THE FOLLOWING DOCUMENT IS SUBSTANTIALLY THE
SAME FOR ALL FOUR COMMUNITIES WITH THE
EXCEPTION OF THE FOLLOWING ITEMS:
Lease
Commencement Lease Term Annual Lease
Date Date Payment
---------- ---------- ----------
Kirkland Lodge Apr 30, 1997 Apr 30, 2009 $708,400
Park Place May 23, 1997 Apr 30, 2009 370,024
The Hearthstone May 23, 1997 Apr 30, 2009 596,192
Meadowbrook May 23, 1997 Apr 30, 2009 302,560
KIRKLAND LODGE
F A C I L I T Y L E A S E A G R E E M E N T
MEDITRUST ACQUISITION CORPORATION I
(A Massachusetts corporation)
as
Lessor
AND
EMERITUS PROPERTIES I, INC.
(A Washington corporation)
as
Lessee
Dated as of May 1, 1997
For Premises Located At
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇.▇.
Kirkland, Washington 98033
FACILITY LEASE AGREEMENT
This FACILITY LEASE AGREEMENT ("Lease")
is dated as of the 1st day of May, 1997 and
is between MEDITRUST ACQUISITION CORPORATION
I ("Lessor"), a Massachusetts corporation
having its principal office at ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
and EMERITUS PROPERTIES I, INC. ("Lessee"), a
Washington corporation, having its principal
office at c/o Emeritus Corporation, ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇.
ARTICLE 1
LEASED PROPERTY; TERM; CONSTRUCTION;
EXTENSIONS
1.1 Leased Property. Upon and subject
to the terms and conditions hereinafter set
forth, Lessor leases to Lessee and Lessee
rents and leases from Lessor all of Lessor's
rights and interests in and to the following
real and personal property (collectively, the
"Leased Property"):
(a) the real property described in
EXHIBIT A attached hereto (the "Land");
(b) all buildings, structures,
Fixtures (as hereinafter defined) and
other improvements of every kind
including, but not limited to, alleyways
and connecting tunnels, sidewalks,
utility pipes, conduits and lines, and
parking areas and roadways appurtenant
to such buildings and structures
presently or hereafter situated upon the
Land (collectively, the "Leased
Improvements");
(c) all easements, rights and
appurtenances of every nature and
description now or hereafter relating to
or benefitting any or all of the Land
and the Leased Improvements;
(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
(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 April 30, 1997 ("Commencement
Date") and end on April 30, 2009 (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 April 30, 2029 .
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, ▇▇▇▇▇▇'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.
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.
2
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 ▇▇▇▇▇▇ ▇. ▇▇▇▇ 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 Agreement Regarding
Related Transactions (Acquisition) dated
October 1, 1996, as amended from time to
time, between Lessee, Lessor and any Related
Party that is party to any Related Lease or
Related Party Agreement. ▇▇▇▇▇▇ and ▇▇▇▇▇▇
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
3
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 period
from and including May 1, 1998 through and
including April 30, 1999, initially as shown
by ▇▇▇▇▇▇'s certified Consolidated Financial
Statements and as later verified by ▇▇▇▇▇▇'s
Consolidated Financial Statements.
Base Rent: As defined in Section 3.1.
Business Day: Any day which is not a
Saturday or Sunday or a public holiday under
the laws of the United States of America, the
Commonwealth of Massachusetts, the State or
the state in which Lessor's depository bank
is located.
Capital Additions: Collectively, all
new buildings and additional structures
annexed to any portion of any of the Leased
Improvements and material expansions of any
of the Leased Improvements which are
constructed on any portion of the Land during
the Term, including, without limitation, the
construction of a new wing or new story, the
renovation of any of the Leased Improvements
on the Leased Property and any expansion,
construction, renovation or conversion in
connection therewith (a) in order to provide
a functionally new facility that is needed or
used to provide services not previously
offered or (b) in order to (i) increase the
bed capacity of a Facility, (ii) change the
purpose for which such beds are utilized
and/or (iii) change the utilization of any
material portion of any of the Leased
Improvements.
Capital Addition Cost: The cost of any
Capital Addition made by ▇▇▇▇▇▇ 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
4
interest on all other Indebtedness which is
fully subordinated to the Lease Obligations,
plus (iii) any indebtedness which is fully
subordinated to the Lease Obligations
pursuant to the Affiliated Party
Subordination Agreement or the Management
Subordination Agreement.
Casualty: As defined in Section 13.1.
Chattel Paper: As defined in the UCC.
Closing Date: As defined in Section
18.3.1.
Code: The Internal Revenue Code of
1986, as amended.
Collateral: All of the property in
which security interests are granted to
Lessor and the other Meditrust Entities
pursuant to the Lease Documents and the
Related Party Agreements to secure the Lease
Obligations, including, without limitation,
the Cash Collateral.
Competitive Activity: As defined in
Section 11.5.
Condemnation: With respect to the
Leased Property or any interest therein or
right accruing thereto or use thereof (i) the
exercise of any governmental authority,
whether by legal proceedings or otherwise, by
a Condemnor or (ii) a voluntary sale or
transfer by Lessor to any Condemnor, either
under threat of Condemnation or Taking or
while legal proceedings for Condemnation or
Taking are pending.
Condemnor: Any public or quasi-public
authority, or private corporation or
individual, having the power of condemnation.
Consolidated: The consolidated accounts
of the relevant Person and its Subsidiaries
consolidated in accordance with GAAP.
Consolidated Financials: For any fiscal
year or other accounting period for any
Person and its consolidated Subsidiaries,
statements of earnings and retained earnings
and of changes in financial position for such
period and for the period from the beginning
of the respective fiscal year to the end of
such period and the related balance sheet as
at the end of such period, together with the
notes thereto, all in reasonable detail and
setting forth in comparative form the
corresponding figures for the corresponding
period in the preceding fiscal year, and
prepared in accordance with GAAP, and
disclosing all liabilities of such Person and
its consolidated Subsidiaries, including,
without limitation, contingent liabilities.
Consultants: Collectively, the
architects, engineers, inspectors, surveyors
and other consultants that are engaged from
time to time by ▇▇▇▇▇▇ 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
5
operation of any programs or services in
conjunction with the Facility and all
renewals, replacement and substitutions
therefor, now or hereafter issued to any
member of the Leasing Group by, or entered
into by any member of the Leasing Group with,
any Governmental Authority, Accreditation
Body or Third Party Payor or maintained or
used by any member of the Leasing Group or
entered into by any member of the Leasing
Group with any third Person.
Current Assets: All assets of any
Person which would, in accordance with GAAP,
be classified as current assets.
Current Liabilities: All liabilities of
any Person which would, in accordance with
GAAP, be classified as current liabilities.
Date of Taking: The date the Condemnor
has the right to possession of the property
being condemned.
Debt Coverage Ratio: The ratio of (i)
Cash Flow for each applicable period to (ii)
the total of all Rent (excluding Additional
Rent due under this Lease) paid or payable
during such period or accrued for such
period.
Declaration: As defined in Article 23.
Deposit: As defined in Section 18.3.
Deposit Pledge Agreement: The pledge
and security agreement so captioned and dated
as of even date herewith between Lessee and
Lessor.
Documents: As defined in the UCC.
Election Notice: As defined in Section
18.3.1.
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
16.
Excess Gross Revenues: Gross Revenues
less Base Gross Revenues.
Expiration Date: As defined in Section
1.2.
Extended Terms: As defined in Section
1.4.
Facility: The 74 unit fully licensed
assisted living facility known as Kirkland
Lodge on the Land (together with related
parking and other amenities).
Failure to Operate: As defined in
Article 16.
6
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.
Fiscal Quarter: Each of the three (3)
month periods commencing on January 1st,
April 1st, July 1st and October 1st.
Fiscal Year: The twelve (12) month
period from January 1st to December 31st.
Fixtures: As defined in Article 1.
GAAP: Generally accepted accounting
principles, consistently applied throughout
the relevant period.
General Intangibles: As defined in the
UCC.
Governmental Authorities: Collectively,
all agencies, authorities, bodies, boards,
commissions, courts, instrumentalities,
legislatures, and offices of any nature
whatsoever of any government, quasi-
government unit or political
7
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,
(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
8
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 Four Acquisition Facilities: As
defined in the Agreement Regarding Related
Transactions.
Guarantor: Emeritus Corporation, a
Washington corporation, and its successors
and assigns.
Guaranty of Lease Obligations: The
Guaranty of Lease Obligations of even date
executed by Guarantor in favor of ▇▇▇▇▇▇,
relating to the Lease Obligations.
Hazardous Substances: As defined in the
Environmental Indemnity Agreement.
Impositions: Collectively, all taxes
(including, without limitation, all capital
stock and franchise taxes of Lessor, all ad
valorem, property, sales and use, single
business, gross receipts, transaction
privilege, rent or similar taxes),
assessments (including, without limitation,
all assessments for public improvements or
benefits, whether or not commenced or
completed prior to the date hereof and
whether or not to be completed within the
Term), ground rents, water and sewer rents,
water charges or other rents and charges,
excises, tax levies, fees (including, without
limitation, license, permit, inspection,
authorization and similar fees), transfer
taxes and recordation taxes imposed as a
result of this Lease or any extensions
hereof, and all other governmental charges,
in each case whether general or special,
ordinary or extraordinary, or foreseen or
unforeseen, of every character in respect of
either or both of the Leased Property and the
Rent (including all interest and penalties
thereon due to any failure in payment by
▇▇▇▇▇▇), which at any time prior to, during
or in respect of the Term hereof and
thereafter until the Leased Property is
surrendered to Lessor as required by the
terms of this Lease, may be assessed or
imposed on or in respect of or be a Lien upon
(a) Lessor or Lessor's interest in the Leased
Property, (b) the Leased Property or any rent
therefrom or any estate, right, title or
interest therein, or (c) any occupancy,
operation, use or possession of, sales from,
or activity conducted on, or in connection
with, the Leased Property or the leasing or
use of the Leased Property. Notwithstanding
the foregoing, nothing contained in this
Lease shall be construed to require Lessee to
pay (1) any tax based on net income (whether
denominated as a franchise or capital stock
or other tax) imposed on Lessor or any other
Person, except Lessee or its successors, (2)
any net revenue tax of Lessor or any other
Person, except Lessee and its successors, (3)
any tax imposed with respect to the sale,
exchange or other disposition by Lessor of
the Leased Property or the proceeds thereof,
or (4) except as expressly provided elsewhere
in this Lease, any principal or interest on
any Encumbrance on the Leased Property;
provided, however, the provisos set forth in
clauses (1) and (2) of this sentence shall
not be applicable to the extent that any real
or personal property tax, assessment, tax
levy or charge 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
9
upon all properties owned by Lessor that are
located within the particular jurisdiction
subject to any such tax.
Indebtedness: The total of all
obligations of a Person, whether current or
long-term, which in accordance with GAAP
would be included as liabilities upon such
Person's balance sheet at the date as of
which Indebtedness is to be determined, and
shall also include (i) all capital lease
obligations and (ii) all guarantees,
endorsements (other than for collection of
instruments in the ordinary course of
business), or other arrangements whereby
responsibility is assumed for the obligations
of others, whether by agreement to purchase
or otherwise acquire the obligations of
others, including any agreement contingent or
otherwise to furnish funds through the
purchase of goods, supplies or services for
the purpose of payment of the obligations of
others.
Indemnified Parties: As defined in
Section 12.2.2.
Index: The rate of interest of actively
traded marketable United States Treasury
Securities bearing a fixed rate of interest
adjusted for a constant maturity of ten (10)
years as calculated by the Federal Reserve
Board.
Initial Term: As defined in Section
1.2.
Instruments: As defined in the UCC.
Insurance Requirements: All terms of
any insurance policy required by this Lease,
all requirements of the issuer of any such
policy with respect to the Leased Property
and the activities conducted thereon and the
requirements of any insurance board,
association or organization or underwriters'
regulations pertaining to the Leased
Property.
Land: As defined in Article 1.
Lease: As defined in the preamble of
this Lease.
Lease Default: The occurrence of any
default or breach of condition continuing
beyond any applicable notice and/or grace
periods under this Lease and/or any of the
other Lease Documents.
Lease Documents: Collectively, this
Lease, the Guaranty of Lease Obligations, the
Agreement Regarding Related Transactions, the
Security Agreement, the Deposit Pledge
Agreement, the Negative Pledge Agreement, the
Permits Assignment, the Financing Statements,
the Affiliated Party Subordination Agreement,
the Environmental Indemnity Agreement and any
and all other instruments, documents,
certificates or agreements executed or
furnished by any member of the Leasing Group
in connection with the transactions evidenced
by the Lease and/or any of the foregoing
documents.
Lease Obligations: Collectively, all
indebtedness, covenants, liabilities,
obligations, agreements and undertakings
(other than Lessor's obligations) under this
Lease and the other Lease Documents.
Lease Year: A twelve month period
ending on April 30 of each year; provided,
that the first Lease Year shall begin on the
Commencement Date and shall end on April 30,
1998 and the final Lease Year shall end at
the end of the Term.
10
Leased Improvements: As defined in
Article 1.
Leased Property: As defined in Article
1.
Leasing Commitment Fee: Thirty-Five
Thousand and 00/100 Dollars ($35,000.00).
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
of the foregoing which may (i) require
repairs, modifications or alterations in or
to the Leased Property, (ii) in any way
affect (adversely or otherwise) the use and
enjoyment of the Leased Property or (iii)
require the assessment, monitoring, clean-up,
containment, removal, remediation or other
treatment of any Hazardous Substances on,
under or from the Leased Property. Without
limiting the foregoing, the term Legal
Requirements includes all Environmental Laws
and shall also include all Permits and
Contracts issued or entered into by any
Governmental Authority, any Accreditation
Body and/or any Third Party Payor and all
Permitted Encumbrances.
Lessee: As defined in the preamble of
this Lease and its successors and assigns.
Lessee's Election Notice: As defined in
Section 14.3.
Lessor: As defined in the preamble of
this 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 property, any mortgage, easement,
restriction, lien, pledge, collateral
assignment, hypothecation, charge, security
interest, title retention agreement, levy,
execution, seizure, attachment, garnishment
or other encumbrance of any kind in respect
of such property, whether or not inchoate,
vested or perfected.
Limited Parties: As defined in Section
11.5.4; provided, however, in no event shall
the term Limited Parties include any Person
in its capacity as a shareholder of a public
entity, unless such shareholder is a member
of the Leasing Group or an Affiliate thereof.
11
Managed Care Plans: All health
maintenance organizations, preferred provider
organizations, individual practice
associations, competitive medical plans, and
similar arrangements.
Management Agreement: Any agreement,
whether written or oral, between Lessee or
any Sublessee and any other Person pursuant
to which Lessee or such Sublessee provides
any payment, fee or other consideration to
any other Person to operate or manage the
Facility.
Management Subordination Agreement: The
Management Subordination Agreement as of even
date herewith between Lessee and Lessor.
Manager: Any Person who has entered
into a Management Agreement with Lessee or
any Sublessee.
Material Structural Work: Any (i)
structural alteration, (ii) structural repair
or (iii) structural renovation to the Leased
Property, which would customarily require or
which require the design and/or involvement
of a structural engineer or architect or
which would require the issuance of a Permit.
Medicaid: The medical assistance
program established by Title XIX of the
Social Security Act (42 USC Section 1396 et
seq.) and any statute succeeding thereto.
Medicare: The health insurance program
for the aged and disabled established by
Title XVIII of the Social Security Act (42
USC Section 1395 et seq.) and any statute
succeeding thereto.
Meditrust: As defined in Article 23.
Meditrust/Emeritus Facilities: As
defined in the Agreement Regarding Related
Transactions.
Meditrust/Emeritus Transaction
Affiliate: An Affiliate of Lessee, the
business and activities of which are limited
to those subject to Meditrust/Emeritus
Transaction Documents (other than the
Affiliated Party Subordination Agreement, the
Agreement Regarding Related Transactions and
comparable agreement now or hereafter in
effect among Affiliates of Lessee and of
Lessor) to which such Affiliate is a party.
Meditrust/Emeritus Transaction
Documents: As defined in the Agreement
Regarding Related Transactions.
Meditrust Entities: Collectively,
Meditrust, Lessor and any other Affiliate of
Lessor which may now or hereafter be a party
to any Related Party Agreement.
Meditrust Investment: The sum of (i)
the Original Meditrust Investment plus (ii)
the aggregate amount of all Subsequent
Investments less the sum of any Net Award
Amounts and/or Net Proceeds Amounts.
Monthly Deposit Date: As defined in
Section 4.6.
Negative Pledge Agreement: The Group
Four Negative Pledge Agreement (Acquisition)
of even date herewith by and between
Guarantor,
12
▇▇▇▇▇▇ and Lessor, as amended from time to
time.
Net Award Amount: As defined in Section
3.7.
Net Income (or Net Loss): The net
income (or net loss, expressed as a negative
number) of a Person for any period, after all
taxes actually paid or accrued and all
expenses and other charges determined in
accordance with GAAP.
Net Proceeds Amount: As defined in
Section 3.7.
Net Worth: An amount determined in
accordance with GAAP equal to the total
assets of any Person, minus the total
liabilities of such Person.
Obligations: Collectively, the Lease
Obligations and the Related Party
Obligations.
Offer: As defined in Section 18.3.1.
Offered Property: As defined in Section
18.3.
Officer's Certificate: A certificate of
▇▇▇▇▇▇ signed on behalf of Lessee by the
Chairman of the Board of Directors, the
President, any Vice President or the
Treasurer of Lessee, or another officer
authorized to so sign by the Board of
Directors or By-Laws of Lessee, or any other
Person whose power and authority to act has
been authorized by delegation in writing by
any of the Persons holding the foregoing
offices.
Original Meditrust Investment: The sum
of Seven Million Dollars ($7,000,000).
Other Permitted Uses: To the extent
permitted under applicable Legal Requirements
and under Insurance Requirements, and so long
as the same do not detract in any material
manner from the Primary Intended Use and do
not occupy more than ten percent (10%) of the
useable floor area of the building comprising
the Facility, such uses as Lessee reasonably
determines are appropriate and incidental to
the Primary Permitted Use.
Overdue Rate: On any date, a rate of
interest per annum equal to the greater of:
(i) a variable rate of interest per annum
equal to one hundred twenty percent (120%) of
the Prime Rate, or (ii) eighteen percent
(18%) per annum; provided, however, in no
event shall the Overdue Rate be greater than
the maximum rate then permitted under
applicable law to be charged by Lessor.
PBGC: Pension Benefit Guaranty
Corporation.
Permits: Collectively, all permits,
licenses, approvals, qualifications, rights,
variances, permissive uses, accreditation,
certificates, certifications, consents,
agreements, contracts, contract rights,
franchises, interim licenses, permits and
other authorizations of every nature
whatsoever required by, or issued under,
applicable Legal Requirements relating or
affecting the Leased Property or the
construction, development, maintenance,
management, use or operation thereof, or the
operation of any programs or services in
conjunction with the Facility and all
renewals, replacements and substitutions
therefor, now or hereafter required or issued
by any Governmental Authority, Accreditation
Body or Third Party Payor to any member of
the Leasing Group, or maintained
13
or used by any member of the Leasing Group,
or entered into by any member of the Leasing
Group with any third Person with respect to
the Leased Property.
Permits Assignment: The Collateral
Assignment of Permits, Licenses and Contracts
of even date granted by Lessee to Lessor.
Permitted Encumbrances: As defined in
Section 10.1.18.
Permitted Prior Security Interests: As
defined in Section 6.1.2.
Person: Any individual, corporation,
general partnership, limited partnership,
joint venture, stock company or association,
company, bank, trust, trust company, land
trust, business trust, unincorporated
organization, unincorporated association,
Governmental Authority or other entity of any
kind or nature.
Plans and Specifications: As defined in
Section 13.1.2.
Primary Intended Use: The use of the
Facility as an assisted living facility with
74 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
financial institution reasonably selected by
Lessor.
Principal Place of Business: As defined
in Section 10.1.28.
Proceeds: As defined in the UCC.
Provider Agreements: All participation,
provider and reimbursement agreements or
arrangements, if any, now or hereafter in
effect for the benefit of Lessee or any
Sublessee in connection with the operation of
the Facility relating to any right of payment
or other claim arising out of or in
connection with ▇▇▇▇▇▇'s or such Sublessee's
participation in any Third Party Payor
Program.
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.
14
Related Leases: The Group Four
Acquisition Facility Leases (as defined in
the Agreement Regarding Related
Transactions), together with such other new
leases identified from time to time in the
Agreement Regarding Related Transactions.
Related Parties: Collectively, each
Person that may now or hereafter be a party
to any Related Party Agreement other than the
Meditrust Entities.
Related Party Agreement: Any agreement,
document or instrument now or hereafter
evidencing or securing any Related Party
Obligation, including, without limitation,
the Related Leases.
Related Party Default: The occurrence
of a default or breach of condition
continuing beyond the expiration of any
applicable notice and grace periods, if any,
under the terms of any Related Party
Agreement.
Related Party Obligations:
Collectively, all indebtedness, covenants,
liabilities, obligations, agreements and
undertakings due to, or made for the benefit
of, Lessor or any of the other Meditrust
Entities by Lessee or any other member of the
Leasing Group or any of their respective
Affiliates in connection with any of the
properties described in Exhibit E to the
Agreement Regarding Related Transactions, as
the same may be modified and amended from
time to time; whether such indebtedness,
covenants, liabilities, obligations,
agreements and/or undertakings are direct or
indirect, absolute or contingent, liquidated
or unliquidated, due or to become due, joint,
several or joint and several, primary or
secondary, now existing or hereafter arising.
Rent: Collectively, the Base Rent,
Additional Rent, the Additional Charges and
all other sums payable under this Lease and
the other Lease Documents.
Rent Adjustment Date: The first day of
any of the Extended Terms.
Rent Adjustment Rate: 320 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
13.1.4.
Right of First Refusal: As defined in
Section 18.3.1.
Security Agreement: The Security
Agreement as of even 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),
15
whether oral or in writing, now in existence
or subsequently entered into by ▇▇▇▇▇▇,
encumbering or affecting the Leased Property.
Sublessee: Any sublessee, licensee,
concessionaire, tenant or other occupant
under any of the Subleases.
Subsequent Investments: The aggregate
amount of all sums expended and liabilities
incurred by Lessor in connection with Capital
Additions.
Subsidiary or Subsidiaries: With
respect to any Person, any corporation or
other entity of which such Person, directly,
or indirectly, through another entity or
otherwise, owns, or has the right to control
or direct the voting of, fifty percent (50%)
or more of the outstanding capital stock or
other ownership interest having general
voting power (under ordinary circumstances).
Taking: A taking or voluntary
conveyance during the Term of the Leased
Property, or any interest therein or right
accruing thereto, or use thereof, as the
result of, or in settlement of, any
Condemnation or other eminent domain
proceeding affecting the Leased Property
whether or not the same shall have actually
been commenced.
Tangible Personal Property: All
machinery, equipment, furniture, furnishings,
movable walls or partitions, computers or
trade fixtures, goods, inventory, supplies,
and other personal property owned or leased
(pursuant to equipment leases) by ▇▇▇▇▇▇ 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 Payor Programs:
Collectively, all third party payor programs
in which Lessee or any Sublessee presently or
in the future may participate, including
without limitation, Medicare, Medicaid, Blue
Cross and/or Blue Shield, Managed Care Plans,
other private insurance plans and employee
assistance programs.
Third Party Payors: Collectively,
Medicare, Medicaid, Blue Cross and/or Blue
Shield, private insurers and any other Person
which presently or in the future maintains
Third Party Payor Programs.
UCC: The Uniform Commercial Code as in
effect from time to time in the State.
United States Treasury Securities: The
uninsured treasury securities issued by the
United States Federal Reserve Bank.
Unsuitable For Its Primary Intended Use:
As used anywhere in this Lease, the term
"Unsuitable For Its Primary Intended Use"
shall mean that, by reason of Casualty, or a
partial or temporary Taking by Condemnation,
in the good faith judgment of Lessor, the
Facility cannot be operated on a commercially
practicable basis for the Primary Intended
Use, taking into account, among other
relevant factors, the number of usable units
or beds affected by such Casualty or partial
or temporary Taking.
Unavoidable Delays: Delays due to
strikes, lockouts, inability to procure
materials, power failure, acts of God,
governmental restrictions, enemy
16
action, civil commotion, fire, unavoidable
casualty or other causes beyond the control
of the party responsible for performing an
obligation hereunder, provided that lack of
funds shall not be deemed a cause beyond the
control of either party hereto.
Upgrade Renovations: Repair and
refurbishing other than normal janitorial,
cleaning and maintenance activities.
