LEASE AGREEMENT
BETWEEN
HCRI KIRKLAND PROPERTIES, LLC
AND
EMERITUS PROPERTIES X, LLC
SEPTEMBER 29, 2003
SECTION PAGE
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TABLE OF CONTENTS
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ARTICLE 1: LEASED PROPERTY, TERM AND DEFINITIONS 1
1.1 Leased Property 1
1.2 Term 1
1.3 Definitions 1
ARTICLE 2: RENT 9
2.1 Base Rent 9
2.1.1 Base Rent Adjustment 9
2.2 Additional Rent 9
2.3 Place of Payment of Rent 9
2.4 Net Lease 9
2.5 No Termination, Abatement, Etc. 10
2.6 Transaction Fee 10
ARTICLE 3: IMPOSITIONS AND UTILITIES 10
3.1 Payment of Impositions 10
3.2 Definition of Impositions 11
3.3 Escrow of Impositions 12
3.4 Utilities 12
3.5 Discontinuance of Utilities 13
3.6 Business Expenses 13
3.7 Permitted Contests 13
ARTICLE 4: INSURANCE 13
4.1 Property Insurance 13
4.2 Liability Insurance 14
4.3 Builder's Risk Insurance 15
4.4 Insurance Requirements 15
4.5 Replacement Value 16
4.6 Blanket Policy 16
4.7 No Separate Insurance 16
4.8 Waiver of Subrogation 16
4.9 Mortgages 17
4.10 Escrows 17
ARTICLE 5: INDEMNITY 17
5.1 Tenant's Indemnification 17
5.1.1 Notice of Claim 18
5.1.2 Survival of Covenants 18
5.1.3 Reimbursement of Expenses 18
5.2 Environmental Indemnity; Audits 18
5.3 Limitation of Landlord's Liability 18
ARTICLE 6: USE AND ACCEPTANCE OF PREMISES 19
6.1 Use of Leased Property 19
6.2 Acceptance of Leased Property 19
6.3 Conditions of Use and Occupancy 19
ARTICLE 7: MAINTENANCE AND MECHANICS' LIENS 20
7.1 Maintenance 20
7.2 Required Alterations 20
7.3 Mechanic's Liens 20
7.4 Replacements of Fixtures and Landlord's Personal Property 21
7.5 Lender Maintenance Reserve Escrow 21
ARTICLE 8: DEFAULTS AND REMEDIES 21
8.1 Events of Default 21
8.2 Remedies 23
8.3 Right of Setoff 26
8.4 Performance of Tenant's Covenants 26
8.5 Late Payment Charge 26
8.6 Default Rent 27
8.7 Attorneys' Fees 27
8.8 Escrows and Application of Payments 27
8.9 Remedies Cumulative 27
8.10 Waivers 27
8.11 Obligations Under the Bankruptcy Code 28
ARTICLE 9: DAMAGE AND DESTRUCTION 28
9.1 Notice of Casualty 28
9.2 Substantial Destruction 28
9.3 Partial Destruction 29
9.4 Restoration 29
9.5 Insufficient Proceeds 30
9.6 Not Trust Funds 30
9.7 Landlord's Inspection 30
9.8 Landlord's Costs 30
9.9 No Rent Abatement 31
ARTICLE 10: CONDEMNATION 31
10.1 Total Taking 31
10.2 Partial Taking 31
10.3 Condemnation Proceeds Not Trust Funds 31
ARTICLE 11: TENANT'S PROPERTY 32
11.1 Tenant's Property 32
11.2 Requirements for Tenant's Property 32
ARTICLE 12: RENEWAL OPTIONS 33
12.1 Renewal Options 33
12.2 Effect of Renewal 33
ARTICLE 13: RIGHT OF FIRST OPPORTUNITY 34
13.1 Right of First Opportunity 34
13.2 Closing 35
ARTICLE 14: NEGATIVE COVENANTS 36
14.1 No Debt 36
14.2 No Liens 36
14.3 No Guaranties 36
14.4 No Transfer 36
14.5 No Dissolution 36
14.6 Subordination of Payments to Affiliates 36
14.7 Change of Location or Name 36
ARTICLE 15: AFFIRMATIVE COVENANTS 37
15.1 Perform Obligations 37
15.2 Proceedings to Enjoin or Prevent Construction 37
15.3 Documents and Information 37
15.3.1 Furnish Documents 37
15.3.2 Furnish Information 37
15.3.3 Further Assurances and Information 37
15.3.4 Material Communications 38
15.3.5 Requirements for Financial Statements 38
15.4 Compliance With Laws 38
15.5 Broker's Commission 38
15.6 Existence and Change in Ownership 38
15.7 Financial Covenants 39
15.7.1 Definitions 39
15.7.2 Coverage Ratio 39
15.8 Facility Licensure and Certification 39
15.9 Transfer of License and Facility Operations 39
15.9.1 Licensure 39
15.9.2 Facility Operations 39
15.10 Bed Operating Rights 40
15.11 Power of Attorney 40
15.12 Compliance with Loan Documents 41
ARTICLE 16: ALTERATIONS, CAPITAL IMPROVEMENTS, AND SIGNS 42
16.1 Prohibition on Alterations and Improvements 42
16.2 Approval of Alterations 42
16.3 Permitted Alterations 43
16.4 Requirements for Permitted Alterations 43
16.5 Ownership and Removal of Permitted Alterations 44
16.6 Minimum Qualified Capital Expenditures 44
16.7 Signs 44
ARTICLE 17: RESERVED 44
ARTICLE 18: ASSIGNMENT AND SALE OF LEASED PROPERTY 44
18.1 Prohibition on Assignment and Subletting 44
18.2 Requests for Landlord's Consent to Assignment, Sublease or Management
Agreement 45
18.3 Agreements with Residents 46
18.4 Sale of Leased Property 46
18.5 Assignment by Landlord 46
ARTICLE 19: HOLDOVER AND SURRENDER 46
19.1 Holding Over 46
19.2 Surrender 47
19.3 Indemnity 47
ARTICLE 20: RESERVED 47
ARTICLE 21: QUIET ENJOYMENT, SUBORDINATION, ATTORNMENT AND ESTOPPEL
CERTIFICATES 47
21.1 Quiet Enjoyment 47
21.2 Subordination 47
21.3 Attornment 48
21.4 Estoppel Certificates 48
ARTICLE 22: REPRESENTATIONS AND WARRANTIES 49
22.1 Organization and Good Standing 49
22.2 Power and Authority 49
22.3 Enforceability 49
22.4 Government Authorizations 49
22.5 Financial Statements 49
22.6 Condition of Facility 50
22.7 Compliance with Laws 50
22.8 No Litigation 50
22.9 Consents 50
22.10 No Violation 51
22.11 Reports and Statements 51
22.12 ERISA 51
22.13 Chief Executive Office 51
22.14 Other Name or Entities 51
22.15 Parties in Possession 51
22.16 Access 52
22.17 Utilities 52
22.18 Condemnation and Assessments 52
22.19 Zoning 52
22.20 Pro Forma Statement 52
22.21 Environmental Matters 52
22.22 Leases and Contracts 53
22.23 No Default 53
22.24 Tax Status 53
ARTICLE 23: RESERVED 53
ARTICLE 24: SECURITY INTEREST 53
24.1 Collateral 53
24.2 Additional Documents 54
24.3 Notice of Sale 54
24.4 Recharacterization 55
24.5 Subordination 55
ARTICLE 25: MISCELLANEOUS 55
25.1 Notices 55
25.2 Advertisement of Leased Property 55
25.3 Entire Agreement 55
25.4 Severability 55
25.5 Captions and Headings 56
25.6 Governing Law 56
25.7 Memorandum of Lease 56
25.8 Waiver 56
25.9 Binding Effect 56
25.10 No Offer 56
25.11 Modification 56
25.12 Landlord's Modification 57
25.13 No Merger 57
25.14 Laches 57
25.15 Limitation on Tenant's Recourse 57
25.16 Construction of Lease 57
25.17 Counterparts 57
25.18 Custody of Escrow Funds 57
25.19 Landlord's Status as a REIT 57
25.20 Exhibits 58
25.21 WAIVER OF JURY TRIAL 58
25.22 CONSENT TO JURISDICTION 58
25.23 Attorney's Fees and Expenses 58
25.24 Survival 59
25.25 Time 59
SCHEDULE 1: INITIAL RENT SCHEDULE
EXHIBIT A: LEGAL DESCRIPTIONS
EXHIBIT B: PERMITTED EXCEPTIONS
EXHIBIT C: FACILITY INFORMATION
EXHIBIT D: LANDLORD'S PERSONAL PROPERTY
EXHIBIT E: DOCUMENTS TO BE DELIVERED
EXHIBIT F: TENANT'S CERTIFICATE AND FACILITY FINANCIAL REPORTS
EXHIBIT G: GOVERNMENT AUTHORIZATIONS TO BE OBTAINED; ZONING PERMITS
EXHIBIT H: PENDING LITIGATION
EXHIBIT I: LIST OF LEASES AND CONTRACTS
EXHIBIT J: WIRE TRANSFER INSTRUCTIONS
EXHIBIT K: BASE PRICE
LEASE AGREEMENT
This Lease Agreement ("Lease") is made effective as of September 29,
2003 (the "Effective Date") between HCRI KIRKLAND PROPERTIES, LLC, a limited
liability company organized under the laws of the State of Delaware ("Landlord"
as further defined in 1.3 below), having its principal office located at One
SeaGate, Suite 1500, P.O. Box 1475, Toledo, Ohio 43603-1475, and EMERITUS
PROPERTIES X, LLC, a limited liability company organized under the laws of the
State of Washington ("Tenant"), having its chief executive office located at
3131 Elliott Avenue, Suite 500, Seattle, Washington 98121.
R E C I T A L S
A. As of the date hereof, Landlord acquired the Leased Property (defined
below) from Tenant and paid the Acquisition Payment (defined below) towards the
purchase price for the Leased Property. The amount paid by Tenant for the costs
incurred by Landlord in connection with its acquisition from Tenant of the
Leased Property, if any, shall be considered Tenant's contribution.
B. Landlord desires to lease the Leased Property to Tenant and Tenant
desires to lease the Leased Property from Landlord upon the terms set forth in
this Lease.
NOW, THEREFORE, Landlord and Tenant agree as follows:
ARTICLE 1: LEASED PROPERTY, TERM AND DEFINITIONS
1.1 Leased Property. Landlord hereby leases to Tenant and Tenant hereby
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leases from Landlord the Leased Property, subject, however, to the Permitted
Exceptions and subject to the terms and conditions of this Lease.
1.2 Term. The initial term ("Initial Term") of this Lease commences on the
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Effective Date and expires at 12:00 Midnight Eastern Time on the day before the
15th anniversary of the Commencement Date (the "Expiration Date"); provided,
however, that Tenant has one or more options to renew the Lease pursuant to
Article 12.
1.3 Definitions. Except as otherwise expressly provided, [i] the terms
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defined in this section have the meanings assigned to them in this section and
include the plural as well as the singular; [ii] all accounting terms not
otherwise defined herein have the meanings assigned to them in accordance with
generally accepted accounting principles as of the time applicable; and [iii]
the words "herein", "hereof" and "hereunder" and similar words refer to this
Lease as a whole and not to any particular section.
"$4,400,000 Note" means the note granted by Guarantor to HCN dated as of
August 28, 2003, as amended or restated.
"Acquisition Payment" means any payment by Landlord to acquire Leased Property.
"ADA" means the federal statute entitled Americans with Disabilities Act, 42
U.S.C. 12101, et seq.
"Additional Rent" has the meaning set forth in 2.2.
"Affiliate" means Guarantor and any person, corporation, partnership, limited
liability company, trust, or other legal entity that, directly or indirectly,
controls, or is controlled by, or is under common control with Tenant or
Guarantor. "Control" (and the correlative meanings of the terms "controlled by"
and "under common control with") means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
such entity. "Affiliate" includes, without limitation, each Guarantor. An
Affiliate of Tenant shall specifically exclude Columbia Pacific Management, Inc.
or any Affiliate thereof and Holiday Retirement Corporation or any Affiliate
thereof and, prior to the date of its acquisition thereof, Alterra Healthcare
Corporation or any Affiliate thereof.
"Annual Company Budget" means Tenant's projection of its financial statement for
the next fiscal year (or the 12-month rolling forward period, if applicable),
which shall include the balance sheet, statement of income, statement of cash
flows, statement of shareholders' equity and statement of capital expenditures
for the applicable period.
"Annual Financial Statements" means [i] an audited Facility Financial Statement
for the most recent fiscal year; and [ii] for Guarantor, if Guarantor is or
includes a corporation, partnership or limited liability company, an audited
balance sheet and statement of income for the most recent fiscal year.
"Bankruptcy Code" means the United States Bankruptcy Code set forth in 11 U.S.C.
101, et seq., as amended from time to time.
"Base Price" has the meaning set forth on Exhibit K.
"Base Rent" has the meaning set forth in 2.1, as increased from time to time
pursuant to 2.2.
"Business Day" means any day other than a Saturday, Sunday, or national holiday.
"Casualty" has the meaning set forth in 9.1.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended from time to time.
"Closing" means the closing of the lease of the Leased Property to Tenant.
"Collateral" has the meaning set forth in 24.1.
"Commencement Date" means the Effective Date if such date is the first day of a
month, and if it is not, the first day of the first month following the
Effective Date.
"Commitment" means the Commitment Letter for the Lease dated March 5, 2002 as
modified by the letter dated March 31, 2003.
"CPI" means the United States Department of Labor, Bureau of Labor Statistics
Revised Consumer Price Index for All Urban Consumers (1982-84=100), U.S. City
Average, All Items, or, if that index is not available at the time in question,
the index designated by such Department as the successor to such index, and if
there is no index so designated, an index for an area in the United States that
most closely corresponds to the entire United States, published by such
Department, or if none, by any other instrumentality of the United States.
"Default Rent" has the meaning set forth in 8.6.
"Effective Date" means the date of this Lease.
"Environmental Laws" means all federal, state, and local laws, ordinances and
policies the purpose of which is to protect human health and the environment, as
amended from time to time, including, but not limited to, [i] CERCLA; [ii] the
Resource Conservation and Recovery Act; [iii] the Hazardous Materials
Transportation Act; [iv] the Clean Air Act; [v] Clean Water Act; [vi] the Toxic
Substances Control Act; [vii] the Occupational Safety and Health Act; [viii] the
Safe Drinking Water Act; and [ix] analogous state laws and regulations.
"Event of Default" has the meaning set forth in 8.1.
"Expiration Date" has the meaning set forth in 1.2.
"Facility" means the Facility located on the Land, including the Facility
Property.
"Facility Cash Flow" has the meaning set forth in 15.7.1.
"Facility Coverage Ratio" has the meaning set forth in 15.7.1.
"Facility Financial Statement" means a financial statement for the Facility
which shall include the balance sheet, statement of income, statement of cash
flows, statement of shareholders' equity, occupancy census data (including payor
mix), statement of capital expenditures and a comparison of the actual financial
data versus the Annual Company Budget for the applicable period.
"Facility Name" means the name under which the Facility has done business during
the Term. The Facility Name in use by the Facility on the Effective Date is set
forth on the attached Exhibit C.
"Facility Property" means the Land on which the Facility is located, the legal
description of which is set forth on Exhibit A, the Improvements on the Land,
the Related Rights, and Landlord's Personal Property.
"Facility State" means the State in which the Facility is located.
"Facility Uses" means the uses relating to the operation of the Facility as a
facility of the type and operating the number of beds and units set forth on
Exhibit C.
"Financial Statements" means [i] the annual, quarterly and year to date
financial statements of Tenant; and [ii] all operating statements for the
Facility, that were submitted to Landlord prior to the Effective Date.
"Fixtures" means all permanently affixed equipment, machinery, fixtures and
other items of real and/or personal property (excluding Landlord's Personal
Property), including all components thereof, now and hereafter located in, on or
used in connection with, and permanently affixed to or incorporated into the
Improvements, including, without limitation, all furnaces, boilers, heaters,
electrical equipment, heating, plumbing, lighting, ventilating, refrigerating,
incineration, air and water pollution control, waste disposal, air-cooling and
air-conditioning systems and apparatus, sprinkler systems and fire and theft
protection equipment, built-in oxygen and vacuum systems, towers and other
devices for the transmission of radio, television and other signals, all of
which, to the greatest extent permitted by law, are hereby deemed by the parties
hereto to constitute real estate, together with all replacements, modifications,
alterations and additions thereto.
"Government Authorizations" means all permits, licenses, approvals, consents,
and authorizations required to comply with all Legal Requirements, including,
but not limited to, [i] zoning permits, variances, exceptions, special use
permits, conditional use permits, and consents; [ii] the permits, licenses,
provider agreements and approvals required for licensure and operation of the
Facility in accordance with the Facility Uses and, if applicable, certified as a
provider under the federal Medicare and state Medicaid programs; [iii]
environmental, ecological, coastal, wetlands, air, and water permits, licenses,
and consents; [iv] curb cut, subdivision, land use, and planning permits,
licenses, approvals and consents; [v] building, sign, fire, health, and safety
permits, licenses, approvals, and consents; and [vi] architectural reviews,
approvals, and consents required under restrictive covenants.
"Guarantor" means Emeritus Corporation, a Washington corporation.
"Guaranty" means the Unconditional and Continuing Lease Guaranty entered into by
Guarantor to guarantee payment and performance of the Obligor Group Obligations
and any amendments thereto or substitutions or replacements therefore.
"Hazardous Materials" means any substance [i] the presence of which poses a
hazard to the health or safety of persons on or about the Land, including, but
not limited to, asbestos containing materials; [ii] which requires removal or
remediation under any Environmental Law, including, without limitation, any
substance which is toxic, explosive, flammable, radioactive, or otherwise
hazardous; or [iii] which is regulated under or classified under any
Environmental Law as hazardous or toxic, including, but not limited to, any
substance within the meaning of "hazardous substance", "hazardous material",
"hazardous waste", "toxic substance", "regulated substance", "solid waste" or
"pollutant" as defined in any Environmental Law.
"HCN" means Health Care REIT, Inc., a Delaware corporation.
"HIPDB" means the Healthcare Integrity and Protection Data Bank maintained by
the Department of Health and Human Services.
"Impositions" has the meaning set forth in 3.2.
"Improvements" means all buildings, structures, Fixtures and other improvements
of every kind on any portion of the Land, including, but not limited to, alleys,
sidewalks, utility pipes, conduits and lines (on-site and off-site), parking
areas and roadways appurtenant to such buildings and structures, now or
hereafter situated upon any portion of the Land.
"Initial Term" has the meaning set forth in 1.2.
"Investment Amount" is an aggregate concept and means the sum of all Landlord
Payments outstanding at the applicable time.
"Land" means the real property described in Exhibit A attached hereto.
"Landlord" means HCRI Kirkland Properties, LLC.
"Landlord Affiliate" means any person, corporation, partnership, limited
liability company, trust, or other legal entity that, directly or indirectly,
controls, or is controlled by, or is under common control with Landlord.
"Control" (and the correlative meanings of the terms "controlled by" and "under
common control with") means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of such entity.
"Landlord Payment" means the Acquisition Payment or any advance by Landlord
under the terms hereof.
"Landlord's Personal Property" means all Personal Property owned by Landlord on
the Effective Date and located at the Facility, including, without limitation,
all personal property listed on the attached Exhibit D, together with any and
all replacements thereof, and all Personal Property that pursuant to the terms
of this Lease becomes the property of Landlord during the Term.
"Lease" means this Lease Agreement, as amended from time to time.
"Lease Documents" means this Lease and all documents executed by Landlord and
Tenant relating to this Lease or the Facility.
"Lease Payments" means the sum of the Base Rent payments (as increased from time
to time) for the applicable period.
"Lease Year" means each consecutive period of 365 or 366 days throughout the
Term. The first Lease Year commences on the Commencement Date and expires on
the day before the first anniversary of the Commencement Date.
"Leased Property" means all of the Land, Improvements, Related Rights and
Landlord's Personal Property.
"Legal Requirements" means all laws, regulations, rules, orders, writs,
injunctions, decrees, certificates, requirements, agreements, conditions of
participation and standards of any federal, state, county, municipal or other
governmental entity, administrative agency, insurance underwriting board,
architectural control board, private third-party payor, accreditation
organization, or any restrictive covenants applicable to the development,
construction, condition and operation of the Facility by Tenant for the Facility
Uses, including, but not limited to, [i] zoning, building, fire, health, safety,
sign, and subdivision regulations and codes; [ii] certificate of need laws (if
applicable); [iii] licensure to operate as the Facility in accordance with its
Facility Uses; [iv] Medicare and Medicaid certification requirements (if
applicable); [v] the ADA; [vi] any Environmental Laws; and [vii] requirements,
conditions and standards for participation in third-party payor insurance
programs.
"Lender" means JPMorgan Chase Bank (formerly known as the Chase Manhattan Bank),
trustee for the registered certificateholders of Credit Suisse First Boston
Mortgage Securities Corp. Commercial Mortgage Pass-Through Certificates, Series
2000-PS4.
"Letter of Credit" shall mean on the Effective Date the letter of credit
required by Lender in the amount of 5% of the outstanding amount of the loan
assumed by Landlord and any time after the Effective Date shall mean such letter
of credit as required by Lender which may be reduced from time to time as a
result of draws thereunder.
"Loan Documents" as used herein means the Loan Documents, as defined in the
Note, and includes the [i] Assumption Agreement, by and among Landlord, Tenant
and Lender; [ii] the Assumption of Obligations of Guarantor by and among HCN,
Guarantor and Lender; [iii] the Subordination and Standstill Agreement by and
among Tenant, Landlord, HCN, Guarantor and Lender; and [iv] any other documents
executed in connection with the Note Assumption executed by either Tenant,
Guarantor, Landlord and/or HCN.
"Material Obligation" means [i] any indebtedness with respect to any critical
care equipment and for all other equipment any indebtedness in excess of
$250,000.00 at the Facility secured by a security interest in or a lien, deed of
trust or mortgage on any of the Leased Property (or any part thereof, including
any Personal Property) and any agreement relating thereto; [ii] any obligation
or agreement that is material to the construction or operation of the Facility
or that is material to Tenant's business or financial condition and where a
breach thereunder, if not cured within any applicable cure period, would have a
material adverse affect on the financial condition of Tenant or the results of
operations at the Facility; [iii] any unsecured indebtedness or lease of Tenant
that has an outstanding principal balance or obligation of at least $250,000.00
and any agreement relating thereto; and [iv] any indebtedness or lease of
Guarantor, other than this Lease, that has an outstanding principal balance or
obligation of at least $1,000,000.00.
"Mortgage" means the Deed of Trust and Security Agreement dated September 29,
1999 from Tenant in favor of Lender to secure the Note, as assigned to and
assumed by Landlord and as the same may be amended from time to time.
"Negotiation Period" has the meaning set forth in Exhibit K.
"Net Operating Income" means the pre-tax net income of Tenant plus [i] the
amount of the provision for depreciation and amortization; plus [ii] the amount
of the provision for interest and lease payments, if any; plus [iii] the amount
of the provision for Rent payments; plus [iv] the amount of the provision for
management fees.
"Note" means the Fixed Rate Note dated September 29, 1999 in the original
principal amount of $4,330,000.00 from Tenant to Lender as assigned to and
assumed by Landlord and as the same may be amended from time to time.
"Obligor Group Obligations" means all payment and performance obligations of
Tenant or Guarantor to Landlord or any Landlord Affiliate, including, but not
limited to, all obligations under this Lease, any loans extended to Tenant or
Guarantor by Landlord or any Landlord Affiliate and all documents executed by
Tenant or Guarantor in favor of Landlord or any Landlord Affiliate in connection
with this Lease, any loan or any other obligation.
"Offer" has the meaning set forth in 13.1.
"Opportunity Notice" has the meaning set forth in 13.1(a).
"Organization State" means the State in which an entity is organized.
"Organizational Documents" means [i] for a corporation, its Articles of
Incorporation certified by the Secretary of State of the Organization State, as
amended to date, and its Bylaws certified by such entity, as amended to date;
[ii] for a partnership, its Partnership Agreement certified by such entity, as
amended to date, and the Partnership Certificate, certified by the appropriate
authority (if applicable), as amended to date; and [iii] for a limited liability
company, its Articles of Organization certified by the Secretary of State of the
Organization State, as amended to date, and its Operating Agreement certified by
such entity, as amended to date.
"Periodic Financial Statements" means an unaudited Facility Financial Statement
for the most recent month.
"Permitted Exceptions" means all easements, liens, encumbrances, restrictions,
agreements and other title matters existing as of the Effective Date, including,
without limitation, the exceptions to title set forth on Exhibit B attached
hereto, and any sublease of any portion of the Leased Property made in complete
accordance with Article 18.
"Permitted Liens" means [i] liens granted to Landlord; [ii] liens customarily
incurred by Tenant in the ordinary course of business for items not delinquent,
including mechanic's liens and deposits and charges under worker's compensation
laws; [iii] liens for taxes and assessments not yet due and payable; [iv] any
lien, charge, or encumbrance which is being contested in good faith pursuant to
this Lease; [v] the Permitted Exceptions; and [vi] purchase money financing and
capitalized equipment leases for the acquisition of personal property provided,
however, that Landlord obtains a nondisturbance agreement from the purchase
money lender or equipment lessor in form and substance as may be satisfactory to
Landlord if the original cost of the equipment exceeds $250,000.00.
"Personal Property" means all machinery, equipment, furniture, furnishings,
movable walls or partitions, computers (and all associated software), trade
fixtures and other personal property (but excluding consumable inventory and
supplies owned by Tenant) used in connection with the Leased Property, together
with all replacements and alterations thereof and additions thereto, except
items, if any, included within the definition of Fixtures or Improvements.
"Pro Forma Statement" means a financial forecast for the Facility for the next
five-year period prepared in accordance with the standards for forecasts
established by the American Institute of Certified Public Accountants.
"Protected Period" has the meaning set forth in 13.1(a).
