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MASTER LEASE AGREEMENT
BETWEEN
VARIOUS SUBSIDIARIES AND AFFILIATES OF
FRETUS INVESTORS LLC
AND
EMERITUS PROPERTIES-NGH, LLC
ESC-NGH, LP
DATED AS OF
OCTOBER 1, 2002
MASTER LEASE AGREEMENT
This Master Lease Agreement ("Lease") is made effective as of October
1, 2002 (the "Effective Date") between FRETUS INVESTORS BIRMINGHAM LLC, FRETUS
INVESTORS CHANDLER LLC, FRETUS INVESTORS GLENDALE LLC, FRETUS INVESTORS MESA
LLC, FRETUS INVESTORS ORANGE PARK LLC, FRETUS INVESTORS JACKSONVILLE LLC, FRETUS
INVESTORS MELBOURNE LLC, FRETUS INVESTORS ORLANDO LLC, FRETUS INVESTORS WINTER
SPRINGS LLC, FRETUS INVESTORS FORT WAYNE LLC, FRETUS INVESTORS INDIANAPOLIS
LLC, FRETUS INVESTORS GREENWOOD LLC, FRETUS INVESTORS LAS VEGAS LLC, FRETUS
INVESTORS AUSTIN LP, FRETUS INVESTORS DALLAS LP, FRETUS INVESTORS EL PASO LLC,
FRETUS INVESTORS FARMERS BRANCH LP, FRETUS INVESTORS FORT WORTH LP, FRETUS
INVESTORS HOLLYWOOD PARK LP, FRETUS INVESTORS HOUSTON LP, FRETUS INVESTORS
MEMORIAL OAKS HOUSTON LP, FRETUS INVESTORS PLANO LP, FRETUS INVESTORS SAN
ANTONIO LP AND FRETUS INVESTORS SUGAR LAND LP, each a Delaware limited liability
company or limited partnership (collectively, "Landlord") and each acting by and
through its manager, in the case of the Landlord entities which are limited
liability companies and through the manager of its general partner, in the case
of the Landlord entities which are limited partnerships, FRETUS INVESTORS LLC, a
limited liability company organized under the laws of the State of Washington
("Fretus"), having its principal office located at 2025 First Avenue, Suite 890,
Seattle, WA 98121, and EMERITUS PROPERTIES-NGH, LLC, a limited liability
company organized under the laws of the State of Washington ("Properties") and
ESC-NGH, LP, a limited partnership organized under the laws of the State of
Washington ("ESC" and together with Properties, "Tenant"), having their chief
executive offices located at 3131 Elliott Avenue, Suite 500, Seattle, Washington
98121.
R E C I T A L S
A. As of the date hereof, Landlord acquired the Leased Property (defined
below).
B. Landlord desires to lease the Leased Property to Tenant and Tenant
desires to lease the Leased Property from Landlord upon the terms set forth in
this Lease.
NOW, THEREFORE, Landlord and Tenant agree as follows:
ARTICLE 1: LEASED PROPERTY, TERM, DEFINITIONS, RECOGNITION OF INDIVISIBLE
MASTER LEASE AND IRREVOCABLE WAIVER OF CERTAIN RIGHTS
1.1 Leased Property. Landlord hereby leases to Tenant and Tenant
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hereby leases from Landlord the Leased Property, subject, however, to the
Permitted Exceptions and subject to the terms and conditions of this Lease.
1.2 Term. The initial term ("Initial Term") of this Lease
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commences on the Effective Date and expires at 12:00 Midnight Eastern Time on
the day before the 10th anniversary of the Commencement Date (the "Expiration
Date"). Tenant shall have the option to renew the Lease beyond the expiration of
the Initial Term for two consecutive renewal terms of five (5) years each (each
a "Renewal Term") on the following terms and conditions: [i] Tenant shall
provide Landlord with written notice of its intent to renew no later than one
hundred eighty (180) days prior to the end of the Initial Term or the first
Renewal Term, as applicable and [ii] there shall be no Event of Default
outstanding at the time such notice of renewal is delivered to Landlord or on
the first day of any such Renewal Term. Any such renewal shall be on the same
terms and conditions set forth in this Lease. Hereinafter the Initial Term and
the Renewal Terms will collectively be referred to as the "Term."
1.3 Definitions. Except as otherwise expressly provided, [i] the
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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; and [iii]
the words "herein", "hereof", and "hereunder" and similar words refer to this
Lease as a whole and not to any particular section.
"ADA" means the federal statute entitled Americans with Disabilities
Act, 42 U.S.C. 12101, et seq.
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"Additional Rent" means the sum of all Percentage Rent and General
Additional Rent.
"Affiliate" means any person, corporation, partnership, limited
liability company, trust, or other legal entity that, directly or indirectly,
controls, or is controlled by, or is under common control with Tenant. "Control"
(and the correlative meanings of the terms "controlled by" and "under common
control with") means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such entity. An
Affiliate of Tenant shall specifically exclude Columbia Pacific Management,
Inc., or any Affiliate thereof, Holiday Retirement Corporation, or any Affiliate
thereof, and Alterra Healthcare Corporation or any Affiliate thereof.
"Alteration" has the meaning set forth in 16.1.
"Applicable Percentage" shall mean 7% in the First Percentage Rent
Period, 7.5% in the Second Percentage Rent Period, 8.25% in the Third Percentage
Rent Period and 8.5% in the Fourth Percentage Rent Period and each Subsequent
Percentage Rent Period through the remainder of the Term.
"Bankruptcy Code" means the United States Bankruptcy Code set forth in
11 U.S.C. 101 et. seq., as amended from time to time.
"Base Rent" means the total of [i] the Part A Base Rent and [ii] the
Part B Base Rent.
"Base Rent Payment Date" has the meaning set forth in 2.1.
"Baty" means Daniel R. Baty.
"Binding Purchase Notice" has the meaning set forth in 13.2.
"Business Day" means any day other than a Saturday, Sunday, or
national holiday.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended from time to time.
"Closing" means the closing of the lease of the Leased Property to
Tenant.
"Collateral" has the meaning set forth in 24.1.
"Column" has the meaning set forth in 4.6.
"Column Loan Agreement" has the meaning set forth in 4.6.
"Commencement Date" means the Effective Date if such date is the first
day of a month, and if it is not, the first day of the first month following the
Effective Date.
"Company" means Tenant.
"Correction Period" has the meaning set forth in 7.1.
"Deciding Court" has the meaning set forth in 13.5.
"Default Rate" means 18% per annum.
"Effective Date" means the date of this Lease.
"Emeritus" means Emeritus Corporation, a Washington corporation.
"Emeritus Facility Names" means any of the Facility Names, other than
the Initial Facility Names, which incorporate the name "Emeritus" or any
variation thereof or use an Emeritus naming convention, including but not
limited to the "Loyalton" naming convention, other than an Emeritus naming
convention adopted for use solely with respect to the Leased Property.
"Environmental Laws" means all federal, state, and local laws,
ordinances and policies the purpose of which is to protect human health and the
environment, as amended from time to time, including, but not limited to, [i]
CERCLA; [ii] the Resource Conservation and Recovery Act; [iii] the Hazardous
Materials Transportation Act; [iv] the Clean Air Act; [v] Clean Water Act; [vi]
the Toxic Substances Control Act; [vii] the Occupational Safety and Health Act;
[viii] the Safe Drinking Water Act; and [ix] analogous state laws and
regulations including laws governing the presence, handling and remediation of
mold.
"Escrow Agent" has the meaning set forth in 13.6.
"Event of Default" has the meaning set forth in 8.1.
"Excess Gross Revenues of the Facilities" shall mean the Gross
Revenues of the Facilities in excess of the Gross Revenues Threshold.
"Expiration Date" has the meaning set forth in 1.3.
"Facility" means each facility located on a portion of the Land,
including the Facility Property associated with such Facility. References in
this Lease to "the Facility" shall mean each Facility individually unless
expressly stated otherwise but such individual references shall not affect the
agreements and acknowledgements of Tenant set forth at the end of this Article
I.
"Facility Financial Reporting" means certain financial statements and
reports with respect to the operating results and financial condition of the
Facilities in the form attached hereto as Exhibit A and which are to be
delivered to Landlord in accordance with the reporting requirements set forth in
Exhibit A.
"Facility Name" means the name under which a Facility has done
business during the Term.
"Facility Property" means the portion of the Land on which a Facility
is located, the legal description of which is set forth beneath the applicable
Facility Name on Exhibit B, the Improvements on such portion of the Land, the
Related Rights with respect to such portion of the Land, and Landlord's Personal
Property with respect to such Facility.
"Facility State" means the State in which a respective Facility is
located.
"Facility States" means, collectively, the States in which the Leased
Property is located.
"Facility Uses" means the uses relating to the operation of a Facility
as a facility of the type and operating the number of beds and units set forth
on Exhibit C with respect to such Facility.
"Fair Market Value" has the meaning set forth in 13.5.
"Final Payment Period" has the meaning set forth in 2.2(b).
"Financial Performance Minimum Targets" has the meaning set forth in
8.1(j).
"Financing Limitations" has the meaning set forth in 13.6.
"First Percentage Rent Period" means the period from the Percentage
Rent Commencement Date through December 31, 2004.
"Fixtures" means all permanently affixed equipment, machinery,
fixtures and other items of real and/or personal property (excluding Landlord's
Personal Property), including all components thereof, now and hereafter located
in, on or used in connection with, and permanently affixed to or incorporated
into the Improvements, including, without limitation, all furnaces, boilers,
heaters, electrical equipment, heating, plumbing, lighting, ventilating,
refrigerating, incineration, air and water pollution control, waste disposal,
air-cooling and air-conditioning systems and apparatus, sprinkler systems and
fire and theft protection equipment, built-in oxygen and vacuum systems, towers
and other devices for the transmission of radio, television and other signals,
all of which, to the greatest extent permitted by law, are hereby deemed by the
parties hereto to constitute real estate, together with all replacements,
modifications, alterations and additions thereto.
"Fourth Percentage Rent Period" means the period from January 1, 2007
though December 31, 2007.
"Fretus" has the meaning set forth in the introductory paragraph.
"Fretus Operating Agreement" means the Amended and Restated Operating
Agreement of Fretus dated September 26, 2002 among the members of Fretus, as the
same may be amended, modified or restated from time to time in accordance with
the terms thereof.
"General Additional Rent" has the meaning set forth in 2.3.
"Government Authorizations" means all permits, licenses, approvals,
consents, and authorizations required 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] the permits,
licenses, provider agreements and approvals required for licensure and operation
of each Facility in accordance with its respective Facility Uses and, if
applicable, certified as a provider under the federal Medicare and state
Medicaid programs; [iii] environmental, ecological, coastal, wetlands, air, and
water permits, licenses, and consents; [iv] curb cut, subdivision, land use, and
planning permits, licenses, approvals and consents; [v] building, sign, fire,
health, and safety permits, licenses, approvals, and consents; and [vi]
architectural reviews, approvals, and consents required under restrictive
covenants.
"Gross Revenues" shall mean all revenues received or receivable from
or by reason of the operation of the Facilities including, without limitation,
all resident revenues received or receivable for the use of or otherwise by
reason of all rooms, beds and other facilities provided, meals service, services
performed, space or facilities subleased or goods sold on the Leased Property,
including without limitation, and except as provided below, any consideration
received under any subletting, licensing or other arrangements with any person
or entity relating to the possession or use of any portion of the Leased
Property and all revenues from all ancillary services provided by Tenant;
provided, however, that Gross Revenues shall not include non-operating revenues
such as interest income or gain from the sale of assets not sold in the ordinary
course of business; and provided, further, that there shall be deducted from
such revenues:
(i) contractual allowances (relating to any period during the Term of this
Lease) for billings not paid by or received from the appropriate governmental
authority or third party payor;
(ii) allowances according to GAAP for uncollectible accounts;
(iii) all proper resident billing credits and adjustments according to GAAP
relating to health care accounting;
(iv) federal, state or local excise taxes and any tax based upon or measured
by said Gross Revenues which is added to or made a part of the amount billed to
the resident or other recipient of such services or goods, whether included in
the billing or stated separately;
;and provided, further, that Gross Revenues shall include, as to residents
or third party payors who receive discounts or as to residents who receive free
care as a condition to Tenant's participation in any federal, state or local
governmental program, only the revenues actually received or receivable from
such residents. To the extent that the Leased Property is subleased by Tenant,
Gross Revenues shall be calculated for all purposes of this Lease by including
the Gross Revenues of such sublessees with respect to the affected portion of
the Leased Property but excluding the rent received or receivable by Tenant from
or under such sublease.
"Gross Revenues Threshold" means Ten Million Eight Hundred Seventy
Five Thousand and no/100 Dollars ($10,875,000) per quarter and Forty Three
Million Five Hundred Thousand and no/100 Dollars ($43,500,000) per annum.
"Guarantor" shall mean collectively, Baty and Emeritus.
"Guaranty" shall mean the Guaranty of Guarantor of even date herewith
with respect to the obligations of Tenant hereunder.
"Hazardous Materials" means any substance [i] the presence of which
poses a hazard to the health or safety of persons on or about the Land,
including, but not limited to, asbestos containing materials; [ii] which
requires removal or remediation under any Environmental Law, including, without
limitation, any substance which is toxic, explosive, flammable, radioactive, or
otherwise hazardous; or [iii] which is regulated under or classified under any
Environmental Law as hazardous or toxic, including, but not limited to, any
substance within the meaning of "hazardous substance", "hazardous material",
"hazardous waste", "toxic substance", "regulated substance", "solid waste", or
"pollutant" as defined in any Environmental Law.
"Impositions" has the meaning set forth in 3.4.
"Imposition Amounts" has the meaning set forth in 3.2.
"Improvements" means all buildings, structures, Fixtures and other
improvements of every kind on any portion of the Land, including, but not
limited to, the Pre-Approved Improvements, alleys, sidewalks, utility pipes,
conduits and lines (on-site and off-site), parking areas and roadways
appurtenant to such buildings and structures, now or hereafter situated upon any
portion of the Land.
"Initial Equity" means the sum of [i] the amount invested by Landlord
in connection with its acquisition and financing of the Leased Property in the
amount of $26,646,425 and [ii] the Pre-Approved Improvements Budgeted Cost,
which amounts are allocated among the Facilities in the manner set forth in
Exhibit D.
"Initial Facility Names" means with respect to each Facility, the Facility
Name in use on the Effective Date as set forth on the attached Exhibit C.
"Initial Financing"means debt secured by the Leased Property as of the
Effective Date in the original principal amount of $45,000,000, which is
allocated among the Facilities in the manner set forth in Exhibit D.
"Initial Term" has the meaning set forth in 1.2.
"Interim Payment Periods" has the meaning set forth in 2.2(a).
"Knowledge" means the actual knowledge of Raymond R. Brandstrom, Daniel R.
Baty and William M. Shorten based on information coming to their attention in
the ordinary course of their capacities as directors, officers and/or employees
of Tenant and/or Emeritus, without any duty of independent investigation.
"Land" means the real property described in Exhibit B attached hereto.
"Landlord" has the meaning set forth in the introductory paragraph.
"Landlord Affiliate" means any person, corporation, partnership,
limited liability company, trust, or other legal entity that, directly or
indirectly, controls, or is controlled by, or is under common control with
Landlord. "Control" (and the correlative meanings of the terms "controlled by"
and "under common control with") means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
such entity.
"Landlord's Personal Property" means all Personal Property owned by
Landlord on the Effective Date and located at the Facility, including, without
limitation, all personal property listed on the attached Exhibit E, together
with any and all replacements thereof, and all Personal Property that pursuant
to the terms of this Lease becomes the property of Landlord during the Term.
"Landlord Property Reports" means the structural and environmental
reports prepared for Landlord and described in Exhibit F hereto.
"Lease" means this Master Lease Agreement, as amended from time to
time.
"Lease Documents" means this Lease and all documents executed by
Landlord and Tenant relating to this Lease or the Facility.
"Lease Termination Cash Flow" means the (i) Portfolio Cash Flow less
(ii) Base Rent payments, in the twelve (12) calendar month period ending
immediately prior to the Lease Termination Date.
"Lease Termination Date" means the date this Lease terminates with
respect to all or any portion of the Leased Property other than upon (i) the
expiration of the Term or (ii) the earlier termination thereof by Landlord as a
result of the occurrence of an Event of Default.
"Lease Termination Fee" means (A) in the case of the termination of the
Lease with respect to all of the Leased Property, (i) zero, in the event the
Lease Termination Cash Flow is less than the Lease Termination Threshold and
(ii) in the event that the Lease Termination Cash Flow is equal to or greater
than the Lease Termination Threshold, the sum of (X) Three Million Five Hundred
Thousand and no/100 Dollars ($3,500,000) plus (Y) the product of (I) any Lease
Termination Cash Flow in excess of the Lease Termination Threshold multiplied by
(II) five (5) and (B) in the case of the termination of the Lease with respect
to less than all of the Leased Property such amount as may be agreed upon by
Landlord and Tenant or as may be determined by arbitration in accordance with
the terms of this Lease.
"Lease Termination Threshold" means, (A) in the case of the termination of the
Lease as to all of the Leased Property, Three Million Five Hundred Thousand and
no/100 Dollars ($3,500,000) and (B) in the case of the termination of the Lease
with respect to less than all of the Leased Property such amount as may be
agreed upon by Landlord and Tenant or as may be determined by arbitration in
accordance with the terms of this Lease.
"Lease Year" means each consecutive period of 365 or 366 days
throughout the Term. The first Lease Year commences on the Commencement Date
and expires on the day before the first anniversary of the Commencement Date.
"Leased Property" means all of the Land, Improvements, Related Rights
and Landlord's Personal Property from time to time leased by Landlord to Tenant
under the terms of this Lease.
"Legal Requirements" means all laws, regulations, rules, orders,
writs, injunctions, decrees, certificates, requirements, agreements, conditions
of participation and standards of any federal, state, county, municipal or other
governmental entity, administrative agency, insurance underwriting board,
architectural control board, private third-party payor, accreditation
organization, or any restrictive covenants affecting a Facility or otherwise
applicable to the development, construction, condition, use and operation of the
Facility for the Facility Uses, including, but not limited to, [i] zoning,
building, fire, health, safety, sign, and subdivision regulations and codes;
[ii] certificate of need laws (if applicable); [iii] licensure to operate as
each Facility in accordance with its respective Facility Uses; [iv] Medicare and
Medicaid certification requirements (if applicable); [v] the ADA; [vi] any
Environmental Laws; and [vii] requirements, conditions and standards for
participation in third-party payor insurance programs (if applicable).
"Lesser Price Offer" has the meaning set forth in 13.2.
"MAI Appraiser" has the meaning set forth in 13.5.
"Marketing Period" has the meaning set forth in 13.2.
"Material Modification" has the meaning set forth in 13.7.
"Material Obligation" means [i] any indebtedness in excess of
$250,000.00 with respect to any equipment at the Facility secured by a security
interest in or a lien, deed of trust or mortgage on any of the Leased Property
(or any part thereof, including any Personal Property) and any agreement
relating thereto; [ii] any obligation or agreement that is material to the
construction or operation of the Facility or that is material to Tenant's
business or financial condition and where a breach thereunder, if not cured
within any applicable cure period, would have a material adverse affect on the
financial condition of Tenant or the results of operations at the Facility;
[iii] any unsecured indebtedness or lease of Tenant that has an outstanding
principal balance or obligation of at least $250,000.00 and any agreement
relating thereto.
"Maximum Assumed Debt Service Amount" has the meaning set forth in
13.7(a).
"Minimum Purchase Price" shall mean One Hundred Forty Two Million
Eight Hundred Thousand and no/100 Dollars ($142,800,000).
"Mold Remediation Reports" shall mean those reports dated September 25,
2002 and issued by EMG with respect to the mold located at certain of the
Facilities.
"Monetary Liens" has the meaning set forth in 13.6.
"Mortgage Debt" means the principal amount of the debt secured by the
Leased Property.
"New Lease" has the meaning set forth in 13.4(c).
"Non-Texas Facilities" means all of the Facilities located in [i]
Chandler, Arizona, [ii] Mesa, Arizona, [iii] Birmingham, Alabama, [iv] Las
Vegas, Nevada, [v] Ft. Wayne, Indiana, [vi] Indianapolis, Indiana, [vii] Orange
Park, Florida, [viii] Jacksonville, Florida, [ix] Melbourne, Florida, [x]
Orlando, Florida and [xi] Winter Springs, Florida.
"Obligor Group Obligations" means all payment and performance
obligations of Tenant to Landlord or any Landlord Affiliate, including, but not
limited to, all obligations under this Lease, any loans extended to Tenant by
Landlord or any Landlord Affiliate and all documents executed by Tenant in favor
of Landlord or any Landlord Affiliate in connection with this Lease, any loan or
any other obligation.
"Offer Notice" has the meaning set forth in 13.2.
"Officer's Certificate" means a certificate of Tenant signed by an
officer authorized to do so by the board of directors or bylaws of its general
partner or member, as applicable.
"Option Exercise Period" means the period commencing on October 1,
2005 and ending on September 30, 2007.
"Option to Purchase" has the meaning set forth in 13.5.
"Other Liens" has the meaning set forth in 13.6.
"Organization State" means the State in which an entity is organized.
"Organizational Documents" means [i] for a corporation, its Articles
of Incorporation certified by the Secretary of State of the Organization State,
as amended to date, and its Bylaws certified by such entity, as amended to date;
[ii] for a partnership, its Partnership Agreement certified by such entity, as
amended to date, and the Partnership Certificate, certified by the appropriate
authority (if applicable), as amended to date; and [iii] for a limited liability
company, its Articles of Organization certified by the Secretary of State of the
Organization State, as amended to date, and its Operating Agreement certified by
such entity, as amended to date.
"Outstanding Equity" means the sum of [i] Initial Equity plus [ii] the
Pre-Approved Improvements Cost Overruns, plus [iii] any additional capital
contributions or loans made by the members of Landlord to cover the costs
incurred by Landlord (A) to cure an Event of Default under this Lease, or (B) to
cure a default under the documents evidencing the Mortgage Debt which arises
from an Event of Default under this Lease, or (C) which Landlord reasonably
determines is necessary to prevent the occurrence of a default under the
documents evidencing the Mortgage Debt (other than a default caused solely by
the acts or omissions of Landlord or its members) or (D) to fund any amounts due
under the documents evidencing the Mortgage Debt, whether in the form of escrow
payments or mandatory prepayments of principal (and not funded by Tenant
pursuant to 15.4 or caused solely by the acts or omissions of Landlord or its
members), in order to ensure compliance with the financial covenants contained
therein or to pay any exit or termination fees due upon the prepayment or
payment at maturity of the Mortgage Debt with respect to any or all of the
Leased Property (and not funded either by Tenant pursuant to 15.4 or from the
proceeds of any Mortgage Debt secured in connection with the refinancing of the
then outstanding Mortgage Debt) less [iv] any portion of the Initial Equity or
previously Outstanding Equity which (X) upon receipt by Fretus from Landlord has
been paid by Fretus to its members as distributions of Adjusted Net Capital
Proceeds (as defined in the Fretus Operating Agreement) under the terms of the
Fretus Operating Agreement or (Y) is reimbursed to Landlord by Tenant, in the
case of a payment made under clauses [iii](A), (B) or (C), or (Z) is returned to
Landlord by the holder of the Mortgage Debt, in the case of a payment made under
clause [iii](D) or in the case of any funds deposited into escrow with the
holder of the Mortgage Debt at the time of the closing of the transaction
evidencing the Mortgage Debt; provided, however, that distributions to the
members of Landlord of Net Ordinary Cash Flow (as defined in Landlord's
Operating Agreement) pursuant to the terms of Landlord's Operating Agreement
shall not serve to reduce Outstanding Equity and provided further, in the event
the Leased Property or any portion thereof is sold and Tenant shall have elected
under Section 13.3 to maintain its leasehold interest in said sold Leased
Property or portion thereof pursuant to the Lease or a replacement lease [x] the
determination of Outstanding Equity with respect to the sold Leased Property or
portion thereof shall not include any amounts paid by the third party purchaser
but instead shall remain, as to such purchaser, the Outstanding Equity of the
sold Leased Property or portion thereof immediately prior to the closing of such
sale, and [y] the determination of Outstanding Equity with respect to the
portion of the Leased Property not so sold shall not include the Sales Profits
in the calculation of Net Capital Proceeds under clause [iii](X) above. "Sales
Profits" as used herein shall mean the amount by which the Net Capital Proceeds
arising from such sale exceeds the Outstanding Equity of the sold Leased
Property or portion thereof immediately prior to the closing of such sale.
"Part A Base Rent" means an amount equal to the Landlord's debt
service payments with respect to the Mortgage Debt; provided, however, in the
case of the sale of less than all of the Leased Property, the amount of the
Mortgage Debt used to calculate the Part A Base Rent with respect to the
remaining portion of the Leased Property shall not be reduced by any prepayment
premium which Landlord is required to pay at the time of such sale (even though
such prepayment premium reduces the outstanding principal balance of the
Mortgage Debt) and the Part A Base Rent due under any New Lease executed with
respect to the sold portion of the Leased Property shall be determined in the
manner set forth in 13.4(d); and provided, further, that in the case of the
refinancing of less than all of the Leased Property and the concurrent execution
of a Refinancing Lease with respect to the affected portion of the Leased
Property, the amount of the Mortgage Debt used to calculate the Part A Base Rent
with respect to the remaining portion of the Leased Property shall be reduced by
any prepayment premium which Landlord is required to pay at the time of such
refinancing transaction and the Part A Base Rent due under any Refinancing Lease
shall be based upon the Mortgage Debt allocated in accordance with the terms of
this Lease to the portion of the Leased Property subject to said Refinancing
Lease, subject, however, to the limitations set forth in 13.7(a).
"Part B Base Rent" means an amount sufficient to provide Landlord with
a 12% annual return on the Outstanding Equity.
"Partial Taking" has the meaning set forth in 10.2.
"Percentage Rent" has the meaning set forth in 2.2.
"Percentage Rent Calculation" has the meaning set forth in 2.2.
"Percentage Rent Commencement Date" means October 1, 2003.
"Percentage Rent Period" means, as applicable, the First Percentage Rent
Period, the Second Percentage Rent Period, the Third Percentage Rent Period, the
Fourth Percentage Rent Period, the Fifth Percentage Rent Period or any
Subsequent Percentage Rent Period.
"Permitted Exceptions" means all easements, liens, encumbrances,
restrictions, agreements and other title matters existing as of the Effective
Date or thereafter created or consented to by Tenant, including, without
limitation, the exceptions to title set forth on Exhibit G attached hereto, and
any sublease of any portion of the Leased Property made in complete accordance
with Article 18.
"Permitted Liens" means [i] liens granted to Landlord; [ii] liens
customarily incurred by Tenant in the ordinary course of business for items not
delinquent, including mechanic's liens and deposits and charges under worker's
compensation laws; [iii] liens for taxes and assessments not yet due and
payable; [iv] any lien, charge, or encumbrance which is being contested in good
faith pursuant to this Lease; [v] the Permitted Exceptions; and [vi] purchase
money financing and capitalized equipment leases for the acquisition of personal
property provided, however, that Landlord obtains a nondisturbance agreement
from the purchase money lender or equipment lessor in form and substance as may
be satisfactory to Landlord if the original cost of the equipment exceeds
$250,000.00 per Facility.
"Personal Property" means all machinery, equipment, furniture,
furnishings, movable walls or partitions, computers (and all associated
software), trade fixtures and other tangible personal property (but excluding
consumable inventory and supplies owned by Tenant) used in connection with the
Leased Property, together with all replacements and alterations thereof and
additions thereto, except items, if any, included within the definition of
Fixtures or Improvements.
"Portfolio Cash Flow" has the meaning set forth in 15.7.1.
"Portfolio Coverage Ratio" has the meaning set forth in 15.7.1.
"Pre-Approved Improvements" means those improvements to the Facilities
described in Exhibit H.
"Pre-Approved Improvements Budgeted Cost" means the cost of each of
the Pre-Approved Improvements as set forth in Exhibit H.
"Pre-Approved Improvements Cost Overruns" means the cost of each of
the Pre-Approved Improvements in excess of the Pre-Approved Improvements
Budgeted Cost, which Landlord agrees to fund in its sole discretion.
"Protected Period" means the period from the Commencement Date to the
last day of the sixtieth (60th) month after the Commencement Date.
"Purchase Agreement" shall mean that Purchase and Sale Contract dated
May 24, 2002 among Fretus Investors LLC, as Purchaser, and Seller, as amended.
"Purchase Notice" has the meaning set forth in 13.5.
"Purchase Price Offset" means (i) zero, in the event the Lease Termination
Cash Flow is less than the Lease Termination Threshold and (ii) in the event
that the Lease Termination Cash Flow is equal to or greater than the Lease
Termination Threshold, the sum of (A) Three Million Five Hundred Thousand and
no/100 Dollars ($3,500,000) plus (B) the product of (I) any Lease Termination
Cash Flow in excess of the Lease Termination Threshold multiplied by (II) five
(5).
"Qualified Capital Expenditures" means the expenditures capitalized on
the books of Tenant for any of the following: replacement of furniture,
fixtures and equipment, including refrigerators, ranges, major appliances,
bathroom fixtures, doors (exterior and interior), central air conditioning and
heating systems (including cooling towers, water chilling units, furnaces,
boilers and fuel storage tanks) and replacement of siding; roof replacements,
including replacements of gutters, downspouts, eaves and soffits; repairs and
replacements of plumbing and sanitary systems; overhaul of elevator systems;
repaving, resurfacing and sealcoating of sidewalks, parking lots and driveways;
repainting of entire building exterior and normal maintenance and repairs needed
to maintain the quality and condition of the Facility in accordance with the
requirements of this Lease, but excluding Alterations.
"Receivables" means [i] all of Tenant's rights to receive payment for
providing resident care and services at the Facility as set forth in any
accounts, contract rights, and instruments, and [ii] those documents, chattel
paper, inventory proceeds, provider agreements, participation agreements, ledger
sheets, files, records, computer programs, tapes, and agreements relating to
Tenant's rights to receive payment for providing resident care services at the
Facility.
"Reconciliation Report" has the meaning set forth in 2.2(b).
"Refinancing Lease" has the meaning set forth in 13.7.
"Related Rights" means all easements, rights (including bed operating
rights) and appurtenances relating to the Land and the Improvements.
"Renewal Term" has the meaning set forth in 1.2.
"Rent" means Base Rent, General Additional Rent, Default Rent and
Percentage Rent.
"Rent Schedule" means the schedule issued by Landlord to Tenant
showing the Base Rent to be paid by Tenant pursuant to the terms of this Lease,
as such schedule is amended from time to time by Landlord. The initial Rent
Schedule is attached to this Lease as Schedule 1 or, after review and approval
by Tenant, will be attached following Closing if the Rent Schedule cannot be
determined until the day of Closing.
"Replacement Operator" has the meaning set forth in 15.9.1.
"Review Period" has the meaning set forth in 13.2.
"Sale Price" has the meaning set forth in 13.2.
"Sale Property" has the meaning set forth in 13.1.
"Sales Profits" has the meaning set forth in the definition of
Outstanding Equity.
"Second Percentage Rent Period" means the period from January 1, 2005
through December 31, 2005.
"Secured Party" has the meaning set forth in 24.1.
"Seller" means collectively, Forum-NGH, Inc., MSLS Investments 20,
Inc. and Meridian-Indianapolis, L.L.C.
