THE FOLLOWING AGREEMENT IS SUBSTANTIALLY THE SAME FOR THE FOLLOWING PROPERTIES
EXCEPT FOR THE FOLLOWING:
Barrington Place: Base rent of $413,601.00 per annum
Springtree: Base rent of $1,410,353.40 per annum
F A C I L I T Y L E A S E A G R E E M E N T
MEDITRUST ACQUISITION CORPORATION I
(A Massachusetts corporation)
as
Lessor
AND
EMERITUS PROPERTIES I, INC.
(A Washington corporation)
as
Lessee
Dated as of May 1, 1996
For Premises Located in
FACILITY LEASE AGREEMENT
This FACILITY LEASE AGREEMENT ("Lease") is dated as of the 1st day of May,
1996 and is between MEDITRUST ACQUISITION CORPORATION I ("Lessor"), a
Massachusetts corporation having its principal office at 197 First Avenue,
Needham Heights, Massachusetts 02194, and EMERITUS PROPERTIES I, INC.
("Lessee"), a Washington corporation, having its principal office at c/o
Emeritus Corporation, Market Place One, 2003 Western Avenue, Suite 660, Seattle,
Washington 98121-2162.
ARTICLE 1
LEASED PROPERTY; TERM; CONSTRUCTION; EXTENSIONS
1.1 LEASED PROPERTY. Upon and subject to the terms and conditions
hereinafter set forth, Lessor leases to Lessee and Lessee rents and leases from
Lessor all of Lessor's rights and interests in and to the following real and
personal property (collectively, the "Leased Property"):
(a) the real property described in EXHIBIT A attached hereto (the
"Land");
(b) all buildings, structures, Fixtures (as hereinafter defined) and
other improvements of every kind including, but not limited to, alleyways
and connecting tunnels, sidewalks, utility pipes, conduits and lines, and
parking areas and roadways appurtenant to such buildings and structures
presently or hereafter situated upon the Land (collectively, the "Leased
Improvements");
(c) all easements, rights and appurtenances of every nature and
description now or hereafter relating to or benefitting any or all of the
Land and the Leased Improvements; and
(d) all equipment, machinery, building fixtures, and other items of
property (whether realty, personalty or mixed), including all components
thereof, now or hereafter located in, on or used in connection with, and
permanently affixed to or incorporated into the Leased Improvements,
including, without limitation, all furnaces, boilers, heaters, electrical
equipment, heating, plumbing, lighting, ventilating, refrigerating,
incineration, air and water pollution control, waste disposal, air-cooling
and air-conditioning systems and apparatus, sprinkler systems and 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 by the
parties hereto to constitute real estate, together with all replacements,
modifications, alterations and additions thereto, but specifically
excluding all items included within the category of Tangible Personal
Property (as hereinafter defined) which are not permanently affixed to or
incorporated in the Leased Property (collectively, the "Fixtures"); and
The Leased Property is leased in its present condition, AS IS, without
representation or warranty of any kind, express or implied, by Lessor and
subject to: (i) the rights of parties in possession; (ii) the existing state of
title including all covenants, conditions, Liens (as hereinafter defined) and
other matters of record (including, without limitation, the matters set forth in
EXHIBIT B); (iii) all applicable laws and (iv) all matters, whether or not of a
similar nature, which would be disclosed by an inspection of the Leased Property
or by an accurate survey thereof.
1.2 TERM. The term of this Lease shall consist of: the "Initial Term",
which shall commence on May 1, 1996 (the "Commencement Date") and end on March
31, 2008 (the "Expiration Date"); PROVIDED, HOWEVER, that this Lease may be
sooner terminated as hereinafter provided. In addition, Lessee shall have the
option(s) to extend the Term (as hereinafter defined) as provided for in Section
1.3.
1.3 EXTENDED TERMS. Provided that this Lease has not been previously
terminated, and as long as there exists no Lease Default (as hereinafter
defined) at the time of exercise and on the last day of the Initial Term or the
then current Extended Term (as hereinafter defined), as the case may be, Lessee
is hereby granted the option to extend the Initial Term of this Lease for four
(4) additional periods (collectively, the "Extended Terms") as follows: four (4)
successive five (5) year periods for a maximum Term, if all such options are
exercised, which ends on March 31, 2028. Lessee's extension option rights shall
be exercised by Lessee by giving written notice to Lessor of each such extension
at least one hundred eighty (180) days, but not more than three hundred sixty
(360) days, prior to the termination of the Initial Term or the then current
Extended Term, as the case may be. Lessee shall have no right to rescind any
such notice once given. Lessee may not exercise its option for more than one
Extended Term at a time. During each effective Extended Term, all of the terms
and conditions of this Lease shall continue in full force and effect, except
that the Base Rent (as hereinafter defined) for each such Extended Term shall be
adjusted as set forth in Section 3.1(a).
Notwithstanding anything to the contrary set forth herein, Lessee's rights
to exercise the options granted in this Section 1.3 are subject to the further
condition that concurrently with the exercise of any extension option hereunder,
Lessee shall have
2
exercised its option to extend the terms of all of the Related Leases in
accordance with the provisions of the Agreement Regarding Related Transactions
and the provisions of Section 1.3 of each of the Related Leases.
ARTICLE 2
DEFINITIONS AND RULES OF CONSTRUCTION
2.1 DEFINITIONS. For all purposes of this Lease and the other Lease
Documents (as hereinafter defined), except as otherwise expressly provided or
unless the context otherwise requires, (i) the terms defined in this Article
have the meanings assigned to them in this Article and include the plural as
well as the singular and (ii) all references in this Lease or any of the other
Lease Documents to designated "Articles", "Sections" and other subdivisions are
to the designated Articles, Sections and other subdivisions of this Lease or the
other applicable Lease Document.
ACCOUNTS: As defined in the UCC.
ACCREDITATION BODY: Any person, including any Person having or claiming
jurisdiction over the accreditation, certification, evaluation or operation of
the Facility.
ADDED VALUE PERCENTAGE: The proportion of the Fair Market Added Value of
Capital Additions paid for or financed by Lessee to the Fair Market Value of the
entire Leased Property, expressed as a percentage.
ADDITIONAL CHARGES: As defined in Article 3.
ADDITIONAL LAND: As defined in Section 9.3.
ADDITIONAL RENT: As defined in Article 3.
ADDITIONAL RENT COMMENCEMENT DATE: As defined in Article 3.
AFFILIATE: With respect to any Person (i) any other Person which, directly
or indirectly, controls or is controlled by or is under common control with such
Person, (ii) any other Person that owns, beneficially, directly or indirectly,
five percent (5%) or more of the outstanding capital stock, shares or equity
interests of such Person or (iii) any officer, director, employee, general
partner or trustee of such Person, or any other Person controlling, controlled
by, or under common control with, such Person (excluding trustees and Persons
serving in a fiduciary or similar capacity who are not otherwise an Affiliate of
such Person). For the purposes of this definition, "control" (including the
correlative meanings of the terms "controlled by"
3
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 provided,
however, that, (a) for purposes of determining a Related Party Default, the
percentage of outstanding capital stock, shares or equity interests referenced
in (ii) above shall be fifty percent (50%) and (b) any Person who is an
Affiliate by virtue of the ownership thereof by Daniel R. Baty or his status
therein as an officer or director shall not be deemed an Affiliate for purposes
of determining a Related Party Default.
AFFILIATED PARTY SUBORDINATION AGREEMENT: That certain Affiliated Party
Subordination Agreement of even date by and among Lessee, the Guarantor, various
Affiliates of Lessee and various Affiliates of Lessor.
AGREEMENT REGARDING RELATED TRANSACTIONS: The Second Amended and Restated
Agreement Regarding Related Transactions (Acquisition) of even date, as amended
from time to time, between Lessee, Lessor and any Related Party that is party to
any Related Lease or Related Party Agreement. Lessor and Lessee anticipate that
the Agreement Regarding Related Transactions will be amended from time to time
to include Affiliates of Lessor and Lessee as parties thereto in connection with
future transactions and acknowledge and agree that for all purposes under this
Lease Agreement such amendments shall be deemed to be included in this
definition.
ANNUAL FACILITY UPGRADE EXPENDITURE: An aggregate annual amount equal to
the product of TWO HUNDRED DOLLARS ($200) (as increased as of the first day of
each Lease Year in which the Annual Facility Upgrade Expenditure is to be made
by an amount equal to the product of the CPI Increase multiplied by TWO HUNDRED
DOLLARS ($200)) times the number of units in the Facility, such amount to be
spent on Upgrade Renovations. The term "CPI Increase" means a fraction, the
numerator of which is the Price Index in effect as of the first day of the Lease
Year in which the Annual Facility Upgrade Expenditure is to be made and the
denominator of which is the Price Index in effect as of the date hereof. The
term "Price Index" means the Consumer Price Index for Urban Wage Earners and
Clerical Workers, All Items-Series A (1982-84=100), published by the Bureau of
Labor Statistics, U.S. Department of Labor. If the Bureau of Labor Statistics
should cease to publish such Price Index in its present form and calculated on
the present basis, then the most similar index published by the same Bureau
shall be used for the same purpose. If there is no such similar index, a
substitute index which is then generally recognized as being similar to such
Price Index, such substitute index to be reasonably selected by Lessor.
4
APPURTENANT AGREEMENTS: Collectively, all instruments, documents and other
agreements that now or hereafter create any utility, access or other rights or
appurtenances benefiting or relating to the Leased Property.
AWARD: All compensation, sums or anything of value awarded, paid or
received on a total or partial Condemnation.
BASE GROSS REVENUES: The annualized Gross Revenues of the Facility for the
period from and including April 1, 1997 through and including March 31, 1998,
initially as shown by Lessee's certified Consolidated Financial Statements and
as later verified by Lessee's Consolidated Financial Statements.
BASE RENT: As defined in Section 3.1.
BUSINESS DAY: Any day which is not a Saturday or Sunday or a public holiday
under the laws of the United States of America, the Commonwealth of
Massachusetts, the State or the state in which Lessor's depository bank is
located.
CAPITAL ADDITIONS: Collectively, all new buildings and additional
structures annexed to any portion of any of the Leased Improvements and material
expansions of any of the Leased Improvements which are constructed on any
portion of the Land during the Term, including, without limitation, the
construction of a new wing or new story, the renovation of any of the Leased
Improvements on the Leased Property and any expansion, construction, renovation
or conversion in connection therewith (a) in order to provide a functionally new
facility that is needed or used to provide services not previously offered or
(b)in order to (i) increase the bed capacity of a Facility, (ii) change the
purpose for which such beds are utilized and/or (iii) change the utilization of
any material portion of any of the Leased Improvements.
CAPITAL ADDITION COST: The cost of any Capital Addition made by Lessee
whether paid for by Lessee or Lessor. Such cost shall include all costs and
expenses of every nature whatsoever incurred directly or indirectly in
connection with the development, permitting, construction and financing of a
Capital Addition as reasonably determined by, or to the reasonable satisfaction
of, Lessor.
CASH COLLATERAL: As defined in the Deposit Pledge Agreement.
CASH FLOW: The Consolidated Net Income (or Consolidated Net Loss) before
federal and state income taxes for any period PLUS (i) the amount of the
provision for depreciation and amortization actually deducted on the books of
the applicable Person for the purposes of computing such Consolidated Net Income
(or
5
Consolidated Net Loss) for the period involved, PLUS (ii) Rent and interest on
all other Indebtedness which is fully subordinated to the Lease Obligations,
PLUS (iii) any indebtedness which is fully subordinated to the Lease Obligations
pursuant to the Affiliated Party Subordination Agreement or the Management
Subordination Agreement.
CASUALTY: As defined in Section 13.1.
CHATTEL PAPER: As defined in the UCC.
CLOSING: As defined in Section 18.3.6.
CODE: The Internal Revenue Code of 1986, as amended.
COLLATERAL: All of the property in which security interests are granted to
Lessor and the other Meditrust Entities pursuant to the Lease Documents and the
Related Party Agreements to secure the Lease Obligations, including, without
limitation, the Cash Collateral.
COMPETITIVE ACTIVITY: As defined in Section 11.5.
CONDEMNATION: With respect to the Leased Property or any interest therein
or right accruing thereto or use thereof (i) the exercise of any governmental
authority, whether by legal proceedings or otherwise, by a Condemnor or (ii) a
voluntary sale or transfer by Lessor to any Condemnor, either under threat of
Condemnation or Taking or while legal proceedings for Condemnation or Taking are
pending.
CONDEMNOR: Any public or quasi-public authority, or private corporation or
individual, having the power of condemnation.
CONSOLIDATED: The consolidated accounts of the relevant Person and its
Subsidiaries consolidated in accordance with GAAP.
CONSOLIDATED FINANCIALS: For any fiscal year or other accounting period for
any Person 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 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, and disclosing all
liabilities of such Person and its consolidated Subsidiaries, including, without
limitation, contingent liabilities.
CONSULTANTS: Collectively, the architects, engineers, inspectors, surveyors
and other consultants that are engaged from
6
time to time by Lessor to perform services for Lessor in connection with this
Lease.
CONTRACTS: All agreements (including, without limitation, Provider
Agreements, to the extent applicable, and any Residency Agreement), contracts
(including without limitation, construction contracts, subcontracts, and
architects' contracts), contract rights, warranties and representations,
franchises, and records and books of account benefiting, relating to or
affecting the Leased Property or the ownership, construction, development,
maintenance, management, repair, use, occupancy, possession, or operation
thereof, or the operation of any programs or services in conjunction with the
Facility and all renewals, replacement and substitutions therefor, now or
hereafter issued to any member of the Leasing Group by, or entered into by any
member of the Leasing Group with, any Governmental Authority, Accreditation Body
or Third Party Payor or maintained or used by any member of the Leasing Group or
entered into by any member of the Leasing Group with any third Person.
CURRENT ASSETS: All assets of any Person which would, in accordance with
GAAP, be classified as current assets.
CURRENT LIABILITIES: All liabilities of any Person which would, in
accordance with GAAP, be classified as current liabilities.
DATE OF TAKING: The date the Condemnor has the right to possession of the
property being condemned.
DEBT COVERAGE RATIO: The ratio of (i) Cash Flow for each applicable period
to (ii) the total of all Rent (excluding Additional Rent due under this Lease)
paid or payable during such period or accrued for such period.
DECLARATION: As defined in Article 23.
DEED: As defined in Section 18.3.
DEPOSIT: As defined in Section 18.3.
DEPOSIT PLEDGE AGREEMENT: The pledge and security agreement so captioned
and dated as of even date herewith between Lessee and Lessor.
DOCUMENTS: As defined in the UCC.
ENCUMBRANCE: As defined in Section 20.3.
ENVIRONMENTAL INDEMNITY AGREEMENT: The Environmental Indemnity Agreement of
even date herewith by and among Lessee the Guarantor and Lessor.
7
ENVIRONMENTAL LAWS: As defined in the Environmental Indemnity Agreement.
ERISA: The Employment Retirement Income Security Act of 1974, as amended.
EVENT OF DEFAULT: As defined in Article 16.
EXCESS GROSS REVENUES: Gross Revenues less Base Gross Revenues.
EXPIRATION DATE: As defined in Section 1.2.
EXTENDED TERMS: As defined in Section 1.4.
FACILITY: The one hundred eighty-four (184) unit, two hundred forty-six
(246) bed, fully licensed assisted living facility known as "Springtree
Retirement Residence" on the Land (together with related parking and other
amenities).
FAILURE TO OPERATE: As defined in Article 16.
FAILURE TO PERFORM: As defined Article 16.
FAIR MARKET ADDED VALUE: The Fair Market Value of the Leased Property
(including all Capital Additions) MINUS the Fair Market Value of the Leased
Property determined as if no Capital Additions paid for by Lessee had been
constructed.
FAIR MARKET VALUE OF THE CAPITAL ADDITION: The amount by which the Fair
Market Value of the Leased Property upon the completion of a particular Capital
Addition exceeds the Fair Market Value of the Leased Property just prior to the
construction of the particular Capital Addition.
FAIR MARKET VALUE OF THE LEASED PROPERTY: The fair market value of the
Leased Property, including all Capital Additions, and including the Land and all
other portions of the Leased Property, and (a) assuming the same is unencumbered
by this Lease, (b) determined in accordance with the appraisal procedures set
forth in Section 18.2 or in such other manner as shall be mutually acceptable to
Lessor and Lessee and not taking into account any reduction in value resulting
from any Lien to which the Leased Property is subject and which Lien Lessee or
Lessor is otherwise required to remove at or prior to closing of the
transaction. However, the positive or negative effect on the value of the
Leased Property attributable to the interest rate, amortization schedule,
maturity date, prepayment provisions and other terms and conditions of any Lien
an the Leased Property which is not so required or agreed to be removed shall be
taken into account in determining the Fair Market Value of the Leased Property.
The Fair Market Value shall be determined as the
8
overall value based on due consideration of the "income" approach, the
"comparable sales" approach, and the "replacement cost" approach.
FEE MORTGAGE: As defined in Section 20.3.
FEE MORTGAGEE: As defined in Section 20.3.
FINANCING PARTY: Any Person who is or may be participating with Lessor in
any way in connection with the financing of any Capital Addition.
FINANCING STATEMENTS: Uniform Commercial Code financing statements
evidencing the security interests granted to Lessor in connection with the Lease
Documents.
FISCAL QUARTER: Each of the three (3) month periods commencing on January
1st, April 1st, July 1st and October 1st.
FISCAL YEAR: The twelve (12) month period from January 1st to December
31st.
FIXTURES: As defined in Article 1.
GAAP: Generally accepted accounting principles, consistently applied
throughout the relevant period.
GENERAL INTANGIBLES: As defined in the UCC.
GOVERNMENTAL AUTHORITIES: Collectively, all agencies, authorities, bodies,
boards, commissions, courts, instrumentalities, legislatures, and offices of any
nature whatsoever of any government, quasi-government unit or political
subdivision, whether with a federal, state, county, district, municipal, city or
otherwise and whether now or hereinafter in existence.
GROSS REVENUES: Collectively, all revenues generated by reason of the
operation of the Leased Property (including any Capital Additions), directly or
indirectly received or to be received by Lessee or any Affiliate of Lessee,
including, without limitation, all resident revenues received or receivable for
the use of, or otherwise by reason of, all rooms, units and other facilities
provided, meals served, services performed, space or facilities subleased or
goods sold on or from the Leased Property and further including, without
limitation, except as otherwise specifically provided below, any consideration
received under any subletting, licensing, or other arrangements with any Person
relating to the possession or use of the Leased Property and all revenues from
all ancillary services provided at or relating to the Leased Property; PROVIDED,
HOWEVER, that Gross Revenues shall not include non-operating revenues such as
interest income or
9
gain from the sale of assets not sold in the ordinary course of business; and
PROVIDED, FURTHER, that there shall be excluded or deducted (as the case may be)
from such revenues:
(i) all applicable contractual allowances (relating to any period during
the Term of this Lease and thereafter until the Rent hereunder is paid in
full), if any, for billings not paid by or received from the appropriate
Governmental Agencies or Third Party Payors,
(ii) all applicable allowances according to GAAP for uncollectible
accounts,
(iii) all proper resident billing credits and adjustments according to
GAAP, if any, relating to health care accounting,
(iv) federal, state or local sales, use, gross receipts and excise taxes
and any tax based upon or measured by said Gross Revenues which is added to
or made a part of the amount billed to the resident or other recipient of
such services or goods, whether included in the billing or stated
separately,
(v) provider discounts for hospital or other medical facility utilization
contracts, if any,
(vi) the cost, if any, of any federal, state or local governmental program
imposed specially to provide or finance indigent resident care (other than
Medicare, Medicaid and the like),
(vii) deposits refundable to residents of the Facility, and
(viii) payments received on behalf of, and paid to, Persons who are not
Affiliates of Lessee.
To the extent that the Leased Property is subleased or occupied by an
Affiliate of Lessee, Gross Revenues calculated for all purposes of this Lease
(including, without limitation, the determination of the Additional Rent payable
under this Lease) shall include the Gross Revenues of such Sublessee with
respect to the premises demised under the applicable Sublease (i.e., the Gross
Revenues generated from the operations conducted on such subleased portion of
the Leased Property) and the rent received or receivable from such Sublessee
pursuant to such Subleases shall be excluded from Gross Revenues for all such
purposes. As to any Sublease between Lessee and a non-Affiliate of Lessee, only
the rental actually received by Lessee from such non-Affiliate shall be included
in Gross Revenues.
10
GROUP TWO ACQUISITION FACILITIES: As defined in the Agreement Regarding
Related Transactions.
GUARANTOR: Emeritus Corporation, a Washington corporation, and its
successors and assigns.
GUARANTY OF LEASE OBLIGATIONS: The Guaranty of Lease Obligations of even
date executed by Guarantor in favor of Lessor, relating to the Lease
Obligations.
HAZARDOUS SUBSTANCES: As defined in the Environmental Indemnity Agreement.
IMPOSITIONS: Collectively, all taxes (including, without limitation, all
capital stock and franchise taxes of Lessor, all ad valorem, property, sales
and use, single business, gross receipts, transaction privilege, rent or
similar taxes), assessments (including, without limitation, all assessments
for public improvements or benefits, whether or not commenced or completed
prior to the date hereof and whether or not to be completed within the Term),
ground rents, water and sewer rents, water charges or other rents and
charges, excises, tax levies, fees (including, without limitation, license,
permit, inspection, authorization and similar fees), transfer taxes and
recordation taxes imposed as a result of this Lease or any extensions hereof,
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 either or both of the Leased Property and the Rent (including all
interest and penalties thereon due to any failure in payment by Lessee),
which at any time prior to, during or in respect of the Term hereof and
thereafter until the Leased Property is surrendered to Lessor as required by
the terms of this Lease, may be assessed or imposed on or in respect of or be
a Lien upon (a) Lessor or Lessor's interest in the Leased Property, (b) the
Leased Property or any rent therefrom or any estate, right, title or interest
therein, or (c) any occupancy, operation, use or possession of, sales from,
or activity conducted on, or in connection with, the Leased Property or the
leasing or use of the Leased Property. Notwithstanding the foregoing,
nothing contained in this Lease shall be construed to require Lessee to pay
(1) any tax based on net income (whether denominated as a franchise or
capital stock or other tax) imposed on Lessor or any other Person, except
Lessee or its successors, (2) any net revenue tax of Lessor or any other
Person, except Lessee and its successors, (3) any tax imposed with respect to
the sale, exchange or other disposition by Lessor of the Leased Property or
the proceeds thereof, or (4) except as expressly provided elsewhere in this
Lease, any principal or interest on any Encumbrance on the Leased Property;
PROVIDED, HOWEVER, the provisos set forth in clauses (1) and (2) of this
sentence shall not be applicable to the extent that any real or personal
property tax, assessment, tax levy or charge
11
which Lessee is obligated to pay pursuant to the first sentence of this
definition and which is in effect at any time during the Term hereof is totally
or partially repealed, and a tax, assessment, tax levy or charge set forth in
clause (1) or (2) is levied, assessed or imposed expressly in lieu thereof. In
computing the amount of any franchise tax or capital stock tax which may be or
become an Imposition, the amount payable by Lessee shall be equitably
apportioned based upon all properties owned by Lessor that are located within
the particular jurisdiction subject to any such tax.
INDEBTEDNESS: The total of all obligations of a Person, whether current or
long-term, which in accordance with GAAP would be included as liabilities upon
such Person's balance sheet at the date as of which Indebtedness is to be
determined, and shall also include (i) all capital lease obligations and (ii)
all guarantees, endorsements (other than for collection of instruments in the
ordinary course of business), or other arrangements whereby responsibility is
assumed for the obligations of others, whether by agreement to purchase or
otherwise acquire the obligations of others, including any agreement contingent
or otherwise to furnish funds through the purchase of goods, supplies or
services for the purpose of payment of the obligations of others.
INDEMNIFIED PARTIES: As defined in Section 12.2.2.
INDEX: The rate of interest of actively traded marketable United States
Treasury Securities bearing a fixed rate of interest adjusted for a constant
maturity of ten (10) years as calculated by the Federal Reserve Board.
INITIAL TERM: As defined in Section 1.2.
INSTRUMENTS: As defined in the UCC.
INSURANCE REQUIREMENTS: All terms of any insurance policy required by this
Lease, all requirements of the issuer of any such policy with respect to the
Leased Property and the activities conducted thereon and the requirements of any
insurance board, association or organization or underwriters' regulations
pertaining to the Leased Property.
LAND: As defined in Article 1.
LEASE: As defined in the preamble of this Lease.
12
LEASE DEFAULT: The occurrence of any default or breach of condition
continuing beyond any applicable notice and/or grace periods under this Lease
and/or any of the other Lease Documents.
LEASE DOCUMENTS: Collectively, this Lease, the Guaranty of Lease
Obligations, the Agreement Regarding Related Transactions, the Security
Agreement, the Deposit Pledge Agreement, the Negative Pledge Agreement, the
Permits Assignment, the Financing Statements, the Affiliated Party Subordination
Agreement, the Environmental Indemnity Agreement and any and all other
instruments, documents, certificates or agreements executed or furnished by any
member of the Leasing Group in connection with the transactions evidenced by the
Lease and/or any of the foregoing documents.
LEASE OBLIGATIONS: Collectively, all indebtedness, covenants, liabilities,
obligations, agreements and undertakings (other than Lessor's obligations) under
this Lease and the other Lease Documents.
LEASE YEAR: A twelve month period ending on March 31st of each year;
PROVIDED, THAT the first Lease Year shall begin on the Commencement Date and
shall end on March 31, 1997.
LEASED IMPROVEMENTS: As defined in Article 1.
LEASED PROPERTY: As defined in Article 1.
LEASING GROUP: Collectively, Lessee, the Guarantor, the General Partner,
any Sublessee which is an Affiliate of Lessee and any Manager which is an
Affiliate of Lessee.
LEGAL REQUIREMENTS: Collectively, all statutes, ordinances, by-laws, codes,
rules, regulations, restrictions, orders, judgments, decrees and injunctions
(including, without limitation, all applicable building, health code, zoning,
subdivision, and other land use and assisted living licensing statutes,
ordinances, by-laws, codes, rules and regulations), whether now or hereafter
enacted, promulgated or issued by any Governmental Authority, Accreditation Body
or Third Party Payor affecting Lessor, any member of the Leasing Group or the
Leased Property or the ownership, construction, development, maintenance,
management, repair, use, occupancy, possession or operation thereof or the
operation of any programs or services in connection with the Leased Property,
including, without limitation, any of the foregoing which may (i) require
repairs, modifications or alterations in or to the Leased Property, (ii) in any
way affect (adversely or otherwise) the use and enjoyment of the Leased Property
or (iii) require the assessment, monitoring, clean-up, containment, removal,
remediation or other treatment of any Hazardous Substances on, under or from the
Leased Property. Without limiting the foregoing, the term Legal
13
Requirements includes all Environmental Laws and shall also include all Permits
and Contracts issued or entered into by any Governmental Authority, any
Accreditation Body and/or any Third Party Payor and all Permitted Encumbrances.
LESSEE: As defined in the preamble of this Lease and its successors and
assigns.
LESSEE'S ELECTION NOTICE: As defined in Section 14.3.
LESSEE'S PURCHASE OPTION NOTICE: As defined in Section 18.3.
LESSOR: As defined in the preamble of this Lease and its successors and
assigns.
LIEN: With respect to any real or personal property, any mortgage,
easement, restriction, lien, pledge, collateral assignment, hypothecation,
charge, security interest, title retention agreement, levy, execution, seizure,
attachment, garnishment or other encumbrance of any kind in respect of such
property, whether or not inchoate, vested or perfected.
LIMITED PARTIES: As defined in Section 11.5.4; PROVIDED, HOWEVER, in no
event shall the term Limited Parties include any Person in its capacity as a
shareholder of a public entity, unless such shareholder is a member of the
Leasing Group or an Affiliate thereof.
MANAGED CARE PLANS: All health maintenance organizations, preferred
provider organizations, individual practice associations, competitive medical
plans, and similar arrangements.
MANAGEMENT AGREEMENT: Any agreement, whether written or oral, between
Lessee or any Sublessee and any other Person pursuant to which Lessee or such
Sublessee provides any payment, fee or other consideration to any other Person
to operate or manage the Facility.
MANAGEMENT SUBORDINATION AGREEMENT: The Management Subordination Agreement
as of even date herewith between Lessee and Lessor.
MANAGER: Any Person who has entered into a Management Agreement with Lessee
or any Sublessee.
MATERIAL STRUCTURAL WORK: Any (i) structural alteration, (ii) structural
repair or (iii) structural renovation to the Leased Property, which would
customarily require or which require the design and/or involvement of a
structural engineer or architect or which would require the issuance of a
Permit.
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MEDICAID: The medical assistance program established by Title XIX of the
Social Security Act (42 USC Sections 1396 ET SEQ.) and any statute succeeding
thereto.
MEDICARE: The health insurance program for the aged and disabled
established by Title XVIII of the Social Security Act (42 USC Sections 1395
ET SEQ.) and any statute succeeding thereto.
MEDITRUST: As defined in Article 23.
MEDITRUST/EMERITUS TRANSACTION AFFILIATE: An Affiliate of Lessee, the
business and activities of which are limited to those subject to
Meditrust/Emeritus Transaction Documents (other than the Affiliated Party
Subordination Agreement, the Agreement Regarding Related Transactions and
comparable agreement now or hereafter in effect among Affiliates of Lessee and
of Lessor) to which such Affiliate is a party.
MEDITRUST/EMERITUS TRANSACTION DOCUMENTS: As defined in the Agreement
Regarding Related Transactions.
MEDITRUST ENTITIES: Collectively, Meditrust, Lessor and any other Affiliate
of Lessor which may now or hereafter be a party to any Related Party Agreement.
MEDITRUST INVESTMENT: The sum of (i) the Original Meditrust Investment PLUS
(ii) the aggregate amount of all Subsequent Investments LESS the sum of any Net
Award Amounts and/or Net Proceeds Amounts.
MONTHLY DEPOSIT DATE: As defined in Section 4.6.
NEGATIVE PLEDGE AGREEMENT: The Group Two Negative Pledge Agreement
(Acquisition) of even date by and between Guarantor, Lessee and Lessor.
NET AWARD AMOUNT: As defined in Section 3.7.
NET INCOME (OR NET LOSS): The net income (or net loss, expressed as a
negative number) of a Person for any period, after all taxes actually paid or
accrued and all expenses and other charges determined in accordance with GAAP.
NET PROCEEDS AMOUNT: As defined in Section 3.7.
NET WORTH: An amount determined in accordance with GAAP equal to the total
assets of any Person, minus the total liabilities of such Person.
OBLIGATIONS: Collectively, the Lease obligations and the Related Party
Obligations.
15
OFFICER'S CERTIFICATE: A Certificate of Lessee signed on behalf of Lessee
by the Chairman of the Board of Directors, the President, any Vice President or
the Treasurer of Lessee, or another officer authorized to so sign by the Board
of Directors or By-Laws of Lessee, or any other Person whose power and authority
to act has been authorized by delegation in writing by any of the Persons
holding the foregoing offices.
ORIGINAL MEDITRUST INVESTMENT: The sum of FOURTEEN MILLION TWO HUNDRED
SEVENTEEN THOUSAND TWO HUNDRED SEVENTY THREE DOLLARS ($14,217,273.00).
OTHER PERMITTED USES: To the extent permitted under applicable Legal
Requirements and under Insurance Requirements, and so long as the same do not
detract in any material manner from the Primary Intended Use and do not occupy
more than ten percent (10%) of the useable floor area of the building comprising
the Facility, such uses as Lessee reasonably determines are appropriate and
incidental to the Primary Permitted Use.
OVERDUE RATE: On any date, a rate of interest per annum equal to the
greater of: (i) a variable rate of interest per annum equal to one hundred
twenty percent (120%) of the Prime Rate, or (ii) eighteen percent (18%) per
annum; PROVIDED, HOWEVER, in no event shall the Overdue Rate be greater than the
maximum rate then permitted under applicable law to be charged by Lessor.
PBGC: Pension Benefit Guaranty Corporation.
PERMITS: Collectively, all permits, licenses, approvals, qualifications,
rights, variances, permissive uses, accreditation, certificates, certifications,
consents, agreements, contracts, contract rights, franchises, interim licenses,
permits and other authorizations of every nature whatsoever required by, or
issued under, applicable Legal Requirements relating or affecting the Leased
Property or the construction, development, maintenance, management, use or
operation thereof, or the operation of any programs or services in conjunction
with the Facility and all renewals, replacements and substitutions therefor, now
or hereafter required or issued by any Governmental Authority, Accreditation
Body or Third Party Payor to any member of the Leasing Group, or maintained or
used by any member of the Leasing Group, or entered into by any member of the
Leasing Group with any third Person with respect to the Leased Property.
PERMITS ASSIGNMENT: The Collateral Assignment of Permits, Licenses and
Contracts of even date granted by Lessee to Lessor.
PERMITTED ENCUMBRANCES: As defined in Section 10.1.18.
16
PERMITTED PRIOR SECURITY INTERESTS: As defined in Section 6.1.2.
PERSON: Any individual, corporation, general partnership, limited
partnership, joint venture, stock company or association, company, bank, trust,
trust company, land trust, business trust, unincorporated organization,
unincorporated association, Governmental Authority or other entity of any kind
or nature.
PLANS AND SPECIFICATIONS: As defined in Section 13.1.3.