"Qualified Capital Expenditures" means the expenditures capitalized on the books
of Tenant for any of the following: replacement of furniture, fixtures and
equipment, including refrigerators, ranges, major appliances, bathroom fixtures,
doors (exterior and interior), central air conditioning and heating systems
(including cooling towers, water chilling units, furnaces, boilers and fuel
storage tanks) and replacement of siding; roof replacements, including
replacements of gutters, downspouts, eaves and soffits; major repairs and
replacements of plumbing and sanitary systems; overhaul of elevator systems;
repaving, resurfacing and sealcoating of sidewalks, parking lots and driveways;
repainting of entire building exterior and normal maintenance and repairs needed
to maintain the quality and condition of the Facility in the market in which it
operates, but excluding Alterations.
"Receivables" means [i] all of Tenant's rights to receive payment for providing
resident care and services as set forth in any accounts, contract rights, and
instruments, and [ii] those documents, chattel paper, inventory proceeds,
provider agreements, participation agreements, ledger sheets, files, records,
computer programs, tapes, and agreements relating to Tenant's rights to receive
payment for providing resident care services.
"Related Rights" means all easements, rights (including bed operating rights)
and appurtenances relating to the Land and the Improvements.
"Renewal Date" means the first day of each Renewal Term.
"Renewal Option" has the meaning set forth in 12.1.
"Renewal Term" has the meaning set forth in 12.1.
"Rent" means Base Rent, Additional Rent and Default Rent.
"Rent Schedule" means the schedule issued by Landlord to Tenant showing the Base
Rent to be paid by Tenant pursuant to the terms of this Lease, as such schedule
is amended from time to time by Landlord. The initial Rent Schedule is attached
to this Lease as Schedule 1 or, after review and approval by Tenant, will be
attached following Closing if the Rent Schedule cannot be determined until the
day of Closing.
"Replacement Operator" has the meaning set forth in 15.9.1.
"Right of First Opportunity Event" has the meaning set forth in 13.1.
"Secured Party" has the meaning set forth in 24.1.
"Tenant" has the meaning set forth in the introductory paragraph of this Lease.
"Tenant's Property" has the meaning set forth in 11.1.
"Term" means the Initial Term and each Renewal Term.
ARTICLE 2: RENT
2.1 Base Rent. Tenant shall pay Landlord base rent ("Base Rent") in advance
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in consecutive monthly installments payable on the first day of each month
during the Term commencing on the Commencement Date. If the Effective Date is
not the first day of a month, Tenant shall pay Landlord Base Rent on the
Effective Date for the partial month, i.e., for the period commencing on the
Effective Date and ending on the day before the Commencement Date. The Base
Rent payable for the Initial Term is as shown on the Rent Schedule, to be
adjusted pursuant to 2.1.1. The Base Rent for each Renewal Term will be
determined in accordance with 12.2.
2.1.1 Base Rent Adjustment. In accordance with the terms of the Loan
----------------------
Documents, monthly payments of principal and interest due to Lender under the
Note ("Loan Payment") shall be paid by Tenant. On October 1, 2003, the Base
Rent due on October 1, 2003 shall be reduced by an amount equal to the Loan
Payment (as of the Effective Date in the amount of $41,789.86) divided by 30
times the number of days starting with the Effective Date and ending on
September 30, 2003. On November 1, 2003, and on the first day of each month
thereafter that Tenant makes a Loan Payment, the Base Rent due on November 1,
2003 and on the first day of each month thereafter, shall be reduced by an
amount equal to the Loan Payment made by Tenant. If Landlord makes a Loan
Payment, the Base Rent for each month thereafter shall not be reduced until such
time as Landlord has been repaid the Loan Payment made by Landlord. Tenant
shall deliver to Landlord written evidence, satisfactory to Landlord, of payment
of the Loan Payment within five Business Days of payment of same, but in any
event prior to the 10th day of each month.
2.2 Additional Rent. In addition to Base Rent, Tenant shall pay all other
----------------
amounts, liabilities, obligations and Impositions which Tenant assumes or agrees
to pay under this Lease including any fine, penalty, interest, charge and
cost which may be added for nonpayment or late payment of such items
(collectively the "Additional Rent").
2.3 Place of Payment of Rent. Tenant shall make all payments of Rent to
----------------------------
Landlord by electronic wire transfer in accordance with the wiring instructions
set forth in Exhibit J attached hereto, subject to change in accordance with
other written instructions provided by Landlord from time to time.
2.4 Net Lease. This Lease shall be deemed and construed to be an
----------
"absolute net lease", and Tenant shall pay all Rent and other charges and
expenses in connection with the Leased Property throughout the Term, without
abatement, deduction, recoupment or setoff. Landlord shall have all legal,
equitable and contractual rights, powers and remedies provided either in this
Lease or by statute or otherwise in the case of nonpayment of the Rent.
2.5 No Termination, Abatement, Etc. Except as otherwise specifically
---------------------------------
provided in this Lease, Tenant shall remain bound by this Lease in accordance
with its terms. Tenant shall not, without the consent of Landlord, modify,
surrender or terminate the Lease, nor seek nor be entitled to any abatement,
deduction, deferment or reduction of Rent, or setoff or recoupment against the
Rent. Except as expressly provided in this Lease, the obligations of Landlord
and Tenant shall not be affected by reason of [i] any damage to, or destruction
of, the Leased Property or any part thereof from whatever cause or any Taking
(as hereinafter defined) of the Leased Property or any part thereof; [ii] the
lawful or unlawful prohibition of, or restriction upon, Tenant's use of the
Leased Property, or any part thereof, the interference with such use by any
person, corporation, partnership or other entity, or by reason of eviction by
paramount title; [iii] any claim which Tenant has or might have against Landlord
or by reason of any default or breach of any warranty by Landlord under this
Lease or any other agreement between Landlord and Tenant, or to which Landlord
and Tenant are parties; [iv] any bankruptcy, insolvency, reorganization,
composition, readjustment, liquidation, dissolution, winding up or other
proceeding affecting Landlord or any assignee or transferee of Landlord; or [v]
any other cause, whether similar or dissimilar to any of the foregoing, other
than a discharge of Tenant from any such obligations as a matter of law. Except
as otherwise specifically provided in this Lease, Tenant hereby specifically
waives all rights, arising from any occurrence whatsoever, which may now or
hereafter be conferred upon it by law [a] to modify, surrender or terminate this
Lease or quit or surrender the Leased Property or any portion thereof; or [b]
entitling Tenant to any abatement, reduction, suspension or deferment of the
Rent or other sums payable by Tenant hereunder. The obligations of Landlord and
Tenant hereunder shall be separate and independent covenants and agreements and
the Rent and all other sums payable by Tenant hereunder shall continue to be
payable in all events unless the obligations to pay the same shall be terminated
pursuant to the express provisions of this Lease or by termination of this Lease
other than by reason of an Event of Default. Nothing in this 2.5 shall be
construed to limit any right which Tenant may have to bring a separate action
against Landlord for any claim which Tenant may have or allege to have against
Landlord.
2.6 Transaction Fee. On the Effective Date, Tenant shall pay a transaction
----------------
fee to Landlord in an amount equal to 1% of the Investment Amount.
ARTICLE 3: IMPOSITIONS AND UTILITIES
3.1 Payment of Impositions. Tenant shall pay, as Additional Rent, all
------------------------
Impositions that may be levied or become a lien on the Leased Property or any
part thereof at any time (whether prior to or during the Term), without regard
to prior ownership of said Leased Property, before any fine, penalty, interest,
or cost is incurred; provided, however, Tenant may contest any Imposition in
accordance with 3.7. Tenant shall deliver to Landlord [i] not more than five
days after the due date of each Imposition, copies of the invoice for such
Imposition and the check delivered for payment thereof; and [ii] not more than
30 days after the due date of each Imposition, a copy of the official receipt
evidencing such payment or other proof of payment satisfactory to Landlord.
Tenant's obligation to pay such Impositions shall be deemed absolutely fixed
upon the date such Impositions become a lien upon the Leased Property or any
part thereof. Tenant, at its expense, shall prepare and file all tax returns
and reports in respect of any Imposition as may be required by governmental
authorities. Tenant shall be entitled to any refund due from any taxing
authority if no Event of Default shall have occurred hereunder and be continuing
and if Tenant shall have paid all Impositions due and payable as of the
date of the refund. Landlord shall be entitled to any refund from any taxing
authority if an Event of Default has occurred and is continuing. Any refunds
retained by Landlord due to an Event of Default shall be applied as provided in
8.8. Landlord and Tenant shall, upon request of the other, provide such data as
is maintained by the party to whom the request is made with respect to the
Leased Property as may be necessary to prepare any required returns and reports.
In the event governmental authorities classify any property covered by this
Lease as personal property, Tenant shall file all personal property tax returns
in such jurisdictions where it may legally so file. Landlord, to the extent it
possesses the same, and Tenant, to the extent it possesses the same, will
provide the other party, upon request, with cost and depreciation records
necessary for filing returns for any property so classified as personal
property. Where Landlord is legally required to file personal property tax
returns, Tenant will be provided with copies of assessment notices indicating a
value in excess of the reported value in sufficient time for Tenant to file a
protest. Tenant may, at Tenant's option and at Tenant's sole cost and expense,
protest, appeal, or institute such other proceedings as Tenant may deem
appropriate to effect a reduction of real estate or personal property
assessments and Landlord, at Tenant's expense as aforesaid, shall fully
cooperate with Tenant in such protest, appeal, or other action. Tenant shall
reimburse Landlord for all personal property taxes paid by Landlord within 30
days after receipt of billings accompanied by copies of a bill therefore and
payments thereof which identify the personal property with respect to which such
payments are made. Impositions imposed in respect to the tax-fiscal period
during which the Term terminates shall be adjusted and prorated between Landlord
and Tenant as of the termination date, whether or not such Imposition is imposed
before or after such termination, and Tenant's obligation to pay its prorated
share thereof shall survive such termination.
3.2 Definition of Impositions. "Impositions" means, collectively, [i] taxes
-------------------------
(including, without limitation, all capital stock and franchise taxes of
Landlord imposed by the Facility State or any governmental entity in the
Facility State due to this lease transaction or Landlord's ownership of the
Leased Property and the income arising therefrom, or due to Landlord being
considered as doing business in the Facility State because of Landlord's
ownership of the Leased Property or lease thereof to Tenant), all real estate
and personal property ad valorem, sales and use, business or occupation, single
business, gross receipts, transaction privilege, rent or similar taxes; [ii]
assessments (including, without limitation, all assessments for public
improvements or benefits, whether or not commenced or completed prior to the
date hereof and whether or not to be completed within the Term); [iii] ground
rents, water, sewer or other rents and charges, excises, tax levies, and fees
(including, without limitation, license, permit, inspection, authorization and
similar fees); [iv] all taxes imposed on Tenant's operations of the Leased
Property, including, without limitation, employee withholding taxes, income
taxes and intangible taxes; [v] all taxes imposed by the Facility State or any
governmental entity in the Facility State with respect to the conveyance of the
Leased Property by Landlord to Tenant or Tenant's designee, including, without
limitation, conveyance taxes; and [vi] all other governmental charges, in each
case whether general or special, ordinary or extraordinary, or foreseen or
unforeseen, of every character in respect of the Leased Property or any part
thereof and/or the Rent (including all interest and penalties thereon due to any
failure in payment by Tenant), which at any time prior to, during or in respect
of the Term hereof may be assessed or imposed on or in respect of or be a lien
upon [a] Landlord or Landlord's interest in the Leased Property or any part
thereof; [b] the Leased Property or any part thereof or any rent therefrom or
any estate, right, title or interest therein; or [c] any occupancy, operation,
use or possession of, or sales from, or activity conducted on, or in connection
with the Leased Property or the leasing or use by Tenant of the Leased Property
or any part thereof. Tenant shall not, however, be required to pay any capital
gains tax or any tax based on net income imposed on Landlord by any governmental
entity other than the capital stock and franchise taxes described in clause [i]
above.
3.3 Escrow of Impositions. Tenant shall deposit with Landlord on the first
----------------------
day of each month a sum equal to 1/12th of the Impositions assessed against the
Leased Property for the preceding tax year for real estate taxes, which sums
shall be used by Landlord toward payment of such Impositions. In addition, if
an Event of Default occurs and while it remains uncured, Tenant shall, at
Landlord's election, deposit with Landlord on the first day of each month a sum
equal to 1/12th of the Impositions assessed against the Leased Property for the
preceding tax year other than for real estate taxes, which sums shall be used by
Landlord toward payment of such Impositions. Tenant, on demand, shall pay to
Landlord any additional funds necessary to pay and discharge the obligations of
Tenant pursuant to the provisions of this section. The receipt by Landlord of
the payment of such Impositions by and from Tenant shall only be as an
accommodation to Tenant, the mortgagees, and the taxing authorities, and shall
not be construed as rent or income to Landlord, Landlord serving, if at all,
only as a conduit for delivery purposes. The foregoing provision shall become
applicable only at such time as the escrow of Impositions is not required by
Lender, it being understood and agreed that for so long as Lender requires that
the real estate tax portion of the Imposition be escrowed with Lender, Tenant
shall be deemed to have fulfilled its obligations under this 3.3 with respect
to the real estate tax portion of the Imposition provided Tenant receives notice
either from Lender or from Landlord as required pursuant to 15.12.4 and then
Tenant makes the required escrow payment of the real estate tax portion of the
Imposition to Lender as and when due.
3.4 Utilities. Tenant shall pay, as Additional Rent, all taxes,
---------
assessments, charges, deposits, and bills for utilities, including, without
---
limitation, charges for water, gas, oil, sanitary and storm sewer, electricity,
telephone service, and trash collection, which may be charged against the
occupant of the Improvements during the Term. If an Event of Default occurs and
while it remains uncured, Tenant shall, at Landlord's election, deposit with
Landlord on the first day of each month a sum equal to 1/12th of the amount of
the annual utility expenses for the preceding Lease Year, which sums shall be
used by Landlord to pay such utilities. Tenant shall, on demand, pay to
Landlord any additional amount needed to pay such utilities. Landlord's receipt
of such payments shall only be an accommodation to Tenant and the utility
companies and shall not constitute rent or income to Landlord. Absent
circumstances beyond Tenant's reasonable control, Tenant shall at all times
maintain that amount of heat necessary to ensure against the freezing of water
lines. Tenant hereby agrees to indemnify and hold Landlord harmless from and
against any liability or damages to the utility systems and the Leased Property
that may result from Tenant's failure to maintain sufficient heat in the
Improvements absent circumstances beyond Tenant's reasonable control.
3.5 Discontinuance of Utilities. Landlord will not be liable for damages to
---------------------------
person or property or for injury to, or interruption of, business for any
discontinuance of utilities nor will such discontinuance in any way be construed
as an eviction of Tenant or cause an abatement of rent or operate to release
Tenant from any of Tenant's obligations under this Lease.
3.6 Business Expenses. Tenant shall promptly pay all expenses and costs
------------------
incurred in connection with the operation of the Facility on the Leased
Property, including, without limitation, employee benefits, employee vacation
and sick pay, consulting fees, and expenses for inventory and supplies.
3.7 Permitted Contests. Tenant, on its own or on Landlord's behalf (or in
-------------------
Landlord's name), but at Tenant's expense, may contest, by appropriate legal
proceedings conducted in good faith and with due diligence, the amount or
validity or application, in whole or in part, of any Imposition or any Legal
Requirement or insurance requirement or any lien, attachment, levy, encumbrance,
charge or claim provided 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
Landlord and from the Leased Property; [ii] neither the Leased Property nor any
Rent therefrom nor any part thereof or interest therein would be in any
immediate danger of being sold, forfeited, attached or lost; [iii] in the case
of a Legal Requirement, Landlord would not be in any immediate danger of civil
or criminal liability for failure to comply therewith pending the outcome of
such proceedings; [iv] in the event that any such contest shall involve a sum of
money or potential loss in excess of $50,000.00, Tenant shall deliver to
Landlord and its counsel an opinion of Tenant's counsel to the effect set forth
in clauses [i], [ii] and [iii], to the extent applicable; [v] in the case of a
Legal Requirement and/or an Imposition, lien, encumbrance or charge, Tenant
shall give such reasonable security as may be demanded by Landlord to insure
ultimate payment of the same and to prevent any sale or forfeiture of the
affected Leased Property or the Rent by reason of such nonpayment or
noncompliance; provided, however, the provisions of this section shall not be
construed to permit Tenant to contest the payment of Rent (except as to contests
concerning the method of computation or the basis of levy of any Imposition or
the basis for the assertion of any other claim) or any other sums payable by
Tenant to Landlord hereunder; [vi] in the case of an insurance requirement, the
coverage required by Article 4 shall be maintained; and [vii] if such contest be
finally resolved against Landlord or Tenant, Tenant shall, as Additional Rent
due hereunder, promptly pay the amount required to be paid, together with all
interest and penalties accrued thereon, or comply with the applicable Legal
Requirement or insurance requirement. Landlord, at Tenant's expense, shall
execute and deliver to Tenant such authorizations and other documents as may be
reasonably required in any such contest, and, if reasonably requested by Tenant
or if Landlord so desires, Landlord shall join as a party therein. Tenant
hereby agrees to indemnify and save Landlord harmless from and against any
liability, cost or expense of any kind that may be imposed upon Landlord in
connection with any such contest and any loss resulting therefrom.
ARTICLE 4: INSURANCE
4.1 Property Insurance. At Tenant's expense, Tenant shall maintain in full
-------------------
force and effect a property insurance policy or policies insuring the Leased
Property against the following:
(a) Loss or damage commonly covered by a "All Risk" or "Special Form", as
the case may be, policy insuring against physical loss or damage to the
Improvements and Personal Property, including, but not limited to, risk of loss
from fire and other hazards, collapse, transit coverage, vandalism, malicious
mischief, theft, earthquake (if the Leased Property is in earthquake zone 1 or
2) and sinkholes (if usually recommended in the area of the Leased Property).
The policy shall be in the amount of the full replacement value (as defined in
4.5) of the Improvements and Personal Property and shall contain a deductible
amount acceptable to Landlord. Landlord shall be named as an additional
insured. The policy shall include a stipulated value endorsement or agreed
amount endorsement and endorsements for contingent liability for operations of
building laws, demolition costs, and increased cost of construction.
(b) If applicable, loss or damage by explosion of steam boilers, pressure
vessels, or similar apparatus, now or hereafter installed on the Leased
Property, in commercially reasonable amounts acceptable to Landlord.
(c) Consequential loss of rents and income coverage insuring against all
"All Risk" or "Special Form", as the case may be, risk of physical loss or
damage with limits and deductible amounts acceptable to Landlord covering risk
of loss during the course of reconstruction, and containing an endorsement for
extended period of indemnity of at least 90 days, and shall be written with a
stipulated amount of coverage if available at a reasonable premium.
(d) If the Leased Property is located, in whole or in part, in a federally
designated 100-year flood plain area, flood insurance for the Improvements in an
amount equal to the lesser of [i] the full replacement value of the
Improvements; or [ii] the maximum amount of insurance available for the
Improvements under all federal and private flood insurance programs.
(e) Loss or damage caused by the breakage of plate glass in commercially
reasonable amounts acceptable to Landlord.
(f) Loss or damage commonly covered by blanket crime insurance, including
employee dishonesty, loss of money orders or paper currency, depositor's
forgery, and loss of property of patients accepted by Tenant for safekeeping, in
commercially reasonable amounts acceptable to Landlord.
4.2 Liability Insurance. At Tenant's expense, Tenant shall maintain
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liability insurance against the following:
(a) Claims for personal injury or property damage commonly covered by
comprehensive general liability insurance with endorsements for incidental
malpractice, contractual, personal injury, owner's protective liability,
voluntary medical payments, products and completed operations, broad form
property damage, and extended bodily injury, with commercially reasonable
amounts for bodily injury, property damage, and voluntary medical payments
acceptable to Landlord, but with a combined single limit of not less than
$5,000,000.00 per occurrence.
(b) Claims for personal injury and property damage commonly covered by
comprehensive automobile liability insurance, covering all owned and non-owned
automobiles, with commercially reasonable amounts for bodily injury, property
damage, and for automobile medical payments acceptable to Landlord, but with a
combined single limit of not less than $5,000,000.00 per occurrence.
(c) Claims for personal injury commonly covered by medical malpractice and
professional liability insurance in commercially reasonable amounts acceptable
to Landlord.
(d) Claims commonly covered by workers' compensation insurance for all
persons employed by Tenant on the Leased Property. Such workers' compensation
insurance shall be in accordance with the requirements of all applicable local,
state, and federal law.
4.3 Builder's Risk Insurance. In connection with any construction, Tenant
---------------------------
shall maintain in full force and effect a builder's completed value risk
coverage ("Builder's Risk Coverage") of insurance in a nonreporting form
insuring against all "All Risk" risk of physical loss or damage to the
Improvements, including, but not limited to, risk of loss from fire and other
hazards, collapse, transit coverage, vandalism, malicious mischief, theft,
earthquake (if Leased Property is in earthquake zone 1 or 2) and sinkholes (if
usually recommended in the area of the Leased Property). The Builder's Risk
Coverage shall include endorsements providing coverage for building materials
and supplies and temporary premises. The Builder's Risk Coverage shall be in
the amount of the full replacement value of the Improvements and shall contain a
deductible amount acceptable to Landlord. Landlord shall be named as an
additional insured. The Builder's Risk Coverage shall include an endorsement
permitting initial occupancy.
4.4 Insurance Requirements. The following provisions shall apply to all
-----------------------
insurance coverages required hereunder:
(a) The form and substance of all policies shall be subject to the approval
of Landlord, which approval will not be unreasonably withheld.
(b) The carriers of all policies shall have a Best's Rating of "A" or better
and a Best's Financial Category of XII or higher and shall be authorized to do
insurance business in the Facility State.
(c) Tenant shall be the "named insured" and Landlord shall be an "additional
insured" on each policy.
(d) Tenant shall deliver to Landlord certificates or policies showing the
required coverages and endorsements. The policies of insurance shall provide
that the policy may not be canceled or not renewed, and no material change or
reduction in coverage may be made, without at least 30 days' prior written
notice to Landlord.
(e) The policies shall contain a severability of interest and/or
cross-liability endorsement, provide that the acts or omissions of Tenant or
Landlord will not invalidate the coverage of the other party, and provide that
Landlord shall not be responsible for payment of premiums.
(f) All loss adjustment shall require the written consent of Landlord and
Tenant, as their interests may appear.
(g) At least 30 days prior to the expiration of each insurance policy,
Tenant shall deliver to Landlord a certificate showing renewal of such policy
and payment of the annual premium therefor and a current Certificate of
Compliance (in the form delivered at the time of Closing) completed and signed
by Tenant's insurance agent.
4.5 Replacement Value. The term "full replacement value" means the actual
------------------
replacement cost thereof from time to time, including increased cost of
construction endorsement, with no reductions or deductions. Tenant shall, in
connection with each annual policy renewal, deliver to Landlord a
redetermination of the full replacement value by the insurer or an endorsement
indicating that the Leased Property is insured for its full replacement value.
If Tenant makes any Permitted Alterations (as hereinafter defined) to the Leased
Property, Landlord may have such full replacement value redetermined at any
time after such Permitted Alterations are made, regardless of when the full
replacement value was last determined.
4.6 Blanket Policy. Notwithstanding anything to the contrary contained in
---------------
this Article 4, Tenant may carry the insurance required by this Article under a
blanket policy of insurance, provided that the coverage afforded Tenant will not
be reduced or diminished or otherwise be different from that which would exist
under a separate policy meeting all of the requirements of this Lease.
4.7 No Separate Insurance. Tenant shall not take out separate insurance
-----------------------
concurrent in form or contributing in the event of loss with that required in
this Article, or increase the amounts of any then existing insurance, by
securing an additional policy or additional policies, unless all parties having
an insurable interest in the subject matter of the insurance, including Landlord
and any mortgagees, are included therein as additional insureds or loss payees,
the loss is payable under said insurance in the same manner as losses are
payable under this Lease, and such additional insurance is not prohibited by the
existing policies of insurance. Tenant shall immediately notify Landlord of the
taking out of such separate insurance or the increasing of any of the amounts of
the existing insurance by securing an additional policy or additional policies.
4.8 Waiver of Subrogation. Each party hereto hereby waives any and every
-----------------------
claim which arises or may arise in its favor and against the other party hereto
during the Term for any and all loss of, or damage to, any of its property
located within or upon, or constituting a part of, the Leased Property, which
loss or damage is covered by valid and collectible insurance policies, to the
extent that such loss or damage is recoverable under such policies. Said mutual
waiver shall be in addition to, and not in limitation or derogation of, any
other waiver or release contained in this Lease with respect to any loss or
damage to property of the parties hereto. Inasmuch as the said waivers will
preclude the assignment of any aforesaid claim by way of subrogation (or
otherwise) to an insurance company (or any other person), each party hereto
agrees immediately to give each insurance company which has issued to it
policies of insurance, written notice of the terms of said mutual waivers, and
to have such insurance policies properly endorsed, if necessary, to prevent the
invalidation of said insurance coverage by reason of said waivers, so long as
such endorsement is available at a reasonable cost.
4.9 Mortgages. The following provisions shall apply if Landlord now or
---------
hereafter places a mortgage on the Leased Property or any part thereof: [i]
Tenant shall obtain a standard form of lender's loss payable clause insuring the
interest of the mortgagee; [ii] Tenant shall deliver evidence of insurance to
such mortgagee; [iii] loss adjustment shall require the consent of the
mortgagee; and [iv] Tenant shall provide such other information and documents as
may be required by the mortgagee.
4.10 Escrows. After an Event of Default occurs hereunder, Tenant shall make
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such periodic payments of insurance premiums in accordance with Landlord's
requirements after receipt of notice thereof from Landlord.
