MASTER LEASE
between
EMERITUS REALTY VII, LLC;
EMERITUS REALTY V, LLC;
ESC-PORT ST. RICHIE, LLC;
EMERITUS REALTY II, LLC;
EMERITUS REALTY XIV, LLC;
EMERITUS REALTY BOZEMAN, LLC;
EMERITUS REALTY III, LLC; and
EMERITUS REALTY PUYALLUP, LLC
collectively, as their interests appear, Lessor
AND
EMERITUS CORPORATION;
EMERITUS PROPERTIES V, INC.;
ESC-NEW PORT RICHEY, LLC;
EMERITUS PROPERTIES II, INC.;
EMERITUS PROPERTIES XIV, LLC;
ESC-BOZEMAN, LLC; and
EMERITUS PROPERTIES III, INC.
collectively, and jointly and severally, as Lessee
Dated as of December 6, 2002
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i
TABLE OF CONTENTS
ARTICLE I. 1
1.1 Leased Property; Term. 1
ARTICLE II. 2
2.1 Definitions 2
ARTICLE III. 12
3.1 Rent. 12
3.2 [Intentionally Omitted] 13
3.3 [Intentionally Omitted] 14
3.4 [Intentionally Omitted] 14
3.5 Additional Charges 14
3.6 Late Payment of Rent 14
3.7 Net Lease 14
ARTICLE IV. 14
4.1 Impositions. 14
4.2 Utilities 16
4.3 Insurance 16
4.4 Impound Account 16
4.5 Tax Service 16
4.6 Initial Facility Mortgages 16
ARTICLE V. 17
5.1 No Termination, Abatement, etc 17
5.2 Termination with Respect to Fewer than All of the Facilities 18
ARTICLE VI. 18
6.1 Ownership of the Leased Property 18
6.2 Personal Property 18
6.3 Transfer of Personal Property and Capital Additions to Lessor 18
ARTICLE VII. 19
7.1 Condition of the Leased Property 19
7.2 Use of the Leased Property. 19
7.3 Lessor to Grant Easements, etc 20
7.4 Preservation of Facility Value 20
ARTICLE VIII. 21
8.1 Compliance with Legal and Insurance Requirements, Instruments, etc
21
ARTICLE IX. 21
9.1 Maintenance and Repair. 21
9.2 Encroachments, Restrictions, Mineral Leases, etc 22
ARTICLE X. 23
10.1 Construction of Capital Additions to the Leased Property. 23
10.2 Construction Requirements for all Capital Additions 24
10.3 Funding by Lessor. 25
10.4 Capital Additions Financed by Lessee 26
ARTICLE XI. 27
11.1 Liens 27
ARTICLE XII. 27
12.1 Permitted Contests 27
ARTICLE XIII. 28
13.1 General Insurance Requirements 28
13.2 Replacement Cost 29
13.3 Additional Insurance 29
13.4 Waiver of Subrogation 30
13.5 Policy Requirements 30
13.6 Increase in Limits 30
13.7 Blanket Policies and Policies Covering Multiple Locations 30
13.8 No Separate Insurance 31
ARTICLE XIV. 31
14.1 Insurance Proceeds 31
14.2 Insured Casualty. 31
14.3 Uninsured Casualty 32
14.4 No Abatement of Rent 32
14.5 Waiver 32
14.6 Damage Near End of Term 32
ARTICLE XV. 33
15.1 Condemnation. 33
15.2 Award-Distribution 33
15.3 Temporary Taking 33
ARTICLE XVI. 33
16.1 Events of Default 33
16.2 Certain Remedies 36
16.3 Damages 36
16.4 Receiver 37
16.5 Lessee's Obligation to Purchase 38
16.6 Waiver 38
16.7 Application of Funds 38
16.8 [Reserved] 38
16.9 [Reserved] 38
16.10 Landlord's Security Interest 38
ARTICLE XVII. 39
17.1 Lessor's Right to Cure Lessee's Default 39
ARTICLE XVIII. 40
18.1 Purchase of the Leased Property 40
ARTICLE XIX. 40
19.1 Renewal Terms 40
ARTICLE XX. 40
20.1 Holding Over 40
ARTICLE XXI. 41
21.1 Letters of Credit 41
21.2 Times for Obtaining Letters of Credit 41
21.3 Reduction in Letter of Credit Amount 42
21.4 Uses of Letters of Credit 42
ARTICLE XXII. 42
22.1 Risk of Loss 42
ARTICLE XXIII. 42
23.1 General Indemnification 42
ARTICLE XXIV. 43
24.1 Subletting and Assignment. 43
24.2 Consent 44
24.3 Costs 46
24.4 No Release of Lessee's Obligations 46
24.5 Assignment of Lessee's Rights Against Sublease 46
24.6 Reserved 47
24.7 REIT Protection 47
24.8 Prepaid Rent 47
ARTICLE XXV. 47
25.1 Officer's Certificates and Financial Statements. 47
25.2 Charges 49
ARTICLE XXVI. 50
26.1 Lessor's Right to Inspect and Show the Leased Property and Capital
Additions 50
ARTICLE XXVII. 50
27.1 No Waiver 50
ARTICLE XXVIII. 50
28.1 Remedies Cumulative 50
ARTICLE XXIX. 50
29.1 Acceptance of Surrender 50
ARTICLE XXX. 50
30.1 No Merger 50
ARTICLE XXXI. 50
31.1 Conveyance by Lessor 50
31.2 New Lease 51
ARTICLE XXXII. 52
32.1 Quiet Enjoyment 52
ARTICLE XXXIII. 52
33.1 Notices 52
ARTICLE XXXIV. 53
34.1 Appraiser 53
ARTICLE XXXV. 54
ARTICLE XXXVI. 54
36.1 Lessor May Grant Liens 54
36.2 Attornment 54
ARTICLE XXXVII. 55
37.1 Hazardous Substances 55
37.2 Notices 55
37.3 Remediation 55
37.4 Indemnity 55
37.5 Environmental Inspection 56
ARTICLE XXXVIII. 57
38.1 Memorandum of Lease 57
ARTICLE XXXIX. 57
39.1 Sale of Assets 57
ARTICLE XL. 57
40.1 Subdivision 57
ARTICLE XLI. 58
41.1 Authority 58
ARTICLE XLII. 58
42.1 Attorneys' Fees 58
ARTICLE XLIII. 58
43.1 Brokers 58
ARTICLE XLIV. 59
44.1 Miscellaneous. 59
ARTICLE XLV. 61
45.1 Provisions Relating to Master Lease 61
45.2 Provisions Relating to Tax Treatment of Lease 61
ARTICLE XLVI. 62
46.1 HCPI Rights 62
46.2 Change in Control of Lessor 63
46.3 Covenants in Initial Facility Mortgage 64
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, Allocated Minimum Rent and Allocated
Value
Exhibit D [Intentionally Omitted]
Exhibit E Property Condition Reports
Exhibit F List of Lessor Addresses
Exhibit G [[Intentionally Omitted]
Exhibit H List of Initial Facility Mortgages
Exhibit I List of Lessors, Lessees and License Holders for each Facility
Exhibit J Form of Letter of Credit
Exhibit K [Intentionally Omitted]
Exhibit L [Intentionally Omitted]
Exhibit M Permitted Competing Facilities
2
LEASE
THIS MASTER LEASE ("Lease") is dated as of the sixth day of December, 2002,
and is between EMERITUS REALTY VII, LLC, a Delaware limited liability company,
EMERITUS REALTY V, LLC, a Delaware limited liability company, ESC-PORT ST.
RICHIE, LLC, a Washington limited liability company, EMERITUS REALTY II, LLC, a
Delaware limited liability company, EMERITUS REALTY XIV, LLC, a Delaware limited
liability company, EMERITUS REALTY BOZEMAN, LLC, a Delaware limited liability
company, EMERITUS REALTY III, LLC, a Delaware limited liability company, and
EMERITUS REALTY PUYALLUP, LLC, a Delaware limited liability company
(collectively, as "Lessor"), and EMERITUS CORPORATION, a Washington corporation,
EMERITUS PROPERTIES V, INC., a Washington corporation, ESC-NEW PORT RICHEY, LLC,
a Washington limited liability company, EMERITUS PROPERTIES II, INC., a
Washington corporation, EMERITUS PROPERTIES XIV, LLC, a Washington limited
liability company, ESC-BOZEMAN, LLC, a Washington limited liability company, and
EMERITUS PROPERTIES III, INC., a Washington corporation (collectively, and
jointly and severally, as "Lessee").
