AMENDED AND RESTATED MASTER LEASE
HEALTH CARE PROPERTY INVESTORS, INC.,
HCPI TRUST
and
TEXAS HCP HOLDING, L.P.
collectively, as Lessor
AND
EMERITUS CORPORATION,
and
ESC III, L.P., d/b/a TEXAS-ESC III, L.P.
collectively, as Lessee
Dated as of September 18, 2002
TABLE OF CONTENTS
ARTICLE I. 1
1.1 Leased Property; Term. 1
ARTICLE II. 2
2.1 Definitions 2
ARTICLE III. 16
3.1 Rent. 16
3.2 Quarterly Calculation and Payment of Percentage Rent; Annual
Reconciliation 18
3.3 [Intentionally Omitted] 19
3.4 Confirmation of Percentage Rent. 19
3.5 Additional Charges 20
3.6 Late Payment of Rent 20
3.7 Net Lease 20
ARTICLE IV. 21
4.1 Impositions. 21
4.2 Utilities 22
4.3 Insurance 22
4.4 Impound Account 22
4.5 Tax Service 22
ARTICLE V. 23
5.1 No Termination, Abatement, etc 23
5.2 Termination with Respect to Fewer than All of the Facilities 23
ARTICLE VI. 24
6.1 Ownership of the Leased Property 24
6.2 Personal Property 24
6.3 Transfer of Personal Property and Capital Additions to Lessor 24
ARTICLE VII. 24
7.1 Condition of the Leased Property 24
7.2 Use of the Leased Property. 25
7.3 Lessor to Grant Easements, etc 26
7.4 Preservation of Gross Revenues 26
ARTICLE VIII. 27
8.1 Compliance with Legal and Insurance Requirements, Instruments, etc
27
ARTICLE IX. 27
9.1 Maintenance and Repair. 27
9.2 Encroachments, Restrictions, Mineral Leases, etc 29
ARTICLE X. 30
10.1 Construction of Capital Additions to the Leased Property. 30
10.2 Construction Requirements for all Capital Additions 31
10.3 Funding by Lessor. 32
10.4 Capital Additions Financed by Lessee 33
ARTICLE XI. 34
11.1 Liens 34
ARTICLE XII. 34
12.1 Permitted Contests 34
ARTICLE XIII. 35
13.1 General Insurance Requirements 35
13.2 Replacement Cost 36
13.3 Additional Insurance 36
13.4 Waiver of Subrogation 37
13.5 Policy Requirements 37
13.6 Increase in Limits 37
13.7 Blanket Policies and Policies Covering Multiple Locations 37
13.8 No Separate Insurance 38
ARTICLE XIV. 38
14.1 Insurance Proceeds 38
14.2 Insured Casualty. 38
14.3 Uninsured Casualty 39
14.4 No Abatement of Rent 40
14.5 Waiver 40
14.6 Damage Near End of Term 40
ARTICLE XV. 40
15.1 Condemnation. 40
15.2 Award-Distribution 41
15.3 Temporary Taking 41
ARTICLE XVI. 41
16.1 Events of Default 41
16.2 Certain Remedies 43
16.3 Damages 44
16.4 Receiver 45
16.5 Lessee's Obligation to Purchase 45
16.6 Waiver 46
16.7 Application of Funds 46
16.8 [Reserved] 46
16.9 [Reserved] 46
16.10 Landlord's Security Interest 46
ARTICLE XVII. 47
17.1 Lessor's Right to Cure Lessee's Default 47
ARTICLE XVIII. 47
18.1 Purchase of the Leased Property 47
18.2 Allocation of the Boise, Idaho Purchase Price 48
ARTICLE XIX. 48
19.1 Renewal Terms 48
ARTICLE XX. 49
20.1 Holding Over 49
ARTICLE XXI. 49
21.1 Letters of Credit 49
21.2 Times for Obtaining Letters of Credit 50
21.3 Amounts for Letters of Credit. 50
21.4 Uses of Letters of Credit 51
21.5 Cash Security Deposit Option 51
ARTICLE XXII. 53
22.1 Risk of Loss 53
ARTICLE XXIII. 53
23.1 General Indemnification 53
ARTICLE XXIV. 54
24.1 Subletting and Assignment. 54
24.2 Consent 55
24.3 Costs 56
24.4 No Release of Lessee's Obligations 56
24.5 Assignment of Lessee's Rights Against Sublease 57
24.6 Reserved 57
24.7 REIT Protection 57
24.8 Prepaid Rent 58
ARTICLE XXV. 58
25.1 Officer's Certificates and Financial Statements. 58
25.2 Charges 60
ARTICLE XXVI. 60
26.1 Lessor's Right to Inspect and Show the Leased Property and Capital
Additions 60
ARTICLE XXVII. 60
27.1 No Waiver 60
ARTICLE XXVIII. 60
28.1 Remedies Cumulative 60
ARTICLE XXIX. 61
29.1 Acceptance of Surrender 61
ARTICLE XXX. 61
30.1 No Merger 61
ARTICLE XXXI. 61
31.1 Conveyance by Lessor 61
31.2 New Lease 61
ARTICLE XXXII. 63
32.1 Quiet Enjoyment 63
ARTICLE XXXIII. 63
33.1 Notices 63
ARTICLE XXXIV. 64
34.1 Appraiser 64
ARTICLE XXXV. 65
35.1 Lessee's Option to Purchase the Leased Property. 65
35.2 Defaults. 68
35.3 Escrow Provisions. 69
35.4 Lessor's Option to Purchase Lessee's Personal Property 70
ARTICLE XXXVI. 70
36.1 Lessor May Grant Liens 70
36.2 Attornment 70
ARTICLE XXXVII. 71
37.1 Hazardous Substances 71
37.2 Notices 71
37.3 Remediation 71
37.4 Indemnity 72
37.5 Environmental Inspection 73
ARTICLE XXXVIII. 73
38.1 Memorandum of Lease 73
ARTICLE XXXIX. 73
39.1 Sale of Assets 73
ARTICLE XL. 74
40.1 Subdivision 74
ARTICLE XLI. 75
41.1 Authority 75
ARTICLE XLII. 75
42.1 Attorneys' Fees 75
ARTICLE XLIII. 75
43.1 Brokers 75
ARTICLE XLIV. 75
44.1 Miscellaneous. 75
ARTICLE XLV. 79
45.1 Restatement of Original Leases 79
ARTICLE XLVI. 79
46.1 Provisions Relating to Master Lease 79
Exhibits:
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Exhibit A Legal Description of the Land
Exhibit B List of Lessor's Personal Property
Exhibit C Description of Facilities and Certain Material Terms
Exhibit D IRR Percentages
Exhibit E Property Condition Reports
Exhibit F Letter of Credit Amounts
Exhibit G Letter of Credit Reduction Fraction
Exhibit H Rent for the Extended Terms
Exhibit I Capital Repair Requirements
Exhibit J Form of Letter of Credit
Exhibit K Form of Amendment to Pennsylvania Land Leases
Exhibit L Boise Work Letter
Exhibit M Permitted Competing Facilities
2
LEASE
THIS AMENDED AND RESTATED MASTER LEASE ("Lease") is dated as of the 18 day
of September, 2002 (the "Restatement Date"), and is between HEALTH CARE PROPERTY
INVESTORS, INC., a Maryland corporation, HCPI TRUST, a Maryland real estate
trust, and TEXAS HCP HOLDING, L.P., a Delaware limited partnership
(collectively, as "Lessor"), and EMERITUS CORPORATION, a Washington corporation,
and ESC III, L.P., a Washington limited partnership d/b/a TEXAS-ESC III, L.P.
(collectively, as "Lessee").
ARTICLE I.
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1.1 Leased Property; Term.
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Upon and subject to the terms and conditions hereinafter set forth, Lessor
leases to Lessee and Lessee leases from Lessor all of Lessor's rights and
interest in and to the following with respect to each Facility (as defined
below) (collectively the "Leased Property"):
(a) the real property or properties described in Exhibit A attached hereto
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(collectively, the "Land");
(b) all buildings, structures, Fixtures (as hereinafter defined) and other
improvements of every kind now or hereafter located on the Land including,
alleyways and connecting tunnels, sidewalks, utility pipes, conduits and lines
(on-site and off-site to the extent Lessor has obtained any interest in the
same), parking areas and roadways appurtenant to such buildings and structures
and Capital Additions funded by Lessor of each such Facility (collectively, the
"Leased Improvements");
(c) all easements, rights and appurtenances relating to the Land and the
Leased Improvements (collectively, the "Related Rights");
(d) all equipment, machinery, fixtures, and other items of real and/or
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 Leased Improvements, including 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, apparatus, sprinkler systems, fire and theft
protection equipment, and built-in oxygen and vacuum systems, all of which, to
the greatest extent permitted by law, are hereby deemed to constitute real
estate, together with all replacements, modifications, alterations and additions
thereto (collectively, the "Fixtures"); and
(e) the machinery, equipment, furniture and other personal property
described on Exhibit B attached hereto, together with all replacements,
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modifications, alterations and substitutes therefore (whether or not
constituting an upgrade) (collectively, "Lessor's Personal Property").
SUBJECT, HOWEVER, to the easements, encumbrances, covenants, conditions and
restrictions and other matters which affect the Leased Property as of the
Original Lease Commencement Date with respect to each portion of the Leased
Property or which are created thereafter as permitted under the Original Lease
or hereunder to have and to hold (i) for a fixed term with respect to each
Facility (with respect to each Facility, the "Fixed Term") commencing on the
Restatement Date and ending at 11:59 p.m. on the applicable Expiration Date (as
defined below), and (ii) the Extended Terms provided for in Article XIX unless
this Lease is earlier terminated as hereinafter provided.
ARTICLE II.
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2.1 Definitions
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. For all purposes of this Lease, except as otherwise expressly provided
or unless the context otherwise requires, (i) the terms defined in this Article
have the meanings assigned to them in this Article 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 GAAP as at the time
applicable; (iii) all references in this Lease to designated "Articles,"
"Sections" and other subdivisions are to the designated Articles, Sections and
other subdivisions of this Lease; (iv) the word "including" shall have the same
meaning as the phrase "including, without limitation," and other similar
phrases; and (v) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Lease as a whole and not to any particular Article,
Section or other subdivision:
Added Value Percentage: As defined in Section 10.4.
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Additional Charges: As defined in Article III.
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Additional Rosewood Option Payment: As defined in Article XXXV.
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Additional Rent: The sum of Allocated Additional Rent for all of the
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Facilities.
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Affiliate: Any Person which, directly or indirectly, controls or is controlled
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by or is under common control with any other Person. For purposes of this
definition, "control" (including the correlative meanings of the terms
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
through the ownership of voting securities, partnership interests or other
equity interests. When used with respect to any corporation, the term
"Affiliate" shall also include any Person which owns, directly or indirectly,
fifty percent (50%) or more of any class of security of such corporation, but
shall exclude any affiliate of Daniel R. Baty which but for its relationship
with Daniel R. Baty would not be considered an Affiliate of Lessee.
Allentown Land Lease: The amended and restated land lease dated April 7, 1988
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by and between Columbian Home of Allentown, a non-profit Pennsylvania
corporation of the City of Allentown, Lehigh County, Pennsylvania and Allentown
Personal Care General Partnership, a Pennsylvania general partnership, with
respect to certain land located in the City of Allentown, Lehigh County,
Pennsylvania.
Allocated Additional Rent: With respect to each Facility, the amount of
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Additional Rent allocated to such Facility as determined by Section 3.1.2 and
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Exhibit C attached hereto.
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Allocated Initial Investment: With respect to each Facility, at any given time,
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the "Allocated Initial Investment" allocated to such Facility as set forth on
Exhibit C attached hereto.
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Allocated Minimum Rent: With respect to each Facility, the amount of Minimum
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Rent allocated to such Facility as set forth on Exhibit C attached hereto.
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Applicable Boise Minimum Rent Increase: As defined in Section 3.1.1.
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Appraiser: As defined in Article XXXIV.
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Appreciation Amount: With respect to a Purchase Group, the amount, if any, by
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which the aggregate Fair Market Value of such Facilities exceeds the aggregate
Minimum Repurchase Price of such Facilities (as defined below) as of the
applicable Outside Closing Date.
Award: All compensation, sums or anything of value awarded, paid or received on
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a total or partial Condemnation.
Base Gross Revenues: With respect to each Facility, the Gross Revenues as set
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forth on Exhibit C attached hereto.
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Base Period: The period commencing on that date which is eighteen (18) months
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prior to the date any appraisal of any Facility is made pursuant to the
provisions of Article XXXIV and ending on the date which is six (6) months prior
to the date any such appraisal of the Facility is made.
BLS: Bureau of Labor Statistics, U.S. Department of Labor.
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Boise Additional Rent Increase: As defined in ExhibitC attached hereto.
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Boise Capital Renovation Project: The "Capital Renovation Project" as defined
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in the Boise Work Letter.
Boise Capital Renovation Project Minimum Rent Reset Date: The date of each
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advance of Boise Capital Renovation Project Costs by Lessor under the Boise Work
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Letter.
Boise Capital Renovation Project Lease Rate: Eleven and One-Half Percent
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(11.5%).
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Boise Capital Renovation Project Costs: The "Capital Renovation Project Costs"
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as defined in the Boise Work Letter.
Boise Completion Date: The "Completion Date" as defined in the Boise Work
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Letter.
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Boise Lessor Maximum Cost: The "Landlord Maximum Cost" as defined in the Boise
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Work Letter.
Boise Work Letter: The Amended and Restated Capital Renovation Project Work
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Letter attached hereto as Exhibit L and incorporated herein by this reference.
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Business Day: Each Monday, Tuesday, Wednesday, Thursday and Friday which is not
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a day on which national banks in the City of New York, New York are authorized,
or obligated, by law or executive order, to close.
Capital Additions: With respect to any Facility, one or more new buildings, or
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one or more additional structures annexed to any portion of any of the Leased
Improvements of such Facility, or the material expansion of existing
improvements, which are constructed on any parcel or portion of the Land of such
Facility, during the Term, including construction of a new wing or new story, or
the repair, replacement, restoration, remodeling or rebuilding of existing
Leased Improvements on such Facility or any portion thereof where the purpose
and effect of such work is to provide a functionally new facility in order to
provide services not previously offered in such Facility. Notwithstanding
anything to the contrary herein, the Boise Capital Renovation Project shall be
at all times deemed a "Capital Addition" for purposes of this Lease.
Capital Addition Costs: The costs of any Capital Addition made to the Leased
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Property whether paid for by Lessee or Lessor, including (i) all permit fees and
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other costs imposed by any governmental authority, the cost of site preparation,
the cost of construction including materials and labor, the cost of supervision
and related design, engineering and architectural services, the cost of any
fixtures, and if and to the extent approved by Lessor, the cost of construction
financing; (ii) fees paid to obtain necessary licenses and certificates; (iii)
the cost of any land contiguous to the Leased Property which is to become a part
of the Leased Property purchased for the purpose of placing thereon the Capital
Addition or any portion thereof or for providing means of access thereto, or
parking facilities therefor, including the cost of surveying the same, but only
to the extent approved by Lessor in writing and in advance if Lessor is funding
such Capital Addition; (iv) the cost of insurance, real estate taxes, water and
sewage charges and other carrying charges for such Capital Addition during
construction; (v) the cost of title insurance; (vi) reasonable fees and expenses
of legal counsel; (vii) filing, registration and recording taxes and fees;
(viii) documentary stamp and similar taxes; and (ix) all reasonable costs and
expenses of Lessor and any Person which has committed to finance the Capital
Addition, including (a) the reasonable fees and expenses of their respective
legal counsel; (b) printing expenses; (c) filing, registration and recording
taxes and fees; (d) documentary stamp and similar taxes; (e) title insurance
charges and appraisal fees; (f) rating agency fees; and (g) commitment fees
charged by any Person advancing or offering to advance any portion of the
financing for such Capital Addition. Notwithstanding anything to the contrary
herein, all Boise Capital Renovation Project Costs advanced, funded or accrued
by Lessor under the Boise Work Letter shall be treated for all purposes as a
Capital Addition Cost financed and paid for by Lessor under this Lease.
Capital Repair Requirements: With respect to each Facility, the applicable
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amount as set forth on Exhibit I attached hereto.
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Cash Flow: With respect to each Facility, the net income from such Facility,
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determined on the basis of GAAP applied on a consistent basis, plus the sum of
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(i) depreciation and amortization expense; (ii) Rent and other expenses payable
hereunder, excluding, however, Impositions for such Facility; plus (iii)
management fees for such Facility; less the sum of (y) a management fee
allowance of five percent (5%) of Gross Revenues for such Facility during the
corresponding period plus (z) an annual Two Hundred Dollar ($200) per unit
reserve for such Facility, pro-rated for the corresponding period.
Cash Flow Coverage: With respect to each Facility, for any period, calculated
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as of the last day of the period, the ratio of Cash Flow for such Facility
attributable to such period to total Rent payable for such period under the
Lease.
Cash Security Deposit: As defined in Section 21.5.
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Close of Escrow: As defined in Article XXXV.
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Code: The Internal Revenue Code of 1986, as amended.
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Collateral: As defined in Section 16.10.1.
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Condemnation: The exercise of any governmental power, whether by legal
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proceedings or otherwise, by a Condemnor or a voluntary sale or transfer by
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Lessor to any Condemnor, either under threat of condemnation or while legal
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proceedings for condemnation are pending.
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Condemnor: Any public or quasi-public authority, or private corporation or
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individual, having the power of Condemnation.
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Consolidated Financials: For any fiscal year or other accounting period for
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Lessee and its consolidated Subsidiaries, statements of earnings and retained
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earnings and of changes in financial position for such period and for the period
- --
from the beginning of the respective fiscal year to the end of such period and
the related balance sheet as at the end of such period, together with the notes
thereto, all in reasonable detail and setting forth in comparative form the
corresponding figures for the corresponding period in the preceding fiscal year,
and prepared in accordance with GAAP.
Consolidated Net Worth: At any time, the sum of the following for Lessee and
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its consolidated Subsidiaries, on a consolidated basis determined in accordance
- --
with GAAP
(i) the amount of capital or stated capital (after deducting the cost of any
shares held in its treasury), plus
(ii) the amount of capital surplus and retained earnings (or, in the case of
a capital surplus or retained earnings deficit, minus the amount of such
deficit), minus
(iii) the sum of the following (without duplication of deductions in respect
of items already deducted in arriving at surplus and retained earnings): (a)
unamortized debt discount and expense; and (b) any write-up in book value of
assets resulting from a revaluation thereof subsequent to the most recent
Consolidated Financials prior to the date hereof, excluding, however, any (i)
net write-up in value of foreign currency in accordance with GAAP, (ii) write-up
resulting from a reversal of a reserve for bad debts or depreciation, and (iii)
write-up resulting from a change in methods of accounting for inventory.
Cost of Living Index: The Consumer Price Index for All Urban Consumers,
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U.S. City Average (1982-1984 = 100), published by the BLS, or such other renamed
index. If the BLS changes the publication frequency of the Cost of Living Index
so that a Cost of Living Index is not available to make a cost-of-living
adjustment as specified herein, the cost-of-living adjustment shall be based on
the percentage difference between the Cost of Living Index for the closest
preceding month for which a Cost of Living Index is available and the Cost of
Living Index for the comparison month as required by this Lease. If the BLS
changes the base reference period for the Cost of Living Index from 1982-84 =
100, the cost-of-living adjustment shall be determined with the use of such
conversion formula or table as may be published by the BLS. If the BLS
otherwise substantially revises, or ceases publication of the Cost of Living
Index, then a substitute index for determining cost-of-living adjustments,
issued by the BLS or by a reliable governmental or other nonpartisan
publication, shall be reasonably selected by Lessor and Lessee.
CPI Increase: (A) With respect to any increase applicable at the commencement
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of the second (2nd) Lease Year of a Facility, the percentage increase (but not
decrease) in (i) the Cost of Living Index published for the beginning of the
first Quarter of each Lease Year, over (ii) the Cost of Living Index published
for the month twelve (12) months prior to such date, and (B) with respect to all
subsequent Lease Years, the percentage increase (but not decrease) in (i) the
Cost of Living Index published for the beginning of the first Quarter of each
Lease Year, over (ii) the Cost of Living Index published for the beginning of
the first Quarter of the immediately prior Lease Year.
CPI Increase (Group 4 Modified): (A) With respect to any increase applicable at
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the commencement of the second (2nd) Lease Year of a Facility, the percentage
increase (rounded to two (2) decimal places), if any, in (i) the Cost of Living
Index published for the month which is three (3) months prior to the
commencement of the applicable Lease Year, over (ii) the Cost of Living Index
published for the month twelve (12) months prior to such date, and (B) with
respect to all subsequent Lease Years, the percentage increase (rounded to two
(2) decimal places), if any, in (i) the Cost of Living Index published for the
month which is three (3) months prior to the commencement of the applicable
Lease Year, over (ii) the Cost of Living Index published for the month which is
three (3) months prior to the commencement of the immediately prior Lease Year.
CPI Percentage Cap: With respect to each Facility, the applicable percentage as
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set forth on Exhibit C attached hereto.
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CPI Percentage Floor: With respect to each Facility, the applicable percentage
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as set forth on Exhibit C attached hereto.
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CPI Rent: The phrase "CPI Rent" shall have the following meanings:
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(I) With respect to the Group 4 Facilities, an amount equal to the sum
of (i) the greater of (A) the lesser of (a) the product of (x) the sum of the
prior Lease Year's Minimum Rent and Additional Rent multiplied by (y) the
current CPI Increase (Group 4 Modified), multiplied by (z) two (2), and (b) the
CPI Percentage Cap multiplied by the sum of the prior Lease Year's Minimum Rent
and Additional Rent, and (B) (1) the CPI Percentage Floor multiplied by (2) the
sum of the prior Lease Year's Minimum Rent and Additional Rent, and (ii) the
prior Lease Year's CPI Rent. If the prior Lease Year is less than twelve (12)
calendar months, the Minimum Rent, Additional Rent and CPI Rent for such Lease
year shall be annualized for purposes of the foregoing calculations; and
(II) With respect to all other Facilities, an amount equal to the sum of
(i) the greater of (A) the lesser of (a) the product of (y) the sum of the prior
Lease Year's Minimum Rent and Additional Rent multiplied by (z) the current CPI
Increase, and (b) the CPI Percentage Cap multiplied by the sum of the prior
Lease Year's Minimum Rent and Additional Rent, and (B) (1) the CPI Percentage
Floor multiplied by (2) the sum of the prior Lease Year's Minimum Rent and
Additional Rent, and (ii) the prior Lease Year's CPI Rent. If the prior Lease
Year is less than twelve (12) calendar months, the Minimum Rent, Additional Rent
and CPI Rent for such Lease year shall be annualized for purposes of the
foregoing calculations.
Notwithstanding anything in the foregoing to the contrary, with respect to each
Facility, CPI Rent for the first Lease Year shall be equal to the amount as set
forth on Exhibit C attached hereto.
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Date of Taking: The date the Condemnor has the right to possession of the
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property being condemned.
Deposit: As defined in Article XXXV.
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Emeritus: As defined in the preamble.
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Environmental Costs: As defined in Article XXXVII.
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Environmental Laws: Environmental Laws shall mean any and all federal, state,
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municipal and local laws, statutes, ordinances, rules, regulations, guidances,
policies, orders, decrees, judgments, whether statutory or common law, as
amended from time to time, now or hereafter in effect, or promulgated,
pertaining to the environment, public health and safety and industrial hygiene,
including the use, generation, manufacture, production, storage, release,
discharge, disposal, handling, treatment, removal, decontamination, cleanup,
transportation or regulation of any Hazardous Substance, including the
Industrial Site Recovery Act, the Clean Air Act, the Clean Water Act, the Toxic
Substances Control Act, the Comprehensive Environmental Response Compensation
and Liability Act, the Resource Conservation and Recovery Act, the Federal
Insecticide, Fungicide, Rodenticide Act, the Safe Drinking Water Act and the
Occupational Safety and Health Act.
Escrow: As defined in Article XXXV.
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Escrow Holder: As defined in Articles XXXV.
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Event of Default: As defined in Article XVI.
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Expiration Date: With respect to each Facility, the expiration dates set forth
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on Exhibit C attached hereto.
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Extended Term(s): With respect to each Facility, as defined in Article XIX and
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set forth on Exhibit C attached hereto.
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Extended Term Rent: With respect to each Facility, an amount equal to the
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applicable sum as set forth on Exhibit H attached hereto.
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Facility: Each Facility being (and to be) operated or proposed to be operated
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on the Leased Property, as more particularly described on Exhibit C attached
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hereto. Notwithstanding the foregoing, the Boise Capital Renovation Project
shall be deemed to be part of the "Facility" with respect to the Facility
located in Boise, Idaho.
Facility Mortgage: As defined in Article XIII.
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Facility Mortgagee: As defined in Article XIII.
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Fair Market Added Value: With respect to each Facility, the Fair Market Value
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(as hereinafter defined) of the Leased Property (including all Capital
Additions) of such Facility less the Fair Market Value of the Leased Property of
such Facility determined as if no Capital Additions financed by Lessee had been
constructed.
Fair Market Rental: With respect to each Facility, the fair market rental value
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of the Leased Property of such Facility, or applicable portion thereof
(including any periodic increases therein), determined in accordance with the
appraisal procedures set forth in Article XXXIV.
Fair Market Value: With respect to each Facility, the fair market value of the
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Leased Property and all Capital Additions of such Facility, or applicable
portion(s) thereof, determined in accordance with the appraisal procedures set
forth in Article XXXIV. Fair Market Value shall be the value obtained by
assuming that the Leased Property is encumbered by this Lease. Further, in
determining Fair Market Value the positive or negative effect on the value of
the Leased Property attributable to the interest rate, amortization schedule,
maturity date, prepayment penalty and other terms and conditions of any
encumbrance which will not be removed at or prior to the date as of which Fair
Market Value shall taken into account. The Leased Property shall be valued at
its highest and best use which shall be presumed to be as a fully-permitted
Facility operated in accordance with the provisions of this Lease. Fair Market
Value of the Leased Property shall not include "going concern" or "business
enterprise" value attributable to factors other than the highest and best use of
the Leased Property. In addition, the following specific matters shall be
factored in or out, as appropriate, in determining Fair Market Value:
(i) The negative value of (a) any deferred maintenance or other items
of repair or replacement of the Leased Property, (b) any then current or prior
licensure or certification violations and/or admissions holds and (c) any other
breach or failure of Lessee to perform or observe its obligations hereunder
shall not be taken into account; rather, the Leased Property, and every part
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thereof shall be deemed to be in the condition required by this Lease (i.e.,
good order and repair) and Lessee shall at all times be deemed to have operated
the Facility in compliance with and to have performed all obligations of the
Lessee under this Lease.
(ii) The occupancy level of the applicable Facility shall be deemed to be
the average occupancy during the Base Period.
(iii) If the applicable Facility's Primary Intended Use includes a mixed
use, then the average of such mix during the Base Period shall be taken into
account.
First Refusal Facilities: Each of those Facilities identified as a First
--------------------------
Refusal Facility on Exhibit C attached hereto.
----------
First Refusal Period: As defined in Section 35.1.4.
- ----------------------
Fixed Term: As defined in Article I.
- -----------
Fixtures: With respect to each Facility, the Fixtures (as defined in Article I)
- --------
of such Facility.
Fullerton Closing Date: The date of closing of the sale by Lessor of the
- ------------------------
Facility located in Fullerton, California provided for in Section 35.1.2, if at
- ------
all.
Fullerton Purchase Option Term: As defined in Article XXXV.
- ---------------------------------
GAAP: Generally accepted accounting principles.
- ----
Gross Revenues: With respect to each Facility, all revenues received or
- ---------------
receivable from or by reason of the operation of the Facility or any other use
- -------
of the Leased Property of such Facility, Lessee's Personal Property and all
Capital Additions including all revenues received or receivable for the use of
or otherwise attributable to units, rooms, beds and other facilities provided,
meals served, services performed (including ancillary services), space or
facilities subleased or goods sold on or from the Leased Property and all
Capital Additions of such Facility, including, and except as provided below, any
consideration received under any commercial (as opposed to resident or patient)
subletting, licensing or other arrangements with third parties (a "Commercial
Sublessee") relating to the possession or use of any portion of the Leased
Property and all Capital Additions; provided, however, that Gross Revenues shall
not include:
(i) non-operating revenues such as interest income or income from the sale
of assets not sold in the ordinary course of business;
(ii) federal, state or local excise taxes and any tax based upon or measured
by such revenues which is added to or made a part of the amount billed to
the patient or other recipient of such services or goods, whether included in
the billing or stated separately;
(iii) contractual allowances (relating to any period during the Term of the
Lease) for billings not paid by or received from the appropriate governmental
agencies or third party providers; and
(iv) all proper patient billing credits and adjustments according to
generally accepted accounting principles relating to health care accounting.
Gross Revenues for each Lease Year of such Facility shall reflect all cost
report settlement adjustments, whether positive or negative, received in or
payable during such Lease Year in accordance with GAAP relating to health care
accounting, regardless of the year that such settlement amounts are applicable
to; provided, however, that to the extent settlement amounts are applicable to
years, or portions thereof, prior to the Restatement Date, such settlement
amounts shall not be reflected in Gross Revenues for the Lease Year of such
Facility in which such settlement amounts are received or paid. Gross Revenues
shall include the Gross Revenues of any Commercial Sublessee with respect to any
applicable portion of the Leased Property and/or any Capital Additions, i.e.,
the Gross Revenues generated from the operations conducted on or from such
portion shall be included directly in the Gross Revenues and the rent received
or receivable by Lessee from such Commercial Sublessee shall be excluded from
Gross Revenues for such purpose.
Group 1 Facilities: Each of those Facilities identified as a Group 1 Facility
- --------------------
on Exhibit C attached hereto.
- - ----------
Group 2 Facilities: Each of those Facilities identified as a Group 2 Facility
- --------------------
on Exhibit C attached hereto.
- - ----------
Group 3 Facilities: Each of those Facilities identified as a Group 3 Facility
- --------------------
on Exhibit C attached hereto.
- - ----------
Group 4 Facilities: Each of those Facilities identified as a Group 4 Facility
- --------------------
on Exhibit C attached hereto.
- - ----------
Group 5 Facility: Each of those Facilities identified as a Group 5 Facility on
- -----------------
Exhibit C attached hereto.
- ----------
Guarantors: Any future guarantor of all or any portion of Lessee's obligations
- ----------
pursuant to this Lease (each, individually, a "Guarantor").
Guaranty: Any future written guaranty of Lessee's obligations hereunder
- --------
executed by a Guarantor.
- -------
Handling: As defined in Article XXXVII.
- --------
Hazardous Substances: Collectively, any petroleum, petroleum product or
- ---------------------
byproduct or any substance, material or waste regulated or listed pursuant to
- -------
any Environmental Law.
- --
HCPI: Health Care Property Investors, Inc., a Maryland corporation.
- ----
HCPI Trust: HCPI Trust, a Maryland real estate Trust.
- -----------
Impositions: Collectively, all taxes, including capital stock, franchise and
- -----------
other state taxes of Lessor (or, if Lessor is not HCPI, of HCPI as a result of
- --
its investment in Lessor), ad valorem, sales, use, single business, gross
receipts, transaction privilege, rent or similar taxes; assessments including
assessments for public improvements or benefits, whether or not commenced or
completed prior to the date hereof and whether or not to be completed within the
Term; ground rents; water, sewer and other utility levies and charges; excise
tax levies; fees including license, permit, inspection, authorization and
similar fees; and 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 and/or the Rent and all interest and
penalties thereon attributable to any failure in payment by Lessee 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 (i) Lessor or Lessor's interest in
the Leased Property, (ii) the Leased Property or any part thereof or any rent
therefrom or any estate, right, title or interest therein, or (iii) 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 of the Leased
Property or any part thereof; provided, however, that nothing contained in this
Lease shall be construed to require Lessee to pay (a) any tax based on net
income (whether denominated as a franchise or capital stock or other tax)
imposed on Lessor or any other Person, (b) any transfer, or net revenue tax of
Lessor or any other Person except Lessee and its successors, (c) any tax imposed
with respect to the sale, exchange or other disposition by Lessor of any Leased
Property or the proceeds thereof, or (d) any principal or interest on any
indebtedness on the Leased Property owed to a Facility Mortgagee for which
Lessor is the obligor, except to the extent that any tax, assessment, tax levy
or charge, which is otherwise included in this definition, and a tax,
assessment, tax levy or charge set forth in clause (a) or (b) is levied,
assessed or imposed in lieu thereof or as a substitute therefor.
Incremental Gross Revenues: With respect to each Facility, the positive amount,
- --------------------------
if any, by which the Gross Revenues for such Facility during the current Lease
Year exceeds the Base Gross Revenues for such Facility. The Incremental Gross
Revenues for any partial Lease Year shall be the amount by which the Gross
Revenues for such partial Lease Year exceeds the Base Gross Revenues for such
Facility as prorated for such partial Lease Year.
Initial Rosewood Option Payment: As defined in Article XXXV.
- ----------------------------------
Insurance Requirements: The terms of any insurance policy required by this
- -----------------------
Lease and all requirements of the issuer of any such policy and of any insurance
- ----
board, association, organization or company necessary for the maintenance of any
such policy.
Intangible Property: All accounts, proceeds of accounts, rents, profits, income
- -------------------
or revenues derived from the use of rooms or other space within the Leased
Property or the providing of services in or from the Leased Property; documents,
chattel paper, instruments, contract rights, deposit accounts, general
intangibles, causes of action, now owned or hereafter acquired by Lessee
(including any right to any refund of any Impositions) arising from or in
connection with Lessee's operation or use of the Leased Property; all licenses
and permits now owned or hereinafter acquired by Lessee, which are necessary or
desirable for Lessee's use of the Leased Property for its Primary Intended Use,
including, if applicable, any certificate of need or similar certificate; the
right to use any trade name or other name associated with the Facility; and any
and all third-party provider agreements (including Medicare and Medicaid).
IRR Percentage: With respect to each Purchase Option Property, an amount equal
- ---------------
to the applicable percentage as set forth on Exhibit D attached hereto.
----------
Land: With respect to each Facility, the Land (as defined in Article I)
- ----
relating to such Facility.
- ----
Land Lease Facilities: Each of the Facilities identified as a Land Lease
- -----------------------
Facility on Exhibit C attached hereto.
- ------ ----------
Land Lease Rent: As defined in Section 3.1.3.
- -----------------
Landlord's Minimum Return Allocation: An amount that yields an internal rate of
- ------------------------------------
return on the Minimum Repurchase Price for the period commencing on the
applicable Original Lease Commencement Date and ending on the closing date of
the purchase provided for in Section 35.1.1 hereof which internal rate of return
is expressed as a percentage equal to the sum of (i) an interest rate equal to
350 basis points in excess of the Ten-Year Treasury Rate as of such date, and,
with respect to each Extended Term, the amount determined pursuant to Article 19
(but in no event less than 10.5% nor more than 11.5%) and (ii) 350 basis points.
Latrobe Land Lease: The land lease, dated October 14, 1986, by and between
- --------------------
Wimmer Corporation, a non-profit Pennsylvania corporation of Unity Township,
- ----
Westmoreland County, Pennsylvania and Unity Partnership, a Pennsylvania general
- ---
partnership, as amended on November 22, 1989, with respect to certain land
located in the Township of Unity, Westmoreland County, Pennsylvania.
Lease: As defined in the preamble.
- -----
Lease Year: The first Lease Year for each Facility shall be the period
- -----------
commencing on the Restatement Date and ending on the day immediately prior to
- --------
the next occurring Lease Year Reference Date, and each subsequent Lease Year for
- --
each Facility shall be each period of twelve (12) full calendar months after the
last day of the prior Lease Year; provided, however, that the last Lease Year
for a Facility during the Term may be a period of less than twelve (12) full
calendar months and shall end on the last day of the Term for such Facility.
Lease Year Reference Date: With respect to each Facility, the Lease Year
- ----------------------------
Reference Date set forth on Exhibit C attached hereto.
- ------ ----------
Leased Improvements: With respect to each Facility, the Leased Improvements (as
- -------------------
defined in Article I) of such Facility.
Leased Property: With respect to each Facility, the Leased Property (as defined
- ---------------
in Article I) of such Facility.
Legal Requirements: All federal, state, county, municipal and other
- -------------------
governmental statutes, laws (including common law and Environmental Laws),
- -----------
rules, policies, guidance, codes, orders, regulations, ordinances, permits,
- -----
licenses, covenants, conditions, restrictions, judgments, decrees and
- ----
injunctions affecting either the Leased Property, Lessee's Personal Property and
- ----
all Capital Additions or the construction, use or alteration thereof, whether
now or hereafter enacted and in force, including any which may (i) require
repairs, modifications or alterations in or to the Leased Property, Lessee's
Personal Property and all Capital Additions, (ii) in any way adversely affect
the use and enjoyment thereof, or (iii) regulate the transport, handling, use,
storage or disposal or require the cleanup or other treatment of any Hazardous
Substance.
