LEASE
SINGLE FACILITY
WASHINGTON LESSOR - SILVERDALE, INC.
AND
ESC-SILVERDALE, LLC
DATED: AUGUST 15, 2003
Facility: Emeritus Oaks of Silverdale
1501 N.W. Tower View Circle
Silverdale, Washington 98383
Table of Contents
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Page
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i
ARTICLE I 1
1.1 Lease 1
1.2 Term 1
1.3 Option to Renew 1
1.3 Option to Renew 2
ARTICLE II 2
2.1 Definitions 2
ARTICLE III 17
3.1 Base Rent, Monthly Installments 17
3.2 Additional Charges 18
3.3 Late Charge, Interest 18
3.4 Net Lease 18
3.5 Payments In The Event of a Rent Adjustment 18
ARTICLE IV 19
4.1 Payment of Impositions 19
4.2 Adjustment of Impositions 19
4.3 Utility Charges 20
4.4 Insurance Premiums 20
ARTICLE V 20
5.1 No Termination, Abatement, etc. 20
ARTICLE VI 20
6.1 Ownership of the leased property 20
6.2 Lessor's Personal Property 21
6.3 Lessee's Personal Property 21
6.4 Grant of Security Interest in Lessee's Personal Property and Accounts
21
ARTICLE VII 21
7.1 Condition of the Leased Property 21
7.2 Use of the Leased Property 22
7.3 Certain Environmental Matters 22
ARTICLE VIII 27
8.1 Compliance with Legal and Insurance Requirements 27
8.2 Certain Covenants 27
8.3 Minimum Qualified Capital Expenditures 28
8.4 Management Agreements 28
8.5 Other Facilities 28
8.6 No Other Business 28
ARTICLE IX 29
9.1 Maintenance and Repair 29
9.2 Encroachments, Restrictions, etc. 30
ARTICLE X 30
10.1 Construction of Alterations and Additions to the Leased Property 30
ARTICLE XI 31
11.1 Liens 31
ARTICLE XII 31
12.1 Permitted Contests 31
12.2 Lessor's Requirement for Deposits 32
ARTICLE XIII 32
13.1 General Insurance Requirements 32
13.2 Risks to be Insured 33
13.3 Payment of Premiums Copies of Policies, Certificates 34
13.4 Umbrella Policies 34
13.5 Additional Insurance 35
13.6 No Liability, Waiver of Subrogation 35
13.8 Blanket Policy 35
13.9 No Separate Insurance 35
ARTICLE XIV 35
14.1 Insurance Proceeds 35
14.2 Restoration in the Event of Damage or Destruction 36
14.3 Restoration of Lessee's Property 36
14.4 No Abatement of Rent 36
14.5 Waiver 36
14.6 Disbursement of Insurance Proceeds Equal to or Greater Than The Approval
Threshold 36
14.7 Net Proceeds Paid to Facility Mortgagee 37
ARTICLE XV 38
15.1 Total Taking or Other Taking with Leased Property Rendered Unsuitable for
Its Primary Intended Use 38
15.2 Allocation of Award 38
15.3 Partial Taking 39
15.4 Temporary Taking 39
15.5 Awards Paid to Facility Mortgagee 39
ARTICLE XVI 40
16.1 Lessor's Rights Upon an Event of Default 40
16.2 Certain Remedies 40
16.3 Damages 41
16.4 Waiver 41
16.5 Application of Funds 42
16.6 Bankruptcy 42
ARTICLE XVII 42
17.1 Lessor's Right to Cure Lessee's Default 42
ARTICLE XVIII 43
18.1 Holding Over 43
18.2 Indemnity 43
ARTICLE XIX 43
19.1 Subordination 43
19.2 Attornment 44
19.3 Lessee's Certificate 44
ARTICLE XX 44
20.1 Risk of Loss 44
ARTICLE XXI 44
21.1 Indemnification 44
21.2 Survival of Indemnification 45
ARTICLE XXII 45
22.1 General Prohibition against Transfers 45
22.2 Subordination and Attornment 45
22.3 Sublease Limitation 46
ARTICLE XXIII 46
23.1 Financial Statments and Other Reports and Materials Required by Lessor
46
23.2 Public Offering Information 47
ARTICLE XXIV 48
24.1 Lessor's Right to Inspect 48
ARTICLE XXV 48
25.1 No Waiver 48
ARTICLE XXVI 48
26.1 Remedies Cumulative 48
ARTICLE XXVII 48
27.1 Acceptance of Surrender 48
ARTICLE XXVIII 48
28.1 No Merger of Title 48
28.2 No Partnership 49
ARTICLE XXIX 49
29.1 Conveyance by Lessor 49
ARTICLE XXX 49
30.1 Quiet Enjoyment 49
ARTICLE XXXI 49
31.1 Notices 49
ARTICLE XXXII 50
32.1 Appraisers 50
ARTICLE XXXIII 51
ARTICLE XXXIV 51
34.1 Facility Trade Names 51
34.2 Transfer of Operational Control of the Facility 51
ARTICLE XXXV 52
35.1 Arbitration 52
ARTICLE XXXVI 53
36.1 Miscellaneous 53
ARTICLE XXXVII 54
37.1 Commissions 54
ARTICLE XXXVIII 54
38.1 Memorandum or Short Form of Lease 54
ARTICLE XXXIX 55
39.1 Security Deposit 55
39.2 Application of Security Deposit 55
39.3 Transfer of Security Deposit 55
39.4 Return of Security Deposit 56
Emeritus Oaks of Silverdale
Execution Copy
SINGLE FACILITY LEASE
(Emeritus Oaks of Silverdale)
THIS LEASE ("Lease") is executed and delivered as of this 15th day of
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August, 2003 and is entered into by WASHINGTON LESSOR - SILVERDALE, INC., a
Maryland corporation ("Lessor"), the address of which is 9690 Deereco Road,
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Suite 100, Timonium, MD 21093, and ESC-Silverdale, LLC, a Washington limited
liability company ("Lessee"), the address of which is c\o Emeritus Corporation,
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3131 Elliott Avenue, Suite 500, Seattle, WA 98121 ("Lessee").
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RECITALS
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The circumstances underlying the execution and delivery of this Lease are
as follows:
A. Capitalized terms used and not otherwise defined herein have the
respective meanings given them in Article II below.
B. Lessor is the owner of the Leased Property.
C. Lessor has agreed to lease the Leased Property to Lessee, and Lessee has
agreed to lease the Leased Property from Lessor, on the terms and conditions set
forth in this Lease.
NOW, THEREFORE, Lessor and Lessee agree as follows:
ARTICLE I
1.1 Lease. Upon and subject to the terms and conditions set forth in this
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Lease, Lessor leases to Lessee, and Lessee leases from Lessor, the Leased
Property. The Leased Property is leased subject to all covenants, conditions,
restrictions, easements and other matters affecting the Leased Property, whether
or not of record, including the Permitted Encumbrances and other matters
which would be disclosed by an inspection or accurate survey of the Leased
Property.
1.2 Term. The initial term of this Lease ("Initial Term") shall be ten (10)
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Lease Years and shall commence on the Commencement Date. The Term shall
commence on the Commencement Date and end on the Expiration Date.
1.3 Option to Renew. Lessee is hereby granted two (2) successive options to
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renew this Lease for a period of ten (10) Lease Years each, for a maximum Term
if such options are exercised of thirty (30) Lease Years. Lessee's options to
renew this Lease are subject to the following terms and conditions (which
conditions may be waived by Lessor in its sole discretion):
(a) An option to renew is exercisable only by Notice to Lessor at least one
hundred and eighty (180) days prior to the expiration of the Initial Term (or
prior to the expiration of the preceding Renewal Term, as the case may be);
(b) No Event of Default or Unmatured Event of Default shall have occurred
and be continuing either at the time a renewal option is exercised or at the
commencement of a Renewal Term; and
(c) During a Renewal Term, all of the terms and conditions of this Lease
shall remain in full force and effect.
1.4 Option to Terminate. During the period commencing on the first day of
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the third Lease Year and continuing until the fifteenth day of the third Lease
Year, Lessee may terminate this Lease upon written notice (the "Termination
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Notice") to Lessor. In accordance with the request of Lessee, this Lease shall
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be terminated effective on the date set by written notice given by Lessor at
least thirty (30) days prior to the effective date (the "Transfer Date").
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Commencing on the date of the Termination Notice and continuing until the
earlier of (1) the Transfer Date, or (2) the later of (i) the date six (6)
months after the date of the Termination Notice and (ii) the date all Payment
Defaults, if any, are cured, Lessee shall pay Base Rent at the rate in effect
during the second Lease Year. During the period commencing on the later of (i)
the date six (6) months after the date of the Termination Notice and (ii) the
date all Payment Defaults, if any, are cured, and ending on the earlier of the
Transfer Date or the termination of this Lease (the "Management Period"), (i)
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Lessee shall not be obligated to pay Rent, (ii) Lessor agrees to pay Lessee a
management fee equal to five (5) percent of Gross Revenues, and (iii) Lessor
shall provide all working capital needs of the Facility (it being the intent of
the parties that Lessee shall not bear the economic risk nor receive the
economic benefit of operating the Facility during the Management Period).
During the Management Period, the management fee shall be paid monthly in
arrears on the fifteenth day of each month. During the Management Period, upon
ninety (90) days written notice to Lessor, Lessee may terminate this Lease and
cease managing the Facility effective at any time after the date one year after
the Termination Notice. This Lease shall otherwise remain in effect until the
Transfer Date. Any termination pursuant to this Section 1.4 shall not relieve
Lessee of its obligations under Section 34.2 of this Lease.
ARTICLE II
2.1 Definitions. For all purposes of this Lease, except as otherwise
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expressly provided or unless the context otherwise requires, (a) the terms
defined in this Article have the meanings assigned to them in this Article and
include the plural as well as the singular; (b) all accounting terms not
otherwise defined herein have the meanings assigned to them in accordance with
GAAP as at the time applicable; (c) all references in this Lease to designated
"Articles," "Sections" and other subdivisions are to the designated Articles,
Sections and other subdivisions of this Lease; and (d) the words "herein,"
"hereof" and "hereunder" and other words of similar import refer to this Lease
as a whole and not to any particular Article, Section or other subdivision.
Additional Charges: All Impositions and other amounts, liabilities and
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obligations that Lessee assumes or agrees to pay under this Lease.
Affiliate: Any Person who, directly or indirectly, Controls or is Controlled by
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or is under common Control with another Person.
Approval Threshold: One Hundred Thousand Dollars ($100,000).
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Assessment: Any governmental assessment on the Leased Property or any part of
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any of them for public or private improvements or benefits, whether or not
commenced or completed prior to the date hereof and whether or not to be
completed within the Term.
Assumed Indebtedness: Any indebtedness or other obligations expressly assumed
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in writing by Lessor and secured by a mortgage, deed of trust or other security
agreement to which Lessor's title to the Leased Property is subject.
Award: All compensation, sums or anything of value awarded, paid or received in
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connection with a Taking or Partial Taking.
Base Rent:
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(A) During the Initial Term, the Base Rent shall be:
(1) For the first Lease Year, One Hundred Eighty Thousand Dollars
($180,000);
(2) For the second Lease Year, One Hundred Eighty Thousand Dollars
($180,000);
(3) For the third Lease Year Two Hundred Twenty Five Thousand Dollars
($225,000);
(4) For the fourth Lease Year Two Hundred Fifty Thousand Dollars ($250,000);
(5) For the fifth Lease Year Two Hundred Seventy Five Thousand Dollars
($275,000);
(6) For the sixth Lease Year Three Hundred Thousand Dollars ($300,000); and
(7) For each succeeding Lease Year in the Initial Term, the Base Rent for
the previous Lease Year, increased by the product of (i) the Base Rent during
the immediately preceding Lease Year and (b) the prior year's CPI (expressed as
a percentage).
(B) During a Renewal Term, the Base Rent shall be:
(1) For the first Lease Year during such Renewal Term, the greater of (a)
the Fair Market Rent for the Leased Property on the first day of such Renewal
Term and (b) the Base Rent in the Lease Year immediately preceding the
commencement of such Renewal Term, increased by application of the formula set
forth in Section (A)(7) above; and
(2) For each succeeding Lease Year during such Renewal Term, the Base Rent
for the previous Lease Year increased by application of the formula set forth in
Section (A)(7) above.
Business Day: Each Monday, Tuesday, Wednesday, Thursday and Friday that is
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not a day on which national banks in the City of New York, New York are
authorized or obligated, by law or executive order, to close.
Capitalization Rate: Nine percent (9%).
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Capitalized Leases: Leases that in accordance with GAAP are required to be
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capitalized for financial reporting purposes.
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Capitalized Lease Obligations: All obligations under Capitalized Leases the
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amount of the indebtedness for which shall be the capitalized amount of such
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obligations determined in accordance with GAAP.
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Cash Flow: For any period, the sum of (a) Net Income of Lessee arising solely
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from the operation of the Facility for the applicable period, and (b) the
amounts deducted in computing Lessee's Net Income for the period for (i)
depreciation, (ii) amortization, (iii) Base Rent, (iv) interest (including
payments in the nature of interest under Capitalized Leases and interest on any
Purchase Money Financing), (v) income taxes (or, if greater, income tax actually
paid during the period) and (vi) management fees.
Cash Flow to Rent Ratio: For any fiscal period, the ratio of Cash Flow to Base
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Rent.
Citation: Any operational or physical plant deficiency set forth in writing with
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respect to the Facility by any governmental body or agency, having regulatory
oversight over the Facility, Lessee, any Sublessee or Manager, with respect to
which the scope and severity of the potential penalty for such deficiency is one
or more of the following: loss of licensure or appointment of a temporary
manager.
Clean-Up: The investigation, removal, restoration, remediation and/or
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elimination of, or other response to, Contamination, in each case to the
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satisfaction of all governmental agencies having jurisdiction, in compliance
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with or as may be required by Environmental Laws.
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Code: The Internal Revenue Code of 1986, as amended.
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Commencement Date: ______________, 2003.
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Condemnor: Any public or quasi-public authority, or private corporation or
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individual, having the power of condemnation.
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Construction Funds: The Net Proceeds and such additional funds as may be
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deposited with Lessor by Lessee pursuant to Section 14.6 for restoration or
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repair work pursuant to this Lease.
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Contamination: The presence, Release or threatened Release of any Hazardous
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Substance at the Leased Property in violation of any Environmental Law, or in a
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quantity that would give rise to any affirmative Clean-Up obligations under an
Environmental Law, including, but not limited to, the existence of any injury or
potential injury to public health, safety, natural resources or the environment
associated therewith, or any other environmental condition at, in, about, under
or migrating from or to the Leased Property.
Control (and its corollaries "Controlled by" and "under common Control with"):
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Possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, through the ownership of
voting securities, partnership interests or other equity interests.
CPI: The United States Department of Labor, Bureau of Labor Statistics Revised
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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.
Date of Taking: The date on which the Condemnor has the right to possession of
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all or any part of the Leased Property.
Distribution: Any payment or distribution of cash or any assets of Lessee to one
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or more shareholders of Lessee or to any Affiliate of Lessee, whether in the
form of a dividend, a fee for management in excess of the fee required by the
terms of a Management Agreement (but in any event not to exceed seven percent
(7%) of gross revenues of the Facility), a payment for services rendered, a
reimbursement for expenditures or overhead incurred on behalf of Lessee or a
payment on any debt required by this Lease to be subordinated to the rights of
Lessee.
Effective Tax Rate: For any period, the ratio of income taxes of Lessee and its
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consolidated subsidiaries allocable to such period (as reflected in the
provision for income taxes contained in the income statement for such period) to
the Net Income before income taxes of Lessee and its consolidated subsidiaries
for such period, as determined in conformity with GAAP.
Encumbrance: Any mortgage, deed of trust, lien, encumbrance or other matter
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affecting title to the Leased Property, or any portion thereof or interest
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therein, securing any borrowing or other means of financing or refinancing.
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Environmental Audit: A written certificate that (a) is in form and substance
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satisfactory to Lessor, (b) is from an environmental consulting or engineering
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firm acceptable to Lessor and (c) states that there is no Contamination on the
Leased Property and that the Leased Property is otherwise in strict compliance
with Environmental Laws.
Environmental Documents: Each and every (a) document received by Lessee or any
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Affiliate from, or submitted by Lessee or any Affiliate to, the United States
Environmental Protection Agency and/or any other federal, state, county or
municipal agency responsible for enforcing or implementing Environmental Laws
with respect to the condition of the Leased Property, or Lessee's operations at
the Leased Property; and (b) review, audit, report, or other analysis data
pertaining to environmental conditions, including, but not limited to, the
presence or absence of Contamination, at, in, under or with respect to the
Leased Property that have been prepared by, for or on behalf of Lessee.
Environmental Laws: All federal, state and local laws (including, without
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limitation, common law), statutes, codes, ordinances, regulations, rules,
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orders, permits or decrees now or at any time in effect and relating to (a) the
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introduction, emission, discharge or release of Hazardous Substances into the
indoor or outdoor environment (including without limitation, air, surface water,
groundwater, land or soil), (b) the manufacture, processing, distribution, use,
treatment, storage, transportation or disposal of Hazardous Substances or (c)
the Clean-Up of Contamination.
Event of Default: The occurrence of any of the following:
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(b) Lessee fails to pay or cause to be paid the Rent within five (5)
Business Days after the Rent became due and payable;
(c) Lessee or Guarantor, on a petition in bankruptcy filed against it, is
adjudicated a bankrupt or has an order for relief thereunder entered against it,
or a court of competent jurisdiction enters an order or decree appointing a
receiver of Lessee, any Sublessee or any Guarantor or of the whole or
substantially all of its property, or approving a petition filed against Lessee
or any Guarantor seeking reorganization or arrangement of Lessee or such
Guarantor under the federal bankruptcy laws or any other applicable law or
statute of the United States of America or any state thereof, and such judgment,
order or decree is not vacated or set aside or stayed within sixty (60) days
from the date of the entry thereof, subject to the applicable provisions of the
Bankruptcy Code (11 USC 101 et. seq.) and to the provisions of Section 16.6
below;
(d) Lessee or Guarantor: (i) Admits in writing its inability to pay its
debts generally as they become due; (ii) files a petition in bankruptcy or a
petition to take advantage of any insolvency law; (iii) makes a general
assignment for the benefit of its creditors; (iv) consents to the appointment of
a receiver of itself or of the whole or any substantial part of its property; or
(v) files a petition or answer seeking reorganization or arrangement under the
Federal bankruptcy laws or any other applicable law or statute of the United
States of America or any state thereof, subject to the applicable provisions of
the Bankruptcy Code (11 USC 101 et. seq.) and to the provisions of Section
16.6 below;
(e) Lessee or Guarantor is liquidated or dissolved, or begins proceedings
toward liquidation or dissolution, or has filed against it a petition or other
proceeding to cause it to be liquidated or dissolved and the proceeding is not
dismissed within sixty (60) days thereafter, or Lessee in any manner permits the
sale or divestiture of all or substantially all of its assets;
(f) The estate or interest of Lessee in the Leased Property or any part
thereof is levied upon or attached in any proceeding and the same is not vacated
or discharged within thirty (30) days thereafter (unless Lessee is in the
process of contesting such lien or attachment in good faith in accordance with
Article XII hereof);
(g) Lessee ceases operation of the Facility for a period in excess of five
(5) Business Days except upon prior Notice to, and with the express prior
written consent of, Lessor (which consent Lessor may withhold in its absolute
discretion), or as the unavoidable consequence of damage or destruction as a
result of a casualty, or a Partial or total Taking;
(h) Any representation or warranty made by Lessee, Guarantor or any of their
Affiliates in the Lease or the other Transaction Documents, or in any
certificates delivered in connection with this Lease or the other Transaction
Documents, proves to be untrue when made in any material respect, it has, or may
reasonably have, a Materially Adverse Effect, and Lessee fails within twenty
(20) days after Notice from Lessor or Omega, as the case may be, to cure such
condition by terminating such adverse effect and making Lessor or Omega, as the
case may be, whole for any damage suffered therefrom, or, if with due diligence
such cure cannot be effected within twenty (20) days, if Lessee has failed to
commence to cure the same within the twenty (20) days or failed thereafter to
proceed promptly and with due diligence to cure such condition and complete such
cure prior to the time that such condition actually causes a Material Adverse
Effect and prior to the time that the same results in civil or criminal
penalties to Lessor, Lessee, any Affiliates of either or the Leased Property;
(i) Lessee (or, if applicable, any Sublessee or Manager):
(i) has any license, permit, approval, certificate of need, certificate of
reimbursement or other authorization necessary to operate the Facility as a
provider of health care services in accordance with its Primary Intended Use
suspended or revoked, or its right to so operate the Facility or to accept
patients suspended, and Lessee fails to remedy any condition causing such
revocation or suspension within any cure period allowed therefor by the
applicable agency or authority or, if no such cure period is allowed or
specified by the applicable agency or authority, Lessee fails to remedy the
condition promptly and diligently following Lessee's receipt of notice of such
condition and, in any event, prior to the final, nonappealable revocation or
suspension of any such license, permit, approval, certificate of need,
certificate of reimbursement , other authorization or right to operate the
Facility or to accept patients at the Facility; or
(ii) receives a Citation with respect to the Facility and fails to cure the
condition that is the subject of the Citation prior to the final, nonappealable
revocation or suspension of any license, permit, approval, certificate of need,
certificate of reimbursement or other authorization necessary to operate the
Facility as a provider of health care services in accordance with its Primary
Intended Use, or prior to the appointment of a temporary manager, as the case
may be; or
(iii) fails to give Lessor Notice that any event set forth in clauses (i)
and (ii) above has occurred within five (5) Business Days after the event
occurs;
(j) A Transfer occurs without the prior written consent of Lessor;
(k) An "Event of Default" (whether defined as an "Event of Default", a
"Guaranty Default", a "Security Agreement Event of Default" or not specifically
defined) occurs under any Transaction Document and such "Event of Default" is
not cured prior to the expiration of any applicable grace or cure period
provided therein;
(l) Lessee breaches any of the financial covenants set forth in Article VIII
hereof, the breach is capable of cure and the breach is not cured within a
period of the shorter of (i) thirty (30) days after the Notice thereof from
Lessor, and (ii) fifteen (15) days following the date of delivery of a
certificate pursuant to Section 23.1(i) or 23.1(ii); provided, however, that
Lessee's failure to amortize move-in expenses at the Facility-level shall not be
the basis of a breach of any of the financial covenants set forth in Article
VIII hereof;
(m) Lessee or an Affiliate of Lessee defaults beyond any applicable grace
period in the payment of any amount or the performance of any material act
required of Lessee or such Affiliate by the terms of any other lease or other
agreement between Lessee or such Affiliate and Lessor or any Affiliate of
Lessor; or
(n) Lessee, Guarantor or their Affiliates fail to observe or perform any
other term, covenant or condition of this Lease or any other Transaction
Document and the failure is not cured by Lessee within a period of thirty (30)
days after Notice thereof from Lessor, unless the failure cannot with due
diligence be cured within a period of thirty (30) days, in which case such
failure shall not be deemed an Event of Default if and for so long as Lessee
proceeds promptly and with due diligence to cure the failure and completes the
cure prior to the time that the same causes a Material Adverse Effect and prior
to the time that the same results in civil or criminal penalties to Lessor,
Lessee, any Affiliates of either or to the Leased Properties.
Executive Officer: Any of the Chairman of the Board of Directors, the
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President, the Chief Executive Officer, the Chief Operating Officer, the Chief
Financial Officer, any Vice President and the Secretary of any corporation, a
general partner of any partnership and a managing member of any limited
liability company upon which service of a Notice is to be made.
Expiration Date: means the Transfer Date if this Lease is terminated pursuant to
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Section 1.4, ______________, 2013 if the first Renewal Option has not been
exercised, or _____________________, 2023, if the first Renewal Option has been
exercised but the second Renewal Option has not been exercised, or
_____________________, 2033, if the second Renewal Option has been exercised
Facility: The health care facility on the Land, including the Leased Property
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associated with such Facility.
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Facility Mortgage: Any mortgage, deed of trust or other security agreement that
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with the express, prior, written consent of Lessor is a lien upon any or all of
the Leased Property, whether such lien secures an Assumed Indebtedness or
another obligation or obligations.
Facility Mortgagee: The secured party to a Facility Mortgage, its successors and
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assigns, any servicer acting on behalf of a Facility Mortgagee with respect to a
Facility Mortgage and, if a Facility Mortgage is deposited with a trust, then
the trustee acting on behalf of the certificate holders of such trust.
Facility Trade Names: The name(s) under which the Facility has done business
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during the Term. The Facility Trade Names in use by the Facility on the
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Commencement Date are set forth on attached Exhibit A.
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Fair Market Rent: The rent that, at the relevant time, a Facility would
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most probably command in the open market, under a lease on substantially the
same terms and conditions as are set forth in this Lease with a lessee unrelated
to Lessor having experience and a reputation in the health care industry and a
credit standing reasonably equivalent to that of Lessee, and, if this Lease is
guaranteed, with such lease being guaranteed by guarantors having a net worth at
least equal to that of Guarantors, with evidence of such rent being the rent
that is being asked and agreed to at such time under any leases of facilities
comparable to such Facility being entered into at such time in which the lessees
and lease guarantors meet the qualifications set forth in this sentence. Fair
Market Rent shall be determined in accordance with the appraisal procedure set
forth in Article XXXII or in such other manner as may be mutually acceptable to
Lessor and Lessee.
