CONSTRUCTION LOAN
AGREEMENT
RECITALS :
RMI CAPITAI. MANAGEMENT CO., (the "Lender")
has agreed to make a loan in the amount of up to
Five Million Eighty Thousand Eighty-Two and 39/100
Dollars ($5,080,082.39) (the "Loan") to EMERITUS
PROPERTIES II, INC. (the "Borrower"). The Borrower
will use the Loan to acquire the property and
construct improvements consisting of an assisted
and independent living facility (the
"Improvements") on such property (the "Property")
legally described in Exhibit "A-1 " attached to
this Agreement (the Improvements and Property
being referred to as the "Project"). The Borrower
will also use the Loan to pay other costs and
expenses related to the development of the
Property and approved by the Lender.
The Borrower is executing its promissory note
(the "Note") payable to the Lender in the amount
of the Loan concurrently with Borrower's execution
of this Agreement. The Note is to be secured by a
Deed of Trust, Assignment of Rents, Security
Agreement, and Financing Statement (the "Deed of
Trust") encumbering the Property. This Agreement
describes how the Loan will be disbursed by Lender
and contains various covenants of the Borrower and
other provisions relating to construction of the
Improvements.
I. DISBURSEMENTS.
A. GENERAL DISBURSEMENT PROCEDURES.
1. Disbursements of the Loan will be made by
the Lender in the manner provided in the
Disbursement Schedule attached as Exhibit "B" to
this Agreement. Subject to paragraph 2 below, all
disbursements will be made into a non-interest
bearing special account of the Disbursement Agent
(defined below) or Lender, or if the Lender so
chooses, upon direct advance by the Lender to
subcontractors, laborers or materialmen, or charge
against Loan funds as provided in paragraph 2
below.
2. Notwithstanding the provisions of
paragraph 1 above, the Lender may elect, without
further notice to or authorization by the
Borrower, to use the Loan funds to pay, as and
when due, any L4an fees owing to Lender, interest
on the Loan, release charges under prior deeds of
trust on the Property, legal fees and
disbursements of the Lender's attorneys which are
payable by the Borrower, and such other sums as
may be owing from time to time by the Borrower to
the Lender with respect to the Loan. Such payments
may be made, at the option of the Lender, by (i)
debiting or charging the Loan funds in the amount
of such payments without first disbursing such
amount into any special disbursement account, or
(ii) disbursing all or any part of the amount of
such payments into any special disbursement
account and then debiting such account for such
payments or invoicing Borrower therefor.
B. COST LNFORMATION. All disbursements will
be based upon a detailed breakdown of the costs of
construction of the Improvements and any financing
or development costs for which the Borrower might
request disbursement. The initial cost breakdown,
as approved by the Lender, is attached as Exhibit
"C" to this Agreement. In the event that the
Borrower becomes aware of any change in the
approved construction
costs which would increase the total cost of
construction of the Improvements shown on the
attached cost breakdown, as that breakdown is
revised from time to time and approved by the
Lender, the Borrower must immediately notify the
Lender in writing and promptly submit to the
Lender for its approval a revised cost breakdown.
No further disbursements need be made by the
Lender unless and until the revised cost breakdown
is approved. The Lender reserves the right to
approve or disapprove any revised cost breakdowns
in its discretion. If requested by Lender,
Borrower shall furnish documentation evidencing
the continuing availability of all funds necessary
to complete the Improvements free of liens.
C. REQUIRED DEPOSIT OF FUNDS BY BORROWER. If
after reasonably consulting with Borrower about
increases in estimated project costs, the Lender's
Architect at any time reasonably determines that
the amount of the undisbursed Loan proceeds will
not be sufficient fully to pay for all costs
required to complete the construction of the
Improvements in accordance with the approved plans
and specifications and for all financing and
development costs to be incurred by the Borrower,
whether such deficiency is attributable to changes
in the work or construction or in the plans and
specifications or to any other cause, the Lender
may make written demand on the Borrower to deposit
with the Lender in a money market fund approved by
Lender funds equal to the amount of the shortage
reasonably determined by the Lender ("Borrower's
Construction Funds"). The Borrower must then
deposit Borrower's Construction Funds with the
Lender within ten (10) days after the date of the
Lender's written demand. No further disbursements
need be made by the Lender until Borrower's
Construction Funds are deposited by the Borrower
with the Lender. Whenever the Lender has any
Borrower's Construction Funds on deposit, all
disbursements will be considered to be made by the
Lender first from Borrower's Construction Funds
until they are exhausted.
