1
EXHIBIT 10.11
FORM OF LEASEHOLD IMPROVEMENT AGREEMENT
2
SUMMARY OF TABLE OF CONTENTS
1. BACKGROUND.............................................................1
1.1 The Lessee........................................................1
1.2 The Land and Existing Improvements................................1
1.3 The Facility Lease................................................1
1.4 Project...........................................................1
1.5 Lessor's Agreement to Fund the Project and Lessee's Agreement to
Supervise the Project.............................................1
1.6 Plans; the Architect and Architect's Contract.....................2
1.7 Construction Contracts............................................2
1.8 Schedule of Work and Completion Date; Schedule of Draws...........2
1.9 Project Budget....................................................2
1.10 Use of Project Funds..............................................2
1.11 Project Funds.....................................................3
1.12 Guaranties and Indemnities........................................3
2. DEFINITIONS............................................................3
3. LEASEHOLD IMPROVEMENT FEE..............................................3
4. LEASE DOCUMENTS; COLLATERAL SECURITY...................................3
4.1 Lease Documents...................................................3
4.2 Lease Obligations.................................................5
4.3 Collateral Security...............................................5
5. REPRESENTATIONS AND WARRANTIES.........................................6
5.1 Architect's Contract and Construction Contract....................6
5.2 Project Plans.....................................................6
5.3 Prior Construction Work...........................................7
5.4 Suitability of Project Plans......................................7
5.5 Compliance with Legal Requirements and Applicable Agreements......7
5.6 Permits and Contracts.............................................7
5.7 First Advance.....................................................8
6. COVENANTS..............................................................8
6.1 Collection and Enforcement Costs..................................8
6.2 The Lessee's Agreements to Perform Certain Obligations............8
6.3 Continuing Effect of Representation and Warranties................8
6.4 Construction Covenants............................................9
6.4.1 Commencement of Construction...............................9
6.4.2 Quality of Materials and Workmanship.......................9
6.4.3 Project Budget.............................................9
6.4.4 Architect Certificates....................................10
6.4.5 Subcontractors............................................10
6.4.6 The Lessor's Consultant...................................10
3
6.4.7 Title To Materials and Security Interest Granted to
Lessor......................................................11
6.4.8 Compliance With Legal Requirements And Applicable
Agreements..................................................12
6.4.9 Liens.......................................................13
6.4.10 Books And Records...........................................13
6.4.11 Inspection Of Construction..................................13
6.4.12 Notice Of Delay.............................................13
6.4.13 Bonds.......................................................14
6.4.14 Use of Project Funds........................................14
6.4.15 Occupancy of the Project....................................14
6.4.16 Seller's Improvements.......................................14
7. ADVANCES OF PROJECT FUNDS................................................15
7.1 Conditions Precedent to First Advance of Project Funds..............15
7.2 The Lessor's Right to Advance.......................................17
7.3 Submission of Requests for Advances.................................17
7.4 Advances by Wire Transfer...........................................19
7.5 Conditions Precedent to All Advances................................19
7.6 Completion of the Project...........................................22
8. THE LESSOR'S RIGHT TO MAKE PAYMENTS AND TAKE OTHER ACTION................22
9. INSURANCE; CASUALTY; TAKING..............................................23
9.1 General Insurance Requirements......................................23
9.2 Fire or Other Casualty or Condemnation..............................23
10. EVENTS OF DEFAULT........................................................23
11. REMEDIES IN EVENT OF DEFAULT.............................................25
12. GENERAL..................................................................26
EXHIBIT A DESCRIPTION OF THE LAND............................................28
EXHIBIT B PLANS AND SPECIFICATIONS...........................................29
EXHIBIT C SCHEDULE OF CONSTRUCTION...........................................30
EXHIBIT D PROJECT BUDGET.....................................................31
EXHIBIT E DEFINITIONS........................................................32
EXHIBIT F FUTURE PERMITS AND CONTRACTS REQUIRED FOR COMPLETION OF
CONSTRUCTION AND COMMENCEMENT OF OPERATION...................................37
EXHIBIT G SURVEY.............................................................41
EXHIBIT H SURVEYOR'S CERTIFICATE.............................................
EXHIBIT I ENGINEER'S/ARCHITECT'S CERTIFICATE.................................47
EXHIBIT J LESSEE'S REQUISITION CERTIFICATE...................................50
EXHIBIT K GENERAL CONTRACTOR'S REQUISITION CERTIFICATE.......................52
EXHIBIT L ARCHITECT'S REQUISITION CERTIFICATE................................54
4
FORM OF LEASEHOLD IMPROVEMENT AGREEMENT
THIS LEASEHOLD IMPROVEMENT AGREEMENT is made as of _________________
by and among _______________, a _____________ corporation (the "Lessee"), and
MEDITRUST ACQUISITION CORPORATION II, a Delaware corporation (the "Lessor").
1. BACKGROUND
1.1 THE LESSEE.
The Lessee is a corporation which is a wholly-owned Subsidiary of the
Guarantor (as hereinafter defined). The Guarantor is a Delaware corporation.
1.2 THE LAND AND EXISTING IMPROVEMENTS.
The Lessor is the owner of a certain parcel of land located in _______ and more
particularly described on EXHIBIT A (the "Land"), together with the
existing buildings and other improvements, if any, located thereon
(collectively, the "Existing Improvements")
1.3 THE FACILITY LEASE.
The Lessor and the Lessee have entered into that certain Facility
Lease Agreement of even date herewith (the "Facility Lease") relating to the
Land and the Improvements (as hereinafter defined), a Notice of which is to be
recorded with the Clerk/Prothonotary of _____________________________.
1.4 PROJECT.
The Lessee proposes to cause BCC Development and Management Co., a Delaware
corporation and a wholly-owned Subsidiary of the Guarantor (the "Developer") to
construct a personal care home consisting of and other improvements,
including, without limitation, accessory parking and landscaping on the Land
(collectively, the "Improvements"). The Land, the Existing Improvements 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.