ARTICLE 5: INDEMNITY
5.1 Tenant's Indemnification. Tenant hereby indemnifies and agrees to hold
-------------------------
harmless Landlord and HCN (jointly and severally, "Indemnified Party"), any
successors or assigns of Indemnified Party, and Indemnified Party's and such
successor's and assign's directors, officers, employees and agents from and
against any and all demands, claims, causes of action, fines, penalties, damages
(including consequential damages), losses, liabilities (including strict
liability), judgments, and expenses (including, without limitation, reasonable
attorneys' fees, court costs, and the costs set forth in 8.7) incurred in
connection with or arising from: [i] the use or occupancy of the Leased
Property by Tenant or any persons claiming under Tenant; [ii] any activity,
work, or thing done, or permitted or suffered by Tenant in or about the Leased
Property; [iii] any acts, omissions, or negligence of Tenant or any person
claiming under Tenant, or the contractors, agents, employees, invitees, or
visitors of Tenant or any such person; [iv] any breach, violation, or
nonperformance by Tenant or any person claiming under Tenant or the employees,
agents, contractors, invitees, or visitors of Tenant or of any such person, of
any term, covenant, or provision of this Lease or any law, ordinance, or
governmental requirement of any kind, including, without limitation, any failure
to comply with any applicable requirements under the ADA; [v] any injury or
damage to the person, property or business of Tenant, its employees, agents,
contractors, invitees, visitors, or any other person entering upon the Leased
Property; [vi] any construction, alterations, changes or demolition of the
Facility performed by or contracted for by Tenant or its employees, agents or
contractors; [vii] any obligations, costs or expenses arising under any
Permitted Exceptions; and [viii] any claim under a Loan Document arising from
the acts or omissions of Tenant or Guarantor, including, but not limited to, (a)
any claim against HCN under an Indemnity Agreement granted by HCN to Lender; and
(b) any applicable make-whole premium payable to Lender as a result of an
acceleration of the Loan. If any action or proceeding is brought against
Landlord, its employees, or agents by reason of any such claim, Tenant, upon
notice from Landlord, will defend the claim at Tenant's expense with counsel
reasonably satisfactory to Landlord. All amounts payable to Landlord under this
section shall be payable on written demand and any such amounts which are not
paid within 10 days after demand therefore by Landlord shall bear interest at
Landlord's rate of return as provided in the Commitment. In case any action,
suit or proceeding is brought against Tenant by reason of any such occurrence,
Tenant shall use its commercially reasonable efforts to defend such action, suit
or proceeding. Nothing in this 5.1 shall be construed as requiring Tenant to
indemnify Landlord with respect to Landlord's own gross negligence or willful
misconduct or with respect to any claim under the Loan Documents arising from
the acts or omissions of Landlord or HCN.
5.1.1 Notice of Claim. Landlord shall notify Tenant in writing of any claim
---------------
or action brought against Landlord in which indemnity may be sought against
Tenant pursuant to this section. Such notice shall be given in sufficient time
to allow Tenant to defend or participate in such claim or action, but the
failure to give such notice in sufficient time shall not constitute a defense
hereunder nor in any way impair the obligations of Tenant under this section
unless the failure to give such notice precludes Tenant's defense of any such
action.
5.1.2 Survival of Covenants. The covenants of Tenant contained in this
-----------------------
section shall remain in full force and effect after the termination of this
Lease until the expiration of the period stated in the applicable statute of
limitations during which a claim or cause of action may be brought and payment
in full or the satisfaction of such claim or cause of action and of all expenses
and charges incurred by Landlord relating to the enforcement of the provisions
herein specified.
5.1.3 Reimbursement of Expenses. Unless prohibited by law, Tenant hereby
---------------------------
agrees to pay to Landlord all of the reasonable fees, charges and reasonable
out-of-pocket expenses related to the Facility and required hereby, or incurred
by Landlord in enforcing the provisions of this Lease.
5.2 Environmental Indemnity; Audits. Tenant hereby indemnifies and agrees
---------------------------------
to hold harmless Landlord, any successors to Landlord's interest in this Lease,
and Landlord's and such successors' directors, officers, employees and agents
from and against any losses, claims, damages (including consequential damages),
penalties, fines, liabilities (including strict liability), costs (including
cleanup and recovery costs), and expenses (including expenses of litigation and
reasonable consultants' and attorneys' fees) incurred by Landlord or any other
indemnitee or assessed against any portion of the Leased Property by virtue of
any claim or lien by any governmental or quasi-governmental unit, body, or
agency, or any third party, for cleanup costs or other costs pursuant to any
Environmental Law. Tenant's indemnity shall survive the termination of this
Lease. Provided, however, Tenant shall have no indemnity obligation with
respect to [i] Hazardous Materials first introduced to the Leased Property
subsequent to the date that Tenant's occupancy of the Leased Property shall have
fully terminated; or [ii] Hazardous Materials introduced to the Leased
Property by Landlord, its agent, employees, successors or assigns. If at any
time during the Term of this Lease any governmental authority notifies Landlord
or Tenant of a violation of any Environmental Law or Landlord reasonably
believes that a Facility may violate any Environmental Law, Landlord may require
one or more environmental audits of such portion of the Leased Property, in such
form, scope and substance as specified by Landlord, at Tenant's expense. Tenant
shall, within 30 days after receipt of an invoice from Landlord, reimburse
Landlord for all costs and expenses incurred in reviewing any environmental
audit, including, without limitation, reasonable attorneys' fees and costs.
5.3 Limitation of Landlord's Liability. Landlord, its agents, and
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employees, will not be liable for any loss, injury, death, or damage (including
-
consequential damages) to persons, property, or Tenant's business occasioned by
theft, act of God, public enemy, injunction, riot, strike, insurrection, war,
court order, requisition, order of governmental body or authority, fire,
explosion, falling objects, steam, water, rain or snow, leak or flow of water
(including water from the elevator system), rain or snow from the Leased
Property or into the Leased Property or from the roof, street, subsurface or
from any other place, or by dampness or from the breakage, leakage, obstruction,
or other defects of the pipes, sprinklers, wires, appliances, plumbing, air
conditioning, or lighting fixtures of the Leased Property, or from construction,
repair, or alteration of the Leased Property or from any acts or omissions of
any other occupant or visitor of the Leased Property, or from any other cause
beyond Landlord's control.
ARTICLE 6: USE AND ACCEPTANCE OF PREMISES
6.1 Use of Leased Property. Tenant shall use and occupy the Leased Property
----------------------
exclusively for the Facility Uses specified for the Facility and for all
lawful and licensed ancillary uses, including the operation of an Alzheimer's
Memory Loss Unit, provided Tenant complies with all applicable Legal
Requirements and for no other purpose without the prior written consent of
Landlord. Tenant shall obtain and maintain all approvals, licenses, and
consents needed to use and operate the Leased Property as herein permitted.
Tenant shall deliver to Landlord complete copies of surveys, examinations,
certification and licensure inspections, compliance certificates, and other
similar reports issued to Tenant by any governmental agency within 10 days after
Tenant's receipt of each item.
6.2 Acceptance of Leased Property. Tenant acknowledges that [i] Tenant and
------------------------------
its agents have had an opportunity to inspect the Leased Property; [ii] Tenant
has found the Leased Property fit for Tenant's use; [iii] Landlord will deliver
the Leased Property to Tenant in "as-is" condition; [iv] Landlord is not
obligated to make any improvements or repairs to the Leased Property; and [v]
the roof, walls, foundation, heating, ventilating, air conditioning, telephone,
sewer, electrical, mechanical, elevator, utility, plumbing, and other portions
of the Leased Property are in good working order. Tenant waives any claim or
action against Landlord with respect to the condition of the Leased Property.
LANDLORD MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF
THE LEASED PROPERTY OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR USE,
DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, OR AS TO
QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING
AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY TENANT.
6.3 Conditions of Use and Occupancy. Tenant agrees that during the Term it
--------------------------------
shall use and keep the Leased Property in a careful, safe and proper manner; not
commit or suffer waste thereon; not use or occupy the Leased Property for any
unlawful purposes; not use or occupy the Leased Property or permit the same to
be used or occupied, for any purpose or business deemed extra-hazardous on
account of fire or otherwise; keep the Leased Property in such repair and
condition as may be required by the Board of Health, or other city, state or
federal authorities, free of all cost to Landlord; not permit any acts to be
done which will cause the cancellation, invalidation, or suspension of any
insurance policy; and permit Landlord and its agents to enter upon the Leased
Property at all reasonable times to examine the condition thereof. Landlord
shall have the right to have an annual inspection of the Leased Property
performed and Tenant shall pay an inspection fee of the lesser of $1,500.00 or
Landlord's reasonable out-of-pocket expenses within 30 days after receipt of
Landlord's invoice.
ARTICLE 7: MAINTENANCE AND MECHANICS' LIENS
7.1 Maintenance. Tenant shall maintain, repair, and replace the Leased
-----------
Property, including, without limitation, all structural and nonstructural
repairs and replacements to the roof, foundations, exterior walls, HVAC systems,
equipment, parking areas, sidewalks, water, sewer and gas connections,
pipes and mains. Tenant shall pay, as Additional Rent, the full cost of
maintenance, repairs, and replacements. Tenant shall maintain all drives,
sidewalks, parking areas, and lawns on or about the Leased Property in a clean
and orderly condition, free of accumulations of dirt, rubbish, snow and ice.
Tenant shall at all times maintain, operate and otherwise manage the Leased
Property on a basis and in a manner consistent with the standards currently
maintained by Tenant at the Leased Property. All repairs shall, to the extent
reasonably achievable, be at least equivalent in quality to the original work or
the property to be repaired shall be replaced. Tenant will not take or omit to
take any action the taking or omission of which might materially impair the
value or the usefulness of the Leased Property or any parts thereof for the
Facility Uses. Tenant shall permit Landlord to inspect the Leased Property at
all reasonable times and on reasonable advance notice, and if Landlord has a
reasonable basis to believe that there are maintenance problem areas and gives
Tenant written notice thereof setting forth its concerns in reasonable detail,
Tenant shall deliver to Landlord a plan of correction within 10 Business Days
after receipt of the notice. Tenant shall diligently pursue correction of all
problem areas within 60 days after receipt of the notice or such longer period
as may be necessary for reasons beyond its reasonable control such as shortage
of materials or delays in securing necessary permits, but not caused by lack of
diligence by Tenant and, upon expiration of the 60-day period, shall deliver
evidence of completion to Landlord or an interim report evidencing Tenant's
diligent progress towards completion and, at the end of the next 60-day period,
evidence of satisfactory completion. Upon completion, Landlord shall have the
right to re-inspect the Facility and Tenant shall pay a re-inspection fee of
$750.00 plus Landlord's reasonable out-of-pocket expenses within 30 days after
receipt of Landlord's invoice. At each inspection of the Leased Property by
Landlord, the Facility employee in charge of maintenance shall be available to
tour the Facility with Landlord and answer questions.
7.2 Required Alterations. Tenant shall, at Tenant's sole cost and expense,
---------------------
make any additions, changes, improvements or alterations to the Leased Property,
including structural alterations, which may be required by any governmental
authorities, including those required to maintain licensure or certification
under the Medicare and Medicaid programs (if so certified), whether such changes
are required by Tenant's use, changes in the law, ordinances, or governmental
regulations, defects existing as of the date of this Lease, or any other cause
whatsoever. All such additions, changes, improvements or alterations shall be
deemed to be Permitted Alterations and shall comply with all laws requiring such
alterations and with the provisions of 16.4.
7.3 Mechanic's Liens. Tenant shall have no authority to permit or create a
-----------------
lien against Landlord's interest in the Leased Property, and Tenant shall post
notices or file such documents as may be required to protect Landlord's interest
in the Leased Property against liens. Tenant hereby agrees to defend,
indemnify, and hold Landlord harmless from and against any mechanic's liens
against the Leased Property by reason of work, labor, services or materials
supplied or claimed to have been supplied on or to the Leased Property. Subject
to Tenant's right to contest the same in accordance with the terms of this
Lease, Tenant shall remove, bond-off, or otherwise obtain the release of any
mechanic's lien filed against the Leased Property within 10 days after notice of
the filing thereof. Tenant shall pay all expenses in connection therewith,
including, without limitation, damages, interest, court costs and reasonable
attorneys' fees.
7.4 Replacements of Fixtures and Landlord's Personal Property. Tenant shall
---------------------------------------------------------
not remove Fixtures and Landlord's Personal Property from the Leased Property
except to replace the Fixtures and Landlord's Personal Property with other
similar items of equal quality and value. Items being replaced by Tenant may be
removed and shall become the property of Tenant and items replacing the same
shall be and remain the property of Landlord. Tenant shall execute, upon
written request from Landlord, any and all documents necessary to evidence
Landlord's ownership of Landlord's Personal Property and replacements therefor.
Tenant may finance replacements for the Fixtures and Landlord's Personal
Property by equipment lease or by a security agreement and financing statement
if, with respect to any financing of critical care equipment and with respect to
any other Personal Property having a value in excess of $250,000.00 [i] Landlord
has consented to the terms and conditions of the equipment lease or security
agreement; and [ii] the equipment lessor or lender has entered into a
nondisturbance agreement with Landlord upon terms and conditions reasonably
acceptable to Landlord, including, without limitation, the following: [a]
Landlord shall have the right (but not the obligation) to assume such security
agreement or equipment lease upon the occurrence of an Event of Default under
this Lease; [b] the equipment lessor or lender shall notify Landlord of any
default by Tenant under the equipment lease or security agreement and give
Landlord a reasonable opportunity to cure such default; and [c] Landlord shall
have the right to assign its rights under the equipment lease, security
agreement, or nondisturbance agreement. Tenant shall, within 30 days after
receipt of an invoice from Landlord, reimburse Landlord for all costs and
expenses incurred in reviewing and approving the equipment lease, security
agreement, and nondisturbance agreement, including, without limitation,
reasonable attorneys' fees and costs.
7.5 Lender Maintenance Reserve Escrow. Upon request from Tenant, Landlord
-----------------------------------
shall cooperate with Tenant to secure the release of funds held by Lender in the
Lender Maintenance Reserve Escrow to the extent such funds are available as set
forth in the Loan Documents. Tenant's obligations set forth in this Article 7
shall not be conditioned upon the release of funds by Lender from the Lender
Maintenance Reserve Fund.
ARTICLE 8: DEFAULTS AND REMEDIES
8.1 Events of Default. The occurrence of any one or more of the following
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shall be an event of default ("Event of Default") hereunder without any advance
notice to Tenant unless specified herein:
(a) Tenant fails to pay in full any installment of Base Rent, any Additional
Rent or any other monetary obligation payable by Tenant under this Lease
within 10 days after such payment is due.
(b) Tenant or Guarantor (where applicable) fails to comply with any covenant
set forth in Article 14, 15.6, 15.7, 15.8 or 15.12 of this Lease.
(c) Tenant fails to observe and perform any other covenant, condition or
agreement under this Lease to be performed by Tenant and [i] such failure
continues for a period of 30 days after written notice thereof is given to
Tenant by Landlord; or [ii] if, by reason of the nature of such default it
cannot be remedied within 30 days, Tenant fails to proceed with diligence
reasonably satisfactory to Landlord after receipt of the notice to cure the
default or, in any event, fails to cure such default within 60 days after
receipt of the notice. The foregoing notice and cure provisions do not apply to
any Event of Default otherwise specifically described in any other subsection of
8.1.
(d) Tenant abandons or vacates(except during a period of repair or
reconstruction after damage, destruction or a Taking) the Facility Property or
any material part thereof, ceases to operate any Facility, ceases to do business
or ceases to exist for any reason for any one or more days.
(e) [i] The filing by Tenant or Guarantor of a petition under the
Bankruptcy Code or the commencement of a bankruptcy or similar proceeding by
Tenant or Guarantor; [ii] the failure by Tenant or Guarantor within 60 days to
dismiss an involuntary bankruptcy petition or other commencement of a
bankruptcy, reorganization or similar proceeding against such party, or to lift
or stay any execution, garnishment or attachment of such consequence as will
impair its ability to carry on its operation at the Leased Property; [iii] the
entry of an order for relief under the Bankruptcy Code in respect of Tenant or
Guarantor; [iv] any assignment by Tenant or Guarantor for the benefit of its
creditors; [v] the entry by Tenant or Guarantor into an agreement of composition
with its creditors; [vi] the approval by a court of competent jurisdiction of a
petition applicable to Tenant or Guarantor in any proceeding for its
reorganization instituted under the provisions of any state or federal
bankruptcy, insolvency, or similar laws; [vii] appointment by final order,
judgment, or decree of a court of competent jurisdiction of a receiver of a
whole or any substantial part of the properties of Tenant or Guarantor (provided
such receiver shall not have been removed or discharged within 60 days of the
date of his qualification).
(f) [i] Any receiver, administrator, custodian or other person takes
possession or control of any of the Leased Property and continues in possession
for 60 days; [ii] any writ against any of the Leased Property is not released
within 60 days; [iii] any judgment is rendered or proceedings are instituted
against the Leased Property, Tenant which adversely affect the Leased Property
or any part thereof, which is not dismissed for 60 days (except as otherwise
provided in this section); [iv] all or a substantial part of the assets of
Tenant are attached, seized, subjected to a writ or distress warrant, or are
levied upon, or come into the possession of any receiver, trustee, custodian, or
assignee for the benefit of creditors; [v] Tenant is enjoined, restrained, or in
any way prevented by court order, or any proceeding is filed or commenced
seeking to enjoin, restrain or in any way prevent Tenant or Guarantor from
conducting all or a substantial part of its business or affairs; or [vi] except
as otherwise permitted hereunder, a final notice of lien, levy or assessment is
filed of record with respect to all or any part of the Leased Property or any
property of Tenant or Guarantor located at the Leased Property and is not
dismissed, discharged, or bonded-off within 30 days.
(g) Any representation or warranty made by Tenant or Guarantor in this Lease
or any other document executed in connection with this Lease, any guaranty of or
other security for this Lease, or any report, certificate, application,
financial statement or other instrument furnished by Tenant or Guarantor
pursuant hereto or thereto shall prove to be false, misleading or incorrect in
any material respect as of the date made.
(h) Tenant or any Affiliate of Tenant defaults on any indebtedness or
obligation to Landlord or any Landlord Affiliate, any Obligor Group Obligation
or any agreement with Landlord or any Landlord Affiliate, including, without
limitation, any lease with Landlord or any Landlord Affiliate, or the occurrence
of a default under any Material Obligation, and any applicable grace or cure
period with respect to default under such indebtedness or obligation expires
without such default having been cured. This provision applies to all such
indebtedness, obligations and agreements as they may be amended, modified,
extended, or renewed from time to time.
(i) Any guarantor of this Lease dissolves, terminates, is adjudicated
incompetent, files a petition in bankruptcy, or is adjudicated insolvent under
the Bankruptcy Code or any other insolvency law, or fails to comply with any
covenant or requirement of such guarantor set forth in this Lease or in the
guaranty of such guarantor, which is not cured within any applicable cure
period.
(j) The license for the Facility or any other Government Authorization is
canceled, suspended, reduced to provisional or temporary, or otherwise
invalidated, or license revocation or decertification proceedings are commenced
against Tenant, and in each instance, such action is not stayed pending appeal,
or, as a result of the acts or omissions of Tenant, any reduction of more than
5% occurs in the number of licensed beds or units at the Facility, or an
admissions ban is issued for the Facility and remains in effect for a period of
more than 45 days.
8.2 Remedies. Upon the occurrence of an Event of Default under this Lease
--------
or any Lease Document, and at any time thereafter until Landlord waives the
default in writing or acknowledges cure of the default in writing, at Landlord's
option, without declaration, notice of nonperformance, protest, notice of
protest, notice of default, notice to quit or any other notice or demand of any
kind, Landlord may exercise any and all rights and remedies provided in this
Lease or any Lease Document or otherwise provided under law or in equity,
including, without limitation, any one or more of the following remedies:
(a) Landlord may re-enter and take possession of the Leased Property without
terminating this Lease, and lease the Leased Property for the account of
Tenant, holding Tenant liable for all costs of Landlord in reletting the Leased
Property and for the difference in the amount received by such reletting and the
amounts payable by Tenant under the Lease.
(b) Landlord may terminate this Lease by written notice to Tenant, exclude
Tenant from possession of the Leased Property and use commercially reasonable
efforts to lease the Leased Property to others, holding Tenant liable for the
difference in the amounts received from such reletting and the amounts payable
by Tenant under this Lease.
(c) Landlord may re-enter the Leased Property and have, repossess and enjoy
the Leased Property as if this Lease had not been made, and in such event,
Tenant and its successors and assigns shall remain liable for any contingent or
unliquidated obligations or sums owing at the time of such repossession.
(d) Landlord may have access to and inspect, examine and make copies of the
books and records and any and all accounts, data and income tax and other
returns of Tenant insofar as they pertain to the Leased Property subject to
landlord's obligation to maintain the confidentiality of any patient or employee
information in accordance with the requirements of applicable State or federal
law.
(e) Landlord may accelerate all of the unpaid Rent hereunder based on the
then current Rent Schedule so that the aggregate Rent for the unexpired term of
this Lease becomes immediately due and payable.
(f) Landlord may take whatever action at law or in equity as may appear
necessary or desirable to collect the Rent and other amounts payable under this
Lease then due and thereafter to become due, or to enforce performance and
observance of any obligations, agreements or covenants of Tenant under this
Lease.
(g) With respect to the Collateral or any portion thereof and Secured
Party's security interest therein, Secured Party may exercise all of its rights
as secured party under Article 9 of the Uniform Commercial Code. Secured Party
may sell the Collateral by public or private sale upon five days notice to
Tenant. Tenant agrees that a commercially reasonable manner of disposition of
the Collateral shall include, without limitation and at the option of Secured
Party, a sale of the Collateral, in whole or in part, concurrently with the sale
of the Leased Property.
(h) Secured Party may obtain control over and collect the Receivables and
apply the proceeds of the collections to satisfaction of the Obligor Group
Obligations unless prohibited by law. Tenant appoints Landlord or its designee
as attorney for Tenant with powers [i] to receive, to endorse, to sign and/or to
deliver, in Tenant's name or Secured Party's name, any and all checks, drafts,
and other instruments for the payment of money relating to the Receivables, and
to waive demand, presentment, notice of dishonor, protest, and any other notice
with respect to any such instrument; [ii] to sign Tenant's name on any invoice
or bill of lading relating to any Receivable, drafts against account debtors,
assignments and verifications of Receivables, and notices to account debtors;
[iii] to send verifications of Receivables to any account debtor; and [iv] to do
all other acts and things necessary to carry out this Lease. Absent gross
negligence or willful misconduct of Secured Party, Secured Party shall not be
liable for any omissions, commissions, errors of judgment, or mistakes in fact
or law made in the exercise of any such powers. At Secured Party's option,
Tenant shall [i] provide Secured Party a full accounting of all amounts received
on account of Receivables with such frequency and in such form as Secured Party
may require, either with or without applying all collections on Receivables in
payment of the Obligor Group Obligations or [ii] deliver to Secured Party on the
day of receipt all such collections in the form received and duly endorsed by
Tenant. At Secured Party's request, Tenant shall institute any action or enter
into any settlement determined by Secured Party to be necessary to obtain
recovery or redress from any account debtor in default of Receivables. Secured
Party may give notice of its security interest in the Receivables to any or all
account debtors with instructions to make all payments on Receivables directly
to Secured Party, thereby terminating Tenant's authority to collect Receivables.
After terminating Tenant's authority to enforce or collect Receivables, Secured
Party shall have the right to take possession of any or all Receivables and
records thereof and is hereby authorized to do so, and only Secured Party shall
have the right to collect and enforce the Receivables. Prior to the occurrence
and during the continuance of an Event of Default, at Tenant's cost and expense,
but on behalf of Secured Party and for Secured Party's account, Tenant shall
collect or otherwise enforce all amounts unpaid on Receivables and hold all such
collections in trust for Secured Party, but Tenant may commingle such
collections with Tenant's own funds, until Tenant's authority to do so has been
terminated, which may be done only after an Event of Default. Notwithstanding
any other provision hereof, Secured Party does not assume any of Tenant's
obligations under any Receivable, and Secured Party shall not be responsible in
any way for the performance of any of the terms and conditions thereof by
Tenant.
(i) Without waiving any prior or subsequent Event of Default, Landlord may
waive any Event of Default or, with or without waiving any Event of Default,
remedy any default.
(j) Landlord may terminate its obligation, if any, to disburse any Landlord
Payments.
(k) Landlord may enter and take possession of the Land and the Facility
without terminating this Lease and complete construction and renovation of the
Improvements (or any part thereof) and perform the obligations of Tenant under
the Lease Documents. Without limiting the generality of the foregoing and for
the purposes aforesaid, Tenant hereby appoints Landlord its lawful
attorney-in-fact with full power to do any of the following: [i] complete
construction, renovation and equipping of the Improvements in the name of
Tenant; [ii] use unadvanced funds remaining under the Investment Amount, or
funds that may be reserved, escrowed, or set aside for any purposes hereunder at
any time, or to advance funds in excess of the Investment Amount, to complete
the Improvements; [iii] make changes in the plans and specifications that shall
be necessary or desirable to complete the Improvements in substantially the
manner contemplated by the plans and specifications; [iv] retain or employ new
general contractors, subcontractors, architects, engineers, and inspectors as
shall be required for said purposes; [v] pay, settle, or compromise all existing
bills and claims, which may be liens or security interests, or to avoid such
bills and claims becoming liens against the Facility or security interest
against fixtures or equipment, or as may be necessary or desirable for the
completion of the construction and equipping of the Improvements or for the
clearance of title; [vi] execute all applications and certificates, in the name
of Tenant, that may be required in connection with any construction; [vii] do
any and every act that Tenant might do in its own behalf, to prosecute and
defend all actions or proceedings in connection with the Improvements; and
[viii] to execute, deliver and file all applications and other documents and
take any and all actions necessary to transfer the operations of the Facility to
Secured Party or Secured Party's designee. This power of attorney is a power
coupled with an interest and cannot be revoked.
(l) Landlord may apply, with or without notice to Tenant, for the
appointment of a receiver ("Receiver") for Tenant or Tenant's business or for
the Leased Property. Unless prohibited by law, such appointment may be made
either before or after termination of Tenant's possession of the Leased
Property, without notice, without regard to the solvency or insolvency of Tenant
at the time of application for such Receiver and without regard to the then
value of the Leased Property, and Secured Party may be appointed as Receiver.
After the occurrence and during the continuance of an Event of Default, Landlord
shall be entitled to appointment of a receiver as a matter of right and without
the need to make any showing other than the existence of an Event of Default.
