Form 10-27

Assignment of Construction Contract and Consent

Basic Information

Date:

Borrower:

Borrower’s Mailing Address:

Lender:

Lender’s Mailing Address:

Contractor:

Contractor’s Mailing Address:

Construction Contract:

Plans:

Project:

Construction Loan Agreement

Date:

Loan (amount):

Deed of Trust:

Date:

Trustee:

Property:

A.Background

A.1.Borrower is entering into the Construction Loan Agreement with Lender under which Lender will provide the Loan for construction of the Project.

A.2.As security for the Loan, Borrower has executed and delivered the Deed of Trust.

A.3.It is a requirement for the advance of the Loan that Lender, Borrower, and Con­tractor enter into this Assignment of Construction Contract and Consent.

B.Assignment

B.1.Borrower hereby assigns to Lender the Construction Contract as security for the Loan.

B.2.Borrower and Contractor, by executing this Assignment, agree that Lender does not assume any of Borrower’s obligations or duties concerning the Construction Contract, including but not limited to the obligation to compensate Contractor for performance of the Construction Contract. Borrower agrees to indemnify and hold Lender harmless against and from any loss, cost, liability, or expense (including but not limited to reasonable attorney’s fees) resulting from any failure of Borrower to perform its obligations or duties under the Construction Contract.

B.3.Borrower hereby irrevocably constitutes and appoints Lender as its attorney-in-fact to demand, receive, and enforce Borrower’s rights with respect to the Construction Con­tract; to give appropriate receipts, releases, and satisfactions for and on behalf of Borrower; and to do all acts in the name of Borrower or in the name of Lender with the same force and effect as Borrower could do if this Assignment had not been made.

C.Borrower’s Representations and Warranties

Borrower hereby represents and warrants to and agrees with Lender as follows:

C.1.Exhibit A attached hereto is a true and complete copy of the Construction Con­tract.

C.2.The Construction Contract has no modifications except as described in Exhibit A.

C.3.Lender may use the Construction Contract for any purpose relating to the Proj­ect including but not limited to inspections of construction and the completion of the Project.

C.4.Lender’s acceptance of this Assignment shall not constitute approval by Lender of the Contractor, the Construction Contract, or any other contractors, subcontractors, or sup­pliers. Lender has no liability or obligation whatsoever in connection with the construction of the Project. Lender has no duty to inspect the Project, and if Lender should inspect the Project, Lender shall have no liability or obligation to Borrower arising out of such inspection. No such inspection nor any failure by Lender to make objections after any such inspection shall constitute a waiver of Lender’s right thereafter to insist that the Project be constructed in accordance with the Construction Contract.

C.5.Borrower has made no previous assignment of its interest in the Construction Contract and agrees not to assign, sell, pledge, transfer, mortgage, or otherwise encumber its interest in the Construction Contract as long as this Assignment is in effect.

D.Contractor’s Representations

Contractor represents and warrants to Lender that as of the date hereof:

D.1.Contractor has not reached any agreement or entered into any contract, written or oral, with respect to the construction of the Project, other than the Construction Contract, which has been duly executed and is in full force and effect.

D.2.The attached copy of the Construction Contract is true, correct, and complete, and it has no amendments or modifications (other than those attached, if any).

D.3.Contractor has no counterclaims, rights of setoff, or defenses to Borrower’s enforcement of Borrower’s rights under the Construction Contract.

D.4.To the best of Contractor’s knowledge, (a) all Required Permits (as defined in the Construction Loan Agreement) have been or will be obtained; (b) the attached list is a comprehensive list of all subcontractors, materialmen, and suppliers that will work on the Project; and (c) there have been no modifications to the Construction Contract except as described in Exhibit A.

