THE FOLLOWING AGREEMENT IS SUBSTANTIALLY THE SAME
EXCEPT FOR THE FOLLOWING:
COMMUNITY BASE RENT
Colonial Park Club Original Meditrust
Investment multiplied
by 9.83%
Lodge at Mainlands $924,530.37
Fairhaven Estates Original Meditrust
Investment multiplied
by 9.9%
Highland Hills Original Meditrust
Investment multiplied
by 9.9%
▇▇▇▇▇▇▇▇ Place Original Meditrust
Investment multiplied
by 9.9%
ORIGINAL
COMMUNITY INVESTMENT
Colonial Park Club $7,841,931
Lodge at Mainlands $9,405,192
Fairhaven Estates $3,677,423
Highland Hills $3,360,000
▇▇▇▇▇▇▇▇ Place $10,669,705
NOTE: Colonial Park Club's lease commenced August 21, 1996 and
ends March 31, 2008; Lodge at Mainland's lease commenced
August 20, 1996 and ends March 31, 2008; Fairhaven Estates,
Highland Hills and ▇▇▇▇▇▇▇▇ Place leases commenced October 1,
1996 and ends September 30, 2007.
EMERITUS
SARASOTA
FACILITY LEASE AGREEMENT
MEDITRUST ACQUISITION CORPORATION I
(A Massachusetts corporation)
as
Lessor
AND
EMERITUS PROPERTIES I, INC.
(A Washington corporation)
as
Lessee
Dated as of August __, 1996
For Premises Located AT
________, __________, __________
FACILITY LEASE AGREEMENT
This FACILITY LEASE AGREEMENT ("Lease") is dated as of
the _____ day of August, 1996 and is between MEDITRUST
ACQUISITION CORPORATION I ("Lessor"), a Massachusetts corporation
having its principal office at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and EMERITUS PROPERTIES I, INC. ("Lessee"), a
Washington corporation, having its principal office at c/o Emeritus
Corporation, ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-
2162.
ARTICLE 1
LEASED PROPERTY; TERM; CONSTRUCTION; EXTENSIONS
1.1 LEASED PROPERTY. Upon and subject to the terms
and conditions hereinafter set forth, Lessor leases to Lessee and Lessee
rents and leases from Lessor all of Lessor's rights and interests in and to the
following real and personal property (collectively, the "Leased Property"):
(a) the real property described in EXHIBIT A
attached hereto (the "Land");
(b) all buildings, structures, Fixtures (as hereinafter
defined) and other improvements of every kind including, but not limited
to, alleyways and connecting tunnels, sidewalks, utility pipes, conduits and
lines, and parking areas and roadways appurtenant to such buildings and
structures presently or hereafter situated upon the Land (collectively, the
"Leased Improvements");
(c) all easements, rights and appurtenances of every
nature and description now or hereafter relating to or benefitting any or all
of the Land and the Leased Improvements;
(d) all equipment, machinery, building fixtures, and
other items of property (whether realty, personalty or mixed), including all
components thereof, now or hereafter located in, on or used in connection
with, and permanently affixed to or incorporated into the Leased
Improvements, including, without limitation, all furnaces, boilers, heaters,
electrical equipment, heating, plumbing, lighting, ventilating, refrigerating,
incineration, air and water pollution control, waste disposal, air-cooling and
air-conditioning systems and apparatus, sprinkler systems and fire and theft
protection equipment, and built-in oxygen and vacuum systems, all of
which, to the greatest extent permitted by law, are hereby deemed by the
parties hereto to constitute real estate, together with all replacements,
modifications, alterations and additions thereto, but specifically excluding
all items included within the category of Tangible Personal Property (as
hereinafter defined) which are not permanently affixed to or incorporated in
the Leased Property (collectively, the "Fixtures"); and
The Leased Property is leased in its present condition, AS IS,
without representation or warranty of any kind, express or implied, by
Lessor and subject to: (i) the rights of parties in possession; (ii) the
existing state of title including all covenants, conditions, Liens (as
hereinafter defined) and other matters of record (including, without
limitation, the matters set forth in EXHIBIT B); (iii) all applicable laws
and (iv) all matters, whether or not of a similar nature, which would be
disclosed by an inspection of the Leased Property or by an accurate survey
thereof.
1.2 TERM. The term of this Lease shall consist of: the
"Initial Term", which shall commence on [August 21, 1996] (the
"Commencement Date") and end on March 31, 2008 (the "Expiration
Date"); provided, however, that this Lease may be sooner terminated as
hereinafter provided. In addition, Lessee shall have the option(s) to extend
the Term (as hereinafter defined) as provided for in Section 1.3.
1.3 EXTENDED TERMS. Provided that this Lease has not
been previously terminated, and as long as there exists no Lease Default (as
hereinafter defined) at the time of exercise and on the last day of the Initial
Term or the then current Extended Term (as hereinafter defined), as the
case may be, Lessee is hereby granted the option to extend the Initial Term
of this Lease for four (4) additional periods (collectively, the "Extended
Terms") as follows: four (4) successive five (5) year periods for a
maximum Term, if all such options are exercised, which ends on March 31,
2028. Lessee's extension option rights shall be exercised by Lessee by
giving written notice to Lessor of each such extension at least one hundred
eighty (180) days, but not more than three hundred sixty (360) days, prior
to the termination of the Initial Term or the then current Extended Term, as
the case may be. Lessee shall have no right to rescind any such notice once
given. Lessee may not exercise its option for more than one Extended
Term at a time. During each effective Extended Term, all of the terms and
conditions of this Lease shall continue in full force and effect, except that
the Base Rent (as hereinafter defined) for each such Extended Term shall be
adjusted as set forth in Section 3.1(a).
Notwithstanding anything to the contrary set forth herein, Lessee's
rights to exercise the options granted in this Section 1.3 are subject to the
further condition that concurrently with the exercise of any extension option
hereunder, Lessee shall have exercised its option to extend the terms of all
of the Related Leases in accordance with the provisions of the Agreement
Regarding Related Transactions and the provisions of Section 1.3 of each of
the Related Leases.
2
ARTICLE 2
DEFINITIONS AND RULES OF CONSTRUCTION
2.1 DEFINITIONS. For all purposes of this Lease and the
other Lease Documents (as hereinafter defined), except as otherwise
expressly provided or unless the context otherwise requires, (i) the terms
defined in this Article have the meanings assigned to them in this Article
and include the plural as well as the singular and (ii) all references in this
Lease or any of the other Lease Documents to designated "Articles",
"Sections" and other subdivisions are to the designated Articles, Sections
and other subdivisions of this Lease or the other applicable Lease
Document.
ACCOUNTS: As defined in the UCC.
ACCREDITATION BODY: Any person, including any Person
having or claiming jurisdiction over the accreditation, certification,
evaluation or operation of the Facility.
ADDED VALUE PERCENTAGE: The proportion of the Fair
Market Added Value of Capital Additions paid for or financed by Lessee to
the Fair Market Value of the entire Leased Property, expressed as a
percentage.
ADDITIONAL CHARGES: As defined in Article 3.
ADDITIONAL LAND: As defined in Section 9.3.
ADDITIONAL RENT: As defined in Article 3.
ADDITIONAL RENT COMMENCEMENT DATE: As defined
in Article 3.
AFFILIATE: With respect to any Person (i) any other Person
which, directly or indirectly, controls or is controlled by or is under
common control with such Person, (ii) any other Person that owns,
beneficially, directly or indirectly, five percent (5%) or more of the
outstanding capital stock, shares or equity interests of such Person or (iii)
any officer, director, employee, general partner or trustee of such Person, or
any other Person controlling, controlled by, or under common control with,
such Person (excluding trustees and Persons serving in a fiduciary or
similar capacity who are not otherwise an Affiliate of such Person). For the
purposes of this definition, "control" (including the correlative meanings of
the terms "controlled by" and "under common control with"), as used with
respect to any Person, shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of
3
such Person, through the ownership of voting securities, partnership
interests or other equity interests provided, however, that, (a) for purposes
of determining a Related Party Default, the percentage of outstanding
capital stock, shares or equity interests referenced in (ii) above shall be
fifty percent (50%) and (b) any Person who is an Affiliate by virtue of
the ownership thereof by ▇▇▇▇▇▇ ▇. ▇▇▇▇ or his status therein as an officer or
director shall not be deemed an Affiliate for purposes of determining a
Related Party Default.
AFFILIATED PARTY SUBORDINATION AGREEMENT: That
certain Affiliated Party Subordination Agreement of even date by and
among Lessee, the Guarantor, various Affiliates of Lessee and various
Affiliates of Lessor.
AGREEMENT REGARDING RELATED TRANSACTIONS
(ACQUISITION): The Fourth Amended and Restated Agreement
Regarding Related Transactions (Acquisition) of even date, as amended
from time to time, between Lessee, Lessor and any Related Party that is
party to any Related Lease or Related Party Agreement. Lessor and Lessee
anticipate that the Agreement Regarding Related Transactions will be
amended from time to time to include Affiliates of Lessor and Lessee as
parties thereto in connection with future transactions and acknowledge and
agree that for all purposes under this Lease Agreement such amendments
shall be deemed to be included in this definition.
ANNUAL FACILITY UPGRADE EXPENDITURE: An
aggregate annual amount equal to the product of TWO HUNDRED
DOLLARS ($200) (as increased as of the first day of each Lease Year in
which the Annual Facility Upgrade Expenditure is to be made by an amount
equal to the product of the CPI Increase multiplied by TWO HUNDRED
DOLLARS ($200)) times the number of units in the Facility, such amount
to be spent on Upgrade Renovations. The term "CPI Increase" means a
fraction, the numerator of which is the Price Index in effect as of the first
day of the Lease Year in which the Annual Facility Upgrade Expenditure is
to be made and the denominator of which is the Price Index in effect as of
the date hereof. The term "Price Index" means the Consumer Price Index
for Urban Wage Earners and Clerical Workers, All Items-Series A (1982-
84=100), published by the Bureau of Labor Statistics, U.S. Department of
Labor. If the Bureau of Labor Statistics should cease to publish such Price
Index in its present form and calculated on the present basis, then the most
similar index published by the same Bureau shall be used for the same
purpose. If there is no such similar index, a substitute index which is then
generally recognized as being similar to such Price Index, such substitute
index to be reasonably selected by Lessor.
APPURTENANT AGREEMENTS: Collectively, all instruments,
documents and other agreements that now or hereafter create any utility,
access or other rights or appurtenances benefiting or relating to the Leased
Property.
4
AWARD: All compensation, sums or anything of value awarded,
paid or received on a total or partial Condemnation.
BASE GROSS REVENUES: The annualized Gross Revenues of
the Facility for the period from and including [___________] and including
[___________], initially as shown by Lessee's certified Consolidated
Financial Statements and as later verified by Lessee's Consolidated
Financial Statements.
BASE RENT: As defined in Section 3.1.
BUSINESS DAY: Any day which is not a Saturday or Sunday or
a public holiday under the laws of the United States of America, the
Commonwealth of Massachusetts, the State or the state in which Lessor's
depository bank is located.
CAPITAL ADDITIONS: Collectively, all new buildings and
additional structures annexed to any portion of any of the Leased
Improvements and material expansions of any of the Leased Improvements
which are constructed on any portion of the Land during the Term,
including, without limitation, the construction of a new wing or new story,
the renovation of any of the Leased Improvements on the Leased Property
and any expansion, construction, renovation or conversion in connection
therewith (a) in order to provide a functionally new facility that is needed or
used to provide services not previously offered or (b) in order to (i) increase
the bed capacity of a Facility, (ii) change the purpose for which such beds
are utilized and/or (iii) change the utilization of any material portion of any
of the Leased Improvements provided that for the purposes of Article 9
hereof the Project shall not be treated as a Capital Addition.
CAPITAL ADDITION COST: The cost of any Capital Addition
made by Lessee whether paid for by Lessee or Lessor. Such cost shall
include all costs and expenses of every nature whatsoever incurred directly
or indirectly in connection with the development, permitting, construction
and financing of a Capital Addition as reasonably determined by, or to the
reasonable satisfaction of, Lessor.
CASH COLLATERAL: As defined in the Deposit Pledge
Agreement.
CASH FLOW: The Consolidated Net Income (or Consolidated
Net Loss) before federal and state income taxes for any period plus (i) the
amount of the provision for depreciation and amortization actually deducted
on the books of the applicable Person for the purposes of computing such
Consolidated Net Income (or Consolidated Net Loss) for the period
involved, plus (ii) Rent and interest on all other Indebtedness which is fully
subordinated to the Lease Obligations, plus (iii) any indebtedness which is
fully subordinated to the Lease Obligations pursuant to the Affiliated Party
Subordination Agreement or the Management Subordination Agreement.
5
CASUALTY: As defined in Section 13.1.
CHATTEL PAPER: As defined in the UCC.
CLOSING: As defined in Section 18.3.6.
CODE: The Internal Revenue Code of 1986, as amended.
COLLATERAL: All of the property in which security interests
are granted to Lessor and the other Meditrust Entities pursuant to the Lease
Documents and the Related Party Agreements to secure the Lease
Obligations, including, without limitation, the Cash Collateral.
COMPETITIVE ACTIVITY: As defined in Section 11.5.
COMPLETION DATE: As defined in the Leasehold
Improvement Agreement.
COMPLETION OF THE PROJECT: As defined in the Leasehold
Improvement Agreement.
CONDEMNATION: With respect to the Leased Property or any
interest therein or right accruing thereto or use thereof (i) the exercise of
any governmental authority, whether by legal proceedings or otherwise, by
a Condemnor or (ii) a voluntary sale or transfer by Lessor to any
Condemnor, either under threat of Condemnation or Taking or while legal
proceedings for Condemnation or Taking are pending.
CONDEMNOR: Any public or quasi-public authority, or private
corporation or individual, having the power of condemnation.
CONSOLIDATED: The consolidated accounts of the relevant
Person and its Subsidiaries consolidated in accordance with GAAP.
CONSOLIDATED FINANCIALS: For any fiscal year or other
accounting period for any Person and its consolidated Subsidiaries,
statements of earnings and retained earnings and of changes in financial
position for such period and for the period from the beginning of the
respective fiscal year to the end of such period and the related balance sheet
as at the end of such period, together with the notes thereto, all in
reasonable detail and setting forth in comparative form the corresponding
figures for the corresponding period in the preceding fiscal year, and
prepared in accordance with GAAP, and disclosing all liabilities of such
Person and its consolidated Subsidiaries, including, without limitation,
contingent liabilities.
CONSULTANTS: Collectively, the architects, engineers,
inspectors, surveyors and other consultants that are engaged from time to
time by Lessor to perform services for Lessor in connection with this Lease.
6
CONTRACTS: All agreements (including, without limitation,
Provider Agreements, to the extent applicable, and any Residency
Agreement), contracts (including without limitation, construction contracts,
subcontracts, and architects' contracts), contract rights, warranties and
representations, franchises, and records and books of account benefiting,
relating to or affecting the Leased Property or the ownership, construction,
development, maintenance, management, repair, use, occupancy,
possession, or operation thereof, or the operation of any programs or
services in conjunction with the Facility and all renewals, replacement and
substitutions therefor, now or hereafter issued to any member of the
Leasing Group by, or entered into by any member of the Leasing Group
with, any Governmental Authority, Accreditation Body or Third Party
Payor or maintained or used by any member of the Leasing Group or
entered into by any member of the Leasing Group with any third Person.
CURRENT ASSETS: All assets of any Person which would, in
accordance with GAAP, be classified as current assets.
CURRENT LIABILITIES: All liabilities of any Person which
would, in accordance with GAAP, be classified as current liabilities.
DATE OF TAKING: The date the Condemnor has the right to
possession of the property being condemned.
DEBT COVERAGE RATIO: The ratio of (i) Cash Flow for each
applicable period to (ii) the total of all Rent (excluding Additional Rent due
under this Lease) paid or payable during such period or accrued for such
period.
DECLARATION: As defined in Article 23.
DEED: As defined in Section 18.3.
DEPOSIT: As defined in Section 18.3.
DEPOSIT PLEDGE AGREEMENT: The pledge and security
agreement so captioned and dated as of even date herewith between Lessee
and Lessor.
DOCUMENTS: As defined in the UCC.
ENCUMBRANCE: As defined in Section 20.3.
ENVIRONMENTAL INDEMNITY AGREEMENT: The
Environmental Indemnity Agreement of even date herewith by and among
Lessee the Guarantor and Lessor.
ENVIRONMENTAL LAWS: As defined in the Environmental
Indemnity Agreement.
7
ERISA: The Employment Retirement Income Security Act of
1974, as amended.
EVENT OF DEFAULT: As defined in Article 16.
EXCESS GROSS REVENUES: Gross Revenues less Base Gross
Revenues.
EXPIRATION DATE: As defined in Section 1.2.
EXTENDED TERMS: As defined in Section 1.4.
FACILITY: The 90 unit, 110 bed, fully licensed assisted living
facility known as American House Sarasota on the Land (together with
related parking and other amenities), together with (after the Completion
Date) the fully licensed assisted living facility addition (the assisted living
facility addition is defined as the Project under the Leasehold Improvement
Agreement) to be constructed on the Land (together with related parking
and other amenities).
FAILURE TO OPERATE: As defined in Article 16.
FAILURE TO PERFORM: As defined Article 16.
FAIR MARKET ADDED VALUE: The Fair Market Value of the
Leased Property (including all Capital Additions) minus the Fair Market
Value of the Leased Property determined as if no Capital Additions paid for
by Lessee had been constructed.
FAIR MARKET VALUE OF THE CAPITAL ADDITION: The
amount by which the Fair Market Value of the Leased Property upon the
completion of a particular Capital Addition exceeds the Fair Market Value
of the Leased Property just prior to the construction of the particular Capital
Addition.
FAIR MARKET VALUE OF THE LEASED PROPERTY: The
fair market value of the Leased Property, including all Capital Additions,
and including the Land and all other portions of the Leased Property, and
(a) assuming the same is unencumbered by this Lease, (b) determined in
accordance with the appraisal procedures set forth in Section 18.2 or in
such other manner as shall be mutually acceptable to Lessor and Lessee and
(c) not taking into account any reduction in value resulting from any Lien to
which the Leased Property is subject and which Lien Lessee or Lessor is
otherwise required to remove at or prior to closing of the transaction.
However, the positive or negative effect on the value of the Leased
Property attributable to the interest rate, amortization schedule, maturity
date, prepayment provisions and other terms and conditions of any Lien on
8
the Leased Property which is not so required or agreed to be removed shall
be taken into account in determining the Fair Market Value of the Leased
Property. The Fair Market Value shall be determined as the overall value
based on due consideration of the "income" approach, the "comparable
sales" approach, and the "replacement cost" approach.
FEE MORTGAGE: As defined in Section 20.3.
FEE MORTGAGEE: As defined in Section 20.3.
FINANCING PARTY: Any Person who is or may be participating
with Lessor in any way in connection with the financing of any Capital
Addition.
FINANCING STATEMENTS: Uniform Commercial Code
financing statements evidencing the security interests granted to Lessor in
connection with the Lease Documents.
FISCAL QUARTER: Each of the three (3) month periods
commencing on January 1st, April 1st, July 1st and October 1st.
FISCAL YEAR: The twelve (12) month period from January 1st
to December 31st.
FIXTURES: As defined in Article 1.
GAAP: Generally accepted accounting principles, consistently
applied throughout the relevant period.
GENERAL INTANGIBLES: As defined in the UCC.
GOVERNMENTAL AUTHORITIES: Collectively, all agencies,
authorities, bodies, boards, commissions, courts, instrumentalities,
legislatures, and offices of any nature whatsoever of any government,
quasi-government unit or political subdivision, whether with a federal,
state, county, district, municipal, city or otherwise and whether now or
hereinafter in existence.
GROSS REVENUES: Collectively, all revenues generated by
reason of the operation of the Leased Property (including any Capital
Additions), directly or indirectly received or to be received by Lessee or
any Affiliate of Lessee, including, without limitation, all resident revenues
received or receivable for the use of, or otherwise by reason of, all rooms,
units and other facilities provided, meals served, services performed, space
or facilities subleased or goods sold on or from the Leased Property and
further including, without limitation, except as otherwise specifically
provided below, any consideration received under any subletting, licensing,
or other arrangements with any Person relating to the possession or use of
9
the Leased Property and all revenues from all ancillary services provided at
or relating to the Leased Property; provided, however, that Gross Revenues
shall not include non-operating revenues such as interest income or gain
from the sale of assets not sold in the ordinary course of business; and
provided, further, that there shall be excluded or deducted (as the case may
be) from such revenues:
(i) all applicable contractual allowances (relating to any
period during the Term of this Lease and thereafter until the Rent
hereunder is paid in full), if any, for ▇▇▇▇▇▇▇▇ not paid by or
received from the appropriate Governmental Agencies or Third
Party Payors,
(ii) all applicable allowances according to GAAP for
uncollectible accounts,
(iii) all proper resident billing credits and adjustments
according to GAAP, if any, relating to health care accounting,
(iv) federal, state or local sales, use, gross receipts and
excise taxes and any tax based upon or measured by said Gross
Revenues which is added to or made a part of the amount billed to
the resident or other recipient of such services or goods, whether
included in the billing or stated separately,
(v) provider discounts for hospital or other medical
facility utilization contracts, if any,
(vi) the cost, if any, of any federal, state or local govern-
mental program imposed specially to provide or finance indigent
resident care (other than Medicare, Medicaid and the like),
(vii) deposits refundable to residents of the Facility, and
(viii) payments received on behalf of, and paid to, Persons who
are not Affiliates of Lessee.
To the extent that the Leased Property is subleased or occupied by
an Affiliate of Lessee, Gross Revenues calculated for all purposes of this
Lease (including, without limitation, the determination of the Additional
Rent payable under this Lease) shall include the Gross Revenues of such
Sublessee with respect to the premises demised under the applicable
Sublease (i.e., the Gross Revenues generated from the operations conducted
on such subleased portion of the Leased Property) and the rent received or
receivable from such Sublessee pursuant to such Subleases shall be
excluded from Gross Revenues for all such purposes. As to any Sublease
between Lessee and a non-Affiliate of Lessee, only the rental actually
received by Lessee from such non-Affiliate shall be included in Gross
Revenues.
10
GROUP TWO ACQUISITION FACILITIES: As defined in the
Agreement Regarding Related Transactions.
GUARANTOR: Emeritus Corporation, a Washington corporation,
and its successors and assigns.
GUARANTY OF LEASE OBLIGATIONS: The Guaranty of
Lease Obligations of even date executed by Guarantor in favor of Lessor,
relating to the Lease Obligations.
HAZARDOUS SUBSTANCES: As defined in the Environmental
Indemnity Agreement.
IMPOSITIONS: Collectively, all taxes (including, without
limitation, all capital stock and franchise taxes of Lessor, all ad valorem,
property, sales and use, single business, gross receipts, transaction privilege,
rent or similar taxes), assessments (including, without limitation, all
assessments for public improvements or benefits, whether or not
commenced or completed prior to the date hereof and whether or not to be
completed within the Term), ground rents, water and sewer rents, water
charges or other rents and charges, excises, tax levies, fees (including,
without limitation, license, permit, inspection, authorization and similar
fees), transfer taxes and recordation taxes imposed as a result of this Lease
or any extensions hereof, and all other governmental charges, in each case
whether general or special, ordinary or extraordinary, or foreseen or
unforeseen, of every character in respect of either or both of the Leased
Property and the Rent (including all interest and penalties thereon due to
any failure in payment by Lessee), which at any time prior to, during or in
respect of the Term hereof and thereafter until the Leased Property is
surrendered to Lessor as required by the terms of this Lease, may be
assessed or imposed on or in respect of or be a Lien upon (a) Lessor or
Lessor's interest in the Leased Property, (b) the Leased Property or any rent
therefrom or any estate, right, title or interest therein, or (c) any occupancy,
operation, use or possession of, sales from, or activity conducted on, or in
connection with, the Leased Property or the leasing or use of the Leased
Property. Notwithstanding the foregoing, nothing contained in this Lease
shall be construed to require Lessee to pay (1) any tax based on net income
(whether denominated as a franchise or capital stock or other tax) imposed
on Lessor or any other Person, except Lessee or its successors, (2) any net
revenue tax of Lessor or any other Person, except Lessee and its successors,
(3) any tax imposed with respect to the sale, exchange or other disposition
by Lessor of the Leased Property or the proceeds thereof, or (4) except as
expressly provided elsewhere in this Lease, any principal or interest on any
Encumbrance on the Leased Property; provided, however, the provisos set
forth in clauses (1) and (2) of this sentence shall not be applicable to the
extent that any real or personal property tax, assessment, tax levy or charge
which Lessee is obligated to pay pursuant to the first sentence of this
definition and which is in effect at any time during the Term hereof is
totally or partially repealed, and a tax, assessment, tax levy or charge set
11
forth in clause (1) or (2) is levied, assessed or imposed expressly in lieu
thereof. In computing the amount of any franchise tax or capital stock tax
which may be or become an Imposition, the amount payable by Lessee
shall be equitably apportioned based upon all properties owned by Lessor
that are located within the particular jurisdiction subject to any such tax.
INDEBTEDNESS: The total of all obligations of a Person,
whether current or long-term, which in accordance with GAAP would be
included as liabilities upon such Person's balance sheet at the date as of
which Indebtedness is to be determined, and shall also include (i) all capital
lease obligations and (ii) all guarantees, endorsements (other than for
collection of instruments in the ordinary course of business), or other
arrangements whereby responsibility is assumed for the obligations of
others, whether by agreement to purchase or otherwise acquire the
obligations of others, including any agreement contingent or otherwise to
furnish funds through the purchase of goods, supplies or services for the
purpose of payment of the obligations of others.
INDEMNIFIED PARTIES: As defined in Section 12.2.2.
INDEX: The rate of interest of actively traded marketable United
States Treasury Securities bearing a fixed rate of interest adjusted for a
constant maturity of ten (10) years as calculated by the Federal Reserve
Board.
INITIAL TERM: As defined in Section 1.2.
INSTRUMENTS: As defined in the UCC.
INSURANCE REQUIREMENTS: All terms of any insurance
policy required by this Lease, all requirements of the issuer of any such
policy with respect to the Leased Property and the activities conducted
thereon and the requirements of any insurance board, association or
organization or underwriters' regulations pertaining to the Leased Property.
LAND: As defined in Article 1.
LEASE: As defined in the preamble of this Lease.
LEASE DEFAULT: The occurrence of any default or breach of
condition continuing beyond any applicable notice and/or grace periods
under this Lease and/or any of the other Lease Documents.
12
LEASE DOCUMENTS: Collectively, this Lease, the Guaranty of
Lease Obligations, the Agreement Regarding Related Transactions, the
Leasehold Improvement Agreement, the Security Agreement, the Deposit
Pledge Agreement, the Negative Pledge Agreement, the Permits
Assignment, the Financing Statements, the Affiliated Party Subordination
Agreement, the Environmental Indemnity Agreement, and any and all other
instruments, documents, certificates or agreements executed or furnished by
any member of the Leasing Group in connection with the transactions
evidenced by the Lease and/or any of the foregoing documents.
LEASE OBLIGATIONS: Collectively, all indebtedness,
covenants, liabilities, obligations, agreements and undertakings (other than
Lessor's obligations) under this Lease and the other Lease Documents.
LEASE YEAR: A twelve month period ending on March 31st of
each year; provided, that the first Lease Year shall begin on the
Commencement Date and shall end on March 31, 1997.
LEASED IMPROVEMENTS: As defined in Article 1.
LEASED PROPERTY: As defined in Article 1.
LEASEHOLD IMPROVEMENT AGREEMENT: The Leasehold
Improvement Agreement of even date by and between Lessee and Lessor.
LEASING GROUP: Collectively, Lessee, the Guarantor, the
General Partner, any Sublessee which is an Affiliate of Lessee and any
Manager which is an Affiliate of Lessee.
LEGAL REQUIREMENTS: Collectively, all statutes, ordinances,
by-laws, codes, rules, regulations, restrictions, orders, judgments, decrees
and injunctions (including, without limitation, all applicable building,
health code, zoning, subdivision, and other land use and assisted living
licensing statutes, ordinances, by-laws, codes, rules and regulations),
whether now or hereafter enacted, promulgated or issued by any
Governmental Authority, Accreditation Body or Third Party Payor
affecting Lessor, any member of the Leasing Group or the Leased Property
or the ownership, construction, development, maintenance, management,
repair, use, occupancy, possession or operation thereof or the operation of
any programs or services in connection with the Leased Property, including,
without limitation, any of the foregoing which may (i) require repairs,
modifications or alterations in or to the Leased Property, (ii) in any way
affect (adversely or otherwise) the use and enjoyment of the Leased
Property or (iii) require the assessment, monitoring, clean-up, containment,
removal, remediation or other treatment of any Hazardous Substances on,
under or from the Leased Property. Without limiting the foregoing, the
term Legal Requirements includes all Environmental Laws and shall also
include all Permits and Contracts issued or entered into by any
13
Governmental Authority, any Accreditation Body and/or any Third Party
Payor and all Permitted Encumbrances.
LESSEE: As defined in the preamble of this Lease and its
successors and assigns.
LESSEE'S ELECTION NOTICE: As defined in Section 14.3.
LESSEE'S PURCHASE OPTION NOTICE: As defined in Section
18.3.
LESSOR: As defined in the preamble of this Lease and its
successors and assigns.
LIEN: With respect to any real or personal property, any
mortgage, easement, restriction, lien, pledge, collateral assignment,
hypothecation, charge, security interest, title retention agreement, levy,
execution, seizure, attachment, garnishment or other encumbrance of any
kind in respect of such property, whether or not inchoate, vested or
perfected.
LIMITED PARTIES: As defined in Section 11.5.4; provided,
however, in no event shall the term Limited Parties include any Person in
its capacity as a shareholder of a public entity, unless such shareholder is a
member of the Leasing Group or an Affiliate thereof.
MANAGED CARE PLANS: All health maintenance
organizations, preferred provider organizations, individual practice
associations, competitive medical plans, and similar arrangements.
MANAGEMENT AGREEMENT: Any agreement, whether
written or oral, between Lessee or any Sublessee and any other Person
pursuant to which Lessee or such Sublessee provides any payment, fee or
other consideration to any other Person to operate or manage the Facility.
MANAGEMENT SUBORDINATION AGREEMENT: The
Management Subordination Agreement as of even date herewith between
Lessee and Lessor.
MANAGER: Any Person who has entered into a Management
Agreement with Lessee or any Sublessee.
MATERIAL STRUCTURAL WORK: Any (i) structural
alteration, (ii) structural repair or (iii) structural renovation to the Leased
Property, which would customarily require or which require the design
and/or involvement of a structural engineer or architect or which would
require the issuance of a Permit.
14
MEDICAID: The medical assistance program established by Title
XIX of the Social Security Act (42 USC 1396 et seq.) and any statute
succeeding thereto.
MEDICARE: The health insurance program for the aged and
disabled established by Title XVIII of the Social Security Act (42 USC
1395 et seq.) and any statute succeeding thereto.
MEDITRUST: As defined in Article 23.
MEDITRUST/EMERITUS TRANSACTION AFFILIATE: An
Affiliate of Lessee, the business and activities of which are limited to those
subject to Meditrust/Emeritus Transaction Documents (other than the
Affiliated Party Subordination Agreement, the Agreement Regarding
Related Transactions and comparable agreement now or hereafter in effect
among Affiliates of Lessee and of Lessor) to which such Affiliate is a party.
MEDITRUST/EMERITUS TRANSACTION DOCUMENTS: As
defined in the Agreement Regarding Related Transactions.
MEDITRUST ENTITIES: Collectively, Meditrust, Lessor and any
other Affiliate of Lessor which may now or hereafter be a party to any
Related Party Agreement.
MEDITRUST INVESTMENT: The sum of (i) the Original
Meditrust Investment plus (ii) the aggregate amount of all Subsequent
Investments plus (iii) so much of the Project Funds as Lessor has expended
from time to time less the sum of any Net Award Amounts and/or Net
Proceeds Amounts.
MONTHLY DEPOSIT DATE: As defined in Section 4.6.
NEGATIVE PLEDGE AGREEMENT: The Group Two Negative
Pledge Agreement (Acquisition) of even date by and between Guarantor,
Lessee and Lessor.
NET AWARD AMOUNT: As defined in Section 3.7.
NET INCOME (OR NET LOSS): The net income (or net loss,
expressed as a negative number) of a Person for any period, after all taxes
actually paid or accrued and all expenses and other charges determined in
accordance with GAAP.
NET PROCEEDS AMOUNT: As defined in Section 3.7.
NET WORTH: An amount determined in accordance with GAAP
equal to the total assets of any Person, minus the total liabilities of such
Person.
15
OBLIGATIONS: Collectively, the Lease Obligations and the
Related Party Obligations.
OFFICER'S CERTIFICATE: A certificate of Lessee signed on
behalf of Lessee by the Chairman of the Board of Directors, the President,
any Vice President or the Treasurer of Lessee, or another officer authorized
to so sign by the Board of Directors or By-Laws of Lessee, or any other
Person whose power and authority to act has been authorized by delegation
in writing by any of the Persons holding the foregoing offices.
ORIGINAL MEDITRUST INVESTMENT: The sum of SEVEN
MILLION EIGHT HUNDRED FORTY-ONE THOUSAND NINE
HUNDRED THIRTY-ONE DOLLARS ($7,841,931).
OTHER PERMITTED USES: To the extent permitted under
applicable Legal Requirements and under Insurance Requirements, and so
long as the same do not detract in any material manner from the Primary
Intended Use and do not occupy more than ten percent (10%) of the useable
floor area of the building comprising the Facility, such uses as Lessee
reasonably determines are appropriate and incidental to the Primary
Permitted Use.
OVERDUE RATE: On any date, a rate of interest per annum
equal to the greater of: (i) a variable rate of interest per annum equal to one
hundred twenty percent (120%) of the Prime Rate, or (ii) eighteen percent
(18%) per annum; provided, however, in no event shall the Overdue Rate
be greater than the maximum rate then permitted under applicable law to be
charged by Lessor.
PBGC: Pension Benefit Guaranty Corporation.
PERMITS: Collectively, all permits, licenses, approvals,
qualifications, rights, variances, permissive uses, accreditation, certificates,
certifications, consents, agreements, contracts, contract rights, franchises,
interim licenses, permits and other authorizations of every nature
whatsoever required by, or issued under, applicable Legal Requirements
relating or affecting the Leased Property or the construction, development,
maintenance, management, use or operation thereof, or the operation of any
programs or services in conjunction with the Facility and all renewals,
replacements and substitutions therefor, now or hereafter required or issued
by any Governmental Authority, Accreditation Body or Third Party Payor
to any member of the Leasing Group, or maintained or used by any member
of the Leasing Group, or entered into by any member of the Leasing Group
with any third Person with respect to the Leased Property.