The Lessee and the Lessor have agreed that the Project will be a
benefit to the premises demised under the Facility Lease and to the Lessee's
and the Lessor's respective interests therein. The Lessor and the Lessee have
further agreed that, pursuant to, and in accordance with, the terms and
conditions of this Agreement, the Lessor shall fund an amount not to exceed
________________________________________________.
5
__________________ of the cost of the Project (the "Project Funds"). The
Lessee has agreed to supervise and manage, or to cause the Developer to
supervise and manage, the construction of the Project and the 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 Project is to be constructed and equipped in accordance with the plans and
specifications (collectively, the "Project Plans"), listed on EXHIBIT B
prepared by _________________(the "Architect") pursuant to the contract dated
_________________, by and between the Developer and the Architect (the
"Architect's Contract").
1.7 CONSTRUCTION CONTRACTS.
All of the Improvements are to be constructed pursuant to a guaranteed
maximum price contract (the "Construction Contract") by and between the
Developer and _______________________________ (the "General Contractor"). The
Construction Contract shall be in form and substance identical to the draft
contract between the Developer and the General Contractor previously delivered
to the Lessor for review.
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 which is annexed
hereto as EXHIBIT C and (B) substantially completed by (the
"Completion Date").
1.9 PROJECT BUDGET.
The Lessee has submitted to the Lessor a line item budget (the "Project
Budget"), a copy of which is annexed hereto as EXHIBIT D, setting forth a
total cost of _____________________________________ for the acquisition cost of
the Land and the design and construction of the Project, including (A) the cost
of the Land, (B) a breakdown of construction costs (itemized as to trade
category, subdivision of the work to be performed and the names of each
contractor), (C) 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, (D) a
projected draw schedule and (E) 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.
-2-
6
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, the Lessor
agrees to advance the Project Funds and the Lessee agrees to supervise and
manage, or cause the Developer 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 the 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 the Lessee.
1.12 GUARANTIES AND INDEMNITIES.
As an inducement to the Lessor to acquire the Land, enter into this
Agreement, advance the Project Funds and enter into the Facility Lease, the
Guarantor and the Developer have 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.
The Lessee shall pay the Leasehold Improvement Fee to the Lessor
simultaneously with the execution of this Agreement; provided, however, that,
at the Lessor's option, the Leasehold Improvement Fee shall be held in an
escrow account established with a Person designated by the Lessor pursuant to
an escrow arrangement satisfactory to the Lessor, with interest thereon
benefiting the Lessor. If the Lessor exercises its option to require that the
Leasehold Improvement Fee be held in such an escrow account (A) the Leasehold
Improvement Fee shall be disbursed from said escrow account only upon the joint
instructions of the Lessee and the Lessor (which instructions from the Lessee
shall be immediately given upon the request of the Lessor) and in no event
shall the Leasehold Improvement Fee be disbursed therefrom, in whole or in
part, unless and until so requested by the Lessor and (B) the Lessor shall bear
the risk of loss of or misappropriation of the Leasehold Improvement Fee by
such escrow agent.
4. LEASE DOCUMENTS; COLLATERAL SECURITY
4.1 LEASE DOCUMENTS.
The Project Funds shall be advanced, evidenced, administered, secured
and governed by all of the terms, conditions and provisions of each of the
following:
-3-
7
A. this Agreement;
B. the Facility Lease;
C. a Collateral Assignment of Permits, Approvals, Licenses, and
Contracts of even date granted by the Lessee to the Lessor
(the "Lessee Permits Assignment") and related UCC Financing
Statements;
D. a Collateral Assignment of Permits, Approvals, Licenses, and
Contracts of even date granted by the Developer to the Lessor
(the "Developer Permits Assignment") and related UCC
Financing Statements;
E. a Security Agreement of even date by and between the Lessee
and the Lessor (the "Security Agreement");
F. a Guaranty of even date executed by the Guarantor for the
benefit of the Lessor guarantying the completion of the
Project and the satisfaction of the other Guarantied
Obligations (the "Balanced Care Guaranty");
G. a Guaranty of even date executed by the Developer for the
benefit of the Lessor guarantying the completion of the
Project and the satisfaction of the other Guarantied
Obligations (the "Developer Guaranty");
H. an Environmental Indemnity Agreement of even date by and
among the Lessee, the Guarantor, the Developer, and the
Lessor (the "Environmental Indemnity Agreement");
I. a Deposit Pledge Agreement of even date by and between the
Lessee and the Lessor (the "Deposit Pledge Agreement");
J. a Pledge Agreement of even date by and among the Lessee, the
Lessor and the Guarantor, pursuant to which the Guarantor
granted the Lessor a security interest in all of the
outstanding capital stock of the Lessee (the "Pledge
Agreement") and related stock powers;
K. an Assignment of Construction Contract to be granted by the
Lessee to the Lessor and containing the consent of the
General Contractor (the "Construction Assignment");
L. an Assignment of Architect's Contract of even date granted by
the Developer to the Lessor and containing the consent of the
Architect (the "Architect's Assignment");
-4-
8
M. an Affiliated Party Subordination Agreement of even date by
and among the Lessee, the Guarantor, the Developer, various
other Affiliates of the Lessee and the Lessor (the
"Affiliated Party Subordination Agreement");
N. an Amended and Restated Agreement Regarding Related Lease
Transactions dated as of November 1, 1996, by and among the
Lessee, the Lessor and any Related Party that is a party to
any Related Lease, as amended by First Amendment to Amended
and Restated Agreement Regarding Related Lease Transactions
of even date (the "Agreement Regarding Related Lease
Transactions");
O. the Assignment Agreement; and
P. all other documents, instruments, or agreements now or
hereafter evidencing or securing the obligations under this
Agreement and/or the Facility Lease.
Items (A) through (P) 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.