Financial Statement:
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(A) For each quarter during Lessee's fiscal year, (i) a statement of
earnings for the current period and fiscal year to the end of such period, with
a comparison to the corresponding figures for the corresponding period in the
preceding fiscal year from the beginning of the fiscal year to the end of such
period, and (ii) a balance sheet as of the end of the period, with a comparison
to the corresponding figures for the corresponding period in the preceding
fiscal year from the beginning of the fiscal year to the end of such period; and
(B) For Lessee's fiscal year, a financial report for Lessee containing
Lessee's balance sheet as of the end of that year, and its related profit and
loss.
Fixtures: Collectively, all permanently affixed equipment, machinery,
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fixtures, and other items of real and/or personal property (excluding Lessor'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 Leased 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 (other than
individual units), 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.
Force Majeure: An event or condition beyond the control of any Person, including
- -------------
without limitation a flood, earthquake, or other Act of God; a fire or other
casualty resulting in a complete or partial destruction of the Facility; a war,
revolution, riot, civil insurrection or commotion, terrorism, or vandalism;
unusual governmental action, delay, restriction or regulation not reasonably to
be expected; a contractor or supplier delay or failure in performance (not
arising from a failure to pay any undisputed amount due), or a delay in the
delivery of essential equipment or materials; bankruptcy or other insolvency of
a contractor, subcontractor or construction manager (not an Affiliate of the
party claiming Force Majeure); a strike, slowdown or other similar labor action;
or any other similar event or condition beyond the reasonable control of the
party claiming that Force Majeure is delaying or preventing such party from
timely and fully performing its obligations under this Lease; provided that in
any such event, the party claiming the existence of Force Majeure shall have
given the other party Notice of such claim within fifteen (15) days after
becoming aware thereof, and if the party claiming Force Majeure shall fail to
give such Notice, then the event or condition shall not be considered Force
Majeure for any period preceding the date such Notice shall be given. No lack
of funds shall be construed as Force Majeure.
GAAP: Generally accepted accounting principles in effect at the time in
- ----
question.
- ----
Gross Revenues: All revenues generated by the Facility during the term of the
- ---------------
Management Period, less bad debt expense resulting from uncollectible accounts
- --
receivable and specifically excluding the proceeds from the sale of the
Facility, any Facility equipment and any insurance proceeds and condemnation
proceeds, any contractual allowances, prior year third-party settlements and the
receipt of revenues during the Management Period which relate to periods prior
to, or after the Management Period.
Guarantor: means Emeritus Corporation, a Washington corporation.
- ---------
Guaranty: means the Guaranty from Guarantor in favor of Lessor.
- --------
Hazardous Substance: Dangerous, toxic or hazardous material, substance,
- --------------------
pollutant, contaminant, chemical, waste (including medical waste), including
- -------
petroleum products, asbestos and PCBs defined, listed or described as such under
- ---
any Environmental Law.
Impositions: Collectively, all taxes (including, without limitation, all
- -----------
capital stock and franchise taxes of Lessor and all ad valorem, sales and use,
- ------
single business, gross receipts, business privilege, transaction privilege, rent
or similar taxes to the extent the same are assessed against Lessor in whole or
in part on the basis of its gross or net income from this Lease, the value of
the Leased Property, the privilege of doing business in the State or any
political subdivision or subdivisions of the State); assessments (including
Assessments), ground rents, water, sewer or other rents and charges, excises,
tax levies, fees (including, without limitation, license, permit, inspection,
authorization and similar fees), and all other governmental charges, in each
case whether general or special, ordinary or extraordinary, or foreseen or
unforeseen, of every character in respect of the Leased Property that at any
time prior to, during or in respect of the Term are assessed or imposed on or in
respect of, or constitute a lien upon (a) Lessor or Lessor's interest in the
Leased Property; (b) the Leased Property or any part thereof or any rent
therefrom or any estate, right, title or interest therein; (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 of the Leased Property
or any part thereof; provided, however, that nothing contained in this Lease
shall be construed to require Lessee to pay (i) any tax based on net income
(whether denominated as a franchise or capital stock or other tax) imposed on
Lessor or any other Person, (ii) any transfer, or net revenue tax of Lessor or
any other Person except Lessee and its successors, (iii) any tax imposed with
respect to the sale, exchange or other disposition by Lessor of any Leased
Property or the proceeds thereof, or (iv) any principal or interest on any
indebtedness on the Leased Property owed to a Facility Mortgagee for which
Lessor is the obligor, except to the extent that any tax, assessment, tax levy
or charge, which is otherwise included in this definition, and a tax,
assessment, tax levy or charge set forth in clause (i) or (ii) is levied,
assessed or imposed in lieu thereof or as a substitute therefor.
Initial Term: As defined in Section 1.2.
- -------------
Insurance Requirements: All terms of any insurance policy required by this
- -----------------------
Lease and all requirements of the issuer of any such policy.
- ----
Investigation: Soil and chemical tests or any other environmental
- -------------
investigations, examinations or analyses.
- -------------
Judgment Date: The date on which a judgment is entered against Lessee that
- --------------
establishes, without the possibility of appeal, the amount of liquidated damages
- ----
to which Lessor is entitled under this Lease.
Land: The real property described in attached ExhibitB.
- ---- ---------
Lease: As defined in the Preamble.
- -----
Lease Year: Each period from and including ______________1 through
- -----------
_______________ during the Term of this Lease. If this Lease is terminated or
- ----------
expires before the end of any Lease Year, the final Lease Year shall be
______________ 1 through the date of termination.
Leased Improvements: Collectively, all buildings, structures, Fixtures and other
- -------------------
improvements of every kind on the Land, including, but not limited to, alleyways
and connecting tunnels, sidewalks, utility pipes, conduits and lines (on-site
and off-site), parking areas and roadways appurtenant to such buildings and
structures.
Leased Property: The Land on which the Facility is located, the Leased
- -----------------
Improvements on the Land, the Related Rights with respect to the Land, and
- --------
Lessor's Personal Property with respect to such Facility.
- -----
Legal Requirements: All federal, state, county, municipal and other
- -------------------
governmental statutes, laws, rules, orders, waivers, regulations, ordinances,
- -----------
judgments, decrees and injunctions affecting the Leased Property or any portion
- --
thereof, Lessee's Personal Property or the construction, use or alteration of
the Leased Property (including but not limited to the Americans with
Disabilities Act), whether enacted and in force before, after or on the
Commencement Date, and including any that may (a) require repairs,
modifications, alterations or additions in or to any portion or all of the
Facility, or (b) in any way adversely affect the use and enjoyment thereof, and
all permits, licenses and authorizations and regulations relating thereto,
including, but not limited to, (i) those relating to existing health care
licenses, (ii) those authorizing the current number of licensed units and the
level of services delivered from the Leased Property and (iii) all covenants,
agreements, restrictions and encumbrances contained in any instruments, either
of record or known to Lessee (other than encumbrances created by Lessor without
the consent of Lessee) and in force at any time during the Term.
Lessee's Certificate: A statement in writing in substantially the form of
- ---------------------
Exhibit C attached hereto (with such changes thereto as may reasonably be
- ----------
requested by the person relying on such certificate).
- ------
Lessee's Personal Property: Personal Property owned or leased by Lessee that is
- --------------------------
not included within the definition of the term "Lessor's Personal Property" but
is used by Lessee in the operation of the Facility, including Personal Property
provided by Lessee in compliance with Section 6.3 hereof.
Lessor's Future Rent Loss: An amount equal to the Rent that would have been
- ----------------------------
payable by Lessee from and after the Liquidated Damages Payment Date through the
- ---
Expiration Date had the Lease not been terminated, plus such additional amount
as may be necessary in order to compensate Lessor for all other damages that are
proximately caused by, and in the ordinary course of things would be likely to
result from, Lessee's failure to perform its obligations under this Lease.
Lessor's Interim Rent Loss: An amount equal to the Rent that would have been
- -----------------------------
payable by Lessee from the Termination Date through the Judgment Date had the
- --
Lease not been terminated (including interest and late charges determined on the
- --
basis of the date or dates on which Lessor's Interim Rent Loss is actually paid
by Lessee), plus such additional amount as may be necessary in order to
compensate Lessor for all other damages that are proximately caused by, and in
the ordinary course of things would be likely to result from, Lessee's failure
to perform its obligations under this Lease.
Lessor's Monthly Rent Loss: For any month, an amount equal to the installment
- ----------------------------
of Rent that would have been due in such month under the Lease if it had not
been terminated, plus, if such amount is not paid on or before the day of the
month on which such installment of Rent would have been due, the amount of
interest and late charges thereon that also would have been due under the Lease,
plus such additional amount as may be necessary in order to compensate Lessor
for all other damages that are proximately caused by, and in the ordinary course
of things would be likely to result from, Lessee's failure to perform its
obligations under this Lease.
Lessor's Personal Property: All Personal Property and intangibles, if any,
- ----------------------------
owned by Lessor and leased to Lessee on the Commencement Date, together with any
- ----
and all replacements thereof, and all Personal Property that pursuant to the
terms of the Lease becomes the property of Lessor during the Term.
Notwithstanding any other provision of this Lease, but subject to Section 6.4
relating to the security interest in favor of Lessor, Lessor's Personal Property
shall not include goodwill nor shall it include any other intangible personal
property that is severable from Lessor's "interests in real property" within the
meaning of Section 856(d) of the Code, or any similar or successor provision
thereto.
Liquidated Damages Payment Date: The date on which Lessee pays Lessor all of
- ----------------------------------
the liquidated damages for which it is liable under Article XVI.
- --
Management Agreement: Any agreement (oral or written) pursuant to which
- ---------------------
management of the Facility is delegated by Lessee (subject to Lessee's ultimate
- -------
responsibility as the licensed party) to any person not an employee of Lessee or
to any other related or unrelated party.
Management Period: As defined in Section 1.4.
- ------------------
Manager: The Person to whom management of the operation of the Facility is
- -------
delegated pursuant to a Management Agreement.
- ----
Material Adverse Effect: means any material adverse effect whatsoever upon (a)
- -------------------------
the validity, performance or enforceability of any Transaction Document, (b) the
properties, contracts, business operations, profits or condition (financial or
otherwise) of Lessee or any Guarantor, taken as a whole, or (c) the ability of
Lessee, any Guarantor or any of their Affiliates to fulfill its obligations
under the Transaction Documents.
Net Income: For any period, Lessee's net income (or loss) for such period
- -----------
attributable to the operation of the Facilities, determined in accordance with
- -----
GAAP; provided, however, that Lessee's Net Income shall not include any
extraordinary gains (or losses) or nonrecurring gains (or losses).
Net Proceeds: All proceeds, net of any costs incurred by Lessor in obtaining
- -------------
such proceeds, payable under any policy of insurance required by Article XIII of
- --
this Lease (including any proceeds with respect to Lessee's Personal Property
that Lessee is required or elects to restore or replace pursuant to Section
14.3) or paid by a Condemnor for a Taking or Partial Taking of the Leased
Property.
Net Reletting Proceeds: Proceeds of the reletting of any portion of the Leased
- ------------------------
Property received by Lessor, net of Reletting Costs.
Notice: A notice given in accordance with Article XXXI hereof.
- ------
Notice of Termination: A Notice from Lessor that it is terminating this Lease
- -----------------------
by reason of an Event of Default.
Officer's Certificate: A certificate signed by an Executive Officer.
- ----------------------
Omega: Omega Healthcare Investors, Inc., a Maryland corporation.
- -----
Overdue Rate: On any date, the interest rate that is equal to five percent (5%)
- ------------
(five hundred (500) basis points) above the Prime Rate, but in no event greater
than the maximum rate then permitted under applicable law.
Partial Taking: A taking of less than the entire fee of the Leased Property
- ---------------
that either (a) does not render the Leased Property Unsuitable for its Primary
- ---
Use, or (b) renders the Leased Property Unsuitable for its Primary Intended Use,
but neither Lessor nor Lessee elects pursuant to Section 15.1 hereof to
terminate this Lease.
Payment Date: Any due date for the payment of the installments of Base Rent or
- -------------
for the payment of Additional Charges or any other amount required to be paid by
Lessee hereunder.
Payment Default: Any Event of Default arising out of the failure to pay Rent.
- ----------------
Permitted Encumbrances: Encumbrances listed on attached Exhibit D.
- ----------------------- ----------
Person: Any natural person, trust, partnership, corporation, joint venture,
- ------
limited liability company or other legal entity.
- ---
Personal Property: 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 Lessee) 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 Leased Improvements.
Pledge Agreement: The Pledge Agreement dated as of the same date as this Lease
- -----------------
between Lessor, as creditor, and Guarantor, as debtor.
Pre-Existing Hazardous Substances: means Hazardous Substances located on,
-----------------------------------
under about or with respect to the Leased Property prior to the Commencement
Date.
Pre-Existing Environmental Conditions: means any Contamination or other
---------------------------------------
environmental condition on, under, about or with respect to the Leased Property
existing prior to the Commencement Date.
Present Value: The value of future payments, determined by discounting each
-------------
such payment at a rate equal to the yield on the specified date on securities
issued by the United States Treasury (bills, notes and bonds) maturing on the
date closest to December 31 in the year in which such future payment would have
been due.
Primary Intended Use: Licensed assisted living Facility providing care for
- ----------------------
Alzeheimer's patients.
- -----
Prime Rate: On any date, an interest rate equal to the prime rate published by
- -----------
the Wall Street Journal, but in no event greater than the maximum rate then
permitted under applicable law. If the Wall Street Journal ceases to be in
existence, or for any reason no longer publishes such prime rate, the Prime Rate
shall be the rate announced as its prime rate by Fleet Bank or other financial
institution that is the agent for the banks under Omega's revolving credit
agreement, and if such bank no longer exists or does not announce a prime rate
at such time, the Prime Rate shall be the rate of interest announced as its
prime rate by a national bank selected by Lessor.
Proceeding: Any action, proposal or investigation by any agency or entity, or
- ----------
any complaint to such agency or entity.
- --
Purchase Money Financing: Any financing provided by a Person to Lessee or a
- -------------------------
Sublessee in connection with the acquisition of Personal Property used in
connection with the operation of the Facility, whether by way of installment
sale or otherwise.
Qualified Capital Expenditures: Expenditures capitalized on the books of Lessee
- ------------------------------
for alterations, renovations, repairs and replacements to the Facility,
including without limitation 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 major replacement of siding; major roof
replacements, including major replacements of gutters, downspouts, eaves and
soffits; major repairs and replacements of plumbing and sanitary systems;
overhaul of elevator systems; major repaving, resurfacing and sealcoating of
sidewalks, parking lots and driveways; repainting of entire building exterior;
but excluding major alterations, renovations, additions (consisting of
expansions of the Facility, including construction of a new wing or a new story
on the Facility), normal maintenance and repairs.
Regulatory Actions: Any claim, demand, notice, action or proceeding brought,
- -------------------
threatened or initiated by any governmental authority in connection with any
- --
Environmental Law, including, without limitation, civil, criminal and
- --
administrative proceedings, whether or not the remedy sought is costs, damages,
- --
equitable remedies, penalties or expenses.
Related Rights: All easements, rights and appurtenances relating to the Land
- ---------------
and the Leased Improvements.
- --
Release: The intentional or unintentional spilling, leaking, dumping, pouring,
- -------
emptying, seeping, disposing, discharging, emitting, depositing, injecting,
leaching, escaping, abandoning, or any other release or threatened release,
however defined, of any Hazardous Substance.
Reletting Costs: Expenses incurred by Lessor in connection with the reletting of
- ---------------
the Leased Property in whole or in part after an Event of Default, including
without limitation attorneys' fees and expenses, brokerage fees and expenses,
marketing expenses and the cost of repairs and renovations reasonably required
for such reletting.
Renewal Term: A period for which the Term is renewed in accordance with Section
- -------------
1.3.
Rent: Collectively, Base Rent and Additional Charges.
- ----
Replacement Cost: The actual replacement cost of the Leased Property, including
- ----------------
an increased cost of construction endorsement, less exclusions provided in the
standard form of fire insurance policy. In all events Replacement Cost shall be
an amount sufficient that neither Lessor nor Lessee is deemed to be a co-insurer
of the Leased Property in question.
SEC: Securities and Exchange Commission.
- ---
Security Agreement: The Security Agreement between Lessor, as secured party, and
- ------------------
Lessee, as debtor.
Security Deposit: As defined in Article XXXIX hereof.
- -----------------
Senior Healthcare: Senior Healthcare Partners, LLC.
- ------------------
Special Purpose Personal Property: Items of Lessee's Personal Property which
- ------------------------------------
meets all of the following criteria: (1) it is delivered to the Facility at the
- --
sole cost and expense of Lessee on or after the Commencement Date; (2) it does
not replace, either specifically or in use, any Personal Property at the
Facility as of the Commencement Date; (3) it is acquired as part of an overall
optional marketing program, plan or strategy of Guarantor; and (4) it is
identified in a writing delivered to Lessor within thirty (30) days of its
delivery to the Facility as "Special Purpose Personal Property". Examples of
Special Purpose Personal Property may include a baby grand piano or additional
kitchen appliances not reasonably considered to be part of a customary kitchen
and used to accommodate special menus. With regard to any item of Personal
Property, the presumption shall be that such item is not an item of Special
Purpose Personal Property and Lessee shall bear the burden of proof that an item
of Personal Property is Special Purpose Personal Property.
Special Risk Insurance: The insurance that Lessee is required to maintain
- ------------------------
pursuant to Section 13.2.1 of this Lease.
- -----
State: The State in which the Leased Property is located.
- -----
Subordination Agreement: The Subordination Agreement from Lessee and Guarantors
- ------------------------
in favor of Lessor.
Taken: Conveyed pursuant to a Taking or Partial Taking.
- -----
Taking: A taking or voluntary conveyance during the Term of all of the Leased
- ------
Property, or any interest therein or right accruing thereto or use thereof, as
the result of, or in settlement of any condemnation or other eminent domain
proceeding affecting the Leased Property, whether or not the proceeding actually
has been commenced.
Term: Collectively, the Initial Term plus the Renewal Term or Renewal Terms, if
- ----
any.
Termination Date: The date on which a Notice of Termination is given.
- -----------------
Termination Notice: is defined in Section 1.4.
- -------------------
Third Party Claims: Any claims, actions, demands or proceedings (other than
- --------------------
Regulatory Actions) howsoever based (including without limitation those based on
- ---
negligence, trespass, strict liability, nuisance, toxic tort or detriment to
health welfare or property) due to Contamination, whether or not the remedy
sought is costs, damages, penalties or expenses, brought by any person or entity
other than a governmental agency.
Transaction Documents: means the following documents: this Lease, the Guaranty,
- -----------------------
the Security Agreement, the Pledge Agreement, the Subordination Agreement, and
any security agreements, pledge agreements, letter of credit agreements,
guarantees, notes or other documents which evidence, secure or otherwise relate
to this Lease, or the transactions contemplated by this Lease; and any and all
amendments, modifications, extensions and renewals of any of the foregoing
documents.
Transfer: The (a) assignment, mortgaging or other encumbering of all or any
- ---------
part of Lessee's interest in this Lease or in the Leased Property; (b)
- ---
subletting of the whole or any part of the Leased Property; (c) entering into of
- ---
any Management Agreement or other arrangement under which the Facility is
operated by or licensed to be operated by an entity other than Lessee; (d)
merger, consolidation or reorganization of a corporate Lessee or corporate
Manager, or the sale, issuance, transfer and/or redemption, cumulatively or in
one transaction, of any voting stock by Lessee or Manager or by Persons who are
stockholders of record of Lessee, or Manager, if such event or events result(s)
in a change of Control of Lessee or Manager; or (e) sale, issuance, transfer or
redemption, cumulatively or in one transaction, of any interest, or the
termination of any interest, in Lessee or Manager if Lessee or such Manager is a
joint venture, partnership, limited liability company or other association and
such sale, issuance, transfer, redemption or termination of interest results in
a change of Control of such joint venture, partnership, limited liability
company or other association.
Transfer Date: is defined in Section 1.4.
- --------------
Transferee: An assignee, subtenant or other occupant of the Leased Property
- ----------
pursuant to a Transfer.
- ----
Unmatured Event of Default: means the occurrence of an event which upon its
- -----------------------------
occurrence, or with the giving of notice, the passage of time, or both, would
- ----
constitute an Event of Default.
- --
Unsuitable for Its Primary Intended Use: A state or condition of the Facility
- -----------------------------------------
such that by reason of a Partial Taking, the Facility cannot be operated on a
commercially practicable basis for its Primary Intended Use, taking into
account, among other relevant factors, the number of usable units permitted by
applicable law and regulation in the Facility after the Partial Taking, the
square footage Taken and the estimated revenue impact of such Partial Taking.
ARTICLE III
3.1 Base Rent; Monthly Installments. In addition to all other payments to
---------------------------------
be made by Lessee under this Lease, Lessee shall pay Lessor the Base Rent in
lawful money of the United States of America which is legal tender for the
payment of public and private debts, in advance, in equal, consecutive monthly
installments, each of which shall be in an amount equal to one-twelfth (1/12) of
the Base Rent payable for the Lease Year in which such installment is
payable. The first installment of Base Rent shall be payable on the Commencement
Date, together with a prorated amount of Base Rent for the period from the
Commencement Date until the last day of the first full calendar month of the
Term. Thereafter, installments of Base Rent shall be payable on the first (1st)
day of each calendar month. Base Rent shall be paid to Lessor, or to such other
Person as Lessor from time to time may designate by Notice to Lessee, by wire
transfer of immediately available federal funds to the bank account designated
in writing by Lessor. If Lessor directs Lessee to pay any Base Rent or
Additional Charges to any Person other than Lessor, Lessee shall send to Lessor,
simultaneously with payment of the Base Rent or Additional Charges, a copy of
the transmittal letter or invoice and check evidencing such, or such other
evidence of payment as Lessor requires.
3.2 Additional Charges. In addition to the Base Rent, Lessee also will pay
-------------------
as and when due all Additional Charges.
3.3 Late Charge; Interest. If any Rent payable to Lessor is not paid within
---------------------
five (5) Business Days after the Rent first became due and payable, Lessee shall
pay Lessor on demand, as an Additional Charge, a late charge equal to five
percent (5%) of the amount not paid when due, and, in addition, if such Rent
(including the late charge) is not paid within thirty (30) days of the date on
which such Rent was due, interest thereon at the Overdue Rate from the date when
due until such Rent (including the late charge and interest) is paid in full.
3.4 Net Lease.
----------
3.4.1 The Rent shall be paid absolutely net to Lessor, so that this Lease
shall yield to Lessor the full amount of the Rent payable to Lessor under this
Lease throughout the Term.
3.4.2 If Lessor commences any proceedings for non-payment of Rent, Lessee
will not interpose any counterclaim or cross complaint or similar pleading of
any nature or description in such proceedings unless Lessee would lose or waive
such claim by the failure to assert it, but Lessee does not waive any rights to
assert such claim in a separate action brought by Lessee. The covenants to pay
Rent are independent covenants, and Lessee shall have no right to hold back,
offset or fail to pay any Rent because of any alleged default by Lessor or for
any other reason.
3.5 Payments In The Event of a Rent Adjustment.
-------------------------------------------------
3.5.1 Upon the adjustment, pursuant to the definition of the term "Base
Rent," in the Base Rent payable pursuant to this Lease with respect to any Lease
Year, the adjustment shall be effective as of the first payment of Base
Rent due in the Lease Year as to which such adjustment pertains. Because it may
not be possible to determine the adjusted Base Rent prior to the effective date
of such adjustment, Lessee shall continue to pay the Base Rent at the rate in
effect prior to the adjustment until Lessor gives Lessee Notice of its
determination of the adjusted Base Rent. Upon such determination, the Base Rent
shall be adjusted retroactively as of the effective date of such adjustment On
or before the second (2nd) payment date for Base Rent following receipt by
Lessee of Lessor's Notice of the adjustment, Lessee shall make an additional
payment of Base Rent in such amount as will bring the Base Rent, as adjusted,
current on or before such second (2nd) payment date, and thereafter Lessee shall
pay the adjusted Base Rent in correspondingly adjusted monthly installments
until the Base Rent is next adjusted or reset as required under this Lease.
3.5.2 This Section 3.5 shall survive the expiration or earlier termination
of this Lease with respect to any adjustment or reset that is not known or fully
paid as of the date of expiration or earlier termination of this Lease.
ARTICLE IV
4.1 Payment of Impositions. Subject to Section 12.1 and Section 12.2,
------------------------
Lessee will pay all Impositions before any fine, penalty, interest or cost is
added for non-payment, and will promptly, upon request, furnish to Lessor copies
of official receipts or other satisfactory proof evidencing such payments.
