Construction Agency Agreement

EXECUTION COPY]


CONSTRUCTION AGENCY AGREEMENT


dated as of May 10, 1996


between


HANCOCK BANK,
not in its individual capacity,
except as expressly provided herein,
but solely as Trustee


and


BL DEVELOPMENT CORP., as Construction Agent.


TABLE OF CONTENTS


Section Page


ARTICLE I


DEFINITIONS


1.1. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . .2


ARTICLE II


APPOINTMENT OF CONSTRUCTION AGENT; AUTHORITY; TERM


2.1. Appointment of Construction Agent . . . . . . . . . . . . . .2 2.2. Acceptance of Appointment . . . . . . . . . . . . . . . . . .2 2.3. Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 2.4. Scope of Authority. . . . . . . . . . . . . . . . . . . . . .3 2.5. No Construction Agency Fee. . . . . . . . . . . . . . . . . .5 2.6. Delegation; Construction Documents. . . . . . . . . . . . . .5


ARTICLE III


COVENANTS OF CONSTRUCTION AGENT


3.1. Completion of Construction. . . . . . . . . . . . . . . . . .6 3.2. Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 3.3. Casualty; Non-Casualty Loss . . . . . . . . . . . . . . . . .6 3.4. Construction Documents. . . . . . . . . . . . . . . . . . . .8 3.5. Construction Documents; Security Agreement and Collateral
Assignment of Primary Construction Contract . . . . . . . .8 3.6. Environmental Matters . . . . . . . . . . . . . . . . . . . .9 3.7. Other Covenants of Construction Agent . . . . . . . . . . . .9


ARTICLE IV


PAYMENT OF FUNDS


4.1. Funding of Hotel Costs. . . . . . . . . . . . . . . . . . . 10


ARTICLE V


CONSTRUCTION AGENCY EVENTS OF DEFAULT


5.1. Construction Agency Events of Default . . . . . . . . . . . 10 5.2. Survival. . . . . . . . . . . . . . . . . . . . . . . . . . 12 5.3. Remedies; Remedies Cumulative . . . . . . . . . . . . . . . 12


ARTICLE VI


MISCELLANEOUS


6.1. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 12 6.2. Successors and Assigns. . . . . . . . . . . . . . . . . . . 12 6.3. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . 13 6.4. Amendments and Waivers. . . . . . . . . . . . . . . . . . . 13 6.5. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . 13 6.6. Severability. . . . . . . . . . . . . . . . . . . . . . . . 13 6.7. Headings and Table of Contents. . . . . . . . . . . . . . . 13 6.8. Limitations of Recourse . . . . . . . . . . . . . . . . . . 13 6.9. Knowledge of Trustee and Bank . . . . . . . . . . . . . . . 14


EXHIBIT A Form of Security Agreement and Collateral
Assignment of Construction Documents


EXHIBIT B Form of Acknowledgment of and Consent to Security Agreement
and Collateral Assignment of Primary
Construction Contract


CONSTRUCTION AGENCY AGREEMENT


THIS CONSTRUCTION AGENCY AGREEMENT (as amended and supplemented from time to time, this "Construction Agency Agreement"), dated as of May 10, 1996, is entered into by and between HANCOCK BANK, not in its individual capacity except as expressly set forth herein but solely as Trustee ("Trustee"), and BL DEVELOPMENT CORP., a Minnesota corporation (in its capacity as construction agent, "Construction Agent").


W I T N E S S E T H:


WHEREAS, Construction Agent, as lessee ("Lessee") and Trustee, as lessor, are parties to (i) that certain Lease Agreement and Deed of Trust dated as of even date herewith (as amended, supplemented or otherwise modified from time to time pursuant thereto, "Lease") pursuant to which, among other things, Lessee has agreed to lease from Trustee, and Trustee has agreed to lease to Lessee, Trustee's interest in the Hotel and (ii) that certain Participation Agreement pursuant to which Trustee and the Lenders will fund Hotel Costs; and


