▇▇▇▇▇ BalzerSusan ▇▇▇▇▇▇
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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 February 27,1998
For Premises Located At
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▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
FACILITY LEASE AGREEMENT
This FACILITY LEASE AGREEMENT ("Lease") is dated as of the
27th day of" Februazy,1998 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,
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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 benefiting
any or all of the Land and the Leased Improvements;
(d) all equipment, machinery, building fixtures, and other
items of property (whether realty, personalty or mixed),
including all components thereof, now or hereafter located
in, on or used in connection with, and permanently affixed
to or incorporated into the Leased Improvements, including,
without limitation, all furnaces, boilers, heaters,
electrical equipment, heating, plumbing, lighting,
ventilating, refrigerating, incineration, air and water
pollution control, waste disposal, air-cooling and air-
conditioning systems and apparatus, sprinkler systems and
fire and theft protection equipment, and built-in oxygen and
vacuum systems, all of which, to the greatest extent
permitted by law, are hereby deemed by the parties hereto to
constitute real estate, together with all replacements,
modifications, alterations and additions thereto, but
specifically excluding all items included within the
category of Tangible Personal Property (as hereinafter
defined) which are not permanently affixed to or
incorporated in the Leased Property (collectively, the
"Fixtures"); and
1
(e) Lessor's Personal Property.
The Leased Property is leased in its present condition, AS
IS, without representation or warranty of any kind, express
or implied, by Lessor and subject to: (i) the rights of
parties in possession; (ii) the existing state of title
including all covenants, conditions, Liens (as hereinafter
defined) and other matters of record (including, without
limitation, the matters set forth in EXHIBIT B); (iii) all
applicable laws and (iv) all matters, whether or not of a
similar nature, which would be disclosed by an inspection of
the Leased Property or by an accurate survey thereof.
1.2 Term. The term of this Lease shall consist of: the
"Initial Term", which shall commence on February 27,1998
("Commencement Date") and end on April 30, 2009 (the
"Expiration Date"); provided, however, that this Lease may
be sooner terminated as hereinafter provided. In addition,
Lessee shall have the option(s) to extend the Term (as
hereinafter defined) as provided for in Section 1.3.
1.3 Extended Terms. Provided that this Lease has not been
previously terminated, and as long as there exists no Lease
Default (as hereinafter defined) at the time of exercise and
on the last day of the Initial Term or the then current
Extended Term (as hereinafter defined, as the case may be,
Lessee is hereby granted the option to extend the Initial
Term of this Lease for four (4) additional periods
(collectively, the "Extended Terms") as follows: four (4)
successive five (5) year periods for a maximum Term, if all
such options are exercised, which ends on April 30, 2029.
Lessee's extension option rights shall be exercised by
Lessee by giving written notice to Lessor of each such
extension at least one hundred eighty (180) days, but not
more than three hundred sixty (360) days, prior to the
termination of the Initial Term or the then current Extended
Term, as the case may be. Lessee shall have no right to
rescind any such notice once given. Lessee may not exercise
its option for more than one Extended Term at a time. During
each effective Extended Term, all of the terms and
conditions of this Lease shall continue in full force and
effect, except that the Base Rent (as hereinafter defined)
for each such Extended Term shall be adjusted as set forth
in Section 3.1 (a).
Notwithstanding anything to the contrary set forth herein,
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 CONSTRITCTION 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 Bodv: 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 i.
Additional Land: As defined in Section 9. i.
Additional Rent: As defined in Article 3.
Additional Rent Commencement Date: As defined in Article.
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
mana5ement and policies of such Person, through the
ownership of voting securities, partnership interests or
other equity interests provided, however, that, (a) for
purposes of determining a Related Party Default, the
percentage of outstanding capital stock, shares or equity
interests referenced in (ii) above shall be fifty percent
(5O%) and (b) any Person who is an Affiliate by virtue of
the ownership thereofby
3
[▇▇▇▇▇▇ ▇. ▇▇▇▇] or his status therein as an officer or
director shall not be deemed an Affiliate for purposes of
determining a Related Party Default.
Affiliated Partner Subordination Agreement: That certain
Affiliated Party Subordination Agreement of even date by and
among Lessee, the Guarantor, various Affiliates of Lessee
and various Affiliates of Lessor.
Agreement Regarding Related Transactions: The Third Amended
and Restated Agreement Regarding Related Transactions
(Acquisition) dated 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.
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 March l,1999
through and including February 29, 2000 initially as shown
by Lessee's certified Consolidated Financial Statements and
as later verified by Lessee's. Consolidated Financial
Statements.
4
Base Rent: As defined in Section i.1.
Business Day: Any day which is not a Saturday or Sunday or a
public holiday under the laws of the United States of
America, the Commonwealth of Massachusetts, the State or the
state in which Lessor s depository bank is located.
Capital Additions: Collectively, all new buildings and
additional structures annexed to any portion of any of the
Leased Improvements and material expansions of any of the
Leased Improvements which are constructed on any portion of
the Land during the Term, including, without limitation, the
construction of a new wing or new story, the renovation of
any of the Leased Improvements on the Leased Property and
any expansion, construction, renovation or conversion in
connection therewith (a) in order to provide a functionally
new facility that is needed or used to provide services not
previously offered or (b) in order to (i) increase the bed
capacity of a Facility, (ii) change the purpose for which
such beds are utilized and/or (iii) change the utilization
of any material portion of any of the Leased Improvements.
Capital Addition Cost: The cost of any Capital Addition made
by Lessee whether paid for by Lessee or Lessor. Such cost
shall include all costs and expenses of every nature
whatsoever incurred directly or indirectly in connection
with the development, permitting, construction and financing
of a Capital Addition as reasonably determined by, or to the
reasonable satisfaction of, Lessor.
Cash Collateral: As defined in the Deposit Pledge Agreement.
Cash Flow: The Consolidated Net Income (or Consolidated Net
Loss) before federal and state income taxes for any period
plus (i) the amount of the provision for depreciation and
amortization actually deducted on the books of the
applicable Person for the purposes of computing such
Consolidated Net Income (or Consolidated Net Loss) for the
period involved, plus (ii) Rent and interest on all other
Indebtedness which is fully subordinated to the Lease
Obligations, plus (iii) any indebtedness which is fully
subordinated to the Lease Obligations pursuant to the
Affiliated Party Subordination Agreement or the Management
Subordination Agreement.
Casualty: As defined in Section l3.l.
Chattel Paper: As defined in the UCC.
Closing Date: As defined in Section 18.1.
Code: The Internal Revenue Code of 1986. as amended.
5
Collateral: All of the property in which security interests
are granted to Lessor and the other Meditrust Entities
pursuant to the Lease Documents and the Related Party
Agreements to secure the Lease Obligations, including,
without limitation, the Cash Collateral.
Competitive Activity: As defined in Section 11.5.
Condemnation: With respect to the Leased Property or any
interest therein or right accruing thereto or use thereof
(i) the exercise of any governmental authority, whether by
legal proceedings or otherwise, by a Condemnor or (ii) a
voluntary sale or transfer by Lessor to any Condemnor,
either under threat of Condemnation or Taking or while legal
proceedings for Condemnation or Taking are pending.
Condemnor: Any public or quasi-public authority, or private.
corporation or individual, having the power of condemnation.
Consolidated: The consolidated accounts of the relevant
Person and its Subsidiaries consolidated in accordance with
GAAP.
Consolidated Financials: For any fiscal year or other
accounting period for any Person and its consolidated
Subsidiaries, statements of earnings and retained earnings
and of changes in financial position for such period and for
the period from the beginning of the respective fiscal year
to the end of such period and the related balance sheet as
at the end of such period, together with the notes thereto,
all in reasonable detail and setting forth in comparative
form the corresponding figures for the corresponding period
in the preceding fiscal year, and prepared in accordance
with GAAP, and disclosing all liabilities of such Person and
its consolidated Subsidiaries, including, without
limitation, contingent liabilities.
Consultants: Collectively, the architects, engineers,
inspectors, surveyors and other consultants that are engaged
from time to time by Lessor to perform services for Lessor
in connection with this Lease.
Contracts: All agreements (including, without limitation,
Provider Agreements, to the extent applicable, and any
Residency Agreement), contracts (including without
limitation, construction contracts, subcontracts, and
architects' contracts), contract rights, warranties and
representations, franchises, and records and books of
account benefiting, relating to or affecting the Leased
Property or the ownership, construction, development,
maintenance, management, repair, use, occupancy, possession,
or operation thereof, or the operation of any programs or
services in conjunction with the Facility and all renewals,
replacement and substitutions therefor, now or hereafter
issued to any member of the Leasing Group by, or entered
into by any member 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.
6
Current Assets: All assets of any Person which would, in
accordance with GAAP, be
Current Liabilities: All liabilities of any Person which
would, in accordance with GAAP, be classified as current
liabilities.
Date of Taking: The date the Condemnor has the right to
possession of the property being condemned.
Debt Coverage Ratio: The ratio of (i) Cash Flow for each
applicable period to (ii) the total of all Rent (excluding
Additional Rent due under this Lease) paid or payable during
such period or accrued for such period.
Declaration: As defined in Article 23.
Deposit: As defined in Section 18.3.
Deposit Pledge Agreement: The pledge and security agreement
so captioned and dated as of even date herewith between
Lessee and Lessor.
Documents: As defined in the UCC.
Election Notice: As defined in Section 18.3.1.
Encumbrance: As defined in Section 20.3.
Environmental Indemnity Agreement: The Environmental
Indemnity Agreement of even date herewith by and among
Lessee the Guarantor and Lessor.
Environmental Laws: As defined in the Environmental
Indemnity Agreement.
ERISA: The Employment Retirement Income Security Act of
1974, as amended.
Event of Default: As defined in Article 16.
Excess Gross Revenues: Gross Revenues less Base Gross
Revenues.
Expiration Date: As defined in Section 1.2.
Extended Terms: As defined in Section 1.4.
Facility: The 71 unit fully licensed mixed assisted and
independent living facility known as Laurel Place on the
Land (together with related parking and other amenities).
7
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 or in
such other manner as shall be mutually acceptable to Lessor
and Lessee and (c) not taking into account any reduction in
value resulting from any Lien to which the Leased Property
is subject and which Lien Lessee or Lessor is otherwise
required to remove at or prior to closing of the
transaction. However, the positive or negative effect on the
value of the Leased Property attributable to the interest
rate, amortization schedule, maturity date, prepayment
provisions and other terms and conditions of any Lien on the
Leased Property which is not so required or agreed to be
removed shall be taken into account in determining the Fair
Market Value of the Leased Property. The Fair Market Value
shall be determined as the overall value based on due
consideration of the "income"
approach, the "comparable sales" approach, and the
"replacement cost" approach.
Fee Mortgage: As defined in Section ?0. i.
Fee Mortgagee: As defined in Section ?0.3.
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 1 st
to December 31st.
Fixtures: As defined in Article I.
8
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 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
governmental program imposed specially to provide or finance
indigent resident care (other than Medicare, Medicaid and
the like),
9
(vii) deposits refundable to residents of the Facility, and
(viii) payments received on behalf of, and paid to, Persons
who are not Affiliates of Lessee.
To the extent that the Leased Property is subleased or
occupied by an Affiliate of Lessee, Gross Revenues
calculated for all purposes of this Lease (including,
without limitation, the determination of the Additional Rent
payable under this Lease) shall include the Gross Revenues
of such Sublessee with respect to the premises demised under
the applicable Sublease (i.e., the Gross Revenues generated
from the operations conducted on such subleased portion of
the Leased Property) and the rent received or receivable
from such Sublessee pursuant to such Subleases shall be
excluded from Gross Revenues for all such purposes. As to
any Sublease between Lessee and a non-Affiliate of Lessee,
only the rental actually received by Lessee from such non-
Affiliate shall be included in Gross Revenues.
Group Four Acquisition Facilities: As defined in the
Agreement Regarding Related Transactions.
Guarantor: Emeritus Corporation, a Washington corporation,
and its successors and
assigns.
Guarantv of Lease Obligations: The Guaranty of Lease
Obligations of even date eY2CUI2d 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.
10
Notwithstanding the foregoing, nothing contained in this
Lease shall be construed to require Lessee to pay (1) any
tax based on net income (whether denominated as a franchise
or capital stock or other tax) imposed on Lessor or any
other Person, except lessee or its successors, (2) any net
revenue tax of Lessor or any other Person, except Lessee and
its successors, (3) any tax imposed with respect to the
sale, exchange or other disposition by Lessor of the Leased
Property or the proceeds thereof, or (4) except as expressly
provided elsewhere in this Lease, any principal or interest
on any Encumbrance on the Leased Property; provided,
however, the provisos set forth in clauses (1) and (2) of
this sentence shall not be applicable to the extent that any
real or personal property tax, assessment, tax levy or
charge which Lessee is obligated to pay pursuant to the
first sentence of this definition and which is in effect at
any time during the Term hereof is totally or partially
repealed, and a tax, assessment, tax levy or charge set
forth in clause (1) or (2) is levied, assessed or imposed
expressly in lieu thereof. In computing the amount of any
franchise tax or capital stock tax which may be or become an
Imposition, the amount payable by Lessee shall be equitably
apportioned based 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) a11 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.?.
Index: The rate of interest of actively traded marketable
United States Treasury Securities bearing a fixed rate of
interest adjusted for a constant maturity often (10) years
as calculated by the Federal Reserve Board.
Initial Term: As defined in Section 1.2.
Instruments: As defined in the UCC.
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.
11
Lease: As defined in the preamble of this Lease.
Lease Default: The occurrence of any default or breach of
condition continuing beyond any applicable notice and/or
grace periods under this Lease and/or any of the other Lease
Documents.
Lease Documents: Collectively, this Lease, the Guaranty of
Lease Obligations, the Agreement Regarding Related
Transactions, the Security Agreement, the Deposit Pledge
Agreement, the Negative Pledge Agreement, the Permits
Assignment, the Financing Statements, the Affiliated Party
Subordination Agreement, the Environmental Indemnity
Agreement and any and all other instruments, documents,
certificates or agreements executed or furnished by any
member of the Leasing Group in connection with the
transactions evidenced by the Lease and/or any of the
foregoing documents.
Lease Obligations: Collectively, all indebtedness,
covenants, liabilities, obligations, agreements and
undertakings (other than Lessor's obligations) under this
Lease and the other Lease Documents.
Lease Year: A twelve month period ending on February 28 of
each year (except Leap Year's in which event the ending date
shall be February 29); provided, that the first Lease Year
shall begin on the Commencement Date and shall end on
February 28,1999 and the final Lease Year shall end at the
end of the Term.
Leased Improvements: As defined in Article 1.
Leased Property: As defined in Article 1.
Leasing Commitment Fee: None.
Leasing Group: Collectively, Lessee, the Guarantor, any
Sublessee which is an Affiliate of Lessee and any Manager
which is an Affiliate of Lessee.
Legal Requirements: Collectively, all statutes, ordinances,
by-laws, codes, rules, regulations, restrictions, orders,
judgments, decrees and injunctions (including, without
limitation, all applicable building, health code, zonin5,
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,
12
Substances on, under or from the Leased Property. Without
limiting the foregoing, the term Legal Requirements includes
all Environmental Laws and shall also include ali Permits
and Contracts issued or entered into by any Governmental
Authority, ariy Accreditatinn Body and/or
Lessee: As defined in the preamble ofthis Lease and its
successors and assigns.
Lessee's Election Nntice: As defined in Section 14.3.
Lessnr: As defined in the preamble ofthis Lease and its
successors and assigns.
Lessnr's Personal Prnpertv: All machinery, equipment,
furniture, furnishings, movable walls or partitions,
computers or trade fixtures, goods, inventory, supplies, and
other personal property owned by Lessor and used in the
operation ofthe Leased Property.
Lien: With respect to any real or personal property, any
mortgage, easement, restriction, lien, pledge, collateral
assignment, hypothecation, charge, security interest, title
retention agreement, levy, execution, seizure, attachment,
garnishment or other encumbrance of any kind in respect of
such property, whether or not inchoate, vested or
perfected.
Limited Parties: As defined in Section 11.4; 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.
Manaaed Care Plans: All health maintenance organizations,
preferred provider oraanizations, individual practice
associations, competitive medical plans, and similar
arrangements.
Manaaement Aareement: Any agreement, whether written or
oral, between Lessee or anv 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.
Nlinaaement Subordinatinn Agareement: The Management
Subordination Agreement between Lessee and Lessor.
IVlanager: Any Person who has entered into a Management
Agreement with Lessee or anv Sublessee.
vlaterial Structural Vnrk: Any (i) structural alteration,
(ii) stnzctural repair or (iii) structural renovation to the
Leased Property, which would customarily require or which
require the design and/or involvement ofa structural
engineer or architect or which would require the issuance of
a Permit.
l3
II
vledicaid: The medical assistance program established by
Title XIX ofthe Social Security Act
and any statute succeeding thereto.
Medicare: The health insurance program for the aged and
disabled established by title XVIII of the Social Security
Act and any statute succeeding
thereto.
Meditrust: As defined in Article 23.
Meditrust/Emeritus Facilities: As defined in the Agreement
Regarding Related Transactions.
Meditrust/Emeritus Transaction Affiliate: An Affiliate of
Lessee, the business and activities of which are limited to
those subject to Meditrust/Emeritus Transaction Documents
(other than the Affiliated Party Subordination Agreement,
the Agreement Regarding Related Transactions and comparable
agreement now or hereafter in effect among Affiliates of
Lessee and of Lessor) to which such Affiliate is a party.
Meditrust/Emeritus Transaction Documents: As defined in the
Agreement Regarding Related Transactions.
Meditrust Entities: Collectively, Meditrust, Lessor and any
other Affiliate of Lessor which may now or hereafter be a
party to any Related Party Agreement.
Meditrust Investment: The sum of (i) the Original Meditrust
Investment plus (ii) the aggregate amount of all Subsequent
Investments less the sum of any Net Award Amounts and/or Net
Proceeds Amounts.
Monthlv Deposit Date: As defined in Section 4.6.
Neaative Pledae Aareement: The Group Four Negative Pledge
Agreement (Acquisition) dated May 1,1997 by and between
Guarantor, Lessee and Lessor, as amended from tirrie to
time.
Net Award Amount: As defined in Section 3.7.
Net Income (or Net Loss): The net income (or net loss,
expressed as a negative number) of a Person for any period,
after all ta;ces actually paid or accrued and all e:cpenses
and other charges determined in accordance with GAAP.
net Proceeds Amount: As defined in Section 3.7.
Net Worth: An amount determined in accordance with GAAP
equal to.the total assets of any Person, minus the total
liabilities of such Person. Provided, however, that for
purposes of
14
calculating the Net Worth ofthe Guarantor, those certain
Thirty-Two Million Dollars ($32,000,000) of 6.25"%
convertible, unsecured, subordinated debentures due in 2006,
which were issued by the Guarantor on February 15,1996,
shall not be included in total liabilities,
Obligations: Collectively, the Lease Obligations and the
Related Party Obligations.
Offer: As defined in Section 18.3.1.
Offered Propertv: As defined in Section 18.3.
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.
OriginaI Meditrust Investment: The sum of Four Million Ten
Thousand and 00/100 ($4,010,000.00).
Other Permitted Uses: To the e;ctent 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 ( 1 O%) of the useable floor
area of the building comprising the Facility, such uses as
Lessee reasonably detennines 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 therefo 'r, now or hereafter
required or issued by any Governmental Authority,
Accreditation Body or Third Party Payor to any member of the
Leasing Group, or rnaintained or used by any member of the
Leasing Group, or entered into by.any member ofthe Leasing
Group with any third Person with respect to the Leased
Property.
l5
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.
I. I 8.
Permitted Prior Securitv Interests: As defned in Section
6.1.2.
Person: Any individual, corporation, general partnership,
limited partnership, joint venture, stock company or
association, company, bank, trust, trust company, land
trust, business trust, unincorporated organization,
unincorporated association, Governmental Authority or other
entity of any kind or nature.
Plans and Specifications: As defined in Section 13.1.2.
Primanr Intended Use: The use of the Facility as a mixed
assisted and independent living facility with a total of71
units (ofwhich at all times at least 32 units will be
assisted living units) and having 142 fully licensed beds or
such additional number ofunits 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
Ionger announces a prime rate of interest, then the Prime
Rate shall be deemed to be the variable rate of interest per
annum which is the prime rate of interest or base rate of
interest from time to time announced by any other major bank
or other financial institution reasonably selected by
Lessor.
Principal Place of Business: As defined in Section 10.1.28.
Proceeds: As defined in the UCC.
Provider Agreements: All participation, provider and
reimbursement agreements or arrangements, if any, now or
hereafter in effect for the benefit of Lessee or any
Sublessee in connection with the operation ofthe Facility
relating to any right ofpayment or other claim arising out
of or in connection with Lessee's or such Sublessee's
participation in any Third Party Payor Program.
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
l6
Instruments, Documents, Accounts, Proceeds, General
Intangibles and Chattel Paper as are reasonably required for
purposes ofexercising the rights set forth in (i) above.
Reference Bank: Fleet Bank of Connecticut, N.A.
Related Leases: The Group Four Acquisition Facility Leases
(as defined in the Agreement Regarding Related
Transactions), together with such other new leases
identified from time to time in the Agreement Regarding
Related Transactions.
Related Parties: Collectively, each Person that may now or
hereafter be a party to any Related Party Agreement other
than the Meditrust Entities.
. Related Partv Aareement: Any agreement, document or
instrument now or hereafter evidencing or securing any
Related Party Obligation, including, without limitation, the
Related Leases.
Related Partv Default: The occurrence ofa default or breach
ofcondition continuing beyond the expiration of any
applicable notice and grace periods, if any, under the terms
of any Related Party Agreement.
Related Partv Obliaations: Collectively, all iizdebtedness,
covenants, liabilities,
obliaations, aareements and undertakings due to, or made for
the benefit of, Lessor or any of the other Meditrust
Entities by Lessee or any other member ofthe Leasing Group
or any oftheir respective Affiliates in connection with any
ofthe properties described in Exhibit F to the Aareement
Regarding Related Transactions, as the same may be modified
and amended from time to time; whether such indebtedness,
covenants, liabilities, obligations, agreements and/or
undertakinas are direct or indirect, absolute or continaent,
liquidated or unliquidated, due or to become due, joint,
several orjoint and several, primary or secondary, now
existing or hereafter arising.
Rent: Collectively, the Base Rent, Additional Rent, the
Additional Charges and all other sums payable under this
Lease and the other Lease Documents.
Rent Adjustment Date: The first day ofany ofthe Extended
Terms.
Rent Adjustment Rate: 320 basis points over the Index.
Rent Insurance Proceeds: As defined in Section I3.8.
Residenee Aareement: All contracts, agreements and consents
etecuted by or on behalf of any resident or other Person
seeking services at the Facility, including, without
limitation, assionments ofbenefits and guarantees.
l7
Third Partv Pavnrs: Collectively, Medicare, Medicaid, Blue
Cross and/or Blue Shield, private insurers and any other
Person which presently or in the future maintains Third
Party Payor Programs:
UCC: The Uniform Commercial Code as in effect from time to
time in the State.
United States Treasury Securities: The uninsured treasury
securities issued by the United States Federal Reserve Bank.
Unsuitable For Its Primarv 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 faithjudgment 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 Delavs: Delays due to strikes, lockouts,
inability to procure materials, power failure, acts of God,
govemmental 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 ofeither party hereto.
Larade Rennvatinns: Repair and refurbishina other than
normal janitorial, cleaning and maintenance activities.
Work: As defined in Section I 3.1.1.
Work Certifieates: As defmed in Section 1 i.l.4.
Working Capital Loan: As defined in Section 6.1.?.
Working Capital Stock Pledge: As defined in Section 16.1
(h).
2.2 Rules of Constructinn. The following rules
ofconstruction shall apply to the Lease and each ofthe other
Lease Documents: (a) references to "herein", "hereof' and
"hereunder" shall be deemed to refer to this Lease or the
other applicable Lease Document, and shall not be limited to
the particular text or section or subsection in which such
words appear; (b) true 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 arid
e:cpenses of attorneys who are employees of an Affiliate of
Lessor; (e) references to Leased Property shall be deemed to
include references to all
19
r
ofthe Leased Property and references to any portion thereof;
(references to the Lease Obligations shall be deemed to
include references to all ofthe Lease Obligations arid
references to any poition thereof; (g) references to the
Obligations shall be deemed to include,reference to all
ofthe Obligations and references to any portion thereof; (h)
the terni "including", wheii following any general
statement, will not be construed to limit such statement to
the specific items or matters as provided immediately
following the term "including" (whether or not nonlimiting
language such as "without limitation" or "but not limited
to" or words of similar import are also used), but rather
will be deemed to refer to all 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 foim shall apply only to such
financial statements as relate to a period during any
poition 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
ofthe 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 ofthe
United States of America, at Lessor's address set foith
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 Propeity, as follows.
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 THREE HUNDRED FIFTY THREE THOUSAND
SIX HUNDRED EIGHTY TWO DOLLARS ($353,682) and that is
payable in advance in equal, consecutive monthly
installments due on the first day of each calendar month,
commencing on March 1,1998 ; provided, however, that on each
Rent Adjustment Date, the Base Rent shall be adjusted to
equal the greater of (i) the then current Base Rent or (ii)
an amount equal to the Meditiust Investment multiplied by
the Rent Adjustment Rate then in effect on such Rent
Adjustment Date and further, provided, however, that on the
Commencement Date, Lessee shall pay to Lessor the
propoitionate share of the Base Rent due for the period from
(and including) the Commencement Date through the end of the
calendar month during which the Commencenient Date occurred.
3.1.2 Additional Rent: In addition to the Base Rent, Lessee
shall also pay to Lessor additional rent (the "Additional
Rent") in an amount equal to five percent (5%) of Excess
Gross Revenues. Additional Rent shall accrue commencing on
March 1, 2000 (the "Additional Rent Accrual Date") and shall
be payable during the Term, quarterly in arrears, commencing
on the first day of the first Fiscal Quaiter occurring
following the
20
Additional Rent Accrual Date ("Additional Rent Commencement
Date") and there shall be an annual reconciliation as
provided in Sectioii 3.Z- tielow.3.2 Calculation and Pavment
of Additional Rent: Annual Reconciliation.3.2.1 Officer's
Certificate and Proration. Each quarterly payment of
Additional Rent shall be delivered to Lessor, together with
an Officer's Certificate setting forth the calculation
thereof, within thirty (30) days after the end ofthe
corresponding quarter. Additional Rent due for any portion
of any calendar year shall be prorated accordingly.
3.2.2 Annual Statement. In addition, on or before the first
day of April ofeach year following any calendar year for
which Additional Rent is payable hereunder, Lessee shall
deliver to Lessor an Officer's Certificate, reasonably
acceptable to Lessor and certified by the chief financial
officer of Lessee, setting forth the Gross Revenues for the
immediately preceding calendar year.
-3.2.3 Defcits. Ifthe Additional Rent, as finally determined
for any calendar year (or portion thereof, exceeds the sum
ofthe quarterly payments of Additional Rent previously paid
by Lessee with respect to said calendar year, within thirty
(30) days after such determination is required to be made
hereunder, Lessee shall pay such deficit to Lessor and, if
the deficit exceeds five percent (Sa%) 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. Ifthe Additional Rent, as fnally
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
2l
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 arid practices
recognized in the assisted living industry as those
customarily utilized by reputable business operations.
Subject to any applicable Legal Requirements, the members of
the Leasing Group shall use their best efforts to maximize
the Facility's Gross Revenues.
3.3 Confirmation and Audit of Additional Rent.
3.3.1 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 industiy 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 32 above has been
made), adequate records conforming to such accounting system
showing all Gross Revenues for such calendar year.
3.3.? Audit Bv 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.? and in connection with such audits, to
examine Lessee's records wzth 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 re5ulations.
3.3.3 Deficiencies and Overpavments. If anv such audit
discloses a deficiency in the reporting of Gross Revenues,
and either Lessee aarees with the result of such audit or
the matter is compromised, Lessee shall forthwith pay to
Lessor the amount ofthe 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 contraiy herein,
with respect to any audit that is commenced more than two
(2) years after the date Gross Revenues for any calendar
year are repoirted 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 Affliate thereof. Ifany audit conducted for Lessor
pursuant to the provisions hereof discloses that (a) the
Gross Revenues actually received by Lessee for and calendar
vear exceed those reported by
22
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 ofsuch
difference.
3.3.4 Survival. The obligations of Lessor and Lessee
contained in this Section shall survive the expiration or
earlier termination ofthis Lease.
3.4 Additional Charaes. Subject to the rights to contest as
set forth in Article 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 everv fine, penalty,
interest and cost which may be added for non-payment or late
payment of such items (the items referred to in clauses (a)
and (b) above being referred to herein collectively as the
"Additional Charges"), and Lessor shall have all legal,
equitable and contractual rights, powers and remedies
provided in this Lease, by statute or otherwise, in the case
of non-payment ofthe Additional Charges, as well as the Base
Rent and Additional Rent. To the extent that Lessee pays any
Additional Charges to Lessor pursuant to any requirement
ofthis Lease, Lessee shall be relieved of its obligation to
pay such Additional Charges to any other Person to whieh
such Additional CharQes 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 ofthe installments of Base Rent, and the payments of
Additional Rent and, if and to the extent payable to Lessor,
Additional Charges throughout the Term.
3.6 No Lessee Termination or Offset.
3.6.1 No Termination. Except as may be otherwise
specifically and expressly provided in this Lease, Lessee,
to the extent not prohibited by applicable law, shall remain
bound by this Lease in accordance with its terms and shall
neither take any action without the consent of Lessor to
modifv, surreizder or terminate the same, nor seek nor be
entitled to any abatement, deduction, deferment or reduction
of Rent, or set-off aaainst the Rent. nor shall the
respective obliQations of Lessor and Lessee be otherwise
affected by reason of (a) any Casualty or any Takina of the
Leased Property, (b) the lawful or unlawful prohibition of,
or restriction upon, Lessee's use ofthe Leased Property or
the interference with such use by any Person (other than
Lessor, except to the extent permitted hereunder) or by
reason of eviction by paramount title; (c) any claim that
Lessee has or might have against Lessor, (d) any default or
breach of any warranty by Lessor or any of the other
Meditrust Entities under this Lease, any other Lease
Doc.ument or any Related Party Aoreement, (e) any
bankruptcy, insolvency, reoraanization, composition,
readjustment,
23
the foregoing, other than a. discharge of Lessee from any of
this 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 ofthis Lease or (except
in those instances where the obligation to pay expressly
survives the termination ofthis Lease) by termination ofthis
Lease other than by reason of an Event of Default.
