender; Numbers.  Words of any gender used in this Contract shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural and vice versa unless the context requires otherwise.

11.6Headings.  The captions used in connection with the articles and sections of this Contract are for convenience only and shall not be deemed to construe or limit the meaning of the language of this Contract.

11.7Days.  Except where Business Days are expressly referred to, references in this Contract to days are to calendar days, not Business Days.  “Business Day” means any calendar day except a Saturday, Sunday or banking holiday.

11.8Governing Law.  THIS CONTRACT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ARIZONA.

11.9Holidays.  If the final date of any period provided for herein for the performance of an obligation or for the taking of any action falls on a day other than a Business Day, then the time of such period shall be deemed extended to the next day which is a Business Day.

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11.10Attorneys’ Fees.  If a legal action is brought to enforce the terms of this Contract, the prevailing party shall be entitled to collect its costs of court, including reasonable attorneys’ fees.

11.11Interpretation.  The parties acknowledge that each party and its counsel have reviewed this Contract and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Contract or any amendments or exhibits hereto.

11.12Severability.  If any provisions of this Contract are held to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable, and this Contract shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part of this Contract, and the remaining provisions of this Contract shall remain in full force and effect and not be affected by the illegal, invalid or unenforceable provision or by its severance from this Contract, provided that both parties may still effectively realize the complete benefit of the transaction contemplated hereby.

11.13Amendments.  No modification or amendment of this Contract shall be effective unless made in writing and executed by both Seller and Purchaser.  If any approval or consent is required pursuant to any provision of this Contract, such approval or consent shall be deemed given only if it is in writing, executed by the party whose approval or consent is required.

11.14Acceptance of Offer.  This Contract constitutes an offer by Seller to sell the Property on the terms and conditions set forth herein.  Unless sooner terminated or withdrawn by notice in writing to Purchaser, this offer shall lapse and terminate at 5:00 p.m., Mountain Time on January 14, 2004, unless prior to such time Purchaser has executed and delivered to Seller four (4) fully executed counterparts of this Contract.  In the event this offer terminates pursuant to the provisions of the immediately preceding sentence, Seller shall have no further duties, obligations or liabilities to Purchaser hereunder.

11.15Confidentiality.

(a)Seller and Purchaser agree to keep the terms of this Contract confidential until Closing if the Closing occurs and for two (2) years following the Effective Date, if the Closing does not occur; provided, however, that each party may disclose this Contract and the Information (defined below) to its attorneys, accountants, partners or prospective partners (and parties who own an interest in such partners), financial advisors, consultants, engineers, lenders, and Escrow Agent (the “Recipient Parties”) and as may be required by any and all laws or regulations applicable to Purchaser.  Purchaser also may disclose the terms of this Contract to any other party as approved by Seller (and upon such disclosure, the party to whom disclosure is made shall be deemed a Recipient Party) as long as prior to such disclosure such Recipient Party agrees to be bound by the provisions of this Section 11.15 by an instrument reasonably acceptable to Seller in form and content.

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(b)“Information” means (1) all documents and other written information furnished (whether prior to, simultaneously with or subsequent to the execution hereof) by or on behalf of Seller with respect to the Property, including the documents furnished under Sections 3.1, 4.1 and 4.2 of this Contract, and (2) all analyses, compilations, forecasts, studies, tests, assessments or other documents which contain or otherwise reflect such information or Purchaser’s review of, or interest in, the Property, regardless of when the same are obtained.  Purchaser agrees that, except as otherwise provided herein, the Information will be kept confidential and shall not, without Seller’s prior written consent, be disclosed by Purchaser or by the Recipient Parties in any manner whatsoever, in whole or in part to any third party other than any of the Recipient Parties, and Purchaser shall instruct the Recipient Parties not to use the Information for any purpose other than in connection with Purchaser’s purchase of the Property. Moreover, Purchaser agrees to reveal the Information only to such of the Recipient Parties who need to know the Information for the purpose of evaluating the Property, who are informed by Purchaser of the confidential nature of the Information and who agree to act in accordance with the terms and conditions of this Section 11.15.  In any event, Purchaser agrees to take such steps as are reasonably practicable to maintain the confidentiality of the Information and prevent any disclosure thereof in violation of this Section 11.15 by any of Purchaser’s agents, partners, representatives or employees.