"Subject Property" has the meaning set forth in 13.1
"Subsequent Percentage Rent Period" means each twelve month period
commencing on January 1 and ending on December 31, with the first Subsequent
Percentage Rent period commencing on January 1, 2008.
"Tenant" has the meaning set forth in the introductory paragraph of
this Lease.
"Tenant and Guarantor Financial Reporting" means certain financial
statements and reports with respect to the operating results and financial
condition of Tenant and Guarantor in the form attached hereto as Exhibit I and
which are to be delivered to Landlord in accordance with the reporting
requirements set forth in Exhibit I.
"Term" has the meaning set forth in 1.2.
"Texas Facilities" means the Facilities located in [i] Houston, [ii]
El Paso, [iii] Plano, [iv] Farmers Branch, [v] Hollywood Park, [vi] Austin,
[vii] San Antonio, [viii] Sugar Land and [ix] Fort Worth, Texas
"Third Party Offer" has the meaning set forth in 13.2.
"Third Percentage Rent Period" means the period from January 1, 2006
through December 31, 2006.
"Total Taking" has the meaning set forth in 10.1.
"Utility Charges" has the meaning set forth in 3.7.
"Valid Contract" has the meaning set forth in 13.2.
"WARN Act" means the Worker Adjustment and Retraining Notification
Act.
1.4. Master Lease Provisions. Tenant acknowledge and agrees that this
-------------------------
Lease constitutes a single, indivisible lease of the entire Leased Property, and
the Leased Property constitutes a single economic unit. Landlord acknowledges
and agrees that the Texas Facilities shall be leased to ESC and the Non-Texas
Facilities shall be leased to Properties and accordingly that any and all
references herein to Tenant shall mean ESC with respect to the Texas Facilities
and Properties with respect to the Non-Texas Facilities. Notwithstanding the
foregoing, Tenant reaffirms and agrees that this Lease is a single, indivisible
lease of the entire Leased Property and that ESC and Properties shall be jointly
and severally liable with respect to each and every Tenant obligation under this
Lease. The Rent payable hereunder and all other provisions contained herein have
been negotiated and agreed upon based on the intent to lease the entirety of the
Leased Property as a single and inseparable transaction, and such Rent and other
provisions would have been materially different had the parties intended to
enter into separate leases or a divisible lease. Any Event of Default under
this Lease shall constitute an Event of Default as to the entire Leased
Property.
In order to induce Landlord to enter into this Lease, to the extent
permitted by law, each of Tenant:
(a) Agrees, acknowledges and is forever estopped from asserting to the
contrary that the statements set forth in the preceding paragraph of this
section are true, correct and complete;
(b) Agrees, acknowledges and is forever estopped from asserting to the
contrary that this Lease is a single master lease pursuant to which the
collective Leased Property are demised as a whole to Tenant;
(c) Agrees, acknowledges and is forever estopped from asserting to the
contrary that if, notwithstanding the provisions of this Section, this Lease
were determined or found to be in any proceeding, action or arbitration under
state or federal bankruptcy, insolvency, debtor relief or other applicable laws
to constitute multiple leases demising multiple properties, such multiple leases
could not by the debtor, trustee, or any other party, be selectively or
individually assumed, rejected or assigned;
(d) Forever knowingly waives and relinquishes any and all rights under or
benefits of the provisions of the Federal Bankruptcy Code Section 365 (11 U.S.C.
365) or any successor or replacement thereof or any analogous state law, to
selectively or individually assume, reject or assign the multiple leases
comprising this Lease following a determination or finding in the nature of that
described in the foregoing clause (c).
1.5. Related Party Provisions. Each of Tenant and Emeritus hereby
--------------------------
acknowledges that Baty has a direct or indirect ownership interest in the entity
or entities comprising Landlord and in each of Tenant and Emeritus and that it
has been advised that the terms and conditions governing Baty's ownership
interest in the entities comprising Landlord is governed by the Landlord's
Operating Agreement. In order to induce Landlord to enter into this Lease, to
the extent permitted by law, each of Tenant and Emeritus:
(a) Agrees, acknowledges and is forever estopped from asserting that any
fiduciary duties owed by the other members of the entity or entities comprising
Landlord to Baty in his capacity, directly or indirectly, as a member of such
entity or entities extends in any way to the separate and independent
relationship of Landlord to Tenant or Emeritus arising from Landlord's capacity
as the Landlord under this Lease;
(b) Agrees, acknowledges and is forever estopped from asserting that any of
the benefits or protections granted to Landlord under the terms of this Lease
are diminished, impaired or affected in any way by virtue of Landlord's
relationship with Baty or the relationship of the members of Landlord with Baty
pursuant to the Landlord's Operating Agreement or any other agreement, document
or instrument executed by the members of Landlord;
(c) Agrees, acknowledges and is forever estopped from asserting that,
as a result of the ownership interest which Baty has, directly or indirectly, in
each of Tenant, Emeritus and Landlord, Landlord is not entitled to take, or is
required to refrain from taking, any action otherwise permitted under this Lease
or any of the documents executed in furtherance thereof or which would otherwise
be permitted but for such common ownership interests;
(d) Agrees, acknowledges and is forever estopped from asserting as a
defense or counterclaim to any action taken by Landlord under this Lease the
common ownership interest which Baty has, directly or indirectly, in each of
Tenant, Emeritus and Landlord or any defense which Guarantor may have against
Landlord in its capacity as a direct or indirect member of Landlord.
ARTICLE 2: RENT
2.1 Base Rent. Tenant shall pay the Part A Base Rent in arrears
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and the Part B Base Rent in advance in consecutive monthly installments payable
on the fourth (4th) day of each month during the Term (each a "Base Rent Payment
Date") commencing on the Commencement Date; provided, however, if the Effective
Date is not the first day of a month, Tenant shall pay Landlord the Base Rent on
the Effective Date for the partial month, i.e., for the period commencing on the
Effective Date and ending on the day before the Commencement Date, and if the
last day of the Term is not the last day of a month, Tenant shall pay Landlord
the Base Rent for the partial month; and provided, further, that Landlord shall
provide Tenant with written notice by no later than the first day of each month
of the amount of Base Rent due on upcoming Base Rent Payment Date; and provided,
further, that in the event that Landlord overstates or understates the amount of
the Base Rent so due, Landlord and Tenant agree to cooperate in adjusting future
Base Rent payments to duly compensate Landlord for any such shortfall or
reimburse Tenant for any such overpayment but no such overpayment or
underpayment shall be subject to any late fees or default interest provided for
in this Lease.
2.2 Percentage Rent. In addition to the Base Rent, from and after
----------------
the Percentage Rent Commencement Date, Tenant shall pay to Landlord on a
quarterly basis in arrears, an amount equal to the product of the Excess Gross
Revenues of the Facilities in the each such quarter multiplied by the Applicable
Percentage in accordance with the following procedures:
(a) Within forty five (45) days after the end of each of the four
quarters of each Percentage Rent Period, Tenant shall deliver to Landlord an
Officer's Certificate setting forth the Excess Gross Revenues of the Facilities
for such quarter and the Percentage Rent, if any, due with respect to such
quarter, accompanied by the amount of the Percentage Rent determined by Tenant
to be due for such quarter.
(b) Within ninety (90) days after the end of each Percentage Rent Period,
Tenant shall deliver to Landlord an Officer's Certificate setting forth the
Excess Gross Revenues of the Facilities for the Percentage Rent Period and the
Percentage Rent payment determined by Tenant to be due for the Percentage Rent
Period, which Officer's Certificate shall reflect any over or underpayments made
with respect to the Percentage Rent previously paid by Tenant in the Percentage
Rent Period (the "Reconciliation Report"). In the event the amount paid by
Tenant in the Percentage Rent Period is less than the amount due from Tenant for
the Percentage Rent Period, as reflected in the Reconciliation Report, then
concurrently with the delivery of the Reconciliation Report, Tenant shall remit
to Landlord any shortfall, along with interest thereon at the Default Rate,
calculated from the date the payment should have been made to the date paid, if
the amount of the shortfall is greater than five (5%) of the total Percentage
Rent due with respect to such Percentage Rent Period. In the event the amount
paid by Tenant in the Percentage Rent Period is more than the total Percentage
Rent due from Tenant for the Percentage Rent Period, as reflected in the
Reconciliation Report, then Tenant shall be entitled to a credit in the amount
of such excess against its Percentage Rent payments coming due for the following
Percentage Rent Period.
(c) Landlord, at its own expense, except as otherwise provided herein,
shall have the right from time to time by its accountants or representatives to
review and/or audit the information set forth in the Officer's Certificates
referred to in 2.2(a) and (b) and in connection with such review and/or audit
to examine Tenant's books and records with respect thereto, subject to any
prohibitions or limitations on disclosure of any such data under applicable law
or regulation including any duly enacted Patients' Bill of Rights or similar
legislation, or as may be necessary to preserve the confidentiality of the
Facility-resident relationship and the physician-patient privilege. If any such
review and/or audit discloses a deficiency in the payment of Percentage Rent,
Tenant shall forthwith pay to Landlord the amount of the deficiency together
with interest thereon at the Default Rate from the date the payment should have
been made to the date paid; provided, however, any dispute concerning such
deficiency shall be resolved through arbitration in accordance with the
procedures set forth in 25.26 hereof; provided, further, that as to any audit
that is commenced more than two (2) years after the end of a Percentage Rent
Period, the deficiency, if any, with respect to the Percentage Rent for such
Percentage Rent Period shall bear interest as permitted herein only from the
date such determination of deficiency is made unless such deficiency is the
result of gross negligence or willful misconduct of Tenant. If any such review
and/or audit disclosed that the Gross Revenues actually received by Tenant for
any Lease Year exceed those reported by Tenant by more than five (5%) percent,
Tenant shall pay the cost of such review and/or audit. Any proprietary
information obtained by Landlord pursuant to such review and/or audit shall be
treated as confidential, except that such information may be used, subject to
appropriate confidentiality safeguards, in any litigation or arbitration
proceedings between the parties and except further that Landlord may disclose
such information to prospective lenders, purchasers, investors, attorneys,
consultants or as otherwise required by law.
2.3 General Additional Rent. In addition to Base Rent and
-------------------------
Percentage Rent, Tenant shall pay all other amounts, liabilities, obligations
and Impositions which Tenant assumes or agrees to pay under this Lease including
any fine, penalty, interest, charge and cost which may be added for nonpayment
or late payment of such items (collectively the "General Additional Rent").
2.4 Place of Payment of Rent. Tenant shall make all payments of
--------------------------
Rent to Landlord by electronic wire transfer in accordance with the wiring
instructions set forth in Exhibit J attached hereto, subject to change in
accordance with other written instructions provided by Landlord from time to
time.
2.5 Net Lease. This Lease shall be deemed and construed to be an
----------
"absolute net lease", and Tenant shall pay all Rent and other charges and
expenses in connection with the Leased Property throughout the Term, without
deduction, recoupment or set-off. Landlord shall have all legal, equitable and
contractual rights, powers and remedies provided either in this Lease or by
statute or otherwise in the case of nonpayment of the Rent.
2.6 No Termination, Abatement, Etc. Except as otherwise
----------------------------------
specifically provided in this Lease, Tenant shall remain bound by this Lease in
accordance with its terms. Tenant shall not, without the consent of Landlord,
modify, surrender or terminate the Lease, nor seek nor be entitled to any
abatement, deduction, deferment or reduction of Rent, or set-off or recoupment
against the Rent. Except as expressly provided in this Lease, the obligations
of Landlord and Tenant shall not be affected by reason of [i] any damage to, or
destruction of, the Leased Property or any part thereof from whatever cause or
any Taking (as hereinafter defined) of the Leased Property or any part thereof;
[ii] the lawful or unlawful prohibition of, or restriction upon, Tenant's use of
the Leased Property, or any part thereof, the interference with such use by any
person, corporation, partnership or other entity, or by reason of eviction by
paramount title; [iii] any claim which Tenant has or might have against Landlord
or by reason of any default or breach of any warranty by Landlord under this
Lease or any other agreement between Landlord and Tenant, or to which Landlord
and Tenant are parties; [iv] any bankruptcy, insolvency, reorganization,
composition, readjustment, liquidation, dissolution, winding up or other
proceeding affecting Landlord or any assignee or transferee of Landlord; or [v]
any other cause, whether similar or dissimilar to any of the foregoing, other
than a discharge of Tenant from any such obligations as a matter of law. Except
as otherwise specifically provided in this Lease, Tenant hereby specifically
waives all rights, arising from any occurrence whatsoever, which may now or
hereafter be conferred upon it by law [a] to modify, surrender or terminate this
Lease or quit or surrender the Leased Property or any portion thereof; or [b]
entitling Tenant to any abatement, reduction, suspension or deferment of the
Rent or other sums payable by Tenant hereunder. The obligations of Landlord and
Tenant hereunder shall be separate and independent covenants and agreements and
the Rent and all other sums payable by Tenant hereunder shall continue to be
payable in all events unless the obligations to pay the same shall be terminated
pursuant to the express provisions of this Lease or by termination of this Lease
other than by reason of an Event of Default. Nothing in this 2.6 shall be
construed to limit any right which Tenant may have to bring a separate action
against Landlord for any claim which Tenant may have or allege to have against
Landlord. Further, in the event of the occurrence of the events set forth in
clause [ii] of this Section 2.6, Landlord agrees to assign to Tenant any rights
which it may have against any title insurer in order to enable Tenant to seek to
recover damages from such title insurer as a result thereof.
2.7. Default Interest. In addition to any interest which may be
-----------------
due pursuant to 2.2, any Rent which is not paid when due shall bear interest at
the Default Rate from the date due to the date paid in full.
ARTICLE 3: IMPOSITIONS AND UTILITIES
3.1 Payment of Impositions. Landlord shall pay all Impositions
------------------------
that may be levied or become a lien on the Leased Property or any part thereof
at any time (whether prior to or during the Term), without regard to prior
ownership of said Leased Property, before any fine, penalty, interest, or cost
is incurred; provided, however, Landlord may contest any Imposition in
accordance with 3.7; provided, however, to the extent any such Impositions may
be paid without penalty in installments Landlord shall have the right to pay the
same over the longest permitted installment period. Landlord shall deliver to
Tenant [i] copies of the invoice for such Imposition and the check delivered for
payment thereof concurrently with the delivery thereof by Landlord to the
applicable taxing or other authority; and [ii] not more than 30 days after the
due date of each Imposition, a copy of the official receipt evidencing such
payment or other proof of payment satisfactory to Tenant. Landlord's obligation
to pay such Impositions shall be deemed absolutely fixed upon the date such
Impositions become a lien upon the Leased Property or any part thereof.
Landlord, at its expense, shall prepare and file all tax returns and reports in
respect of any Imposition as may be required by governmental authorities.
Landlord shall be entitled to any refund due from any taxing authority with
respect to any Impositions paid by Landlord, subject to Landlord's obligation to
forward the same to Tenant if no Event of Default shall have occurred hereunder
and be continuing. Landlord shall be entitled to retain any refund from any
taxing authority if an Event of Default has occurred and is continuing. Any
refunds retained by Landlord due to an Event of Default shall be applied as
provided in 8.8. Landlord and Tenant shall, upon request of the other, provide
such data as is maintained by the party to whom the request is made with respect
to the Leased Property as may be necessary to prepare any required returns and
reports. In the event governmental authorities classify any property covered by
this Lease as personal property, Landlord shall file all personal property tax
returns in such jurisdictions where it may legally so file. Landlord, to the
extent it possesses the same, and Tenant, to the extent it possesses the same,
will provide the other party, upon request, with cost and depreciation records
necessary for filing returns for any property so classified as personal
property. Landlord may, at Landlord's option, or at Tenant's direction, and at
Landlord's cost and expense (subject to Tenant's reimbursement obligation as set
forth in 3.2, protest, appeal or institute such other proceedings as Landlord
or Tenant may deem appropriate to effect a reduction of real estate or personal
property assessments and Tenant, at Landlord's expense as aforesaid, shall fully
cooperate with Landlord in such protest, appeal, or other action.
3.2. Tenant's Reimbursement Obligation. Any and all amounts paid by
-----------------------------------
Landlord under 3.1 shall hereinafter be referred to as "Imposition Amounts."
Tenant shall reimburse Landlord for all Imposition Amounts paid by Landlord
within thirty (30) days after receipt of billings accompanied by copies of a
bill therefore and payments thereof which identify the Imposition or related
costs or expenses with respect to which such payments are made. Tenant shall
not, however, be required to reimburse Landlord for any capital gains tax or any
tax based on net income imposed on Landlord by any governmental entity other
than the capital stock and franchise taxes described in clause [i] of Section
3.4.
3.3. Proration of Impositions. Impositions imposed in respect to the
--------------------------
tax-fiscal period during which the Term commences or terminates shall be
adjusted and prorated between Landlord and Tenant as of the Effective Date or
termination date, as applicable, whether or not such Imposition is imposed
before or after such commencement or termination, and Tenant's obligation to pay
the Imposition Amount as to its prorated share thereof shall survive such
termination. Tenant's prorata liability shall be calculated on the basis of a
365-day year to account for any fractional portion of a tax year included in the
Term at its commencement and expiration.
3.4 Definition of Impositions. "Impositions" means, collectively, [i]
--------------------------
taxes (including, without limitation, all capital stock and franchise taxes of
Landlord imposed by the Facility State or any governmental entity in the
Facility State due to this lease transaction or Landlord's ownership of the
Leased Property and the income arising therefrom, or due to Landlord being
considered as doing business in the Facility State because of Landlord's
ownership of the Leased Property or lease thereof to Tenant), all real estate
and personal property ad valorem, sales and use, business or occupation, single
business, gross receipts, transaction privilege, rent or similar taxes; [ii]
assessments (including, without limitation, all assessments for public
improvements or benefits, whether or not commenced or completed prior to the
date hereof and whether or not to be completed with the Term); [iii] ground
rents, water, sewer or other rents and charges, excises, tax levies, and fees
(including, without limitation, license, permit, inspection, authorization and
similar fees); [iv] all taxes imposed by the Facility State or any governmental
entity in the Facility State with respect to the conveyance of the Leased
Property by Landlord to Tenant or Tenant's designee, including, without
limitation, conveyance taxes; and [v] all other governmental charges, in each
case whether general or special, ordinary or extraordinary, or foreseen or
unforeseen, of every character in respect of the Leased Property or any part
thereof and/or the Rent (including all interest and penalties thereon due to any
failure in payment by Tenant), which at any time prior to, during or in respect
of the Term hereof may be assessed or imposed on or in respect of or be a lien
upon [a] Landlord or Landlord's interest in the Leased Property or any part
thereof; [b] the Leased Property or any part thereof or any rent therefrom or
any estate, right, title or interest therein; or [c] any occupancy, operation,
use or possession of, or sales from, or activity conducted on, or in connection
with the Leased Property or the leasing or use by Tenant of the Leased Property
or any part thereof. Impositions shall not include any taxes imposed on
Tenant's operations at the Leased Property, including, without limitation,
employee withholding taxes, income taxes and intangible taxes, which shall be
and remain the responsibility of Tenant to pay as and when due.
3.5 Escrow of Impositions. If either [i] an Event of Default occurs and
-----------------------
remains uncured or [ii] whether or not an Event of Default is outstanding,
Landlord is required by the holder of any Mortgage Debt to escrow Impositions,
then Tenant shall, at Landlord's election, deposit with Landlord or with the
holder of any Mortgage Debt if directed by Landlord, on the fifth day of each
month a sum which Landlord reasonable determines to be necessary to provide
security for the performance by Tenant of its reimbursement obligations under
3.2, or equal to any amounts which Landlord is required to deposit in escrow
with the holder of the Mortgage Debt, as applicable, which sums may be drawn
upon by Landlord to satisfy Tenant's reimbursement obligation under 3.2.
Landlord and the holder of any Mortgage Debt, as applicable, shall have the
right to commingle any amounts deposited with them by Tenant pursuant to this
3.5 and shall have no obligation to pay Tenant any interest thereof but if and
to the extent any such interest is paid by the holder of any Mortgage Debt to
Landlord, then Landlord shall remit such interest to Tenant.
3.6. Escrow of Reserves. If an Event of Default occurs and remains
--------------------
uncured or whether or not an Event of Default is outstanding, if required by the
holder of any Mortgage Debt, Tenant shall, at Landlord's election, deposit with
Landlord or with the holder of such Mortgage Debt, if directed by Landlord, on
the fourth day of each month a sum equal to any amounts required to be deposited
into a replacement reserve or other similar customary reserves established by
the holder of any Mortgage Debt. Tenant, on demand, shall pay to Landlord any
additional funds necessary to pay and discharge the obligations of Tenant
pursuant to the provisions of this section, which amounts shall be made
available by Landlord to Tenant to fulfill its obligations under 16.6 hereof
and, if and to the extent permitted by the holder of any mortgage Debt, under
7.1 or to cover the cost of an Alterations made pursuant to 16.3. The receipt
by Landlord of the payment of such Impositions by and from Tenant shall only be
as an accommodation to Tenant, the mortgagees, and the taxing authorities, and
shall not be construed as rent or income to Landlord, Landlord serving, if at
all, only as a conduit for delivery purposes. Landlord and the holder of any
Mortgage Debt, as applicable, shall have the right to commingle any amounts
deposited with them by Tenant pursuant to this 3.6 and shall have no obligation
to pay Tenant any interest thereof but if and to the extent any such interest is
paid by the holder of any Mortgage Debt to Landlord, then Landlord shall remit
such interest to Tenant.
3.7 Utilities. Landlord shall cause all of the Facilities'
---------
utilities to be registered in Landlord's name and shall pay all taxes,
assessments, charges, deposits, and bills for utilities, including, without
limitation, charges for water, gas, oil, sanitary and storm sewer, electricity,
telephone service, and trash collection, which may be charged against the
occupant of the Improvements during the Term (the "Utility Charges"). Unless
other arrangements for payment of the Utility Charges are made by Landlord and
are approved by Tenant, which approval shall not be unreasonably withheld,
Tenant shall reimburse Landlord for all such Utility Charges paid by Landlord
within thirty (30) days after receipt from Landlord of billings, accompanied by
copies of a bill therefore and payments thereof, which identify the Utility
Charge and Facility with respect to which such payments were made. Except for a
discontinuance of utilities caused solely by Landlord's failure to pay any of
the Utility Charges as and when due in accordance with this Section 3.7,
Landlord will not be liable for damages to persons or property or for injury to
or interruption of, business for any discontinuance of utilities nor will such
discontinuance in any way be construed as an eviction of Tenant or cause an
abatement of rent or operate to release Tenant from any of Tenant's obligations
under this Lease and even then Landlord's liability shall be limited to the
period prior to when Tenant receives actual notice of Landlord's failure to pay
the Utility Charges, it being understood and agreed that once Tenant receives
such notice it shall be entitled to invoke the power of attorney provided for in
Section 3.8.
3.8 Power of Attorney. In the event Landlord fails to pay any of
------------------
the Utility Charges as and when due in accordance with 3.7, provided Tenant is
not in default of its reimbursement obligations to Landlord as set forth in
3.7, then Landlord does hereby designate Tenant as its true and lawful attorney
in fact with power of substitution to provide such notice to the utility
providers as may be necessary to cause all future billings with respect thereto
to be issued in the name of Tenant, after which Tenant shall assume direct
responsibility for the payment of the Utility Charges as and when due and the
failure of Tenant to pay the same when due or within any applicable cure period
shall be deemed to be an Event of Default hereunder. The power of attorney
provided for in this 3.8 is coupled with an interest and shall be irrevocable
by Landlord.
3.9 Business Expenses. Tenant shall promptly pay all expenses and
-----------------
costs incurred in connection with the operation of the Facility on the Leased
Property, including, without limitation, employee benefits, employee vacation
and sick pay, consulting fees, and expenses for inventory and supplies.
3.10 Permitted Contests. Subject to the terms of the Mortgage
-------------------
Debt, Tenant, on its own or on Landlord's behalf (or in Landlord's name), but at
Tenant's expense, may contest, by appropriate legal proceedings conducted in
good faith and with due diligence, the amount or validity or application, in
whole or in part, of any Legal Requirement or insurance requirement or any lien,
attachment, levy, encumbrance, charge or claim provided that [i] in the case of
an unpaid lien, attachment, levy, encumbrance, charge or claim, the commencement
and continuation of such proceedings shall suspend the collection thereof from
Landlord and from the Leased Property; [ii] neither the Leased Property nor any
Rent therefrom nor any part thereof or interest therein would be in any
immediate danger of being sold, forfeited, attached or lost; [iii] in the case
of a Legal Requirement, Landlord would not be in any immediate danger of civil
or criminal liability for failure to comply therewith pending the outcome of
such proceedings; [iv] in the event that any such contest shall involve a sum of
money or potential loss in excess of $50,000.00, Tenant shall deliver to
Landlord and its counsel an opinion of Tenant's counsel to the effect set forth
in clauses [i], [ii] and [iii], to the extent applicable; [v] in the case of a
Legal Requirement and/or a lien, encumbrance or charge, Tenant shall give such
reasonable security as may be demanded by Landlord to insure ultimate payment of
the same and to prevent any sale or forfeiture of the affected Leased Property
or the Rent by reason of such nonpayment or noncompliance; provided, however,
the provisions of this section shall not be construed to permit Tenant to
contest the payment of Rent or any other sums payable by Tenant to Landlord
hereunder; [vi] in the case of an insurance requirement, the coverage required
by Article 4 shall be maintained; and [vii] if such contest be finally resolved
against Landlord or Tenant, Tenant shall, as Additional Rent due hereunder,
promptly pay the amount required to be paid, together with all interest and
penalties accrued thereon, or comply with the applicable Legal Requirement or
insurance requirement. Landlord, at Tenant's expense, shall execute and deliver
to Tenant such authorizations and other documents as may be reasonably required
in any such contest, and, if reasonably requested by Tenant or if Landlord so
desires, Landlord shall join as a party therein. Tenant hereby agrees to
indemnify and save Landlord harmless from and against any liability, cost or
expense of any kind that may be imposed upon Landlord in connection with any
such contest and any loss resulting therefrom.
ARTICLE 4: INSURANCE
4.1 Property Insurance. At Tenant's expense, during the Term of
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this Lease, Tenant shall maintain in full force and effect a property insurance
policy or policies insuring the Leased Property against the following:
(a) Loss or damage commonly covered by an "All Risks" policy insuring
against physical loss or damage to the Improvements and Personal Property,
including, but not limited to, risk of loss from fire, wind, flood (except with
respect to any portion of the Leased Property which is located within a 100 year
flood zone) earthquake and other hazards such as, collapse, transit
coverage, vandalism, malicious mischief, theft, terrorism and sinkholes. The
policy shall be in the amount of the full replacement value (as defined in 4.6)
of the Improvements and Personal Property and shall contain a deductible amount
not greater than $50,000, unless a higher deductible is approved by Landlord,
which approval may be conditioned on Landlord's receipt of the approval of the
holder of any Mortgage Debt, if and to the extent required by the terms thereof.
Landlord, and the holder of any Mortgage Debt, shall be named as a loss payee.
The policy shall not include a co-insurance clause and shall insure against
contingent liability for operations of building laws, demolition costs, and
increased cost of construction subject, however, to industry standard coverage
limits on such endorsements. Either the policy shall provide, or Tenant shall
secure a separate policy which provides, for "boiler and Machinery" coverage for
objects, such as steam boilers, pressure vessels, machinery and similar
apparatus, now or hereafter installed on the Leased Property.
(b) Loss of rents and income and extra expense caused by or resulting from
physical loss or damage insured under 4.1(a) with a limit of not less than
eighteen (18) months total of rents and income and containing an endorsement for
extended period of indemnity of at least 90 days and a per claim deductible
not greater than $50,000 unless a higher deductible is approved by Landlord.
(c) If any of the improvements comprising the Leased Property are located,
in whole or in part, in a federally designated 100-year flood plain area, flood
insurance for the Improvements in an amount equal to the lesser of [i] the full
replacement value of the Improvements; or [ii] the maximum amount of insurance
available for the Improvements under all federal and private flood insurance
programs.
(d) Loss or damage caused by the breakage of plate glass in commercially
reasonable amounts acceptable to Landlord.
(e) Loss or damage commonly covered by blanket crime insurance, including
employee dishonesty, loss of money orders or paper currency, depositor's
forgery, and loss of property of patients accepted by Tenant for safekeeping,
with a limit of not less than $500,000.
4.2 Liability Insurance. At Tenant's expense, during the Term of
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this Lease, Tenant shall maintain liability insurance against the following:
(a) Claims for bodily injury, personal injury or property damage commonly
covered by commercial general liability insurance with endorsements for
contractual, personal injury, owner's protective liability, voluntary medical
payments, products and completed operations, broad form property damage, and
extended bodily injury, with a combined single limit of not less than
$11,000,000.00 per occurrence. Each occurrence is subject to a $500,000 self
insurance retention by Tenant before such limit is available.
(b) Claims for bodily injury, personal injury and property damage commonly
covered by comprehensive automobile liability insurance, covering all owned,
leased and non-owned automobiles, with a combined single limit of not less than
$11,000,000.00 per occurrence.
(c) Claims for bodily injury and personal injury commonly covered by medical
malpractice insurance, with a combined single limit of not less than
$11,000,000.00 per occurrence. Each occurrence is subject to a $500,000 self
insurance retention by Tenant before such limit is available.
(d) All of the insurance required by this Section 4.2 shall either be
provided under an "occurrence basis" policy of insurance or under a "claims
made" policy which also provides for retrospective "tail" coverage (Extended
Reporting Endorsement) for a period of not less than two (2) years, unless a
shorter period is approved by Landlord, the period of which coverage may be
conditioned on Landlord's receipt of the approval of such period by the holder
of any Mortgage Debt, if and to the extent required by the terms thereof, and
with a combined single limit of not less than $11,000,000 per occurrence or if
the policy does not provide for such retrospective coverage then Tenant shall
have secured a separate tail insurance policy providing for such retrospective
coverage for the period and in the amount specified herein.
(e) Any and all references in this Section 4.2 to a combined single limit
shall mean that in any single occurrence involving one or more of the above
claim descriptions, not more than $11,000,000 per occurrence is available from
insurers. Unless otherwise agreed by Landlord, this $11,000,000 per occurrence
limit shall consist of a primary $1,000,000 per occurrence and $3,000,000 per
location general aggregate limit, plus an umbrella limit of not less than
$10,000,000 per occurrence and $10,000,000 general aggregate.
(f) Landlord acknowledges and agrees that the insurance provided by Tenant
under this Section 4.2 will be provided under a blanket policy of insurance and
that the coverage limits set forth in this Section 4.2 will apply on a combined
basis to the Leased Property and to all of the other assisted living facilities
owned or operated by Tenant.
4.3. Workers Compensation. At Tenant's expense, during the Term of this
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Lease, Tenant shall maintain Workers Compensation and Employers Liability
insurance for all persons employed by Tenant on, or involved in any activity
associated with, the Leased Property. Such worker's compensation insurance
shall be in accordance with the requirements of all applicable local, state, and
federal law and the Employer's Liability insurance shall be maintained with a
limit of not less than $2,000,000. The policy shall contain the insurer's
agreement to waive all rights of subrogation applicable to Landlord.
