Form Of Hcri Construction Disbursing Agreement

FORM OF HCRI CONSTRUCTION DISBURSING AGREEMENT


THIS CONSTRUCTION DISBURSING AGREEMENT ("Agreement") is made and entered into effective as of September 22, 1998 (the "Effective Date") between BCC DEVELOPMENT AND MANAGEMENT CO., a corporation organized under the laws of the State of Delaware ("Developer"), having its chief executive office at 5021 Louise Drive, Suite 200, Mechanicsburg, Pennsylvania 17055, and [_____________], a corporation organized under the laws of the State of Pennsylvania ("Landlord"), having an address of One SeaGate, Suite 1500, P.O. Box 1475, Toledo, Ohio 43603.


RECITALS:


A. As of the date hereof, Landlord acquired and leased to Financial Care Investors of [__________], LLC, a limited liability company organized under the laws of the State of Delaware ("Tenant") the Land (defined below) located in Lebanon, Pennsylvania pursuant to a Lease Agreement between Landlord and Tenant ("Lease").


B. Tenant desires to cause Developer to construct a [__]-unit personal care facility ("Facility") on the Land. Landlord has agreed to pay for the development and construction costs of the Facility up to a maximum amount of $[_______________], subject to the terms and conditions of the Lease and this Agreement.


C. All Improvements constructed on the Land and all Fixtures installed into the Improvements shall be the property of Landlord and shall be part of the "Leased Property" under the Lease.


NOW, THEREFORE, in consideration of the mutual covenants and the premises contained herein, and intending to be legally bound hereby, the parties agree as follows:


ARTICLE 1: PURPOSE AND DEFINITIONS


1.1 Purpose. The purpose of this Agreement is to establish the terms and conditions for disbursing Lease Advances under the Lease.


1.2 Definitions. Except as otherwise expressly provided, [i] the terms defined in this section have the meanings assigned to them in this section and include the plural as well as the singular; [ii] all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles as of the time applicable; [iii] the words "herein", "hereof", and "hereunder" and similar words refer to this Agreement as a whole and not to any particular section; and [iv] any capitalized term not defined in this Agreement which is defined in the Lease shall have the meaning set forth in the Lease. 2
"Appraisal" means an "as-built" appraisal setting forth the fair market value of the Facility upon completion thereof in accordance with the Plans and Specifications.


"Architect" means Bink Architectural Partnership, the architect for the design of the Improvements.


"Architect's Certificate" means a certificate of the Architect in favor of Landlord in form and substance satisfactory to Landlord.


"Architect's Contract" means the contract between the Architect and Developer for the design of the Improvements, as it may be amended from time to time, and any other material agreements entered into between Developer and design professionals.


"Bonds" means a labor and material payment bond and a performance bond issued by the Surety with a dual obligee rider naming Landlord and Developer as joint and several obligees. The Bonds shall each be in an amount not less than the amount payable under the Construction Contract.


"Business Day" means any day which is not a Saturday or Sunday or a public holiday under the laws of the United States of America or the State of Ohio.


"Closing" means the closing of the Lease.


"Collateral Assignment of Architect's Contract" means the Collateral Assignment of Architect's Contract between Landlord and Developer and the Consent of Architect attached thereto.


"Collateral Assignment of Construction Contract" means the Collateral Assignment of Construction Contract by Developer in favor of Landlord and the Consent of Contractor attached thereto.


"Commitment" means the commitment letter for the Lease dated September 22, 1998.


"Commitment Fee" means the commitment fee for the Lease payable to Landlord by Tenant in an amount equal to 2% of the Maximum Lease Amount.


"Construction Contract" means the construction contract between Developer and the General Contractor for the construction of the Improvements, as it may be amended from time to time, and any other contracts entered into between Developer and any contractors for the construction of the Improvements.


"Construction Documents" means the Architect's Contract, the Construction Contract and any other material contracts entered into by Developer relating to the development, design or construction of the Improvements. 3
"Construction Term" means the term of the Lease commencing on the Effective Date and expiring on the Conversion Date.


"Conversion Date" means the date on which the final Lease Advance is disbursed to Developer.


"Developer Documents" means [i] this Agreement; [ii] the Collateral Assignment of Construction Contract; [iii] the Collateral Assignment of Architect's Contract; and [iv] all other documents executed by Developer and Landlord in connection with the Lease.


"Developer's Obligations" means all payment and performance obligations of Developer under this Agreement.