PRIMARY INTENDED USE: The use of the Facility as an assisted living
facility with one hundred eighty-four (184) units, two hundred forty six (246)
beds or such additional number of units or beds as may hereafter be permitted
under this Lease, and such ancillary uses as are permitted by law and may be
necessary in connection therewith or incidental thereto.
PRIME RATE: The variable rate of interest per annum from time to time
announced by the Reference Bank as its prime rate of interest and in the event
that the Reference Bank no longer announces a prime rate of interest, then the
Prime Rate shall be deemed to be the variable rate of interest per annum which
is the prime rate of interest or base rate of interest from time to time
announced by any other major bank or other financial institution reasonably
selected by Lessor.
PRINCIPAL PLACE OF BUSINESS: As defined in Section 10.1.28.
PROCEEDS: As defined in the UCC.
PROVIDER AGREEMENTS: All participation, provider and reimbursement
agreements or arrangements, if any, now or hereafter in effect for the benefit
of Lessee or any Sublessee in connection with the operation of the Facility
relating to any right of payment or other claim arising out of or in connection
with Lessee's or such Sublessee's participation in any Third Party Payor
Program.
PURCHASE OPTION: As defined in Section 18.3.
PURCHASE OPTION DATE: As defined in Section 18.3.
PURCHASE OPTION PURCHASE PRICE: As defined in Section 18.3.
PURCHASER: As defined in Section 11.5.
RECEIVABLES: Collectively, (i) all rights to payment for goods sold or
leased or services rendered by Lessee or any other party, whether now in
existence or arising from time to time hereafter and whether or not yet earned
by performance, including, without limitation, obligations evidenced by an
17
account, note, contract, security agreement, chattel paper, or other evidence of
indebtedness, including Accounts and Proceeds, and (ii) a license to use such
Instruments, Documents, Accounts, Proceeds, General Intangibles and Chattel
Paper as are reasonably required for purposes of exercising the rights set forth
in (i) above.
REFERENCE BANK: Fleet Bank of Connecticut, N.A.
RELATED LEASES: The Group Two Acquisition Facility Leases (as defined in
the Agreement Regarding Related Transactions), together with such other new
leases identified from time to time in the Agreement Regarding Related
Transactions.
RELATED PARTIES: Collectively, each Person that may now or hereafter be a
party to any Related Party Agreement other than the Meditrust Entities.
RELATED PARTY AGREEMENT: Any agreement, document or instrument now or
hereafter evidencing or securing any Related Party Obligation, including,
without limitation, the Related Leases.
RELATED PARTY DEFAULT: The occurrence of a default or breach of condition
continuing beyond the expiration of any applicable notice and grace periods, if
any, under the terms of any Related Party Agreement.
RELATED PARTY OBLIGATIONS: Collectively, all indebtedness, covenants,
liabilities, obligations, agreements and undertakings due to, or made for the
benefit of, Lessor or any of the other Meditrust Entities by Lessee or any other
member of the Leasing Group or any of their respective Affiliates in connection
with any of the properties described in EXHIBIT E to the Agreement Regarding
Related Transactions, as the same may be modified and amended from time to time;
whether such indebtedness, covenants, liabilities, obligations, agreements
and/or undertakings are direct or indirect, absolute or contingent, liquidated
or unliquidated, due or to become due, joint, several or joint and several,
primary or secondary, now existing or hereafter arising.
RENT: Collectively, the Base Rent, Additional Rent, the Additional Charges
and all other sums payable under this Lease and the other Lease Documents.
RENT ADJUSTMENT DATE: The first day of any of the Extended Terms.
RENT ADJUSTMENT RATE: 325 basis points over the Index.
RENT INSURANCE PROCEEDS: As defined in Section 13.8.
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RESIDENCY AGREEMENT: All contracts, agreements and consents executed by or
on behalf of any resident or other Person seeking services at the Facility,
including, without limitation, assignments of benefits and guarantees.
RETAINAGE: As defined in Section 13.1.4.
SECURITY AGREEMENT: The Security Agreement as of even date herewith between
Lessee and Lessor.
SELLER: Barrington, Ltd.
STATE: The state or commonwealth in which the Leased Property is located.
SUBLEASE: Collectively, all subleases, licenses, use agreements, concession
agreements, tenancy at will agreements and other occupancy agreements of every
kind and nature (but excluding any Residency Agreement), whether oral or in
writing, now in existence or subsequently entered into by Lessee, encumbering or
affecting the Leased Property.
SUBLESSEE: Any sublessee, licensee, concessionaire, tenant or other
occupant under any of the Subleases.
SUBSEQUENT INVESTMENTS: The aggregate amount of all sums expended and
liabilities incurred by Lessor in connection with Capital Additions.
SUBSIDIARY OR SUBSIDIARIES: With respect to any Person, any corporation or
other entity of which such Person, directly, or indirectly, through another
entity or otherwise, owns, or has the right to control or direct the voting of,
fifty percent (50%) or more of the outstanding capital stock or other ownership
interest having general voting power (under ordinary circumstances).
TAKING: A taking or voluntary conveyance during the Term of the Leased
Property, or any interest therein or right accruing thereto, or use thereof, as
the result of, or in settlement of, any Condemnation or other eminent domain
proceeding affecting the Leased Property whether or not the same shall have
actually been commenced.
TANGIBLE PERSONAL PROPERTY: All machinery, equipment, furniture,
furnishings, movable walls or partitions, computers or trade fixtures, goods,
inventory, supplies, and other personal property owned or leased (pursuant to
equipment leases) by Lessee and used in the operation of the Leased Property.
TERM: Collectively, the Initial Term and each Extended Term which has
become effective pursuant to Section 1.4, as the
19
context may require, unless earlier terminated pursuant to the provisions
hereof.
THIRD PARTY PAYOR PROGRAMS: Collectively, all third party payor programs in
which Lessee or any Sublessee presently or in the future may participate,
including without limitation, Medicare, Medicaid, Blue Cross and/or Blue Shield,
Managed Care Plans, other private insurance plans and employee assistance
programs.
THIRD PARTY PAYORS: Collectively, Medicare, Medicaid, Blue Cross and/or
Blue Shield, private insurers and any other Person which presently or in the
future maintains Third Party Payor Programs.
TIME OF CLOSING: As defined in Section 18.3.
UCC: The Uniform Commercial Code as in effect from time to time in the
State.
UNITED STATES TREASURY SECURITIES: The uninsured treasury securities issued
by the United States Federal Reserve Bank.
UNSUITABLE FOR ITS PRIMARY INTENDED USE: As used anywhere in this Lease,
the term "Unsuitable For Its Primary Intended Use" shall mean that, by reason of
Casualty, or a partial or temporary Taking by Condemnation, in the good faith
judgment of Lessor, the Facility cannot be operated on a commercially
practicable basis for the Primary Intended Use, taking into account, among other
relevant factors, the number of usable units or beds affected by such Casualty
or partial or temporary Taking.
UNAVOIDABLE DELAYS: Delays due to strikes, lockouts, inability to procure
materials, power failure, acts of God, governmental restrictions, enemy action,
civil commotion, fire, unavoidable casualty or other causes beyond the control
of the party responsible for performing an obligation hereunder, provided that
lack of funds shall not be deemed a cause beyond the control of either party
hereto.
UPGRADE RENOVATIONS: Repair and refurbishing other than normal janitorial,
cleaning and maintenance activities.
WORK: As defined in Section 13.1.1.
WORK CERTIFICATES: As defined in Section 13.1.4.
WORKING CAPITAL Loan: As defined in Section 6.1.2.
WORKING CAPITAL STOCK PLEDGE: As defined in Section 16.1(h).
20
2.2 RULES OF CONSTRUCTION. The following rules of construction shall
apply to the Lease and each of the other Lease Documents: (a) references to
"herein", "hereof" and "hereunder" shall be deemed to refer to this Lease or
the other applicable Lease Document, and shall not be limited to the
particular text or section or subsection in which such words appear; (b) the
use of any gender shall include all genders and the singular number shall
include the plural and vice versa as the context may require; (c) references
to Lessor's attorneys shall be deemed to include, without limitation, special
counsel and local counsel for Lessor; (d) reference to attorneys' fees and
expenses shall be deemed to include all costs for administrative, paralegal
and other support staff and to exclude any fees and expenses of attorneys who
are employees of an Affiliate of Lessor; (e) references to Leased Property
shall be deemed to include references to all of the Leased Property and
references to any portion thereof; (f) references to the Lease Obligations
shall be deemed to include references to all of the Lease Obligations and
references to any portion thereof; (g) references to the Obligations shall be
deemed to include references to all of the Obligations and references to any
portion thereof; (h) the term "including", when following any general
statement, will not be construed to limit such statement to the specific
items or matters as provided immediately following the term "including"
(whether or not non-limiting language such as "without limitation" or "but
not limited to" or words of similar import are also used), but rather will be
deemed to refer to all of the items or matters that could reasonably fall
within the broadest scope of the general statement; (i) any requirement that
financial statements be Consolidated in form shall apply only to such
financial statements as relate to a period during any portion of which the
relevant Person has one or more Subsidiaries; (j) all accounting terms not
specifically defined in the Lease Documents shall be construed in accordance
with GAAP and (k) all exhibits annexed to any of the Lease Documents as
referenced therein shall be deemed incorporated in such Lease Document by
such annexation and/or reference.
ARTICLE 3
RENT
3.1 RENT FOR LAND, LEASED IMPROVEMENTS, RELATED RIGHTS AND FIXTURES.
Lessee will pay to Lessor, in lawful money of the United States of America, at
Lessor's address set forth herein or at such other place or to such other Person
as Lessor from time to time may designate in writing, rent for the Leased
Property, as follows.
3.1.1 BASE RENT: From and after the Commencement Date, Lessee shall
pay to Lessor a base rent (the "Base Rent") per annum which is equal to
$ and that is payable in
21
advance in equal, consecutive monthly installments due on the first day of
each calendar month, commencing on April 1, 1996; PROVIDED, HOWEVER, that
on each Rent Adjustment Date, the Base Rent shall be adjusted to equal the
greater of (i) the then current Base Rent or (ii)$ plus
Subsequent Investments multiplied by the Rent Adjustment Rate then in
effect on such Rent Adjustment Date and FURTHER, PROVIDED, HOWEVER, that on
the Commencement Date, Lessee shall pay to Lessor (x) the proportionate
share of the Base Rent due for the period from (and including) the
Commencement Date through the end of the calendar month during which the
Commencement Date occurred.
3.1.2 ADDITIONAL RENT: In addition to the Base Rent, Lessee shall also
pay to Lessor additional rent (the "Additional Rent") in an amount equal to
five percent (5%) of Excess Gross Revenues. Additional Rent shall accrue
commencing on April 1, 1998 (the "Additional Rent Accrual Date")and shall
be payable during the Term, quarterly in arrears, commencing on the July 1,
1998 ("Additional Rent Commencement Date") and shall be payable during the
Term, quarterly in arrears, commencing on the first day of the first fiscal
quarter occurring following the Additional Rent Accrual Date and there
shall be an annual reconciliation as provided in Section 3.2 below.
3.2 CALCULATION AND PAYMENT OF ADDITIONAL RENT; ANNUAL RECONCILIATION.
3.2.1 OFFICER'S CERTIFICATE AND PRORATION. 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. Additional Rent due for any
portion of any calendar year shall be prorated accordingly.
3.2.2 ANNUAL STATEMENT. In addition, on or before the first day of
April of each year following any calendar year for which Additional Rent is
payable hereunder, Lessee shall deliver to Lessor an Officer's Certificate,
reasonably acceptable to Lessor and certified by the chief financial
officer of Lessee, setting forth the Gross Revenues for the immediately
preceding calendar year.
3.2.3 DEFICITS. If the Additional Rent, as finally determined for any
calendar year (or portion thereof), exceeds the sum of the quarterly
payments of Additional Rent previously paid by Lessee with respect to said
calendar year, within thirty (30) days after such determination is required
to be made hereunder, Lessee shall pay such deficit to Lessor and, if the
deficit exceeds five percent (5%) of
22
the Additional Rent which was previously paid to Lessor with respect to
said calendar year, then Lessee shall also pay Lessor interest on such
deficit at the Overdue Rate from the date that such payment should have
been made by Lessee to the date that Lessor receives such payment.
3.2.4 OVERPAYMENTS. If the Additional Rent, as finally determined for
any calendar year (or portion thereof), is less than the amount previously
paid with respect thereto by Lessee, Lessee shall notify Lessor either
(a) to pay to Lessee an amount equal to such difference or (b) to grant
Lessee a credit against Additional Rent next coming due in the amount of
such difference.
3.2.5 FINAL DETERMINATION. The obligation to pay Additional Rent shall
survive the expiration or earlier termination of the Term (as to Additional
Rent payments that are due and payable prior to the expiration or earlier
termination of the Term and during any periods that Lessee remains in
possession of the Leased Property), and a final reconciliation, taking into
account, among other relevant adjustments, any contractual allowances which
related to Gross Revenues that accrued prior to the date of such expiration
or earlier termination, but which have been determined to be not payable
and Lessee's good faith best estimate of the amount of any unresolved
contractual allowances, shall be made not later than two (2) years after
said expiration or termination date. Within sixty (60) days after the
expiration or earlier termination of the Term, Lessee shall advise Lessor
of Lessee's best estimate of the approximate amount of such adjustments,
which estimate shall not be binding on Lessee or have any legal effect
whatsoever.
3.2.6 BEAT EFFORTS TO MAXIMIZE. Lessee further covenants that the
operation of the Facility shall be conducted in a manner consistent with
the prevailing standards and practices recognized in the assisted living
industry as those customarily utilized by reputable business operations.
Subject to any applicable Legal Requirements, the members of the Leasing
Group shall use their best efforts to maximize the Facility's Gross
Revenues.
3.3 CONFIRMATION AND AUDIT OF ADDITIONAL RENT.
3.3.1 MAINTAIN ACCOUNTING SYSTEMS. Lessee shall utilize, or cause to
be utilized, an accounting system for the Leased Property in accordance
with usual and customary practices in the assisted living industry and in
accordance with GAAP which will accurately record all Gross Revenues.
Lessee shall retain, for at least three (3) years after the expiration of
each calendar year (and in any event until the
23
final reconciliation described in Section 3.2 above has been made),
adequate records conforming to such accounting system showing all Gross
Revenues for such calendar year.
3.3.2 AUDIT BY LESSOR. Lessor, at its own expense except as provided
hereinbelow, shall have the right from time to time to have its accountants
or representatives audit the information set forth in the Officer's
Certificate referred to in Section 3.2 and in connection with such audits,
to examine Lessee's records with respect thereto (including supporting
data, income tax and sales tax returns), subject to any prohibitions or
limitations on disclosure of any such data under applicable law or
regulations.
3.3.3 DEFICIENCIES AND OVERPAYMENTS. If any such audit discloses a
deficiency in the reporting of Gross Revenues, and either Lessee agrees
with the result of such audit or the matter is compromised, Lessee shall
forthwith pay to Lessor the amount of the deficiency in Additional Rent
which would have been payable BY it had such deficiency in reporting Gross
Revenues not occurred, as finally agreed or determined, together with
interest on the Additional Rent which should have been payable by it,
calculated at the Overdue Rate, from the date when said payment should have
been made by Lessee to the date that Lessor receives such payment.
Notwithstanding anything to the contrary herein, with respect to any audit
that is commenced more than two (2) years after the date Gross Revenues for
any calendar year are reported by Lessee to Lessor, the deficiency, if any,
with respect to Additional Rent 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 (or any Affiliate thereof). If any audit conducted for
Lessor pursuant to the provisions hereof discloses that (a) the Gross
Revenues actually received by Lessee for any calendar year exceed those
reported by Lessee by more than five percent (5%), Lessee shall pay the
reasonable cost of such audit and examination or (b) Lessee has overpaid
Additional Rent, Lessor shall so notify Lessee and Lessee shall direct
Lessor either (i) to refund the overpayment to Lessee or (ii) grant a
credit against Additional Rent next coming due in the amount of such
difference.
3.3.4 SURVIVAL. The obligations of Lessor and Lessee contained in this
Section shall survive the expiration or earlier termination of this Lease.
3.4 ADDITIONAL CHARGES. Subject to the rights to contest as set forth in
Article 15, in addition to the Base Rent and Additional Rent, (a) Lessee will
also pay and discharge as and
24
when due and payable all Impositions, all amounts, liabilities and obligations
under the Appurtenant Agreements and all other amounts, liabilities and
obligations which Lessee assumes or agrees to pay under this Lease, and (b) in
the event of any failure on the part of Lessee to pay any of those items
referred to in clause (a) above, Lessee will 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 (a) and (b) above
being referred to herein collectively as the "Additional Charges"), and Lessor
shall have all legal, equitable and contractual rights, powers and remedies
provided in this Lease, by statute or otherwise, in the case of non-payment of
the Additional Charges, as well as the Base Rent and Additional Rent. To the
extent that Lessee pays any Additional Charges to Lessor pursuant to any
requirement of this Lease, Lessee shall be relieved of its obligation to pay
such Additional Charges to any other Person to which such Additional Charges
would otherwise be due.
3.5 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 Base
Rent, and the payments of Additional Rent and, if and to the extent payable to
Lessor, Additional Charges throughout the Term.
3.6 NO LESSEE TERMINATION OR OFFSET.
3.6.1 NO TERMINATION. Except as may be otherwise specifically and
expressly provided in this Lease, Lessee, to the extent not prohibited by
applicable law, shall remain bound by this Lease in accordance with its
terms and shall neither take any action without the consent of Lessor to
modify, surrender or terminate the same, nor seek nor be entitled to any
abatement, deduction, deferment or reduction of Rent, or set-off against
the Rent, nor shall the respective obligations of Lessor and Lessee be
otherwise affected by reason of (a) any Casualty or any Taking of the
Leased Property, (b) the lawful or unlawful prohibition of, or restriction
upon, Lessee's use of the Leased Property or the interference with such use
by any Person (other than Lessor, except to the extent permitted hereunder)
or by reason of eviction by paramount title; (c) any claim that Lessee has
or might have against Lessor, (d) any default or breach of any warranty by
Lessor or any of the other Meditrust Entities under this Lease, any other
Lease Document or any Related Party Agreement, (e) any bankruptcy,
insolvency, reorganization, composition, readjustment, liquidation,
dissolution, winding up or other proceedings affecting Lessor or any
assignee or transferee of Lessor or (f) for any other cause whether similar
or dissimilar to any of the foregoing, other than a discharge of Lessee
from any of the Lease Obligations as a matter of law.
25
3.6.2 WAIVER. Lessee to the fullest extent not prohibited by
applicable law, hereby specifically waives all rights, arising from any
occurrence whatsoever, which may now or hereafter be conferred upon it by
law to (a) modify, surrender or terminate this Lease or quit or surrender
the Leased Property or (b) entitle Lessee to any abatement, reduction,
suspension or deferment of the Rent or other sums payable by Lessee
hereunder, except as otherwise specifically and expressly provided in this
Lease.
3.6.3 INDEPENDENT COVENANTS. 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 (except in
those instances where the obligation to pay expressly survives the
termination of this Lease) by termination of this Lease other than by
reason of an Event of Default.
3.7 ABATEMENT OF RENT LIMITED. There shall be no abatement of Rent on
account of any Casualty, Taking or other event, except that (a) in the event of
a partial Taking or a temporary Taking as described in Section 14.3, the Base
Rent shall be abated as follows: (i) in the case of such a partial Taking, the
Meditrust Investment shall be reduced for the purposes of calculating Base Rent
pursuant to Section 3.1 by subtracting therefrom, as applicable, the net amount
of the Award received by Lessor, and (ii) in the case of such a temporary
Taking, by reducing the Base Rent for the period of such a temporary Taking, by
the net amount of the Award received by Lessor and (b) in the event of a
Casualty, the Base Rent shall be abated as follows: the Meditrust Investment
shall be reduced for the purposes of calculating Base Rent pursuant to Section
3.1 by subtracting therefrom, as applicable, the net amount of the insurance
proceeds.
For the purposes of this Section 3.7, the "net amount of the Award received
by Lessor" shall mean the Award paid to Lessor or Lessor's mortgagee on account
of such Taking, minus all costs and expenses incurred by Lessor in connection
therewith, and minus any amounts paid to or for the account of Lessee to
reimburse for the costs and expenses of reconstructing the Facility following
such Taking in order to create a viable and functional Facility under all of the
circumstances "Net Award Amount") and the "net amount of the insurance proceeds"
shall mean the insurance proceeds paid to Lessor or Lessor's mortgagee on
account of such Casualty, minus all costs and expenses incurred by Lessor in
connection therewith and minus any amounts paid to or for the account of Lessee
to reimburse for the costs and expenses of reconstructing the Facility following
such Casualty in order to
26
create a viable and functional Facility under all of the circumstances ("Net
Proceeds Amount").
ARTICLE 4
IMPOSITIONS; TAXES; UTILITIES;
INSURANCE PAYMENTS
4.1 PAYMENT OF IMPOSITIONS.
4.1.1 LESSEE TO PAY. Subject to the provisions of Article 15, Lessee
will pay or cause to be paid all Impositions before any fine, penalty,
interest or cost may be added for non-payment, such payments to be made
directly to the taxing authority where feasible, and Lessee will promptly
furnish Lessor copies of official receipts or other satisfactory proof
evidencing payment not later than the last day on which the same may be
paid without penalty or interest. Subject to the provisions of Article 15
and Section 4.1.2, Lessee's obligation to pay such Impositions shall be
deemed absolutely fixed upon the date such Impositions become a lien upon
the Leased Property or any part thereof.
4.1.2 INSTALLMENT ELECTIONS. If any such 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 exercise
the option to pay the same (and any accrued interest on the unpaid balance
of such Imposition) in installments and, in such event, shall pay such
installments during the Term hereof (subject to Lessee's right to contest
pursuant to the provisions of Section 4.1.5 below) as the same respectively
become due and before any fine, penalty, premium, further interest or cost
may be added thereto.
4.1.3 RETURNS AND REPORTS. Lessor, at its expense, shall, to the
extent permitted by applicable law, prepare and file all tax returns and
reports as may be required by Governmental Authorities in respect of
Lessor's net income, gross receipts, franchise taxes and taxes on its
capital stock, and Lessee, at its expense, shall, to the extent permitted
by applicable laws and regulations, prepare and file all other tax returns
and reports in respect of any Imposition as may be required by Governmental
Authorities. 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. In the event that any Governmental Authority
classifies any property covered by this Lease as personal property, Lessee
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shall file all personal property tax returns in such jurisdictions where it
may legally so file. Lessor, to the extent it possesses the same, and
Lessee, to the extent it possesses the same, will provide the other party,
upon request, with cost and depreciation records necessary for filing
returns for any portion of Leased Property so classified as personal
property. Where Lessor is legally required to file personal property tax
returns, if Lessee notifies Lessor of the obligation to do so in each year
at least thirty (30) days prior to the date any protest must be filed,
Lessee will be provided with copies of assessment notices so as to enable
Lessee to file a protest.
4.1.4 REFUNDS. If no Lease Default shall have occurred and be
continuing, 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
a Lease Default shall have occurred and be continuing, at Lessor's option,
such funds shall be paid over to Lessor and/or retained by Lessor and
applied toward Lease Obligations which relate to the Leased Property in
accordance with the Lease Documents.
4.1.5 PROTEST. Upon giving notice to Lessor, at Lessee's option and
sole cost and expense, and subject to compliance with the provisions of
Article 15, Lessee may contest, protest, appeal, or institute such other
proceedings as Lessee may deem appropriate to effect a reduction of any
Imposition and Lessor, at Lessee's cost and expense as aforesaid, shall
fully cooperate in a reasonable manner with Lessee in connection with such
protest, appeal or other action.
4.2 NOTICE OF IMPOSITIONS. Lessor shall give prompt notice to Lessee of
all Impositions payable by Lessee hereunder of which Lessor at any time has
knowledge, but Lessor's failure to give any such notice shall in no way diminish
Lessee's obligations hereunder to pay such Impositions.
4.3 ADJUSTMENT OF IMPOSITIONS. Impositions imposed in respect of the
period during which the expiration or earlier termination of the Term occurs
shall be adjusted and prorated between Lessor and Lessee, whether or not such
Impositions are imposed before or after such expiration or termination, and
Lessee's obligation to pay its prorated share thereof shall survive such
expiration or termination.
4.4 UTILITY CHARGES. Lessee will pay or cause to be paid all charges for
electricity, power, gas, oil, water, telephone, cable television and other
utilities used in the Leased Property during the Term and thereafter until
Lessee surrenders the Leased Property in the manner required by this Lease.
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4.5 INSURANCE PREMIUMS. Lessee will pay or cause to be paid all premiums
for the insurance coverage required to be maintained pursuant to Article 12
during the Term, and thereafter until Lessee yields up the Leased Property in
the manner required by this Lease. All such premiums shall be paid annually in
advance and Lessee shall furnish Lessor with evidence satisfactory to Lessor
that all such premiums have been so paid prior to the commencement of the Term
and thereafter at least thirty (30) days prior to the due date of each premium
which thereafter becomes due. Notwithstanding the foregoing, Lessee may pay
such insurance premiums to the insurer in monthly installments so long as the
applicable insurer is contractually obligated to give Lessor not less than a
sixty (60) days notice of non-payment and so long as no Lease Default has
occurred and is continuing. In the event of the failure of Lessee either to
comply with the insurance requirements in Article 12, or to pay the premiums for
such insurance, or to deliver such policies or certificates thereof to Lessor at
the times required hereunder, Lessor shall be entitled, but shall have no
obligation, to effect such insurance and pay the premiums therefor, which
premiums shall be a demand obligation of Lessee to Lessor.
4.6 DEPOSITS.
4.6.1 LESSOR'S OPTION. At the option of Lessor upon the occurrence of
an event or circumstance which, with the giving of notice and/or the
passage of time, would constitute a Lease Default, which may be exercised
at any time thereafter, Lessee shall, upon written request of Lessor, on
the first day on the calendar month immediately following such request, and
on the first day of each calendar month thereafter during the Term (each of
which dates is referred to as a "Monthly Deposit Date"), pay to and deposit
with Lessor a sum equal to one-twelfth (1/12th) of the Impositions to be
levied, charged, filed, assessed or imposed upon or against the Leased
Property within one (1) year after said Monthly Deposit Date and a sum
equal to one-twelfth (1/12th) of the premiums for the insurance policies
required pursuant to Article 12 which are payable within one (1) year after
said Monthly Deposit Date. If the amount of the Impositions to be levied,
charged, assessed or imposed or insurance premiums to be paid within the
ensuing one (1) year period shall not be fixed upon any Monthly Deposit
Date, such amount for the purpose of computing the deposit to be made by
Lessee hereunder shall be estimated by Lessor based upon the most recent
available information concerning said Impositions with an appropriate
adjustment to be promptly made between Lessor and Lessee as soon as such
amount becomes determinable. In addition, Lessor may, at its option, from
time to time require that any particular deposit be greater than one-
twelfth (1/12th) of the estimated amount payable within one (1) year after
said
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Monthly Deposit Date, if such additional deposit is required in order to
provide to Lessor a sufficient fund from which to make payment of all
Impositions on or before the next due date of any installment thereof, or
to make payment of any required insurance premiums not later than the due
date thereof.
4.6.2 USE OF DEPOSITS. The sums deposited by Lessee under this Section
4.6 shall be held by Lessor and shall be applied in payment of the
Impositions or insurance premiums, as the case may be, when due. Any such
deposits may be commingled with other assets of Lessor, and shall be
deposited by Lessor at such bank as Lessor may, from time to time select,
and, provided that Lessor has invested such deposits in one or more of the
investment vehicles described on SCHEDULE 4.6.2 attached hereto and
incorporated by reference, Lessor shall not be liable to Lessee or any
other Person (a) based on Lessor's (or such bank's) choice of investment
vehicles, (b) for any consequent loss of principal or interest or (c) for
any unavailability of funds based on such choice of investment.
Furthermore, Lessor shall bear no responsibility for the financial
condition of, nor any act or omission by, Lessor's depository bank. The
income from such investment or interest on such deposit shall be paid to
Lessee on a semi-annual basis as long as no Lease Default has occurred and
is then continuing, and as long as no fact or circumstance exists which,
with the giving of notice and/or the passage of time, would constitute a
Lease Default. Lessee shall give not less than ten (10) days prior written
notice to Lessor in each instance when an Imposition or insurance premium
is due, specifying the Imposition or premium to be paid and the amount
thereof, the place of payment, and the last day on which the same may be
paid in order to comply with the requirements of this Lease. If Lessor, in
violation of its obligations under this Lease, does not pay any Imposition
or insurance premium when due, for which a sufficient deposit exists,
Lessee shall not be in default hereunder by virtue of the failure of
Lessor to pay such Imposition or such insurance premium and Lessor shall
pay any interest or fine assessed by virtue of Lessor's failure to pay such
Imposition or insurance premium.
4.6.3 DEFICITS. If for any reason any deposit held by Lessor under
this Section 4.6 shall not be sufficient to pay an Imposition or insurance
premium within the time specified therefor in this Lease, then, within ten
(10) days after demand by Lessor, Lessee shall deposit an additional amount
with Lessor, increasing the deposit held by Lessor so that Lessor holds
sufficient funds to pay such Imposition or premium in full (or in
installments as otherwise provided for herein), together with any penalty
or interest due
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thereon. Lessor may change its estimate of any Imposition or insurance
premium for any period on the basis of a change in an assessment or tax
rate or on the basis of a prior miscalculation or for any other good faith
reason; in which event, within ten (10) days after demand by Lessor, Lessee
shall deposit with Lessor the amount in excess of the sums previously
deposited with Lessor for the applicable period which would theretofore
have been payable under the revised estimate.
4.6.4 OTHER PROPERTIES. If any Imposition shall be levied, charged,
filed, assessed, or imposed upon or against the Leased Property, and if
such Imposition shall also be a levy, charge, assessment, or imposition
upon or for any other real or personal property that does not constitute a
part of the Leased Property but for which a lien exists or can exist upon
the Leased Property, then, at Lessor's reasonable discretion, the
computation of the amounts to be deposited under this Section 4.6 shall be
based upon the entire amount of such Imposition and Lessee shall not have
the right to apportion any deposit with respect to such Imposition.
4.6.5 TRANSFERS. In connection with any assignment of Lessor's
interest under this Lease, the original Lessor named herein and each
successor in interest shall transfer all amounts deposited pursuant to the
provisions of this Section 4.6 and still in its possession to such assignee
(as the subsequent holder of Lessor's interest in this Lease) and upon such
transfer, the original Lessor named herein or the applicable successor in
interest transferring the deposits shall thereupon be completely released
from all liability with respect to such deposits so transferred and Lessee
shall look solely to said assignee, as the subsequent holder of Lessor's
interest under this Lease, in reference thereto.
4.6.6 SECURITY. All amounts deposited with Lessor pursuant to the
provisions of this Section 4.6 shall be held by Lessor as additional
security for the payment and performance of the Obligations and, upon the
occurrence of any Lease Default, Lessor may, in its sole and absolute
discretion, apply said amounts towards payment or performance of such
Obligations.
4.6.7 RETURN. Upon the expiration or earlier termination of this
Lease, provided that all of the Lease Obligations relating to the Leased
Property have been fully paid and performed, any sums then held by Lessor
under this Section 4.6 shall be refunded to Lessee.
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4.6.8 RECEIPTS. Lessee shall deliver to Lessor copies of all notices,
demands, claims, bills and receipts in relation to the Impositions and
insurance premiums upon the earlier to occur of (a) ten (10) days following
receipt thereof by Lessee and (b) in the case of an invoice, demand or bill
for the payment of an Imposition, prior to the date when such Imposition is
due and payable.
ARTICLE 5
OWNERSHIP OF LEASED PROPERTY AND PERSONAL PROPERTY;
INSTALLATION, REMOVAL AND REPLACEMENT OF
PERSONAL PROPERTY;
5.1 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.
5.2 PERSONAL PROPERTY; REMOVAL AND REPLACEMENT OF PERSONAL PROPERTY.
5.2.1 LESSEE TO EQUIP FACILITY. If and to the extent not included in
the Leased Property, Lessee, at its sole cost and expense, shall install,
affix or assemble or place on the Leased Property, sufficient items of
Tangible Personal Property, to enable the operation of the Facility in
accordance with the requirements of this Lease for the Primary Intended
Use, and such Tangible Personal Property and replacements thereof, shall be
at all times the property of Lessee.
5.2.2 SUFFICIENT PERSONAL PROPERTY. Lessee shall maintain, during the
entire Term, the Tangible Personal Property in good order and repair and
shall provide at its expense all necessary replacements thereof, as may be
necessary in order to operate the Facility in compliance with all
applicable Legal Requirements and Insurance Requirements and otherwise in
accordance with customary practice in the industry for the Primary Intended
Use and, if applicable, Other Permitted Uses. In addition, Lessee shall
furnish all necessary replacements of such obsolete items of the Tangible
Personal Property during the Term as are necessary to enable the operation
of the Facility in accordance with the requirements of this Lease for the
Primary Intended Use.