Subject to Section 12.2, if at the option of the taxpayer any Imposition may be
paid in installments, Lessee may pay the same in the required installments
provided it also pays any and all interest due thereon as and when due and
shall only be obligated to pay the installments allocable to the Term. If
during the first two Lease Years any Imposition is not payable in installments
and covers a period greater than the first two Lease Years, then Lessee shall
pay such Assessment and, if this Lease is terminated pursuant to Section 1.4 of
this Lease, then upon such termination, Lessee shall be entitled to a refund
from Lessor of the amount of the Assessment so paid less the amount of such
Assessment allocable to the first two Lease Years.
Lessee shall prepare and file as and when required all tax returns and
reports required by governmental authorities with respect to all Impositions.
Lessor and Lessee shall each, upon request, provide the other with such data,
including without limitation cost and depreciation records, as is maintained by
the party to whom the request is made as is necessary to prepare any required
returns and reports. Lessee shall have no responsibility for and shall not
prepare or file any of Lessor's income tax returns.
Lessee shall be entitled to receive and retain any refund from a taxing
authority in respect of an Imposition paid by Lessee if at the time of the
refund no Event of Default has occurred, but if an Event of Default has occurred
at the time of the refund, Lessee shall not be entitled to receive or retain
such refund, and if and when received by Lessor such refund shall be applied as
provided in Article XVI.
Lessee may, upon Notice to and with the consent of Lessor (which consent shall
not be withheld unreasonably), at Lessee's sole cost and expense, protest,
appeal or institute such other proceedings as Lessee deems appropriate to effect
a reduction of real estate or personal property assessments and Lessor, at
Lessee's expense as aforesaid, shall cooperate with Lessee in such protest,
appeal or other action. Lessee shall reimburse Lessor for Lessor's direct costs
of cooperating with Lessee for such protest, appeal or other action.
4.2 Adjustment of Impositions. Impositions imposed in respect of the tax
---------------------------
fiscal period during which the Term ends shall be adjusted and prorated between
Lessor and Lessee, whether or not imposed before or after the expiration or
earlier termination of the Term, and Lessee's obligation to pay its prorated
share thereof shall survive the expiration or earlier termination of the Term.
4.3 Utility Charges. Lessee will pay or cause to be paid when due all
----------------
charges for electricity, power, gas, oil, water and other utilities imposed upon
the Leased Property or upon Lessor or Lessee with respect to the Leased
Property.
4.4 Insurance Premiums. Lessee shall pay or cause to be paid when due all
-------------------
premiums for the insurance coverage required to be maintained pursuant to
Article XIII during the Term. Lessee shall deposit with Lessor the premiums for
such insurance in accordance with the provisions of Section 12.2 of this Lease.
ARTICLE V
5.1 No Termination, Abatement, etc. Except as otherwise specifically
---------------------------------
provided in this Lease, Lessee shall not take any action without the consent of
Lessor to modify, surrender or terminate this Lease, and shall not seek or be
entitled to any abatement, deduction, deferment or reduction of Rent, or setoff
against Rent. The respective obligations of Lessor and Lessee shall not be
affected by reason of (a) any damage to, or destruction of, the Leased Property
or any portion thereof from whatever cause or any Taking or Partial Taking of
the Leased Property, except as expressly set forth herein; (b) the lawful or
unlawful prohibition of, or restriction upon, Lessee's use of the Leased
Property, or any portion thereof, or the interference with such use by any
Person or by reason of eviction by paramount title as a result of Lessee's
willful misconduct or gross negligence; (c) any claim that Lessee has or might
have against Lessor or by reason of any default or breach of any warranty by
Lessor under this Lease or any other agreement between Lessor and Lessee, or to
which Lessor and Lessee are parties; (d) any bankruptcy, insolvency,
reorganization, composition, readjustment, liquidation, dissolution, winding up
or other proceedings affecting Lessor or any assignee or transferee of Lessor;
or (e) any other cause, whether similar or dissimilar to any of the foregoing,
other than a discharge of Lessee from any such obligations as a matter of law or
the lawful eviction of Lessee because of defects in Lessor's title to the
Leased Property. Lessee hereby specifically waives all rights, arising from any
occurrence whatsoever, that now or hereafter may be conferred upon it by law to
(a) modify, surrender or terminate this Lease or quit or surrender the Leased
Property or any portion thereof, or (b) entitle Lessee to any abatement,
reduction, suspension or deferment of the Rent or other sums payable by Lessee
hereunder, except as otherwise specifically provided hereunder.
ARTICLE VI
6.1 Ownership of the Leased Property. Lessee acknowledges that the Leased
----------------------------------
Property is the property of Lessor and that Lessee has only the right to the
possession and use of the Leased Property upon the terms and conditions of this
Lease. Lessee will not (a) file any income tax return or other associated
documents, (b) file any other document with or submit any document to any
governmental body or authority, (c) enter into any written contractual
arrangement with any Person or (d) release any financial statements of Lessee,
in any case that take any position other than that throughout the Term Lessor is
the owner of the Leased Property for federal, state and local income tax
purposes and this Lease is a "true lease," and an "operating lease" and not a
"capital lease."
6.2 Lessor's Personal Property. Lessee shall, during the entire Term,
----------------------------
maintain all of Lessor's Personal Property in good order, condition and repair
as shall be necessary in order to operate the Facility for the Primary Intended
Use in compliance with all applicable licensure and certification requirements,
all applicable Legal Requirements and Insurance Requirements, and customary
industry practice for the Primary Intended Use. If any of Lessor's Personal
Property requires replacement in order to comply with the foregoing, Lessee
shall replace it with similar property of the same or better quality at Lessee's
sole cost and expense, and when such replacement property is placed in service
with respect to the Leased Property it shall become Lessor's Personal Property.
Lessee shall not permit or suffer Lessor's Personal Property to be subject to
any lien, charge, encumbrance, financing statement, contract of sale, equipment
lessor's interest or the like, except for any purchase money security interest
or equipment lessor's interest expressly approved in advance, in writing, by
Lessor. At the expiration or earlier termination of this Lease, all of Lessor's
Personal Property shall be surrendered to Lessor with the Leased Property at or
before the time of the surrender of the Leased Property in at least as good a
condition as at the Commencement Date (or, as to replacements, in at least as
good a condition as when placed in service at the Facility) except for ordinary
wear and tear.
6.3 Lessee's Personal Property. Lessee shall provide and maintain during
----------------------------
the Term such Personal Property, in addition to Lessor's Personal Property, as
shall be necessary and appropriate in order to operate the Facility for the
Primary Intended Use in compliance with all licensure and certification
requirements, in compliance with all applicable Legal Requirements and Insurance
Requirements and otherwise in accordance with customary practice in the industry
for the Primary Intended Use. Except as permitted under Section 8.2.1.4,
without the prior written consent of Lessor, Lessee shall not permit or suffer
Lessee's Personal Property to be subject to any lien, charge, encumbrance,
financing statement or contract of sale or the like. Upon the termination of
this Lease pursuant to Section 1.4 or Article XVI, without the payment of any
additional consideration by Lessor, Lessee shall be deemed to have sold,
assigned, transferred and conveyed to Lessor all of Lessee's right, title and
interest in and to any of Lessee's Personal Property; provided, however, that if
this Lease is terminated pursuant to Section 1.4, then any Special Purpose
Personal Property, if any, shall not be transferred to Lessor pursuant to this
Section. Upon the expiration of the Term or the earlier termination of this
Lease other than pursuant to Section 1.4 or Article XVI, Lessee (i) may, but
shall not be required to, remove all of Lessee's Personal Property unless Lessor
purchases Lessee's Personal Property upon terms acceptable to Lessor and Lessee
and (ii) shall be deemed to have sold, assigned, transferred and conveyed to
Lessor all of Lessee's right, title and interest in and to any of Lessee's
Personal Property that Lessee does not remove, all in its "as is" condition.
6.4 Grant of Security Interest in Lessee's Personal Property. Lessee has
-----------------------------------------------------------
concurrently granted to Lessor a security interest in the Collateral as defined
in the Security Agreement, which includes, without limitation, the Lessee's
Personal Property as defined herein.
ARTICLE VII
7.1 Condition of the Leased Property. Lessee acknowledges that it has
------------------------------------
inspected and otherwise has knowledge of the condition of the Leased Property
prior to the execution and delivery of this Lease and has found the same to be
in good order and repair and satisfactory for its purposes hereunder. Lessee is
leasing the Leased Property "as is" in its condition on the Commencement
Date. Lessee waives any claim or action against Lessor in respect of the
condition of the Leased Property. LESSOR MAKES NO WARRANTY OR REPRESENTATION,
EXPRESS OR IMPLIED, IN RESPECT OF THE LEASED PROPERTY OR ANY PART THEREOF,
EITHER AS TO ITS FITNESS FOR USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR
PURPOSE OR OTHERWISE AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN,
LATENT OR PATENT, IT BEING AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY LESSEE.
Lessee further acknowledges that throughout the Term Lessee is solely
responsible for the condition of the Leased Property.
7.2 Use of the Leased Property. Throughout the Term Lessee shall use the
-----------------------------
Leased Property continuously for the Primary Intended Use and uses incidental
thereto. Lessee shall not use the Leased Property or any portion thereof for any
other use without the prior written consent of Lessor. No use shall be made or
permitted to be made of, or allowed in, the Leased Property, and no acts shall
be done, which will cause the cancellation of, or be prohibited by, any
insurance policy covering the Leased Property or any part thereof, nor shall the
Leased Property or Lessee's Personal Property be used for any unlawful purpose.
Lessee shall not commit or suffer to be committed any waste on the Leased
Property, or cause or permit any nuisance thereon, or suffer or permit the
Leased Property or any portion thereof, or Lessee's Personal Property, to be
used in such a manner as (a) might reasonably tend to impair Lessor's (or
Lessee's, as the case may be) title thereto or to any portion thereof, or (b)
may reasonably make possible a claim or claims of adverse usage or adverse
possession by the public, as such, or of implied dedication of the Leased
Property or any portion thereof.
7.3 Certain Environmental Matters.
-------------------------------
(a) Prohibition Against Use of Hazardous Substances. Lessee shall not
----------------------------------------------------
permit, conduct or allow the generation, introduction, presence, maintenance,
use, receipt, acceptance, treatment, manufacture, production, installation,
management, storage, disposal or release of any Hazardous Substance on the
Leased Property, except for (i) those types and quantities of Hazardous
Substances necessary for and ordinarily associated with the conduct of Lessee's
business and used in full compliance with all Environmental Laws and (ii) any
Pre-Existing Hazardous Substances.
(b) Notice of Environmental Claims, Actions or Contaminations. Lessee shall
---------------------------------------------------------
notify Lessor, in writing, immediately upon learning of any existing, pending or
threatened: (i) investigation, inquiry, claim or action by any governmental
authority in connection with any Environmental Laws, (ii) Third Party Claims,
(iii) Regulatory Actions, and/or (iv) Contamination of any portion of the Leased
Property
(c) Costs of Remedial Actions with Respect to Environmental Matters. If any
---------------------------------------------------------------
investigation and/or Clean-Up of any Hazardous Substance or other environmental
condition on, under, about or with respect to the Leased Property is required by
any Environmental Law (other than Pre-Existing Hazardous Substances or
Pre-Existing Environmental Conditions), Lessee shall complete, at its own
expense, such investigation and/or Clean-Up or cause any other Person who may be
legally responsible to complete such investigation and/or Clean-Up.
(d) Delivery of Environmental Documents. Lessee shall deliver to Lessor
--------------------------------------
complete copies of any and all Environmental Documents that may now be in, or at
any time hereafter come into, the possession of Lessee.
(e) Environmental Audit. At Lessee's expense, Lessee shall, upon and within
-------------------
thirty (30) days of a written request therefor from Lessor or a Facility
Mortgagee, deliver an Environmental Audit to Lessor and a Facility Mortgagee, if
any. All tests and samplings shall be conducted using generally accepted and
scientifically valid technology and methodologies. Lessee shall give the
engineer or environmental consultant conducting the Environmental Audit
reasonable and complete access to the Leased Property and to all records in the
possession of Lessee that may indicate the presence (whether current or past) of
a Release or threatened Release of any Hazardous Substances on, in, under, about
and adjacent to the Leased Property. Lessee also shall provide the engineer or
environmental consultant full access to and the opportunity to interview such
persons as may be employed in connection with the Leased Property as the
engineer or consultant deems appropriate. However, neither Lessor nor a
Facility Mortgagee shall be entitled to request an Environmental Audit from
Lessee unless (i) after the Commencement Date there have been changes,
modifications or additions to Environmental Laws as applied to or affecting any
of the Leased Property; (ii ) a significant change in the condition of any of
the Leased Property has occurred; (iii) there are fewer than six (6) months
remaining in the Term and Lessor has a reasonable belief that the Contamination
has occurred during the Term; or (iv) Lessor or a Facility Mortgagee has
another good reason for requesting such certificate or certificates. If the
Environmental Audit discloses the presence of Contamination or any noncompliance
with Environmental Laws, Lessee shall immediately perform all of Lessee's
obligations under this Lease with respect to such Hazardous Substances or
noncompliance.
(f) Entry onto Leased Property for Environmental Matters. If Lessee fails
------------------------------------------------------
to provide an Environmental Audit as and when required by Subparagraph (e)
above, in addition to Lessor's other remedies Lessee shall permit Lessor and a
Facility Mortgagee from time to time, by its employees, agents, contractors or
representatives, to enter upon the Leased Property for the purpose of conducting
such Investigations as Lessor may desire, the expense of which shall be paid or
reimbursed promptly by Lessee as an Additional Charge. Lessor, a Facility
Mortgagee exercising such right of entry and the employees, agents, contractors,
consultants and/or representatives thereof, shall conduct any such Investigation
in a manner that does not unreasonably interfere with Lessee's use of and
operations on the Leased Property (however, reasonable temporary interference
with such use and operations is permissible if the investigation cannot
otherwise be reasonably and inexpensively conducted). Other than in an
emergency, Lessor and a Facility Mortgagee exercising such right of entry shall
provide Lessee with prior notice before entering any of the Leased Property to
conduct such Investigation, and shall provide copies of any reports or results
to Lessee, and Lessee shall cooperate fully in such Investigation.
(g) Environmental Matters Upon Termination of the Lease or Expiration of
------------------------------------------------------------------------
Term. Upon the expiration or earlier termination of the Term, Lessee shall
-
cause the Leased Property to be delivered free of any and all Regulatory Actions
-
and Third Party Claims and otherwise in compliance with all Environmental
Laws with respect thereto, and in a manner and condition that is reasonably
required to ensure that the then present use, operation, leasing, development,
construction, alteration, refinancing or sale of the Leased Property shall not
be restricted by any environmental condition existing as of the date of such
expiration or earlier termination of the Term; provided, that Lessee shall not
be required to take any of the foregoing actions with respect to Pre-Existing
Hazardous Substances or Pre-Existing Environmental Conditions.
(h) Compliance with Environmental Laws. Lessee shall comply with, and cause
----------------------------------
its agents, servants and employees to comply with, and shall use reasonable
efforts to cause each occupant and user of the Leased Property, and the agents,
servants and employees of such occupants and users to comply with, each and
every Environmental Law applicable to Lessee, the Leased Property and each such
occupant or user with respect to the Leased Property. Specifically, but without
limitation:
(i) Maintenance of Licenses and Permits. Lessee shall obtain and maintain
-------------------------------------
(and Lessee shall use reasonable efforts to cause each tenant, occupant and user
to obtain and maintain) all permits, certificates, licenses and other consents
and approvals required by any applicable Environmental Law from time to time
with respect to Lessee, each and every part of the Leased Property and/or the
conduct of any business at the Facility or related thereto;
(ii) Contamination. Lessee shall not cause, suffer or permit any
-------------
Contamination (other than Pre-Existing Hazardous Substances or Pre-Existing
-
Environmental Conditions);
(iii) Clean-Up. If a Contamination occurs (other than one arising solely
--------
out of Pre-Existing Hazardous Substances or Pre-Existing Environmental
Conditions), Lessee promptly shall Clean-Up and remove any Hazardous Substance
or cause the Clean-Up and the removal of any Hazardous Substance and in any such
case such Clean-Up and removal of the Hazardous Substance shall be effected to
Lessor's reasonable satisfaction and in any event in strict compliance with
applicable Environmental Laws;
(iv) Discharge of Lien. Within twenty (20) days of the date any lien is
-------------------
imposed against the Leased Property or any part thereof under any Environmental
Law (other than those arising solely out of Pre-Existing Hazardous Substances or
Pre-Existing Environmental Conditions), Lessee shall cause such lien to be
discharged (by payment, by bond or otherwise to Lessor's absolute satisfaction);
(v) Notification of Lessor. Within three (3) Business Days after receipt by
----------------------
Lessee of Notice or discovery by Lessee of any fact or circumstance that might
result in a breach or violation of any covenant or agreement, Lessee shall give
Lessor Notice of such fact or circumstance; and
(vi) Requests, Orders and Notices. Within three (3) Business Days after
-------------------------------
receipt of any request, order or other notice relating to the Leased Property
under any Environmental Law, Lessee shall forward a copy thereof to Lessor.
(i) Environmental Related Remedies. In the event of a breach by Lessee
--------------------------------
beyond any applicable notice and/or grace period of its covenants with respect
to environmental matters, Lessor may, in its sole discretion, do any one or more
of the following (the exercise of one right or remedy hereunder not
precluding the simultaneous or subsequent exercise of any other right or remedy
hereunder):
(i) Cause a Clean-Up. Cause the Clean-Up of any Hazardous Substance or
------------------
other environmental condition on or under the Leased Property, or both, at
Lessee's cost and expense (except to the extent such Clean-Up relates to
Pre-Existing Hazardous Substances or Pre-Existing Environmental Conditions); or
(ii) Payment of Regulatory Damages. Pay on behalf of Lessee any damages,
--------------------------------
costs, fines or penalties imposed on Lessee or Lessor as a result of any
Regulatory Actions; or
(iii) Payments to Discharge Liens. On behalf of Lessee, make any payment or
---------------------------
perform any other act or cause any act to be performed that will prevent a lien
in favor of any federal, state or local governmental authority from attaching to
the Leased Property or that will cause the discharge of any lien then attached
to the Leased Property; or
(iv) Demand of Payment. Demand that Lessee make immediate payment of all of
-----------------
the costs of such Clean-Up and/or exercise of the remedies set forth in this
Section 7.2 incurred by Lessor and not paid by Lessee as of the date of such
demand.
(j) Environmental Indemnification. Lessee shall and does hereby indemnify,
------------------------------
and shall defend and hold harmless, Lessor, each Facility Mortgagee and the
principals, officers, directors, agents and employees of Lessor and each
Facility Mortgagee, from each and every incurred and potential claim, cause of
action, damage, demand, obligation, fine, laboratory fee, liability, loss,
penalty, imposition settlement, levy, lien removal, litigation, judgment,
proceeding, disbursement, expense and/or cost (including without limitation the
cost of each and every Clean-Up), however defined and of whatever kind or
nature, known or unknown, foreseeable or unforeseeable, contingent, incidental,
consequential or otherwise (including, but not limited to, attorneys' fees,
consultants' fees, experts' fees and related expenses, capital, operating and
maintenance costs, incurred in connection with (i) any Investigation or
monitoring of site conditions, and (ii) any Clean-Up required or performed by
any federal, state or local governmental entity or performed by any other entity
or person because of the presence of any Hazardous Substance, Release,
threatened Release or any Contamination on, in, under or about any of the Leased
Property) that may be asserted against, imposed on, suffered or incurred by,
each and every indemnitee arising out of or in any way related to, or allegedly
arising out of or due to any environmental matter (except to the extent it
arises out of Pre-Existing Hazardous Substances or Pre-Existing Environmental
Conditions) including, but not limited to, any one or more of the following:
(i) Release Damage or Liability. The presence of Contamination in, on, at,
----------------------------
under or near the Leased Property or migrating to the Leased Property from
another location;
(ii) Injuries. All injuries to health or safety (including wrongful death),
--------
or to the environment, by reason of environmental matters relating to the
condition of or activities past or present on, at, in or under the Leased
Property, other than with respect to or resulting solely from Pre-Existing
Hazardous Substances or Pre-Existing Environmental Conditions;
(iii) Violations of Law. All violations, and alleged violations, of any
-------------------
Environmental Law relating to the Leased Property or any activity on, in, at or
under the Leased Property, other than with respect to or resulting solely from
Pre-Existing Hazardous Substances or Pre-Existing Environmental Conditions;
(iv) Misrepresentation. All material misrepresentations relating to
-----------------
environmental matters in any documents or materials furnished by Lessee to
Lessor and/or its representatives in connection with the Lease;
(v) Event of Default. Each and every Event of Default relating to
------------------
environmental matters;
-
(vi) Lawsuits. Any and all lawsuits brought or threatened, settlements
--------
reached and governmental orders relating to any Hazardous Substances at, on, in
or under the Leased Property, and all demands of governmental authorities, and
all policies and requirements of Lessor's, based upon or in any way related to
any Hazardous Substances at, on, in or under the Leased Property, other than
with respect to or resulting solely from Pre-Existing Hazardous Substances or
Pre-Existing Environmental Conditions; and
(vii) Presence of Liens. All liens imposed upon any of the Leased Property
------------------
in favor of any governmental entity or any person as a result of the presence,
disposal, release or threat of release of Hazardous Substances at, on, in, from
or under the Leased Property, other than with respect to or resulting solely
from Pre-Existing Hazardous Substances or Pre-Existing Environmental Conditions.
(k) Rights Cumulative and Survival. The rights granted Lessor under this
---------------------------------
Section are in addition to and not in limitation of any other rights or remedies
available to Lessor under this Lease or allowed at law or in equity or
rights of indemnification provided to Lessor in any agreement pursuant to which
Lessor purchased any of the Leased Property. The payment and indemnification
obligations set forth in this Section 7.3 shall survive the expiration or
earlier termination of the Term.
(l) Exculpation. Notwithstanding anything to the contrary in this Lease,
------------
Lessee shall not be liable for any costs, loss, liability, damage or expense
arising from or in connection with the Clean-Up of any Pre-Existing Hazardous
Substances or Pre-Existing Environmental Conditions.
ARTICLE VIII
8.1 Compliance with Legal and Insurance Requirements. In its use,
-----------------------------------------------------
maintenance, operation and any alteration of the Leased Property, Lessee, at its
-
expense, promptly will (a) comply with all Legal Requirements and Insurance
Requirements, whether or not compliance with them requires structural changes in
any of the Leased Improvements (which structural changes shall be subject to
Lessor's prior written approval, which Lessor shall not unreasonably withhold or
delay) or interferes with or prevents the use and enjoyment of the Leased
Property, and (b) procure, maintain and comply with all licenses, certificates
of need, provider agreements and other authorizations required for the use of
the Leased Property and Lessee's Personal Property for the Primary Intended Use,
and for the proper erection, installation, operation and maintenance of the
Leased Property or any part thereof. The judgment of any court of competent
jurisdiction, or the admission of Lessee in any action or proceeding against
Lessee, whether or not Lessor is a party thereto, that Lessee has violated any
such Legal Requirements or Insurance Requirements shall be conclusive of that
fact as between Lessor and Lessee.
8.2 Certain Covenants.
------------------
8.2.1 Certain Financial Covenants.
-----------------------------
8.2.1.1 Cash Flow to Rent Ratio. Commencing in the third Lease Year, Lessee
------------------------
shall maintain a Cash Flow to Rent Ratio of 1.10 or more.
8.2.1.2 Limitation of Distributions. In or with respect to any Lease Year,
----------------------------
Lessee shall not make any Distributions to its shareholders or any Affiliate if,
as of the date of such Distribution or upon giving effect to such Distribution,
(a) an Event of Default has occurred and is continuing or (b) an Unmatured Event
of Default has occurred and is continuing; provided, however, that Lessee may
pay to Senior Healthcare the lesser of (i) the actual, unpaid cost of
prescription services delivered to the Facility during the Term; and (ii) the
market price for such services in the State of Washington.
8.2.1.3 Guarantees Prohibited. Lessee shall not guarantee any indebtedness
----------------------
of any Affiliate or other third party.
8.2.1.4 Equipment Financing. The aggregate amount of principal, interest
--------------------
and lease payments due from Lessee on any equipment financing shall not exceed
Fifty Thousand Dollars ($50,000) per Lease Year.
8.2.1.5 Loans from Affiliates. Lessee shall not borrow money from any
-----------------------
Affiliate unless the obligations of Lessee and the rights of its Affiliates with
respect to any such loan are subordinated to the rights of Lessor pursuant to a
written subordination agreement in form and substance acceptable to Lessor.
8.3 Minimum Qualified Capital Expenditures. Each Lease Year Lessee shall
-----------------------------------------
expend at least Three Hundred Dollars ($300) per-licensed unit in the Facility
for Qualified Capital Expenditures to improve the Facility, which amount shall
be increased each Lease Year, beginning with the second Lease Year, in
proportion to increases in the CPI. At least annually, at the request of
Lessor, Lessor and Lessee shall review capital expenditures budgets and agree on
modifications, if any, required by changed circumstances and the changed
conditions of the Leased Property.