Lessee: As defined in the preamble.
- ------
Lessee's Personal Property: With respect to each Facility, the Personal
- ----------------------------
Property other than Lessor's Personal Property, allocable or relating to such
- -------
Facility.
- --
Lessee's Share of the Appreciation Amount: An amount determined by (i)
- ----------------------------------------------
subtracting the sum of Minimum Repurchase Price and the Appreciation Amount from
- --------
Landlord's Minimum Return Allocation, and (ii) multiplying the resultant amount
by one-half.
Lessor: Collectively, HCPI, Texas HCP, and HCPI Trust, as their interests may
- ------
appear.
Lessor's Personal Property: With respect to each Facility, Lessor's Personal
- ----------------------------
Property (as defined in Article I) allocable or relating to such Facility.
- --
Lessor's Shared Appreciation Amount: Lessor's share of the Appreciation Amount
- ------------------------------------
which shall be calculated as follows: (i) first, Lessor shall be allocated the
first dollars of the Appreciation Amount until such dollars together with all
Minimum Rent and Additional Rent paid or payable to Lessor in the aggregate
under the Original Leases as amended, consolidated and restated by this Lease
for the applicable Purchase Group to the Outside Closing Date yield Lessor an
annual internal rate of return on the Minimum Repurchase Price of the applicable
Purchase Group in the aggregate equal to the IRR Percentage and (ii) second,
Lessor and its Affiliates shall be allocated one-half of any dollars remaining
in the Appreciation Amount after subtracting the portion of the Appreciation
Amount allocated to Lessor and its Affiliates in clause (i) above.
Letter of Credit Amount: With respect to each Facility, the amount identified
- -------------------------
as the Letter of Credit Amount on Exhibit F attached hereto.
- - ----------
Letter of Credit Date: As defined in Section 21.2.
- ------------------------
LOC Reduction Fraction: The fraction set forth on Exhibit G with respect to
- ------------------------ ---------
each Facility listed thereon.
- ---
Minimum Rent: The sum of Allocated Minimum Rent for all of the Facilities.
- -------------
Minimum Repurchase Price: With respect to each Facility other than the
- --------------------------
Facilities located in Biloxi, Mississippi, and Auburn California, the sum of (i)
- --------
the Allocated Initial Investment with respect to such Facility plus (ii) any
Capital Addition Costs funded by Lessor with respect to such Facility. The
Minimum Repurchase Price with respect to the Facility located in Biloxi,
Mississippi shall be $8,849,392.03. The Minimum Repurchase Price with respect
to the Facility located in Auburn, California shall be $6,341,242.33.
Notwithstanding the foregoing, the Minimum Repurchase Price with respect to the
Facility located in San Antonio, Texas, commonly known as Hamilton House, the
Minimum Repurchase Price shall be reduced by the product of (x) a fraction the
numerator of which is the gross acres of the Land removed from the Leased
Property of such Facility pursuant to Article XL, and the denominator of which
is 4.471, and (y) $632,000.00.
New Lease: As defined in Section 31.2.1.
- ----------
New Lease Effective Date: As defined in Section 31.2.1.
- ---------------------------
Note: That certain Promissory Note made by Emeritus in favor of HCPI dated as
- ----
of September 18, 2002, in an original principal amount of Eight Hundred Thousand
and No/100 Dollars ($800,000.00).
Offer: As defined in Section 35.1.4.
- -----
Officer's Certificate: A certificate of Lessee signed by an officer authorized
- ----------------------
to so sign by its board of directors or by-laws.
Original Leases: As defined in Article XLV.
- ----------------
Original Lease Commencement Date. With respect to each Facility, the
- -----------------------------------
"Commencement Date" as defined in the applicable Original Lease and as set forth
- ----------
on Exhibit I attached hereto.
----------
Opening Deposit: As defined in Article XXXV.
- ----------------
Outside Closing Date: As defined in Article XXXV.
- ----------------------
Overdue Rate: On any date, a rate equal to 2% above the Prime Rate, but in no
- -------------
event greater than the maximum rate then permitted under applicable law.
Payment Date: Any due date for the payment of the installments of Minimum Rent,
- ------------
Additional Rent, Land Lease Rent or any other sums payable under this Lease.
Pennsylvania Land Leases: The Allentown Land Lease and the Latrobe Land Lease.
- -------------------------
Percentage Rent: With respect to each Lease Year of a Group 1 Facility, an
- ----------------
amount equal to the applicable percentage for each Group 1 Facility as set forth
- ----
on Exhibit C attached hereto multiplied by Incremental Gross Revenues during
----------
such Lease Year for such Facility.
Person: Any individual, corporation, partnership, joint venture, association,
- ------
joint stock company, trust, unincorporated organization, government or any
agency or political subdivision thereof or any other form of entity.
Personal Property: With respect to each Facility, all machinery, furniture and
- ------------------
equipment, including phone systems and computers, trade fixtures, inventory,
supplies and other personal property used or useful in the use of the Leased
Property for its Primary Intended Use, other than Fixtures.
Primary Intended Use: With respect to each Facility, an Alzheimer care,
- ----------------------
congregate care, assisted-living, or skilled nursing facility and such other
- -------
uses necessary or incidental to such use. Notwithstanding the foregoing, the
- ---
Primary Intended Use of the Facilities located in Biloxi, Mississippi and
- --
Auburn, California shall mean the foregoing-described facilities consisting of
- --
81 units and 89 units, respectively.
Prime Rate: On any date, a rate equal to the annual rate on such date announced
- ----------
by the Bank of New York to be its prime, base or reference rate for 90-day
unsecured loans to its corporate borrowers of the highest credit standing but in
no event greater than the maximum rate then permitted under applicable law. If
the Bank of New York discontinues its use of such prime, base or reference rate
or ceases to exist, Lessor shall designate the prime, base or reference rate of
another state or federally chartered bank based in New York to be used for the
purpose of calculating the Prime Rate hereunder.
Priority Encumbrances: As defined in Article XXXVI.
- ----------------------
Property Condition Reports: The reports described on Exhibit E attached hereto.
- -------------------------- ---------
Purchase Group: Those Facilities identified in the aggregate as a Purchase
- ---------------
Group on Exhibit C attached hereto.
- ---- ----------
Purchase Option Facilities: Each of those Facilities identified as a Purchase
- ----------------------------
Option Facility on Exhibit C attached hereto.
- - ----------
Purchase Option Purchase Price: The Shared Appreciation Purchase Price.
- ---------------------------------
Quarter: During each Lease Year, the first three (3) calendar month period
- -------
commencing on the first (1st) day of such Lease Year and each subsequent three
- ----
(3) calendar month period within such Lease Year; provided, however, that (i)
the last Quarter during the first Lease Year may be a period of less than three
(3) calendar months and shall end on the last day of the first Lease Year; and
(ii) last Quarter during the Term may be a period of less than three (3)
calendar months and shall end on the last day of the Term.
Renewal Group: Those Facilities identified in the aggregate as a Renewal Group
- --------------
on Exhibit C attached hereto.
----------
Rent: Collectively, the Minimum Rent, Additional Rent, Land Lease Rent and
- ----
Additional Charges, all as defined in Article III.
- ----
Restatement Date: As defined in the preamble.
- -----------------
Rosewood: As defined in Article XXXV.
- --------
Rosewood Option Agreement: As defined in Article XXXV.
- ---------------------------
SEC: Securities and Exchange Commission.
- ---
Separated Property: As defined in Section 31.2.
- -------------------
Shared Appreciation Purchase Price: The Minimum Repurchase Price of the
- -------------------------------------
Purchase Option Facilities in the aggregate plus Lessor's Shared Appreciation
- ------- ----
Amount.
- --
State: With respect to each Facility, the State or Commonwealth in which the
- -----
Leased Property for such Facility is located.
- --
Subsidiaries: Corporations, limited liability companies or partnerships, in
- ------------
which Lessee owns, directly or indirectly, more than 50% of the voting stock or
- ---
partnership interest.
Term: Collectively, the Fixed Term and any Extended Term(s), as the context may
- ----
require, unless earlier terminated.
Texas HCP. Texas HCP Holding, L.P., a Delaware limited partnership
- ----------
Transfer Consideration: As defined in Article XXIV.
- -----------------------
Unavoidable Delays: Delays due to strike, lockout, inability to procure
- -------------------
materials, power failure, act of God, governmental restriction, enemy action,
- -------
civil commotion, fire, unavoidable casualty or other cause beyond the control of
- --
the party responsible for performing an obligation hereunder; provided, however,
that a lack of funds shall not be deemed a cause beyond the control of either
party hereto.
Unsuitable for Its Primary Intended Use: With respect to each Facility, a state
- ---------------------------------------
or condition of such Facility such that by reason of damage or destruction or
Condemnation, in the good faith judgment of Lessor and Lessee, such Facility
cannot be operated on a commercially practicable basis for its Primary Intended
Use taking into account, among other relevant factors, the number of units and
usable beds affected by such damage or destruction or Condemnation.
ARTICLE III.
- -------------
3.1 Rent.
----
From and after the Restatement Date Lessee will pay to Lessor in lawful
money of the United States of America which shall be legal tender for the
payment of public and private debts, without offset or deduction, the amounts
set forth hereinafter as Minimum Rent during the Term. Lessee shall also pay,
where applicable, the amounts set forth hereinafter as Additional Rent and Land
Lease Rent. Payments of Rent shall be made by wire transfer of funds initiated
by Lessee to Lessor's account or to such other Person as Lessor from time to
time may designate in writing.
3.1.1 Minimum Rent.
-------------
(a) For the period from the Restatement Date through the expiration of the
Fixed Term, Lessee shall pay to Lessor as monthly "Allocated Minimum Rent" for
each Facility the amounts allocated to and set forth opposite such Facility on
Exhibit Cattached hereto and incorporated herein by this reference, in advance
---------
on or before the first day of each calendar month.
(b) With respect to the Facility located in Boise, Idaho, the monthly
Allocated Minimum Rent determined pursuant to subsection (a) above shall be
increased by amount equal to the product of (i) the total Boise Capital
Renovation Project Costs paid, funded or accrued by Lessor from the date of the
previous increase pursuant to this subsection (c) through the date of such Boise
Capital Renovation Project Minimum Rent Reset Date, times (ii) the Boise Capital
-----
Renovation Project Lease Rate (the "Applicable Boise Minimum Rent Increase"),
and accordingly the monthly installments of monthly Allocated Minimum Rent shall
be increased by one-twelfth (1/12) of the Applicable Boise Minimum Rent Increase
payable for any months during which such increase is applicable shall be
prorated based upon the number of days for which the different rental amounts
apply. Following any changes in monthly Allocated Minimum Rent with respect to
the Facility located in Boise, Idaho pursuant to this Lease, at the request of
either party, the parties shall execute an amendment to this Lease to confirm
the same in form and substance reasonably acceptable to Lessor and Lessee.
Notwithstanding the foregoing, the failure of Lessor to prepare and/or the
failure of Lessee to execute and deliver any such amendment shall not affect
Lessor's determination of such monthly Allocated Minimum Rent payable hereunder.
3.1.2 Additional Rent. Lessee shall pay to Lessor as monthly "Allocated
----------------
Additional Rent" for each Facility the amounts set forth below:
(a) Percentage Rent. With respect to the Group 1 Facilities, Lessee shall,
----------------
commencing on the Restatement Date through the expiration of the Fixed Term for
each such Facility, pay to Lessor Percentage Rent at the times and on the terms
described in Sections 3.2 and 3.3 below.
(b) CPI Rent.
---------
(i) With respect to the Group 1 Facilities and Group 2 Facilities, Lessee
shall, commencing on the Restatement Date and through the expiration of the
Fixed Term for each such Facility, pay to Lessor on the thirtieth (30th) day of
each Quarter an amount equal to the CPI Rent allocable to the previous Quarter.
(ii) With respect to each of the Group 3 Facilities, Lessee shall,
commencing on (i) October 1, 2002, and continuing through the expiration of the
Fixed Term for each such Facility, and (ii) the first (1st) calendar month of
the second (2nd) Lease Year of each Extended Term for a Group 3 Facility, if
any, and continuing through the expiration of such applicable Extended Term, pay
to Lessor the CPI Rent in advance in equal monthly installments.
(iii) With respect to each of the Group 4 Facilities, Lessee shall,
commencing on the Restatement Date, and continuing through the expiration of the
Term for each such Facility, including the Extended Terms, if any, pay to Lessor
the CPI Rent in advance in equal monthly installments.
3.1.3 Land Lease Rent. With respect to the Land Lease Facilities, Lessee
-----------------
shall pay to Lessor land lease rent ("Land Lease Rent") in an amount equal to
any payments made or to be made by Lessor to any lessor under a land lease
relating to a Land Lease Facility as set forth in a notice by Lessor to Lessee
that such payment is due. Within five (5) Business Days of receipt of such
written notice, Lessee shall pay to Lessor such land lease rent with respect to
all payments disclosed in such notice.
3.2 Quarterly Calculation and Payment of Percentage Rent; Annual
-------------------------------------------------------------------
Reconciliation
------
. The following shall apply with respect to Group 1 Facilities:
3.2.1 Lessee shall calculate and pay Percentage Rent quarterly, in arrears,
for the portion of the entire Lease Year, on a cumulative basis, up to the end
of the Quarter then most recently ended, less the Percentage Rent already paid
and attributable to such Lease Year. If at the time any calculation on account
of Percentage Rent is to be made the applicable Gross Revenues are not yet
available, Lessee shall use its best estimate of the applicable Gross Revenues.
Each quarterly payment of Percentage Rent shall be delivered to Lessor,
together with an Officer's Certificate setting forth the calculation thereof,
within thirty (30) days after the end of the corresponding Quarter.
3.2.2 Within ninety (90) days after the end of each Lease Year with respect
to a Group 1 Facility, Lessee shall deliver to Lessor an Officer's Certificate
setting forth the Gross Revenues for such Facility for such Lease Year. As soon
as practicable following receipt by Lessor of such Certificate, Lessor shall
determine the Percentage Rent for such Lease Year for each such Group 1 Facility
and give Lessee notice of the same together with the calculations upon which the
Percentage Rent was based. If such Percentage Rent exceeds the sum of the
quarterly payments of Percentage Rent previously paid by Lessee with respect to
such Lease Year, Lessee shall forthwith pay such deficiency to Lessor. If such
Percentage Rent for such Lease Year is less than the amount previously paid by
Lessee with respect thereto, Lessor shall, at Lessee's option, either (i) remit
to Lessee its check in an amount equal to such difference, or (ii) credit such
difference against the quarterly payments of Percentage Rent next coming due.
3.2.3 Any difference between the annual Percentage Rent for any Lease Year
as shown in said Officer's Certificate and the total amount of quarterly
payments for such Lease Year previously paid by Lessee, whether in favor of
Lessor or Lessee, shall bear interest at a rate equal to the rate payable on
90-day U. S. Treasury Bills as of the last Business Day of such Lease Year until
the amount of such difference shall be paid or otherwise discharged.
3.2.4 If the expiration or earlier termination of the Term with respect to a
Facility is a day other than the last day of a Lease Year for such Facility,
then the amount of the last quarterly installment of Percentage Rent for such
Facility shall be paid pro rata on the basis of the actual number of days in
such Lease Year.
3.2.5 As soon as practicable after the expiration or earlier termination of
the Term, a final reconciliation of Percentage Rent shall be made taking into
account, among other relevant adjustments, any unresolved contractual allowances
which relate to Gross Revenues accrued prior to such expiration or termination;
provided that if the final reconciliation has not been made within six (6)
months of such expiration or termination, then a final reconciliation shall be
made at that time based on all available relevant information, including
Lessee's good faith best estimate of the amount of any unresolved contractual
allowances.
3.3 [Intentionally Omitted]
3.4 Confirmation of Percentage Rent.
Lessee shall utilize, or cause to be utilized, an accounting system for
the Leased Property in accordance with its usual and customary practices and in
accordance with GAAP which will accurately record all Gross Revenues for each
Group 1 Facility and Lessee shall retain for at least five (5) years after the
expiration of each applicable Lease Year reasonably adequate records conforming
to such accounting system showing all Gross Revenues for such Lease Year for
each Group 1 Facility. Lessor, at its own expense except as provided
hereinbelow, 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 Certificate referred to in Section 3.2 and in connection with such
review and/or audit to examine Lessee's records with respect thereto (including
supporting data and sales tax returns) subject to any prohibitions or
limitations on disclosure of any such data under applicable law or regulations
including any duly enacted "Patients' Bill of Rights" or similar legislation, or
as may be necessary to preserve the confidentiality of the Facility-patient
relationship and the physician-patient privilege. If any such review and/or
audit discloses a deficiency in the payment of Additional Rent, Lessee shall
forthwith pay to Lessor the amount of the deficiency together with interest
thereon at the Overdue Rate compounded monthly from the date when said payment
should have been made to the date of payment thereof; provided, however, that
any dispute concerning such deficiency shall be resolved through an arbitration
proceeding reasonably approved by the parties; provided, further, that as to any
audit that is commenced more than two (2) years after the date Gross Revenues
for any Lease Year are reported by Lessee to Lessor, the deficiency, if any,
with respect to such Gross Revenues 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 on the part of Lessee. If
any such review and/or audit discloses that the Gross Revenues actually received
by Lessee for any Lease Year exceed those reported by Lessee by more than two
percent (2%), Lessee shall pay the costs of such review and/or audit. Any
proprietary information obtained by Lessor 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 Lessor may
disclose such information to prospective lenders or purchasers.
3.5 Additional Charges
-------------------
. In addition to the Minimum Rent, Additional Rent, and Land Lease Rent,
(i) Lessee shall also pay and discharge as and when due and payable all other
amounts, liabilities, obligations and Impositions which Lessee assumes or agrees
to pay under this Lease; and (ii) in the event of any failure on the part of
Lessee to pay any of those items referred to in clause (i) above, Lessee shall
also promptly pay and discharge every fine, penalty, interest and cost which may
be added for non-payment or late payment of such items (the items referred to in
clauses (i) and (ii) above being referred to herein collectively as the
"Additional Charges"), and Lessor 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 non-payment of the Additional Charges as in
the case of non-payment of the Minimum Rent.
3.6 Late Payment of Rent
-----------------------
. Lessee hereby acknowledges that late payment by Lessee to Lessor of Rent
will cause Lessor to incur costs not contemplated hereunder, the exact amount of
which is presently anticipated to be extremely difficult to ascertain. Such
costs may include processing and accounting charges and late charges which may
be imposed on Lessor by the terms of any loan agreement and other expenses of a
similar or dissimilar nature. Accordingly, if any installment of Rent other
than Additional Charges payable to a Person other than Lessor shall not be paid
within three (3) Business Days after its due date, Lessee will pay Lessor on
demand a late charge equal to the lesser of (i) five percent (5%) of the amount
of such installment or (ii) the maximum amount permitted by law. The parties
agree that this late charge represents a fair and reasonable estimate of the
costs that Lessor will incur by reason of late payment by Lessee. The parties
further agree that such late charge is Rent and not interest and such assessment
does not constitute a lender or borrower/creditor relationship between Lessor
and Lessee. In addition, the amount unpaid, including any late charges, shall
bear interest at the Overdue Rate compounded monthly from the due date of such
installment to the date of payment thereof, and Lessee shall pay such interest
to Lessor on demand. The payment of such late charge or such interest shall not
constitute waiver of, nor excuse or cure, any default under this Lease, nor
prevent Lessor from exercising any other rights and remedies available to
Lessor.
3.7 Net Lease
----------
. This Lease is and is intended to be what is commonly referred to as a
"net, net, net" or "triple net" lease. The Rent shall be paid absolutely net to
Lessor, so that this Lease shall yield to Lessor the full amount or benefit of
the installments of Minimum Rent, Additional Rent, Land Lease Rent and
Additional Charges throughout the Term with respect to each Facility, all as
more fully set forth in Article IV and subject to any other provisions of this
Lease which expressly provide for adjustment or abatement of Rent or other
charges.
ARTICLE IV.
- ------------
4.1 Impositions.
-----------
4.1.1 Subject to Article XII relating to permitted contests, Lessee shall
pay, or cause to be paid, all Impositions before any fine, penalty, interest or
cost may be added for non-payment. Lessee shall make such payments directly to
the taxing authorities where feasible, and promptly furnish to Lessor copies of
official receipts or other satisfactory proof evidencing such payments.
Lessee's obligation to pay Impositions shall be absolutely fixed upon the date
such Impositions become a lien upon the Leased Property or any part thereof. If
any Imposition may, at the option of the taxpayer, lawfully be paid in
installments, whether or not interest shall accrue on the unpaid balance of such
Imposition, Lessee may pay the same, and any accrued interest on the unpaid
balance of such Imposition, in installments as the same respectively become due
and before any fine, penalty, premium, further interest or cost may be added
thereto.
4.1.2 Lessor shall prepare and file all tax returns and reports as may be
required by Legal Requirements with respect to Lessor's net income, gross
receipts, franchise taxes and taxes on its capital stock, and Lessee shall
prepare and file all other tax returns and reports as may be required by Legal
Requirements with respect to or relating to the Leased Property, all Capital
Additions and Lessee's Personal Property.
4.1.3 Any refund due from any taxing authority in respect of any Imposition
paid by Lessee shall be paid over to or retained by Lessee if no Event of
Default shall have occurred hereunder and be continuing. Any other refund shall
be paid over to or retained by Lessor and applied to the payment of Lessee's
obligations under this Lease in such order of priority as Lessor shall
determine.
4.1.4 Lessor and Lessee 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.
If any property covered by this Lease is classified as personal property for tax
purposes, Lessee shall file all personal property tax returns in such
jurisdictions where it must legally so file. Lessor, to the extent it possesses
the same, and Lessee, to the extent it possesses the same, shall provide the
other party, upon request, with cost and depreciation records necessary for
filing returns for any property so classified as personal property. Where
Lessor is legally required to file personal property tax returns and to the
extent practicable, Lessee shall be provided with copies of assessment notices
indicating a value in excess of the reported value in sufficient time for Lessee
to file a protest.
4.1.5 Lessee may, upon notice to Lessor, at Lessee's option and at Lessee's
sole cost and expense, protest, appeal, or institute such other proceedings as
Lessee may deem appropriate to effect a reduction of real estate or personal
property assessments and Lessor, at Lessee's expense as aforesaid, shall
reasonably cooperate with Lessee in such protest, appeal, or other action but at
no cost or expense to Lessor. Billings for reimbursement by Lessee to Lessor of
personal property or real property taxes shall be accompanied by copies of a
bill therefor and payments thereof which identify the personal property or real
property with respect to which such payments are made.
4.1.6 Lessor shall give prompt notice to Lessee of all Impositions payable
by Lessee hereunder of which Lessor has knowledge, but Lessor's failure to give
any such notice shall in no way diminish Lessee's obligations hereunder to pay
such Impositions.
4.1.7 Impositions imposed or assessed in respect of the tax-fiscal period
during which the Term terminates with respect to such Facility shall be adjusted
and prorated between Lessor and Lessee with respect to such Facility, whether or
not such Imposition is imposed or assessed before or after such termination, and
Lessee's obligation to pay its prorated share thereof shall survive such
termination with respect to such Facility.
4.2 Utilities
---------
. Lessee shall pay or cause to be paid all charges for electricity, power,
gas, oil, water and other utilities used in the Leased Property and all Capital
Additions thereto. Lessee shall also pay or reimburse Lessor for all costs and
expenses of any kind whatsoever which at any time with respect to the Term
hereof with respect to any Facility may be imposed against Lessor by reason of
any of the covenants, conditions and/or restrictions affecting the Leased
Property or any portion thereof, or with respect to easements, licenses or other
rights over, across or with respect to any adjacent or other property which
benefits the Leased Property, including any and all costs and expenses
associated with any utility, drainage and parking easements.
4.3 Insurance
---------
. Lessee shall pay or cause to be paid all premiums for the insurance
coverage required to be maintained by Lessee hereunder.
4.4 Impound Account
----------------
. Lessor may, at its option to be exercised by thirty (30) days' written
notice to Lessee, require Lessee to deposit, at the time of any payment of
Minimum Rent, an amount equal to one-twelfth of Lessee's estimated annual taxes,
of every kind and nature, required pursuant to Section 4.1 plus, if Lessee fails
to pay any insurance premium in a timely manner as required by this Lease,
one-twelfth of Lessee's estimated annual insurance premiums required pursuant to
Section 4.3, into an impound account as directed by Lessor. Such amounts shall
be applied to the payment of the obligations in respect of which said amounts
were deposited in such order of priority as Lessor shall determine, on or before
the respective dates on which the same or any of them would become delinquent.
The cost of administering such impound account shall be paid by Lessee. Nothing
in this Section 4.4 shall be deemed to affect any right or remedy of Lessor
hereunder.
4.5 Tax Service
------------
. If requested by Lessor, Lessee shall, at its sole cost and expense,
cause to be furnished to Lessor a tax reporting service, to be designated by
Lessor, covering the Leased Property.
ARTICLE V.
- -----------
5.1 No Termination, Abatement, etc
---------------------------------
. Except as otherwise specifically provided in this Lease, Lessee shall
remain bound by this Lease in accordance with its terms and shall not seek or be
entitled to any abatement, deduction, deferment or reduction of Rent, or set-off
against the Rent. The respective obligations of Lessor and Lessee shall not be
affected by reason of (i) any damage to or destruction of the Leased Property or
any portion thereof from whatever cause or any Condemnation of the Leased
Property or any portion thereof; (ii) other than a result of Lessor's willful
misconduct or gross negligence, the lawful or unlawful prohibition of, or
restriction upon, Lessee's use of the Leased Property, or any portion thereof,
the interference with such use by any Person or by reason of eviction by
paramount title; (iii) any claim that Lessee has or might have against Lessor by
reason of any default or breach of any warranty by Lessor hereunder or under any
other agreement between Lessor and Lessee or to which Lessor and Lessee are
parties; (iv) any bankruptcy, insolvency, reorganization, composition,
readjustment, liquidation, dissolution, winding up or other proceedings
affecting Lessor or any assignee or transferee of Lessor; or (v) for any other
cause, whether similar or dissimilar to any of the foregoing, other than a
discharge of Lessee from any such obligations as a matter of law. Lessee 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) which may entitle Lessee to any abatement, reduction, suspension
or deferment of the Rent or other sums payable by Lessee hereunder, except as
otherwise specifically provided in this Lease. However, nothing shall preclude
Lessee from bringing a separate action and Lessee is not waiving other rights
and remedies not expressly waived herein. The obligations of Lessor and Lessee
hereunder shall be separate and independent covenants and agreements and the
Rent and all other sums payable by Lessee 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. Lessee's agreement that any
eviction by paramount title as described in item (ii) above shall not affect
Lessee's obligations under this Lease shall not in any way discharge or diminish
any obligation of any insurer under any policy of title or other insurance and,
to the extent the recovery thereof is not necessary to compensate Lessor for any
damages incurred by any such eviction, Lessee shall be entitled to a credit for
any sums recovered by Lessor under any such policy of title or other insurance,
and Lessor, upon request by Lessee, shall assign Lessor's rights under such
policies to Lessee provided such assignment does not adversely affect Lessor's
rights under any such policy and provided further that Lessee shall indemnify,
defend, protect and save Lessor harmless from and against any liability, cost or
expense of any kind that may be imposed upon Lessor in connection with any such
assignment.
5.2 Termination with Respect to Fewer than All of the Facilities
---------------------------------------------------------------------
. Wherever in this Lease the action of terminating the Lease with respect
to a Facility (or action of similar import) is discussed, such action shall mean
the termination of Lessee's rights in and to the Leased Property relating to
such Facility. Notwithstanding anything in this Lease to the contrary, if this
Lease shall be terminated by Lessor or Lessee pursuant to rights granted
hereunder with respect to any Facility, such termination shall not affect the
applicable Term of this Lease with respect to the balance of the Facilities not
so terminated by Lessor, and this Lease shall continue in full force and effect
with respect to each other such Facility, except that the total Minimum Rent
payable hereunder shall be reduced by the amount of Allocated Minimum Rent with
respect to such Facility as to which this Lease has so terminated, subject,
however, to Lessor's right, in the event of a termination because of an Event of
Default, to recover damages with respect to any such Facility as to which this
Lease has been terminated as provided in Article XVI.
ARTICLE VI.
- ------------
6.1 Ownership of the Leased Property
------------------------------------
. Lessee acknowledges that the Leased Property is the property of Lessor
and that Lessee has only the right to the exclusive possession and use of the
Leased Property upon the terms and conditions of this Lease. Upon the
expiration or earlier termination of this Lease with respect to any Facility
Lessee shall, at its expense, restore the Leased Property relating to such
Facility to the condition required by Section 9.1.4.
6.2 Personal Property
------------------
. During the Term, Lessee may, as necessary and at its expense, install,
affix or assemble or place on any parcels of the Land or in any of the Leased
Improvements, any items of Lessee's Personal Property and replacements thereof
which shall be the property of and owned by Lessee. Except as provided in
Sections 6.3, 6.10 and 35.4, Lessor shall have no rights to Lessee's Personal
Property. With respect to each Facility, Lessee shall provide and maintain
during the entire Term applicable to such Facility all Personal Property
necessary in order to operate the Facility in compliance with all licensure and
certification requirements, all Legal Requirements and all Insurance
Requirements and for the Primary Intended Use and as required, in Lessee's
prudent business judgment, to meet the needs of residents of the Facility.
6.3 Transfer of Personal Property and Capital Additions to Lessor
---------------------------------------------------------------------
. Upon the expiration or earlier termination of this Lease with respect to
a Facility, Lessee's Personal Property relating to such Facility which does not
provide a new function with respect to Lessor's Personal Property relating to
such Facility shall become the property of Lessor, free of any encumbrance and
Lessee shall execute all documents and take any actions reasonably necessary to
evidence such ownership and discharge any encumbrance.
ARTICLE VII.
- -------------
7.1 Condition of the Leased Property
------------------------------------
. Lessee acknowledges receipt and delivery of possession of the Leased
Property and confirms that Lessee has examined and otherwise has knowledge of
the condition of the Leased Property prior to the execution and delivery of this
Lease and, as of the Original Lease Commencement Date with respect to each
portion of the Leased Property, has found the same to be in good order and
repair, free from Hazardous Substances not in compliance with Legal Requirements
(except as disclosed on the Property Condition Reports) and satisfactory for its
purposes hereunder. Regardless, however, of any examination or inspection made
by Lessee and whether or not any patent or latent defect or condition was
revealed or discovered thereby, Lessee is leasing the Leased Property "as is" in
its present condition. Lessee waives any claim or action against Lessor in
respect of the condition of the Leased Property including any defects or adverse
conditions not discovered or otherwise known by Lessee as of the Original Lease
Commencement Date. LESSOR 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 THE NATURE OR QUALITY OF THE MATERIAL OR WORKMANSHIP
THEREIN, OR THE EXISTENCE OF ANY HAZARDOUS SUBSTANCE, IT BEING AGREED THAT ALL
SUCH RISKS, LATENT OR PATENT, ARE TO BE BORNE SOLELY BY LESSEE INCLUDING ALL
RESPONSIBILITY AND LIABILITY FOR ANY ENVIRONMENTAL REMEDIATION AND COMPLIANCE
WITH ALL ENVIRONMENTAL LAWS.
7.2 Use of the Leased Property.
------------------------------
7.2.1 Lessee covenants that it will obtain and maintain all authorizations
and approvals needed to use and operate the Leased Property and each Facility
for such Facility's respective Primary Intended Use and any other use conducted
on the Leased Property as may be permitted from time to time hereunder in
accordance with Legal Requirements including applicable licenses, provider
agreements, permits, and, if appropriate, Medicare and/or Medicaid
certification.
7.2.2 Lessee shall use or cause to be used the Leased Property and the
improvements thereon of each Facility for its Primary Intended Use. Lessee
shall not use the Leased Property or any portion thereof or any Capital Addition
thereto for any other use without the prior written consent of Lessor, which
consent Lessor may withhold in its sole discretion.
7.2.3 Lessee shall operate continuously the Leased Property and all Capital
Additions of each Facility in accordance with its Primary Intended Use. Lessee
shall devote the entirety of each Facility and all Capital Additions thereto to
the Primary Intended Use, except for areas reasonably required for office or
storage space uses incidental to the Primary Intended Use. Lessee shall not
modify the services offered or take any other action (e.g., removing patients or
residents from any Facility or directing patients or residents, or prospective
patients or residents, to another Facility) which would materially reduce Gross
Revenues. Lessee shall at all times maintain an adequate staff for the service
of its residents and/or patients. Lessee shall employ its best judgment,
efforts and abilities to operate the entirety of each Facility in such a manner
so as to maximize Gross Revenues and to enhance the reputation and
attractiveness of each Facility.
7.2.4 Lessee shall conduct its business at each Facility in conformity with
prudent standards of patient or resident care practice.
7.2.5 Lessee shall not commit or suffer to be committed any waste on the
Leased Property or any Capital Addition thereto or cause or permit any nuisance
thereon.
7.2.6 Lessee shall neither suffer nor permit the Leased Property or any
portion thereof or any Capital Addition thereto financed by Lessor to be used in
such a manner as (i) might reasonably tend to impair Lessor's title thereto or
to any portion thereof or (ii) may make possible a claim of adverse use or
possession, or an implied dedication of the Leased Property or any portion
thereof or any Capital Addition thereto financed by Lessor.
7.2.7 For purposes of computing Incremental Gross Revenues for any Lease
Year or other period during which Lessee is in breach or violation of any of the
covenants set forth in Sections 7.2.1 through 7.2.4, Lessee's Gross Revenues for
such Lease Year or other period shall be deemed to be the greater of (i)
Lessee's Gross Revenues for such Lease Year or other period, or (ii) eighty-five
percent (85%) of the average Gross Revenues for the prior three (3) Lease Years
or any corresponding period of the prior three (3) Lease Years, as applicable,
as determined by Lessor; provided however that during the first three (3) Lease
Years averaging shall take place over the prior Lease Year(s) and corresponding
periods, if any, pursuant to which the Leased Property was operated under any
Original Leases, prior to the Restatement Date.
7.3 Lessor to Grant Easements, etc
----------------------------------
. Lessor shall, from time to time so long as no Event of Default has
occurred and is continuing, at the request of Lessee and at Lessee's cost and
expense, but subject to the approval of Lessor, which approval shall not be
unreasonably withheld or delayed (i) grant easements and other rights in the
nature of easements; (ii) release existing easements or other rights in the
nature of easements which are for the benefit of the Leased Property; (iii)
dedicate or transfer unimproved portions of the Leased Property for road,
highway or other public purposes; (iv) execute petitions to have the Leased
Property annexed to any municipal corporation or utility district; (v) execute
amendments to any covenants, conditions and restrictions affecting the Leased
Property; and (vi) execute and deliver to any Person any instrument appropriate
to confirm or effect such grants, releases, dedications and transfers to the
extent of its interest in the Leased Property, but only upon delivery to Lessor
of an Officer's Certificate stating that such grant release, dedication,
transfer, petition or amendment is not detrimental to the proper conduct of the
business of Lessee on the Leased Property and does not materially reduce the
value of the Leased Property.
7.4 Preservation of Gross Revenues
---------------------------------
. Lessee acknowledges that a fair return to Lessor on its investment in
the Leased Property is dependent, in part, on the concentration on the Leased
Property during the Term of the assisted living business of Lessee and its
Affiliates in the geographical area of the Leased Property. Lessee further
acknowledges that diversion of residents and/or patients, as applicable, from
any Facility to other facilities or institutions owned, operated or managed,
whether directly or indirectly, by Lessee or its Affiliates will have a material
adverse impact on the value and utility of the Leased Property. Accordingly,
Lessor and Lessee agree as follows:
7.4.1 If, during the Term with respect to a Facility, either Lessee or any
of its Affiliates, directly or indirectly, shall operate, own, manage or have
any interest in or otherwise participate in or receive revenues from any other
facility or institution providing services or similar goods to those provided in
connection with any Facility and the Primary Intended Use (which Lessee did
not operate, own, manage or have any interest in on the applicable Original
Lease Commencement Date), within a ten (10) mile radius outward from the outside
boundary of the Leased Property of such Facility, thereafter Percentage Rent
shall be determined using the greater of the actual Gross Revenues for such
Facility in the applicable Lease Year or eighty-five percent (85%) of the
average Gross Revenues for such Facility for the immediately preceding three (3)
Lease Years; provided however that during the first three (3) Lease Years
averaging shall take place over the prior Lease Year(s) and corresponding
periods, if any, pursuant to which the Leased Property was operated under any
Original Leases prior the Restatement Date. All distances shall be measured on
a straight line rather than on a driving distance basis. In the event that any
portion of such other facility or institution is located within such restricted
area the entire facility or institution shall be deemed located within such
restricted area. Notwithstanding the foregoing, the provisions of this Section
7.4.1 shall not apply to Lessee's operation of the facilities and institutions
set forth on Exhibit M attached hereto and incorporated herein.