5.2.3 REMOVAL AND REPLACEMENT; LESSOR'S OPTION TO PURCHASE. Lessee
shall not remove from the Leased Property any one or more items of Tangible
Personal Property (whether now owned or hereafter acquired), the fair
market value of
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which exceeds TWENTY-FIVE THOUSAND DOLLARS ($25,000), individually or ONE
HUNDRED THOUSAND DOLLARS ($100,000.00) collectively, if such Tangible
Personal Property is necessary to enable the operation of the Facility in
accordance with the requirements of this Lease for the Primary Intended
Use. At its sole cost and expense, Lessee shall restore the Leased
Property to the condition required by Article 8, including repair of all
damage to the Leased Property caused by the removal of the Tangible
Personal Property, whether effected by Lessee or Lessor. Upon the
expiration or earlier termination of this Lease, Lessor shall have the
option, which may be exercised by giving notice thereof within twenty (20)
days prior to such expiration or termination, of (a) acquiring the Tangible
Personal Property (pursuant to a bill of sale and assignments of any
equipment leases, all in such forms as are reasonably satisfactory to
Lessor) upon payment of its fair market value or (b) requiring Lessee to
remove the Tangible Personal Property. If Lessor exercises its option to
purchase the Tangible Personal Property, the price to be paid by Lessor
shall be (i) reduced by the amount of all payments due on any equipment
leases or any other Permitted Prior Security Interests assumed by Lessor
and (ii) applied to the Lease Obligations before any payment to Lessee. If
Lessor requires the removal of the Tangible Personal Property, then all of
the Tangible Personal Property that is not removed by Lessee within ten
(10) days following such request shall be considered abandoned by Lessee
and may be appropriated, sold, destroyed or otherwise disposed of by Lessor
without first giving notice thereof to Lessee, without any payment to
Lessee and without any obligation to account therefor.
ARTICLE 6
SECURITY FOR LEASE OBLIGATIONS
6.1 SECURITY FOR LESSEE'S OBLIGATIONS; PERMITTED PRIOR SECURITY INTERESTS.
6.1.1 SECURITY. In order to secure the payment and performance fall of
the Obligations, Lessee agrees to provide or cause there to be provided the
following security:
(a) a first lien and exclusive security interest in the
Collateral, as more particularly provided for in the Security
Agreement;
(b) the Cash Collateral.
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(c) a first lien and exclusive pledge and assignment of, and
security interest in, all Permits and Contracts, as more particularly
provided for in the Collateral Assignment of Permits and Contracts;
and
(d) in the event that, at any time during the Term, Lessee holds
the fee title to or a leasehold interest in any real property and/or
personal property which is used as an integral part of the operation
of the Leased Property (but is not subject to this Lease), Lessee
shall (i) provide Lessor with prior notice of such acquisition and
(ii) shall take such actions and enter into such agreements as Lessor
shall reasonably request in order to grant Lessor a first priority
mortgage or other security interest in such real property and personal
property, subject only to the Permitted Encumbrances and other Liens
reasonably acceptable to Lessor. Without limiting the foregoing, it
is acknowledged and agreed that all revenues generated from the
operation of such additional real property shall be included in the
determination of Gross Revenues (subject to such adjustments as agreed
upon hereunder).
Notwithstanding the foregoing, Lessor shall subordinate its
security interest in Receivables to a prior security interest to
secure a working capital line as provided in Section 6.1.3.
6.1.2 PURCHASE MONEY SECURITY INTERESTS AND EQUIPMENT LEASES.
Notwithstanding any other provision hereof regarding the creation of Liens,
Lessee may (a) grant priority purchase money security interests in items of
Tangible Personal Property, (b) lease Tangible Personal Property from
equipment lessors as long as: (i) the aggregate value of such Tangible
Personal Property shall not exceed TWO HUNDRED THOUSAND DOLLARS ($200,000)
or (ii) (A) the secured party or equipment lessor enters into an
intercreditor agreement with, and satisfactory to, Lessor pursuant to
which, without limiting the foregoing, (1) Lessor shall be afforded the
option of curing defaults and the option of succeeding to the rights of
Lessee and (2) Lessor's security interest in Tangible Personal Property
shall be subordinated to the security interest granted to such secured
party, (B) all of the terms, conditions and provisions of the financing,
security interest or lease are reasonably acceptable to Lessor, (C) Lessee
provides a true and complete copy, as executed, of each such purchase money
security agreement, financing document and equipment lease and all
amendments thereto
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and (D) no such security interest, financing agreement or lease is
cross-defaulted or cross-collateralized with any other obligation.
Security interests granted by Lessee in full compliance with the
provisions of this Section 6.1.2 are referred to as "Permitted Prior
Security Interests".
6.1.3 RECEIVABLES FINANCING. Notwithstanding any other provision
hereof regarding the creation of Liens, Lessee shall also be permitted to
grant a prior security interest in Receivables (with the Lessor retaining a
junior security interest therein) to an institutional lender which is
providing a working capital line of credit (a "Working Capital Loan") for
the exclusive use of Guarantor, Lessee and Affiliates of Lessee as long as
such Lender enters into an intercreditor agreement with, and satisfactory
to, Lessor pursuant to which, without limiting the foregoing, (1) Lessor
shall be provided with notice with respect to defaults under the Working
Capital Loan simultaneously with the delivery of such notice to Lessee and
shall be afforded the option of curing defaults thereunder, (2) such
lender's use of Instruments, Documents, General Intangibles and Chattel
Paper shall be limited to a license only for the purpose of collecting
Receivables and (3) the subordination of Lessor's interest in the
Receivables shall be of no force and effect and Lessor's first priority
security interest shall be reinstated from and after the occurrence of an
Event of Default if, upon or following such Event of Default, Lessor either
exercises any of its remedies set forth in Article 16 or Lessor notifies in
writing such lender of Lessor's intention to invoke its right to reinstate
its first priority security interest in the Receivables.
6.2 GUARANTY. All of the Lease Obligations shall be unconditionally and
irrevocably guaranteed by the Guarantor pursuant to the Guaranty of Lease
Obligations.
ARTICLE 7
CONDITION AND USE OF LEASED PROPERTY;
MANAGEMENT AGREEMENTS
7.1 CONDITION OF THE LEASED PROPERTY. Lessee acknowledges that Lessee has
caused the Leased Property to be sold to Lessor and has concurrently entered
into this Lease. Lessee acknowledges receipt and delivery of possession of the
Leased Property and that Lessee has examined and otherwise has acquired
35
knowledge of the condition of the Leased Property prior to the execution and
delivery of this Lease and has found the same to be in good order and repair and
satisfactory for its purposes hereunder. Lessee is leasing the Leased Property
"AS IS" in its present condition. Lessee waives any claim or action against
Lessor in respect of the condition of the Leased Property. LESSOR MAKES NO
WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT TO THE LEASED
PROPERTY, EITHER AS TO ITS FITNESS FOR ANY PARTICULAR PURPOSE OR USE, ITS DESIGN
OR CONDITION OR OTHERWISE, OR AS TO DEFECTS IN THE QUALITY OF THE MATERIAL OR
WORKMANSHIP THEREIN, LATENT OR PATENT; IT BEING AGREED THAT ALL RISKS RELATING
TO THE DESIGN, CONDITION AND/OR USE OF THE LEASED PROPERTY ARE TO BE BORNE BY
LESSEE. LESSEE HEREBY ASSUMES ALL RISK OF THE PHYSICAL CONDITION OF THE LEASED
PROPERTY, THE SUITABILITY OF THE LEASED PROPERTY FOR LESSEE'S PURPOSES, AND THE
COMPLIANCE OR NON-COMPLIANCE OF THE LEASED PROPERTY WITH ALL APPLICABLE
REQUIREMENTS OF LAW, INCLUDING BUT NOT LIMITED TO ENVIRONMENTAL LAWS AND ZONING
OR LAND USE LAWS.
Upon the request of Lessor, at any time and from time to time during the
Term, Lessee shall engage one (1) or more independent professional consultants,
engineers and inspectors, qualified to do business in the State and acceptable
to Lessor to perform any environmental and/or structural investigations and/or
other inspections of the Leased Property and the Facility as Lessor may
reasonably request in order to detect (a) any structural deficiencies in the
Leased Improvements or the utilities servicing the Leased Property or (b) the
presence of any condition that (i) may be harmful or present a health hazard to
the residents and other occupants of the Leased Property or (ii) constitutes a
breach or violation of any of the Lease Documents. In the event that Lessor
reasonably determines that the results of such testing or inspections are
unsatisfactory, within thirty (30) days of notice from Lessor, Lessee shall
commence such appropriate remedial actions as may be reasonably requested by
Lessor to correct such unsatisfactory conditions and, thereafter, shall
diligently and continuously prosecute such remedial actions to completion within
the time limits prescribed in this Lease or the other Lease Documents.
7.2 USE OF THE LEASED PROPERTY; COMPLIANCE; MANAGEMENT.
7.2.1 OBLIGATION TO OPERATE. Lessee shall continuously operate the
Leased Property in accordance with the Primary Intended Use and the Other
Permitted Uses and maintain its qualifications for licensure and
accreditation as required by all applicable Legal Requirements.
7.2.2 PERMITTED USES. During the entire Term, Lessee shall use the
Leased Property, or permit the Leased Property to be used, only for the
Primary Intended Use and, if applicable, the Other Permitted Uses. Lessee
shall not
36
use the Leased Property or permit the Leased Property to be used for any
other use without the prior written consent of Lessor, which consent may be
withheld in Lessor's sole and absolute discretion.
7.2.3 COMPLIANCE WITH INSURANCE REQUIREMENTS. No use shall be made or
permitted to be made of the Leased Property and no acts shall be done which
will cause the cancellation of any insurance policy covering the Leased
Property, nor shall Lessee, any Manager or any other Person sell or
otherwise provide to residents, other occupants or invites therein, or
permit to be kept, used or sold in or about the Leased Property, any
article which may be prohibited by any of the Insurance Requirements.
Furthermore, Lessee shall, at its sole cost and expense, take whatever
other actions that may be necessary to comply with and to insure that the
Leased Property complies with all Insurance Requirements.
7.2.4 NO WASTE. Lessee shall not commit or suffer to be committed any
waste on, in or under the Leased Property, nor shall Lessee cause or permit
any nuisance thereon.
7.2.5 NO IMPAIRMENT. Lessee shall neither permit nor knowingly suffer
the Leased Property to be used in such a manner as (a) might reasonably
tend to impair Lessor's title thereto or (b) may reasonably make possible a
claim or claims of adverse usage or adverse possession by the public or of
implied dedication of the Leased Property.
7.2.6 NO LIENS. Except as permitted pursuant to Section 6.1.2, Lessee
shall not permit or suffer any Lien to exist on the Tangible Personal
Property and shall in no event cause, permit or suffer any Lien to exist
with respect to the Leased Property other than as set forth in Section
11.5.2.
7.3 COMPLIANCE WITH LEGAL REQUIREMENTS. Lessee covenants and agrees that
the Leased Property shall not be used for any unlawful purpose and that
Lessee, at its sole cost and expense, will promptly (a) comply with, and
shall cause every other member of the Leasing Group to comply with, all
applicable Legal Requirements relating to the use, operation, maintenance,
repair and restoration of the Leased Property, whether or not compliance
therewith shall require structural change in any of the Leased Property or
interfere with the use and enjoyment of the Leased Property and (b) procure,
maintain and comply with (in all material respects), and shall cause every
other member of the Leasing Group to procure, maintain and comply with (in
all material respects), all Contracts and Permits necessary or desirable in
order to operate the Leased Property for the Primary
37
Intended Use and/or, if applicable, other Permitted Uses, and for compliance
with all of the terms and conditions of this Lease. Unless a Lease Default has
occurred or any event has occurred which, with the passage of time and/or the
giving of notice would constitute a Lease Default, Lessee may, upon prior
written notice to Lessor, contest any Legal Requirement to the extent permitted
by, and in accordance with, Article 15 below.
7.4 MANAGEMENT AGREEMENTS. Throughout the Term, Lessee shall not enter
into any Management Agreement without the prior written approval of Lessor, in
each instance, which approval shall not be unreasonably withheld. Lessee shall
not, without the prior written approval of Lessor, in each instance, which
approval shall not be unreasonably withheld, agree to or allow: (a) any change
in the Manager or change in the ownership or control of the Manager, (b) the
termination of any Management Agreement (other than in connection with the
exercise by Lessee of any of its remedies under the Management Agreement as a
result of any default by the Manager thereunder), (c) any assignment by the
Manager of its interest under the Management Agreement or (d) any material
amendment of the Management Agreement. In addition, Lessee shall, at its sole
cost and expense, promptly and fully perform or cause to be performed every
covenant, condition, promise and obligation of the licensed operator of the
Leased Property under any Management Agreement.
Each Management Agreement shall provide that Lessor shall be provided
notice of any defaults thereunder and, at Lessor's option, an opportunity to
cure such default. Lessee shall furnish to Lessor, within three (3) days after
receipt thereof, or after the mailing or service thereof by Lessee, as the case
may be, a copy of each notice of default which Lessee shall give to, or receive
from any Person, based upon the occurrence, or alleged occurrence, of any
default in the performance of any covenant, condition, promise or obligation
under any Management Agreement.
Whenever and as often as Lessee shall fail to perform, promptly and fully,
at its sole cost and expense, any covenant, condition, promise or obligation on
the part of the licensed operator of the Leased Property under and pursuant to
any Management Agreement, Lessor, or a lawfully appointed receiver of the Leased
Property, may, at their respective options (and without any obligation to do
so), after five (5) days' prior notice to Lessee (except in the case of an
emergency) enter upon the Leased Property and perform, or cause to be performed,
such work, labor, services, acts or things, and take such other steps and do
such other acts as they may deem advisable, to cure such defaulted covenant,
condition, promise or obligation, and any amount so paid or advanced by Lessor
or such receiver and all costs and expenses reasonably incurred in connection
therewith (including, without limitation, attorneys' fees and expenses and
38
court costs), shall be a demand obligation of Lessee to Lessor or such receiver,
and, Lessor shall have the same rights and remedies for failure to pay such
costs on demand as for Lessee's failure to pay any other sums due hereunder.
7.5 PARTICIPATION IN THIRD PARTY PAYOR PROGRAMS. No provision of this
Lease shall be deemed to require Lessee to commence participation in any Third
Party Payor Program or any Managed Care Plan.
ARTICLE 8
REPAIRS; RESTRICTIONS
8.1 MAINTENANCE AND REPAIR.
8.1.1 LESSEE'S RESPONSIBILITY. Lessee, at its sole cost and expense,
shall keep the Leased Property and all private roadways, sidewalks and
curbs appurtenant thereto 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
or such private roadways, sidewalks and curbs or any other cause whatsoever
other than Lessor's gross negligence or willful misconduct) and, subject to
Articles 9, 13 and 14, Lessee shall promptly, with the exercise of all
reasonable efforts, undertake and diligently complete all necessary and
appropriate repairs, replacements, renovations, restorations, alterations
and modifications thereof of every kind and nature, whether interior or
exterior, structural or non-structural, ordinary or extraordinary, foreseen
or unforeseen or arising by reason of a condition (concealed or otherwise)
existing prior to the commencement of, or during, the Term and thereafter
until Lessee surrenders the Leased Property in the manner required by this
Lease. In addition, Lessee, at its sole cost and expense, shall make all
repairs, modifications, replacements, renovations and alterations of the
Leased Property (and such private roadways, sidewalks and curbs) that are
necessary to comply with all applicable Legal Requirements and Insurance
Requirements so that the Leased Property can be legally operated for the
Primary Intended Use and, if applicable, the Other Permitted Uses. All
repairs, replacements, renovations, alterations, and modifications required
by the terms of this Section 8.1 shall be (a) performed in a good and
workmanlike manner in compliance with all applicable Legal Requirements,
Insurance Requirements and the requirements of Article 9 hereof, using new
materials well suited for their intended purpose and (b) consistent with
the operation of the Facility in a reputable manner. Lessee will not take
or omit to take any action the taking or omission of which might materially
impair the
39
value or the usefulness of the Leased Property for the Primary Intended Use
and, if applicable, the other Permitted Uses. To the extent that any of
the repairs, replacements, renovations, alterations or modifications
required by the terms of this Section 8.1 constitute Material Structural
Work, Lessee shall obtain Lessor's prior written approval (which approval
shall not be unreasonably withheld) of the specific repairs, replacements,
renovations, alterations and modifications to be performed by or on behalf
of Lessee in connection with such Material Structural Work.
Notwithstanding the foregoing, in the event of a bona fide emergency during
which Lessee is unable to contact the appropriate representatives of
Lessor, Lessee may commence such Material Structural Work as may be
necessary in order to address such emergency without Lessor's prior
approval, PROVIDED, HOWEVER, that Lessee shall immediately thereafter
advise Lessor of such emergency and the nature and scope of the Material
Structural Work commenced and shall obtain Lessor's approval of the
remaining Material Structural Work to be completed.
8.1.2 NO LESSOR OBLIGATION. Lessor shall not, under any
circumstances, be required to build or rebuild any improvements on the
Leased Property (or any private roadways, sidewalks or curbs appurtenant
thereto), or to make any repairs, replacements, renovations, alterations,
restorations, modifications, or renewals of any nature or description to
the Leased Property (or any private roadways, sidewalks or curbs
appurtenant thereto), whether ordinary or extraordinary, structural or non-
structural, foreseen or unforeseen, or to make any expenditure whatsoever
with respect thereto in connection with this Lease, or to maintain the
Leased Property (or any private roadways, sidewalks or curbs appurtenant
thereto) in any way.
8.1.3 LESSEE MAY NOT OBLIGATE LESSOR. Nothing contained herein nor any
action or inaction by Lessor shall be construed as (a) constituting the
consent or request of Lessor, express or implied, to any contractor,
subcontractor, laborer, materialman or vendor to or for the performance of
any labor or services for any construction, alteration, addition, repair or
demolition of or to the Leased Property or (b) except as otherwise provided
in this Lease, 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 for the payment thereof or to make any agreement
that may create, or in any way be the basis for, any right, title or
interest in, or Lien or claim against, the estate of Lessor in the Leased
Property. Without limiting the generality of the foregoing and except as
40
otherwise provided in this Lease, the right title and interest of Lessor in
and to the Leased Property shall not be subject to liens or encumbrances
for the performance of any labor or services or the furnishing of any
materials or other property furnished to the Leased Property at or by the
request of Lessee or any other Person other than Lessor. Lessee shall
notify any contractor, subcontractor, laborer, materialman or vendor
providing any labor, services or materials to the Leased Property of this
provision.
8.2 ENCROACHMENTS; TITLE RESTRICTIONS. If any of the Leased Improvements
shall, at any time, encroach upon any property, street or right-of-way adjacent
to the Leased Property, or shall violate the agreements or conditions contained
in any lawful restrictive covenant or other Lien now or hereafter affecting the
Leased Property, or shall impair the rights of others under any easement, right-
of-way or other Lien to which the Leased Property is now or hereafter subject,
then promptly upon the request of Lessor, Lessee shall, at its sole cost and
expense, subject to Lessee's right to contest the existence of any encroachment,
violation or impairment as set forth in Article 15, (a) obtain valid and
effective waivers or settlements of all claims, liabilities and damages
resulting from each such encroachment, violation or impairment or (b) make such
alterations to the Leased Improvements, 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. Notwithstanding
the foregoing, Lessee shall, in any event, take all such actions as may be
reasonably necessary in order to be able to continue the operation of the Leased
Improvements for the Primary Intended Use and, if applicable, the Other
Permitted Uses substantially in the manner and to the extent that the Leased
Improvements were operated prior to the assertion of such encroachment,
violation or impairment and nothing contained herein shall limit Lessee's
obligations to operate the Leased Property in accordance with its Primary
Intended Use. Any such alteration made pursuant to the terms of this Section
8.2 shall be completed in conformity with the applicable requirements of Section
8.1 and Article 9. Lessee's obligations under this Section 8.2 shall be in
addition to and shall in no way discharge or diminish any obligation of any
insurer under any policy of title or other insurance. If and to the extent any
obligation of an insurer under any policy of title or other insurance exists and
Lessee has incurred costs and expenses with respect to the subject matter of
such obligation and provided Lessor is reasonably satisfied with the resolution
of such subject matter, at the request of Lessee, Lessor, at Lessor's option,
shall either assign to Lessee any right it may have to proceed against such
insurer or remit to Lessee any amount which Lessor recovers from such insurer,
minus any amounts needed to reimburse Lessor for its reasonable costs and
expenses,
41
for the costs and expenses incurred by Lessee in reconstructing the Facility or
taking such other action reasonably required in order to create a viable and
functional Facility under all of the circumstances.
ARTICLE 9
MATERIAL STRUCTURAL WORK AND
CAPITAL ADDITIONS
9.1 LESSOR'S APPROVAL. Without the prior written consent of Lessor, which
consent may be withheld by Lessor, in its sole and absolute discretion, Lessee
shall make no Capital Addition or Material Structural Work to the Leased
Property (including, without limitation, any change in the size or unit capacity
of the Facility), except as may be otherwise expressly required pursuant to
Article 8.
9.2 GENERAL PROVISIONS AS TO CAPITAL ADDITIONS AND CERTAIN MATERIAL
STRUCTURAL WORK. As to any Capital Addition or Material Structural Work (other
than such Material Structural Work that is required to be performed pursuant to
the terms of Section 8.1) for which Lessor has granted its prior written
approval, the following terms and conditions shall apply unless otherwise
expressly set forth in Lessor's written approval.
9.2.1 NO LIENS. Lessee shall not be permitted to create any Lien on
the Leased Property in connection with any Capital Addition or Material
Structural Work (including, without limitation, Liens relating to the
provision of financing for a Capital Addition) other than Liens expressly
permitted by the terms and provisions of this Lease Agreement.
9.2.2 LESSEE'S PROPOSAL REGARDING CAPITAL ADDITIONS AND MATERIAL
STRUCTURAL WORK. If Lessee desires to undertake any Capital Addition or
Material Structural Work, Lessee shall submit to Lessor in writing a
proposal setting forth in reasonable detail any proposed Capital Addition
or Material Structural Work and shall provide to Lessor copies of, or
information regarding, the applicable plans and specifications, Permits,
Contracts and any other materials concerning the proposed Capital Addition
or Material Structural Work, as the case may be, as Lessor may reasonably
request. Without limiting the generality of the foregoing, each such
proposal pertaining to any Capital Addition shall indicate the approximate
projected cost of constructing such Capital Addition, the use or uses to
which it will be put and a good faith estimate of the change, if any, in
the Gross Revenues that Lessee anticipates will result from the
construction of such Capital Addition.
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9.2.3 LESSOR'S OPTIONS REGARDING CAPITAL ADDITIONS AND STRUCTURAL WORK.
Lessor shall have the options of (a) denying permission for the construction of
the applicable Capital Addition or Material Structural Work, (b) offering to
finance the construction of the Capital Addition pursuant to Section 9.3 on such
terms as may be specified by Lessor, including the terms of any amendment to
this Lease, including, without limitation, an increase in Base Rent based on
Lessor's then existing terms and prevailing conditions to compensate Lessor for
the additional funds advanced by it, (c) allowing Lessee to separately pay for
or finance the construction of the Capital Addition, subject to compliance with
the terms and conditions of Section 9.2.1, Section 9.4, Section 13.1.3, all
applicable Legal Requirements, all other requirements of this Lease and to such
other terms and conditions as Lessor may in its discretion reasonably impose or
(d) any combination of the foregoing. Unless Lessor notifies Lessee in writing
of a contrary election within thirty (30) days of Lessee's request or unless
Lessor is required to consent thereto pursuant to this Section 9.2.3, Lessor
shall be deemed to have denied the request for the Capital Addition or Material
Structural Work. In the event and to the extent Lessor has granted permission
for the construction of the applicable Capital Addition or Material Structural
Work and (b) Lessor has not offered to finance the construction of the same or
(y) Lessee declines to accept the financing offered by Lessor, Lessee may
separately finance such construction, subject to the limitation on Liens set
forth in Section 9.2.1, or pay for such construction itself. In the event
Lessee declines to accept the financing offered by Lessor or if Lessor has not
offered such financing to Lessee and proposes to obtaining financing from
another Person, Lessee shall inform Lessor in writing of the terms and
conditions of such financing and shall provide Lessor with a copy of a
commitment letter evidencing the same and Lessor may, by giving notice thereof
to Lessee within twenty (20) days following being so informed, elect to provide
financing to Lessee at the effective rate of interest as such financing. Lessor
shall not unreasonably withhold its permission for the construction of Material
Structural Work which is necessary to protect the safety or welfare of residents
of the Facility.
9.2.4 LESSOR MAY ELECT TO FINANCE CAPITAL ADDITIONS. If Lessor elects
to offer financing for the proposed Capital Addition and Lessee accepts
Lessor's financing proposal, the provisions of Section 9.3 shall apply.
43
9.3 CAPITAL ADDITIONS FINANCED BY LESSOR.
9.3.1 ADVANCES. All advances of funds for any such financing shall be
made in accordance with Lessor's then standard construction loan
requirements and procedures, which may include, without limitation, the
requirements and procedures applicable to Work under Sections 13.1.3 and
13.1.4.
9.3.2 LESSOR' S GENERAL REQUIREMENTS. If Lessor agrees to finance the
proposed Capital Addition and Lessee accepts Lessor's proposal therefor, in
addition to all other items which Lessor or any applicable Financing Party
may reasonably require, Lessee shall provide to Lessor the following:
(a) prior to any advance of funds, (i) any information, opinions,
certificates, Permits or documents reasonably requested by Lessor or
any applicable Financing Party which are necessary to confirm that
Lessee is reasonably expected to be able to use the Capital Addition
upon completion thereof in accordance with the Primary Intended Use
and/or, if applicable, the Other Permitted Uses and (ii) evidence
satisfactory to Lessor and any applicable Financing Party that all
Permits required for the construction and use of the Capital Addition
have been received, are in full force and effect and are not subject
to appeal, except only for those Permits which cannot in the normal
course be obtained prior to commencement or completion of the
construction; PROVIDED, THAT Lessor and any applicable Financing Party
are furnished with reasonable evidence that the same is reasonably
expected to be available in the normal course of business without
unusual condition;
(b) prior to any advance of funds, an Officer's
Certificate and, if requested, a certificate from Lessee's architect,
setting forth in reasonable detail the projected (or actual, if
available) Capital Addition Cost;
(c) bills of sale, instruments of
transfer and other documents required by Lessor so as to vest title to
the Capital Addition in Lessor free and clear of all Liens (except to
the extent a Lien is being duly contested in accordance with the terms
and provisions of this Lease), and amendments to this Lease and any
recorded notice or memorandum thereof, duly executed and acknowledged,
in form and substance reasonably satisfactory to Lessor, providing for
any changes required by Lessor including, without limitation,
44
changes in the Base Rent and the legal description of the Land;
(d) upon payment therefor, a deed conveying to Lessor title to
any land acquired for the purpose of constructing the Capital Addition
("Additional Land") free and clear of any Liens except those approved
by Lessor;
(e) upon completion of the Capital Addition, a final as built
survey thereof reasonably satisfactory to Lessor, if required by
Lessor;
(f) during and following the advance of funds and the completion
of the Capital Addition, endorsements to any outstanding policy of
title insurance covering the Leased Property satisfactory in form and
substance to Lessor (i) updating the same without any additional
exception except as may be reasonably permitted by Lessor and (ii)
increasing the coverage thereof by an amount equal to the Fair Market
Value of the Capital Addition and/or increasing the coverage thereof
by an amount equal to the Fair Market Value of the Additional Land and
including the Additional Land in the premises covered by such title
insurance policy;
(g) simultaneous with the initial advance of funds, if
appropriate, (i) an owner's policy of title insurance insuring fee
simple title to any Additional Land conveyed to Lessor pursuant to
subparagraph (d) free and clear of all Liens except those approved by
Lessor and (ii) an owner's policy of title insurance reasonably
satisfactory in form and substance to Lessor and a lender's policy of
title insurance reasonably satisfactory in form and substance to any
applicable Financing Party;
(h) following the completion of the Capital Addition, if
reasonably deemed necessary by Lessor, an appraisal of the Leased
Property by an M.A.I. appraiser acceptable to Lessor, which states
that the Fair Market Value of the Leased Property upon completion of
the Capital Addition exceeds the Fair Market Value of the Leased
Property prior to the commencement of such Capital Addition by an
amount not less than one hundred twenty-five percent (125%) of the
Capital Addition Cost;
(i) and during or following the advancement of funds, prints of
architectural and engineering drawings relating to the Capital
Addition and such other materials, including, without limitation, the
45
modifications to outstanding policies of title insurance contemplated
by subsection (f) above, opinions of counsel, appraisals, surveys,
certified copies of duly adopted resolutions of the board of directors
of Lessee authorizing the execution and delivery of the lease
amendment and any other documents and instruments as may be reasonably
required by Lessor and any applicable Financing Party.
9.3.3 PAYMENT OF COSTS. By virtue of making a request to finance a
Capital Addition, whether or not such financing is actually consummated,
Lessee shall be deemed to have agreed to pay, upon demand, all costs and
expenses reasonably incurred by Lessor and any Person participating with
Lessor in any way in the financing of the Capital Addition Cost, including,
but not limited to (a) fees and expenses of their respective attorneys, (b)
all photocopying expenses, if any, (c) the amount of any filing,
registration and recording taxes and fees, (d) documentary stamp taxes and
intangible taxes (e) title insurance charges and appraisal fees.
9.4 GENERAL LIMITATIONS. Without in any way limiting Lessor's options
with respect to proposed Capital Additions or Material Structural Work: (a)
no Capital Addition or Material Structural Work shall be completed that
could, upon completion, significantly alter the character or purpose or
detract from the value or operating efficiency of the Leased Property, or
significantly impair the revenue-producing capability of the Leased
Property, or adversely affect the ability of Lessee to comply with the
terms of this Lease; (b) no Capital Addition or Material Structural Work
shall be completed which would tie in or connect any Leased Improvements on
the Leased Property with any other improvements on property adjacent to the
Leased Property (and not part of the Land covered by this Lease) including,
without limitation, tie-ins of buildings or other structures or utilities,
unless Lessee shall have obtained the prior written approval of Lessor,
which approval may be withheld in Lessor's sole and absolute discretion and
(c) all proposed Capital Additions and Material Structural Work shall be
architecturally integrated and consistent with the Leased Property.
9.5 NON-CAPITAL ADDITIONS. Lessee shall have the obligation and
right to make repairs, replacements and alterations which are not Capital
Additions as required by the other Sections of this Lease, but in so doing,
Lessee shall always comply with and satisfy the conditions of Section 9.4.
Lessee shall have the right, from time to time, to make additions,
modifications or improvements to the Leased Property which do not
constitute Capital Additions or Material Structural Work as it may deem to
be desirable or necessary for its uses and purposes, subject to the same
limits and conditions imposed under
46
Section 9.4. The cost of any such repair, replacement, alteration,
addition, modification or improvement shall be paid by Lessee and the
results thereof shall be included under the terms of this Lease and become
a part of the Leased Property, without payment therefor by Lessor at any
time. Notwithstanding the foregoing, all such additions, modifications and
improvements which affect the structure of any of the Leased Improvements,
or which involve the expenditure of more than FIFTY THOUSAND DOLLARS
($50,000.00), shall be undertaken only upon compliance with the provisions
of Section 13.1.3, all applicable Legal Requirements and all other
applicable requirements of this Lease; PROVIDED, HOWEVER, that in the event
of a bona fide emergency during which Lessee is unable to contact the
appropriate representatives of Lessor, Lessee may commence such additions,
modifications and improvements as may be necessary in order to address such
emergency without Lessor's prior approval, as long as Lessee immediately
thereafter advises Lessor of such emergency and the nature and scope of the
additions, modifications and improvements performed and obtains Lessor's
approval of the remaining work to be completed. Any such addition,
modification and improvement which affects the structure of any of the
Leased Improvements which is not a Capital Addition or Material Structural
Work shall be exempt from the requirements of Section 9.2 hereof.
9.6 COMPENSATION TO LESSEE FOR CAPITAL ADDITIONS PAID FOR OR FINANCED BY
LESSEE. Upon the expiration or earlier termination of this Lease, except by
reason of the default by Lessee hereunder, Lessor shall compensate Lessee for
all Capital Additions paid for or financed lay Lessee in any of the following
ways, determined in the sole discretion of Lessor:
(a) By purchasing all Capital Additions paid for or financed by Lessee from
Lessee for cash in the amount of the Fair Market Added Value (determined as of
the date of such purchase) of all such Capital Additions paid for or financed by
Lessee or
(b) By purchasing such Capital Addition from Lessee by delivering to Lessee
Lessor's purchase money promissory note in the amount of said Fair Market Added
Value, due and payable no later than eighteen (18) months after the date of
expiration or other termination of this Lease, bearing interest at a rate equal
to one hundred ten percent (110%) of the applicable federal rate (determined at
the time of execution of such note pursuant to Section 1274 of the Code or any
successor section thereto), compounded semiannually, or, if no such rate exists,
or such rate is in excess of that permitted under applicable law, at the Prime
Rate, which interest shall be payable monthly, and which note shall be secured
by a mortgage on the Leased Property, subject to all Liens on the Leased
Property at the time of such purchase; or
(c) By Lessor assigning to Lessee under appropriate written instruments the
right to receive an amount equal to the Added
47
Value Percentage (determined as of the expiration of earlier termination of this
Lease) from all rent and other consideration receivable by Lessor under any re-
letting or other disposition of the Leased Property, after deducting all costs
and expenses incurred by Lessor in connection with such re-letting or other
disposition of the leased Property and all costs and expenses of operating and
maintaining the Leased Property during any such new lease which are not borne by
the tenant thereunder. The provisions of this Subparagraph (c) shall remain in
effect until the sale or other final disposition of the Leased Property in which
event Lessor shall pay to Lessee the outstanding balance of the Fair Market
Added Value in accordance with Subparagraph (a), (b), or (d) of this Section
9.6, after deducting any amounts received by Lessee under this Subparagraph (c);
or
(d) Such other arrangement regarding such compensation as shall be mutually
acceptable to Lessor and Lessee.
