FACILITY LEASE AGREEMENT
MEDITRUST COMPANY LLC
(A Delaware limited liability company)
as
Lessor
AND
EMERITUS PROPERTIES I, INC.
(A Washington corporation)
as
Lessee
May 12,1998
For Premises Located In
City of Flagstaff, Coconino County, Arizona
FACILITY LEASE AGREEMENT
This FACILITY LEASE AGREEMENT ("Lease") is dated as of the l2th
day of May, 1998 and is between MEDITRUST COMPANY LLC ("Lessor"),
a Delaware limited liability company having its principal office
at 197 First Avenue, Needham Heights, Massachusetts 02 I 94, and
EMERITUS PROPERTIES I, INC. ("Lessee"), a Washington corporation,
having its principal office at c/o Emeritus Corporation, 3131
Elliott Avenue, Suite 500, 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 properly 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 benefiting any or all
of the Land and the Leased Improvements;
(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
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(e) Lessor's Personal Property.
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 Mayl2,1998 (the "Commencement
Date") and end on March 31, 2010 (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, 2030. 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
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.
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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" 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
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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 Eighth Amended and
Restated Agreement Regarding Related Transactions (Development)
dated of even date herewith, as may be 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.
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 second twelve month period following the Conversion Date,
initially as shown by Lessee's certified Consolidated Financial
Statements and as later verified by Lessee's Consolidated
Financial Statements.
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BASE RENT: Pre-Conversion Base Rent and/or Post-Conversion Base
Rent, as the context permits.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, provided that for the purposes of Article 9 hereof,
the Project shall not be treated as a Capital Addition.
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 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 I 3.1.
CHATTEL PAPER: As defined in the UCC.
CLOSING: As defined in Section 18.3.6.
CODE: The Internal Revenue Code of 1986, as amended.
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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.
Completion Date: As defined in the Leasehold Improvement
Agreement.
COMPLETION OF THE PROJECT: As defined in the Leasehold Improvement
Agreement.
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 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
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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.
CONVERSION DATE: The earlier to occur of (a) the Completion Date,
(b) the Completion of the Project and (c) the occupancy of the
Facility by a resident.
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 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.
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 I 6.
EXCESS GROSS REVENUES: Gross Revenues less Base Gross Revenues.
EXPIRATION DATE: As defined in Section 12.
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EXTENDED TERMS: As defined in Section 1.4.
FACILITY: The 61 unit, fully licensed assisted living facility to
be constructed on the Land and to be known Assisted Living 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 (c) 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 on 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 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.
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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 I st 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 of ices 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 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,
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(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.
GROUP TWO DEVELOPMENT FACILITIES: As defined in the Agreement
Regarding Related Transactions.
GUARANTOR: Emeritus Corporation, a Washington corporation, and its
successors and assigns.
GUARANTOR 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
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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 (I) and (2) of this sentence shall not be applicable to
the extent that any real or personal property tax, assessment, tax
levy or charge 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 often (10) years as calculated by
the Federal Reserve Board.
INITIAL TERM: As defined in Section 1.2.
INSTRUMENTS: As defined in the UCC.
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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.
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
Leasehold Improvement Agreement, 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 ofthe 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 aiid undertakings (other than
Lessor's obligations) under this Lease and the other Lease
Documents.
LEASE YEAR: A twelve month period ending on July 31 st of each
year; provided, that the first Lease Year shall begin on the
Commencement Date and shall end on July 31, I 998.
LEASED IMPROVEMENTS: As defined in Article 1.
LEASED PROPERTY: As defined in Article 1.
LEASEHOLD IMPROVEMENT AGREEMENT: The Leasehold Improvement
Agreement of even date by and between Lessee and Lessor.
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LEASING GROUP: Collectively, Lessee, the Guarantor, 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 ofthe
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 ofthe 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.
Withqut limiting the foregoing, the term Legal 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 ofthis 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 ofthis Lease and its successors
and assigns.
LESSOR'S PERSONAL PROPERTY. All machinery, equipment, furniture,
furnishings, movable walls or partitions, computers or trade
fixtures, goods, inventory, supplies, and other personal property
owned by Lessor and used in the operation of the Leased Property.
LIEN: With respect to any real or personal propeity, any mortgage,
easement, restriction, lien, pledge, collateral assignment,
hypothecation, charge, security interest, title retention
agreement, levy, execution, seizure, attachment, garnishment or
other encumbrance ofany 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.
13
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 which may be executed in the future 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. .
MEDICAID: The medical assistance program established by Title XIX
ofthe Social Security Act and any statute
succeeding thereto.
MEDICARE: The health insurance program for the aged and disabled
established by Title XVIII ofthe Social Security Act (42 USC
1395 et seq.) and any statute succeeding thereto.
MEDITRUST/EMERITUS TRANSACTION AFFILIATE: An Affiliate of Lessee,
the business and activities ofwhich are limited to those subject
to Meditrust/Emeritus Transaction Documents (other than the
Affliated 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" 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 lus (iii) so much of the Project Funds as Lessor has
expended from time to time less the sum of any Net Award Amounts
and/or Net Proceeds Amounts.
MONTHLY DEPOSIT DATE: As defined in Section 4.6.
