THE FOLLOWING AGREEMENT IS SUBSTANTIALLY THE SAME FOR THE FOLLOWING PROPERTIES
EXCEPT FOR THE FOLLOWING:
Greenville: $5,926,684
Lakewood Inn: $7,052,071
Ocean Shores: $3,501,349
LEASEHOLD IMPROVEMENT AGREEMENT
AMONG
MEDITRUST ACQUISITION CORPORATION I
AND
EMERITUS PROPERTIES I, INC.
AND
EMERITUS CORPORATION
LEASEHOLD IMPROVEMENT AGREEMENT
THIS LEASEHOLD IMPROVEMENT AGREEMENT is made as of 1996 by
and among EMERITUS PROPERTIES I, INC., a WASHINGTON corporation (the
"Lessee"), and MEDITRUST ACQUISITION CORPORATION I, a Massachusetts
corporation (the "Lessor").
1. BACKGROUND
1.1 LESSEE.
Lessee is a corporation which is a wholly-owned Subsidiary of the
Guarantor (as hereinafter defined). The Guarantor is a corporation the stock
of which is publicly traded on the American Stock Exchange.
1.2 THE LAND AND EXISTING IMPROVEMENTS.
Lessor is the owner of a certain parcel of land located in
and more particularly described on EXHIBIT A
(the "Land").
1.3 THE FACILITY LEASE.
Lessor and Lessee have entered into that certain Facility Lease Agreement
of even date herewith, relating to the Land (the "Facility Lease"), a
Memorandum of which is to be recorded with the real
estate records.
1.4 PROJECT.
Lessee proposes to construct a 62 unit 80 bed assisted living facility
consisting of a 56 unit 62 bed assisted living addition and a 6 unit 12 bed
cottage addition and other improvements, including, without limitation,
accessory parking and landscaping on the Land (collectively, the
"Improvements"). The Land and the Improvements are collectively referred to
herein as the "Project".
1.5 LESSOR'S AGREEMENT TO FUND THE PROJECT AND LESSEE'S AGREEMENT TO
SUPERVISE THE PROJECT.
Lessee and Lessor have agreed that the Project will be a benefit to the
premises demised under the Facility Lease and to Lessee's and Lessor's
respective interests therein. Lessor and Lessee have further agreed that,
pursuant to, and in accordance with, the terms and conditions of this
Agreement, Lessor shall fund an amount not to exceed
of the cost of the Project (the
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"Project Funds"). Lessee has agreed to supervise and manage the construction
of the Project and Lessor has agreed to advance the Project Funds to pay for
the cost of the construction of the Project; all pursuant to the terms and
conditions of this Agreement.
1.6 PLANS; THE ARCHITECT AND ARCHITECT'S CONTRACT.
The Improvements are to be constructed and equipped in accordance with
the plans and specifications to be delivered as provided herein
(collectively, the "Project Plans"), prepared or to be prepared by
(the "Architect") pursuant to the contract to be
entered into by and between Lessee and the Architect and approved by Lessor
(the "Architect's Contract").
1.7 CONSTRUCTION CONTRACTS.
All of the Improvements are to be constructed pursuant to a guaranteed
maximum contract (the "Construction Contract") to be delivered as provided
herein by and between Lessee and Robert B. Goebel General Contractors, Inc.
and approved by Lessor (the "General Contractor").
1.8 SCHEDULE OF WORK AND COMPLETION DATE; SCHEDULE OF DRAWS.
The work necessary to complete and fully equip the Project is to be (a)
undertaken and completed in accordance with the schedule of work and schedule
of values ("Schedules") to be delivered as provided herein and approved by
Lessor; and (b) substantially completed lay the first anniversary of the date
hereof (the "Completion Date") in accordance with the terms hereof.
1.9 PROJECT BUDGET.
Lessee shall submit in accordance with the terms hereof prior to the
making of the first advance which includes amounts to be expended on the
construction or equipping of the Improvements, to Lessor a line item budget
(the "Project Budget"), for the design and construction of the Project,
including (a) a breakdown of construction costs (itemized as to trade
category, subdivision of the work to be performed and the names of each
contractor), (b) a breakdown of all soft costs in connection with the
construction of the Project, including, without limitation, costs for such
items as real estate taxes, legal and accounting fees, survey costs, permits
and inspection fees, insurance premiums, architect's and engineer's fees,
marketing, management, leasing and advertising expenses, and all amounts due
in connection with the Advance of Project Funds pursuant to this Agreement,
(c) a projected draw schedule and (d) a projected progress schedule for the
construction of the Project.
1.10 USE OF PROJECT FUNDS.
The Project Funds are to be used, to the extent sufficient therefore,
solely for the payment of Project costs set forth in the Project Budget.
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1.11 PROJECT FUNDS.
Subject to all of the terms, conditions and provisions of this Agreement,
and of the agreements and instruments referred to herein, Lessor agrees to
advance the Project Funds and Lessee agrees to supervise and manage the
construction of the Project and to pay the Rent (as hereinafter defined) due
under the Facility Lease (as the same may from time to time be adjusted
pursuant to the terms and conditions set forth therein); it being understood
that Lessee shall be liable for the payment of Rent regarding such sums as
shall have been advanced from time to time under this Agreement to Lessee.
1.12 GUARANTIES AND INDEMNITIES.
As an inducement to Lessor to enter into this Agreement, advance the
Project Funds and enter into the Facility Lease, the
Guarantor has agreed to furnish certain guaranties as hereinafter described.
2. DEFINITIONS
In this Agreement, except as otherwise expressly provided in the text of
this Agreement or unless the context otherwise requires, all capitalized
terms shall have the meaning ascribed to them in EXHIBIT E.
3. LEASEHOLD IMPROVEMENT FEE.
Lessee shall pay the Leasehold Improvement Fee to Lessor simultaneously
with the execution of this Agreement; PROVIDED, HOWEVER, that, at Lessor's
option, the Leasehold Improvement Fee shall be held in an escrow account
established with a Person designated by Lessor pursuant to an escrow
arrangement satisfactory to Lessor, with interest thereon benefiting Lessor.
If Lessor exercises its option to require that the Leasehold Improvement Fee
be held in such an escrow account (a) the Leasehold Improvement Fee shall be
disbursed from said escrow account only upon the joint instructions of Lessee
and Lessor (which instructions from Lessee shall be immediately given upon
the request of Lessor) and in no event shall the Leasehold Improvement Fee be
disbursed therefrom, in whole or in part, unless and until so requested by
Lessor and (b) Lessor shall bear the risk of loss of or misappropriation of
the Leasehold Improvement Fee by such escrow agent.