Work: As defined in Section 13.1.1.
Work Certificates: As defined in
Section 13.1.4.
Working Capital Loan: As defined in
Section 6.1.2.
Working Capital Stock Pledge: As
defined in Section 16.1(h).
2.2 Rules of Construction. The
following rules of construction shall apply
to the Lease and each of the other Lease
Documents: (a) references to "herein",
"hereof" and "hereunder" shall be deemed to
refer to this Lease or the other applicable
Lease Document, and shall not be limited to
the particular text or section or subsection
in which such words appear; (b) the use of
any gender shall include all genders and the
singular number shall include the plural and
vice versa as the context may require; (c)
references to Lessor's attorneys shall be
deemed to include, without limitation,
special counsel and local counsel for Lessor;
(d) reference to attorneys' fees and expenses
shall be deemed to include all costs for
administrative, paralegal and other support
staff and to exclude any fees and expenses of
attorneys who are employees of an Affiliate
of Lessor; (e) references to Leased Property
shall be deemed to include references to all
of the Leased Property and references to any
portion thereof; (f) references to the Lease
Obligations shall be deemed to include
references to all of the Lease Obligations
and references to any portion thereof; (g)
references to the Obligations shall be deemed
to include references to all of the
Obligations and references to any portion
thereof; (h) the term "including", when
following any general statement, will not be
construed to limit such statement to the
specific items or matters as provided
immediately following the term "including"
(whether or not non-limiting language such as
"without limitation" or "but not limited to"
or words of similar import are also used),
but rather will be deemed to refer to all of
the items or matters that could reasonably
fall within the broadest scope of the general
statement; (i) any requirement that financial
statements be Consolidated in form shall
apply only to such financial statements as
relate to a period during any portion of
which the relevant Person has one or more
Subsidiaries; (j) all accounting terms not
specifically defined in the Lease Documents
shall be construed in accordance with GAAP
and (k) all exhibits annexed to any of the
Lease Documents as referenced therein shall
be deemed incorporated in such Lease Document
by such annexation and/or reference.
ARTICLE 3
RENT
3.1 Rent for Land, Leased Improvements,
Related Rights and Fixtures. Lessee will pay
to Lessor, in lawful money of the United
States of America, at ▇▇▇▇▇▇'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.
17
3.1.1 Base Rent: From and after
the Commencement Date, Lessee shall pay
to Lessor a base rent (the "Base Rent")
per annum which is equal to Seven
Hundred Eight Thousand Four Hundred
Dollars ($708,400) and that is payable
in advance in equal, consecutive monthly
installments due on the first day of
each calendar month, commencing on May
1, 1997; provided, however, that on each
Rent Adjustment Date, the Base Rent
shall be adjusted to equal the greater
of (i) the then current Base Rent or
(ii) an amount equal to the Meditrust
Investment multiplied by the Rent
Adjustment Rate then in effect on such
Rent Adjustment Date and further,
provided, however, that on the
Commencement Date, Lessee shall pay to
Lessor the proportionate share of the
Base Rent due for the period from (and
including) the Commencement Date through
the end of the calendar month during
which the Commencement Date occurred.
3.1.2 Additional Rent: In
addition to the Base Rent, Lessee shall
also pay to Lessor additional rent (the
"Additional Rent") in an amount equal to
five percent (5%) of Excess Gross
Revenues. Additional Rent shall accrue
commencing on May 1, 1999 (the
"Additional Rent Accrual Date") and
shall be payable during the Term,
quarterly in arrears, commencing on July
1, 1999 ("Additional Rent Commencement
Date") and shall be payable during the
Term, quarterly in arrears, commencing
on the first day of the first fiscal
quarter occurring following the
Additional Rent Accrual Date and there
shall be an annual reconciliation as
provided in Section 3.2 below.
3.2 Calculation and Payment of
Additional Rent; Annual
Reconciliation.
3.2.1Officer's Certificate and
Proration. Each quarterly payment of
Additional Rent shall be delivered to
Lessor, together with an Officer's
Certificate setting forth the
calculation thereof, within thirty (30)
days after the end of the corresponding
quarter. Additional Rent due for any
portion of any calendar year shall be
prorated accordingly.
3.2.2Annual Statement. In
addition, on or before the first day of
April of each year following any
calendar year for which Additional Rent
is payable hereunder, ▇▇▇▇▇▇ 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.
3.2.3Deficits. If the Additional
Rent, as finally determined for any
calendar year (or portion thereof),
exceeds the sum of the quarterly
payments of Additional Rent previously
paid by Lessee with respect to said
calendar year, within thirty (30) days
after such determination is required to
be made hereunder, Lessee shall pay such
deficit to Lessor and, if the deficit
exceeds five percent (5%) of the
Additional Rent which was previously
paid to Lessor with respect to said
calendar year, then Lessee shall also
pay Lessor interest on such deficit at
the Overdue Rate from the date that such
payment should have been made by Lessee
to the date that Lessor receives such
payment.
18
3.2.4Overpayments. If the
Additional Rent, as finally determined
for any calendar year (or portion
thereof), is less than the amount
previously paid with respect thereto by
Lessee, Lessee shall notify Lessor
either (a) to pay to Lessee an amount
equal to such difference or (b) to grant
Lessee a credit against Additional Rent
next coming due in the amount of such
difference.
3.2.5Final Determination. The
obligation to pay Additional Rent shall
survive the expiration or earlier
termination of the Term (as to
Additional Rent payments that are due
and payable prior to the expiration or
earlier termination of the Term and
during any periods that Lessee remains
in possession of the Leased Property),
and a final reconciliation, taking into
account, among other relevant
adjustments, any contractual allowances
which related to Gross Revenues that
accrued prior to the date of such
expiration or earlier termination, but
which have been determined to be not
payable and ▇▇▇▇▇▇'s good faith best
estimate of the amount of any unresolved
contractual allowances, shall be made
not later than two (2) years after said
expiration or termination date. Within
sixty (60) days after the expiration or
earlier termination of the Term, Lessee
shall advise Lessor of Lessee's best
estimate of the approximate amount of
such adjustments, which estimate shall
not be binding on Lessee or have any
legal effect whatsoever.
3.2.6Best Efforts To Maximize.
Lessee further covenants that the
operation of the Facility shall be
conducted in a manner consistent with
the prevailing standards and practices
recognized in the assisted living
industry as those customarily utilized
by reputable business operations.
Subject to any applicable Legal
Requirements, the members of the Leasing
Group shall use their best efforts to
maximize the Facility's Gross Revenues.
3.3 Confirmation and Audit of Additional
Rent.
3.3.1Maintain Accounting Systems.
Lessee shall utilize, or cause to be
utilized, an accounting system for the
Leased Property in accordance with usual
and customary practices in the assisted
living industry and in accordance with
GAAP which will accurately record all
Gross Revenues. Lessee shall retain,
for at least three (3) years after the
expiration of each calendar year (and in
any event until the 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.
3.3.2Audit By Lessor. Lessor, at
its own expense except as provided
hereinbelow, shall have the right from
time to time to have its accountants or
representatives audit the information
set forth in the Officer's Certificate
referred to in Section 3.2 and in
connection with such audits, to examine
▇▇▇▇▇▇'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.
3.3.3Deficiencies and Overpayments.
If any such audit discloses a deficiency
in the reporting of Gross Revenues, and
either
19
Lessee agrees with the result of such
audit or the matter is compromised,
Lessee shall forthwith pay to Lessor the
amount of the deficiency in Additional
Rent which would have been payable by it
had such deficiency in reporting Gross
Revenues not occurred, as finally agreed
or determined, together with interest on
the Additional Rent which should have
been payable by it, calculated at the
Overdue Rate, from the date when said
payment should have been made by Lessee
to the date that Lessor receives such
payment. Notwithstanding anything to
the contrary herein, with respect to any
audit that is commenced more than two
(2) years after the date Gross Revenues
for any calendar year are reported by
Lessee to Lessor, the deficiency, if
any, with respect to Additional Rent
shall bear interest as permitted herein
only from the date such determination of
deficiency is made, unless such
deficiency is the result of gross
negligence or willful misconduct on the
part of Lessee (or any Affiliate
thereof). If any audit conducted for
Lessor pursuant to the provisions hereof
discloses that (a) the Gross Revenues
actually received by Lessee for any
calendar year exceed those reported by
Lessee by more than five percent (5%),
Lessee shall pay the reasonable cost of
such audit and examination or (b) Lessee
has overpaid Additional Rent, Lessor
shall so notify Lessee and Lessee shall
direct Lessor either (i) to refund the
overpayment to Lessee or (ii) grant a
credit against Additional Rent next
coming due in the amount of such
difference.
3.3.4Survival. The obligations of
Lessor and Lessee contained in this
Section shall survive the expiration or
earlier termination of this Lease.
3.4 Additional Charges. Subject to the
rights to contest as set forth in Article 15,
in addition to the Base Rent and Additional
Rent, (a) Lessee will also pay and discharge
as and 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,
▇▇▇▇▇▇ will also promptly pay and discharge
every fine, penalty, interest and cost which
may be added for non-payment or late payment
of such items (the items referred to in
clauses (a) and (b) above being referred to
herein collectively as the "Additional
Charges"), and Lessor shall have all legal,
equitable and contractual rights, powers and
remedies provided in this Lease, by statute
or otherwise, in the case of non-payment of
the Additional Charges, as well as the Base
Rent and Additional Rent. To the extent that
Lessee pays any Additional Charges to Lessor
pursuant to any requirement of this Lease,
Lessee shall be relieved of its obligation to
pay such Additional Charges to any other
Person to which such Additional Charges would
otherwise be due.
3.5 Net Lease. The Rent shall be paid
absolutely net to Lessor, so that this Lease
shall yield to Lessor the full amount of the
installments of Base Rent, and the payments
of Additional Rent and, if and to the extent
payable to Lessor, Additional Charges
throughout the Term.
3.6 No Lessee Termination or Offset.
3.6.1No Termination. Except as may
be otherwise specifically and expressly
provided in this Lease, Lessee, to the
extent
20
not prohibited by applicable law, shall
remain bound by this Lease in accordance
with its terms and shall neither take
any action without the consent of Lessor
to modify, surrender or terminate the
same, nor seek nor be entitled to any
abatement, deduction, deferment or
reduction of Rent, or set-off against
the Rent, nor shall the respective
obligations of Lessor and Lessee be
otherwise affected by reason of (a) any
Casualty or any Taking of the Leased
Property, (b) the lawful or unlawful
prohibition of, or restriction upon,
▇▇▇▇▇▇'s use of the Leased Property or
the interference with such use by any
Person (other than Lessor, except to the
extent permitted hereunder) or by reason
of eviction by paramount title; (c) any
claim that Lessee has or might have
against Lessor, (d) any default or
breach of any warranty by Lessor or any
of the other Meditrust Entities under
this Lease, any other Lease Document or
any Related Party Agreement, (e) any
bankruptcy, insolvency, reorganization,
composition, readjustment, liquidation,
dissolution, winding up or other
proceedings affecting Lessor or any
assignee or transferee of Lessor or (f)
for any other cause whether similar or
dissimilar to any of the foregoing,
other than a discharge of Lessee from
any of the Lease Obligations as a matter
of law.
3.6.2Waiver. Lessee to the fullest
extent not prohibited by applicable law,
hereby specifically waives all rights,
arising from any occurrence whatsoever,
which may now or hereafter be conferred
upon it by law to (a) modify, surrender
or terminate this Lease or quit or
surrender the Leased Property or (b)
entitle Lessee to any abatement,
reduction, suspension or deferment of
the Rent or other sums payable by Lessee
hereunder, except as otherwise
specifically and expressly provided in
this Lease.
3.6.3Independent Covenants. The
obligations of ▇▇▇▇▇▇ and Lessee
hereunder shall be separate and
independent covenants and agreements and
the Rent and all other sums payable by
Lessee hereunder shall continue to be
payable in all events unless the
obligations to pay the same shall be
terminated pursuant to the express
provisions of this Lease or (except in
those instances where the obligation to
pay expressly survives the termination
of this Lease) by termination of this
Lease other than by reason of an Event
of Default.
3.7 Abatement of Rent Limited. There
shall be no abatement of Rent on account of
any Casualty, Taking or other event, except
that (a) in the event of a partial Taking or
a temporary Taking as described in Section
14.3, the Base Rent shall be abated as
follows: (i) in the case of such a partial
Taking, the Meditrust Investment shall be
reduced for the purposes of calculating Base
Rent pursuant to Section 3.1 by subtracting
therefrom, as applicable, the net amount of
the Award received by Lessor, and (ii) in the
case of such a temporary Taking, by reducing
the Base Rent for the period of such a
temporary Taking, by the net amount of the
Award received by ▇▇▇▇▇▇ and (b) in the event
of a Casualty, the Base Rent shall be abated
as follows: the Meditrust Investment shall be
reduced for the purposes of calculating Base
Rent pursuant to Section 3.1 by subtracting
therefrom, as applicable, the net amount of
the insurance proceeds.
For the purposes of this Section 3.7,
the "net amount of the Award received by
Lessor" shall mean the Award paid to Lessor
or ▇▇▇▇▇▇'s mortgagee on account of such
Taking, minus all costs and expenses incurred
by Lessor in
21
connection therewith, and minus any amounts
paid to or for the account of Lessee to
reimburse for the costs and expenses of
reconstructing the Facility following such
Taking in order to create a viable and
functional Facility under all of the
circumstances ("Net Award Amount") and the
"net amount of the insurance proceeds" shall
mean the insurance proceeds paid to Lessor or
Lessor's mortgagee on account of such
Casualty, minus all costs and expenses
incurred by Lessor in connection therewith
and minus any amounts paid to or for the
account of ▇▇▇▇▇▇ 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").
3.8 Leasing Commitment Fee: The Lessee
shall pay to the Lessor the Leasing
Commitment Fee simultaneously with the
execution of this Lease; provided, however,
that, at the Lessor's option, the Leasing
Commitment 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 Leasing Committee Fee be held in
such an escrow account (a) the Leasing
Commitment 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 Leasing
Commitment 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 Leasing Commitment
Fee by such escrow agent.
ARTICLE 4
IMPOSITIONS; TAXES; UTILITIES;
INSURANCE PAYMENTS
4.1 Payment of Impositions.
4.1.1Lessee To Pay. Subject to the
provisions of Article 15, Lessee will
pay or cause to be paid all Impositions
before any fine, penalty, interest or
cost may be added for non-payment, such
payments to be made directly to the
taxing authority where feasible, and
Lessee will promptly furnish Lessor
copies of official receipts or other
satisfactory proof evidencing payment
not later than the last day on which the
same may be paid without penalty or
interest. Subject to the provisions of
Article 15 and Section 4.1.2, ▇▇▇▇▇▇'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.
4.1.2Installment Elections. If any
such Imposition may, at the option of
the taxpayer, lawfully be paid in
installments (whether or not interest
shall accrue on the unpaid balance of
such Imposition), Lessee may exercise
the option to pay the same (and any
accrued interest on the unpaid balance
of such Imposition) in installments and,
in such event, shall pay such
installments during the Term hereof
(subject to ▇▇▇▇▇▇'s right to contest
pursuant to the provisions of Section
4.1.5 below) as the same respectively
become due and before
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any fine, penalty, premium, further
interest or cost may be added thereto.
4.1.3Returns and Reports. Lessor,
at its expense, shall, to the extent
permitted by applicable law, prepare and
file all tax returns and reports as may
be required by Governmental Authorities
in respect of Lessor's net income, gross
receipts, franchise taxes and taxes on
its capital stock, and Lessee, at its
expense, shall, to the extent permitted
by applicable laws and regulations,
prepare and file all other tax returns
and reports in respect of any Imposition
as may be required by Governmental
Authorities. Lessor and ▇▇▇▇▇▇ shall,
upon request of the other, provide such
data as is maintained by the party to
whom the request is made with respect to
the Leased Property as may be necessary
to prepare any required returns and
reports. In the event that any
Governmental Authority classifies any
property covered by this Lease as
personal property, Lessee 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 ▇▇▇▇▇▇, to the
extent it possesses the same, will
provide the other party, upon request,
with cost and depreciation records
necessary for filing returns for any
portion of Leased Property so classified
as personal property. Where Lessor is
legally required to file personal
property tax returns, if Lessee notifies
Lessor of the obligation to do so in
each year at least thirty (30) days
prior to the date any protest must be
filed, Lessee will be provided with
copies of assessment notices so as to
enable Lessee to file a protest.
4.1.4Refunds. If no Lease Default
shall have occurred and be continuing,
any refund due from any taxing authority
in respect of any Imposition paid by
Lessee shall be paid over to or retained
by ▇▇▇▇▇▇. 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.
4.1.5Protest. Upon giving notice
to Lessor, at ▇▇▇▇▇▇'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 ▇▇▇▇▇▇'s cost
and expense as aforesaid, shall fully
cooperate in a reasonable manner with
Lessee in connection with such protest,
appeal or other action.
4.2 Notice of Impositions. Lessor shall
give prompt notice to Lessee of all
Impositions payable by Lessee hereunder of
which ▇▇▇▇▇▇ at any time has knowledge, but
▇▇▇▇▇▇'s failure to give any such notice
shall in no way diminish ▇▇▇▇▇▇'s obligations
hereunder to pay such Impositions.
4.3 Adjustment of Impositions.
Impositions imposed in respect of the period
during which the expiration or earlier
termination of the Term occurs shall be
adjusted and prorated between Lessor and
Lessee, whether or not such Impositions are
imposed before or after such expiration or
termination, and ▇▇▇▇▇▇'s obligation to pay
its prorated share thereof shall survive such
expiration or termination.
23
4.4 Utility Charges. Lessee will pay or
cause to be paid all charges for electricity,
power, gas, oil, water, telephone, cable
television and other utilities used in the
Leased Property during the Term and
thereafter until ▇▇▇▇▇▇ 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 of each premium which thereafter
becomes due. Notwithstanding the foregoing,
Lessee may pay such insurance premiums to the
insurer in monthly installments so long as
the applicable insurer is contractually
obligated to give Lessor not less than a
sixty (60) days notice of non-payment and so
long as no Lease Default has occurred and is
continuing. In the event of the failure of
Lessee either to comply with the insurance
requirements in Article 12, or to pay the
premiums for such insurance, or to deliver
such policies or certificates thereof to
Lessor at the times required hereunder,
Lessor shall be entitled, but shall have no
obligation, to effect such insurance and pay
the premiums therefor, which premiums shall
be a demand obligation of Lessee to Lessor.
4.6 Deposits.
4.6.1Lessor's Option. At the
option of Lessor upon the occurrence of
an event or circumstance which, with the
giving of notice and/or the passage of
time, would constitute a Lease Default,
which may be exercised at any time
thereafter, Lessee shall, upon written
request of Lessor, on the first day on
the calendar month immediately following
such request, and on the first day of
each calendar month thereafter during
the Term (each of which dates is
referred to as a "Monthly Deposit
Date"), pay to and deposit with Lessor a
sum equal to one-twelfth (1/12th) of the
Impositions to be levied, charged,
filed, assessed or imposed upon or
against the Leased Property within one
(1) year after said Monthly Deposit Date
and a sum equal to one-twelfth (1/12th)
of the premiums for the insurance
policies required pursuant to Article 12
which are payable within one (1) year
after said Monthly Deposit Date. If the
amount of the Impositions to be levied,
charged, assessed or imposed or
insurance premiums to be paid within the
ensuing one (1) year period shall not be
fixed upon any Monthly Deposit Date,
such amount for the purpose of computing
the deposit to be made by Lessee
hereunder shall be estimated by Lessor
based upon the most recent available
information concerning said Impositions
with an appropriate adjustment to be
promptly made between Lessor and Lessee
as soon as such amount becomes
determinable. In addition, Lessor may,
at its option, from time to time require
that any particular deposit be greater
than one-twelfth (1/12th) of the
estimated amount payable within one (1)
year after said 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.
24
4.6.2Use of Deposits. The sums
deposited by Lessee under this Section
4.6 shall be held by Lessor and shall be
applied in payment of the Impositions or
insurance premiums, as the case may be,
when due. Any such deposits may be
commingled with other assets of Lessor,
and shall be deposited by Lessor at such
bank as Lessor may, from time to time
select, and, provided that Lessor has
invested such deposits in one or more of
the investment vehicles described on
SCHEDULE 4.6.2 attached hereto and
incorporated by reference, Lessor shall
not be liable to Lessee or any other
Person (a) based on Lessor's (or such
bank's) choice of investment vehicles,
(b) for any consequent loss of principal
or interest or (c) for any
unavailability of funds based on such
choice of investment. Furthermore,
Lessor shall bear no responsibility for
the financial condition of, nor any act
or omission by, ▇▇▇▇▇▇'s depository
bank. The income from such investment
or interest on such deposit shall be
paid to Lessee on a semi-annual basis as
long as no Lease Default has occurred
and is then continuing, and as long as
no fact or circumstance exists which,
with the giving of notice and/or the
passage of time, would constitute a
Lease Default. Lessee shall give not
less than ten (10) days prior written
notice to Lessor in each instance when
an Imposition or insurance premium is
due, specifying the Imposition or
premium to be paid and the amount
thereof, the place of payment, and the
last day on which the same may be paid
in order to comply with the requirements
of this Lease. If Lessor, in violation
of its obligations under this Lease,
does not pay any Imposition or insurance
premium when due, for which a sufficient
deposit exists, Lessee shall not be in
default hereunder by virtue of the
failure of Lessor to pay such Imposition
or such insurance premium and Lessor
shall pay any interest or fine assessed
by virtue of Lessor's failure to pay
such Imposition or insurance premium.
4.6.3Deficits. If for any reason
any deposit held by Lessor under this
Section 4.6 shall not be sufficient to
pay an Imposition or insurance premium
within the time specified therefor in
this Lease, then, within ten (10) days
after demand by Lessor, Lessee shall
deposit an additional amount with
Lessor, increasing the deposit held by
Lessor so that Lessor holds sufficient
funds to pay such Imposition or premium
in full (or in installments as otherwise
provided for herein), together with any
penalty or interest due thereon. Lessor
may change its estimate of any
Imposition or insurance premium for any
period on the basis of a change in an
assessment or tax rate or on the basis
of a prior miscalculation or for any
other good faith reason; in which event,
within ten (10) days after demand by
Lessor, Lessee shall deposit with Lessor
the amount in excess of the sums
previously deposited with Lessor for the
applicable period which would
theretofore have been payable under the
revised estimate.
4.6.4Other Properties. If any
Imposition shall be levied, charged,
filed, assessed, or imposed upon or
against the Leased Property, and if such
Imposition shall also be a levy, charge,
assessment, or imposition upon or for
any other real or personal property that
does not constitute a part of the Leased
Property but for which a lien exists or
can exist upon the Leased Property,
then, at Lessor's reasonable discretion,
the computation of the amounts to be
deposited under this Section 4.6 shall
be based upon the entire amount
25
of such Imposition and Lessee shall not
have the right to apportion any deposit
with respect to such Imposition.
4.6.5Transfers. In connection with
any assignment of Lessor's interest
under this Lease, the original Lessor
named herein and each successor in
interest shall transfer all amounts
deposited pursuant to the provisions of
this Section 4.6 and still in its
possession to such assignee (as the
subsequent holder of Lessor's interest
in this Lease) and upon such transfer,
the original Lessor named herein or the
applicable successor in interest
transferring the deposits shall
thereupon be completely released from
all liability with respect to such
deposits so transferred and Lessee shall
look solely to said assignee, as the
subsequent holder of ▇▇▇▇▇▇'s interest
under this Lease, in reference thereto.
4.6.6Security. All amounts
deposited with Lessor pursuant to the
provisions of this Section 4.6 shall be
held by Lessor as additional security
for the payment and performance of the
Obligations and, upon the occurrence of
any Lease Default, Lessor may, in its
sole and absolute discretion, apply said
amounts towards payment or performance
of such Obligations.
4.6.7Return. Upon the expiration
or earlier termination of this Lease,
provided that all of the Lease
Obligations relating to the Leased
Property have been fully paid and
performed, any sums then held by Lessor
under this Section 4.6 shall be refunded
to Lessee.
4.6.8Receipts. Lessee shall
deliver to Lessor copies of all notices,
demands, claims, bills and receipts in
relation to the Impositions and
insurance premiums upon the earlier to
occur of (a) ten (10) days following
receipt thereof by ▇▇▇▇▇▇ 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.
▇▇▇▇▇▇ acknowledges that the Leased Property
is the property of Lessor and that ▇▇▇▇▇▇ has
only the right to the exclusive possession
and use of the Leased Property upon the terms
and conditions of this Lease.