ARTICLE I.
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 Exhibits A-1 through A-11
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attached hereto (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
Commencement Date with respect to each portion of the Leased Property or which
are created thereafter as permitted hereunder to have and to hold (i) for a
Fixed Term (as defined below) and (ii) the Extended Terms provided for in
Article XIX unless this Lease is earlier terminated as hereinafter provided.
ARTICLE II.
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:
Additional Charges: As defined in Article III.
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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.
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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Allocated Value: With respect to each Facility, the "Allocated Value" related
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to such Facility as set forth on Exhibit C attached hereto.
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Appraiser: As defined in Article XXXIV.
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Award: All compensation, sums or anything of value awarded, paid or received on
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a total or partial Condemnation.
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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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.
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.
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.
Closing Date: As defined in the HCPI Loan Documents.
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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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Commencement Date: The date hereof, which date is the same as the Closing Date.
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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
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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
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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: For each applicable Lease Year, the product of (a) percentage
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increase, if any, in (i) the Cost of Living Index published for the month which
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is three (3) months prior to the commencement of such 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, times (b)
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two (2); provided, however, that in no event shall the CPI Increase be less than
zero percent (0%) or more than two and three-fourths percent (2.75%).
Date of Determination: The date on which any Prepayment Premium is paid to any
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Facility Mortgagee.
Date of Taking: The date the Condemnor has the right to possession of the
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property being condemned.
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Emeritus: Emeritus Corporation, a Washington corporation.
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Emeritus Realty: Emeritus Realty Corporation, a Nevada corporation.
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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.
Event of Default: As defined in Article XVI.
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Extended Term(s): As defined in Article XIX.
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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
- - ---------
hereto.
Facility Mortgage: As defined in Article XIII.
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Facility Mortgagee: As defined in Article XIII; provided, however, that with
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respect to any matter relating to a particular Facility (including any matter in
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which the consent or approval of a Facility Mortgagee is required in connection
with any such matter relating to a particular Facility), as used herein,
"Facility Mortgagee" shall mean only the Facility Mortgagee for such Facility.
As of the Commencement Date, the "Facility Mortgagee" for each Facility shall be
General Electric Capital Corporation.
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, exit fee 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.
Fixed Term: The period of time commencing on the Commencement Date and
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ending at 11:50 p.m. Los Angeles time on the expiration of the fifteenth (15th)
Lease Year.
Fixtures: With respect to each Facility, the Fixtures (as defined in Article I)
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of such Facility.
GAAP: Generally accepted accounting principles.
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Gross Revenues: With respect to each Facility, all revenues received or
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receivable from or by reason of the operation of the Facility or any other use
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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, 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;
(iv) 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;
(v) 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
(vi) 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 Commencement 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.
Guarantors: Emeritus, and any future guarantor of all or any portion of
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Lessee's obligations pursuant to this Lease (each, individually, a "Guarantor").
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Guaranty: The Guaranty of even date herewith executed by Emeritus, as a
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Guarantor, and any future written guaranty of Lessee's obligations hereunder
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executed by a Guarantor.
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Handling: As defined in Article XXXVII.
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Hazardous Substances: Collectively, any petroleum, petroleum product or
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byproduct or any substance, material or waste regulated or listed pursuant to
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any Environmental Law.
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HCPI: Health Care Property Investors, Inc., a Maryland corporation, and its
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successors and assigns.
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HCPI Loan Agreement: That certain Loan Agreement dated as of December __, 2002
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by and between HCPI, as lender, and Emeritus Realty, as borrower, as the same
may be amended, modified or supplemented from time to time in accordance with
the terms thereof.
HCPI Loan Documents: Collectively, the HCPI Loan Agreement, and all of the
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other documents included within the definition of "Loan Documents" in the HCPI
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Loan Agreement, as the same may be amended, modified or supplemented from time
to time in accordance with the terms thereof.
Impositions: Collectively, all taxes, including capital stock, franchise and
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other state taxes of Lessor (or, if Lessor is not an Affiliate of HCPI, of HCPI
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as a result of its ownership (whether direct or indirect) in such 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.
Initial Facility Mortgages: The Facility Mortgages set forth on Exhibit H
- ---------------------------- ---------
attached hereto, together with any amendments, renewals or extensions thereto.
- -----
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).
Land: With respect to each Facility, the Land (as defined in Article I)
- ----
relating to such Facility.
- ----
Lease: As defined in the preamble.
- -----
Lease Year: Each period of twelve (12) full calendar months from and after the
- -----------
Commencement Date, unless the Commencement Date is a day other than the first
(1st) day of a calendar month, in which case the first Lease Year shall be the
period commencing on the Commencement Date and ending on the last day of the
eleventh (11th) month following the month in which the Commencement Date occurs
and each subsequent Lease Year 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 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.
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.
Lender: Initially, HCPI in its capacity as lender under the HCPI Loan
- ------
Agreement, and also its successors and assigns as lender under the HCPI Loan
- ------
Agreement.
- ---
Lessee: As defined in the preamble; provided, however that with respect to each
- ------
Facility, only the License Holder with respect to such Facility shall be
entitled to operate or maintain such Facility or be entitled to legal possession
of such Facility, and in no event shall any Lessee other than the applicable
License Holder with respect to such Facility be entitled to operate or maintain
such Facility or be entitled to legal possession of such Facility or take other
actions with respect to such Facility to the extent that such operations or the
taking of such actions would violate the licensure requirements or other laws or
regulations of any governmental authority with respect to such Facility.
Notwithstanding the foregoing, nothing herein shall affect the joint and several
liability of the Lessees.
Lessee's Personal Property: With respect to each Facility, the Personal
- ----------------------------
Property other than Lessor's Personal Property, allocable or relating to such
- -------
Facility.
- --
Lessor: As defined in the preamble; provided, however, that with respect to any
- ------
matter as it relates to a particular Facility (including, but not limited to,
any matter in which Lessor's consent or approval is required for a particular
Facility), as used herein, "Lessor" shall mean only that Lessor which is the fee
owner of such Facility. As of the date hereof, the "Lessor" for each Facility
is as set forth on Exhibit I attached hereto.
----------
Lessor's Personal Property: With respect to each Facility, Lessor's Personal
- ----------------------------
Property (as defined in Article I) allocable or relating to such Facility.
- --
Letter of Credit Amount: For each Lease Year, an amount equal to one-fourth
- --------------------------
(1/4) of the annual total Minimum Rent payable under this Lease for such Lease
- ---
Year.
Letter of Credit Date: As defined in Section 21.2.
- ------------------------
License Holder: With respect to any Facility, the Lessee that holds all
- ---------------
permits, licenses, approvals, entitlements and other authorizations issued by
- -------
governmental authorities necessary to operate such Facility for its Primary
- --
Intended Use.
- --
Minimum Rent: The sum of Allocated Minimum Rent for all of the Facilities.
- -------------
Minimum Repurchase Price: With respect to each Facility, the sum of (i) the
- --------------------------
Allocated Value with respect to such Facility plus (ii) any Capital Addition
- ---
Costs funded by Lessor with respect to such Facility.
- ---
New Lease: As defined in Section 31.2.1.
- ----------
New Lease Effective Date: As defined in Section 31.2.1.
- ---------------------------
Officer's Certificate: A certificate of Lessee signed by an officer authorized
- ----------------------
to so sign by its board of directors or by-laws.
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
- -------------
or any other sums payable under this Lease.
Person: Any individual, corporation, partnership, joint venture, association,
- ------
joint stock company, limited liability 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.
Prepayment Lease Rate: For the first (1st) Lease Year of the Term, twelve
- -----------------------
percent (12%); provided, however, that commencing upon the expiration of the
- -----
first (1st) Lease Year of the Term and upon the expiration of each Lease Year
- ---
thereafter during the applicable Term (including the Extended Terms, if any),
- --
the then current "Prepayment Lease Rate" shall be adjusted to an amount equal to
- --
the product of (a) the then-current Prepayment Lease Rate, times the sum of (b)
-----
(i) one (1), plus (ii) the applicable CPI Increase for such Lease Year.