4. LEASE DOCUMENTS; COLLATERAL SECURITY
4.1 LEASE DOCUMENTS.
The Project Funds shall be advanced, evidenced, administered and
governed by all of the terms, conditions and provisions of each of the
following:
A. an Agreement Regarding Related Transactions of even date herewith by
and among Lessee, Lessor and ESC G.P. I Inc., as the same may be
amended from time to time;
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B. this Agreement;
C. the Facility Lease;
D. a Collateral Assignment of Permits, Approvals, Licenses, and
Contracts of even date granted by Lessee to Lessor (the "Permits
Assignment") and related UCC Financing Statements;
E. a Security Agreement of even date by and between Lessee and Lessor
(the "Security Agreement")
F. a Completion Guaranty of even date executed by the Guarantor for the
benefit of Lessor guarantying the completion of the Project and the
satisfaction of the other Guaranteed Obligations (the "Completion
Guaranty");
G. a Guaranty of Lease Obligations of even date executed by the
Guarantor for the benefit of Lessor guarantying the payment and
performance of the Lease obligations (the "Guaranty of Lease
Obligations");
H. an Environmental Indemnity Agreement of even date by and among
Lessee, the Guarantor and Lessor (the "Environmental Indemnity
Agreement");
I. a Deposit Pledge Agreement of even date by and between Lessee and
Lessor (the "Deposit Pledge Agreement");
J. a Group One Negative Pledge (Development) Agreement of even date by
and among Lessee, Lessor and Guarantor (the "Negative Pledge
Agreement");
K. an Assignment of Construction Contract granted by Lessee to Lessor
and containing the consent of the General Contractor (the "Construction
Assignment");
L. an Assignment of Architect's Contract of even date granted by Lessee
to Lessor and containing the consent of the Architect (the "Architect's
Assignment");
M. an Affiliated Party Subordination Agreement of even date by and among
Lessee, the Guarantor, various Affiliates of Lessee and Lessor (the
"Affiliated Party Subordination Agreement"); and
N. an Assignment of that certain Consulting Agreement by and between
Emeritus Corporation and Paul Aigner, AIA, d/b/a/ Paul Aigner Medical
Facility Consultants, dated ________, (the "Consultant Assignment") of
even date granted by Emeritus Corporation to Lessor;
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0. all other documents, instruments, or agreements now or hereafter
evidencing or securing the obligations under this Agreement and the
Facility Lease.
Items (A) through (L) above, as the same from time to time may be hereinafter
amended, modified or supplemented, are referred to herein as the "Lease
Documents".
4.2 LEASE OBLIGATIONS.
Lessee agrees to pay and perform all indebtedness, covenants,
liabilities, obligations, agreements and undertakings (other than Lessor's
obligations) under this Agreement and all of the other Lease Documents
(collectively, the "Lease Obligations").
4.3 COLLATERAL SECURITY.
The Lease Obligations shall be secured by the following:
A. a perfected first priority security interest in all Permits and
Contracts pursuant to the Permits Assignment;
B. a security interest in Tangible Personal Property, and certain other
Collateral and a security interest in Receivables, all pursuant to
the Security Agreement;
C. the Completion Guaranty;
D. the Guaranty of Lease Obligations;
E. the Environmental Indemnity;
F. a perfected first priority interest in the Cash Collateral pursuant
to the Deposit Pledge Agreement;
G. all other security interests in such other property for which
provision is made in the Lease Documents or at law or in equity; and
H. certain other Related Party Agreements.
All of the property in which security interests are granted as described in
items (A) through (H) above are referred to herein as the "Collateral".
5. REPRESENTATIONS AND WARRANTIES
In order to induce Lessor to advance the Project Funds pursuant to the
terms and conditions of this Agreement, Lessee represents and warrants to
Lessor that:
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5.1 ARCHITECT'S CONTRACT AND CONSTRUCTION CONTRACT.
The Architect's Contract and the Construction Contract, at the time of
the execution thereof will be, validly executed by, and will upon execution
be binding upon Lessee. Lessee has no
reason to believe that such agreements will not be validly executed by and
binding upon the other parties thereto;
5.2 PROJECT PLANS.
The Project Plans which will be delivered to Lessor by Lessee in
accordance with Section 7.1 will be (a) filed with and approved by all
appropriate Governmental Authorities. All necessary Permits relating to the
Project Plans to be issued or granted by any applicable Governmental
Authority having or claiming jurisdiction over the Leased Property which can
be obtained in the ordinary course as of the date hereof have been obtained
and all such Permits are in full force and effect, are not subject to any
unexpired appeal periods or any appeals or challenges which have not been
fully resolved in favor of Lessee, and do not contain any conditions or terms
relating to the Leased Property which have not been fully satisfied or which
will not be fully satisfied by the completion of the construction of the
Project (in accordance with the Project Plans and the terms and provisions of
this Agreement). Furthermore, the Project Plans will be the plans and
specifications which shall be approved in writing by Lessor and all future
construction on the Project shall be performed in accordance with the Project
Plans, as the same may be amended or modified from time in accordance with
Section 6.3.2 hereof, and the terms and conditions of this Agreement. There
are no structural defects in the Project of which Lessee has been advised or
of which Lessee has notice or knowledge except as otherwise described in
writing to Lessor or actually known by Lessor. Lessee has not received any
notice claiming that, and Lessee has no knowledge that, the Project Plans
violate any Legal Requirement;
5.3 PRIOR CONSTRUCTION WORK.
No Person has performed any construction work or furnished any services
in connection with any construction carried on or to be carried on at the
Leased Property who or which remains unpaid at the time of execution of this
Agreement, except as indicated in the requisition submitted simultaneously
herewith or otherwise expressly approved by Lessor and, if applicable, the
Other Permitted Uses;
5.4 SUITABILITY OF PROJECT PLANS.
The Project Plans shall provide for the construction and renovation of
all buildings and related improvements necessary, both legally and
practically, for the construction of the Project in accordance with the terms
of this Agreement and, after the completion of the construction thereof, for
the operation of the Project for its Primary Intended Use;
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5.5 COMPLIANCE WITH LEGAL REQUIREMENTS AND APPLICABLE AGREEMENTS.
Upon the completion of construction of the Project, which shall be
constructed in accordance with the Project Plans and the terms and provisions
of this Agreement, the Project shall be in compliance with (a) all Legal
Requirements; (b) all Permits and Contracts and (c) all applicable by-laws,
codes, rules, regulations and restrictions of the Board of Fire Underwriters
or other insurance underwriters or similar bodies.
5.6 PERMITS AND CONTRACTS.
All Permits and Contracts required by or entered into with any
Governmental Authority or quasi-governmental authority or agency for, or in
connection with, the construction of the Project which can be obtained in the
ordinary course as of the date hereof have been obtained or executed, as the
case may be. All such Permits and Contracts are in full force and effect,
are not subject to any unexpired appeal periods or any appeals or challenges
which have not been conclusively resolved in favor of any member of the
Leasing Group, and do not contain any conditions or terms which have not been
fully satisfied or which will not be fully satisfied by the completion of the
construction of the Project (if constructed in accordance with the Project
Plans and the terms and provisions of this Agreement). There is no action
pending, or, to the best knowledge and belief of Lessee, recommended by the
applicable Governmental Authority having jurisdiction thereof, either to
revoke, repeal, cancel, modify, withdraw or suspend any such Permit or
Contract relating to the construction of the Project, or any other action of
any other type which would have a material adverse effect on the Project.
All other Permits and Contracts required for the completion of the
construction of the Project and the operation of the Facility are described
on SCHEDULE 5.6 annexed hereto and Lessee has no reason to believe such
Permits and Contracts shall not be obtainable as and when needed.
5.7 FIRST ADVANCE.
As of the date of the first advance of Project Funds to Lessee
pursuant to this Agreement, the amount of the money expended by Lessee on
account of the construction of the Project in accordance with the Project
Plans and the items listed on Project Budget will not be less than the amount
of such first advance.