The Lessee agrees to pay and perform all indebtedness, covenants,
liabilities, obligations, agreements and undertakings (other than the 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 Assignments;
B. a perfected first priority security interest in Tangible
Personal Property, Receivables and certain other Collateral
pursuant to the Security Agreement;
C. the Guaranties;
D. the Environmental Indemnity Agreement;
E. a perfected first priority security interest in all of the
outstanding capital stock of the Lessee pursuant to the
Pledge Agreement;
F. a perfected first priority interest in the Cash Collateral
pursuant to the Deposit Pledge Agreement;
-5-
9
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 (I) as described in
items (A) through (H) above and (II) pursuant to any other Lease Document is
collectively referred to herein as the "Collateral".
5. REPRESENTATIONS AND WARRANTIES
In order to induce the Lessor to advance the Project Funds pursuant to
the terms and conditions of this Agreement, the Lessee represents and warrants
to the Lessor that:
5.1 ARCHITECT'S CONTRACT AND CONSTRUCTION CONTRACT.
The Architect's Contract has been validly executed by and is binding
upon the parties thereto and is in full force and effect in accordance with the
terms thereof. All of the parties to the Architect's 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 Architect's Contract has
asserted any claim of default thereunder;
5.2 PROJECT PLANS.
The two (2) copies of the Project Plans delivered to the Lessor by the
Lessee (A) are true and correct and satisfactory to the 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 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 the 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
have been approved in writing by the 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 and the terms and conditions of this
Agreement. There are no structural defects in the Project of which the Lessee
has been advised or of which the Lessee has notice or knowledge. The Lessee has
not received any notice claiming that, and the Lessee has no knowledge that,
the Project Plans violate any Legal Requirement;
-6-
10
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 the Lessor;
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 proper and efficient 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 that 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 the Lessee, recommended by the
applicable Governmental Authority having jurisdiction thereof, either to
revoke, repeal, cancel, modify, withdraw or suspend any such Permit or Contract
relating to the construction of the Project, or any other action of any other
type which would have a material adverse effect on the Project. All other
Permits and Contracts required for the completion of the construction of the
Project and the commencement of the operation of the Facility are described on
EXHIBIT F and the Lessee knows of no impediment to the future issuance or
execution of such Permits and Contracts and has no reason to believe that such
Permits and Contracts will not be obtained as and when needed.
-7-
11
5.7 FIRST ADVANCE.
As of the date of the first advance of Project Funds to the Lessee
pursuant to this Agreement, the amount of the money expended by the 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.
6. COVENANTS
6.1 COLLECTION AND ENFORCEMENT COSTS.
Upon demand, the Lessee shall reimburse the Lessor for all costs and
expenses, including, without limitation, attorneys' fees and expenses and court
costs, paid or reasonably incurred by the Lessor in connection with the
collection of any sum due hereunder, or in connection with the enforcement of
any of the 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 the 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 the 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 the
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 the 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; the Lessee shall
nevertheless remain obligated to pay the indebtedness evidenced by this
Agreement, as extended or modified by any such agreement or stipulation, unless
the Lessee is released and discharged from such obligation by a written
agreement executed by the Lessor.
6.2 THE LESSEE'S AGREEMENTS TO PERFORM CERTAIN
OBLIGATIONS.
The Lessee agrees faithfully to perform, pay and observe all
agreements, covenants, indebtedness, obligations and liabilities of the Lessee
to the Lessor, whether such agreements, covenants, indebtedness, obligations
and liabilities are direct or indirect, absolute or contingent, due or to
become due, existing or hereafter arising, including, without limitation, all
of the Lessee's obligations under all of the Lease Documents. The payment of
all obligations and the performance of all covenants of and agreements by the
Lessee under the Lease Documents shall be absolute and unconditional,
irrespective of any defense or any rights or set-off, recoupment or
counterclaim the Lessee might otherwise have against the Lessor, and the Lessee
shall pay absolutely net during the Term all payments to be made as prescribed
in the all of the Lease Documents, free of any deductions and without
abatement, diminution or set-off.
-8-
12
6.3 CONTINUING EFFECT OF REPRESENTATION AND WARRANTIES.
All representations and warranties contained in this Agreement shall
constitute continuing representations and warranties which shall remain true,
correct and complete throughout the Term.
6.4 CONSTRUCTION COVENANTS.
6.4.1 COMMENCEMENT OF CONSTRUCTION.
If construction of the Project has not already begun, the
Lessee shall commence construction of the Project within thirty (30)
day from the date hereof. The 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 the Lessor on or before the Completion Date.
Notwithstanding anything to the contrary contained herein, the Lessee
shall be and shall remain unconditionally liable to the 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 the Lessee hereunder.
6.4.2 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 the Lessor. The Lessee shall not make any changes in,
and shall not permit the Developer, 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 the Lessor, in each
instance (which consent may be withheld in the Lessor's sole and
absolute discretion); provided, however, that such consent shall not
be required for any individual change (necessitated by job conditions)
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 TWENTY-FIVE THOUSAND DOLLARS ($25,000) or which
changes, in the aggregate, do not exceed TWO HUNDRED THOUSAND DOLLARS
($200,000) in cost. Notwithstanding the foregoing, prior to making any
change in Project Plans, copies of all change orders shall be
submitted by the Lessee to the Lessor and the Lessee shall also
deliver to the Lessor evidence satisfactory to the 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.
6.4.3 PROJECT BUDGET.
Upon the request of the Lessor, the Lessee shall furnish the
Lessor with revisions for the Project Budget to reflect (A) any
changes approved by the Lessor to the Project
-9-
13
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.
6.4.4 ARCHITECT CERTIFICATES.
The Lessee agrees to cause the Architect to furnish such
statements as to progress and certificates of completion as the Lessor
may reasonably require from time to time during such period as this
Agreement may be in effect, all without expense to the Lessor. The
Lessee agrees to cause the Architect to make the Project Plans
available to the Lessor without expense to the Lessor, and to agree
that, in the event that the Lessor shall take over the Project by
reason of an occurrence of a Lease Default, the 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.