4.4 Builder's Risk Insurance. In connection with any construction
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the cost of which is reasonably anticipated to exceed the $2,500,000 limit of
builders risk insurance coverage provided in Tenant's All Risk policy of
insurance, Tenant shall maintain in full force and effect a builder's completed
value risk policy ("Builder's Risk Policy") of insurance in a nonreporting form
insuring against "all risks" of physical loss or damage to the Improvements,
including, but not limited to, risk of loss from fire, wind, flood (except with
respect to any portion of the Leased Property which is within a 100 year flood
zone) earthquake and other hazards, such as, collapse, transit coverage,
vandalism, malicious mischief, theft, and sinkholes. The Builder's Risk Policy
shall include endorsements providing coverage for building materials and
supplies and temporary premises. The Builder's Risk Policy shall be in the
amount of the full replacement value of the Improvements and shall contain a
deductible amount not greater than $25,000 for all perils other than the perils
of earthquake, wind, and flood, the deductibles for which shall be in an amount
acceptable to Landlord. Landlord shall be named as an additional insured with
loss payable to Landlord. The Builder's Risk Policy shall not include an
endorsement preventing occupancy.
4.5 Insurance Requirements. The following provisions shall
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apply to all insurance coverages required under 4.1 through 4.4 and under
4.12, to the extent provided for therein:
(a) The insurers of all policies shall have an A. M. Best's Rating of "A
minus" or better and a Best's Financial Category of IX or higher and shall be
authorized to do insurance business in the Facility State.
(b) Tenant shall be the "named insured" and, except for the Workers
Compensation policy, Landlord shall be an "additional insured" on each policy.
(c) Prior to the Effective Date Tenant shall deliver to Landlord
certificates of insurance showing the required coverages and endorsements. Each
policy with respect to the insurance required by this Article 4 shall
provide that it may not be canceled or not renewed, and no material change or
reduction in coverage may be made, without at least 30 days' prior written
notice to Landlord.
(d) The policies shall contain a severability of interest and/or
cross-liability endorsement, provide that the acts or omissions of Tenant or
Landlord will not invalidate the coverage of the other party, and provide that
Landlord shall not be responsible for payment of premiums.
(e) All property loss adjustments shall require the written consent of
Landlord and Tenant, as their interests may appear.
(f) At least 30 days prior to the expiration of each insurance policy,
Tenant shall deliver to Landlord a certificate of insurance showing renewal of
such policy and payment of the annual premium therefor and a current Certificate
of Compliance (in the form delivered at the time of Closing) completed and
signed by Tenant's insurance agent.
(g) Landlord reserves the right to increase the foregoing amount of
liability coverage from time to time as Landlord determines is required to
adequately protect Tenant and Landlord for the claims insured thereby; provided,
however, that Landlord makes no representation or warranty that the limits
of liability required hereunder from time to time shall be adequate to protect
Tenant.
(h) Landlord reserves the right to require that Tenant cause any of its
contractors, vendors, movers or other parties conducting activities in or about
or occupying the Facility to obtain and maintain insurance as determined by
Landlord and as to which Landlord and such other parties designated by Landlord
shall be additional insureds.
(i) All insurance policies required of Tenant hereunder shall be primary to
any insurance maintained by Landlord and any insurance maintained by Landlord
shall not be contributing with any insurance required of Tenant hereunder.
(j) If Tenant fails to procure such insurance or to deliver such
certificates of insurance, Landlord may, at its option, procure the same for
Tenant's account, and the cost thereof shall be paid to Landlord by Tenant upon
demand. Landlord reserves the right to assume Tenant's obligation to maintain
insurance specified under 4.1(a) or (b), and upon Landlord's written notice to
Tenant exercising this right, Tenant shall cooperate with Landlord to assure an
efficient transition of such insurance.
(k) Tenant shall provide Landlord with copies of its property insurance
policies and, subject to the approval of Tenant's insurers and Landlord's
execution of an appropriate confidentiality agreement in form and substance
acceptable to Landlord and Tenant, with copies of Tenant's commercial general
liability and professional liability insurance policies.
4.6 Other Insurance. Notwithstanding anything to the contrary
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contained herein, Tenant shall be obligated to maintain, at a minimum, insurance
coverage in the amounts and satisfying the requirements provided for in any
Mortgaged Debt then secured by the Leased Properties, which, as of the Effective
Date is the Mortgage Debt provided by Column Financial, Inc, ("Column") and
which insurance requirements, as of the date hereof, are set forth in Section
6.1 of the Loan Agreement of even date herewith between Landlord, as Borrower,
and Column, as Lender (the "Column Loan Agreement").
4.7. Replacement Value. The term "full replacement value" means the
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actual replacement cost new at the time of loss, including increased cost of
construction endorsement, with no reductions or deductions. Payment of full
replacement cost new by the insurers shall not be affected in the event the
insured property is not rebuilt, replaced or repaired. Tenant shall, in
connection with each annual policy renewal, deliver to Landlord a
redetermination of the full replacement value by the insurer or an endorsement
indicating that the Leased Property is insured for its full replacement value.
If Tenant makes any Permitted Alterations (as hereinafter defined) to the Leased
Property, Landlord may have such full replacement value redetermined at any time
after such Permitted Alterations are made, regardless of when the full
replacement value was last determined.
4.8 Blanket Policy. Notwithstanding anything to the contrary
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contained in this section, Tenant may carry the insurance required by this
Article under a blanket policy of insurance, provided that, unless otherwise
agreed by Landlord and the holder of any Mortgage Debt, the coverage afforded
Tenant will not be reduced or diminished or otherwise be different from that
which would exist under a separate policy meeting all of the requirements of
this Lease.
4.9 No Separate Insurance. Tenant shall not take out separate
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insurance concurrent in form or contributing in the event of loss with that
required in this Article, or increase the amounts of any then existing
insurance, by securing an additional policy or additional policies, unless all
parties having an insurable interest in the subject matter of the insurance,
including Landlord and any mortgagees, are included therein as additional
insureds or loss payees, the loss is payable under said insurance in the same
manner as losses are payable under this Lease, and such additional insurance is
not prohibited by the existing policies of insurance. Tenant shall immediately
notify Landlord of the taking out of such separate insurance or the increasing
of any of the amounts of the existing insurance by securing an additional policy
or additional policies.
4.10 Waiver of Subrogation. Each party hereto hereby waives any
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and every claim which arises or may arise in its favor and against the other
party hereto and those whom each party has agreed to indemnify under Article 5
hereof during the Term for any and all loss of, or damage to, any of its
property located within or upon, or constituting a part of, the Leased Property,
which loss or damage is covered by valid and collectible insurance policies, to
the extent that such loss or damage is recoverable under such policies. Said
mutual waiver shall be in addition to, and not in limitation or derogation of,
any other waiver or release contained in this Lease with respect to any loss or
damage to property of the parties hereto. Inasmuch as the said waivers will
preclude the assignment of any aforesaid claim by way of subrogation (or
otherwise) to an insurance company (or any other person), each party hereto
agrees immediately to give each insurance company which has issued to it
policies of insurance, written notice of the terms of said mutual waivers, and
to have such insurance policies properly endorsed, if necessary, to prevent the
invalidation of said insurance coverage by reason of said waivers, so long as
such endorsement is available at a reasonable cost.
4.11 Mortgages. The following provisions shall apply if Landlord
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now or hereafter places a mortgage on the Leased Property or any part thereof:
[i] Tenant shall obtain a standard form of lender's loss payable clause insuring
the interest of the mortgagee; [ii] Tenant shall deliver evidence of insurance
to such mortgagee; [iii] loss adjustment shall require the consent of the
mortgagee and [iv] Tenant shall provide such other information and documents as
may be required by the mortgagee.
4.12 Escrows. After an Event of Default occurs hereunder or
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whether or not an Event of Default is outstanding, if required by the holder of
any Mortgage Debt, Tenant shall make such periodic payments of insurance
premiums and/or other insurance escrow payments required by the terms of the
Mortgage Debt (other than the deposit into the Insurance Deductible Fund, as
that term is defined in the Column Loan Agreement), in accordance with
Landlord's requirements after receipt of notice thereof from Landlord.
4.12 Key Man Life Insurance. Until the earlier to occur of the
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expiration of the Term or the death of Baty, Tenant shall obtain and maintain in
full force and effect, but at Landlord's sole cost and expense, a key man life
insurance policy with respect to Baty, which policy shall provide for coverage
in the amount of $3,000,000 and shall further provide that any losses thereunder
shall be payable to Landlord. As set forth more fully in that letter dated
September 30, 2002 from the Aon Corporation to Landlord, the original of the
policy or policies of such key man life insurance shall be delivered to Landlord
after this Lease is signed. The requirements contained in 4.5(a), (c) (except
with respect to the timing of the delivery of the certificate of insurance) and
(f) (but only if Landlord has duly paid all premiums due upon the renewal of
such policy) shall apply to this 4.12.
ARTICLE 5: INDEMNITY
5.1 Tenant's Indemnification. Tenant hereby indemnifies and
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agrees to hold harmless Landlord, any successors or assigns of Landlord, and
Landlord's and such successor's and assign's directors, officers, employees,
members, partners and agents from and against any and all demands, claims,
causes of action, fines, penalties, damages (including consequential damages),
losses, liabilities (including strict liability), judgments, and expenses
(including, without limitation, reasonable attorneys' fees, court costs, and the
costs set forth in 8.7) incurred in connection with or arising from: [i] the
use or occupancy of the Leased Property by Tenant or any persons claiming under
Tenant; [ii] any activity, work, or thing done, or permitted or suffered by
Tenant in or about the Leased Property; [iii] any acts, omissions, or negligence
of Tenant or any person claiming under Tenant, or the contractors, agents,
employees, invitees, or visitors of Tenant or any such person; [iv] any breach,
violation, or nonperformance by Tenant or any person claiming under Tenant or
the employees, agents, contractors, invitees, or visitors of Tenant or of any
such person, of any term, covenant, or provision of this Lease or any law,
ordinance, or governmental requirement of any kind, including, without
limitation, any failure to comply with any applicable requirements under the
ADA; [v] any injury or damage to the person, property or business of Tenant, its
employees, agents, contractors, invitees, visitors, or any other person entering
upon the Leased Property; [vi] any construction, alterations, changes or
demolition of the Facility performed by or contracted for by Tenant or its
employees, agents or contractors; and [vii] any obligations, costs or expenses
arising under any Permitted Exceptions. If any action or proceeding is brought
against Landlord, its employees, or agents by reason of any such claim, Tenant,
upon notice from Landlord, will defend the claim at Tenant's expense with
counsel reasonably satisfactory to Landlord. All amounts payable to Landlord
under this section shall be payable on written demand and any such amounts which
are not paid within 10 days after demand therefor by Landlord shall bear
interest at the Default Rate from the date due to the date paid in full. In case
any action, suit or proceeding is brought against Tenant by reason of any such
occurrence, Tenant shall use its commercially reasonable efforts to defend such
action, suit or proceeding. Nothing in this 5.1 shall be construed as
requiring Tenant to indemnify Landlord with respect to Landlord's own gross
negligence or willful misconduct.
5.1.1 Notice of Claim. Landlord shall notify Tenant in writing of
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any claim or action brought against Landlord in which indemnity may be sought
against Tenant pursuant to this section. Such notice shall be given in
sufficient time to allow Tenant to defend or participate in such claim or
action, but the failure to give such notice in sufficient time shall not
constitute a defense hereunder nor in any way impair the obligations of Tenant
under this section unless the failure to give such notice precludes Tenant's
defense of any such action.
5.1.2 Survival of Covenants. The covenants of Tenant contained in
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this section shall remain in full force and effect after the termination of this
Lease until the expiration of the period stated in the applicable statute of
limitations during which a claim or cause of action may be brought and payment
in full or the satisfaction of such claim or cause of action and of all expenses
and charges incurred by Landlord relating to the enforcement of the provisions
herein specified.
5.1.3 Reimbursement of Expenses. Unless prohibited by law, Tenant
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hereby agrees to pay to Landlord all of the reasonable fees, charges and
reasonable out-of-pocket expenses related to the Facility and required hereby,
or incurred by Landlord in enforcing the provisions of this Lease.
5.2 Limitation of Landlord's Liability. Landlord, its agents, and
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employees, will not be liable for any loss, injury, death, or damage (including
consequential damages) to persons, property, or Tenant's business occasioned by
theft, act of God, public enemy, injunction, riot, strike, insurrection, war,
court order, requisition, order of governmental body or authority, fire,
explosion, falling objects, steam, water, rain or snow, leak or flow of water
(including water from the elevator system), rain or snow from the Leased
Property or into the Leased Property or from the roof, street, subsurface or
from any other place, or by dampness or from the breakage, leakage, obstruction,
or other defects of the pipes, sprinklers, wires, appliances, plumbing, air
conditioning, or lighting fixtures of the Leased Property, or from construction,
repair, or alteration of the Leased Property or from any acts or omissions of
any other occupant or visitor of the Leased Property who is not an agent or
employee of Landlord, or from any other cause beyond Landlord's control. In the
case of any loss, injury, death or damage arising from the acts or omissions of
Landlord or its agents and employees, Landlord's liability shall be limited to
the gross negligence or willful misconduct of such persons or entities.
5.3. Landlord's Cooperation. If and to the extent any of the
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matters which are the subject of Tenant's indemnity obligations under this
Article 5 are or might also be the subject of the Seller's indemnity obligations
under the Purchase Agreement, Landlord agrees upon request of Tenant and, at no
cost or expense to Landlord, either to [i] assign its indemnity rights to
Tenant, if and to the extent it is permitted to assign its rights under the
Purchase Agreement or, [ii] if such assignment is not permitted, then Landlord
shall, at Tenant's sole cost and expense, enforce any such indemnity rights and,
provided Tenant has previously fulfilled its indemnity obligations to Landlord
under this Article 5, shall remit the proceeds thereof, if any, to Tenant.
Tenant acknowledges and agrees that its indemnity obligations to Landlord under
Article 5 are independent of the indemnity obligations of Seller to Landlord
under the Purchase Agreement and accordingly Tenant shall not be excused from,
or entitled to condition the performance of, its indemnity obligations under the
Article 5 on the ability of Landlord or Tenant, as applicable, to recover any
amounts from the Seller under the Purchase Agreement nor shall the amount due
from Tenant under this Article 5 be limited to or by the amount recovered from
the Seller under the Purchase Agreement.
ARTICLE 6: USE AND ACCEPTANCE OF PREMISES
6.1 Use of Leased Property. Tenant shall use and occupy the
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Leased Property exclusively for the Facility Uses specified for each Facility
and for all lawful and licensed ancillary uses, including the operation of an
Alzheimer's memory loss unit at one or more of the Facilities, provided Tenant
complies with all applicable Legal Requirements, and for no other purpose
without the prior written consent of Landlord; and provided, further, in no
event may the Alzheimer's Memory Loss Unit at any Facility consist of more than
25% of the units located at the Facility without the prior written consent of
Landlord, which consent shall not be unreasonably withheld. Tenant shall obtain
and maintain all approvals, licenses, and consents needed to use and operate the
Leased Property as herein permitted. Tenant shall deliver to Landlord complete
copies of surveys, examinations, certification and licensure inspections,
compliance certificates, and other similar reports issued to Tenant by any
governmental agency within 10 Business Days after Tenant's receipt of each item
and, to the extent Tenant receives a notice of deficiency or a condition exists
at any Facility that requires remediation or other action, Tenant shall take all
action necessary to ensure such remediation or other action is completed
promptly and, in all events, within the time periods required by any applicable
Legal Requirements.
6.2 Acceptance of Leased Property. Tenant acknowledges that [i]
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Tenant is presently engaged in some or all of the Facility States in the
operation of health care facilities similar to the Facilities and has expertise
in the assisted living industry, has thoroughly investigated the Leased
Property, has selected the Leased Property to its own specifications, and has
concluded that no improvements or modifications to the Leased Property, other
than the Pre-Approved Improvements, are required in order to operate the Leased
Property for the Facility Uses and for all lawful and licensed ancillary uses,
including the operation of an Alzheimer's Memory Loss Unit at one or more of the
Facilities, [ii] Tenant and its agents have had an opportunity to inspect the
Leased Property; [iii] except for the Pre-Approved Improvements, Tenant has
found the Leased Property fit for Tenant's use and, except for the Pre-Approved
Improvements Budgeted Cost and the Pre-Approved Improvement Cost Overruns, will
assume all responsibility and cost for the correction of any observed or
unobserved deficiencies or violations; [iv] Landlord will deliver the Leased
Property to Tenant in "as-is" condition and with all faults; [v] Landlord is not
obligated to make any improvements or repairs to the Leased Property; and [vi]
except to the extent repairs or replacements thereto are included in the
Pre-Approved Improvements, the roof, walls, foundation, heating, ventilating,
air conditioning, telephone, sewer, electrical, mechanical, elevator, utility,
plumbing, and other portions of the Leased Property are in good working order;
provided, however, nothing herein shall be construed to limit Tenant's
obligation to make the Pre-Approved Improvements or Landlord's obligation to
fund the Pre-Approved Improvements Budgeted Cost and the Pre-Approved
Improvement Cost Overruns. Tenant waives any claim or action against Landlord
with respect to the condition of the Leased Property. LANDLORD MAKES NO
WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF THE LEASED
PROPERTY OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR USE, DESIGN OR
CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, OR AS TO QUALITY OF
THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING AGREED THAT ALL
SUCH RISKS ARE TO BE BORNE BY TENANT.
6.3 Conditions of Use and Occupancy. Tenant agrees that during
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the Term it shall use and keep the Leased Property in good working order and
repair and in a careful, safe and proper manner; not commit or suffer waste
thereon; not use or occupy the Leased Property for any unlawful purposes; not
use or occupy the Leased Property or permit the same to be used or occupied, for
any purpose or business deemed extrahazardous on account of fire or otherwise;
keep the Leased Property in such repair and condition as may be required by the
Board of Health, or other city, state or federal authorities, free of all cost
to Landlord; not permit any acts to be done which will cause the cancellation,
invalidation, or suspension of any insurance policy; and permit Landlord and its
agents to enter upon the Leased Property at all reasonable times to examine the
condition thereof.
ARTICLE 7: MAINTENANCE AND MECHANICS' LIENS
7.1 Maintenance. Tenant shall maintain, repair, and replace the
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Leased Property, including, without limitation, all structural and nonstructural
repairs and replacements to the roof, foundations, exterior walls, HVAC systems,
equipment, parking areas, sidewalks, water, sewer and gas connections, pipes and
mains. Tenant shall pay, as Additional Rent, the full cost of maintenance,
repairs, and replacements. Tenant shall maintain all drives, sidewalks, parking
areas, and lawns on or about the Leased Property in a clean and orderly
condition, free of accumulations of dirt, rubbish, snow and ice. Tenant shall
at all times maintain, operate and otherwise manage the Leased Property in good
working order and repair and on a basis and in a manner which maintains the
competitive quality and condition of the Facility in the marketplace in which it
operates. All repairs shall, to the extent reasonably achievable, be at least
equivalent in quality to the original work or the property to be repaired shall
be replaced. Tenant will not take or omit to take any action the taking or
omission of which might materially impair the value or the usefulness of the
Leased Property or any parts thereof for the Facility Uses. Tenant shall permit
Landlord to inspect the Leased Property at all reasonable times and on
reasonable advance notice, and if Landlord has a reasonable basis to believe
that there are maintenance problem areas and gives Tenant written notice thereof
setting forth its concerns in reasonable detail, Tenant shall deliver to
Landlord a plan of correction within ten (10) Business Days after receipt of the
notice. Tenant shall diligently pursue correction of all problem areas within
sixty (60) days after receipt of the notice or such longer period as may be
necessary for reasons beyond its reasonable control such as shortage of
materials or delays in securing necessary permits, but not caused by lack of
diligence by Tenant, or such shorter period as may be necessary in the event of
an emergency or to ensure the continued compliance of the Leased Property with
applicable Legal Requirements (the "Correction Period"). Upon expiration of the
Correction Period, Tenant shall deliver evidence of completion to Landlord and,
upon request, during the Correction Period, Tenant shall deliver to Landlord an
interim report evidencing Tenant's diligent progress towards completion. Upon
completion, Landlord shall have the right to re-inspect the Facility. At each
inspection of the Leased Property by Landlord, the Facility employee in charge
of maintenance shall be available to tour the Facility with Landlord and answer
questions.
7.2 Required Alterations. Tenant shall, at Tenant's sole cost and
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expense, make [i] any additions, changes, improvements or alterations to the
Leased Property, including structural alterations, which may be required by any
governmental authorities, including those required to maintain licensure under
the licensure laws of the Facility States or certification under the Medicare
and Medicaid programs (if so certified), whether such changes are required by
Tenant's use, changes in the law, ordinances, or governmental regulations,
defects existing as of the date of this Lease, or any other cause whatever, [ii]
the Pre-Approved Improvements and [iii] the changes referred to in accordance
with the Mold Remediation Reports. All such additions, changes, improvements or
alterations shall be deemed to be Permitted Alterations and shall comply with
all laws requiring such alterations and with the provisions of 16.4.
7.3 Mechanic's Liens. Tenant shall have no authority to permit or create a
-----------------
lien against Landlord's interest in the Leased Property, and Tenant shall post
notices or file such documents as may be required to protect Landlord's interest
in the Leased Property against liens. Tenant hereby agrees to defend,
indemnify, and hold Landlord harmless from and against any mechanic's liens
against the Leased Property by reason of work, labor, services or materials
supplied or claimed to have been supplied on or to the Leased Property. Subject
to Tenant's right to contest the same in accordance with the terms of this
Lease, Tenant shall remove, bond-off, or otherwise obtain the release of any
mechanic's lien filed against the Leased Property within 10 days after notice of
the filing thereof. Tenant shall pay all expenses in connection therewith,
including, without limitation, damages, interest, court costs and reasonable
attorneys' fees.
7.4 Replacements of Fixtures and Landlord's Personal Property.
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Tenant shall not remove Fixtures and Landlord's Personal Property from the
Leased Property except to replace the Fixtures and Landlord's Personal Property
with other similar items of equal quality and value. Items being replaced by
Tenant may be removed and shall become the property of Tenant and items
replacing the same shall be and remain the property of Landlord. Tenant shall
execute, upon written request from Landlord, any and all documents necessary to
evidence Landlord's ownership of Landlord's Personal Property and replacements
therefor. Tenant may finance replacements for the Fixtures and Landlord's
Personal Property by equipment lease or by a security agreement and financing
statement if, with respect to any financing of critical care equipment and with
respect to any other Personal Property having a value per Facility in excess of
$250,000.00, [i] Landlord has consented to the terms and conditions of the
equipment lease or security agreement; and [ii] the equipment lessor or lender
has entered into a nondisturbance agreement with Landlord upon terms and
conditions reasonably acceptable to Landlord, including, without limitation, the
following: [a] Landlord shall have the right (but not the obligation) to assume
such security agreement or equipment lease upon the occurrence of an Event of
Default under this Lease; [b] the equipment lessor or lender shall notify
Landlord of any default by Tenant under the equipment lease or security
agreement and give Landlord a reasonable opportunity to cure such default; and
[c] Landlord shall have the right to assign its rights under the equipment
lease, security agreement, or nondisturbance agreement. Tenant shall, within 30
days after receipt of an invoice from Landlord, reimburse Landlord for all costs
and expenses incurred in reviewing and approving the equipment lease, security
agreement, and nondisturbance agreement, including, without limitation,
reasonable attorneys' fees and costs.
7.5. Limitations on Alterations and Improvements Owned by Tenant.
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Except as otherwise provided below, no part of the cost of improvements,
modifications or additions to the Leased Property which are to be and remain the
property of Tenant (a "Tenant Owned Improvement") will be furnished by Tenant or
a related party. Notwithstanding the foregoing,
(a) Tenant may pay for the cost of a Tenant Owned Improvement
which is readily removable without causing material damage to the Leased
Property (a "Severable Tenant Owned Improvement") provided that (i) the
severable improvement is not subject to a contract or option for purchase or
sale between Landlord and Tenant at a price other than fair market value at the
time of such purchase or sale and (ii0 at the beginning of the Term, the
severable improvement is not required in order to render the Leased Property
complete for the use contemplated by 6.1; and
(b) Tenant may pay for the cost of a Tenant Owned Improvement
which is not a Severable Tenant Owned Improvement (a "Non-Severable Tenant Owned
Improvement") provided (i) it is furnished in order to comply with Legal
Requirements or (ii) it does not increase the Gross Revenues of, or licensed
beds/units at, the Leased Property to more than 125% of such Gross Revenues or
licensed beds/units on the Effective Date or modify the Leased Property for a
materially different use or (ii) its cost, when added to the cost of other Non
Severable Tenant Owned Improvements made previously (other than those to comply
with Legal Requirements) does not exceed 10% of the cost of the Leased Property.
(c) The foregoing provisions are intended to comply with Section
4(4).02 and .03 of Rev. Proc, 2001-28 and shall be interpreted and applied in a
manner consistent therewith.
ARTICLE 8: DEFAULTS AND REMEDIES
8.1 Events of Default. The occurrence of any one or more of the
-------------------
following shall be an event of default ("Event of Default") hereunder without
any advance notice to Tenant unless specified herein:
(a) Tenant fails to pay in full any installment of Base Rent, any Additional
Rent or any other monetary obligation payable by Tenant under this Lease
(including the Option Price), within one (1) Business Day after such payment is
due; provided, however, if an Event of Default occurs under this 8.1(a) in more
than three (3) consecutive months, then Tenant shall thereafter have no cure
rights under this 8.1(a).
(b) Tenant fails to comply with any covenant set forth in Article 14, 15.6
or 15.8 of this Lease.
(c) Tenant fails to observe and perform any other covenant, condition or
agreement under this Lease to be performed by Tenant other than those described
in 8.1(a) and (b) and [i] such failure continues for a period of 25 days (or
15 days with respect to Tenant's obligations under Article 4) after written
notice thereof is given to Tenant by Landlord; or [ii] if such default is
susceptible to cure but, by reason of the nature of such default, it cannot be
remedied within 25 days, Tenant fails to proceed with diligence reasonably
satisfactory to Landlord after receipt of the notice to cure the default or, in
any event, fails to cure such default within 80 days after receipt of the
notice. The foregoing notice and cure provisions do not apply to any Event of
Default otherwise specifically described in any other subsection of 8.1.
(d) Tenant abandons or vacates (except during a period of repair or
reconstruction after damage, destruction or a Taking) any Facility Property or
any material part thereof, ceases to operate any Facility, ceases to do business
or ceases to exist for any reason for any one or more days.
(e) [i] The filing by Tenant of a petition under the Bankruptcy Code or the
commencement of a bankruptcy or similar proceeding by Tenant; [ii] the failure
by Tenant within 60 days to dismiss an involuntary bankruptcy petition or other
commencement of a bankruptcy, reorganization or similar proceeding against
such party, or to lift or stay any execution, garnishment or attachment of such
consequence as will impair its ability to carry on its operation at the Leased
Property; [iii] the entry of an order for relief under the Bankruptcy Code in
respect of Tenant; [iv] any assignment by Tenant for the benefit of its
creditors; [v] the entry by Tenant into an agreement of composition with its
creditors; [vi] the approval by a court of competent jurisdiction of a petition
applicable to Tenant in any proceeding for its reorganization instituted under
the provisions of any state or federal bankruptcy, insolvency, or similar laws;
[vii] appointment by final order, judgment, or decree of a court of competent
jurisdiction of a receiver of the whole or any substantial part of the
properties of Tenant (provided such receiver shall not have been removed or
discharged within 60 days of the date of his qualification).
(f) [i] Any receiver, administrator, custodian or other person takes
possession or control of any of the Leased Property and continues in possession
for 60 days; [ii] any writ against any of the Leased Property is not released
within 60 days; [iii] any judgment is rendered or proceedings are instituted
against the Leased Property, Tenant which adversely affect the Leased Property
or any part thereof, which is not dismissed for 60 days (except as otherwise
provided in this section); [iv] all or a substantial part of the assets of
Tenant are attached, seized, subjected to a writ or distress warrant, or are
levied upon, or come into the possession of any receiver, trustee, custodian, or
assignee for the benefit of creditors; [v] Tenant is enjoined, restrained,
or in any way prevented by court order, or any proceeding is filed or commenced
seeking to enjoin, restrain or in any way prevent Tenant from conducting all or
a substantial part of its business or affairs; or [vi] except as otherwise
permitted hereunder, a final notice of lien, levy or assessment is filed of
record with respect to all or any part of the Leased Property or any property of
Tenant located at the Leased Property and is not dismissed, discharged, or
bonded-off within 30 days.
(g) Any representation or warranty made by Tenant in this Lease or any other
document executed in connection with this Lease, any guaranty of or other
security for this Lease, or any report, certificate, application, financial
statement or other instrument furnished by Tenant pursuant hereto or thereto
shall prove to be false, misleading or incorrect in any material respect as of
the date made.
(h) Tenant or any Affiliate defaults on any indebtedness or obligation to
Landlord or any Landlord Affiliate, any Obligor Group Obligations or any
agreement with Landlord or any Landlord Affiliate, including, without
limitation, any lease with Landlord or any Landlord Affiliate, or the occurrence
of a default under any Material Obligation and any applicable grace or cure
period with respect to default under such indebtedness or obligation expires
without such default having been cured. This provision applies to all such
indebtedness, obligations and agreements as they may be amended, modified,
extended, or renewed from time to time,
(i) The license for the Facility or any other Government Authorization is
canceled, suspended, restricted, terminated, revoked, reduced to provisional or
temporary status, or otherwise invalidated, or license revocation or
decertification proceedings are commenced against Tenant and, in each instance,
such action is not stayed pending appeal, or, as a result of the acts or
omissions of Tenant, any reduction of more than 10% occurs in either the
resident occupancy capacity of the Facility or the number of resident occupants
approved for the Facility, or an admissions ban is issued for the Facility and
remains in effect for a period of more than thirty (30) days; provided, however,
if Tenant has taken or caused to be taken all actions necessary to complete
a cure of such termination, cancellation, restriction, reduction, suspension or
resident occupancy reduction and the confirmation of such cure is pending
governmental inspection or verification, the Tenant shall have an additional
cure period equal to such additional period of time as is necessary for such
governmental inspection or verification to be completed and any additional
action required of Tenant by such inspection or verification to be completed and
inspected and verified,
(j) In the event from and after the first day of the second Lease Year, the
Portfolio Cash Flow in any three (3) consecutive fiscal quarters, commencing
with the first quarter of the second Lease Year, or in any three (3) of five (5)
consecutive fiscal quarters, commencing with the first quarter of the
second Lease Year, falls below the amounts set forth in Exhibit K (the
"Financial Forecast Targets").
(k) A default under the Guaranty which is not cured or waived within any
applicable cure period provided for therein.
8.2 Remedies. Upon the occurrence of an Event of Default under
--------
this Lease or any Lease Document, and at any time thereafter until Landlord
waives the default in writing or acknowledges cure of the default in writing, at
Landlord's option, without declaration, notice of nonperformance, protest,
notice of protest, notice of default, notice to quit or any other notice or
demand of any kind, Landlord may exercise any and all rights and remedies
provided in this Lease or any Lease Document or otherwise provided under law or
in equity, including, without limitation, any one or more of the following
remedies:
(a) Landlord may re-enter and take possession of the Leased Property without
terminating this Lease, and lease the Leased Property for the account of
Tenant, holding Tenant liable for all costs of Landlord in reletting the Leased
Property and for the difference in the amount received by such reletting and the
amounts payable by Tenant under the Lease.
(b) Landlord may terminate this Lease by written notice to Tenant, exclude
Tenant from possession of the Leased Property and lease the Leased Property to
others, holding Tenant liable for the difference in the amounts received from
such reletting and the amounts payable by Tenant under this Lease; provided,
however, nothing herein shall be construed to require Landlord to relet the
Leased Property unless it is required to do so under applicable law in the
Facility States.