(c)If the Closing does not occur, all copies of the Information provided by Seller will be returned to Seller, and copies of any other Information obtained by or on behalf of Purchaser shall be delivered to Seller, within ten (10) days upon Seller’s request.  That portion of the Information which consists of analyses, compilations, forecasts, studies or other documents prepared by the Recipient Parties and which are based upon or contain summaries of the Information will, at Seller’s request, be destroyed (except to the extent a consultant retains a copy of any report prepared by it) and in all events shall continue to be subject to the terms of this Section 11.15 for two (2) years following the Effective Date.

(d)The term “Information” shall not include such portions of the information which (i) are or become generally available to the public other than as a result of a disclosure by Purchaser or Purchaser’s agents, partners, representatives or employees, or (ii) are or become available to Purchaser on a non-confidential basis from a source (other than Seller or Seller’s agents) which is not prohibited from disclosing such information to Purchaser by a legal, contractual or fiduciary obligation.

(e)If Purchaser or any of the Recipient Parties to whom Purchaser transmits the Information becomes legally compelled by order of a court or tribunal of competent jurisdiction to disclose any of the Information, Purchaser will (if time and law permits) provide Seller with prompt notice so that Seller may seek a protective order or other appropriate remedy and/or waive compliance with the provisions of this Section 11.15.

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(f)Neither Seller nor Purchaser shall make any public announcements or issue any press releases regarding the transaction contemplated by this Contract prior to Closing; after Closing, any such announcement or release by either party which contains the name of the other party, any direct or indirect partner or venturer in such other party, or any derivative of any of the foregoing shall be subject to the other party’s approval.

11.16Recording.  This Contract shall not be placed of public record.

11.17Counterparts.  This Contract may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument.

11.18No Third Party Rights.  Nothing in this Contract, express or implied, is intended to confer upon any persons other than the parties hereto and their respective successors and assigns, any rights or remedies under or by reason of this Contract.

11.19No Joint Venture.  Notwithstanding anything to the contrary contained herein, this Contract shall not be deemed or construed to make the parties hereto partners or joint venturers, or to render either party liable for any of the debts or obligations of the other.

11.20Exhibits.  Exhibits A through I, inclusive, which are attached hereto and incorporated herein by reference.

11.21No Personal Liability.  No member, partner, investor, employee, officer, director or representative of Seller or Seller’s members shall have any personal liability under this Contract or any document executed in connection with the transactions contemplated in this Contract.

11.22Real Estate Reporting Person.  Escrow Agent is hereby designated the “real estate reporting person” for purposes of Section 6045 of Title 26 of the United States Code and Treasury Regulation 1.6045-4 and any instructions or settlement statement prepared by Escrow Agent shall so provide.  Upon the consummation of the transaction contemplated by this Contract, Escrow Agent shall file the Form 1099 information return and send the statement to Seller as required under the aforementioned statute and regulation.

11.23Exchange of Properties. Purchaser and Seller acknowledge that either Seller or Purchaser may desire to structure the transaction evidenced hereby as part of an exchange of properties (i) of like-kind within the contemplation of Section 1031 of the Internal Revenue Code, or (ii) involving condemnation proceeds within the contemplation of Section 1033 of the Internal Revenue Code.  Any such exchange of properties is referred to herein as an “Exchange”.  The parties agree to cooperate with each other in structuring such an Exchange provided that (a) such cooperation shall be without out-of-pocket cost or expense to the party not structuring such Exchange; (b) the party structuring such Exchange shall pay all of the other party’s out-of-pocket costs or expenses arising due to such Exchange; (c) the party structuring such Exchange shall give notice of the proposed structure of the Exchange at least two (2)

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Business Days prior to the Closing Date; (d) no such Exchange structure shall require the party that does not structure such Exchange to hold legal or equitable title to any property other than the Property; and (e) no such Exchange or structuring in relation thereto shall delay or operate to postpone the Closing Date or any time periods set forth in this Contract, nor shall the obligations of any of the parties hereto be modified, amended or assigned as a result of any such Exchange.