5.8 VALID AND BINDING.
Lessee is duly authorized to make and enter into all of the Lease
Documents to which Lessee is a party and to carry out the
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transactions contemplated therein. All of the Lease Documents to which
Lessee is a party have been duly executed and delivered by Lessee, and each
is a legal, valid and binding obligation of Lessee, enforceable in accordance
with its terms.
5.9 NO VIOLATION.
The execution, delivery and performance of the Lease Documents and the
consummation of the transactions thereby contemplated shall not result in any
breach of, or constitute a default under, or result in the acceleration of,
or constitute an event which, with the giving of notice or the passage of
time, or both, would result in default or acceleration of any obligation of
any member of the Leasing Group under any of the Permits or contracts or any
other contract, mortgage, lien, lease, agreement, instrument, franchise,
arbitration award, judgment, decree, bank loan or credit agreement, trust
indenture or other instrument to which any member of the Leasing Group is a
party or by which any member of the Leasing Group may be bound or affected
and do not violate or contravene any Legal Requirement.
5.10 CONSENTS AND APPROVALS.
Except as already obtained or filed or as reasonably expected to be
obtained in the ordinary course of business prior to or upon the Completion
of the Project, as the case may be, no consent or approval or other
authorization of, or exemption lay, or declaration or filing with, any Person
and no waiver of any right by any Person is required to authorize or permit,
or is otherwise required as a condition of the execution, delivery and
performance of its obligations under the Lease Documents, the Construction
Contract if and when the same is duly executed by the parties thereto or the
Architect's Agreement by any member of the Leasing Group or as a condition to
the validity (assuming the due authorization, execution and delivery by
Lessor of the Lease Documents to which it is a party) and the priority of any
Liens granted to Lessor under the Lease Documents, except the filing of the
Financing Statements.
5.11 PENDING ACTIONS, NOTICES AND REPORTS.
(a) There is no action or investigation pending or, to the best
knowledge and belief of Lessee, threatened, anticipated or contemplated (nor,
to the knowledge of Lessee, is there any reasonable basis therefor) against
or affecting the Leased Property or any member of the Leasing Group (or any
Affiliate thereof) before any Governmental Authority, which could prevent or
hinder the consummation of the transactions contemplated hereby or call into
question the validity of any of the Lease Documents or any action taken or to
be taken in connection with the transactions contemplated thereunder or which
in any single
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case or in the aggregate might result in any material adverse change in the
business, prospects, condition, affairs or operations of any member of the
Leasing Group or the Leased Property (including, without limitation, any
action to revoke, withdraw or suspend any Permit necessary or desirable for
the construction of the Project for its Primary Intended Use.
(b) No member of the Leasing Group has received any notice of any claim,
requirement or demand of any Governmental Authority, to take action so as to
make the Project or the Leased Property conform to or comply with any
applicable Legal Requirement.
6. COVENANTS
6.1 COLLECTION AND ENFORCEMENT COSTS.
Upon demand, Lessee shall reimburse Lessor for all costs and expenses,
including, without limitation, attorneys, fees and expenses and court costs,
paid or reasonably incurred by Lessor in connection with the collection of
any sum due hereunder, or in connection with the enforcement of any of
Lessor's rights or any member of the Leasing Group's obligations under this
Agreement or any of the other Lease Documents. Any amount due and payable to
Lessor pursuant to the provisions of this Section shall be a demand
obligation and, to the extent permitted by law, shall be added to the Lease
Obligations and shall be secured by the Liens created by the Lease Documents
as fully and effectively and with the same priority as every other obligation
of Lessee secured thereby and, if not paid within ten (10) days after demand,
shall thereafter, to the extent permitted by applicable law, bear interest at
the Overdue Rate until the date of payment. The obligation of Lessee to pay
all costs, charges and sums due hereunder or under any of the other Lease
Documents shall continue in full force and effect and in no way shall be
impaired, until the actual payment thereof to Lessor. In the event of (a) a
sale, conveyance, transfer or other disposition of the Leased Property, (b)
any further agreement given to secure the payment of the obligations set
forth herein or (c) any agreement or stipulation extending the time or
modifying the terms of payment set forth herein, Lessee shall nevertheless
remain obligated to pay the indebtedness evidenced by this Agreement, as
extended or modified by any such agreement or stipulation, unless Lessee is
released and discharged from such obligation by a written agreement executed
by Lessor.
6.2 CONTINUING EFFECT OF REPRESENTATIONS AND WARRANTIES.
All representations and warranties contained in this Leasehold
Improvement Agreement shall constitute continuing
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representations and warranties which shall remain true, correct and complete
throughout the Term.
6.3 CONSTRUCTION COVENANTS.
6.3.1 COMMENCEMENT OF CONSTRUCTION.
If construction of the Project has not already begun, Lessee shall
commence construction of the Project within thirty (30) days from the later
of the date hereof or of issuance of a building permit for the Project.
Lessee shall diligently and continuously cause the Project to be
constructed and completed and made ready for occupancy and use in
accordance with the Project Plans all in a manner satisfactory to Lessor
on or before the Completion Date. Notwithstanding anything to the contrary
contained herein, Lessee shall be and shall remain unconditionally liable
to Lessor for (a) the complete construction of the Project in accordance
with the Project Plans on or before the Completion Date and whether or not
proceeds of the Project Funds remaining to be disbursed hereunder, if any,
are sufficient to cover all costs of construction and (b) the complete
performance of all other obligations, covenants, agreements and liabilities
of Lessee hereunder.
6.3.2 QUALITY OF MATERIALS AND WORKMANSHIP.
The materials used in the Project shall be of the quality called
for by the Project Plans, and the workmanship shall be in conformity with
the Construction Contract and this Agreement, and both the quality of such
materials and such workmanship shall be satisfactory to Lessor. Lessee
shall not make any changes in, and shall not permit the General Contractor
or the Architect to make any changes in, the quality of such materials,
the Project Plans or the Project Budget, whether by change order or
otherwise, without the prior written consent of Lessor, in each instance
(which consent may be withheld in Lessor's reasonable discretion);
PROVIDED, HOWEVER, that such consent shall not be required for any
individual change which has been approved by the Architect, which does
not materially affect the structure or exterior of the Project, and the
cost of which does not exceed TEN THOUSAND DOLLARS ($10,000) or which
changes, in the aggregate, do not exceed ONE HUNDRED THOUSAND DOLLARS
($100,000) in cost. Notwithstanding the foregoing, prior to making any
change in Project Plans, copies of all change orders shall be submitted
by Lessee to
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Lessor and Lessee shall also deliver to Lessor evidence satisfactory to
Lessor, in its reasonable discretion, that all necessary Permits and/or
Contracts required by any Governmental Authority in connection therewith
have been obtained or entered into, as the case may be.
6.3.3 PROJECT BUDGET.
Upon the request of Lessor, Lessee shall furnish Lessor with revisions
for the Project Budget to reflect (a) any changes approved by Lessor to the
Project Budget, (b) the total cost of the construction of the Project
completed through any specific date and (c) the remaining cost to complete
the construction of the Project in accordance with the Project Plans and
the terms and provisions of this Agreement.