ARTICLE 10
WARRANTIES AND REPRESENTATIONS
10.1 REPRESENTATIONS AND WARRANTIES. Lessee hereby represents and warrants
to, and covenants and agrees with, Lessor that:
10.1.1 EXISTENCE; POWER; QUALIFICATION.
Lessee is a corporation duly organized, validly existing and in good
standing under the laws of the State of Washington. Lessee has all
requisite corporate power to own and operate its properties and to carry on
its business as now conducted and is duly qualified to transact business
and is in good standing in each jurisdiction where such qualification is
necessary or desirable in order to carry out its business as presently
conducted. As of the date of this Agreement, Lessee does not have any
Subsidiaries and Lessee is not a member of any partnership or joint
venture. Attached hereto as EXHIBIT C is a true and correct list of all of
the shareholders of Lessee and their respective ownership interests in
Lessee;
10.1.2 VALID AND BINDING. Lessee is duly authorized to make and enter
into all of the Lease Documents to which Lessee is a party and to carry out
the transactions contemplated therein. All of the Lease Documents to which
Lessee is a party have been duly executed and delivered by Lessee, and each
is a legal, valid and binding obligation of Lessee, enforceable in
accordance with its terms.
48
10.1.3 SINGLE PURPOSE. Lessee is, and during the entire time that this
Lease remains in force and effect shall be, engaged in no business, trade
or activity other than the operation and development of the Leased Property
for the Primary Intended Use and such other activities in which Lessee may
be permitted to engage by the provisions of Meditrust/Emeritus Transaction
Documents. The fiscal year of Lessee, and the Guarantor is the Fiscal
Year.
10.1.4 NO VIOLATION. The execution, delivery and performance of the
Lease Documents by the members of the Leasing Group and the consummation by
the members of the Leasing Group of the transactions thereby contemplated
shall not result in any breach of, or constitute a default under, or result
in the acceleration of, or constitute an event which, with the giving of
notice or the passage of time, or both, could result in default or
acceleration of any obligation of any such member of the Leasing Group
under any of the Permits or Contracts or any other contract, mortgages
lien, lease, agreement, instrument, franchise, arbitration award, judgment,
decree, bank loan or credit agreement, trust indenture or other instrument
to which any member of the Leasing Group is a party or by which any member
of the Leasing Group may be bound or affected and do not violate or
contravene any Legal Requirement.
10.1.5 CONSENTS AND APPROVALS. Except as already obtained or filed, as
the case may be, no consent or approval or other authorization of, or
exemption by, or declaration or filing with, any Person and no waiver of
any right by any Person is required to authorize or permit, or is otherwise
required as a condition of the execution, delivery and performance of its
obligations under the Lease Documents by any member of the Leasing Group or
as a condition to the validity (assuming the due authorization, execution
and delivery by Lessor of the Lease Documents to which it is a party) and
the first priority of any Liens granted under the Lease Documents, except
the filing of the Financing Statements.
10.1.6 NO LIENS OR INSOLVENCY PROCEEDINGS. Each member of the Leasing
Group in existence as of the date hereof is financially solvent and there
are no actions, suits, investigations or proceedings including, without
limitation, outstanding federal or state tax liens, garnishments or
insolvency or bankruptcy proceedings, pending or, to the best of Lessee's
knowledge and belief, threatened:
(a)against or affecting any member of the Leasing Group, which if
adversely resolved to such
49
member of the Leasing Group, would materially adversely affect the
ability of any of the foregoing to perform their respective
obligations under the Lease Documents;
(b) against or affecting the Leased Property or the ownership,
construction, development, maintenance, management, repair, use,
occupancy, possession or operation thereof; or
(c) which may involve or affect the validity, priority or
enforceability of any of the Lease Documents, at law or in equity, or
before or by any arbitrator or Governmental Authority.
10.1.7 INTENTIONALLY DELETED.
10.1.8 COMMERCIAL ACTS. Lessee's performance of and compliance with
the obligations and conditions set forth herein and in the other Lease
Documents will constitute commercial acts done and performed for commercial
purposes.
10.1.9 ADEQUATE CAPITAL, NOT INSOLVENT. After giving effect to the
consummation of the transactions contemplated by the Lease Documents, each
member of the Leasing Group:
(a) will be able to pay its debts as they become due;
(b) will have sufficient funds or available capital to carry on
its business as now conducted or as contemplated to be conducted (in
accordance with the terms of the Lease Documents); and
(c) will not be rendered insolvent as determined by applicable
law.
10.1.10 NOT DELINQUENT. Except as permitted under Section 11.3.8, no
member of the Leasing Group which exists as of the date hereof is
delinquent or claimed to be delinquent under any obligation for the payment
of borrowed money.
10.1.11 NO AFFILIATE DEBT. Lessee has not created, incurred,
guaranteed, endorsed, assumed or suffered to exist any liability (whether
direct or contingent) for borrowed money from the Guarantor (or any of its
Affiliates) or any Affiliate of Lessee which has not been fully
subordinated to the Lease Obligations.
10.1.12 TAXES CURRENT. Each member of the Leasing Group which exists
as of the date hereof has filed
50
all federal, state and local tax returns which are required to be filed as
to which extensions are not currently in effect and has paid all taxes,
assessments, impositions, fees and other governmental charges (including
interest and penalties) which have become due pursuant to such returns or
pursuant to any assessment or notice of tax claim or deficiency received by
each such member of the Leasing Group. No tax liability has been asserted
by the Internal Revenue Service against any member of the Leasing Group or
any other federal, state or local taxing authority for taxes, assessments,
impositions, fees or other governmental charges (including interest or
penalties thereon) in excess of those already paid.
10.1.13 FINANCIALS COMPLETE AND ACCURATE. The financial statements
of each member of the Leasing Group given to Lessor in connection with the
execution and delivery of the Lease Documents were true, complete and
accurate, in all material respects, and fairly presented the financial
condition of each such member of the Leasing Group as of the date thereof
and for the periods covered thereby, having been prepared in accordance
with GAAP and such financial statements disclosed all liabilities,
including, without limitation, contingent liabilities, of each such member
of the Leasing Group as of the date thereof. There has been no material
adverse change since such date with respect to the Net Worth of any such
member of the Leasing Group or with respect to any other matters contained
in such financial statements, nor have any additional material liabilities,
including, without limitation, contingent liabilities, of any such member
of the Leasing Group arisen or been incurred or asserted since such date
except as otherwise disclosed to Lessor. The projections heretofore
delivered to Lessor continue to be reasonable (with respect to the material
assumptions upon which such projections are based) and Lessee reasonably
anticipates based on information currently available to it after due
inquiry the results projected therein will be achieved, there having been
(a) no material adverse change in the business, assets or condition,
financial or otherwise of any such member of the Leasing Group or the
Leased Property and (b) no material depletion of the cash or decrease in
working capital of any such member of the Leasing Group.
10.1.14 PENDING ACTIONS, NOTICES AND REPORTS.
(a) There is no action or investigation pending or, to the best
knowledge and belief of Lessee, threatened, anticipated or
contemplated (nor, to the knowledge of Lessee, is there any reasonable
basis therefor) against or affecting the Leased Property or any member
of the Leasing Group (or any Affiliate thereof) before any
Governmental
51
Authority, which could prevent or hinder the consummation of the
transactions contemplated hereby or call into question the validity of
any of the Lease Documents or any action taken or to be taken in
connection with the transactions contemplated thereunder or which in
any single case or in the aggregate might result in any material
adverse change in the business, prospects, condition, affairs of any
member of the Leasing Group or the Leased Property (including, without
limitation, any action to revoke, withdraw or suspend any Permit
necessary or desirable for the operation of the Leased Property in
accordance with its Primary Intended Use and any action to transfer or
relocate any such Permit to a location other than the Leased Property)
or any material impairment of the right or ability of any member of
the Leasing Group to carry on its operations as presently conducted or
proposed to be conducted with respect to the Leased Property or with
respect to its obligations under the Lease Documents.
(b) Neither the Facility nor any member of the Leasing Group has
received any notice of any claim, requirement or demand of any
Governmental Authority, or any insurance body having or claiming any
licensing, certifying, supervising, evaluating or accrediting
authority over the Leased Property to rework or redesign the Leased
Property, its professional staff or its professional services,
procedures or practices in any material respect or to provide
additional furniture, fixtures, equipment or inventory or to otherwise
take action so as to make the Leased Property conform to or comply
with any Legal Requirement;
(c) The most recent utilization reviews, if any, relating to the
Leased Property by all applicable Governmental Authorities and all
applicable reviews or scrutiny by any managed care or utilization
review companies, if any, have not had a material adverse impact on
the utilization of units or programs at any of the Leased Property.
No claims or assertions have been made in any utilization review that
any of the practices or procedures used at the Leased Property are
improper or inappropriate other than such claims or assertions which
singly and in the aggregate will not have a material adverse impact on
the Leased Property; and
(d) Lessee has delivered or caused to be delivered to Lessor true
and correct copies of all licenses, inspection surveys and
accreditation reviews, if any, relating to the Leased Property, issued
by any Governmental Authority during the most recent licensing period,
together with all plans of correction relating thereto.
52
10.1.15 COMPLIANCE WITH LEGAL AND OTHER REQUIREMENTS.
(a) Lessee and the Leased Property and the ownership, construction,
development, maintenance, management, repair, use, occupancy, possession and
operation thereof comply with all applicable Legal Requirements and there is no
claim of any violation thereof known to Lessee. Without limiting the foregoing,
Lessee has obtained all Permits that are necessary or desirable to operate the
Leased Property in accordance with its Primary Intended Use.
(b) Except as previously delivered to Lessor pursuant to Section
10.1.14(d) hereof, there are no outstanding notices of deficiencies, notices of
proposed action or orders of any kind relating to the Leased Property, if any,
issued by any Governmental Authority requiring conformity to any of the
applicable Legal Requirements.
10.1.16 NO ACTION BY GOVERNMENTAL AUTHORITY. There is no action pending
or, to the best knowledge and belief of Lessee, recommended, by any Governmental
Authority to revoke, repeal, cancel, modify, withdraw or suspend any Permit or
Contract or to take any other action of any other type which could have a
material adverse effect on the Leased Property.
10.1.17 PROPERTY MATTERS.
(a) The Leased Property is free and clear of agreements, covenants and
Liens, except those agreements, covenants and Liens to which this Lease is
expressly subject, whether presently existing, as are listed on EXHIBIT B or
were listed on the UCC lien search results delivered to Lessor at or prior to
the execution and delivery of this Lease (and were not required to be terminated
as a condition of the execution and delivery of this Lease), or which may
hereafter be created in accordance with the terms hereof (collectively referred
to herein as the "Permitted Encumbrances")l and Lessee shall warrant and defend
Lessor's title to the Leased Property against any and all claims and demands of
every kind and nature whatsoever;
(b) There is no Condemnation or similar proceeding pending with respect to
or affecting the Leased Property, and Lessee is not aware, to the best of
Lessee's knowledge and belief, that any such proceeding is contemplated;
(c) No part of the Collateral or the Leased Property has been damaged by
any fire or other casualty. The Leased Improvements are in good operating
condition and repair,
53
ordinary wear and tear excepted, free from known defects in construction or
design;
(d) None of the Permitted Encumbrances has or is likely to have a material
adverse impact upon, nor interfere with or impede, in any material respect, the
operation of the Leased Property in accordance with the Primary Intended Use;
(e) All buildings, facilities and other improvements necessary, both
legally and practically, for the proper and efficient operation of the Facility
are located upon the Leased Property and all real property and personal property
currently utilized by Lessee is included within the definition of the Leased
Property or the Collateral;
(f) The Leased Property abuts on and has direct vehicular access to a
public road or access to a public road via permanent, irrevocable, appurtenant
easements;
(g) The Leased Property constitutes a parcel(s) for real estate tax
purposes separate from any real property that does not constitute a portion of
the Leased Property and no portion of any real property that does not constitute
a portion of the Leased Property is part of the same tax parcel as any part of
the Leased Property;
(h) All utilities necessary for the use and operation of the Facility are
available to the lot lines of the Leased Property:
(i) in sufficient supply and capacity;
(ii) through validly created and existing easements of record
appurtenant to or encumbering the Leased Property (which easements
shall not impede or restrict the operation of the Facility); and
(iii) without need for any Permits and/or Contracts to be issued by
or entered into with any Governmental Authority, except as already
obtained or executed, as the case may be, or as otherwise shown to the
satisfaction of Lessor to be readily obtainable; and
(iv) Lessee has made no structural alterations or improvements to any
of the Leased Improvements that changed the foot print of any of the
Leased Improvements, added an additional story to any of the Leased
Improvements, decreased the amount of parking available on the Leased
Property or otherwise involved any alteration which would be regulated
by applicable zoning requirements, in each case without the express
written consent of Lessor. Except for
54
matters which have been disclosed to Lessor or concerning which Lessor has
independent actual knowledge, Lessee has no actual knowledge of any such
structural alteration or improvement made to any of the Leased Improvements
during the last ten (10) years and has no knowledge of any such structural
alteration or renovation made to any of the Leased Improvements or any such
decrease in parking during such period.
10.1.18 THIRD PARTY PAYOR AGREEMENTS. Neither Lessee nor the Facility is
qualified as a provider of services under or participates in any Third Party
Payor Programs and neither Lessee nor the Facility is accredited by any
Accreditation Body.
10.1.19 RATE LIMITATIONS. The State currently imposes no restrictions or
limitations on rates which may be charged to private pay residents receiving
services at the Facility.
10.1.20 FREE CARE. There are no Contracts, Permits or applicable Legal
Requirements which require that, a percentage of units in any program at the
Facility be reserved for Medicaid or Medicare eligible residents or that the
Facility provide a certain amount of welfare, free or charity care or discounted
or government assisted resident care.
10.1.21 NO PROPOSED CHANGES. Lessee has no actual knowledge of any
applicable Legal Requirements which have been enacted, promulgated or issued
within the eighteen (18) months preceding the date of this Lease or any proposed
applicable Legal Requirements currently pending in the State which may
materially adversely affect rates at the Facility (or any program operated by a
member of the Leasing Group in conjunction with the Facility) or may result in
the likelihood of increased competition at the Facility or the imposition of
Medicaid, Medicare, charity, free care, welfare or other discounted or
government assisted residents at the Facility or require that Lessee or the
Facility obtain a certificate of need, Section 1122 approval or the equivalent,
which Lessee or the Facility does not currently possess.
10.1.22 ERISA. No employee pension benefit plan maintained by any member
of the Leasing Group has any accumulated funding deficiency within the meaning
of the ERISA, nor does any member of the Leasing Group have any material
liability to the PBGC established under ERISA (or any successor thereto) in
connection with any employee pension benefit plan (or other class of benefit
which the PBGC has elected to insure), and there have been no
55
reportable events" (not waived) or "prohibited transactions" with respect to any
such plan, as those terms are defined in Section 4043 of ERISA and Section 4975
of the Internal Revenue Code of 1986, as now or hereafter amended, respectively.
10.1.23 NO BROKER. No member of the Leasing Group nor any of their
respective Affiliates has dealt with any broker or agent in connection with the
transactions contemplated by the Lease Documents.
10.1.24 NO IMPROPER PAYMENTS. No member of the Leasing Group nor any of
their respective Affiliates has:
(a) made any contributions, payments or gifts of its funds or property to
or for the private use of any government official, employee, agent or other
Person where either the payment or the purpose of such contribution, payment or
gifts is illegal under the laws of the United States, any state thereof or any
other jurisdiction (foreign or domestic);
(b) knowingly established or maintained any unrecorded fund or asset for
any purpose or knowingly made any false or artificial entries on any of its
books or records for any reason;
(c) made any payments to any Person with the intention or understanding
that any part of such payment was to be used for any other purpose other than
that described in the documents supporting the payment; or
(d) made any contribution, or reimbursed any political gift or contribution
made by any other Person, to candidates for public office, whether federal,
state or local, where such contribution would be in violation of applicable law.
10.1.25 NOTHING OMITTED. Neither this Lease, nor any of the other Lease
Documents, nor any certificate, agreement, statement or other document,
including, without limitation, any financial statements concerning the financial
condition of any member of the Leasing Group, furnished to or to be furnished to
Lessor or its attorneys in connection with the transactions contemplated by the
Lease Documents, contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary in order to
prevent all statements contained herein and therein from being misleading.
There is no fact within the special knowledge of Lessee which has not been
disclosed herein or in writing to Lessor that
56
materially adversely affects, or in the future, insofar as Lessee can reasonably
foresee based on the information currently available to it after due inquiry,
may materially adversely affect the business, properties, assets or condition,
financial or otherwise, of any member of the Leasing Group or the Leased
Property.
10.1.26 NO MARGIN SECURITY. Lessee is not engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation U of the Board of Governors of the Federal Reserve
System), and no part of the proceeds of the Meditrust Investment will be used to
purchase or carry any margin security or to extend credit to others for the
purpose of purchasing or carrying any margin security or in any other manner
which would involve a violation of any of the regulations of the Board of
Governors of the Federal Reserve System. Lessee is not an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
10.1.27 NO DEFAULT. No event or state of facts which constitutes, or
which, with notice or lapse of time, or both, could constitute, a Lease Default
has occurred and is continuing.
10.1.28 PRINCIPAL PLACE OF BUSINESS. The principal place of business and
chief executive office of Lessee is located at Market Place One, 2003 Western
Avenue, Suite 660, Seattle, Washington 98121-2162 (the "Principal Place of
Business").
10.1.29 LABOR MATTERS. There are no proceedings now pending, nor, to the
best of Lessee's knowledge, threatened with respect to the operation of the
Facility before the National Labor Relations Board, State Commission on Human
Rights and Opportunities, State Department of Labor, U.S. Department of Labor or
any other Governmental Authority having jurisdiction of employee rights with
respect to hiring, tenure and conditions of employment, and no member of the
Leasing Group has experienced any material controversy with any Facility
administrator or other employee of similar stature or with any labor
organization which has, or is likely, to have a materially adverse effect upon
the financial condition and/or operations of the Facility.
10.1.30 INTELLECTUAL PROPERTY. Lessee is duly licensed or authorized to
use all (if any) copyrights, rights of reproduction, trademarks, trade names,
trademark applications, service marks, patent applications, patents and patent
license rights, (all whether registered or
57
unregistered, U.S. or foreign), inventions, franchises, discoveries, ideas,
research, engineering, methods, practices, processes, systems, formulae,
designs, drawings, products, projects, improvements, developments, know how
and trade secrets which are used in or necessary for the development and/or
operation of the Facility in accordance with its Primary Intended Use,
without conflict with or infringement of any, and subject to no
restriction, lien, encumbrance, right, title or interest in others.
10.1.31 MANAGEMENT AGREEMENTS. There is no Management Agreement in force
and effect as of the date hereof.
10.2 CONTINUING EFFECT OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained in this Lease and the other Lease
Documents shall constitute continuing representations and warranties which shall
remain true, correct and complete throughout the Term. Notwithstanding the
provisions of the foregoing sentence but without derogation from any other terms
and provisions of this Lease, including, without limitation, those terms and
provisions containing covenants to be performed or conditions to be satisfied on
the part of Lessee, the representations and warranties contained in Sections
10.1.6, 10.1.8, 10.1.10, 10.1.14, 10.1.15, 10.1.17(b), 10.1.17(c), 10.1.17(i),
10.1.18, 10.1.19, 10.1.20, 10.1.21, 10.1.22, 10.1.27, 10.1.29, in the second
sentence of Section 10.1.12, in the second and third sentences of Section
10.1.13 and in the second sentence of Section 10.1.25 shall not constitute
continuing representations and warranties throughout the Term provided, however,
that nothing contained in the first sentence of Section 10.1.25 shall be
construed as imposing any obligation on Lessee to update after the Commencement
Date the information furnished to Lessor prior to the execution and delivery of
this Lease but without derogation of any other obligation Lessee has under this
Lease to provide information to Lessor.
ARTICLE 11
FINANCIAL AND OTHER COVENANTS
11.1 STATUS CERTIFICATES. At any time, and from time to time, upon request
from the other, Lessee and Lessor shall furnish to the other, within ten (10)
Business Days' after receipt of such request, an Officer's Certificate
certifying 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) and the dates to which the Rent has been paid. Any Officer's
Certificate furnished pursuant to this Section at the request of Lessor shall be
addressed to any prospective purchaser or mortgagee of the Leased Property as
58
Lessor may request and may be relied upon by Lessor and any such prospective
purchaser or mortgagee of the Leased Property.
11.2 FINANCIAL STATEMENTS; REPORTS; NOTICE AND INFORMATION.
11.2.1 OBLIGATION TO FURNISH. Lessee will furnish and shall cause to be
furnished to Lessor the following statements, information and other materials:
(a) ANNUAL STATEMENTS. Within ninety (90) days after the end of each
of their respective fiscal years, (i) a copy of the Consolidated Financials
for each of (x) Lessee, (y) the Guarantor and (z) any Sublessee which is an
Affiliate of Lessee for the preceding fiscal year, certified and, in the
case of Guarantor, audited by, and with the unqualified opinion of,
independent certified public accountants acceptable to Lessor and certified
as true and correct by Lessee, the Guarantor or the applicable Sublessee,
as the case may be (and, without limiting anything else contained herein,
the Consolidated Financials for Lessee and for each such Sublessee shall
include a detailed balance sheet for Leased Property as of the last day of
such fiscal year and a statement of earnings from the Leased Property for
such fiscal year showing, among other things, all rents and other income
therefrom and all expenses paid or incurred in connection with the
operation of the Leased Property); (ii) separate statements, certified as
true and correct by Lessee, the Guarantor, any Manager which is an
Affiliate of Lessee and each such Sublessee which is an Affiliate of
Lessee, stating whether, to the best of the signer's knowledge and belief
after making due inquiry, Lessee, the Guarantor, such Manager or any such
Sublessee, as the case may be, is in default in the performance or
observance of any of the terms of this Lease or any of the other Lease
Documents and, if so, specifying all such defaults, the nature thereof and
the steps being taken to immediately remedy the same; (iii) a copy of all
letters from the independent certified accountants engaged to perform the
annual audits referred to above, directed to the management of the
Guarantor regarding the existence of any reportable conditions or material
weaknesses; (iv) a statement certified as true and correct by Lessee
setting forth all Subleases as of the last day of such fiscal year, the
respective areas demised thereunder, the names of the Sublessees
thereunder, the respective expiration dates of the Subleases, the
respective rentals provided for therein, and such other information
pertaining to the Subleases as may be reasonably requested by Lessor; and
(v) evidence satisfactory to Lessor that Lessee has
59
fulfilled its obligation to make the Annual Facility Upgrade Expenditure,
provided, however, that no such evidence shall be required to be submitted
until the fourth lease year.
(b) MONTHLY STATEMENTS OF LESSEE. Within thirty (30) days after the
end of each calendar month during the pendency of this Lease, (i) a
statement certified as true and correct by Lessee setting forth the Gross
Revenues of the Leased Property for the immediately preceding month, (ii)
an unaudited, detailed month and year to date income and expense statement
for the Leased Property which shall include a comparison to corresponding
budget figures, occupancy statistics (including the actual number of
residents, the number of units available and total resident days for such
month) and resident mix breakdowns (for each resident day during such month
classifying residents by the type of care required and source of payment)
and (iii) an express written calculation showing the compliance or non-
compliance, as the case may be, with the specific financial covenants set
forth in Section 11.3 for the applicable period, including, with respect to
the calculation of Lessee's Debt Coverage Ratio, a schedule substantially
in the form attached hereto as EXHIBIT D.
(c) QUARTERLY STATEMENTS. Within thirty (30) days after the end of
each respective fiscal quarter, unaudited Consolidated Financials for each
of (i) Lessee and (ii) each Sublessee which is an Affiliate of Lessee
certified as true and correct by Lessee or such applicable Sublessee, as
the case may be and within thirty (30) days after each calendar quarter,
Lessee shall also provide Lessor with a calculation of the Additional Rent
payable for such quarter.
(d) QUARTERLY STATEMENTS OF THE GUARANTOR. Within forty-five (45)
days after the end of each fiscal quarter, unaudited Consolidated
Financials for the Guarantor certified as true and correct by the
Guarantor.
(e) PERMITS AND CONTRACTS. Within ten (10) days after the issuance
or the execution thereof, as the case may be, true and complete copies of
(i) all Permits which constitute operating licenses for the Facility issued
by any Governmental Authority having jurisdiction over assisted living
matters and (ii) Contracts (involving payments in the aggregate in excess
of $100,000 per annum), including, without limitation, all Provider
Agreements.
60
(f) CONTRACT NOTICES. Promptly but in no event more than ten (10)
days after the receipt thereof, true and complete copies of any notices,
consents, terminations or statements of any kind or nature relating to any
of the Contracts (involving payments in the aggregate in excess of ONE
HUNDRED THOUSAND DOLLARS ($100,000) per annum) other than those issued in
the ordinary course of business.
(g) PERMIT OR CONTRACT DEFAULTS. Promptly but in no event more than
ten (10) days after the receipt thereof, true and complete copies of all
surveys, follow-up surveys, licensing surveys, complaint surveys,
examinations, compliance certificates, inspection reports, statements other
than those statements that are issued in the ordinary course of business),
if any, terminations and notices of any kind (other than those notices that
are furnished in the ordinary course of business) issued or provided to
Lessee, the Manager or any Sublessee by any Governmental Authority,
Accreditation Body or any Third Party Payor, including, without limitation,
any notices pertaining to any delinquency in, or proposed revision of,
Lessee's, the Manager's or any Sublessee's obligations under the terms and
conditions of any Permits or Contracts now or hereafter issued by or
entered into with any Governmental Authority, Accreditation Body or Third
Party Payor and the responses) thereto made by or on behalf of Lessee, the
Manager or any Sublessee.
(h) OFFICIAL REPORTS. Upon completion or filing thereof, complete
copies of all applications (other than those that are furnished in the
ordinary course of business), notices (other than those that are furnished
in the ordinary course of business), statements, annual reports, cost
reports and other reports or filings of any kind (other than those that are
furnished in the ordinary course of business) provided by Lessee, the
Manager or any Sublessee to any Governmental Authority, Accreditation Body
or any Third Party Payor with respect to the Leased Property.
(i) OTHER INFORMATION. With reasonable promptness, such other
information as Lessor may from time to time reasonably request respecting
(i) the financial condition and affairs of each member of the Leasing Group
and the Leased Property and (ii) the licensing and operation of the Leased
Property; including, without limitation, financial statements, certificates
and consents from accountants and all other financial and
licensing/operational information
61
as may be required or requested by any Governmental Authority.
(j) DEFAULT CONDITIONS. As soon as possible, and in any event within
five (5) days after the occurrence of any Lease Default, or any event or
circumstance which, with the giving of notice or the passage of time, or
both, would constitute a Lease Default, a written statement of Lessee
setting forth the details of such Lease Default, event or circumstance and
the action which Lessee proposes to take with respect thereto.
(k) OFFICIAL ACTIONS. Promptly but in no event more than ten (10)
days after the commencement thereof, notice of all actions, suits and
proceedings before any Governmental Authority or Accreditation Body which
could have a material adverse effect on any member of the Leasing Group or
the Leased Property.
(l) AUDIT REPORTS. Promptly but in no event more than ten (10) days
after receipt, a copy of all audits or reports submitted to Lessee by any
independent public accountant in connection with any annual, special or
interim audits of the books of Lessee and if requested by Lessor, any
letter of comments directed by such accountant to the management of Lessee.
(m) ADVERSE DEVELOPMENTS. Promptly but in no event more than ten
(10) days after Lessee acquires knowledge thereof, written notice of:
(i) the potential termination of any Permit or Provider Agreement
necessary for the operation of the Leased Property;
(ii) any loss, damage or destruction to or of the Leased Property in
excess of TWENTY FIVE THOUSAND DOLLARS ($25,000) (regardless of
whether the same is covered by insurance);
(iii) any material controversy involving Lessee or any Sublessee which
is an Affiliate of Lessee and (x) Facility administrator or
Facility employee of similar stature or (y) any labor
organization or (z) the Manager or any employee of the Manager
which has, or is reasonably likely to have, a materially adverse
effect on the financial condition and/or operations of the
Facility;
62
(iv) any controversy that calls into question the eligibility of the
Facility for the participation in any Medicaid, Medicare or other
Third Party Payor Program in which the Facility is participating;
(v) any refusal of reimbursement by any Third Party Payor which,
singularly or together with all other such refusals by any Third
Party Payors, could reasonably be expected to have a material
adverse effect on the financial condition of Lessee or any
Sublessee which is an Affiliate of Lessee; and
(vi) any fact within the special knowledge of any member of the
Leasing Group, or any other development in the business or
affairs of any member of the Leasing Group, which could
reasonably be expected to be materially adverse to the business,
properties, assets or condition, financial or otherwise, of any
member of the Leasing Group or the Leased Property.
(n) RESPONSES TO INSPECTION REPORTS. Within thirty (30) days after
receipt of an inspection report relating to the Leased Property from
Lessor, a written response describing in detail prepared plans to address
concerns raised by the inspection report.
(o) PUBLIC INFORMATION. Upon the completion or filing, mailing or
other delivery thereof, complete copies of all financial statements,
reports, notices and proxy statements, if any, sent by any member of the
Leasing Group which is a publicly held corporation) to its shareholders and
of all reports, if any, filed by any member of the Leasing Group (which is
a publicly held corporation) with any securities exchange or with the
Securities Exchange Commission.
(p) ANNUAL BUDGETS. Prior to the end of each Fiscal Year, Lessee any
Sublessee which is an Affiliate of Lessee and/or any manager which is an
Affiliate of Lessee shall submit to Lessor a preliminary annual financial
budget for the Facility for the next Fiscal Year, a preliminary capital
expenditures budget for the Facility for the next Fiscal Year and a report
detailing the capital expenditures made in the then current Fiscal Year and
on or before the end of the first month of each Fiscal Year, Lessee, any
such Sublessee and/or any such
63
Manager shall submit to Lessor revised finalized versions of such budgets
and report.
(q) WORKING CAPITAL LOAN. Promptly after receipt thereof, copies of
any notices with respect to default from a lender of a Working Capital
Loan.
11.2.2 RESPONSIBLE OFFICER. Any certificate, instrument, notice, or
other document to be provided to Lessor hereunder by any member of the Leasing
Group shall be signed by an executive officer of such member (in the event that
any of the foregoing is not an individual), having a position of Vice President
or higher and with respect to financial matters, any such certificate,
instrument, notice or other document shall be signed by the chief financial
officer of such member.
11.2.3 NO MATERIAL OMISSION. No certificate, instrument, notice or
other document, including without limitation, any financial statements furnished
or to be furnished to Lessor pursuant to the terms hereof or of any of the other
Lease Documents shall contain any untrue statement of a material fact or shall
omit to state any material fact necessary in order to prevent all statements
contained therein from being misleading.
11.2.4 CONFIDENTIALITY. Lessor shall afford any information received
pursuant to the provisions of the Lease Documents the same degree of
confidentiality that Lessor affords similar information proprietary to Lessor;
PROVIDED, HOWEVER, that Lessor shall have the unconditional right to (a)
disclose any such information as Lessor deems necessary or appropriate in
connection with any sale, transfer, conveyance, participation or assignment of
the Leased Property or any of the Lease Documents or any interest therein and
(b) use such information in any litigation or arbitration proceeding between
Lessor and any member of the Leasing Group. Without limiting the foregoing,
Lessor may also utilize any information furnished to it hereunder as and to the
extent (i) counsel to Lessor determines that such utilization is necessary
pursuant to 15 U.S.C. 77a-77aa or 15 U.S.C. 78a-78jj and the rules and
regulations promulgated thereunder, (ii) Lessor is required or requested by any
Governmental Authority to disclose any such information and/or (iii) Lessor is
requested to disclose any such information by any of the Meditrust Entities,
lenders or potential lenders. Lessor shall not be liable in any way for any
subsequent disclosure of such information by any Person to which Lessor has
provided such information in accordance with the terms hereof. Nevertheless, in
connection with any such disclosure, Lessor shall inform the recipient of any
such information of the confidential nature
64
thereof. Lessor shall observe any prohibitions or limitations on the disclosure
of any such information under applicable confidentiality law or regulations, to
the extent that the same are applicable to such information.
11.3 FINANCIAL COVENANTS. Lessee covenants and agrees that, throughout the
Term and as long as Lessee is in possession of the Leased Property:
11.3.1 DEBT COVERAGE RATIO OF LESSEE. From and after the second
anniversary of the date hereof until the fourth anniversary hereof, Lessee shall
maintain with respect to the Facility and all other Group Two Acquisition.
Facilities for each Fiscal Quarter an aggregate Debt Coverage Ratio equal to or
greater than 1.1 to 1 and from and after the fourth anniversary hereof and for
the remainder of the Term, Lessee shall maintain with respect to the Facility
and all other Group Two Acquisition Facilities each Fiscal Quarter an aggregate
Debt Coverage Ratio equal to or greater than 1.2 to 1.
