FLAGSTAFF, ARIZONA
LEASEHOLD IMPROVEMENT AGREEMENT
AMONG
MEDITRUST COMPANY LLC
AND
EMERITUS PROPERTIES I, INC.
LEASEHOLD IMPROVEMENT AGREEMENT
THIS LEASEHOLD IMPROVEMENT AGREEMENT is made as of May 12,1998 by
and among EMERITUS PROPERTIES I, INC., a Washington corporation
(the "Lessee"), and MEDITRUST COMPANY LLC, a Delaware limited
liability company (the "Lessor").
1. BACKGROUND
l.l 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 the
City of Flagstaff, Coconino County, Arizona 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 Coconino County, Arizona real estate records.
1.4 Project.
Lessee proposes to construct a 61-unit assisted living facility
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 Four Million Eight Hundred Sixty Two Thousand
One Hundred Seventy Six Dollars ($4,862,176) of the cost o fthe
Project (the
"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.
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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 by Architects
Todd & Associates, Inc. (the "Architect") pursuant to the contract
dated February 14, 1997, by and between Lessee and the Architect
(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 ADA
Construction Company, dated April 1,1998 (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 (b) substantially completed by the first
anniversary of the date hereof (the "Completion Date") in
accordance with the terms hereof.
1.9 Project Budget.
Lessee has submitted, or 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
therefor, solely for the payment of Project costs set forth in the
Project Budget.
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l.ll 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. INTENTIONALLY OMITTED
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
ofthe following:
A. an Eighth Amended and Restated Agreement Regarding Related
Transactions (Development) of even date by and among Lessee,
Lessor, ESC I, L.P., and ESC G.P. I, Inc., as the same may be
amended from time to time;
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");
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E. a Security Agreement of even date by and between Lessee and
Lessor (the
"Security Agreement") and related UCC Financing Statements;
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 Guarantied 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 [Two] Negative Pledge Agreement (Development) dated
April I 5, I 996 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. all other documents, instruments, or agreements now or
hereafter evidencing or securing the obligations under this
Agreement and the Facility Lease.
Items (A) through (N) 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").
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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:
5.1 Architect's Contract and Construction Contract.
The Architect's Contract and the Construction Contract have been
validly executed by, and are binding upon Lessee and are in full
force and effect in accordance with the terms thereof as of the
date hereof. All of the parties to the Architect's Contract
Construction Contract have faithfully performed all of their
respective obligations thereunder to the extent accrued as of the
date hereof, and none of the parties to the foregoing instruments
has asserted any claim of default thereunder and Lessee has no
reason to believe that such agreements have not been validly
executed by and binding upon the other parties thereto;
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5.2 Project Plans.
The two (2) copies of the Project Plans delivered to Lessor by
Lessee (a) are true and correct and satisfactory to Lessee and (b)
have been 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 are
the plans and specifications which have been approved in writing
by Lessor, any construction heretofore performed on the Project
has been performed in accordance with the Project Plans 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 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;
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
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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
Proj ect 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
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,
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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 by, 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 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 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
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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 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.
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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 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.
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6.3.5 Intentionally Deleted.
6.3.6 Lessor's Consultant.
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:
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
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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
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 security for advances of Project
Funds under this Agreement and for the complete performance of the
Lease Obligations.
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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 Facility 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 Facility 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 Facility 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 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.
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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 cf God or interruption of the construction
ofthe 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.
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
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(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 for nature whatsoever
other than the Permitted Encumbrances (the "Title Policy");
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;
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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 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) such other matters as Lessor may
reasonably request (collectively, the "Opinions");
L. Payment ofthe 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
16
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;
O. 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.
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:
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
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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;
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);
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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;
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 by the Lease Documents and
(c) the Permitted Encumbrances;
O. 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
19
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 Tom Mullins 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 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
ofthe 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 (i) 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
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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 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
21
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
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 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 (E)
22
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), unless 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 o pinion 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 therefore 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.
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 ( I 0) days after demand, shall thereafter,
23
to the extent permitted by applicable law, bear interest at the
Overdue Rate until the date of payment.
9. INSURANCE; CASUALTY; TAHING
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;
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;
24
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
F. if construction of the Project shall not be completed in
accordance with the Project Plans and this Agreement (including,
without limitation, satisfaction of the 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.
25
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 on Lessor to exercise any such power
and neither Lessor nor such attorney-in-fact shall be liable for
any act, omission, error in judgment or mistake of law, except as
the same may result from its gross negligence or willful
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 Articles 22, 23 and Sections 2.2,16.8
through 16.10, 24.2 through 24.6, and 24.8 through 24.12 of the
Facility Lease are hereby incorporated by reference, mutatis,
mutandis, and shall be applicable to this Agreement as if set
forth in full herein.
This Agreement and the other Lease Documents set forth the entire
agreement of the parties with respect to the subject matter and
shall supersede (a) the Letter of Intent with respect to the
Project, and (b) the letter dated April 1 I,1997, as amended, from
Hutchins, Wheeler & Dittmar to Randi S. Nathanson relating to the
Land; provided, however, that this Agreement shall not supersede
the indemnities set forth in the letter of April 1 Ith with
respect to matters arising prior to the date of this Agreement.
13. LEASE PROVISIONS PARAMOUNT
In the event of a conflict between the provisions hereof and the
provisions of the Facility Lease, the provisions of the Facility
Lease are paramount.
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[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first above written.
ATTEST:
By: /s/: Susan Griffin
Name: Susan Griffin
ATTEST:
By: /s/: Amelia C. Gentry
Name: Amelia C. Gentry
LESSEE:
EMERITUS PROPERTIES I, INC.,
a Washington corporation
By: /s/: Kelly J. Price
Name: Kelly J. Price
Title: Vice President of Finance
LESSOR:
MEDITRUST COMPANY LLC, a Delaware
limited liability company
By: /s/: Michael S. Benjamin
Name: Michael S. Benjamin, ESQ.
Tille: Senior Vice President
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