EXHIBIT 10.1
19478/8
Agenda No. 1.3
Lease Agreement
______________________________________________________________________________
LEASE AGREEMENT
dated as of
May 11, 1998
by and between
Atrium of San ▇▇▇▇ LLC , a Delaware limited liability company
as Lessor-Owner
and
Brookdale Living Communities of California, Inc., a Delaware corporation,
as Lessee
______________________________________________________________________________
TABLE OF CONTENTS
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Page
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Section 1. Definitions........................................................... 2
Section 2. Agreement to Lease.................................................... 3
Section 3. Term.................................................................. 3
Section 4. Conditions Precedent Prior to Basic Term Commencement Date............ 3
Section 5. Rental................................................................ 5
Section 6. Use................................................................... 6
Section 7. Net Lease; Nonterminability........................................... 6
Section 8. Taxes and Other Charges; Laws and Agreements.......................... 7
Section 9. Liens................................................................. 10
Section 10. Ownership of the Leased Property...................................... 11
Section 11. Owner's Disclaimer; Acknowledgement by Lessee......................... 12
Section 12. Representations of Parties............................................ 13
Section 13. Maintenance; Quiet Enjoyment.......................................... 16
Section 14. Compliance with Legal Requirements.................................... 18
Section 15. Insurance............................................................. 19
Section 16. Loss, Damage or Destruction........................................... 22
Section 17. Additions and Improvements; Removal................................... 25
Section 18. Right Of Entry........................................................ 26
Section 19. Assignments and Subleasing; Subordination and Attornment.............. 26
Section 20. Environmental Matters................................................. 30
Section 21. Environmental Indemnity............................................... 33
Section 22. Indemnification and Hold Harmless Agreement........................... ▇▇
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▇▇▇▇▇▇▇ ▇▇. Events of Default by Lessee........................................... 36
Section 24. Remedies Upon Default................................................. 37
Section 25. Owner's Right to Perform for Lessee................................... 40
Section 26. Expenses.............................................................. 41
Section 27. Further Assurances.................................................... 41
Section 28. Notices............................................................... 41
Section 29. Lessee's Extension Lease Options and End of Term Purchase Options..... 43
Section 30. Third Party Sale of Leased Property................................... 44
Section 31. End of Term Adjustment................................................ 45
Section 32. Procedure for Owner Conveyance........................................ 46
Section 33. Time of the Essence; Manner of Payment................................ 47
Section 34. Return of Leased Property............................................. 48
Section 35. Financial Information................................................. 49
Section 36. Recording............................................................. 50
Section 37. No Reliance........................................................... 50
Section 38. Miscellaneous......................................................... 50
Section 39. Venue; Governing Law.................................................. 51
Section 40. Estoppel Certificate.................................................. 51
Section 41. Survival of Representations, Warranties and Covenants................. 51
LIST OF EXHIBITS
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EXHIBIT A Legal Description of Land
EXHIBIT B Base Rental
EXHIBIT C Termination Values and Purchase Prices
EXHIBIT D Maximum Lessee Risk Amount and Maximum Owner Risk Amount
LIST OF SCHEDULES
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SCHEDULE I List of Listed Permits..............................................
SCHEDULE II List of Acceptable Hazardous Materials..............................
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LEASE AGREEMENT
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THIS LEASE AGREEMENT (the "Lease"), dated as of May __, 1998, by and
between Atrium of San ▇▇▇▇ LLC, a Delaware limited liability company, as owner-
lessor hereunder ("Owner") and Brookdale Living Communities of California, Inc.,
a Delaware corporation, as lessee hereunder ("Lessee").
PRELIMINARY STATEMENT
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Brookdale Living Communities, Inc., a Delaware corporation ("Brookdale")
has entered into a Purchase and Sale Agreement by and between Atrium Venture, a
California limited partnership, as seller, and Brookdale, as purchaser, dated as
of February 10, 1998 (the "P&S") to acquire a parcel of land consisting of
approximately 10.14 acres, more or less, located in the City of San ▇▇▇▇, County
of Santa Clara, California, (the "Land") as more particularly described in
Exhibit A attached hereto, together with all structures, buildings and
improvements of every kind and description now or at any time hereafter located
or placed on the Land (the "Improvements") which include, without limitation,
two residential buildings of approximately 243,186 square feet, one common
building of approximately 20,600 square feet and certain parking facilities and
driveways (the Land and Improvements, together with all related personalty,
easements, privileges, rights and appurtenances thereto, are referred to
collectively as the "Leased Property"). Brookdale has determined that the most
advantageous financing for the acquisition of the Leased Property can be
realized by assigning purchaser's rights under the P&S to Owner, permitting
Owner to purchase the Leased Property and causing the Lessee to lease the Leased
Property from Owner pursuant to this Lease, which Lease is intended to be an
operating lease for accounting purposes under GAAP. The date upon which
Brookdale assigns the P&S to the Owner, the Owner acquires the Leased Property
from the Seller and Lessee and Owner enter into this Lease is referred to as the
"Closing Date".
On the Closing Date, Owner will purchase the Leased Property pursuant to
the P&S for a price of $31,100,000 (the "Acquisition Price"), which Acquisition
Price includes the assumption of certain outstanding debt incurred by the Seller
to Column Financial, Inc., a Delaware corporation (the "Original Lender"), which
is now held by LaSalle National Bank, as Trustee for the Registered Holders of
DLJ Mortgage Acceptance Corp., Commercial Mortgage Pass-Through Certificates,
Series 1996-CF1 (the "Trust") (the Trust, together with its successors and
assigns, the "Senior Lender"), in the original principal amount of EIGHTEEN
MILLION FOUR HUNDRED THOUSAND DOLLARS ($18,400,000) (the "Senior Loan"). The
remainder of the Acquisition Price shall be provided by the Owner from the
proceeds of an equity contribution in the amount THIRTEEN MILLION SEVEN HUNDRED
THOUSAND DOLLARS ($13,700,000) ("Owner's Equity") which amount will be provided
by the majority member of the Owner, SELCO Service Corporation, an Ohio
corporation ("SELCO"), from (i) the proceeds of a nonrecourse loan to be made to
SELCO from Healthcare Realty Trust Incorporated, a Maryland corporation
("Healthcare Realty"), in the amount of SIX MILLION EIGHT HUNDRED THOUSAND
DOLLARS ($6,800,000) (the "A Investor Loan"), (ii) the proceeds of a nonrecourse
loan to be made to SELCO from Key Corporate Capital, Inc., a Michigan
corporation ("KCCI") in the amount of FIVE MILLION NINE HUNDRED FORTY-SIX
THOUSAND DOLLARS ($5,946,000) (the "B Investor Loan," and together with the A
Investor Loan, the "Investor Loans"), and (iii) equity provided by
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SELCO from its own funds in the amount of NINE HUNDRED FIFTY FOUR THOUSAND
DOLLARS ($954,000) (the "SELCO Contribution"). The A Investor Loan will be
secured by a pledge of the membership interests in Owner owned by SELCO and the
stock interest in The Atrium of San ▇▇▇▇, Inc., the managing member of the
Owner. The B Investor and the SELCO Contribution will each be secured by a
pledge of the "Supplemental Collateral" as defined below.
This Lease provides for a Basic Lease Term of five (5) years. Upon the
expiration of the Basic Lease Term, Lessee will have options to extend the Term
of the Lease for five (5) consecutive one (1)-year Extension Lease Terms. At
the end of the Basic Lease Term or any Extension Lease Term, Lessee has an
option to purchase the Leased Property for the Purchase Price set forth in
Exhibit C to this Lease. If Lessee does not exercise its option to purchase the
Leased Property, Lessee is obligated to solicit bids for the purchase of the
Leased Property from third parties. If the Leased Property is sold to a third
party pursuant to the provisions of this Lease or is returned to the Owner upon
the completion of the Basic Lease Term or any Extension Lease Term or upon any
Termination Date, Lessee will be obligated to pay the applicable End of Term
Adjustment provided for in this Lease to Owner.
On the date hereof, the Owner shall execute and deliver for the benefit of
SELCO, and KCCI a nonrecourse guaranty under which Owner guarantees the payment
and receipt by SELCO and KCCI Basic Rent and the B Investor Loan Debt Service,
respectively. Pursuant to the Owner's Pledge Agreement, the Lessee shall pledge
to Owner (which pledge will be assigned to KCCI and SELCO as security for the
nonrecourse guaranty) two Certificates of Deposit each issued by Fleet National
Bank or such other bank constituting an "Acceptable CD Issuer" (as defined in
the Owner Pledge Agreement) to secure the performance and payment of Lessee's
obligations hereunder. One certificate of deposit shall be issued in the
principal amount of SIX MILLION TEN THOUSAND SIX HUNDRED TWO AND 12/100 DOLLARS
($6,010,602.12) and the other certificate of deposit shall be issued in the
principal amount of NINE HUNDRED FIFTY-FOUR THOUSAND DOLLARS ($954,000). The
Certificates of Deposit will be delivered to Key Bank National Association,
which shall hold the Certificates of Deposit as custodian for KCCI and SELCO in
accordance with the Owner Pledge Agreement.
The Lessee shall execute and deliver to Owner a Notice of Lease and
Leasehold Deed of Trust granting to Owner a Lien on the Lessee's interest in the
Leased Property.
In consideration of the mutual covenants and agreements herein contained,
the parties hereto agree as follows:
Section 1. Definitions. Unless the context otherwise requires, and except
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as specifically provided herein, each of the capitalized terms shall have the
meaning set forth in the Definitions Appendix attached to this Lease, as the
same may be amended, modified or supplemented from time to time.
Unless otherwise expressly stated, the words "this Lease," "herein,"
"hereunder," "hereof" or other like words mean and include this Lease and the
Definitions Appendix, all exhibits hereto and each amendment and supplement
hereto.
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Section 2. Agreement to Lease. Owner hereby leases, lets and demises unto
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Lessee, and Lessee hereby leases, rents and takes possession from Owner, all of
the Owner's right, title and interest in the Leased Property, to have and to
hold the same for the Term, subject to the covenants, agreements, terms,
conditions, limitations and provisions hereinafter set forth.
Section 3. Term.
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The Basic Lease Term shall commence on the Closing Date, and, unless this
Lease is sooner terminated pursuant to the provisions hereof, shall end on the
Basic Lease Term Expiration Date, or if this Lease is extended pursuant to
Section 29(a) hereof, on the last day of the last Extension Lease Term hereof
for which the Term of this Lease is renewed.
Section 4. Conditions Precedent Prior to Commencement of Basic Lease Term.
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Unless otherwise waived in writing by the Owner or the Senior Lender, the
right of Lessee to lease the Leased Property from the Owner under this Lease is
subject to the fulfillment of each of the following conditions:
(a) The Lease and each of the other Transaction Documents shall have duly
authorized, executed and delivered by the parties thereto, in form and substance
satisfactory to the parties hereto, and shall be in full force and effect. No
Default or Event of Default shall exist under any of the Transaction Documents
(either before or after giving effect to the transactions contemplated by the
Transaction Documents), and the Owner, Senior Lender, Healthcare Realty, KCCI
and SELCO shall have received fully executed copies or originals of the
Transaction Documents. The Transaction Documents (or memoranda thereof), any
supplements thereto and any financing statements in connection therewith
required under the Uniform Commercial Code shall have been recorded, registered
and filed, if necessary, in such manner as to enable counsel to render the
opinions referred to in clause (c) below and to enable the title company to
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issue the title insurance policies referred to in clause (d) below;
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(b) All taxes, fees and other charges in connection with the execution,
delivery, recording, filing and registration of the Transaction Documents shall
have been paid or provisions for such payment shall have been made to the
satisfaction of the Owner;
(c) Counsel to the Lessee (i) in the jurisdiction in which the Leased
Property is located shall have issued to the Owner their opinions, all in form
and substance satisfactory to the Owner, (ii) shall have issued to the Owner its
opinion that the execution, delivery and performance of this Lease by Owner and
Lessee will not violate or result in a default under the Senior Loan Documents,
and (iii) shall have issued to the Owner, KCCI and SELCO its opinion to the
effect that upon delivery to the Custodian of the Certificates of Deposit and
the filing of the financing statements in the States of Ohio and Illinois, a
valid first priority security interest in the Supplemental Collateral shall have
been created and granted to the Owner and assigned to KCCI and SELCO;
(d) All approvals, consents, permits and licenses from every governmental
authority having jurisdiction of the Leased Property, the Seller, the Lessee
and/or the Owner required in connection with the purchase and sale of the Leased
Property from Seller to Owner, the leasing of
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the Leased Property by Owner to Lessee and the operation of the Leased Property
for its intended purposes (i.e. as an independent living facility for seniors)
shall have been obtained;
(e) No action or proceeding shall have been instituted, nor shall any
action or proceeding be threatened, before any U.S., state or local governmental
agency or authority, nor shall any order, judgment or decree have been issued or
proposed to be issued by any U.S., state or local governmental agency or
authority (i) to set aside, restrain, enjoin or prevent the full performance of
this Lease, any other Transaction Document or any transaction contemplated
hereby or thereby or (ii) which is reasonably likely to Materially and adversely
affect the Owner or the Lessee.
(f) The transactions contemplated herein and in the Transaction Documents
do not and will not violate any Legal Requirements;
(g) The Owner shall have received a "phase I" environmental assessment of
the Land and Improvements addressed to Senior Lender, Owner, SELCO, Healthcare
Realty and KCCI from a duly qualified environmental consultant acceptable to
Owner and such assessment shall have been performed in a manner which is
acceptable to Owner (and in any event such assessment shall have been performed
in accordance with all applicable 1997 ASTM standards). There shall be no event
or matter disclosed in the environmental assessment which presents a material
risk of the Leased Property, the Owner, the Lessee not being in compliance with
all Environmental Legal Requirements;
(h) The Owner and Senior Lender shall have received an appraisal of the
Leased Property in form and substance satisfactory to Owner and Senior Lender;
(i) Owner shall have received: (i) an owner's title insurance policy which
meets Owner's title insurance requirements previously furnished to Lessee and
which is to the satisfaction of Owner, Healthcare Realty and their respective
counsel; and (ii) a current, on-site instrument survey of the Land and
Improvements, which survey shall contain a certification thereon, or on a
separate surveyor's certificate, of a Registered Land Surveyor acceptable to
Owner which meets Owner's survey requirements previously furnished to Lessee and
which is to the satisfaction of Owner and its counsel;
(j) The Owner and Senior Lender shall have received evidence of insurance
with respect to the Leased Property required to be maintained pursuant to this
Lease, setting forth the respective coverages, limits of liability, carrier,
policy number and period of coverage, and otherwise satisfying the requirements
set forth in Section 15 hereof;
(k) Brookdale shall have executed and delivered to Senior Lender an
"Hazardous Substances Indemnity Agreement" and an "Indemnity and Guaranty
Agreement" in substantially the same form as the agreements of the same caption
delivered by Seller to the Original Lender;
(l) All conditions of Senior Lender to the assumption by Owner of the
Senior Loan shall have been satisfied; and
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(m) All other matters relating to the transaction contemplated by this
Lease shall be reasonably satisfactory to Owner, Senior Lender, SELCO,
Healthcare Realty and KCCI, and their respective counsel.
Section 5. Rental. Lessee shall pay the Base Rental and Additional Rental
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to the Persons, in the amounts and at the times and in the manner set forth
below, such amounts constituting in the aggregate the total of the rental
payable under this Lease, as follows:
(a) Lessee hereby agrees to pay Base Rental to the Persons and in the
amounts determined in accordance with Exhibit B hereto and all Base Rental shall
be paid on or before such amounts are due and payable as set forth on Exhibit B.
(b) In addition to the Base Rental, Lessee agrees during the Term to pay
as Additional Rental to the Owner or the Person entitled to receive the same all
of the following:
(i) All "taxes or other impositions" (as defined in Section 8(a)
hereof), including any amounts payable by Owner to Senior Lender for payment in
the "Impound Account" under Section 1.6 of the Deed of Trust;
(ii) Insurance premiums, if any, on all insurance required to be
obtained and maintained in force and effect by Lessee under the provisions of
Section 15 of this Lease, including any amounts payable by Owner to Senior
Lender for payment in the "Impound Account" under Section 1.6 of the Deed of
Trust;
(iii) All other costs and expenses of every nature whatsoever incurred
by Lessee incident to the ownership, management, maintenance, repair,
replacement, restoration, and operation of the Leased Property, including any
amounts payable by Owner to Senior Lender for payment in the "Replacement
Reserve" under Section 1.8 of the Deed of Trust;
(iv) All indemnities, fees and expenses (not otherwise paid or
provided for out of the proceeds of the Owner's Equity) incurred by Owner or
which the Owner is obligated to pay in connection with the transactions
contemplated in this Lease or the Senior Loan;
(v) All amounts, liabilities and obligations which Lessee assumes or
agrees to pay hereunder to Owner or others, including, if any, payments of
indemnities, in addition to any other amounts due as Base Rental and Additional
Rental hereunder;
(vi) All indemnification payments or other amounts payable to the
Administrator or any of its employees hereunder or under the other Transaction
Documents and the customary fees and expenses payable to the Administrator for
administrative services rendered to Owner;
Amounts constituting Additional Rental payable pursuant to clauses
(i), (ii), (iii), (iv) and (vi) of this Section 5(b) shall be paid by Lessee
directly to the Person or Persons to whom such
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amounts are payable. The obligation of Lessee to pay all such amounts shall
survive the termination of this Lease.
(c) All payments of Base Rental and Additional Rental required to be made
by Lessee to Owner or Senior Lender shall be made by wire transfer of
immediately available funds. While the Senior Loan remains outstanding, all
payments of Base Rental constituting Senior Loan Debt Service shall be payable
directly to the Senior Lender as the Senior Lender may direct from time to time;
all payments of Base Rental constituting A Investor Loan Debt Service, B
Investor Loan Debt Service and SELCO Basic Rent shall be payable to the
Administrator. Notwithstanding the foregoing but subject to the terms of the
Indemnity Priority Agreement, each Indemnified Party shall be entitled to
exercise all of its Excepted Rights directly against Lessee.
Section 6. Use. Lessee shall use the Leased Property, including related
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amenities, as a congregate care facility with assisted living services and shall
not cause or permit such use to be discontinued or abandoned, unless such use of
the Leased Improvements is or becomes a use prohibited by law.
Section 7. Net Lease; Nonterminability.
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(A) THIS LEASE IS A "NET LEASE." ALL COSTS, EXPENSES AND OBLIGATIONS OF
EVERY KIND AND NATURE WHATSOEVER RELATING TO THE LEASED PROPERTY AND THE
APPURTENANCES THERETO AND THE USE AND OCCUPANCY THEREOF BY LESSEE OR ANYONE
CLAIMING BY, THROUGH OR UNDER LESSEE WHICH MAY ARISE OR BECOME DUE DURING OR
WITH RESPECT TO THE PERIOD CONSTITUTING THE TERM HEREOF SHALL BE PAID BY LESSEE,
AND LESSEE SHALL INDEMNIFY THE INDEMNIFIED PARTIES AGAINST ANY OF THE FOREGOING
AS PROVIDED IN SECTION 8 BELOW. LESSEE ASSUMES, DURING THE TERM OF THIS LEASE,
THE SOLE RESPONSIBILITY FOR THE CONDITION, USE, OPERATION, MAINTENANCE,
SUBLETTING AND MANAGEMENT OF THE LEASED PROPERTY, NEITHER OWNER NOR ANY OTHER
INDEMNIFIED PARTY SHALL HAVE ANY RESPONSIBILITY IN RESPECT THEREOF, NOR SHALL
OWNER NOR ANY OTHER INDEMNIFIED PARTY HAVE ANY LIABILITY FOR DAMAGE INCURRED BY
ANY PERSON OR FOR DAMAGE TO THE PROPERTY OF LESSEE OR ANY SUBLESSEE OF LESSEE
FOR ANY REASON WHATSOEVER. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING,
DURING THE TERM OF THIS LEASE, LESSEE SHALL PERFORM ALL OF THE OBLIGATIONS OF
THE SUBLESSOR UNDER ANY SUBLEASES AFFECTING ALL OR ANY PART OF THE LEASED
PROPERTY WHICH LESSEE MAY HEREINAFTER ENTER INTO AS SUBLESSOR TO THE EXTENT THAT
LESSEE'S FAILURE TO PERFORM SUCH OBLIGATIONS COULD RESULT IN THE OCCURRENCE OF
AN EVENT OF DEFAULT UNDER THIS LEASE. IN NO EVENT SHALL THE LESSEE BE LIABLE OR
BE HELD RESPONSIBLE FOR MISAPPLICATION OF ANY PAYMENTS RECEIVED BY THE OWNER (OR
THE ADMINISTRATOR) WHICH ARE TO BE PAID TO HEALTHCARE REALTY, KCCI AND/OR SELCO
AND LESSEE SHALL BE GIVEN CREDIT FOR ALL PAYMENTS MADE BY LESSEE TO OWNER (OR
THE ADMINISTRATOR) OF EQUITY RENTAL NOTWITHSTANDING FAILURE OF HEALTHCARE
REALTY, KCCI AND/OR SELCO TO RECEIVE SUCH PAYMENTS.
