THE FOLLOWING DOCUMENT IS SUBSTANTIALLY
THE SAME FOR THE XXXXXXXXXX PROPERTY AND
THE RIDGELAND PROPERTY WITH THE EXEPTION
OF THE LESSOR'S AGREEMENT TO FUND THE
PROJECT IS NOT TO EXCEED $9,600,000 IN
RELATION TO THE XXXXXXXXXX PROPERTY AND
$6,520,000 IN RELATION TO THE RIDGELAND
PROPERTY.
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 March 15, 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 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 Sarasota,
Sarasota County, Florida 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 Sarasota
County, Florida real estate records.
1.4 Project.
Lessee is currently contemplating a
proposal to construct an addition of [ ]
units and [ ] beds to the existing
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". Lessee shall have
until December 15, 1996 to notify Lessor
in writing of its decision to construct
the Project, and Lessor shall have no
obligation to fund or permit the
construction of the Project contemplated
hereunder until such time as Lessee has so
elected in writing to proceed with the
construction of the Project. The
obligations contained in this Leasehold
Improvement Agreement shall not take
effect until Lessor receives such notice
from Lessee of its election to proceed
with the construction of the Project.
Notwithstanding any other provision
contained herein, this Leasehold
Improvement Agreement shall become null
and void if such notice is not received by
Lessor by December 15, 1996.
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 NINE MILLION SIX
HUNDRED THOUSAND DOLLARS ($9,600,000) of
the cost of the 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.
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 be prepared by an architect to
be approved by Lessor, which approval
shall not be unreasonably withheld (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 a
contractor to be approved by Lessor, which
approval shall not be unreasonably
withheld, 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 by 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
2
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.
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
3
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 he 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 he 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;
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 Guarantied Obligations
(the "Completion Guaranty");
G. 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");
4
J. a Group Two Negative Pledge
(Acquisition) Agreement dated
May l, 1996 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").
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;
5
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, 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 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
6
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;
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
7
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 o 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 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
by, declaration or filing with,
8
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 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
9
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 rent 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
Representation 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.
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
10
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.
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
11
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 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 xxxx 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
12
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.
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
13
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 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
14
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 xxxx xxxxx,
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
(or its equivalent) permitting the
occupancy of the Project for its Primary
Intended Use has been issued by the
applicable Governmental Authorities.
15
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");
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;
16
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;
X. Xxxxxx'x 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");
17
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;
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.
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.
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
18
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 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
19
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);
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
20
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
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,
21
(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 Xxxxxx Xxxxx
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 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 (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 unencumbered title
thereto and (iii)
approved soft costs, which have not been
paid for under prior
requisitions.
22
C. All requisitions for
the first fifty percent (50%) of the
Project Funds shall be
subject to a ten percent (l0%)
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
23
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
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.
24
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) 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
25
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 (10) days after demand, shall
hereafter, 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 xxxxx any portion of the Leased
Property (a "Condemnation"), Lessee shall
give immediate written notice hereof to
Lessor and comply with the provisions of
the Facility ease governing Casualties and
Condemnations.
26
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;
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
27
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 f 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
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
28
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 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.
[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK]
29
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/ Xxxxxxx X. Day
By: /s/ Xxxxxxx X. Xxxxxxxxxx
-----------------------------
----------------------
Name: Xxxxxxx X. Day Name:
Xxxxxxx X. Xxxxxxxxxx
Title: President
WITNESS:
LESSOR:
MEDITRUST ACQUISITION
CORPORATION I, a
Massachusetts corporation
/s/ Xxxxxxx X. Day
By: /s/ Xxxxxxx X. Xxxxxxxx,
------------------------
--------------------------
Name: Xxxxxxx X. Day Name:
Xxxxxxx X. Xxxxxxxx, ESQ.
Title: Senior Vice President
30