6.4.5 SUBCONTRACTORS.
Prior to the initial advance of Project Funds contemplated by
this Agreement, the Lessee agrees to provide the Lessor with a list of
the major subcontractors working on the Project, including an
identification by trade and the amount of each subcontract. The Lessor
reserves the right of reasonable approval of all subcontractors
(collectively, the "Major Subcontractors") under any subcontract the
aggregate amount due under which is equal to or greater than ONE
HUNDRED THOUSAND DOLLARS ($100,000). The Lessee further agrees that
the Lessee shall not permit any Major Subcontractors working on the
Project to change without the Lessor's prior written consent, in each
instance, which consent shall not be unreasonably withheld.
6.4.6 THE LESSOR'S CONSULTANT.
The Lessee agrees to pay the costs and expenses reasonably
incurred by the Lessor to retain the Consultants to perform various
services to the 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
the 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 the Lessee's then current requisition to
determine whether it is consistent with the
obligations of the Lessee under this Agreement, and
to advise the Lessor of the anticipated costs of,
and the time for, the
-10-
14
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 the Lessor regarding the
same;
E. to review and analyze the Project Budget and advise
the Lessor as to the sufficiency thereof; and
F. to review and analyze the Architect's Contract,
Construction Contract and all subcontracts entered
into by the Lessee, the Developer or the General
Contractor in connection with the construction of
the Project and advise the Lessor regarding the
same.
Except as otherwise expressly provided herein, the Lessee
agrees promptly to make such changes or corrections, or to cause the
Developer to make such changes or corrections, in the construction of
the Project as may be required by the Lessor, based on the
recommendation of any of the Consultants, unless the Lessee
demonstrates to the Lessor's satisfaction that such corrective work is
inconsistent with the Project Plans.
6.4.07 TITLE TO MATERIALS AND SECURITY INTEREST GRANTED TO LESSOR.
Except as otherwise expressly provided herein, the 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 the Lessee does not have absolute
and unencumbered title. The 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 cost of the construction of the Project
on behalf of the Lessor, the Lessee agrees that title to all
materials, fixtures and equipment that are incorporated into the
Improvements shall automatically pass to the 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
the Lessor with reference to all advances of Project Funds made
hereunder, the Lessee hereby conveys to the Lessor a security interest
in all of the Lessee's right, title and interest in materials on the
Leased Property which are not at any relevant time incorporated into
the Project
-11-
15
and materials, wherever located, intended for incorporation into the
Project. The Lessee agrees:
A. that the 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 the Lessee without the
prior written consent of the 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 the Lessee in this Section shall also be
applicable to any personal property owned by the Lessee and 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 the
Lessor.
The Lessee agrees to execute such instruments as the Lessor
may from time to time request to perfect the security interest of the
Lessor in any and all rights under this Agreement and the other Lease
Documents, and any and all property of the 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 payment and
performance of the Lease Obligations.
6.4.08 COMPLIANCE WITH LEGAL REQUIREMENTS AND APPLICABLE AGREEMENTS.
The 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 that any of the matters referred to in clauses (a) or (c)
are being duly contested in accordance with the terms of the Lease.
-12-
16
6.4.9 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 that any such Liens are being duly
contested in accordance with the terms of the Facility Lease or the
terms hereof. The 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. 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) the Lessee shall proceed promptly to cause such attachment or lis
pendens to be removed, but the 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 the
Lessor, has been posted as security for such attachment or lis
pendens.
6.4.10 BOOKS AND RECORDS.
The Lessee shall cause to be kept and maintained, and shall
permit the 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 reflecting all financial transactions of
the Lessee (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 connection with said construction in
accordance with the terms of the Project Budget.
6.4.11 INSPECTION OF CONSTRUCTION.
The 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 the 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 the Lessee is not in compliance
herewith (in its sole and absolute discretion), then the Lessor shall
not be obligated to make any further advances under this Agreement to
the Lessee.
-13-
17
6.4.12 NOTICE OF DELAY.
The Lessee shall give to the 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 the Lessee to complete the Project by
the Completion Date.
6.4.13 BONDS.
Performance, payment and xxxx xxxxx, in form and substance
and guaranteed by sureties satisfactory to the Lessor (in its sole and
absolute discretion), shall be furnished to the Lessor in connection
with the Construction Contract in an amount at least equivalent to the
contract sum due under the Construction Contract, naming the Lessor as
a dual obligee, shall be furnished to the Lessor prior to the
commencement of any work pursuant to the Construction Contract.
6.4.14 USE OF PROJECT FUNDS.
The Lessee shall utilize all advances by the 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. The Lessee agrees to hold all advances by the Lessor
hereunder as a trust fund for the purpose of payment of the costs and
expenses permitted under this Agreement.
6.4.15 OCCUPANCY OF THE PROJECT.
The 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. 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.
6.4.16 SELLER'S IMPROVEMENTS.
The Lessee shall cause the Seller's Improvements to be
constructed and completed in accordance with the terms of the Option
Puchase Agreement and the Municipal Improvements Agreement.
-14-
18
6.5 CONSTRUCTION CONTRACT.
Upon the full execution of the Construction Contract, it
shall be binding upon the parties thereto in accordance with the terms
thereof and shall thereafter remain in full force and effect. All of
the parties to the Construction Contract shall faithfully perform all
of their obligations thereunder.