(B) LESSEE ACKNOWLEDGES AND AGREES THAT ITS OBLIGATIONS HEREUNDER,
INCLUDING, WITHOUT LIMITATION, ITS OBLIGATIONS TO PAY BASE RENTAL AND ADDITIONAL
RENTAL, SHALL BE UNCONDITIONAL AND IRREVOCABLE UNDER ANY AND ALL CIRCUMSTANCES
AND SHALL NOT BE SUBJECT TO CANCELLATION, TERMINATION, MODIFICATION OR
REPUDIATION BY LESSEE. THIS LEASE SHALL NOT TERMINATE, NOR SHALL LESSEE HAVE
ANY RIGHT TO TERMINATE THIS LEASE, AND LESSEE SHALL PERFORM ALL OBLIGATIONS
HEREUNDER, INCLUDING THE PAYMENT OF ALL BASE RENTAL AND ADDITIONAL RENTAL,
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WITHOUT NOTICE, DEMAND, COUNTERCLAIM, SET-OFF, DEDUCTION, DEFENSE OR RECOUPMENT,
AND WITHOUT ABATEMENT, SUSPENSION, DEFERMENT, DIMINUTION OR REDUCTION FOR ANY
REASON, INCLUDING, WITHOUT LIMITATION, ANY PAST, PRESENT OR FUTURE CLAIMS WHICH
LESSEE MAY HAVE AGAINST THE OWNER, SENIOR LENDER, SELCO, HEALTHCARE REALTY, KCCI
OR ANY OTHER PERSON FOR ANY REASON WHATSOEVER; ANY DEFECT IN THE LEASED PROPERTY
OR ANY PORTION THEREOF, OR IN THE TITLE, CONDITION, DESIGN, CONSTRUCTION,
HABITABILITY OR FITNESS FOR A PARTICULAR USE THEREOF; ANY DAMAGE TO OR
DESTRUCTION OR LOSS OF ALL OR PART OF THE LEASED PROPERTY; ANY RESTRICTION,
DEPRIVATION (INCLUDING EVICTION) OR PREVENTION OF, OR ANY INTERFERENCE WITH OR
INTERRUPTION OF, ANY USE OR OCCUPANCY OF THE LEASED PROPERTY (WHETHER DUE TO ANY
DEFECT IN OR FAILURE OF OWNER'S TITLE TO THE LEASED PROPERTY, ANY OWNER LIEN OR
OTHERWISE); ANY CONDEMNATION, REQUISITION OR OTHER TAKING OR SALE OF THE USE,
OCCUPANCY OR TITLE TO THE LEASED PROPERTY; ANY ACTION, OMISSION OR BREACH ON THE
PART OF THE OWNER UNDER THIS LEASE (INCLUDING WITHOUT LIMITATION, ANY BREACH OF
THE OWNER'S REPRESENTATIONS AND WARRANTIES SET FORTH IN SECTION 12 HEREOF) OR
UNDER ANY OTHER AGREEMENT BETWEEN OWNER AND LESSEE, OR ANY OTHER INDEBTEDNESS OR
LIABILITY, HOWSOEVER AND WHENEVER ARISING, OF OWNER, ANY ASSIGNEE OR LESSEE TO
ANY OTHER PERSON, OR BY REASON OF INSOLVENCY, BANKRUPTCY OR SIMILAR PROCEEDINGS
BY OR AGAINST OWNER, ANY ASSIGNEE OR LESSEE; THE INADEQUACY OR INACCURACY OF THE
DESCRIPTION OF THE LEASED PROPERTY OR THE FAILURE TO DEMISE AND LET TO LESSEE
THE PROPERTY INTENDED TO BE LEASED HEREBY; LESSEE'S ACQUISITION OF OWNERSHIP OF
THE LEASED PROPERTY OR ANY SALE OR OTHER DISPOSITION OF THE LEASED PROPERTY; THE
IMPOSSIBILITY OR ILLEGALITY OF PERFORMANCE BY OWNER OR LESSEE OR BOTH; THE
FAILURE OF OWNER TO DELIVER POSSESSION OF THE LEASED PROPERTY ON THE CLOSING
DATE; ANY ACTION OF ANY COURT, ADMINISTRATIVE AGENCY OR OTHER GOVERNMENTAL
AUTHORITY; OR ANY OTHER CAUSE, WHETHER SIMILAR OR DISSIMILAR TO THE FOREGOING,
ANY PRESENT OR FUTURE LAW NOTWITHSTANDING; IT BEING THE INTENTION OF THE PARTIES
HERETO THAT ALL BASE RENTAL AND ADDITIONAL RENTAL PAYABLE BY LESSEE HEREUNDER
SHALL CONTINUE TO BE PAYABLE IN ALL EVENTS AND IN THE MANNER AND AT THE TIMES
HEREIN PROVIDED, WITHOUT NOTICE OR DEMAND, UNLESS THE OBLIGATION TO PAY THE SAME
SHALL BE TERMINATED PURSUANT TO THE EXPRESS PROVISIONS OF THIS LEASE.
(C) LESSEE WILL REMAIN OBLIGATED UNDER THIS LEASE IN ACCORDANCE WITH ITS
TERMS, AND WILL NOT TAKE ANY ACTION TO TERMINATE, RESCIND OR AVOID THIS LEASE
FOR ANY REASONS (OTHER THAN AS EXPRESSLY PROVIDED HEREIN), NOTWITHSTANDING ANY
BANKRUPTCY, INSOLVENCY, REORGANIZATION, LIQUIDATION, DISSOLUTION OR OTHER
PROCEEDING AFFECTING OWNER, OR ANY ASSIGNEE OF OWNER, OR ANY ACTION WITH RESPECT
TO THIS LEASE WHICH MAY BE TAKEN BY ANY RECEIVER, TRUSTEE OR LIQUIDATOR, OR ANY
ASSIGNEE OF OWNER OR BY ANY COURT IN ANY SUCH PROCEEDING. LESSEE WAIVES ALL
RIGHTS AT ANY TIME CONFERRED BY STATUTE OR OTHERWISE TO QUIT, TERMINATE OR
SURRENDER THIS LEASE OR THE LEASED PROPERTY (EXCEPT AS OTHERWISE EXPRESSLY
PROVIDED IN SECTIONS 16 OR 29 HEREOF), OR TO ANY ABATEMENT, REDUCTION, DEFERMENT
OR SET-OFF OF ANY BASE RENTAL, ADDITIONAL RENTAL OR OTHER SUM PAYABLE BY LESSEE
HEREUNDER, FOR DAMAGE, LOSS OR EXPENSE SUFFERED BY LESSEE ON ACCOUNT OF ANY
CAUSE REFERRED TO IN THIS SECTION 7 OR OTHERWISE.
Section 8. Taxes and Other Charges; Laws and Agreements.
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(a) Lessee agrees to pay, defend and indemnify and hold each Indemnified
Party harmless on an after-tax basis from any and all Federal, state, local and
foreign taxes, fees, withholdings, levies, imposts, duties, assessments and
charges of any kind and nature whatsoever, including, without limitation, all
amounts payable hereunder as Additional Rental hereunder,
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together with any penalties, fines or interest thereon (herein called "taxes or
other impositions") attributable to any given period prior to or within the
Indemnification Period, howsoever imposed, whether levied or imposed upon or
asserted against Owner, Administrator, Senior Lender, SELCO, KCCI, Healthcare
Realty, any Assignee, Lessee, the Leased Property, or any portion thereof
(including, without limitation, taxes and assessments referred to in clause (i)
of Section 5(b) hereof) or any other Indemnified Party, by any Federal, state or
local government or taxing authority in the United States, or by any taxing
authority or governmental subdivision of a foreign country, upon or with respect
to (a) the Leased Property or any portion thereof (including, without
limitation, all fixtures, equipment and personal property which forms a part of
the Leased Property), (b) the acquisition, manufacture, construction, ordering,
purchase, ownership, delivery, leasing, subleasing, re-leasing, possession, use,
maintenance, registration, re-registration, titling, re-titling, licensing,
documentation, return, repossession, foreclosure, condemnation, conveyance,
assignment, sale or other application or disposition of the Leased Property or
any other portion thereof, (c) the rentals, receipts or earnings arising from
the Leased Property or other portion thereof, or (d) this Lease, the Base Rental
or Additional Rental payable by Lessee hereunder or any of the Transaction
Documents, provided, however, that the foregoing indemnity shall not apply to
and nothing in this Lease shall require the payment by the Lessee of (i) any
taxes or impositions based upon or measured solely by any Indemnified Party's
gross, net or taxable income, tax preferences or dividends paid or taxes payable
in the nature of capital gains, excess profits, accumulated earnings or personal
holding company taxes of such Indemnified Party, unless any such tax is in lieu
of or in substitute for any other taxes of such Indemnified Party or impositions
upon or with respect to the Leased Property which, if such other taxes or
impositions were in effect, would be payable by Lessee hereunder; (ii) any
franchise, estate, inheritance, succession, capital stock tax, unless any such
tax is in lieu of or in substitute for any other taxes of such Indemnified Party
or impositions upon or with respect to the Leased Property which, if such other
taxes or impositions were in effect, would be payable by Lessee hereunder; (iii)
any taxes of the Administrator imposed on or measured by the administrative fees
earned by such Persons in connection with the transaction contemplated herein;
(iv) any taxes of an Indemnified Party arising by reason of any voluntary
transfer of the Lease or Leased Property or part thereof other than (A) a
transfer by Owner pursuant to an exercise of remedies which are enforceable
after the occurrence of an Event of Default hereunder, (B) a transfer
constituting an Owner Conveyance hereunder; or (C) a subsequent transfer by the
Senior Lender or any nominee, designee or affiliate thereof if such entity
purchases the Leased Property at a foreclosure sale or accepts a deed-in-lieu of
foreclosure to the Leased Property, and (v) any taxes of an Indemnified Party
arising by reason of the voluntary transfer by SELCO, Healthcare Realty or KCCI
or any other Person holding an interest in Owner of its equity interests held in
Owner (other than voluntary transfers arising by reason of an Event of Default
hereunder). As used herein, the term "Indemnification Period" means the period
commencing on the Closing Date and ending on the date that the Owner or any
Assignee sells, transfers or otherwise conveys such Person's interest in and to
the Leased Property to the Lessee or a third person. Lessee will promptly notify
Owner of all reports or returns required to be made with respect to any tax or
other imposition with respect to which Lessee is required to indemnify
hereunder, and will promptly provide each of them with all information necessary
for the making and timely filing of such reports or returns by Owner. If Owner
requests that any such reports or returns be prepared and filed by Lessee,
Lessee will prepare and file the same with the relevant taxing authorities if
permitted by applicable law to file the same, and if not so permitted, Lessee
shall prepare such report or returns for signature by Owner, and shall forward
the same, together with immediately available funds for payment of any tax or
other
-8-
imposition due, to Owner, at least ten (10) days in advance of the date such
payment is due. Lessee shall be entitled to seek reimbursement for the payment
of such taxes from moneys held by the Senior Lender in the Impound Account in
the manner and to the extent permitted under the Deed of Trust. Upon written
request, Lessee shall furnish Owner with copies of all paid receipts or other
appropriate evidence of payment for all taxes or other impositions paid by
Lessee pursuant to this Section 8. All of the indemnities contained in this
Section 8 shall continue in full force and effect notwithstanding the expiration
or earlier termination of this Lease in whole or in part, including the
expiration or termination of the Term with respect to the Leased Property, and
are expressly made for the benefit of, and shall be enforceable by, Owner and
each Assignee.
(b) While the Senior Loan is outstanding, all taxes and impositions shall
be paid by Lessee in accordance with the Deed of Trust. Lessee shall, on
Owner's behalf, furnish the Senior Lender with receipts (or if receipts are not
immediately available, with copies of canceled checks evidencing payment with
receipts to follow promptly after they become available) showing payment of all
taxes and other impositions on the Leased Property at least fifteen (15) days
prior to the applicable delinquency date therefor. While the Senior Loan is
outstanding, the Lessee shall be entitled in good faith to contest validity,
applicability or amount of any asserted tax or other imposition provided that
the Lessee complies with all of the terms and conditions of Section 1.5 of the
Deed of Trust. If the Senior Loan is not outstanding, then Lessee shall be
entitled in good faith to contest validity, applicability or amount of any
asserted tax or other imposition in accordance with Section 8(d) below.
(c) Lessee shall, on Owner's behalf, comply with all of the Owner's
obligations to maintain the Impound Account pursuant to Section 1.6 of the Deed
of Trust. Lessee shall ensure the receipt by the Senior Lender, on or prior to
the respective due date under the Deed of Trust for payment thereof, of all
bills, invoices and statements for all taxes and other impositions, assessments
and insurance premiums to be paid from the Impound Account. All deficiencies in
the Impound Account shall be paid by Lessee when due in accordance with the Deed
of Trust and Lessee shall pay the other amounts due to the Senior Lender under
Section 1.6 of the Deed of Trust. Upon payment of the Senior Loan and provided
that no Default or Event of Default has occurred and is continuing hereunder,
the proceeds of the Impound Account, Replacement Reserve and any other reserve
accounts, if any, held by Senior Lender shall be remitted to Lessee and Lessee
shall be required to pay all taxes or other impositions to the applicable
governmental authorities prior to the date the same are due.
(d) After the Senior Loan has been paid in full and notwithstanding the
provisions of paragraph (a) of this Section 8 and the provisions of Section 9
and so long as no Default or Event of Default shall have occurred and is
continuing, Lessee shall have the right to contest, by appropriate legal
proceedings, any tax, charge, levy, assessment, Lien or other encumbrance
affecting the Leased Property, and to postpone payment of or compliance with the
same during the pendency of such contest, provided that (i) the commencement and
continuation of such proceedings shall suspend the collection thereof from, and
suspend the enforcement thereof against, the Person on whom such tax, charge,
levy, assessment or Lien or other encumbrance is sought to be imposed and/or the
Leased Property, (ii) no part of the Leased Property nor any Base Rental or
Additional Rental or other sums payable by Lessee hereunder shall be in danger
of being sold, forfeited, attached or lost, (iii) there shall not exist (x) any
interference with the use and occupancy of the Leased Property or any part
-9-
thereof, or (y) any interference with the payment of Base Rental or any
Additional Rental (other than the portion subject to the contest), (iv) Lessee
shall promptly prosecute such contest to a final settlement or conclusion, or if
Lessee deems it advisable to abandon such contest, Lessee shall promptly pay or
perform the obligation which was the subject of such contest, (v) at no time
during the permitted contest shall there be a risk of the imposition of criminal
liability on Owner for failure to comply therewith; (vi) the amount of such
claim exceeds $15,000, (vii) the Lessee shall furnish Owner with written opinion
of independent legal counsel selected by Lessee and reasonably satisfactory to
Owner to the effect that there is a reasonable basis to contest such claim, and
(viii) the Lessee shall admit in writing to Owner and the other Indemnified
Parties that Lessee shall be liable for all costs and expenses which may be
incurred by any Indemnified Party in contesting such claim. If (i) any such
contest shall involve an amount of money or potential loss (including penalties
and similar charges) in excess of $250,000, or (ii) a Default or an Event of
Default shall have occurred and be continuing, then Lessee shall either (A)
deposit with the Owner an amount equal to 110% of the tax, charge, levy,
assessment, lien or other encumbrance (including penalties and interest charges)
affecting the Leased Property, or (B) post an equivalent bond for security
issued by a surety or other issuer reasonably acceptable to Owner and containing
such terms which are reasonably acceptable to Owner. Notwithstanding the
foregoing, (i) Lessee shall not postpone the payment of any such tax, charge,
levy, assessment or Lien for such length of time as shall permit the Leased
Property, or any lien thereon created by such item being contested, to be sold
or foreclosed by federal, state, county or municipal authority for the non-
payment thereof and (ii) Lessee shall not postpone compliance with any such law,
rule, order, ordinance, regulation or other governmental requirement if Owner
will thereby be subject to criminal prosecution, or if any municipal or other
governmental authority shall be in a position according to applicable law to
commence and carry out any action which would prevent compliance with the same
or to foreclose or sell any Lien which shall have arisen by reason of such
postponement or failure of compliance.
Section 9. Liens. Lessee represents and warrants that on the Closing
-----
Date, fee simple title in the Leased Property will be vested in Owner subject
only to Permitted Liens. Subject to the right to contest any claim or demand
for any work performed or materials delivered for the Leased Property pursuant
to Section 1.10 of the Deed of Trust or if the Senior Loan is not outstanding,
the right to contest set forth in Section 8(d) hereof, Lessee will pay, when
due, all claims and demands demand for any work performed or materials delivered
for the Leased Property. Lessee shall promptly, but in any event no later than
60 days after Lessee acquires actual knowledge of the filing thereof but in any
event prior to the enforcement of the same, at its own expense, remove and
discharge of record, by bond or otherwise, any charge, lien, security interest
or encumbrance upon the Leased Property, upon any Base Rental, or upon any
Additional Rental or other sums payable by Lessee under this Lease which arises
for any reason (except for Owner Liens) including all liens which arise out of
Lessee's possession, use, construction, operation and occupancy of the Leased
Property, but not including any Permitted Liens. Nothing contained in this
Lease shall be construed as constituting the consent or request of Owner,
express or implied, to or for the performance by any contractor, laborer,
materialman, or vendor of any labor or services or for the furnishing of any
materials for construction, alteration, addition, repair or demolition of or to
the Leased Property or any part thereof. Notice is hereby given that Owner will
not be liable for any labor, services or materials furnished or to be furnished
to Lessee, or to anyone holding an interest in the Leased Property or any part
thereof by, through or under Lessee, and that no mechanic's or other liens for
any such labor, services or materials shall attach to or affect the interest of
Owner in and to the Leased Property.
-10-
Lessee shall notify Owner in writing at least fifteen (15) days prior to
commencing any work on the Leased Property in order to enable the Owner to file
and post a notice of nonresponsibility. In the event of the failure of Lessee to
discharge any charge or Lien within the time period set forth above and
otherwise as aforesaid, except during the pendency of any contest permitted and
conducted pursuant to Section 1.10 of the Deed of Trust or Section 8(d) hereof
(if the Senior Loan is not outstanding), Owner may (but shall not be required
to) discharge such items by payment or bond or both, and Lessee will repay to
Owner, upon demand, any and all amounts paid therefor, or by reason of any
liability on such bond, and also any and all reasonable incidental expenses,
including reasonable attorney's fees, incurred by Owner in connection therewith.
Section 10. Ownership of the Leased Property.
--------------------------------
(a) The Owner and the Lessee intend that (i) for financial accounting
purposes with respect to the Lessee, this Lease will be treated as an "operating
lease" pursuant to Statement of Financial Accounting Standards No. 13, as
amended, but (ii) for federal and all state and local income tax purposes, (A)
this Lease will be treated as a financing arrangement, (B) the Senior Lender and
Owner will each be deemed a lender having made or making a loan for the benefit
of the Lessee, which loan is secured by all of the Leased Property, and (C) the
Lessee will be treated as the owner of all of the Leased Property and will be
entitled to all tax benefits ordinarily available to an owner of a property
similar to the Leased Property for such tax purposes. Owner shall take no
action inconsistent with such intent for tax purposes, provided that nothing in
this Section 10(a) shall deemed to restrict the Owner's right to exercise any
remedies after the occurrence and during the continuance of an Event of Default.
If, notwithstanding the income tax intentions of the parties as set forth
herein, the Owner actually receives any income tax deduction, reduction in
income tax or other income tax benefits as a result of any claim for, or
recharacterization requiring the Owner to take, any tax benefits attributable to
ownership of the Leased Property for federal income tax purposes, the Owner
shall pay to the Lessee the amount of such income tax savings actually realized
by the Owner (less the amount of any anticipated increase in income tax which
the Owner determines is payable as a result of such claim or
recharacterization); provided that the Lessee shall agree to reimburse the Owner
for any subsequent increase in the Owner's income taxes resulting from such
claim or recharacterization not taken into account in the payment made to Lessee
by the Owner. The parties agree that this Section 10(a) is intended to require
a payment to the Lessee if and only if the Owner shall have actually received
an unanticipated tax savings with respect to the Leased Property that would not
have been received if the Owner had advanced funds to the Lessee in the form of
one or more loans secured by the Leased Property in an aggregate amount equal to
the Termination Value. Nothing in this Section 10(a) shall be construed to
require the Owner to take any affirmative action to realize any tax savings if
in its good faith judgment such action may have a material adverse effect on
Owner, Senior Lender, SELCO, Healthcare Realty or KCCI.