6.3.4 ARCHITECT CERTIFICATES.
Lessee agrees to cause the Architect to furnish such statements as
to progress and certificates of completion as Lessor may reasonably require
from time to time during such period as this Agreement may be in effect,
all without expense to Lessor; provided, however, that to the extent the
delivery of such certificates will require a visit to the Project, Lessee
shall have no obligation to deliver the same. more frequently than with
every other advance request hereunder. Lessee agrees to cause the Architect
to make the Project Plans available to Lessor without expense to Lessor,
and to agree that, in the event that Lessor shall take over the Project by
reason of an occurrence of a Lease Default, Lessor shall be entitled to use
said Project Plans without any additional compensation to the Architect
above what is required (and was not previously paid) under the Architect's
Contract.
6.3.5 INTENTIONALLY DELETED.
6.3.6 LESSOR'S CONSULTANTS.
Lessee agrees to pay the costs and expenses reasonably incurred by
Lessor to retain the Consultants to perform various services to Lessor in
connection with the construction of the Project and the advances of Project
Funds contemplated hereunder, including, without limitation, the following:
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A. to review and analyze the Project Plans and advise Lessor whether
the same are satisfactory for the intended purposes thereof;
B. to make periodic inspections of the Leased Property for the purpose
of assuring that construction performed in connection with the Project
prior to the date of such inspection has been completed in accordance
with the Project Plans and this Agreement;
C. to review Lessee's then current requisition to determine whether it
is consistent with the obligations of Lessee under this Agreement, and
to advise Lessor of the anticipated costs of, and the time for, the
completion of the Project in accordance with the Project Plans, and
the adequacy of reserves and contingencies related thereto;
D. to review and analyze any proposed changes to the Project Plans and
advise Lessor regarding the same;
E. to review and analyze the Project Budget and advise Lessor as to the
sufficiency thereof; and
F. to review and analyze the Architect's Contract and the Construction
Contract entered into by Lessee in connection with the construction of
the Project and advise Lessor regarding the same.
Except as otherwise expressly provided herein, Lessee agrees
promptly to make such changes or corrections in the construction of the
Project as may be required by Lessor, based on the recommendation of any of
the Consultants, unless Lessee demonstrates to Lessor's satisfaction that
such corrective work is inconsistent with the Project Plans.
6.3.7 TITLE TO MATERIALS AND SECURITY INTEREST GRANTED TO LESSOR.
Except as otherwise expressly provided herein, Lessee shall not
suffer the use in connection with any construction relating to the Project
of any materials, fixtures or equipment intended to become part of the
Project which are purchased upon lease or conditional bill of sale or to
which Lessee does not have absolute and unencumbered title. Lessee
covenants to cause to be paid punctually all sums becoming due for labor,
materials, fixtures or equipment used or purchased in
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connection with any such construction and, in recognition of the fact
that it is intended that the Project Funds be used to pay for the costs of
the construction of the Project on behalf of the Lessor, Lessee agrees that
title to all materials, fixtures and equipment that are incorporated into
the Project shall automatically pass to Lessor upon such incorporation
without the need for the execution or delivery of any further instrument of
conveyance.
Notwithstanding the foregoing, in order to more fully secure Lessor
with reference to all advances of Project Funds made hereunder, Lessee
hereby conveys to Lessor a security interest in all of Lessee's right,
title and interest in materials on the Leased Property which are not at
any relevant time incorporated into the Project and materials, wherever
located, intended for incorporation into the Project. Lessee agrees:
A. that Lessor shall have all the rights, with reference to such
security, as a secured party is entitled to hold with reference to any
security interest under the UCC;
B. that such security interest shall cover cash and non-cash proceeds
of such materials;
C. that such materials will not be held for sale to others or disposed
of by Lessee without the prior written consent of Lessor and, if at any
time located on the Leased Property shall be suitably stored, secured
and insured and furthermore, shall not be removed from the Leased
Property; and
D. that such security interest shall be prior to the rights of any other
Person other than the Permitted Prior Security Interests.
The undertakings of Lessee in this Section shall also be applicable to
any personal property that is owned by Lessee and that is used (or to be
used) in connection with the Project, whether or not the purchase thereof was
financed by advances of Project Funds made by Lessor.
Lessee agrees to execute such instruments as Lessor may from time to
time request to perfect the security interest of Lessor in any and all rights
under this Agreement and the other Lease Documents, and any and all property
of Lessee which, under applicable provisions of this Agreement and/or any of
the other Lease Documents, may or shall stand as
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security for advances of Project Funds under this Agreement and for the
complete performance of the Lease Obligations.
6.3.8 COMPLIANCE WITH LEGAL REQUIREMENTS AND APPLICABLE AGREEMENTS.
Lessee, the Project Plans and the Leased Property and all uses thereof
(including, without limitation, the construction of the Project) shall
comply with (a) all Legal Requirements, (b) all Permits and Contracts,
(c) all applicable by-laws, codes, rules, regulations and restrictions
of the Board of Fire Underwriters or other insurance underwriters or
similar body and (d) the Lease Documents, except to the extent any of
the matters represented in clause (a) or (c) are being duly contested
in accordance with the terms of the Lease.
6.3.9 LIENS.
The Leased Property shall at all times be free from any attachment,
encumbrance, lis pendens, mechanic's or materialmen's lien or notice
arising from the furnishing of materials or labor and, with the exception
of the Permitted Encumbrances, all other Liens of any kind except to the
extent the same is being duly contested in accordance with the terms of
the Lease or the terms hereof. Lessee shall not permit the recording of
any notice of contract or mechanic's or materialmen's lien relating to
construction of the Project or otherwise affecting the Leased Property
except to the extent the same is being duly contested in accordance with
the terms of the Lease or the terms hereof. Notwithstanding the foregoing
provisions of this Section 6.3.09, the existence of an attachment or lis
pendens for a period not in excess of thirty (30) days shall not be deemed
to be a default hereunder provided that (a) there shall be no cessation of
construction of the Project, (b) a Lease Default has not occurred and (c)
Lessee shall proceed promptly to cause such attachment or lis pendens to be
removed, but Lessor shall not be obliged to make any further advance under
this Agreement while such attachment or lis pendens remains outstanding,
unless a bond, satisfactory to Lessor, has been posted as security for such
attachment or lis pendens.
6.3.10 BOOKS AND RECORDS.
Lessee shall cause to be kept and maintained, and shall permit
Lessor and its representatives to inspect at all reasonable times, accurate
books of accounts in
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which complete entries will be made in accordance with GAAP, if applicable,
reflecting all financial transactions of Lessee relating to the Project
(showing, without limitation, all materials ordered and received and all
disbursements, accounts payable and accounts receivable in connection with
the construction of the Project and the operation of the Leased Property).
Such books and records must accurately reflect that all funds advanced
hereunder for construction of the Project have been used solely for the
payment of obligations and expenses properly incurred in accordance with
the Project Budget.
6.3.11 INSPECTION OF CONSTRUCTION.
Lessor and its representatives including, without limitation, the
Consultants, shall, at all times as long as this Agreement remains in
effect, have the right to enter the Leased Property, upon reasonable
notice to Lessee and at reasonable times (except in the event of an
emergency) for the purpose of inspecting the Project and the progress
of the work and materials thereon, and if any such inspection reveals
that Lessee is not in compliance herewith (in its sole and absolute
discretion), then Lessor shall not be obligated to make any further
advances under this Agreement to Lessee.