WHEREAS, subject to the terms and conditions hereof, (i) Trustee and Agent desire that Construction Agent act as Construction Agent for the benefit of Trustee and each Lender for the design, engineering, identification, acquisition, construction, installation, testing and placement into service of the Hotel in accordance with the Construction Documents and the Plans and Specifications and pursuant to the Lease, and (ii) Construction Agent desires, for the benefit of Trustee and each Lender, to cause the Hotel to be designed, engineered, identified, acquired, constructed, installed, tested and placed into service in accordance with the Construction Documents, the Plans and Specifications and this Construction Agency Agreement and pursuant to the Lease, in each case in accordance with the terms herein set forth;


NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto covenant and agree as follows:


ARTICLE I


DEFINITIONS


SECTION 1.1. Defined Terms. Capitalized terms used but not otherwise defined in this Construction Agency Agreement shall have the meanings set forth in Appendix 1 to the Participation Agreement (as defined in the Lease).


ARTICLE II


APPOINTMENT OF CONSTRUCTION AGENT; AUTHORITY; TERM


SECTION 2.1. Appointment of Construction Agent. Pursuant and subject to the terms and conditions set forth herein and in the Participation Agreement and the other Operative Documents, Trustee hereby irrevocably designates and appoints Construction Agent as its exclusive agent to act on Trustee's behalf for the design, engineering, identification, acquisition, construction, installation, testing and placement into service of the Hotel.


SECTION 2.2. Acceptance of Appointment. Construction Agent hereby unconditionally and irrevocably accepts the designation and appointment as Construction Agent for the purposes set forth in Section 2.1. Construction Agent agrees to perform its duties and obligations as set forth in this Construction Agency Agreement.


SECTION 2.3. Term. This Construction Agency Agreement shall commence on the date hereof and shall terminate upon the first to occur of:


(a) payment by Lessee of the Lease Balance together with all other
amounts due and owing under the Operative Documents and termination of the
Lease in accordance with Article V of the Lease;


(b) termination of this Construction Agency Agreement pursuant to
Article V;


(c) the occurrence of the Completion Date; or


(d) by mutual agreement of Construction Agent and Trustee; provided,
Trustee's agreement shall be subject to the requirements of Section 9.5 of
the Participation Agreement.


SECTION 2.4. Scope of Authority.


(a) Subject to the terms, conditions, restrictions and limitations set
forth in the Operative Documents, Trustee hereby expressly authorizes
Construction Agent, or any agent or contractor of Construction Agent, and
Construction Agent unconditionally agrees, for the benefit of Trustee, to
take or cause to be taken all action necessary or desirable for the
performance and satisfaction of all of Construction Agent's obligations
hereunder relating to the construction and placement into service of the
Hotel, such actions to include, without limitation:


(i) identifying and assisting with the acquisition of the Hotel;


(ii) performing all design and supervisory functions relating to
the construction, design, engineering, installation, testing and/or
placement into service of the Hotel, including determining feasible
construction methods, available materials and labor, and time
requirements for procurement, installation and construction of
materials, supplies for the Hotel;


(iii) negotiating and entering into all contracts or arrangements
(including any amendments or modifications thereto) to procure the
equipment and materials necessary to construct, install, test and/or
place into service the Hotel on such terms and conditions as are
customary and reasonable in light of local standards and practices;


(iv) paying, or causing to be paid, in accordance with the
Construction Documents, all Hotel Costs and performing all obligations
under the Construction Documents and otherwise in connection with the
construction and installation of the Hotel in the manner contemplated
by the Construction Documents;


(v) determining, evaluating, accepting and validating completion
of construction of the Hotel in accordance with the Construction
Documents and the Operative Documents;


(vi) enforcing performance by the Prime Contractor and of each
party to each Construction Document of their respective warranties and
other construction obligations with respect to the design,
engineering, construction and installation of the Hotel or pursuing
remedies with respect to the breach of these obligations;


(vii) to the extent permitted under the Operative Documents,
using the proceeds of any insurance maintained by Lessee to complete
construction of or rebuild any portion of the Hotel suffering a
Casualty;