(b) It is the intent of the parties here to that the obligations of the
Lessee under this Lease to pay Base Rental and Supplemental Rental, End of Term
Adjustment, Termination Value or Purchase Price on the Termination Date, shall
be treated as payments of interest on and principal of, respectively, loans from
Owner to Lessee. Specifically, without limiting the generality of the
foregoing, the Owner and Lessee intend and agree that with respect to the nature
of the transactions evidenced by this Lease in the context of the exercise or
remedies under the Transaction Documents, including without limitation, in the
case of any insolvency or receivership proceedings or any
-11-
petition under the United States bankruptcy laws or any other applicable
insolvency laws or statute of the United States of America or any state thereof
affecting Owner and Lessee, or the enforcement or collection actions, the
transactions evidenced hereby are loans by the Owner to the Lessee as unrelated
third party lender to the Lessee.
(c) This Lease is a lease intended as security. Lessee hereby grants to
Owner (and Owner agrees to assign to Senior Lender) a security interest in all
of the Lessee's right, title and interest in and to the Leased Property
(including, without limitation, all site improvements, base building, building
systems, equipment and related fixtures now or hereafter existing on the Land
and all furniture, equipment, furnishings, goods, equipment, inventory or
personal property acquired from Seller and used in connection with the Leased
Property), together with any substitutions, replacements and additions thereto,
all of the Lessee's rights in and to all leases, subleases, occupancy agreements
or other rights to occupy the Leased Property entered into or assumed by Lessee
and to all general intangibles related to the Leased Property and all of
Lessee's rights, claims and damages arising from warranties (whether express or
implied) of architects, contractors and subcontractors with respect to the
development and construction of the Improvements, and all proceeds of the
conversion, voluntary or involuntary, of the foregoing into cash, investments,
securities or other property, whether in cash, investments, securities or other
property. The Owner and the Lessee shall, to the extent consistent with this
Lease, take such actions and execute, deliver, file and record such other
documents, financing statements, mortgages and deeds of trust as may be
necessary to ensure that, if this Lease were deemed to create a security
interest in the Leased Property in accordance with this Section 10, such
security interest would be deemed to be a perfected security interest of first
priority under applicable federal, state and local law, subject only to
Permitted Liens, and will be maintained as such throughout the Term.
Section 11. Owner's Disclaimer; Acknowledgment by Lessee. The Leased
--------------------------------------------
Property is demised and let in its present condition without representation and
warranty by Owner subject to (i) Permitted Liens, (ii) the rights of parties in
possession, (iii) the state of title transferred to Owner on the Closing Date
pursuant to the P&S, (iv) any state of facts which an accurate survey or
physical inspection might show, (v) the existing environmental condition of the
Leased Property, (vi) all applicable laws, rules, regulations, ordinances and
restrictions, including, without limitation, all Environmental Legal
Requirements, now in effect or hereafter adopted by any governmental authority
having jurisdiction, and (vii) any violation of such laws, rules, regulations,
ordinances and restrictions occurring on or before the Closing Date. Lessee has
examined the Leased Property and the Owner's title and interest thereto and has
found as between Lessee and Owner (and each Person claiming by, through or under
Owner) the same to be satisfactory for all purposes.
OWNER HAS NOT MADE AN INSPECTION OF THE LEASED PROPERTY AND MAKES NO
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE LEASED
PROPERTY OR ANY PORTION THEREOF OR THE LOCATION, USE, DESCRIPTION, DESIGN,
MERCHANTABILITY, HABITABILITY, ENVIRONMENTAL CONDITION, COMPLIANCE WITH
SPECIFICATIONS, CONDITION, OPERATION, ABSENCE FROM DEFECTS (PATENT OR LATENT),
DURABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE LEASED PROPERTY OR ANY
PORTION THEREOF; AND ALL RISKS INCIDENTAL TO THE LEASED PROPERTY SHALL BE BORNE
BY THE LESSEE AND THE OWNER SHALL HAVE NO RESPONSIBILITY WITH RESPECT
-12-
THERETO. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, IN THE EVENT OF ANY
DEFECT OR DEFICIENCY OF ANY NATURE IN THE LEASED PROPERTY OR ANY PORTION
THEREOF, WHETHER PATENT OR LATENT, WHETHER DISCOVERABLE BY LESSEE, OWNER SHALL
NOT HAVE ANY RESPONSIBILITY OR LIABILITY WITH RESPECT THERETO OR FOR ANY DIRECT
OR INDIRECT DAMAGE TO PERSONS OR PROPERTY RESULTING THEREFROM, OR FOR LESSEE'S
LOSS OF USE OF THE LEASED PROPERTY, OR ANY PORTION THEREOF, OR FOR ANY
INTERRUPTION IN LESSEE'S BUSINESS CAUSED BY LESSEE'S INABILITY TO USE THE LEASED
PROPERTY, OR ANY PORTION THEREOF, FOR ANY REASON WHATSOEVER. THE PROVISIONS OF
THIS SECTION 11 HAVE BEEN NEGOTIATED BY LESSEE AND OWNER AND ARE INTENDED TO BE
A COMPLETE EXCLUSION AND DISCLAIMER BY OWNER OF ANY AND ALL WARRANTIES BY OWNER
WITH RESPECT TO THE LEASED PROPERTY OR ANY PORTION THEREOF, WHETHER EXPRESS OR
IMPLIED, AND WHETHER ARISING UNDER THE UNIFORM COMMERCIAL CODE, ANY OTHER
APPLICABLE LAW OR OTHERWISE. LESSEE REPRESENTS AND WARRANTS TO OWNER THAT THE
PROVISIONS OF THIS SECTION 11 ARE ENFORCEABLE BY OWNER AGAINST LESSEE (AND THOSE
CLAIMING BY, THROUGH OR UNDER LESSEE) AND THAT OWNER SHALL NOT HAVE ANY
LIABILITY FOR ANY OF THE MATTERS SUBJECT TO THIS DISCLAIMER.
WITH RESPECT TO THE EXCULPATION PROVIDED IN THIS SECTION 11, LESSEE WAIVES
THE BENEFITS OF CALIFORNIA CIVIL CODE SECTION 1542, WHICH PROVIDES:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE,
WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR."
Section 12. Representations of Parties.
--------------------------
Lessee hereby represents and warrants to and covenants with Owner that as
of the Closing Date and at all times during the Term as follows:
(a) Lessee is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, with full corporate power and
authority to own its properties and to conduct its business as currently
conducted.
(b) Lessee is qualified to do business as a foreign corporation and is in
good standing in the State of California.
(c) Lessee has the requisite power and authority to enter into this Lease
and the Transaction Documents to which it is a party and to carry out and
perform the obligations of Lessee under the terms hereof and thereof.
-13-
(d) The execution, delivery and performance by Lessee of this Lease and
the Transaction Documents to which it is a party have been duly authorized by
all the necessary corporate action of Lessee and do not (A) violate any
provision of any law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award applicable to Lessee, (B) result in a breach of
or constitute a default under any indenture or loan or credit agreement or any
other agreement, lease or instrument to which Lessee or Lessee's Parent is a
party or by which either of them or their respective properties are bound, which
would have, in the case of Lessee's Parent, a Material adverse effect or (C)
result in, or require, the creation or imposition of any Lien, except as herein
contemplated. Neither Lessee nor Lessee's Parent is in violation of or in
default under any such Legal Requirements or any such indenture, agreement,
lease or instrument described in this paragraph which would have a Material
adverse effect.
(e) The Lease and the Transaction Documents to which Lessee is a party
have been duly executed and delivered by Lessee and constitute the legal, valid
and binding obligations of Lessee enforceable against Lessee in accordance with
their terms, including, without limitation, the choice of laws provisions
therein except as such enforceability may be affected by applicable bankruptcy
or insolvency laws, or laws affecting the enforcement of creditor's rights or
remedies generally or by general principles of equity.
(f) Neither the execution and delivery of this Lease, nor the payment and
performance by Lessee of all of its obligations hereunder, require the consent
or approval of, the giving of notice to, or the registration, filing or
recording with, or the taking of any other action in respect of, any Federal,
state, local or foreign government or governmental authority or agency or other
Person other than the recording of a Memorandum of Lease.
(g) All balance sheets, statements of profit and loss and other financial
data that have been delivered to Owner and Senior Lender with respect to
Lessee's Parent (A) are complete and correct in all material respects, (B)
accurately present the financial condition of Lessee's Parent on the dates for
which, and the results of its operations for the periods for which, the same
have been furnished, and (C) have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
covered thereby, and there has been no material adverse change in the condition
of Lessee or Lessee's Parent, financial or otherwise, since the date of the most
recent financial statements delivered to Owner with respect to Lessee's Parent;
(h) Except as otherwise stated in Schedule I (the "Listed Permits"),
Lessee holds all licenses, certificates and permits (including any applicable
environmental permits) from governmental authorities necessary to occupy and use
the Leased Property for its intended purposes as a congregate care facility with
assisted living services. All such licenses, certificates and permits will
remain in full force and effect and be complied with in all respects.
(i) No litigation or administrative proceedings of or before any court,
tribunal or governmental body is pending, or, to the knowledge of Lessee,
threatened against Lessee or any of its properties or with respect to this Lease
which, if adversely determined, would have a material adverse effect on the
business, assets or financial condition of Lessee or upon its right to enter
into this Lease or the validity or effectiveness thereof.
-14-
(j) Lessee is not in default in the payment or performance of any of its
obligations of any contract, agreement or other instrument to which it is a
party or by which it or any of its assets may be bound and which will continue
to exist subsequent to the date hereof.
(k) The Leased Property is not subject to any Lien, except for this Lease,
the Deed of Trust and the other Permitted Liens.
(l) Lessee has not incurred or become liable for any broker's commission
or finder's fee relating to or in connection with the transaction contemplated
in this Lease or the other Transaction Documents.
(m) Lessee will not, during the entire term of this Lease, engage in any
business other than the business of leasing and operating the Leased Property
and will not incur any debts other than the debts contemplated in the
Transaction Documents and debts incurred to satisfy and discharge such debts and
debts representing trade payables to vendors and suppliers which are incurred in
the ordinary course of Lessee's business in operating the Leased Property.
Owner hereby represents and warrants to and covenants with Lessee that as
of the Closing Date and at all times during the Term as follows:
(a) Owner is a limited liability company duly organized, validly existing
and in good standing under the laws of the State of Delaware, with full
corporate power and authority to own its properties and to conduct its business
as currently conducted.
(b) Owner is qualified to do business as a foreign limited liability
company and is in good standing in the State of California.
(c) Owner has the requisite power and authority to enter into this Lease
and the Transaction Documents to which it is a party and to carry out and
perform the obligations of Lessee under the terms hereof and thereof.
(d) The execution, delivery and performance by Owner of this Lease and the
Transaction Documents to which it is a party have been duly authorized and do
not (A) violate any provision of any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award applicable to Owner, (B)
result in a breach of or constitute a default under any indenture or loan or
credit agreement or any other agreement, lease or instrument to which Owner is a
party or by which it or its properties are bound, or (C) result in, or require,
the creation or imposition of any Lien, except as contemplated herein. Owner is
not in violation of or in default under any Legal Requirement or any such
indenture, agreement, lease or instrument described in this paragraph.
(e) The Lease and the Transaction Documents to which Owner is a party have
been duly executed and delivered by Owner and constitute the legal, valid and
binding obligations of Owner enforceable against Owner in accordance with their
terms, including, without limitation, the choice of laws provisions therein
except as such enforceability may be affected by applicable bankruptcy or
insolvency laws, or laws affecting the enforcement of creditor's rights or
remedies generally or by general principles of equity.
-15-
(f) Neither the execution and delivery of this Lease, nor the performance
by Owner of all of its obligations hereunder, requires the consent or approval
of, the giving of notice to, or the registration, filing or recording with, or
the taking of any other action in respect of, any Federal, state, local or
foreign government or governmental authority or agency or other Person other
than the recording of a Memorandum of Lease.
(g) No litigation or administrative proceedings of or before any court,
tribunal or governmental body is pending, or, to the knowledge of Owner,
threatened against Owner or any of its properties or with respect to this Lease
which, if adversely determined, would have a material adverse effect on the
business, assets or financial condition of Owner or upon its right to enter into
this Lease or the validly or effectiveness thereof.
(h) Owner has not contracted with a broker or a finder relating to or in
connection with the transactions contemplated in this Lease or the other
Transaction Documents.
(i) Owner will not, during the entire Term, engage in any business other
than the business of owning the Leased Property and will not incur any debts
other than the debts contemplated in the Transaction Documents and debts
incurred to satisfy and discharge such debts.
(j) Unless a Default or Event of Default has occurred and is continuing
hereunder, Owner will not amend, modify or supplement the Senior Loan Documents
without the prior written consent of the Lessee, which will not be unreasonably
withheld, delayed or conditioned.
Section 13. Maintenance; Quiet Enjoyment.
----------------------------
(a) In addition to the other covenants contained in this Lease, Lessee
hereby further covenants and agrees that during the Term of this Lease:
(i) Lessee represents that all Improvements are in good condition,
repair and appearance. Subject to Owner's and Lessee's rights under Section 16
hereof, Lessee shall, at its cost and expense, keep and maintain the
Improvements, including any altered, rebuilt, additional or substituted
buildings, structures and other improvements thereto, in the same condition as
on the Basic Term Commencement Date, ordinary wear and tear excepted, and on a
basis consistent with the operation and maintenance of congregate care
facilities with assisted living services and other uses permitted under Section
6 hereof, as the case may be, comparable in style and location to the Leased
Property and in no event less than the standards applied by Lessee or its
Affiliates in the operation of other comparable properties owned or leased by
Lessee or its Affiliates. Lessee will make all structural and nonstructural,
and ordinary and extraordinary changes, repairs and replacements, foreseen or
unforeseen, which may be required, whether or not caused by its act or omission,
to be made upon or in connection with the Improvements in order to keep the same
in such condition, including taking, or causing to be taken, action necessary to
maintain the Leased Property in compliance with the provisions of any insurance
policy with respect to the Leased Property and any applicable Legal
Requirements, including all applicable Environmental Legal Requirements. Lessee
shall provide or cause to be provided all security service, custodial service,
janitorial service and other services necessary for the proper upkeep and
maintenance of the Leased Property.
-16-
Without limiting the generality of the foregoing, the Lessee, on behalf of the
Owner, shall comply with the provisions of Section 1.8 of the Deed of Trust,
including (x) the maintenance of the Replacement Reserve and the payment of the
required monthly deposit thereto and the payment of any deficiencies, and (y)
the obligation to make repairs which an annual inspection of the Leased Property
show are needed. Owner hereby directs and authorizes Lessee and Lessee hereby
agrees to seek reimbursement for any costs incurred to repair the Leased
Property from amounts maintained by the Senior Lender in the Replacement
Reserve, provided that the Lessee will comply with all of the terms and
conditions set forth in Section 1.8 of the Deed of Trust relating to the payment
of such costs from the Replacement Reserve. If required by Senior Lender, Owner
shall join with Lessee in any requests made to Senior Lender for reimbursement
from the Replacement Reserve provided that Lessee (and Lessee's Parent) shall
indemnify and hold harmless Owner and each of the other Indemnified Parties for
any loss, damages, claims, expenses or liabilities incurred by Owner or any
Indemnified Party by reason of joining in such request.
(ii) Lessee covenants to perform or observe all terms, covenants or
conditions of any Permitted Liens, including, without limitation, the Deed of
Trust, and any easement or maintenance agreements to which it may at any time be
a party or to which the Leased Property or any portion thereof is subject at any
time or any other like matters which now or hereafter affect the Leased
Property, the Owner, the Lease or any one of the foregoing. Lessee shall, at
its expense, use its reasonable efforts, consistent with sound business
practice, to enforce compliance with any Permitted Liens, easement, or
maintenance agreements or similar agreements benefiting the Leased Property or
any portion thereof by any other Person subject to such agreement, provided,
however, that if a failure to comply with any of the foregoing would adversely
affect the utility, fair market value or useful life of the Leased Property, the
Lessee shall enforce compliance with the same. Lessee expressly waives the
right to make repairs at the expense of the Owner pursuant to any law at any
time in effect that would impose any such obligations on a lessor or give any
such rights to a lessor. Lessee shall not abandon the Leased Property or any
portion thereof or commit waste thereon.
(iii) If any Improvements situated on the Leased Property at any time
during the Term of this Lease shall encroach upon any property, street or right-
of-way adjoining or adjacent to the Leased Property, or shall violate the
agreements or conditions contained in any restrictive covenant affecting the
Leased Property or any part thereof, or shall impair the rights of others under
or obstruct any easement or right-of-way to which the Leased Property is
subject, then, promptly after the written request of Owner or any Person
affected by any such encroachment, violation, impairment or obstruction, Lessee
shall, at its expense, either (A) obtain affirmative insurance from the Title
Company insuring Owner and/or Senior Lender against any losses or damages
occasioned thereby, the form of said affirmative insurance to be satisfactory to
Owner and Senior Lender in their sole discretion exercised independently, (B)
obtain effective waivers or settlements of all claims, liabilities and damages
resulting from each such encroachment, violation, impairment or obstruction
whether the same shall affect Owner, Senior Lender, SELCO, Healthcare Realty,
KCCI, the Administrator or any one or more of the foregoing, or (C) make such
changes in the Improvements on the Leased Property and take such other action as
shall be necessary to remove such encroachments or obstructions and to end such
violations or impairments, including, if necessary, the alteration or removal of
any Improvement on the Leased Property. Any such alteration or removal shall be
made in conformity with the requirements of Section 17 to the same extent as if
such
-17-
alteration or removal were an alteration under Section 17 of this Lease and
there shall be no abatement of Basic Rental or Additional Rental by reason of
such alteration or removal.
(iv) Owner shall have no obligation to incur any expense of any kind
or character in connection with the management, operation or maintenance of the
Leased Property during the Term of this Lease. Owner shall not be required at
any time to make any improvements, alterations, changes, additions, repairs or
replacements of any nature whatsoever in or to the Leased Property and so long
as no Event of Default shall have occurred and is continuing, Owner shall not
make any improvements, changes, additions, repairs or replacements of any nature
in or on the Leased Property without the prior written consent of Lessee.
Lessee shall use and operate the Leased Property or cause it to be used and
operated only by personnel authorized by Lessee, and Lessee shall use reasonable
precautions to prevent loss or damage to the Leased Property from fire and other
hazards.
(v) Lessee shall pay all charges for utility, communication and other
services on or about the Leased Property, whether or not payment therefor shall
become due after the Term of this Lease.
(vi) Other than the provisions of Section 13(b) hereof, Lessee shall
perform all covenants and agreements (except for those covenants and agreements
which are by their express terms capable of being, or specifically required to
be, performed by Owner acting alone) which it and/or Owner agree to perform
under the Senior Loan Documents and the other Transaction Documents.
(b) Owner hereby covenants and agrees that during the Term of this Lease
it shall not take any affirmative action which will interfere with the quiet use
and enjoyment of the Leased Property by Lessee, unless such interference arises
out of an Event of Default by Lessee. Owner further covenants and agrees that,
so long as no Event of Default shall have occurred and be continuing or would
result therefrom and provided that Lessee shall bear all associated costs and
provided further that the Senior Lender consents, it shall take all reasonably
necessary actions as owner of the Leased Property to grant and/or to convey such
necessary easements or rights of passage over the Leased Property or enter into
such agreements as may be necessary or desirable to enable the Lessee to operate
the Leased Property for the uses permitted under Section 6 hereof provided, that
no such agreements shall impose any Material liabilities on the Owner.
Section 14. Compliance with Legal Requirements. Lessee shall at all
----------------------------------
times, at Lessee's own cost and expense, perform and comply with all laws,
rules, orders, ordinances, regulations and requirements now or hereafter enacted
or promulgated, of every government and municipality having jurisdiction over
the Leased Property and of any agency thereof, relating to the Leased Property,
or the Improvement, or the facilities or equipment thereon or therein, or the
streets, sidewalks, vaults, vault spaces, curbs and gutters adjoining the Leased
Property, or the appurtenances to the Leased Property, or the franchise and
privileges connected therewith (collectively, "Legal Requirements"), whether or
not such Legal Requirements so involved shall necessitate structural changes,
improvements, interference with use and enjoyment of the Leased Property,
replacements or repairs, extraordinary as well as ordinary, and Lessee shall so
perform and comply, whether or not such Legal Requirements shall now exist or
shall hereafter be enacted or
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promulgated, and whether or not such Legal Requirements can be said to be within
the present contemplation of the parties hereto. Lessee shall, at its expense,
comply with all provisions of insurance policies required pursuant to Section 15
hereof, and with the provisions of all Material Permitted Liens and all Material
contracts, agreements, instruments and restrictions existing at the commencement
of this Lease or thereafter suffered or permitted by Lessee, affecting the
Leased Property or any part thereof or the ownership, occupancy, use, operation
or possession thereof. Lessee shall at all times comply with the terms of and
perform its obligations under any assignment to Senior Lender of this Lease and
any consent of Lessee to such assignment.
