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Sectors: Services
Governing Law: Massachusetts, View Massachusetts State Laws
Effective Date: July 12, 1996
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TURNKEY CONSTRUCTION AGREEMENT


THIS TURNKEY CONSTRUCTION AGREEMENT is by and among CareMatrix of Massachusetts, Inc., a Delaware corporation, with an office at 197 First Avenue, Needham, Massachusetts 02194 ("CareMatrix"), Atlantic on the Hudson, LLC ("Atlantic"), a New York limited liability company, with an office at Two Penn Plaza, New York, New York 10121 (collectively, the "Contractor"), and Cambridge House Associates General Partnership, a New York general partnership, with an office at c/o Chancellor of Ossining, 197 First Avenue, Needham, Massachusetts 02194 (the "Owner"), and is entered into for the purpose of reducing to a formal writing all of their understandings with respect to the development and construction of a proposed senior housing facility to be comprised of 122 units (the "Facility") to be located in Ossining, New York (the "Premises").


In consideration of the undertakings of each of the parties to the other:


IT IS AGREED:


ARTICLE I


Representations


The parties make each of the following material representations:


Section 1.1 - Title to Premises. The Owner (or its nominee) shall own good, record and marketable title in fee simple to the Premises consisting of approximately 10.33 acres of land as more fully described in Exhibit "A". Exhibit "A" and each of the other Exhibits referred to in this Agreement shall be incorporated into this Agreement by such reference as if fully set forth in this Agreement. The Premises shall be free and clear of any and all encumbrances which would impair the construction or operation of the Facility except the Existing Encumbrance (as defined below).


Section 1.2 - Encumbrances.


(a) The Owner and the Contractor acknowledge and agree that the
Premises may be subject to easements, assessments, conditions,
contracts, rights, claims, encroachments, restrictions and other
encumbrances as would be disclosed on a title report (the "Existing
Encumbrances"), to physical conditions which would be disclosed by a
survey of the Premises and to those easements, conditions, contracts,
rights, licenses,


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encroachments, restrictions and other encumbrances resulting from the
Contractor securing regulatory, development and construction approvals
for the Facility and attendant site improvements. The Owner and the
Contractor each warrant and represent to the other that it has
reviewed or shall review prior to its purchase of the Premises the
boundary survey and the topographical survey of the Premises and has
made, or shall make prior to its purchase of the Premises a careful
physical inspection of the Premises to satisfy it as to the site
characteristics and attributes in all respects. The Owner agrees to
accept the Facility subject to the Existing Encumbrances, the
mortgages described herein, to the physical conditions which exist and
as such conditions may change during the course of construction and to
those easements, conditions, contracts, rights, licenses,
encroachments, restrictions and other encumbrances resulting from the
Owner securing regulatory, development and construction approvals for
the Facility and attendant site improvements, provided that the same
do not interfere with the Owner's operation of the Facility.


(a) Concurrently with the execution of this Agreement, the Owner shall
provide the Contractor with copies of all engineering, architectural
and any other plans, studies and surveys, title reports, environmental
assessments, appraisals and other information regarding the Premises
or the Facility which are in the Owner's possession, custody or
control.


(b) Commencing on the date the Contractor elects to commence
construction in accordance with this Agreement, the Owner shall
provide the Contractor with full possession and complete control of
the Premises for purposes of performing the Contractor's obligations
hereunder.


Section 1.3 - Permits and Approvals.


(a) The Contractor represents that it shall use its reasonable best
efforts to obtain, prior to the date of the Closing (as hereinafter
defined), all state, federal, county and municipal land use approvals
and permits, licenses, easements, and sewer agreements which may be
needed in order to permit the construction and operation of the
Facility on the Premises (the "Approvals"). The Contractor covenants
to diligently use its reasonable best efforts to obtain all of the
Approvals in an expeditious manner. In the event the Contractor is
unable to obtain the Approvals, the Contractor shall have no liability
whatsoever to the Owner, or any other party and at the Owner's or the
Contractor's option, this Agreement shall be terminated without
recourse to either party hereto at law or in equity.


