AFFORDABLE RESIDENTIAL COMMUNITIES INC
EX-10.1
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<p style="line-height:normal;margin:0pt 0pt .0001pt .15pt;text-align:right;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Exhibit 10.1</font></b></p>

<p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="font-weight:bold;margin:0pt 0pt 12.0pt;text-align:center;text-decoration:underline;"><b><u><font size="2" face="Times New Roman" style="font-size:10.0pt;">SEPARATION AND RELEASE
AGREEMENT</font></u></b></p>

<p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">This Separation and Release Agreement (the &#147;Agreement&#148;)
is entered this 26<sup>th</sup> day of October, 2004 by and between GEORGE W.
MCGEENEY (&#147;McGeeney&#148;) and AFFORDABLE RESIDENTIAL COMMUNITIES INC., a Maryland
corporation (&#147;Parent&#148;) and ARC MANAGEMENT SERVICES, INC., a Delaware
corporation, on behalf of themselves and their affiliated entities ARC (Parent
and its affiliates collectively hereinafter sometimes referred to as &#147;ARC&#148;).</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">WHEREAS, McGeeney has served as ARC&#146;s President
and Chief Operating Officer; and</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">WHEREAS, the parties have reached certain
mutual agreements and understandings with respect to the termination of
McGeeney&#146;s employment and desire to fully and finally settle any matters of
employment, claims, disputes and obligations relating to McGeeney&#146;s employment
with ARC and the termination thereof.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In exchange for the mutual promises set forth
below, and intending to be legally bound, McGeeney and ARC agree as follows:</font></p>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; &#173;<b><u><font style="font-weight:bold;">Separation Date</font></u></b>.&#160; McGeeney hereby irrevocably resigns from his
employment and all positions with ARC as of October 26, 2004 (the &#147;Separation
Date&#148;).&#160; As of the Separation Date,
McGeeney&#146;s Employment Agreement dated February 18, 2004 shall terminate,
McGeeney shall be relieved of all duties, and shall no longer be authorized to
represent ARC or incur any obligations on behalf of ARC.</font></p>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; &#173;<b><u><font style="font-weight:bold;">Paym</font></u></b></font><b><u><font size="2" style="font-size:10.0pt;font-weight:bold;">e</font></u></b><b><u><font size="2" style="font-size:10.0pt;font-weight:bold;">nts</font></u></b><font size="2" style="font-size:10.0pt;">.</font></p>

<p style="color:black;margin:0pt 0pt 12.0pt 36.0pt;"><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;">(a)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Compensation</u>.&#160;&#160;&#160; Provided that McGeeney has complied with
the terms of this Agreement and provided further that McGeeney has provided to
ARC the necessary transition services as ARC may, until November 1, 2006, from
time to time require, McGeeney will be compensated in the amount of $
670,000.00 on the following schedule:</font></p>

<p style="color:black;margin:0pt 0pt 12.0pt 108.0pt;text-indent:-36.0pt;"><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;">(i)</font><font size="1" color="black" style="color:windowtext;font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" color="black" style="color:windowtext;font-size:10.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; On the first business day
following the Full Acceptance of this Agreement by McGeeney and the expiration
of the revocation period as provided for in paragraph 12 herein, $ 120,000.00;</font></p>

<p style="color:black;margin:0pt 0pt 12.0pt 108.0pt;text-indent:-36.0pt;"><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;">(ii)</font><font size="1" color="black" style="color:windowtext;font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" color="black" style="color:windowtext;font-size:10.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; On the 18th day of January,
2005, $ 200,000.00; and<br>
From January 31 1, 2005 through November 3, 2006, the balance of&#160; $ 350,000.00 shall be paid in approximately
equal installments in accordance with ARC&#146;s payroll practices; <br>
less all amounts required to be withheld by law including any applicable
federal, state and local withholding taxes and deductions.</font></p>

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<p align="center" style="color:black;margin:0pt 0pt 12.0pt;text-align:center;"><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;">&nbsp;</font></p>

<p style="color:black;margin:0pt 0pt 12.0pt 36.0pt;"><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;">(b)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Outplacement
Services</u>.&#160; At his request, McGeeney
shall be entitled to receive, beginning on the first business day following the
Full Acceptance of this Agreement by McGeeney and the expiration of the
revocation period as provide for in paragraph 12 herein, at ARC&#146;s expense,
outplacement services through the Executive program offered by Drake, Beam and
Morin for a period of up to twelve (12) months.</font></p>

