Construction Loan Agreement



Identification of Parties. THIS AGREEMENT is made [date] by and between [name] (Borrower) and [name], a [state] banking corporation, with a principal place of business in [address](mortgagee).

1. Note. Borrower has given to Mortgagee contemporaneously herewith a promissory note for ---------- dollars ($----------) secured by a mortgage of real estate with all the buildings and appurtenances thereon situated at and near [address or description of premises] in [state] and being more particularly described in the mortgage executed by Borrower and recorded in the [shire] Registry of Deeds.

2. Consideration. In consideration for periodic advances of the proceeds of the promissory note in accordance with the terms of this Agreement, Borrower agrees as follows:

a. Proceed With Construction. To proceed immediately with the construction of the buildings on the land as well as other improvements according to the specifications, drawings, and plans of [name] (Architect), dated [date], all to be in accordance with appropriate building laws, ordinances, and restrictions, if any; and to continue the construction without undue delay to completion in accordance with the construction contract therefore.

[Alternative Paragraph]

a. Proceed With Construction. Borrower expressly covenants to construct on the premises and pay for the building described below in accordance with the plans and specifications approved by Mortgagee. Before Mortgagee makes the first advance, Borrower shall file the plans and specifications with all governmental authorities having jurisdiction and shall obtain all necessary approvals of the plans and specifications and all necessary building permits. The building to be constructed by Borrower shall be [brief description of building, e.g., use, height, square meters]. The plans and specifications for the building that have been approved by Mortgagee and are to be used by Borrower are the following: [description].





b. Keep Premises Free of Caveats or other Liens. To keep the premises, building, and improvements free from any caveat, other liens, and claims whether inferior or superior to the mortgage. A discharge of the mortgage and taking of a new mortgage in substitution shall not release or diminish this obligation; to keep all buildings on the premises in good repair and insured against loss by fire and other casualty to an amount and by such companies as shall be satisfactory to Mortgagee, and maintain such insurance for the benefit of and first payable in case of loss to Mortgagee; in case of insured loss, Mortgagee, at Mortgagee's option, may credit all or part of the insurance proceeds to the outstanding debt of Borrower, or may use all or part of the proceeds for rebuilding or repairing the loss or damage.

c. Furnish Bonds, Releases, Etc. To furnish all bonds and waivers of liens or claims on the premises, buildings, or improvements and any surveys, releases, and assurances that Mortgagee may deem necessary or may request for Mortgagee's protection, including surety or other bonds and assurances of performance and payment by Borrower and any contractors; also, to pay for additional engineering or architectural studies and reports that Mortgagee in Mortgagee's judgment may require as a result of Mortgagee's periodic inspections of the construction project to provide assurance that the construction is proceeding in accordance with the plans and specifications, sound engineering and architectural principles, and commonly accepted safety standards.

d. Pay All Indebtedness. To pay all indebtedness and comply with all terms and conditions set forth in the promissory note, mortgage, and this Agreement, and set forth in any security agreement pertaining to personal property of Borrower that Mortgagee may require for Mortgagee's protection.

e. Use Borrower's Funds. To invest or expend such of Borrower's own funds in the project and construction as Mortgagee may require before Mortgagee begins to make advances of the proceeds of the promissory note, and to pay on demand to Mortgagee added construction funds should additional construction and related costs beyond original estimates be determined necessary by Mortgagee to complete the construction project.

f. Proof of Payment to Contractors; Contracts, Etc. To deliver to Mortgagee, upon Mortgagee's request, executed copies of all construction contracts and subcontracts, change orders, invoices, bonds, estimates with respect to the construction, and, also upon Mortgagee's request, to give sworn statements setting forth names of contractors, subcontractors, and all others furnishing labor, materials, and services to the construction, including amounts due, amounts paid, and total contract prices. Borrower agrees not to change or alter, without Mortgagee's prior written consent, any contract, specification, drawing, or construction detail.

g. Inspection of Premises. To allow Mortgagee, or Mortgagee's agents and employees, to inspect the construction project at all reasonable times. Borrower acknowledges the inspections are for Mortgagee's sole benefit as lender.

h. Payment of Fees, Title Reports, Etc. To pay at the time of the execution of this Agreement or, at the option of Mortgagee, at any time or times thereafter specified by Mortgagee all fees and charges agreed to be paid including the fees, if any, for procuring and making this loan and the charges for the examination of title to the premises, surveys, continuations of surveys and title reports, inspections, and drawing of papers, and to also pay recording and filing fees, mortgage-recording tax, and architects', engineers', and building loan service fees.