11.3.2 INTENTIONALLY DELETED.
11.3.3 INTENTIONALLY DELETED.
11.3.4 INTENTIONALLY DELETED.
11.3.5 CURRENT RATIO - GUARANTOR. From and after December 31, 1999 and
for the remainder of the Term, the Guarantor shall maintain a ratio of
Consolidated Current Assets to Consolidated Current Liabilities equal to or
greater than 1 to 1 as of the end of each fiscal year.
11.3.6 INTENTIONALLY DELETED.
11.3.7 NET WORTH - GUARANTOR. The Guarantor shall maintain, at all
times, a Net Worth of not less than TWENTY MILLION DOLLARS ($20,000,000).
11.3.8 NO INDEBTEDNESS. Lessee shall not create, incur, assume or
suffer to exist any liability for borrowed money except (i) Indebtedness to
Lessor under the Lease Documents and, (ii) Impositions allowed pursuant to the
provisions of the Lease, (iii) unsecured normal trade debt incurred upon
customary terms in the ordinary course of business, (iv) Indebtedness created in
connection with any financing of any Capital Addition, PROVIDED, THAT each such
financing has been approved by Lessor in accordance with the terms of Article 9
hereof, (v) Indebtedness to any Affiliate, PROVIDED, THAT, such Indebtedness is
fully subordinated to this Lease pursuant to the Affiliated Party Subordination
Agreement, (vi) other Indebtedness of Lessee
65
in the aggregate amount not to exceed TWO HUNDRED THOUSAND DOLLARS ($200,000)
incurred, for the exclusive use of the Leased Property, on account of purchase
money indebtedness or finance lease arrangements, each of which shall not exceed
the fair market value of the assets or property acquired or leased and shall not
extend to any assets or property other than those purchased or leased and
purchase money security interests in equipment and equipment leases which comply
with the provisions of Section 6.1.2 and (vii) Indebtedness specifically
permitted by the Meditrust Emeritus Transaction Documents.
11.3.9 NO GUARANTIES. Lessee shall not assume, guarantee, endorse,
contingently agree to purchase or otherwise become directly or contingently
liable (including, without limitation, liable by way of agreement, contingent or
otherwise, to purchase, to provide funds for payment, to supply funds to or
otherwise to invest in any debtor or otherwise to assure any creditor against
loss) in connection with any Indebtedness of any other Person, except by the
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business and except for a guaranty of the
Indebtedness of the Guarantor in connection with a Working Capital Loan which
expressly limits recourse under such guaranty to the Receivables.
11.4 AFFIRMATIVE COVENANTS. Lessee covenants and agrees that throughout
the Term and any periods thereafter that Lessee remains in possession of the
Leased Property:
11.4.1 MAINTENANCE OF EXISTENCE. If Lessee is a corporation, trust or
partnership, during the entire time that this Lease remains in full force and
effect, Lessee shall keep in effect its existence and rights as a corporation,
trust or partnership under the laws of the state of its incorporation or
formation and its right to own property and transact business in the State.
11.4.2 MATERIALS. Except as provided in Section 6.1.2, Lessee shall not
suffer the use in connection with any renovations or other construction relating
to the Leased Property of any materials, fixtures or equipment intended to
become part of the Leased Property which are purchased upon lease or conditional
bill of sale or to which Lessee does not have absolute and unencumbered title,
and Lessee covenants to cause to be paid punctually all sums becoming due for
labor, materials, fixtures or equipment used or purchased in connection with any
such renovations or construction, subject to Lessee's right to contest to the
extent provided for in Article 15.
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11.4.3 COMPLIANCE WITH LEGAL REQUIREMENTS AND APPLICABLE AGREEMENTS.
Lessee and the Leased Property and all uses thereof shall comply with (i)
all applicable Legal Requirements (except to the extent being duly
contested in accordance with the terms hereof), (ii) all Permits and
Contracts, (iii) all Insurance Requirements, (iv) the Lease Documents, (v)
the Permitted Encumbrances and (vi) the Appurtenant Agreement.
11.4.4 BOOKS AND RECORDS. Lessee shall cause to be kept and
maintained, and shall permit Lessor and its representatives to inspect at
all reasonable times and upon reasonable notice, accurate books of accounts
in which complete entries will be made in accordance with GAAP reflecting
all financial transactions of Lessee (showing, without limitation, all
materials ordered and received and all disbursements, accounts payable and
accounts receivable in connection with the operation of the Leased
Property).
11.4.5 PARTICIPATION IN THIRD PARTY PAYOR PROGRAMS. If Lessee or a
Sublessee which is an Affiliate of Lessee elects to participate in Third
Party Payor Programs, Lessee or such Sublessee shall remain eligible to
participate in such Third Party Payor Programs in accordance with all
requirements thereof (including, without limitation, all applicable
Provider Agreements), if and to the extent remaining eligible shall be
necessary for the prudent operation of the Facility in the good faith
exercise of commercially reasonable business judgment.
11.4.6 CONDUCT OF ITS BUSINESS. Lessee will maintain, and cause any
Sublessee and any Manager to maintain, experienced and competent
professional management with respect to its business and with respect to
the Leased Property. Lessee, any Sublessee and any Manager shall conduct,
in the ordinary course, the operation of the Facility, and Lessee and any
Sublessee which is an Affiliate of Lessee shall not enter into any other
business or venture during the Term or such time as Lessee or any such
Sublessee is in possession of the Leased Property other than activities in
which Lessee or such Sublessee are permitted to engage by the provisions of
the Meditrust/Emeritus Transaction Documents.
11.4.7 ADDRESS. Lessee shall provide Lessor thirty
(30) days' prior written notice of any change of its Principal Place of
Business from its current Principal Place of Business. Lessee shall
maintain the Collateral, including without limitation, all books and
records relating to its business, solely at its Principal Place of Business
and at the Leased Property. Lessee shall not (a) remove the Collateral,
including, without limitation, any books or
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records relating to Lessee's business from either the Leased Property or
Lessee's Principal Place of Business or (b) relocate its Principal Place of
Business until after receipt of a certificate from Lessor, signed by an
officer thereof, stating that Lessor has, to its satisfaction, obtained
all documentation that it deems necessary or desirable to obtain, maintain,
perfect and confirm the first priority security interests granted in the
Lease Documents.
11.4.8 SUBORDINATION OF AFFILIATE TRANSACTIONS. Without limiting
the provisions of any other Section of this Lease or the Affiliated Party
Subordination Agreement, any payments to be made by Lessee to (a) any
member of the Leasing Group (or any of its Affiliates) or (b) any Affiliate
of Lessee, in connection with any transaction between Lessee and such
Person, including, without limitation, the purchase, sale or exchange of
any property, the rendering of any service to or with any such Person
(including, without limitation, all allocations of any so-called corporate
or central office costs, expenses and charges of any kind or nature) or the
making of any loan or other extension of credit or the making of any equity
investment, shall be subordinate to the complete payment and performance of
the Lease Obligations; PROVIDED, HOWEVER, that all such subordinated
payments may be paid at any time unless: (x) after giving effect to such
payment, Lessee shall be unable to comply with any of its obligations under
any of the Lease Documents or (y) a Lease Default has occurred and is
continuing and has not been expressly waived in writing by Lessor or an
event or state of facts exists, which, with the giving of notice or the
passage of time, or both, would constitute a Lease Default.
11.4.9 INSPECTION. At reasonable times and upon reasonable notice,
Lessee shall permit Lessor and its authorized representatives (including,
without limitation, the Consultants) to inspect the Leased Property as
provided in Section 7.1 above, provided, however, that, in the event
results of any such testing or inspection reflect the same satisfactory
results as the results of a similar testing or inspection initiated by
Lessor within the prior twelve (12) months period, the costs and expense of
such testing or inspection shall be the responsibility of Lessor.
11.5 ADDITIONAL NEGATIVE COVENANTS. Lessee covenants and agrees that,
throughout the Term and such time as Lessee remains in possession of the Leased
Property:
11.5.1 RESTRICTIONS RELATING TO LESSEE. Except as may otherwise be
expressly provided in Section 19.4 or in any of the other Lease Documents,
Lessee shall not, without the prior written consent of Lessor, in each
instance, which
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consent may be withheld in the sole and absolute discretion of Lessor:
(a) convey, assign, hypothecate, transfer, dispose of or
encumber, or permit the conveyance, assignment, transfer,
hypothecation, disposal or encumbrance of all or any part of any legal
or beneficial interest in this Lease, its other assets or the Leased
Property except as expressly permitted by the terms of this Lease
Agreement; PROVIDED, HOWEVER, that this restriction shall not apply to
(i) the Permitted Encumbrances that may be created after the date
hereof pursuant to the Lease Documents; (ii) Liens created in
accordance with Section 6.1.2 against Tangible Personal Property
securing Indebtedness permitted under Section 11.3.8(v); (iii) the
sale, conveyance, assignment, hypothecation, lease or other transfer
of any material asset or assets (whether now owned or hereafter
acquired), the fair market value of which equals or is less than
TWENTY-FIVE THOUSAND DOLLARS ($25,000), individually, or ONE HUNDRED
THOUSAND DOLLARS ($100,000) collectively; (iv) without limitation as
to amount, the disposition in the ordinary course of business of any
obsolete, worn out or defective fixtures, furnishings or equipment
used in the operation of the Leased Property provided that the same
are replaced with fixtures, furnishings or equipment of equal or
greater utility or value or Lessee provides Lessor with an explanation
(reasonably satisfactory to Lessor) as to why such fixtures,
furnishings or equipment is no longer required in connection with the
operation of the Leased Property; (v) without limitation as to amount,
any sale of inventory by Lessee in the ordinary course of business;
and (vi) subject to the terms of the Negative Pledge Agreement and the
Affiliated Party Subordination Agreement, distributions to the
shareholders of Lessee;
(b) permit the use of the Facility for any purpose other than
the Primary Intended Use and the Other Permitted Uses; or
(c) liquidate, dissolve or merge or consolidate with any other
Person except, subject to Lessor's prior written consent, which
consent shall not be unreasonably withheld, a Meditrust/Emeritus
Transaction Affiliate.
11.5.2 NO LIENS. Lessee will not directly or indirectly create or
allow to remain and will promptly discharge at its expense any Lien, title
retention agreement or claim upon or against the Leased Property (including
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Lessee's interest therein) or Lessee's interest in this Lease or any of the
other Lease Documents, or in respect of the Rent, excluding (a) this Lease
and any permitted Subleases, (b) the Permitted Encumbrances, (c) Liens
which are consented to in writing by Lessor, (d) Liens for those taxes of
Lessor which Lessee is not required to pay hereunder, (e) Liens of
mechanics, laborers, materialmen, suppliers or vendors for sums either not
yet due or being contested in strict compliance with the terms and
conditions of Article 15, (f) any Liens which are the responsibility of
Lessor pursuant to the provisions of Article 20, (g) Liens for Impositions
which are either not yet due and payable or which are in the process of
being contested in strict compliance with the terms and conditions of
Article 15 (h) the Liens incurred pursuant to the provisions of Section
6.1.2 and (i) involuntary Liens caused by the actions or omissions of
Lessor.
11.5.3 LIMITS ON AFFILIATE TRANSACTIONS. Lessee shall not enter
into any transaction with any Affiliate, including, without limitation,
the purchase, sale or exchange of any property, the rendering of any
service to or with any Affiliate and the making of any loan or other
extension of credit, except in the ordinary course of, and pursuant to the
reasonable requirements of, Lessee's business and upon fair and reasonable
terms no less favorable to the Lessee than would be obtained in a
comparable arms' length transaction with any Person that is not an
Affiliate.
11.5.4 NON-COMPETITION. Lessee acknowledges that upon and after
any termination of this Lease, any competition by any member of the Leasing
Group with any subsequent owner or subsequent lessee of the Leased Property
(the "Purchaser") would cause irreparable harm to Lessor and any such
Purchaser. To induce Lessor to enter into this Lease, Lessee agrees that,
from and after the date hereof and thereafter until (a) in the case of the
expiration of the Initial Term or a termination of this Lease, the fifth
(5th) anniversary of the termination hereof or of the expiration of the
Initial Term, as applicable, and (b) in the case of an expiration of any of
the Extended Terms, the second (2nd) anniversary of the expiration of the
applicable Extended Term, no member of the Leasing Group nor any Person
holding or controlling, directly or indirectly, any interest in any member
of the Leasing Group (collectively, the "Limited Parties") shall be
involved in any capacity in or lend any of their names to or engage in any
capacity in any assisted living facility, center, unit or program (or in
any Person engaged in any such activity or any related activity competitive
therewith) other than (a) those set forth on SCHEDULE 11.5.4 annexed
hereto, (b) those activities in
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which a Meditrust/Emeritus Transaction Affiliate is permitted to engage by
the provisions of the Meditrust/Emeritus Transaction Documents which relate
to any such facility, center, unit or program and (c) the acquisition of
an ownership interest in any such facility, center, unit or program which
is part of a single transaction in which an ownership interest in at least
four (4) other facilities, centers, units or programs (provided, however,
that if such acquisition occurs within the last twelve month period of the
Initial Term or any of the Extended Terms, Lessee shall have the benefit of
this clause (c) only if at the time such acquisition occurs Lessee has
already (x) exercised in that twelve month period its right under Section
1.3 hereof to extend the Term for another Extended Term or (y) given a
Purchase Option Notice and has waived any right to rescind the same based
upon the determination of the Fair Market Value of the Leased Property),
whether such competitive activity shall be as an officer, director, owner,
employee, agent, advisor, independent contractor, developer, lender,
sponsor, venture capitalist, administrator, manager, investor, partner,
joint venturer, consultant or other participant in any capacity whatsoever
with respect to an assisted living facility, center, unit or program
located within a five (5) mile radius of the Leased Property.
Lessee hereby acknowledges and agrees that none of the time span,
scope or area covered by the foregoing restrictive covenants is or are
unreasonable and that it is the specific intent of Lessee that each and all
of the restrictive covenants set forth hereinabove shall be valid and
enforceable as specifically set forth herein. Lessee further agrees that
these restrictions are special, unique, extraordinary and reasonably
necessary for the protection of Lessor and any Purchaser and that the
violation of any such covenant by any of the Limited Parties would cause
irreparable damage to Lessor and any Purchaser for which a legal remedy
alone would not be sufficient to fully protect such parties.
Therefore, in addition to and without limiting any other remedies
available at law or hereunder, in the event that any of the Limited Parties
breaches any of the restrictive covenants hereunder or shall threaten
breach of any of such covenants, then Lessor and any Purchaser shall be
entitled to obtain equitable remedies, including specific performance and
injunctive relief, to prevent or otherwise restrain a breach of this
Section 11.5.4 (without the necessity of posting a bond) and to recover any
and all costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses and court costs) incurred in enforcing the
provisions of this Section 11.5.4.
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The existence of any claim or cause of action of any of the Limited Parties
or any member of the Leasing Group against Lessor or any Purchaser, whether
predicated on this Lease or otherwise, shall not constitute a defense to
the enforcement by Lessor or any Purchaser of the foregoing restrictive
covenants and the Limited Parties shall not defend on the basis that there
is an adequate remedy at law.
Without limiting any other provision of this Lease, the parties hereto
acknowledge that the foregoing restrictive covenants are severable and
separate. If at any time any of the foregoing restrictive covenants shall
be deemed invalid or unenforceable by a court having jurisdiction over this
Lease, by reason of being vague or unreasonable as to duration, or
geographic scope or scope of activities restricted, or for any other
reason, such covenants shall be considered divisible as to such portion and
such covenants shall be immediately amended and reformed to include only
such covenants as are deemed reasonable and enforceable by the court having
jurisdiction over this Lease to the full duration, geographic scope and
scope of restrictive activities deemed reasonable and thus enforceable by
said court; and the parties agree that such covenants as so amended and
reformed, shall be valid and binding as through the invalid or
unenforceable portion has not been included therein.
The provisions of this Section 11.5.4 shall survive the termination of
the Lease and any satisfaction of the Lease Obligations in connection
therewith or subsequent thereto. The parties hereto acknowledge and agree
that any Purchaser may enforce the provisions of this Section 11.5.4 as a
third party beneficiary.
11.5.5 Intentionally deleted.
11.5.6 Intentionally deleted.
11.5.7 Intentionally deleted.
11.5.8 ERISA. Lessee shall not establish or permit any Sublessee
to establish any new pension or defined benefit plan or modify any such
existing plan for employees subject to ERISA, which plan provides any
benefits based on past service without the advance consent of Lessor (which
consent shall not be unreasonably withheld) to the amount of the aggregate
past service liability thereby created.
11.5.9 FORGIVENESS OF INDEBTEDNESS. Lessee will not waive, or
permit any Sublessee or Manager which is an Affiliate to waive any debt or
claim, except in the ordinary course of its business.
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11.5.10 VALUE OF ASSETS. Except as disclosed in the financial
statements provided to Lessor as of the date hereof, Lessee will not write
up (by creating an appraisal surplus or otherwise) the value of any assets
of Lessee above their cost to Lessee, less the depreciation regularly
allowable thereon.
11.5.11 CHANGES IN FISCAL YEAR AND ACCOUNTING PROCEDURES. Upon
notice to Lessor, Lessee may (a) change its fiscal year or capital
structure or (b) change, alter, amend or in any manner modify in accordance
with GAAP any of its current accounting procedures related to the method of
revenue recognition, billing procedures or determinations of doubtful
accounts or bad debt expenses or permit any of its Subsidiaries to so
change its fiscal year, provided that, in the event of such change,
modification or alteration, Lessee and Lessor shall make such adjustments
to the calculation of Additional Rent and the financial covenants contained
herein as Lessor shall reasonably require to make the same consistent in
result with the calculation thereof immediately prior to such change,
modification or alteration.
ARTICLE 12
INSURANCE AND INDEMNITY
12.1 GENERAL INSURANCE REQUIREMENTS. During the Term of this Lease and
thereafter until Lessee surrenders the Leased Property in the manner required by
this Lease, Lessee shall at its sole cost and expense keep the Leased Property,
the Tangible Personal Property located thereon and the business operations
conducted on the Leased Property insured as set forth below.
12.1.1 TYPES AND AMOUNTS OF INSURANCE. Lessee's insurance shall
include the following:
(a) property loss and physical damage insurance on an all-risk
basis (with only such exceptions as Lessor may in its reasonable
discretion approve) covering the Leased Property (exclusive of Land)
for its full replacement cost, which cost shall be reset once a year
at Lessor's option, with an agreed-amount endorsement and a deductible
not in excess OF TWENTY FIVE THOUSAND DOLLARS ($25,000). Such
insurance shall include, without limitation, the following coverages:
(i) increased cost of construction, (ii) cost of demolition, (iii) the
value of the undamaged portion of the Facility and (iv) contingent
liability from the operation of building laws, less exclusions
provided in the normal "All Risk" insurance policy. During any
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period of construction, such insurance shall be on a builder's-risk,
completed value, non-reporting form (including all risk and extended
coverage, collapse, cost of demolition, increased cost of construction
and value of undamaged portion of the improvements protection) with
permission to occupy;
(b) flood insurance (if the Leased Property or any portion
thereof is situated in an area which is considered a flood risk area
by the U.S. Department of Housing and Urban Development or any future
governmental authority charged with such flood risk analysis in the
future) in limits reasonably acceptable to Lessor and subject to the
availability of such flood insurance;
(c) boiler and machinery insurance (including related electrical
apparatus and components) under a standard comprehensive form,
providing coverage against loss or damage caused by explosion of steam
boilers, pressure vessels or similar vessels, now or hereafter
installed on the Leased Property, in limits acceptable to Lessor;
(d) earthquake insurance (if reasonably deemed necessary by
Lessor) in limits and with deductibles acceptable to Lessor;
(e) environmental impairment liability insurance (if available
on commercially reasonable terms and deemed reasonably necessary by
Lessor) in limits and with deductibles acceptable to Lessor;
(f) business interruption insurance in an amount equal to the
annual Base Rent due hereunder plus the aggregate sum of the
Impositions relating to the Leased Property due and payable during one
year;
(g) comprehensive general public liability insurance including
coverages commonly found in the Broad Form Commercial Liability
Endorsements with amounts not less than FIVE MILLION DOLLARS
($5,000,000) per occurrence with respect to bodily injury and death
and THREE MILLION DOLLARS ($3,000,000) for property damage and with
all limits based solely upon occurrences at the Leased Property
without any other impairment;
(h) professional liability insurance in an amount not less than
TEN MILLION DOLLARS ($10,000,000) for each medical incident;
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(i) physical damage insurance on an all-risk basis (with only
such exceptions as Lessor in its reasonable discretion shall approve)
covering the Tangible Personal Property for the full replacement cost
thereof and with a deductible not in excess of one percent (1%) of the
full replacement cost thereof;
(j) "Workers' Compensation and Employers' Liability Insurance
providing protection against all claims arising out of injuries to all
employees of Lessee or of any Sublessee (employed on the Leased
Property or any portion thereof) in amounts equal for Workers'
Compensation, to the statutory benefits payable to employees in the
State and for Employers, Liability, to limits of not less than ONE
HUNDRED THOUSAND DOLLARS ($100,000) for injury by accident, ONE
HUNDRED THOUSAND DOLLARS ($100,000) per employee for disease and FIVE
HUNDRED THOUSAND DOLLARS ($500,000) disease policy limit;
(k) subsidence insurance (if deemed necessary by Lessor) in
limits acceptable to Lessor; and
(1) such other insurance as Lessor from time to time may
reasonably require and also, as may from time to time be required by
applicable Legal Requirements and/or by any Fee Mortgagee.
12.1.2 INSURANCE COMPANY REQUIREMENTS. All such insurance required
by this Lease or the other Lease Documents shall be issued and underwritten
by insurance companies licensed to do insurance business by, and in good
standing under the laws of, the State and which companies have and maintain
a rating of A:X or better by A.M. Best Co.
12.1.3 POLICY REQUIREMENTS. Every policy of insurance from time to
time required under this Lease or any of the other Lease Documents (other
than worker's compensation) shall name Lessor as owner, loss payee, secured
party (to the extent applicable) and additional named insured as its
interests may appear. If an insurance policy covers properties other than
the Leased Property, then Lessor shall be so named with respect only to the
Leased Property. Each such policy, where applicable or appropriate, shall:
(a) include an agreed amount endorsement and loss payee,
additional named insured and secured party endorsements, in forms
acceptable to Lessor in its reasonable discretion;
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(b) include mortgagee, secured party, loss payable and
additional named insured endorsements reasonably acceptable to each
Fee Mortgagee;
(c) provide that the coverages may not be canceled or materially
modified except upon thirty (30) days' prior written notice to Lessor
and any Fee Mortgagee;
(d) be payable to Lessor and any Fee Mortgagee notwithstanding
any defense or claim that the insurer may have to the payment of the
same against any other Person holding any other interest in the Leased
Property;
(e) be endorsed with standard noncontributory clauses in favor
of and in form reasonably acceptable to Lessor and any Fee Mortgagee;
(f) expressly waive any right of subrogation on the part of the
insurer against Lessor, any Fee Mortgagee or the Leasing Group and
(g) otherwise be in such forms as shall be reasonably acceptable
to Lessor.
12.1.4 NOTICES; CERTIFICATES AND POLICIES. Lessee shall promptly
provide to Lessor copies of any and all notices (including notice of non-
renewal), claims and demands which Lessee receives from insurers of the
Leased Property. At least ten (10) days prior to the expiration of any
insurance policy required hereunder, Lessee shall deliver to Lessor
certificates and evidence of insurance relating to all renewals and
replacements thereof, together with evidence, satisfactory to Lessor, of
payment of the premiums thereon. Lessee shall deliver to Lessor original
counterparts or copies certified by the insurance company to be true and
complete copies, of all insurance policies required hereunder not later than
ten (10) days after receipt thereof by Lessee. Lessee shall use its best
efforts to obtain such counterparts or copies within ninety (90) days after
the effective date of each such policy.
12.1.5 LESSOR'S RIGHT TO PLACE INSURANCE. If Lessee shall fail to
obtain any insurance policy required hereunder by Lessor, or shall fail to
deliver the certificate and evidence of insurance relating to any such
policy to Lessor, or if any insurance policy required hereunder (or any
part thereof) shall expire or be canceled or become void or voidable by
reason of any breach of any condition thereof, or if Lessor reasonably
determines that such insurance coverage is unsatisfactory by reason of the
failure or
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impairment of the capital of any insurance company which wrote any such
policy, upon demand by Lessor, Lessee shall promptly but in any event in
not more than ten (10) days thereafter obtain new or additional insurance
coverage on the Leased Property, or for those risks required to be insured
by the provisions hereof, satisfactory to Lessor, and, in the event Lessee
fails to perform its obligations under this Section and at its option,
Lessor may obtain such insurance and pay the premium or premiums therefor;
in which event, any amount so paid or advanced by Lessor and all costs and
expenses incurred in connection therewith (including, without limitation,
reasonable attorneys' fees and expenses and court costs), shall be a demand
obligation of Lessee to Lessor, payable as an Additional Charge.
12.1.6 PAYMENT OF PROCEEDS. All insurance policies required
hereunder (except for general public liability, professional liability and
workers' compensation and employers liability insurance) shall provide
that in the event of loss, injury or damage, subject to the rights of any
Fee Mortgagee, all proceeds shall be paid to Lessor alone (rather than
jointly to Lessee and Lessor). Lessor is hereby authorized to adjust and
compromise any such loss with the consent of Lessee or, following any Lease
Default, whether or not cured, without the consent of Lessee, and to collect
and receive such proceeds in the name of Lessor and Lessee, and Lessee
appoints Lessor (or any agent designated by Lessor) as Lessee's
attorney-in-fact with full power of substitution, to endorse Lessee's name
upon any check in payment thereof. Subject to the provisions of Article 13,
such insurance proceeds shall be applied first toward reimbursement of all
costs and expenses reasonably incurred by Lessor in collecting said
insurance proceeds, then toward payment of the Lease Obligations or any
portion thereof, which have not been paid when due and payable or within
any applicable cure period, in such order as Lessor determines, and then in
whole or in part toward restoration, repair or reconstruction of the Leased
Property for which such insurance proceeds shall have been paid.
12.1.7 IRREVOCABLE POWER OF ATTORNEY. The power of attorney
conferred on Lessor pursuant to the provisions of Section 12.1, being
coupled with an interest, shall be irrevocable for as long as this Lease is
in effect or any Lease Obligations are outstanding, shall not be affected
by any disability or incapacity which Lessee may suffer and shall survive
the same. Such power of attorney, is provided solely to protect the
interests of Lessor and shall not impose any duty on Lessor to exercise any
such power, and neither Lessor nor such attorney-in-fact shall be liable
for any act, omission, error in judgment or mistake of law,
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except as the same may result from its gross negligence or wilful
misconduct.
12.1.8 BLANKET POLICIES. Notwithstanding anything to the contrary
contained herein, Lessee's obligations to carry the insurance provided for
herein may be brought within the coverage of a so-called blanket policy or
policies of insurance carried and maintained by Lessee and its Affiliates;
PROVIDED, HOWEVER, that the coverage afforded to Lessor shall 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 Section 12.1 are otherwise satisfied.
12.1.9 NO SEPARATE INSURANCE. Lessee shall not, on Lessee's own
initiative or pursuant to the request or requirement of any other Person,
take out separate insurance concurrent in form or contributing in the event
of loss with the insurance required hereunder to be furnished by Lessee, or
increase the amounts of any then existing insurance by securing an
additional policy or additional policies, unless (a) all parties having an
insurable interest in the subject matter of the insurance, including
Lessor, are included therein as additional insureds and (b) losses are
payable under said insurance in the same manner as losses are required to
be 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
insurance policy or policies.
12.1.10 ASSIGNMENT OF UNEARNED PREMIUMS. Lessee hereby assigns to
Lessor all rights of Lessee in and to any unearned premiums on any
insurance policy required hereunder to be furnished by Lessee which may
become payable or are refundable after the occurrence of an Event of
Default hereunder, which premium, upon receipt thereof, Lessor shall at
Lessor's option apply toward the Lease Obligations or hold as security
therefor. In the event that this Lease is terminated for any reason (other
than the purchase of the Leased Property by Lessee), the insurance policies
required to be maintained hereunder, including all right, title and
interest of Lessee thereunder, shall become the absolute property of Lessor
subject to any limitation on assignment provided for therein.
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12.2 INDEMNITY.
12.2.1 INDEMNIFICATION. Except with respect to the
gross negligence or wilful misconduct of Lessor or any of the other
Indemnified Parties, as to which no indemnity is provided, Lessee hereby
agrees to defend with counsel reasonably acceptable to Lessor, against all
claims and causes of action and to indemnify and hold harmless Lessor and
each of the other Indemnified Parties from and against all damages, losses,
liabilities, obligations, penalties, costs and expenses (including, without
limitation, reasonable attorneys' fees, court costs and other expenses of
litigation) suffered by, or claimed or asserted against, Lessor or any of
the other Indemnified Parties, directly or indirectly, by any Person other
than a member of the Leasing Group who prevails in such claim or action
based on, arising out of or resulting from (a) the use and occupancy of the
Leased Property or any business conducted therein, (b) any act, fault,
omission to act or misconduct by (i) any member of the Leasing Group, (ii)
any Affiliate of Lessee or (iii) any employee, agent, licensee, business
invitee, guest, customer, contractor or sublessee of any of the foregoing
parties, relating to, directly or indirectly, the Leased Property, (c) any
accident, injury or damage whatsoever caused to any Person, including,
without limitation, any claim of malpractice, or to the property of any
Person in or about the Leased Property or outside of the Leased Property
where such accident, injury or damage results or is claimed to have
resulted from any act, fault, omission to act or misconduct by any member
of the Leasing Group or any Affiliate of Lessee or any employee, agent,
licensee, contractor or sublessee of any of the foregoing parties, (d) any
Lease Default, (e) any claim brought or threatened against Lessor by any
member of the Leasing Group or by any other Person on account of (i)
Lessor's relationship with any member of the Leasing Group pertaining in
any way to the Leased Property and/or the transaction evidenced by the
Lease Documents and/or (ii) Lessor's negotiation of, entering into and/or
performing any of its obligations and/or exercising any of its right and
remedies under any of the Lease Documents, (f) any attempt by any member of
the Leasing Group or any Affiliate of Lessee to transfer or relocate any of
the Permits to any location other than the Leased Property and/or (g) the
enforcement of this indemnity. Any amounts which become payable by lessee
under this Section 12.2.1 shall be a demand obligation of Lessee to Lessor,
payable as an Additional Charge. The indemnity provided for in this
Section 12.2.1 shall survive any termination of this Lease.
12.2.2 INDEMNIFIED PARTIES. As used in this Lease the term
"Indemnified Parties" shall mean the Meditrust
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Entities, any Fee Mortgagee and their respective successors, assigns,
employees, servants, agents, attorneys, officers, directors, shareholders,
partners and owners.
12.2.3 LIMITATION ON LESSOR LIABILITY. Neither Lessor nor any
Affiliate of Lessor shall be liable to any member of the Leasing Group or
any Affiliate of any member of the Leasing Group, or to any other Person
whatsoever for any damage, injury, loss, compensation, or claim (including,
but not limited to, any claim for the interruption of or loss to any
business conducted on the Leased Property) based on, arising out of or
resulting from any cause whatsoever, including, but not limited to, the
following: (a) repairs to the Leased Property; (b) interruption in use of
the Leased Property; (c) any accident or damage resulting from the use or
operation of the Leased Property or any business conducted thereon; (d) the
termination of this Lease by reason of Casualty or Condemnation; (e) any
fire, theft or other casualty or crime; (f) the actions, omissions or
misconduct of any other Person; (g) damage to any property; or (h) any
damage from the flow or leaking of water, rain or snow. All Tangible
Personal Property and the personal property of any other Person on the
Leased Property shall be at the sole risk of Lessee and Lessor shall not in
any manner be held responsible therefor (except in the event Of loss caused
by the gross negligence or willful misconduct of Lessor). Notwithstanding
the foregoing, Lessor shall not be released from liability for any injury,
loss, damage or liability suffered by Lessee to the extent caused directly
by the gross negligence or willful misconduct of Lessor, its servants,
employees or agents acting within the scope of their authority on or about
the Leased Property or in regards to the Lease; provided, however, that in
no event shall Lessor, its servants, employees or agents have any liability
based on any loss for any indirect or consequential damages. or
12.2.4 RISK OF LOSS. During the Term of this Lease, the risk of
loss or of decrease in the enjoyment and beneficial use of the Leased
Property in consequence of any damage or destruction thereof by fire, the
elements, casualties, thefts, riots, wars or otherwise, or in consequence
of foreclosures, levies or executions of Liens (other than those created by
Lessor in accordance with the provisions of Article 20) is assumed by
Lessee and, in the absence of the gross negligence or willful misconduct as
set forth in Section 12.2.3, Lessor shall in no event be answerable or
accountable therefor (except for the obligation to account for insurance
proceeds and Awards to the extent provided for in Articles 13 and 14) nor
shall any of the events mentioned in this Section entitle Lessee to
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any abatement of Rent (except for an abatement, if any, as specifically
provided for in Section 3.7).