<p style="color:black;margin:0pt 0pt 12.0pt 36.0pt;"><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;">(c)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Continued
Payment of Health Insurance Benefits</u>. During the Payment Period, McGeeney
shall be entitled to continued health benefits as if he were an employee of the
ARC, subject to the same terms, conditions, costs and deductibles as are
available to ARC employees during that time and subject to any rules,
regulations or requirements imposed by ARC&#146;s insurance carrier.</font></p>

<p style="color:black;margin:0pt 0pt 12.0pt 36.0pt;"><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;">(d)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Stock</u>.&#160; McGeeney shall forfeit to ARC any&#160; shares of the stock in ARC awarded to him under
the 2003 Equity Incentive Plan that are not vested as of the Separation Date.</font></p>

<p style="color:black;margin:0pt 0pt 12.0pt 36.0pt;"><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;">(e)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>No
Other Payments</u>.&#160; Except as
specifically provided in this Agreement, McGeeney shall not be eligible to
participate or continue to participate in any employee benefit plans or
compensation arrangements of ARC as of the Separation Date and shall not be
entitled to any further payments, benefits, compensation or remuneration of any
kind or nature by ARC.</font></p>

<p style="color:black;margin:0pt 0pt 12.0pt 36.0pt;"><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;">(f)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Note</u>.&#160;&#160; On or before the first business day
following expiration of the revocation period as provided for in paragraph 12
herein, McGeeney shall pay to ARC the entire balance of principal and interest
due on his note with ARC Management Services, Inc. dated July 30, 2002.</font></p>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; &#173;<b><u><font style="font-weight:bold;">Release</font></u></b>.&#160; McGeeney
knowingly, voluntarily and willingly releases and forever discharges ARC, and
all of its past and present affiliates, mem&#173;bers, managers, trustees,
directors, officers, partners, employees, agents, attorneys, servants,
predecessors, successors and assigns (collectively, the &#147;ARC Releasees&#148;) from
any and all claims, charges, complaints, promises, agreements, controversies,
liens, demands, causes of action, obligations, damages and liabili&#173;ties of any
nature whatsoever, known or unknown, suspected or unsuspected, which against
them,&#160; McGeeney or his executors,
administrators, successors or assigns ever had, now have, or may hereafter
claim to have against any of the ARC Releasees by reason of any matter, cause
or thing whatsoever arising on or before the date this Agreement is executed by
McGeeney, and whether or not previously asserted before any state or federal
court or before any state or federal agency or governmental entity (the &#147;
Release&#148;).&#160; This Release includes,
without limitation, any rights or claims relating in any way to McGeeney&#146;s
employment relationship with any of the ARC Releasees, or the termination
thereof, or arising under any statute or regulation, including the federal Age
Discrimination in Employment Act of 1967, Title VII of the Civil Rights Act of
1964, the Civil Rights Act of 1991, the Americans with Disabilities Act of
1990, the Employee&#160; Retirement Income
Security Act of 1974, and the Family Medical Leave Act of 1993, each as amended,
the State of&#160; Colorado
anti-discrimination law, or any other federal, state or local law, regulation,
ordinance, or common law, or under any policy, agreement, understanding or
promise, written or oral, formal or informal, between McGeeney and any of the
ARC Releasees.&#160; McGeeney represents that
he has not com&#173;menced or joined in any claim, charge, action or proceeding
whatsoever against any of the ARC Releasees arising out of or relating to any
of the matters set forth in this paragraph.&#160;
McGeeney further repre&#173;sents and agrees that he will not seek or be enti&#173;tled
to any personal recovery in any claim, charge, action or pro&#173;ceeding that may
be com&#173;menced on McGeeney&#146;s be&#173;half arising out of the mat&#173;ters released
hereby.</font></p>

<p style="margin:0pt 0pt .0001pt;"><font size="3" face="Times New Roman" style="font-size:12.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0pt 0pt .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0pt 0pt .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2</font></p>