Notwithstanding the foregoing provisions of this Section 14 and so long as
no Event of Default shall have occurred and be continuing, Lessee shall have the
right to contest by appropriate legal proceedings, any order or other direction
issued by any federal, state or local governmental agency which order or
direction affects the Lessee or the Leased Property, and to postpone compliance
with the same during the pendency of such contest, provided that (i) while the
Senior Loan is outstanding, such contest is made in accordance with the terms
and provisions of Section 1.24 of the Deed of Trust, (ii) the commencement and
continuation of such proceedings shall suspend the enforcement of such order or
direction, (iii) no part of the Leased Property nor any Base Rental or
Additional Rental or other sums payable by Lessee hereunder shall be in danger
of being sold, forfeited, attached or lost, (iv) there shall not exist (x) any
unreasonable interference with the use or occupancy of the Leased Property or
any part thereof, or (y) any interference with the payment of Base Rental or
Additional Rental (v) Lessee shall promptly prosecute such contest to a final
settlement or conclusion, or if Lessee deems it advisable to abandon such
contest, Lessee shall promptly pay or perform the obligation which was the
subject to such contest, and (vi) at no time during the permitted contest shall
there be a risk of the imposition of criminal liability on Owner for failure to
comply therewith. If (i) any such contest shall involve an amount of money, or
potential loss (including penalties and similar charges) in excess of $250,000,
or (ii) an Event of Default shall have occurred and be continuing, then Lessee
shall either (A) deposit with the Owner an amount equal to 110% of the amount of
money or potential loss involved in such contest (including any penalties and
interest) or (B) post an equivalent bond for security (provided any security for
such bond shall be junior in right and interest to any security required by
Senior Lender under Section 1.24 of the Deed of Trust) issued by a surety or
other issuer reasonably acceptable to Owner and containing such terms which are
reasonably acceptable to Owner. In no event shall Lessee postpone the payment
or performance of the order or direction for such length of time as shall permit
the Leased Property, or any lien thereon created by such order or direction
being contested, to be sold or foreclosed by any federal, state, county or
municipal authority for the nonpayment or nonperformance thereof. Lessee shall
not postpone compliance with any such order or direction if Owner will thereby
be subject to criminal prosecution, or if any governmental authority shall be in
a position according to applicable law to commence or carry out any action which
would then prohibit compliance with same or to foreclose or sell any lien
affecting all or a part of the Leased Property which shall have arisen by reason
of such postponement or failure of compliance.
Section 15. Insurance. Lessee shall during the Term of this Lease obtain
---------
and maintain or cause to be obtained and maintained at all times the following
insurance:
(a) "All-risk" coverage insurance against loss or damage to the
Leased Property from all-risk perils. The amount of such insurance shall be
not less than one hundred percent
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(100%) of the full replacement costs of the Improvements, furniture,
furnishings, fixtures, equipment and other items (whether personalty or
fixtures) included in the Leased Property and owned by Owner or Lessee from
time to time, without reduction for depreciation. The determination of the
replacement cost shall be adjusted annually to comply with the requirements
of the insurer issuing such coverage or in accordance with such indices,
appraisals or information as Senior Lender determines in accordance with
Section 1.4 of the Deed of Trust. Full replacement cost, as used herein,
means, with respect to the Improvements, the cost of replacing the
Improvements without regard to depreciation, exclusive of the cost of
excavations, foundations and footings below the lowest basement floor, and
means, with respect to such furniture, fixtures, equipment and other items,
the cost of replacing the same. Each policy shall contain a replacement
cost endorsement and either an agreed amount endorsement (to avoid
operation of any co-insurance provisions) or a waiver of any co-insurance
provisions and shall comply with all of the Senior Lender's requirements.
(b) Commercial general liability insurance for personal injury, bodily
injury, death and property damage liability in amounts not less than
$5,000,000 per occurrence and $10,000,000 aggregate (inclusive of umbrella
coverage) combined single limit for bodily injury, personal injury and
property damage. This policy must contain, but not be limited to, coverage
for premises and operations liability, products and completed operations
liability, contractual liability, hired and non-owned automobile liability,
personal injury liability and property damage liability. During any
construction on the Land, the Lessee's general contractor for such
construction shall also provide the insurance required under this Section
15(b). The Lessee agrees to increase the amount of said liability
insurance at the request of the Senior Lender made in accordance with
Section 1.4 of the Deed of Trust.
(c) Insurance covering the major components of the central heating,
air conditioning and ventilating systems, boilers, other pressure vessels,
high pressure piping and machinery, elevators and escalators, if any, and
any other similar equipment installed in the Improvements, in an amount
equal to one hundred percent (100%) of the full replacement cost of the
Improvements which policies shall insure against physical damage to and
loss of occupancy and use of the Improvements arising out of accident or
breakdown covered thereunder.
(d) If any portions of the Leased Property is now or hereafter located
in an area designated by the Secretary of Housing and Urban Development as
having special flood hazards (including, without limitation, those areas
designated as Zone A or Zone V), flood insurance in an amount equal to one
hundred percent (100%) of the replacement cost of the Improvements or the
maximum available amount, which ever is lesser.
(e) During any period of any construction on the Land or renovation or
alteration of the Improvements, a so-called "Builder's All-Risk Completed
Value" or "Course of Construction" insurance policy in non-reporting form
for any Improvements under construction, renovation or alteration in an
amount approved by Owner and Senior Lender and worker's compensation
insurance covering all persons engaged in such construction, renovation or
alteration.
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(f) Workers' compensation insurance issued by a responsible carrier
authorized under the laws of the State of California to insure employers
against liability for compensation or in lieu thereof, such workers'
compensation insurance to cover all persons employed by Lessee in
connection with the Leased Property and to cover full liability for
compensation under any such act aforesaid.
(g) Business interruption insurance covering loss of use, total or
partial, of any part of the Leased Property in an amount sufficient at all
times to pay the total Base Rental and Additional Rental payable under this
Lease with respect to the Leased Property for a period adequate to cover
the period of loss of use of any part of the Leased Property. Such policy
shall provide that the amount payable thereunder shall not be less than an
amount equal to one (1) year's Base Rental and Additional Rental.
(h) Such other insurance coverages in such amounts as the Owner or
Senior Lender may require against insurable hazards or casualties which at
the time are commonly insured against in case of property similarly
situated, due regard being given to the height and type of buildings, their
construction, location, use and occupancy.
All such insurance shall (i) be with insurers authorized to do business in
the State of California and who have and maintain a rating of at least the third
(3rd) highest rating category by ▇▇▇▇▇'▇, DCR, ▇▇▇▇▇ or S&P or a Best Insurance
Guide rating of "A-VIII" or better (such choice of rating to be at the Senior
Lender's election while the Senior Loan is outstanding, then shall be at Owner's
election), (ii) contain a complete address of the Land (or a legal description
thereof), (iii) be for terms of at least one (1) year, (iv) contain deductibles
no greater than $10,000 or such other amount approved by Senior Lender and
Owner, and (v) be subject to the approval of the Senior Lender and the Owner as
to insurance companies, amounts, content, forms of policies, method by which
premiums are paid and expiration dates.
The Lessee shall as of the date hereof deliver to Owner and Senior Lender
evidence that said insurance policies have been paid current as of the Closing
Date and certified copies of such insurance policies and original certificates
of insurance signed by an authorized agent evidencing such insurance
satisfactory to Owner and Senior Lender. Lessee shall renew all such insurance
and deliver to Owner and Senior Lender certificates evidencing such renewals at
least thirty (30) days before any such insurance shall expire. Without limiting
the required endorsements to insurance policies, Lessee further agrees that all
such policies and any other policies covering the Leased Property or any portion
thereof, whether or not required or requested by Owner or Senior Lender, shall
provide that the proceeds are payable to Senior Lender, its successors and
assigns, pursuant and subject to a mortgagee clause (without contribution) of
standard form attached to, or otherwise made a part of, the applicable policy.
All policies of property insurance provided for therein shall name the Owner as
insured, and all liability policies shall name the Owner, Senior Lender, SELCO,
Healthcare Realty, KCCI and Administrator as additional insureds, as their
interests may appear.
Lessee further agrees that all such insurance policies and any other
policies covering the Leased Property or any portion thereof, whether or not
required or requested by Senior Lender: (i) shall provide for at least thirty
(30) days' prior written notice to Owner and Senior Lender prior to
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any cancellation or termination thereof and prior to any modification thereof
which affects the interest of Owner or Senior Lender, (ii) shall contain an
endorsement or agreement by the insurer that any loss shall be payable to Senior
Lender (or Owner, if the Senior Loan is not outstanding) in accordance with the
terms of such policy notwithstanding any act or negligence of Owner (except if
such amounts are payable to Owner) or Lessee which might otherwise result in
forfeiture of such insurance, and (iii) shall waive all rights of subrogation
against the Senior Lender and Owner. If Lessee fails to maintain the insurance
required hereby and Senior Lender (or Owner) procures such insurance pursuant to
Section 1.4 of the Deed of Trust, the Lessee shall timely pay all amounts
becoming due to Senior Lender under the Deed of Trust resulting therefrom.
In the event of the foreclosure of the Deed of Trust, or other transfer of
title to the Leased Property in extinguishment in whole or in part of the Senior
Loan, all right, title, and interest of Owner and Lessee in and to all proceeds
payable under the policies of insurance required under this Section 15 shall
thereupon vest in the purchaser at such foreclosure sale, or in Senior Lender or
other transferee in the event of any such transfer of title to Senior Lender,
except with respect to the Owner's and other Indemnified Parties rights to
proceeds payable under the policies of insurance required under Section 15(b)
which shall not be affected by any such foreclosure.
Section 16. Loss, Damage or Destruction.
---------------------------
(a) Lessee hereby assumes all risk of loss, damage, theft, Taking,
destruction, confiscation, requisition or commandeering, partial or complete, of
or to the Leased Property, however caused or occasioned, such risk to be borne
by Lessee with respect to the Leased Property from and after the Closing Date.
Lessee agrees that no occurrence specified in the preceding sentence shall
impair, in whole or in part, any obligation of Lessee under this Lease,
including, without limitation, the obligation to pay Base Rental and Additional
Rental. The provisions of this Lease, including those in this Section 16,
constitute an express agreement between Owner and Lessee that applies in the
event of any Casualty to the Leased Property, Improvements or the Land. Lessee,
therefore, fully waives the provisions of any statute or regulation, including
California Civil Code Sections 1932(2) and 1933(4), for any rights concerning a
Casualty.
(b) Lessee shall give Owner and Senior Lender prompt notice of the
occurrence of any fire or other hazard or casualty or cause (a "Casualty")
resulting in damage or destruction to all or any portion of the Leased Property
or the institution of any Taking. All insurance proceeds on the Leased Property
(whether or not insurance was requested or required by Owner or Senior Lender)
payable by reason of a Casualty and all causes of action, claims, compensation,
awards and recoveries for any Taking are hereby assigned to Owner and Senior
Lender and the Owner has reassigned its interests in the same to the Senior
Lender pursuant to the Deed of Trust. Owner and Senior Lender may each
participate in any suits or proceedings relating to any such proceeds, causes of
action, claims, compensation, awards or recoveries and Owner and Senior Lender
are each authorized, in their own names or in the Lessee's name, to adjust any
loss covered by any insurance (whether or not such insurance was requested or
required by Owner or Senior Lender) or any claim or cause of action in
connection with a Taking and Lessee shall from time to time deliver to Owner or
Senior Lender any instruments required to permit such participation; provided,
however, that, if there is not a Default or Event of Default hereunder which has
occurred and is continuing, the Owner and Senior Lender shall not have the right
to participate in the adjustment of any loss which is not in
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excess of the lesser of (i) ten percent (10%) of the then outstanding principal
amount of the Senior Loan and (ii) $250,000. All proceeds of a Casualty or
Taking shall be paid to Senior Lender and shall be applied in accordance with
the provisions of Section 1.9 of the Deed of Trust while the Senior Loan is
outstanding. So long as no Event of Default has occurred and is continuing, if
Senior Lender permits the Owner to use the proceeds of a Casualty or Taking to
rebuild or restore the Leased Property, Owner hereby directs and authorizes
Lessee and Lessee hereby agrees to rebuild and restore the Leased Property and
seek reimbursement therefor from the Senior Lender from the proceeds of a
Casualty or Taking. If requested by the Lessee, the Owner shall join in any
request made to Senior Lender for the release of the proceeds of a Casualty or
Taking provided that Lessee (and Lessee's Parent) shall indemnify and hold
harmless Owner and each of the other Indemnified Parties for any loss, damages,
claims, expenses or liabilities incurred by Owner or any Indemnified Party by
reason of joining in such request. If the Senior Lender accelerates the maturity
of the Senior Loan as a result of a Casualty or Taking in accordance with the
Senior Loan Documents, such acceleration shall constitute an "Event of Loss"
-------------
(notwithstanding that it does not comply with the definition in Section 16(d))
hereunder and the Lessee shall be required to pay to the Owner the Termination
Value, together with the other amounts specified in Section 16(d) hereof. The
provisions of this Section 16(b) to the extent the same grant rights to or
create obligations in favor of the Senior Lender shall not be applicable if the
Senior Loan is not then outstanding.
(c) The remaining provisions of this Section 16 shall apply only if the
Senior Loan is not outstanding and a Taking or Casualty to the Leased Property
occurs. The amounts received for any Casualty, less such costs and expenses,
shall be referred to as the "Net Casualty Award" and the amounts received for
any Taking, less such costs and expenses, shall be referred to as the "Net
Taking Award." All such amounts shall be applied either (x) to the payment of
the Termination Value and the other amounts due under Section 16(d) hereof, if
such Casualty or Taking results in, or the Lessee elects to deem such Casualty
or Taking as, an Event of Loss, or (y) to pay in accordance with Section 16(e)
hereof for the actual cost of repair, restoration, rebuilding or replacement of
the Improvements by Lessee (collectively, "Cost To Repair") if such Casualty or
Taking does not result in, or the Lessee does not elect to deem such Casualty or
Taking as, an Event of Loss.
(d) If the Taking or Casualty constitutes an Event of Loss, Lessee shall
pay to Owner on the Rent Payment Date next following the date of such Event of
Loss the sum of (i) all unpaid Base Rental due on or before such Rent Payment
Date or such last day of the Rental Period, plus (ii) the Termination Value as
of such Rent Payment Date, plus (iii) Additional Rental due as of such Rent
Payment Date. Any payments received at any time by Owner or by Lessee
constituting either Net Casualty Award or Net Taking Award from any insurer or
other party (except Lessee) as a result of the occurrence of such Event of Loss
will be applied in reduction of Lessee's obligation to pay the foregoing
amounts, if not already paid by Lessee, or, if already fully paid by Lessee,
will be applied to reimburse Lessee for its payment of such amount or amounts.
Upon payment in full of such Termination Value, Base Rental and Additional
Rental, (A) the obligation of Lessee to pay Base Rental hereunder shall
terminate and the Term of this Lease shall thereupon terminate, and (B) the
Owner shall transfer to Lessee all of the Owner's interest in the Leased
Property in accordance with the provisions of Section 32 hereof. As used in
this Lease, the term "Termination Value" of the Leased Property as of any Rent
-----------------
Payment Date means the amount set forth in the table of Termination Values for
the applicable Rent Payment Date set forth on Exhibit C hereto. An "Event of
--------
Loss" shall be deemed to have occurred if either (a) with respect to a Casualty,
----
sixty percent (60%) or more
-23-
of the Improvements shall have been destroyed; or (b) with respect to a Taking,
the Taking renders the Leased Property or any Material portion thereof
permanently unfit for its intended use under the Lease; or (c) or within the
last six (6) months of the any Basic Lease Term or Extension Term unless Lessee
has exercised its right to enter into the following Extension Term and with
respect to a Casualty only, twenty-five percent (25%) or more of the
Improvements shall have been damaged or destroyed. Either the Owner or the
Lessee may declare that the Taking or Casualty constitutes an Event of Loss,
provided, however, that the Lessee may deem such Taking or Casualty as an "Event
of Loss," regardless of the extent of damage or destruction the Improvements
with respect to a Casualty, and regardless of the effect of the Taking on the
utility of the Leased Property, with respect to a Taking, and the Owner is paid
the Termination Value in full and the other amounts required to be paid under
this Section 16(d). Upon making such determination, the party making such
determination shall notify the other party in writing thereof. If Owner
determines that such Taking or Casualty constitutes an Event of Loss, it shall
notify the Lessee thereof and the Lessee shall have ten (10) Business Days from
the date the Owner delivers notice of its determination to initiate a challenge
in writing to such determination pursuant to the provisions of Section 16(g)
below. If no challenge in writing is made by the Lessee of an Owner's
determination of an Event of Loss, such determination shall be binding upon
Lessee. If Owner and Lessee determine that such Taking or Casualty does not
constitute an Event of Loss (or if Owner's determination of an Event of Loss is
not upheld after arbitration pursuant to Section 16(g) hereof), Lessee shall be
required to repair, replace and restore the Leased Property as provided in
paragraph (e) below.
(e) If a Taking or Casualty to the Leased Property occurs which does not
result in (or is not otherwise deemed to constitute) an Event of Loss and the
Lessee elects to repair, replace and restore the Leased Property, it shall, at
its sole cost and regardless of whether any amounts constituting a Net Casualty
Award or Net Taking Award are made available to Lessee for such purpose, proceed
with diligence and promptness to carry out any demolition and to restore,
repair, replace and/or rebuild the Leased Property, as nearly as practicable, to
a condition and fair market value not less than the condition required to be
maintained and fair market value thereof immediately prior to such Taking or
Casualty. No repair or restoration work undertaken by Lessee pursuant to this
Section shall violate the terms of any Permitted Lien or other restriction,
easement, condition or covenant or other matter affecting title to the Leased
Property, and shall be undertaken and completed in a good and workmanlike manner
and in compliance in all material respects with all Legal Requirements then in
effect with respect to the Leased Property. If the Lessee elects to repair,
replace and restore the Leased Property, it shall submit for approval by Owner
prior to the commencement of any work, all plans, specifications, cost estimates
and contracts for the restoration or repair of the loss or damage, provided,
however, the Owner shall not unreasonably withhold such approval provided that
the utility, fair market value and useful life of the Leased Property after the
restoration or repair is not less than the utility, fair market value and useful
life of the Leased Property prior to the Taking or Casualty.
Upon the performance of the restoration or repair work in accordance with
this Section 16(e), any Net Casualty Award or Net Taking Award received by
Owner will be released to Lessee in partial monthly disbursements equal to
ninety percent (90%) of the value of the work completed (or if the contract is
on a cost-plus basis, then monthly advances of ninety percent (90%) of the costs
of the work completed if less than the value of the work). The release by Owner
of Net Casualty Awards or Net Taking Awards shall be subject to the satisfaction
of the following conditions:
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(i) no Default or Event of Default shall have occurred and be
continuing hereunder;
(ii) Owner is in receipt of any architect's certificates,
contractor's sworn statements and other evidence of costs, payments and
completion as the Owner may require and satisfactory evidence of payment and
release or partial release of all Liens of contractors, sub-contractors, and
materialmen and of any other Person providing work, service or materials in
connection with the repair, replacement and restoration of the Leased Premises
completed to the date of disbursement;
(iii) Receipt by Owner of all required approvals, if any, of any
municipal or other governmental authorities having jurisdiction over the Leased
Premises and all approvals required under any Permitted Liens.
The remaining portion of the Net Casualty Award or Net Taking Award shall
be released by Owner upon completion of the restoration and repairs provided
that the conditions set forth above have been met in full. The Lessee agrees at
the Owner's request to provide the Owner with copies of any available as-built
surveys and as-built plans and specifications of the Leased Property after
completion of the restoration and repair of the Leased Property.
(f) The Lessee's obligation to pay Base Rental and Additional Rental shall
not ▇▇▇▇▇ by reason of a Taking or a Casualty, and this Lease shall continue in
full force and effect and Lessee shall continue to perform and fulfill all
obligations, covenants and agreements hereunder notwithstanding such Taking or
Casualty.
(g) In the event the Lessee objects to the Owner's determination that a
Taking or a Casualty constitutes an Event of Loss and notifies the Owner in
writing of its objection, the parties agree in good faith to attempt to resolve
the dispute through negotiation and agree to refer the matter to one or more of
their respective officers or employees who have the authority to resolve the
dispute. If no resolution is reached within ten (10) Business Days (or such
longer period as the parties may mutually determine), then Lessee and Owner
shall submit to arbitration before a single arbiter in San Francisco,
California, under the Commercial Arbitration Rules of the American Arbitration
Association then in effect. If the parties are unable to agree on a single
arbiter within a further ten (10) Business Day period, each party shall select
an arbiter and the two arbiters so selected shall select a third. The resulting
decision of the arbiter or arbiters shall be deemed final from which no appeal
or review may be taken. All expenses and costs of such arbitration shall be
borne by the party not prevailing in the proceeding. The parties agree that each
shall have the rights to discovery pursuant to California Code of Civil
Procedure Sections 1283, 1283.05 and 1283.1 or any successor statutes.