3.7 Abatement of Rent Limited. There shall be no abatement
of Rent on account of any Casualty, Taking or other event,
except that (a) in the event of a partial Taking or a
temporary Taking as described in Section 14.3, the Base Rent
shall be abated as follows: (i) in the case of such a
partial Taking, the Meditrust Investment shall be reduced
for the purposes of calculating Base Rent pursuant to
Section 3.1 by subtracting therefrom, as applicable, the net
amount ofthe Award received by Lessor, and (ii) in the case
ofsuch 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 ofthis Section 3.7, the "net amount ofthe
Award received by Lessor" shall mean the Award paid to
Lessor or Lessor's mortgagee on account of such Taking,
minus all costs and expenses incurred by Lessor in
connection therewith, and minus any amounts paid to or for
the account of Lessee to reimburse for the costs and
expenses of reconstructing the Facility following such
Taking in order to create a viable and functional Facility
under all of the circumstances ("Net Award Amount") and the
"net amount 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").
24
NORMAL.STYIBMGRAPH 3.8 Leasino Commitment
Fee: The Lessee shall pay to the Lessor the Leasing
Commitment Fee simultaneously with the execution of this
Lease; provided, however, that, at the Lessor's option,
the Leasing Commitment Fee shall be held in an escrow
account- estatilish_ ed with a Person designated by the
Lessor pursuant to an escrow arrangerrient satisfactory to
the Lessor, with interest thereon benefiting the Lessor. If
the Lessor exercises its option to require that the Leasing
Committee Fee be held in such an escrow account (a) the
Leasing Commitment Fee shall be disbursed from said escrow
account only upon the joint instructions of the Lessee and
the Lessor (which instructions from the Lessee shall be
immediately given upon the request ofthe Lessor) and in no
event shall the Leasing Commitment Fee be disbursed
therefrom, in whole or in part, unless and until so
requested by the Lessor and (b) the Lessor shall bear the
risk of loss of or misappropriation of the Leasing
Commitment Fee by such escrow agent.
ARTICLE 4
IMPOSITIONS: TAXES; UTILITIES:
INSURANCE PAYMENTS
4.1 Payment of Impositions.
4.1.1 Lessee To Pav. Subject to the provisions of Article
15, Lessee will pay or cause to be paid all Impositions
before any fine, penalty, interest or cost may be added for
non-payment, such payments to be made directly to the taxing
authority where feasible, and Lessee will promptly furnish
Lessor copies of official receipts or other satisfactory
proof evidencing payment not later than the last day on
which the same may be paid without penalty or interest.
Subject to the provisions of Article 15 and Section 4.1.2,
Lessee's obligation to pay such Impositions shall be deemed
absolutely fixed upon the date such Impositions become a
lien upon the Leased Property or any part thereof.
4.1.2 Installment Elections. Ifany such Imposition may, at
the option ofthe taxpayer, lawfully be paid in installments
(whether or not interest shall accrue on the unpaid balance
of such Imposition), Lessee may exercise the option to pay
the same (and any accrued interest on the unpaid balance of
such Imposition) in installments and, in such event, shall
pay such installments during the Term hereof (subject to
Lessee's right to contest pursuant to the provisions of
Section 4.1.5 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 Govemmental
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 law.s and regulations, prepare and file all
other tax returns
25
and reports in respect ofany Imposition as may be required
by Governmental Authorities. Lessor and Lessee shall, upon
request ofthe 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 Govermentalized
Authoizty classifies any property covered by this Lease as
personal property, Lessee shall file all personal property
tax returns in suchjurisdictions where it may legally so
fle. Lessor, to the extent it possesses the same, and
Lessee, to the extent it possesses the same, will provide
the other party, upon request, with cost and depreciation
records necessary for filing returns for any portion of
Leased Property so classified as personal property. Where
Lessor is legally required to file personal property tax
returns, if Lessee notifies Lessor ofthe obligation to do so
in each year at least thirty (30) days prior to the date any
protest must be fled, Lessee will be provided with copies
ofassessment notices so as to enable Lessee to file a
protest.
4.1.4 Refunds. Ifno Lease Default shall have occurred and be
continuing, any refund due from any taxing authority in
respect ofany 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. Protest. Upon eiving notice to Lessor, at Lessee's
option and sole cost and expense, and subject to compliance
with the provisions of Article 15, Lessee may contest,
protest, appeal, or institute such other proceedings as
Lessee may deem appropriate to effect a reduction of any
Imposition and Lessor, at Lessee's cost and expense as
aforesaid, shall fully cooperate in a reasonable manner with
Lessee in connection with such protest, appeal or other
action.
42 Notice of Impositions. Lessor shall give prompt notice to
Lessee of all Impositions payable by Lessee hereunder of
which I.essor 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 ofthe period during which the expiration or earlier
termination ofthe Term occurs shall be adjusted and prorated
between Lessor and Lessee, whether or not such Impositions
are imposed before or after such expiration or termination,
and Lessee's obligation to pay its prorated share thereof
shall survive such expiration or termination.
4.4 Utilitv Charaes. 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
suirenders the Leased Property in the manner required by
this Lease.
26
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 ( i0) 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 ofthe failure of Lessee either to
comply with the insurance requirements in Article 12, or to
pay the premiums for such insurance, or to deliver such
policies or certificates thereof to Lessor at the times
required hereunder, Lessor shall be entitled, but shall have
no obligation, to effect such insurance and pay the premiums
therefor, which premiums shall be a demand obligation of
Lessee to Lessor.
4.6 Deposits.
4.6.1 Lessor's Option. At the option of Lessor upon the
occurrence ofan 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 (1/1?th) ofthe Impositions
to be levied, charged, filed, assessed or imposed upon or
against the Leased Property within one (1) year after said
Monthly Deposit Date and a sum equal to one-twelfth (1/l2th)
ofthe premiums for the insurance policies required pursuant
to Article 12 which are payable within one ( 1 ) year after
said Monthly Deposit Date. Ifthe amount ofthe 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 wiih 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 (I/l2th) ofthe estimated
amount payable within one ( 1 ) year after said Monthly
Deposit Date, if such additional deposit is required in
order to provide to Lessor a sufficient fund from which to
make payment of all Impositions on or before the next due
date of any installment thereof, or to make payment of any
required insurance premiums not later than the due date
thereof.
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
27
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.fi.2 attached hereto and
incorporated by reference, Lessor shall not be liable to
Lessee or any other Person (a) based on Lessor's (or such
bank's) choice ofinvestment vehicles, (b) for any consequent
loss ofprincipal or interest or (c) for any unavailability
of funds based on such choice of investment. Furthermore,
Lessor shall bear no responsibilitv for the financial
condition of, nor any act or omission by, Lessor's
depositorv bank. The income from such investment or interest
on such deposit shall be paid to Lessee on a semi-annual
basis as long as no Lease Default has occurred and is then
continuing, and as long as no fact or circumstance etists
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 ofpayment, 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 prerriium when due, for which a sufficient deposit
exists, Lessee shall not be in default hereunder by virtue
ofthe failure of Lessor to pay such Imposition or such
insurarice 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 anv 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), toaether 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 taY 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 llave been payable under the revised
estimate.
4.6.4 Other Properties. Ifany Imposition shall be levied,
charged, filed,
assessed, or imposed upon or against the Leased Property,
and if such lmposition 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 Propertv but for which a lie-n exists
P P
or can exist on the Leased Pro ertv, then, at Lessor s
reasonable discretion, the computation ofthe 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
lmposition.
28
Intended Use, and such Tangible Personal Property and
replacements thereof, shall be at all times the property of
Lessee. 5.2.2 S.ufficient Personal Propertv. Lessee shall
maintain, during the erttire Term, the Tangible Personal
Property and Lessor's Personal Property in good order and
repair and shall provide at its expense all necessary
replacements thereof, as may be necessary in order to
operate the Facility in compliance with all applicable Legal
Requirements and Insurance Requirements and otherwise in
accordance with customary practice in the industry for the
Primary Intended Use and, if applicable, Other Permitted
Uses. In addition, Lessee shall furnish all necessary
replacements of such obsolete items ofthe Tangible Personal
Property and Lessor's Personal Property during the Term as
are necessary to enable the operation ofthe Facility in
accordance with the requirements of this Lease for the
Primary Intended Use.
52.3 Removal and Replacement; Lessor's Option to Purchase.
Lessee shall not remove from the Leased Property any one or
more items of Tangible Personal Property or Lessor's
Personal Propezty (whether now owned or hereafter acquired),
the fair riiarket value of which exceeds [TWENTY-FIVE
THOUSAND DOLLARS (25,000), individually or ONE HUNDRED
THOUSAND DOLLARS ($100,000.00)) collectively, ifsuch
Tangible Personal Property or Lessor's Personal Property is
necessary to enable the operation ofthe Facility in
accordance with the requirements of this Lease for the
Primary Intended Use. At its sole cost and expense, Lessee
shall restore the Leased Property to the condition required
by Article 8, including repair of all damage to the Leased
Property caused by the removal ofthe Tangible Personal
Property or Lessor's Personal Property, whether effected by
Lessee or Lessor. Upon the expiration or earlier termination
of this Lease, Lessor shall have the option, which may be
exercised by giving notice thereofwithin twenty (?0) days
prior to such expiration or termination, of (a) acquiring
the Tangible Personal Property (pursuant to a ▇▇▇▇ of sale
and assign.tnents of any equipment leases, all in such forms
as- are reasonably satisfactory to Lessor) upon payrnent 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 otlzer Permitted
Prior Security Interests assumed by Lessor and (ii) applied
to the Lease Obligations before any payment to Lessee. If
Lessor requires the removal of the Tanaible 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 othenvise disposed of by
Lessor without first giving notice thereof to Lessee,
without any payment to Lessee and without any obligation to
account therefor.
30
ARTICLE fi
SECURITY FOR LEASE OBLIGATIONS
6.1 Securitv for Lessee's Obligations; Permitted Prior
Securitv Interests.
6.1.1 Secnritv. In order to secure the payment and
performance ofall ofthe Obligations, Lessee agrees to
provide or cause there to be provided the following
security:.
(a) a first lien and exclusive security interest in the
Collateral, as more particularly provided for in the
Security Agreement;
(b) the Cash Collateral.
(c) a first lien and exclusive pledge and assignment of, and
security interest in, all Permits and Contracts, as more
particularly provided for in the Collateral Assignment of
Permits and Contracts; and
(d) in the event that, at any time during the Term, Lessee
holds the fee title to or a leasehold interest in any real
property and/or personal property which is used as an
inteoral part ofthe operation ofthe Leased Property (but is
not subject to this Lease), Lessee shall (i) provide Lessor
with prior notice of such acquisition and (ii) shall take
such actions and enter into such agreements as Lessor shall
reasonably request in order to ▇▇▇▇▇ ▇▇▇▇▇▇ 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 foregoina, it is acknowledged
and a5reed that all revenues generated from the operation of
such additional real property shall be irlcluded in the
determination of Gross Revenues (subject to such adjustments
as agreed upon hereunder).
Notwithstanding the foregoing, Lessor shall subordinate its
security interest in Receivables to a prior security
interest to secure a working capital line as provided in
Section 6.1.3.
In addition to the foregoing, Guarantor shall provide the
following to secure the Obliaations and the obliaations
under the Guaranty of Lease Obligations:
(a) a first lien on and security interest in substantially
all of its assets related to the Leased Property; and
31
(b) a first lien and exclusive pledge and assignment of, and
security interest in, all Permits and Contracts, as mbre
particularly provided- for iri.aCollateral Assignment of
Permits and Contracts froizi Guarantor to- Lessor.-.
6.1.2 Purchase-Monev Securitv Interests and Equipment
Leases. Notwithstanding any other provision hereof
regarding the creation of Liens, Lessee may (a) grant
priority purchase money security interests in items of
Tangible Personal Property, (b) lease Tangible Personal
Property from equipment lessors as long as: (i) the
aggregate value ofsuch 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, ofeach such purchase money
security agreement, financing document and equipment lease
and all amendments thereto and (D) no such security
interest, financing agreement or lease is cross-defaulted or
crosscollateralized with any other obligation. Security
interests granted by Lessee in full compliance with the
provisions ofthis Section 6.1.? are referred to as
"Permitted Prior Security Interests".
6.1.3 Receivables Financina. Notwithstanding any other
provision hereofregarding 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 ofcredit (a "Working
Capital Loan") for the exclusive use of Guarantor, Lessee
and Affiliates of Lessee as long as such Lender enters into
an intercreditor agreement with, and satisfactory to, Lessor
pursuant to which, without limiting the foregoing, (1)
Lessor shall be provided with notice with respect to
defaults under the Working Capital Loan simultaneously with
the delivery of such notice to Lessee and shall be afforded
the option of curing defaults thereunder, (2) such lender s
use of Instruments, Documents. General Intangibles and
Chattel Paper shall be limited to a license only for the
purpose of collecting Receivables and (3) the subordination
of Lessor's interest in the Receivables shall be of no force
and effect and 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 Airticle I 6 or Lessor notifies in writina such
lender of Lessor's intention to invoke its right to
reinstate its first
b
priority security interest in the Receivables.
32
6.2 Guaranrr. All ofthe Lease Obligations shall be
unconditionally and irrevocably guaranteed by the Guarantor
pursuant to the Guaranty of Lease Obligations. -
ARTICLE 7
CONDITION AND USE OF LEASED PROPERTY;
MANAGEMENT AGREEMENTS
7.1 Condition of the Leased Propertv. Lessee acknowledges
that Lessee has caused the Leased Property to be sold to
Lessor and has concunently entered into this Lease. Lessee
acknowledges receipt and delivery ofpossession ofthe 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. Lessee
waives any claim or action against Lessor in respect ofthe
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%O.R 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-COvIPLIANCE OF THE
LEASED PROPERTY WITH ALL APPLICABLE REQUIREMENT ITS OF LAW,
INCLUDING BUT NOTIS LIMITED TO ENVIRONMENTAL LAWS AND
ZONING OR LAND USE LAl VS.
Upon the request of Lessor, at any time and from time to
time during the Term, Lessee shall engage ▇▇▇▇ (1) or more
independent professional consultants, engineers and
inspectors, qualified to do business in the State and
acceptable to Lessor to perform any environmental and/or
structural investigations and/or other inspections ofthe
Leased Property and the Facility as Lessor may reasonablv
request in order to detect (a) any structural deficiencies
in the Leased Improvements or the utilities servicina 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 ofany ofthe Lease
Documents. In the event that Lessor reasonably determines
that the results of such testing or inspections are
unsatisfactory, within thirty ( i0) 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.
33
7.2 Use ofthe Leased Propertv; 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 coverilzg the Leased Property, nor
shall Lessee, any Manager or any other Person sell or
otherwise provide to residents,. other occupants or invitees
therein, or permit to be kept, used or sold in or about the
Leased Property, any article which may be prohibited by any
ofthe Insurance Requirements. Furthermore, Lessee shall, at
its sole cost and expense, take whatever other actions that
may be necessarv to comply with and to insure that the
Leased Property complies with all Insurance Requirements.
7.2.4 No Waste. Lessee shall not commit or suffer to be
committed any waste on, in or under the Leased Property, nor
shall Lessee cause or permit any nuisance thereon.
7.2. 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 ofthe Leased Property.
7.?.6 l\To Liens. Except as permitted pursuant to Section
6.1.?, 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 I,eased Property other than as set forth in Section
11.5.2.
7.3 Compliance with Legal Requirements. Lessee covenants and
agrees that the Leased Property shall not be used for any
unlawful purpose and that Lessee, at its sole cost and
expense, will promptly (a) comply with, and shall cause
every other member ofthe Leasing Group to comply with, all
applicable Leaal Requirements ▇▇▇▇▇▇▇▇.▇▇ the use,
operation, maintenance, repair and restoration of the Leased
Propertv, whether or not compliance therewith shall require
structural change in any ofthe Leased Propertv or interfere
with the use and
34
enjoyment ofthe Leased Property and (b) procure, maintain
and comply with (in all material respects), and shall cause
every other member of the Leasirlg Crroup to procure
maintain arl 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 Peririzted Uses, and for
compliance with all of the terms and conditions of this
Lease. Unless a Lease DeEault has occurred or any event has
occurred which, with the passage oftime and/or the giving of
notice would constitute a Lease Default, Lessee may, upon
prior written notice to Lessor, contest any Legal
Requirement to the extent permitted by, and in accordance
with, Article I below.
7.4 Management Agreements. Throughout the Term, Lessee shall
not enter into any Ivlanagement Agreement without the prior
written approval of Lessor, in each instance, which approval
shall not be unreasonably withheld. Lessee shall not,
without the prior written approval of Lessor, in each
instance, which approval shall not be unreasonably withheld,
agree to or allow: (a) any change in the Manager or change
in the ownership or control of the Manager, (b) the
termination of any Management Agreement (other than in
connection with the exercise by Lessee of any of its
remedies under the Management Agreement as a result of any
default by the Manager thereunder), (c) any assignment by
the Manager of its interest under the Management Agreement
or (d) any material amendment of the Management Agreement.
In addition, Lessee shall, at its sole cost and expense,
promptly and fully perform or cause to be performed every
covenant, condition, promise and obligation of the licensed
operator of the Leased Property under any Management
Agreement. Each Management Aareement 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
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 aive to, or
receive from any Person, based upon the occurrence, or
alleged occurrence, of any default in the performance ofany
covenant, condition, promise or obligation under any
Manaaement Agreement.
Whenever and as often as Lessee shall fail to perform,
promptly and fully, at its sole cost and expense, any
covenant, condition, promise or obligation on the part ofthe
licensed operator of the Leased Property under and pursuant
to any Management Aareement, Lessor, or a lawfully
appoin.▇▇▇ receiver ofthe Leased Property, may, at their
respective options (and without any obliaation to do so),
after five (5) days' prior notice to Lessee (except in the
case of an emeraency) enter upon the Leased Property and
perform, or cause to be performed, such work, labor,
sen.ices, 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 obliaation,
and.any amount so paid or advanced by Lessor or such
receiver and all costs and etpenses reasonably incurred in
connection therewith (including, without limitation,
attorneys' fees and expenses and court costs), shall be a
demand obliaation of Lessee to Lessor or such receiver, and
Lessor shall have
35.
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 Partv Pavor Proarams. No
provision ofthis Lease shall be deemed to require Lessee to
commence participation in any Third Party Payor Program or
any vlanaged Care Plan.
ARTICLE 8
REPAIRS; RESTRICTIONS
8.1 Maintenance and Repair.
8.1.1 Lessee's Responsibility. Lessee, at its sole cost and
expense, shall keep the Leased Property and all private
roadways, sidewalks and curbs appurtenant thereto which are
under Lessee's control in good order and repair (whether or
not the need for such repairs occurs as a result of Lessee's
use, any prior use, the elements or the age of the Leased
Property or such private roadways, sidewalks and curbs or
any other cause whatsoever other than Lessor's gross
negligence or willful misconduct) and, subject to Articles
9, I 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 modifcations
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. I
shall be (a) performed in a good and workmanlike manner in
compliance with all applicable Legal Requirements, Insurance
Requirements and the requirements of Article 9 hereof, using
new materials well suited for their intended purpose and (b)
consistent with the operation of the Facility in a reputable
manner. Lessee will not take or omit to take any action the
taking or omission ofwhich 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 ofthis Section 8.I constitute Material Structural
Work, Lessee shall obtain Lessor's prior written approval
(which approval shall not be unreasonably withheld) ofthe
specific repairs, replacements, renovations, alterations and
modifications to be performed bv or on behalf of Lessee in
36
connection with such Nlaterial Structural Work.
Notwithstanding the foregoing, in the event of a bona fide
emergency during which Lessee is unable to contact 2he
appropriate representatives of Lessor, Lessee may commence
such Material Structural Work as :rnay be necessary in order
to address such emergency without Lessor's prior approval,
provided, however, that Lessee shall immediately thereafter
advise Lessor ofsuch emergency and the nature and scope
ofthe Material Structural Work commenced and shall obtain
Lessor's approval ofthe remaining Material Structural Work
to be completed.
8.12 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 ofany nature or
description to the Leased Property (or any private roadways,
sidewalks or curbs appurtenant thereto), whether ordinary or
extraordinarv, 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 NIav Not Obliaate Lessor. Nothing contained
herein nor arly 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 ofor 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 fumishina 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 fumishing of any materials or
other property fumished to the Leased Property at or bv the
request of Lessee or any other Person other than Lessor.
Lessee shall notifv any contractor, subcontractor, laborer,
materialman or vendor providing any labor, services or
materials to the Leased Property ofthis provision.
8.? Encroachments; Title Restrictions. Ifany ofthe Leased
Improvements shall, at any time, encroach upon any property,
street or rioht-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
ofothers under any easement, right-of way or other Lien to
which the Leased Propertv is now or hereafter subject. then
promptlv upon the request of Lessor, Lessee shall, at its
sole cost and eYpense, subject to Lessee's riaht to contest
the etistence ofany encroachment, violation or impairment as
set forth
37
in Article 15, (a) obtain valid and effective waivers or
settlements of all claims, liabilities and damages resulting
from each such encroachment, violation or impairment or
(li.) iziake such, alterations to the Leased Improvements,
and take such other actions, as Lessee in-the good faith
e:cercise of its judgment deems reasonably practicable, to
remove sucli encroachment, or to such violation or
impairment, including, ifnecessary, the alteration ofany
ofthe 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 ofthe Leased Improvements for the Primary Intended
Use and, if applicable, the Other Permitted Uses
substantially in the manner and to the extent that the
Leased Improvements were operated prior to the assertion of
such encroachment, violation or impairment and nothing
contained herein shall limit Lessee's obligations to operate
the Leased Property in accordance with its Primary Intended
Use. Any such alteration made pursuant to the terms ofthis
Section 8.2 shall be completed in conformity with the
applicable requirements of Section 8.1 and Article 9.
Lessee's obligations under this Section 8.2 shall be in
addition to and shall in no way discharge or diminish any
obligation of any insurer under any policy of title or other
insurance. If and to the extent any obligation ofan insurer
under any policy oftitle 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 ofsuch 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 Facilitv), 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.
38
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 financirig
for a Capital- Addition) other than Liens expressly
permitted by the terms and provisions ofthis Lease
Agreement.
9.2.2 Lessee's Pro osal Re ardin Ca ital 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 ofthe
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 O tions Regarding Capital Additions and
Material Structural Work. Lessor shall have the options of:
(a) denying permission for the coizstruction 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
fnance the construction of the Capital Addition, subject to
compliance with the terms and conditions of Section 9.?.l,
Section 9.4, Section 13.1.3, all applicable Legal
Requirements, all other requirements ofthis Lease and to
such other terms and conditions as Lessor may in its
discretion reasonably impose or (d) any combination 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, 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 (r) Lessor
has not offered to finance the construction ofthe same or
(y) Lessee declines to accept the financing offered by
Lessor, Lessee may separately finance such construction,
subject to the limitation on Liens set forth in Section
9.?.1, or pay for such construction itself. In the event
Lessee declines to accept the financinc offered by Lessor or
if Lessor has not offered such financing to Lessee and
proposes to obtainina financing from another Person, Lessee
shall inform Lessor- in writina of the terms and conditions
of such financina and shall provide Lessor with a copy of a
commitment letter evidencina the same and Lessor may, by
givina notice
39
thereofto 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 shal-1
noI 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.
92.4 Lessor Nlav Elect to Finance Capital Additions. If
Lessor elects to offer financing for the proposed Capital
Addition and Lessee accepts Lessor's financing proposal, the
prpvisions of Section 9.3 shall apply.
9.3 Capital Additions Financed bv Lessor.
9.3.1 Advances. All advances offunds 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
fnance 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
followinD:
(a) prior to any advance of fiznds, (i) any information;
opinions, . certifcates, Permits or documents reasonably
requested by Lessor or any applicable Financina Party which
are necessarv to confirm that Lessee is reasonably eYpected
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 Paity
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, e;ccept only for
those Permits which cannot in the normal course be obtained
prior to commencement or completion of the construction;
nrovided, that Lessor and any applicable Financing Party are
furnished with reasonable evidence that the same is
reasonably e;cpected to be available in the normal course
ofbusiness without unusual condition;
(b) prior to any advance of funds, an Officer's Certificate
and, if
' a
requested, a certifcate from Lessee s architect, settin5
forth in reasonable detail the projected (or actual,
ifavailable) 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
40
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, chariges iri the Bas:e 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 e;ccept those approved,by Lessor;
(e) upon completion ofthe Capital Addition, a final as-built
survey thereof reasonably satisfactory to Lessor, if
required by Lessor;
(f) during and following the advance 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 ofthe Capital Addition and/or increasing the coverage
thereof by an amount equal to the Fair Market Value of the
Additional Land and including the Additional Land in the
premises covered by such title insurance policy;
(g) simultaneous with the initial advance of funds, if
appropriate, (i) an owner's policy oftitle insurance
insurina fee simple title to any Additional Land conveyed to
Lessor pursuant to subparagraph (d) free and clear of all
Liens e;ccept those approved by Lessor and (ii) an owner's
policy oftitle insurance reasonably satisfactory in folm and
substance to Lessor and a lender's policy oftitle insurance
reasonably satisfactory in form and substance to any
applicable Financing Party;
(h) following the completion of the Capital Addition, if
reasonably deemed necessary by Lessor, an appraisal ofthe
Leased Property by an M.A.I. appraiser acceptable to Lessor,
which states that the Fair Market Value ofthe Leased
Propertv upon completion ofthe 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 twentv-five percent (125%) ofthe Capital
Addition Cost; and
(i) during or following the advancement of funds, prints of
architectural and enaineering drawinQs relating to the
Capital Addition and such other materials, including,
without limitation. the modifications to outstandine
policies of title insurance contemplated by subsection
above, opinions of counsel, appraisals, surveys, certi ied
copies of duly adopted resolutions of the board of directors
of Lessee authorizing the execution and delivery of the
lease
41
amendment and any other documents and instruments as may be
reasona_bly required by Lessor and any applicable Financing
Party.
9.3.3 Payment of Costs. By virtue ofmaking a request to
fnance a Capital Addition, whether or not such financing is
actually consummated, Lessee shall be deemed to have agreed
to pay, upon demand, all costs and expenses reasonably
incurred by Lessor and any Person participating with Lessor
in any way in the financing ofthe Capital Addition Cost,
including, but not limited to (a) fees and expenses 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, signifcantly alter the character or purpose or
detract from the value or operating efficiency ofthe Leased
Property, or significantly impair the revenue-producing
capability ofthe Leased Property, or adversely affect the
ability of Lessee to comply with the terms of this Lease;
(b) no Capital Addition or Material Structural Work shall be
completed which would tie in or connect any Leased
Improvements on the Leased Propeirty 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 buildinas or other structures
or utilities, unless Lessee shall have obtained the prior
writteii approval of Lessor, which approval may be withheld
in Lessor's sole and absolute discretion and (c) alI
proposed Capital Additions and Material Structural Work
shall be architecturallv intearated and consistent with the
Leased Property.
9.Non-Capital Additions. Lessee shall have the obligation
and right to make repairs, replaceme.nts 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 satisfv the
a
conditions of Section 9.4. Lessee shall have the right, from
time to time, to make additions, modifications or
improvements to the Leased Property of which do not
constitute Capital Additions or Material Structural Work as
it may deem to be desirable or necessary for its uses and
purposes, subject to the same limits and conditions imposed
under Section 9.4. The cost ofany such repair, replacement,
alteration, addition, modification or improvement shall be
paid by Lessee and the results thereofshall be included
under the terms ofthis Lease and become a part 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 1 i. I. i, all applicable Legal
Requirements and all other applicable requirements of this
Lease; provided, however, that in the event of a bona fide
emergency durina w.hich 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
42
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 ofany ofthe Leased
Improvements which is not a Capital Addition or Material
Structural Work shall be etempt from the requirements of
Section 9.? hereof.
. 9.6 Com ensation to Lessee for Ca ital Additions Paid For
or Financed bv
Lessce. Upon the expiration or earlier termination ofthis
Lease, except by reason ofthe default by Lessee hereunder,
Lessor shall compensate Lessee for all Capital Additions
paid for or financed by Lessee in any of the following ways,
determined in the sole discretion of Lessor:
.(a) By purchasing all Capital Additions paid for or
financed by Lessee from Lessee for cash in the amount of the
Fair Market Added Value (determined as of the date of such
purchase) 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 (I8) months after the date
ofexpiration or other termination ofthis Lease, bearing
interest at a rate equal to one hundred ten percent ( 1 I
O%) of the applicable federal rate (determined at the time
of execution of such note pursuant to Section 1 ?74 of the
Code or any successor section thereto), compounded
semiannually, or, if no such rate eYists, or sucti rate is
in e:tcess of that permitted under applicable law, at the
Prime Rate, which interest shall be payable monthly, and
which note shall be secured by a mortaaQe on the Leased
Property, subject to all Liens on the Leased Property at the
time of such purchase; or
(c) By Lessor assianing to Lessee under appropriate written
instruments the right to receive an amount equal to the
Added Value Percentage (determined as ofthe expiration of
earlier tennination ofthis Lease) from all rent and other
consideration receivable by Lessor under anv re-lettina or
other disposition ofthe 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 ofoperating 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 Propeirty in which
event Lessor shall pay to Lessee the outstanding balance
ofthe Fair Market Added Value in accordance with
Subparagraph (a), (b), or (d) ofthis Section 9.6, after
deducting any amounts received bv Lessee under this
Subparagraph (c); or
(d) Such other arrangement regarding such compensation as
shall be mutually acceptable to Lessor and Lessee.
43
ARTICLE 10
WARRANTIES AND REPRESENTATIONS
10.1 Representations
and Warranties. Lessee hereby represents and warrants to,
and covenants and agrees with, Lessor that:
10.1.1 Existence; Power; Qualification.
Lessee is a corporation duly organized, validly eYisting and
in good standing under the laws ofthe State of Washington.
The Lessee has requisite power to own and operate its
properties and to carry on its businesses as presently
conducted and as proposed to be 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 and as proposed to be conducted. As of the date of
this Agreement, the Lessee has no Subsidiaries and is not a
member of any partnership orjoint venture. Attached hereto
as EXHIBIT C is a true and correct list of all of the
Persons owning any interest in the Lessee and their
respective ownership interests in the 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 dulv eYecuted and delivered by Lessee, and
each is a legal, valid and binding obliaation of Lessee,
enforceable in accordance with its terms.