The Receiver shall have the power to collect the rents, income, profits and
Receivables of the Leased Property during the pendency of the receivership and
all other powers which may be necessary or are usual in such cases for the
protection, possession, control, management and operation of the Leased Property
during the whole of said proceeding. All sums of money received by the Receiver
from such rents and income, after deducting therefrom the reasonable charges and
expenses paid or incurred in connection with the collection and disbursement
thereof, shall be applied to the payment of the Rent or any other monetary
obligation of Tenant under this Lease, including, without limitation, any losses
or damages incurred by Landlord under this Lease. Tenant, if requested to do
so, will consent to the appointment of any such Receiver as aforesaid.
(m) Landlord may terminate any management agreement with respect to any of
the Leased Property and shall have the right to retain one or more managers for
the Leased Property at the expense of Tenant, such manager(s) to serve for such
term and at such compensation as Landlord reasonably determines is necessary
under the circumstances.
8.3 Right of Setoff. Landlord may, and is hereby authorized by Tenant to,
-----------------
at any time and from time to time without advance notice to Tenant (any such
notice being expressly waived by Tenant), setoff or recoup and apply any and all
sums held by Landlord, any indebtedness of Landlord to Tenant, and any
claims by Tenant against Landlord, against any obligations of Tenant hereunder
and against any claims by Landlord against Tenant, whether or not such
obligations or claims of Tenant are matured and whether or not Landlord has
exercised any other remedies hereunder. The rights of Landlord under this
section are in addition to any other rights and remedies Landlord may have
against Tenant.
8.4 Performance of Tenant's Covenants. Landlord may perform any obligation
----------------------------------
of Tenant which Tenant has failed to perform within five days after Landlord has
sent a written notice to Tenant informing it of its specific failure. Tenant
shall reimburse Landlord on demand, as Additional Rent, for any expenditures
thus incurred by Landlord and shall pay interest thereon at Landlord's rate of
return as provided in the Commitment.
8.5 Late Payment Charge. Tenant acknowledges that any default in the
---------------------
payment of any installment of Rent payable hereunder will result in loss and
additional expense to Landlord in servicing any indebtedness of Landlord secured
by the Leased Property, handling such delinquent payments, and meeting its other
financial obligations, and because such loss and additional expense is extremely
difficult and impractical to ascertain, Tenant agrees that in the event any Rent
payable to Landlord hereunder is not paid within 10 days after the due date,
Tenant shall pay a late charge of 5% of the amount of the overdue payment as a
reasonable estimate of such loss and expenses, unless applicable law requires a
lesser charge, in which event the maximum rate permitted by such law may be
charged by Landlord. The 10-day grace period set forth in this section shall
not extend the time for payment of Rent or the period for curing any default or
constitute a waiver of such default.
8.6 Default Rent. At Landlord's option at any time after the occurrence of
-------------
an Event of Default and while such Event of Default remains uncured, the Base
Rent payable under this Lease shall be increased to reflect Landlord's rate of
return of 18.5% per annum on the Investment Amount ("Default Rent"); provided,
however, that if a court of competent jurisdiction determines that any other
amounts payable under this Lease are deemed to be interest, the Default Rent
shall be adjusted to ensure that the aggregate interest payable under this Lease
does not accrue at a rate in excess of the maximum legal rate.
8.7 Attorneys' Fees. Tenant shall pay all reasonable costs and expenses
----------------
incurred by Landlord in enforcing or preserving Landlord's rights under this
Lease, whether or not an Event of Default has actually occurred or has been
declared and thereafter cured, including, without limitation, [i] the fees,
expenses, and costs of any litigation, appellate, receivership, administrative,
bankruptcy, insolvency or other similar proceeding; [ii] reasonable attorney,
paralegal, consulting and witness fees and disbursements; and [iii] the
expenses, including, without limitation, lodging, meals, and transportation, of
Landlord and its employees, agents, attorneys, and witnesses in preparing for
litigation, administrative, bankruptcy, insolvency or other similar proceedings
and attendance at hearings, depositions, and trials in connection therewith.
All such reasonable costs, expenses, charges and fees payable by Tenant shall be
deemed to be Additional Rent under this Lease.
8.8 Escrows and Application of Payments. As security for the performance of
-----------------------------------
the Obligor Group Obligations, Tenant hereby assigns to Landlord all its right,
title, and interest in and to all monies escrowed with Landlord under this Lease
and all deposits with utility companies, taxing authorities and insurance
companies; provided, however, that Landlord shall not exercise its rights
hereunder until an Event of Default has occurred. Any payments received by
Landlord under any provisions of this Lease during the existence or continuance
of an Event of Default shall be applied to the Obligor Group Obligations in the
order which Landlord may determine.
8.9 Remedies Cumulative. The remedies of Landlord herein are cumulative to
--------------------
and not in lieu of any other remedies available to Landlord at law or in equity.
The use of any one remedy shall not be taken to exclude or waive the right to
use any other remedy.
8.10 Waivers. Tenant waives [i] any notice required by statute or other law
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as a condition to bringing an action for possession of, or eviction from, any of
the Leased Property, [ii] any right of re-entry or repossession, [iii] any right
to a trial by jury in any action or proceeding arising out of or relating to
this Lease, [iv] any right of redemption whether pursuant to statute, at law or
in equity, [v] all presentments, demands for performance, notices of
nonperformance, protest, notices of protest, notices of dishonor, notices to
quit and any other notice or demand of any kind other than those specifically
provided for in this Lease, and [vi] all notices of the existence, creation or
incurring of any obligation or advance under this Lease before or after this
date.
8.11 Obligations Under the Bankruptcy Code. Upon filing of a petition by or
-------------------------------------
against Tenant under the Bankruptcy Code, Tenant, as debtor and as
debtor-in-possession, and any trustee who may be appointed with respect to the
assets of or estate in bankruptcy of Tenant, agree to pay monthly in advance on
the first day of each month, as reasonable compensation for the use and
occupancy of the Leased Property, an amount equal to all Rent due pursuant to
this Lease. Included within and in addition to any other conditions or
obligations imposed upon Tenant or its successor in the event of the assumption
and/or assignment of this Lease are the following: [i] the cure of any monetary
defaults and reimbursement of pecuniary loss within not more than five Business
Days of assumption and/or assignment; [ii] the deposit of an additional amount
equal to not less than three months' Base Rent, which amount is agreed to be a
necessary and appropriate deposit to adequately assure the future performance
under this Lease of the Tenant or its assignee; and [iii] the continued use of
the Leased Property for the Facility Uses. Nothing herein shall be construed as
an agreement by Landlord to any assignment of this Lease or a waiver of
Landlord's right to seek adequate assurance of future performance in addition to
that set forth hereinabove in connection with any proposed assumption and/or
assignment of this Lease.
ARTICLE 9: DAMAGE AND DESTRUCTION
9.1 Notice of Casualty. If the Leased Property shall be destroyed, in whole
------------------
or in part, or damaged by fire, flood, windstorm or other casualty in
excess of $150,000.00 (a "Casualty"), Tenant shall give written notice thereof
to Landlord within two Business Days after the occurrence of the Casualty.
Within 15 days after the occurrence of the Casualty or as soon thereafter as
such information is reasonably available to Tenant, Tenant shall provide the
following information to Landlord: [i] the date of the Casualty; [ii] the
nature of the Casualty; [iii] a description of the damage or destruction caused
by the Casualty, including the type of Leased Property damaged and the area of
the Improvements damaged; [iv] a preliminary estimate of the cost to repair,
rebuild, restore or replace the Leased Property; [v] a preliminary estimate of
the schedule to complete the repair, rebuilding, restoration or replacement of
the Leased Property; [vi] a description of the anticipated property insurance
claim, including the name of the insurer, the insurance coverage limits, the
deductible amount, the expected settlement amount, and the expected settlement
date; and [vii] a description of the business interruption claim, including the
name of the insurer, the insurance coverage limits, the deductible amount, the
expected settlement amount, and the expected settlement date. Within five days
after request from Landlord, Tenant will provide Landlord with copies of all
correspondence to the insurer and any other information reasonably requested by
Landlord.
9.2 Substantial Destruction.
------------------------
9.2.1 If the Facility Improvements are substantially destroyed at any time
other than during the final 18 months of the Initial Term or any Renewal Term,
Tenant shall promptly rebuild and restore such Improvements in accordance with
9.4 and Landlord shall make the insurance proceeds available to Tenant for such
restoration. The term "substantially destroyed" means any casualty resulting in
the loss of use of 50% or more of the licensed beds at any one Facility.
9.2.2 If the Facility Improvements are substantially destroyed during the
final 18 months of the Initial Term or any Renewal Term, Landlord may elect to
terminate this Lease and retain the insurance proceeds unless Tenant exercises
its option to renew as set forth in 9.2.3. If Landlord elects to terminate,
Landlord shall give notice ("Termination Notice") of its election to terminate
this Lease within 30 days after receipt of Tenant's notice of the damage. If
Tenant does not exercise its option to renew under 9.2.3 within 15 days after
delivery of the Termination Notice, this Lease shall terminate on the 15th day
after delivery of the Termination Notice. If this Lease is so terminated,
Tenant shall be liable to Landlord for all Rent and all other obligations
accrued under this Lease through the effective date of termination.
9.2.3 If the Facility Improvements are substantially destroyed during the
final 18 months of the Initial Term or the Renewal Term and Landlord gives the
Termination Notice, Tenant shall have the option to renew this Lease. Tenant
shall give Landlord irrevocable notice of Tenant's election to renew within 15
days after delivery of the Termination Notice. If Tenant elects to renew, the
Renewal Term will be in effect for the balance of the then current Term plus a
15-year period. The Renewal Term will commence on the third day following
Landlord's receipt of Tenant's notice of renewal. All other terms of this Lease
for the Renewal Term shall be in accordance with Article 12. The Improvements
will be restored by Tenant in accordance with the provisions of this Article 9
regarding partial destruction.
9.3 Partial Destruction. If the Facility Improvements are not substantially
-------------------
destroyed, then Tenant shall comply with the provisions of 9.4 and
Landlord shall make the insurance proceeds available to Tenant for such
restoration.
9.4 Restoration. Subject to any limitations imposed by law with respect to
-----------
the rebuilding of the Leased Premises, Tenant shall promptly repair, rebuild, or
restore the damaged Leased Property, at Tenant's expense, so as to make the
Leased Property at least equal in value to the Leased Property existing
immediately prior to such occurrence and as nearly similar to it in character as
is practicable and reasonable. Before beginning such repairs or rebuilding with
respect to any Casualty, or letting any contracts in connection with such
repairs or rebuilding, Tenant will submit for Landlord's approval, which
approval Landlord will not unreasonably withhold or delay, plans and
specifications meeting the requirements of 16.2 for such repairs or rebuilding.
Promptly after receiving Landlord's approval of the plans and specifications,
Tenant will begin such repairs or rebuilding and will prosecute the repairs and
rebuilding to completion with diligence, subject, however, to strikes, lockouts,
acts of God, embargoes, governmental restrictions, and other causes beyond
Tenant's reasonable control. Landlord will make available to Tenant the net
proceeds of any fire or other casualty insurance paid to Landlord for such
repair or rebuilding as the same progresses, after deduction of any costs of
collection, including reasonable attorneys' fees. Payments will be made against
properly certified vouchers of a competent architect in charge of the work and
approved by Landlord. Payments for deposits for the repairing or rebuilding or
delivery of materials to the Facility will be made upon Landlord's receipt of
evidence satisfactory to Landlord that such payments are required in advance.
With respect to any Casualty, prior to commencing the repairing or rebuilding,
Tenant shall deliver to Landlord for Landlord's approval a schedule setting
forth the estimated monthly draws for such work. Landlord will contribute to
such payments out of the insurance proceeds an amount equal to the proportion
that the total net amount received by Landlord from insurers bears to the total
estimated cost of the rebuilding or repairing, multiplied by the payment by
Tenant on account of such work. Landlord may, however, withhold 10% from each
payment until the work is completed and proof has been furnished to Landlord
that no lien or liability has attached or will attach to the Leased Property or
to Landlord in connection with such repairing or rebuilding. Upon the
completion of rebuilding and the furnishing of such proof, the balance of the
net proceeds of such insurance payable to Tenant on account of such repairing or
rebuilding will be paid to Tenant. If required by law as a result of the nature
or extent of the damage, Tenant will obtain and deliver to Landlord a temporary
or final certificate of occupancy before the damaged Leased Property is
reoccupied for any purpose. Tenant shall complete such repairs or rebuilding
free and clear of mechanic's or other liens, and in accordance with the building
codes and all applicable laws, ordinances, regulations, or orders of any state,
municipal, or other public authority affecting the repairs or rebuilding, and
also in accordance with all requirements of the insurance rating organization,
or similar body. Any remaining proceeds of insurance after such restoration
will be Tenant's property.
9.5 Insufficient Proceeds. If the proceeds of any insurance settlement are
----------------------
not sufficient to pay the costs of Tenant's repair, rebuilding or restoration
under 9.4 in full, Tenant shall deposit with Landlord at Landlord's option, and
within 10 days of Landlord's request, an amount sufficient in Landlord's
reasonable judgment to complete such repair, rebuilding or restoration or shall
provide Landlord with evidence reasonably satisfactory to Landlord that Tenant
has available the funds needed to complete such repair, rebuilding or
restoration. Tenant shall not, by reason of the deposit or payment, be entitled
to any reimbursement from Landlord or diminution in or postponement of the
payment of the Rent.
9.6 Not Trust Funds. Notwithstanding anything herein or at law or equity to
---------------
the contrary, none of the insurance proceeds paid to Landlord as herein provided
shall be deemed trust funds, and Landlord shall be entitled to dispose of such
proceeds as provided in this Article 9. Tenant expressly assumes all risk of
loss, including a decrease in the use, enjoyment or value, of the Leased
Property from any casualty whatsoever, whether or not insurable or insured
against.
9.7 Landlord's Inspection. During the progress of such repairs or
----------------------
rebuilding, Landlord and its architects and engineers may, from time to time,
-
inspect the Leased Property and will be furnished, if required by them, with
copies of all plans, shop drawings, and specifications relating to such repairs
or rebuilding. Tenant will keep all plans, shop drawings, and specifications at
the building, and Landlord and its architects and engineers may examine them at
all reasonable times and on reasonable notice. If, during such repairs or
rebuilding, Landlord and its architects and engineers determine that the repairs
or rebuilding are not being done in accordance with the approved plans and
specifications, Landlord will give prompt notice in writing to Tenant,
specifying in detail the particular deficiency, omission, or other respect in
which Landlord claims such repairs or rebuilding do not accord with the approved
plans and specifications. Upon the receipt of any such notice, Tenant will
cause corrections to be made to any deficiencies, omissions, or such other
respect. Tenant's obligations to supply insurance, according to Article 4, will
be applicable to any repairs or rebuilding under this section.
9.8 Landlord's Costs. Tenant shall, within 30 days after receipt of an
-----------------
invoice from Landlord, pay the costs, expenses, and fees of any architect or
engineer employed by Landlord to review any plans and specifications and to
supervise and approve any construction, or for any services rendered by such
architect or engineer to Landlord as contemplated by any of the provisions of
this Lease, or for any services performed by Landlord's attorneys in connection
therewith.
9.9 No Rent Abatement. Rent will not abate pending the repairs or
-------------------
rebuilding of the Leased Property.
-
ARTICLE 10: CONDEMNATION
10.1 Total Taking. If, by exercise of the right of eminent domain or by
-------------
conveyance made in response to the threat of the exercise of such right
("Taking"), the entire Facility Property is taken, or so much of the Facility
Property is taken that the number of licensed beds/units at the Facility
Property is reduced by more than 25% as a result of such Taking, then this Lease
will end with respect to the Facility Property only on the earlier of the
vesting of title to the Facility Property in the condemning authority or the
taking of possession of the Facility Property by the condemning authority. All
damages awarded for such Taking under the power of eminent domain shall be the
property of Landlord, whether such damages shall be awarded as compensation for
diminution in value of the leasehold or the fee of the Facility Property,
provided, however, nothing herein shall preclude Tenant from pursuing a separate
award for the Taking of its Tenant's Property (as defined below) or for
relocation costs or expenses.
10.2 Partial Taking. If, after a Taking, so much of the Facility Property
---------------
remains that the Facility Property can be used for substantially the same
purposes for which it was used immediately before the Taking, then [i] this
Lease will end as to the part taken on the earlier of the vesting of title to
such Leased Property in the condemning authority or the taking of possession of
the Leased Property by the condemning authority and the Rent will be adjusted
accordingly; [ii] at its cost, Tenant shall restore so much of the Facility
Property as remains to a sound architectural unit substantially suitable for the
purposes for which it was used immediately before the Taking, using good
workmanship and new, first-class materials; [iii] upon completion of the
restoration, Landlord will pay Tenant the lesser of the net award made to
Landlord on the account of the Taking (after deducting from the total award,
reasonable attorneys', appraisers', and other fees and costs incurred in
connection with the obtaining of the award and amounts paid to the holders of
mortgages secured by the Facility Property), or Tenant's actual out-of-pocket
costs of restoring the Facility Property; and [iv] Landlord shall be entitled to
the balance of the net award except to the extent specifically allocated to the
value of Tenant's Property or any relocation costs or expenses incurred by
Tenant as a result of such partial Taking. The restoration shall be completed
in accordance with 9.4, 9.5, 9.7, 9.8 and 9.9 with such provisions deemed to
apply to condemnation instead of casualty.
10.3 Condemnation Proceeds Not Trust Funds. Notwithstanding anything in
-----------------------------------------
this Lease or at law or equity to the contrary, none of the condemnation award
paid to Landlord shall be deemed trust funds, and Landlord shall be entitled to
dispose of such proceeds as provided in this Article 10. Tenant expressly
assumes all risk of loss, including a decrease in the use, enjoyment, or value,
of the Leased Property from any Taking.
ARTICLE 11: TENANT'S PROPERTY
11.1 Tenant's Property. Tenant shall have the right to install, place, and
------------------
use on the Leased Property such fixtures, furniture, equipment, inventory and
other personal property in addition to Landlord's Personal Property as may be
required or as Tenant may, from time to time, deem necessary or useful to
operate the Leased Property for its permitted purposes. All fixtures,
furniture, equipment, inventory, and other personal property installed, placed,
or used on the Leased Property which is owned by Tenant or leased by Tenant from
third parties is hereinafter referred to as "Tenant's Property".
11.2 Requirements for Tenant's Property. Tenant shall comply with all of
-------------------------------------
the following requirements in connection with Tenant's Property:
(a) Tenant shall, at Tenant's sole cost and expense, maintain, repair, and
replace Tenant's Property.
(b) Tenant shall, at Tenant's sole cost and expense, keep Tenant's Property
insured against loss or damage by fire, vandalism and malicious mischief,
sprinkler leakage, earthquake, and other physical loss perils commonly covered
by fire and extended coverage, boiler and machinery, and difference in
conditions insurance in an amount not less than 90% of the then full replacement
cost thereof. Tenant shall use the proceeds from any such policy for the repair
and replacement of Tenant's Property. The insurance shall meet the requirements
of 4.3.
(c) Tenant shall pay all taxes applicable to Tenant's Property.
(d) If Tenant's Property is damaged or destroyed by fire or any other cause,
Tenant shall have the right, but not the obligation, to repair or replace
Tenant's Property (unless the same is required for the operation of the Leased
Property in compliance with applicable Legal Requirements, in which case Tenant
shall be required to promptly repair or replace the same) unless Landlord elects
to terminate this Lease pursuant to 9.2.2.
(e) Unless an Event of Default or any event which, with the giving of notice
or lapse of time, or both, would constitute an Event of Default has occurred,
Tenant may remove Tenant's Property from the Leased Property from time to time
provided that [i] the items removed are not required to operate the Leased
Property for the Facility Uses (unless such items are being replaced by Tenant);
and [ii] Tenant repairs any damage to the Leased Property resulting from the
removal of Tenant's Property.
(f) Tenant shall not, without the prior written consent of Landlord or as
otherwise provided in this Lease, remove any Tenant's Property or Leased
Property. Tenant shall, at Landlord's option, remove Tenant's Property upon the
termination or expiration of this Lease and shall repair any damage to the
Leased Property resulting from the removal of Tenant's Property. If Tenant
fails to remove Tenant's Property within 30 days after request by Landlord, then
Tenant shall be deemed to have abandoned Tenant's Property, Tenant's Property
shall become the property of Landlord, and Landlord may remove, store and
dispose of Tenant's Property. In such event, Tenant shall have no claim or
right against Landlord for such property or the value thereof regardless of the
disposition thereof by Landlord. Tenant shall pay Landlord, upon demand, all
expenses incurred by Landlord in removing, storing, and disposing of Tenant's
Property and repairing any damage caused by such removal. Tenant's obligations
hereunder shall survive the termination or expiration of this Lease.
(g) Tenant shall perform its obligations under any equipment lease or
security agreement for Tenant's Property. For equipment loans or leases for
critical care equipment and for all other equipment having an original cost in
excess of $250,000.00, Tenant shall cause such equipment lessor or lender to
enter into a nondisturbance agreement with Landlord upon terms and conditions
acceptable to Landlord, including, without limitation, the following: [i]
Landlord shall have the right (but not the obligation) to assume such equipment
lease or security agreement upon the occurrence of an Event of Default by Tenant
hereunder; [ii] such equipment lessor or lender shall notify Landlord of any
default by Tenant under the equipment lease or security agreement and give
Landlord a reasonable opportunity to cure such default; and [iii] Landlord shall
have the right to assign its interest in the equipment lease or security
agreement and nondisturbance agreement. Tenant shall, within 30 days after
receipt of an invoice from Landlord, reimburse Landlord for all costs and
expenses incurred in reviewing and approving the equipment lease, security
agreement and nondisturbance agreement, including, without limitation,
reasonable attorneys' fees and costs.
ARTICLE 12: RENEWAL OPTIONS
12.1 Renewal Options. Tenant has the option to renew ("Renewal Option")
----------------
this Lease for one 15-year renewal term ("Renewal Term"). Tenant can exercise
the Renewal Option only upon satisfaction of the following conditions:
(a) There shall be no uncured Event of Default, or any event which with the
passage of time or giving of notice would constitute an Event of Default, at the
time Tenant exercises its Renewal Option nor on the date the Renewal Term
is to commence.
(b) Tenant shall give Landlord irrevocable written notice of renewal no
later than the date which is [i] 90 days prior to the expiration date of the
Initial Term; or [ii] 15 days after Landlord's delivery of the Termination
Notice as set forth in 9.2.3.
12.2 Effect of Renewal. The following terms and conditions will be
-------------------
applicable if Tenant renews the Lease:
(a) Effective Date. Except as otherwise provided in 9.2.3, the effective
---------------
date of any Renewal Term will be the first day after the expiration date of the
Term. The first day of the Renewal Term is also referred to as the Renewal
Date.
(b) Investment Amount. Effective as of the Renewal Date, a single
------------------
Investment Amount will be computed by summing all Landlord Payments made to
-
date.
(c) Rent Adjustment. Effective as of the Renewal Date, Landlord shall
----------------
calculate Base Rent for the Renewal Term in accordance with 2.1(c)(2) of the
Commitment and shall issue a new Rent Schedule reflecting the Base Rent
adjustment. Until Tenant receives a revised Rent Schedule from Landlord, Tenant
shall for each month [i] continue to make installments of Base Rent according to
the Rent Schedule in effect on the day before the Renewal Date; and [ii] within
10 days following Landlord's issuance of an invoice, pay the difference between
the installment of Base Rent paid to Landlord for such month and the installment
of Base Rent actually due for such month as a result of the renewal of the
Lease.
(d) Other Terms and Conditions. Except for the modifications set forth in
----------------------------
this 12.2, all other terms and conditions of the Lease will remain the same for
the Renewal Term.
ARTICLE 13: RIGHT OF FIRST OPPORTUNITY
13.1 Right of First Opportunity. In the event at any time during the Term
----------------------------
either [i] Landlord elects to seek a purchaser of the Leased Property (the
"Right of First Opportunity Event") or [ii] Landlord receives a bona fide offer
from a third party (the "Offer") setting forth the terms and conditions upon
which it proposes to purchase the Leased Property which it is interested in
accepting, but in no event shall Landlord be obligated to accept (the "Right of
First Refusal Event"), the following provisions shall apply:
(a) In the event of the occurrence of the Right of First Opportunity Event,
Landlord shall provide Tenant with written notice of its intent to sell the
Leased Property and its proposed terms with respect thereto (the "Opportunity
Notice"). Landlord and Tenant shall have a period of 30 days after Tenant's
receipt of the Opportunity Notice (the "Protected Period") to negotiate in good
faith with respect to the terms and conditions under which such transaction
shall occur provided that in no event shall the purchase price be less than the
Base Price and shall occur on the terms and conditions set forth in the
Transaction Documents (as defined below) (the "Opportunity Transaction"). In
the event Landlord and Tenant are unable to reach agreement within the Protected
Period with respect to the terms of the Opportunity Transaction, then
Landlord shall be free to enter into negotiations with respect to the
Opportunity Transaction with any other person or entity; provided, however, that
Landlord shall not be permitted to consummate a transaction with any other
person or entity on terms which are less favorable to Landlord than those
offered to Tenant during the Protected Period without first offering Tenant the
opportunity on written notice setting forth such terms to consummate the
Opportunity Transaction on such alternative terms and conditions (the "Modified
Opportunity Notice"); provided, however, that Tenant shall be deemed to have
waived its right to proceed with such revised Opportunity Transaction in the
event it does not advise Landlord of its election to proceed within 10 days
after its receipt of the Modified Opportunity Notice.