D. ADDITIONAL SECURITY. The Borrower
irrevocably assigns to the Lender and grants to
the Lender a security interest in, as additional
security for the performance of the Borrower's
obligations under this Agreement, the Note and the
Deed of Trust and all guaranties of same, its
interest in all Loan funds held by the Lender,
whether or not disbursed, all funds deposited by
the Borrower with the Lender under this Agreement,
all governmental permits obtained for the lawful
construction of the Improvements, and all
reserves, deferred payments, deposits, refunds,
cost savings, tap fees, utility deposits, and
payments of any land relating to the construction
of the Improvements. The Borrower irrevocably
assigns to the Lender and grants to the Lender a
security interest in all licenses and permits and
in all engineering reports, land planning maps,
plans and specifications, soils tests, surveys,
environmental reports, feasibility studies, and
other similar documents prepared for the
construction of the Improvements. Upon any Event
of Default of the Borrower, the Lender shall use
any of the foregoing for any purpose
for which the Borrower could have used them under
this Agreement or with respect to the construction
or financing of the Improvements. The Lender will
also have all other rights and remedies as to any
of the foregoing which are provided under
applicable law or in equity.
2
E. FIRST DISBURSMENT. The Lender will not
make the first disbursement of the Loan until the
Borrower has fulfilled to the Lender's
satisfaction all pre-closing conditions of the
Lender's written loan commitment dated August 23,
1996 (the "Commitment"), the terms of which are
incorporated herein by this reference, and all of
the Lender's customary and reasonable loan opening
conditions for construction loans.
The first Loan advance will occur at closing
and will include funds for the purchase or
refinance of the Property, title premiums and
fees, recording costs, Lender's legal fees, soil
tests, building permits and fees, and loan closing
costs certified by Lender. If in the reasonable
opinion of Lender, the cost breakdown and
construction budget indicate that the Loan
proceeds are insufficient to complete
construction, Borrower shall bring such shortfall
to closing in cash or certified funds. Thereafter,
Lender shall not be obligated to make any further
loan advances (but Lender may make advances in its
discretion on its sole authorization) until all
conditions as specified in the Commitment and this
Agreement are fulfilled by Borrower and
construction has commenced. At the option of
Lender, advances may be disbursed through a title
Company or other agent (Disbursement Agent) in
which event, Borrower shall comply with the
Disbursement Agent's reasonable and normal
requirements.
F. SUBSEQUENT DISBURSEMENT. Additional funds
will be made available on a monthly basis as
construction of Improvements related to the
Project progresses but shall be limited to amounts
actually paid or obligations actually incurred by
the Borrower for the Improvements. Therefore, the
actual Loan proceeds disbursed may be less than
$5,080,082.39. Lender shall disburse proceeds from
the Loan funds subject to retainage, if any, in
the amount payable to the General Contractor as
shown upon the latest application for payment for
work completed. Material and labor costs shall be
evidenced by the Contractor's xxxxxxxx showing the
applicable retainage on hard costs. All requests
for drawdowns shall be on forms approved by Lender
and shall be supported by the following:
1. Evidence satisfactory to the Lender of the
payment by the Borrower to the Contractor of the
aggregate amounts theretofore approved for
payment;
2. A certificate in form reasonably
acceptable to the Lender executed by the Borrower
certifying all representations and warranties of
the Borrower made in this Agreement to the date of
the advance have been fulfilled;
3. A certificate in form reasonably
acceptable to the Lender executed by Borrower's
and Lender's Architects certifying that work
finished to the date of the requested draw has
been completed in a good and workmanlike manner in
compliance with the plans and specifications and
that the amount of work completed is in relation
to the amount of funds requested;
4. A monthly endorsement date down from the
Title Company obtained by Lender indicating the
ownership of the Property to be in the Borrower
and further indicating that there are no liens or
encumbrances against the Property other than as
expressly approved by the Lender in writing;
3
5. Unconditional mechanics ' lien waivers or
releases in form approved by the Lender from such
subcontractors, materialmen and laborers as the
Lender may designate, for prior disbursement;
conditional waivers or releases for current
disbursement;
6. A monthly report of the worker-hours
worked for each trade.
