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L E A S E
(Rosewood Court Facility)
HEALTH CARE PROPERTY INVESTORS, INC.
Lessor
AND
EMERITUS CORPORATION
Lessee
Dated as of March 29, 1996
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LEASE
THIS LEASE ("Lease") is dated as of the 29th day of March, 1996, and is
between HEALTH CARE PROPERTY INVESTORS, INC., a Maryland corporation ("Lessor")
and EMERITUS CORPORATION, a Washington corporation ("Lessee").
ARTICLE I.
1. LEASED PROPERTY; TERM
Upon and subject to the terms and conditions hereinafter set forth,
Lessor leases to Lessee and Lessee leases from Lessor all of Lessor's rights and
interest in and to the following (collectively the "Leased Property"):
(a) the real property described in Exhibit A attached hereto
(collectively, the "Land");
(b) all buildings, structures, Fixtures and other improvements of
every kind now or hereafter located on the Land including, alleyways and
connecting tunnels, sidewalks, utility pipes, conduits and lines (on-site
and off-site to the extent Lessor has obtained any interest in the same),
parking areas and roadways appurtenant to such buildings and structures and
Capital Additions funded by Lessor (collectively, the "Leased
Improvements");
(c) all easements, rights and appurtenances relating to the Land and
the Leased Improvements (collectively, the "Related Rights");
(d) all equipment, machinery, fixtures, and other items of real
and/or personal property, including all components thereof, now and
hereafter located in, on or used in connection with and permanently affixed
to or incorporated into the Leased Improvements, including all furnaces,
boilers, heaters, electrical equipment, heating, plumbing, lighting,
ventilating, refrigerating, incineration, air and water pollution control,
waste disposal, air-cooling and air-conditioning systems, apparatus,
sprinkler systems, fire and theft protection equipment, and built-in oxygen
and vacuum systems, all of which, to the greatest extent permitted by law,
are hereby deemed to constitute real estate, together with all
replacements, modifications, alterations and additions thereto
(collectively, the "Fixtures"); and
(e) the machinery, equipment, furniture and other personal property
described on Exhibit B attached hereto, together with all replacements and
substitutes therefor, (collectively, "Lessor's Personal Property").
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SUBJECT, HOWEVER, to the easements, encumbrances, covenants,
conditions and restrictions and other matters which affect the Leased Property
as of the date hereof or the Commencement Date or created thereafter as
permitted hereunder to have and to hold for a fixed term (the "Fixed Term")
commencing on the Commencement Date, as defined below, and ending at 11:59 p.m.
Los Angeles time on January 31, 2011, and the three (3) Extended Terms provided
for in Article XIX unless this Lease is earlier terminated as hereinafter
provided. Promptly after the Commencement Date, the parties shall execute an
amendment to this Lease in substantially the form attached hereto as Exhibit C
to confirm certain matters; notwithstanding the foregoing, the failure of Lessee
to so execute and deliver such amendment shall not affect Lessor's determination
of any such matters.
ARTICLE II.
2. DEFINITIONS. For all purposes of this Lease, except as otherwise
expressly provided or unless the context otherwise requires, (i) the terms used
in this Lease and defined in this Article have the meanings assigned to them in
this Article and include the plural as well as the singular; (ii) all accounting
terms not otherwise defined herein have the meanings assigned to them in
accordance with GAAP as at the time applicable; (iii) all references in this
Lease to designated "Articles," "Sections" and other subdivisions are to the
designated Articles, Sections and other subdivisions of this Lease; (iv) the
word "including" shall have the same meaning as the phrase "including, without
limitation," and other similar phrases; and (v) the words "herein," "hereof" and
"hereunder" and other similar words refer to this Lease as a whole and not to
any particular Article, Section or other subdivision:
ADDED VALUE PERCENTAGE: As defined in Section 10.4.
ADDITIONAL CHARGES: As defined in Article III.
ADDITIONAL RENT: As defined in Article III.
AFFILIATE: Any Person which, directly or indirectly, controls or
is controlled by or is under common control with any other Person. For purposes
of this definition, "control" (including the correlative meanings of the terms
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
through the ownership of voting securities, partnership interests or other
equity interests. When used with respect to any corporation, the term
"Affiliate" shall also include any Person which owns, directly or indirectly,
fifty percent (50%) or more of any class of security of such corporation, but
shall exclude any affiliates of Daniel R. Baty which but for their relationship
with Daniel R. Baty would not be considered affiliates of Lessee.
APPRAISER: As defined in Article XXXIV.
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APPRECIATION AMOUNT: The amount, if any, by which the Fair Market
Value exceeds the Minimum Repurchase Price of the Seven Properties in the
aggregate as of the Outside Closing Date.
ASSIGNMENT AGREEMENT: The Assignment Agreement, dated as of January
26, 1996, by and between Lessor, HCPI Trust, Lessee and Heritage Hills relating
to the acquisition by Lessor of the Countryside Property, Heritage Health Center
Property, Heritage Lodge Property, Pine Park Property, Skylyn Property and the
Summit Place Property, each as defined therein.
AWARD: All compensation, sums or anything of value awarded, paid or
received on a total or partial Condemnation.
BASE GROSS REVENUES: The Gross Revenues for the second Lease Year.
BASE PERIOD: The period commencing on that date which is eighteen
(18) months prior to the date any appraisal of the Facility is made pursuant
to the provisions of Article XXXIV and ending on the date which is six (6)
months prior to the date any such appraisal of the Facility is made.
BLS: Bureau of Labor Statistics, U.S. Department of Labor.
BUSINESS DAY: Each Monday, Tuesday, Wednesday, Thursday and Friday
which is 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.
CAPITAL ADDITIONS: One or more new buildings, or one or more
additional structures annexed to any portion of any of the Leased
Improvements, or the material expansion of existing improvements, which are
constructed on any parcel or portion of the Land, during the Term, including
construction of a new wing or new story, or the renovation of existing
improvements on the Leased Property in order to provide a functionally new
facility needed to provide services not previously offered.
CAPITAL ADDITION COSTS: The costs of any Capital Addition made to the
leased Property whether paid for by Lessee or Lessor, including (i) all permit
fees and other costs imposed by any governmental authority, the cost of site
preparation, the cost of construction including materials and labor, the cost of
supervision and related design, engineering and architectural services, the cost
of any fixtures, and if and to the extent approved by Lessor, the cost of
construction financing; (ii) fees paid to obtain necessary licenses and
certificates; (iii) the cost of any land contiguous to the Leased Property which
is to become a part of the Leased Property purchased for the purpose of placing
thereon the Capital Addition or any portion thereof or for providing means of
access thereto, or parking facilities therefor, including the cost of surveying
the same, but only to the extent approved by Lessor in
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writing and in advance if Lessor is funding such Capital Addition; (iv) the cost
of insurance, real estate taxes, water and sewage charges and other carrying
charges for such Capital Addition during construction; (v) the cost of title
insurance; (vi) reasonable fees and expenses of outside legal counsel; (vii)
filing, registration and recording taxes and fees; (viii) documentary stamp and
similar taxes; and (ix) all reasonable costs and expenses of Lessor and any
Person which has committed to finance the Capital Addition, including (a) the
reasonable fees and expenses of their respective outside legal counsel; (b)
printing expenses; (c) filing, registration and recording taxes and fees; (d)
documentary stamp and similar taxes; (e) title insurance charges and appraisal
fees; (f) rating agency fees; and (g) commitment fees charged by any Person
advancing or offering to advance any portion of the financing for such Capital
Addition.
CASH FLOW: The net income from the Facility, determined on the basis
of GAAP applied on a consistent basis, plus the sum of (i) depreciation and
amortization expense; (ii) Rent and other expenses payable hereunder, excluding,
however, Impositions; plus (iii) management fees; less the sum of (y) a
management fee allowance of five percent (5%) of Gross Revenues for the
corresponding period plus (z) an annual Two Hundred Dollar ($200) per unit
reserve, pro-rated for the corresponding period.
CASH FLOW COVERAGE: For any period, calculated as of the last day of
the period, the ratio of Cash Flow attributable to such period to total Rent
payable for such period under the Lease.
CLOSE OF ESCROW: As defined in Article XXXV.
CLOSING DATE: As defined in the Contract of Acquisition.
CODE: The Internal Revenue Code of 1986, as amended.
COMMENCEMENT DATE: The Closing Date.
CONDEMNATION: The exercise of any governmental power, whether by
legal proceedings or otherwise, by a Condemnor or a voluntary sale or transfer
by Lessor to any Condemnor, either under threat of reasonably imminent
condemnation or while legal proceedings for condemnation are pending.
CONDEMNOR: Any public or quasi-public authority, or private
corporation or individual, having the power of Condemnation.
CONSOLIDATED FINANCIALS: For any fiscal year or other accounting
period for Lessee and its consolidated Subsidiaries, statements of earnings and
retained earnings and of changes in financial position for such period and for
the period from the beginning of the respective fiscal year to the end of such
period and the related balance sheet as at the end of
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such period, together with the notes thereto, all in reasonable detail and
setting forth in comparative form the corresponding figures for the
corresponding period in the preceding fiscal year, and prepared in accordance
with GAAP.
CONSOLIDATED NET WORTH: At any time, the sum of the following for
Lessee and its consolidated Subsidiaries, on a consolidated basis determined in
accordance with GAAP:
(i) the amount of capital or stated capital (after
deducting the cost of any shares held in its treasury), plus
(ii) the amount of capital surplus and retained earnings
(or, in the case of a capital surplus or retained earnings deficit, minus
the amount of such deficit), minus
(iii) the sum of the following (without duplication of
deductions in respect of items already deducted in arriving at surplus and
retained earnings): (a) unamortized debt discount and expense; and (b) any
write-up in book value of assets resulting from a revaluation thereof
subsequent to the most recent Consolidated Financials prior to the date
hereof, excluding, however, any (i) net write-up in value of foreign
currency in accordance with GAAP, (ii) write-up resulting from a reversal
of a reserve for bad debts or depreciation, and (iii) write-up resulting
from a change in methods of accounting for inventory.
CONTRACT OF ACQUISITION: The Contract of Acquisition of even date
herewith by and between Lessor and Lessee relative to the acquisition by Lessor
of the Leased Property.
COST OF LIVING INDEX: The Consumer Price Index for All Urban
Consumers, U.S. City Average (1982-1984 = 100), published by the BLS, or such
other renamed index. If the BLS changes the publication frequency of the Cost
of Living Index so that a Cost of Living Index is not available to make a cost-
of-living adjustment as specified herein, the cost-of-living adjustment shall be
based on the percentage difference between the Cost of Living Index for the
closest preceding month for which a Cost of Living Index is available and the
Cost of Living Index for the comparison month as required by this Lease. If the
BLS changes the base reference period for the Cost of Living Index from 1982-84
= 100, the cost-of-living adjustment shall be determined with the use of such
conversion formula or table as may be published by the BLS. If the BLS
otherwise substantially revises, or ceases publication of the Cost of Living
Index, then a substitute index for determining cost-of-living adjustments,
issued by the BLS or by a reliable governmental or other nonpartisan
publication, shall be reasonably selected by Lessor and Lessee.
CPI RENT: An amount equal to the sum of (i) the product of (y) a
fraction, the numerator of which is the Cost of Living Index for the first month
of the Lease Year for
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which CPI Rent is being calculated minus the Cost of Living Index for the first
month of the preceding Lease Year, and the denominator of which is the Cost of
Living Index for the first month of the preceding Lease Year multiplied by (z)
the sum of the prior Lease Year's Minimum Rent and Additional Rent and (ii) the
prior Lease Year's CPI Rent; provided, however, that in no event will the
increase in CPI Rent from one Lease Year to the next be greater than one and
seventy-five one hundredths percent (1.75%) of the sum of the prior Lease
Year's (a) Minimum Rent and (b) Additional Rent or less than zero.
DATE OF TAKING: The date the Condemnor has the right to possession of
the property being condemned.
ENVIRONMENTAL COSTS: As defined in Article XXXVII.
ENVIRONMENTAL LAWS: Environmental Laws shall mean any and all federal,
state, municipal and local laws, statutes, ordinances, rules, regulations,
guidances, policies, orders, decrees, judgments, whether statutory or common
law, as amended from time to time, now or hereafter in effect, or promulgated,
pertaining to the environment, public health and safety and industrial hygiene,
including the use, generation, manufacture, production, storage, release,
discharge, disposal, handling, treatment, removal, decontamination, cleanup,
transportation or regulation of any Hazardous Substance, including the Clean Air
Act, the Clean Water Act, the Toxic Substances Control Act, the Comprehensive
Environmental Response Compensation and Liability Act, the Resource Conservation
and Recovery Act, the Federal Insecticide, Fungicide, Rodenticide Act, the Safe
Drinking Water Act and the Occupational Safety and Health Act.
ESCROW: As defined in Article XXXV.
ESCROW HOLDER: As defined in Articles XXXV.
EVENT OF DEFAULT: As defined in Article XVI.
EXTENDED TERM(s): As defined in Article XIX.
FACILITY: The 69 unit facility operated on the Leased Property
providing assisted living services and licensed as a residential care facility
for the elderly.
FACILITY MORTGAGE: As defined in Article XIII.
FACILITY MORTGAGEE: As defined in Article XIII.
FAIR MARKET ADDED VALUE: The Fair Market Value (as hereinafter
defined) of the Leased Property (including all Capital Additions) less the Fair
Market Value of the
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Leased Property determined as if no Capital Additions financed by Lessee had
been constructed.
FAIR MARKET RENTAL: The fair market rental value of the Leased
Property, or applicable portion thereof, based upon the Fair Market Value,
including any periodic increases therein, determined in accordance with the
appraisal procedures set forth in Article XXXIV.
FAIR MARKET VALUE: The fair market value of the Leased Property, and
all Capital Additions, determined in accordance with the appraisal procedures
set forth in Article XXXIV. Fair Market Value shall be the value obtained by
assuming that the Leased Property is encumbered by this Lease. Further, in
determining Fair Market Value the positive or negative effect on the value of
the Leased Property attributable to the interest rate, amortization schedule,
maturity date, prepayment penalty and other terms and conditions of any
encumbrance which will not be removed at or prior to the date as of which such
Fair Market Value determination is being made shall be taken into account. The
Leased Property shall be valued at its highest and best use which shall be
presumed to be as a fully-permitted Facility operated in accordance with the
provisions of this Lease. Without limiting the foregoing, the Leased Property
shall be valued as if the zoning laws and ordinances applicable thereto permit
use of the Leased Property in the manner in which it is presently used, not as a
nonconforming use or other use that imposes limitations on the ability to
restore the property, but as a use that satisfies all requirements of the
current zoning laws and ordinances. Fair market value of the Leased Property
shall not include "going concern" or "business enterprise" value attributable to
factors other than the highest and best use of the Leased Property. In
addition, except as provided in Section 16.9, the following specific matters
shall be factored in or out, as appropriate, in determining Fair Market Value:
(i) The negative value of (a) any deferred maintenance or
other items of repair or replacement of the Leased Property, (b) any then
current or prior licensure or certification violations and/or admissions
holds and (c) any other breach or failure of Lessee to perform or observe
its obligations hereunder shall NOT be taken into account; rather, the
Leased Property, and every part thereof, shall be deemed to be in the
condition required by this Lease (i.e., good order and repair) and Lessee
shall at all times be deemed to have operated the Facility in compliance
with and to have performed all obligations of the Lessee under this Lease.
(ii) The occupancy level of the Facility shall be deemed to be
the average occupancy during the Base Period.
(iii) If the Facility's Primary Intended Use includes a mixed
use, then the average of such mix during the Base Period shall be taken
into account.
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FIXED TERM: As defined in Article I.
FIXTURES: As defined in Article I.
GAAP: Generally accepted accounting principles.
GROSS REVENUES: All revenues received or receivable from or by reason
of the operation of the Facility or any other use of the Leased Property,
Lessee's Personal Property and all Capital Additions including all revenues
received or receivable for the use of or otherwise attributable to units, rooms,
beds and other facilities provided, meals served, services performed (including
ancillary services), space or facilities subleased or goods sold on or from the
Leased Property and all Capital Additions, including, and except as provided
below, any consideration received under any commercial (as opposed to resident
or patient) subletting, licensing or other arrangements with third parties (a
"Commercial Sublessee") relating to the possession or use of any portion of the
Leased Property and all Capital Additions; provided, however, that Gross
Revenues shall not include:
(i) non-operating revenues such as interest income or income
from the sale of assets not sold in the ordinary course of business;
(ii) federal, state or local excise taxes and any tax based
upon or measured by such revenues which is added to or made a part of the
amount billed to the patient or other recipient of such services or goods,
whether included in the billing or stated separately;
(iii) contractual allowances (relating to any period during the
Term of the Lease) for billings not paid by or received from the
appropriate governmental agencies or third party providers; and
(iv) all proper patient billing credits and adjustments
according to generally accepted accounting principles relating to health
care accounting.
Gross Revenues for each Lease Year shall reflect all cost report settlement
adjustments, whether positive or negative, received in or payable during such
Lease Year in accordance with GAAP relating to health care accounting,
regardless of the year that such settlement amounts are applicable to; provided,
however, that to the extent settlement amounts are applicable to years, or
portions thereof, prior to the Commencement Date, such settlement amounts shall
not be reflected in Gross Revenues for the Lease Year in which such settlement
amounts are received or paid. Gross Revenues shall include the Gross Revenues
of any Commercial Sublessee with respect to any applicable portion of the Leased
Property and/or any Capital Additions, I.E., the Gross Revenues generated from
the operations conducted on or from such portion shall be included directly in
the Gross
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Revenues and the rent received or receivable by Lessee from such Commercial
Sublessee shall be excluded from Gross Revenues for such purpose.
GUARANTOR: Any guarantor of Lessee's or an Affiliate of Lessee's
obligations to Lessor or an Affiliate of Lessor, in every case, whether such
guaranty is now or hereafter existing.
HANDLING: As defined in Article XXXVII.
HAZARDOUS SUBSTANCES: Collectively, any petroleum, petroleum product
or byproduct or any substance, material or waste regulated or listed pursuant to
any Environmental Law.
HCPI: Health Care Property Investors, Inc., a Maryland corporation.
HCPI TRUST: HCPI Trust, a Maryland real estate investment trust.
HERITAGE HILLS: Heritage Hills Retirement, Inc., a North Carolina
corporation
IMPOSITIONS: Collectively, all taxes, including capital stock,
franchise and other state taxes of Lessor (or, if Lessor is not HCPI, of HCPI as
a result of its investment in Lessor), ad valorem, sales, use, single business,
gross receipts, transaction privilege, rent or similar taxes; assessments
including assessments for public improvements or benefits, whether or not
commenced or completed prior to the date hereof and whether or not to be
completed within the Term; ground rents; water, sewer and other utility levies
and charges; excise tax levies; fees including license, permit, inspection,
authorization and similar fees; and all other governmental charges, in each case
whether general or special, ordinary or extraordinary, or foreseen or
unforeseen, of every character in respect of the Leased Property and/or the Rent
and all interest and penalties thereon attributable to any failure in payment by
Lessee which at any time prior to, during or in respect of the Term hereof may
be assessed or imposed on or in respect of or be a lien upon (i) Lessor or
Lessee's interest in the Leased Property, (ii) the Leased Property or any part
thereof or any rent therefrom or any estate, right, title or interest therein,
or (iii) any occupancy, operation, use or possession of, or sales from or
activity conducted on or in connection with the Leased Property or the leasing
or use of the Leased Property or any part thereof; provided, however, that
nothing contained in this Lease shall be construed to require Lessee to pay (a)
any tax based on net income (whether denominated as a franchise or capital stock
or other tax) imposed on Lessor or any other Person, (b) any transfer, or net
revenue tax of Lessor or any other Person except Lessee and its successors, (c)
any tax imposed with respect to the sale, exchange or other disposition by
Lessor of any Leased Property or the proceeds thereof, or (d) any principal or
interest on any indebtedness on the Leased Property owed to a Facility Mortgagee
for which Lessor is the obligor, except to the extent that any tax, assessment,
tax levy or charge, which is otherwise included in this definition, and a tax,
assessment, tax levy
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or charge set forth in clause (a) or (b) is levied, assessed or imposed in lieu
thereof or as a substitute therefor.
INCREMENTAL GROSS REVENUES: The amount by which the Gross Revenues for
the current Lease Year exceeds the Base Gross Revenues. The Incremental Gross
Revenues for any partial Lease Year shall be the amount by which the Gross
Revenues for such partial Lease Year exceeds the Base Gross Revenues for the
corresponding period of the second Lease Year.
INSURANCE REQUIREMENTS: The terms of any insurance policy required by
this Lease and all requirements of the issuer of any such policy and of any
insurance board, association, organization or company necessary for the
maintenance of any such policy.
INTANGIBLE PROPERTY: All accounts, proceeds of accounts, rents,
profits, income or revenues derived from the use of rooms or other space within
the Leased Property or the providing of services in or from the Leased Property;
documents, chattel paper, instruments, contract rights, deposit accounts,
general intangibles, causes of action, now owned or hereafter acquired by Lessee
(including any right to any refund of any Impositions) arising from or in
connection with Lessee's operation or use of the Leased Property; all licenses
and permits now owned or hereinafter acquired by Lessee, which are necessary or
desirable for Lessee's use of the Leased Property for its Primary Intended Use,
including, if applicable, any certificate of need or similar certificate; the
right to use any trade name or other name associated with the Facility; and any
and all third-party provider agreements (including Medicare and Medicaid).
LAND: As defined in Article I.
LEASE: As defined in the preamble.