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(b) For the sole purpose of permitting the Contractor to construct the
Facility, the Owner grants to the Contractor, to the extent required
by the Contractor in order that the purpose of this Agreement be
effectuated, the rights under the Approvals and any other grants of
rights, permits, approvals, or licenses, which may be necessary to
complete the performance of the Contractor's obligations hereunder;
provided, however, that no transfer or assignment of any of the
foregoing shall occur which is prohibited by applicable law or the
respective terms thereof.


Section 1.4 - Documentation. The Owner shall provide or obtain construction and permanent financing for the Premises, the Facility and the Personal Property (as defined herein) (the "Project Loan") which shall be sufficient, together with the Owner's equity contributions, if any, to pay the full amount necessary for the development of the Project. The Contractor covenants that it will provide fully and in a timely fashion all reasonable documentation required by the Owner's lender in connection with the Project Loan. Such documentation shall include, but not be limited to, all zoning and plan approvals; all utility letters indicating availability of service; inventory of concessions made to any or all municipal bodies; site plans; title commitments or binders, and all other regulatory body approvals. The Contractor also covenants that it will, in a timely manner, provide whatever financial or other information the Owner's lender might reasonably require in connection with the Owner's applications for financing for the construction of the Facility and as required by such lender in connection with the Project Loan. The Owner will use its reasonable best efforts to pursue its application for construction and permanent financing for the Facility.


Section 1.5 - Other Agreements. The Owner and the Contractor each represents to the other that neither entering into this Agreement nor performing its respective obligations hereunder will violate any other agreements or documents by which it may be bound. The Contractor shall cause the definitive construction agreements to include and incorporate the Contractor's obligations under Sections 2.13, 2.14 and 4.1 hereunder. The foregoing does not release the Contractor of any of its obligations hereunder.


Section 1.6 - Good Standing of the Contractor. CareMatrix represents that it is duly organized, validly existing and in good standing under the laws of the State of Delaware. Atlantic represents that it is duly organized, validly existing and in good standing under the laws of the State of New York. The Contractor represents that it is empowered and authorized to execute, deliver and perform its obligations under this Agreement, and, upon such execution and delivery and subject to the conditions subsequent set forth in Section 5.1, this Agreement shall be the valid, binding and legal


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obligation of the Contractor, enforceable in accordance with its terms and duly authorized by a vote of its Board of Directors in compliance with its certificate of incorporation, bylaws, and operating agreement, as the case may be, and all applicable laws of the State of Delaware and New York, respectively.


Section 1.7 - Good Standing of the Owner. The Owner represents that it is duly organized and validly existing under the laws of the State of New York. The Owner further represents that it is empowered and authorized to execute, deliver and perform its obligations under this Agreement, and, upon such execution and delivery and subject to the satisfaction of the conditions subsequent set forth in Section 5.1, this Agreement shall be valid, binding and legal obligation of the Owner, enforceable in accordance with its terms and duly authorized by a vote of its partners in compliance with its partnership agreement and all applicable laws of the State of New York.


ARTICLE II


Construction of the Facility


Section 2.1 - Control of Construction. Subject to the express provisions contained herein, it is the intention of this Agreement that CareMatrix shall have sole, complete and absolute authority and discretion to decide any and all issues pertaining to the construction of the Facility, including, without limitation, the expenditure of funds, the incurring of costs and all of the other matters referred to herein so long as the same are in compliance with the Approvals and all applicable laws.


Section 2.2 - Architectural Services. As a condition precedent to this Agreement, the Contractor shall have reviewed, approved and adopted all drawings and plans for the Facility prepared by Meltzer/Mandl Architects, P.C. (the "Architect") (the "Basic Plans"). The Owner will be responsible for payment of the architectural fees due to the Architect, pursuant to the contract with respect to the Facility dated July 12, 1996 (the "Architectural Contract"). The Owner represents and warrants to the Contractor that a true, accurate and complete copy of the Architectural Contract is attached hereto as Exhibit "B". The Contractor shall not be responsible to the Owner, or any other party for any errors, omissions, breaches or failures thereof, or any damages resulting from the acts or omissions of the Architect.