14
NEGATIVE PLEDGE AGREEMENT: The Group Two Negative Pledge Agreement
(Development) dated April 30,1997 by and between Guarantor,
Lessee, Lessor and any Related Party that is party to any Related
Lease or Related Party Agreement.
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, provided, however, that for purposes of calculating
the Net Worth ofthe Guarantor, those certain Thirty-Two Million
Dollars ($32,000,000.00) of6.25"% ofconvertible, unsecured,
subordinated debentures due in 2006, which were issued by the
Guarantor on February 15,1996, shall not be included in total
liabilities.
OBLIGATIONS: Collectively, the Lease Obligations and the Related
Party Obligations.
OFFICER'S CERTIFICATE: A certificate of Lessee signed on behalf of
Lessee by the Chairman of the Board of Directors, the President,
any Vice President or the Treasurer of Lessee, or another officer
authorized to so sign by the Board of Directors or By-Laws of
Lessee, or any other Person whose power and authority to act has
been authorized by delegation in writing by any ofthe Persons
holding the foregoing offices.
ORIGINAL MEDITRUST INVESTMENT: The sum of Dollars and /00 ($
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.
15
PERMITS: Collectively, all permits, licenses, approvals,
qualifcations, 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 ofany
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 ofthe Leasing
Group, or entered into by any member ofthe 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 I 0.1. I 8.
Permitted Prior Securitv 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.
PRE-CONVERSION BASE RENT: As defined in Section 3.1.
Pre-Conversion Rent Adjustment Rate: I 75 basis points over the
Prime Rate.
POST-CONVERSION BASE RENT: As defined in Section 3.1.
Primary Intended Use: The use ofthe Facility as an assisted living
facility with sixty-one (61 ) fully licensed units, or such
additional number of units 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 fnancial institution reasonably
selected by Lessor.
Principal Place of Business: As defined in Section I 0. I 28.
16
Proceeds: As defined in the UCC.
Project: As defined in the Leasehold Improvement Agreement.
Project Funds: As defined in the Leasehold Improvement Agreement.
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 ofthe Facility relating to any right ofpayment 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 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 Development Facility Leases (as
defined in the Agreement Regarding Related Transactions), together
with such other new leases identifled 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.
17
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 Parhr Obligations: Collectively, all indebtedness,
covenants, liabilities, obligations, agreements and undertakings
due to, or made for the benefit of, Lessor or any of the other
Meditiust Entities by Lessee or any other member ofthe Leasing
Group or any oftheir respective Affiliates in connection with any
ofthe 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 orjoint 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 ofany ofthe Extended Terms.
Rent Adjustment Rate: 325 basis points over the Index.
Rent Insurance Proceeds: As defined in Section 13.8.
Residence 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 13.1.3.
Security Agreement: The Security Agreement as ofeven date
herewith between Lessee and Lessor.
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.
18
Subsequent Investments: The aggregate amount ofall sums expended
and liabilities incurred by Lessor in connection with Capital
Additions.
Subsidianr 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 ofthe outstanding capital stock or other ownership interest
having general voting power (under ordinary circumstances).
Taking: A taking or voluntary conveyance during the Term ofthe
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 context may
require, unless earlier terminated pursuant to the provisions
hereof.
Third Party Pavor 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 Treasunr 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,
19
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 defned in Section 13.1.3.
Working Capital Loan: As defned in Section 6.1.3.
Working Capital Stock Pledge: As defined in Section 16.1 (h).
2.2 Rules of Construction. The following rules of construction
shall apply to the Lease and each ofthe 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 attomeys 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
attomeys 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; (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 deeriied to include references to all ofthe
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 nonlimiting 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 ofthe 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
specifcally defined in the Lease Documents shall be construed in
accordance with GAAP and (k) all exhibits annexed to any ofthe
Lease Documents as
20
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 Im rovements 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: (a) Pre-Conversion Base Rent: From and after the
Commencement Date and until the Conversion Date, Lessee shall pay,
commencing on June 1,1998, and on the first day of each calendar
month thereafter and on the Conversion Date, a base rent (the "Pre-
Conversion Base Rent") in arrears which is equal to the product of
(i) the Original Meditrust Investment so much of the Project Funds
as Lessor has expended from time to time multiplied bY (ii) the
Pre-Conversion Rent Adjustment Rate in effect from time to time,
calculated on a daily basis.
(b) Post-Conversion Base Rent: From and after the Conversion Date,
Lessee shall pay a base rent (the "Post-Conversion Base Rent") per
annum which is equal to the product of (i) the Original Meditrust
Investment the aggregate amount of the Project Funds as Lessor
has expended as of the Conversion Date multiplied bY (ii) the Rent
Adjustment Rate which is in effect or calculated on the Conversion
Date, payable in advance in equal, consecutive monthly
installments due on the first day of each calendar month;
provided, however, that on each Rent Adjustment Date, the Base
Rent shall be adjusted to equal the greater of(i) the then current
Post-Conversion Base Rent or (ii) an amount equal to Original
Meditrust Investment plus the aggregate amount ofthe Project Funds
as Lessor has expended as of the Conversion Date plus the
Subsequent Advances multiplied by the Rent Adjustment Rate then in
effect on such subsequent Rent Adjustment Date and further,
provided, however, that on the Conversion Date, Lessee shall pay
to Lessor (x) the proportionate share ofthe Post-Conversion Base
Rent due for the period from (and including) such date through the
end of the calendar month during which such 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 the second anniversary
of the Conversion Date ("Additional Rent Accrual Date") and shall
be payable during the Term, quarterly in arrears, commencing on
the first day ofthe first fscal quarter occurring following the
Additional Rent Accrual Date and there shall be an annual
reconciliation as provided in Section 3.2 below.