5.2 Personal Property; Removal and
Replacement of Personal Property.
5.2.1Lessee To Equip Facility. If
and to the extent not included in the
Leased Property, Lessee, at its sole
cost and expense, shall install, affix
or assemble or place on the Leased
Property, sufficient items of Tangible
Personal Property, to enable the
operation of the Facility in accordance
with the requirements of this Lease for
the Primary Intended Use, and such
Tangible Personal Property and
26
replacements thereof, shall be at all
times the property of ▇▇▇▇▇▇.
5.2.2Sufficient Personal Property.
Lessee shall maintain, during the entire
Term, the Tangible Personal Property and
Leased Personal Property in good order
and repair and shall provide at its
expense all necessary replacements
thereof, as may be necessary in order to
operate the Facility in compliance with
all applicable Legal Requirements and
Insurance Requirements and otherwise in
accordance with customary practice in
the industry for the Primary Intended
Use and, if applicable, Other Permitted
Uses. In addition, Lessee shall furnish
all necessary replacements of such
obsolete items of the Tangible Personal
Property and Lessor's Personal Property
during the Term as are necessary to
enable the operation of the Facility in
accordance with the requirements of this
Lease for the Primary Intended Use.
5.2.3Removal 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 of the Facility in
accordance with the requirements of this
Lease for the Primary Intended Use. At
its sole cost and expense, Lessee shall
restore the Leased Property to the
condition required by Article 8,
including repair of all damage to the
Leased Property caused by the removal of
the Tangible Personal Property 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 of the Tangible
Personal Property, then all of the
Tangible Personal Property that is not
removed by Lessee within ten (10) days
following such request shall be
considered abandoned by Lessee and may
be appropriated, sold, destroyed or
otherwise disposed of by Lessor without
first giving notice thereof to Lessee,
without any payment to Lessee and
without any obligation to account
therefor.
ARTICLE 6
SECURITY FOR LEASE OBLIGATIONS
6.1 Security for ▇▇▇▇▇▇'s Obligations;
Permitted Prior Security Interests.
27
6.1.1Security. In order to secure
the payment and performance of all of
the Obligations, ▇▇▇▇▇▇ 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, ▇▇▇▇▇▇ holds
the fee title to or a leasehold
interest in any real property
and/or personal property which is
used as an integral part of the
operation of the Leased Property
(but is not subject to this Lease),
Lessee shall (i) provide Lessor
with prior notice of such
acquisition and (ii) shall take
such actions and enter into such
agreements as Lessor shall
reasonably request in order to
▇▇▇▇▇ ▇▇▇▇▇▇ a first priority
mortgage or other security interest
in such real property and personal
property, subject only to the
Permitted Encumbrances and other
Liens reasonably acceptable to
Lessor. Without limiting the
foregoing, it is acknowledged and
agreed that all revenues generated
from the operation of such
additional real property shall be
included in the determination of
Gross Revenues (subject to such
adjustments as agreed upon
hereunder).
Notwithstanding the foregoing,
Lessor shall subordinate its
security interest in Receivables to
a prior security interest to secure
a working capital line as provided
in Section 6.1.3.
6.1.2 Purchase-Money
Security Interests and Equipment
Leases. Notwithstanding any other
provision hereof regarding the
creation of Liens, Lessee may (a)
grant priority purchase money
security interests in items of
Tangible Personal Property, (b)
lease Tangible Personal Property
from equipment lessors as long as:
(i) the aggregate value of such
Tangible Personal Property shall
not exceed TWO HUNDRED THOUSAND
DOLLARS ($200,000) or (ii) (A) the
secured party or equipment lessor
enters into an intercreditor
agreement with, and satisfactory
to, Lessor, pursuant to which,
without limiting the foregoing, (1)
Lessor shall be afforded the option
of curing defaults and the option
of succeeding to the rights of
Lessee and (2) Lessor's security
interest in Tangible Personal
Property shall be subordinated to
the security interest granted to
such secured party, (B) all of the
terms, conditions and provisions of
the financing, security interest or
lease are reasonably acceptable to
Lessor, (C) Lessee provides a true
and complete copy, as executed, of
each such purchase money security
agreement, financing document and
equipment lease
28
and all amendments thereto and (D)
no such security interest,
financing agreement or lease is
cross-defaulted or cross-
collateralized with any other
obligation. Security interests
granted by Lessee in full
compliance with the provisions of
this Section 6.1.2 are referred to
as "Permitted Prior Security
Interests".
6.1.3 Receivables
Financing. Notwithstanding any
other provision hereof regarding
the creation of Liens, Lessee shall
also be permitted to grant a prior
security interest in Receivables
(with the Lessor retaining a junior
security interest therein) to an
institutional lender which is
providing a working capital line of
credit (a "Working Capital Loan")
for the exclusive use of Guarantor,
Lessee and Affiliates of Lessee as
long as such Lender enters into an
intercreditor agreement with, and
satisfactory to, Lessor pursuant to
which, without limiting the
foregoing, (1) Lessor shall be
provided with notice with respect
to defaults under the Working
Capital Loan simultaneously with
the delivery of such notice to
Lessee and shall be afforded the
option of curing defaults
thereunder, (2) such lender's use
of Instruments, Documents, General
Intangibles and Chattel Paper shall
be limited to a license only for
the purpose of collecting
Receivables and (3) the
subordination of Lessor's interest
in the Receivables shall be of no
force and effect and ▇▇▇▇▇▇'s first
priority security interest shall be
reinstated from and after the
occurrence of an Event of Default
if, upon or following such Event of
Default, Lessor either exercises
any of its remedies set forth in
Article 16 or Lessor notifies in
writing such lender of Lessor's
intention to invoke its right to
reinstate its first priority
security interest in the
Receivables.
6.2 Guaranty. All of the Lease
Obligations shall be unconditionally and
irrevocably guaranteed by the Guarantor
pursuant to the Guaranty of Lease
Obligations.
ARTICLE 7
CONDITION AND USE OF LEASED PROPERTY;
MANAGEMENT AGREEMENTS
7.1 Condition of the Leased Property.
▇▇▇▇▇▇ acknowledges that ▇▇▇▇▇▇ has caused
the Leased Property to be sold to Lessor and
has concurrently entered into this Lease.
▇▇▇▇▇▇ acknowledges receipt and delivery of
possession of the Leased Property and that
▇▇▇▇▇▇ has examined and otherwise has
acquired knowledge of the condition of the
Leased Property prior to the execution and
delivery of this Lease and has found the same
to be in good order and repair and
satisfactory for its purposes hereunder.
Lessee is leasing the Leased Property "AS-IS"
in its present condition. Lessee waives any
claim or action against Lessor in respect of
the condition of the Leased Property. LESSOR
MAKES NO WARRANTY OR REPRESENTATION, EXPRESS
OR IMPLIED, WITH RESPECT TO THE LEASED
PROPERTY, EITHER AS TO ITS FITNESS FOR ANY
PARTICULAR PURPOSE OR USE, ITS DESIGN OR
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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 ▇▇▇▇▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
ASSUMES ALL RISK OF THE PHYSICAL CONDITION OF
THE LEASED PROPERTY, THE SUITABILITY OF THE
LEASED PROPERTY FOR LESSEE'S PURPOSES, AND
THE COMPLIANCE OR NON-COMPLIANCE OF THE
LEASED PROPERTY WITH ALL APPLICABLE
REQUIREMENTS OF LAW, INCLUDING BUT NOT
LIMITED TO ENVIRONMENTAL LAWS AND ZONING OR
LAND USE LAWS.
Upon the request of Lessor, at any time
and from time to time during the Term, Lessee
shall engage one (1) or more independent
professional consultants, engineers and
inspectors, qualified to do business in the
State and acceptable to Lessor to perform any
environmental and/or structural
investigations and/or other inspections of
the Leased Property and the Facility as
Lessor may reasonably request in order to
detect (a) any structural deficiencies in the
Leased Improvements or the utilities
servicing the Leased Property or (b) the
presence of any condition that (i) may be
harmful or present a health hazard to the
residents and other occupants of the Leased
Property or (ii) constitutes a breach or
violation of any of the Lease Documents. In
the event that Lessor reasonably determines
that the results of such testing or
inspections are unsatisfactory, within thirty
(30) days of notice from Lessor, Lessee shall
commence such appropriate remedial actions as
may be reasonably requested by Lessor to
correct such unsatisfactory conditions and,
thereafter, shall diligently and continuously
prosecute such remedial actions to completion
within the time limits prescribed in this
Lease or the other Lease Documents.
7.2 Use of the Leased Property;
Compliance; Management.
7.2.1Obligation to Operate. Lessee
shall continuously operate the Leased
Property in accordance with the Primary
Intended Use and the Other Permitted
Uses and maintain its qualifications for
licensure and accreditation as required
by all applicable Legal Requirements.
7.2.2Permitted Uses. During the
entire Term, Lessee shall use the Leased
Property, or permit the Leased Property
to be used, only for the Primary
Intended Use and, if applicable, the
Other Permitted Uses. Lessee shall not
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.
7.2.3Compliance With Insurance
Requirements. No use shall be made or
permitted to be made of the Leased
Property and no acts shall be done which
will cause the cancellation of any
insurance policy covering the Leased
Property, nor shall Lessee, any Manager
or any other Person sell or otherwise
provide to residents, other occupants or
invitees therein, or permit to be kept,
used or sold in or about the Leased
Property, any article which may be
prohibited by any of the Insurance
Requirements. Furthermore, Lessee
shall, at its sole cost and expense,
take whatever other actions that may be
necessary to comply
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with and to insure that the Leased
Property complies with all Insurance
Requirements.
7.2.4No 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.
7.2.5No 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 ▇▇▇▇▇▇'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.
7.2.6No Liens. Except as permitted
pursuant to Section 6.1.2, Lessee shall
not permit or suffer any Lien to exist
on the Tangible Personal Property and
shall in no event cause, permit or
suffer any Lien to exist with respect to
the Leased Property other than as set
forth in Section 11.5.2.
7.3 Compliance with Legal Requirements.
Lessee covenants and agrees that the Leased
Property shall not be used for any unlawful
purpose and that Lessee, at its sole cost and
expense, will promptly (a) comply with, and
shall cause every other member of the Leasing
Group to comply with, all applicable Legal
Requirements relating to the use, operation,
maintenance, repair and restoration of the
Leased Property, whether or not compliance
therewith shall require structural change in
any of the Leased Property or interfere with
the use and enjoyment of the Leased Property
and (b) procure, maintain and comply with (in
all material respects), and shall cause every
other member of the Leasing Group to procure,
maintain and comply with (in all material
respects), all Contracts and Permits
necessary or desirable in order to operate
the Leased Property for the Primary Intended
Use and/or, if applicable, Other Permitted
Uses, and for compliance with all of the
terms and conditions of this Lease. Unless a
Lease Default has occurred or any event has
occurred which, with the passage of time
and/or the giving of notice would constitute
a Lease Default, Lessee may, upon prior
written notice to Lessor, contest any Legal
Requirement to the extent permitted by, and
in accordance with, Article 15 below.
7.4 Management Agreements. Throughout
the Term, Lessee shall not enter into any
Management Agreement without the prior
written approval of Lessor, in each instance,
which approval shall not be unreasonably
withheld. Lessee shall not, without the
prior written approval of Lessor, in each
instance, which approval shall not be
unreasonably withheld, agree to or allow: (a)
any change in the Manager or change in the
ownership or control of the Manager, (b) the
termination of any Management Agreement
(other than in connection with the exercise
by Lessee of any of its remedies under the
Management Agreement as a result of any
default by the Manager thereunder), (c) any
assignment by the Manager of its interest
under the Management Agreement or (d) any
material amendment of the Management
Agreement. In addition, Lessee shall, at its
sole cost and expense, promptly and fully
perform or cause to be performed every
covenant, condition, promise and obligation
of the licensed operator of the Leased
Property under any Management Agreement.
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Each Management Agreement shall provide
that Lessor shall be provided notice of any
defaults thereunder and, at Lessor's option,
an opportunity to cure such default. Lessee
shall furnish to Lessor, within three (3)
days after receipt thereof, or after the
mailing or service thereof by Lessee, as the
case may be, a copy of each notice of default
which Lessee shall give to, or receive from
any Person, based upon the occurrence, or
alleged occurrence, of any default in the
performance of any covenant, condition,
promise or obligation under any Management
Agreement.
Whenever and as often as Lessee shall
fail to perform, promptly and fully, at its
sole cost and expense, any covenant,
condition, promise or obligation on the part
of the licensed operator of the Leased
Property under and pursuant to any Management
Agreement, Lessor, or a lawfully appointed
receiver of the Leased Property, may, at
their respective options (and without any
obligation to do so), after five (5) days'
prior notice to Lessee (except in the case of
an emergency) enter upon the Leased Property
and perform, or cause to be performed, such
work, labor, services, acts or things, and
take such other steps and do such other acts
as they may deem advisable, to cure such
defaulted covenant, condition, promise or
obligation, and any amount so paid or
advanced by Lessor or such receiver and all
costs and expenses reasonably incurred in
connection therewith (including, without
limitation, attorneys' fees and expenses and
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 ▇▇▇▇▇▇'s failure to pay any
other sums due hereunder.
7.5 Participation in Third Party Payor
Programs. No provision of this Lease shall
be deemed to require Lessee to commence
participation in any Third Party Payor
Program or any Managed Care Plan.
ARTICLE 8
REPAIRS; RESTRICTIONS
8.1 Maintenance and Repair.
8.1.1 ▇▇▇▇▇▇'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
▇▇▇▇▇▇'s control in good order and
repair (whether or not the need for such
repairs occurs as a result of Lessee's
use, any prior use, the elements or the
age of the Leased Property or such
private roadways, sidewalks and curbs or
any other cause whatsoever other than
Lessor's gross negligence or willful
misconduct) and, subject to Articles 9,
13 and 14, Lessee shall promptly, with
the exercise of all reasonable efforts,
undertake and diligently complete all
necessary and appropriate repairs,
replacements, renovations, restorations,
alterations and modifications thereof of
every kind and nature, whether interior
or exterior, structural or non-
structural, ordinary or extraordinary,
foreseen or unforeseen or arising by
reason of a condition (concealed or
otherwise) existing prior to the
commencement of, or during, the Term and
thereafter until ▇▇▇▇▇▇ surrenders the
Leased Property in the manner required
by this Lease. In addition, Lessee, at
its sole cost and expense, shall make
all repairs, modifications,
replacements, renovations and
alterations of the Leased Property (and
such private roadways, sidewalks and
curbs) that
32
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.
Without limiting the generality of the
foregoing, Lessee shall install, or pay
for, the underground utilities if and to
the extent any Person is or shall be
required to do so pursuant to the
Concomitant Agreement Relating to
Construction or Installation of Public
Improvements by and between Emeritus
Corporation and City of Kirkland,
Washington and recorded with King County
Records as Recording No. 9604080115.
All repairs, replacements, renovations,
alterations, and modifications required
by the terms of this Section 8.1 shall
be (a) performed in a good and
workmanlike manner in compliance with
all applicable Legal Requirements,
Insurance Requirements and the
requirements of Article 9 hereof, using
new materials well suited for their
intended purpose and (b) consistent with
the operation of the Facility in a
reputable manner. Lessee will not take
or omit to take any action the taking or
omission of which might materially
impair the value or the usefulness of
the Leased Property for the Primary
Intended Use and, if applicable, the
Other Permitted Uses. To the extent
that any of the repairs, replacements,
renovations, alterations or
modifications required by the terms of
this Section 8.1 constitute Material
Structural Work, Lessee shall obtain
Lessor's prior written approval (which
approval shall not be unreasonably
withheld) of the specific repairs,
replacements, renovations, alterations
and modifications to be performed by or
on behalf of Lessee in connection with
such Material Structural Work.
Notwithstanding the foregoing, in the
event of a bona fide emergency during
which ▇▇▇▇▇▇ is unable to contact the
appropriate representatives of Lessor,
Lessee may commence such Material
Structural Work as may be necessary in
order to address such emergency without
Lessor's prior approval, provided,
however, that Lessee shall immediately
thereafter advise Lessor of such
emergency and the nature and scope of
the Material Structural Work commenced
and shall obtain Lessor's approval of
the remaining Material Structural Work
to be completed.
8.1.2 No Lessor Obligation.
Lessor shall not, under any
circumstances, be required to build or
rebuild any improvements on the Leased
Property (or any private roadways,
sidewalks or curbs appurtenant thereto),
or to make any repairs, replacements,
renovations, alterations, restorations,
modifications, or renewals of any nature
or description to the Leased Property
(or any private roadways, sidewalks or
curbs appurtenant thereto), whether
ordinary or extraordinary, structural or
non-structural, foreseen or unforeseen,
or to make any expenditure whatsoever
with respect thereto in connection with
this Lease, or to maintain the Leased
Property (or any private roadways,
sidewalks or curbs appurtenant thereto)
in any way.
8.1.3 Lessee May Not Obligate
Lessor. Nothing contained herein nor
any action or inaction by Lessor shall
be construed as (a) constituting the
consent or request of Lessor, express or
implied, to any contractor,
subcontractor, laborer, materialman or
vendor to or for the performance of any
labor or services for any construction,
alteration, addition, repair or
demolition of or to the Leased Property
or (b) except as otherwise provided in
this Lease, giving Lessee any right,
power or permission to contract for or
permit the performance of any labor or
33
services or the furnishing of any
materials or other property in such
fashion as would permit the making of
any claim against Lessor for the payment
thereof or to make any agreement that
may create, or in any way be the basis
for, any right, title or interest in, or
Lien or claim against, the estate of
Lessor in the Leased Property. Without
limiting the generality of the foregoing
and except as otherwise provided in this
Lease, the right title and interest of
Lessor in and to the Leased Property
shall not be subject to liens or
encumbrances for the performance of any
labor or services or the furnishing of
any materials or other property
furnished to the Leased Property at or
by the request of Lessee or any other
Person other than Lessor. Lessee shall
notify any contractor, subcontractor,
laborer, materialman or vendor providing
any labor, services or materials to the
Leased Property of this provision.
8.2 Encroachments; Title Restrictions.
If any of the Leased Improvements shall, at
any time, encroach upon any property, street
or right-of-way adjacent to the Leased
Property, or shall violate the agreements or
conditions contained in any lawful
restrictive covenant or other Lien now or
hereafter affecting the Leased Property, or
shall impair the rights of others under any
easement, right-of-way or other Lien to which
the Leased Property is now or hereafter
subject, then promptly upon the request of
Lessor, Lessee shall, at its sole cost and
expense, subject to Lessee's right to contest
the existence of any encroachment, violation
or impairment as set forth in Article 15, (a)
obtain valid and effective waivers or
settlements of all claims, liabilities and
damages resulting from each such
encroachment, violation or impairment or (b)
make such alterations to the Leased
Improvements, and take such other actions, as
Lessee in the good faith exercise of its
judgment deems reasonably practicable, to
remove such encroachment, or to end such
violation or impairment, including, if
necessary, the alteration of any of the
Leased Improvements. Notwithstanding the
foregoing, Lessee shall, in any event, take
all such actions as may be reasonably
necessary in order to be able to continue the
operation of the Leased Improvements for the
Primary Intended Use and, if applicable, the
Other Permitted Uses substantially in the
manner and to the extent that the Leased
Improvements were operated prior to the
assertion of such encroachment, violation or
impairment and nothing contained herein shall
limit Lessee's obligations to operate the
Leased Property in accordance with its
Primary Intended Use. Any such alteration
made pursuant to the terms of this Section
8.2 shall be completed in conformity with the
applicable requirements of Section 8.1 and
Article 9. Lessee's obligations under this
Section 8.2 shall be in addition to and shall
in no way discharge or diminish any
obligation of any insurer under any policy of
title or other insurance. If and to the
extent any obligation of an insurer under any
policy of title or other insurance exists and
▇▇▇▇▇▇ has incurred costs and expenses with
respect to the subject matter of such
obligation and provided Lessor is reasonably
satisfied with the resolution of such subject
matter, at the request of Lessee, Lessor, at
Lessor's option, shall either assign to
Lessee any right it may have to proceed
against such insurer or remit to Lessee any
amount which Lessor recovers from such
insurer, minus any amounts needed to
reimburse Lessor for its reasonable costs and
expenses, for the costs and expenses incurred
by ▇▇▇▇▇▇ 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.
34
ARTICLE 9
MATERIAL STRUCTURAL WORK AND
CAPITAL ADDITIONS
9.1 Lessor's Approval. Without the
prior written consent of Lessor, which
consent may be withheld by Lessor, in its
sole and absolute discretion, Lessee shall
make no Capital Addition or Material
Structural Work to the Leased Property
(including, without limitation, any change in
the size or unit capacity of the Facility),
except as may be otherwise expressly required
pursuant to Article 8.
9.2 General Provisions as to Capital
Additions and Certain Material Structural
Work. As to any Capital Addition or Material
Structural Work (other than such Material
Structural Work that is required to be
performed pursuant to the terms of Section
8.1) for which Lessor has granted its prior
written approval, the following terms and
conditions shall apply unless otherwise
expressly set forth in Lessor's written
approval.
9.2.1No Liens. Lessee shall not be
permitted to create any Lien on the
Leased Property in connection with any
Capital Addition or Material Structural
Work (including, without limitation,
Liens relating to the provision of
financing for a Capital Addition) other
than Liens expressly permitted by the
terms and provisions of this Lease
Agreement.
9.2.2Lessee's Proposal Regarding
Capital Additions and Material
Structural Work. If Lessee desires to
undertake any Capital Addition or
Material Structural Work, Lessee shall
submit to Lessor in writing a proposal
setting forth in reasonable detail any
proposed Capital Addition or Material
Structural Work and shall provide to
Lessor copies of, or information
regarding, the applicable plans and
specifications, Permits, Contracts and
any other materials concerning the
proposed Capital Addition or Material
Structural Work, as the case may be, as
Lessor may reasonably request. Without
limiting the generality of the
foregoing, each such proposal pertaining
to any Capital Addition shall indicate
the approximate projected cost of
constructing such Capital Addition, the
use or uses to which it will be put and
a good faith estimate of the change, if
any, in the Gross Revenues that Lessee
anticipates will result from the
construction of such Capital Addition.
9.2.3Lessor'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, (b) offering to finance the
construction of the Capital Addition
pursuant to Section 9.3 on such terms as
may be specified by Lessor, including
the terms of any amendment to this
Lease, including, without limitation, an
increase in Base Rent based on Lessor's
then existing terms and prevailing
conditions to compensate Lessor for the
additional funds advanced by it, (c)
allowing Lessee to separately pay for or
finance the construction of the Capital
Addition, subject to compliance with the
terms and conditions of Section 9.2.1,
Section 9.4, Section 13.1.3, all
applicable Legal Requirements, all other
requirements of this Lease and to such
35
other terms and conditions as Lessor may
in its discretion reasonably impose or
(d) any combination of the foregoing.
Unless Lessor notifies Lessee in writing
of a contrary election within thirty
(30) days of ▇▇▇▇▇▇'s request or unless
Lessor is required to consent thereto
pursuant to this Section 9.2.3, Lessor
shall be deemed to have denied the
request for the Capital Addition or
Material Structural Work. In the event
and to the extent Lessor has granted
permission for the construction of the
applicable Capital Addition or Material
Structural Work and (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 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.
9.2.4Lessor May Elect to Finance
Capital Additions. If Lessor elects to
offer financing for the proposed Capital
Addition and ▇▇▇▇▇▇ accepts ▇▇▇▇▇▇'s
financing proposal, the provisions of
Section 9.3 shall apply.
9.3 Capital Additions Financed by
Lessor.
9.3.1Advances. 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.
9.3.2Lessor's General Requirements.
