OGDEN, UTAH
LEASEHOLD IMPROVEMENT AGREEMENT
AMONG
MEDITRUST ACQUISITION CORPORATION I
AND
EMERITUS PROPERTIES I, INC.
LEASEHOLD IMPROVEMENT AGREEMENT
THIS LEASEHOLD IMPROVEMENT AGREEMENT is
made as of April 30, 1997 by and among
EMERITUS PROPERTIES I, INC., a Washington
corporation (the "Lessee"), and MEDITRUST
ACQUISITION CORPORATION I, a Massachusetts
corporation (the "Lessor").
1. BACKGROUND
1.1 LESSEE.
Lessee is a corporation which is a
wholly-owned Subsidiary of the Guarantor (as
hereinafter defined). The Guarantor is a
corporation the stock of which is publicly
traded on the American Stock Exchange.
1.2 THE LAND AND EXISTING IMPROVEMENTS.
Lessor is the owner of a certain parcel
of land located in Ogden, ▇▇▇▇▇ County, Utah
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 ▇▇▇▇▇ County, Utah real
estate records.
1.4 PROJECT.
Lessee proposes to construct an 82 unit
164 bed assisted living facility and other
improvements, including, without limitation,
accessory parking and landscaping on the Land
(collectively, the "Improvements"). The Land
and the Improvements are collectively
referred to herein as the "Project".
1.5 LESSOR'S AGREEMENT TO FUND THE
PROJECT AND LESSEE'S AGREEMENT TO SUPERVISE
THE PROJECT.
Lessee and Lessor have agreed that the
Project will be a benefit to the premises
demised under the Facility Lease and to
Lessee's and Lessor's respective interests
therein. Lessor and Lessee have further
agreed that, pursuant to, and in accordance
with, the terms and conditions of this
Agreement, Lessor shall fund an amount not to
exceed Six Million Three Hundred Two Thousand
Eight Hundred Seventy-Four Dollars
($6,302,874) 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 by Architects' ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Willows, PLLC (the "Architect") pursuant to
the contract dated January 13, 1997 by and
between Lessee and the Architect (the
"Architect's Contract").
1.7 CONSTRUCTION CONTRACTS.
All of the Improvements are to be
constructed pursuant to a guaranteed maximum
contract (the "Construction Contract") to be
delivered as provided herein by and between
Lessee and ▇▇▇▇▇▇▇▇▇ Construction, dated
April 22, 1997 (the "General Contractor").
1.8 SCHEDULE OF WORK AND COMPLETION
DATE; SCHEDULE OF DRAWS.
The work necessary to complete and fully
equip the Project is to be (a) undertaken and
completed in accordance with the schedule of
work and schedule of values ("Schedules") to
be delivered as provided herein; and (b)
substantially completed by the first
anniversary of the date hereof (the
"Completion Date") in accordance with the
terms hereof.
1.9 PROJECT BUDGET.
Lessee has submitted, or shall submit in
accordance with the terms hereof prior to the
making of the first advance which includes
amounts to be expended on the construction or
equipping of the Improvements), to Lessor a
line item budget (the "Project Budget"), for
the design and construction of the Project,
including (a) a breakdown of construction
costs (itemized as to trade category,
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subdivision of the work to be performed and
the names of each contractor), (b) a
breakdown of all soft costs in connection
with the construction of the Project,
including, without limitation, costs for such
items as real estate taxes, legal and
accounting fees, survey costs, permits and
inspection fees, insurance premiums,
architect's and engineer's fees, marketing,
management, leasing and advertising expenses,
and all amounts due in connection with the
Advance of Project Funds pursuant to this
Agreement, (c) a projected draw schedule and
(d) a projected progress schedule for the
construction of the Project.
1.10USE OF PROJECT FUNDS.
The Project Funds are to be used, to the
extent sufficient therefor, solely for the
payment of Project costs set forth in the
Project Budget.
1.11PROJECT 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.
1.12GUARANTIES 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.
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3. INTENTIONALLY OMITTED.
4. LEASE DOCUMENTS; COLLATERAL SECURITY
4.1 LEASE DOCUMENTS.
The Project Funds shall be advanced,
evidenced, administered and governed by all
of the terms, conditions and provisions of
each of the following:
A. a Fourth Amended and Restated
Agreement Regarding Related
Transactions (Development) dated
August 1, 1996 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");
E. a Security Agreement of even date
by and between Lessee and Lessor
(the "Security Agreement") and
related UCC Financing Statements;
F. a Completion Guaranty of even date
executed by the Guarantor for the
benefit of Lessor guarantying the
completion of the Project and the
satisfaction of the other
Guarantied Obligations (the
"Completion Guaranty");
G. a Guaranty of Lease Obligations of
even date executed by the Guarantor
for the benefit of Lessor
guarantying the payment and
performance of the Lease
Obligations (the "Guaranty of Lease
Obligations");
H. an Environmental Indemnity
Agreement of even date by and among
Lessee, the Guarantor and Lessor
(the "Environmental Indemnity
Agreement");
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I. a Deposit Pledge Agreement of even
date by and between Lessee and
Lessor (the "Deposit Pledge
Agreement");
J. a Group Two Negative Pledge
Agreement (Development) dated April
15, 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").