10.1.3 Sin;le 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 fscal year of
Lessee, and the Guarantor is the Fiscal Year.
10.1.4 No Violation. The execution, delivery and performance
ofthe Lease Documents by the members ofthe Leasing Group and
the consummation by the members of the Leasing Group of the
transactions thereby contemplated shall not result in any
breactz 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 ofany obliaation ofany
such member ofthe Leasing Group under any of the Permits or
Contracts or any other contract, mortgage, lien, lease,
aareement, instrument, franchise, arbitration award,
judament, decree, bank loan or credit agreement, trust
indenture or.other instrument to which any rriember of the
Leasina Group is a partv
44
or by which any member ofthe Leasing Group may be bound or
affected and do not violate or contravene any Legal
Requirement.
10.1. Consents and ApProvals. Except as already obtained or
filed, as the case may be, no consent or approval or other
authorization of, or eYemption by, or declaration or filing
with, any Person and no waiver ofany 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 ofthe Lease Documents to which it is a party) and the
frst priority of any Liens granted under the Lease
Documents, except the filing of the Financing Statements.
10.1.6 No Liens or Insolvencv Proceedings. Each member ofthe
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, 5amishments 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 Propertv or the
ownership, construction, development, maintenance,
manaQement, 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
equitv, or before or by any arbitrator or Governmental
Authority.
10.1.7 Intentionallv deleted.
10.1.8 Commercial Acts. Lessee's performance ofand
compliance with the obliaations and conditions set forth
herein and in the other Lease Documents will constitute
commercial acts done and performed for commercial purposes.
45
10.1.9 Adequate Capital, Not Insolvent. After giving effect
to the consummation ofthe transactions contemplated by the
Lease_ Documerits, each. memb_er of the Leasing Group: - - -
- -
(a) will be able to pay its debts as they become due;
(b) will have sufficient funds or available capital to carry
on its business as now conducted or as contemplated to be
conducted (in accordance with the terms ofthe Lease
Documents); and
(c) will not be rendered insolvent as determined by
applicable law.
10.1.10 Not Delinquent. Except as permitted under Section
11. i.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. The 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 I.essee which has not been fully subordinated
to the Lease Obligations.
10.1.12 Taxes Current. Each member ofthe 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 oftax claim or deficiency
received by each such member ofthe Leasing Group. No tax
liability has been asserted by the Internal Revenue Service
against any member of the Leasina Group or any other
federal, state or local taxing authority for taxes,
assessments, impositions, fees or other govemmental charges
(including interest or penalties thereon) in excess ofthose
already paid. -
10.1.13 Financials Complete and Accurate. The financial
statements ofeach member ofthe Leasing Group given to Lessor
in connection with the execution and deliverv ofthe Lease
Documents were true, complete and accurate, in all material
respects, and fairly presented the fmancial condition ofeach
such member ofthe Leasing Group as of the date thereof and
for the periods covered thereby, having been prepared in
accordance with GAAP and such fnancial statements disclosed
all liabilities, including, without limitation, continaent
liabilities, ofeach such memlier ofthe Leasing Group as of
the date thereof. There has been no material adverse ▇▇▇▇▇▇
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 rziaterial liabilities, includina, without
limitation, contingent liabilities, ofany such member ofthe
46
Leasing Group arisen or been incurred or asserted since such
date except as otherwise disclosed to Lessor. The
projections heretofore delivered to Lessor coritiriue to be
reasonable (with respect to the material assumptions upon
which sizch projections_aze 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
a
material adverse change in the business, assets or
condition, financial or otherwise of any such member of the
I.easing 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.
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 Govemmental 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
azv action to trar.sf2r or relocate anv such Permit to a
location other than the Leased Property) or any material
impairment of the right or ability of any member of the
Leasing Group to carry on its operations as presently
conducted or proposed to be conducted with respect to the
Leased Property or with respect to its obliaations under the
Lease Documents.
10.1.1 Compliance with Legal and Other Requirements.
(a) Lessee and the Leased Propertv and the ownership,
construction, development, maintenance, manaaement, repair,
use, occupancy, possession and operation thereof comply with
all applicable Legal Requirements and there is no claim of
any violation thereofknown to Lessee. Without limiting the
foregoing, Lessee has obtained all Permits that are
necessary or desirable to operate the Leased Property in
accordance with its Primary Intended Use.
(b) Except as previously delivered to Lessor, there are no
outstanding notices of deficiencies, notices of proposed
action or orders of any kind relating to the Leased
Property, ifany, issued by any Governmental Authority
requiring conformity to any of the applicable Legal
Requirements.
47
10.1.16 No Action By Governmental Authoritv or
Accreditation Bndv. There is no action pending or, to the
best knowledge and belief of Lessee, recommended, by any
Governmental Authority to revoke, repeal, cancel, rriodify,
withdraw or suspend any Perznit 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 Propertv Matters.
(a) The Leased Property is free and clear ofagreements,
covenants and Liens, except those agreements, covenants and
Liens to which this Lease is expressly subject, whether
presently existing, as are listed on EXHIBIT B or were
listed on the UCC lien search results delivered to Lessor at
or prior to the execution and delivery of this Lease (and
were not required to be terminated as a condition ofthe
execution and deliverv 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 ofevery 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 are in aood 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 ofthe Leased
Property in accordance with the Primarv Intended Use;
(e) All buildings, facilities and other improvements
necessary, both legally and practically, for the proper and
efficient operation of the Facility are located upon the
Leased Property and all real property and personal property
currently utilized by Lessee is included within the
definition ofthe Leased Property or the Collateral;
(t) The Leased Property abiits 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 tat purposes separate from any real property that
does not constitute a portion of the Leased Propertv and no
portion ofany real property that does not constitute a
portion ofthe Leased Property is part of the same ta;c
parcel as anv part of the Leased Property;
48
(h) All utilities necessary for the use and operation ofthe
Facility are available to the lot lines ofthe Leased
Property:
(i) in sufficient supply and capacity;
(ii) through validly created and etisting easements of
record appurtenant to or encumbering the Leased Property
(which easements shall not impede or restrict the operation
ofthe Facility); and
(iii) without need for any Permits and/or Contracts to be
issued by or entered into with any Governmental Authority,
except as already obtained or executed, as the case may be,
or as otherwise shown to the satisfaction of Lessor to be
readily obtainable; and
(i) Lessee has made no structural alterations or
improvements to any ofthe Leased Improvements that changed
the foot-print ofany ofthe Leased Improvements, added an
additional story to any ofthe Leased Improvements, decreased
the amount of parking available on the Leased Property or
otherwise involved any alteration which would be reaulated
by applicable zoning requirements, in each case without the
express w-▇▇▇▇▇▇ consent of Lessor. EYcept for matters
which have been disclosed to Lessor or concernina which
Lessor has independent actual knowledge, Lessee has no
actual knowlede of any such structural alteration or
improvement made to any of the Leased Improvements during
the last ten ( 10) years and has no knowledge of any such
structural alteration or renovation made to any of the
Leased Improvements or any such decrease in parking during
such period.
l0.1.15 Third Partv Pavor Aareements.
iIeither Lessee with respect to the Facility nor the
Facilitv is qualified as a provider of services under or
participates in any Third Party Payor Proarams and neither
Lessee w'ith respect to the Facility nor the Facility is
accredited by any Accreditation Bodv.
10.1.19 Rate Limitations. The State currently imposes no
restrictions or limitations on rates which may be charged to
private pay residents receivina services at the Facilitv.
10.1.20 Free Care. There are no Contracts, Permits or
applicable Legal Requirements which require that, a
percentaae ofunits in any proaram 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.
49
10.1.21 No Proposed Chang,es. Lessee has no actual knowledge
ofany applicable Legal Requirements which have been enacted,
promulgated or issued -within the eighteen ( I 8) months
preceding the date of this Lease or arly 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 ofincreased competition at the Facility or the
imposition of Medicaid, Medicare, charity, free care,
welfare or other discounted or government assisted residents
at the Facility or require that Lessee or the Facility
obtain a certificate ofneed, Section 1122 approval or the
equivalent, which Lessee or the Facility does not currently
possess.
10.1.22 ERISA. No employee pension benefit plan maintained
by any
member of the Leasing Group has any accumulated funding
deficiency within the meaning ofthe ERISA, nor does any
member ofthe Leasing Group have any material liability to
the PBGC established under ERISA (or any successor thereto)
in connection with any employee pension benefit plan (or
other class ofbenefit which the PBGC has elected to insure),
and there have been no "reportable events" (not waived) or
"prohibited transactions" with respect to any such plan, as
those terms are defined in Section 404 i of ERISA and
Section 4975 ofthe Internal Revenue Code of 1986, as now or
hereafter amended, respectively.
10.1.23 No Broker. No member ofthe Leasing Group nor any
oftheir respective Affiliates has dealt with any broker or
agent in connection with the transactions contemplated by
the Lease Documents.
10.1.24 No Improper Payments. No member ofthe Leasing Group
nor any oftheir respective Affliates has:
(a) made any contributions, payments or gifts of its funds
or property to or for the private use of anv oovemment
official, employee, aaent or other Person where either the
payment or the purpose of such contribution, payment or
gifts is illegal under the laws ofthe United States, any
state thereofor any other jurisdiction (foreian 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
understandina that any part of such pavment was to be used
for any other purpose other than that described in the
documents supportina the payment; or
50
(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.
10.1.2 Nothing Omitted. Neither this Lease, nor any ofthe
other Lease Documents, nor any certificate, agreement,
statement or other document, including, without limitation,
any financial statements concezning the financial condition
ofany 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 beina misleading. There is no fact within the special
knowledge of Lessee which has not been disclosed herein or
in writing to Lessor that materially adversely affects, or
in the future, insofar as Lessee can reasonably foresee
based on the information cunently available to it after due
inquiry, may materially adversely affect the business,
properties, assets or condition, financial or otherwise,
ofany member ofthe Leasing Group or the Leased Property.
10.1.26 No Vlarain Securitv. Lessee is not engaged in the
business of
extending credit for the purpose ofpurchasing or carrying
margin stock (within the meanin5 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
anv_ marDin security or in any other manner which would
involve a violation ofany ofthe regulations of the Board of
Governors of the Federal Reserve System. Lessee is not an
"investment company" within the meaning ofthe Investment
Company Act of 1940, as amended.
10.1.27 No Default. No event or state offacts which
constitutes, or which. with notice or lapse of time, or
both, could constitute, a Lease Default has occurred and is
continuing.
10.128 Principal Place of Business. The principal place
ofbusiness and chief executive office of Lessee is located
at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇- ▇▇▇ (▇▇▇ "▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇").
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 riahts.with respect to hiring;
tenure and conditions of employment, and no member of the
Leasing Gcoup has
51
experienced any material controversy with any Facility
administrator or other e_mployee ofsimilar stature or with
any labor organization which has, or is likely, to have a -
materially adverse effect upon the financial condition
and/ot= 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, desians, drawings,
products, projects, improvements, developments, know-how and
trade secrets which are used in or necessary for the
development and/or operation of the Facility in accordance
with its Primary Intended Use, without conflict with or
infringement of any, and subject to no restriction, lien,
encumbrance, right, title or interest in others.
10.1.31 Nlanagement Agreemcnts. There is no Management
Agreement in force and effect as ofthe 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 continizing
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.
I.6,10. I.8,10.1.10, I 0.1.14,
10.1.1,10.1.17(b),10.1.17(c),10.1.17(i),10.1.18,10.1.19,10.
1.20,10.1.21, IO.I.22,10.1.?7, I 0.1.?9, in the second
sentelice of Section 10. I. I 2, in the second and third
sentences of Section 10.1.1 i and in the second sentence of
Section 10. I.2 shall not constitute continuina
b
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
FI
I1.1 Status Certificates. At any time, and from tirne 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
52
pursuant to this Section at the request of Lessor shall be
addressed to any prospective purchaser or mortgagee ofthe
Leased Property as Lessor may request and may be relied
upon by Lesspr and any such prospective purchaser or
mortgagee ofthe Leased Property.
-
11.2 Financial Statements; Renorts: 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
ofeach of their respective fiscal years, (i) a copy of the
Consolidated Financials for each of (c) Lessee, (y) the
Guarantor and (z) any Sublessee which is an Affiliate of
Lessee for the preceding fiscal year, certified and, in the
case of Guarantor, audited by, and with the unqualified
opinion of, independent certified public accountants
acceptable to Lessor and certified as true and correct by
Lessee, the Guarantor or the applicable Sublessee, as the
case may be (and, without limiting anything else contained
herein, the Consolidated Financials for Lessee and for each
such Sublessee shall include a detailed balance sheet for
Leased Property as ofthe last day of such fiscal year and a
statement of earnings from the Leased Property for such
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
separate statements, certified as true and correct by
Lessee, the. Gua:aiitor, any IVlanager 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 inquiiy, 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 enaaged 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
Sub!eases as ofthe last day of such fiscal year, the
respective areas demised thereunder, the names of the
Sublessees thereunder, the respective etpiration dates ofthe
Subleases, the respective rentals provided for therein, and
such other information pertaining to the Subleases as may be
reasonably requested by Lessor; and (v) evidence
satisfactory to Lessor that Lessee has fulfilled its
obligation to make the Annual Facility Upgrade E;cpenditure.
(b) Monthlv Statements of Lessee. Within thiirty (30) days
after the end of each calendar month durina the pendencv of
this Lease, (i) a statement certified as true and correct by
Lessee setting forth the Gross Revenues of the
53
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 ofpayment) and (iii) an
express written calculation showing the compliance or non-
compliance, as the case may be, with the specific financial
covenants set forth in Section 11.3 for the applicable
period, including, with respect to the calculation of
Lessee's Debt Coverage Ratio, a schedule substantially in
the form attached hereto as EXHIBIT D.
(c) Quarterly Statements. 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) Quarterlv Statements ofthe Guarantor. Within forty-five
(45) days after the end of each fiscal quarter, unaudited
Consolidated Financials for the Guarantor certified as tiue
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 A uthority having jurisdiction over assisted
living matters and (ii) Contracts (involving payments in the
agaregate in excess of $ 100,000 per annum), includina,
without limitation, all Provider Agreements.
Contract Notices. Promptly but in no event more than ten
(10) days after the receipt thereof, true and complete
copies ofany 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
HLTNDRED THOUSAND DOLLARS (100,000) per annum) other than
those issued in the ordinary course ofbusiness.
(g) Permit or Contract Defaults. Promptly but in no event
more than ten ( 10) days after the receipt thereof, true and
complete copies of all surveys, follow-up surveys,
licensing surveys, complaint surveys, examinations,
compliance certificates, inspection reports, statements
(other than those statements ▇▇.▇▇ are issued in the
ordinarv course of business), if any, terminations and
notices of any kind (other than those notices that are
furnished in the ordinary course of
54
business) issued or provided to Lessee, the Manager or any
Sublessee by_ any Govemmental Authority, Accreditation Body
or any Third Party I'ayor, including, without limitation,
any notices pertaining to any delirlquency in; or proposed:
revision of, Lessee's, the NIanager's or any Sublessee's
obligations under the t'-erms 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.
(i) Other Information. With reasonable promptness, such
other information as Lessor may from time to time reasonably
request respecting (i) the financial condition and affairs
of each member of the Leasing Group and the Leased Property
and (ii) the licensing and operation ofthe Leased Property;.
including, without limitation, financial statements,
certificates and consents from accountants and all other
financial and licensina/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, avoid
constitute a Lease Default, a written statement of Lessee
settina forth the details ofsuch 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 ofall
actions, suits and proceedings before any Governmental
Authority or Accreditation Body which could have a material
adverse effect on any member of the LeasinQ Group or the
Leased Property.
(1) Audit Reports. Promptly but in no event more than ten
(10) days after receipt, a copy of all audits or reports
submitted to Lessee by any independent public accountant in
connection with any annual, special or interim
55
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
thari:ten (10) days after Lessee acquires knowledge thereof,
written notice of:
(i) the potential termination ofany Permit or Provider
Agreement necessary for the operation of the Leased
Property;
(ii) any loss, damage or destruction to or ofthe Leased
Property in etcess 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 (t) Facility
administrator or Facility employee of similar stature or (y)
any labor organization or (z) the Manager or any employee
ofthe Manager which has, or is reasonably likely to have, a
materially adverse effect on the financial condition and/or
operations ofthe Facility;
(iv) any controversy that calls into question the
eligibility ofthe Facility for the participation in any
Medicaid, Medicare or other Third Party Payor Program in
which the Facility is participating;
(v) any refusal of reimbursement by any Third Party Payor
which, singularly or together with all other such refusals
by any Third Party Payors, could reasonably be e:cpected 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 ofany member ofthe Leasing Group, which could
reasonably be eYpected to be materially adverse to the
business, properties, assets or condition, financial or
otherwise, of any member of the Leasing Group or the
Leased Property.
56
(n) Responses To Inspection Reports. Within thirty (30) days
after receipt of an inspection report relating to the Leased
Property frorn Lessor, a, written response describing in
detail prepared plans to address corscems 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 ofall
reports, ifany, 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 repoirt detailing the capital expenditures made
in the then current Fiscal Year and on or before the end of
the first month ofeach Fiscal Year, Lessee. any such
Sub?essee and/or any such Manaaer shall submit to Lessor
revised finalized versions of such budgets and report.
(q) Working Capital Loan. Promptly after receipt thereof,
copies of any notices Lvith respect to default from a lender
ofa Working Capital Loan.
11.2.2 Responsible Officer. Any certificate, instrument,
notice, or other
document to be provided to Lessor hereunder by any member
ofthe Leasing Group shall be signed by an executive officer
ofsuch member (in the event that any ofthe foregoing is not
an individual), having a position of Vice President or
hiaher and with respect to financial matters, any such
ceitificate, instrument, notice or other document shall be
sianed by the chief financial officer of such member.
11.?.3 No 1\Iaterial Omission. No ceirtificate, 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 ofa 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 Confidentialitv. Lessor shall afford any informat.ion
i'eceived pursuant to the prov isions 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 anv such information as Lessor deems necessary
or appropriate in connection with anv sale, transfer,
conveyance, participation
57
or assignment of the Leased Property or any of the Lease
Documents or any interest therein and (b) use such
information in any litigatiort or arbitration proceeding
between Lessor and any member of the Leasing Group. Without
liriliting the foregomg, Lessor may also utilize any
information fumished to it hereunder as and to the extent
(i) counsel to Lessor determines that such utilization is
necessary pursuant to I 5 U.S.C. 77a-77aa or I Ll.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
ofthe 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
ofany such information under applicable confidentiality law
or regulations, to the eYtent that the same are applicable
to such information.
11.3 Financial Covenants. Lessee covenants and agrees that,
throughout the Term and as long as Lessee is in possession
ofthe Leased Property:
11.3.1 Debt Coverage Ratio of Lessee. From and after the
second
anniversary ofthe date hereofuntil the fourth anniversary
thereof, the Facility and all other Group Four Acquisition
Facilities shall maintain for each Fiscal Quarter an
aggregate Debt Coverage Ratio equal to or greater than 1. I
to 1 and from and after the fourth anniversary thereofand
for the remainder ofthe Term, the Facility and all other
Group Four Acquisition Facilities shall maintain for each
Fiscal Quarter an aggregate Debt Coverage Ratio equal to or
greater than 1.2 to I.
11.3.2 Intentionallv Deleted.
11.3.3 Intentionallv Deleted.
11.3.4 Intentionallv Deleted.
11.3. Current Ratio - Guarantor. From and after December i
1,1999 and for the remainder of the Terzn, 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 Intentionallv Deleted.
11.3.7 Net Worth - Guarantor. The Guarantor shall maintain,
at all times, a Net Worth ofnot less than FORTY VIILLION
DOLLARS (540,000,000).
58
11.3.8 No Indebtedness. The 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 incuzred upon
customary terms in the ordinary course of business, (iv)
Indebtedness created in connection with any financing ofany
Capital Addition, provided, that each such financing has
been approved by Lessor in accordance with the tezrns of
Azrticle 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
(5200,000) incurred, for the eYclusive use ofthe Leased
Property, on account ofpurchase 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 propezrty other
than those purchased or leased and purchase money security
interests in equipment and equipment leases which comply
with the provisions of Section 6.1.2 and (vii) Indebtedness
specifically pezmitted by the Meditrust/Emeritus Transaction
Documents.
11.3.9 No Guaranties. The Lessee shall not assume,
auarantee, 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 debtor or
othezwise to assure any creditor against loss) in connection
with any Indebtedness of any other Person, except by the
ezidorsement 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 aarees that
throughout the Term and any periods thereafter that Lessee
remains in possession ofthe Leased Property:
11.4.1 vlaintenance of Etistence. If Lessee is a
cozporation, 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, tzust or partnership under the laws ofthe state
of its incorporation or formation and its rioht to own
property and transact business in the State.
11.4.2 Nlaterials. Except as provided in Section 6.1.?,
Lessee shall not suffer the use in connection with any
renovations or other constzuction 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
59
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
thereofshall comply with (i) all applicable Legal
Requirements (except to the extent being duly contested in
accordance with the terms hereof, (ii) all Permits and
Contracts, (iii) all Insurance Requirements, (iv) the Lease
Documents, (v) the Permitted Encumbrances and (vi) the
Appurtenant Agreement.
11.4.4 Books And Records. Lessee shall cause to be kept and
maintained, and shall permit Lessor and its representatives
to inspect at all reasonable times and upon reasonable
notice, accurate books of accounts in which complete entries
will be made in accordance with GAAP reflecting all
financial transactions of Lessee (showing, wi.thout
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. Participation in Third Partv 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 (includina, without limitation, all applicable
Provider Agreements), if and to the extent remaining
eli5ible shall be necessary for the prudent operation ofthe
Facility in the good faith exercise of commercially
reasonable business judament. .
11.4.6 Conduct ofits Business. Lessee will maintain, and
cause any Sublessee and any Manaaer 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
veriture during the Term or such time as Lessee or any such
Sublessee is in possession ofthe Leased Property other than
activities in which Lessee or such Sublessee are permitted
to engage by the provisions ofthe MeditrustlEmeritus
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 relatina 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 relatinQ to Lessee's business from either the Leased
Propertv or Lessee's Principal Place of Business or (b)
relocate its ▇▇▇▇▇▇▇▇▇▇.▇▇▇▇▇ of Business until after
receipt ofa certificate from Lessor, signed by an officer
thereof,
6C
stating that Lessor has, to its satisfaction, obtained all
d_ ocumentation that it dee_ ms necessary or desirable to
obtain, maintain, perfect and confirm the first priority
security interests granted in the Lease Documents. -. -.
11.4.8 Subordination of Affiliate Transactions. Without
limiting the provisions ofany other Section ofthis 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 ofany so-called corporate or central office
costs, expenses and charges of any kind or nature) or the
making of any loan or other extension of credit or the
making of any equity investment, shall be subordinate to the
complete payment and performance ofthe Lease Obligations;
provided, however, that all such subordinated payments may
be paid at any time unless: (x) after giving effect to such
payment, Lessee shall be unable to comply with any of its
obligations under any of the Lease Documents or (y) a Lease
Default has occurred and is continuing and has not beeri
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
riotice, 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 Facilihr Upgrade Etpenditure. Lessee shall
spend an amount equal to the Annual Facility Upgrade
Expenditure on Upgrade Renovations to the Facility each
Lease Year commencing with the second Lease Year. Lessee
will fumish and shall cause to be furnished to Lessor
evidence satisfactory to Lessor that Lessee has fulfilled
its obligation to make the Annual Facility LTpgrade
Expenditure within ninety (90) days after the end of
Lessee's fiscal year.
11. Additional Negative Covenants. Lessee covenants and
agrees that, throughout the Term and such time as Lessee
remains in possession ofthe Leased Property:
11.5.1 Restrictions Relating to Lessee. Except as may
otherwise be
expressly provided in Section 19.4 or in any of the other
Lease Documents, Lessee shall not, without the prior written
consent of Lessor, in each instanee, which consent may be
withheld in the sole and absolute discretion of Lessor:
61
(a) convey, assign, hypothecate, transfer, dispose of or
encum_ ber, 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
hereofpursuant to the Lease Documents; (ii) Liens created in
accordance with Section 6. I.? against Tangible Personal
Property securing Indebtedness peimitted under Section 11.
i.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 ofthe Leased Property provided that the same are
replaced with fxtures, fuinishings 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 ofthe Leased
Property; (v) without limitation as to amount, any sale of
inventory by Lessee in the ordinary course ofbusiness; and
(vi) subject to the terms ofthe Negative Pledge Agreement
and the Affiliated Party Subordination Agreerrient,
distributions to the Parners of Lessee;
(b) perznit the use of the Facility for any purpose other
than the Primary Intended Use and the Other Permitted Uses;
or
(c) liquidate, dissolve or merge or consolidate with any
other Person except, subject to Lessor's prior written
consent, which consent shall not be unreasonably withheld, a
Meditrust/Emeritus Transaction Affiliate.
11.2 No Liens. Lessee will not directly or indirectly
create or allow to remain and will promptly discharae at
its eYpense any Lien, title retention agreement or claim
upon o~ against the Leased Propery (including Lessee's
interest therein) or Lessee's interest in this Lease or any
ofthe other Lease Documents, or in respect ofthe Rent,
excludina (a) this Lease and any permitted Subleases, (b)
the Permitted Encumbrances, (c) Liens which are consented to
in w-riting by Lessor, (d) Liens for those tates of Lessor
which Lessee is not required to pay hereunder, (e) Liens
ofmechanics, laborers, materialmen, suppliers or vendors for
sums either not yet due or being contested in strict
compliance with the terms and conditions of Article 1 ,
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 pavable or which are in
the process ofbeing contested in strict compliance with the
terms and conditions of Article 1 (h) the Liens incurred
62
pursuant to the provisions of Section 6.1.2 and (i) invol_
untary Liens caused by t_he actions or omissions of Lessor.
11.5.3 Limits on Affiliate Transactions. The Lessee shall
not enter into ari 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 ofthe 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 hereofand thereafter until (a) in the
case ofthe expiration ofthe Initial Term or a termination
ofthis Lease, the ffth (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 (?nd) anniversary ofthe
expiration ofthe applicable Extended Term, no member ofthe
Leasin5 Group nor any Person holding or controlling,
directly or indirectly, any interest in ai-iy member ofthe
Leasing Group (collectively, the "Limited Parties")shall be
involved in any capacity in or lend any oftheir 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
there with) other than (a) those set forth on Schedule I
1..4 anneYed hereto, (b) those activities in which a
Meditrust/Emeritus Transaction Affiliate is permitted to
engage by the provisions ofthe 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 ofthis clause (c) only ifat the time such
acquisition occurs Lessee has already (x) exercised in that
twelve month period its right under Section 1. i 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 ofthe Leased Property), whether such competitive
activity shall be as an offcer, director, owner, employee,
agent, advisor, independent contractor, developer, ▇▇▇▇.▇▇,
sponsor, venture capitalist, administrator: manaaer,
investor, partner, joint venturer, consultant or other
participant in anv capacity whatsoever with respect to an
assisted living facility, center, unit or program loeated
within a five (5) mile radius of the Leased Property.
63
Lessee hereby aclaiowledges and agrees that none ofthe time
span, scope or area covered by the foregoing restrictive
covenants is or are unreasonable arid 2hat it is th.e
specific intent of Lessee that each and all ofthe
restrictive covenants set forth. hereinabove shall be
valid and enforceable as specifically set forth herein.
Lessee fizrther agrees that these restrictions are special,
unique, extraordinary and reasonably necessarv for the
protection of Lessor and any Purchaser and that the
violation ofany such covenant by any of the Limited Parties
would cause irreparable damage to Lessor and any Purchaser
for which a legal remedy alone would not be sufficient to
fully protect such parties.
Therefore, in addition to and without limiting any other
remedies available at law or hereunder, in the event that
any of the Limited Parties breaches any of the restrictive
covenants hereunder or shall threaten breach of any of such
covenants, then Lessor and any Purchaser shall be entitled
to obtain equitable remedies, including specific performance
and injunctive relief, to prevent or otherwise restrain a
breach ofthis Section 11.5.4 (without the necessity
ofposting 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 Leasirig 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 ofthe foregoing restrictive
covenants and the Limited Pairties shall not defend on the
basis that there is an adequate remedy at law.
Without limiting any other provision ofthis Lease, the
parties hereto acknowledae that the foregoing restrictive
covenants are severable and separate. Ifat any time any of
the foreaoing restrictive covenants shall be deemed invalid
or unenforceable by a court ▇▇▇▇▇▇ jurisdiction over this
Lease, by reason of beina 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 immediatel5 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 pairties agree that such covenar.ts as so
amended and reformed, shall be valid and b?nding as throuah
the invalid or unenforceable portion has not been included
therein.
The provisions of this Section I 1.5.4 shall survive the
termination of the Lease and any satisfaction ofthe Lease
Obliaations in connection therewith or subsequent thereto.
The parties hereto acl;nowledae and aaree that any Purchaser
may enforce the provisions of this Section 11..4 as a third
party beneficiary.
11. Intentionallv deleted.
6.4
11.5.6 Intentionallv deleted.
11.5.7 Intentionallv 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 ofthe
aggregate past service liability thereby created.
11.5.9 Forgiveness of Indebtedness. Lessee will not waive,
or permit any Sublessee or Manager which is an Affiliate to
waive, any debt or claim, except in the ordinary course of
its business.
11.5.10 Value of Assets. Except as disclosed in the
financial statements provided to Lessor as ofthe 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..11 Changes in Fiscal Year and Accountina 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
accouiiting procedures related to the method of revenue
recoanition, billing procedures or determinations of
doubtful accounts or bad debt expenses or permit any of its
Subsidiaries to so ▇▇▇▇▇▇ its fiscal year, provided that, in
the event of such change, moditication 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
1?.l General Insurance Requirements. Durina the Term ofthis
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 Propertv, the
Tangible Personal Property located theceon and the business
operations conducted on the Leased Property insured as set
forth below.
12.1.1 Tvpes and Amounts of Insurance. Lessee's insurance
shall include the following: .