If ▇▇▇▇▇▇ agrees to finance the proposed
Capital Addition and ▇▇▇▇▇▇ accepts
▇▇▇▇▇▇'s proposal therefor, in addition
to all other items which Lessor or any
applicable Financing Party may
reasonably require, Lessee shall provide
to Lessor the following:
(a) prior to any advance of
funds, (i) any information,
opinions, certificates, Permits or
documents reasonably requested by
Lessor or any applicable Financing
Party which are necessary to
confirm that Lessee is reasonably
expected to be able to use the
Capital Addition upon completion
thereof in accordance with the
Primary Intended Use and/or, if
applicable, the Other Permitted
Uses and (ii) evidence satisfactory
to Lessor and any applicable
Financing Party that all Permits
required for the construction and
use of the Capital Addition have
been received, are in full force
and effect and are not subject to
appeal, except only for those
Permits which cannot in the normal
course be obtained prior to
36
commencement or completion of the
construction; provided, that Lessor
and any applicable Financing Party
are furnished with reasonable
evidence that the same is
reasonably expected to be available
in the normal course of business
without unusual condition;
(b) prior to any advance of
funds, an Officer's Certificate
and, if requested, a certificate
from ▇▇▇▇▇▇'s architect, setting
forth in reasonable detail the
projected (or actual, if available)
Capital Addition Cost;
(c) bills of sale,
instruments of transfer and other
documents required by Lessor so as
to vest title to the Capital
Addition in Lessor free and clear
of all Liens (except to the extent
a Lien is being duly contested in
accordance with the terms and
provisions of this Lease), and
amendments to this Lease and any
recorded notice or memorandum
thereof, duly executed and
acknowledged, in form and substance
reasonably satisfactory to Lessor,
providing for any changes required
by Lessor including, without
limitation, changes in the Base
Rent and the legal description of
the Land;
(d) upon payment therefor, a
deed conveying to Lessor title to
any land acquired for the purpose
of constructing the Capital
Addition ("Additional Land") free
and clear of any Liens except those
approved by ▇▇▇▇▇▇;
(e) upon completion of the
Capital Addition, a final as-built
survey thereof reasonably
satisfactory to Lessor, if required
by Lessor;
(f) during and following the
advance of funds and the completion
of the Capital Addition,
endorsements to any outstanding
policy of title insurance covering
the Leased Property satisfactory in
form and substance to Lessor (i)
updating the same without any
additional exception except as may
be reasonably permitted by Lessor
and (ii) increasing the coverage
thereof by an amount equal to the
Fair Market Value of the Capital
Addition and/or increasing the
coverage thereof by an amount equal
to the Fair Market Value of the
Additional Land and including the
Additional Land in the premises
covered by such title insurance
policy;
(g) simultaneous with the
initial advance of funds, if
appropriate, (i) an owner's policy
of title insurance insuring fee
simple title to any Additional Land
conveyed to Lessor pursuant to
subparagraph (d) free and clear of
all Liens except those approved by
Lessor and (ii) an owner's policy
of title insurance reasonably
satisfactory in form and substance
to Lessor and a lender's policy of
title insurance reasonably
satisfactory in form and substance
to any applicable Financing Party;
(h) following the completion
of the Capital Addition, if
reasonably deemed necessary by
▇▇▇▇▇▇, an
37
appraisal of the Leased Property by
an M.A.I. appraiser acceptable to
Lessor, which states that the Fair
Market Value of the Leased Property
upon completion of the Capital
Addition exceeds the Fair Market
Value of the Leased Property prior
to the commencement of such Capital
Addition by an amount not less than
one hundred twenty-five percent
(125%) of the Capital Addition
Cost; 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 of title insurance
contemplated by subsection (f)
above, opinions of counsel,
appraisals, surveys, certified
copies of duly adopted resolutions
of the board of directors of Lessee
authorizing the execution and
delivery of the lease amendment and
any other documents and instruments
as may be reasonably required by
Lessor and any applicable Financing
Party.
9.3.3Payment of Costs. By virtue
of making a request to finance a Capital
Addition, whether or not such financing
is actually consummated, Lessee shall be
deemed to have agreed to pay, upon
demand, all costs and expenses
reasonably incurred by Lessor and any
Person participating with Lessor in any
way in the financing of the Capital
Addition Cost, including, but not
limited to (a) fees and expenses of
their respective attorneys, (b) all
photocopying expenses, if any, (c) the
amount of any filing, registration and
recording taxes and fees, (d)
documentary stamp taxes and intangible
taxes (e) title insurance charges and
appraisal fees.
9.4 General Limitations. Without in any
way limiting Lessor's options with respect to
proposed Capital Additions or Material
Structural Work: (a) no Capital Addition or
Material Structural Work shall be completed
that could, upon completion, significantly
alter the character or purpose or detract
from the value or operating efficiency of the
Leased Property, or significantly impair the
revenue-producing capability of the Leased
Property, or adversely affect the ability of
Lessee to comply with the terms of this
Lease; (b) no Capital Addition or Material
Structural Work shall be completed which
would tie in or connect any Leased
Improvements on the Leased Property with any
other improvements on property adjacent to
the Leased Property (and not part of the Land
covered by this Lease) including, without
limitation, tie-ins of buildings or other
structures or utilities, unless Lessee shall
have obtained the prior written approval of
Lessor, which approval may be withheld in
Lessor's sole and absolute discretion and (c)
all proposed Capital Additions and Material
Structural Work shall be architecturally
integrated and consistent with the Leased
Property.
9.5 Non-Capital Additions. Lessee shall
have the obligation and right to make
repairs, replacements and alterations which
are not Capital Additions as required by the
other Sections of this Lease, but in so
doing, Lessee shall always comply with and
satisfy the conditions of Section 9.4.
Lessee shall have the right, from time to
time, to make additions, modifications or
improvements to the Leased Property which do
not constitute Capital Additions or Material
Structural Work as it may deem to be
desirable or necessary for its
38
uses and purposes, subject to the same limits
and conditions imposed under Section 9.4.
The cost of any such repair, replacement,
alteration, addition, modification or
improvement shall be paid by Lessee and the
results thereof shall be included under the
terms of this Lease and become a part of the
Leased Property, without payment therefor by
Lessor at any time. Notwithstanding the
foregoing, all such additions, modifications
and improvements which affect the structure
of any of the Leased Improvements, or which
involve the expenditure of more than FIFTY
THOUSAND DOLLARS ($50,000.00), shall be
undertaken only upon compliance with the
provisions of Section 13.1.3, all applicable
Legal Requirements and all other applicable
requirements of this Lease; provided,
however, that in the event of a bona fide
emergency during which Lessee is unable to
contact the appropriate representatives of
Lessor, Lessee may commence such additions,
modifications and improvements as may be
necessary in order to address such emergency
without Lessor's prior approval, as long as
▇▇▇▇▇▇ immediately thereafter advises Lessor
of such emergency and the nature and scope of
the additions, modifications and improvements
performed and obtains Lessor's approval of
the remaining work to be completed. Any such
addition, modification and improvement which
affects the structure of any of the Leased
Improvements which is not a Capital Addition
or Material Structural Work shall be exempt
from the requirements of Section 9.2 hereof.
9.6 Compensation to Lessee for Capital
Additions Paid For or Financed by ▇▇▇▇▇▇.
Upon the expiration or earlier termination of
this Lease, except by reason of the default
by Lessee hereunder, Lessor shall compensate
Lessee for all Capital Additions paid for or
financed by ▇▇▇▇▇▇ in any of the following
ways, determined in the sole discretion of
Lessor:
(a) By purchasing all Capital Additions
paid for or financed by ▇▇▇▇▇▇ from Lessee
for cash in the amount of the Fair Market
Added Value (determined as of the date of
such purchase) of all such Capital Additions
paid for or financed by ▇▇▇▇▇▇; or
(b) By purchasing such Capital Addition
from Lessee by delivering to Lessee Lessor's
purchase money promissory note in the amount
of said Fair Market Added Value, due and
payable no later than eighteen (18) months
after the date of expiration or other
termination of this Lease, bearing interest
at a rate equal to one hundred ten percent
(110%) of the applicable federal rate
(determined at the time of execution of such
note pursuant to Section 1274 of the Code or
any successor section thereto), compounded
semiannually, or, if no such rate exists, or
such rate is in excess of that permitted
under applicable law, at the Prime Rate,
which interest shall be payable monthly, and
which note shall be secured by a mortgage on
the Leased Property, subject to all Liens on
the Leased Property at the time of such
purchase; or
(c) By Lessor assigning to Lessee under
appropriate written instruments the right to
receive an amount equal to the Added Value
Percentage (determined as of the expiration
of earlier termination of this Lease) from
all rent and other consideration receivable
by Lessor under any re-letting or other
disposition of the Leased Property, after
deducting all costs and expenses incurred by
Lessor in connection with such re-letting or
other disposition of the leased Property and
all costs and expenses of operating and
maintaining the Leased Property during any
such new lease which are not borne by the
tenant thereunder. The provisions of this
Subparagraph (c) shall remain in effect until
39
the sale or other final disposition of the
Leased Property in which event Lessor shall
pay to Lessee the outstanding balance of the
Fair Market Added Value in accordance with
Subparagraph (a), (b), or (d) of this Section
9.6, after deducting any amounts received by
Lessee under this Subparagraph (c); or
(d) Such other arrangement regarding
such compensation as shall be mutually
acceptable to Lessor and Lessee.
ARTICLE 10
WARRANTIES AND REPRESENTATIONS
10.1Representations and Warranties.
Lessee hereby represents and warrants to, and
covenants and agrees with, ▇▇▇▇▇▇ that:
10.1.1 Existence; Power;
Qualification.
Lessee is a corporation duly
organized, validly existing and in good
standing under the laws of the State of
Washington. Lessee has all requisite
corporate power to own and operate its
properties and to carry on its business
as now conducted and is duly qualified
to transact business and is in good
standing in each jurisdiction where such
qualification is necessary or desirable
in order to carry out its business as
presently conducted. As of the date of
this Agreement, ▇▇▇▇▇▇ does not have any
Subsidiaries and Lessee is not a member
of any partnership or joint venture.
Attached hereto as EXHIBIT C is a true
and correct list of all of the
shareholders of ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ is a party and to carry out
the transactions contemplated therein.
All of the Lease Documents to which
▇▇▇▇▇▇ is a party have been duly
executed and delivered by ▇▇▇▇▇▇, 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 of
the Lease Documents by the members of
the Leasing Group and the consummation
by the members of the Leasing Group of
the transactions thereby contemplated
shall not result in any breach of, or
constitute a default under, or result in
the acceleration of, or constitute an
event which, with the giving of notice
or the passage of time, or both, could
result in default or acceleration of any
obligation of any such member of the
Leasing Group under any of the Permits
or Contracts or any other contract,
mortgage, lien, lease, agreement,
instrument, franchise, arbitration
award, judgment, decree, bank loan or
40
credit agreement, trust indenture or
other instrument to which any member of
the Leasing Group is a party or by which
any member of the Leasing Group may be
bound or affected and do not violate or
contravene any Legal Requirement.
10.1.5 Consents and Approvals.
Except as already obtained or filed, as
the case may be, no consent or approval
or other authorization of, or exemption
by, or declaration or filing with, any
Person and no waiver of any right by any
Person is required to authorize or
permit, or is otherwise required as a
condition of the execution, delivery and
performance of its obligations under the
Lease Documents by any member of the
Leasing Group or as a condition to the
validity (assuming the due
authorization, execution and delivery by
Lessor of the Lease Documents to which
it is a party) and the first priority of
any Liens granted under the Lease
Documents, except the filing of the
Financing Statements.
10.1.6 No Liens or Insolvency
Proceedings. Each member of the Leasing
Group in existence as of the date hereof
is financially solvent and there are no
actions, suits, investigations or
proceedings including, without
limitation, outstanding federal or state
tax liens, garnishments or insolvency or
bankruptcy proceedings, pending or, to
the best of ▇▇▇▇▇▇'s knowledge and
belief, threatened:
(a) against or affecting any
member of the Leasing Group, which
if adversely resolved to such
member of the Leasing Group, would
materially adversely affect the
ability of any of the foregoing to
perform their respective
obligations under the Lease
Documents;
(b) against or affecting the
Leased Property or the ownership,
construction, development,
maintenance, management, repair,
use, occupancy, possession or
operation thereof; or
(c) which may involve or
affect the validity, priority or
enforceability of any of the Lease
Documents, at law or in equity, or
before or by any arbitrator or
Governmental Authority.
10.1.7 Intentionally deleted.
10.1.8 Commercial Acts.
▇▇▇▇▇▇'s performance of and compliance
with the obligations and conditions set
forth herein and in the other Lease
Documents will constitute commercial
acts done and performed for commercial
purposes.
10.1.9 Adequate Capital, Not
Insolvent. After giving effect to the
consummation of the transactions
contemplated by the Lease Documents,
each member of the Leasing Group:
(a) will be able to pay its
debts as they become due;
(b) will have sufficient
funds or available capital to carry
on its business as now conducted or
as
41
contemplated to be conducted (in
accordance with the terms of the
Lease Documents); and
(c) will not be rendered
insolvent as determined by
applicable law.
10.1.10 Not Delinquent.
Except as permitted under Section
11.3.8, no member of the Leasing Group
which exists as of the date hereof is
delinquent or claimed to be delinquent
under any obligation for the payment of
borrowed money.
10.1.11 No Affiliate Debt.
Lessee has not created, incurred,
guaranteed, endorsed, assumed or
suffered to exist any liability (whether
direct or contingent) for borrowed money
from the Guarantor (or any of its
Affiliates) or any Affiliate of Lessee
which has not been fully subordinated to
the Lease Obligations.
10.1.12 Taxes Current. Each
member of the Leasing Group which exists
as of the date hereof has filed all
federal, state and local tax returns
which are required to be filed as to
which extensions are not currently in
effect and has paid all taxes,
assessments, impositions, fees and other
governmental charges (including interest
and penalties) which have become due
pursuant to such returns or pursuant to
any assessment or notice of tax claim or
deficiency received by each such member
of the Leasing Group. No tax liability
has been asserted by the Internal
Revenue Service against any member of
the Leasing Group or any other federal,
state or local taxing authority for
taxes, assessments, impositions, fees or
other governmental charges (including
interest or penalties thereon) in excess
of those already paid.
10.1.13 Financials Complete
and Accurate. The financial statements
of each member of the Leasing Group
given to Lessor in connection with the
execution and delivery of the Lease
Documents were true, complete and
accurate, in all material respects, and
fairly presented the financial condition
of each such member of the Leasing Group
as of the date thereof and for the
periods covered thereby, having been
prepared in accordance with GAAP and
such financial statements disclosed all
liabilities, including, without
limitation, contingent liabilities, of
each such member of the Leasing Group as
of the date thereof. There has been no
material adverse change since such date
with respect to the Net Worth of any
such member of the Leasing Group or with
respect to any other matters contained
in such financial statements, nor have
any additional material liabilities,
including, without limitation,
contingent liabilities, of any such
member of the Leasing Group arisen or
been incurred or asserted since such
date except as otherwise disclosed to
Lessor. The projections heretofore
delivered to Lessor continue to be
reasonable (with respect to the material
assumptions upon which such projections
are based) and Lessee reasonably
anticipates based on information
currently available to it after due
inquiry the results projected therein
will be achieved, there having been (a)
no material adverse change in the
business, assets or condition, financial
or otherwise of any such member of the
Leasing Group or the Leased Property
and (b) no material depletion of the
cash or decrease in working capital of
any such member of the Leasing Group.
42
10.1.14 Pending Actions,
Notices and Reports.
There is no action or investigation
pending or, to the best knowledge and
belief of ▇▇▇▇▇▇, 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 which could
prevent or hinder the consummation of
the transactions contemplated hereby or
call into question the validity of any
of the Lease Documents or any action
taken or to be taken in connection with
the transactions contemplated thereunder
or which in any single case or in the
aggregate might result in any material
adverse change in the business,
prospects, condition, affairs of any
member of the Leasing Group or the
Leased Property (including, without
limitation, any action to revoke,
withdraw or suspend any Permit necessary
or desirable for the operation of the
Leased Property in accordance with its
Primary Intended Use and any action to
transfer or relocate any such Permit to
a location other than the Leased
Property) or any material impairment of
the right or ability of any member of
the Leasing Group to carry on its
operations as presently conducted or
proposed to be conducted with respect to
the Leased Property or with respect to
its obligations under the Lease
Documents.
10.1.15 Compliance with
Legal and Other Requirements.
(a) Lessee and the Leased Property
and the ownership, construction,
development, maintenance, management,
repair, use, occupancy, possession and
operation thereof comply with all
applicable Legal Requirements and there
is no claim of any violation thereof
known to Lessee. Without limiting the
foregoing, Lessee has obtained all
Permits that are necessary or desirable
to operate the Leased Property in
accordance with its Primary Intended
Use.
(b) Except as previously delivered
to Lessor, there are no outstanding
notices of deficiencies, notices of
proposed action or orders of any kind
relating to the Leased Property, if any,
issued by any Governmental Authority
requiring conformity to any of the
applicable Legal Requirements.
10.1.16 No Action By
Governmental Authority or Accreditation
Body. There is no action pending or, to
the best knowledge and belief of Lessee,
recommended, by any Governmental
Authority to revoke, repeal, cancel,
modify, withdraw or suspend any Permit
or Contract or to take any other action
of any other type which could have a
material adverse effect on the Leased
Property.
10.1.17 Property Matters.
(a) The Leased Property is free
and clear of agreements, covenants and
Liens, except those agreements,
covenants and Liens to which this Lease
is expressly subject, whether presently
existing, as are listed on EXHIBIT B or
were listed on the UCC lien search
results delivered to Lessor at or prior
to the execution and delivery of this
Lease (and were not required to be
terminated as a condition of the
43
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 warrant and defend ▇▇▇▇▇▇'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
▇▇▇▇▇▇ is not aware, to the best of
▇▇▇▇▇▇'s knowledge and belief, that any
such proceeding is contemplated;
(c) No part of the Collateral or
the Leased Property has been damaged by
any fire or other casualty. The Leased
Improvements are in good operating
condition and repair, ordinary wear and
tear excepted, free from known defects
in construction or design;
(d) None of the Permitted
Encumbrances has or is likely to have a
material adverse impact upon, nor
interfere with or impede, in any
material respect, the operation of the
Leased Property in accordance with the
Primary Intended Use;
(e) All buildings, facilities and
other improvements necessary, both
legally and practically, for the proper
and efficient operation of the Facility
are located upon the Leased Property and
all real property and personal property
currently utilized by ▇▇▇▇▇▇ is included
within the definition of the Leased
Property or the Collateral;
(f) The Leased Property abuts on
and has direct vehicular access to a
public road or access to a public road
via permanent, irrevocable, appurtenant
easements;
(g) The Leased Property
constitutes a parcel(s) for real estate
tax purposes separate from any real
property that does not constitute a
portion of the Leased Property and no
portion of any real property that does
not constitute a portion of the Leased
Property is part of the same tax parcel
as any part of the Leased Property;
(h) All utilities necessary for
the use and operation of the Facility
are available to the lot lines of the
Leased Property:
(i) in sufficient supply and
capacity;
(ii) through validly created and
existing easements of record
appurtenant to or encumbering the
Leased Property (which easements
shall not impede or restrict the
operation of the Facility); and
(iii) without need for any Permits
and/or Contracts to be issued by or
entered into with any Governmental
Authority, except as already
obtained or executed, as the case
may be, or as otherwise shown to
the satisfaction of Lessor to be
readily obtainable; and
(i) Lessee has made no structural
alterations or improvements to any of
the Leased Improvements that changed the
foot-print of any of the Leased
Improvements, added an additional
44
story to any of the Leased Improvements,
decreased the amount of parking
available on the Leased Property or
otherwise involved any alteration which
would be regulated by applicable zoning
requirements, in each case without the
express written consent of Lessor.
Except for matters which have been
disclosed to Lessor or concerning which
Lessor has independent actual knowledge,
Lessee has no actual knowledge of any
such structural alteration or
improvement made to any of the Leased
Improvements during the last ten (10)
years and has no knowledge of any such
structural alteration or renovation made
to any of the Leased Improvements or any
such decrease in parking during such
period.
10.1.18 Third Party Payor
Agreements.
Neither Lessee with respect to the
Facility nor the Facility is qualified
as a provider of services under or
participates in any Third Party Payor
Programs and neither Lessee with respect
to the Facility nor the Facility is
accredited by any Accreditation Body.
10.1.19 Rate Limitations.
The State currently imposes no
restrictions or limitations on rates
which may be charged to private pay
residents receiving services at the
Facility.
10.1.20 Free Care. There
are no Contracts, Permits or applicable
Legal Requirements which require that, a
percentage of units in any program at
the Facility be reserved for Medicaid or
Medicare eligible residents or that the
Facility provide a certain amount of
welfare, free or charity care or
discounted or government assisted
resident care.
10.1.21 No Proposed Changes.
Lessee has no actual knowledge of any
applicable Legal Requirements which have
been enacted, promulgated or issued
within the eighteen (18) months
preceding the date of this Lease or any
proposed applicable Legal Requirements
currently pending in the State which may
materially adversely affect rates at the
Facility (or any program operated by a
member of the Leasing Group in
conjunction with the Facility) or may
result in the likelihood of increased
competition at the Facility or the
imposition of Medicaid, Medicare,
charity, free care, welfare or other
discounted or government assisted
residents at the Facility or require
that Lessee or the Facility obtain a
certificate of need, Section 1122
approval or the equivalent, which Lessee
or the Facility does not currently
possess.
10.1.22 ERISA. No employee
pension benefit plan maintained by any
member of the Leasing Group has any
accumulated funding deficiency within
the meaning of the ERISA, nor does any
member of the Leasing Group have any
material liability to the PBGC
established under ▇▇▇▇▇ (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 of the Internal Revenue
Code of 1986, as now or hereafter
amended, respectively.
45
10.1.23 No Broker. No
member of the Leasing Group nor any of
their respective Affiliates has dealt
with any broker or agent in connection
with the transactions contemplated by
the Lease Documents.
10.1.24 No Improper
Payments. No member of the Leasing
Group nor any of their respective
Affiliates has:
(a) made any contributions,
payments or gifts of its funds or
property to or for the private use
of any government official,
employee, agent or other Person
where either the payment or the
purpose of such contribution,
payment or gifts is illegal under
the laws of the United States, any
state thereof or any other
jurisdiction (foreign or domestic);
(b) knowingly established or
maintained any unrecorded fund or
asset for any purpose or knowingly
made any false or artificial
entries on any of its books or
records for any reason;
(c) made any payments to any
Person with the intention or
understanding that any part of such
payment was to be used for any
other purpose other than that
described in the documents
supporting the payment; or
(d) made any contribution, or
reimbursed any political gift or
contribution made by any other
Person, to candidates for public
office, whether federal, state or
local, where such contribution
would be in violation of applicable
law.
10.1.25 Nothing Omitted.
Neither this Lease, nor any of the other
Lease Documents, nor any certificate,
agreement, statement or other document,
including, without limitation, any
financial statements concerning the
financial condition of any member of the
Leasing Group, furnished to or to be
furnished to Lessor or its attorneys in
connection with the transactions
contemplated by the Lease Documents,
contains or will contain any untrue
statement of a material fact or omits or
will omit to state a material fact
necessary in order to prevent all
statements contained herein and therein
from being misleading. There is no fact
within the special knowledge of Lessee
which has not been disclosed herein or
in writing to Lessor that materially
adversely affects, or in the future,
insofar as Lessee can reasonably foresee
based on the information currently
available to it after due inquiry, may
materially adversely affect the
business, properties, assets or
condition, financial or otherwise, of
any member of the Leasing Group or the
Leased Property.
10.1.26 No Margin Security.
▇▇▇▇▇▇ is not engaged in the business of
extending credit for the purpose of
purchasing or carrying margin stock
(within the meaning of Regulation U of
the Board of Governors of the Federal
Reserve System), and no part of the
proceeds of the Meditrust Investment
will be used to purchase or carry any
margin security or to extend credit to
others for the purpose of
46
purchasing or carrying any margin
security or in any other manner which
would involve a violation of any of the
regulations of the Board of Governors of
the Federal Reserve System. Lessee is
not an "investment company" within the
meaning of the Investment Company Act of
1940, as amended.
10.1.27 No Default. No
event or state of facts which
constitutes, or which, with notice or
lapse of time, or both, could
constitute, a Lease Default has occurred
and is continuing.
10.1.28 Principal Place of
Business. The principal place of
business and chief executive office of
Lessee is located at ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇ (the "Principal Place of
Business").
10.1.29 Labor Matters.
There are no proceedings now pending,
nor, to the best of ▇▇▇▇▇▇'s knowledge,
threatened with respect to the operation
of the Facility before the National
Labor Relations Board, State Commission
on Human Rights and Opportunities, State
Department of Labor, U.S. Department of
Labor or any other Governmental
Authority having jurisdiction of
employee rights with respect to hiring,
tenure and conditions of employment, and
no member of the Leasing Group has
experienced any material controversy
with any Facility administrator or other
employee of similar stature or with any
labor organization which has, or is
likely, to have a materially adverse
effect upon the financial condition
and/or operations of the Facility.
10.1.30 Intellectual
Property. Lessee is duly licensed or
authorized to use all (if any)
copyrights, rights of reproduction,
trademarks, trade-names, trademark
applications, service marks, patent
applications, patents and patent license
rights, (all whether registered or
unregistered, U.S. or foreign),
inventions, franchises, discoveries,
ideas, research, engineering, methods,
practices, processes, systems, formulae,
designs, drawings, products, projects,
improvements, developments, know-how and
trade secrets which are used in or
necessary for the development and/or
operation of the Facility in accordance
with its Primary Intended Use, without
conflict with or infringement of any,
and subject to no restriction, lien,
encumbrance, right, title or interest in
others.