ARTICLE 13
FIRE AND CASUALTY
13.1 RESTORATION FOLLOWING FIRE OR OTHER CASUALTY.
13.1.1 FOLLOWING FIRE OR CASUALTY. In the event of
any damage or destruction to the Leased Property by reason of fire or other
hazard or casualty (a "Casualty"), Lessee shall give immediate written
notice thereof to Lessor and, subject to the terms of this Article 13 and
any applicable Legal Requirements, Lessee shall proceed with reasonable
diligence, in full compliance with all applicable Legal Requirements, to
perform such repairs, replacement and reconstruction work (referred to
herein as the "Work") to restore the Leased Property to the condition it
was in immediately prior to such damage or destruction and to a condition
adequate to operate the Facility for the Primary Intended Use and, if
applicable, the Other Permitted Uses and in compliance with applicable Legal
Requirements. All Work shall be performed and completed in accordance with
all applicable Legal Requirements and the other requirements of this Lease
within one hundred and twenty (120) days following the occurrence of the
damage or destruction plus a reasonable time to compensate for Unavoidable
Delays (including for the purposes of this Section, delays in obtaining
Permits and in adjusting insurance losses), but in no event beyond two-
hundred and seventy (270) days following the occurrence of the Casualty.
13.1.2 PROCEDURES. In the event that any Casualty results in non-
structural damage to the Leased Property in excess of FIFTY THOUSAND
DOLLARS ($50,000) or in any structural damage to the Leased Property,
regardless of the extent of such structural damage, prior to commencing
the Work, Lessee shall comply with the following requirements:
(a) Lessee shall furnish to Lessor complete plans and
specifications for the Work (collectively and as the same may be
modified and amended from time to time pursuant to the terms hereof,
the "Plans and Specifications"), for Lessor's approval, in each
instance, which approval shall not be unreasonably withheld. The
Plans and Specifications shall bear the signed approval thereof by an
architect, licensed to do business in the State, reasonably
satisfactory to Lessor (in the event Lessor reasonably determines that
the Work is of a nature for which the involvement of an
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architect is appropriate) and shall be accompanied by a written
estimate from the architect, bearing the architect's seal, of the
entire cost of completing the Work, and to the extent feasible, the
Plans and Specifications shall provide for Work of such nature,
quality and extent, that, upon the completion thereof, the Leased
Property shall be at least equal in value and general utility to its
value and general utility prior to the Casualty and shall be adequate
to operate the Leased Property for the Primary Intended Use and, if
applicable, the Other Permitted Uses;
(b) Lessee shall furnish to Lessor certified or photostatic
copies of all Permits and Contracts required by all applicable Legal
Requirements in connection with the commencement and conduct of the
Work to the extent the same can be secured in the ordinary course
prior to the commencement of construction;
(c) Lessee shall furnish to Lessor a cash deposit or a payment
and performance bond sufficient to pay for completion of and payment
for the Work in an amount not less than the architect's estimate of
the entire cost of completing the Work, less the amount of property
insurance proceeds (net of costs and expenses incurred by Lessor in
collecting the same), if any, then held by Lessor and which Lessor
shall be required to apply toward restoration of the Leased Property
as provided in Section 13.2;
(d) Lessee shall furnish to Lessor such insurance with respect
to the Work (in addition to the insurance required under Section 12.1
hereof) in such amounts and in such forms as is reasonably required
by Lessee; and
(e) Lessee shall not commence any of the Work until Lessee shall
have complied with the requirements set forth in clauses (a) through
(d) immediately above, as applicable, and, thereafter, Lessee shall
perform the Work diligently, in a good and workmanlike fashion and in
good faith in accordance with (i) the Plans and Specifications
referred to in clause (a) immediately above, (ii) the Permits and
Contracts referred to in clause (b) immediately above and (iii) all
applicable Legal Requirements and other requirements of this Lease;
PROVIDED, HOWEVER, that in the event of a bona fide emergency during
which Lessee is unable to contact the appropriate representatives of
Lessor, Lessee may commence such Work as may be necessary in order to
address such emergency without Lessor's prior approval, as long as
Lessee immediately thereafter advises Lessor
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of such emergency and the nature and scope of the Work performed and
obtains Lessor Is approval of the remaining Work to be completed.
13.1.3 DISBURSEMENT OF INSURANCE PROCEEDS. If, as provided in Section
13.2, Lessor is required to apply any property insurance proceeds toward
repair or restoration of the Leased Property, then as long as the Work is
being diligently performed by Lessee in accordance with the terms and
conditions of this Lease, Lessor shall disburse such insurance proceeds
from time to time during the course of the Work in accordance with and
subject to satisfaction of the following provisions and conditions. Lessor
shall not be required to make disbursements more often than at thirty (30)
day intervals. Lessee shall submit a written request for each disbursement
at least ten (10) Business Days in advance and shall comply with the
following requirements in connection with each disbursement:
(a) Prior to the commencement of any Work, Lessee shall have
received Lessor's written approval of the Plans and Specifications
(which approval shall not be unreasonably withheld) and the Work shall
be supervised by an experienced construction manager with the
consultation of an architect or engineer qualified and licensed to do
business in the State (in the event Lessor reasonably determines that
the Work is of a nature for which the involvement of such architect or
engineer is appropriate). Lessee shall not make any changes in, and
shall not permit any changes in, the quality of the materials to be
used in the Work, the Plans and Specifications or the Work, whether by
change order or otherwise, without the prior written consent of
Lessor, in each instance (which consent may be withheld in Lessor's
sole and absolute discretion); PROVIDED, HOWEVER, that such consent
shall not be required for any individual change which has been
approved by the architect, which does not materially affect the
structure or exterior of the Facility, and the cost of which does not
exceed TEN THOUSAND DOLLARS ($10,000) or which changes, in the
aggregate, do not exceed ONE HUNDRED THOUSAND DOLLARS ($100,000) in
cost. Notwithstanding the foregoing, prior to making any change in
Plans and Specifications, copies of all change orders shall be
submitted by Lessee to Lessor and Lessee shall also deliver to Lessor
evidence satisfactory to Lessor, in its reasonable discretion, that
all necessary Permits and/or Contracts required by any Governmental
Authority in connection therewith have been obtained or entered into,
as the case may be.
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(b) Each request for payment shall be accompanied by (x) a
certificate of the architect or engineer, bearing the architect's or
engineer's seal, and (y) a certificate of the general contractor,
qualified and licensed to do business in the State, that is performing
the Work (collectively, the "Work Certificates"), each dated not more
than ten (10) days prior to the application for withdrawal of funds,
and each stating:
(i) that all of the Work performed as of the date of the
certificates has been completed in compliance with the
approved Plans and Specifications, applicable Contracts
and all applicable Legal Requirements;
(ii) that the sum then requested to be withdrawn has been
paid by Lessee or is justly due to contractors,
subcontractors, materialmen, engineers, architects or
other Persons, whose names and addresses shall be
stated herein, who have rendered or furnished certain
services or materials for the Work, and the certificate
shall also include a brief description of such services
and materials and the principal subdivisions or
categories thereof and the respective amounts so paid
or due to each of said Persons in respect thereof and
stating the progress of the Work up to the date of said
certificate;
(iii) that the sum then requested to be withdrawn, plus all
sums previously withdrawn, does not exceed the cost of
the Work insofar as actually accomplished up to the date
of such certificate;
(iv) that the remainder of the funds held by Lessor will be
sufficient to pay for the full completion of the Work
in accordance with the Plans and Specifications;
(v) that no part of the cost of the services and materials
described in the applicable Work Certificate has been or
is being made the basis of the withdrawal of any funds
in any previous or then pending application; and
(vi) that, except for the amounts, if any,
specified in the applicable Work Certificate to be due
for services and materials, there is no outstanding
indebtedness known, after
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due inquiry, which is then due and payable for work,
labor, services or materials in connection with the
Work which, if unpaid, might become the basis of a
vendors, mechanic's, laborer's or materialman's
statutory or other similar Lien upon the Leased
Property.
(c) Lessee shall deliver to Lessor satisfactory evidence that the
Leased Property and all materials and all property described in the
Work Certificates are free and clear of Liens, except (i) Liens, if
any, securing indebtedness due to Persons (whose names and addresses
and the several amounts due them shall be stated therein) specified in
an applicable Work Certificate, which Liens shall be discharged upon
disbursement of the funds then being requested or duly contested in
accordance with the terms of this Lease Agreement, (ii) any Fee
Mortgage and (iii) the Permitted Encumbrances. Lessor shall accept as
satisfactory evidence of the foregoing lien waivers in customary form
from the general contractor and all subcontractors performing the
Work, together with an endorsement of its title insurance policy
(relating to the Leased Property) in form acceptable to Lessor, dated
as of the date of the making of the then current disbursement,
confirming the foregoing.
(d) If the Work involves alteration or restoration of the
exterior of any Leased Improvement that changes the footprint of any
Leased Improvement, Lessee shall deliver to Lessor, upon the request
of Lessor, an "as-built" survey of the Leased Property dated as of a
date within ten (10) days prior to the making of the first and final
advances (or revised to a date within ten (1O) days prior to each such
advance) showing no encroachments other than such encroachments, if
any, by the Leased Improvements upon or over the Permitted
Encumbrances as are in existence as of the date hereof.
(e) Lessee shall deliver to Lessor (i) an opinion of counsel
(satisfactory to Lessor both as to counsel and as to the form of
opinion) prior to the first advance opining that all necessary Permits
for the repair, replacement and/or restoration of the Leased Property
which can be obtained in the ordinary course as of said date have been
obtained and that the Leased Property, it repaired, replaced or
rebuilt in accordance, in all material respects, with the approved
Plans and Specifications and such Permits, shall comply with all
applicable Legal Requirements subject to such
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limitations as may be imposed on such opinion under local law and (ii)
if applicable, an architect's certificate (satisfactory to Lessor both
as to the architect and as to the form of the certificate) prior to
the final advance, certifying that the Leased Property was repaired,
replaced or rebuilt in accordance, in all material respects, with the
approved Plans and Specifications and complies with all applicable
Legal Requirements, including, without limitation, all Permits
referenced in the foregoing clause (i).
(f) There shall be no Lease Default or any state of facts or
circumstance existing which, with the giving of notice and/or the
passage of time, would constitute any Lease Default.
Lessor, at its option, may waive any of the foregoing requirements in whole
or in part in any instance. Upon compliance by Lessee with the foregoing
requirements except for such requirements, if any, as Lessor may have
expressly elected to waive), and to the extent of (x) the insurance
proceeds, if any, which Lessor may be required to apply to restoration of
the Leased Property pursuant to the provisions of this Lease and (y) all
other cash deposits made by Lessee, Lessor shall make available for payment
to the Persons named in the Work Certificate the respective amounts stated
in said certificates to be due, subject to a retention of ten percent (10%)
as to all hard costs of the Work (the "Retainage"). It is understood that
the Retainage is intended to provide a contingency fund to assure Lessor
that the Work shall be fully completed in accordance with the Plans and
Specifications and the requirements of Lessor. Upon the full and final
completion of all of the Work in accordance with the provisions hereof, the
Retainage shall be made available for payment to those Persons entitled
thereto.
Upon completion of the Work, and as a condition precedent to making any
further advance, in addition to the requirements set forth above, Lessee
shall promptly deliver to Lessor:
(i) if applicable, written certificates of the architect or engineer,
bearing the architects or engineer's seal, and the general
contractor, certifying that the Work has been fully completed in
a good and workmanlike manner in material compliance with the
Plans and Specifications and all applicable Legal Requirements;
(ii) an endorsement of its title insurance policy (relating to the
Leased Property) in form
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reasonably acceptable to Lessor insuring the Leased Property
against all mechanic's and materialman's liens accompanied by the
final lien waivers from the general contractor and all
subcontractors;
(iii) a certificate by Lessee in form and substance reasonably
satisfactory to Lessor, listing all costs and expenses in
connection with the completion of the work and the amount paid by
Lessee with respect to the Work; and
(iv) a temporary certificate of occupancy (if obtainable) and all
other applicable Permits and Contracts issued by or entered into
with any Governmental Authority with respect to the Primary
Intended Use not already delivered to Lessor and, to the extent
applicable, the Other Permitted Uses and by the appropriate Board
of Fire Underwriters or other similar bodies acting in and for
the locality in which the Leased Property is situated with
respect to the Facility; PROVIDED, THAT within thirty (30) days
after completion of the Work, Lessee shall obtain and deliver to
Lessor a permanent certificate of occupancy for the Leased
Property, subject to seasonal delays.
Upon completion of the Work and delivery of the documents required
pursuant to the provisions of this Section 13.1, Lessor shall pay the
Retainage to Lessee or to those Persons entitled thereto and if there shall
be insurance proceeds or cash deposits, other than the Retainage, held by
Lessor in excess of the amounts disbursed pursuant to the foregoing
provisions, then provided that no Lease Default has occurred and is
continuing, nor any state of facts or circumstances which, with the giving
of notice and/or the passage of time would constitute a Lease Default,
Lessor shall pay over such proceeds or cash deposits to Lessee.
No inspections or any approvals of the Work during or after
construction shall constitute a warranty or representation by Lessor, or
any of its agents or Consultants, as to the technical sufficiency, adequacy
or safety of any structure or any of its component parts, including,
without limitation, any fixtures, equipment or furnishings, or as to the
subsoil conditions or any other physical condition or feature pertaining to
the Leased Property. All acts, including any failure to act, relating to
Lessor are performed solely for the benefit of Lessor to assure the payment
and performance of the Lease Obligations
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and are not for the benefit of Lessee or the benefit of any other Person.
13.2 DISPOSITION OF INSURANCE PROCEEDS.
13.2.1 PROCEEDS TO BE RELEASED to PAY FOR WORK. In
the event of any Casualty, except as provided for in Section 13.2.2, Lessor
shall release proceeds of property insurance held by it to pay for the Work
in accordance with the provisions and procedures set forth in this Article
13, only if:
(a) all of the terms, conditions and provisions of Sections 13.1
and 13.2.1 are satisfied;
(b) Lessee demonstrates to Lessor's satisfaction that Lessee has
the financial ability to satisfy the Lease Obligations during such
repair or restoration; and
(c) no Sublease material to the operation of the Facility
immediately prior to such damage or taking shall have been canceled or
terminated, nor contain any still exercisable right to cancel or
terminate, due to such Casualty if and to the extent that the income
from such Sublease is necessary in order to avoid the violation of any
of the financial covenants set forth in this Lease or otherwise to
avoid the creation of an Event of Default.
If a Fee Mortgagee prevents Lessor from releasing proceeds of property
insurance notwithstanding the satisfaction of the foregoing requirements,
Lessee shall have no obligation to restore the Casualty to which such
proceeds pertain.
13.2.2 PROCEEDS NOT TO BE RELEASED. If, as the result of any
Casualty, the Leased Property is damaged to the extent it is rendered
Unsuitable For Its Primary Intended Use and if either: (a) Lessee, after
exercise of diligent efforts, cannot within a reasonable time (not in
excess of ninety (90) days) obtain all necessary Permits in order to be
able to perform all required Work and to again operate the Facility for its
Primary Intended Use and, if applicable, the Other Permitted Uses within
two hundred and seventy (270) days from the occurrence of the damage or
destruction in substantially the manner as immediately prior to such damage
or destruction or (b) such Casualty occurs during the last twenty-four (24)
months of the Term and would reasonably require more than nine (9) months
to obtain all Permits and complete the Work, then Lessee may either (i)
acquire the Leased Property from Lessor for a purchase price equal to the
greater of (x) the Meditrust Investment
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or (y) the Fair Market Value of the Leased Property MINUS the Fair Market
Added Value, with the Fair Market Value and the Fair Market Added Value to
be determined as of the day immediately prior to such Casualty and prior to
any other Casualty which has not been fully repaired, restored or
replaced, in which event, Lessee shall be entitled upon payment of the full
purchase price to receive all property insurance proceeds (less any costs
and expenses incurred by Lessor in collecting the same), or (ii) terminate
this Lease, in which event (subject to the provisions of the last sentence
of this Section 13.2.2) Lessor shall be entitled to receive and retain the
insurance proceeds; PROVIDED, HOWEVER, that Lessee shall only have such
right of termination effective upon payment to Lessor of all Rent and other
sums due under this Lease and the other Lease Documents through the date of
termination plus an amount, which when added to the sum of (1) the Fair
Market Value of the Leased Property as affected by all unrepaired or
unrestored damage due to any Casualty (and giving due regard for delays,
costs and expenses incident to completing all repair or restoration
required to fully repair or restore the same) PLUS (2) the amount of
insurance proceeds actually received by Lessor (net of costs and expenses
incurred by Lessor in collecting the same) equals (3) the greater-of the
Meditrust Investment or the Fair Market Value of the Leased Property MINUS
the Fair Market Added Value, with the Fair Market Value and the Fair Market
Added Value to be determined as of the day immediately prior to such
Casualty and prior to any other Casualty which has not been fully repaired.
Any acquisition of the Leased Property pursuant to the terms of this
Section 13.2.2 shall be consummated in accordance with the provisions of
Article 18, MUTATIS, MUTANDIS. If such termination becomes effective,
Lessor shall assign to Lessee any outstanding insurance claims and, at
Lessee's expense, shall cooperate in Lessee's efforts to secure the same.
In the event this Lease is terminated pursuant to the provisions of this
Section 13.2.2 and the insurance proceeds received by Lessor in connection
there with (net of costs and expenses incurred in obtaining such proceeds)
exceeds one hundred fifteen percent (115%) of the Fair Market Value of the
Leased Premises at the time of such termination, Lessor shall pay to Lessee
fifty percent (50%) of the amount of such excess.
13.3 TANGIBLE PERSONAL PROPERTY. All insurance proceeds payable by reason
of any loss of or damage to any of the Tangible Personal Property shall be paid
to Lessor as secured party, subject to the rights of the holders of any
Permitted Prior Security Interests, and, thereafter, provided that no Lease
Default, nor any fact or circumstance which with the giving of notice and/or the
passage of time could constitute a Lease Default, has occurred and is
continuing, Lessor shall pay such
89
insurance proceeds to Lessee to reimburse Lessee for the cost of repairing or
replacing the damaged Tangible Personal Property, subject to the terms and
conditions set forth in the other provisions of this Article 13, MUTATIS
MUTANDIS.
13.4 RESTORATION OF CERTAIN IMPROVEMENTS AND THE TANGIBLE PERSONAL
PROPERTY. If Lessee is required or elects to restore the Facility-, Lessee shall
either (a) restore (i) all alterations and improvements to the Leased Property
made by Lessee and (ii) the Tangible Personal Property or (b) replace such
alterations and improvements and the Tangible Personal Property with
improvements or items of the same or better quality and utility in the operation
of the Leased Property provided, however, that Lessee shall be obligated to so
restore or replace the Tangible Personal Property only to the extent desirable
for the prudent operation of the Facility in the good faith exercise of
commercially reasonable business judgment.
13.5 NO ABATEMENT OF RENT. In no event shall any Rent abate as a
result of any Casualty except as expressly provided in Section 3.7.
13.6 TERMINATION OF CERTAIN RIGHTS. Any termination of this Lease
pursuant to this Article 13 shall cause any right of Lessee to extend the Term
of this Lease granted to Lessee herein and any right of Lessee to purchase the
Leased Property contained in this Lease to be terminated and to be without
further force or effect.
13.7 WAIVER. Lessee hereby waives any statutory rights of termination
which may arise by reason of any damage or destruction to the Leased Property
due to any Casualty which Lessee is obligated to restore or may restore under
any of the provisions of this Lease.
13.8 APPLICATION OF RENT LOSS AND/OR BUSINESS INTERRUPTION
INSURANCE. Lessor shall direct all proceeds of rent loss and/or business
interruption insurance (collectively, "Rent Insurance Proceeds") to be paid to
Lessee, provided no fact or circumstance exists which constitutes, or with
notice, or passage of time, or both, would constitute, a Lease Default
pertaining to Facility or the Leased Property. If a Lease Default or such fact
or circumstance exists, Lessor may rescind such direction and apply all such
insurance proceeds towards the Lease Obligations pertaining to the Facility or
the Leased Property or hold such proceeds as security therefor.
13.9 OBLIGATION TO ACCOUNT. Upon Lessee's written request, which may
not be made not more than once in any three (3) month period, Lessor shall
provide Lessee with a written accounting of the application of all insurance
proceeds received by Lessor.
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ARTICLE 14
CONDEMNATION
14.1 PARTIES' RIGHTS AND OBLIGATIONS. If during the Term there is any
Taking of all or any part of the Leased Property or any interest in this Lease,
the rights and obligations of the parties shall be determined by this Article
14.
14.2 TOTAL TAKING. If there is a permanent Taking of all or
substantially all of the Leased Property, this Lease shall terminate on the Date
of Taking. In the event this Lease is terminated pursuant to the provisions of
this Section 14.2 and the Award received by Lessor in connection therewith (net
of costs and expenses incurred in obtaining such Award) exceeds one hundred
fifteen percent (115% of the Fair Market Value of the Leased Premises at the
time of such termination, Lessor shall pay to Lessee fifty percent (50%) of the
amount of such excess.
14.3 PARTIAL OR TEMPORARY TAKING. If there is a Permanent Taking of
a portion of the Leased Property, or if there is a temporary Taking of all or a
portion of the Leased Property, this Lease shall remain in effect so long as the
Leased Property is not thereby rendered permanently Unsuitable For Its Primary
Intended Use or temporarily Unsuitable For Its Primary Intended Use for a period
not likely to, or which does not, exceed two hundred and seventy (270) days.
If, however, the Leased Property is thereby so rendered permanently or
temporarily Unsuitable For Its Primary Intended Use: (a) if only rendered
temporarily Unsuitable For Its Primary Intended Use, Lessee shall have the right
to restore the Leased Property, at its own expense (subject to the right under
certain circumstances as provided for in Section 14.5 to receive the net
proceeds of an Award for reimbursement), to the extent possible, to
substantially the same condition as existed immediately before the partial or
temporary Taking or (b) Lessee shall have the right to acquire the Leased
Property from Lessor (i) upon payment of all Rent due through the date that the
purchase price is paid, for a purchase price equal to the greater of (x) the
Meditrust Investment or (y) the Fair Market Value of the Leased Property MINUS
the Fair Market Added Value, with the Fair Market Value of the Leased Property
and the Fair Market Added Value to be determined as of the day immediately prior
to such partial or temporary Taking and (ii) in accordance with the terms and
conditions set forth in Article 18; in which event, this Lease shall terminate
upon payment of such purchase price and the consummation of such acquisition.
Notwithstanding the foregoing, Lessor may overrule Lessee's' election under
clause (a) or (b) and instead either (1) terminate this Lease (with no
obligation on the part of Lessee to acquire the Leased Property as a result
thereof) as of the date when
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Lessee is required to surrender possession of the portion of the Leased Property
so taken if (X) such portion comprises more than thirty percent (30%) of the
Leased Property or of the residential buildings) located thereon or (Y)
possession thereof is to be surrendered within two years of the expiration of
the Term or (2) compel Lessee to keep the Lease in full force and effect and to
restore the Leased Property as provided in clause (a) above, but only if the
Leased Property may be operated for at least eighty percent (80%) of the
licensed unit capacity of the Facility in effect prior to the Taking. Lessee
shall exercise its election under this Section 14.3 by giving Lessor notice
thereof ("Lessee's Election Notice") within sixty (60) days after Lessee
receives notice of the Taking. Lessor shall exercise its option to overrule
Lessee's election under this Section 14.3 by giving Lessee notice of Lessor's
exercise of its rights under Section 14.3 within thirty (30) days after Lessor
receives Lessee's Election Notice. If, as the result of any such partial or
temporary Taking, this Lease is not terminated as provided above, Lessee shall
be entitled to an abatement of Rent, but only to the extent, if any, provided
for in Section 3.7, effective as of the date upon which the Leased Property is
rendered Unsuitable For Its Primary Intended Use.
14.4 RESTORATION. If there is a partial or temporary Taking of the
Leased Property and this Lease remains in full force and effect pursuant to
Section 14.3, Lessee shall accomplish all necessary restoration and Lessor shall
release the net proceeds of such Award to reimburse Lessee for the actual
reasonable costs and expenses thereof, subject to all of the conditions and
provisions set forth in Article 13 as though the Taking was a Casualty and the
Award was insurance proceeds. If the cost of the restoration exceeds the amount
of the Award (net of costs and expenses incurred in obtaining the Award), Lessee
shall be obligated to contribute any excess amount needed to restore the
Facility or pay for such costs and expenses. To the extent that the cost of
restoration is less than the amount of the Award (net of cost and expenses
incurred in obtaining the Award), the remainder of the Award shall be retained
by Lessor and Rent shall be abated as set forth in Section 3.7.
14.5 AWARD DISTRIBUTION. In the event Lessee completes the purchase of
the Leased Property, as described in Section 14.3, the entire Award shall, upon
payment of the purchase price and all Rent and other sums due under this Lease
and the other Lease Documents, belong to Lessee and Lessor agrees to assign to
Lessee all of Lessor's rights thereto or, to the extent Lessor has received
payment of the Award, the amount of such payment shall be credited against the
purchase price. In any other event, the entire Award (except for such portion
thereof which the Condemner designates as allocable to Lessee's loss of business
or Tangible Personal Property) shall belong to and be paid to Lessor.
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14.6 CONTROL OF PROCEEDINGS. Subject to the rights of any Fee
Mortgagee, unless and until Lessee completes the purchase of the Leased Property
as provided in Section 14.3, all proceedings involving any Taking and the
prosecution of claims arising out of any Taking against the Condemnor shall be
conducted, prosecuted and settled by Lessor; PROVIDED, HOWEVER, that Lessor
shall keep Lessee apprised of the progress of all such proceedings and shall
solicit Lessee's advice with respect thereto and shall give due consideration to
any such advice. In addition, Lessee shall reimburse Lessor (as an Additional
Charge) for all costs and expenses, including reasonable attorneys' fees,
appraisal fees, fees of expert witnesses and costs of litigation or dispute
resolution, in relation to any Taking, whether or not this Lease is terminated;
PROVIDED, HOWEVER, if this Lease is terminated as a result of a Taking, Lessee's
obligation to so reimburse Lessor shall be diminished by the amount of the
Award, if any, received by Lessor which is in excess of the Meditrust
Investment.
ARTICLE 15
PERMITTED CONTESTS
15.1 LESSEE'S RIGHT TO CONTEST. To the extent of the express
references made to this Article 15 in other Sections of this Lease, Lessee, any
Sublessee or any Manager on their own or on Lessor's behalf (or in Lessor's
name), but at their sole cost and expense, may contest, by appropriate legal
proceedings conducted in good faith and with due diligence (until the resolution
thereof), the amount, validity or application, in whole or in part, of any
Imposition, Legal Requirement, the decision of any Governmental Authority
related to the operation of the Leased Property for its Primary Intended Use
and/or, if applicable, any of the Other Permitted Uses or any Lien or claim
relating to the Leased Property not otherwise permitted by this Agreement;
PROVIDED, THAT (a) prior written notice of such contest is given to Lessor, (b)
in the case of an unpaid Imposition, Lien or claim, the commencement and
continuation of such proceedings shall suspend the collection thereof from
Lessor and/or compliance by any applicable member of the Leasing Group with the
contested Legal Requirement or other matter may be legally delayed pending the
prosecution of any such proceeding without the occurrence or creation of any
Lien, charge or liability of any kind against the Leased Property, (c) neither
the Leased Property nor any rent therefrom would be in any immediate danger of
being sold, forfeited, attached or lost as a result of such proceeding, (d) in
the case of a Legal Requirement, neither Lessor nor any member of the Leasing
Group would be in any immediate danger of civil or criminal liability for
failure to comply therewith pending the outcome of such proceedings, (e) in the
event that any such contest shall involve
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a sum of money or potential loss in excess of TWENTY FIVE THOUSAND DOLLARS
($25,000), Lessee shall deliver to Lessor an Officer's Certificate and opinion
of counsel, if Lessor deems the delivery of an opinion to be appropriate,
certifying or opining, as the case may be, as to the validity of the statements
set forth to the effect set forth in clauses (b), (c) and (d), to the extent
applicable, (f) Lessee shall give such cash security as may be demanded in good
faith by Lessor to insure ultimate payment of any fine, penalty, interest or
cost and to prevent any sale or forfeiture of the affected portion of the Leased
Property by reason of such non-payment or non-compliance, (g) if such contest is
finally resolved against Lessor or any member of the Leasing Group, Lessee
shall promptly pay, as Additional Charges due hereunder, the amount required to
be paid, together with all interest and penalties accrued thereon and/or comply
(and cause any Sublessee and any Manager to comply) with the applicable Legal
Requirement, and (H) no state of facts or circumstance exists which constitutes,
or with the passage of time and/or the giving of notice, could constitute a
Lease Default; PROVIDED, HOWEVER, but without limiting any other right Lessee
may have under the Lease Documents to contest the payment of Rent, the
provisions of this Article 15 shall not be construed to permit Lessee to contest
the payment of Rent or any other sums payable by Lessee to Lessor under any of
the Lease Documents. If such contest is finally resolved in favor of Lessee,
Lessee shall be entitled to any refund resulting therefrom.
15.2 LESSOR'S COOPERATION. Lessor, at Lessee's sole cost and expense,
shall execute and deliver to Lessee such authorizations and other documents as
may reasonably be required in any such contest, so long as the same does not
expose Lessor to any civil or criminal liability, and, if reasonably requested
by Lessee or if Lessor so desires, Lessor shall join as a party therein.
15.3 LESSEE'S INDEMNITY. Lessee, as more particularly provided for in
Section 12.2, shall indemnify, defend (with counsel acceptable to Lessor) and
save Lessor harmless against any liability, cost or expense of any kind,
including, without limitation, attorneys' fees and expenses that may be imposed
upon Lessor in connection with any such contest and any loss resulting therefrom
and in the enforcement of this indemnification.
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ARTICLE 16
DEFAULT
16.1 EVENTS OF DEFAULT. Each of the following shall constitute an
"Event of Default" hereunder and shall entitle Lessor to exercise its remedies
hereunder and under any of the other Lease Documents:
(a) any failure of Lessee to pay any amount due hereunder or under
any of the other Lease Documents within ten (10) days following the date
when such payment was due;
(b) any failure in the observance or performance of any other
covenant, term, condition or warranty provided in this Lease or any of the
other Lease Documents, other than the payment of any monetary obligation
and other than as specified in subsections (c) through (v) below (a
"Failure to Perform"), continuing for thirty (30) days after the giving of
notice by Lessor to Lessee specifying the nature of the Failure to Perform;
except as to matters not susceptible to cure within thirty (30) days,
provided that with respect to such matters, (i) Lessee commences the cure
thereof within thirty (30) days after the giving of such notice by Lessor
to Lessee, (ii) Lessee continuously prosecutes such cure to completion,
(iii) such cure is completed within one hundred twenty (120) days after the
giving of such notice by Lessor to Lessee and (iv) such Failure to Perform
does not impair the value of, or Lessor's rights with respect to, the
Leased Property or otherwise impair the Collateral or Lessor's security
interest therein;
(c) the occurrence of any default or breach of condition continuing
beyond the expiration of the applicable notice and grace periods, if any,
under any of the other Lease Documents, including, without limitation, the
Agreement Regarding Related Transactions;
(d) if any representation, warranty or statement contained herein or
in any of the other Lease Documents proves to be untrue in any material
respect as of the date when made or at any time during the Term if such
representation or warranty is a continuing representation or warranty
pursuant to Section 10.2;
(e) if any member of the Leasing Group shall (i) voluntarily be
adjudicated a bankrupt or insolvent, (ii) seek or consent to the
appointment of a receiver or trustee for itself or for the Leased Property,
(iii) file a petition seeking relief under the bankruptcy or other similar
laws of the United States, any state or any jurisdiction, (iv) make a
general assignment for the benefit
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of creditors, (v) make or offer a composition of its debts with its
creditors or (vi) be unable to pay its debts as such debts mature;
(f) if any court shall enter an order, judgment or decree appointing,
without the consent of any member of the Leasing Group, a receiver or
trustee for such member or for any of its property and such order, judgment
or decree shall remain in force, undischarged or unstayed, ninety (90) days
after it is entered;
(g) if a petition is filed against any member of the Leasing Group
which seeks relief under the bankruptcy or other similar laws of the United
States, any state or any other jurisdiction, and such petition is not
dismissed within ninety (90) days after it is filed;
(h) in the event that:
i. all or any portion of the interest of any partner, shareholder,
member in any member of the Leasing Group (other than Guarantor)
shall be, on any one or more occasions, directly or indirectly,
sold, assigned, hypothecated or otherwise transferred (whether by
operation of law or otherwise), if such member of the Leasing
Group shall be a partnership, joint venture, syndicate or other
group, without the prior written consent of Lessor, in each
instance, which consent may be withheld by Lessor in its
reasonable discretion with respect to a sale, assignment,
hypothecation or other transfer to a Meditrust/Emeritus
Transaction Affiliate and in all other cases, in its sole and
absolute discretion;
ii. the shares of the issued and outstanding capital stock of any
member of the Leasing Group (other than Guarantor) shall be, on
any one or more occasions, directly or indirectly, sold,
assigned, hypothecated or otherwise transferred (whether by
operation of law or otherwise), if such member of the Leasing
Group shall be a corporation, without the prior written consent
of Lessor, in each instance, which consent may be withheld by
Lessor in its reasonable discretion with respect to a sale,
assignment, hypothecation or other transfer to a
Meditrust/Emeritus Transaction Affiliate and in all other cases,
in its sole and absolute discretion; or
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iii. all or any portion of the beneficial interest in any member of
the Leasing Group (other than Guarantor) shall be, directly or
indirectly, sold or otherwise transferred (whether by operation
of law or otherwise), if such member of the Leasing Group shall
be a trust, without the prior written consent of Lessor, in each
instance, which consent may be withheld by Lessor in its
reasonable discretion with respect to a sale, assignment,
hypothecation or other transfer to a Meditrust/Emeritus
Transaction Affiliate and in all other cases, in its sole and
absolute discretion;
Notwithstanding the foregoing, no consent of Lessor to a pledge by Lessee
of its stock to the lender of a Working Capital Loan satisfying the
requirements of Section 6.1.3 shall be required la "Working Capital Stock
Pledge").