Prepayment Premium: Any prepayment premium, prepayment penalty, exit fee or
- -------------------
other similar amount due in connection with (a) the purchase by the Lender of
- ---
any Initial Facility Mortgage following an Event of Default hereunder or under
- --
the Initial Facility Mortgage, or (b) a prepayment (whether partial or full) of
any Initial Facility Mortgage.
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. As of the date hereof, the "Primary
- ---
Intended Use" is as set forth on Exhibit C attached hereto and incorporated
- - ---------
herein by this reference.
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. Without limiting the
- ----------------------
definition therein, "Priority Encumbrances" shall also include the Initial
- -----
Facility Mortgages.
- -----
Property Condition Reports: The reports described on Exhibit E attached hereto.
- -------------------------- ---------
Rent: Collectively, the Minimum Rent and Additional Charges, all as defined in
- ----
Article III.
SEC: Securities and Exchange Commission.
- ---
Separated Property: As defined in Section 31.2.
- -------------------
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, membership or other equity interest, respectively.
Term: Collectively, the Fixed Term and any Extended Term(s), as the context may
- ----
require, unless earlier terminated.
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 Commencement 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. 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 Allocated Minimum Rent. For the period from the Commencement Date
------------------------
through and including the expiration of the first (1st) Lease Year in 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.
3.1.2 Allocated Minimum Rent Increases. Subject to any increases in
-----------------------------------
Sections 3.1.3 and 3.1.4 below, commencing upon the expiration of the first
(1st) Lease Year of the Term and upon the expiration of each Lease Year
thereafter during the applicable Term (including the Extended Terms, if any),
the then current monthly "Allocated Minimum Rent" for each Facility shall be
adjusted to an amount equal to one-twelfth (1/12) of the amount equal to the
product of (a) annual Allocated Minimum Rent paid or payable for such Facility
for the immediately prior Lease Year, times (b) the sum of (x) one (1), plus (y)
-----
the applicable CPI Increase for such Lease Year.
3.1.3 Increase in Minimum Rent By Reason of a Prepayment Premium. If (x)
-------------------------------------------------------------
any Payment Party (as defined below) pays (whether directly or indirectly) any
Prepayment Premium with respect to any Initial Facility Mortgage of a Facility,
and (y) such Payment Party is not reimbursed in full for such Prepayment Premium
by Lessee within fifteen (15) days after demand by such Payment Party, then the
then monthly Allocated Minimum Rent for such Facility shall be increased
effective as of the Date of Determination, by an amount equal to one-twelfth
(1/12) of the product of (a) the Prepayment Lease Rate, times (b) the amount of
such Prepayment Premium so paid by a Payment Party. In such event, Lessor shall
determine the new monthly "Allocated Minimum Rent" for such Facility pursuant to
this Section 3.1.3 and Lessor shall give Lessee notice thereof and shall
indicate in such notice how the new monthly Allocated Minimum Rent for such
Facility was computed. Within ten (10) days after receipt of Lessor's notice,
Lessee shall pay to Lessor an amount equal to the new monthly Allocated Minimum
Rent for such Facility times the number of months from the Date of Determination
to the date of receipt of Lessor's notice (prorated for any partial month), less
the aggregate amount paid by Lessee on account of monthly Allocated Minimum Rent
for such Facility the same period. Thereafter, Lessee shall pay monthly
Allocated Minimum Rent for such Facility at the new rate set forth in Lessor's
notice. As used herein, a "Payment Party" shall mean either (i) Lender, (ii) an
Affiliate of Lender, (iii) Lessor, if the interest in such Lessor which has been
pledged as security to Lender is owned (whether directly or indirectly, and
irrespective of how such ownership is acquired) by Lender or an Affiliate of
Lender, or (iv) Lessor, if the interest in such Lessor which has been pledged as
security to Lender such Lessor will be owned (whether directly or indirectly,
and irrespective of how such ownership is acquired) by Lender or an Affiliate of
Lender immediately following any Prepayment Premium.
3.1.4 Increase in Minimum Rent For Failure to Obtain Letter of Credit. If
-----------------------------------------------------------------
Lessee fails to obtain a letter of credit in accordance with Article XXI, then
for such time as Lessee has failed to obtain such letter of credit, the then
monthly Allocated Minimum Rent for each Facility shall be increased to an amount
equal to one hundred and one percent (101%) of the then monthly Allocated
Minimum Rent.
3.2 [Intentionally Omitted]
------------------------
3.3 [Intentionally Omitted]
3.4 [Intentionally Omitted]
3.5 Additional Charges
. In addition to the Minimum 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 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, with credit to
Lessee for any amounts impounded pursuant to the Initial Facility Mortgages for
such purposes. 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.
4.6 Initial Facility Mortgages
----------------------------
. Notwithstanding anything to the contrary contained in this Lease, during
the Term of this Lease, Lessee shall be solely responsible and hereby covenants
to fund and maintain any and all impound, escrow or other reserve or similar
accounts required under any Initial Facility Mortgage as security for or
otherwise relating to any operating expenses of the Facility, including any
capital repair or replacement reserves and/or impounds or escrow accounts for
Impositions or insurance premiums (each an "Operating Reserve Account"), but
excluding any so-called debt service or loan payment sinking funds required
under any such Initial Facility Mortgage and excluding any such accounts (or
modified requirements with respect to any existing Operating Reserve Account)
required by virtue of any amendment to the Initial Facility Mortgages after the
date hereof unless (i) Lessee consents in writing to such amendments, which
consent shall not be unreasonably withheld, or (ii) such account(s) required by
virtue of any such amendment(s) do not materially increase Lessee's monetary
obligations under this Section 4.6. During the Term of this Lease and provided
that no Event of Default shall have occurred and be continuing hereunder, Lessee
shall, subject to the terms and conditions of such Operating Reserve Account and
the requirements of the Facility Mortgagee(s) under such Initial Facility
Mortgages, have access to and the right to apply or use (including for
reimbursement) to the same extent of Lessor all monies held in each such
Operating Reserve Account for the purposes and subject to the limitations for
which such Operating Reserve Account is maintained; Lessor agrees to reasonably
cooperate with Lessee in connection therewith. The right of Lessee to use and
apply such Operating Reserve Account monies in accordance with the foregoing
shall also apply to any monies currently held or maintained in an Operating
Reserve Account as of the date hereof, regardless whether originally funded by
Lessor or Lessee.
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, all Capital Additions not owned by Lessor and 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. Except as set forth in Sections 10.3 and 10.4
below (if applicable), upon the expiration or earlier termination of this Lease
with respect to any Facility, Lessor shall not be obligated to reimburse Lessee
for any replacements, rebuildings, alterations, additions, substitutions, and/or
improvements that are surrendered as part of or with the Leased Property or
Capital Additions of such Facility.
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 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 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 There shall be no change of any License Holder for any Facility
without Lessor's prior written consent, which consent may be given or withheld
in Lessor's sole and absolute discretion.
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 Facility Value
---------------------------------
. Lessee acknowledges that the value of the Facility 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 During the Term, neither Lessee nor any of its Affiliates, shall
directly or indirectly, 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 Commencement Date), within a ten (10)
mile radius outward from the outside boundary of the Leased Property of
such Facility. 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. Lessor shall have all rights
-----
at law and in equity available to Lessor as a result of any breach of this
Section 7.4 hereunder.
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 Commencement 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, Lessee's Personal Property 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.
9.2 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. 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) 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 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) matters that exist as of the
Commencement Date; (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 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;
(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; and
(t) any event of default under the HCPI Loan Documents. In addition, Lessor
and Lessee acknowledge that an "Event of Default" under this Lease shall
constitute an event of default under the HCPI Loan Documents, as more
particularly set forth in the HCPI Loan Documents.
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.
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
payable hereunder shall be reduced by the amount of monthly Allocated Minimum
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.