7. ADVANCES OF PROJECT FUNDS
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 the Lessee's right to receive any of the
proceeds of the Project Funds, there shall have been furnished to the Lessor:
A. An owner's title insurance policy in form and substance
satisfactory to the Lessor, in its sole and absolute
discretion, issued by a title insurance company or companies
satisfactory to the Lessor (the "Title Company") with such
endorsements, reinsurance and/or co-insurance as the Lessor
may require, insuring the 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 the 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 the 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 the Lessor, will not exceed the total amount set
forth in the Project Budget;
E. Such evidence as the Lessor may require that the Lessee's
representations and warranties contained herein and in all of
the other Lease Documents are true and correct in every
material respect;
-15-
19
F. Such evidence as the Lessor may require as to the
satisfaction of such of the terms and conditions of this
Agreement and of the other Lease Documents as may by their
nature be satisfied prior to the making of such advance;
G. Such evidence as the Lessor may require that all outstanding
Impositions pertaining to the Leased Property have been paid
in full;
H. A current instrument survey, satisfactory in form and content
to the 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 executed Architect's Contract,
all major subcontracts in effect with respect to the Project,
the form of Construction Contract to be executed by the
Developer and the General Contractor, as well as all
receipted bills paid by the Lessee or the Developer to the
General Contractor and the Architect for goods and/or
services rendered with respect to the Project prior to the
date hereof;
J. True and correct copies of (I) the Project Budget and (II)
the Project Plans, each of which shall be in form and content
satisfactory to the Lessor (in its sole and absolute
discretion);
K. 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 I,
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 the Lessor may
require;
L. Opinions, in forms satisfactory to the Lessor (in its sole
and absolute discretion), from the 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 those provisions of applicable zoning
and other land-use Legal Requirements relating to the use of
the Leased Property and the Project for the Primary Intended
Use; (III) the valid issuance of the Certificate of Need and
all other Permits required for the construction of the
Project, the continuing effectiveness of said Certificate of
Need and other Permits and the Lessee's and Project's
-16-
20
compliance therewith and (IV) such other matters as the
Lessor may reasonably request (collectively, the
"Opinions")];
M. Payment of the Leasehold Improvement Fee (subject, however,
to the provisions of Section 3 hereof);
N. 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 that 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);
O. Such evidence as the Lessor may require that there has been
no material adverse change in the financial condition and
strength of the Lessee, the Guarantor and the Developer, 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;
P. Such evidence as the Lessor may require that the General
Contractor and the Architect maintain adequate insurance, as
determined in the Lessor's reasonable discretion;
Q. [Intentionally Deleted];
R. [Intentionally Deleted]; and
S. A fully executed and authorized Architect's Assignment, in
form and substance satisfactory to the Lessor.
7.2 THE LESSOR'S RIGHT TO ADVANCE THE PROJECT FUNDS.
Without at any time waiving any of the Lessor's rights hereunder, the
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 the Lessor's obligation to make such advance, and the Lessee
agrees to accept such advance as the Lessor may elect to make. The making of
any advance hereunder shall not constitute an approval or acceptance by the
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) Business Days before the date upon which an advance
is requested, the Lessee
-17-
21
shall give notice to the Lessor, specifying the total advance which will be
desired, accompanied by:
A. Itemized requisitions for advances or, at the Lessee's
option, for reimbursements to the Lessee for prepaid items,
signed by the Lessee, the Architect and the General
Contractor on A.I.A. Forms G702, G702A or G703 or such other
form(s) as the Lessor may reasonably require (together with
copies of invoices or receipted bills relating to items
covered by such requisitions when so requested by the
Lessor). All such requisitions shall include an
indemnification of the Lessor by the Developer, the General
Contractor and the Lessee, jointly and severally, to the
extent such indemnification is available from the General
Contractor upon the Lessee's best efforts to obtain such
indemnification, against any and all claims of any
subcontractors, laborers and suppliers;
B. A certificate executed by the Lessee substantially in the
form attached hereto as EXHIBIT J;
C. A certificate executed by the General Contractor
substantially in the form attached hereto as EXHIBIT K;
D. A certificate executed by the Architect substantially in the
form attached hereto as EXHIBIT L.
E. At the Lessor's request, certificates executed by the
Consultants in such form as the Lessor may reasonably
require;
F. An endorsement of the Title Policy issued by the Title
Company, satisfactory in form and substance to the 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 the Lessee under this Agreement and subject to
no additional exceptions other than the Permitted
Encumbrances;
G. If and when reasonably requested by the 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 the Lessor, an updated
Surveyor's Certificate substantially in the form attached
hereto as EXHIBIT H and/or
-18-
22
updated Engineer's/Architect's Certificate substantially in
the form attached hereto as EXHIBIT I;
I. If and when reasonably requested by the Lessor, updated
Opinions from the Lessee's counsel and the Guarantor's
counsel (in form and substance satisfactory to the Lessor in
its sole and absolute discretion);
J. If and when requested by the Lessor, satisfactory evidence
that the Project 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 reasonably satisfactory to
the Lessor, in its sole and absolute discretion, it shall be
a condition to the making of any further advance hereunder
that the Lessee will provide the Lessor with such financial
guaranties (whether in the form of a bond, cash deposit,
letter of credit or otherwise) as are acceptable to the
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 the Lessor requires a cash
deposit from the Lessee, the Lessee shall deposit with the
Lessor such funds, to be held in an interest bearing account
with the interest accruing thereon to the benefit of the
Lessee, which, together with such unadvanced Project Funds,
shall be sufficient to pay all of the aforesaid costs. All
funds so deposited with the Lessor, along with the proceeds
thereof, shall be disbursed prior to any further advance
hereunder;
K. A certification of work completed by any major contractor
working on the Project, together with a statement of the
payment due therefor;
L. Partial lien waivers from the General Contractor, all other
contractors and all subcontractors and suppliers for all work
theretofore performed;
M. If and when reasonably requested, the Lessee shall deliver to
the Lessor an updated Survey of the Leased Property,
acceptable to the Lessor (in its reasonable discretion); and
N. Such evidence as the Lessor may require that there has been
no material adverse change in the financial condition and
strength of the Lessee, the Developer 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.
The Lessee hereby designates Xxxxx Xxxxxx with authority to approve
requisitions and to execute certificates to be delivered pursuant to Section
7.3B on behalf of the Lessee.