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4.3 COLLATERAL SECURITY.
The Lease Obligations shall be secured
by the following:
A. a perfected first priority security
interest in all Permits and
Contracts pursuant to the Permits
Assignment;
B. a security interest in Tangible
Personal Property, and certain
other Collateral and a security
interest in Receivables, all
pursuant to the Security Agreement;
C. the Completion Guaranty;
D. the Guaranty of Lease Obligations;
E. the Environmental Indemnity;
F. a perfected first priority interest
in the Cash Collateral pursuant to
the Deposit Pledge Agreement;
G. all other security interests in
such other property for which
provision is made in the Lease
Documents or at law or in equity;
and
H. certain other Related Party
Agreements.
All of the property in which security
interests are granted as described in items
(A) through (H) above are referred to herein
as the "Collateral".
5. REPRESENTATIONS AND WARRANTIES
In order to induce Lessor to advance the
Project Funds pursuant to the terms and
conditions of this Agreement, Lessee
represents and warrants to Lessor that:
5.1 ARCHITECT'S CONTRACT AND
CONSTRUCTION CONTRACT.
The Architect's Contract and the
Construction Contract have been validly
executed by, and are binding upon Lessee and
are in full force and effect in accordance
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with the terms thereof as of the date hereof.
All of the parties to the Architect's
Contract Construction Contract have
faithfully performed all of their respective
obligations thereunder to the extent accrued
as of the date hereof, and none of the
parties to the foregoing instruments has
asserted any claim of default thereunder and
Lessee has no reason to believe that such
agreements have not been validly executed by
and binding upon the other parties thereto;
5.2 PROJECT PLANS.
The two (2) copies of the Project Plans
delivered to Lessor by Lessee (a) are true
and correct and satisfactory to Lessee and
(b) have been filed with and approved by all
appropriate Governmental Authorities. All
necessary Permits relating to the Project
Plans to be issued or granted by any
applicable Governmental Authority having or
claiming jurisdiction over the Leased
Property which can be obtained in the
ordinary course as of the date hereof have
been obtained and all such Permits are in
full force and effect, are not subject to any
unexpired appeal periods or any appeals or
challenges which have not been fully resolved
in favor of Lessee, and do not contain any
conditions or terms relating to the Leased
Property which have not been fully satisfied
or which will not be fully satisfied by the
completion of the construction of the Project
(in accordance with the Project Plans and the
terms and provisions of this Agreement).
Furthermore, the Project Plans are the plans
and specifications which have been approved
in writing by Lessor, any construction
heretofore performed on the Project has been
performed in accordance with the Project
Plans and all future construction on the
Project shall be performed in accordance with
the Project Plans, as the same may be amended
or modified from time in accordance with
Section 6.3.2 hereof, and the terms and
conditions of this Agreement. There are no
structural defects in the Project of which
Lessee has been advised or of which Lessee
has notice or knowledge except as otherwise
described in writing to Lessor or actually
known by Lessor. Lessee has not received any
notice claiming that, and Lessee has no
knowledge that, the Project Plans violate any
Legal Requirement;
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5.3 PRIOR CONSTRUCTION WORK.
No Person has performed any construction
work or furnished any services in connection
with any construction carried on or to be
carried on at the Leased Property who or
which remains unpaid at the time of execution
of this Agreement, except as indicated in the
requisition submitted simultaneously herewith
or otherwise expressly approved by Lessor
and, if applicable, the Other Permitted Uses;
5.4 SUITABILITY OF PROJECT PLANS.
The Project Plans provide for the
construction and renovation of all buildings
and related improvements necessary, both
legally and practically, for the construction
of the Project in accordance with the terms
of this Agreement and, after the completion
of the construction thereof, for the
operation of the Project for its Primary
Intended Use;
5.5 COMPLIANCE WITH LEGAL REQUIREMENTS
AND APPLICABLE AGREEMENTS.
Upon the completion of construction of
the Project, which shall be constructed in
accordance with the Project Plans and the
terms and provisions of this Agreement, the
Project shall be in compliance with (a) all
Legal Requirements; (b) all Permits and
Contracts and (c) all 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
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satisfied by the completion of the
construction of the Project (if constructed
in accordance with the Project Plans and the
terms and provisions of this Agreement).