(c) Landlord may re-enter the Leased Property and have, repossess and enjoy
the Leased Property as if this Lease had not been made, and in such event,
Tenant and its successors and assigns shall remain liable for any contingent or
unliquidated obligations or sums owing at the time of such repossession.
(d) Landlord may have access to and inspect, examine and make copies of the
books and records and any and all accounts, data and income tax and other
returns of Tenant insofar as they pertain to the Leased Property subject to
Landlord's obligation to maintain the confidentiality of any patient or employee
information in accordance with the requirements of applicable State or
federal law.
(e) Landlord may accelerate all of the unpaid Base Rent hereunder so that
the aggregate Base Rent for the unexpired term of this Lease becomes immediately
due and payable.
(f) Landlord may take whatever action at law or in equity as may appear
necessary or desirable to collect the Rent and other amounts payable under this
Lease then due and thereafter to become due, or to enforce performance and
observance of any obligations, agreements or covenants of Tenant under this
Lease.
(g) With respect to the Collateral or any portion thereof and Secured
Party's security interest therein, Secured Party may exercise all of its rights
as secured party under Article 9 of the Uniform Commercial Code. Secured Party
may sell the Collateral by public or private sale upon five days notice to
Tenant. Tenant agrees that a commercially reasonable manner of disposition of
the Collateral shall include, without limitation and at the option of Secured
Party, a sale of the Collateral, in whole or in part, concurrently with the sale
of the Leased Property.
(h) Secured Party may obtain control over and collect the Receivables and
apply the proceeds of the collections to satisfaction of the Obligor Group
Obligations unless prohibited by law. Tenant appoints Secured Party or its
designee as attorney for Tenant with powers from and after and during the
continuance of an Event of Default [i] to receive, to endorse, to sign and/or to
deliver, in Tenant's name or Secured Party's name, any and all checks,
drafts, and other instruments for the payment of money relating to the
Receivables, and to waive demand, presentment, notice of dishonor, protest, and
any other notice with respect to any such instrument; [ii] to sign Tenant's name
on any invoice or bill of lading relating to any Receivable, drafts against
account debtors, assignments and verifications of Receivables, and notices to
account debtors; [iii] to send verifications of Receivables to any account
debtor; and [iv] to do all other acts and things necessary to carry out this
Lease. Absent gross negligence or willful misconduct of Secured Party, Secured
Party shall not be liable for any omissions, commissions, errors of judgment, or
mistakes in fact or law made in the exercise of any such powers. At Secured
Party's option, from and after and during the continuance of an Event of
Default, Tenant shall [i] provide Secured Party a full accounting of all amounts
received on account of Receivables with such frequency and in such form as
Secured Party may require, either with or without applying all collections on
Receivables in payment of the Obligor Group Obligations or [ii] deliver to
Secured Party on the day of receipt all such collections in the form received
and duly endorsed by Tenant. At Secured Party's request, from and after and
during the continuance of an Event of Default, Tenant shall institute any action
or enter into any settlement determined by Secured Party to be necessary to
obtain recovery or redress from any account debtor in default of Receivables.
From and after and during the continuance of an Event of Default, Secured Party
may give notice of its security interest in the Receivables to any or all
account debtors with instructions to make all payments on Receivables directly
to Secured Party, thereby terminating Tenant's authority to collect Receivables.
After terminating Tenant's authority to enforce or collect Receivables, Secured
Party shall have the right to take possession of any or all Receivables and
records thereof and is hereby authorized to do so, and only Secured Party shall
have the right to collect and enforce the Receivables. Prior to the occurrence
and during the continuance of an Event of Default, at Tenant's cost and expense,
but on behalf of Secured Party and for Secured Party's account, Tenant shall
collect or otherwise enforce all amounts unpaid on Receivables and hold all such
collections in trust for Secured Party, but Tenant may commingle such
collections with Tenant's own funds, until Tenant's authority to do so has been
terminated, which may be done only after an Event of Default. Notwithstanding
any other provision hereof, Secured Party does not assume any of Tenant's
obligations under any Receivable, and Secured Party shall not be responsible in
any way for the performance of any of the terms and conditions thereof by
Tenant.
(i) Without waiving any prior or subsequent Event of Default, Landlord may
waive any Event of Default or, with or without waiving any Event of Default,
remedy any default.
(j) Landlord may enter and take possession of the Land and the Facilities
without terminating this Lease and complete construction and renovation of the
Improvements (or any part thereof) and perform the obligations of Tenant under
the Lease Documents. Without limiting the generality of the foregoing and for
the purposes aforesaid, Tenant hereby appoints Landlord its lawful
attorney-in-fact with full power to do any of the following from and after and
during the continuance of an Event of Default: [i] complete construction,
renovation and equipping of the Improvements in the name of Tenant; [ii] advance
funds to complete the Improvements; [iii] make changes in the plans and
specifications that shall be necessary or desirable to complete the Improvements
in substantially the manner contemplated by the plans and specifications; [iv]
retain or employ new general contractors, subcontractors, architects, engineers,
and inspectors as shall be required for said purposes; [v] pay, settle, or
compromise all existing bills and claims, which may be liens or security
interests, or to avoid such bills and claims becoming liens against the Facility
or security interest against fixtures or equipment, or as may be necessary or
desirable for the completion of the construction and equipping of the
Improvements or for the clearance of title; [vi] execute all applications and
certificates, in the name of Tenant, that may be required in connection with any
construction; [vii] do any and every act that Tenant might do in its own behalf,
to prosecute and defend all actions or proceedings in connection with the
Improvements; and [viii] execute, deliver and file all applications and other
documents and take any and all actions necessary to transfer the operations of
the Facility to Landlord or Landlord's designee. This power of attorney is a
power coupled with an interest and cannot be revoked.
(k) Landlord may apply, with or without notice to Tenant, for the
appointment of a receiver ("Receiver") for Tenant or Tenant's business or for
the Leased Property. Unless prohibited by law, such appointment may be made
either before or after termination of Tenant's possession of the Leased
Property, without notice, without regard to the solvency or insolvency of Tenant
at the time of application for such Receiver and without regard to the then
value of the Leased Property, and Secured Party may be appointed as Receiver.
After the occurrence and during the continuance of an Event of Default, Landlord
shall be entitled to appointment of a receiver as a matter of right and without
the need to make any showing other than the existence of an Event of Default.
The Receiver shall have the power to collect the rents, income, profits and
Receivables of the Leased Property during the pendency of the receivership and
all other powers which may be necessary or are usual in such cases for the
protection, possession, control, management and operation of the Leased Property
during the whole of said proceeding. All sums of money received by the Receiver
from such rents and income, after deducting therefrom the reasonable charges and
expenses paid or incurred in connection with the collection and disbursement
thereof, shall be applied to the payment of the Rent or any other monetary
obligation of Tenant under this Lease, including, without limitation, any losses
or damages incurred by Landlord under this Lease. Tenant, if requested to do
so, will consent to the appointment of any such Receiver as aforesaid.
(l) Landlord may terminate any management agreement with respect to the
Leased Property and shall have the right to retain one or more managers for the
Leased Property at the expense of Tenant, such manager(s) to serve for such term
and at such compensation as Landlord reasonably determines is necessary
under the circumstances.
(m) For a period of up to six (6) months after the termination of this Lease
or of Tenant's right to possession of the Leased Property, Landlord shall
have the right to use any of the Facility Names which, at the time of such Event
of Default, are Emeritus Facility Names, it being understood and agreed that
Landlord is the owner of the Initial Facility Names and thus there shall be no
limitation on Landlord's or its designee's right to use the Initial Facility
Names.
8.3 Right of Set-Off. Landlord may, and is hereby authorized by
------------------
Tenant to, at any time and from time to time without advance notice to Tenant
(any such notice being expressly waived by Tenant), set-off or recoup and apply
any and all sums held by Landlord, any indebtedness of Landlord to Tenant, and
any claims by Tenant against Landlord, against any obligations of Tenant
hereunder and against any claims by Landlord against Tenant, whether or not such
obligations or claims of Tenant are matured and whether or not Landlord has
exercised any other remedies hereunder. The rights of Landlord under this
section are in addition to any other rights and remedies Landlord may have
against Tenant.
8.4 Performance of Tenant's Covenants. Landlord may perform any
-----------------------------------
obligation of Tenant which Tenant has failed to perform within five days after
Landlord has sent a written notice to Tenant informing it of its specific
failure. Tenant shall reimburse Landlord on demand, as General Additional Rent,
for any expenditures thus incurred by Landlord and shall pay interest thereon at
the Default Rate.
8.5 Late Payment Charge. Tenant acknowledges that any default in
--------------------
the payment of any installment of Rent payable hereunder will result in loss and
additional expense to Landlord in servicing any indebtedness of Landlord secured
by the Leased Property, handling such delinquent payments, and meeting its other
financial obligations, and because such loss and additional expense is extremely
difficult and impractical to ascertain, Tenant agrees that in the event any Rent
payable to Landlord hereunder is not paid within 10 days after the due date,
Tenant shall pay, in addition to any interest which may be due thereon pursuant
to the terms of this Lease, a late charge of 5% of the amount of the overdue
payment as a reasonable estimate of such loss and expenses, unless applicable
law requires a lesser charge, in which event the maximum rate permitted by such
law may be charged by Landlord. The 10-day grace period set forth in this
section shall not extend the time for payment of Rent or the period for curing
any default or constitute a waiver of such default.
8.6 Attorneys' Fees. Tenant shall pay all reasonable costs and
----------------
expenses incurred by Landlord in enforcing or preserving Landlord's rights under
this Lease, whether or not an Event of Default has actually occurred or has been
declared and thereafter cured, including, without limitation, [i] the fees,
expenses, and costs of any litigation, appellate, receivership, administrative,
bankruptcy, insolvency or other similar proceeding; [ii] reasonable attorney,
paralegal, consulting and witness fees and disbursements; and [iii] the
expenses, including, without limitation, lodging, meals, and transportation, of
Landlord and its employees, agents, attorneys, and witnesses in preparing for
litigation, administrative, bankruptcy, insolvency or other similar proceedings
and attendance at hearings, depositions, and trials in connection therewith.
All such reasonable costs, expenses, charges and fees payable by Tenant shall be
deemed to be General Additional Rent under this Lease.
8.8 Escrows and Application of Payments. As security for the
---------------------------------------
performance of the Obligor Group Obligations, Tenant hereby assigns to Landlord
all its right, title, and interest in and to all monies escrowed with Landlord
under this Lease and all deposits with utility companies, taxing authorities and
insurance companies; provided, however, that Landlord shall not exercise its
rights hereunder until an Event of Default has occurred. Any payments received
by Landlord under any provisions of this Lease during the existence or
continuance of an Event of Default shall be applied to the Obligor Group
Obligations in the order which Landlord may determine.
8.9 Remedies Cumulative. The remedies of Landlord herein are
--------------------
cumulative to and not in lieu of any other remedies available to Landlord at law
or in equity. The use of any one remedy shall not be taken to exclude or waive
the right to use any other remedy.
8.10 Waivers. Tenant waives [i] any notice required by statute or
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other law as a condition to bringing an action for possession of, or eviction
from, any of the Leased Property, [ii] any right of re-entry or repossession,
[iii] any right to a trial by jury in any action or proceeding arising out of or
relating to this Lease, [iv] any right of redemption whether pursuant to
statute, at law or in equity, [v] all presentments, demands for performance,
notices of nonperformance, protest, notices of protest, notices of dishonor,
notices to quit and any other notice or demand of any kind (other than those
specifically provided for in this Lease, and [vi] all notices of the existence,
creation or incurring of any obligation or advance under this Lease before or
after this date.
8.11 Obligations Under the Bankruptcy Code. Upon filing of a
-----------------------------------------
petition by or against Tenant under the Bankruptcy Code, Tenant, as debtor and
as debtor-in-possession, and any trustee who may be appointed with respect to
the assets of or estate in bankruptcy of Tenant, agree to pay monthly in advance
on the first day of each month, as reasonable compensation for the use and
occupancy of the Leased Property, an amount equal to all Rent due pursuant to
this Lease. Included within and in addition to any other conditions or
obligations imposed upon Tenant or its successor in the event of the assumption
and/or assignment of this Lease are the following: [i] the cure of any monetary
defaults and reimbursement of pecuniary loss within not more than five Business
Days of assumption and/or assignment; [ii] the deposit of an additional amount
equal to not less than three months' Base Rent, which amount is agreed to be a
necessary and appropriate deposit to adequately assure the future performance
under this Lease of the Tenant or its assignee; and [iii] the continued use of
the Leased Property for the Facility Uses. Nothing herein shall be construed as
an agreement by Landlord to any assignment of this Lease or a waiver of
Landlord's right to seek adequate assurance of future performance in addition to
that set forth hereinabove in connection with any proposed assumption and/or
assignment of this Lease.
ARTICLE 9: DAMAGE AND DESTRUCTION
9.1 Notice of Casualty. If the Leased Property shall be
--------------------
destroyed, in whole or in part, or damaged by fire, flood, windstorm or other
casualty in excess of $50,000.00 (a "Casualty"), Tenant shall give written
notice thereof to Landlord within two Business Days after the occurrence of the
Casualty. Within 15 days after the occurrence of the Casualty or as soon
thereafter as such information is reasonably available to Tenant, Tenant shall
provide the following information to Landlord: [i] the date of the Casualty;
[ii] the nature of the Casualty; [iii] a description of the damage or
destruction caused by the Casualty, including the type of Leased Property
damaged and the area of the Improvements damaged; [iv] a preliminary estimate of
the cost to repair, rebuild, restore or replace the Leased Property; [v] a
preliminary estimate of the schedule to complete the repair, rebuilding,
restoration or replacement of the Leased Property; [vi] a description of the
anticipated property insurance claim, including the name of the insurer, the
insurance coverage limits, the deductible amount, the expected settlement
amount, and the expected settlement date; and [vii] a description of the
business interruption claim, including the name of the insurer, the insurance
coverage limits, the deductible amount, the expected settlement amount, and the
expected settlement date. Within five days after request from Landlord, Tenant
will provide Landlord with copies of all correspondence to the insurer and any
other information reasonably requested by Landlord.
9.2 Destruction Other than Near End of Term. If any Facility's
-------------------------------------------
Improvements are destroyed, in whole or in part, at any time other than during
the final eighteen [18] months of the Term (calculated by taking into account
any periods covered by previously exercised Renewal Terms even if the same have
not commenced at the time of such destruction occurs), except as otherwise
specifically provided in this Article 9, Landlord shall promptly rebuild and
restore such Improvements in accordance with 9.4 and Landlord shall (subject to
the rights of the holder of the Mortgage Debt) use the insurance proceeds for
such restoration.
9.3 Substantial Destruction Near End of Term or Where Rebuilding
--------------------------------------------------------------
is Prohibited or Limited by Law. If any Facility's Improvements are
-----------------------------------
substantially destroyed during the final eighteen [18] months of the Term or if
-----------
any of the Facility's Improvements are destroyed to the extent that, as a matter
of law, Landlord is not permitted to rebuild the affected Facility to a capacity
of at least 60 residents, Tenant may elect to terminate this Lease with respect
to the affected Facility, in which case Landlord shall be entitled to retain the
insurance proceeds. The term "substantially destroyed during the final eighteen
[18] months of the Term" means any casualty occurring during the final eighteen
[18] months of the Term (calculated by taking into account any periods covered
by previously exercised Renewal Terms even if the same have not commenced at the
time such destruction occurs) resulting in the loss of use of 50% or more of the
licensed beds or units, as applicable, at any one Facility. If this Lease is so
terminated with respect to the affected Facility, Tenant shall be liable to
Landlord for all Rent and all other obligations accrued under this Lease with
respect to the affected Facility through the effective date of termination and
the Base Rent due hereunder for the remainder of the Term shall be reduced to
reflect the reduction, after application of the insurance proceeds received by
Landlord, in the Outstanding Equity and then outstanding Mortgage Debt allocated
to the affected Facility and the Minimum Purchase Price, Financial Performance
Minimum Targets, Gross Revenues Threshold and the dollar amounts set forth in
the definition of Lease Termination Fee, the Lease Termination Threshold and the
dollar amount set forth in the definition of Purchase Price Offset; provided,
however, if Landlord and Tenant are unable to agree upon the amount of such
reductions, the same shall be submitted to arbitration in accordance with the
provisions of 25.26 hereof; provided, further, if there is only one Facility
Property subject to this Lease after such Taking, the Lease will terminate. If
Tenant does not elects to terminate the Lease with respect to the Term" means
any casualty occurring during the final eighteen [18] months of the Term
(calculated by taking into account any periods covered by previously exercised
Renewal Terms even if the same have not commenced at the time of such
destruction occurs) resulting in the loss of use of 50% or more of the licensed
beds or units, as applicable, at any one Facility. If this Lease is so
terminated with respect to the affected Facility, Tenant shall be liable to
Landlord for all Rent and all other obligations accrued under this Lease with
respect to the affected Facility through the effective date of termination and
the Base Rent due hereunder for the remainder of the Term shall be reduced to
reflect the reduction, after application of the insurance proceeds received by
Landlord, in the Outstanding Equity and then outstanding Mortgage Debt allocated
to the affected Facility and the Minimum Purchase Price, Financial Performance
Minimum Targets, Gross Revenues Threshold and the dollar amounts set forth in
the definitions of the Lease Termination Fee and Purchase Price Offset will also
be reduced on a basis which Landlord and Tenant deem to be fair and reasonable
taking into account the Cash Flow and/or Gross Revenues, as applicable, of the
affected Facility in such period prior to the destruction as may be reasonably
agreed upon by Landlord and Tenant; provided, however, if Landlord and Tenant
are unable to agree upon the amount of such reductions, the same shall be
submitted to arbitration in accordance with the provisions of 25.26 hereof;
provided, further, if there is only one Facility Property subject to this Lease
after such Taking, the Lease will terminate. If Tenant does not elects to
terminate the Lease with respect to the affected Facility pursuant to this 9.3,
then Landlord shall be required to rebuild the affected Facility Improvements in
accordance with 9.2.
9.4 Partial Destruction Near End of Term. If any Facility's
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Improvements are not substantially destroyed during the final eighteen [18]
months of the Term, then Landlord shall comply with the provisions of 9.5 and
Landlord shall use the insurance proceeds available to it for such restoration;
subject, however, to the rights of the holder of any Mortgage Debt.
9.5 Restoration. Subject to any limitations imposed by law with
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respect to the rebuilding of the Leased Property, Landlord shall promptly (and
in any event within any period required by the terms of any Mortgage Debt)
repair, rebuild, or restore the damaged Leased Property, at Tenant's expense, so
as to make the Leased Property at least equal in value to the Leased Property
existing immediately prior to such occurrence and as nearly similar to it in
character as is practicable and reasonable. Such repair or restoration shall be
undertaken in accordance with the following procedures:
(a) Before beginning such repairs or rebuilding, or letting any contracts in
connection with such repairs or rebuilding with respect to any Casualty,
Landlord will submit for Tenant's approval, which approval Tenant will not
unreasonably withhold or delay, plans and specifications meeting the
requirements of 16.2 for such repairs or rebuilding. In addition, prior to
commencing the repairing or rebuilding, Landlord shall deliver to Tenant for
Tenant's approval the name of the proposed general contractor, a construction
budget and schedule setting forth the estimated monthly draws for such work.
(b) Promptly after receiving Tenant's approval of the plans and
specifications, Landlord will begin such repairs or rebuilding and, subject to
Tenant fulfilling its obligations under 9.5 below, will prosecute the repairs
and rebuilding to completion with diligence, subject, however, to strikes,
lockouts, acts of God, embargoes, governmental restrictions, and other causes
beyond Landlord's reasonable control, and in a good and workmanlike manner and
using new materials of a quality equivalent to those at the Leased Property
prior to the Casualty.
(c) Subject to the rights of the holder of any Mortgage Debt, Landlord will
be entitled to use the net proceeds of any fire or other casualty insurance paid
to Landlord or Tenant for such repair or rebuilding as the same progresses,
after deduction of any costs of collection, including reasonable attorneys'
fees. With respect to each disbursement made by Landlord, Landlord will provide
to Tenant properly certified vouchers of a competent architect in charge of the
work and lien releases duly executed by each contractor to whom payment is being
made with respect to the amount being paid. Payments for deposits for the
repairing or rebuilding or delivery of materials to the Facility will be made
upon Landlord's receipt of evidence satisfactory to Landlord that such payments
are required in advance. Landlord may withhold 10% from each payment until the
work is completed and Landlord is reasonably satisfied that no lien or liability
has attached or will attach to the Leased Property or to Landlord in connection
with such repairing or rebuilding.
(d) Upon the completion of rebuilding and the furnishing of such proof, the
balance of the net proceeds of such insurance payable to Tenant on account of
such repairing or rebuilding will be paid to Tenant.
(e) If required by law as a result of the nature or extent of the damage,
Landlord will obtain and deliver to Tenant a temporary or final certificate of
occupancy before the damaged Leased Property is reoccupied for any purpose.
(f) Subject to the requirements of any Mortgage Debt, Landlord shall
complete such repairs or rebuilding free and clear of mechanic's or other liens,
and in accordance with the building codes and all applicable laws,
ordinances, regulations, or orders of any state, municipal, or other public
authority affecting the repairs or rebuilding, and also in accordance with all
requirements of the insurance rating organization, or similar body.
9.6 Insufficient Proceeds. If the proceeds of any insurance
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settlement are not sufficient to pay in full the costs of Landlord's repair,
rebuilding or restoration under 9.5, other than as a result of the refusal of
the holder of any Mortgage Debt to release the same to Landlord, Tenant shall
deposit with Landlord within 10 days of Landlord's request, an amount sufficient
in Landlord's reasonable judgment to complete such repair, rebuilding or
restoration or, at Landlord's option, Tenant shall provide Landlord with
evidence reasonably satisfactory to Landlord that Tenant has available the funds
needed to complete such repair, rebuilding or restoration. Tenant shall not, by
reason of the deposit or payment, be entitled to any reimbursement from Landlord
or diminution in or postponement of the payment of the Rent. If the holder of
any Mortgage Debt refuses to make the insurance proceeds available to Landlord
to cover the cost of such restoration or repair and, as a result thereof,
Landlord exercises any election which may be available to it to prepay the
Mortgage Debt allocated to the affected portion of the Leased Property in lieu
of restoring the affected portion of the Leased Property, then (i) Landlord
shall be excused from its repair/restoration obligations, (ii) Tenant shall be
excused from its funding obligations under 9.5 and under this 9.6 and (iii)
Landlord and Tenant shall enter into an amendment to this Lease which (A)
confirms that this Lease shall terminate with respect to the affected portion of
the Leased Property concurrently with the prepayment of the Mortgage Debt
allocated to the affected portion of the Leased Property and (B) reflects a
reduction in the Part A Base Rent due hereunder resulting from the repayment of
such Mortgage Debt and, if applicable, a corresponding increase in the Part B
Base Rent due hereunder to reflect any increase in the Outstanding Equity
resulting from such prepayment and (C) reflects a reduction in the Minimum
Purchase Price, Financial Performance Minimum Targets, Gross Revenues Threshold,
the dollar amount set forth in the definition of Lease Termination Fee, the
Lease Termination Threshold and the dollar amount set forth in the definition of
Purchase Price Offset; provided, however, if Landlord and Tenant are unable to
agree upon the amount of such reductions, the same shall be submitted to
arbitration in accordance with the provisions of 25.26. In addition, where the
holder of the Mortgage Debt refuses to make the insurance proceeds available to
Landlord, Landlord shall have the right, but not the obligation, to elect to
repair or restore the affected portion of the Leased Property. In the event
Landlord has elected to prepay the Mortgage Debt in accordance with this 9.6
and Landlord thereafter elects to repair or restore the affected portion of the
Leased Property, Landlord and Tenant shall negotiate in good faith the terms
under which Tenant shall lease the affected portion of the Leased Property from
and after the completion of such restoration and repair; provided, however, if
Landlord and Tenant are unable to agree upon such terms within forty five (45)
days after the date on which Landlord advises Tenant of its election to repair
or restore, then Landlord shall thereafter be free to take such actions with
respect to the Leased Property as it deems appropriate, including, but not
limited to, leasing it to a third party, free of any claim by Tenant of any
interest therein.
9.7 Not Trust Funds. Notwithstanding anything herein or at law or
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equity to the contrary, none of the insurance proceeds paid to Landlord as
herein provided shall be deemed trust funds, and Landlord shall be entitled to
dispose of such proceeds as provided in this Article 9. Tenant expressly
assumes all risk of loss, including a decrease in the use, enjoyment or value,
of the Leased Property from any casualty whatsoever, whether or not insurable or
insured against.
9.8 Tenant's Inspection. During the progress of such repairs or
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rebuilding, Tenant and its architects and engineers may, from time to time,
inspect the Leased Property and will be furnished, if required by them, with
copies of all plans, shop drawings, and specifications relating to such repairs
or rebuilding. Landlord will keep all plans, shop drawings, and specifications
at the building, and Tenant and its architects and engineers may examine them at
all reasonable times and on reasonable notice. If, during such repairs or
rebuilding, Tenant or its architects and engineers determine that the repairs or
rebuilding are not being done in accordance with the approved plans and
specifications, Tenant will give prompt notice in writing to Landlord,
specifying in detail the particular deficiency, omission, or other respect in
which Tenant claims such repairs or rebuilding do not accord with the approved
plans and specifications. Upon the receipt of any such notice, Landlord will
cause corrections to be made to any deficiencies, omissions, or such other
respect. If and to the extent not covered by the insurance provided by Tenant
pursuant to Article 4, any repairs or rebuilding under this Section shall
require Landlord to provide the insurance coverage specified in 4.4.
9.9 Landlord's Costs. Tenant shall, within 30 days after receipt
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of an invoice from Landlord, pay the costs, expenses, and fees of any architect
or engineer employed by Landlord to prepare any plans and specifications and to
supervise and approve any construction, or for any services rendered by such
architect or engineer to Landlord as contemplated by any of the provisions of
this Lease, or for any services performed by Landlord's attorneys in connection
therewith.
9.10 Rent Abatement. Provided Landlord proceeds with all due
---------------
diligence to commence and complete any repairs or rebuilding (and in any event
within any period required by the terms of any Mortgage Debt), Rent will not
abate during the period of repair or rebuilding of the Leased Property but Rent
shall abate both during the period of repair or rebuilding and for the balance
of the Term, in the event Landlord is unable, as a matter of law, to repair or
rebuild the affected Facility with the same number of licensed units/beds as
existed immediately prior to such damage or destruction. The amount of the Rent
abatement shall reflect the reduction, after application by Landlord of the
available insurance proceeds, in the Outstanding Equity and then outstanding
Mortgage Debt allocated to the affected Facility. In addition, in such event the
Minimum Purchase Price, Financial Performance Minimum Targets, Gross Revenues
Threshold, the dollar amount set forth in the definition of the Lease
Termination Fee, the Lease Termination Threshold and the dollar amount set forth
in the definition of the Purchase Price Offset will also be reduced on a basis
which Landlord and Tenant deem to be fair and reasonable taking into account the
Cash Flow and/or Gross Revenues, as applicable, of the affected Facility in such
period prior to the destruction as may be reasonably agreed upon by Landlord and
Tenant; provided, however, if Landlord and Tenant are unable to agree upon the
amount of such reductions, the same shall be submitted to arbitration in
accordance with the provisions of 25.26 hereof.
ARTICLE 10: CONDEMNATION
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final.doc
10.1 Total Taking. If, by exercise of the right of eminent domain or
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by conveyance made in response to the threat of the exercise of such right
("Taking"), more than twenty (20%) percent of the land constituting a Facility
Property is taken and such land is located anywhere other than along the
perimeter or periphery of the Facility Property and any portion of the Facility
is located on such land (a "Total Taking") and, as a result thereof, the holder
of the Mortgage Debt refuses to make available to Landlord the condemnation
award, and, as a result thereof, Landlord exercises any election which may be
available to it to prepay the Mortgage Debt with respect to the affected portion
of the Leased Property in lieu of restoring the affected portion of the Leased
Property, then (i) Tenant shall be liable to Landlord for all Rent and all other
obligations accrued under this Lease with respect to the affected Facility
through the effective date of the Taking, (ii) this Lease shall terminate with
respect to the applicable Facility Property as of the date of Taking and (ii)
Landlord and Tenant shall enter into an amendment to this Lease which (A)
confirms that this Lease shall terminate with respect to the affected portion of
the Leased Property concurrently with the prepayment of the Mortgage Debt
allocated to the affected portion of the Leased Property and (B) reflects a
reduction in the Part A Base Rent due hereunder resulting from the repayment of
such Mortgage Debt and, if applicable, a corresponding increase in the Part B
Base Rent due hereunder to reflect any increase in the Outstanding Equity
resulting from such prepayment and (C) reflects a reduction in the Minimum
Purchase Price, Financial Performance Minimum Targets, Gross Revenues Threshold,
the dollar amount set forth in the definition of Lease Termination Fee, the
Lease Termination Threshold and the dollar amount set forth in the definition of
Purchase Price Offset; provided, however, if Landlord and Tenant are unable to
agree upon the amount of such reductions, the same shall be submitted to
arbitration in accordance with the provisions of 25.26. In addition, where the
holder of the Mortgage Debt refuses to make the proceeds of a Taking available
to Landlord and Landlord has elected to prepay the Mortgage Debt in accordance
with this 10.1, Landlord shall thereafter have the right, but not the
obligation, to elect to repair or restore the affected portion of the Leased
Property. In the event Landlord elects to repair or restore the affected
portion of the Leased Property, Landlord and Tenant shall negotiate in good
faith the terms under which Tenant shall lease the affected portion of the
Leased Property from and after the completion of such restoration and repair;
provided, however, if Landlord and Tenant are unable to agree upon such terms
within forty five (45) days after the date on which Landlord advises Tenant of
its election to repair or restore, then Landlord shall thereafter be free to
take such actions with respect to the Leased Property as it deems appropriate,
including, but not limited to, leasing it to a third party, free of any claim by
Tenant of any interest therein. All damages awarded for such Taking under the
power of eminent domain shall be the property of Landlord, whether such damages
shall be awarded as compensation for diminution in value of the leasehold or the
fee of the Facility Property; provided, however, nothing herein shall preclude
Tenant from pursuing a separate award for the Taking of its Tenant's Property
(as defined below) or for relocation costs or expenses.
10.2 Partial Taking. If, after a Taking, so much of the Facility
---------------
Property remains that the holder of the Mortgage Debt is required to release any
condemnation award to Landlord to be used for the repair or restoration of the
Facility Property (a "Partial Taking"), then [i] this Lease will end as to the
part taken on the earlier of the vesting of title to such Leased Property in the
condemning authority or the taking of possession of such Leased Property by the
condemning authority and the Rent will be adjusted accordingly; [ii] Landlord
shall, at Tenant's expense, restore so much of the Facility Property as remains
to a sound architectural unit substantially suitable for the purposes for which
it was used immediately before the Taking, using good workmanship and new,
first-class materials and [ii] Landlord will be entitled to apply to the cost of
restoration the net award (after deducting from the total award, reasonable
attorneys', appraisers' and other fees and costs incurred in connection with the
obtaining of the award and amounts paid to the holders of the Mortgage Debt
secured by the affected portion of the Leased Property), except for any portion
thereof specifically allocated to the value of Tenant's Property or any
relocation costs or expenses incurred by Tenant as a result of such Partial
Taking, which shall be remitted by Landlord to Tenant. The restoration shall be
completed in accordance with 9.4, 9.5, 9.7, 9.8 and 9.9 with such provisions
deemed to apply to condemnation instead of casualty.