10.1.31 Management
Agreements. There is no Management
Agreement in force and effect as of the
date hereof.
10.2 Continuing Effect of
Representations and Warranties. All
representations and warranties contained in
this Lease and the other Lease Documents
shall constitute continuing representations
and warranties which shall remain true,
correct and complete throughout the Term.
Notwithstanding the provisions of the
foregoing sentence but without derogation
from any other terms and provisions of this
Lease, including, without limitation, those
terms and provisions containing covenants to
be performed or conditions to be satisfied on
the part of Lessee, the representations and
warranties contained in Sections 10.1.6,
10.1.8, 10.1.10, 10.1.14, 10.1.15,
10.1.17(b), 10.1.17(c), 10.1.17(i), 10.1.18,
10.1.19, 10.1.20, 10.1.21, 10.1.22, 10.1.27,
10.1.29, in the second sentence of Section
10.1.12, in the second and third sentences of
Section
47
10.1.13 and in the second sentence of Section
10.1.25 shall not constitute continuing
representations and warranties throughout the
Term provided, however, that nothing
contained in the first sentence of Section
10.1.25 shall be construed as imposing any
obligation on Lessee to update after the
Commencement Date the information furnished
to Lessor prior to the execution and delivery
of this Lease but without derogation of any
other obligation Lessee has under this Lease
to provide information to Lessor.
ARTICLE 11
FINANCIAL AND OTHER COVENANTS
11.1 Status Certificates. At any time,
and from time to time, upon request from the
other, Lessee and Lessor shall furnish to the
other, within ten (10) Business Days' after
receipt of such request, an Officer's
Certificate certifying that this Lease is
unmodified and in full force and effect (or
that this Lease is in full force and effect
as modified and setting forth the
modifications) and the dates to which the
Rent has been paid. Any Officer's
Certificate furnished pursuant to this
Section at the request of Lessor shall be
addressed to any prospective purchaser or
mortgagee of the Leased Property as Lessor
may request and may be relied upon by ▇▇▇▇▇▇
and any such prospective purchaser or
mortgagee of the Leased Property.
11.2 Financial Statements; Reports;
Notice and Information.
11.2.1 Obligation To Furnish.
Lessee will furnish and shall cause to
be furnished to Lessor the following
statements, information and other
materials:
(a) Annual Statements.
Within ninety (90) days after the
end of each of their respective
fiscal years, (i) a copy of the
Consolidated Financials for each of
(x) Lessee, (y) the Guarantor and
(z) any Sublessee which is an
Affiliate of Lessee for the
preceding fiscal year, certified
and, in the case of Guarantor,
audited by, and with the
unqualified opinion of, independent
certified public accountants
acceptable to Lessor and certified
as true and correct by Lessee, the
Guarantor or the applicable
Sublessee, as the case may be (and,
without limiting anything else
contained herein, the Consolidated
Financials for Lessee and for each
such Sublessee shall include a
detailed balance sheet for Leased
Property as of the last day of such
fiscal year and a statement of
earnings from the Leased Property
for such fiscal year showing, among
other things, all rents and other
income therefrom and all expenses
paid or incurred in connection with
the operation of the Leased
Property); (ii) separate
statements, certified as true and
correct by Lessee, the Guarantor,
any Manager which is an Affiliate
of Lessee and each such Sublessee
which is an Affiliate of Lessee,
stating whether, to the best of the
signer's knowledge and belief after
making due inquiry, ▇▇▇▇▇▇, 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
48
being taken to immediately remedy
the same; (iii) a copy of all
letters from the independent
certified accountants engaged to
perform the annual audits referred
to above, directed to the
management of the Guarantor
regarding the existence of any
reportable conditions or material
weaknesses; (iv) a statement
certified as true and correct by
Lessee setting forth all Subleases
as of the last day of such fiscal
year, the respective areas demised
thereunder, the names of the
Sublessees thereunder, the
respective expiration dates of the
Subleases, the respective rentals
provided for therein, and such
other information pertaining to the
Subleases as may be reasonably
requested by Lessor; and (v)
evidence satisfactory to Lessor
that Lessee has fulfilled its
obligation to make the Annual
Facility Upgrade Expenditure.
(b) Monthly Statements of
Lessee. Within thirty (30) days
after the end of each calendar
month during the pendency of this
Lease, (i) a statement certified as
true and correct by Lessee setting
forth the Gross Revenues of the
Leased Property for the immediately
preceding month, (ii) an unaudited,
detailed month and year to date
income and expense statement for
the Leased Property which shall
include a comparison to
corresponding budget figures,
occupancy statistics (including the
actual number of residents, the
number of units available and total
resident days for such month) and
resident mix breakdowns (for each
resident day during such month
classifying residents by the type
of care required and source of
payment) and (iii) an express
written calculation showing the
compliance or non-compliance, as
the case may be, with the specific
financial covenants set forth in
Section 11.3 for the applicable
period, including, with respect to
the calculation of Lessee's Debt
Coverage Ratio, a schedule
substantially in the form attached
hereto as EXHIBIT D.
(c) Quarterly Statements.
Within thirty (30) days after the
end of each respective fiscal
quarter, unaudited Consolidated
Financials for each of (i) Lessee
and (ii) each Sublessee which is an
Affiliate of Lessee certified as
true and correct by Lessee or such
applicable Sublessee, as the case
may be and within thirty (30) days
after each calendar quarter, Lessee
shall also provide Lessor with a
calculation of the Additional Rent
payable for such quarter.
(d) Quarterly Statements of
the Guarantor. Within forty-five
(45) days after the end of each
fiscal quarter, unaudited
Consolidated Financials for the
Guarantor certified as true and
correct by the Guarantor.
(e) Permits and Contracts.
Within ten (10) days after the
issuance or the execution thereof,
as the case may be, true and
complete copies of (i) all Permits
which constitute operating licenses
for the Facility issued by any
Governmental Authority having
jurisdiction over assisted living
matters and (ii) Contracts
(involving payments in the
aggregate in excess
49
of $100,000 per annum), including,
without limitation, all Provider
Agreements.
(f) Contract Notices.
Promptly but in no event more than
ten (10) days after the receipt
thereof, true and complete copies
of any notices, consents,
terminations or statements of any
kind or nature relating to any of
the Contracts (involving payments
in the aggregate in excess of ONE
HUNDRED THOUSAND DOLLARS ($100,000)
per annum) other than those issued
in the ordinary course of business.
(g) Permit or Contract
Defaults. Promptly but in no event
more than ten (10) days after the
receipt thereof, true and complete
copies of all surveys, follow-up
surveys, licensing surveys,
complaint surveys, examinations,
compliance certificates, inspection
reports, statements (other than
those statements that are issued in
the ordinary course of business),
if any, terminations and notices of
any kind (other than those notices
that are furnished in the ordinary
course of business) issued or
provided to Lessee, the Manager or
any Sublessee by any Governmental
Authority, Accreditation Body or
any Third Party Payor, including,
without limitation, any notices
pertaining to any delinquency in,
or proposed revision of, ▇▇▇▇▇▇'s,
the Manager's or any Sublessee's
obligations under the terms and
conditions of any Permits or
Contracts now or hereafter issued
by or entered into with any
Governmental Authority,
Accreditation Body or Third Party
Payor and the 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 of business)
provided by ▇▇▇▇▇▇, the Manager or
any Sublessee to any Governmental
Authority, Accreditation Body or
any Third Party Payor with respect
to the Leased Property.
(i) Other Information. With
reasonable promptness, such other
information as Lessor may from time
to time reasonably request
respecting (i) the financial
condition and affairs of each
member of the Leasing Group and the
Leased Property and (ii) the
licensing and operation of the
Leased Property; including, without
limitation, financial statements,
certificates and consents from
accountants and all other financial
and licensing/operational
information as may be required or
requested by any Governmental
Authority.
(j) Default Conditions. As
soon as possible, and in any event
within five (5) days after the
occurrence of any Lease Default, or
any event or circumstance which,
with
50
the giving of notice or the passage
of time, or both, would constitute
a Lease Default, a written
statement of ▇▇▇▇▇▇ setting forth
the details of such Lease Default,
event or circumstance and the
action which Lessee proposes to
take with respect thereto.
(k) Official Actions.
Promptly but in no event more than
ten (10) days after the
commencement thereof, notice of all
actions, suits and proceedings
before any Governmental Authority
or Accreditation Body which could
have a material adverse effect on
any member of the Leasing Group or
the Leased Property.
(l) Audit Reports. Promptly
but in no event more than ten (10)
days after receipt, a copy of all
audits or reports submitted to
Lessee by any independent public
accountant in connection with any
annual, special or interim audits
of the books of Lessee and, if
requested by ▇▇▇▇▇▇, any letter of
comments directed by such
accountant to the management of
▇▇▇▇▇▇.
(m) Adverse Developments.
Promptly but in no event more than
ten (10) days after ▇▇▇▇▇▇ acquires
knowledge thereof, written notice
of:
(i) the potential
termination of any
Permit or Provider
Agreement necessary
for the operation of
the Leased Property;
(ii) any loss,
damage or destruction
to or of the Leased
Property in excess of
TWENTY-FIVE THOUSAND
DOLLARS ($25,000)
(regardless of
whether the same is
covered by
insurance);
(iii) any material
controversy involving
Lessee or any
Sublessee which is an
Affiliate of Lessee
and (x) Facility
administrator or
Facility employee of
similar stature or
(y) any labor
organization or (z)
the Manager or any
employee of the
Manager which has, or
is reasonably likely
to have, a materially
adverse effect on the
financial condition
and/or operations of
the Facility;
(iv) any controversy
that calls into
question the
eligibility of the
Facility for the
participation in any
Medicaid, Medicare or
other Third Party
Payor Program in
which the Facility is
participating;
51
(v) any refusal of
reimbursement by any
Third Party Payor
which, singularly or
together with all
other such refusals
by any Third Party
Payors, could
reasonably be
expected to have a
material adverse
effect on the
financial condition
of Lessee or any
Sublessee which is an
Affiliate of Lessee;
and
(vi) any fact within
the special knowledge
of any member of the
Leasing Group, or any
other development in
the business or
affairs of any member
of the Leasing Group,
which could
reasonably be
expected to be
materially adverse to
the business,
properties, assets or
condition, financial
or otherwise, of any
member of the Leasing
Group or the Leased
Property.
(n) Responses To Inspection
Reports. Within thirty (30) days
after receipt of an inspection
report relating to the Leased
Property from Lessor, a written
response describing in detail
prepared plans to address concerns
raised by the inspection report.
(o) Public Information. Upon
the completion or filing, mailing
or other delivery thereof, complete
copies of all financial statements,
reports, notices and proxy
statements, if any, sent by any
member of the Leasing Group (which
is a publicly held corporation) to
its shareholders and of all
reports, if any, filed by any
member of the Leasing Group (which
is a publicly held corporation)
with any securities exchange or
with the Securities Exchange
Commission.
(p) Annual Budgets. Prior to
the end of each Fiscal Year,
Lessee, any Sublessee which is an
Affiliate of Lessee and/or any
Manager which is an Affiliate of
Lessee shall submit to Lessor a
preliminary annual financial budget
for the Facility for the next
Fiscal Year, a preliminary capital
expenditures budget for the
Facility for the next Fiscal Year
and a report detailing the capital
expenditures made in the then
current Fiscal Year and on or
before the end of the first month
of each Fiscal Year, Lessee, any
such Sublessee and/or any such
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
52
member of the Leasing Group shall be
signed by an executive officer of such
member (in the event that any of the
foregoing is not an individual), having
a position of Vice President or higher
and with respect to financial matters,
any such certificate, instrument, notice
or other document shall be signed by the
chief financial officer of such member.
11.2.3 No Material Omission. No
certificate, instrument, notice or other
document, including without limitation,
any financial statements furnished or to
be furnished to Lessor pursuant to the
terms hereof or of any of the other
Lease Documents shall contain any untrue
statement of a material fact or shall
omit to state any material fact
necessary in order to prevent all
statements contained therein from being
misleading.
11.2.4 Confidentiality. Lessor
shall afford any information received
pursuant to the provisions of the Lease
Documents the same degree of
confidentiality that Lessor affords
similar information proprietary to
Lessor; provided, however, that Lessor
shall have the unconditional right to
(a) disclose any such information as
Lessor deems necessary or appropriate in
connection with any sale, transfer,
conveyance, participation or assignment
of the Leased Property or any of the
Lease Documents or any interest therein
and (b) use such information in any
litigation or arbitration proceeding
between Lessor and any member of the
Leasing Group. Without limiting the
foregoing, Lessor may also utilize any
information furnished to it hereunder as
and to the extent (i) counsel to Lessor
determines that such utilization is
necessary pursuant to 15 U.S.C. 77a-77aa
or 15 U.S.C. 78a-78jj and the rules and
regulations promulgated thereunder, (ii)
Lessor is required or requested by any
Governmental Authority to disclose any
such information and/or (iii) Lessor is
requested to disclose any such
information by any of the Meditrust
Entities' lenders or potential lenders.
Lessor shall not be liable in any way
for any subsequent disclosure of such
information by any Person to which
Lessor has provided such information in
accordance with the terms hereof.
Nevertheless, in connection with any
such disclosure, Lessor shall inform the
recipient of any such information of the
confidential nature 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 ▇▇▇▇▇▇ is in possession
of the Leased Property:
11.3.1 Debt Coverage Ratio of
Lessee. From and after the second
anniversary of the date hereof until the
fourth anniversary hereof, Lessee shall
maintain with respect to the Facility
and all other Group Four Acquisition
Facilities for each Fiscal Quarter an
aggregate Debt Coverage Ratio equal to
or greater than 1.1 to 1 and from and
after the fourth anniversary hereof and
for the remainder of the Term, Lessee
shall maintain with respect to the
Facility and all other Group Four
Acquisition Facilities for each Fiscal
Quarter an aggregate Debt Coverage Ratio
equal to or greater than 1.2 to 1.
53
11.3.2 Intentionally Deleted.
11.3.3 Intentionally Deleted.
11.3.4 Intentionally Deleted.
11.3.5 Current Ratio -
Guarantor. From and after December 31,
1999 and for the remainder of the Term,
the Guarantor shall maintain a ratio of
Consolidated Current Assets to
Consolidated Current Liabilities equal
to or greater than 1 to 1 as of the end
of each fiscal year.
11.3.6 Intentionally Deleted.
11.3.7 Net Worth - Guarantor.
The Guarantor shall maintain, at all
times, a Net Worth of not less than
TWENTY MILLION DOLLARS ($20,000,000).
11.3.8 No Indebtedness. Lessee
shall not create, incur, assume or
suffer to exist any liability for
borrowed money except (i) Indebtedness
to Lessor under the Lease Documents and,
(ii) Impositions allowed pursuant to the
provisions of the Lease, (iii) unsecured
normal trade debt incurred upon
customary terms in the ordinary course
of business, (iv) Indebtedness created
in connection with any financing of any
Capital Addition, provided, that each
such financing has been approved by
Lessor in accordance with the terms of
Article 9 hereof, (v) Indebtedness to
any Affiliate, provided, that, such
Indebtedness is fully subordinated to
this Lease pursuant to the Affiliated
Party Subordination Agreement, (vi)
other Indebtedness of Lessee in the
aggregate amount not to exceed TWO
HUNDRED THOUSAND DOLLARS ($200,000)
incurred, for the exclusive use of the
Leased Property, on account of purchase
money indebtedness or finance lease
arrangements, each of which shall not
exceed the fair market value of the
assets or property acquired or leased
and shall not extend to any assets or
property other than those purchased or
leased and purchase money security
interests in equipment and equipment
leases which comply with the provisions
of Section 6.1.2 and (vii) Indebtedness
specifically permitted by the
Meditrust/Emeritus Transaction
Documents.
11.3.9 No Guaranties. Lessee
shall not assume, guarantee, endorse,
contingently agree to purchase or
otherwise become directly or
contingently liable (including, without
limitation, liable by way of agreement,
contingent or otherwise, to purchase, to
provide funds for payment, to supply
funds to or otherwise to invest in any
debtor or otherwise to assure any
creditor against loss) in connection
with any Indebtedness of any other
Person, except by the endorsement of
negotiable instruments for deposit or
collection or similar transactions in
the ordinary course of business and
except for a guaranty of the
Indebtedness of the Guarantor in
connection with a Working Capital Loan
which expressly limits recourse under
such guaranty to the Receivables.
54
11.4 Affirmative Covenants. Lessee
covenants and agrees that throughout the Term
and any periods thereafter that ▇▇▇▇▇▇
remains in possession of the Leased Property:
11.4.1 Maintenance of Existence.
If Lessee is a corporation, trust or
partnership, during the entire time that
this Lease remains in full force and
effect, Lessee shall keep in effect its
existence and rights as a corporation,
trust or partnership under the laws of
the state of its incorporation or
formation and its right to own property
and transact business in the State.
11.4.2 Materials. Except as
provided in Section 6.1.2, Lessee shall
not suffer the use in connection with
any renovations or other construction
relating to the Leased Property of any
materials, fixtures or equipment
intended to become part of the Leased
Property which are purchased upon lease
or conditional bill of sale or to which
Lessee does not have absolute and
unencumbered title, and Lessee covenants
to cause to be paid punctually all sums
becoming due for labor, materials,
fixtures or equipment used or purchased
in connection with any such renovations
or construction, subject to ▇▇▇▇▇▇'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 and (vi) the Appurtenant
Agreement.
11.4.4 Books And Records.
Lessee shall cause to be kept and
maintained, and shall permit Lessor and
its representatives to inspect at all
reasonable times and upon reasonable
notice, accurate books of accounts in
which complete entries will be made in
accordance with GAAP reflecting all
financial transactions of Lessee
(showing, without limitation, all
materials ordered and received and all
disbursements, accounts payable and
accounts receivable in connection with
the operation of the Leased Property).
11.4.5 Participation in Third
Party Payor Programs. If Lessee or a
Sublessee which is an Affiliate of
Lessee elects to participate in Third
Party Payor Programs, Lessee or such
Sublessee shall remain eligible to
participate in such Third Party Payor
Programs in accordance with all
requirements thereof (including, without
limitation, all applicable Provider
Agreements), if and to the extent
remaining eligible shall be necessary
for the prudent operation of the
Facility in the good faith exercise of
commercially reasonable business
judgment.
11.4.6 Conduct of its Business.
Lessee will maintain, and cause any
Sublessee and any Manager to maintain,
experienced and competent professional
management with respect to its business
and with respect to the Leased Property.
Lessee, any Sublessee and any Manager
shall conduct, in the ordinary course,
the operation of the Facility, and
Lessee and any Sublessee which is an
Affiliate of Lessee
55
shall not enter into any other business
or venture during the Term or such time
as Lessee or any such Sublessee is in
possession of the Leased Property other
than activities in which Lessee or such
Sublessee are permitted to engage by the
provisions of the Meditrust/Emeritus
Transaction Documents.
11.4.7 Address. Lessee shall
provide Lessor thirty (30) days' prior
written notice of any change of its
Principal Place of Business from its
current Principal Place of Business.
Lessee shall maintain the Collateral,
including without limitation, all books
and records relating to its business,
solely at its Principal Place of
Business and at the Leased Property.
Lessee shall not (a) remove the
Collateral, including, without
limitation, any books or records
relating to ▇▇▇▇▇▇'s business from
either the Leased Property or ▇▇▇▇▇▇'s
Principal Place of Business or (b)
relocate its Principal Place of Business
until after receipt of a certificate
from Lessor, signed by an officer
thereof, stating that Lessor has, to its
satisfaction, obtained all documentation
that it deems necessary or desirable to
obtain, maintain, perfect and confirm
the first priority security interests
granted in the Lease Documents.
11.4.8 Subordination of
Affiliate Transactions. Without
limiting the provisions of any other
Section of this Lease or the Affiliated
Party Subordination Agreement, any
payments to be made by Lessee to (a) any
member of the Leasing Group (or any of
its Affiliates) or (b) any Affiliate of
Lessee, in connection with any
transaction between Lessee and such
Person, including, without limitation,
the purchase, sale or exchange of any
property, the rendering of any service
to or with any such Person (including,
without limitation, all allocations of
any so-called corporate or central
office costs, expenses and charges of
any kind or nature) or the making of any
loan or other extension of credit or the
making of any equity investment, shall
be subordinate to the complete payment
and performance of the Lease
Obligations; provided, however, that all
such subordinated payments may be paid
at any time unless: (x) after giving
effect to such payment, Lessee shall be
unable to comply with any of its
obligations under any of the Lease
Documents or (y) a Lease Default has
occurred and is continuing and has not
been expressly waived in writing by
Lessor or an event or state of facts
exists, which, with the giving of notice
or the passage of time, or both, would
constitute a Lease Default.
11.4.9 Inspection. At
reasonable times and upon reasonable
notice, Lessee shall permit Lessor and
its authorized representatives
(including, without limitation, the
Consultants) to inspect the Leased
Property as provided in Section 7.1
above, provided, however, that, in the
event results of any such testing or
inspection reflect the same satisfactory
results as the results of a similar
testing or inspection initiated by
Lessor within the prior twelve (12)
months period, the costs and expense of
such testing or inspection shall be the
responsibility of Lessor.
11.4.10 Annual Facility 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 third Lease
Year. Lessee will furnish and shall
56
cause to be furnished to Lessor evidence
satisfactory to Lessor that ▇▇▇▇▇▇ has
fulfilled its obligation to make the
Annual Facility Upgrade Expenditure
within ninety (90) days after the end of
▇▇▇▇▇▇'s fiscal year.
11.5 Additional Negative Covenants.
Lessee covenants and agrees that, throughout
the Term and such time as ▇▇▇▇▇▇ remains in
possession of the Leased Property:
11.5.1 Restrictions Relating to
Lessee. Except as may otherwise be
expressly provided in Section 19.4 or in
any of the other Lease Documents, Lessee
shall not, without the prior written
consent of Lessor, in each instance,
which consent may be withheld in the
sole and absolute discretion of Lessor:
(a) convey, assign,
hypothecate, transfer, dispose of
or encumber, or permit the
conveyance, assignment, transfer,
hypothecation, disposal or
encumbrance of all or any part of
any legal or beneficial interest in
this Lease, its other assets or the
Leased Property except as expressly
permitted by the terms of this
Lease Agreement; provided, however,
that this restriction shall not
apply to (i) the Permitted
Encumbrances that may be created
after the date hereof pursuant to
the Lease Documents; (ii) Liens
created in accordance with Section
6.1.2 against Tangible Personal
Property securing Indebtedness
permitted under Section 11.3.8(v);
(iii) the sale, conveyance,
assignment, hypothecation, lease or
other transfer of any material
asset or assets (whether now owned
or hereafter acquired), the fair
market value of which equals or is
less than TWENTY-FIVE THOUSAND
DOLLARS ($25,000), individually, or
ONE HUNDRED THOUSAND DOLLARS
($100,000) collectively; (iv)
without limitation as to amount,
the disposition in the ordinary
course of business of any obsolete,
worn out or defective fixtures,
furnishings or equipment used in
the operation of the Leased
Property provided that the same are
replaced with fixtures, furnishings
or equipment of equal or greater
utility or value or Lessee provides
Lessor with an explanation
(reasonably satisfactory to Lessor)
as to why such fixtures,
furnishings or equipment is no
longer required in connection with
the operation of the Leased
Property; (v) without limitation as
to amount, any sale of inventory by
Lessee in the ordinary course of
business; and (vi) subject to the
terms of the Negative Pledge
Agreement and the Affiliated Party
Subordination Agreement,
distributions to the shareholders
of Lessee;
(b) permit the use of the
Facility for any purpose other than
the Primary Intended Use and the
Other Permitted Uses; or
(c) liquidate, dissolve or
merge or consolidate with any other
Person except, subject to Lessor's
prior written consent, which
consent shall not be unreasonably
withheld, a Meditrust/Emeritus
Transaction Affiliate.
57
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 ▇▇▇▇▇▇'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 ▇▇▇▇▇▇, (d)
Liens for those taxes of Lessor which
▇▇▇▇▇▇ is not required to pay hereunder,
(e) Liens of mechanics, laborers,
materialmen, suppliers or vendors for
sums either not yet due or being
contested in strict compliance with the
terms and conditions of Article 15, (f)
any Liens which are the responsibility
of Lessor pursuant to the provisions of
Article 20, (g) Liens for Impositions
which are either not yet due and payable
or which are in the process of being
contested in strict compliance with the
terms and conditions of Article 15 (h)
the Liens incurred pursuant to the
provisions of Section 6.1.2 and (i)
involuntary Liens caused by the actions
or omissions of Lessor.