Section 17. Additions and Improvements; Removal. Subject to the
-----------------------------------
applicable Legal Requirements and the provisions of the Deed of Trust, if in
effect, Lessee shall have the right during the Term of this Lease to make any
additions or improvements to the Leased Property to attach fixtures, structures
or signs, and to affix any personal property to the Leased Property, so long as
(i) the utility, fair market value and useful life of the Leased Property is not
thereby reduced in any Material respect, (ii) prior to the construction of any
structural improvement, Lessee shall deliver a certificate of an AIA registered
architect and a certificate of a registered engineer to the effect that
-25-
the planned structural improvement will comply in all Material respects with all
applicable Legal Requirements, will not Materially and adversely affect or
interfere with the utility, operation or structural integrity of the then
existing Improvements and shall conform to the character and quality of the
existing Improvements, (iii) Lessee shall finance such construction with its own
funds or through a borrowing unsecured by the Leased Property. Each such
improvement (and all fixtures and equipment included as a part thereof) shall be
deemed a part of the Leased Property and become part of Owner's property. Lessee
may remove, during or at the expiration or other termination of the Term of this
Lease, all equipment and personal property placed or installed in or upon the
Leased Property after the Basic Term Commencement Date by Lessee or under its
authority, other than any equipment or personal property included as a part of
the Leased Property title to which, prior to the exercise of Lessee's purchase
option or a third party sale, is held by the Owner, provided that Lessee shall
repair any damage to the Leased Property resulting from such removal.
Section 18. Right Of Entry. Subject to the rights of tenants or residents
--------------
under any lease, representatives of the Owner shall have the right to enter upon
the Leased Property (and to review and copy Lessee's records regarding the
Leased Property which Lessee agrees to provide to Owner for inspection) during
reasonable business hours (i) to inspect the same (including, without
limitation, the use of photographic and video equipment) or (ii) for any purpose
connected with the rights or obligations of the parties under this Lease.
Unless a Default or Event of Default has occurred and is continuing, Lessee
shall be given no less than 48 hours prior notice of entry. The Lessee shall
afford the Senior Lender access to the Leased Property in the manner required
under the Deed of Trust.
Section 19. Assignments and Subleasing; Subordination and Attornment.
--------------------------------------------------------
(a) Assignment By Lessee. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH BELOW,
--------------------
LESSEE SHALL NOT, WITHOUT THE PRIOR WRITTEN CONSENT OF SENIOR LENDER AND OWNER
IN EACH INSTANCE, SUBLEASE OR OTHERWISE RELINQUISH POSSESSION OF THE LEASED
PROPERTY OR ANY PART THEREOF, OR ASSIGN, TRANSFER, MORTGAGE OR ENCUMBER ITS
RIGHTS, INTERESTS OR OBLIGATIONS HEREUNDER AND ANY ATTEMPTED SUBLEASE,
RELINQUISHMENT, ASSIGNMENT, TRANSFER OR ENCUMBERING BY LESSEE SHALL BE NULL AND
VOID. Furthermore, Lessee shall not be permitted to merge, consolidate or sell
a substantial portion of its assets (other than inventory in the ordinary course
of its business) without Owner's prior written consent in each instance unless
each of the following conditions are met in full or waived in writing by Owner
(i) the surviving, resulting or acquiring entity expressly assumes in writing
all of Lessee's past, current and future obligations and liabilities under this
Lease, the form and content of such documentation, including an opinion of
counsel, to be satisfactory to Owner in its sole and absolute discretion, (ii)
at the time of such merger, consolidation or sale, no Event of Default shall
have occurred and be continuing, (iii) all of the representations of Lessee set
forth in Section 12 hereof shall be true and correct with respect to the
surviving, resulting or acquiring entity as if made directly by such entity as
of the date of the merger, consolidation or sale; (iv) the surviving, resulting
or acquiring entity is a wholly owned subsidiary of Lessee's Parent or such
other Person which is acceptable to Owner in its sole discretion, and (v) such
merger, consolidation or sale is permitted under the Senior Loan Documents or is
otherwise approved by the Senior Lender in writing. Notwithstanding the
foregoing, Lessee may enter into subleases with occupants of the Leased Property
provided that (i) if the Senior
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Loan is outstanding, all of the provisions of Section 1.12 of the Deed of Trust
are fully complied with by Lessee and (ii) such subleases are in a form approved
by the Owner and, if the Senior Loan is outstanding, the Senior Lender and (iii)
all such subleases are entered into in the ordinary course of the Lessee's
business.
(b) Assignment By Owner. This Lease and all Base Rental and Additional
-------------------
Rental (except for the Excepted Rights) due and to become due hereunder have
been assigned by Owner to Senior Lender pursuant to the terms of the Deed of
Trust and the Assignment of Leases and Rents and constitutes part of the "Rents
-----
and Profits" as such term is defined in the Deed of Trust, although until an
-----------
Event of Default occurs under the Senior Loan Documents, Senior Lender has
agreed that Base Rental which is Equity Rental shall be payable directly to the
Administrator. The Senior Lender may re-assign and/or grant a security interest
in any of such rights, obligations, title or interest assigned to the Senior
Lender. Lessee agrees to execute any documents that may be reasonably requested
by Owner or the Senior Lender in connection with the assignment of this Lease to
the Senior Lender provided that such documents do not increase the liability of
Lessee in any Material respect. Lessee acknowledges receipt of executed copies
of the Senior Loan Documents. Any Person to whom any sale, assignment, transfer
or grant of security interest (which has been consented to by Senior Lender
while the Senior Loan is outstanding) is made by Owner is herein called an
"Assignee".
(c) Rights of Senior Lender. Without limiting the foregoing or any of the
-----------------------
provisions of Section 7 hereof, Lessee further acknowledges and agrees that (i)
the rights of the Senior Lender in and to the sums payable by Lessee under any
provision of this Lease shall not be subject to any abatement whatsoever and
shall not be subject to any defense, set-off, counterclaim or recoupment
whatsoever, whether by reason of failure of or defect in Owner's title, or any
interruption from whatsoever cause in the use, operation or occupancy of the
Leased Property, or any damage to, loss, destruction, reduction or impairment of
the Leased Property for any reason whatsoever, or by reason of any other
indebtedness or liability, howsoever and whenever arising, of Owner to Lessee or
to any other Person or for any cause whatsoever, it being the intent hereof that
Lessee shall be unconditionally and absolutely obligated to pay directly to the
Senior Lender (on behalf of Owner) until the Senior Loan is paid in full all of
the Base Rental (other than Equity Rental) and all Additional Rental (except the
Excepted Rights which remain payable directly to Owner and the other Indemnified
Parties) payable by Lessee hereunder; (ii) Lessee's covenants, representations
and warranties in this Lease (including, without limitation, in Section 12
hereof) shall be deemed to be made to and for the benefit of, the Senior Lender
as well as Owner; and (iii) the Senior Lender shall be entitled to the benefit
of all covenants and obligations to be performed by Lessee under this Lease,
except Lessee's covenants and obligations relating to Excepted Rights.
Notwithstanding the assignment to the Senior Lender, Lessee and Owner
acknowledge that all obligations of Owner to Lessee under this Lease shall be
and remain enforceable by Lessee against, and only against, Owner.
(d) Subordination and Attornment. This Lease and Lessee's interest
----------------------------
hereunder shall at all times be subject and subordinate to the lien and security
title of the Senior Loan Documents and any advances made thereunder and all
renewals, modifications, consolidations, replacements, substitutions and
extensions thereof.
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Lessee and Owner acknowledge and agree that Lessee's payments of the Senior
Loan Debt Service component of the Base Rental and Lessee's payment to Senior
Lender of any other amounts due under the Senior Loan Documents shall not be
deemed to: (i) cause Senior Lender to succeed to or to assume any obligations or
responsibilities as landlord or Owner under the Lease, all of which shall
continue to be performed and discharged solely by Owner unless and until Senior
Lender has agreed to any attornment by Lessee under this Lease (which Senior
Lender has no obligation to do); (ii) relieve Owner of any obligations under the
Lease; or (iii) cure any default by Owner under any of the Senior Loan
Documents.
Lessee shall be entitled to full credit under the Lease for any Base Rental
or Additional Rental paid to Senior Lender pursuant to the terms hereof to the
same extent as if such Base Rental were paid directly to Owner.
No act or failure to act on the part of the Owner which would entitle
Lessee under the terms of this Lease, or by law, to be relieved of any of
Lessee's obligations hereunder (including, without limitation, its obligation to
pay Base Rental or Additional Rental) or to terminate this Lease shall result in
a release or termination of such obligations of Lessee or termination of this
Lease unless: (i) Lessee shall have first given written notice of Owner's act or
failure to act to Senior Lender, specifying the act or failure to act on the
part of Owner which would give rise to Lessee's rights; and (ii) Senior Lender,
after receipt of such notice, shall have failed or refused to correct or cure
the conditions complained of within a reasonable time thereafter (in no event
more than ninety (90) days), provided that such cure period shall include a
reasonable time for Senior Lender to obtain possession of the Leased Property if
possession is reasonably necessary for Senior Lender to correct or cure the
condition or to foreclose the Deed of Trust, if Senior Lender notifies the
Lessee of its intention to take possession of the Leased Property or to complete
the foreclosure of such Deed or Trust and unconditionally commits to correct or
cure such conditions. If Senior Lender is prohibited by any process or
injunction issued by any court or by reason of any action by any court having
jurisdiction or any bankruptcy, debt or rehabilitation or insolvency proceedings
involving Owner or Lessee from commencing or prosecuting foreclosure or other
appropriate proceedings in the nature thereof, the Lease, at the option of the
Senior Lender, shall continue to be in full force and effect and the times for
commencing or prosecuting such foreclosure or other proceedings shall be
extended for the period of such prohibition. Lessee shall deliver to Senior
Lender a duplicate copy of any and all notices regarding any default which
Lessee may from time to time give or serve upon Owner pursuant to the provisions
of this Lease. Copies of such notices given by Lessee to Owner shall be
delivered to Senior Lender simultaneously with delivery to Owner. No such
notice by Lessee to Owner hereunder shall be deemed to have been given unless a
copy thereof has been given to Senior Lender pursuant to the terms hereof.
If Senior Lender or any other party ("Successor Landlord") becomes owner of
------------------
the Leased Property as the result of a foreclosure or any other exercise by
Senior Lender of its right and remedies under the Senior Loan Documents or by a
deed in lieu thereof, then, at Successor Landlord's election, Lessee shall
recognize and attorn to Successor Landlord as Lessee's direct landlord and
Successor Landlord shall not be (i) liable for any act or omission of Owner,
(ii) subject to any offset right or termination right that Lessee may have
relating to any event or occurrence before the date of attornment, including any
claim for damages of any kind whatsoever as the result of any breach by Owner
that occurred before (but not after) the date of attornment; (iii) bound by
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any representation or warranty of Owner, by any previous modification of this
Lease not consented to in writing by Senior Lender or by any payment of Lessee
of more than one month's rent or any security deposit not actually received by
Successor Landlord. If KCCI and/or SELCO have foreclosed on the Supplemental
Collateral and the proceeds of such foreclosure has been applied to the
reduction or payment in full of the B Investor Loan and/or SELCO Contribution,
then the Base Rental shall be adjusted to reflect such reduction or payment in
full.
(e) Subsequent Lenders. Upon or concurrently with the payment in full of
------------------
all indebtedness outstanding under the Senior Loan and the termination of the
Senior Lender's Lien in the Leased Property in accordance with the provisions of
the Deed of Trust and with the prior written consent of Healthcare Realty, KCCI
and SELCO while any of the Equity Balance remains outstanding, the Owner shall,
at Lessee's written request, re-assign, sell or transfer and/or ▇▇▇▇▇ ▇ ▇▇▇▇ in,
this Lease, in whole or in part and/or Leased Property to any Person, and upon
notice of such assignment, sale, transfer or grant, Lessee shall comply with the
requests and demands of such Person as if such Person was the Senior Lender as
provided above; provided that such Person shall agree, with or for the benefit
of Lessee, that it shall not disturb Lessee's possession under the Lease and
shall respect and take its Lien subject to Lessee's right to purchase the Leased
Premises under the terms of this Lease, so long as no Event of Default shall
have occurred and be continuing under this Lease. Prior to the occurrence and
continuance of an Event of Default, Owner shall not take any affirmative action
to sell, transfer or ▇▇▇▇▇ ▇ ▇▇▇▇ on the Leased Property or this Lease without
Lessee's prior written consent, except that nothing in this section 19(e) shall
prevent the Owner remarketing the Leased Property in accordance with Section 30
hereof.
If Lessee desires that Owner refinance the Senior Loan at any time when the
Senior Loan may be prepaid in accordance with its terms, Owner agrees to
cooperate with Lessee in effecting such refinancing provided (i) all costs,
expenses, fees and other amounts incurred by reason of such refinancing are paid
in full by Lessee, including, without limitation, any fees or expenses payable
to the party arranging or holding the loan made to refinance the Senior Loan
(the "Successor Senior Lender"), (ii) Owner's right to directly receive Base
Rental relating to the Equity Balance and any Additional Rental shall not be
affected and any subordination of the Owner's, Healthcare Realty's, KCCI's and
SELCO's rights to receive Base Rental and Additional Rental shall be reasonably
acceptable to such Persons, (iii) the rights of the Indemnified Parties to
exercise any of the Excepted Rights directly against Lessee (or Brookdale under
the Indemnity Agreement) continue and are not made subordinate to the rights of
the Successor Senior Lender for indemnification, (iv) the rights of Owner, KCCI
and SELCO to enforce their Lien in the Supplemental Collateral shall continue
and the Successor Senior Lender shall not have any rights to a Lien on the
Supplemental Collateral, (v) the terms and provisions of the loan made or held
by the Successor Senior Lender are satisfactory to Owner, Healthcare Realty,
KCCI and SELCO and Lessee shall deliver any documents, certificates, opinions of
counsel or other material which may be reasonably requested by Owner, Healthcare
Realty, KCCI or SELCO in connection with the loan being made by the Successor
Senior Lender and the relative rights of Owner, Healthcare Realty, KCCI or SELCO
and the Successor Senior Lender, (vi) the principal amount of the loan being
made by the Successor Senior Lender does not exceed the principal amount of the
Senior Loan, unless Healthcare Realty and SELCO have consented thereto, (viii)
the Base Rental payable hereunder shall be adjusted to reflect debt service
payments payable to the Successor Senior Lender on the new Loan, and (viii) no
Default or Event of Default shall have occurred and be continuing hereunder.
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Section 20. Environmental Matters. Lessee hereby represents and warrants
---------------------
to and covenants with Owner, Senior Lender, SELCO, Healthcare Realty, KCCI, the
Administrator, and their respective Affiliates, successors, assigns,
stockholders, partners, directors, officers, trustees, employees, beneficiaries,
attorneys and accountants and any other Person claiming by through or under
Owner, Senior Lender, SELCO, Healthcare Realty, KCCI, the Administrator or any
of their successors or assigns (collectively, "Indemnified Parties") as follows:
(a) Lessee covenants and agrees that (i) Lessee shall comply with all
Environmental Legal Requirements, including, but not limited to, Hazardous
Materials Legal Requirements, applicable to the Leased Property or as required
by any governmental agency or third party, and (b) Lessee shall take, and cause
each permitted sublessee and assignee to take, all remedial action necessary to
avoid any liability of Lessee, or any Indemnified Party for, and to avoid the
imposition of, or to discharge, any Liens on the Leased Property, as a result
of, any failure to comply with Environmental Legal Requirements with respect to
the Leased Property.
(b) Without limiting the generality of the foregoing, Lessee agrees that it
shall not:
(i) release any Hazardous Materials on or under the Leased Property
or fail to take all reasonable precautions to prevent the release or threat of
release of any Hazardous Materials on or under the Leased Property;
(ii) generate any Hazardous Materials on or under the Leased
Property or fail to take all reasonable precautions to prevent the generation of
Hazardous Materials on or under, or the migration of Hazardous Materials to, the
Leased Property;
(iii) except in compliance with all Environmental Legal Requirements,
store or utilize, or permit any Hazardous Materials to be stored or utilized on
the Leased Property provided, however, that the materials listed in Schedule II
attached hereto may be used on or about the Leased Property and stored on the
Leased Property in the quantities listed in such Schedule provided that all
Environmental Legal Requirements are complied with in connection with such use
or storage;
(iv) dispose of or permit any Hazardous Materials to be disposed of
on the Leased Property except in compliance with all Environmental Legal
Requirements; and
(v) use, or allow the Leased Property to be used, in a manner which
does not comply with all Environmental Legal Requirements in all Material
respects.
(c) Lessee shall provide Owner with prompt written notice, but in no event
later than ten (10) Business Days after obtaining any actual knowledge or actual
notice thereof, of any of the following conditions: (i) the presence, or any
release or threat of release, of any Hazardous Materials on, under or from the
Leased Property, whether or not caused by any of the Indemnified Parties;
provided, however, that no notice of the use or storage of the materials noted
on Schedule II attached hereto not exceeding the quantities indicated thereon
shall be required if such use or storage is in compliance in all Material
respects with Environmental Legal Requirements; (ii) any Environmental
-30-
Enforcement Action instituted or threatened in writing; or (iii) any condition
or occurrence on the Leased Property that constitutes a violation of any of the
Environmental Legal Requirements.
(d) Upon Lessee obtaining knowledge or notice of: (i) the violation of any
Environmental Legal Requirement related to the Leased Property, or (ii) the
presence, or any release or any threat of release, of any Hazardous Materials
on, under, or from the Leased Property, which is lawfully claimed by any
Governmental Authority or third party to violate any other Environmental Legal
Requirement, or any combination thereof, Lessee shall immediately take all
reasonable actions to cure or eliminate any such violation of any such
Environmental Legal Requirement and, where applicable, to arrange for the
assessment, monitoring, clean-up, containment, removal, remediation, or
restoration of the Leased Property as are required pursuant to any Hazardous
Materials Legal Requirements or by any Governmental Authority.
(e) Owner shall have the right (but not the obligation) to require Lessee,
at its own cost and expense, to obtain a professional environmental assessment
of the Leased Property in accordance with Owner's requirements and sufficient
in scope to determine compliance with Hazardous Materials Legal Requirements
upon the occurrence of any one or more of the following events: (i) an Event of
Default hereunder; or (ii) upon receipt of any notice of any of the conditions
specified in Section 20(c) hereof unless Lessee complies with the remedial
actions required pursuant to Section 20(d), or (iii) upon any return of the
Leased Property in accordance with Section 34(d) hereof.
(f) Owner may exercise its rights and remedies under all of this paragraph
(f) only upon and following the existence of one or more of the following events
or conditions: (i) an Event of Default has occurred and is continuing; (ii) an
Indemnified Party, or an affiliate thereof, or any nominee or designee of an
Indemnified Party or an affiliate thereof has taken possession of all or some
portion of the Leased Property based upon an Event of Default; (iii) an
Indemnified Party, or an affiliate thereof or any nominee or designee of an
Indemnified Party or an affiliate thereof, has commenced foreclosure proceedings
or has acquired title to all or some portion of the Leased Property by virtue of
foreclosure or deed in lieu of foreclosure; or (iv) a claim has been asserted
against an Indemnified Party for which indemnification is provided herein, but
Lessee has not undertaken or is not continuing to pursue, after having
undertaken, commercially reasonable efforts to remediate, defend and otherwise
indemnify any such Indemnified Party. In any of such events, the Owner shall
have the right, but not the obligation, through such representatives or
independent contractors as it may designate, to enter upon the Leased Property
and to expend funds to:
(A) cause one or more environmental assessments of the Leased
Property to be undertaken, if Owner in its sole but reasonable discretion
determines that such assessment is appropriate. Such environmental
assessments shall be reasonable in scope considering the history and use of
the Leased Property and the data available from prior reports, provided,
however, the foregoing shall not limit or restrict the reasonable
discretion of the Owner's engineers and consultants in formulating the
exact parameters of any such site assessment and such site assessment may
include, without limitation, (i) detailed visual inspections of the Leased
Property, including without limitation all storage areas, storage tanks,
drains, drywells and leaching areas; (ii) the taking of soils and surface
and sub-surface water samples; (iii) the performance of soils and ground
water analysis; and (iv) the performance
-31-
of such other investigations or analysis as are necessary or appropriate
and consistent with sound professional environmental engineering practice
in order for Owner to obtain a complete assessment of the compliance of the
Leased Property and the use thereof with all Environmental Legal
Requirements and to make a determination as to whether or not there is any
risk of contamination (x) to the Leased Property resulting from Hazardous
Materials originating on, under, or from any surrounding property or (y) to
any surrounding property resulting from Hazardous Materials originating on,
under, or from the Leased Property;
(B) cure any breach of the representations, warranties, covenants and
conditions made by or imposed upon Lessee under this Lease including
without limitation any violation by Lessee, or by the Leased Property, of
any of the Environmental Legal Requirements;
(C) take all actions as are necessary to (i) prevent the migration of
Hazardous Materials on, under, or from the Leased Property to any other
property; or (ii) prevent the migration of any Hazardous Materials on,
under, or from any other property to the Leased Property;
(D) comply with, settle, or otherwise satisfy any Environmental
Enforcement Action as the same relates to the Leased Property including,
but not limited to, the payment of any funds or penalties imposed by any
governmental authority and the payment of all amounts required to remove
any lien or threat of lien on or affecting the Leased Property; and
(E) comply with, settle, or otherwise satisfy any Environmental Legal
Requirement and correct or ▇▇▇▇▇ in accordance with all applicable
Environmental Legal Requirements any environmental condition on, or which
threatens, the Property and which could cause damage or injury to the
Property or to any person.