LEASE YEAR: Each period of twelve (12) full calendar months from and
after the Commencement Date, unless the Commencement Date is a day other than
the first (1st) day of a calendar month, in which case the first (1st) Lease
Year shall be the period of twelve (12) full calendar months from and after the
first (1st) day of the first (1st) calendar month following the month in which
the Commencement Date occurs, and each subsequent Lease Year shall be the period
of twelve (12) full calendar months from and after the first (1st) day of the
first (1st) calendar month following the expiration of the prior Lease Year;
provided, however, that the last Lease Year during the Term may be a period of
less than twelve (12) full calendar months and shall end on the last day of the
Term.
LEASED IMPROVEMENTS; LEASED PROPERTY: Each as defined in Article I.
LEGAL REQUIREMENTS: All federal, state, county, municipal and other
governmental statutes, laws (including common law and Environmental Laws),
rules,
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policies, guidance, codes, orders, regulations, ordinances, permits, licenses,
covenants, conditions, restrictions, judgments, decrees and injunctions
affecting either the Leased Property, Lessee's Personal Property and all Capital
Additions or the construction, use or alteration thereof, whether now or
hereafter enacted and in force, including any which may (i) require repairs,
modifications or alterations in or to the Leased Property, Lessee's Personal
Property and all Capital Additions, (ii) in any way adversely affect the use and
enjoyment thereof, or (iii) regulate the transport, handling, use, storage or
disposal or require the cleanup or other treatment of any Hazardous Substance.
LESSEE: As defined in the preamble.
LESSEE'S PERSONAL PROPERTY: The Personal Property other than Lessor's
Personal Property.
LESSOR: As defined in the preamble.
LESSOR'S PERSONAL PROPERTY: As defined in Article I.
LESSOR'S SHARED APPRECIATION AMOUNT: Lessor's and its Affiliates'
share of the Appreciation Amount which shall be calculated as follows: (i)
first, Lessor and its Affiliates shall be allocated the first dollars of the
Appreciation Amount until such dollars together with all Minimum Rent and
Additional Rent paid or payable to Lessor and its Affiliates in the aggregate
under the Leases for the Seven Properties to the Outside Closing Date yield
Lessor and its Affiliates an annual internal rate of return on the Minimum
Repurchase Price of the Seven Properties in the aggregate equal to 12.70% and
(ii) second, Lessor and its Affiliates shall be allocated one-half of any
dollars remaining in the Appreciation Amount after subtracting the portion of
the Appreciation Amount allocated to Lessor and its Affiliates in clause (i)
above.
LETTER OF CREDIT DATE: As defined in Section 21.2.
MINIMUM RENT: As defined in Article III.
MINIMUM REPURCHASE PRICE: The purchase price of the Leased Property at
the time of acquisition of the Leased Property by Lessor plus any Capital
Addition Costs funded by Lessor.
OFFICER'S CERTIFICATE: A certificate of Lessee signed by an officer
authorized to so sign by its board of directors or by-laws.
OPENING DEPOSIT: As defined in Article XXXV.
OUTSIDE CLOSING DATE: As defined in Article XXXV.
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OVERDUE RATE: On any date, a rate equal to 2% above the Prime Rate,
but in no event greater than the maximum rate then permitted under applicable
law.
PAYMENT DATE: Any due date for the payment of the installments of
Minimum Rent, Additional Rent or any other sums payable under this Lease.
PERCENTAGE RENT: An amount equal to five percent (5%) of Incremental
Gross Revenues in the third Lease Year, eight percent (8%) of Incremental Gross
Revenues in the fourth Lease Year, and ten percent (10%) of Incremental Gross
Revenues in every Lease Year thereafter.
PERSON: Any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other form of entity.
PERSONAL PROPERTY: All machinery, furniture and equipment, including
phone systems and computers, trade fixtures, inventory, supplies and other
personal property used or useful in the use of the Leased Property for its
Primary Intended Use, other than Fixtures.
PRIMARY INTENDED USE: Assisted living facility and such other uses
necessary or incidental to such uses.
PRIME RATE: On any date, a rate equal to the annual rate on such date
announced by the Bank of New York to be its prime, base or reference rate for
90-day unsecured loans to its corporate borrowers of the highest credit standing
but in no event greater than the maximum rate then permitted under applicable
law. If the Bank of New York discontinues its use of such prime, base or
reference rate or ceases to exist, Lessor shall designate the prime, base or
reference rate of another state or federally chartered bank based in New York to
be used for the purpose of calculating the Prime Rate hereunder.
PRIORITY ENCUMBRANCES: As defined in Article XXXVI.
QUARTER: During each Lease Year, the first three (3) calendar month
period commencing on the first (1st) day of such Lease Year and each subsequent
three (3) calendar month period within such Lease Year; provided, however, that
the last Quarter during the Term may be a period of less than three (3) calendar
months and shall end on the last day of the Term.
RENT: Collectively, the Minimum Rent, Additional Rent and Additional
Charges.
SEC: Securities and Exchange Commission.
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SEVEN PROPERTIES: the Countryside Property, Heritage Health Center
Property, Heritage Lodge Property, Pine Park Property, Skylyn Property and the
Summit Place Property, each as defined in the Assignment Agreement, and the
Rosewood Court Property as defined in the Contract of Acquisition.
SHARED APPRECIATION PURCHASE PRICE: The Minimum Repurchase Price of
the Seven Properties in the aggregate PLUS Lessor's Shared Appreciation Amount.
STATE: The State or Commonwealth in which the Leased Property is
located.
SUBSIDIARIES: Corporations, limited liability companies or
partnerships, in which Lessee owns, directly or indirectly, more than 50% of the
voting stock or partnership interest.
TERM: Collectively, the Fixed Term and any Extended Term(s), as the
context may require, unless earlier terminated.
TEST RATE: The minimum interest rate necessary to avoid imputation of
original issue discount income under Sections 483 or 1272 of the Code or any
similar provisions.
TRANSFER CONSIDERATION: As defined in Article XXIV.
UNAVOIDABLE DELAYS: Delays due to strike, lockout, inability to
procure materials, power failure, act of God, governmental restriction, enemy
action, civil commotion, fire, unavoidable casualty or other cause beyond the
control of the party responsible for performing an obligation hereunder;
provided, however, that a lack of funds shall not be deemed a cause beyond the
control of either party hereto.
UNSUITABLE FOR ITS PRIMARY INTENDED USE: A state or condition of the
Facility such that by reason of damage or destruction or Condemnation, in the
good faith judgment of Lessor and Lessee, 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 units and usable beds affected by
such damage or destruction or Condemnation.
ARTICLE III.
3.1 RENT. Lessee will pay to Lessor in lawful money of the United
States of America which shall be legal tender for the payment of public and
private debts, without offset or deduction, the amounts set forth hereinafter as
Minimum Rent and Additional Rent during the Term. Payments of Minimum Rent
shall be made by a prearranged payment deposit through the Electronic Automated
Clearing House Network ("ACH") initiated by Lessee to Lessor's account at an ACH
member bank on the first day of each calendar month.
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Payments of Additional Rent shall be made at Lessor's address set forth in
Article XXXIII or at such other place or to such other Person as Lessor from
time to time may designate in writing.
3.1.1 MINIMUM RENT. For the period from the Commencement Date
through the expiration of the Fixed Term, Lessee shall pay to Lessor "Minimum
Rent" monthly, in advance on or before the first day of each calendar month, in
an amount equal to $32,766.67.
3.1.2 ADDITIONAL RENT. In addition to the Minimum Rent, Lessee
shall, commencing with the first Quarter of the third Lease Year and continuing
through the expiration of the Fixed Term, pay to Lessor annual "Additional Rent"
equal to the sum of (i) Percentage Rent and (ii) CPI Rent.
3.2 QUARTERLY CALCULATION AND PAYMENT OF ADDITIONAL RENT;
ANNUAL RECONCILIATION.
3.2.1 Lessee shall calculate and pay Additional Rent quarterly,
in arrears, for the portion of the entire Lease Year, on a cumulative basis, up
to the end of the Quarter then most recently ended, less the Additional Rent
already paid and attributable to such Lease Year. If at the time any
calculation on account of Additional Rent is to be made the applicable Gross
Revenues are not yet available, Lessee shall use its best estimate of the
applicable Gross Revenues. Each quarterly payment of Additional Rent shall be
delivered to Lessor, together with an Officer's Certificate setting forth the
calculation thereof, within thirty (30) days after the end of the corresponding
Quarter.
3.2.2 Within ninety (90) days after the end of each Lease Year,
Lessee shall deliver to Lessor an Officer's Certificate setting forth the Gross
Revenues for such Lease Year. As soon as practicable following receipt by Lessor
of such Certificate, Lessor shall determine the Additional Rent for such Lease
Year and give Lessee notice of the same together with the calculations upon
which the Additional Rent was based. If such Additional Rent exceeds the sum of
the quarterly payments of Additional Rent previously paid by Lessee with respect
to such Lease Year, Lessee shall forthwith pay such deficiency to Lessor. If
such Additional Rent for such Lease Year is less than the amount previously paid
by Lessee with respect thereto, Lessor shall, at Lessee's option, either (i)
remit to Lessee its check in an amount equal to such difference, or (ii) credit
such difference against the quarterly payment of Additional Rent next coming
due.
3.2.3 Any difference between the annual Additional Rent for any
Lease Year as shown in said Officer's Certificate and the total amount of
quarterly payments for such Lease Year previously paid by Lessee, whether in
favor of Lessor or Lessee, shall bear interest at a rate equal to the rate
payable on 90-day U.S. Treasury Bills as of the last
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Business Day of such Lease Year until the amount of such difference shall be
paid or otherwise discharged.
3.2.4 If the expiration or earlier termination of the Term is a
day other than the last day of a Lease Year, then the amount of the last
quarterly installment of Additional Rent shall be paid pro rata on the basis of
the actual number of days in such Lease Year.
3.2.5 As soon as practicable after the expiration or earlier
termination of the Term, a final reconciliation of Additional Rent shall be made
taking into account, among other relevant adjustments, any unresolved
contractual allowances which relate to Gross Revenues accrued prior to such
expiration or termination; provided that if the final reconciliation has not
been made within six (6) months of such expiration or termination, then a final
reconciliation shall be made at that time based on all available relevant
information, including Lessee's good faith best estimate of the amount of any
unresolved contractual allowances.
3.3 CONFIRMATION OF ADDITIONAL RENT. Lessee shall utilize, or cause
to be utilized, an accounting system for the Leased Property in accordance with
its usual and customary practices and in accordance with GAAP which will
accurately record all Gross Revenues and Lessee shall retain for at least five
(5) years after the expiration of each Lease Year reasonably adequate records
conforming to such accounting system showing all Gross Revenues for such Lease
Year. Lessor, at its own expense except as provided herein below, shall have
the right from time to time by its accountants or representatives, to review
and/or audit the information set forth in the Officer's Certificate referred to
in Section 3.2 and in connection with such review and/or audit to examine
Lessee's records with respect thereto (including supporting data and sales tax
returns) subject to any prohibitions or limitations on disclosure of any such
data under applicable law or regulations including any duly enacted "Patients'
Bill of Rights" or similar legislation, or as may be necessary to preserve the
confidentiality of the Facility-patient relationship and the physician-patient
privilege. If any such review and/or audit discloses a deficiency in the
payment of Additional Rent, Lessee shall forthwith pay to Lessor the amount of
the deficiency together with interest thereon at the Overdue Rate compounded
monthly from the date when said payment should have been made to the date of
payment thereof; :provided, however, that any dispute concerning such deficiency
shall be resolved through an arbitration proceeding reasonably approved by the
parties; provided, further, that as to any audit that is commenced more than two
(2) years after the date Gross Revenues for any Lease Year are reported by
Lessee to Lessor, the deficiency, if any, with respect to such Gross Revenues
shall bear interest as permitted herein only from the date such determination of
deficiency is made unless such deficiency is the result of gross negligence or
willful misconduct on the part of Lessee. If any such review and/or audit
discloses that the Gross Revenues actually received by Lessee for any Lease Year
exceed those reported by Lessee by more than two percent (2%), Lessee shall pay
the costs of such review and/or audit. Any proprietary information obtained by
Lessor pursuant
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to such review and/or audit shall be treated as confidential, except that such
information may be used, subject to appropriate confidentiality safeguards, in
any litigation or arbitration proceedings between the parties and except further
that Lessor may disclose such information to prospective lenders or purchasers.
3.4 ADDITIONAL CHARGES. In addition to the Minimum Rent and
Additional Rent, (i) Lessee shall also pay and discharge as and when due and
payable all other amounts, liabilities, obligations and Impositions which Lessee
assumes or agrees to pay under this Lease; and (ii) in the event of any failure
on the part of Lessee to pay any of those items referred to in clause (i) above,
Lessee shall also promptly pay and discharge every fine, penalty, interest and
cost which may be added for non-payment or late payment of such items (the items
referred to in clauses (i) and (ii) above being referred to herein collectively
as the "Additional Charges").
3.5 LATE PAYMENT OF RENT. Lessee hereby acknowledges that late
payment by Lessee to Lessor of Rent will cause Lessor to incur costs not
contemplated hereunder, the exact amount of which is presently anticipated to be
extremely difficult to ascertain. Such costs may include processing and
accounting charges and late charges which may be imposed on Lessor by the terms
of any loan agreement and other expenses of a similar or dissimilar nature.
Accordingly, if any installment of Rent other than Additional Charges payable to
a Person other than Lessor shall not be paid within three (3) Business Days
after its due date, Lessee will pay Lessor on demand a late charge equal to the
lesser of (i) the lesser of five percent (5%) or the maximum percentage
permitted by applicable law of the amount of such installment or (ii) the
maximum amount permitted by law. The parties agree that this late charge
represents a fair and reasonable estimate of the costs that Lessor will incur by
reason of late payment by Lessee. The parties further agree that such late
charge is Rent and not interest and such assessment does not constitute a lender
or borrower/creditor relationship between Lessor and Lessee. In addition, the
amount unpaid, including any late charges, shall bear interest at the Overdue
Rate compounded monthly from the due date of such installment to the date of
payment thereof, and Lessee shall pay such interest to Lessor on demand. The
payment of such late charge or such interest shall not constitute waiver of, nor
excuse or cure, any default under this Lease, nor prevent Lessor from exercising
any other rights and remedies available to Lessor.
3.6 NET LEASE. This Lease is and is intended to be what is commonly
referred to as a "net, net, net" or "triple net" lease. The Rent shall be paid
absolutely net to Lessor, so that this Lease shall yield to Lessor the full
amount of the installments of Minimum Rent, Additional Rent and Additional
Charges throughout the Term, all as more fully set forth in Article IV and
subject to any other provisions of this Lease which expressly provide for
adjustment or abatement of Rent or other charges.
ARTICLE IV.
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4.1 IMPOSITIONS.
4.1. 1 Subject to Article XII relating to permitted contests,
Lessee shall pay, or cause to be paid, all Impositions before any fine, penalty,
interest or cost may be added for non-payment. Lessee shall make such payments
directly to the taxing authorities where feasible, and promptly furnish to
Lessor copies of official receipts or other satisfactory proof evidencing such
payments. Lessee's obligation to pay Impositions shall be absolutely fixed upon
the date such Impositions become a lien upon the Leased Property or any part
thereof. If any Imposition may, at the option of the taxpayer, lawfully be paid
in installments, whether or not interest shall accrue on the unpaid balance of
such Imposition, Lessee may pay the same, and any accrued interest on the unpaid
balance of such Imposition, in installments as the same respectively become due
and before any fine, penalty, premium, further interest or cost may be added
thereto.
4.1.2 Lessor shall prepare and file all tax returns and reports
as may be required by Legal Requirements with respect to Lessor's net income,
gross receipts, franchise taxes and taxes on its capital stock, and Lessee shall
prepare and file all other tax returns and reports as may be required by Legal
Requirements.
4.1.3 Any refund due from any taxing authority in respect of any
Imposition paid by Lessee shall be paid over to or retained by Lessee if no
Event of Default shall have occurred hereunder and be continuing. Any other
refund shall be paid over to or retained by Lessor.
4.1.4 Lessor and Lessee shall, upon request of the other,
provide such data as is maintained by the party to whom the request is made with
respect to the Leased Property as may be necessary to prepare any required
returns and reports. If any property covered by this Lease is classified as
personal property for tax purposes, Lessee shall file all personal property tax
returns in such jurisdictions where it must legally so file. Lessor, to the
extent it possesses the same, and Lessee, to the extent it possesses the same,
shall provide the other party, upon request, with cost and depreciation records
necessary for filing returns for any property so classified as personal
property. Where Lessor is legally required to file personal property tax
returns and to the extent practicable, Lessee shall be provided with copies of
assessment notices indicating a value in excess of the reported value in
sufficient time for Lessee to file a protest.
4.1.5 Lessee may, upon notice to Lessor, at Lessee's option and
at Lessee's sole cost and expense, protest, appeal, or institute such other
proceedings as Lessee may deem appropriate to effect a reduction of real estate
or personal property assessments and Lessor, at Lessee's expense as aforesaid,
shall reasonably cooperate with Lessee in such protest, appeal, or other action
but at no cost or expense to Lessor. Billings for reimbursement by Lessee to
Lessor of personal property or real property taxes shall be
17
accompanied by copies of a bill therefor and payments thereof which identify the
personal property or real property with respect to which such payments are made.
4.1.6 Lessor shall give prompt notice to Lessee of all
Impositions payable by Lessee hereunder of which Lessor has knowledge, but
Lessor's failure to give any such notice shall in no way diminish Lessee's
obligations hereunder to pay such Impositions.
4.1.7 Impositions imposed in respect of the tax-fiscal period
during which the Term terminates shall be adjusted and prorated between Lessor
and Lessee, whether or not such Imposition is imposed before or after such
termination.
4.2 UTILITIES. Lessee shall pay or cause to be paid all charges for
electricity, power, gas, oil, water and other utilities used in the Leased
Property and all Capital Additions thereto. Lessee shall also pay or reimburse
Lessor for all costs and expenses of any kind whatsoever which at any time with
respect to the Term hereof may be imposed against Lessor by reason of any of the
covenants, conditions and/or restrictions affecting the Leased Property or any
portion thereof, or with respect to easements, licenses or other rights over,
across or with respect to any adjacent or other property which benefits the
Leased Property, including any and all costs and expenses associated with any
utility, drainage and parking easements.
4.3 INSURANCE. Lessee shall pay or cause to be paid all premiums for
the insurance coverage required to be maintained by Lessee hereunder.
4.4 IMPOUND ACCOUNT. Lessor may, at its option to be exercised by
thirty (30) days' written notice to Lessee, require Lessee to deposit, at the
time of any payment of Minimum Rent, an amount equal to one-twelfth of Lessee's
estimated annual taxes, of every kind and nature, required pursuant to Section
4.1 plus, if Lessee fails to pay any insurance premium in a timely manner as
required by this Lease, one-twelfth of Lessee's estimated annual insurance
premiums required pursuant to Section 4.3 into an impound account as directed by
Lessor. Such amounts shall be applied to the Payment of the obligations in
respect of which said amounts were deposited in such order of priority as Lessor
shall determine, on or before the respective dates on which the same or any of
them would become delinquent. The cost of administering such impound account
shall be paid by Lessee. Nothing in this Section 4.4 shall be deemed to affect
any right or remedy of Lessor hereunder.
4-5 TAX SERVICE. If requested by Lessor, Lessee shall, at its sole
cost and expense, cause to be furnished to Lessor a tax reporting service, to be
designated by Lessor, covering the Leased Property.
ARTICLE V.
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5. NO TERMINATION, ABATEMENT. ETC. Except as otherwise specifically
provided in this Lease, Lessee shall remain bound by this Lease in accordance
with its terms and shall not seek or be entitled to any abatement, deduction,
deferment or reduction of Rent, or set-off against the Rent. Except as
otherwise specifically provided in this Lease, the respective obligations of
Lessor and Lessee shall not be affected by reason of (i) any damage to or
destruction of the Leased Property or any portion thereof from whatever cause or
any Condemnation of the Leased Property or any portion thereof; (ii) other than
a result of Lessor's willful misconduct or gross negligence, the lawful or
unlawful prohibition of, or restriction upon, Lessee's use of the Leased
Property, or any portion thereof, the interference with such use by any Person
or by reason of eviction by paramount title; (iii) any claim that Lessee has or
might have against Lessor by reason of any default or breach of any warranty by
Lessor hereunder or under any other agreement between Lessor and Lessee or to
which Lessor and Lessee are parties; (iv) any bankruptcy, insolvency,
reorganization, composition, readjustment, liquidation, dissolution, winding up
or other proceedings affecting Lessor or any assignee or transferee of Lessor;
or (v) for any other cause, whether similar or dissimilar to any of the
foregoing, other than a discharge of Lessee from any such obligations as a
matter of law. Lessee hereby specifically waives all rights arising from any
occurrence whatsoever which may now or hereafter be conferred upon it by law (a)
to modify, surrender or terminate this Lease or quit or surrender the Leased
Property or any portion thereof; or (b) which may entitle Lessee to any
abatement, reduction, suspension or deferment of the Rent or other sums payable
by Lessee hereunder, except as otherwise specifically provided in this Lease;
provided, however, nothing in this sentence shall preclude Lessee from bringing
a separate action with respect to any claims that Lessee may have arising out of
any wrongful conduct of Lessor and Lessee is not waiving other rights and
remedies not expressly waived herein. The obligations of Lessor and Lessee
hereunder shall be separate and independent covenants and agreements and the
Rent and all other sums payable by Lessee hereunder shall continue to be payable
in all events unless the obligations to pay the same shall be terminated
pursuant to the express provisions of this Lease or by termination of this Lease
other than by reason of an Event of Default.
ARTICLE VI.
6.1 OWNERSHIP OF THE LEASED PROPERTY. Lessee acknowledges that the
Leased Property is the property of Lessor and that Lessee has only the right to
the exclusive possession and use of the Leased Property upon the terms and
conditions of this Lease. Lessee shall, at its expense, restore the Leased
Property to the condition required by Section 9.1.4.