10.3 Condemnation Proceeds Not Trust Funds. Notwithstanding
-----------------------------------------
anything in this Lease or at law or equity to the contrary, none of the
condemnation award paid to Landlord shall be deemed trust funds, and Landlord
shall be entitled to dispose of such proceeds as provided in this Article 10.
Except as otherwise set forth in Section 10.4, Tenant expressly assumes all risk
of loss, including a decrease in the use, enjoyment, or value, of the Leased
Property from any Condemnation.
10.4 Rent Abatement. In the event of a Partial Taking, provided
---------------
Landlord proceeds with all due diligence to commence and complete any repairs or
rebuilding (and in any event within any period required by the terms of any
Mortgage Debt), Rent will not abate during the period of repair or rebuilding of
the Leased Property, but Rent shall abate both during the period of repair or
rebuilding and for the balance of the Term, in the event Landlord is unable, as
a matter of law, to repair or rebuild the affected Facility with the same number
of licensed units/beds as existed immediately prior to such Partial Taking. The
amount of the Rent abatement shall reflect the reduction in the Outstanding
Equity and then outstanding Mortgage Debt allocated to the affected Facility
after application by Landlord of the condemnation award to the reduction
thereof. In addition, in such event the Minimum Purchase Price, Financial
Performance Minimum Targets, Gross Revenues Threshold, the Lease Termination
Threshold, the dollar amounts set forth in the definition of the Lease
Termination Fee and the dollar amounts set forth in the definition of the
Purchase Price Offset will also be reduced on a basis which Landlord and Tenant
deem to be fair and reasonable taking into account the Cash Flow and/or Gross
Revenues, as applicable, of the affected Facility in such period prior to the
destruction as may be reasonably agreed upon by Landlord and Tenant; provided,
however, if Landlord and Tenant are unable to agree upon the amount of such
reductions, the same shall be submitted to arbitration in accordance with the
provisions of 25.26 hereof.
ARTICLE 11: TENANT'S PROPERTY
11.1 Tenant's Property. Tenant shall have the right to install,
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place, and use on the Leased Property such fixtures, furniture, equipment,
inventory and other personal property as Tenant may, from time to time, deem
necessary or useful to operate the Leased Property for its permitted purposes
and which is not required to be installed in order to repair, restore or
maintain Landlord's Personal Property in accordance with the terms of this
Lease. All such additional fixtures, furniture, equipment, inventory, and other
personal property installed, placed, or used on the Leased Property is
hereinafter referred to as "Tenant's Property." Tenant acknowledges and agrees
that as of the Effective Date all of the fixtures, furniture, equipment,
inventory, and other personal property installed, placed, or used on the Leased
Property are Landlord's Personal Property and there is no Tenant's Property at
the Leased Property as of the Effective Date other than the Tenant's Property
conveyed, with the consent of Landlord, to Tenant on the Effective Date by the
Sellers pursuant to the Purchase Agreement.
11.2 Requirements for Tenant's Property. Tenant shall comply with
----------------------------------
all of the following requirements in connection with Tenant's Property:
(a) Tenant shall, at Tenant's sole cost and expense, maintain, repair, and
replace Tenant's Property.
(b) Tenant shall, at Tenant's sole cost and expense, keep Tenant's Property
insured against loss or damage by fire, vandalism and malicious mischief,
sprinkler leakage, earthquake, and other physical loss perils commonly covered
by fire and extended coverage, boiler and machinery, and difference in
conditions insurance in an amount not less than 90% of the then full replacement
cost thereof. Tenant shall use the proceeds from any such policy for the
repair and replacement of Tenant's Property. The insurance shall meet the
requirements of 4.3.
(c) Tenant shall pay all taxes applicable to Tenant's Property.
(d) If Tenant's Property is damaged or destroyed by fire or any other cause,
Tenant shall have the right, but not the obligation, to repair or replace
Tenant's Property (unless the same is required for the operation of the Leased
Property in compliance with applicable Legal Requirements, in which case Tenant
shall be required to promptly repair or replace the same) unless Landlord elects
to terminate this Lease pursuant to 9.2.2.
(e) Unless an Event of Default or any event which, with the giving of notice
or lapse of time, or both, would constitute an Event of Default has
occurred, Tenant may remove Tenant's Property from the Leased Property from time
to time provided that [i] the items removed are not required to operate the
Leased Property for the Facility Uses (unless such items are being replaced by
Tenant) or otherwise to maintain the Facility in accordance with the
requirements of this Lease; and [ii] Tenant repairs any damage to the Leased
Property resulting from the removal of Tenant's Property.
(f) Upon the termination or expiration of this Lease Tenant shall, at
Landlord's option exercised no later than the last day of the Term hereof,
either [i] convey Tenant's Property to Landlord for a purchase price equal to
the net book value thereof which shall be due and payable from Landlord
concurrently with the execution by Tenant of a Bill of Sale in favor of Landlord
in form and substance acceptable to Landlord and Tenant or [ii] remove
Tenant's Property from the Leased Property and repair any damage to the Leased
Property resulting from the removal of Tenant's Property. If Tenant fails to
remove Tenant's Property within 30 days after request by Landlord, then Tenant
shall be deemed to have abandoned Tenant's Property, Tenant's Property shall
become the property of Landlord, and Landlord may remove, store and dispose of
Tenant's Property. In such event, Tenant shall have no claim or right against
Landlord for such property or the value thereof regardless of the disposition
thereof by Landlord. Tenant shall pay Landlord, upon demand, all expenses
incurred by Landlord in removing, storing, and disposing of Tenant's Property
and repairing any damage caused by such removal. Tenant's obligations hereunder
shall survive the termination or expiration of this Lease.
(g) Tenant shall perform its obligations under any equipment lease or
security agreement for Tenant's Property. For equipment loans or leases for
critical care equipment and for all other equipment having an original cost in
excess of $250,000.00 per Facility, Tenant shall cause such equipment lessor or
lender to enter into a nondisturbance agreement with Landlord upon terms and
conditions acceptable to Landlord, including, without limitation, the following:
[i] Landlord shall have the right (but not the obligation) to assume such
equipment lease or security agreement upon the occurrence of an Event of Default
by Tenant hereunder; [ii] such equipment lessor or lender shall notify Landlord
of any default by Tenant under the equipment lease or security agreement and
give Landlord a reasonable opportunity to cure such default; and [iii] Landlord
shall have the right to assign its interest in the equipment lease or security
agreement and nondisturbance agreement. Tenant shall, within 30 days after
receipt of an invoice from Landlord, reimburse Landlord for all costs and
expenses incurred in reviewing and approving the equipment lease, security
agreement and nondisturbance agreement, including, without limitation,
reasonable attorneys' fees and costs.
ARTICLE 12: PRESERVATION OF REVENUES
Tenant acknowledges that a fair return to Landlord on its investment in the
Leased Property is dependent, in part, on the concentration on each Facility
comprising the Leased Property during the Term of the licensed assisted living
home business of Tenant and its Affiliates in the geographical area of such
Facility. Tenant further acknowledges that the diversion of residents and/or
patient care activities from any Facility to other facilities owned or operated
by Tenant or its Affiliates at any time during the Term will have a material
adverse impact on the value and utility of the Leased Property. Therefore,
Tenant agrees that during the Term neither Tenant nor any of its Affiliates
shall, without the prior written consent of Landlord, within a five (5) mile
radius of any Facility, operate, own, participate in or otherwise receive
revenues from any other facility or institution, other than those facilities
identified on Exhibit L hereto, which taken as a whole provides substantially
the same services as those provided at the Facility located within such
restricted radius. Landlord acknowledges and agrees that the provisions of 12.1
shall not prohibit Tenant or its Affiliates from consummating a transaction
involving three (3) or more facilities, even if one or more of such facilities
are within the geographic area protected by this 12.1, provided Tenant does
not, as a result of any such transaction or series of transactions, individually
or in the aggregate, operate, own, participate in or otherwise receive revenues
from more than five (5) facilities which are located within the geographic area
protected by this 12.1 during the Term.
ARTICLE 13: PURCHASES, SALES AND REFINANCINGS OF THE LEASED PROPERTY
13.1 Overview of Article.
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(a) Pursuant to 13.2, Landlord shall have the right to sell all
or any portion of the Leased Property (the "Sale Property"), without the consent
of Tenant, and Tenant shall have the right of first opportunity to purchase the
Sale Property.
(b) Certain special provisions regarding the Sale of the Property
prior to the expiration of the Option Exercise Period are set forth in 13.3
below.
(c) If the Sale Property consists of less than all of the Leased
Property, the provisions of 13.4 below shall apply.
(d) In addition, Tenant shall have the option to purchase all of
the Leased Property pursuant to 13.5 below (including without limitation the
right to receive the Purchase Price Offset). As used in this Article 13, the
term "Subject Property" shall refer collectively to any Sale Property being
purchased by Tenant under its right of first opportunity set forth in 13.2 and
to the Leased Property being purchased by Tenant pursuant to the purchase option
set forth in 13.5.
(e) Certain mechanical, documentary and other aspects of any
purchase of Subject Property by Tenant under this Article 13 are set forth in
13.6 below. Without limitation, 13.6 sets forth the circumstances under which
Tenant shall be paid the Lease Termination Fee or shall be entitled to the
Purchase Price Offset.
(f) Finally, the right of Landlord to refinance all or a portion
of the Leased Property and the obligation of Landlord and Tenant to cooperate in
an amendment of the Lease as required by the holder of the Mortgage Debt are set
forth 13.7.
13.2 Landlord Right to Sell; Tenant Right of First Opportunity.
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(a) If at any time during the Term of this Lease Landlord desires
to offer all or a portion of the Leased Property for sale, it shall deliver to
Tenant a written notice (the "Offer Notice") specifying the gross sale price for
the Sale Property (the "Sale Price") and a brief summary of the other material
terms of the proposed sale. If Landlord is delivering the Offer Notice because
it desires to accept an unsolicited offer to purchase the Sale Property from an
unrelated third party, then the Offer Notice shall also be referred to as a
"Third Party Offer" and, if applicable, Landlord shall attach to the Offer
Notice a true and correct copy of the Third Party Offer.
(b) Tenant shall thereafter have sixty (60) days (the "Review
Period") from receipt of the Offer Notice (including without limitation a Third
Party Offer) to deliver to Landlord a notice stating its binding commitment to
purchase the Sale Property for an amount equal to the Sale Price set forth in
the Offer Notice (less the amount of the Purchase Price Offset) and otherwise
upon the terms and conditions set forth in this Lease, and escrow instructions
together with an earnest money deposit in immediately available funds, both as
described in 13.6 below (the foregoing being referred to herein as the "Binding
Purchase Notice").
(c) If Tenant does not deliver a Binding Purchase Notice
(including the required earnest money deposit) in the time period provided
above, Landlord shall be permitted for a period of up to one hundred eighty
(180) days after the end of the Review Period (the "Marketing Period") to [i]
market the Sale Property to bona fide unrelated purchasers or to negotiate with
the party that tendered the Third Party Offer, and [ii] thereafter enter into a
binding Valid Contract (as hereinafter defined) to sell the Sale Property to a
bona fide purchaser (or the third party offeror, as the case may be) subject to
the terms hereof. If Landlord does not enter into a binding Valid Contract
within the Marketing Period, then any future sale of the Leased Property shall
again be subject to the rights of Tenant under this 13.2.
(d) For purposes hereof, a "Valid Contract" shall mean a contract
for the purchase of the Sale Property that [i] provides for an earnest money
deposit of not less than one and one half percent (1.5%) of the gross purchase
price (provided that if the Sale Property includes all of the Leased Property,
such earnest money deposit shall be in the amount of Two Million Five Hundred
Thousand Dollars ($2,500,000)), [ii] stipulates a closing date that is not more
than one hundred eighty (180) days following the date of the contract, [iii]
contains no financing contingencies beyond the due diligence period, [iv] limits
any due diligence period to one hundred and twenty [120] days after the
execution of the contract, [v] may provide for the purchase and sale of the Sale
Property subject to mortgage liabilities secured by the Sale Property on the
express condition that the purchasing party thereunder shall be required to
assume in writing all such liabilities and pay all costs and expenses assessed
by the lender in connection with such assumption and that Landlord shall be
released from all further liability thereunder, and [vi] is otherwise on
commercially reasonable at a gross purchase price (without any deduction for any
brokerage commissions or similar fees payable in connection with such sale and
without adjustment for apportionments) of not less than ninety five percent
(95%) of the Sale Price set forth in the applicable Offer Notice.
(e) If Tenant does not deliver a Binding Purchase Notice
(including earnest money deposit) within the Review Period, and Landlord enters
into a letter of intent within the Marketing Period to sell the Sale Property on
terms that contemplate the execution of a definitive purchase agreement that
would be a Valid Contract but for the fact that such letter of intent provides
for a gross purchase price (without any deduction for any brokerage commissions
or similar fees payable in connection with such sale and without adjustment for
apportionments) that is less than ninety five percent (95%) of the Sale Price
stated in the applicable Offer Notice and Landlord is willing to sell the Sale
Property at such lesser price (the "Lesser Price Offer"), then upon written
notice by Landlord to Tenant, Tenant shall have the right to purchase the Sale
Property pursuant to the terms hereof at the Lesser Price Offer as if such
notice were an Offer Notice, except that the time to deliver a Binding Purchase
Notice (including earnest money deposit) shall be reduced to a twenty (20) day
period. If Tenant does not timely elect to so purchase the Sale Property at the
Lesser Price Offer as aforesaid, then Landlord may sell the Sale Property in a
bona fide arms length transaction for the Lesser Price Offer provided the
closing of such sale occurs within no more than one hundred eighty (180) days
after the end of such twenty (20) day period.
(f) If Landlord enters into a Valid Contract to sell the Sale
Property (whether in connection with an Offer Notice or a Lesser Price Offer)
but fails to close such sale within the applicable one hundred eighty (180) day
period, then that sale or any future sale of the Leased Property shall again be
subject to the rights of Tenant under this 13.2.
(g) If Tenant shall fail, after the delivery of a Binding Purchase
Notice, to close the purchase of the Sale Property as required herein then,
unless such failure would have been excused under the terms set forth in the
contract between the parties pursuant to 13.6 below, Landlord may thereafter
sell the Sale Property which was the subject of such Binding Purchase Notice
within the Marketing Period without Tenant having any further rights to purchase
such Sale Property or otherwise consent thereto under the terms of this 13.2.
In such event, such sale shall be made free and clear of the Lease and Tenant
shall be paid the Lease Termination Fee upon the closing of such sale.
(h) Any sale of Sale Property by Landlord to a party other than Tenant
pursuant to this 13.2 after the expiration of the Option Exercise Period shall
be made free and clear of this Lease, and upon the closing of such sale this
Lease shall terminate as to the Sale Property and Tenant shall be paid the Lease
Termination Fee pursuant to 13.6 below in respect of the loss of Tenant's
business on the Sale Property.
(i) The purchase price payable by Tenant for the Sale Property pursuant to
this 13.2 shall be reduced by the Purchase Price Offset in order to reflect
compensation to Tenant for the lost value of its business on the Leased
Property.
(j) Except as otherwise specifically provided in this 13.2(j), the rights
granted to Tenant under this 13.2 shall not apply to any sale of the Leased
Property or any portion thereof in a foreclosure sale or the transfer of title
thereto by deed in lieu of foreclosure but, unless this Lease is terminated
concurrently with such sale or transfer in accordance with the terms of any
Mortgage Debt, any such purchaser or transferee shall take subject to the rights
of Tenant under this Lease including, but not limited to, under this 13.2;
provided, however, Landlord shall be required to pay any Lease Termination Fee
due to Tenant upon the termination of this Lease at the time of such sale or
transfer if such sale or transfer arises from a default under any Mortgage Debt
caused solely by the acts or omissions of Landlord or its members.
13.3 Sale Prior to Expiration of Option Exercise Period.
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(a) Prior to the expiration of the Option Exercise Period, upon
receipt of an Offer Notice, Tenant shall have the right, to be exercised within
the Review Period to elect, in lieu of delivering a Binding Purchase Notice, to
terminate this Lease as to the Sale Property on closing of the sale described in
the Offer Notice (in which event the Sale Property shall be sold free and clear
of this Lease and Tenant shall be paid the Lease Termination Fee at the closing
of the sale of the Sale Property), or to continue this Lease in effect as to the
Sale Property after the closing of the sale described in the Offer Notice (in
which event the Sale Property shall be sold subject to the terms of the New
Lease and the Lease Termination Fee shall not be paid to Tenant). This 13.3
sets forth the manner in which Tenant has the right to make such election.
(b) If an Offer Notice is delivered by Landlord prior to the end of the
Option Exercise Period, in lieu of Tenant's right to deliver a Binding Purchase
Notice pursuant to such Offer Notice pursuant to 13.2 above, Tenant shall have
the right to elect by written notice to Landlord delivered prior to the end of
the Review Period either [i] to terminate this Lease as to the Sale Property
effective upon the closing of the sale of the Sale Property, or [ii] to continue
to lease the Sale Property pursuant to the terms of the New Lease from and
after the closing of the sale of the Sale Property. The failure of Tenant to
deliver any such notice within the Review Period shall be deemed to be Tenant's
election to continue to lease the Sale Property pursuant to the terms of this
Lease (and any new lease executed as part of such sale transaction as described
more fully herein) from and after the closing of the sale of the Sale Property.
(c) Except as otherwise specifically provided in this 13.3(c), the
rights granted to Tenant under this 13.3 to elect to terminate the Lease shall
not apply to any sale of the Leased Property or any portion thereof in a
foreclosure sale or the transfer of title thereto by deed in lieu of foreclosure
but, unless this Lease is terminated concurrently with such sale or transfer in
accordance with the terms of any Mortgage Debt, any such purchaser or transferee
shall take subject to the rights of Tenant under this Lease including, but not
limited to, under this 13.3; provided, however, Landlord shall be required to
pay any Lease Termination Fee due to Tenant upon the termination of this Lease
at the time of such sale or transfer if such sale or transfer arises from a
default under any Mortgage Debt caused solely by the acts or omissions of
Landlord or its members.
13.4 Sale of Less Than All of Leased Property.
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(a) The provisions of this 13.4 shall apply if the Sale Property
constitutes less than all of the Leased Property then remaining subject to this
Lease. For the avoidance of doubt, Tenant's purchase option as set forth in
13.5 below shall apply only to all of (but not less than all of) the Leased
Property remaining subject to this Lease at the time of the exercise of the
purchase option.
(b) Notwithstanding anything to the contrary set forth herein,
Landlord shall not have the right to deliver an Offer Notice with respect to
less than all of the Leased Property unless the Portfolio Coverage Ratio for the
portion of the Leased Property remaining subject to this Lease after such sale
is not less than the lesser of [i] the Portfolio Coverage Ratio of the entire
Leased Property prior to such transaction or [ii] 1:1. For the purposes of the
foregoing, the Portfolio Coverage Ratio of the entire Leased Property and of
that portion not covered by the Offer Notice shall be determined using the
Facility Financial Reporting for the six (6) calendar month period ending
immediately prior to Landlord's delivery of the applicable Offer Notice.
(c) Concurrently with the sale of the Sale Property, [i] Landlord
and Tenant shall enter into an appropriate amendment to each of the provisions
of this Lease that would be affected by such a sale (i.e., the allocations
described in 13.4(d) and 13.4(e)); and [ii] if such sale is subject to this
Lease pursuant to the terms of 13.3 above, then Tenant shall enter into a new
lease of the Sale Property with the purchaser thereof on substantially the same
terms as this Lease with appropriate modifications to each of the provisions
hereof that would be affected by such a sale transaction, including, but not
limited to, the allocations described in 13.4(d) and 13.4(e) (the "New
Lease").
(d) During the Review Period Landlord and Tenant shall agree upon
an appropriate allocation of Base Rent between the Sale Property and the
remaining Leased Property. The allocation of Part A Base Rent shall be based on
the debt service under the Mortgage Debt which encumbers the Sale Property and
the remainder of the Leased Property, respectively, immediately prior to the
closing of the sale. The allocation of Part B Base Rent shall be based on a 12%
annual return on the Outstanding Equity allocated between the Sale Property and
the remainder of the Leased Property, respectively, immediately prior to the
closing of the sale, such that the aggregate amount of Part A Base Rent and Part
B Base Rent paid by Tenant under this Lease and the New Lease related to the
Sale Property will not exceed the Part A Base Rent and the Part B Base Rent paid
by Tenant under this Lease immediately prior to the closing of the sale of the
Sale Property.
(e) During the Review Period Landlord and Tenant shall also agree
upon an appropriate allocation between the Sale Property and the remaining
Leased Property of the following: [i] the Three Million Five Hundred Thousand
Dollar ($3,500,000) amount set forth in the definitions of Lease Termination
Fee, Lease Termination Threshold and Purchase Price Offset; [ii] Minimum
Purchase Price; [iii] Gross Revenues Threshold; and [iv] Financial Performance
Targets. The allocations described in this 13.4(e) shall be made based on
annualized Gross Revenues for the six (6) calendar month period ending before
the date of delivery of the Offer Notice.
(f) If Landlord and Tenant are unable to agree upon any of the
allocations set forth in 13.4(c), 13.4(d) and 13.4(e) above or any other
terms of the New Lease or an amendment to this Lease prior to the end of the
Review Period, the same shall be submitted to arbitration in accordance with the
provisions of 25.26 hereof.
13.5. Option to Purchase. Tenant shall have the right during the
--------------------
Option Exercise Period to purchase all, but not less than all, of the Leased
Property upon delivery of a Purchase Notice to Landlord no earlier than sixty
(60) days prior to the first day of the Option Exercise Period and no later than
the last day of the Option Exercise Period. Tenant may exercise its Option to
Purchase only by giving an irrevocable notice of Tenant's election to purchase
the Leased Property satisfying the requirements of 13.6 below ("Purchase
Notice").
(a) In the event of the purchase of the Leased Property by Tenant
pursuant to this 13.5, the purchase price payable by Tenant will be equal to
the difference between [i] the greater of the Fair Market Value of the Leased
Property or the Minimum Purchase Price, less [ii] the Purchase Price Offset.
The parties acknowledge that the purchase price payable by Tenant on exercise of
its option under this 13.5 is reduced by the Purchase Price Offset because the
Fair Market Value of the Leased Property will be determined free and clear of
the Lease, and the Purchase Price Offset reflects compensation to Tenant for the
lost value of its business on the Leased Property.
(b) The "Fair Market Value" of the Leased Property is its fair
market value free and clear of the Lease, and shall be determined as follows.
[i] The parties shall attempt to determine the Fair Market Value by
mutual agreement within 15 days after giving the Purchase Notice (the
"Negotiation Period"). However, if the parties do not agree on the Fair Market
Value during the Negotiation Period, the following provisions shall apply.
[ii] Landlord and Tenant shall each select an MAI Appraiser within five (5)
Business Days after the end of the Negotiation Period. The two MAI Appraisers
will then select a third MAI Appraiser within an additional five (5) days. An
"MAI Appraiser" shall mean an appraiser licensed or otherwise qualified to do
business in the State of California or the State of Washington and who has
substantial experience in performing appraisals of facilities similar to the
Leased Property and is certified as a member of the American Institute of Real
Estate Appraisers or certified as a SRPA by the Society of Real Estate
Appraisers, or, if such organizations no longer exist or certify appraisers,
such successor organization or such other organization as is approved by
Landlord.
[iii] In the event either Landlord or Tenant fails to select a MAI Appraiser
within the five (5) Business Day period set forth above, the MAI Appraiser
selected by the other party shall alone determine the Fair Market Value of the
Leased Property in accordance with the provisions of this Section and the Fair
Market Value so determined shall be binding upon Landlord and Tenant.
[iv] In the event the MAI Appraisers selected by Landlord and Tenant are
unable to agree upon or otherwise fail to select a third MAI Appraiser within
the five (5) day period set forth above, then the MAI Appraisers selected by
Landlord and Tenant each shall perform their valuation of the Leased Property
pursuant to clause [v] below, and (A) if the higher of such two appraisals is
not greater than 110% of the lower such appraisal, then the appraised values
shall be averaged to arrive at the Fair Market Value, and (B) if the higher such
appraisal is in excess of 110% of the lower such appraisal, then Fair Market
Value shall be determined by arbitration pursuant to Section 25.26 of this
Lease.
[v] The Fair Market Value shall be determined by the MAI Appraisers within
sixty (60) days from the appointment of the last MAI Appraiser. Landlord and
Tenant agree that the appraisals shall be prepared in compliance with the
Uniform Appraisal Instructions to Appraisers as set forth by FIRREA and shall
conform to the current Uniform Standards of Professional Appraisal Practice
(USPAP) adopted by the Appraisal Standards Board of the Appraisal Foundation.
The appraised values submitted by the three (3) MAI Appraisers shall be ranked
from highest value to middle value to lowest value, the appraised value (highest
or lowest) which is furthest from the middle appraised value shall be discarded,
and the remaining two appraised values shall be averaged to arrive at the Fair
Market Value.
[vi] Upon any failure of any of the MAI Appraisers appointed pursuant to
this Section to perform their duties within the periods set forth in this
Section, then Fair Market Value shall be determined by arbitration pursuant to
Section 25.26 of this Lease.
[vii] In the event of any condemnation, similar taking or threat
thereof with respect to any part of the Leased Property or any insured or
partially insured casualty loss to any part of the Leased Property after Tenant
has exercised an Option to Purchase, but before settlement, the Fair Market
Value of the Leased Property shall be redetermined as provided in this 13.5 to
give effect to such condemnation, taking or loss and shall take into account all
available condemnation awards and insurance proceeds.
[viii] Tenant shall pay, or reimburse Landlord for, all costs and
expenses in connection with the appraisals.
(c) If Tenant for any reason (other than Landlord's failure to
deliver title in the condition set forth herein) fails to purchase the Leased
Property after Tenant has given the Purchase Notice, Tenant shall have no right
at anytime thereafter to re-exercise its option to purchase or to acquire the
Leased Property pursuant to this 13.5 and Tenant shall continue to be obligated
as Tenant under the terms of this Lease for the remainder of the Term but such
failure shall not affect Tenant's rights under 13.2 with respect to any future
sales by Landlord of all or any portion of the Leased Property.
(d) If Tenant for any reason does not exercise its purchase option
under this 13.5 within the Option Exercise Period, Tenant shall be deemed to
have forfeited all of Tenant's rights to exercise such option to purchase but
such forfeiture shall not affect Tenant's rights under 13.2 with respect to any
future sales by Landlord of all or any portion of the Leased Property.
13.6 Closing of Purchase and Sale. In the event of the sale of the
--------------------------------
Sale Property hereunder to a person other than Tenant, the Lease Termination Fee
shall be paid to Tenant from sales proceeds payable to Landlord at the closing
thereof in order to compensate Tenant for the loss of Tenant's business on the
Sale Property resulting from such transaction. The purchase of any portion of
the Leased Property by Tenant pursuant to the exercise of its right of first
opportunity or option to purchase under this Article 13 shall be effectuated
pursuant to this 13.6, as follows:
(a) The Binding Purchase Notice under 13.2 and/or the Purchase
Notice under 13.5 shall be documented and closed through an escrow established
with the main San Francisco, California, office of one of the five largest
national title insurance companies in the United States designated by Landlord
(the "Escrow Agent") pursuant to the Escrow Agent's standard form of escrow
instructions reflecting the terms of this 13.6. Tenant shall be obligated to
close on the purchase and sale of the Subject Property on a date mutually
selected by Landlord and Tenant no more than ninety (90) days following the
delivery of the Binding Purchase Notice or the Purchase Notice, as applicable
(as such ninety (90) day period may be extended pursuant to 13.6(n) below).
(b) Such escrow instructions shall require Tenant to deliver to
Escrow Agent concurrently with the opening of such escrow an earnest money
deposit in immediately available funds in an amount equal to Two Million Five
Hundred Thousand and no/100 Dollars ($2,500,000) (pro rated based on the ratio
the number of units of the Sale Property bears to the number of units of the
Leased Property immediately prior to the sale, if the Sale Property is than all
of the Leased Property), which amount shall be non-refundable liquidated damages
(except in the event that Landlord fails to deliver title in accordance with the
requirement of this 13.6 in which case such deposit and any accrued interest
thereon shall be returned to Tenant).
(c) Tenant shall take title to the Subject Property in its "as is"
"where is" condition with all faults and without any representations and
warranties of Landlord other than Landlord's limited warranty of title to the
Subject Property and authority to convey the same in accordance with the terms
hereof.
(d) In the event that Tenant defaults in its obligations to purchase the
Subject Property, Escrow Agent shall disburse the deposit to Landlord and
Landlord as its sole and exclusive remedy shall be entitled to retain the same
as liquidated damages arising out of such default by Tenant.
(e) At the close of such escrow, Tenant shall deliver to Landlord the
purchase price (less the deposit and any accrued interest thereon) by wire
transfer in immediately available funds and the deposit, together with all
interest accrued thereon, shall be transferred from the Escrow Agent to
Landlord.
(f) Landlord shall pay any prepayment penalties on any Mortgage Debt
which is to be satisfied at Closing; provided, however, in the event Tenant
elects to prepay, rather than assume, any Mortgage Debt which it is otherwise
authorized to assume without a change in the financial terms thereof in effect
immediately prior to Closing, including, but not limited to the interest rate,
maturity date and amortization schedule applicable to the payment of principal
and interest due thereunder, or a material change in any of the other
obligations imposed on Landlord, as the borrower thereunder, then such
prepayment penalty shall be the sole responsibility of Tenant.
(g) Tenant shall pay all assumption fees charged by the holder of any
Mortgage Debt in connection with Tenant's assumption thereof and shall otherwise
comply with the requirements for assumption set forth in the Mortgage Debt, it
being understood and agreed by Tenant that any assumption of the Mortgage Debt
shall require the consent of the holder thereof and compliance with any other
requirements set forth in the documents evidencing such Mortgage Debt.
(h) In the event of Tenant's exercise of its right of first
opportunity, closing costs and expenses shall be paid in accordance with the
terms of the Offer Notice or Third Party Offer, as applicable. In the event of
Tenant's exercise of its option to purchase, Tenant shall pay all other closing
costs and expenses in connection with the transfer of the Subject Property to
Tenant, including, but not limited to, the following: [A] real property
conveyance or transfer fees or deed stamps; [B] title search fees, title
insurance commitment fees, and title insurance premiums; [C] survey fees; [D]
environmental assessment fees; [E] recording fees other than recording fees
required for Landlord to deliver title to the Subject Property in accordance
with the terms hereof; [F] reasonable attorneys' fees of Landlord's counsel; [G]
fees of the Escrow Agent; [H] all amounts, costs, expenses, charges, Rent and
other items payable by Tenant to Landlord.