3. Mortgagee's Advances. Mortgagee agrees to lend and advance to Borrower the principal sum of the promissory note subject to the covenants and provisions in this Agreement in monthly installments as construction progresses in accordance with the specifications, drawings, and plans upon satisfactory evidence to Mortgagee of stages of completion as certified by an architect or other qualified person agreeable to Mortgagee. The advances are to be made within [number] days after such evidence is received, and each advance shall be equivalent to ---------- percent (----------%) of the construction costs then approved by Mortgagee after Mortgagee's examination of the stage of completion. The remaining ---------- percent (----------%) of the loan shall be withheld pending final completion, similarly certified, and release or termination of all caveats, other lien's against the premises superior to Mortgagee's lien. The monthly advances and other advances or proceeds of the loan may be made at Mortgagee's discretion directly to Borrower, or to any contractor, subcontractor, materialman, or other person or entity providing labor, services, or materials, or jointly to two or more of them.

[Alternative Paragraph]

3. Mortgagee's Advances. The principal sum will be advanced from time to time, upon not less than [number] days' advance written request to Mortgagee in each instance during the course of construction of the building. Each request for an advance shall be accompanied by a certificate of an architect satisfactory to Mortgagee that shall certify (a) that all work usually done at the stage of construction when the request is made has been done in a good and workmanlike manner, that all materials and fixtures usually installed and furnished at that stage of construction have been furnished and installed, and that all construction materials and fixtures then incorporated in the building are in strict conformity with the plans and specifications; and (b) the total amount then and theretofore payable to [name] (Contractor) under contract dated [date] between Borrower and Contractor. Each advance shall be made in an amount equal to the total amount referred to in Clause (b) of the immediately preceding sentence less the sums theretofore advanced by Mortgagee hereunder. Whenever Mortgagee shall require, Borrower shall furnish to Mortgagee, as a condition precedent to the making of any said advance, a receipt or certificate signed by Contractor confirming Architect's certificate tendered in connection with the advance. The final advance on account on the loan shall be made upon completion of the building.





Advances shall not be made more frequently than monthly, and no advance, interim or final, shall be due unless, in the judgment of Mortgagee, all work usually done at the stage of construction when the advance is requested has been done in a good and workmanlike manner, and all materials and fixtures usually installed and furnished at that stage of construction have been furnished and installed, and unless all construction, materials, and fixtures are in strict conformity with the plans and specifications. However, Mortgagee may advance part or the whole of any advance before it becomes due if Mortgagee believes it advisable to do so, and these advances or payments shall be deemed to have been made in pursuance of this Agreement and not to be modifications of it. The making of any advance, or any part of an advance, shall not be deemed an approval or acceptance by Mortgagee of the work theretofore done. Any advance or any part or parts thereof may be postponed or deferred by mutual consent of Borrower and Mortgagee, and any postponement shall be deemed to be in pursuance of this Agreement and not in modification of it. If the building is not completed by [date], then Mortgagee shall not be obligated to make any further advances. Mortgagee shall not be obligated to make any advance, interim or final, if and as long as there shall be filed of record against the land, premises or property, and remain undischarged, any caveat or other lien, notice of refusal, stop notice, lien claim, or similar lien or notice.

4. Binding Effect. All the provisions of this Agreement shall be binding upon and inure to the benefit of Borrower's and Mortgagee's heirs, successors, and assigns except as may otherwise be provided.

5. Receipts and Statements. Upon the making of each advance, and as a condition to making the advance, Borrower will: (a) execute under Borrower's corporate seal a dated receipt for the amount advanced, which receipt shall be indorsed upon or attached to the note; and (b) deliver to Mortgagee any written verified statements of Borrower and proofs of payment to Contractor, subcontractors, laborers, and materialmen, as Mortgagee may demand.

All advances are to be made at [address] or at such other place reasonably convenient to the parties as Mortgagee shall designate.