2l
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 ofthe 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 ofeach 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 defcit to Lessor and, ifthe deficit exceeds five percent
(5"%) ofthe 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. Ifthe Additional Rent, as finally determined
for any calendar year (or poition 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 ofthe Leased Propeity),
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 teimination 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.
22
3.2.6 Best 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 ofthe 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 Svstems. 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 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 Certi icate 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. Ifany such audit discloses a
defciency 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
23
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
ofthis Lease.
3.4 Additional Charges. Subject to the rights to contest as set
foith in Airticle 15, in addition to the Base Rent and Additional
Rent, (a) Lessee will also pay and discharge as and 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 ofthe
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 ofthe Leased
Property, (b) the lawful or unlawful prohibition of, or
restriction upon, Lessee's use ofthe 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 wairanty 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
24
the foregoing, other than a discharge of Lessee from any of the
Lease Obligations as a matter of law.
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 deferznent 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 ofsuch a temporary Taking, by the net amount
ofthe 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 ofcalculating Base Rent pursuant
to Section 3.1 by subtracting therefrom, as applicable, the net
amount ofthe insurance proceeds.
For the purposes ofthis Section 3.7, the "net amount ofthe 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
ofthe 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 create a viable and
functional Facility under all of the circumstances ("Net Proceeds
Amount").
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3.8 Leasehold Improvement Fee: The Lessee shall pay to the Lessor
the Leasehold Improvement Fee simultaneously with the execution of
this Lease; provided, however, that, at the Lessor s o tion, the
Leasehold Improvement Fee shall be held in an escrow account
established with a Person designated by the Lessor pursuant to an
escrow arrangement satisfactory to the Lessor, with interest
thereon benefiting the Lessor. If the Lessor exercises its option
to require that the Leasehold Improvement Fee be held in such an
escrow account (a) the Leasehold Improvement Fee shall be
disbursed from said escrow account only upon the joint
instructions of the Lessee and the Lessor (which instructions from
the Lessee shall be immediately given upon the request of the
Lessor) and in no event shall the Leasehold Improvement Fee be
disbursed therefrom, in whole or in part, unless and until so
requested by the Lessor and (b) the Lessor shall bear the risk of
loss of or misappropriation of the Leasehold Improvement Fee by
such escrow agent.
ARTICLE 4
IMPOSITIONS. TAXES. UTILITIES.
INSURANCE PAYMENTS
4.1 Parrment of Impositions.
4.1.1 Lessee To Payor. 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. Ifany such Imposition may, at the
option ofthe 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. I.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 Goveznmental 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
26
extent permitted by applicable laws and regulations, prepare and
fle 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 propezty covered by this Lease as personal
property, Lessee 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 ofthe 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 fle a protest.
4.1.4 Refunds. Ifno 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 ofall 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 oflmpositions. Impositions imposed in respect ofthe
period during which the expiration or earlier termination ofthe
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
27
during the Term and thereafter until Lessee surrenders the Leased
Property in the manner required by this Lease.
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 ofeach 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 ofnon-payment and so long as no
Lease Default has occurred and is continuing. In the event ofthe
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 thereofto 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
ofan event or circumstance which, with the giving ofnotice 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 frst day of each
calendar month thereafter during the Term (each ofwhich dates is
referred to as a "Monthly Deposit Date"), pay to and deposit with
Lessor a sum equal to one-twelfth (1/l2th) ofthe 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/l2th) ofthe 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 ofcomputing 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/l2th) ofthe
estimated amount payable within one ( 1 ) year after said 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.
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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 ofthe 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
ofinvestment vehicles, (b) for any consequent loss ofprincipal or
interest or (c) for any unavailability of funds based on such
choice of investment. Furthermore, Lessor shall bear no
responsibility for the fnancial 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 ofnotice and/or the passage oftime, 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 ofthis 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
ofthe 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. Iffor any reason any deposit held by Lessor under
this Section 4.6 shall not be suffcient 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 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 amortization 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. Ifany 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 ofthe 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
29
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 ofthis 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 ofthe
Obligations and, upon the occurrence ofany Lease Default, Lessor
may, in its sole and absolute discretion, apply said amounts
towards payment or performance ofsuch Obligations.
4.6.7 Return. Upon the expiration or earlier termination ofthis
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.
4.6.8 Receipts. Lessee shall deliver to Lessor copies ofall
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 ofthe Leased
Property upon the terms and conditions ofthis Lease.
30
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 Securitv for Lessee's Obligations; Permitted Prior Security
Interests.
6.1.1 Security. In order to secure the payment and performance
ofall ofthe 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.
(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 ofthe
operation ofthe 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 Securitv 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
32
5.2 Personal Pro er. Removal and Replacement of Personal Pro e
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 ofthe Facility in accordance with the requirements
ofthis Lease for the Primary Intended Use, and such Tangible
Personal Property and replacements thereof, shall be at all times
the property of Lessee.
