Exhibit 10.64.2
LEASE AGREEMENT
THIS AGREEMENT is made and entered into as of the 29th day of December,
2000 by and between MELCHOR BALAZS AND ISABEL BALAZS as trustees for the MELCHOR
& ISABEL BALAZS FAMILY LIVING TRUST DATED OCTOBER 21, 1997, MELCHOR BALAZS,
individually, JOSE AND AMALIA CHAVEZ, husband and wife, and GLAURO TRONCOSO AND
ANA INES LOPEZ (collectively "Landlord") and EMERITUS CORPORATION, a Washington
corporation ("Tenant").
RECITALS
A. Tenant was the owner and licensed operator of the facility with 99
assisted living beds and units and known as Villa Ocotillo, 3327 N. Civic Center
Plaza, Scottsdale, Arizona 85251 (the "Facility").
B. Landlord has purchased the Facility from Tenant effective as of December
29, 2000 (the "Closing Date").
C. In order to facilitate the closing of the sale of the Facility, Tenant
agreed to continue to operate the Facility for up to one year after the Closing
Date under the terms of a lease agreement with Landlord.
D. Landlord and Tenant are interested in documenting the terms and
conditions of such lease.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants of the parties set forth herein, IT IS HEREBY AGREED AS FOLLOWS:
1. The Premises. Landlord does hereby lease to Tenant and Tenant does
hereby lease from Landlord the real property described in Exhibit A hereto and
the improvements thereon and furniture, fixtures and equipment located therein
which collectively comprise the Facility.
2. Term.
(a) The initial term of this Lease shall commence on the Closing Date and
shall terminate on the earlier to occur of (i) June 30, 2001 or (ii) the date
specified in writing by Landlord to Tenant as the date on which Landlord has
identified a tenant to lease the Facility (the "New Operator") and the New
Operator has confirmed that it will be duly licensed to operate the Facility by
the State of Arizona (the "Initial Term").
(b) Upon the payment by Landlord to Tenant in immediately available funds
of the sum of Fifty Thousand and no/100 Dollars ($50,000) (the "Extension
Payment"), Landlord shall have the right to extend the term of this Lease beyond
the expiration of the Initial Term for an additional period which shall end on
the earlier to occur of December 29, 2001 or (ii) the date specified in writing
by Landlord to Tenant as the date on which Landlord has identified the New
Operator and the New Operator has confirmed that it will be duly licensed to
operate the Facility by the State of Arizona (the "Extension Term").
Hereinafter the Initial Term and the Extension Term will be collectively
referred to as the "Lease Term."
(c) At the end of the Term, Landlord shall be required to take such action
as may be necessary to ensure that the Facility can be lawfully operated as an
assisted living facility, it being understood and agreed that Tenant shall not
be required to operate the Facility beyond June 30, 2001 or, if the Extension
Payment is timely remitted by Landlord to Tenant, December 29, 2001 whether or
not a New Operator has been identified and licensed as of that date.
(d) At the end of the Term, all of Tenant's right, title and interest in
and to any leases or other agreements with the residents of the Facility shall
automatically be assigned to the persons and entities identified herein as
comprising Landlord without the need for any further action, or the execution of
any further documents, by such persons or entities or Tenant.
(e) At the end of the Term, Tenant shall cooperate, at no cost to Tenant,
in Landlord's or New Operator's efforts to obtain a license to operate the
Facility in its name.
3. The Rent. Throughout the Lease Term, the monthly rent due from Tenant
to Landlord shall be $42,558.00 and shall be due by no later than the seventh
(7th) day of each month and with the first such payment due by January 7, 2001
for the period from the Closing Date through January 31, 2001. Any payment of
rent which is not made by the seventh day of the month shall be subject to a
late fee equal to 5% of the amount of the rent which is due and owing.
4. The Tenant's Operating, Maintenance and Insurance Covenants.
(a) Tenant acknowledges and agrees that Landlord has financed the purchase
of the Facility with a new loan from Bank United Loan and that the documents
evidencing the loan contain a series of covenants with respect to the operation,
maintenance and insuring of the Facility (the "Bank United Loan Documents"). A
true and correct copy of the Bank United Loan Documents is attached hereto as
Exhibit C. Tenant further acknowledges and agrees that throughout the Lease
Term, Tenant shall comply with all of the obligations imposed on Landlord under
the Facility Loan Documents with respect to the Facility. In furtherance and
not in limitation of the foregoing, Tenant specifically agrees to comply with
any provisions of the Bank United Loan Documents dealing with the handling of
insurance proceeds.