----------
ARTICLE VIII.
- --------------
8.1 Compliance with Legal and Insurance Requirements, Instruments, etc
------------------------------------------------------------------------
. Subject to Article XII regarding permitted contests, Lessee, at its
expense, shall promptly (i) comply with all Legal Requirements and Insurance
Requirements regarding the use, operation, maintenance, repair and restoration
of the Leased Property, Lessee's Personal Property and all Capital Additions
whether or not compliance therewith may require structural changes in any of the
Leased Improvements or Capital Additions thereto or interfere with the use and
enjoyment of the Leased Property and (ii) procure, maintain and comply with all
licenses, certificates of need, provider agreements (but only to the extent
Lessee, in its prudent business judgment, elects to participate in the Medicare,
Medicaid or other third party payor programs) and other authorizations required
for the use of the Leased Property, Lessee's Personal Property and all Capital
Additions for the applicable Primary Intended Use and any other use of the
Leased Property, Lessee's Personal Property and all Capital Additions then being
made, and for the proper erection, installation, operation and maintenance of
the Leased Property, Lessee's Personal Property and all Capital Additions. In
an emergency or in the event of a breach by Lessee of its obligations hereunder
which is not cured within any applicable cure period, Lessor may, but shall not
be obligated to, enter upon the Leased Property and all Capital Additions
thereto and take such actions and incur such costs and expenses to effect such
compliance as it deems advisable to protect its interest in the Leased Property
and Capital Additions thereto, and Lessee shall reimburse Lessor for all costs
and expenses incurred by Lessor in connection with such actions. Lessee
covenants and agrees that the Leased Property, Lessee's Personal Property and
all Capital Additions shall not be used for any unlawful purpose.
ARTICLE IX.
- ------------
9.1 Maintenance and Repair.
------------------------
9.1.1 Lessee, at its expense, shall maintain the Leased Property, and every
portion thereof, Lessee's Personal Property and all Capital Additions, and all
private roadways, sidewalks and curbs appurtenant to the Leased Property, and
which are under Lessee's control in good order and repair whether or not the
need for such repairs occurs as a result of Lessee's use, any prior use, the
elements or the age of the Leased Property, Lessee's Personal Property and all
Capital Additions, and, with reasonable promptness, make all necessary and
appropriate repairs thereto of every kind and nature, including, without
limitations all repairs described in Section 9.1.6 within the time periods
specified in Section 9.1.6, and those necessary to comply with changes in any
Legal Requirements, whether interior or exterior, structural or non-structural,
ordinary or extraordinary, foreseen or unforeseen or arising by reason of a
condition existing prior to the Restatement Date. All repairs shall be at least
equivalent in quality to the original work. Lessee 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 part thereof or any
Capital Addition thereto for its Primary Intended Use.
9.1.2 Lessor shall not under any circumstances be required to (i) build or
rebuild any improvements on the Leased Property; (ii) make any repairs,
replacements, alterations, restorations or renewals of any nature to the Leased
Property, whether ordinary or extraordinary, structural or non-structural,
foreseen or unforeseen, or to make any expenditure whatsoever with respect
thereto; or (iii) maintain the Leased Property in any way. Lessee hereby
waives, to the extent permitted by law, the right to make repairs at the expense
of Lessor pursuant to any law in effect at the time of the execution of this
Lease or hereafter enacted.
9.1.3 Nothing contained in this Lease and no action or inaction by Lessor
shall be construed as (i) constituting the consent or request of Lessor,
expressed or implied, to any contractor, subcontractor, laborer, materialman or
vendor to or for the performance of any labor or services or the furnishing of
any materials or other property for the construction, alteration, addition,
repair or demolition of or to the Leased Property or any part thereof or any
Capital Addition thereto; or (ii) giving Lessee any right, power or permission
to contract for or permit the performance of any labor or services or the
furnishing of any materials or other property in such fashion as would permit
the making of any claim against Lessor in respect thereof or to make any
agreement that may create, or in any way be the basis for, any right, title,
interest, lien, claim or other encumbrance upon the estate of Lessor in the
Leased Property, or any portion thereof or any Capital Addition thereto.
9.1.4 Unless Lessor shall convey any of the Leased Property to Lessee
pursuant to the provisions of this Lease, Lessee shall, upon the expiration or
earlier termination of the Term with respect to a Facility, vacate and surrender
the Leased Property, Lessor's Personal Property, the portion of Lessee's
Personal Property for which Lessor exercises its option pursuant to Section
35.4, and all Capital Additions in each case with respect to such Facility, to
Lessor in the condition in which such Leased Property and Lessor's Personal
Property were originally received from Lessor and such Lessee's Personal
Property and Capital Additions were originally introduced to such Facility,
except as repaired, rebuilt, restored, altered or added to as permitted or
required by the provisions of this Lease and except for ordinary wear and tear.
9.1.5 Without limiting Lessee's obligations to maintain the Leased Property
under this Lease, within thirty (30) days of the end of each Lease Year with
respect to a Facility, Lessee shall provide Lessor with evidence satisfactory to
Lessor in the reasonable exercise of Lessor's discretion that Lessee has in such
Lease Year spent, with respect to only the Group 1 Facilities and the Group 5
Facility, at least the dollar amount as set forth on Exhibit I attached hereto
---------
per living unit as such amounts are increased by the increase in the Cost of
Living Index from the applicable Original Lease Commencement Date to the first
day of such Lease Year, for repair and maintenance of such Facility excluding
normal janitorial and cleaning. If Lessee fails to make at least the above
amount of expenditures, Lessee shall promptly on demand from Lessor (but in no
event more than five (5) days) pay to Lessor the applicable shortfall in
expenditures. Such funds shall be the sole property of Lessor and Lessor may in
its sole discretion provide such funds to Lessee to correct the shortfall in
expenditures or may simply retain such funds as supplemental Rent hereunder.
9.1.6 Lessee covenants and agrees to commence, complete and perform timely
all obligations of Lessee with respect to the Boise Capital Renovation Project
as set forth in the Boise Work Letter.
9.2 Encroachments, Restrictions, Mineral Leases, etc
----------------------------------------------------
. If any of the Leased Improvements or Capital Additions shall, at any
time, encroach upon any property, street or right-of-way, or shall violate any
restrictive covenant or other agreement affecting the Leased Property, or any
part thereof or any Capital Addition thereto, or shall impair the rights of
others under any easement or right-of-way to which the Leased Property is
subject, or the use of the Leased Property or any Capital Addition thereto is
impaired, limited or interfered with by reason of the exercise of the right of
surface entry or any other provision of a lease or reservation of any oil, gas,
water or other minerals, then promptly upon the request of Lessor or any Person
affected by any such encroachment, violation or impairment, Lessee, at its sole
cost and expense, but subject to its right to contest the existence of any such
encroachment, violation or impairment, shall protect, indemnify, save harmless
and defend Lessor from and against all losses, liabilities, obligations, claims,
damages, penalties, causes of action, costs and expenses (including reasonable
attorneys', consultants' and experts' fees and expenses) based on or arising by
reason of any such encroachment, violation or impairment. In the event of an
adverse final determination with respect to any such encroachment, violation or
impairment, Lessee shall either (i) obtain valid and effective waivers or
settlements of all claims, liabilities and damages resulting from each such
encroachment, violation or impairment, whether the same shall affect Lessor or
Lessee; or (ii) make such changes in the Leased Improvements and any Capital
Addition thereto, and take such other actions, as Lessee in the good faith
exercise of its judgment deems reasonably practicable, to remove such
encroachment or to end such violation or impairment, including, if necessary,
the alteration of any of the Leased Improvements or any Capital Addition
thereto, and in any event take all such actions as may be necessary in order to
be able to continue the operation of the Leased Improvements and any Capital
Addition thereto for the Primary Intended Use substantially in the manner and to
the extent the Leased Improvements and Capital Additions were operated prior to
the assertion of such encroachment, violation or impairment. Lessee's
obligations under this Section 9.2 shall be in addition to and shall in no way
discharge or diminish any obligation of any insurer under any policy of title or
other insurance and, to the extent the recovery thereof is not necessary to
compensate Lessor for any damages incurred by any such encroachment, violation
or impairment, Lessee shall be entitled to a credit for any sums recovered by
Lessor under any such policy of title or other insurance and Lessor, upon
request by Lessee, shall assign Lessor's rights under such policies to Lessee
provided such assignment does not adversely affect Lessor's rights under any
such policy and provided further that Lessee shall indemnify, defend, protect
and save Lessor harmless from and against any liability, cost or expense of any
kind that may be imposed upon Lessor in connection with any such assignment.
Lessor agrees to use reasonable efforts to seek recovery under any policy of
title or other insurance under which Lessor is an insured party for all losses,
liabilities, obligations, claims, damages, penalties, causes of action, costs
and expenses (including reasonable attorneys', consultants' and experts' fees
and expenses) based on or arising by reason of any such encroachment, violation
or impairment as set forth in this Section 9.2; provided, however, that in no
event shall Lessor be obligated to institute any litigation, arbitration or
other legal proceedings in connection therewith.
ARTICLE X.
- -----------
10.1 Construction of Capital Additions to the Leased Property.
---------------------------------------------------------------
10.1.1 Requests.
--------
With respect to each Facility, no Capital Addition shall be made which
would tie in or connect any Leased Improvements with any improvements on
property adjacent to the Land of such Facility without Lessor's approval which
may be withheld in Lessor's sole and absolute discretion. Except as provided
above, Lessee shall, with respect to only the Group 1 Facilities and the Group 3
Facilities, have the right to make a Capital Addition without the consent of
Lessor if the Capital Addition Cost for such Capital Addition project does not
exceed $100,000. All other Capital Additions shall be subject to Lessor's
review and approval which approval shall not be unreasonably withheld. For any
Capital Addition which does not require the approval of Lessor, Lessee shall,
prior to commencing construction of such Capital Addition, provide to Lessor a
written description of such Capital Addition and on an ongoing basis supply
Lessor with related documentation and information as Lessor may reasonably
request. If Lessee desires to make a Capital Addition for which Lessor's
approval is required, Lessee shall submit to Lessor in reasonable detail a
general description of the proposal, the projected cost of construction and such
plans and specifications, permits, licenses, contracts and other information
concerning the proposal as Lessor may reasonably request. Such description
shall indicate the use or uses to which such Capital Addition will be put and
the impact, if any, on current and forecasted gross revenues and operating
income attributable thereto. It shall be reasonable for Lessor to condition its
approval of any Capital Addition upon any or all of the following terms and
conditions:
(a) Such construction shall be effected pursuant to detailed plans and
specifications approved by Lessor;
(b) Such construction shall be conducted under the supervision of a licensed
architect or engineer selected by Lessee and approved by Lessor;
(c) Lessee shall have procured or caused to be procured a performance and
payment bond for the full value of such construction, which such bond shall name
Lessor as an additional obligee and otherwise be in form and substance and
issued by a Person reasonably satisfactory to Lessor; and
(d) Such construction shall not be undertaken unless Lessee demonstrates to
the reasonable satisfaction of Lessor the financial ability to complete the
construction without adversely affecting its cash flow position or financial
viability.
10.2 Construction Requirements for all Capital Additions
--------------------------------------------------------
. Whether or not Lessor's review and approval is required, for all Capital
Additions:
(a) Such construction shall not be commenced until Lessee shall have
procured and paid for all municipal and other governmental permits and
authorizations required therefor, and Lessor shall join in the application for
such permits or authorizations whenever such action is necessary; provided,
however, that (i) any such joinder shall be at no cost or expense to Lessor; and
(ii) any plans required to be filed in connection with any such application
which require the approval of Lessor as hereinabove provided shall have been so
approved by Lessor;
(b) Such construction shall not, and Lessee's licensed architect or engineer
shall certify to Lessor that such construction shall not, impair the structural
strength of any component of the applicable Facility or overburden the
electrical, water, plumbing, HVAC or other building systems of any such
component;
(c) Lessee's licensed architect or engineer shall certify to Lessor that the
detailed plans and specifications conform to and comply with all applicable
building, subdivision and zoning codes, laws, ordinances and regulations imposed
by all governmental authorities having jurisdiction over the Leased Property of
the applicable Facility;
(d) Such construction shall, when completed, be of such a character as not
to decrease the value of the Leased Property as it was immediately before such
Capital Addition;
(e) During and following completion of such construction, the parking which
is located in the applicable Facility or on the Land of such Facility shall
remain adequate for the operation of such Facility for its Primary Intended Use
and in no event shall such parking be less than that which was or is required by
law or which was located in such Facility or on the Land prior to such
construction; provided, however, with Lessor's prior consent and at no
additional expense to Lessor, (i) to the extent additional parking is not
already a part of a Capital Addition, Lessee may construct additional parking on
the Land; or (ii) Lessee may acquire off-site parking to serve such Facility as
long as such parking shall be dedicated to, or otherwise made available to
serve, such Facility;
(f) All work done in connection with such construction shall be done
promptly and in a good and workmanlike manner using first-class materials and in
conformity with all Legal Requirements; and
(g) Promptly following the completion of such construction, Lessee shall
deliver to Lessor "as built" drawings of such addition, certified as accurate by
the licensed architect or engineer selected by Lessee to supervise such work,
and copies of any new or revised Certificates of Occupancy.
10.3 Funding by Lessor.
-------------------
10.3.1 Lessee may request that Lessor fund a Capital Addition, in which case
Lessee shall provide to Lessor any information about such Capital Addition
which Lessor may reasonably request. Lessor may, but shall be under no
obligation to, provide the funds necessary to meet the request. Within thirty
(30) days of receipt of a request to fund a proposed Capital Addition, Lessor
shall notify Lessee as to whether it will fund the proposed Capital Addition
and, if so, the terms and conditions upon which it would do so, including the
terms of any amendment to this Lease. Lessee shall have ten (10) days to accept
or reject Lessor's funding proposal. In no event shall the portion of the
projected Capital Addition Cost comprised of land, if any, materials, labor
charges and fixtures be less than ninety percent (90%) of the total amount of
the projected cost of such Capital Addition.
10.3.2 If Lessor agrees to fund a proposed Capital Addition and Lessee
accepts the terms thereof, Lessee shall provide Lessor with the following prior
to any advance of funds:
(a) any information, certificates, licenses, permits or documents requested
by Lessor which are necessary and obtainable to confirm that Lessee will be able
to use the Capital Addition upon completion thereof in accordance with the
Primary Intended Use, including all required federal, state or local government
licenses and approvals;
(b) an Officer's Certificate and, if requested, a certificate from Lessee's
architect, setting forth in reasonable detail the projected or actual Capital
Addition Costs;
(c) an amendment to this Lease, in a form prepared by Lessor and reasonably
agreed to by Lessee, providing for an increase in the Rent in amounts as agreed
upon by the parties hereto and other provisions as may be necessary or
appropriate;
(d) a deed conveying title to Lessor to any land acquired for the purpose of
constructing the Capital Addition free and clear of any liens or encumbrances
except those approved by Lessor, and accompanied by an ALTA survey thereof
satisfactory to Lessor;
(e) for each advance, endorsements to any outstanding policy of title
insurance covering the Leased Property or commitments therefor satisfactory in
form and substance to Lessor (i) updating the same without any additional
exception except as may be approved by Lessor and (ii) increasing the coverage
thereof by an amount equal to the Fair Market Value of the Capital Addition,
except to the extent covered by the owner's policy of title insurance referred
to in subparagraph (f), below;
(f) if appropriate, an owner's policy of title insurance insuring fee simple
title to any land conveyed to Lessor free and clear of all liens and
encumbrances except those that do not materially affect the value of such land
and do not interfere with the use of the Leased Property or are approved by
Lessor;
(g) if requested by Lessor, a M.A.I. appraisal of the Leased Property
indicating that the Fair Market Value of the Leased Property upon completion of
the Capital Addition will exceed the Fair Market Value of the Leased Property
immediately prior thereto by an amount not less than ninety-five percent (95%)
of the cost of the Capital Addition; and
(h) such other billing statements, invoices, certificates, endorsements,
opinions, site assessments, surveys, resolutions, ratifications, lien releases
and waivers and other instruments and information reasonably required by Lessor.
10.4 Capital Additions Financed by Lessee
----------------------------------------
. If Lessee provides or arranges such financing, this Lease shall be and
hereby is amended to provide as follows:
(a) Upon completion of any Capital Addition, Gross Revenues attributable to
any Capital Additions financed by Lessee shall be excluded from Gross Revenues
of the Leased Property of the applicable Facility for purposes of calculating
Percentage Rent. The Gross Revenues attributable to such Capital Addition and
all other Capital Additions, if any, financed by Lessee, shall be deemed to be
an amount which bears the same proportion to the total Gross Revenues from the
entire Leased Property (including all Capital Additions) of such Facility as the
Fair Market Added Value of all said Capital Additions to such Facility
financed by Lessee bears to the Fair Market Value of the entire Leased Property
(including all Capital Additions) immediately after completion of said Capital
Addition. The above referenced proportion of the Fair Market Added Value of
Capital Additions to a Facility paid for by Lessee to the Fair Market Value of
the entire Leased Property of such Facility expressed as a percentage is
referred to herein as the "Added Value Percentage" for such Facility. The Added
Value Percentage determined as provided above for Capital Additions financed by
Lessee with respect to a Facility shall remain in effect for such Facility until
any subsequent Capital Addition to such Facility with respect to a Facility
financed by Lessee is completed.
(b) There shall be no adjustment in the Minimum Rent or CPI Rent by reason
of any such Capital Addition.
(c) Upon the expiration or earlier termination of this Lease with respect to
a Facility, except by reason of the default by Lessee hereunder, Lessor shall
compensate Lessee for all Capital Additions financed by Lessee with respect to
such Facility:
(i) By purchasing such Capital Additions from Lessee for cash in the amount
of the then Fair Market Added Value of such Capital Additions; or
(ii) By such other arrangement regarding such compensation as shall be
mutually and reasonably acceptable to Lessor and Lessee.
ARTICLE XI.
- ------------
11.1 Liens
-----
. Subject to the provisions of Article XII relating to permitted contests,
Lessee will not directly or indirectly create or allow to remain and will
promptly discharge at its expense any lien, encumbrance, attachment, title
retention agreement or claim upon the Leased Property or any Capital Addition
thereto or any attachment, levy, claim or encumbrance in respect of the Rent,
excluding, however, (i) this Lease; (ii) except with respect to the Facilities
located in Walla Walla, Washington, Odessa, Texas, Boise, Idaho, and El Paso,
Texas (Cambria), the matters that existed as of the Original Lease Commencement
Date with respect to such Facility; (iii) restrictions, liens and other
encumbrances which are consented to in writing by Lessor, or any easements
granted pursuant to the provisions of Section 7.3; (iv) liens for Impositions
which Lessee is not required to pay hereunder; (v) subleases permitted by
Article XXIV; (vi) liens for Impositions not yet delinquent; (vii) liens of
mechanics, laborers, materialmen, suppliers or vendors for sums either disputed
or not yet due, provided that (1) the payment of such sums shall not be
postponed under any related contract for more than sixty (60) days after the
completion of the action giving rise to such lien and such reserve or other
appropriate provisions as shall be required by law or GAAP shall have been made
therefor or (2) any such liens are in the process of being contested as
permitted by Article XII; (viii) any liens which are the responsibility of
Lessor pursuant to the provisions of Article XXXVI; and (ix) liens related to
equipment leases for equipment which is used or useful in Lessee's business on
the Leased Property, provided that the payment of any sums due under such
equipment leases shall either (1) be paid as and when due in accordance with the
terms thereof, or (2) be in the process of being contested as permitted by
Article XII.
ARTICLE XII.
- -------------
12.1 Permitted Contests
-------------------
. Lessee, upon prior written notice to Lessor, on its own or in Lessor's
name, at Lessee's expense, may contest, by appropriate legal proceedings
conducted in good faith and with due diligence, the amount, validity or
application, in whole or in part, of any licensure or certification decision,
Imposition, Legal Requirement, Insurance Requirement, lien, attachment, levy,
encumbrance, charge or claim; provided, however, that (i) in the case of an
unpaid Imposition, lien, attachment, levy, encumbrance, charge or claim, the
commencement and continuation of such proceedings shall suspend the collection
thereof from Lessor and from the Leased Property or any Capital Addition
thereto; (ii) neither the Leased Property or any Capital Addition thereto, the
Rent therefrom nor any part or interest in either thereof would be in any danger
of being sold, forfeited, attached or lost pending the outcome of such
proceedings; (iii) in the case of a Legal Requirement, neither Lessor nor Lessee
would be in any danger of civil or criminal liability for failure to comply
therewith pending the outcome of such proceedings; (iv) if any such contest
shall involve a sum of money or potential loss in excess of Fifty Thousand
Dollars ($50,000), Lessee shall deliver to Lessor and its counsel an opinion of
legal counsel reasonably acceptable to Lessor to the effect set forth in clauses
(i), (ii) and (iii) above, to the extent applicable; (v) in the case of a Legal
Requirement, Imposition, lien, encumbrance or charge, Lessee shall give such
reasonable security as may be required by Lessor to insure ultimate payment of
the same and to prevent any sale or forfeiture of the Leased Property or any
Capital Addition thereto or the Rent by reason of such non-payment or
noncompliance; (vi) in the case of an Insurance Requirement, the coverage
required by Article XIII shall be maintained; and (vii) if such contest be
finally resolved against Lessor or Lessee, Lessee shall 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.
Lessor, at Lessee's expense, shall execute and deliver to Lessee such
authorizations and other documents as may reasonably be required in any such
contest, and, if reasonably requested by Lessee or if Lessor so desires, Lessor
shall join as a party therein. The provisions of this Article XII shall not be
construed to permit Lessee to contest the payment of Rent or any other amount
(other than Impositions or Additional Charges which Lessee may from time to time
be required to impound with Lessor) payable by Lessee to Lessor hereunder.
Lessee shall indemnify, defend, protect and save Lessor harmless from and
against any liability, cost or expense of any kind that may be imposed upon
Lessor in connection with any such contest and any loss resulting therefrom.
ARTICLE XIII.
- --------------
13.1 General Insurance Requirements
--------------------------------
. During the Term, Lessee shall at all times keep the Leased Property, and
all property located in or on the Leased Property, including Capital Additions,
the Fixtures and the Personal Property, insured with the kinds and amounts of
insurance described below. Each element of insurance described in this Article
shall be maintained with respect to the Leased Property of each Facility and the
Personal Property and operations thereon. This insurance shall be written by
companies authorized to do insurance business in the State in which the Leased
Property is located. All liability type policies must name Lessor as an
"additional insured." All property policies shall name Lessor as "loss payee."
All business interruption policies shall name Lessor as "loss payee" with
respect to Rent only. Losses shall be payable to Lessor and/or Lessee as
provided in Article XIV. In addition, the policies, as appropriate, shall name
as an "additional insured" or "loss payee" the holder of any mortgage, deed of
trust or other security agreement ("Facility Mortgagee") securing any
indebtedness or any other Encumbrance placed on the Leased Property in
accordance with the provisions of Article XXXVI ("Facility Mortgage") by way of
a standard form of mortgagee's loss payable endorsement. Any loss adjustment
shall require the written consent of Lessor, Lessee, and each Facility Mortgagee
unless the amount of the loss is less than $10,000 in which event no consent
shall be required. Evidence of insurance shall be deposited with Lessor and, if
requested, with any Facility Mortgagee(s). If any provision of any Facility
Mortgage requires deposits of insurance to be made with such Facility Mortgagee,
Lessee shall either pay to Lessor monthly the amounts required and Lessor shall
transfer such amounts to each Facility Mortgagee, or, pursuant to written
direction by Lessor, Lessee shall make such deposits directly with such Facility
Mortgagee. The policies shall insure against the following risks with respect
to each Facility:
13.1.1 Loss or damage by fire, vandalism and malicious mischief, extended
coverage perils commonly known as special form perils, earthquake (including
earth movement) and windstorm in an amount not less than the insurable value on
a replacement cost basis (as defined below in Section 13.2) and including a
building ordinance coverage endorsement;
13.1.2 Loss or damage by explosion of steam boilers, pressure vessels or
similar apparatus, now or hereafter installed in each Facility, in such limits
with respect to any one accident as may be reasonably requested by Lessor from
time to time;
13.1.3 Flood (when the Leased Property of a Facility is located in whole or
in part within a designated 100-year flood plain area) and such other hazards
and in such amounts as may be customary for comparable properties in the area;
13.1.4 Loss of rental value in an amount not less than twelve (12) months'
Rent payable hereunder or business interruption in an amount not less than
twelve (12) months of income and normal operating expenses including payroll and
Rent payable hereunder with an endorsement extending the period of indemnity by
at least ninety (90) days (Building Ordinance - Increased Period of Restoration
Endorsement) necessitated by the occurrence of any of the hazards described in
Sections 13.1.1, 13.1.2 or 13.1.3;
13.1.5 Claims for personal injury or property damage under a policy of
comprehensive general public liability insurance with amounts not less than One
Million and No/100 Dollars ($1,000,000.00) combined single limit and Three
Million No/100 Dollars ($3,000,000.00) in the annual aggregate, with respect to
each Facility; and
13.1.6 Medical professional liability with amounts not less than One Million
Dollars ($1,000,000) combined single limit and Three Million Dollars
($3,000,000) in the annual aggregate, with respect to each Facility.
13.2 Replacement Cost
-----------------
. The term "replacement cost" shall mean the actual replacement cost of
the insured property from time to time with new materials and workmanship of
like kind and quality. If either party believes that the replacement cost has
increased or decreased at any time during the Term, it shall have the right to
have such replacement cost redetermined by an impartial national insurance
company reasonably acceptable to both parties (the "impartial appraiser"). The
party desiring to have the replacement cost so redetermined shall forthwith, on
receipt of such determination by the impartial appraiser, give written notice
thereof to the other party hereto. The determination of the impartial appraiser
shall be final and binding on the parties hereto, and Lessee shall forthwith
increase or decrease the amount of the insurance carried pursuant to this
Article to the amount so determined by the impartial appraiser. Each party
shall pay one-half (1/2) of the fee, if any, of the impartial appraiser. If
Lessee has made improvements to the Leased Property, Lessor may at Lessee's
expense have the replacement cost redetermined at any time after such
improvements are made, regardless of when the replacement cost was last
determined.
13.3 Additional Insurance
---------------------
. In addition to the insurance described above, Lessee shall maintain such
additional insurance upon notice from Lessor as may be reasonably required from
time to time by any Facility Mortgagee and shall further at all times maintain
adequate workers' compensation coverage and any other coverage required by Legal
Requirements for all Persons employed by Lessee on the Leased Property and any
Capital Addition thereto in accordance with Legal Requirements.
13.4 Waiver of Subrogation
-----------------------
. All insurance policies carried by either party covering the Leased
Property and any Capital Addition thereto and Lessee's Personal Property
including contents, fire and casualty insurance, shall expressly waive any right
of subrogation on the part of the insurer against the other party. The parties
hereto agree that their policies will include such waiver clause or endorsement
so long as the same are obtainable without extra cost, and in the event of such
an extra charge the other party, at its election, may pay the same, but shall
not be obligated to do so. Each party waives any claims it has against the
other party to the extent such claim is covered by insurance.
13.5 Policy Requirements
--------------------
. All of the policies of insurance referred to in this Article shall be
written in form satisfactory to Lessor and by insurance companies with a
policyholder rating of "A" and a financial rating of "X" in the most recent
version of Best's Key Rating Guide. Lessee shall pay all of the premiums
therefor, and deliver such policies or certificates thereof to Lessor prior to
their effective date (and with respect to any renewal policy, at least ten (10)
days prior to the expiration of the existing policy), and in the event of the
failure of Lessee either to effect such insurance in the names herein called for
or to pay the premiums therefor, or to deliver such policies or certificates
thereof to Lessor, at the times required, Lessor shall be entitled, but shall
have no obligation, to effect such insurance and pay the premiums therefor, in
which event the cost thereof, together with interest thereon at the Overdue
Rate, shall be repayable to Lessor upon demand therefor. Each insurer shall
agree, by endorsement on the policy or policies issued by it, or by independent
instrument furnished to Lessor, that it will give to Lessor ten (10) days'
written notice before the policy or policies in question shall be altered,
allowed to expire or cancelled. Each property policy shall have a deductible or
deductibles, if any, which are no greater than $5,000, unless such requirement
is specifically waived by Lessor. Each earthquake policy shall have a
deductible of ten percent of real property, personal property and rental value
limit at the subject location, unless such requirement is specifically waived by
Lessor.
13.6 Increase in Limits
--------------------
. If either party shall at any time believe the limits of the insurance
required hereunder to be either excessive or insufficient, the parties shall
endeavor to agree in writing on the proper and reasonable limits for such
insurance to be carried and such insurance shall thereafter be carried with the
limits thus agreed on until further change pursuant to the provisions of this
Section. If the parties shall be unable to agree thereon, the proper and
reasonable limits for such insurance to be carried shall be determined by an
impartial third party reasonably selected by the parties. Nothing herein shall
permit the amount of insurance to be reduced below the amount or amounts
required by any Facility Mortgagee.
13.7 Blanket Policies and Policies Covering Multiple Locations
---------------------------------------------------------------
. Notwithstanding anything to the contrary contained in this Article,
Lessee's obligations to carry the insurance provided for herein may be brought
within the coverage of a blanket policy or policies of insurance carried and
maintained by Lessee; provided, however, that the coverage afforded Lessor will
not be reduced or diminished or otherwise be different from that which would
exist under a separate policy for each Facility meeting all other requirements
of this Lease by reason of the use of such blanket policy of insurance, and
provided further that the requirements of this Article XIII are otherwise
satisfied. For any liability policies covering one or more of the Facilities or
any other facilities in addition to the Facilities, Lessor may require excess
limits as Lessor reasonably determines.
13.8 No Separate Insurance
-----------------------
. Lessee shall not, on Lessee's own initiative or pursuant to the request
or requirement of any third party, (i) take out separate insurance concurrent in
form or contributing in the event of loss with that required in this Article to
be furnished by, or which may reasonably be required to be furnished by, Lessee
or (ii) 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 in all cases Lessor
and all Facility Mortgagees, are included therein as additional insureds and the
loss is payable under such insurance in the same manner as losses are payable
under this Lease. Lessee shall immediately notify Lessor of the taking out of
any such separate insurance or of the increasing of any of the amounts of the
then existing insurance by securing an additional policy or additional policies.
ARTICLE XIV.
- -------------
14.1 Insurance Proceeds
-------------------
. All proceeds payable by reason of any loss or damage to the Leased
Property, or any portion thereof, under any policy of insurance required to be
carried hereunder shall be paid to Lessor and made available by Lessor to Lessee
from time to time for the reasonable costs of reconstruction or repair, as the
case may be, of any damage to or destruction of the Leased Property, or any
portion thereof; provided, however, that if the total amount of proceeds payable
is $10,000 or less, the proceeds shall be paid to Lessee and used for the repair
of any damage to the Leased Property. Any excess proceeds of insurance
remaining after the completion of the restoration or reconstruction of the
Leased Property to substantially the same condition as existed immediately
before the damage or destruction and with materials and workmanship of like kind
and quality and to Lessor's reasonable satisfaction shall be remitted by Lessor
to Lessee free and clear upon completion of any such repair and restoration
except as otherwise specifically provided below in this Article XIV. In the
event neither Lessor nor Lessee is required or elects to repair and restore the
Leased Property, all such insurance proceeds shall be retained by Lessor free
and clear except as otherwise specifically provided below in this Article XIV.
All salvage resulting from any risk covered by insurance shall belong to Lessor.
14.2 Insured Casualty.
-----------------
14.2.1 If the Leased Property and/or any Capital Additions of a Facility are
damaged or destroyed from a risk covered by insurance carried by Lessee
such that such Facility thereby is rendered Unsuitable for its Primary Intended
Use, Lessee shall either (i) restore such Leased Property to substantially the
same condition as existed immediately before such damage or destruction, or (ii)
offer to acquire the Leased Property of such Facility from Lessor for a purchase
price equal to the greater of (y) the Minimum Repurchase Price or (z) the Fair
Market Value immediately prior to such damage or destruction. If Lessor does
not accept Lessee's offer to so purchase the Leased Property of such Facility,
Lessee may either withdraw such offer and proceed to restore the Leased Property
of such Facility to substantially the same condition as existed immediately
before such damage or destruction or terminate the Lease in which event Lessor
shall be entitled to retain the insurance proceeds.
14.2.2 If the Leased Property and/or any Capital Additions of a Facility are
damaged from a risk covered by insurance carried by Lessee, but such Facility is
not thereby rendered Unsuitable for its Primary Intended Use, Lessee shall
restore such Leased Property to substantially the same condition as existed
immediately before such damage. Such damage shall not terminate this Lease;
provided, however, that if Lessee cannot within a reasonable time after diligent
efforts obtain the necessary government approvals needed to restore and operate
such Facility for its Primary Intended Use, Lessee may offer to purchase the
Leased Property of such Facility for a purchase price equal to the greater of
the Minimum Repurchase Price of such Facility or the Fair Market Value of such
Facility immediately prior to such damage. If Lessee shall make such offer and
Lessor does not accept the same, Lessee may either withdraw such offer and
proceed to restore the Leased Property of such Facility to substantially the
same condition as existed immediately before such damage or destruction, or
terminate the Lease with respect to such Facility, in which event Lessor shall
be entitled to retain the insurance proceeds.
14.2.3 If the cost of the repair or restoration exceeds the amount of
proceeds received by Lessor from the insurance required to be carried hereunder,
Lessee shall contribute any excess amounts needed to restore such Facility.
Such difference shall be paid by Lessee to Lessor together with any other
insurance proceeds, for application to the cost of repair and restoration.
14.2.4 If Lessor accepts Lessee's offer to purchase the Leased Property of a
Facility, this Lease shall terminate as to such Facility upon payment of the
purchase price and Lessor shall remit to Lessee all insurance proceeds
pertaining to the Leased Property of such Facility, including insurance proceeds
pertaining to Capital Additions and Lessee's Personal Property, then held by
Lessor.
14.3 Uninsured Casualty
-------------------
. If the Leased Property of a Facility is damaged or destroyed from a risk
not covered by insurance carried by Lessee, whether or not such damage or
destruction renders such Facility Unsuitable for its Primary Intended Use,
Lessee at its expense shall restore the Leased Property of such Facility to
substantially the same condition it was in immediately before such damage or
destruction and such damage or destruction shall not terminate this Lease;
provided, however, that if Lessee cannot within a reasonable time after diligent
efforts obtain the necessary government approvals needed to restore and operate
the Facility for its Primary Intended Use, Lessee shall purchase the Leased
Property of such Facility for a purchase price equal to the greater of the
Minimum Repurchase Price or the Fair Market Value immediately prior to such
damage.
14.4 No Abatement of Rent
-----------------------
. This Lease shall remain in full force and effect and Lessee's obligation
to pay the Rent and all other charges required by this Lease shall remain
unabated during the period required for adjusting insurance, satisfying Legal
Requirements, repair and restoration.
14.5 Waiver
------
. Lessee waives any statutory rights of termination which may arise by
reason of any damage or destruction of the Leased Property.
14.6 Damage Near End of Term
---------------------------
. If the damage or destruction contemplated hereunder occurs during the
last year of the Fixed Term or any Extended Term, as applicable, of the
applicable Facility and Lessee terminates any options it might then have to
purchase the Leased Property or extend the Term of this Lease with respect to
such Facility, Lessee may, in lieu of repairing and restoring the Leased
Property as contemplated hereunder, terminate this Lease with respect to such
Facility, effective as of the date of payment to Lessor of the greater of (a)
the insurance proceeds attributable to such damage or destruction and (b) the
cost to repair such damage or destruction as reasonably estimated by Lessor.
ARTICLE XV.
- ------------
15.1 Condemnation.
------------
15.1.1 Total Taking
-------------
. If the Leased Property of a Facility is totally and permanently taken by
Condemnation, this Lease shall terminate with respect to such Facility as of the
day before the Date of Taking for such Facility.
15.1.2 Partial Taking
---------------
. If a portion of the Leased Property of a Facility is taken by
Condemnation, this Lease shall remain in effect if the affected Facility is not
thereby rendered Unsuitable for Its Primary Intended Use, but if such Facility
is thereby rendered Unsuitable for its Primary Intended Use, this Lease shall
terminate with respect to such Facility as of the day before the Date of Taking
for such Facility.