"Developer's Organizational Documents" means the Articles of Incorporation of Developer certified by the Secretary of State of the state of organization, as amended to date, and the Bylaws of Developer certified by Developer, as amended to date.


"Development Fees" means the fees paid to Developer not to exceed $[__________], for services rendered in connection with the acquisition and development of the Facility, payable as follows: 1/2 at Closing and 1/2 upon completion of construction of the Facility and issuance of a certificate of occupancy for the Facility.


"Disbursement Schedule" means the Disbursement Schedule attached hereto as Exhibit C setting forth Developer's estimate of the dates and amounts of the disbursements required hereunder.


"Disbursement Voucher" means Developer's written request for a disbursement set forth on a form satisfactory to Landlord.


"Environmental Assessment" means an environmental assessment of the Land meeting the Landlord's Requirements for Environmental Assessments, including all agreements, contracts, reports, sampling results, amendments and addenda relating thereto.


"Environmental Consultant" means a registered engineer in the State or other consultant approved by Landlord.


"Event of Default" has the meaning set forth in Section 4.1.


"Facility" means the Real Property and Personal Property comprising each facility located on any of the Leased Property.


"Facility Costs" means the following: [i] the organizational, acquisition and construction costs for the Facility; [ii] all costs and expenses in connection with the Lease; [iii] Development Fees; and [iv] other Facility costs and expenses, direct and indirect, as set forth in the Project Budget. 4
"Financial Statements" has the meaning set forth in the Lease.


"Fixtures" means all fixtures now or hereafter installed or located in, on or about the Land or the Improvements and any replacements, substitutions and additions thereto.


"Force Majeure" means any delay due to strikes, riots, acts of God, shortages of labor or materials, governmental law, regulations or restrictions or other similar cause which is beyond the control of Developer.


"General Contractor" means [____________________], the general contractor for the construction of the Improvements.


"Government Authorizations" means all permits, licenses, approvals, consents, and authorizations required to be obtained by Tenant, Manager or Developer to comply with all Legal Requirements, including but not limited to, [i] zoning permits, variances, exceptions, special use permits, conditional use permits, and consents; [ii] environmental, ecological, coastal, wetlands, air, and water permits, licenses, and consents; [iii] curb cut, subdivision, land use, and planning permits, licenses, approvals and consents; [iv] building, sign, fire, health, and safety permits, licenses, approvals, and consents; and [v] architectural reviews, approvals, and consents required under restrictive covenants.


"Guarantor" means Balanced Care Corporation, a corporation organized under the laws of the State of Delaware.


"Guaranty" means the Guaranty entered into by the Guarantor, and any amendments thereto or substitutions or replacements therefor.


"Guaranty Documents" means the Guaranty, the Working Capital Documents (as defined in the Lease), and any other agreement or instrument to be executed by Guarantor in accordance with the requirements of any Lease Document or the Commitment.


"Improvements" means all buildings, structures, additions, renovations and improvements now or hereafter erected or placed upon the Land and the offsite improvements, if any, necessary for the operation of the Facility.


"Initial Term" has the meaning set forth in Section 1.2 of the Lease.


"Insurance Requirements" means [i] all terms of any insurance policy required by the Lease; [ii] all requirements of the issuer of any such policy; and [iii] the requirements of any Board of Insurance Underwriters or similar organization.


"Intangible Personal Property" means Tenant's, Manager's or Developer's rights in the following: [i] all accounts, contract rights, general intangibles, instruments, documents, Receivables, and chattel paper (as "accounts", "contract rights", "general intangibles", 5 "instruments", "documents", and "chattel paper" are defined for purposes of Article 9) now or hereafter arising in connection with the business located in or on or used or usable in connection with the Real Property and replacements, additions, and accessions thereto; [ii] unless prohibited by law, all franchises, permits, licenses and rights therein regarding the use, occupancy or operation of the Improvements, or any part thereof; [iii] unless expressly prohibited by the terms thereof, all contracts, agreements, contract rights and materials relating to the design, construction or operation of the Improvements, including but not limited to, plans, specifications, drawings, blueprints, models and mock-ups, and all brochures, flyers, advertising and promotional materials and mailing lists; and [iv] all ledger sheets, files, records, computer programs, tapes, other electronic data processing materials, and other documentation relating to the preceding listed property.


"Issuer" means a financial institution satisfactory to Landlord issuing the Letter of Credit and such Issuer's successors and assigns. Any "Issuer" shall have a Lace Financial Service Rating of "C+" or higher at all times throughout the term of the Lease.


"Land" means the land described on Exhibit A.