-19-
23
7.4 ADVANCES BY WIRE TRANSFER.
All advances hereunder shall be made by wire transfer of funds into a
bank account maintained by either the Lessee or an authorized agent of the
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 the 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 and no advances of Project
Funds may be used to refund any part of expenditures from the
Lessee's own resources on the Project, except to the extent
that any Project Funds are used to reimburse the Lessee for
out-of-pocket expenses incurred by it in accordance with the
terms of the Project Budget. No funds advanced by the 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, partner, 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 any member of the Leasing Group, or any
employee thereof, except to the extent that Project 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 covered by prior requisitions,
(II) the cost of all equipment, fixtures and furnishings
included within the Project Budget, but not incorporated into
any contract approved by the Lessor, which have been delivered
to the Leased Property for incorporation into the Project and
have not been covered by prior requisitions; provided, that,
in the Lessor's judgment, such materials are suitably stored,
secured and insured and that the Lessee can furnish the Lessor
with evidence satisfactory to the Lessor of the Lessee's
unencumbered title thereto and (III) approved soft costs,
which have not been covered by prior requisitions.
C. All requisitions shall be subject to a ten percent (10%)
retainage for the completion of the Project. 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
the 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
-20-
24
of the Project or the receipt of such evidence as may be
required to assure the 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, could
constitute, a Lease Default shall have occurred and be
continuing.
E. Without at any time waiving any of the Lessor's rights under
this Agreement, the Lessor shall always have the right to
make an advance hereunder without satisfaction of each and
every condition upon the Lessor's obligation to make an
advance under this Agreement, and the Lessee agrees to accept
any advance which the Lessor may elect to make under this
Agreement. Notwithstanding the foregoing, the 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 the 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 the Lessee in which
a claim is made as to whether the Project does so comply, the
Lessor shall have the right to defer any advance of Project
Funds which the Lessor would otherwise be obligated to make
until such time as any such claim is finally disposed of
favorably to the position of the Lessee, without any
obligation on the part of the 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, the 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 the 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, the Lessor
shall also have the right, at its option, to treat the
commencement of such action as a Lease Default, for which the
Lessor shall have all rights herein specified for a Lease
Default. As aforesaid, the 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 the Lessor in making such election or
any continuation by the Lessor in making advances under this
Agreement.
-21-
25
In all events, the Lessee agrees to notify the 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
will be made by the Lessor to the Lessee pursuant to this
Agreement.
H. No inspections or any approvals of the Project during or
after construction shall constitute a warranty or
representation by the 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 the Lessor
(including, without limitation, the Consultants) are
performed solely for the benefit of the Lessor to assure the
payment and performance of the Obligations and are not for
the benefit of the Lessee or the benefit of any other Person.
I. Notwithstanding anything to the contrary hereunder or under
any of the other Lease Documents, the Lessor shall have no
obligation to make any advance hereunder, other than the
first advance on the date hereof, unless and until the Lessee
delivers to the Lessor (I) a fully executed Construction
Contract, (II) true and correct copies of all payment,
performance and completion bonds required pursuant to Section
6.4.13 hereof and (III) a fully executed Construction
Assignment in form and substance satisfactory to the Lessor.
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, the
Lessee shall provide the 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 personal care home consisting of 56 units with
62 beds, (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 the 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 the Lessor.
-22-
26
8. THE LESSOR'S RIGHT TO MAKE PAYMENTS AND TAKE OTHER ACTION
The Lessor may, after ten (10) Business Days' prior notice to the
Lessee of its intention so to do (except in an emergency when such shorter
notice shall be given as is reasonable under the circumstances), 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 the Lessor, or its attorneys, it is expedient to pay, and may take
such other and further action which in the reasonable opinion of the Lessor is
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 the Lessor
pursuant to the Lease Documents and (C) the performance of all obligations
under the Lease Documents. The Lessor, in its sole and absolute discretion, may
charge any such payments against any advance that may otherwise be due
hereunder to the Lessee or may otherwise collect such amounts from the Lessee,
and the Lessee agrees to repay to the Lessor all such amounts, notwithstanding
that the aggregate indebtedness of the Lessee to the Lessor hereunder may
exceed the aggregate amount the Lessor has agreed to advance hereunder as the
Project Funds. Any amount which is not so charged against advances due
hereunder and all costs and expenses reasonably incurred by the Lessor in
connection therewith (including, without limitation, attorneys' fees and
expenses and court costs) shall be a demand obligation of the 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 the 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 the Lessee fails to observe or cause to be observed any of the
provisions of this Section and such failure continues beyond any applicable
notice or cure period provided for under this Agreement, the 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 the Lessee hereby waives any
claim against the 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 the 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
the Lessee to the 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 the Lessee secured thereunder and, if not paid within
ten (10) days after demand, shall thereafter, to the extent permitted by
applicable law, bear interest at the Overdue Rate until the date of payment.
-23-
27
9. INSURANCE; CASUALTY; TAKING
9.1 GENERAL INSURANCE REQUIREMENTS.
The Lessee, at its sole cost and expense, shall 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"), the Lessee shall give immediate written
notice thereof to the 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 the Lessor to exercise its remedies hereunder and under any
of the other Lease Documents:
A. any failure of the 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 the Lessor to the 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) the Lessee
commences the cure thereof within thirty (30) days after the
giving of such notice by the Lessor to the Lessee, (II) the
Lessee continuously prosecutes such cure to completion, (III)
such cure is completed within ninety (90) days after the
giving of such notice by the Lessor to the Lessee and (IV)
such Failure to Perform does not impair the Lessor's rights
with respect to the Leased Property or otherwise impair the
Collateral or the 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;
-24-
28
D. if any representation, warranty or statement contained herein
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, other than those contained in
Sections 5.2, 5.5 and in the third sentence of Section 5.6,
is a continuing representation or warranty pursuant to
Section 6.3;
E. Without limiting any of the terms of the other Lease
Documents, if any representation, warranty or statement
contained in Section 5.2, 5.5 or in the third sentence of
Section 5.6 proves to be untrue in any material respect at
any time during the Term after the date when made, beyond the
notice and grace periods set forth in Section 10(B).