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 for two (2) ten year renewal terms (each an "Extended Term"),
by 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. 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 then-current Term, such
possession shall be as a month-to-month tenant during which time Lessee shall
pay as Minimum Rent each month twice the monthly Minimum Rent applicable to the
prior Lease Year for 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
-------------------
. Commencing upon the first day of the sixth (6th) Lease Year and
continuing for sixty (60) days after the expiration or earlier termination of
this Lease, Lessee shall have obtained letters of credit from a financial
institution satisfactory to Lessor, in an amount equal to the Letter of Credit
Amount, 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 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 commencement of the sixth (6th) Lease Year. The letters of credit
covering subsequent periods (or renewals of the then existing letters of credit)
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 Reduction in Letter of Credit Amount
-----------------------------------------
. If Lessee purchases any Facility, or if this Lease is terminated or
expires with respect to any Facility (other than by reason of an Event of
Default), the Letter of Credit Amount shall be reduced by an amount equal to the
product of (a) the then existing Letter of Credit Amount, times (b) a fraction,
the numerator of which is the then existing Allocated Minimum Rent for the
Facility being purchased by Lessee or for which this Lease has been terminated
or expired, as applicable, and the denominator of which is the then existing
total Minimum Rent payable for all Facilities (including the Facility being
purchased by Lessee, or the Facility with respect to which this Lease has been
terminated or expired).
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.
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
-----------
. 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 or limited
liability company, 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 or membership 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 or
membership 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 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 or membership
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 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 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 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 Lessor or HCPI 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 or HCPI 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 and Guarantor'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 and Guarantor 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 and Guarantor'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 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 Emeritus 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, any Guarantor 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.
Notwithstanding the foregoing, if HCPI or an Affiliate of HCPI does not own
any interest (whether direct or indirect) in Lessor, Lessee shall not be
required to provide Lessor with the statements set forth in subsections (a) and
(e) above (except to the extent that such statements are required by Facility
Mortgages); provided, however, that the foregoing shall not be deemed or
construed to limit or otherwise modify any requirements of Emeritus Realty under
the HCPI Loan Documents, including any obligations of Emeritus Realty thereunder
to deliver the financial and other instruments required by such subsections (a)
and (c) above to HCPI as and when required under the HCPI Loan Documents.
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
----------
. Any 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 owned by such Lessor (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 the Lessor that is the owner of such Separated Property and the
Lessee that is the License Holder with respect to such Separated Property 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 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 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 for the
Substituted Property(ies), and the denominator of which is the sum of the then
existing total annual Minimum 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.
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 Commencement Date with respect to the
applicable portion of the Leased Property or created thereafter as permitted
under 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.
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: As set forth on Exhibit F
----------
with a copy to: The Nathanson Group
1520 Fourth Ave., Sixth Floor
Seattle, Washington 98101
Attn: Randi S. Nathanson, Esq.
Fax: (206) 623-1738
If to Lessee: c/o Emeritus Corporation
3131 Elliott Ave., Suite 500
Seattle, Washington 98121
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 Integra Realty Resources, or in the event Integra Realty Resources
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.
To the extent consistent with sound appraisal practice as then existing at the
time of any such appraisal, an appraisal of Fair Market Value for purposes of
this Lease shall take into account and shall give appropriate consideration to
all three customary methods of appraisal (i.e., the cost approach, the sales
comparison approach and the income approach), and no one method or approach
shall be deemed conclusive simply by reason of the nature of Lessor's business
or because such approach may have been used for purposes of determining the fair
market value of the applicable Facility at the time of acquisition thereof 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.
[Intentionally Omitted]
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 (other than with respect to the Initial Facility
---- -------
Mortgages) 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 HCPI'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 HCPI'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 HCPI'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 to HCPI 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 have 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.
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.
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.
44.1.16 Third Party Beneficiaries
---------------------------
. The provisions of this Lease are for the benefit of Lessor and Lessee
only; provided, however that HCPI shall be a third party beneficiary as to the
provisions in favor of Lessor, including but not limited to any rights and
remedies of Lessor under this Lease. Other than as set forth in Article XLVI
below, the provisions of this Lease are not for the benefit of any third party,
and no third party shall have the right to enforce the provisions of this Lease.
44.1.17 Amended and Restated
----------------------
. If there is a lease currently in effect for all or any portion of the
Leased Property between Lessor or an Affiliate of Lessor, on the one hand, and
Lessee or an Affiliate of Lessee on the other hand (a "Prior Lease"), this Lease
shall amend and restate such Prior Lease, and such Prior Lease shall be of no
further force and effect.
ARTICLE XLV.
45.1 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. Lessee acknowledges that in order to induce Lessor to lease the
Leased Property of each Facility to Lessee and as a condition thereto, Lessee
insisted that the parties execute this Lease covering all of the Facilities in a
single, integrated and indivisible agreement.
45.2 Provisions Relating to Tax Treatment of Lease
---------------------------------------------------
. The parties intend that this Lease shall be treated as an operating
lease for all purposes and not as a synthetic lease, financing lease or loan,
and that Lessor shall be entitled to all the benefits of ownership of the Leased
Property, including depreciation for all federal, state and local tax purposes.
ARTICLE XLVI.
46.1 HCPI Rights
------------
. Notwithstanding anything to the contrary in this Lease, so long as the
loan pursuant to the HCPI Loan Documents is outstanding:
(a) Lessor shall send a copy of any notice or statement under this Lease to
HCPI in accordance with Section 33.1 at the same time Lessor sends such notice
or statement to Lessee;
(b) Lessee shall send a copy of any notice or statement under this Lease to
HCPI in accordance with Section 33.1 at the same time Lessee sends such notice
or statement to Lessor, including the financial statements, certifications and
other documents set forth in Section 25.1.2 above;
(c) HCPI's consent shall be required for any provisions in this Lease
requiring the consent of Lessor. The standards of consent for HCPI shall be the
same as those which are applicable to Lessor in the applicable provisions of
this Lease;
(d) this Lease shall not be surrendered, terminated, amended or modified
without the prior written consent of HCPI, which consent may be given or
withheld in HCPI's sole and absolute discretion;
(e) Lessor shall, at the request of HCPI, promptly exercise any of Lessor's
rights and remedies under this Lease, in each case as may be directed by HCPI;
(f) Lessor shall not exercise any of its rights and remedies under this
Lease without first obtaining the consent of HCPI, which consent may be given or
withheld in HCPI's sole and absolute discretion;
(g) any Transfer Consideration received by Lessor in connection with Section
24.1.2.2 shall be promptly forwarded to HCPI in accordance with, and subject to,
the terms of the HCPI Loan Documents;
(h) any proceeds payable to Lessor pursuant to Article XIV for any Facility
shall, subject to the rights of the Facility Mortgagee for such Facility,
instead be payable to HCPI in accordance with, and subject to, the terms of the
HCPI Loan Documents;
(i) any purchase price paid or payable pursuant to Article XVIII hereof
shall be paid directly to HCPI in accordance with, and subject to, the terms of
the HCPI Loan Documents;
(j) Lessor shall cause the letter of credit required pursuant to Article XXI
to be in the actual possession of HCPI, together with a transfer certificate
endorsed to HCPI, in form and substance satisfactory to HCPI;
(k) any amounts required to be deposited into an impound account pursuant to
Section 4.4 above shall be deposited into an impound account to be maintained
with and subject to the control of HCPI to be held for the benefit of Lessor;
(l) other than the Initial Facility Mortgages, neither Lessor nor Lessee
shall cause any encumbrances (including any Facility Mortgages) to be placed on
the Leased Property without the prior written consent of HCPI, which consent or
approval may be given or withheld in HCPI's sole and absolute discretion; and
(m) subject to the rights of any Initial Facility Mortgages, all property,
loss of rental and business interruption type insurance policies required
pursuant to this Lease shall name HCPI as "loss payee".
Notwithstanding the foregoing, if a Facility Mortgagee which is not an Affiliate
of Lessee acquires title to any of the Leased Properties (herein, a "Foreclosed
Property"), including by reason of foreclosure, deed or assignment in lieu of
foreclosure or otherwise purchases the rights granted under any Facility
Mortgage or related document, then the provisions of this Section 46.1 shall
automatically be of no further force and effect with respect to such Foreclosed
Property.