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<p align="center" style="margin:0pt 0pt .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <b><u><font style="font-weight:bold;">Non-Compete</font></u></b>.&#160; For a period of four years following the
Separation Date, McGeeney shall not engage in Competition (as hereinafter
defined) with ARC.&#160; For purposes of this
Agreement, &#147;Competition&#148; by McGeeney shall mean McGeeney&#146;s engaging in, or
otherwise directly or indirectly being employed by or acting as a consultant or
lender to, or being a director, officer, employee, principal, agent,
stockholder, member, owner or partner of, or permitting his name to be used in
connection with the activities of any other business or organization anywhere
in the United States which competes, directly or indirectly, with the Business
of ARC (as hereinafter defined), or otherwise participates in any way in the
manufactured housing industry.&#160; For
purposes of this Agreement, &#147;Business of ARC&#148; means the business, conduct or
activity related to the ownership, finance, operation or management of
manufactured home communities, the acquisition, refurbishment, transportation,
sale or finance of manufactured homes, the manufacturing of manufactured homes,
the sale of insurance for manufactured homes or manufactured home communities,
the sale of or providing services to entities or persons who engage in any of
the foregoing, or any other activity related thereto.</font></p>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <b><u><font style="font-weight:bold;">Confidentiality</font></u></b>.</font></p>

<p style="color:black;margin:0pt 0pt 12.0pt 36.0pt;"><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;">(a)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; McGeeney agrees not to disclose any
Confidential Information (as defined below) about ARC obtained by McGeeney
during his association with ARC or, except as set forth in paragraph 6 (b)
below, any information about the circumstances surrounding his separation from
ARC.&#160; &#147;Confidential Information&#148; shall
mean ARC information not generally known by or available to the public,
including, without limitation, personnel information, financial information,
trade secrets, reports, documents, knowledge, data, products, processes,
customer lists, research, business and pricing models or plans, terms of
contracts and negotiations, infor&#173;mation regarding operations, background
information on publicly available information that is otherwise not known to or
generally available to the public, systems and services, computer and any other
processed or collated data, computer programs, marketing data and all other
subject matter pertaining to the actual or anticipated business of ARC or of
any of its clients, customers, consultants, licensees or affiliates, which
McGeeney produced, obtained or acquired during McGeeney&#146;s employment with
ARC.&#160; In addition, McGeeney shall
not&#160; engage in any conversation with any
past or present employee, officer, director or agent of ARC about matters
related to ARC except at the request of the CEO or the CEO&#146;s designee in accordance
with paragraph 8 herein.</font></p>

<p style="color:black;margin:0pt 0pt 12.0pt 36.0pt;"><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;">(b)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; The parties agree that the
negotiation of this Agreement shall remain confidential and shall not be
disclosed to any person, except (i)&nbsp;by McGeeney to his immediate family
and as may be required for obtaining legal or tax advice in connection with
this Agreement; (ii) by ARC, to members of the Board of Directors or staff as
may be required for business purposes; (iii)&nbsp;for the preparation and/or
filing of securities filings,&#160; income tax
returns or required financial disclosures.&#160;
In the case of any disclosure to immediate family or a legal or tax
advisor, McGeeney shall require any person receiving such information to
maintain its confidentiality and shall be liable for any damages that arise as
a result of the failure of such person to maintain such confidentiality.</font></p>

<p style="color:black;margin:0pt 0pt 12.0pt 36.0pt;"><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;">(c)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; Notwithstanding any provision of this
Agreement to the contrary, each party shall be permitted to respond to any subpoena
or other lawful process, provided, that such party gives notice to the other
party sufficiently in advance of disclosure for such party to seek a protective
order limiting or precluding any such requested disclosure.</font></p>

<p align="center" style="margin:0pt 0pt .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0pt 0pt .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3</font></p>

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<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">6.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <b><u><font style="font-weight:bold;">Non-Disparagement</font></u></b>.</font></p>

<p style="color:black;margin:0pt 0pt 12.0pt 36.0pt;"><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;">(a)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; McGeeney agrees that he will not make
any comments relating to any of the ARC Releasees, that are critical,
derogatory or which may tend to injure the reputation or business of ARC or any
of the other ARC Releasees.</font></p>