65
(a) property loss and physical damage insurance on an all-
risk basis (with only such exceptions as Lessor may in its
reasonable discretiori 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
aareed-amount
5
endorsement and a deductible not in excess of TWENTY FIVE
THOUSAND DOLLARS (25,000). Such insurance shall include,
without limitation, the following coverages: (i) increased
cost of construction, (ii) cost of demolition, (iii) the
value of the undamaged portion of the Facility and (iv)
contingent liability from the operation ofbuilding 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 goveznmental authority charged
with such flood risk analysis in the future) in limits
reasonably acceptable Lo Lessor and subject to the
availabilitv of such flood insLlrance;
(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 (ifreasonably deemed necessary by
Lessor) in limits and with deductibles acceptable to Lessor;
(e) environmental impairment liability insurance
(ifavailable on commercially reasonable terms and deemed
reasonably necessary by Lessor) in limits and with
deductibles acceptable to Lessor;
business interruption insurance in an amount equal to the
annual Base Rent due hereunder plus the agregate sum of the
Impositions relating to the Leased Propertv 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 NIILLION DOLLARS (5,000,000) per occurrence with
respect to bodily injury and death and THREE NIILLION
DOLLARS (53,000,000) for property damage and with all limits
66
(a) include an agreed amount endorsement and loss payee,
additional named insured and secured party endorsements, in
forms accepLable 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 ofand in form reasonably acceptable to Lessor and any
Fee Mortgagee;
expressly waive any right ofsubrogation on the part ofthe
insurer against Lessor, any Fee Mortgaaee or the Leasing
Group; and
(g) otherwise be in such forms as shall be reasonably
acceptable to Lessor.
12.1.4 Notices. Certificates and Policies. Lessee shall
promptly provide to Lessor copies of any and all notices
(including notice of non-renewal), claims and demands which
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, toaether with
evidence, satisfactory to Lessor, of payment of the premiums
thereon. Lessee shall deliver to Lessor original
counterparts or copies certi ied 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 ofeach such policv.
12.1. Lessor's Riaht 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
thereo 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
coveraoe is unsatisfactory by reason ofthe failure or
impairment ofthe capital ofany insurance company which
rote any such policy, upon
58
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 thereofand vith a deductible not
in excess ofone percent (l%) ofthe 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
thereo 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
limirts acceptable to Lessor; and
(1) such other insurance as Lessor from time to time may
reasonably require and also, as may from time to time be
required by applicable Legal Requirements and/or by any Fee
Mortgaaee.
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
ratina of A:X or better by A.l. Best Co.
12.1.3 Policv Requirements. Everv policy of insurance from
time to time required under this Lease or any ofthe other
Lease Documents (other than worker's compensation) shall
name Lessor as ovner, loss payee, secured party (to the
extent applicable) and additional named insured as its
interests may appear. Ifan insurance policy covers
properties other than the Leased Property, then Lessor shall
be so named vith respect only to the Leased Property-. Each
such policy, where applicable or appropriate, shall:
67
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 foX
those risks required to be insured by the provisions hereof,
satisfactory to Lessor, an_d, 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
lirnitation, 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 Pavment of Proceeds. All insurance policies
required hereunder (except for eneral 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 ofany
Fee Mortgagee, all proceeds shall be paid to Lessor alone
(rather thanjointly to Lessee and Lessor). Lessor is hereby
authorized to adjust and compromise any such loss with the
consent of Lessee or, following any Lease Default, whether
or not cured, without the consent of Lessee, and to collect
and receive such proceeds in the name of Lessor and Lessee,
and Lessee appoints Lessor (or any agent designated by
Lessor) as Lessee's attorney-in-fact with full power of
substitution, to endorse Lessee's name upon any check in
payment thereof Subject to the provisions of Article 1 ,
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 ofthe Leased Property for which such
insurance proceeds shall have been paid.
12.1.7 Irrevocable Power of Attorney. .The power
ofattorney conferred on Lessor pursuant to the provisions of
Section I 2.1, being coupled with an interest, shall be
irrevocable for as long as this Lease is in effect or any
Lease Obligations are outstandin, shall not be affected by
any disability or incapacity which Lessee may suffer and
shall survive the same. Such pover of attorney, is provided
solely to protect the interests of Lessor and shall not
impose any duty on Lessor to e:cercise any such pover, and
neither Lessor nor such attorney-in-fact shall be liable for
anv act, omission, error in judgment or mistake of law,
except as the same may result from its gross negligence or
wilful misconduct.
1?.1.8 Blanket Policies. NotvithstandinQ anything to the
contrary contained herein, Lessee's obligations to carry the
insurance provided for herein may be brought within the
coveraae of a so-called blanket policy or policies of
insurance carried and maintained by Lessee and its
Affiliates; provided, hovever, that the coverage afforded
to Lessor shall not be reduced or diminished or otherwise be
different from that which
69
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, furthe_ r that
the requirerents of Section 12.1 are otherwise satisfed.
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 forzn 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 ofthe insurance, including
Lessor, are included therein as additional insureds and (b)
losses are payable under said insurance in the same manner
as losses are required to be payable under this Lease.
Lessee shall immediately notify Lessor of the taking out of
any such separate insurance or of the increasing of any of
the amounts of the then existing insurance by securing an
additional insurance policy or policies.
12.1.10 Assianment of Unearned Premiums. Lessee hereby
assigns to L.essor 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 ofthe
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.
12.2.1 Indemnifieation. Except vith 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 ofaction and to indemnifv and hold harmless Lessor
and each of the other Indemnified Parties from and against
all damages, losses, liabilities, obliations, penalties,
costs and expenses (including, without limitation,
reasonable attorneys' fees, costs and expenses, whether
incurred in litigation or not and whether before or
afierjudgement, including those incurred on appeal, 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,
70
business invitee, guest, customer, contractor or sublessee
ofany ofthe foreaoing parties, relating to, directly or
indirectly, the Leased Property, (c) any accident, injury
or.darrtage whatsoever caused to any Person, including,
without limitation, any clairri ofmalpractice, 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 Affliate of Lessee or any employee,
agent, licensee, contractor or sublessee ofany ofthe
foregoing parties, (d) any Lease Default, (e) any claim
brought or threatened aQainst 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 ofits right and
remedies under any ofthe Lease Documents, ( any attempt by
any member ofthe Leasing Group or any Affliate of Lessee to
transfer or relocate any of the Permits to any location
other than the Leased Property and/or (g) the enforcement
ofthis indemnity. Any amounts which become payable by Lessee
under this Section 1 ?.2.1 shall be a demand obligation of
Lessee to Lessor, payable as an Additional Charge. The
indemnity provided for in this Section 12.?.1 shall survive
any termination ofthis Lease and meraer into anyjudgement.
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.
1?.2.3 Limitation on Lessor Liabilitv. I Teither Lessor
nor any Affiliate of Lessor shall be liable to any member of
the Leasing Group or any Affiliate of any m.ember ofthe
Leasin5 Group, or to any other Person whatsoever for any
damaae, injury, loss, compensation, or claim (including, but
not lirnited 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 ofthe Leased
Property; (c) any accident or damaoe resulting from the use
or operation of the Leased Property or any business
conducted thereon; (d) the termination of this Lease by
reason of Casualtv 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 leakina 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 tlie event of
loss caused by the aross nealiaence or willful misconduct of
Lessor). Notwithstandina the foreaoing, Lessor shall not be
released from liability for any injury, loss, damage or
liabilitv suffered by Lessee to the extent caused directlv
by the gross nealigence or willful misconduct of Lessor, its
servants, employees or aents acting within the scope of
their
.7I
authority on or about the Leased Property or in regards,to
the Lease; prov_ ided, however, that in no event shall
Lessor, its servants, employeesor agents have any
liability.basd on any loss for any indirect or
consequential damages. or
12.2.4 Risk of Loss. During the Term ofthis Lease, the
risk ofloss or of decrease in the enjoyment and beneficial
use ofthe 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
Airticle 20) is assumed by Lessee and, in the absence ofthe
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 Airticles 13 and 14) nor shall any ofthe events mentioned
in this Section entitle Lessee to any abatement of Rent
(except for an abatement, if any, as specifically provided
for in Section 3.7).
ARTICLE 13
FIRE AND CASUALTY
13.1 Restoration Followina Fire or Other Casualtv.
13.1.1 Follovina Fire or Casualtv. In the event ofany
damage or destruction to the Leased Property by reason of
fire or other hazard or casualty (a
"Casualty"), Lessee shall give immediate written notice
thereofto Lessor and, subject to the terms ofthis Article I
i 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 Propertv to the condition it
was in immediately prior to such dainage or destiuction and
to a condition adequate to operate the Facility for the
Primary Intended Use and, ifapplicable, the Other Permitted
Uses and in compliance with applicable Legal Requirements.
All Work shall be performed and completed in accordance
vvith ali applicable Legal Requirements and the other
requirements of this L ease within one hundred and twentv (
I ?0) days following the occurrence of the damae or
destruction plus a reasonable time to compensate for
Unavoidable Delays (including for the purposes ofthis
Section, delays in obtaining Permits and in adjusting
insurance lossesj, but in no event beyond two-hundred and
seventy (270) days following the occurrence ofthe Casualty.
13.1.2 Procedures. In the event that any Casualty results in
non-structural damaQe to the Ieased Property in excess of
FIFTY THOUSAND DOLLARS.(50,000) or in any structural damage
to the Leased Propertv, reaardless of the extent of such
72
structural damage, prior to commencing the Work, Lessee
shall comply with the following requirements:
(a) Lessee shall fumish to Lessor complete plans and
specificatioils for the Work (collectively and as the same
may be modifed 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, ofthe entire cost of completing the Work, and to the
extent feasible, the Plans and Specifications shall provide
for Work of such nature, quality and extent, that, upon the
completion thereof, the Leased Property shall be at least
equal in value and general utility to its value and general
utility prior to the Casualty and shall be adequate to
operate the Leased Property for the Primary Intended Use
and, if applicable, the Other Permitted Uses;
(b) Lessee shall fumish to Lessor certified or photostatic
copies of all Permits and Contracts required by all
applicable Legal Requirements in connection with the
cominencement and conduct ofthe Work to the ettent tlie same
can be secured in the ordinary course prior to the
commencement of construction;
(c) Lessee shall fumish to Lessor a cash deposit or a
payment and performance bond sufficient to pay for
completion ofand payment for the Vork in an amount not
less than the architect's estimate of the entire cost of
completina the Vork, less the amount ofproperty insurance
proceeds (net ofcosts and expenses incurred by Lessor in
collecting the same), ifany, then held by Lessor and which
Lessor shall be required to apply toward restoration ofthe
Leased Propertv as provided in Section I.2;
(d) Lessee shall fumish to Lessor such insurance with
respect to the Work (in addition to the insurance required
under Section 1 ?. I hereo 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) throuah (d) immediately above, as applicable,
and, thereafter, Lessee shall perform the Vork diligently,
in a good and vorkmanlike fashion and in good faith in
accordance vith (i) the Plans and Specifications referred
to irz clause (a) immediately above, . (ii) the Permits and
Contracts referred to in clause (b) immediately above and
(iii)
73
all applicable Legal Requirements and other requirements of
this Lease; provided, however, that in the event ofa bona
fide emergency during whicti 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 Lessos prior approval, as long as
Lessee immediately thereafter advises Lessor of such
emergency and the nature and scope ofthe Work performed and
obtains Lessor's approval ofthe remaining Work to be
completed.
13.1.3 Disbursement oflnsurance Proceeds. If, as provided
in Section 1.2, Lessor is required to apply any property
insurance proceeds toward repair or restoration ofthe Leased
Property, then as long as the Z Vork is being diligently
performed by Lessee in accordance with the terms and
conditions ofthis Lease, Lessor shall disburse such
insurance proceeds from time to time during the course of
the ▇▇▇▇ in accordance with and subject to satisfaction
ofthe following provisions and conditions. Lessor shall not
be required to make disbursements more often than at thirty
(0) day intervals. Lessee shall submit a written request
for each disbursement at least ten (10) Business Days in
advance and shall comply w_ ith the following requirements
in connection with each disbursement:
(a) Prior to the commencement ofany Work, Lessee shall have
received Lessor's written approval ofthe Plans and
Specifications (which approval shall not be unreasonably
withheld) and the Work shall be supervised by an
e:cperienced construction manaer with the consultation of
an architect or enaineer qualizied 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 enaineer is appropriate).
Lessee shall not make any changes in, and shall not permit
any changes in, the quality ofthe materials to be used in
the Work, the Plans and Specifications or the Work, whether
by change order or otherwise, without the prior ▇▇▇▇▇▇
consent of Lessor, in each instance (vhich consent may be
withheld in Lessor s sole and absolute discretion);
provided, however, that such consent sh.all not be required
for any individual change which has been approved by the
architect, which does not materially affect the structure or
eYterior of the Facilitv, and the cost of which does not
eYceed TEN THOUSAND DOLLARS (10,000) or hich chanes, in
the agaregate, do not exceed ONE HUNDRED THOUSAND DOLLARS
(100,000) in cost. Notwithstanding the foregoina, prior to
making any change in Plans and Specifications, copies ofall
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 necessarv
Permits and/or Contracts required by any Govemmental
Authority in connection therewith have been obtained or
entered into, as the case may be.
74
(b) Each request for payment shall be accompanied by (r) a
certificate of the architect or engineer, bearing the
architect's or engineer's seal, and (y) a certificate ofthe
general contractor, qualified and licerised to do bzzsiness
n tlie State, that is performing the Work (collectively,
the "Work Certificates"), eaci 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 certiflcate 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; then requested to be withdrawn,
plus all suzns previously withdrawn, does not exceed the
cost of the Work insofar as actually accomplished up to the
date of such certificate;
(iv) that the remainder of the funds held by Lessor will be
sufficient to pay for the full completion of the Work in
accordance with the Plans and Specifications;
(v) that no part of the cost of the services and materials
described in the applicable Work Certificate has been or is
being made the basis of the withdraval 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,
ifunpaid, might become the basi.s of a vendor's, mechanic's,
laborer s or materialman's statutorv or other similar Lien
upon the Leased Property.
75
(e) Lessee shall deliver to Lessor satisfactory evidence
that the Leased Property and all materials and all property
described in the Work Certificates.a_ re 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 ofthe funds then being requested or duly
contested in accordance with the terms ofthis 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 Improvements upon or
over the Permitted Encumbrances as are in existence as ofthe
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 ofthe 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 ofthe 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).
( There shall be no Lease Default or any state of facts
or circumstance eYistina vhich, with the giving ofnotice
and/or the passage oftime, would constitute any Lease
Default.
76
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 requiremenCs
(except frr such requirements, if any, as Lessor may have
expressly elected to waive;.and to -th extent of (r) the
insurance proceeds, if any, which Lessor may be required to
apply ti 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.
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 temporarv certificate oi occupancy (if obtainable)
and all other applicable Permits and Contracts issued by or
entered into with any Goveznmental 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 ( i0) days afier completion of
the Work, Lessee shall obtain and deliver to Lessor a
permanent certificate of occupancy for the Leased Property,
subject to seasonal delays.
77
Upon completion ofthe Work and delivery ofthe 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 ifthere shall be insurance proceeds or
cash deposits, other than the Retainage, held by Lessor in
excess of the amounts disbursed pursuant to th 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 ofthe 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 ofthe Lease Obligations and are not
for the benefit of Lessee or the benefit of any other
Person.
13.2 Dis osition of Insurance Proceeds.
13.2.1 Proceeds To Be Released to Pav For Work. In the event
ofany Casualtv, eYcept as provided for in Section 1 i.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 1.2. I are satisfied
,
(b) Lessee demonstrates to Lessor's satisfactior that
Lesse has the fmancial ability to satisfy the Lease
Obligations during such repair or restoration; and
(c) no Sublease material to the operation o.fthe Faciiitv
immediately prior to such damage or taking shall have been
cancelled or terminated, nor contain any still ecercisable
right to cancel or terminate, due to such Casualty if and to
the etent that the income from such Sublease is necessary
in order to avoid the violation of any of the financial
covenants set forth in this Lease or otherwise to avoid the
creation of an Event of Default.
If a Fee Mortgagee prevents Lessor from releasing proceeds
of property insurance notwithstanding the satisfaction ofthe
foregoing requirements, Lessee shall have no obligation to
restore the Casualty to which such.proceeds pertain.
78
13.2.? 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 fts Primary Intended Use and if
either: (a) Lessee, after exercise of diligent efforts;
cannot.wi2hin 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 ofthe 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 ofthe last
sentence ofthis Section 1.2.2) 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 oftermination plus an amount,
which when added to th 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) tlze amount ofinsurance proceeds actually
received by Lessor (net of costs and expenses incurred by
Lessor in collecting the same) equals (3) the areater ofthe
Nleditrust Investment or the Fair Market Value ofthe 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 dav immediately prior to such Casualty
and prior to any other Casualty which has notbeen fully
repaired. Any acquisition of the Leased Property pursuant to
the terms ofthis Section 13.2.2 shall be consummated in
accordance with the provisions of Article 18, mutatis,
mutandis. Ifsuch termination becomes effective, Lessor shall
assian 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 ofthis Section 1.2.2 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 (15)
of the Fair Market Value of the Leased Premises at the time
of such termination; Lessor shall pay to Lessee fifty
percent (50) ofthe amount ofsuch excess.
13.2.3 .Secial Right to Rebuild. Anythina contained in
Section 1 i.?.2(A) (a) above notwithstanding, iffollowing
any Casualty, Lessee vill be unable, as a result of
79
any applicable Legal Requirements, to rebuild and operate
the Facility for the Primary Intended Use and, ifapplicable,
the Other PermittedUses, but will be able to rebuild and
operate an assisted living facility (the "New Use Facility")
providing substantially_ siinilar services as the Facility
immediately prior to such Casualty and having units equal
irr number to at least seventy-five per cent (75%) ofthe
number ofunits included in the Primary Intended Use (the
"New Primary Intended Use"), as in effect immediately prior
to any such Casualty, then, Lessee may rebuild the New Use
Facility in accordance with the terms and provisions of
Article 13, so long as (a) Lessee is ▇▇▇▇▇▇▇▇▇.▇▇▇▇ to
comply with, and does comply with, all of the terms and
conditions of Article I 3 and (b) the projections for the
New Use Facility, as reasonably approved by Lessor, indicate
that Lessee shall be able to maintain for the New Use
Facility, for each Fiscal Quarter of the Term, including all
Extended Terms, commencing with the first Fiscal Quarter
following the first anniversary of the earlier of the
issuance of a temporary certificate of occupancy therefor or
the completion of the Work, a Debt Coverage Ratio equal to
or greater than 1.1 to 1 (the "Minimum Coverage Ratio"). In
such case, for purposes of compliance with the terms and
conditions of this Article 13 by Lessee and for the balance
of the Term following such Casualty, the Primarv Intended
Use shall be deemed to be the New Prizriary Intended Use and
the Facility shall be deemed to be the New Use Facility.
Lessee shall deliver to Lessor the projections referred to
in clause (b)(i) above, together vith calculations, based
tlzereon, showing the Minimum Coverage Ratio, prior to the
commencement ofany Work.
13.3 Tangible Personal Propertv. All insurance proceeds
payable by reason ofany loss ofor damage to any ofthe
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 Tanaible Personal Property, subject to
the terms and conditions set forth in the other provisions
ofthis Article 13, mutatis mutandis.
13.4 Restoration of Certain Improvements and the Tangible
Personal Propertv. 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 Leasee a.d (ii) the Tangible Personal Property or (b)
replace such alterations and improvements and the Tanaible
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 eYtent desirable for the prudent operation ofthe
Facility in the o.od faith. etercise of commercially
reasonable business judgment.
13. No Abatement of Rent. In no event shall any Rent ▇▇▇▇▇
as a result of any Casualty except as expressly.provided in
Section 3.7.
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13.6 Termination of Certain Rihts. Any termination ofthis
Lease pursuant to this Article 1 i shall cause any right of
Lessee to extend the Termofthis 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
oftermination which may arise by reason of any damage or
destruction to the Leased Property due to any Casualty which
Lessee is obligated to restore or may restore under any of
the provisions of this Lease.
13.8 Application of Rent Loss and/or Business Interruption
Insurance. Lessor shall direct all proceeds ofrent loss
and/or business interruption insurance (collectively, "Rent
Insurance Proceeds") to be paid to Lessee, provided no fact
or circumstance eists which constitutes, or with notice, or
passage of time, or both, would constitute, a Lease Default
pertaining to Facility or the Leased Property. If a Lease
Default or such fact or circumstance exists, Lessor may
rescind such direction and apply all such insurance proceeds
towards the Lease Obligations pertaining to the Facility or
the Leased Propertv or hold such proceeds as security
therefor.
13.9 Obliation To Account. Upon Lessee's written request,
which may not be made not more than once in any three ()
month period, Lessor shall provide Lessee with a written
accounting of the application of all insurance proceeds
received by Lessor.
ARTICLE 14
CONDEMNATION
l4.l Parties' Riahts and Obliaations. Ifdliring the Term
there is- any Taking ofall or :.v part ofthe Leased
Property or any interest in this Lease, the rights and
obligations ofthe parties shall be determined by this
Article 14.
I:l.? Total Takina. Ifthere is a permanent Taking ofall or
substantially all ofthe I.eased Property, this Lease shall
terminate on the Date of Takina. 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)
ofthe amount ofsuch etcess.
1.3 Partial or Temporarv Taking. Ifthere is a Permanent
Taking ofa portion ofthe Leased Property, or if there is a
temporary Takina of all or a portion of the Leased Property,
this Lease shall remain in effect so lon as the Leased
Property is not thereby rendered permanently Unsuitable For
Its Primary Intended Use or temporarilv Unsuitable For Its
Primary Intended Use for a period not likely to, or which
does not, exceed two hundred and seventv (?70) days. If,
8l
however, the Leased Property
is thereby so rendered permanently or temporarily Unsuitable
For Its Primary Intended Use: (a) ifonly rendered
temporarily Unsuitable For Its primary Intended Use, Lessee
shall have the right to restore the Leased Property, at its
own expense (subjeet to the right under certain
circumstances as provided for in Section 14.5 to receive the
net procee-ofan Award for reimbursement), to the
extent possible, to substantially the same condition as
existed immediately before the partial or temporary Taking
or (b) Lessee shall have the right to acquire the Leased
Property from Lessor (i) upon payment ofall Rent due through
the date that the purchase price is.paid, for a purchase
price equal to the greater of (x) the Meditrust Investment
or (y) the Fair Market Value of the Leased Property minus
the Fair Market Added Value, with the Fair Market Value of
the Leased Property and the Fair Market Added Value to be
determined as of the day immediately prior to such partial
or temporary Taking and (ii) in accordance with the terms
and conditions set forth in Article I 8; in which event,
this Lease shall terminate upon payment of such.purchase
price and the consummation of such acquisition.
Notwithstanding the foregoing, Lessor may overrule Lessee's
election under clause (a) or (b) and instead either (1)
terminate this Lease (with no obligation on the part of
Lessee to acquire the Leased Property as a result thereo as
of the date when Lessee is required to surrender possession
of the portion of the Leased ▇▇▇▇▇▇▇▇.▇▇ 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 ifthe Leased Property may be operated for at least
eighty percent (80%) ofthe licensed unit capacity ofthe
Facility in effect prior to the Taking. Lessee shall
exercise its election under this Section 14. bv givino
Lessor notice thereof("Lessee's Election Notice") within
sixty (60) days after Lessee receives notice ofthe Taking.
Lessor shall exercise its option to overrule Lessee's
election under this Section 14. by givina Lessee notice of
Lessor's exercise ofits riahts under Section 14. i 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 terzninated as provided above,
Lessee shall be entitled to an abatement of Rent, but only
to the extent, if any, provided for in Section i.7,
effective as ofthe date upon which the Leased Property is
rendered Unsuitable For Its Primary Intended Use.
14.4 Restoration. Ifthere is a partial or temporary Taking
ofthe Leased Property and this Lease remains in full force
and effect pursuant to Section 14., Lessee shall accomplish
all necessarv restoration ar?d Lessor shall release the net
proceeds of such Award to reimburse Lessee for the actual
reasonable costs and expenses thereof, subject to all ofthe
conditions and provisions set forth in Article 1 i as though
the Taking was a Casualty and the Award was insurance
proceeds. If the cost of the restoration eceeds the amount
of the Award (net of costs and e:cpenses incurred in
obtainina the Award), Lessee shall be obligated to
contribute any ecess amount needed to restore the Facility
or pay for such costs and expenses. To the extent that the
cost ofrestoration is less than the amount ofthe Award (net
ofcost and expenses incurred in obtainina the Award), the
remainder of the ▇▇▇▇▇ shall be retained by Lessor and Rent
shall be abated as set forth in Section i.7
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14.2 ▇▇▇▇▇ Distribution. In the event Lessee comletes the
purchase of the, Leased Property, as described in Section
14.3, the entire Award shall, upon payment ofthe purchase
price and all Rent and other sums due under this Lease and
the other hease Documents, belorlg 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 thereofvhich 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 ofany
Fee Mortgagee, unless and until Lessee completes the
purchase ofthe 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 ofthe
progress ofall 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, ifthis Lease is
terminated as a result ofa Taking, Lessee's obligationto so
reimburse Lessor shall be diminished by the amount of the
Award, if any, received by Lessor hich is in eccess
ofthe Meditrust Investment.
ARTICLE 15
PERlVIITTED CONTESTS
- 15.1 Lessee's Riht to Contest. To the extent ofthe
express references made to this
Article l5 in other Sections ofthis 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 leaal proceedings conducted in
good faith and with due diligence (until the resolution
thereo, 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 thereoffrom Lessor and/or compliance
by any applicable member ofthe 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 anv rent
therefrom would be in any immediate danaer of beina sold,
forfeited, attached or lost as a result ofsuch proceeding,
(d) in the case ofa Legal Requirement, neither Lessor nor
any
83
member ofthe Leasing Group would be in any immediate danger
ofcivil 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 ofmoney
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 ofthe 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 offacts or circumstance exists which constitutes, or
with the passage oftime and/or the giving ofnotice, could
constitute a Lease Default; rovided, however, but without
limiting any other right Lessee may have under the Lease
Documents to contest the payment of Rent, the provisions of
this Article 15 shall not be construed to permit Lessee to
contest the payment of Rent or any other sums payable by
Lessee to Lessor under any ofthe Lease Documents. Ifsuch
contest is finally resolved in favor of Lessee, Lessee shall
be entitled to any refund resulting therefrom.
1.2 Lessor's Cooperation. Lessor, at Lessee's sole cost and
expense, shall execute a: d 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 Indemnitv. Lessee, as more particularly
provided for in Section I?.?, shall indemnify, defend (with
counsel acceptable to Lessor) and save Lessor harmless
aaainst any liability, cost or ecpense ofany kind,
includina, without limitation, attorneys' fees and etpenses
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 ofthe following shall
constitute an "Event of Default" hereunder and shall entitle
Lessor to eercise its remedies hereunder and under any of
the other
Lease Documents:
ga
(a) any failure of Lessee to pay any amount due hereunder
or under any of the other Lease Documents within ten (10)
days folloving the date wheri such paymgnt 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;
(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, warrantv 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
ofthe United States, any state or anyjurisdiction, (iv) make
a general assignment for the benefit of creditors, (v) make
or offer a composition of its debts with its creditors or
(vi) be unable to pay its debts as such debts mature;
if any court shall enter an order, judgment or decree
appointing, without the consent of any member of the Leasing
Group, a receiver or trustee for such member or for any of
its property and such order, judgment or decree shall remain
in force, undischarged or unstayed, ninety (90) days after
it is entered;
(g) if a petition is filed aaainst any member of the
Leasing Group which seeks relief under the bankruptcy or
other similar laws of the United States, any state or any
otherjurisdiction, and such petition is not dismissed within
ninety (90) day-s after it is filed;
85
(h) in the event that:
i: all or any portion ofthe interest ofany partrter,
shareholder, member in any member ofthe Leasing Group (other
than Guarantor) shallbe=; on any one or more occasions,
directly or indirectly, sold, assigned, hypothecated or
otherwise transferred (whether by operation of law or
otherwise), if such member of the Leasing Group shall be a
partnership, joint venture, syndicate or other group,
without the prior written consent of Lessor, in each
instance, which consent may be withheld by Lessor in its
reasonable discretion with respect to a sale, assignment,
hypothecation or other transfer to a MeditrustlEmeritus
Transaction Affiliate and in all other cases, in its sole
and absolute discretion;
ii. the shares ofthe issued and outstanding capital stock
ofany 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 Affliate 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 Leasina Group (other than Guarantor) shall be,
directly or indirectly, sold or otherwise transfened
(whether by operation of law or otherwise), if such member
of the Leasina 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. I.
shall be required (a "Working Capital Stock PledQe").
(i) the death, incapacity, liquidation, dissolution or
termination of
ecistence of any member of the Leasino Group or the meraer
or consolidation of any member of the Leasina Group with anv
other Person except as eYpressly permitted bv_ the terms
ofthis Lease Agreement.
,
86
(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 ei.ther (i)
enforcement proceedings shall have been commenced by any
creditor uporr'-such award orjudgment or (ii) such award
orjudgment 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 orjudgment 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 fiznding, a final unappealable
determination is made by the appli cable Govemmental
Authority that Lessee or any Sublessee shall have failed to
comply with applicable Medicare and/or Medicaid regulations
in the operation ofthe 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 ofthe Leased Property;
(s) ifany member ofthe Leasing Group receives notice ofa
fnal unappealable determination by applicable Governmental
Authorities of the revocation of any Permit required for the
lavful construction or operation ofthe Facility in
accordance w-ith 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
ofthe Leasing Group is required to permanently cease the
construction or operation of the Facility in accordance w-
ith the Primary Intended Use and the Other Permitted Uses;
and
(t) any failure to maintain the insurance required pursuant
to Section I i of this Lease in force and effect at all
times until the Lease Obligations are fully paid and
perforzned;
(u) the appointment of a temporary manaaer (or operator)
for the Leased Property by any Govemmental Authority;
(v) the entry of an order by a court with jurisdiction over
the LeasedPropezty to close the Facility, to transfer one or
more residents the Facility as a result of
88
an allegation of abuse or neglect or to take any acti,on to
eliminate an emergency situation then existing at the
Facility, if such order has not been stayed pending appeal
vithin Ien (10) following such entry; or
(w) the occurrence of any default or breach of condition
continuing for more than thirty (0) days under any credit
agreement, loan agreement or other agreement establishing a
major line ofcredit (including, without Iimitation, a major
line ofcredit or a Working Capital Loan which is not secured
by a Working Capital Stock Pledge)(or any documents executed
in connection with such lines of credit) on behalf of
Guarantor without regard to whether the applicable creditor
has elected to declare the indebtedness due and payable
under such line of credit or to exercise any other right or
remedy available to it or the occurrence of any such default
or breach of condition if the applicable creditor has
elected to declare the indebtedness due and payable under
such line of credit or to exercise any other right or remedy
available to it. For the purpose of this provision, a major
line of credit shall mean and include any line of credit
established in an amount equal to or greater than ONE
MILLION DOLLARS (1,000,000) with respect to a line of
credit for which Guarantor is an obligor, endorser, surety
or guarantor.