11.5.3 Limits on Affiliate
Transactions. Lessee shall not enter
into any transaction with any Affiliate,
including, without limitation, the
purchase, sale or exchange of any
property, the rendering of any service
to or with any Affiliate and the making
of any loan or other extension of
credit, except in the ordinary course
of, and pursuant to the reasonable
requirements of, ▇▇▇▇▇▇'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. ▇▇▇▇▇▇
acknowledges that upon and after any
termination of this Lease, any
competition by any member of the Leasing
Group with any subsequent owner or
subsequent lessee of the Leased Property
(the "Purchaser") would cause
irreparable harm to Lessor and any such
Purchaser. To induce Lessor to enter
into this Lease, ▇▇▇▇▇▇ agrees that,
from and after the date hereof and
thereafter until (a) in the case of the
expiration of the Initial Term or a
termination of this Lease, the fifth
(5th) anniversary of the termination
hereof or of the expiration of the
Initial Term, as applicable, and (b) in
the case of an expiration of any of the
Extended Terms, the second (2nd)
anniversary of the expiration of the
applicable Extended Term, no member of
the Leasing Group nor any Person holding
or controlling, directly or indirectly,
any interest in any member of the
Leasing Group (collectively, the
"Limited Parties") shall be involved in
any capacity in or lend any of their
names to or engage in any capacity in
any assisted living facility, center,
unit or program (or in any Person
engaged in any such activity or any
related activity competitive therewith)
other than (a) those set forth on
Schedule 11.5.4 annexed hereto, (b)
those activities in which a
Meditrust/Emeritus Transaction Affiliate
is permitted to engage by the provisions
of the Meditrust/Emeritus Transaction
Documents which relate to any such
facility, center, unit or program and
(c) the acquisition of an ownership
interest in any such facility, center,
unit or program which is part of a
single transaction in which an ownership
interest in at least four (4) other
facilities, centers, units or programs
(provided, however, that if such
acquisition occurs within the last
twelve month period of the Initial Term
or any of the Extended Terms, Lessee
shall have the
58
benefit of this clause (c) only if at
the time such acquisition occurs Lessee
has already (x) exercised in that twelve
month period its right under Section 1.3
hereof to extend the Term for another
Extended Term or (y) given a Purchase
Option Notice and has waived any right
to rescind the same based upon the
determination of the Fair Market Value
of the Leased Property), whether such
competitive activity shall be as an
officer, director, owner, employee,
agent, advisor, independent contractor,
developer, lender, sponsor, venture
capitalist, administrator, manager,
investor, partner, joint venturer,
consultant or other participant in any
capacity whatsoever with respect to an
assisted living facility, center, unit
or program located within a five (5)
mile radius of the Leased Property.
▇▇▇▇▇▇ hereby acknowledges and
agrees that none of the time span, scope
or area covered by the foregoing
restrictive covenants is or are
unreasonable and that it is the specific
intent of Lessee that each and all of
the restrictive covenants set forth
hereinabove shall be valid and
enforceable as specifically set forth
herein. ▇▇▇▇▇▇ further agrees that
these restrictions are special, unique,
extraordinary and reasonably necessary
for the protection of Lessor and any
Purchaser and that the violation of any
such covenant by any of the Limited
Parties would cause irreparable damage
to Lessor and any Purchaser for which a
legal remedy alone would not be
sufficient to fully protect such
parties.
Therefore, in addition to and
without limiting any other remedies
available at law or hereunder, in the
event that any of the Limited Parties
breaches any of the restrictive
covenants hereunder or shall threaten
breach of any of such covenants, then
Lessor and any Purchaser shall be
entitled to obtain equitable remedies,
including specific performance and
injunctive relief, to prevent or
otherwise restrain a breach of this
Section 11.5.4 (without the necessity of
posting a bond) and to recover any and
all costs and expenses (including,
without limitation, reasonable
attorneys' fees and expenses and court
costs) incurred in enforcing the
provisions of this Section 11.5.4. The
existence of any claim or cause of
action of any of the Limited Parties or
any member of the Leasing Group against
Lessor or any Purchaser, whether
predicated on this Lease or otherwise,
shall not constitute a defense to the
enforcement by Lessor or any Purchaser
of the foregoing restrictive covenants
and the Limited Parties shall not defend
on the basis that there is an adequate
remedy at law.
Without limiting any other
provision of this Lease, the parties
hereto acknowledge that the foregoing
restrictive covenants are severable and
separate. If at any time any of the
foregoing restrictive covenants shall be
deemed invalid or unenforceable by a
court having jurisdiction over this
Lease, by reason of being vague or
unreasonable as to duration, or
geographic scope or scope of activities
restricted, or for any other reason,
such covenants shall be considered
divisible as to such portion and such
covenants shall be immediately amended
and reformed to include only such
covenants as are deemed reasonable and
enforceable by the court having
jurisdiction over this Lease to the full
duration, geographic scope and scope of
restrictive activities deemed reasonable
and thus enforceable by said court; and
the parties agree that such covenants as
so amended and reformed, shall be valid
and
59
binding as through the invalid or
unenforceable portion has not been
included therein.
The provisions of this Section
11.5.4 shall survive the termination of
the Lease and any satisfaction of the
Lease Obligations in connection
therewith or subsequent thereto. The
parties hereto acknowledge and agree
that any Purchaser may enforce the
provisions of this Section 11.5.4 as a
third party beneficiary.
11.5.5 Intentionally deleted.
11.5.6 Intentionally deleted.
11.5.7 Intentionally deleted.
11.5.8 ERISA. Lessee shall not
establish or permit any Sublessee to
establish any new pension or defined
benefit plan or modify any such existing
plan for employees subject to ERISA,
which plan provides any benefits based
on past service without the advance
consent of Lessor (which consent shall
not be unreasonably withheld) to the
amount of the aggregate past service
liability thereby created.
11.5.9 Forgiveness of Indebtedness.
Lessee will not waive, or permit any
Sublessee or Manager which is an
Affiliate to waive, any debt or claim,
except in the ordinary course of its
business.
11.5.10 Value of Assets.
Except as disclosed in the financial
statements provided to Lessor as of the
date hereof, ▇▇▇▇▇▇ will not write up
(by creating an appraisal surplus or
otherwise) the value of any assets of
Lessee above their cost to Lessee, less
the depreciation regularly allowable
thereon.
11.5.11 Changes in Fiscal
Year and Accounting Procedures. Upon
notice to Lessor, Lessee may (a) change
its fiscal year or capital structure or
(b) change, alter, amend or in any
manner modify in accordance with GAAP
any of its current accounting procedures
related to the method of revenue
recognition, billing procedures or
determinations of doubtful accounts or
bad debt expenses or permit any of its
Subsidiaries to so change its fiscal
year, provided that, in the event of
such change, modification or alteration,
Lessee and Lessor shall make such
adjustments to the calculation of
Additional Rent and the financial
covenants contained herein as Lessor
shall reasonably require to make the
same consistent in result with the
calculation thereof immediately prior to
such change, modification or alteration.
ARTICLE 12
INSURANCE AND INDEMNITY
12.1 General Insurance Requirements.
During the Term of this Lease and thereafter
until ▇▇▇▇▇▇ 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.
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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;
(d) earthquake insurance (if
reasonably deemed necessary by
Lessor) in limits and with
deductibles acceptable to Lessor;
(e) environmental impairment
liability insurance (if available
on commercially reasonable terms
and deemed reasonably necessary by
Lessor) in limits and with
deductibles acceptable to Lessor;
(f) business interruption
insurance in an amount equal to the
annual Base Rent due hereunder plus
the aggregate sum of the
Impositions relating to the Leased
Property due and payable during one
year;
(g) comprehensive general
public liability insurance
including coverages commonly found
in the Broad Form Commercial
Liability Endorsements with amounts
not less than FIVE MILLION DOLLARS
($5,000,000) per
61
occurrence with respect to bodily
injury and death and THREE MILLION
DOLLARS ($3,000,000) for property
damage and with all limits based
solely upon occurrences at the
Leased Property without any other
impairment;
(h) professional liability
insurance in an amount not less
than TEN MILLION DOLLARS
($10,000,000) for each medical
incident;
(i) physical damage insurance
on an all-risk basis (with only
such exceptions as Lessor in its
reasonable discretion shall
approve) covering the Tangible
Personal Property for the full
replacement cost thereof and with a
deductible not in excess of one
percent (1%) of the full
replacement cost thereof;
(j) "Workers' Compensation
and Employers' Liability Insurance
providing protection against all
claims arising out of injuries to
all employees of Lessee or of any
Sublessee (employed on the Leased
Property or any portion thereof) in
amounts equal for Workers'
Compensation, to the statutory
benefits payable to employees in
the State and for Employers'
Liability, to limits of not less
than ONE HUNDRED THOUSAND DOLLARS
($100,000) for injury by accident,
ONE HUNDRED THOUSAND DOLLARS
($100,000) per employee for disease
and FIVE HUNDRED THOUSAND DOLLARS
($500,000) disease policy limit;
(k) subsidence insurance (if
deemed necessary by Lessor) in
limits acceptable to Lessor; and
(l) 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 ▇▇▇▇▇▇
as owner, loss payee, secured party (to
the extent applicable) and additional
named insured as its interests may
appear. If an insurance policy covers
properties other than the Leased
Property, then Lessor shall be so named
with respect only to the Leased
Property. Each such policy, where
applicable or appropriate, shall:
(a) include an agreed amount
endorsement and loss payee,
additional named insured and
secured party endorsements, in
forms acceptable to Lessor in its
reasonable discretion;
62
(b) include mortgagee,
secured party, loss payable and
additional named insured
endorsements reasonably acceptable
to each Fee Mortgagee;
(c) provide that the
coverages may not be cancelled or
materially modified except upon
thirty (30) days' prior written
notice to Lessor and any Fee
Mortgagee;
(d) be payable to Lessor and
any Fee Mortgagee notwithstanding
any defense or claim that the
insurer may have to the payment of
the same against any other Person
holding any other interest in the
Leased Property;
(e) be endorsed with standard
noncontributory clauses in favor of
and in form reasonably acceptable
to Lessor and any Fee Mortgagee;
(f) expressly waive any right
of subrogation on the part of the
insurer against Lessor, any Fee
Mortgagee or the Leasing Group; and
(g) otherwise be in such
forms as shall be reasonably
acceptable to Lessor.
12.1.4 Notices; Certificates and
Policies. Lessee shall promptly provide
to Lessor copies of any and all notices
(including notice of non-renewal),
claims and demands which ▇▇▇▇▇▇ receives
from insurers of the Leased Property.
At least ten (10) days prior to the
expiration of any insurance policy
required hereunder, ▇▇▇▇▇▇ 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 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 cancelled 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
63
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 ▇▇▇▇▇▇'s attorney-in-fact
with full power of substitution, to
endorse Lessee's name upon any check in
payment thereof. Subject to the
provisions of Article 13, such insurance
proceeds shall be applied first toward
reimbursement of all costs and expenses
reasonably incurred by Lessor in
collecting said insurance proceeds, then
toward payment of the Lease Obligations
or any portion thereof, which have not
been paid when due and payable or within
any applicable cure period, in such
order as Lessor determines, and then in
whole or in part toward restoration,
repair or reconstruction of the Leased
Property for which such insurance
proceeds shall have been paid.
12.1.7 Irrevocable Power of
Attorney. The power of attorney
conferred on Lessor pursuant to the
provisions of Section 12.1, being
coupled with an interest, shall be
irrevocable for as long as this Lease is
in effect or any Lease Obligations are
outstanding, shall not be affected by
any disability or incapacity which
Lessee may suffer and shall survive the
same. Such power of attorney, is
provided solely to protect the interests
of ▇▇▇▇▇▇ 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 wilful
misconduct.
12.1.8 Blanket Policies.
Notwithstanding anything to the contrary
contained herein, ▇▇▇▇▇▇'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 ▇▇▇▇▇▇'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
64
(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.
12.1.10Assignment 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇), the
insurance policies required to be
maintained hereunder, including all
right, title and interest of Lessee
thereunder, shall become the absolute
property of Lessor subject to any
limitation on assignment provided for
therein.
12.2Indemnity.
12.2.1 Indemnification. Except
with respect to the gross negligence or
wilful misconduct of Lessor or any of
the other Indemnified Parties, as to
which no indemnity is provided, ▇▇▇▇▇▇
hereby agrees to defend with counsel
reasonably acceptable to Lessor, against
all claims and causes of action and to
indemnify and hold harmless Lessor and
each of the other Indemnified Parties
from and against all damages, losses,
liabilities, obligations, penalties,
costs and expenses (including, without
limitation, reasonable attorneys' fees,
court costs and other expenses of
litigation) suffered by, or claimed or
asserted against, Lessor or any of the
other Indemnified Parties, directly or
indirectly, by any Person other than a
member of the Leasing Group who prevails
in such claim or action based on,
arising out of or resulting from (a) the
use and occupancy of the Leased Property
or any business conducted therein, (b)
any act, fault, omission to act or
misconduct by (i) any member of the
Leasing Group, (ii) any Affiliate of
Lessee or (iii) any employee, agent,
licensee, business invitee, guest,
customer, contractor or sublessee of any
of the foregoing parties, relating to,
directly or indirectly, the Leased
Property, (c) any accident, injury or
damage whatsoever caused to any Person,
including, without limitation, any claim
of malpractice, or to the property of
any Person in or about the Leased
Property or outside of the Leased
Property where such accident, injury or
damage results or is claimed to have
resulted from any act, fault, omission
to act or misconduct by any member of
the Leasing Group or any Affiliate of
Lessee or any employee, agent, licensee,
contractor or sublessee of any of the
foregoing parties, (d) any Lease
Default, (e) any claim brought or
threatened against Lessor by any member
of the Leasing Group or by any other
Person on account of (i) Lessor's
relationship with any member of the
Leasing Group pertaining in any way to
the Leased Property and/or the
transaction evidenced by the Lease
Documents and/or (ii) Lessor's
negotiation of, entering into and/or
performing any of its obligations and/or
exercising any of its right and remedies
under any of the Lease Documents, (f)
any attempt by any member of the Leasing
Group or any Affiliate of Lessee
65
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.
12.2.3 Limitation on Lessor
Liability. Neither Lessor nor any
Affiliate of Lessor shall be liable to
any member of the Leasing Group or any
Affiliate of any member of the Leasing
Group, or to any other Person whatsoever
for any damage, injury, loss,
compensation, or claim (including, but
not limited to, any claim for the
interruption of or loss to any business
conducted on the Leased Property) based
on, arising out of or resulting from any
cause whatsoever, including, but not
limited to, the following: (a) repairs
to the Leased Property, (b) interruption
in use of the Leased Property; (c) any
accident or damage resulting from the
use or operation of the Leased Property
or any business conducted thereon; (d)
the termination of this Lease by reason
of Casualty or Condemnation, (e) any
fire, theft or other casualty or crime,
(f) the actions, omissions or misconduct
of any other Person, (g) damage to any
property, or (h) any damage from the
flow or leaking of water, rain or snow.
All Tangible Personal Property and the
personal property of any other Person on
the Leased Property shall be at the sole
risk of Lessee and Lessor shall not in
any manner be held responsible therefor
(except in the event of loss caused by
the gross negligence or willful
misconduct of Lessor). Notwithstanding
the foregoing, Lessor shall not be
released from liability for any injury,
loss, damage or liability suffered by
Lessee to the extent caused directly by
the gross negligence or willful
misconduct of Lessor, its servants,
employees or agents acting within the
scope of their authority on or about the
Leased Property or in regards to the
Lease; provided, however, that in no
event shall Lessor, its servants,
employees or agents have any liability
based on any loss for any indirect or
consequential damages. or
12.2.4 Risk of Loss. During the
Term of this Lease, the risk of loss or
of decrease in the enjoyment and
beneficial use of the Leased Property in
consequence of any damage or destruction
thereof by fire, the elements,
casualties, thefts, riots, wars or
otherwise, or in consequence of
foreclosures, levies or executions of
Liens (other than those created by
Lessor in accordance with the provisions
of Article 20) is assumed by ▇▇▇▇▇▇ 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).
66
ARTICLE 13
FIRE AND CASUALTY
13.1Restoration Following Fire or Other
Casualty.
13.1.1 Following Fire or Casualty.
In the event of any damage or
destruction to the Leased Property by
reason of fire or other hazard or
casualty (a "Casualty"), Lessee shall
give immediate written notice thereof to
Lessor and, subject to the terms of this
Article 13 and any applicable Legal
Requirements, Lessee shall proceed with
reasonable diligence, in full compliance
with all applicable Legal Requirements,
to perform such repairs, replacement and
reconstruction work (referred to herein
as the "Work") to restore the Leased
Property to the condition it was in
immediately prior to such damage or
destruction and to a condition adequate
to operate the Facility for the Primary
Intended Use and, if applicable, the
Other Permitted Uses and in compliance
with applicable Legal Requirements. All
Work shall be performed and completed in
accordance with all applicable Legal
Requirements and the other requirements
of this Lease within one hundred and
twenty (120) days following the
occurrence of the damage or destruction
plus a reasonable time to compensate for
Unavoidable Delays (including for the
purposes of this Section, delays in
obtaining Permits and in adjusting
insurance losses), but in no event
beyond two-hundred and seventy (270)
days following the occurrence of the
Casualty.
13.1.2 Procedures. In the event
that any Casualty results in
non-structural damage to the Leased
Property in excess of FIFTY THOUSAND
DOLLARS ($50,000) or in any structural
damage to the Leased Property,
regardless of the extent of such
structural damage, prior to commencing
the Work, Lessee shall comply with the
following requirements:
(a) Lessee shall furnish to
Lessor complete plans and
specifications for the Work
(collectively and as the same may
be modified and amended from time
to time pursuant to the terms
hereof, the "Plans and
Specifications"), for Lessor's
approval, in each instance, which
approval shall not be unreasonably
withheld. The Plans and
Specifications shall bear the
signed approval thereof by an
architect, licensed to do business
in the State, reasonably
satisfactory to Lessor (in the
event Lessor reasonably determines
that the Work is of a nature for
which the involvement of an
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;
67
(b) Lessee shall furnish to
Lessor certified or photostatic
copies of all Permits and Contracts
required by all applicable Legal
Requirements in connection with the
commencement and conduct of the
Work to the extent the same can be
secured in the ordinary course
prior to the commencement of
construction;
(c) Lessee shall furnish to
Lessor a cash deposit or a payment
and performance bond sufficient to
pay for completion of and payment
for the Work in an amount not less
than the architect's estimate of
the entire cost of completing the
Work, less the amount of property
insurance proceeds (net of costs
and expenses incurred by Lessor in
collecting the same), if any, then
held by Lessor and which Lessor
shall be required to apply toward
restoration of the Leased Property
as provided in Section 13.2;
(d) Lessee shall furnish to
Lessor such insurance with respect
to the Work (in addition to the
insurance required under Section
12.1 hereof) in such amounts and in
such forms as is reasonably
required by Lessee; and
(e) Lessee shall not commence
any of the Work until Lessee shall
have complied with the requirements
set forth in clauses (a) through
(d) immediately above, as
applicable, and, thereafter, Lessee
shall perform the Work diligently,
in a good and workmanlike fashion
and in good faith in accordance
with (i) the Plans and
Specifications referred to in
clause (a) immediately above, (ii)
the Permits and Contracts referred
to in clause (b) immediately above
and (iii) all applicable Legal
Requirements and other requirements
of this Lease; provided, however,
that in the event of a bona fide
emergency during which Lessee is
unable to contact the appropriate
representatives of Lessor, Lessee
may commence such Work as may be
necessary in order to address such
emergency without Lessor's prior
approval, as long as Lessee
immediately thereafter advises
Lessor 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:
68
(a) Prior to the commencement
of any Work, Lessee shall have
received Lessor's written approval
of the Plans and Specifications
(which approval shall not be
unreasonably withheld) and the Work
shall be supervised by an
experienced construction manager
with the consultation of an
architect or engineer qualified and
licensed to do business in the
State (in the event Lessor
reasonably determines that the Work
is of a nature for which the
involvement of such architect or
engineer is appropriate). Lessee
shall not make any changes in, and
shall not permit any changes in,
the quality of the materials to be
used in the Work, the Plans and
Specifications or the Work, whether
by change order or otherwise,
without the prior written consent
of Lessor, in each instance (which
consent may be withheld in Lessor's
sole and absolute discretion);
provided, however, that such
consent shall not be required for
any individual change which has
been approved by the architect,
which does not materially affect
the structure or exterior of the
Facility, and the cost of which
does not exceed TEN THOUSAND
DOLLARS ($10,000) or which changes,
in the aggregate, do not exceed ONE
HUNDRED THOUSAND DOLLARS ($100,000)
in cost. Notwithstanding the
foregoing, prior to making any
change in Plans and Specifications,
copies of all change orders shall
be submitted by Lessee to Lessor
and ▇▇▇▇▇▇ 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
69
thereof and stating
the progress of the Work
up to the date of said
certificate;
(iii) that the sum
then requested to be
withdrawn, plus all sums
previously withdrawn,
does not exceed the cost
of the Work insofar as
actually accomplished up
to the date of such
certificate;
(iv) that the remainder
of the funds held by
Lessor will be sufficient
to pay for the full
completion of the Work in
accordance with the Plans
and Specifications;
(v) that no part of the
cost of the services and
materials described in
the applicable Work
Certificate has been or
is being made the basis
of the withdrawal of any
funds in any previous or
then pending application;
and
(vi) that, except for the
amounts, if any,
specified in the
applicable Work
Certificate to be due
for services and
materials, there is no
outstanding indebtedness
known, after 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 (10) days prior to
70
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
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 of ten percent (10%) as to all
hard costs of the Work (the
"Retainage"). It is understood that the
Retainage is intended to provide a
contingency fund to assure ▇▇▇▇▇▇ 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
71
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 Property against
all mechanic's and
materialman's liens
accompanied by the final lien
waivers from the general
contractor and all
subcontractors;
(iii) a certificate by
Lessee in form and substance
reasonably satisfactory to
Lessor, listing all costs and
expenses in connection with
the completion of the Work and
the amount paid by Lessee with
respect to the Work; and
(iv) a temporary certificate
of occupancy (if obtainable)
and all other applicable
Permits and Contracts issued
by or entered into with any
Governmental Authority with
respect to the Primary
Intended Use not already
delivered to Lessor and, to
the extent applicable, the
Other Permitted Uses and by
the appropriate Board of Fire
Underwriters or other similar
bodies acting in and for the
locality in which the Leased
Property is situated with
respect to the Facility;
provided, that within thirty
(30) days after completion of
the Work, Lessee shall obtain
and deliver to Lessor a
permanent certificate of
occupancy for the Leased
Property, subject to seasonal
delays.
Upon completion of the Work and
delivery of the documents required
pursuant to the provisions of this
Section 13.1, Lessor shall pay the
Retainage to Lessee or to those Persons
entitled thereto and if there shall be
insurance proceeds or cash deposits,
other than the Retainage, held by Lessor
in excess of the amounts disbursed
pursuant to the foregoing provisions,
then provided that no Lease Default has
occurred and is continuing, nor any
state of facts or circumstances which,
with the giving of notice and/or the
passage of time would constitute a Lease
Default, Lessor shall pay over such
proceeds or cash deposits to Lessee.
No inspections or any approvals of
the Work during or after construction
shall constitute a warranty or
representation by Lessor, or any of its
agents or Consultants, as to the
technical sufficiency, adequacy or
safety of any structure or any of its
component parts, including, without
limitation, any fixtures, equipment or
furnishings, or as to the subsoil
conditions or any other physical
condition or feature pertaining to the
Leased Property. All acts, including
any failure to act, relating to Lessor
are performed solely for the benefit of
Lessor to assure the payment and
performance of the Lease Obligations and
are not for the benefit of Lessee or the
benefit of any other Person.
72
13.2Disposition of Insurance Proceeds.
13.2.1 Proceeds To Be Released to
Pay For Work. In the event of any
Casualty, except as provided for in
Section 13.2.2, Lessor shall release
proceeds of property insurance held by
it to pay for the Work in accordance
with the provisions and procedures set
forth in this Article 13, only if:
(a) all of the terms,
conditions and provisions of
Sections 13.1 and 13.2.1 are
satisfied;
(b) Lessee demonstrates to
Lessor's satisfaction that ▇▇▇▇▇▇
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 cancelled or
terminated, nor contain any still
exercisable right to cancel or
terminate, due to such Casualty if
and to the extent that the income
from such Sublease is necessary in
order to avoid the violation of any
of the financial covenants set
forth in this Lease or otherwise to
avoid the creation of an Event of
Default.