Section 2.3 - Other Professionals and Limited Assumed Obligations. The Owner represents that it has not engaged any architects or any engineers, lawyers, consultants,


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accountants, or other professionals with respect to the Facility other than the Architect which the Owner shall be obligated to pay. The Contractor neither assumes nor shall be obliged for any debts, liabilities or obligations of the Owner or related to the Premises or the Facility other than payments due to the Architect under the Architectural Contract.


Section 2.4 - Plans and Specifications. The Contractor shall direct the Architect to prepare as promptly as possible, but, in any event, within thirty (30) days after the execution of this Agreement, final plans, specifications and a site plan (the "Final Plans") based on the Basic Plans.


Section 2.5 - Construction. The Contractor shall construct the Facility substantially in accordance with the Final Plans, subject to field changes and minor design changes approved by the Owner. All work shall be done in a good and workmanlike manner and in accordance with the Approvals, if any, and all applicable laws. The structure shall be designed as a senior housing facility to be constructed in accordance with the requirements in effect on the date of this Agreement of federal, state and local governmental agencies having jurisdiction of the Facility, including Life Safety Code requirements imposed by the Federal Department of Health and Human Services.


Section 2.6 - Personal Property. Exhibit "C" contains a representative list of the kinds of personal property needed for the Facility (the "Personal Property"). In order to reduce the risk that the Personal Property will be delivered prior to the Closing (as hereinafter defined), the Owner covenants that it shall select such Personal Property as soon as practicable but not later than approximately six (6) months prior to the estimated date of Physical Completion.


Section 2.7 - Changes. The Owner agrees that the Contractor shall also have the right to make changes in the Final Plans and in the Personal Property if required by any federal, state or local governmental authority having jurisdiction or if required due to the unavailability of any construction material or Personal Property. The Owner shall be notified of any such changes or substitutions in the Personal Property but the Contractor shall have final authority to make all decisions with respect to such changes; provided, that such changes result in construction, space, design, personal property, equipment and interior and exterior design comparable in overall design and quality to that shown on the Final Plans.


Section 2.8 - Commencement of Construction. Construction of the Facility will start on or prior to the date which is thirty (30) days after the satisfaction of the last of the conditions set forth in Section 5.1 to be satisfied, or as soon thereafter as weather and ground conditions permit but not later than October 1, 1996.


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Section 2.9 - Continuity of Construction. Construction, once undertaken, shall proceed in a continuous and reasonably expeditious manner until Physical Completion, as such term is defined in Section 2.10, is achieved, which shall not occur later than ten (10) months after the completion of the foundation for the Facility. Any delays caused by acts of God, fire, accident, casualty, cessation of activity due to refusal to work by labor, or any other cause not attributable to the failure of the Contractor to use reasonable care and due diligence, however, shall be excused by the Owner, provided that the Contractor shall use its reasonable best efforts to minimize any such delays and shall resume construction at the earliest possible time.


Section 2.10 - Completion of Construction.


(a) For the purposes of this Agreement, the terms "Physical
Completion" or "Physically Completed" shall mean the date on which the
building and improvements described and set forth in the Final Plans
have been completed and the Facility shall have been approved for
temporary or permanent occupancy by the local building inspector, and
by the State Fire Marshall in the event his approval is required.
Physical Completion shall be deemed to have been achieved
notwithstanding that any of such officials or agencies have issued a
Punch-List listing items requiring completion or correction, so long
as such Punch-List does not prevent or prohibit occupancy.


(b) The Contractor will use its reasonable best efforts to notify the
Owner at least ninety (90) days prior to the time the Owner estimates
that the Facility will be Physically Completed, whereupon the Owner
will diligently proceed to fulfill all other conditions necessary for
licensure and the Owner will apply in a timely manner for all licenses
and permits necessary to commence operation of the Facility. After
such notice from the Contractor, the Owner, to the extent necessary to
perform necessary administrative activities may, so long as it does
not interfere with completion of construction, enter upon the Premises
in an effort to coordinate initial licensure with Physical Completion.