16.2 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
arly one or more ofits rights and remedies under this Lease
or any ofthe other Lease Documents, or as available at law
or in equity and upon the expiration ofthe 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. Notvithstanding 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 ( I 0) 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 Documenta, unless otherwise expresslv agreed to in a
written document sianed by an authorized officer or agent of
Lessor.
(b) To the extent permitted under applicable law, Lessee
shall pay as Additional Charoes all costs and expenses
(includina, without limitation, attorneys' fee and expenses)
reasoriablv incurred by or on behalf of Lessor as a result
of any Lease Default.
89
(j) except as provided in Section 19.1 hereof, if, without
the prior written consent of Lessor, in each instance, which
consent rriay be withheld by Lessor in its sole and
absolute discretion, Lessee's interest, or any interest ofa
Sublessee whieh 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
oflaw 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 Affliate of Lessee, ifthe
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, ifexercised, 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);
(I) the occurrence of a Relaed 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
Plede (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 ecess of thirty (0) days (a "Failure to
Operaie");
(o) if one or more j udgments against Lessee or any
Sublessee which is an Af iliate of Lessee or attachments
aaainst Lessee's interest or any such Sublessee's interest
in the Leased Property, which in the aagregate exceed TWO
HUNDRED FIFTY THOUSAND DOLLARS (250;000) or which may
materially and adversely interfere vvith the operation of
the Facility, remain unpaid, unstayed on appeal,
undischarged, unbonded or undismissed for a period of thirty
(30) days;
87
(c) If any Lease Default shall have occurred, whether or not
this Lease has been terminated pursuant to Paragraph (a)
ofthis Section, Lesseeshall, to the extent.permitted
unsier applicable law, if required by Lessor so to do, upon
not less than ▇▇▇▇ (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 ofthe Tangible Personal Property
from the Leased Property, subject to the rights of any
residents of the Facility and any Sublessees who are not
Affiliates ofany member ofthe Leasing Group and to any
requirements ofapplicable law, or Lessor may claim ownership
ofthe Tangible Personal Property as set forth in Section
5.2.3 hereofor 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 damaes suffered by Lessor as a result
of Lessee's breach of this Lease.
(d) In addition to all of the rights and remedies of Lessor
set forth in this Lease and the other Lease Documents, if
Lessee shall fail to pay any rental or other charge due
hereunder (whether denominated as Base Rent, Additional
Rent, Additional Charges or otherwise) within ten ( 10) days
after same shall have become due and payable, then and in
such event Lessee shall also pay to Lessor (i) a late
payment service charge (in order to partially defray
Lessor's administrative and other overhead expenses) equal
to TWO HUNDRED FIFTY DOLLARS (250) and (ii) to the extent
permitted by applicable law, interest on such unpaid sum at
the Overdue Rate; it being understood, however, that nothing
herein shall be deemed to extend the due date for payment of
any sums required to be paid by Lessee hereunder or to
relieve Lessee of iis obligation to pay such sums at the
time or times required by this Lease.
16.3 Damages. None of(a) the termination ofthis 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
relettina, 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: (r) 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 neeessary to
compensate Lessor for all damage proximately caused by
Lessee's failure to perform the Lease Oblioations or which
in the ordinary course
90
vould be likely to result therefrom and less the amount of
rent that has actually been received by Lessor following the
termirlation ofthis Leasefrom a PersQn 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 operatiori ci 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
(ii) each payment of Rent as the same would have become due
and payable if Lessee's right ofpossession 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 ofthis 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" ofunpaid Rent shall be determined by a
court havingjurisdiction thereofusing the lowest rate of
capitalization (hihest present worth) reasonably applicable
at the time ofsuch determination and allowed by applicable
lav and the Additional Rent shall be deemed to be the same
as the average dditional Rent ofthe precedin; five (5) full
calendar years, or ifshorter, the averaae Additional Rnt
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 eamed during the remainder of the Term or any portion
thereof.
16.=t Lessee Waivers. Ifthis Lease is terminated pursuant to
Section 16.?, Lessee vaives, to the ettent not prohibited
by applicable lav, (a) any right ofredemption, re-entrv or
repossession, (b) any riaht to a trial by jury in the event
of summary proceedinas to enforce the remedies set forth in
this Article 16, and (c) the benefit of any laws now or
hereafter in force eemptina property from liability for
rent or for debt.
16. :pplication f Funds. Any payments othenvise 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 vhich Lessor may reasonablv
dtrmine or as may be required by the laws ofthe State.
16.6 Failure to Conduct Business. For the purpose
ofdetermining rental loss damages or Additional Rent, in the
event Lessee fails to conduct business upon the Leased
Property, eact damaaes or the amount of Additional Rent
being unascertainable, it shall be deemed that the
▇▇▇▇▇▇▇▇▇▇.▇▇▇▇ for such period vould be equal to the
average annual Additional
9l
Rent during the five (5) preceding calendar years or such
shorter period oftime as may. have existed between the date
Additional Rent commenced to accrue and the date of
computatio.
16.7 Lessor's Riaht to Cure. If Lessee shall fail to make
any payment, or to per drm 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 obligatiqn 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 Bv Lessor. Lessor shall not by any act,
delay, omission or otlierwise (including, without
limitation, the exercise of any right or remedy hereunder)
be deemed to have vaived any ofits rights or remedies
hereunder or under any ofthe other Lease Documents unless
such waiver is in writing and signed by Lessor, and then,
only to the extent specifically set ▇▇▇▇ therein. No waiver
at any time of any of the terms, conditions, covenants,
representations or warranties set forth in any ofthe Lease
Documents (including, without limitation, any ofthe 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 e:iereise arv oi its rihts or
remedies under any of the Lease Documents or before any
Lease Default can occur, or as establishing a course of
dealing for interpretin5 the conduct of and aoreements
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 uhder any of the
Lease Documents at the time of the making of such payment
shall not: (a) constitute a waiver ofthe riaht to exercise
any of Lessor's remedies at that time or at any subsequent
time, (b) constitute an accord and satisfaction or (c)
nullify any prior exercise ofany remedy, without the epress
written consent of Lessor. Any failure by Lessor to take any
action under this Lease or any of the other Lease Documents
bv reason of a default hereunder or
92
thereunder, acceptance ofa 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
Documerits or as a waiver of such right or of the right of
Lessor thereafter to insist upon strict compliance with the
ternzs 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., 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 ofthe Obligations
evidenced or secured by the Lease Documents; notice ofany
such extension, forbearance or indulgence being hereby
waived by Lessee and all those claiming by, through or under
Lessee.
The rights and
remedies set forth under this Lease are in addition to all
other rights and remedies afforded to Lessor under any ofthe
othei- 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 ofthe rights and remedies of Lessor under each ofthe
Lease Documents shall be separate and cumulative and may be
exercised concurrently or successively in Lessor's sole and
absolute discretion.
ARTICLE 17
SURRENDER OF LEASED PROPERTY OR LEASE HOLDING OVER
17.1 Surrender. Lessee shall, upon the expiration or prior
termination ofthe Terzn (unless oceasioned by Lessee's
purchase ofthe Leased Property pursuant to the terms ofthis
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) ordinarv wear and tear (subject
to the obliaation of Lessee to maintain the Leased Property
in aood order and repair during the entire Term of the
Lease), (b) dairiage caused bv the gross nealigence or
willful acts of Lessor, and (c) any damaae or destruction
resultina from a Casualty or Taking that Lessee is not
required by the terms of this Lease to repair or restore.
93
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 L,eased
Property pursuant to the terms of this Lease Agreement),
upon any request rriade from time to time by Lessor, Lessee
shall (a) promptly and diligently use its best efforts to
(i) transfer and assigriall Permits and Contracts necessary
or desirable for the operation ofthe 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 anv location other than the Leased
Property. The provisions of this Section I 7.2 shall survive
theexpiration or e3rlier termination ofthis Lease.
Lessee hereby appoints Lessor as its attorney-in-fact, with
full power of substitution to take such actions, in the
event that Lessee fails to comply with any request made by
Lessor hereunder, as Lessor (in its sole absolute
discretion) may deem necessary or desirable to effectuate
the intent of this Section 17.2. The power of attorney
conferred on Lessor by the provisions of this Section 17.?,
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 ofattorney 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
ofthe 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 ofany such surrender.
17.4 Holding Over. If; for any reason, Lessee ▇▇▇▇▇ remain
in possessiori ofthe Leasecl Property after the expiration
or any earlier termination of the Term, such possession
shall be as a
94
tenant at sufferance during which time Lessee shall pay as
rental each month, one and one-half times the aggregate
of(i) one-twelfth ofthe aggregate BaseRerit, and
AdditiorialRentpayable at the time of such expiration or
earlier termination of the Term; (ii) aIl Additional Charges
accruing during the month and (iii) all other sums, if any,
payable by I.essee pursuant to th provisions of this Lease
with respect to the Leased Property. During such period of
tenancy, Lessee shall be obligated to perform and observe
all ofthe 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 ofthe 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 ofthis Lease.
ARTI.CLE 18
PURCHASE OF THE LEASED PROPERTY/RIGHT OF FIRST REFUSAL
18.1 Purchase of the Leased Propert. 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, aIl ofthe 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 hereo 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 ofthe 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
ofsuch conveyance, including, without limitation, the cost
oftitle examination or standard or extended coverage title
insurance, attomeys' fees incurred by Lessor in connection
with such conveyance, recording and transfer taxes and
recording fees and similar charges and specifically
excludin any prepayment penalties, ifany, due Lessor's
mortgagee, shall be paid by Lessee.
18.2 Appraisal.
18.2.1 Designation of Appraisers. In the event that it
becomes necessarv to determine the Fair Market Value ofthe
Leased Property for any purpose ofthis Lease, the party
required or permitted to ive 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)
95
days after receipt of any such notice, Lessor (or Lessee, as
the case mav 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 Nlarket Value of the Leased
Property or appoint a scond Person as appraiser on its
behalf. -
18.2.2 Appraisal Process. The appraisers thus appointed,
each ofwhom must be a member of the American Institute of
Real Estate Appraisers (or any successor organization
thereto), shall, within forty-five (45) days after the date
of the notice appointing the first appraiser, proceed to
appraise the Leased Property to determine the Fair Market
Value ofthe Leased Property as ofthe relevant date (aiving
effect to the impact, if any, of inflation from the date of
their decision to the relevant date); provided, however,
that ifonly one appraiser shall have been so appointed, or
iftwo 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
ifthe difference between the amounts so determined shall not
e;cceed ten per cent (10) of the lesser of such amounts,
then the Fair Market Value ofthe 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
(?0) days to appoint a third appraiser, but if such
appraisers fail to do so, then either party may request the
American Arbitration Association or anv successor
organization thereto to appoint an appraiser within twenty
(?0) days ofsuch 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 tvventy (20) days or within ninety (90) days
ofthe oriainal 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 bv such court. Anv appraiser
appointed by the orinal appraisers, by the American
Arbitration Association or by such court shall be instructed
to determine the Fair Market Value ofthe Leased Property
within thirty (30) days after appointment of such Appraiser.
The determination ofthe appraiser vhich differs most in
terms ofdollar amount from the determinations of tize other
tvo appraisers shali be eciuded, and fifty percent (50)
ofthe sum ofthe remainin two determinations shall be final
and binding upon Lesscr and Lessee as the Fair Market Value
ofthe Leased Property.
18.?.3 Specific Enforcement and Cn5t5. This provision for
dctermination bv appraisal shall be specificallv enforceable
to the etent such remedv is available under applicable
lav, and any determination hereunder slzall be final and
bindina upon the parties ecept as otherwise provided bv
applicable lav. Lessor and Lessee shall each pay the fees
and etpenses of the appraiser appointed bv it and each shall
pa one-half of the
95
fees and expenses of the third appraiser and one-half of all
other cost and expenses incurred in connection with each
appraisal. 18.3 Lessee's Riht of First Refusal.
18.3.1 Right of First Refusal. At any time during the Term,
as long as there etists no Lease Default at the time of
exercise and on the Closing Date and this Lease is then in
full force and effect and there exists no event or state of
facts which constitutes, or with the passage of time and/or
the giving of notice would constitute, a Lease Default, the
Lessee shall have a "Right of First Refusal" subject to the
following terms and condition: (a) if the Lessor receives a
bona fide written offer to purchase the Leased Property from
a Person which is not a member ofthe Leasing Group or an
Affiliate of any member of the Leasing Group (the "Offer"),
acceptable to Lessor in the Lessor's sole and absolute
discretion, and the Lessor elects, in the Lessor's sole and
absolute discretion, to sell the Leased Property in
accordance with the Offer, the Lessee shall have thirty (30)
days following the delivery ofthe notice ofthe Offer to
Lessee to elect to purchase the Leased Property on the same
terms and conditions as specified in the Offer; (b) unless
the Lessor receives notice from Lessee within such thirty
(30) day period setting forth the Lessee's election
("Election Notice") to so purchase the Leased Property and
unless thereafter the Lessee completes the acquisition of
the Leased Property exactly as provided for, and by the date
specified in the Offer (the "Closing Date"), the Lessor
shall be at liberty, and shall have the absolute and
unconditional right to sell the Leased Property to any
person within the next twelve (12) months substantially on
the terms and conditions set forth in the Offer or on any
other terrns and conditions more favorable to the Lessor;
and (c) any such sale consummated in accordance with the
provisions of the foregoing clause (b) shall extinguish all
rights granted to the Lessee under this Section 18.3. The
Lessee's Right of First Refusal shall not apply to and shall
survive: (a) any sale or transfer of the Leased Property to
any Affiliate of the Lessor or of Meditrust; (b) any sale or
transfer of the Leased Property occasioned by the exercise
of any rights or remedies of any Fee Mortgagee; or (c) a
deed or transfer in lieu of foreclosure to any Fee Mortgagee
or any Affiliate thereof. The Lessee's Right of First
Refusal shall in all events terminate upon the expiration or
any earlier termination of this Lease. The acceptance of the
deed to the Leased Property by Lessee or any grantee
desianated by Lessee, as the case may be, shall be deemed to
be a full performance and dischare ofevery agreement and
obliaation to be performed by Lessor contained or expressed
in this Lease.
18.32 Condition of Leased Propertv. The Leased Property is
to be purchased
"AS IS" and "WHERE IS" as ofthe Closina Date.
18.3.3 Qualitv of Title. If Lessor shall be unable to give
title or to make conveyance, as stipulated in this Section
18. i, then, at Lessor's option, Lessor shall use reasonable
efforts to remove all defe.cts in title and. the applicable
Closing Date shall be extended for period of thirty (30)
days other than with respect to any Encumbrances
97
which Lessor has caused to exist. Lessor shall not be
required to expend more than FIFTY THOUSAND DOLLARS
(50,000) (inclusive ofattorney's fees) in or_der ta have
used "reasonable efforts." - -.
18.3.4 Lessor's Inabilitv to Perform. Ifat the expiration
ofthe extended time Lessor shall have failed so to remove
any such defects in title, then all other obligations of all
parties hereto under Section 18.3 shall cease and Section
18.3 shall be void and without recourse to the parties
hereto. Notwithstanding the foregoing, Lessee shall have the
election, at either the original or extended Closing Date,
to accept such title as Lessor can deliver to the Leased
Property in its then condition and to pay therefor the
Purchase Price without reduction, in which case Lessor shall
convey such title; provided, that, in the event of such
conveyance, if any portion of the Leased Property shall have
been taken by Condemnation prior to the applicable Closing
Date, Lessor shall pay over or assign to Lessee at the
Closing Date, all Awards recovered on account of such
Taking, less any amounts reasonably expended by Lessor in
obtaining such Award and less any amounts expended for
restoration pursuant to the provisions of Article 14 hereof,
or, to the extent such Awards have not been recovered as of
the applicable Closing Date, Lessor shall assigrl to Lessee
all its rights with respect to any claim therefor and
further provided, that, in the event of such conveyance, if
any portion of the Leased Property shall have suffered a
Casualty prior to the applicable Closing Date, Lessor shall
pay over or assign to Lessee at the Closing Date, all
insurance proceeds recovered on account of such Casualty,
less any amounts reasonably expended by Lessor in obtaining
such proceeds and less any amounts expended for restoration
pursuant to the provisions of Article I 3 hereof, or, to the
extent such proceeds have not been recovered as of the
applicable Closing Date, Lessor shall assign to Lessee all
its rights with respect to any claim therefor.
18.3. Use of Purchase Price to Clear Title. To enable
Lessor to make
conveyance as provided in this Section, Lessor may, at the
Closing Date, use the Purchase Price or any portion thereof
to clear the title of any Lien, provided that all
instruments so procured are recorded contemporaneously on
the Closing Date or reasonable arrangements are made for a
recording subsequent to the Closing Date in accordance with
customary conveyancing practices.
18.3.6 Lessee's Default. If Lessee delivers Lessee's
Election Notice and fails to consummate the purchase ofthe
Leased Property in accordance with the terms hereof for any
reason other than Lessor's willful and unexcused refusal to
deliver the Deed, (a) Lessee shall thereafter have no
further right to purchase the Leased Property pursuant to
this Section, although this Lease shall otherwise continue
in fulI 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 Closing Date on which such sale was supposed to
occur.
98
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 oflaw or otherwise) or
sublet all or any part ofthe Leased Property. For purposes
of this Section 19. I, 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 oflaw) ofany
ofthe capital stock ofor 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, Lessor's consent
shall not be unreasonably withheld with respect to an
assignment or pledge of an interest of Lessee in this Lease
or a sublet of all or a part of the Leased Property to a
Meditrust/Emeritus Transaction Affiliate.
19.2 Attornment. Lessee shall insert in each Sublease
approved by Lessor, provisions to the effect that (a) such
Sublease is subject and subordinate to all ofthe 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 optiori, attorn to Lessor and
waive any right the Sublessee may have to terminate the
Sublease or to surrender possession trereunder, as a result
of the termination of this Lease and (c) in the event the
Sublessee receives a written notice from Lessor stating that
Lessee is in default under this Lease, the Sublessee shall
thereafter be obligated to pay all rentals accruing under
said Sublease directly to Lessor or as Lessor may direct.
All rentals received from the Sublessee by Lessor shall be
credited against the amounts owing by Lessee under this
Lease.
ARTICLE 20
TITLE TRANSFERS AND LIIS GRANTED BY LESSOR
20.1 No Merger of Titte. Except as otherwise provided in
Section 18. i.10, there shall be no merger ofthis Lease or
ofthe leasehold estate created hereby with the fee estate in
the Leased Propertv 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 Bv Lessor. Ifthe original Lessor named herein
or any successor in interest shall convey the Leased
Propertv in accordance with the terms hereof, other than as
security for a debt, and the grantee or transferee ofthe
Leased Property shall eYpresslv assume all
99
obligations of Lessor hereunder arising or accruing from and
after the date of such conveyance or transfer, the original
Lessor named herein or the applicablesuccessor 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 trarisfer as to the Leased
Property and all such future liabilities and obligations
shall thereupon be binding upon the new owner.
.20.3 Lessor Mav 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 obliga.tion
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 ofa mortgage or
deed oftrust on Lessor s interest in the Leased Property the
same shall be referred to herein as a "Fee Mortage" and the
holder thereofshall be referred to herein as a "Fee
Mortgagee".
20.4 Subordination and Non-Disturbance. Concurrently with
the execution and delivery of any Fee Mortgage entered into
after the date hereof, provided that the Lessee eYeutes and
delivers an aareement ofthe type described in the folloving
paragraph, Lessor shall obtain and deliver to Lessee an
aareement by the holder of such Fee Mortoage, pursuant to
which, (a) the applicable Fee Nlortagee consents to this
Lease and (b) agrees that, notwithstanding the terms of the
applicable Fee MortQage held by such Fee Mortgagee, or any
default, expiration, termination, foreclosure, sale, entiy
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 ofthe Leased
Property nor shall this Lease be terminated or cancelled at
any time, except in the event that Lessor shall have the
right to terr:inate 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 obliations hereunder in
connection vith any such election, the holder ofthe Fee
Mortgage shall release its Fee Mortgage upon payment by
Lessee ofthe purchase price required hereunder, provided,
that (1) such purchase price is paid to the holder ofthe Fee
Mortgage, in the event that the Indebtedness secured by the
applicable Fee Ivlortgage is equal to or greater than the
purchase price or (2) in the event that the purchase price
is reater than the Indebtedness secured by the Fee
Mortaaae, a portion ofthe purchase price equal to the
Indebtedness secured by the Fee Mortaage is paid to the Fee
MortaaQee and the remainder of the purchase price is paid to
Lessor.
At the request from time to time by any Fee Mortgaaee,
Lessee shall (a) subordinate this Lease and all of I.essee's
riahts and estate hereunder to the Fee Nlortae held by
such Fee Vlortgagee and (b) aaree that Lessee will attorn to
and recoanize such Fee Nlortgagee or the
I00
purchaser at any foreclosure sale or any sale under a,power
ofsale contained in any such Fee Mortgage as Lessor under
this Lease for the balance of the Terrri then remaining. To
effect the intent and purpose of the immediately preceding
sentence, Lessee agrees to execute and deli-ver such
instruments in recordable from as are reasonably requested
by Lessor or the applicableee Mortgagee; provided, however,
that such Fee Mortgagee simultaneously executes, delivers
and records a written agreement of the type described in the
preceding paragraph.
ARTICLE 21
LESSOR OBLIGATIONS
21.1 Quiet Enjovment. 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 foreaoing 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 ofthe 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 onlv if Lessor shall fail to
observe or perform any term, covenant or condition ofthis
Lease on its part to be performed and such failure shall
continue for a period ofthirty (30) days after notice
thereof from Lessee (or such shorter time as may be
necessary in order to protect the health or velfare ofany
residents ofthe Facility or to ensure the continuing
compliance ofthe Facility with applicable Legal
Requirements), unless such failure cannot with due diligence
be cured vithin a period ofthirty (30) days, in which case
such failure shall not be deemed to continue if Lessor,
within said thirty (0) day period, proceeds promptly and
with due diligence to cure the failure and diliaeritly
completes the curing thereofwithin one hundred twenty (120)
days after notice thereof.
l01
ARTICLE 22
NOTICES Any notice, request, demand, statement or
consent made hereunder or under any ofthe 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:
Ifto Lessee: c/o Emeritus Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇ ▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, President
With a copy to: The ▇▇▇▇▇▇▇▇▇ Group ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esquire
Ifto the Guarantor: Emeritus Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. Brandstrorn, President
With a copy to: The ▇▇▇▇▇▇▇▇▇ Group ▇▇▇ ▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esquire
If to Lessor: Meditrust Acquisit:on Corporation I ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇? 194 Attn: President
With copies to: Meditrust Acquisition Corporation I ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Attn: General Counsel
l02
and ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ __ ▇▇ ▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
- ▇▇▇▇▇▇, ▇▇ 021 I 0 - - - 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 fizrther or similar notice was
or is required.
ARTICLE 23
LIMITATION OF MEDITRUST LIABILITY
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 only to the assets of Lessor for the
payment of any sum or performance of any obligation due by
or from Lessor pursuant to the terms and provisions of the
Lease Documents.
ARTICLE 24
MISCELLANEOUS PROVISIONS
24.1 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 ofthis indemnification
agreement and shall survive the termination ofthis Lease.
l03
2=1.2 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 orjoint 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, r 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 ofthe
terms, covenants,
conditions, warranties or representations contained in this
Lease or in any ofthe 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 ofany
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, amendnzents,
extensions, substitutions, revisions, consolidations and
modifications of any of the Lease Documents, the Management
Agreements, the Related Party Agreements, the Pemiits 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, . subst:tutions,
revisions, consolidations or modifications thereof.
Notwithstanding the foregoing. any reference contained in
any ofthe Lease Documents, whether express or implied, to
any renewal, replacement, amendment, extension,
substitution, revisions, consolidation or modification ofany
ofthe Lease Documents or any Management Agreement, Related
Party Agreement, Permit and/or the Contract is not intended
to constitute an agreement or consent bv Lessor to any such
reneal, 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 ofany ofthe Lease Documents.
2.4 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 meanina of, or the scope
or intent of, this Lease, any ofthe other Lease Documents or
any parts hereofor thereof.
2 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.
104
24.6 Counterparts. This Lease and the other Lease Documents
may be executed in one or more counterparts, each ofwhich
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 RESPECTS THE LETTERS OF INTENT, DATED
JANUARY 31,1996 AND AUGUST 13,1996 (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 ofany such suit, action or proceeding seek to
enforce this waiver to the right of trial by jury and
acknowledges that Lessor has been induced by this waiver
(among other things) to enter into the transactions
evidenced by this Lease and the other Lease Documents and
further acknowledges that 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 bindin upon and inure to the benefit of
(a) Lessee and Lessee's legal representatives and permitted
successors and asigns 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 Partv 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 ofthe
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 riaht 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 assians. 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
l05
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 dQ so.
24.11 GOVERNING LAW. THIS LEASE SHALL BE CONSTRUED AND 7flHE
RIGHTS AND OBLIGATIONS OF LESSOR AND LESSEE SHALL BE
DETERMINED
IN ACCORDANCE WITH THE LAWS OF THE STATE.
LESSEE HEREBY CONSENTS TO PERSONAL JURISDICTION IN THE
COURTS OF THE STATE AND THE UNITED STATES DISTRICT COURT FOR
THE DISTRICT IN WHICH THE LEASED PROPERTY IS SITUATED AS
WELL AS TO THE JURISDICTION OF ALL COURTS FROM WHICH AN
APPEAL MAY BE TAKEN FROM THE AFORESAID COURTS, FOR THE
PURPOSE OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT
OF OR WITH RESPECT TO ANY OF THE LEASE DOCUMENTS, THE
NEGOTIATION AND/OR CONSUMMATION OF THE TRANSACTIONS
EVIDENCED BY THE LEASE DOCUMENTS, THE LESSOR'S RELATIONSHIP
OF ANY MEMBER OF THE LEASING GROUP IN CONNECTION WITH THE
TRANSACTIONS EVIDENCED BY THE LEASE DOCUMENTS AND/OR THE
PERFORMANCE OF ANY OBLIGATION OR THE EXERCISE OF ANY REMEDY
UNDER ANY OF THE LEASE DOCUMENTS AND EXPRESSLY WAIVES ANY
AND ALL OBJECTIONS LESSEE MAY HAVE AS TO VENUE IN ANY OF
SUCH COURTS.
24.12 General. Anything colitained in this Lease to the
contrary notwithstanding, all claims against, and
liabilities of, Lessee or Lessor arising prior to any date
oftermination ofthis Lease or any ofthe 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
ofthe 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 ofwhich 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 ma. Yimum 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 ofnonperformance, 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.
106
24.13 Notice of Indemnification. THE PARTIES '1'O THIS
LEASE iiEREBY, ACKNOWLEDGE AND AGREE THAT THIS LEASE
CONTAINS
INDEMNIFICATION OBLIGATION$ PURSUANT TO SECTIONS 122,1.3
AND.l HEREOF.
[INTENTIONALLY LEFT BLANK)
l07
IN WITNESS WHEREOF, the parties have caused this Lease to be
executed and attested by their respective officers thereunto
duly authorized
WITNES S : N
WITNESS:
/
Name: A,▇▇▇▇▇ ▇. ▇▇▇▇▇
23033 I-2
192285-1 (compareto Iaal9s)
LESSEE: EMERITUS PROPERTIES I, INC.
LESSOR:
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇ Title:
MEDITRUST ACQUISITION CORPORATIO I, a Massachusetts
corporation
By:
l08
Recording Requested By And When Recorded Mail To:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇ & Sterling
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
DEED OF TRUST, TRUST INDENTURE, ASSIGNMENT, ASSIGNMENT OF
RENTS,
SECURITY AGREEMENT, INCLUDING FIXTURES, FIXTURE FILING AND
FINANCING STATEMENT
Grantor (Borrower): Emeritus Properties III, Inc.
Grantee (Lender): Deutsche Bank AG
Grantee (Trustee): Chicago Title Insurance Company
Legal Description (ablbreviated): Lot 1 of Columbia Pacific
Management Binding Site Plan in Puyallup, ▇▇▇▇▇▇ County,
Washington, Additional legal(s) on Exhibit A.
Assessor's Tax Parcel ID# ▇▇▇▇▇-▇▇▇-▇
DEED OF TRUST, TRUST INDENTURE, ASSIGNMENT,
ASSIGIGNMENT OF RENTS, SECURITY AGREEMENT,
INCLUDING FIXTURE FILING AND FINANCING STATEMENT
Dated June 30,1998
EMERITUS PROPERTIES III, INC.
Grantor
to
CHICAGO TITLE INSURANCE COMPANY
as Trustee
and
DEUTSCHE BANK AG, NEW YORK BRANCH,
Beneficiary
DEED OF TRUST, TRUST INDENTURE, ASSIGNMENT, ASSIGNMENT OF
RENTS, SECURITY AGREEMENT, INCLUDING FIXTURES, FIXTURE
FILING AND FINANCING STATEMENT (as the same may from time to
time be extended, spread, split, consolidated, modified,
restated and renewed, this "Deed of Trust") made as of June
30,1998 by EMERITUS PROPERTIES III, INC., a Washington
corporation having an address c/o Emeritus Corporation, ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
("Grantor"), to CHICAGO TITLE l NSURANCE COMPANY, a Missouri
corporation having an address at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, the trustee, (the
"Trustee") for the benefit of, DEUTSCHE BANK AG, a bank
chartered under the laws of the Federal Republic of Germany,
acting by and through its New York Branch having an address
at ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ being the
beneficiary hereunder (the "Beneficiary").
WITNESSETH:
WHEREAS, pursuant to that certain Credit Agreement by and
among Emeritus Properties II, Inc. ("EII"), Emeritus
Properties V, Inc. ("EV"), Emeritus Properties VII, Inc.