There is no action pending, or, to the best
knowledge and belief of Lessee, recommended
by the applicable Governmental Authority
having jurisdiction thereof, either to
revoke, repeal, cancel, modify, withdraw or
suspend any such Permit or Contract relating
to the construction of the Project, or any
other action of any other type which would
have a material adverse effect on the
Project. All other Permits and Contracts
required for the completion of the
construction of the Project and the operation
of the Facility are described on SCHEDULE 5.6
annexed hereto and Lessee has no reason to
believe such Permits and Contracts shall not
be obtainable as and when needed.
5.7 FIRST ADVANCE.
As of the date of the first advance of
Project Funds to Lessee pursuant to this
Agreement, the amount of the money expended
by Lessee on account of the construction of
the Project in accordance with the Project
Plans and the items listed on Project Budget
will not be less than the amount of such
first advance.
5.8 VALID AND BINDING.
Lessee is duly authorized to make and
enter into all of the Lease Documents to
which Lessee is a party and to carry out the
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
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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.
5.10CONSENTS AND APPROVALS.
Except as already obtained or filed or
as reasonably expected to be obtained in the
ordinary course of business prior to or upon
the Completion of the Project, as the case
may be, no consent or approval or other
authorization of, or exemption by, or
declaration or filing with, any Person and no
waiver of any right by any Person is required
to authorize or permit, or is otherwise
required as a condition of the execution,
delivery and performance of its obligations
under the Lease Documents, the Construction
Contract or the Architect's Agreement by any
member of the Leasing Group or as a condition
to the validity (assuming the due
authorization, execution and delivery by
Lessor of the Lease Documents to which it is
a party) and the priority of any Liens
granted to Lessor under the Lease Documents,
except the filing of the Financing
Statements.
5.11PENDING 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
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in any material adverse change in the
business, prospects, condition, affairs or
operations of any member of the Leasing Group
or the Leased Property (including, without
limitation, any action to revoke, withdraw or
suspend any Permit necessary or desirable for
the construction of the Project for its
Primary Intended Use.
(b) No member of the Leasing Group has
received any notice of any claim, requirement
or demand of any Governmental Authority, to
take action so as to make the Project or the
Leased Property conform to or comply with any
applicable Legal Requirement.
6. COVENANTS
6.1 COLLECTION AND ENFORCEMENT COSTS.
Upon demand, Lessee shall reimburse
Lessor for all costs and expenses, including,
without limitation, attorneys' fees and
expenses and court costs, paid or reasonably
incurred by Lessor in connection with the
collection of any sum due hereunder, or in
connection with the enforcement of any of
Lessor's rights or any member of the Leasing
Group's obligations under this Agreement or
any of the other Lease Documents. Any amount
due and payable to Lessor pursuant to the
provisions of this Section shall be a demand
obligation and, to the extent permitted by
law, shall be added to the Lease Obligations
and shall be secured by the Liens created by
the Lease Documents as fully and effectively
and with the same priority as every other
obligation of Lessee secured thereby and, if
not paid within ten (10) days after demand,
shall thereafter, to the extent permitted by
applicable law, bear interest at the Overdue
Rate until the date of payment. The
obligation of Lessee to pay all costs,
charges and sums due hereunder or under any
of the other Lease Documents shall continue
in full force and effect and in no way shall
be impaired, until the actual payment thereof
to Lessor. In the event of (a) a sale,
conveyance, transfer or other disposition of
the Leased Property, (b) any further
agreement given to secure the payment of the
obligations set forth herein or (c) any
agreement or stipulation extending the time
or modifying the terms of payment set forth
herein, Lessee shall nevertheless remain
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obligated to pay the indebtedness evidenced
by this Agreement, as extended or modified by
any such agreement or stipulation, unless
Lessee is released and discharged from such
obligation by a written agreement executed by
Lessor.
6.2 CONTINUING EFFECT OF REPRESENTATIONS
AND WARRANTIES.
All representations and warranties
contained in this Leasehold Improvement
Agreement shall constitute continuing
representations and warranties which shall
remain true, correct and complete throughout
the Term.
6.3 CONSTRUCTION COVENANTS.
6.3.1COMMENCEMENT 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.