<p style="color:black;margin:0pt 0pt 12.0pt 36.0pt;"><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;">(b)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; Reference inquiries from prospective
employers will be handled by the Human Resources Department and by only verifying
McGeeney&#146;s dates of employment and last position held.</font></p>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">7.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <b><u><font style="font-weight:bold;">Non-Solicitation</font></u></b>.&#160; For a period of four years following the
Separation Date, McGeeney, or any person or entity acting on McGeeney&#146;s behalf
or at his direction, shall not directly or indirectly solicit any person
employed by ARC for employment by McGeeney, or at any company or entity of
which McGeeney is a director, officer, employee, principal, agent, stockholder,
member, owner or partner of, or permits his name to be used in connection with
the activities of said business or organization.</font></p>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">8.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <b><u><font style="font-weight:bold;">Cooperation</font></u></b>.&#160;&#160; McGeeney agrees that as a result of his
former position with ARC, he may have information and/or knowledge of dealings,
sales, transactions and the like related to ARC.&#160; In consideration of this Agreement, McGeeney
shall make himself and his services reasonably available to ARC, at the request
and sole discretion of the Chief Executive Officer of ARC or any person or
entity designated by the CEO for (a) general consultation relating to McGeeney&#146;s
duties while employed by ARC or (b) to provide such information for interviews,
and, if necessary, for any preparation,&#160;
depositions or testimony in any&#160;
arbitral, judicial, regulatory or similar proceeding.&#160; The CEO of ARC shall only request Mr. McGeeney&#146;s
services if, in his opinion, Mr. McGeeney&#146;s information and knowledge are
reasonably required by ARC.</font></p>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">9.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <b><u><font style="font-weight:bold;">Return of ARC Property</font></u></b>.&#160; McGeeney represents and agrees that he has
returned or shall immediately return to ARC all laptops, blackberry, reports,
files, memoranda, documents, records and software, credit cards, cardkey
passes, door and file keys, computer access codes or disks and instructional
manuals, and other physical property that McGeeney received and/or prepared or
helped to prepare in connection with McGeeney&#146;s employment with ARC, and that
he has not retained and shall not retain any copies, dupli&#173;cates, reproductions
or excerpts thereof.</font></p>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">10.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <b><u><font style="font-weight:bold;">Disclaimer</font></u></b>.&#160; The parties agree that this Agreement shall
not be construed as an admis&#173;sion by McGeeney or ARC of any unlawful act
against the other, or that McGeeney or ARC has acted wrongfully towards the
other.&#160; McGeeney and ARC specifically
disclaim and deny any unlawful or wrongful act towards the other.</font></p>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">11.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <b><u><font style="font-weight:bold;">Legal Counsel</font></u></b>.&#160; McGeeney acknowledges and agrees that ARC has
advised him to seek legal advice regarding this Agreement; that he fully
understands his right to discuss all aspects of this Agreement with his private
attorney(s); that he is voluntarily entering into this Agreement; and that upon
executing this Agreement, he will not and cannot sue ARC for any claims
associated with his employment with or separation from ARC except as stated in
this Agreement.</font></p>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">12.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <b><u><font style="font-weight:bold;">Full Acceptance</font></u></b>.&#160; McGeeney received this Agreement on the
Separation Date and has twenty one (21) calendar days from such date to review,
discuss and seek legal counsel although he may sign it prior to the expiration
of such period if he so chooses.&#160; Upon
accepting the terms of the Agreement and signing it, he has the right to revoke
the Agreement within seven (7) calendar days after signing it.&#160; McGeeney represents and agrees that if he
wishes to revoke this Agreement, McGeeney will immediately notify the CEO of
ARC, Scott D. Jackson, at 600 </font></p>

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<p align="center" style="margin:0pt 0pt .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4</font></p>