ARTICLE XII

REPRESENTATIONS AND WARRANTIES

12.1Purchaser’s Representations and Warranties.  Purchaser hereby represents and warrants the following to Seller:

(a)Purchaser is an Arizona corporation, which is duly formed, validly existing and in good standing under the laws of the State of Arizona and has the full right, power and authority to enter into, and to perform all of its obligations under, this Contract, and all persons signing this Contract and/or any documents and instruments in connection herewith on behalf of Purchaser have full power and authority to do so;

(b)To Purchaser’s actual knowledge, there are no actions, suits or proceedings pending or threatened, before or by any judicial or administrative body, any arbiter or any governmental authority, against or affecting Purchaser which would affect Purchaser’s ability to perform its obligations under this Contract;

(c)To Purchaser’s knowledge, neither the execution or delivery of this Contract nor the performance of Purchaser’s obligations under this Contract violates, or will violate, any contract or agreement to which Purchaser is a party or by which Purchaser is otherwise bound; and

(d)Purchaser has (or as of the Closing Date will have) sufficient funds available to it to fund the payment of the Purchase Price at Closing.

12.2Seller’s Representations and Warranties.  Seller represents and warrants to Purchaser as of the date hereof, and such representations and warranties be deemed remade by Seller to Purchaser as of the Closing Date:

(a)Seller is a limited liability company which is duly formed, validly existing and in good standing under the laws of the State of Delaware and has the full right, power and authority to enter into, and to perform all of its obligations under, this Contract, and all persons signing this Contract and/or any documents and instruments in connection herewith on behalf of Seller have full power and authority to do so;

(b)This Contract is, and all other documents executed by Seller pursuant hereto will be, duly authorized, executed, and delivered by Seller and is and will be the legal, valid, and binding obligations of Seller, enforceable against Seller, in accordance with their respective terms, and, to Seller’s Knowledge, this Contract and

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such documents do not and will not violate any provisions of any agreement, order or judgment to which Seller, is a party or to which it is subject;

(c)To Seller’s Knowledge, Seller’s execution of this Contract, consummation of the transactions herein contemplated, and performance and observance of the obligations of Seller hereunder and under all other agreements and instruments herein mentioned to which Seller is a party will not conflict with or result in the breach of any law, regulation, order, writ, injunction or decree of any court or governmental authority or of any agreement or instrument to which Seller is now a party or to which it or the Property is subject, or constitute a default thereunder and, to Seller’s Knowledge, no consent, waiver or approval by any third party is required in connection with the execution and delivery by Seller of this Contract or the performance by Seller of the obligations to be performed by Seller under this Contract;

(d)Seller has received no written notice from any city, county, state or other governmental authority of any violation of any law, statute, ordinance, regulation, or administrative or judicial order or holding with respect to the Property, which violation has not been corrected;

(e)That to the best of Seller’s Knowledge, (i) the Property, or any part thereof, has never been used as a sanitary landfill or waste dump site; (ii) no underground storage tanks are present on the Property; (iii) there is no litigation with respect to the Property relating to Environmental Law violations; (iv) no notice of violation or other written communication has been received by Seller from a governmental agency or any other person or entity alleging or suggesting an Environmental Law violation on the Property; and (v) Seller has not deposited or released any “hazardous substance”, “hazardous waste”, “hazardous materials”, “pollutants”, or “contaminants” as defined by any Environmental Laws, on the Property in violation of Environmental Laws in existence as of the Effective Date.