6.3.2QUALITY 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
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Construction Contract and this
Agreement, and both the quality of such
materials and such workmanship shall be
satisfactory to Lessor. Lessee shall
not make any changes in, and shall not
permit the General Contractor or the
Architect to make any changes in, the
quality of such materials, the Project
Plans or the Project Budget, whether by
change order or otherwise, without the
prior written consent of Lessor, in each
instance (which consent may be withheld
in Lessor's reasonable discretion);
provided, however, that such consent
shall not be required for any individual
change which has been approved by the
Architect, which does not materially
affect the structure or exterior of the
Project, and the cost of which does not
exceed TEN THOUSAND DOLLARS ($10,000) or
which changes, in the aggregate, do not
exceed ONE HUNDRED THOUSAND DOLLARS
($100,000) in cost. Notwithstanding the
foregoing, prior to making any change in
Project Plans, copies of all change
orders shall be submitted by Lessee to
Lessor and Lessee shall also deliver to
Lessor evidence satisfactory to Lessor,
in its reasonable discretion, that all
necessary Permits and/or Contracts
required by any Governmental Authority
in connection therewith have been
obtained or entered into, as the case
may be.
6.3.3PROJECT 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.
6.3.4ARCHITECT CERTIFICATES.
Lessee agrees to cause the
Architect to furnish such statements as
to progress and certificates of
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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.
6.3.5INTENTIONALLY DELETED.
6.3.6LESSOR'S CONSULTANT.
Lessee agrees to pay the costs and
expenses reasonably incurred by Lessor
to retain the Consultants to perform
various services to Lessor in connection
with the construction of the Project and
the advances of Project Funds
contemplated hereunder, including,
without limitation, the following:
A. to review and analyze the
Project Plans and advise
Lessor whether the same are
satisfactory for the intended
purposes thereof;
B. to make periodic inspections
of the Leased Property for the
purpose of assuring that
construction performed in
connection with the Project
prior to the date of such
inspection has been completed
in accordance with the Project
Plans and this Agreement;
C. to review Lessee's then
current requisition to
determine whether it is
consistent with the
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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.
6.3.7TITLE 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 ▇▇▇▇ 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
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in connection with any such construction
and, in recognition of the fact that it
is intended that the Project Funds be
used to pay for the costs of the
construction of the Project on behalf of
the Lessor, Lessee agrees that title to
all materials, fixtures and equipment
that are incorporated into the Project
shall automatically pass to Lessor upon
such incorporation without the need for
the execution or delivery of any further
instrument of conveyance.
Notwithstanding the foregoing, in
order to more fully secure Lessor with
reference to all advances of Project
Funds made hereunder, Lessee hereby
conveys to Lessor a security interest in
all of Lessee's right, title and
interest in materials on the Leased
Property which are not at any relevant
time incorporated into the Project and
materials, wherever located, intended
for incorporation into the Project.
Lessee agrees:
A. that Lessor shall have all the
rights, with reference to such
security, as a secured party
is entitled to hold with
reference to any security
interest under the UCC;
B. that such security interest
shall cover cash and non-cash
proceeds of such materials;
C. that such materials will not
be held for sale to others or
disposed of by Lessee without
the prior written consent of
Lessor and, if at any time
located on the Leased Property
shall be suitably stored,
secured and insured and
furthermore, shall not be
removed from the Leased
Property; and
D. that such security interest
shall be prior to the rights
of any other Person other than
the Permitted Prior Security
Interests.
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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.
6.3.8COMPLIANCE WITH LEGAL
REQUIREMENTS AND APPLICABLE AGREEMENTS.
Lessee, the Project Plans and the
Leased Property and all uses thereof
(including, without limitation, the
construction of the Project) shall
comply with (a) all Legal Requirements,
(b) all Permits and Contracts, (c) all
applicable by-laws, codes, rules,
regulations and restrictions of the
Board of Fire Underwriters or other
insurance underwriters or similar body
and (d) the Lease Documents, except to
the extent any of the matters
represented in clause (a) or (c) are
being duly contested in accordance with
the terms of the Facility Lease.
6.3.9LIENS.
The Leased Property shall at all
times be free from any attachment,
encumbrance, lis pendens, mechanic's or
materialmen's lien or notice arising
from the furnishing of materials or
labor and, with the exception of the
Permitted Encumbrances, all other Liens
of any kind except to the extent the
same is being duly contested in
accordance with the terms of the
Facility Lease or the terms hereof.
17
Lessee shall not permit the recording of
any notice of contract or mechanic's or
materialmen's lien relating to
construction of the Project or otherwise
affecting the Leased Property except to
the extent the same is being duly
contested in accordance with the terms
of the Facility Lease or the terms
hereof. Notwithstanding the foregoing
provisions of this Section 6.3.09, the
existence of an attachment or lis
pendens for a period not in excess of
thirty (30) days shall not be deemed to
be a default hereunder provided that
(a) there shall be no cessation of
construction of the Project, (b) a Lease
Default has not occurred and (c) Lessee
shall proceed promptly to cause such
attachment or lis pendens to be removed,
but Lessor shall not be obliged to make
any further advance under this Agreement
while such attachment or lis pendens
remains outstanding, unless a bond,
satisfactory to Lessor, has been posted
as security for such attachment or lis
pendens.