PERMITS ASSIGNMENT: The Collateral Assignment of Permits,
Licenses and Contracts of even date granted by Lessee to Lessor.
PERMITTED ENCUMBRANCES: As defined in Section 10.1.18.
16
PERMITTED PRIOR SECURITY INTERESTS: As defined in
Section 6.1.2.
PERSON: Any individual, corporation, general partnership,
limited partnership, joint venture, stock company or association, company,
bank, trust, trust company, land trust, business trust, unincorporated
organization, unincorporated association, Governmental Authority or other
entity of any kind or nature.
PLANS AND SPECIFICATIONS: As defined in Section 13.1.3.
PRIMARY INTENDED USE: The use of the Facility as an
assisted living facility with ninety (90) units, one hundred-ten (110) beds
prior to the Completion Date, and additional units and beds after the
Completion Date consisting of (i) an existing facility with ninety (90) units
one hundred-ten (110) beds; and (ii) an assisted living addition as provided
in the Leasehold Improvement Agreement; or such additional number of
units or beds as may hereafter be permitted under this Lease, and such
ancillary uses as are permitted by law and may be necessary in connection
therewith or incidental thereto.
PRIME RATE: The variable rate of interest per annum from time
to time announced by the Reference Bank as its prime rate of interest and in
the event that the Reference Bank no longer announces a prime rate of
interest, then the Prime Rate shall be deemed to be the variable rate of
interest per annum which is the prime rate of interest or base rate of interest
from time to time announced by any other major bank or other financial
institution reasonably selected by Lessor.
PRINCIPAL PLACE OF BUSINESS: As defined in Section
10.1.28.
PROCEEDS: As defined in the UCC.
PROJECT: As defined in the Leasehold Improvement Agreement.
PROJECT FUNDS: As defined in the Leasehold Improvement
Agreement.
PROVIDER AGREEMENTS: All participation, provider and
reimbursement agreements or arrangements, if any, now or hereafter in
effect for the benefit of Lessee or any Sublessee in connection with the
operation of the Facility relating to any right of payment or other claim
arising out of or in connection with Lessee's or such Sublessee's
participation in any Third Party Payor Program.
PURCHASE OPTION: As defined in Section 18.3.
PURCHASE OPTION DATE: As defined in Section 18.3.
17
PURCHASE OPTION PURCHASE PRICE: As defined in Section
18.3.
PURCHASER: As defined in Section 11.5.
RECEIVABLES: Collectively, (i) all rights to payment for goods
sold or leased or services rendered by Lessee or any other party, whether
now in existence or arising from time to time hereafter and whether or not
yet earned by performance, including, without limitation, obligations
evidenced by an account, note, contract, security agreement, chattel paper,
or other evidence of indebtedness, including Accounts and Proceeds, and
(ii) a license to use such Instruments, Documents, Accounts, Proceeds,
General Intangibles and Chattel Paper as are reasonably required for
purposes of exercising the rights set forth in (i) above.
REFERENCE BANK: Fleet Bank of Connecticut, N.A.
RELATED LEASES: The Group Two Acquisition Facility Leases
(as defined in the Agreement Regarding Related Transactions), together
with such other new leases identified from time to time in the Agreement
Regarding Related Transactions.
RELATED PARTIES: Collectively, each Person that may now or
hereafter be a party to any Related Party Agreement other than the
Meditrust Entities.
RELATED PARTY AGREEMENT: Any agreement, document or
instrument now or hereafter evidencing or securing any Related Party
Obligation, including, without limitation, the Related Leases.
RELATED PARTY DEFAULT: The occurrence of a default or
breach of condition continuing beyond the expiration of any applicable
notice and grace periods, if any, under the terms of any Related Party
Agreement.
RELATED PARTY OBLIGATIONS: Collectively, all
indebtedness, covenants, liabilities, obligations, agreements and
undertakings due to, or made for the benefit of, Lessor or any of the other
Meditrust Entities by Lessee or any other member of the Leasing Group or
any of their respective Affiliates in connection with any of the properties
described in EXHIBIT E to the Agreement Regarding Related Transactions,
as the same may be modified and amended from time to time; whether such
indebtedness, covenants, liabilities, obligations, agreements and/or
undertakings are direct or indirect, absolute or contingent, liquidated or
unliquidated, due or to become due, joint, several or joint and several,
primary or secondary, now existing or hereafter arising.
RENT: Collectively, the Base Rent, Additional Rent, the
Additional Charges and all other sums payable under this Lease and the
other Lease Documents.
18
RENT ADJUSTMENT DATE: The first day of any of the
Extended Terms.
RENT ADJUSTMENT RATE: 325 basis points over the Index.
RENT INSURANCE PROCEEDS: As defined in Section 13.8.
RESIDENCY AGREEMENT: All contracts, agreements and
consents executed by or on behalf of any resident or other Person seeking
services at the Facility, including, without limitation, assignments of
benefits and guarantees.
RETAINAGE: As defined in Section 13.1.3.
SECURITY AGREEMENT: The Security Agreement as of even
date herewith between Lessee and Lessor.
SELLER: American House Sarasota Limited Partnership, a
Michigan limited partnership.
STATE: The state or commonwealth in which the Leased Property
is located.
SUBLEASE: Collectively, all subleases, licenses, use agreements,
concession agreements, tenancy at will agreements and other occupancy
agreements of every kind and nature (but excluding any Residency
Agreement), whether oral or in writing, now in existence or subsequently
entered into by Lessee, encumbering or affecting the Leased Property.
SUBLESSEE: Any sublessee, licensee, concessionaire, tenant or
other occupant under any of the Subleases.
SUBSEQUENT INVESTMENTS: The aggregate amount of all
sums expended and liabilities incurred by Lessor in connection with Capital
Additions.
SUBSIDIARY OR SUBSIDIARIES: With respect to any Person,
any corporation or other entity of which such Person, directly, or indirectly,
through another entity or otherwise, owns, or has the right to control or
direct the voting of, fifty percent (50%) or more of the outstanding capital
stock or other ownership interest having general voting power (under
ordinary circumstances).
TAKING: A taking or voluntary conveyance during the Term of
the Leased Property, or any interest therein or right accruing thereto, or use
thereof, as the result of, or in settlement of, any Condemnation or other
eminent domain proceeding affecting the Leased Property whether or not
the same shall have actually been commenced.
19
TANGIBLE PERSONAL PROPERTY: All machinery,
equipment, furniture, furnishings, movable walls or partitions, computers or
trade fixtures, goods, inventory, supplies, and other personal property
owned or leased (pursuant to equipment leases) by Lessee and used in the
operation of the Leased Property.
TERM: Collectively, the Initial Term and each Extended Term
which has become effective pursuant to Section 1.4, as the context may
require, unless earlier terminated pursuant to the provisions hereof.
THIRD PARTY PAYOR PROGRAMS: Collectively, all third
party payor programs in which Lessee or any Sublessee presently or in the
future may participate, including without limitation, Medicare, Medicaid,
Blue Cross and/or Blue Shield, Managed Care Plans, other private
insurance plans and employee assistance programs.
THIRD PARTY PAYORS: Collectively, Medicare, Medicaid,
Blue Cross and/or Blue Shield, private insurers and any other Person which
presently or in the future maintains Third Party Payor Programs.
TIME OF CLOSING: As defined in Section 18.3.
UCC: The Uniform Commercial Code as in effect from time to
time in the State.
UNITED STATES TREASURY SECURITIES: The uninsured
treasury securities issued by the United States Federal Reserve Bank.
UNSUITABLE FOR ITS PRIMARY INTENDED USE: As used
anywhere in this Lease, the term "Unsuitable For Its Primary Intended Use"
shall mean that, by reason of Casualty, or a partial or temporary Taking by
Condemnation, in the good faith judgment of Lessor, the Facility cannot be
operated on a commercially practicable basis for the Primary Intended Use,
taking into account, among other relevant factors, the number of usable
units or beds affected by such Casualty or partial or temporary Taking.
UNAVOIDABLE DELAYS: Delays due to strikes, lockouts,
inability to procure materials, power failure, acts of God, governmental
restrictions, enemy action, civil commotion, fire, unavoidable casualty or
other causes beyond the control of the party responsible for performing an
obligation hereunder, provided that lack of funds shall not be deemed a
cause beyond the control of either party hereto.
UPGRADE RENOVATIONS: Repair and refurbishing other than
normal janitorial, cleaning and maintenance activities.
WORK: As defined in Section 13.1.1.
WORK CERTIFICATES: As defined in Section 13.1.3.
20
WORKING CAPITAL LOAN: As defined in Section 6.1.3.
WORKING CAPITAL STOCK PLEDGE: As defined in Section
16.1(h).
2.2 RULES OF CONSTRUCTION. The following rules of
construction shall apply to the Lease and each of the other Lease
Documents: (a) references to "herein", "hereof" and "hereunder" shall be
deemed to refer to this Lease or the other applicable Lease Document, and
shall not be limited to the particular text or section or subsection in which
such words appear; (b) the use of any gender shall include all genders and
the singular number shall include the plural and vice versa as the context
may require; (c) references to Lessor's attorneys shall be deemed to include,
without limitation, special counsel and local counsel for Lessor; (d)
reference to attorneys' fees and expenses shall be deemed to include all
costs for administrative, paralegal and other support staff and to exclude
any fees and expenses of attorneys who are employees of an Affiliate of
Lessor; (e) references to Leased Property shall be deemed to include
references to all of the Leased Property and references to any portion
thereof; (f) references to the Lease Obligations shall be deemed to include
references to all of the Lease Obligations and references to any portion
thereof; (g) references to the Obligations shall be deemed to include
references to all of the Obligations and references to any portion thereof;
(h) the term "including", when following any general statement, will not be
construed to limit such statement to the specific items or matters as
provided immediately following the term "including" (whether or not non-
limiting language such as "without limitation" or "but not limited to" or
words of similar import are also used), but rather will be deemed to refer to
all of the items or matters that could reasonably fall within the broadest
scope of the general statement; (i) any requirement that financial statements
be Consolidated in form shall apply only to such financial statements as
relate to a period during any portion of which the relevant Person has one
or more Subsidiaries; (j) all accounting terms not specifically defined in the
Lease Documents shall be construed in accordance with GAAP and (k) all
exhibits annexed to any of the Lease Documents as referenced therein shall
be deemed incorporated in such Lease Document by such annexation and/or
reference.
ARTICLE 3
RENT
3.1 RENT FOR LAND, LEASED IMPROVEMENTS, RELATED
RIGHTS AND FIXTURES. Lessee will pay to Lessor, in lawful money of
the United States of America, at Lessor's address set forth herein or at such
other place or to such other Person as Lessor from time to time may
designate in writing, rent for the Leased Property, as follows.
21
3.1.1 BASE RENT: From and after the Commencement
Date, Lessee shall pay to Lessor a base rent (the "Base Rent") per
annum which is equal to the product of (i) the Original Meditrust
Investment plus so much of the Project Funds as Lessor has
expended from time to time multiplied by (ii) nine and eighty-
three one hundredths percent (9.83%) calculated on a daily basis
and that is payable in arrears in consecutive monthly installments
due on the first day of each calendar month commencing on
September 1, 1996; provided, however, that on each Rent
Adjustment Date, the Base Rent shall be adjusted to equal the
greater of (i) the then current Base Rent or (ii) the Original
Meditrust Investment plus so much of the Project Funds as Lessor
has expended from time to time plus Subsequent Investments
multiplied by the Rent Adjustment Rate calculated on a daily basis
and further provided, however, that Base Rent shall be prorated for
any partial month.
3.1.2 ADDITIONAL RENT: In addition to the Base
Rent, Lessee shall also pay to Lessor additional rent (the
"Additional Rent") in an amount equal to five percent (5%) of
Excess Gross Revenues. Additional Rent shall accrue
commencing, September 1, 1998 (in each case, an "Additional
Rent Accrual Date") and shall be payable during the Term,
quarterly in arrears, commencing on the first day of the first fiscal
quarter occurring following the Additional Rent Accrual Date and
there shall be an annual reconciliation as provided in Section 3.2
below.
3.2 CALCULATION AND PAYMENT OF ADDITIONAL
RENT; ANNUAL RECONCILIATION.
3.2.1 OFFICER'S CERTIFICATE AND
PRORATION. Each quarterly payment of Additional Rent shall be
delivered to Lessor, together with an Officer's Certificate setting
forth the calculation thereof, within thirty (30) days after the end of
the corresponding quarter. Additional Rent due for any portion of
any calendar year shall be prorated accordingly.
3.2.2 ANNUAL STATEMENT. In addition, on or
before the first day of April of each year following any calendar
year for which Additional Rent is payable hereunder, Lessee shall
deliver to Lessor an Officer's Certificate, reasonably acceptable to
Lessor and certified by the chief financial officer of Lessee, setting
forth the Gross Revenues for the immediately preceding calendar
year.
3.2.3 DEFICITS. If the Additional Rent, as finally
determined for any calendar year (or portion thereof), exceeds the
sum of the quarterly payments of Additional Rent previously paid
22
by Lessee with respect to said calendar year, within thirty (30)
days after such determination is required to be made hereunder,
Lessee shall pay such deficit to Lessor and, if the deficit exceeds
five percent (5%) of the Additional Rent which was previously
paid to Lessor with respect to said calendar year, then Lessee shall
also pay Lessor interest on such deficit at the Overdue Rate from
the date that such payment should have been made by Lessee to the
date that Lessor receives such payment.
3.2.4 OVERPAYMENTS. If the Additional Rent, as
finally determined for any calendar year (or portion thereof), is less
than the amount previously paid with respect thereto by Lessee,
Lessee shall notify Lessor either (a) to pay to Lessee an amount
equal to such difference or (b) to grant Lessee a credit against
Additional Rent next coming due in the amount of such difference.
3.2.5 FINAL DETERMINATION. The obligation to
pay Additional Rent shall survive the expiration or earlier
termination of the Term (as to Additional Rent payments that are
due and payable prior to the expiration or earlier termination of the
Term and during any periods that Lessee remains in possession of
the Leased Property), and a final reconciliation, taking into
account, among other relevant adjustments, any contractual
allowances which related to Gross Revenues that accrued prior to
the date of such expiration or earlier termination, but which have
been determined to be not payable and Lessee's good faith best
estimate of the amount of any unresolved contractual allowances,
shall be made not later than two (2) years after said expiration or
termination date. Within sixty (60) days after the expiration or
earlier termination of the Term, Lessee shall advise Lessor of
Lessee's best estimate of the approximate amount of such
adjustments, which estimate shall not be binding on Lessee or have
any legal effect whatsoever.
3.2.6 BEST EFFORTS TO MAXIMIZE. Lessee
further covenants that the operation of the Facility shall be
conducted in a manner consistent with the prevailing standards and
practices recognized in the assisted living industry as those
customarily utilized by reputable business operations. Subject to
any applicable Legal Requirements, the members of the Leasing
Group shall use their best efforts to maximize the Facility's Gross
Revenues.
23
3.3 CONFIRMATION AND AUDIT OF ADDITIONAL
RENT.
3.3.1 MAINTAIN ACCOUNTING SYSTEMS.
Lessee shall utilize, or cause to be utilized, an accounting system
for the Leased Property in accordance with usual and customary
practices in the assisted living industry and in accordance with
GAAP which will accurately record all Gross Revenues. Lessee
shall retain, for at least three (3) years after the expiration of each
calendar year (and in any event until the final reconciliation
described in Section 3.2 above has been made), adequate records
conforming to such accounting system showing all Gross Revenues
for such calendar year.
3.3.2 AUDIT BY LESSOR. Lessor, at its own
expense except as provided hereinbelow, shall have the right from
time to time to have its accountants or representatives audit the
information set forth in the Officer's Certificate referred to in
Section 3.2 and in connection with such audits, to examine Lessee's
records with respect thereto (including supporting data, income tax
and sales tax returns), subject to any prohibitions or limitations on
disclosure of any such data under applicable law or regulations.
3.3.3 DEFICIENCIES AND OVERPAYMENTS. If
any such audit discloses a deficiency in the reporting of Gross
Revenues, and either Lessee agrees with the result of such audit or
the matter is compromised, Lessee shall forthwith pay to Lessor the
amount of the deficiency in Additional Rent which would have
been payable by it had such deficiency in reporting Gross
Revenues not occurred, as finally agreed or determined, together
with interest on the Additional Rent which should have been
payable by it, calculated at the Overdue Rate, from the date when
said payment should have been made by Lessee to the date that
Lessor receives such payment. Notwithstanding anything to the
contrary herein, with respect to any audit that is commenced more
than two (2) years after the date Gross Revenues for any calendar
year are reported by Lessee to Lessor, the deficiency, if any, with
respect to Additional Rent shall bear interest as permitted herein
only from the date such determination of deficiency is made,
unless such deficiency is the result of gross negligence or willful
misconduct on the part of Lessee (or any Affiliate thereof). If any
audit conducted for Lessor pursuant to the provisions hereof
discloses that (a) the Gross Revenues actually received by Lessee
for any calendar year exceed those reported by Lessee by more
than five percent (5%), Lessee shall pay the reasonable cost of such
audit and examination or (b) Lessee has overpaid Additional Rent,
Lessor shall so notify Lessee and Lessee shall direct Lessor either
(i) to refund the overpayment to Lessee or (ii) grant a credit against
Additional Rent next coming due in the amount of such difference.
24
3.3.4 SURVIVAL. The obligations of Lessor and
Lessee contained in this Section shall survive the expiration or
earlier termination of this Lease.
3.4 ADDITIONAL CHARGES. Subject to the rights to
contest as set forth in Article 15, in addition to the Base Rent and
Additional Rent, (a) Lessee will also pay and discharge as and when due
and payable all Impositions, all amounts, liabilities and obligations under
the Appurtenant Agreements and all other amounts, liabilities and
obligations which Lessee assumes or agrees to pay under this Lease, and (b)
in the event of any failure on the part of Lessee to pay any of those items
referred to in clause (a) above, Lessee will also promptly pay and discharge
every fine, penalty, interest and cost which may be added for non-payment
or late payment of such items (the items referred to in clauses (a) and (b)
above being referred to herein collectively as the "Additional Charges"),
and Lessor shall have all legal, equitable and contractual rights, powers and
remedies provided in this Lease, by statute or otherwise, in the case of non-
payment of the Additional Charges, as well as the Base Rent and Additional
Rent. To the extent that Lessee pays any Additional Charges to Lessor
pursuant to any requirement of this Lease, Lessee shall be relieved of its
obligation to pay such Additional Charges to any other Person to which
such Additional Charges would otherwise be due.
3.5 NET LEASE. The Rent shall be paid absolutely net to
Lessor, so that this Lease shall yield to Lessor the full amount of the
installments of Base Rent, and the payments of Additional Rent and, if and
to the extent payable to Lessor, Additional Charges throughout the Term.
25
3.6 NO LESSEE TERMINATION OR OFFSET.
3.6.1 NO TERMINATION. Except as may be
otherwise specifically and expressly provided in this Lease, Lessee,
to the extent not prohibited by applicable law, shall remain bound
by this Lease in accordance with its terms and shall neither take
any action without the consent of Lessor to modify, surrender or
terminate the same, nor seek nor be entitled to any abatement,
deduction, deferment or reduction of Rent, or set-off against the
Rent, nor shall the respective obligations of Lessor and Lessee be
otherwise affected by reason of (a) any Casualty or any Taking of
the Leased Property, (b) the lawful or unlawful prohibition of, or
restriction upon, Lessee's use of the Leased Property or the
interference with such use by any Person (other than Lessor, except
to the extent permitted hereunder) or by reason of eviction by
paramount title; (c) any claim that Lessee has or might have against
Lessor, (d) any default or breach of any warranty by Lessor or any
of the other Meditrust Entities under this Lease, any other Lease
Document or any Related Party Agreement, (e) any bankruptcy,
insolvency, reorganization, composition, readjustment, liquidation,
dissolution, winding up or other proceedings affecting Lessor or
any assignee or transferee of Lessor or (f) for any other cause
whether similar or dissimilar to any of the foregoing, other than a
discharge of Lessee from any of the Lease Obligations as a matter
of law.
3.6.2 WAIVER. Lessee to the fullest extent not
prohibited by applicable law, hereby specifically waives all rights,
arising from any occurrence whatsoever, which may now or
hereafter be conferred upon it by law to (a) modify, surrender or
terminate this Lease or quit or surrender the Leased Property or (b)
entitle Lessee to any abatement, reduction, suspension or
deferment of the Rent or other sums payable by Lessee hereunder,
except as otherwise specifically and expressly provided in this
Lease.
3.6.3 INDEPENDENT COVENANTS. The
obligations of Lessor and Lessee hereunder shall be separate and
independent covenants and agreements and the Rent and all other
sums payable by Lessee hereunder shall continue to be payable in
all events unless the obligations to pay the same shall be terminated
pursuant to the express provisions of this Lease or (except in those
instances where the obligation to pay expressly survives the
termination of this Lease) by termination of this Lease other than
by reason of an Event of Default.
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3.7 ABATEMENT OF RENT LIMITED. There shall be no
abatement of Rent on account of any Casualty, Taking or other event,
except that (a) in the event of a partial Taking or a temporary Taking as
described in Section 14.3, the Base Rent shall be abated as follows: (i) in
the case of such a partial Taking, the Meditrust Investment shall be reduced
for the purposes of calculating Base Rent pursuant to Section 3.1 by
subtracting therefrom, as applicable, the net amount of the Award received
by Lessor, and (ii) in the case of such a temporary Taking, by reducing the
Base Rent for the period of such a temporary Taking, by the net amount of
the Award received by Lessor and (b) in the event of a Casualty, the Base
Rent shall be abated as follows: the Meditrust Investment shall be reduced
for the purposes of calculating Base Rent pursuant to Section 3.1 by
subtracting therefrom, as applicable, the net amount of the insurance
proceeds.
For the purposes of this Section 3.7, the "net amount of the Award
received by Lessor" shall mean the Award paid to Lessor or Lessor's
mortgagee on account of such Taking, minus all costs and expenses
incurred by Lessor in connection therewith, and minus any amounts paid to
or for the account of Lessee to reimburse for the costs and expenses of
reconstructing the Facility following such Taking in order to create a viable
and functional Facility under all of the circumstances ("Net Award
Amount") and the "net amount of the insurance proceeds" shall mean the
insurance proceeds paid to Lessor or Lessor's mortgagee on account of such
Casualty, minus all costs and expenses incurred by Lessor in connection
therewith and minus any amounts paid to or for the account of Lessee to
reimburse for the costs and expenses of reconstructing the Facility
following such Casualty in order to create a viable and functional Facility
under all of the circumstances ("Net Proceeds Amount").
ARTICLE 4
IMPOSITIONS; TAXES; UTILITIES;
INSURANCE PAYMENTS
4.1 PAYMENT OF IMPOSITIONS.
4.1.1 LESSEE TO PAY. Subject to the provisions of
Article 15, Lessee will pay or cause to be paid all Impositions
before any fine, penalty, interest or cost may be added for non-
payment, such payments to be made directly to the taxing authority
where feasible, and Lessee will promptly furnish Lessor copies of
official receipts or other satisfactory proof evidencing payment not
later than the last day on which the same may be paid without
penalty or interest. Subject to the provisions of Article 15 and
Section 4.1.2, Lessee's obligation to pay such Impositions shall be
deemed absolutely fixed upon the date such Impositions become a
lien upon the Leased Property or any part thereof.
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4.1.2 INSTALLMENT ELECTIONS. If any such
Imposition may, at the option of the taxpayer, lawfully be paid in
installments (whether or not interest shall accrue on the unpaid
balance of such Imposition), Lessee may exercise the option to pay
the same (and any accrued interest on the unpaid balance of such
Imposition) in installments and, in such event, shall pay such
installments during the Term hereof (subject to Lessee's right to
contest pursuant to the provisions of Section 4.1.5 below) as the
same respectively become due and before any fine, penalty,
premium, further interest or cost may be added thereto.
4.1.3 RETURNS AND REPORTS. Lessor, at its
expense, shall, to the extent permitted by applicable law, prepare
and file all tax returns and reports as may be required by
Governmental Authorities in respect of Lessor's net income, gross
receipts, franchise taxes and taxes on its capital stock, and Lessee,
at its expense, shall, to the extent permitted by applicable laws and
regulations, prepare and file all other tax returns and reports in
respect of any Imposition as may be required by Governmental
Authorities. Lessor and Lessee shall, upon request of the other,
provide such data as is maintained by the party to whom the
request is made with respect to the Leased Property as may be
necessary to prepare any required returns and reports. In the event
that any Governmental Authority classifies any property covered
by this Lease as personal property, Lessee shall file all personal
property tax returns in such jurisdictions where it may legally so
file. Lessor, to the extent it possesses the same, and Lessee, to the
extent it possesses the same, will provide the other party, upon
request, with cost and depreciation records necessary for filing
returns for any portion of Leased Property so classified as personal
property. Where Lessor is legally required to file personal
property tax returns, if Lessee notifies Lessor of the obligation to
do so in each year at least thirty (30) days prior to the date any
protest must be filed, Lessee will be provided with copies of
assessment notices so as to enable Lessee to file a protest.
4.1.4 REFUNDS. If no Lease Default shall have
occurred and be continuing, any refund due from any taxing
authority in respect of any Imposition paid by Lessee shall be paid
over to or retained by Lessee. If a Lease Default shall have
occurred and be continuing, at Lessor's option, such funds shall be
paid over to Lessor and/or retained by Lessor and applied toward
Lease Obligations which relate to the Leased Property in
accordance with the Lease Documents.
4.1.5 PROTEST. Upon giving notice to Lessor, at
Lessee's option and sole cost and expense, and subject to
compliance with the provisions of Article 15, Lessee may contest,
protest, appeal, or institute such other proceedings as Lessee may
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deem appropriate to effect a reduction of any Imposition and
Lessor, at Lessee's cost and expense as aforesaid, shall fully
cooperate in a reasonable manner with Lessee in connection with
such protest, appeal or other action.
4.2 NOTICE OF IMPOSITIONS. Lessor shall give prompt
notice to Lessee of all Impositions payable by Lessee hereunder of which
Lessor at any time has knowledge, but Lessor's failure to give any such
notice shall in no way diminish Lessee's obligations hereunder to pay such
Impositions.
4.3 ADJUSTMENT OF IMPOSITIONS. Impositions
imposed in respect of the period during which the expiration or earlier
termination of the Term occurs shall be adjusted and prorated between
Lessor and Lessee, whether or not such Impositions are imposed before or
after such expiration or termination, and Lessee's obligation to pay its
prorated share thereof shall survive such expiration or termination.
4.4 UTILITY CHARGES. Lessee will pay or cause to be paid
all charges for electricity, power, gas, oil, water, telephone, cable television
and other utilities used in the Leased Property during the Term and
thereafter until Lessee surrenders the Leased Property in the manner
required by this Lease.
4.5 INSURANCE PREMIUMS. Lessee will pay or cause to
be paid all premiums for the insurance coverage required to be maintained
pursuant to Article 12 during the Term, and thereafter until Lessee yields up
the Leased Property in the manner required by this Lease. All such
premiums shall be paid annually in advance and Lessee shall furnish Lessor
with evidence satisfactory to Lessor that all such premiums have been so
paid prior to the commencement of the Term and thereafter at least thirty
(30) days prior to the due date of each premium which thereafter becomes
due. Notwithstanding the foregoing, Lessee may pay such insurance
premiums to the insurer in monthly installments so long as the applicable
insurer is contractually obligated to give Lessor not less than a sixty (60)
days notice of non-payment and so long as no Lease Default has occurred
and is continuing. In the event of the failure of Lessee either to comply
with the insurance requirements in Article 12, or to pay the premiums for
such insurance, or to deliver such policies or certificates thereof to Lessor at
the times required hereunder, Lessor shall be entitled, but shall have no
obligation, to effect such insurance and pay the premiums therefor, which
premiums shall be a demand obligation of Lessee to Lessor.
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4.6 DEPOSITS.
4.6.1 LESSOR'S OPTION. At the option of Lessor
upon the occurrence of an event or circumstance which, with the
giving of notice and/or the passage of time, would constitute a
Lease Default, which may be exercised at any time thereafter,
Lessee shall, upon written request of Lessor, on the first day on the
calendar month immediately following such request, and on the
first day of each calendar month thereafter during the Term (each
of which dates is referred to as a "Monthly Deposit Date"), pay to
and deposit with Lessor a sum equal to one-twelfth (1/12th) of the
Impositions to be levied, charged, filed, assessed or imposed upon
or against the Leased Property within one (1) year after said
Monthly Deposit Date and a sum equal to one-twelfth (1/12th) of
the premiums for the insurance policies required pursuant to
Article 12 which are payable within one (1) year after said
Monthly Deposit Date. If the amount of the Impositions to be
levied, charged, assessed or imposed or insurance premiums to be
paid within the ensuing one (1) year period shall not be fixed upon
any Monthly Deposit Date, such amount for the purpose of
computing the deposit to be made by Lessee hereunder shall be
estimated by Lessor based upon the most recent available
information concerning said Impositions with an appropriate
adjustment to be promptly made between Lessor and Lessee as
soon as such amount becomes determinable. In addition, Lessor
may, at its option, from time to time require that any particular
deposit be greater than one-twelfth (1/12th) of the estimated
amount payable within one (1) year after said Monthly Deposit
Date, if such additional deposit is required in order to provide to
Lessor a sufficient fund from which to make payment of all
Impositions on or before the next due date of any installment
thereof, or to make payment of any required insurance premiums
not later than the due date thereof.
4.6.2 USE OF DEPOSITS. The sums deposited by
Lessee under this Section 4.6 shall be held by Lessor and shall be
applied in payment of the Impositions or insurance premiums, as
the case may be, when due. Any such deposits may be
commingled with other assets of Lessor, and shall be deposited by
Lessor at such bank as Lessor may, from time to time select, and,
provided that Lessor has invested such deposits in one or more of
the investment vehicles described on SCHEDULE 4.6.2 attached
hereto and incorporated by reference, Lessor shall not be liable to
Lessee or any other Person (a) based on Lessor's (or such bank's)
choice of investment vehicles, (b) for any consequent loss of
principal or interest or (c) for any unavailability of funds based on
such choice of investment. Furthermore, Lessor shall bear no
responsibility for the financial condition of, nor any act or
omission by, Lessor's depository bank. The income from such
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investment or interest on such deposit shall be paid to Lessee on a
semi-annual basis as long as no Lease Default has occurred and is
then continuing, and as long as no fact or circumstance exists
which, with the giving of notice and/or the passage of time, would
constitute a Lease Default. Lessee shall give not less than ten (10)
days prior written notice to Lessor in each instance when an
Imposition or insurance premium is due, specifying the Imposition
or premium to be paid and the amount thereof, the place of
payment, and the last day on which the same may be paid in order
to comply with the requirements of this Lease. If Lessor, in
violation of its obligations under this Lease, does not pay any
Imposition or insurance premium when due, for which a sufficient
deposit exists, Lessee shall not be in default hereunder by virtue of
the failure of Lessor to pay such Imposition or such insurance
premium and Lessor shall pay any interest or fine assessed by
virtue of Lessor's failure to pay such Imposition or insurance
premium.
4.6.3 DEFICITS. If for any reason any deposit held
by Lessor under this Section 4.6 shall not be sufficient to pay an
Imposition or insurance premium within the time specified therefor
in this Lease, then, within ten (10) days after demand by Lessor,
Lessee shall deposit an additional amount with Lessor, increasing
the deposit held by Lessor so that Lessor holds sufficient funds to
pay such Imposition or premium in full (or in installments as
otherwise provided for herein), together with any penalty or
interest due thereon. Lessor may change its estimate of any
Imposition or insurance premium for any period on the basis of a
change in an assessment or tax rate or on the basis of a prior
miscalculation or for any other good faith reason; in which event,
within ten (10) days after demand by Lessor, Lessee shall deposit
with Lessor the amount in excess of the sums previously deposited
with Lessor for the applicable period which would theretofore have
been payable under the revised estimate.
4.6.4 OTHER PROPERTIES. If any Imposition shall
be levied, charged, filed, assessed, or imposed upon or against the
Leased Property, and if such Imposition shall also be a levy,
charge, assessment, or imposition upon or for any other real or
personal property that does not constitute a part of the Leased
Property but for which a lien exists or can exist upon the Leased
Property, then, at Lessor's reasonable discretion, the computation
of the amounts to be deposited under this Section 4.6 shall be
based upon the entire amount of such Imposition and Lessee shall
not have the right to apportion any deposit with respect to such
Imposition.
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4.6.5 TRANSFERS. In connection with any
assignment of Lessor's interest under this Lease, the original Lessor
named herein and each successor in interest shall transfer all
amounts deposited pursuant to the provisions of this Section 4.6
and still in its possession to such assignee (as the subsequent holder
of Lessor's interest in this Lease) and upon such transfer, the
original Lessor named herein or the applicable successor in interest
transferring the deposits shall thereupon be completely released
from all liability with respect to such deposits so transferred and
Lessee shall look solely to said assignee, as the subsequent holder
of Lessor's interest under this Lease, in reference thereto.
4.6.6 SECURITY. All amounts deposited with Lessor
pursuant to the provisions of this Section 4.6 shall be held by
Lessor as additional security for the payment and performance of
the Obligations and, upon the occurrence of any Lease Default,
Lessor may, in its sole and absolute discretion, apply said amounts
towards payment or performance of such Obligations.
4.6.7 RETURN. Upon the expiration or earlier
termination of this Lease, provided that all of the Lease Obligations
relating to the Leased Property have been fully paid and
performed, any sums then held by Lessor under this Section 4.6
shall be refunded to Lessee.
4.6.8 RECEIPTS. Lessee shall deliver to Lessor
copies of all notices, demands, claims, bills and receipts in relation
to the Impositions and insurance premiums upon the earlier to
occur of (a) ten (10) days following receipt thereof by Lessee and
(b) in the case of an invoice, demand or ▇▇▇▇ for the payment of an
Imposition, prior to the date when such Imposition is due and
payable.