6.2 PERSONAL PROPERTY. During the Term, Lessee may, as necessary and
at its expense, install, affix or assemble or place on any parcels of the Land
or in any of the Leased Improvements, any items of Lessee's Personal Property
and replacements thereof which shall be the property of and owned by Lessee.
Except as provided in Sections 6.3 and 16.10, Lessor shall have no rights to
Lessee's Personal Property. Lessee shall provide and
19
maintain during the entire Term all Personal Property necessary in order to
operate the Facility in compliance with all licensure and certification
requirements, all Legal Requirements and all Insurance Requirements and for the
Primary Intended Use and as required, in Lessee's prudent business judgment, to
meet the needs of residents of the Facility.
6.3 TRANSFER OF PERSONAL PROPERTY TO LESSOR. Upon the expiration or
earlier termination of this Lease, Lessee's Personal Property which does not
provide a new function with respect to Lessor's Personal Property shall become
the property of Lessor, free of any encumbrance and Lessee shall execute all
documents and take any actions reasonably necessary to evidence such ownership
and discharge any encumbrance.
ARTICLE VII.
7.1 CONDITION OF THE LEASED PROPERTY. Lessee acknowledges receipt
and delivery of possession of the Leased Property and that Lessee has examined
and otherwise has knowledge of the condition of the Leased Property prior to the
execution and delivery of this Lease and has found the same to be in good order
and repair, free from Hazardous Substances not in compliance with Legal
Requirements (except as disclosed in the Phase I Environmental Site Assessment
(Rosewood Court), dated November 25, 1994, prepared by Environmental Enterprise
Group, Inc. for Emeritus) and satisfactory for its purposes hereunder.
Regardless, however, of any or inspection made by Lessee and whether or not any
patent or latent defect or condition was revealed or discovered thereby, Lessee
is leasing the Leased Property "as is" in its present condition. Lessee waives
any claim or action against Lessor in respect of the condition of the Leased
Property including any defects or adverse conditions not discovered or otherwise
known by Lessee as of the date hereof. LESSOR MAKES NO WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF THE LEASED PROPERTY OR ANY
PART THEREOF, EITHER AS TO ITS FITNESS FOR USE, DESIGN OR CONDITION FOR ANY
PARTICULAR USE OR PURPOSE OR OTHERWISE, OR AS TO THE NATURE OR QUALITY OF THE
MATERIAL OR WORKMANSHIP THEREIN, OR THE EXISTENCE OF ANY HAZARDOUS SUBSTANCE, IT
BEING AGREED THAT ALL SUCH RISKS, LATENT OR PATENT, ARE TO BE BORNE SOLELY BY
LESSEE INCLUDING ALL RESPONSIBILITY AND LIABILITY FOR ANY ENVIRONMENTAL
REMEDIATION AND COMPLIANCE WITH ALL ENVIRONMENTAL LAWS.
7.2 USE OF THE LEASED PROPERTY
7.2.1 Lessee covenants that it will obtain and maintain all
authorization and approvals needed to use and operate the Leased Property and
the Facility for the Primary Intended Use and any other use conducted on the
Leased Property as may be permitted from time to time hereunder in accordance
with Legal Requirements including
20
applicable licenses, provider agreements, permits, and, if appropriate, Medicare
and/or Medicaid certification.
7.2.2 Lessee shall use or cause to be used the Leased Property
and the improvements thereon for their Primary Intended Use. Lessee shall not
use the Leased Property or any portion thereof or any Capital Addition thereto
for any other use without the prior written consent of Lessor, which consent
Lessor may withhold in its sole discretion.
7.2.3 Lessee shall operate continuously the Leased Property and
all Capital Additions thereto in accordance with its Primary Intended Use.
Lessee shall devote the entire Facility and all Capital Additions thereto to the
Primary Intended Use, except for areas reasonably required for office or storage
space uses incidental to the Primary Intended Use. Lessee shall not modify the
services offered or take any other action (e.g., removing patients or residents
from the Facility or directing patients or residents, or prospective patients or
residents, to another facility) which would materially reduce Gross Revenues.
Lessee shall at all times maintain an adequate staff for the service of its
residents and/or patients. Lessee shall employ its best judgment, efforts and
abilities to operate the Facility in such a manner so as to maximize Gross
Revenues and to enhance the reputation and attractiveness of the Facility.
7.2.4 Lessee shall conduct its business at the Facility in
conformity with prudent standards of patient or resident care practice.
7.2.5 Lessee shall not commit or suffer to be committed any
waste on the Leased Property or any Capital Addition thereto or cause or permit
any nuisance thereon.
7.2.6 Lessee shall neither suffer nor permit the Leased Property
or any portion thereof or any Capital Addition thereto financed by Lessor to be
used in such a manner as (i) might reasonably tend to impair Lessor's title
thereto or to any portion thereof or (ii) may make possible a claim of adverse
use or possession, or an implied dedication of the Leased Property or any
portion thereof or any Capital Addition thereto financed by Lessor.
7.2.7 For purposes of computing Incremental Revenues for any
Lease Year or other period during which Lessee is in breach or violation of any
of the covenants set forth in Sections 7.2.1 through 7.2.4, Lessee's Gross
Revenues for such Lease Year or other period shall be deemed to be the greater
of Lessee's Gross Revenues for (i) such Lease Year or other period, or (ii)
eighty-five percent (85%) of the average Gross Revenues for the prior three (3)
Lease Years or any corresponding period of the prior three (3) Lease Years, as
applicable, as determined by Lessor; provided however that during the first
three (3) Lease Years averaging shall take place over the prior Lease Year(s).
21
7.3 LESSOR TO GRANT EASEMENTS, ETC. Lessor shall, from time to time
so long as no Event of Default has occurred and is continuing, at the request of
Lessee and at Lessee's cost and expense, but subject to the approval of Lessor,
which approval shall not be unreasonably withheld or delayed (i) grant easements
and other rights in the nature of easements; (ii) release existing easements or
other rights in the nature of easements which are for the benefit of the Leased
Property; (iii) dedicate or transfer unimproved portions of the Leased Property
for road, highway or other public purposes; (iv) execute petitions to have the
Leased Property annexed to any municipal corporation or utility district; (v)
execute amendments to any covenants, conditions and restrictions affecting the
Leased Property; and (vi) execute and deliver to any Person any instrument
appropriate to confirm or effect such grants, releases, dedications and
transfers to the extent of its interest in the Leased Property, but only upon
delivery to Lessor of an Officer's Certificate stating that such grant release,
dedication, transfer, petition or amendment is not detrimental to the proper
conduct of the business of Lessee on the Leased Property and does not materially
reduce the value of the Leased Property.
7.4 PRESERVATION OF GROSS REVENUES. Lessee acknowledges that a fair
return to Lessor on its investment in the Leased Property is dependent, in part,
on the concentration on the Leased Property during the Term of the assisted
living business of Lessee and its Affiliates in the geographical area of the
Leased Property. Lessee further acknowledges that diversion of residents and/or
patients, as applicable, from the Facility to other facilities or institutions
owned, operated or managed, whether directly or indirectly, by Lessee or its
Affiliates will have a material adverse impact on the value and utility of the
Leased Property. Accordingly, Lessor and Lessee agree as follows:
7.4.1 If, during the Term, either Lessee or any of its
Affiliates, directly or indirectly, shall operate, own, manage or have any
interest in or otherwise participate in or receive revenues from any other
facility or institution providing services or similar goods to those provided in
connection with the Facility and the Primary Intended Use (which Lessee did not
operate, own, manage or have any interest in on the Commencement Date), within a
ten (10) mile radius outward from the outside boundary of the Leased Property,
thereafter Percentage Rent shall be determined using the greater of the actual
Gross Revenues in the applicable Lease Year or eighty-five percent (85%) of the
average Gross Revenues for the immediately preceding three (3) Lease Years;
provided however that during the first three (3) Lease Years averaging shall
take place over the prior Lease Year(s). All distances shall be measured on a
straight line rather than on a driving distance basis. In the event that any
portion of such other facility or institution is located within such restricted
area the entire facility or institution shall be deemed located within such
restricted area.
ARTICLE VIII.
8. COMPLIANCE WITH LEGAL AND INSURANCE REQUIREMENTS, INSTRUMENTS, ETC.
Subject to Article XII regarding permitted contests, Lessee, at its expense,
shall promptly (i) comply
22
with all Legal Requirements and Insurance Requirements regarding the use,
operation, maintenance, repair and restoration of the Leased Property, Lessee's
Personal Property and all Capital Additions whether or not compliance therewith
may require structural changes in any of the Leased Improvements or Capital
Additions thereto or interfere with the use and enjoyment of the Leased Property
and (ii) procure, maintain and comply with all licenses, certificates of need,
provider agreements (but only to the extent Lessee, in its prudent business
judgment, elects to participate in the Medicare, Medicaid or other third party
payor programs) and other authorizations required for the use of the Leased
Property, Lessee's Personal Property and all Capital Additions for the Primary
Intended Use and any other use of the Leased Property, Lessee's Personal
Property and all Capital Additions then being made, and for the proper erection,
installation, operation and maintenance of the Leased Property, Lessee's
Personal Property and all Capital Additions. In an emergency or in the event of
a breach by Lessee of its obligations hereunder which is not cured within any
applicable cure period, Lessor may, but shall not be obligated to, enter upon
the Leased Property and all Capital Additions thereto and take such actions and
incur such costs and expenses to effect such compliance as it deems advisable to
protect its interest in the Leased Property and Capital Additions thereto, and
Lessee shall reimburse Lessor for all costs and expenses incurred by Lessor in
connection with such actions. Lessee covenants and agrees that the Leased
Property, Lessee's Personal Property and all Capital Additions shall not be used
for any unlawful purpose.
ARTICLE IX.
9.1 MAINTENANCE AND REPAIR
9.1.1 Lessee, at its expense, shall maintain the Leased
Property, and every portion thereof, Lessee's Personal Property and all Capital
Additions, and all private roadways, sidewalks and curbs appurtenant to the
Leased Property, and which are under Lessee's control in good order and repair
whether or not the need for such repairs occurs as a result of Lessee's use, any
prior use, the elements or the age of the Leased Property, Lessee's Personal
Property or the Capital Additions, and, with reasonable promptness, make all
necessary and appropriate repairs thereto of every kind and nature, including,
without limitation, all repairs described in Section 9.1.6, within the time
periods specified in Section 9.1.6, and those necessary to comply with changes
in any Legal Requirements, whether interior or exterior, structural or non-
structural, ordinary or extraordinary, foreseen or unforeseen or arising by
reason of a condition existing prior to the Commencement Date. All repairs
shall be at least equivalent in quality to the original work. Lessee will not
take or omit to take any action the taking or omission of which might materially
impair the value or the usefulness of the Leased Property or any part thereof or
any Capital Addition thereto for its Primary Intended Use.
9.1.2 Lessor shall not under any circumstances be required to
(i) build or rebuild any improvements on the Leased Property; (ii) make any
repairs, replacements,
23
alterations, restorations or renewals of any nature to the Leased Property,
whether ordinary or extraordinary, structural or non-structural, foreseen or
unforeseen, or to make any expenditure whatsoever with respect thereto; or (iii)
maintain the Leased Property in any way. Lessee hereby waives, to the extent
permitted by applicable law, the right to make repairs at the expense of Lessor
pursuant to any law in effect at the time of the execution of this Lease or
hereafter enacted.
9.1.3 Nothing contained in this Lease and no action or inaction
by Lessor shall be construed as (i) constituting the consent or request of
Lessor, expressed or implied, to any contractor, subcontractor, laborer,
materialman or vendor to or for the performance of any labor or services or the
furnishing of any materials or other property for the construction, alteration,
addition, repair or demolition of or to the Leased Property or any part thereof
or any Capital Addition thereto; or (ii) giving Lessee any right, power or
permission to contract for or permit the performance of any labor or services or
the furnishing of any materials or other property in such fashion as would
permit the making of any claim against Lessor in respect thereof or to make any
agreement that may create, or in any way be the basis for, any right, title,
interest, lien, claim or other encumbrance upon the estate of Lessor in the
Leased Property, or any portion thereof or any Capital Addition thereto.
9.1.4 Unless Lessor shall convey any of the Leased Property to
Lessee pursuant to the provisions of this Lease, Lessee shall, upon the
expiration or earlier termination of the Term, vacate and surrender the Leased
Property, Lessor's Personal Property, the portion of Lessee's Personal Property
for which Lessor exercises its option pursuant to Section 35.4, and all Capital
Additions to Lessor in the condition in which the Leased Property and Lessor's
Personal Property were originally received from Lessor and Lessee's Personal
Property and Capital Additions were originally introduced to the Facility,
except as repaired, rebuilt, restored, altered or added to as permitted or
required by the provisions of this Lease and except for ordinary wear and tear.
9.1.5 Without limiting Lessee's obligations to maintain the
Leased Property under this Lease, within thirty (30) days of the end of each
Lease Year, Lessee shall provide Lessor with evidence satisfactory to Lessor in
the reasonable exercise of Lessor's discretion that Lessee has in such Lease
Year spent at least $150 per living unit as such amount is adjusted annually at
the end of each Lease Year for increases in the Cost of Living Index for repair
and maintenance of the Facility excluding normal janitorial and cleaning. If
Lessee fails to make at least the above amount of expenditures, Lessee shall
promptly on demand from Lessor (but in no event more than five days) pay to
Lessor the applicable shortfall in expenditures. Such funds shall be the sole
property of Lessor and Lessor may in its sole discretion provide such funds to
Lessee to correct the shortfall in expenditures or may simply retain such funds
as supplemental rent hereunder.
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9.1.6 Within the times set forth below, Lessee shall do the
following and shall provide to Lessor evidence (including copies of invoices or
other receipts with respect to the work performed) reasonably satisfactory to
Lessor that the same have been done which evidence shall specifically identify
that it is provided in order to satisfy the requirements of this Section 9.1 of
the Lease:
(a) On or before June 30, 1996, Lessee shall repair the
cracked stucco material under the front eve as described on page
3 of the Building Condition Evaluation with respect to the Leased
Property, dated February 15, 1996, prepared by Barge, Waggoner,
Sumner and Cannon, Inc. (the "Building Condition Evaluation");
(b) On or before June 30, 1996, Lessee shall repaint the
stucco material around the right front window trim as described
on page 3 of the Building Condition Evaluation;
(c) On or before June 30, 1996, Lessee shall re-grade the new
rain gutter adjacent to the new second floor walkway on the north
side of the interior courtyard as pictured in Photo #6 of the
Building Condition Evaluation so that this rain gutter will drain
properly;
(d) On or before June 30, 1996, Lessee shall recaulk around
all tub/shower inserts as described on page 6 of the Building
Condition Evaluation;
(e) Lessee shall monitor the floor cracks in the electrical
room as described on page 6 of the Building Condition Evaluation
for any continued expansion and promptly make any repairs which
may be needed in the future;
(f) On or before June 30, 1996, Lessee shall oversee the
completion of all renovation work related to the trim,
furnishings, lighting etc., to be performed by others as
described on page 6 of the Building Condition Evaluation;
(g) On or before June 30, 1996, Lessee shall install a hot
water booster at the dishwasher as described on page 6 of the
Building Condition Evaluation; and
(h) On or before June 30, 1996, Lessee shall enclose the wires
connecting the public phone located in the first floor west
25
hallway near the television room (as pictured in Photo 50 of the
Building Condition Evaluation) in conduit.
9.2 ENCROACHMENTS, RESTRICTIONS, MINERAL LEASES, ETC. If any
of the Leased Improvements or Capital Additions shall, at any time, encroach
upon any property, street or right-of-way, or shall violate any restrictive
covenant or other agreement affecting the Leased Property, or any part thereof
or any Capital Addition thereto, or shall impair the rights of others under any
easement or right-of-way to which the Leased Property is subject, or the use of
the Leased Property or any Capital Addition thereto is impaired, limited or
interfered with by reason of the exercise of the right of surface entry or any
other provision of a lease or reservation of any oil, gas, water or other
minerals, then promptly upon the request of Lessor or any Person affected by any
such encroachment, violation or impairment, Lessee, at its sole cost and
expense, but subject to its right to contest the existence of any such
encroachment, violation or impairment, shall protect, indemnify, save harmless
and defend Lessor from and against all losses, liabilities, obligations, claims,
damages, penalties, causes of action, costs and expenses (including reasonable
attorneys', consultants' and experts' fees and expenses) based on or arising by
reason of any such encroachment, violation or impairment. In the event of an
adverse final determination with respect to any such encroachment, violation or
impairment, Lessee shall either (i) obtain valid and effective waivers or
settlements of all claims, liabilities and damages resulting from each such
encroachment, violation or impairment, whether the same shall affect Lessor or
Lessee; or (ii) make such changes in the Leased Improvements and any Capital
Addition thereto, and take such other actions, as Lessee in the good faith
exercise of its judgment deems reasonably practicable, to remove such
encroachment or to end such violation or impairment, including, if necessary,
the alteration of any of the Leased Improvements or any Capital Addition
thereto, and in any event take all such actions as may be necessary in order to
be able to continue the operation of the Leased Improvements and any Capital
Addition thereto for the Primary Intended Use substantially in the manner and to
the extent the Leased Improvements and Capital Additions were operated prior to
the assertion of such encroachment, violation or impairment. Lessee's
obligations under this Section 9.2 shall be in addition to and shall in no way
discharge or diminish any obligation of any insure under any policy of title or
other insurance and, to the extent the recovery thereof is not necessary to
compensate Lessor for any damages incurred by any such encroachment, violation
or impairment, Lessee shall be entitled to a credit for any sums recovered by
Lessor under any such policy of title or other insurance and Lessor, upon
request by Lessee, shall assign Lessor's rights under such policies to Lessee
provided such assignment does not adversely affect Lessor's rights under any
such policy and provided further that Lessee shall indemnify, defend, protect
and save Lessor harmless from and against any liability, cost or expense of any
kind that may be imposed upon Lessor in connection with any such assignment.
ARTICLE X.
10. CONSTRUCTION OF CAPITAL ADDITIONS TO THE LEASED PROPERTY.
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10.1 REQUESTS. No Capital Addition shall be made which would tie in
or connect any Leased Improvements with any improvements on property adjacent to
the Land without Lessor's approval which may be withheld in Lessor's sole and
absolute discretion. Except as provided above, Lessee shall, without the
consent of Lessor, have the right to make a Capital Addition if the Capital
Addition Cost for such Capital Addition project does not exceed $100,000. All
other Capital Additions shall be subject to Lessor's review and approval which
approval shall not be unreasonably withheld. For any Capital Addition which
does not require the approval of Lessor, Lessee shall, prior to commencing
construction of such Capital Addition, provide to Lessor a written description
of such Capital Addition and on an ongoing basis supply Lessor with related
documentation and information as Lessor may reasonably request. If Lessee
desires to make a Capital Addition for which Lessor's approval is required,
Lessee shall submit to Lessor in reasonable detail a general description of the
proposal, the projected cost of construction and such plans and specifications,
permits, licenses, contracts and other information concerning the proposal as
Lessor may reasonably request. Such description shall indicate the use or uses
to which such Capital Addition will be put and the impact, if any, on current
and forecasted gross revenues and operating income attributable thereto. It
shall be reasonable for Lessor to condition its approval of any Capital Addition
upon any or all of the following terms and conditions:
(a) Such construction shall be effected pursuant to detailed
plans and specifications approved by Lessor;
(b) Such construction shall be conducted under the supervision
of a licensed architect or engineer selected by Lessee and approved by
Lessor;
(c) Lessee shall have procured or caused to be procured a
performance and payment bond for the full value of such construction, which
such bond shall name Lessor as an additional obligee and otherwise be in
form and substance and issued by a Person reasonably satisfactory to
Lessor; and
(d) Such construction shall not be undertaken unless Lessee
demonstrates to the reasonable satisfaction of Lessor the financial ability
to complete the construction without adversely affecting its cash flow
position or financial viability.
10.2 CONSTRUCTION REQUIREMENTS FOR ALL CAPITAL ADDITIONS. Whether or
not Lessor's review and approval is required, for all Capital Additions:
(a) Such construction shall not be commenced until Lessee shall have
procured and paid for all municipal and other governmental permits and
authorizations required therefor, and Lessor shall join in the application
for such permits or authorizations whenever such action is necessary;
provided, however, that
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(i) any such joinder shall be at no cost or expense to Lessor; and (ii) any
plans required to be filed in connection with any such application which
require the approval of Lessor as hereinabove provided shall have been so
approved by Lessor;
(b) Such construction shall not, and Lessee's licensed architect or
engineer shall certify to Lessor that such construction shall not, impair
the structural strength of any component of the Facility or overburden the
electrical, water, plumbing, HVAC or other building systems of any such
component;
(c) Lessee's licensed architect or engineer shall certify to Lessor
that the detailed plans and specifications conform to and comply with all
applicable building, subdivision and zoning codes, laws, ordinances and
regulations imposed by all governmental authorities having jurisdiction
over the Leased Property;
(d) Such construction shall, when completed, be of such a character
as not to decrease the value of the Leased Property as it was immediately
before such Capital Addition;
(e) During and following completion of such construction, parking
which is located in the Facility or on the Land shall remain adequate for
the operation of the Facility for its Primary Intended Use and in no event
shall such parking be less than that which was or is required by law or
which was located in the Facility or on the Land prior to such
construction; provided, however, with Lessor's prior consent and at no
additional expense to Lessor, (i) to the extent additional parking is not
already a part of a Capital Addition, Lessee may construct additional
parking on the Land; or (ii) Lessee may acquire off-site parking to serve
the Facility as long as such parking shall be dedicated to, or otherwise
made available to serve, the Facility;
(f) All work done in connection with such construction shall be done
promptly and in a good and workmanlike manner using first-class materials
and
in conformity with all Legal Requirements; and
(g) Promptly following the completion of such construction, Lessee
shall deliver to Lessor "as built" drawings of such addition, certified as
accurate by the licensed architect or engineer selected by Lessee to
supervise such work, and copies of any new or revised Certificates of
Occupancy.