6.3.10 BOOKS AND RECORDS.
Lessee shall cause to be kept and
maintained, and shall permit Lessor and
its representatives to inspect at all
reasonable times, accurate books of
accounts in which complete entries will
be made in accordance with GAAP, if
applicable, reflecting all financial
transactions of Lessee relating to the
Project (showing, without limitation,
all materials ordered and received and
all disbursements, accounts payable and
accounts receivable in connection with
the construction of the Project and the
operation of the Leased Property). Such
books and records must accurately
reflect that all funds advanced
hereunder for construction of the
Project have been used solely for the
payment of obligations and expenses
properly incurred in accordance with the
Project Budget.
18
6.3.11 INSPECTION OF
CONSTRUCTION.
Lessor and its representatives
including, without limitation, the
Consultants, shall, at all times as long
as this Agreement remains in effect,
have the right to enter the Leased
Property, upon reasonable notice to
Lessee and at reasonable times (except
in the event of an emergency) for the
purpose of inspecting the Project and
the progress of the work and materials
thereon, and if any such inspection
reveals that Lessee is not in compliance
herewith (in its sole and absolute
discretion), then Lessor shall not be
obligated to make any further advances
under this Agreement to Lessee.
6.3.12 NOTICE OF DELAY.
Lessee shall give to Lessor prompt
written notice of any fire, explosion,
accident, flood, storm, earthquake or
other casualty or strike, lock out, act
of God or interruption of the
construction of the Project which is
reasonably anticipated to interfere with
the ability of Lessee to complete the
Project by the Completion Date.
6.3.13 BONDS.
Performance, payment and ▇▇▇▇
▇▇▇▇▇, 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.
19
Lessee agrees to hold all advances by
Lessor hereunder as a trust fund for the
purpose of payment of the costs and
expenses permitted under this Agreement.
6.3.15 OCCUPANCY OF THE PROJECT.
Lessee shall not permit any
occupancy of the Project (other than
such occupancy as is required in
connection with the construction
thereto) prior to (a) the substantial
completion of that portion of the
Project being occupied and (b) the
issuance by the appropriate Governmental
Authorities of a Certificate of
Occupancy (or its equivalent) permitting
the occupancy of the Project for its
Primary Intended Use and, if applicable,
the Other Permitted Uses. The Project
shall not be deemed to have been
completed unless and until constructed
in accordance with this Agreement and a
Certificate of Occupancy (or its
equivalent) permitting the occupancy of
the Project for its Primary Intended Use
has been issued by the applicable
Governmental Authorities.
7. CONSTRUCTION ADVANCES
7.1 CONDITIONS PRECEDENT TO FIRST
ADVANCE OF PROJECT FUNDS.
Prior to the first advance of Project
Funds contemplated by this Agreement, and as
a condition of Lessee's right to receive any
of the proceeds of the Project Funds, there
shall have been furnished to Lessor:
A. An owner's title insurance policy
in form and substance satisfactory
to Lessor, in its sole and absolute
discretion, issued by a title
insurance company or companies
satisfactory to Lessor (the "Title
Company") with such endorsements,
reinsurance and/or co-insurance as
Lessor may require, insuring
Lessor's fee title to the Leased
Property free from all Liens and
without exception for (i) filed or
unfiled mechanics' liens,
(ii) survey matters, (iii) rights
20
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;
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;
21
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;
▇. ▇▇▇▇▇▇'▇ 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
22
land-use Legal Requirements (except
in such instances in which a
satisfactory title insurance zoning
endorsement has been issued); (iii)
the valid issuance of the
Certificate of Need, if applicable,
and all other Permits required for
the construction of the Project,
the continuing effectiveness of
said Certificate of Need, if
applicable, and other Permits and
Lessee's and Project's compliance
therewith and (iv) such other
matters as Lessor may reasonably
request (collectively, the
"Opinions");
L. Payment 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;
23
P. True and correct copies of all
payment, performance and completion
bonds required pursuant to 6.3.13
hereof;
Q. A fully executed Construction
Assignment, in form and substance
satisfactory to Lessor; and
R. A fully executed and authorized
Architect's Assignment, in form and
substance satisfactory to Lessor.
7.2 LESSOR'S RIGHT TO ADVANCE THE
PROJECT FUNDS.
Without at any time waiving any of
Lessor's rights hereunder, Lessor shall have
the right to make the first advance of a
portion of the Project Funds hereunder
without the satisfaction of each and every
condition precedent to Lessor's obligation to
make such advance, and Lessee agrees to
accept such advance as Lessor may elect to
make. The making of any advance hereunder
shall not constitute an approval or
acceptance by Lessor of any work on the
Project theretofore completed.
