CONSTRUCTION LOAN AGREEMENT
R E C I T A L S
RMI CAPITAL MANAGEMENT CO. (the "Lender") has agreed to make a loan in the
amount of up to Four Million Six Hundred Ninety-Five Thousand Dollars
($4,695,000.00)(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 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 Loan 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 INFORMATION. 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
2
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 kind
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.
E. FIRST DISBURSEMENT. 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 February 1, 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 DISBURSEMENTS. 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 $4,695,000.00. Lender shall disburse
proceeds from
3
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
billings 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;
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 (10th) 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
4
from the loan funds only to the extent of 90% of the contractor's billings for
labor and materials. Thereafter, Lender shall disburse proceeds to the extent
of 95% of the contractor's billings for labor and materials.
H. DISBURSEMENT 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
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
5
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.
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
6
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
7
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 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.
D. LISTS OF CONTRACTORS AND SUBCONTRACTORS. 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 employed in connection with construction
of the Improvements and true and correct copies of all executed contracts and
8
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.
E. PURCHASE OF MATERIALS; CONDITIONAL SALES CONTRACTS. 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.
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
9
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.
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.
10
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.
0. 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
11
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 make any deposit of Borrower
Construction Funds required under this Agreement within ten (10) days after
written notice from the Lender; or
2. The Borrower fails to comply with any other covenant
contained in this Agreement which calls for the payment of money within seven
(7) days after written notice from Lender; or
3. 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.
12
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
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.
13
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.
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 Montana 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
14
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. ATTORNEYS' 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.
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.
0. 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 Loan 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
15
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.
Dated this 30th day of May, 1996.
BORROWER:
EMERITUS PROPERTIES II, INC.
By: /s/ Raymond R. Brandstrom
--------------------------------
By: President
--------------------------------
Address:
Market Place One
2003 Western Avenue, Suite 660
Seattle, Washington 98121
LENDER:
RMI CAPITAL MANAGEMENT CO.,
a Colorado Corporation
By: /s/ W. Bradley Frizell
--------------------------------
By: Managing Director
--------------------------------
Address:
RMI Capital Management Co.
Ptarmigan Place, Suite 640
3774 Cherry Creek North Drive
Denver, Colorado 80209
16