10.3 FUNDING BY LESSOR.
10.3.1 Lessee may request that Lessor fund a Capital Addition,
in which case Lessee shall provide to Lessor any information about such Capital
Addition which Lessor may reasonably request. Lessor may, but shall be under no
obligation to, provide the
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funds necessary to meet the request. Within thirty (30) days of receipt of a
request to fund a proposed Capital Addition, Lessor shall notify Lessee as to
whether it will fund the proposed Capital Addition and, if so, the terms and
conditions upon which it would do so, including the terms of any amendment to
this Lease. Lessee shall have ten (10) days to accept or reject Lessor's
funding proposal. In no event shall the portion of the projected Capital
Addition Cost comprised of land, if any, materials, labor charges and fixtures
be less than ninety percent (90%) of the total amount of the projected cost of
such Capital Addition.
10.3.2 If Lessor agrees to fund a proposed Capital Addition and
Lessee accepts the terms thereof, Lessee shall provide Lessor with the following
prior to any advance of funds:
(a) any information, certificates, licenses, permits or
documents requested by Lessor which are necessary and obtainable to confirm
that Lessee will be able to use the Capital Addition upon completion
thereof in accordance with the Primary Intended Use, including all required
federal, state or local government licenses and approvals;
(b) an Officer's Certificate and, if requested, a certificate
from Lessee's architect, setting forth in reasonable detail the projected
or actual Capital Addition Costs;
(c) an amendment to this Lease, in a form prepared by Lessor
and reasonably agreed to by Lessee, providing for an increase in the Rent
in amounts as agreed upon by the parties hereto and other provisions as may
be necessary or appropriate;
(d) a deed conveying title to Lessor to any land acquired for
the purpose of constructing the Capital Addition free and clear of any
liens or encumbrances except those approved by Lessor, and accompanied by
an ALTA survey thereof satisfactory to Lessor;
(e) for each advance, endorsements to any outstanding policy
of title insurance covering the Leased Property or commitments therefor
satisfactory in form and substance to Lessor (i) updating the same without
any additional exception except as may be approved by Lessor and (ii)
increasing the coverage thereof by an amount equal to the Fair Market Value
of the Capital Addition, except to the extent covered by the owner's policy
of title insurance referred to in subparagraph (f), below;
(f) if appropriate, an owner's policy of title insurance
insuring fee simple title to any land conveyed to Lessor free and clear of
all liens and
29
encumbrances except those that do not materially affect the value of such
land and do not interfere with the use of the Leased Property or are
approved by Lessor;
(g) if requested by Lessor, a M.A.I. appraisal of the Leased
Property indicating that the Fair Market Value of the Leased Property upon
completion of the Capital Addition will exceed the Fair Market Value of the
Leased Property immediately prior thereto by an amount not less than
ninety-five percent (95%) of the cost of the Capital Addition; and
(h) such other billing statements, invoices, certificates,
endorsements, opinions, site assessments, surveys, resolutions,
ratifications, lien releases and waivers and other instruments and
information reasonably required by Lessor.
10.4 CAPITAL ADDITIONS FINANCED BY LESSEE. If Lessee provides or arranges
such financing, this Lease shall be and hereby is amended to provide as follows:
(a) Upon completion of any Capital Addition, Gross Revenues
attributable to any Capital Additions financed by Lessee shall be excluded
from Gross Revenues of the Leased Property for purposes of calculating
Percentage Rent. The Gross Revenues attributable to such Capital Addition
and all other Capital Additions, if any, financed by Lessee, shall be
deemed to be an amount which bears the same proportion to the total Gross
Revenues from the entire Leased Property including all Capital Additions)
as the Fair Market Added Value of all said Capital Additions financed by
Lessee bears to the Fair Market Value of the entire Leased Property
(including all Capital Additions) immediately after completion of said
Capital Addition. The above referenced proportion of the Fair Market Added
Value of Capital Additions paid for by Lessee to the Fair Market Value of
the entire Leased Property expressed as a percentage is referred to herein
as the "Added Value Percentage. The Added Value Percentage determined as
provided above for Capital Additions financed by Lessee shall remain in
effect until any subsequent Capital Addition financed by Lessee or Lessor
is completed.
(b) There shall be no adjustment in the Minimum Rent or CPI
Rent by reason of any such Capital Addition.
(c) Upon the expiration or earlier termination of this Lease,
except by reason of the default by Lessee hereunder, Lessor shall
compensate Lessee:
(i) By purchasing such Capital Additions from Lessee
for cash in the amount of the then Fair Market Added Value of such
Capital Additions; or
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(ii) By such other arrangement regarding such
compensation as shall be mutually and reasonably acceptable to Lessor
and Lessee.
ARTICLE XI.
11. LIENS. Subject to the provisions of Article XII relating to
permitted contests, Lessee will not directly or indirectly create or allow to
remain and will promptly discharge at its expense any lien, encumbrance,
attachment, title retention agreement or claim upon the Leased Property or any
Capital Addition thereto or any attachment, levy, claim or encumbrance in
respect of the Rent, excluding, however, (i) this Lease; (ii) the matters that
existed as of the Commencement Date; (iii) restrictions, liens and other
encumbrances which are consented to in writing by Lessor, or any easements
granted pursuant to the provisions of Section 7.3; (iv) liens for Impositions
which Lessee is not required to pay hereunder; (v) subleases permitted by
Article XXIV; (vi) liens for Impositions not yet delinquent; (vii) liens of
mechanics, laborers, materialmen, suppliers or vendors for sums either disputed
or not yet due, provided that (1) the payment of such sums shall not be
postponed under any related contract for more than sixty (60) days after the
completion of the action giving rise to such lien and such reserve or other
appropriate provisions as shall be required by law or GAAP shall have been made
therefor or (2) any such liens are in the process of being contested as
permitted by Article XII; (viii) any liens which are the responsibility of
Lessor pursuant to the provisions of Article XXXVI; and (ix) liens related to
equipment leases for equipment which is used or useful in Lessee's business on
the Leased Property, provided that the payment of any sums due under such
equipment leases shall either (1) be paid as and when due in accordance with the
terms thereof, or (2) be in the process of being contested as permitted by
Article XII.
ARTICLE XII.
12. PERMITTED CONTESTS. Lessee, upon prior written notice to Lessor, on
its own or in Lessor's name, at Lessee's expense, may contest, by appropriate
legal proceedings conducted in good faith and with due diligence, the amount,
validity or application, in whole or in part, of any licensure or certification
decision, Imposition, Legal Requirement, Insurance Requirement, lien,
attachment, levy, encumbrance, charge or claim; provided, however, that (i) in
the case of an unpaid Imposition, lien, attachment, levy, encumbrance, charge or
claim, the commencement and continuation of such proceedings shall suspend the
collection thereof from Lessor and from the Leased Property or any Capital
Addition thereto; (ii) neither the Leased Property or any Capital Addition
thereto, the Rent therefrom nor any part or interest in either thereof would be
in any danger of being sold, forfeited, attached or lost pending the outcome of
such proceedings; (iii) in the case of a Legal Requirement, neither Lessor nor
Lessee would be in any danger of civil or criminal liability for failure to
comply therewith pending the outcome of such proceedings; (iv) if any such
contest shall involve a sum of money or potential loss in excess of Fifty
Thousand Dollars ($50,000),
31
Lessee shall deliver to Lessor and its counsel an opinion of legal counsel
reasonably acceptable to Lessor to the effect set forth in clauses (i), (ii) and
(iii) above, to the extent applicable; (v) in the case of a Legal Requirement,
Imposition, lien, encumbrance or charge, Lessee shall give such reasonable
security as may be required by Lessor to insure ultimate payment of the same and
to prevent any sale or forfeiture of the Leased Property or any Capital Addition
thereto or the Rent by reason of such non-payment or noncompliance; (vi) in the
case of an Insurance Requirement, the coverage required by Article XIII shall be
maintained; and (vii) if such contest be finally resolved against Lessor or
Lessee, Lessee shall promptly pay the amount required to be paid, together with
all interest and penalties accrued thereon, or comply with the applicable Legal
Requirement or Insurance Requirement. Lessor, at Lessee's expense, shall
execute and deliver to Lessee such authorizations and other documents as may
reasonably be required in any such contest, and, if reasonably requested by
Lessee or if Lessor so desires, Lessor shall join as a party therein. The
provisions of this Article XII shall not be construed to permit Lessee to
contest the payment of Rent or any other amount (other than Impositions or
Additional Charges which Lessee may from time to time be required to impound
with Lessor) payable by Lessee to Lessor hereunder. Lessee shall indemnify,
defend, protect and save Lessor harmless from and against any liability, cost or
expense of any kind that may be imposed upon Lessor in connection with any such
contest and any loss resulting therefrom.
ARTICLE XIII.
13.1 GENERAL INSURANCE REQUIREMENTS. During the Term, Lessee shall at
all times keep the Leased Property, and all property located in or on the Leased
Property, including Capital Additions, the Fixtures and the Personal Property,
insured with the kinds and amounts of insurance described below. This insurance
shall be written by companies authorized to do insurance business in the State
in which the Leased Property is located. All liability type policies must name
Lessor as an "additional insured." All property policies shall name Lessor as
"loss payee." All business interruption policies shall name Lessor as "loss
payee" with respect to Rent only. Losses shall be payable to Lessor and/or
Lessee as provided in Article XIV. In addition, the policies, as appropriate,
shall name as an "additional insured" or "loss payee" the holder of any
mortgage, deed of trust or other security agreement ("Facility Mortgagee")
securing any indebtedness or any other Encumbrance placed on the Leased Property
in accordance with the provisions of Article XXXVI ("Facility Mortgage") by way
of a standard form of mortgagee's loss payable endorsement. Any loss adjustment
shall require the written consent of Lessor, Lessee, and each Facility Mortgagee
unless the amount of the loss is less than $10,000 in which event no consent
shall be required. Evidence of insurance shall be deposited with Lessor and, if
requested, with any Facility Mortgagee(s). If any provision of any Facility
Mortgage requires deposits of insurance to be made with such Facility
Mortgagee, Lessee shall either pay to Lessor monthly the amounts required and
Lessor shall transfer such amounts to each Facility Mortgagee, or, pursuant to
written direction by Lessor, Lessee shall make such
32
deposits directly with such Facility Mortgagee. The policies shall insure
against the following risks:
13.1.1 Loss or damage by fire, vandalism and malicious mischief,
extended coverage perils commonly known as special form perils, earthquake
(including earth movement) and windstorm in an amount not less than the
insurable value on a replacement cost basis (as defined below in Section 13.2)
and including a building ordinance coverage endorsement;
13.1.2 Loss or damage by explosion of steam boilers, pressure
vessels or similar apparatus, now or hereafter installed in the Facility, in
such limits with respect to anyone accident as may be reasonably requested by
Lessor from time to time;
13.1.3 Flood (when the Leased Property is located in whole or in
part within a designated 100-year flood plain area) and such other hazards and
in such amounts as may be customary for comparable properties in the area;
13.1.4 Loss of rental value in an amount not less than twelve
(12) months' Rent payable hereunder or business interruption in an amount not
less than twelve (12) months of income and normal operating expenses including
payroll and Rent payable hereunder with an endorsement extending the period of
indemnity by at least ninety (90) days (Building Ordinance Increased Period of
Restoration Endorsement) necessitated by the occurrence off any of the hazards
described in Sections 13.1.1, 13.1.2 or 13.1.3;
13.1.5 Claims for personal injury or property damage under a
policy of comprehensive general public liability insurance with amounts not less
than One Million and No/100 Dollars ($1,000,000.00) combined single limit and
Three Million No/100 Dollars ($3,000,000.00) in the annual aggregate; and
13.1.6 Medical professional liability with amounts not less than
One Million Dollars ($1,000,000) combined single limit and Three Million Dollars
($3,000,000)in the annual aggregate.
13.2 REPLACEMENT COST. The term "replacement cost" shall mean the
actual replacement cost of the insured property from time to time with new
materials and workmanship of like kind and quality. If either party believes
that the replacement cost has increased or decreased at any time during the
Term, it shall have the right to have such replacement cost redetermined by an
impartial national insurance company reasonably acceptable to both parties (the
"impartial appraiser"). The party desiring to have the replacement cost so
redetermined shall forthwith, on receipt of such determination by the impartial
appraiser, give written notice thereof to the other party hereto. The
determination of the impartial appraiser shall be final and binding on the
parties hereto, and Lessee shall forthwith increase or decrease the amount of
the insurance carried pursuant to this Article to
33
the amount so determined by the impartial appraiser. Each party shall pay one-
half (1/2) of the fee, if any, of the impartial appraiser. If Lessee has made
improvements to the Leased Property, Lessor may at Lessee's expense have the
replacement cost redetermined at any time after such improvements are made,
regardless of when the replacement cost was last determined.
13.3 ADDITIONAL INSURANCE. In addition to the insurance described
above, Lessee shall maintain such additional insurance upon notice from Lessor
as may be reasonably required from time to time by any Facility Mortgagee and
shall further at all times maintain adequate workers' compensation coverage and
any other coverage required by Legal Requirements for all Persons employed by
Lessee on the Leased Property and any Capital Addition thereto in accordance
with Legal Requirements.
13.4 WAIVER OF SUBROGATION. All insurance policies carried. by either
party covering the Leased Property and any Capital Addition thereto and Lessee's
Personal Property including contents, fire and casualty insurance, shall
expressly waive any right of subrogation on the part of the insurer against the
other party. The parties hereto agree that their policies will include such
waiver clause or endorsement so long as the same are obtainable without extra
cost, and in the event of such an extra charge the other party, at its election,
may pay the same, but shall not be obligated to do so. Each party waives any
claims it has against the other party to the extent such claim is covered by
insurance.
13.5 POLICY REQUIREMENTS. All of the policies of insurance referred
to in this Article shall be written in form satisfactory to Lessor and by
insurance companies with a policyholder rating of "A" and a financial rating of
"X" in the most recent version of Best's Key Rating Guide. Lessee shall pay all
of the premiums therefor, and deliver such policies or certificates thereof to
Lessor prior to their effective date (and with respect to any renewal policy, at
least ten (10) days prior to the expiration of the existing policy), and in the
event of the failure of Lessee either to effect such insurance in the names
herein called for or to pay the premiums therefor, or to deliver such policies
or certificates thereof to Lessor, at the times required, Lessor shall be
entitled, but shall have no obligation, to effect such insurance and pay the
premiums therefor, in which event the cost thereof, together with interest
thereon at the Overdue Rate, shall be repayable to Lessor upon demand therefor.
Each insurer shall agree, by endorsement on the policy or policies issued by it,
or by independent instrument furnished to Lessor, that it will give to Lessor
ten (10) days' written notice before the policy or policies in question shall be
altered, allowed to expire or canceled. Each property policy shall have a
deductible or deductibles, if any, which are no greater than $5,000, unless such
requirement is specifically waived by Lessor. Each earthquake policy shall have
a deductible of ten percent of real property, personal property and rental value
limit at the subject location, unless such requirement is specifically waived by
Lessor.
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13.6 INCREASE IN LIMITS. If either party shall at any time believe
the limits of the insurance required hereunder to be either excessive or
insufficient, the parties shall
endeavor to agree in writing on the proper and reasonable limits for such
insurance to be carried and such insurance shall thereafter be carried with the
limits thus agreed on until further change pursuant to the provisions of this
Section. If the parties shall be unable to agree thereon, the proper and
reasonable limits for such insurance to be carried shall be determined by an
impartial third party reasonably selected by the parties. Nothing herein shall
permit the amount of insurance to be reduced below the amount or amounts
required by any Facility Mortgagee.
13.7 BLANKET POLICIES AND POLICIES COVERING MULTIPLE LOCATIONS.
Notwithstanding anything to the contrary contained in this Article, Lessee's
obligations to carry the insurance provided for herein may be brought within the
coverage of a blanket policy or policies of insurance carried and maintained by
Lessee; provided, however, that the coverage afforded Lessor will not be reduced
or diminished or otherwise be different from that which would exist under a
separate policy meeting all other requirements of this Lease by reason of the
use of such blanket policy of insurance, and provided further that the
requirements of this Article XIII are otherwise satisfied. For any liability
policies covering facilities in addition to the Leased Property, Lessor may
require excess limits as Lessor reasonably determines.
13.8 NO SEPARATE INSURANCE. Lessee shall not, on Lessee's own
initiative or pursuant to the request or requirement of any third party, (i)
take out separate insurance concurrent in form or contributing in the event of
loss with that required in this Article to be furnished by, or which may
reasonably be required to be furnished by, Lessee or (ii) increase the amounts
of any then existing insurance by securing an additional policy or additional
policies, unless all parties having an insurable interest in the subject matter
of the insurance, including in all cases Lessor and all Facility Mortgagees, are
included therein as additional insures and the loss is payable under such
insurance in the same manner as losses are payable under this Lease. Lessee
shall immediately notify Lessor of the taking out of any such separate insurance
or of the increasing of any of the amounts of the then existing insurance by
securing an additional policy or additional policies.
ARTICLE XIV.
14.1 INSURANCE PROCEEDS. All proceeds payable by reason of any loss
or damage to the Leased Property, or any portion thereof, under any policy of
insurance required to be carried hereunder shall be paid to Lessor and made
available by Lessor to Lessee from time to time for the reasonable costs of
reconstruction or repair, as the case may be, of any damage to or destruction of
the Leased Property, or any portion thereof; provided, however, that if the
total amount of proceeds payable is $10,000 or less, the proceeds shall be paid
to Lessee and used for the repair of any damage to the Leased Property. Any
excess proceeds of insurance remaining after the completion of the restoration
35
or reconstruction of the Leased Property to substantially the same condition as
existed immediately before the damage or destruction and with materials and
workmanship of like kind and quality and to Lessor's reasonable satisfaction
shall be remitted by Lessor to Lessee free and clear upon completion of any
such repair and restoration except as otherwise specifically provided below in
this Article XIV. In the event neither Lessor nor Lessee is required or elects
to repair and restore the Leased Property, all such insurance proceeds shall
be retained by Lessor free and clear except as otherwise specifically provided
below in this Article XIV. All salvage resulting from any risk covered by
insurance shall belong to Lessor.
14.2 INSURED CASUALTY.
14.2.1 If the Leased Property is damaged or destroyed from a
risk covered by insurance carried by Lessee such that the Facility thereby is
rendered Unsuitable for its Primary Intended Use, Lessee shall either (i)
restore the Leased Property to substantially the same condition as existed
immediately before such damage or destruction, or (ii) offer to acquire the
Leased Property from Lessor for a purchase price equal to the greater of (y) the
Minimum Repurchase Price or (z) the Fair Market Value immediately prior to such
damage or destruction. If Lessor does not accept Lessee's offer to so purchase
the Leased Property, Lessee may either withdraw such offer and proceed to
restore the Leased Property to substantially the same condition as existed
immediately before such damage or destruction or terminate the Lease in which
event Lessor shall be entitled to retain the insurance proceeds.
14.2.2 If the Leased Property is damaged from a risk covered
by insurance carried by Lessee, but the Facility is not thereby rendered
Unsuitable for its Primary Intended Use, Lessee shall restore the Leased
Property to substantially the same condition as existed immediately before such
damage. Such damage shall not terminate this Lease; provided, however, that if
Lessee cannot within a reasonable time after diligent efforts obtain the
necessary government approvals needed to restore and operate the Facility for
its Primary Intended Use, Lessee may offer to purchase the Leased Property for a
purchase price equal to the greater of the Minimum Repurchase Price or the Fair
Market Value immediately prior to such damage. If Lessee shall make such offer
and Lessor does not accept the same, Lessee may either withdraw such offer and
proceed to restore the Leased Property to substantially the same condition as
existed immediately before such damage or destruction, or terminate the Lease,
in which event Lessor shall be entitled to retain the insurance proceeds.
14.2.3 If the cost of the repair or restoration exceeds the
amount of proceeds received by Lessor from the insurance required to be carried
hereunder, Lessee shall contribute any excess amounts needed to restore the
Facility. Such difference shall be paid by Lessee to Lessor together with any
other insurance proceeds, for application to the cost of repair and restoration.
36
14.2.4 If Lessor accepts Lessee's offer to purchase the
Leased Property, this Lease shall terminate as to the Leased Property upon
payment of the purchase price and Lessor shall remit to Lessee all insurance
proceeds pertaining to the Leased Property, including insurance proceeds
pertaining to Capital Additions and Lessee's Personal Property, then held by
Lessor.
14.3 UNINSURED CASUALTY. If the Leased Property is damaged or
destroyed from a risk not covered by insurance carried by Lessee, whether or not
such damage or destruction renders the Leased Property Unsuitable for its
Primary Intended Use, Lessee at its expense shall restore the Leased Property to
substantially the same condition it was in immediately before such damage or
destruction and such damage or destruction shall not terminate this Lease;
provided, however, that if Lessee cannot within a reasonable time after diligent
efforts obtain the necessary government approvals needed to restore and operate
the Facility for its Primary Intended Use, Lessee shall purchase the Leased
Property for a purchase price equal to the greater of the Minimum Repurchase
Price or the Fair Market Value immediately prior to such damage.
14.4 NO ABATEMENT OF RENT. This Lease shall remain in full force and
effect and Lessee's obligation to pay the Rent and all other charges required by
this Lease shall remain unabated during the period required for adjusting
insurance, satisfying Legal Requirements, repair and restoration.
14.5 WAIVER. Lessee waives any statutory rights of termination which
may arise by reason of any damage or destruction of the Leased Property.