5.2Z Sufficient Personal Property. Lessee shall maintain, during
the entire Term, the Tangible Personal Property and Lessor's
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
ofsuch obsolete items of the Tangible Personal Property and
Lessor's Personal Property during the Term as are necessary to
enable the operation ofthe 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 or Lessor's Personal Property (whether
now owned or hereafter acquired) the fair market value of which
exceeds TWENTY-FIVE THOUSAND DOLLARS ($25,000), individually or
ONE HUNDRED THOUSAND DOLLARS ($100,000.00) collectively, if such
Tangible Personal Property or Lessor's Personal Property is
necessary to enable the operation ofthe 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 ofthe
Tangible Personal Property or Lessor's 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 ofthe Tangible Personal
Property, then all ofthe 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
31
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 and (D) no such
security interest, financing agreement or lease is cross-defaulted
or crosscollateralized 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 ajunior 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 Affliates 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 ofno 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 ofthe 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
33
7.1 Condition of the Leased Properht. 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 ofpossession ofthe Leased Property and that Lessee
has examined and otherwise has acquired knowledge ofthe condition
ofthe 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, provided,
however, that nothing herein contained in this Section 7. I shall
be deemed to modify the terms and provisions of the Leasehold
Improvement Agreement. 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 ofthe 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
ofnotice from Lessor, Lessee shali 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. Following completion ofthe Facility,
Lessee shall continuously operate the Leased Property in
accordance with the Primary Intended
34
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, ifapplicable, the Other
Permitted Uses. Lessee shall not 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 ofthe Leased Property and no acts shall be
done which will cause the cancellation ofany insurance policy
covering the Leased Property, nor shall Lessee, any Manager or any
other Person sell or otherwise provide to residents, other
occupants or invitees therein, or permit to be kept, used or sold
in or about the Leased Property, any article which may be
prohibited by any ofthe 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 ofthe
Leasing Group to comply with, all applicable Legal Requirements
relating to the use, operation, maintenance, repair and
restoration ofthe Leased Property, whether or not compliance
therewith shall require structural change in any of the Leased
Property or interfere with the use and enjoyment ofthe Leased
Property and (b) procure, maintain and comply with (in all
material respects), and shall cause every other member ofthe
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
Intended Use and/or, if applicable, Other Permitted
35
Uses, and for compliance with all ofthe terms and conditions
ofthis Lease. Unless a Lease Default has occurred or any event has
occurred which, with the passage oftime 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 ofthe 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 ofthe 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 ofthe licensed operator of the
Leased Property under and pursuant to any Management Agreement,
Lessor, or a lawfully appointed receiver ofthe 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 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.
36
7.5 Participation in Third Party Payor Programs. No provision
ofthis 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 to the extent consistent with the
stage ofconstruction ofthe Project (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 ofthe 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 ofthis Section 8. I 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 value or the usefulness of the Leased Property for the
Primary Intended Use and, ifapplicable, the Other Permitted Uses.
To the extent that any ofthe repairs, replacements, renovations,
alterations or modifcations 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) ofthe 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
37
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 ofthe Material Structural Work commenced and
shall obtain Lessor's approval ofthe 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
uny 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 ofthe foregoing and except as
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 ofany 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 ofthis provision.
8.2 Encroachments; Title Restrictions. Ifany ofthe 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
38
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 ofthis 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 satisfed 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, 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 ofthe
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,
39
without limitation, Liens relating to the provision of financing
for a Capital Addition) other than Liens expressly permitted by
the terms and provisions ofthis 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 specifcations, 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 ofthe change, ifany, in the Gross Revenues
that Lessee anticipates will result from the construction of such
Capital Addition.
9.2.3 Lessor's Options Regarding Capital Additions and Material
Structural Work. Lessor shall have the options of: (a) denying
permission for the construction of the applicable Capital Addition
or Material Structural Work, (lb) offering to finance the
construction ofthe Capital Addition pursuant to Section 9.3 on
such terms as may be specifed by Lessor, including the terms of
any amendnzent 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. I,
Section 9.4, Section 13.1.3, all applicable Legal Requirements,
all other requirements ofthis Lease and to such other terms and
conditions as Lessor may in its discretion reasonably impose or
(d) any combination ofthe foregoing. Unless Lessor notifes 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 ofthe applicable Capital Addition or Material
Structural Work and (x) 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
40
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 Mav 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.
9.3 Capital Additions Financed bJr 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 ofthe
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 ofthe 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 ofbusiness 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 ofsale, 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
ofthis 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
41
required by Lessor including, without limitation, changes in the
Base Rent and the legal description ofthe 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 ofany Liens except those
approved by Lessor;
(e) upon completion ofthe Capital Addition, a final as-built
survey thereof reasonably satisfactory to Lessor, if required by
Lessor;
(f) during and following the advance offunds and the completion of
the Capital Addition, endorsements to any outstanding policy
oftitle 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 thereofby an amount equal
to the Fair Market Value ofthe 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
oftitle insurance reasonably satisfactory in form and substance to
any applicable Financing Party;
(h) following the completion ofthe Capital Addition, if reasonably
deemed necessary by Lessor, an appraisal ofthe Leased Property by
an M.A.I. appraiser acceptable to Lessor, which states that the
Fair Market Value ofthe 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; and
(i) 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 modifications to outstanding policies oftitle insurance
contemplated by subsection (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.
