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Construction Mortgage

1. Description of Parties. THIS MORTGAGE is made [date] between [name], a corporation of [state], with principal office in [city, county, state] (Mortgagor), and [name], a corporation of [state] (Mortgagee).

2. Description of Mortgage Note. Mortgagor, by Mortgagor's Note bearing even date, is indebted to Mortgagee in the sum of ---------- dollars ($----------), lawful money of the United States, with interest from the date thereof at the rate set forth in the Note, principal and interest payable in accordance with the terms and conditions provided by the Note, the final payment of which, if not sooner paid, is due and payable not later than [date], both principal and interest being payable at the principal office of Mortgagee in [city, state] or at such other place as the holder of the Note may designate in writing.

3. Mortgage and Description of Property. To secure the payment of the described debt as well as all other sums recoverable by Mortgagee under the terms of this Mortgage, according to the conditions of the Note, Mortgagor mortgages to Mortgagee: [description of mortgaged real estate].

TOGETHER with all buildings and improvements now or hereafter erected or created on the premises;

TOGETHER with all the fixtures appurtenant to the premises and all personal property now or hereafter used or useful in the operation of the premises;

AND TOGETHER with the buildings and improvements, streets, lanes, alleys, passages, ways, waters, watercourses, rights and easements belonging to the premises, and the rents, issues and profits, reversions and remainders of the premises;

4. Assignment of Rents. As further security for payment of the indebtedness and performance of the obligations, covenants, and agreements secured by this Instrument, Mortgagor assigns to Mortgagee and Mortgagee's successors and assigns, all leases of the mortgaged premises already in existence and to be created in the future, together with all rents to become due under existing or future leases. Upon an event of default, Mortgagor confers on Mortgagee the exclusive power, to be used or not in Mortgagee's sole discretion, to act as agent, or to appoint a third person to act as agent for Mortgagor, with power to take possession of and collect all rents, and issues and profits arising from the mortgaged premises and the personal property used in the operation of the premises and apply the rents, and issues and profits at the option of Mortgagee to the payment of the mortgage debt, interest, insurance, taxes, costs of maintenance and operation, repairs and other similar expenses, in such order of priority as Mortgagee may in Mortgagee's sole discretion determine, and to turn any balance remaining over to Mortgagor. The collection of rents, and issues and profits shall not operate as an affirmance of any tenant or lease in the event the title to the property is acquired by Mortgagee or any other purchaser at a foreclosure sale. In exercising any of the powers set out in this Paragraph, Mortgagee may also, upon an event of default, take possession of any personal property contained in the mortgaged premises and useful in their operation and operate and maintain it. The right to enter and take possession of the premises, to manage and operate them, and to collect the rents, and issues and profits, may be exercised concurrently with or independently of any other right or remedy under this Mortgage or afforded by law. Mortgagee shall be liable to account only for such rents, and issues and profits actually received by Mortgagee.

5. Mortgagor's Obligations. Mortgagor covenants with Mortgagee as follows:

a. Furnish Financial Statements. Mortgagor will furnish Mortgagee with a sworn statement of annual income and expense and a balance sheet during the month following the expiration of each of Mortgagor's fiscal years, covering the operation of the mortgaged premises during the preceding fiscal year and the financial condition of Mortgagor as at the end of such fiscal year.

b. Maintain Premises. Mortgagor will abstain from and not permit the commission of waste in or about the mortgaged premises. Mortgagor will maintain the premises in good condition and repair and will replace all items of real and personal property in which Mortgagee has a security interest and that may wear out, or be lost, damaged or destroyed.

c. Adequate Insurance. Mortgagor will keep the building and improvements on the mortgaged premises, and the personnal property used in their operation, continually insured in companies approved by Mortgagee, against the hazards, for the amounts, in the forms of insurance, and in the manner that Mortgagee may require for Mortgagee's benefit, as additional security. Mortgagor will deliver to Mortgagee all policies and receipts relating to the insurance, with standard mortgagee clauses attached to policies insuring real property and naming Mortgagee as an insured in policies insuring personal property. The policies and receipts will be held by Mortgagee.

d. Payment of Taxes, Assessments, Etc. Mortgagor will pay when due all taxes, assessments, water and sewer rents, and other charges assessed against the mortgaged premises or upon the interest of Mortgagee in the premises or upon any personal property, without any deduction, defalcation, or abatement. Mortgagor will pay, when due, any other taxes (including corporate taxes), assessments or charges, claims or encumbrances that might become a lien prior to the lien of this Mortgage or that might have priority in distribution of the proceeds of a judicial sale. However, if Mortgagor deposits cash with Mortgagee or a corporate surety bond naming Mortgagee as Obligee in an amount sufficient to pay the tax, assessment, charge, claim, or encumbrance with interest and penalties, Mortgagor may withhold payment or discharge as long as the validity of the tax, assessment, charge, claim, or encumbrance is contested in good faith.