Section 2.11 - The Owner's Noninvolvement. The Owner shall have access to the construction site while construction is in progress, but it shall have no authority over the Contractor, and shall not be empowered to interfere or become involved with construction or require changes thereto; provided, however, that the Owner's management agent shall have the right to view the construction in progress and shall have access to the site for the purpose of equipping the Facility and preparing the Facility for operation.


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Section 2.12 - Punch-List. If, at any time after the Facility has been Physically Completed, there exist any items requiring completion or correction, then the Contractor agrees to use all reasonable diligence to complete or correct the items so that each conforms to the Final Plans. The parties shall make a Punch-List of the items requiring completion or correction. Each item on the Punch List shall be assigned a reasonable value based upon the reasonable cost of completion or correction of the same or such other value as may be required by the Owner's lender ("Punch-list Amount"). The Contractor shall give its written undertaking to complete each such item within ninety (90) days after transfer of title, further agreeing to permit the Owner to complete any such items at the Contractor's expense if the Contractor has failed to complete the same within the ninety (90) day time period.


Section 2.13 - Work and Warranties. Upon completion of construction, landscaping and installation of Personal Property, the Contractor will assign to the Owner, in addition to any warranties created by law, all warranties and guarantees received from designers, the Architect, subcontractors and suppliers of equipment and furnishings, to the extent assignable. The Contractor will agree to remedy any defect in construction caused by poor workmanship or materials which are brought to its attention by written notice within a period of one (1) year from the date of the issuance of the Certificate of Occupancy. Aside from the foregoing, the Owner hereby waives and the Contractor hereby disclaims all other express and implied warranties of every kind or nature with respect to the Facility and the Personal Property, including, without limitation, waiving all IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.


Section 2.14 - Subcontractors. The Contractor agrees to indemnify and save the Owner harmless from claims for payment by any subcontractor who furnishes materials or supplies or performs labor or services in the prosecution of the work pursuant to this Agreement. The Contractor reserves absolute discretion on the selection of subcontractors.


Section 2.15 - Financing Arrangements.


(a) The Owner will obtain a commitment for the Project Loan for
construction and permanent financing for the Facility which shall be
sufficient, together with the Owner's equity contributions, to pay the
full amount of the Contract Price. This Agreement may be terminated by
the Contractor or the Owner, in its sole and absolute discretion and
without further recourse to any party, in the event that the closing
and funding of the construction loan financing with respect to the
Facility pursuant to the Project Loan (with all conditions precedent
to such closing either satisfied


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or irrevocably waived by the lender) shall not have occurred by
November 15, 1996.


(b) The Owner and the Contractor also contemplate that the Premises
and the Facility, together with all fixtures, furnishing, equipment,
and articles of personal property now owned or hereafter acquired by
the Owner which are or may be attached to or used in connection with
the Premises or the Facility, together with any and all replacements
thereto and substitutions therefor, and all proceeds thereof; and all
present and future rents, issues, leases, and profits of the Premises
and the Facility will serve as security for the payment obligations to
any lenders relating to the Project Loan or otherwise, and that the
Owner will be the principal obligor for the repayment of all financial
obligations thereunder after the transfer of title to the Owner. The
Owner therefore, agrees to execute and deliver all commitments,
promissory notes, mortgages, collateral assignments, guaranties and
all other instruments, agreements, documents, certificates,
affidavits, and other writings required to be executed by any lender
in connection with such financing.


ARTICLE III


Closing


Section 3.1 - Date of Closing. The delivery of possession of the Premises and the Facility to the Owner and payment of the Contract Price shall take place contemporaneously within three (3) business days after Physical Completion of the Facility but in no event later than the date established in Section 2.9 (the "Closing").


Section 3.2 - Contract Price.


(a) CareMatrix and Atlantic shall each be entitled to a development
fee in the amount of Two Hundred Thousand Dollars ($200,000). Such fee
shall be paid by Owner at the closing of the Project Loan, to the
extent that there exists funds for the same out of the Project Loan.
In the event that such development fee is not paid in full at the
closing of the Project Loan, the portion of the development fee paid,
if any, shall be payable as follows: (I) the first One Hundred Fifty
Thousand Dollars ($150,000) to Atlantic; and (ii) the next Two
Hundred Fifty Thousand Dollars ($250,000), eighty percent (80%) to
CareMatrix and twenty percent (20%) to Atlantic. The remainder shall
be paid (based on the formula set forth in the immediately preceding
sentence) from cash flow from operations at the Project (after


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debt service, guaranty fees, and all expenses at the Project,
including management fees).