7.3 SUBMISSION OF REQUESTS FOR ADVANCES
OF THE PROJECT FUNDS.
Advances under this Agreement shall be
made not more than once each month and at
least ten (10) days before the date upon
which an advance is requested, Lessee shall
give notice to Lessor, specifying the total
advance which will be desired, accompanied
by:
A. Itemized requisitions for advances
or, at Lessee's option, for
reimbursements to Lessee for
prepaid items, signed by Lessee,
the Architect and the General
Contractor on A.I.A. Forms G702,
G702A or G703 or such other form(s)
as Lessor may reasonably require
(together with copies of invoices
or receipted bills relating to
items covered by such requisitions
when so requested by Lessor). All
such requisitions shall include an
indemnification of Lessor by the
24
Architect, the General Contractor
and Lessee, jointly and severally,
to the extent such indemnification
is available from the General
Contractor and the Architect upon
Lessee's best efforts to obtain
such indemnification, against any
and all claims of any
subcontractors, laborers and
suppliers;
B. A certificate executed by Lessee
substantially in the form attached
hereto as EXHIBIT I;
C. A certificate executed by the
General Contractor substantially in
the form attached hereto as EXHIBIT
J;
D. With respect to every other Advance
requested, a certificate executed
by the Architect substantially in
the form attached hereto as EXHIBIT
K.
E. At Lessor's request, certificates
executed by the Consultants in such
form as Lessor may reasonably
require;
F. To the event the Advance is not
clearly subject to effective
coverage, an endorsement of the
Title Policy issued by the Title
Company, satisfactory in form and
substance to Lessor, redating the
Title Policy to the date that the
then current advance will be made,
increasing the coverage afforded by
the Title Policy so that the same
shall constitute insurance in an
amount at least equal to the sum of
the amount of the insurance then
existing under the Title Policy
plus the amount of the then current
advance of Project Funds to be
disbursed to Lessee under this
Agreement and subject to no
additional exceptions other than
the Permitted Encumbrances;
25
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
26
funds, to be held in an interest
bearing account with the interest
accruing thereon to the benefit of
Lessee, which, together with such
unadvanced funds of the Loan, shall
be sufficient to pay all of the
aforesaid costs. All funds so
deposited with Lessor along with
the proceeds thereof, shall be
disbursed prior to any further
advance hereunder and upon
completion of the Project any
remaining funds so deposited or any
unadvanced portion of the Project
Funds, shall be remitted to Lessee;
K. A certification of work completed
by the General Contractor, together
with a statement of the payment due
therefor;
L. Partial lien waivers from the
General Contractor for all work
theretofore performed, and from all
other contractors and all
subcontractors and suppliers for
all work, the cost of which in each
instance exceeds ONE THOUSAND
DOLLARS ($1,000.00), which was the
subject of a requisition in the
immediately preceding month;
M. If and when reasonably requested,
Lessee shall deliver to Lessor an
updated Survey of the Leased
Property, acceptable to Lessor (in
its reasonable discretion);
N. Evidence satisfactory to Lessor (in
its reasonable discretion) that all
materials and other property
furnished by any contractors,
subcontractors, materialmen or
other Persons, the cost of which
will be paid with the proceeds of
the advance to be made by Lessor,
are free and clear of all Liens,
except (a) encumbrances, if any,
(securing indebtedness due to
Persons whose names, addresses and
amounts due to them are identified
to Lessor) that shall be discharged
upon the disbursement of the funds
then being requested, (b) the Liens
27
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, (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 ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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-
28
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.
C. All requisitions for the first
fifty percent (50%) of the Project
Funds shall be subject to a ten
percent (10%) retainage for the
completion of the Project, and no
retainage shall be required with
respect to all requisitions
thereafter. It is understood that
such retainage is intended to
provide a contingency fund to
assure that the construction of the
29
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
30
constitute an approval or
acceptance by Lessor of any work on
the Project theretofore completed.
F. If, while this Agreement is in
effect, a claim is made that the
Project does not comply with any
Legal Requirement or an action is
instituted before any Governmental
Authority with jurisdiction over
the Leased Property or Lessee in
which a claim is made as to whether
the Project does so comply, Lessor
shall have the right to defer any
advance of Project Funds which
Lessor would otherwise be obligated
to make until such time as any such
claim is finally disposed of
favorably to the position of
Lessee, without any obligation on
the part of Lessor to make a
determination of, or judgment on,
the merits of any such claim. For
the purposes of the foregoing
sentence, the term "claim" shall
mean an assertion by any
Governmental Authority or Person as
to which, in each case, Lessor has
made a good faith determination
that the assertion may properly be
made by the party asserting the
same, that the 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
31
from any forbearance by Lessor in
making such election or any
continuation by Lessor in making
advances under this Agreement.