ARTICLE 5
OWNERSHIP OF LEASED PROPERTY AND PERSONAL PROPERTY;
INSTALLATION, REMOVAL AND REPLACEMENT OF
PERSONAL PROPERTY;
5.1 OWNERSHIP OF THE LEASED PROPERTY. Lessee
acknowledges that the Leased Property is the property of Lessor and that
Lessee has only the right to the exclusive possession and use of the Leased
Property upon the terms and conditions of this Lease.
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5.2 PERSONAL PROPERTY; REMOVAL AND
REPLACEMENT OF PERSONAL PROPERTY.
5.2.1 LESSEE TO EQUIP FACILITY. If and to the
extent not included in the Leased Property, Lessee, at its sole cost
and expense, shall install, affix or assemble or place on the Leased
Property, sufficient items of Tangible Personal Property, to enable
the operation of the Facility in accordance with the requirements of
this Lease for the Primary Intended Use, and such Tangible
Personal Property and replacements thereof, shall be at all times
the property of Lessee.
5.2.2 SUFFICIENT PERSONAL PROPERTY.
Lessee shall maintain, during the entire Term, the Tangible
Personal Property in good order and repair and shall provide at its
expense all necessary replacements thereof, as may be necessary in
order to operate the Facility in compliance with all applicable
Legal Requirements and Insurance Requirements and otherwise in
accordance with customary practice in the industry for the Primary
Intended Use and, if applicable, Other Permitted Uses. In addition,
Lessee shall furnish all necessary replacements of such obsolete
items of the Tangible Personal Property during the Term as are
necessary to enable the operation of the Facility in accordance with
the requirements of this Lease for the Primary Intended Use.
5.2.3 REMOVAL AND REPLACEMENT;
LESSOR'S OPTION TO PURCHASE. Lessee shall not remove
from the Leased Property any one or more items of Tangible
Personal Property (whether now owned or hereafter acquired), the
fair market value of which exceeds TWENTY-FIVE THOUSAND
DOLLARS ($25,000), individually or ONE HUNDRED
THOUSAND DOLLARS ($100,000.00) collectively, if such
Tangible Personal Property is necessary to enable the operation of
the Facility in accordance with the requirements of this Lease for
the Primary Intended Use. At its sole cost and expense, Lessee
shall restore the Leased Property to the condition required by
Article 8, including repair of all damage to the Leased Property
caused by the removal of the Tangible Personal Property, whether
effected by Lessee or Lessor. Upon the expiration or earlier
termination of this Lease, Lessor shall have the option, which may
be exercised by giving notice thereof within twenty (20) days prior
to such expiration or termination, of (a) acquiring the Tangible
Personal Property (pursuant to a ▇▇▇▇ of sale and assignments of any
equipment leases, all in such forms as are reasonably satisfactory to
Lessor) upon payment of its fair market value or (b) requiring
Lessee to remove the Tangible Personal Property. If Lessor
exercises its option to purchase the Tangible Personal Property, the
price to be paid by Lessor shall be (i) reduced by the amount of all
payments due on any equipment leases or any other Permitted Prior
33
Security Interests assumed by Lessor and (ii) applied to the Lease
Obligations before any payment to Lessee. If Lessor requires the
removal of the Tangible Personal Property, then all of the Tangible
Personal Property that is not removed by Lessee within ten (10)
days following such request shall be considered abandoned by
Lessee and may be appropriated, sold, destroyed or otherwise
disposed of by Lessor without first giving notice thereof to Lessee,
without any payment to Lessee and without any obligation to
account therefor.
ARTICLE 6
SECURITY FOR LEASE OBLIGATIONS
6.1 SECURITY FOR LESSEE'S OBLIGATIONS;
PERMITTED PRIOR SECURITY INTERESTS.
6.1.1 SECURITY. In order to secure the payment and
performance of all of the Obligations, Lessee agrees to provide or
cause there to be provided the following security:
(a) a first lien and exclusive security
interest in the Collateral, as more particularly provided for
in the Security Agreement;
(b) the Cash Collateral.
(c) a first lien and exclusive pledge and
assignment of, and security interest in, all Permits and
Contracts, as more particularly provided for in the
Collateral Assignment of Permits and Contracts; and
(d) in the event that, at any time during the
Term, Lessee holds the fee title to or a leasehold interest
in any real property and/or personal property which is
used as an integral part of the operation of the Leased
Property (but is not subject to this Lease), Lessee shall (i)
provide Lessor with prior notice of such acquisition and
(ii) shall take such actions and enter into such agreements
as Lessor shall reasonably request in order to ▇▇▇▇▇ ▇▇▇▇▇▇
a first priority mortgage or other security interest in such
real property and personal property, subject only to the
Permitted Encumbrances and other Liens reasonably
acceptable to Lessor. Without limiting the foregoing, it is
acknowledged and agreed that all revenues generated from
the operation of such additional real property shall be
included in the determination of Gross Revenues (subject
to such adjustments as agreed upon hereunder).
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Notwithstanding the foregoing, Lessor shall
subordinate its security interest in Receivables to a prior
security interest to secure a working capital line as
provided in Section 6.1.3.
6.1.2 PURCHASE-MONEY SECURITY
INTERESTS AND EQUIPMENT LEASES.
Notwithstanding any other provision hereof regarding the
creation of Liens, Lessee may (a) grant priority purchase
money security interests in items of Tangible Personal
Property, (b) lease Tangible Personal Property from
equipment lessors as long as: (i) the aggregate value of
such Tangible Personal Property shall not exceed TWO
HUNDRED THOUSAND DOLLARS ($200,000) or (ii)
(A) the secured party or equipment lessor enters into an
intercreditor agreement with, and satisfactory to, Lessor,
pursuant to which, without limiting the foregoing, (1)
Lessor shall be afforded the option of curing defaults and
the option of succeeding to the rights of Lessee and (2)
Lessor's security interest in Tangible Personal Property
shall be subordinated to the security interest granted to
such secured party, (B) all of the terms, conditions and
provisions of the financing, security interest or lease are
reasonably acceptable to Lessor, (C) Lessee provides a
true and complete copy, as executed, of each such
purchase money security agreement, financing document
and equipment lease and all amendments thereto and (D)
no such security interest, financing agreement or lease is
cross-defaulted or cross-collateralized with any other
obligation. Security interests granted by Lessee in full
compliance with the provisions of this Section 6.1.2 are
referred to as "Permitted Prior Security Interests".
6.1.3 RECEIVABLES FINANCING.
Notwithstanding any other provision hereof regarding the
creation of Liens, Lessee shall also be permitted to grant a
prior security interest in Receivables (with the Lessor
retaining a junior security interest therein) to an
institutional lender which is providing a working capital
line of credit (a "Working Capital Loan") for the exclusive
use of Guarantor, Lessee and Affiliates of Lessee as long
as such Lender enters into an intercreditor agreement with,
and satisfactory to, Lessor pursuant to which, without
limiting the foregoing, (1) Lessor shall be provided with
notice with respect to defaults under the Working Capital
Loan simultaneously with the delivery of such notice to
Lessee and shall be afforded the option of curing defaults
thereunder, (2) such lender's use of Instruments,
Documents, General Intangibles and Chattel Paper shall
35
be limited to a license only for the purpose of collecting
Receivables and (3) the subordination of Lessor's interest
in the Receivables shall be of no force and effect and
Lessor's first priority security interest shall be reinstated
from and after the occurrence of an Event of Default if,
upon or following such Event of Default, Lessor either
exercises any of its remedies set forth in Article 16 or
Lessor notifies in writing such lender of Lessor's intention
to invoke its right to reinstate its first priority security
interest in the Receivables.
6.2 GUARANTY. All of the Lease Obligations shall be
unconditionally and irrevocably guaranteed by the Guarantor pursuant to
the Guaranty of Lease Obligations.
ARTICLE 7
CONDITION AND USE OF LEASED PROPERTY;
MANAGEMENT AGREEMENTS
7.1 CONDITION OF THE LEASED PROPERTY. Lessee
acknowledges that Lessee has caused the Leased Property to be sold to
Lessor and has concurrently entered into this Lease. Lessee acknowledges
receipt and delivery of possession of the Leased Property and that Lessee
has examined and otherwise has acquired knowledge of the condition of the
Leased Property prior to the execution and delivery of this Lease and has
found the same to be in good order and repair and satisfactory for its
purposes hereunder. Lessee is leasing the Leased Property "AS-IS" in its
present condition, provided, however, that nothing herein contained in this
Section 7.1 shall be deemed to modify the terms and provisions of the
Leasehold Improvement Agreement. Lessee waives any claim or action
against Lessor in respect of the condition of the Leased Property. LESSOR
MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR
IMPLIED, WITH RESPECT TO THE LEASED PROPERTY, EITHER AS
TO ITS FITNESS FOR ANY PARTICULAR PURPOSE OR USE, ITS
DESIGN OR CONDITION OR OTHERWISE, OR AS TO DEFECTS IN
THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN,
LATENT OR PATENT; IT BEING AGREED THAT ALL RISKS
RELATING TO THE DESIGN, CONDITION AND/OR USE OF THE
LEASED PROPERTY ARE TO BE BORNE BY LESSEE. LESSEE
HEREBY ASSUMES ALL RISK OF THE PHYSICAL CONDITION OF
THE LEASED PROPERTY, THE SUITABILITY OF THE LEASED
PROPERTY FOR LESSEE'S PURPOSES, AND THE COMPLIANCE OR
NON-COMPLIANCE OF THE LEASED PROPERTY WITH ALL
APPLICABLE REQUIREMENTS OF LAW, INCLUDING BUT NOT
LIMITED TO ENVIRONMENTAL LAWS AND ZONING OR LAND
USE LAWS.
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Upon the request of Lessor, at any time and from time to time
during the Term, Lessee shall engage one (1) or more independent
professional consultants, engineers and inspectors, qualified to do business
in the State and acceptable to Lessor to perform any environmental and/or
structural investigations and/or other inspections of the Leased Property and
the Facility as Lessor may reasonably request in order to detect (a) any
structural deficiencies in the Leased Improvements or the utilities servicing
the Leased Property or (b) the presence of any condition that (i) may be
harmful or present a health hazard to the residents and other occupants of
the Leased Property or (ii) constitutes a breach or violation of any of the
Lease Documents. In the event that Lessor reasonably determines that the
results of such testing or inspections are unsatisfactory, within thirty (30)
days of notice from Lessor, Lessee shall commence such appropriate
remedial actions as may be reasonably requested by Lessor to correct such
unsatisfactory conditions and, thereafter, shall diligently and continuously
prosecute such remedial actions to completion within the time limits
prescribed in this Lease or the other Lease Documents.
7.2 USE OF THE LEASED PROPERTY; COMPLIANCE;
MANAGEMENT.
7.2.1 OBLIGATION TO OPERATE. Lessee shall
continuously operate the Leased Property in accordance with the
Primary Intended Use and the Other Permitted Uses and maintain
its qualifications for licensure and accreditation as required by all
applicable Legal Requirements.
7.2.2 PERMITTED USES. During the entire Term,
Lessee shall use the Leased Property, or permit the Leased
Property to be used, only for the Primary Intended Use and, if
applicable, the Other Permitted Uses. Lessee shall not use the
Leased Property or permit the Leased Property to be used for any
other use without the prior written consent of Lessor, which
consent may be withheld in Lessor's sole and absolute discretion.
7.2.3 COMPLIANCE WITH INSURANCE
REQUIREMENTS. No use shall be made or permitted to be made
of the Leased Property and no acts shall be done which will cause
the cancellation of any insurance policy covering the Leased
Property, nor shall Lessee, any Manager or any other Person sell or
otherwise provide to residents, other occupants or invitees therein,
or permit to be kept, used or sold in or about the Leased Property,
any article which may be prohibited by any of the Insurance
Requirements. Furthermore, Lessee shall, at its sole cost and
expense, take whatever other actions that may be necessary to
comply with and to insure that the Leased Property complies with
all Insurance Requirements.
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7.2.4 NO WASTE. Lessee shall not commit or suffer
to be committed any waste on, in or under the Leased Property, nor
shall Lessee cause or permit any nuisance thereon.
7.2.5 NO IMPAIRMENT. Lessee shall neither permit
nor knowingly suffer the Leased Property to be used in such a
manner as (a) might reasonably tend to impair Lessor's title thereto
or (b) may reasonably make possible a claim or claims of adverse
usage or adverse possession by the public or of implied dedication
of the Leased Property.
7.2.6 NO LIENS. Except as permitted pursuant to
Section 6.1.2, Lessee shall not permit or suffer any Lien to exist on
the Tangible Personal Property and shall in no event cause, permit
or suffer any Lien to exist with respect to the Leased Property other
than as set forth in Section 11.5.2.
7.3 COMPLIANCE WITH LEGAL REQUIREMENTS.
Lessee covenants and agrees that the Leased Property shall not be used for
any unlawful purpose and that Lessee, at its sole cost and expense, will
promptly (a) comply with, and shall cause every other member of the
Leasing Group to comply with, all applicable Legal Requirements relating
to the use, operation, maintenance, repair and restoration of the Leased
Property, whether or not compliance therewith shall require structural
change in any of the Leased Property or interfere with the use and
enjoyment of the Leased Property and (b) procure, maintain and comply
with (in all material respects), and shall cause every other member of the
Leasing Group to procure, maintain and comply with (in all material
respects), all Contracts and Permits necessary or desirable in order to
operate the Leased Property for the Primary Intended Use and/or, if
applicable, Other Permitted Uses, and for compliance with all of the terms
and conditions of this Lease. Unless a Lease Default has occurred or any
event has occurred which, with the passage of time and/or the giving of
notice would constitute a Lease Default, Lessee may, upon prior written
notice to Lessor, contest any Legal Requirement to the extent permitted by,
and in accordance with, Article 15 below.
7.4 MANAGEMENT AGREEMENTS. Throughout the
Term, Lessee shall not enter into any Management Agreement without the
prior written approval of Lessor, in each instance, which approval shall not
be unreasonably withheld. Lessee shall not, without the prior written
approval of Lessor, in each instance, which approval shall not be
unreasonably withheld, agree to or allow: (a) any change in the Manager or
change in the ownership or control of the Manager, (b) the termination of
any Management Agreement (other than in connection with the exercise by
Lessee of any of its remedies under the Management Agreement as a result
of any default by the Manager thereunder), (c) any assignment by the
Manager of its interest under the Management Agreement or (d) any
material amendment of the Management Agreement. In addition, Lessee
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shall, at its sole cost and expense, promptly and fully perform or cause to be
performed every covenant, condition, promise and obligation of the
licensed operator of the Leased Property under any Management
Agreement.
Each Management Agreement shall provide that Lessor shall be
provided notice of any defaults thereunder and, at Lessor's option, an
opportunity to cure such default. Lessee shall furnish to Lessor, within
three (3) days after receipt thereof, or after the mailing or service thereof by
Lessee, as the case may be, a copy of each notice of default which Lessee
shall give to, or receive from any Person, based upon the occurrence, or
alleged occurrence, of any default in the performance of any covenant,
condition, promise or obligation under any Management Agreement.
Whenever and as often as Lessee shall fail to perform, promptly
and fully, at its sole cost and expense, any covenant, condition, promise or
obligation on the part of the licensed operator of the Leased Property under
and pursuant to any Management Agreement, Lessor, or a lawfully
appointed receiver of the Leased Property, may, at their respective options
(and without any obligation to do so), after five (5) days' prior notice to
Lessee (except in the case of an emergency) enter upon the Leased Property
and perform, or cause to be performed, such work, labor, services, acts or
things, and take such other steps and do such other acts as they may deem
advisable, to cure such defaulted covenant, condition, promise or
obligation, and any amount so paid or advanced by Lessor or such receiver
and all costs and expenses reasonably incurred in connection therewith
(including, without limitation, attorneys' fees and expenses and court costs),
shall be a demand obligation of Lessee to Lessor or such receiver, and,
Lessor shall have the same rights and remedies for failure to pay such costs
on demand as for Lessee's failure to pay any other sums due hereunder.
7.5 PARTICIPATION IN THIRD PARTY PAYOR
PROGRAMS. No provision of this Lease shall be deemed to require
Lessee to commence participation in any Third Party Payor Program or any
Managed Care Plan.
ARTICLE 8
REPAIRS; RESTRICTIONS
8.1 MAINTENANCE AND REPAIR.
8.1.1 LESSEE'S RESPONSIBILITY. Lessee, at its sole
cost and expense, shall keep the Leased Property (with respect to
the Project, to the extent consistent with the stage of construction
of the Project) and all private roadways, sidewalks and curbs
appurtenant thereto which are under Lessee's control in good order
and repair (whether or not the need for such repairs occurs as a
39
result of Lessee's use, any prior use, the elements or the age of the
Leased Property or such private roadways, sidewalks and curbs or
any other cause whatsoever other than Lessor's gross negligence or
willful misconduct) and, subject to Articles 9, 13 and 14, Lessee
shall promptly, with the exercise of all reasonable efforts,
undertake and diligently complete all necessary and appropriate
repairs, replacements, renovations, restorations, alterations and
modifications thereof of every kind and nature, whether interior or
exterior, structural or non-structural, ordinary or extraordinary,
foreseen or unforeseen or arising by reason of a condition
(concealed or otherwise) existing prior to the commencement of, or
during, the Term and thereafter until Lessee surrenders the Leased
Property in the manner required by this Lease. In addition, Lessee,
at its sole cost and expense, shall make all repairs, modifications,
replacements, renovations and alterations of the Leased Property
(and such private roadways, sidewalks and curbs) that are
necessary to comply with all applicable Legal Requirements and
Insurance Requirements so that the Leased Property can be legally
operated for the Primary Intended Use and, if applicable, the Other
Permitted Uses. All repairs, replacements, renovations, alterations,
and modifications required by the terms of this Section 8.1 shall be
(a) performed in a good and workmanlike manner in compliance
with all applicable Legal Requirements, Insurance Requirements
and the requirements of Article 9 hereof, using new materials well
suited for their intended purpose and (b) consistent with the
operation of the Facility in a reputable manner. Lessee will not
take or omit to take any action the taking or omission of which
might materially impair the value or the usefulness of the Leased
Property for the Primary Intended Use and, if applicable, the Other
Permitted Uses. To the extent that any of the repairs,
replacements, renovations, alterations or modifications required by
the terms of this Section 8.1 constitute Material Structural Work,
Lessee shall obtain Lessor's prior written approval (which approval
shall not be unreasonably withheld) of the specific repairs,
replacements, renovations, alterations and modifications to be
performed by or on behalf of Lessee in connection with such
Material Structural Work. Notwithstanding the foregoing, in the
event of a bona fide emergency during which Lessee is unable to
contact the appropriate representatives of Lessor, Lessee may
commence such Material Structural Work as may be necessary in
order to address such emergency without Lessor's prior approval,
provided, however, that Lessee shall immediately thereafter advise
Lessor of such emergency and the nature and scope of the Material
Structural Work commenced and shall obtain Lessor's approval of
the remaining Material Structural Work to be completed.
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8.1.2 NO LESSOR OBLIGATION. Lessor shall not,
under any circumstances, be required to build or rebuild any
improvements on the Leased Property (or any private roadways,
sidewalks or curbs appurtenant thereto), or to make any repairs,
replacements, renovations, alterations, restorations, modifications,
or renewals of any nature or description to the Leased Property (or
any private roadways, sidewalks or curbs appurtenant thereto),
whether ordinary or extraordinary, structural or non-structural,
foreseen or unforeseen, or to make any expenditure whatsoever
with respect thereto in connection with this Lease, or to maintain
the Leased Property (or any private roadways, sidewalks or curbs
appurtenant thereto) in any way.
8.1.3 LESSEE MAY NOT OBLIGATE LESSOR.
Nothing contained herein nor any action or inaction by Lessor shall
be construed as (a) constituting the consent or request of Lessor,
express or implied, to any contractor, subcontractor, laborer,
materialman or vendor to or for the performance of any labor or
services for any construction, alteration, addition, repair or
demolition of or to the Leased Property or (b) except as otherwise
provided in this Lease, giving Lessee any right, power or
permission to contract for or permit the performance of any labor
or services or the furnishing of any materials or other property in
such fashion as would permit the making of any claim against
Lessor for the payment thereof or to make any agreement that may
create, or in any way be the basis for, any right, title or interest in,
or Lien or claim against, the estate of Lessor in the Leased
Property. Without limiting the generality of the foregoing and
except as otherwise provided in this Lease, the right title and
interest of Lessor in and to the Leased Property shall not be subject
to liens or encumbrances for the performance of any labor or
services or the furnishing of any materials or other property
furnished to the Leased Property at or by the request of Lessee or
any other Person other than Lessor. Lessee shall notify any
contractor, subcontractor, laborer, materialman or vendor
providing any labor, services or materials to the Leased Property of
this provision.
8.2 ENCROACHMENTS; TITLE RESTRICTIONS. If any
of the Leased Improvements shall, at any time, encroach upon any property,
street or right-of-way adjacent to the Leased Property, or shall violate the
agreements or conditions contained in any lawful restrictive covenant or
other Lien now or hereafter affecting the Leased Property, or shall impair
the rights of others under any easement, right-of-way or other Lien to which
the Leased Property is now or hereafter subject, then promptly upon the
request of Lessor, Lessee shall, at its sole cost and expense, subject to
Lessee's right to contest the existence of any encroachment, violation or
impairment as set forth in Article 15, (a) obtain valid and effective waivers
or settlements of all claims, liabilities and damages resulting from each such
41
encroachment, violation or impairment or (b) make such alterations to the
Leased Improvements, and take such other actions, as Lessee in the good
faith exercise of its judgment deems reasonably practicable, to remove such
encroachment, or to end such violation or impairment, including, if
necessary, the alteration of any of the Leased Improvements.
Notwithstanding the foregoing, Lessee shall, in any event, take all such
actions as may be reasonably necessary in order to be able to continue the
operation of the Leased Improvements for the Primary Intended Use and, if
applicable, the Other Permitted Uses substantially in the manner and to the
extent that the Leased Improvements were operated prior to the assertion of
such encroachment, violation or impairment and nothing contained herein
shall limit Lessee's obligations to operate the Leased Property in accordance
with its Primary Intended Use. Any such alteration made pursuant to the
terms of this Section 8.2 shall be completed in conformity with the
applicable requirements of Section 8.1 and Article 9. Lessee's obligations
under this Section 8.2 shall be in addition to and shall in no way discharge
or diminish any obligation of any insurer under any policy of title or other
insurance. If and to the extent any obligation of an insurer under any policy
of title or other insurance exists and Lessee has incurred costs and expenses
with respect to the subject matter of such obligation and provided Lessor is
reasonably satisfied with the resolution of such subject matter, at the request
of Lessee, Lessor, at Lessor's option, shall either assign to Lessee any right
it may have to proceed against such insurer or remit to Lessee any amount
which Lessor recovers from such insurer, minus any amounts needed to
reimburse Lessor for its reasonable costs and expenses, for the costs and
expenses incurred by Lessee in reconstructing the Facility or taking such
other action reasonably required in order to create a viable and functional
Facility under all of the circumstances.
ARTICLE 9
MATERIAL STRUCTURAL WORK AND
CAPITAL ADDITIONS
9.1 LESSOR'S APPROVAL. Without the prior written
consent of Lessor, which consent may be withheld by Lessor, in its sole and
absolute discretion, Lessee shall make no Capital Addition or Material
Structural Work to the Leased Property (including, without limitation, any
change in the size or unit capacity of the Facility), except as may be
otherwise expressly required pursuant to Article 8.
9.2 GENERAL PROVISIONS AS TO CAPITAL
ADDITIONS AND CERTAIN MATERIAL STRUCTURAL WORK. As
to any Capital Addition or Material Structural Work (other than such
Material Structural Work that is required to be performed pursuant to the
terms of Section 8.1) for which Lessor has granted its prior written
approval, the following terms and conditions shall apply unless otherwise
expressly set forth in Lessor's written approval.
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9.2.1 NO LIENS. Lessee shall not be permitted to
create any Lien on the Leased Property in connection with any
Capital Addition or Material Structural Work (including, without
limitation, Liens relating to the provision of financing for a Capital
Addition) other than Liens expressly permitted by the terms and
provisions of this Lease Agreement.
9.2.2 LESSEE'S PROPOSAL REGARDING
CAPITAL ADDITIONS AND MATERIAL STRUCTURAL
WORK. If Lessee desires to undertake any Capital Addition or
Material Structural Work, Lessee shall submit to Lessor in writing
a proposal setting forth in reasonable detail any proposed Capital
Addition or Material Structural Work and shall provide to Lessor
copies of, or information regarding, the applicable plans and
specifications, Permits, Contracts and any other materials
concerning the proposed Capital Addition or Material Structural
Work, as the case may be, as Lessor may reasonably request.
Without limiting the generality of the foregoing, each such
proposal pertaining to any Capital Addition shall indicate the
approximate projected cost of constructing such Capital Addition,
the use or uses to which it will be put and a good faith estimate of
the change, if any, in the Gross Revenues that Lessee anticipates
will result from the construction of such Capital Addition.
9.2.3 LESSOR'S OPTIONS REGARDING CAPITAL
ADDITIONS AND MATERIAL STRUCTURAL WORK. Lessor
shall have the options of: (a) denying permission for the
construction of the applicable Capital Addition or Material
Structural Work, (b) offering to finance the construction of the
Capital Addition pursuant to Section 9.3 on such terms as may be
specified by Lessor, including the terms of any amendment to this
Lease, including, without limitation, an increase in Base Rent
based on Lessor's then existing terms and prevailing conditions to
compensate Lessor for the additional funds advanced by it, (c)
allowing Lessee to separately pay for or finance the construction of
the Capital Addition, subject to compliance with the terms and
conditions of Section 9.2.1, Section 9.4, Section 13.1.3, all
applicable Legal Requirements, all other requirements of this Lease
and to such other terms and conditions as Lessor may in its
discretion reasonably impose or (d) any combination of the
foregoing. Unless Lessor notifies Lessee in writing of a contrary
election within thirty (30) days of Lessee's request or unless Lessor
is required to consent thereto pursuant to this Section 9.2.3, Lessor
shall be deemed to have denied the request for the Capital Addition
or Material Structural Work. In the event and to the extent Lessor
has granted permission for the construction of the applicable
Capital Addition or Material Structural Work and (x) Lessor has
not offered to finance the construction of the same or (y) Lessee
declines to accept the financing offered by Lessor, Lessee may
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separately finance such construction, subject to the limitation on
Liens set forth in Section 9.2.1, or pay for such construction itself.
In the event Lessee declines to accept the financing offered by
Lessor or if Lessor has not offered such financing to Lessee and
proposes to obtaining financing from another Person, Lessee shall
inform Lessor in writing of the terms and conditions of such
financing and shall provide Lessor with a copy of a commitment
letter evidencing the same and Lessor may, by giving notice
thereof to Lessee within twenty (20) days following being so
informed, elect to provide financing to Lessee at the effective rate
of interest as such financing. Lessor shall not unreasonably
withhold its permission for the construction of Material Structural
Work which is necessary to protect the safety or welfare of
residents of the Facility.
9.2.4 LESSOR MAY ELECT TO FINANCE
CAPITAL ADDITIONS. If Lessor elects to offer financing for the
proposed Capital Addition and Lessee accepts Lessor's financing
proposal, the provisions of Section 9.3 shall apply.
9.3 CAPITAL ADDITIONS FINANCED BY LESSOR.
9.3.1 ADVANCES. All advances of funds for any
such financing shall be made in accordance with Lessor's then
standard construction loan requirements and procedures, which
may include, without limitation, the requirements and procedures
applicable to Work under Sections 13.1.3 and 13.1.4.
9.3.2 LESSOR'S GENERAL REQUIREMENTS. If
Lessor agrees to finance the proposed Capital Addition and Lessee
accepts Lessor's proposal therefor, in addition to all other items
which Lessor or any applicable Financing Party may reasonably
require, Lessee shall provide to Lessor the following:
(a) prior to any advance of funds, (i) any
information, opinions, certificates, Permits or documents
reasonably requested by Lessor or any applicable
Financing Party which are necessary to confirm that
Lessee is reasonably expected to be able to use the Capital
Addition upon completion thereof in accordance with the
Primary Intended Use and/or, if applicable, the Other
Permitted Uses and (ii) evidence satisfactory to Lessor and
any applicable Financing Party that all Permits required
for the construction and use of the Capital Addition have
been received, are in full force and effect and are not
subject to appeal, except only for those Permits which
cannot in the normal course be obtained prior to
commencement or completion of the construction;
44
provided, that Lessor and any applicable Financing Party
are furnished with reasonable evidence that the same is
reasonably expected to be available in the normal course
of business without unusual condition;
(b) prior to any advance of funds, an
Officer's Certificate and, if requested, a certificate from
Lessee's architect, setting forth in reasonable detail the
projected (or actual, if available) Capital Addition Cost;
(c) bills of sale, instruments of transfer and
other documents required by Lessor so as to vest title to
the Capital Addition in Lessor free and clear of all Liens
(except to the extent a Lien is being duly contested in
accordance with the terms and provisions of this Lease),
and amendments to this Lease and any recorded notice or
memorandum thereof, duly executed and acknowledged,
in form and substance reasonably satisfactory to Lessor,
providing for any changes required by Lessor including,
without limitation, changes in the Base Rent and the legal
description of the Land;
(d) upon payment therefor, a deed
conveying to Lessor title to any land acquired for the
purpose of constructing the Capital Addition ("Additional
Land") free and clear of any Liens except those approved
by Lessor;
(e) upon completion of the Capital
Addition, a final as-built survey thereof reasonably
satisfactory to Lessor, if required by Lessor;
(f) during and following the advance of
funds and the completion of the Capital Addition,
endorsements to any outstanding policy of title insurance
covering the Leased Property satisfactory in form and
substance to Lessor (i) updating the same without any
additional exception except as may be reasonably
permitted by Lessor and (ii) increasing the coverage
thereof by an amount equal to the Fair Market Value of
the Capital Addition and/or increasing the coverage
thereof by an amount equal to the Fair Market Value of
the Additional Land and including the Additional Land in
the premises covered by such title insurance policy;
(g) simultaneous with the initial advance of
funds, if appropriate, (i) an owner's policy of title
insurance insuring fee simple title to any Additional Land
conveyed to Lessor pursuant to subparagraph (d) free and
45
clear of all Liens except those approved by Lessor and (ii)
an owner's policy of title insurance reasonably satisfactory
in form and substance to Lessor and a lender's policy of
title insurance reasonably satisfactory in form and
substance to any applicable Financing Party;
(h) following the completion of the Capital
Addition, if reasonably deemed necessary by Lessor, an
appraisal of the Leased Property by an M.A.I. appraiser
acceptable to Lessor, which states that the Fair Market
Value of the Leased Property upon completion of the
Capital Addition exceeds the Fair Market Value of the
Leased Property prior to the commencement of such
Capital Addition by an amount not less than one hundred
twenty-five percent (125%) of the Capital Addition Cost;
and
(i) during or following the advancement of
funds, prints of architectural and engineering drawings
relating to the Capital Addition and such other materials,
including, without limitation, the modifications to
outstanding policies of title insurance contemplated by
subsection (f) above, opinions of counsel, appraisals,
surveys, certified copies of duly adopted resolutions of the
board of directors of Lessee authorizing the execution and
delivery of the lease amendment and any other documents
and instruments as may be reasonably required by Lessor
and any applicable Financing Party.
9.3.3 PAYMENT OF COSTS. By virtue of making a
request to finance a Capital Addition, whether or not such
financing is actually consummated, Lessee shall be deemed to have
agreed to pay, upon demand, all costs and expenses reasonably
incurred by Lessor and any Person participating with Lessor in any
way in the financing of the Capital Addition Cost, including, but
not limited to (a) fees and expenses of their respective attorneys,
(b) all photocopying expenses, if any, (c) the amount of any filing,
registration and recording taxes and fees, (d) documentary stamp
taxes and intangible taxes (e) title insurance charges and appraisal
fees.
9.4 GENERAL LIMITATIONS. Without in any way limiting
Lessor's options with respect to proposed Capital Additions or Material
Structural Work: (a) no Capital Addition or Material Structural Work shall
be completed that could, upon completion, significantly alter the character
or purpose or detract from the value or operating efficiency of the Leased
Property, or significantly impair the revenue-producing capability of the
Leased Property, or adversely affect the ability of Lessee to comply with
the terms of this Lease; (b) no Capital Addition or Material Structural Work
46
shall be completed which would tie in or connect any Leased Improvements
on the Leased Property with any other improvements on property adjacent
to the Leased Property (and not part of the Land covered by this Lease)
including, without limitation, tie-ins of buildings or other structures or
utilities, unless Lessee shall have obtained the prior written approval of
Lessor, which approval may be withheld in Lessor's sole and absolute
discretion and (c) all proposed Capital Additions and Material Structural
Work shall be architecturally integrated and consistent with the Leased
Property.
9.5 NON-CAPITAL ADDITIONS. Lessee shall have the
obligation and right to make repairs, replacements and alterations which are
not Capital Additions as required by the other Sections of this Lease, but in
so doing, Lessee shall always comply with and satisfy the conditions of
Section 9.4. Lessee shall have the right, from time to time, to make
additions, modifications or improvements to the Leased Property which do
not constitute Capital Additions or Material Structural Work as it may deem
to be desirable or necessary for its uses and purposes, subject to the same
limits and conditions imposed under Section 9.4. The cost of any such
repair, replacement, alteration, addition, modification or improvement shall
be paid by Lessee and the results thereof shall be included under the terms
of this Lease and become a part of the Leased Property, without payment
therefor by Lessor at any time. Notwithstanding the foregoing, all such
additions, modifications and improvements which affect the structure of
any of the Leased Improvements, or which involve the expenditure of more
than FIFTY THOUSAND DOLLARS ($50,000.00), shall be undertaken
only upon compliance with the provisions of Section 13.1.3, all applicable
Legal Requirements and all other applicable requirements of this Lease;
provided, however, that in the event of a bona fide emergency during which
Lessee is unable to contact the appropriate representatives of Lessor, Lessee
may commence such additions, modifications and improvements as may be
necessary in order to address such emergency without Lessor's prior
approval, as long as Lessee immediately thereafter advises Lessor of such
emergency and the nature and scope of the additions, modifications and
improvements performed and obtains Lessor's approval of the remaining
work to be completed. Any such addition, modification and improvement
which affects the structure of any of the Leased Improvements which is not
a Capital Addition or Material Structural Work shall be exempt from the
requirements of Section 9.2 hereof.