8.4 Management Agreements. Lessee shall not enter into or terminate any
----------------------
Management Agreement without the prior written consent of Lessor and a Facility
Mortgagee as to the identity of the Manager and the terms of such agreement, and
shall not amend, modify, or otherwise change the terms of any Management
Agreement without the prior written consent of Lessor and, in addition, as to
any amendment, modification or other change that directly or indirectly
increases the compensation of the Manager or allows a change in the identity of
the Manager, without the consent of a Facility Mortgagee, which consent Lessor
and such Facility Mortgagee may withhold in its or their sole discretion, and in
no event without the execution by Lessee, Manager and Lessor of an agreement, in
form and substance satisfactory to Lessor and a Facility Mortgagee, pursuant to
which Manager's right to receive its management fee is subordinated to the
obligation of Lessee to pay the Rent as and when required under this Lease.
Lessor (1) acknowledges that Guarantor shall manage the Facility on behalf of
Lessee and that Guarantor shall paid a monthly fee of seven percent (7%) of
Gross Revenues, subject only to the terms of this Lease and the other
Transaction Documents, (2) consents to such management by Guarantor, and (3)
acknowledges that the consent of any Facility Mortgagee is not required with
respect to such management by Guarantor.
8.5 Other Facilities. Neither Lessee nor any Affiliate shall own, operate
-----------------
or manage any nursing home, rest home, assisted living facility, subacute
facility, retirement center or similar health care facility within a five (5)
mile radius of the Facility, unless Lessee first obtains the prior written
approval of Lessor, which shall not be unreasonably withheld.
8.6 No Other Business. Lessee shall not engage in any business other than
-------------------
the operation of the Facility.
ARTICLE IX
9.1 Maintenance and Repair.
------------------------
9.1.1 Lessee, at its expense, will keep the Leased Property, and all
appurtenant landscaping, private roadways, sidewalks and curbs that are under
Lessee's control and Lessee's Personal Property in good order and repair,
whether or not the need for such repairs arises out of Lessee's use, any prior
use, the elements or the age of the Leased Property or any portion thereof, or
any cause whatsoever except the act or negligence of Lessor, and with reasonable
promptness shall make all necessary and appropriate repairs thereto of
every kind and nature, whether interior or exterior, structural or
non-structural, ordinary or extraordinary, foreseen or unforeseen, or arising by
reason of a condition existing prior to the Commencement Date (concealed or
otherwise). Lessee shall maintain, operate and otherwise manage the Leased
Property at all times on a basis and in a manner consistent with the standards
of the other facilities maintained, operated or managed by Guarantor. 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.
Lessee will not take or omit to take any action the taking or omission of which
might materially impair the value or the usefulness of the Leased Property for
the Primary Intended Use.
9.1.2 Lessor shall not under any circumstances be required to maintain,
build or rebuild any improvements on the Leased Property (or any private
roadways, sidewalks or curbs appurtenant thereto), or to make any repairs,
replacements, alterations, restorations or renewals of any nature or description
to the Leased Property, whether ordinary or extraordinary, structural or
non-structural, foreseen or unforeseen, or upon any adjoining property, whether
to provide lateral or other support or abate a nuisance, or otherwise, or to
make any expenditure whatsoever with respect thereto, in connection with this
Lease. Lessee hereby waives, to the extent permitted by law, the right to make
repairs at the expense of Lessor pursuant to any law in effect at the time of
the execution of this Lease or hereafter enacted.
9.1.3 Nothing contained in this Lease shall be construed as (a) constituting
the consent or request of Lessor, expressed or implied, to any contractor,
subcontractor, laborer, materialmen or vendor to or for the performance of any
labor or services or the furnishing of any materials or other property for the
construction, alteration, addition, repair or demolition of or to the Leased
Property or any part thereof, or (b) giving Lessee any right, power or
permission to contract for or permit the performance of any labor or services or
the furnishing of any materials or other property in such fashion as would
permit the making of any claim against Lessor in respect thereof or to make any
agreement that may create, or in any way be the basis for, any right, title,
interest, lien, claim or other encumbrance upon the estate of Lessor in the
Leased Property or any portion thereof. Lessor shall have the right to give,
record and post, as appropriate, notices of non-responsibility under any
mechanics' and construction lien laws now or hereafter existing.
9.1.4 Lessee promptly shall replace any of the Leased Improvements or
Lessor's Personal Property that becomes worn out, obsolete or unusable or
unavailable for the purpose for which intended. All replacements shall have a
value and utility at least equal to that of the items replaced and shall become
part of the Leased Property immediately upon their acquisition by Lessee. Upon
Lessor's request, Lessee promptly shall execute and deliver to Lessor a bill of
sale or other instrument establishing Lessor's lien-free ownership of such
replacements. Lessee promptly shall repair all damage to the Leased Property
incurred in the course of such replacement.
9.1.5 Lessee will, upon the expiration or earlier termination of the Term,
vacate and surrender the Leased Property to Lessor in the condition in which it
was originally received from Lessor, in good operating condition, ordinary wear
and tear excepted, except as repaired, rebuilt, restored, altered or added to as
permitted or required by the provisions of this Lease.
9.2 Encroachments, Restrictions, etc. If, at any time, any of the Leased
----------------------------------
Improvements are alleged to encroach upon any property, street or right of way
adjacent to the Leased Property, or to violate any restrictive covenant, or to
impair the rights of others under any easement or right of way, Lessee promptly
shall settle such allegations or take such other lawful action as may be
necessary in order to be able to continue the use of the Leased Property for the
Primary Intended Use substantially in the manner and to the extent the
Leased Property was being used at the time of the assertion of such violation,
impairment or encroachment; provided, however, that no such action shall violate
any other provision of this Lease, and any alteration of the Leased Property
must be made in conformity with the applicable requirements of Article X.
Lessee shall not have any claim against Lessor or offset against any of Lessee's
obligations under this Lease with respect to any such violation, impairment or
encroachment.
ARTICLE X
10.1 Construction of Alterations and Additions to the Leased Property.
----------------------------------------------------------------------
10.1.1 Lessee shall not (a) make or permit to be made any structural
alterations, improvements or additions of or to the Leased Property or any part
thereof, or (b) materially alter the plumbing, HVAC or electrical systems
thereon or (c) make any other alterations, improvements or additions the cost of
which exceeds (i) One Hundred Thousand ($100,000.00) Dollars in any Lease
Year, unless and until Lessee has (x) caused complete plans and specifications
therefor to have been prepared by a licensed architect and submitted to Lessor
at least ninety (90) Business Days before the planned start of construction
thereof, (y) obtained Lessor's written approval thereof and the approval of a
Facility Mortgagee and (z), if required to do so by Lessor, provided Lessor with
reasonable assurance of the payment of the cost of any such alterations,
improvements or additions, in the form of a bond, letter of credit or cash
deposit. If Lessor requires a deposit, Lessor shall retain and disburse the
amount deposited in the same manner as is provided for insurance proceeds in
Section 14.6. If the deposit is reasonably determined by Lessor at any time to
be insufficient for the completion of the alteration, improvement or addition,
Lessee immediately shall increase the deposit to the amount reasonably required
by Lessor. Lessee shall be responsible for the completion of such improvements
in accordance with the plans and specifications approved by Lessor, and promptly
shall correct any failure with respect thereto.
10.1.2 Alterations and improvements not falling within the categories
described in the first sentence of Section 10.1.1 may be made by Lessee without
the prior approval of Lessor, but Lessee shall give Lessor at least thirty (30)
days prior written Notice of any such alterations and improvements.
10.1.3 All alterations, improvements and additions shall (a) be constructed
in a first class, workmanlike, manner, in compliance with all Insurance
Requirements and Legal Requirements, (b) be in keeping with the character of the
Leased Property and the area in which the Leased Property is located and (c) be
designed and constructed so that the value of the Leased Property will not be
diminished and the Primary Intended Use of the Leased Property will not be
changed. All improvements, alterations and additions immediately shall become a
part of the Leased Property.
10.1.4 Lessee shall have no claim against Lessor at any time in respect of
the cost or value of any improvement, alteration or addition. There shall be no
adjustment in the Rent by reason of any such improvement, alteration or
addition. With Lessor's consent, expenditures made by Lessee pursuant to this
Article X may be included as capital expenditures for purposes of inclusion in
the capital expenditures budget for the Facility and for measuring compliance
with the obligations of Lessee set forth in Section 8.3 of this Lease.
10.1.5 In connection with any alteration that involves the removal,
demolition or disturbance of any asbestos-containing material, Lessee shall
cause to be prepared at its expense a full asbestos assessment applicable to
such alteration and shall carry out such asbestos monitoring and maintenance
program as reasonably shall be required thereafter in light of the results of
such assessment.
ARTICLE XI
11.1 Liens. Without the consent of Lessor or as expressly permitted
-----
elsewhere herein, Lessee will not directly or indirectly create or allow to
remain and will promptly discharge at its expense any lien, encumbrance,
attachment, title retention agreement or claim upon the Leased Property, and any
attachment, levy, claim or encumbrance in respect of the Rent, except for
(a) Permitted Encumbrances, (b) liens of mechanics, laborers, materialmen,
suppliers or vendors for sums not yet due, and (c) liens created by the
malfeasance or negligence of Lessor.
ARTICLE XII
12.1 Permitted Contests. Lessee, on its own or on Lessor's behalf (or in
-------------------
Lessor's name), but at Lessee's sole cost and expense, shall have the right to
contest, by appropriate legal proceedings conducted in good faith and with due
diligence, the amount or validity of any real or personal property assessment,
Imposition, Legal Requirement or Insurance Requirement, or any lien, attachment,
levy, encumbrance, charge or claim or any encroachment or restriction
burdening the Leased Property, provided: (a) prior Notice of such contest is
given to Lessor; (b) the Leased Property would not be in any danger of being
sold, forfeited or attached as a result of such contest, and there is no risk to
Lessor of a loss of or interruption in the payment of Rent; (c) in the case of
an unpaid Imposition or other lien, attachment, levy, encumbrance, charge or
claim, collection thereof is suspended during the pendency of such contest; (d)
in the case of a contest of a Legal Requirement, compliance may legally be
delayed pending such contest and pending such contest no license, permit,
approval, certificate of need, certificate of reimbursement or other
authorization necessary to operate the Facility as a provider of health care
services in accordance with its Primary Intended Use may be irrevocably
suspended or revoked, or its right to so operate the Facility or to accept
patients irrevocably suspended. Upon request of Lessor, Lessee shall deposit
funds or assure Lessor in some other manner reasonably satisfactory to Lessor
that the amount to be paid by Lessee that is the subject of a contested
Imposition, Legal Requirement, Insurance Requirement or Claim, together with
interest and penalties, if any, thereon, and any and all costs for which Lessee
is responsible will be paid if and when required upon the conclusion of such
contest. Lessee shall defend, indemnify and save harmless Lessor from all costs
or expenses arising out of or in connection with any such contest, including but
not limited to attorneys' fees. If at any time Lessor reasonably determines that
payment of any Imposition or other lien, attachment, levy, encumbrance, charge
or claim, or compliance with any Legal or Insurance Requirement being contested
by Lessee is necessary in order to prevent loss of any of the Leased Property or
Rent or civil or criminal penalties or other damage (including revocation or
suspension of any license, permit, approval, certificate of need, certificate of
reimbursement or other authorization necessary to operate the Facility as a
provider of health care services in accordance with its Primary Intended Use or
suspension of any right to accept patients), upon such prior Notice to Lessee as
is reasonable in the circumstances Lessor may pay such amount, require Lessee to
comply with such Legal or Insurance Requirement or take such other action as it
may deem necessary to prevent such loss or damage. If reasonably necessary, upon
Lessee's written request, Lessor, at Lessee's expense, shall cooperate with
Lessee in a permitted contest, provided Lessee upon demand makes arrangements
satisfactory to Lessor to assure the reimbursement of any and all Lessor's costs
incurred in cooperating with Lessee in such contest.
12.2 Lessor's Requirement for Deposits. After the occurrence of an Event of
---------------------------------
Default and while it continues, Lessee shall deposit with Lessor monthly, at the
time of its payments of Base Rent, a pro rata portion of the amounts required to
comply with Insurance Requirements, Impositions, Legal Requirements and Lessee's
obligations under Section 8.3 of this Lease, and when such obligations become
due, Lessor shall pay them (to the extent of the deposit) upon Notice from
Lessee requesting such payment. If sufficient funds have not been deposited to
cover the amount of the obligations due at least thirty (30) days in advance of
the due date, Lessee immediately shall deposit the same with Lessor upon Notice
from Lessor. Lessor shall not be obligated to segregate such deposited funds
from its other funds or to pay Lessee any interest on any deposit held by
Lessor. Upon an Event of Default, any of the funds remaining on deposit may be
applied under this Lease in any manner and in such priority as Lessor may
determine in its sole discretion.
ARTICLE XIII
13.1 General Insurance Requirements. Lessee shall keep the Leased Property,
------------------------------
and all property located in or on the Leased Property, including Lessor's
Personal Property and Lessee's Personal Property, insured with insurance meeting
the following requirements: (a) all insurance shall be written by companies
authorized to do insurance business in the applicable States and having a rating
classification of not less than A- and a financial size category of "Class X",
according to the then most recent issue of Best's Key Rating Guide; (b) all
policies must name Lessor as an additional insured, and name as an additional
insured a Facility Mortgagee by way of a standard form of mortgagee's loss
payable endorsement in use in the applicable States and in accordance with any
such other requirements as may be established by such Facility Mortgagee.
However, if requested by Lessor and available on a commercially reasonable
basis, all public liability and property damage insurance shall contain a
provision that Lessor, although named as an insured, nevertheless shall be
entitled to recovery for loss, damage or injury to Lessor, its servants, agents
and employees by reason of the negligence of Lessee or Lessor; (c) losses must
be payable to Lessor or Lessee as provided in Article XIV, and loss adjustments
shall require the written consent of Lessor, a Facility Mortgagee and, provided
it is not then in default, Lessee, which consent shall not be unreasonably
withheld by either Lessor or Lessee; (d) each insurer must agree that it will
give Lessor and a Facility Mortgagee at least sixty (60) days' written Notice
before its policy shall be altered, allowed to expire or canceled; (e) the
amount of any deductible or retention must be approved by Lessor prior to the
issuance of any policy; and (f) the form of all policies shall be approved by
Lessor, whose approval shall not unreasonably be withheld, and by a Facility
Mortgagee.
13.2 Risks to be Insured. The policies covering the Leased Property and
----------------------
Lessee's Personal Property shall insure against the following risks:
13.2.1 Loss or damage by fire, vandalism and malicious mischief, earthquake,
extended coverage perils commonly known as "Special Risk," and all physical
loss perils normally included in such Special Risk insurance, including but not
limited to sprinkler leakage, in an amount not less than one hundred percent
(100%) of Replacement Cost (provided that Lessor shall have the right from time
to time, but no more frequently than once in any period of three (3) consecutive
Lease Years, to have Replacement Cost reasonably redetermined by the fire
insurance company then carrying the largest amount of fire insurance on the
Leased Property (Lessee hereby agreeing to pay the fee, if any, for such
insurer), which determination shall be final and binding on the parties hereto,
and upon such determination Lessee immediately shall increase, but not decrease,
the amount of the insurance carried pursuant to this Section 13.2.1 to the
amount so determined, subject to the approval of a Facility Mortgagee;
13.2.2 Broad form comprehensive boiler and machinery insurance on a blanket
repair and replace basis, with limits for each accident in an amount not less
than one hundred percent (100%) of Replacement Cost;
13.2.3 Loss of rental under a rental value insurance policy covering risk of
loss during reconstruction necessitated by the occurrence of any of the hazards
described in Sections 13.2.1 or 13.2.2 (but in no event for a period less than
twelve (12) months) in an amount sufficient to prevent Lessor and Lessee from
becoming a co-insurer;
13.2.4 Claims for bodily injury (including resulting death), personal injury
or property damage under a policy of commercial general public liability
insurance with a combined single limit per occurrence in respect of bodily
injury and death and property damage of One Million Dollars ($1,000,000.00),
which insurance shall insure Lessee's contractual liability to Lessor under the
indemnity provisions of this Lease;
13.2.5 Claims arising out of malpractice in an amount not less than Two
Million Dollars ($2,000,000.00) for each person and for each occurrence and, if
written on a "claims-made" basis, Lessee also shall provide continuous liability
coverage for claims arising during the Term either by obtaining an endorsement
providing for an extended reporting period reasonably acceptable to Lessor in
the event such policy is canceled or not renewed for any reason whatsoever, or
by obtaining "tail" insurance coverage converting the policies to "occurrence"
basis policies providing coverage for a period of at least two (2) years beyond
the expiration of the Term;
13.2.6 Flood (with respect to any portions of the Leased Property located in
whole or in part within a designated flood plain area) and such other hazards
and in such amounts as may be customary for comparable properties in the area;
13.2.7 During such time as Lessee is constructing any improvements, (a) a
completed operations endorsement to the commercial general liability and
property damage insurance policies referred to above, (b) builder's risk
insurance, completed value form, covering all physical loss, in an amount
satisfactory to Lessor, and (c) such other insurance, in such amounts, as Lessor
deems necessary to protect Lessor's interest in the Leased Property from any act
or omission of Lessee's contractors or subcontractors, and certificates of
insurance evidencing such coverage, in form satisfactory to Lessor, shall be
presented to Lessor prior to the commencement of construction of such
improvements;
13.2.8 Primary automobile liability insurance with limits of One Million
Dollars ($1,000,000.00) per occurrence each for owned and non-owned and hired
vehicles;
13.2.9 Loss or damage commonly covered by blanket crime insurance including
dishonesty, loss of money orders or paper currency and depositor's forgery, with
a limit of not less than Five Hundred Thousand Dollars ($500,000.00).
13.3 Payment of Premiums; Copies of Policies; Certificates. Subject to
----------------------------------------------------------
Section 12.2 of this Lease, Lessee shall pay when due all of the premiums for
the insurance required by this Lease, and shall deliver to Lessor and to a
Facility Mortgagee requesting such evidence, certificates of insurance in form
satisfactory to Lessor and such Facility Mortgagee. Copies of the certificates
of insurance required by this Lease shall be delivered to Lessor to their
effective date (and, with respect to any renewal policy, not less than twenty
(20) days prior to the expiration of the existing policy), with copies of the
policies of insurance to follow when available to Lessee, and in the event of
the failure of Lessee either to carry the required insurance or pay the premiums
therefor, or to deliver copies of policies or certificates to Lessor as
required, Lessor shall be entitled, but shall have no obligation, to obtain such
insurance and pay the premiums therefor when due, in which event Lessee shall
repay to Lessor the premiums upon written demand therefor as Additional Charges.
13.4 Umbrella Policies. If Lessee chooses to carry umbrella liability
------------------
coverage to obtain the limits of liability required under this Lease, the
umbrella policies must provide coverage in the same manner as the primary
commercial general liability policy and must contain no exclusions in addition
to, or limitations materially different than, those of the primary policy.
13.5 Additional Insurance. In addition to the insurance described above,
---------------------
Lessee shall at all times comply with all Legal Requirements with respect to
worker's compensation insurance coverage.
13.6 No Liability; Waiver of Subrogation. Lessor shall have no liability to
-----------------------------------
Lessee, and, provided Lessee provides the insurance required of it by this
Lease, Lessee shall have no liability to Lessor, regardless of the cause, for
any loss or expense resulting from or in connection with damage to or the
destruction or other loss of the Leased Property or Lessee's Personal Property,
and neither party will have any right or claim against the other for any such
loss or expense by way of subrogation. Each insurance policy carried by either
party covering any of the Leased Property and Lessee's Personal Property,
including without limitation, contents, fire and casualty insurance, shall
contain an express waiver of any right of subrogation on the part of the insurer
against the other party. Lessee shall pay any additional costs or charges for
obtaining such waiver.
13.7 Intentionally omitted.
-----------------------
13.8 Blanket Policy. Any insurance required by this Lease may be provided
---------------
by so-called blanket policies of insurance carried by Lessee; provided, however,
that the coverage afforded Lessor thereby may not be less than or materially
different from that which would be provided by separate policies meeting the
requirements of this Lease, and provided further that such policies meet the
requirements of all Facility Mortgages.
13.9 No Separate Insurance.
-----------------------
13.9.1 Lessee shall not, on its own initiative or pursuant to the request or
requirement of any third party, take out separate insurance concurrent in
form or contributing in the event of loss with that required by this Lease, to
be furnished by, or that may reasonably be required to be furnished by, Lessee,
or increase the amount of any then existing insurance by securing an additional
policy or additional policies, unless all parties having an insurable interest
in the subject matter of the insurance, including in all cases Lessor and all
Facility Mortgagees, are named therein as additional insureds, and losses are
payable thereunder in the same manner as losses are payable under this Lease.
13.9.2 Nothing herein shall prohibit Lessee, upon Notice to Lessor, from (a)
securing insurance required to be carried hereby with higher limits of liability
than required in this Lease, or (b) securing insurance against risks not
required to be insured pursuant to this Lease, and as to such insurance, Lessor
and a Facility Mortgagee need not be included therein as additional insureds,
nor must losses thereunder be payable in the same manner as losses are payable
under this Lease, except to the extent required to avoid a default under a
Facility Mortgage or any other encumbrance.
ARTICLE XIV
14.1 Insurance Proceeds. Net Proceeds shall be paid to Lessor and held,
-------------------
disbursed or retained by Lessor as provided herein. If the Net Proceeds are less
than the Approval Threshold, and no Event of Default has occurred and is
continuing, Lessor shall pay the Net Proceeds to Lessee promptly upon Lessee's
completion of the restoration of the damaged or destroyed Leased Property. If
the Net Proceeds equal or exceed the Approval Threshold, and no Event of Default
has occurred and is continuing, the Net Proceeds shall be made available for
restoration or repair as provided in Section 14.6. Within fifteen (15) days of
the receipt of the Net Proceeds of Special Risk Insurance, Lessor and Lessee
shall agree as to the portion thereof, if any, attributable to the Lessee's
Personal Property that Lessee is not required and does not elect to restore or
replace, and if they cannot agree they shall submit the matter to arbitration
pursuant to Article XXXV hereof, and the portion of the proceeds of such Special
Risk Insurance agreed or determined by arbitration to be attributable to the
Lessee's Personal Property that Lessee is not required and does not elect to
restore or replace shall be paid to Lessee.
14.2 Restoration in the Event of Damage or Destruction. If all or any
-------------------------------------------------------
portion of the Leased Property is damaged by fire or other casualty, Lessee
shall: (a) give Lessor Notice of such damage or destruction within five (5)
Business Days of the occurrence thereof; (b) within thirty (30) Business Days of
the occurrence commence the restoration of the Leased Property; and (c)
thereafter proceed diligently to complete such restoration as quickly as
reasonably possible, but in any event within one hundred eighty (180) days of
the occurrence, to the end that the Leased Property is in substantially the same
(or better) condition as it was in immediately prior to the damage or
destruction. Regardless of the anticipated cost thereof, if the restoration of
the Leased Property requires any modification of structural elements, prior to
commencing such modification Lessee shall obtain Lessor's written approval of
the plans and specifications therefor.
14.3 Restoration of Lessee's Property. If Lessee is required to restore the
--------------------------------
Leased Property, Lessee also concurrently shall restore any of Lessee's Personal
Property that is integral to the Primary Intended Use of the Leased Property at
the time of the damage or destruction.
14.4 No Abatement of Rent. There shall be no abatement of Rent by reason of
--------------------
any damage to or the partial or total destruction of the Leased Property.
14.5 Waiver. Except as provided elsewhere in this Lease, Lessee hereby
------
waives any statutory or common law rights of termination that may arise by
reason of any damage to or destruction of the Leased Property.
14.6 Disbursement of Insurance Proceeds Equal to or Greater Than The
-----------------------------------------------------------------------
Approval Threshold. If Lessee restores or repairs the Leased Property pursuant
------------
to this Article XIV, and if the Net Proceeds equal or exceed the Approval
Threshold, the restoration or repair and disbursement of funds to Lessee shall
be in accordance with the following procedures:
(a) The restoration or repair work shall be done pursuant to plans and
specifications approved by Lessor and a certified construction cost statement,
to be obtained by Lessee from a contractor reasonably acceptable to Lessor,
showing the total cost of the restoration or repair; to the extent the cost
exceeds the Net Proceeds, Lessee shall deposit with Lessor the amount of the
excess cost, and Lessor shall disburse the funds so deposited in payment of the
costs of restoration or repair before any disbursement of Net Proceeds.
(b) Construction Funds shall be made available, subject to a ten percent
(10%) holdback, to Lessee upon request, but no more frequently than monthly, as
the restoration and repair work progresses pursuant to certificates, in form and
substance reasonably acceptable to Lessor, of an architect selected by Lessee
and reasonably acceptable to Lessor (such architect to be, in the reasonable
judgment of Lessor, highly qualified in the design and construction of the type
of facility being repaired).
(c) After the first disbursement to Lessee, sworn statements and lien
waivers in an amount at least equal to the amount of Construction Funds
previously paid to Lessee shall be delivered to Lessor from all contractors,
subcontractors and material suppliers covering all labor and materials furnished
through the date of the previous disbursement.
(d) Lessee shall deliver to Lessor such other evidence as Lessor reasonably
may request, from time to time during the course of the restoration and repair,
as to the progress of the work, compliance with the approved plans and
specifications, the cost of restoration and repair and the total amount needed
to complete the restoration and repair, and showing that there are no liens
against the Leased Property arising in connection with the restoration and
repair and that the cost of the restoration and repair at least equals the total
amount of Construction Funds then disbursed to Lessee hereunder.