(i) the death, incapacity, liquidation, dissolution or termination of
existence of any member of the Leasing Group or the merger or consolidation
of any member of the Leasing Group with any other Person except as
expressly permitted by the terms of this Lease Agreement;
(j) except as provided in Section 19.1 hereof, if, without the prior
written consent of Lessor, in each instance, which consent may be withheld
by Lessor in its sole and absolute discretion, Lessee's or any interest of
a Sublessee which is an Affiliate of Lessee in the Leased Property shall
be, directly or indirectly, mortgaged, encumbered (by any voluntary or
involuntary Lien other than the Permitted Encumbrances), subleased, sold,
assigned, hypothecated or otherwise transferred (whether by operation of
law or otherwise);
(k) the occurrence of a default or breach of condition continuing
beyond the expiration of the applicable notice and grace periods, if any,
in connection with the payment or performance of any other material
obligation of Lessee or any Sublessee which is an Affiliate of Lessee, if
the applicable creditor or obligee elects to declare the obligations of
Lessee or the applicable Sublessee under the applicable agreement due and
payable or to exercise any other right or remedy available to such creditor
or obligee, or, whether or not such creditor or obligee has so elected or
exercised, such creditor's or obligee's rights and remedies, if exercised,
may involve or result in the taking of possession of, or the creation of a
Lien on, the Leased Property; PROVIDED, HOWEVER, that in any event, the
election by the applicable creditor or obligee to declare the
obligations of Lessee under the applicable agreement due and
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payable or to exercise any other right or remedy available to such creditor
or obligee shall be an Event of Default hereunder only if such obligations,
individually or in the aggregate, are in excess of TWO HUNDRED FIFTY
THOUSAND DOLLARS ($250,000);
(l) the occurrence of a Related Party Default;
(m) the occurrence of any default or breach of condition which is not
cured within any applicable cure period under a Working Capital Loan
secured by a Working Capital Stock Pledge (or any documents executed in
connection therewith) or the exercise of any ownership rights by the lender
of a Working Capital Loan secured by a Working Capital Stock Pledge;
(n) except as a result of Casualty or a partial or complete
Condemnation (including a temporary taking), if Lessee or any Sublessee
ceases operation of the Facility for a period in excess of thirty (30) days
(a "Failure to Operate");
(o) if one or more judgments against Lessee or any Sublessee which is
an Affiliate of Lessee or attachments against Lessee's interest or any such
Sublessee's interest in the Leased Property, which in the aggregate exceed
TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000) or which may materially and
adversely interfere with the operation of the Facility, remain unpaid,
unstayed on appeal, undischarged, unbonded or undismissed for a period of
thirty (30) days;
(p) if any malpractice award or judgment exceeding any applicable
professional liability insurance coverage by more than FIVE HUNDRED
THOUSAND DOLLARS ($500,000) shall be rendered against any member of the
Leasing Group and either (i) enforcement proceedings shall have been
commenced by any creditor upon such award or judgment or (ii) such award or
judgment shall continue unsatisfied and in effect for a period of ten (10)
consecutive days without an insurance company satisfactory to Lessor (in
its sole and absolute discretion) having agreed to fund such award or
judgment in a manner satisfactory to Lessor (in its sole and absolute
discretion) and in either case such award or judgment shall, in the
reasonable opinion of Lessor, have a material adverse affect on the ability
of Lessee or any Sublessee to operate the Facility;
(q) if any Provider Agreement material to the operation or financial
condition of the Leased Property shall be terminated prior to the
expiration of the term thereof or, without the prior written consent of
Lessor, in each instance, which consent may be withheld in Lessor's
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reasonable discretion, shall not be renewed or extended upon the expiration
of the stated term thereof;
(r) if, after Lessee or any Sublessee has obtained approval for
Medicare and/or Medicaid funding, a final unappealable determination is
made by the applicable Governmental Authority that Lessee or any Sublessee
shall have failed to comply with applicable Medicare and/or Medicaid
regulations in the operation of the Facility, as a result of which failure
Lessee or such Sublessee is declared ineligible to continue
its participation in the Medicare and/or Medicaid programs and such
determination could reasonably be expected to have a material adverse
effect on the operation or financial condition of the Leased Property;
(s) if any member of the Leasing Group receives notice of a final
unappealable determination by applicable Governmental Authorities of the
revocation of any Permit required for the lawful construction or operation
of the Facility in accordance with the Primary Intended Use and, if
applicable, the Other Permitted Uses or the loss of any Permit under any
other circumstances under which any member of the Leasing Group is required
to permanently cease the construction or operation of the Facility in
accordance with the Primary Intended Use and the Other Permitted Uses; and
(t) any failure to maintain the insurance required pursuant to
Section 13 of this Lease in force and effect at all times until the Lease
Obligations are fully paid and performed;
(u) the appointment of a temporary manager (or operator) for the
Leased Property by any Governmental Authority;
(v) the entry of an order by a court with jurisdiction over the
Leased Property to close the Facility, to transfer one or more residents
the Facility as a result of an allegation of abuse or neglect or to take
any action to eliminate an emergency situation then existing at the
Facility, if such order has not been stayed pending appeal within ten (10)
following such entry; or
(w) the occurrence of any default or breach of condition continuing
for more than thirty (30) days under any credit agreement, loan agreement
or other agreement establishing a major line of credit (including, without
limitation, a major line of credit or a Working Capital Loan which is not
secured by a Working Capital Stock Pledge)(or any documents executed in
connection with such lines of credit) on behalf of Guarantor without regard
to whether the applicable creditor has elected to declare the indebtedness
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due and payable under such line of credit or to exercise any other right or
remedy available to it or the occurrence of any such default or breach of
condition if the applicable creditor has elected to declare the
indebtedness due and payable under such line of credit or to exercise any
other right or remedy available to it. For the purpose of this provision,
a major line of credit shall mean and include any line of credit
established in an amount equal to or greater than ONE MILLION DOLLARS
($1,000,000) with respect to a line of credit for which Guarantor is an
obligor, endorser, surety or guarantor.
16.2 REMEDIES.
(a) If any Lease Default shall have occurred, Lessor may at its option
terminate this Lease by giving Lessee not less than ten (10) days' notice of
such termination, or exercise any one or more of its rights and remedies under
this Lease or any of the other Lease Documents, or as available at law or in
equity and upon the expiration of the time fixed in such notice, the Term shall
terminate (but only if Lessor shall have specifically elected by a written
notice to so terminate the Lease) and all rights of Lessee under this Lease
shall cease. Notwithstanding the foregoing, in the event of Lessee's failure to
pay Rent, if such Rent remains unpaid beyond ten (10) days from the due
date thereof, Lessor shall not be obligated to give ten (10) days notice of such
termination or exercise of any of its other rights and remedies under this
Lease, or the other Lease Documents, or otherwise available at law or in equity,
and Lessor shall be at liberty to pursue any one or more of such rights or
remedies without further notice. No taking of possession of the Leased Property
by or on behalf of Lessor, and no other act done by or on behalf of Lessor,
shall constitute an acceptance of surrender of the Leased Property by Lessee or
reduce Lessee's obligations under this Lease or the other Lease Documents,
unless otherwise expressly agreed to in a written document signed by an
authorized officer or agent of Lessor.
(b) To the extent permitted under applicable law, Lessee shall pay as
Additional Charges all costs and expenses (including, without limitation,
attorneys' fee and expenses) reasonably incurred by or on behalf of Lessor as a
result of any Lease Default.
(c) If any Lease Default shall have occurred, whether or not this Lease
has been terminated pursuant to Paragraph (a) of this Section, Lessee shall, to
the extent permitted under applicable law, if required by Lessor so to do, upon
not less than ten (10) days' prior notice from Lessor, immediately surrender to
Lessor the Leased Property pursuant to the provisions of Paragraph (a) of this
Section and quit the same, and Lessor may enter upon and repossess the Leased
Property by
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reasonable force, summary proceedings, ejectment or otherwise, and may remove
Lessee and all other Persons and any and all of the Tangible Personal Property
from the Leased Property, subject to the rights of any residents of the Facility
and any Sublessees who are not Affiliates of any member of the Leasing Group and
to any requirements of applicable law, or Lessor may claim ownership of the
Tangible Personal Property as set forth in Section 5.2.3 hereof or Lessor may
exercise its rights as secured party under the Security Agreement. Lessor shall
use reasonable, good faith efforts to relet the Leased Property or otherwise
mitigate damages suffered by Lessor as a result of Lessee's breach of this
Lease.
(d) In addition to all of the rights and remedies of Lessor set forth in
this Lease and the other Lease Documents, if Lessee shall fail to pay any rental
or other charge due hereunder (whether denominated as Base Rent, Additional
Rent, Additional Charges or otherwise) within ten (10) days after same shall
have become due and payable, then and in such event Lessee shall also pay to
Lessor (i) a late payment service charge (in order to partially defray Lessor's
administrative and other overhead expenses) equal to TWO HUNDRED FIFTY DOLLARS
($250) and (ii) to the extent permitted by applicable law, interest on such
unpaid sum at the Overdue Rate; it being understood, however, that nothing
herein shall be deemed to extend the due date for payment of any sums required
to be paid by Lessee hereunder or to relieve Lessee of its obligation to pay
such sums at the time or times required by this Lease.
16.3 DAMAGES. None of (a) the termination of this Lease pursuant to
Section 16.2, (b) the eviction of Lessee or the repossession of the Leased
Property, (c) the inability after reasonable diligence of Lessor,
notwithstanding reasonable good faith efforts, to relet the Leased Property, (d)
the reletting of the Leased Property or (e) the failure of Lessor to collect or
receive any rentals due upon any such reletting, shall relieve Lessee of its
liability and obligations hereunder, all of which shall survive any such
termination, repossession or reletting. In any such event, 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, repossession or
eviction. Thereafter, Lessee shall forthwith pay to Lessor, at Lessor's option,
either:
(i) the sum of: (x) all Rent that is due and unpaid at later to occur
of termination, repossession or eviction, together with interest
thereon at the Overdue Rate to the date of payment, PLUS (y) the
worth (calculated in the manner stated below) of the amount by
which the unpaid Rent for the balance of the Term after the later
to occur of the termination, repossession or eviction exceeds the
fair market rental
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value of the Leased Property for the balance of the Term, PLUS (z) any
other amount necessary to compensate Lessor for all damage proximately
caused by Lessee's failure to perform the Lease Obligations or which
in the ordinary course would be likely to result therefrom and LESS
the amount of rent that has actually been received by Lessor following
the termination of this Lease from a Person other than an Affiliate of
Lessor (which for purposes hereof shall include the net income
received by Lessor or an Affiliate of Lessor from its own operation of
the Leased Property in the event it elects to resume operation thereof
in lieu of hiring a third party manager or re-letting the Leased
Property); or
(ii) each payment of Rent as the same would have become due and payable if
Lessee's right of possession or other rights under this Lease had not
been terminated, or if Lessee had not been evicted, or if the Leased
Property had not been repossessed which Rent, to the extent permitted
by law, shall bear interest at the Overdue Rate from the date when due
until the date paid, and Lessor may enforce, by action or otherwise,
any other term or covenant of this Lease. There shall be accredited
against Lessee's obligation under this Clause (ii) amounts actually
collected by Lessor from another tenant to whom the Leased Property
may have actually been leased or, if Lessor is operating the Leased
Property for its own account, the actual Cash Flow of the Leased
Property.
In making the determinations described in subparagraph (i) above, the
"worth" of unpaid Rent shall be determined by a court having jurisdiction
thereof using the lowest rate of capitalization (highest present worth)
reasonably applicable at the time of such determination and allowed by
applicable law and the Additional Rent shall be deemed to be the same as the
average Additional Rent of the preceding five (5) full calendar years, or if
shorter, the average Additional Rent for the calendar years or portions thereof
since the date that Additional Rent commenced to accrue or such other amount as
either party shall prove reasonably could have been earned during the remainder
of the Term or any portion thereof.
16.4 LESSEE WAIVERS. If this Lease is terminated pursuant to Section
16.2, Lessee waives, to the extent not prohibited by applicable law, (a) any
right of redemption, re-entry or repossession, (b) any right to a trial by jury
in the event of summary proceedings to enforce the remedies set forth in this
Article 16, and (c) the benefit of any laws now or hereafter in force exempting
property from liability for rent or for debt.
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16.5 APPLICATION OF FUNDS. Any payments otherwise payable to Lessee
which are received by Lessor under any of the provisions of this Lease during
the existence or continuance of any Lease Default shall be applied to the Lease
Obligations in the order which Lessor may reasonably determine or as may be
required by the laws of the State.
16.6 FAILURE TO CONDUCT BUSINESS. For the purpose of determining
rental loss damages or Additional Rent, in the event Lessee fails to conduct
business upon the Leased Property, exact damages or the amount of Additional
Rent being unascertainable, it shall be deemed that the Additional Rent for such
period would be equal to the average annual Additional Rent during the five (5)
preceding calendar years or such shorter period of time as may have existed
between the date Additional Rent commenced to accrue and the date of
computation.
16.7 LESSOR'S RIGHT TO CURE. If Lessee shall fail to make any
payment, or to perform any act required to be made or performed under this Lease
and to cure the same within the relevant time periods provided in Section 16.1,
Lessor, after five (5) Business Days' prior notice to Lessee (except in an
emergency when such shorter notice shall be given as is reasonable under the
circumstances), and without waiving or releasing any obligation or Event of
Default, may (but shall be under no obligation to) at any time thereafter make
such payment or perform such act for the account and at the expense of Lessee,
and may, to the extent permitted by law, enter upon the Leased Property for such
purpose and take all such action thereon as, in Lessor's 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,
without limitation, reasonable attorneys' fees and expenses, in each case, to
the extent permitted by law) so incurred shall be paid by Lessee to Lessor on
demand as an Additional Charge. The obligations of Lessee and rights of Lessor
contained in this Article shall survive the expiration or earlier termination of
this Lease.
16.8 NO WAIVER BY LESSOR. Lessor shall not by any act, delay, omission
or otherwise including, without limitation, the exercise of any right or remedy
hereunder) be deemed to have waived any of its rights or remedies hereunder or
under any of the other Lease Documents unless such waiver is in writing and
signed by Lessor, and then, only to the extent specifically set forth therein.
No waiver at any time of any of the terms, conditions, covenants,
representations or warranties set forth in any of the Lease Documents
(including, without limitation, any of the time periods set forth therein for
the performance of the Lease Obligations) shall be construed as a waiver of any
other term, condition, covenant, representation or warranty of any of the Lease
Documents, nor shall such a waiver in any one instance
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or circumstances be construed as a waiver of the same term, condition, covenant,
representation or warranty in any subsequent instance or circumstance. No such
failure, delay or waiver shall be construed as creating a requirement that
Lessor must thereafter, as a result of such failure, delay or waiver, give
notice to Lessee or any Guarantor, or any other Person that Lessor does not
intend to, or may not, give a further waiver or to refrain from insisting upon
the strict performance of the terms, conditions, covenants, representations and
warranties set forth in the Lease Documents before Lessor can exercise any of
its rights or remedies under any of the Lease Documents or before any Lease
Default can occur, or as establishing a course of dealing for interpreting the
conduct of and agreements between Lessor and Lessee, the Guarantor or any other
Person.
The acceptance by Lessor of any payment that is less than payment in full
of all amounts then due under any of the Lease Documents at the time of the
making of such payment shall not: (a) constitute a waiver of the right to
exercise any of Lessor's remedies at that time or at any subsequent time, (b)
constitute an accord and satisfaction or (c) nullify any prior exercise of any
remedy, without the express written consent of Lessor. Any failure by Lessor to
take any action under this Lease or any of the other Lease Documents by reason
of a default hereunder or thereunder, acceptance of a past due installment, or
indulgences granted from time to time shall not be construed as a novation of
this Lease or any of the other Lease Documents or as a waiver of such right or
of the right of Lessor thereafter to insist upon strict compliance with the
terms of this Lease or any of the other Lease Documents, or (d) prevent the
exercise of such right of acceleration or any other right granted hereunder or
under applicable law for purposes of obtaining the damages set forth in Section
16.3, specific performance or equitable remedies; and to the maximum extent not
prohibited by applicable law, Lessee hereby expressly waives the benefit of any
statute or rule of law or equity now provided, or which may hereafter be
provided, which would produce a result contrary to or in conflict with the
foregoing.
16.9 RIGHT OF FORBEARANCE. Whether or not for consideration paid or
payable to Lessor and, except as may be otherwise specifically agreed to by
Lessor in writing, no forbearance on the part of Lessor, no extension of the
time for the payment of the whole or any part of the Obligations, and no other
indulgence given by Lessor to Lessee or any other Person, shall operate to
release or in any manner affect the original liability of Lessee or such other
Persons, or to limit, prejudice or impair any right of Lessor, including,
without limitation, the right to realize upon any collateral, or any part
thereof, for any of the Obligations evidenced or secured by the Lease Documents;
notice of any such extension, forbearance or
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indulgence being hereby waived by Lessee and all those claiming by, through or
under Lessee.
16.10 CUMULATIVE REMEDIES. The rights and remedies set forth under this
Lease are in addition to all other rights and remedies afforded to Lessor under
any of the other Lease Documents or at law or in equity, all of which are hereby
reserved by Lessor, and this Lease is made and accepted without prejudice to any
such rights and remedies. All of the rights and remedies of Lessor under each
of the Lease Documents shall be separate and cumulative and may be exercised
concurrently or successively in Lessor's sole and absolute discretion.
ARTICLE 17
SURRENDER OF LEASED PROPERTY OR LEASE; HOLDING OVER
17.1 SURRENDER. Lessee shall, upon the expiration or prior termination
of the Term (unless occasioned by Lessee's purchase of the Leased Property
pursuant to the terms of this Lease Agreement), vacate and surrender the Leased
Property to Lessor in good repair and condition, in compliance with all
applicable Legal Requirements, all Insurance Requirements, and in compliance
with the provisions of Article 8, except for: (a) ordinary wear and tear
(subject to the obligation of Lessee to maintain the Leased Property in good
order and repair during the entire Term of the Lease), (b) damage caused by the
gross negligence or willful acts of Lessor, and (c) any damage or destruction
resulting from a Casualty or Taking that Lessee is not required by the terms of
this Lease to repair or restore.
17.2 TRANSFER OF CONTRACTS AND PERMITS. In connection with the
expiration or any earlier termination of this Lease (unless occasioned by
Lessee's purchase of the Leased Property pursuant to the terms of this Lease
Agreement), upon any request made from time to time by Lessor, Lessee shall (a)
promptly and diligently use its best efforts to (i) transfer and assign all
Permits and Contracts necessary or desirable for the operation of the Leased
Property in accordance with its Primary Intended Use to Lessor or its designee
to the extent the same are assignable under applicable Legal Requirements and/or
(ii) arrange for the transfer or assignment of such Permits and Contracts to
Lessor or its designee and (b) cooperate in every respect (and to the fullest
extent possible) and assist Lessor or its designee in obtaining such Permits and
Contracts (whether by transfer, assignment or otherwise) provided, however, that
unless a termination is the result of a Lease Default, Casualty or Condemnation,
Lessee's efforts and cooperation shall not require Lessee to pay the costs and
expenses incurred by Lessor or Lessor's designated transferee of the Contracts
and Permits. Such efforts and cooperation on the part of Lessee shall include,
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without limitation, the execution, delivery and filing with appropriate
Governmental Authorities and Third Party Payors of any applications, petitions,
statements, notices, requests, assignments and other documents or instruments
requested by Lessor. Furthermore, Lessee shall not take any action or refrain
from taking any action which would defer, delay or jeopardize the process of
Lessor or its designee obtaining said Permits and Contracts (whether by
transfer, assignment or otherwise). Without limiting the foregoing, Lessee
shall not seek to transfer or relocate any of said Permits or Contracts to any
location other than the Leased Property. The provisions of this Section 17.2
shall survive the expiration or earlier termination of this Lease.
Lessee hereby appoints Lessor as its attorney-in-fact, with full power of
substitution to take such actions, in the event that Lessee fails to comply with
any request made by Lessor hereunder, as Lessor (in its sole absolute
discretion) may deem necessary or desirable to effectuate the intent of this
Section 17.2. The power of attorney conferred on Lessor by the provisions of
this Section 17.2, being coupled with an interest, shall be irrevocable until
the Obligations are fully paid and performed and shall not be affected by any
disability or incapacity which Lessee may suffer and shall survive the same.
Such power of attorney is provided solely to protect the interests of Lessor and
shall not impose any duty on the Lender to exercise any such power and neither
Lessor-nor such attorney-in-fact shall be liable for any act, omission, error in
judgment or mistake of law, except as the same may result from its gross
negligence or willful misconduct.
17.3 NO ACCEPTANCE OF SURRENDER. Except at the expiration of the Term
in the ordinary course, no surrender to Lessor of this Lease or of the Leased
Property or 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.
17.4 HOLDING OVER. If, for any reason, Lessee shall remain in
possession of the Leased Property after the expiration or any earlier
termination of the Term, such possession shall be as a tenant at sufferance
during which time Lessee shall pay as rental each month, one and one-half times
the aggregate of (I) one-twelfth of the aggregate Base Rent, and Additional Rent
payable at the time of such expiration or earlier termination of the Term; (II)
all Additional Charges accruing during the month and (III) all other sums, if
any, payable by Lessee pursuant to the provisions of this Lease with respect to
the Leased Property. During such period of 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
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right, to the extent given by law to tenants at sufferance, 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 18
PURCHASE OF THE LEASED PROPERTY
18.1 PURCHASE OF THE LEASED PROPERTY. In the event Lessee purchases
the Leased Property from Lessor pursuant to any of the terms of this Lease,
Lessor shall, upon receipt from Lessee of the applicable purchase price,
together with full payment of any unpaid Rent due and payable with respect to
any period ending on or before the date of the purchase, deliver to Lessee a
deed with covenants only against acts of Lessor conveying the entire interest of
Lessor in and to the Leased Property to Lessee subject to all applicable Legal
Requirements, all of the matters described in clauses (a), (b), (e) and (g) of
Section 11.5.2, Impositions, any Liens created BY Lessee, any Liens created in
accordance with the terms of this Lease (except to the extent specifically
excluded by the terms hereof) or consented to by Lessee, the claims of all
Persons claiming by, through or under Lessee, any other matters assented to by
Lessee and all matters for which Lessee has responsibility under any of the
Lease Documents, but otherwise not subject to any other Lien created by Lessor
from and after the Commencement Date (other than an Encumbrance permitted under
Article 20 which Lessee elects to assume). The applicable purchase price shall
be paid in cash to Lessor, or as Lessor may direct, in federal or other
immediately available funds except as otherwise mutually agreed by Lessor and
Lessee. All expenses of such conveyance, including, without limitation, the
cost of title examination or standard or extended coverage title insurance,
attorneys' fees incurred by Lessor in connection with such conveyance, recording
and transfer taxes and recording fees and similar charges and specifically
excluding any prepayment penalties, if any, due Lessor's mortgagee, shall be
paid by Lessee.
18.2 APPRAISAL.
18.2.1 DESIGNATION OF APPRAISERS. In the event that it becomes
necessary to determine the Fair Market Value of the Leased Property for any
purpose of this Lease, the party required or permitted to give notice of
such required determination shall include in the notice the name of a
Person selected to act as appraiser on its behalf. Within ten (10) days
after receipt of any such notice, Lessor (or Lessee, as the case may be)
shall by notice to Lessee (or Lessor, as the case may be) either accept
such Person to be
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the sole appraiser to determine the Fair Market Value of the Leased
Property or appoint a second Person as appraiser on its behalf.
18.2.2 APPRAISAL PROCESS. The appraisers thus appointed, each of
whom must be a member of the American Institute of Real Estate Appraisers
(or any successor organization thereto), shall, within forty-five (45) days
after the date of the notice appointing the first appraiser, proceed to
appraise the Leased Property to determine the Fair Market Value of the
Leased Property as of the relevant date (giving effect to the impact, if
any, of inflation from the date of their decision to the relevant date);
provided, however, that if only one appraiser shall have been so appointed,
or if two appraisers shall have been so appointed but only one such
appraiser shall have made such determination within fifty (50) days after
the making of Lessee's or Lessor's request, then the determination of such
appraiser shall be final and binding upon the parties. If two appraisers
shall have been appointed and shall have made their determinations within
the respective requisite periods set forth above and if the difference
between the amounts so determined shall not exceed ten percent (10%) of the
lesser of such amounts, then the Fair Market Value of the Leased Property
shall be an amount equal to fifty percent (50%) of the sum of the amounts
so determined. If the difference between the amounts so determined shall
exceed ten percent (10%) of the lesser of such amounts, then such two
appraisers shall have twenty (20) days to appoint a third appraiser, but if
such appraisers fail to do so, then either party may request the American
Arbitration Association or any successor organization thereto to appoint an
appraiser within twenty (20) days of such request, and both parties shall
be bound by any Appointment so made within such twenty (20) day period. If
no such appraiser shall have been appointed within such twenty (20) days or
within ninety (90) days of the original request for a determination of Fair
Market Value of the Leased Property, whichever is earlier, either Lessor or
Lessee may apply to any court having jurisdiction to have such appointment
made by such court. Any appraiser appointed by the original appraisers, by
the American Arbitration Association or by such court shall be instructed
to determine the Fair Market Value of the Leased Property within thirty
(30) days after appointment of such Appraiser. The determination of the
appraiser which differs most in terms of dollar amount from the
determinations of the other two appraisers shall be excluded, and fifty
percent (50%) of the sum of the remaining two determinations shall be final
and binding upon Lessor and Lessee as the Fair Market Value of the Leased
Property.
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18.2.3 SPECIFIC ENFORCEMENT AND COSTS. 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 the fees and
expenses of the appraiser appointed by it and each shall pay one-half of
the fees and expenses of the third appraiser and one-half of all other cost
and expenses incurred in connection with each appraisal.
18.3 LESSEE'S OPTION TO PURCHASE.
18.3.1 CONDITIONS TO OPTION. On the conditions (which conditions
Lessor may waive, at its sole option, by notice to Lessee at any time) that
(A) at the time of exercise of the Purchase Option and on the applicable
Purchase Option Date, there then exists no Lease Default, nor any state of
facts or circumstance which constitutes, or with the passage of time and/or
the giving of notice, would constitute a Lease Default and (b) Lessee
strictly complies with the provisions of this Section 18.3, then Lessee
shall have the option to purchase the Leased Property, at the price and
upon the terms hereinafter set forth (the "Purchase Option").
18.3.2 EXERCISE OF OPTION; DEPOSIT. Such Purchase Option shall
permit Lessee to purchase the Leased Property (a) on the last day of the
Initial Term or (b) on the last day, of any Extended Term effectively
exercised by Lessee (each of such dates are referred to herein as a
"Purchase Option Date") and shall be exercised by notice given by Lessee to
Lessor (the "Lessee's Purchase Option Notice") at least one hundred eighty
(180) days (but not more than three hundred sixty (360) days) prior to the
relevant Purchase Option Date. Notwithstanding anything to the contrary
set forth in this Lease, Lessee's right to purchase the Leased Property is
subject to the further conditions that (i) concurrently with the exercise
of the option set forth under this Section 18.3, the Lessee shall have
exercised its right to purchase the premises demised under each of the
Related Leases in accordance with the provisions of Section 18.3 of each of
the Related Leases, (ii) the conveyance of the Leased Property pursuant to
the provisions of this Section 18.3 shall occur simultaneously with the
conveyance of the premises demised under each of the Related Leases
pursuant to Section 18.3 of each of the Related Leases and (iii) all
conditions contained in the Agreement Regarding Related Transactions
pertaining to the Purchase Option are satisfied. Lessee shall have no
right to rescind Lessee's Purchase Option Notice once given unless (a) a
notice of
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such rescission is given (i) within ten (10) days following receipt of the
final determination of the Fair Market Value of the Leased Property or (ii)
within thirty (30) days following an event of Casualty or Condemnation as
to which Lessee has waived any right of termination set forth in Section
13.2.2 hereof and (b) simultaneously with such notice of rescission,
Lessee, by notice given pursuant to Section 1.3 hereof extends the Term.
18.3.3 CONVEYANCE. If the Purchase Option is exercised by Lessee in
accordance with the terms hereof, the Leased Property shall be conveyed by
a good and sufficient deed with covenants only against acts of Lessor (the
"Deed") running to Lessee or to such grantee as Lessee may designate by
notice to Lessor at least seven (7) days before the Time of Closing.
18.3.4 CALCULATION OF PURCHASE PRICE. The price to be paid by
Lessee for the acquisition of the Leased Property pursuant to this Purchase
Option (the "Purchase Price") shall be equal to the greater of (a) the
Meditrust Investment or (b) an amount equal to the then Fair Market Value
of the Leased Property minus the Fair Market Added Value, subject to the
terms of the Agreement Regarding Related Transactions.
18.3.5 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid
by Lessee at the Time of Closing by certified, cashier's, treasurer's or
bank check(s) or wire transfer pursuant to instructions received from
Lessor in accordance with the terms of the Agreement Regarding Related
Transactions as reduced by the principal balance of any Fee Mortgage which
Lessee has elected to, and has the right to, assume in accordance with the
terms hereof.
18.3.6 PLACE AND TIME OF CLOSING. If this Purchase Option is
exercised, the closing shall occur and the Deed shall be delivered (the
"Closing") at the office of Lessor at 12:00 o'clock noon (E.S.T.) on the
applicable Purchase Option Date (such time, as the same may be extended by
mutual written agreement of Lessor and Lessee, being hereinafter referred
to as the "Time of Closing") in accordance with the terms of the Agreement
Regarding Related Transactions. It is agreed that time is of the essence
of this Purchase Option.
18.3.7 CONDITION OF LEASED PROPERTY. The Leased Property is to be
purchased "AS IS" and "WHERE IS" as of the Time of Closing.
18.3.8 QUALITY OF TITLE. If Lessor shall be unable to give title or
to make conveyance, as stipulated in this
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Section 18.3, then, at Lessor's option, Lessor shall use reasonable efforts
to remove all defects in title and the applicable Purchase Option Date and
Time of Closing shall be extended for period of thirty (30) days other than
with respect to any Encumbrances which Lessor has caused to exist. Lessor
shall not be required to expend more than FIFTY THOUSAND DOLLARS ($50,000)
(inclusive of attorney's fees) in order to have used "reasonable efforts."
18.3.9 LESSOR'S INABILITY to PERFORM. If at the expiration of the
extended time Lessor shall have failed so to remove any such defects in
title, then all other obligations of all parties hereto under Section 18.3
shall cease and Section 18.3 shall be void and without recourse to the
parties hereto. Notwithstanding the foregoing, Lessee shall have the
election, at either the original or extended Purchase Option Date and Time
of Closing, to accept such title as Lessor can deliver to the Leased
Property in its then condition and to pay therefor the Purchase Price
without reduction, in which case Lessor shall convey such title; PROVIDED,
THAT, in the event of such conveyance, if any portion of the Leased
Property shall have been taken by Condemnation prior to the applicable
Purchase Option Date and Time of Closing, Lessor shall pay over or assign
to Lessee at the Time of Closing, all Awards recovered on account of such
Taking, less any amounts reasonably expended by Lessor in obtaining such
Award and less any amounts expended for restoration pursuant to the
provisions of Article 14 hereof, or, to the extent such Awards have not
been recovered as of the applicable Purchase Option Date and Time of
Closing, Lessor shall assign to Lessee all its rights with respect to any
claim therefor and FURTHER PROVIDED, THAT in the event of such conveyance,
if any portion of the Leased Property shall have suffered a Casualty prior
to the applicable Purchase Option Date and Time of Closing, Lessor shall
pay over or assign to Lessee at the Time of Closing, all insurance proceeds
recovered on account of such Casualty, less any amounts reasonably expended
by Lessor in obtaining such proceeds and less any amounts expended for
restoration pursuant to the provisions of Article 13 hereof, or, to the
extent such proceeds have not been recovered as of the applicable Purchase
Option Date and Time of Closing, Lessor shall assign to Lessee all its
rights with respect to any claim therefor.
18.3.10 MERGER BY DEED. The acceptance of the Deed by Lessee or the
grantee designated by Lessee, as the case may be, shall be deemed to be a
full performance and discharge of every agreement and obligation to be
performed by Lessor contained or expressed in this Lease.
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18.3.11 USE OF PURCHASE PRICE TO CLEAR TITLE. To enable Lessor to
make conveyance as provided in this Section, Lessor may, at the Time of
Closing, use the Purchase Price or any portion thereof to clear the title
of any Lien, provided that all instruments so procured are recorded
contemporaneously with the Closing or reasonable arrangements are made for
a recording subsequent to the Time of Closing in accordance with customary
conveyancing practices.