e. Receipts for Payment of Taxes, Assessments, Etc. Mortgagor will produce to Mortgagee, not later than [number] days before the date on which any taxes, assessments, water and sewer rents, and other charges bear interest or penalties, receipts for the taxes, assessments, water and sewer rents, and other charges or, if Mortgagor has made the deposit as provided by the preceding Paragraph, evidence that the validity of any tax, assessment, charge, claim, or encumbrance is being contested in good faith.

f. Revenue Stamps on Note. If at any time any agency of the United States requires internal revenue stamps on the Note secured by this Mortgage, Mortgagor, upon demand, will pay for the stamps and on default of the payment within [number] days after demand, the holder of the Note may pay for the stamps and add the amount paid to the principal indebtedness evidenced by the Note and secured by this Mortgage, and the additional principal shall bear interest at the rate specified in the Note.

g. Taxes on Note or Mortgage. Mortgagor will pay all taxes that may be assessed upon this Mortgage or the Note, or the indebtedness secured by this Mortgage, other than income taxes and taxes measured by income, without regard to any law imposing payment upon Mortgagee. If a court of competent jurisdiction decides that the undertaking by Mortgagor to pay these taxes is legally inoperative, and if Mortgagor nevertheless fails to pay such taxes, the failure shall be a default under this Mortgage.

h. Removal or Alteration of Building. Mortgagor will not remove or demolish any building now or hereafter erected upon the premises, nor alter the design or structural character of any building now or hereafter erected upon the premises so as to diminish the premises value, unless Mortgagee first consents in writing. Mortgagor will comply with all laws, ordinances, regulations, covenants, conditions, and restrictions affecting the premises, and will not permit any violation of them.

i. Insurance Proceeds; Awards. Mortgagee may apply the proceeds of any insurance or any sums received as the result of the taking by eminent domain of any part of the mortgaged premises as follows: If no event of default has occurred, proceeds of less than ---------- dollars ($----------) for a loss shall be paid directly to Mortgagor, and proceeds of ---------- dollars ($----------) or more for a loss shall be paid over to Mortgagor to the extent necessary to reimburse Mortgagor for the cost of restoring the mortgaged premises, or of replacing any personal property in which Mortgagee has a security interest, upon receipt from Mortgagor of vouchers showing the cost of the restoration or replacement, If an event of default has occurred, Mortgagee may apply the proceeds either on account of the principal debt or interest, or for the cost of restoring the mortgaged premises or of replacing any personal property in which Mortgagee has a security interest, or both.

j. Failure to Pay Liens or Taxes; Keep Property in Repair; Defend Actions, Etc. If Mortgagor (i) fails to pay any claim, lien, or encumbrance that is prior to this Mortgage; (ii) fails to pay any tax or assessment when due unless the validity of the tax is being contested; (iii) fails to pay any insurance premium when due; (iv) does not keep the premises in repair; (v) commits or permits waste; or (vi) if an action or proceeding affecting the premises or the title to it is started by a third party, Mortgagee may demand that Mortgagor deposit with Mortgagee either cash or a corporate surety bond naming Mortgagee as Obligee. The cash or bond shall be deposited no later than [number] days following the making of Mortgagee's demand. The cash or bond shall be in an amount sufficient to: (i) pay any claim, lien, encumbrance, tax, assessment, or insurance premium, together with any interest or penalties that may be due; (ii) cover the cost of any repairs or the elimination of any waste; or (iii) pay the cost of defending the action or proceeding, all in accordance with Mortgagee's demand.

If Mortgagor fails to deposit cash or a bond as demanded, Mortgagee may promptly take steps to eliminate the condition or defend the action described in Mortgagee's demand. In connection with the elimination of the condition or defense of the action, Mortgagee may take any action Mortgagee deems advisable, including the: (i) payment of any claim, lien, encumbrance, tax, assessment, or insurance premium, together with interest and penalties, with right of subrogation; (ii) procurement of any abstracts or evidence of title that Mortgagee deems necessary; (iii) making of any repairs and taking of any steps to prevent or cure waste; and (iv) appearance in any action or proceeding and the retention of counsel, and Mortgagee may advance any sums Mortgagee deems necessary for these purposes. Mortgagee shall be the sole judge of the legality, validity, and priority of any claim, lien, encumbrance, tax, assessment, or insurance premium and of the sum necessary to satisfy any of them. Mortgagor will pay Mortgagee immediately and without demand all sums of money advanced by Mortgagee pursuant to this Paragraph, together with interest on each advance at the rate of ---------- percent (----------%) per annum, and all sums and interest shall be secured by this Mortgage.