42
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
ofthe Capital. Addition Cost, including, but not limited to (a)
fees and expenses oftheir 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 effciency ofthe 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 adj acent to the Leased Property (and not part ofthe Land
covered by this Lease) including, without limitation, tie-ins
ofbuildings 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 ofthis 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 Section 9.4. The cost ofany such
repair, replacement, alteration, addition, modification or
improvement shall be paid by Lessee and the results thereofshall
be included under the terms ofthis Lease and become a part ofthe
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 ofthe Leased
Improvements, or which involve the expenditure ofmore 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, modifcations and
improvements performed and obtains Lessor's approval ofthe
remaining work
43
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
ofthis Lease, except by reason ofthe default by Lessee hereunder,
Lessor shall compensate Lessee for all Capital Additions paid for
or financed by 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) ofall 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 (1 l0%) ofthe 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, ifno such rate exists, or such rate
is in excess ofthat 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
Value Percentage (determined as ofthe expiration of earlier
termination of this Lease) from all rent and other consideration
receivable by Lessor under any re-letting or other disposition
ofthe Leased Property, after deducting all costs and expenses
incurred by Lessor in connection with such re-letting or other
disposition ofthe leased Property and all costs and expenses
ofoperating and maintaining the Leased Property during any such
new lease which are not borne by the tenant thereunder. The
provisions ofthis Subparagraph (c) shall remain in effect until
the sale or other final disposition ofthe 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) ofthis 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
44
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 ofthe 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 ofthe
date ofthis Agreement, Lessee does not have any Subsidiaries and
Lessee is not a member ofany paitnership orjoint 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.
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 ofthe
Lease Documents by the members ofthe 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 ofnotice 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, mortgage,
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 or reasonably
expected to be obtained in the ordinary course of business prior
to or upon the Completion of the Project, as the case may be, no
consent or approval or other authorization of, or exemption by, or
45
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 ofthe 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 ofthe 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 ofthe
Leasing Group in existence as ofthe date hereofis 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 member ofthe Leasing Group, would
materially adversely affect the ability ofany ofthe foregoing to
perform their respective obligations under the Lease Documents;
(b) against or affecting the Leased Property or the ownership,
constnzction, development, maintenance, management, repair, use,
occupancy, possession or operation thereof; or
(c) which may involve or affect the validity, priority or
enforceability ofany ofthe Lease Documents, at law or in equity,
or before or by any arbitrator or Governmental Authority.
10.1.7 Intentionallv deleted.
10.1.8 Commercial Acts. Lessee's performance ofand 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 Capitah 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 ofthe Lease Documents); and
46
(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 ofthe Leasing Group which
exists as ofthe date hereofhas filed 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 ofthe Leasing Group. No
tax liability has been asserted by the Internal Revenue Service
against any member ofthe 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 ofthose already paid.
10.1.13 Financials Complete and Accurate. The financial statements
ofeach member ofthe Leasing Group given to Lessor in connection
with the execution and delivery ofthe Lease Documents were true,
complete and accurate, in all material respects, and fairly
presented the financial condition ofeach such member ofthe 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 fnancial 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 ofthe 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.
47
10.1.14 Pending Actions, Notices and Reports.
(a) There is no action or investigation pending or, to the best
knowledge and beliefof 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 Authority, Accreditation Body or
Third Party Payor 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 ofthe 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 proposed, upon
Completion ofthe Project, to be conducted with respect to the
Leased Property or with respect to its obligations under the Lease
Documents or which may materially adversely impact reimbursement
to any member ofthe Leasing Group for services rendered to
beneficiaries of Third Party Payor Programs.
(b) Neither the Facility nor any member ofthe Leasing Group has
received any notice of any claim, requirement or demand of any
Govemmental Authority, Accreditation Body, Third Party Payor 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 Third Party Payors,
Accreditation Bodies and 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 ofthe 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
48
Leased Property, issued by any Governmental Authority or
Accreditation Body during the most recent licensing period,
together with all plans ofcorrection relating thereto.
10.1.15 Compliance with Legal and Other Requirements.
(a) To the extent consistent with the stage of construction of
the Proj ect, 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 ofany
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 or reasonably expects to obtain such Permits prior
to, or upon, the Completion ofthe Project.
(b) Except as previously delivered to Lessor pursuant to Section
10.1.14(d) hereof, there are no outstanding notices
ofdeficiencies, notices of proposed action or orders of any kind
relating to the Leased Property, if any, issued by any
Governmental Authority, Accreditation Body or Third Party Payor
requiring conformity to any of the applicable Legal Requirements.
(c) To the extent such accreditation is applicable, the Facility
is accredited by all applicable Accreditation Bodies and there are
no deficiencies in either the Leased Property or any services
provided at the Facility that would prevent the extension ofthe
accreditation of the Facility by any applicable Accreditation Body
after any next regularly scheduled inspections.
10.1.16 No Action By Governmental Authority or Accreditation Body.
There is no action pending or, to the best knowledge and belief of
Lessee, recommended, by any Governmental Authority, Accreditation
Body 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 ofthe 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"); and Lessee shall
49
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;
(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 ofthe Leased Property in
accordance with the Primary Intended Use;
(e) Upon the Conversion Date, all buildings, facilities and other
improvements necessary, both legally and practically, for the
proper and efficient operation of the Facility will be located
upon the Leased Property and all real property and personal
property currently utilized by Lessee will be included within the_
definition ofthe Leased Property or the Collateral;
Upon the Conversion Date the Leased Property shall abut on and
have 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 ofthe same tax parcel as any part ofthe Leased
Property;
(h) All utilities necessary for the use and operation ofthe
Facility are available to the lot lines ofthe Leased Propezty:
(i) in sufficient supply and capacity;
(ii) through validly created and existing easements ofrecord
appurtenant to or encumbering the Leased Property (which easements
shall not impede or restrict the operation ofthe 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.