(e) If the Construction Funds are at any time determined by Lessor to be
inadequate for payment in full of all labor and materials for the restoration
and repair, Lessee immediately shall pay the amount of the deficiency to Lessor
to be held and disbursed as Construction Funds prior to the disbursement of any
other Construction Funds then held by Lessor.
(f) The Construction Funds may be disbursed by Lessor to Lessee or to the
persons entitled to receive payment thereof from Lessee, and such disbursement
in either case may be made directly or through a third party escrow agent, such
as, but not limited to, a title insurance company, or its agent, all as Lessor
may determine in its sole discretion. Provided Lessee is not in default
hereunder, any excess Construction Funds shall be paid to Lessee upon completion
of the restoration or repair.
(g) If Lessee at any time fails to perform promptly and fully the conditions
and covenants set forth in subparagraphs (a) through (f) above, and the failure
is not corrected within ten (10) days of written Notice thereof, or if during
the restoration or repair an Event of Default occurs, Lessor may, at its option,
immediately cease making any further payments to Lessee for the restoration and
repair.
(h) Lessor may reimburse itself out of the Construction Funds for its
reasonable expenses incurred in administering the Construction Funds and
inspecting the restoration and repair work, including without limitation
attorneys' and other professional fees and escrow fees and expenses.
14.7 Net Proceeds Paid to Facility Mortgagee. Notwithstanding anything in
----------------------------------------
this Lease to the contrary, if any Facility Mortgagee is entitled to any Net
Proceeds or any portion thereof under the terms of any Facility Mortgage, the
Net Proceeds shall be applied, held and/or disbursed in accordance with the
terms of the Facility Mortgage. Lessor shall make commercially reasonable
efforts to cause the Net Proceeds to be applied to the restoration of the Leased
Property. If the Facility Mortgagee elects to apply the Net Proceeds to the
indebtedness secured by the Facility Mortgage and the Net Proceeds would
otherwise be available pursuant to this Article XIV for restoration of the
Facility, Lessee may elect to (a) restore the Facility as nearly as possible
under the circumstances to a complete architectural unit of the same general
character and condition as that of the Facility existing immediately prior to
such damage or destruction or (b) terminate this Lease as to such Facility by
delivery of written notice to Lessor within thirty (30) days of the date the
Facility Mortgagee elects to apply the Net Proceeds to the indebtedness secured
by the Facility Mortgage. In any such circumstance where Lessee elects to
terminate the Lease as to the affected Facility pursuant to this Section 14.7,
Lessor may, at its option, within thirty (30) days of Lessee's election to so
terminate make available to Lessee pursuant to the same terms as set forth in
this Article XIV of this Lease funds equal to the lesser of (x) the amount of
funds Lessor would be obligated to make available to Lessee for such restoration
pursuant to Article XIV of this Lease if the Facility Mortgagee had not so
applied such funds and (y) the amount of such funds so applied by the Facility
Mortgagee. If the Lessor does not elect to make such funds available to Lessee
within such thirty (30) day period, the Lease shall terminate on the thirtieth
(30th) day following the last day of such thirty (30) day period. If Lessor
does make such funds available to Lessee as provided for in this Section 14.7,
the Lease shall not terminate.
ARTICLE XV
15.1 Total Taking or Other Taking with Leased Property Rendered Unsuitable
-----------------------------------------------------------------------
for Its Primary Intended Use. If title to the fee of the Leased Property is
-------------------------------
Taken, this Lease shall cease and terminate as of the Date of Taking by the
--
Condemnor, and Rent shall be apportioned as of the termination date. If title to
--
the fee of less than the whole of the Leased Property is Taken, but the
Leased Property is rendered Unsuitable for Its Primary Intended Use as a result
of the Partial Taking, each of Lessee and Lessor shall have the option, which
shall be exercisable by written Notice to the other at any time prior to the
first to occur of the taking of possession by, or the date of vesting of title
in, the Condemnor, to terminate this Lease as of the date so determined, in
which event this Lease shall so cease and terminate as of the earlier of the
date specified in the Notice or the date on which possession is taken by the
Condemnor. If this Lease is so terminated, Rent shall be apportioned as of the
termination date.
15.2 Allocation of Award. The total Award made with respect to all or any
---------------------
portion of the Leased Property or for loss of Rent, or for loss of business,
shall be solely the property of and payable to Lessor or, if so provided in a
Facility Mortgage, to a Facility Mortgagee. Nothing contained in this lease
will be deemed to create any additional interest in Lessee, or entitle Lessee to
any payment based on the value of the unexpired term or so-called "bonus value"
to Lessee of this Lease. Any Award made for the taking of Lessee's Personal
Property that is not integral to the Primary Intended Use of the Facility, or
for removal and relocation expenses of Lessee in any such proceedings, shall be
payable to Lessee. Any Award made for the taking of Lessee's Personal Property
that is integral to the Primary Intended Use of the Facility shall payable to
Lessor or, if so provided in a Facility Mortgage, to a Facility Mortgagee. In
any proceedings with respect to an Award, each of Lessor and Lessee shall seek
its own Award in conformity herewith, at its own expense. Notwithstanding the
foregoing, Lessee may pursue a claim for loss of its business, provided that
under the laws of the State of Washington, such claim will not diminish the
Award to Lessor.
15.3 Partial Taking. In the event of a Partial Taking, Lessee, at its own
---------------
cost and expense, shall, within sixty (60) days of the first to occur of the
taking of possession by, or the date of vesting of title in, the Condemnor,
commence the restoration of the Leased Property to a complete architectural unit
of the same general character and condition (as nearly as may be possible under
the circumstances) as existed immediately prior to the Partial Taking, and
complete such restoration with all reasonable dispatch, but in any event within
one hundred eighty (180) days of the date on which such Notice is given. Lessor
shall contribute to the cost of restoration only such portion of the Award as is
made therefor. As long as no Event of Default has occurred and is continuing,
if such portion of the Award is in an amount less than the Approval Threshold,
Lessor shall pay the same to Lessee upon completion of such restoration. As
long as no Event of Default has occurred and is continuing, if such portion of
the Award is in an amount equal to or greater than the Approval Threshold,
Lessor shall make such portion of the Award available to Lessee in the manner
provided in Section 14.6 with respect to Net Proceeds in excess of the Approval
Threshold. Notwithstanding anything to the contrary in this Lease, if the Fair
Market Rent of the Leased Property is reduced by reason of the Partial Taking,
from and after the date on which possession is taken by the Condemnor the
annualized Base Rent shall be reduced by an amount determined by dividing the
portion of the Award made to Lessor expressly for such reduction in Fair Market
Rent by the Capitalization Rate.
15.4 Temporary Taking. If there is a Partial Taking of possession or the
-----------------
use of all or part of the Leased Property, but the fee of the Leased Property is
not Taken in whole or in part, until such Partial Taking of possession or use
continues for more than six (6) months, all the provisions of this Lease shall
remain in full force and effect and the entire amount of any Award made for such
Partial Taking shall be paid to Lessee provided there is then no Event of
Default. Upon the termination of any such period of temporary use or occupancy,
Lessee at its sole cost and expense shall restore the Leased Property, as nearly
as may be reasonably possible, to the condition existing immediately prior to
such Partial Taking. If any such Partial Taking continues for longer than six
(6) months, and twenty-five percent (25%) or more of the patient capacity of the
Facility is thereby rendered Unsuitable for Its Primary Use, this Lease shall
cease and terminate as of the last day of the sixth (6th) month, but if less
than twenty-five percent (25%) of the patient capacity of the Facility is
thereby rendered Unsuitable for Its Primary Use, each of Lessee and Lessor shall
have the option, which shall be exercisable by giving written Notice to the
other at least sixty (60) days prior written Notice to the other, at any time
prior to the end of the temporary Partial Taking, to terminate this Lease as of
the date set forth in such Notice, and Lessee shall be entitled to any Award
made for the period of such temporary Partial Taking prior to the date of
termination of the Lease. Rent shall not abate during the period of any
temporary Partial Taking.
15.5 Awards Paid to Facility Mortgagee. Notwithstanding anything herein to
---------------------------------
the contrary, if any Facility Mortgagee is entitled to any Award or any portion
thereof under the terms of any Facility Mortgage, such Award shall be applied,
held and/or disbursed in accordance with the terms of the Facility Mortgage. If
the Facility Mortgagee elects to apply the Award to the indebtedness secured by
the Facility Mortgage and the Award represents an Award for Partial Taking as
described in Section 15.3 above, Lessee may elect to (a) restore the affected
Facility as nearly as possible under the circumstances to a complete
architectural unit of the same general character and condition as that of the
Facility existing immediately prior to such Taking or (b) terminate this Lease
as to such Facility by delivery of written notice to Lessor within thirty (30)
days of the date the Facility Mortgagee elects to apply the Award to the
indebtedness secured by the Facility Mortgage. In any such circumstance where
Lessee elects to terminate the Lease as to the affected Facility pursuant to
this Section 15.5, Lessor may, at its option, within thirty (30) days of
Lessee's election to so terminate make available to Lessee pursuant to the same
terms as set forth in Section 15.3 of this Lease funds equal to the lesser of
(x) the amount of funds Lessor would be obligated to make available to Lessee
for such restoration pursuant to Section 15.3 of this Lease if the Facility
Mortgagee had not so applied such funds and (y) the amount of such funds so
applied by the Facility Mortgagee. If the Lessor does not elect to make such
funds available to Lessee within such thirty (30) day period, the Lease shall
terminate on the thirtieth (30th) day following the last day of such thirty (30)
day period. If Lessor does make such funds available to Lessee as provided for
in this Section 15.5, the Lease shall not terminate.
ARTICLE XVI
16.1 Lessor's Rights Upon an Event of Default. If an Event of Default
----------------------------------------------
occurs, Lessor may terminate this Lease by giving Lessee a Notice of
Termination, and in such event the Term shall end and all rights of Lessee under
this Lease shall cease on the Termination Date. The Notice of Termination
shall be in lieu of and not in addition to any notice required by the laws of
any State as a condition to bringing an action for possession of the Leased
Premises or to recover damages under this Lease. In addition to Lessor's right
to terminate this Lease, Lessor shall have all other rights set forth in this
Lease and all remedies available at law and in equity.
Lessee shall, to the extent permitted by law, pay as Additional Charges all
costs and expenses incurred by or on behalf of Lessor, including, without
limitation, reasonable attorneys' fees and expenses (whether or not litigation
is commenced, and if litigation is commenced, including fees and expenses
incurred in appeals and post-judgment proceedings) as a result of any default of
Lessee hereunder.
No Event of Default (other than a failure to make payment of money) shall be
deemed to exist if and for so long as Lessee is unable to prevent such Event of
Default because of Force Majeure, provided that, upon the cessation of the Force
Majeure, Lessee immediately shall proceed to remedy the action or condition
giving rise to the Event of Default within the applicable cure period as
extended by the Force Majeure.
16.2 Certain Remedies. If an Event of Default occurs, whether or not this
-----------------
Lease has been terminated pursuant to Section 16.1, if required to do so by
Lessor, Lessee immediately shall surrender the Leased Property to Lessor in the
condition required by Section 9.1.5 and quit the same, and Lessor may enter upon
and repossess the Leased Property by reasonable force, summary proceedings,
ejectment or otherwise, and may remove Lessee and all other persons and any and
all personal properties from the Leased Property, subject to rights of any
residents or patients and to any Legal Requirements. In addition to all other
remedies set forth or referred to in this Article XVI, after the occurrence and
during the continuance of an Event of Default, Lessor shall have the right to
suspend any Management Agreement and to retain a manager of the Facility at the
expense of Lessee, such manager to serve for such term (which term shall not end
upon the cure of all Events of Default) and at such compensation as Lessor
reasonably determines is necessary under the circumstances. Lessor shall use
commercially reasonable, good faith efforts to cause any such replacement
management agreement to include provisions pursuant to indemnifying Lessee from
any damage to Lessee arising from the gross negligence or willful misconduct of
such replacement manager.
16.3 Damages. None of (a) the termination of this Lease pursuant to Section
-------
16.1, (b) the repossession of the Leased Property, (c) the failure of Lessor to
relet the Leased Property, (d) the reletting of all or any portion thereof, or
(v) the failure of Lessor to collect or receive any rentals due upon such any
reletting, shall relieve Lessee of its liability and obligations hereunder, all
of which shall survive any such termination, repossession or reletting. If this
Lease is terminated by Lessor, Lessee immediately shall pay to Lessor all Rent
due and payable with respect to the Leased Property to and including the
Termination Date, including without limitation all interest and late charges
payable under Section 3.3 hereof with respect to any late payment of such Rent.
Lessee also shall pay to Lessor, as liquidated damages, at Lessor's option,
either:
(A) The sum of:
(i) Lessor's Interim Rent Loss, minus Net Reletting Proceeds for such
period, and minus the portion of Lessor's Interim Rent Loss, if any, that Lessee
proves reasonably could have been mitigated by Lessor, plus
(ii) the Present Value on the Judgment Date of Lessor's Future Rent Loss,
assuming the Cost of Living Index were to increase four (4) percentage points
per Lease Year from the Judgment Date through the Expiration Date, minus the
Present Value on the Termination Date of the portion of Lessor's Future Rent
Loss that Lessee proves reasonably could be mitigated by Lessor;
or
(B) Each month between the Termination Date and the Expiration Date,
Lessor's Monthly Rent Loss, minus the Net Reletting Proceeds for such month, and
minus the portion, if any, of Lessor's Monthly Rent Loss that Lessee proves
reasonably could have been avoided. Any suit brought to recover liquidated
damages payable under this subsection (B) shall not prejudice Lessor's right to
collect liquidated damages for subsequent months in a similar proceeding.
16.4 Waiver. If this Lease is terminated pursuant to Section 16.1, Lessee
------
waives, to the extent permitted by applicable law, (a) any right of reentry,
repossession or redesignation, (b) any right to a trial by jury in the event of
summary proceedings to enforce the remedies set forth in this Article XVI, and
(c) the benefit of any laws now or hereafter in force exempting property from
liability for rent or for debt. Acceptance of Rent at any time does not
prejudice or remove any right of Lessor as to any right or remedy. No course of
conduct shall be held to bar Lessor from literal enforcement of the terms
of this Lease.
16.5 Application of Funds. Any payments received by Lessor under any of the
--------------------
provisions of this Lease during the existence or continuance of any Event of
Default shall be applied to Lessee's obligations in the order that Lessor
determines in its sole discretion or as may be prescribed by law.
16.6 Bankruptcy.
----------
(a) None of Lessee's interest in this Lease, any estate hereby created in
Lessee's interest or any interest herein or therein shall pass to any trustee or
receiver or assignee for the benefit of creditors or otherwise by operation
of law, except as specifically may be provided pursuant to the Bankruptcy Code
(11 USC 101 et. seq.), as the same may be amended from time to time.
(b) Rights and Obligations Under the Bankruptcy Code.
(i) Upon filing of a petition by or against Lessee under the Bankruptcy
Code, Lessee, 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 Lessee, agree
to pay monthly in advance, on the first day of each month, as reasonable
compensation for the use and occupancy of the Leased Premises, an amount equal
to all Rent due pursuant to this Lease.
(ii) Included within and in addition to any other conditions or obligations
imposed upon Lessee or its successor in the event of the assumption and/or
assignment of the Lease are the following: (A) the cure of any monetary defaults
and reimbursement of pecuniary loss within not more than thirty (30) days of the
assumption and/or assignment; (B) the deposit of an additional amount equal to
not less than three (3) months' Base Rent, which amount is agreed to be a
necessary and appropriate deposit to secure the future performance under the
Lease of Lessee or its assignee; (C) the continued use of the Leased Premises
for the Primary Intended Use; and (D) the prior written consent of a Facility
Mortgagee.
ARTICLE XVII
17.1 Lessor's Right to Cure Lessee's Default. If Lessee fails to make any
-----------------------------------------
payment or perform any act required to be made or performed under this Lease,
and fails to cure the same within any grace or cure period applicable thereto,
upon such Notice as may be expressly required herein (or, if Lessor reasonably
determines that the giving of Notice would risk loss to the Leased Property or
cause damage to Lessor, upon such Notice as is practical under the
circumstances), and without waiving or releasing any obligation of Lessee,
Lessor may make such payment or perform such act for the account and at the
expense of Lessee, and may, to the extent permitted by law, enter upon the
Leased Property for such purpose and take all such action thereon as, in
Lessor's sole opinion, may be necessary or appropriate. No such entry shall be
deemed an eviction of Lessee. All amounts so paid by Lessor and all costs and
expenses (including, without limitation, reasonable attorneys' fees and
expenses) so incurred, together with the late charge and interest provided for
in Section 3.3 thereon, shall be paid by Lessee to Lessor on demand. The
obligations of Lessee and rights of Lessor contained in this Article shall
survive the expiration or earlier termination of this Lease.
ARTICLE XVIII
18.1 Holding Over. If Lessee remains in possession of the Leased Property
-------------
after the expiration of the Term or earlier termination of this Lease, such
possession shall be as a month-to-month tenant, and throughout the period of
such possession Lessee shall pay as Rent for each month one and one-half (1 1/2)
times the sum of: (a) one-twelfth (1/12th) of the Base Rent payable during
the Lease Year in which such expiration or termination occurs, plus (b) all
Additional Charges accruing during the month. During such period of
month-to-month tenancy, Lessee shall be obligated to perform and observe all of
the terms, covenants and conditions of this Lease, but shall have no rights
hereunder other than the right, to the extent given by applicable law to
month-to-month tenancies, to continue its occupancy and use of the Leased
Property until the month-to-month tenancy is terminated. Nothing contained
herein shall constitute the consent, express or implied, of Lessor to the
holding over of Lessee after the expiration or earlier termination of this
Lease.
18.2 Indemnity. If Lessee fails to surrender the Leased Property in a
---------
timely manner and in accordance with the provisions of Section 9.1.5 upon the
expiration or termination of this Lease, in addition to any other liabilities to
Lessor accruing therefrom, Lessee shall defend, indemnify and hold Lessor, 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 paid by Lessee pursuant to
this Lease during Lessee's hold-over and any claims by any proposed new tenant
founded on such failure. The provisions of this Section 18.2 shall survive the
expiration or earlier termination of the Term.
ARTICLE XIX
19.1 Subordination. This Lease is subject and subordinate to any Facility
-------------
Mortgage to all advances made or hereafter to be made thereunder and to all
renewals, modifications, consolidations, replacements and extensions thereof and
substitutions therefore. This clause shall be self-operative and no further
instrument of subordination need be required by a Facility Mortgagee; provided,
however, that Lessor or a Facility Mortgagee may elect to make this Lease
superior to a Facility Mortgage at any time by Notice to Lessee. As to a
Facility Mortgage to which this Lease is subordinate, Lessor shall provide
Lessee with a "non-disturbance agreement" reasonably acceptable to such Facility
Mortgagee providing that, if such Facility Mortgagee acquires the Leased
Property by way of foreclosure or deed in lieu of foreclosure, such Facility
Mortgagee will not disturb Lessee's possession under this Lease and will
recognize Lessee's rights hereunder if and for so long as no Event of Default
has occurred under this Lease and is continuing. Lessee agrees that it shall
not withhold or delay its consent unreasonably to any amendment of this Lease
reasonably required by a Facility Mortgagee, and Lessee shall be deemed to have
withheld or delayed its consent unreasonably if Lessee has received the
non-disturbance agreement provided for above and the requested amendment does
not materially (a) alter the economic terms of this Lease, (b) diminish the
rights of Lessee under this Lease or (c) increase the obligations of Lessee
under this Lease.
19.2 Attornment. If a Facility Mortgagee enforces the remedies provided for
----------
by law or by a Facility Mortgage, Lessee shall, at the option of the party
succeeding to the interest of Lessor as a result of such enforcement or as a
result of a deed or delivery of possession of the Leased Property in lieu of
such enforcement, attorn to such successor and recognize such successor as
Lessor under this Lease; provided, however, that such successor in interest
shall not (a) be bound by any payment of Rent for more than one (1) month in
advance, except for any such advance payments as may be expressly required by
this Lease; (b) be bound by any modification of this Lease made without the
written consent of a Facility Mortgagee or successor in interest; (c) be liable
for any act or omission of Lessor; or (d) be subject to any offset or defense
arising prior to the date such successor in interest acquired title to the
Leased Property. Upon request, Lessee shall execute and deliver an instrument or
instruments confirming the attornment provided for herein.
19.3 Lessee's Certificate. Lessee shall, upon not less than ten (10) days
---------------------
prior Notice from Lessor, execute, acknowledge and deliver to Lessor Lessee's
Certificate containing then-current facts. It is intended that any Lessee's
Certificate delivered pursuant hereto may be relied upon by Lessor, any
prospective tenant or purchaser of the Leased Property, any mortgagee or
prospective mortgagee and any other party who reasonably may rely on such
statement. Lessee's failure to deliver the Lessee's Certificate within such
time shall constitute an Event of Default. In addition, if Lessee fails to
deliver the Lessee's Certificate within the ten (10) day period referred to
above, Lessee hereby authorizes Lessor to execute and deliver a certificate to
the effect (if true) that Lessee represents and warrants that (a) this Lease is
in full force and effect without modification, and (b) Lessor is not in breach
or default of any of its obligations under this Lease.
ARTICLE XX
20.1 Risk of Loss. During the Term, the risk of loss or of decrease in the
-------------
enjoyment and beneficial use of the Leased Property in consequence of the damage
or destruction thereof by fire, the elements, casualties, thefts, riots,
wars or otherwise, or in consequence of foreclosures, attachments, levies or
executions (other than those caused by Lessor and those claiming from, through
or under Lessor) is assumed by Lessee, and, in the absence of gross negligence,
willful misconduct or material breach of this Lease by Lessor, Lessor in no
event shall be answerable or accountable therefor nor shall any of the events
mentioned in this Section entitle Lessee to any abatement of Rent.
ARTICLE XXI
21.1 Indemnification. Notwithstanding the existence of any insurance or
---------------
self-insurance provided for in Article XIII, and without regard to the policy
limits of any such insurance or self-insurance, Lessee shall protect, indemnify,
save harmless and defend Lessor, and the principals, officers, directors
and agents and employees of Lessor, from and against all liabilities,
obligations, claims, damages, penalties, causes of action, costs and expenses
(including, without limitation, reasonable attorneys' fees and expenses), to the
extent permitted by law, imposed upon or incurred by or asserted against Lessor
by reason of: (a) any accident, injury to or death of persons or loss of or
damage to property occurring on or about the Leased Property or adjoining
sidewalks, including without limitation any claims of malpractice; (b) any use,
misuse, non-use, condition, maintenance or repair by Lessee of the Leased
Property; (c) any failure on the part of Lessee to perform or comply with any of
the terms of this Lease; and (d) the nonperformance of any contractual
obligation, express or implied, assumed or undertaken by Lessee or Manager
Lessee with respect to the Leased Property or any business or other activity
carried on with respect to the Leased Property by Lessee or Manager on the
Leased Property. Any amounts that become payable by Lessee under this Section
shall be paid within ten (10) days after liability therefor on the part of
Lessee is determined by litigation or otherwise, and, if not timely paid, shall
bear interest (to the extent permitted by law) at the Overdue Rate from the date
of such determination to the date of payment. Nothing herein shall be construed
as indemnifying either Lessor or a Facility Mortgagee against its own grossly
negligent acts or omissions or willful misconduct.
21.2 Survival of Indemnification. Lessee's liability under this Article
-----------------------------
shall survive the expiration or any earlier termination of this Lease.
ARTICLE XXII
22.1 General Prohibition against Transfers. Lessee acknowledges that a
----------------------------------------
significant inducement to Lessor to enter into this Lease with Lessee on the
terms set forth herein is the combination of financial strength, experience,
skill and reputation possessed by Lessee, the Person or Persons in Control of
Lessee and the Manager of the Facility on the Commencement Date, together with
Lessee's assurance that Lessor shall have the unrestricted right to approve or
disapprove any proposed Transfer. Therefore, there shall be no Transfer except
as specifically permitted by this Lease or consented to in advance by Lessor in
writing. Lessee agrees that Lessor shall have the right to withhold its consent
to any proposed Transfer on the basis of Lessor's judgment as to the effect the
proposed Transfer may have on the Facility and the future performance of the
obligations of the Lessee under this Lease, whether or not Lessee agrees with
such judgment. Any attempted Transfer that is not specifically permitted by
this Lease or consented to by Lessor in advance in writing shall be null and
void and of no force and effect whatsoever. In the event of a Transfer, Lessor
may collect Rent and other charges from the Transferee and apply the amounts
collected to the Rent and other charges herein reserved, but no Transfer or
collection of Rent and other charges shall be deemed to be a waiver of Lessor's
rights to enforce Lessee's covenants or an acceptance of the Transferee as
Lessee, or a release of the Lessee named herein from the performance of its
covenants. Notwithstanding any Transfer, Lessee shall remain fully liable for
the performance of all terms, covenants and provisions of this Lease. Any
violation of this Lease by any Transferee shall be deemed to be a violation of
this Lease by Lessee.