If a Fee Mortgagee prevents Lessor from
releasing proceeds of property insurance
notwithstanding the satisfaction of the
foregoing requirements, Lessee shall
have no obligation to restore the
Casualty to which such proceeds pertain.
13.2.2 Proceeds Not To Be Released.
If, as the result of any Casualty, the
Leased Property is damaged to the extent
it is rendered Unsuitable For Its
Primary Intended Use and if either: (a)
Lessee, after exercise of diligent
efforts, cannot within a reasonable time
(not in excess of ninety (90) days)
obtain all necessary Permits in order to
be able to perform all required Work and
to again operate the Facility for its
Primary Intended Use and, if applicable,
the Other Permitted Uses within two
hundred and seventy (270) days from the
occurrence of the damage or destruction
in substantially the manner as
immediately prior to such damage or
destruction or (b) such Casualty occurs
during the last twenty-four (24) months
of the Term and would reasonably require
more than nine (9) months to obtain all
Permits and complete the Work, then
Lessee may either (i) acquire the Leased
Property from Lessor for a purchase
price equal to the greater of (x) the
Meditrust Investment 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
73
such right of termination effective upon
payment to Lessor of all Rent and other
sums due under this Lease and the other
Lease Documents through the date of
termination plus an amount, which when
added to the sum of (1) the Fair Market
Value of the Leased Property as affected
by all unrepaired or unrestored damage
due to any Casualty (and giving due
regard for delays, costs and expenses
incident to completing all repair or
restoration required to fully repair or
restore the same) plus (2) the amount of
insurance proceeds actually received by
Lessor (net of costs and expenses
incurred by Lessor in collecting the
same) equals (3) the greater of the
Meditrust Investment or the Fair Market
Value of the Leased Property minus the
Fair Market Added Value, with the Fair
Market Value and the Fair Market Added
Value to be determined as of the day
immediately prior to such Casualty and
prior to any other Casualty which has
not been fully repaired. Any
acquisition of the Leased Property
pursuant to the terms of this Section
13.2.2 shall be consummated in
accordance with the provisions of
Article 18, mutatis, mutandis. If such
termination becomes effective, Lessor
shall assign to Lessee any outstanding
insurance claims and, at ▇▇▇▇▇▇'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 (115%) of the Fair
Market Value of the Leased Premises at
the time of such termination, Lessor
shall pay to Lessee fifty percent (50%)
of the amount of such excess.
13.2.3 Special Right to
Rebuild. Anything contained in Section
13.2.2(A) (a) above notwithstanding, if
following any Casualty, Lessee will be
unable, as a result of any applicable
Legal Requirements, to rebuild and
operate the Facility for the Primary
Intended Use and, if applicable, the
Other Permitted Uses, but will be able
to rebuild and operate an assisted
living facility (the "New Use Facility")
providing substantially similar services
as the Facility immediately prior to
such Casualty and having units equal in
number to at least seventy-five per cent
(75%) of the number of units included in
the Primary Intended Use (the "New
Primary Intended Use"), as in effect
immediately prior to any such Casualty,
then, Lessee may rebuild the New Use
Facility in accordance with the terms
and provisions of Article 13, so long as
(a) Lessee is otherwise able to comply
with, and does comply with, all of the
terms and conditions of Article 13 and
(b) the projections for the New Use
Facility, as reasonably approved by
Lessor, indicate that Lessee shall be
able to maintain for the New Use
Facility, for each Fiscal Quarter of the
Term, including all Extended Terms,
commencing with the first Fiscal Quarter
following the first anniversary of the
earlier of the issuance of a temporary
certificate of occupancy therefor or the
completion of the Work, a Debt Coverage
Ratio equal to or greater than 1.1 to 1
(the "Minimum Coverage Ratio"). In
such case, for purposes of compliance
with the terms and conditions of this
Article 13 by ▇▇▇▇▇▇ and for the balance
of the Term following such Casualty, the
Primary Intended Use shall be deemed to
be the New Primary Intended Use and the
Facility shall be deemed to be the New
Use Facility. Lessee shall deliver to
Lessor the projections referred to in
clause (b)(i) above, together with
calculations, based thereon, showing the
Minimum Coverage Ratio, prior to the
commencement of any Work.
74
13.3Tangible 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.
13.4Restoration 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.
13.5No Abatement of Rent. In no event
shall any Rent ▇▇▇▇▇ as a result of any
Casualty except as expressly provided in
Section 3.7.
13.6Termination of Certain Rights. Any
termination of this Lease pursuant to this
Article 13 shall cause any right of Lessee to
extend the Term of this Lease granted to
Lessee herein and any right of Lessee to
purchase the Leased Property contained in
this Lease to be terminated and to be without
further force or effect.
13.7Waiver. 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.
13.8Application of Rent Loss and/or
Business Interruption Insurance. Lessor
shall direct all proceeds of rent loss and/or
business interruption insurance
(collectively, "Rent Insurance Proceeds") to
be paid to Lessee, provided no fact or
circumstance exists which constitutes, or
with notice, or passage of time, or both,
would constitute, a Lease Default pertaining
to Facility or the Leased Property. If a
Lease Default or such fact or circumstance
exists, Lessor may rescind such direction and
apply all such insurance proceeds towards the
Lease Obligations pertaining to the Facility
or the Leased Property or hold such proceeds
as security therefor.
13.9Obligation To Account. Upon
▇▇▇▇▇▇'s written request, which may not be
made not more than once in any three (3)
month period, Lessor shall provide Lessee
with a written accounting of the application
of all insurance proceeds received by ▇▇▇▇▇▇.
75
ARTICLE 14
CONDEMNATION
14.1Parties' 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.
14.2Total Taking. If there is a
permanent Taking of all or substantially all
of the Leased Property, this Lease shall
terminate on the Date of Taking. In the
event this Lease is terminated pursuant to
the provisions of this Section 14.2 and the
Award received by Lessor in connection
therewith (net of costs and expenses incurred
in obtaining such Award) exceeds one hundred
fifteen percent (115%) of the Fair Market
Value of the Leased Premises at the time of
such termination, Lessor shall pay to Lessee
fifty percent (50%) of the amount of such
excess.
14.3Partial or Temporary Taking. If
there is a Permanent Taking of a portion of
the Leased Property, or if there is a
temporary Taking of all or a portion of the
Leased Property, this Lease shall remain in
effect so long as the Leased Property is not
thereby rendered permanently Unsuitable For
Its Primary Intended Use or temporarily
Unsuitable For Its Primary Intended Use for a
period not likely to, or which does not,
exceed two hundred and seventy (270) days.
If, however, the Leased Property is thereby
so rendered permanently or temporarily
Unsuitable For Its Primary Intended Use: (a)
if only rendered temporarily Unsuitable For
Its Primary Intended Use, Lessee shall have
the right to restore the Leased Property, at
its own expense (subject to the right under
certain circumstances as provided for in
Section 14.5 to receive the net proceeds of
an Award for reimbursement), to the extent
possible, to substantially the same condition
as existed immediately before the partial or
temporary Taking or (b) Lessee shall have the
right to acquire the Leased Property from
Lessor (i) upon payment of all Rent due
through the date that the purchase price is
paid, for a purchase price equal to the
greater of (x) the Meditrust Investment or
(y) the Fair Market Value of the Leased
Property minus the Fair Market Added Value,
with the Fair Market Value of the Leased
Property and the Fair Market Added Value to
be determined as of the day immediately prior
to such partial or temporary Taking and (ii)
in accordance with the terms and conditions
set forth in Article 18; in which event, this
Lease shall terminate upon payment of such
purchase price and the consummation of such
acquisition. Notwithstanding the foregoing,
Lessor may overrule Lessee's election under
clause (a) or (b) and instead either (1)
terminate this Lease (with no obligation on
the part of Lessee to acquire the Leased
Property as a result thereof) as of the date
when 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 (Y) possession
thereof is to be surrendered within two years
of the expiration of the Term or (2) compel
Lessee to keep the Lease in full force and
effect and to restore the Leased Property as
provided in clause (a) above, but only if the
Leased Property may be operated for at least
eighty percent (80%) of the licensed unit
capacity of the Facility in effect prior to
the Taking. Lessee shall exercise its
election under this Section 14.3 by giving
Lessor notice thereof ("Lessee's Election
Notice") within sixty (60) days after ▇▇▇▇▇▇
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 ▇▇▇▇▇▇ receives ▇▇▇▇▇▇'s Election
Notice. If, as the
76
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.
14.4Restoration. 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
▇▇▇▇▇▇ and Rent shall be abated as set forth
in Section 3.7.
14.5Award Distribution. In the event
Lessee completes the purchase of the Leased
Property, as described in Section 14.3, the
entire Award shall, upon payment of the
purchase price and all Rent and other sums
due under this Lease and the other Lease
Documents, belong to Lessee and Lessor agrees
to assign to Lessee all of Lessor's rights
thereto or, to the extent Lessor has received
payment of the Award, the amount of such
payment shall be credited against the
purchase price. In any other event, the
entire Award (except for such portion thereof
which the Condemner designates as allocable
to ▇▇▇▇▇▇'s loss of business or Tangible
Personal Property) shall belong to and be
paid to Lessor.
14.6Control of Proceedings. Subject to
the rights of any Fee Mortgagee, unless and
until ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇;
provided, however, that Lessor shall keep
Lessee apprised of the progress of all such
proceedings and shall solicit ▇▇▇▇▇▇'s advice
with respect thereto and shall give due
consideration to any such advice. In
addition, ▇▇▇▇▇▇ 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, ▇▇▇▇▇▇'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▇▇▇▇▇▇'s Right to Contest. To the
extent of the express references made to this
Article 15 in other Sections of this Lease,
Lessee, any Sublessee or any Manager on their
own or on ▇▇▇▇▇▇'s behalf (or in Lessor's
name), but at their sole cost and expense,
may contest, by appropriate legal
77
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 opining, as the case may be, as
to the validity of the statements set forth
to the effect set forth in clauses (b), (c)
and (d), to the extent applicable, (f) Lessee
shall give such cash security as may be
demanded in good faith by Lessor to insure
ultimate payment of any fine, penalty,
interest or cost and to prevent any sale or
forfeiture of the affected portion of the
Leased Property by reason of such non-payment
or non-compliance, (g) if such contest is
finally resolved against Lessor or any member
of the Leasing Group, Lessee shall promptly
pay, as Additional Charges due hereunder, the
amount required to be paid, together with all
interest and penalties accrued thereon and/or
comply (and cause any Sublessee and any
Manager to comply) with the applicable Legal
Requirement, and (h) no state of facts or
circumstance exists which constitutes, or
with the passage of time and/or the giving of
notice, could constitute a Lease Default;
provided, however, but without limiting any
other right Lessee may have under the Lease
Documents to contest the payment of Rent, the
provisions of this Article 15 shall not be
construed to permit Lessee to contest the
payment of Rent or any other sums payable by
Lessee to Lessor under any of the Lease
Documents. If such contest is finally
resolved in favor of ▇▇▇▇▇▇, ▇▇▇▇▇▇ shall be
entitled to any refund resulting therefrom.
15.2Lessor's Cooperation. Lessor, at
▇▇▇▇▇▇'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.
15.3Lessee'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.
78
ARTICLE 16
DEFAULT
16.1Events of Default. Each of the
following shall constitute an "Event of
Default" hereunder and shall entitle Lessor
to exercise its remedies hereunder and under
any of the other Lease Documents:
(a) any failure of Lessee to pay
any amount due hereunder or under any of
the other Lease Documents within ten
(10) days following the date when such
payment was due;
(b) any failure in the
observance or performance of any other
covenant, term, condition or warranty
provided in this Lease or any of the
other Lease Documents, other than the
payment of any monetary obligation and
other than as specified in subsections
(c) through (v) below (a "Failure to
Perform"), continuing for thirty (30)
days after the giving of notice by
Lessor to Lessee specifying the nature
of the Failure to Perform; except as to
matters not susceptible to cure within
thirty (30) days, provided that with
respect to such matters, (i) Lessee
commences the cure thereof within thirty
(30) days after the giving of such
notice by Lessor to Lessee, (ii) Lessee
continuously prosecutes such cure to
completion, (iii) such cure is completed
within one hundred twenty (120) days
after the giving of such notice by
Lessor to Lessee and (iv) such Failure
to Perform does not impair the value of,
or Lessor's rights with respect to, the
Leased Property or otherwise impair the
Collateral or ▇▇▇▇▇▇'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;
(f) if any court shall enter an
order, judgment or decree appointing,
without the consent of any member of the
Leasing Group, a receiver or trustee for
such member or for any of its property
and such order, judgment or decree shall
remain in force, undischarged or
unstayed, ninety (90) days after it is
entered;
79
(g) if a petition is filed
against any member of the Leasing Group
which seeks relief under the bankruptcy
or other similar laws of the United
States, any state or any other
jurisdiction, and such petition is not
dismissed within ninety (90) days after
it is filed;
(h) in the event that:
i. all or any portion of the
interest of any partner,
shareholder, member in any
member of the Leasing Group
(other than Guarantor)
shall be, on any one or
more occasions, directly or
indirectly, sold, assigned,
hypothecated or otherwise
transferred (whether by
operation of law or
otherwise), if such member
of the Leasing Group shall
be a partnership, joint
venture, syndicate or other
group, without the prior
written consent of Lessor,
in each instance, which
consent may be withheld by
Lessor in its reasonable
discretion with respect to
a sale, assignment,
hypothecation or other
transfer to a
Meditrust/Emeritus
Transaction Affiliate and
in all other cases, in its
sole and absolute
discretion;
ii. the shares of the issued
and outstanding capital
stock of any member of the
Leasing Group (other than
Guarantor) shall be, on any
one or more occasions,
directly or indirectly,
sold, assigned,
hypothecated or otherwise
transferred (whether by
operation of law or
otherwise), if such member
of the Leasing Group shall
be a corporation, without
the prior written consent
of Lessor, in each
instance, which consent may
be withheld by Lessor in
its reasonable discretion
with respect to a sale,
assignment, hypothecation
or other transfer to a
Meditrust/Emeritus
Transaction Affiliate and
in all other cases, in its
sole and absolute
discretion; or
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").
80
(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, ▇▇▇▇▇▇'s interest, or any
interest of a Sublessee which is an
Affiliate of Lessee, in the Leased
Property shall be, directly or
indirectly, mortgaged, encumbered (by
any voluntary or involuntary Lien other
than the Permitted Encumbrances),
subleased, sold, assigned, hypothecated
or otherwise transferred (whether by
operation of law or otherwise);
(k) the occurrence of a default
or breach of condition continuing beyond
the expiration of the applicable notice
and grace periods, if any, in connection
with the payment or performance of any
other material obligation of Lessee or
any Sublessee which is an Affiliate of
Lessee, if the applicable creditor or
obligee elects to declare the
obligations of Lessee or the applicable
Sublessee under the applicable agreement
due and payable or to exercise any other
right or remedy available to such
creditor or obligee, or, whether or not
such creditor or obligee has so elected
or exercised, such creditor's or
obligee's rights and remedies, if
exercised, may involve or result in the
taking of possession of, or the creation
of a Lien on, the Leased Property;
provided, however, that in any event,
the election by the applicable creditor
or obligee to declare the obligations of
Lessee under the applicable agreement
due and payable or to exercise any other
right or remedy available to such
creditor or obligee shall be an Event of
Default hereunder only if such
obligations, individually or in the
aggregate, are in excess of TWO HUNDRED
FIFTY THOUSAND DOLLARS ($250,000);
(l) the occurrence of a Related
Party Default;
(m) the occurrence of any
default or breach of condition which is
not cured within any applicable cure
period under a Working Capital Loan
secured by a Working Capital Stock
Pledge (or any documents executed in
connection therewith) or the exercise of
any ownership rights by the lender of a
Working Capital Loan secured by a
Working Capital Stock Pledge;
(n) except as a result of
Casualty or a partial or complete
Condemnation (including a temporary
taking), if Lessee or any Sublessee
ceases operation of the Facility for a
period in excess of thirty (30) days (a
"Failure to Operate");
(o) if one or more judgments
against Lessee or any Sublessee which is
an Affiliate of Lessee or attachments
against ▇▇▇▇▇▇'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
81
with the operation of the Facility,
remain unpaid, unstayed on appeal,
undischarged, unbonded or undismissed
for a period of thirty (30) days;
(p) if any malpractice award or
judgment exceeding any applicable
professional liability insurance
coverage by more than FIVE HUNDRED
THOUSAND DOLLARS ($500,000) shall be
rendered against any member of the
Leasing Group and either (i) enforcement
proceedings shall have been commenced by
any creditor upon such award or judgment
or (ii) such award or judgment shall
continue unsatisfied and in effect for a
period of ten (10) consecutive days
without an insurance company
satisfactory to Lessor (in its sole and
absolute discretion) having agreed to
fund such award or judgment in a manner
satisfactory to Lessor (in its sole and
absolute discretion) and in either case
such award or judgment shall, in the
reasonable opinion of Lessor, have a
material adverse affect on the ability
of Lessee or any Sublessee to operate
the Facility;
(q) if any Provider Agreement
material to the operation or financial
condition of the Leased Property shall
be terminated prior to the expiration of
the term thereof or, without the prior
written consent of Lessor, in each
instance, which consent may be withheld
in Lessor's 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
82
to take any action to eliminate an
emergency situation then existing at the
Facility, if such order has not been
stayed pending appeal within ten (10)
following such entry; or
(w) the occurrence of any
default or breach of condition
continuing for more than thirty (30)
days under any credit agreement, loan
agreement or other agreement
establishing a major line of credit
(including, without limitation, a major
line of credit or a Working Capital Loan
which is not secured by a Working
Capital Stock Pledge)(or any documents
executed in connection with such lines
of credit) on behalf of Guarantor
without regard to whether the applicable
creditor has elected to declare the
indebtedness due and payable under such
line of credit or to exercise any other
right or remedy available to it or the
occurrence of any such default or breach
of condition if the applicable creditor
has elected to declare the indebtedness
due and payable under such line of
credit or to exercise any other right or
remedy available to it. For the purpose
of this provision, a major line of
credit shall mean and include any line
of credit established in an amount equal
to or greater than ONE MILLION DOLLARS
($1,000,000) with respect to a line of
credit for which Guarantor is an
obligor, endorser, surety or guarantor.
16.2Remedies.
(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 ▇▇▇▇▇▇'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 ▇▇▇▇▇▇,
and no other act done by or on behalf of
▇▇▇▇▇▇, shall constitute an acceptance of
surrender of the Leased Property by Lessee or
reduce ▇▇▇▇▇▇'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
83
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 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 ▇▇▇▇▇▇ as a
result of ▇▇▇▇▇▇'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.
16.3Damages. None of (a) the
termination of this Lease pursuant to Section
16.2, (b) the eviction of Lessee or the
repossession of the Leased Property, (c) the
inability after reasonable diligence of
Lessor, notwithstanding reasonable good faith
efforts, to relet the Leased Property, (d)
the reletting of the Leased Property or (e)
the failure of Lessor to collect or receive
any rentals due upon any such reletting,
shall relieve Lessee of its liability and
obligations hereunder, all of which shall
survive any such termination, repossession or
reletting. In any such event, Lessee shall
forthwith pay to Lessor all Rent due and
payable with respect to the Leased Property
to and including the date of such
termination, repossession or eviction.
Thereafter, Lessee shall forthwith pay to
Lessor, at Lessor's option, either:
(i) the sum of: (x) all Rent
that is due and unpaid at later to
occur of termination, repossession
or eviction, together with interest
thereon at the Overdue Rate to the
date of payment, plus (y) the worth
(calculated in the manner stated
below) of the amount by which the
unpaid Rent for the balance of the
Term after the later to occur of
the termination, repossession or
eviction exceeds the fair market
rental value of the Leased Property
for the balance of the Term, plus
(z) any other amount necessary to
compensate Lessor for all damage
proximately caused by ▇▇▇▇▇▇'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
84
thereof in lieu of hiring a
third party manager or re-letting
the Leased Property); or
(ii) each payment of Rent as the
same would have become due and
payable if ▇▇▇▇▇▇'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 ▇▇▇▇▇▇'s
obligation under this Clause (ii)
amounts actually collected by
▇▇▇▇▇▇ 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.
16.4Lessee 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.
16.5Application 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.
16.6Failure to Conduct Business. For
the purpose of determining rental loss
damages or Additional Rent, in the event
Lessee fails to conduct business upon the
Leased Property, exact damages or the amount
of Additional Rent being unascertainable, it
shall be deemed that the Additional Rent for
such period would be equal to the average
annual Additional Rent during the five (5)
preceding calendar years or such shorter
period of time as may have existed between
the date Additional Rent commenced to accrue
and the date of computation.
16.7Lessor'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
85
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.
16.8No 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 ▇▇▇▇▇▇, 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 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.
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16.9Right 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 LEASE;
HOLDING OVER
17.1Surrender. Lessee shall, upon the
expiration or prior termination of the Term
(unless occasioned by ▇▇▇▇▇▇'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.
17.2Transfer of Contracts and Permits.
In connection with the expiration or any
earlier termination of this Lease (unless
occasioned by ▇▇▇▇▇▇'s purchase of the Leased
Property pursuant to the terms of this Lease
Agreement), upon any request made from time
to time by Lessor, Lessee shall (a) promptly
and diligently use its best efforts to (i)
transfer and assign all Permits and Contracts
necessary or desirable for the operation of
the Leased Property in accordance with its
Primary Intended Use to Lessor or its
designee to the extent the same are
assignable under applicable Legal
Requirements and/or (ii) arrange for the
transfer or assignment of such Permits and
Contracts to Lessor or its designee and (b)
cooperate in every respect (and to the
fullest extent possible) and assist Lessor or
its designee in obtaining such Permits and
Contracts (whether by transfer, assignment or
otherwise) provided, however, that unless a
termination is the result of a Lease Default,
Casualty or Condemnation, ▇▇▇▇▇▇'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
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appropriate Governmental Authorities and
Third Party Payors of any applications,
petitions, statements, notices, requests,
assignments and other documents or
instruments requested by ▇▇▇▇▇▇.
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 ▇▇▇▇▇▇ fails to comply with any
request made by Lessor hereunder, as ▇▇▇▇▇▇
(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.
17.3No 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 ▇▇▇▇▇▇
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.
17.4Holding Over. If, for any reason,
Lessee shall remain in possession of the
Leased Property after the expiration or any
earlier termination of the Term, such
possession shall be as a tenant at sufferance
during which time Lessee shall pay as rental
each month, one and one-half times the
aggregate of (i) one-twelfth of the aggregate
Base Rent, and Additional Rent payable at the
time of such expiration or earlier
termination of the Term; (ii) all Additional
Charges accruing during the month and (iii)
all other sums, if any, payable by Lessee
pursuant to the provisions of this Lease with
respect to the Leased Property. During such
period of tenancy, Lessee shall be obligated
to perform and observe all of the terms,
covenants and conditions of this Lease, but
shall have no rights hereunder other than the
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/RIGHT OF
FIRST REFUSAL
18.1Purchase 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,
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together with full payment of any unpaid Rent
due and payable with respect to any period
ending on or before the date of the purchase,
deliver to Lessee a deed with covenants only
against acts of Lessor conveying the entire
interest of Lessor in and to the Leased
Property to Lessee subject to all applicable
Legal Requirements, all of the matters
described in clauses (a), (b), (e) and (g) of
Section 11.5.2, Impositions, any Liens
created by Lessee, any Liens created in
accordance with the terms of this Lease
(except to the extent specifically excluded
by the terms hereof) or consented to by
▇▇▇▇▇▇, 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 ▇▇▇▇▇▇. 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 ▇▇▇▇▇▇.
18.2Appraisal.
18.2.1Designation 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.
18.2.2Appraisal 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 ▇▇▇▇▇▇'s or ▇▇▇▇▇▇'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 per cent (10%) of the lesser of such
amounts, then the Fair Market Value of
the Leased Property shall be an amount
equal to fifty percent (50%) of the sum
of the amounts so determined. If the
difference between the amounts so
determined shall exceed ten percent
(10%) of the lesser of such
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amounts, then such two appraisers shall
have twenty (20) days to appoint a third
appraiser, but if such appraisers fail
to do so, then either party may request
the American Arbitration Association or
any successor organization thereto to
appoint an appraiser within twenty (20)
days of such request, and both parties
shall be bound by any appointment so
made within such twenty (20) day period.