k. Escrow Deposits. Mortgagor, if required by Mortgagee, shall also make monthly deposits in an account in [bank], which shall be subject to Mortgagee's control, of a sum equal to one twelfth of the yearly taxes and assessments that may be levied against the premises and shall furnish Mortgagee with evidence of the deposits. The amount of the taxes and assessments, when unknown, shall be estimated by Mortgagee. The deposits shall be used by Mortgagee to pay taxes and assessments at the allowed discount, if the accumulated funds are sufficient to pay them at a discount. Any insufficiency shall be paid by Mortgagor to Mortgagee on demand. If, by reason of any default by Mortgagor under any provision of this Mortgage, Mortgagee declares all sums secured by this Mortgage to be due and payable, Mortgagee may then apply any funds in the account against the entire secured indebtedness. The enforceability of the covenants relating to taxes and assessments contained in this Mortgage and the Note shall not be affected except if those obligations have been met by compliance with this Paragraph. Mortgagee may, at Mortgagee's option, waive and, after any waiver, reinstate any or all provisions requiring deposits by notice to Mortgagor in writing. While any waiver is in effect, Mortgagor shall pay taxes and assessments as provided above.

l. Loan Is a Construction Loan. The loan secured by this Mortgage is for the purpose of financing the construction of a [description] to be completed on the mortgaged premises in accordance with a Construction Loan Agreement between the parties bearing even date. The consideration for this Mortgage is the present and future advance of funds to Mortgagor by Mortgagee which advances Mortgagee makes in accordance with the provisions of the Construction Agreement. This Mortgage secures all future advances, and the lien of each advance shall relate back to the date of this Mortgage. This Mortgage shall have the full force, effect, and benefits of a mortgage to secure future advances of money.

m. State Taxes. The word "taxes" as used in this Mortgage includes, in addition to municipal taxes, all state taxes imposed under authority of any law of [state], together with all interest and penalties.

n. Act of Default. An event of default shall mean (i) default in performance of any of the terms or conditions of the Construction Loan Agreement after the expiration of any applicable grace period; (ii) failure to pay any installments of principal or interest or any payment of any other sums secured by this Mortgage within [number] days of the date that it becomes due and payable; or (iii) failure to cure, within [number] days after written notice, any default in the performance of any of Mortgagor's other obligations, covenants, and agreements in this Mortgage or in the Note. Upon the occurrence of an event of default, the whole of the principal debt, with interest, and any other sums secured by this Mortgage then unpaid, shall become due and payable, at the option of Mortgagee, without further notice or demand. A complaint may be issued on this Mortgage and prosecuted to judgment, execution, and sale for the collection of the whole amount of the principal debt and interest and any other sums secured by this Mortgage remaining unpaid, together with all fees, costs, and expenses including attorney fees.

o. No Waiver. No delay by Mortgagee in exercising any right or remedy under this Mortgage or given by law shall operate as a waiver or preclude the exercise of that right or remedy during the continuance of any default. All rights and remedies of Mortgagee are cumulative and concurrent and may be exercised singly, successively, or concurrently.

p. Other Documents. Mortgagor will execute and deliver to Mortgagee any other documents and statements that Mortgagee needs to perfect and protect the lien of this Mortgage, and will pay all costs of recording or filing the documents or statements in any public office that Mortgagee may require.

q. Modification. If any agreement is entered into modifying or changing the terms of this Mortgage or the Note secured by it in any particular, the rights of the parties to that agreement shall be superior to the rights of the holder of any intervening lien.

r. Binding on Parties. The covenants and agreements contained in this Mortgage shall bind and inure to the benefit of the parties, their successors, and assigns.

6. Satisfaction Piece. When the entire indebtedness secured by this Mortgage has been paid, and if Mortgagor also pays all satisfaction costs including but not limited to the cost of recording a power of attorney to satisfy this Mortgage, then this Mortgage and the estate granted and the Note secured by it shall be void and of no further effect.

IN WITNESS WHEREOF, [name] has caused these presents to be executed and its corporate seal to be hereto affixed, duly attested, as of this [date].

[name of Mortgagor]

Attest: [signature]


By: [signature]