9.6 COMPENSATION TO LESSEE FOR CAPITAL
ADDITIONS PAID FOR OR FINANCED BY LESSEE. Upon the
expiration or earlier termination of this Lease, except by reason of the
default by Lessee hereunder, Lessor shall compensate Lessee for all Capital
Additions paid for or financed by Lessee in any of the following ways,
determined in the sole discretion of Lessor:
47
(a) By purchasing all Capital Additions paid for or financed
by Lessee from Lessee for cash in the amount of the Fair Market Added
Value (determined as of the date of such purchase) of all such Capital
Additions paid for or financed by Lessee; or
(b) By purchasing such Capital Addition from Lessee by
delivering to Lessee Lessor's purchase money promissory note in the
amount of said Fair Market Added Value, due and payable no later than
eighteen (18) months after the date of expiration or other termination of this
Lease, bearing interest at a rate equal to one hundred ten percent (110%) of
the applicable federal rate (determined at the time of execution of such note
pursuant to Section 1274 of the Code or any successor section thereto),
compounded semiannually, or, if no such rate exists, or such rate is in
excess of that permitted under applicable law, at the Prime Rate, which
interest shall be payable monthly, and which note shall be secured by a
mortgage on the Leased Property, subject to all Liens on the Leased
Property at the time of such purchase; or
(c) By Lessor assigning to Lessee under appropriate written
instruments the right to receive an amount equal to the Added Value
Percentage (determined as of the expiration of earlier termination of this
Lease) from all rent and other consideration receivable by Lessor under any
re-letting or other disposition of the Leased Property, after deducting all
costs and expenses incurred by Lessor in connection with such re-letting or
other disposition of the leased Property and all costs and expenses of
operating and maintaining the Leased Property during any such new lease
which are not borne by the tenant thereunder. The provisions of this
Subparagraph (c) shall remain in effect until the sale or other final
disposition of the Leased Property in which event Lessor shall pay to
Lessee the outstanding balance of the Fair Market Added Value in
accordance with Subparagraph (a), (b), or (d) of this Section 9.6, after
deducting any amounts received by Lessee under this Subparagraph (c); or
(d) Such other arrangement regarding such compensation as
shall be mutually acceptable to Lessor and Lessee.
ARTICLE 10
WARRANTIES AND REPRESENTATIONS
10.1 REPRESENTATIONS AND WARRANTIES. Lessee
hereby represents and warrants to, and covenants and agrees with, Lessor
that:
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10.1.1 EXISTENCE; POWER; QUALIFICATION.
Lessee is a corporation duly organized, validly existing
and in good standing under the laws of the State of Washington.
Lessee has all requisite corporate power to own and operate its
properties and to carry on its business as now conducted and is
duly qualified to transact business and is in good standing in each
jurisdiction where such qualification is necessary or desirable in
order to carry out its business as presently conducted. As of the
date of this Agreement, Lessee does not have any Subsidiaries and
Lessee is not a member of any partnership or joint venture.
Attached hereto as EXHIBIT C is a true and correct list of all of the
shareholders of Lessee and their respective ownership interests in
Lessee;
10.1.2 VALID AND BINDING. Lessee is duly
authorized to make and enter into all of the Lease Documents to
which Lessee is a party and to carry out the transactions
contemplated therein. All of the Lease Documents to which Lessee
is a party have been duly executed and delivered by Lessee, and
each is a legal, valid and binding obligation of Lessee, enforceable
in accordance with its terms.
10.1.3 SINGLE PURPOSE. Lessee is, and during the
entire time that this Lease remains in force and effect shall be,
engaged in no business, trade or activity other than the operation
and development of the Leased Property for the Primary Intended
Use and such other activities in which Lessee may be permitted to
engage by the provisions of Meditrust/Emeritus Transaction
Documents. The fiscal year of Lessee, and the Guarantor is the
Fiscal Year.
10.1.4 NO VIOLATION. The execution, delivery and
performance of the Lease Documents by the members of the
Leasing Group and the consummation by the members of the
Leasing Group of the transactions thereby contemplated shall not
result in any breach of, or constitute a default under, or result in the
acceleration of, or constitute an event which, with the giving of
notice or the passage of time, or both, could result in default or
acceleration of any obligation of any such member of the Leasing
Group under any of the Permits or Contracts or any other contract,
mortgage, lien, lease, agreement, instrument, franchise, arbitration
award, judgment, decree, bank loan or credit agreement, trust
indenture or other instrument to which any member of the Leasing
Group is a party or by which any member of the Leasing Group
may be bound or affected and do not violate or contravene any
Legal Requirement.
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10.1.5 CONSENTS AND APPROVALS. Except as
already obtained or filed or, with respect to the Project, reasonably
expected to be obtained in the ordinary course of business prior to
or upon the Completion of the Project, as the case may be, no
consent or approval or other authorization of, or exemption by, or
declaration or filing with, any Person and no waiver of any right by
any Person is required to authorize or permit, or is otherwise
required as a condition of the execution, delivery and performance
of its obligations under the Lease Documents by any member of
the Leasing Group or as a condition to the validity (assuming the
due authorization, execution and delivery by Lessor of the Lease
Documents to which it is a party) and the first priority of any Liens
granted under the Lease Documents, except the filing of the
Financing Statements.
10.1.6 NO LIENS OR INSOLVENCY
PROCEEDINGS. Each member of the Leasing Group in existence
as of the date hereof is financially solvent and there are no actions,
suits, investigations or proceedings including, without limitation,
outstanding federal or state tax liens, garnishments or insolvency or
bankruptcy proceedings, pending or, to the best of Lessee's
knowledge and belief, threatened:
(a) against or affecting any member of the
Leasing Group, which if adversely resolved to such
member of the Leasing Group, would materially adversely
affect the ability of any of the foregoing to perform their
respective obligations under the Lease Documents;
(b) against or affecting the Leased Property
or the ownership, construction, development,
maintenance, management, repair, use, occupancy,
possession or operation thereof; or
(c) which may involve or affect the
validity, priority or enforceability of any of the Lease
Documents, at law or in equity, or before or by any
arbitrator or Governmental Authority.
10.1.7 INTENTIONALLY DELETED.
10.1.8 COMMERCIAL ACTS. Lessee's performance
of and compliance with the obligations and conditions set forth
herein and in the other Lease Documents will constitute
commercial acts done and performed for commercial purposes.
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10.1.9 ADEQUATE CAPITAL, NOT INSOLVENT.
After giving effect to the consummation of the transactions
contemplated by the Lease Documents, each member of the
Leasing Group:
(a) will be able to pay its debts as they
become due;
(b) will have sufficient funds or available
capital to carry on its business as now conducted or as
contemplated to be conducted (in accordance with the
terms of the Lease Documents); and
(c) will not be rendered insolvent as
determined by applicable law.
10.1.10 NOT DELINQUENT. Except as permitted
under Section 11.3.8, no member of the Leasing Group which
exists as of the date hereof is delinquent or claimed to be
delinquent under any obligation for the payment of borrowed
money.
10.1.11 NO AFFILIATE DEBT. Lessee has not created,
incurred, guaranteed, endorsed, assumed or suffered to exist any
liability (whether direct or contingent) for borrowed money from
the Guarantor (or any of its Affiliates) or any Affiliate of Lessee
which has not been fully subordinated to the Lease Obligations.
10.1.12 TAXES CURRENT. Each member of the
Leasing Group which exists as of the date hereof has filed all
federal, state and local tax returns which are required to be filed as
to which extensions are not currently in effect and has paid all
taxes, assessments, impositions, fees and other governmental
charges (including interest and penalties) which have become due
pursuant to such returns or pursuant to any assessment or notice of
tax claim or deficiency received by each such member of the
Leasing Group. No tax liability has been asserted by the Internal
Revenue Service against any member of the Leasing Group or any
other federal, state or local taxing authority for taxes, assessments,
impositions, fees or other governmental charges (including interest
or penalties thereon) in excess of those already paid.
51
10.1.13 FINANCIALS COMPLETE AND ACCURATE.
The financial statements of each member of the Leasing Group given to
Lessor in connection with the execution and delivery of the Lease
Documents were true, complete and accurate, in all material respects, and
fairly presented the financial condition of each such member of the Leasing
Group as of the date thereof and for the periods covered thereby, having
been prepared in accordance with GAAP and such financial statements
disclosed all liabilities, including, without limitation, contingent
liabilities, of each such member of the Leasing Group as of the date thereof.
There has been no material adverse change since such date with respect to the
Net Worth of any such member of the Leasing Group or with respect to any
other matters contained in such financial statements, nor have any
additional material liabilities, including, without limitation, contingent
liabilities, of any such member of the Leasing Group arisen or been
incurred or asserted since such date except as otherwise disclosed to Lessor.
The projections heretofore delivered to Lessor continue to be reasonable
(with respect to the material assumptions upon which such projections are
based) and Lessee reasonably anticipates based on information currently
available to it after due inquiry the results projected therein will be
achieved, there having been (a) no material adverse change in the business,
assets or condition, financial or otherwise of any such member of the
Leasing Group or the Leased Property and (b) no material depletion of the
cash or decrease in working capital of any such member of the Leasing
Group.
10.1.14 PENDING ACTIONS, NOTICES AND
REPORTS.
(a) There is no action or investigation pending or, to
the best knowledge and belief of Lessee, threatened, anticipated or
contemplated (nor, to the knowledge of Lessee, is there any
reasonable basis therefor) against or affecting the Leased Property
or any member of the Leasing Group (or any Affiliate thereof)
before any Governmental Authority which could prevent or hinder
the consummation of the transactions contemplated hereby or call
into question the validity of any of the Lease Documents or any
action taken or to be taken in connection with the transactions
contemplated thereunder or which in any single case or in the
aggregate might result in any material adverse change in the
business, prospects, condition, affairs of any member of the
Leasing Group or the Leased Property (including, without
limitation, any action to revoke, withdraw or suspend any Permit
necessary or desirable for the operation of the Leased Property in
accordance with its Primary Intended Use and any action to
transfer or relocate any such Permit to a location other than the
Leased Property) or any material impairment of the right or ability
of any member of the Leasing Group to carry on its operations as
presently conducted or, with respect to the Project, proposed upon
52
Completion of the Project to be conducted with respect to the
Leased Property or with respect to its obligations under the Lease
Documents.
(b) Neither the Facility nor any member of the
Leasing Group has received any notice of any claim, requirement
or demand of any Governmental Authority, Accreditation Body, if
any, Third Party Payor or any insurance body having or claiming
any licensing, certifying, supervising, evaluating or accrediting
authority over the Leased Property to rework or redesign the
Leased Property, its professional staff or its professional services,
procedures or practices in any material respect or to provide
additional furniture, fixtures, equipment or inventory or to
otherwise take action so as to make the Leased Property conform
to or comply with any Legal Requirement;
(c) The most recent utilization reviews, if any,
relating to the Leased Property by all applicable Third Party
Payors, Accreditation Bodies and Governmental Authorities and
all applicable reviews or scrutiny by any managed care or
utilization review companies, if any, have not had a material
adverse impact on the utilization of units or programs at any of the
Leased Property. No claims or assertions have been made in any
utilization review that any of the practices or procedures used at
the Leased Property are improper or inappropriate other than such
claims or assertions which singly and in the aggregate will not
have a material adverse impact on the Leased Property; and
(d) Lessee has delivered or caused to be delivered
to Lessor true and correct copies of all licenses, inspection surveys
and accreditation reviews, if any, relating to the Leased Property,
issued by any Governmental Authority during the most recent
licensing period, together with all plans of correction relating
thereto.
10.1.15 COMPLIANCE WITH LEGAL AND OTHER
REQUIREMENTS.
(a) Lessee and the Leased Property (with respect to
the Project, to the extent consistent with the stage of construction
of the Project) and the ownership, construction, development,
maintenance, management, repair, use, occupancy, possession and
operation thereof comply with all applicable Legal Requirements
and there is no claim of any violation thereof known to Lessee.
Without limiting the foregoing, Lessee has obtained all Permits
that are necessary or desirable to operate the Leased Property in
accordance with its Primary Intended Use or, with respect to the
Project, reasonably expects to obtain such Permits prior to, or
upon, the Completion of the Project.
53
(b) Except as previously delivered to Lessor
pursuant to Section 10.1.14(d) hereof, there are no outstanding
notices of deficiencies, notices of proposed action or orders of any
kind relating to the Leased Property, if any, issued by any
Governmental Authority requiring conformity to any of the
applicable Legal Requirements.
10.1.16 NO ACTION BY GOVERNMENTAL
AUTHORITY OR ACCREDITATION BODY. There is no action
pending or, to the best knowledge and belief of Lessee,
recommended, by any Governmental Authority to revoke, repeal,
cancel, modify, withdraw or suspend any Permit or Contract or to
take any other action of any other type which could have a
material adverse effect on the Leased Property.
10.1.17 PROPERTY MATTERS.
(a) The Leased Property is free and clear of
agreements, covenants and Liens, except those agreements,
covenants and Liens to which this Lease is expressly subject,
whether presently existing, as are listed on EXHIBIT B or were
listed on the UCC lien search results delivered to Lessor at or prior
to the execution and delivery of this Lease (and were not required
to be terminated as a condition of the execution and delivery of
this Lease), or which may hereafter be created in accordance with
the terms hereof (collectively referred to herein as the "Permitted
Encumbrances"); and Lessee shall warrant and defend Lessor's
title to the Leased Property against any and all claims and demands
of every kind and nature whatsoever;
(b) There is no Condemnation or similar proceeding
pending with respect to or affecting the Leased Property, and
Lessee is not aware, to the best of Lessee's knowledge and belief,
that any such proceeding is contemplated;
(c) No part of the Collateral or the Leased Property
has been damaged by any fire or other casualty. The Leased
Improvements (except the Project prior to completion of the
Project) are in good operating condition and repair, ordinary wear
and tear excepted, free from known defects in construction or
design;
(d) None of the Permitted Encumbrances has or is
likely to have a material adverse impact upon, nor interfere with or
impede, in any material respect, the operation of the Leased
Property in accordance with the Primary Intended Use;
54
(e) All buildings, facilities and other improvements
necessary, both legally and practically, for the proper and efficient
operation of the Facility are (or in the case of the Project, will be)
located upon the Leased Property and all real property and
personal property currently utilized by Lessee is (or in the case of
the Project, will be) included within the definition of the Leased
Property or the Collateral;
(f) The Leased Property abuts on and has direct
vehicular access to a public road or access to a public road via
permanent, irrevocable, appurtenant easements;
(g) The Leased Property constitutes a parcel(s) for
real estate tax purposes separate from any real property that does
not constitute a portion of the Leased Property and no portion of
any real property that does not constitute a portion of the Leased
Property is part of the same tax parcel as any part of the Leased
Property;
(h) All utilities necessary for the use and operation
of the Facility are available to the lot lines of the Leased Property:
(i) in sufficient supply and capacity;
(ii) through validly created and existing
easements of record appurtenant to or encumbering the
Leased Property (which easements shall not impede or
restrict the operation of the Facility);
(iii) without need for any Permits and/or
Contracts to be issued by or entered into with any
Governmental Authority, except as already obtained or
executed, as the case may be, or as otherwise shown to
the satisfaction of Lessor to be readily obtainable; and
(iv) Lessee has made no structural
alterations or improvements to any of the Leased
Improvements that changed the foot-print of any of the
Leased Improvements, added an additional story to any of
the Leased Improvements, decreased the amount of
parking available on the Leased Property or otherwise
involved any alteration which would be regulated by
applicable zoning requirements, in each case without the
express written consent of Lessor. Except for matters
which have been disclosed to Lessor or concerning which
Lessor has independent actual knowledge, Lessee has no
actual knowledge of any such structural alteration or
55
improvement made to any of the Leased Improvements
during the last ten (10) years and has no knowledge of
any such structural alteration or renovation made to any
of the Leased Improvements or any such decrease in
parking during such period.
10.1.18 THIRD PARTY PAYOR AGREEMENTS.
Neither Lessee nor the Facility is qualified as a provider
of services under or participates in any Third Party Payor
Programs and neither Lessor nor the Facility is accredited by any
Accreditation Body.
10.1.19 RATE LIMITATIONS. The State currently
imposes no restrictions or limitations on rates which may be
charged to private pay residents receiving services at the Facility.
10.1.20 FREE CARE. There are no Contracts, Permits
or applicable Legal Requirements which require that, a percentage
of units in any program at the Facility be reserved for Medicaid or
Medicare eligible residents or that the Facility provide a certain
amount of welfare, free or charity care or discounted or
government assisted resident care.
10.1.21 NO PROPOSED CHANGES. Lessee has no
actual knowledge of any applicable Legal Requirements which
have been enacted, promulgated or issued within the eighteen (18)
months preceding the date of this Lease or any proposed
applicable Legal Requirements currently pending in the State
which may materially adversely affect rates at the Facility (or any
program operated by a member of the Leasing Group in
conjunction with the Facility) or may result in the likelihood of
increased competition at the Facility or the imposition of
Medicaid, Medicare, charity, free care, welfare or other discounted
or government assisted residents at the Facility or require that
Lessee or the Facility obtain a certificate of need, Section 1122
approval or the equivalent, which Lessee or the Facility does not
currently possess.
10.1.22 ERISA. No employee pension benefit plan
maintained by any member of the Leasing Group has any
accumulated funding deficiency within the meaning of the ERISA,
nor does any member of the Leasing Group have any material
liability to the PBGC established under ERISA (or any successor
thereto) in connection with any employee pension benefit plan (or
other class of benefit which the PBGC has elected to insure), and
there have been no "reportable events" (not waived) or "prohibited
transactions" with respect to any such plan, as those terms are
56
defined in Section 4043 of ERISA and Section 4975 of the Internal
Revenue Code of 1986, as now or hereafter amended, respectively.
10.1.23 NO BROKER. No member of the Leasing
Group nor any of their respective Affiliates has dealt with any
broker or agent in connection with the transactions contemplated
by the Lease Documents.
10.1.24 NO IMPROPER PAYMENTS. No member of
the Leasing Group nor any of their respective Affiliates has:
(a) made any contributions, payments or
gifts of its funds or property to or for the private use of
any government official, employee, agent or other Person
where either the payment or the purpose of such
contribution, payment or gifts is illegal under the laws of
the United States, any state thereof or any other
jurisdiction (foreign or domestic);
(b) knowingly established or maintained
any unrecorded fund or asset for any purpose or
knowingly made any false or artificial entries on any of its
books or records for any reason;
(c) made any payments to any Person with
the intention or understanding that any part of such
payment was to be used for any other purpose other than
that described in the documents supporting the payment;
or
(d) made any contribution, or reimbursed
any political gift or contribution made by any other
Person, to candidates for public office, whether federal,
state or local, where such contribution would be in
violation of applicable law.
10.1.25 NOTHING OMITTED. Neither this Lease, nor
any of the other Lease Documents, nor any certificate, agreement,
statement or other document, including, without limitation, any
financial statements concerning the financial condition of any
member of the Leasing Group, furnished to or to be furnished to
Lessor or its attorneys in connection with the transactions
contemplated by the Lease Documents, contains or will contain
any untrue statement of a material fact or omits or will omit to
state a material fact necessary in order to prevent all statements
contained herein and therein from being misleading. There is no
fact within the special knowledge of Lessee which has not been
disclosed herein or in writing to Lessor that materially adversely
affects, or in the future, insofar as Lessee can reasonably foresee
57
based on the information currently available to it after due inquiry,
may materially adversely affect the business, properties, assets or
condition, financial or otherwise, of any member of the Leasing
Group or the Leased Property.
10.1.26 NO MARGIN SECURITY. Lessee is not
engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of
Regulation U of the Board of Governors of the Federal Reserve
System), and no part of the proceeds of the Meditrust Investment
will be used to purchase or carry any margin security or to extend
credit to others for the purpose of purchasing or carrying any
margin security or in any other manner which would involve a
violation of any of the regulations of the Board of Governors of
the Federal Reserve System. Lessee is not an "investment
company" within the meaning of the Investment Company Act of
1940, as amended.
10.1.27 NO DEFAULT. No event or state of facts which
constitutes, or which, with notice or lapse of time, or both, could
constitute, a Lease Default has occurred and is continuing.
10.1.28 PRINCIPAL PLACE OF BUSINESS. The
principal place of business and chief executive office of Lessee is
located at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇ (the "Principal Place of Business").
10.1.29 LABOR MATTERS. There are no proceedings
now pending, nor, to the best of Lessee's knowledge, threatened
with respect to the operation of the Facility before the National
Labor Relations Board, State Commission on Human Rights and
Opportunities, State Department of Labor, U.S. Department of
Labor or any other Governmental Authority having jurisdiction of
employee rights with respect to hiring, tenure and conditions of
employment, and no member of the Leasing Group has
experienced any material controversy with any Facility
administrator or other employee of similar stature or with any
labor organization which has, or is likely, to have a materially
adverse effect upon the financial condition and/or operations of the
Facility.
10.1.30 INTELLECTUAL PROPERTY. Lessee is duly
licensed or authorized to use all (if any) copyrights, rights of
reproduction, trademarks, trade-names, trademark applications,
service marks, patent applications, patents and patent license
rights, (all whether registered or unregistered, U.S. or foreign),
inventions, franchises, discoveries, ideas, research, engineering,
methods, practices, processes, systems, formulae, designs,
drawings, products, projects, improvements, developments,
58
know-how and trade secrets which are used in or necessary for the
development and/or operation of the Facility in accordance with its
Primary Intended Use, without conflict with or infringement of
any, and subject to no restriction, lien, encumbrance, right, title or
interest in others.
10.1.31 MANAGEMENT AGREEMENTS. There is no
Management Agreement in force and effect as of the date hereof.
10.2 CONTINUING EFFECT OF REPRESENTATIONS
AND WARRANTIES. All representations and warranties contained in this
Lease and the other Lease Documents shall constitute continuing
representations and warranties which shall remain true, correct and
complete throughout the Term. Notwithstanding the provisions of the
foregoing sentence but without derogation from any other terms and
provisions of this Lease, including, without limitation, those terms and
provisions containing covenants to be performed or conditions to be
satisfied on the part of Lessee, the representations and warranties contained
in Sections 10.1.6, 10.1.7, 10.1.10, 10.1.14, 10.1.15, 10.1.17(b), 10.1.17(c),
10.1.17(i), 10.1.18, 10.1.19, 10.1.20, 10.1.21, 10.1.22, 10.1.27, 10.1.29, in
the second sentence of Section 10.1.12, in the second and third sentences of
Section 10.1.13 and in the second sentence of Section 10.1.25 shall not
constitute continuing representations and warranties throughout the Term
provided, however, that nothing contained in the first sentence of Section
10.1.25 shall be construed as imposing any obligation on Lessee to update
after the Commencement Date the information furnished to Lessor prior to
the execution and delivery of this Lease but without derogation of any other
obligation Lessee has under this Lease to provide information to Lessor.
ARTICLE 11
FINANCIAL AND OTHER COVENANTS
11.1 STATUS CERTIFICATES. At any time, and from time
to time, upon request from the other, Lessee and Lessor shall furnish to the
other, within ten (10) Business Days' after receipt of such request, an
Officer's Certificate certifying that this Lease is unmodified and in full
force and effect (or that this Lease is in full force and effect as modified
and setting forth the modifications) and the dates to which the Rent has been
paid. Any Officer's Certificate furnished pursuant to this Section at the
request of Lessor shall be addressed to any prospective purchaser or
mortgagee of the Leased Property as Lessor may request and may be relied
upon by Lessor and any such prospective purchaser or mortgagee of the
Leased Property.
59
11.2 FINANCIAL STATEMENTS; REPORTS; NOTICE
AND INFORMATION.
11.2.1 OBLIGATION TO FURNISH. Lessee will
furnish and shall cause to be furnished to Lessor the following
statements, information and other materials:
(a) ANNUAL STATEMENTS. Within
ninety (90) days after the end of each of their respective
fiscal years, (i) a copy of the Consolidated Financials for
each of (x) Lessee, (y) the Guarantor and (z) any
Sublessee which is an Affiliate of Lessee for the preceding
fiscal year, certified and, in the case of Guarantor, audited
by, and with the unqualified opinion of, independent
certified public accountants acceptable to Lessor and
certified as true and correct by Lessee, the Guarantor or
the applicable Sublessee, as the case may be (and, without
limiting anything else contained herein, the Consolidated
Financials for Lessee and for each such Sublessee shall
include a detailed balance sheet for Leased Property as of
the last day of such fiscal year and a statement of earnings
from the Leased Property for such fiscal year showing,
among other things, all rents and other income therefrom
and all expenses paid or incurred in connection with the
operation of the Leased Property); (ii) separate statements,
certified as true and correct by Lessee, the Guarantor, any
Manager which is an Affiliate of Lessee and each such
Sublessee which is an Affiliate of Lessee, stating whether,
to the best of the signer's knowledge and belief after
making due inquiry, Lessee, the Guarantor, such Manager
or any such Sublessee, as the case may be, is in default in
the performance or observance of any of the terms of this
Lease or any of the other Lease Documents and, if so,
specifying all such defaults, the nature thereof and the
steps being taken to immediately remedy the same; (iii) a
copy of all letters from the independent certified
accountants engaged to perform the annual audits referred
to above, directed to the management of the Guarantor
regarding the existence of any reportable conditions or
material weaknesses; (iv) a statement certified as true and
correct by Lessee setting forth all Subleases as of the last
day of such fiscal year, the respective areas demised
thereunder, the names of the Sublessees thereunder, the
respective expiration dates of the Subleases, the respective
rentals provided for therein, and such other information
pertaining to the Subleases as may be reasonably
requested by Lessor; and (v) evidence satisfactory to
Lessor that Lessee has fulfilled its obligation to make the
60
Annual Facility Upgrade Expenditure, provided, however,
that no such evidence shall be required to be submitted
until the fourth Lease Year with respect to that portion of
the Leased Property comprised only of the Project.
(b) MONTHLY STATEMENTS OF
LESSEE. Within thirty (30) days after the end of each
calendar month during the pendency of this Lease, (i) a
statement certified as true and correct by Lessee setting
forth the Gross Revenues of the Leased Property for the
immediately preceding month, (ii) an unaudited, detailed
month and year to date income and expense statement for
the Leased Property which shall include a comparison to
corresponding budget figures, occupancy statistics
(including the actual number of residents, the number of
units available and total resident days for such month) and
resident mix breakdowns (for each resident day during
such month classifying residents by the type of care
required and source of payment) and (iii) an express
written calculation showing the compliance or non-
compliance, as the case may be, with the specific financial
covenants set forth in Section 11.3 for the applicable
period, including, with respect to the calculation of
Lessee's Debt Coverage Ratio, a schedule substantially in
the form attached hereto as EXHIBIT E.
(c) QUARTERLY STATEMENTS.
Within thirty (30) days after the end of each respective
fiscal quarter, unaudited Consolidated Financials for each
of (i) Lessee and (ii) each Sublessee which is an Affiliate
of Lessee certified as true and correct by Lessee or such
applicable Sublessee, as the case may be and within thirty
(30) days after each calendar quarter, Lessee shall also
provide Lessor with a calculation of the Additional Rent
payable for such quarter.
(d) QUARTERLY STATEMENTS OF
THE GUARANTOR. Within forty-five (45) days after the
end of each fiscal quarter, unaudited Consolidated
Financials for the Guarantor certified as true and correct
by the Guarantor.
(e) PERMITS AND CONTRACTS.
Within ten (10) days after the issuance or the execution
thereof, as the case may be, true and complete copies of (i)
all Permits which constitute operating licenses for the
Facility issued by any Governmental Authority having
jurisdiction over assisted living matters and (ii) Contracts
(involving payments in the aggregate in excess of
61
$100,000 per annum), including, without limitation, all
Provider Agreements.
(f) CONTRACT NOTICES. Promptly but
in no event more than ten (10) days after the receipt
thereof, true and complete copies of any notices, consents,
terminations or statements of any kind or nature relating to
any of the Contracts (involving payments in the aggregate
in excess of ONE HUNDRED THOUSAND DOLLARS
($100,000) per annum) other than those issued in the
ordinary course of business.
(g) PERMIT OR CONTRACT
DEFAULTS. Promptly but in no event more than ten (10)
days after the receipt thereof, true and complete copies of
all surveys, follow-up surveys, licensing surveys,
complaint surveys, examinations, compliance certificates,
inspection reports, statements (other than those statements
that are issued in the ordinary course of business), if any,
terminations and notices of any kind (other than those
notices that are furnished in the ordinary course of
business) issued or provided to Lessee, the Manager or
any Sublessee by any Governmental Authority,
Accreditation Body, or any Third Party Payor, including,
without limitation, any notices pertaining to any
delinquency in, or proposed revision of, Lessee's, the
Manager's or any Sublessee's obligations under the terms
and conditions of any Permits or Contracts now or
hereafter issued by or entered into with any Governmental
Authority, Accreditation Body, or Third Party Payor and
the response(s) thereto made by or on behalf of Lessee,
the Manager or any Sublessee.
(h) OFFICIAL REPORTS. Upon
completion or filing thereof, complete copies of all
applications (other than those that are furnished in the
ordinary course of business), notices (other than those that
are furnished in the ordinary course of business),
statements, annual reports, cost reports and other reports
or filings of any kind (other than those that are furnished
in the ordinary course of business) provided by Lessee,
the Manager or any Sublessee to any Governmental
Authority, Accreditation Body, or any Third Party Payor
with respect to the Leased Property.
62
(i) OTHER INFORMATION. With
reasonable promptness, such other information as Lessor
may from time to time reasonably request respecting (i)
the financial condition and affairs of each member of the
Leasing Group and the Leased Property and (ii) the
licensing and operation of the Leased Property; including,
without limitation, financial statements, certificates and
consents from accountants and all other financial and
licensing/operational information as may be required or
requested by any Governmental Authority.
(j) DEFAULT CONDITIONS. As soon as
possible, and in any event within five (5) days after the
occurrence of any Lease Default, or any event or
circumstance which, with the giving of notice or the
passage of time, or both, would constitute a Lease Default,
a written statement of Lessee setting forth the details of
such Lease Default, event or circumstance and the action
which Lessee proposes to take with respect thereto.
(k) OFFICIAL ACTIONS. Promptly but in
no event more than ten (10) days after the commencement
thereof, notice of all actions, suits and proceedings before
any Governmental Authority or Accreditation Body,
which could have a material adverse effect on any
member of the Leasing Group or the Leased Property.
(l) AUDIT REPORTS. Promptly but in no
event more than ten (10) days after receipt, a copy of all
audits or reports submitted to Lessee by any independent
public accountant in connection with any annual, special
or interim audits of the books of Lessee and, if requested
by Lessor, any letter of comments directed by such
accountant to the management of Lessee.
(m) ADVERSE DEVELOPMENTS.
Promptly but in no event more than ten (10) days after
Lessee acquires knowledge thereof, written notice of:
(i) the potential termination of any
Permit or Provider Agreement
necessary for the operation of the
Leased Property;
63
(ii) any loss, damage or destruction
to or of the Leased Property in
excess of TWENTY-FIVE
THOUSAND DOLLARS
($25,000) (regardless of whether
the same is covered by
insurance);
(iii) any material controversy
involving Lessee or any
Sublessee which is an Affiliate of
Lessee and (x) Facility
administrator or Facility
employee of similar stature or (y)
any labor organization or (z) the
Manager or any employee of the
Manager which has, or is
reasonably likely to have, a
materially adverse effect on the
financial condition and/or
operations of the Facility;
(iv) any controversy that calls into
question the eligibility of the
Facility for the participation in
any Medicaid, Medicare or other
Third Party Payor Program in
which the Facility is
participating;
(v) any refusal of reimbursement by
any Third Party Payor which,
singularly or together with all
other such refusals by any Third
Party Payors, could reasonably
be expected to have a material
adverse effect on the financial
condition of Lessee or any
Sublessee which is an Affiliate of
Lessee; and
(vi) any fact within the special
knowledge of any member of the
Leasing Group, or any other
development in the business or
affairs of any member of the
Leasing Group, which could
reasonably be expected to be
materially adverse to the
64
business, properties, assets or
condition, financial or otherwise,
of any member of the Leasing
Group or the Leased Property.
(n) RESPONSES TO INSPECTION
REPORTS. Within thirty (30) days after receipt of an
inspection report relating to the Leased Property from
Lessor, a written response describing in detail prepared
plans to address concerns raised by the inspection report.
(o) PUBLIC INFORMATION. Upon the
completion or filing, mailing or other delivery thereof,
complete copies of all financial statements, reports,
notices and proxy statements, if any, sent by any member
of the Leasing Group (which is a publicly held
corporation) to its shareholders and of all reports, if any,
filed by any member of the Leasing Group (which is a
publicly held corporation) with any securities exchange or
with the Securities Exchange Commission.
(p) ANNUAL BUDGETS. Prior to the end
of each Fiscal Year, Lessee, any Sublessee which is an
Affiliate of Lessee and/or any Manager which is an
Affiliate of Lessee shall submit to Lessor a preliminary
annual financial budget for the Facility for the next Fiscal
Year, a preliminary capital expenditures budget for the
Facility for the next Fiscal Year and a report detailing the
capital expenditures made in the then current Fiscal Year
and on or before the end of the first month of each Fiscal
Year, Lessee, any such Sublessee and/or any such
Manager shall submit to Lessor revised finalized versions
of such budgets and report.
(q) WORKING CAPITAL LOAN.
Promptly after receipt thereof, copies of any notices with
respect to default from a lender of a Working Capital
Loan.
11.2.2 RESPONSIBLE OFFICER. Any certificate,
instrument, notice, or other document to be provided to Lessor
hereunder by any member of the Leasing Group shall be signed by
an executive officer of such member (in the event that any of the
foregoing is not an individual), having a position of Vice President
or higher and with respect to financial matters, any such certificate,
instrument, notice or other document shall be signed by the chief
financial officer of such member.
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11.2.3 NO MATERIAL OMISSION. No certificate,
instrument, notice or other document, including without limitation,
any financial statements furnished or to be furnished to Lessor
pursuant to the terms hereof or of any of the other Lease
Documents shall contain any untrue statement of a material fact or
shall omit to state any material fact necessary in order to prevent
all statements contained therein from being misleading.