22.2 Subordination and Attornment. Lessee shall insert in any sublease
------------------------------
permitted by Lessor provisions to the effect that (a) such sublease is subject
and subordinate to all of the terms and provisions of this Lease and to the
rights of Lessor hereunder, (b) if this Lease terminates before the expiration
of such sublease, the sublessee thereunder will, at Lessor's option, attorn to
Lessor and waive any right the sublessee may have to terminate the sublease or
to surrender possession thereunder, as a result of the termination of this
Lease, and (c) if the sublessee receives a written Notice from Lessor or
Lessor's assignee, if any, stating that Lessee is in default under this Lease,
the sublessee thereafter shall be obligated to pay all rentals accruing under
the sublease directly to the party giving such Notice, or as such party may
direct, and such payments shall be credited against the amounts owing by Lessee
under this Lease.
22.3 Sublease Limitation. Anything contained in this Lease to the contrary
--------------------
notwithstanding, even if a sublease of the Leased Property is permitted, Lessee
shall not sublet the Leased Property on any basis such that the rental to be
paid by the sublessee thereunder would be based, in whole or in part, on either
(a) the income or profits derived by the business activities of the sublessee,
or (b) any other formula such that any portion of the sublease rental received
by Lessor would fail to qualify as "rents from real property" within the meaning
of Section 856(d) of the Code, or any similar or successor provision thereto.
The parties agree that this Section shall not be deemed waived or modified by
implication, but may be waived or modified only by an instrument in writing
explicitly referring to this Section by number.
ARTICLE XXIII
23.1 Financial Statements and Other Reports and Materials Required by
-----------------------------------------------------------------------
Lessor. Lessee shall furnish to Lessor, in paper form and by electronic means
satisfactory to Lessor:
(a) Within seventy five (75) days after the end of each of Lessee's fiscal
years: (i) Lessee's Financial Statement, prepared in accordance with GAAP and
certified by an officer of the Lessee, (ii) a variance report comparing actual
items of income and expenses to such items as budgeted; and (iii) an Officer's
Certificate stating that Lessee is not in default in the performance or
observance of any of the terms of this Lease, or if Lessee is in default,
specifying all such defaults, the nature thereof, and the steps being taken to
remedy the same;
(b) Within thirty five (35) days after the end of each of Lessee's quarters,
quarterly Financial Statements of Lessee, together with an Officer's Certificate
stating that (i) Lessee is not in default of any covenant set forth in this
Lease, or if Lessee is in default, specifying all such defaults, the nature
thereof, and the steps being taken to remedy the same; and (ii) the then-current
number of licensed and operating units at the Facility;
(c) Within thirty (30) days after the end of each month, a monthly financial
report for the Facility, including a detailed statement of income and expense
and detailed operational statistics regarding occupancy rates, patient mix and
patient rates by type;
(d) Within fifteen (15) days of filing a copy of each cost report filed with
a governmental agency for the Facility;
(e) Within fifteen (15) days after they are required to be filed with the
SEC, copies of any annual or quarterly report and of information, documents and
other reports (or copies of such portions of any of the foregoing as the SEC may
by rules and regulations prescribe) that Lessee, Guarantor or Manager is
required to file with the SEC pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934;
(f) Within thirty (30) days of Lessee's or Manager's receipt thereof, copies
of surveys performed by the appropriate governmental agencies for licensing or
certification purposes, including, without limitation, annual surveys, revisits
and complaint surveys, copies of any plans of correction and all related
correspondence;
(g) Immediate Notice to Lessor of any action, proposal or investigation by
any agency or entity, or complaint to such agency or entity, known to Lessee,
the result of which could be to (i) modify in a way adverse to Lessee or revoke
or suspend or terminate, or fail to renew or fully continue in effect, any
license or certificate or operating authority pursuant to which Lessee carries
on any part of the Primary Intended Use of the Facility, or (ii) suspend,
terminate, adversely modify, or fail to renew or fully continue in effect any
cost reimbursement or cost sharing program by any state or federal governmental
agency, or seek return of or reimbursement for any funds previously advanced or
paid pursuant to any such program, or (iii) impose any bed hold, limitation on
patient admission or similar restriction on the Leased Property, or (iv)
prosecute any party with respect to the operation of any activity in the
Facility or enjoin any party or seek any civil penalty in excess of One Thousand
Dollars ($1,000.00) in respect thereof;
(h) As soon as it is prepared in each Lease Year, but not later than the
last day of the second (2nd) month in each Lease Year a capital and operating
budget for the Facility for that and the following Lease Year;
(i) With reasonable promptness, such other information respecting the
financial condition and affairs of Lessee and the Facility as Lessor reasonably
may request from time to time, including, without limitation, any such other
information as may be available to the administration of the Leased Property;
(j) Upon Lessor's request from time to time, such additional information and
unaudited quarterly financial information concerning the Leased Property
and Lessee as Lessor may require for its on-going filings with the Securities
and Exchange Commission, under both the Securities Act of 1933, as amended, and
the Securities Exchange Act of 1934, as amended, including, but not limited to,
10-Q Quarterly Reports, 10-K Annual Reports and registration statements to be
filed by Lessor during the Term of this Lease; and
(k) At least fifteen (15) Business Days before the expiration of each
license and permit required for the operation of the Facility for the Primary
Intended Use, evidence satisfactory to Lessor that such license or permit has
been unconditionally renewed by the issuer thereof.
23.2 Public Offering Information. Lessee specifically agrees that Lessor
-----------------------------
may include financial information and information concerning the operation of
the Facility that does not violate the confidentiality of the facility-patient
relationship and the physician-patient privilege under applicable laws, in
offering memoranda or prospectus, or similar publications in connection with
syndications or public offerings of Lessor's securities or interests, and any
other reporting requirements under applicable Federal and State Laws, including
those of any successor to Lessor. Lessee agrees to provide such other
reasonable information necessary with respect to Lessee and the Leased Property
to facilitate a public offering or to satisfy SEC or regulatory disclosure
requirements. Upon request of Lessor, Lessee shall notify Lessor of any
necessary corrections to information Lessor proposes to publish within a
reasonable period of time (not to exceed three (3) days) after being informed
thereof by Lessor.
ARTICLE XXIV
24.1 Lessor's Right to Inspect. Lessee shall permit Lessor and its
----------------------------
authorized representatives to inspect the Leased Property and Lessee's books and
records pertaining thereto during normal business hours at any time without
Notice. Lessor acknowledges that notwithstanding anything to the contrary in
this Lease, Lessor and Lessee do not intend Lessor to have access to any
protected health information (as defined by the Health Insurance Portability and
Accountability Act of 1996 ("HIPAA") at the Facility. In the event that Lessor
-----
unintentionally obtains access to any such protected health information, it
shall hold such information in confidence pursuant to HIPAA and shall not
disclose it to anyone.
ARTICLE XXV
25.1 No Waiver. No failure by Lessor to insist upon the strict performance
----------
of any term hereof or to exercise any right, power or remedy consequent upon a
breach hereof, and no acceptance of full or partial payment of Rent during the
continuance of any such breach, shall constitute a waiver of any such breach or
of any such term. No waiver of any breach shall affect or alter this Lease,
which shall continue in full force and effect with respect to any other then
existing or subsequent breach.
ARTICLE XXVI
26.1 Remedies Cumulative. To the extent permitted by law, each legal,
--------------------
equitable or contractual right, power and remedy of Lessor now or hereafter
provided either in this Lease or by statute or otherwise shall be cumulative and
concurrent and shall be in addition to every other right, power and remedy,
and the exercise or beginning of the exercise by Lessor of any one or more of
such rights, powers and remedies shall not preclude the simultaneous or
subsequent exercise by Lessor of any or all of such other rights, powers and
remedies.
ARTICLE XXVII
27.1 Acceptance of Surrender. No surrender to Lessor of this Lease or of
-------------------------
the Leased Property or any part thereof, or of any interest therein, shall be
valid or effective unless agreed to and accepted in writing by Lessor, and no
act by Lessor or any representative or agent of Lessor, other than such a
written acceptance by Lessor, shall constitute an acceptance of any such
surrender.
ARTICLE XXVIII
28.1 No Merger of Title. There shall be no merger of this Lease or of the
--------------------
leasehold estate created hereby by reason of the fact that the same person,
firm, corporation or other entity may acquire, own or hold, directly or
indirectly, (a) this Lease or the leasehold estate created hereby or any
interest in this Lease or such leasehold estate, and (b) the fee estate in the
Leased Property.
28.2 No Partnership. Nothing contained in this Lease will be deemed or
---------------
construed to create a partnership or joint venture between Lessor and Lessee or
to cause either party to be responsible in any way for the debts or obligations
of the other or any other party, it being the intention of the parties that the
only relationship hereunder is that of Lessor and Lessee.
ARTICLE XXIX
29.1 Conveyance by Lessor. If Lessor or any successor owner of the Leased
----------------------
Property conveys the Leased Property other than as security for a debt, Lessor
or such successor owner, as the case may be, shall be released from all future
liabilities and obligations of Lessor under this Lease arising or accruing from
and after the date of such conveyance or other transfer, and all such future
liabilities and obligations shall be binding upon the new owner.
ARTICLE XXX
30.1 Quiet Enjoyment. So long as Lessee pays all Rent as it becomes due and
---------------
complies with all of the terms of this Lease and performs its obligations
hereunder, Lessee shall peaceably and quietly have, hold and enjoy the Leased
Property for the Term, free of any claim or other action by Lessor or anyone
claiming by, through or under Lessor, but subject to all liens and encumbrances
of record as of the date hereof or hereafter provided for in this Lease or
consented to by Lessee. Except as otherwise provided in this Lease, no failure
by Lessor to comply with the foregoing covenant will give Lessee any right to
cancel or terminate this Lease or abate, reduce or make a deduction from or
offset against the Rent or any other sum payable under this Lease, or to fail to
perform any other obligation of Lessee. Lessee shall, however, have the right,
by separate and independent action, to pursue any claim it may have against
Lessor as a result of a breach by Lessor of the covenant of quiet enjoyment
contained in this Section.
ARTICLE XXXI
31.1 Notices. Any notice, request or other communication to be given by any
-------
party hereunder shall be in writing and shall be sent by registered or
certified mail, postage prepaid, or by hand delivery or facsimile transmission
to the following address:
To Lessee: ESC-Silverdale, LLC
c/o Emeritus Corporation
3131 Elliott Avenue, Suite 500
Seattle, WA 98121
Attn: Raymond Brandstrom
Telephone No.: (206) 298-2909
Facsimile No.: (206) 301-4500
With copy to The Nathanson Group PLLC
(which shall not 1520 Fourth Avenue, Sixth Floor
constitute notice): Seattle, Washington 98101
Attn: Randi Nathanson
Telephone No.: (206) 623-6239
Facsimile No.: (206) 623-1738
To Lessor: Washington Lessor - Silverdale, Inc.
c/o Omega Healthcare Investors, Inc.
9690 Deereco Road, Suite 100
Timonium, MD 21093
Attn.: Daniel J. Booth
Telephone No.: (410) 427-1700
Facsimile No.: (410) 427-8800
And with copy to Myers Nelson Dillon & Shierk, PLLC
(which shall not 125 Ottawa Ave., N.W., Suite 270
constitute notice): Grand Rapids, Michigan 49503
Attn: Mark E. Derwent
Telephone No.: (616) 233-9640
Facsimile No.: (616) 233-9642
or to such other address as either party may hereafter designate. Notice shall
be deemed to have been given on the date of delivery if such delivery is made on
a Business Day, or if not, on the first Business Day after delivery. If delivery
is refused, Notice shall be deemed to have been given on the date delivery was
first attempted. Notice sent by facsimile transmission shall be deemed given
upon confirmation that such Notice was received at the number specified above or
in a Notice to the sender. If Lessee has vacated the Leased Property, Lessor's
Notice may be posted on the door of the Leased Property.
ARTICLE XXXII
32.1 Appraisers. If it becomes necessary to determine Fair Market Value or
----------
Fair Market Rent for any purpose under this Lease, the party required or
permitted to give Notice of such required determination shall include in the
Notice the name of a person selected to act as appraiser on its behalf. Within
ten (10) days after such Notice, the party receiving such Notice shall give
Notice to the other party of its selection of a person to act as appraiser on
its behalf. The appraisers thus appointed, each of whom must be a member of the
Appraisal Institute (or any successor organization thereto) and experienced
in appraising facilities used for purposes similar to the Primary Intended Use
of the Facilities, shall, within forty-five (45) days after the date of the
Notice appointing the first appraiser, proceed to appraise the Leased Property
or Leased Properties, as the case may be, to determine the Fair Market Value or
Fair Market Rent thereof as of the relevant date (giving effect to the impact,
if any, of inflation between the date of their decision and the relevant date);
provided, however, that if only one appraiser has been so appointed, or if two
appraisers have been so appointed but only one such appraiser has made such
determination within fifty (50) days after the date of the Notice appointing the
first appraiser, then the determination of such appraiser shall be final and
binding upon the parties. To the extent consistent with sound appraisal
practice at the time of any such appraisal, such appraisal shall be made on a
basis consistent with the basis on which the Leased Property or Leased
Properties were appraised for purposes of determining its Fair Market Value at
the time of Lessor's acquisition thereof. If two appraisers have been appointed
and have made their determinations within the respective requisite periods set
forth above, and if the difference between the amounts so determined does not
exceed ten percent (10%) of the lesser of such amounts, then the Fair Market
Value or Fair Market Rent shall be an amount equal to fifty percent (50%) of the
sum of the amounts so determined. If the difference between the amounts so
determined exceeds ten percent (10%) of the lesser of such amounts, then such
two appraisers shall within twenty (20) days appoint a third appraiser. If no
such appraiser is appointed within such twenty (20) days or within ninety (90)
days of the date of the Notice appointing the first appraiser, whichever is
earlier, either Lessor or Lessee may apply to any court having jurisdiction to
have such appointment made by such court. Any appraiser appointed by the
original appraisers or by such court shall be instructed to determine the Fair
Market Value or Fair Market Rent within forty-five (45) days after appointment
of such appraiser. The determination of the appraiser which differs most in
terms of dollar amount from the determinations of the other two appraisers shall
be excluded, and the average of the remaining two determinations shall be final
and binding upon Lessor and Lessee as the Fair Market Value or Fair Market Rent
of the Leased Property or Leased Properties, as the case may be. If the Fair
Market Rent is being determined for more than one year, the Fair Market Rent may
include such annual increases, if any, as the appraisers determine to be in
accordance with the terms of this Lease.
32.2 This provision for determining by appraisal shall be specifically
enforceable to the extent such remedy is available under applicable law, and any
determination hereunder shall be final and binding upon the parties except as
otherwise provided by applicable law, and judgment may be entered upon such
determination in a court of competent jurisdiction. Lessor and Lessee shall
each pay the fees and expenses of the appraiser appointed by it and each shall
pay one-half of the fees and expenses of the third appraiser and one-half of all
other costs and expenses incurred in connection with each appraisal.
ARTICLE XXXIII
33.1 Intentionally omitted.
-----------------------
ARTICLE XXXIV
34.1 Facility Trade Names. Upon expiration or termination of this Lease,
----------------------
Lessee shall not use the Facility Trade Names and Lessor shall not use any
Facility Trade Names which include the word "Emeritus" in them.
34.2 Transfer of Operational Control of the Facility.
-----------------------------------------------------
34.2.1 If the certificates of need or licenses to operate the Leased
Property for the Primary Intended Use are issued to Lessee, any approved
sublessee or the Manager, Lessee agrees that it will cooperate with Lessor to
turn over or cause to be turned over to Lessor or its designee, upon the
expiration or earlier termination of the Term, all of Lessee's and such
sublessee's or Manager's rights in connection with the certificate of need
and/or licenses.
34.2.2 Upon the expiration or earlier termination of the Term, Lessee shall
cooperate fully in transferring operational control of the Facility to Lessor or
Lessor's nominee and shall use its best efforts to cause the business conducted
at the Facility to continue without interruption. Upon the request of Lessor,
Lessee shall execute and deliver an Operations Transfer Agreement to Lessor and
any new operator identified by Lessor in substantially the same form as the
Operations Transfer Agreement attached as Exhibit E. The obligation of Lessee
---------
regarding the Operations Transfer Agreement shall survive the termination of
this Lease. To that end, pending completion of the transfer of the operational
control of the Facility to Lessor or its nominee:
(a) Lessee will provide all necessary information requested by Lessor or its
nominee for the preparation and filing of any and all necessary
applications or notifications of any federal or state governmental authority
having jurisdiction over a change in the operational control of the Facility,
and any other information reasonably required to effect an orderly transfer of
the Facility, and Lessee will use its best efforts to cause all operating health
care licenses to be transferred to Lessor or to Lessor's nominee; and
(b) Lessee shall engage only in transactions or other activities with
respect to the Facility that are in the ordinary course of its business and
shall perform all maintenance and repairs reasonably necessary to keep the
Facility in satisfactory operating condition and repair, and shall maintain the
supplies and foodstuffs at levels that are consistent and in compliance with all
health care regulations, and shall not sell or remove any personal property
except in the ordinary course of business and in accordance with the terms and
conditions of this Lease.
ARTICLE XXXV
35.1 Arbitration. Except with respect to the payment of Rent under this
-----------
Lease, the determination of Fair Market Rent and any proceedings to recover
possession of the Leased Property, if any controversy arises between the parties
hereto as to any of the provisions of this Lease or the performance
thereof, and if the parties are unable to settle the controversy by agreement or
as otherwise provided herein, the controversy shall be decided by arbitration.
The arbitration shall be conducted by three arbitrators selected in accordance
with the rules and procedures of the American Arbitration Association. The
decision of the arbitrators shall be final and binding, and judgment may be
entered thereon in any court of competent jurisdiction. The decision shall set
forth in writing the basis for the decision. In rendering the decision and
award, the arbitrators shall not add to, subtract from or otherwise modify the
provisions of this Lease. The expense of the arbitration shall be divided
between Lessor and Lessee unless otherwise specified in the award. Each party
in interest shall pay the fees and expenses of its own counsel. The arbitration
shall be conducted in Ann Arbor, Michigan. In any arbitration, the parties
shall be entitled to conduct discovery in the same manner as permitted under
Federal Rules of Civil Procedure 26 through 37, as amended. No provision in
this Article shall limit the right of any party to this Agreement to obtain
provisional or ancillary remedies from a court of competent jurisdiction before,
after or during the pendency of any arbitration, and the exercise of such
remedies does not constitute a waiver of the right of either party to
arbitration.
ARTICLE XXXVI
36.1 Miscellaneous.
-------------
36.1.1 Survival, Choice of law. Anything contained in this Lease to the
--------------------------
contrary notwithstanding, all claims against, and liabilities of, Lessee or
Lessor arising prior to the date of expiration or termination of this Lease
shall survive such expiration or termination. If any term or provision of this
Lease or any application thereof is held invalid or unenforceable, the remainder
of this Lease and any other application of such term or provisions shall
not be affected thereby. Neither this Lease nor any provision hereof may be
changed, waived, discharged or terminated except by an instrument in writing and
in recordable form signed by Lessor, a Facility Mortgagee and Lessee. All the
terms and provisions of this Lease shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns. The
headings in this Lease are for convenience of reference only and shall not limit
or otherwise affect the meaning hereof. This Lease shall be governed by and
construed in accordance with the laws of the State of Washington.
LESSEE CONSENTS TO IN PERSONAM JURISDICTION BEFORE THE STATE AND FEDERAL
COURTS OF THE STATES OF WASHINGTON AND MARYLAND, AND AGREES THAT ALL DISPUTES
CONCERNING THIS AGREEMENT SHALL BE HEARD IN THE STATE AND FEDERAL COURTS LOCATED
IN THE STATE OF MARYLAND OR WASHINGTON. LESSEE AGREES THAT SERVICE OF PROCESS
MAY BE EFFECTED UPON IT UNDER ANY METHOD PERMISSIBLE UNDER THE LAW OF THE STATE
OF MARYLAND OR WASHINGTON AND IRREVOCABLY WAIVES ANY OBJECTION TO VENUE IN THE
STATE AND FEDERAL COURTS OF THE STATES OF MARYLAND AND WASHINGTON.
36.1.2 Limitation on Recovery. Lessee specifically agrees to look solely to
----------------------
Lessor's interest in the Leased Property for recovery of any judgment from
Lessor, it being specifically agreed that no constituent shareholder, officer or
director of Lessor shall ever be personally liable for any such judgment or for
the payment of any monetary obligation to Lessee. Furthermore, Lessor (original
or successor) shall never be liable to Lessee for any indirect or consequential
damages suffered by Lessee from whatever cause.
36.1.3 Waivers. Lessee waives any defense by reason of any disability of
--------
Lessee, and waives any other defense based on the termination of Lessee's
(including Lessee's successor's) liability from any cause. Lessee waives all
presentments, demands for performance, notices of nonperformance, protests,
notices of protest, notices of dishonor, and notices of acceptance, and waives
all notices of the existence, creation, or incurring of new or additional
obligations.
36.1.4 Consents. Whenever the consent or approval of Lessor is required
--------
hereunder, Lessor may in its sole discretion and without reason withhold that
consent or approval unless otherwise specifically provided.
36.1.5 Counterparts. This Lease may be executed in separate counterparts,
------------
each of which shall be considered an original when each party has executed and
delivered to the other one or more copies of this Lease.
36.1.6 Options Personal. The renewal options granted to Lessee in this
-----------------
Lease, if any, are granted solely to Lessee and are not assignable or
transferable except in connection with a Transfer permitted in Article XXII.
36.1.7 Rights Cumulative. Except as provided herein to the contrary, the
------------------
respective rights and remedies of the parties specified in this Lease shall be
cumulative and in addition to any rights and remedies not specified in this
Lease.
36.1.8 Entire Agreement. There are no oral or written agreements or
-----------------
representations between the parties hereto affecting this Lease. This Lease
supersedes and cancels any and all previous negotiations, arrangements,
representations, brochures, agreements and understandings, if any, between
Lessor and Lessee.
36.1.9 Amendments in Writing. No provision of this Lease may be amended
-----------------------
except by an agreement in writing signed by Lessor and Lessee.
36.1.10 Severability. If any provision of this Lease or the application of
------------
such provision to any person, entity or circumstance is found invalid or
unenforceable by a court of competent jurisdiction, such determination shall not
affect the other provisions of this Lease and all other provisions of this Lease
shall be deemed valid and enforceable.
36.1.11 Time of the Essence. Except for the delivery of possession of the
---------------------
Facility to Lessee, time is of the essence with respect to all provisions of
this Lease of which time is an element.
ARTICLE XXXVII
37.1 Commissions. Lessee represents and warrants to Lessor that no real
-----------
estate commission, finder's fee or the like is due and owing to any person in
connection with this Lease. Lessee agrees to save, indemnify and hold Lessor
harmless from and against any and all claims, liabilities or obligations for
brokerage, finder's fees or the like in connection with this Lease or the
transactions contemplated hereby, asserted by any person on the basis of any
statement or act alleged to have been made or taken by Lessee.
ARTICLE XXXVIII
38.1 Memorandum or Short Form of Lease. Lessor and Lessee shall, promptly
-----------------------------------
upon the request of either, enter into a Memorandum or Short Form of this Lease,
substantially in the form of attached Exhibit F, with such modifications as
---------
may be appropriate under the laws and customs of the State of Washington and in
the customary form suitable for recording under the laws of the State of
Washington. Lessee shall pay all costs and expenses of recording such
memorandum or short form of this Lease.
ARTICLE XXXIX
39.1 Security Deposit. On the Commencement Date, Lessee shall deliver to
-----------------
Lessor a security deposit in the amount of Forty-five Thousand Dollars ($45,000)
("Security Deposit"), which Lessor shall hold as security for the full and
------------------
faithful performance by Lessee of each and every term, provision, covenant and
condition of this Lease. The Security Deposit shall not be considered an advance
payment of Rent (or of any other sum payable to Lessee under this Lease) or a
measure of Lessor's damages in case of a default by Lessee. The Security
Deposit shall not be considered a trust fund, and Lessee expressly acknowledges
and agrees that Lessor is not acting as a trustee or in any fiduciary capacity
in controlling or using the Security Deposit. Lessor shall have no obligation
to maintain the Security Deposit separate and apart from Lessor's general and/or
other funds. Unless earlier returned pursuant to Section 39.4 of this Lease,
the Security Deposit, less any portion thereof applied as provided Section 39.2,
shall be returned to Lessee within sixty (60) days following the expiration of
the Term.
39.2 Application of Security Deposit. If Lessee defaults in respect of any
--------------------------------
of the terms, provisions, covenants and conditions of this Lease or of any
agreement or instrument with which this Lease is cross-defaulted), including,
but not limited to, payment of any Rent and other sums of money payable by
Lessee, Lessor may, but shall not be required to, in addition to and not in lieu
of any other rights and remedies available to Lessor, apply all or any part of
the Security Deposit to the payment of any sum in default, or any other sum that
Lessor may expend or be required to expend by reason of Lessee's default,
including but not limited to, any damages or deficiency in reletting the Leased
Property. Whenever, and as often as, Lessor has applied any portion of the
Security Deposit to cure Lessee's default hereunder or under any agreement with
which this Lease is cross-defaulted, Lessee shall, within ten (10) days after
Notice from Lessor, deposit additional money with Lessor sufficient to restore
the Security Deposit to the full amount then required to be deposited with
Lessor pursuant to Section 39.1 above, and Lessee's failure to do so shall
constitute an Event of Default without any further Notice.