(f)To Seller’s Knowledge, there are not any existing or threatened litigation, condemnation or similar proceedings against or involving the Property or Seller’s interest therein;

(g)There are no attachments, levies, executions, assignments for the benefit of creditors, receivership, conservatorship, or voluntary or involuntary proceedings in bankruptcy (or pursuant to any other debt or relief laws) filed by Seller, or, to Seller’s Knowledge, pending in any current judicial or administrative proceedings against Seller;

(h)The Leases that are listed or referenced on the Rent Roll provided by Seller under Section 3.1(b), constitute all of the Leases affecting the Property, as such Rent Roll, is modified, amended or supplemented from time to time after the Effective Date in accordance with the Contract.  The Leases have not been modified or amended except as identified on the Rent Roll.  To Seller’s actual Knowledge,  (i) Seller has not sent written notice to any Tenant claiming that the Tenant is in default under its Lease,

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which default remains uncured; (ii) no person has or claims any right of occupancy or possession of any part of the Property except pursuant to a Lease or the Permitted Encumbrances; (iii) except as set forth in the Tenant Estoppels, no Tenant has asserted any defense, offset, claim or counterclaim in writing against Seller under a Lease, and Seller has not received notice of any default under any Lease; (iv) there are no Tenant improvement allowances or leasing commissions unpaid as of the date hereof that will not be either paid by Seller, prior to Closing, or escrowed at Closing, as provided above; (v) the Rent Roll reflects the actual rent due from Tenants under the Leases; (vi) except as set forth in the Leases and on the Rent Roll, no Tenant is entitled to any free rent, abatement of rent, or similar concession, and Seller has not accepted any prepaid rent or prepayment of any other sum due under the Leases for more than thirty (30) days in advance; (vii) Seller has delivered to Purchaser true and complete copies of all Leases entered into by Seller as landlord, and Seller has delivered to Purchaser true and complete copies of all other Leases in Seller’s possession; and (viii) the security deposits set forth on the Rent Roll are all the security deposits paid by the Tenants under the Leases.

(i)Other than those service contracts, maintenance agreements, leasing commission or brokerage agreements, repair contracts, property management contracts, contracts for the purchase or delivery of labor, services, materials or goods, supplies or equipment or similar agreements entered into by or on behalf of Seller (A) which are included in the Delivered Documents, (B) which will be terminated prior to Closing, or (C) which are cancelable on no more than thirty (30) days’ notice without the payment of any termination fee or cancellation penalty (all of the foregoing contracts or agreements referenced in clauses (A) (B) or (C) hereof are collectively referred to as the “Contracts”), Seller does not have any other agreements presently affecting the Property other than the Leases and the Permitted Encumbrances.  Seller has delivered to Purchaser true and complete copies of each of the Contracts.  The Contracts represent the complete agreement between Seller and such other parties as to the services to be performed or materials to be provided thereunder and the compensation to be paid for such services or materials, as applicable.  Seller has no Knowledge of any default under any of the Contracts.

(j)To the best of Seller’s Knowledge, the Delivered Documents prepared by Seller and delivered to Purchaser are or will be true, accurate, and complete and Seller does not know of any material misstatements contained in the Delivered Documents; provided that Seller does not represent and warrant the accuracy of projections or budgets.

(k)For purposes of this Contract, the term “to Seller’s Knowledge” shall mean the present actual (as opposed to constructive or imputed) knowledge solely of Julie Echols (the asset manager), without any independent investigation or inquiry whatsoever.

(l)If any representation or warranty made by Seller in this Contract is not true as of the date hereof (or as of the Closing Date), and Purchaser becomes aware of such untrue representation on or prior to Closing, then Purchaser shall have the right, as

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its sole and exclusive remedy (Purchaser hereby waiving all other remedies), either (i) to terminate this Contract in accordance with the provisions hereof by delivering written notice to Seller and the Escrow Agent prior to Closing, in which case the Earnest Money Deposit shall be paid to Purchaser, and neither Seller nor Purchaser shall have any further rights or obligations under this Contract, except as provided in Sections 3.2, 3.3, 8.1, 9.1, 11.10, and 11.15 hereof, or (ii) to elect to purchase the Property subject to such untrue representation or warranty without any adjustment to the Purchase Price.