50
10.1.18 Third Parhr Payor Agreements. Neither Lessee with respect
to the Facility nor the Facility is, or upon completion of
construction, will be qualified as a provider of services under,
or does, or upon completion of construction will, participate in,
any Third Party Payor Programs and neither Lessee with respect to
the Facility nor the Facility is, or upon completion of
construction will be, accredited by an 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
ofwelfare, free or charity care or discounted or government
assisted resident care.
10.1.21 No Proposed Changes. Lessee has no actual knowledge ofany
applicable Legal Requirements which have been enacted, promulgated
or issiied within the eighteen (18) months preceding the date
ofthis 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
ofthe 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 ofneed, 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 ofthe Leasing Group has any accumulated funding deficiency
within the meaning ofthe ERISA, nor does any member ofthe 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 "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 ofthe Internal Revenue Code of 1986, as now or
hereafter amended, respectively.
10.1.23 No Broker. No member ofthe Leasing Group nor any oftheir
respective Affiliates has dealt with any broker or agent in
connection with the transactions contemplated by the Lease
Documents.
51
10.1.24 No Improper Payments. No member ofthe Leasing Group nor
any oftheir respective Affiliates has:
(a) made any contributions, payments or gifts of its funds or
property to or for the private use of any govemment official,
employee, agent or other Person where either the payment or the
purpose of such contribution, payment or gifts is illegal under
the laws ofthe United States, any state thereofor 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 ofthe 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, fumished to or to be furnished to Lessor or its
attorneys in connection with the transactioiis 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 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, ofany member ofthe 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 ofpurchasing or carrying
margin stock (within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System), and no part ofthe
proceeds ofthe 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 ofany ofthe
regulations o the Board of Governors of the Federal Reserve
System. Lessee is not an
52
"investment company" within the meaning ofthe Investment Company
Act of 1940, as amended.
10.1.27 No Default. No event or state offacts 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
ofbusiness and chief executive office of Lessee is located at 3131
Elliot Avenue, Suite 500, Seattle, Washington 98121-2162 (the
"Principal Place of Business").
10.1.29 Intentionally Deleted
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 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 ofthe 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 ofthis 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, I
0.1.8,10. I.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 ofthis Lease but without derogation ofany
other obligation Lessee has under this Lease to provide
information to Lessor.
53
ARTICLE 11
FINANCIAL AND OTHER COVENANTS
11.1 Status Certifcates. 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 Offcer'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
modifcations) 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 Lessor may request and may
be relied upon by Lessor and any such prospective purchaser or
moitgagee ofthe 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 oftheir respective fiscal years, (i) a copy ofthe
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 ofthe last day of such fiscal year and a
statement of earnings from the Leased Property for such fscal year
showing, among other things, all rents and other income therefrom
and all expenses paid or incurred in connection with the operation
ofthe 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 repoitable conditions or
material weaknesses; (iv) a statement certified as true and
correct by Lessee setting forth all Subleases as ofthe last day of
such fiscal year, the respective areas demised thereunder, the
names of the
54
Sublessees thereunder, the respective expiration dates ofthe
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 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. Commencing on the Conversion
Date, within thirty (30) days after the end ofeach calendar month
during the pendency of this Lease, (i) a statement certified as
true and correct by Lessee setting forth the Gross Revenues ofthe
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 ofcare required and source ofpayment) 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. Commencing on the Conversion Date,
within thirty (30) days after the end ofeach 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 ofthe
Additional Rent payable for such quarter.
(d) QuarterlJr Statements of the Guarantor. Commencing on the
Conversion Date, 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.
55
PAGE>
(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 ofbusiness.
(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 ofany Permits or Contracts now or hereafter issued
by.or entered into with any Governmental Authority, Accreditation
Body or Third Party Payor and the response(s) 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
ofbusiness) 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 ofthe Leased Property; including, without
limitation, financial statements, certificates and consents from
accountants and all other financial and licensing/operational
information as may be required or requested by any Governmental
Authority.
(j) Default Conditions. As soon as possible, and in any event
within fve (5) days after the occurrence ofany 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
56
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 (1D)
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.
(1) 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 ofthe books of Lessee and,
ifrequested by Lessor, any letter ofcomments 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 ofthe
Manager which has, or is reasonably likely to have, a materially
adverse effect on the financial condition and/or operations ofthe
Facility;
(iv) any controversy that calls into question the eligibility
ofthe 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
57
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
ofany member ofthe 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 ofall 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 ofthe Leasing Group (which is a publicly held
corporation) with any securities exchange or with the Securities
Exchange Commission.
(p) Annual Budgets. Commencing on the Conversion Date, 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 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 certifcate,
instrument, notice or other document shall be signed by the chief
financial officer of such member.