"Landlord's Inspector" means the consulting inspector designated by Landlord to inspect the Facility and review documentation in connection with the Facility on behalf of Landlord.


"Lease" means the Lease Agreement between Landlord and Tenant dated the date hereof, as amended from time to time.


"Lease Advance" means each advance of funds by Landlord pursuant to the Lease and this Agreement but excluding any Earnout Lease Advance that may be made by Landlord pursuant to the Lease.


"Lease Documents" means [i] this Agreement; [ii] the Lease; [iii] the Collateral Assignment of Construction Contract; [iv] the Collateral Assignment of Architect's Contract; [v] the Collateral Assignment of Management Agreement and Consent of Manager to Collateral Assignment of Management Agreement and Security Agreement; and [vi] all other documents and instruments executed by Tenant, Manager or Developer and Landlord in connection with the Lease.


"Lease Expenses" means all reasonable costs and expenses incurred by Landlord in investigating, making and administering the Lease, including but not limited to, [i] attorneys' and paralegals' fees and costs; [ii] the fees of the Landlord's Inspector; and [iii] travel, transportation, food, and lodging costs and expenses incurred by Landlord, the Landlord's Inspector and Landlord's attorneys and paralegals.


"Legal Requirements" means all laws, regulations, rules, orders, writs, injunctions, decrees, certificates, material requirements, material agreements, conditions of participation and standards of any federal, state, county, municipal or other governmental entity, administrative agency, insurance underwriting board, architectural control board, and any restrictive covenants applicable to the development, construction, renovation and operation of each Facility as an assisted living facility, 6 including but not limited to, [i] zoning, building, fire, health, safety, sign, and subdivision regulations and codes; and [ii] the Environmental Laws.


"Letter of Credit" means an irrevocable and transferable Letter of Credit in the aggregate amount equal to 5% of the Maximum Lease Amount issued by Issuer in favor of Landlord as security for the Lease and in form acceptable to Landlord, and any amendments thereto or replacements or substitutions therefor.


"List of Leases and Contracts" means the List of Leases and Contracts set forth on Exhibit G of the Lease.


"Mandatory Completion Date" means the earlier of [i] the date which is 18 months after the Effective Date, provided that such date shall be extended by the number of days' delay caused by Force Majeure to the extent permitted under Section 5.2; or [ii] the completion date required by the Department of Health or any other governmental authority.


"Maximum Guarantied Amount" means an amount equal to [i] 89% of Project Costs incurred at the time of the calculation of the Maximum Guarantied Amount, minus [ii] any amounts previously paid by Guarantor, Developer or Tenant in connection with the exercise by Landlord of its remedies under the Lease and other Lease Documents, including but not limited to [a] indemnification payments arising from any claim or loss asserted against Landlord resulting from the acts or omissions of Developer, Guarantor or Tenant in connection with the construction of the Facility including without limitation, insurance deductibles actually paid by Guarantor, Developer or Tenant under insurance policies, [b] amounts drawn by Landlord on the Letter of Credit, [c] amounts deposited with Landlord under Section 2.5 of this Agreement, and [d] amounts paid by Guarantor under Section 8.2(l) of the Lease plus [iii] 100% of all losses suffered or incurred by Landlord exclusively in connection with the acquisition of the Land.


"Maximum Lease Amount" means $[_______________].


"Permitted Exceptions" means the exceptions to title set forth on Exhibit B of the Lease.


"Personal Property" means the Tangible Personal Property and Intangible Personal Property.


"Plans and Specifications" means the plans and specifications for the Facility approved by Landlord, including but not limited to, plans, drawings, specifications, details, models and mock-ups for the Improvements.


"Pro Forma Statement" means a financial forecast for the Facility for the five year period commencing on the anticipated date when the Facility commences operations prepared in accordance with the standards for forecasts established by the American Institute of Certified Public Accountants. 7
"Project Budget" means the budget of the total costs of acquiring, developing, constructing, furnishing and equipping the Facility prepared by Tenant and Developer and approved by Landlord, as the same may be modified from time to time as provided herein. The initial Project Budget is attached hereto as Exhibit B.


"Project Costs" means all costs of the Facility (exclusive of the costs of acquisition of the Land) that are properly capitalized in accordance with generally accepted accounting principles consistently applied.


"Real Property" means, collectively, the Land, Improvements and Fixtures.


"Reserves" has the meaning set forth in Section 2.5.3.


"Secured Obligations" means all of the obligations of Tenant, Manager or Developer under the Lease Documents.


"State" means the State of [___________].