14.6 DAMAGE NEAR END OF TERM. If the damage or destruction
contemplated hereunder occurs during the last year of the Fixed Term or any
Extended Term, as applicable, and Lessee terminates any options it might then
have to purchase the Leased Property or extend the Term of this Lease, Lessee
may, in lieu of repairing and restoring the Leased Property as contemplated
hereunder, terminate this Lease effective as of the date of payment to Lessor of
the greater of (a) the insurance proceeds attributable to such damage or
destruction and (b) the cost to repair such damage or destruction as reasonably
estimated by Lessor.
ARTICLE XV.
15. CONDEMNATION
15.1 TOTAL TAKING. If the Leased Property is totally and permanently
taken by Condemnation, this Lease shall terminate as of the day before the Date
of Taking.
15.2 PARTIAL TAKING. If a portion of the Leased Property is taken by
Condemnation, this Lease shall remain in effect if the Facility is not thereby
rendered
37
Unsuitable for Its Primary Intended Use, but if the Facility is thereby rendered
Unsuitable for its Primary intended Use, this Lease shall terminate as of the
day before the Date of Taking.
15.3 RESTORATION. If there is a partial taking of the Leased Property
and this Lease remains in full force and effect pursuant to Section 15.2, Lessor
shall make available to Lessee the portion of the Award necessary and
specifically identified for restoration of the Leased Property and Lessee shall
accomplish all necessary restoration whether or not the amount provided by the
condemnor for restoration is sufficient.
15.4 AWARD DISTRIBUTION. The entire Award shall belong to and be paid
to Lessor, except that, subject to the rights of the Facility Mortgagees, Lessee
shall be entitled to receive from the Award, if and to the extent such Award
specifically includes such item, lost profits value and moving expenses,
provided, that in any event Lessor shall receive from the Award, subject to the
rights of the Facility Mortgagees, no less than the greater of the Fair Market
Value prior to the institution of the Condemnation or the Minimum Repurchase
Price.
15.5 TEMPORARY TAKING. The taking of the Leased Property, or any part
thereof, shall constitute a taking by Condemnation only when the use and
occupancy by the taking authority has continued for longer than 180 consecutive
days. During any shorter period, which shall be a temporary taking, all the
provisions of this Lease shall remain in full force and effect and the Award
allocable to the Term shall be paid to Lessee.
ARTICLE XVI.
16.1 EVENTS OF DEFAULT. Any one or more of the following shall
constitute an "Event of Default":
(a) a default shall occur under any other lease or agreement,
including the Contract of Acquisition, between Lessor or an Affiliate of
Lessor and Lessee or an Affiliate of Lessee, or any letter of credit,
guaranty, mortgage, deed of trust, or other instrument executed by Lessee
or an Affiliate of Lessee in favor of Lessor or an Affiliate of Lessor, in
every case, whether now or hereafter existing, where the default is not
cured within any applicable grace period set forth therein;
(b) Lessee shall fail to pay any installment of Rent when the
same becomes due and payable and such failure is not cured by Lessee within
a period of five (5) days after notice thereof from Lessor; provided,
however, that such notice shall be in lieu of and not in addition to any
notice required under applicable law;
38
(c) Lessee shall fail to obtain a letter of credit as required
by Article XXI;
(d) Provided that no other cure period is specified under the
terms of this Lease, if Lessee shall fail to observe or perform any term,
covenant or condition of this Lease other than those contained within this
Section 16.1 and such failure is not cured by Lessee within thirty (30)
days after notice thereof from Lessor, unless such failure cannot with due
diligence be cured within a period of thirty (30) days, in which case such
failure shall not be deemed to be an Event of Default if Lessee proceeds
promptly and with due diligence to cure the failure and diligently
completes the curing thereof; provided, however, that such notice shall be
in lieu of and not in addition to any notice required under applicable law;
(e) Lessee or any Guarantor shall:
(i) admit in writing its inability to pay its debts
generally as they become due,
(ii) file a petition in bankruptcy or a petition to
take advantage of any insolvency act,
(iii) make an assignment for the benefit of its
creditors,
(iv) consent to the appointment of a receiver of itself
or of the whole or any substantial part of its Property, or
(v) file a petition or answer seeking reorganization
or arrangement under the Federal bankruptcy laws or any other applicable law
or statute of the United States of America or any state thereof;
(f) Lessee or any Guarantor shall be adjudicated as bankrupt
or a court of competent jurisdiction shall enter an order or decree
appointing, without the consent of Lessee, a receiver of Lessee or of the
whole or substantially all of its property, or approving a petition filed
against it seeking reorganization or arrangement of Lessee under the
Federal bankruptcy laws or any other applicable law or statute of the
United States of America or any state thereof, and such judgment, order or
decree shall not be vacated or set aside or stayed within sixty (60) days
from the date of the entry thereof;
(g) Lessee or any Guarantor shall be liquidated or dissolved,
or shall begin proceedings toward such liquidation or dissolution, or
shall, in any manner, permit the sale or divestiture of substantially all
its assets;
39
(h) the estate or interest of Lessee in the Leased Property or
any part thereof shall be levied upon or attached in any proceeding and the
same shall not be vacated or discharged within the later of ninety (90)
days after commencement thereof or thirty (30) days after receipt by Lessee
of notice thereof from Lessor, provided, however, that such notice shall be
in lieu of and not in addition to any notice required under applicable law;
(i) except as a result of damage, destruction or Condemnation,
Lessee voluntarily ceases operations on the Leased Property for a period in
excess of thirty (30) days;
(j) any of the representations or warranties made by Lessee in
the Contract of Acquisition or otherwise proves to be untrue when made in
any material respect which materially and adversely affects Lessor;
(k) the Facility's applicable license or third-party provider
reimbursement agreements material to the Facility's operation for its
Primary Intended Use are at any time terminated or revoked or suspended for
more than twenty (20) days;
(l) any local, state or federal agency having jurisdiction
over the operation of the Facility removes ten percent (10%) or more of the
patients or residents located in the Facility;
(m) Lessee voluntarily transfers ten (10) or more patients
located in the Facility to any other facility in which Lessee or any
Affiliate of Lessee has any ownership or other financial interest,
including, without limitation, fees earned under any management agreement,
provided that Lessee's transfer of any patient to a different type of care
facility as a result of such patient's special needs that cannot be met at
the Facility shall not be deemed a voluntary transfer;
(n) Lessee fails to give notice to Lessor not later than ten
(10) days after Lessee's receipt thereof of any Class A or equivalent fine
notice from any governmental authority or officer acting on behalf thereof
relating to the Facility;
(o) Lessee fails to notify Lessor within twenty-four (24)
hours after receipt of any notice from any governmental agency terminating
or suspending or threatening termination or suspension, of any material
license or certification relating to the Facility;
(P) Lessee fails to give notice to Lessor not later than ten
(10) days after any notice, claim or demand from any governmental authority
or any
40
officer acting on behalf thereof, of any violation of any law, order,
ordinance, rule or regulation with respect to the operation of the
Facility;
(q) Lessee fails to cure or abate any Class A or equivalent
violation occurring during the Term that is claimed by any governmental
authority, or any officer acting on behalf thereof, of any law, order,
ordinance, rule or regulation pertaining to the operation of the Facility,
and within the time permitted by such authority for such cure or abatement;
(r) any proceedings are instituted against Lessee by any
governmental authority which are reasonably likely to result in (i) the
revocation of any license granted to Lessee for the operation of the
Facility, (ii) if applicable, the decertification of the Facility from
participation in the Medicare or Medicaid reimbursement program, or (iii)
the issuance of a stop placement order with respect to the Facility;
(s) any default and acceleration of any recourse funded
indebtedness of Lessee or any recourse funded indebtedness of any Affiliate
of Lessee has occurred, and such funded indebtedness has an unpaid
principal balance of $1,000,000 or more or such default and acceleration
could reasonably be expected to have a material adverse impact on the
financial condition or operations of Lessee or any Guarantor; and
(t) any default which is not cured within any applicable cure
period shall occur under any guaranty of Lessee's or an Affiliate of
Lessee's obligations to Lessor or an Affiliate of Lessor, in every case,
whether such guaranty is now or hereafter existing.
16.2 CERTAIN REMEDIES. If an Event of Default shall have occurred,
Lessor may terminate this Lease by giving Lessee notice of such termination and
the Term shall terminate and all rights of Lessee under this Lease shall cease.
Lessor shall have all rights at law and in equity available to Lessor under
applicable law as a result of any Event of Default. Lessee shall pay as
Additional Charges all costs and expenses incurred by or on behalf of Lessor,
including reasonable attorneys' fees and expenses, as a result of any Event of
Default hereunder. If an Event of Default shall have occurred and be
continuing, whether or not this Lease has been terminated pursuant to Section
16.1, Lessee shall, to the extent permitted by law, if required by Lessor so to
do, immediately surrender to Lessor possession of the Leased Property and any
Capital Additions thereto and quit the same and Lessor may enter upon and
repossess the Leased Property and any Capital Addition thereto by reasonable
force, summary proceedings, ejectment or otherwise, and, to the extent permitted
by applicable law, may remove Lessee and all other Persons (other than the
Residents of the Facility) and any of Lessee's Personal Property from the Leased
Property and any Capital Addition thereto.
41
16.3 DAMAGES. (i) The termination of this Lease; (ii) the repossession
of the Leased Property and any Capital Addition thereto; (iii) the failure of
Lessor, notwithstanding reasonable good faith efforts, to relet the Leased
Property; (iv) the reletting of all or any portion of the Leased Property; or
(v) the inability of Lessor to collect or receive any rentals due upon any such
reletting, shall not relieve Lessee of its liabilities and obligations
hereunder, all of which shall survive any such termination, repossession or
reletting. If any such termination occurs, Lessee shall forthwith pay to Lessor
all Rent due and payable with respect to the Leased Property to and including
the date of such termination. Thereafter:
Lessee shall forthwith pay to Lessor, at Lessor's option, as and for
liquidated and agreed current damages for Lessee's Default, either:
(A) the sum of:
(i) the worth at the time of award of the unpaid Rent which
had been earned at the time of termination to the extent not previously
paid by Lessee under this Section 16.3,
(ii) the worth at the time of award of the amount by which the
unpaid Rent which would have been earned after termination until the time
of award exceeds the amount of such rental loss that Lessee proves could
have been reasonably avoided,
(iii) the worth at the time of award of the amount by which the
unpaid Rent for the balance of the Term after the time of award exceeds the
amount of such rental loss that Lessee proves could be reasonably avoided,
plus
(iv) any other amount necessary to compensate Lessor for all
the detriment proximately caused by Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of things
would be likely to result therefrom.
As used in clauses (i) and (ii) above, the "worth at the time of award"
shall be computed by allowing interest at the Overdue Rate. As used in
clause (iii) above, the "worth at the time of award" shall be computed by
discounting such amount at the discount rate of the Federal Reserve Bank of
San Francisco at the time of award plus one percent (1%). For purposes of
determining the worth at the time of the award, Additional Rent that would
have been payable for the remainder of the Term shall be deemed to be the
greater of (y) the same as the Additional Rent for the then current Lease
Year or, if not determinable, the immediately preceding Lease Year; and (z)
such other amount as Lessor shall demonstrate could reasonably have been
earned.
or (B)
42
without termination of Lessee's right to possession of the Leased Property,
each installment of said Rent and other sums payable by Lessee to Lessor
under the Lease as the same becomes due and payable, together with interest
at the Overdue Rate from the date when due until paid, and Lessor may
enforce, by action or otherwise, any other term or covenant of this Lease.
16.4 RECEIVER. Upon the occurrence of an Event of Default, and upon
commencement of proceedings to enforce the rights of Lessor hereunder, Lessor
shall be entitled, as a matter of right, to the appointment of a receiver or
receivers acceptable to Lessor of the Leased Property and any Capital Addition
thereto and of the revenues, earnings, income, products and profits thereof,
pending the outcome of such proceedings, with such powers as the court making
such appointment shall confer.
16.5 LESSEE'S OBLIGATION TO PURCHASE. If an Event of Default shall
have occurred, Lessor may require Lessee to purchase the Leased Property on the
first Minimum Rent Payment Date occurring not less than thirty (30) days after
the date specified in a notice from Lessor requiring such purchase for an amount
equal to the greater of (i) the Fair Market Value, or (ii) the Minimum
Repurchase Price, plus, in either event, all Rent then due and payable
(excluding the installment of Minimum Rent due on the purchase date). If Lessor
exercises such right, Lessor shall convey the Leased Property to Lessee on the
date fixed therefor in accordance with the provisions of Article XVIII upon
receipt of the purchase price therefor and this Lease shall thereupon terminate.
Any purchase by Lessee of the Leased Property pursuant to this Section shall be
in lieu of the damages specified in Section 16.3.
16.6 WAIVER. If Lessor initiates judicial proceedings or if this
Lease is terminated by Lessor pursuant to this Article, Lessee waives, to the
extent permitted by applicable law, (i) any right of redemption, re-entry or
repossession; and (ii) the benefit of any laws now or hereafter in force
exempting property from liability for rent or for debt.
16.7 APPLICATION OF FUNDS. Any payments received by Lessor under any
of the provisions of this Lease during the existence or continuance of any Event
of Default which are made to Lessor rather than Lessee due to the existence of
an Event of Default shall be applied to Lessee's obligations in the order which
Lessor may reasonably determine or as may be prescribed by the laws of the
State.
16.8 RESERVED.
16.9 RESERVED.
16.10 LANDLORD'S SECURITY INTEREST. The parties intend that if an
Event of Default occurs under this Lease, Lessor will control Lessee's Personal
Property and the Intangible Property so that Lessor or its designee or nominee
can operate or re-let the Leased
43
Property intact for its Primary Intended Use. Accordingly, to implement such
intention, and for the purpose of securing the payment and performance
obligations of Lessee hereunder, Lessor and Lessee agree as follows:
16.10.1 Lessee, as debtor, hereby grants to Lessor, as secured
party, a security interest and an express contractual lien upon all of Lessee's
right, title and interest in and to Lessee's Personal Property and in and to the
Intangible Property and any and all products, proceeds, rents and profits
thereof in which Lessee now owns or hereafter acquires an interest or right,
including any leased Lessee's Personal Property. This Lease constitutes a
security agreement covering all such Lessee's Personal Property and the
Intangible Property. The security interest granted to Lessor with respect to
Lessee's Personal Property in this Section 16.10 is intended by Lessor and
Lessee to be subordinate to any security interest granted in connection with the
financing or leasing of all or any portion of the Lessee's Personal Property so
long as Lessee uses its best efforts to secure an agreement in Lessor's favor
that the Lessor or financier of such Lessee's Personal Property agrees to give
Lessor written notice of any default by Lessee under the terms of such lease or
financing arrangement, to give Lessor a reasonable time following such notice to
cure any such default and consents to Lessor's written assumption of such lease
or financing arrangement upon Lessor's curing of any such defaults. This
security agreement and the security interest created herein shall survive the
termination, but not the expiration, of this Lease until such time as Lessor has
been fully compensated for all damages resulting from such termination.
16.10.2 If required by Lessor at any time during the Term,
Lessee shall execute and deliver to Lessor, in form reasonably satisfactory to
Lessor, additional security agreements, financing statements, fixture filings
and such other documents as Lessor may reasonably require to perfect or continue
the perfection of Lessor's security interest in Lessee's Personal Property and
the Intangible Property and any and all products and proceeds thereof now owned
or hereinafter acquired by Lessee. In the event Lessee fails to execute any
financing statement or other documents for the perfection or continuation of
Lessor's security interest, Lessee hereby appoints Lessor as its true and lawful
attorney-in-fact to execute any such documents on its behalf, which power of
attorney shall be irrevocable and is deemed to be coupled with an interest.
16.10.3 Upon the occurrence of an Event of Default, Lessor
shall be entitled to exercise any and all rights or remedies available to a
secured party under the Uniform Commercial Code, or available to a lessor under
the laws of the State, with respect to Lessee's Personal Property and the
Intangible Property, including the right to sell the same at public or private
sale.
ARTICLE XVII.
17. LESSOR'S RIGHT TO CURE LESSEE'S DEFAULT. If Lessee shall fail to make
any payment or to perform any act required to be made or performed hereunder,
Lessor, without
44
waiving or releasing any obligation or default, may, but shall be under no
obligation to, make such payment or perform such act for the account and at the
expense of Lessee, and may, to the extent permitted by law, enter upon the
Leased Property and any Capital Addition thereto for such purpose and take all
such action thereon as, in Lessor's opinion, may be necessary or appropriate
therefor. No such entry shall be deemed an eviction of Lessee. All sums so
paid by Lessor and all costs and expenses, including reasonable attorneys' fees
and expenses, so incurred, together with interest thereon at the Overdue Rate
from the date on which such sums or expenses are paid or incurred by Lessor,
shall be paid by Lessee to Lessor on demand.
ARTICLE XVIII.
18. PURCHASE OF THE LEASED PROPERTY. If Lessee purchases the Leased
Property from Lessor, Lessor shall, upon receipt from Lessee of the applicable
purchase price, together with full payment of any unpaid Rent due and payable
with respect to any period ending on or before the date of the purchase, deliver
to Lessee an appropriate deed or other conveyance conveying the entire interest
of Lessor in and to the Leased Property to Lessee free and clear of all
encumbrances other than (i) those that Lessee has agreed hereunder to pay or
discharge; (ii) those mortgage liens, if any, which Lessee has agreed in writing
to accept and to take title subject to; (iii) those liens and encumbrances which
were in effect on the date of conveyance of the Leased Property to Lessor; and
(iv) any other encumbrances permitted hereunder to be imposed on the Leased
Property which are assumable at no cost to Lessee or to which Lessee may take
subject without cost to Lessee; provided, however, that in no event shall Lessee
be obligated to assume or take subject to any encumbrance with a principal
balance in excess of the applicable purchase or option price, and provided
further that where the purchase price is equal to the Minimum Repurchase Price
and if any such encumbrance may not be removed without penalty, the applicable
purchase price shall be increased or decreased by an amount equal to the
positive or negative effect on Fair Market Value attributable to the interest
rate, amortization schedule, maturity date, prepayment penalty and other terms
and conditions of such encumbrance. The difference between the applicable
purchase price and the total of the encumbrances assumed or taken subject to
shall be paid to Lessor or as Lessor may direct in immediately available funds.
All expenses of such conveyance, including the cost of title insurance,
attorneys' fees incurred by Lessor in connection with such conveyance and
release, transfer taxes and recording and escrow fees, shall be paid by Lessee.
ARTICLE XIX.
19. RENEWAL TERMS. Provided that Lessee exercises its right to renew the
lease for each of the Seven Properties in accordance with the respective terms
of the renewal option relating to each such lease and provided that no Event of
Default, or event which, with notice or lapse of time or both, would constitute
an Event of Default, has occurred and is continuing, either at the date of
exercise or upon the commencement of an Extended Term
45
(as hereunder defined), then Lessee shall have the right to renew this Lease for
three (3) five year renewal terms (each, an "Extended Term), upon giving written
notice to Lessor of such renewal not less than twelve (12) months and not more
than fifteen (15) months prior to the expiration of the then current Fixed Term
or Extended Term, as applicable. During each Extended Term, all of the terms
and conditions of this Lease shall continue in full force and effect except that
the annual Minimum Rent and Additional Rent for and during such Extended Term
shall be the greater of (a) the then current annual Fair Market Rental for the
Leased Property and (b) One Hundred and Three Percent (103%) of the annual
Minimum Rent and Additional Rent payable for the last Lease Year of the
immediately preceding Fixed Term or Extended Term, as applicable.
Notwithstanding anything to the contrary in this Article XIX, Lessor, in its
sole discretion, may waive the condition to Lessee's right to renew this Lease
that no Event of Default, or event which, with notice or lapse of time or both,
would constitute an Event of Default, have occurred or be continuing, and the
same may not be used by Lessee as a means to negate the effectiveness of
Lessee's exercise of its renewal right for such Extended Term.
ARTICLE XX.
20. HOLDING OVER. Except as provided in Article XIX, if Lessee shall for
any reason remain in possession of the Leased Property after the expiration or
earlier termination of the Fixed Term, such possession shall be as a month-to-
month tenant during which time Lessee shall pay as Minimum Rent each month twice
the sum of (i) monthly Minimum Rent applicable to the prior Lease Year, plus
(ii) one-twelfth of the aggregate Additional Rent payable applicable to the
prior Lease Year, together with all Additional Charges and all other sums
payable by Lessee pursuant to this Lease. During such period of month-to-month
tenancy, Lessee shall be obligated to perform and observe all of the terms,
covenants and conditions of this Lease, but shall have no rights hereunder other
than the right, to the extent given by law to month-to-month tenancies, to
continue its occupancy and use of the Leased Property. Nothing contained herein
shall constitute the consent, express or implied, of Lessor to the holding over
of Lessee after the expiration or earlier termination of this Lease.
ARTICLE XXI.
21.1 LETTERS OF CREDIT. During the entire Term and for sixty (60)
days after the expiration or earlier termination of this Lease, Lessee shall
have obtained letters of credit from a financial institution satisfactory to
Lessor naming Lessor as beneficiary to secure Lessee's obligations hereunder and
Lessee's and any Affiliate of Lessee's obligations under any other lease or
other agreement or instrument with or in favor of Lessor or any Affiliate of
Lessor, at the times, in the amounts and for the purposes set forth below. Each
letter of credit shall be in substantially the form of Exhibit D hereto. Each
letter of credit shall be for a term of not less than one (1) year and
irrevocable during that term. Each letter of credit shall provide that it will
be honored upon a signed statement by Lessor that Lessor is entitled to draw
upon the letter of credit under this Lease, and shall require no signature or
statement
46
from any party other than Lessor. No notice to Lessee shall be required to
enable Lessor to draw upon the letter of credit. Each letter of credit shall
also provide that following the honor of any drafts in an amount less than the
aggregate amount of the letter of credit, the financial institution shall return
the original letter of credit to Lessor and Lessor's rights as to the remaining
amount of the letter of credit will not be extinguished. In the event of a
transfer of Lessor's interest in the Leased Property, Lessor shall have the
right to transfer the letter of credit to the transferee and thereupon shall,
without any further agreement between the parties, be released by Lessee from
all liability therefor, and it is agreed that the provisions hereof shall apply
to every transfer or assignment of the letter of credit to a new Lessor. The
letter of credit may be assigned as security in connection with a Facility
Mortgage. If the financial institution from which Lessee has obtained a letter
of credit shall admit in writing its inability to pay its debts generally as
they become due, file a petition in bankruptcy or a petition to take advantage
of any insolvency act, make an assignment for the benefit of its creditors
consent to the appointment of a receiver of itself or of the whole or any
substantial part of its property, or file a petition or answer seeking
reorganization or arrangement under the Federal bankruptcy laws or any other
applicable law or statute of the United States of America or any state thereof,
then Lessee shall obtain a replacement letter of credit within thirty (30) days
of such act from another financial institution satisfactory to Lessor.