("EVII") and the Mortgagee, dated as of April 29,1998 (the
"Original Credit Agreement") as amended by that certain
Amendment to Credit Agreement by and among EII, EV, EVII,
Grantor and the Mortgagee, dated as of the date hereof(the
"Amendment"; the Original Credit Agreement as amended by the
Amendment is referred to herein as the "Credit Agreement"),
a copy of each of which may be examined at reasonable times
at the office of Mortgagee by persons who do or will hold an
interest in the Land (as hereinafter defined) or the
Improvements (as hereinafter defined)), and subject to the
terms and conditions therein set forth, the Mortgagee has
agreed to make a loan to Grantor in a principal amount of
SIXTEEN MILLION NINE HCTNDRED FORTY-NINE THOUSAND AND
NO/100 DOLLARS (16,949,000.00) (the
"Loan") with a maturity date of April 29, 2001; and
WHEREAS, to evidence such indebtedness Grantor has executed
and delivered the Credit Agreement and will execute and
deliver a promissory note (the "Note") to the order of
Mortgagee in an aggregate principal amount of equal to the
Loan and issued pursuant to, and dated the same date as, the
Credit Agreement and having a Maturity Date of April 29,
2001; and
WHEREAS, pursuant to the terms of the Credit Agreement, on
April 29,1998, the Mortgagee made a separate loan to (a) EII
in the amount of SIXTEEN MILLION THREE HUNDRED TWENTY-EIGHT
THOUSAND AND NO/100 DOLLARS (16,328,000.00), (b) EV, in the
amount of THIRTY ONE MILLION THREE HUNDRED SIXTY FIVE
THOUSAND AND NO/100 DOLLARS (31,365,000.00) and (c) EVII
(collectively, the "Other Borrowers") in the amount of EIGHT
MILLION FIVE HIINDRED NINETY THREE THOUSAND AND NO/100
DOLLARS (8,593,000.00) (collectively, the "Other Loans");
and
1
WHEREAS, each of the Other Loans is evidenced by a note by
EII, EV or EVII, as applicable, in an aggregate principal
amount equal to the Other Loans (collectively, the "Other
Notes"); and
WHEREAS, in accordance with the terms of the Credit
Agreement, Grantor has guaranteed the obligations of the
Other Borrowers under the Other Notes (the "CrossGuaranty");
and
WHEREAS, the total indebtedness and liabilities to be
secured by this Mortgage are as follows (all such
indebtedness and liabilities or the instruments evidencing
same, as applicable, being herein collectively called the
"Obligations"):
(i) the aggregate principal amount of SIXTEEN MILLION NINE
HUNDRED FORTY-NINE THOUSAND AND NO/100 DOLLARS
(16,949,000.00) pursuant to the Note; plus
(ii) interest on such principal amount, as provided in the
Credit Agreement; plus
(iii) the obligation of the Grantor with respect to the
Cross-Guaranty; plus
(iv) all other amounts payable and all other obligations of
Grantor under the Credit Agreement, the Note, this Mortgage,
and any other document which relates to any of the Credit
Agreement or the Note or any of the security therefor (as
the same may be amended, modified, extended, renewed, or
supplemented from time to time, all of the foregoing being
herein collectively called the "Loan Documents"); and
WHEREAS, it has been agreed that the payment and performance
of the Obligations shall be secured by a mortgage, open-end
mortgage, advance money mortgage, trust deed, deed of trust,
trust indenture, assignment, assignment of rents, security
agreement, including fixtures, fixture fling and financing
statement, as applicable, of certain property as hereinafter
identified; and
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, to secure the punctual
payment by Grantor when due, whether at stated maturity, by
acceleration or otherwise, of the Obligations and the
performance and observance of all other covenants,
obligations and liabilities of Grantor under this Deed of
Trust, as the same may be extended, modified or renewed or
repledged, Grantor does hereby grant, bargain, sell,
mortgage, warrant, convey, alien, remise, release, assign,
transfer, set over, deliver, confirm and convey unto
Beneficiary (where this instrument constitutes a mortgage)
or Trustee (where this instrument constitute a deed of trust
or trust indenture), upon the terms and conditions of this
Deed of Trust,
2
in trust with power of sale and right of entry as provided
hereinbelow, each and all of the real properties described
in the Granting Clauses herein (which, together with all
other property located therein or described in the Granting
Clauses herein, is hereinafter collectively called the
"Mortgaged Property").
GRANTING CLAUSES
(a) All plots, pieces and parcels of land more particularly
described in Exhibit A attached hereto (the "Land"),
together with all of the easements, rights and appurtenances
now or hereafter in any way appertaining thereto, either at
law or in equity, whether now owned or hereafter acquired by
Grantor;
(b) All structures, buildings and improvements of every kind
and description now or at any time hereafter located on the
Land (the "Improvements"), together with all the estate,
right, title and interest of Grantor in all fixtures and all
appurtenances and additions thereto and substitutions or
replacements thereof owned by Grantor and now or hereafter
attached to the Premises (as hereafter defined);
(c) All right, title and interest of Grantor in and to (i)
the streets, roads, sidewalks and alleys abutting the Land,
(ii) strips and gores within or adjoining the Land, (iii)
the air space and right to use said air space above the Land
and any transferable development or similar rights
appurtenant thereto, (iv) all rights of ingress and egress
by motor vehicles to parking facilities on or within the
Land, (v) all easements now or hereafter affecting the Land,
(vi) all royalties and all rights appertaining to the use
and enjoyment of the Land, including alley, drainage,
mineral, water, oil and gas rights, (vii) all sewer rights,
and (viii) all other emblements now or hereafter located on
the Land or under or above the same or any part thereof, and
all estates, rights, interests and appurtenances; reversions
and remainders whatsoever, in any way belonging or
appertaining to the Premises or any part thereof, whether
now owned or hereafter acquired by Grantor;
(d) All right, title and interest of Grantor in and to all
water, ditches, ▇▇▇▇▇, reservoirs and drains and all water,
ditch, well, reservoir and drainage rights which are
appurtenant to, located on, under or above or used in
connection with the Land or the Improvements, or any part
thereof, whether now existing or hereafter created or
acquired by Grantor;
(e) All right, title and interest of Grantor in and to all
minerals, crops, timber, trees, shrubs, flowers and
landscaping features now or hereafter located on, under or
above the Land;
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(f) All right, title and interest of Grantor in and to all
building materials, supplies and equipment now or hereafter
placed on the Land or in the Improvements and all
architectural renderings, models, drawings, plans,
specifications, studies and data now or hereafter relating
to the Land or the Improvements;
(g) All "Equipment" (as defined in the Uniform Commercial
Code), now or hereafter located on, attached to or contained
in or used or usable in connection with the Mortgaged
Property, and shall also mean and include all of Grantor's
right, title and interest in and to, all building materials,
construction materials, movable (personal) property
constituting furniture, fittings, appliances, apparatus,
leasehold improvements, machinery, devices, interior
improvements, appurtenances, equipment, plant, furnishings,
fixtures, computers, electronic data processing equipment,
telecommunications equipment, elevator, kitchen, medical,
dental or rehabilitation fixtures, cleaning apparatus, beds,
linens, televisions, carpeting, telephones, cash registers,
computers, lamps, glassware, rehabilitation equipment,
medical, dental, therapeutic and paramedical equipment and
other fixed assets now owned or hereafter acquired by
Grantor and now or hereafter used in the operation of the
business conducted at the Premises, and all proceeds thereof
as well as all additions to, substitutions for, replacements
of or accessions to any of the items recited as aforesaid
and all attachments, components, parts (including spare
parts) and accessories, whether installed thereon or affixed
thereto, and wherever located, now or hereafter owned by
Grantor and used or intended to be used in connection with,
or with the operation of, the Premises or the buildings,
structures, or other improvements now or hereafter located
at such Premises, or in connection with any construction
being conducted or which may be conducted thereon, all
regardless of whether the same are located on such Premises
or are located elsewhere (including, without limitation, in
warehouses or other storage facilities or in the possession
of or on the premises of a bailee, vendor or manufacturer)
for purposes of manufacture, storage, fabrication or
transportation and all extensions and replacements to, and
proceeds of, any of the foregoing. For purposes of the
preceding sentence, "other fixed assets" shall also be
deemed to include any and all "furniture, furnishings and
equipment" of the Premises as such term is commonly
understood in the assisted living care industry (including,
without limitation, any and all fixtures, furnishings,
equipment, furniture, and other items of corporeal
(tangible) movable (personal) property now or hereafter
located at the Premises or used in connection with the use,
occupancy, operation and maintenance of all or any part of
the Premises, other than stocks of food and other supplies
held for consumption in normal operation, but including,
without limitation, appliances, machinery, equipment, signs,
artwork (including paintings, prints, sculpture and other
fine art), office furnishings and equipment, guest room
furnishings, and specialized equipment for kitchens,
laundries, bars, restaurant, public rooms, health and
recreational facilities, linens, dishwashers, two-way
radios, all partitions, screens, awnings, shades, blinds,
floor coverings, hall and lobby equipment, heating;
lighting, plumbing, ventilating, refrigerating,
incinerating, elevators, escalators, air conditioning and
communication plants or systems with appurtenant fixtures,
vacuum cleaning systems, call or beeper systems, security
systems, sprinkler systems and other fire prevention and
extinguishing apparatus and
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materials, reservation system computer and related
equipment, all equipment, manual, mechanical or motorized,
for the construction, maintenance, repair and cleaning of
parking areas, walks, underground ways, truck ways,
driveways, common areas, roadways, highways and streets, and
motor vehicles) (the items described in Granting Clauses (a)
through (g) are herein collectively referred to as the
"Premises");
(h) All right, title and interest of Grantor in and to all
leases, subleases, lettings and, to the extent permitted by
Law, licenses affecting the Premises, including, without
limitation, any assignments thereof (including, without
limitation, all guarantees of any such leases, assignment of
leases and subleases) and, to the extent assignable, other
agreements affecting the use, enjoyment or occupancy of the
Mortgaged Property heretofore or hereafter entered into, and
all amendments, modifications, supplements, additions,
extensions and renewals thereof(the "Leases"), and all
right, title and interest of Grantor in the Occupancy
Agreements (as hereafter defined), and all right, title and
interest of Grantor under the Leases and the Occupancy
Agreements, including cash and securities deposited
thereunder (as down payments, security deposits or
otherwise), the right to receive and collect the rents,
security deposits, income, proceeds, earnings, royalties,
revenues, issues and profits payable thereunder (including
any claims (i) based on holdover by any lessee, (ii) for
damages sustained by Grantor or (iii) arising under any
federal, state or other law as a result of or in connection
with the bankruptcy or insolvency, of any lessee) and the
rights to enforce, whether at law or in equity or by any
other means, all provisions and options thereof or
thereunder (all of the foregoing hereinafter collectively
referred to as the "Rents") and the right to apply the same
to the payment and performance of the Obligations;
(i) All rights, dividends and/or claims of any kind
whatsoever relating to the Premises (including damage,
secured, unsecured, lien, priority and administration
claims); together with the right to take any action or file
any papers or process in any court of competent
jurisdiction, which may in the opinion of Beneficiary be
necessary to preserve, protect, or enforce such rights or
claims, including the fling of any proof of claim in any
insolvency proceeding under any state, federal or other laws
and any rights, claims or awards accruing to or to be paid
to Grantor in its capacity as landlord under the Leases;
(j) All right, title and interest of Grantor in and to any
insurance policies covering the Mortgaged Property,
including, without limitation, all proceeds thereof and any
unearned premiums on any insurance policies covering the
Mortgaged Property, including, without limitation, the right
to receive and apply the proceeds of any insurance,
judgments, or settlements made in lieu thereof, for damage
to the Mortgaged Property or any part thereof, subject to
and in accordance with the terms and conditions of the
Leases;
(k) Subject to the terms and provisions of this Deed of
Trust, the right, in the name and on behalf of Grantor, to
appear in and defend any action or proceeding brought with
5
respect to the Mortgaged Property and to commence any action
or proceeding to protect the interest of Beneficiary in the
Mortgaged Property or any part thereof;
(1) All of the right, title and interest of Grantor in and
to all franchises, trade names, trademarks, symbols, service
marks, books, records, plans and specifications, contracts,
licenses, approvals, consents, subcontracts, service
contracts, management contracts, permits and other
agreements of any nature whatsoever now or hereafter
obtained or entered into by Grantor, or any manager of the
Mortgaged Property on behalf of Grantor, with respect to the
use, occupation, development, construction and/or operation
of the Mortgaged Property or any part thereof or the
activities conducted thereon or therein, or otherwise
pertaining to the Mortgaged Property or any part thereof;
(m) All accounts receivable, contract rights, interests,
estate or other claims, both in law and in equity, which
Grantor now has or may hereafter acquire in the Mortgaged
Property or any part thereof, and all reserve accounts,
accounts for the deposit, collection and/or disbursement of
Rents and other accounts now or hereafter in existence with
respect to the Loan;
(n) All rights which Grantor now has or may hereafter
acquire, to be indemnified and/or held harmless from any
liability, loss, damage, costs or expense (including,
without limitation, attorneys' fees and disbursements)
relating to the Mortgaged Property or any part thereof;
(o) All appurtenances in respect of or otherwise relating to
the Leases, including, but not limited to, all the estate
and rights of the Grantor of, in and to (i) all
modifications, extensions and renewals of the Leases and all
rights to renew or extend the term thereof, (ii) all of
Grantor's rights, if any, pertaining to deposits of the
lessee under the Leases (including lessee security deposits,
if any), (iii) all the right or privilege of the Grantor to
terminate, cancel, abridge, surrender, merge, modify or
amend the Leases and (iv) any and all possessory rights of
the Grantor and other rights and/or privileges of
possession, including, without limitation, the Grantor's
right to elect to take possession of the Mortgaged Property;
(p) All of the Grantor's claims and rights to damages and
any other remedies in connection with or arising from the
rejection of the Leases by the lessee or any trustee,
custodian or receiver pursuant to the U.S. Bankruptcy Code,
as amended (the "Bankruptcy Code") in the event that there
shall be filed by or against the Lessee any petition, action
or proceeding under the Bankruptcy Code or under any other
similar federal or state law now or hereafter in effect;
(q) All present and future monetary deposits given by
Grantor to any public or private utility with respect to
utility services furnished to any part of the Premises or
the Improvements;
6
(r) All right, title and interest of Grantor in and to all
refunds and rebates of taxes and assessments relating to the
Premises and Improvements (except to the extent such refunds
and rebates relate to taxes or assessments paid by the
lessee under the Leases);
(s) All right, title and interest of Grantor in and to all
proceeds, products, substitutions and accessions (including
claims and demands therefor) of the conversion, voluntary or
involuntary, of any of the foregoing into cash or liquidated
claims, including, without limitation, the proceeds of
insurance and condemnation awards; and
(t) All other or greater rights and interests of every
nature in the Premises and in the possession or use thereof
and income therefrom, whether now owned or hereafter
acquired by Grantor.
TOGETHER with all right, title and interest of Grantor in
and to all extensions, improvements, betterments, renewals,
substitutes and replacements of, and all additions and
appurtenances to, any of foregoing hereafter acquired by, or
released to, Grantor or constructed, assembled or placed by
Grantor on the Premises and all conversions of the security
constituted thereby, immediately upon such acquisition,
release, construction, assemblage, placement or conversion,
as the case may be, and in each such case, without any
further mortgage, conveyance, assignment or other act by
Grantor, shall become subject to the lien of this Deed of
Trust as fully and completely, and with the same effect, as
though now owned by Grantor and specifically described
herein.
Notwithstanding anything to the contrary herein contained,
this Deed of Trust shall be deemed to be and shall be
enforceable as a deed of trust, assignment, assignment of
rents, fixture filing and financing statement.
Wherever herein contained, the phrase "Trustee and/or
Beneficiary" or any similar phrase shall be deemed to refer
to Trustee for the benefit of Beneficiary.
To the extent any of the foregoing Mortgaged Property is not
considered "real property" under the Uniform Commercial Code
of the state in which the Premises are located ("UCC"),
Grantor hereby grants to Beneficiary a security interest
(the "Security Interest") as security for the Obligations in
all such items of Mortgaged Property, and Beneficiary shall
have, in addition to all rights and remedies provided
herein, and in any other agreements, commitments and
undertakings made by Grantor to Beneficiary, all of the
rights and remedies of a "secured party" under the UCC. To
the extent permitted under applicable law, this Deed of
Trust shall be deemed to be a "security agreement" for
purposes of the UCC.
TO HAVE AND TO HOLD the Mortgaged Property unto Trustee,
Beneficiary, and their respective successors and assigns,
forever.
7
ARTICLE I
Representations, Warranties and Covenants of Grantor
SECTION 1.01. Payment of Obligations. Grantor shall
punctually pay when due, and timely perform, the
Obligations.
SECTION 1.02. Legal Status, Authority and Other Matters. (a)
Legal Status. Grantor represents and warrants that it is a
corporation duly organized and existing in good standing
under the laws of Washington and has the full power and
authority to own the Mortgaged Property and carry out its
business in the state in which the Mortgaged Property is
located.
(b) No Actions Pending. Except as set forth on the
Disclosure Schedule (as defined in the Credit Agreement)
there is no action, suit or proceeding, judicial,
administrative or otherwise, pending or, to the best of
Grantor's knowledge, overtly threatened or contemplated
against ox affecting Grantor or the Mortgaged Property which
would cause a Material Adverse Effect.
SECTION 1.03. Warranty of Title. Grantor warrants that it
has good and marketable title to the Premises, in each case
free and clear of all liens, charges and encumbrances of
every kind and character, subject only to the encumbrances
set forth on Exhibit B hereto ("Permitted Encumbrances");
has and will continue to have full power and lawful
authority to encumber and convey the Premises as provided
herein; owns all other Mortgaged Property free and clear of
all liens, charges and encumbrances of every kind and
character, subject only to Permitted Encumbrances; and this
Deed of Trust is and will continue to remain a valid and
enforceable first mortgage lien on and security interest in
the Mortgaged Property, subject only to Permitted
Encumbrances. Grantor further covenants that it will
preserve such title and will forever warrant and defend the
title to the Mortgaged Property unto Trustee and Beneficiary
against all lawful claims whatsoever and will forever
warrant and defend the validity, enforceability and priority
of the lien of this Deed of Trust against the claims of all
persons and parties whomsoever.
Grantor covenants that it will, at Grantor's sole cost and
expense and at the request of Trustee or Beneficiary, (i)
promptly correct any defect or error which may be discovered
in the Loan Documents, (ii) promptly do, execute,
acknowledge and deliver, and record and re-record, file and
re-file and register and re-register, any and all such
instruments as Trustee or Beneficiary may require from time
to time in order to carry out more effectively the purposes
of this Deed of
8
Trust and (iii) will promptly furnish Trustee and
Beneficiary with evidence satisfactory to Trustee and
Beneficiary of every such recording, filing or registration.
SECTION 1.04. Operation and Maintenance. (a) Repair and
Maintenance. Grantor will operate and maintain the Premises
in good order, repair and operating condition, will promptly
make all necessary repairs, restorations, renewals,
replacements, additions and improvements thereto, interior
and exterior, structural and nonstructural, foreseen and
unforeseen, or otherwise necessary to insure that the same
as part of the security under this Deed of Trust shall not
in any way be diminished or impaired, and will not cause or
allow the Premises to be misused, wasted or to deteriorate.
No part of the Improvements shall be removed, demolished or
structurally or materially altered nor shall any new
building, structure, facility or other improvement be
constructed on the Land or the Leased Land without
Beneficiary's prior written consent in the case of each such
removal, demolition, alteration or construction.
(b) Replacement of Equipment. Grantor will keep the Premises
fully equipped and will replace all worn out or obsolete
Equipment with fixtures or personal property comparable
thereto when new to the extent necessary to operate the Deed
of Trust, Property in accordance with prudent business
standards for assisted living facilities and will not,
without Beneficiary's consent, remove any Equipment or other
personal property from the Land, the Leased Land or the
Improvements unless, to the extent necessary to operate the
Mortgaged Property in accordance with prudent business
standards for assisted living facilities Grantor replaces
the same with an article of equal suitability and value when
new, owned by Grantor free and clear of any lien or security
interest (other than Permitted Encumbrances).
(c) Zoning; Title Matters. Grantor will not, without the
prior written consent of Beneficiary, (i) initiate or
support any zoning reclassification of the Premises, seek
any variance under existing zoning ordinances applicable to
the Premises or use or permit the use of the Premises in a
manner which would result in such use becoming a non-
conforming use under applicable zoning ordinances, (ii)
modify or amend any of the Permitted Encumbrances, (iii)
impose any restrictive covenants or encumbrances upon the
Premises, execute or file any subdivision plat affecting the
Premises or consent to the annexation of the Premises to any
municipality or (iv) permit or suffer the Premises to be
used by the public or any person in such manner as might
make possible a claim of adverse usage or possession or of
any implied dedication or easement.
(d) Status of the Premises. (i) The Premises is not located
in an area identified by the Secretary of Housing and Urban
Development or a successor thereto as an area having special
flood hazards pursuant to the terms of the National Flood
Insurance Act of 1968, or the Flood Disaster Protection Act
of 1973, as amended, or any successor law; or if the
Premises is located in such an area, Grantor will obtain and
maintain insurance against damage or loss by flood on such
basis and in such amounts as shall be required by
Beneficiary; (ii) the
9
Premises is served by all utilities required for the current
use thereof; (iii) all streets necessary to serve the Land,
the Leased Land and the Improvements for the current use
thereof have been completed and are serviceable and have
been dedicated or accepted by the appropriate governmental
entities and Grantor has access from public roads to the
Land, the Leased Land and the Improvements; and (iv) there
is no condemnation or similar proceeding pending or
threatened affecting any part of the Premises that might
materially adversely affect the Premises.
(e) Use. Grantor will use the Premises for substantially the
same use as in effect as of the date hereof and for no other
use unless consented to in writing by Beneficiary.
SECTION 1.05. Insurance. (a) Coverage. Grantor shall obtain
and maintain, or cause to be maintained, insurance for
Grantor and the Mortgaged Property providing at least the
following coverages:
(i) comprehensive all risk insurance on the Improvements and
the Personal Property, including, but not limited to,
coverage for steam, pressure exploding, earthquakes, riot
and civil commotion, vandalism, malicious mischief, burglary
and theft and contingent liability from Operation of
Building Laws, Demolition Costs and Increased Cost of
Construction Endorsements, in each case (A) in an amount
equal to 100"% of the "Full Replacement Cost", which for
purposes of this Deed of Trust shall mean actual replacement
value (exclusive of costs of excavations, foundations,
underground utilities and footings); (B) containing an
agreed amount endorsement with respect to the Improvements
and Personal Property waiving all co-insurance revisions.
and (C) containing an "Ordinance or Law Coverage" or
"Enforcement" endorsement if, any of the Improvements or the
use of the Premises shall at any time constitute legal non
conforming structures or uses. In addition, Trustor shall
obtain flood hazard insurance if any portion of the Premises
is currently or at any time in the future located in a
federally designated "special flood hazard area", in an
amount equal to the lessor of (y) the outstanding principal
balance of the Loan or (z) the maximum amount of such
insurance available under the National Flood Insurance Act
of 1968, the Flood Disaster Protection Act of 1973 or the
National Flood Insurance Reform Act of 1994, as each case
may be amended; provided that any such flood hazard
insurance shall be on terms consistent with the
comprehensive all risk insurance policy required under this
Section 1.05 except that the deductible on such insurance
shall be commercially reasonable and if not available from a
private carrier then from the government to the extent
available
(ii) comprehensive general liability insurance, including
bodily injury, death and property damage liability, and
umbrella liability insurance against any and all claims,
including all legal liability to the extent insurable,
imposed upon Beneficiary and all court costs and attorneys
fees and expenses, arising out of or connected with the
possession, use, leasing, operation, maintenance or
condition of the Premises, in such amounts as are
10
generally available at reasonable premiums and are generally
required by institutional lenders for properties comparable
to the Premises;
(iii) business interruption insurance, with loss payable to
Beneficiary, in an amount sufficient to avoid any co-
insurance penalty and to provide proceeds for a period not
less than one (1) year of loss of business income, the term
"business income" to mean the total anticipated gross income
to be received by Grantor from the use and occupancy of the
Premises and the sale of goods and rendering of services at
the Premises, reduced to the extent such amounts would not
be received because of expenses not incurred during a period
of non-operation of that portion of the Premises then not
being operated. Beneficiary shall be entitled to the
insurance proceeds to the extent necessary to satisfy all
amounts due and payable to Beneficiary under the Note, which
insurance proceeds shall be held by Beneficiary and shall be
applied to the Obligations secured hereunder from time to
time due and payable hereunder and under the Note; provided,
however, that nothing herein contained shall be deemed to
relieve Grantor of its Obligations secured hereunder except
to the extent such amounts are actually paid out of the
proceeds of such business income insurance;
(iv) workers' compensation, subject to the statutory limits
of the state in which the Premises are located, and
employer's liability insurance;
(v) comprehensive boiler and machinery insurance, if
applicable, in amounts as shall be reasonably required by
Beneficiary on terms consistent with the comprehensive all
risk insurance policy required under Subsection 1.05(a)(i);
(vi) umbrella liability insurance in an amount not less than
$30,000,000 on terms consistent with the commercial general
liability insurance policy required under Subsection
1.05(a)(ii); and
(vii) such other insurance and in such amount as (a)
Beneficiary from time to time may reasonably request, or (b)
Grantor, as a prudent owner of the Premises, deems
appropriate, against such other insurable hazards which at
the time are commonly insured against for property similar
to the Premises and used as an assisted living facility.
(b) Ratings. All policies of insurance (the "Policies")
required pursuant to this Section 1.05 shall be issued by an
insurer authorized to do business in the state in which the
Premises are located and having an A.M. Best rating of A:V
or better and a Standard & Poor's claims-paying ability
rating of not less than the greater of(A) for so long as any
Securities shall have been issued and be outstanding, one
rating category below the higher rating assigned to any such
outstanding Securities, and (B) "BBB."
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(c) Blanket Policies. The insurance coverage required under
Subsection 1.05(a) may be effected under a blanket policy or
policies covering the Premises and other property assets not
constituting a part of the Premises provided that (i) each
such blanket policy, except in the case of liability
insurance, shall specify thereon the total insurance
allocated to the Premises, which amount shall be not less
than that required hereunder, (ii) each such blanket policy
shall otherwise comply in all respects with this Deed of
Trust, and (iii) Beneficiary shall be named as an additional
insured under each such blanket policy to the extent
required hereunder.
(d) Additional Insured. All Policies of insurance provided
for or contemplated by Subsection 1.05(a), except for the
Policy referenced in Subsection 1.05(a)(iv), shall name
Beneficiary and Trustee as the insured or additional
insured, as their respective interests may appear, and in
the case of property damage, boiler and machinery, flood and
earthquake insurance, shall contain a so-called New York
standard non-contributing mortgagee clause in favor of
Beneficiary providing that the loss thereunder shall be
payable to Beneficiary notwithstanding the negligent or
wilful acts of omissions of Grantor.
(e) Form and Endorsements. All Policies shall be in such
form and with such endorsements as are comparable to the
forms of and endorsements to the Policies in effect, on the
date hereof or otherwise in accordance with commercially
reasonable standards applied by prudent owners of assisted
care facilities in the general vicinity of the Mortgaged
Property. A certificate of insurance with respect to all
such Policies has been delivered to Beneficiary and
originals or certified copies of all such Policies shall be
delivered to Beneficiary when the same are available and
shall be held by Beneficiary. All Policies shall contain:
(i) to the extent available at commercially reasonable
rates, a waiver of subrogation endorsement as to
Beneficiary; (ii) a provision that no Policy shall be
impaired or invalidated by virtue of any act, failure to
act, negligence of, or violation ofd eclarations, warranties
or conditions contained in such Policy by Grantor,
Beneficiary or Trustee or any other named insured,
additional insured or loss payee, except for the wilful
misconduct of Beneficiary or Trustee knowingly in violation
of the conditions of such Policy; (iii) an endorsement
providing for a deductible per loss of an amount not more
than that which is customarily maintained by prudent owners
of assisted care facilities in the general vicinity of the
Premises (but in no event greater than $ 100,000); (iv) a
provision that such Policies shall not be canceled,
terminated or expire without at lest thirty (30) days prior
written notice to Beneficiary in each instance; and (v) to
the extent Grantor determines such a waiver is available at
commercially reasonable rates, effective waivers by the
insurer of all claims for insurance premiums against all
loss payees, additional insureds and named insureds (other
than Grantor). Grantor shall deliver or cause to be
delivered to Beneficiary (y) not less than thirty (30) days
prior to the expiration date of any of the Policies required
to be maintained hereunder, evidence reasonably satisfactory
to Beneficiary that such Policies will be renewed or
replaced and (z) prior to the expiration date of such
Policies, among other things, an original of the certificate
of insurance and evidence of payment of the applicable
premium for such renewal
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or replacement. Certified copies of such replacement
insurance policies shall be delivered to Beneficiary
promptly after Grantor's receipt thereof but in any case
within thirty (30) days after receipt thereof by Grantor. If
Grantor fails to maintain and deliver to Beneficiary the
certificates of insurance required by this Deed of Trust,
Beneficiary may, in accordance with the provisions hereof,
procure such insurance at the expense of Grantor, to be
promptly reimbursed by Grantor.
Delivery of Statements. Grantor shall furnish to Beneficiary
annually a statement certified by Grantor or a duly
authorized officer of Grantor of the amounts of insurance
maintained in compliance herewith, of the risks covered by
such insurance and of the insurance company or companies
which carry such insurance and, if requested by Beneficiary,
verification of the adequacy of such insurance by an
independent insurance broker or appraiser to Beneficiary.
(g) Protection of Beneficiary. If at any time Grantor fails
to maintain the insurance policies required hereunder,
Beneficiary shall have the right, without notice to Grantor,
to take such action as Beneficiary deems necessary to
protect its interest in the Premises, including, without
limitation, the obtaining of such insurance coverage as
Beneficiary in its sole discretion deems appropriate, and
all reasonable expenses incurred by Beneficiary in
connection with such action or in obtaining such insurance
and keeping it in effect shall be paid by Grantor to
Beneficiary upon demand and until paid shall be secured by
this Deed of Trust and shall bear interest in accordance
with Section 2.05(b) of the Credit Agreement.
(h) Proceeds. All Insurance Proceeds shall be paid to
Beneficiary for application pursuant to Section 1.09. If the
Mortgaged Properly shall be damaged or destroyed, in whole
or in part, by fire or other casualty, Grantor shall give
prompt notice of such damage to Beneficiary. Grantor shall
promptly commence and diligently prosecute the completion of
the repair and restoration of the Premises as nearly as
possible to the condition the Premises were in immediately
prior to such fire or other casualty, with such alterations
as may be approved by Beneficiary (the "Restoration") and
otherwise in accordance with Section 1.09. Grantor shall pay
all costs of such Restoration whether or not such costs are
covered by insurance. Beneficiary may, but shall not be
obligated to make proof of loss if not made promptly by
Grantor. To the extent that the Insurance Proceeds received
in connection with such damage or destruction of the
Mortgaged Property are less than $15,000, then Grantor shall
have the right to use such Insurance Proceeds without
Beneficiary's consent.