46.2 Change in Control of Lessor
-------------------------------
. Lessee agrees that if HCPI or an Affiliate of HCPI acquires any interest
in any Lessor (whether directly or indirectly) (an "HCPI Lessor"), neither HCPI,
such Affiliate of HCPI, nor such HCPI Lessor, as applicable, shall be:
(a) liable for any act or omission of any Lessor occurring (or not
occurring) prior to such Lessor becoming an HCPI Lessor;
(b) subject to any defenses or offsets which any Lessee may have against any
Lessor, prior to such Lessor becoming an HCPI Lessor;
(c) bound by any payment of Rent which any Lessee might have paid to any
Lessor, except to the extent such Rent is actually received by HCPI, such
Affiliate of HCPI, or the HCPI Lessor;
(d) bound by any obligation to make any payment to any Lessee which was
required to be made prior to the time HCPI or such Affiliate of HCPI succeeded
to or acquired any interest in any Lessor;
(e) accountable for any monies deposited with any Lessor, except to the
extent such monies are actually received by HCPI, such Affiliate of HCPI or the
HCPI Lessor;
(f) bound by any surrender, termination, amendment or modification of this
Lease made without the prior written consent of HCPI; or
(g) liable to any Lessee or any other party for any conflict between the
provisions of this Lease and the provisions of any other lease affecting the
Leased Property which is not entered into by HCPI or an Affiliate of HCPI.
46.3 Covenants in Initial Facility Mortgage
------------------------------------------
. Lessor has provided Lessee copies of all documents relating to the
Initial Facility Mortgages listed on Exhibit H hereto. Lessee hereby covenants
---------
to comply with all representations, warranties and covenants set forth in the
Initial Facility Mortgages that relate to Lessee and/or the operation of the
Facilities.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties have caused this Lease to be executed and
attested by their respective officers thereunto duly authorized.
"Lessor"
"Witness"
EMERITUS REALTY CORPORATION, a Nevada corporation, in its capacity as the
Sole Member of each of the entities listed below:
By: /s/ Raymond R. Brandstrom
------------------------------
Its: Raymond R. Brandstrom
-------------------------
Witness Title: Vice President of Finance
------------------------------
Witness
EMERITUS REALTY VII, LLC, a Delaware limited liability company
EMERITUS REALTY V, LLC, a Delaware limited liability company
ESC-PORT ST. RICHIE, LLC, a Washington limited liability company
EMERITUS REALTY II, LLC, a Delaware limited liability company
EMERITUS REALTY XIV, LLC, a Delaware limited liability company
EMERITUS REALTY BOZEMAN, LLC, a Delaware limited liability company
EMERITUS REALTY III, LLC, a Delaware limited liability company
EMERITUS REALTY PUYALLUP, LLC, a Delaware limited liability company
71
70
"Lessee"
"Witness"
EMERITUS CORPORATION, a Washington corporation
By: /s/ Raymond R. Brandstrom
------------------------------
Witness Its: Raymond R. Brandstrom
-------------------------
Title: Vice President of Finance
------------------------------
Witness
EMERITUS PROPERTIES V, INC., a Washington corporation
By: /s/ Raymond R. Brandstrom
------------------------------
Witness Its: Raymond R. Brandstrom
-------------------------
Title: Vice President of Finance
------------------------------
Witness
ESC-NEW PORT RICHEY, LLC, a Washington limited liability company
By: Emeritus Corporation, a Washington corporation
Witness
By: /s/ Raymond R. Brandstrom
-------------------------------
Its: Raymond R. Brandstrom
-------------------------
Witness Title: Vice President of Finance
------------------------------
EMERITUS PROPERTIES II, INC., a Washington corporation
Witness By: /s/ Raymond R. Brandstrom
------------------------------
Its: Raymond R. Brandstrom
-------------------------
Title: Vice President of Finance
------------------------------
Witness
EMERITUS PROPERTIES XIV, LLC, a Washington limited liability company
By: Emeritus Corporation, a Washington corporation
Witness
By: /s/ Raymond R. Brandstrom
-------------------------------
Its: Raymond R. Brandstrom
-------------------------
Witness Title: Vice President of Finance
------------------------------
ESC-BOZEMAN, LLC, a Washington limited liability company
By: Emeritus Corporation, a Washington corporation
Witness
By: /s/ Raymond R. Brandstrom
-------------------------------
Its: Raymond R. Brandstrom
-------------------------
Witness Title: Vice President of Finance
------------------------------
EMERITUS PROPERTIES III, INC., a Washington corporation
Witness By: /s/ Raymond R. Brandstrom
------------------------------
Its: Raymond R. Brandstrom
-------------------------
Title: Vice President of Finance
------------------------------
Witness
A-1
A-1
EXHIBIT A-1
-----------
Description of Land
Villa Del Rey (Escondido Facility), California
----------------------------------------------
Situated in the County of San Diego, State of California, more particularly
described as:
ALL THAT PORTION OF LOT 7 IN BLOCK 179 OF THE RANCHO RINCON DEL DIABLO, IN THE
CITY OF ESCONDIDO, IN THE COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO
MAP THEREOF NO. 723 FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO
COUNTY, AUGUST 13, 1892, DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT IN THE NORTHWESTERLY LINE OF SAID LOT 7 DISTANT THEREON
NORTH 53 59' 20" EAST 226.83 FEET FROM THE NORTHWESTERLY CORNER THEREOF, SAID
POINT BEING ALSO A POINT IN THE CENTER LINE OF THE SAN DIEGO COUNTY WATER
AUTHORITY EASEMENT; THENCE CONTINUING NORTH 53 59' 20" EAST ALONG SAID
NORTHWESTERLY LINE OF LOT 7 A DISTANCE OF 66.87 FEET TO A CUSP FORMED WITH THE
ARC OF A 20.00 FOOT RADIUS CURVE, CONCAVE EASTERLY A RADIAL OF WHICH BEARS NORTH
36 00' 40" WEST TO SAID POINT BEING THE TRUE POINT OF BEGINNING; THENCE
SOUTHERLY ALONG SAID CURVE 30.83 FEET THROUGH A CENTRAL ANGLE OF 88 19' 45";
THENCE TANGENT TO SAID CURVE SOUTH 34 20' 25" EAST 317.19 FEET TO THE BEGINNING
OF A TANGENT 1000 FOOT RADIUS CURVE, CONCAVE NORTHEASTERLY; THENCE SOUTHEASTERLY
ALONG SAID CURVE 21.43 FEET THROUGH A CENTRAL ANGLE OF 1 13' 40"; THENCE
TANGENT TO SAID CURVE SOUTH 35 34' 05" EAST 83.06 FEET TO THE NORTHEASTERLY
LINE OF THE LAND CONVEYED TO THE CITY OF ESCONDIDO BY DEED RECORDED DECEMBER 20,
1968 FILE NO. 223861 OF OFFICIAL RECORDS SAID POINT BEING ALSO A POINT IN THE
ARC OF A 1077 FOOT RADIUS CURVE, CONCAVE SOUTHERLY, A RADIAL OF WHICH BEARS
NORTH 4 27' 04" WEST TO SAID POINT; THENCE EASTERLY ALONG SAID NORTHEASTERLY
LINE TO AND ALONG THE NORTHEASTERLY LINE OF THE LAND CONVEYED TO THE CITY OF
ESCONDIDO BY DEED RECORDED DECEMBER 20, 1968, FILE NO. 223862 OF OFFICIAL
RECORDS ALONG THE ARC OF SAID 1077 FOOT RADIUS CURVE THROUGH A CENTRAL ANGLE OF
9 16' 54" A DISTANCE OF 178.04 FEET (RECORD 9 27' 38" A DISTANCE OF 177.83
FEET) AND TANGENT TO SAID CURVE SOUTH 84 58' 46" EAST 77.22 FEET (RECORD SOUTH
83 52' 27" EAST 77.78 FEET TO THE EASTERLY LINE OF SAID LOT 7; THENCE ALONG
SAID EASTERLY LINE NORTH 18 03' 27" WEST 627.50 FEET (RECORD NORTH 16 58' 15"
WEST 627.52 FEET PER SAID FILE NO. 223862) TO THE MOST NORTHERLY CORNER OF SAID
LOT 7; THENCE ALONG THE NORTHWESTERLY LINE THEREOF SOUTH 53 59' 20" WEST 364.34
FEET TO THE TRUE POINT OF BEGINNING.
(ASSESSOR'S PARCEL NO. 230-141-11)
A-3
A-2
EXHIBIT A-2
-----------
Description of Land
Fulton Villa (Stockton Facility), California
--------------------------------------------
Situated in the County of San Joaquin, State of California, more particularly
described as:
PARCEL ONE:
Parcel A, as shown on that certain Parcel Map filed for record July 18, 1972 in
Book 1 of Parcel Maps, Page 81, San Joaquin County Records, being a portion of
the Southeast quarter of Section 17, C.M. Weber Grant, in the City of Stockton.