(g) Any amounts reasonably paid or advanced by Owner and all reasonable
costs and expenditures incurred in connection with any action taken pursuant to
the terms of this Section 20, including but not limited to reasonable
environmental consultants' and experts' fees and expenses, attorneys' fees and
expenses, court costs and all costs of assessment, monitoring, clean-up,
containment, remediation, removal and restoration, with interest thereon at the
Default Rate hereof shall be a demand obligation of Lessee to the Owner if not
paid within ten (10) days after notice, and, to the extent not prohibited by
law, and shall be deemed to be Additional Rental hereunder.
(h) The exercise by Owner of any one or more of the rights and remedies set
forth in this Section 20 shall not operate or be deemed to place upon Owner any
responsibility for the operation, control, care, service, management,
maintenance or repair of the Leased Property.
(i) Without limiting the generality of the other provisions of this Section
20, any partial exercise by Owner of any one or more of the rights and remedies
set forth in this Section 20 including, without limitation, any partial
undertaking on the part of Owner to cure any failure by any of Lessee, or of the
Leased Property, or any other occupant, prior occupant or prior owner thereof,
to comply with any of the Hazardous Materials Legal Requirements shall not
obligate the Owner to complete such actions taken or require Owner to expend
further sums to cure such non-compliance.
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Section 21. Environmental Indemnity. Lessee hereby agrees that it shall
-----------------------
at its sole cost and expense indemnify, defend, exonerate, protect and save
harmless each Indemnified Party on an after-tax basis against and from any and
all damages, losses, liabilities, obligations, penalties, claims, litigation,
demands, defenses, judgments, suits, proceedings, costs, disbursements or
expenses of any kind or nature whatsoever, including, without limitation,
reasonable attorneys' and experts' fees and disbursements, which may at any time
be imposed upon, incurred by, or asserted or awarded against Owner or an
Indemnified Party and arising from or out of any of the following, or any claims
alleging any of the following:
(a) Any Hazardous Materials on, in, under, or which emanated from, all or
any portion of the Leased Property, or which may hereafter be on, in, under or
emanate from, all or any portion of the Leased Property whenever discovered;
(b) The violation of any Hazardous Materials Legal Requirements by Lessee,
or with respect to the Leased Property, existing on or before the date hereof or
which may so exist in the future, whenever discovered;
(c) The violation of any Environmental Legal Requirement by Lessee, or with
respect to the Leased Property, existing on or before the date hereof or which
may so exist in the future, whenever discovered;
(d) Any Material breach of warranty or representation made by Lessee under
or pursuant to Section 20 hereof;
(e) Any Environmental Enforcement Action with respect to the Leased
Property, whenever asserted; and
(f) The enforcement of this Section 21 or the assertion by Lessee of any
defense to the obligations of Lessee hereunder, which is not sustained by a
final order of a court of competent jurisdiction which is not subject to further
appeal, whether any of such matters arise before, during or after the Term of
this Lease or the taking of possession of all or any portion of the Leased
Property by the Owner, and specifically including therein, without limitation,
the following which are incurred following an Event of Default: (i) costs
incurred for any of the matters set forth in Section 20 of this Agreement; and
(ii) costs and expenses incurred in ascertaining the existence or extent of any
asserted violation of any Environmental Legal Requirements relating to the
Leased Property and any remedial action taken on account thereof including,
without limitation, the reasonable costs, fees and expenses of engineers,
geologists, chemists, other scientists, attorneys, surveyors, and other
professionals, or testing and analyses performed in connection therewith.
(g) The obligations of Lessee under this Section 21 are not subject to any
limitation as to amount. Nothing herein shall limit the right of an Indemnified
Party to obtain injunctive relief or to pursue equitable remedies under this
Section 21. The provisions of this Section 21, and the obligations of Lessee
under this Section 21, shall apply from the Closing Date, and shall survive and
continue in full force and effect, notwithstanding the expiration or earlier
termination of the Term of this Lease in whole or in part, including the
expiration or termination of the Term, and are expressly
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made for the benefit of, and shall be enforceable by, each Indemnified Party,
provided, however, that notwithstanding the foregoing, the Lessee shall not have
any indemnification obligations to (i) the Indemnified Parties for a violation
of any Hazardous Materials Legal Requirements or Environmental Legal
Requirements or for any Environmental Enforcement Actions attributable solely to
any facts or circumstances arising after possession of the Leased Property has
been returned to Owner, the Termination Date has occurred and the Owner has
relet or sold the Leased Property or (ii) to any Indemnified Party if the
violation of any Hazardous Materials Legal Requirements or Environmental Legal
Requirements arose solely as a result of the gross negligence or willful
misconduct of such Indemnified Party.
(h) Without limiting the generality of the foregoing, Lessee and Lessee's
Parent have executed and delivered to Senior Lender a Hazardous Substances
Indemnity Agreement and in the event of any conflict of the provisions of
Section 20 or Section 21 of this Lease with the provisions of the Hazardous
Substances Indemnity Agreement as such conflicts relate to the obligation of
Lessee or Lessee's Parent to indemnify the Senior Lender, the provisions of the
Hazardous Substances Indemnity Agreement shall be controlling. Lessee agrees to
comply with the provisions of the Hazardous Substances Indemnity Agreement.
Section 22. Indemnification and Hold Harmless Agreement. To the fullest
-------------------------------------------
extent not prohibited by applicable law, Lessee hereby agrees to indemnify and
hold harmless each Indemnified Party, on an after-tax basis from and against
any and all losses, damages, injuries, costs or expenses (including reasonable
attorneys' fees and expenses) and from and against any and all suits, demands,
claims, actions or other proceedings whatsoever, brought by any entity or person
whatsoever (except suits brought by Lessee against an Indemnified Party in which
Lessee is the prevailing party) and arising or allegedly arising from (i) this
Lease or the Transaction Documents, including the Senior Loan Documents; (ii)
any transaction contemplated hereby or thereby; (iii) the acquisition,
financing, construction, installation, ownership, lease and operation of the
Leased Property (including patent or latent defects in the Land or Improvements,
whether or not discoverable by Lessee or any Indemnified Party), including,
without limitation, any suit, demand, claim or action arising under the Loan
Documents by reason of Lessee being in default or failing to otherwise perform
thereunder, hereunder or under any other Transaction Document; (iv) the defense
of any suit, demand, claim, action or other proceeding brought against such
Indemnified Party in connection with the foregoing; (v) the enforcement of any
provision of this Lease; (vi) damage, injury or death to any Person or damage to
the property of any Person, due to any defect in the Land or Improvements, or
any act or omission of any person including the defense of any suit, demand,
claim, action or other proceeding brought against such Indemnified Party in
connection with such damage or injury; (vii) any claims based upon absolute or
strict liability in tort or claims based upon patent, trademark, tradename or
copyright infringement; and (viii) any action taken in good faith by such
Indemnified Party in connection with this Lease or the Leased Property; except
that, as to any Indemnified Party, the foregoing indemnities shall not apply to
the following:
(i) losses, damages, injuries, costs or expenses solely and directly
caused by the gross negligence or willful misconduct of such
Indemnified Party;
(ii) losses, damages, injuries, costs or expenses solely and directly
caused by the mishandling or misapplication by any Indemnified Party
of payments made by the
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Lessee hereunder if such payments are made to such Indemnified
Party in accordance with the Transaction Documents;
(iii) the inaccuracy in any Material respect of any representation or
warranty made by such Indemnified Party in this Lease;
(iv) the creation or existence of an Owner Lien attributable to such
Indemnified Party;
(v) if such Indemnified Party is the Owner, or the Senior Lender, the
voluntary disposition of the Leased Property or the Lease, other
than in connection with (A) a voluntary disposition permitted after
the occurrence and during the continuance of an Event of Default,
(B) an Owner Conveyance, or (C) a subsequent transfer by the Lender
or any nominee, designee or affiliate thereof if such entity
purchases the Leased Property at a foreclosure sale or accepts a
deed-in-lieu of foreclosure of the Leased Property;
(vi) any other matters expressly excluded from any other indemnity
provisions contained in the Transaction Documents pursuant to which
the Lessee has agreed to indemnify any Indemnified Party; and
(vii) acts or events that occur after the Indemnification Period.
Lessee shall give each Indemnified Party prompt notice of any occurrence, event
or condition known to Lessee as a consequence of which any Indemnified Party may
be entitled to indemnification hereunder. Lessee shall forthwith upon demand of
any such Indemnified Party reimburse such Indemnified Party for amounts expended
by it in connection with any of the foregoing or pay such amounts directly.
Lessee shall be subrogated to an Indemnified Party's rights in any matter with
respect to which Lessee has actually reimbursed such Indemnified Party for
amounts expended by it or has actually paid such amounts directly pursuant to
this Section 22. In case any action, suit or proceeding is brought against any
Indemnified Party in connection with any claim indemnified against hereunder,
such Indemnified Party will, promptly after receipt of notice of the
commencement of such action, suit or proceeding, notify Lessee thereof,
enclosing a copy of all papers served upon such Indemnified Party, but failure
to give such notice or to enclose such papers shall not relieve Lessee from any
liability hereunder. Lessee may, and upon such Indemnified Party's request will,
at Lessee's expense, resist and defend such action, suit or proceeding, or cause
the same to be resisted or defended by counsel selected by Lessee and reasonably
satisfactory to such Indemnified Party and in the event of any failure by Lessee
to do so, Lessee shall pay all costs and expenses (including, without
limitation, attorney's fees and expenses) incurred by such Indemnified Party in
connection with such action, suit or proceeding. The provisions of this Section
22, and the obligations of Lessee under this Section 22, shall apply from the
Closing Date (notwithstanding the failure of Lessee to satisfy any condition set
forth in Section 4 hereof), and shall survive and continue in full force and
effect, notwithstanding the expiration or earlier termination of this Lease in
whole or in part, including the expiration or termination of the Term, and are
expressly made for the benefit of, and shall be enforceable by, each Indemnified
Party.
-35-
Without limiting the generality of the foregoing, Lessee and Lessee's
Parent have executed and delivered to Senior Lender an "Indemnity and Guaranty
Agreement" and in the event of any conflict of the provisions of this Section 22
of this Lease with the provisions of the Indemnity and Guaranty Agreement as
such conflicts relate to the obligation of Lessee or Lessee's Parent to
indemnify the Senior Lender, the provisions of the Indemnity and Guaranty
Agreement shall be controlling. Lessee agrees to comply with the provisions of
the Indemnity and Guaranty Agreement.
Section 23. Events of Default by Lessee. Any of the following events
---------------------------
shall constitute Events of Default under this Lease:
(a) Lessee shall fail to make any payment of Base Rental within ten (10)
days after the same is due and payable or fails to make any payment of
Additional Rent when the same becomes due and payable and such failure continues
for thirty (30) days after written notice thereof is given to Lessee; or
(b) Lessee shall fail to pay the Termination Value, Purchase Price or End
of Term Adjustment, as applicable, when the same becomes due and payable; or
(c) Lessee shall fail to observe or perform any of its covenants or
agreements set forth in Sections 15, 16, 29, 30, 32 or 34 of this Lease; or
(d) Lessee shall fail to perform or observe any other covenant, condition,
or agreement to be performed or observed by it under this Lease and such failure
shall continue unremedied, for thirty (30) days after written notice to Lessee
specifying such failure and demanding the same to be remedied, provided,
however, that no Event of Default shall be deemed to have occurred with respect
to breach of any covenant, condition or agreement that cannot be remedied, with
the exercise of reasonable diligence on Lessee's part, within such thirty (30)
day period, if Lessee commences cure of such failure within such thirty (30) day
period and diligently pursues such cure to completion, provided further,
however, that the period given to the Lessee to remedy such failure should not
exceed a total of one hundred twenty (120) days from the initial notice of
default is given to Lessee, provided further still, that if such failure relates
to a failure to comply with Environmental Legal Requirements, such one hundred
twenty (120) day period may be extended to such longer period as may be
reasonably necessary to remedy such failure; or
(e) Owner shall be in default beyond any grace or cure period under any of
the Senior Loan Documents by reason of (i) the failure of the Lessee to perform
any of the Owner's obligations under the Senior Loan Documents or (ii) any
failure of the Lessee to perform its obligations hereunder; or
(f) Lessee shall be in default beyond any applicable grace or cure periods
(i) under any Transaction Documents to which it is a party or any lease, loan
agreement or other agreement, instrument or document heretofore, now or
hereafter entered into between Lessee and Owner, or between Lessee and any
parent, subsidiary or affiliate of Owner, or between Lessee and Senior Lender,
or between Lessee's Parent and Owner or between Lessee's Parent and Senior
Lender or (ii) under any promissory note or guarantee heretofore, now or
hereafter executed by Lessee or Lessee's Parent and delivered to any party
referred to in clause (i) above evidencing or guaranteeing a loan
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made by any such party to Lessee, Lessee's Parent or Owner any obligation of
Lessee or Lessee's Parent, to any Person (other than Owner, or any parent,
subsidiary or affiliate of Owner) in excess of $1 million relating to the
payment of borrowed money or the payment of rent or hire under any lease
agreement, shall be declared to be due and payable or otherwise accelerated
prior to the maturity thereof by reason of a default in payment or performance
by Lessee or Lessee's Parent (excluding any such default which is being
contested in good faith by Lessee or Lessee's Parent by appropriate proceedings
and the liability for which has not been reduced to judgment); or an attachment
or other Lien shall be filed or levied against a substantial part of the
property of Lessee or Lessee's Parent (taken in aggregate), and such judgment
shall continue unstayed and in effect, or such attachment or Lien shall continue
undischarged or unbonded, for a period of thirty (30) days; (unless Lessee has
the right to contest such Lien under this Lease and is contesting the same in
accordance with the terms hereof) or
(g) Lessee or Lessee's Parent shall become insolvent or make an assignment
for the benefit of creditors or consent to the appointment of a trustee or
receiver; or a trustee or a receiver shall be appointed for Lessee or Lessee's
Parent or for a substantial part of its property without its consent and shall
not be dismissed for a period of sixty (60) days; or any petition for the
relief, reorganization or arrangement of Lessee or Lessee's Parent, or any other
petition in bankruptcy or for the liquidation, insolvency or dissolution of
Lessee or Lessee's Parent, shall be filed by or against Lessee or Lessee's
Parent and, if filed against Lessee or Lessee's Parent, shall be consented to or
be pending and not be dismissed for a period of sixty (60) days, or an order for
relief under any bankruptcy or insolvency law shall be entered by any court or
governmental authority of competent jurisdiction with respect to Lessee or
Lessee's Parent; or any execution or writ or process shall be issued under any
action or proceeding against Lessee or Lessee's Parent whereby any of the Leased
Property may be taken or restrained (other than a Taking); or Lessee's or
Lessee's Parent's corporate existence shall cease; or Lessee or Lessee's Parent
shall (whether in one transaction or a series of transactions) without Owner's
prior written consent, sell, transfer or dispose of, or pledge or otherwise
encumber, all or substantially all of its assets or property, or consolidate or
merge with any other entity, or become the subject of, or engage in, a leveraged
buy-out or any other form of corporate reorganization; or
(h) any representation, warranty, statement or certification made by Lessee
under this Lease or in any document or certificate furnished to Owner or any
Assignee in connection herewith or pursuant hereto, shall prove to be untrue or
incorrect in any Material respect when made, or shall be breached in any
Material respect.
Section 24. Remedies Upon Default. Upon the occurrence of any Event of
---------------------
Default and at any time thereafter so long as the same shall be continuing,
Owner may exercise one or more of the following remedies:
(a) The Owner may take action at law or in equity to collect any payments
then due or thereafter to become due under this Lease, or to enforce performance
and observance of any term, covenant or condition of this Lease applicable to
Lessee, including, without limitation, the remedies permitted by Sections 1951.2
or 1951.4 of the California Civil Code, whichever is applicable, or any
amendments thereof. Upon application by Owner, a receiver may be appointed to
take possession of the Leased Property and exercise all rights granted to Owner
as set forth in this Section 24.
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(b) The Owner may, in addition to or in lieu of taking such action at law
or in equity as it may otherwise be entitled to, terminate the leasehold estate
created hereby by giving Lessee not less than ten (10) days' prior written
notice of the date Owner elects to make such termination effective (such notice
period is referred to as the "Standstill Period") and, subject to the Lessee's
rights under Section 24(e) below, the Owner may upon or after the completion of
the Standstill Period repossess the Leased Property without further notice,
either by summary proceeding or other suitable action either at law or in equity
or otherwise, and without being deemed guilty of any manner of trespass and
without prejudice to any remedies which might otherwise be used to demand, ▇▇▇
for or collect arrears of Base Rental and Additional Rental and any other
accrued obligations of Lessee under this Lease, and Lessee hereby waives all
statutory rights (including without limitation rights of redemption, if any, to
the extent such rights may be lawfully waived), provided, however, that if the
Basic Lease Term or Extension Lease Term then in effect would otherwise expire
during said Standstill Period, such Basic Lease Term or Extension Lease Term
shall be extended to the end of the Standstill Period and Lessee shall be liable
for the payment of all Basic Rent and Additional Rent during such extended
rental period. In calculating the amount of any deficiency for which Lessee
shall be liable hereunder, there shall be included, in addition to Base Rental
and Additional Rental, the value of all other considerations agreed to be paid
or performed by Lessee under this Lease. In calculating the amounts to be paid
by Lessee pursuant to the foregoing sentence, there shall also be included all
of the Owner's reasonable expenses in connection with any sale or reletting of
the Leased Property, including, without limitation, all repossession costs,
brokerage commissions, reasonable fees for legal services and expenses of
preparing the Leased Property for such sale or reletting, it being agreed by
Lessee that the Owner may, but shall not be obligated to, (A) relet the Leased
Property or any other portion thereof for a term or terms which may at the
Owner's option be equal to or less than or exceed the period which would
otherwise have constituted the balance of the Basic Lease Term or an Extension
Lease Term then in effect and may grant such concessions and free rent as the
Owner in its reasonable judgment considers advisable or necessary to relet the
same, (B) make such alterations, repairs and decorations in or to the Leased
Property as the Owner in its reasonable judgment considers advisable or
necessary to sell or relet the same, or (C) keep the Leased Property vacant. No
action of the Owner in accordance with the foregoing or failure to sell or relet
or to collect rent upon reletting shall operate or be construed to release or
reduce Lessee's liability hereunder except that a sale of the Leased Property
not subject to this Lease shall terminate any further accruals of rent hereunder
and Owner's only remedy in respect of such rentals shall be pursuant to Section
24(c) below. Upon the occurrence and during the continuation of an Event of
Default, the Owner shall also be entitled to foreclose upon any fixtures,
furniture or equipment or other personalty which is part of the Leased Property
pursuant to the Uniform Commercial Code of California.
(c) Whether or not Owner shall have exercised, or shall thereafter at any
time exercise, any of its rights under Section 24 (a) or (b) above with respect
to the Leased Property (but subject to Lessee's rights set forth in Section
24(e) hereof), Owner, by written notice to Lessee specifying a payment date, may
demand that Lessee pay to Owner, and Lessee shall pay to Owner, on the payment
date specified in such notice ("Liquidated Damage Payment Date") which shall not
be earlier than the end of the Standstill Period and shall not be later than the
end of the then applicable Basic Lease Term or Extension Lease Term (if the
Standstill Period expires after the applicable Basic Lease Term or Extension
Lease Term, the Liquidated Damage Payment Date shall be the first
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Business Day after the last day of the Standstill Period), as liquidated damages
for loss of a bargain and not as a penalty (in lieu of the Base Rental due for
the Leased Property for any Rental Period commencing after the Liquidated Damage
Payment Date and in lieu of the exercise by Owner of its remedies under Section
24(b) above in the case of a reletting of the Leased Property or with respect to
a sale of the Leased Property), the sum of (i) all unpaid Base Rental payable
for all Rental Periods through the Liquidated Damage Payment Date specified in
such notice, plus (ii) all unpaid Additional Rental due with respect to such
Leased Property as of the Liquidated Damage Payment Date, plus (iii) an amount
equal to the Termination Value computed as of the Rent Payment Date coincident
with or next preceding the Liquidated Damage Payment Date, plus (without
duplication) all interest, cost, fees, reimbursements and all other amounts due
and payable either to Owner or Senior Lender under the Transaction Documents,
and, on payment of such amounts, Owner shall convey the Leased Property to
Lessee as an Owner's Conveyance as provided in Section 32 below. If Owner elects
(or Lessee requires Owner to elect) to exercise the remedies set forth in this
Section 24(c) prior to March 1, 2001, unless the Senior Lender directs that the
Senior Loan be paid in full, the Lessee shall pay the Equity Balance to the
Owner pursuant to Section 29(c) hereof, in lieu of the exercise of the remedies
set forth in this Section 24(c), and upon the payment of the Equity Balance to
the Owner, Owner shall cause the membership interests in the Owner and the stock
interests in the managing member of the Owner to be transferred to the Lessee
(or its nominee). Lessee shall take any actions to enable the Lessee to acquire
the membership interests in the Owner and the stock interests in the managing
member of the Owner in accordance with the terms and provisions of the Senior
Loan Documents.