(i) Event of Foreclosure. In the event of foreclosure of
this Deed of Trust, or other transfer of title to the
Premises in extinguishment in whole or in part of the
Obligations, all right, title and interest of Grantor in and
to such policies then in force concerning the Premises and
all proceeds payable thereunder shall thereupon vest in the
purchaser at such foreclosure or Beneficiary or other
transferee in the event of such other transfer of title.
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(j) No Separate Insurance. Grantor shall not carry separate
or additional insurance concurrent in form or contributing,
in the event of loss, with that required under the Credit
Agreement unless endorsed in favor of Beneficiary and
Trustee as loss payee or additional insured, as applicable,
and otherwise applicable to Beneficiary in all respects.
Nothing contained herein shall prohibit Grantor from holding
or obtaining an owner's policy of title insurance covering
the Premises.
SECTION 1.06. Liens and Liabilities. (a) Discharge of Liens.
Grantor will pay, bond or otherwise discharge, from time to
time when the same shall become due, all claims and demands
of mechanics, materialmen, laborers and others which, if
unpaid, might result in, or permit the creation of, a lien
on the Mortgaged Property.
(b) Creation of Liens. Grantor will not, without
Beneficiary's consent, create, place or permit to be created
or placed or allow to remain, and shall discharge and
release within ten (10) days of the placing thereof, any
deed of trust, mortgage, trust deed, voluntary or
involuntary lien, security interest or other encumbrance
against or covering the Mortgaged Property, other than
Permitted Encumbrances, whether or not subordinate hereto.
(c) No Consent. Nothing in this Deed of Trust shall be
deemed or construed in any way as constituting the consent
or request by Trustee or Beneficiary, express or implied, to
any contractor, subcontractor, laborer, mechanic or
materialman for the performance of any labor or the
furnishing of any material for any improvement,
construction, alteration or repair of the Premises. Grantor
further agrees that neither Trustee nor Beneficiary stands
in any fiduciary relationship to Grantor.
SECTION 1.07. Taxes and Other Charges. (a) Taxes on the
Premises. Grantor will promptly pay prior to delinquency and
before any penalty or interest may be added thereto, all
taxes, assessments, vault, water and sewer rents, rates,
charges and assessments, levies, permits, inspection and
license fees and other governmental and quasi-governmental
charges and any penalties or interest for non-payment
thereof, heretofore or hereafter imposed, or which may
become a lien, upon the Mortgaged Property or arising with
respect to the occupancy, use or possession thereof
(collectively, "Impositions"). Grantor will also pay any
penalty, interest or cost for non-payment of Impositions
which may become due and payable.
(b) Receipts. Unless Grantor is making monthly deposits
pursuant to Section 1.08, Grantor will furnish to
Beneficiary upon Beneficiary's request, proof of payment at
the time same is made, and thereafter, upon receipt,
validated receipts showing payment in full of all
Impositions.
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(c) Increased Costs. In the event of the enactment after the
date hereof of any law in the state in which the Mortgaged
Property is located or any other governmental entity
deducting from the value of the Mortgaged Property for the
purpose of taxation any lien or security interest thereon,
or changing in any way the laws for the taxation of
mortgages, deeds of trust or other liens or debts secured
thereby, or the manner of collection of such taxes, so as to
affect this Deed of Trust, the Obligations, Beneficiary or
the holders of the Obligations, then, and in such event,
Grantor shall, on demand, pay to Beneficiary or such holder,
or reimburse Beneficiary or such holder for payment of, all
taxes, assessments, charges or liens for which Beneficiary
or such holder is or may be liable as a result thereof,
provided that if any such payment or reimbursement shall be
unlawful or would constitute usury or render the Obligations
wholly or partially usurious under applicable law, then
Beneficiary may, at its option, declare the Obligations
immediately due and payable or require Grantor to pay or
reimburse Beneficiary for payment of the lawful and non-
usurious portion thereof.
SECTION 1.08. Tax and Insurance Deposits. (a) Amount of
Deposits. Beneficiary may require that each month Grantor
deposit with Trustee, Beneficiary or any service or
financial institution designated for such purposes by
Beneficiary (whichever of the foregoing is applicable being
the "Depository"), one-twelfth (1/12) of the annual
Impositions and premiums for insurance required under
Section 1.05, and Grantor shall accordingly make such
deposits. In addition, if required by Beneficiary, Grantor
shall also deposit with the Depository a sum of money which,
together with the aforesaid monthly installments, will be
sufficient to make payments of Impositions and premiums at
least thirty (30) days before such payments are delinquent.
If the amount of any such payment is not ascertainable at
the time any such deposit is required to be made, the
deposit shall be made on the basis of Beneficiary s estimate
thereof, and when such amount is fixed for the then-current
year, Grantor shall promptly deposit any deficiency with the
Depository.
(b) Use of Deposits. All funds so deposited, until so
applied, shall constitute additional security for the
Obligations, shall be held by the Depository with interest
payable to Grantor (except to the extent required under
applicable law), may be commingled with other funds of the
Depository and, provided that no Event of Default (as
defined in Section 5.01) shall have occurred and be
continuing hereunder, shall be applied in payment of the
aforesaid amounts prior to their becoming delinquent. If an
Event of Default shall have occurred and be continuing
hereunder, or if the Obligations shall be accelerated as
herein provided, all funds so deposited may, at
Beneficiary's option, be applied to the Obligations in the
order determined by Beneficiary. If such deposits are being
made with the Depository, at least fifteen (15) days before
the date on which such charges first become payable, Grantor
shall furnish the Depository with bills for the charges for
which such deposits are required to be made hereunder and/or
such other documents necessary for the payment of the same.
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SECTION 1.09. Damage and Destruction. (a) Grantor's
Obligations. In the event of any damage to or loss or
destruction of the Premises, Grantor shall (i) promptly
notify Beneficiary of such event and take such steps as
shall be necessary to preserve any undamaged portion of the
Premises and (ii) unless otherwise instructed by
Beneficiary, regardless whether the insurance proceeds, if
any, shall be sufficient for the purpose or shall be
otherwise applied by Beneficiary as provided herein,
promptly commence and diligently pursue to completion the
restoration, replacement and rebuilding of the Premises to
the condition of the Premises affected thereby immediately
prior to such damage, loss or destruction in accordance with
plans and specifications approved, and with other provisions
for the preservation of the security hereunder established,
by Beneficiary.
(b) Trustee's and Beneficiary's Rights; Application of
Proceeds. In the event that any portion of the Premises is
so damaged, destroyed or lost, and such damage, destruction
or loss is covered, in whole or in part, by insurance
required by Section 1.05, then, (i) Beneficiary or Trustee
may, but shall not be obligated to, make proof of loss if
not made promptly by Grantor and is hereby authorized and
empowered by Grantor to settle, adjust or compromise any
claims for damage, destruction or loss thereunder, (ii) each
insurance company concerned is hereby authorized and
directed to make payment therefor directly to Beneficiary or
Trustee; provided, however, that if all of the conditions
set forth in Section 1.09(c) are met and Grantor delivers a
written undertaking to expeditiously commence and to
satisfactorily complete with due diligence any such damage
or destruction in accordance with the terms hereof, the
insurance proceeds will be made available to Grantor in
accordance with Section 1.09(c).
(c) Proceeds for Restoration. Notwithstanding anything
provided herein to the contrary, if:
(i) less than (A) thirty percent (30%) of the Improvements
and (B) forty percent (40%) of the Land have been taken or
destroyed;
(ii) no monetary Default or Event of Default has occurred
and is continuing hereunder or under any of the other Loan
Documents and has not been waived;
(iii) the Restoration can, in Beneficiary's judgment, with
diligent work, be completed prior to the expiration of
business interruption insurance required hereunder;
(iv) the taking, fire or casualty did not occur during the
six (6) months prior to the maturity of the Note;
(v) all necessary governmental approvals can be obtained for
the Restoration;
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(vi) there are sufficient sums available (through insurance
proceeds or condemnation awards and contributions by
Grantor, the full amount of which shall have been deposited
into an account pledged to Beneficiary) for the Restoration
(including, without limitation, for any reasonable costs and
expenses of Beneficiary to be incurred in administering said
restoration or repair) and for payment of principal and
interest to become due and payable under the Note during the
period necessary to complete the Restoration;
(vii) Grantor so elects by written notice delivered to
Beneficiary within thirty (30) days after settlement of the
aforesaid insurance or condemnation claim; and
(viii) the Restoration is done and diligently completed by
Grantor in compliance with all applicable Laws,
then, Beneficiary shall, solely for the purposes of the
Restoration, release so much of the remainder of such sums
as may be required for the Restoration, and any funds
deposited by Mortgagor therefor, to Mortgagor in the manner
and upon such terms and conditions as would be required by a
prudent interim construction lender, including, but not
limited to, the prior approval by Beneficiary of plans and
specifications, contractors and form of construction
contracts and the furnishing to Beneficiary of permits,
bonds, lien waivers, invoices, receipts and affidavits from
contractors and subcontractors, in form and substance
reasonably satisfactory to Beneficiary in its reasonable
discretion, with any remainder being applied by Beneficiary,
in its sole discretion, for payment of the Obligations in
whatever order Beneficiary directs in its absolute
discretion, with any remainder being paid to Grantor.
(d) Effect on the Obligations. Notwithstanding any loss,
damage or destruction referred to in this Section, Grantor
shall continue to pay and perform the Obligations as
provided herein. Any reduction in the Obligations resulting
from such application shall be deemed to take effect only on
the date of receipt by Beneficiary or Trustee of such
insurance proceeds and application against the Obligations,
provided that if prior to the receipt by Trustee or
Beneficiary of such insurance proceeds the Mortgaged
Property shall have been sold on foreclosure of this Deed of
Trust, or shall have been transferred by deed in lieu of
foreclosure of this Deed of Trust, Beneficiary shall have
the right to receive the same to the extent of any
deficiency found to be due upon such sale, with legal
interest thereon together with attorneys' fees and
disbursements incurred by Trustee or Beneficiary in
connection with the collection thereof.
SECTION 1.10. Condemnation. (a) Grantor's Obligations;
Proceedings. Grantor, promptly upon obtaining knowledge of
any pending or overtly threatened institution of any
proceedings for the condemnation of the Premises, or of any
right of eminent domain, or of any other proceedings arising
out of injury or damage to or decrease in the value of the
Premises, including a change in grade of any street, will
notify Beneficiary of the threat or pendency
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thereof. Beneficiary may participate in any such
proceedings, and Grantor from time to time will execute and
deliver to Beneficiary all instruments requested by
Beneficiary or as may be required to permit such
participation. Grantor shall, at its expense, diligently
prosecute any such proceedings, shall deliver to Beneficiary
copies of all papers served in connection therewith and
shall consult and cooperate with Beneficiary, its attorneys
and agents, in the carrying on and defense of any such
proceedings; provided that no settlement of any such
proceeding shall be made by Grantor without Beneficiary's
consent.
(b) Trustee's and Beneficiary's Rights to Proceeds. All
proceeds of condemnation awards or proceeds of sale in lieu
of condemnation, and all judgments, decrees and awards for
injury or damage to the Premises (collectively, "Awards")
are hereby assigned and shall be paid to Beneficiary or
Trustee. Grantor authorizes Beneficiary and Trustee to
collect and receive the same, to give receipts and
acquittances therefor, and to appeal from any Awards.
(c) Application of Proceeds. Beneficiary shall have the
right to apply any Awards, first, to reimburse Trustee and
Beneficiary for all costs and expenses, and, sec4nd, the
remainder thereof in the manner provided in Section 1.09. In
the event that Grantor shall have received all or any
portion of such Awards, Grantor, upon demand from
Beneficiary, shall pay to Beneficiary or Trustee an amount
equal to the amount so received by Grantor, to be applied as
Beneficiary shall have the right pursuant to this
subsection. Notwithstanding anything herein or at law or in
equity to the contrary, none of the Awards paid to
Beneficiary or Trustee under this Section 1.10 shall be
deemed trust funds and Beneficiary or Trustee shall be
entitled to apply the same as provided in this Section 1.10.
(d) Effect on the Obligations. Notwithstanding any
condemnation, taking or other proceeding referred to in this
Section 1.10, Grantor shall continue to pay and perform the
Obligations as provided herein. Any reduction in the
Obligations resulting from such application shall be deemed
to take effect only on the date of receipt by Beneficiary or
Trustee of such Awards and application against the
Obligations, provided that if prior to the receipt by
Trustee or Beneficiary of such Awards the Mortgaged Property
shall have been sold on foreclosure of this Deed of Trust,
or shall have been transferred by deed in lieu of
foreclosure of this Deed of Trust, Beneficiary shall have
the right to receive the same to the extent of any
deficiency found to be due upon such sale, with legal
interest thereon together with attorneys' fees and
disbursements incurred by Trustee or Beneficiary in
connection with the collection thereof.
SECTION l.1l. Contest. Notwithstanding anything to the
contrary contained in Section 1.04(c),1.06 or 1.07, Grantor
shall have the right to contest in good faith and at its own
expense the validity or applicability of any duty or
obligation described in Section 1.04(c), the validity of any
lien, encumbrance, charge or security referred to in Section
1.06 and any Imposition imposed upon the Premises (a
"Contest") by an appropriate legal proceeding which
proceeding must operate to prevent the collection of such
Impositions or other realization thereon
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and the sale or forfeiture of the Mortgaged Property or any
part thereof to satisfy the same; provided that during the
pendency of such Contest, Grantor shall provide security
satisfactory to Beneficiary, assuring the discharge of
Grantor's obligations that are the subject of such Contest
("Contested Impositions") and of any additional interest
charge, penalty or expense arising from or incurred as a
result of such Contest; and provided, further, that if at
any time payment of such Contested Impositions shall become
necessary to prevent (i) the delivery of a tax deed
conveying the Mortgaged Property because of non-payment or
(ii) the imposition of any civil or criminal penalty or
liability on Beneficiary, Trustee or the holders of the
Obligations, Grantor shall pay the same in sufficient time
to avoid the delivery of such tax deed or the imposition of
any such penalty or liability.
SECTION 1.12. Notice Limiting Amount. Grantor covenants that
it will not, without the prior written consent of
Beneficiary, file of record any notice limiting the maximum
principal amount secured by this Deed of Trust.
ARTICLE II
Assignment of Leases, Rents and Other Sums
SECTION 2.01. Assignment. (a) Grantor hereby absolutely and
presently bargains, sells, transfers, assigns and sets over
to Beneficiary, as further security for the payment of the
Obligations, all of its right, title and interest in and to
all current and future Leases and Rents payable thereunder
and all rights of Grantor thereunder and any and all
deposits held as security under the Leases, whether before
or after foreclosure or during the full period of
redemption, if any, and shall, upon demand, deliver to
Beneficiary an executed counterpart of each Lease. The
assignment of the Leases and Rents, and of the aforesaid
rights with respect thereto, is intended to be and is an
absolute present assignment from Grantor to Beneficiary and
not merely the passing of a security interest. Such
assignment and grant shall continue in effect until the
Obligations are paid, the execution of this Deed of Trust
constituting and evidencing the irrevocable consent of
Grantor to the entry upon and taking possession of the
Premises by Beneficiary pursuant to such grant, whether
foreclosure has been instituted or not and without applying
for a receiver. Until the occurrence of an Event of Default
hereunder, Grantor shall be entitled to collect and receive
the Rents. Such right of Grantor to collect and receive said
Rents shall be automatically revoked upon the occurrence of
an Event of Default and thereafter Trustee or Beneficiary
shall have the right and authority to exercise any of the
rights or remedies referred to or set forth in Article V. In
addition, upon such an Event of Default, Grantor shall
promptly pay to Trustee or Beneficiary (i) all rent
prepayments and security or other deposits paid to Grantor
pursuant to any lease assigned hereunder and (ii) all
charges for services or facilities or for escalation which
were paid pursuant to any such lease to the extent allocable
to any period from and after such Event of Default. Nothing
contained in this Section 2.01(a) shall be construed to bind
Beneficiary to the performance of any of the covenants,
conditions or
19
provisions contained in any Lease or otherwise to impose any
obligation on Beneficiary (including any liability under the
covenant of quiet enjoyment contained in any Lease or under
any applicable law in the event that any tenant shall have
been joined as a party defendant in any action to foreclose
this Deed of Trust and shall have been barred and foreclosed
thereby of all right, title and interest and equity of
redemption in the Premises), except that Beneficiary shall
be accountable for any money actually received pursuant to
such assignment. Grantor hereby further grants to
Beneficiary the right to notify the tenant under any Lease
of the assignment thereof and, after the occurrence of an
Event of Default hereunder (i) to demand that the tenant
under any Lease pay all amounts due thereunder directly to
Beneficiary, (ii) to enter upon and take possession of the
Premises for the purpose of collecting the Rents, (iii) to
dispossess by the usual summary proceedings any tenant
defaulting in the payment thereof, (iv) to let the Premises,
or any part thereof, and (v) to apply the Rents, after
payment of all necessary charges and expenses, on account of
the Obligations.
(b) If Grantor is not required to surrender possession of
the Premises hereunder in the event of any Event of Default,
Grantor will pay monthly in advance to Beneficiary, on its
entry into possession pursuant to Article V, or to any
receiver appointed to collect said Rents, the fair and
reasonable rental value for the use and occupation of the
Premises or such part thereof as may be in the possession of
Grantor. Upon a default in any such payment, Grantor will
vacate and surrender such possession to Beneficiary, Trustee
or such receiver, and, in default thereof, may be evicted by
summary or any other available proceedings or actions.
(c) Grantor will, as and when requested from time to time by
Beneficiary, execute, acknowledge and deliver to
Beneficiary, in form approved by Beneficiary, one or more
general or specific assignments of the lessor's interest
under any Lease. Grantor will, on demand, pay to
Beneficiary, or reimburse Beneficiary for the payment of any
costs or expenses incurred in connection with the
preparation or recording of any such assignment.
SECTION 2.02. Leases and Rents. (a) Grantor will (i) perform
or cause to be performed all the lessor's obligations under
any Lease, (ii) enforce (including the termination and
cancellation of any Lease, so long as the same is a bona
fide enforcement of Grantor's right as lessor under any such
Lease and such termination or cancellation, either by itself
or in the aggregate with other terminations and
cancellations, will not diminish or impair the security of
this Deed of Trust) the performance by the lessee under its
respective Lease of all of said lessee's obligations
thereunder and (iii) give Beneficiary prompt notice and a
copy of any notice of default, event of default, termination
or cancellation sent or received by Grantor.
(b)(i) Grantor will not, without Beneficiary's consent, (I)
assign, mortgage, pledge or otherwise transfer, dispose of
or encumber, whether by operation of law or otherwise, any
Lease or the Rents, (2) accept or permit the acceptance of a
prepayment of any amounts payable under such Lease for more
than one month in advance of the due date therefor, (3)
enter
20
into, amend or modify any Lease, (4) cancel, terminate or
accept a surrender of any Lease (5) enter into any Lease (A)
with Grantor or any affiliate of Grantor or its constituent
partners or (B) which would be a "disqualified lease", as
defined in Section 168(h)(1)(B)(ii) of the Internal
Revenue Code of 1986, as amended. Grantor will not enter
into or amend, without Beneficiary's consent, any Occupancy
Agreement other than in the ordinary course of business for
prudent assisted living facilities. "Occupancy Agreement"
means any agreement by and between Grantor and any resident
of the Premises.
(ii) Supplementing the provisions of clause (i) of this
Section 2.02(b), if the lessee under any Lease (or any
receiver, trustee, custodian or other party who succeeds to
the rights of any lessee) rejects or disaffirms such Lease
pursuant to any Bankruptcy Law, Grantor hereby assigns to
Beneficiary the proceeds of any claims (including the right
to retain or apply any security deposits) that Grantor may
have against the lessee (or receiver, trustee, custodian or
other party who succeeds to the rights of any lessee) and
any guarantor of any of the Leases, under any one or more of
the Leases or any guaranty thereof based upon (1) any breach
by such lessee of the terms and provisions of the applicable
Lease (including any claim that Grantor may have by reason
of a termination, rejection or disaffirmance of such Lease
pursuant to any Bankruptcy Law), and (2) the use and
occupancy of the premises demised thereby, whether or not
pursuant to the applicable Lease (including any claim for
use and occupancy arising under any Bankruptcy Law).
Grantor, immediately upon obtaining knowledge of any such
breach or use by any such lessee, will notify Beneficiary of
any such breach or use. Upon the occurrence of an Event of
Default, Beneficiary shall have the sole right to elect,
either:
(A) to proceed against such lessee or guarantor as if it
were the named lessor thereunder, in Grantor's name or in
Beneficiary's name as agent for Grantor and Grantor agrees
to cooperate with Beneficiary in such action and shall
execute any and all documents required in furtherance of
such action; or
(B) to have Grantor proceed in Grantor's and Beneficiary's
behalf in which event Beneficiary may participate in any
such proceedings, and Grantor from time to time will deliver
to Beneficiary all instruments requested by Beneficiary or
as may be required to permit such participation. Grantor
shall, at its expense, diligently prosecute any such
proceedings, shall deliver to Beneficiary copies of all
papers served in connection therewith and shall consult and
cooperate with Beneficiary, its attorneys and agents, in the
carrying on and defense of any such proceedings; provided
that no settlement of any such proceeding shall be made by
Grantor without Beneficiary's consent.
ARTICLE III
Additional Advances; Expenses; Indemnity
21
SECTION 3.01. Additional Advances and Disbursements. (a)
Grantor agrees that, upon the occurrence of an Event of
Default, Trustee or Beneficiary shall have the right without
notice to Grantor to advance all or any part of amounts
owing or to perform any or all required actions. No such
advance or performance shall be deemed to have cured such
Default by Grantor or any Event of Default with respect
thereto. All sums advanced and all expenses incurred by
Trustee or Beneficiary in connection with such advances or
actions, and all other sums advanced or expenses incurred by
Trustee or Beneficiary hereunder or under applicable law
(whether required or optional and whether indemnified
hereunder or not) shall be part of the Obligations, shall
bear interest at the Default Rate and as provided in the
Credit Agreement and shall be secured by this Deed of Trust.
(b) This Deed of Trust secures not only existing
indebtedness, but also future or additional advances made
pursuant hereto or to the Credit Agreement, whether such
advances are obligatory or optional.
SECTION 3.02. Other Expenses. Grantor will pay or, on
demand, reimburse Trustee, Beneficiary or any holder of the
Obligations for the payment of any and all costs or expenses
(including attorneys' fees and disbursements) incurred in
connection with (i) any default or Event of Default by
Grantor hereunder, (ii) the exercise or enforcement by or on
behalf of Trustee, Beneficiary or any holder of the
Obligations of any of its rights or of Grantor's obligations
under the Loan Documents or (iii) the granting,
administration, enforcement and closing of the transactions
contemplated hereunder.
SECTION 3.03. Indemnity. Grantor agrees to indemnify and
hold harmless Trustee, Beneficiary, the holders of the
Obligations and their respective officers, directors,
employees, agents and shareholders (the "Indemnified
Parties") from and against any and all losses, damages,
claims, costs and expenses (including attorneys' fees and
disbursements) which may be imposed on, incurred by or
asserted against any of the Indemnified Parties in
connection with any transaction in any way connected with
the Mortgaged Property or the Loan Documents, except to the
extent any such loss, damage, claim, cost or expense is the
result of the willful misconduct or gross negligence of the
Indemnified Party. Any amount payable under this Section
3.03 shall be deemed a demand obligation, shall be added to
and become a part of. the Obligations, shall bear interest
at the rate and as provided in the Credit Agreement, and
shall be secured by this Deed of Trust. Notwithstanding
anything contained herein to the contrary, any amount
payable under Section 10.04(b)(ii) of the Credit Agreement
shall be deemed a demand obligation, shall bear interest at
the rate provided in the Credit Agreement but shall not be
secured a obligation.
SECTION 3.04. Interest After Default. If any payment due
hereunder or under the other Loan Documents is not paid in
full when due, whether by acceleration or otherwise,
22
then the same shall bear interest hereunder at the Default
Rate and as provided in the Credit Agreement, and such
interest shall be added to and become a part of the
Obligations and shall be secured hereby.
ARTICLE IV
Sale or Transfer of the Premises
SECTION 4.01. Continuous Ownership. Grantor acknowledges
that the continuous ownership of the Mortgaged Properly by
Grantor, except as otherwise permitted in the other Loan
Documents, is of a material nature to the transaction
hereinabove described and Beneficiary's agreement to create
the Obligations. Without Beneficiary's prior written
consent, Grantor will not, whether voluntarily or
involuntarily, (a) sell, grant, convey, assign or otherwise
transfer, by operation of law or otherwise, (b) permit to be
the subject of any transaction described in clause (a)
above, (c) enter into an agreement for any transaction
described in clause (a) above, or (d) grant an option which
or take any action which pursuant to the terms of any
agreement to which Grantor is a party may result in any
transaction described in clause (a) above of, the Mortgaged
Property, or any legal, beneficial or equitable interest
therein, other than any specific transfers permitted by the
Credit Agreement (the foregoing, collectively or severally,
"Transfer"). For purposes of this Deed of Trust, but without
limiting the foregoing, (i) the issuance of any equity
interest in Grantor (whether stock, partnership interest or
otherwise) not in accordance with and pursuant to the Credit
Agreement, shall be deemed a Transfer of the Mortgaged
Property, (ii) a Transfer of all or substantially all of the
assets of Grantor shall be deemed a Transfer of the
Mortgaged Property, (iii) the execution and delivery of any
documentation relating to a proposed zoning lot merger or
the execution and delivery of any other documentation
effecting or purporting to effect, or the taking or
suffering of any other action effecting or purporting to
effect, a transfer of, or the granting of a right to
utilize, any development rights appurtenant to the Mortgaged
Property shall be deemed a Transfer of the Mortgaged
Property, and (iv) any person or legal representative of
Grantor to whom Grantor's interest in the Mortgaged Property
passes by operation of law, or otherwise, shall be bound by
the provisions of this Deed of Trust. The provisions of this
Section shall apply to each and every such Transfer of all
or any portion of the Mortgaged Property or any legal or
equitable interest therein, regardless whether or not
Beneficiary has consented to, or waived by its action or
inaction its rights hereunder with respect to any previous
Transfer of all or any portion of the Mortgaged Property or
any legal or equitable interest therein.
SECTION 4.02. Intentionally Omitted.
ARTICLE V
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Defaults and Remedies
SECTION 5.01. Events of Default. The term "Event of
Default", as used in this Deed of Trust, shall mean the
occurrence of any of the following events:
(a) if default shall be made in the payment, when and as the
same shall
become due and payable, of any amounts required to be paid
under the Note, hereunder or under any other Loan Document,
whether of principal, interest within five (5) days after
the same becomes due, premium, fee or otherwise, and whether
on any stated due date, upon demand, at maturity or upon
acceleration;
(b) if default shall be made in the performance or
observance of any other term, covenant or agreement
contained in this Deed of Trust or in any other Loan
Document; or
(c) if any Event of Default (as defined in the Credit
Agreement) occurs; or
(d) if Grantor abandons the Premises or ceases to do
business or terminates its business for any reason
whatsoever; or
(e) if the Mortgaged Property shall be taken, attached or
sequestered on execution or other process of law in any
action against Grantor; or
if Grantor shall fail at any time to obtain, provide,
maintain, keep in force or, within ten (10) days after
request therefor, deliver to Beneficiary the insurance
policies required by Section 1.05; or
(g) if any claim of priority (except a claim based upon a
Permitted
Encumbrance) to this Deed of Trust or any other document or
instrument securing the Obligations by title, lien or
otherwise shall be upheld by any court of competent
jurisdiction or shall be consented to by Grantor; or
(h) if Grantor fails to cure any material default under any
Lease within the shorter of thirty (30) days following the
giving of notice of default by the lessor thereunder or the
applicable grace period set forth therein.
SECTION 5.02. Remedies. Upon the occurrence of any one or
more Events of Default, or any Transfer without the consent
of Beneficiary, Trustee or Beneficiary may, in addition to
any rights or remedies available to it hereunder or under
the other Loan Documents and to the extent permitted by
applicable law, take such action personally or by its agents
or attorneys, with or without entry, and without notice,
demand, presentment or protest (each and all
24
of which are hereby waived), as it deems necessary or
advisable to protect and enforce its rights and remedies
against Grantor and in and to the Mortgaged Property,
including the following actions, each of which may be
pursued concurrently or otherwise, at such time and in such
order as Trustee or Beneficiary may determine, in its sole
discretion, without impairing or otherwise affecting its
other rights or remedies:
(a) declare the entire balance of the Obligations to be
immediately due and payable, and upon any such declaration,
the entire unpaid balance of the Obligations shall become
and be immediately due and payable, without presentment,
demand, protest or further notice of any kind, all of which
are hereby expressly waived by Grantor, anything in any
other Loan Documents to the contrary notwithstanding; or
(b) institute a proceeding or proceedings, judicial or
otherwise, for the complete or partial foreclosure of this
Deed of Trust in any manner provided hereunder or under any
applicable provision of law; or
(c) sell the Mortgaged Property, and all estate, right,
title, interest, claim and demand of Grantor therein, and
all rights of redemption thereof, at one or more sales, as
an entirety or in parcels, with such elements of real and/or
personal property, and at such time and place and upon such
terms as it may deem expedient, or as may be required by
applicable law, and in the event of a sale, by foreclosure
or otherwise, of less than all of the Mortgaged Property,
this Deed of Trust shall continue as a lien and security
interest on the remaining portion of the Mortgaged Property;
or
(d) institute an action, suit or proceeding in equity for
the specific performance of any of the provisions contained
in the Loan Documents; or
(e) cause the Trustee to sell the Mortgaged Property in
accordance with the Trustee's power of sale contained herein
and in accordance with the Washington Deed of Trust Act, RCW
Ch. 61.24, as amended by Chapter 295, Laws of 1998.