In all events, Lessee agrees to
notify Lessor forthwith upon
learning of the assertion of any
such claim or the commencement of
any such proceedings.
G. It is contemplated that all
advances of the Project Funds made
by Lessor to Lessee will be
pursuant to this Agreement.
H. No inspections or any approvals of
the Project during or after
construction shall constitute a
warranty or representation by
Lessor or any of the Consultants as
to the technical sufficiency,
adequacy or safety of any structure
or any of its component parts,
including, without limitation, any
fixtures, equipment or furnishings,
or as to the subsoil conditions or
any other physical condition or
feature pertaining to the Leased
Property. All acts, including any
failure to act, relating to the
Leased Property by any agent,
representative or designee of
Lessor (including, without
limitation, the Consultants) are
performed solely for the benefit of
Lessor to assure the payment and
performance of the Obligations and
are not for the benefit of Lessee
or the benefit of any other Person.
7.6 COMPLETION OF THE PROJECT.
Upon the completion of the construction
of the Project in accordance with the Project
Plans and the terms and provisions of this
Agreement, Lessee shall provide Lessor with
(A) true, correct and complete copies of (i)
a final unconditional Certificate of
Occupancy (or its equivalent) issued by the
appropriate governmental authorities,
permitting the occupancy and use of the
Project for its Primary Intended Use and (ii)
all Permits issued by the appropriate
Governmental Authorities which are necessary
32
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), unless
Lessee demonstrates the same has already been
paid, pay any sums due or claimed to be due
for labor or materials furnished in
connection with the ownership, construction,
development, maintenance, management, repair,
use or operation of the Leased Property, and
any other sums which in the reasonable
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
33
applicable law, shall be added to the Lease
Obligations and secured by the Liens created
by the Lease Documents, as fully and
effectively and with the same priority as
every other obligation of Lessee thereunder
and, if not paid within ten (10) days after
demand, shall thereafter, to the extent
permitted under applicable law, bear interest
at the Overdue Rate until the date of
payment.
If Lessee fails to observe or cause to
be observed any of the provisions of this
Agreement and such failure continues beyond
any applicable notice or cure period provided
for under this Agreement, Lessor or a
lawfully appointed receiver of the Leased
Property, at their respective options, from
time to time may perform, or cause to be
performed, any and all repairs and such other
work as they deem necessary to bring the
Leased Property into compliance with the
provisions of this Agreement may enter upon
the Leased Property for any of the foregoing
purposes, and Lessee hereby waives any claim
against Lessor or such receiver arising out
of such entry or out of any other act carried
out pursuant to this Section. All amounts so
expended or incurred by Lessor and by such
receiver and all costs and expenses
reasonably incurred in connection therewith
(including, without limitation, attorneys'
fees and expenses and court costs), shall be
a demand obligation of Lessee to Lessor or
such receiver, and, to the extent permitted
by law, shall be added to the Obligations and
shall be secured by the Liens created by the
Lease Documents as fully and effectively and
with the same priority as every other
obligation of Lessee secured thereunder and,
if not paid within ten (10) days after
demand, shall thereafter, to the extent
permitted by applicable law, bear interest at
the Overdue Rate until the date of payment.
9. INSURANCE; CASUALTY; TAKING
9.1 GENERAL INSURANCE REQUIREMENTS.
Lessee shall at its sole cost and
expense keep the Leased Property and the
business operations conducted thereon insured
as required under the Facility Lease.
34
▇.▇.▇▇▇▇ OR OTHER CASUALTY OR
CONDEMNATION.
In the event of any damage or
destruction to the Leased Property by reason
of fire or other hazard or casualty (a
"Casualty") or a taking by power of eminent
domain or conveyance in lieu thereof of all
or any portion of the Leased Property (a
"Condemnation"), Lessee shall give immediate
written notice thereof to Lessor and comply
with the provisions of the Facility Lease
governing Casualties and Condemnations.