PARCEL TWO:
A right of way 20 feet in width lying Southerly of the Northerly line of the
land described in Deed to Five Oak Pyramid, Inc., a California corporation,
dated June 30, 1954 recorded July 1, 1954 in Book 1646 of Official Records, page
496, San Joaquin County Records.
EXCEPT THEREFROM the Westerly 203.81 feet.
EXHIBIT A-3
-----------
Description of Land
Stanford Centre (Altamonte Springs Facility), Florida
-----------------------------------------------------
Situated in Seminole County, Florida, more particularly described as:
That part of Lots 613, 614, 615, 616, 634, 635, 636 and 637, all in the
subdivision of Altamonte Land, Hotel and Navigation Company, according to the
plat thereof as recorded in Plat Book 1, page 12, of the Public Records of
Seminole County, Florida, described as follows:
Commencing at the Southeast corner of said Lot 637; thence North 000 17' 25"
West, along the East line of said Lot 637, a distance of 5.00 feet to the North
right of way line of Orange Drive; thence on a bearing of South 90 00' 00"
West, along said North right of way line, 141.71 feet to the West line of the
East 9.71 feet of said Lot 636 and the Point of Beginning; thence continue on a
bearing of South 90 00' 00" West along said North right of way line 260.00
feet to the West line of the East 5.80 feet of said Lots 634 and 613; thence
North 00 18' 40" West, along said West line, 369.91 feet to the North line of
the South 111.00 feet of said Lots 613 and 616; thence South 89 53' 35" East,
along said North line, 401.85 feet to the East line of said Lots 616 and 637;
thence South 00 17'32" East, along said East line, 184.16 feet to the North
line of the South 190.00 feet of said Lots 636 and 637; thence on a bearing of
West, along said North line, 127.44 feet; thence South 53 48' 08" West, 17.62
feet to the West line of the East 9.71 feet of said Lot 636; thence South 000
17'25" East, along said West line 174.59 feet to the Point of Beginning.
TOGETHER WITH an easement as created by access and parking easement dated
December 23, 1986, and recorded February 19, 1987, in Official Records Book
1820, and 287, of the Public Records of Seminole County, Florida, for access and
parking purposes over and across that part of said Lots 636 and 637, described
as follows:
Commencing at the Southeast corner of said Lot 637; thence North 00 17' 25"
West, along the East line of said Lot 637, a distance of 5.00 feet to the North
right-of-way line of Orange Drive; thence on a bearing of West, along said North
line 141.71 feet to the West line of the East 9.71 feet of said Lot 636; thence
North 00 17' 25" West, 120.00 feet to the Point of Beginning; thence on a
bearing of East, 75.00 feet; thence South 00 17' 25" East 90.00 feet; thence
on a bearing of West, 75.00 feet to the West line of the East 9.71 feet of said
Lot 636; thence North 00 17' 25" West, 90.00 feet to the Point of Beginning.
Subject to an easement for ingress, egress and utility purposes over and across
that part of said Lot 636, described as follows:
A portion of Lot 636, ALTAMONTE LAND HOTEL AND NAVIGATION COMPANY SUBDIVISION,
as recorded in Plat Book 1, page 12, Public Records of Seminole County, Florida,
being described as follows:
From the Southeast corner of Lot 637 of said ALTAMONTE LAND HOTEL AND NAVIGATION
COMPANY SUBDIVISION, run West along the South line of said Lots 636 and 637, a
distance of 141.71 feet to the Point of Beginning; thence continue West along
said South lot line 65.00 feet; thence North 000 17' 25" West 110.00 feet;
thence East 65.00 feet; thence South 00 17' 25" East 110.00 feet to the Point
of Beginning, as recorded in Official Records Book 1820, page 291, Public
Records of Seminole County, Florida.
NOW KNOWN AS Parcel A and part of Parcel B, "LA CASA GRANDE", Plat Book 39,
pages 50 and 51, Public Records of Seminole County, Florida.
EXHIBIT A-4
-----------
Description of Land
River Oaks (Englewood Facility), Florida
----------------------------------------
Situated in the County of Sarasota, State of Florida, more particularly
described as:
The Northwesterly 533.39 feet, more or less, of Lots 509, 510 and 511, of
ENGLEWOOD GARDENS - UNIT-NO. 6, as per plat thereof, recorded in Plat Book 4,
pages 74 and 75, Public Records of Sarasota County, Florida. LESS AND EXCEPT the
Northwesterly 27 feet thereof, conveyed to county for road.
EXHIBIT A-5
-----------
Description of Land
La Casa Grande (New Port Richey Facility), Florida
--------------------------------------------------
Situated in Pasco County, State of Florida, more particularly described as:
The West 60 feet of Tract 49 and the East 270 feet of Tract 50, in Section 16,
Township 26 South, Range 16 East, Pasco County, Florida, said tracts being
designated in accordance with the Plat of Tampa and Tarpon Springs Land Company
Subdivision recorded in Plat Book 1, pages 68, 69, and 70, of the Public Records
of Pasco County, Florida.
LESS ROAD RIGHT OF WAY, ALSO DESCRIBED AS:
A portion of Tracts 49 and 50, TAMPA AND TARPON SPRINGS LAND COMPANY SUBDIVISION
of Section 16, Township 26 South, Range 16 East, as shown on Plat recorded in
Plat Book 1, pages 68, 69 and 70, of the Public Records of Pasco County,
Florida, being more fully described as follows:
Commence at the Northeast corner of said Tract 49; thence North 89 45'20" West,
along the Northerly boundary line of said Tract 49, 377.29 feet; thence South 00
15'48" West, 33.00 feet to the Point of Beginning; thence South 00 15'48" West,
along the Easterly boundary line of the West 60.00 feet of said Tract 49, 630.28
feet; thence North 89 42'50" West, along the Southerly boundary line of a
portion of aid Tracts 49 and 50, 330.00 feet; thence North 00 15' 48" East,
along the Westerly boundary line of the East 270.00 feet of said Tract 50,
630.04 feet; thence South 89 45'20" East, along the Southerly right of way line
of Trouble Creek Road, 330.00 feet to the Point of Beginning.
EXHIBIT A-6
-----------
Description of Land
Silver Pines (Cedar Rapids Facility), Iowa
------------------------------------------
Situated in County of Linn, State of Iowa, more particularly described as
follows:
LOT 2 , EXCEPTING THEREFROM THE NORTH 150 FEET, AND LOT 3, RADEC FREEWAY THIRD
ADDITION TO THE CITY OF CEDAR RAPIDS, LINN COUNTY, IOWA.
EXHIBIT A-7
-----------
Description of Land
Juniper Meadows (Lewiston Facility), Idaho
------------------------------------------
Situated in the County of Nez Perce, State of Idaho, more particularly described
as:
Lot 1 of Scenic Crest 4th Addition to the City of Lewiston, according to the
official plat thereof, filed in CABII 327B of Plats, Official Records of Nez
Perce County, Idaho
EXHIBIT A-8
-----------
Description of Land
Lodge at Eddy Pond (Auburn Facility), Massachusetts
---------------------------------------------------
Situated in the County of Worcester, State of Massachusetts, more particularly
described as:
Lot 1
- ------
Auburn, Massachusetts
A certain parcel of land in the Commonwealth of Massachusetts, County of
Worcester, Town of Auburn, Situated on the southerly side of Washington Street
(Route 20) and shown as Lot 1 on a plan entitled "Plan of Land in Auburn, MA
(Worcester County)," scale 1" - 50', dated August 14, 2002, prepared by Beals
and Thomas, Inc., recorded on August 28, 2002 in Plan Book 785 as Plan 28, being
more particularly bounded and described as follows:
Beginning at the northwesterly corner of the parcel on the southerly side of
Washington Street, thence running:
N 73 41 31 E 13.19 Feet, to a point, said course being by Washington Street,
thence turning and running;
S 16 18 29 E 25.00 Feet, to a point, said course being by Washington Street,
thence turning and running;
N 73 41 31 E 281.07 Feet, to a point, said course being by Washington
Street, thence turning and running;
S 20 04 51 W 330.52 feet, to a point, said course being by Lot 2 on said
plan, thence turning and running;
S 23 52 15 E 193.52 feet, to a point, said course being by said Lot 2,
thence turning and running;
S 75 01 44 E 144.12 feet to a point, said course being by said Lot 2, thence
turning and running;
S 36 36 20 E 270.85 feet, to a point, said course being by said Lot 2,
thence turning and running;
S 05 48 25 E 113.00 feet, to a point, said course being by said Lot 2,
thence turning and running;
N 79 20 40 W 737.00 feet, to a point, said course being by land n/f of the
Town of Auburn, thence turning and running;
N 13 27 36 E 678.19 feet, to a point, said course being by land n/f of the
Town of Auburn, to the point of beginning.