(m)If, however, Purchaser first discovers such untrue representation or warranty after the Closing Date but within one (1) year after the Closing Date, then (a) Seller shall have no liability whatsoever unless and until the damages caused by such untrue representation or warranty exceed $32,000, and (b) Seller’s total liability, if any, to Purchaser or any other party with respect to any and all such untrue representations or warranties in the aggregate shall in no event exceed $320,000.00.

(n)Notwithstanding anything contained in this Contract to the contrary, any and all representations and warranties of Seller contained in this Section 12.2 shall survive the Closing only for a period of one (1) year after the Closing Date and shall in all events be subject to the limitation on liability specified in the immediately preceding sentence.  From and after the expiration of such 1 year period, Seller shall have no liability whatsoever to Purchaser with respect to any such representations or warranties, as to which a claim was not made by Purchaser within such 1 year period (unless otherwise provided in Articles VIII, IX and XI).

[END OF PAGE; SIGNATURE PAGES FOLLOW]

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EXECUTED by Seller the 15th day of January, 2004.

ADDRESS:	LSF PRESIDIO INVESTMENT I, LLC,
c/o Presidio Investments, Ltd.	a Delaware limited liability company
2001 Bryan Tower
Suite 2000
Dallas, TX  75201	By:	LSF Presidio Holdings, LLC, a Delaware limited liability
Attention:  Julie Echols		company, its sole member
Telecopy No: 214.691.1930
		By:	Lone Star Fund III (U.S.), L.P., a Delaware limited partnership, its co-manager
With copies to:
			By:		Lone Star Partners III, L.P., a Delaware
Hudson Advisors					limited partnership, its general partner
717 N. Harwood
Suite 2200					By:		Lone Star Management Co. III, Ltd., its general partner
Dallas, TX 75201
Attn: Joe Jernigan
Telecopy No: 214.459.1475
							By:			Mary Etta Ford
AND							Name:			Mary Etta Ford
							Title:			Assistant Secretary
Baker Botts L.L.P.
2001 Ross Avenue		By:	Presidio Arizona Holdings LLC, a Texas limited
Dallas, TX  75201-2980			liability company, its co-manager
Attention:  Jonathan W. Dunlay
Telecopy No:  214.661.4711			By:	Presidio Investments, Ltd., a Texas limited
				partnership, its sole member
				By:		Centenary Partners, Ltd., a Texas limited partnership, its general partner
						By:		Continental Star Investments, Inc., a Texas corporation, its general partner
						By:			Michael G. Loftis
						Name:			Michael G. Loftis
						Title:			President

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EXECUTED by Purchaser the 13th day of January, 2004.

ADDRESS:	AMERIVEST CAMELBACK INC.,
	an Arizona corporation
AmeriVest Properties, Inc.
1780 South Bellaire Street
Suite 515	By:	John B. Greenman
Denver, Colorado  80222	Name:	John B. Greenman
Attention:  John B. Greenman	Title:	Vice President
Telephone:  303.297.1800
Telecopy:  303.291.7353
With a copy to:
Steven G. Wright, Esq.
Isaacson, Rosenbaum, Woods & Levy, P.C.
633 Seventeenth Street
Suite 2200
Denver, Colorado  80202
Telephone:  303.292.5656
Telecopy:  303.292.3152

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Attachments
Receipt and Acknowledgment
Exhibit A	-	Legal Description
Exhibit B	-	“As-Is” Certificate
Exhibit C	-	Form of Special Warranty Deed
Exhibit D	-	Form of Bill of Sale and Assignment of Leases and Service Contracts
Exhibit E	-	Form of Notice to Tenant
Exhibit F	-	Rent Roll
Exhibit G	-	Tenant Estoppel Certificate
Exhibit H	-	Intentionally Deleted
Exhibit I	-	Documents Requested For Due Diligence

EX-21

Exhibit 21

Subsidiaries of AmeriVest Properties Inc.