21.2 TIMES FOR OBTAINING LETTERS OF CREDIT. The initial letter of
credit shall be obtained and delivered to Lessor prior to the execution and
delivery of this Lease. The letters of credit covering subsequent periods shall
be obtained and delivered to Lessor not less than thirty (30) days prior to the
expiration of the then existing letter of credit ("Letter of Credit Date"). The
term for each such letter of credit shall begin no later than the expiration
date of the previous letter of credit.
21.3 AMOUNTS FOR LETTERS OF CREDIT.
21.3.1 Letters of credit covering the first and second Lease
Years shall be in an amount equal to one-half of the annual Minimum Rent payable
by Lessee under this Lease for the applicable Lease Year. The letters of credit
covering subsequent Lease Years shall be in an amount equal to one-half of the
sum of the annual Minimum Rent plus Lessor's reasonable estimate of the
Additional Rent to be payable by Lessee for the applicable Lease Year.
21.3.2 Notwithstanding subsection 21.3.1 above, if for any
eight (8) consecutive month period during the Term the average Cash Flow
Coverage for the Facility equals or exceeds 1.25 and during such time period
Lessee maintains a Consolidated Net Worth in excess of Twenty Million Dollars
($20,000,000), then Lessee shall be entitled to reduce the amount of the letter
of credit for the then current and each subsequent Lease Year by fifty percent
(50%) of the amount required by subsection 21.3.1 above, and if for any eight
(8) consecutive month period during the Term the average Cash Flow Coverage for
the
47
Facility equals or exceeds 1.4 and during such time period Lessee maintains a
Consolidated Net Worth in excess of Twenty Million Dollars ($20,000,000), then
Lessee shall no longer be required to supply a letter of credit pursuant to this
Lease; provided, however, that if, following any such reduction in the amount or
elimination of the applicable letter of credit, the average Cash Flow Coverage
for the Facility for any three (3) consecutive month period decreases below 1.4,
then Lessee shall again be required to provide a letter of credit for the then
current and each subsequent Lease Year in an amount equal to fifty percent (50%)
of the amount required by subsection 21.3.1 above and Lessee shall promptly
deliver to Lessor a letter of credit in the readjusted amount, and if the
average Cash Flow Coverage for the Facility for any three (3) consecutive month
period decreases below 1.25 or if at any time Lessee's Consolidated Net Worth
falls below Twenty Million Dollars ($20,000,000), then Lessee shall again be
required to provide a letter of credit for the then current and each subsequent
Lease Year in an amount equal to that required by subsection 21.3.1 above and
Lessee shall promptly deliver to Lessor a letter of credit in the readjusted
amount; provided further that following any such increase, the letter of credit
may be reduced, released and increased as provided above.
21.4 USES OF LETTERS OF CREDIT. Lessor shall have the right to draw
upon a letter of credit up to its full amount whenever an Event of Default has
occurred or an event of default under any other lease or agreement between
Lessor or an Affiliate of Lessor and Lessee or an Affiliate of Lessee or any
letter of credit, guaranty, mortgage, deed of trust, or other instrument
executed by Lessee or an Affiliate of Lessee in favor of Lessor or an Affiliate
of Lessor has occurred and any applicable cure periods have expired; provided
further, if Lessee fails to obtain a satisfactory letter of credit prior to the
applicable Letter of Credit Date, Lessor may draw upon the full amount of the
then existing letter of credit without giving any notice or time to cure to
Lessee. No such draw shall (i) cure or constitute a waiver of an Event of
Default, (ii) be deemed to fix or determine the amounts to which Lessor is
entitled to recover under this Lease or otherwise, or (iii) be deemed to limit
or waive Lessor's right to pursue any remedies provided for in this Lease. If
all or any portion of a letter of credit is drawn against by Lessor, Lessee
shall, within two (2) business days after demand by Lessor, order the issuer of
such letter of credit to issue Lessor, at Lessee's expense, a replacement or
supplementary letter of credit in substantially the form attached hereto as
Exhibit D such that at all times during the Term, Lessor shall have the ability
to draw on one or more letters of credit totaling, in the aggregate, the amount
required pursuant to Section 21.3 and Lessor, upon the receipt thereof, shall
return any amounts drawn down because of Lessee's failure to timely procure a
replacement or supplementary letter of credit and held pending receipt of such
replacement or supplementary letter of credit. However, nothing shall preclude
Lessee from bringing a separate action with respect to the matters governed by
this Section 21.4 and Lessee is not waiving other rights and remedies not
expressly waived with respect to the matters governed by this Section 21.4.
ARTICLE XXII.
48
22. RISK OF LOSS. The risk of loss or of decrease in the enjoyment and
beneficial use of the Leased Property as a consequence of the damage or
destruction thereof by fire, the elements, casualties, thefts, riots, wars or
otherwise, or in consequence of foreclosures, attachments, levies or executions
(other than by Lessor and Persons claiming from, through or under Lessor) is
assumed by Lessee, and except as otherwise provided herein no such event shall
entitle Lessee to any abatement of Rent.
ARTICLE XXIII.
23. GENERAL INDEMNIFICATION. In addition to the other indemnities
contained herein, and notwithstanding the existence of any insurance carried by
or for the benefit of Lessor or Lessee, and without regard to the policy limits
of any such insurance, Lessee shall protect, indemnify, save harmless and defend
Lessor from and against all liabilities, obligations, claims, damages penalties,
causes of action, costs and expenses, including reasonable attorneys',
consultants' and experts' fees and expenses, imposed upon or incurred by or
asserted against Lessor by reason of: (i) any accident, injury to or death of
Persons or loss of or damage to property occurring on or about the Leased
Property or adjoining sidewalks; (ii) any use, misuse, non-use, condition,
maintenance or repair by Lessee of the Leased Property; (iii) any failure on the
part of Lessee to perform or comply with any of the terms of this Lease; (iv)
the non-performance of any of the terms and provisions of any and all existing
and future subleases of the Leased Property to be performed by any party
thereunder; (v) any claim for malpractice, negligence or misconduct committed by
any Person on or working from the Leased Property; and (vi) the violation by
Lessee of any Legal Requirement. Any amounts which become payable by Lessee
under this Article shall be paid within ten (10) days after liability therefor
is determined by litigation or otherwise, and if not timely paid shall bear
interest at the Overdue Rate from the date of such determination to the date of
payment. Lessee, at its sole cost and expense, shall contest, resist and defend
any such claim, action or proceeding asserted or instituted against Lessor or
may compromise or otherwise dispose of the same as Lessee sees fit. For
purposes of this Article XXIII, any acts or omissions of Lessee, or by
employees, agents, assignees, contractors, subcontractors or others acting for
or on behalf of Lessee (whether or not they are negligent, intentional, willful
or unlawful), shall be strictly attributable to Lessee.
Lessor shall indemnify, save harmless and defend Lessee from and
against all liabilities, obligations, claims, damages, penalties, causes of
action, costs and expenses, including, but not limited to, reasonable attorneys'
fees, imposed upon or incurred by or asserted against Lessee as a result of the
gross negligence or wilful misconduct of Lessor. Lessor, at its expense, shall
contest, resist, and defend any claim, action or proceeding asserted or
instituted against Lessee with respect to the foregoing or may compromise or
otherwise dispose of the same as Lessor sees fit. Any amounts which become
payable by Lessor under this Section shall be paid within ten (10) days after
liability therefor on the part of Lessor is determined by litigation or
otherwise, and if not timely paid shall bear a late
49
charge (to the extent permitted by law) at the Overdue Rate from the date of
such determination to the date of payment.
ARTICLE XXIV.
24. SUBLETTING AND ASSIGNMENT.
24.1 PROHIBITION. Lessee shall not, without Lessor's prior written
consent, which may be withheld in Lessor's sole and absolute discretion,
voluntarily or by operation of law assign (which term includes any sale,
encumbering, pledge or other transfer or hypothecation) this Lease, master
sublet all or any part of the Leased Property or engage the services of any
Person for the management or operation of the Facility. Lessee acknowledges
that Lessor is relying upon the expertise of Lessee in the operation of the
Facility and that Lessor entered into this Lease with the expectation that
Lessee would remain in and operate the Facility during the entire Term and for
that reason Lessor retains sole and absolute discretion in approving or
disapproving any assignment or master sublease. If Lessee is a corporation or
partnership, any transfer of its stock (other than a transfer of any of Lessee's
stock owned by Daniel R. Baty for estate planning purposes) or partnership
interests (or the stock or partnership interests of the entity(ies) that
controls Lessee) or any dissolution or merger or consolidation of Lessee (or its
controlling entity(ies)) with any other entity, which results in any Person
(other than Daniel R. Baty) and such Person's Affiliates collectively owning
greater than twenty-five percent (25%) of the total outstanding shares of any
class of Lessee's stock or partnership interests, or the sale or other transfer
of all or substantially all of the assets of Lessee (or its controlling
entity(ies)), shall constitute an assignment of Lessee's interest in this Lease
within the meaning of this Article XXIV and the provisions requiring consent
contained herein shall apply (provided, however, that the foregoing provision
regarding transfer of Lessee's stock constituting an assignment shall not apply
if (i) Lessee's stock is publicly traded, and (ii) Lessee's Consolidated Net
Worth after such transfer is not less than Lessee's Consolidated Net Worth as of
the Commencement Date. Any sublease of more than ten percent (10%) of the
Facility to any Person or its Affiliates, in one transaction or in a series of
transactions, shall be deemed to be a master sublease hereunder. For any
sublease transaction not requiring the consent of Lessor hereunder, Lessee
shall, within ten (10) days of entering into any such sublease, notify Lessor of
the existence of such sublease and the identity of the sublessee and supply
Lessor with a copy of the sublease, any related documentation and any other
materials or information reasonably requested by Lessor.
24.1.1 Lessor will not unreasonably withhold its written
consent to an assignment of this Lease to (A) any Person which acquires all or
substantially all of the assets and business of Lessee by virtue of a merger or
consolidation of, with or into Lessee or (B) any purchaser of 51% or more of the
outstanding voting stock or partnership interest of Lessee, if in Lessor's
reasonable judgment such assignee, together with any guarantor of such
assignee's obligations under this Lease, has (1) a consolidated net worth equal
to or
50
greater than Lessee's consolidated net worth at the time of the proposed
assignment or as of the Commencement Date, whichever is greater, and (2) the
operational expertise and reputation at least equal to that of Lessee at the
time of the proposed assignment or as of the Commencement Date, whichever is
greater.
24.2 CONSENT. If Lessee desires at any time to assign this Lease, to
master sublet the Facility or any portion thereof or engage the services of any
Person for the management or operation of the Facility, it shall first notify
Lessor of its desire to do so and shall submit in writing to Lessor: (i) the
name of the proposed master sublessee, assignee or manager; (ii) the terms and
provisions of the proposed master sublease, assignment or management agreement;
and (iii) such financial information as Lessor reasonably may request concerning
the proposed master sublessee, assignee or manager.
24.2.1 Lessor may, as a condition to granting such consent,
require that the obligations of any sublessee, assignee, or manager which is an
Affiliate of another Person be guaranteed by its parent or controlling Person if
(i) the Consolidated Net Worth of Lessee would be diminished as a result of any
such assignment of Lessee's interest described in this Article XXIV, or (ii) the
new controlling Person(s) would have a consolidated net worth less than the
Lessee's consolidated net worth as of the Closing Date and that any guaranty of
this Lease be reaffirmed by any Guarantor notwithstanding such subletting,
assignment or management arrangement. Any sublease shall be expressly subject
and subordinate to all applicable terms and conditions of this Lease and provide
that Lessor, at its option and without any obligation to-do so, may require any
sublessee to attorn to Lessor, in which event Lessor shall undertake the
obligations of Lessee, as sublessor under such sublease from the time of the
exercise of such option to the termination of such sublease and in such case
Lessor shall not be liable for any prepaid rents or security deposit paid by
such sublessee to Lessee unless Lessor actually receives the same from Lessee or
for any other prior defaults of Lessee under such sublease. In the event that
Lessor shall not require such attornment with respect to any sublease, then such
sublease shall automatically terminate upon the expiration or earlier
termination of this Lease, including any early termination by mutual agreement
of Lessor and Lessee. Furthermore, any sublease, assignment or management
agreement shall expressly provide that the sublessee, assignee or manager shall
furnish Lessor with such financial and operational information and information
about the physical condition of the Facility, including the information required
by Section 25.2 herein, as Lessor may request from time to time.
24.2.2 Lessor may, as a condition to its consent to any such
master subletting, require Lessee to pay to Lessor one hundred percent (100%) of
all Transfer Consideration (defined below). "Transfer Consideration" shall mean
the positive difference, if any, between the Fair Market Rental and the Rent
payable by Lessee determined on a monthly basis, prorating the Rent, as
appropriate, if less than all of the Facility is sublet; provided, however, in
no event shall Lessor be entitled to receive any amount in excess of the amount
Lessee is entitled to receive as a result of the master sublease. The Transfer
51
Consideration for each month shall be paid by Lessee to Lessor monthly when the
Minimum Rent is due for the duration of the master subletting.
24.2.3 Lessor may, as a condition to its consent to any
assignment or management arrangement, require Lessee to pay to Lessor upon the
effective date of such assignment or management arrangement an amount equal to
one hundred percent (100%) of the gross fair market value of Lessee's leasehold
interest, which shall be deemed to equal the Transfer Consideration for the
remaining Term of the Lease assuming all renewal options are exercised and there
is no early termination of the Lease and Lessor shall refund any amounts
attributable to renewal options if they subsequently are not exercised with
interest thereon at the Prime Rate; provided, however, in no event shall Lessor
be entitled to receive any amount in excess of the amount Lessee is entitled to
receive as a result of the assignment or management agreement.
24.2.4 The consent by Lessor to any assignment, master
subletting or management arrangement shall not constitute a consent to any
subsequent assignment, master subletting or management arrangement by Lessee or
to any subsequent or successive assignment, master subletting or management
arrangement by the master sublessee, assignee or manager. Any purported or
attempted assignment, sublease, management agreement or other permission to use
the Facility contrary to the provisions of this Article shall be void and, at
the option of Lessor, shall Terminate this Lease.
24.2.5 Notwithstanding the preceding, Lessee may sublease or
assign the Lease to an Affiliate of Lessee without the written consent of Lessor
and Lessee shall not be required to pay any Transfer Consideration to Lessor as
a result of such sublease or assignment to an Affiliate, but such sublease or
assignment of the Lease from Lessee to an Affiliate of Lessee will not relieve
Lessee from its obligations under the Lease or any Guarantor from its
obligations under any guaranty of this Lease.
24.3 COSTS. Lessee shall reimburse Lessor for Lessor's reasonable
costs and expenses incurred in conjunction with the processing and documentation
of any assignment, master subletting or management arrangement, including
reasonable attorneys', architects', engineers' or other consultants' fees
whether or not such master sublease, assignment or management agreement is
actually consummated.
24.4 NO RELEASE OF LESSEE'S OBLIGATIONS. No assignment, subletting or
management agreement shall relieve Lessee of its obligation to pay the Rent and
to perform all of the other obligations to be performed by Lessee hereunder.
The liability of Lessee named herein and any immediate and remote successor in
interest of Lessee (by assignment or otherwise), and the due performance of the
obligations of this Lease on Lessee's part to be performed or observed, shall
not in any way be discharged, released or impaired by any(i) agreement which
modifies any of the rights or obligations of the parties under this Lease, (ii)
stipulation which extends the time within which an obligation under this Lease
is to be
52
performed, (iii) waiver of the performance of an obligation required under this
Lease, or (iv) failure to enforce any of the obligations set forth in this
Lease.
24.5 ASSIGNMENT OF LESSEE'S RIGHTS AGAINST SUBLESSEE. If Lessor shall
consent to a master subletting, then the written instrument of consent, executed
and acknowledged by Lessor, Lessee and sublessee, shall contain a provision
substantially similar to the following:
(i) Lessee and sublessee hereby agree that, if sublessee shall
be in default of any obligation of Lessee under the sublease, which default
also constitutes a default by Lessee under the Lease, then Lessor shall be
permitted to avail itself of all of the rights and remedies available to
Lessee in connection therewith.
(ii) Without limiting the generality of the foregoing, Lessor
shall be permitted (by assignment of a cause of action or otherwise) to
institute an action or proceeding against sublessee in the name of Lessee
in order to enforce Lessee's rights under the sublease, and also shall be
permitted to take all ancillary actions (e.g., serve default notices and
demands) in the name of Lessee as Lessor reasonably shall determine to be
necessary.
(iii) Lessee agrees to cooperate with Lessor, and to execute
such documents as shall be reasonably necessary, in connection with the
implementation of the foregoing rights of Lessor.
(iv) Lessee expressly acknowledges and agrees that the exercise
by Lessor of any of the foregoing rights and remedies shall not constitute
an election of remedies, and shall not in any way impair Lessor's
entitlement to pursue other rights and remedies directly against Lessee.
24.6 Reserved
24.7 REIT PROTECTION. Anything contained in this Lease to the
contrary notwithstanding, Lessee shall not (i) sublet, assign or enter into a
management arrangement for the Leased Property on any basis such that the rental
or other amounts to be paid by the sublessee, assignee or manager thereunder
would be based, in whole or in part, on the income or profits delivered by the
business activities of the sublessee, assignee or manager; (ii) furnish or
render any services to the sublessee, assignee or manager or manage or operate
the Leased Property so subleased, assigned or managed; (iii) sublet, assign or
enter into a management arrangement for the Leased Property to any Person in
which Lessee or Lessor owns an interest, directly or indirectly (by applying
constructive ownership rules set forth in Section 856(d)(5) of the Code); or
(iv) sublet, assign or enter into a management arrangement for the Leased
Property in any other manner which could cause any portion of
53
the amounts received by Lessor pursuant to this Lease or any sublease to fail to
qualify as "rents from real property" within the meaning of Section 856(d) of
the Code, or any similar or successor provision thereto or which could cause any
other income of Lessor to fail to qualify as income described in Section
856(c)(2) of the Code.
24.8 PREPAID RENT. Lessee shall not require or accept prepayment for
more than three (3) months' use of individual units or rooms of the Facility.
Amounts charged to residents for individual units or rooms shall not be
materially less than fair market value.
ARTICLE XXV.
25. OFFICER'S CERTIFICATES AND FINANCIAL STATEMENTS
25.1 OFFICER'S CERTIFICATE. At any time and from time to time upon
Lessee's receipt of not less than ten (10) days' prior written request by
Lessor, Lessee shall furnish to Lessor an Officer's Certificate certifying (i)
that this Lease is unmodified and in full force and effect, or that this Lease
is in full force and effect as modified and setting forth the modifications;
(ii) the dates to which the Rent has been paid; (iii) whether or not, to the
best knowledge of Lessee, Lessor is in default in the performance of any
covenant, agreement or condition contained in this Lease and, if so, specifying
each such default of which Lessee may have knowledge, and (iv) responses to such
other questions or statements of fact as Lessor, any ground or underlying
lessor, any purchaser or any current or prospective Facility Mortgagee shall
reasonably request. Lessee's failure to deliver such statement within such time
shall constitute an acknowledgment by Lessee that (x) this Lease is unmodified
and in full force and effect except as may be represented to the contrary by
Lessor; (y) Lessor is not in default in the performance of any covenant,
agreement or condition contained in this Lease; and (z) the other matters set
forth in such request, if any, are true and correct. Any such certificate
furnished pursuant to this Article may be relied upon by Lessor and any current
or prospective Facility Mortgagee, ground or underlying lessor or purchaser of
the Leased Property.