(d) Subject to Lessee's rights under Section 24(e) below, Owner may
exercise any other right or remedy which may be available to it under applicable
law or proceed by appropriate court action to enforce the terms hereof or to
recover damages for the breach hereof or to rescind this Lease. The remedies
herein conferred upon and reserved to the Owner are not intended to be exclusive
of any other available remedy or remedies which the Owner may have at law or in
equity, but each and every such remedy shall be cumulative and shall be in
addition to every other remedy given under this Lease or now or hereafter
existing at law or in equity. No delay or omission to exercise any right or
power accruing upon any Event of Default shall impair any such right or power or
shall be construed to be a waiver thereof, but any such right and power may be
exercised from time to time and as often as may be deemed expedient. In order to
entitle the Owner to exercise any remedy reserved to it in this Section, it
shall not be necessary to give any notice, other than such notice as may be
required in this Section.
In addition, Lessee shall be liable for all costs and expenses, including
without limiting the generality of the foregoing, reasonable attorney's fees,
incurred by Owner or any Assignee by reason of the occurrence of any Event of
Default or the exercise of Owner's remedies with respect thereto, including all
costs and expenses incurred in connection with the surrender of the Leased
Property in accordance with Section 33 hereof or in placing the Leased Property
in the condition required by said Section. No express or implied waiver by
Owner of any Event of Default shall in any way be, or be construed to be, a
waiver of any future or subsequent Event of Default. To the extent permitted by
applicable law, Lessee hereby waives any rights now or hereafter conferred by
statute or otherwise which may require Owner to sell, lease or otherwise use the
Leased Property in mitigation of Owner's damages as set forth in this Section 24
or which may otherwise limit or modify any of Owner's rights and remedies in
this Section 24.
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Notwithstanding any provision contained in this Lease to the contrary, any
and all remedies available to Owner upon the occurrence of an Event of Default
shall survive the termination of this Lease.
(e) If the Owner notifies the Lessee that it elects to repossess the Leased
Property pursuant to Section 24(b) hereof, or, to terminate or rescind the
Lease pursuant to the provisions in Section 24(b) or (d) hereof or to exercise
its remedies under the Leasehold Deed of Trust, the Lessee shall be entitled to
require the Owner to exercise the remedies set forth in Section 24(c) hereof in
lieu of repossessing the Leased Property or in lieu of rescinding the Lease or
in lieu of exercising its remedies under the Leasehold Deed of Trust by
delivering to the Owner at any time during the Standstill Period written notice
of its election to have the Owner exercise its remedies under Section 24(c).
Unless the Owner specifies another date as the Liquidated Damage Payment Date
pursuant to the notice required under Section 24(c) hereof, the Liquidated
Damage Payment Date shall be the first Business Day after the last day of the
Standstill Period. If no notice of such election by Lessee is received by Owner
within the Standstill Period or if the required payments are not made on the
Liquidated Damage Payment Date, the Owner may pursue the remedies set forth in
Section 24(b) or Section 24(d) hereof or the remedies set forth in the Leasehold
Deed of Trust.
(f) When this Lease requires service of a notice, that notice shall replace
rather than supplement any equivalent or similar statutory notice, including any
notices required by California Code of Civil Procedure Section 1161 or any
similar or successor statute. When a statute requires service of a notice in a
particular manner, service of that notice (or a similar notice required by this
Lease) in the manner required by Section 28 shall replace and satisfy the
statutory service-of-notice procedures, including those required by California
Code of Civil Procedure Section 1162 or any similar or successor statute.
(g) In addition to and not in limitation of the foregoing, KCCI and SELCO,
as assignee of Owner, shall be entitled to pursue its remedies under the Owner
Pledge Agreement in conjunction with or independently of the exercise of any of
the remedies set forth herein after an Event of Default and any proceeds derived
therefrom shall be used to reduce the Equity Balance in accordance with the
Participation Agreement. Owner shall also be entitled to exercise its rights
under the Leasehold Deed of Trust, provided, however, that Lessee shall be
entitled to require the Owner to exercise the remedies set forth in Section
24(c) hereof if such election is made during the Standstill Period. If the
event of a conflict between the express provisions of this Lease and the express
provisions of the Leasehold Deed of Trust, the provisions this Lease shall
govern.
Section 25. Owner's Right to Perform for Lessee. If Lessee fails to make
-----------------------------------
any payment of Additional Rental required to be made by it hereunder or fails to
obtain the insurance required by Section 15 hereof or to otherwise perform or
comply with any of its material agreements contained herein, Owner may (but
shall not be required) itself, after written notice to Lessee, make such payment
or perform or comply with such agreement, and the amount of such payment and the
amount of the reasonable expenses of Owner incurred in connection with such
payment or the performance of or compliance with such agreement, together with
interest on all such amounts calculated at a per annum rate equal to the rate
equal to the Default Rate, shall be due and payable
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by Lessee upon demand by Owner; provided, however, that no such payment,
-------- -------
performance or compliance by Owner shall be deemed to cure or waive any Event of
Default hereunder.
Section 26. Expenses. Lessee agrees, whether or not the transactions
--------
contemplated by this Lease are consummated, but solely to the extent such are
incurred in connection with the transactions contemplated under the Transaction
Documents (i) to pay the fees and expenses of the Administrator (and any
successors or Administration) for ordinary or extraordinary services as
Administrator under the Administrator Agreement, including, without limitation,
the reasonable fees and expenses of its counsel, (ii) all fees and expenses of
the Owner, Senior Lender, SELCO, Healthcare Realty and KCCI including, without
limitation, the reasonable fees and expenses of their respective counsel and
(iii) to pay to or reimburse the Owner, Senior Lender, SELCO, Healthcare Realty
and KCCI for (A) the payment of lien searches, filing and transfer fees, and
taxes, fees and expenses relating to the titling and registration of and
recording of this Lease or any mortgage, collateral, assignment of leases and
rents, UCC financing statements and any other security documents with respect to
the Leased Property incurred by or on behalf the Owner, Senior Lender, SELCO,
Healthcare Realty and KCCI, (B) appraisal fees, engineering fees, environmental
assessments, title insurance fees, survey costs and (C) all other reasonable
fees and expenses which the Owner is obligated to pay in connection with the
negotiation and documentation of, and consummation of the transactions
contemplated by, and the ongoing performance of the various parties under this
Lease, the Senior Loan Documents, the other Transaction Documents, and any other
instruments and documents related to the transaction described in this Lease and
said other documents, including, without limiting the generality of the
foregoing, the organization and qualification of the Owner. The obligation of
Lessee to pay all such reasonable fees, expenses and other amounts shall survive
the termination of this Lease for any reason.
Section 27. Further Assurances. Lessee will promptly and duly execute and
------------------
deliver to Owner and any Assignee of Owner such other documents and assurances,
including, without limitation, such amendments to this Lease as may be
reasonably required by Owner and by any Assignee of Owner, and Uniform
Commercial Code financing statements and continuation statements, and will take
such further action as Owner or any Assignee of Owner may from time to time
reasonably request in order to carry out more effectively the intent and
purposes of this Lease and to establish and protect the rights and remedies
created or intended to be created in favor of Owner and of any Assignee of Owner
and their respective rights, title and interests in and to the Leased Property
or portions thereof.
Owner, at Lessee's sole cost and expense, will promptly and duly execute
and deliver to Lessee and any permitted assignee of Lessee such other documents
and assurances, including, without limitation, such amendments to this Lease as
may be reasonably required by Lessee and by any permitted assignee of Lessee,
and will take such further action as Lessee or any permitted assignee of Lessee
may from time to time reasonably request in order to carry out more effectively
the intent and purposes of this Lease and to establish and protect the rights
and remedies created or intended to be created in favor of Lessee and of any
permitted assignee of Lessee and their respective rights, title and interests in
and to the Leased Property or portions thereof.
Section 28. Notices. All notices provided for or required under the terms
-------
and provisions hereof shall be in writing, and any such notice shall be deemed
given (a) when personally delivered,
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(b) when deposited in the United States mails, with proper postage prepaid, for
first class certified mail, return receipt requested, (c) when delivered by an
overnight courier service, or (d) when received by the intended recipient if
sent by telecopy, provided that a copy of such notice also is delivered in the
manner permitted in subparagraphs (a), (b) or (c) of this Section 28, addressed
or sent (i) if to Owner or Lessee, at their respective addresses as set forth
below or at such other address as either of them shall, from time to time,
designate in writing to the other, and (ii) if to any Assignee, to the address
of such Assignee as such Assignee shall designate in writing to Owner and
Lessee.
If to Owner:
The Atrium of San ▇▇▇▇, Inc.
c/o Keycorp Leasing
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy Number:
and
Wilmington Trust Company, administrator (name of Owner)
▇▇▇▇▇▇ Square North
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Corporate Trust Administration
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
If to Lessee:
Brookdale Living Communities of California, Inc.
c/o Brookdale Living Communities, Inc.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
Telecopy Number: ▇▇▇ ▇▇▇-▇▇▇▇
with a copy to:
Brookdale Living Communities of California, Inc.
c/o Brookdale Living Communities, Inc.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopy Number: ▇▇▇ ▇▇▇-▇▇▇▇
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with a additional copy to:
▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopy Number: ▇▇▇ ▇▇▇-▇▇▇▇
Copies of any notices sent either by or to Owner or Lessee shall be
delivered to Healthcare Realty at the following address:
Healthcare Realty Trust Incorporated
▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇
Telecopy Number: 615-269-8175
Section 29. Lessee's Extension Lease Options and End of Term Purchase
---------------------------------------------------------
Options.
-------
(a) After the Basic Lease Term Expiration Date and each Extension Lease
Term (except the fifth Extension Lease Term) and if no Event of Default shall
have occurred and be continuing, Lessee shall be entitled to extend this Lease
annually for an Extension Lease Term of one (1) year provided that there shall
be no more than five (5) Extension Lease Terms in total. The first Extension
Lease Term will commence on the day immediately following the Basic Lease Term
Expiration Date, and each succeeding Extension Lease Term will commence on the
day immediately following the last day of the immediately preceding Extension
Lease Term. All of the provisions of this Lease shall be applicable during each
Extension Lease Term. Except during the fourth (4th) Extension Lease Term, this
Lease shall be deemed automatically extended for the succeeding Extension Lease
Term without the necessity of any notice or the taking of any other action
unless Lessee shall give written notice to Owner that Lessee does not elect to
extend the Term of this Lease for the next succeeding Extension Lease Term at
least three hundred and sixty-five (365) days prior to the last day of the then
current Term. Unless Lessee has exercised its purchase option under Section
29(b) hereof, in the event Lessee elects not to exercise an extension option the
Leased Property shall be returned to Owner in accordance with the provisions of
Section 34 hereof, in which case the provisions of Section 31(b) hereof shall
apply (unless delivered to a bidder in accordance with Section 30(b) hereof, in
which case the provisions of Section 31(a) shall apply). If the Leased Property
has not been so returned or delivered to Owner on the last day of the then
effective Basic Lease Term or Extension Lease Term, as the case may be, Lessee
shall pay Base Rental and Additional Rental payable as provided in Section 34(f)
hereof. If Lessee elects not to renew this Lease for an Extension Lease Term as
provided above, then during the three hundred sixty-five (365)-day period
preceding the date on which the then effective Basic Lease Term or Extension
Lease Term, as the case may be, shall terminate or expire, Owner may, subject to
Legal Requirements, place signs in locations on the grounds in front of the
Leased Property advertising that the same will be available for rent or
purchase. If Lessee has exercised its option to enter into an Extension Lease
Term ending on May 1, 2006, Lessee agrees that it will (x) effect a refinancing
of the Senior Loan on or before the maturity date for the Senior Loan (i.e.
February 1, 2006) in
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accordance with Section 19(e) hereof or (y) make a payment of Base Rental on
February 1, 2006 in an amount sufficient to pay the Senior Loan in full (and to
make payments of the other components of Base Rental which are due on such
date).
(b) Lessee shall be entitled, at its option, upon written notice to Owner,
as hereinafter provided, to purchase Owner's interest in the Leased Property in
accordance with Section 32 hereof, on any Rent Payment Date on or after March 1,
2001, for an amount equal to the Purchase Price applicable to the Basic Lease
Term or Extension Lease Term thereof then ending (i.e., the Termination Date).
To exercise said purchase option, Lessee shall give written notice to Owner to
such effect at least sixty (60) days prior to the Rent Payment Date upon which
such purchase is to be made, provided however, that Lessee shall be relieved of
its obligation to remarket the Leased Property during the Remarketing Period (as
defined in Section 39(a)) by giving Owner prior to the commencement of the
Remarketing Period written notice of its exercise of its right to purchase the
Leased Property on the last day of the then current Term.. If Lessee gives
written notice of its exercise of its right to purchase to Owner, such notice
shall constitute a binding obligation of Lessee to purchase the Leased Property
and to pay Owner the Purchase Price on the Termination Date. Notwithstanding
the provisions of Section 19 above, Lessee may freely assign its option to
purchase to any third party.
(c) Provided that the Lease is then not within a Remarketing Period, the
Lessee shall have the option on any Rent Payment Date to pay Owner the Equity
Balance (or so much thereof which represents the B Investor Loan and SELCO
Contribution) and reduce the Base Rental, Purchase Price, Termination Value and
End of Term Adjustment to reflect the repayment of the Investor Loans and the
SELCO Contribution. Lessee shall give Owner no less than thirty (30) days prior
written notice of its intent to pay the Equity Balance (or the portion thereof
representing the B Investor Loan and SELCO Contribution). The Owner and Lessee
agree that as soon as possible after the payment by the Lessee to the Owner of
the full Equity Balance, the Owner shall cause SELCO (or the then beneficial
owner of Owner) to transfer the membership interests in the Owner and the stock
in the managing member of Owner to Lessee (or its nominee) free and clear of any
Liens given to secure the A Investor Loan. Owner, Lessee and SELCO agree to
execute all documents which may be reasonably required to effectuate the
transfer of such membership interests and stock. As soon as possible after the
payment in full of the Equity Balance (or so much thereof which represents the B
Investor Loan and SELCO Contribution), Owner shall cause the Supplementatl
Collateral to be released from the Lien of the Owner Pledge Agreement and shall
direct the Custodian to return the Certificates of Deposit to Lessee.
Section 30. Third Party Sale of Leased Property.
-----------------------------------
(a) If Lessee does not exercise its option to enter into an Extension Term
or its option to purchase the Leased Property as of the last day of the then
current Term, then Lessee shall have the obligation during the final three
hundred sixty-five (365) days of the then current Term (the "Remarketing
Period"), to use such commercially reasonable efforts as would be made by a
self- interested property owner in the area to actively market commercial
property to obtain bona fide bids for the Leased Property from prospective
purchasers who are financially capable of purchasing the Leased Property for
cash on an as-is, where-is basis, without recourse to or warranty by Owner on
the terms and conditions set forth in Section 32 hereof applicable to Owner
Conveyances. The
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Lessee shall be responsible for hiring brokers who shall be reasonably
acceptable to Owner and promptly upon Owner's request, shall permit inspection
of the Leased Property and any maintenance records relating to the Leased
Property by Owner or any potential purchasers (subject, however, to any pre-
existing rights of any tenants or other occupants of the Leased Property), and
shall otherwise do all things necessary to sell and deliver possession of the
Leased Property to any purchaser. All such marketing of the Leased Property
shall be at Lessee's sole expense. The Lessee shall allow the Owner and any
potential purchaser access to the Leased Property for purposes of showing the
same (subject, however, to any pre-existing rights of any tenants or other
occupants of the Leased Property). All bids received by Lessee prior to the end
of the Basic Lease Term, or Extension Lease Term if applicable, shall be
immediately certified to Owner in writing, setting forth the amount of such bid
and the name and address of the person or entity submitting such bid.
Notwithstanding the foregoing, Owner shall have the right, but not the
obligation, to seek bids for the Leased Property during the Remarketing Period.
The obligation of Lessee to continue to pay Base Rental, Additional Rental and
any other amounts payable hereunder shall not ▇▇▇▇▇ during the Remarketing
Period.
(b) Delivery of Leased Property to Third Party Buyer. Not later than the
------------------------------------------------
Termination Date, Lessee shall deliver the Leased Property to the bidder, if
any, who shall have submitted such highest bid during the Remarketing Period,
and Owner shall simultaneously therewith sell (or cause to be sold), its
ownership in such Leased Property to such bidder, provided, that Owner shall not
--------
be obligated to sell the Leased Property if either (x) all of the conditions set
forth in Sections 32 and 33 have not been complied with on or before such
Termination Date or (y) the Net Proceeds of Sale of the Leased Property would be
less than the Maximum Owner Risk Amount applicable as of the Termination Date.
The Net Proceeds of Sale shall be retained by the Owner subject however to
Section 31(a).
(c) Delivery of Appraisals and Reports. Owner shall have the right in its
----------------------------------
sole discretion, but not the obligation, to retain a third party as its agent
for the purpose of determining compliance of the Lessee with the conditions
applicable to a return of the Leased Property pursuant to Section 34, at
Lessee's cost and expense. Upon the request of Owner and at Lessee's sole cost
and expense, Lessee shall provide Owner with a written report on or before the
fifteenth (15th) day after Owner's request which describes in reasonable detail
Lessee's efforts during the Remarketing Period to obtain bona fide bids for the
purchase of the Leased Property, including a list of all Persons approached for
the purpose of soliciting bids to purchase the Leased Property.
Section 31. End of Term Adjustment.
----------------------
(a) This Section 31(a) shall apply only if a sale of the Leased Property
has been consummated on or prior to the Termination Date pursuant to Section
30(b) hereof. If the Net Proceeds of Sale of the Leased Property from a sale to
a third party are less than the Purchase Price of the Leased Property as of such
Termination Date, Lessee shall, on the Termination Date, pay to Owner as an End
of Term Adjustment, in immediately available funds, an amount equal to such
deficiency (a "Deficiency") as an adjustment to the Rent payable under this
Lease; provided, however, that if all of the Limited Lessee Risk Conditions have
-------- -------
been met, the amount of the Deficiency payable by Lessee with respect to the
Leased Property shall not exceed the Maximum Lessee Risk Amount then applicable.
If the Net Proceeds of Sale of the Leased Property exceed the Purchase Price,
Owner shall pay to Lessee an amount equal to such excess as an adjustment to the
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Rent paid or payable under this Lease; provided, however, that Owner shall have
-------- -------
the right to offset against such adjustment payable by Owner, any other amounts
then due and payable from Lessee to Owner hereunder or under any other
agreements between Owner and Lessee. Lessee shall also pay to Owner on the
Termination Date the Base Rental due and payable for the Leased Property on the
Termination Date, plus all Additional Rental then due and owing to Owner.
Owner's obligation to sell (or cause to be sold) the Leased Property to a third
party under Section 30 is contingent upon the receipt of the amounts, if any,
payable by Lessee pursuant to this Section 31(a) and Section 31(c).
(b) If upon the expiration of the Basic Lease Term or any Extension Lease
Term or upon any Termination Date, (x) Lessee does not purchase the Leased
Property pursuant to Section 29 hereof or under Sections 16 or 24, if
applicable, (y) a third party sale is not consummated in accordance with Section
30 hereof, or (z) the Lessee does not extend the Term of the Lease by an
Extension Term pursuant to Section 29(a) hereof, then Lessee shall, on the
Termination Date, pay to Owner as an End of Term Adjustment, an amount equal to
one of the following amounts: (i) the Maximum Lessee Risk Amount then applicable
if all of the Limited Lessee Risk Conditions have been met, or (ii) the Purchase
Price, if all of the Limited Lessee Risk Conditions have not been met, plus, in
either case, the Base Rental due and payable on the Termination Date, plus all
Additional Rental then due and owing to Owner. The total selling price realized
from any sale of the Leased Property after the Termination Date shall be
retained by Owner. Lessee shall remain liable for the payment of, and upon the
consummation by Owner of the sale of the Leased Property after the Termination
Date, Lessee shall pay or reimburse Owner for the payment of, all applicable
sales, excise, transfer, recording or other taxes imposed as a result of such
sale, and fees and all expenses incurred by Owner as a result of such sale,
including, without limitation, expenses incurred in titling and registering the
conveyance of Owner's title to the Leased Property, title insurance fees and
expenses and reasonable fees and expenses of counsel, but the Lessee shall not
be required to pay or reimburse Owner for any tax based upon or measured solely
by Owner's or SELCO's gross, net or taxable income realized upon such sale or
any taxes payable in the nature of capital gains, unless any such tax is in lieu
of or a substitute for any sales, excise, transfer or recording taxes imposed as
a result of a sale of the Leased Property.