39.3 Transfer of Security Deposit. If Lessor transfers its interest under
------------------------------
this Lease, Lessor shall assign the Security Deposit to the new lessor and
thereafter Lessor shall have no further liability for the return of the Security
Deposit, and Lessee agrees to look solely to the new lessor for the return of
the Security Deposit. The provisions of the preceding sentence shall apply to
every transfer or assignment of Lessor's interest under this Lease. Lessee
agrees that it will not assign or encumber or attempt to assign or encumber the
Security Deposit and that Lessor, its successors and assigns may return the
Security Deposit to the last Lessee in possession at the last address for which
Notice has given by such Lessee and that Lessor thereafter shall be relieved of
any liability therefor, regardless of one or more assignments of this Lease or
any such actual or attempted assignment or encumbrances of the Security Deposit.
39.4 Return of Security Deposit. On the first day of the third Lease Year,
---------------------------
provided that no Event of Default or Unmatured Event of Default shall have
occurred and is continuing, or upon the first day thereafter that no Event of
Default or Unmatured Event of Default shall exist, the Security Deposit, less
any portion thereof applied as provided in Section 39.2, shall be returned to
Lessee and Lessee shall no longer be required to maintain a Security Deposit
under this Lease.
SIGNATURE PAGES FOLLOW
IN WITNESS WHEREOF, the parties have executed this Lease by their duly
authorized officers as of the date first above written.
LESSOR:
------
Washington Lessor - Silverdale, Inc.
By: /s/ Daniel J. Booth
Name: Daniel J. Booth
Title: Chief Operating Officer
LESSEE:
------
ESC-Silverdale, LLC
By: /s/ Raymond R. Brandstrom
Name: Raymond R. Brandstrom
Title: Vice President of Finance
THE STATE OF _____________)
)
COUNTY OF _______________)
This instrument was acknowledged before me on the ______ day of __________,
2003, by __________, the _____________ of Washington Lessor - Silverdale, Inc.,
a Maryland corporation, on behalf of said corporation.
Notary Public
THE STATE OF_____________)
)
COUNTY OF________________)
This instrument was acknowledged before me on the _____ day of _________,
2003, by _____, the ____________ of ESC-Silverdale, LLC, a Washington limited
liability company, on behalf of said limited liability company.
Notary Public
LIST OF EXHIBITS TO LEASE
EXHIBITS A - Facility Trade Names
EXHIBIT B - Description of Land
EXHIBIT C - Form of Lessee's Certificate
EXHIBIT D - Permitted Encumbrances
EXHIBIT E - Form of Operations Transfer Agreement
EXHIBIT F - Form of Memorandum and Short Form of
Lease
A-1
EXHIBIT A
FACILITY TRADE NAMES
Trade Names
------------
Name Address
- ---- -------
Emeritus Oaks of Silverdale 1501 N.W. Tower View Circle
Silverdale, Washington 98383 Emeritus Oaks of Silverdale
B-1
EXHIBIT B
DESCRIPTION OF LAND
Tract 1, Ridge Point West, Division 3, according to the plat recorded in Volume
25 of Plats, Pages 181, 182 and 183, Records of Kitsap County, Washington.
C-1
EXHIBIT C
FORM OF LESSEE'S CERTIFICATE
The undersigned
("Lessee") under that certain Lease (the "Lease") dated
, 20 and made with, a ("Lessor"), hereby certifies:
1. That it is Lessee under the Lease; that attached hereto as Exhibit "A" is
-----------
a true and correct copy of the Lease; that the Lease is now in full force and
effect and has not been amended, modified or assigned except as disclosed or
included in Exhibit "A"; and that the Lease constitutes the entire agreement
------------
between Lessor and Lessee.
2. That there exist no defenses or offsets to enforcement of the Lease; that
there are, as of the date hereof, no breaches or uncured defaults on the part of
Lessee or Lessor thereunder; and that Lessee has no notice or knowledge of any
prior assignment, hypothecation, subletting or other transfer of Lessor's
interest in the Lease.
3. That the Base Rent for the first Lease Year under this Lease is
$_____________. All Rent which is due has been paid, and there are no unpaid
-----
Additional Charges owing by Lessee under the Lease as of the date hereof. No
Base Rent or other items (including without limitation security deposit and any
impound account or funds) have been paid by Lessee in advance under the Lease
except for the security deposit held by Lessor [in the form of an irrevocable
letter of credit] in the amount of $ and the monthly installment of Base Rent
that became due on .
4. That Lessee has no claim against Lessor for any security deposit, impound
account or prepaid Rent except as provided in paragraph 3 of this Certificate.
5. That there are no actions, whether voluntary or otherwise, pending
against the undersigned under the bankruptcy laws of the United States or any
state thereof, nor has Lessee nor, to the best of Lessee's knowledge has Lessor
begun any action, or given or received any notice for the purpose of termination
of the Lease.
6. That there are, as of the date hereof, no breaches or uncured defaults on
the part of Lessee under any other agreement executed in connection with the
Lease.
7. This Certificate has been requested by Lessor pursuant to Section 19.3 of
this Lease and for the benefit of __________________________________("Relying
Party"). The Relying Party is entitled to rely on the statements of Lessee
contained in this certificate.
8. All capitalized terms used herein and not defined herein shall have the
meanings for such terms set forth in the Lease.
Dated: _____, 20__ LESSEE:
------
By:
D-1
EXHIBIT D
PERMITTED ENCUMBRANCES
1. Easement, including its terms, covenants and provisions as disclosed by
instrument recorded October 7, 1988, Recording No. 8810070092, aforesaid
records.
2. Easement recorded May 10, 1989, Recording No. 8905100067, aforesaid
records.
3. Easement recorded May 10, 1989, Recording No. 89005100068, aforesaid
records.
4. Easement recorded September 14, 1989, Recording No. 8909140032, aforesaid
records.
5. Easement in favor of Puget Sound Power and Light Company and/or Puget
Sound Energy, recorded March 19, 1999, in the office of the recording officer of
Kitsap County, Washington under Auditor's File No. 3164188, aforesaid records.
6. Covenants, conditions and restrictions contained in instrument recorded
September 22, 1998, Recording No. 3119741, aforesaid records.
7. Liability for maintenance of storm drainage as disclosed by instrument
recorded under Auditor's File No. 3119741, aforesaid records.
8. Easement as dedicated on the face of the plat of said addition for
slopes, also the right to drain all streets over and across any lot or lots
where water might take a natural course after the street or streets are graded.
9. The following is shown in the dedication on the face of the plat:
Dimensions and uses of all lots, tracts or parcels of land embraced in this plat
are subject to and shall be in conformity with Kitsap County Zoning Regulations.
10. Provisions for multi-purpose easements as dedicated on the face of said
plat.
11. Encroachment of water line and grass area along the southwest corner of
the property as disclosed by survey made by Barghausen Consulting Engineers,
Inc., under Job No. 6313, dated June 2, 1999.
E - 17
EXHIBIT E
FORM OF OPERATIONS TRANSFER AGREEMENT
---_________________
OPERATIONS TRANSFER AGREEMENT
(Silverdale, Washington Facility)
THIS OPERATIONS TRANSFER AGREEMENT ("Agreement") is entered into as of
---------
_________, 20__ (the "Effective Date") by and between EMERITUS CORPORATION, a
--------------
Washington corporation ("Manager"), ESC-SILVERDALE, LLC, a Washington limited
-------
liability company ("ESC"), WASHINGTON LESSOR - SILVERDALE, INC., a Maryland
---
corporation ("Lessor"), and ________________________, a ___________________
------
("New Operator").
-----------
BACKGROUND
----------
A. Lessor is the owner of the following assisted living facility (the
"Facility"):
--------
Emeritus Oaks of Silverdale
1501 NW Tower View Circle
Silverdale, WA 98383
B. ESC is leasing the Facility from Lessor pursuant to a Single
Facility Lease dated as of August __, 2003, as amended (as so amended, the
"Lease").
-
C. Manager is the manager of the Facility pursuant to a Management Agreement
(as defined in the Lease) between Manager and ESC (the "Management Agreement").
--------------------
ESC and Manager are each referred to as an "Emeritus Entity" and sometimes
---------------
collectively as the "Emeritus Entities".
------------------
D. This Agreement is being executed pursuant to the Lease.
E. The parties to this Agreement desire to enter into this Agreement in
order to facilitate an orderly transition of the possession and operation of the
Facility to New Operator.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the mutual promises contained herein,
and for other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the parties hereto agree that:
ARTICLE I
THE CLOSING
1.1 Effectiveness of Closing. The closing (the "Closing") under this
-------------------------- -------
Agreement shall be effective as of 11:59:59 p.m. on the date agreed to by the
parties following New Operator obtaining all Regulatory Clearances (as
hereinafter defined) (the "Closing Date").
-------------
1.2 Manager's Deliveries at Closing. Manager and ESC, as applicable, shall
--------------------------------
deliver the following to New Operator at the Closing:
(a) Executed warranty Bill of Sale for Personal Property (as hereinafter
defined) pursuant to Section 2.2 of this Agreement;
(b) Executed Assignments of the Third Party Contracts requested by New
Operator pursuant to Section 2.3 of this Agreement;
(c) Executed termination with respect to the Management Agreement;
(d) Executed counterparts of a closing statement (the "Closing Statement")
-----------------
reflecting the estimated prorations and other payments and credits to be made at
Closing pursuant hereto, which amounts are subject to post-closing
reconciliation pursuant to Section 2.9 below; and
(e) Payment in immediately available funds of amounts due New Operator, if
any, from the Emeritus Entities pursuant to this Agreement at Closing as
reflected in the Closing Statement.
1.3 New Operator's Deliveries at Closing. New Operator shall deliver
--------------------------------------
the following to the Emeritus Entities at the Closing:
(a) Executed counterpart of the Closing Statement;
(b) Payment in immediately available funds of amounts due the Emeritus
Entities, if any, from New Operator at Closing as reflected in the Closing
Statement; and
(c) Reasonable evidence that New Operator has obtained all Regulatory
Clearances.
1.4 Payment. Any amounts owed under Sections 1.2 and 1.3 shall be set off
-------
against each other at Closing. To the extent a party is owed a payment after
such set off, such payment shall be made in cash at Closing via wire transfer of
immediately available funds to a bank account specified by the party owed a
payment.
1.5 Liabilities Not Assumed. Neither Lessor nor New Operator shall assume
-------------------------
or be responsible to pay, perform or discharge any obligations, liabilities,
contracts or commitments of the Emeritus Entities of any kind or nature
whatsoever, other than those contracts and obligations New Operator expressly
agrees to assume hereunder or at Closing.
ARTICLE II
TRANSFER OF OPERATIONS
2.1 Cooperation. The Emeritus Entities agrees to cooperate with New
-----------
Operator, and New Operator agrees to cooperate with the Emeritus Entities, to
effect an orderly transfer of possession and the operation of the Facility.
2.2 Conveyance of Supplies and Personal Property. Each of the Emeritus
-------------------------------------------------
Entities hereby agree to sell, transfer and convey to New Operator as of the
Closing Date, all of its right, title and interest, if any, in and to any
furniture, fixtures, equipment (including, to the extent owned, if any, computer
hardware and software, except (1) proprietary software and (2) computer hardware
and software subject to lease), and supplies (including linens, consumables and
foodstuffs, medical supplies, office supplies, and maintenance inventories)
owned by an Emeritus Entity and located at a Facility as of the Closing, but
specifically excluding the Emeritus Entities' proprietary brochures and any
vehicles, copiers, facsimile machines, or other personal property (the "Leased
Property") that are leased by the Emeritus Entities as permitted by the Lease,
and all signage bearing the Emeritus Entities' names (or portions thereof) or
trademarks or service marks owned by the Emeritus Entities (or either of them)
(collectively, the "Personal Property") for and in consideration of the mutual
-----------------
promises contained in this Agreement, the Settlement Agreement and the Second
Amendment. The Emeritus Entities shall also assign their interest in any
telephone or facsimile numbers in use at the Facility. The Emeritus Entities
shall have no obligation to deliver the Personal Property to any location other
than the Facility, and New Operator agrees that the presence of the Personal
Property at the Facility at Closing shall constitute delivery thereof. Except
for the Leased Property and any Special Purpose Personal Property, all of the
furniture, fixtures, equipment and supplies used by the Emeritus Entities in
connection with the operation of the Facility is being transferred and conveyed
to New Operator under this Agreement. On the Closing Date, the Emeritus
Entities covenant that the supplies at the Facility will be sufficient to
satisfy any minimum requirements established under applicable state law. Other
than the vehicles, copiers and facsimile machines, Manager has no actual
knowledge of any other Leased Property at the Facility.
2.3 Contracts.
---------
(a) New Operator shall not be obligated to assume any leases or executory
contracts of an Emeritus Entity in respect of the Facility; provided, however,
that New Operator shall assume the obligations of the Emeritus Entities with
respect to (1) residency agreements for residents at the Facility on the Closing
Date for residency for periods after the Closing Date or for services or care
provided after the Closing Date, and (2) post-Closing Date services provided
pursuant to Designated Third Party Contracts (as hereinafter defined).
(b) Prior to the Effective Date, Manager has provided New Operator with
copies of all of the Emeritus Entities' current service contracts with third
party vendors that are in effect on the Effective Date (the "Operating
---------
Contracts"). A list of those contracts is included as Schedule 2.3. In the
event New Operator wishes the Emeritus Entities to terminate any such contracts,
New Operator shall give the Emeritus Entities notice of same within five (5)
business days after the Effective Date, and upon the Closing the Emeritus
Entities shall give notice to the appropriate vendors to terminate such
contracts as soon as possible after the Closing. The Emeritus Entities and New
Operator acknowledge and agree that in the event Manager terminates any of the
Operating Contracts at the direction of New Operator but such termination will
not be effective until after the Closing Date as a result of notice provisions
set forth in such Operating Contacts (the "Termination Date"), if and to the
----------------
extent that New Operator derives any benefit from the goods or services provided
under such Operating Contracts between the Closing Date and the Termination
Date, New Operator shall reimburse the Emeritus Entities as part of the
reconciliation process for any payments under such Operating Contracts made by
the Emeritus Entities between the Closing Date and the Termination Date.
(c) All service contracts identified on Schedule 2.3 which New Operator does
not specify that the Emeritus Entities should terminate, shall constitute the
"Designated Third Party Contracts" and shall be assigned by the Emeritus
----------------------------------
Entities to New Operator at Closing; provided, however, that in no event shall
-----
New Operator assume any liability related to goods or services provided under
the Designated Third Party Contracts on or before the Closing Date.
(d) If an Emeritus Entity enters into any contract with a third party vendor
after the Effective Date, (1) the contract shall provide that it may be
terminated upon not more than thirty (30) days' notice, (2) the Emeritus
Entities shall immediately provide New Operator with a copy of the contract, and
(3) the contract shall be terminated by the Emeritus Entities on the Closing
Date unless New Operator notifies the Emeritus Entities prior to the Closing
Date that it wants the Emeritus Entities to assign the contract to New Operator,
in which event it shall become a Designated Third Party Contract.
2.4 Transfer of Resident Trust Funds. On the Closing Date, the
------------------------------------
Emeritus Entities shall provide to New Operator a true, correct and complete
accounting (properly reconciled) of any resident trust funds and an inventory of
all residents' property held by Manager on the Closing Date for residents at the
Facility. On the Closing Date, the Emeritus Entities shall assign and transfer
to New Operator the resident trust accounts maintained by the Emeritus Entities
and all residents' property held by Manager as of the Closing Date.
2.5 Cooperation. The Emeritus Entities and New Operator shall
-----------
cooperate with each other in connection with any claim, demand, appeal, lawsuit
or proceeding, arising out of or in any way relating to the operation of the
Facility prior to the Closing Date, including providing and making available for
inspection and copying, at the requesting party's sole cost and expense, any
information that the requesting party reasonably deems necessary in prosecuting
or defending any such claim, demand, appeal, lawsuit or proceeding.
2.6 Employees.
---------
(a) The Emeritus Entities shall terminate all Hired Employees (as
defined in Section 2.6(b) below) effective as of the end of business on the
Closing Date, shall either terminate or reassign to other duties all other
employees of the Facility who are not Hired Employees, and shall be solely
responsible for all costs and expenses in so terminating or reassigning, as
applicable, all employees of the Facility. The Emeritus Entities shall pay all
wages due to all Facility employees (whether or not they are Hired Employees) as
of 11:59:59 p.m. on the Closing Date. In addition, the Emeritus Entities shall
be solely liable for payment of all Employee Benefits (as defined in Section 2.8
below) due as of 11:59:59 p.m. on the Closing Date to all Facility employees
(including all Hired Employees pursuant to Section 2.8 of this Agreement).
There shall be no proration at closing of payroll for employees (whether or not
they are Hired Employees), as all employees will be terminated by the Emeritus
Entities as of the Closing Date.
(b) New Operator shall offer employment to at least two-thirds (2/3) of the
employees of the Facility who, as of the Closing Date, work at the Facility and
have been employed on an average of 20 hours or more per week in the month
immediately preceding the Closing Date and have provided services solely to such
Facility. Such employees, who accept employment with New Operator, shall be
referred to as the "Hired Employees." Any such employment of a Hired Employee
---------------
by New Operator shall be on such terms as New Operator in its discretion elects.
Manager and any of its affiliates shall have the right to employ or offer to
employ in any other facility or corporate offices of Manager or its affiliates
any employee of the Facility who declines to accept employment with New
Operator; provided, however, that Manager shall not actively solicit such
employment. Prior to the Closing Date, the Emeritus Entities shall grant New
Operator reasonable access to the Facility's employees for purpose of carrying
out this Section 2.6(b).
(c) New Operator and the Emeritus Entities acknowledge and agree that the
provisions of Section 2.6(b) are designed, in part, to ensure that the Emeritus
Entities are not required to give notice to employees of the Facility of the
"closure" thereof under the Worker Adjustment and Restraining Notification Act
(the "WARN Act") or any other comparable state law. Nothing in this Section 2.6
--------
shall, however, create any rights in favor of any person not a party hereto,
including employees of the Facility, or constitute an employment agreement or
condition of employment for any employee of Manager or any affiliate of Manager
who is a Hired Employee.
(d) The Emeritus Entities shall offer and provide, as appropriate, group
health plan continuation coverage pursuant to the requirement of Section 601 et.
seq. of ERISA and Section 4980B of the Internal Revenue Code ("COBRA") to all
-----
the employees of the Facility to whom they are required to offer the same under
applicable law. New Operator in its discretion may also elect to provide group
health plan coverage to Hired Employees on such terms as New Operator elects.
(e) For a period of ninety (90) days after the Closing Date, Manager shall
retain and continue to make available for consultation with New Operator the
Directors of Nursing, Facility Administrators and employees of the Emeritus
Entities who are not employed at the Facility but who provide essential services
to the Facility, such as billing, collection, filing Medicaid cost reports,
attending to licensing issues and similar services, and investigating,
documenting and filing proof of claims with respect to potential claims arising
under the Facility's insurance policies.
2.7 Accounts Receivable.
--------------------
(a) Subject to (i) the terms of the Transaction Documents (as defined in the
Second Amendment), including the grant of security interests and exercise of any
remedies thereunder in favor of Lessor, and (ii) Section 2.9 below with respect
to the proration of revenues and expenses from operating the Facility, the
Emeritus Entities shall retain all unpaid accounts receivable, including, but
not limited to, any arising on or prior to the Closing Date and any accounts
receivable arising from rate adjustments which relate to the period on or prior
to the Closing Date even if such adjustments occur after the Closing Date, as of
11:59:59 p.m. on the Closing Date with respect to the Facility, but only to the
extent that such accounts receivable relate to services rendered on or prior to
the Closing Date, and shall provide New Operator with copies of Manager's
records with respect thereto upon request. The Emeritus Entities shall, during
the period prior to the Closing Date, use and continue to use commercially
reasonable efforts to collect accounts receivables relating to periods prior to
the Closing Date from the responsible party therefor. All accounts receivable
that relate to services rendered after the Closing Date shall be the sole
property of New Operator free and clear of any liens or any security interests
granted by the Emeritus Entities.
(b) If at any time after the Closing Date, New Operator shall receive any
payment, which payment represents payment for, or reimbursement with respect to,
payments or underpayments made to the Emeritus Entities for services rendered on
or prior to the Closing Date, then New Operator shall remit such payments to the
Emeritus Entities. If at any time before or after the Closing Date, the
Emeritus Entities shall receive any payment, which payment represents payment
for, or reimbursement with respect to, payments or underpayments made to New
Operator for services to be rendered after the Closing Date, then the Emeritus
Entities shall remit such payments to New Operator. All non-designated payments
received during the first thirty (30) days after the Closing Date will first be
applied to any pre-Closing Date accounts receivable of the Emeritus Entities due
from such payee and not older than sixty (60) days since the date of invoice,
with the excess, if any, applied to the extent of any balances due for services
rendered by New Operator after the Closing Date. All non-designated payments
thereafter shall be retained by New Operator; provided, however, that if New
Operator has been paid all amounts due from a resident during the period that
New Operator operates the Facility and that resident is no longer a resident of
the Facility, any non-designated payments shall be remitted to the Emeritus
Entities if the Emeritus Entities document that they have a balance due from
that resident.
(c) To the extent either party receives any proceeds from the accounts
receivable of the other party, both parties acknowledge that the party receiving
the payment belonging to the other party shall hold the payment in trust, that
neither party shall have any right to offset with respect to such accounts
receivable, and that the party erroneously receiving the payment shall have no
right, title or interest whatsoever in the payment and shall remit the same to
the other within ten (10) days of receipt.
2.8 Employment Benefits. On or before the Closing Date, the Emeritus
--------------------
Entities shall prepare an accounting of all accrued and earned paid time off due
to all employees in accordance with the Emeritus Entities' standard policies and
state and federal law as of 11:59:59 p.m. on the Closing Date (collectively,
"Employee Benefits"). On the next regularly occurring payday following the
----------------
Closing Date, the Emeritus Entities shall pay to the respective employees their
--
respective Employee Benefits in their final paychecks. The Emeritus Entities
acknowledge that:
(a) Neither Lessor nor New Operator shall have any liability to any
employees terminated by the Emeritus Entities on or prior to the Closing Date
for benefits pursuant to Section 601, et seq. of ERISA and COBRA; and
(b) the Emeritus Entities shall be solely responsible for providing required
notices to all employees of the Facility as of the Closing Date pursuant to
COBRA.
The Emeritus Entities acknowledges and agrees that neither Lessor nor New
Operator is assuming any of the Emeritus Entities' obligations under COBRA, and
that all such obligations shall remain the obligations of the Emeritus Entities.
2.9 Prorations at Closing.
-----------------------
(a) Expenses, Costs and Charges. The following items shall be prorated
------------------------------
between the Emeritus Entities and New Operator effective as of the Closing Date,
with the Emeritus Entities responsible for such items prior to and as of the
Closing Date and New Operator responsible for such items after the Closing Date:
i. real and personal property taxes for the calendar year in which the
Closing occurs, giving recognition to any discount available for earliest
payment. If taxes are prorated on an estimated basis rather than the actual tax
for the year in which the Closing occurs, the parties shall adjust the prorated
amount when such actual tax is known, based on the final tax bill for the year
in which the Closing occurs; and
ii. water, fuel, electricity, telephone, garbage collection, sewage, and
other utility service charges and expenses; and
iii. any other accrued and apportionable operating costs, charges and
expenses.
The Emeritus Entities are not appealing any ad valorem tax assessment or
otherwise engaged in a tax contest. Any refund or reduction in taxes applicable
to any year prior to the year in which the Closing occurs shall be and remain
the property of Manager and if any such tax refund is paid to, received by or
credited to New Operator, New Operator shall promptly remit such payment or a
check for such credit to the Emeritus Entities.
The Emeritus Entities and New Operator acknowledge and agree that many, if
not all, of the items referenced in (ii) and (iii) may not be readily or easily
determinable as of the Closing Date, and as such will be part of the
reconciliation process more particularly described below.
(b) Resident Rents and Services Fees; Reconciliation. Resident rents and
---------------------------------------------------
service fees for the month of Closing, shall be allocated as of the Closing
Date; the portion thereof allocable to all time periods on and prior to the
Closing Date shall be credited to the Emeritus Entities and the portion thereof
allocable after the Closing Date shall be credited to New Operator. New
Operator and the Emeritus Entities hereby recognize and agree that all resident
rents and service fees for the month of Closing will not have been collected as
of the Closing Date. Therefore, the parties agree to estimate such amounts on
the Closing Statement and reconcile such estimate post-Closing as hereinafter
provided. If the Closing Date occurs on or before the 10th day of the month,
then New Operator shall receive a credit at Closing in an amount equal to fifty
percent (50%) of the total billed amount for resident rents and service fees.