If no such appraiser shall have been
appointed within such twenty (20) days
or within ninety (90) days of the
original request for a determination of
Fair Market Value of the Leased
Property, whichever is earlier, either
Lessor or Lessee may apply to any court
having jurisdiction to have such
appointment made by such court. Any
appraiser appointed by the original
appraisers, by the American Arbitration
Association or by such court shall be
instructed to determine the Fair Market
Value of the Leased Property within
thirty (30) days after appointment of
such Appraiser. The determination of
the appraiser which differs most in
terms of dollar amount from the
determinations of the other two
appraisers shall be excluded, and fifty
percent (50%) of the sum of the
remaining two determinations shall be
final and binding upon Lessor and Lessee
as the Fair Market Value of the Leased
Property.
18.2.3Specific 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 ▇▇▇▇▇▇ 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 Right of First
Refusal.
18.3.1Right of First Refusal. At any time during
the Term, as long as there exists no Lease Default at the
time of exercise and on the Closing Date and this Lease is
then in full force and effect and there exists no event or
state of facts which constitutes, or with the passage of
time and/or the giving of notice would constitute, a Lease
Default, the Lessee shall have a "Right of First Refusal"
subject to the following terms and condition: (a) if the
Lessor receives a bona fide written offer to purchase the
Leased Property from a Person which is not a member of the
Leasing Group or an Affiliate of any member of the Leasing
Group (the "Offer"), acceptable to Lessor in the Lessor's
sole and absolute discretion, and the Lessor elects, in the
Lessor's sole and absolute discretion, to sell the Leased
Property in accordance with the Offer, the Lessee shall have
thirty (30) days following the delivery of the notice of the
Offer to Lessee to elect to purchase the Leased Property on
the same terms and conditions as specified in the Offer; (b)
unless the Lessor receives notice from Lessee within such
thirty (30) day period setting forth the Lessee's election
("Election Notice") to so purchase the Leased Property and
unless thereafter the Lessee completes the acquisition of
the Leased Property exactly as provided for, and by the date
specified in the Offer (the "Closing Date"), the Lessor
shall be at liberty, and shall have the absolute and
unconditional right to sell the Leased Property to any
person within the next twelve (12) months substantially on
the terms and conditions set forth in the
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Offer or on any other terms and
conditions more favorable to the Lessor;
and (c) any such sale consummated in
accordance with the provisions of the
foregoing clause (b) shall extinguish
all rights granted to the Lessee under
this Section 18.3. The Lessee's Right
of First Refusal shall not apply to and
shall survive: (a) any sale or transfer
of the Leased Property to any Affiliate
of the Lessor or of Meditrust; (b) any
sale or transfer of the Leased Property
occasioned by the exercise of any rights
or remedies of any Fee Mortgagee; or (c)
a deed or transfer in lieu of
foreclosure to any Fee Mortgagee or any
Affiliate thereof. The Lessee's Right
of First Refusal shall in all events
terminate upon the expiration or any
earlier termination of this Lease. The
acceptance of the deed to the Leased
Property by Lessee or any grantee
designated by ▇▇▇▇▇▇, as the case may
be, shall be deemed to be a full
performance and discharge of every
agreement and obligation to be performed
by ▇▇▇▇▇▇ contained or expressed in this
Lease.
18.3.2Condition of Leased Property.
The Leased Property is to be purchased
"AS IS" and "WHERE IS" as of the Closing
Date.
18.3.3Quality 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 Closing Date 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."
18.3.4Lessor'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 Closing Date, 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
Closing Date, Lessor shall pay over or
assign to Lessee at the Closing Date,
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 Closing Date, 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 Closing
Date, Lessor shall pay over or assign to
Lessee at the Closing Date, all
insurance proceeds recovered on account
of such Casualty, less any amounts
reasonably expended by Lessor in
obtaining such proceeds and less any
amounts expended for restoration
pursuant to the provisions of Article 13
hereof, or, to the extent such proceeds
have not been recovered as of
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the applicable Closing Date, Lessor
shall assign to Lessee all its rights
with respect to any claim therefor.
18.3.5Use of Purchase Price to
Clear Title. To enable Lessor to make
conveyance as provided in this Section,
Lessor may, at the Closing Date, use the
Purchase Price or any portion thereof to
clear the title of any Lien, provided
that all instruments so procured are
recorded contemporaneously on the
Closing Date or reasonable arrangements
are made for a recording subsequent to
the Closing Date in accordance with
customary conveyancing practices.
18.3.6Lessee's Default. If Lessee
delivers Lessee's Election 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, (a) Lessee shall
thereafter have no further right to
purchase the Leased Property pursuant to
this Section, although this Lease shall
otherwise continue in full force and
effect and (b) Lessor shall have the
right to sue for specific performance of
Lessee's obligations to purchase the
Leased Property provided such suit for
specific performance is commenced within
one (1) year after the applicable
Closing Date on which such sale was
supposed to occur.
ARTICLE 19
SUBLETTING AND ASSIGNMENT
19.1Subletting and Assignment. Lessee
may not, without the prior written consent of
Lessor, which consent may be withheld in
▇▇▇▇▇▇'s sole and absolute discretion, assign
or pledge all or any portion of its interest
in this Lease or any of the other Lease
Documents (whether by operation of law or
otherwise) or sublet all or any part of the
Leased Property. For purposes of this
Section 19.1, the term "assign" shall be
deemed to include, but not be limited to, any
one or more sales, pledges, hypothecations or
other transfers (including, without
limitation, any transfer by operation of law)
of any of the capital stock of or partnership
interest in Lessee or sales, pledges,
hypothecations or other transfers (including,
without limitation, any transfer by operation
of law) of the capital or the assets of
Lessee. Any such assignment, pledge, sale,
hypothecation or other transfer made without
▇▇▇▇▇▇'s consent shall be void and of no
force and effect. Notwithstanding the
foregoing, Lessors consent shall not be
unreasonably withheld with respect to an
assignment or pledge of an interest of Lessee
in this Lease or a sublet of all or a part of
the Leased Property to a Meditrust/Emeritus
Transaction Affiliate.
19.2Attornment. 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
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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 ▇▇▇▇▇▇
20.1No 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.
20.2Transfers 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.
20.3Lessor 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 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 ▇▇▇▇▇▇'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".
20.4Subordination and Non-Disturbance.
Concurrently with the execution and delivery
of any Fee Mortgage entered into after the
date hereof, provided that the Lessee
executes and delivers an agreement of the
type described in the following paragraph,
Lessor shall obtain and deliver to Lessee an
agreement by the holder of such Fee Mortgage,
pursuant to which, (a) the applicable Fee
Mortgagee consents to this Lease and (b)
agrees that, notwithstanding the terms of the
applicable Fee Mortgage held by such Fee
Mortgagee, or any default, expiration,
termination, foreclosure, sale, entry or
other act or omission under or pursuant to
such Fee Mortgage or a transfer in lieu of
foreclosure, (i) Lessee shall not be
disturbed in peaceful enjoyment of the Leased
Property nor shall this Lease be terminated
or cancelled at any time, except in the event
that Lessor shall have the right to terminate
this Lease under the terms and provisions
expressly set forth herein, (ii) Lessee's
option to purchase the Leased Property shall
remain in force and effect pursuant to the
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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, ▇▇▇▇▇▇ 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
21.1Quiet 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 ▇▇▇▇▇▇. 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 ▇▇▇▇▇▇ as a result of a breach by
Lessor of the covenant of quiet enjoyment
contained in this Article 21.
21.2Memorandum 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.
21.3Default by Lessor. Lessor shall be
in default of its obligations under this
Lease only if Lessor shall fail to observe or
perform any term, covenant or condition of
this Lease on its part to be performed and
such failure shall continue for a period of
thirty (30) days after notice thereof from
Lessee (or such shorter time as may be
necessary in order to protect the health or
welfare of any residents of the Facility or
to ensure the continuing compliance
94
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
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇, President
With a copy to: The ▇▇▇▇▇▇▇▇▇ Group
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
Esquire
If to the Guarantor: Emeritus Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇, President
With a copy to: The ▇▇▇▇▇▇▇▇▇ Group
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
Esquire
If to Lessor: Meditrust
Acquisition Corporation I
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: President
With copies to: Meditrust
Acquisition Corporation I
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: General Counsel
and ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
Esquire
95
or such other address as Lessor, Lessee or
the Guarantor shall hereinafter from time to
time designate by a written notice to the
others given in such manner. Any notice
given to Lessee or the Guarantor by Lessor at
any time shall not imply that such notice or
any further or similar notice was or is
required.
ARTICLE 23
LIMITATION OF MEDITRUST LIABILITY
The Declaration of Trust establishing
the sole shareholder of Lessor, Meditrust, a
Massachusetts business trust ("Meditrust"),
dated August 6, 1985 (the "Declaration"), as
amended, a copy of which is duly filed in the
office of the Secretary of State of the
Commonwealth of Massachusetts, provides that
the name "Meditrust" refers to the trustees
under the Declaration collectively as
trustees, but not individually or personally;
and that no trustee, officer, shareholder,
employee or agent of Meditrust or any of its
Subsidiaries shall be held to any personal
liability, jointly, or severally, for any
obligation of, or claim against Meditrust or
any of its Subsidiaries. All Persons dealing
with Meditrust or Lessor, in any way, shall
look only to the assets of Meditrust or
Lessor, as applicable, for the payment of any
sum or the performance of any obligation.
Furthermore, in no event shall Meditrust or
Lessor ever be liable to Lessee or any other
Person for any indirect or consequential
damages incurred by Lessee or such other
Person resulting from any cause whatsoever.
Notwithstanding the foregoing, ▇▇▇▇▇▇ hereby
acknowledges and agrees that Meditrust is not
a party to this Lease and that Lessee shall
look only to the assets of Lessor for the
payment of any sum or performance of any
obligation due by or from Lessor pursuant to
the terms and provisions of the Lease
Documents.
ARTICLE 24
MISCELLANEOUS PROVISIONS
24.1Broker's Fee Indemnification.
▇▇▇▇▇▇ and ▇▇▇▇▇▇ 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.
24.2No 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.
96
24.3Amendments, Waivers and
Modifications. None of the terms, covenants,
conditions, warranties or representations
contained in this Lease or in any of the
other Lease Documents may be renewed,
replaced, amended, modified, extended,
substituted, revised, waived, consolidated or
terminated except by an agreement in writing
signed by all parties to this Lease or the
other Lease Documents, as the case may be, in
the case of any renewal, replacement,
amendment, modification, extension,
substitution, revisions, consolidation or
termination and by the Person against whom
enforcement is sought in the case of a waiver
or except as otherwise expressly provided for
herein or in any other Lease Document. The
provisions of this Lease and the other Lease
Documents shall extend and be applicable to
all renewals, replacements, amendments,
extensions, substitutions, revisions,
consolidations and modifications of any of
the Lease Documents, the Management
Agreements, the Related Party Agreements, the
Permits and/or the Contracts. References
herein and in the other Lease Documents to
any of the Lease Documents, the Management
Agreements, the Related Party Agreements, the
Permits and/or the Contracts shall be deemed
to include any renewals, replacements,
amendments, extensions, substitutions,
revisions, consolidations or modifications
thereof.
Notwithstanding the foregoing, any
reference contained in any of the Lease
Documents, whether express or implied, to any
renewal, replacement, amendment, extension,
substitution, revisions, consolidation or
modification of any of the Lease Documents or
any Management Agreement, Related Party
Agreement, 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.
24.4Captions 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.
24.5Time 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.
24.6Counterparts. 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.
24.7Entire Agreement. This Lease and
the other Lease Documents set forth the
entire agreement of the parties with respect
to the subject matter and shall supersede in
all respect the letters of intent, dated
January 31, 1996 and August 13, 1996 (and all
prior iterations thereof), from Meditrust to
Lessee.
24.8WAIVER OF JURY TRIAL. TO THE
MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW,
▇▇▇▇▇▇ AND ▇▇▇▇▇▇ HEREBY MUTUALLY, KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY
97
WAIVE ANY RIGHT WHICH ANY PARTY HERETO MAY
NOW OR HEREAFTER HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THE LEASE OR
ANY OF THE LEASE DOCUMENTS. Lessee hereby
certifies that neither Lessor nor any of
Lessor's representatives, agents or counsel
has represented expressly or otherwise that
Lessor would not, in the event of any such
suit, action or proceeding seek to enforce
this waiver to the right of trial by jury and
acknowledges that Lessor has been induced by
this waiver (among other things) to enter
into the transactions evidenced by this Lease
and the other Lease Documents and further
acknowledges that ▇▇▇▇▇▇ (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.
24.9Successors and Assigns. This Lease
and the other Lease Documents shall be
binding upon and inure to the benefit of (a)
▇▇▇▇▇▇ and ▇▇▇▇▇▇'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.
98
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.
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.
▇▇▇▇▇▇ 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
25.1Substitution of Property for the
Leased Property. Provided that no Event of
Default has occurred under this Lease
(excluding any Event of Default which has
been waived, in writing, by the Lessor), nor
any event which, with the giving of notice or
the passage of time or both, would constitute
such an Event of Default, Lessee shall have
the right from time to time (referred to
herein as the "Substitution Right"),
exercisable upon not less than ninety (90)
days' prior written notice to Lessor
(referred to herein as a "Substitution
Notice") to substitute, on a date specified
in such Substitution Notice (such date, as
the same may be extended by express written
agreement of lessor, shall be referred to
herein as a "Substitution Date"), the Leased
Property with a Comparable Facility. As used
herein, the term "Comparable Facility" shall
be defined as a health care facility or
facilities which Lessor determines (a) has an
appraised Fair Market Value greater than or
equal to the greater of (i) the appraised
Fair Market Value of the Leased Property at
the Commencement Date or (ii) the appraised
Fair Market Value of the Leased Property at
the time that the applicable Substitution
Notice is furnished to Lessor (based on
appraisal criteria then in effect), (b) has a
Facility Debt Coverage Ratio greater than or
equal to the greater of (i) the Facility Debt
Coverage Ratio of the Leased Property as of
the second anniversary of the Commencement
Date (ii) the Facility Debt Coverage Ratio of
the Leased Property at the time that the
applicable Substitution Notice is furnished
to Lessor, (c) provides a mix of services
similar to the Leased Property and (d) is
otherwise reasonably acceptable, in all
respects, to Lessor (based on Lessor's usual
and customary property evaluation criteria
then in effect). Lessee may not exercise its
Substitution Right more than once in any
calendar year.
99
25.2Conditions 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
▇▇▇▇▇▇ in the applicable Substitution Notice
(referred to herein as a "Proposed
Facility"), reasonably satisfactory in all
respects to Lessor;
(c) Lessee shall have delivered to
Lessor (i) an MAI appraisal of the Proposed
Facility (prepared by an appraiser selected
by Lessee and approved by Lessor), in form
and substance reasonably satisfactory to
Lessor and (ii) an instrument survey of the
premises upon which the Proposed Facility is
located acceptable to Lessor and the title
insurance company providing insurance with
respect to the Proposed Facility;
(d) Lessor shall be satisfied as to
compliance of Lessee, the Proposed Facility,
the owner of the Proposed Facility (to the
extent such owner is not Lessee as provided
in subsection (l) below) and/or the proposed
substitution, as the case may be, with (i)
all applicable land use, zoning, subdivision
and environmental laws and regulations, (ii)
all applicable assisted living licensure laws
and regulations and (iii) such other matters
as Lessor reasonably deems relevant
(including, without limitation, whether the
conveyance of the property to Lessor in
connection with the proposed substitution may
be avoided under the Bankruptcy Code);
(e) Lessee shall have delivered to
Lessor a valid and binding owner's or
lessee's (as applicable) title insurance
commitment issued by a title insurer
reasonably acceptable to Lessor (the "Title
Company"), in an amount equal to the Fair
Market Value of the Proposed Facility, with
such endorsements and affirmative coverages,
and in such form, as Lessor may reasonably
require insuring Lessor's fee title or
leasehold title to the Proposed Facility,
subject to no Liens except those approved or
assumed by ▇▇▇▇▇▇ and arrangements
satisfactory to Lessor shall have been made
for the issuance of a title insurance policy
on the Substitution Date in accordance with
such title insurance commitment;
(f) Lessee shall have delivered an
environmental site assessment report relating
to the Proposed Facility, in form and
substance reasonably acceptable to Lessor and
prepared by an environmental consultant
reasonably acceptable to Lessor;
(g) Lessor shall have obtained, at
Lessee's cost, an opinion of Lessor's
counsel, in form and substance acceptable to
Lessor, confirming that (i) the substitution
of the Proposed Facility for the Leased
Property will qualify as an exchange solely
of property of a like-kind under Section 1031
of the Code, in which, generally, except for
"boot" such as cash needed to equalize
exchange values or discharge indebtedness, no
gain or loss is recognized to Lessor, (ii)
the substitution or sale will not result in
ordinary recapture income to Lessor pursuant
to Code Section 1250(d)(4) or any other Code
provision, (iii) the substitution or sale
will result in income, if any, to Lessor of a
type described in
100
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 ▇▇▇▇▇▇'s counsel as to (i) the compliance
of the Proposed Facility with land use,
zoning, subdivision and environmental laws
and regulations, (ii) the compliance of
Lessee, the owner of the Proposed Facility
(to the extent such owner is not Lessee as
provided in subsection (l) below), the
proposed substitution and the Proposed
Facility with applicable assisted living laws
and regulations, (iii) the due authorization,
execution and enforceability of the
Substitution Documents and (iv) such other
matters as are reasonably requested; in form
and substance reasonably acceptable to
Lessor;
(i) Lessee and each Guarantor shall have
executed and delivered, or caused to be
executed and delivered, such documents as are
reasonably required by Lessor to effectuate
the substitution (collectively, the
"Substitution Documents"), including, without
limitation, (i) a deed with full warranties
or assignment of a leasehold estate with full
warranties (as applicable) conveying to
Lessor title to the Proposed Facility free
and clear of all Liens, except those approved
or assumed by Lessor, (ii) a facility lease
(the "Substitution Lease") duly executed,
acknowledged and delivered by Lessee,
containing the same terms and conditions as
are contained herein except that (1) the
legal description of the land shall refer to
the Proposed Facility, (2) the Minimum
Repurchase Price of the Proposed Facility
shall be an amount equal to the Minimum
Repurchase Price of the Leased Property
increased by any Cash Adjustment paid by
Lessor, (3) the Rent under the Substitution
Lease in all respects shall provide Lessor
with a substantially equivalent yield at the
time of the substitution (i.e., annual return
on its equity in such Proposed Facility) to
that received (and reasonably expected to be
received thereafter) from the Leased
Property, taking into account the Cash
Adjustment, if any, paid by Lessor and any
other relevant factors and (4) such other
changes therein as may be necessary or
appropriate under the circumstances shall be
made; (iii) a collateral assignment of
permits, licenses, approvals and contracts
relating to the Proposed Facility,
substantially in the form of the Permits
Assignment; (iv) UCC financing statements;
(v) a guaranty substantially in the form of
the Guaranty of Lease Obligations shall be
executed by Guarantor, (vi) an affiliated
party subordination agreement, substantially
in the form of the Affiliated Party
Subordination Agreement, shall be executed by
the Lessee, and such other Affiliates of the
Lessee as are deemed necessary or appropriate
by the Lessor and (vii) the Agreement
Regarding Related Transactions shall be
amended to reflect the substitution of the
Proposed Facility. The Substitution
Documents shall be based upon and contain the
same terms and conditions as are set forth in
Lessee Documents in effect prior to the
substitution, except that such changes shall
be made as may be necessary or reasonably
appropriate under the circumstances to
effectuate the substitution and secure the
protection and priority of the property and
security interests conveyed and/or granted to
Lessor;
101
(j) without limiting any other provision
contained herein, Lessee shall have delivered
to Lessor such other information and
materials relating to Lessee, the owner of
the Proposed Facility (to the extent that
such owner is not Lessee as provided in
subsection (l) below) and the Proposed
Facility as Lessor may reasonably request,
including, without limitation, leases,
receipted bills, management agreements and
other Contracts, Provider Agreements, cost
reports, Permits, evidence of legal and
actual access to the Proposed Facility,
evidence of the availability and sufficiency
of utilities servicing the Proposed Facility,
historical and current operating statements,
detailed budgets and financial statements and
▇▇▇▇▇▇ 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;
(l) the Proposed Facility shall be owned
or leased by Lessee or an Affiliate of
Lessee, or Lessee or an Affiliate of Lessee
shall have the right to acquire the Proposed
Facility pursuant to a valid, binding and
enforceable purchase agreement (and Lessee or
such Affiliate shall have assigned all of
such Person's rights thereunder to Lessor or
its nominee pursuant to Assignment in form
and substance acceptable to Lessor);
provided, however, that in the event that the
Proposed Facility is owned by any such
Affiliate or such Affiliate shall be the
Person having the right to acquire the
Proposed Facility, (i) said Affiliate shall
execute and deliver to Lessor such
Substitution Documents as may be reasonably
required by Lessor and (ii) Lessor shall be
provided with such evidence as it may require
to determine that the conveyance of the
Proposed Facility (or a leasehold interest
therein) to Lessor does not constitute a
fraudulent conveyance (under applicable
federal or state law);
(m) Lessee shall have delivered to
Lessor an insurance certificate evidencing
compliance with all of the insurance
requirements set forth in the Substitution
Documents;
(n) Lessee shall have delivered to
Lessor an Officer's Certificate certifying as
of the Substitution Date that (i) the
Proposed Facility has been accepted by Lessee
for all purposes of the Substitution Lease
and there has been no material damage to the
improvements located on the Proposed
Facility, nor is any condemnation or eminent
domain proceeding pending with respect
thereto; (ii) all Permits (including, but not
limited to, a permanent, unconditional
certificate of occupancy and all certificates
of need, licenses and Provider Agreements)
which are necessary to permit the use of the
Proposed Facility in accordance with the
provisions of the Substitution Lease have
been obtained and are in full force and
effect; (iii) under applicable zoning and use
laws, ordinances, rules and regulations, the
Proposed Facility may be used for the
purposes contemplated by Substitution
Documents and all necessary subdivision
approvals have been obtained; (iv) to the
best knowledge of Lessee, there exists no
Event of Default under this Lease, and no
defense, offset or claim exists with respect
to any sums to be paid by Lessee hereunder,
and (v) any exceptions to Lessor's title to
the Proposed Facility do not materially
interfere with the intended use of the
Proposed Facility by Lessee;
(o) Lessor shall have determined that
the Proposed Facility constitutes a
Comparable Facility, and
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(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.
25.3Conveyance to Lessee. If the Lessor
shall have determined that the Proposed
Facility constitutes a Comparable Facility,
on the Substitution Date, after the
consummation of a substitution in accordance
with the terms hereof, Lessor will convey the
Leased Property to Lessee in accordance with
the provisions of Article 18 (except as to
payment of any expenses in connection
therewith which shall be governed by Section
22.4 below) and this Lease shall thereupon
terminate as to the Leased Property. Upon
completion of the purchase of the Leased
Property, no Rent shall thereafter accrue
with respect thereto.
25.4Expenses. Whether or not any
proposed substitution is consummated, Lessee
shall pay all of the out-of-pocket expenses
and other costs incurred or expended by
Lessor in connection with any proposed
substitution (collectively referred to herein
as "Substitution Closing Costs"), including,
without limitation, reasonable attorneys'
fees and expenses, engineering costs,
consultants' fees, appraisal costs, audit and
tax review costs, out-of-pocket travel
expenses, inspection fees, title insurance
premiums and other title fees, survey
expenses, mortgage taxes, transfer,
documentary stamp and other taxes, search
charges of any nature, recording,
registration and filing costs, broker's fees
and commissions, if any, escrow fees, fees
and expenses, if any, incurred in qualifying
Lessor and maintaining its right to do
business in the state where the Proposed
Facility is located, the cost of obtaining,
preparing and recording a release of the
Leased Property from the lien of any Fee
Mortgage on the Facility (other than the
amount necessary to payoff such Fee Mortgage)
and any other costs expended or incurred by
Lessor in connection with the preparation for
and the documentation and/or the closing of
the proposed substitution. The Substitution
Closing Costs shall be a demand obligation of
Lessee to Lessor and, if not paid within ten
(10) days after demand, shall thereafter (to
the extent permitted by applicable law) bear
interest at the Overdue Rate until the date
of payment.
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103
IN WITNESS WHEREOF, the parties have
caused this Lease to be executed and attested
by their respective officers thereunto duly
authorized.
WITNESS: LESSEE:
EMERITUS
PROPERTIES
I, INC.,
a Washington corporation
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
-----------------------
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Name:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: President
WITNESS: LESSOR:
MEDITRUST
ACQUISITIO
N
CORPORATIO
N I,
a
Massachuse
tts
corporatio
n
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ESQ.
Title: Senior Vice President
104