7. A monthly narrative status report by
Lender's Architect or licensed
engineer.
Lender shall use its best efforts to disburse
Loan advances on or about the tenth (l0th) of each
month provided that Borrower has submitted all
appropriate documentation described above by the
25th of the preceding month, said advances to
include the interest due and payable to Lender.
The request for advances must be approved by
Lender and certified by Borrower.
G. RETAINAGE. Until the Improvements are 50%
complete as certified by Lender's Architect,
Lender shall disburse proceeds from the loan funds
only to the extent of 90% of the contractor's
xxxxxxxx for labor and materials, unless the
contractor furnishes a performance bond issued by
a surety acceptable to Lender. After the
Improvements are 50% complete or in all cases when
the contractor has furnished a performance bond,
Lender shall disburse proceeds to the extent of 95
% of the contractor' s xxxxxxxx for labor and
materials.
H. DISBURSMENT DISCONTINUANCE. Once the
Lender begins making disbursements of Loan funds,
the Lender need not make any further disbursements
if:
1. The Improvements are materially damaged by
fire or other casualty and not repaired, unless
the Lender actually receives insurance proceeds or
Borrower Construction Funds sufficient in the
Lender Architect's judgment to pay for the repair
of the Improvements in a timely manner; or
2. The Lender reasonably believes that the
disbursement might not be entitled to priority
over mechanics' or materialmen's liens or any
intervening or subordinate liens
on the property, unless the Lender receives, at
the Borrower's expense, a title policy endorsement
satisfactory to the Lender insuring priority; or
3. The Borrower fails to provide to the
Lender, at the Borrower' s expense, a foundation
survey upon the completion of the foundation for
the Improvements and showing no encroachments; or
4. The Lender reasonably believes that
withholding a disbursement in whole or in part is
required by applicable mechanics' lien laws; or
5. The Borrower fails to deliver to Lender
any assignments, agreements, permits or licenses
required to be furnished hereunder, or any
estoppel certificates or subordination agreements
which Lender reasonably requires from tenants or
proposed occupants of pre-leased space; or
4
6. The Borrower enters into lease agreements
containing terms, conditions and provisions which
have not been previously approved by Lender;
provided that, Borrower may execute resident
agreements substantially in the form approved by
Lender and leases of less than 10% of the floor
area of the Improvements without Lender's consent;
or
7. Borrower's Contractor is using labor other
than union labor or union trades in the
construction of the Improvements without Lender's
written consent; or
8. The Borrower is otherwise in Event of
Default under this Agreement;
or
9. The Lender reasonably believes, or the
Lender' s Architect reasonably believes, that if a
disbursement is made, there would thereafter
remain insufficient funds not previously advanced
under the Loan to fully complete the Improvements
free of liens; or
10. The Borrower fails to post the sign
identifying Lender as construction lender as
required herein.
I. FINAL DISBURSEMENT. The Lender will not be
obligated to make its final disbursement of Loan
funds (including any of the undisbursed retainage)
as set forth in Exhibit "B". attached hereto
unless and until Completion of Improvements
(defined below). Completion of Improvements must
occur within twelve (12) months of closing,
subject to the Force Majeure clause of this
Agreement, but in no event later than 24 months
from the date of this Agreement.
J. COMPLETION OF IMPROVEMENTS. Completion of
Improvements shall be evidenced by:
1. A Certificate of Completion signed by
Borrower's Architect or engineer, attesting to the
Completion of the Improvements in a good and
workmanlike manner and in accordance with the
Plans and Specifications.
2. Certificate of Occupancy from the
appropriate governmental authority subject to
tenant finish requirements.
3. Survey showing the completed Improvements
as-built.