6. Sale, Bankruptcy, Etc. This Agreement is primarily between Borrower and Mortgagee, and if at any time before the entire loan has been advanced the interest of Borrower in the mortgaged premises shall pass from Borrower, voluntarily or involuntarily, or should Borrower be adjudicated bankrupt or insolvent, or if any court action affecting any part of the loan remaining to be advanced is pending, or if the building or improvements on the premises shall be substantially damaged in any manner, or if Borrower shall have violated or failed to perform any of the provisions in this Agreement, the note, mortgage, or any security agreement, as to personal property, or shall fail to perform or fail to cause to be performed the terms and conditions of the loan commitment letter(s) or agreement(s), if any, pursuant to which this Construction Loan Agreement is executed, Mortgagee shall not be required to advance any part of the remainder of the loan; it being expressly understood that full performance of the provisions is a condition precedent to Mortgagee's liability to advance the remainder of the loan or any part of it; no creditor of Borrower or any other person, entity, or court shall have any claim upon the unadvanced remainder of the loan, and Mortgagee shall not be a trustee or fiduciary for any one with respect to the loan; provided, however, that any or all conditions precedent may be waived at any time by Mortgagee but no waiver at any time of any condition shall be construed as a right to subsequent waiver of the same provision or condition; furthermore, Mortgagee may at Mortgagee's option enter upon the mortgaged premises and complete the construction of the buildings and improvements. All construction materials at the time of entry of Mortgagee on or near the premises shall become Mortgagee's property without payment to be used in the completion of construction, and Mortgagee is given full power and authority to make this entry and to enter into contracts or arrangements that may be necessary to complete the buildings and improvements; moneys so expended by Mortgagee shall be added to the principal amount of the loan and secured by the mortgage and shall be payable by Borrower on demand with interest at the rate of ---------- percent (----------%) per annum. Borrower assigns all Borrower's right, title, and interest in all contracts, now or hereafter existing, for the construction to Mortgagee for Mortgagee's use if Mortgagee enters the premises to complete the construction. Mortgagee shall not be bound by any such contracts or be under any obligation to fulfill Borrower's commitments until Mortgagee elects to do so in writing with the various contractors, materialmen, or other parties to such contracts. If Mortgagee exercises Mortgagee's option to

complete any construction, full, complete, and irrevocable authorization is given to Mortgagee as Borrower's duly constituted attorney-in-fact to bind Borrower to any contracts, commitments, or undertakings deemed necessary or advisable by Mortgagee for the purpose of completing construction in accordance with the plans and specifications agreed upon by Borrower and Mortgagee.

[Alternative Paragraph]

6. Sale, Bankruptcy, Etc. Borrower covenants and agrees not to do any act or thing prohibited by the terms of this Agreement. Upon the occurrence of any of the following events, all obligation on the part of Mortgagee to make the loan or to make any further advance shall, if Mortgagee so elects, cease and terminate, and the note and mortgage shall, at the option of Mortgagee, become immediately due and payable. However, Mortgagee may make any advances or parts of advances after the happening of any of the following events, each of which shall constitute an event of default by Borrower, without waiving the right to demand payment of the mortgage debt and without becoming liable to make any other or further advances:





a. Title Not Satisfactory. If at the time any advance is due to Borrower the title is not satisfactory to Mortgagee's solicitor, regardless of whether the caveat, lien, encumbrance, or other question existed at the time of any prior advance;

b. Assignment of Contract or Advances. If Borrower attempts to assign this Agreement or any advances or any interest in them, or if the premises are conveyed or encumbered in any way without Mortgagee's written consent;

c. Encroachments. If a survey shows that the improvement on the premises encroaches upon the street or upon adjoining property, or any adjoining structure encroaches upon the premises to an extent deemed material by Mortgagee's attorney;

d. Refusal to Accept Advance; Failure to Complete Building. If Borrower does not accept any advance within [number] days after it is payable, or if the building is not completed on or before [date];

e. Bankruptcy or Insolvency. If a petition in bankruptcy is filed by or against Borrower or a receiver or trustee of the property of Borrower is appointed; or if Borrower files a petition for reorganization under any of the provisions of the Bankruptcy Act or of any other law, state or federal, or makes an assignment for the benefit of creditors or is adjudged insolvent by any state or federal court of competent jurisdiction;

f. Improper Construction. If Borrower does not construct the building in accordance with the plans and specifications and in accordance with all laws, rules, regulations, and requirements of all governmental authorities having jurisdiction, and in accordance with any amendments and additions to the plans and specifications made with the written approval of Mortgagee and any governmental authorities having jurisdiction; or if Borrower fails to file amended or supplemental plans and specifications, if required;

g. Refusal to Permit Mortgagee to Enter Premises. If Borrower does not permit Mortgagee, or representatives of Mortgagee, to enter upon the premises and inspect the building at all reasonable times and examine all detailed plans, shop drawings, and specifications that are kept at the work, or fails to furnish, when requested, copies of the plans, drawings, and specifications;