11.2.4 CONFIDENTIALITY. Lessor shall afford any
information received pursuant to the provisions of the Lease
Documents the same degree of confidentiality that Lessor affords
similar information proprietary to Lessor; provided, however, that
Lessor shall have the unconditional right to (a) disclose any such
information as Lessor deems necessary or appropriate in
connection with any sale, transfer, conveyance, participation or
assignment of the Leased Property or any of the Lease Documents
or any interest therein and (b) use such information in any
litigation or arbitration proceeding between Lessor and any
member of the Leasing Group. Without limiting the foregoing,
Lessor may also utilize any information furnished to it hereunder
as and to the extent (i) counsel to Lessor determines that such
utilization is necessary pursuant to 15 U.S.C. 77a-77aa or 15
U.S.C. 78a-78jj and the rules and regulations promulgated
thereunder, (ii) Lessor is required or requested by any
Governmental Authority to disclose any such information and/or
(iii) Lessor is requested to disclose any such information by any of
the Meditrust Entities' lenders or potential lenders. Lessor shall
not be liable in any way for any subsequent disclosure of such
information by any Person to which Lessor has provided such
information in accordance with the terms hereof. Nevertheless, in
connection with any such disclosure, Lessor shall inform the
recipient of any such information of the confidential nature
thereof. Lessor shall observe any prohibitions or limitations on the
disclosure of any such information under applicable confidentiality
law or regulations, to the extent that the same are applicable to
such information.
11.3 FINANCIAL COVENANTS. Lessee covenants and
agrees that, throughout the Term and as long as Lessee is in possession of
the Leased Property:
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11.3.1 DEBT COVERAGE RATIO OF LESSEE.
From and after the second anniversary of the date hereof until the
fourth anniversary hereof, Lessee shall maintain with respect to the
Facility and all other Group Two Acquisition Facilities for each
Fiscal Quarter an aggregate Debt Coverage Ratio equal to or
greater than 1.1 to 1 and from and after the fourth anniversary
thereof and for the remainder of the Term, Lessee shall maintain
with respect to the Facility and all other Group Two Acquisition
Facilities each Fiscal Quarter an aggregate Debt Coverage Ratio
equal to or greater than 1.2 to 1.
11.3.2 INTENTIONALLY DELETED.
11.3.3 INTENTIONALLY DELETED.
11.3.4 INTENTIONALLY DELETED.
11.3.5 CURRENT RATIO - GUARANTOR. From
and after December 31, 1999 and for the remainder of the Term,
the Guarantor shall maintain a ratio of Consolidated Current Assets
to Consolidated Current Liabilities equal to or greater than 1 to 1
as of the end of each fiscal year.
11.3.6 INTENTIONALLY DELETED.
11.3.7 NET WORTH - GUARANTOR. The
Guarantor shall maintain, at all times, a Net Worth of not less than
TWENTY MILLION DOLLARS ($20,000,000).
11.3.8 NO INDEBTEDNESS. Lessee shall not
create, incur, assume or suffer to exist any liability for borrowed
money except (i) Indebtedness to Lessor under the Lease
Documents and, (ii) Impositions allowed pursuant to the
provisions of the Lease, (iii) unsecured normal trade debt incurred
upon customary terms in the ordinary course of business,
(iv) Indebtedness created in connection with any financing of any
Capital Addition, provided, that each such financing has been
approved by Lessor in accordance with the terms of Article 9
hereof, (v) Indebtedness to any Affiliate, provided, that, such
Indebtedness is fully subordinated to this Lease pursuant to the
Affiliated Party Subordination Agreement, (vi) other Indebtedness
of Lessee in the aggregate amount not to exceed TWO HUNDRED
THOUSAND DOLLARS ($200,000) incurred, for the exclusive
use of the Leased Property, on account of purchase money
indebtedness or finance lease arrangements, each of which shall
not exceed the fair market value of the assets or property acquired
or leased and shall not extend to any assets or property other than
those purchased or leased and purchase money security interests in
equipment and equipment leases which comply with the provisions
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of Section 6.1.2 and (vii) Indebtedness specifically permitted by
the Meditrust/Emeritus Transaction Documents.
11.3.9 NO GUARANTIES. Lessee shall not
assume, guarantee, endorse, contingently agree to purchase or
otherwise become directly or contingently liable (including,
without limitation, liable by way of agreement, contingent or
otherwise, to purchase, to provide funds for payment, to supply
funds to or otherwise to invest in any debtor or otherwise to assure
any creditor against loss) in connection with any Indebtedness of
any other Person, except by the endorsement of negotiable
instruments for deposit or collection or similar transactions in the
ordinary course of business and except for a guaranty of the
Indebtedness of the Guarantor in connection with a Working
Capital Loan which expressly limits recourse under such guaranty
to the Receivables.
11.4 AFFIRMATIVE COVENANTS. Lessee covenants and
agrees that throughout the Term and any periods thereafter that Lessee
remains in possession of the Leased Property:
11.4.1 MAINTENANCE OF EXISTENCE. If
Lessee is a corporation, trust or partnership, during the entire time
that this Lease remains in full force and effect, Lessee shall keep in
effect its existence and rights as a corporation, trust or partnership
under the laws of the state of its incorporation or formation and its
right to own property and transact business in the State.
11.4.2 MATERIALS. Except as provided in Section
6.1.2, Lessee shall not suffer the use in connection with any
renovations or other construction relating to the Leased Property of
any materials, fixtures or equipment intended to become part of the
Leased Property which are purchased upon lease or conditional ▇▇▇▇
of sale or to which Lessee does not have absolute and
unencumbered title, and Lessee covenants to cause to be paid
punctually all sums becoming due for labor, materials, fixtures or
equipment used or purchased in connection with any such
renovations or construction, subject to Lessee's right to contest to
the extent provided for in Article 15.
11.4.3 COMPLIANCE WITH LEGAL
REQUIREMENTS AND APPLICABLE AGREEMENTS. Lessee
and the Leased Property and all uses thereof shall comply with (i)
all applicable Legal Requirements (except to the extent being duly
contested in accordance with the terms hereof), (ii) all Permits and
Contracts, (iii) all Insurance Requirements, (iv) the Lease
Documents, (v) the Permitted Encumbrances and (vi) the
Appurtenant Agreement.
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11.4.4 BOOKS AND RECORDS. Lessee shall
cause to be kept and maintained, and shall permit Lessor and its
representatives to inspect at all reasonable times and upon
reasonable notice, accurate books of accounts in which complete
entries will be made in accordance with GAAP reflecting all
financial transactions of Lessee (showing, without limitation, all
materials ordered and received and all disbursements, accounts
payable and accounts receivable in connection with the operation
of the Leased Property).
11.4.5 PARTICIPATION IN THIRD PARTY
PAYOR PROGRAMS. If Lessee or a Sublessee which is an
Affiliate of Lessee elects to participate in Third Party Payor
Programs, Lessee or such Sublessee shall remain eligible to
participate in such Third Party Payor Programs in accordance with
all requirements thereof (including, without limitation, all
applicable Provider Agreements), if and to the extent remaining
eligible shall be necessary for the prudent operation of the Facility
in the good faith exercise of commercially reasonable business
judgment.
11.4.6 CONDUCT OF ITS BUSINESS. Lessee will
maintain, and cause any Sublessee and any Manager to maintain,
experienced and competent professional management with respect
to its business and with respect to the Leased Property. Lessee,
any Sublessee and any Manager shall conduct, in the ordinary
course, the operation of the Facility, and Lessee and any Sublessee
which is an Affiliate of Lessee shall not enter into any other
business or venture during the Term or such time as Lessee or any
such Sublessee is in possession of the Leased Property other than
activities in which Lessee or such Sublessee are permitted to
engage by the provisions of the Meditrust/Emeritus Transaction
Documents.
11.4.7 ADDRESS. Lessee shall provide Lessor
thirty (30) days' prior written notice of any change of its Principal
Place of Business from its current Principal Place of Business.
Lessee shall maintain the Collateral, including without limitation,
all books and records relating to its business, solely at its Principal
Place of Business and at the Leased Property. Lessee shall not (a)
remove the Collateral, including, without limitation, any books or
records relating to Lessee's business from either the Leased
Property or Lessee's Principal Place of Business or (b) relocate its
Principal Place of Business until after receipt of a certificate from
Lessor, signed by an officer thereof, stating that Lessor has, to its
satisfaction, obtained all documentation that it deems necessary or
desirable to obtain, maintain, perfect and confirm the first priority
security interests granted in the Lease Documents.
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11.4.8 SUBORDINATION OF AFFILIATE
TRANSACTIONS. Without limiting the provisions of any other
Section of this Lease or the Affiliated Party Subordination
Agreement, any payments to be made by Lessee to (a) any
member of the Leasing Group (or any of its Affiliates) or (b) any
Affiliate of Lessee, in connection with any transaction between
Lessee and such Person, including, without limitation, the
purchase, sale or exchange of any property, the rendering of any
service to or with any such Person (including, without limitation,
all allocations of any so-called corporate or central office costs,
expenses and charges of any kind or nature) or the making of any
loan or other extension of credit or the making of any equity
investment, shall be subordinate to the complete payment and
performance of the Lease Obligations; provided, however, that all
such subordinated payments may be paid at any time unless: (x)
after giving effect to such payment, Lessee shall be unable to
comply with any of its obligations under any of the Lease
Documents or (y) a Lease Default has occurred and is continuing
and has not been expressly waived in writing by Lessor or an event
or state of facts exists, which, with the giving of notice or the
passage of time, or both, would constitute a Lease Default.
11.4.9 INSPECTION. At reasonable times and
upon reasonable notice, Lessee shall permit Lessor and its
authorized representatives (including, without limitation, the
Consultants) to inspect the Leased Property as provided in Section
7.1 above, provided, however, that, in the event results of any such
testing or inspection reflect the same satisfactory results as the
results of a similar testing or inspection initiated by Lessor within
the prior twelve (12) months period, the costs and expense of such
testing or inspection shall be the responsibility of Lessor.
11.4.10 ANNUAL FACILITY UPGRADE
EXPENDITURE. Lessee shall spend an amount equal to the
Annual Facility Upgrade Expenditure on Upgrade Renovations to
the Facility each Lease Year provided, however, that such
expenditures shall not be required until the fourth Lease Year with
respect to that portion of the Leased Property consisting of units
added to the Leased Property through construction of the Project.
Lessee will furnish and shall cause to be furnished to Lessor
evidence satisfactory to Lessor that Lessee has fulfilled its
obligation to make the Annual Facility Upgrade Expenditure
within ninety (90) days after the end of Lessee's Fiscal year,
provided, however, that no such evidence shall be required to be
submitted until the fourth Lease Year with respect to that portion
of the Leased Property comprised only of the Project.
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11.5 ADDITIONAL NEGATIVE COVENANTS. Lessee
covenants and agrees that, throughout the Term and such time as Lessee
remains in possession of the Leased Property:
11.5.1 RESTRICTIONS RELATING TO LESSEE.
Except as may otherwise be expressly provided in Section 19.4 or
in any of the other Lease Documents, Lessee shall not, without the
prior written consent of Lessor, in each instance, which consent
may be withheld in the sole and absolute discretion of Lessor:
(a) convey, assign, hypothecate, transfer,
dispose of or encumber, or permit the conveyance,
assignment, transfer, hypothecation, disposal or
encumbrance of all or any part of any legal or beneficial
interest in this Lease, its other assets or the Leased
Property except as expressly permitted by the terms of this
Lease Agreement; provided, however, that this restriction
shall not apply to (i) the Permitted Encumbrances that
may be created after the date hereof pursuant to the Lease
Documents; (ii) Liens created in accordance with Section
6.1.2 against Tangible Personal Property securing
Indebtedness permitted under Section 11.3.8(v); (iii) the
sale, conveyance, assignment, hypothecation, lease or
other transfer of any material asset or assets (whether now
owned or hereafter acquired), the fair market value of
which equals or is less than TWENTY-FIVE
THOUSAND DOLLARS ($25,000), individually, or ONE
HUNDRED THOUSAND DOLLARS ($100,000)
collectively; (iv) without limitation as to amount, the
disposition in the ordinary course of business of any
obsolete, worn out or defective fixtures, furnishings or
equipment used in the operation of the Leased Property
provided that the same are replaced with fixtures,
furnishings or equipment of equal or greater utility or
value or Lessee provides Lessor with an explanation
(reasonably satisfactory to Lessor) as to why such fixtures,
furnishings or equipment is no longer required in
connection with the operation of the Leased Property; (v)
without limitation as to amount, any sale of inventory by
Lessee in the ordinary course of business; and (vi) subject
to the terms of the Negative Pledge Agreement and the
Affiliated Party Subordination Agreement, distributions to
the shareholders of Lessee;
(b) permit the use of the Facility for any
purpose other than the Primary Intended Use and the
Other Permitted Uses; or
71
(c) liquidate, dissolve or merge or
consolidate with any other Person except, subject to
Lessor's prior written consent, which consent shall not be
unreasonably withheld, a Meditrust/Emeritus Transaction
Affiliate.
11.5.2 NO LIENS. Lessee will not directly or
indirectly create or allow to remain and will promptly discharge at
its expense any Lien, title retention agreement or claim upon or
against the Leased Property (including Lessee's interest therein) or
Lessee's interest in this Lease or any of the other Lease
Documents, or in respect of the Rent, excluding (a) this Lease and
any permitted Subleases, (b) the Permitted Encumbrances,
(c) Liens which are consented to in writing by Lessor, (d) Liens for
those taxes of Lessor which Lessee is not required to pay
hereunder, (e) Liens of mechanics, laborers, materialmen,
suppliers or vendors for sums either not yet due or being contested
in strict compliance with the terms and conditions of Article 15, (f)
any Liens which are the responsibility of Lessor pursuant to the
provisions of Article 20, (g) Liens for Impositions which are either
not yet due and payable or which are in the process of being
contested in strict compliance with the terms and conditions of
Article 15 (h) the Liens incurred pursuant to the provisions of
Section 6.1.2 and (i) involuntary Liens caused by the actions or
omissions of Lessor.
11.5.3 LIMITS ON AFFILIATE TRANSACTIONS.
Lessee shall not enter into any transaction with any Affiliate,
including, without limitation, the purchase, sale or exchange of
any property, the rendering of any service to or with any Affiliate
and the making of any loan or other extension of credit, except in
the ordinary course of, and pursuant to the reasonable
requirements of, Lessee's business and upon fair and reasonable
terms no less favorable to the Lessee than would be obtained in a
comparable arms'-length transaction with any Person that is not an
Affiliate.
11.5.4 NON-COMPETITION. Lessee acknowledges
that upon and after any termination of this Lease, any competition
by any member of the Leasing Group with any subsequent owner
or subsequent lessee of the Leased Property (the "Purchaser")
would cause irreparable harm to Lessor and any such Purchaser.
To induce Lessor to enter into this Lease, Lessee agrees that, from
and after the date hereof and thereafter until (a) in the case of the
expiration of the Initial Term or a termination of this Lease, the
fifth (5th) anniversary of the termination hereof or of the
expiration of the Initial Term, as applicable, and (b) in the case of
an expiration of any of the Extended Terms, the second (2nd)
72
anniversary of the expiration of the applicable Extended Term, no
member of the Leasing Group nor any Person holding or
controlling, directly or indirectly, any interest in any member of
the Leasing Group (collectively, the "Limited Parties") shall be
involved in any capacity in or lend any of their names to or engage
in any capacity in any assisted living facility, center, unit or
program (or in any Person engaged in any such activity or any
related activity competitive therewith) other than (a) those set forth
on Schedule 11.5.4 annexed hereto, (b) those activities in which a
Meditrust/Emeritus Transaction Affiliate is permitted to engage by
the provisions of the Meditrust/Emeritus Transaction Documents
which relate to any such facility, center, unit or program and (c)
the acquisition of an ownership interest in any such facility, center,
unit or program which is part of a single transaction in which an
ownership interest in at least four (4) other facilities, centers, units
or programs (provided, however, that if such acquisition occurs
within the last twelve month period of the Initial Term or any of
the Extended Terms, Lessee shall have the benefit of this clause (c)
only if at the time such acquisition occurs Lessee has already (x)
exercised in that twelve month period its right under Section 1.3
hereof to extend the Term for another Extended Term or (y) given
a Purchase Option Notice and has waived any right to rescind the
same based upon the determination of the Fair Market Value of the
Leased Property), whether such competitive activity shall be as an
officer, director, owner, employee, agent, advisor, independent
contractor, developer, lender, sponsor, venture capitalist,
administrator, manager, investor, partner, joint venturer, consultant
or other participant in any capacity whatsoever with respect to an
assisted living facility, center, unit or program located within a five
(5) mile radius of the Leased Property.
Lessee hereby acknowledges and agrees that none of the
time span, scope or area covered by the foregoing restrictive
covenants is or are unreasonable and that it is the specific intent of
Lessee that each and all of the restrictive covenants set forth
hereinabove shall be valid and enforceable as specifically set forth
herein. Lessee further agrees that these restrictions are special,
unique, extraordinary and reasonably necessary for the protection
of Lessor and any Purchaser and that the violation of any such
covenant by any of the Limited Parties would cause irreparable
damage to Lessor and any Purchaser for which a legal remedy
alone would not be sufficient to fully protect such parties.
Therefore, in addition to and without limiting any other
remedies available at law or hereunder, in the event that any of the
Limited Parties breaches any of the restrictive covenants hereunder
or shall threaten breach of any of such covenants, then Lessor and
any Purchaser shall be entitled to obtain equitable remedies,
including specific performance and injunctive relief, to prevent or
73
otherwise restrain a breach of this Section 11.5.4 (without the
necessity of posting a bond) and to recover any and all costs and
expenses (including, without limitation, reasonable attorneys' fees
and expenses and court costs) incurred in enforcing the provisions
of this Section 11.5.4. The existence of any claim or cause of
action of any of the Limited Parties or any member of the Leasing
Group against Lessor or any Purchaser, whether predicated on this
Lease or otherwise, shall not constitute a defense to the
enforcement by Lessor or any Purchaser of the foregoing
restrictive covenants and the Limited Parties shall not defend on
the basis that there is an adequate remedy at law.
Without limiting any other provision of this Lease, the
parties hereto acknowledge that the foregoing restrictive covenants
are severable and separate. If at any time any of the foregoing
restrictive covenants shall be deemed invalid or unenforceable by a
court having jurisdiction over this Lease, by reason of being vague
or unreasonable as to duration, or geographic scope or scope of
activities restricted, or for any other reason, such covenants shall
be considered divisible as to such portion and such covenants shall
be immediately amended and reformed to include only such
covenants as are deemed reasonable and enforceable by the court
having jurisdiction over this Lease to the full duration, geographic
scope and scope of restrictive activities deemed reasonable and
thus enforceable by said court; and the parties agree that such
covenants as so amended and reformed, shall be valid and binding
as through the invalid or unenforceable portion has not been
included therein.
The provisions of this Section 11.5.4 shall survive the
termination of the Lease and any satisfaction of the Lease
Obligations in connection therewith or subsequent thereto. The
parties hereto acknowledge and agree that any Purchaser may
enforce the provisions of this Section 11.5.4 as a third party
beneficiary.
11.5.5 INTENTIONALLY DELETED.
11.5.6 INTENTIONALLY DELETED.
11.5.7 INTENTIONALLY DELETED.
11.5.8 ERISA. Lessee shall not establish or permit any
Sublessee to establish any new pension or defined benefit plan or
modify any such existing plan for employees subject to ERISA,
which plan provides any benefits based on past service without the
advance consent of Lessor (which consent shall not be
unreasonably withheld) to the amount of the aggregate past service
liability thereby created.
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11.5.9 FORGIVENESS OF INDEBTEDNESS. Lessee
will not waive, or permit any Sublessee or Manager which is an
Affiliate to waive any debt or claim, except in the ordinary course
of its business.
11.5.10 VALUE OF ASSETS. Except as disclosed in
the financial statements provided to Lessor as of the date hereof,
Lessee will not write up (by creating an appraisal surplus or
otherwise) the value of any assets of Lessee above their cost to
Lessee, less the depreciation regularly allowable thereon.
11.5.11 CHANGES IN FISCAL YEAR AND
ACCOUNTING PROCEDURES. Upon notice to Lessor, Lessee
may (a) change its fiscal year or capital structure or (b) change,
alter, amend or in any manner modify in accordance with GAAP
any of its current accounting procedures related to the method of
revenue recognition, billing procedures or determinations of
doubtful accounts or bad debt expenses or permit any of its
Subsidiaries to so change its fiscal year, provided that, in the event
of such change, modification or alteration, Lessee and Lessor shall
make such adjustments to the calculation of Additional Rent and
the financial covenants contained herein as Lessor shall reasonably
require to make the same consistent in result with the calculation
thereof immediately prior to such change, modification or
alteration.
ARTICLE 12
INSURANCE AND INDEMNITY
12.1 GENERAL INSURANCE REQUIREMENTS. During
the Term of this Lease and thereafter until Lessee surrenders the Leased
Property in the manner required by this Lease, Lessee shall at its sole cost
and expense keep the Leased Property, the Tangible Personal Property
located thereon and the business operations conducted on the Leased
Property insured as set forth below.
12.1.1 TYPES AND AMOUNTS OF INSURANCE.
Lessee's insurance shall include the following:
(a) property loss and physical damage
insurance on an all-risk basis (with only such exceptions
as Lessor may in its reasonable discretion approve)
covering the Leased Property (exclusive of Land) for its
full replacement cost, which cost shall be reset once a year
at Lessor's option, with an agreed-amount endorsement
and a deductible not in excess of TWENTY FIVE
THOUSAND DOLLARS ($25,000). Such insurance shall
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include, without limitation, the following coverages: (i)
increased cost of construction, (ii) cost of demolition, (iii)
the value of the undamaged portion of the Facility and (iv)
contingent liability from the operation of building laws,
less exclusions provided in the normal "All Risk"
insurance policy. During any period of construction, such
insurance shall be on a builder's-risk, completed value,
non-reporting form (including all risk and extended
coverage, collapse, cost of demolition, increased cost of
construction and value of undamaged portion of the
improvements protection) with permission to occupy;
(b) flood insurance (if the Leased Property
or any portion thereof is situated in an area which is
considered a flood risk area by the U.S. Department of
Housing and Urban Development or any future
governmental authority charged with such flood risk
analysis in the future) in limits reasonably acceptable to
Lessor and subject to the availability of such flood
insurance;
(c) boiler and machinery insurance
(including related electrical apparatus and components)
under a standard comprehensive form, providing coverage
against loss or damage caused by explosion of steam
boilers, pressure vessels or similar vessels, now or
hereafter installed on the Leased Property, in limits
acceptable to Lessor;
(d) earthquake insurance (if reasonably
deemed necessary by Lessor) in limits and with
deductibles acceptable to Lessor;
(e) environmental impairment liability
insurance (if available on commercially reasonable terms
and deemed reasonably necessary by Lessor) in limits and
with deductibles acceptable to Lessor;
(f) business interruption insurance in an
amount equal to the annual Base Rent due hereunder plus
the aggregate sum of the Impositions relating to the
Leased Property due and payable during one year;
(g) comprehensive general public liability
insurance including coverages commonly found in the
Broad Form Commercial Liability Endorsements with
amounts not less than FIVE MILLION DOLLARS
($5,000,000) per occurrence with respect to bodily injury
76
and death and THREE MILLION DOLLARS
($3,000,000) for property damage and with all limits
based solely upon occurrences at the Leased Property
without any other impairment;
(h) professional liability insurance in an
amount not less than TEN MILLION DOLLARS
($10,000,000) for each medical incident;
(i) physical damage insurance on an all-
risk basis (with only such exceptions as Lessor in its
reasonable discretion shall approve) covering the Tangible
Personal Property for the full replacement cost thereof and
with a deductible not in excess of one percent (1%) of the
full replacement cost thereof;
(j) "Workers' Compensation and
Employers' Liability Insurance providing protection
against all claims arising out of injuries to all employees
of Lessee or of any Sublessee (employed on the Leased
Property or any portion thereof) in amounts equal for
Workers' Compensation, to the statutory benefits payable
to employees in the State and for Employers' Liability, to
limits of not less than ONE HUNDRED THOUSAND
DOLLARS ($100,000) for injury by accident, ONE
HUNDRED THOUSAND DOLLARS ($100,000) per
employee for disease and FIVE HUNDRED THOUSAND
DOLLARS ($500,000) disease policy limit;
(k) subsidence insurance (if deemed
necessary by Lessor) in limits acceptable to Lessor; and
(l) such other insurance as Lessor from
time to time may reasonably require and also, as may from
time to time be required by applicable Legal Requirements
and/or by any Fee Mortgagee.
12.1.2 INSURANCE COMPANY
REQUIREMENTS. All such insurance required by this Lease or
the other Lease Documents shall be issued and underwritten by
insurance companies licensed to do insurance business by, and in
good standing under the laws of, the State and which companies
have and maintain a rating of A:X or better by A.M. Best Co.
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12.1.3 POLICY REQUIREMENTS. Every policy
of insurance from time to time required under this Lease or any of
the other Lease Documents (other than worker's compensation)
shall name Lessor as owner, loss payee, secured party (to the extent
applicable) and additional named insured as its interests may
appear. If an insurance policy covers properties other than the
Leased Property, then Lessor shall be so named with respect only
to the Leased Property. Each such policy, where applicable or
appropriate, shall:
(a) include an agreed amount endorsement
and loss payee, additional named insured and secured
party endorsements, in forms acceptable to Lessor in its
reasonable discretion;
(b) include mortgagee, secured party, loss
payable and additional named insured endorsements
reasonably acceptable to each Fee Mortgagee;
(c) provide that the coverages may not be
cancelled or materially modified except upon thirty (30)
days' prior written notice to Lessor and any Fee
Mortgagee;
(d) be payable to Lessor and any Fee
Mortgagee notwithstanding any defense or claim that the
insurer may have to the payment of the same against any
other Person holding any other interest in the Leased
Property;
(e) be endorsed with standard
noncontributory clauses in favor of and in form
reasonably acceptable to Lessor and any Fee Mortgagee;
(f) expressly waive any right of
subrogation on the part of the insurer against Lessor, any
Fee Mortgagee or the Leasing Group; and
(g) otherwise be in such forms as shall be
reasonably acceptable to Lessor.
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12.1.4 NOTICES; CERTIFICATES AND
POLICIES. Lessee shall promptly provide to Lessor copies of any
and all notices (including notice of non-renewal), claims and
demands which Lessee receives from insurers of the Leased
Property. At least ten (10) days prior to the expiration of any
insurance policy required hereunder, Lessee shall deliver to Lessor
certificates and evidence of insurance relating to all renewals and
replacements thereof, together with evidence, satisfactory to
Lessor, of payment of the premiums thereon. Lessee shall deliver
to Lessor original counterparts or copies certified by the insurance
company to be true and complete copies, of all insurance policies
required hereunder not later than ten (10) days after receipt thereof
by Lessee. Lessee shall use its best efforts to obtain such
counterparts or copies within ninety (90) days after the effective
date of each such policy.
12.1.5 LESSOR'S RIGHT TO PLACE
INSURANCE. If Lessee shall fail to obtain any insurance policy
required hereunder by Lessor, or shall fail to deliver the certificate
and evidence of insurance relating to any such policy to Lessor, or
if any insurance policy required hereunder (or any part thereof)
shall expire or be cancelled or become void or voidable by reason
of any breach of any condition thereof, or if Lessor reasonably
determines that such insurance coverage is unsatisfactory by reason
of the failure or impairment of the capital of any insurance
company which wrote any such policy, upon demand by Lessor,
Lessee shall promptly but in any event in not more than ten (10)
days thereafter obtain new or additional insurance coverage on the
Leased Property, or for those risks required to be insured by the
provisions hereof, satisfactory to Lessor, and, in the event Lessee
fails to perform its obligations under this Section and at its option,
Lessor may obtain such insurance and pay the premium or
premiums therefor; in which event, any amount so paid or
advanced by Lessor and all costs and expenses incurred in
connection therewith (including, without limitation, reasonable
attorneys' fees and expenses and court costs), shall be a demand
obligation of Lessee to Lessor, payable as an Additional Charge.
12.1.6 PAYMENT OF PROCEEDS. All insurance
policies required hereunder (except for general public liability,
professional liability and workers' compensation and employers
liability insurance) shall provide that in the event of loss, injury or
damage, subject to the rights of any Fee Mortgagee, all proceeds
shall be paid to Lessor alone (rather than jointly to Lessee and
Lessor). Lessor is hereby authorized to adjust and compromise any
such loss with the consent of Lessee or, following any Lease
Default, whether or not cured, without the consent of Lessee, and
to collect and receive such proceeds in the name of Lessor and
Lessee, and Lessee appoints Lessor (or any agent designated by
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Lessor) as Lessee's attorney-in-fact with full power of substitution,
to endorse Lessee's name upon any check in payment thereof.
Subject to the provisions of Article 13, such insurance proceeds
shall be applied first toward reimbursement of all costs and
expenses reasonably incurred by Lessor in collecting said
insurance proceeds, then toward payment of the Lease Obligations
or any portion thereof, which have not been paid when due and
payable or within any applicable cure period, in such order as
Lessor determines, and then in whole or in part toward restoration,
repair or reconstruction of the Leased Property for which such
insurance proceeds shall have been paid.
12.1.7 IRREVOCABLE POWER OF
ATTORNEY. The power of attorney conferred on Lessor pursuant
to the provisions of Section 12.1, being coupled with an interest,
shall be irrevocable for as long as this Lease is in effect or any
Lease Obligations are outstanding, shall not be affected by any
disability or incapacity which Lessee may suffer and shall survive
the same. Such power of attorney, is provided solely to protect the
interests of Lessor and shall not impose any duty on Lessor to
exercise any such power, and neither Lessor nor such attorney-in-
fact shall be liable for any act, omission, error in judgment or
mistake of law, except as the same may result from its gross
negligence or wilful misconduct.
12.1.8 BLANKET POLICIES. Notwithstanding
anything to the contrary contained herein, Lessee's obligations to
carry the insurance provided for herein may be brought within the
coverage of a so-called blanket policy or policies of insurance
carried and maintained by Lessee and its Affiliates; provided,
however, that the coverage afforded to Lessor shall not be reduced
or diminished or otherwise be different from that which would
exist under a separate policy meeting all other requirements of this
Lease by reason of the use of such blanket policy of insurance, and
provided, further that the requirements of Section 12.1 are
otherwise satisfied.
12.1.9 NO SEPARATE INSURANCE. Lessee
shall not, on Lessee's own initiative or pursuant to the request or
requirement of any other Person, take out separate insurance
concurrent in form or contributing in the event of loss with the
insurance required hereunder to be furnished by Lessee, or increase
the amounts of any then existing insurance by securing an
additional policy or additional policies, unless (a) all parties having
an insurable interest in the subject matter of the insurance,
including Lessor, are included therein as additional insureds and
(b) losses are payable under said insurance in the same manner as
losses are required to be payable under this Lease. Lessee shall
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immediately notify Lessor of the taking out of any such separate
insurance or of the increasing of any of the amounts of the then existing
insurance by securing an additional insurance policy or policies.
12.1.10 ASSIGNMENT OF UNEARNED PREMIUMS. Lessee
hereby assigns to Lessor all rights of Lessee in and to any unearned
premiums on any insurance policy required hereunder to be furnished by
Lessee which may become payable or are refundable after the occurrence of
an Event of Default hereunder, which premium, upon receipt thereof,
Lessor shall at Lessor's option apply toward the Lease Obligations or hold
as security therefor. In the event that this Lease is terminated for any
reason (other than the purchase of the Leased Property by Lessee), the
insurance policies required to be maintained hereunder, including all right,
title and interest of Lessee thereunder, shall become the absolute property
of Lessor subject to any limitation on assignment provided for therein.
12.2 INDEMNITY.
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12.2.1 INDEMNIFICATION. Except with respect
to the gross negligence or wilful misconduct of Lessor or any of
the other Indemnified Parties, as to which no indemnity is
provided, Lessee hereby agrees to defend with counsel reasonably
acceptable to Lessor, against all claims and causes of action and to
indemnify and hold harmless Lessor and each of the other
Indemnified Parties from and against all damages, losses,
liabilities, obligations, penalties, costs and expenses (including,
without limitation, reasonable attorneys' fees, court costs and other
expenses of litigation) suffered by, or claimed or asserted against,
Lessor or any of the other Indemnified Parties, directly or
indirectly, by any Person other than a member of the Leasing
Group who prevails in such claim or action based on, arising out of
or resulting from (a) the use and occupancy of the Leased Property
or any business conducted therein, (b) any act, fault, omission to
act or misconduct by (i) any member of the Leasing Group, (ii) any
Affiliate of Lessee or (iii) any employee, agent, licensee, business
invitee, guest, customer, contractor or sublessee of any of the
foregoing parties, relating to, directly or indirectly, the Leased
Property, (c) any accident, injury or damage whatsoever caused to
any Person, including, without limitation, any claim of malpractice,
or to the property of any Person in or about the Leased Property or
outside of the Leased Property where such accident, injury or
damage results or is claimed to have resulted from any act, fault,
omission to act or misconduct by any member of the Leasing
Group or any Affiliate of Lessee or any employee, agent, licensee,
contractor or sublessee of any of the foregoing parties, (d) any
Lease Default, (e) any claim brought or threatened against Lessor
by any member of the Leasing Group or by any other Person on
account of (i) Lessor's relationship with any member of the Leasing
Group pertaining in any way to the Leased Property and/or the
transaction evidenced by the Lease Documents and/or (ii) Lessor's
negotiation of, entering into and/or performing any of its
obligations and/or exercising any of its right and remedies under
any of the Lease Documents, (f) any attempt by any member of the
Leasing Group or any Affiliate of Lessee to transfer or relocate any
of the Permits to any location other than the Leased Property
and/or (g) the enforcement of this indemnity. Any amounts which
become payable by Lessee under this Section 12.2.1 shall be a
demand obligation of Lessee to Lessor, payable as an Additional
Charge. The indemnity provided for in this Section 12.2.1 shall
survive any termination of this Lease.
12.2.2 INDEMNIFIED PARTIES. As used in this
Lease the term "Indemnified Parties" shall mean the Meditrust
Entities, any Fee Mortgagee and their respective successors,
assigns, employees, servants, agents, attorneys, officers, directors,
shareholders, partners and owners.
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12.2.3 LIMITATION ON LESSOR LIABILITY.