4. Photographs of the completed Improvements.
5. Detailed schedule of all chattels,
fixtures, equipment, furniture and furnishings
which will be used in the operation of the
Improvements. ,
6. List of all contractors, subcontractors,
laborers and materialmen who worked on the
project, together with unconditional lien waivers
from each and total worker hours by trade worked.
5
7. Title insurance endorsements to the
Lender's policy which insure the lien-free
completion of the Improvements, and any other
endorsements required to close the permanent loan,
if applicable.
8. Lender approval of the completed
Improvements and confirmation that all conditions
precedent to the initial funding of the permanent
loan or other take-out have been fulfilled as
applicable.
9. The Borrower must not be in Event of
Default under this Agreement.
II. BORROWER'S COVENANTS.
A. CONSTRUCTION.
1. COMMENCEMENT OF CONSTRUCTION. No materials
shall be delivered to the site nor any labor be
performed prior to Lender's authorization to
commence construction. The Borrower will
immediately commence construction of the
Improvements not later than thirty (30) days from
the date hereof subject to the Force Majeure
clause of this Agreement ("Commencement of
Construction"), and will diligently prosecute
construction in accordance with the plans and
specifications approved by the Lender.
2. CHANGES TO PLANS. The Borrower must obtain
the Lender's prior written approval of any
material change in the plans and specifications
for the Improvements approved by the Lender and
also of any change in any work or materials for
the Improvements which exceed an amount
individually of Fifteen Thousand and No One-
Hundredths Dollars ($15,000.00) or Forty Thousand
and No One-Hundredths Dollars ($40,000.00)
collectively. The Improvements shall be completed
in compliance with such plans and specifications.
In the event that changes are made to the plans
and specifications which decrease the gross square
footage of the Improvements, Borrower must obtain
a new appraisal of the Property and the Loan
amount will be adjusted as necessary to meet a 75%
loan-to-value ratio.
In addition, if construction of the
Improvements is being accomplished under one or
more general contracts, the Borrower must obtain
the Lender's prior written approval of such
contracts. The Borrower must also obtain all
approvals of any changes in plans, specifications,
work, materials or contracts that are required by
law, or under any lease, loan commitment or other
agreement relating to the Property.
The Lender will have a reasonable time to
evaluate any requests for its approval of any
changes referred to in this paragraph, and will
not be required to consider approving any changes
unless all other approvals that are required from
other parties have been obtained. Lender will be
deemed to have approved if it fails to respond
within ten (10) working days after Lender receives
all information requested by Lender relating to
such changes or if it fails to include a
reasonable statement of its reasons with its
disapproval. If it reasonably appears to the
Lender that any change may increase the total cost
of completing the Improvements, the Lender may
require the Borrower to deposit additional
Borrower Construction Funds sufficient to cover
the increased costs as
6
a condition to giving its approval. All contracts
and subcontracts relating to the construction of
the Improvements must contain provisions
satisfactory to the Lender implementing the
provisions of this paragraph.
3. UNION COVENANT. Borrower covenants and
agrees that all work performed at the Property,
including tenant improvements, which is covered by
or the subject of collective bargaining agreements
("Agreements")in effect from time to time for all
the appropriate building trades shall be done in
its entirety by contractors signed to and abiding
by those Agreements unless otherwise approved by
Lender in writing. In addition, all contracts and
subcontracts shall contain a provision that in the
event the contractor or subcontractor fails to pay
fringe benefit contributions then the Borrower
shall have the right to withhold the amount of
such contributions for direct payment to the
benefit funds. A breach of these covenants shall
be an event of default hereunder. Further,
Borrower agrees that this foregoing construction
covenant will be included in all contracts and
subcontracts relating to this Project. The General
Contractor shall also be a signatory to the
Agreements. This covenant shall continue in full
force and effect until Completion of Improvements
and 90% occupancy of the project have occurred.
B. PERMITS AND LEGAL REQUIREMENTS. The
Borrower will comply with and keep in effect all
permits and approvals obtained from any
governmental agencies that relate to the lawful
construction of the Improvements. The Borrower
will comply with all existing and future laws,
regulations, orders and requirements of all
governmental, judicial or legal authorities having
jurisdiction over the Property or Improvements,
(including parking requirements) and with all
recorded restrictions affecting the Property.