h. Construction Discontinued. If, for any cause, the construction of the building is discontinued or not carried on with reasonable dispatch in the judgment of Mortgagee;

i. Security Interests Adverse to Mortgagee. If Borrower creates any security interest or chattel mortgage in any materials, fixtures, or articles used in the construction or operation of the building or appurtenant to it, or in articles of personal property placed on the premises or in the building, or if any materials, fixtures, or articles are not satisfactory to Mortgagee or are purchased on conditional bill of sale or otherwise so that their ownership will not vest unconditionally in Borrower, free from encumbrance, on delivery at the premises; or if Borrower does not deliver to Mortgagee, if requested, the contracts, bills of sale, statements, receipted vouchers, and agreements, or any of them, under which Borrower claims title to materials, fixtures, and articles;

j. Government Requirements. If Borrower fails to comply with any requirement of any governmental authority having jurisdiction within [number] days after notice in writing of the requirement has been given to Borrower; or fails to deliver to Mortgagee, when requested, official searches made by the governmental authorities having jurisdiction;

k. Identity of Contractors. If Borrower does not disclose to Mortgagee, upon demand, the names of all persons or entities with whom Borrower contracted or intends to contract for the construction of the building or for the furnishing of labor or materials;

l. Amendment of Construction Contract. If Borrower agrees to amend the contract with Contractor or Borrower's agreement dated [date] with [name], Borrower's architect, without the prior written consent of Mortgagee;

m. Third-Party Occupancy of Premises. If Borrower permits any purchaser or prospective purchaser to occupy the premises before this Contract has been fully performed and the final advance made hereunder; or

n. Breach of Contract, Note, or Mortgage. If Borrower fails to keep, observe, or perform any of the conditions, stipulations, agreements, or covenants contained in this Agreement or in the note or mortgage.

7. Liability. Borrower has selected all architects, engineers, contractors, subcontractors, materialmen, as well as all others furnishing services or materials to the construction project, and Mortgagee has, and shall have, no responsibility for them or for the quality of their materials or workmanship. Mortgagee's sole function is that of lender and the only consideration passing from Mortgagee to Borrower is the loan proceeds in accordance with and subject to the terms of this Agreement. Borrower shall have no right to rely on any procedures required by Mortgagee, the procedures being for Mortgagee's protection as lender and no one else. Borrower will hold and save Mortgagee harmless and indemnify Mortgagee against and from claims, of any kind, of any persons, including but without limiting the generality of the foregoing, Borrower's employees, any contractor constructing the improvements and Contractor's employees, any tenant of Borrower, any subtenant or concessionaire of any such tenant, and the employees and business invitees of any tenant, subtenant, or concessionaire, arising from or out of the construction, use, occupancy or possession of the improvements in accordance with the plans and specifications.

8. Security Agreement. Borrower, as Debtor, in consideration of the loan, hereby grants to Mortgagee, as Secured Party, a security interest in the following property including additions, accessions, substitutions, and replacements:

All construction materials, supplies, machinery, and equipment of Debtor now and to be situated on premises owned by Debtor at and near [address or description of premises including state] (the premises are more completely described in the real estate mortgage delivered by Debtor to Secured Party of even date and recorded in [shire] Registry of Mortgages), including all other tangible personal property of Debtor that becomes affixed to the premises.





The security interest shall secure payment and performance of all of Borrower's obligations set forth in the promissory note, the mortgage, and this Agreement. Default in payment or performance of any obligation shall entitle Mortgagee to all default remedies with respect to the security interest as in the [state] which allows or may in the future allow.

9. Release of Premises. Mortgagee may at any time release portions of the premises from the provisions of this Agreement and from the mortgage upon such terms and conditions as Mortgagee deems fit.

10. Extension. Mortgagee may at any time extend the payment of the principal indebtedness secured by the note and mortgage. Any extension so granted shall be deemed made in pursuance of this Agreement and not a modification.

11. Surveys and Title Reports. Borrower shall furnish to Mortgagee or Mortgagee may procure at Borrower's expense, surveys and continuations of surveys made by a surveyor satisfactory to Mortgagee and title continuations whenever required by Mortgagee.

12. Insurance. Borrower shall furnish to Mortgagee, premiums prepaid, or Mortgagee may procure at Borrower's expense, insurance policies in companies, forms and amounts satisfactory to Mortgagee, insuring the premises against loss or damage by such risks and hazards as may reasonably be required by Mortgagee.