6.3.12 NOTICE OF DELAY.
Lessee shall give to Lessor prompt written notice of any fire,
explosion, accident, flood, storm, earthquake or other casualty or strike,
lock out, act of God or interruption of the construction of the Project
which is reasonably anticipated to interfere with the ability of Lessee to
complete the Project by the Completion Date.
6.3.13 BONDS.
Performance, payment and lien bonds, in form and substance and
guaranteed by sureties satisfactory to Lessor (in its sole and absolute
discretion), shall be furnished to Lessor in connection with the
Construction Contract in amounts at least equivalent to the amount of
such contract, naming Lessor as a dual obligee and shall be furnished
to Lessor prior to the commencement of any work pursuant to such contract.
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6.3.14 USE OF PROJECT FUNDS.
Lessee shall utilize all advances by Lessor pursuant to the terms of
this Agreement only for those items for which requisitions are permitted
under this Agreement or for reimbursement of expenditures already made for
items for which requisitions are so permitted. Lessee agrees to hold all
advances by Lessor hereunder as a trust fund for the purpose of payment of
the costs and expenses permitted under this Agreement.
6.3.15 OCCUPANCY OF THE PROJECT.
Lessee shall not permit any occupancy of the Project (other than
such occupancy as is required in connection with the construction thereto)
prior to (a) the substantial completion of that portion of the Project
being occupied and (b) the issuance by the appropriate Governmental
Authorities of a Certificate of Occupancy (or its equivalent) permitting
the occupancy of the Project for its Primary Intended Use and, if
applicable, the Other Permitted Uses. The Project shall not be deemed
to have been completed unless and until constructed in accordance with
this Agreement and a Certificate of Occupancy (or its equivalent)
permitting the occupancy of the Project for its Primary Intended Use has
been issued by the applicable Governmental Authorities.
7. CONSTRUCTION ADVANCES
7.1 CONDITIONS PRECEDENT TO FIRST ADVANCE OF PROJECT FUNDS.
Prior to the first advance of Project Funds contemplated by this
Agreement, and as a condition of Lessee's right to receive any of the
proceeds of the Project Funds, there shall have been furnished to Lessor:
A. An owner's title insurance policy in form and substance satisfactory
to Lessor, in its sole and absolute discretion, issued by a title
insurance company or companies satisfactory to Lessor (the "Title
Company") with such endorsements, reinsurance and/or co-insurance as
Lessor may require, insuring Lessor's fee title to the Leased Property
free from all Liens and without exception for (i) filed or unfiled
mechanics' liens, (ii) survey matters, (iii) rights of parties in
possession, (iv) environmental liens and (v) any other matters of any
kind or nature whatsoever other than the Permitted Encumbrances
(the "Title Policy");
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B. Such evidence as Lessor may require that the use contemplated for the
Project, and all of the improvements and construction contemplated by
the Project Plans, comply with all applicable Legal Requirements, to
the extent in force and applicable;
C. Insurance policies and/or Certificates of Insurance required
pursuant to the terms and provisions of the Facility Lease;
D. Such evidence as Lessor may require to determine that the total cost
of completion of the Project in all respects, including all related
direct and indirect costs as previously approved by Lessor, will not
exceed the amount set forth in the Project Budget;
E. Such evidence as Lessor may require that Lessee's representations and
warranties contained herein and in all of the other Lease Documents are
true and correct in every material respect;
F. Such evidence as Lessor may require as to the satisfaction of such of
the terms and conditions of this Agreement and of the other Lease
Documents as may by their nature be satisfied prior to the making of
such advance;
G. Such evidence as Lessor may require that all outstanding Impositions
which are due and payable as of the date of the First Advance
pertaining to the Leased Property have been paid in full in accordance
with the terms of the Facility Lease;
H. A current instrument survey, satisfactory in form and content to
Lessor, prepared in accordance with the requirements set forth in
EXHIBIT G (the "Survey") and a certificate substantially in the form
of EXHIBIT H (the "Surveyor's Certificate"), prepared and signed by a
surveyor licensed to do business in the state where the Leased Property
is located with his or her seal affixed thereto;
I. True and correct copies of the Construction Contract and the
Architect's Contract in effect with respect to the Project, as well as
all receipted bills paid by Lessee to the General Contractor and the
Architect for goods and/or services rendered with respect to the Project
prior to the date hereof;
J. A certificate from an engineer and/or architect, registered as such
in the state where the Leased
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Property is located, substantially in the form attached hereto as
EXHIBIT H, certifying as to the (i) compliance of the Leased Property
with all applicable Legal Requirements, (ii) the availability and
adequacy of access/egress to and from the Leased Property and (iii)
the availability and adequacy of sewer, drainage, water, electric
and other utility services to the lot line of the Leased Property;
together with such other assurances concerning the design of the
Project as Lessor may require;
K. Lessor's receipt of opinions, in forms satisfactory to Lessor (in its
sole and absolute discretion), from Lessee's counsel and the Guarantor's
counsel, regarding (i) the due execution, authority and enforceability
of the Lease Documents; (ii) the compliance of the Leased Property and
the Project, in all material respects, with applicable zoning and
other land-use Legal Requirements (except in such instances in which a
satisfactory title insurance zoning endorsement has been issued);
(iii) the valid issuance of the Certificate of Need, if applicable,
and all other Permits required for the construction of the Project, the
continuing effectiveness of said Certificate of Need, if applicable, and
other Permits and Lessee's and Project's compliance therewith and (iv)
much other matters as Lessor may reasonably request (collectively, the
"Opinions");
L. Payment of the Leasehold Improvement Fee (subject, however, to the
provisions of Section 3 hereof);
M. True and correct Copies of all Permits and Contracts relating to the
construction and operation of the Project (including, without
limitation, an unconditional building permit or a building permit
which is subject only to such conditions as will be fully satisfied
by the completion of the construction of the Project in accordance
with the Project Plans and this Agreement);
N. Such evidence as Lessor may require that there has been no material
adverse change in the financial condition and strength of Lessee and the
Guarantor, and that the Leased Property shall have sustained no
impairment, reduction, loss or damage which has not been fully restored
and repaired, and that no Condemnation proceedings or other governmental
action is or shall be pending against or with respect thereto;
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0. Such evidence as Lessor may require that the General Contractor and
the Architect maintain adequate insurance, as determined in Lessor's
reasonable discretion;
P. True and correct copies of all payment, performance and completion
bonds required pursuant to 6.3.13 hereof;
Q. A fully executed Construction Assignment, in form and substance
satisfactory to Lessor; and
R. A fully executed and authorized Architect's Assignment, in form and
substance satisfactory to Lessor.
S. The Project Plans, in form and substance satisfactory to Lessor;
T. The Schedules, in form and substance satisfactory to Lessor;
U. The Project Budget, in form and substance satisfactory to Lessor;
V. Funding forecasts, in form and substance satisfactory to Lessor;
W. A fully executed and authorized Consultant Assignment, in form and
substance satisfactory to Lessor.
7.2 LESSOR'S RIGHT TO ADVANCE THE PROJECT FUNDS.
Without at any time waiving any of Lessor's rights hereunder, Lessor
shall have the right to make the first advance of a portion of the Project
Funds hereunder without the satisfaction of each and every condition
precedent to Lessor's obligation to make such advance, and Lessee agrees to
accept such advance as Lessor may elect to make. The making of any advance
hereunder shall not constitute an approval or acceptance by Lessor of any
work on the Project theretofore completed.