C. SOIL ENGINEER'S REPORT. The Borrower shall
faithfully comply with all recommendations and
requirements of the soil report for the Property
and furnish copies to Lender of the periodic
inspection reports required therein.
The Borrower will furnish to the Lender from time
to time on request by the Lender, in a form
acceptable to the Lender, correct lists of all
contractors and subcontractors and union trades
affiliated with each employee in connection with
construction of the Improvements and true and
correct copies of all executed contracts and
subcontracts. The Lender may contact any
contractor or subcontractor to verify any facts
disclosed in the lists, and all contracts and
subcontracts relating to construction of the
Improvements must require the disclosure of the
listed information to the Lender.
No materials, equipment, fixtures or articles of
personal property of the Borrower placed in the
Improvements shall be purchased or installed under
any security agreement or other agreement where
the seller reserves or purports to reserve title
or the right of removal or repossession, or the
right to consider them personal property after
their incorporation in the work of construction,
unless authorized by the Lender in writing.
F. FOUNDATION SURVEY, Upon completion of the
foundation, Borrower shall provide a foundation
survey showing said foundations to be in the lot
lines, not infringing on established easements and
placed in accordance with the approved plans and
ordinances.
7
G. INSPECTION; RIGHT TO STOP WORK.
1. The Lender, and its respective agents and
representatives, will each have the right at any
reasonable time to enter the Property and inspect
the work of construction and all materials, plans,
specifications, change orders and other matters
relating to the construction. The Lender will also
have the right to examine, copy and audit the
books, records, accounting data and other
documents of the Borrower and contractors relating
to the Property or construction of the
Improvements.
2. If the Lender in good faith determines
that any work or materials do not conform to the
approved plans and specifications or sound
building practice, or otherwise
depart from any of the requirements of this
Agreement, then after notice to Borrower and 14
calendar days to cure, if Borrower has not
corrected such deficiencies, then Lender may
require the work to be stopped and withhold
disbursements until the matter is corrected. In
such event, the Borrower will promptly correct the
work to Lender's satisfaction. No such action by
the Lender will affect the Borrower's obligation
to complete the Improvements on or before the
Completion Date, nor be deemed to trigger an
extension pursuant to the Force Majeure provision
contained in this Agreement.
3. The Lender is under no duty to supervise
or inspect construction, inspect for compliance
with building codes, or examine any books and
records. Any inspection or examination by the
Lender or agent of Lender is for the sole purpose
of protecting the Lender' s security and
preserving the Lender's rights under this
Agreement. No default of the Borrower will be
waived by any inspection by the Lender. In no
event will any inspection by the Lender be a
representation that there has been or will be
compliance with the plans and specifications or
that the construction is free from defective
materials or workmanship.
H. PROTECTION AGAINST LIEN CLAIMS. The
Borrower will promptly pay and discharge all
claims and liens for labor done and materials and
services furnished in connection with the
construction of the Improvements. The Borrower
will have the right to contest in good faith any
claim or lien, provided that it does so diligently
and without prejudice to the Lender. Upon the
Lender's request, the Borrower will promptly
provide a bond, cash deposit or other security
reasonably satisfactory to the Lender to protect
the Lender's interest and security should the
contest be unsuccessful.
I. SIGNS AND PUBLICITY. The Borrower at its
sole cost will post a sign in a prominent location
on the Property for the purpose of identifying RMI
CAPITAL MANAGEMENT CO. and the participating
pension funds as the "Construction Lenders", said
sign to be approximately four (4) feet by eight
(8) feet in size and in place within 30 days of
closing. At the request of the Lender, the
Borrower will use its best efforts to identify the
Lender as the construction lender in publicity
concerning the Property. In addition, within 30
days from closing, Borrower shall furnish to
Lender 2 copies, approximately 8 x 10 inches in
size, of a color artist's rendering showing the
completed Improvements.