(b) In the event of the occurrence of a Right of First Refusal Event,
Landlord shall provide Tenant with a true and correct copy of the Offer (the
"Right of First Refusal Notice"). Tenant shall have 20 days from its receipt of
the Right of First Refusal Notice to advise Landlord in writing whether it is
prepared to purchase the Leased Property on the same terms and conditions as set
forth in the Offer. Tenant's failure to so advise Landlord within such 20 day
period shall be deemed to be a determination by Tenant not to exercise the right
of first refusal provided for herein, at which time Landlord shall be free to
consummate the transaction which was the subject of the Offer; provided,
however, that Landlord shall not be permitted to modify the terms specified in
the Offer in an manner more favorable to the third party than those reflected in
the original Offer (the "Modified Offer") without first again offering Tenant
the opportunity to consummate a transaction on the terms set forth in the
Modified Offer; provided, however, that Tenant shall be deemed to have waived
its right to proceed with such a transaction in the event it does not advise
Landlord of its election to proceed within 10 days after its receipt of the
Modified Offer.
(c) In the event Landlord does not consummate a transaction on the terms
provided for in the Offer or the Modified Offer, as applicable, within 90 days
after the date thereof, Landlord shall not be permitted to sell the Leased
Property to the Offeror or to any other party, whether on the terms set forth in
the Offer or the Modified Offer, as applicable, or pursuant to a new Offer
without again first offering Tenant an option to consummate a transaction on the
terms specified in the Offer, the Modified Offer or any new Offer, as
applicable; provided, however, that Tenant shall be deemed to have waived its
rights hereunder in the event it does not advise Landlord of its election to
proceed within 10 days after its receipt of another copy of the Offer or of the
Modified Offer or the new Offer, as applicable.
(d) In the event Tenant exercises its right of first refusal or right of
first opportunity provided for herein, Tenant and Landlord shall have a period
of 30 days in which to enter into one or more written agreements outlining the
terms and conditions, in addition to those set forth in the Offer or the
Modified Offer, if applicable, on which the sale will occur (the "Transaction
Documents"). In the event Landlord and Tenant fail to execute the Transaction
Documents within said 30 day period, then Tenant shall be deemed to have
forfeited its rights hereunder with respect to such transaction; provided,
however, that Landlord shall not be permitted to sell the Leased Property to any
other person or entity on terms which are less favorable to Landlord than those
offered to Tenant during the Protected Period or beyond the expiration of the 90
day period provided for in clause (c), without first complying with the terms of
this 13.1 unless Landlord and Tenant failed to execute the Transaction
Documents as a result of Tenant's bad faith in the negotiation of the terms of
such Transaction Documents, in which case Landlord shall be permitted to sell
the Leased Property to any other person or entity regardless of the terms of
such transaction.
(e) Any sale of the Lease Property by Landlord pursuant to this 13, other
than to Tenant, shall be subject to the rights of Tenant under this Lease,
including, but not limited to, its rights under this 13.
(f) At the time of the acquisition of the Leased Property by Tenant, the
then outstanding amount of principal and accrued and unpaid interest, if any,
due under the $4,400,000 Note shall be due and payable in full or if said
$4,400,000 Note is consolidated, then the lesser of $4,400,000.00 or the then
outstanding principal and accrued and unpaid interest of said consolidated note.
13.2 Closing. Any closing pursuant to, and the consequences to Tenant of
-------
failing to close after exercising its rights under 13.1 shall be in accordance
with the terms set forth in the Offer or Modified Offer and in the Transaction
Documents executed pursuant to the terms of this Article 13.
ARTICLE 14: NEGATIVE COVENANTS
Until the Obligor Group Obligations shall have been performed in full,
Tenant and Guarantor covenant and agree that Tenant (and Guarantor where
applicable) shall not do any of the following without the prior written consent
of Landlord:
14.1 No Debt. Tenant shall not create, incur, assume, or permit to exist
--------
any indebtedness with respect to the Leased Property other than [i] trade debt
incurred in the ordinary course of business; [ii] indebtedness for Facility
working capital purposes; and [iii] indebtedness that is secured by any
Permitted Lien.
14.2 No Liens. Tenant shall not create, incur, or permit to exist any lien,
--------
charge, encumbrance, easement or restriction upon the Leased Property or any
lien upon or pledge of any interest in Tenant, except for Permitted Liens.
14.3 No Guaranties. Tenant shall not create, incur, assume, or permit to
--------------
exist any guarantee of any loan or other indebtedness with respect to the Leased
Property except for the endorsement of negotiable instruments for collection in
the ordinary course of business.
14.4 No Transfer. Tenant shall not sell, lease, sublease, mortgage, convey,
-----------
assign or otherwise transfer any legal or equitable interest in the Leased
Property or any part thereof, except for transfers made in connection with any
Permitted Lien or leases to the residents of the Leased Property or commercial
leases with respect to a portion of the leased Property comprising in the
aggregate less than 2,500 square feet provided such commercial leases shall be
for services that are an integral part of the Facility.
14.5 No Dissolution. Tenant shall not dissolve, liquidate, merge,
---------------
consolidate or terminate its existence or sell, other than in a sale/leaseback
or sale/manage back transaction, assign, lease, or otherwise transfer (whether
in one transaction or in a series of transactions) all or substantially all of
its assets (whether now owned or hereafter acquired) unless, in the case of a
merger or consolidation by Tenant, the surviving entity in such merger has a net
worth immediately after the merger or consolidation at least equal to that of
the Tenant immediately prior thereto. Tenant shall maintain its organizational
structure as a special purpose, bankruptcy remote entity as required under the
Loan Documents.
14.6 Subordination of Payments to Affiliates. After the occurrence of an
------------------------------------------
Event of Default and until such Event of Default is cured (or waived in
writing), Tenant and Guarantor shall not make any payments or distributions
(including, without limitation, salary, bonuses, fees, principal, interest,
dividends, liquidating distributions, management fees, cash flow distributions
or lease payments but specifically excluding salary paid to employees of the
Facility or employees of Tenant or Guarantor in the ordinary course of business)
to Guarantor or any shareholder, member or partner of Tenant or Guarantor.
14.7 Change of Location or Name. Tenant shall not, without providing
------------------------------
Landlord with 30 days prior notice thereof, change any of the following: [i]
the location of the principal place of business or chief executive office of
Tenant, or any office where any of Tenant's books and records are maintained;
[ii] the name under which Tenant conducts any of its business or operations; or
[iii] reorganize or otherwise change its Organization State.
ARTICLE 15: AFFIRMATIVE COVENANTS
15.1 Perform Obligations. Tenant shall perform all of its obligations under
-------------------
this Lease, the Government Authorizations, the Permitted Exceptions, and
all Legal Requirements.
15.2 Proceedings to Enjoin or Prevent Construction. If any proceedings are
----------------------------------------------
filed seeking to enjoin or otherwise prevent or declare invalid or unlawful
Tenant's construction, occupancy, maintenance, or operation of the Facility or
any portion thereof, Tenant will cause such proceedings to be vigorously
contested in good faith, and in the event of an adverse ruling or decision,
prosecute all allowable appeals therefrom, and will, without limiting the
generality of the foregoing, resist the entry or seek the stay of any temporary
or permanent injunction that may be entered, and use its best commercially
reasonable efforts to bring about a favorable and speedy disposition of all such
proceedings and any other proceedings.
15.3 Documents and Information.
---------------------------
15.3.1 Furnish Documents. Tenant shall periodically during the term of the
------------------
Lease deliver to Landlord the Annual Financial Statements, Periodic Financial
Statements, Annual Company Budget and all other documents, reports, schedules
and copies described on Exhibit E within the specified time periods. With each
delivery of Annual Financial Statements and Periodic Financial Statements (other
than the monthly Facility Financial Statement) to Landlord, Tenant shall
also deliver to Landlord a certificate signed by the Chief Financial Officer or
managing member (as applicable) of Tenant, an Annual Facility Financial Report
or Quarterly Facility Financial Report, as applicable, and a Quarterly Facility
Accounts Receivable Aging Report all in the form of Exhibit F. In addition,
Tenant shall deliver to Landlord the applicable Annual Facility Financial Report
and the applicable Quarterly Facility Accounts Receivable Aging Report (based
upon internal financial statements) within 60 days after the end of each fiscal
year. After the occurrence of an Event of Default and receipt of Landlord's
written request, Tenant shall deliver to Landlord an updated Annual Company
Budget (based on a 12-month rolling forward period) within 10 Business Days
after receipt of Landlord's request.
15.3.2 Furnish Information. Tenant and Guarantor shall [i] promptly supply
--------------------
Landlord with such information concerning its financial condition, affairs and
property, as Landlord may reasonably request from time to time hereafter; [ii]
promptly notify Landlord in writing of any condition or event that constitutes a
breach or event of default of any term, condition, warranty, representation, or
provisions of this Lease or any other agreement, and of any material adverse
change in its financial condition; [iii] maintain a standard and modern system
of accounting; [iv] permit Landlord or any of its agent or representatives to
have access to and to examine all of its books and records regarding the
financial condition of the Facility at any time or times hereafter during
business hours and after reasonable oral or written notice; and [v] permit
Landlord to copy and make abstracts from any and all of said books and records
subject to any limitations imposed by State or federal law with respect to the
confidentiality of patient and employee records.
15.3.3 Further Assurances and Information. Tenant shall, on request of
-------------------------------------
Landlord from time to time, execute, deliver, and furnish documents as may be
necessary to fully consummate the transactions contemplated under this Lease.
Within 15 days after a request from Landlord, Tenant shall provide to Landlord
such additional information regarding Tenant, Tenant's financial condition, or
the Facility as Landlord, or any existing or proposed creditor of Landlord, or
any auditor or underwriter of Landlord, may reasonably require from time to
time, including, without limitation, a current Tenant's Certificate and Facility
Financial Report in the form of Exhibit F. From and after and during the
continuance of an Event of Default, Landlord shall have the right to require
Tenant to provide to Landlord, at Tenant's expense, an appraisal prepared by an
MAI appraiser setting forth the current fair market value of the Leased
Property.
15.3.4 Material Communications. Tenant shall transmit to Landlord, within
------------------------
five days after receipt thereof, any material communication affecting a
Facility, this Lease, the Legal Requirements or the Government Authorizations,
and Tenant will promptly respond to Landlord's inquiry with respect to such
information. Tenant shall notify Landlord in writing within five days after
Tenant has knowledge of any potential, threatened or existing litigation or
proceeding against, or investigation of, Tenant, Guarantor or the Facility that
would reasonably be expected to adversely affect the right to operate the
Facility or Landlord's title to the Facility or Tenant's interest therein.
15.3.5 Requirements for Financial Statements. Tenant shall meet the
----------------------------------------
following requirements in connection with the preparation of the financial
statements: [i] all audited financial statements shall be prepared in
accordance with general accepted accounting principles consistently applied;
[ii] all unaudited financial statements shall be prepared in a manner
substantially consistent with prior audited and unaudited financial statements
submitted to Landlord; [iii] all financial statements shall fairly present the
financial condition and performance for the relevant period in all material
respects; [iv] the audited financial statements shall include all notes to the
financial statements and a complete schedule of contingent liabilities and
transactions with Affiliates; and [v] the audited financial statements shall
contain an unqualified opinion.
15.4 Compliance With Laws. Tenant shall comply with all Legal Requirements
---------------------
and keep all Government Authorizations in full force and effect. Subject to
Tenant's right to contest the same in accordance with the terms of this Lease,
Tenant shall pay when due all taxes and governmental charges of every kind and
nature that are assessed or imposed upon Tenant at any time during the term of
the Lease, including, without limitation, all income, franchise, capital stock,
property, sales and use, business, intangible, employee withholding, and all
taxes and charges relating to Tenant's business and operations at the Leased
Property. Tenant shall be solely responsible for compliance with all Legal
Requirements, including the ADA, and Landlord shall have no responsibility for
such compliance.
15.5 Broker's Commission. Tenant shall indemnify Landlord from claims of
--------------------
brokers arising by the execution hereof or the consummation of the transactions
contemplated hereby and from expenses incurred by Landlord in connection with
any such claims (including reasonable attorneys' fees).
15.6 Existence and Change in Ownership. Except as otherwise specifically
------------------------------------
provided herein, Tenant and Guarantor shall maintain its existence throughout
the term of this Lease and any change in the ownership of Tenant, directly or
indirectly, shall require Landlord's prior written consent.
15.7 Financial Covenants. The defined terms used in this section are
--------------------
defined in 15.7.1. The method of valuing assets shall be consistent with the
Financial Statements. The following financial covenants shall be met throughout
the term of this Lease:
15.7.1 Definitions.
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(a) "Facility Cash Flow" means the net income of Tenant arising from the
Facility as reflected on the Facility Financial Statement plus [i] the amount of
the provision for depreciation and amortization; plus [ii] the amount of
the provision for management fees; plus [iii] the amount of the provision for
income taxes; plus [iv] the amount of the provision for Base Rent payments and
interest and equipment lease payments, if any; minus [v] an imputed management
fee equal to 5% of gross revenues (net of contractual allowances); and minus
[vi] an imputed replacement reserve of $250 per licensed unit at the Facility,
per year.
(b) "Facility Coverage Ratio" is the ratio of [i] Facility Cash Flow for
each applicable period; to [ii] the Base Rent payments and all debt service and
equipment lease payments relating for the applicable period.
15.7.2 Coverage Ratio. Tenant shall maintain for each fiscal quarter a
---------------
Facility Coverage Ratio for the Facility of not less than 1.00 to 1.00 for the
third and fourth quarter of 2003 and the first quarter of 2004 and a Facility
Coverage Ratio of not less than 1.25 to 1.00 for each quarter thereafter.
15.8 Facility Licensure and Certification. Tenant shall [i] give written
---------------------------------------
notice to Landlord within five days after an inspection of the Facility with
respect to health care licensure or certification has occurred; and [ii] deliver
to Landlord copies of each of the reports, notices, correspondence and all
other items and documents listed under item no. 18 of Exhibit E within five days
after receipt thereof. Tenant acknowledges that it has reviewed Exhibit E and
agrees to the foregoing obligation. If Tenant receives a Facility survey or
inspection report with material deficiencies, notice of failure to comply with a
plan of correction or an HIPDB adverse action report, Tenant shall cure all
deficiencies and implement all corrective actions by the date required by the
regulatory authority and shall deliver evidence of same to Landlord.
15.9 Transfer of License and Facility Operations. If this Lease is
------------------------------------------------
terminated due to expiration of the Term, pursuant to an Event of Default or for
any reason other than Tenant's purchase of the Leased Property, or if Tenant
vacates the Leased Property (or any part thereof) without termination of this
Lease (other than during periods of repair or reconstruction after damage,
destruction or a Taking), the following provisions shall be immediately
effective:
15.9.1 Licensure. Tenant shall execute, deliver and file all documents and
---------
statements requested by Landlord to effect the transfer of the Facility license
and Government Authorizations to a replacement operator designated by Landlord
("Replacement Operator"), subject to any required approval of governmental
regulatory authorities, and Tenant shall provide to Landlord all information and
records required by Landlord in connection with the transfer of the license
and Government Authorizations.
15.9.2 Facility Operations. In order to facilitate a responsible and
--------------------
efficient transfer of the operations of the Facility, Tenant shall, if and to
the extent requested by Landlord, [i] deliver to Landlord the most recent
updated reports, notices, schedules and documents listed under item nos. 17, 18,
19, 20 and 21 of Exhibit E; [ii] assuming Tenant has not already vacated the
Leased Property, continue and maintain the operation of the Facility in the
ordinary course of business, including using its commercially reasonable efforts
to retain the residents at the Facility to the fullest extent practicable and
consistent with applicable laws and regulations, until transfer of the Facility
operations to the Replacement Operator is completed; [iii] enter into such
management agreements, operations transfer agreements and other types of
agreements that may be reasonably requested by Landlord or the Replacement
Operator, provided, however, in no event shall Tenant be required to permit the
Replacement Operator to operate the Leased Property under their licenses unless
they receive confirmation that doing so will not violate applicable Legal
Requirements and they get appropriate indemnities from the Replacement Operator
in form and substance reasonably acceptable to Tenant; and [iv] provide
reasonable access during normal business hours and on reasonable advance notice
for Landlord and its agents to show the Facility to potential replacement
operators. Tenant consents to the distribution by Landlord to potential
replacement operators of Facility financial statements, licensure reports,
financial and property due diligence materials and other documents, materials
and information relating to the Facility. The provisions of this section do not
create or establish any rights in Tenant or any third party and Landlord
reserves all rights and remedies relating to termination of this Lease.
15.10 Bed Operating Rights. Tenant acknowledges and agrees that the rights
---------------------
to operate the beds located at the Facility as set forth on Exhibit C under the
law of the Facility State, to relocate such bed operating rights to another
location or locations, and to transfer such bed operating rights to third
parties, are property of the Landlord and are an integral part of the real and
personal property that constitutes the Leased Property. Tenant has only the
right to use of such rights during the term of this Lease and subject to its
terms and conditions. Subject to applicable law and to the extent permitted by
law, all operating rights shall automatically revert to Landlord or Landlord's
designee upon the expiration or termination of this Lease for any reason
whatsoever (other than Tenant's purchase of the Leased Property) without any
requirement of a transfer or the payment of additional consideration.
15.11 Power of Attorney. Effective upon [i] the occurrence and during the
-------------------
continuance of an Event of Default, or [ii] termination of this Lease for any
reason other than Tenant's purchase of the Leased Property, Tenant hereby
irrevocably and unconditionally appoints Landlord, or Landlord's authorized
officer, agent, employee or designee, as Tenant's true and lawful
attorney-in-fact, to act for Tenant in Tenant's name, place, and stead, to
execute, deliver and file all applications and any and all other necessary
documents and statements to effect the issuance, transfer, reinstatement,
renewal and/or extension of the Facility license and all Governmental
Authorizations issued to Tenant or applied for by Tenant in connection with
Tenant's operation of the Facility, to permit any designee of Landlord or any
other transferee to operate the Facility under the Governmental Authorizations,
and to do any and all other acts incidental to any of the foregoing, but only in
the event Tenant fails to take such actions or execute such documents after a
request from Landlord. Tenant irrevocably and unconditionally grants to
Landlord as its attorney-in-fact full power and authority to do and perform
every act necessary and proper to be done in the exercise of any of the
foregoing powers as fully as Tenant might or could do if personally present or
acting, with full power of substitution, hereby ratifying and confirming all
that said attorney shall lawfully do or cause to be done by virtue hereof. This
power of attorney is coupled with an interest and is irrevocable prior to
Tenant's purchase of the Leased Property. Landlord shall provide Tenant with
copies of any documents filed and/or with a summary of any action taken pursuant
to this power of attorney.
15.12 Compliance with Loan Documents. Tenant and Guarantor acknowledge that
------------------------------
[i] Landlord is acquiring the Leased Property subject to the Mortgage; [ii]
Landlord and HCN will assume the obligations set forth in the Mortgage and Loan
Documents; and [iii] Landlord and HCN would not have assumed the obligations set
forth in the Mortgage or the Loan Documents without Tenant and Guarantor's
agreement to comply with the terms and conditions set forth in the Loan
Documents as hereinafter set forth. Tenant and Guarantor have each reviewed the
Loan Documents and are familiar with the terms and conditions thereof. Tenant
and Guarantor agree to comply with the terms and conditions set forth in the
Loan Documents to the extent such terms and conditions apply to Tenant or
Guarantor, or the operation of the Facility including, but not limited to,
satisfying all insurance requirements, maintaining required reserves and escrow
accounts, making payments due thereunder other than regularly scheduled payments
of principal and interest, and granting access to the Property to the Lenders as
set forth in the Loan Documents. Neither Tenant nor Guarantor shall, in
connection with either Tenant's or Guarantor's compliance with the terms and
conditions of the Loan Documents and the operation of the Facility, create or
permit any third party (other than Landlord for which neither Tenant nor
Guarantor assumes any responsibility hereunder) to create any condition that
would cause an Event of Default, as defined in any such Loan Documents.
Tenant's or Guarantor's failure to comply with the Loan Documents to the extent
such terms and conditions apply to Tenant or Guarantor, or the operation of the
Facility and to cure same within any applicable cure period provided for in the
Loan Documents shall be an Event of Default under this Lease.
15.12.1 Tenant acknowledges that under the terms of Landlord's assumption
of the Loan Documents, Lender has required the Letter of Credit. Tenant agrees,
at Tenant's sole cost and expense, to deliver the Letter of Credit to
Lender and, except as otherwise provided herein, to maintain the Letter of
Credit in effect for so long as required by Lender. In the event of a draw upon
the Letter of Credit or upon the expiration of the Letter of Credit, Tenant
shall be responsible, at Tenant's sole cost and expense, to provide a
replacement Letter of Credit satisfactory to Lender unless the draw on the
Letter of Credit is caused by a Landlord Default as defined in 15.12.2.
15.12.2 In the event of a Landlord Default, as hereinafter defined,
Landlord shall (i) upon demand by Tenant, reimburse Tenant for any amounts drawn
by Lender under the Letter of Credit and for any other costs and expenses
incurred by Tenant as a result thereof, including but not limited to, reasonable
attorney fees; (ii) thereafter be obligated, at Landlord's sole cost and
expense, to provide and continuously maintain a replacement Letter of Credit
satisfactory to Lender unless a subsequent draw is caused by a Tenant Default as
defined in 15.12.3, in which case 15.12.1 shall apply; and (iii) indemnify,
defend and hold harmless Tenant and Guarantor from and against any and all
demands, claims, causes of action, fines, penalties, damages (including
consequential damages), losses, liabilities (including strict liability),
judgments and expenses (including, without limitation, reasonable attorneys'
fees, court costs and the costs described in 8.7) to the extent incurred by
Tenant as a result of the Landlord Default including, but not limited to, as a
result of the foreclosure by Lender with respect to any of the collateral
provided by Tenant or Guarantor under the Loan Documents or the taking of any
other action by the Lender against Tenant or Guarantor under the terms of the
Loan Documents. Landlord Default shall mean an Event of Default under the Loan
Document caused solely by the acts or omissions of Landlord or HCN and is not an
Event of Default under a Loan Document arising due to Tenant's or Guarantor's
failure to comply with the terms and conditions of a Loan Document as agreed to
by Tenant and Guarantor pursuant to 15.12 ("Landlord Defaults").
15.12.3 Upon the occurrence of an Event of Default under the Loan
Documents caused by Tenant ("Tenant Default"), Tenant or Guarantor shall (i)
upon demand by Landlord or HCN, reimburse Landlord or HCN for any amounts drawn
by Lender under the Letter of Credit and for any other costs and expenses
incurred by Landlord or HCN as a result thereof, including but not limited to,
reasonable attorney fees; provided, however, this clause (i) shall only apply if
the Tenant Default occurs after the occurrence of a Landlord Default and at a
time when the Letter of Credit has been posted by Landlord pursuant to 15.12.2;
(ii) thereafter be obligated, at Tenant's sole cost and expense, to provide and
continuously maintain a replacement Letter of Credit satisfactory to Lender
unless a subsequent draw is caused by a Landlord Default, in which case 15.12.2
shall apply; and (iii) indemnify, defend and hold harmless Landlord and HCN from
and against any and all demands, claims, causes of action, fines, penalties,
damages (including consequential damages), losses, liabilities (including strict
liability), judgments and expenses (including, without limitation, reasonable
attorneys' fees, court costs and the costs described in 8.7) to the extent
incurred by Landlord or HCN as a result of the Tenant Default including, but not
limited to, as a result of the foreclosure by Lender with respect to any of the
collateral provided by Landlord or HCN under the Loan Documents or the taking of
any other action by the Lender against Landlord or HCN under the terms of the
Loan Documents.
15.12.4 Landlord shall, within five Business Days after receipt thereof
from Lender, deliver to Tenant all notices received by Landlord from Lender.
Tenant shall, within five Business Days after receipt thereof from Lender,
deliver to Landlord all notices received by Tenant from Lender. Landlord
further acknowledges and agrees that Tenant shall not be in default of its
obligations under this 15.12 in the event Tenant fails to fulfill the
obligations imposed under a Loan Document as and when due solely as a result of
the failure of Landlord to remit any such Lender notice within the time period
specified herein and that in the event of a draw by Lender on the Letter of
Credit as a result thereof, the same shall be deemed to be a Landlord Default.
ARTICLE 16: ALTERATIONS, CAPITAL IMPROVEMENTS, AND SIGNS
16.1 Prohibition on Alterations and Improvements. Except for Permitted
-----------------------------------------------
Alterations (as hereinafter defined), Tenant shall not make any structural or
nonstructural changes, alterations, additions and/or improvements (hereinafter
collectively referred to as "Alterations") to the Leased Property.
16.2 Approval of Alterations. If Tenant desires to perform any Permitted
-------------------------
Alterations, Tenant shall deliver to Landlord plans, specifications, drawings,
and such other information as may be reasonably requested by Landlord
(collectively the "Plans and Specifications") showing in reasonable detail the
scope and nature of the Alterations that Tenant desires to perform. It is the
intent of the parties hereto that the level of detail shall be comparable to
that which is referred to in the architectural profession as "design development
drawings" as opposed to working or biddable drawings. Landlord agrees not to
unreasonably delay its review of the Plans and Specifications. Within 30 days
after receipt of an invoice, Tenant shall reimburse Landlord for all costs and
expenses incurred by Landlord in reviewing and, if required, approving or
disapproving the Plans and Specifications, inspecting the Leased Property, and
otherwise monitoring compliance with the terms of this Article 16. Tenant shall
comply with the requirements of 16.4 in making any Permitted Alterations.
16.3 Permitted Alterations. Permitted Alterations means any one of the
----------------------
following: [i] Alterations approved by Landlord; [ii] Alterations required
under 7.2; [iii] Alterations affecting the structure of the Leased Property and
having a total cost of less than $250,000.00 individually or in the aggregate;
[iv] repairs, rebuilding and restoration required or undertaken pursuant to 9.4
or [v] non-structural Alterations such as painting, landscaping, wallpapering,
installing new floor coverings, etc. without regard to the cost thereof.
16.4 Requirements for Permitted Alterations. Tenant shall comply with all
----------------------------------------
of the following requirements in connection with any Permitted Alterations:
(a) The Permitted Alterations shall be made in accordance with the approved
Plans and Specifications.
(b) The Permitted Alterations and the installation thereof shall comply with
all applicable legal requirements and insurance requirements.
(c) The Permitted Alterations shall be done in a good and workmanlike
manner, shall not impair the value or the structural integrity of the Leased
Property, and shall be free and clear of all mechanic's liens.