15.1.3 Restoration
-----------
. If there is a partial taking of the Leased Property and this Lease
remains in full force and effect pursuant to Section 15.2, Lessor shall make
available to Lessee the portion of the Award necessary and specifically
identified for restoration of the Leased Property and Lessee shall accomplish
all necessary restoration whether or not the amount provided by the condemnor
for restoration is sufficient.
15.2 Award-Distribution
------------------
. The entire Award shall belong to and be paid to Lessor, except that,
subject to the rights of the Facility Mortgagees, Lessee shall be entitled to
receive from the Award, if and to the extent such Award specifically includes
such item, lost profits value and moving expenses, provided, that in any event
Lessor shall receive from the Award, subject to the rights of the Facility
Mortgagees, no less than the greater of the Fair Market Value of the applicable
Facility prior to the institution of the Condemnation or the Minimum Repurchase
Price of the applicable Facility.
15.3 Temporary Taking
-----------------
. The taking of the Leased Property, or any part thereof, shall constitute
a taking by Condemnation only when the use and occupancy by the taking authority
has continued for longer than 180 consecutive days. During any shorter period,
which shall be a temporary taking, all the provisions of this Lease shall remain
in full force and effect and the Award allocable to the Term shall be paid to
Lessee.
ARTICLE XVI.
- -------------
16.1 Events of Default
-------------------
. Any one or more of the following shall constitute an "Event of Default":
(a) a default shall occur under any other lease or agreement between Lessor
or an Affiliate of Lessor and Lessee or an Affiliate of Lessee, or any letter of
credit, guaranty, mortgage, deed of trust, or other instrument executed by
Lessee or an Affiliate of Lessee in favor of Lessor or an Affiliate of Lessor,
in every case, whether now or hereafter existing, where the default is not cured
within any applicable grace period set forth therein;
(b) Lessee shall fail to pay any installment of Rent when the same becomes
due and payable and such failure is not cured by Lessee within a period of five
(5) days after notice thereof from Lessor; provided, however, that such notice
shall be in lieu of and not in addition to any notice required under applicable
law;
(c) Lessee shall fail to obtain a letter of credit or deposit the Cash
Security Deposit as required by Article XXI;
(d) if Lessee shall fail to observe or perform any other term, covenant or
condition of this Lease and such failure is not cured by Lessee within thirty
(30) days after notice thereof from Lessor, unless such failure cannot with due
diligence be cured within a period of thirty (30) days, in which case such
failure shall not be deemed to be an Event of Default if Lessee proceeds
promptly and with due diligence to cure the failure and diligently completes the
curing thereof; provided, however, that such notice shall be in lieu of and not
in addition to any notice required under applicable law;
(e) Lessee or any Guarantor shall:
(i) admit in writing its inability to pay its debts generally as they become
due,
(ii) file a petition in bankruptcy or a petition to take advantage of any
insolvency act,
(iii) make an assignment for the benefit of its creditors,
(iv) consent to the appointment of a receiver of itself or of the whole or
any substantial part of its property, or
(v) file a petition or answer seeking reorganization or arrangement under
the Federal bankruptcy laws or any other applicable law or statute of the United
States of America or any state thereof;
(f) Lessee or any Guarantor shall be adjudicated as bankrupt or a court of
competent jurisdiction shall enter an order or decree appointing, without the
consent of Lessee, a receiver of Lessee or of the whole or substantially all of
its property, or approving a petition filed against it seeking reorganization or
arrangement of Lessee under the Federal bankruptcy laws or any other
applicable law or statute of the United States of America or any state thereof,
and such judgment, order or decree shall not be vacated or set aside or stayed
within sixty (60) days from the date of the entry thereof;
(g) Lessee or any Guarantor shall be liquidated or dissolved, or shall begin
proceedings toward such liquidation or dissolution, or shall, in any manner,
permit the sale or divestiture of substantially all its assets;
(h) the estate or interest of Lessee in the Leased Property or any part
thereof shall be levied upon or attached in any proceeding and the same shall
not be vacated or discharged within the later of ninety (90) days after
commencement thereof or thirty (30) days after receipt by Lessee of notice
thereof from Lessor; provided, however, that such notice shall be in lieu of and
not in addition to any notice required under applicable law;
(i) except as a result of damage, destruction or Condemnation, Lessee
voluntarily ceases operations on the Leased Property for a period in excess of
thirty (30) days;
(j) any of the representations or warranties made by Lessee in the Guaranty
or otherwise proves to be untrue when made in any material respect which
materially and adversely affects Lessor;
(k) any applicable license or third-party provider reimbursement agreements
material to a Facility's operation for its Primary Intended Use are at any time
terminated or revoked or suspended for more than twenty (20) days;
(l) any local, state or federal agency having jurisdiction over the
operation of any Facility removes ten percent (10%) or more of the patients or
residents located in such Facility;
(m) Lessee voluntarily transfers ten (10) or more patients located in the
Facility to any other facility in which Lessee or any Affiliate of Lessee has
any ownership or other financial interest, including, without limitation, fees
earned under any management agreement, provided that Lessee's transfer of any
patient to a different type of care facility as a result of such patient's
special needs that cannot be met at such Facility shall not be deemed a
voluntary transfer;
(n) Lessee fails to give notice to Lessor not later than ten (10) days after
any notice, claim or demand from any governmental authority or any officer
acting on behalf thereof, of any violation of any law, order, ordinance, rule or
regulation with respect to the operation of any Facility;
(o) Lessee fails to notify Lessor within twenty-four (24) hours after
receipt of any notice from any governmental agency terminating or suspending or
threatening termination or suspension, of any material license or certification
relating to any Facility;
(p) Lessee fails to cure or abate any violation occurring during the Term of
a Facility that is claimed by any governmental authority, or any officer acting
on behalf thereof, of any law, order, ordinance, rule or regulation pertaining
to the operation of such Facility, and within the time permitted by such
authority for such cure or abatement;
(q) any proceedings are instituted against Lessee by any governmental
authority which are reasonably likely to result in (i) the revocation of any
license granted to Lessee for the operation of any Facility, (ii) if applicable,
the decertification of any Facility from participation in the Medicare or
Medicaid reimbursement program, or (iii) the issuance of a stop placement order
with respect to any Facility;
(r) any default and acceleration of any recourse funded indebtedness of
Lessee or any recourse funded indebtedness of any Affiliate of Lessee has
occurred, and such funded indebtedness has an unpaid principal balance of
$1,000,000 or more or such default and acceleration could reasonably be expected
to have a material adverse impact on the financial condition or operations of
Lessee or any Guarantor; and
(s) any default which is not cured within any applicable cure period shall
occur under any guaranty of Lessee's or an Affiliate of Lessee's obligations to
Lessor or an Affiliate of Lessor, in every case, whether such guaranty is now or
hereafter existing.
16.2 Certain Remedies
-----------------
. If an Event of Default shall have occurred, Lessor may terminate this
Lease with respect to the Facility from which such Event of Default emanated, if
any, and any one or more (including all, if so elected by Lessor) of the
Facilities, regardless of whether such Event of Default emanated primarily from
a single Facility, by giving Lessee notice of such termination and the Term
shall terminate and all rights of Lessee under this Lease shall cease with
respect to all such Facilities as to which Lessor has elected to so terminate
this Lease. Notwithstanding the foregoing, an Event of Default shall not be
deemed to emanate from a particular Facility or group of Facilities if such
Event of Default is of a monetary nature or is described in subparagraphs (b),
(c), (e), (f), (g), (h), (j), (r) and (s) of Section 16.1 above. Lessor shall
have all rights at law and in equity available to Lessor as a result of any
Event of Default. Lessee shall pay as Additional Charges all costs and expenses
incurred by or on behalf of Lessor, including reasonable attorneys' fees and
expenses, as a result of any Event of Default hereunder. If an Event of Default
shall have occurred and be continuing, whether or not this Lease has been
terminated with respect to any one or more (including all, if so elected by
Lessor) of the Facilities pursuant to Section 16. 1, Lessee shall, to the extent
permitted by law, if required by Lessor so to do, immediately surrender to
Lessor possession of the Leased Property and any Capital Additions of the
Facilities as to which Lessor has so elected to terminate this Lease and quit
the same and Lessor may enter upon and repossess such Leased Property and such
Capital Addition thereto by reasonable force, summary proceedings, ejectment or
otherwise, and, to the extent permitted by law, may remove Lessee and all other
Persons (other than the residents of each Facility) and any of Lessee's Personal
Property from such Leased Property and such Capital Addition thereto.
16.3 Damages
-------
. (i) The termination of this Lease with respect to any one or more of the
Facilities; (ii) the repossession of the Leased Property and any Capital
Additions of any Facility; (iii) the failure of Lessor, notwithstanding
reasonable good faith efforts, to relet the Leased Property or any portion
thereof; (iv) the reletting of all or any portion of the Leased Property; or (v)
the inability of Lessor to collect or receive any rentals due upon any such
reletting, shall not relieve Lessee of its liabilities and obligations
hereunder, all of which shall survive any such termination, repossession or
reletting. If any such termination occurs, Lessee shall forthwith pay to Lessor
all Rent due and payable with respect to the Facility terminated to and
including the date of such termination. Thereafter:
Lessee shall forthwith pay to Lessor, at Lessor's option, as and for liquidated
and agreed current damages for Lessee's Default, either:
(A) the sum of:
(i) the worth at the time of award of the unpaid Rent which had been earned
at the time of termination with respect to the terminated Facility to the extent
not previously paid by Lessee under this Section 16.3,
(ii) the worth at the time of award of the amount by which the unpaid Rent
which would have been earned after termination with respect to the terminated
Facility until the time of award exceeds the amount of such rental loss that
Lessee proves could have been reasonably avoided,
(iii) the worth at the time of award of the amount by which the unpaid Rent
for the balance of the Term after the time of award exceeds the amount of such
rental loss that Lessee proves could be reasonably avoided, plus
(iv) any other amount necessary to compensate Lessor for all the detriment
proximately caused by Lessee's failure to perform its obligations under this
Lease or which in the ordinary course of things would be likely to result
therefrom.
As used in clauses (i) and (ii) above, the "worth at the time of award" shall be
computed by allowing interest at the Overdue Rate. As used in clause (iii)
above, the "worth at the time of award" shall be computed by discounting such
amount at the discount rate of the Federal Reserve Bank of San Francisco at the
time of award plus one percent (1 %). For purposes of determining the worth at
the time of the award, Additional Rent that would have been payable for the
remainder of the Term shall be deemed to be the greater of (y) the same as the
Additional Rent for the then current Lease Year or, if not determinable, the
immediately preceding Lease Year; and (z) such other amount as Lessor shall
demonstrate could reasonably have been earned.
or (B)
without termination of Lessee's right to possession of the Leased Property, each
installment of said Rent and other sums payable by Lessee to Lessor under the
Lease as the same becomes due and payable, together with interest at the Overdue
Rate from the date when due until paid, and Lessor may enforce, by action or
otherwise, any other term or covenant of this Lease.
Notwithstanding anything in this Lease to the contrary, in the event that
this Lease shall be terminated by Lessor with respect to any Facility by reason
of an Event of Default, such termination shall not affect the applicable Term of
this Lease with respect to the balance of the Facilities not so terminated by
Lessor, and this Lease shall continue in full force and effect with respect to
each such other Facility, except that the total monthly Allocated Minimum Rent
and Allocated Additional Rent payable hereunder shall be reduced by the amount
of monthly Allocated Minimum Rent and Allocated Additional Rent as to which this
Lease has so terminated, subject, however, to Lessor's right to recover damages
with respect to any such Facility as to which this Lease has been so terminated
as provided in this Article XVI.
16.4 Receiver
--------
. Upon the occurrence of an Event of Default, and upon commencement of
proceedings to enforce the rights of Lessor hereunder, Lessor shall be entitled,
as a matter of right, to the appointment of a receiver or receivers acceptable
to Lessor of the Leased Property and any Capital Addition thereto and of the
revenues, earnings, income, products and profits thereof, pending the outcome of
such proceedings, with such powers as the court making such appointment shall
confer.
16.5 Lessee's Obligation to Purchase
----------------------------------
. If an Event of Default shall have occurred with respect to any Facility,
Lessor may require Lessee to purchase the Leased Property of such Facility on
the first Minimum Rent Payment Date occurring not less than thirty (30) days
after the date specified in a notice from Lessor requiring such purchase for an
amount equal to the greater of (i) the Fair Market Value of such Facility, or
(ii) the Minimum Repurchase Price of such Facility, plus, in either event, all
Rent then due and payable (excluding the installment of Minimum Rent due on the
purchase date) with respect to such Facility. If Lessor exercises such right,
Lessor shall convey the Leased Property of such Facility to Lessee on the date
fixed therefor in accordance with the provisions of Article XVIII upon receipt
of the purchase price therefor and this Lease shall thereupon terminate with
respect to such Facility. Any purchase by Lessee of the Leased Property of a
Facility pursuant to this Section shall be in lieu of the damages specified in
Section 16.3 with respect to such Facility.
16.6 Waiver
------
. If Lessor initiates judicial proceedings or if this Lease is terminated
by Lessor pursuant to this Article with respect to a Facility, Lessee waives, to
the extent permitted by applicable law, (i) any right of redemption, re-entry or
repossession; and (ii) the benefit of any laws now or hereafter in force
exempting property from liability for rent or for debt.
16.7 Application of Funds
----------------------
. Any payments received by Lessor under any of the provisions of this
Lease during the existence or continuance of any Event of Default which are made
to Lessor rather than Lessee due to the existence of an Event of Default shall
be applied to Lessee's obligations in the order which Lessor may reasonably
determine or as may be prescribed by the laws of the State.
16.8 [Reserved]
16.9 [Reserved]
16.10 Landlord's Security Interest
. The parties intend that if an Event of Default occurs under this Lease,
Lessor will control Lessee's Personal Property and the Intangible Property so
that Lessor or its designee or nominee can operate or re-let each Facility
intact for its Primary Intended Use. Accordingly, to implement such intention,
and for the purpose of securing the payment and performance obligations of
Lessee hereunder, Lessor and Lessee agree as follows:
16.10.1 Lessee, as debtor, hereby grants to Lessor, as secured party, a
security interest and an express contractual lien upon all of Lessee's right,
title and interest in and to Lessee's Personal Property and in and to the
Intangible Property and any and all products, proceeds, rents and profits
thereof in which Lessee now owns or hereafter acquires an interest or right,
including any leased Lessee's Personal Property (collectively, the
"Collateral"). This Lease constitutes a security agreement covering all such
Lessee's Personal Property and the Intangible Property. The security interest
granted to Lessor with respect to Lessee's Personal Property in this Section
16.10 is intended by Lessor and Lessee to be subordinate to any security
interest granted in connection with the financing or leasing of all or any
portion of the Lessee's Personal Property so long as Lessee uses its best
efforts to secure an agreement in Lessor's favor that the lessor or financier of
such Lessee's Personal Property agrees to give Lessor written notice of any
default by Lessee under the terms of such lease or financing arrangement, to
give Lessor a reasonable time following such notice to cure any such default and
consents to Lessor's written assumption of such lease or financing arrangement
upon Lessor's curing of any such defaults. This security agreement and the
security interest created herein shall survive the termination, but not the
expiration, of this Lease with respect to any or all of the Facilities until
such time as Lessor has been fully compensated for all damages resulting from
such termination.
16.10.2 Lessee hereby authorizes Lessor to file such financing statements,
continuation statements and other documents as may be necessary or desirable to
perfect or continue the perfection of Lessor's security interest in the
Collateral. In addition, if required by Lessor at any time during the Term,
Lessee shall execute and deliver to Lessor, in form reasonably satisfactory to
Lessor, additional security agreements, financing statements, fixture filings
and such other documents as Lessor may reasonably require to perfect or continue
the perfection of Lessor's security interest in the Collateral. In the
event Lessee fails to execute any financing statement or other documents for the
perfection or continuation of Lessor's security interest, Lessee hereby appoints
Lessor as its true and lawful attorney-in-fact to execute any such documents on
its behalf, which power of attorney shall be irrevocable and is deemed to be
coupled with an interest.
16.10.3 Lessee will give Lessor at least thirty (30) days' prior written
notice of any change in Lessee's name, identity, jurisdiction of organization or
corporate structure. With respect to any such change, Lessee will promptly
execute and deliver such instruments, documents and notices and take such
actions, as Lessor deems necessary or desirable to create, perfect and protect
the security interests of Lessor in the Collateral.
16.10.4 Upon the occurrence of an Event of Default, Lessor shall be entitled
to exercise any and all rights or remedies available to a secured party under
the Uniform Commercial Code, or available to a lessor under the laws of the
State, with respect to Lessee's Personal Property and the Intangible Property,
including the right to sell the same at public or private sale.
ARTICLE XVII.
- --------------
17.1 Lessor's Right to Cure Lessee's Default
--------------------------------------------
. If Lessee shall fail to make any payment or to perform any act required
to be made or performed hereunder, Lessor, without waiving or releasing any
obligation or default, may, but shall be under no obligation to, make such
payment or perform such act for the account and at the expense of Lessee, and
may, to the extent permitted by law, enter upon the Leased Property and any
Capital Addition thereto for such purpose and take all such action thereon as,
in Lessor's opinion, may be necessary or appropriate therefor. No such entry
shall be deemed an eviction of Lessee. All sums so paid by Lessor and all costs
and expenses, including reasonable attorneys' fees and expenses, so incurred,
together with interest thereon at the Overdue Rate from the date on which such
sums or expenses are paid or incurred by Lessor, shall be paid by Lessee to
Lessor on demand.
ARTICLE XVIII.
- ---------------
18.1 Purchase of the Leased Property
-----------------------------------
. If Lessee purchases the Leased Property of any Facility from Lessor
pursuant to any provision of this Lease, Lessor shall, upon receipt from Lessee
of the applicable purchase price, together with full payment of any unpaid Rent
due and payable with respect to any period ending on or before the date of the
purchase, deliver to Lessee an appropriate deed or other conveyance conveying
the entire interest of Lessor in and to the Leased Property to Lessee free and
clear of all encumbrances other than (i) those that Lessee has agreed hereunder
to pay or discharge; (ii) those mortgage liens, if any, which Lessee has agreed
in writing to accept and to take title subject to; (iii) those liens and
encumbrances which were in effect on the date of conveyance of such Leased
Property to Lessor; and (iv) any other encumbrances permitted hereunder to be
imposed on such Leased Property which are assumable at no cost to Lessee or to
which Lessee may take subject without cost to Lessee; provided, however, that in
no event shall Lessee be obligated to assume or take subject to any encumbrance
with a principal balance in excess of the applicable purchase or option price,
and provided further that where the purchase price is equal to the Minimum
Repurchase Price and if any such encumbrance may not be removed without penalty,
the applicable purchase price shall be increased or decreased by an amount equal
to the positive or negative effect on Fair Market Value attributable to the
interest rate, amortization schedule, maturity date, prepayment penalty and
other terms and conditions of such encumbrance. The difference between the
applicable purchase price and the total of the encumbrances assumed or taken
subject to shall be paid to Lessor or as Lessor may direct in immediately
available funds. All expenses of such conveyance, including the cost of title
insurance, attorneys' fees incurred by Lessor in connection with such conveyance
and release, transfer taxes and recording and escrow fees, shall be paid by
Lessee.
18.2 Allocation of the Boise, Idaho Purchase Price
---------------------------------------------------
. If Lessee purchases the Leased Property of the Facility located in
Boise, Idaho pursuant to any of the terms of this Lease, the portion of the
purchase price paid by Lessee with respect to the Leased Improvements shall be
allocated between the portion constructed in accordance with the Boise Capital
Renovation Project and the remainder of the Facility located in Boise, Idaho in
accordance with the relative proportions of square feet contained within each
such portion of the Facility located in Boise, Idaho.
ARTICLE XIX.
- -------------
19.1 Renewal Terms
--------------
. With respect to each Facility, provided that no Event of Default, or
event which, with notice or lapse of time or both, would constitute an Event of
Default, has occurred and is continuing, either at the date of exercise or upon
the commencement of an Extended Term (as hereunder defined), then Lessee shall
have the right to renew this Lease with respect to all (but not less than all)
of the Facilities in a Renewal Group for the Extended Term set forth on Exhibit
-------
C upon giving written notice to Lessor of such renewal not less than twelve (12)
months and not more than fifteen (15) months prior to the expiration of the then
current Fixed Term or Extended Term, as applicable. With respect to each
Facility, during each Extended Term, all of the terms and conditions of this
Lease shall continue in full force and effect except that the annual Minimum
Rent and Additional Rent for and during such Extended Term shall be equal to the
Extended Term Rent, subject to increases after the first (1st) Lease Year of
such Extended Term as provided in Sections 3.1.2(b)(ii) and 3.1.2(b)(iii).
Notwithstanding anything to the contrary in this Article XIX, Lessor, in its
sole discretion, may waive the condition to Lessee's right to renew this Lease
that no Event of Default, or event which, with notice or lapse of time or both,
would constitute an Event of Default, have occurred or be continuing, and the
same may not be used by Lessee as a means to negate the effectiveness of
Lessee's exercise of its renewal right for such Extended Term.
ARTICLE XX.
- ------------
20.1 Holding Over
-------------
. Except as provided in Section 19, if Lessee shall for any reason remain
in possession of the Leased Property and/or Capital Additions of a Facility
after the expiration or earlier termination of the Fixed Term, such possession
shall be as a month-to-month tenant during which time Lessee shall pay as
Minimum Rent each month twice the sum of (i) monthly Minimum Rent applicable to
the prior Lease Year for such Facility, plus (ii) one-twelfth of the aggregate
Additional Rent payable applicable to the prior Lease Year with respect to such
Facility, together with all Additional Charges and all other sums payable by
Lessee pursuant to this Lease. During such period of month-to-month tenancy,
Lessee 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 law to month-to-month tenancies, to continue its
occupancy and use of the Leased Property and/or any Capital Additions of such
Facility. Nothing contained herein shall constitute the consent, express or
implied, of Lessor to the holding over of Lessee after the expiration or earlier
termination of this Lease.
ARTICLE XXI.
- -------------
21.1 Letters of Credit
-------------------
. With respect to each Facility except the Group 3 Facilities, during the
entire Term and for sixty (60) days after the expiration or earlier termination
of this Lease, subject to Section 21.5 below, Lessee shall have obtained letters
of credit from a financial institution satisfactory to Lessor naming Lessor as
beneficiary to secure Lessee's obligations hereunder and Lessee's and any
Affiliate of Lessee's obligations under any other lease or other agreement or
instrument with or in favor of Lessor or any Affiliate of Lessor, at the times,
in the amounts and for the purposes set forth below. Each letter of credit
shall be in substantially the form of Exhibit J hereto. Each letter of credit
---------
shall be for a term of not less than one (1) year and irrevocable during that
term. Each letter of credit shall provide that it will be honored upon a signed
statement by Lessor that Lessor is entitled to draw upon the letter of credit
under this Lease, and shall require no signature or statement from any party
other than Lessor. No notice to Lessee shall be required to enable Lessor to
draw upon the letter of credit. Each letter of credit shall also provide that
following the honor of any drafts in an amount less than the aggregate amount of
the letter of credit, the financial institution shall return the original letter
of credit to Lessor and Lessor's rights as to the remaining amount of the letter
of credit will not be extinguished. In the event of a transfer of Lessor's
interest in the Leased Property, Lessor shall have the right to transfer the
letter of credit to the transferee and thereupon shall, without any further
agreement between the parties, be released by Lessee from all liability
therefor, and it is agreed that the provisions hereof shall apply to every
transfer or assignment of the letter of credit to a new Lessor. The letter of
credit may be assigned as security in connection with a Facility Mortgage. If
the financial institution from which Lessee has obtained a letter of credit
shall admit in writing its inability to pay its debts generally as they become
due, file a petition in bankruptcy or a petition to take advantage of any
insolvency act, make an assignment for the benefit of its creditors consent to
the appointment of a receiver of itself or of the whole or any substantial part
of its property, or file a petition or answer seeking reorganization or
arrangement under the Federal bankruptcy laws or any other applicable law or
statute of the United States of America or any state thereof, then Lessee shall
obtain a replacement letter of credit within thirty (30) days of such act from
another financial institution satisfactory to Lessor.
21.2 Times for Obtaining Letters of Credit
------------------------------------------
. The initial letter of credit shall be obtained and delivered to Lessor
prior to the execution and delivery of this Lease. The letters of credit
covering subsequent periods shall be obtained and delivered to Lessor not less
than thirty (30) days prior to the expiration of the then existing letter of
credit ("Letter of Credit Date"). The term for each such letter of credit shall
begin no later than the expiration date of the previous letter of credit.
21.3 Amounts for Letters of Credit.
----------------------------------
21.3.1 With respect to each Facility as set forth in Section 21.1 above,
letters of credit shall be in an amount equal to the Letter of Credit Amount for
such Facility.
21.3.2 Notwithstanding subsection 21.3.1 above, the Letter of Credit Amount
with respect to such Facility as set forth in subsection 21.3.1 above may be
reduced on the following conditions and to the following amounts:
(a) If for any eight (8) consecutive month period during the Term the
average Cash Flow Coverage for a Facility described on Exhibit G equals or
---------
exceeds 1.25 and during such time period Lessee maintains a Consolidated Net
Worth in excess of Twenty Million Dollars ($20,000,000), then Lessee shall be
entitled to reduce the amount of the letter of credit for the then current and
each subsequent Lease Year by the LOC Reduction Fraction, if any, for such
Facility, and if for any eight (8) consecutive month period during the Term the
average Cash Flow Coverage for a Facility described on Exhibit G equals or
---------
exceeds 1.4 and during such time period Lessee maintains a Consolidated Net
Worth in excess of Twenty Million Dollars ($20,000,000), then Lessee shall be
entitled to reduce the amount of the letter of credit required hereunder by the
amount corresponding to such Facility on Exhibit F; provided, however, that if,
---------
following any such reduction in the amount or elimination of the applicable
letter of credit, the average Cash Flow Coverage for the Facility for any three
(3) consecutive month period decreases below 1.4, then Lessee shall again be
required to provide a letter of credit for the then current and each subsequent
Lease Year in an amount equal to the amount required by Exhibit F as multiplied
---------
by the fraction that is the complement of the applicable LOC Reduction Fraction
and Lessee shall promptly deliver to Lessor a letter of credit in the readjusted
amount, and if the average Cash Flow Coverage for the Facility for any
three (3) consecutive month period decreases below 1.25 or if at any time
Lessee's Consolidated Net Worth falls below Twenty Million Dollars
($20,000,000), then Lessee shall again be required to restore the amount of the
letter of credit required hereunder for the then current and each subsequent
Lease Year to the amount equal to that required by Exhibit F and Lessee shall
---------
promptly deliver to Lessor a letter of credit in the readjusted amount; provided
further that following any such increase, the letter of credit may be reduced,
released and increased as provided above.
(b) With respect to each of the Group 2 Facilities, if for the twelve (12)
consecutive month period most recently completed as of the date of determination
Lessee does not (a) permit the ratio of (i) Lessee's Cash Flow with respect
to a Facility to the sum of Allocated Minimum Rent and Allocated Additional Rent
payable during the Term with respect to such Facility and principal and interest
payments payable to Lessee for any Quarter to be less than 2.5 to 1.0, nor (ii)
Lessee's Cash Flow with respect to such Facility to Allocated Minimum Rent
payable by Lessee with respect to such Facility for any Quarter to be less than
1.4 to 1.0 or (b) fail to maintain, as of the end of each Quarter, a
Consolidated Net Worth of at least Ten Million Dollars ($10,000,000), as
reflected in financial statements prepared in accordance with GAAP, then Lessee
shall be entitled to reduce the amount of the letter of credit for the then
current and each subsequent Lease Year with respect to such Facility by fifty
percent (50%) of the amount required by Exhibit F; provided, however, that if,
---------
following any such reduction in the amount or elimination of the applicable
letter of credit Lessee fails to comply with the aforementioned requirements,
then Lessee shall again be required to provide a letter of credit for the then
current and each subsequent Lease Year in an amount equal to the amount required
by Exhibit F and Lessee shall promptly deliver to Lessor a letter of credit in
----------
the readjusted amount.
21.4 Uses of Letters of Credit
-----------------------------
. Lessor shall have the right to draw upon a letter of credit up to its
full amount whenever an Event of Default has occurred or an event of default
under any other lease or agreement between Lessor or an Affiliate of Lessor and
Lessee or an Affiliate of Lessee or any letter of credit, guaranty, mortgage,
deed of trust, or other instrument executed by Lessee or an Affiliate of Lessee
in favor of Lessor or an Affiliate of Lessor has occurred and any applicable
cure periods have expired; provided further, if Lessee fails to obtain a
satisfactory letter of credit prior to the applicable Letter of Credit Date,
Lessor may draw upon the full amount of the then existing letter of credit
without giving any notice or time to cure to Lessee. No such draw shall (i)
cure or constitute a waiver of an Event of Default, (ii) be deemed to fix or
determine the amounts to which Lessor is entitled to recover under this Lease or
otherwise, or (iii) be deemed to limit or waive Lessor's right to pursue any
remedies provided for in this Lease. If all or any portion of a letter of
credit is drawn against by Lessor, Lessee shall, within two (2) business days
after demand by Lessor, order the issuer of such letter of credit to issue
Lessor, at Lessee's expense, a replacement or supplementary letter of credit in
substantially the form attached hereto as Exhibit J such that at all times
---------
during the Term, Lessor shall have the ability to draw on one or more letters of
credit totaling, in the aggregate, the amount required pursuant to Section 21.3
and Lessor, upon the receipt thereof, shall return any amounts drawn down and
held pending receipt of such replacement or supplementary letter of credit.
21.5 Cash Security Deposit Option
-------------------------------
. Notwithstanding anything to the contrary in this Article XXI, with
respect to each Facility with respect to which a Letter of Credit is required
under Section 21.1, Lessee shall have the option to deposit with Lessor a sum
equal to the applicable Letter of Credit Amount for such Facility above (the
"Cash Security Deposit"). If Lessee exercises such option, during the entire
Term and for sixty (60) days after the expiration or earlier termination of this
Lease, unless such Cash Security Deposit is replaced by a Letter of Credit
complying with this Article XXI, Lessee shall deposit the Cash Security Deposit
with HCPI cash to secure Lessee's obligations hereunder and Lessee's and any
Affiliate of Lessee's obligations under any other lease or other agreement or
instrument with or in favor of Lessor or any Affiliate of HCPI, at the times, in
the amounts and for the purposes set forth below. On the first day of each
Quarter, except during any period during which any Event of Default, or event
which, with notice or lapse of time or both, would constitute an Event of
Default, has occurred and is continuing hereunder, the Cash Security Deposit
shall accrue, and HCPI shall pay to Lessee, or, at HCPI's option, credit for the
restoration of the required amount of the Cash Security Deposit upon any draw
hereunder, interest on the aggregate Cash Security Deposit held by Lessor from
time to time at an annual rate equal to nine percent (9%); provided, however,
that Lessor shall not be required to keep the Cash Security Deposit separate
from its general funds, and Lessee acknowledges that Lessor may invest and
reinvest the Cash Security Deposit for Lessor's own account. No notice to
Lessee shall be required to enable Lessor to draw upon such Cash Security
Deposit; provided however, that Lessor shall use reasonable efforts to provide
Lessee with written notice of such drawing within a reasonable time after such
drawing. In the event of a transfer of Lessor's interest in the Leased
Property, Lessor shall have the right to transfer the Cash Security Deposit to
the transferee and thereupon shall, without any further agreement between the
parties, be released by Lessee from all liability therefor, and it is agreed
that the provisions hereof shall apply to every transfer or assignment of such
Cash Security Deposit to a new Lessor. The Cash Security Deposit may be
assigned as security in connection with a Facility Mortgage. Notwithstanding
the foregoing, with respect to the Group 4 Facilities, Lessee's rights under
this Section 21.5 to deposit a Cash Security Deposit shall be expressly
conditioned upon Lessee's repayment of all amounts outstanding under the Note.
LESSEE WAIVES THE PROVISIONS OF ANY APPLICABLE LAWS NOW IN FORCE OR THAT BECOME
IN FORCE AFTER THE DATE OF EXECUTION OF THIS LEASE THAT PROVIDE IN SUBSTANCE
THAT LESSOR MAY CLAIM FROM A CASH SECURITY DEPOSIT ONLY THOSE SUMS REASONABLY
NECESSARY TO REMEDY DEFAULTS IN THE PAYMENT OF RENT, TO REPAIR DAMAGE CAUSED BY
LESSEE, TO CLEAN THE PREMISES OR FOR OTHER LIMITED PURPOSES. LESSOR AND LESSEE
AGREE THAT LESSOR MAY, IN ADDITION, CLAIM THOSE SUMS NECESSARY TO COMPENSATE
LESSOR FOR ANY OTHER FORESEEABLE OR UNFORESEEABLE LOSS OR DAMAGE CAUSED BY THE
ACT OR OMISSION OF LESSEE OR LESSOR'S OFFICERS, AGENTS, EMPLOYEES, INDEPENDENT
CONTRACTORS, OR INVITEES.
_______________________
Lessee's Initials
ARTICLE XXII.
- --------------
22.1 Risk of Loss
--------------
. The risk of loss or of decrease in the enjoyment and beneficial use of
the Leased Property as a consequence of the damage or destruction thereof by
fire, the elements, casualties, thefts, riots, wars or otherwise, or in
consequence of foreclosures, attachments, levies or executions (other than by
Lessor and Persons claiming from, through or under Lessor) is assumed by Lessee,
and except as otherwise provided herein no such event shall entitle Lessee to
any abatement of Rent.
ARTICLE XXIII.
- ---------------
23.1 General Indemnification
------------------------
. In addition to the other indemnities contained herein, and
notwithstanding the existence of any insurance carried by or for the benefit of
Lessor or Lessee, and without regard to the policy limits of any such insurance,
Lessee shall protect, indemnify, save harmless and defend Lessor from and
against all liabilities, obligations, claims, damages penalties, causes of
action, costs and expenses, including reasonable attorneys', consultants' and
experts' fees and expenses, imposed upon or incurred by or asserted against
Lessor by reason of: (i) any accident, injury to or death of Persons or loss of
or damage to property occurring on or about the Leased Property or adjoining
sidewalks; (ii) any use, misuse, non-use, condition, maintenance or repair by
Lessee of the Leased Property; (iii) any failure on the part of Lessee to
perform or comply with any of the terms of this Lease; (iv) the non-performance
of any of the terms and provisions of any and all existing and future subleases
of the Leased Property to be performed by any party thereunder; (v) any claim
for malpractice, negligence or misconduct committed by any Person on or working
from the Leased Property; and (vi) the violation by Lessee of any Legal
Requirement. Any amounts which become payable by Lessee under this Article
shall be paid within ten (10) days after liability therefor is determined by
litigation or otherwise, and if not timely paid shall bear interest at the
Overdue Rate from the date of such determination to the date of payment.
Lessee, at its sole cost and expense, shall contest, resist and defend any such
claim, action or proceeding asserted or instituted against Lessor or may
compromise or otherwise dispose of the same as Lessee sees fit. For purposes of
this Article XXIII, any acts or omissions of Lessee, or by employees, agents,
assignees, contractors, subcontractors or others acting for or on behalf of
Lessee (whether or not they are negligent, intentional, willful or unlawful),
shall be strictly attributable to Lessee.
Lessor shall indemnify, save harmless and defend Lessee from and against all
liabilities, obligations, claims, damages, penalties, causes of action, costs
and expenses, including, but not limited to, reasonable attorneys' fees, imposed
upon or incurred by or asserted against Lessee as a result of the gross
negligence or willful misconduct of Lessor. Lessor, at its expense, shall
contest, resist, and defend any claim, action or proceeding asserted or
instituted against Lessee with respect to the foregoing or may compromise or
otherwise dispose of the same as Lessor sees fit. Any amounts which become
payable by Lessor under this Section shall be paid within ten (10) days after
liability therefor on the part of Lessor is determined by litigation or
otherwise, and if not timely paid shall bear a late charge (to the extent
permitted by law) at the Overdue Rate from the date of such determination to the
date of payment.
ARTICLE XXIV.