25.2 STATEMENTS. Lessee shall furnish the following statements to
Lessor:
(a) within 120 days after the end of each of Lessee's fiscal
years, a copy of the audited consolidated balance sheets of Lessee and its
consolidated Subsidiaries as of the end of such fiscal year, and related
audited consolidated statements of income, changes in common stock and
other stockholders' equity and changes in the financial position of Lessee
and its consolidated Subsidiaries for such fiscal year, prepared in
accordance with GAAP applied on a basis consistently maintained throughout
the period involved, such consolidated financial statements to be certified
by nationally recognized certified public accountants;
54
(b) within 120 days after the end of Lessee's fiscal years,
and together with the annual audit report furnished in accordance with
clause (a) above, an Officer's Certificate stating that to the best of the
signer's knowledge and belief after making due inquiry, Lessee is not in
default in the performance or observance of any of the terms of this LEASE,
or if Lessee shall be in default, specifying all such defaults, the nature
thereof, and the steps being taken to remedy the same;
(c) within thirty (30) days after the end of each month for
those months occurring from the Commencement Date to three months after the
first month in which the average Cash Flow Coverage for the Facility equals
or exceeds 1.3 for such month, all consolidated financial reports Lessee
produces for reporting purposes and detailed statements of income and
detailed operational statistics regarding occupancy rates, patient and
resident mix and patient and resident rates by type for the Facility; and
thereafter within sixty (60) days after the end of each of Lessee's
quarters, all quarterly consolidated financial reports Lessee produces for
reporting purposes and detailed statements of income and detailed
operational statistics regarding occupancy rates, patient and resident mix
and patient and resident rates by type for the Facility;
(d) within 120 days after the end of each of Lessee's fiscal
years, a copy of each cost report, if any, FILED with the appropriate
governmental agency for the Facility;
(e) within thirty (30) days after they are required to be
FILED with the SEC, copies of any annual reports and of information,
documents and other reports, or copies of such portions of any of the
foregoing as the SEC may prescribe, which Lessee is required to file with
the SEC pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934;
(f) within three (3) Business Days after Lessee's receipt
thereof, copies of all written communications received by Lessee from any
regulatory agency relating to (i) surveys of the Facility for purposes of
licensure, Medicare and Medicaid certification and accreditation and (ii)
any proceeding, formal or informal, with respect to cited deficiencies with
respect to services and activities provided and performed at the Facility,
including patient and resident care, patient and resident activities,
patient and resident therapy, dietary, medical records, drugs and
medicines, supplies, housekeeping and maintenance, or the condition of the
Facility, and involving an actual or threatened warning, imposition of a
fine or a penalty, or suspension, termination or revocation of the
Facility's license to be operated in accordance with its Primary Intended
Use;
(g) to the extent reasonably obtainable by Lessee, within 120
days after the end of each fiscal year of the financial institution issuing
the letter of
55
credit required under Article XXI, a copy of the audited consolidated
balance sheets of such financial institution as of the end of such fiscal
year, and related unaudited consolidated statements of income, changes in
common stock and other stockholders equity and changes in the financial
position of such financial institution and its consolidated subsidiaries
for each such fiscal year, prepared in accordance with generally accepted
accounting principles applied on a basis consistently maintained throughout
the period involved, such consolidated financial statements to be certified
by nationally recognized certified public accountants;
(h) immediately upon Lessee's receipt thereof, copies of all
material claims, complaints, notices, warnings or asserted violations
relating in any way to the Leased Property or Lessee's use thereof; and
(i) with reasonable promptness, such other information
respecting the financial and operational condition and affairs of Lessee
and the Facility and the physical condition of the Leased Property and any
Capital Addition thereto as Lessor may reasonably request, in the form of a
questionnaire or otherwise, from time to time.
25.3 CHARGES. Lessee acknowledges that the failure to furnish Lessor
with any of the certificates or statements required by this Article XXV will
cause Lessor to incur costs and expenses not contemplated hereunder, the exact
amount of which is presently anticipated to be extremely difficult to ascertain.
Accordingly, if Lessee fails to furnish Lessor with any of the certificates or
statements required by this Article XXV, Lessee shall pay to Lessor upon demand
$1,000 for each such failure as Additional Charges. The parties agree that this
charge represents a fair and reasonable estimate of the costs that Lessor will
incur by reason of Lessee's failure to furnish Lessor with such certificates and
statements.
ARTICLE XVI.
26. LESSOR'S RIGHT TO INSPECT. Lessee shall permit Lessor and its
authorized representatives to inspect the Leased Property and any Capital
Addition thereto during usual business hours and on reasonable notice subject to
any security, health, safety or confidentiality requirements of Lessee or any
Legal Requirement or Insurance Requirement.
ARTICLE XXVII.
27. NO WAIVER. No failure by Lessor to insist upon the strict performance
of any term hereof or to exercise any right, power or remedy hereunder and no
acceptance of full or partial payment of Rent during the continuance of any
default or Event of Default shall constitute a waiver of any such breach or of
any such term. No waiver of any breach shall affect or alter this Lease, which
shall continue in full force and effect with respect to any other then existing
or subsequent breach.
56
ARTICLE XXVIII.
28. REMEDIES CUMULATIVE. Each legal, equitable or contractual right,
power and remedy of Lessor now or hereafter provided either in this Lease or by
statute or otherwise shall be cumulative and concurrent and shall be in addition
to every other right, power and remedy and the exercise or beginning of the
exercise by Lessor of any one or more of such rights, powers and remedies shall
not preclude the simultaneous or subsequent exercise by Lessor of any or all of
such other rights, powers and remedies.
ARTICLE XXIX.
29. ACCEPTANCE OF SURRENDER. No surrender to Lessor of this Lease or of
the Leased Property, or any part thereof or of any interest therein, shall be
valid or effective unless agreed to and accepted in writing by Lessor and no act
by Lessor or any representative or agent of Lessor, other than such a written
acceptance by Lessor, shall constitute an acceptance of any such surrender.
ARTICLE XXX.
30. NO MERGER. There shall be no merger of this Lease or of the leasehold
estate created hereby by reason of the fact that the same Person may acquire,
own or hold, directly or indirectly, (i) this Lease or the leasehold estate
created hereby or any interest in this Lease or such leasehold estate and (ii)
the fee estate in the Leased Property.
ARTICLE XXXI.
31. CONVEYANCE BY LESSOR. If Lessor or any successor owner of the Leased
Property shall convey the Leased Property other than as security for a debt,
Lessor or such successor owner, as the case may be, shall thereupon be released
from all future liabilities and obligations of the Lessor under this Lease
arising or accruing from and after the date of such conveyance or other transfer
and all such future liabilities and obligations shall thereupon be binding upon
the new owner.
ARTICLE XXXII.
32. QUIET ENJOYMENT. So long as Lessee shall pay the Rent as the same
becomes due and shall fully comply with all of the terms of this Lease and fully
perform its obligations hereunder, Lessee shall peaceably and quietly have, hold
and enjoy the Leased Property for the Term, free of any claim or other action by
Lessor or anyone claiming by, through or under Lessor, but subject to all liens
and encumbrances of record as of the date hereof, or the Commencement Date or
created thereafter as permitted hereunder or thereafter consented to by Lessee.
No failure by Lessor to comply with the foregoing covenant shall give Lessee any
right to cancel or terminate this Lease or abate, reduce or make a deduction
57
from or offset against the Rent or any other sum payable under this Lease, or to
fail to perform any other obligation of Lessee hereunder. Notwithstanding the
foregoing, Lessee shall have the right, by separate and independent action to
pursue any claim it may have against Lessor as a result of a breach by Lessor of
the covenant of quiet enjoyment contained in this Article.
ARTICLE XXXIII.
33. NOTICES. Any notice, consent, approval, demand or other communication
required or permitted to be given hereunder (a "notice") must be in writing and
may be served personally or by U.S. Mail. If served by U.S. Mail, it shall be
addressed as follows:
If to Lessor: Health Care Property Investors Inc.
1O990 Wilshire Boulevard
Suite 1200
Los Angeles, California 90024
Attn: Legal Department
Fax: (310) 444-7817
with a copy to: Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
Attn: David H. Vena, Esq.
Fax: (213) 891-8763
If to Lessee: Emeritus Corporation
Market Place One
2003 Western Avenue
Suite 660
Seattle, Washington 98121
Attn: Raymond Brandstrom
Fax: (206) 443-5432
with a copy to: The Nathanson Group
1411 Fourth Ave., Suite 905
Seattle, Washington 98101
Attn: Randi S. Nathanson, Esq.
Fax: (206) 623-1738
Any notice which is personally served shall be effective upon the date of
service; any notice given by U.S. Mail shall be deemed effectively given, if
deposited in the United States Mail, registered or certified with return receipt
requested, postage prepaid and addressed as provided above, on the date of
receipt, refusal or non-delivery indicated on the return
58
receipt. In addition, either party may send notices by facsimile or by a
nationally recognized overnight courier service which provides written proof of
delivery (such as U.P.S. or Federal Express). Any notice sent by facsimile
shall be effective upon confirmation of receipt in legible form, and any notice
sent by a nationally recognized overnight courier shall be effective on the date
of delivery to the party at its address specified above as set forth in the
courier's delivery receipt. Either party may, by notice to the other from time
to time in the manner herein provided, specify a different address for notice
purposes.
ARTICLE XXXIV.
34. APPRAISER. If it becomes necessary to determine the Fair Market Value
or Fair Market Rental for any purpose of this Lease, the same shall be
determined by Valuation Counselors, or in the event Valuation Counselors no
longer exists upon the date the same is to be determined, any other nationally
recognized appraisal firm, in which one or more of the members, officers or
principals of such firm are members of the American Institute of Real Estate
Appraisers (or any successor organization thereto), as may be selected by Lessor
in writing to Lessee (the "Appraiser"). Lessor shall cause such Appraiser to
determine the Fair Market Value or Fair Market Rental as of the relevant date
(giving effect to the impact, if any, of inflation from the date of the
Appraiser's decision to the relevant date) and the determination of such
Appraiser shall be final and binding upon the parties. If the Facility had
reached stabilized operations prior to the Commencement Date, to the extent
consistent with sound appraisal practice as then existing at the time of any
such appraisal, an appraisal for Fair Market Value shall be made on a basis
consistent with the basis on which the Leased Property was appraised for
purposes of determining its fair market value at the time the Leased Property
was acquired by Lessor. This provision for determination by appraisal shall be
specifically enforceable to the extent such remedy is available under applicable
law, and any determination hereunder shall be final and binding upon the parties
except as otherwise provided by applicable law. Lessor and Lessee shall each
pay one-half of the fees and expenses of the Appraiser and one-half of all other
cost and expenses incurred in connection with such appraisal.
ARTICLE XXXV.
35.1 LESSEE'S OPTION TO PURCHASE THE LEASED PROPERTY. Provided no Event of
Default, or event which, with notice or lapse of time or both, would constitute
an Event of Default, has occurred and is continuing hereunder, Lessee shall have
the option to purchase the Leased Property upon the expiration of the Fixed Term
and each Extended Term at the Shared Appreciation Purchase Price, calculated as
of the Outside Closing Date, provided that Lessee or one of its Affiliates
exercises its option to purchase each of the Seven Properties in accordance with
the respective terms of the option relating to each such property. Lessee may
exercise such option to purchase the Leased Property by opening an escrow (the
"Escrow") with and by depositing a copy of this Lease with a national title
company reasonably acceptable to Lessor ("Escrow Holder") and giving written
notice to
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Lessor of such deposit with Escrow Holder no earlier than fifteen (15) months
and not less than twelve (12) months prior to the expiration of the Fixed Term
or the Extended Term, as applicable. If Lessee shall not be entitled to
exercise such option (e.g., by reason of an Event of Default) or shall be
entitled to exercise the same but shall fail to do so within the time and in the
manner herein provided, such option shall lapse and thereafter not be
exercisable by Lessee. No failure by Lessor to notify Lessee of any defect in
any attempted exercise of the foregoing option shall be deemed a waiver by
Lessor of the right to insist upon Lessee's exercise of such option in strict
accordance with the provisions hereof. Not less than six (6) months prior to
the expiration of the Fixed Term for the Extended Term, as applicable, Lessee
shall deposit one and one-half percent of the Minimum Repurchase Price of the
Seven Properties in the aggregate (the "Opening Deposit") with Escrow Holder.
In the event that Lessee shall properly and timely exercise such option and make
the Opening Deposit, then such transaction shall be consummated on or within ten
(10) days after the expiration of the Fixed Term or Extended Term, as applicable
(the "Outside Closing Date").
35.2 DEFAULTS
35.2.1 LIQUIDATED DAMAGES. IF, FOLLOWING A VALID AND PROPER
EXERCISE OF THE FOREGOING OPTION, LESSEE FAILS TO COMPLETE THE PURCHASE OF THE
LEASED PROPERTY AND SUCH FAILURE CONSTITUTES A BREACH HEREOF, THEN LESSOR, AT
ITS OPTION, MAY TERMINATE THE PURCHASE CONTRACT FORMED BY LESSEE'S EXERCISE OF
SUCH OPTION AND THE ESCROW BY GIVING WRITTEN NOTICE TO LESSEE AND ESCROW HOLDER
AND, THEREUPON, THE ESCROW SHALL BE CANCELED, ALL DOCUMENTS SHALL BE RETURNED TO
THE RESPECTIVE PARTIES WHO DEPOSITED THE SAME, AND LESSEE SHALL PAY ALL TITLE
AND ESCROW CANCELLATION CHARGES AND ALL OF LESSOR'S LEGAL FEES AND COSTS. IN
ADDITION, LESSOR AND LESSEE AGREE THAT, BASED ON THE CIRCUMSTANCES NOW EXISTING,
KNOWN OR UNKNOWN, IT WOULD BE EXCESSIVELY COSTLY AND IMPRACTICABLE TO ESTABLISH
LESSOR'S DAMAGES BY REASON OF LESSEE'S DEFAULT RESULTING IN A FAILURE OF THE
ESCROW TO CLOSE, AND, THEREFORE, LESSOR AND LESSEE AGREE THAT IT WOULD BE
REASONABLE TO AWARD LESSOR LIQUIDATED DAMAGES IN THE AMOUNT OF THE OPENING
DEPOSIT PLUS ANY ACCRUED INTEREST ON THE OPENING DEPOSIT. BY THEIR RESPECTIVE
INITIALS SET FORTH BELOW, LESSOR AND LESSEE ACKNOWLEDGE AND AGREE THAT THE
OPENING DEPOSIT, PLUS ANY INTEREST ACCRUED ON THE OPENING DEPOSIT, TOGETHER WITH
PAYMENT OF LESSOR'S LEGAL FEES AND COSTS, IS REASONABLE AS LIQUIDATED DAMAGES
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FOR A DEFAULT OF LESSEE UNDER THE PURCHASE CONTRACT FORMED BY LESSEE'S EXERCISE
OF SUCH OPTION THAT RESULTS IN A FAILURE OF THE ESCROW TO CLOSE AND SHALL BE IN
LIEU OF ANY OTHER RELIEF, RIGHT OR REMEDY, AT LAW OR IN EQUITY, TO WHICH LESSOR
MIGHT OTHERWISE BE ENTITLED BY REASON OF A LESSEE'S DEFAULT THAT
RESULTS IN A FAILURE OF THE ESCROW TO CLOSE, BUT NOTHING CONTAINED HEREIN SHALL
LIMIT LESSOR'S RIGHTS AND REMEDIES FOR LESSEE'S DEFAULT OCCURRING AFTER THE
CLOSE OF ESCROW OR FOR LESSEE'S DEFAULT UNDER THIS LEASE. ESCROW HOLDER IS
HEREBY AUTHORIZED AND INSTRUCTED TO RELEASE THE OPENING DEPOSIT PLUS ACCRUED
INTEREST THEREON TO LESSOR UPON THE DELIVERY OF UNILATERAL WRITTEN INSTRUCTIONS
THEREOF TO ESCROW HOLDER BY LESSOR, AND ESCROW HOLDER IS HEREBY RELIEVED OF ALL
LIABILITY THEREFOR. IF LESSEE ATTEMPTS TO INTERFERE WITH THE RELEASE OF ANY
SUCH SUMS BY ESCROW HOLDER TO LESSOR, OR COMMENCES ANY ACTION AGAINST LESSOR OR
THE LEASED PROPERTY ARISING OUT OF THIS ARTICLE, THEN LESSOR SHALL NOT BE
LIMITED IN THE AMOUNT OF DAMAGES IT MAY RECOVER FROM LESSEE.
Lessor's Initials:
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Lessee's Initials: /s/DRB
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35.2.2 OTHER DEFAULTS. A default under any other lease or other
agreement, including any purchase contract formed upon exercise of any other
option, between Lessor or any Affiliate of Lessor and Lessee or any Affiliate of
Lessee where such default is not cured within the applicable time period, if
any, shall be deemed a default under this Article XXXV and the purchase contract
formed upon proper exercise by Lessee of the option herein provided, entitling
Lessor, as seller, at its option, to terminate such purchase contract and the
Escrow and upon any such termination the Opening Deposit plus all accrued
interest shall be paid over to Lessee.
35.3 ESCROW PROVISIONS.
35.3.1 OPENING OF ESCROW. Escrow shall be deemed open when the
Opening Deposit and a copy of this Lease are delivered to Escrow Holder.
35.3.2 GENERAL AND SUPPLEMENTAL INSTRUCTIONS. Lessee and Lessor each
shall execute, deliver and be bound by such further escrow instructions or other
instruments as may be reasonably requested by the other party or by Escrow
Holder from time to time, so long as the same are consistent with the provisions
of this Lease.
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35.3.3 DISPOSITION OF OPENING DEPOSITS. Escrow Holder shall hold the
Opening Deposit in interest-bearing accounts. All interest earned on the
Opening Deposit shall accrue to Lessee's benefit unless Lessor is entitled
thereto under Section 35.2.1. The Opening Deposit plus interest thereon shall
be (i) applied against the purchase price (as herein determined) if Escrow
closes, (ii) returned to Lessee in full if Escrow does not close for any reason
other than Lessee's default, or (iii) be paid to Lessor as nonrefundable
liquidated damages under Section 35.2.1, if Escrow fails to close under the
provisions of hereof as a result of Lessee's default.
35.3.4 CLOSING FUNDS. At least one (1) business day before the Close
of Escrow (as hereinafter defined), Escrow Holder shall calculate and Lessee
shall wire cash into Escrow (using wiring instructions reasonably satisfactory
to Escrow Holder) in an amount which, when added to the Opening Deposit and all
accrued interest shall equal the purchase price for the Leased Property plus any
other sums payable by Lessee pursuant to the provisions hereof.
35.3.5 CLOSE OF ESCROW. Escrow shall close on the Outside Closing
Date. The term "Close of Escrow" as used in this Article shall mean the time
and date that an appropriate deed or other conveyance document conveying
Lessor's entire interest in the Leased Property, subject to the permitted liens
and encumbrances described in Article XVIII hereof, is recorded in appropriate
records of the county in which the Leased Property is located. The Outside
Closing Date shall not be extended for any reason.
35.3.6 CLOSING COSTS. The closing costs of consummating the purchase
of the Leased Property shall be paid by Lessee as provided in Article XVIII.
35.3.7 ASSURANCES. At any time prior to Close of Escrow, Lessor may
request and Lessee shall provide reasonable assurances that it will be able to
consummate the purchase of the Leased Property, including that Lessee has a
firm, written commitment from a reputable lending institution to finance such
purchase and/or has sufficient liquidity to pay any balance of the purchase
price owing by Lessee on the date of the Close of Escrow; provided, however,
that in no event shall Lessee be entitled to exercise such option conditioned
upon Lessee obtaining any such financing.
35.4 LESSOR'S OPTION TO PURCHASE THE LESSEE'S PERSONAL PROGRAM. Effective
on not less than ninety (90) days prior written notice, or such shorter notice
as shall be appropriate if this Lease is terminated prior to its expiration
date, Lessor shall have the option to purchase some or all of Lessee's Personal
Property which does provide a new function with respect to Lessor's Personal
Property, at the expiration or termination of this Lease, for an amount equal to
the then net book value thereof as shown on Lessee's books, subject to, and with
appropriate price adjustments for, all equipment leases, conditional sale
contracts, UCC-1 financing statements and other encumbrances to which such
personal property is subject.
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ARTICLE XXXVI.
36.1 LESSOR MAY GRANT LIENS. Without the consent of Lessee, Lessor may,
from time to time, directly or indirectly, create or otherwise cause to exist
any lien, encumbrance or title retention agreement upon the Leased Property, or
any portion thereof or
interest therein, whether to secure any borrowing or other means of financing or
refinancing. This Lease is and at all times shall be subject and subordinate to
any ground or underlying leases, mortgages, deeds of trust or like encumbrances
(collectively, "Priority Encumbrances"), which may now or hereafter affect the
Leased Property and to all renewals, modifications, consolidations, replacements
and extensions of any such lease, mortgage, deed of trust or like encumbrance;
PROVIDED, HOWEVER, that the subjection and subordination of this Lease and
Lessee's leasehold interest hereunder to any Priority Encumbrance shall be
conditioned upon the execution by the holder of each Priority Encumbrance and
delivery to Lessee of a non-disturbance and attornment agreement which provides
that so long as no default has occurred and is continuing beyond the period of
time allowed for the remedy thereof under the terms of this Lease, the holder of
such Priority Encumbrance (i) shall not disturb either Lessee's leasehold
interest or possession of the Leased Property in accordance with the terms
hereof, or any of its rights, privileges and options, (ii) shall permit
application of all proceeds of insurance and all Awards and payments in
connection with the taking of all or any portion of the Leased Property in
accordance with the provisions of Articles XIV and XV of this Lease, (iii)
waives all Priority Encumbrance rights or interests in any of Lessee's Personal
Property, and (iv) shall execute a release of such rights, privileges, options
and all liens and claim s that the holder of such Priority Encumbrance may have
in the Leased Property upon payment of the purchase price therefor in the event
Lessee exercises any of its options or rights to purchase the Leased Property
provided in this Lease. In connection with the foregoing and at the request of
Lessor, Lessee shall promptly execute a reasonable subordination, non-
disturbance and attornment agreement which will incorporate the terms set forth
in the preceding sentence. Except for the documents described in the preceding
sentences, this clause shall be self-operative and no further instrument of
subordination shall be required by any ground or underlying lessor or by any
mortgagee or beneficiary, affecting any lease or the Leased Property. In
confirmation of such subordination, Lessee shall execute promptly any
certificate that Lessor may request for such purposes.
36.2 ATTORNMENT. If Lessor's interest am the Leased Property is sold or
conveyed upon the exercise of any remedy provided for in any Facility Mortgage,
or otherwise by operation of law: (i) at the new owner's option, Lessee shall
attorn to and recognize the new owner as Lessee's Lessor under this Lease or
enter into a new lease substantially in the form of this Lease with the new
owner, and Lessee shall take such actions to confirm the foregoing within ten
(10) days after request; and (ii) the new owner shall not be (a) liable for any
act or omission of Lessor under this Lease occurring prior to such sale or
conveyance, or (b) subject to any offset, abatement or reduction of rent because
of any default of Lessor under this Lease occurring prior to such sale or
conveyance.
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ARTICLE XXXVII.