(b) Each of CareMatrix and Atlantic shall be entitled to a
construction supervision fee in the amount of Five Thousand Dollars
($5,000) per month during the course of construction of the Project,
provided that such fee shall only be payable to the extent that there
exists funds for the same out of the Project Loan. In the event that
such construction supervision fee is not paid in full during the
course of construction, the portion of the construction supervision
fee paid, if any, shall be payable in equal monthly installments
during the course of construction, fifty percent (50%) to Atlantic and
fifty percent (50%) to CareMatrix. The remainder shall be paid (based
on the formula set forth in the immediately preceding sentence) from
cash flow from operations at the Project (after debt service, guaranty
fees, all expenses at the Project, including management fees, and the
development fees set forth in subsection (b) above).


Section 3.3 - Form of Conveyance and Status of Title. The Facility and Personal Property shall be conveyed by warranty bill of sale. The Facility and Personal Property may be subject to the mortgages and security interests described in Section 2.15.


ARTICLE IV


Additional Responsibilities of Parties


Section 4.1 - The Contractor's Responsibilities. In addition to its obligations elsewhere expressed in this Agreement, the Contractor shall have the following responsibilities:


(a) To obtain and pay for necessary building permits and the
Certificate of Occupancy;


(b) The Contractor shall at all times, commencing with the date upon
which construction begins, carry the following types of insurance with
an insurance carrier or carriers acceptable to the Owner's lender:


(i) Workman's compensation insurance fully covering all persons
engaged in the performance of this Agreement, in accordance with
applicable law.


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(ii) Public liability insurance covering death or bodily injury
with limits of not less than $1,000,000 for one person and
$1,000,000 for any one accident or disaster; and property damage
coverage limits of not less than $1,000,000; all of which
insurance shall name the Owner as an additional insured.


(iii) "Builders Risk" insurance against damage or destruction by
fire and full extended coverage, including vandalism and
malicious mischief, covering all improvements to be erected
hereunder and all materials for the same which are on or about
the Premises, in an amount equal to the full insurable value of
such improvements and materials; such insurance to be payable to
the Owner, the Contractor and the Owner's lender as their
interests may appear, with a standard mortgagee endorsement to
the Owner's lender or its assigns as mortgagee.


The Contractor shall furnish to the Owner and the Owner's lender
if required by such lender, duplicate policies of insurance as
set forth in subparagraphs (i), (ii), and (iii) hereof. Each of
such policies shall, if the insurance carriers so permit, contain
a provision to the effect that they may not be canceled except
upon ten (10) days prior written notice to the Owner and the
Owner's lender.


(c) At Closing, the Contractor shall deliver to the Owner, at the
Owner's option:


(i) duly executed waivers of mechanic's liens signed by each
subcontractor which provided labor or materials on the project;
or


(ii) reasonable proof of payment or proof of a provision for
payment to such contractors; or


(iii) an indemnification to the Owner with respect to same.


Section 4.2 - The Owner's Responsibilities. In addition to its obligations elsewhere expressed in this Agreement, the Owner shall have the following responsibilities: To obtain commitments for financing the contemplated construction, including the furnishing of financial statements, providing an appraisal of the Premises and the Facility and by execution of applications, notes, mortgages, assumption agreements and other documents reasonably necessary to effectuate such financing or the financing of the Personal Property.


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Section 4.3 - Indemnification. The Contractor hereby agrees to indemnify and hold the Owner harmless from all liabilities, claims, and demands for personal injury or property damage arising out of or caused by any act or omission of the Contractor, its subcontractors, agents, or employees, or arising in or about the Premises at any time from the date of this Agreement until the transfer of title. The Contractor further covenants to use proper care and caution in the performance of its work hereunder s
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