If the Closing occurs on or after the 10th day of the month, then New Operator
shall receive a credit at Closing which is prorated based on resident rents and
service fees actually collected by the Emeritus Entities for the month of
Closing, determined as of the close of business on the date two (2) business
days prior to the Closing Date.
(c) Within forty-five (45) days after the Closing Date representatives
of the Emeritus Entities and New Operator shall prepare and deliver to each
other a schedule itemizing the prorations and adjustments to costs, charges and
expenses under Section 2.9(a), together with resident rents and service fees
actually collected (the "Initial Reconciliation"). The Initial Reconciliation
----------------------
shall include appropriate detail to identify the items being adjusted. A final
reconciliation of all such expenses, costs, charges, service fees and resident
rents shall be prepared and delivered by representatives of New Operator and the
Emeritus Entities to each other within seventy-five (75) days after the Closing
Date (the "Final Reconciliation"). The Final Reconciliation shall appropriately
--------------------
net all items to reflect the net amount owed to New Operator or to the Emeritus
Entities as a result of such reconciliation. After approval by both parties of
the Final Reconciliation, the party determined to owe cash as a result of such
Final Reconciliation shall promptly pay such cash to the other party.
2.10 Resident Deposits. The Emeritus Entities represent that there are
------------------
no traditional security deposits posted by residents of the Facilities with the
Emeritus Entities. In some instances, the Emeritus Entities collects move-in
fees from residents, which fees are deemed earned on their payment by the
resident to the Emeritus Entities. Under limited circumstances, such as the
death of the resident or if the resident's physician determines that the
resident needs care not offered by the Emeritus Entities within the first ninety
(90) days after the resident moves into the Facility, the Emeritus Entities will
refund a pro-rated portion of one-half of the move-in fee. New Operator and the
Emeritus Entities shall not prorate the move-in fees at Closing. The Emeritus
Entities shall be responsible for paying directly to a resident any refund of a
move-in fee that may be owed to such resident post-Closing under the terms of
the residency agreement between an Emeritus Entity and the resident.
2.11 Transfer of Records. Prior to the Closing, New Operator shall
---------------------
review the files physically located at the Facility, including without
limitation all employment files, medical records, cost reports, surveys with
plans of correction, historical financial records related to the Facility,
nonproprietary electronic files, and any other nonproprietary operational data
reasonably necessary to the operation of the Facility as authorized by
applicable law and notify Manager in writing not less than ten (10) days before
the Closing which files, if any, New Operator wants removed from the Facility at
Closing. At Closing, the Emeritus Entities shall remove the designated files
and shall transfer to New Operator all other files at the Facility; provided,
however, the Emeritus Entities shall be entitled to keep copies of all of the
foregoing as it deems necessary.
2.12 Computer Systems. Each of the Emeritus Entities represents to New
-----------------
Operator that it does not own any computer hardware used at the Facility as of
the date of this Agreement. The Emeritus Entities agree to provide New
Operator, upon its written request, with such unaudited financial and operating
reports for the Facility relating to the period on or prior to the Closing Date
as New Operator may request from time to time, and which can be produced by such
Emeritus Entity on an automated basis, provided that any such request is made no
later than ninety (90) after the Closing Date.
2.13 Operations Pending Transition. (a) Prior to the Closing Date,
------------------------------
the Emeritus Entities shall operate the Facility in accordance with its normal
and customary business practices, including the continued marketing and
admission of residents (utilizing the form of residency agreement in effect on
the Effective Date without material deviation), hiring and management of
employees, and compliance with governmental regulations. Manager shall use its
commercially reasonable best efforts to transition the Facility to New Operator
in substantially the same condition as exists at the Facility as of the date of
this Agreement. New Operator and Lessor acknowledge that the news of a change
in management often results in employee retention decreases and drops in
occupancy levels.
(b) The Emeritus Entities agrees not to actively solicit for transfer
any residents of the Facility.
(c) The Emeritus Entities agree not to directly solicit any employees of the
Facility for employment at any other facility of the Emeritus Entities prior to
the Closing Date and agrees not to directly solicit any Hired Employees for
employment at any other facility of the Emeritus Entities for a period of one
year after the Closing Date.
(d) The Emeritus Entities agree not to increase salaries of employees at the
Facility except in the ordinary course of business consistent with the Emeritus
Entities' practices at other facilities.
(e) The Emeritus Entities agrees to provide New Operator with copies of
accounts receivable aging reports as soon as such reports are available, but in
no event later than forty-five (45) days after the end of each calendar month.
2.14 Regulatory Clearances. New Operator shall be responsible for
----------------------
obtaining all Regulatory Clearances and the Emeritus Entities shall use its
commercially reasonable efforts to assist New Operator in such efforts. As used
herein, "Regulatory Clearances" means receipt by New Operator of either: (i) a
license issued by the Agency to operate the Facility of the type and kind which
is substantially consistent with the operations of the Facility as of the
Effective Date, or (ii) reasonable assurances by the Agency that the Agency will
issue a license authorizing New Operator to operate the Facility in a manner
substantially consistent with the manner that the Facility is being operated as
of the Effective Date, and permission to commence such operation. As used
herein, "Agency" means collectively any and all agencies and departments
responsible for licensure of assisted living facilities in the state of
Washington or their successor agencies or departments.
2.15 Advances by Lessor and Security for Obligations. To the extent
---------------------------------------------------
that the Emeritus Entities are unable to perform their obligations under this
Agreement, which performance requires in whole or in part the payment of money,
Lessor may advance funds on behalf of any such Emeritus Entity for purposes of
fulfilling such obligation. To the extent that Lessor advances funds on behalf
of an Emeritus Entity, as contemplated by the immediately preceding sentence, to
effectuate a Facility transfer pursuant to this Agreement, including funds
advanced for purposes of preparing bills, invoices or claims for payment with
third party payors with respect to services rendered or goods delivered at the
Facility, or to fund the Employee Benefits, the Emeritus Entities agree that any
amounts advanced pursuant to this Agreement shall constitute additional secured
obligations of the Emeritus Entities, due and payable upon demand, and shall be
secured by the Transaction Documents. The obligations of the Emeritus Entities
under this Agreement to the extent they are owed to, or ultimately performed
pursuant to this Section 2.15 by, Lessor are secured by all the liens,
encumbrances, security interests, pledges and guaranties given or granted
pursuant to the Transaction Documents. Lessor agrees that the Personal
Property and all receivables related to post-Closing Date services are being
transferred free of any liens, encumbrances or security interests given or
granted by any of the Emeritus Entities to Lessor or any of its affiliates.
ARTICLE III
INDEMNIFICATION
3.1 The Emeritus Entities Indemnification of New Operator. The
----------------------------------------------------------
Emeritus Entities shall, jointly and severally defend, indemnify and hold
harmless each of Lessor and New Operator from and against any and all losses,
damages, costs, expenses, liabilities, obligations and claims of any kind of any
nature, whether arising in contract or tort, at law or in equity, or otherwise,
from or arising out of or in connection with the management and operation of the
Facility on or prior to the Closing Date, including, but not limited to, (i)
bodily injury or property damage occurring within or about the Facility on or
prior to the Closing Date, (ii) labor disputes, including unfair labor practice
allegations, from acts or occurrences on or prior to the Closing Date, (iii)
accounts payable with respect to goods or services provided to the Facility on
or prior to the Closing Date and which have not been assumed by New Operator
under this Agreement or which are not subject to proration hereunder, and (iv)
claims made by Lessor or New Operator against the Emeritus Entities with respect
to the Emeritus Entities' indemnification obligations under this Agreement,
including without limitation claims relating to civil monetary penalties and
fraud offsets relating to the period on or prior to the Closing Date.
3.2 New Operator Indemnification of the Emeritus Entities. New Operator
-----------------------------------------------------
shall defend, indemnify and hold harmless the Emeritus Entities, their
directors, officers and shareholders, from and against any and all losses,
damages, costs, expenses, liabilities, obligations and claims of any kind of any
nature, whether arising in contract or tort, at law or in equity, or otherwise,
from or arising out of or in connection with the management and operation of the
Facility by New Operator after the Closing Date, including, but not limited to,
(i) bodily injury or property damage occurring within or about the Facility
after the Closing Date, (ii) labor disputes, including unfair labor practice
allegations, from acts or occurrences after the Closing Date, (iii) accounts
payable with respect to goods or services provided to the Facility after the
Closing Date, and (iv) claims made by the Emeritus Entities against New Operator
with respect to New Operator's indemnification obligations under this Agreement,
including without limitation claims relating to civil monetary penalties and
fraud offsets relating to the period after the Closing Date.
3.3 Claims. As soon as is reasonably practicable after the Emeritus
------
Entities, Lessor or New Operator becomes aware of any claim that it has to
recover against the other under this Article IV, the party to be indemnified
("Indemnified Party") shall notify the other party ("Indemnifying Party") in
----------------- ------------------
writing, which notice shall describe the claim in reasonable detail, and shall
indicate the amount (estimated, if necessary and to the extent feasible) of the
claim. The failure of any Indemnified Party to promptly give any Indemnifying
Party such notice shall not preclude such Indemnified Party from obtaining
indemnification under this Agreement, except to the extent that such Indemnified
Party's failure has materially prejudiced the Indemnifying Party's rights or
materially increased its liabilities and obligations hereunder. In the event of
a third party claim which is subject to indemnification under this Agreement,
the Indemnifying Party shall promptly defend such claim by counsel of its own
choosing, subject to the approval of the Indemnified Party, which approval shall
not unreasonably be withheld, and the Indemnified Party shall cooperate with the
Indemnifying Party in the defense of such claim including the settlement of the
matter on the basis stipulated by the Indemnifying Party (with the Indemnifying
Party being responsible for all costs and expenses of such settlement). If the
Indemnifying Party within a reasonable time after notice of a claim fails to
defend the Indemnified Party, the Indemnified Party shall be entitled to
undertake the defense, compromise or settlement of such claim at the expense of
and for the account and risk of the Indemnifying Party.
ARTICLE IV
RESPRESENTATIONS, WARRANTIES AND AGREEMENTS OF LESSOR
Lessor represents and warrants to the Emeritus Entities and New Operator
that the following representations and warranties are true and correct on the
date hereof:
4.1 Authority, Validity and Binding Effect. Lessor has all necessary power
----------------------------------------
and authority to carry on its business as it is now being conducted. Lessor has
all necessary power and authority to enter into this Agreement and to execute
all documents and instruments referred to herein or contemplated hereby and all
necessary action has been taken to authorize the individual executing this
Agreement to do so. This Agreement has been duly and validly executed and
delivered by Lessor and is enforceable against Lessor in accordance with its
terms.
4.2 Survival. All representations and warranties of Lessor shall survive the
--------
Closing Date for a period of one (1) year.
ARTICLE V
RESPRESENTATIONS, WARRANTIES AND AGREEMENTS OF NEW OPERATOR
New Operator represents and warrants to the Emeritus Entities and Lessor
that the following representations and warranties are true and correct on the
date hereof:
5.1 Authority, Validity and Binding Effect. New Operator has all necessary
----------------------------------------
power and authority to carry on its business as it is now being conducted. New
Operator has all necessary power and authority to enter into this Agreement and
to execute all documents and instruments referred to herein or contemplated
hereby and all necessary action has been taken to authorize the individual
executing this Agreement to do so. This Agreement has been duly and validly
executed and delivered by New Operator and is enforceable against New Operator
in accordance with its terms.
5.2 Access to Records. Subsequent to the Closing Date, New Operator shall
-------------------
allow the Emeritus Entities and their agents and representatives, at the
Emeritus Entities' sole cost and expense, to have reasonable access to (upon
reasonable prior notice), and to make copies of, the books and records and
supporting material of the Facility relating to the period prior to and
including the Closing Date, to the extent reasonably necessary to enable Manager
to investigate and defend malpractice, employee or other claims, to file or
defend cost reports and tax returns, to verify accounts receivable collections
due the Emeritus Entities, and to perform similar matters. New Operator will
maintain such books, records and other material comprising records of the
Facility's operations prior to the Closing Date that have been received by New
Operator from the Emeritus Entities or otherwise, including, but not limited to,
resident records and records of resident funds, to the extent required by law,
but in no event less than a period of three (3) years (provided that New
Operator will have no liability for failure to maintain any records which are
destroyed as a result of a fire or other similar casualty). Notwithstanding the
above, (1) the Emeritus Entities shall remove from the Facility any records that
New Operator requests it to remove prior to the Closing; and (2) with respect to
any records that New Operator does not request the Emeritus Entities to remove
at Closing, New Operator may deliver any such records to the Emeritus Entities
at any time after Closing and shall thereafter not be required to maintain such
records except to the extent required by law.
5.3 Licenses and Permits. New Operator shall represent and warrant to the
----------------------
Emeritus Entities as of the Closing Date that it has obtained all Regulatory
Clearances as of the Closing Date.
5.4 Survival. All representations and warranties of New Operator shall
--------
survive the Closing Date for a period of one (1) year.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE EMERITUS ENTITIES
Each of the Emeritus Entities hereby, jointly and severally, represents and
warrants as follows:
6.1 Authority, Validity and Binding Effect. Each of the Emeritus Entities
-----------------------------------------
has all necessary power and authority to enter into this Agreement and to
execute all documents and instruments referred to herein or contemplated hereby
and all necessary action has been taken to authorize the individual executing
this Agreement to do so. This Agreement has been duly and validly executed and
delivered by each of the Emeritus Entities and is enforceable against each of
the Emeritus Entities in accordance with its terms.
6.2 Personal Property. The Emeritus Entities have maintained Personal
------------------
Property, including inventories of linens, consumables and foodstuffs, and
medical supplies prior to the Closing Date consistent with the operation of the
Facility in the ordinary course of business and the requirements of applicable
law, and the Personal Property transferred to New Operator pursuant to this
Agreement reflects supply levels required to be maintained by the Emeritus
Entities in order to operate a assisted living facility.
6.3 Survival. All representations and warranties of the Emeritus Entities
--------
shall survive the Closing Date for a period of one (1) year.
ARTICLE VII
MISCELLANEOUS
7.1 Further Assurances. Each of the parties hereto agrees to execute
-------------------
and deliver any and all further agreements, documents or instruments necessary
to effectuate this Agreement and the transactions referred to herein or
contemplated hereby or reasonably requested by the other party to perfect or
evidence their rights hereunder.
7.2 Notices. Any notice, request or other communication ("Notice") to be
------- ------
given by any party hereunder shall be in writing and shall be sent by registered
or certified mail, postage prepaid, or by hand delivery or facsimile
transmission to the following addresses:
TO THE EMERITUS ENTITIES:
ESC-Silverdale, LLC
c/o Emeritus Corporation
1131 Elliott Avenue
Suite 500
Seattle, WA 98121
Telephone No.: (206) 298-2909
Facsimile No.: (206) 301-4500
With copy to The Nathanson Group
(which shall not 1520 Fourth Avenue
constitute notice): Sixth Floor
Seattle, WA 98101
Attn: Randi S. Nathanson
Telephone No.: (206) 623-6239
Facsimile No.: (206) 623-1738
TO LESSOR: c/o Omega Healthcare Investors, Inc.
9690 Deereco Road, Suite 100
Timonium, MD 21093
Attn.: Daniel J. Booth
Telephone No.: (410) 427-1700
Facsimile No.: (410) 427-8800
With copy to Mark Derwent, Esq.
(which shall not Myers Nelson Dillon & Shierk, PLLC
constitute notice): 125 Ottawa Avenue, N.W.
Suite 270
Grand Rapids, MI 49503
Telephone No.: (616) 233-9640x14
Facsimile No.: (616) 233-9642
TO NEW OPERATOR: _______________________
_______________________
_______________________
Telephone No.: (___) _______
Facsimile No.: (___) ________
With copy to _______________________
(which shall not _______________________
constitute notice): _______________________
_______________________
Telephone No.: (___) _______
Facsimile No.: (___) ________
or to such other address as either party may hereafter designate. Notice shall
be deemed to have been given on the date of delivery if such delivery is made on
a business day, or if not, on the first business day after delivery. If delivery
is refused, Notice shall be deemed to have been given on the date delivery was
first attempted. Notice sent by facsimile transmission shall be deemed given
upon confirmation (electronic or verbal) that such Notice was received at the
number specified above.
7.3 MUTUAL WAIVER OF RIGHT TO JURY TRIAL. EACH PARTY HERETO HEREBY
----------------------------------------
WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON,
ARISING OUT OF, OR IN ANY WAY RELATING TO THIS AGREEMENT.
7.4 Arbitration. In case any controversy arises between the parties hereto
-----------
as to any of the provisions of this Agreement or the performance thereof, and
the parties are unable to settle the controversy by agreement or as otherwise
provided herein, the controversy shall be decided by arbitration. The
arbitration shall be conducted by three arbitrators selected in accordance with
the rules and procedures of the American Arbitration Association. The decision
of the arbitrators shall be final and binding, and judgment may be entered
thereon in any court of competent jurisdiction. The decision shall set forth in
writing the basis for the decision. In rendering the decision and award, the
arbitrators shall not add to, subtract from, or otherwise modify the provisions
of this Agreement. The expense of the arbitration shall be divided between the
parties unless otherwise specified in the award. Each party in interest shall
pay the fees and expenses of its own counsel. The arbitration shall be
conducted in Seattle, Washington. In any arbitration, the parties shall be
entitled to conduct discovery in the same manner as permitted under Federal
Rules of Civil Procedure 26 through 37, as amended. No provision in this
Section shall limit the right of any party to this Agreement to obtain
provisional or ancillary remedies from a court of competent jurisdiction before,
after, or during the pendency of any arbitration, and the exercise of such
remedies does not constitute a waiver of the right of either party to
arbitration.
7.5 Entire Agreement; Amendment; Waiver. This Agreement together with the
-------------------------------------
other agreements referred to herein, constitutes the entire understanding
between the parties with respect to the subject matter hereof, superseding all
negotiations, prior discussions and preliminary agreements. This Agreement may
not be modified or amended except in writing signed by the parties hereto. No
waiver of any term, provision or condition of this Agreement, in any one or more
instances, shall be deemed to be or be construed as a further or continuing
waiver of any such term, provision or condition or as a waiver of any other
term, provision or condition of this Agreement. No failure to act shall be
construed as a waiver of any term, provision, condition or rights granted
hereunder.
7.6 Assignment. Neither this Agreement nor the rights, duties or
----------
obligations arising hereunder shall be assignable or delegable by either party
--
hereto without the express prior written consent of the other parties hereto;
provided, however, that, (a) the rights but not the obligations under this
Agreement shall be assignable by Lessor in whole or in part without Manager's
prior consent (but after notice to Manager and New Operator) to any entity that
is owned or controlled directly or indirectly by Lessor, any entity that
controls, is controlled by or is under common control with Lessor, including,
without limitation, through any merger or acquisition, (b) any assignment by New
Operator may only be to a party who will have all necessary Regulatory
Clearances to operate the Facility as of the Closing Date and (c) this Agreement
may be assigned as a matter of law to any successor entity to Manager.
7.7 Joint Venture; Third Party Beneficiaries. Nothing contained herein
--------------------------------------------
shall be construed as forming a joint venture or partnership between the parties
hereto with respect to the subject matter hereof. The parties hereto do not
intend that any third party shall have any rights under this Agreement.
7.8 Representation by Counsel. The parties hereto acknowledge that they
---------------------------
have been represented by independent legal counsel of their choosing throughout
all of the negotiations which preceded the execution of this Agreement, and that
each party has executed this Agreement with the consent and on the advice of
such independent legal counsel. This Agreement is a negotiated document. As a
result, any rule of construction providing for any ambiguity in the terms of
this Agreement to be construed against the draftsperson of this Agreement shall
be inapplicable to the interpretation of this Agreement.
7.9 Attorneys' Fees. If any legal action or arbitration proceeding is
----------------
brought for the enforcement of this Agreement, or because of an alleged dispute,
breach, default or misrepresentation in connection with any of the provisions of
this Agreement, the successful or prevailing party or parties shall be entitled
to recover reasonable and documented attorneys' fees and other costs actually
incurred in that action in addition to any other relief to which it or they may
be entitled.
7.10 Captions. The section headings contained herein are for convenience
--------
only and shall not be considered or referred to in resolving questions of
interpretation.
7.11 Counterparts. This Agreement may be executed in one or more
------------
counterparts and all such counterparts taken together shall constitute a single
-
original Agreement.
7.12 Governing Law. This Agreement shall be governed by, interpreted,
--------------
construed, applied and enforced in accordance with the laws of the State of
Washington applicable to contracts between residents of the State of Washington
which are to be performed entirely within the State of Washington, regardless of
(i) where this Agreement is executed or delivered; or (ii) where any payment or
other performance required by this Agreement is made or required to be made; or
(iii) where any breach of any provision of this Agreement occurs, or any cause
of action otherwise accrues; or (iv) where any action or other proceeding is
instituted or pending; or (v) the nationality, citizenship, domicile, principal
place of business or jurisdiction of organization or domestication of any party;
or (vi) whether the laws of the forum jurisdiction otherwise would apply the
laws of the jurisdiction other than the State of Washington; or (vii) any
combination of the foregoing.
Signatures on following page.
E-19
IN WITNESS WHEREOF, the parties hereto have executed this Operations
Transfer Agreement as of the day and year first above written.
ESC-SILVERDALE, LLC, a Washington limited liability company
By: _________________________________
Name: _________________________________
Its: _________________________________
EMERITUS CORPORATION, a Washington corporation
By: _________________________________
Name: _________________________________
Its: _________________________________
WASHINGTON LESSOR - SILVERDALE, INC., a Maryland corporation
By: _________________________________
Name: _________________________________
Its: _________________________________
__________________________, a _____________
By: _________________________________
Name: _________________________________
Its: _________________________________
469100
SCHEDULE 2.3
TO
OPERATIONS TRANSFER AGREEMENT
LIST OF ALL SERVICE CONTRACTS
F-3
EXHIBIT F
MEMORANDUM OR SHORT FORM OF LEASE
THIS INSTRUMENT PREPARED BY:
Mark E. Derwent
Myers Nelson Dillon & Shierk, PLLC
125 Ottawa Ave., N.W., Suite 370
Grand Rapids, Michigan 49503
THIS LEASE, made and entered into as of _____________, 2003, by and between
WASHINGTON LESSOR - SILVERDALE, INC., a Maryland corporation ("Lessor"), the
-----
address of which is 9690 Deereco Road, Suite 100, Timonium, MD 21093, and
ESC-Silverdale, LLC, a Washington limited liability company ("Lessee"), the
------
address of which is c\o Emeritus Corporation, 3131 Elliott Avenue, Suite 500,
Seattle, WA 98121 ("Lessee"), with respect to the real property identified in
------
Exhibit A attached hereto and located in Kitsap County, State of Washington.
--------
WITNESSETH:
1. For and in consideration of the rents reserved and the other
covenants contained in that certain Lease made by and between the parties hereto
and dated the date hereof ("Lease"), Lessor has and does hereby lease to Lessee,
-----
and Lessee has and does hereby take and rent from Lessor, all of Lessor's rights
and interest in and to the parcel of real property described in attached Exhibit
-------
"A" and all fixtures and improvements thereto, and certain personal and other
- ---
property as set forth in the Lease.
- --
2. The Initial Term of the Lease is ten (10) years, commencing
_____________, 2003 and ending on _________________, 2013.
3. As more particularly provided in the Lease, Lessee may elect to renew the
original term for two (2) ten (10) year optional renewal periods for a maximum
term, if exercised, of thirty (30) years after the Commencement Date.
4. This instrument is executed and recorded for the purpose of giving notice
of Lessee's interest in the property covered by the Lease and giving notice of
the existence of the Lease, to which reference is made for a full statement of
the terms and conditions thereof. The respective addresses of the parties
hereto are:
To Lessee: ESC-Silverdale, LLC
c/o Emeritus Corporation
3131 Elliott Avenue, Suite 500
Seattle, WA 98121
Attn: Raymond Brandstrom
Telephone No.: (206) 298-2909
Facsimile No.: (206) 301-4500
To Lessor: Washington Lessor - Silverdale, Inc.
c/o Omega Healthcare Investors, Inc.
9690 Deereco Road, Suite 100
Timonium, MD 21093
Attn.: Daniel J. Booth
Telephone No.: (410) 427-1700
Facsimile No.: (410) 427-8800
IN WITNESS WHEREOF, the parties have caused this instrument to be executed
by their duly authorized officer or officers and [general partners] [managing
partners], as applicable, all as of the day and date first above written.
LESSOR:
------
Washington Lessor - Silverdale, Inc.
By: ____________________________
Name: ____________________________
Title: ____________________________
LESSEE:
------
ESC-Silverdale, LLC
By: ____________________________
Name: ____________________________
Title: ____________________________
THE STATE OF _____________)
)
COUNTY OF _______________)
This instrument was acknowledged before me on the ______ day of __________,
2003, by __________, the _____________ of Washington Lessor - Silverdale, Inc.,
a Maryland corporation, on behalf of said corporation.
Notary Public
THE STATE OF_____________)
)
COUNTY OF________________)
This instrument was acknowledged before me on the _____ day of _________,
2003, by _____, the ____________ of ESC-Silverdale, LLC, a Washington limited
liability company, on behalf of said company.
Notary Public