10. EVENTS OF DEFAULT
Each of the following shall constitute
an "Event of Default" hereunder and shall
entitle Lessor to exercise its remedies
hereunder and under any of the other Lease
Documents:
A. any failure of Lessee to pay any
amount due hereunder or under any
of the other Lease Documents within
ten (10) days following the date
when such payment was due;
B. any failure in the observance or
performance of any other covenant,
term, condition or warranty
provided in this Agreement or any
of the other Lease Documents, other
than the payment of any monetary
obligation and other than as
specified in subsections (C)
through (F) below (referred to
herein as a "Failure to Perform"),
continuing for thirty (30) days
after the giving of notice by
Lessor to Lessee specifying the
nature of the Failure to Perform;
except as to matters not
susceptible to cure within thirty
(30) days, provided that with
respect to such matters, (i) Lessee
commences the cure thereof within
thirty (30) days after the giving
of such notice by Lessor to Lessee,
(ii) Lessee continuously prosecutes
such cure to completion, (iii) such
cure is completed within one
hundred twenty (120) days after the
giving of such notice by Lessor to
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Lessee and (iv) such Failure to
Perform does not impair Lessor's
rights with respect to the Leased
Property or otherwise impair the
Collateral or Lessor's security
interest therein;
C. the occurrence of any default or
breach of condition continuing
beyond the expiration of the
applicable notice and grace
periods, if any, under any of the
other Lease Documents;
D. if any representation, warranty or
statement contained herein or in
any of the other Lease Documents
proves to be untrue in any material
respect as of the date when made or
at any time during the Term if such
representation or warranty is a
continuing representation or
warranty pursuant to Section 6.2;
E. except as a result of any Casualty
or a partial or complete
Condemnation, if a suspension of
any work in connection with the
construction of the Project occurs
for a period in excess of ten (10)
Business Days, irrespective of the
cause thereof, provided that Lessee
shall not be deemed to be in
default under this Subsection if
such suspension is for
circumstances not reasonably within
its control, but only if Lessor, in
its sole and absolute discretion,
shall determine that such
suspension shall not create any
risk that the construction of the
Project will not be completed (in
accordance with the Project Plans
and the terms and conditions of
this Agreement) on or before the
Completion Date; and
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.
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11. REMEDIES IN EVENT OF DEFAULT
Upon the occurrence of an Event of
Default, at the option of Lessor, which may
be exercised at any time after an Event of
Default shall have occurred, Lessor shall
have all rights and remedies available to it,
at law or in equity, including, without
limitation, all of the rights and remedies
under the Facility Lease and the other Lease
Documents. Subject to the requirements of
applicable law, all materials at that time on
or near the Leased Property which are the
property of Lessee and which are to be used
in connection with the completion of the
Project shall be subject to the Liens created
by the Lease Documents.
In addition to, and without limitation
of, the foregoing, Lessor is authorized to
charge all money expended for completion of
the Project against sums hereunder which have
not already been advanced (even if the
aggregate amount of such sums expended and
all amounts previously advanced hereunder
exceed the amount of the Project Funds which
Lessor has agreed to advance hereunder); and
Lessee agrees to pay to Lessor Rent under the
Facility Lease (calculated, in part,
thereunder based upon all sums advanced
hereunder, including, without limitation, all
sums expended in good faith by Lessor in
connection with the completion of the
Project), and, in addition thereto, Lessee
agrees to pay to Lessor (as Rent under the
Facility Lease), for services in connection
with said completion of the Project, such
additional sums as shall compensate Lessor
for the time and effort Lessor and its
employees shall have expended in connection
therewith. Lessor is authorized, but not
obligated in any event, to do all such things
in connection with the construction of the
Project as Lessor, in its sole and absolute
discretion, may deem advisable, including,
without limitation, the right to make any
payments with respect to any obligation of
Lessee to Lessor or to any other Person in
connection with the completion of
construction of the Project and to make
additions and changes in the Project Plans,
to employ contractors, subcontractors and
agents and to take any and all such action,
either in Lessor's own name or in the name of
Lessee, and Lessee hereby grants Lessor an
irrevocable power of attorney to act in its
37
name in connection with the foregoing. This
power of attorney, being coupled with an
interest, shall be irrevocable until all of
the Obligations are fully paid and performed
and shall not be affected by any disability
or incapacity which Lessee may suffer and
shall survive the same. The power of
attorney conferred on Lessor by the
provisions of this Section 11 is provided
solely to protect the interests of Lessor and
shall not impose any duty on Lessor to
exercise any such power and neither Lessor
nor such attorney-in-fact shall be liable for
any act, omission, error in judgment or
mistake of law, except as the same may result
from its gross negligence or 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
Facility Lease are hereby incorporated by
reference, mutatis, mutandis, and shall be
applicable to this Agreement as if set forth
in full herein.
This Agreement, 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.
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13. LEASE PROVISIONS PARAMOUNT
In the event of a conflict between the
provisions hereof and the provisions of the
Facility Lease, the provisions of the
Facility Lease are paramount.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto
have executed this Agreement under seal on
the day and year first above written.
LESSEE:
EMERITUS PROPERTIES I, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: President
LESSOR:
MEDITRUST ACQUISITION
CORPORATION I, a Massachusetts
corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
-----------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ESQ.
Title: Senior Vice President
40