Neither Lessor nor any Affiliate of Lessor shall be liable to any
member of the Leasing Group or any Affiliate of any member of
the Leasing Group, or to any other Person whatsoever for any
damage, injury, loss, compensation, or claim (including, but not
limited to, any claim for the interruption of or loss to any business
conducted on the Leased Property) based on, arising out of or
resulting from any cause whatsoever, including, but not limited to,
the following: (a) repairs to the Leased Property, (b) interruption
in use of the Leased Property; (c) any accident or damage resulting
from the use or operation of the Leased Property or any business
conducted thereon; (d) the termination of this Lease by reason of
Casualty or Condemnation, (e) any fire, theft or other casualty or
crime, (f) the actions, omissions or misconduct of any other
Person, (g) damage to any property, or (h) any damage from the
flow or leaking of water, rain or snow. All Tangible Personal
Property and the personal property of any other Person on the
Leased Property shall be at the sole risk of Lessee and Lessor shall
not in any manner be held responsible therefor (except in the event
of loss caused by the gross negligence or willful misconduct of
Lessor). Notwithstanding the foregoing, Lessor shall not be
released from liability for any injury, loss, damage or liability
suffered by Lessee to the extent caused directly by the gross
negligence or willful misconduct of Lessor, its servants, employees
or agents acting within the scope of their authority on or about the
Leased Property or in regards to the Lease; provided, however, that
in no event shall Lessor, its servants, employees or agents have any
liability based on any loss for any indirect or consequential
damages. or
12.2.4 RISK OF LOSS. During the Term of this
Lease, the risk of loss or of decrease in the enjoyment and
beneficial use of the Leased Property in consequence of any
damage or destruction thereof by fire, the elements, casualties,
thefts, riots, wars or otherwise, or in consequence of foreclosures,
levies or executions of Liens (other than those created by Lessor in
accordance with the provisions of Article 20) is assumed by Lessee
and, in the absence of the gross negligence or willful misconduct as
set forth in Section 12.2.3, Lessor shall in no event be answerable
or accountable therefor (except for the obligation to account for
insurance proceeds and Awards to the extent provided for in
Articles 13 and 14) nor shall any of the events mentioned in this
Section entitle Lessee to any abatement of Rent (except for an
abatement, if any, as specifically provided for in Section 3.7).
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ARTICLE 13
FIRE AND CASUALTY
13.1 RESTORATION FOLLOWING FIRE OR OTHER
CASUALTY.
13.1.1 FOLLOWING FIRE OR CASUALTY. In
the event of any damage or destruction to the Leased Property by
reason of fire or other hazard or casualty (a "Casualty"), Lessee
shall give immediate written notice thereof to Lessor and, subject
to the terms of this Article 13 and any applicable Legal
Requirements, Lessee shall proceed with reasonable diligence, in
full compliance with all applicable Legal Requirements, to perform
such repairs, replacement and reconstruction work (referred to
herein as the "Work") to restore the Leased Property to the
condition it was in immediately prior to such damage or
destruction and to a condition adequate to operate the Facility for
the Primary Intended Use and, if applicable, the Other Permitted
Uses and in compliance with applicable Legal Requirements. All
Work shall be performed and completed in accordance with all
applicable Legal Requirements and the other requirements of this
Lease within one hundred and twenty (120) days following the
occurrence of the damage or destruction plus a reasonable time to
compensate for Unavoidable Delays (including for the purposes of
this Section, delays in obtaining Permits and in adjusting insurance
losses), but in no event beyond two-hundred and seventy (270)
days following the occurrence of the Casualty.
13.1.2 PROCEDURES. In the event that any
Casualty results in non-structural damage to the Leased Property in
excess of FIFTY THOUSAND DOLLARS ($50,000) or in any
structural damage to the Leased Property, regardless of the extent
of such structural damage, prior to commencing the Work, Lessee
shall comply with the following requirements:
(a) Lessee shall furnish to Lessor complete
plans and specifications for the Work (collectively and as
the same may be modified and amended from time to time
pursuant to the terms hereof, the "Plans and
Specifications"), for Lessor's approval, in each instance,
which approval shall not be unreasonably withheld. The
Plans and Specifications shall bear the signed approval
thereof by an architect, licensed to do business in the
State, reasonably satisfactory to Lessor (in the event
Lessor reasonably determines that the Work is of a nature
for which the involvement of an architect is appropriate)
and shall be accompanied by a written estimate from the
architect, bearing the architect's seal, of the entire cost of
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completing the Work, and to the extent feasible, the Plans
and Specifications shall provide for Work of such nature,
quality and extent, that, upon the completion thereof, the
Leased Property shall be at least equal in value and
general utility to its value and general utility prior to the
Casualty and shall be adequate to operate the Leased
Property for the Primary Intended Use and, if applicable,
the Other Permitted Uses;
(b) Lessee shall furnish to Lessor certified
or photostatic copies of all Permits and Contracts required
by all applicable Legal Requirements in connection with
the commencement and conduct of the Work to the extent
the same can be secured in the ordinary course prior to the
commencement of construction;
(c) Lessee shall furnish to Lessor a cash
deposit or a payment and performance bond sufficient to
pay for completion of and payment for the Work in an
amount not less than the architect's estimate of the entire
cost of completing the Work, less the amount of property
insurance proceeds (net of costs and expenses incurred by
Lessor in collecting the same), if any, then held by Lessor
and which Lessor shall be required to apply toward
restoration of the Leased Property as provided in Section
13.2;
(d) Lessee shall furnish to Lessor such
insurance with respect to the Work (in addition to the
insurance required under Section 12.1 hereof) in such
amounts and in such forms as is reasonably required by
Lessee; and
(e) Lessee shall not commence any of the
Work until Lessee shall have complied with the
requirements set forth in clauses (a) through (d)
immediately above, as applicable, and, thereafter, Lessee
shall perform the Work diligently, in a good and
workmanlike fashion and in good faith in accordance with
(i) the Plans and Specifications referred to in clause (a)
immediately above, (ii) the Permits and Contracts referred
to in clause (b) immediately above and (iii) all applicable
Legal Requirements and other requirements of this Lease;
provided, however, that in the event of a bona fide
emergency during which Lessee is unable to contact the
appropriate representatives of Lessor, Lessee may
commence such Work as may be necessary in order to
address such emergency without Lessor's prior approval,
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as long as Lessee immediately thereafter advises Lessor of
such emergency and the nature and scope of the Work
performed and obtains Lessor's approval of the remaining
Work to be completed.
13.1.3 DISBURSEMENT OF INSURANCE
PROCEEDS. If, as provided in Section 13.2, Lessor is required to
apply any property insurance proceeds toward repair or restoration
of the Leased Property, then as long as the Work is being diligently
performed by Lessee in accordance with the terms and conditions
of this Lease, Lessor shall disburse such insurance proceeds from
time to time during the course of the Work in accordance with and
subject to satisfaction of the following provisions and conditions.
Lessor shall not be required to make disbursements more often
than at thirty (30) day intervals. Lessee shall submit a written
request for each disbursement at least ten (10) Business Days in
advance and shall comply with the following requirements in
connection with each disbursement:
(a) Prior to the commencement of any
Work, Lessee shall have received Lessor's written
approval of the Plans and Specifications (which approval
shall not be unreasonably withheld) and the Work shall be
supervised by an experienced construction manager with
the consultation of an architect or engineer qualified and
licensed to do business in the State (in the event Lessor
reasonably determines that the Work is of a nature for
which the involvement of such architect or engineer is
appropriate). Lessee shall not make any changes in, and
shall not permit any changes in, the quality of the
materials to be used in the Work, the Plans and
Specifications or the Work, whether by change order or
otherwise, without the prior written consent of Lessor, in
each instance (which consent may be withheld in Lessor's
sole and absolute discretion); provided, however, that such
consent shall not be required for any individual change
which has been approved by the architect, which does not
materially affect the structure or exterior of the Facility,
and the cost of which does not exceed TEN THOUSAND
DOLLARS ($10,000) or which changes, in the aggregate,
do not exceed ONE HUNDRED THOUSAND DOLLARS
($100,000) in cost. Notwithstanding the foregoing, prior
to making any change in Plans and Specifications, copies
of all change orders shall be submitted by Lessee to
Lessor and Lessee shall also deliver to Lessor evidence
satisfactory to Lessor, in its reasonable discretion, that all
necessary Permits and/or Contracts required by any
Governmental Authority in connection therewith have
been obtained or entered into, as the case may be.
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(b) Each request for payment shall be
accompanied by (x) a certificate of the architect or
engineer, bearing the architect's or engineer's seal, and
(y) a certificate of the general contractor, qualified and
licensed to do business in the State, that is performing the
Work (collectively, the "Work Certificates"), each dated
not more than ten (10) days prior to the application for
withdrawal of funds, and each stating:
(i) that all of the Work performed as of the
date of the certificates has been
completed in compliance with the
approved Plans and Specifications,
applicable Contracts and all applicable
Legal Requirements;
(ii) that the sum then requested to be
withdrawn has been paid by Lessee or
is justly due to contractors,
subcontractors, materialmen, engineers,
architects or other Persons, whose
names and addresses shall be stated
therein, who have rendered or furnished
certain services or materials for the
Work, and the certificate shall also
include a brief description of such
services and materials and the principal
subdivisions or categories thereof and
the respective amounts so paid or due to
each of said Persons in respect thereof
and stating the progress of the Work up
to the date of said certificate;
(iii) that the sum then requested to be
withdrawn, plus all sums previously
withdrawn, does not exceed the cost of
the Work insofar as actually
accomplished up to the date of such
certificate;
(iv) that the remainder of the funds held by
Lessor will be sufficient to pay for the
full completion of the Work in
accordance with the Plans and
Specifications;
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(v) that no part of the cost of the services
and materials described in the
applicable Work Certificate has been or
is being made the basis of the
withdrawal of any funds in any
previous or then pending application;
and
(vi) that, except for the amounts, if any,
specified in the applicable Work
Certificate to be due for services and
materials, there is no outstanding
indebtedness known, after due inquiry,
which is then due and payable for work,
labor, services or materials in
connection with the Work which, if
unpaid, might become the basis of a
vendor's, mechanic's, laborer's or
materialman's statutory or other similar
Lien upon the Leased Property.
(c) Lessee shall deliver to Lessor
satisfactory evidence that the Leased Property and all
materials and all property described in the Work
Certificates are free and clear of Liens, except (i) Liens, if
any, securing indebtedness due to Persons (whose names
and addresses and the several amounts due them shall be
stated therein) specified in an applicable Work Certificate,
which Liens shall be discharged upon disbursement of the
funds then being requested or duly contested in
accordance with the terms of this Lease Agreement, (ii)
any Fee Mortgage and (iii) the Permitted Encumbrances.
Lessor shall accept as satisfactory evidence of the
foregoing lien waivers in customary form from the general
contractor and all subcontractors performing the Work,
together with an endorsement of its title insurance policy
(relating to the Leased Property) in form acceptable to
Lessor, dated as of the date of the making of the then
current disbursement, confirming the foregoing.
(d) If the Work involves alteration or
restoration of the exterior of any Leased Improvement that
changes the footprint of any Leased Improvement, Lessee
shall deliver to Lessor, upon the request of Lessor, an "as-
built" survey of the Leased Property dated as of a date
within ten (10) days prior to the making of the first and
final advances (or revised to a date within ten (10) days
prior to each such advance) showing no encroachments
other than such encroachments, if any, by the Leased
88
Improvements upon or over the Permitted Encumbrances
as are in existence as of the date hereof.
(e) Lessee shall deliver to Lessor (i) an
opinion of counsel (satisfactory to Lessor both as to
counsel and as to the form of opinion) prior to the first
advance opining that all necessary Permits for the repair,
replacement and/or restoration of the Leased Property
which can be obtained in the ordinary course as of said
date have been obtained and that the Leased Property, if
repaired, replaced or rebuilt in accordance, in all material
respects, with the approved Plans and Specifications and
such Permits, shall comply with all applicable Legal
Requirements subject to such limitations as may be
imposed on such opinion under local law and (ii) if
applicable, an architect's certificate (satisfactory to Lessor
both as to the architect and as to the form of the
certificate) prior to the final advance, certifying that the
Leased Property was repaired, replaced or rebuilt in
accordance, in all material respects, with the approved
Plans and Specifications and complies with all applicable
Legal Requirements, including, without limitation, all
Permits referenced in the foregoing clause (i).
(f) There shall be no Lease Default or any
state of facts or circumstance existing which, with the
giving of notice and/or the passage of time, would
constitute any Lease Default.
Lessor, at its option, may waive any of the foregoing requirements
in whole or in part in any instance. Upon compliance by Lessee
with the foregoing requirements (except for such requirements, if
any, as Lessor may have expressly elected to waive), and to the
extent of (x) the insurance proceeds, if any, which Lessor may be
required to apply to restoration of the Leased Property pursuant to
the provisions of this Lease and (y) all other cash deposits made by
Lessee, Lessor shall make available for payment to the Persons
named in the Work Certificate the respective amounts stated in said
certificate(s) to be due, subject to a retention of ten percent (10%)
as to all hard costs of the Work (the "Retainage"). It is understood
that the Retainage is intended to provide a contingency fund to
assure Lessor that the Work shall be fully completed in accordance
with the Plans and Specifications and the requirements of Lessor.
Upon the full and final completion of all of the Work in accordance
with the provisions hereof, the Retainage shall be made available
for payment to those Persons entitled thereto.
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Upon completion of the Work, and as a condition precedent to
making any further advance, in addition to the requirements set
forth above, Lessee shall promptly deliver to Lessor:
(i) if applicable, written certificates of the architect
or engineer, bearing the architect's or engineer's
seal, and the general contractor, certifying that
the Work has been fully completed in a good and
workmanlike manner in material compliance
with the Plans and Specifications and all
applicable Legal Requirements;
(ii) an endorsement of its title insurance policy
(relating to the Leased Property) in form
reasonably acceptable to Lessor insuring the
Leased Property against all mechanic's and
materialman's liens accompanied by the final
lien waivers from the general contractor and all
subcontractors;
(iii) a certificate by Lessee in form and substance
reasonably satisfactory to Lessor, listing all costs
and expenses in connection with the completion
of the Work and the amount paid by Lessee with
respect to the Work; and
(iv) a temporary certificate of occupancy (if
obtainable) and all other applicable Permits and
Contracts issued by or entered into with any
Governmental Authority with respect to the
Primary Intended Use not already delivered to
Lessor and, to the extent applicable, the Other
Permitted Uses and by the appropriate Board of
Fire Underwriters or other similar bodies acting
in and for the locality in which the Leased
Property is situated with respect to the Facility;
provided, that within thirty (30) days after
completion of the Work, Lessee shall obtain and
deliver to Lessor a permanent certificate of
occupancy for the Leased Property, subject to
seasonal delays.
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Upon completion of the Work and delivery of the
documents required pursuant to the provisions of this Section 13.1,
Lessor shall pay the Retainage to Lessee or to those Persons
entitled thereto and if there shall be insurance proceeds or cash
deposits, other than the Retainage, held by Lessor in excess of the
amounts disbursed pursuant to the foregoing provisions, then
provided that no Lease Default has occurred and is continuing, nor
any state of facts or circumstances which, with the giving of notice
and/or the passage of time would constitute a Lease Default, Lessor
shall pay over such proceeds or cash deposits to Lessee.
No inspections or any approvals of the Work during or
after construction shall constitute a warranty or representation by
Lessor, or any of its agents or Consultants, as to the technical
sufficiency, adequacy or safety of any structure or any of its
component parts, including, without limitation, any fixtures,
equipment or furnishings, or as to the subsoil conditions or any
other physical condition or feature pertaining to the Leased
Property. All acts, including any failure to act, relating to Lessor
are performed solely for the benefit of Lessor to assure the
payment and performance of the Lease Obligations and are not for
the benefit of Lessee or the benefit of any other Person.
13.2 DISPOSITION OF INSURANCE PROCEEDS.
13.2.1 PROCEEDS TO BE RELEASED TO PAY
FOR WORK. In the event of any Casualty, except as provided for
in Section 13.2.2, Lessor shall release proceeds of property
insurance held by it to pay for the Work in accordance with the
provisions and procedures set forth in this Article 13, only if:
(a) all of the terms, conditions and
provisions of Sections 13.1 and 13.2.1 are satisfied;
(b) Lessee demonstrates to Lessor's
satisfaction that Lessee has the financial ability to satisfy
the Lease Obligations during such repair or restoration;
and
(c) no Sublease material to the operation of
the Facility immediately prior to such damage or taking
shall have been cancelled or terminated, nor contain any
still exercisable right to cancel or terminate, due to such
Casualty if and to the extent that the income from such
Sublease is necessary in order to avoid the violation of any
of the financial covenants set forth in this Lease or
otherwise to avoid the creation of an Event of Default.
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If a Fee Mortgagee prevents Lessor from releasing proceeds of
property insurance notwithstanding the satisfaction of the
foregoing requirements, Lessee shall have no obligation to restore
the Casualty to which such proceeds pertain.
13.2.2 PROCEEDS NOT TO BE RELEASED. If,
as the result of any Casualty, the Leased Property is damaged to
the extent it is rendered Unsuitable For Its Primary Intended Use
and if either: (a) Lessee, after exercise of diligent efforts, cannot
within a reasonable time (not in excess of ninety (90) days) obtain
all necessary Permits in order to be able to perform all required
Work and to again operate the Facility for its Primary Intended Use
and, if applicable, the Other Permitted Uses within two hundred
and seventy (270) days from the occurrence of the damage or
destruction in substantially the manner as immediately prior to
such damage or destruction or (b) such Casualty occurs during the
last twenty-four (24) months of the Term and would reasonably
require more than nine (9) months to obtain all Permits and
complete the Work, then Lessee may either (i) acquire the Leased
Property from Lessor for a purchase price equal to the greater of
(x) the Meditrust Investment or (y) the Fair Market Value of the
Leased Property minus the Fair Market Added Value, with the Fair
Market Value and the Fair Market Added Value to be determined
as of the day immediately prior to such Casualty and prior to any
other Casualty which has not been fully repaired, restored or
replaced, in which event, Lessee shall be entitled upon payment of
the full purchase price to receive all property insurance proceeds
(less any costs and expenses incurred by Lessor in collecting the
same), or (ii) terminate this Lease, in which event (subject to the
provisions of the last sentence of this Section 13.2.2) Lessor shall
be entitled to receive and retain the insurance proceeds; provided,
however, that Lessee shall only have such right of termination
effective upon payment to Lessor of all Rent and other sums due
under this Lease and the other Lease Documents through the date
of termination plus an amount, which when added to the sum of
(1) the Fair Market Value of the Leased Property as affected by all
unrepaired or unrestored damage due to any Casualty (and giving
due regard for delays, costs and expenses incident to completing all
repair or restoration required to fully repair or restore the same)
plus (2) the amount of insurance proceeds actually received by
Lessor (net of costs and expenses incurred by Lessor in collecting
the same) equals (3) the greater of the Meditrust Investment or the
Fair Market Value of the Leased Property minus the Fair Market
Added Value, with the Fair Market Value and the Fair Market
Added Value to be determined as of the day immediately prior to
such Casualty and prior to any other Casualty which has not been
fully repaired. Any acquisition of the Leased Property pursuant to
the terms of this Section 13.2.2 shall be consummated in
accordance with the provisions of Article 18, mutatis, mutandis. If
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such termination becomes effective, Lessor shall assign to Lessee
any outstanding insurance claims and, at Lessee's expense, shall
cooperate in Lessee's efforts to secure the same. In the event this
Lease is terminated pursuant to the provisions of this Section
13.2.2 and the insurance proceeds received by Lessor in connection
therewith (net of costs and expenses incurred in obtaining such
proceeds) exceeds one hundred fifteen percent (115%) of the Fair
Market Value of the Leased Premises at the time of such
termination, Lessor shall pay to Lessee fifty percent (50%) of the
amount of such excess.
13.3 TANGIBLE PERSONAL PROPERTY. All insurance
proceeds payable by reason of any loss of or damage to any of the Tangible
Personal Property shall be paid to Lessor as secured party, subject to the
rights of the holders of any Permitted Prior Security Interests, and,
thereafter, provided that no Lease Default, nor any fact or circumstance
which with the giving of notice and/or the passage of time could constitute
a Lease Default, has occurred and is continuing, Lessor shall pay such
insurance proceeds to Lessee to reimburse Lessee for the cost of repairing
or replacing the damaged Tangible Personal Property, subject to the terms
and conditions set forth in the other provisions of this Article 13, mutatis
mutandis.
13.4 RESTORATION OF CERTAIN IMPROVEMENTS AND
THE TANGIBLE PERSONAL PROPERTY. If Lessee is required or elects
to restore the Facility, Lessee shall either (a) restore (i) all alterations and
improvements to the Leased Property made by Lessee and (ii) the Tangible
Personal Property or (b) replace such alterations and improvements and the
Tangible Personal Property with improvements or items of the same or
better quality and utility in the operation of the Leased Property provided,
however, that Lessee shall be obligated to so restore or replace the Tangible
Personal Property only to the extent desirable for the prudent operation of
the Facility in the good faith exercise of commercially reasonable business
judgment.
13.5 NO ABATEMENT OF RENT. In no event shall any Rent
▇▇▇▇▇ as a result of any Casualty except as expressly provided in Section
3.7.
13.6 TERMINATION OF CERTAIN RIGHTS. Any
termination of this Lease pursuant to this Article 13 shall cause any right of
Lessee to extend the Term of this Lease granted to Lessee herein and any
right of Lessee to purchase the Leased Property contained in this Lease to
be terminated and to be without further force or effect.
13.7 WAIVER. Lessee hereby waives any statutory rights of
termination which may arise by reason of any damage or destruction to the
Leased Property due to any Casualty which Lessee is obligated to restore or
may restore under any of the provisions of this Lease.
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13.8 APPLICATION OF RENT LOSS AND/OR BUSINESS
INTERRUPTION INSURANCE. Lessor shall direct all proceeds of rent
loss and/or business interruption insurance (collectively, "Rent Insurance
Proceeds") to be paid to Lessee, provided no fact or circumstance exists
which constitutes, or with notice, or passage of time, or both, would
constitute, a Lease Default pertaining to the Facility or the Leased Property.
If a Lease Default or such fact or circumstance exists, Lessor may rescind
such direction and apply all such insurance proceeds towards the Lease
Obligations pertaining to the Facility or the Leased Property or hold such
proceeds as security therefor.
13.9 OBLIGATION TO ACCOUNT. Upon Lessee's written
request, which may not be made not more than once in any three (3) month
period, Lessor shall provide Lessee with a written accounting of the
application of all insurance proceeds received by Lessor.
ARTICLE 14
CONDEMNATION
14.1 PARTIES' RIGHTS AND OBLIGATIONS. If during the
Term there is any Taking of all or any part of the Leased Property or any
interest in this Lease, the rights and obligations of the parties shall be
determined by this Article 14.
14.2 TOTAL TAKING. If there is a permanent Taking of all
or substantially all of the Leased Property, this Lease shall terminate on the
Date of Taking. In the event this Lease is terminated pursuant to the
provisions of this Section 14.2 and the Award received by Lessor in
connection therewith (net of costs and expenses incurred in obtaining such
Award) exceeds one hundred fifteen percent (115%) of the Fair Market
Value of the Leased Premises at the time of such termination, Lessor shall
pay to Lessee fifty percent (50%) of the amount of such excess.
14.3 PARTIAL OR TEMPORARY TAKING. If there is a
Permanent Taking of a portion of the Leased Property, or if there is a
temporary Taking of all or a portion of the Leased Property, this Lease shall
remain in effect so long as the Leased Property is not thereby rendered
permanently Unsuitable For Its Primary Intended Use or temporarily
Unsuitable For Its Primary Intended Use for a period not likely to, or which
does not, exceed two hundred and seventy (270) days. If, however, the
Leased Property is thereby so rendered permanently or temporarily
Unsuitable For Its Primary Intended Use: (a) if only rendered temporarily
Unsuitable For Its Primary Intended Use, Lessee shall have the right to
restore the Leased Property, at its own expense (subject to the right under
certain circumstances as provided for in Section 14.5 to receive the net
proceeds of an Award for reimbursement), to the extent possible, to
substantially the same condition as existed immediately before the partial or
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temporary Taking or (b) Lessee shall have the right to acquire the Leased
Property from Lessor (i) upon payment of all Rent due through the date that
the purchase price is paid, for a purchase price equal to the greater of (x) the
Meditrust Investment or (y) the Fair Market Value of the Leased Property
minus the Fair Market Added Value, with the Fair Market Value of the
Leased Property and the Fair Market Added Value to be determined as of
the day immediately prior to such partial or temporary Taking and (ii) in
accordance with the terms and conditions set forth in Article 18; in which
event, this Lease shall terminate upon payment of such purchase price and
the consummation of such acquisition. Notwithstanding the foregoing,
Lessor may overrule Lessee's election under clause (a) or (b) and instead
either (1) terminate this Lease (with no obligation on the part of Lessee to
acquire the Leased Property as a result thereof) as of the date when Lessee
is required to surrender possession of the portion of the Leased Property so
taken if (X) such portion comprises more than thirty percent (30%) of the
Leased Property or of the residential building(s) located thereon or (Y)
possession thereof is to be surrendered within two years of the expiration of
the Term or (2) compel Lessee to keep the Lease in full force and effect and
to restore the Leased Property as provided in clause (a) above, but only if
the Leased Property may be operated for at least eighty percent (80%) of
the licensed unit capacity of the Facility in effect prior to the Taking.
Lessee shall exercise its election under this Section 14.3 by giving Lessor
notice thereof ("Lessee's Election Notice") within sixty (60) days after
Lessee receives notice of the Taking. Lessor shall exercise its option to
overrule Lessee's election under this Section 14.3 by giving Lessee notice
of Lessor's exercise of its rights under Section 14.3 within thirty (30) days
after Lessor receives Lessee's Election Notice. If, as the result of any such
partial or temporary Taking, this Lease is not terminated as provided above,
Lessee shall be entitled to an abatement of Rent, but only to the extent, if
any, provided for in Section 3.7, effective as of the date upon which the
Leased Property is rendered Unsuitable For Its Primary Intended Use.
14.4 RESTORATION. If there is a partial or temporary Taking
of the Leased Property and this Lease remains in full force and effect
pursuant to Section 14.3, Lessee shall accomplish all necessary restoration
and Lessor shall release the net proceeds of such Award to reimburse
Lessee for the actual reasonable costs and expenses thereof, subject to all of
the conditions and provisions set forth in Article 13 as though the Taking
was a Casualty and the Award was insurance proceeds. If the cost of the
restoration exceeds the amount of the Award (net of costs and expenses
incurred in obtaining the Award), Lessee shall be obligated to contribute
any excess amount needed to restore the Facility or pay for such costs and
expenses. To the extent that the cost of restoration is less than the amount
of the Award (net of cost and expenses incurred in obtaining the Award),
the remainder of the Award shall be retained by Lessor and Rent shall be
abated as set forth in Section 3.7.
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14.5 AWARD DISTRIBUTION. In the event Lessee
completes the purchase of the Leased Property, as described in Section
14.3, the entire Award shall, upon payment of the purchase price and all
Rent and other sums due under this Lease and the other Lease Documents,
belong to Lessee and Lessor agrees to assign to Lessee all of Lessor's rights
thereto or, to the extent Lessor has received payment of the Award, the
amount of such payment shall be credited against the purchase price. In
any other event, the entire Award (except for such portion thereof which the
Condemner designates as allocable to Lessee's loss of business or Tangible
Personal Property) shall belong to and be paid to Lessor.
14.6 CONTROL OF PROCEEDINGS. Subject to the rights of
any Fee Mortgagee, unless and until Lessee completes the purchase of the
Leased Property as provided in Section 14.3, all proceedings involving any
Taking and the prosecution of claims arising out of any Taking against the
Condemnor shall be conducted, prosecuted and settled by Lessor; provided,
however, that Lessor shall keep Lessee apprised of the progress of all such
proceedings and shall solicit Lessee's advice with respect thereto and shall
give due consideration to any such advice. In addition, Lessee shall
reimburse Lessor (as an Additional Charge) for all costs and expenses,
including reasonable attorneys' fees, appraisal fees, fees of expert witnesses
and costs of litigation or dispute resolution, in relation to any Taking,
whether or not this Lease is terminated; provided, however, if this Lease is
terminated as a result of a Taking, Lessee's obligation to so reimburse
Lessor shall be diminished by the amount of the Award, if any, received by
Lessor which is in excess of the Meditrust Investment.
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ARTICLE 15
PERMITTED CONTESTS
15.1 LESSEE'S RIGHT TO CONTEST. To the extent of the
express references made to this Article 15 in other Sections of this Lease,
Lessee, any Sublessee or any Manager on their own or on Lessor's behalf
(or in Lessor's name), but at their sole cost and expense, may contest, by
appropriate legal proceedings conducted in good faith and with due
diligence (until the resolution thereof), the amount, validity or application,
in whole or in part, of any Imposition, Legal Requirement, the decision of
any Governmental Authority related to the operation of the Leased Property
for its Primary Intended Use and/or, if applicable, any of the Other
Permitted Uses or any Lien or claim relating to the Leased Property not
otherwise permitted by this Agreement; provided, that (a) prior written
notice of such contest is given to Lessor, (b) in the case of an unpaid
Imposition, Lien or claim, the commencement and continuation of such
proceedings shall suspend the collection thereof from Lessor and/or
compliance by any applicable member of the Leasing Group with the
contested Legal Requirement or other matter may be legally delayed
pending the prosecution of any such proceeding without the occurrence or
creation of any Lien, charge or liability of any kind against the Leased
Property, (c) neither the Leased Property nor any rent therefrom would be
in any immediate danger of being sold, forfeited, attached or lost as a result
of such proceeding, (d) in the case of a Legal Requirement, neither Lessor
nor any member of the Leasing Group would be in any immediate danger
of civil or criminal liability for failure to comply therewith pending the
outcome of such proceedings, (e) in the event that any such contest shall
involve a sum of money or potential loss in excess of TWENTY FIVE
THOUSAND DOLLARS ($25,000), Lessee shall deliver to Lessor an
Officer's Certificate and opinion of counsel, if Lessor deems the delivery of
an opinion to be appropriate, certifying or opining, as the case may be, as to
the validity of the statements set forth to the effect set forth in clauses (b),
(c) and (d), to the extent applicable, (f) Lessee shall give such cash security
as may be demanded in good faith by Lessor to insure ultimate payment of
any fine, penalty, interest or cost and to prevent any sale or forfeiture of the
affected portion of the Leased Property by reason of such non-payment or
non-compliance, (g) if such contest is finally resolved against Lessor or any
member of the Leasing Group, Lessee shall promptly pay, as Additional
Charges due hereunder, the amount required to be paid, together with all
interest and penalties accrued thereon and/or comply (and cause any
Sublessee and any Manager to comply) with the applicable Legal
Requirement, and (h) no state of facts or circumstance exists which
constitutes, or with the passage of time and/or the giving of notice, could
constitute a Lease Default; provided, however, but without limiting any
other right Lessee may have under the Lease Documents to contest the
payment of Rent, the provisions of this Article 15 shall not be construed to
permit Lessee to contest the payment of Rent or any other sums payable by
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Lessee to Lessor under any of the Lease Documents. If such contest is
finally resolved in favor of Lessee, Lessee shall be entitled to any refund
resulting therefrom.
15.2 LESSOR'S COOPERATION. Lessor, at Lessee's sole cost
and expense, shall execute and deliver to Lessee such authorizations and
other documents as may reasonably be required in any such contest, so long
as the same does not expose Lessor to any civil or criminal liability, and, if
reasonably requested by Lessee or if Lessor so desires, Lessor shall join as a
party therein.
15.3 LESSEE'S INDEMNITY. Lessee, as more particularly
provided for in Section 12.2, shall indemnify, defend (with counsel
acceptable to Lessor) and save Lessor harmless against any liability, cost or
expense of any kind, including, without limitation, attorneys' fees and
expenses that may be imposed upon Lessor in connection with any such
contest and any loss resulting therefrom and in the enforcement of this
indemnification.
ARTICLE 16
DEFAULT
16.1 EVENTS OF DEFAULT. Each of the following shall
constitute an "Event of Default" hereunder and shall entitle Lessor to
exercise its remedies hereunder and under any of the other Lease
Documents:
(a) any failure of Lessee to pay any amount due
hereunder or under any of the other Lease Documents within ten
(10) days following the date when such payment was due;
(b) any failure in the observance or
performance of any other covenant, term, condition or warranty
provided in this Lease or any of the other Lease Documents, other
than the payment of any monetary obligation and other than as
specified in subsections (c) through (v) below (a "Failure to
Perform"), continuing for thirty (30) days after the giving of notice
by Lessor to Lessee specifying the nature of the Failure to Perform;
except as to matters not susceptible to cure within thirty (30) days,
provided that with respect to such matters, (i) Lessee commences
the cure thereof within thirty (30) days after the giving of such
notice by Lessor to Lessee, (ii) Lessee continuously prosecutes
such cure to completion, (iii) such cure is completed within one
hundred twenty (120) days after the giving of such notice by
Lessor to Lessee and (iv) such Failure to Perform does not impair
the value of, or Lessor's rights with respect to, the Leased Property
or otherwise impair the Collateral or Lessor's security interest
therein;
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(c) the occurrence of any default or breach of
condition continuing beyond the expiration of the applicable notice
and grace periods, if any, under any of the other Lease Documents,
including, without limitation, the Agreement Regarding Related
Transactions;
(d) if any representation, warranty or statement
contained herein or in any of the other Lease Documents proves to
be untrue in any material respect as of the date when made or at
any time during the Term if such representation or warranty is a
continuing representation or warranty pursuant to Section 10.2;
(e) if any member of the Leasing Group shall
(i) voluntarily be adjudicated a bankrupt or insolvent, (ii) seek or
consent to the appointment of a receiver or trustee for itself or for
the Leased Property, (iii) file a petition seeking relief under the
bankruptcy or other similar laws of the United States, any state or
any jurisdiction, (iv) make a general assignment for the benefit of
creditors, (v) make or offer a composition of its debts with its
creditors or (vi) be unable to pay its debts as such debts mature;
(f) if any court shall enter an order, judgment or
decree appointing, without the consent of any member of the
Leasing Group, a receiver or trustee for such member or for any of
its property and such order, judgment or decree shall remain in
force, undischarged or unstayed, ninety (90) days after it is entered;
(g) if a petition is filed against any member of
the Leasing Group which seeks relief under the bankruptcy or other
similar laws of the United States, any state or any other
jurisdiction, and such petition is not dismissed within ninety (90)
days after it is filed;
(h) in the event that:
i. all or any portion of the interest of any
partner, shareholder, member in any
member of the Leasing Group (other than
Guarantor) shall be, on any one or more
occasions, directly or indirectly, sold,
assigned, hypothecated or otherwise
transferred (whether by operation of law or
otherwise), if such member of the Leasing
Group shall be a partnership, joint venture,
syndicate or other group, without the prior
written consent of Lessor, in each instance,
which consent may be withheld by Lessor in
its reasonable discretion with respect to a
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sale, assignment, hypothecation or other
transfer to a Meditrust/Emeritus Transaction
Affiliate and in all other cases, in its sole
and absolute discretion;
ii. the shares of the issued and outstanding
capital stock of any member of the Leasing
Group (other than Guarantor) shall be, on
any one or more occasions, directly or
indirectly, sold, assigned, hypothecated or
otherwise transferred (whether by operation
of law or otherwise), if such member of the
Leasing Group shall be a corporation,
without the prior written consent of Lessor,
in each instance, which consent may be
withheld by Lessor in its reasonable
discretion with respect to a sale, assignment,
hypothecation or other transfer to a
Meditrust/Emeritus Transaction Affiliate
and in all other cases, in its sole and
absolute discretion; or
iii. all or any portion of the beneficial interest in
any member of the Leasing Group (other
than Guarantor) shall be, directly or
indirectly, sold or otherwise transferred
(whether by operation of law or otherwise),
if such member of the Leasing Group shall
be a trust, without the prior written consent
of Lessor, in each instance, which consent
may be withheld by Lessor in its reasonable
discretion with respect to a sale, assignment,
hypothecation or other transfer to a
Meditrust/Emeritus Transaction Affiliate
and in all other cases, in its sole and
absolute discretion;
Notwithstanding the foregoing, no consent of Lessor to a pledge by
Lessee of its stock to the lender of a Working Capital Loan
satisfying the requirements of Section 6.1.3 shall be required (a
"Working Capital Stock Pledge").