- --------------
24.1 Subletting and Assignment.
---------------------------
24.1.1 Prohibition
-----------
(a) . Lessee shall not, without Lessor's prior written consent, which may
be withheld in Lessor's sole and absolute discretion, voluntarily or by
operation of law assign (which term includes any sale, encumbering, pledge or
other transfer or hypothecation) this Lease, master sublet all or any part of
the Leased Property of any Facility or engage the services of any Person for the
management or operation of any Facility. Lessee acknowledges that Lessor
is relying upon the expertise of Lessee in the operation of the Facilities and
that Lessor entered into this Lease with the expectation that Lessee would
remain in and operate such Facilities during the entire Term and for that reason
Lessor retains sole and absolute discretion in approving or disapproving any
assignment or master sublease. If Lessee is a corporation or partnership, any
transfer of its stock (other than a transfer of any of Lessee's stock owned by
Daniel R. Baty for estate planning purposes) or partnership interests (or the
stock or partnership interests of the entity(ies) that controls Lessee) or any
dissolution or merger or consolidation of Lessee (or its controlling
entity(ies)) with any other entity, which results in any Person (other than
Daniel R. Baty) and such Person's Affiliates collectively owning greater than
twenty-five percent (25%) of the total outstanding shares of any class of
Lessee's stock or partnership interests, or the sale or other transfer of all or
substantially all of the assets of Lessee (or its controlling entity(ies)),
shall constitute an assignment of Lessee's interest in this Lease within the
meaning of this Article XXIV and the provisions requiring consent contained
herein shall apply (provided, however, that the foregoing provision regarding
transfer of Lessee's stock constituting an assignment shall not apply if (i)
Lessee's stock is publicly traded, and (ii) Lessee's Consolidated Net Worth
after such transfer is not less than Lessee's Consolidated Net Worth as of the
Original Lease Commencement Date). Any sublease of more than ten percent (10%)
of any Facility to any Person or its Affiliates, in one transaction or in a
series of transactions, shall be deemed to be a master sublease hereunder. For
any sublease transaction not requiring the consent of Lessor hereunder, Lessee
shall, within ten (10) days of entering into any such sublease, notify Lessor of
the existence of such sublease and the identity of the sublessee and supply
Lessor with a copy of the sublease, any related documentation and any other
materials or information reasonably requested by Lessor.
24.1.2 Certain Business Reorganizations. Lessor will not unreasonably
----------------------------------
withhold its written consent to an assignment of this Lease to (A) any Person
which acquires all or substantially all of the assets and business of Lessee by
virtue of a merger or consolidation of, with or into Lessee or (B) any purchaser
of 51% or more of the outstanding voting stock or partnership interest of
Lessee, if in Lessor's reasonable judgment such assignee, together with any
guarantor of such assignee's obligations under this Lease, has (1) a
consolidated net worth equal to or greater than Lessee's consolidated net worth
at the time of the proposed assignment or as of the Original Lease Commencement
Date, whichever is greater, and (2) the operational expertise and reputation at
least equal to that of Lessee at the time of the proposed assignment or as of
the Original Lease Commencement Date, whichever is greater.
24.1.3 Public Offering; Public Trading. Notwithstanding anything to the
----------------------------------
contrary in Section 24.1.2, Lessor's consent shall not be required in connection
with and the provisions of Section 24.1.2 shall not apply to any transfer of any
stock of Lessee as a result of a public offering of Lessee's stock which (a)
constitutes a bona fide public distribution of such stock pursuant to a firm
commitment underwriting or a plan of distribution registered under the
Securities Act of 1933 and (b) results in such stock being listed for trading on
the American Stock Exchange or the New York Stock Exchange or authorized for
quotation on the NASDAQ National Market immediately upon the completion of such
public offering. In addition, so long as such stock is listed for trading on
any such exchange or authorized for quotation on such market, the transfer or
exchange of such stock over such exchange or market shall not be deemed a
Transfer hereunder unless the same (whether in one transaction or in any step or
series of transactions) results in a change in control of Lessee or (including
pursuant to a tender or similar offer to acquire the outstanding and issued
securities of such entity).
24.2 Consent
-------
. If Lessee desires at any time to assign this Lease, to master sublet any
Facility or any portion thereof or engage the services of any Person for the
management or operation of such Facility, it shall first notify Lessor of its
desire to do so and shall submit in writing to Lessor: (i) the name of the
proposed master sublessee, assignee or manager; (ii) the terms and provisions of
the proposed master sublease, assignment or management agreement; and (iii) such
financial information as Lessor reasonably may request concerning the proposed
master sublessee, assignee or manager.
24.2.1 Lessor may, as a condition to granting such consent, require that the
obligations of any sublessee, assignee, or manager which is an Affiliate of
another Person be guaranteed by its parent or controlling Person if (i) the
Consolidated Net Worth of Lessee would be diminished as a result of any such
assignment of Lessee's interest described in this Article XXIV, or (ii) the new
controlling Person(s) would have a consolidated net worth less than the Lessee's
consolidated net worth as of the Original Lease Commencement Date and that any
guaranty of this Lease be reaffirmed by any Guarantor notwithstanding such
subletting, assignment or management arrangement. Any sublease shall be
expressly subject and subordinate to all applicable terms and conditions of this
Lease and provide that Lessor, at its option and without any obligation to do
so, may require any sublessee to attorn to Lessor, in which event Lessor shall
undertake the obligations of Lessee, as sublessor under such sublease from the
time of the exercise of such option to the termination of such sublease and in
such case Lessor shall not be liable for any prepaid rents or security deposit
paid by such sublessee to Lessee unless Lessor actually receives the same from
Lessee or for any other prior defaults of Lessee under such sublease. In the
event that Lessor shall not require such attornment with respect to any
sublease, then such sublease shall automatically terminate upon the expiration
or earlier termination of this Lease, including any early termination by mutual
agreement of Lessor and Lessee. Furthermore, any sublease, assignment or
management agreement shall expressly provide that the sublessee, assignee or
manager shall furnish Lessor with such financial and operational information and
information about the physical condition of such Facility, including the
information required by Section 25.2 herein, as Lessor may request from time to
time.
24.2.2 Lessor may, as a condition to its consent to any such master
subletting, require Lessee to pay to Lessor one hundred percent (100%) of all
Transfer Consideration (defined below). "Transfer Consideration" shall mean the
positive difference, if any, between the Fair Market Rental for the Facility and
the Rent payable by Lessee determined on a monthly basis, prorating the Rent, as
appropriate, if less than all of such Facility is sublet; provided, however, in
no event shall Lessor be entitled to receive any amount in excess of the amount
Lessee is entitled to receive as a result of the master sublease. The Transfer
Consideration for each month shall be paid by Lessee to Lessor monthly when the
Minimum Rent is due for the duration of the master subletting.
24.2.3 Lessor may, as a condition to its consent to any assignment or
management arrangement, require Lessee to pay to Lessor upon the effective date
of such assignment or management arrangement an amount equal to one hundred
percent (100%) of the Transfer Consideration for the remaining Term of the Lease
assuming all renewal options are exercised and there is no early termination of
the Lease and Lessor shall refund any amounts attributable to renewal options if
they subsequently are not exercised with interest thereon at the Prime Rate;
provided, however, in no event shall Lessor be entitled to receive any amount in
excess of the amount Lessee is entitled to receive as a result of the assignment
or management agreement.
24.2.4 The consent by Lessor to any assignment, master subletting or
management arrangement shall not constitute a consent to any subsequent
assignment, master subletting or management arrangement by Lessee or to any
subsequent or successive assignment, master subletting or management arrangement
by the master sublessee, assignee or manager. Any purported or attempted
assignment, sublease, management agreement or other permission to use such
Facility contrary to the provisions of this Article shall be void and, at the
option of Lessor, shall terminate this Lease.
24.2.5 Notwithstanding the preceding, Lessee may sublease or assign the
Lease to an Affiliate of Lessee without the written consent of Lessor and Lessee
shall not be required to pay any Transfer Consideration to Lessor as a result of
such sublease or assignment to an Affiliate, but such sublease or assignment of
the Lease from Lessee to an Affiliate of Lessee will not relieve Lessee from its
obligations under the Lease or any Guarantor from its obligations under any
guaranty of this Lease.
24.3 Costs
-----
. Lessee shall reimburse Lessor for Lessor's reasonable costs and expenses
incurred in conjunction with the processing and documentation of any assignment,
master subletting or management arrangement, including reasonable attorneys',
architects', engineers' or other consultants' fees whether or not such master
sublease, assignment or management agreement is actually consummated.
24.4 No Release of Lessee's Obligations
--------------------------------------
. No assignment, subletting or management agreement shall relieve Lessee
of its obligation to pay the Rent and to perform all of the other obligations to
be performed by Lessee hereunder. The liability of Lessee named herein and any
immediate and remote successor in interest of Lessee (by assignment or
otherwise), and the due performance of the obligations of this Lease on Lessee's
part to be performed or observed, shall not in any way be discharged, released
or impaired by any (i) agreement which modifies any of the rights or obligations
of the parties under this Lease, (ii) stipulation which extends the time within
which an obligation under this Lease is to be performed, (iii) waiver of the
performance of an obligation required under this Lease, or (iv) failure to
enforce any of the obligations set forth in this Lease.
24.5 Assignment of Lessee's Rights Against Sublease
---------------------------------------------------
. If Lessor shall consent to a master subletting, then the written
instrument of consent, executed and acknowledged by Lessor, Lessee and
sublessee, shall contain a provision substantially similar to the following:
(i) Lessee and sublessee hereby agree that, if sublessee shall be in default
of any obligation of Lessee under the sublease, which default also
constitutes a default by Lessee under the Lease, then Lessor shall be permitted
to avail itself of all of the rights and remedies available to Lessee in
connection therewith.
(ii) Without limiting the generality of the foregoing, Lessor shall be
permitted (by assignment of a cause of action or otherwise) to institute an
action or proceeding against sublessee in the name of Lessee in order to enforce
Lessee's rights under the sublease, and also shall be permitted to take all
ancillary actions (e.g., serve default notices and demands) in the name of
Lessee as Lessor reasonably shall determine to be necessary.
(iii) Lessee agrees to cooperate with Lessor, and to execute such documents
as shall be reasonably necessary, in connection with the implementation of the
foregoing rights of Lessor.
(iv) Lessee expressly acknowledges and agrees that the exercise by Lessor of
any of the foregoing rights and remedies shall not constitute an election of
remedies, and shall not in any way impair Lessor's entitlement to pursue other
rights and remedies directly against Lessee.
24.6 Reserved
--------
24.7 REIT Protection
. Anything contained in this Lease to the contrary notwithstanding, Lessee
shall not (i) sublet, assign or enter into a management arrangement for the
Leased Property on any basis such that the rental or other amounts to be paid by
the sublessee, assignee or manager thereunder would be based, in whole or in
part, on the income or profits derived by the business activities of the
sublessee, assignee or manager; (ii) furnish or render any services to the
sublessee, assignee or manager or manage or operate the Leased Property so
subleased, assigned or managed; (iii) sublet, assign or enter into a management
arrangement for the Leased Property to any Person in which Lessee or Lessor owns
an interest, directly or indirectly (by applying constructive ownership rules
set forth in Section 856(d)(5) of the Code); or (iv) sublet, assign or enter
into a management arrangement for the Leased Property in any other manner which
could cause any portion of the amounts received by Lessor pursuant to this Lease
or any sublease to fail to qualify as "rents from real property" within the
meaning of Section 856(d) of the Code, or any similar or successor provision
thereto or which could cause any other income of Lessor to fail to qualify as
income described in Section 856(c)(2) of the Code.
24.8 Prepaid Rent
-------------
. Lessee shall not require or accept prepayment for more than three (3)
months' use of individual units or rooms of any Facility. Amounts charged to
residents for individual units or rooms shall not be materially less than fair
market value.
ARTICLE XXV.
- -------------
25.1 Officer's Certificates and Financial Statements.
---------------------------------------------------
25.1.1 Officer's Certificate
----------------------
. At any time and from time to time upon Lessee's receipt of not less than
ten (10) days' prior written request by Lessor, Lessee shall furnish to Lessor
an Officer's Certificate certifying (i) that this Lease is unmodified and in
full force and effect, or that this Lease is in full force and effect as
modified and setting forth the modifications; (ii) the dates to which the Rent
has been paid; (iii) whether or not, to the best knowledge of Lessee, Lessor is
in default in the performance of any covenant, agreement or condition contained
in this Lease and, if so, specifying each such default of which Lessee may have
knowledge; and (iv) responses to such other questions or statements of fact as
Lessor, any ground or underlying lessor, any purchaser or any current or
prospective Facility Mortgagee shall reasonably request. Lessee's failure to
deliver such statement within such time shall constitute an acknowledgement by
Lessee that (x) this Lease is unmodified and in full force and effect except as
may be represented to the contrary by Lessor; (y) Lessor is not in default in
the performance of any covenant, agreement or condition contained in this Lease;
and (z) the other matters set forth in such request, if any, are true and
correct. Any such certificate furnished pursuant to this Article may be relied
upon by Lessor and any current or prospective Facility Mortgagee, ground or
underlying lessor or purchaser of the Leased Property.
25.1.2 Statements
----------
. Lessee shall furnish the following statements to Lessor:
(a) within 120 days after the end of each of Lessee's fiscal years, a copy
of the audited consolidated balance sheets of Lessee and its consolidated
Subsidiaries as of the end of such fiscal year, and related audited consolidated
statements of income, changes in common stock and other stockholders'
equity and changes in the financial position of Lessee and its consolidated
Subsidiaries for such fiscal year, prepared in accordance with GAAP applied on a
basis consistently maintained throughout the period involved, such consolidated
financial statements to be certified by nationally recognized certified public
accountants;
(b) within 120 days after the end of Lessee's fiscal years, and together
with the annual audit report furnished in accordance with clause (a) above, an
Officer's Certificate stating that to the best of the signer's knowledge and
belief after making due inquiry, Lessee is not in default in the performance or
observance of any of the terms of this Lease, or if Lessee shall be in default,
specifying all such defaults, the nature thereof, and the steps being taken to
remedy the same;
(c) within thirty (30) days after the end of each month for those months
occurring from the Original Lease Commencement Date to three months after the
first month in which the average Cash Flow Coverage for any Facility equals or
exceeds 1.3 for such month, all consolidated financial reports Lessee produces
for reporting purposes and detailed statements of income and detailed
operational statistics regarding occupancy rates, patient and resident mix and
patient and resident rates by type for such Facility; and thereafter within
sixty (60) days after the end of each of Lessee's quarters, all quarterly
consolidated financial reports Lessee produces for reporting purposes and
detailed statements of income and detailed operational statistics regarding
occupancy rates, patient and resident mix and patient and resident rates by type
for such Facility;
(d) within 120 days after the end of each of Lessee's fiscal years, a copy
of each cost report, if any, filed with the appropriate governmental agency for
each Facility;
(e) within thirty (30) days after they are required to be filed with the
SEC, copies of any annual reports and of information, documents and other
reports, or copies of such portions of any of the foregoing as the SEC may
prescribe, which Lessee is required to file with the SEC pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934;
(f) within three (3) Business Days after Lessee's receipt thereof, copies of
all written communications received by Lessee from any regulatory agency
relating to (i) surveys of any Facility for purposes of licensure, Medicare and
Medicaid certification and accreditation and (ii) any proceeding, formal or
informal, with respect to cited deficiencies with respect to services and
activities provided and performed at any Facility, including patient and
resident care, patient and resident activities, patient and resident therapy,
dietary, medical records, drugs and medicines, supplies, housekeeping and
maintenance, or the condition of such Facility, and involving an actual or
threatened warning, imposition of a fine or a penalty, or suspension,
termination or revocation of such Facility's license to be operated in
accordance with its Primary Intended Use;
(g) to the extent reasonably obtainable by Lessee, within 120 days after the
end of each fiscal year of the financial institution issuing the letter of
credit required under Article XXI, a copy of the audited consolidated balance
sheets of such financial institution as of the end of such fiscal year, and
related unaudited consolidated statements of income, changes in common stock and
other stockholders equity and changes in the financial position of such
financial institution and its consolidated subsidiaries for each such fiscal
year, prepared in accordance with generally accepted accounting principles
applied on a basis consistently maintained throughout the period involved, such
consolidated financial statements to be certified by nationally recognized
certified public accountants;
(h) immediately upon Lessee's receipt thereof, copies of all material
claims, complaints, notices, warnings or asserted violations relating in any way
to the Leased Property or Lessee's use thereof; and
(i) with reasonable promptness, such other information respecting the
financial and operational condition and affairs of Lessee and each Facility and
the physical condition of the Leased Property and any Capital Addition thereto
as Lessor may reasonably request, in the form of a questionnaire or otherwise,
from time to time.
25.2 Charges
-------
. Lessee acknowledges that the failure to furnish Lessor with any of the
certificates or statements required by this Article XXV will cause Lessor to
incur costs and expenses not contemplated hereunder, the exact amount of which
is presently anticipated to be extremely difficult to ascertain. Accordingly,
if Lessee fails to furnish Lessor with any of the certificates or statements
required by this Article XXV, Lessee shall pay to Lessor upon demand $1,000 for
each such failure as Additional Charges. The parties agree that this charge
represents a fair and reasonable estimate of the costs that Lessor will incur by
reason of Lessee's failure to furnish Lessor with such certificates and
statements.
ARTICLE XXVI.
- --------------
26.1 Lessor's Right to Inspect and Show the Leased Property and Capital
-----------------------------------------------------------------------
Additions
-----
. Lessee shall permit Lessor and its authorized representatives to inspect
the Leased Property and any Capital Addition thereto during usual business hours
and on reasonable notice subject to any security, health, safety or
confidentiality requirements of Lessee or any Legal Requirement or Insurance
Requirement.
ARTICLE XXVII.
- ---------------
27.1 No Waiver
----------
. No failure by Lessor to insist upon the strict performance of any term
hereof or to exercise any right, power or remedy hereunder and no acceptance of
full or partial payment of Rent during the continuance of any default or Event
of Default shall constitute a waiver of any such breach or of any such term. No
waiver of any breach shall affect or alter this Lease, which shall continue in
full force and effect with respect to any other then existing or subsequent
breach.
ARTICLE XXVIII.
- ----------------
28.1 Remedies Cumulative
--------------------
. Each legal, equitable or contractual right, power and remedy of Lessor
now or hereafter provided either in this Lease or by statute or otherwise shall
be cumulative and concurrent and shall be in addition to every other right,
power and remedy and the exercise or beginning of the exercise by Lessor of any
one or more of such rights, powers and remedies shall not preclude the
simultaneous or subsequent exercise by Lessor of any or all of such other
rights, powers and remedies.
ARTICLE XXIX.
- --------------
29.1 Acceptance of Surrender
-------------------------
. No surrender to Lessor of this Lease or of the Leased Property, or any
part thereof or of any interest therein, shall be valid or effective unless
agreed to and accepted in writing by Lessor and no act by Lessor or any
representative or agent of Lessor, other than such a written acceptance by
Lessor, shall constitute an acceptance of any such surrender.
ARTICLE XXX.
- -------------
30.1 No Merger
----------
. There shall be no merger of this Lease or of the leasehold estate
created hereby by reason of the fact that the same Person may acquire, own or
hold, directly or indirectly, (i) this Lease or the leasehold estate created
hereby or any interest in this Lease or such leasehold estate and (ii) the fee
estate in the Leased Property.
ARTICLE XXXI.
- --------------
31.1 Conveyance by Lessor
----------------------
. If Lessor or any successor owner of the Leased Property shall convey the
Leased Property other than as security for a debt, Lessor or such successor
owner, as the case may be, shall thereupon be released from all future
liabilities and obligations of the Lessor under this Lease arising or accruing
from and after the date of such conveyance or other transfer and all such future
liabilities and obligations shall thereupon be binding upon the new owner.
31.2 New Lease
----------
. Lessor shall have the right, at any time and from time to time during
the Term for any purpose, by written notice to Lessee, to require Lessee to
execute an amendment to this Lease whereby the Leased Property of one or more
Facilities (individually, a "Separated Property" or collectively, the "Separated
Properties") is separated and removed from this Lease, and to simultaneously
execute a substitute lease with respect to such Separated Property(ies), in
which case:
31.2.1 Lessor and Lessee shall execute a new lease (the "New Lease") for
such Separated Property(ies), effective as of the date specified in Section
31.2.3. below (the "New Lease Effective Date"), in the same form and substance
as this Lease, but with such changes thereto as necessary to reflect the
separation of the Separated Property(ies) from the balance of the Leased
Property, including specifically the following:
(a) The total monthly Minimum Rent payable under such New Lease shall be the
total applicable monthly Allocated Minimum Rent with respect to such
Separated Property(ies);
(b) All Minimum Rent rental escalations under the New Lease shall be at the
times and in the amounts set forth in this Lease for Minimum Rent increases; and
(c) The New Lease shall provide that the lessee thereunder shall be
responsible for the payment, performance and satisfaction of all duties,
obligations and liabilities arising under this Lease, insofar as they relate to
the Separated Property(ies), that were not paid, performed and satisfied in full
prior to the effective date of the New Lease (and Lessee under this Lease shall
also be responsible for the payment, performance and satisfaction of the
aforesaid duties, obligations and liabilities not paid, performed and satisfied
in full prior to the effective date of such New Lease).
31.2.2 Lessor and Lessee shall also execute an amendment to this Lease
effective as of the New Lease Effective Date reflecting the separation of the
Separated Property(ies) from the balance of the Leased Property and making such
modifications to this Lease as are necessitated thereby.
31.2.3 In the case of any New Lease that is entered into in accordance with
this Section 31.2 such New Lease shall be effective on the date which is the
earlier of (i) the date the New Lease is fully executed and delivered by the
parties thereto and (ii) the date specified in the written notice from Lessor to
Lessee requiring a New Lease as described above, which date shall be no sooner
than ten (10) days after the date such notice is issued.
31.2.4 Lessee's obligation to provide letters of credit and/or a Cash
Security Deposit in accordance with Article 21 of this Lease shall be segregated
so that (a) the applicable Lessee shall be required to provide a letter of
credit and/or a Cash Security Deposit pursuant to the New Lease, on the same
terms and conditions as set forth in this Lease, except that "Letter of Credit
Amount" under the New Lease shall mean an amount equal to the then existing
Letter of Credit Amount under this Lease (prior to the amendment contemplated in
Section 31.2.2 above), times a fraction, the numerator of which is the sum of
the then existing annual Allocated Minimum Rent and Allocated Additional Rent
for the Substituted Property(ies), and the denominator of which is the sum of
the then existing total annual Minimum Rent and Additional Rent payable for all
Facilities (including the Separated Property(ies)), and (b) the "Letter of
Credit Amount" under this Lease (as amended) shall be reduced by the "Letter of
Credit Amount" for the New Lease determined in accordance with subsection (a)
above.
31.2.5 Lessee and Lessor shall take such actions and execute and deliver
such documents, including without limitation the New Lease and an amendment to
this Lease, as are reasonably necessary and appropriate to effectuate the
provisions and intent of this Section 31.2.
31.2.6 Lessor shall reimburse Lessee for all of Lessee's reasonable
out-of-pocket costs and expenses in connection with the preparation and review
of any New Lease entered into in accordance with this Section 31.2, including
but not limited to reasonable attorney's and accountant's costs, fees and
expenses incurred by Lessee.
ARTICLE XXXII.
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32.1 Quiet Enjoyment
----------------
. So long as Lessee shall pay the Rent as the same becomes due and shall
fully comply with all of the terms of this Lease and fully perform its
obligations hereunder, Lessee shall peaceably and quietly have, hold and enjoy
the Leased Property for the Term, free of any claim or other action by Lessor or
anyone claiming by, through or under Lessor, but subject to all liens and
encumbrances of record as of the Original Lease Commencement Date with respect
to the applicable portion of the Leased Property or created thereafter as
permitted under the Original Leases or hereunder or thereafter consented to by
Lessee. No failure by Lessor to comply with the foregoing covenant shall give
Lessee any right to cancel or terminate this Lease or abate, reduce or make a
deduction from or offset against the Rent or any other sum payable under this
Lease, or to fail to perform any other obligation of Lessee hereunder.
Notwithstanding the foregoing, Lessee shall have the right, by separate and
independent action to pursue any claim it may have against Lessor as a result of
a breach by Lessor of the covenant of quiet enjoyment contained in this Article.
ARTICLE XXXIII.
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33.1 Notices
-------
. Any notice, consent, approval, demand or other communication required or
permitted to be given hereunder (a "notice") must be in writing and may be
served personally or by U.S. Mail. If served by U.S. Mail, it shall be
addressed as follows:
If to Lessor: Health Care Property Investors, Inc.
4675 MacArthur Court
Suite 900
Newport Beach, California 92660
Attn: Legal Department
Fax: (949) 221-0600
with a copy to: Latham & Watkins
650 Town Center Drive, Suite 2000
Costa Mesa, California 92626
Attn: David C. Meckler, Esq.
Fax: (714) 755-8290
If to Lessee: Emeritus Corporation
3131 Elliott Ave, Suite 500
Seattle, WA 98121
Fax (206) 301-4500
Attn: Raymond Brandstrom
Fax: (206) 443-5432
with a copy to: The Nathanson Group
1520 Fourth Ave., Sixth Floor
Seattle, Washington 98101
Attn: Randi S. Nathanson, Esq.
Fax: (206) 623-1738
Any notice which is personally served shall be effective upon the date of
service; any notice given by U.S. Mail shall be deemed effectively given, if
deposited in the United States Mail, registered or certified with return receipt
requested, postage prepaid and addressed as provided above, on the date of
receipt, refusal or non-delivery indicated on the return receipt. In addition,
either party may send notices by facsimile or by a nationally recognized
overnight courier service provides written proof of delivery (such as U.P.S. or
Federal Express). Any notice sent by facsimile shall be effective upon
confirmation of receipt in legible form, and any notice sent by a nationally
recognized overnight courier shall be effective on the date of delivery to the
party at its address specified above as set forth in the courier's delivery
receipt. Either party may, by notice to the other from time to time in the
manner herein provided, specify a different address for notice purposes.
ARTICLE XXXIV.
- ---------------
34.1 Appraiser
---------
. If it becomes necessary to determine the Fair Market Value or Fair
Market Rental of any Facility for any purpose of this Lease, the same shall be
determined by Valuation Counselors, or in the event Valuation Counselors no
longer exists upon the date the same is to be determined, any other nationally
recognized appraisal firm, in which one or more of the members, officers or
principals of such firm are members of the American Institute of Real Estate
Appraisers (or any successor organization thereto), as may be selected by Lesser
in writing to Lessee (the "Appraiser"). Lessor shall cause such Appraiser to
determine the Fair Market Value or Fair Market Rental of such Facility as of the
relevant date (giving effect to the impact, if any, of inflation from the date
of the Appraiser's decision to the relevant date) and the determination of such
Appraiser shall be final and binding upon the parties. If the applicable
Facility had reached stabilized operations prior to the applicable Original
Lease Commencement Date, to the extent consistent with sound appraisal practice
as then existing at the time of any such appraisal, an appraisal for Fair Market
Value shall be made on a basis consistent with the basis on which the Leased
Property was appraised for purposes of determining its fair market value at the
time the Leased Property was acquired by Lessor. This provision for
determination by appraisal shall be specifically enforceable to the extent such
remedy is available under applicable law, and any determination hereunder shall
be final and binding upon the parties except as otherwise provided by applicable
law. Lessor and Lessee shall each pay one-half of the fees and expenses of the
Appraiser and one-half of all other cost and expenses incurred in connection
with such appraisal.
ARTICLE XXXV.
- --------------
35.1 Lessee's Option to Purchase the Leased Property.
-----------------------------------------------------
35.1.1 Subject to Sections 35.1.2 and 35.1.3 below, with respect to the
Purchase Option Facilities, provided no Event of Default, or event which, with
notice or lapse of time or both, would constitute an Event of Default, has
occurred and is continuing hereunder, Lessee shall have the option to purchase
the Leased Property of all (but not less than all) of the Facilities in a
Purchase Group upon the expiration of the Fixed Term and each Extended Term for
such Facilities at the Purchase Option Purchase Price, calculated as of the
Outside Closing Date. Lessee may exercise such option to purchase the Leased
Property of the Facilities in a Purchase Group by opening an escrow (the
"Escrow") with and by depositing a copy of this Lease with a national title
company reasonably acceptable to Lessor ("Escrow Holder") and giving written
notice to Lessor of such deposit with Escrow Holder no earlier than fifteen (15)
months and not less than twelve (12) months prior to the expiration of the
Fixed Term or the Extended Term, as applicable for such Facilities. If Lessee
shall not be entitled to exercise such option (e.g., by reason of an Event of
Default) or shall be entitled to exercise the same but shall fail to do so
within the time and in the manner herein provided, such option shall lapse and
thereafter not be exercisable by Lessee. No failure by Lessor to notify Lessee
of any defect in any attempted exercise of the foregoing option shall be deemed
a waiver by Lessor of the right to insist upon Lessee's exercise of such option
in strict accordance with the provisions hereof. Not less than six (6) months
prior to the expiration of the Fixed Term or the Extended Term, as applicable,
Lessee shall deposit one and one-half percent of the aggregate Minimum
Repurchase Price of the Facilities in the applicable Purchase Group (the
"Opening Deposit") with Escrow Holder. In the event that Lessee shall properly
and timely exercise such option and make the Opening Deposit, then such
transaction shall be consummated on or within ten (10) days after the expiration
of the Fixed Term or Extended Term, as applicable (the "Outside Closing Date").
35.1.2 Notwithstanding anything to the contrary in Section 35.1.1 above,
with respect to the Facility located in Fullerton, California, provided that (i)
no Event of Default, or event which, with notice or lapse of time or both, would
constitute an Event of Default, has occurred and is continuing hereunder, (ii)
Rosewood Assisted Living, Inc., a California corporation ("Rosewood"), has
exercised its option to purchase the Leased Property of the Facility pursuant to
the terms of that certain Sublessee Purchase Option Agreement (the "Rosewood
Option Agreement") and (iii) Lessee has paid over to Lessor when received by
Lessee and Lessor has received the initial option payment (i.e., $250,000.00)
(the "Initial Rosewood Option Payment") and any additional option payments
(i.e., any extension payments under that certain Sublease Agreement by and
between Lessee and Rosewood (the "Rosewood Sublease")) (the "Additional Rosewood
Option Payments") required to be paid to Lessee by Rosewood under the Rosewood
Option Agreement, Lessee shall have the option to purchase the Leased Property
of such Facility at any time after the Restatement Date and prior to the
expiration or earlier termination of the Rosewood Sublease (the "Fullerton
Purchase Option Term") for a purchase price equal to Two Million Two Hundred
Fifty Thousand Dollars ($2,250,000.00). Lessee may exercise such option to
purchase the Leased Property of such Facility by (a) delivering written notice
of Lessee's exercise of such option on or before the expiration of the Fullerton
Purchase Option Term together with evidence that Rosewood has exercised its
purchase option under the Rosewood Option Agreement and substantially concurrent
therewith opening an Escrow with and by depositing a copy of this Lease with the
Escrow Holder. If Lessee shall not be entitled to exercise such option (e.g. by
reason of an Event of Default or failure of any other condition set forth above)
or shall be entitled to exercise the same but shall fail to do so within the
time and in the manner herein provided, such option shall lapse and thereafter
not be exercisable by Lessee. No failure by Lessor to notify Lessee of any
defect in any attempted exercise of the foregoing option shall be deemed a
waiver by Lessor of the right to insist upon Lessee's exercise of such option in
strict accordance with the provisions hereof. In the event that Lessee shall
properly and timely exercise such option, then such transaction shall be
consummated on or within sixty (60) days after Lessee's exercise of such option.
As consideration for Lessor's grant of the purchase option to Lessee as provided
in this Section 35.1.2, Lessee shall promptly pay and deliver over to Lessor as
an Additional Charge under this Lease, the Initial Rosewood Option Payment and
any Additional Rosewood Option Payments required to be paid to Lessee by
Rosewood under the Rosewood Option Agreement. Such Initial Rosewood Option
Payment and any Additional Rosewood Option Payments shall be deemed
non-refundable option payments and not earnest money deposits. In the event
that the Close of Escrow (as hereinafter defined) occurs with respect to the
Facility located in Fullerton, California, the Initial Rosewood Option Payment
and any Additional Rosewood Option Payment received by Lessor shall be applied
against the purchase price for such Facility. The Initial Rosewood Option
Payment and any Additional Rosewood Option Payment shall be deemed fully earned
by Lessor upon receipt thereof. Accordingly, in the event that Lessee either is
not entitled to exercise its purchase option or fails to exercise the same
within the time and manner provided in subparagraph (b) above, or in the event
that Lessee shall timely and properly exercise such option and the Close of
Escrow fails to occur for any reason, the Initial Rosewood Option Payment and
any Additional Rosewood Option Payment shall be retained by Lessor and neither
Lessee nor Sublessee shall have any claim thereto.
35.1.3 Notwithstanding anything to the contrary in Section 35.1.1 above,
with respect to the Facility located in Latrobe, PA, in addition to the Opening
Deposit, on the first day of each month Lessee shall pay Three Thousand Dollars
($3,000) to Lessor during the Fixed Term as a purchase option deposit (the
"Deposit"). The Deposit amounts shall bear interest at the 3-month LIBOR rate
published in the Wall Street Journal as of the last business day of the calendar
-------------------
quarter ending immediately prior to the Restatement Date which such rate shall
be reset on the last Business Day of each calendar quarter and interest shall
compound on such last Business Day of each calendar quarter. If Lessee causes
the lessor under the Allentown Land Lease to grant to Lessor an option to extend
the Allentown Land Lease for two (2) ten (10)-year renewal periods and causes
the lessors under the Pennsylvania Land Leases to execute and deliver to Lessor,
for the purpose of improving the financeability of the Pennsylvania Land Leases,
lease amendments substantially in the form attached as Exhibit K, subject to
---------
such modifications thereto as may be reasonably approved by Lessor, Lessee shall
no longer be required to make the Deposits and the balance in the Deposit
account shall be returned to Lessee within ten (10) days after receipt thereof.
Otherwise, the balance in the account shall be applied to the purchase price if
Lessee exercises its purchase option under Section 35.1.1. If Lessee has not
obtained the above-referenced options to extend and lease amendments and has not
exercised its purchase option at the expiration of the Fixed Term, then Lessee
shall forfeit the Deposit account and all accrued interest to Lessor with such
amounts to be separate and apart from the treatment of any Opening Deposit.
35.1.4 With respect to the First Refusal Facilities, during the last six (6)
months of the Term, as the same may have been extended ("First Refusal Period"),
provided no Event of Default, or event which, with notice or lapse of time or
both, would constitute an Event of Default, has occurred and is continuing
hereunder, Lessee shall have a right of first refusal to purchase the Leased
Property of a Facility upon the same terms and conditions of any offer or
counter offer from a third party to purchase the Leased Property of such
Facility which Lessor intends to accept (or has accepted subject to Lessee's
right of first refusal herein) (the "Offer"); provided, however that such first
refusal option shall not apply to (a) any sale of the Leased Property of such
Facility by Lessor to an Affiliate of Lessor, (b) a sale or transfer of all or
substantially all of the outstanding capital stock of Lessor or a sale or
transfer of all or substantially all of the assets of Lessor, in each case to a
single purchaser or transferee in a single transaction or (c) a merger,
consolidation or stock exchange to which Lessor is a party; and provided
further, that in no event shall Lessor be required to make or provide to Lessee
any representations or warranties with respect to the Leased Property of a
Facility, notwithstanding the terms of any such Offer. If, during a First
Refusal Period, Lessor desires to accept (or has accepted subject to Lessee's
right of first refusal herein) an Offer, Lessor shall promptly notify Lessee of
the same, which notice shall set forth all of the material terms and conditions
of such Offer, including the purchase price for the Leased Property of the
applicable Facility. Lessee shall have fifteen (15) days after receipt of such
notice from Lessor within which time to exercise Lessee's right of first
refusal. Lessee may exercise such right of first refusal by (i) delivering
written notice to Lessor stating that Lessee unequivocally accepts the terms and
conditions of the Offer applicable to Lessee as herein provided within such
fifteen (15) day period and (ii) opening an escrow (the "Escrow") with a
national title company reasonably acceptable to Lessor ("Escrow Holder") and
depositing five percent (5%) of the purchase price (the "Opening Deposit") with
Escrow Holder. If Lessee exercises its right of first refusal within the time
and in the manner herein provided, then such transaction shall be consummated on
or before the date specified for closing in the terms of the Offer at the price
and otherwise in accordance with (A) the terms and conditions of such Offer
applicable to Lessee as herein provided and (B) the provisions of Article XVIII
and Section 35.2 to the extent not inconsistent therewith. If Lessee shall not
exercise Lessee's right of first refusal in the manner and within the time
period provided herein, Lessor shall be free for the remainder of such First
Refusal Period after the expiration of said fifteen (15) day period to sell the
Leased Property to any third party at a price and upon terms no less favorable
to Lessor than those so offered to Lessee pursuant to the Offer. If such sale
is consummated, Lessee's right of first refusal hereunder shall automatically
terminate and the same shall not apply to any subsequent sale of the Leased
Property or any interest therein to any subsequent purchaser or transferee. If
such sale is not consummated, Lessee's right of first refusal as provided in
this Section shall be reinstituted as to any subsequent sale of the Leased
Property of the applicable Facility during any First Refusal Period.
35.1.5 Notwithstanding anything to the contrary in Section 35.1.4 above,
with respect to each of the Facilities located in El Paso, Texas (Cambria),
Walla Walla, Washington, Odessa, Texas and Boise, Idaho, Offers received at any
time during the Term of such Facility shall be subject to Lessee's rights
described in Section 35.1.4.