F. 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 the 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 the 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
G. 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 the
Lessor, which may be exercised at any time after an Event of Default shall have
occurred, the 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 the 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, the 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 the Lessor has agreed to
advance hereunder); and the Lessee agrees to pay to the 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
the Lessor in connection with the completion of the Project), and, in addition
thereto, the Lessee agrees to pay to the Lessor (as Rent under the
-25-
29
Facility Lease), for services in connection with said completion of the
Project, such additional sums as shall compensate the Lessor for the time and
effort the Lessor and its employees shall have expended in connection
therewith. The Lessor is authorized, but not obligated in any event, to do all
such things in connection with the construction of the Project as the 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
the Lessee to the 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 the Lessor's own name or in the name of the
Lessee, and the Lessee hereby grants the 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 the Lessee may suffer and shall survive the
same. The power of attorney conferred on the Lessor by the provisions of this
Section 11 is provided solely to protect the interests of the Lessor and shall
not impose any duty on the Lessor to exercise any such power and neither the
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 the 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 for any
period of time longer than the Lessor shall see fit (in its sole and absolute
discretion), and the Lessor may thereafter, at any time, abandon its efforts
and refuse to make further payments for the account of the Lessee, whether or
not the Project has been completed.
In addition, at the 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 and 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 herein by reference, mutatis, mutandis, and shall be
applicable to this Agreement as if set forth in full herein.
In the event of any conflict between the provisions hereof and the
provisions of the Lease, the provisions of the Facility Lease shall control.
-26-
30
EXECUTED as a sealed instrument as of the day and year first above
mentioned.
WITNESS: LESSOR:
MEDITRUST ACQUISITION CORPORATION II,
a Delaware corporation
---------------------------- By:
Name: Name:
Title:
WITNESS: LESSEE:
-------------------------------
---------------------------- By:
Name: Name:
Title:
-27-
31
EXHIBIT E
DEFINITIONS
AFFILIATE: As defined in the Facility Lease.
AFFILIATED PARTY SUBORDINATION AGREEMENT: As defined in Section 4.1.
AGREEMENT REGARDING RELATED LEASE TRANSACTIONS: As defined in Section 4.1.
ARCHITECT: As defined in Section 1.6.
ARCHITECT'S ASSIGNMENT: As defined in Section 4.1.
ARCHITECT'S CONTRACT: As defined in Section 1.6.
ASSIGNMENT AGREEMENT: As defined in the Facility Lease.
BALANCED CARE GUARANTY: As defined in Section 4.1.
BUSINESS DAY: As defined in the Facility Lease.
CASH COLLATERAL: As defined in the Deposit Pledge Agreement.
CASUALTY: As defined in Section 9.2.
COLLATERAL: As defined in Section 4.3.
COMPLETION DATE: As defined in Section 1.8.
CONDEMNATION: As defined in Section 9.2.
CONSTRUCTION ASSIGNMENT: As defined in Section 4.1.
CONSTRUCTION CONTRACT: As defined in Section 1.7.
CONSULTANTs: Collectively, the architects, engineers, inspectors, surveyors and
other consultants that are engaged, from time to time, by the Lessor to perform
services for the Lessor in connection with the construction of the Project
contemplated under this Agreement.
CONTRACTS: As defined in the Facility Lease.
DEPOSIT PLEDGE AGREEMENT: As defined in Section 4.1.
DEVELOPER: As defined in Section 1.4.
32
DEVELOPER GUARANTY: As defined in Section 4.1.
DEVELOPER PERMITS ASSIGNMENT: As defined in Section 4.1.
DOLLARS: Lawful money of the United States of America.
ENVIRONMENTAL INDEMNITY AGREEMENT: As defined in Section 4.1.
EVENT OF DEFAULT: As defined in Section 10.
EXISTING IMPROVEMENTS: As defined in Section 1.2.
FACILITY LEASE: As defined in Section 1.3.
FAILURE TO PERFORM: As defined in Section 10.
FINANCING STATEMENTS: Uniform Commercial Code financing statements evidencing
the security interests granted to the Lessor in connection with the Lease
Documents.
GENERAL CONTRACTOR: As defined in Section 1.7.
GOVERNMENTAL AUTHORITIES: As defined in the Facility Lease.
GUARANTOR: Balanced Care Corporation, a Delaware corporation, and its
successors and assigns.
GUARANTIED OBLIGATIONS: As defined in the Guaranties.
GUARANTIES: Collectively, the Balanced Care Guaranty and the Developer
Guaranty.
IMPOSITIONS: As defined in the Facility Lease.
IMPROVEMENTS: As defined in Section 1.4.
INSURANCE REQUIREMENTS: As defined in the Facility Lease.
LAND: As defined in Section 1.2.
LEASE DEFAULT: The occurrence of a default or breach of condition continuing
beyond the expiration of any applicable notice and/or grace period, if any,
under the terms of any of the Lease Documents.
LEASE DOCUMENTS: As defined in Section 4.1.
LEASE OBLIGATIONS: As defined in Section 4.2 and, including, without
limitation, the Guarantied Obligations.
33
LEASED PROPERTY: As defined in the Facility Lease.
LEASEHOLD IMPROVEMENT FEE: THIRTY-EIGHT THOUSAND TWO HUNDRED SIXTY-
NINE AND TEN/100 DOLLARS ($38,269.10).
LEASING GROUP: As defined in the Facility Lease.
LEGAL REQUIREMENTS: As defined in the Facility Lease.
LESSEE: As defined in the preamble of this Agreement and its successors and
assigns.
LESSEE PERMITS ASSIGNMENT: As defined in Section 4.1.
LESSOR: As defined in the preamble of this Agreement and its successors and
assigns.
LESSOR'S ADDRESS: 000 Xxxxx Xxxxxx, Xxxxxxx Xxxxxxx, XX 00000 or such other
address as the Lessor shall designate in writing.
LIEN: With respect to any real or personal property, any mortgage, easement,
restriction, lien, pledge, collateral assignment, hypothecation, charge,
security interest, title retention agreement, levy, execution, seizure,
attachment, garnishment or other encumbrance of any kind in respect of such
property, whether or not xxxxxx, vested or perfected.