Containing 300,897 square feet more or less.
Subject to and with the benefit of Drainage, Utility and Access Easement
Agreement by and between Auburn Land, LLC and LM Auburn Assisted Living, LLC,
dated April 26, 1996 and recorded May 1, 1996 at Book 17872, Page 321.
Subject to and with the benefit of Deed of Easement from LM Auburn Assisted
Living, LLC and Auburn Land, LLC to Auburn Water District dated April 29, 1996
and recorded May 1, 1996 at Book 17872, Page 398.
Confirmatory Gas Easement dated August 22, 2002 and recorded on August 28, 2002
at the Worcester Registry of Deeds as instrument number 164439.
EXHIBIT A-9
-----------
Description of Land
Spring Meadows (Bozeman Facility), Montana
------------------------------------------
Situated in the County of Gallatin, State of Montana, more particularly
described as:
Lot 2 in Block 2 of Spring Meadows Subdivision, being a portion of unplatted
SW1/4 of Section 19 and Certificate of Survey 819A, situated in the NW1/4 of
Section 19, Township 2 South, Range 6 East, P.M.M., Gallatin County, Montana,
according to Plat on file and of record in the office of the County Clerk and
Recorder of Gallatin County, Montana. [Plat J-145]
EXHIBIT A-10
------------
Description of Land
Concorde (Las Vegas Facility), Nevada
-------------------------------------
Situated in the County of Clark, State of Nevada, and more particularly
described as follows:
Government Lot Thirty-Seven (37) in Section 13, Township 21 South, Range 61
East, M.D.B.&M., County of Clark County, Nevada.
EXCEPT that portion conveyed to the County of Clark for road purposes by Deed
recorded January 17, 1996 in Book 960117 as Document No. 01463 of Official
Records.
EXHIBIT A-11
------------
Description of Land
Courtyard at the Willows (Puyallup Facility), Washington
--------------------------------------------------------
SITUATED IN THE CITY OF PUYALLUP, PIERCE COUNTY, WASHINGTON, MORE PARTICULARLY
DESCRIBED AS FOLLOWS:
PARCEL A:
LOT 1 OF COLUMBIA PACIFIC MANAGEMENT BINDING SITE PLAN RECORDED JULY 19, 1995
UNDER AUDITOR'S NO. 9507190625, RECORDS OF PIERCE COUNTY, WASHINGTON.
EXCEPT THE SOUTH 30 FEET THEREOF DEEDED TO THE CITY OF PUYALLUP, A WASHINGTON
MUNICIPAL CORPORATION, BY DEED RECORDED UNDER AUDITOR'S NO. 9701090196.
PARCEL B:
A NON-EXCLUSIVE ROAD EASEMENT AREA FOR PURPOSES OF INGRESS, EGRESS AND UTILITIES
AS DELINEATED ON COLUMBIA PACIFIC MANAGEMENT BINDING SITE PLAN RECORDED JULY 19,
1995 UNDER AUDITOR'S NO. 9507190625, AS GRANTED BY INSTRUMENT RECORDED UNDER
RECORDING NUMBER 9806190616.
EXCEPT FROM SAID EASEMENT THAT PORTION LYING WITHIN SAID LOT 1. PARCEL C:
A NON-EXCLUSIVE FENCE EASEMENT AREA FOR PURPOSES OF FENCING AND LANDSCAPING AS
GRANTED BY INSTRUMENT RECORDED UNDER RECORDING NUMBER 9806190616, OVER LOTS 2, 3
AND 4 OF COLUMBIA PACIFIC MANAGEMENT BINDING SITE PLAN RECORDED JULY 19, 1995
UNDER AUDITOR'S NO. 9507190625.
PARCEL D:
A NON-EXCLUSIVE STORM DRAINAGE EASEMENT AREA FOR PURPOSES OF STORM DRAINAGE AS
GRANTED BY INSTRUMENT RECORDED UNDER RECORDING NUMBER 9806190616, OVER LOTS 2, 3
AND 4 OF COLUMBIA PACIFIC MANAGEMENT BINDING SITE PLAN RECORDED JULY 19, 1995
UNDER AUDITOR'S NO. 9507190625.
PARCEL E:
A NON-EXCLUSIVE PERPETUAL EASEMENT OVER, UNDER, ACROSS AND THROUGH PORTION OF
LOT 2 OF COLUMBIA PACIFIC MANAGEMENT BINDING SITE PLAN RECORDED JULY 19, 1995
UNDER AUDITOR'S NO. 9507190625, NECESSARY FOR PURPOSES OF CONSTRUCTING,
MODIFYING, MAINTAINING, OPERATING, AND USING THOSE LOT 1 OFFSITE IMPROVEMENTS
LOCATED ON SAID LOT 2, AS GRANTED BY INSTRUMENT RECORDED UNDER RECORDING NUMBER
9806190616.
PARCEL F:
A NON-EXCLUSIVE PERPETUAL EASEMENT OVER, UNDER, ACROSS AND THROUGH PORTION OF
LOT 4 OF COLUMBIA PACIFIC MANAGEMENT BINDING SITE PLAN RECORDED JULY 19, 1995
UNDER AUDITOR'S NO. 9507190625, NECESSARY FOR PURPOSES OF CONSTRUCTING,
MODIFYING, MAINTAINING, OPERATING, AND USING THOSE LOT 1 OFFSITE IMPROVEMENTS
LOCATED ON SAID LOT 4, AS GRANTED BY INSTRUMENT RECORDED UNDER RECORDING NUMBER
9806190616.
B-1
EXHIBIT B
List of Lessor's Personal Property
With Respect to Each Facility
-----------------------------
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.
C-1
EXHIBIT C
---------
LIST OF FACILITIES, FACILITY DESCRIPTION, ALLOCATED MINIMUM RENT AND ALLOCATED
------------------------------------------------------------------------------
VALUE
-----
INITIAL
FACILITY DESCRIPTION MONTHLY ALLOCATED ALLOCATED
FACILITY AND PRIMARY INTENDED USE MINIMUM RENT VALUE
------------ -----
Villa Del Rey Facility Assisted living facility located at 1351 E.