8
J. INSURANCE. Prior to the loan closing, and
until payment in full, Borrower agrees to carry
insurance in amounts and by such insurance
companies as is satisfactory to Lender and its
legal counsel. Such coverage shall include, but
not be limited to: Builder's Risk during period of
construction, and fire and extended coverage
insurance thereafter. In addition, Lender will
require a certificate of insurance evidencing
Borrower's liability insurance coverage,
$2,000,000.00 limits, a certificate of contractor
s worker s compensation insurance and certificate
of contractor's public liability and property
damage insurance, $2,000,000.00 limits. All
insurance policies shall contain standard
mortgagee clauses (without contribution) in favor
of Lender and shall be deposited with Lender as
evidence of such insurance until the Loan is fully
paid.
K. BORROWER COOPERATION. The Borrower agrees
to cooperate at all times with the Lender in
bringing about the timely Completion of the
Improvements, and the Borrower will resolve all
disputes arising during the work of construction
in a manner which will allow work to proceed
expeditiously.
L. PAYMENT OF EXPENSES. The Borrower agrees
to pay the Lender's reasonable out-of pocket costs
and expenses incurred in connection with the
making or disbursement of the Loan or in the
exercise of any of its rights or remedies under
this Agreement, including, but not limited to,
title insurance, title insurance endorsements, and
escrow charges, recording charges and mortgage
taxes, reasonable legal fees and disbursements,
appraisal and survey charges, real estate taxes
and special assessments, charges in connection
with the delivery of the mortgage and reasonable
travel expenses for Lender's monthly site
inspections. The Borrower also agrees to pay
reasonable Lender's Architect fees for review of
the plans, specifications and documents relating
to the construction of Improvements. The
provisions of this paragraph will survive the
termination of this Agreement and the repayment of
the Loan.
M. ACCOUNTING; CHANGES IN CONDITION. The
Borrower will keep true and correct financial
books and records on a cash basis for the
construction of the Improvements, and will
maintain adequate reserves for all contingencies.
If required by the Lender, the Borrower will
submit to the Lender at such times as the Lender
requires (which will in no event be more often
than monthly) a statement which accurately shows
the application of all funds expended to date for
construction of the Improvements and the source of
those funds as well as the Borrower's best
estimate of the funds needed to complete the.
Improvements and the source of those funds. The
Borrower will promptly supply the Lender with any.
financial statements or other information
concerning its affairs and properties as the
Lender may reasonably request, and will promptly
notify the Lender of any material adverse change
in its financial condition or in the physical
condition of the Property or Improvements.
N. GOVERNMENTAL AGENCIES. The Borrower agrees
to comply with the requirements of any commitment
or agreement entered into by any governmental
agency to assist the construction, sale, lease or
financing of the Improvements, and with the terms
of all applicable laws, regulations and
requirements governing such assistance.
9
O. INDEMNITY. The Borrower agrees to
indemnify and hold the Lender harmless from and
against all liabilities, claims, damages, costs
and expenses (including, but not limited to,
reasonable legal fees and disbursements) arising
out of or resulting from any defective workmanship
or materials occurring in the construction of the
Improvements. Upon demand by the Lender, the
Borrower will defend any action or proceeding
brought against the Lender alleging any defective
workmanship or materials, or the Lender may elect
to conduct its own defense at the expense of the
Borrower. The provisions of this paragraph will
survive the termination of this Agreement and the
repayment of the Loan.
P. ENTITY AGREEMENT. Prior to Completion of
Improvements, Borrower agrees not to amend, or
permit any amendment of, its corporate articles
and bylaws without the prior written approval of
Lender, which approval will not be unreasonably
withheld; provided that, Borrower may make non-
material amendments to its articles or bylaws
which have no adverse effect on Lender without
Lender's prior written approval. In any case of
amendment, Borrower agrees to furnish a copy of
such amended articles or bylaws to Lender within
seven (7) days following the effective date of the
amendment.
Q. LEASES. The form and content of all
leases shall be subject to review and approval by
Lender, except as otherwise provided herein.