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<p align="center" style="margin:0pt 0pt .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0pt 0pt .0001pt;"><font size="3" face="Times New Roman" style="font-size:12.0pt;">&nbsp;</font></p>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Grant Street, Suite 900, Denver, CO 80203, phone (303)
383-7501, by telephone and in writing, signed by McGeeney, by no later than
5:00 p.m. Mountain Time on the seventh (7) day of the revocation period.&#160; If no such revocation occurs, Full Acceptance
of this Agreement will occur on the eighth day after Mr. McGeeney signs his
Agreement.&#160; McGeeney represents and
agrees that in executing this Agreement he will not rely on any statement not
set forth herein which may have been made by any ARC Releasees with respect to
the subject matter, basis or effect of this Agreement.&#160; McGeeney shall not be entitled to receive any
payments or benefits under this Agreement until Full Acceptance.&#160; McGeeney agrees that changes made to this
Agreement since the Separation Date do not cause the twenty-one day review
period to restart and he waives any additional twenty-one day review period
beyond the initial review period that began on the Separation Date.&#160; Unless accepted by the twenty first (21) day
after the Separation Date, the offer of this Agreement shall be withdrawn, and
McGeeney shall have no right to receive any payments or benefits under this
Agreement.</font></p>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">13.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <b><u><font style="font-weight:bold;">Entire Agreement</font></u></b>.&#160; This Agreement sets forth the entire
agreement and under&#173;standing between McGeeney and ARC and merges and supersedes
all prior discussions, agreements, arrangements, negotiations, discussions,
representations and understandings of every kind and nature, written or oral,
between McGeeney and ARC.&#160; No provision
of this Agreement may be modified or discharged unless such modification or
discharge is authorized and agreed to in writing, signed by McGeeney and ARC.</font></p>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">14.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <b><u><font style="font-weight:bold;">Severability</font></u></b>.&#160; The provisions of this Agreement are
severable, and if any part of it is found unenforceable, the other paragraphs,
sections and provisions shall remain full, valid and enforceable.&#160; In addition, if any one or more of the provisions
contained in this Agreement shall be held to be excessively broad as to
duration, geographic scope, activity or subject matter, such provision shall be
construed by limiting and reducing it so as to be enforceable to the maximum extent
allowed by law.</font></p>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">15.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <b><u><font style="font-weight:bold;">Governing Law</font></u></b>.&#160; This Agreement and all rights, duties and
remedies hereunder shall be governed by and construed and enforced in
accordance with the laws of the State of Colorado, without reference to its
conflict of law rules.&#160; This Agreement
may be executed in two or more counterparts, each of which shall be deemed an
original but all of which together shall constitute one and the same
instrument.</font></p>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">16.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <b><u><font style="font-weight:bold;">Jurisdiction</font></u></b>.&#160; The parties agree (a) to submit to the
jurisdiction of the federal and state courts of the State of Colorado, which
shall be the exclusive jurisdictions, in connection with any dispute which may
arise between the parties including, without limitation, any dispute relating
this Agreement and (b) not to assert improper or inappropriate venue as a defense
to any such action.</font></p>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">17.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <b><u><font style="font-weight:bold;">Counterparts</font></u></b>.&#160; This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.</font></p>

<p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0pt 0pt .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5</font></p>

<div style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">

<hr size="2" width="100%" noshade color="gray" align="left">

</font></div>

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<div style="font-family:Times New Roman;">

<p align="center" style="margin:0pt 0pt .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<table border="0" cellspacing="0" cellpadding="0" width="98%" style="border-collapse:collapse;margin-left:.7pt;width:98.84%;">
 <tr>
  <td width="312" valign="top" style="padding:0pt .7pt 0pt .7pt;width:234.0pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">AFFORDABLE
  RESIDENTIAL COMMUNITIES INC.,</font></p>
  </td>
  <td width="16" valign="top" style="padding:0pt .7pt 0pt .7pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="275" valign="top" style="padding:0pt .7pt 0pt .7pt;width:206.1pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">ARC
  MANAGEMENT SERVICES, INC.,</font></p>
  </td>
 </tr>
 <tr>
  <td width="312" valign="top" style="padding:0pt .7pt 0pt .7pt;width:234.0pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">a
  Maryland Corporation</font></p>
  </td>
  <td width="16" valign="top" style="padding:0pt .7pt 0pt .7pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="275" valign="top" style="padding:0pt .7pt 0pt .7pt;width:206.1pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">a
  Delaware corporation</font></p>
  </td>
 </tr>
</table>