58
11.2.3 No Material Omission. No certificate, instrument, notice or
other document, including without limitation, any fnancial
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
ofthe Leased Property or any ofthe Lease Documents or any interest
therein and (b) use such information in any litigation or
arbitration proceeding between Lessor and any member ofthe 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 IS 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 ofany such information ofthe confidential
nature 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 ofthe
Leased Property:
11.3.1 Debt Coverage Ratio of Lessee. From and after the second
anniversary ofthe Conversion Date until the fourth anniversary
thereof, the Facility and all other Group Two Development
Facilities shall maintain 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 thereof and for the remainder of the
Term, the Facility and all other Group Two Development Facilities
shall maintain for each Fiscal Quarter an aggregate Debt Coverage
Ratio equal to or greater than 1.2 to 1.
11.3.2 Intentionallv Deleted.
11.3.3 Intentionally Deleted.
11.3.4 Intentionallv Deleted.
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11.3.5 Current Ratio - Guarantor. From and after December 31,1999
and for the remainder ofthe Term, the Guarantor shall maintain a
ratio of Consolidated Current Assets to Consolidated Current
Liabilities equal to or greater than 1 to I as of the end of each
fscal year.
11.3.6 Intentionallv Deleted.
11.3.7 Net Worth - Guarantor. The Guarantor shall maintain, at all
times, a Net Worth ofnot less than FORTY MILLION DOLLARS
($40,000,000).
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 fnancing 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
Affliate, provided, that, such Indebtedness is fully subordinated
to this Lease pursuant to the Affiliated Party Subordination
Agreement, (vi) other Indebtedness of Lessee in the aggregate
amount not to exceed TWO HUNDRED THOUSAND DOLLARS ($200,000)
incurred, for the exclusive use ofthe Leased Property, on account
ofpurchase money indebtedness or fnance lease arrangements, each
ofwhich shall not exceed the fair market value ofthe 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 ofany other Person, except by the
endorsement ofnegotiable 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 Ternz 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
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shall keep in effect its existence and rights as a corporation,
trust or partnership under the laws ofthe state ofits
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 ofthe
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.
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 an_d (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 ofaccounts 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 ofthe 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 ofthe
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
61
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 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 ceitificate 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 ofthe 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 ofthe 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 ofnotice or the passage oftime, 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 ofsuch
testing or inspection shall be the responsibility of Lessor.
11.4.10 Annual Facilihr Upgrade Expenditure. Lessee shall spend an
amount equal to the Annual Facility Upgrade Expenditure on Upgrade
Renovations to the Facility each Lease Year commencing with the
fourth Lease Year. Lessee will furnish and shall
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cause to be furnished to Lessor evidence satisfactory to Lessor
that Lessee has fulfilled its obligation to rriake the Annual
Facility Upgrade Expenditure within ninety (90) days after the end
of Lessee's fscal year, provided, however, that no such evidence
shall be required to be submitted and no such expenditure shall be
required to be made until the fourth Lease Year.
11.5 Additional Negative Covenants. Lessee covenants and agrees
that, throughout the Term and such time as Lessee remains in
possession ofthe Leased Property:
11.5.1 Restrictions Relating to Lessee. Except as may otherwise be
expressly provided in Section 19.4 or in any ofthe other Lease
Documents, Lessee shall not, without the prior written consent of
Lessor, in each instance, which 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 6.12 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
63
(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 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 I 5 (h) the
Liens incurred pursuant to the provisions of Section 6. I.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 inseparable
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 1 I.5.4 annexed hereto, (b) those activities in which a
Meditrust/Emeritus Transaction Affiliate is permitted to engage by
the provisions of the Meditrust/Emeritus
64
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 h as 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 venture,
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 herein
above 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 I 1.5.4. The existence
ofany 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
65
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 I 1.5.4 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.
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
66
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 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;
67
(d) earthquake insurance (if reasonably deemed necessary by
Lessor) in limits and with deductibles acceptable to Lessor;
(e) environmental impairment liability insurance (ifavailable on
commercially reasonable terms and deemed reasonably necessary by
Lessor) in limits and with deductibles acceptable to Lessor;
(f) From and after the Conversion Date: 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
coverage 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) From and after the Conversion Date: professional liability
insurance in an amount not less than TEN MILLION DOLLARS
($10,000,000) for each medical incident;
(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) From and after the Conversion Date and prior thereto with
respect to Persons employed on the Leased Property or any portion
thereof prior to the Conversion Date, "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
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(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. I fan
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;
(b) include mortgagee, secured party, loss payable and additional
named insured endorsements reasonably acceptable to each Fee
Mortgagee;
(c) provide that the coverage 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;
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.
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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 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
70
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. I,
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,
except as the same may result from its gross negligence or willful
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
7l
become the absolute property of Lessor subject to any limitation
on assignment provided for therein.
12.2 Indemnity.
12.2.1 Indemnification. Except with respect to the gross
negligence or willful misconduct of Lessor or any of the other
Indemnifed 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
ofthe 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
ofthe 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, ( 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 Entities, any Fee
Mortgagee and their respective successors, assigns, employees,
servants, agents, attorneys, officers, directors, shareholders,
partners and owners.
72
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,
(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.
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 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
73
"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 ofthe
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 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;
74
(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 ofthe
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 I 2.
I 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 ofthis 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 of such emergency and the
nature and scope of the Work performed and obtains Lessor's
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 ofthe 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
75
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.