(i) Landlord shall deliver to Tenant a duly executed and acknowledged
limited warranty deed (or equivalent form for the particular state in which each
individual parcel is located) and other applicable instruments of assignment,
along with all necessary title company affidavits or indemnities, conveying the
Subject Property to Tenant, subject to the Permitted Exceptions; provided,
however, except with respect to liens and encumbrances which can be removed with
the payment of money (the "Monetary Liens"), which Landlord shall be required to
remove or discharge, Landlord shall have no obligation to remove any liens or
encumbrances which are not Permitted Exceptions (the "Other Liens"), it being
understood and agreed that in the event Landlord is unable or unwilling to
remove the Other Liens, Tenant's sole recourse shall be to either waive its
objection to the Other Liens and proceed with its purchase of the Leased
Property subject thereto or to elect not to proceed with the purchase of the
Subject Property and instead, to continue to be obligated as lessee hereunder;
(j) Upon mutual agreement, Landlord shall be permitted to convey, and Tenant
shall be permitted to acquire, the Subject Property subject to existing Mortgage
Debt secured by the Leased Property on the express condition that (A) Tenant
shall have obtained the relevant lender's written consent thereto, (B) Tenant
shall have assumed in writing the Mortgage Debt and shall have delivered to
Landlord a written instrument releasing Landlord from any and all such
liabilities and claims with respect thereto and lender's written release of
Landlord, and (C) Tenant shall have paid all costs and expenses of such lender
and/or Landlord in connection with such assumption;
(k) All items of revenue and expense of the Subject Property which are
customarily apportioned in the sale of property comparable thereto shall be
prorated as of the sale closing date in accordance with the customs and
practices usual in transactions involving property comparable to the Subject
Property unless the same are ultimately the responsibility of Tenant under the
Lease in which case no such proration shall be required;
(l) Landlord and Tenant shall deliver such additional instruments, such as
title affidavits and indemnities and FIRPTA Affidavits, which are customarily
delivered by buyers or sellers of property comparable to the Subject Property;
and
(m) The date for the closing of the purchase of the Subject
Property by Tenant as set forth in 13.6(a) above may be extended if the
Mortgage Debt secured by the Subject Property prohibits prepayment and in the
further event that Tenant is unable either by the terms of such Mortgage Debt or
as a result of the inability to secure the necessary consent of the holder of
the Mortgage Debt to assume such Mortgage Debt (the "Financing Limitations").
In such event, such closing shall be delayed to a date which is thirty (30) days
after the earlier to occur of the date on which such Mortgage Debt can be
prepaid, whether with or without penalty, or assumed by Tenant; provided
further, if such Financing Limitations apply to eight (8) or less Facilities,
then Tenant shall have the option of consummating the purchase as to the
unaffected Facilities and deferring the closing as to the affected Facilities
only.
13.7 Right to Refinance. Landlord shall have the right, at any time
--------------------
and from time to time, during the Term of this Lease to replace some or all of
the Initial Financing with new Mortgage Debt on the following terms and
conditions:
(a) For purposes of calculating the Base Rent due from Tenant to
Landlord after the completion of such refinancing, in no event shall the total
principal amount of the Mortgage Debt immediately after any such refinancing
transaction included in calculating the Base Rent exceed the sum of [i] the
Outstanding Equity plus [ii] the Initial Financing immediately prior to such
financing (which, for purposes hereof, shall include any accrued and unpaid
default interest and protective advances made under the terms of the Mortgage
Debt as a result of a default by Tenant under this Lease) plus [iii] any
prepayment premiums or termination/exit fees due upon such refinancing under the
terms of the Mortgage Debt plus [iv] the fees and expenses incurred in
connection with such refinancing transaction.
(b) To the extent the terms of any such refinancing would increase
the financial obligations imposed on Tenant hereunder, including, but not
limited to, the amount of the Base Rent or would increase in any material
respect any of the other obligations imposed on Tenant hereunder (a "Material
Modification"), Landlord shall be entitled to proceed with such refinancing but
Tenant shall have no obligation to make such additional payments or to comply
with such additional obligations unless it has approved the Material
Modification in writing, which approval may be withheld in its sole discretion,
and to the extent Tenant does not approve any such Material Modification but
Landlord nonetheless elects to proceed with such refinancing on terms which
include such Material Modification, the cost of complying with such Material
Modification shall be the sole responsibility of Landlord and shall be paid by
Landlord, at its option, from the Part B Base Rent and/or the Percentage Rent
due from Tenant to Landlord hereunder or from other revenue sources then
available to Landlord. For purposes of this Section 13.7(b) there shall not be a
Material Modification if the maximum amount of debt service, i.e. principal and
interest payments, which could, at any time during the term of the refinancing
loan, be included in calculating the Part A Base Rent hereunder is no greater
than the maximum amount of debt service, i.e., principal and interest payments,
which could have been included in calculating the Part A Base Rent hereunder as
if the highest possible non-default interest rate provided for in the Mortgage
Debt was in effect prior to such refinancing (the "Maximum Assumed Debt Service
Amount"), whether or not the Part A Base Rent in effect immediately prior to
such refinancing included such Maximum Assumed Debt Service Amount.
(c) If requested by Landlord in connection with such a
refinancing, Tenant shall enter into a separate Lease with respect to the
Facility or Facilities affected by such refinancing (a "Refinancing Lease"). The
terms of the Refinancing Lease shall be substantially the same as the terms of
this Lease, and shall include, among other things, an option to purchase the
Facility or Facilities covered by such Refinancing Lease, a Lease Termination
Fee which shall be payable in the event of the termination of the Refinancing
Lease on the same terms that the Lease Termination Fee is payable hereunder, and
a Purchase Price Offset which shall apply in the event of the purchase by Tenant
of the Facility or Facilities covered by the Refinancing Lease. Landlord and
Tenant shall allocate the matters set forth in 13.4(d) and 13.4(e) above
between the Refinancing Lease and this Lease as it is to remain after the
Refinancing Lease is executed. Such allocations are to be made on the basis set
forth in said 13.4(d) and 13.4(e), and shall be completed within thirty (30)
days after a request for the same by Landlord. If Landlord and Tenant are
unable to agree upon the terms of the Refinancing Lease as aforesaid, the same
shall be submitted to arbitration in accordance with the provisions of 25.26
hereof.
(d) Landlord and Tenant further acknowledge and agree that
concurrently with the execution of such Refinancing Lease, Landlord and Tenant
shall enter into an appropriate amendment to each of the provisions of this
Lease that would be affected by such a sale transaction, including, but not
limited to, the Minimum Purchase Price, the Gross Revenues Threshold, the
Financial Performance Targets, the Lease Termination Threshold, the Lease
Termination Fee and the Purchase Price Offset and shall confirm in writing the
Part A Base Rent and Part B Base Rent in effect immediately after the closing of
such refinancing transaction;; and, provided further, that if Landlord and
Tenant are unable to agree upon the terms of such amendment, the same shall be
submitted to arbitration in accordance with the provisions of 25.26 hereof.
13.8 Mutual Cooperation. Landlord and Tenant both agree that it shall
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be reasonable and cooperate with the other by executing any documents which may
be reasonably required in order to consummate the transactions contemplated by
this Article 13 or by the documents evidencing the Mortgage Debt, including any
amendments hereto required in conjunction with the severance of the Mortgage
Debt into two or more loan pools.
ARTICLE 14: NEGATIVE COVENANTS
Until the Obligor Group Obligations shall have been performed in full,
Tenant covenants and agrees that Tenant shall not do any of the following
without the prior written consent of Landlord, which consent may be withheld by
Landlord in its sole discretion:
14.1 No Debt. Tenant shall not create, incur, assume, or permit
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to exist any indebtedness with respect to the Leased Property other than [i]
trade debt incurred in the ordinary course of business; [ii] indebtedness for
Facility working capital purposes; and [iii] indebtedness that is secured by any
Permitted Lien.
14.2 No Liens. Tenant shall not create, incur, or permit to exist
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any lien, charge, encumbrance, easement or restriction upon the Leased Property
or any lien upon or pledge of any interest in Tenant, except for Permitted
Liens.
14.3 No Guaranties. Tenant shall not create, incur, assume, or
--------------
permit to exist any guarantee of any loan or other indebtedness with respect to
the operation of the Leased Properties except for the endorsement of negotiable
instruments for collection in the ordinary course of business.
14.4 No Transfer. Except as permitted by Article 18, Tenant shall
-----------
not sell, lease, sublease, mortgage, convey, assign or otherwise transfer any
legal or equitable interest in the Leased Property or any part thereof, except
for transfers made in connection with any Permitted Lien or leases to the
residents of the Leased Property or commercial leases with respect to a portion
of the Leased Property comprising in the aggregate less than 2,500 square feet
provided such commercial leases shall be for services that are an integral part
of the Facility.
14.5 Subordination of Payments to Affiliates. After the
-------------------------------------------
occurrence of an Event of Default and until such Event of Default is cured or
waived in writing, Tenant shall not make any payments or distributions
(including, without limitation, salary, bonuses, fees, principal, interest,
dividends, liquidating distributions, management fees, cash flow distributions
or lease payments but specifically excluding [i] salaries and benefits paid to
employees of the Facilities or employees of Tenant in the ordinary course of
business and [ii] any amounts due to or from Tenant with respect to amounts
advanced by Properties on behalf of ESC or by ESC on behalf of Properties in
connection with the operation of the Facilities) to each other or to any
Affiliate, or any shareholder, member or partner of Tenant or any Affiliate.
14.7 Change of Location or Name. Tenant shall not, without
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providing Landlord with 30 days prior notice thereof, change any of the
following: [i] the location of the principal place of business or chief
executive office of Tenant, or any office where any of Tenant's books and
records are maintained; [ii] the name under which Tenant conducts any of its
business or operations; or [iii] reorganize or otherwise change its respective
Organization State.
ARTICLE 15: AFFIRMATIVE COVENANTS
15.1 Perform Obligations. Tenant shall perform all of its
--------------------
obligations under this Lease, the Government Authorizations, the Permitted
Exceptions, and all Legal Requirements. If applicable, Tenant shall take all
necessary action to obtain all Government Authorizations required for the
operation of the Facility as soon as possible after the Effective Date.
15.2 Proceedings to Enjoin or Prevent Construction. If any
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proceedings are filed seeking to enjoin or otherwise prevent or declare invalid
or unlawful Tenant's construction, occupancy, maintenance, or operation of the
Facility or any portion thereof, Tenant will cause such proceedings to be
vigorously contested in good faith, and in the event of an adverse ruling or
decision, prosecute all allowable appeals therefrom, and will, without limiting
the generality of the foregoing, resist the entry or seek the stay of any
temporary or permanent injunction that may be entered, and use its best
commercially reasonable efforts to bring about a favorable and speedy
disposition of all such proceedings and any other proceedings.
15.3 Documents and Information.
---------------------------
15.3.1 Furnish Documents. Tenant shall periodically during the
------------------
term of the Lease deliver to Landlord the information and reports required from
Tenant or Emeritus by the Tenant and Guarantor Financial Reporting and the
Facility Financial Reporting. Landlord shall have the right to review and
provide Tenant with its input on the annual operating and capital budgets
included within the Facility Financial Reporting.
15.3.2 Furnish Information. Tenant shall [i] promptly supply
--------------------
Landlord with such information concerning its financial condition, affairs and
property, as Landlord may reasonably request from time to time hereafter; [ii]
promptly notify Landlord in writing of any condition or event that constitutes a
breach or event of default of any term, condition, warranty, representation, or
provisions of this Lease or any other agreement, and of any material adverse
change in its financial condition; [iii] at any time or times hereafter during
business hours and after reasonable oral or written notice, permit Landlord or
any of its agent or representatives to have access to, and to examine, the books
and records and any and all accounts, data and income tax and other returns of
Tenant insofar as they pertain to the Leased Property, subject to Landlord's
obligation to maintain the confidentiality of any patient or employee
information in accordance with the requirements of applicable State or federal
law; and [iv] permit Landlord to copy and make abstracts from any and all of
said books and records subject to any limitations imposed by State or federal
law with respect to the confidentiality of patient and employee records.
15.3.3 Further Assurances and Information. Tenant shall, on
-------------------------------------
request of Landlord from time to time, execute, deliver, and furnish documents
as may be necessary to fully consummate the transactions contemplated under this
Lease. Within 15 days after a request from Landlord, Tenant shall provide to
Landlord such additional information regarding Tenant, Tenant's financial
condition or the Facility as Landlord, or any existing or proposed creditor of
Landlord, or any auditor or underwriter of Landlord, may reasonably require from
time to time.
15.3.4 Material Communications. Tenant shall transmit to
------------------------
Landlord, within five days after receipt thereof, any material communication
affecting a Facility, this Lease, the Legal Requirements or the Government
Authorizations, and Tenant will promptly respond to Landlord's inquiry with
respect to such information. Tenant shall notify Landlord in writing within
five days after Tenant has knowledge of any potential, threatened or existing
litigation or proceeding against, or investigation of, Tenant or the Facility
that would reasonably be expected to adversely affect the right to operate the
Facility or Landlord's title to the Facility or Tenant's interest therein.
15.3.5 Requirements for Financial Statements. Tenant shall meet
---------------------------------------
the following requirements in connection with the preparation of the financial
statements: [i] all audited financial statements shall be prepared in
accordance with general accepted accounting principles consistently applied;
[ii] all unaudited financial statements shall be prepared in a manner
substantially consistent with prior audited and unaudited financial statements
submitted to Landlord; [iii] all financial statements shall fairly present the
financial condition and performance for the relevant period in all material
respects and [iv] the audited financial statements shall include all notes to
the financial statements.
15.4 Compliance With Laws/Mortgage Debt. Notwithstanding anything
----------------------------------
to the contrary contained in this Lease, Tenant shall comply with all Legal
Requirements and keep all Government Authorizations in full force and effect and
comply with the terms of any documents evidencing the Mortgage Debt, except any
terms which are personal to and can only be performed by Landlord, and Tenant
shall have the right, but not the obligation, to make any principal prepayments,
exit or termination fees or escrow payments required to be made to the holder of
any Mortgage Debt to ensure compliance with the financial covenants set forth in
any documents evidencing the Mortgage Debt; provided, however, if Tenant does
not exercise the rights granted to it to make such payments, it shall
nonetheless be required to pay the same as part of its Base Rent to the extent
the same are included in the Outstanding Equity. Subject to Tenant's right to
contest the same in accordance with the terms of this Lease, Tenant shall pay
when due all taxes and governmental charges of every kind and nature that are
assessed or imposed upon Tenant at any time during the term of the Lease,
including, without limitation, all income, franchise, capital stock, property,
sales and use, business, intangible, employee withholding, and all taxes and
charges relating to Tenant's business and operations at the Leased Property.
Tenant shall be solely responsible for compliance with all Legal Requirements,
including the ADA, and Landlord shall have no responsibility for such compliance
other than when undertaking its repair or reconstruction obligations pursuant to
Articles 9 and 10 hereof.
15.5 Broker's Commission. Tenant shall indemnify Landlord from
--------------------
claims of brokers arising by the execution hereof or the consummation of the
transactions contemplated hereby and from expenses incurred by Landlord in
connection with any such claims (including reasonable attorneys' fees).
15.6 Existence. Except as otherwise specifically provided herein,
---------
Tenant shall maintain its existence throughout the term of this Lease.
15.7 Financial Covenants. The defined terms used in this section
--------------------
are defined in 15.7.1. The method of valuing assets shall be consistent with
the Financial Statements. The following financial covenants shall be met
throughout the term of this Lease:
15.7.1 Definitions.
-----------
(a) "Portfolio Cash Flow" means the aggregate net income arising from all
Facilities under this Lease as reflected in the Facility Financial Reporting for
each Facility plus [i] the amount of the provision for depreciation and
amortization; plus [ii] the amount of the provision for management fees; plus
[iii] the amount of the provision for income taxes; plus [iv] the amount of the
provision for Base Rent payments and interest relating to the Facilities; minus
[v] an imputed management fee equal to 5% of gross revenues of the Facilities
(net of contractual allowances); and minus [vi] an imputed replacement reserve
of $300.00 per unit at the Facilities, per year (but only to the extent not
included in calculating net income).
(b) "Portfolio Coverage Ratio" is the ratio of [i] Portfolio Cash Flow for
each applicable period; to [ii] the Base Rent payments under this Lease and all
other debt service payments relating to the Facilities for the applicable
period.
15.8 Facility Licensure and Certification. Tenant shall give
---------------------------------------
written notice to Landlord within five days after an inspection of the Facility
with respect to health care licensure or certification has occurred. If Tenant
receives a Facility survey or inspection report with deficiencies or notice of
failure to comply with a plan of correction, Tenant shall cure all deficiencies
and implement all corrective actions by the date required by the regulatory
authority and shall deliver evidence of same to Landlord.
15.9 Transfer of License and Facility Operations. If this Lease
---------------------------------------------
is terminated due to expiration of the Term, pursuant to an Event of Default or
for any reason other than Tenant's purchase of the Leased Property, or if Tenant
vacates the Leased Property (or any part thereof) without termination of this
Lease (other than during periods of repair or reconstruction after damage,
destruction or a Taking), the following provisions shall be immediately
effective:
15.9.1 Licensure. Tenant shall execute, deliver and file all
---------
documents and statements requested by Landlord to effect the transfer of the
Facility license and Government Authorizations to a replacement operator
designated by Landlord ("Replacement Operator"), subject to any required
approval of governmental regulatory authorities, and Tenant shall provide to
Landlord all information and records required by Landlord in connection with the
transfer of the license and Government Authorizations.
15.9.2 Facility Operations. In order to facilitate a responsible
--------------------
and efficient transfer of the operations of the Facility at the expiration or
earlier termination of the Term other than as a result of the purchase of the
Leased Property by Tenant but including upon a sale at foreclosure or a transfer
by deed in lieu of foreclosure, Tenant shall, if and to the extent requested by
Landlord, the holder of the Mortgage Debt or any such purchaser or transferee
[i] continue and maintain the operation of the Facility in the ordinary course
of business, including using its commercially reasonable efforts to retain the
residents at the Facility to the fullest extent practicable and consistent with
applicable laws and regulations, until transfer of the Facility operations to
the Replacement Operator is completed either as a result of the issuance to the
Replacement Operator of a license to operate the Facility or the agreement by
Tenant to permit the Replacement Operator to operate the Facility under Tenant's
license in accordance with the terms of clause [ii] hereof; [ii] enter into such
management agreements, operations transfer agreements and other types of
agreements that may be reasonably requested by Landlord or the Replacement
Operator; provided, however, in no event shall Tenant be required to permit the
Replacement Operator to operate the Leased Property under Tenant's licenses
unless Tenant receives confirmation that doing so will not violate applicable
Legal Requirements and Tenant receives appropriate indemnities from the
Replacement Operator or other party deemed acceptable by Tenant (which shall in
no event be the holder or servicer of the Mortgage Debt) in form and substance
reasonably acceptable to Tenant; [iii] provide reasonable access during normal
business hours and on reasonable advance notice for Landlord and its agents to
show the Facility to potential replacement operators; and [iv] permit Landlord
or any replacement operator to use any of the Emeritus Facility Names for a
period of up to six (6) months after the expiration or earlier termination of
the Term. Tenant consents to the distribution by Landlord to potential
replacement operators of Facility financial statements, licensure reports,
financial and property due diligence materials and other documents, materials
and information relating to the Facility. The provisions of this section do not
create or establish any rights in Tenant or any third party and Landlord
reserves all rights and remedies relating to termination of this Lease.
15.10 Bed Operating Rights. Tenant acknowledges and agrees that
----------------------
the rights to operate the beds located at the Facility as set forth on Exhibit C
under the law of the Facility State and to operate any Alzheimer's memory loss
units added to any of the Facilities in accordance with the terms of this Lease,
to relocate such bed operating rights to another location or locations, and to
transfer such bed operating rights to third parties, are property of the
Landlord and are an integral part of the real and personal property that
constitutes the Leased Property. Tenant has only the right to use of such
rights during the term of this Lease and subject to its terms and conditions.
All operating rights shall automatically revert to Landlord or Landlord's
designee upon the expiration or termination of this Lease for any reason
whatsoever (other than Tenant's purchase of the Leased Property) without any
requirement of a transfer or the payment of additional consideration.
15.11 Power of Attorney. Effective upon [i] the occurrence and
-------------------
during the continuance of an Event of Default, or [ii] termination of this Lease
for any reason other than Tenant's purchase of the Leased Property, Tenant
hereby irrevocably and unconditionally appoints Landlord, or Landlord's
authorized officer, agent, employee or designee, as Tenant's true and lawful
attorney-in-fact, to act for Tenant in Tenant's name, place, and stead, to
execute, deliver and file all applications and any and all other necessary
documents and statements to effect the issuance, transfer, reinstatement,
renewal and/or extension of the Facility license and all Governmental
Authorizations issued to Tenant or applied for by Tenant in connection with
Tenant's operation of the Facility, to permit any designee of Landlord or any
other transferee to operate the Facility under the Governmental Authorizations,
and to do any and all other acts incidental to any of the foregoing but only in
the event Tenant fails to take such actions or execute such documents after a
request from Landlord. Tenant irrevocably and unconditionally grant to Landlord
as their respective attorney-in-fact full power and authority to do and perform
every act necessary and proper to be done in the exercise of any of the
foregoing powers as fully as Tenant might or could do if personally present or
acting, with full power of substitution, hereby ratifying and confirming all
that said attorney shall lawfully do or cause to be done by virtue hereof. This
power of attorney is coupled with an interest and is irrevocable prior to
Tenant's purchase of the Leased Property. Landlord shall provide Tenant with
copies of any documents filed and/or with a summary of any actions taken
pursuant to this power of attorney.
15.12. Environmental Compliance.
-------------------------
(a) Tenant shall not bring, release, use, generate, manufacture,
store or dispose of, or permit to be brought, released, used, generated,
manufactured, stored or disposed of, on, under or about the Leased Property, or
transfer or permit to be transferred to or from the Leased Property, any
Hazardous Materials. There is excluded from this prohibition Hazardous Materials
of the type commonly used in licensed assisted living facilities, subject to the
condition that they are used, stored and disposed of in accordance with all
applicable law.
(b) If Tenant knows, or has reasonable cause to believe, that
Hazardous Materials, or a condition involving or relating to the same, has come
to be located in, on or about the Leased Property, other than as previously
consented to by Landlord, Tenant shall immediately give written notice of such
fact to Landlord.
(c) Tenant shall, at its sole cost and expense, promptly take all
investigatory and/or remedial action reasonably recommended, whether or not
formally ordered or required, for the clean-up of any contamination of, and for
the maintenance, security and or monitoring of, the Facility, the elements
surrounding the same, or neighboring properties, that was caused or materially
contributed to by Tenant, its agents, officers, directors or employees, relating
to or involving any Hazardous Materials brought onto and/or released from the
Leased Property.
(d) Tenant agrees, as appropriate, to cause to be developed
operations and maintenance plans and to manage any potential mold within the
Facilities in accordance with the terms of such plans.
(e) Tenant shall indemnify, protect, defend and hold Landlord, its
agents, employees, partners, members (including, in the case of a corporate
partner or member, such corporation's shareholders, officers and directors),
harmless from and against any and all damages, liabilities, judgments, costs,
claims, liens, expenses, penalties and attorney's and consultants' fees arising
out of or involving (i) any Hazardous Materials presently existing or brought
onto and/or released or threatened to be released from or onto the Leased
Property by any person during the Term of the Lease and/or (ii) Tenant's failure
to perform any of its obligations under this 15.12. Tenant's obligations
hereunder shall include, but not be limited to, the effects of any contamination
or injury to person, property or the environment created or suffered by Tenant,
and the cost of investigation, removal, remediation, restoration and/or
abatement thereof, or of any removal, remediation, restoration and/or abatement
thereof or of any contamination therein involved and shall survive the
expiration or earlier termination of this Lease. No termination, cancellation
or release agreement entered into by Landlord and Tenant shall release Tenant
from its obligations under this Lease with respect to Hazardous Materials,
unless specifically so agreed by Landlord in writing at the time of such
agreement.
(f) If at any time during the Term of this Lease any governmental
authority notifies Landlord or Tenant of a violation of any Environmental Law or
Landlord reasonably believes that a Facility may violate any Environmental Law,
Landlord may require one or more environmental audits of such portion of the
Leased Property, in such form, scope and substance as specified by Landlord, at
Tenant's expense. Tenant shall, within thirty (30) days after receipt of an
invoice from Landlord, reimburse Landlord for all costs and expenses incurred in
reviewing any environmental audit, including, without limitation, reasonable
attorneys' fees and costs.
ARTICLE 16: ALTERATIONS, CAPITAL IMPROVEMENTS, AND SIGNS
16.1 Prohibition on Alterations and Improvements. Except for
-----------------------------------------------
Permitted Alterations (as hereinafter defined), Tenant shall not make any
structural or nonstructural changes, alterations, additions and/or improvements
(hereinafter collectively referred to as "Alterations") to the Leased Property.
16.2 Approval of Alterations. If Tenant desires to perform any
-------------------------
Permitted Alterations, Tenant shall deliver to Landlord plans, specifications,
drawings, and such other information as may be reasonably requested by Landlord
(collectively the "Plans and Specifications") showing in reasonable detail the
scope and nature of the Alterations that Tenant desires to perform. It is the
intent of the parties hereto that the level of detail shall be comparable to
that which is referred to in the architectural profession as "design development
drawings" as opposed to working or biddable drawings. Landlord agrees not to
unreasonably delay its review of the Plans and Specifications. Within 30 days
after receipt of an invoice, Tenant shall reimburse Landlord for all costs and
expenses incurred by Landlord in reviewing and, if required, approving or
disapproving the Plans and Specifications, inspecting the Leased Property, and
otherwise monitoring compliance with the terms of this Article 16. Tenant shall
comply with the requirements of 16.4 in making any Permitted Alterations.
16.3 Permitted Alterations. Permitted Alterations means any one
----------------------
of the following: [i] Alterations approved by Landlord; [ii] Alterations
required under 7.2; [iii] Alterations affecting the structure of the Leased
Property and having a total cost of less than $250,000.00 individually or in the
aggregate; [iv] repairs, rebuilding and restoration required or undertaken
pursuant to 9.4; [v] non-structural Alterations such as painting, landscaping,
wallpapering, installing new floor coverings, etc. without regard to the cost
thereof, [vi] the Pre-Approved Improvements and [vii] alterations required in
connection with the development at the Facilities of Alzheimer's memory loss
units, subject to the limitation set forth in 6.1 with respect to the number of
such units within any Facility which may be converted to such use.
16.4 Requirements for Permitted Alterations. Tenant shall comply with
---------------------------------------
all of the following requirements in connection with any Permitted Alterations:
(a) The Permitted Alterations shall be made in accordance with the approved
Plans and Specifications.
(b) The Permitted Alterations and the installation thereof shall comply with
all applicable legal requirements and insurance requirements.
(c) The Permitted Alterations shall be done in a good and workmanlike manner
using new materials of a quality consistent with that used to construct the
affected Facility, shall not impair the value or the structural integrity of the
Leased Property, and shall be free and clear of all mechanic's liens.
(d) For any Permitted Alterations having a total cost of $100,000.00 or
more, Tenant shall deliver to Landlord a completion and performance bond in a
form and with a surety acceptable to Landlord, in an amount equal to the
estimated cost of the Permitted Alterations, guaranteeing the completion of the
work free and clear of liens and in accordance with the approved Plans and
Specifications, and naming Landlord and any mortgagee of Landlord as joint
obligees on such bond.
(e) Tenant shall, at Tenant's expense, obtain a builder's completed value
risk policy of insurance insuring against all risks of physical loss, including
collapse and transit coverage, in a nonreporting form, covering the total value
of the work performed, and equipment, supplies, and materials, and insuring
initial occupancy. Landlord and any mortgagee of Landlord shall be additional
insureds of such policy. Landlord shall have the right to approve the form and
substance of such policy.
(f) Tenant shall pay the premiums required to increase the amount of the
insurance coverages required by Article 4 to reflect the increased value of the
Improvements resulting from installation of the Permitted Alterations, and shall
deliver to Landlord a certificate evidencing the increase in coverage.
(g) Tenant shall, not later than 60 days after completion of the Permitted
Alterations, deliver to Landlord a revised "as-built" survey of the respective
Facility if the Permitted Alterations altered the Land or "footprint" of the
Improvements and an "as-built" set of Plans and Specifications for the Permitted
Alterations in form and substance satisfactory to Landlord.
(h) Tenant shall, not later than 30 days after Landlord sends an invoice,
reimburse Landlord for any reasonable costs and expenses, including attorneys'
fees and architects' and engineers' fees, incurred in connection with reviewing
and approving the Permitted Alterations and ensuring Tenant's compliance with
the requirements of this section.
(i) Except for the Pre-Approved Improvements Budgeted Costs and Pre-Approved
Improvements Cost Overruns, which shall be paid for by Landlord using the
disbursement procedures set forth in Exhibit M, all of the Permitted Alterations
shall be undertaken at the sole cost and expense of Tenant.
16.5 Ownership and Removal of Permitted Alterations. The
---------------------------------------------------
Permitted Alterations shall become a part of the Leased Property, owned by
Landlord, and leased to Tenant subject to the terms and conditions of this
Lease. Tenant shall not be required or permitted to remove any Permitted
Alterations.
16.6 Minimum Qualified Capital Expenditures. During each Lease
-----------------------------------------
Year commencing with the Second Lease Year, Tenant shall deposit into a
replacement reserve established and held by the holder of the Mortgage Debt the
amount required by the terms of any documents evidencing such Mortgage Debt (but
in no event less than $300 per unit) and Tenant shall then, subject to any
limitations set forth in the documents evidencing the Mortgage Debt, draw on the
amounts so deposited to cover the cost of Qualified Capital Expenditures of at
least $300 per unit per Lease Year, calculated on an aggregate basis for all of
the Facilities included in the Portfolio (or as otherwise required by the terms
of any documents evidencing the Mortgage Debt. Landlord agrees to use its
commercially reasonable efforts to cause the holder of the Mortgage Debt to
grant Tenant the right to draw upon any amounts deposited by Tenant into any
such replacement reserve account in order to cover the cost of such Qualified
Capital Expenditures; provided, however, if such funds are not available by the
holder of the Mortgage Debt, Tenant shall be deemed to have fulfilled its
obligations hereunder by making the deposits required by this 16.6. Any amounts
remaining in escrow at the expiration or earlier termination of the Term and
which are not required to reimburse Tenant for amounts previously expended by
Tenant for Qualified Capital Expenditures in accordance with this 16.6 shall,
subject to the rights of the holder of any Mortgage Debt, be and remain the
property of Landlord; provided, however, in the event of the purchase of the
Leased Property by Tenant then, subject to the rights of the holder of any
Mortgage Debt, any amounts remaining in escrow at the closing of such purchase
shall be and remain the property of Tenant.
16.7 Signs. Tenant may, at its own expense, erect and maintain
-----
identification signs at the Leased Property, provided such signs comply with all
laws, ordinances, and regulations. Upon the termination or expiration of this
Lease (other than as a result of the exercise by Tenant of its purchase option),
Tenant shall, within 30 days after notice from Landlord, remove the signs and
restore the Leased Property to its original condition.