<p align="center" style="margin:0pt 0pt .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<table border="0" cellspacing="0" cellpadding="0" width="98%" style="border-collapse:collapse;margin-left:.7pt;width:98.84%;">
 <tr>
  <td width="25" valign="top" style="padding:0pt .7pt 0pt .7pt;width:18.4pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="288" colspan="3" valign="top" style="padding:0pt .7pt 0pt .7pt;width:216.25pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="287" colspan="5" valign="top" style="padding:0pt .7pt 0pt .7pt;width:215.35pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="3" style="border:none;font-size:12.0pt;padding:0pt 0pt 0pt 0pt;"><p style="margin:0pt 0pt .0001pt;">&nbsp;</p></td>
 </tr>
 <tr>
  <td width="25" valign="top" style="padding:0pt .7pt 0pt .7pt;width:18.4pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">By:</font></p>
  </td>
  <td width="288" colspan="3" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt .7pt;width:216.25pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/s/
  Scott D. Jackson</font></p>
  </td>
  <td width="16" colspan="2" valign="top" style="padding:0pt .7pt 0pt .7pt;width:12.2pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="25" valign="top" style="padding:0pt .7pt 0pt .7pt;width:18.45pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">By:</font></p>
  </td>
  <td width="246" colspan="2" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt .7pt;width:184.7pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/s/
  Scott D. Jackson</font></p>
  </td>
  <td width="3" style="border:none;font-size:1.0pt;padding:0pt 0pt 0pt 0pt;"><p style="margin:0pt 0pt .0001pt;">&nbsp;</p></td>
 </tr>
 <tr>
  <td width="25" valign="top" style="padding:0pt .7pt 0pt .7pt;width:18.4pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Its:</font></p>
  </td>
  <td width="288" colspan="3" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt .7pt;width:216.25pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Chairman
  and Chief Executive Officer</font></p>
  </td>
  <td width="16" colspan="2" valign="top" style="padding:0pt .7pt 0pt .7pt;width:12.2pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="25" valign="top" style="padding:0pt .7pt 0pt .7pt;width:18.45pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Its:</font></p>
  </td>
  <td width="246" colspan="2" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt .7pt;width:184.7pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Manager
  </font></p>
  </td>
  <td width="3" style="border:none;font-size:1.0pt;padding:0pt 0pt 0pt 0pt;"><p style="margin:0pt 0pt .0001pt;">&nbsp;</p></td>
 </tr>
 <tr>
  <td width="25" valign="top" style="padding:0pt .7pt 0pt .7pt;width:18.4pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="288" colspan="3" valign="top" style="border:none;padding:0pt .7pt 0pt .7pt;width:216.25pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="287" colspan="5" valign="top" style="padding:0pt .7pt 0pt .7pt;width:215.35pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="3" style="border:none;font-size:12.0pt;padding:0pt 0pt 0pt 0pt;"><p style="margin:0pt 0pt .0001pt;">&nbsp;</p></td>
 </tr>
 <tr>
  <td width="312" colspan="3" valign="top" style="padding:0pt .7pt 0pt .7pt;width:234.0pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Agreed
  to and Accepted:</font></p>
  </td>
  <td width="286" colspan="5" valign="top" style="padding:0pt .7pt 0pt .7pt;width:214.55pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="5" colspan="2" style="border:none;font-size:1.0pt;padding:0pt 0pt 0pt 0pt;"><p style="margin:0pt 0pt .0001pt;">&nbsp;</p></td>
 </tr>
 <tr>
  <td width="31" colspan="2" valign="top" style="padding:0pt .7pt 0pt .7pt;width:23.4pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="281" valign="top" style="padding:0pt .7pt 0pt .7pt;width:210.6pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="288" colspan="6" valign="top" style="padding:0pt .7pt 0pt .7pt;width:216.0pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="3" style="border:none;font-size:12.0pt;padding:0pt 0pt 0pt 0pt;"><p style="margin:0pt 0pt .0001pt;">&nbsp;</p></td>
 </tr>
 <tr>
  <td width="312" colspan="3" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt .7pt;width:234.0pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/s/
  George W. McGeeney</font></p>
  </td>
  <td width="16" colspan="2" valign="top" style="padding:0pt .7pt 0pt .7pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="275" colspan="5" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt .7pt;width:206.1pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">October
  26, 2004</font></p>
  </td>
 </tr>
 <tr>
  <td width="312" colspan="3" valign="top" style="border:none;padding:0pt .7pt 0pt .7pt;width:234.0pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">GEORGE
  W. MCGEENEY</font></p>
  </td>
  <td width="16" colspan="2" valign="top" style="padding:0pt .7pt 0pt .7pt;width:12.0pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="275" colspan="5" valign="top" style="border:none;padding:0pt .7pt 0pt .7pt;width:206.1pt;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Date</font></p>
  </td>
 </tr>
 <tr height="0">
  <td width="25" style="border:none;"></td>
  <td width="7" style="border:none;"></td>
  <td width="281" style="border:none;"></td>
  <td width="1" style="border:none;"></td>
  <td width="15" style="border:none;"></td>
  <td width="1" style="border:none;"></td>
  <td width="25" style="border:none;"></td>
  <td width="244" style="border:none;"></td>
  <td width="2" style="border:none;"></td>
  <td width="3" style="border:none;"></td>
 </tr>
</table>

<p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0pt 0pt .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0pt 0pt .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">6</font></p>

<div style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">

<hr size="2" width="100%" noshade color="gray" align="left">

</font></div>

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