(c) [omitted]
(d) All amounts received by Owner upon the sale of the Leased Property or
as payment of the Purchase Price, End of Term Adjustment or Termination Value
shall be first applied to pay the Senior Loan in full prior to applying such
amounts to payment of Owner's Equity.
Section 32. Procedure for Owner Conveyance. In the event of an Owner
------------------------------
Conveyance, the terms and conditions of this Section 32 shall apply. On the
closing date for such transfer:
(i) The Owner shall have received all amounts due and payable to it
under the applicable provisions of this Lease, and without limitation of the
foregoing, Lessee shall have paid all Basic Rental and Additional Rental and all
other sums due and payable by Lessee under this Lease, through the date of
consummation of the transfer, in each case in funds of the type specified and
otherwise in accordance with Section 33 hereof.
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(ii) Each Owner's Conveyance shall be made by a good and sufficient grant
deed, subject to all matters of public record or apparent from an inspection or
survey, except as otherwise provided herein, or such other instruments as may be
appropriate in the circumstances, which shall transfer all of the Owner's
interest in the Leased Property to Lessee or third party, as the case may be.
OWNER'S TRANSFER OF ITS OWNERSHIP IN THE LEASED PROPERTY SHALL BE ON AN AS-IS,
WHERE-IS BASIS, WITHOUT ANY REPRESENTATION OR WARRANTY, EITHER EXPRESSED OR
IMPLIED, AS TO THE DESIGN, CONDITION, QUALITY, CAPACITY, MERCHANTABILITY,
HABITABILITY, DURABILITY, SUITABILITY OR FITNESS OF THE LEASED PROPERTY FOR ANY
PARTICULAR PURPOSE, OR ANY OTHER MATTER CONCERNING THE LEASED PROPERTY OR ANY
PORTION THEREOF. LESSEE AND, IF APPLICABLE, ANY THIRD PARTY SHALL WAIVE ANY
CLAIM (INCLUDING ANY CLAIM BASED ON STRICT OR ABSOLUTE LIABILITY IN TORT OR
INFRINGEMENT) IT MIGHT HAVE AGAINST OWNER FOR ANY LOSS, DAMAGE (INCLUDING
INCIDENTAL OR CONSEQUENTIAL DAMAGE) OR EXPENSE CAUSED BY THE LEASED PROPERTY OR
BY LESSEE'S LOSS OF USE THEREOF FOR ANY REASON WHATSOEVER. WITH RESPECT TO THE
EXCULPATION PROVIDED IN THIS SECTION 32, LESSEE WAIVES THE BENEFITS OF
CALIFORNIA CIVIL CODE SECTION 1542, WHICH PROVIDES:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE,
WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR."
Owner shall convey all of its then right, title and interest in and to the
Leased Property to Lessee or third party, as the case may be, free and clear of
any Owner Liens (other than Permitted Liens), and any liens securing debt
incurred by Owner, whether recourse or otherwise, including but not limited to
the Senior Loan and any replacements for or additions to the foregoing, but NO
REPRESENTATION OR WARRANTY SHALL BE MADE BY OWNER AS TO THE EXISTENCE OF ANY
OTHER LIENS OR ENCUMBRANCES ON THE LEASED PROPERTY AS OF THE DATE OF SALE.
(iii) The Lessee shall have paid all charges and expenses incident to
the transfer of the Leased Property in an Owner's Conveyance, including, without
limitation, all transfer taxes, recording fees, title insurance premiums and
federal, state and local taxes arising as a result of such transfer. Lessee
shall have paid all reasonable fees and expenses of Owner's counsel and Senior
Lender's counsel incurred by reason of the transfer.
Section 33. Time of the Essence; Manner of Payment. The provisions of
--------------------------------------
this Lease requiring the payment by Lessee to the Owner or to any third party,
whether such payments are for Base Rental, Additional Rental, Termination Value,
Purchase Price, Equity Balance, End of Term Adjustment, Maximum Lessee Risk
Amount or otherwise are of the essence of this Lease, and time is of the essence
for any payment and performance of such obligations of Lessee set forth herein.
All payments to be made to Owner and Senior Lender hereunder shall be in
immediately available funds paid by wire transfer to an account designated by
Owner or Senior Lender, as applicable to the
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portion of any such amounts payable to the designating party, or at Owner's or
Senior Lender's request, by certified or cashier's check.
Section 34. Return of Leased Property.
-------------------------
(a) Subject to Section 16 hereof, upon the expiration or earlier
termination of the Term (unless Lessee has purchased the Leased Property
pursuant to Section 29 hereof), Lessee will vacate and surrender and deliver
possession of the Leased Property to Owner in broom clean condition and in the
condition required pursuant to Section 13(a) hereof. Lessee shall remove from
the Leased Property on or prior to such expiration or earlier termination of
this Lease, all personal property, furniture and fixtures (other than equipment
and fixtures which form a part of the building systems and any personal property
in which Owner has been granted a security interest pursuant to Section 10(b)
hereof or in which Senior Lender has been granted a security interest pursuant
to the Deed of Trust) situated thereon which is not the property of Owner, and
shall repair any damage caused by such removal. Property not so removed shall
become the property of Owner, and Owner may cause such property to be removed
from the Leased Property and disposed of, and Lessee shall pay the reasonable
cost of any such removal and disposition and of repairing any damage caused by
such removal.
(b) Except for surrender upon the expiration or earlier termination of the
Term hereof, no surrender to Owner of this Lease or of the Leased Property shall
be valid or effective unless agreed to and accepted in writing by Owner and any
Assignee of Owner.
(c) Without limiting the generality of the foregoing, upon the surrender
and return of the Leased Property to Owner pursuant to this Section 34, the
Leased Property shall (i) be capable of being immediately utilized by a third-
party purchaser or third-party lessee without further inspection, construction,
repair, replacement, alterations or improvements, licenses, permits, or
approvals, except for any of the foregoing required solely by virtue of the
change in ownership (other than to Owner or Assignee and except for any buildout
requirements that are unique to such new owner or lessee), use or occupancy of
the Leased Property, (ii) be in accordance and compliance with all Legal
Requirements and Environmental Legal Requirements including, without limitation,
any of the foregoing required by virtue of a change in ownership, use or
occupancy of the Leased Property other than to Lessee, (iii) be free and clear
of all Liens, other than (A) any Permitted Liens and Owner Liens and (B) any
liens securing debt incurred by Owner, whether recourse or otherwise, including
but not limited to the Senior Loan and any replacements for or additions to the
foregoing.
(d) On or prior to the date of such surrender and return of the Leased
Property, Owner shall have received from Lessee, at Lessee's expense, evidence
satisfactory to Owner and each Assignee, of compliance with the provisions of
this Section 34, including without limitation, an environmental assessment for
the Leased Property addressed in form and substance satisfactory to Owner and
each Assignee or, in lieu of addressing to such parties directly, accompanied by
a letter permitting Owner and each Assignee to rely thereon, performed by an
independent, licensed professional engineer satisfactory to Owner and each
Assignee, and which assessment (x) shall be sufficient in scope to determine
compliance with the applicable Environmental Legal Requirements, (y) shall
reveal no actual or potential environmental liabilities which cannot be
remediated by Lessee as provided in the following clause (z), and (z) if such
environmental assessment reveals the need for
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additional review, Lessee shall have provided such additional information or
environmental assessments as are required by Owner and each Assignee and,
subject to Section 20 hereof, any remediation recommended therein to be
performed shall have been performed, and evidence of compliance with Section
34(c)(ii).
(e) Upon such return of the Leased Property to Owner, Lessee shall deliver
to Owner a then current title insurance policy or a binding commitment to issue
Owner's and Lender's title insurance policies written by a title insurance
company reasonably acceptable to Owner and Senior Lender or endorsements to the
existing Owner's and Lender's Title Insurance, in each case, insuring good and
marketable title in the Leased Property in an amount equal to the Termination
Value determined as of the Termination Date, unencumbered except for Owner Liens
and Permitted Liens. Upon the request of Owner, Lessee shall continue for a
period not in excess of one hundred eighty (180) days to maintain its insurance
policies for the Leased Property required under Section 15 hereof if able to do
so on a commercially reasonable basis, provided that Owner pays or reimburses
Lessee for its pro rata costs thereof.
(f) Until the Leased Property has been returned to Owner in the condition
required under Section 34(a) through (d) hereof, Lessee shall continue to pay
Owner, on the same dates on which Base Rental was payable during the Basic Lease
Term or any Extension Lease Term thereof, 125% of the Base Rental that was
payable on the last Rent Payment Date plus, all Additional Rental for which
Lessee is liable applicable to such periods.
(g) The provisions of this Section 34 are of the essence of this Lease, and
any Material breach thereof shall be deemed an Event of Default hereunder, and
upon application to any court of equity having jurisdiction in the premises,
Owner shall be entitled to a decree against Lessee requiring specific
performance of the covenants of Lessee set forth in this Section 34.
Section 35. Financial Information.
---------------------
(a) Lessee agrees to furnish Owner and Senior Lender (i) as soon as
available, and in any event within 105 days after the last day of each fiscal
year of Lessee, a copy of the balance sheet of Lessee's Parent on a consolidated
basis as of the end of such fiscal year, and related consolidated statements of
income and retained earnings of Lessee's Parent for such fiscal year, certified
by an independent certified public accounting firm of recognized standing, each
on a comparative basis with corresponding statements for the prior fiscal year,
and a copy of Lessee's Parent's form 10-K, if any, filed with the Securities and
Exchange Commission for such fiscal year; (ii) within 50 days after the last day
of each fiscal quarter of Lessee's Parent (except the last such fiscal quarter),
a copy of the balance sheet as of the end of such quarter, and statement of
income and retained earnings covering the fiscal year to date of Lessee Parent
on a consolidated basis, each on a comparative basis with the corresponding
period of the prior year, all in reasonable detail and certified by the
treasurer or principal financial officer of Lessee's Parent, together with a
copy of Lessee's Parent's form 10-Q, if any, filed with the Securities and
Exchange Commission for such quarterly period; (iii) contemporaneously with its
transmittal to each stockholder of Lessee's Parent and to the Securities and
Exchange Commission, all such other financial statements and reports as Lessee's
Parent shall send to its stockholders and to the Securities and Exchange
Commission; (iv) as soon as available to Lessee's Parent, the notice of any
Material adjustment resulting from any audit of the books and/or
-49-
records of Lessee's Parent by any taxing authority having jurisdiction over
Lessee's Parent; and (v) such additional financial information as Owner may
reasonably request concerning Lessee's Parent.
(b) Lessee agrees to and shall cause Lessee's Parent to prepare and deliver
the reports required under Section 1.18 of the Deed of Trust to Owner and Senior
Lender and shall permit the Senior Lender access to Lessee's books and records
as required thereby.
Section 36. Recording. Lessee and Owner will execute, acknowledge,
---------
deliver and cause to be recorded or filed in the manner and place required by
any present or future law, a memorandum hereof, and all other instruments,
including, without limitation, financing statements, continuation statements,
releases and instruments of similar character, which shall be reasonably
requested by Owner or any Assignee as being necessary or appropriate in order to
protect Owner's or Assignee's respective interests in the Leased Property or to
publish notice of or to create, maintain and protect the lien and security
interest intended to be created by the Deed of Trust and the other obligations
of Owner to Senior Lender upon, and the interest of Senior Lender in, the Leased
Property. If Lessee shall fail to comply with this Section 36, Owner shall be
and is hereby irrevocably appointed the agent and attorney in fact of Lessee, to
comply therewith, but this sentence shall not prevent any default in the
observance of this Section 36 by Lessee from constituting an Event of Default in
accordance with the provisions of this Lease. Lessee may record a memorandum of
this Lease whether or not requested by Owner.
Section 37. No Reliance. Lessee and Owner hereby mutually acknowledge
-----------
that in negotiating the terms of this Lease and all other related agreements and
documents, each has sought, obtained and relied exclusively upon such
accounting, actuarial, tax and legal advice from its own or other independent
sources as it has deemed necessary, and further acknowledges that neither
Lessee, Owner, Senior Lender, SELCO, Healthcare Realty, KCCI, the Administrator
or any Assignee nor any of their respective affiliates or personnel has
represented or warranted the legal, tax, economic, accounting, or other
consequences of the terms and provisions hereof and of the other related
agreements and documents.
Section 38. Miscellaneous. Any provision of this Lease which is
-------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating or diminishing Owner's or Lessee's rights under the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, Lessee and Owner
hereby waives any provision of law which renders any provision of this Lease
prohibited or unenforceable in any respect. In no event shall any amounts
payable hereunder, whether payable as Base Rental, Additional Rental or
otherwise, exceed any limits imposed by applicable law. To the extent any
amounts received by Owner exceeds the maximum amount permitted, such payment
shall be credited to future Base Rental payable hereunder or at Owner's option,
be refunded to Lessee. No term or provision of this Lease may be amended,
altered, waived, discharged or terminated orally, but may be amended, altered,
waived, discharged or terminated only by an instrument in writing signed by a
duly authorized officer of the party against which the enforcement of the
amendment, alteration, waiver, discharge or termination is sought and consented
to in writing by the Senior Lender (while the Senior Loan is outstanding). No
amendment of any provision benefitting any Indemnitee hereunder shall be
effective to adversely
-50-
affect such Indemnitee's right hereunder without the written consent of such
Indemnitee. A waiver on any one occasion shall not be construed as a waiver on a
future occasion. All of the covenants, conditions and obligations contained in
this Lease shall be binding upon and shall inure to the benefit of the
respective successors and assigns of Owner and (subject to the restrictions of
Section 19 hereof) Lessee. This Lease, the other Transaction Documents and each
related instrument, document, agreement and certificate, collectively constitute
the complete and exclusive statement of the terms of the agreement between Owner
and Lessee with respect to the leasing of the Leased Property, and cancel and
supersede any and all prior oral or written understandings with respect thereto.
Section 39. Venue; Governing Law. Lessee agrees that at Owner's sole
--------------------
election any suit, action or proceeding brought by Owner against Lessee in
connection with or arising out of this Lease may be brought in any federal or
state court in the State of California, and Lessee waives personal service of
all process upon it and consents that service of process may be made by mail or
messenger directed to it at its address set forth above and that service so made
shall be deemed to be completed upon the earlier of actual receipt or three (3)
days after the same shall have been posted to Lessee's said address. Nothing
herein contained shall affect Owner's right to serve legal process in any other
manner permitted by law or to bring any suit, action or proceeding against
Lessee or its property in the courts of any other jurisdiction. This Lease shall
in all respects be governed by, and constructed in accordance with, the laws of
the State of California, including all matter of construction, validity and
performance.
Section 40. Estoppel Certificate. Lessee agrees from time to time, upon
--------------------
not less than ten (10) days' prior written notice from Owner, Senior Lender,
SELCO, Healthcare Realty or KCCI, to execute, acknowledge and deliver to Owner,
Senior Lender, SELCO, Healthcare Realty or KCCI or any other Person designated
by Owner, Senior Lender, SELCO, Healthcare Realty or KCCI, a statement in form
and substance reasonably satisfactory to the Person requesting same certifying
that this Lease is unmodified and in full force and effect (or if there have
been modifications, that this Lease is in full force and effect as modified and
stating the modifications), the dates to which Base Rental and Additional Rental
have been paid, and stating whether or not, to the best knowledge of the signer
of the certificate, Owner is in default in performance of any covenant,
agreement or condition in this Lease and, if so, specifying each such default of
which the signer may have knowledge, it being intended that any such statement
may be relied upon by any prospective purchasers of the Leased Property, any
assignee of Owner, Senior Lender, SELCO, Healthcare Realty or KCCI or any
prospective mortgage lender. Owner agrees that at the reasonable request of the
Lessee it will provide the Lessee with a statement of the then current Equity
Balance and shall cooperate with Lessee in requesting that the Senior Lender
provide the Owner and Lessee with a statement of the then current balance of the
Senior Loan.
Section 41. Survival of Representations, Warranties and Covenants. All
-----------------------------------------------------
representations, warranties, agreements, covenants and obligations of Lessee
herein are material, shall be deemed to have been relied upon by Owner, and,
unless by their express terms expire as of an earlier date, shall survive and
continue in full force and effect notwithstanding the expiration or earlier
termination of this Lease in whole or in part, including the expiration or
termination of the Term with respect to the Leased Property.
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[SIGNATURES ON NEXT PAGE]
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[SIGNATURE PAGE FOR LEASE AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have caused this Lease to be duly
executed under seal by their duly authorized representatives effective as of the
date first written above.
The Atrium of San ▇▇▇▇ LLC
(Owner)
By: The Atrium of San ▇▇▇▇, Inc.
By:________________________________
Title:_____________________________
Brookdale Living Communities of
California, Inc.
(Lessee)
By:________________________________
Title:_____________________________
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EXHIBIT A
Legal Description of Land
-54-
Exhibit B
BASE RENTAL
-----------
There are four (4) components to Base Rental: (i) Senior Loan Debt
Service, (ii) A Investor Loan Debt Service, (iii) B Investor Loan Debt Service,
and (iv) SELCO Basic Rent.
(i) SENIOR LOAN DEBT SERVICE means (a) all interest payable on the
Senior Loan on any Senior Loan Payment Date, plus (b) the principal, if any,
payable on the Senior Loan as of such Senior Loan Payment Date, plus (c) all
premiums, make-whole amounts, prepayment penalties or any other charges or
payments due on the Senior Loan on such Senior Loan Payment Date, plus (d) any
sinking fund or other principal redemption payments due on such Senior Loan
Payment Date, plus (e) all other payments due under the Senior Loan Documents,
including but not limited to, late charges, default interest and other costs and
expenses incurred by Senior Lender in collecting the Senior Loan Debt Service.
Pursuant to the terms of the Senior Loan Documents, the Lessor is required
to make monthly payments in the amount of ONE HUNDRED THIRTY-FOUR THOUSAND EIGHT
HUNDRED EIGHTY-FOUR AND 43/100 DOLLARS ($134,884.43). All Senior Loan Debt
Service shall be paid directly to the Senior Lender on or before the same is due
under the Senior Loan Documents.
(ii) A INVESTOR LOAN DEBT SERVICE means (a) all interest payable on the A
Investor Loan on any A Investor Distribution Date (as defined in the
Participation Agreement), plus (b) the principal, if any, payable on the A
Investor Loan as of such A Investor Distribution Date, plus (c) all premiums,
make-whole amounts, prepayment penalties, any increased costs, yield protection
payments, late fees, default interest, and any other charges or other payments
due with respect to the A Investor Loan under the terms of the Participation
Agreement, plus (d) any sinking fund or other principal redemption payments due
on such A Investor Distribution Date.
(iii) B INVESTOR LOAN DEBT SERVICE means (a) all interest payable on the B
Investor Loan on any B Investor Distribution Date as defined in the
Participation Agreement, plus (b) the principal, if any, payable on the B
Investor Loan as of such B Investor Distribution Date, plus (c) all premiums,
make-whole amounts, prepayment penalties, any increased costs, yield protection
payments, late fees, default interest, and any other charges or other payments
due with respect to the B Investor Loan under the terms of the Participation
Agreement, plus (d) any sinking fund or other principal redemption payments due
on such B Investor Distribution Date.
(iv) SELCO BASIC RENT means an amount equal to the return payable on the
SELCO Contribution in accordance with Section 2.3 of the Participation
Agreement, together with all make-whole amounts, prepayment penalties, any
increased costs, yield protection payments, late fees, default interest and
other charges or other payments due with respect to the SELCO Contribution under
the terms of the Participation Agreement. SELCO Basic Rent shall be payable
quarterly in advance on each SELCO Distribution Date.
-55-
The rights of the Owner, KCCI, SELCO and Healthcare Realty to receive
Equity Rental is subject to the rights of the Senior Lender under the Senior
Loan Documents while the Senior Loan is outstanding.
-56-
EXHIBIT C
Termination Values and Purchase Prices
-57-
EXHIBIT D
Maximum Lessee Risk Amounts and Maximum Owner Risk Amounts
-58-
Schedule I
List of Listed Permits
[none]
-59-
Schedule II
List of Acceptable Hazardous Waste
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