ARTICLE 17: RESERVED
ARTICLE 18: ASSIGNMENT AND SALE OF LEASED PROPERTY
18.1 Prohibition on Assignment and Subletting. Tenant
--------------------------------------------
acknowledges that Landlord has entered into this Lease in reliance on the
personal services and business expertise of Tenant and its affiliated entities,
including without limitation Emeritus. Tenant may not assign, sublet, mortgage,
hypothecate, pledge, grant a right of first refusal or transfer any interest in
this Lease, or in the Leased Property, in whole or in part, without the prior
written consent of Landlord, which Landlord may withhold in its sole and
absolute discretion. The following transactions will be deemed an assignment or
sublease requiring Landlord's prior written consent: [i] an assignment by
operation of law; [ii] an imposition (whether or not consensual) of a lien,
mortgage, or encumbrance upon Tenant's interest in the Lease; [iii] except as
otherwise permitted by 14.4 and 18.3, an arrangement (including, but not
limited to, management agreements, concessions, licenses, and easements) which
allows the use or occupancy of all or part of the Leased Property by anyone
other than Tenant; [iv] any sale of all or substantially all of the assets of
Tenant; [v] any transfer of the ownership interests in Tenant (and in the case
of ESC, the shares of its general partner) to any person other than Emeritus or
a wholly owned subsidiary of Emeritus; [vi] any sale of assets or stock, merger,
tender offer, proxy contest, business combination or other similar transaction
of or by Emeritus (or any of the foregoing in a related series of transactions,
which shall be deemed a single transaction) whereby (A) the persons who held the
voting and economic interests in Emeritus prior to such transaction do not hold
at least 50% of the voting and economic interests in Emeritus or a successor
entity following such transaction; or (B) the persons who served as members of
the board of directors of Emeritus prior to the transaction do not constitute a
majority of the voting members of the board of directors of Emeritus or a
successor entity following the transaction; [vii] any person or related group of
persons (as defined in Section 13(d) of the Securities Exchange Act) other than
those individuals who, as of the Effective Date, are full time senior officers
of Emeritus and own Emeritus Stock, acquires 40% or more of the stock of
Emeritus and [viii] any transfer prohibited by the terms of the Mortgage Debt.
Landlord's consent to any assignment, right of first refusal or sublease will
not release Tenant from its payment and performance obligations under this
Lease, but rather Tenant and Tenant's assignee or sublessee will be jointly and
severally liable for such payment and performance. An assignment, right of
first refusal or sublease without the prior written consent of Landlord will be
void at Landlord's option. Landlord's consent to one assignment, right of first
refusal or sublease will not waive the requirement of its consent to any
subsequent assignment or sublease.
18.2 Requests for Landlord's Consent to Assignment, Sublease or
-------------------------------------------------------------
Management Agreement. If Tenant is required to obtain Landlord's consent to a
-------------------
specific assignment, sublease, or management agreement, Tenant shall give
Landlord [i] the name and address of the proposed assignee, subtenant or
manager; [ii] a copy of the proposed assignment, sublease or management
agreement; [iii] reasonably satisfactory information about the nature, business
and business history of the proposed assignee, subtenant, or manager and its
proposed use of the Leased Property; and [iv] banking, financial, and other
credit information, and references about the proposed assignee, subtenant or
manager sufficient to enable Landlord to determine the financial responsibility
and character of the proposed assignee, subtenant or manager. Any assignment,
sublease or management agreement shall contain provisions to the effect that [a]
such assignment, sublease or management agreement is subject and subordinate to
all of the terms and provisions of this Lease and to the rights of Landlord and
that the assignee, subtenant or manager shall comply with all applicable
provisions of this Lease; [b] such assignment, sublease or management agreement
may not be modified without the prior written consent of Landlord not to be
unreasonably withheld or delayed; [c] if this Lease shall terminate before the
expiration of such assignment, sublease or management agreement, the assignee,
subtenant or manager thereunder will, solely at Landlord's option and only upon
the express written notice of attornment from Landlord, attorn to Landlord and
waive any right the assignee, subtenant or manager may have to terminate the
assignment, sublease or management agreement or surrender possession thereunder
as a result of the termination of this Lease; and [d] if the assignee, subtenant
or manager receives a written notice from Landlord stating that Tenant is in
default under this Lease, the assignee, subtenant or manager shall thereafter
pay all rentals or payments under the assignment, sublease or management
agreement directly to Landlord until such default has been cured. Any attempt
or offer by an assignee, subtenant or manager to attorn to Landlord shall not be
binding or effective without the express written consent of Landlord. Tenant
hereby collaterally assigns to Landlord, as security for the performance of its
obligations hereunder, all of Tenant's right, title, and interest in and to any
assignment, sublease or management agreement now or hereafter existing for all
or part of the Leased Property. Tenant shall, at the request of Landlord,
execute such other instruments or documents as Landlord may request to evidence
this collateral assignment. If Landlord, in its sole and absolute discretion,
consents to such assignment, sublease, or management agreement, such consent
shall not be effective until [i] a fully executed copy of the instrument of
assignment, sublease or management agreement has been delivered to Landlord;
[ii] in the case of an assignment, Landlord has received a written instrument in
which the assignee has assumed and agreed to perform all of Tenant's obligations
under the Lease; and [iii] Landlord has received reimbursement from Tenant or
the assignee for all attorneys' fees and expenses and all other reasonable
out-of-pocket expenses incurred in connection with determining whether to give
its consent, giving its consent and all matters relating to the assignment
(applies only to consent requests after the Closing) including, without
limitation, any costs incurred by Landlord under the Mortgage Debt as a result
of such assignment.
18.3 Agreements with Residents. Notwithstanding 18.1, Tenant may
-------------------------
enter into an occupancy agreement with residents of the Leased Property without
the prior written consent of Landlord provided that [i] the agreement does not
provide for lifecare services; [ii] the agreement does not contain any type of
rate lock provision or rate guaranty for more than one calendar year; [iii] the
agreement does not provide for any rent reduction or waiver other than for an
introductory period not to exceed six months; [iv] Tenant may not collect rent
for more than one month in advance, other than one month of rent collected to be
held as security for the performance of the resident's obligation to Tenant; and
[v] all residents of the Leased Property are accurately shown in accounting
records for the Facility. Without the prior written consent of Landlord, Tenant
shall not materially change the form of resident occupancy agreement that was
submitted to Landlord prior to the Effective Date.
18.4 Sale of Leased Property. If Landlord or any subsequent owner
-----------------------
of the Leased Property sells the Leased Property other than pursuant to the
provisions of this Lease which permit Landlord to terminate this Lease
concurrently with such sale, subject to the assumption by the new owner of the
obligations of Landlord or such subsequent owner of the Leased Property under
this Lease, the liability for the performance of the agreements of the Landlord
set forth in this Lease will end on the date of the sale of the Leased Property,
and Tenant will look solely to the purchaser for the performance of those
agreements. For purposes of this section, any holder of a mortgage or security
agreement which affects the Leased Property at any time, and any landlord under
any lease to which this Lease is subordinate at any time, will be a subsequent
owner of the Leased Property when it succeeds to the interest of Landlord or any
subsequent owner of the Leased Property.
18.5 Assignment by Landlord. Landlord may transfer, assign,
------------------------
mortgage, collaterally assign, or otherwise dispose of Landlord's interest in
this Lease or the Leased Property in connection with a sale or refinancing
permitted by the terms of Article 13.
18.6. Limitations on Subletting. Anything contained in this Lease
-------------------------
to the contrary notwithstanding, Tenant shall not sublet the Leased Property on
any basis such that the rental to be paid by the sublessee thereunder would be
based, in whole or in part, on either the income or profits derived from the
business activities of the sublessee, or any other formula, such that any
portion of the sublease rental received by Landlord would fail to qualify as
"rents from real property" within the meaning of Section 856(d) of the Internal
Revenue Code, or any similar or successor provision thereto.
ARTICLE 19: HOLDOVER AND SURRENDER
19.1 Holding Over. If Tenant, with or without the express or
-------------
implied consent of Landlord, continues to hold and occupy the Leased Property
(or any part thereof) after the expiration of the Term or earlier termination of
this Lease (other than pursuant to Tenant's purchase of the Leased Property),
such holding over beyond the Term and the acceptance or collection of Rent in
the amount specified below by Landlord shall operate and be construed as
creating a tenancy from month to month and not for any other term whatsoever.
Said month-to-month tenancy may be terminated by Landlord by giving Tenant five
days written notice, and at any time thereafter Landlord may re-enter and take
possession of the Leased Property. If, without Landlord's consent or at
Landlord's request, Tenant continues after the expiration of the Term or earlier
termination of this Lease to hold and occupy the Leased Property whether as a
month-to-month tenant or a tenant at sufferance or otherwise, Tenant shall pay
Rent for each month in an amount equal to the sum of [i] one and one-half
(1-1/2) times the Base Rent and the Percentage Additional Rent payable during
the month in which such expiration or termination occurs, plus [ii] all General
Additional Rent accruing during the month, plus [iii] any and all other sums
payable by Tenant pursuant to this Lease. During any continued tenancy after
the expiration of the Term or earlier termination of this Lease, Tenant shall be
obligated to perform and observe all of the terms, covenants and conditions of
this Lease, but shall have no rights hereunder other than the right, to the
extent given by applicable law, to continue its occupancy and use of the Leased
Property until the tenancy is terminated. Nothing contained herein shall
constitute the consent, express or implied, of Landlord to the holding over of
Tenant after the expiration or earlier termination of this Lease.
19.2 Surrender. Except for [i] Permitted Alterations; [ii] normal
---------
and reasonable wear and tear (subject to the obligation of Tenant to maintain
the Leased Property in good order and repair during the Term); and [iii] damage
and destruction not required to be repaired by Tenant, Tenant shall surrender
and deliver up the Leased Property at the expiration or termination of the Term
in as good order and condition as of the Commencement Date. The provisions of
this 19.2 shall not apply in the event of the termination of the Lease upon the
exercise by Tenant of its option to purchase the Leased Property.
19.3 Indemnity. If Tenant fails to surrender the entire Leased
---------
Property or any part thereof upon the expiration or termination of this Lease in
a timely manner and in accordance with the provisions of this Lease, in addition
to any other liabilities to Landlord accruing therefrom, Tenant shall defend,
indemnify and hold Landlord, its principals, officers, directors, agents, and
employees harmless from loss or liability resulting from such failure,
including, without limiting the generality of the foregoing, loss of rental with
respect to any new lease in which the rental payable thereunder exceeds the Rent
collected by Landlord pursuant to this Lease during Tenant's hold-over and any
claims by any proposed new tenant founded on Tenant's failure to surrender the
Leased Property. The provisions of this Article 19 shall survive the expiration
or termination of this Lease. The provisions of this 19.3 shall not apply in
the event of the termination of this Lease upon the exercise by Tenant of its
option to purchase the Leased Property.
ARTICLE 20: RESERVED
ARTICLE 21: QUIET ENJOYMENT, SUBORDINATION, ATTORNMENT AND ESTOPPEL
CERTIFICATES
21.1 Quiet Enjoyment. So long as Tenant performs all of its
----------------
obligations under this Lease, Tenant's possession of the Leased Property will
not be disturbed by Landlord or any party claiming by, through or under
Landlord.
21.2 Subordination. Subject to the terms and conditions of this
-------------
section, this Lease and Tenant's rights under this Lease are subordinate to any
ground lease or underlying lease, first mortgage, first deed of trust, or other
first lien against the Leased Property, together with any renewal,
consolidation, extension, modification or replacement thereof, which now or at
any subsequent time affects the Leased Property or any interest of Landlord in
the Leased Property, except to the extent that any such instrument expressly
provides that this Lease is superior. In furtherance, and not in limitation of
the foregoing, Tenant specifically acknowledges and agrees that the rights of
Tenant under this Lease are subject and subordinate to the mortgages/deeds of
trust of even date herewith executed by Landlord in favor of Column Financial,
Inc, which are secured by the Leased Property and that such subordination shall
be self operative and no further instrument is required in order to effect such
subordination. In consideration for the subordination provided for herein with
respect to any future gournd lease or underlying lease, first mortgage, first
deed of trus or other first lien, Landlord shall use its commercially reasonable
efforts to cause any lessor or mortgagee to be obligated and bound to recognize
Tenant as the tenant under this Lease, and to agree that such lessor or
mortgagee shall have no right to disturb Tenant's possession, use and occupancy
of the Leased Property or Tenant's enjoyment of its rights under this Lease
unless and until an Event of Default occurs hereunder; provided, however,
Landlord shall not be in breach of its obligations hereunder in the event it
cannot obtain such an agreement after using commercially reasonable efforts to
do so. The foregoing provisions will be self-operative, and no further
instrument will be required in order to effect them. However, Tenant shall
execute, acknowledge and deliver to Landlord, at any time and from time to time
upon demand by Landlord, such documents as may be requested by Landlord or any
mortgagee or any holder of any mortgage or other instrument described in this
section, to confirm or effect any such subordination, provided that any such
document shall include a nondisturbance provision as set forth in this section
satisfactory to Tenant if and to the extent Landlord is able to secure the
agreement of any lessor or mortgagee to such non-disturbance provision.
21.3 Attornment. If any holder of any mortgage, indenture, deed
----------
of trust, or other similar instrument described in 21.2 succeeds to Landlord's
interest in the Leased Property, Tenant will pay to such holder all Rent
subsequently payable under this Lease. Tenant shall, upon request of anyone
succeeding to the interest of Landlord, automatically become the tenant of, and
attorn to, such successor in interest without changing this Lease. The
successor in interest will not be bound by [i] any payment of Rent for more than
one month in advance unless actually received by such successor; [ii] any
amendment or modification of this Lease thereafter made without its consent as
provided in this Lease; [iii] any claim against Landlord arising prior to the
date on which the successor succeeded to Landlord's interest; or [iv] any claim
or offset of Rent against Landlord. Upon request by Landlord or such successor
in interest and without cost to Landlord or such successor in interest, Tenant
will execute, acknowledge and deliver an instrument or instruments confirming
the attornment.
21.4 Estoppel Certificates. At the request of Landlord or any
----------------------
mortgagee or purchaser of the Leased Property, Tenant shall execute,
acknowledge, and deliver an estoppel certificate, in recordable form, in favor
of Landlord or any mortgagee or purchaser of the Leased Property certifying the
following: [i] that the Lease is unmodified and in full force and effect, or if
there have been modifications that the same is in full force and effect as
modified and stating the modifications; [ii] the date to which Rent and other
charges have been paid; [iii] whether Tenant or Landlord is in default or
whether there is any fact or condition known to Landlord or Tenant which, with
notice or lapse of time, or both, would constitute a default, and specifying any
existing default, if any; [iv] that Tenant has accepted and occupies the Leased
Property; [v] that Tenant has no defenses, set-offs, deductions, credits, or
counterclaims against Landlord, if that be the case, or specifying such that
exist; and [vi] such other information as may reasonably be requested by
Landlord or any mortgagee or purchaser. Any purchaser or mortgagee may rely on
this estoppel certificate. If Tenant fails to deliver the estoppel certificates
to Landlord within 10 days after the request of Landlord, then Tenant shall be
deemed to have certified that [a] the Lease is in full force and effect and has
not been modified, or that the Lease has been modified as set forth in the
certificate delivered to Tenant; [b] Tenant has not prepaid any Rent or other
charges except for the current month; [c] Tenant has accepted and occupies the
Leased Property; [d] neither Tenant nor Landlord is in default nor is there any
fact or condition which, with notice or lapse of time, or both, would constitute
a default; and [e] Tenant has no defenses, set-offs, deductions, credits, or
counterclaims against Landlord. Tenant hereby irrevocably appoints Landlord as
Tenant's attorney-in-fact to execute, acknowledge, and deliver on Tenant's
behalf any estoppel certificate to which Tenant does not object within 10 days
after Landlord sends the certificate to Tenant. This power of attorney is
coupled with an interest and is irrevocable.
ARTICLE 22: REPRESENTATIONS AND WARRANTIES
Tenant hereby makes the following representations and warranties, as
of the Effective Date, to Landlord and acknowledge that Landlord is granting the
Lease in reliance upon such representations and warranties. Tenant's
representations and warranties shall survive the Closing and, except to the
extent made as of a specific date, shall continue in full force and effect until
the Obligor Group Obligations have been performed in full.
22.1 Organization and Good Standing. Tenant, Properties, is a
---------------------------------
limited liability company duly organized, validly existing and in good standing
under the laws of its Organization State. Tenant, ESC, is a limited
partnership, duly organized, validly existing and in good standing under the
laws of its Organization State. Tenant is qualified to do business in and is in
good standing under the laws of the Facility States.
22.2 Power and Authority. Tenant has the power and authority to
---------------------
execute, deliver and perform this Lease. Tenant has taken all requisite action
necessary to authorize the execution, delivery and performance of their
respective obligations under this Lease.
22.3 Enforceability. This Lease constitutes a legal, valid, and
--------------
binding obligation of Tenant, enforceable in accordance with its terms except as
such enforceability may be limited by creditors rights laws and general
principles of equity.
22.4 Government Authorizations. Except as reflected in the title
--------------------------
insurance policies issued to Landlord on the Effective Date, the Facilities are
in compliance with all Legal Requirements. As set forth more fully in the
Licensure Certification dated as of the Effective Date and executed by Tenant in
favor of Landlord and certain other parties identified therein, as of the
Effective Date, either Tenant has obtained all certifications, permits, licenses
and approvals, including without limitation, certificates of completion and
occupancy permits (to the extent issued by the local jurisdiction), any assisted
living facility license, fire safety certificate, life safety certificate, food
preparation and/or handling license and similar licenses, certificates and
permits required under applicable law (the "Licenses") required for the legal
use, occupancy and operation by Tenant of each of the Facilities as an assisted
living facility, or Tenant has taken all action necessary to secure the Licenses
after the Effective Date and to lawfully operate the Facilities from and after
the Effective Date and prior to the issuance of the Licenses. As of the
Effective Date, each of the Facilities is licensed for the number of beds or
units set forth in Exhibit C opposite its name and, to the Knowledge of Tenant,
none of the Licenses currently in effect with respect to the Facilities is
provisional, probationary, temporary, restricted or conditioned upon the
completion of any work, inspections, approvals, filings or payment of fees at
the Facilities; provided, however, nothing herein shall be construed as a
representation that no such work, inspections, approvals, filings or fees will
be required for the issuance of the Licenses in the name of Tenant.
22.5 RESERVED.
---------
22.6 Consents. The execution, delivery and performance of this
--------
Lease will not require any consent, approval, authorization, order, or
declaration of, or any filing or registration with, any court, any federal,
state, or local governmental or regulatory authority, or any other person or
entity, the absence of which would materially impair the ability of Tenant to
operate the Facility for the Facility Uses except for the post-acquisition
filing for licensure of the Facility.
22.7 No Violation. The execution, delivery and performance of
-------------
this Lease [i] do not and will not conflict with, and do not and will not result
in a breach of Tenant's Organizational Documents; [ii] do not and will not
conflict with, and do not and will not result in a breach of, and do not and
will not constitute a default under (or an event which, with or without notice
or lapse of time, or both, would constitute a default under), any of the terms,
conditions or provisions of any agreement or other instrument or obligation to
which Tenant is a party or by which its assets are bound; and [iii] do not and
will not violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Tenant or the Facility.
22.8 Reports and Statements. All reports, statements,
------------------------
certificates and other data furnished by or on behalf of Tenant to Landlord in
connection with this Lease, and all representations and warranties made herein
or in any certificate or other instrument delivered in connection herewith and
therewith, are true and correct in all material respects and do not omit to
state any material fact or circumstance necessary to make the statements
contained herein or therein, in light of the circumstances under which they are
made, not misleading as of the date of such report, statement, certificate or
other data. The copies of all agreements and instruments submitted to Landlord,
including, without limitation, all agreements relating to management of the
Facility and Tenant's working capital are true, correct and complete copies in
all material respects and include all material amendments and modifications of
such agreements.
22.9 Related Party Representations. Tenant and Emeritus hereby
-------------------------------
acknowledge that Baty has a direct or indirect ownership interest in Tenant and
Emeritus, and also a direct or indirect ownership interest in Landlord and with
respect thereto, Tenant and Emeritus hereby represent and warrant as follows:
(a) The relationship of Baty to Landlord and of Baty to Tenant and
Emeritus, the contractual guaranty obligations of Guarantor and the transactions
represented by this Lease and related documents and the Landlord Entity
Documents (collectively, the "Subject Matters"), have each been fully and
----------------
accurately described and disclosed to the board of directors of Emeritus (the
"Emeritus Board of Directors"), the opportunity for a direct or indirect
ownership interest in Landlord was offered to Emeritus and Emeritus declined to
pursue that opportunity, and the Emeritus Board of Directors is aware of, and by
authorizing Emeritus on its own behalf and on behalf of Tenant to proceed with
the transaction which is the subject of this Lease, has consented to, the
potential conflicts of interest resulting from the Subject Matters, including
without limitation Baty's various ownership interests and guarantee obligations.
(b) The Subject Matters have each been fully and accurately described
and disclosed to Emeritus' Chief Financial Officer, who also serves as the CFO
of Tenant (the "Emeritus CFO"), and the Emeritus CFO is aware of and believes
that Emeritus and Tenant have adequately consented to the potential conflicts of
interest resulting from the Subject Matters, including without limitation
Guarantor's various ownership interests and guarantee obligations.
(c) KPMG Peat Marwick presently serves as the outside and independent
auditors of Emeritus and its consolidated subsidiaries, including Tenant
("Emeritus Auditors") at the direction of the Emeritus Board of Directors, and
the Subject Matters have each been fully and accurately described and disclosed
to the Emeritus Auditors and Emeritus has advised the Emeritus Auditors of the
potential conflicts of interest resulting from the Subject Matters, including
without limitation Baty's various ownership interests and guarantee obligations,
and of the determination by Emeritus' Board of Directors to consent thereto and
the Emeritus Auditors have not advised Tenant or Emeritus or the Emeritus Board
of Directors of any objections they may have to Emeritus and Tenant proceeding
with the Subject Matters.
(d) Tenant and Emeritus will make on a timely basis all necessary and proper
disclosures to the shareholders of Emeritus as may be required under applicable
securities laws with respect to the Subject Matters.
22.10. Condition of the Leased Property. Tenant has no Knowledge
---------------------------------
of any physical plant conditions, violations of Environmental Laws or the
presence of any Hazardous Substances at the Leased Property or any portion
thereof, other than those conditions, violations and Hazardous Substances
described in the Landlord Property Reports.
22.11. Landlord Disclaimer of Representations and Warranties. TENANT
--------------------------------------------------------
ACKNOWLEDGES AND AGREES THAT LANDLORD HAS MADE NO REPRESENTATIONS OR WARRANTIES,
EXPRESS OR IMPLIED, NOR DOES LANDLORD MAKE ANY HEREIN REGARDING THE CONDITION OF
THE LEASED PROPERTY OR ANY PART THEREOF INCLUDING WITHOUT LIMITATION THE
STRUCTURAL SOUNDNESS THEREOF, THE PRESENCE OR ABSENCE OF HAZARDOUS SUBSTANCES OR
THE LEASED PROPERTY'S FITNESS FOR ANY PARTICULAR USE OR OCCUPANCY. LANDLORD
SPECIFICALLY DISCLAIMS ANY REPRESENTATIONS AND/OR WARRANTIES WITH RESPECT TO THE
VACATION OF THE LEASED PROPERTY BY THE SELLERS, IT BEING UNDERSTOOD AND AGREED
THAT, WHILE TENANT'S OBLIGATIONS HEREUNDER ARE SPECIFICALLY CONDITIONED ON THE
VACATION OF THE LEASED PROPERTY BY THE SELLERS, LANDLORD SHALL NOT BE LIABLE TO
TENANT IN THE EVENT THE SELLERS FAIL TO VACATE THE LEASED PROPERTY ON OR PRIOR
TO THE EFFECTIVE DATE. LANDLORD FURTHER HEREBY SPECIFICALLY DISCLAIMS ANY
REPRESENTATIONS AND/OR WARRANTIES, BOTH EXPRESS AND IMPLIED IN LAW, WITH RESPECT
TO THE CONDITION, HABITABILITY, OR SUITABILITY OF THE LEASED PROPERTY, OR ANY
PART THEREOF, FOR THE USE AND PURPOSES PERMITTED HEREUNDER OR ANY OTHER PURPOSE,
AND LANDLORD DOES NOT REPRESENT OR WARRANT THAT THE LEASED PROPERTY OR ANY PART
THEREOF COMPLIES WITH ANY LAWS RELATING TO THE USES AND OCCUPANCY THEREOF.
TENANT FULLY UNDERSTANDS THAT THERE MAY BE CERTAIN ALTERATIONS, REPAIRS AND
REPLACEMENTS REQUIRED TO CAUSE THE LEASED PROPERTY TO COMPLY WITH APPLICABLE LAW
(AS THE SAME MAY BE MODIFIED FROM TIME TO TIME THROUGHOUT THE TERM HEREOF) AND
FOR THE CONTINUED LICENSING AND/OR CERTIFICATION OF THE LEASED PROPERTY, AND
TENANT SHALL BE FULLY RESPONSIBLE FOR THE COST OF AND FOR EFFECTUATING ANY AND
ALL ALTERATIONS, REPAIRS AND REPLACEMENTS REQUIRED TO BE MADE TO CAUSE THE
LEASED PROPERTY TO COMPLY WITH APPLICABLE LAW AND FOR THE CONTINUED LICENSING
AND CERTIFICATION OF THE LEASED PROPERTY AS WELL AS ALL ALTERATIONS, REPAIRS AND
REPLACEMENTS REQUIRED TO MAINTAIN AND PRESERVE THE LEASED PROPERTY IN THE
CONDITION CALLED FOR HEREIN. TENANT ACKNOWLEDGES THAT, EXCEPT AS OTHERWISE
SPECIFICALLY PROVIDED HEREIN, LANDLORD IS NOT RESPONSIBLE FOR AND TENANT SHALL
HOLD LANDLORD HARMLESS IN CONNECTION WITH ANY SUCH ALTERATIONS, REPAIRS AND
REPLACEMENTS TO THE LEASED PROPERTY OR ANY REASON WHATSOEVER.
Initials of Tenant: __________
22.12. Tenant's Financial Forecast. To Tenant's Knowledge, as of the
----------------------------
Effective Date, the Financial Forecast attached hereto as Exhibit K is
reasonable in light of the facts and circumstances of which Tenant has Knowledge
as of the Effective Date. Landlord and Tenant acknowledge and agree that the
Financial Forecast is based upon assumptions and estimates projecting the
performance of the Leased Property over the five (5) years subsequent to the
Effective Date and that many of the assumptions and estimates are based upon
factors outside the control of Tenant and that there can be no assurances that
the actual performance of the Leased Property will meet the performance
projections set forth in the Financial Forecast. Landlord further acknowledges
and agrees that that this representation and warranty has been included by
Tenant solely as an accommodation to Landlord and that Landlord will have no
recourse against Tenant if this representation and warranty is untrue.
ARTICLE 23: FACILITY EMPLOYEES
23.1 Offer of Employment. Tenant agrees to offer employment as of the
---------------------
Effective Date to such number of the employees of each of the Facilities as may
be necessary to avoid triggering notice requirements or liability under the WARN
Act or any similar state law for Seller as a result of the termination of
Seller's operations at each of the Facilities.
23.2 Terms of Employment. For each of the employees of the Facilities
---------------------
employed by Tenant as of the Effective Date, Tenant agrees to give reasonably
equivalent credit for the period of service of such employee with Seller or any
of its affiliates as service with Tenant, but Tenant shall have no liability or
responsibility whatsoever after the Effective Date for any matters related to
the employees of the Facilities arising with respect to their employment by
Seller or any of its affiliates at or prior to the Effective Date, including,
but not limited to, any benefits accrued prior to the Effective Date.
ARTICLE 24: SECURITY; SECURITY INTEREST
24.1 Collateral. Tenant hereby grants to Landlord (hereinafter
----------
referred to for purposes of this Article 24 as "Secured Party") a security
interest in the following described property, whether now owned or hereafter
acquired by Tenant (the "Collateral"), to secure the payment and performance of
the Obligor Group Obligations:
(a) All machinery, furniture, equipment, trade fixtures, appliances,
inventory and all other goods (as "equipment", "inventory" and "goods" are
defined for purposes of Article 9 ("Article 9") of the Uniform Commercial Code
as adopted in the state in which the Collateral is located) and any leasehold
interest of Tenant in any of the foregoing, including, without limitation, those
items which are to become fixtures or which are building supplies and
materials to be incorporated into any improvement or fixture.
(b) All accounts, contract rights, general intangibles, the Initial Facility
Names, instruments, documents, and chattel paper [as "accounts", "contract
rights", "general intangibles", "instruments", "documents", and "chattel paper",
are defined for purposes of Article 9] now or hereafter arising.
(c) All franchises, permits, licenses, operating rights, certifications,
approvals, consents, authorizations and other general intangibles, including,
without limitation, certificates of need, state health care facility licenses,
and Medicare and Medicaid provider agreements, to the extent permitted by law.
(d) Unless expressly prohibited by the terms thereof, all contracts,
agreements, contract rights and materials relating to the design, construction,
operation or management of any improvements, including, but not limited to,
plans, specifications, drawings, blueprints, models, mock-ups, brochures,
flyers, advertising and promotional materials and mailing lists.
(e) All subleases, occupancy agreements, license agreements and concession
agreements, written or unwritten, of any nature, now or hereafter entered into,
and all right, title and interest of Tenant thereunder; and including, without
limitation, Tenant's right, if any, to cash or securities deposited thereunder
whether or not the same was deposited to secure performance by the subtenants,
occupants, licensees and concessionaires of their obligations thereunder,
including the right to receive and collect the rents, revenues, and other
charges thereunder.
(f) All ledger sheets, files, records, computer programs, tapes, other
electronic data processing materials, and other documentation.
(g) The products and proceeds of the preceding listed property, including,
without limitation, cash and non-cash proceeds, proceeds of proceeds, and
insurance proceeds.
24.2 Additional Documents. At the request of Landlord, Tenant
---------------------
shall execute additional security agreements, financing statements, and such
other documents as may be requested by Landlord to maintain and perfect such
security interest. Tenant hereby irrevocably appoints Landlord, its successors
and assigns, as Tenant's attorney-in-fact to execute, acknowledge, deliver and
file such documents on behalf of Tenant should Tenant fail to do so after
request by Landlord. This power of attorney is coupled with an interest and is
irrevocable.
24.3 Notice of Sale. With respect to any sale or other
----------------
disposition of any of the Collateral after the occurrence of an Event of
Default, Landlord, Tenant agrees that the giving of five days' notice by
Landlord, sent by overnight delivery, postage prepaid, to Tenant's notice
address designating the time and place of any public sale or the time after
which any private sale or other intended disposition of such Collateral is to be
made, shall be deemed to be reasonable notice thereof and Tenant waives any
other notice with respect thereto.
24.4 Recharacterization. Landlord and Tenant intend this Lease to
------------------
be a true lease. However, if despite the parties' intent, it is determined or
adjudged by a court for any reason that this Lease is not a true lease or if
this Lease is recharacterized as a financing arrangement, then this Lease shall
be considered a secured financing agreement and Landlord's title to the Leased
Property shall constitute a perfected first priority lien in Landlord's favor on
the Leased Property to secure the payment and performance of all the Obligor
Group Obligations.
24.5. Other Security. Landlord and Tenant acknowledge and agree
---------------
that Guarantor has executed and delivered the Guaranty as additional security
for the obligations of Tenant hereunder and that upon the occurrence of an Event
of Default, Landlord shall be entitled to exercise the rights and remedies
provided for therein.
ARTICLE 25: MISCELLANEOUS
25.1 Notices. Landlord and Tenant hereby agree that all notices,
-------
demands, requests, and consents (hereinafter "notices") required to be given
pursuant to the terms of this Lease shall be in writing, shall be addressed to
the addresses set forth in the introductory paragraph of this Lease, and shall
be served by [i] personal delivery; [ii] certified mail, return receipt
requested, postage prepaid; or [iii] nationally recognized overnight courier.
All notices shall be deemed to be given upon the earlier of actual receipt or
three Business Days after mailing, or one Business Day after deposit with the
overnight courier. Any notices meeting the requirements of this section shall
be effective, regardless of whether or not actually received. Landlord or
Tenant may change its notice address at any time by giving the other party
notice of such change.