(viii) entering into financing arrangements to construct and
install the Hotel subject to the terms and conditions set forth in the
Operative Documents;


(ix) obtaining all necessary permits, licenses, consents,
approvals and other authorizations, including those required under
Applicable Law, from all Governmental Authorities in connection with
the development, construction, installation, testing and placement
into service of the Hotel in accordance with the Plans and
Specifications;


(x) handling any Hazardous Materials in compliance with all
Environmental Laws;


(xi) functioning as the on-site representative of Lessee and, in
such capacity, monitoring, testing and inspecting the progress of the
construction and installation of the Hotel, reviewing all invoices and
all costs and expenses relating to the Hotel;


(xii) giving all notices and providing all certificates and other
information required to be given by Lessee under the Lease;


(xiii) maintaining all books and records with respect to the
design, engineering, identification, acquisition, construction,
installation, testing, placement into service, operation and
management of the Hotel; and


(xiv) performing any other acts necessary in connection with the
design, engineering, identification, acquisition, construction,
installation, testing, placement into service and development of the
Hotel.


(b) Subject to the terms and conditions of this Construction Agency
Agreement and the other Operative Documents, Construction Agent shall have
sole management and control over the construction means, methods, sequences
and procedures with respect to the construction and installation of the
Hotel.


(c) Construction Agent may, subject to the conditions, restrictions
and limitations set forth herein and in the other Operative Documents, at
any time during the term hereof revise, amend or modify the Plans and
Specifications without the consent of Trustee; provided, however, that
Trustee's prior written consent will be required if the aggregate effect of
such revision, amendment or modification, when taken together with any
previous or contemporaneous revisions, amendment or modification to any of
the Plans and Specifications, would be to reduce the Fair Market Sales
Value of the Hotel in any material respect when completed, or to have a
material adverse effect on the economic life and utility of the Hotel as
built and installed in accordance with the original Plans and
Specifications.


SECTION 2.5. No Construction Agency Fee. All obligations, duties and requirements imposed upon or allocated to Construction Agent shall be performed by Construction Agent at Construction Agent's sole cost and expense, and Construction Agent will not be entitled to, and Trustee shall have no obligation to pay, any agency fee or other fee or compensation, and Construction Agent shall not be entitled to, and neither Trustee nor any other Person shall have any obligation to make or pay, any reimbursement therefor, it being understood that this Construction Agency Agreement is being entered into as consideration for and as an inducement to Trustee to enter into the Lease and the other Operative Documents.


SECTION 2.6. Delegation; Construction Documents. Trustee acknowledges that Construction Agent has previously entered into the Construction Documents and that Construction Agent will cause substantially all of its obligations hereunder to be performed by the Prime Contractor pursuant to the Construction Documents. Construction Agent may from time to time also enter into other agreements with third parties as Construction Agent deems necessary or desirable in order to cause the Hotel to be constructed and installed pursuant to this Construction Agency Agreement. If for any reason the Prime Contractor under the Construction Documents or any other third party under any other such agreement defaults or fails to perform or otherwise complete construction of the Hotel in accordance with the time schedule set forth in the Construction Documents and in conformance with the Plans and Specifications, Construction Agent shall remain liable hereunder and shall be fully responsible for completion and installation of the Hotel in accordance with the Plans and Specifications by not later than the Construction Termination Date. The Primary Construction Contract and the Architect's Agreement shall provide that the Primary Contractor and the Architect will look solely to Construction Agent for performance under such agreements, and in the event of default or failure to perform by Construction Agent, none of Trustee, Agent or any Lender will have any liability under any such agreements.


ARTICLE III


COVENANTS OF CONSTRUCTION AGENT


SECTION 3.1. Completion of Construction. Construction Agent shall, unconditionally and for the benefit of Trustee and the Lenders, cause the Completion Date to occur on or before the Construction Termination Date. Construction Agent's obligations shall not be limited or reduced by virtue of any failure of Trustee to provide any funds (or any lack of funds of Construction Agent), except if such failure constit ...