35.2 Defaults.
--------
35.2.1 Liquidated Damages. IF, FOLLOWING A VALID AND PROPER EXERCISE OF THE
------------------
FOREGOING OPTION, LESSEE FAILS, TO COMPLETE THE PURCHASE OF THE LEASED
PROPERTY AND SUCH FAILURE CONSTITUTES A BREACH HEREOF, THEN LESSOR, AT ITS
OPTION, MAY TERMINATE THE PURCHASE CONTRACT FORMED BY LESSEE'S EXERCISE OF SUCH
OPTION AND THE ESCROW BY GIVING WRITTEN NOTICE TO LESSEE AND ESCROW HOLDER AND,
THEREUPON, THE ESCROW SHALL BE CANCELLED, ALL DOCUMENTS SHALL BE RETURNED TO THE
RESPECTIVE PARTIES WHO DEPOSITED THE SAME, AND LESSEE SHALL PAY ALL TITLE AND
ESCROW CANCELLATION CHARGES AND ALL OF LESSOR'S LEGAL FEES AND COSTS. IN
ADDITION, LESSOR AND LESSEE AGREE THAT, BASED ON THE CIRCUMSTANCES NOW EXISTING,
KNOWN OR UNKNOWN, IT WOULD BE EXCESSIVELY COSTLY AND IMPRACTICABLE TO ESTABLISH
LESSOR'S DAMAGES BY REASON OF LESSEE'S DEFAULT RESULTING IN A FAILURE OF THE
ESCROW TO CLOSE, AND, THEREFORE, LESSOR AND LESSEE AGREE THAT IT WOULD BE
REASONABLE TO AWARD LESSOR LIQUIDATED DAMAGES IN THE AMOUNT OF THE OPENING
DEPOSIT PLUS ANY ACCRUED INTEREST ON THE OPENING DEPOSIT. BY THEIR RESPECTIVE
INITIALS SET FORTH BELOW, LESSOR AND LESSEE ACKNOWLEDGE AND AGREE THAT THE
OPENING DEPOSIT, PLUS ANY INTEREST ACCRUED ON THE OPENING DEPOSIT, TOGETHER WITH
PAYMENT OF LESSOR'S LEGAL FEES AND COSTS, IS REASONABLE AS LIQUIDATED DAMAGES
FOR A DEFAULT OF LESSEE UNDER THE PURCHASE CONTRACT FORMED BY LESSEE'S EXERCISE
OF SUCH OPTION THAT RESULTS IN A FAILURE OF THE ESCROW TO CLOSE AND SHALL BE IN
LIEU OF ANY OTHER RELIEF, RIGHT OR REMEDY, AT LAW OR IN EQUITY, TO WHICH LESSOR
MIGHT OTHERWISE BE ENTITLED BY REASON OF A LESSEE'S DEFAULT THAT RESULTS IN A
FAILURE OF THE ESCROW TO CLOSE, BUT NOTHING CONTAINED HEREIN SHALL LIMIT
LESSOR'S RIGHTS AND REMEDIES FOR LESSEE'S DEFAULT OCCURRING AFTER THE CLOSE OF
ESCROW OR FOR LESSEE'S DEFAULT UNDER THIS LEASE. ESCROW HOLDER IS HEREBY
AUTHORIZED AND INSTRUCTED TO RELEASE THE OPENING DEPOSIT PLUS ACCRUED INTEREST
THEREON TO LESSOR UPON THE DELIVERY OF UNILATERAL WRITTEN INSTRUCTIONS THEREOF
TO ESCROW HOLDER BY LESSOR, AND ESCROW HOLDER IS HEREBY RELIEVED OF ALL
LIABILITY THEREFOR. IF LESSEE ATTEMPTS TO INTERFERE WITH THE RELEASE OF ANY
SUCH SUMS BY ESCROW HOLDER TO LESSOR, OR COMMENCES ANY ACTION AGAINST LESSOR OR
THE LEASED PROPERTY ARISING OUT OF THIS ARTICLE, THEN LESSOR SHALL NOT BE
LIMITED IN THE AMOUNT OF DAMAGES IT MAY RECOVER FROM LESSEE.
Lessor's Initials:
Lessee's Initials:
35.2.2 Other Defaults. A default under any other lease or other agreement,
---------------
including any purchase contract formed upon exercise of any other option,
between Lessor or any Affiliate of Lessor and Lessee or any Affiliate of Lessee
where such default is not cured within the applicable time period, if any, shall
be deemed a default under this Article XXXV and the purchase contract
formed upon proper exercise by Lessee of the option herein provided, entitling
Lessor, as seller, at its option, to terminate such purchase contract and the
Escrow and upon any such termination the Opening Deposit plus all accrued
interest shall be paid over to Lessee.
35.3 Escrow Provisions.
-------------------
35.3.1 Opening of Escrow. Escrow shall be deemed open when the Opening
-------------------
Deposit and a copy of this Lease are delivered to Escrow Holder.
35.3.2 General and Supplemental Instructions. Lessee and Lessor each shall
--------------------------------------
execute, deliver and be bound by such further escrow instructions or other
instruments as may be reasonably requested by the other party or by Escrow
Holder from time to time, so long as the same are consistent with the provisions
of this Lease.
35.3.3 Disposition of Opening Deposits. Escrow Holder shall hold the
----------------------------------
Opening Deposit in interest-bearing accounts. All interest earned on the
Opening Deposit shall accrue to Lessee's benefit unless Lessor is entitled
thereto under Section 35.2.1. The Opening Deposit plus interest thereon shall be
(i) applied against the purchase price (as herein determined) if Escrow closes,
(ii) returned to Lessee in full if Escrow does not close for any reason other
than Lessee's default, or (iii) be paid to Lessor as nonrefundable liquidated
damages under Section 35.2.1, if Escrow fails to close under the provisions of
hereof as a result of Lessee's default.
35.3.4 Closing Funds. At least one (1) business day before the Close of
--------------
Escrow, Escrow Holder shall calculate and Lessee shall wire cash into Escrow
(using wiring instructions reasonably satisfactory to Escrow Holder) in an
amount which, when added to the Opening Deposit and all accrued interest shall
equal the purchase price for the applicable portion of the Leased Property plus
any other sums payable by Lessee pursuant to the provisions hereof.
35.3.5 Close of Escrow. Escrow shall close on the Outside Closing Date.
-----------------
The term "Close of Escrow" as used in this Article shall mean the time and date
that an appropriate deed or other conveyance document conveying Lessor's entire
interest in the Leased Property, subject to the permitted liens and encumbrances
described in Article XVIII hereof, is recorded in appropriate records of the
county in which the Leased Property is located. The Outside Closing Date shall
not be extended for any reason.
35.3.6 Closing Costs. The closing costs of consummating the purchase of the
-------------
Leased Property shall be paid by Lessee as provided in Article XVIII.
35.3.7 Assurances. At any time prior to Close of Escrow, Lessor may request
----------
and Lessee shall provide reasonable assurances that it will be able to
consummate the purchase of the Leased Property, including that Lessee has a
firm, written commitment from a reputable lending institution to finance such
purchase and/or has sufficient liquidity to pay any balance of the purchase
price owing by Lessee on the date of the Close of Escrow; provided, however,
that in no event shall Lessee be entitled to exercise such option conditioned
upon Lessee obtaining any such financing.
35.4 Lessor's Option to Purchase Lessee's Personal Property
------------------------------------------------------------
. Effective on not less than ninety (90) days prior written notice, or
such shorter notice as shall be appropriate if this Lease is terminated prior to
its expiration date, Lessor shall have the option to purchase some or all of
Lessee's Personal Property, at the expiration or termination of this Lease, for
an amount equal to the then net book value thereof as shown on Lessee's books,
subject to, and with appropriate price adjustments for, all equipment leases,
conditional sale contracts, UCC-1 financing statements and other encumbrances to
which such personal property is subject.
ARTICLE XXXVI.
- ---------------
36.1 Lessor May Grant Liens
-------------------------
. Without the consent of Lessee, Lessor may, from time to time, directly
or indirectly, create or otherwise cause to exist any lien, encumbrance or title
retention agreement upon the Leased Property, or any portion thereof or interest
therein, whether to secure any borrowing or other means of financing or
refinancing. This Lease is and at all times shall be subject and subordinate to
any ground or underlying leases, mortgages, trust deeds or like encumbrances
(collectively, "Priority Encumbrances"), which may now or hereafter affect the
Leased Property and to all renewals, modifications, consolidations, replacements
and extensions of any such lease, mortgage, trust deed or like encumbrance;
provided, however, that the subjection and subordination of this Lease and
--------------
Lessee's leasehold interest hereunder to any Priority Encumbrance shall be
-
conditioned upon the execution by the holder of each Priority Encumbrance and
-
delivery to Lessee of a nondisturbance and attornment agreement which provides
that so long as no default has occurred and is continuing beyond the period of
time allowed for the remedy thereof under the terms of this Lease, the holder of
such Priority Encumbrance (i) shall not disturb either Lessee's leasehold
interest or possession of the Leased Property in accordance with the terms
hereof, or any of its rights, privileges and options, (ii) shall permit
application of all proceeds of insurance and all Awards and payments in
connection with the taking of all or any portion of the Leased Property in
accordance with the provisions of Articles XIV and XV of this Lease, (iii)
waives all Priority Encumbrance rights or interests in any of Lessee's Personal
Property, and (iv) shall execute a release of such rights, privileges, options
and all liens and claims that the holder of such Priority Encumbrance may have
in the Leased Property upon payment of the purchase price therefor in the event
Lessee exercises any of its options or rights to purchase the Leased Property
provided in this Lease. In connection with the foregoing and at the request of
Lessor, Lessee shall promptly execute a reasonable subordination, nondisturbance
and attornment agreement which will incorporate the terms set forth in the
preceding sentence. Except for the documents described in the preceding
sentences, this clause shall be self-operative and no further instrument of
subordination shall be required by any ground or underlying lessor or by any
mortgagee or beneficiary, affecting any lease or the Leased Property. In
confirmation of such subordination, Lessee shall execute promptly any
certificate that Lessor may request for such purposes.
36.2 Attornment
----------
. If Lessor's interest in the Leased Property is sold or conveyed upon the
exercise of any remedy provided for in any Facility Mortgage, or otherwise by
operation of law: (i) at the new owner's option, Lessee shall attorn to and
recognize the new owner as Lessee's Lessor under this Lease or enter into a new
lease substantially in the form of this Lease with the new owner, and Lessee
shall take such actions to confirm the foregoing within ten (10) days after
request; and (ii) the new owner shall not be (a) liable for any act or omission
of Lessor under this Lease occurring prior to such sale or conveyance, or (b)
subject to any offset, abatement or reduction of rent because of any default of
Lessor under this Lease occurring prior to such sale or conveyance.
ARTICLE XXXVII.
- ----------------
37.1 Hazardous Substances
---------------------
. Lessee shall not allow any Hazardous Substance to be located in, on,
under or about the Leased Property or incorporated in any Facility; provided,
however, that Hazardous Substances may be brought, kept, used or disposed of in,
on or about the Leased Property in quantities and for purposes similar to those
brought, kept, used or disposed of in, on or about similar facilities used for
purposes similar to the Primary Intended Use or in connection with the
construction of facilities similar to the applicable Facility and which are
brought, kept, used and disposed of in strict compliance with Legal
Requirements. Lessee shall not allow the Leased Property to be used as a waste
disposal site or for the manufacturing, handling, storage, distribution or
disposal of any Hazardous Substance.
37.2 Notices
-------
. Lessee shall provide to Lessor promptly, and in any event immediately
upon Lessee's receipt thereof, a copy of any notice, or notification with
respect to, (i) any violation of a Legal Requirement relating to Hazardous
Substances located in, on, or under the Leased Property or any adjacent
property; (ii) any enforcement, cleanup, removal, or other governmental or
regulatory action instituted, completed or threatened with respect to the Leased
Property; (iii) any claim made or threatened by any Person against Lessee or the
Leased Property relating to damage, contribution, cost recovery, compensation,
loss, or injury resulting from or claimed to result from any Hazardous
Substance; and (iv) any reports made to any federal, state or local
environmental agency arising out of or in connection with any Hazardous
Substance in, on, under or removed from the Leased Property, including any
complaints, notices, warnings or asserted violations in connection therewith.
37.3 Remediation
-----------
. If Lessee becomes aware of a violation of any Legal Requirement relating
to any Hazardous Substance in, on, under or about the Leased Property or any
adjacent property, or if Lessee, Lessor or the Leased Property becomes subject
to any order of any federal, state or local agency to repair, close, detoxify,
decontaminate or otherwise remediate the Leased Property, Lessee shall
immediately notify Lessor of such event and, at its sole cost and expense, cure
such violation or effect such repair, closure, detoxification, decontamination
or other remediation. If Lessee fails to implement and diligently pursue any
such cure, repair, closure, detoxification, decontamination or other
remediation, Lessor shall have the right, but not the obligation, to carry out
such action and to recover from Lessee all of Lessor's costs and expenses
incurred in connection therewith.
37.4 Indemnity
---------
. Lessee shall indemnify, defend, protect, save, hold harmless, and
reimburse Lessor for, from and against any and all costs, losses (including,
losses of use or economic benefit or diminution in value), liabilities, damages,
assessments, lawsuits, deficiencies, demands, claims and expenses (collectively,
"Environmental Costs") (whether or not arising out of third-party claims and
regardless of whether liability without fault is imposed, or sought to be
imposed, on Lessor) incurred in connection with, arising out of, resulting from
or incident to, directly or indirectly, before or during (but not after) the
Term or such portion thereof during which the Leased Property is leased to
Lessee (i) the production, use, generation, storage, treatment, transporting,
disposal, discharge, release or other handling or disposition of any Hazardous
Substances from, in, on or about the Leased Property (collectively, "Handling"),
including the effects of such Handling of any Hazardous Substances on any Person
or property within or outside the boundaries of the Leased Property, (ii) the
presence of any Hazardous Substances in, on, under or about the Leased Property
and (iii) the violation of any Environmental Law. "Environmental Costs" include
interest, costs of response, removal, remedial action, containment, cleanup,
investigation, design, engineering and construction, damages (including actual,
consequential and punitive damages) for personal injuries and for injury to,
destruction of or loss of property or natural resources, relocation or
replacement costs, penalties, fines, charges or expenses, attorney's fees,
expert fees, consultation fees, and court costs, and all amounts paid in
investigating, defending or settling any of the foregoing.
Without limiting the scope or generality of the foregoing, Lessee expressly
agrees to reimburse Lessor for any and all costs and expenses incurred by Lessor
in connection with, arising out of, resulting from or incident to, directly or
indirectly, before or during (but not after) the Term or such portion thereof
during which the Leased Property is leased to Lessee of the following:
(a) In investigating any and all matters relating to the Handling of any
Hazardous Substances, in, on, from, under or about the Leased Property;
(b) In bringing the Leased Property into compliance with all Legal
Requirements; and
(c) Removing, treating, storing, transporting, cleaning-up and/or disposing
of any Hazardous Substances used, stored, generated, released or disposed of in,
on, from, under or about the Leased Property or off-site.
If any claim is made by Lessor for reimbursement for Environmental Costs
incurred by it hereunder, Lessee agrees to pay such claim promptly, and in any
event to pay such claim within thirty (30) calendar days after receipt by Lessee
of notice thereof. If any such claim is not so paid and Lessor is ultimately
found or agrees to be responsible therefore, Lessee agrees also to pay interest
on the amount paid from the date of the first notice of such claim, at the
Overdue Rate.
37.5 Environmental Inspection
-------------------------
. Lessor shall have the right, from time to time, during normal business
hours and upon not less than five (5) days written notice to Lessee, except in
the case of an emergency in which event no notice shall be required, to conduct
an inspection of the Leased Property to determine the existence or presence of
Hazardous Substances on or about the Leased Property. Lessor shall have the
right to enter and inspect the Leased Property, conduct any testing, sampling
and analyses it deems necessary and shall have the right to inspect materials
brought into the Leased Property. Lessor may, in its discretion, retain such
experts to conduct the inspection, perform the tests referred to herein, and to
prepare a written report in connection therewith. All costs and expenses
incurred by Lessor under this Section shall be paid on demand as Additional
Charges by Lessee to Lessor. Failure to conduct an environmental inspection or
to detect unfavorable conditions if such inspection is conducted shall in no
fashion be intended as a release of any liability for environmental conditions
subsequently determined to be associated with or to have occurred during
Lessee's tenancy. Lessee shall remain liable for any environmental condition
related to or having occurred during its tenancy regardless of when such
conditions are discovered and regardless of whether or not Lessor conducts an
environmental inspection at the termination of the Lease. The obligations set
forth in this Article shall survive the expiration or earlier termination of the
Lease.
ARTICLE XXXVIII.
- -----------------
38.1 Memorandum of Lease
---------------------
. Lessor and Lessee shall, promptly upon the request of either, enter into
one or more short form memoranda of this Lease, in form suitable for recording
under the laws of the State. Lessee shall pay all costs and expenses of
recording any such memorandum and shall fully cooperate with Lessor in removing
from record any such memorandum upon the expiration or earlier termination of
the Term with respect to the applicable Facility.
ARTICLE XXXIX.
- ---------------
39.1 Sale of Assets
----------------
. Notwithstanding any other provision of this Lease, Lessor shall not be
required to (i) sell or transfer the Leased Property, or any portion thereof,
which is a real estate asset as defined in Section 856(c)(5)(B), or functionally
equivalent successor provision, of the Code, to Lessee if Lessor's counsel
advises Lessor that such sale or transfer may not be a sale of property
described in Section 857(b)(6)(C), or functionally equivalent successor
provision, of the Code or (ii) sell or transfer the Leased Property, or any
portion thereof, to Lessee if Lessor's counsel advises Lessor that such sale or
transfer could result in an unacceptable amount of gross income for purposes of
the ninety five percent (95 %) gross income test contained in Section 856(c)(2),
or functionally equivalent successor provision, of the Code. If Lessee has the
obligation to purchase the property pursuant to the terms herein, and if Lessor
determines not to sell such property pursuant to the above sentence, then Lessee
shall purchase such property, upon and subject to all applicable terms and
conditions set forth in this Lease, including the provisions of Article XXXV, at
such time as the transaction, upon the advice of Lessor's counsel, would be a
sale of property (to the extent the Leased Property is a real estate asset)
described in Section 857(b)(6)(C), or functionally equivalent successor
provision, of the Code, and would not result in an unacceptable amount of gross
income for purposes of the ninety five percent (95%) gross income test contained
in Section 856(c)(2), or functionally equivalent successor provision of the Code
and until such time Lessee shall lease the Leased Property from Lessor at the
Fair Market Rental determined in accordance with Article XXXIV; provided,
however, that if Lessee's obligation to purchase arises pursuant to Section
16.5, and if the events giving rise to the Event of Default for which Lessor
exercised its right to put the Leased Property to Lessee pursuant to Section
16.5 has been cured prior to the time Lessor determines to sell the Leased
Property, then this Lease shall continue in full force and effect as if such
Event of Default had not occurred. If Lessee has the right to purchase the
property pursuant to the terms herein, and if Lessor determines not to sell such
property pursuant to the above sentence, Lessee's right, if any, to purchase any
or all of such property shall, upon notice to Lessor that Lessee intends to
continue such right, continue and be exercisable, upon and subject to all
applicable terms and conditions set forth in this Lease, including the
provisions of Article XXXV, at such time as the transaction, upon the advice of
Lessor's counsel, would be a sale of property (to the extent the Leased Property
is a real estate asset) described in Section 857(b)(6)(C), or functionally
equivalent successor provision, of the Code, and would not result in an
unacceptable amount of gross income for purposes of the ninety five percent
(95%) gross income test contained in Section 856(c)(2), or functionally
equivalent successor provision of the Code and until such time Lessee shall
lease the Leased Property from Lessor at the Fair Market Rental determined in
accordance with Article XXXIV.
ARTICLE XL.
- ------------
40.1 Subdivision
-----------
. If the Land is in excess of that which is required to operate the
Facilities in accordance with the Primary Intended Use, Lessor may subdivide the
Land and amend this Lease and the legal description attached hereto as Exhibit A
---------
such that the Land contains only so much of the Land as is necessary to operate
each Facility in accordance with its Primary Intended Use. If Lessor subdivides
the Land, Lessee shall have the right to an appropriate abatement of Rent
payable and of the purchase price payable in the event that Lessee exercises its
option to purchase the Leased Property pursuant to Article XXXV and the right to
reasonably adjust any other obligations of either party accordingly. After any
such subdivision Lessee shall have no rights to any land which is no longer part
of the Leased Property and Lessor may sell, lease or develop any land which is
no longer part of the Leased Property, provided that Lessor may not use such
land for the operation of a facility providing adult congregate care and
assisted living services, and provided further that Lessor may not sell or lease
such land to a third party that Lessor knows intends to use such land for the
development of a facility providing adult congregate care and assisted living
services. If Lessor elects to subdivide the Land Lessee shall cooperate with
Lessor and take all actions reasonably requested by Lessor to effect such
subdivision.
ARTICLE XLI.
- -------------
41.1 Authority
---------
. If Lessee is a corporation, trust, or partnership, Lessee, and each
individual executing this Lease on behalf of Lessee, represent and warrant that
each is duly authorized to execute and deliver this Lease on behalf of Lessee
and shall within thirty (30) days after execution of this Lease deliver to
Lessor evidence of such authority satisfactory to Lessor.
ARTICLE XLII.
- --------------
42.1 Attorneys' Fees
----------------
. If Lessor or Lessee brings an action or other proceeding against the
other to enforce any of the terms, covenants or conditions hereof or any
instrument executed pursuant to this Lease, or by reason of any breach or
default hereunder or thereunder, the party prevailing in any such action or
proceeding and any appeal thereupon shall be paid all of its costs and
reasonable outside attorneys' fees incurred therein. In addition to the
foregoing and other provisions of this Lease that specifically require Lessee to
reimburse, pay or indemnify against Lessor's attorneys' fees, Lessee shall pay,
as Additional Charges, all of Lessor's reasonable outside attorneys' fees
incurred in connection with the administration or enforcement of this Lease,
including attorneys' fees incurred in connection with Lessee's exercise of its
option to purchase the Leased Property or the renewal of this Lease for any
Extended Term, the review of any letters of credit, the review, negotiation or
documentation of any subletting, assignment, or management arrangement or any
consent requested in connection therewith, and the collection of past due Rent.
ARTICLE XLIII.
- ---------------
43.1 Brokers
-------
. Lessee warrants that it has not had any contact or dealings with any
Person or real estate broker which would give rise to the payment of any fee or
brokerage commission in connection with this Lease, and Lessee shall indemnify,
protect, hold harmless and defend Lessor from and against any liability with
respect to any fee or brokerage commission arising out of any act or omission of
Lessee. Lessor warrants that it has not had any contact or dealings with any
Person or real estate broker which would give rise to the payment of any fee or
brokerage commission in connection with this Lease, and Lessor shall indemnify,
protect, hold harmless and defend Lessee from and against any liability with
respect to any fee or brokerage commission arising out of any act or omission of
Lessor.
ARTICLE XLIV.
- --------------
44.1 Miscellaneous.
--------------
44.1.1 Survival
--------
. Anything contained in this Lease to the contrary notwithstanding, all
claims against, and liabilities and indemnities of, Lessee or Lessor arising
prior to the expiration or earlier termination of the Term shall survive such
expiration or termination.
44.1.2 Severability
------------
. If any term or provision of this Lease or any application thereof shall
be held invalid or unenforceable, the remainder of this Lease and any other
application of such term or provision shall not be affected thereby.
44.1.3 Non-Recourse
------------
. Lessee specifically agrees to look solely to the Leased Property for
recovery of any judgment from Lessor. It is specifically agreed that no
constituent partner in Lessor or officer or employee of Lessor shall ever be
personally liable for any such judgment or for the payment of any monetary
obligation to Lessee. The provision contained in the foregoing sentence is not
intended to, and shall not, limit any right that Lessee might otherwise have to
obtain injunctive relief against Lessor, or any action not involving the
personal liability of Lessor. Furthermore, except as otherwise expressly
provided herein, in no event shall Lessor ever be liable to Lessee for any
indirect or consequential damages suffered by Lessee from whatever cause.
44.1.4 Licenses
--------
. Upon the expiration or earlier termination of the Term, Lessee shall use
its best efforts to transfer to Lessor or Lessor's nominee and shall cooperate
with Lessor or Lessor's designee or nominee in connection with the processing by
Lessor or Lessor's designee or nominee of any applications for all licenses,
operating permits and other governmental authorization, all contracts, including
contracts with governmental or quasi-governmental entities, business records,
data, patient and resident records, and patient and resident trust accounts,
which may be necessary or useful for the operation of the applicable Facility;
provided that the costs and expenses of any such transfer or the processing of
any such application shall be paid by Lessor or Lessor's designee or nominee.
Lessee shall not commit any act or be remiss in the undertaking of any act that
would jeopardize the licensure or certification of such Facility, and Lessee
shall comply with all requests for an orderly transfer of the same upon the
expiration or early termination of the Term. In addition, upon request, Lessee
shall promptly deliver copies of all books and records relating to the Leased
Property and its operation to Lessor or Lessor's designee or nominee but Lessee
shall not be required to deliver corporate financial records or proprietary
materials. Lessee shall indemnify, defend, protect and hold harmless Lessor
from and against any loss, damage, cost or expense incurred by Lessor or
Lessor's designee or nominee in connection with the correction of any and all
deficiencies of a physical nature identified by any governmental authority
responsible for licensing the Leased Property in the course of any change of
ownership inspection and audit and previously identified during the Term by such
governmental authority.
44.1.5 Successors and Assigns
------------------------
. This Lease shall be binding upon Lessor and its successors and assigns
and, subject to the provisions of Article XXIV, upon Lessee and its successors
and assigns.
44.1.6 Governing Law
--------------
. THIS LEASE WAS NEGOTIATED IN THE STATE OF CALIFORNIA, WHICH STATE THE
PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE
UNDERLYING TRANSACTION EMBODIED HEREBY. ACCORDINGLY, IN ALL RESPECTS THIS LEASE
(AND ANY AGREEMENT FORMED PURSUANT TO THE TERMS HEREOF) SHALL BE GOVERNED BY,
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
CALIFORNIA (WITHOUT REGARD OF PRINCIPLES OR CONFLICTS OF LAW) AND ANY APPLICABLE
LAWS OF THE UNITED STATES OF AMERICA, EXCEPT THAT ALL PROVISIONS HEREOF RELATING
TO THE CREATION OF THE LEASEHOLD ESTATE AND ALL REMEDIES SET FORTH IN ARTICLE
XVI RELATING TO RECOVERY OF POSSESSION OF THE LEASED PROPERTY OF ANY FACILITY
(SUCH AS AN ACTION FOR UNLAWFUL DETAINER OR OTHER SIMILAR ACTION) SHALL BE
CONSTRUED AND ENFORCED ACCORDING TO, AND GOVERNED BY, THE LAWS OF THE STATE IN
WHICH THE LEASED PROPERTY OF SUCH FACILITY IS LOCATED.
44.1.7 Waiver of Trial by Jury
---------------------------
. EACH OF LESSOR AND LESSEE ACKNOWLEDGES THAT IT HAS HAD THE ADVICE OF
COUNSEL OF ITS CHOICE WITH RESPECT TO ITS RIGHTS TO TRIAL BY JURY UNDER THE
CONSTITUTION OF THE UNITED STATES AND THE STATE. EACH OF LESSOR AND LESSEE
HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION
OR CAUSE OF ACTION (i) ARISING UNDER THIS LEASE (OR ANY AGREEMENT FORMED
PURSUANT TO THE TERMS HEREOF) OR (ii) IN ANY MANNER CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF LESSOR AND LESSEE WITH RESPECT TO TIES LEASE (OR
ANY AGREEMENT FORMED PURSUANT TO THE TERMS HEREOF) OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE
TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR
HEREINAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; EACH
OF LESSOR AND LESSEE HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY A COURT TRIAL WITHOUT A JURY, AND
THAT EITHER PARTY MAY FILE A COPY OF THIS SECTION WITH ANY COURT AS CONCLUSIVE
EVIDENCE OF THE CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL
BY JURY.
LESSOR'S INITIALS:
LESSEE'S INITIALS:
44.1.8 Reserved
--------
.
44.1.9 Entire Agreement
-----------------
. This Lease and the Exhibits hereto constitutes the entire agreement of
the parties with respect to the subject matter hereof, and may not be changed or
modified except by an agreement in writing signed by the parties. Lessor and
Lessee hereby agree that all prior or contemporaneous oral understandings,
agreements or negotiations relative to the leasing of the Leased Property are
merged into and revoked by this Lease. Without limiting the generality of the
foregoing, any schedules, abstracts of Original Leases and any other materials
prepared in connection with this Lease or the Original Leases are hereby merged
into and revoked by this Lease.
44.1.10 Headings
--------
. All titles and headings to sections, subsections, paragraphs or other
divisions of this Lease are only for the convenience of the parties and shall
not be construed to have any effect or meaning with respect to the other
contents of such sections, subsections, paragraphs or other divisions, such
other content being controlling as to the agreement among the parties hereto.
44.1.11 Counterparts
------------
. This Lease may be executed in any number of counterparts, each of which
shall be a valid and binding original, but all of which together shall
constitute one and the same instrument.
44.1.12 Joint and Several
-------------------
. If more than one Person is the Lessee under this Lease, the liability of
such Persons under this Lease shall be joint and several.
44.1.13 Interpretation
-------------
. Both Lessor and Lessee have been represented by counsel and this Lease
and every provision hereof has been freely and fairly negotiated. Consequently,
all provisions of this Lease shall be interpreted according to their fair
meaning and shall not be strictly construed against any party.
44.1.14 Time of Essence
-----------------
. Time is of the essence of this Lease and each provision hereof in which
time of performance is established.
44.1.15 Further Assurances
-------------------
. The parties' agree to promptly sign all documents reasonably requested
to give effect to the provisions of this Lease.
ARTICLE XLV.
- -------------
45.1 Restatement of Original Leases
---------------------------------
. This Lease amends, consolidates and restates in their entirety the
Original Leases, and, to the extent applicable, shall constitute an assignment
by each lessee under the Original Leases to all parties constituting "Lessee"
hereunder, jointly and severally. Lessor and Lessee acknowledge and agree that
from and after the Restatement Date, Lessee shall occupy the Leased Property of
each Facility pursuant to the Original Leases, as amended, consolidated and
restated by this Lease. Notwithstanding the foregoing amendment, consolidation
and restatement of the Original Leases, the following obligations of Lessee
under the Original Leases, prior to amendment hereby, shall be preserved and
continue subsequent to such termination:
(a) The applicable "Lessee" under each Original Lease shall remain
responsible for and shall indemnify and hold Lessor harmless from and against
any and all claims, liabilities, damages, actions and causes of action, costs
and expenses, including attorneys' fees, for which such Person is responsible
pursuant to the Original Leases and which accrue or have accrued on or before
the Restatement Date.
(b) The applicable "Lessee" under each Original Lease shall remain
responsible for all obligations of the lessee under each applicable Original
Lease which have accrued on or before the Restatement Date until full and
complete payment and/or performance of the same.
ARTICLE XLVI.
- --------------
46.1 Provisions Relating to Master Lease
---------------------------------------
. Lessor and Lessee hereby acknowledge and agree that, except as otherwise
expressly provided herein to the contrary, this Lease is and the parties intend
the same for all purposes to be treated as a single, integrated and indivisible
agreement. Lessor and Lessee acknowledge their desire to amend the terms and
conditions of the Original Leases by executing this Master Lease, thereby
covering all of the Facilities in a single, integrated and indivisible
agreement.
IN WITNESS WHEREOF, the parties have caused this Lease to be executed and
attested by their respective officers thereunto duly authorized.
"Lessor"
HEALTH CARE PROPERTY INVESTORS, INC.,
a Maryland corporation
By: /s/ Arthur G. Sundby
-----------------------
Name: Arthur G. Sundby
Title: Vice President
HCPI TRUST,
a Maryland real estate trust
By: /s/ Arthur G. Sundby
-----------------------
Name: Arthur G. Sundby
Title: Vice President
TEXAS HCP HOLDING, L.P.,
a Delaware limited partnership
By: Texas HCP G.P., Inc.,
a Delaware corporation,
its general partner
By: /s/ Arthur G. Sundby
-----------------------
Name: Arthur G. Sundby
Title: Vice President
"Lessee"
EMERITUS CORPORATION,
a Washington corporation
By: /s/ Raymond R. Brandstrom
----------------------------
Name: Raymond R. Brandstrom
Title: CFO
ESC III, L.P.,
a Washington limited partnership
d.b.a. Texas - ESC III, L.P.
By: ESC G.P. II, Inc.,
a Washington corporation,
its general partner
By: /s/ Raymond R. Brandstrom
----------------------------
Name: Raymond R. Brandstrom
Title: CFO
- ------
A-23
A-1
EXHIBIT A-1
-----------
Description of Land
Allentown, PA (Green Meadows)
-----------------------------
EXHIBIT A-2
-----------
Description of Land
Boise, ID (Summerwind)
----------------------
EXHIBIT A-3
-----------
Description of Land
Dover, DE (Green Meadows)
-------------------------
EXHIBIT A-4
-----------
Description of Land
Latrobe, PA (Green Meadows of Latrobe)
--------------------------------------
EXHIBIT A-5
-----------
Description of Land
Easley, SC (Countryside Village)
--------------------------------
EXHIBIT A-6
-----------
Description of Land
Easley, SC (Summit Place)
-------------------------
EXHIBIT A-7
-----------
Description of Land
Fullerton, CA (Rosewood)
------------------------
EXHIBIT A-8
-----------
Description of Land
Hendersonville, NC (Heritage Lodge)
-----------------------------------
EXHIBIT A-9
-----------
Description of Land
Hendersonville, NC (Pine Park)
------------------------------
EXHIBIT A-10
------------
Description of Land
Spartanburg, SC (Skylyn)
------------------------
EXHIBIT A-11
------------
Description of Land
El Paso, TX (Palisades)
-----------------------
EXHIBIT A-12
------------
Description of Land
San Antonio, TX (Amber Oaks)
----------------------------
EXHIBIT A-13
------------
Description of Land
San Marcos, TX
--------------
EXHIBIT A-14
------------
Description of Land
El Paso, TX (Cambria)
---------------------
EXHIBIT A-15
------------
Description of Land
Odessa, TX (Sherwood Place)
---------------------------
EXHIBIT A-16
------------
Description of Land
Walla Walla, WA (Garrison Creek)
--------------------------------
EXHIBIT A-17
------------
Description of Land
Everett, WA
-----------
EXHIBIT A-18
------------
Description of Land
Phoenix, AZ
-----------
EXHIBIT A-19
------------
Description of Land
Renton, WA (Renton Villas)
--------------------------
EXHIBIT A-20
------------
Description of Land
Voorhees, NJ
------------
EXHIBIT A-21
------------
Description of Land
Biloxi, MS
----------
EXHIBIT A-22
------------
Description of Land
Auburn, CA
----------
EXHIBIT A-23
------------
Description of Land
San Antonio, TX (Hamilton House)
--------------------------------
- ------
B-2
B-1
EXHIBIT B-1
-----------
List of Lessor's Personal Property
With Respect to Each Facility Other Than The Group 2 Facilities
---------------------------------------------------------------
All furniture, equipment, and tangible personal property, including but not
limited to the following: all fabrics, beds, mattresses, credenzas, desks,
mirrors, framed pictures, prints, art work, tables, chairs, lamps, luggage
racks, draperies, bed spreads, sofas, nightstands, activity tables, stools,
shower curtains and hooks, registration equipment, planters, coat racks, ceiling
fans, memo holders, podiums, stands, window blinds, wastebaskets, copy machines,
file cabinets, typewriters, trash cans, safes, lockers, washers, dryers, towels,
washcloths, linens, blankets, mattress pads, pillows, laundry carts, maid carts,
vacuum cleaners, hand trucks, medical carts, time clocks, clothes hangers, ice
machines, locksetters and equipment, ice bins, blenders, moveable coolers,
beverage dispensers, glass racks, syrup tanks, cash registers, coffee machines,
ranges, fryers, broilers, griddles, hot plates, warmers, toasters, waffle irons,
soup wells, microwaves, heat lamps, timers, dishwashers, coffee grinders,
steamers, ovens, smallwares, china, silverware, glasses, t.v. sets, and supplies
of every type and nature now or hereafter used in the Facility and all
increases, substitutions, replacements, additions and accessions to any such, of
every type, and any certificate of occupancy and architectural drawings with
respect to the Facility; excluding, however, other intangible personal property
relating to the trade or business operated on the Facility, including operating
licenses and good will, and any inventory or vehicles relating to the trade or
business operated on the Facility.