"Surety" means the issuer of the Bonds, and it shall have a Best's Rating of B+ or better and a Best's Financial Category of XII or larger.


"Survey" means a survey of the Land prepared in accordance with the Minimum Detail Requirements for Land Title Surveys jointly adopted by ALTA/ACSM in 1992 and such other requirements as may be required by Landlord or Title Company.


"Tangible Personal Property" means all machinery, furniture, equipment, trade fixtures, appliances, inventory, and other goods (as "equipment", "inventory", and "goods" are defined for purposes of Article 9) now or hereafter located in or on or used or usable in connection with the Real Property and replacements, additions, and accessions thereto, including without limitation those items which are to become Fixtures or which are building supplies and materials to be incorporated into an Improvement or Fixture, but excluding any equipment, furniture, and trade fixtures leased under the equipment financing permitted under the Lease.


"Tenant's Equity" means Tenant's cash and other liquid assets dedicated for payment of Working Capital in an amount not less than $[_____________].


"Tenant's Organizational Documents" means [i] for a corporate Tenant, the Articles of Incorporation of Tenant certified by the Secretary of State of the state of organization, as amended to date, and the Bylaws of Tenant certified by Tenant, as amended to date; [ii] for a partnership Tenant, the Partnership Agreement of Tenant certified by Tenant, as amended to date and the Partnership Certificate, certified by the appropriate authority, as amended to date; and [iii] for a limited liability company Tenant, the Certificate of Formation of Tenant certified by the Secretary of State of the state of organization, as amended to date and the Operating Agreement of Tenant certified by Tenant, as amended to date. 8
"Title Commitment" means an ALTA Form B Commitment, 1970 form as revised 10-17-84, for owner's title insurance issued by the Title Company for the Facility.


"Title Company" means Lawyers Title Insurance Corporation.


"Title Policy" means the final title policy issued by the Title Company to Landlord pursuant to the Title Commitment for the Facility.


"Working Capital" means the capital to be invested by Tenant to be used for pre-opening, pre-marketing, opening, start-up, and other similar costs and expenses in connection with the Facility.


1.3 Incorporation of Amendments. The definition of any agreement, document, or instrument set forth in this Agreement or in any other Lease Document shall be deemed to incorporate all amendments, modifications, and renewals thereof and all substitutions and replacements therefor.


1.4 Exhibits. The following exhibits are attached hereto and incorporated herein:


Exhibit A: Legal Description
Exhibit B: Project Budget
Exhibit C: Disbursement Schedule
Exhibit D: Litigation


ARTICLE 2: LEASE ADVANCES


2.1 Obligation to Advance Funds. Subject to the terms and upon the conditions set forth in the Lease Documents, Landlord shall make Lease Advances up to the Maximum Lease Amount.


2.2 Use of Proceeds. Developer shall use the proceeds of the Lease Advances solely for the following purposes: [i] pay or reimburse Developer for the acquisition cost of the Land; [ii] pay or reimburse Developer for all hard and soft expenses and costs of the design, development and construction of the Improvements; [iii] pay for the costs of the Tangible Personal Property not to exceed 10% of the Maximum Lease Amount; [iv] the closing costs for the Lease (including without limitation the Commitment Fee and any other fees payable to Landlord under the Commitment); [v] the Development Fee, and [vi] all items specified in the Project Budget.


2.3 Commitment Fee. The Commitment Fee shall be paid at Closing as a Lease Advance.


2.4 Lease Expenses. At the Closing, Landlord shall make a Lease Advance for any Lease Expenses incurred up to the Effective Date. Within 30 days after receipt of an invoice therefor, Landlord shall make a Lease Advance for any Lease Expenses incurred by Landlord. Landlord shall apply proceeds of the Lease Advances to pay the Commitment Fee, Development Fee, and Lease Expenses. 9 2.5 Disbursements. Upon satisfaction of all conditions precedent, Landlord shall make the initial Lease Advance and continue to disburse the Lease Advances in accordance with the terms and conditions of this Agreement. Landlord may make disbursements from time to time as construction progresses, but shall not be obligated to disburse more frequently than once in each calendar month and shall not be obligated to disburse until at least eight Business Days following receipt of all documentation required for such disbursement. As of the Effective Date, Developer estimates that the disbursements will be in accordance with the Disbursement Schedule. In the event that the undisbursed proceeds of the Maximum Lease Amount are not sufficient to pay all unpaid items set forth on the Project Budget (after adjustment for any permitted change orders), Landlord may require Developer to deposit with Landlord a sum sufficient so tha ...