(d) For any Permitted Alterations having a total cost of $100,000.00 or
more, Tenant shall deliver to Landlord a payment and performance bond, with a
surety acceptable to Landlord, in an amount equal to the estimated cost of the
Permitted Alterations, guaranteeing the completion of the work free and clear of
liens and in accordance with the approved Plans and Specifications, and naming
Landlord and any mortgagee of Landlord as joint obligees on such bond.
(e) Tenant shall, at Tenant's expense, obtain a builder's completed value
risk policy of insurance insuring against all risks of physical loss, including
collapse and transit coverage, in a nonreporting form, covering the total value
of the work performed, and equipment, supplies, and materials, and insuring
initial occupancy. Landlord and any mortgagee of Landlord shall be additional
insureds of such policy. Landlord shall have the right to approve the form and
substance of such policy.
(f) Tenant shall pay the premiums required to increase the amount of the
insurance coverages required by Article 4 to reflect the increased value of the
Improvements resulting from installation of the Permitted Alterations, and shall
deliver to Landlord a certificate evidencing the increase in coverage.
(g) Tenant shall, not later than 60 days after completion of the Permitted
Alterations, deliver to Landlord a revised "as-built" survey of the Facility if
the Permitted Alterations altered the Land or "footprint" of the Improvements
and an "as-built" set of Plans and Specifications for the Permitted Alterations
in form and substance satisfactory to Landlord.
(h) Tenant shall, not later than 30 days after Landlord sends an invoice,
reimburse Landlord for any reasonable costs and expenses, including attorneys'
fees and architects' and engineers' fees, incurred in connection with reviewing
and approving the Permitted Alterations and ensuring Tenant's compliance with
the requirements of this section. The daily fee for Landlord's consulting
engineer is $750.00.
16.5 Ownership and Removal of Permitted Alterations. The Permitted
---------------------------------------------------
Alterations shall become a part of the Leased Property, owned by Landlord, and
leased to Tenant subject to the terms and conditions of this Lease. Tenant
shall not be required or permitted to remove any Permitted Alterations.
16.6 Minimum Qualified Capital Expenditures. During each calendar year of
----------------------------------------
the Term, Tenant shall expend at least $300.00 per unit for Qualified Capital
Expenditures to improve the Facility. Thereafter throughout the Term, Tenant
shall expend such amount each calendar year, increased annually in proportion to
increases in the CPI. At least annually, at the request of Landlord,
Landlord and Tenant shall review capital expenditures budgets and agree on
modifications, if any, required by changed circumstances and the changed
conditions of the Leased Property. Upon request from Tenant, Landlord shall
cooperate with Tenant to secure the release of funds held by Lender in the
Lender Maintenance Reserve Escrow to the extent such funds are available as set
forth in the Loan Documents. Tenant's obligations set forth in this 16.6 shall
not be conditioned upon the release of funds by Lender from the Lender
Maintenance Reserve Fund.
16.7 Signs. Tenant may, at its own expense, erect and maintain
-----
identification signs at the Leased Property, provided such signs comply with all
---
laws, ordinances, and regulations. Upon the termination or expiration of
this Lease (other than as a result of the exercise by Tenant of its purchase
rights), Tenant shall, within 30 days after notice from Landlord, remove the
signs and restore the Leased Property to its original condition.
ARTICLE 17: RESERVED
ARTICLE 18: ASSIGNMENT AND SALE OF LEASED PROPERTY
18.1 Prohibition on Assignment and Subletting. Tenant acknowledges that
--------------------------------------------
Landlord has entered into this Lease in reliance on the personal services and
business expertise of Tenant. Tenant may not assign, sublet, mortgage,
hypothecate, pledge, grant a right of first refusal or transfer any interest in
this Lease, or in the Leased Property, in whole or in part, without the prior
written consent of Landlord, which Landlord may withhold in its sole and
absolute discretion. The following transactions will be deemed an assignment or
sublease requiring Landlord's prior written consent: [i] an assignment by
operation of law; [ii] an imposition (whether or not consensual) of a lien,
mortgage, or encumbrance upon Tenant's interest in the Lease; [iii] except as
otherwise permitted by 14.4 and 18.3, an arrangement (including, but not
limited to, management agreements, concessions, licenses, and easements) which
allows the use or occupancy of all or part of the Leased Property by anyone
other than Tenant; and [iv] a material change of ownership of Tenant other than
changes resulting from the trading of Tenant's or Guarantor's stock on a
national stock exchange. Landlord's consent to any assignment, right of first
refusal or sublease will not release Tenant (or any guarantor) from its payment
and performance obligations under this Lease, but rather Tenant, any guarantor,
and Tenant's assignee or sublessee will be jointly and severally liable for such
payment and performance. An assignment, right of first refusal or sublease
without the prior written consent of Landlord will be void at Landlord's option.
Landlord's consent to one assignment, right of first refusal or sublease will
not waive the requirement of its consent to any subsequent assignment or
sublease. Notwithstanding the foregoing, Tenant may enter into a Management
Agreement with Guarantor.
18.2 Requests for Landlord's Consent to Assignment, Sublease or Management
-----------------------------------------------------------------------
Agreement. If Tenant is required to obtain Landlord's consent to a specific
--------
assignment, sublease, or management agreement, Tenant shall give Landlord [i]
--
the name and address of the proposed assignee, subtenant or manager; [ii] a copy
-
of the proposed assignment, sublease or management agreement; [iii] reasonably
satisfactory information about the nature, business and business history of the
proposed assignee, subtenant, or manager and its proposed use of the Leased
Property; and [iv] banking, financial, and other credit information, and
references about the proposed assignee, subtenant or manager sufficient to
enable Landlord to determine the financial responsibility and character of the
proposed assignee, subtenant or manager. Any assignment, sublease or management
agreement shall contain provisions to the effect that [a] such assignment,
sublease or management agreement is subject and subordinate to all of the terms
and provisions of this Lease and to the rights of Landlord and that the
assignee, subtenant or manager shall comply with all applicable provisions of
this Lease; [b] such assignment, sublease or management agreement may not be
modified without the prior written consent of Landlord not to be unreasonably
withheld or delayed; [c] if this Lease shall terminate before the expiration of
such assignment, sublease or management agreement, the assignee, subtenant or
manager thereunder will, solely at Landlord's option and only upon the express
written notice of attornment from Landlord, attorn to Landlord and waive any
right the assignee, subtenant or manager may have to terminate the assignment,
sublease or management agreement or surrender possession thereunder as a result
of the termination of this Lease; and [d] if the assignee, subtenant or manager
receives a written notice from Landlord stating that Tenant is in default under
this Lease, the assignee, subtenant or manager shall thereafter pay all rentals
or payments under the assignment, sublease or management agreement directly to
Landlord until such default has been cured. Any attempt or offer by an
assignee, subtenant or manager to attorn to Landlord shall not be binding or
effective without the express written consent of Landlord. Tenant hereby
collaterally assigns to Landlord, as security for the performance of its
obligations hereunder, all of Tenant's right, title, and interest in and to any
assignment, sublease or management agreement now or hereafter existing for all
or part of the Leased Property. Tenant shall, at the request of Landlord,
execute such other instruments or documents as Landlord may request to evidence
this collateral assignment. If Landlord, in its sole and absolute discretion,
consents to such assignment, sublease, or management agreement, such consent
shall not be effective until [i] a fully executed copy of the instrument of
assignment, sublease or management agreement has been delivered to Landlord;
[ii] in the case of an assignment, Landlord has received a written instrument in
which the assignee has assumed and agreed to perform all of Tenant's obligations
under the Lease; and [iii] Tenant has paid to Landlord a fee in the amount equal
to the lesser of Landlord's actual out-of-pocket costs and expenses and
$2,500.00 (applies only to consent requests after the Closing); and [iv]
Landlord has received reimbursement from Tenant or the assignee for all
attorneys' fees and expenses and all other reasonable out-of-pocket expenses
incurred in connection with determining whether to give its consent, giving its
consent and all matters relating to the assignment (applies only to consent
requests after the Closing).
18.3 Agreements with Residents. Notwithstanding 18.1, Tenant may enter
---------------------------
into an occupancy agreement with residents of the Leased Property without the
prior written consent of Landlord provided that [i] the agreement does not
provide for lifecare services; [ii] the agreement does not contain any type of
rate lock provision or rate guaranty for more than one calendar year; [iii] the
agreement does not provide for any rent reduction or waiver other than for an
introductory period not to exceed six months; [iv] Tenant may not collect rent
for more than one month in advance, other than one month of rent collected to be
held as security for the performance of the resident's obligation to Tenant; and
[v] all residents of the Leased Property are accurately shown in accounting
records for the Facility. Without the prior written consent of Landlord and
Tenant shall not change the form of resident occupancy agreement that was
submitted to Landlord prior to the Effective Date.
18.4 Sale of Leased Property. If Landlord or any subsequent owner of the
--------------------------
Leased Property sells the Leased Property, its liability for the performance of
its agreements in this Lease will end on the date of the sale of the Leased
Property, and Tenant will look solely to the purchaser for the performance of
those agreements. For purposes of this section, any holder of a mortgage or
security agreement which affects the Leased Property at any time, and any
landlord under any lease to which this Lease is subordinate at any time, will be
a subsequent owner of the Leased Property when it succeeds to the interest of
Landlord or any subsequent owner of the Leased Property.
18.5 Assignment by Landlord. Landlord may transfer, assign, mortgage,
------------------------
collaterally assign, or otherwise dispose of Landlord's interest in this Lease
or the Leased Property.
ARTICLE 19: HOLDOVER AND SURRENDER
19.1 Holding Over. If Tenant, with or without the express or implied
-------------
consent of Landlord, continues to hold and occupy the Leased Property (or any
part thereof) after the expiration of the Term or earlier termination of this
Lease (other than pursuant to Tenant's purchase of the Leased Property), such
holding over beyond the Term and the acceptance or collection of Rent in the
amount specified below by Landlord shall operate and be construed as creating a
tenancy from month to month and not for any other term whatsoever. Said
month-to-month tenancy may be terminated by Landlord by giving Tenant five days
written notice, and at any time thereafter Landlord may re-enter and take
possession of the Leased Property. If without Landlord's consent or at
Landlord's request, Tenant continues after the expiration of the Term or earlier
termination of this Lease to hold and occupy the Leased Property whether as
a month-to-month tenant or a tenant at sufferance or otherwise, Tenant shall pay
Rent for each month in an amount equal to the sum of [i] one and one-half (1 )
times the Base Rent payable during the month in which such expiration or
termination occurs, plus [ii] all Additional Rent accruing during the month,
plus [iii] any and all other sums payable by Tenant pursuant to this Lease.
During any continued tenancy after the expiration of the Term or earlier
termination of this Lease, Tenant shall be obligated to perform and observe all
of the terms, covenants and conditions of this Lease, but shall have no rights
hereunder other than the right, to the extent given by applicable law, to
continue its occupancy and use of the Leased Property until the tenancy is
terminated. Nothing contained herein shall constitute the consent, express or
implied, of Landlord to the holding over of Tenant after the expiration or
earlier termination of this Lease.
19.2 Surrender. Except for [i] Permitted Alterations; [ii] normal and
---------
reasonable wear and tear (subject to the obligation of Tenant to maintain the
Leased Property in good order and repair during the Term); and [iii] damage and
destruction not required to be repaired by Tenant, Tenant shall surrender and
deliver up the Leased Property at the expiration or termination of the Term in
as good order and condition as of the Commencement Date. The provisions of this
19.2 shall not apply in the event of the termination of this Lease upon the
purchase of the Leased Property by Tenant.
19.3 Indemnity. If Tenant fails to surrender the entire Leased Property or
---------
any part thereof upon the expiration or termination of this Lease in a timely
manner and in accordance with the provisions of this Lease, in addition to any
other liabilities to Landlord accruing therefrom, Tenant shall defend, indemnify
and hold Landlord, its principals, officers, directors, agents, and
employees harmless from loss or liability resulting from such failure,
including, without limiting the generality of the foregoing, loss of rental with
respect to any new lease in which the rental payable thereunder exceeds the Rent
collected by Landlord pursuant to this Lease during Tenant's holdover and any
claims by any proposed new tenant founded on Tenant's failure to surrender the
Leased Property. The provisions of this Article 19 shall survive the expiration
or termination of this Lease. The provisions of this 19.3 shall not apply in
the event of the termination of this Lease upon the purchase of the Leased
Property by Tenant.
ARTICLE 20: [RESERVED]
ARTICLE 21: QUIET ENJOYMENT, SUBORDINATION, ATTORNMENT AND ESTOPPEL
CERTIFICATES
21.1 Quiet Enjoyment. So long as Tenant performs all of its obligations
----------------
under this Lease, Tenant's possession of the Leased Property will not be
disturbed by Landlord or any party claiming by, through or under Landlord.
21.2 Subordination. Subject to the terms and conditions of this section,
-------------
this Lease and Tenant's rights under this Lease are subordinate to any ground
lease or underlying lease, first mortgage, first deed of trust, or other first
lien against the Leased Property, together with any renewal, consolidation,
extension, modification or replacement thereof, which now or at any subsequent
time affects the Leased Property or any interest of Landlord in the Leased
Property, except to the extent that any such instrument expressly provides that
this Lease is superior. The foregoing subordination provision is expressly
conditioned upon any lessor or mortgagee being obligated and bound to recognize
Tenant as the tenant under this Lease, and such lessor or mortgagee shall have
no right to disturb Tenant's possession, use and occupancy of the Leased
Property or Tenant's enjoyment of its rights under this Lease unless and until
an Event of Default occurs hereunder. Any foreclosure action or proceeding by
any mortgagee with respect to the Leased Property shall not affect Tenant's
rights under this Lease and shall not terminate this Lease unless and until an
Event of Default occurs hereunder. The foregoing provisions will be
self-operative, and no further instrument will be required in order to effect
them. However, Tenant shall execute, acknowledge and deliver to Landlord, at
any time and from time to time upon demand by Landlord, such documents as may be
requested by Landlord or any mortgagee or any holder of any mortgage or other
instrument described in this section, to confirm or effect any such
subordination, provided that any such document shall include a nondisturbance
provision as set forth in this section satisfactory to Tenant. Any mortgagee of
the Leased Property shall be deemed to be bound by the nondisturbance provision
set forth in this section. If Tenant fails or refuses to execute, acknowledge,
and deliver any such document within 20 days after written demand, Landlord may
execute acknowledge and deliver any such document on behalf of Tenant as
Tenant's attorney-in-fact. Tenant hereby constitutes and irrevocably appoints
Landlord, its successors and assigns, as Tenant's attorney-in-fact to execute,
acknowledge, and deliver on behalf of Tenant any documents described in this
section. This power of attorney is coupled with an interest and is irrevocable.
21.3 Attornment. If any holder of any mortgage, indenture, deed of trust,
----------
or other similar instrument described in 21.2 succeeds to Landlord's interest
in the Leased Property, Tenant will pay to such holder all Rent subsequently
payable under this Lease. Tenant shall, upon request of anyone succeeding to
the interest of Landlord, automatically become the tenant of, and attorn to,
such successor in interest without changing this Lease. The successor in
interest will not be bound by [i] any payment of Rent for more than one month in
advance unless actually received by the successor; [ii] any amendment or
modification of this Lease thereafter made without its consent as provided in
this Lease; [iii] any claim against Landlord arising prior to the date on which
the successor succeeded to Landlord's interest; or [iv] any claim or offset of
Rent against Landlord. Upon request by Landlord or such successor in interest
and without cost to Landlord or such successor in interest, Tenant will execute,
acknowledge and deliver an instrument or instruments confirming the attornment.
If Tenant fails or refuses to execute, acknowledge, and deliver any such
instrument within 20 days after written demand, then Landlord or such successor
in interest will be entitled to execute, acknowledge, and deliver any document
on behalf of Tenant as Tenant's attorney-in-fact. Tenant hereby constitutes and
irrevocably appoints Landlord, its successors and assigns, as Tenant's
attorney-in-fact to execute, acknowledge, and deliver on behalf of Tenant any
such document. This power of attorney is coupled with an interest and is
irrevocable.
21.4 Estoppel Certificates. At the request of Landlord or any mortgagee or
----------------------
purchaser of the Leased Property, Tenant shall execute, acknowledge, and deliver
an estoppel certificate, in recordable form, in favor of Landlord or any
mortgagee or purchaser of the Leased Property certifying the following: [i]
that the Lease is unmodified and in full force and effect, or if there have been
modifications that the same is in full force and effect as modified and stating
the modifications; [ii] the date to which Rent and other charges have been paid;
[iii] whether Tenant or Landlord is in default or whether there is any fact or
condition known to Landlord or Tenant which, with notice or lapse of time, or
both, would constitute a default, and specifying any existing default, if any;
[iv] that Tenant has accepted and occupies the Leased Property; [v] that Tenant
has no defenses, setoffs, deductions, credits, or counterclaims against
Landlord, if that be the case, or specifying such that exist; and [vi] such
other information as may reasonably be requested by Landlord or any mortgagee or
purchaser. Any purchaser or mortgagee may rely on this estoppel certificate.
If Tenant fails to deliver the estoppel certificates to Landlord within 10 days
after the request of Landlord, then Tenant shall be deemed to have certified
that [a] the Lease is in full force and effect and has not been modified, or
that the Lease has been modified as set forth in the certificate delivered to
Tenant; [b] Tenant has not prepaid any Rent or other charges except for the
current month; [c] Tenant has accepted and occupies the Leased Property; [d]
neither Tenant nor Landlord is in default nor is there any fact or condition
which, with notice or lapse of time, or both, would constitute a default; and
[e] Tenant has no defenses, setoffs, deductions, credits, or counterclaims
against Landlord. Tenant hereby irrevocably appoints Landlord as Tenant's
attorney-in-fact to execute, acknowledge, and deliver on Tenant's behalf any
estoppel certificate to which Tenant does not object within 10 days after
Landlord sends the certificate to Tenant. This power of attorney is coupled
with an interest and is irrevocable.
ARTICLE 22: REPRESENTATIONS AND WARRANTIES
Tenant hereby makes the following representations and warranties, as of the
Effective Date, to Landlord and acknowledge that Landlord is granting the Lease
in reliance upon such representations and warranties. Tenant's representations
and warranties shall survive the Closing and, except to the extent made as of a
specific date, shall continue in full force and effect until the Obligor Group
Obligations have been performed in full.
22.1 Organization and Good Standing. Tenant is a limited liability company,
------------------------------
duly organized, validly existing and in good standing under the laws of its
Organization State. Tenant is qualified to do business in and is in good
standing under the laws of the Facility State.
22.2 Power and Authority. Tenant has the power and authority to execute,
---------------------
deliver and perform this Lease. Tenant has taken all requisite action necessary
to authorize the execution, delivery and performance of its obligations under
this Lease.
22.3 Enforceability. This Lease constitutes a legal, valid, and binding
--------------
obligation of Tenant, enforceable in accordance with its terms, except as such
enforceability may be limited by creditors rights laws and general principles of
equity.
22.4 Government Authorizations. The Facility is in compliance with all
--------------------------
Legal Requirements. All Government Authorizations are in full force and effect.
Except as otherwise noted in Exhibit G, Tenant holds all Government
Authorizations necessary for the operation of the Facility in accordance with
the Facility Uses. No prior notice to or approval from any licensure authority
is required in connection with the Lease or the transfer of the fee interest in
the Leased Property to Landlord other than those notices which have been given
or approval which have been obtained prior to the Commencement Date.
22.5 Financial Statements. Tenant has furnished Landlord with true, correct
--------------------
and complete copies of the Financial Statements described on Exhibit C. The
Financial Statements fairly present the financial position of Tenant, Guarantor
and the Facility, as applicable, as of the respective dates and the results of
operations for the periods then ended in conformance with generally accepted
accounting principles applied on a basis consistent with prior periods. The
Financial Statements and other information furnished to Landlord are true,
complete and correct and, as of the Effective Date, no material adverse change
has occurred since the furnishing of such statements and information. As of the
Effective Date, the Financial Statements and other information do not contain
any untrue statement or omission of a material fact and are not misleading in
any material respect. Tenant and Guarantor are solvent, and no bankruptcy,
insolvency, or similar proceeding is pending or contemplated by or, to the
knowledge of Tenant, against Tenant or Guarantor.
22.6 Condition of Facility. To the best of Tenant's knowledge and except as
---------------------
otherwise disclosed in writing by Tenant to Landlord prior to the Effective
Date, all of the mechanical and electrical systems, heating and air-conditioning
systems, plumbing, water and sewer systems, and all other items of mechanical
equipment or appliances are in good working order, condition and repair, are of
sufficient size and capacity to service the Facility for the Facility Uses and
conform with all applicable ordinances and regulations, and with all building,
zoning, fire, safety, and other codes, laws and orders. The Improvements,
including the roof and foundation, are structurally sound and free from leaks
and other defects.
22.7 Compliance with Laws. To the best of Tenant's knowledge, there is no
----------------------
violation of, or noncompliance with, [i] any laws, orders, rules or regulations,
ordinances or codes of any kind or nature whatsoever relating to the Facility or
the ownership or operation thereof (including, without limitation, building,
fire, health, occupational safety and health, zoning and land use, planning and
environmental laws, orders, rules and regulations); [ii] any covenants,
conditions, restrictions or agreements affecting or relating to the ownership,
use or occupancy of the Facility; or [iii] any order, writ, regulation or decree
relating to any matter referred to in [i] or [ii] above.
22.8 No Litigation. As of the Effective Date and except as disclosed on
--------------
Exhibit H, [i] there are no actions or suits, or any proceedings or
investigations by any governmental agency or regulatory body pending against
Tenant with respect to its operation at the Facility or against the Facility;
[ii] no HIPDB adverse action reports have been issued to Tenant, Guarantor or
the Facility; [iii] Tenant has not received notice of any threatened actions,
suits, proceedings or investigations against Tenant or with respect to its
operation at the Facility or against the Facility at law or in equity, or before
any governmental board, agency or authority which, if determined adversely to
Tenant or Guarantor, would materially and adversely affect the Facility or title
to the Facility (or any part thereof), the right to operate the Facility as
presently operated, or the financial condition of Tenant or Guarantor; [iv]
there are no unsatisfied or outstanding judgments against Tenant with respect to
its operations at the Facility or against the Facility; [v] there is no labor
dispute materially and adversely affecting the operation or business conducted
by Tenant at the Facility; and [vi] Tenant does not have knowledge of any facts
or circumstances which might reasonably form the basis for any such action,
suit, or proceeding.
22.9 Consents. The execution, delivery and performance of this Lease will
--------
not require any consent, approval, authorization, order, or declaration of, or
any filing or registration with, any court, any federal, state, or local
governmental or regulatory authority, or any other person or entity, the absence
of which would materially impair the ability of Tenant to operate the Facility
for the Facility Uses except for the post-acquisition filing for licensure of
the Facility.
22.10 No Violation. The execution, delivery and performance of this Lease
-------------
[i] do not and will not conflict with, and do not and will not result in a
breach of Tenant's Organizational Documents; [ii] do not and will not conflict
with, and do not and will not result in a breach of, and do not and will not
constitute a default under (or an event which, with or without notice or lapse
of time, or both, would constitute a default under), any of the terms,
conditions or provisions of any agreement or other instrument or obligation to
which Tenant is a party or by which its assets are bound; and [iii] do not and
will not violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Tenant or the Facility.
22.11 Reports and Statements. All reports, statements, certificates and
------------------------
other data furnished by or on behalf of Tenant or Guarantor to Landlord in
connection with this Lease, and all representations and warranties made herein
or in any certificate or other instrument delivered in connection herewith and
therewith, are true and correct in all material respects and do not omit to
state any material fact or circumstance necessary to make the statements
contained herein or therein, in light of the circumstances under which they are
made, not misleading as of the date of such report, statement, certificate or
other data. The copies of all agreements and instruments submitted to Landlord,
including, without limitation, all agreements relating to management of the
Facility and Tenant's working capital are true, correct and complete copies in
all material respects and include all material amendments and modifications of
such agreements.
22.12 ERISA. All plans (as defined in 4021(a) of the Employee Retirement
-----
Income Security Act of 1974, as amended or supplemented from time to time
("ERISA")) for which Tenant is an "employer" or a "substantial employer" (as
defined in 3(5) and 4001(a)(2) of ERISA, respectively) are in compliance with
ERISA and the regulations and published interpretations thereunder. To the
extent Tenant maintains a qualified defined benefit pension plan: [i] there
exists no accumulated funding deficiency; [ii] no reportable event and no
prohibited transaction has occurred; [iii] no lien has been filed or threatened
to be filed by the Pension Benefit Guaranty Corporation established pursuant to
Subtitle A of Title IV of ERISA; and [iv] Tenant has not been deemed to be a
substantial employer.
22.13 Chief Executive Office. Tenant maintains its chief executive office
------------------------
and its books and records at Tenant's address set forth in the introductory
paragraph of this Lease. Tenant does not conduct any business or operations
other than at Tenant's chief executive office and at the Facility.
22.14 Other Name or Entities. Except as disclosed herein, none of Tenant's
-----------------------
business is conducted through any subsidiary, unincorporated association or
other entity and Tenant has not, within the six years preceding the date of this
Lease [i] changed its name, [ii] used any name other than the name stated at the
beginning of this Lease, or [iii] merged or consolidated with, or acquired any
of the assets of, any corporation or other business.
22.15 Parties in Possession. Except as disclosed on Exhibit B, there are no
---------------------
parties in possession of any Leased Property or any portion thereof as managers,
lessees, tenants at sufferance, or trespassers.
22.16 Access. Except as otherwise disclosed in writing by Tenant to
------
Landlord prior to the Effective Date, access to the Land is directly from a
dedicated public right-of-way without any easement. To the knowledge of Tenant,
there is no fact or condition which would result in the termination or reduction
of the current access to and from the Land to such right-of-way.
22.17 Utilities. There are available at the Land gas, municipal water, and
---------
sanitary sewer lines, storm sewers, electrical and telephone services in
operating condition which are adequate for the operation of the Facility at a
reasonable cost. Except as otherwise disclosed in writing by Tenant to Landlord
prior to the Effective Date, the Land has direct access to utility lines located
in a dedicated public right-of-way without any easement. As of the Effective
Date, there is no pending or, to the knowledge of Tenant, threatened
governmental or third party proceeding which would impair or result in the
termination of such utility availability.