25.2 Advertisement of Leased Property. In the event Tenant has
-----------------------------------
not exercised its Option to Purchase, then Landlord or its agent shall have the
right to enter the Leased Property at all reasonable times for the purpose of
exhibiting the Leased Property to others and to place upon the Leased Property
for and during the period commencing 120 days prior to the expiration of this
Lease, "for sale" or "for rent" notices or signs.
25.3 Entire Agreement. This Lease contains the entire agreement
-----------------
between Landlord and Tenant with respect to the subject matter hereof. No
representations, warranties, and agreements have been made by Landlord except as
set forth in this Lease. No oral agreements or understandings between Landlord
and Tenant shall survive execution of this Lease.
25.4 Severability. If any term or provision of this Lease is held
------------
or deemed by Landlord to be invalid or unenforceable, such holding shall not
affect the remainder of this Lease and the same shall remain in full force and
effect, unless such holding substantially deprives Tenant of the use of the
Leased Property or Landlord of the rents herein reserved, in which event this
Lease shall forthwith terminate as if by expiration of the Term.
25.5 Captions and Headings. The captions and headings are
-----------------------
inserted only as a matter of convenience and for reference and in no way define,
limit or describe the scope of this Lease or the intent of any provision hereof.
25.6 Governing Law. This Lease shall be governed by and construed
-------------
in accordance with the laws of the State of Washington, except that at all times
the procedures for the enforcement of eviction remedies shall be governed by and
construed in accordance with the laws of the State in which a respective
Facility is located, it being understood that, to the fullest extent permitted
by the laws of such state, the laws of the State of Washington shall govern the
construction, validity and enforceability of the Lease.
25.7 Memorandum of Lease. Tenant shall not record this Lease.
---------------------
Tenant and Landlord shall, however, record a memorandum of lease approved by
Landlord and Tenant upon the request of the other party. Further, each of
Landlord and Tenant shall execute such documents as may be necessary to amend
any such Memorandum of Lease in the event of the sale by Landlord to Tenant or
any third party of any portion of the Leased Property so as to terminate such
Memorandum of Lease with respect to the portion of the Leased Property so sold
by Landlord and to release the Memorandum of Lease upon the expiration or
earlier termination of the Term. Tenant does hereby appoint Landlord as its
attorney in fact to execute any and all documents necessary to implement the
provisions of this 25.7 should Tenant fail or refuse to do so after receiving a
request from Landlord to do so. The power of attorney provided for in this
Section 25.7 shall be deemed to be coupled with an interest and shall be
irrevocable
25.8 Waiver. No waiver by Landlord of any condition or covenant herein
------
contained, or of any breach of any such condition or covenant, shall be held or
taken to be a waiver of any subsequent breach of such covenant or condition, or
to permit or excuse its continuance or any future breach thereof or of any
condition or covenant, nor shall the acceptance of Rent by Landlord at any time
when Tenant is in default in the performance or observance of any condition or
covenant herein be construed as a waiver of such default, or of Landlord's right
to terminate this Lease or exercise any other remedy granted herein on account
of such existing default.
25.9 Binding Effect. This Lease will be binding upon and inure to
--------------
the benefit of the heirs, successors, personal representatives, and permitted
assigns of Landlord and Tenant.
25.10 No Offer. Landlord's submission of this Lease to Tenant is
---------
not an offer to lease the Leased Property, or an agreement by Landlord to
reserve the Leased Property for Tenant. Landlord will not be bound to Tenant
until Tenant has duly executed and delivered duplicate original leases to
Landlord, and Landlord has duly executed and delivered one of these duplicate
original leases to Tenant.
25.11 Modification. This Lease may only be modified by a writing
------------
signed by both Landlord and Tenant. All references to this Lease, whether in
this Lease or in any other document or instrument, shall be deemed to
incorporate all amendments, modifications and renewals of this Lease, made after
the date hereof. If Tenant requests Landlord's consent to any change in
ownership, merger or consolidation of Tenant, any assumption of the Lease, or
any modification of the Lease, Tenant shall provide Landlord all relevant
information and documents sufficient to enable Landlord to evaluate the request.
In connection with any such request, Tenant shall pay to Landlord its actual
reasonable attorney's fees and expenses and other reasonable out-of-pocket
expenses incurred in connection with Landlord's evaluation of Tenant's request,
the preparation of any documents and amendments, the subsequent amendment of any
documents between Landlord and its collateral pool lenders (if applicable), and
all related matters.
25.12 No Merger. The surrender of this Lease by Tenant or the
----------
cancellation of this Lease by agreement of Tenant and Landlord or the
termination of this Lease on account of Tenant's default will not work a merger,
and will, at Landlord's option, terminate any subleases or operate as an
assignment to Landlord of any subleases. Landlord's option under this paragraph
will be exercised by notice to Tenant and all known subtenants of the Leased
Property.
25.13 Laches. No delay or omission by either party hereto to
------
exercise any right or power accruing upon any noncompliance or default by the
other party with respect to any of the terms hereof shall impair any such right
or power or be construed to be a waiver thereof.
25.14 Limitation on Tenant's Recourse. Tenant's sole recourse
----------------------------------
against Landlord, and any successor to the interest of Landlord in the Leased
Property, is to the interest of Landlord, and any such successor, in the Leased
Property. Tenant will not have any right to satisfy any judgment which it may
have against Landlord, or any such successor, from any other assets of Landlord,
or any such successor. In this section, the terms "Landlord" and "successor"
include the shareholders, venturers, members, and partners of "Landlord" and
"successor" and the officers, directors, and employees of the same. The
provisions of this section are not intended to limit Tenant's right to seek
injunctive relief or specific performance.
25.15 Counterparts. This Lease may be executed in multiple
------------
counterparts, each of which shall be deemed an original hereof.
25.16 Custody of Escrow Funds. Any funds paid to Landlord in
--------------------------
escrow hereunder may be held by Landlord or, at Landlord's election, by a
financial institution, the deposits or accounts of which are insured or
guaranteed by a federal or state agency. The funds shall not be deemed to be
held in trust, may be commingled with the general funds of Landlord or such
other institution, and shall not bear interest.
25.17 Landlord's Status as a REIT. Tenant acknowledges that
-------------------------------
Landlord (or a Landlord Affiliate) has elected or may hereafter elect to be
taxed as a real estate investment trust ("REIT") under the Internal Revenue
Code.
25.18 Exhibits. All of the exhibits referenced in this Lease are
--------
attached hereto and incorporated herein.
25.19 WAIVER OF JURY TRIAL. LANDLORD AND TENANT WAIVE TRIAL BY
-----------------------
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY OF THEM AGAINST
THE OTHER ON ALL MATTERS ARISING OUT OF THIS LEASE OR THE USE AND OCCUPANCY OF
THE LEASED PROPERTY (EXCEPT CLAIMS FOR PERSONAL INJURY OR PROPERTY DAMAGE). IF
LANDLORD COMMENCES ANY SUMMARY PROCEEDING FOR NONPAYMENT OF RENT, TENANT WILL
NOT INTERPOSE, AND WAIVES THE RIGHT TO INTERPOSE, ANY COUNTERCLAIM IN ANY SUCH
PROCEEDING.
25.20 CONSENT TO JURISDICTION. TENANT HEREBY IRREVOCABLY SUBMITS
------------------------
AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION AND VENUE OF ANY STATE OR FEDERAL
COURT HAVING JURISDICTION OVER KING COUNTY, WASHINGTON OR ANY COUNTY IN WHICH A
FACILITY IS LOCATED FOR ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY MATTER
ARISING FROM OR RELATED TO [I] THIS LEASE; OR [II] ANY DOCUMENT EXECUTED BY
TENANT IN CONNECTION WITH THIS LEASE. TENANT HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT TENANT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT
FORUM TO THE MAINTENANCE OF ANY SUCH ACTION OR PROCEEDING. TENANT AGREES THAT A
FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN ANY OTHER JURISDICTION BY SUIT ON THE JUDGMENT OR IN ANY OTHER
MANNER PROVIDED BY LAW.
TENANT AGREES NOT TO INSTITUTE ANY LEGAL ACTION OR PROCEEDING AGAINST
LANDLORD OR ANY DIRECTOR, OFFICER, EMPLOYEE, AGENT OR PROPERTY OF LANDLORD,
CONCERNING ANY MATTER ARISING OUT OF OR RELATING TO THIS LEASE OR ANY RELATED
DOCUMENT IN ANY COURT OTHER THAN A STATE OR FEDERAL COURT HAVING JURISDICTION
OVER KING COUNTY, WASHINGTON UNLESS SUCH COURT LACKS IN PERSONAM OR SUBJECT
MATTER JURISDICTION IN WHICH CASE TENANT SHALL HAVE THE RIGHT TO INSTITUTE SUCH
ACTION OR PROCEEDING BEFORE ANY COURT HAVING SUCH JURISDICTION.
TENANT HEREBY CONSENTS TO SERVICE OF PROCESS BY LANDLORD IN ANY MANNER
AND IN ANY JURISDICTION PERMITTED BY LAW. NOTHING HEREIN SHALL AFFECT OR IMPAIR
LANDLORD'S RIGHT TO SERVE LEGAL PROCESS IN ANY MANNER PERMITTED BY LAW, OR
LANDLORD'S RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST TENANT OR THE
PROPERTY OF TENANT IN THE COURTS OF ANY OTHER JURISDICTION.
25.21 Attorney's Fees and Expenses. Tenant shall pay to Landlord
-----------------------------
all reasonable costs and expenses incurred by Landlord in administering this
Lease and the security for this Lease, enforcing or preserving Landlord's rights
under this Lease and the security for this Lease, and in all matters of
collection, whether or not an Event of Default has actually occurred or has been
declared and thereafter cured, including, but not limited to, [a] reasonable
attorney's and paralegal's fees and disbursements; [b] the fees and expenses of
any litigation, administrative, bankruptcy, insolvency, receivership and any
other similar proceeding; [c] court costs; [d] the expenses of Landlord, its
employees, agents, attorneys and witnesses in preparing for litigation,
administrative, bankruptcy, insolvency and other proceedings and for lodging,
travel, and attendance at meetings, hearings, depositions, and trials; and [e]
consulting and witness fees and expenses incurred by Landlord in connection with
any litigation or other proceeding; provided, however, Landlord's internal
bookkeeping and routine lease servicing costs are not payable by Tenant.
25.22 Survival. The following provisions shall survive
--------
termination of the Lease: Article 8 (Defaults and Remedies); Article 9 (Damage
and Destruction); Article 10 (Condemnation); 15.9 (Transfer of License and
Facility Operations); 15.10 (Bed Operating Rights); 18.2 (Assignment or
Sublease); Article 19 (Holdover and Surrender); Article 24 (Security Interest)
and 25.24 (Survival).
25.23 Time. Time is of the essence in the performance of this
----
Lease.
25.24 Emeritus. Emeritus has joined in the execution of this
--------
Lease to acknowledge that Emeritus has reviewed and approved the provisions of
this Lease which specifically refer to Emeritus, including, without limitation,
1.5, 24.5 and 22.9.
25.25. Nature of Relationship; Usury Savings Clause. The parties
------------------------------------------------
intend that their relationship shall be that of lessor and lessee only. Nothing
contained in this Lease shall be deemed or construed to be a partnership or
venture agreement between Landlord and Tenant. Notwithstanding the foregoing,
in the event any payment made to Landlord hereunder is deemed to violate any
applicable laws regarding usury, the portion of any payment deemed to be
usurious shall be held by Landlord to pay the future obligations of Tenant as
such obligations arise and, in the event Tenant discharges and performance all
obligations hereunder, such funds will be reimbursed to Tenant upon the
expiration or earlier termination of the Term. No interest shall be paid on any
such funds held by Landlord.
25.26. Arbitration. In the event of any dispute among the parties
-----------
which this Lease specially provides will be submitted to arbitration, the
parties agree to submit the same to resolution before an arbitrator, in the case
of disputes alleged to involve less than $250,000, and before a panel of three
arbitrators, in the case of disputes alleged to involve $250,000 or more,
selected by mutual agreement of the parties or, if the parties are unable to
agree on an arbitrator or panel of arbitrators within a period of twenty (20)
days, selected by the presiding judge of the Superior Court in King County,
Washington . Such arbitration shall be held in accordance with the rules of the
American Arbitration Association then in effect and the decision of the
arbitrator(s) shall be final and binding on the parties and may be enforced by a
court of competent jurisdiction. The party requesting arbitration shall do so
by giving notice to that effect to the other party, specifying in reasonable
detail in said notice the nature of the dispute; provided, however, in the event
that notwithstanding the terms hereof, a party commences legal proceedings,
rather than arbitration proceedings, before a court of competent jurisdiction,
the other party shall be deemed to have forfeited its right to have such dispute
determined by binding arbitration in accordance with this 25.26 unless within
thirty (30) days after being served with the first pleading in such legal
proceedings, it files a motion to dismiss such legal proceedings and serves on
the other party notice of its intent to submit such dispute to arbitration. Any
party who fails to submit to binding arbitration following a lawful demand by
the other party shall bear all costs and expenses, including reasonable
attorneys fees (including those incurred in any trial, bankruptcy proceeding,
appeal or review) incurred by the other party in obtaining a stay of any pending
judicial proceeding concerning a dispute which by the terms of this Lease has
been properly submitted to mandatory arbitration and/or in compelling
arbitration of any dispute. All disputes under this 25.26 shall be determined
in the City of Seattle, Washington. Each arbitrator shall be (i) a former or
retired judge of a California or Washington Superior Court or any higher court
in California or Washington, or (ii) a licensed attorney having at least fifteen
(15) years experience, with at least five (5) years experience with assisted
living facility sale, lease or management transactions. The award in such
arbitration may be enforced on the application of either party by the order of
judgment of a court of competent jurisdiction. The prevailing party shall be
entitled to recover the reasonable fees and expenses of its attorneys and
experts unless the arbitrator(s), for good cause, determine(s) otherwise. A
post-arbitration proceeding to determine costs, if needed, shall be held within
ten (10) days of notice of the award. The arbitrator(s) shall resolve all
disputes in accordance with the substantive law of the state of Washington. The
arbitrator(s) shall have the power to grant all appropriate legal and equitable
relief (both by way of interim relief and as a part of its final award), other
than punitive damages, as may be granted by any court of the State of
Washington, to carry out the terms of this Lease (e.g., declaratory and
injunctive relief and damages). The parties expressly waive any right to
punitive damages arising out of any dispute subject to arbitration. Upon
receipt of the written opinion of the arbitrator(s), either party shall have the
right within ten (10) days to file with the arbitrator(s) a motion to
reconsider, and the arbitrator(s) shall then reconsider the issues raised by the
motion, may allow the other party an opportunity to respond thereto, and shall
either confirm or change the decision within ten (10) days after such filing.
Such revised or confirmed decision shall then be final and conclusive upon the
parties. The costs (other than the attorneys' fees of the respective parties)
of a motion for reconsideration and related proceedings shall be borne by the
moving party. Any monetary award of the arbitrator(s) may include interest at
the then "prime rate" of interest published from time to time by the Wall Street
Journal, plus three percent (3%), which interest shall accrue from the date the
claim, dispute or other matter in question was rightfully due and payable under
the Lease until the date the award is paid to the prevailing party.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have executed this Lease or
caused the same to be executed by their respective duly authorized officers as
of the date first set forth above.
FRETUS INVESTORS LLC, a Washington limited liability company, as manager on
behalf of each of the Landlord entities which is a limited liability company,
and as manager on behalf of the general partners of each of the Landlord
entities which is a limited partnership
By: FSPP Fretus I, L.L.C., a Delaware limited liability company
Its: Authorized Member
By: /s/ Steve Sandholtz
Name: Steve Sandholtz
Title: Authorized Signatory
-------
ESC-NGH, LP
By: ESC G.P. II, Inc., its General Partner
By: /s/ Martin D. Roffe
Name: Martin D. Roffe
Title: Vice President
Tax I.D. No.: 02-0608811
------------
EMERITUS PROPERTIES-NGH, LLC
By: Emeritus Corporation
Its: Sole Member
By: /s/ Martin D. Roffe
Name: Martin D. Roffe
Title: Vice President
Tax I.D. No.: 91-1605464
----------
STATE OF )
) SS:
COUNTY OF )
The foregoing instrument was acknowledged before me this ___ day of
_____, 2002 by _________________________, the _________________________ of
Fretus Investors LLC, a Washington limited liability company, on behalf of each
of the entities described above which is a limited liability company and on
behalf of the general partners of each of the entities described above which is
a limited partnership.
Notary Public
My Commission Expires: [SEAL]
STATE OF WASHINGTON )
) SS:
COUNTY OF KING )
The foregoing instrument was acknowledged before me this ___ day of
_______, 2002 by _________________________, the _________________________ of
Emeritus Corporation, a Washington corporation, on behalf of the corporation, in
its capacity as the sole member of Emeritus Properties-NGH, LLC, a Washington
limited liability company, on behalf of said limited liability company.
Notary Public
My Commission Expires: [SEAL]
STATE OF WASHINGTON )
) SS:
COUNTY OF KING )
The foregoing instrument was acknowledged before me this ___ day of
_____, 2002 by _________________________, the _________________________ of ESC
G.P. II, Inc., on behalf of the corporation, in its capacity as the sole the
general partner in ESC-NGH, LP, a Washington limited partnership, on behalf of
the limited partnership.
Notary Public
My Commission Expires: [SEAL]
STATE OF WASHINGTON )
) SS:
COUNTY OF KING )
The foregoing instrument was acknowledged before me this ___ day of
_____, 2002 by _________________________, the _________________________ of
Emeritus Corporation, the sole member of Emeritus Properties-NGH, LLC, a
Washington limited partnership, on behalf of the limited partnership.
Notary Public
My Commission Expires: [SEAL]
EXHIBIT A
FACILITY FINANCIAL REPORTING REQUIREMENTS
The Tenant shall prepare and deliver (or cause to be prepared and delivered) to
Landlord and to the parties noted below the following:
Budgets:
- -------
Not later than (i) December 15, 2002 for the calendar year commencing
January 1, 2003 and (ii) December 15 for each calendar year thereafter, a draft
operating budget and plan with respect to the each Facility including residency
guidelines and setting forth separately on a month-by-month basis all
anticipated income and operating expenses to be incurred during the upcoming
year and including a line item for contingencies in an amount equal to 5% of the
aggregate of all such expenses. Following delivery of such draft operating
budgets and plans, Tenant shall meet with Landlord to discuss the same.
Following said meeting, said draft budgets and plans, as the same may be revised
to reflect changes agreed to by Tenant at the meeting, shall be deemed the
approved plans and budgets for the Facilities for the forthcoming year.
Monthly Reports:
- ----------------
By the 10th day of each month, estimated property revenues for the Leased
Property for the preceding month on an individual Facility and consolidated
basis.
By the 20th business day of each month (except for the Monthly Report for
December due by the 25th business day of January as provided below under "Annual
Reports"), an unaudited financial report and asset trend analysis for the Leased
Property for the preceding month on an individual Facility and consolidated
basis in a form to be agreed by Landlord and Tenant (the "Monthly Report"). The
--------------
Monthly Report shall be accompanied by a certificate signed by an officer of
Tenant certifying, in his/her representative capacity, that such items are true,
correct, accurate, and complete and fairly present the financial condition and
results of the operations of the Leased Property on a combined basis as well as
an individual Facility basis (subject to normal year-end adjustments), and
shall, upon Landlord's request, be accompanied by appropriate documentation of
all expenditures made by the Landlord or Tenant under the Lease.
Such other information with respect to Tenant or the Leased Property as may
be required under the terms of the Mortgage Debt (including, without limitation,
as to the Column Loan Agreement, the information required by Section 5.11(d)).
By the 20th business day of each month, a 12-month rolling revenues
forecast for the Leased Property on an individual Facility and consolidated
basis.
Quarterly Reports:
- ------------------
None other than any quarterly reports with respect to Tenant or the Leased
Property which may be required by the terms of the Mortgage Debt.
Annual Reports:
---------------
By the 25th business day after the end of each calendar year, a Monthly
Report containing both December and year-to-date information.
Other Information:
Within three business days of receipt, copies of any and all notices received by
Operator indicating the potential for, threat of or actual termination,
suspension or reduction of any license, permit or approval held by Tenant.
Reports are to be delivered concurrently to the following:
- ------------------------------------------------------------------
Landlord: 2025 First Avenue, Suite 890, Seattle WA 98121
--------- -----------------------------------------------------
FSPP: 199 Fremont, San Francisco, CA 94105 Attn: Steven M. Sandholtz
- ----- ----------------------------------------------------------------------
Column Financial: All reports and financial information required by the
- ------------------ ---------------------------------------------------------
terms of the Mortgage Debt
- ------------------------------
EXHIBIT B
LEGAL DESCRIPTIONS
CONSISTING OF 24 SEPARATE LEGAL DESCRIPTIONS
EXHIBIT C
FACILITY INFORMATION
FACILITY NAME STREET ADDRESS FACILITY TYPE (PER LICENSE)
LICENSED OPERATOR BEDS/UNITS
----------
Champion Oaks 17705 Red Oak Drive 90 beds
ESC-NGH, L.P. Houston, Texas 77090 Assisted Living Facility Type B Large
- ------------- -------------------- -------------------------------------
Village Oaks at Chandler 1919 Carla Vista 103 beds
Emeritus Properties-NGH, LLC Chandler, Arizona 85224 Assisted Living
- ------------------------------ ------------------------- ---------------
Center (Directed Care)
- ------------------------
Village Oaks at Cielo Vista 7949 Sunmount Drive 105 beds
ESC-NGH, L.P. El Paso, Texas 79925 Assisted Living Facility Type B
- -------------- ----------------------- ---------------------------------
Large
- -----
Collin Oaks 4045 West 15th Street 116 beds
ESC-NGH, L.P. Plano, Texas 75093 Assisted Living Faculty Type B Large
- -------------- -------------------- ------------------------------------
Village Oaks at Conway 5501 East Michigan Street 103 beds
Emeritus Properties-NGH, LLC Orlando, Florida 32822 Assisted Living
- ------------------------------ ------------------------ ----------------
Facility
- --------
Duval Oaks 3510 Duval Road 112 beds
ESC-NGH, L.P. Austin, Texas 78727 Assisted Living Facility Type B Large
- -------------- ------------------- -------------------------------------
Village Oaks at Farmers Branch 13505 Webb Chapel Road 105 beds
ESC-NGH, L.P. Farmers Branch, Texas 75234 Assisted Living Facility Type
- -------------- --------------------------- -----------------------------
B Large
- --------
Village Oaks at Ft. Wayne 4730 East State Blvd 66 units
Emeritus Properties-NGH, LLC Ft. Wayne, Indiana 46815 NOT CURRENTLY
- ------------------------------ --------------------------- -------------
LICENSED
- --------
Galleria Oaks 570 Southland Drive 110 bed
Emeritus Properties-NGH, LLC Birmingham, Alabama Congregate Specialty
- ------------------------------ -------------------- --------------------
Care Assisted Living Facility
- --------------------------------
Village Oaks at Glendale 5861 West Beverly Lane 112 beds
Emeritus Properties-NGH, LLC Glendale, Arizona 85306 Assisted Living
- ------------------------------ ------------------------- ---------------
Center
- ------
Village Oaks at Hollywood Park 16911 San Pedro 101 beds
ESC-NGH, L.P. Hollywood Park, Texas 78232 Assisted Living Facility Type
- -------------- --------------------------- -----------------------------
B Large
- --------
Kingsley Oaks 9715 Plano Road 116 beds
ESC-NGH, L.P. Dallas, Texas 75238 Assisted Living Facility Type B Large
- -------------- ------------------- -------------------------------------
Village Oaks at Las Vegas 3025 E. Russell Road 105 beds
Emeritus Properties-NGH, LLC Las Vegas, Nevada 89120 Residential
- ------------------------------ -------------------------- -----------
Facility for Elderly or Disabled Persons Category 2 Residents
- ---------------------------------------------------------------------
Village Oaks at Melbourne 1765 W. Hibiscus Blvd 102 beds
Emeritus Properties-NGH, LLC Melbourne, Florida 32901 Assisted Living
- ------------------------------ ------------------------- ---------------
Facility
- --------
Memorial Oaks 1414 Sandy Springs Road 120 beds
ESC-NGH, L.P. Houston, Texas 77042 Assisted Living Facility Type B Large
- ------------- -------------------- -------------------------------------
Meridian Oaks 1251 W. 96th Street 77 units
Emeritus Properties-NGH, LLC Indianapolis, Indiana 46260 NOT CURRENTLY
- ------------------------------ --------------------------- -------------
LICENSED
- --------
Village Oaks at Mesa 2122 E. Brown 113 beds
Emeritus Properties-NGH, LLC Mesa, Arizona 85213 Assisted Living Center
- ----------------------------- ------------------- ----------------------
(Personal Care Services)
- --------------------------
Northwest Oaks 9505 Fredericksburg Road 120 beds
ESC-NGH, L.P. San Antonio, Texas 78240 Assisted Living Facility, Type B
- -------------- ------------------------ --------------------------------
Large
- -----
Village Oaks at Orange Park 1248 Kingsley Avenue 102 beds
Emeritus Properties-NGH, LLC Orange Park, Florida 32073 Assisted Living
- ----------------------------- -------------------------- ---------------
Facility
- --------
Village Oaks at Southpoint 6895 Belfort Oaks Place 102 beds
Emeritus Properties-NGH, LLC Jacksonville, Florida 32216 Assisted Living
- ---------------------------- --------------------------- ---------------
Facility
- --------
Sugar Land Oaks 151 Commerce Green Blvd 126 beds
ESC-NGH, L.P. Sugar Land, Texas 77478 Assisted Living Facility Type B
- -------------- ------------------------- -------------------------------
Large
- -----
Tanglewood Oaks 2698 S. Hulen Street 116 beds
ESC-NGH, L.P. Fort Worth, Texas 76109 Assisted Living Facility Type B
- -------------- ------------------------- -------------------------------
Large
- -----
Village Oaks at Tuskawilla 1016 Willa Springs Drive 102 beds
Emeritus Properties-NGH, LLC Winter Springs, Florida 32708 Assisted
- ------------------------------ -------------------------------- --------
Living Facility
- ----------------
Village Oaks at Greenwood 7212 US Highway 31 South 66 units
Emeritus Properties-NGH, LLC Indianapolis, Indiana 46227 NOT CURRENTLY
- ------------------------------ --------------------------- -------------
LICENSED
- --------
EXHIBIT D
ALLOCATION OF INITIAL EQUITY AND INITIAL FINANCING
FACILITY NAME INITIAL EQUITY INITIAL FINANCING
------------- -------------- -----------------
Champion Oaks
$1,302,283 $1,738,899
---------- ----------
Village Oaks at Chandler
$ 580,120 $ 944,135
---------- ----------
Village Oaks at Cielo Vista
$ 593,337 $ 907,497
---------- ----------
Collin Oaks
$2,077,310 $3,765,266
---------- ----------
Duval Oaks
$1,111,120 $1,876,996
---------- ----------
Village Oaks at Farmers Branch
$1,054,417 $1,758,627
---------- ----------
Village Oaks at Ft. Wayne
$1,536,525 $2,812,676
---------- ----------
Galleria Oaks
$ 820,556 $1,256,967
---------- ----------
Village Oaks at Glendale
$ 536,611 $ 837,039
---------- ----------
Village Oaks at Hollywood Park
$ 998,327 $1,589,528
---------- ----------
Kingsley Oaks
$1,472,877 $2,609,760
---------- ----------
Village Oaks at Las Vegas
$ 474,876 $ 744,035
---------- ----------
Village Oaks at Melbourne
$1,139,055 $2,130,644
---------- ----------
Memorial Oaks
$1,177,165 $1,961,546
---------- ----------
Village Oaks at Mesa
$ 955,588 $1,741,717
---------- ----------
Meridian Oaks
$1,030,824 $1,471,159
---------- ----------
Northwest Oaks
$ 974,553 $1,488,069
---------- ----------
Village Oaks at Orange Park
$1,947,498 $3,613,077
---------- ----------
Village Oaks at Southpoint
$ 737,042 $1,161,145
---------- ----------
Sugar Land Oaks
$1,364,984 $2,147,554
---------- ----------
Tanglewood Oaks
$1,122,309 $1,899,543
---------- ----------
Village Oaks at Tuskawilla
$ 980,736 $1,769,900
---------- ----------
Village Oaks at Greenwood
$1,285,487 $2,265,923
---------- ----------
EXHIBIT E
LANDLORD'S PERSONAL PROPERTY
All furniture, fixtures, furnishings, fittings, equipment, machinery, apparatus,
appliances and other articles of personal property now located at the Leased
Property and used or usable in connection with any present or future occupation
or operation of the Leased Property which was acquired by Landlord from the
Seller.
EXHIBIT F
LANDLORD'S PROPERTY REPORTS
EXHIBIT G
PERMITTED EXCEPTIONS
CONSISTING OF 24 SEPARATE SETS OF TITLE EXCEPTIONS
EXHIBIT H
DESCRIPTION OF PRE APPROVED IMPROVEMENTS AND
PRE-APPROVED IMPROVEMENTS COSTS
EXHIBIT I
TENANT AND GUARANTOR FINANCIAL REPORTING
REQUIREMENTS
Within 90 days after the end of the fiscal year of Emeritus, Emeritus' Annual
Report, together with (A) unaudited financial statements covering each of the
Facilities certified by Emeritus and containing statements of profit and loss
for the Facilities and a balance sheet for the Facilities and (B) such other
information as may be required under the terms of the Mortgage Debt, all as
described more fully as of the Effective Date in Section 5.11(c) of the Column
Loan Agreement.
EXHIBIT J
WIRE TRANSFER INSTRUCTIONS
FRETUS INVESTORS, LLC
Bank:
- ----
ABA Number:
- -----------
Account Name:
- -------------
Account Number:
- ---------------
Notify:
- ------
Phone:
- -----
EXHIBIT K
PROJECTIONS
EXHIBIT L
EXISTING FACILITIES EXCEPTIONS TO NON-COMPETE
MARRIOTT FACILITY LOCATION EMERITUS OPERATED LOCATION MILES
Village Oaks at Glendale Phoenix, AZ Loyalton of Phoenix
- --------------------------- ------------ ---------------------
Phoenix, AZ 10 miles
- ------------ ---------
Village Oaks at Conway Orlando, FL Pavillion at Crossing Points
Orlando, FL 10 miles
Village Oaks at Tuskawilla Winter Springs, FL Stanford Centre
Altamonte Springs, FL 7 miles
Village Oaks at Las Vegas Las Vegas, NV Concorde Las Vegas, NV
3 miles
Cielo Vista El Paso, TX Cambria El Paso, TX 7 miles
Palisades El Paso, TX 7 miles
Hollywood Park Hollywood Park, TX Amber Oaks San Antonio, TX
6 miles
Kingsley Place at Oakwell Farms San Antonio, TX 10 miles
Kingsley Oaks Dallas, TX Vickery Towers Dallas, TX 8 miles
Northwest Oaks San Antonio, TX Hamilton House San Antonio, TX
2 miles
Kingsley Place at Medical Center San Antonio, TX 2 miles
EXHIBIT M
DISBURSEMENT PROCEDURES FOR PRE-APPROVED
IMPROVEMENTS
The disbursement of the Pre-Approved Improvements Budgeted Costs shall be
governed by Section 7.1.2 of the Loan Agreement dated as of the Effective Date
between Column Financial, Inc., as Lender, and Landlord, as Borrower, which is
incorporated herein by reference.