13. Building Security. Mortgagee may, at Borrower's expense, employ a security guard to protect the building and its contents from depredation or injury.

14. Mortgagee's Rights in Event of Discontinuance of Construction. If the construction of the building is discontinued or not carried on with reasonable dispatch in Mortgagee's judgment, Mortgagee may purchase materials and employ workers to protect the building so that it will not suffer from depredation or the weather, or to complete the building, so that it may be used for the purposes for which it is designed.

15. Sums Paid by Mortgagee. All sums paid or expended by Mortgagee (other than actual advances to Borrower) in accordance with any of the provisions of this Agreement shall be deemed advances to Borrower and secured by the note and mortgage and may be applied, at Mortgagee's option, to any advances thereafter becoming due.

16. Deduction From Advances. Mortgagee may deduct from any advances to be made under this Agreement any amount necessary for the payment of: (a) any fees and expenses relating to the examination of the title to the premises, including costs of survey continuations and title examination continuations; (b) charges for appraisals; (c) inspections; (d) drawing of papers; (e) architects', engineers', and building loan service fees; (f) any expenses incurred in procuring or making the loan; (g) any insurance and title insurance premiums; (h) mortgage-recording taxes; (i) assessments; (j) water rates and other charges; (k) any caveats, liens and encumbrances upon the premises; and (l) any other amounts necessary for the payment of the cost of the improvement. Mortgagee may apply these amounts in making the payments, and all sums so applied shall be deemed advances under this Agreement and secured by the note and mortgage.

17. Assignment by Mortgagee. Mortgagee may assign this Agreement and the note and mortgage and cause the assignee or any subsequent assignee to make any advances not made at the time of the assignment, and all the provisions of this Agreement shall continue to apply to the loan and the note and mortgage.

18. Assignment by Borrower. Borrower will not assign this Agreement or the monies due under this Agreement or convey or encumber the premises without Mortgagee's written consent, but, in the event of an assignment with Mortgagee's consent, Mortgagee shall nevertheless continue to make advances under this Agreement to Borrower or to those who succeed to Borrower's title. All sums so advanced by Mortgagee shall be deemed advances under this Agreement and not modifications and shall be secured by the note and mortgage. Any assignment of this Agreement or the monies due under this Agreement made without Mortgagee's consent shall be void.

19. Definition of Completion. For purposes of this Agreement, construction of the building shall be deemed completed only when:

a. An architect or engineer approved by Mortgagee shall certify to Mortgagee in writing that the physical construction of the building has been completed in strict accordance with the plans and specifications, as they may have been amended and supplemented with Mortgagee's written approval and that of any governmental authorities having jurisdiction, all utilities serving the building have been connected and are operating, and the building is ready for occupancy for the purposes for which designed;

b. A final certificate of occupancy has been issued for the building by the governmental authorities having jurisdiction authorizing its use for the purposes for which designed; and

c. Certificates of inspection and approval have been issued by insurance bureaus having jurisdiction for rating purposes.

20. Contractor to Complete. Individual Contractor(s) executing this Agreement individually agree that should Mortgagee, Mortgagee's successors, or assigns, under the terms of this Agreement, request it as Contractor to complete the construction under the terms of its Construction Contract, the Contract being with Borrower, it shall complete the construction in consideration of the payments to be made under the terms of the Construction Contract, comply with all other terms of that Contract, and recognize Mortgagee's rights under its note, mortgage, and this Agreement; provided that at the same time, Mortgagee agrees in writing to perform all obligations of Borrower under the Contract. In addition, Contractor(s) agree(s) that the Contract(s) shall not be terminated by Contractor(s) without a number]-day prior written notice to Mortgagee. Mortgagee shall have the [number]-day period, at Mortgagee's option, to cure any defect or breach by Borrower in the contract.

21. Enforceability. If any part of this Agreement is held to be unenforceable or void, that shall not affect the enforceability or validity of the remaining parts of the Agreement.

22. Joint and Several Liability. Although reference to Borrower is in the singular throughout, if there are two or more persons, corporations, or other entities as borrowers, their obligations shall be joint and several, and a breach or violation by any one of them shall constitute a breach or violation by all of such borrowers.

IN WITNESS WHEREOF, the parties have executed this Agreement the day and year first above written.

Witness:

[signatures] By: [signature]

Borrower

By: [signature]

Mortgagee

By: [signature]

Contractor