E.Default and Remedies

Contractor consents and agrees in all respects to the creation in favor of Lender by Bor­rower of a security interest in Borrower’s rights in the Construction Contract as security for the full and complete payment and performance of Borrower’s indebtedness and obligations to Lender, and Contractor further agrees with Lender as follows:

E.1.If a default occurs in connection with the Loan, Contractor will, upon notice from Lender, and at Lender’s election, (a) complete the performance of the work in accor­dance with the Construction Contract for the benefit of Lender notwithstanding any previous default thereunder by Borrower, and Contractor agrees that Lender’s rights in this agreement are solely to protect its rights as a lender, and Lender shall have no liability to Contractor whatsoever by reason of any such default by Borrower unless Contractor receives notice from Lender as provided herein to complete the performance of the work in accordance with the Construction Contract, and that Contractor shall not seek payment from Lender for any per­formance of the work performed before Lender’s notice, provided that Contractor is paid, in accordance with the Construction Contract, for all work thereafter rendered by Contractor for the benefit of Lender; or (b) immediately cease performance of the work in accordance with the Construction Contract and vacate the Project.

E.1.If a default occurs in connection with the Loan, Contractor will, upon notice from Lender, and at Lender’s election, (a) complete the performance of the work in accor­dance with the Construction Contract for the benefit of Lender notwithstanding any previous default thereunder by Borrower, and Contractor agrees that Lender’s rights in this agreement are solely to protect its rights as a lender, and Lender shall have no liability to Contractor whatsoever by reason of any such default by Borrower unless Contractor receives notice from Lender as provided herein to complete the performance of the work in accordance with the Construction Contract, in which case Lender shall be responsible for payment of amounts due to Contractor, whether performed before or after receipt of notice from Lender; or (b) immedi­ately cease performance of the work in accordance with the Construction Contract and vacate the Project.

E.2.Upon the occurrence of a default by Borrower under the Loan, Contractor will not exercise any remedies thereunder (other than the cessation of the work for monetary defaults pending either the cure thereof or the request by Lender that, in accordance with para­graph E.1., Contractor complete the work for the benefit of Lender) until it has notified Lender in writing and granted Lender thirty days (or a reasonable time if the default cannot be cured in thirty days) after receipt by Lender of that notice, during which Lender shall be enti­tled, but not obligated, to cure the default.

E.2.Upon the occurrence of a default by Borrower under the Loan, Contractor will not exercise any remedies thereunder (other than the cessation of the work for monetary defaults pending the cure thereof) until it has notified Lender in writing and granted Lender thirty days (or a reasonable time if the default cannot be cured in thirty days) after receipt by Lender of that notice, during which Lender shall be entitled, but not obligated, to cure the default.

E.3.In the event any of the proceeds of the Loan are disbursed by Lender directly to Contractor, Contractor will receive all such disbursements, will hold them as a trust fund for paying the costs of the work under the Construction Contract, including labor, materials, and supplies, and will apply them only to the payment of such costs and for no other purposes.

E.4.Upon request by Lender, Contractor shall furnish to Lender a current list of all persons or firms with whom Contractor has entered into subcontracts or other agreements relating to the work in connection with the Project, together with a statement of the status of each such subcontract or agreement and the respective amounts, if any, owed by Contractor thereunder.

E.5.After execution and delivery of the Construction Contract, Contractor will not amend the Construction Contract without the prior written consent of Lender, except upon terms similar to those negotiated by and between Lender and Borrower in the Construction Loan Agreement.

F.General Provisions

F.1.Contractor hereby subordinates all liens in its favor to the Deed of Trust and all other liens in favor of Lender with the same force and effect as though the Deed of Trust and any other instrument creating or evidencing liens in favor of the Lender had been executed, delivered, and recorded before the creation or inception of the liens in favor of Contractor.

F.2.Nothing herein shall be construed to impose upon Lender any duty to see to the application of the proceeds of the Loan. Contractor acknowledges that Lender is obligated with respect thereto only to Borrower and to no other person or entity.

F.3.This instrument shall be binding upon Contractor and its heirs, personal repre­sentatives, successors, and assigns and shall inure to the benefit of Lender and its successors and assigns.

   
[Name of contractor]

   
[Name of borrower]

   
[Name of lender]

Exhibit A

Construction Contract