(i) the death, incapacity, liquidation,
dissolution or termination of existence of any member of the
Leasing Group or the merger or consolidation of any member of
the Leasing Group with any other Person except as expressly
permitted by the terms of this Lease Agreement;
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(j) except as provided in Section 19.1 hereof,
if, without the prior written consent of Lessor, in each instance,
which consent may be withheld by Lessor in its sole and absolute
discretion, Lessee's or any interest of a Sublessee which is an
Affiliate of Lessee in the Leased Property shall be, directly or
indirectly, mortgaged, encumbered (by any voluntary or
involuntary Lien other than the Permitted Encumbrances),
subleased, sold, assigned, hypothecated or otherwise transferred
(whether by operation of law or otherwise);
(k) the occurrence of a default or breach of
condition continuing beyond the expiration of the applicable notice
and grace periods, if any, in connection with the payment or
performance of any other material obligation of Lessee or any
Sublessee which is an Affiliate of Lessee, if the applicable creditor
or obligee elects to declare the obligations of Lessee or the
applicable Sublessee under the applicable agreement due and
payable or to exercise any other right or remedy available to such
creditor or obligee, or, whether or not such creditor or obligee has
so elected or exercised, such creditor's or obligee's rights and
remedies, if exercised, may involve or result in the taking of
possession of, or the creation of a Lien on, the Leased Property;
provided, however, that in any event, the election by the applicable
creditor or obligee to declare the obligations of Lessee under the
applicable agreement due and payable or to exercise any other right
or remedy available to such creditor or obligee shall be an Event of
Default hereunder only if such obligations, individually or in the
aggregate, are in excess of TWO HUNDRED FIFTY THOUSAND
DOLLARS ($250,000);
(l) the occurrence of a Related Party Default;
(m) the occurrence of any default or breach of
condition which is not cured within any applicable cure period
under a Working Capital Loan secured by a Working Capital Stock
Pledge (or any documents executed in connection therewith) or the
exercise of any ownership rights by the lender of a Working
Capital Loan secured by a Working Capital Stock Pledge;
(n) except as a result of Casualty or a partial or
complete Condemnation (including a temporary taking), if Lessee
or any Sublessee ceases operation of the Facility for a period in
excess of thirty (30) days (a "Failure to Operate");
(o) if one or more judgments against Lessee or
any Sublessee which is an Affiliate of Lessee or attachments
against Lessee's interest or any such Sublessee's interest in the
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Leased Property, which in the aggregate exceed TWO HUNDRED
FIFTY THOUSAND DOLLARS ($250,000) or which may
materially and adversely interfere with the operation of the
Facility, remain unpaid, unstayed on appeal, undischarged,
unbonded or undismissed for a period of thirty (30) days;
(p) if any malpractice award or judgment
exceeding any applicable professional liability insurance coverage
by more than FIVE HUNDRED THOUSAND DOLLARS
($500,000) shall be rendered against any member of the Leasing
Group and either (i) enforcement proceedings shall have been
commenced by any creditor upon such award or judgment or
(ii) such award or judgment shall continue unsatisfied and in effect
for a period of ten (10) consecutive days without an insurance
company satisfactory to Lessor (in its sole and absolute discretion)
having agreed to fund such award or judgment in a manner
satisfactory to Lessor (in its sole and absolute discretion) and in
either case such award or judgment shall, in the reasonable opinion
of Lessor, have a material adverse affect on the ability of Lessee or
any Sublessee to operate the Facility;
(q) if any Provider Agreement material to the
operation or financial condition of the Leased Property shall be
terminated prior to the expiration of the term thereof or, without
the prior written consent of Lessor, in each instance, which consent
may be withheld in Lessor's reasonable discretion, shall not be
renewed or extended upon the expiration of the stated term thereof;
(r) if, after Lessee or any Sublessee has
obtained approval for Medicare and/or Medicaid funding, a final
unappealable determination is made by the applicable
Governmental Authority that Lessee or any Sublessee shall have
failed to comply with applicable Medicare and/or Medicaid
regulations in the operation of the Facility, as a result of which
failure Lessee or such Sublessee is declared ineligible to continue
its participation in the Medicare and/or Medicaid programs and
such determination could reasonably be expected to have a
material adverse effect on the operation or financial condition of
the Leased Property;
(s) if any member of the Leasing Group
receives notice of a final unappealable determination by applicable
Governmental Authorities of the revocation of any Permit required
for the lawful construction or operation of the Facility in
accordance with the Primary Intended Use and, if applicable, the
Other Permitted Uses or the loss of any Permit under any other
circumstances under which any member of the Leasing Group is
required to permanently cease the construction or operation of the
Facility in accordance with the Primary Intended Use and the Other
Permitted Uses; and
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(t) any failure to maintain the insurance
required pursuant to Section 13 of this Lease in force and effect at
all times until the Lease Obligations are fully paid and performed;
(u) the appointment of a temporary manager (or
operator) for the Leased Property by any Governmental Authority;
(v) the entry of an order by a court with
jurisdiction over the Leased Property to close the Facility, to
transfer one or more residents the Facility as a result of an
allegation of abuse or neglect or to take any action to eliminate an
emergency situation then existing at the Facility, if such order has
not been stayed pending appeal within ten (10) following such
entry; or
(w) the occurrence of any default or breach of
condition continuing for more than thirty (30) days under any
credit agreement, loan agreement or other agreement establishing a
major line of credit (including, without limitation, a major line of
credit or a Working Capital Loan which is not secured by a
Working Capital Stock Pledge)(or any documents executed in
connection with such lines of credit) on behalf of Guarantor
without regard to whether the applicable creditor has elected to
declare the indebtedness due and payable under such line of credit
or to exercise any other right or remedy available to it or the
occurrence of any such default or breach of condition if the
applicable creditor has elected to declare the indebtedness due and
payable under such line of credit or to exercise any other right or
remedy available to it. For the purpose of this provision, a major
line of credit shall mean and include any line of credit established
in an amount equal to or greater than ONE MILLION DOLLARS
($1,000,000) with respect to a line of credit for which Guarantor is
an obligor, endorser, surety or guarantor.
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16.2 REMEDIES.
(a) If any Lease Default shall have occurred, Lessor may at its
option terminate this Lease by giving Lessee not less than ten (10) days'
notice of such termination, or exercise any one or more of its rights and
remedies under this Lease or any of the other Lease Documents, or as
available at law or in equity and upon the expiration of the time fixed in
such notice, the Term shall terminate (but only if Lessor shall have
specifically elected by a written notice to so terminate the Lease) and all
rights of Lessee under this Lease shall cease. Notwithstanding the
foregoing, in the event of Lessee's failure to pay Rent, if such Rent remains
unpaid beyond ten (10) days from the due date thereof, Lessor shall not be
obligated to give ten (10) days notice of such termination or exercise of any
of its other rights and remedies under this Lease, or the other Lease
Documents, or otherwise available at law or in equity, and Lessor shall be
at liberty to pursue any one or more of such rights or remedies without
further notice. No taking of possession of the Leased Property by or on
behalf of Lessor, and no other act done by or on behalf of Lessor, shall
constitute an acceptance of surrender of the Leased Property by Lessee or
reduce Lessee's obligations under this Lease or the other Lease Documents,
unless otherwise expressly agreed to in a written document signed by an
authorized officer or agent of Lessor.
(b) To the extent permitted under applicable law, Lessee shall
pay as Additional Charges all costs and expenses (including, without
limitation, attorneys' fee and expenses) reasonably incurred by or on behalf
of Lessor as a result of any Lease Default.
(c) If any Lease Default shall have occurred, whether or not
this Lease has been terminated pursuant to Paragraph (a) of this Section,
Lessee shall, to the extent permitted under applicable law, if required by
Lessor so to do, upon not less than ten (10) days' prior notice from Lessor,
immediately surrender to Lessor the Leased Property pursuant to the
provisions of Paragraph (a) of this Section and quit the same, and Lessor
may enter upon and repossess the Leased Property by reasonable force,
summary proceedings, ejectment or otherwise, and may remove Lessee and
all other Persons and any and all of the Tangible Personal Property from the
Leased Property, subject to the rights of any residents of the Facility and
any Sublessees who are not Affiliates of any member of the Leasing Group
and to any requirements of applicable law, or Lessor may claim ownership
of the Tangible Personal Property as set forth in Section 5.2.3 hereof or
Lessor may exercise its rights as secured party under the Security
Agreement. Lessor shall use reasonable, good faith efforts to relet the
Leased Property or otherwise mitigate damages suffered by Lessor as a
result of Lessee's breach of this Lease.
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(d) In addition to all of the rights and remedies of Lessor set
forth in this Lease and the other Lease Documents, if Lessee shall fail to
pay any rental or other charge due hereunder (whether denominated as Base
Rent, Additional Rent, Additional Charges or otherwise) within ten (10)
days after same shall have become due and payable, then and in such event
Lessee shall also pay to Lessor (i) a late payment service charge (in order to
partially defray Lessor's administrative and other overhead expenses) equal
to TWO HUNDRED FIFTY DOLLARS ($250) and (ii) to the extent
permitted by applicable law, interest on such unpaid sum at the Overdue
Rate; it being understood, however, that nothing herein shall be deemed to
extend the due date for payment of any sums required to be paid by Lessee
hereunder or to relieve Lessee of its obligation to pay such sums at the time
or times required by this Lease.
16.3 DAMAGES. None of (a) the termination of this Lease
pursuant to Section 16.2, (b) the eviction of Lessee or the repossession of
the Leased Property, (c) the inability after reasonable diligence of Lessor,
notwithstanding reasonable good faith efforts, to relet the Leased Property,
(d) the reletting of the Leased Property or (e) the failure of Lessor to collect
or receive any rentals due upon any such reletting, shall relieve Lessee of its
liability and obligations hereunder, all of which shall survive any such
termination, repossession or reletting. In any such event, Lessee shall
forthwith pay to Lessor all Rent due and payable with respect to the Leased
Property to and including the date of such termination, repossession or
eviction. Thereafter, Lessee shall forthwith pay to Lessor, at Lessor's
option, either:
(i) the sum of: (x) all Rent that is due and unpaid at later to
occur of termination, repossession or eviction, together
with interest thereon at the Overdue Rate to the date of
payment, plus (y) the worth (calculated in the manner
stated below) of the amount by which the unpaid Rent for
the balance of the Term after the later to occur of the
termination, repossession or eviction exceeds the fair
market rental value of the Leased Property for the balance
of the Term, plus (z) any other amount necessary to
compensate Lessor for all damage proximately caused by
Lessee's failure to perform the Lease Obligations or which
in the ordinary course would be likely to result therefrom
and less the amount of rent that has actually been received
by Lessor following the termination of this Lease from a
Person other than an Affiliate of Lessor (which for
purposes hereof shall include the net income received by
Lessor or an Affiliate of Lessor from its own operation of
the Leased Property in the event it elects to resume
operation thereof in lieu of hiring a third party manager or
re-letting the Leased Property); or
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(ii) each payment of Rent as the same would have become due
and payable if Lessee's right of possession or other rights
under this Lease had not been terminated, or if Lessee had
not been evicted, or if the Leased Property had not been
repossessed which Rent, to the extent permitted by law,
shall bear interest at the Overdue Rate from the date when
due until the date paid, and Lessor may enforce, by action
or otherwise, any other term or covenant of this Lease.
There shall be credited against Lessee's obligation under
this Clause (ii) amounts actually collected by Lessor from
another tenant to whom the Leased Property may have
actually been leased or, if Lessor is operating the Leased
Property for its own account, the actual Cash Flow of the
Leased Property.
In making the determinations described in subparagraph (i) above,
the "worth" of unpaid Rent shall be determined by a court having
jurisdiction thereof using the lowest rate of capitalization (highest present
worth) reasonably applicable at the time of such determination and allowed
by applicable law and the Additional Rent shall be deemed to be the same
as the average Additional Rent of the preceding five (5) full calendar years,
or if shorter, the average Additional Rent for the calendar years or portions
thereof since the date that Additional Rent commenced to accrue or such
other amount as either party shall prove reasonably could have been earned
during the remainder of the Term or any portion thereof.
16.4 LESSEE WAIVERS. If this Lease is terminated pursuant
to Section 16.2, Lessee waives, to the extent not prohibited by applicable
law, (a) any right of redemption, re-entry or repossession, (b) any right to a
trial by jury in the event of summary proceedings to enforce the remedies
set forth in this Article 16, and (c) the benefit of any laws now or hereafter
in force exempting property from liability for rent or for debt.
16.5 APPLICATION OF FUNDS. Any payments otherwise
payable to Lessee which are received by Lessor under any of the provisions
of this Lease during the existence or continuance of any Lease Default shall
be applied to the Lease Obligations in the order which Lessor may
reasonably determine or as may be required by the laws of the State.
16.6 FAILURE TO CONDUCT BUSINESS. For the purpose
of determining rental loss damages or Additional Rent, in the event Lessee
fails to conduct business upon the Leased Property, exact damages or the
amount of Additional Rent being unascertainable, it shall be deemed that
the Additional Rent for such period would be equal to the average annual
Additional Rent during the five (5) preceding calendar years or such shorter
period of time as may have existed between the date Additional Rent
commenced to accrue and the date of computation.
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16.7 LESSOR'S RIGHT TO CURE. If Lessee shall fail to
make any payment, or to perform any act required to be made or performed
under this Lease and to cure the same within the relevant time periods
provided in Section 16.1, Lessor, after five (5) Business Days' prior notice
to Lessee (except in an emergency when such shorter notice shall be given
as is reasonable under the circumstances), and without waiving or releasing
any obligation or Event of Default, may (but shall be under no obligation
to) at any time thereafter make such payment or perform such act for the
account and at the expense of Lessee, and may, to the extent permitted by
law, enter upon the Leased Property for such purpose and take all such
action thereon as, in Lessor's opinion, may be necessary or appropriate
therefor. No such entry shall be deemed an eviction of Lessee. All sums so
paid by Lessor and all costs and expenses (including, without limitation,
reasonable attorneys' fees and expenses, in each case, to the extent
permitted by law) so incurred shall be paid by Lessee to Lessor on demand
as an Additional Charge. The obligations of Lessee and rights of Lessor
contained in this Article shall survive the expiration or earlier termination
of this Lease.
16.8 NO WAIVER BY LESSOR. Lessor shall not by any act,
delay, omission or otherwise (including, without limitation, the exercise of
any right or remedy hereunder) be deemed to have waived any of its rights
or remedies hereunder or under any of the other Lease Documents unless
such waiver is in writing and signed by Lessor, and then, only to the extent
specifically set forth therein. No waiver at any time of any of the terms,
conditions, covenants, representations or warranties set forth in any of the
Lease Documents (including, without limitation, any of the time periods set
forth therein for the performance of the Lease Obligations) shall be
construed as a waiver of any other term, condition, covenant, representation
or warranty of any of the Lease Documents, nor shall such a waiver in any
one instance or circumstances be construed as a waiver of the same term,
condition, covenant, representation or warranty in any subsequent instance
or circumstance. No such failure, delay or waiver shall be construed as
creating a requirement that Lessor must thereafter, as a result of such
failure, delay or waiver, give notice to Lessee or any Guarantor, or any
other Person that Lessor does not intend to, or may not, give a further
waiver or to refrain from insisting upon the strict performance of the terms,
conditions, covenants, representations and warranties set forth in the Lease
Documents before Lessor can exercise any of its rights or remedies under
any of the Lease Documents or before any Lease Default can occur, or as
establishing a course of dealing for interpreting the conduct of and
agreements between Lessor and Lessee, the Guarantor or any other Person.
The acceptance by Lessor of any payment that is less than payment
in full of all amounts then due under any of the Lease Documents at the
time of the making of such payment shall not: (a) constitute a waiver of the
right to exercise any of Lessor's remedies at that time or at any subsequent
time, (b) constitute an accord and satisfaction or (c) nullify any prior
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exercise of any remedy, without the express written consent of Lessor. Any
failure by Lessor to take any action under this Lease or any of the other
Lease Documents by reason of a default hereunder or thereunder,
acceptance of a past due installment, or indulgences granted from time to
time shall not be construed as a novation of this Lease or any of the other
Lease Documents or as a waiver of such right or of the right of Lessor
thereafter to insist upon strict compliance with the terms of this Lease or
any of the other Lease Documents, or (d) prevent the exercise of such right
of acceleration or any other right granted hereunder or under applicable law
for purposes of obtaining the damages set forth in Section 16.3, specific
performance or equitable remedies; and to the maximum extent not
prohibited by applicable law, Lessee hereby expressly waives the benefit of
any statute or rule of law or equity now provided, or which may hereafter
be provided, which would produce a result contrary to or in conflict with
the foregoing.
16.9 RIGHT OF FORBEARANCE. Whether or not for
consideration paid or payable to Lessor and, except as may be otherwise
specifically agreed to by Lessor in writing, no forbearance on the part of
Lessor, no extension of the time for the payment of the whole or any part of
the Obligations, and no other indulgence given by Lessor to Lessee or any
other Person, shall operate to release or in any manner affect the original
liability of Lessee or such other Persons, or to limit, prejudice or impair any
right of Lessor, including, without limitation, the right to realize upon any
collateral, or any part thereof, for any of the Obligations evidenced or
secured by the Lease Documents; notice of any such extension, forbearance
or indulgence being hereby waived by Lessee and all those claiming by,
through or under Lessee.
16.10 CUMULATIVE REMEDIES. The rights and remedies set
forth under this Lease are in addition to all other rights and remedies
afforded to Lessor under any of the other Lease Documents or at law or in
equity, all of which are hereby reserved by Lessor, and this Lease is made
and accepted without prejudice to any such rights and remedies. All of the
rights and remedies of Lessor under each of the Lease Documents shall be
separate and cumulative and may be exercised concurrently or successively
in Lessor's sole and absolute discretion.
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ARTICLE 17
SURRENDER OF LEASED PROPERTY OR LEASE; HOLDING OVER
17.1 SURRENDER. Lessee shall, upon the expiration or prior
termination of the Term (unless occasioned by Lessee's purchase of the
Leased Property pursuant to the terms of this Lease Agreement), vacate and
surrender the Leased Property to Lessor in good repair and condition, in
compliance with all applicable Legal Requirements, all Insurance
Requirements, and in compliance with the provisions of Article 8, except
for: (a) ordinary wear and tear (subject to the obligation of Lessee to
maintain the Leased Property in good order and repair during the entire
Term of the Lease), (b) damage caused by the gross negligence or willful
acts of Lessor, and (c) any damage or destruction resulting from a Casualty
or Taking that Lessee is not required by the terms of this Lease to repair or
restore.
17.2 TRANSFER OF CONTRACTS AND PERMITS. In
connection with the expiration or any earlier termination of this Lease
(unless occasioned by Lessee's purchase of the Leased Property pursuant to
the terms of this Lease Agreement), upon any request made from time to
time by Lessor, Lessee shall (a) promptly and diligently use its best efforts
to (i) transfer and assign all Permits and Contracts necessary or desirable for
the operation of the Leased Property in accordance with its Primary
Intended Use to Lessor or its designee to the extent the same are assignable
under applicable Legal Requirements and/or (ii) arrange for the transfer or
assignment of such Permits and Contracts to Lessor or its designee and (b)
cooperate in every respect (and to the fullest extent possible) and assist
Lessor or its designee in obtaining such Permits and Contracts (whether by
transfer, assignment or otherwise) provided, however, that unless a
termination is the result of a Lease Default, Casualty or Condemnation,
Lessee's efforts and cooperation shall not require Lessee to pay the costs
and expenses incurred by Lessor or Lessor's designated transferee of the
Contracts and Permits. Such efforts and cooperation on the part of Lessee
shall include, without limitation, the execution, delivery and filing with
appropriate Governmental Authorities and Third Party Payors of any
applications, petitions, statements, notices, requests, assignments and other
documents or instruments requested by Lessor. Furthermore, Lessee shall
not take any action or refrain from taking any action which would defer,
delay or jeopardize the process of Lessor or its designee obtaining said
Permits and Contracts (whether by transfer, assignment or otherwise).
Without limiting the foregoing, Lessee shall not seek to transfer or relocate
any of said Permits or Contracts to any location other than the Leased
Property. The provisions of this Section 17.2 shall survive the expiration or
earlier termination of this Lease.
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Lessee hereby appoints Lessor as its attorney-in-fact, with full
power of substitution to take such actions, in the event that Lessee fails to
comply with any request made by Lessor hereunder, as Lessor (in its sole
absolute discretion) may deem necessary or desirable to effectuate the
intent of this Section 17.2. The power of attorney conferred on Lessor by
the provisions of this Section 17.2, being coupled with an interest, shall be
irrevocable until the Obligations are fully paid and performed and shall not
be affected by any disability or incapacity which Lessee may suffer and
shall survive the same. Such power of attorney is provided solely to protect
the interests of Lessor and shall not impose any duty on the Lender to
exercise any such power and neither Lessor nor such attorney-in-fact shall
be liable for any act, omission, error in judgment or mistake of law, except
as the same may result from its gross negligence or willful misconduct.
17.3 NO ACCEPTANCE OF SURRENDER. Except at the
expiration of the Term in the ordinary course, no surrender to Lessor of this
Lease or of the Leased Property or any interest therein shall be valid or
effective unless agreed to and accepted in writing by Lessor and no act by
Lessor or any representative or agent of Lessor, other than such a written
acceptance by Lessor, shall constitute an acceptance of any such surrender.
17.4 HOLDING OVER. If, for any reason, Lessee shall remain
in possession of the Leased Property after the expiration or any earlier
termination of the Term, such possession shall be as a tenant at sufferance
during which time Lessee shall pay as rental each month, one and one-half
times the aggregate of (i) one-twelfth of the aggregate Base Rent, and
Additional Rent payable at the time of such expiration or earlier termination
of the Term; (ii) all Additional Charges accruing during the month and (iii)
all other sums, if any, payable by Lessee pursuant to the provisions of this
Lease with respect to the Leased Property. During such period of tenancy,
Lessee shall be obligated to perform and observe all of the terms, covenants
and conditions of this Lease, but shall have no rights hereunder other than
the right, to the extent given by law to tenants at sufferance, to continue its
occupancy and use of the Leased Property. Nothing contained herein shall
constitute the consent, express or implied, of Lessor to the holding over of
Lessee after the expiration or earlier termination of this Lease.
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ARTICLE 18
PURCHASE OF THE LEASED PROPERTY
18.1 PURCHASE OF THE LEASED PROPERTY. In the
event Lessee purchases the Leased Property from Lessor pursuant to any of
the terms of this Lease, Lessor shall, upon receipt from Lessee of the
applicable purchase price, together with full payment of any unpaid Rent
due and payable with respect to any period ending on or before the date of
the purchase, deliver to Lessee a deed with covenants only against acts of
Lessor conveying the entire interest of Lessor in and to the Leased Property
to Lessee subject to all applicable Legal Requirements, all of the matters
described in clauses (a), (b), (e) and (g) of Section 11.5.2, Impositions, any
Liens created by Lessee, any Liens created in accordance with the terms of
this Lease (except to the extent specifically excluded by the terms hereof)
or consented to by Lessee, the claims of all Persons claiming by, through or
under Lessee, any other matters assented to by Lessee and all matters for
which Lessee has responsibility under any of the Lease Documents, but
otherwise not subject to any other Lien created by Lessor from and after the
Commencement Date (other than an Encumbrance permitted under Article
20 which Lessee elects to assume). The applicable purchase price shall be
paid in cash to Lessor, or as Lessor may direct, in federal or other
immediately available funds except as otherwise mutually agreed by Lessor
and Lessee. All expenses of such conveyance, including, without
limitation, the cost of title examination or standard or extended coverage
title insurance, attorneys' fees incurred by Lessor in connection with such
conveyance, recording and transfer taxes and recording fees and similar
charges and specifically excluding any prepayment penalties, if any, due
Lessor's mortgagee, shall be paid by Lessee.
18.2 APPRAISAL.
18.2.1 DESIGNATION OF APPRAISERS. In the
event that it becomes necessary to determine the Fair Market Value
of the Leased Property for any purpose of this Lease, the party
required or permitted to give notice of such required determination
shall include in the notice the name of a Person selected to act as
appraiser on its behalf. Within ten (10) days after receipt of any
such notice, Lessor (or Lessee, as the case may be) shall by notice
to Lessee (or Lessor, as the case may be) either accept such Person
to be the sole appraiser to determine the Fair Market Value of the
Leased Property or appoint a second Person as appraiser on its
behalf.
18.2.2 APPRAISAL PROCESS. The appraisers thus
appointed, each of whom must be a member of the American
Institute of Real Estate Appraisers (or any successor organization
thereto), shall, within forty-five (45) days after the date of the
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notice appointing the first appraiser, proceed to appraise the Leased
Property to determine the Fair Market Value of the Leased
Property as of the relevant date (giving effect to the impact, if any,
of inflation from the date of their decision to the relevant date);
provided, however, that if only one appraiser shall have been so
appointed, or if two appraisers shall have been so appointed but
only one such appraiser shall have made such determination within
fifty (50) days after the making of Lessee's or Lessor's request, then
the determination of such appraiser shall be final and binding upon
the parties. If two appraisers shall have been appointed and shall
have made their determinations within the respective requisite
periods set forth above and if the difference between the amounts
so determined shall not exceed ten per cent (10%) of the lesser of
such amounts, then the Fair Market Value of the Leased Property
shall be an amount equal to fifty percent (50%) of the sum of the
amounts so determined. If the difference between the amounts so
determined shall exceed ten percent (10%) of the lesser of such
amounts, then such two appraisers shall have twenty (20) days to
appoint a third appraiser, but if such appraisers fail to do so, then
either party may request the American Arbitration Association or
any successor organization thereto to appoint an appraiser within
twenty (20) days of such request, and both parties shall be bound
by any appointment so made within such twenty (20) day period.
If no such appraiser shall have been appointed within such twenty
(20) days or within ninety (90) days of the original request for a
determination of Fair Market Value of the Leased Property,
whichever is earlier, either Lessor or Lessee may apply to any
court having jurisdiction to have such appointment made by such
court. Any appraiser appointed by the original appraisers, by the
American Arbitration Association or by such court shall be
instructed to determine the Fair Market Value of the Leased
Property within thirty (30) days after appointment of such
Appraiser. The determination of the appraiser which differs most
in terms of dollar amount from the determinations of the other two
appraisers shall be excluded, and fifty percent (50%) of the sum of
the remaining two determinations shall be final and binding upon
Lessor and Lessee as the Fair Market Value of the Leased Property.
18.2.3 SPECIFIC ENFORCEMENT AND COSTS.
This provision for determination by appraisal shall be specifically
enforceable to the extent such remedy is available under applicable
law, and any determination hereunder shall be final and binding
upon the parties except as otherwise provided by applicable law.
Lessor and Lessee shall each pay the fees and expenses of the
appraiser appointed by it and each shall pay one-half of the fees
and expenses of the third appraiser and one-half of all other cost
and expenses incurred in connection with each appraisal.
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18.3 LESSEE'S OPTION TO PURCHASE.
18.3.1 CONDITIONS TO OPTION. On the
conditions (which conditions Lessor may waive, at its sole option,
by notice to Lessee at any time) that (a) at the time of exercise of
the Purchase Option and on the applicable Purchase Option Date,
there then exists no Lease Default, nor any state of facts or
circumstance which constitutes, or with the passage of time and/or
the giving of notice, would constitute a Lease Default and
(b) Lessee strictly complies with the provisions of this Section
18.3, then Lessee shall have the option to purchase the Leased
Property, at the price and upon the terms hereinafter set forth (the
"Purchase Option").
18.3.2 EXERCISE OF OPTION; DEPOSIT. Such
Purchase Option shall permit Lessee to purchase the Leased
Property (a) on the last day of the Initial Term or (b) on the last day
of any Extended Term effectively exercised by Lessee (each of
such dates are referred to herein as a "Purchase Option Date") and
shall be exercised by notice given by Lessee to Lessor (the
"Lessee's Purchase Option Notice") at least one hundred eighty
(180) days (but not more than three hundred sixty (360) days) prior
to the relevant Purchase Option Date. Notwithstanding anything to
the contrary set forth in this Lease, Lessee's right to purchase the
Leased Property is subject to the further conditions that (i)
concurrently with the exercise of the option set forth under this
Section 18.3, the Lessee shall have exercised its right to purchase
the premises demised under each of the Related Leases in
accordance with the provisions of Section 18.3 of each of the
Related Leases, (ii) the conveyance of the Leased Property
pursuant to the provisions of this Section 18.3 shall occur
simultaneously with the conveyance of the premises demised under
each of the Related Leases pursuant to Section 18.3 of each of the
Related Leases and (iii) all conditions contained in the Agreement
Regarding Related Transactions pertaining to the Purchase Option
are satisfied. Lessee shall have no right to rescind Lessee's
Purchase Option Notice once given unless (a) a notice of such
rescission is given (i) within ten (10) days following receipt of the
final determination of the Fair Market Value of the Leased
Property or (ii) within thirty (30) days following an event of
Casualty or Condemnation as to which Lessee has waived any right
of termination set forth in Section 13.2.2 hereof and (b)
simultaneously with such notice of rescission, Lessee, by notice
given pursuant to Section 1.3 hereof extends the Term.
18.3.3 CONVEYANCE. If the Purchase Option is
exercised by Lessee in accordance with the terms hereof, the
Leased Property shall be conveyed by a good and sufficient deed
with covenants only against acts of Lessor (the "Deed") running to
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Lessee or to such grantee as Lessee may designate by notice to
Lessor at least seven (7) days before the Time of Closing.
18.3.4 CALCULATION OF PURCHASE PRICE.
The price to be paid by Lessee for the acquisition of the Leased
Property pursuant to this Purchase Option (the "Purchase Price")
shall be equal to the greater of (a) the Meditrust Investment or (b)
an amount equal to the then Fair Market Value of the Leased
Property minus the Fair Market Added Value, subject to the terms
of the Agreement Regarding Related Transactions.
18.3.5 PAYMENT OF PURCHASE PRICE. The
Purchase Price shall be paid by Lessee at the Time of Closing by
certified, cashier's, treasurer's or bank check(s) or wire transfer
pursuant to instructions received from Lessor in accordance with
the terms of the Agreement Regarding Related Transactions as
reduced by the principal balance of any Fee Mortgage which
Lessee has elected to, and has the right to, assume in accordance
with the terms hereof.
18.3.6 PLACE AND TIME OF CLOSING. If this
Purchase Option is exercised, the closing shall occur and the Deed
shall be delivered (the "Closing") at the office of Lessor at 12:00
o'clock noon (E.S.T.) on the applicable Purchase Option Date (such
time, as the same may be extended by mutual written agreement of
Lessor and Lessee, being hereinafter referred to as the "Time of
Closing") in accordance with the terms of the Agreement
Regarding Related Transactions. It is agreed that time is of the
essence of this Purchase Option.
18.3.7 CONDITION OF LEASED PROPERTY. The
Leased Property is to be purchased "AS IS" and "WHERE IS" as of
the Time of Closing.
18.3.8 QUALITY OF TITLE. If Lessor shall be
unable to give title or to make conveyance, as stipulated in this
Section 18.3, then, at Lessor's option, Lessor shall use reasonable
efforts to remove all defects in title and the applicable Purchase
Option Date and Time of Closing shall be extended for period of
thirty (30) days other than with respect to any Encumbrances
which Lessor has caused to exist. Lessor shall not be required to
expend more than FIFTY THOUSAND DOLLARS ($50,000)
(inclusive of attorney's fees) in order to have used "reasonable
efforts."
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18.3.9 LESSOR'S INABILITY TO PERFORM. If at
the expiration of the extended time Lessor shall have failed so to
remove any such defects in title, then all other obligations of all
parties hereto under Section 18.3 shall cease and Section 18.3 shall
be void and without recourse to the parties hereto.
Notwithstanding the foregoing, Lessee shall have the election, at
either the original or extended Purchase Option Date and Time of
Closing, to accept such title as Lessor can deliver to the Leased
Property in its then condition and to pay therefor the Purchase
Price without reduction, in which case Lessor shall convey such
title; provided, that, in the event of such conveyance, if any portion
of the Leased Property shall have been taken by Condemnation
prior to the applicable Purchase Option Date and Time of Closing,
Lessor shall pay over or assign to Lessee at the Time of Closing, all
Awards recovered on account of such Taking, less any amounts
reasonably expended by Lessor in obtaining such Award and less
any amounts expended for restoration pursuant to the provisions of
Article 14 hereof, or, to the extent such Awards have not been
recovered as of the applicable Purchase Option Date and Time of
Closing, Lessor shall assign to Lessee all its rights with respect to
any claim therefor and further provided, that, in the event of such
conveyance, if any portion of the Leased Property shall have
suffered a Casualty prior to the applicable Purchase Option Date
and Time of Closing, Lessor shall pay over or assign to Lessee at
the Time of Closing, all insurance proceeds recovered on account
of such Casualty, less any amounts reasonably expended by Lessor
in obtaining such proceeds and less any amounts expended for
restoration pursuant to the provisions of Article 13 hereof, or, to
the extent such proceeds have not been recovered as of the
applicable Purchase Option Date and Time of Closing, Lessor shall
assign to Lessee all its rights with respect to any claim therefor.