7.3 SUBMISSION OF REQUESTS FOR ADVANCES OF THE PROJECT FUNDS.
Advances under this Agreement shall be made not more than once each
month and at least ten (10) days before the date upon which an advance is
requested, Lessee shall give notice to Lessor, specifying the total advance
which will be desired, accompanied by:
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A. Itemized requisitions for advances or, at Lessee's option, for
reimbursements to Lessee for prepaid items, signed by Lessee, the
Architect and the General Contractor on A.I.A. Forms G702, G702A
or G703 or such other form(s) as Lessor may reasonably require
(together with copies of invoices or receipted bills relating to
items covered by such requisitions when so requested by Lessor).
All such requisitions shall include an indemnification of Lessor
by the Architect, the General Contractor and Lessee, jointly and
severally, to the extent such indemnification is available from
the General Contractor and the Architect upon Lessee's best efforts
to obtain such indemnification, against any and all claims of any
subcontractors, laborers and suppliers;
B. A certificate executed by Lessee substantially in the form attached
hereto as EXHIBIT I;
C. A certificate executed by the General Contractor substantially in the
form attached hereto as EXHIBIT J;
D. With respect to every other Advance requested, a certificate executed
by the Architect substantially in the form attached hereto as EXHIBIT K.
E. At Lessor's request, certificates executed by the Consultants in
such form as Lessor may reasonably require;
F. To the event the Advance is not clearly subject to effective
coverage, an endorsement of the Title Policy issued by the Title
Company, satisfactory in form and substance to Lessor, redating
the Title Policy to the date that the then current advance will be
made, increasing the coverage afforded by the Title Policy so that
the same shall constitute insurance in an amount at least equal to
the sum of the amount of the insurance then existing under the Title
Policy PLUS the amount of the then current advance of Project Funds
to be disbursed to Lessee under this Agreement and subject
to no additional exceptions other than the Permitted Encumbrances;
G. If and when reasonably requested by Lessor, satisfactory assurance
that the construction of the Project has been performed in accordance
with the requirements of the Construction Contract, the Project Plans,
this Agreement and all of the other Lease Documents and has been
inspected and found satisfactory by the parties hereto;
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H. If and when reasonably requested by Lessor, an updated Surveyor's
Certificate substantially in the form attached hereto as EXHIBIT G
and/or updated Engineer's/Architect's Certificate substantially in
the form attached hereto as EXHIBIT H;
I. If and when requested by Lessor, updated Opinions from Lessee's
counsel and the Guarantor's counsel (in form and substance satisfactory
to Lessor in its sole and absolute discretion);
J. If and when requested by Lessor, satisfactory evidence that the funds
remaining unadvanced under this Agreement are sufficient for the
payment of all related direct and indirect costs for the completion
of the Project in accordance with the terms and provisions hereof.
If the evidence furnished shall not be satisfactory to Lessor, in its
sole and absolute discretion, it shall be a condition to the making of
any further advance hereunder that Lessee will provide Lessor with such
financial guaranties (whether in the form of a bond, cash deposit,
letter of credit or otherwise) as are acceptable to Lessor, in its sole
and absolute discretion, to assure the completion of the construction of
the Project in accordance with the Project Plans and the terms and
conditions of this Agreement. In the event that Lessor requires a cash
deposit from Lessee, Lessee shall deposit with Lessor such funds, to be
held in an interest bearing account with the interest accruing thereon
to the benefit of Lessee, which, together with such unadvanced funds
of the Loan, shall be sufficient to pay all of the aforesaid
costs. All funds so deposited with Lessor along with the proceeds
thereof, shall be disbursed prior to any further advance hereunder and
upon completion of the Project any remaining funds so deposited or any
unadvanced portion of the Project Funds, shall be remitted to Lessee;
K. A certification of work completed by the General Contractor, together
with a statement of the payment due therefor;
L. Partial lien waivers from the General Contractor for all work
theretofore performed, and from all other contractors and all
subcontractors and suppliers for all work, the cost of which in each
instance exceeds ONE THOUSAND DOLLARS ($1,000.00), which was the
subject of a requisition in the immediately preceding month;
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M. if and when reasonably requested, Lessee shall deliver to Lessor an
updated Survey of the Leased Property, acceptable to Lessor (in its
reasonable discretion);
N. Evidence satisfactory to Lessor (in its reasonable discretion) that
all materials and other property furnished by any contractors,
subcontractors, materialmen or other Persons, the cost of which will be
paid with the proceeds of the advance to be made by Lessor, are free
and clear of all Liens, except (a) encumbrances, if any, (securing
indebtedness due to Persons whose names, addresses and amounts due to
them are identified to Lessor) that shall be discharged upon. the
disbursement of the funds then being requested, (b) the Liens created
lay the Lease Documents and (c) the Permitted Encumbrances;
0. Such evidence as Lessor may require that there has been no material
adverse change in the financial condition and strength of Lessee and the
Guarantor, and that the Leased Property shall have sustained no
impairment, reduction, loss or damage which has not been fully restored
and repaired and that no condemnation is or shall be pending against or
with respect thereto; and
P. Prior to the first advance which includes amounts to be expended on
the construction or equipping of the Improvements, Lessee shall, to the
extent not previously delivered to Lessor, submit to Lessor true and
correct copies of (i) the Project Budget, (ii) the Project Plans, (iii)
the Schedules and (iv) the Construction Contract, each of which shall
be in form and content satisfactory to Lessor (in its sole and absolute
discretion);
Lessee hereby designates George Lenes as Lessee's construction
representative with authority to approve requisitions and to execute
certificates to be delivered pursuant to Section 13.3B on behalf of Lessee.
7.4 ADVANCES BY WIRE TRANSFER.
All advances hereunder shall be made by wire transfer of funds into a
bank account maintained by either Lessee or an authorized agent of Lessee.
7.5 CONDITIONS PRECEDENT TO ALL ADVANCES.
A. Advances hereunder shall be made solely for the payment of the costs
and expenses incurred by Lessee directly in connection with the
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construction of the Project, consistent with the Project Budget, which
are required to be paid out-of-pocket to all other Persons or to
reimburse Lessee for out-of-pocket costs incurred by it pursuant to
the Project Budget. No funds advanced by Lessor shall be utilized for
any purpose other than as specified herein and none of the Project Funds
shall be paid over to any officer, stockholder or employee of any member
of the Leasing Group or to any of the Persons collectively constituting
any member of the Leasing Group or those holding a beneficial interest
in any member of the Leasing Group, or any employee thereof, except to
the extent funds are used to pay compensation to an employee for and
with respect to activity of such employee in construction of the
Project.
B. The amount of each requisition shall represent M the cost of the work
completed on the Project as of the date of such requisition, which has
not been paid for under prior requisitions, (ii) the cost of all
equipment, fixtures and furnishings included within the Project Budget
approved by Lessor, which has not been paid for under prior
requisitions, but not incorporated into any contract and which have
been delivered to the Leased Property for incorporation into the
Project; provided that, in Lessor's judgment, such materials are
suitably stored, secured and insured and that Lessee can furnish
Lessor with evidence satisfactory to Lessor of Lessee's unencumbered
title thereto and (iii) approved soft costs, which have not been
paid for under prior requisitions.