EXHIBIT B-2
List of Lessor's Personal Property
With Respect to The Group 2 Facilities
--------------------------------------
All Personal Property owned by Lessor and in, on or about the Leased
Property as of the Restatement Date.
C-2
C-1
EXHIBIT C
---------
DESCRIPTION OF FACILITIES AND CERTAIN MATERIAL TERMS
----------------------------------------------------
GROUP 1 FACILITIES
FACILITY MONTHLY ALLOCATED MINIMUM RENT ALLOCATED INITIAL INVESTMENT
-------- ------------------------------ ----------------------------
LEASE YEAR REFERENCE DATE BASE GROSS REVENUES CPI RENT AS OF RESTATEMENT
- ------------------------- ------------------- --------------------------
DATE APPLICABLE % FOR PERCENTAGE RENT CPI PERCENTAGE CAP CPI
---- -------------------------------- ------------------ ---
PERCENTAGE FLOOR EXPIRATION DATE EXTENDED TERM
---- --------- --------------- -------------
Allentown, PA1,6,8,9, 17 $46,093.58 $4,994,406 November 1
- -------------------------- ---------- ---------- -----------
$1,942,466 $49,598 10% 1.75% 0% October 31, 2007 Three
- ---------- ------- --- ----- -- ------------------ -----
five (5) year terms
- ----------------------
Dover, DE1,6,9, 17 $31,249.67 $4,525,000 November 1 $1,458,261
- -------------------- ---------- ---------- ---------- ----------
$34,114 10% 1.75% 0% October 31, 2007 Three five (5) year
- ------- --- ----- -- ------------------ --------------------
terms
- -----
Latrobe, PA1,6,8,9, 17 $66,751.67 $9,055,653 November 1
- ------------------------ ---------- ---------- -----------
$2,394,700 $71,259 10% 1.75% 0% October 31, 2007 Three
- ---------- ------- --- ----- -- ------------------ -----
five (5) year terms
- ----------------------
Easley, SC (Countryside)1,6,12, 19 $75,451.84 $10,088,151 February 1
- ---------------------------------- ---------- ----------- ----------
$3,910,786 $71,778 10% 1.75% 0% January 31, 2011 Three
- ---------- ------- --- ----- -- ------------------ -----
five (5) year terms
- ----------------------
Easley, SC (Summit Place)1,6,12,19 $30,652.31 $3,499,328 February 1
- ----------------------------------- ---------- ---------- ----------
$1,082,692 $29,238 10% 1.75% 0% January 31, 2011 Three
---------- ------- --- ----- -- ---------------- -----
five (5) year terms
-------------------
Hendersonville, NC (Heritage Lodge)1,6,12,19 $17,291.05 $1,933,562
- ----------------------------------------------- ---------- ----------
February 1 $568,067 $16,754 10% 1.75% 0% January 31,
---------- -------- ------- --- ----- -- -----------
2011 Three five (5) year terms
---- -------------------------
Hendersonville, NC (Pine Park)1,6,12, 19 $61,304.62 $8,219,742
- -------------------------------------------- ---------- ----------
February 1 $2,160,318 $59,520 10% 1.75% 0% January 31,
- ----------- ---------- ------- --- ----- -- ------------
2011 Three five (5) year terms
- ---- -----------------------------
Spartanburg, SC1,6,12,19 $136,027.11 $18,296,692 February 1
- ------------------------- ----------- ----------- -----------
$5,839,730 $129,403 10% 1.75% 0% January 31, 2011 Three
- ---------- -------- --- ----- -- ----------------- -----
five (5) year terms
- ----------------------
El Paso, TX (Palisades)1,6,11, 18 $66,693.00 $8,520,398 April 1
- ------------------------------------- ---------- ---------- --------
$2,385,076 $61,542 5% 1.5% 0% March 31, 2012 Three five
- ---------- ------- -- ---- -- --------------- ----------
(5) year terms
- ----------------
FACILITY MONTHLY ALLOCATED MINIMUM RENT ALLOCATED INITIAL INVESTMENT
-------- ------------------------------ ----------------------------
LEASE YEAR REFERENCE DATE BASE GROSS REVENUES CPI RENT AS OF RESTATEMENT
- ------------------------- ------------------- --------------------------
DATE APPLICABLE % FOR PERCENTAGE RENT CPI PERCENTAGE CAP CPI
---- -------------------------------- ------------------ ---
PERCENTAGE FLOOR EXPIRATION DATE EXTENDED TERM
---- --------- --------------- -------------
San Antonio, TX(Amber Oaks)1,6,11, 18 $74,503.00 $9,606,452 April 1
- -------------------------------------- ---------- ---------- -------
$1,964,084 $69,496 5% 1.5% 0% March 31, 2012 Three five
- ---------- ------- -- ---- -- --------------- ----------
(5) year terms
- ----------------
San Marcos, TX1,6,11, 18 $39,998.00 $3,758,493 April 1
- --------------------------- ---------- ---------- --------
$1,476,210 $37,482 5% 1.5% 0% March 31, 2012 Three five
- ---------- ------- -- ---- -- --------------- ----------
(5) year terms
- ----------------
Continuing to and until the later of (i) the Fixed Term Expiration Date and
(ii) the Fullerton Closing Date, if at all, Lessee shall pay the following:
2002-$43,357
2003-$42,977
2004-$42,107
2005-$42,416
2006-$42,731
2007-$43,051
2008-$43,376
2009-$43,707
2010-$44,044
2011-$44,387
2012-$44,736
2013-$45,091
2014-$45,452
2015-$45,820
Commencing upon the Fullerton Closing Date, if at all, and continuing for
the balance of the Fixed Term, Lessee shall pay the following:
2002-2015: $39,169
Everett, WA1,7,10 $3,687,578 January 1 $1,375,676 $30,630
----------------- ---------- --------- ---------- -------
10% 1.75% 0% December 31, 2015 Three five (5) year terms
- --- ----- -- ------------------- -----------------------------
C-3
FACILITY MONTHLY ALLOCATED MINIMUM RENT ALLOCATED INITIAL INVESTMENT
-------- ------------------------------ ----------------------------
LEASE YEAR REFERENCE DATE BASE GROSS REVENUES CPI RENT AS OF RESTATEMENT
- ------------------------- ------------------- --------------------------
DATE APPLICABLE % FOR PERCENTAGE RENT CPI PERCENTAGE CAP CPI
---- -------------------------------- ------------------ ---
PERCENTAGE FLOOR EXPIRATION DATE EXTENDED TERM
---- --------- --------------- -------------
Phoenix, AZ1,7,10 $40,868.27 $4,949,024 January 1 $1,482,390
- ------------------ ---------- ---------- ---------- ----------
$41,312 10% 1.75% 0% December 31, 2007 Three five (5) year
- ------- --- ----- -- ------------------- -------------------
terms
- -----
$31,642.84
Renton, WA1,7,10 $3,105,270 January 1 $1,685,695 $27,336
---------------- ---------- --------- ---------- -------
10% 1.75% 0% December 31, 2015 Three five (5) year terms
- --- ----- -- ------------------- -----------------------------
Voorhees, NJ1,7,10 $53,694.75 $6,737,704 February 1 $2,385,723
- ------------------- ---------- ---------- ----------- ----------
$52,294 10% 1.75% 0% December 31, 2007 Three five (5) year
- ------- --- ----- -- ------------------- -------------------
terms
- -----
GROUP 2 FACILITIES
FACILITY MONTHLY ALLOCATED MINIMUM RENT ALLOCATED INITIAL INVESTMENT
-------- ------------------------------ ----------------------------
LEASE YEAR REFERENCE DATE BASE GROSS REVENUES CPI RENT AS OF RESTATEMENT
- ------------------------- ------------------- --------------------------
DATE APPLICABLE % FOR PERCENTAGE RENT CPI PERCENTAGE CAP CPI
---- -------------------------------- ------------------ ---
PERCENTAGE FLOOR EXPIRATION DATE EXTENDED TERM
---- --------- --------------- -------------
Boise, ID2, 7, 16, 20 $26,250.00 $3,044,158 September 1 N/A
- ------------------------- ---------- ---------- ------------ ---
$61,35521 N/A 4% 2.5% August 31, 2015 Six five (5) year
- --------- --- ----- ---- ----------------- -----------------
terms
- -----
El Paso, TX (Cambria)2, 7, 15 $45,346.00 $4,350,072 September 1
- ---------------------------------- ---------- ---------- -----------
N/A $76,43221 N/A 4% 2.5% October 31, 2006 Six five (5)
- --- --------- --- -- ---- ----------------- ------------
year terms
- -----------
Odessa, TX2,7, 15 $44,046.79 $4,250,072 October 1 N/A
- ------------------- ---------- ---------- ---------- ---
$73,833 N/A 4% 2.5% October 31, 2006 Six five (5) year terms
- ------- --- -- ---- ---------------- -----------------------
Walla Walla, WA2,7, 15 $49,416.21 $5,579,971 August 1 N/A
---------------------- ---------- ---------- -------- ---
$114,384 N/A 4% 2.5% October 31, 2006 Six five (5) year
- -------- --- -- ---- ------------------ --------------------
terms
- -----
C-5
C-4
GROUP 3 FACILITIES
FACILITY MONTHLY ALLOCATED MINIMUM RENT ALLOCATED INITIAL INVESTMENT
-------- ------------------------------ ----------------------------
LEASE YEAR REFERENCE DATE BASE GROSS REVENUES CPI RENT AS OF RESTATEMENT
- ------------------------- ------------------- --------------------------
DATE APPLICABLE % FOR PERCENTAGE RENT CPI PERCENTAGE CAP CPI
---- -------------------------------- ------------------ ---
PERCENTAGE FLOOR EXPIRATION DATE EXTENDED TERM
---- --------- --------------- -------------
Biloxi, MS3,13 $58,128.05 $6,333,703 October 1 N/A $58,110
-------------- ---------- ---------- --------- --- -------
N/A 3.5% 0% September 30, 2016 One ten (10) year term
- --- ---- -- -------------------- --------------------------
Auburn, CA3,13 $81,119.43 $8,847,077 October 1 N/A $81,072
-------------- ---------- ---------- --------- --- -------
N/A 3.5% 0% September 30, 2016 One ten (10) year term
- --- ---- -- -------------------- --------------------------
GROUP 4 FACILITIES
FACILITY MONTHLY ALLOCATED MINIMUM RENT ALLOCATED INITIAL INVESTMENT
-------- ------------------------------ ----------------------------
LEASE YEAR REFERENCE DATE BASE GROSS REVENUES CPI RENT AS OF RESTATEMENT
- ------------------------- ------------------- --------------------------
DATE APPLICABLE % FOR PERCENTAGE RENT CPI PERCENTAGE CAP CPI
---- -------------------------------- ------------------ ---
PERCENTAGE FLOOR EXPIRATION DATE EXTENDED TERM
---- --------- --------------- -------------
San Antonio, TX (Hamilton House)4, 14 $79,034.68 $7,811,869 January
- -------------------------------------- ---------- ---------- -------
1 N/A $0.00 N/A 2.75% 0% September 30, 2017 Two ten
- - --- ----- --- ----- -- ------------------- -------
(10) year terms
- -----------------
GROUP 5 FACILITIES
FACILITY MONTHLY ALLOCATED MINIMUM RENT ALLOCATED INITIAL INVESTMENT
-------- ------------------------------ ----------------------------
LEASE YEAR REFERENCE DATE BASE GROSS REVENUES CPI RENT AS OF RESTATEMENT
- ------------------------- ------------------- --------------------------
DATE APPLICABLE % FOR PERCENTAGE RENT CPI PERCENTAGE CAP CPI
---- -------------------------------- ------------------ ---
PERCENTAGE FLOOR EXPIRATION DATE EXTENDED TERM
---- --------- --------------- -------------
2002 - $16,500
2003 - $17,500
2004 - $19,000
2005 - $19,333
2006 - $19,671
2007 - $20,015
2008 - $20,365
2009 - $20,722
2010 - $21,084
2011 - $21,453
2012 - $21,829
2013 - $22,211
2014 - $22,599
Fullerton, CA5,6,7, 12 2015 - $22,995 $4,003,174 May 1 N/A
- ------------------------ ---------------- ---------- ------ ---
N/A N/A N/A 0% December 31, 2015 Three five (5) year terms
--- --- --- -- ----------------- -------------------------
1Group 1 Facility
2Group 2 Facility
3Group 3 Facility
4Group 4 Facility
5Group 5 Facility
6Purchase Option Facility
7First Refusal Facility
8Land Lease Facility
9Renewal Group A: Allentown, PA; Latrobe, PA; Dover, DE
10Renewal Group B: Renton, WA; Everett, WA; Phoenix, AZ; Voorhees, NJ
11Renewal Group C: El Paso, TX (Palisades); San Antonio, TX (Amber Oaks); San
Marcos, TX
12Renewal Group D: Easley, SC (Countryside); Easley, SC (Summit Place);
Fullerton, CA; Hendersonville, NC (Heritage Lodge); Hendersonville, NC (Pine
Park); Spartanburg, SC
13Renewal Group E: Biloxi, MS; Auburn, CA
14Renewal Group F: San Antonio, TX (Hamilton House)
15Renewal Group G: El Paso, TX (Cambria); Odessa, TX; Walla Walla, WA
16Renewal Group H: Boise, ID
17Purchase Group A: Allentown, PA; Latrobe, PA; Dover, DE
18Purchase Group B: El Paso, TX (Palisades); San Antonio, TX; San Marcos, TX
19Purchase Group C: Easley, SC (Countryside); Easley, SC (Summit Place);
Hendersonville, NC (Heritage Lodge); Hendersonville, NC (Pine Park);
Spartanburg, SC
20For purposes of determining the increase (the "Boise Additional Rent
Increase") in Allocated Additional Rent for any Lease Year immediately following
a Lease Year in which an increase in Allocated Minimum Rent with respect to
the Facility located in Boise, Idaho pursuant to Section 3.1.1(b) occurs, the
following shall apply:
(i) First, Lessor shall calculate the Boise Additional Rent Increase on
the aggregate sum of Allocated Minimum Rent and Allocated Additional Rent
payable for the immediately preceding Lease Year, but excluding for purposes of
such calculation the amount of the Applicable Boise Minimum Rent Increase during
the immediately preceding Lease Year;
(ii) Second, Lessor shall calculate the Boise Additional Rent Increase
with respect to only that portion of any Applicable Boise Minimum Rent Increases
during the last Lease Year, prorating the amount of each such Boise Additional
Rent Increase based upon the number of days for which such Applicable Boise
Minimum Rent Increase was in effect during the immediately preceding Lease Year;
and
(iii) Lastly, Lessor shall add the results of clauses (i) and (ii)
above, and the sum thereof shall be deemed the Boise Additional Rent Increase
for the applicable Lease Year.
21 CPI Rent amounts are current as of August, 2002, and do not reflect increases
in Allocated Additional Rent as set forth in Section 3.1.2(b) scheduled for
September 1, 2002.
EXHIBIT D
---------
INTERNAL RATE OF RETURN
-----------------------
D-1
FACILITIES IRR%
---------- ----
Easley, SC (Countryside)
Easley, SC (Summit Place)
Hendersonville, NC (Heritage Lodge)
Hendersonville, NC (Pine Park)
Spartanburg, SC
12.7%
-----
Allentown, PA
Dover, DE
Latrobe, PA
12.95%
------
El Paso, TX (Palisades)
San Antonio, TX (Amber Oaks)
San Marcos, TX
13.8%
-----
EXHIBIT E
---------
PROPERTY CONDITION REPORTS
--------------------------
E-1
FACILITY PROPERTY CONDITION REPORTS
-------- --------------------------
Allentown, PA The Phase I Environmental Assessment prepared by Ecklund
- -------------- -------------------------------------------------------------
Consultants, Inc. dated June 30, 1995
- ------------------------------------------
Dover, DE The Phase I Environmental Assessment prepared by Ecklund
- ---------- ---------------------------------------------------------------
Consultants, Inc. dated June 30, 1995
- ------------------------------------------
Latrobe, PA The Property Condition Report prepared by Ecklund Consultants,
- ------------ ---------------------------------------------------------------
Inc. dated 6/13/95
- --------------------
Easley, SC (Countryside Village) The Phase I Environmental Site Assessment
- ---------------------------------- -----------------------------------------
dated 8/31/95 prepared by Environmental Enterprise Group, Inc.
- ---------------------------------------------------------------------
Easley, SC (Summit Place) The Phase I Environmental Site Assessment dated
- ---------------------------- -----------------------------------------------
8/31/95 prepared by Environmental Enterprise Group, Inc.
- --------------------------------------------------------------
Fullerton, CA The Phase I Environmental Site Assessment dated 11/25/94
- -------------- -------------------------------------------------------------
prepared by Environmental Enterprise Group, Inc.
- -----------------------------------------------------
Hendersonville, NC (Heritage Lodge) The Phase I Environmental Site
- -------------------------------------- ----------------------------------
Assessment dated 8/31/95 prepared by Environmental Enterprise Group, Inc.
- --------------------------------------------------------------------------------
Hendersonville, NC (Pine Park) The Phase I Environmental Site Assessment
- --------------------------------- ------------------------------------------
dated 8/31/95 prepared by Environmental Enterprise Group, Inc.
- ---------------------------------------------------------------------
Spartanburg, SC The Phase I Environmental Site Assessment dated 8/31/95
- ---------------- -----------------------------------------------------------
prepared by Environmental Enterprise Group, Inc.
- -----------------------------------------------------
El Paso, TX (Palisades) The Phase I Environmental Site Assessment dated
- -------------------------- -------------------------------------------------
3/17/97 prepared by VATC Associates, Inc.
- ----------------------------------------------
San Antonio, TX (Amber Oaks) The Phase I Environmental Site Assessment dated
- ---------------------------- -----------------------------------------------
3/17/97 prepared by VATC Associates, Inc.
- ----------------------------------------------
San Marcos, TX The Phase I Environmental Site Assessment dated 3/17/97
- ---------------- -----------------------------------------------------------
prepared by VATC Associates, Inc.
- -------------------------------------
Everett, WA The Phase I Environmental Site Assessment (Seabrook) dated
- ------------ ---------------------------------------------------------------
8/11/95
- -------
Phoenix, AZ The Phase I Environmental Site Assessment (Olive Grove) dated
- ------------ ---------------------------------------------------------------
April 14/94
- ------------
Renton, WA The Phase I Environmental Site Assessment (Renton Villa) dated
- ----------- ----------------------------------------------------------------
8/11/95
- -------
Voorhees, NJ The Phase I Environmental Site Assessment (Olive Grove) dated
- ------------- --------------------------------------------------------------
April 14/94
- ------------
Biloxi, MS The Phase One Environmental Site Assessment dated 8/6/2001
- ----------- ----------------------------------------------------------------
prepared by The Breland Group
- ---------------------------------
Auburn, CA The Phase One Environmental Site Assessment dated 3/16/2001
- ----------- ----------------------------------------------------------------
prepared by The Breland Group
- ---------------------------------
F-2
EXHIBIT F
---------
LETTER OF CREDIT AMOUNTS
------------------------
F-1
FACILITY LETTER OF CREDIT AMOUNT
-------- -----------------------
Allentown, PA One-half of the sum of the Allocated Minimum Rent plus
- -------------- -------------------------------------------------------------
Lessor's reasonable estimate of Allocated Additional Rent to be payable by
- --------------------------------------------------------------------------------
Lessee for the applicable Lease Year
- -----------------------------------------
Boise, ID One-half of the sum of Allocated Minimum Rent to be payable by
- ---------- -----------------------------------------------------------------
Lessee for the applicable Lease Year
- -----------------------------------------
Dover, DE One-half of the sum of the Allocated Minimum Rent plus Lessor's
- ---------- -----------------------------------------------------------------
reasonable estimate of Allocated Additional Rent to be payable by Lessee for the
- --------------------------------------------------------------------------------
applicable Lease Year
- -----------------------
Latrobe, PA One-half of the sum of the Allocated Minimum Rent plus Lessor's
- ------------ ---------------------------------------------------------------
reasonable estimate of Allocated Additional Rent to be payable by Lessee for the
- --------------------------------------------------------------------------------
applicable Lease Year
- -----------------------
Easley, SC (Countryside) One-half of the sum of the Allocated Minimum Rent
- -------------------------- -------------------------------------------------
plus Lessor's reasonable estimate of Allocated Additional Rent to be payable by
- --------------------------------------------------------------------------------
Lessee for the applicable Lease Year
- -----------------------------------------
Easley, SC (Summit Place) One-half of the sum of the Allocated Minimum Rent
- -------------------------- -------------------------------------------------
plus Lessor's reasonable estimate of Allocated Additional Rent to be payable by
- --------------------------------------------------------------------------------
Lessee for the applicable Lease Year
- -----------------------------------------
Hendersonville, NC (Heritage Lodge) One-half of the sum of the Allocated
- -------------------------------------- -------------------------------------
Minimum Rent plus Lessor's reasonable estimate of Allocated Additional Rent to
- --------------------------------------------------------------------------------
be payable by Lessee for the applicable Lease Year
- ----------------------------------------------------------
Hendersonville, NC (Pine Park) One-half of the sum of the Allocated Minimum
- ------------------------------- --------------------------------------------
Rent plus Lessor's reasonable estimate of Allocated Additional Rent to be
- --------------------------------------------------------------------------------
payable by Lessee for the applicable Lease Year
- ------------------------------------------------------
Spartanburg, SC One-half of the sum of the Allocated Minimum Rent plus
- ---------------- -----------------------------------------------------------
Lessor's reasonable estimate of Allocated Additional Rent to be payable by
- --------------------------------------------------------------------------------
Lessee for the applicable Lease Year
- -----------------------------------------
El Paso, TX (Palisades) One-third of the sum of the Allocated Minimum Rent
- ------------------------- --------------------------------------------------
plus Lessor's reasonable estimate of Allocated Additional Rent to be payable by
- --------------------------------------------------------------------------------
Lessee for the applicable Lease Year
- -----------------------------------------
San Antonio, TX (Amber Oaks) One-third of the sum of the Allocated Minimum
- ------------------------------ ---------------------------------------------
Rent plus Lessor's reasonable estimate of Allocated Additional Rent to be
- --------------------------------------------------------------------------------
payable by Lessee for the applicable Lease Year
- ------------------------------------------------------
San Marcos, TX One-third of the sum of the Allocated Minimum Rent plus
- ---------------- -----------------------------------------------------------
Lessor's reasonable estimate of Allocated Additional Rent to be payable by
- --------------------------------------------------------------------------------
Lessee for the applicable Lease Year
- -----------------------------------------
El Paso, TX (Cambria) One-half of the sum of Allocated Minimum Rent to be
- ------------------------ ---------------------------------------------------
payable by Lessee for the applicable Lease Year
- ------------------------------------------------------
Odessa, TX One-half of the sum of Allocated Minimum Rent to be payable by
- ----------- ----------------------------------------------------------------
Lessee for the applicable Lease Year
- -----------------------------------------
Walla Walla, WA One-half of the sum of Allocated Minimum Rent to be payable
- ---------------- -----------------------------------------------------------
by Lessee for the applicable Lease Year
- ---------------------------------------------
Everett, WA One-half of the sum of the Allocated Minimum Rent plus Lessor's
- ------------ ---------------------------------------------------------------
reasonable estimate of Allocated Additional Rent to be payable by Lessee for the
- --------------------------------------------------------------------------------
applicable Lease Year
- -----------------------
Phoenix, AZ One-half of the sum of the Allocated Minimum Rent plus Lessor's
- ------------ ---------------------------------------------------------------
reasonable estimate of Allocated Additional Rent to be payable by Lessee for the
- --------------------------------------------------------------------------------
applicable Lease Year
- -----------------------
Renton, WA One-half of the sum of the Allocated Minimum Rent plus Lessor's
- ----------- ----------------------------------------------------------------
reasonable estimate of Allocated Additional Rent to be payable by Lessee for the
- --------------------------------------------------------------------------------
applicable Lease Year
- -----------------------
Voorhees, NJ One-half of the sum of the Allocated Minimum Rent plus Lessor's
- ------------ ---------------------------------------------------------------
reasonable estimate of Allocated Additional Rent to be payable by Lessee for the
- --------------------------------------------------------------------------------
applicable Lease Year
- -----------------------
San Antonio, TX (Hamilton House) $741,751.65
- ------------------------------------ -----------
EXHIBIT G
---------
LETTER OF CREDIT REDUCTION FRACTION
-----------------------------------
G-1
FACILITY LOC REDUCTION FRACTION
-------- ----------------------
Allentown, PA
Dover, DE
Latrobe, PA
Easley, SC (Countryside)
Easley, SC (Summit Place)
Hendersonville, NC (Heritage Lodge)
Hendersonville, NC (Pine Park)
Spartanburg, SC
Everett, WA
Phoenix, AZ
Renton, WA
Voorhees, NJ
One-Half (1/2)
--------------
El Paso, TX (Palisades)
San Antonio, TX (Amber Oaks)
San Marcos, TX One-Fourth ( )
-------------- --------------
EXHIBIT H
---------
RENT FOR THE EXTENDED TERM
--------------------------
H-1
FACILITY EXTENDED TERM RENT
-------- ------------------
Allentown, PA
Dover, DE
Latrobe, PA
Easley, SC (Countryside)
Easley, SC (Summit Place)
Fullerton, CA
Hendersonville, NC (Heritage Lodge)
Hendersonville, NC (Pine Park)
Spartanburg, SC
Everett, WA
Phoenix, AZ
Renton, WA
Voorhees, NJ
El Paso, TX (Palisades)
San Antonio, TX (Amber Oaks)
San Marcos, TX Greater of (a) the then current Fair Market Rental for the
- ---------------- -----------------------------------------------------------
Facility and (b) one hundred three percent (103%) of the annual Allocated
- --------------------------------------------------------------------------------
Minimum Rent and Allocated Additional Rent payable for the last Lease Year of
- --------------------------------------------------------------------------------
the immediately preceding Fixed Term or Extended Term, as applicable.
- ------------------------------------------------------------------------------
Auburn, CA
Biloxi, MS One-twelfth (1/12) of the product of Allocated Minimum Rent and
- ----------- ----------------------------------------------------------------
CPI Rent for previous Lease Year times one hundred three and one-half percent
- --------------------------------------------------------------------------------
(103.5%)
- --------
Boise, ID
El Paso, TX (Cambria)
Odessa, TX
Walla Walla, WA Greater of (a) the then current Fair Market Rental for the
- ----------------- ----------------------------------------------------------
Facility and (b) one hundred two and one-half percent (102.5%) of the annual
- --------------------------------------------------------------------------------
Allocated Minimum Rent and Allocated Additional Rent payable for the last Lease
- --------------------------------------------------------------------------------
Year of the immediately preceding Fixed Term or Extended Term, as applicable.
- --------------------------------------------------------------------------------
San Antonio, TX (Hamilton House) Greater of (i) Fair Market Rental for the
- ---------------------------------- -----------------------------------------
Facility and (ii) one hundred two percent (102%) of the annual Allocated Minimum
- --------------------------------------------------------------------------------
Rent payable for the last Lease Year of the immediately preceding Fixed Term or
- --------------------------------------------------------------------------------
Extended Term, as applicable.
- --------------------------------
I-2
EXHIBIT I
---------
CAPITAL REPAIR REQUIREMENT AND
------------------------------
ORIGINAL LEASE COMMENCEMENT DATE
--------------------------------
I-1
ORIGINAL LEASE
FACILITY CAPITAL REPAIR REQUIREMENT COMMENCEMENT DATE
-------- -------------------------- -----------------
Allentown, PA $150.00 October 23, 1995
- -------------- ------- ------------------
Boise, ID $0.00 August 31, 1995
- ---------- ----- -----------------
Dover, DE $150.00 October 23, 1995
- ---------- ------- ------------------
Latrobe, PA $150.00 October 23, 1995
- ------------ ------- ------------------
Easley, SC (Countryside) $150.00 February 1, 1996
- -------------------------- ------- ------------------
Easley, SC (Summit Place) $150.00 February 1, 1996
- ---------------------------- ------- ------------------
Fullerton, CA $150.00 April 2, 1996
- -------------- ------- ---------------
Hendersonville, NC (Heritage Lodge) $150.00 January 26, 1996
- -------------------------------------- ------- ------------------
Hendersonville, NC (Pine Park) $150.00 January 26, 1996
- --------------------------------- ------- ------------------
Spartanburg, SC $150.00 February 1, 1996
- ---------------- ------- ------------------
El Paso, TX (Palisades) $150.00 April 1, 1997
- -------------------------- ------- ---------------
San Antonio, TX (Amber Oaks) $150.00 April 1, 1997
- -------------------------------- ------- ---------------
San Marcos, TX $150.00 April 1, 1997
- ---------------- ------- ---------------
El Paso, TX (Cambria) $0.00 August 22, 1996
- ------------------------ ----- -----------------
Odessa, TX $0.00 September 17, 1996
- ----------- ----- --------------------
Walla Wall, WA $0.00 July 24, 1996
- ---------------- ----- ---------------
Everett, WA $150.00 December 29, 1995
- ------------ ------- -------------------
Phoenix, AZ $150.00 December 29, 1995
- ------------ ------- -------------------
Renton, WA $150.00 December 29, 1995
- ----------- ------- -------------------
Voorhees, NJ $150.00 January 19, 1996
- ------------- ------- ------------------
Biloxi, MS $0.00 September 5, 2001
- ----------- ----- -------------------
Auburn, CA $0.00 September 5, 2001
- ----------- ----- -------------------
San Antonio, TX (Hamilton House) $0.00 October 14, 1997
- ------------------------------------ ----- ------------------
- ------
2
1
EXHIBIT J
---------
FORM OF
IRREVOCABLE STANDBY LETTER OF CREDIT
Health Care Property Investors, Inc.,
Texas HCP Holding, L.P., and
HCPI Trust
4675 MacArthur Court, Suite 900
Newport Beach, California 92660
Date: _______________ Letter of Credit No.: ___________
Expiration Date: ________________
GENTLEMEN:
We hereby establish our irrevocable letter of credit in your favor for the
account of __________________________ available by your draft(s) on us payable
at sight not to exceed a total of
__________________________________________________________________
(_____________________) when accompanied by this letter of credit and the
following documents.
1) A certificate purported to be executed by a representative of Health Care
Property Investors, Inc. stating that ______________________, as lessee, has
committed an Event of Default under the lease dated __________________, between
Health Care Property Investors, Inc., as lessor, and __________________________,
as lessee, or that __________________________ or an affiliate of
_____________________ has committed an event of default under any other lease,
agreement or instrument with or in favor of Health Care Property Investors, Inc.
or an affiliate of Health Care Property Investors, Inc. and stating the amount
for which a draw under this letter of credit is made; (or) a certificate
purported to be executed by a representative of Health Care Property Investors,
Inc. stating that a replacement letter of credit for this instrument has not
been supplied prior to thirty (30) days in advance of the expiration of this
instrument for the account of Health Care Property Investors, Inc. As used in
this paragraph, "affiliate" shall not include any affiliates of Daniel R. Baty
("Baty") which but for their relationship with Baty would not be considered
affiliates of _____________________.
2) The original letter of credit must accompany all drafts unless a partial
draw is presented, in which case the original must accompany the final draft.
Partial drawings are permitted, with the letter of credit being reduced, without
amendment, by the amount(s) drawn hereunder.
This letter of credit shall expire at 2:00 p.m. at the office of
____________________________ ________________________________________ on the
expiration date.
This letter of credit may be transferred or assigned by the beneficiary hereof
to any successor or assign of such beneficiary's interest in any such lease or
other agreement or to any lender obtaining a lien or security interest in the
property covered by any such lease. Each draft hereunder by any assignee or
successor shall be accompanied by a copy of the fully executed documents or
judicial orders evidencing such encumbrance, assignment or transfer.
Any draft drawn hereunder must bear the legend "Drawn under __________________
Letter of Credit Number _________ dated _______________. Except so far as
otherwise expressly stated, this letter of credit is subject to the "Uniform
Customs and Practice for Documentary Credits (1993 Revision), International
Chamber of Commerce Brochure No. 500. " We hereby agree with you and all
persons negotiating such drafts that all drafts drawn and negotiated in
compliance with the terms of this letter of credit will be duly honored upon
presentment and delivery of the documents specified above by certified or
registered mail to __________________ located at ____________________________ if
negotiated not later that 2:00 pm on or before the expiration date shown above.
Very truly yours,
By
Its
EXHIBIT K
---------
[Attach Pennsylvania Land Leases Form Amendments]
18
1
EXHIBIT L
---------
AMENDED AND RESTATED CAPITAL RENOVATION PROJECT WORK LETTER
THIS AMENDED AND RESTATED CAPITAL RENOVATION PROJECT WORK LETTER (the "Work
Letter") is dated as of September 18, 2002, by and between HEALTH CARE PROPERTY
INVESTORS, INC., a Maryland corporation, HCPI TRUST, a Maryland real estate
trust, and TEXAS HCP HOLDING, L.P., a Delaware limited partnership
(collectively, as "Landlord"), and EMERITUS CORPORATION, a Washington
corporation and ESC III, L.P., a Washington limited partnership dba TEXAS-ESC
III, L.P. (collectively, as "Tenant").
RECITALS
--------
A. HCPI and Emeritus entered into that certain Capital Renovation
Project Work Letter dated as of July 30, 2001 (the "Original Work Letter") for
the Capital Renovation Project (as hereinafter defined).
B. In connection with that certain Amended and Restated Master Lease dated
as of even date herewith (the "Lease"), by and between Landlord and Tenant,
Landlord and Tenant desire to amend and restate the Original Work Letter in its
entirety. Capitalized terms used but not defined herein shall have the meanings
ascribed to them in the Lease.
AGREEMENT
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1. Definitions. The definitions set forth in this Section 1 shall
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apply with respect to this Work Letter, the Capital Renovation Project, and the
Lease. For all purposes of this Work Letter, except as otherwise expressly
provided or unless the context otherwise requires, (i) the terms defined in this
Section 1 have the meanings assigned to them in this Section 1 and shall include
the plural as well as the singular; (ii) all references in this Work Letter to
designated "Sections" and other subdivisions are to the designated Sections and
other subdivisions of this Work Letter; (iii) the word "including" shall have
the same meaning as the phrase "including, without limitation," and other
similar phrases; and (iv) the words "herein," "hereof" and "hereunder" and other
similar words refer to this Work Letter as a whole and not to any particular
Section or other subdivision.
Amendment: That certain Second Amendment to Lease dated as of July 30, 2001, by
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and between Landlord and Tenant.
Architect: An architect and/or engineer selected by Tenant in connection with
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the design and construction of the Capital Renovation Project and approved by
Landlord, which approval shall not be unreasonably withheld or delayed so long
as such architect is licensed in the State and has experience with the type and
scope of the project for which he/she is being retained.
Capital Renovation Plans: (i) The final plans and specifications for the
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construction/performance of the Capital Renovation Project as prepared by the
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Architect and approved by Landlord, which approval shall not be unreasonably
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withheld or delayed, and (ii) all amendments, modifications and supplements
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thereto which do not require the approval of Landlord or which have been
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approved by Landlord subsequent to the approval of the plans and specifications
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described in clause (i).
Capital Renovation Project: An approximately 4,370 square foot
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addition/expansion to the Facility as more particularly depicted on and to be
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constructed/performed in accordance with the Capital Renovation Plans, including
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(A) the fixtures referred to in and/or shown thereon, (B) to the extent not
shown on the Capital Renovation Plans, additions to the parking facilities so as
to provide sufficient parking spaces to comply with all Legal Requirements and
as otherwise necessary for the operation of the Facility (including the Capital
Renovation Project) for its Primary Intended Use, (iii) all Offsite Improvements
and (iv) any and all site preparation, landscaping and drainage works and all
other improvements necessary to comply with all Legal Requirements and/or for
the operation of the Facility (including the Capital Renovation Project) for its
Primary Intended Use.
Boise Capital Renovation Project Minimum Rent Reset Date: As defined in
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the Lease.
Capital Renovation Project Budget: The budget attached hereto as Schedule
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1, together with (i) a detailed estimate report to be prepared by Tenant or its
General Contractor and delivered to and approved by Landlord (which approval
shall not be unreasonably withheld or delayed) prior to, on or promptly
following the execution and delivery of this Work Letter, which report shall
also provide a detailed cost breakdown of all hard construction costs for the
Capital Renovation Project and (ii) any other detailed budget information as
Landlord may reasonably request and approve from Tenant, including a further
breakdown of such hard construction costs to a level of detail that will allow
Landlord to determine the actual cost and percentage of completion of
construction as of the date of any Request for Advance.