22.18 Condemnation and Assessments. As of the Effective Date, Tenant has
------------------------------
not received notice of, and there are no pending or, to the best of Tenant's
knowledge, threatened, condemnation, assessment (except as otherwise disclosed
in writing by Tenant to Landlord prior to the Effective Date), or similar
proceedings affecting or relating to the Facility, or any portion thereof, or
any utilities, sewers, roadways or other public improvements serving the
Facility.
22.19 Zoning. As of the Effective Date, [i] the use and operation of the
------
Facility for the Facility Uses is a permitted use under the applicable zoning
code; [ii] except as disclosed on Exhibit G hereto, no special use permits,
conditional use permits, variances, or exceptions have been granted or are
needed for such use of the Facility; [iii] the Land is not located in any
special districts such as historical districts or overlay districts; and [iv]
the Facility has been constructed in accordance with and complies with all
zoning laws in effect at the time of its construction, including, but not
limited to, dimensional, parking, setback, screening, landscaping, sign and curb
cut requirements or the Facility obtained required waivers or variances from
such requirements.
22.20 Pro Forma Statement. Tenant has delivered to Landlord a true, correct
-------------------
and complete copy of the Pro Forma Statement. The Pro Forma Statement shows
Tenant's reasonable expectation based on the facts and circumstances known to
Tenant, of the most likely results of Facility operations for the next five-year
period. By its execution of this Lease, Landlord acknowledges and agrees that
the Pro Forma Statement has been reviewed by Landlord and that Tenant shall not
be in default of its obligations under this Lease in the event the actual
results of Facility operations for the next five-year period differ from those
set forth in the Pro Forma Statement.
22.21 Environmental Matters. During the period of Tenant's ownership or
----------------------
possession of the Leased Property and, to the best of Tenant's knowledge after
diligent inquiry, for the period prior to Tenant's ownership or possession of
the Leased Property, [i] the Leased Property is in compliance with all
Environmental Laws; [ii] there were no releases or threatened releases of
Hazardous Materials on, from, or under the Leased Property, except in compliance
with all Environmental Laws; [iii] no Hazardous Materials have been, are or will
be used, generated, stored, or disposed of at the Leased Property, except in
compliance with all Environmental Laws; [iv] asbestos has not been and will not
be used in the construction of any Improvements; [v] no permit is or has been
required from the Environmental Protection Agency or any similar agency or
department of any state or local government for the use or maintenance of any
Improvements; [vi] underground storage tanks on or under the Land, if any, have
been and currently are being operated in compliance with all applicable
Environmental Laws; [vii] any closure, abandonment in place or removal of an
underground storage tank on or from the Land was performed in compliance with
applicable Environmental Laws and any such tank had no release contaminating the
Leased Property or, if there had been a release, the release was remediated in
compliance with applicable Environmental Laws to the satisfaction of regulatory
authorities; [viii] no summons, citation or inquiry has been made by any such
environmental unit, body or agency or a third party demanding any right of
recovery for payment or reimbursement for costs incurred under CERCLA or any
other Environmental Laws and the Land is not subject to the lien of any such
agency; and [ix] to the best of Tenant's knowledge, the environmental assessment
of the Facility (and all follow-up reports, supplements and amendments) that was
delivered to Landlord by Tenant in connection with the closing of this Lease is
true, complete and accurate. "Disposal" and "release" shall have the meanings
set forth in CERCLA.
22.22 Leases and Contracts. As of the Effective Date and except as
----------------------
disclosed on Exhibit I, there are no leases or contracts (including, but not
limited to, insurance contracts, maintenance contracts, construction contracts,
employee benefit plans, employment contracts, equipment leases, security
agreements, architect agreements, and management contracts) to which Tenant or
Guarantor is a party relating to any part of the ownership, operation,
possession, construction, management or administration of the Land or the
Facility.
22.23 No Default. As of the Effective Date, [i] there is no existing Event
-----------
of Default under this Lease; and [ii] no event has occurred which, with the
giving of notice or the passage of time, or both, would constitute or result in
such an Event of Default.
22.24 Tax Status. If Tenant is a limited liability company, it is taxable
-----------
as a partnership under the Internal Revenue Code and all applicable facility
state tax laws.
ARTICLE 23: [RESERVED]
ARTICLE 24: SECURITY INTEREST
24.1 Collateral. Tenant hereby grants to Landlord and HCN (individually and
----------
collectively called "Secured Party") a security interest in the following
described property, whether now owned or hereafter acquired by Tenant (the
"Collateral"), to secure the payment and performance of the Obligor Group
Obligations:
(a) All machinery, furniture, equipment, trade fixtures, appliances,
inventory and all other goods (as "equipment", "inventory" and "goods" are
defined for purposes of Article 9 ("Article 9") of the Uniform Commercial Code
as adopted in Washington) and any leasehold interest of Tenant in any of the
foregoing, including, without limitation, those items which are to become
fixtures or which are building supplies and materials to be incorporated into
any improvement or fixture.
(b) All accounts, contract rights, general intangibles, instruments,
documents, and chattel paper [as "accounts", "contract rights", "general
intangibles", "instruments", "documents" and "chattel paper" are defined for
purposes of Article 9] now or hereafter arising.
(c) All franchises, permits, licenses, operating rights, certifications,
approvals, consents, authorizations and other general intangibles, including,
without limitation, certificates of need, state health care facility licenses,
and Medicare and Medicaid provider agreements, to the extent permitted by law.
(d) Unless expressly prohibited by the terms thereof, all contracts,
agreements, contract rights and materials relating to the design, construction,
operation or management of any improvements, including, but not limited to,
plans, specifications, drawings, blueprints, models, mock-ups, brochures,
flyers, advertising and promotional materials and mailing lists.
(e) All subleases, occupancy agreements, license agreements and concession
agreements, written or unwritten, of any nature, now or hereafter entered into,
and all right, title and interest of Tenant thereunder, and including, without
limitation, Tenant's right, if any, to cash or securities deposited thereunder
whether or not the same was deposited to secure performance by the subtenants,
occupants, licensees and concessionaires of their obligations thereunder,
including the right to receive and collect the rents, revenues, and other
charges thereunder.
(f) All ledger sheets, files, records, computer programs, tapes, other
electronic data processing materials, and other documentation.
(g) The products and proceeds of the preceding listed property, including,
without limitation, cash and non-cash proceeds, proceeds of proceeds, and
insurance proceeds.
24.2 Additional Documents. At the request of Landlord, Tenant shall execute
--------------------
additional security agreements, financing statements, and such other
documents as may be requested by Landlord to maintain and perfect such security
interest. Tenant hereby irrevocably appoints Landlord, its successors and
assigns, as Tenant's attorney-in-fact to execute, acknowledge, deliver and file
such documents on behalf of Tenant. This power of attorney is coupled with an
interest and is irrevocable. Tenant authorizes Landlord to file financing
statements describing the Collateral to perfect and maintain the security
interest granted hereunder without the signature or any further authorization of
Tenant.
24.3 Notice of Sale. With respect to any sale or other disposition of any
----------------
of the Collateral after the occurrence of an Event of Default, Landlord, Tenant
agrees that the giving of five days' notice by Landlord, sent by overnight
delivery, postage prepaid, to Tenant's notice address designating the time and
place of any public sale or the time after which any private sale or other
intended disposition of such Collateral is to be made, shall be deemed to be
reasonable notice thereof and Tenant waives any other notice with respect
thereto.
24.4 Recharacterization. Landlord and Tenant intend this Lease to be a true
------------------
lease. However, if despite the parties' intent, it is determined or adjudged by
a court for any reason that this Lease is not a true lease or if this Lease is
recharacterized as a financing arrangement, then this Lease shall be considered
a secured financing agreement and Landlord's title to the Leased Property shall
constitute a perfected first priority lien in Landlord's favor on the Leased
Property to secure the payment and performance of all the Obligor Group
Obligations.
24.5 Subordination Landlord acknowledges and agrees that the liens and
-------------
rights granted to Landlord under this Article 24 are and shall be subordinate to
any liens and rights granted by Tenant in favor of Lender with respect to the
Collateral.
ARTICLE 25: MISCELLANEOUS
25.1 Notices. Landlord and Tenant hereby agree that all notices, demands,
-------
requests, and consents (hereinafter "notices") required to be given pursuant to
the terms of this Lease shall be in writing, shall be addressed to the addresses
set forth in the introductory paragraph of this Lease, and shall be served
by [i] personal delivery; [ii] certified mail, return receipt requested, postage
prepaid; or [iii] nationally recognized overnight courier. Notwithstanding the
foregoing, any notice received by Landlord from Lender may be sent to Tenant by
facsimile at 206/301-4500 and deemed sent upon receipt of successful
transmission. Notwithstanding the foregoing, any notice received by Tenant from
Lender may be sent to Landlord, Attn: Erin C. Ibele, by facsimile at
419/247-2826 and deemed sent upon receipt of successful transmission. All
notices shall be deemed to be given upon the earlier of actual receipt or three
Business Days after mailing, or one Business Day after deposit with the
overnight courier. Any notices meeting the requirements of this section shall
be effective, regardless of whether or not actually received. Landlord or
Tenant may change its notice address at any time by giving the other party
notice of such change.
25.2 Advertisement of Leased Property. In the event Tenant fails to
-----------------------------------
exercise its option to renew within the time period set forth in 12.1 or in the
event, the parties hereto have not executed a renewal Lease within 120 days
prior to the expiration of this Lease, or Tenant has not exercised its Right of
First Opportunity, then Landlord or its agent shall have the right to enter the
Leased Property at all reasonable times for the purpose of exhibiting the Leased
Property to others and to place upon the Leased Property for and during the
period commencing 120 days prior to the expiration of this Lease, "for sale" or
"for rent" notices or signs.
25.3 Entire Agreement. This Lease contains the entire agreement between
-----------------
Landlord and Tenant with respect to the subject matter hereof. No
representations, warranties, and agreements have been made by Landlord except as
set forth in this Lease. No oral agreements or understandings between Landlord
and Tenant shall survive execution of this Lease.
25.4 Severability. If any term or provision of this Lease is held or deemed
------------
by Landlord to be invalid or unenforceable, such holding shall not affect the
remainder of this Lease and the same shall remain in full force and effect,
unless such holding substantially deprives Tenant of the use of the Leased
Property or Landlord of the rents herein reserved, in which event this Lease
shall forthwith terminate as if by expiration of the Term.
25.5 Captions and Headings. The captions and headings are inserted only as
----------------------
a matter of convenience and for reference and in no way define, limit or
describe the scope of this Lease or the intent of any provision hereof.
25.6 Governing Law. This Lease shall be governed by and construed in
--------------
accordance with the laws of the State of Washington, except as to matters under
applicable procedural conflicts of laws rules which require the application of
laws of another state, in which case the laws or conflicts of laws rules, as the
case may be, of such state shall govern to the extent required.
25.7 Memorandum of Lease. Tenant shall not record this Lease. Tenant
---------------------
shall, however, record a memorandum of lease approved by Landlord upon
Landlord's request.
25.8 Waiver. No waiver by Landlord of any condition or covenant herein
------
contained, or of any breach of any such condition or covenant, shall be held or
taken to be a waiver of any subsequent breach of such covenant or condition, or
to permit or excuse its continuance or any future breach thereof or of any
condition or covenant, nor shall the acceptance of Rent by Landlord at any time
when Tenant is in default in the performance or observance of any condition or
covenant herein be construed as a waiver of such default, or of Landlord's right
to terminate this Lease or exercise any other remedy granted herein on account
of such existing default.
25.9 Binding Effect. This Lease will be binding upon and inure to the
---------------
benefit of the heirs, successors, personal representatives, and permitted
assigns of Landlord and Tenant.
25.10 No Offer. Landlord's submission of this Lease to Tenant is not an
---------
offer to lease the Leased Property, or an agreement by Landlord to reserve the
Leased Property for Tenant. Landlord will not be bound to Tenant until Tenant
has duly executed and delivered duplicate original leases to Landlord, and
Landlord has duly executed and delivered one of these duplicate original leases
to Tenant.
25.11 Modification. This Lease may only be modified by a writing signed by
------------
both Landlord and Tenant. All references to this Lease, whether in this Lease
or in any other document or instrument, shall be deemed to incorporate all
amendments, modifications and renewals of this Lease, made after the date
hereof. If Tenant requests Landlord's consent to any change in ownership,
merger or consolidation of Tenant or Guarantor, any assumption of the Lease, or
any modification of the Lease, Tenant shall provide Landlord all relevant
information and documents sufficient to enable Landlord to evaluate the request.
In connection with any such request, Tenant shall pay to Landlord a fee in the
amount equal to the lesser of $2,500.00 and Landlord's actual reasonable
attorney's fees and expenses and other reasonable out-of-pocket expenses
incurred in connection with Landlord's evaluation of Tenant's request, the
preparation of any documents and amendments, the subsequent amendment of any
documents between Landlord and its collateral pool lenders (if applicable), and
all related matters.
25.12 Landlord's Modification. Tenant acknowledges that, provided Lender
------------------------
consents or the Lender has been paid in full, Landlord may mortgage the Leased
Property or use the Leased Property as collateral for collateralized mortgage
obligations or Real Estate Mortgage Investment Companies (REMICS). If any
mortgage lender of Landlord desires any modification of this Lease, Tenant
agrees to consider such modification in good faith and to execute an amendment
of this Lease if Tenant finds such modification acceptable. Landlord shall not
do anything in connection with its financing of the Leased Property which would
limit the rights granted Tenant hereunder.
25.13 No Merger. The surrender of this Lease by Tenant or the cancellation
----------
of this Lease by agreement of Tenant and Landlord or the termination of this
Lease on account of Tenant's default will not work a merger, and will, at
Landlord's option, terminate any subleases or operate as an assignment to
Landlord of any subleases. Landlord's option under this paragraph will be
exercised by notice to Tenant and all known subtenants of the Leased Property.
25.14 Laches. No delay or omission by either party hereto to exercise any
------
right or power accruing upon any noncompliance or default by the other party
with respect to any of the terms hereof shall impair any such right or power or
be construed to be a waiver thereof.
25.15 Limitation on Tenant's Recourse. Tenant's sole recourse against
----------------------------------
Landlord, and any successor to the interest of Landlord in the Leased Property,
is to the interest of Landlord, and any such successor, in the Leased Property.
Tenant will not have any right to satisfy any judgment which it may have against
Landlord, or any such successor, from any other assets of Landlord, or any such
successor. In this section, the terms "Landlord" and "successor" include the
shareholders, venturers, and partners of "Landlord" and "successor" and the
officers, directors, and employees of the same. The provisions of this section
are not intended to limit Tenant's right to seek injunctive relief or specific
performance.
25.16 Construction of Lease. This Lease has been prepared by Landlord and
-----------------------
its professional advisors and reviewed by Tenant and its professional advisors.
Landlord, Tenant, and their advisors believe that this Lease is the product of
all their efforts, that it expresses their agreement, and agree that it shall
not be interpreted in favor of either Landlord or Tenant or against either
Landlord or Tenant merely because of their efforts in preparing it.
25.17 Counterparts. This Lease may be executed in multiple counterparts,
------------
each of which shall be deemed an original hereof.
25.18 Custody of Escrow Funds. Any funds paid to Landlord in escrow
--------------------------
hereunder may be held by Landlord or, at Landlord's election, by a financial
institution, the deposits or accounts of which are insured or guaranteed by a
federal or state agency. The funds shall not be deemed to be held in trust, may
be commingled with the general funds of Landlord or such other institution, and
shall not bear interest.
25.19 Landlord's Status as a REIT. Tenant acknowledges that Landlord (or a
----------------------------
Landlord Affiliate) has elected and may hereafter elect to be taxed as a real
estate investment trust ("REIT") under the Internal Revenue Code.
25.20 Exhibits. All of the exhibits referenced in this Lease are attached
--------
hereto and incorporated herein.
25.21 WAIVER OF JURY TRIAL. LANDLORD AND TENANT WAIVE TRIAL BY JURY IN ANY
---------------------
ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY OF THEM AGAINST THE OTHER ON
ALL MATTERS ARISING OUT OF THIS LEASE OR THE USE AND OCCUPANCY OF THE LEASED
PROPERTY (EXCEPT CLAIMS FOR PERSONAL INJURY OR PROPERTY DAMAGE). IF LANDLORD
COMMENCES ANY SUMMARY PROCEEDING FOR NONPAYMENT OF RENT, TENANT WILL NOT
INTERPOSE, AND WAIVES THE RIGHT TO INTERPOSE, ANY COUNTERCLAIM IN ANY SUCH
PROCEEDING.
25.22 CONSENT TO JURISDICTION. TENANT HEREBY IRREVOCABLY SUBMITS AND
-------------------------
CONSENTS TO THE NONEXCLUSIVE JURISDICTION AND VENUE OF ANY STATE OR FEDERAL
COURT HAVING JURISDICTION OVER LUCAS COUNTY, OHIO OR ANY COUNTY IN WHICH A
FACILITY IS LOCATED FOR ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY MATTER
ARISING FROM OR RELATED TO [I] THE COMMITMENT; [II] THIS LEASE; OR [III] ANY
DOCUMENT EXECUTED BY TENANT IN CONNECTION WITH THIS LEASE. TENANT HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT TENANT MAY EFFECTIVELY DO SO, THE
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF ANY SUCH ACTION OR
PROCEEDING. TENANT AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR
PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY OTHER JURISDICTION BY
SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
TENANT AGREES NOT TO INSTITUTE ANY LEGAL ACTION OR PROCEEDING AGAINST
LANDLORD OR ANY DIRECTOR, OFFICER, EMPLOYEE, AGENT OR PROPERTY OF LANDLORD,
CONCERNING ANY MATTER ARISING OUT OF OR RELATING TO THE COMMITMENT, THIS LEASE
OR ANY RELATED DOCUMENT IN ANY COURT OTHER THAN A STATE OR FEDERAL COURT HAVING
JURISDICTION OVER LUCAS COUNTY, OHIO UNLESS SUCH COURT LACKS IN PERSONAM OR
SUBJECT MATTER JURISDICTION IN WHICH CASE TENANT SHALL HAVE THE RIGHT TO
INSTITUTE SUCH ACTION OR PROCEEDING BEFORE ANY COURT HAVING SUCH JURISDICTION.
TENANT HEREBY CONSENTS TO SERVICE OF PROCESS BY LANDLORD IN ANY MANNER AND IN
ANY JURISDICTION PERMITTED BY LAW. NOTHING HEREIN SHALL AFFECT OR IMPAIR
LANDLORD'S RIGHT TO SERVE LEGAL PROCESS IN ANY MANNER PERMITTED BY LAW, OR
LANDLORD'S RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST TENANT OR THE
PROPERTY OF TENANT IN THE COURTS OF ANY OTHER JURISDICTION.
25.23 Attorney's Fees and Expenses. Tenant shall pay to Landlord all
-------------------------------
reasonable costs and expenses incurred by Landlord in administering this Lease
and the security for this Lease, enforcing or preserving Landlord's rights under
this Lease and the security for this Lease, and in all matters of
collection, whether or not an Event of Default has actually occurred or has been
declared and thereafter cured, including, but not limited to, [a] reasonable
attorney's and paralegal's fees and disbursements; [b] the fees and expenses of
any litigation, administrative, bankruptcy, insolvency, receivership and any
other similar proceeding; [c] court costs; [d] the expenses of Landlord, its
employees, agents, attorneys and witnesses in preparing for litigation,
administrative, bankruptcy, insolvency and other proceedings and for lodging,
travel, and attendance at meetings, hearings, depositions, and trials; and [e]
consulting and witness fees and expenses incurred by Landlord in connection with
any litigation or other proceeding; provided, however, Landlord's internal
bookkeeping and routine lease servicing costs are not payable by Tenant.
25.24 Survival. The following provisions shall survive termination of the
--------
Lease: Article 8 (Defaults and Remedies); Article 9 (Damage and Destruction);
Article 10 (Condemnation); 15.9 (Transfer of License and Facility Operations);
15.10 (Bed Operating Rights); 18.2 (Assignment or Sublease); Article 19
(Holdover and Surrender); Article 24 (Security Interest) and 25.24 (Survival).
25.25 Time. Time is of the essence in the performance of this Lease.
----
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have executed this Lease or
caused the same to be executed by their respective duly authorized officers as
of the date first set forth above.
Signed and acknowledged in the presence of:
HCRI KIRKLAND PROPERTIES, LLC
By: Health Care REIT, Inc.
Signature Rita J. Rogge Its: Sole Member
Print Name Rita J. Rogge
By: Erin C. Ibele
Signature Kathleen A. Sullivan
Print Name Kathleen A. Sullivan Title: V.P. & Corporate Secretary
EMERITUS PROPERTIES X, LLC
By: Emeritus Corporation
Its: Sole Member
By: William M. Shorten
Signature
Print Name Title: Director of Real Estate Finance
Signature
Print Name Tax I.D. No.: 91-1935103
STATE OF OHIO )
) SS:
COUNTY OF LUCAS )
The foregoing instrument was acknowledged before me this ___ day of
September, 2003 by _________________________, the _________________________ of
Health Care REIT, Inc., a Delaware corporation, the sole member of HCRI Kirkland
Properties, LLC, a Delaware limited liability company, on behalf of the company.
Notary Public
My Commission Expires: [SEAL]
STATE OF WASHINGTON )
) SS:
COUNTY OF KING )
The foregoing instrument was acknowledged before me this ___ day of
September, 2003 by _________________________, the _________________________ of
Emeritus Corporation, a Washington corporation, the sole member of Emeritus
Properties X, LLC, a Washington limited liability company, on behalf of the
limited liability company.
Notary Public
My Commission Expires: [SEAL]
THIS INSTRUMENT PREPARED BY:
OKSANA M. LUDD, ESQ.
SHUMAKER, LOOP & KENDRICK, LLP
1000 JACKSON STREET
TOLEDO, OHIO 43624-1573
SCHEDULE 1: INITIAL RENT SCHEDULE
EMERITUS CORPORATION - KIRKLAND, WA
- ---------------------------------------
HEALTH CARE REIT, INC.
EFFECTIVE DATE 09/29/03
INITIAL TERM DATE 10/01/03
INITIAL TERM 15 Yrs
INITIAL TERM EXPIRATION DATE 09/30/18
INITIAL INVESTMENT AMOUNT 6,200,000
RATE OF RETURN N/A
(365/360 BASIS)
INITIAL RATE OF RETURN 10.00%
------
INCREASER (*) ANNUAL RENT INCREASER IS EQUAL TO THE LESSER OF THREE TIMES
CPI OR 25 BASIS POINTS. THIS SCHEDULE WAS PREPARED USING THE CPI FOR THE PERIOD
JULY, 2002 TO JULY, 2003 AND ASSUMED AS SUCH GOING FORWARD. ACTUAL INCREASERS
WILL BE REVIEWED ANNUALLY.