C. All requisitions for the first fifty percent (50%) of the Project
Funds shall be subject to a ten percent (10%) retainage for the
completion of the Project, and no retainage shall be required with
respect to all requisitions thereafter. It is understood that such
retainage is intended to provide a contingency fund to assure that the
construction of the Project shall be fully completed in accordance with
the Project Plans and the terms and provisions of this Agreement. All
amounts so withheld shall be disbursed after (i) construction of the
Project has been fully completed in accordance with the Project Plans
and the terms and provisions of this Agreement, (ii) all of the items
set forth in Section 7.6 hereof have been delivered to Lessor and (iii)
the
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expiration of the period during which liens may be perfected with
respect to any work performed or labor or materials supplied in
connection with the construction of the Project or the receipt of
such evidence as may be required to assure Lessor that no claim may
thereafter arise with respect to any work performed or labor or
materials supplied in connection with the construction of the Project.
D. At the time of each advance, no event which constitutes, or which,
with notice or lapse of time, or both, would constitute, a Lease Default
shall have occurred and be continuing.
E. Without at any time waiving any of Lessor's rights under this
Agreement, Lessor shall always have the right to make an advance
hereunder without satisfaction of each and every condition upon
Lessor's obligation to make an advance under this Agreement, and
Lessee agrees to accept any advance which Lessor may elect to make
under this Agreement. Notwithstanding the foregoing, Lessor shall
have the right, notwithstanding a waiver relative to the first
advance or any subsequent advance hereunder, to refuse to make any
and all subsequent advances under this Agreement until each and every
condition set forth in this Section has been satisfied. The making of
any advance hereunder shall not constitute an approval or acceptance by
Lessor of any work on the Project theretofore completed.
F. If, while this Agreement is in effect, a claim is made that the
Project does not comply with any Legal Requirement or an action is
instituted before any Governmental Authority with jurisdiction over
the Leased Property or Lessee in which a claim is made as to whether
the Project does so comply, Lessor shall have the right to defer any
advance of Project Funds which Lessor would otherwise be obligated to
make until such time as any such claim is finally disposed of favorably
to the position of Lessee, without any obligation on the part of Lessor
to make a determination of, or judgment on, the merits of any such
claim. For the purposes of the foregoing sentence, the term "claim"
shall mean an assertion by any Governmental Authority or Person as to
which, in each case, Lessor has made a good faith determination
that the assertion may properly be made by the party asserting the
same, that the
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assertion, on its face, is not without foundation and that the interests
of Lessor require that the assertion be treated as presenting a bona
fide risk of liability or adverse effect on the Project.
If any such proceeding is not favorably resolved within thirty (30) days
after the commencement thereof, Lessor shall also have the right, at its
option, to treat the commencement of such action as a Lease Default, for
which Lessor shall have all rights herein specified for a Lease Default.
As aforesaid, Lessor shall have no obligation to make a determination
with reference to the merits of any such claim. No waiver of the
foregoing right shall be implied from any forbearance by Lessor in
making such election or any continuation by Lessor in making advances
under this Agreement.
In all events, Lessee agrees to notify Lessor forthwith upon learning
of the assertion of any such claim or the commencement of any such
proceedings.
G. It is contemplated that all advances of the Project Funds made by
Lessor to Lessee will be pursuant to this Agreement.
H. No inspections or any approvals of the Project during or after
construction shall constitute a warranty or representation by Lessor or
any of the Consultants as to the technical sufficiency, adequacy or
safety of any structure or any of its component parts, including,
without limitation, any fixtures, equipment or furnishings, or as to
the subsoil conditions or any other physical condition or feature
pertaining to the Leased Property. All acts, including any failure to
act, relating to the Leased Property by any agent, representative or
designee of Lessor (including, without limitation, the Consultants)
are performed solely for the benefit of Lessor to assure the
payment and performance of the Obligations and are not for the benefit
of Lessee or the benefit of any other Person.
7.6 COMPLETION OF THE PROJECT.
Upon the completion of the construction of the Project in accordance
with the Project Plans and the terms and provisions of this Agreement,
Lessee shall
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provide Lessor with (A) true, correct and complete copies of (i) a final
unconditional Certificate of occupancy (or its equivalent) issued by the
appropriate governmental authorities, permitting the occupancy and use of
the Project for its Primary Intended Use and (ii) all Permits issued by
the appropriate Governmental Authorities which are necessary in order to
operate the Project as a fully licensed assisted living facility, (B) a
certification from the Architect or the Consultants stating that the
Project was completed in accordance with the Project Plans, (C) an
updated Survey of the Leased Property, acceptable to Lessor (in its
sole and absolute discretion), (D) updated Opinions and such other
items relating to the operation and/or construction of the Project
as may be reasonably requested by Lessor.
8. LESSOR'S RIGHT TO MAKE PAYMENTS AND TAKE OTHER ACTION
Lessor may, after ten (10) Business Days' prior notice to Lessee of its
intention so to do (except in an emergency when such shorter notice shall be
given as is reasonable under the circumstances), under Lessee demonstrates
the same has already been paid, pay any sums due or claimed to be due for
labor or materials furnished in connection with the ownership, construction,
development, maintenance, management, repair, use or operation of the Leased
Property, and any other sums which in the reasonable opinion of Lessor, or
its attorneys, it is expedient to pay, and may take such other and further
action which in the reasonable opinion of Lessor is reasonably necessary in
order to secure (A) the completion of the Project in accordance with the
Project Plans and the terms and conditions of this Agreement, (B) the
protection and priority of the security interests granted to Lessor pursuant
to the Lease Documents and (C) the performance of all obligations under the
Lease Documents. Lessor, in its sole and absolute discretion, may charge any
such payments against any advance that may otherwise be due hereunder to
Lessee or may otherwise collect such amounts from Lessee, and Lessee agrees
to repay to Lessor all such amounts, which may exceed the line item amount
therefor in the Project Budget. Any amount which is not so charged against
advances due hereunder and all costs and expenses reasonably incurred by
Lessor in connection therewith (including, without limitation, attorneys'
fees and expenses and court costs) shall be a demand obligation of Lessee
and, to the extent permitted by applicable law, shall be added to the Lease
Obligations and secured by the Liens created by the Lease Documents, as fully
and effectively and with the same priority as every other obligation of
Lessee thereunder and, if not paid within ten (10) days after demand, shall
thereafter, to the extent permitted under applicable law, bear interest at
the Overdue Rate until the date of payment.
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If Lessee fails to observe or cause to be observed any of the provisions
of this Agreement and such failure continues beyond any applicable notice or
cure period provided for under this Agreement, Lessor or a lawfully appointed
receiver of the Leased Property, at their respective options, from time to
time may perform, or cause to be performed, any and all repairs and such
other work as they deem necessary to bring the Leased Property into
compliance with the provisions of this Agreement may enter upon the Leased
Property for any of the foregoing purposes, and Lessee hereby waives any
claim against Lessor or such receiver arising out of such entry or out of
any other act carried out pursuant to this Section. All amounts so expended
or incurred by Lessor and by such receiver and all costs and expenses
reasonably incurred in connection therewith (including, without limitation,
attorneys' fees and expenses and court costs), shall be a demand obligation
of Lessee to Lessor or such receiver, and, to the extent permitted by law,
shall be added to the Obligations and shall be secured by the Liens created
by the Lease Documents as fully and effectively and with the same priority as
every other obligation of Lessee secured thereunder and, if not paid within
ten (10) days after demand, shall thereafter, to the extent permitted by
applicable law, bear interest at the Overdue Rate until the date of payment.