Capital Renovation Project Costs: All the costs and expenses incurred in
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connection with (i) drafting, negotiating, and entering into the Amendment, this
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Work Letter and the exhibits thereto and hereto and in reviewing all documents
and instruments required thereby or hereby; and (ii) the
construction/performance of the Capital Renovation Project, as contemplated by
the Capital Renovation Project Budget, including the costs of
constructing/performing work depicted by the Capital Renovation Plans and
otherwise in accordance with applicable provisions of this Work Letter, a
construction administration fee pursuant to the terms and conditions of Section
2.3 of this Work Letter, costs for bonds, costs and fees for surveys, costs for
title work and premiums for title insurance, environmental fees and expenses,
architect fees, engineering costs, the cost of purchase and installation of any
fixtures or other property included as part of the Capital Renovation Project
and all governmental licenses and fees. Without limiting the foregoing, Capital
Renovation Project Costs shall include all amounts funded, advanced or accrued
by Landlord pursuant to this Work Letter on account of the Capital Renovation
Project.
Completion Date: The date on which the construction/performance of the Capital
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Renovation Project have been substantially completed such that Landlord has
received the following: (i) a certificate of substantial completion from the
Architect substantially in the form of American Institute of Architects ("AIA")
form G704-2000, (ii) a certificate of occupancy or its equivalent issued in
accordance with all Legal Requirements and by the appropriate Governmental
Authority having jurisdiction over the Property which permits the occupancy and
use of the improvements constructed as part of the Capital Renovation Project,
and (iii) all other licenses, authorizations and permits, if any, required by
any Governmental Authority for the use and operation of the Capital Renovation
Project as part of the Facility for its Primary Intended Use. For purposes of
this Work Letter, "substantially completed" shall mean that the improvements
being constructed/performed as part of the Capital Renovation Project and all
other work which Tenant is obligated to perform under this Work Letter with
respect to the Capital Renovation Project have been completed in accordance with
the Capital Renovation Plans and the applicable provisions of this Work Letter
and the Lease, notwithstanding the fact that Punch-List Items remain to be
performed.
Construction Contracts: The contracts between Tenant and the General
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Contractor, Tenant and the Architect and/or Tenant or any other contractor
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(including subcontractors) relating to rendering of services or furnishing of
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materials in connection with the construction/performance of the Capital
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Renovation Project, contracts between the General Contractor and any
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subcontractor and contracts between any of the foregoing and any other Person
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relating to rendering of services or furnishing of materials in connection with
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construction/performance of the Capital Renovation Project.
Facility: That certain assisted living facility located in Boise, Idaho,
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commonly known as "Summer Wind."
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General Contractor: The general contractor selected by Tenant and approved by
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Landlord in connection with the construction/performance of any approved Capital
Additions, including the Capital Renovation Project, which approval of such
general contractor shall not be unreasonably withheld or delayed so long as such
general contractor has all required State and local licenses and permits, is
bondable and has sufficient experience with the size, type and scope of the
Capital Renovation Project.
Governmental Authority: The United States, the state, county, city and
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political subdivisions in which the Property is located or which exercise
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jurisdiction over the Property or the construction/performance of the Capital
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Renovation Project, and any court administrator, agency, department, commission,
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board, bureau or instrumentality of any of them which exercises jurisdiction
over the Property or the construction/performance of the Capital Renovation
Project.
Tenant's Affidavit: A sworn affidavit of Tenant, in form and substance
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satisfactory to Landlord, stating that to the best of Tenant's knowledge, all
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labor and material bills of every kind and character incurred by Tenant to the
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date of such affidavit in connection with the Capital Renovation Project have
been paid in accordance with the payment provisions of the applicable
Construction Contracts except for the unpaid bills to be paid from the proceeds
of the current Request for Advance, and that the builder's risk insurance
described in Section 2.4(d)(i) contains sufficient coverage for the
construction/performance of the Capital Renovation Project, including the value
of materials stored off the Property.
Landlord's Maximum Cost: The sum of Four Hundred Thirteen Thousand Seven
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Hundred Twenty Dollars ($413,720.00).
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Major Subcontractors: Subcontractors, materialmen and other vendors with
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Construction Contracts in excess of Twenty-Five Thousand Dollars ($25,000.00).
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Offsite Improvements: (i) Any streets, roads, walks, curbs and the like
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(whether or not ultimately dedicated for public use and/or maintenance)
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necessary to provide access to public roads, streets and highways, (ii) any
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improvements and other works necessary or desirable for the provision of
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utilities to the Capital Renovation Project and/or the existing Facility and
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(iii) any other improvements on property other than the Land that are (A)
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required by Legal Requirements, (B) necessary for the construction/performance
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of the Capital Renovation Project in accordance with the Capital Renovation
Plans and the applicable provisions of the Lease or this Work Letter, and/or (C)
necessary for operation of the Facility (including the Capital Renovation
Project) for its Primary Intended Use.
Outside Completion Date: October 31, 2002.
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Punch List Items: Minor details of construction, mechanical adjustments or
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decorations which remain to be completed with respect to the Capital Renovation
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Project following the Completion Date and which do not (i) prevent the issuance
of a certificate of occupancy (or the local equivalent thereof) for the Capital
Renovation Project and/or (ii) materially interfere with Tenant's use of the
Facility (including the Capital Renovation Project) for its Primary Intended
Use.
Remaining Funds: The unadvanced portion of Landlord's Maximum Cost, if any.
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Request for Advance: Certificates of Tenant and, to the extent applicable, the
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Architect, in each case on the appropriate AIA form, including form G702
together with attached AIA form G703 (or equivalent, which AIA form G703 or
equivalent shall be modified to include columns for the original estimate of
scheduled values for each line item, changes to the scheduled values for each
line item and a revised scheduled value for each line item after any such
change) and/or such other form(s) as Landlord may hereafter reasonably request
which shall: (i) set forth the Persons to whom money is owed and the amount
owed each; (ii) certify among other things that such amounts represent payments
due for services actually rendered or materials actually acquired or furnished
in connection with the construction/performance of the Capital Renovation
Project; (iii) state that the sum requested is Capital Renovation Project Cost
within the Capital Renovation Project Budget for such item and that, in the
opinion of the Architect (if any) and Tenant, the Remaining Funds are sufficient
to complete the Capital Renovation Project pursuant to the Capital Renovation
Plans and to pay for all labor, material and other expenses in connection
therewith; (iv) be accompanied by copies of billing statements, fee schedules,
documentation supporting all costs to date, copies of all subcontracts not
previously submitted and vouchers or invoices from the Persons named therein, in
form reasonably satisfactory to Landlord; (v) refer to an attached schedule, to
be verified by the Architect (if any) or other reliable Person reasonably
acceptable to Landlord prior to the advance being requested, identifying in a
manner reasonably satisfactory to Landlord all materials not yet affixed or
incorporated into the Capital Renovation Project but which have been covered by
certificates submitted to date, including the current certificate; (vi) contain
a statement, to be verified by the Architect (if any) or other reliable Person
reasonably acceptable to Landlord prior to the advance being requested, that all
such materials not yet affixed or incorporated into the Capital Renovation
Project have been stored at the Property or at one or more other bonded
locations approved by Landlord identified therein (specifying the materials
located at each location) under adequate safeguards to minimize the possibility
of loss, damage or commingling with other materials or projects, and that
builder's risk insurance coverage for such materials stored off the Property is
not less than the full insurable value of such materials then being stored off
the Property; and (vii) be accompanied by appropriate waivers of lien rights (to
the extent not previously received and approved by Landlord) with respect to
work and materials for which funds have already been advanced pursuant to this
Work Letter, or which were performed or were supplied prior to July 30, 2001,
executed by the General Contractor (if any) and all contractors, subcontractors,
mechanics and materialmen no more than one month in arrears and who have
furnished labor or material to date and whose charges are or will be greater
than Five Thousand Dollars ($5,000.00) and, unless Tenant has provided a
statutory payment bond in accordance with applicable Legal Requirements, by all
other contractors, subcontractors, mechanics and materialmen. Notwithstanding
anything set forth herein to the contrary, the Request for Advance for the first
advance of funds by Landlord hereunder and for each advance that is for an item
on the Capital Renovation Project Budget that is not a hard cost shall mean such
certificate with respect thereto as Landlord may reasonably request. To the
extent that any payment, funding or accrual of Capital Renovation Project Costs
by Landlord hereunder is attributable or allocable to one or more of the
categories comprising the Capital Renovation Project, Landlord shall allocate
such Capital Renovation Project Costs among such categories as Landlord shall
reasonably determine.
2. Capital Renovation Project. Without limiting any other obligation or
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liability of Tenant under the Lease, the following shall apply with respect to
the Capital Renovation Project and the construction/performance and funding
thereof:
2.1 Obligations of Tenant.
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(a) Construction/Performance of Capital Renovation Project. Tenant
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shall be responsible to arrange, supervise, coordinate and carry out all
services necessary for the construction, performance and completion of the
Capital Renovation Project in accordance with the Capital Renovation Plans and
the applicable provisions of this Work Letter, and Tenant undertakes and accepts
such responsibility with the understanding that all Capital Renovation Project
Costs up to Landlord's Maximum Cost will be funded by Landlord to Tenant or its
designee pursuant to, but subject to the applicable terms of, this Section 2.
Tenant shall cause the Capital Renovation Project to be completed substantially
in accordance with the Capital Renovation Plans and the terms of the
Construction Contracts for an amount not to exceed the Landlord's Maximum Cost
and the Completion Date to occur by the Outside Completion Date (subject to
Unavoidable Delays, provided that Tenant delivers notice to Landlord of each
event constituting an Unavoidable Delay within ten (10) days after such event).
If and to the extent total Capital Renovation Project Costs exceed the
Landlord's Maximum Cost, Tenant shall pay and shall not be reimbursed for such
excess. If total Capital Renovation Project Costs do not exceed Landlord's
Maximum Cost, Tenant shall not be entitled to any portion of the difference
between Landlord's Maximum Cost and total Capital Renovation Project Costs.
(b) Duties and Responsibilities. Without limiting Tenant's obligations
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under the Lease, the duties and responsibilities of Tenant with respect to the
Capital Renovation Project shall specifically include the following:
(i) Subject to the other provisions of this Work Letter, to negotiate
and enter into Construction Contracts and other agreements necessary for
construction/performance of the Capital Renovation Project in accordance with
the Capital Renovation Plans, which such contracts, by their terms, may be
assigned by Tenant to Landlord;
(ii) To establish operating procedures and a system of records and accounts
suitable for record keeping during construction/performance satisfactory to
Landlord;
(iii) To administer and monitor the performance under all Construction
Contracts and other agreements relating to the construction/performance of the
Capital Renovation Project and the monthly reporting of the status of estimated
costs of completing the same in relation to the Capital Renovation Project
Budget and other applicable budgets;
(iv) To manage and coordinate contractors, engineers, architects and other
consultants and monitor their compliance with their respective contracts or
agreements;
(v) To monitor and review and, when in the judgment of Tenant it is in the
best interest of Landlord, propose changes in the Capital Renovation Plans or in
any budget relating to the construction/performance of the Capital Renovation
Project;
(vi) To review and make a recommendation to Landlord with respect to payment
of all applications for payment under the Construction Contracts and other
agreements relating to the construction/performance of the Capital Renovation
Project and make payments of any and all bills, invoices or other matters
calling for payment by Tenant or Landlord or for the Landlord's account in
connection with the construction/performance of the Capital Renovation Project,
all in accordance with the provisions of this Section 2;
(vii) To coordinate with the Architect and any inspecting engineer employed
by Landlord in the performance of periodic inspections of the Property in order
to confirm that the materials furnished and work performed are in accordance
with the Capital Renovation Plans and that the work on the Capital Renovation
Project is progressing on schedule;
(viii) To stop the work and cause the correction of any defect in the
materials or workmanship furnished by any contractor or of any failure by any
contractor to perform its obligations under its Construction Contract and to
promptly inform Landlord of any instances of faulty materials and/or
workmanship;
(ix) To make available to Landlord, upon request, the identities of and
copies of contracts with all subcontractors and any other Person supplying labor
or materials for the construction/performance of the Capital Renovation Project;
and
(x) To obtain all approvals necessary to construct/perform the Capital
Renovation Project and to operate the Facility for its Primary Intended Use.
(c) Performance of Duties. Tenant agrees that, subject to the
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performance by Landlord of its obligations under this Section 2, Tenant shall
act with prudence and diligence in performing its duties and responsibilities
under this Work Letter, with respect to the Capital Renovation Project and in
good faith in the best interests of Landlord and the Facility.
2.2 Completion Guarantee.
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(a) Construction and Cost Guarantee. Tenant unconditionally guarantees
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to Landlord (i) the construction/performance of the Capital Renovation Project
in accordance with the Capital Renovation Plans and all covenants and
obligations of Tenant under the Lease and this Work Letter, by the Outside
Completion Date (subject only to the performance by Landlord of its obligations
under this Section 2 and Unavoidable Delays, provided that Tenant delivers
notice to Landlord of each event constituting an Unavoidable Delay within ten
(10) days after such event) and (ii) the payment without demand, and without
right to reimbursement therefor, of all development, construction and related
costs of the Capital Renovation Project incurred for any reason whatsoever in
excess of the Landlord's Maximum Cost.
(b) Failure to Construct. Without limiting any other right or remedy
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of Landlord under the Lease, if for any reason or under any contingency any
contractor shall default under a Construction Contract, fail to commence, or
abandon construction of, the Capital Renovation Project, or fail to complete the
Capital Renovation Project within the maximum construction time in accordance
with the terms of the Construction Contracts, then in any such event, without
the need of any demand by Landlord, Tenant shall assume all responsibility for
and control over the construction, performance and completion of the Capital
Renovation Project and shall cause the Capital Renovation Project to be fully
completed in accordance with this Work Letter on or before the Outside
Completion Date, other than Punch List Items. Without limiting any other right
or remedy of Landlord under the Lease, if Tenant fails to complete the Capital
Renovation Project in accordance with the Capital Renovation Plans prior to the
Outside Completion Date other than the Punch List Items, Landlord, at Landlord's
option, shall have the right to complete the Capital Renovation Project in
accordance with the Capital Renovation Plans and expend such sums as Landlord
reasonably deems proper in order so to complete the Capital Renovation Project.
The amount of any and all expenditures made by Landlord pursuant to this clause
(b) which, when combined with all Capital Renovation Project Costs previously
funded by Landlord, are in excess of Landlord's Maximum Cost, shall be
immediately due and payable by Tenant to Landlord as an Additional Charge,
together with interest thereon from the date of such expenditure to the date
paid by Tenant at the Overdue Rate (but in no event greater than the maximum
rate of interest then permitted by law). Said interest shall accrue on a daily
basis. Upon any assumption by Landlord of the obligation to complete the
Capital Renovation Project as provided herein, Tenant shall forthwith surrender
and deliver to Landlord, or Landlord's designee, any funds which have been
received from Landlord but have not been disbursed by Tenant, and all records,
plans, specifications, permits and other governmental approvals, purchase
agreements, contracts, receipts for deposits, unpaid bills and all other
records, papers and documents in the possession of Tenant relating to the
Capital Renovation Project.
(c) Completion of Punch List Items. All Punch List Items, other than those
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reasonably requiring more than thirty (30) days to complete due to long
scheduling or ordering time or other reasonable factors, shall be completed
within thirty (30) days after the Completion Date, but in no event later than
thirty (30) days after the Outside Completion Date. Any Punch List Items
reasonably requiring more than thirty (30) days to complete shall be diligently
pursued and completed as promptly as practicable, but in no event later than
sixty (60) days after the Outside Completion Date.
2.3 Construction Administration Fee. Landlord shall accrue in arrears,
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from and after July 30, 2001, until the Completion Date, a construction
administration fee in the form of an allowance equal to $1,600.00 per month for
the costs associated with the administration of the provisions of this Work
Letter and the making of advances hereunder.
2.4 Other Covenants of Tenant.
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(a) Construction/Performance of the Capital Renovation Project.
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Construction/performance of Capital Renovation Project will be prosecuted by
Tenant in accordance with the Capital Renovation Plans in a good and workmanlike
manner and in accordance with sound building and engineering practices and all
applicable Legal Requirements and all restrictive covenants affecting the
Property. All materials, fixtures or articles used in the
construction/performance of the Capital Renovation Project, or to be used in the
operation thereof shall be substantially in accordance with the Capital
Renovation Plans as approved by Landlord. Tenant shall ensure that no asbestos
or asbestos-containing materials or other Hazardous Substances will be contained
in the completed Capital Renovation Project. Tenant will complete the
construction/performance of the Capital Renovation Project substantially in
accordance with the Capital Renovation Plans on or before the Outside Completion
Date (subject to Unavoidable Delays, provided that Tenant delivers notice to
Landlord of each event constituting an Unavoidable Delay within ten (10) days
after such event), free and clear of liens or claims for liens for material
supplied and for labor or services performed in connection with the construction
of the Capital Renovation Project (except for permitted contests pursuant to
Article XIII of the Lease).
(b) Legal Requirements. Tenant will cause all Legal Requirements and
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all restrictive covenants affecting the Leased Property to be complied with
promptly, and Landlord will be furnished, on demand, evidence of such
compliance.
(c) Change Orders, Defects.
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(i) Tenant may, without obtaining the prior written approval of
Landlord, change the Capital Renovation Plans, permit the Capital Renovation
Plans to be changed or permit construction/performance of the Capital Renovation
Project other than in accordance with the Capital Renovation Plans; provided,
however, that if (1) any such change would (w) change the basic structure or
character of the Facility; (x) change the appearance of the Facility; (y) change
or reduce the quality of the basic building systems, including the mechanical,
electrical, sprinkler, plumbing, life-safety, heating, air conditioning and
ventilation systems within the Facility or (z) result in an item of the Capital
Renovation Project not being performed, (2) any single change in the Capital
Renovation Plans involves an amount in excess of Five Thousand Dollars
($5,000.00), (3) any number of changes in the Capital Renovation Plans involves
in the aggregate an amount not in excess of Ten Thousand Dollars ($10,000.00),
or (4) any such change in the Capital Renovation Plans results in the Capital
Renovation Project Costs exceeding the Landlord's Maximum Cost, then in any such
event Tenant must obtain the prior written approval of Landlord prior to
implementing such change, which approval may be given or withheld in the sole
and absolute discretion of Landlord.
(ii) Tenant will at its sole cost and expense and not as part of the Capital
Renovation Project Costs correct or cause to be corrected any defect in the
Capital Renovation Project or any departure from the Capital Renovation Plans
not approved by Landlord or permitted herein without such approval or any
encroachment by any part of the Capital Renovation Project on or over any
building lines, easements, property lines or other restricted areas which any
survey or inspection reflects.
(d) Construction Insurance. To the extent not already maintained or
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covered by Tenant pursuant to Article XIV of the Lease, Tenant will at all times
maintain or cause to be maintained the following insurance during the
construction/performance of the Capital Renovation Project (including through
the date of completion of the Punch List Items):
(i) Builder's risk insurance covering the construction/performance of
the Capital Renovation Project, in a face amount of not less than the full
insurable value of the Capital Renovation Project and materials supplied in
connection therewith, with appropriate provisions made to include coverage of
materials stored off the Property in an amount not less than the full insurable
value of such materials stored off the Property from time to time.
(ii) Errors and omissions insurance by any Architect in an amount at least
equal to Four Hundred Thousand Dollars ($400,000) which can be applied to the
construction/performance of the Capital Renovation Project, covering the entire
period of design and construction/performance of the Capital Renovation Project,
including completion of the Punch-List Items.
All such insurance maintained or caused to be maintained by Tenant pursuant to
clauses (i) and (ii) of this clause (c) shall name Landlord as an additional
insured. All insurance maintained or caused to be maintained by Tenant pursuant
to clause (i) of this clause (c) shall name Tenant, Landlord and any General
Contractor or other contractor, jointly, as loss payee. In addition, all such
insurance to be maintained or caused to be maintained by Tenant shall otherwise,
to the extent applicable, comply with the provisions of and shall be in addition
to the insurance specified in Article XIV of the Lease.
(e) [Intentionally Omitted]
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(f) Liens on Materials. Tenant shall not at any time during the performance
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of the work, make or cause to be made, or permit any General Contractor or any
other contractor to make, any contract for materials or equipment of any kind or
nature whatsoever to be incorporated in or to become a part of the Property,
title to which is not good or which is subject to any lien or title retention
arrangement other than inchoate mechanic's liens. Tenant will deliver to
Landlord, on demand, true copies of any contracts, bills of sale, statements,
receipted vouchers, or agreements, under which Tenant claims title to any
materials, fixtures, or articles used in the construction/performance of the
Capital Renovation Project.
(g) Storage of Materials. Tenant will cause all materials acquired or
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furnished in connection with the construction/performance of the Capital
Renovation Project, but not affixed or incorporated into the Property, to be
stored at the Property or at bonded locations approved by Landlord, in each case
under adequate safeguards to minimize the possibility of loss, theft, damage or
commingling with other materials or projects. Tenant will employ suitable means
to protect from theft or vandalism the Property and all tools and building
materials stored on the Property.
(h) Inspections. Without limiting any of Landlord's rights or remedies
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under the Lease, at any time during regular business hours, Landlord and/or its
representatives will be permitted to enter upon the Property and any other
location where materials for the Capital Renovation Project are being stored to
inspect the same and all materials to be used in the construction/performance
thereof, and to examine all detailed plans and shop drawings which are or may be
kept at the construction site, provided that in so doing, Landlord shall not
unreasonably interfere with the construction/performance of the Capital
Renovation Project. Upon request, Landlord will be furnished with reasonable
information regarding the construction/performance of the Capital Renovation
Project from Tenant, any Architect, any General Contractor and any other
contractors or subcontractors.
(i) Notices. Without limiting any other obligation of Tenant under the
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Lease, Tenant will furnish Landlord with a copy of any (A) notice or claim made
by any Governmental Authority pertaining to the Property, (B) any notice of any
termination, late payment or other material aspect of any Construction Contract
involving more than Five Thousand Dollars ($5,000.00), together with a copy of
each such Construction Contract and (C) any fire, casualty, notice of any
condemnation or other event materially affecting the Leased Property.
(j) Use of Funds, Deficiency.
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(i) Tenant shall expend all the proceeds of each advance hereunder for
Capital Renovation Project Costs in amounts and for the purposes provided in the
Capital Renovation Project Budget and for no other purpose whatsoever.
(ii) Tenant will promptly advise Landlord if and when (1) Capital Renovation
Project Costs shall exceed or appear likely to exceed the Landlord's Maximum
Cost or (2) Capital Renovation Project Costs with respect to any particular item
in the Capital Renovation Project Budget shall exceed or appear likely to exceed
the amount specified for any such item in the Capital Renovation Project Budget,
and shall give Landlord sufficiently detailed information with respect thereto.
(iii) If, in the reasonable good faith judgment of Landlord, it appears at
any time or from time to time that the Remaining Funds will be insufficient to
complete the construction/performance of the Capital Renovation Project
substantially in accordance with the Capital Renovation Plans on or before the
Outside Completion Date (unless otherwise extended by reason of any Unavoidable
Delays as permitted under this Work Letter, and to pay for all Capital
Renovation Project Costs incurred in connection with such
construction/performance, or if any other expenses are required for such
completion which were not scheduled in the Capital Renovation Project Budget,
Landlord may request that Tenant demonstrate that the Remaining Funds are
sufficient for such completion and payment. If Tenant does not so demonstrate
to Landlord's reasonable satisfaction within five (5) Business Days of receipt
of Landlord's request to do so, then Tenant shall make arrangements for
additional monies to be made available as shall, in the reasonable good faith
judgment of Landlord, when added to the Remaining Funds, be sufficient so as to
complete and/or pay for the construction/performance of the Capital Renovation
Project. Such additional monies of Tenant shall be applied for payment of costs
prior to Landlord advancing any additional funds under this Work Letter.
(k) Documents at Completion. Without limiting any provisions of this
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Work Letter, from time to time as requested by Landlord and as soon as
practicable following the Completion Date, Tenant shall supply or cause to be
supplied to Landlord such reasonable documents and information pertaining to the
Capital Renovation Project and the construction, performance and/or completion
of the same as Landlord shall request.
(l) Assignment of Construction Contracts. At the request of Landlord,
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Tenant shall assign to Landlord each Construction Contract to which Tenant is a
party utilizing an assignment instrument in form and substance acceptable to
Landlord and shall cause each other party to such Construction Contract to
consent to such assignment, if required by the terms thereof.
2.5 Additional Events of Default. In addition to and without limiting
-----------------------------
the "Events of Default" set forth in the Lease, any one or more of the following
shall also constitute an "Event of Default" under the Lease:
(a) Tenant fails to perform any of the obligations to be performed by
Tenant under this Work Letter with respect to the Capital Renovation Project,
and such failure is not cured within thirty (30) days after notice thereof from
Landlord or, if such failure cannot reasonably be cured within such thirty (30)
day period, such longer period as reasonably may be required to remedy such
default as long as Tenant has commenced such cure within such thirty (30) day
period, thereafter diligently prosecutes such cure and completes such cure not
later than sixty (60) days after notice from Landlord but in any event prior to
the Outside Completion Date (subject to Unavoidable Delays, provided that Tenant
delivers notice to Landlord of each event constituting an Unavoidable Delay
within ten (10) days after such event); or
(b) [Intentionally Omitted]
----------------------
(c) Tenant uses any monies advanced by Landlord under this Work Letter for
any purpose other than as allowed or contemplated under this Work Letter; or
(d) Except as a result of a casualty, Condemnation or other Unavoidable
Delay, work on the Capital Renovation Projects ceases for thirty (30)
consecutive days for any reason; or
(e) The Completion Date does not occur by the Outside Completion Date, free
and clear of mechanics', materialmen's and other liens (except for permitted
contests pursuant to Article XIII of the Lease); or
(f) Except for change orders allowed pursuant to the provisions of this Work
Letter, Tenant modifies, amends or terminates any Construction Contract without
Landlord's written consent; or
(g) Any mechanics', materialmen's or other lien is filed or asserted against
the Property, or any part thereof, or any suit or other proceeding is instituted
to enforce or foreclose such a lien (except for permitted contests pursuant to
Article XIII of the Lease).
2.6 Advances of Funds by Landlord.
---------------------------------
(a) Funding. Subject to the satisfaction by Tenant of the conditions
-------
set forth in Section 2.6 of this Work Letter and the other provisions of this
Work Letter, Landlord will advance to Tenant funds up to the Landlord's Maximum
Cost (less all costs, fees, allowances and charges of Landlord which are
included within Capital Renovation Project Costs) for the purpose of paying or
reimbursing Tenant for the payment of the Capital Renovation Project Costs.
(b) Limitation of Funding Obligation. Landlord shall not be obligated to
-----------------------------------
advance to Tenant any sums (i) in excess of the Landlord's Maximum Cost or for
which a Request for Advance is received more than sixty (60) days after the
Outside Completion Date, (ii) when any of the conditions set forth in Section
2.6 of this Work Letter have not been met or fulfilled.
(c) Advances of Funds by Landlord. Draw requests will be reviewed monthly
-------------------------------
and will be based on the prorata share completion to date of each construction
line item listed in the Capital Renovation Project Budget. All advances of
funds under this Work Letter shall be made by Landlord in accordance with a
Request for Advance. Each Request for Advance shall be honored within ten (10)
Business Days of receipt of the same delivered in accordance with the Notice
provisions of the Lease together with the information required therein, subject,
however, to the limitations herein. In no event shall Landlord be required to
make any advance for a particular line item which, when aggregated with prior
advances, is in excess of the Capital Renovation Project Budget for such line
item except to the extent amounts from contingency line items are unused and/or
to the extent savings, in Landlord's reasonable good faith discretion, in other
budget line items remain unused. Landlord shall issue checks payable to, or
otherwise advance funds to, Tenant, the payees designated in a Request for
Advance or jointly to Tenant and such payees, as Landlord shall reasonably
determine. Advances of funds to such payees or jointly to Tenant and any such
payee shall constitute an advance hereunder as though advanced directly to
Tenant.
(d) Holdbacks. Any advances for costs and expenses of labor and materials
---------
connected with the construction/performance of the Capital Renovation Project
shall be limited to Ninety Percent (90%) of such costs and expenses and shall be
made in accordance with the payment schedule of the Construction Contract with
any General Contractor or other contractor. The final advance of proceeds
representing the Ten Percent (10%) retainage for any particular item will not be
made until the last to occur of (i) the Completion Date, (ii) completion of all
Punch List Items and (iii) the date Landlord receives, as applicable, (1) all
final lien releases and waivers provided for herein, (2) an "As-Built" set of
plans and specifications (if reasonably requested by Landlord based upon the
nature of the Capital Renovation Project), (3) an ALTA "As-Built" survey (if
reasonably requested by Landlord based upon the nature of the Capital Renovation
Project), and (4) such other documents as Landlord may reasonably request. In
no event shall any portion of such retainage be paid if any mechanics' and/or
materialmen's liens or other encumbrances have been filed and remain on the
Property (except for permitted contests pursuant to Article XIII of the Lease).
2.7 Conditions to Landlord Obligations to Advance Funds. Landlord
--------------------------------------------------------
shall not be obligated to make any advance of funds under this Work Letter,
including the first advance, unless and until the following conditions shall
have been satisfied (with proof thereof in form and sufficiency as may be
reasonably requested by Landlord):
(a) Approvals/Entitlements. To the extent not theretofore received and
----------------------
approved by Landlord and to the extent of a material change not permitted herein
without approval, Landlord shall have received and approved (i) the Capital
Renovation Plans; (ii) the Capital Renovation Project Budget(s); (iii) all
Construction Contracts with any General Contractor, any Architect and any other
contractor or material supplier that may be requested by Landlord; and (iv) all
authorizations and permits required by any Governmental Authority for the
construction/performance of the Capital Renovation Project, including building
and grading permits, a foundation letter (if applicable to the Capital
Renovation Project) and such other authorizations and permits as are required
for the use and operation of the Facility for its Primary Intended Use, which
are presently procurable.
(b) Utilities and Access. To the extent applicable to the Capital
----------------------
Renovation Project as reasonably determined by Landlord, Landlord shall have
-
received evidence satisfactory to Landlord that (i) all existing public
utilities, including telephone, water, sewage, electricity and gas are adequate
for the Facility; and (ii) all existing means of ingress and egress, parking,
access to public streets and drainage facilities are adequate for the Facility.
(c) Soils and Other Tests. To the extent applicable to the Capital
------------------------
Renovation Project as reasonably determined by Landlord, Landlord shall have
received and approved test borings, engineering reports and such other site
analysis as Landlord may require, all of which must indicate that the soil is
adequate for the proposed construction/performance of the Capital Renovation
Project in accordance with the Capital Renovation Plans.
(d) Insurance. Landlord shall have received certificates with respect to
---------
the insurance required to be carried by Tenant or other Persons pursuant to
Section 2.4 above, together with evidence satisfactory to Landlord that the
premiums therefor have been paid in full.
(e) [Intentionally Omitted]
(f) No Default. No Event of Default shall have occurred under the Lease
-----------
(including this Work Letter) and no event or condition shall exist which, with
notice and/or lapse of time, or both, would constitute such an Event of Default
under the Lease (including this Work Letter).
(g) Condemnation; Casualty. No Condemnation shall be pending or threatened
-----------------------
and no casualty shall have occurred, in either case with respect to the Property
or any portion thereof.
(h) Other Documents and Assurances. Landlord shall have received such other
------------------------------
documents and assurances as Landlord shall have reasonably requested, including
any endorsements to Landlord existing policy of title insurance updating the
same without any additional exception except as may be approved by Landlord and
increasing the policy limit thereof to an amount equal to the Capital Renovation
Project Costs funded or accrued by Landlord.
(i) Request for Advance. Landlord shall have received and approved (A) a
---------------------
Request for Advance accompanied by all necessary documents and certificates as
set forth in the definition thereof; (B) a Tenant's Affidavit; and (C) to the
extent applicable, a certificate from the Architect, or if no Architect, from an
officer of Tenant or any other reliable Person acceptable to Landlord, to the
effect that in such Person's opinion (1) the construction/performance of the
Capital Renovation Project theretofore performed is in accordance with the
Capital Renovation Plans and (2) the amount requested is appropriate in light of
the percentage of construction completed and amount of stored material.
(j) Architect, Contractor Letters. Landlord shall have received from each
-------------------------------
of the Architect, General Contractor, and major subcontractors a letter, in form
and substance satisfactory to Landlord, which, among other things, (i) states
that, in the event of a default by Tenant under the contract with the
undersigned, the undersigned agrees to perform for Landlord at Landlord's
request under the terms of the applicable Construction Contract, (ii) to the
best knowledge of the undersigned certifies to Landlord that the Capital
Renovation Plans comply with all Legal Requirements, and that the work performed
by the undersigned has been completed in accordance with the Capital Renovation
Plans, and (iii) confirms such other matters consistent with the terms and
provisions of this subsection (j).
(k) Proceedings. Landlord shall have reviewed and approved all corporate
-----------
proceedings to be taken by Tenant and Guarantor in connection with the
transactions contemplated under the Lease, as amended by this Work Letter.
(l) [Intentionally Omitted]
(m) [Intentionally Omitted]
2.8 Miscellaneous Provisions Applicable to Capital Renovation Project.
------------------------------------------------------------------
(a) Ownership of Capital Renovation Project. At all times the Capital
----------------------------------------
Renovation Project shall be owned entirely by Landlord subject to the leasehold
interest of Tenant under the Lease with respect to the Capital Renovation
Project. Upon the request of Landlord, Tenant shall execute and/or cause any
Affiliate of Tenant to execute such documents as Landlord may reasonably request
evidencing and confirming Landlord's ownership of such Capital Renovation
Project.
(b) Advance Not a Waiver. No advance of funds under this Work Letter shall
---------------------
constitute a waiver of any of the conditions to Landlord's obligation to make
further advances nor, if Tenant is unable to satisfy any such condition, shall
any such advance have the effect of precluding Landlord from thereafter
declaring such inability to be an Event of Default under the Lease.
(c) Conditions for Benefit of Landlord. All conditions to the obligations
------------------------------------
of Landlord hereunder are imposed solely for the benefit of Landlord and no
other Person shall have standing to require satisfaction of such conditions.
(d) Compliance Responsibility. Notwithstanding the review and approval by
--------------------------
Landlord of the Capital Renovation Plans or any other matter, Landlord shall
have no responsibility for compliance by the Property, the Capital Renovation
Project or the construction/performance of the Capital Renovation Project with
Legal Requirements, sound architectural or engineering practices or other
matters.
(e) Notices. Any Notices with respect to Request for Advances and/or
-------
change orders (only) shall be sent to Landlord in accordance with the provisions
for notices in the Lease.
(f) Attorneys' Fees and Costs. Subject to the Landlord's funding
----------------------------
obligations under this Work Letter, Tenant shall pay to Landlord all of
Landlord's attorneys' fees and other costs and expenses or incurred in
connection with (A) amendments or other modifications to any of the Construction
Contracts or the Capital Renovation Plans; and (B) any other matter related to
the construction/performance of the Capital Renovation Project.
(g) Incorporation. This Work Letter is incorporated into and shall form a
-------------
part of the Lease.
[Signatures on Next Page]
IN WITNESS WHEREOF, the parties hereto have caused this Work Letter as of
September 18, 2002.
"Landlord"
HEALTH CARE PROPERTY INVESTORS, INC., a Maryland corporation
By: /s/ Arthur G. Sundby
-----------------------
Name: Arthur G. Sundby
Title: Vice President
TEXAS HCP HOLDING, L.P., a Delaware limited partnership
By: /s/ Arthur G. Sundby
-----------------------
Name: Arthur G. Sundby
Title: Vice President
HCPI TRUST, a Maryland real estate trust
By: /s/ Arthur G. Sundby
-----------------------
Name: Arthur G. Sundby
Title: Vice President
"Tenant"
EMERITUS CORPORATION,
a Washington corporation
By: /s/ Raymond R. Brandstrom
----------------------------
Name: Raymond R. Brandstrom
Title: CFO
"Tenant"
ESC III, L.P., a Washington limited partnership dba TEXAS-ESC III, L.P.
By: /s/ Raymond R. Brandstrom
----------------------------
Name: Raymond R. Brandstrom
Title: CFO
75
Schedule 1 to Work Letter
-------------------------
Capital Renovation Project Budget
---------------------------------
[See Attached]
EXHIBIT M
---------
FACILITY NAME LOCATION
La Villita Phoenix, AZ
- ----------- ------------
Willow Park Boise, ID
- ------------ ----------
Kingsley Place at Oakwell San Antonio, TX
- ---------------------------- -----------------
Kingsley Place at Medical Center San Antonio, TX
- ------------------------------------ -----------------
Hollywood Park Hollywood, TX
- --------------- --------------
Northwest Oaks San Antonio, TX
- --------------- -----------------
Cielo Vista El Paso, TX
- ------------ -------------
Arbor Place at Silver Lake Everett, WA
- ------------------------------ ------------