Following sale of the Mortgaged Property pursuant to the
Trustee's power of sale, Grantor and any guarantor of the
Loan secured hereby shall continue to be liable for a
deficiency to the extent permitted by Chapter 295, Laws of
1998 or other applicable law. The power of sale contained
herein is not an exclusive remedy and Beneficiary may
foreclose this Deed of Trust judicially, in the same manner
as a mortgages, or ▇▇▇ directly on the Note or any guaranty
in accordance with applicable law.
enter upon the Premises, and exclude Grantor and its agents
and servants wholly therefrom, without liability for
trespass, damages or otherwise, and take possession of all
books, records and accounts relating thereto and all other
Mortgaged Property, and Grantor agrees to surrender
possession of the Mortgaged Property and of
25
such books, records and accounts to Trustee or Beneficiary
on demand after the happening of any Event of Default; and
having and holding the same may use, operate, manage,
preserve, control and otherwise deal therewith and conduct
the business thereof, either personally or by its
superintendents, managers, agents, servants, attorneys or
receivers, without interference from Grantor; and upon each
such entry and from time to time thereafter may, at the
expense of Grantor and the Mortgaged Property, without
interference by Grantor and as Beneficiary may deem
advisable, (i) insure or reinsure the Premises, (ii) make
all necessary or proper repairs, renewals, replacements,
alterations, additions, betterments and improvements thereto
and thereon and (iii) in every such case in connection with
the foregoing have the right to exercise all rights and
powers of Grantor with respect to the Mortgaged Property,
either in Grantor's name or otherwise; or
(g) with or without the entrance upon the Premises, collect,
receive, ▇▇▇ for and recover in its own name all Rents and
cash collateral derived from the Mortgaged Property, and
after deducting therefrom all costs, expenses and
liabilities of every character incurred by Trustee or
Beneficiary in collecting the same and in using, operating,
managing, preserving and controlling the Mortgaged Property,
and otherwise in exercising Trustee's or Beneficiary's
rights under Subsection (of this Section including all
amounts necessary to pay Impositions, insurance premiums and
other charges in connection with the Premises, as well as
compensation for the services of Trustee or Beneficiary and
their respective attorneys, agents and employees, to apply
the remainder as provided in Section 5.05; or
(h) release any portion of the Mortgaged Property for such
consideration as Beneficiary may require without, as to the
remainder of the Mortgaged Property, in any way impairing or
affecting the lien or priority of this Deed of Trust, or
improving the position of any subordinate lienholder with
respect thereto, except to the extent that the Obligations
shall have been reduced by the actual monetary
consideration, if any, received by Trustee or Beneficiary
for such release and applied to the Obligations, and may
accept by assignment, pledge or otherwise any other property
in place thereof as Beneficiary may require without being
accountable for so doing to any other lienholder; or
(i) take all actions permitted under the UCC; or
(j) take any other action, or pursue any other right or
remedy, as Trustee or Beneficiary may have under applicable
law, and Grantor does hereby grant the same to Trustee or
Beneficiary; or
In the event that Trustee or Beneficiary shall exercise any
of the rights or remedies set forth in subsections (f) and
(g) of this Section, Trustee or Beneficiary shall not be
deemed to have entered upon or taken possession of the
Mortgaged Property except upon the
26
exercise of its option to do so, evidenced by its demand and
overt act for such purpose, nor shall it be deemed a
beneficiary or mortgagee in possession by reason of such
entry or taking possession. Neither Trustee nor Beneficiary
shall be liable to account for any action taken pursuant to
any such exercise other than for Rents actually received by
Beneficiary, nor liable for any loss sustained by Grantor
resulting from any failure to let the Premises, or from any
other act or omission of Trustee or Beneficiary except to
the extent such loss is caused by the willful misconduct or
bad faith of Trustee or Beneficiary.
SECTION 5.03. Rights Pertaining to Sales. Subject to the
provisions or other requirements of law and except as
otherwise provided herein, the following provisions shall
apply to any sale or sales of all or any portion of the
Mortgaged Property under or by virtue of this Article V,
whether made under the power of sale herein granted or by
virtue of judicial proceedings or of a judgment or decree of
foreclosure and sale:
(a) Trustee or Beneficiary may conduct any number of sales
from time to time. The power of sale set forth in Section
5.02(c) hereof shall not be exhausted by any one or more
such sales as to any part of the Mortgaged Properly which
shall not have been sold, nor by any sale which is not
completed or is defective in Beneficiary's opinion, until
the Obligations shall have been paid in full.
(b) Any sale may be postponed or adjourned by public
announcement at the time and place appointed for such sale
or for such postponed or adjourned sale without further
notice.
(c) After each sale, Beneficiary, Trustee or an officer of
any court empowered to do so shall execute and deliver to
the purchaser or purchasers at such sale a good and
sufficient instrument or instruments granting, conveying,
assigning and transferring all right, title and interest of
Grantor in and to the property and rights sold and shall
receive the proceeds of said sale or sales and apply the
same as herein provided. Each of Trustee and Beneficiary is
hereby appointed the true and lawful attorney-in-fact of
Grantor, which appointment is irrevocable and shall be
deemed to be coupled with an interest, in Grantor's name and
stead, to make all necessary conveyances, assignments,
transfers and deliveries of the property and rights so sold,
and for that purpose Trustee and Beneficiary may execute all
necessary instruments of conveyance, assignment, transfer
and delivery, and may substitute one or more persons with
like power, Grantor hereby ratifying and confirming all that
said attorney or such substitute or substitutes shall
lawfully do by virtue thereof. Nevertheless, Grantor, if
requested by Trustee or Beneficiary, shall ratify and
confirm any such sale or sales by executing and delivering
to Trustee, Beneficiary or such purchaser or purchasers all
such instruments as may be advisable, in Trustee's or
Beneficiary's judgment, for the purposes as may be
designated in such request.
27
(d) Any and all statements of fact or other recitals made in
any of the instruments referred to in subsection (c) of this
Section 5.03 given by Trustee or Beneficiary as to
nonpayment of the Obligations, or as to the occurrence of
any Event of Default, or as to Beneficiary having declared
all or any of the Obligations to be due and payable, or as
to the request to sell, or as to notice of time, place and
terms of sale and of the property or rights to be sold
having been duly given, or as to the refusal, failure or
inability to act of Trustee, or as to the appointment of any
substitute or successor trustee, or as to any other act or
thing having been duly done by Grantor, Beneficiary, or by
Trustee, shall be taken as conclusive and binding against
all persons as to evidence of the truth of the facts so
stated and recited. Trustee or Beneficiary may appoint or
delegate any one or more persons as agent to perform any act
or acts necessary or incident to any sale so held, including
the posting of notices and the conduct of sale, but in the
name and on behalf of Trustee.
(e) The receipt of Trustee or Beneficiary for the purchase
money paid at any such sale, or the receipt of any other
person authorized to receive the same, shall be sufficient
discharge therefor to any purchaser of any property or
rights sold as aforesaid, and no such purchaser, or its
representatives, grantees or assigns, after paying such
purchase price and receiving such receipt, shall be bound to
see to the application of such purchase price or any part
thereof upon or for any trust or purpose of this Deed of
Trust or, in any manner whatsoever, be answerable for any
loss, misapplication or non-application of any such purchase
money, or part thereof, or be bound to inquire as to the
authorization, necessity, expediency or regularity of any
such sale.
(f) Any such sale or sales shall operate to divest all of
the estate, right, title, interest, claim and demand
whatsoever, whether at law or in equity, of Grantor in and
to the properties and rights so sold, and shall be a
perpetual bar both at law and in equity against Grantor and
any and all persons claiming or who may claim the same, or
any part thereof or any interest therein, by, through or
under Grantor to the fullest extent permitted by applicable
law.
(g) Upon any such sale or sales, Beneficiary may bid for and
acquire the Mortgaged Property and, in lieu of paying cash
therefor, may make settlement for the purchase price by
crediting against the Obligations the amount of the bid made
therefor, after deducting therefrom the expenses of the
sale, the cost of any enforcement proceeding hereunder, and
any other sums which Trustee or Beneficiary is authorized to
deduct under the terms hereof, to the extent necessary to
satisfy such bid.
(h) In the event that Grantor, or any person claiming by,
through or under Grantor, shall transfer or refuse or fail
to surrender possession of the Mortgaged Property after any
sale thereof, then Grantor, or such person, shall be deemed
a tenant at sufferance
28
of the purchaser at such sale, subject to eviction by means
of forcible entry and unlawful detainer proceedings, or
subject to any other right or remedy available hereunder or
under applicable law.
(i) Upon any such sale, it shall not be necessary for
Trustee, Beneficiary or any public officer acting under
execution or order of court to have present or
constructively in its possession any of the Mortgaged
Property.
(j) In the event a foreclosure hereunder shall be commenced
by Trustee or Beneficiary, Trustee or Beneficiary may at any
time before the sale of the Mortgaged Property abandon the
sale, and may institute suit for the collection of the
Obligations and for the foreclosure of this Deed of Trust,
or in the event that Trustee or Beneficiary should institute
a suit for collection of the Obligations, and for the
foreclosure of this Deed of Trust, Beneficiary may at any
time before the entry of final judgment in said suit dismiss
the same and require Trustee or Beneficiary to sell the
Mortgaged Property in accordance with the provisions of this
Deed of Trust.
SECTION 5.04. Expenses. In any proceeding, judicial or
otherwise, to foreclose this Deed of Trust or enforce any
other remedy of Trustee or Beneficiary under the Loan
Documents, there shall be allowed and included as an
addition to and a part of the Obligations in the decree for
sale or other judgment or decree all expenditures and
expenses (including, without limitation, reasonable
attorney's fees) which may be paid or incurred in connection
with the exercise by Trustee or Beneficiary of any of its
rights and remedies provided or referred to in Section 5.02,
or any comparable provision of any other Loan Document,
together with interest thereon at the rate and as provided
in the Credit Agreement, and the same shall be part of the
Obligations and shall be secured by this Deed of Trust.
SECTION 5.05. Application of Proceeds. The purchase money,
proceeds or avails of any sale referred to in Section 5.02,
together with any other sums which may be held by Trustee or
Beneficiary hereunder, whether under the provisions of this
Article V or otherwise, shall, except as herein expressly
provided to the contrary, be applied as follows:
First: To the payment of the costs and expenses of any such
sale, including compensation to Trustee, Beneficiary, their
agents and counsel, and of any judicial proceeding wherein
the same may be made, and of all expenses, liabilities and
advances made or incurred by Trustee or Beneficiary
hereunder, together with interest thereon as provided
herein, and all Impositions and other charges, except any
Impositions or other charges subject to which the Mortgaged
Property shall have been sold.
Second: To the payment in full of the monetary Obligations
(including principal, interest, premium and fees) in such
order as Beneficiary may elect.
29
Third: To the payment of any other sums secured hereunder or
required to be paid by Grantor pursuant to any provision of
the Loan Documents.
Fourth: To the extent permitted by applicable law, to be set
aside by Trustee or Beneficiary as adequate security in its
judgment for the payment of sums which would have been paid
by application under clauses First through Third above to
Trustee or Beneficiary, arising out of an obligation or
liability with respect to which Grantor has agreed to
indemnify Beneficiary, but which sums are not yet due and
payable or liquidated.
Fifth: To the payment of any withholding tax requirements of
the Foreign Investment in Real Property Tax Act of 1980, as
amended.
Sixth: To the payment of the surplus, if any, to whomsoever
may be lawfully entitled to receive the same.
SECTION 5.06. Additional Provisions as to Remedies. (a) No
delay or omission by Trustee or Beneficiary to exercise any
right or remedy hereunder upon any default or Event of
Default shall impair such exercise, or be construed to be a
waiver of any such default or Event of Default.
(b) The failure, refusal or waiver (by consent, waiver or
otherwise) of Trustee or Beneficiary to assert any right or
remedy hereunder upon any default or Event of Default or
other occurrence shall not be construed as waiving such
right or remedy upon any other or subsequent default or
Event of Default or other occurrence.
(c) Neither Trustee nor Beneficiary shall have any
obligation to pursue any rights or remedies it may have
under any other agreement prior to pursuing its rights or
remedies hereunder or under the other Loan Documents.
(d) Acceptance of any payment after the occurrence of any
default or Event of Default shall not be deemed a waiver or
a cure of such default or Event of Default, and acceptance
of any payment less than any amount then due shall be deemed
an acceptance on account only.
(e) In the event that Trustee or Beneficiary shall have
proceeded to enforce any right or remedy hereunder by
foreclosure, sale, entry or otherwise, and such proceeding
shall be discontinued, abandoned or determined adversely for
any reason, then Grantor and Beneficiary shall be restored
to their former positions and rights hereunder with respect
to the Mortgaged Property, subject to the lien hereof.
30
Each right of Trustee or Beneficiary provided for in this
Deed of Trust shall be cumulative and shall be in addition
to every other right provided for in this Deed of Trust or
now or hereafter existing at law or in equity, by statute or
otherwise, and the exercise by Trustee or Beneficiary of any
one or more of such rights shall not preclude the
simultaneous or later exercise by Trustee or Beneficiary of
any other such right.
SECTION 5.07. Waiver of Rights and Defenses. To the full
extent Grantor may lawfully do so, Grantor agrees with
Beneficiary as follows:
(a) Grantor will not claim or take the benefit of any
statute or rule of law now or hereafter in force providing
for any appraisement, valuation, stay, extension, moratorium
or redemption, or of any statute of limitations, and
Grantor, for itself and its heirs, devisees,
representatives, successors and assigns, and for any and all
persons ever claiming an interest in the Mortgaged Property
(other than Beneficiary and Trustee), hereby waives and
releases all rights of redemption, valuation, appraisement,
notice of intention to mature or declare due the whole of
the Obligations, and all rights to a marshaling of the
assets of Grantor, including the Mortgaged Property, or to a
sale in inverse order of alienation, in the event of
foreclosure of the liens and security interests created
hereunder.
(b) Grantor shall not have or assert and hereby waives any
right under any statute or rule of law pertaining to any of
the matters set forth in subsection (a) of this Section
5.07, to the administration of estates of decedents or to
any other matters whatsoever to defeat, reduce or affect any
of the rights or remedies of Trustee or Beneficiary
hereunder.
SECTION 5.08. Exercise by Trustee. Notwithstanding anything
herein to the contrary, Trustee (a) shall not exercise, or
waive the exercise of, any of its rights or remedies
hereunder (other than its right to reimbursement) except
upon the request of Beneficiary, and (b) shall exercise, or
waive the exercise of, any or all of such rights or remedies
upon the request of Beneficiary and at the direction of
Beneficiary as to the manner ofsuch exercise or waiver,
provided that Trustee shall have the right to decline to
follow any of such request or direction if Trustee shall be
advised by counsel that the action or proceeding, or manner
thereof, so directed may not lawfully be taken or waived.
ARTICLE VI
RELEASE OF LIEN
31
SECTION 6.01. Release of Lien. If(i) all of the Obligations
have been paid in full or (ii) Grantor shall have satisfied
all of the terms and conditions set forth in Section 8.01 of
the Credit Agreement with respect to the Mortgaged Property,
then, and only in such events, all rights and obligations
hereunder (except for the rights and obligations set forth
in Section 3.03 and the indemnities provided in the Loan
Documents) shall terminate and the Mortgaged Property shall
become wholly released and cleared of the liens, security
interests, conveyances and assignments evidenced hereby. In
such event Beneficiary shall, at the request of Grantor,
execute and deliver to Grantor, in recordable form, all such
documents as shall be necessary to release the Mortgaged
Property, or a portion thereof, from the liens, security
interests, conveyances and assignments created or evidenced
hereby. Notwithstanding anything in the preceding sentence
to the contrary, Trustee shall so release the Mortgaged
Property only upon the direction of Beneficiary.
ARTICLE VII
ADDITIONAL PROVISIONS
SECTION 7.01. Provisions as to Payments, Advances. To the
extent that any part ofthe Obligations is used to pay
indebtedness secured by any Permitted Encumbrance or other
outstanding lien, security interest, charge or prior
encumbrance against the Mortgaged Property or to pay in
whole or in part the purchase price therefor, Trustee or
Beneficiary shall be subrogated to any and all rights,
security interests and liens held by any owner or holder of
the same, whether or not the same are released. Grantor
agrees that, in consideration of such payment by Trustee or
Beneficiary, effective upon such payment Grantor shall and
hereby does waive and release all demands, defenses and
causes of action for offsets and payments with respect to
the same.
SECTION 7.02. Separability. If all or any portion of any
provision of this Deed of Trust or any other Loan Documents
shall be held to be invalid, illegal or unenforceable in any
respect or in any jurisdiction, then such invalidity,
illegality or unenforceability shall not affect any other
provision hereof or thereof, and such provision shall be
limited and construed in such jurisdiction as if such
invalid, illegal or unenforceable provision or portion
thereof were not contained herein or therein.
SECTION 7.03. Notices. (a) Any notice, demand, consent,
approval, direction, agreement or other communication (any
"Notice") required or permitted hereunder or under any other
documents evidencing or securing the-Note shall be in
writing and shall be validly given if mailed by United
States mail, certified mail, return receipt requested,
postage prepaid, addressed as follows to the person entitled
to receive the same:
32
(1) If to Grantor:
Emeritus Properties III, Inc.
c/o Emeritus Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
and a copy to:
Emeritus Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
(2) If to Beneficiary:
Deutsche Bank AG, New York Branch
▇▇ ▇▇▇▇ ▇▇"▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
(3) If to Trustee:
Chicago Title Insurance Company
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Legal Department
Any Notice shall be deemed to have been validly given
hereunder when so mailed. Any person shall have the right to
specify, from time to time, as its address or addresses for
purposes of this Deed of Trust, any other address or
addresses upon giving three (3) days' notice thereof to each
other person then entitled to receive notices or other
instruments hereunder.
SECTION 7.04. Right to Deal. In the event that ownership of
the Mortgaged Property becomes vested in a person other than
Grantor, Trustee and Beneficiary may, without notice to
Grantor, deal with such successor or successors in interest
with reference to this Deed of Trust or the Obligations in
the same manner as with Grantor, without in any way
vitiating or discharging Grantor's liability hereunder or
for the payment of the Obligations or being deemed a consent
to such vesting.
33
SECTION 7.05. Continuation of Lease. (a) Upon the
foreclosure of the lien created hereby on the Mortgaged
Property, as herein provided, any leases then existing shall
not be destroyed or terminated as a result of such
foreclosure unless Beneficiary or any purchaser at a
foreclosure sale shall so elect by notice to the lessee in
question.
(b) If both the lessor's and the lessee's interest under any
lease which constitutes a part of the Premises shall at any
time become vested in any one person, this Deed of Trust and
the lien and security interest created hereby shall not be
destroyed or terminated by the application of the doctrine
of merger and, in such event, Trustee and Beneficiary shall
continue to have and enjoy all of the rights and privileges
of Trustee and Beneficiary hereunder as to each separate
estate.
(c) In the event that Grantor acquires the fee or any other
interest in any portion of the Land that is presently leased
to Grantor, such interest shall, immediately upon such
acquisition, become subject to the lien of this Deed of
Trust as fully and completely, and with the same effect, as
though now owned by Grantor and specifically described
herein, without need for the delivery and/or recording of a
supplement to this Deed of Trust or any other instrument.
SECTION 7.06. Applicable Law. This Deed of Trust shall be
governed by, and construed in accordance with, the laws of
the State of Washington.
SECTION 7.07. Sole Discretion of Trustee and Beneficiary.
(a) Whenever Trustee's or Beneficiary's judgment, consent or
approval is required hereunder for any matter, or either
shall have an option or election hereunder, such judgment,
the decision whether or not to consent to or approve the
same or the exercise of such option or election shall be in
the sole discretion of Trustee or Beneficiary, as the case
may be.
(b) Notwithstanding anything contained herein to the
contrary, in the event that Trustee or Beneficiary fails or
refuses to grant consent or approval when required hereunder
or under any other Loan Document for any matter, the parties
agree that the remedy of specific performance shall be the
sole remedy of Grantor with respect to such actions and
Trustor hereby waives all claims for damages with respect
thereto, unless a final nonappealable judgment has been
rendered against Beneficiary finding that Beneficiary had
acted in bad faith.
SECTION 7.08. Provisions as to Covenants and Agreements. All
of Grantor's covenants and agreements hereunder shall run
with the land and time is of the essence with respect
thereto.
SECTION 7.09. Matters to be in Writing. This Deed of Trust
cannot be altered, amended, modified, terminated, waived,
released or discharged except in a writing signed by the
party against whom enforcement is sought.
34
SECTION 7.10. Submission to Jurisdiction. Without limiting
the right of Beneficiary to bring any action or proceeding
against the undersigned or its property arising out of or
relating to the Obligations (an "Action") in the courts of
other jurisdictions, Grantor hereby irrevocably submits to
the jurisdiction of the state court or Federal court in each
jurisdiction in which the Mortgaged Property is located, and
Grantor hereby irrevocably agrees that any Action may be
heard and determined in such state or federal court. Grantor
hereby irrevocably waives, to the fullest extent that it may
effectively do so, the defense of an inconvenient forum to
the maintenance of any Action in the jurisdiction. Grantor
hereby irrevocably agrees that the summons and complaint or
any other process in any Action in any jurisdiction may be
served by mailing to any of the addresses set forth herein
or by hand delivery to a person of suitable age and
discretion at any such address. Such service will be
complete on the date such process is so mailed or delivered.
SECTION 7.11. Construction of Provisions. The following
rules of construction shall be applicable for all purposes
of this Deed of Trust and all documents or instruments
supplemental hereto, unless the context otherwise requires:
(a) All references herein to numbered Articles or Sections
or to lettered
Exhibits are references to the Articles and Sections hereof
and the Exhibits annexed to this Deed of Trust, unless
expressly otherwise designated in context. All Article,
Section and Exhibit captions herein are used for reference
only and in no way limit or describe the scope or intent of,
or in any way affect, this Deed of Trust.
(b) The terms "include", "including" and similar terms shall
be construed as if followed by the phrase "without being
limited to".
(c) The terms "Land", "Leased Land", "Leasehold Estate",
"Improvements", "Equipment", "Mortgaged Property" and
"Premises" shall be construed as if followed by the phrase
"or any part thereof'.
(d) The term "Obligations" shall be construed as if followed
by the phrase "or any other sums secured hereby, or any part
thereof'.
(e) Words of masculine, feminine or neuter gender shall mean
and include the correlative words of the other genders, and
words importing the singular number shall mean and include
the plural number, and vice versa.
(f) The term "person" shall include natural persons, firms,
partnerships, corporations and any other public and private
legal entities.
35
(g) The term "provisions", when used with respect hereto or
to any other document or instrument, shall be construed as
if preceded by the phrase "terms, covenants, agreements,
requirements, conditions and/or".
(h) The cover page of and all recitals set forth in, and all
Exhibits to, this Deed of Trust are hereby incorporated in
this Deed of Trust.
(i) All obligations of Grantor hereunder shall be performed
and satisfied by or on behalf of Grantor at Grantor's sole
cost and expense.
(j) The term "lease" shall mean "tenancy, subtenancy, lease
or sublease", the term "Lessor" shall mean "landlord,
sublandlord, lessor and sublessor" and the term
"lessee" shall mean "tenant, subtenant, lessee and
sublessee".
(k) No inference in favor of or against any party shall be
drawn from the fact that such party has drafted any portion
hereof.
(1) The term "Beneficiary and/or Trustee" shall be construed
as if followed by the phrase "as applicable".
SECTION 7.12. Successors and Assigns. The provisions hereof
shall be binding upon Grantor and the heirs, devisees,
representatives, successors and permitted assigns of
Grantor, including successors in interest of Grantor in and
to all or any part of the Mortgaged Property, and shall
inure to the benefit of Trustee, Beneficiary, the holders of
the Obligations and their respective heirs, successors,
legal representatives, substitutes and assigns. Where two or
more persons have executed this Deed of Trust, the
obligations of such persons shall be joint and several.
SECTION 7.13. Counterparts. This Deed of Trust may be
executed in counterparts, each of which shall be deemed to
be an original, but all of which shall constitute one and
the same agreement.
SECTION 7.14. Agency. Beneficiary may deal with the
Mortgaged Property and may issue, or instruct Trustee to
issue, as applicable, any release to be given hereunder
pursuant to Section 4.02 or 6.01 or grant any consent or
approval or take any other action, or instruct Trustee to
take any other action, as applicable, required or permitted
hereunder, without reference to or the approval of the
holders of the Obligations and any third party (including
any title insurance company issuing a title insurance
policy, or a commitment to issue a title insurance policy,
in connection with the Mortgaged Property) may conclusively
rely on the due authority of Beneficiary (or Trustee, if so
instructed by Beneficiary) to do any or all of the
foregoing.
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SECTION 7.15. The Security Agreement. In the event that a
valid and enforceable security interest has been created in
any of the Mortgaged Property under the terms of the
Security Agreement (as defined in the Credit Agreement) and
the terms of the Security Agreement are inconsistent with
the terms of this Deed of Trust, then with respect to such
Mortgaged Property, the terms of the Security Agreement
shall be controlling in the case of Equipment and proceeds
of insurance policies and the terms of this Deed of Trust
shall be controlling in all other cases.
SECTION 7.16. Inapplicable Provisions. If any term, covenant
or condition of this Deed of Trust is held to be invalid,
illegal or unenforceable in any respect, this Deed of Trust
shall be construed without such provision.
ARTICLE VIII
PROVISIONS AS TO TRUSTEE
SECTION 8.01. Trustee's Appointment. Trustee may resign by
an instrument in writing addressed to Beneficiary, or
Trustee may be removed at any time with or without cause by
an instrument in writing executed by Beneficiary. In case of
the death, resignation, removal or disqualification of
Trustee or if for any reason Beneficiary shall deem it
desirable to appoint a substitute or successor Trustee to
act instead of Trustee herein named or any substitute or
successor Trustee, then Beneficiary shall have the right and
is hereby authorized and empowered to appoint a successor
Trustee, or a substitute Trustee, without other formality
than appointment and designation in writing executed by
Beneficiary, and the authority hereby conferred shall extend
to the appointment of other successor and substitute
Trustees successively until the Obligations have been paid
in full or until the Mortgaged Property is sold hereunder.
Such appointment and designation by Beneficiary shall be
full evidence of the right and authority to make the same
and of all facts therein recited. If Beneficiary is a
corporation or a national banking association and such
appointment is executed in its behalf by an officer of such
corporation or national banking association, such
appointment shall be conclusively presumed to be executed
with authority and shall be valid and sufficient without
proof of any action by the board of directors or any
superior officer of the corporation or national banking
association. Upon the making of such appointment and
designation, all of the estate and title of Trustee in the
Mortgaged Property shall vest in the named successor or
substitute Trustee and it shall thereupon succeed to and
shall hold, possess and execute all the rights, powers,
privileges, immunities and duties herein conferred upon
Trustee; but, nevertheless, upon the written request of
Beneficiary or of the successor or substitute Trustee,
Trustee ceasing to act shall execute and deliver an
instrument transferring to such successor or substitute
Trustee all of the estate and title in the Mortgaged
Property of Trustee so ceasing to act, together with all the
rights, powers, privileges, immunities and duties herein
conferred upon Trustee, and shall duly assign, transfer and
deliver
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any of the properties and moneys held by said Trustee
hereunder to said successor or substitute Trustee. All
references herein to Trustee shall be deemed to refer to
Trustee (including any successor or substitute appointed and
designated as herein provided) from time to time acting
hereunder. Except as otherwise required by applicable law,
Trustee shall not perform any act or omit to act hereunder
unless, prior to such act or omission, Beneficiary delivers
to Trustee direction to so act or omit to act. Grantor
hereby ratifies and confirms any and all acts which Trustee
herein named or its successor or successors, substitute or
substitutes, in this trust, shall do lawfully by virtue
hereof.
SECTION 8.02. Exculpation. Trustee shall not be liable for
any error of judgment or act done by Trustee in good faith,
or be otherwise responsible or accountable under any
circumstances whatsoever, except for Trustee's gross
negligence or willful misconduct. Trustee shall have the
right to rely on any instrument, document or signature
authorizing or supporting any action taken or proposed to be
taken by it hereunder, believed by it in good faith to be
genuine. All moneys received by Trustee shall, until used or
applied as herein provided, be held in trust for the
purposes for which they were received, but need not be
segregated in any manner from any other moneys (except to
the extent required by law), and Trustee shall be under no
liability for interest on any moneys received by it
hereunder.
ARTICLE IX
NOTICES OF DEFAULT
SECTION 9.01. Notices of Default. To the extent that the
Mortgaged Property is located in the State of California,
Grantor hereby requests that a copy of any Notice of Default
and/or Notice of Sale be sent to Grantor at Grantor's
address set forth in Section 7.03 hereof.
ARTICLE X
FIXTURE FILING
SECTION 10.01. Fixture Filing. A portion of the Mortgaged
Property is or is to become fixtures upon the Premises. To
the extent permitted by applicable law, Grantor covenants
and agrees that the filing of this Deed of Trust in the real
estate records of the county in which the Mortgaged Property
is located shall also operate from the time of filing as a
fixture filing with respect to all goods constituting part
of the Mortgaged Property which are or are to become
fixtures related to the real estate described herein. For
such purpose, the following information is set forth:
(a) Name and Address of Debtor:
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Emeritus Properties III, Inc.
c/o Emeritus Corporation,
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(b) Name and Address of Secured Party:
Deutsche Bank AG, New York Branch
▇▇ ▇▇▇▇ ▇▇"" ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
(c) This document covers goods which are or are to become
fixtures.
(d) The real property on which the fixtures are or may be
located is described on Exhibit A.
(e) Grantor is the record owner of the real property.
The fixture filing is to be recorded in the records of the
county where the real property is located.
ARTICLE XI
State Specific Clauses
SECTION 11.01. Washington. Grantor hereby represents and
warrants that, to the extent the Mortgaged Property is
located in the State of Washington, no part or portion of
the Mortgaged Property is used principally for agricultural
or farming purposes.
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IN WITNESS WHEREOF, the undersigned has executed this Deed
of Trust the day first set forth above.
Signed, sealed and delivered in the presence of the
following witnesses:
Name: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Address:
Name: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
Address:
PLEASE BE ADVISED THAT ORAL AGREEMENTS OR ORAL
COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR FORBEAR FROM
ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER
WASHINGTON LAW.
EMERITUS PROPERTIES III. INC. a Washington corporation
By : /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
STATE OF WASHINGTON
COUNTY OF KING
ss.
I certify that I know or have satisfactory evidence that
▇▇▇▇▇ ▇▇▇▇▇ is the person who appeared before me, and said
person acknowledged that said person signed this instrument,
on oath stated that said person was authorized to execute
the instrument and acknowledged it as the Vice President of
Emeritus III, Inc., a Washington corporation, to be the free
and voluntary act of such corporation for the uses and
purposes mentioned in the instrument.
Dated this 30th day of June,1 998.
/s/ ▇▇▇▇▇▇ ▇▇▇
(Signature of Notary)
Notary public in and for the state of Washington, residing
at Seattle
My appointment expires 01-05-02"