Subsidiary Name	State of Incorporation
AmeriVest Broadway Properties Inc.	Colorado
AmeriVest Sheridan Center Inc.	Colorado
AmeriVest Properties Texas Inc.	Texas
AmeriVest Buildings Texas Inc.	Texas
AmeriVest Properties Indiana Inc.	Indiana
AmeriVest Inverness Inc.	Colorado
AmeriVest Arrowhead Inc.	Arizona
AmeriVest Kellogg Inc.	Colorado
Kellogg Executive Suites Inc.	Colorado
AmeriVest Parkway Inc.	Texas
AmeriVest Centerra Inc.	Colorado
AmeriVest Chateau Inc.	Colorado
AmeriVest Black Canyon Inc.	Arizona
AmeriVest Keystone Inc.	Indiana
AmeriVest Mesa Inc.	Arizona
AmeriVest Scottsdale Inc.	Arizona
AmeriVest Greenhill Inc.	Texas
AmeriVest Camelback Inc.	Arizona

EX-23

Exhibit 23

Independent Auditors’ Consent

The Board of Directors
AmeriVest Properties Inc.:

We consent to the incorporation by reference in the registration statements (No. 333-112210, No. 333-101713, and No. 333-44210) on Form S-3 and in the registration statements (No. 333-101803 and No. 333-101802) on Form S-8 of AmeriVest Properties Inc. of our report dated February 20, 2004, except as to note 5, which is as of March 16, 2004, with respect to the consolidated balance sheets of AmeriVest Properties Inc. as of December 31, 2003 and 2002, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years then ended, which report appears in the December 31, 2003 annual report on Form 10-KSB of AmeriVest Properties Inc.

KPMG LLP

Denver, Colorado
March 16, 2004

EX-31

Exhibit 31

CERTIFICATION

Pursuant to Rule 13a-14(a) of the Exchange Act

I, William T. Atkins, Chairman and Chief Executive Officer, certify that:

1.I have reviewed this annual report on Form 10-KSB of AmeriVest Properties Inc. 

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

March 18, 2004
	By:	/s/ William T. Atkins
	William T. Atkins
	Chairman and Chief Executive Officer

I, Kathryn L. Hale, Chief Financial Officer, certify that:

1.I have reviewed this annual report on Form 10-KSB of AmeriVest Properties Inc.

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

March 18, 2004
	By:	/s/ Kathryn L. Hale
	Kathryn L. Hale
	Chief Financial Officer

EX-32

Exhibit 32

1.The undersigned are the Chief Executive Officer and the Chief Financial Officer of AmeriVest Properties Inc.  This Certification is made pursuant to 18 U.S.C. § 1350 (§ 906 of the Sarbanes-Oxley Act of 2002).  This Certification accompanies the Form 10-KSB of AmeriVest Properties Inc. for the year ended December 31, 2003.

2.We certify that such Form 10-KSB fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such Form 10-KSB fairly presents, in all material respects, the financial condition and results of operations of AmeriVest Properties Inc.

March 18, 2004
	By:	/s/ William T. Atkins
			William T. Atkins
			Chief Executive Officer
	By:	/s/ Kathryn L. Hale
			Kathryn L. Hale
			Chief Financial Officer

EX-99

Exhibit 99

Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Share Dividends:

	Year Ended December 31,
	2003			2002			2001		2000		1999		1998
Earnings:
Net (loss)/income	$	(1,980,420	)	$	(157,274	)	$	1,488,493	$	2,676,724	$	968,748	$	(317,406	)
Add: interest expense	7,867,534			4,144,231			3,181,697		2,167,869		1,696,222		1,357,565
Earnings as adjusted	$	5,887,114		$	3,986,957		$	4,670,190	$	4,844,593	$	2,664,970	$	1,040,159
Combined Fixed Charges and Preferred Share Dividends:
Interest expense	$	7,867,534		$	4,144,231		$	3,181,697	$	2,167,869	$	1,696,222	$	1,357,565
Preferred share dividends	—			—			—		—		—		—
Total	$	7,867,534		$	4,144,231		$	3,181,697	$	2,167,869	$	1,696,222	$	1,357,565
Ratio of Earnings to Combined Fixed Charges and Preferred Share Dividends	0.75			0.96			1.47		2.23		1.57		0.77