18.3.10 MERGER BY DEED. The acceptance of the
Deed by Lessee or the grantee designated by Lessee, as the case
may be, shall be deemed to be a full performance and discharge of
every agreement and obligation to be performed by Lessor
contained or expressed in this Lease.
18.3.11 USE OF PURCHASE PRICE TO CLEAR
TITLE. To enable Lessor to make conveyance as provided in this
Section, Lessor may, at the Time of Closing, use the Purchase Price
or any portion thereof to clear the title of any Lien, provided that
all instruments so procured are recorded contemporaneously with
the Closing or reasonable arrangements are made for a recording
subsequent to the Time of Closing in accordance with customary
conveyancing practices.
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18.3.12 LESSEE'S DEFAULT. If Lessee delivers
Lessee's Purchase Option Notice and fails to consummate the
purchase of the Leased Property in accordance with the terms
hereof for any reason other than Lessor's willful and unexcused
refusal to deliver the Deed or exercise of the right of rescission in
Section 18.3.2 hereof, (a) Lessee shall thereafter have no further
right to purchase the Leased Property pursuant to this Section,
although this Lease shall otherwise continue in full force and effect
and (b) Lessor shall have the right to ▇▇▇ for specific performance
of Lessee's obligations to purchase the Leased Property provided
such suit for specific performance is commenced within one (1)
year after the applicable Purchase Option Date on which such sale
was supposed to occur.
ARTICLE 19
SUBLETTING AND ASSIGNMENT
19.1 SUBLETTING AND ASSIGNMENT. Lessee may not,
without the prior written consent of Lessor, which consent may be withheld
in Lessor's sole and absolute discretion, assign or pledge all or any portion
of its interest in this Lease or any of the other Lease Documents (whether
by operation of law or otherwise) or sublet all or any part of the Leased
Property. For purposes of this Section 19.1, the term "assign" shall be
deemed to include, but not be limited to, any one or more sales, pledges,
hypothecations or other transfers (including, without limitation, any transfer
by operation of law) of any of the capital stock of or partnership interest in
Lessee or sales, pledges, hypothecations or other transfers (including,
without limitation, any transfer by operation of law) of the capital or the
assets of Lessee. Any such assignment, pledge, sale, hypothecation or other
transfer made without Lessor's consent shall be void and of no force and
effect. Notwithstanding the foregoing, Lessors consent shall not be
unreasonably withheld with respect to an assignment or pledge of an
interest of Lessee in this Lease or a sublet of all or a part of the Leased
Property to a Meditrust/Emeritus Transaction Affiliate.
19.2 ATTORNMENT. Lessee shall insert in each Sublease
approved by Lessor, provisions to the effect that (a) such Sublease is
subject and subordinate to all of the terms and provisions of this Lease and
to the rights of Lessor hereunder, (b) in the event this Lease shall terminate
before the expiration of such Sublease, the Sublessee thereunder will, at
Lessor's option, attorn to Lessor and waive any right the Sublessee may
have to terminate the Sublease or to surrender possession thereunder, as a
result of the termination of this Lease and (c) in the event the Sublessee
receives a written notice from Lessor stating that Lessee is in default under
this Lease, the Sublessee shall thereafter be obligated to pay all rentals
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accruing under said Sublease directly to Lessor or as Lessor may direct. All
rentals received from the Sublessee by Lessor shall be credited against the
amounts owing by Lessee under this Lease.
ARTICLE 20
TITLE TRANSFERS AND LIENS GRANTED BY LESSOR
20.1 NO MERGER OF TITLE. Except as otherwise provided
in Section 18.3.10, there shall be no merger of this Lease or of the leasehold
estate created hereby with the fee estate in the Leased Property by reason of
the fact that the same Person may acquire, own or hold, directly or
indirectly (a) this Lease or the leasehold estate created hereby or any
interest in this Lease or such leasehold estate and (b) the fee estate in the
Leased Property.
20.2 TRANSFERS BY LESSOR. If the original Lessor named
herein or any successor in interest shall convey the Leased Property in
accordance with the terms hereof, other than as security for a debt, and the
grantee or transferee of the Leased Property shall expressly assume all
obligations of Lessor hereunder arising or accruing from and after the date
of such conveyance or transfer, the original Lessor named herein or the
applicable successor in interest so conveying the Leased Property shall
thereupon be released from all future liabilities and obligations of Lessor
under this Lease arising or accruing from and after the date of such
conveyance or other transfer as to the Leased Property and all such future
liabilities and obligations shall thereupon be binding upon the new owner.
20.3 LESSOR MAY GRANT LIENS. Without the consent of
Lessee, but subject to the terms and conditions set forth below in this
Section 20.3, Lessor may, from time to time, directly or indirectly, create or
otherwise cause to exist any lien, encumbrance or title retention agreement
upon the Leased Property or any interest therein ("Encumbrance"), whether
to secure any borrowing or other means of financing or refinancing,
provided that Lessee shall have no obligation to make payments under such
Encumbrances. Lessee shall subordinate this Lease to the lien of any such
Encumbrance, on the condition that the beneficiary or holder of such
Encumbrance executes a non-disturbance agreement in conformity with the
provisions of Section 20.4. To the extent that any such Encumbrance
consists of a mortgage or deed of trust on Lessor's interest in the Leased
Property the same shall be referred to herein as a "Fee Mortgage" and the
holder thereof shall be referred to herein as a "Fee Mortgagee".
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20.4 SUBORDINATION AND NON-DISTURBANCE.
Concurrently with the execution and delivery of any Fee Mortgage entered
into after the date hereof, provided that the Lessee executes and delivers an
agreement of the type described in the following paragraph, Lessor shall
obtain and deliver to Lessee an agreement by the holder of such Fee
Mortgage, pursuant to which, (a) the applicable Fee Mortgagee consents to
this Lease and (b) agrees that, notwithstanding the terms of the applicable
Fee Mortgage held by such Fee Mortgagee, or any default, expiration,
termination, foreclosure, sale, entry or other act or omission under or
pursuant to such Fee Mortgage or a transfer in lieu of foreclosure, (i) Lessee
shall not be disturbed in peaceful enjoyment of the Leased Property nor
shall this Lease be terminated or cancelled at any time, except in the event
that Lessor shall have the right to terminate this Lease under the terms and
provisions expressly set forth herein, (ii) Lessee's option to purchase the
Leased Property shall remain in force and effect pursuant to the terms
hereof and (iii) in the event that Lessee elects its option to purchase the
Leased Property and performs all of its obligations hereunder in connection
with any such election, the holder of the Fee Mortgage shall release its Fee
Mortgage upon payment by Lessee of the purchase price required
hereunder, provided, that (1) such purchase price is paid to the holder of the
Fee Mortgage, in the event that the Indebtedness secured by the applicable
Fee Mortgage is equal to or greater than the purchase price or (2) in the
event that the purchase price is greater than the Indebtedness secured by the
Fee Mortgage, a portion of the purchase price equal to the Indebtedness
secured by the Fee Mortgage is paid to the Fee Mortgagee and the
remainder of the purchase price is paid to Lessor.
At the request from time to time by any Fee Mortgagee, Lessee
shall (a) subordinate this Lease and all of Lessee's rights and estate
hereunder to the Fee Mortgage held by such Fee Mortgagee and (b) agree
that Lessee will attorn to and recognize such Fee Mortgagee or the
purchaser at any foreclosure sale or any sale under a power of sale
contained in any such Fee Mortgage as Lessor under this Lease for the
balance of the Term then remaining. To effect the intent and purpose of the
immediately preceding sentence, Lessee agrees to execute and deliver such
instruments in recordable from as are reasonably requested by Lessor or the
applicable Fee Mortgagee; provided, however, that such Fee Mortgagee
simultaneously executes, delivers and records a written agreement of the
type described in the preceding paragraph.
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ARTICLE 21
LESSOR OBLIGATIONS
21.1 QUIET ENJOYMENT. As long as Lessee shall pay all
Rent and all other sums due under any of the Lease Documents as the same
become due and shall fully comply with all of the terms of this Lease and
the other Lease Documents and fully perform its obligations thereunder,
Lessee shall peaceably and quietly have, hold and enjoy the Leased
Property throughout the Term, free of any claim or other action by Lessor
or anyone claiming by, through or under Lessor, but subject to all the
Permitted Encumbrances and such Liens as may hereafter be consented to
by Lessee. No failure by Lessor to comply with the foregoing covenant
shall give Lessee any right to cancel or terminate this Lease, or to fail to
perform any other sum payable under this Lease, or to fail to perform any
other obligation of Lessee hereunder. Notwithstanding the foregoing,
Lessee shall have the right by separate and independent action to pursue
any claim it may have against Lessor as a result of a breach by Lessor of the
covenant of quiet enjoyment contained in this Article 21.
21.2 MEMORANDUM OF LEASE. Lessor and Lessee shall,
promptly upon the request of either, enter into a short form memorandum of
this Lease, in form suitable for recording under the laws of the State, in
which reference to this Lease and all options contained herein shall be
made. Lessee shall pay all recording costs and taxes associated therewith.
21.3 DEFAULT BY LESSOR. Lessor shall be in default of its
obligations under this Lease only if Lessor shall fail to observe or perform
any term, covenant or condition of this Lease on its part to be performed
and such failure shall continue for a period of thirty (30) days after notice
thereof from Lessee (or such shorter time as may be necessary in order to
protect the health or welfare of any residents of the Facility or to ensure the
continuing compliance of the Facility with applicable Legal Requirements),
unless such failure cannot with due diligence be cured within a period of
thirty (30) days, in which case such failure shall not be deemed to continue
if Lessor, within said thirty (30) day period, proceeds promptly and with
due diligence to cure the failure and diligently completes the curing thereof
within one hundred twenty (120) days after notice thereof.
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ARTICLE 22
NOTICES
Any notice, request, demand, statement or consent made hereunder
or under any of the other Lease Documents shall be in writing and shall be
deemed duly given if personally delivered, sent by certified mail, return
receipt requested, or sent by a nationally recognized commercial overnight
delivery service with provision for a receipt, postage or delivery charges
prepaid, and shall be deemed given when so personally delivered, three (3)
business days following the date postmarked or the next business day when
placed in the possession of such mail delivery service and addressed as
follows:
If to Lessee: c/o Emeritus Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Chief
Executive Officer
With a copy to: The ▇▇▇▇▇▇▇▇▇ Group
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esquire
If to the Guarantor: Emeritus Corporation
Market Place One
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Chief
Executive Officer
With a copy to: The ▇▇▇▇▇▇▇▇▇ Group
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esquire
If to Lessor: Meditrust Acquisition Corporation I
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: President
With copies to: Meditrust Acquisition Corporation I
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: General Counsel
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and Mintz, Levin, Cohn, Ferris, Glovsky
and Popeo, P.C.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇, Esquire
or such other address as Lessor, Lessee or the Guarantor shall hereinafter
from time to time designate by a written notice to the others given in such
manner. Any notice given to Lessee or the Guarantor by Lessor at any time
shall not imply that such notice or any further or similar notice was or is
required.
ARTICLE 23
LIMITATION OF MEDITRUST LIABILITY
The Declaration of Trust establishing the sole shareholder of
Lessor, Meditrust, a Massachusetts business trust ("Meditrust"), dated
August 6, 1985 (the "Declaration"), as amended, a copy of which is duly
filed in the office of the Secretary of State of the Commonwealth of
Massachusetts, provides that the name "Meditrust" refers to the trustees
under the Declaration collectively as trustees, but not individually or
personally; and that no trustee, officer, shareholder, employee or agent of
Meditrust or any of its Subsidiaries shall be held to any personal liability,
jointly, or severally, for any obligation of, or claim against Meditrust or any
of its Subsidiaries. All Persons dealing with Meditrust or Lessor, in any
way, shall look only to the assets of Meditrust or Lessor, as applicable, for
the payment of any sum or the performance of any obligation.
Furthermore, in no event shall Meditrust or Lessor ever be liable to Lessee
or any other Person for any indirect or consequential damages incurred by
Lessee or such other Person resulting from any cause whatsoever.
Notwithstanding the foregoing, Lessee hereby acknowledges and agrees
that Meditrust is not a party to this Lease and that Lessee shall look only to
the assets of Lessor for the payment of any sum or performance of any
obligation due by or from Lessor pursuant to the terms and provisions of
the Lease Documents.
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ARTICLE 24
MISCELLANEOUS PROVISIONS
24.1 BROKER'S FEE INDEMNIFICATION. Lessee and
Lessor each shall and hereby agrees to indemnify, defend (with counsel
acceptable to the other) and hold the other harmless from and against any
and all claims for premiums or other charges, finder's fees, taxes, brokerage
fees or commissions and other similar compensation due to a broker or
finder allegedly employed or retained by it in connection with any of the
transactions contemplated by the Lease Documents. Notwithstanding the
foregoing, the indemnified party shall have the option of conducting its
own defense against any such claims with counsel of such party's choice,
but at the expense of the indemnifying party, as aforesaid. This
indemnification shall include all reasonable attorneys' fees and expenses
and court costs reasonably incurred by the indemnified party in connection
with the defense against any such claims and the enforcement of this
indemnification agreement and shall survive the termination of this Lease.
24.2 NO JOINT VENTURE OR PARTNERSHIP. Neither
anything contained in any of the Lease Documents, nor the acts of the
parties hereto, shall create, or be construed to create, a partnership or joint
venture between Lessor and Lessee. Lessee is not the agent or
representative of Lessor and nothing contained herein or in any of the other
Lease Documents shall make, or be construed to make, Lessor liable to any
Person for goods delivered to Lessee, services performed with respect to the
Leased Property at the direction of Lessee or for debts or claims accruing
against Lessee.
24.3 AMENDMENTS, WAIVERS AND MODIFICATIONS.
None of the terms, covenants, conditions, warranties or representations
contained in this Lease or in any of the other Lease Documents may be
renewed, replaced, amended, modified, extended, substituted, revised,
waived, consolidated or terminated except by an agreement in writing
signed by all parties to this Lease or the other Lease Documents, as the case
may be, in the case of any renewal, replacement, amendment, modification,
extension, substitution, revisions, consolidation or termination and by the
Person against whom enforcement is sought in the case of a waiver or
except as otherwise expressly provided for herein or in any other Lease
Document. The provisions of this Lease and the other Lease Documents
shall extend and be applicable to all renewals, replacements, amendments,
extensions, substitutions, revisions, consolidations and modifications of any
of the Lease Documents, the Management Agreements, the Related Party
Agreements, the Permits and/or the Contracts. References herein and in the
other Lease Documents to any of the Lease Documents, the Management
Agreements, the Related Party Agreements, the Permits and/or the
Contracts shall be deemed to include any renewals, replacements,
amendments, extensions, substitutions, revisions, consolidations or
modifications thereof.
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Notwithstanding the foregoing, any reference contained in any of
the Lease Documents, whether express or implied, to any renewal,
replacement, amendment, extension, substitution, revisions, consolidation
or modification of any of the Lease Documents or any Management
Agreement, Related Party Agreement, Permit and/or the Contract is not
intended to constitute an agreement or consent by Lessor to any such
renewal, replacement, amendment, substitution, revision, consolidation or
modification; but, rather as a reference only to those instances where Lessor
may give, agree or consent to any such renewal, replacement, amendment,
extension, substitution, revision, consolidation or modification as the same
may be required pursuant to the terms, covenants and conditions of any of
the Lease Documents.
24.4 CAPTIONS AND HEADINGS. The captions and
headings set forth in this Lease and each of the other Lease Documents are
included for convenience and reference only, and the words contained
therein shall in no way be held or deemed to define, limit, describe, explain,
modify, amplify or add to the interpretation, construction or meaning of, or
the scope or intent of, this Lease, any of the other Lease Documents or any
parts hereof or thereof.
24.5 TIME IS OF THE ESSENCE. Time is of essence of each
and every term, condition, covenant and warranty set forth herein and in the
other Lease Documents.
24.6 COUNTERPARTS. This Lease and the other Lease
Documents may be executed in one or more counterparts, each of which
taken together shall constitute an original and all of which shall constitute
one in the same instrument.
24.7 ENTIRE AGREEMENT. This Lease and the other Lease
Documents set forth the entire agreement of the parties with respect to the
subject matter and shall supersede in all respect the letter of intent, dated
January 31, 1996 (and all prior iterations thereof), from Meditrust to
Lessee.
24.8 WAIVER OF JURY TRIAL. TO THE MAXIMUM
EXTENT PERMITTED BY APPLICABLE LAW, LESSOR AND
LESSEE HEREBY MUTUALLY, KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT WHICH ANY PARTY
HERETO MAY NOW OR HEREAFTER HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THE LEASE OR ANY OF THE LEASE
DOCUMENTS. Lessee hereby certifies that neither Lessor nor any of
Lessor's representatives, agents or counsel has represented expressly or
otherwise that Lessor would not, in the event of any such suit, action or
proceeding seek to enforce this waiver to the right of trial by jury and
acknowledges that Lessor has been induced by this waiver (among other
things) to enter into the transactions evidenced by this Lease and the other
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Lease Documents and further acknowledges that Lessee (a) has read the
provisions of this Lease, and in particular, the paragraph containing this
waiver, (b) has consulted legal counsel, (c) understands the rights that it is
granting in this Lease and the rights that it waiving in this paragraph in
particular and (d) makes the waivers set forth herein knowingly, voluntarily
and intentionally.
24.9 SUCCESSORS AND ASSIGNS. This Lease and the
other Lease Documents shall be binding upon and inure to the benefit of (a)
Lessee and Lessee's legal representatives and permitted successors and
assigns and (b) Lessor and any other Person who may now or hereafter hold
the interest of Lessor under this Lease and their respective successors and
assigns.
24.10 NO THIRD PARTY BENEFICIARIES. This Lease and
the other Lease Documents are solely for the benefit of Lessor, its
successors, assigns and participants (if any), the Meditrust Entities, Lessee,
the Guarantor, the other members of the Leasing Group and their respective
permitted successors and assigns, and, except as otherwise expressly set
forth in any of the Lease Documents, nothing contained therein shall confer
upon any Person other than such parties any right to insist upon or to
enforce the performance or observance of any of the obligations contained
therein. All conditions to the obligations of Lessor to advance or make
available proceeds of insurance or Awards, or to release any deposits held
for Impositions or insurance premiums are imposed solely and exclusively
for the benefit of Lessor, its successors and assigns. No other Person shall
have standing to require satisfaction of such conditions in accordance with
their terms, and no other Person shall, under any circumstances, be a
beneficiary of such conditions, any or all of which may be freely waived in
whole or in part by Lessor at any time, if, in Lessor's sole and absolute
discretion, Lessor deems it advisable or desirable to do so.
24.11 GOVERNING LAW. This Lease shall be construed and
the rights and obligations of Lessor and Lessee shall be determined in
accordance with the laws of the State.
Lessee hereby consents to personal jurisdiction in the courts of the
State and the United States District Court for the District in which the
Leased Property is situated as well as to the jurisdiction of all courts from
which an appeal may be taken from the aforesaid courts, for the purpose of
any suit, action or other proceeding arising out of or with respect to any of
the Lease Documents, the negotiation and/or consummation of the
transactions evidenced by the Lease Documents, the Lessor's relationship of
any member of the Leasing Group in connection with the transactions
evidenced by the Lease Documents and/or the performance of any
obligation or the exercise of any remedy under any of the Lease Documents
and expressly waives any and all objections Lessee may have as to venue in
any of such courts.
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24.12 GENERAL. Anything contained in this Lease to the
contrary notwithstanding, all claims against, and liabilities of, Lessee or
Lessor arising prior to any date of termination of this Lease or any of the
other Lease Documents shall survive such termination.
If any provision of this Lease or any of the other Lease Documents
or any application thereof shall be invalid or unenforceable, the remainder
of this Lease or the other applicable Lease Document, as the case may be,
and any other application of such term or provision shall not be affected
thereby. Notwithstanding the foregoing, it is the intention of the parties
hereto that if any provision of any of this Lease is capable of two (2)
constructions, one of which would render the provision void and the other
of which would render the provision valid, then such provision shall be
construed in accordance with the construction which renders such provision
valid.
If any late charges provided for in any provision of this Lease or
any of the other Lease Documents are based upon a rate in excess of the
maximum rate permitted by applicable law, the parties agree that such
charges shall be fixed at the maximum permissible rate.
Lessee waives all presentments, demands for performance, notices
of nonperformance, protests, notices of protest, notices of dishonor, and
notices of acceptance and waives all notices of the existence, creation, or
incurring of new or additional obligations, except as to all of the foregoing
as expressly provided for herein.
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ARTICLE 25
SUBSTITUTION OF PROPERTY
25.1 SUBSTITUTION OF PROPERTY FOR THE LEASED
PROPERTY. Provided that no Event of Default has occurred under this
Lease (excluding any Event of Default which has been waived, in writing,
by the Lessor), nor any event which, with the giving of notice or the
passage of time or both, would constitute such an Event of Default, Lessee
shall have the right from time to time (referred to herein as the "Substitution
Right"), exercisable upon not less than ninety (90) days' prior written notice
to Lessor (referred to herein as a "Substitution Notice") to substitute, on a
date specified in such Substitution Notice (such date, as the same may be
extended by express written agreement of lessor, shall be referred to herein
as a "Substitution Date"), the Leased Property with a Comparable Facility.
As used herein, the term "Comparable Facility" shall be defined as a health
care facility or facilities which Lessor determines (a) has an appraised Fair
Market Value greater than or equal to the greater of (i) the appraised Fair
Market Value of the Leased Property as of the Completion Date or (ii) the
appraised Fair Market Value of the Leased Property at the time that the
applicable Substitution Notice is furnished to Lessor (based on appraisal
criteria then in effect), (b) has a Facility Debt Coverage Ratio greater than
or equal to the greater of (i) the Facility Debt Coverage Ratio of the Leased
Property as of the Commencement Date, (ii) the Facility Debt Coverage
Ratio of the Leased Property at the time that the applicable Substitution
Notice is furnished to Lessor, (c) provides a mix of services similar to the
Leased Property and (d) is otherwise reasonably acceptable, in all respects,
to Lessor (based on Lessor's usual and customary property evaluation
criteria then in effect). Lessee may not exercise its Substitution Right more
than once in any calendar year.
25.2 CONDITIONS TO SUBSTITUTION. Without limiting
the foregoing, as conditions precedent to the consummation of any
proposed substitution:
(a) as of the applicable Substitution Date, no Event of Default
shall have occurred under the Lease (excluding any Event of Default which
has been waived, in writing, by Lessor), nor any event which with the
giving of notice or the passage of time or both would constitute such an
Event of Default;
(b) Lessor shall have received engineering and inspection
reports relating to the assisted living facility identified by Lessee in the
applicable Substitution Notice (referred to herein as a "Proposed Facility"),
reasonably satisfactory in all respects to Lessor;
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(c) Lessee shall have delivered to Lessor (i) an MAI appraisal
of the Proposed Facility (prepared by an appraiser selected by Lessee and
approved by Lessor), in form and substance reasonably satisfactory to
Lessor and (ii) an instrument survey of the premises upon which the
Proposed Facility is located acceptable to Lessor and the title insurance
company providing insurance with respect to the Proposed Facility;
(d) Lessor shall be satisfied as to compliance of Lessee, the
Proposed Facility, the owner of the Proposed Facility (to the extent such
owner is not Lessee as provided in subsection (l) below) and/or the
proposed substitution, as the case may be, with (i) all applicable land use,
zoning, subdivision and environmental laws and regulations, (ii) all
applicable assisted living licensure laws and regulations and (iii) such other
matters as Lessor reasonably deems relevant (including, without limitation,
whether the conveyance of the property to Lessor in connection with the
proposed substitution may be avoided under the Bankruptcy Code);
(e) Lessee shall have delivered to Lessor a valid and binding
owner's or lessee's (as applicable) title insurance commitment issued by a
title insurer reasonably acceptable to Lessor (the "Title Company"), in an
amount equal to the Fair Market Value of the Proposed Facility, with such
endorsements and affirmative coverages, and in such form, as Lessor may
reasonably require insuring Lessor's fee title or leasehold title to the
Proposed Facility, subject to no Liens except those approved or assumed by
Lessor and arrangements satisfactory to Lessor shall have been made for the
issuance of a title insurance policy on the Substitution Date in accordance
with such title insurance commitment;
(f) Lessee shall have delivered an environmental site
assessment report relating to the Proposed Facility, in form and substance
reasonably acceptable to Lessor and prepared by an environmental
consultant reasonably acceptable to Lessor;
(g) Lessor shall have obtained, at Lessee's cost, an opinion of
Lessor's counsel, in form and substance acceptable to Lessor, confirming
that (i) the substitution of the Proposed Facility for the Leased Property will
qualify as an exchange solely of property of a like-kind under Section 1031
of the Code, in which, generally, except for "boot" such as cash needed to
equalize exchange values or discharge indebtedness, no gain or loss is
recognized to Lessor, (ii) the substitution or sale will not result in ordinary
recapture income to Lessor pursuant to Code Section 1250(d)(4) or any
other Code provision, (iii) the substitution or sale will result in income, if
any, to Lessor of a type described in Code Section 856(c)(2) or (3) and will
not result in income of the types described in Code Section 856(c)(4) or
result in the tax imposed under Code Section 857(b)(6) and (iv) the
substitution or sale, together with all other substitutions and sales made or
requested by Lessee or any Affiliate of Lessee or of any Guarantor pursuant
to any other leases with Lessor (or any of its Affiliates) or any other
128
transfers of the Leased Property or the properties leased under other such
leases, during the relevant time period, will not jeopardize the qualification
of Lessor as a real estate investment trust under Code Sections 856-860;
(h) Lessor shall have received opinions of Lessee's counsel as
to (i) the compliance of the Proposed Facility with land use, zoning,
subdivision and environmental laws and regulations, (ii) the compliance of
Lessee, the owner of the Proposed Facility (to the extent such owner is not
Lessee as provided in subsection (l) below), the proposed substitution and
the Proposed Facility with applicable assisted living laws and regulations,
(iii) the due authorization, execution and enforceability of the Substitution
Documents and (iv) such other matters as are reasonably requested; in form
and substance reasonably acceptable to Lessor;
(i) Lessee and each Guarantor shall have executed and
delivered, or caused to be executed and delivered, such documents as are
reasonably required by Lessor to effectuate the substitution (collectively,
the "Substitution Documents"), including, without limitation, (i) a deed with
full warranties or assignment of a leasehold estate with full warranties (as
applicable) conveying to Lessor title to the Proposed Facility free and clear
of all Liens, except those approved or assumed by Lessor, (ii) a facility
lease (the "Substitution Lease") duly executed, acknowledged and delivered
by Lessee, containing the same terms and conditions as are contained herein
except that (1) the legal description of the land shall refer to the Proposed
Facility, (2) the Minimum Repurchase Price of the Proposed Facility shall
be an amount equal to the Minimum Repurchase Price of the Leased
Property increased by any Cash Adjustment paid by Lessor, (3) the Rent
under the Substitution Lease in all respects shall provide Lessor with a
substantially equivalent yield at the time of the substitution (i.e., annual
return on its equity in such Proposed Facility) to that received (and
reasonably expected to be received thereafter) from the Leased Property,
taking into account the Cash Adjustment, if any, paid by Lessor and any
other relevant factors and (4) such other changes therein as may be
necessary or appropriate under the circumstances shall be made; (iii) a
collateral assignment of permits, licenses, approvals and contracts relating
to the Proposed Facility, substantially in the form of the Permits
Assignment; (iv) UCC financing statements; (v) a guaranty substantially in
the form of the Guaranty of Lease Obligations shall be executed by
Guarantor, (vi) an affiliated party subordination agreement, substantially in
the form of the Affiliated Party Subordination Agreement, shall be executed
by the Lessee, and such other Affiliates of the Lessee as are deemed
necessary or appropriate by the Lessor and (vii) the Agreement Regarding
Related Transactions shall be amended to reflect the substitution of the
Proposed Facility. The Substitution Documents shall be based upon and
contain the same terms and conditions as are set forth in Lessee Documents
in effect prior to the substitution, except that such changes shall be made as
may be necessary or reasonably appropriate under the circumstances to
effectuate the substitution and secure the protection and priority of the
property and security interests conveyed and/or granted to Lessor;
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(j) without limiting any other provision contained herein,
Lessee shall have delivered to Lessor such other information and materials
relating to Lessee, the owner of the Proposed Facility (to the extent that
such owner is not Lessee as provided in subsection (l) below) and the
Proposed Facility as Lessor may reasonably request, including, without
limitation, leases, receipted bills, management agreements and other
Contracts, Provider Agreements, cost reports, Permits, evidence of legal
and actual access to the Proposed Facility, evidence of the availability and
sufficiency of utilities servicing the Proposed Facility, historical and current
operating statements, detailed budgets and financial statements and Lessor
shall have found the same to be satisfactory in all respects;
(k) Lessee or an Affiliate of Lessee shall be the licensed
operator of the Proposed Facility as of the date of the consummation of the
substitution;
(l) the Proposed Facility shall be owned or leased by Lessee
or an Affiliate of Lessee; provided, however that in the event that the
Proposed Facility is owned by any such Affiliate, (i) said Affiliate shall
execute and deliver to Lessor such Substitution Documents as may be
reasonably required by Lessor and (ii) Lessor shall be provided with such
evidence as it may require to determine that the conveyance of the Proposed
Facility (or a leasehold interest therein) to Lessor does not constitute a
fraudulent conveyance (under applicable federal or state law);
(m) Lessee shall have delivered to Lessor an insurance
certificate evidencing compliance with all of the insurance requirements set
forth in the Substitution Documents;
(n) Lessee shall have delivered to Lessor an Officer's
Certificate certifying as of the Substitution Date that (i) the Proposed
Facility has been accepted by Lessee for all purposes of the Substitution
Lease and there has been no material damage to the improvements located
on the Proposed Facility, nor is any condemnation or eminent domain
proceeding pending with respect thereto; (ii) all Permits (including, but not
limited to, a permanent, unconditional certificate of occupancy and all
certificates of need, licenses and Provider Agreements) which are necessary
to permit the use of the Proposed Facility in accordance with the provisions
of the Substitution Lease have been obtained and are in full force and
effect; (iii) under applicable zoning and use laws, ordinances, rules and
regulations, the Proposed Facility may be used for the purposes
contemplated by Substitution Documents and all necessary subdivision
approvals have been obtained; (iv) to the best knowledge of Lessee, there
exists no Event of Default under this Lease, and no defense, offset or claim
exists with respect to any sums to be paid by Lessee hereunder, and (v) any
exceptions to Lessor's title to the Proposed Facility do not materially
interfere with the intended use of the Proposed Facility by Lessee;
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(o) Lessor shall have determined that the Proposed Facility
constitutes a Comparable Facility, and
(p) Lessor shall have received all Rent due and payable
hereunder through the Substitution Date.
In the event that the equity value of the Proposed Facility (i.e., the
Fair Market Value of the Proposed Facility minus the Liens to which Lessor
will take the Proposed Facility subject) as of the Substitution Date is greater
than the equity value of the Leased Property (i.e., the Fair Market Value of
the Leased Property minus the Liens to which Lessee will take the Leased
Property subject other than those Liens which Lessee is obligated to pay or
discharge pursuant to the terms of this Lease) as of the Substitution Date,
subject to the limitation set forth below, Lessor shall pay an amount equal
to the difference to Lessee; provided, however, that Lessor shall not be
obligated to consummate such substitution if Lessor would be required to
make a payment to Lessee of an amount equal to or in excess of fifteen
percent (15%) of said Fair Market Value of the Leased Property (the
amount of cash paid by Lessor to Lessee being referred to herein as the
"Cash Adjustment"). Without limiting the generality or effect of the
preceding sentence, in the event that, on the Substitution Date, Lessor is
obligated to pay a Cash Adjustment to Lessee and Lessor does not have
sufficient funds available, or elects not to make such payment in cash,
Lessor shall provide Lessee with (and Lessee shall accept) a purchase
money note and mortgage for a term not to exceed eighteen (18) months
from the Substitution Date and bearing interest, payable monthly, at the rate
described in Section 10.2.
25.3 CONVEYANCE TO LESSEE. If the Lessor shall have
determined that the Proposed Facility constitutes a Comparable Facility, on
the Substitution Date, after the consummation of a substitution in
accordance with the terms hereof, Lessor will convey the Leased Property
to Lessee in accordance with the provisions of Article 18 (except as to
payment of any expenses in connection therewith which shall be governed
by Section 22.4 below) and this Lease shall thereupon terminate as to the
Leased Property. Upon completion of the purchase of the Leased Property,
no Rent shall thereafter accrue with respect thereto.
25.4 EXPENSES. Whether or not any proposed substitution is
consummated, Lessee shall pay all of the out-of-pocket expenses and other
costs incurred or expended by Lessor in connection with any proposed
substitution (collectively referred to herein as "Substitution Closing Costs"),
including, without limitation, reasonable attorneys' fees and expenses,
engineering costs, consultants' fees, appraisal costs, audit and tax review
costs, out-of-pocket travel expenses, inspection fees, title insurance
premiums and other title fees, survey expenses, mortgage taxes, transfer,
documentary stamp and other taxes, search charges of any nature,
recording, registration and filing costs, broker's fees and commissions, if
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any, escrow fees, fees and expenses, if any, incurred in qualifying Lessor
and maintaining its right to do business in the state where the Proposed
Facility is located, the cost of obtaining, preparing and recording a release
of the Leased Property from the lien of any Fee Mortgage on the Facility
(other than the amount necessary to payoff such Fee Mortgage) and any
other costs expended or incurred by Lessor in connection with the
preparation for and the documentation and/or the closing of the proposed
substitution. The Substitution Closing Costs shall be a demand obligation of
Lessee to Lessor and, if not paid within ten (10) days after demand, shall
thereafter (to the extent permitted by applicable law) bear interest at the
Overdue Rate until the date of payment.
25.5 LIMITATION. In the event that Lessee exercises its right to
construct the Project pursuant to the Leasehold Improvement Agreement,
no Substitution Right may be exercised earlier than the fifth anniversary of
the Completion Date.
[INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have caused this Lease to be
executed and attested by their respective officers thereunto duly authorized.
WITNESS: LESSEE: EMERITUS PROPERTIES I,
INC., a Washington
corporation
/s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------- ------------------------
Name: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Secretary
WITNESS: LESSOR: MEDITRUST
ACQUISITION
CORPORATION I, a
Massachusetts corporation
/s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------- ---------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ESQ.
Title: Senior Vice President
133