III. DEFAULT AND REMEDIES,
A. EVENTS OF DEFAULT. The Borrower will be
in default under this Agreement if any of the
following occurs ("Event of Default"):
1. The Borrower fails to comply with any
covenant contained in this Agreement which calls
for the payment of money within ten (10) days
after written notice from Lender; or
2. The Borrower fails to comply with any
obligation, agreement or covenant contained in
this Agreement other than those covenants referred
to in (1) and (2) above, and such failure shall
either be incurable or, if curable, shall remain
uncured during any specific time period, if any,
set out herein or if none shall remain uncured for
a period of fifteen (15) days after the date of
written notice thereof from Lender to Borrower. In
the event that such failure, refusal or neglect,
is susceptible of cure but is not cured within
said fifteen (15) days, so long as Borrower is
diligently and continuously pursuing such cure,
Lender shall permit Borrower an additional thirty
(30) days to effectuate such cure; provided that
prior to Completion of Improvements, such
additional thirty (30) days shall not apply where
such failure, refusal or neglect results, in
Lender's reasonable determination, in a matter
which is of an emergency nature.
4. Construction of the Improvements is
abandoned, or is not completed on or before the
Completion Date subject to the Force Majeure
provision of this Agreement; or
5. Construction of the Improvements is halted
prior to Completion of Improvements for any period
of ten (10) consecutive days for any cause which
is not beyond the reasonable control of the
Borrower; or
10
6. An Event of Default occurs under the Note,
the Deed of Trust or any other Loan document.
B. REMEDIES. If there is an Event of Default
under this Agreement, the Lender may exercise any
right or remedy which it has under the Deed of
Trust, this Agreement or any other agreement with
the Borrower relating to the Loan, or under any
agreement guaranteeing the Loan or the completion
of construction of the Improvements, or otherwise
available at law or in equity or by statute, and
all of the Lender's rights and remedies will be
cumulative. Upon an Event of Default, the Lender
may withhold any one or more disbursements in its
discretion, and no disbursement of Loan funds by
the Lender will cure any default of the Borrower,
unless the Lender agrees otherwise in writing. The
Lender will also have the right in its discretion
to enter the Property and take any and all actions
necessary in its judgment to complete construction
of the Improvements, including, but not limited
to, making changes in plans, specifications, work
or materials and entering into, modifying or
terminating any contractual arrangements, subject
to the Lender's right at any time to discontinue
any work without liability. If the Lender elects
to complete the Improvements, it will not assume
any liability to the Borrower or any other person
for completing the Improvements or for the manner
or quality of construction of the Improvements and
the Borrower expressly waives any such liability.
The Borrower irrevocably appoints the Lender as
its attorney-in-fact, with full power of
substitution, to complete the Improvements in the
Borrower's name, or the Lender may elect to
complete construction in its own name. In any
event, all sums expended by the Lender in
completing construction will be considered to have
been disbursed to the Borrower and will be secured
by the Deed of Trust and any other instruments or
documents securing the Loan, and any such sums
that cause the principal amount of the Loan to
exceed the face amount of the Note will be
considered to be an additional loan to the
Borrower bearing interest at the rate provided in
the Note and will be secured by the Deed of Trust
and any other instrument or documents securing the
Loan.
IV. MISCELLANEOUS.
A. NO WAIVER; CONSENTS. Any waiver by the
Lender must be in writing and will not be
construed as a continuing waiver. No waiver will
be implied from any delay or failure by the Lender
to take action on account of any default of the
Borrower. Consent by the Lender to any act or
omission by the Borrower will not be construed to
be a consent to any other or subsequent act or
omission or to waive the requirement for the
Lender's consent to be obtained in any future or
other instance. However, the Lender reserves the
right to waive any requirement, if it determines
in its sole discretion that such waiver is
advisable.
B. THIRD PARTIES NOT BENEFITTED. This
Agreement is made and entered into for the sole
protection and benefit of the Lender and the
Borrower and their successors and assigns. No
trust fund is created by this Agreement and no
other persons or entities will have any right of
action under this Agreement or any right to the
Loan funds.
C. JOINT AND SEVERAL LIABILITY. If the Borrower
consists of more than one person or entity, each
will be jointly and severally liable to the Lender
for the faithful performance of this Agreement.
11
D. NOTICES, All notices given under this
Agreement must be in writing and delivered in
accordance with the notice provisions of the Deed
of Trust.