(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 therein, 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;
76
(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 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 vendor's, 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 (I 0) days prior to the making of the first and
final advances (or revised to a date within ten (10) 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
77
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, if 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 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 certificate(s) to be due, subject to a retention
often percent (l0%) 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 architect's 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 reasonably acceptable to Lessor insuring
the Leased
78
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. I, 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 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:
79
(a) all of the terms, conditions and provisions of Sections 13. I
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 (?70) 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 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
80
<PLUS>
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 therewith (net of costs and expenses incurred
in obtaining such proceeds) exceeds one hundred fifteen percent (I
15"%) 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 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 I 3 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.
81
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 the 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 ofthe
application of all insurance proceeds received by Lessor.
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 ( I 15"%) of the Fair Market Value of the Leased
Premises at the time of such termination, Lessor shall pay to
Lessee fifty percent (SO%) 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 our 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
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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 I 8; 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 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 building(s) located thereon or (in
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 I 4.3 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
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purchase price. In any other event, the entire Award (except for
such portion thereof which the Condemnor designates as allocable
to Lessee's loss of business or Tangible Personal Property) shall
belong to and be paid to Lessor.
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 IS 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 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
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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, (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.
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
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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 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;
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,
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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
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 (a
"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 interest, or any interest of a Sublessee which is an
Affiliate of Lessee, in the Leased Property shall be, directly or
indirectly, mortgaged,
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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 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); .
(1) 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 unsatisfed
and in effect
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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 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;
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(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 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; or
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 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
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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, (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 value of the Leased Property for the balance of
the Term, (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
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(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 credited 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.
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 oftime as may have existed
between the date Additional Rent commenced to accrue and the date
of computation.
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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 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
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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 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 LEASED 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
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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, 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
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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
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 1 I.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 the sole appraiser to determine the Fair Market
Value of the Leased Property or appoint a second Person as
appraiser on its behalf.
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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 (1O%) 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
ofthe 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.
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.
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]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 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 Convevance. 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.
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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 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
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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 I 3 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.
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 (I) 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,
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<PAAGE>
hypothecation or other transfer made without Lessor's consent
shall be void and ofno force and effect. Notwithstanding the
foregoing, Lessor's 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.
19.2 Attornment. Lessee shall insert in each Sublease approved by
Lessor, provisions to the effect that (a) such Sublease is subject
and subordinate to all of the terms and provisions of this Lease
and to the rights of Lessor hereunder, (b) 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
Encumbrances. Lessee shall subordinate this Lease to
l01
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 canceled 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 such Fee
Mortgagee simultaneously executes, delivers and records a written
agreement of the type described in the preceding paragraph.
ARTICLE 21
LESSOR OBLIGATIONS
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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 bv 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.
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
103
3131 Elliot Avenue, Suite 500
Seattle, WA 98121-2162
Attention: Raymond R. Brandstrom, President
With a copy to: The Nathanson Group
1411 Fourth Avenue, Suite 905
Seattle, WA 98101
Attn: Randi S. Nathanson, Esquire
If to the Emeritus Corporation
Guarantor: 3131 Elliot Avenue, Suite 500
Seattle, WA 98121-2162
Attention: Raymond R. Brandstrom, President
With a copy to: The Nathanson Group
1411 Fourth Avenue, Suite 905
Seattle, WA 98101
Attn: Randi S. Nathanson, Esquire
If to Lessor: Meditrust Company LLC
197 First Avenue
Needham Heights, Massachusetts 02194
Attn: President
With copies to: Meditrust Company LLC
197 First Avenue
Needham Heights, Massachusetts 02194
Attn: General Counsel
and Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02110
Attn: Jack H. Fainberg, Esq.
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.
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ARTICLE 23
LIMITATION OF THE LESSOR'S LIABILITY
All Persons dealing with the Lessor, in any way, shall look only
to the assets of the Lessor, for the payment of any sum or the
performance of any obligation. Furthermore, in no event shall the
Lessor ever be liable to the Lessee or any other Person for any
indirect or consequential damages incurred by the Lessee or such
other Person resulting from any cause whatsoever.
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 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,
105
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, 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, as it relates to the Leased Property, 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
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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.
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.
107
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 as of the Conversion 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 second anniversary of the Conversion 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.
108
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 (I)
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 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; .
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
109
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 (3) 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 (1)
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 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
110
forth in Lease 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 (I) 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;
(1) 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;
111
(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,
Lessor shall pay an amount equal to the difference to Lessee;
provided, however, that Lessor shall not be obligated to
consummate 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 I
8 (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
112
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.
25.5 Limitation. No Substitution Right may be exercised earlier
than the fifth anniversary of the Conversion Date.
[Remainder of Page Intentionally Left Blank)
113
IN WITNESS WHEREOF, the parties have caused this Lease to be
executed and attested by their respective officers thereunto duly
authorized.
ATTEST: LESSEE: EMERITUS PROPERTIES I
INC., a Washington corporation
/s/: Susan Griffin /s/: Kelly J. Price
Susan Griffin Kelly J. Price
Vice President of Finance
ATTEST: LESSOR: MEDITRUST COMPANY LLC, a
Delaware limited liability company
/s/: Amelia C. Gentry /s/: Michael S. Benjamin, ESQ.
Michael S. Benjamin, ESQ.
Senior Vice President
114