18.3.12 LESSEE'S DEFAULT. If Lessee delivers Lessee's Purchase
Option Notice and fails to consummate the purchase of the Leased Property
in accordance with the terms. hereof for any reason other than Lessor's
willful and unexcused refusal to deliver the Deed or exercise of the right
of rescission in Section 18.3.2 hereof, (a) Lessee shall thereafter have no
further right to purchase the Leased Property pursuant to this Section,
although this Lease shall otherwise continue in full force and effect and
(b) Lessor shall have the right to sue for specific performance of Lessee's
obligations to purchase the Leased Property provided such suit for specific
performance is commenced within one (1) year after the applicable Purchase
Option Date on which such sale was supposed to occur.
ARTICLE 19
SUBLETTING AND ASSIGNMENT
19.1 SUBLETTING AND ASSIGNMENT. Lessee may not, without the prior
written consent of Lessor, which consent may be withheld in Lessor's sole and
absolute discretion, assign or pledge all or any portion of its interest in this
Lease or any of the other Lease Documents (whether by operation of law or
otherwise) or sublet all or any part of the Leased Property. For purposes of
this Section 19.1, the term "assign" shall be deemed to include, but not be
limited to, any one or more sales, pledges, hypothecations or other transfers
(including, without limitation, any transfer by operation of law) of any of the
capital stock of or partnership interest in Lessee or sales, pledges,
hypothecations or other transfers (including, without limitation, any transfer
by operation of law) of the capital or the assets of Lessee. Any such
assignment, pledge, sale, hypothecation or other transfer made without Lessor's
consent shall be void and of no force and effect. Notwithstanding the
foregoing, Lessors consent shall not be unreasonably withheld with respect to an
assignment or pledge of an interest of Lessee in this Lease or a sublet of all
or a part of the Leased Property to a Meditrust/Emeritus Transaction Affiliate.
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19.2 ATTORNMENT. Lessee shall insert in each (a) Sublease approved by
Lessor, provisions to the effect that (b) and such Sublease is subject and
subordinate to all of the terms and provisions of this Lease and to the rights
of Lessor hereunder, (B) in the event this Lease shall terminate before the
expiration of such Sublease, the Sublessee thereunder will, at Lessor's option,
attorn to Lessor and waive any right the Sublessee may have to terminate the
Sublease or to surrender possession thereunder, as a result of the termination
of this Lease and (c) in the event the Sublessee receives a written notice from
Lessor stating that Lessee is in default under this Lease, the Sublessee shall
thereafter be obligated to pay all rentals accruing under said Sublease directly
to Lessor or as Lessor may direct. All rentals received from the Sublessee by
Lessor shall be credited against the amounts owing by Lessee under this Lease.
ARTICLE 20
TITLE TRANSFERS AND LIENS GRANTED BY LESSOR
20.1 NO MERGER OF TITLE. Except as otherwise provided in Section
18.3.10, there shall be no merger of this Lease or of the leasehold estate
created hereby with the fee estate in the Leased Property by reason of the fact
that the same Person may acquire, own or hold, directly or indirectly (a) this
Lease or the leasehold estate created hereby or any interest in this Lease or
such leasehold. estate and (b) the fee estate in the Leased Property.
20.2 TRANSFERS BY LESSOR. If the original Lessor named herein or any
successor in interest shall convey the Leased Property in accordance with the
terms hereof, other than as security for a debt, and the grantee or transferee
of the Leased Property shall expressly assume all obligations of Lessor
hereunder arising or accruing from and after the date of such conveyance or
transfer, the original Lessor named herein or the applicable successor in
interest so conveying the Leased Property shall thereupon be released from all
future liabilities and obligations of Lessor under this Lease arising or
accruing from and after the date of such conveyance or other transfer as to the
Leased Property and all such future liabilities and obligations shall thereupon
be binding upon the new owner.
20.3 LESSOR MAY GRANT LIENS. Without the consent of Lessee, but
subject to the terms and conditions set forth below in this Section 20.3, 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 interest therein ("Encumbrance"), whether to secure any
borrowing or other means of financing or refinancing, provided that Lessee shall
have no obligation to make payments under such
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Encumbrances. Lessee shall subordinate this Lease to the lien of any such
Encumbrance, on the condition that the beneficiary or holder of such Encumbrance
executes a non-disturbance agreement in conformity with the provisions of
Section 20.4. To the extent that any such Encumbrance consists of a mortgage or
deed of trust on Lessor's interest in the Leased Property the same shall be
referred to herein as a "Fee Mortgage" and the holder thereof shall be referred
to herein as a "Fee Mortgagee".
20.4 SUBORDINATION AND NON-DISTURBANCE. Concurrently with the
execution and delivery of any Fee Mortgage entered into after the date hereof,
provided that the Lessee executes and delivers an agreement of the type
described in the following paragraph, Lessor shall obtain and deliver to Lessee
an agreement by the holder of such Fee Mortgage, pursuant to which, (a) the
applicable Fee Mortgagee consents to this Lease and (b) agrees that,
notwithstanding the terms of the applicable Fee Mortgage held by such Fee
Mortgagee, or any default, expiration, termination, foreclosure, sale, entry or
other act or omission under or pursuant to such Fee Mortgage or a transfer in
lieu of foreclosure, (i) Lessee shall not be disturbed in peaceful enjoyment of
the Leased Property nor shall this Lease be terminated or cancelled at any time,
except in the event that Lessor shall have the right to terminate this Lease
under the terms and provisions expressly set forth herein, (ii) Lessee's option
to purchase the Leased Property shall remain in force and effect pursuant to the
terms hereof and (iii) in the event that Lessee elects its option to purchase
the Leased Property and performs all of its obligations hereunder in connection
with any such election., the holder of the Fee Mortgage shall release its Fee
Mortgage upon payment by Lessee of the purchase price required hereunder,
PROVIDED, THAT (1) such purchase price is paid to the holder of the Fee
Mortgage, in the event that the Indebtedness secured by the applicable Fee
Mortgage is equal to or greater than the purchase price or (2) in the event that
the purchase price is greater than the Indebtedness secured by the Fee Mortgage,
a portion of the purchase price equal to the Indebtedness secured by the Fee
Mortgage is paid to the Fee Mortgagee and the remainder of the purchase price is
paid to Lessor.
At the request from time to time by any Fee Mortgagee, Lessee shall (a)
subordinate this Lease and all of Lessee's rights and estate hereunder to the
Fee Mortgage held by such Fee Mortgagee and (b) agree that Lessee will attorn to
and recognize such Fee Mortgagee or the purchaser at any foreclosure sale or any
sale under a power of sale contained in any such Fee Mortgage as Lessor under
this Lease for the balance of the Term then remaining. To effect the intent and
purpose of the immediately preceding sentence, Lessee agrees to execute and
deliver such instruments in recordable from as are reasonably requested by
Lessor or the applicable Fee Mortgagee; PROVIDED, HOWEVER, that
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such Fee Mortgagee simultaneously executes, delivers and records a written
agreement of the type described in the preceding paragraph.
ARTICLE 21
LESSOR OBLIGATIONS
21.1 QUIET ENJOYMENT. As long as Lessee shall pay all Rent and all
other sums due under any of the Lease Documents as the same become due and shall
fully comply with all of the terms of this Lease and the other Lease Documents
and fully perform its obligations thereunder, Lessee shall peaceably and quietly
have, hold and enjoy the Leased Property throughout the Term, free of any claim
or other action by Lessor or anyone claiming by, through or under Lessor, but
subject to all the Permitted Encumbrances and such Liens as may hereafter be
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 to
fail to perform 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 21.
21.2 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, in which reference to this
Lease and all options contained herein shall be made. Lessee shall pay all
recording costs and taxes associated therewith.
21.3 DEFAULT BY LESSOR. Lessor shall be in default of its obligations
under this Lease only if Lessor shall fail to observe or perform any term,
covenant or condition of this Lease on its part to be performed and such failure
shall continue for a period of thirty (30) days after notice thereof from Lessee
(or such shorter time as may be necessary in order to protect the health or
welfare of any residents of the Facility or to ensure the continuing compliance
of the Facility with applicable Legal Requirements), 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 continue if Lessor, within said thirty (30)
day period, proceeds promptly and with due diligence to cure the failure and
diligently completes the curing thereof within one hundred twenty (120) days
after notice thereof.
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ARTICLE 22
NOTICES
Any notice, request, demand, statement or consent made hereunder or under
any of the other Lease Documents shall be in writing and shall be deemed duly
given if personally delivered, sent by certified mail, return receipt requested,
or sent by a nationally recognized commercial overnight delivery service with
provision for a receipt, postage or delivery charges prepaid, and shall be
deemed given when so personally delivered, three (3) business days following the
date postmarked or the next business day when placed in the possession of such
mail delivery service and addressed as follows:
If to Lessee: c/o Emeritus Corporation
Market Place One
2003 Western Avenue, Suite 660
Seattle, WA 98121-2162
Attention: Daniel R. Baty,
Chief Executive Officer
With a copy to: The Nathanson Group
1411 Fourth Avenue, Suite 905
Seattle, WA 98101
Attn: Randi S. Nathanson, Esquire
If to the Guarantor: Emeritus Corporation
Market Place One
2003 Western Avenue, Suite 660
Seattle, WA 98121-2162
Attention: Daniel R. Baty,
Chief Executive Officer
With a copy to: The Nathanson Group
1411 Fourth Avenue, Suite 905
Seattle, WA 98101
Attn: Randi S. Nathanson, Esquire
If to Lessor: Meditrust Acquisition Corporation I
197 First Avenue
Needham Heights, Massachusetts 02194
Attn: President
With copies to: Meditrust Acquisition Corporation I
197 First Avenue
Needham Heights, Massachusetts 02194
Attn: General Counsel
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and Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C.
One Financial Center
Boston, MA 02111
Attn: Joshua Davis, Esquire
or such other address as Lessor, Lessee or the Guarantor shall hereinafter from
time to time designate by a written notice to the others given in such manner.
Any notice given to Lessee or the Guarantor by Lessor at any time shall not
imply that such notice or any further or similar notice was or is required.
ARTICLE 23
LIMITATION OF MEDITRUST LIABILITY
The Declaration of Trust establishing the sole shareholder of Lessor,
Meditrust, a Massachusetts business trust ("Meditrust"), dated August 6, 1985
(the "Declaration"), as amended, a copy of which is duly filed in the office of
the Secretary of State of the Commonwealth of Massachusetts, provides that the
name "Meditrust" refers to the trustees under the Declaration collectively as
trustees, but not individually or personally; and that no trustee, officer,
shareholder, employee or agent of Meditrust or any of its Subsidiaries shall be
held to any personal liability, jointly, or severally, for any obligation of, or
claim against Meditrust or any of its Subsidiaries. All Persons dealing with
Meditrust or Lessor, in any way, shall look only to the assets of Meditrust or
Lessor, as applicable, for the payment of any sum or the performance of any
obligation. Furthermore, in no event shall Meditrust or Lessor ever be liable
to Lessee or any other Person for any indirect or consequential damages incurred
by Lessee or such other Person resulting from any cause whatsoever.
Notwithstanding the foregoing, Lessee hereby acknowledges and agrees that
Meditrust is not a party to this Lease and, that Lessee shall look only to the
assets of Lessor for the payment of any sum or performance of any obligation due
by or from Lessor pursuant to the terms and provisions of the Lease Documents.
ARTICLE 24
MISCELLANEOUS PROVISIONS
24.1 BROKER'S FEE INDEMNIFICATION. Lessee and Lessor each shall and
hereby agrees to indemnify, defend (with counsel acceptable to the other) and
hold the other harmless from and against any and all claims for premiums or
other charges, finder's fees, taxes, brokerage fees or commissions and other
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similar compensation due to a broker or finder allegedly employed or retained by
it in connection with any of the transactions contemplated by the Lease
Documents. Notwithstanding the foregoing, the indemnified party shall have the
option of conducting its own defense against any such claims with counsel of
such party's choice, but at the expense of the indemnifying party, as aforesaid.
This indemnification shall include all reasonable attorneys' fees and expenses
and court costs reasonably incurred by the indemnified party in connection with
the defense against any such claims and the enforcement of this indemnification
agreement and shall survive the termination of this Lease.
24.2. NO JOINT VENTURE OR PARTNERSHIP. Neither anything contained in
any of the Lease Documents, nor the acts of the parties hereto, shall create, or
be construed to create, a partnership or joint venture between Lessor and
Lessee. Lessee is not the agent or representative of Lessor and nothing
contained herein or in any of the other Lease Documents shall make, or be
construed to make, Lessor liable to any Person for goods delivered to Lessee,
services performed with respect to the Leased Property at the direction of
Lessee or for debts or claims accruing against Lessee.
24.3 AMENDMENTS, WAIVERS AND MODIFICATIONS. None of the terms,
covenants, conditions, warranties or representations contained in this Lease or
in any of the other Lease Documents may be renewed, replaced, amended, modified,
extended, substituted, revised, waived, consolidated or terminated except by an
agreement in writing signed by all parties to this Lease or the other Lease
Documents, as the case may be, in the case of any renewal, replacement,
amendment, modification, extension, substitution, revisions, consolidation or
termination and by the Person against whom enforcement is sought in the case of
a waiver or except as otherwise expressly provided for herein or in any other
Lease Document. The provisions of this Lease and the other Lease Documents
shall extend and be applicable to all renewals, replacements, amendments,
extensions, substitutions, revisions, consolidations and modifications of any of
the Lease Documents, the Management Agreements, the Related Party Agreements,
the Permits and/or the Contracts. References herein and in the other Lease
Documents to any of the Lease Documents, the Management Agreements, the Related
Party Agreements, the Permits and/or the Contracts shall be deemed to include
any renewals, replacements, amendments, extensions, substitutions, revisions,
consolidations or modifications thereof.
Notwithstanding the foregoing, any reference contained in any of the Lease
Documents, whether express or implied, to any renewal, replacement, amendment,
extension, substitution, revisions, consolidation or modification of any of the
Lease Documents or any Management Agreement, Related Party Agreement,
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Permit and/or the Contract is not intended to constitute an agreement or consent
by Lessor to any such renewal, replacement, amendment, substitution, revision,
consolidation or modification; but, rather as a reference only to those
instances where Lessor may give, agree or consent to any such renewal,
replacement, amendment, extension, substitution, revision, consolidation or
modification as the same may be required pursuant to the terms, covenants and
conditions of any of the Lease Documents.
24.4 CAPTIONS AND HEADINGS. The captions and headings set forth in
this Lease and each of the other Lease Documents are included for convenience
and reference only, and the words contained therein shall in no way be held or
deemed to define, limit, describe, explain, modify, amplify or add to the
interpretation, construction or meaning of, or the scope or intent of, this
Lease, any of the other Lease Documents or any parts hereof or thereof.
24.5 TIME IS OF THE ESSENCE. Time is of essence of each and every
term, condition, covenant and warranty set forth herein and in the other Lease
Documents.
24.6 COUNTERPARTS. This Lease and the other Lease Documents may be
executed in one or more counterparts, each of which taken together shall
constitute an original and all of which shall constitute one in the same
instrument.
24.7 ENTIRE AGREEMENT. This Lease and the other Lease Documents set
forth the entire agreement of the parties with respect to the subject matter and
shall supersede in all respect the letter of intent, dated January 31, 1996 (and
all prior iterations thereof), from Meditrust to Lessee.
24.8 WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY
APPLICABLE LAW, LESSOR AND LESSEE HEREBY MUTUALLY, KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT WHICH ANY PARTY HERETO MAY NOW OR HEREAFTER HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THE LEASE OR ANY OF THE LEASE DOCUMENTS. Lessee hereby certifies
that neither Lessor nor any of Lessor's representatives, agents or counsel has
represented expressly or otherwise that Lessor would not, in the event of any
such suit, action or proceeding seek to enforce this waiver to the right of
trial by jury and acknowledges that Lessor has been induced by this waiver
(among other things) to enter into the transactions evidenced by this Lease and
the other Lease Documents and further acknowledges that Lessee (a) has read the
provisions of this Lease, and in particular, the paragraph containing this
waiver, (b) has consulted legal counsel, (c) understands the rights that it is
granting in this Lease and the rights that it waiving in this paragraph in
particular and (d) makes the waivers set forth herein knowingly, voluntarily and
intentionally.
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24.9 SUCCESSORS AND ASSIGNS. This Lease and the other Lease Documents
shall be binding upon and inure to the benefit of (A) Lessee and Lessee's legal
representatives and permitted successors and assigns and (B) Lessor and any
other Person who may now or hereafter hold the interest of Lessor under this
Lease and their respective successors and assigns.
24.10 NO THIRD PARTY BENEFICIARIES. This Lease and the other Lease
Documents are solely for the benefit of Lessor, its successors, assigns and
participants (if any), the Meditrust Entities, Lessee, the Guarantor, the other
members of the Leasing Group and their respective permitted successors and
assigns, and, except as otherwise expressly set forth in any of the Lease
Documents, nothing contained therein shall confer upon any Person other than
such parties any right to insist upon or to enforce the performance or
observance of any of the obligations contained therein. All conditions to the
obligations of Lessor to advance or make available proceeds of insurance or
Awards, or to release any deposits held for Impositions or insurance premiums
are imposed solely and exclusively for the benefit of Lessor, its successors and
assigns. No other Person shall have standing to require satisfaction of such
conditions in accordance with their terms, and no other Person shall, under any
circumstances, be a beneficiary of such conditions, any or all of which may be
freely waived in whole or in part by Lessor at any time, if, in Lessor's sole
and absolute discretion, Lessor deems it advisable or desirable to do so.
24.11 GOVERNING LAW. This Lease shall be construed and the rights and
obligations of Lessor and Lessee shall be determined in accordance with the laws
of the State.
Lessee hereby consents to personal jurisdiction in the courts of the State
and the United States District Court for the District in which the Leased
Property is situated as well as to the jurisdiction of all courts from which an
appeal may be taken from the aforesaid courts, for the purpose of any suit,
action or other proceeding arising out of or with respect to any of the Lease
Documents, the negotiation and/or consummation of the transactions evidenced by
the Lease Documents, the Lessor's relationship of any member of the Leasing
Group in connection with the transactions evidenced by the Lease Documents
and/or the performance of any obligation or the exercise of any remedy under any
of the Lease Documents and expressly waives any and all objections Lessee may
have as to venue in any of such courts.
24.12 GENERAL. Anything contained in this Lease to the contrary
notwithstanding, all claims against, and liabilities of, Lessee or Lessor
arising prior to any date of termination of this Lease or any of the other Lease
Documents shall survive such termination.
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If any provision of this Lease or any of the other Lease Documents or any
application thereof shall be invalid or unenforceable, the remainder of this
Lease or the other applicable Lease Document, as the case may be, and any other
application of such term or provision shall not be affected thereby.
Notwithstanding the foregoing, it is the intention of the parties hereto that if
any provision of any of this Lease is capable of two (2) constructions, one of
which would render the provision void and the other of which would render the
provision valid, then such provision shall be construed in accordance with the
construction which renders such provision valid.
If any late charges provided for in any provision of this Lease or any of
the other Lease Documents are based upon a rate in excess of the maximum rate
permitted by applicable law, the parties agree that such charges shall be fixed
at the maximum permissible rate.
Lessee waives all presentments, demands for performance, notices of
nonperformance, protests, notices of protest, notices of dishonor, and notices
of acceptance and waives all notices of the existence, creation, or incurring of
new or additional obligations, except as to all of the foregoing as expressly
provided for herein.
ARTICLE 25
SUBSTITUTION OF PROPERTY
25.1 SUBSTITUTION OF PROPERTY FOR THE LEASED PROPERTY . Provided that
no Event of Default has occurred under this Lease (excluding any Event of
Default which has been waived, in writing, by the Lessor), nor any event which,
with the giving of notice or the passage of time or both, would constitute such
an Event of Default, Lessee shall have the right from time to time (referred to
herein as the "Substitution Right"), exercisable upon not less than ninety (90)
days' prior written notice to Lessor (referred to herein as a "Substitution
Notice") to substitute, on a date specified in such Substitution Notice (such
date, as the same may be extended by express written agreement of lessor, shall
be referred to herein as a "Substitution Date"), the Leased Property with a
Comparable Facility. As used herein, the term "Comparable Facility" shall be
defined as a health care facility or facilities which Lessor determines (a) has
an appraised Fair Market Value greater than or equal to-the greater of (i) the
appraised Fair Market Value of the Leased Property at the Commencement Date or
(ii) the appraised Fair Market Value of the Leased Property at the time that the
applicable Substitution Notice is furnished to Lessor (based on appraisal
criteria then in effect), (b) has a Facility Debt Coverage Ratio greater than or
equal to the greater of (i) the Facility Debt Coverage Ratio of the Leased
Property as of the
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second anniversary of the Commencement Date (ii) the Facility Debt Coverage
Ratio of the Leased Property at the time that the applicable Substitution Notice
is furnished to Lessor, (c) provides a mix of services similar to the Leased
Property and (d) is otherwise reasonably acceptable, in all respects, to Lessor
(based on Lessor's usual and customary property evaluation criteria then in
effect). Lessee may not exercise its Substitution Right more than once in any
calendar year.
25.2 CONDITIONS TO SUBSTITUTION. Without limiting the foregoing, as
conditions precedent to the consummation of any proposed substitution:
(a) as of the applicable Substitution Date, no Event of Default shall have
occurred under the Lease (excluding any Event of Default which has been waived,
in writing, by Lessor), nor any event which with the giving of notice or the
passage of time or both would constitute such an Event of Default;
(b) Lessor shall have received engineering and inspection reports relating
to the assisted living facility identified by Lessee in the applicable
Substitution Notice (referred to herein as a "Proposed Facility"), reasonably
satisfactory in all respects to Lessor;
(c) Lessee shall have delivered to Lessor (i) an MAI appraisal of the
Proposed Facility (prepared by an appraiser selected by Lessee and approved by
Lessor), in form and substance reasonably satisfactory to Lessor and (ii) an
instrument survey of the premises upon which the Proposed Facility is located
acceptable to Lessor and the title insurance company providing insurance with
respect to the Proposed Facility;
(d) Lessor shall be satisfied as to compliance of Lessee, the Proposed
Facility, the owner of the Proposed Facility (to the extent such owner is not
Lessee as provided in subsection (l) below) and/or the proposed substitution, as
the case may be, with (i) all applicable land use, zoning, subdivision and
environmental laws and regulations, (ii) all applicable assisted living
licensure laws and regulations and (iii) such other matters as Lessor reasonably
deems relevant (including, without limitation, whether the conveyance of the
property to Lessor in connection with the proposed substitution may be avoided
under the Bankruptcy Code);
(e) Lessee shall have delivered to Lessor a valid and binding owner's or
lessee's (as applicable) title insurance commitment issued by a title insurer
reasonably acceptable to Lessor (the "Title Company"), in an amount equal to the
Fair Market Value of the Proposed Facility, with such endorsements and
affirmative coverages, and in such form, as Lessor may reasonably require
insuring Lessor's fee title or leasehold title to the
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Proposed Facility, subject to no Liens except those approved or assumed by
Lessor and arrangements satisfactory to Lessor shall have been made for the
issuance of a title insurance policy on the Substitution Date in accordance with
such title insurance commitment;
(f) Lessee shall have delivered an environmental site assessment report
relating to the Proposed Facility, in form and substance reasonably acceptable
to Lessor and prepared by an environmental consultant reasonably acceptable to
Lessor;
(g) Lessor shall have obtained, at Lessee's cost, an opinion of Lessor's
counsel, in form and substance acceptable to Lessor, confirming that (i) the
substitution of the Proposed Facility for the Leased Property will qualify as an
exchange solely of property of a like-kind under Section 1031 of the Code, in
which, generally, except for "boot" such as cash needed to equalize exchange
values or discharge indebtedness, no gain or loss is recognized to Lessor, (ii)
the substitution or sale will not result in ordinary recapture income to Lessor
pursuant to Code Section 1250(d)(4) or any other Code provision, (iii) the
substitution or sale will result in income, if any, to Lessor of a type
described in Code Section 856(c)(2) or 13) and will not result in income of the
types described in Code Section 856(c)(4) or result in the tax imposed under
Code Section 857(b)(6) and (iv) the substitution or sale, together with all
other substitutions and sales made or requested by Lessee or any Affiliate of
Lessee or of any Guarantor pursuant to any other leases with Lessor (or any of
its Affiliates) or any other transfers of the Leased Property or the properties
leased under other such leases, during the relevant time period, will not
jeopardize the qualification of Lessor as a real estate investment trust under
Code Sections 856-860;
(h) Lessor shall have received opinions of Lessee's counsel as to (i) the
compliance of the Proposed Facility with land use, zoning, subdivision and
environmental laws and regulations, (ii) the compliance of Lessee, the owner of
the Proposed Facility (to the extent such owner is not Lessee as provided in
subsection (l) below), the proposed substitution and the Proposed Facility with
applicable assisted living laws and regulations, (iii) the due authorization,
execution and enforceability of the Substitution Documents and (iv) such other
matters as are reasonably requested; in form and substance reasonably acceptable
to Lessor;
(i) Lessee and each Guarantor shall have executed and delivered, or caused
to be executed and delivered, such documents as are reasonably required by
Lessor to effectuate the substitution (collectively, the "Substitution
Documents" including, without limitation, (i) a deed with full warranties or
assignment of a leasehold estate with full warranties (as applicable) conveying
to Lessor title to the Proposed Facility
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free and clear of all Liens, except those approved or assumed by Lessor, (ii) a
facility lease (the "Substitution Lease") duly executed, acknowledged and
delivered by Lessee, containing the same terms and conditions as are contained
herein except that (1) the legal description of the land shall refer to the
Proposed Facility, (2) the Minimum Repurchase Price of the Proposed Facility
shall be an amount equal to the Minimum Repurchase Price of the Leased Property
increased by any Cash Adjustment paid by Lessor, (3) the Rent under the
Substitution Lease in all respects shall provide Lessor with a substantially
equivalent yield at the time of the substitution (i.e., annual return on its
equity in such Proposed Facility) to that received (and reasonably expected to
be received thereafter) from the Leased Property, taking into account the Cash
Adjustment, if any, paid by Lessor and any other relevant factors and (4) such
other changes therein as may be necessary or appropriate under the circumstances
shall be made; (iii) a collateral assignment of permits, licenses, approvals and
contracts relating to the Proposed Facility, substantially in the form of the
Permits Assignment; (iv) UCC financing statements; (v) a guaranty substantially
in the form of the Guaranty of Lease Obligations shall be executed by Guarantor,
(vi) an affiliated party subordination agreement, substantially in the form of
the Affiliated Party Subordination Agreement, shall be executed by the Lessee,
and such other Affiliates of the Lessee as are deemed necessary or appropriate
by the Lessor and (vii) the Agreement Regarding Related Transactions shall be
amended to reflect the substitution of the Proposed Facility. The Substitution
Documents shall be based upon and contain the same terms and conditions as are
set forth in Lessee Documents in effect prior to the substitution, except that
such changes shall be made as may be necessary or reasonably appropriate under
the circumstances to effectuate the substitution and secure the protection and
priority of the property and security interests conveyed and/or granted to
Lessor;
(j) without limiting any other provision contained herein, Lessee shall
have delivered to Lessor such other information and materials relating to
Lessee, the owner of the Proposed Facility (to the extent that such owner is not
Lessee as provided in subsection (l) below) and the Proposed Facility as Lessor
may reasonably request, including, without limitation, leases, receipted bills,
management agreements and other Contracts, Provider Agreements, cost reports,
Permits, evidence of legal and actual access to the Proposed Facility, evidence
of the availability and sufficiency of utilities servicing the Proposed
Facility, historical and current operating statements, detailed budgets and
financial statements and Lessor shall have found the same to be satisfactory in
all respects;
(k) Lessee or an Affiliate of Lessee shall be the licensed operator of the
Proposed Facility as of the date of the consummation of the substitution;
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(l) the Proposed Facility shall be owned or leased by Lessee or an
Affiliate of Lessee; PROVIDED, HOWEVER that in the event that the Proposed
Facility is owned by any such Affiliate, (i) said Affiliate shall execute and
deliver to Lessor such Substitution Documents as may be reasonably required by
Lessor and (ii) Lessor shall be provided with such evidence as it may require to
determine that the conveyance of the Proposed Facility (or a leasehold interest
therein) to Lessor does not constitute a fraudulent conveyance (under applicable
federal or state law);
(m) Lessee shall have delivered to Lessor an insurance certificate
evidencing compliance with all of the insurance requirements set forth in the
Substitution Documents;
(n) Lessee shall have delivered to Lessor an Officer's Certificate
certifying as of the Substitution Date that (i) the Proposed Facility has been
accepted by Lessee for all purposes of the Substitution Lease and there has
been no material damage to the improvements located on the Proposed Facility,
nor is any condemnation or eminent domain proceeding pending with respect
thereto; (ii) all Permits (including, but not limited to, a permanent,
unconditional certificate of occupancy and all certificates of need, licenses
and Provider Agreements) which are necessary to permit the use of the Proposed
Facility in accordance with the provisions of the Substitution Lease have been
obtained and are in full force and effect; (iii) under applicable zoning and
use laws, ordinances, rules and regulations, the Proposed Facility may be used
for the purposes contemplated by Substitution Documents and all necessary
subdivision approvals have been obtained; (iv) to the best knowledge of
Lessee, there exists no Event of Default under this Lease, and no defense,
offset or claim exists with respect to any sums to be paid by Lessee
hereunder, and (v) any exceptions to Lessor's title to the Proposed Facility
do not materially interfere with the intended use of the Proposed Facility by
Lessee;
(o) Lessor shall have determined that the Proposed Facility constitutes a
Comparable Facility, and
(p) Lessor shall have received all Rent due and payable hereunder through
the Substitution Date.
In the event that the equity value of the Proposed Facility (i.e., the Fair
Market Value of the Proposed Facility minus the Liens to which Lessor will take
the Proposed Facility subject) as of the Substitution Date is greater than the
equity value of the Leased Property (i.e., the Fair Market Value of the Leased
Property MINUS the Liens to which Lessee will take the Leased Property subject
other than those Liens which Lessee is obligated to pay or discharge pursuant to
the terms of this Lease) as of the Substitution Date, subject to the limitation
set forth below,
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Lessor shall pay an amount equal to the difference to Lessee; PROVIDED, HOWEVER,
that Lessor shall not be obligated to consulate such substitution if Lessor
would be required to make a payment to Lessee of an amount equal to or in excess
of fifteen percent (15%) of said Fair Market Value of the Leased Property (the
amount of cash paid by Lessor to Lessee being referred to herein as the "Cash
Adjustment"). Without limiting the generality or effect of the preceding
sentence, in the event that, on the Substitution Date, Lessor is obligated to
pay a Cash Adjustment to Lessee and Lessor does not have sufficient funds
available, or elects not to make such payment in cash, Lessor shall provide
Lessee with (and Lessee shall accept) a purchase money note and mortgage for a
term not to exceed eighteen (18) months from the Substitution Date and bearing
interest, payable monthly, at the rate described in Section 10.2.
25.3 CONVEYANCE TO LESSEE. If the Lessor shall have determined that
the Proposed Facility constitutes a Comparable Facility, on the Substitution
Date, after the consummation of a substitution in accordance with the terms
hereof, Lessor will convey the Leased Property to Lessee in accordance with the
provisions of Article 18 (except as to payment of any expenses in connection
therewith which shall be governed by Section 22.4 below) and this Lease shall
thereupon terminate as to the Leased Property. Upon completion of the purchase
of the Leased Property, no Rent shall thereafter accrue with respect thereto.
25.4 EXPENSES. Whether or not any proposed substitution is
consummated, Lessee shall pay all of the out-of-pocket expenses and other costs
incurred or expended by Lessor in connection with any proposed substitution
(collectively referred to herein as "Substitution Closing Costs"), including,,
without limitation, reasonable attorneys' fees and expenses, engineering costs,
consultants' fees, appraisal costs, audit and tax review costs, out-of-pocket
travel expenses, inspection fees, title insurance premiums and other title fees,
survey expenses, mortgage taxes, transfer, documentary stamp and other taxes,
search charges of any nature, recording, registration and filing costs, broker's
fees and commissions, if any, escrow fees, fees and expenses, if any, incurred
in qualifying Lessor and maintaining its right to do business in the state where
the Proposed Facility is located, the cost of obtaining, preparing and recording
a release of the Leased Property from the lien of any Fee Mortgage on the
Facility (other than the amount necessary to payoff such Fee Mortgage) and any
other costs expended or incurred by Lessor in connection with the preparation
for and the documentation and/or the closing of the proposed substitution. The
Substitution Closing Costs shall be a demand obligation of Lessee to Lessor and,
if not paid within ten (10) days after demand, shall thereafter (to the extent
permitted by applicable law) bear interest at the Overdue Rate until the date of
payment.
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IN WITNESS WHEREOF, the parties have caused this Lease to be executed and
attested by their respective officers thereunto duly authorized.
WITNESS: LESSEE:
EMERITUS PROPERTIES I, INC., a
Washington corporation
/s/ Melissa L. Day By: /s/ Raymond R. Brandstrom
- ----------------------------- ------------------------------------
Name: Melissa L. Day Name: Raymond R. Brandstrom
Title: President
WITNESS: LESSOR:
MEDITRUST ACQUISITION CORPORATION
I, a Massachusetts corporation
/s/ Maureen McConville By: /s/ Michael S. Benjamin
- --------------------------------- ------------------------------------
Maureen McConville Name: Michael S. Benjamin, Esq.
Title: Senior Vice President
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