- ------------------------- -------------------------------------------------
Washington Ave. in Escondido, California, consisting of 84 assisted living
- --------------------------------------------------------------------------------
facility units $41,208.33 $4,600,000
-------------- ---------- ----------
Fulton Villa Facility Assisted living facility located at 517 East Fulton
- ----------------------- ----------------------------------------------------
Street in Stockton, California, consisting of 81 assisted living facility units
- --------------------------------------------------------------------------------
$32,250.00 $3,600,000
---------- ----------
Stanford Centre Facility Assisted living facility located at 433 Orange
- -------------------------- -------------------------------------------------
Drive in Altamonte Springs, Florida, consisting of 117 assisted living facility
- --------------------------------------------------------------------------------
units and special care (Alzheimer's) units $26,875.00 $3,000,000
------------------------------------------ ---------- ----------
River Oak Facility Assisted living facility located at 925 South River Road
- ------------------- --------------------------------------------------------
in Englewood, Florida, consisting of 155 assisted living facility units and
- --------------------------------------------------------------------------------
special care (Alzheimer's) units $86,000.00 $9,600,000
-------------------------------- ---------- ----------
La Casa Grande Facility Assisted living facility located at 6400 Trouble
- -------------------------- -------------------------------------------------
Creek Rd. in New Port Richey, Florida, consisting of 193 assisted living
- --------------------------------------------------------------------------------
facility units and special care (Alzheimer's) units $154,979.17
--------------------------------------------------- -----------
$17,300,000
-----------
Silver Pines Facility Assisted living facility located at 136 36th Avenue SW
- --------------------- ------------------------------------------------------
in Cedar Rapids, Iowa, consisting of 69 assisted living facility units and
- --------------------------------------------------------------------------------
special care (Alzheimer's) units $27,770.83 $3,100,000
-------------------------------- ---------- ----------
Juniper Meadows Facility Assisted living facility located at 2975 Juniper
- -------------------------- -------------------------------------------------
Drive in Lewiston, Idaho, consisting of 74 assisted living facility units
- --------------------------------------------------------------------------------
$51,062.50 $5,700,000
---------- ----------
Lodge at Eddy Pond Facility Assisted living facility located at 669
- ------------------------------- --------------------------------------------
Washington Street in Auburn, Massachusetts, consisting of 108 assisted living
- --------------------------------------------------------------------------------
facility units $85,104.17 $9,500,000
-------------- ---------- ----------
Spring Meadows Facility Assisted living facility located at 3175 Graf Street
- ----------------------- ----------------------------------------------------
in Bozeman, Montana, consisting of 71 assisted living facility units
- -----------------------------------------------------------------------------
$84,208.33 $9,400,000
---------- ----------
Concorde Facility Assisted living facility located at 2465 East Twain Avenue
- ----------------- ----------------------------------------------------------
in Las Vegas, Nevada, consisting of 73 assisted living facility units and 30
- --------------------------------------------------------------------------------
independent living units $33,145.83 $3,700,000
------------------------ ---------- ----------
Courtyard at the Willows Facility Assisted living facility located at 4610
- ----------------------------------- ----------------------------------------
6th Place SE in Puyallup, Washington, consisting of 101 assisted living facility
- --------------------------------------------------------------------------------
units $98,541.67 $11,000,000
----- ---------- -----------
TOTAL $721,145.83 $80,500,000
----- ----------- -----------
D-1
EXHIBIT D
---------
[INTENTIONALLY OMITTED]
-----------------------
------
E-1
EXHIBIT E
---------
PROPERTY CONDITION REPORTS
--------------------------
FACILITY PROPERTY CONDITION REPORTS
--------------------------
Escondido, California The Phase I Environmental Site Assessment dated
- ---------------------- -----------------------------------------------------
November 1, 2002 prepared by Vertex Engineering.
- ------------------------------------------------------
Stockton, California The Phase I Environmental Site Assessment dated
- --------------------- -----------------------------------------------------
November 1, 2002 prepared by Vertex Engineering.
- ------------------------------------------------------
Altamonte Springs, Florida The Phase I Environmental Site Assessment dated
- ---------------------------- -----------------------------------------------
November 4, 2002 prepared by Vertex Engineering.
- ------------------------------------------------------
Englewood, Florida The Phase I Environmental Site Assessment dated November
- ------------------- --------------------------------------------------------
4, 2002 prepared by Vertex Engineering.
- --------------------------------------------
New Port Richey, Florida The Phase I Environmental Site Assessment dated
- --------------------------- ------------------------------------------------
July 30, 2001 prepared by EnviroBusiness, Inc.
- ----------------------------------------------------
Lewiston, Idaho The Phase I Environmental Site Assessment dated November 1,
- ---------------- -----------------------------------------------------------
2002 prepared by Vertex Engineering.
- ----------------------------------------
Cedar Rapids, Iowa The Phase I Environmental Site Assessment dated November
- ------------------- --------------------------------------------------------
4, 2002 prepared by Vertex Engineering.
- --------------------------------------------
Auburn, Massachusetts The Phase I Environmental Site Assessment dated May
- ---------------------- -----------------------------------------------------
31, 2002 prepared by Commercial Inspectors.
- ------------------------------------------------
Bozeman, Montana The Phase I Environmental Site Assessment dated July 31,
- ----------------- ----------------------------------------------------------
2002 prepared by EnviroBusiness, Inc.
- -----------------------------------------
Las Vegas, Nevada The Phase I Environmental Site Assessment dated November
- ------------------- --------------------------------------------------------
5, 2002 prepared by Vertex Engineering.
- --------------------------------------------
Puyallup, Washington The Phase I Environmental Site Assessment dated July
- --------------------- ------------------------------------------------------
30, 2001 prepared by EnviroBusiness, Inc.
- ----------------------------------------------
F-1
EXHIBIT F
---------
LESSOR ADDRESSES
----------------
Emeritus Realty II, LLC
3131 Elliott Avenue, Suite 500-B
Seattle, Washington 98121
Emeritus Realty III, LLC
3131 Elliott Avenue, Suite 500-C
Seattle, Washington 98121
Emeritus Realty VII, LLC
3131 Elliott Avenue, Suite 500-D
Seattle, Washington 98121
Emeritus Realty XIV, LLC
3131 Elliott Avenue, Suite 500-E
Seattle, Washington 98121
Emeritus Properties V, LLC
3131 Elliott Avenue, Suite 500-F
Seattle, Washington 98121
ESC-Port St. Richie, LLC
3131 Elliott Avenue, Suite 500-G
Seattle, Washington 98121
Emeritus Realty Bozeman, LLC
3131 Elliott Avenue, Suite 500-I
Seattle, Washington 98121
Emeritus Realty Puyallup, LLC
3131 Elliott Avenue, Suite 500-J
Seattle, Washington 98121
Emeritus Realty V, LLC
3131 Elliott Avenue, Suite 500-K
Seattle, Washington 98121
G-1
EXHIBIT G
---------
[[INTENTIONALLY OMITTED]
------------------------
H-1
EXHIBIT H
---------
LIST OF INITIAL FACILITY MORTGAGES
----------------------------------
The Initial Facility Mortgage for each Leased Property is in favor of General
Electric Capital Corporation, who has a first priority lien encumbering such
Leased Property."
I-1
EXHIBIT I
---------
LIST OF LESSORS, LESSEES AND LICENSE HOLDERS FOR EACH FACILITY
--------------------------------------------------------------
FACILITY LESSOR LESSEE/LICENSE HOLDER
- -------- ------ ----------------------
Villa Del Rey Emeritus Realty VII, LLC, Emeritus Corporation,
a Delaware limited liability company a Washington corporation
Fulton Villa Emeritus Realty VII, LLC, Emeritus Corporation,
a Delaware limited liability company a Washington corporation
Stanford Centre Emeritus Realty V, LLC, Emeritus Properties V, Inc.,
a Delaware limited liability company a Washington corporation
River Oaks Emeritus Realty V, LLC, Emeritus Properties V, Inc.,
a Delaware limited liability company a Washington corporation
La Casa Grande ESC-Port St. Richie, LLC, ESC-New Port Richey, LLC,
a Washington limited liability company a Washington limited liability
company **
Silver Pines Emeritus Realty II, LLC, Emeritus Properties II, Inc.,
a Delaware limited liability company a Washington corporation
Juniper Meadows Emeritus Realty II, LLC, Emeritus Properties II, Inc.,
a Delaware limited liability company a Washington corporation
Lodge at Eddy Pond Emeritus Realty XIV, LLC, Emeritus Properties XIV,
a Delaware limited liability company LLC, a Washington limited
liability company
Spring Meadows Emeritus Realty Bozeman, LLC, ESC-Bozeman, LLC,
a Delaware limited liability company a Washington limited liability
company
Concorde Emeritus Realty III, LLC, Emeritus Properties III, Inc.,
a Delaware limited liability company a Washington corporation
Courtyard at the Emeritus Realty Puyallup, LLC, Emeritus Properties III,
Inc.,
Willows a Delaware limited liability company a Washington corporation
** License Holder is ESC-Port St. Richie, LLC, a Washington limited liability
company
J-2
J-1
EXHIBIT J
---------
FORM OF
IRREVOCABLE STANDBY LETTER OF CREDIT
[Lessor]
[Lessor Addresses]
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
_____________ stating that ______________________, as lessee, has committed an
Event of Default under the lease dated __________________, between
__________________, 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
K-1
EXHIBIT K
---------
[INTENTIONALLY OMITTED]
L-1
EXHIBIT L
---------
[INTENTIONALLY OMITTED]
M-1
EXHIBIT M
---------
FACILITY NAME LOCATION
--------
1. Concorde (Las Vegas, NV) Village Oaks at Las Vegas
- ------------------------------- -----------------------------
2. Lodge at Eddy Pond (Auburn, MA) Woods at Eddy Pond
- ---------------------------------------- ---------------------
3. Stanford Centre (Altamonte Springs, FL) Village Oaks at Tuskawilla
- ----------------------------------------------- ----------------------------
4. Courtyard at the Willows (Puyallup, WA) Charlton Place
- ------------------------------------------------ ---------------