9. INSURANCE; CASUALTY; TAKING
9.1 GENERAL INSURANCE REQUIREMENTS.
Lessee shall at its sole cost and expense keep the Leased Property and
the business operations conducted thereon insured as required under the
Facility Lease.
9.2 FIRE OR OTHER CASUALTY OR CONDEMNATION.
In the event of any damage or destruction to the Leased Property by
reason of fire or other hazard or casualty (a "Casualty") or a taking by
power of eminent domain or conveyance in lieu thereof of all or any portion
of the Leased Property (a "Condemnation"), Lessee shall give immediate
written notice thereof to Lessor and comply with the provisions of the
Facility Lease governing Casualties and Condemnations.
10. EVENTS OF DEFAULT
Each of the following shall constitute an "Event of Default" hereunder
and shall entitle Lessor to exercise its remedies hereunder and under any of
the other Lease Documents:
A. any failure of Lessee to pay any amount due hereunder or under any
of the other Lease Documents within ten (10) days following the
date when such payment was due;
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B. any failure in the observance or performance of any other covenant,
term, condition or warranty provided in this Agreement or any of the
other Lease Documents, other than the payment of any monetary
obligation and other than as specified in subsections (C) through (F)
below (referred to herein as a "Failure to Perform"), continuing for
thirty (30) days after the giving of notice by Lessor to Lessee
specifying the nature of the Failure to Perform; except as to matters
not susceptible to cure within thirty (30) days, provided that with
respect to such matters, (i) Lessee commences the cure thereof within
thirty (30) days after the giving of such notice by Lessor to Lessee,
(ii) Lessee continuously prosecutes such cure to completion, (iii)
such cure is completed within one hundred twenty (120) days after the
giving of such notice by Lessor to Lessee and (iv) such Failure to
Perform does not impair Lessor's rights with respect to the Leased
Property or otherwise impair the Collateral or Lessor's security
interest therein;
C. the occurrence of any default or breach of condition continuing
beyond the expiration of the applicable notice and grace periods, if
any, under any of the other Lease Documents;
D. if any representation, warranty or statement contained herein or in
any of the other Lease Documents proves to be untrue in any material
respect as of the date when made or at any time during the Term if
such representation or warranty is a continuing representation or
warranty pursuant to Section 6.2;
E. except as a result of any Casualty or a partial or complete
Condemnation, if a suspension of any work in connection with the
construction of the Project occurs for a period in excess of ten
(10) Business Days, irrespective of the cause thereof, provided
that Lessee shall not be deemed to be in default under this Subsection
if such suspension is for circumstances not reasonably within its
control, but only if Lessor, in its sole and absolute discretion,
shall determine that such suspension shall not create any risk that
the construction of the Project will not be completed (in accordance
with the Project Plans and the terms and conditions of this
Agreement) on or before the Completion Date; and
P. if construction of the Project shall not be completed in accordance
with the Project Plans and this Agreement (including, without
limitation, satisfaction of the
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conditions set forth in Section 7.6) on or before the Completion Date.
11. REMEDIES IN EVENT OF DEFAULT
Upon the occurrence of an Event of Default, at the option of Lessor,
which may be exercised at any time after an Event of Default shall have
occurred, Lessor shall have all rights and remedies available to it, at law
or in equity, including, without limitation, all of the rights and remedies
under the Facility Lease and the other Lease Documents. Subject to the
requirements of applicable law, all materials at that time on or near the
Leased Property which are the property of Lessee and which are to be used in
connection with the completion of the Project shall be subject to the Liens
created by the Lease Documents.
In addition to, and without limitation of, the foregoing, Lessor is
authorized to charge all money expended for completion of the Project against
sums hereunder which have not already been advanced (even if the aggregate
amount of such sums expended and all amounts previously advanced hereunder
exceed the amount of the Project Funds which Lessor has agreed to advance
hereunder); and Lessee agrees to pay to Lessor Rent under the Facility Lease
(calculated, in part, thereunder based upon all sums advanced hereunder,
including, without limitation, all sums expended in good faith by Lessor in
connection with the completion of the Project), and, in addition thereto,
Lessee agrees to pay to Lessor (as Rent under the Facility Lease), for
services in connection with said completion of the Project, such additional
sums as shall compensate Lessor for the time and effort Lessor and its
employees shall have expended in connection therewith. Lessor is authorized,
but not obligated in any event, to do all such things in connection with the
construction of the Project as Lessor, in its sole and absolute discretion,
may deem advisable, including, without limitation, the right to make any
payments with respect to any obligation of Lessee to Lessor or to any other
Person in connection with the completion of construction of the Project and
to make additions and changes in the Project Plans, to employ contractors,
subcontractors and agents and to take any and all such action, either in
Lessor's own name or in the name of Lessee, and Lessee hereby grants Lessor
an irrevocable power of attorney to act in its name in connection with the
foregoing. This power of attorney, being coupled with an interest, shall be
irrevocable until all of the Obligations are fully paid and performed and
shall not be affected by any disability or incapacity which Lessee may suffer
and shall survive the same. The power of attorney conferred on Lessor by the
provisions of this Section 11 is provided solely to protect the interests of
Lessor and shall not impose any duty an Lessor to exercise any such power and
neither Lessor nor such attorney-in-fact shall be liable for any act,
omission, error in judgment
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or mistake of law, except as the same may result from its gross negligence or
wilful misconduct. In the event that Lessor takes possession of the Leased
Property and assumes control of the Project as aforesaid, it shall not be
obligated to continue the construction of the Project and/or the operation of
the Project for any period of time longer than Lessor shall see fit (in its
sole and absolute discretion), and Lessor may thereafter, at any time,
abandon its efforts and refuse to make further payments for the account of
Lessee, whether or not the Project has been completed.
In addition, at Lessor's option and without demand, notice or protest,
the occurrence of any Event of Default shall also constitute a default under
any one or more of the Related Party Agreements.
12. GENERAL
The provisions set forth in Article 23 and Sections 2.2, 16.8 through
16.10, 24.2 through 24.6, and 24.8 through 24.12 of the Lease are hereby
incorporated by reference, MUTATIS, MUTANDIS, and shall be applicable to this
Agreement as if set forth in full herein.
This Agreement, the other Lease Documents and the other Lease Documents
set forth the entire agreement of the parties with respect to the subject
matter and shall supersede in all respect the Letter of Intent.
13. LEASE PROVISIONS PARAMOUNT.
In the event of a conflict between the provisions hereof and the
provisions of the Lease, the provisions of the Lease are paramount.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement under seal on the day and year first above written.
WITNESS: LESSEE:
EMERITUS PROPERTIES I, INC.
/s/ Jim Wright By: /s/ Raymond R. Brandstrom
- ------------------------------ ----------------------------------
Name: Jim Wright Name: Raymond R. Brandstrom
Title: President
WITNESS: LESSOR:
MEDITRUST ACQUISITION CORPORATION
I, a Massachusetts corporation
/s/ Lila Brazao By: /s/ Michael F. Bushee
- ------------------------------- ------------------------------
Name: Lila Brazao Name: Michael F. Bushee
Title: Chief Operating Officer
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