MAJOR SUBCONTRACTORS: As defined in Section 6.4.05.
MUNICIPAL IMPROVEMENTS AGREEMENT: That certain Municipal Improvements Agreement
dated as of February 4, 1997 by and between the Seller and the Township.
OBLIGATIONS: Collectively, the Lease Obligations and the Related Party
Obligations.
OPINIONS: As defined in Section 7.1.
OVERDUE RATE: As defined in the Facility Lease.
PERMITS: As defined in the Facility Lease.
PERMITS ASSIGNMENTS: Collectively, the Lessee Permits Assignment and the
Developer Permits Assignment.
PERMITTED ENCUMBRANCES: As defined in the Facility Lease.
PERMITTED PRIOR SECURITY INTERESTS: As defined in the Facility Lease.
PERSON: As defined in the Facility Lease.
PLEDGE AGREEMENT: As defined in Section 4.1.
34
PRIMARY INTENDED USE: The use of the Project as a personal care home with
______________ licensed units and such ancillary uses as are permitted by
applicable law and may be necessary in connection therewith or incidental
thereto.
PROJECT: As defined in Section 1.4.
PROJECT BUDGET: As defined in Section 1.7.
PROJECT FUNDS: As defined in Section 1.5.
PROJECT PLANS: As defined in Section 1.6.
PURCHASE OPTION AGREEMENT: As defined in the Facility Lease.
RECEIVABLES: As defined in the Security Agreement.
RELATED PARTY AGREEMENT: As defined in the Facility Lease.
RELATED PARTY OBLIGATIONS: As defined in the Facility Lease.
RENT: As defined in the Facility Lease.
SECURITY AGREEMENT: As defined in Section 4.1
SELLER: As defined in the Facility Lease.
SELLER'S IMPROVEMENTS: As defined in the Option Purchase Agreement.
SUBSIDIARY: As defined in the Facility Lease.
SURVEY: As defined in Section 17.1.
SURVEYOR'S CERTIFICATE: As defined in Section 17.1.
TANGIBLE PERSONAL PROPERTY: As defined in the Facility Lease.
TERM: As defined in the Facility Lease.
TITLE COMPANY: As defined in Section 7.1.
TITLE POLICY: As defined in Section 7.1.
TOWNSHIP: The Township of ___________________.
UCC: Uniform Commercial Code as adopted in the Commonwealth of Pennsylvania.
35
SCHEDULE TO EXHIBIT 10.11 FILED PURSUANT TO INSTRUCTION 2 TO ITEM 601(a) OF
REGULATION S-K
LEASEHOLD IMPROVEMENT AGREEMENT
-------------------------------
PROJECT PARTIES DATE OF LESSOR'S SUBSTANTIAL
------- ------- ------- -------- -----------
AGREEMENT INVESTMENT COMPLETION
--------- ---------- ----------
DATE
----
Reading, PA Meditrust Acquisition 2/27/97 $4,217,940.00 8/27/98
Corporation II (Lessor) and
BCC at Reading, Inc. (Lessee)
State College, PA Meditrust Acquisition 8/2/96 $3,637,006.00 2/2/98
Corporation II (Lessor) and
BCC at State College, Inc.
(Lessee)
Allegheny, PA Meditrust Acquisition 8/2/96 $3,637,018.00 2/2/98
Corporation II (Lessor) and
BCC at Altoona, Inc. (Lessee)
Blytheville, AR Meditrust Acquisition 11/1/96 $3,516,500.00 4/30/98
Corporation II (Lessor) and
Balanced Care at Blytheville,
Inc. (Lessee)
Maumelle, AR Meditrust Acquisition 11/1/96 $3,796,500.00 4/30/98
Corporation II (Lessor) and
Balanced Care at Maumelle,
Inc. (Lessee)
Mountain Home, AR Meditrust Acquisition 11/1/96 $3,656,700.00 4/30/98
Corporation II (Lessor) and
Balanced Care at Mountain
Home, Inc. (Lessee)
Pocahontas, AR Meditrust Acquisition 11/1/96 $3,455,500.00 4/30/98
Corporation II (Lessor) and
Balanced Care at Pocahontas,
Inc. (Lessee)
Sherwood, AR Meditrust Acquisition 11/1/96 $3,987,000.00 4/30/98
Corporation II (Lessor) and
Balanced Care at Sherwood,
Inc. (Lessee)
36
SCHEDULE TO EXHIBIT 10.11 FILED PURSUANT TO INSTRUCTION 2 TO ITEM 601(a) OF
REGULATION S-K
LEASEHOLD IMPROVEMENT AGREEMENT
-------------------------------
SUBSTANTIAL
DEVELOPMENT LEASEHOLD WORKING CAPITAL DATE OF COMPLETION
PROJECT PARTIES PROJECT BUDGET FEE IMPROVEMENT FEE RESERVE AGREEMENT DATE
------- ------- -------------- ------------ --------------- --------------- --------- ------------
Lima, OH BCC Development and $4,463,373.00 $350,000.00 $9,800.00 $470,000.00 9/30/97 3/31/99
Management Company
(Developer), TC Realty
Corporation I (Lessee) and
Meditrust Acquisition
Corporation II (Lessor)
Mansfield, OH BCC Development and $6,125,618.00 $350,000.00 $13,100.00 $390,000.00 9/30/97 3/31/99
Management Company
(Developer), TC Realty
Corporation II (Lessee) and
Meditrust Acquisition
Corporation II (Lessor)
Scranton, PA BCC Development and $3,705,700.00 $200,000.00 $6,000.00 $297,000.00 9/30/97 3/31/99
Management Company
(Developer), TC Realty
Corporation III (Lessee) and
Meditrust Acquisition
Corporation II (Lessor)
Xenia, OH BCC Development and $8,615,245.00 $450,000.00 $30,500.00 $950,000.00 9/30/97 3/31/99
Management Company
(Developer), TC Realty
Corporation IV (Lessee) and
Meditrust Acquisition
Corporation II (Lessor)