37.1 HAZARDOUS SUBSTANCES. Lessee shall not allow any Hazardous
Substance to be located in, on, under or about the Leased Property or
incorporated in the Facility; provided, however, that Hazardous Substances may
be brought, kept, used or
disposed of in, on or about the Leased Property in quantities and for purposes
similar to those brought, kept, used or disposed of in, on or about similar
facilities used for purposes similar to the Primary Intended Use or in
connection with the construction of facilities similar to the Facility and which
are brought, kept, used and disposed of in strict compliance with Legal
Requirements. Lessee shall not allow the Leased Property to be used as a waste
disposal site or for the manufacturing, handling, storage, distribution or
disposal of any Hazardous Substance.
37.2 NOTICES. Lessee shall provide to Lessor promptly, and in any event
immediately upon Lessee's receipt thereof, a copy of any notice, or notification
with respect to, (i) any violation of a Legal Requirement relating to Hazardous
Substances located in, on, or under the Leased Property or any adjacent
property; (ii) any enforcement, cleanup, removal, or other governmental or
regulatory action instituted, completed or threatened with respect to the Leased
property; (iii) any claim made or threatened by any Person against Lessee or the
Leased Property relating to damage, contribution, cost recovery, compensation,
loss, or injury resulting from or claimed to result from any Hazardous
Substance; and (iv) any reports made to any federal, state or local
environmental agency arising out of or in connection with any Hazardous
Substance in, on, under or removed from the Leased Property, including any
complaints, notices, warnings or asserted violations in connection therewith.
37.3 REMEDIATION. If Lessee becomes aware of a violation of any Legal
Requirement relating to any Hazardous Substance in, on, under or about the
Leased Property or any adjacent property, or if Lessee, Lessor or the Leased
Property becomes subject to any order of any federal, state or local agency to
repair, close, detoxify, decontaminate or otherwise remediate the Leased
Property, Lessee shall immediately notify Lessor of such event and, at its sole
cost and expense, cure such violation or effect such repair, closure,
detoxification, decontamination or other remediation; provided, however, that
Lessee's obligation to remediate with respect to any adjacent property shall
only apply if such contamination of the adjacent property poses a material
threat to the Leased Property, including the value thereof. If Lessee fails to
implement and diligently pursue any such cure, repair, closure, detoxification,
decontamination or other remediation, Lessor shall have the right, but not the
obligation, to carry out such action and to recover from Lessee all of Lessor's
costs and expenses incurred in connection therewith.
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37.4 INDEMNITY. Lessee shall indemnify, defend, protect, save, hold
harmless, and reimburse Lessor for, from and against any and all costs, losses
(including, losses of use or economic benefit or diminution in value),
liabilities, damages, assessments, lawsuits, deficiencies, demands, claims and
expenses (collectively, "Environmental Costs") (whether or not arising out of
third-party claims and regardless of whether liability without fault is imposed,
or sought to be imposed, on Lessor) incurred in connection with, arising out of,
resulting from or incident to, directly or indirectly, before or during (but not
after) the Term or such portion thereof during which the Leased Property is
leased to Lessee (i) the
production, use, generation, storage, treatment, transporting, disposal,
discharge, release or other handling or disposition of any Hazardous Substances
from, in, on or about the Leased Property (collectively, "Handling"), including
the effects of such handling of any Hazardous Substances on any Person or
property within or outside the boundaries of the Leased Property, (ii) the
presence of any Hazardous Substances in, on, under or about the Leased Property
and (iii) the violation of any Environmental Law. "Environmental Costs" include
interest, costs of response, removal, remedial action, containment, cleanup,
investigation, design, engineering and construction, damages (including actual,
consequential and punitive damages) for personal injuries and for injury to,
destruction of or loss of property or natural resources, relocation or
replacement costs, penalties, fines, charges or expenses, attorney's fees,
expert fees, consultation fees, and court costs, and all amounts paid in
investigating, defending or settling any of the foregoing.
Without limiting the scope or generality of the foregoing, Lessee expressly
agrees to reimburse Lessor for any and all costs and expenses incurred by Lessor
in connection with, arising out of, resulting from or incident to, directly or
indirectly, before or during (but not after) the Term or such portion thereof
during which the Leased Property is leased to Lessee of the following:
(a) In investigating any and all matters relating to the Handling of any
Hazardous Substances, in, on, from, under or about the Leased Property,
(b) In bringing the Leased Property into compliance with all Legal
Requirements; and
(c) Removing, treating, storing, transporting, cleaning-up and/or
disposing of any Hazardous Substances used, stored, generated, released or
disposed of in, on, from, under or about the Leased Property or off-site.
If any claim is made by Lessor for reimbursement for Environmental Costs
incurred by it hereunder, Lessee agrees to pay such claim promptly, and in any
event to pay such claim within thirty (30) calendar days after receipt by Lessee
of notice thereof. If any such claim is not so paid and Lessor is ultimately
found or agrees to be responsible therefore, Lessee agrees also to pay interest
on the amount paid from the date of the first notice of such claim, at the
Overdue Rate.
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37.5 ENVIRONMENTAL INSPECTION. Lessor shall have the right, from time to
time, during normal business hours and upon not less than five (5) days written
notice to Lessee, except in the case of an emergency in which event no notice
shall be required, to conduct an inspection of the Leased Property to determine
the existence or presence of Hazardous Substances on or about the Leased
Property. Lessor shall have the right to enter and inspect the Leased Property,
conduct any testing, sampling and analyses it deems necessary and shall have the
right to inspect materials brought into the Leased Property.
Lessor may, in its discretion, retain such experts to conduct the inspection,
perform the tests referred to herein, and to prepare a written report in
connection therewith. All costs and expenses incurred by Lessor under this
Section shall be paid on demand as Additional Charges by Lessee to Lessor.
Failure to conduct an environmental inspection or to detect unfavorable
conditions if such inspection is conducted shall in no fashion be intended as a
release of any liability for environmental conditions subsequently determined to
be associated with or to have occurred during Lessee's tenancy. Lessee shall
remain liable for any environmental condition related to or having occurred
during its tenancy regardless of when such conditions are discovered and
regardless of whether or not Lessor conducts an environmental inspection at the
termination of the Lease. The obligations set forth in this Article shall
survive the expiration or earlier termination of the Lease.
ARTICLE XXXVIII.
38. MEMORANDUM OF LEASE. Lessor and Lessee shall, promptly upon the
request of either, enter into a short form memorandum of this Lease, in form
suitable for recording under the laws of the State. Lessee shall pay all costs
and expenses of recording any such memorandum and shall fully cooperate with
Lessor in removing from record any such memorandum upon the expiration or
earlier termination of the Term.
ARTICLE XXXIX.
39. SALE OF ASSETS. Notwithstanding any other provision of this Lease,
Lessor shall not be required to (i) sell or transfer the Leased Property, or any
portion thereof, which is a real estate asset as defined in Section
856(c)(6)(B), or functionally equivalent successor provision, of the Code, to
Lessee if Lessor's counsel advises Lessor that such sale or transfer may not be
a sale of property described in Section 857(b)(6)(C), or functionally equivalent
successor provision, of the Code or (ii) sell or transfer the Leased Property,
or any portion thereof, to Lessee if Lessor's counsel advises Lessor that such
sale or transfer could result in an unacceptable amount of gross income for
purposes of the ninety five percent (95%) gross income test contained in Section
856(c)(2), or functionally equivalent successor provision, of the Code. If
Lessee has the obligation to purchase the property pursuant to the terms herein,
and if Lessor determines not to sell such property pursuant to the above
sentence, then Lessee shall purchase such property, upon and subject to all
applicable terms and conditions set forth in this Lease, including the
provisions of Article XXXV, at such time as the transaction, upon the advice of
Lessor's counsel, would be a sale of property (to the extent the Leased Property
66
is a real estate asset) described in Section 857(b)(6)(C), or functionally
equivalent successor provision, of the Code, and would not result in an
unacceptable amount of gross income for purposes of the ninety five percent
(95%) gross income test contained in Section 856(c)(2), or functionally
equivalent successor provision of the Code and until such time Lessee shall
lease the Leased Property from Lessor at the Fair Market Rental determined in
accordance with Article XXXIV; provided, however, that if Lessee's obligation to
purchase arises pursuant to Section 16.5, and if the events giving rise to the
Event of Default for which Lessor exercised its right to put the Leased Property
to Lessee pursuant to Section 16.5 has been cured prior to the time Lessor
determines to sell the Leased Property, then this Lease shall continue in full
force and effect as if such Event of Default had not occurred. If Lessee has
the right to purchase the property pursuant to the terms herein, and if Lessor
determines not to sell such property pursuant to the above sentence, Lessee's
right, if any, to purchase any or all of such property shall, upon notice to
Lessor that Lessee intends to continue such right, continue and be exercisable,
upon and subject to all applicable terms and conditions set forth in this Lease,
including the provisions of Article XXXV, at such time as the transaction, upon
the advice of Lessor's counsel, would be a sale of property (to the extent the
Leased Property is a real estate asset) described in Section 857(b)(6)(C), or
functionally equivalent successor provision, of the Code, and would not result
in an unacceptable amount of gross income for purposes of the ninety five
percent (95%) gross income test contained in Section 856(c)(2), or functionally
equivalent successor provision of the Code and until such time Lessee shall
lease the Leased Property from Lessor at the Fair Market Rental determined in
accordance with Article XXXIV.
ARTICLE XL.
40. SUBDIVISION. If the Land is in excess of that which is required to
operate the Leased Property in accordance with its Primary Intended Use, Lessor
may subdivide the Land and amend this Lease and the legal description attached
hereto as Exhibit A such that the Land contains only so much of the Land as is
necessary to operate the Leased Property in accordance with its Primary Intended
Use. If Lessor subdivides the Land, Lessee shall have the right to an
appropriate abatement of Rent payable and of the purchase price payable in the
event that Lessee exercises its option to purchase the Leased Property pursuant
to Article XXXV and the right to reasonably adjust any other obligations of
either party accordingly. After any such subdivision Lessee shall have no
rights to any land which is no longer part of the Leased Property and Lessor may
sell, lease or develop any land which is no longer part of the Leased Property,
provided that Lessor may not use such land for the operation of a facility
providing assisted living services, and provided rather that Lessor may not sell
or lease such land to a third party that Lessor knows intends to use such land
for the development of a facility providing assisted living services. If Lessor
elects to subdivide the Land Lessee shall cooperate with Lessor and take all
actions reasonably requested by Lessor to effect such subdivision.
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ARTICLE XLI
41. AUTHORITY. If Lessee is a corporation, trust, or partnership, Lessee,
and each individual executing this Lease on behalf of Lessee, represent and
warrant that each is duly authorized to execute and deliver this Lease on behalf
of Lessee and shall within thirty (30) days after execution of this Lease
deliver to Lessor evidence of such authority satisfactory to Lessor.
ARTICLE XLII.
42. ATTORNEYS' FEES. If Lessor or Lessee brings an action for other
proceeding against the other to enforce any of the terms, covenants or
conditions hereof or any instrument executed pursuant to this Lease, or by
reason of any breach or default hereunder or thereunder, the party prevailing in
any such action or proceeding and any appeal thereupon shall be paid all of its
costs and reasonable outside attorneys' fees incurred therein. In addition to
the foregoing and other provisions of this Lease that specifically require
Lessee to reimburse, pay or indemnify against Lessor's attorneys' fees, Lessee
shall pay, as Additional Charges, all of Lessor's reasonable outside attorneys'
fees incurred in connection with the administration or enforcement of this
Lease, including attorneys' fees incurred in connection with Lessee's exercise
of its option to purchase the Leased Property or the renewal of this Lease for
any Extended Term, the review of any letters of credit, the review, negotiation
or documentation of any subletting, assignment, or management arrangement or any
consent requested in connection therewith, and the collection of past due Rent.
ARTICLE XLIII.
43. BROKERS. Lessee warrants that it has not had any contact or dealings
with any Person or real estate broker which would give rise to the payment of
any fee or brokerage commission in connection with this Lease, and Lessee shall
indemnify, protect, hold harmless and defend Lessor from and against any
liability with respect to any fee or brokerage commission arising out of any act
or omission of Lessee. Lessor warrants that it has not had any contact or
dealings with any Person or real estate broker which would give rise to the
payment of any fee or brokerage commission in connection with this Lease, and
Lessor shall indemnify, protect, hold harmless and defend Lessee from and
against any liability with respect to any fee or brokerage commission arising
out of any act or omission of Lessor.
ARTICLE XLIV.
44. MISCELLANEOUS
44.1 SURVIVAL. Anything contained in this Lease to the contrary
notwithstanding, all claims against, and liabilities and indemnities of, Lessee
or Lessor arising prior to the expiration or earlier termination of the Term
shall survive such expiration or termination.
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44.2 SEVERABILITY. If any term or provision of this Lease or any
application thereof shall be held invalid or unenforceable, the remainder of
this Lease and any other application of such term or provision shall not be
affected thereby.
44.3 NON-RECOURSE. Lessee specifically agrees to look solely to the Leased
Property for recovery of any judgment from Lessor. It is specifically agreed
that no constituent partner in Lessor or officer or employee of Lessor shall
ever be personally liable for any such judgment or for the payment of any
monetary obligation to Lessee. The provision contained in the foregoing
sentence is not intended to, and shall not, limit any right that Lessee might
otherwise have to obtain injunctive relief against Lessor, or any action not
involving the personal liability of Lessor. Furthermore, except as otherwise
expressly provided herein, in no event shall Lessor ever be liable to Lessee for
any indirect or consequential damages suffered by Lessee from whatever cause.
44.4 LICENSES. Upon the expiration or earlier termination of the Term,
Lessee shall use its best efforts to transfer to Lessor or Lessor's nominee and
shall cooperate with Lessor or Lessor's designee or nominee in connection with
the processing by Lessor or Lessor's designee or nominee of any applications for
all licenses, operating permits and other governmental authorization, all
contracts, including contracts with governmental or quasi-governmental entities,
business records, data, patient and resident records, and patient and resident
trust accounts, which may be necessary or useful for the operation of the
Facility; provided that the costs and expenses of any such transfer or the
processing of any such application shall be paid by Lessor or Lessor's designee
or nominee. Lessee shall not commit any act or be remiss in the undertaking of
any act that would jeopardize the licensure or certification of the Facility,
and Lessee shall comply with all requests for an orderly transfer of the same
upon the expiration or early termination of the Term. In addition, upon
request, Lessee shall promptly deliver copies of all books and records relating
to the Leased Property and its operation to Lessor or Lessor's designee or
nominee but Lessee shall not be required to deliver corporate financial records
or proprietary materials. Lessee shall indemnify, defend, protect and hold
harmless Lessor from and against any loss, damage, cost or expense incurred by
Lessor or Lessor's designee or nominee in connection with the correction of any
and all deficiencies of a physical nature identified by any governmental
authority responsible for licensing the Leased Property in the course of any
change of ownership inspection and audit and previously identified during the
Term by such governmental authority.
44.5 SUCCESSORS AND ASSIGNS. This Lease shall be binding upon Lessor and
its successors and assigns and, subject to the provisions of Article XXIV, upon
Lessee and its successors and assigns.
44.6 GOVERNING LAW. THIS LEASE (AND ANY AGREEMENT FORMED PURSUANT TO THE
TERMS HEREOF) SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, THE INTERNAL LAWS OF THE STATE (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS
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OF LAW) AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. Lessee and
Lessor each hereby (i) irrevocably submit to the jurisdiction of the State and
federal courts of the State and consent to service of process in any legal
proceedings arising out of, or in
connection with, this Lease (or any agreement formed pursuant to the terms
hereof), by any means authorized by applicable law; (ii) irrevocably waive, to
the fullest extent permitted by law, any objection to which such party may now
or hereinafter have to the lying or to the laying of venue of any litigation
arising out of, in connection with, this Lease (or any agreement formed pursuant
to the terms hereof), brought in the State courts of Orange County, California,
or in the United States District Court for the district in which such County is
located; and (iii) irrevocably waive any claim in any litigation brought in any
such court that the same has been brought in an inconvenient forum.
44.7 WAIVER OF TRIAL BY JURY. EACH OF LESSOR AND LESSEE ACKNOWLEDGES THAT
IT HAS HAD THE ADVICE OF COUNSEL OF ITS CHOICE WITH RESPECT TO ITS RIGHTS TO
TRIAL BY JURY UNDER THE CONSTITUTION OF THE UNITED STATES AND THE STATE. TO THE
MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EACH OF LESSOR AND LESSEE HEREBY
EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION (i) ARISING UNDER THIS LEASE (OR ANY AGREEMENT FORMED PURSUANT
TO THE TERMS HEREOF) OR (ii) IN ANY MANNER CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF LESSOR AND LESSEE WITH RESPECT TO THIS LEASE (OR
ANY AGREEMENT FORMED PURSUANT TO THE TERMS HEREOF) OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE
TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR
HEREINAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; EACH
OF LESSOR AND LESSEE HEREBY AGREES AND CONSENTS THAT, TO THE MAXIMUM EXTENT
PERMITTED BY APPLICABLE LAW, (A) ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY A COURT TRIAL WITHOUT A JURY, AND (B) EITHER PARTY
MAY FILE A COPY OF THIS SECTION WITH ANY COURT AS CONCLUSIVE EVIDENCE OF THE
CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.
LESSOR'S INITIALS:
----------
LESSEE'S INITIALS: /s/DRB
----------
44.8 RESERVED.
70
44.9 ENTIRE AGREEMENT. This Lease, together with the other Lessee
Documents, as defined in the Contract of Acquisition, the Exhibits hereto and
thereto and such other documents as are contemplated hereunder or thereunder,
constitutes the entire agreement of the parties with respect to the subject
matter hereof, and may not be changed or modified except by an agreement in
writing signed by the parties. Lessor and Lessee hereby
connection with, this Lease (or any agreement formed pursuant to the terms
hereof), by any means authorized by applicable law; (ii) irrevocably waive, to
the fullest extent permitted by law, any objection to which such party may now
or hereinafter have to the lying or to the laying of venue of any litigation
arising out of, in connection with, this Lease (or any agreement formed pursuant
to the terms hereof), brought in the State courts of Orange County, California,
or in the United States District Court for the district in which such County is
located; and (iii) irrevocably waive any claim in any litigation brought in any
such court that the same has been brought in an inconvenient forum.
44.7 WAIVER OF TRIAL BY JURY. EACH OF LESSOR AND LESSEE ACKNOWLEDGES THAT
IT HAS HAD THE ADVICE OF COUNSEL OF ITS CHOICE WITH RESPECT TO ITS RIGHTS TO
TRIAL BY JURY UNDER THE CONSTITUTION OF THE UNITED STATES AND THE STATE. TO THE
MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EACH OF LESSOR AND LESSEE HEREBY
EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION (i) ARISING UNDER THIS LEASE (OR ANY AGREEMENT FORMED PURSUANT
TO THE TERMS HEREOF) OR (ii) IN ANY MANNER CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF LESSOR AND LESSEE WITH RESPECT TO THIS LEASE (OR
ANY AGREEMENT FORMED PURSUANT TO THE TERMS HEREOF) OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE
TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR
HEREINAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; EACH
OF LESSOR AND LESSEE HEREBY AGREES AND CONSENTS THAT, TO THE MAXIMUM EXTENT
PERMITTED BY APPLICABLE LAW, (A) ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY A COURT TRIAL WITHOUT A JURY, AND (B) EITHER PARTY
MAY FILE A COPY OF THIS -SECTION WITH ANY COURT AS CONCLUSIVE EVIDENCE OF THE
CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.
LESSOR'S INITIALS: /s/EJH
----------
LESSEE'S INITIALS:
----------
70
44.8 RESERVED.
44.9 ENTIRE AGREEMENT. This Lease, together with the other Lessee
Documents, as defined in the Contract of Acquisition, the Exhibits hereto and
thereto and such other documents as are contemplated hereunder or thereunder,
constitutes the entire agreement of the parties with respect to the subject
matter hereof, and may not be changed or modified except by an agreement in
writing signed by the parties. Lessor and Lessee hereby
agree that all prior or contemporaneous oral understandings, agreements or
negotiations relative to the leasing of the Leased Property are merged into and
revoked by this Lease.
44.10 HEADINGS. All titles and headings to sections, subsections,
paragraphs or other divisions of this Lease are only for the convenience of the
parties and shall not be construed to have any effect or meaning with respect to
the other contents of such sections, subsections, paragraphs or other divisions,
such other content being controlling as to the agreement among the parties
hereto.
44.11 COUNTERPARTS. This Lease may be executed in any number of
counterparts, each of which shall be a valid and binding original, but all of
which together shall constitute one and the same instrument.
44.12 JOINT AND SEVERAL. If more than one Person is the Lessee under this
Lease, the liability of such Persons under this Lease shall be joint and
several.
44.13 INTERPRETATION. Both Lessor and Lessee have been represented by
counsel and this Lease and every provision hereof has been freely and fairly
negotiated. Consequently, all provisions of this Lease shall be interpreted
according to their fair meaning and shall not be strictly construed against any
party.
44.14 TIME OF ESSENCE. Time is of the essence of this Lease and each
provision hereof in which time of performance is established.
44.15 FURTHER ASSURANCES. The parties agree to promptly sign all
documents reasonably requested to give effect to the provisions of this Lease.
71
IN WITNESS WHEREOF, the parties have caused this Lease to be executed
by their duly authorized officers as of the date first set forth above.
LESSOR:
HEALTH CARE PROPERTY
INVESTORS, INC., a Maryland
corporation
By: /s/Edward J. Hinning
--------------------------------
Name: Edward J. Hinning
------------------------------
Title: Senior Vice President
-----------------------------
72
LESSEE:
EMERITUS CORPORATION, a
Washington corporation
By: /s/Daniel R. Baty
-------------------------------
Name: Daniel R. Baty
-----------------------------
Title: Chairman
73