E. AUTHORITY TO FILE NOTICES. The Borrower
irrevocably appoints the Lender as its attorney-in-
fact, with full power of substitution, to file for
record, at the Borrower's cost and expense and in
the Borrower's name, any notices of completion,
notices of cessation of labor
,or any other notices that the Lender considers
necessary or desirable to protect its security.
F. LEGAL ACTIONS. The Lender will have the
right, but not the obligation, to commence, appear
in, and defend any action or proceeding that
affects its security or its rights, duties or
liabilities relating to the, Loan, the Property,
the Improvements, or this Agreement. The Borrower
will pay promptly on demand all of the Lender's
reasonable out-of-pocket costs, expenses, and
legal fees and disbursements incurred in those
actions or proceedings.
G. APPLICABLE LAW. This Agreement will be
governed by Idaho law.
H. HEIRS, SUCCESSORS AND ASSIGNS. The terms
of this Agreement will bind and benefit the heirs,
legal representatives, successors and assigns of
the parties; provided, however, that except in
connection with a permitted transfer of the
Property as set forth in the Deed of Trust, the
Borrower may not assign this Agreement or any Loan
funds, or assign or delegate any of its rights or
obligations, without the prior written consent of
the Lender, which consent shall not be
unreasonably withheld. The Lender shall have the
right to sell participations in the Loan to any
other persons or entities without the consent of
or notice to the Borrower, provided that no such
action by the Lender shall relieve the Lender of
its obligation to make disbursements of the Loan
when required by this Agreement and to service the
Loan. The Lender may disclose to any participants
or prospective participants any information or
other data or material in the Lender's possession
relating to the Borrower, the Loan and the
construction project, without the consent of or
notice to the Borrower.
I. ATTORNEYRS' FEES. If any lawsuit is
commenced to enforce any of the terms of this
Agreement, the prevailing party will have the
right to recover its reasonable attorneys' fees
and costs of suit from the other party.
J. SEVERABILITY. The invalidity or
unenforceability of any one or more provisions of
this Agreement will in no way affect any other
provisions.
K. INTERPRETATION. Whenever the context
requires, all words used in the singular will be
construed to have been used in the plural, and
vice versa, and each gender will include any other
gender. The captions of the paragraphs of this
Agreement are for convenience only and do not
define or limit any terms or provisions.
L. TIME IS OF THE ESSENCE. Time is of the
essence in the performance of this Agreement by
the Borrower.
12
M. AMENDMENTS. This Agreement may not be
modified or amended except by a written agreement
signed by the parties.
N. COUNTERPARTS. This Agreement and any
attached Consents or Exhibits requiring signatures
may be executed in counterparts, but all
counterparts shall constitute but one and the same
document.
O. RELATION TO LOAN COMMITMENT. The terms
and provisions of this Agreement, the Note and the
Deed of Trust supersede any inconsistent terms and
conditions of the Lender's Construction L4an
Commitment to the Borrower; provided that all
obligations of the Borrower under the commitment
to pay any fees to the Lender or any costs and
expenses relating to the Loan or the commitment
shall survive the execution and delivery of this
Agreement, the Note and the Deed of Trust, and any
failure of the Borrower to perform any such
obligations shall constitute a default hereunder.
P. FORCE MAJEURE. The date for commencement
of construction and Completion of Improvements
shall be advanced for the period of time that
construction is delayed by acts of God, war, riot,
fire, strike, lockout, or other causes beyond
Borrower s reasonable control (which shall not
include inability for any reason to meet its
financial obligations), provided that Completion
of Improvements shall occur no later than 24
months from the date of this Agreement.
13
Dated this 30th day of January, 1997.
BORROWER:
EMERITUS PROPERTIES II, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxxx
--------------------------------------------
PRESIDENT
Address :
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxxx 00000
LENDER:
RMI CAPITAL MANAGEMENT
CO. , a Colorado Corporation
By:
--------------------------------------------
Address:
RMI Capital Management Co.
Ptarmigan Place, Suite 640
0000 Xxxxxx Xxxxx Xxxxx Xxxxx
Xxxxxx, Xxxxxxxx 00000
14