INITIAL MONTHLY RENT 51,666.67
ANNUAL INCREASER AMOUNT 0.00
LEASE YEAR DATES ACTUAL CPI INCREASER (BP) (LESSER OF 3 TIMES THE
CPI INCREASE OVER PRIOR YEAR OR 25 BP) BEGINNING RENT RATE OF RETURN
MONTHLY RENT AMOUNT ANNUAL RENT AMOUNT
FROM TO
09/29/03 09/30/03 10.00% 3,397.26
1 10/01/03 09/30/04 N/A N/A 10.00% 51,666.67
620,000.04
2 10/01/04 09/30/05 2.10% 0.25% 10.25% 52,958.33
635,500.00
3 10/01/05 09/30/06 2.10% 0.25% 10.50% 54,250.00
651,000.00
4 10/01/06 09/30/07 2.10% 0.25% 10.75% 55,541.67
666,500.00
5 10/01/07 09/30/08 2.10% 0.25% 11.00% 56,833.33
682,000.00
6 10/01/08 09/30/09 2.10% 0.25% 11.25% 58,125.00
697,500.00
7 10/01/09 09/30/10 2.10% 0.25% 11.50% 59,416.67
713,000.00
8 10/01/10 09/30/11 2.10% 0.25% 11.75% 60,708.33
728,500.00
9 10/01/11 09/30/12 2.10% 0.25% 12.00% 62,000.00
744,000.00
10 10/01/12 09/30/13 2.10% 0.25% 12.25% 63,291.67
759,500.00
11 10/01/13 09/30/14 2.10% 0.25% 12.50% 64,583.33
775,000.00
12 10/01/14 09/30/15 2.10% 0.25% 12.75% 65,875.00
790,500.00
13 10/01/15 09/30/16 2.10% 0.25% 13.00% 67,166.67
806,000.00
14 10/01/16 09/30/17 2.10% 0.25% 13.25% 68,458.33
821,500.00
15 10/01/17 09/30/18 2.10% 0.25% 13.50% 69,750.00
837,000.00
EXHIBIT A: LEGAL DESCRIPTION
THAT PORTION OF GOVERNMENT LOTS 3 AND 4, SECTION 8, TOWNSHIP 25 NORTH, RANGE 5
EAST, W.M., DESCRIBED AS FOLLOWS:
BEGINNING AT THE SOUTHWEST MEANDER CORNER OF GOVERNMENT LOT 4, SAID SECTION 8;
THENCE ALONG THE GOVERNMENT MEANDER LINE, NORTH 8 30' WEST 990 FEET;
THENCE NORTH 339 FEET TO THE SOUTHWEST MEANDER CORNER OF GOVERNMENT LOT 3;
THENCE EASTERLY ALONG THE SOUTH LINE OF SAID GOVERNMENT LOT 3, SAID LINE BEING
ALSO THE NORTH LINE OF GOVERNMENT LOT 4, TO A POINT WHICH LIES 300 FEET EASTERLY
OF THE EASTERLY MARGIN OF LAKE WASHINGTON BOULEVARD AND THE TRUE POINT OF
BEGINNING;
THENCE NORTH 82.5 FEET;
THENCE EAST TO THE NORTHERLY EXTENSION OF THE WEST LINE OF SECOND STREET (NOW
102ND AVENUE NORTHEAST EXTENSION) AS SHOWN ON THE PLAT OF FRENCH'S HOMESTEAD
VILLA, AS PER PLAT RECORDED IN VOLUME 20 OF PLATS, PAGE 24, RECORDS OF KING
COUNTY, WASHINGTON;
THENCE SOUTHERLY ALONG SAID EXTENSION LINE, 82.5 FEET, MORE OR LESS, TO THE
SOUTHERLY LINE OF GOVERNMENT LOT 3;
THENCE CONTINUING SOUTHERLY ALONG SAID EXTENSION LINE, 121 FEET, MORE OR LESS,
TO A POINT 92 FEET NORTH OF THE NORTH LINE OF SAID FRENCH'S HOMESTEAD VILLA;
THENCE WEST TO A POINT WHICH IS SOUTH OF THE TRUE POINT OF BEGINNING;
THENCE NORTH TO THE TRUE POINT OF BEGINNING;
SAID PARCEL ALSO BEING DESCRIBED AS SET FORTH IN SURVEY BY SADLER/BARNARD &
ASSOC. INC., DATED APRIL 22, 1997, DESIGNATED AS JOB NO. 97082, DESCRIBED AS
FOLLOWS:
THAT PORTION OF GOVERNMENT LOTS 3 AND 4, SECTION 8, TOWNSHIP 25 NORTH, RANGE 5
EAST, W.M., IN KING COUNTY, WASHINGTON, DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT ON THE SOUTH LINE OF SAID GOVERNMENT LOT 3 AND THE NORTH
LINE OF SAID GOVERNMENT LOT 4, WHICH LIES 300.00 FEET EASTERLY OF THE EASTERLY
MARGIN OF LAKE WASHINGTON BOULEVARD;
THENCE NORTH 01 37'22" EAST 82.50 FEET;
THENCE SOUTH 88 22'38" EAST, 241.07 FEET TO THE NORTHERLY EXTENSION OF THE WEST
LINE OF SECOND STREET (NOW 102ND AVENUE NORTHEAST EXTENSION), AS SHOWN ON THE
PLAT OF FRENCH'S HOMESTEAD VILLA, ACCORDING TO THE PLAT THEREOF, RECORDED IN
VOLUME 20 OF PLATS, PAGE 24, IN KING COUNTY, WASHINGTON;
THENCE SOUTH 01 34'36" WEST, ALONG SAID EXTENSION LINE, 203.50 FEET TO A POINT
WHICH IS 92.00 FEET NORTH OF THE NORTH LINE OF SAID FRENCH'S HOMESTEAD VILLA;
THENCE NORTH 88 22'38" WEST, ALONG A LINE WHICH IS PARALLEL TO THE NORTH LINE OF
SAID FRENCH'S HOMESTEAD VILLA, 241.24 FEET;
THENCE NORTH 01 37'22" EAST, 121.00 FEET TO THE POINT OF BEGINNING;
TOGETHER WITH AN EASEMENT FOR SANITARY SEWER AND SURFACE WATER DRAIN SYSTEM,
RECORDED UNDER RECORDING NO. 4979611, RECORDS OF KING COUNTY, WASHINGTON;
SITUATE IN THE CITY OF KIRKLAND, COUNTY OF KING, STATE OF WASHINGTON.
EXHIBIT B: PERMITTED EXCEPTIONS
1. GENERAL PROPERTY TAXES and SERVICE CHARGES, as follows, together with
interest, penalty and statutory foreclosure costs, if any, after delinquency:
(1st half delinquent on May 1; 2nd half delinquent on November 1):
Tax Account No.: 0825059030
Year Billed Paid Balance
2003 $68,526.43 $34,263.21 $34,263.22
The balance in the amount of $34,263.22 is not yet delinquent and payable.
2. EASEMENT AND THE TERMS AND CONDITIONS THEREOF:
Grantee: King County
Purpose: Constructing and Maintaining slopes and embankment
Area Affected: A 5 foot strip being a portion of said premises
Recorded: April 27, 1944
Recording No.: 3383049
3. EASEMENT AND THE TERMS AND CONDITIONS THEREOF:
Grantee: Puget Sound Power and Light Company
Purpose: Electric Transmission and/or Distribution Line System
Area Affected: The South 10 feet of the East 120 feet of said premises
Recorded: March 4, 1991
Recording No.: 9103040485
4. EASEMENT AND THE TERMS AND CONDITIONS THEREOF, as disclosed by King
County Commissioner's Records under Volume 42, page 58:
Purpose: Slopes and embankment
Area Affected: Portion adjoining 102nd Avenue Northeast extension
5. EASEMENT AND THE TERMS AND CONDITIONS THEREOF:
Grantee: Televue Systems, Inc., d/b/a Viacom Cable
Purpose: Cable distribution system
Area Affected: A portion of said premises
Recorded: September 1, 1995
Recording No.: 9509010092
6. LICENSE TO ENTER THE TERMS AND CONDITIONS THEREOF:
Grantee: City of Kirkland
Purpose: Inspection and maintenance of storm, sanitary sewer and water
utilities
Area Affected: A portion of said premises
Recorded: February 12, 1996
Recording No.: 9602120584
7. EASEMENT AND THE TERMS AND CONDITIONS THEREOF:
Grantee: City of Kirkland
Purpose: Landscape greenbelt
Area Affected: The North 5 feet, East 15 feet, the South 5 feet, the West 5
feet and the East 10 feet of the West 15 of the South 121 feet of said premises
Recorded: April 8, 1996
Recording No.: 9604080152
8. AGREEMENT AND THE TERMS AND CONDITIONS THEREOF:
Recorded: December 24, 1958
Recording No.: 4979611
Regarding: Conditions and agreements for beneficial side sewer and drain
easement
9. AGREEMENT AND THE TERMS AND CONDITIONS THEREOF:
Recorded: February 6, 1995
Recording No.: 9502060550
Regarding: Operation of Kirkland Pointe Assisted Living and Congregate
Residence
10. AGREEMENT AND THE TERMS AND CONDITIONS THEREOF:
Recorded: April 8, 1996
Recording No.: 9604080155
Regarding: Construction or installation of public improvements
11. ALTA Survey prepared by Hebrank, Steadman & Associates, Inc., P.S. on
July 16, 2003 under Job No. 2003-045.00 discloses the following:
1) Encroachments as follows:
a) Building corner is 0.1 feet North of building setback line.
b) South edge of Rock Wall (pond) is 1.8 feet South of property line.
c) South Edge of brick pillar is 0.6 feet South of property line.
d) West edge of overhead power line is 2.2 feet plus or minus West of
property line.
e) East edge of sign is 2.9 feet East of property line.
f) Guy Anchor is 0.3 feet South and 1.9 feet West of property corner and the
west edge of overhead power line is 0.3 feet West of property corner.
g) East end of fence is 0.9 feet North and 4.6 feet West of property corner.
h) Fence corner is 0.8 feet North of property line.
i) Fence corner is 0.4 feet North of property line.
j) Fence corner is 0.1 feet North and 0.1 feet West of property corner.
k) Wood deck is 4.0 feet in to the rear building setback.
l) Fence corner is 0.3 feet West of property line.
m) Encroachment of fence along the South line of property.
n) Encroachment of deck into landscape easement recorded under King County
Recording No. 9604080152 along the Southwest corner of property.
2) Possible unrecorded easement for water lines located in the Westerly,
Easterly and Northeasterly portion of the property.
3) Possible unrecorded easement for gas lines located on the property.
4) Possible unrecorded easement for underground power and telecommunication
lines located in the Northeast corner of the property.
5) Possible unrecorded easement for sewer line located in Easterly portion
of the property.
12. DEED OF TRUST AND THE TERMS AND CONDITIONS THEREOF:
Grantor: Emeritus Properties X, LLC
Trustee: Chicago Title Insurance Company
Beneficiary: Amresco Capital, L.P., a Delaware limited partnership
Address: 700 North Pearl Street, Suite 2400, LB 342, Dallas, Texas
75201-7424
ATTN: Loan Servicing
Loan No.: 400029617
Original Amount: $5,690,000.00
Dated: September 29, 1999
Recorded: September 29, 1999
Recording No.: 19990929001890
SUCCESSIVE ASSIGNMENTS OF THE DEED OF TRUST:
Last Assignee: The Chase Manhattan Bank, as Trustee, for the benefit of the
holders of The Credit Suisse First Boston Mortgage Securities Corporation
commercial mortgage pass-through certificates, Series 2000-PS4
Recorded: May 15, 2001
Recording No.: 20010515003441
ASSIGNMENT OF LEASE FOR SECURITY PURPOSES AND THE TERMS AND CONDITIONS THEREOF:
Lesser's Interest
Assigned To: Amresco Capital, L.P., a Delaware limited partnership
By Assignment
Recorded: September 29, 1999
Recording No.: 19990929001891
Said assignment given as additional security for the Deed of Trust recorded
under Recording No. 19990929001890, shown at paragraph preceding herein.
Lessor's interest is now held of record by The Chase Manhattan Bank, as Trustee,
for the benefit of the holders of The Credit Suisse First Boston Mortgage
Securities Corporation commercial mortgage pass-through certificates, Series
2000-PS4.
EXHIBIT C: FACILITY INFORMATION
STREET ADDRESS FACILITY TYPE (PER LICENSE)
FACILITY NAME COUNTY BEDS/UNITS INVESTMENT AMOUNT
------ ---------- -----------------
Boarding Home
6505 Lakeview Drive NE ___ licensed beds
Kirkland, WA 98033 ___ operating beds
Kirkland Lodge County: King 75 units $6,200,000
-------------- ------------- -------- ----------
EXHIBIT D: LANDLORD'S PERSONAL PROPERTY
[Tenant to provide]
EXHIBIT E: DOCUMENTS TO BE DELIVERED
Tenant shall deliver each of the following documents to Landlord no
later than the date specified for each document:
1. Annual Financial Statement of Tenant (audited) - within 90 days after the
end of each fiscal year.
2. Annual Company Budget not later than 60 days prior to the beginning of
the next fiscal year.
3. Quarterly Variance Report for the Facility, including occupancy, census,
capital expenditures and operating revenues and expenses by line item with a
detailed explanation of the cause of all material variances from the Annual
Company Budget (i.e., more than 10% for that line item) and a description of
Tenant's plans for eliminating all material variances - within 45 days after the
end of each quarter.
4. Quarterly Update to Annual Company Budget (on a 12-month rolling forward
period) - within 45 days after the end of each quarter.
5. Quarterly Healthcare Integrity and Protection Data Bank (HIPDB) Report
(dated not earlier than the end of the quarter) - within 45 days after the end
of each quarter.
6. Quarterly Updates to Operator Profile of Tenant, including a review of
the Profile prepared by Landlord and identification of all changes to the
Profile to reflect the current situation - within 45 days after the end of each
quarter.
7. Monthly Facility Financial Statement - within 30 days after the end of
each month.
8. Tenant's Certificate and Annual or Quarterly Facility Financial Report
(Exhibit F) - with each delivery of Tenant's financial statements.
9. Annual Facility Financial Report (based upon internal financial records)
- - within 60 days after the end of each fiscal year.
10. Annual Financial Statement (audited) of Guarantor - within 90 days after
the end of each fiscal year.
11. Periodic Financial Statement of Guarantor - within 45 days after the end
of each quarter.
12. Guarantor's certificate - with each delivery of Guarantor's financial
statements.
13. Federal tax returns of Guarantor, which shall include on a consolidated
basis, Tenant - within 15 days after the filing of the return. If the filing
date is extended, also provide a copy of the extension application within 15
days after filing.
14. If applicable, Medicaid cost reports for the Facility - within five days
after filing of the report with the State agency.
15. State and federal health care survey and inspection reports, inspector
exit interview notes and report (if delivered to Tenant), plans of correction,
re-survey reports, evidence of annual license renewal within 30 days after
receipt by Tenant, HIPDB adverse action report, notice of any investigation,
inspection or survey by licensing authorities, notice of licensure deficiencies
or commencement of licensure revocation or decertification proceeding, notice of
admissions ban, issuance of a provisional or temporary license and all
correspondence regarding any of the foregoing for the Facility - within five
days after receipt by Tenant.
16. Real estate taxes
(a) Copy of invoice and check - within five days after the due date; and
(b) Copy of official receipt or other satisfactory evidence of payment -
within 30 days after the due date.
17. Certificate of insurance renewal, current Certificate of Compliance from
insurance agent and evidence of payment of premium - at least 30 days prior
to the expiration of each policy.
18. Facility information: [i] a security deposit report, including resident
name, date of move-in, security deposit, and corresponding security deposit
bank account balance, with a monthly update of any changes; [ii] a report
accounting for all resident trust funds, including corresponding trust fund
deposit bank accounts; [iii] a schedule and copies of any equipment leases and
financings, including vendor, equipment descriptions, monthly payment, rate and
maturity, with a monthly update of any changes and the required nondisturbance
agreement if the original cost of the equipment exceeds $50,000.00; [iv] a
schedule of all utility providers and utility deposits; [v] a list of all rent
concessions, including, but not limited to, free rent, rent reduction, community
fee waivers, rate locks, rate guaranties and waivers of security deposits; [vi]
a copy of each private pay resident's occupancy agreement and the Facility's
form of agreement; [vii] a schedule of all employee vacation and sick days; and
[viii] employee policies and procedures handbook, including employee benefits -
current and annually updated reports, schedules and copies to be delivered upon
request.
EXHIBIT F: TENANT'S CERTIFICATE
AND FACILITY FINANCIAL REPORTS
Report Period: Commencing _______________ and ending _______________
Lease: Lease made by HCRI Kirkland Properties, LLC ("Landlord") to Emeritus
Properties X, LLC ("Tenant")
Tenant hereby certifies to Landlord to the best of its knowledge as
follows:
1. The attached [specify audited or unaudited and annual or quarterly, and
------- --------- ------ ---------
if consolidated, so state] financial statements of Tenant [i] have been prepared
------------
in accordance with generally accepted accounting principles consistently
applied; [ii] have been prepared in a manner substantially consistent with prior
financial statements submitted to Landlord; and [iii] fairly present the
financial condition and performance of Tenant in all material respects.
2. The attached [Annual or Quarterly] Facility Financial Report and Facility
Accounts Receivable Aging Report for the Report Period is complete, true
and accurate and has been prepared in a manner substantially consistent with
prior schedules submitted to Landlord. As set forth in the [Annual or
Quarterly] Facility Financial Report, Tenant has maintained the Facility
Coverage Ratio [*IF APPLICABLE: and the Current Ratio/Debt to Equity Ratio] for
the Report Period as required under the Lease between Tenant and Landlord.
3. To the best of its knowledge, Tenant was in compliance with all of the
provisions of the Lease and all other documents executed by Tenant in connection
with the Lease at all times during the Report Period, and no default, or
any event which with the passage of time or the giving of notice or both would
constitute a default, has occurred under the Lease.
Executed this ___ day of _______________, _____.
Name:
Title:
ANNUAL FACILITY FINANCIAL REPORT
FACILITY NAME:
FACILITY ADDRESS:
REPORT PERIOD: Twelve (12) months beginning _______________ and ending
_______________. All information reported should be for this period only.
% RESIDENT
OCCUPANCY DATA CENSUS DATA DAYS % REVENUES
-------------- ----------- ---- ----------
Total Beds/Units: _______ Medicaid: _______% _______%
----------------- ------- --------- -------- --------
Total Available Days: _______ Medicare: _______% _______%
Total Occupied Days: _______ Private and Other: _______%
_______%
Occupancy Percentage: _______% Total: _______% _______%
OPERATING DATA
1. Gross Revenues $
2. Contractual Allowances $
3. Net Revenues $
4. Operating Expenses(before interest, lease/rent, depreciation,
amortization and management fees) $
---
5. Net Operating Income $
6. Interest Expense $
7. Lease/Rent Expense $
8. Depreciation Expense $
9. Amortization Expense $
10. Management Fees $
11. Management Fees (as a percent of Gross Revenues) %
12. Overhead Allocation (if applicable) $
13. Other (identify) $
14. Income Taxes $
15. Net Income (amount should agree with the facility's financial
statements) $
FINANCING DATA
(Note: This data breaks out Items 6 and 7 above.)
Related to HCN All Other Leases and/or Debt Total
Lease Payments _________ _________ ________
----------- ----------- ----------
Interest Payments _________ _________ ________
Principal Payments (if any) _________ _________ ________
$ $ $
= = =
COVERAGE RATIO
1. Net Operating Income $______________
2. Less Imputed Management Fee
( _____% of gross revenues) (______________)
3. Less Imputed Replacement Reserve for period
($_________ per bed [or unit] per year) (______________)
4. Adjusted Net Operating Income $______________
5. Loan/Lease Payments to HCN $______________
6. Actual Coverage Ratio (Line 4 Line 5) ______________
7. Minimum Coverage Ratio (per Lease Agreement) ______________
CURRENT RATIO
[*DELETE IF NOT APPLICABLE]
1. Current Assets $______________
2. Current Liabilities $______________
3. Actual Current Ratio (Line 1 Line 2) ______________
4. Minimum Current Ratio (per Lease Agreement) ______________
I certify that the foregoing is true and accurate.
Date:
Name: Phone Number:
Title:
QUARTERLY FACILITY FINANCIAL REPORT
FACILITY NAME:
FACILITY ADDRESS:
REPORT PERIOD: Three (3) months beginning _______________ and ending
_______________. All information reported should be for this period only.
% RESIDENT
OCCUPANCY DATA CENSUS DATA DAYS % REVENUES
----------
Total Beds/Units: _______ Medicaid: _______% _______%
----------------- ------- --------- -------- --------
Total Available Days: _______ Medicare: _______% _______%
Total Occupied Days: _______ Private & Other: _______% _______%
Occupancy Percentage: _______% Total: _______% _______%
OPERATING DATA
1. Gross Revenues $
2. Contractual Allowances $
3. Net Revenues $
4. Operating Expenses (before interest, lease/rent, depreciation,
amortization and management fees) $
---
5. Net Operating Income $
6. Interest Expense $
7. Lease/Rent Expense $
8. Depreciation Expense $
9. Amortization Expense $
10. Management Fees $
11. Management Fees (as a percent of Gross Revenues) %
12. Overhead Allocation (if applicable) $
13. Other (identify) $
14. Income Taxes $
15. Net Income (amount should agree with the facility's financial
statements) $
------
FINANCING DATA
(Note: This data breaks out Items 6 and 7 above.)
Related to HCN All Other Leases and/or Debt Total
Lease Payments _________ _________ ________
----------- ----------- ----------
Interest Payments _________ _________ ________
Principal Payments (if any) _________ _________ ________
$ $ $
= = =
COVERAGE RATIO
1. Net Operating Income $______________
2. Less Imputed Management Fee
( _____% of gross revenues) (______________)
3. Less Imputed Replacement Reserve for period
($_________ per bed [or unit] per year) (______________)
4. Adjusted Net Operating Income $______________
5. Loan/Lease Payments to HCN $______________
6. Actual Coverage Ratio (Line 4 Line 5) ______________
7. Minimum Coverage Ratio (per Lease Agreement) ______________
CURRENT RATIO
[*DELETE IF NOT APPLICABLE]
1. Current Assets $______________
2. Current Liabilities $______________
3. Actual Current Ratio (Line 1 Line 2) ______________
4. Minimum Current Ratio (per Lease Agreement) ______________
I certify that the foregoing is true and accurate.
Date:
Name: Phone Number:
Title:
- ------
QUARTERLY FACILITY ACCOUNTS RECEIVABLE AGING REPORT
FACILITY NAME:
FACILITY ADDRESS:
ACCOUNTS RECEIVABLE AGING AS OF ____________ (MOST RECENT QUARTER ENDED)
PAYOR 0-30 DAYS % 31-60 DAYS % 61-90 DAYS % OVER 90 DAYS %
TOTALS %
Medicaid $__________ ____% $__________ ____% $__________ ____%
$__________ ____% $__________ ____%
Medicare $__________ ____% $__________ ____% $__________ ____%
$__________ ____% $__________ ____%
Commercial Insurance $__________ ____% $__________ ____%
$__________ ____% $__________ ____% $__________ ____%
Other -_____________ $__________ ____% $__________ ____%
$__________ ____% $__________ ____% $__________ ____%
TOTALS $__________ 100% $__________ 100% $__________ 100%
$__________ 100% $__________ 100%
% OF TOTALS $ ___________% ___________% ___________%
___________% 100%
ACCOUNTS RECEIVABLE AGING AS OF ____________ (2ND RECENT QUARTER ENDED)
PAYOR 0-30 DAYS % 31-60 DAYS % 61-90 DAYS % OVER 90 DAYS %
TOTALS %
Medicaid $__________ ____% $__________ ____% $__________ ____%
$__________ ____% $__________ ____%
Medicare $__________ ____% $__________ ____% $__________ ____%
$__________ ____% $__________ ____%
Commercial Insurance $__________ ____% $__________ ____%
$__________ ____% $__________ ____% $__________ ____%
Other -_____________ $__________ ____% $__________ ____%
$__________ ____% $__________ ____% $__________ ____%
TOTALS $__________ 100% $__________ 100% $__________ 100%
$__________ 100% $__________ 100%
% OF TOTALS $ ___________% ___________% ___________%
___________% 100%
EXHIBIT G: GOVERNMENT AUTHORIZATIONS
TO BE OBTAINED; ZONING PERMITS
The letter dated April 22, 2003 from Naomi Mason, Planning Information
Specialist, City of Kirkland, Department of Planning and Community Development,
123 Fifth Avenue, Kirkland, Washington 98033-6189 addressed to Health Care
REIT, Inc.; HCRI Massachusetts Properties Trust II; HCRI Kentucky Properties,
LLC; and HCRI Mississippi Properties, Inc., One SeaGate, Suite 1500, P.O. Box
1475, Toledo, Ohio 43603-1475 regarding Zoning Certification, Kirkland Lodge,
describes any and all special use permits, conditional use permits, variances
and exceptions which have been granted or are needed in connection with the use
of Kirkland Lodge.
EXHIBIT H: PENDING LITIGATION
The Facility has recently received a request for patient records, which they
anticipate will mature into litigation. It is, however, too early to predict
what affect, if any, the outcome of this litigation would have on the Tenant,
Guarantor or the Facility.
EXHIBIT I: LIST OF LEASES AND CONTRACTS
1. Ecolab Dishmachine Lease Agreement;
2. Beauty Salon Agreement with Valerie Montemayor; and
3. Northwestern Landscape Co.
EXHIBIT J: WIRE TRANSFER INSTRUCTIONS
HEALTH CARE REIT, INC.
WIRE TRANSFER INSTRUCTIONS
KeyBank
BANK: Cleveland, Ohio
ABA NUMBER: 041001039
ACCOUNT NAME: Health Care REIT, Inc.
ACCOUNT NUMBER: 353321001011
NOTIFY: Michael A. Crabtree
PHONE: (419) 247-2800
EXHIBIT K: BASE PRICE
(A) The base price ("Base Price") for the Leased Property will be an amount
equal to the greater of [i] the Investment Amount; or [ii] the sum of [a] the
Investment Amount plus [b] 50% of the difference between the Fair Market Value
at the time of the acquisition and the sum of [I] the Investment Amount and [II]
$1,100,000.00.
(B) Fair Market Value. The fair market value (the "Fair Market Value") of
-------------------
the Leased Property shall be determined as follows:
The parties shall attempt to determine the Fair Market Value by mutual
agreement within 15 days after giving the Termination Notice (the "Negotiation
Period"). However, if the parties do not agree on the Fair Market Value during
the Negotiation Period, the following provisions shall apply:
Landlord and Tenant shall each give the other party notice of the name of
an acceptable appraiser five Business Days after the end of the Negotiation
Period. The two appraisers will then select a third appraiser within an
additional five days. Each appraiser must demonstrate to the reasonable
satisfaction of both Landlord and Tenant that it has significant experience in
appraising properties similar to the Leased Property. Within five days after
designation, each appraiser shall submit a resume to Landlord and Tenant setting
forth such appraiser's qualifications, including education and experience with
similar properties. A notice of objections to the qualifications of any
appraiser shall be given within 10 days after receipt of such resume. If a
party fails to timely object to the qualifications of an appraiser, then the
appraiser shall be conclusively deemed satisfactory. If a party gives a timely
notice of objection to the qualifications of an appraiser, then the disqualified
appraiser shall be replaced by an appraiser selected by the qualified appraisers
or, if all appraisers are disqualified, then by an appraiser selected by a
commercial arbitrator acceptable to Landlord and Tenant.
The Fair Market Value shall be determined by the appraisers within 60 days
thereafter as follows. Each of the appraisers shall be instructed to prepare an
appraisal of the Leased Property in accordance with the following instructions:
The Leased Property is to be valued upon the three conventional approaches
to estimate value known as the Income, Sales Comparison and Cost Approaches.
Once the approaches are completed, the appraiser correlates the individual
approaches into a final value conclusion.
The three approaches to estimate value are summarized as follows:
INCOME APPROACH: This valuation approach recognizes that the value of the
operating tangible and intangible assets can be represented by the expected
economic viability of the business giving returns on and of the assets.
SALES COMPARISON APPROACH: This valuation approach is based upon the principle
of substitution. When a facility is replaceable in the market, the market
approach assumes that value tends to be set at the price of acquiring an equally
desirable substitute facility. Since healthcare market conditions change and
frequently are subject to regulatory and financing environments, adjustments
need to be considered. These adjustments also consider the operating
differences such as services and demographics.
COST APPROACH: This valuation approach estimates the value of the tangible
assets only. Value is represented by the market value of the land plus the
depreciated reproduction cost of all improvements and equipment.
In general, the Income and Sales Comparison Approaches are considered the best
representation of value because they cover both tangible and intangible assets,
consider the operating characteristics of the business and have the most
significant influence on attracting potential investors.
The appraised values submitted by the three appraisers shall be ranked from
highest value to middle value to lowest value, the appraised value (highest or
lowest) which is furthest from the middle appraised value shall be discarded,
and the remaining two appraised values shall be averaged to arrive at the Fair
Market Value.