(b) Tenant acknowledges and agrees that this lease is a "triple net" lease
and as such Tenant shall be responsible for the payment of rent, taxes,
insurance and all other expenses related to the ownership and operation of the
Facility other than Landlord's income taxes and other than the debt service
payments due under the Bank United Loan Documents. In furtherance and not in
limitation of the foregoing, except as otherwise provided herein, Tenant agrees
to operate the Facility in compliance with its fiscal 2001 Operating and Capital
Budget, a copy of which is attached hereto as Exhibit D (as the amounts set
forth therein may be prorated in the event the Lease Term is less than 12
months) (the "Budget"). In the event Tenant intends to expend more than 10%
less than the amounts reflected in the Budget, it shall provide Landlord
with written notice thereof and with a reasonably detailed written explanation
of the reasons therefor (the "Variance Report"). Landlord shall have a period of
ten (10) days to review and approve such Variance Report, which approval shall
not be unreasonably withheld. In the event Landlord fails to object within such
ten (10) day period, then Landlord shall be deemed to have approved such
Variance Report. In the event Landlord objects to such Variance Report, Landlord
shall be required to provide Tenant with a reasonably detailed written
explanation of the reasons for such objection and Landlord and Tenant shall have
an additional period of ten (10) days in which to attempt to resolve Landlord's
objections. In the event Landlord and Tenant are unable to resolve Landlord's
objections within such 10 day period, Tenant shall either expend the amounts at
issue or submit the matter to an independent accountant having no relationship
to Landlord and Tenant for review (the "Accountant"). Landlord and Tenant agree
to be bound by the determination of the Accountant. Landlord and Tenant further
agree that the party against whom the Accountant rules shall be responsible for
any costs and expenses of the Accountant.
(c) On the Commencement Date Tenant shall deliver to Landlord a certificate
of insurance meeting the requirements set forth in the Bank United Loan
Documents and naming Landlord as an additional insured/loss payee thereunder.
(d) By no later than the 7th day of each month Tenant shall provide
Landlord with information concerning the occupancy of the Facility during the
immediately preceding month and by no later than the 20th day of each month
Tenant shall provide Landlord with its monthly financial statements in the form
routinely prepared by Tenant reflecting the operating results of the Facility
during the immediately preceding month. In addition, Tenant shall provide
Landlord with quarterly financial statements for the Facility within forty five
(45) days after the end of each quarter and with annual financial statements for
the Facility within thirty (30) days after the end of each fiscal year,
commencing with the year ending December 31, 2001, which show the operations at
the Facility for the year then ended and on a comparison basis to the prior
fiscal year and which include a balance sheet (reflecting without limitation all
contingent liabilities), income statements and statements of changes in
financial position (reflecting without limitation, cash flow changes).
(e) At the end of the Lease Term Landlord or the New Operator shall have
the right to extend an offer of employment to the Executive Director of the
Facility and Tenant shall not offer him/her employment at any other facility
owned or operated by Tenant or its affiliates if he or she elects to accept the
offer of employment proffered by Landlord or the New Operator.
(f) Tenant acknowledges and agrees that it has been advised by Landlord
that it intends to refinance the Bank United Loan and that Landlord intends to
identify a New Operator for the Facility prior to the end of the Lease Term.
Accordingly, Tenant agrees upon request and at no cost to Tenant to provide
Landlord or any prospective New Operator and/or lender with any information
concerning Tenant's operations at the Facility that may be reasonably requested
by such parties and with access to the Facility on reasonable advance notice and
during normal working hours.
5. Entirety. This Agreement, including the exhibits hereto, represents the
entire and final agreement of the parties hereto with respect to the subject
matter hereof and may not be amended or modified except by written instrument
signed by the parties hereto.
6. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Arizona.
7. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which taken together shall
constitute but one and the same instrument.
8. Third Party Beneficiary. Landlord and Tenant acknowledge and agree that
Bank United is an intended third party beneficiary of this Agreement.
IN WITNESS WHEREOF, the parties hereby execute this Agreement as of the day
and year first set forth above.
LANDLORD: MELCHOR AND ISABEL BALAZS AS TRUSTEES
FOR THE MELCHOR AND ISABEL BALAZS FAMILY
LIVING TRUST DATED OCTOBER 21, 1997
By:___________________________
Its:____________________________
/s/ Melchor Balazs
___________________________
MELCHOR BALAZS
/s/ Jose Chavez
___________________________
JOSE CHAVEZ
/s/ Amalia Chavez
____________________________
AMALIA CHAVEZ
/s/ Glauro Troncoso
____________________________
GLAURO TRONCOSO by Melchor Balazs his duly
authorized attorney in fact
/s/ Ana Ines Lopez
____________________________
ANA INES LOPEZ by Melchor Balazs her duly
authorized attorney in fact
TENANT: EMERITUS CORPORATION
By: _____________________
Its: _____________________